Half Yearly Report

RNS Number : 5856E

Artemis Alpha Trust PLC

22 December 2009

 



ARTEMIS ALPHA TRUST PLC (the "Company")

Half-Yearly Financial Report for the six months ended 31 October 2009

This announcement contains regulated information

Chairman's Statement

Performance

The last six months have seen a dramatic reversal of the significant falls in asset values that followed the global financial crisis. Action by governments around the world since the end of 2008, through interest rate cuts and increased money supply (quantitative easing), seems to have prevented a prolonged global recession. Indeed, in the third quarter of 2009 most of the developed economies have returned to modest growth, with the notable exception of the UK. 

Renewed optimism has been reflected in stock markets' performances. The broader UK market, as represented by the FTSE All-Share Index, rose by 21.2 per cent over the six months ended 31 October 2009. At the smaller company end of the market, the FTSE Small Cap (ex IT) Index increased by 31.1 per cent. This has benefited your Company, which has performed well over the period, with the diluted net asset value increasing by 31.5 per cent to stand at 248.22p per share as at 31 October 2009.

Unquoted investments

Within the Company's unquoted portfolio, there have been two notable events during the period. The value of the Company's largest investment, Hurricane Exploration, was increased following the sale of a small portion of the holding to a third party. Hurricane announced that it had discovered light oil in its West of Shetland prospect, although further work is being undertaken to determine the scale of this find. There was further positive news on the other significant unquoted investment in the portfolio, Vostok Energy: it secured further financing. This will enable it to develop its gas fields in the Saratov region of Russia and begin production in 2010. 

Your Board continues to review the unquoted investments formally each quarter. As at 31 October 2009, these investments represented 33.9 per cent of the Company's net assets. 

Dividends

Your Board has declared a first interim dividend for the year ending 30 April 2010 of 1.15p per share (2008: 1.10p). This is a 4.5 per cent increase over the equivalent dividend last year. This dividend will be paid on 29 January 2010 to those shareholders on the register as at 8 January 2010.

Share capital

To try to minimise the discount to net asset value at which its shares trade, the Company has continued to buy back its own shares, where necessary. During the period under review, the Company bought 66,000 shares at an average discount of 7.6 per cent and at a cost of £129,000. At the period end, the Company's share price stood at a discount of 5.9 per cent to the diluted net asset value. 

The Company also issued 102,715 shares in the period as a result of an exercise of manager warrants. 

Investment Plan

The Investment Plan is available for those wishing to invest in the Company either through regular monthly contributions or by one-off, lump sum investment. This is operated by the Investment Manager. Details are available at www.artemisonline.co.uk, or by calling 0800 092 2051. 

Outlook

After such strong stock market returns over recent months, questions arise over the sustainability of this rally. The economic outlook remains uncertain. Although there appear to be the first signs of improvement, much depends on the strength and pace of the economic recovery and, in the UK, the result of next year's General Election.  

Although corporate earnings have started to improve, this has been mainly as a result of cost-cutting. In order to maintain the recovery, markets will need evidence of increased end-demand and rising corporate revenues.  

The Company has performed well over the past six months, and your Board believes that the portfolio remains well positioned to benefit from an improving economic environment.  

At the time of writing, the Company's diluted net asset value stood at 255.84p per share and the share price was 240.00p per share, representing a discount of 6.2 per cent.

I look forward to reporting to you again following the Company's year end on 30 April 2010.

Simon Miller

Chairman

22 December 2009

  Investment Manager's Review

Review of the period

The pace of the recovery in financial markets has surprised many, not least because the scale of the problems that originally caused the correction has yet to be fully addressed. Government injections of monetary stimulus have fuelled the recovery in world stock markets, particularly in emerging markets. In the UK we have seen a much higher degree of intervention by the government, particularly in the banking sector, which has resulted in significant levels of government debt. Although there are pockets of improvement in the economy, unemployment continues to rise and companies are making adjustments to cope with the constraints on the availability of credit.  

Against this background we have seen many negative trends reversed which have helped the portfolio. The recovery in commodity prices, especially the oil price, has boosted our holdings in this area, such as Salamander Energy, which is also benefitting from its extensive drilling program in the Far East. We have added to our exposure to the sector with purchases of Cove Energy, which is focused on the Mediterranean and Africa, and Zhaikmunai, which has production interests in Kazakhstan. During the period we supported a fund raising by Providence Resources, which is building a gas storage business in the southern Irish Sea, which offers excellent growth prospects. 

The other significant driver of performance has been the recovery of the palm oil price, which has helped New Britain Palm Oil. We have reduced our holding following this rerating. 

