Final Results

RNS Number : 1384J

Athelney Trust PLC

25 March 2010

 



Embargoed 7am Thursday March 25 2010

ATHELNEY TRUST plc: ANNUAL RESULTS

Athleney Trust plc, the investor in small companies and junior markets, announces its results for the 12 months ending December 31 2009.

Highlights:

·    Audited Nest Asset Value ("NAV") up 33.4 per cent at 127p per share (2008: 95.2p)

·    Gross Revenue of £122,963 (2008: £123,951)

·    Revenue return per Ordinary Share of 5.3p (2008: 5.5p)

·    No final dividend as interim dividend of 4.75p approved to be paid on April 1 2010

Chairman Hugo Deschampsneufs said:  "The year 2009 was a disappointing one as far as dividends were concerned with private investors on average receiving 15 per cent less than in 2008.  In total, 202 UK companies cut their dividends in 2009, of which more than one third paid no dividend at all.

"During the year Athleney purchased shares in nine companies for the first time while selling out of 15 others.  In addition, a total of 14 holdings were top sliced to provide capital for the new purchases.   During the year the Company incurred actual realised capital profits arising on the sale of investments in the sum of £118,623.

"Last year it was the banks: this year it is countries.  The economic crisis, which seemed to have moderated in the latter part of 2009, is once again in full swing as the threat of sovereign default grows, with all eyes on Greece and other members of Club Med such as Spain, Portugal and Italy. 

"Not only that but policy changes abroad are worrying investors: China is reigning in lending, Brazil's fiscal stimulus is being phased out, India's central bank has raised reserve requirements whereas other central banks are gradually unwinding the emergency liquidity facilities they introduced at the height of the crisis. All this has knocked confidence, share prices and commodities. 

"The way forward is clear: we must encourage productivity, investment and competition, free trade, cut spending rather than raising taxes and agree new financial regulations.  Oh yes, and we must reform public sector pensions, raise the retirement age and means-test benefits.  None of this will help markets in the short-term, which is why I am hoping for a small rise of 5-7 per cent this year rather than something more dramatic"

-ends-

For further information:

Robin Boyle, Managing Director

Athelney Trust plc                                                                                 020 7628 7937

Paul Quade                                                                                          020 7248 8010

CityRoad Communications                                                                    07947 186694.

CHAIRMAN'S STATEMENT AND BUSINESS REVIEW

I announce the results for the year ended 31 December 2009.  The salient points are as follows:

·    Audited Net Asset Value ("NAV") was 127p per share (31 December 2008: 95.2p) an increase of 33.4 per cent.

·    Gross Revenue decreased by 0.8 per cent to £122,963 (31 December 2008: £123,951).

·    Revenue return per ordinary share was 5.3p, a decrease of 3.6 per cent (31 December 2008: 5.5p).

·    In respect of the year ended 31 December 2009 an Interim Dividend of 4.75p per share was approved for payment on 01 April 2010.

 

 

Review of 2009

More than any other time in history, mankind faces a crossroads.  One path leads to despair and utter hopelessness: the other, to total extinction.  Let us pray we have the wisdom to choose correctly.

Woody Allen 1935-    : Side effects (1980) 'My Speech to the Graduates'

The air of immediate crisis is over.  The patient is recovering but is still far too dependent on the drug of government spending.  The coming year (including the General Election campaign) will be dominated by a debate about how quickly that support can be taken away.  Two shocks have reduced the standard of living of Western economies: one is the terms-of-trade shift.  Thanks mainly to China, the prices of manufactured goods that rich countries sell have fallen - on the other hand, raw materials prices to make those goods have risen.  The other is the 'leverage' shock, in which the credit crisis has stopped companies and households from borrowing to finance consumption.  In response to the latter, governments have deliberately taken on the debts of the private sector.  In most cases, it is assumed that governments have an almost limitless capacity to assume such burdens.  But you can see welfare states as national Ponzi schemes in which governments grant benefits and take on spending responsibilities, confident in the expectation that the next generation of citizens/subjects (poor things!) will pick up the bill. Such promises have worked so far because of continued economic growth and rising populations.  But with such populations starting to fall in some countries and with the tax base shrinking in others (such as the U.K.), the strain is starting to show.  Iceland was overwhelmed by the debts of its banks.  Dubai has shown that the distinction between government debt and that of government-controlled companies can be very fuzzy indeed.  Greece has been downgraded by two rating agencies.

