Final Results
Artemis Alpha Trust PLC
06 August 2007
ARTEMIS ALPHA TRUST PLC (the 'Company')
Final Results for the year ended 30th April 2007
Chairman's Statement
Performance
In my interim statement I reported a disappointing first six months which was
reflected by a fall in the diluted net asset value (''NAV'') of 14.5 per cent.
It is therefore satisfying to report a strong recovery in the second six months
with an uplift in the diluted NAV return of 21.9 per cent, resulting in a net
increase for the full year of 4.2 per cent. The broader market, as represented
by the FTSE All-Share Index, increased by 12.7 per cent for the year to 30th
April 2007.
The second half of the year to 30th April 2007 was characterised by a robust
performance from smaller caps, particularly AIM traded companies which, given
the portfolio's bias towards this area, was a welcome development. This is in
marked contrast to AIM's poor performance in the first half of the year.
Investment in unlisteds
As shareholders are aware, your Company has pursued a policy of investing in
unlisted companies which, to date, has proved to be the source of a number of
good investments. Such investments are often made at the pre-IPO stage. Your
Board shares the Investment Manager's belief that this approach will continue to
generate positive returns for shareholders.
The Investment Management Agreement contains a provision that limits the amount
the Company can have invested in unlisted securities to 10 per cent of net
assets. During the year, the Board waived this restriction and authorised the
Investment Manager to invest up to 30 per cent of the Company's net assets in
unlisted companies, in order to allow attractive opportunities to be pursued. At
the time the Board took this decision, it was agreed that this should be put to
shareholders for approval at the next Annual General Meeting. Accordingly, a
resolution to amend the relevant provision, as set out in the Investment
Management Agreement, is contained in the Notice of Meeting, which accompanies
the Annual Report and Accounts for the year ended 30th April 2007.
As at 30th April 2007, unlisted investments represented 22 per cent of the
Company's net assets.
Dividends
The Board has declared a second interim dividend of 1.3p (2006:1.2p) per
ordinary share bringing the total dividend for the year to 2.3p (2006: 2.2p) per
share, an increase of 4.5 per cent over dividends paid in 2006. The second
interim dividend will be paid on 31st August 2007 to those shareholders on the
register on 17th August 2007.
Buy Back of Shares
The Company is authorised to buy back its own shares and has adopted a policy of
buying back shares, whenever possible, at a discount to NAV. During the year
your Company acquired 125,000 of its own ordinary shares at a cost of £234,000.
The shares were bought at a 4.1 per cent discount to the prevailing NAV per
share and are presently held in treasury. A resolution to renew the Company's
authority to buy its own shares will be put to shareholders at the forthcoming
Annual General Meeting.
Investment Plan
The Investment Plan enables investors to acquire shares in the Company in a cost
effective manner, either through lump sum investments or regular monthly
investments. Documentation can be obtained by contacting Artemis Investment
Management Limited on 0800 092 2051 or from the following web address;
www.artemisonline.co.uk/pdf/brochures/alphatrustinvestmentplan.pdf
Annual General Meeting
Your Company's Annual General Meeting ('AGM'') this year will be held at the
offices of Artemis Investment Management Limited, Cassini House, 57 St James's
Street, London SW1A 1LD on Thursday, 6th September 2007 at 12.30 pm.
Full details of the business to be conducted at the AGM are set out in the
Notice of Meeting in the Annual Report.
Your Board would welcome your attendance at the AGM as it provides an
opportunity to ask questions of the Directors and Investment Manager. Should you
have any detailed or technical questions, it would be helpful if these could be
raised in advance of the AGM with the Company Secretary. If you are unable to
attend the AGM, your Board would encourage you to send in your proxy votes.
Outlook
There remain various inherent risks in the equity market. That said, the
valuation of the UK equity market remains relatively attractive by historic
standards, with many companies continuing to report growing earnings and
dividends. There also remains a considerable amount of money waiting to be
invested, much of which is with private equity groups, and this in part is
behind the high level of merger activity being experienced. All of these factors
continue to provide support for the equity market.
It is difficult to say with any certainty how markets will move in the coming
months, but, at present, your Investment Manager continues to believe that
equities still remain attractive compared to other asset classes. For its part,
your Board considers that the Company's broad investment policy will allow the
Investment Manager to continue to be selective in identifying long-term
investment opportunities, irrespective of market conditions.
I look forward to welcoming you to the AGM on Thursday, 6th September 2007.
Simon Miller
Chairman
6th August 2007
Investment Manager's Review
Performance and Portfolio Analysis
In a similar pattern to last year we have maintained our focus of favouring non
large cap companies. At 30th April 2007, the portfolio comprised 87.8% in small
caps, with 8.9% and 3.3% invested in mid and large caps respectively.