Within the financial sector we have continued our strategy of avoiding the mainstream UK banking sector. Following a good recovery in share prices we have sold our positions in Close Brothers, F&C Asset Management, Liontrust Asset Management and Polar Capital. Given the attractive outlook for emerging markets, we have bought Ashmore, a specialist credit asset manager in this area. Other new holdings include Syndicate Asset Management and we have added to BlueBay and Hargreaves Lansdown. We have also established holdings in the property sector by buying Hansteen and NewRiver Retail, which are businesses led by strong and experienced management teams.

The unquoted portfolio has had both some good news and also disappointments, which is not surprising given the conditions for raising new money. The most significant holdings, Hurricane Exploration and Vostok Energy, which represent 23.1 per cent of the portfolio, have reported positive updates, which are covered in the Chairman's Statement. 

Elsewhere in the unquoted portfolio there have been a number of delays in some companies raising finance and also completing corporate transactions. Against this background, a provision has been taken against these investments where appropriate. The latest investment we have made in the unquoted area is in a very exciting opportunity for a technology led business in building re-usable and more cost effective rockets. Reaction Engines is a UK based company which is developing heat exchangers which pre-cool air for rocket engines. The company designs and develops advanced space propulsion systems and has recently been awarded a large grant from the European Space Agency to undertake further development work.

The UK stock market looks reasonable value at present and, although it has risen ahead of a material improvement in the economy, we believe there remain some good buying opportunities and therefore gearing has been increased during the period and stands at 5 per cent at the period end. This has been invested in a number of new holdings including Handmade, Debenhams, Telford Homes and Ideal Shopping Direct. We have also supported a number of distressed rights issues including UK Coal. Investments sold include Playtech, Ceramic Fuel Cells and BAE Systems. There were a number of takeovers during the period including CAMEC and Genesis Petroleum and we expect this trend to continue as the stronger companies take advantage of their position.

Outlook

As the calendar year draws to a close we can reflect on the many opportunities to buy a number of companies on relatively cheap valuations over the summer. Many investors have remained cautious over this period, however, sentiment has, since then, turned a little more positive. Levels of debt remain high but the days of cheap money are clearly over. As this situation unwinds the stock market should move forward. We will continue to seek to identify exciting companies to invest in and shareholders can follow the progress of the Company through our website. We look forward to reporting further at the Company's year end.

John Dodd

Investment Manager

Artemis Investment Management Limited

22 December 2009

  Responsibility Statement of the Directors in respect of the Half-Yearly Financial Report

We confirm that to the best of our knowledge, in respect of the Half-Yearly Financial Report for the six months ended 31 October 2009:

•    the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim
     Financial Reporting' issued by the International Accounting Standards Board as adopted by 
     the EU;

           •     the interim management report includes a fair review of the information required by:

                (a)    Disclosure and Transparency Rule 4.2.7R (indication of important events during the first six
                        months; and a description of the principal risks and uncertainties for the remaining six
                        months of the year); and

                (b)    Disclosure and Transparency Rule 4.2.8R (related party transactions). 

For and on behalf of the Board

Simon Miller

Chairman

22 December 2009

  Condensed Income Statement

For the six months ended 31 October 2009

		Six months ended 31 October 2009 (unaudited)			Six months ended 31 October 2008  (unaudited)			Year ended 30 April 2009  (audited)
		Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Investment income		635	--	635	278	--	278	723	--	723
Other income		304	--	304	(129)	--	(129)	42	--	42
Total revenue		939	--	939	149	--	149	765	--	765
Gains/(losses) on investments		--	21,453	21,453	--	(31,234)	(31,234)	--	(24,528)	(24,528)
(Losses)/gains on current asset investments		(21)	--	(21)	170	--	170	169	--	169
Currency gains/(losses)		--	12	12	--	17	17	--	(61)	(61)
Total income		918	21,465	22,383	319	(31,217)	(30,898)	934	(24,589)	(23,655)
Expenses
Investment management fees		(23)	(206)	(229)	(25)	(224)	(249)	(43)	(388)	(431)
VAT recoverable on investment management fees		--	--	--	--	--	--	24	215	239
Other expenses		(165)	--	(165)	(174)	--	(174)	(332)	--	(332)
Profit/(loss) before finance costs and tax		730	21,259	21,989	120	(31,441)	(31,321)	583	(24,762)	(24,179)
Finance costs		(3)	(31)	(34)	(30)	(268)	(298)	(32)	(285)	(317)
Profit/(loss) before tax		727	21,228	21,955	90	(31,709)	(31,619)	551	(25,047)	(24,496)
Tax		(71)	50	(21)	--	--	--	(49)	11	(38)
Profit/(loss) for the period		656	21,278	21,934	90	(31,709)	(31,619)	502	(25,036)	(24,534)
Earnings per share (basic)	2	2.16p	70.02p	72.18p	0.28p	(99.29)p	(99.01)p	1.58p	(78.80)p	(77.22)p
Earnings per share (diluted)	2	1.99p	64.62p	66.61p	0.26p	(89.88)p	(89.62)p	1.47p	(73.43)p	(71.96)p

