Interim Results
Artemis Alpha Trust PLC
08 January 2007
Chairman's Statement
Performance
The six months to 31st October 2006 has been a difficult period for your
Company. The diluted net asset value has fallen from its year end value of
229.67p to 195.06p, a fall of 15.1% on a capital basis and minus 14.5% on a
total return basis, taking dividends into account. Whilst it is always
disappointing to report a period of poor performance, it should be viewed in the
context of the Company's objective of producing above average rates of return
over the longer term. Since the appointment of Artemis Investment Management as
the Company's investment manager, the diluted net asset value has risen by
179.4%. At the time of writing the Company's diluted net asset value stood at
213.84p per ordinary share.
The Company's significant exposure to the oil & gas sector had the largest
influence on performance over the six months to 31st October 2006. With the oil
price falling sharply from its summer high, many companies' share prices have
fallen and this in turn has adversely affected your Company's net asset value.
Another feature of the market over recent months has been greater investor
appetite for larger cap stocks over smaller caps and those traded on AIM. The
Company's exposure to smaller caps, particularly AIM traded companies has had a
negative bearing on the performance. The divergence of performance between the
large and small caps over the reporting period is illustrated by the rise in the
FTSE 100 Index 2.8% in contrast to the FTSE AIM All Share Index which fell by
20.3%.
Of the Company's small cap investments, a number are in unlisted companies.
Investment is often made at a pre IPO stage and your Manager believes that this
will continue to provide good investment opportunities. Subsequent to the
reporting period end, one of the unlisted investments, Salamander Energy, listed
on the London Stock Exchange, and this produced an uplift over cost of
approximately £2.3 million. At the time of writing the Company's exposure to
unlisted investments represented 19% of net assets, when valued at the lower of
cost or realisable value and 23% at their fair value, as determined by the
Directors.
The Company is subject to an investment constraint that restricts investment in
unlisted securities to the extent that such investments will not exceed 10% of
the net asset value, unless otherwise authorised by the Board. As the Board
considers the opportunities available to the Manager in the unlisted sector to
be attractive, it has waived this investment constraint and has given the
Manager the ability to invest up to 30% of net assets. The Board intends to
formalise this arrangement by putting a resolution to shareholders at the annual
general meeting.
Dividends
Your Board declares a first interim dividend for the year to 30th April 2007 of
1.0p per ordinary share. This dividend has been maintained at the same level as
last year and it is intended that any increase in total dividends for the year
to 30th April 2007 will be reflected in the second interim for the year.
The first interim dividend will be paid on 16th February 2007, to those
shareholders on the register at close of business on 19th January 2007.
Buy Back of Shares
During the period the Company utilised its authority to buy back its own shares
by acquiring 125,000 shares at a cost of £234,000. These shares were bought at a
discount to the diluted net asset value of around 4.1% and will be held in
treasury.
Investment Plan
The Company's shares can be acquired in a cost effective manner through the
Investment Plan, which features a lump sum and regular monthly investment
options. Further details and documentation can be obtained from the Manager's
web site at www.artemisonline.co.uk/pdf/brochures/alphatrustinvestmentplan.pdf,
or by contacting the Manager on 0800 092 2051.
Outlook
Your Board continues to remain relatively cautious about the market, and slowing
economic growth, rising interest rates and continuing geopolitical tensions
reinforce this viewpoint. Conversely there are substantial funds awaiting
investment, in particular from the private equity sector and this should provide
continuing support for equity markets. Equities therefore appear to offer
reasonable value relative to other asset classes, and the Board believes that
the Company's broad investment policy will identify investment opportunities
which will ensure continued growth in the Company's net assets.
Simon Miller
Chairman
8th January 2007
Investment Manager's Report
Review of the period
Our strategy to focus on the oil exploration sector started well but a
combination of over exuberance on valuation, disappointing corporate news and
drilling announcements caused a massive de-rating of the sector. Against a
background of a falling oil price over the summer, it has been impossible to
make the returns we have been in need of.
From a stock selection overview we have continued to have successes such as
Petrohunter and Salamander Energy, but these have been overshadowed by the
underperformance of Solana Resources, whose management team promised much but
have delivered nothing but disappointment, a common trait in this sector.
Although we have reduced our exposure to the sector, our feeling is not to give
up but try harder to identify the less speculative investment.