We continue to believe that this area offers more exciting growth prospects over
the longer term, and most companies that will deliver the greatest returns in
terms of share price tend to be of a smaller size. Although small and medium cap
companies have continued to outperform large cap on a relative basis, we had a
poor first half of the year, mainly due to our large position in emerging oil
and natural resource plays, as well as the general de-rating of AIM listed
companies.
The poor first six months was reversed in the second half of the year and the
NAV rose by 21.9 per cent, compared to an increase of 8.6 per cent for the FTSE
All-Share Index, although it was not sufficient to beat the benchmark over the
full period under review. Since Artemis became the Investment Manager in June
2003, the share price has risen by 257.6 per cent and the diluted NAV by 240.6
per cent, which compares to an increase of 93.3 per cent for the FTSE All-Share
Index over this period.
The portfolio continues to be managed as a best ideas portfolio and receives
input from the whole Artemis fund management team, whose interests are directly
aligned with shareholders through holding ordinary shares in the Company and/or
manager warrants. Like any best ideas fund, not all our best ideas worked as
well as we had hoped, and we have had some poor investments such as Blueheath
and MICE Group. The former has, however, reinvented itself into a vehicle to
take the Booker cash and carry business forward, which we have supported through
a further investment.
Portfolio
Although our overweight exposure to the oil exploration sector has been correct
from a macro viewpoint, the stock selection has tended to focus on the highest
return type investments, which by their nature, are somewhat speculative. This
worked well for the Company in 2005/6, but, as the cycle matures we have reduced
our positions in such companies where possible and bought new holdings in lower
risk companies such as Venture Production, which is a North Sea focused oil and
gas production business, and Expro Group, an international oil services business
which has the most exciting future in sub sea areas, such as rig-less
intervention. We have seen good progress across holdings such as Ascent
Resources, Genesis Petroleum and Revus Energy. This has been partly offset by
the performance of Petrohunter, which failed to complete wells it had
successfully drilled and whose shares have performed poorly over the period as
it seeks further funding.
The ability to make unlisted investments, which are often made at a pre-IPO
stage, has been positive for the portfolio. A good example of this, and a
significant contributor to performance, was Salamander Energy, which listed on
the London Stock Exchange's main market in December 2006. The company is led by
a highly regarded management team who are building up a South East Asian oil
exploration and production company. More recently the shares were de-rated
following an operational update from their Phu Horm field in Thailand. We think
the shares remain attractive over the medium-term. Another unlisted stock that
looks attractive is Vostok Energy, a Kazakh based oil and gas exploration and
production business, which recently received further funding to develop its
business and may list in the year ahead.
Looking forward we still believe the oil and gas exploration sector offers great
opportunities to make returns, particularly with the oil price making new highs.
Our overall weighting has been reduced to approximately 21 per cent from the
very highest levels to better reflect the lessons learned from the sectors
de-rating last year.
The largest portfolio holding by value, and also the largest unlisted
investment, remains the investment in Artemis. This holding has been valued in
line with an independent valuation carried out for Artemis in November 2006.
Since then the company has traded well, with assets under management rising to
£15.5 billion as at 30th April 2007.
The financials sector is the portfolio's largest exposure, principally through
holdings in fund management companies. Alongside existing holdings such as ACP
Capital and New Star we have made new investments in BlueBay Asset Management, a
leading credit asset manager, which is experiencing strong growth across its
long only products and also its hedged long/short strategy funds. The other new
investment was Polar Capital Holdings. Further progress for our asset management
holdings is clearly dependent on stock market levels but we have sought to
spread the risk across a wide range of market exposures. During the period we
benefited from the listing of ORA Capital Partners, which the Company invested
in as an unlisted, and also rumoured bid activity with Domestic and General.
The mining sector has provided the greatest contribution this year, principally
through our investments in the uranium sector in Geiger Counter and URASIA
Energy, which was recently taken over by SXR Uranium. Both companies have
benefited from a significant re-rating of the sector, reflecting the current
demand and supply imbalance. Our principal unlisted investment in this sector,
Gem Diamonds, listed on the London Stock Exchange during the period under
review. Led by a highly regarded management team, this diamond business will
continue to grow through a combination of both organic and acquisitive growth.
Aricom, which has strategic iron ore and ilemite deposits in the Amur region in
the Far East of Russia, has continued to attract investor interest on the back
of rising commodity prices.
Recent investment activity has resulted in the portfolio comprising too many
holdings and we are taking steps to reduce this number accordingly. We wish to
reassure shareholders that there are a number of very exciting opportunities in
the portfolio and the process of identifying the winners and losers is constant.