The total column of this statement represents the Statement of Comprehensive Income of the Group, prepared in accordance with International Financial Reporting Standards. 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.  Condensed Balance Sheet

As at 31 October 2009

	Note	31 October 2009 £'000 (unaudited)	31 October 2008 £'000 (unaudited)	30 April 2009 £'000 (audited)
Non-current assets
Investments		90,228	52,911	59,285
Current assets
Investments held by subsidiary		130	1	--
Other receivables		164	212	791
Cash		661	4,740	3,015
		955	4,953	3,806
Total assets		91,183	57,864	63,901
Current liabilities
Other payables		(2,299)	(244)	(690)
Bank loan		(5,000)	--	--
		(7,299)	(244)	(690)
Net assets		83,884	57,620	62,401
Equity attributable to equity holders
Share capital		328	334	327
Share premium		24,117	23,984	23,984
Special reserve		2,749	4,833	2,878
Warrant reserve		1,278	1,299	1,299
Capital redemption reserve		9	2	9
Retained earnings -- revenue		1,784	1,521	1,584
Retained earnings -- capital	5	53,619	25,647	32,320
Total equity		83,884	57,620	62,401
Net asset value per share (basic)	3	275.56p	182.02p	205.23p
Net asset value per share (diluted)	3	248.22p	170.75p	189.69p

  Condensed Statement of Changes in Equity

For the six months ended 31 October 2009

	Six months ended 31 October 2009 (unaudited)
					Capital
	Share	Share	Special	Warrant	redemption	Retained earnings
	capital	premium	reserve	reserve	reserve	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 May 2009	327	23,984	2,878	1,299	9	1,584	32,320	62,401
Profit for the period	--	--	--	--	--	656	21,278	21,934
Repurchase of own shares	--	--	(129)	--	--	--	--	(129)
Exercise of manager warrants	1	133	--	(21)	--	--	21	134
Dividends paid	--	--	--	--	--	(456)	--	(456)
At 31 October 2009	328	24,117	2,749	1,278	9	1,784	53,619	83,884

	Six months ended 31 October 2008 (unaudited)
					Capital
	Share	Share	Special	Warrant	redemption	Retained earnings
	capital	premium	reserve	reserve	reserve	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 May 2008	334	23,984	6,762	1,299	2	1,888	57,356	91,625
Profit/(loss) for the period	--	--	--	--	--	90	(31,709)	(31,619)
Repurchase of own shares	--	--	(1,929)	--	--	--	--	(1,929)
Dividends paid	--	--	--	--	--	(457)	--	(457)
At 31 October 2008	334	23,984	4,833	1,299	2	1,521	25,647	57,620

	Year ended 30 April 2009 (audited)
					Capital
	Share	Share	Special	Warrant	redemption	Retained earnings
	capital	premium	reserve	reserve	reserve	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 May 2008	334	23,984	6,762	1,299	2	1,888	57,356	91,625
Profit/(loss) for the period	--	--	--	--	--	502	(25,036)	(24,534)
Repurchase of own shares	(7)	--	(3,884)	--	7	--	--	(3,884)
Dividends paid	--	--	--	--	--	(806)	--	(806)
At 30 April 2009	327	23,984	2,878	1,299	9	1,584	32,320	62,401