Amongst our other large investments we have had good news, such as the bid for
Whitehead Mann and the re-rating of uranium companies such as Urasia Energy and
Geiger Counter. But like any focussed, best ideas portfolio, we have been wrong
with companies such at Blueheath and Healthcare Enterprises.
Within the unquoted portfolio, the largest holding remains Artemis Investment
Management. I am pleased to report this business continues to grow and provides
the potential of higher re-rating within the portfolio. We have added to our
financial exposure by buying a holding in BlueBay Asset Management, the growing
credit asset management business, which offers considerable growth opportunities
in this sector.
Outlook
At the time of writing, the UK stock market continues to look an attractive
place to invest and make money. The usual risk caveats apply such as the US
deficit, inflation and the ongoing issues of world security, but we have been in
this situation for a long time.
The underlying portfolio offers the best ideas of our investment team and there
will be fallow periods but unlike many investment funds the Managers have a
direct interest in making the Company's portfolio perform.
John Dodd
Artemis Investment Management Limited
8th January 2007
Consolidated Income Statement
For the six months ended 31st October 2006
Six months ended Six months ended Year ended
31st October 2006 31st October 2005 30th April 2006 (Audited)
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment income 663 -- 663 596 -- 596 1,272 -- 1,272
Other income 121 -- 121 148 -- 148 575 -- 575
--------- -------- -------- -------- -------- -------- ---------- -------- --------
Total revenue 784 -- 784 744 -- 744 1,847 -- 1,847
--------- -------- -------- -------- -------- -------- ---------- -------- --------
(Losses)/gains on
investments -- (13,240) (13,240) -- (3,358 ) (3,358 ) -- 19,003 19,003
(Losses)/gains on current
asset investments (93 ) -- (93 ) 32 -- 32 (23 ) -- (23 )
Currency gains/(losses) -- 23 23 -- (37 ) (37 ) -- (50 ) (50 )
--------- -------- -------- -------- -------- -------- ---------- -------- --------
Total income 691 (13,217) (12,526) 776 (3,395 ) (2,619 ) 1,824 18,953 20,777
--------- -------- -------- -------- -------- -------- ---------- -------- --------
Expenses
Investment management fees (27 ) (246 ) (273 ) (28 ) (249 ) (277 ) (58 ) (520 ) (578 )
Other expenses (186 ) - (186 ) (164 ) -- (164 ) (339 ) -- (339 )
--------- -------- -------- -------- -------- -------- ---------- -------- --------
Profit/(loss) before finance
costs and tax 478 (13,463) (12,985) 584 (3,644 ) (3,060 ) 1,427 18,433 19,860
--------- -------- -------- -------- -------- -------- ---------- -------- --------
Finance costs (32 ) (283 ) (315 ) (34 ) (305 ) (339 ) (64 ) (570 ) (634 )
--------- -------- -------- -------- -------- -------- ---------- -------- --------
Profit/(loss) before tax 446 (13,746) (13,300) 550 (3,949 ) (3,399 ) 1,363 17,863 19,226
--------- -------- -------- -------- -------- -------- ---------- -------- --------
Tax (13 ) 10 (3) (40 ) 40 -- (154 ) 209 55
--------- -------- -------- -------- -------- -------- ---------- -------- --------
Profit/(loss) for the period 433 (13,736) (13,303) 510 (3,909 ) (3,399 ) 1,209 18,072 19,281
--------- -------- -------- -------- -------- -------- ---------- -------- --------
Earnings per Ordinary share
(basic) 2 1.30p (41.18 )p(39.88 )p 1.53p (11.73 )p(10.20 )p 3.63p 54.21p 57.84p
Earnings per Ordinary share
(diluted) 2 1.20p (38.12 )p(36.92 )p 1.42p (10.91 )p(9.49 )p 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.