Some of the other new investments that spring to mind from a positive viewpoint
include Music Copyright Solutions which, as its name implies, is an
international publishing company and Redhall Group, a specialist engineering
business. We have also bought Qinetiq, the UK based defence business which is
often in the national press for the wrong reasons.
Gearing in the portfolio continues to be actively used, stood at 12 per cent at
year end, and was 14 per cent at the date of this Review.
Outlook
At present there is a lot more to be pessimistic about when writing an outlook.
On the positive side we have stronger than forecast economic growth, combined
with fair valuations for equities, the likelihood of higher institutional
liquidity and the wall of money argument from private equity as support for
equity markets. This is pitted against rising inflation, rising interest rates
and the start of a credit crisis, given the various well reported issues of the
debt financial markets and contagion of sub prime lending problems. Although we
see volatile stock market conditions ahead, we are as confident as we can be of
our ability to create meaningful returns and our money is with yours.
John Dodd
Artemis Investment Management Limited
Investment Manager
6th August 2007
Consolidated Income Statement
For the year ended 30th April 2007
Year ended Year ended
30th April 2007 30th April 2006
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
-------------------------------------------------------------------------------------- --------------------------------
Investment income 1,268 -- 1,268 1,272 -- 1,272
Other income 848 -- 848 575 -- 575
-------------------------------------------------------------------------------------- --------------------------------
Total revenue 2,116 -- 2,116 1,847 -- 1,847
-------------------------------------------------------------------------------------- --------------------------------
Gains on investments -- 3,234 3,234 -- 19,003 19,003
Losses on current asset investments (295) -- (295) (23) -- (23)
Currency gains/(losses) -- 5 5 -- (50) (50)
-------------------------------------------------------------------------------------- --------------------------------
Total income 1,821 3,239 5,060 1,824 18,953 20,777
-------------------------------------------------------------------------------------- --------------------------------
Expenses
Investment management fees (57) (515) (572) (58) (520) (578)
Other expenses (359) -- (359) (339) -- (339)
-------------------------------------------------------------------------------------- --------------------------------
Profit before finance costs and tax 1,405 2,724 4,129 1,427 18,433 19,860
-------------------------------------------------------------------------------------- --------------------------------
Finance costs (64) (577) (641) (64) (570) (634)
-------------------------------------------------------------------------------------- --------------------------------
Profit before tax 1,341 2,147 3,488 1,363 17,863 19,226
-------------------------------------------------------------------------------------- --------------------------------
Tax (173) 167 (6) (154) 209 55
-------------------------------------------------------------------------------------- --------------------------------
Profit for the year 1,168 2,314 3,482 1,209 18,072 19,281
-------------------------------------------------------------------------------------- --------------------------------
Earnings per ordinary share (basic) 2 3.51p 6.95p 10.46p 3.63p 54.21p 57.84p
Earnings per ordinary share (diluted) 2 3.24p 6.43p 9.67p 3.37p 50.31p 53.68p
-------------------------------------------------------------------------------------- --------------------------------
The total column of this statement represents the Income Statement of the Group,
prepared in accordance with International Financial Reporting Standards ('
IFRSs''). The supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment Companies. All items in the
above statement derive from continuing operations.
All income is attributable to the equity shareholders of Artemis Alpha Trust
plc. There are no minority interests.