  Condensed Cash Flow Statement

For the six months ended 31 October 2009

	Six months ended 31 October 2009 (unaudited) £'000	Six months ended 31 October 2008 (unaudited) £'000	Year ended 30 April 2009 (audited) £'000
Operating activities
Profit/(loss) before tax	21,955	(31,619)	(24,496)
Interest payable	34	298	317
(Gains)/losses on investments	(21,453)	31,234	24,528
Currency (gains)/losses	(12)	(17)	61
Net movement in current asset investments	21	(170)	(169)
Decrease/(increase) in other receivables	336	61	(228)
Increase/(decrease) in other payables	8	(55)	(37)
Net cash inflow/(outflow) from operating activities before interest and tax	889	(268)	(24)
Interest paid	(34)	(352)	(371)
Corporation tax paid	--	--	(1)
Withholding tax paid	(21)	--	(38)
Net cash inflow/(outflow) from operating activities	834	(620)	(434)
Investing activities
Purchases of investments	(29,898)	(15,735)	(22,854)
Sales of investments	22,149	34,468	42,058
Net cash (outflow)/inflow from investing activities	(7,749)	18,733	19,204
Financing activities
Repurchase of own shares	(129)	(1,929)	(3,884)
Exercise of manager warrants	134	--	--
Dividends paid	(456)	(457)	(806)
Net cash outflow from financing activities	(451)	(2,386)	(4,690)
Net (decrease)/increase in cash and cash equivalents	(7,366)	15,727	14,080
Cash and cash equivalents at the start of the period	3,015	(11,004)	(11,004)
Effect of foreign exchange rate changes	12	17	(61)
Cash and cash equivalents at the end of the period	(4,339)	4,740	3,015
Bank Loan	(5,000)	--	--
Cash	661	4,740	3,015
	(4,339)	4,740	3,015

Notes 

1. Accounting policies

The Group's Half-Yearly Financial Report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', the provisions of the Companies Act 2006 and with the guidance set out in the Statement of Recommended Practice for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies in January 2009. 

The Half-Yearly Financial Report has been prepared under the same accounting policies as the Annual Financial Report for the year ended 30 April 2009.

2. Earnings per share

	Six months ended 31 October 2009	Six months ended 31 October 2008	Year ended 30 April 2009
Earnings per share is based on: Revenue earnings (£'000) Capital earnings (£'000)	656 21,278	90 (31,709)	502 (25,036)
Total earnings (£'000)	21,934	(31,619)	(24,534)
Weighted average number of shares in issue during the period (basic) Weighted average number of shares in issue during the period (diluted)	30,388,992 32,927,822	31,934,315 35,280,410	31,769,952 34,093,382

3. Net asset value per share

	As at 31 October 2009	As at 31 October 2008	As at 30 April 2009
Net asset value per share is based on: Net Assets (£'000)	83,884	57,620	62,401
Number of shares in issue at the end of the period (basic)	30,441,703	31,656,488	30,404,988
Assumed exercised manager warrants at end of period	6,568,982	6,118,689	6,118,689
Number of shares in issue at the end of the period (diluted)	37,010,685	37,775,177	36,523,677

4. Dividends

	Six months ended 31 October 2009 £'000	Six months ended 31 October 2008 £'000	Year ended 30 April 2009 £'000
Second interim dividend for the year ended 30 April 2008 - 1.40p	--	457	457
First interim dividend for the year ended 30 April 2009 - 1.10p	--	--	349
Second interim dividend for the year ended 30 April 2009 - 1.50p	456	--	--
	456	457	806

A first interim dividend for the year ended 30 April 2010 of £350,000 (1.15p per share) has been declared. This will be paid on 29 January 2010 to those shareholders on the register at close of business on 8 January 2010.

5. Analysis of retained earnings - capital

	31 October 2009 £'000	31 October 2008 £'000	30 April 2009 £'000
Retained earnings - capital (realised)	44,293	55,098	43,765
Retained earnings - capital (unrealised)	9,326	(29,451)	(11,445)
	53,619	25,647	32,320

6. Comparative information

The financial information for the six months ended 31 October 2009 and 31 October 2008 has not been audited and does not constitute statutory financial statements as defined in Section 234 of the Companies Act 2006.

The information for the year ended 30 April 2009 has been extracted from the Annual Financial Report for the year ended 30 April 2009. These financial statements contained an unqualified Auditor's report and have been lodged with the Registrar of Companies and did not contain a statement required under Section 498 of the Companies Act 2006.    

Copies of the Half-Yearly Financial Report for the six months ended 31 October 2009 will be sent out to shareholders shortly and will be available from the registered office at Cassini House, 57 St. James's Street, London SW1A 1LD as well as on the website of the Investment Manager, www.artemisonline.co.uk.

7. Principal risks and uncertainties

The principal risks faced by the Company include general market price risk, liquidity risk, regulatory, operational and financial risks.

These risks, which have not materially changed since the Annual Financial Report for the year ended 30 April 2009, and the way in which they are managed are described in more detail in the Annual Financial Report for the year ended 30 April 2009 which is available on the Investment Manager's website at www.artemisonline.co.uk.

8.  Related party transactions

There were no related party transactions during the period.

Artemis Investment Management Limited

Company Secretary

For further information, please contact:

Billy Aitken at Artemis Investment Management Limited

Telephone: [phone]

22 DECEMBER 2009

 

END

 

 

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