Consolidated Balance Sheet
As at 31st October 2006
31st October 31st October 2005 30th April 2006
Note 2006 £'000 £'000
£'000 (Unaudited) (Audited)
(Unaudited)
Non-current assets
Investments 77,744 69,838 87,511
--------------- ----------------- ---------------
Current assets
Investments held by subsidiary 818 1,246 768
Other receivables 874 237 1,202
Cash and cash equivalents 2,332 3,285 7,994
--------------- ----------------- ---------------
4,024 4,768 9,964
--------------- ----------------- ---------------
Total assets 81,768 74,606 97,475
--------------- ----------------- ---------------
Current liabilities
Other payables (388 ) (1,906 ) (2,158 )
Bank loan (11,500 ) (11,500 ) (11,500 )
--------------- ----------------- ---------------
(11,888 ) (13,406 ) (13,658 )
--------------- ----------------- ---------------
Net assets 69,880 61,200 83,817
--------------- ----------------- ---------------
Equity attributable to equity holders
Share capital 333 333 334
Share premium 23,984 23,912 23,984
Special reserve 7,974 8,208 8,208
Warrant reserve 1,299 1,101 1,299
Capital redemption reserve 3 2 2
Retained earnings -- revenue 1,573 1,175 1,540
Retained earnings -- capital 34,714 26,469 48,450
--------------- ----------------- ---------------
Equity shareholders' funds 69,880 61,200 83,817
--------------- ----------------- ---------------
Net asset value per Ordinary share (basic)
3 210.27p 183.67p 251.26p
Net asset value per Ordinary share
(diluted) 3 195.06p 172.62p 229.67p
--------------- ----------------- ---------------
Consolidated Statement of Changes in Equity
For the six months ended 31st October 2006
Six months ended 31st October 2006 (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
Net assets
at 1st May 334 23,984 8,208 1,299 2 1,540 48,450 83,817
2006
Dividends
paid and -- -- -- -- -- (400 ) -- (400 )
declared
Profit/
(loss) on
ordinary -- -- -- -- -- 433 (13,736 ) (13,303 )
activities
after
taxation
Repurchase
of own (1 ) -- (234 ) -- 1 -- -- (234 )
shares
-------------- -------------- -------------- ------------- ------------- ------------- ------------- -------------
Net assets
at 31st
October 2006 333 23,984 7,974 1,299 3 1,573 34,714 69,880
-------------- -------------- -------------- ------------- ------------- ------------- ------------- -------------
Six months ended 31st October 2005 (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
Net assets at
1st May 2005 333 23,912 8,208 1,101 2 1,001 30,378 64,935
Dividends
paid and -- -- -- -- -- (336 ) -- (336 )
declared
Profit/(loss)
on ordinary
activities -- -- -- -- -- 510 (3,909 ) (3,399 )
after
taxation
------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
Net assets at
31st October
2005 333 23,912 8,208 1,101 2 1,175 26,469 61,200
------------- ------------- ------------- ------------- ------------- ------------- -------------- -------------
Year ended 30th April 2006 (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
Net assets at
1st May 2005 333 23,912 8,208 1,101 2 1,001 30,378 64,935
Dividends
paid and -- -- -- -- (670 ) -- (670 )
declared --
Profit on
ordinary
activities -- -- -- -- -- 1,209 18,072 19,281
after
taxation
Issue of
manager -- -- -- 198 -- -- -- 198
warrants
Issue of 1 72 -- -- -- -- -- 73
shares
------------- ------------ ------------- ------------- -------------- ------------ -------------- -------------
Net assets at
30th April 334 23,984 8,208 1,299 2 1,540 48,540 83,817
2006
------------- ------------ ------------- ------------- -------------- ------------ -------------- -------------
Consolidated Cash Flow Statement
For the six months ended 31st October 2006
Six months ended Six months ended Year ended
31st October 31st October 30th April
2006 2005 2006
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Operating activities
Profit before tax (13,303 ) (3,399 ) 19,226
Losses/(gains) on investments 13,240 3,358 (19,003 )
(Gain)/loss on foreign exchange (23 ) 37 50
Net movement in current asset investments 93 (32 ) 23
Increase in receivables (160 ) (122 ) (313 )
(Decrease)/increase in payables (187 ) (79 ) 36
Interest payable 315 339 634
Overseas tax recovered -- 6 6
---------------- ---------------- --------------
Net cash (outflow)/inflow from operating activities before interest (25 ) 108 659
and tax
---------------- ---------------- --------------
Interest paid (309) (311 ) (607 )
Corporation tax refunded/(paid) 24 -- (445 )
---------------- ---------------- --------------
Net cash outflow from operating activities (310 ) (203 ) (393 )
---------------- ---------------- --------------
Investing activities