Balance Sheets
As at 30th April 2007
Group Company Group Company
Notes 2007 2007 2006 2006
£'000 £'000 £'000 £'000
----------------------------------------------------------------------------------------- -----------------------------
Non-current assets
Investments 95,411 104,112 87,511 95,755
----------------------------------------------------------------------------------------- -----------------------------
Current assets
Investments held by subsidiary 1,167 -- 768 --
Other receivables 506 505 1,202 980
Cash 1,119 937 7,994 7,866
----------------------------------------------------------------------------------------- -----------------------------
2,792 1,442 9,964 8,846
----------------------------------------------------------------------------------------- -----------------------------
Total assets 98,203 105,554 97,475 104,601
----------------------------------------------------------------------------------------- -----------------------------
Current liabilities
Other payables (371) (7,722) (2,158) (9,284)
Bank loan (11,500) (11,500) (11,500) (11,500)
----------------------------------------------------------------------------------------- -----------------------------
(11,871) (19,222) (13,658) (20,784)
----------------------------------------------------------------------------------------- -----------------------------
Net assets 86,332 86,332 83,817 83,817
----------------------------------------------------------------------------------------- -----------------------------
Equity attributable to equity holders
Share capital 333 333 334 334
Share premium 23,984 23,984 23,984 23,984
Special reserve 7,974 7,974 8,208 8,208
Warrant reserve 1,299 1,299 1,299 1,299
Capital redemption reserve 3 3 2 2
Retained earnings -- revenue 1,975 635 1,540 525
Retained earnings -- capital 50,764 52,104 48,450 49,465
----------------------------------------------------------------------------------------- -----------------------------
Total equity 86,332 86,332 83,817 83,817
----------------------------------------------------------------------------------------- -----------------------------
Net asset value per ordinary share (basic) 3 259.77p 251.26p
----------------------------------------------------------------------------------------- -----------------------------
Net asset value per ordinary share (diluted) 3 236.69p 229.67p
----------------------------------------------------------------------------------------- -----------------------------
Statements of Changes in Equity
For the year ended 30th April 2007
Capital Retained Retained
Share capital Share Special Warrant redemption earnings - earnings -
Group £'000 premium reserve reserve reserve Revenue Capital
£'000 £'000 £'000 £'000 £'000 £'000 Total
£'000
-----------------------------------------------------------------------------------------------------------------
For the year ended 30th April 2006
At 1st May 2005 333 23,912 8,208 1,101 2 1,001 30,378 64,935
Profit for the year -- -- -- -- -- 1,209 18,072 19,281
Issue of manager warrants -- -- -- 198 -- -- -- 198
Issue of shares 1 72 -- -- -- -- -- 73
Dividends paid and declared -- -- -- -- -- (670) -- (670)
-----------------------------------------------------------------------------------------------------------------
At 30th April 2006 334 23,984 8,208 1,299 2 1,540 48,450 83,817
-----------------------------------------------------------------------------------------------------------------
For the year ended 30th April 2007
At 1st May 2006 334 23,984 8,208 1,299 2 1,540 48,450 83,817
Profit for the year -- -- -- -- -- 1,168 2,314 3,482
Repurchase of own shares (1) -- (234) -- 1 -- -- (234)
Dividends paid and declared -- -- -- -- -- (733) -- (733)
-----------------------------------------------------------------------------------------------------------------
At 30th April 2007 333 23,984 7,974 1,299 3 1,975 50,764 86,332
-----------------------------------------------------------------------------------------------------------------
Capital Retained Retained
Company Share capital Share Special Warrant redemption earnings - earnings - Total
£'000 premium reserve reserve reserve Revenue Capital £'000
£'000 £'000 £'000 £'000 £'000 £'000
-----------------------------------------------------------------------------------------------------------------
For the year ended 30th April 2006
At 1st May 2005 333 23,912 8,208 1,101 2 376 31,003 64,935
Profit for the year -- -- -- -- -- 819 18,462 19,281
Issue of manager warrants -- -- -- 198 -- -- -- 198
Issues of shares 1 72 -- -- -- -- -- 73
Dividends paid and declared -- -- -- -- -- (670) -- (670)
-----------------------------------------------------------------------------------------------------------------
At 30th April 2006 334 23,984 8,208 1,299 2 525 49,465 83,817
-----------------------------------------------------------------------------------------------------------------
For the year ended 30th April 2007
At 1st May 2006 334 23,984 8,208 1,299 2 525 49,465 83,817
Profit for the year -- -- -- -- -- 843 2,639 3,482
Repurchase of own shares (1) -- (234) -- 1 -- -- (234)
Dividends paid and declared -- -- -- -- -- (733) -- (733)
-----------------------------------------------------------------------------------------------------------------
At 30th April 2007 333 23,984 7,974 1,299 3 635 52,104 86,332
-----------------------------------------------------------------------------------------------------------------
Cash Flow Statements
For the year ended 30th April 2007
Group Company Group Company
2007 2007 2006 2006
£'000 £'000 £'000 £'000
----------------------------------------------------------------------------------------------- -----------------------
Operating activities
Profit before tax 3,488 3,479 19,226 19,281
Interest payable 641 642 634 634
Gains on investments (3,234) (3,690) (19,003) (19,539)
(Gain)/loss on foreign exchange (5) (5) 50 50
Net movement in current asset investments 295 -- 23 --
Decrease/(increase) in other receivables 210 210 (313) (312)