A zero-interest rate policy has supported assets such as equities and commercial property, while quantitative easing, by allowing central banks to buy government bonds, has prevented long-term interest rates from rising. But having taken these two steps the authorities cannot prop up their currencies even if they desired to do so.  A falling currency, after all, seems to be a painless way of boosting the prospects of exporters. 

So the Bank of England has been happy to watch sterling slide. When the time comes, will the British electorate be willing to swallow unpleasant medicine in the form of several years of austerity?  The temptation must be to try to solve the problem by raising taxes, especially if those taxes can be aimed at an unpopular group like bankers.  However, in a world of highly mobile capital and labour, this strategy seems doomed to failure in the long run.  The pain is likely to fall on the broad mass of the population.  The battle will be between the taxpayer and the public-service worker represented broadly by respectively the Conservatives and Labour.  Even if the former were to win a working majority in the Commons, it could still lose on the streets if strike action were to force a climb-down. 

The gold standard broke down in the 1930s because countries such as Britain would not pay the price in the form of austerity to maintain the link: voters came before foreign creditors.  The Bretton Woods system of fixed exchange rates broke down because America was unwilling to bear the burden of being the linchpin any longer.  Now, the system that has prevailed in the 1980s, 1990s and 2000s in which creditors trusted central banks to maintain the value of their respective currencies is breaking down as well.

Allow me, Gentle Reader, to remind you of a few of the factors that shaped the year 2009.  January: interest rates fall to their lowest level in 300 years.  The UK is now officially in recession.  February: interest rates are cut further to 1 per cent.  Car production falls by 55 per cent.  March: the Government takes a big chunk of Lloyds Banking Group.  April: Mr Darling's nasty little budget pretends that taxing the well-off will sort out our economic ills.  June: Mervyn King, Governor of the Bank of England, tells the Government to put the economic house in order.  July: factory orders fall sharply.  September: unemployment climbs steadily.  November: Dubai-based companies default.  December: market professionals digest the news that public borrowing would be £178bn in 2009 and £176bn in 2010.

And what of markets in this extraordinary year?  Without a doubt, it was the year of the emerging markets: in dollar terms, Brazil was up by 142 per cent, Russia 129 per cent and Jakarta with 115 per cent.  Some of the Middle Eastern markets did poorly, Bahrain being down by 20 per cent with Kuwait and Qatar following behind.  Looking over the decade, emerging markets again took first prize with Ukraine (yes, honestly) up by 900 per cent followed by Peru, Russia, Romania, China, Bangladesh, Slovakia, Kuwait, Estonia and the Czech Republic.  Congratulations to anyone who had anything in three or more of these markets.  At the other end of the spectrum, Iceland fell by 81 per cent over the ten years, Japan by 40 per cent, then New York and London. 

So where did all the money go which was poured into the economy by the Treasury and the Bank of England?  Some £76bn from the Treasury to buy shares in Lloyds and RBS, £200bn of liquidity by the Bank as lender of last resort, £250bn of wholesale lending by the Bank through the Credit Guarantee Scheme (CGS), £185bn of loans to banks via the Special Liquidity Scheme (SLS) and £40bn of loans to Bradford & Bingley and the Financial Services Compensation Scheme. Take a deep breath:  there is the £200bn of liabilities taken on board from the Asset Protection Scheme and the £200bn of cash pumped into the economy through quantitative easing (QE). It isn't really fair to add all these sums together - parts are merely guarantees rather than actual pledged money and much should, we all hope, come back to the Government in the end. 

QE has undoubtedly had a beneficial effect on share and commercial property markets but what of the rest?  The answer, disappointingly, is far less than had been expected, certainly in terms of bank lending.  Part of the reason the banks are reluctant to lend is that they are unsure about how far they must go in fortifying their balance sheets for the future.  Most have increased both capital and liquidity to levels far stronger than before the crisis but they are aware that the regulators will demand even higher ratios.  SLS may come to an end in 2012 and CGS in 2014: these dates may seem far off to thee and me but not to a bank offering 25-year mortgages.  With stronger regulation a racing certainty and the various Bank schemes running out of runway, the shortage of bank lending is likely to continue, thus dashing hopes for a quick recovery from this recession.