Purchases of investments (21,144 ) (15,516 ) (35,768 )
Sales of investments 16,403 17,895 43,172
---------------- ---------------- --------------
Net cash (outflow)/inflow from investing activities (4,741 ) 2,469 7,404
---------------- ---------------- --------------
Financing activities
Share repurchase (234 ) -- --
Dividends paid (400 ) (336 ) (670 )
Issue of manager warrants -- -- 198
Issue of shares -- -- 73
Expenses of share issue -- (12 ) (72 )
---------------- ---------------- --------------
Net cash outflow from financing activities (634 ) (348 ) (471 )
---------------- ---------------- --------------
Net (decrease)/increase in cash and cash equivalents (5,685 ) 1,918 6,540
---------------- ---------------- --------------
Cash and cash equivalents at start of period (3,506 ) 1,404 (10,096 )
Effect of foreign exchange rate changes 23 (37 ) 50
---------------- ---------------- --------------
Cash and cash equivalents at end of period (9,168 ) 3,285 (3,506 )
---------------- ---------------- --------------
Notes to the Financial Statements
1. Accounting Policies
The Group's interim financial statements have been prepared in accordance with
International Financial Reporting Standards (''IFRSs'') as adopted by the
European Union (''EU'') in accordance with the provisions of the Companies Act
1985 (the ''Act'') and with the guidance set out in the Statement of Recommended
Practice (''SORP'') for investment trusts issued by the Association of
Investment Companies (''AIC'') in December 2005.
The interim financial statements have been prepared under the same accounting
policies as the annual financial statements for the year ended 30th April 2006.
The principal activity of the Company is that of an investment trust company
within the meaning of Section 842 of the Income and Corporation Taxes Act 1988.
2. Earnings per Ordinary share
The basic revenue return per Ordinary share is based on the net revenue on
ordinary activities after tax of £433,000 (30th April 2006: £1,209,000; 31st
October 2005: £510,000) and on 33,355,091 (30th April 2006: 33,338,030; 31st
October 2005: 33,320,799) Ordinary shares, being the weighted average number of
Ordinary shares in issue during the period. Basic capital returns per Ordinary
share is based on net capital losses after tax of £13,736,000 (30th April 2006:
gains of £18,072,000; 31st October 2005: losses of £3,909,000) and on 33,355,091
(30th April 2006: 33,338,030; 31st October 2005: 33,320,799) Ordinary shares,
being the weighted average number of Ordinary shares in issue during the period.
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 warrants by reference to the average share
price of the Ordinary shares during the period/year. The calculations indicate
that the exercise of warrants would result in an increase in the weighted
average number of Ordinary shares of 2,673,185 (30th April 2006: 2,583,320; 31st
October 2005: 2,494,670).
3. Net asset value per Ordinary share
The basic net asset value per Ordinary share is based on net assets of
£69,880,000 (30th April 2006: £83,817,000; 31st October 2005: £61,200,000) and
on 33,233,488 (30th April 2006: 33,358,488; 31st October 2005: 33,320,799)
Ordinary shares, being the number of Ordinary shares in issue at the period end.
The diluted net asset value per Ordinary share has been calculated on the
assumption that all manager warrants in issue which were 'in the money', i.e.
their exercise price was above the basic net asset value per Ordinary share at
the period end, were exercised. This results in a total of number of Ordinary
shares in issue at 31st October 2006 of 39,352,177 (30th April 2006: 40,030,185;
31st October 2005: 39,439,488).
4. Transaction costs
Six months ended Six months ended Year ended
31st October 31st October 30th April
2006 2005 2006
£'000 £'000 £'000
Sales 53 42 123
Purchases 11 8 26
64 50 149
5. Comparative information
The interim financial information for the six months ended 31st October 2006 and
31st October 2005 has not been audited and does not constitute statutory
financial statements as defined in Section 240 of the Companies Act 1985. The
information for the year ended 30th April 2006 has been extracted from the
audited financial statements for the year then ended. 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
237 (2) and (3) of the Companies Act 1985.
6. Copies of the interim report will be sent to shareholders in January 2007 and
will be available from the Company Secretary.
Artemis Investment Management Limited
Company Secretary
8th January 2007
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