(Decrease)/increase in other payables (10) (5) 36 36
Overseas tax received -- -- 6 6
----------------------------------------------------------------------------------------------- -----------------------
Net cash inflow from operating activities before interest and tax 1,385 631 659 156
----------------------------------------------------------------------------------------------- -----------------------
Interest paid (633) (633) (607) (607)
Corporation tax refunded/(paid) 21 -- (445) --
----------------------------------------------------------------------------------------------- -----------------------
Net cash inflow/(outflow) from operating activities 773 (2) (393) (451)
----------------------------------------------------------------------------------------------- -----------------------
Investing activities
Purchases of investments (44,811) (43,353) (35,768) (35,286)
Sales of investments 38,135 37,173 43,172 43,172
----------------------------------------------------------------------------------------------- -----------------------
Net cash (outflow)/inflow from investment activities (6,676) (6,180) 7,404 7,886
----------------------------------------------------------------------------------------------- -----------------------
Financing activities
Repurchase of own shares (234) (234) -- --
Dividends paid (733) (733) (670) (670)
Issue of manager warrants -- -- 198 198
Increase in inter-company loan -- 225 -- 2,355
Issue of shares -- -- 73 73
Share issue expenses -- -- (72) (72)
----------------------------------------------------------------------------------------------- -----------------------
Net cash (outflow)/inflow from financing activities (967) (742) (471) 1,884
----------------------------------------------------------------------------------------------- -----------------------
Net (decrease)/increase in cash and cash equivalents (6,870) (6,924) 6,540 9,319
Cash and cash equivalents at the start of the year (3,506) (3,634) (10,096) (13,003)
Effect of foreign exchange rate changes (5) (5) 50 50
----------------------------------------------------------------------------------------------- -----------------------
Cash and cash equivalents at the end of the year (10,381) (10,563) (3,506) (3,634)
----------------------------------------------------------------------------------------------- -----------------------
Bank loans (11,500) (11,500) (11,500) (11,500)
Cash 1,119 937 7,994 7,866
----------------------------------------------------------------------------------------------- -----------------------
(10,381) (10,563) (3,506) (3,634)
----------------------------------------------------------------------------------------------- -----------------------
Notes
1. Accounting policies
The Group's financial statements have been prepared in accordance with
International Financial Reporting Standards ('IFRSs') as adopted by the European
Union. The Company's financial statements have also been prepared in accordance
with IFRSs as adopted by the European Union and with the provisions of the
Companies Act 1985. The Company has taken advantage of the exemption provided
under section 230 of the Companies Act 1985 not to publish its income statement
and related notes.
2. Earnings per ordinary share
The basic revenue return per ordinary share is based on the revenue profit for
the year of £1,168,000 (2006: £1,209,000) and on 33,294,789 (2006: 33,338,030)
ordinary shares, being the weighted average number of ordinary shares in issue
during the year. The basic capital earnings per ordinary share is based on
capital profits for the year of £2,314,000 (2006: £18,072,000) and on 33,294,789
(2006: 33,338,030) ordinary shares, being the weighted average number of
ordinary shares in issue during the year.
For the purposes of calculating diluted revenue and capital returns per ordinary
share, the number of ordinary shares is the weighted average used in the basic
calculation plus the number of ordinary shares deemed to be issued for no
consideration on exercise of all manager warrants by reference to the average
share price of the ordinary shares during the year. The calculations indicate
that the exercise of warrants would result in an increase in the weighted
average number of ordinary shares of 2,771,003 (2006: 2,583,320).
3. Net asset value per ordinary share
The basic NAV per ordinary share is based on net assets of £86,332,000 (2006:
£83,817,000) and on 33,233,488 (2006: 33,358,488) ordinary shares, being the
number in issue at the year end.
The diluted NAV per ordinary share has been calculated on the assumption that
the 6,671,697 manager warrants (2006: 6,671,697) in issue were exercised
resulting in a total of 39,905,185 ordinary shares in issue (2006: 40,030,185).
4. 2007 accounts
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 30th April 2007 and 30th April 2006 but is
derived from those accounts. Statutory accounts for 2006 have been delivered to
the Registrar of Companies. The statutory accounts for 2006 and 2007 both
received an audit report which was unqualified and did not contain a statement
under section 237(2) or (3) of the Companies Act 1985. The statutory accounts
for the year ended 30th April 2007 have not yet been delivered to the Registrar
of Companies and will be delivered following the Annual General Meeting.
5. Dividend
The Directors declare a second interim dividend of 1.3p per ordinary share,
which will be paid on 31st August 2007 to eligible shareholders on the register
as at close of business on 17th August 2007.
The Annual Report will be sent to shareholders in early August 2007 and
thereafter copies will be available from the registered office at Cassini House,
57 St James's Street, London SW1A 1LD. The Annual General Meeting of the Company
will be held on Thursday, 6th September 2007.
Artemis Investment Management Limited
Secretary
6th August 2007
For further information, please contact:
Billy Aitken at Artemis Investment Management Limited
Telephone: 0131 225 7300
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