No Chairman's Statement could possibly be complete without a few polite words on the subject of the performance of our Supreme Leader, Mr. Brown.  (I exclude shouting at staff, throwing telephones, kicking furniture and the like.)  How has the U.K. done since his first full budget in March 1998?  To quote the great man himself, 'A weak currency arises from a weak economy, which in turn is the result of weak government.'  Since that date, the British pound has lost 14 per cent against the Swedish krona, 24 per cent against the Chinese renminbi, 33 per cent against the Swiss franc and 35 per cent against the Japanese yen.  The euro did not exist then but my guess is sterling has shed 27 per cent against the basket of currencies forming the euro.  As far as the Stock Exchange is concerned, the index has fallen by about 10 per cent compared with Germany (up 12 per cent), New York (up 15 per cent), Hong Kong (up 77 per cent) and so on.  Only Tokyo has done worse in terms of the world's major markets.  All share markets perform badly under Labour governments but this one has been even worse than previous incarnations.  Back again to March 1998 when he talked about Britain's 'debt reduction plan,' 'an unshakeable commitment to prudent monetary and fiscal rules' and (yes, honestly) addressing the 'structural weaknesses' of unemployment.  So what happened? Well, Britain's budget deficit at 14 per cent of GDP is higher than that of Greece and is the worst in G20.  Our stock of debt is heading for £1 trillion.  As for unemployment, today it is 7.8 per cent compared with 6.3 per cent back in 1998.

Apart from that, I think that he has done a pretty decent job.

Gold bugs throughout history have been mesmerised by the yellow metal's apparent capacity to provide a safe haven and store of value.  Unlike just about any other commodity I can think of, the global stock of gold could meet 375 years of industrial demand.  Proponents point out that the drop in jewellery sales following the rise in price has been outweighed by the surge in speculative demand without any compensating increase in mined supplies.  But such backward-looking arguments were probably heard in Holland, circa 1637, when it was seen that gardeners could no longer afford tulip bulbs but speculative investors would support the market, despite the poor growing season.  In today's terms, the gold price is round about where it was in 1265 and, indeed, one banker has pointed out that a 15^th Century gold bug who had stored all his wealth in bullion, bequeathed it to his children and required them to do the same would look from his lofty perch and see the real value of his bequest decline by 90 per cent over the next 500 years.  Calling a market top is never easy but I would not invest a brass farthing in this metal.

More intellectual confusion surrounds the theory of peak oil supply, whose followers believe that oil production is in permanent decline.  Others, who believe that the oil price will rise to match the $147 per barrel of 2008, argue that rapid growth from emerging markets, notably China, will underpin a huge rise in the price.  However, the best estimate that I have seen demonstrates that oil supply will rise by 9-10m barrels per day (bpd) by 2017, which would absorb the possible 5m bpd increase in Chinese demand.  I do not, though, pretend that squeezing an extra 9-10m bpd will be easy - Venezuela, Russia, Nigeria and Iran will, at best, provide stable supplies.  The UK, US and Norway peaked in 1999, 1970 and 2001 respectively.  However, Saudi Arabia (+3.5m bpd), Iraq (+3.7m bpd) and Kuwait, amongst others, are planning substantial capacity and production increases.  Then there are countries like Canada, second only to Saudi Arabia in reserves, Brazil, aiming to double production, Angola, plus 50 per cent by 2015, and Kazakhstan.  These increases then have to be linked with country-wide initiatives to change the environment: China is targeting 15 per cent of total energy use from alternative sources by 2020, most European countries offer subsidies for green energies, the US has legislated to raise mileage per gallon on new vehicles, and so on. OPEC spare capacity at present is as much as 6m bpd, there are dramatic increases in oil supply to come and more, much more, alternative energy all suggest to me that I should believe in peak demand, not peak supply.

The year 2009 was a disappointing one as far as dividends were concerned with private investors on average receiving 15 per cent less than in 2008.  In total, 202 UK companies cut their dividends in 2009, of which more than one third paid no dividend at all.  Bank shares, traditionally held by private investors for income, had a bad year with Royal Bank of Scotland and Lloyds Banking Group paying nothing at all and even powerful HSBC cut its payout.  Retailers' dividends fell by 62 per cent, while household goods companies did even worse at 64 per cent: cyclical companies as a group cut by 25 per cent.  In these difficult circumstances, the Board is pleased that a small increase in Athelney's total dividend for the year has proved possible.

Results

Gross Revenue decreased by 0.8 per cent compared to 2008.  A breakdown of the companies paying dividends is given below:

                                                                                                        Number

Companies paying dividends                                                                 59

Companies sold (therefore no true comparison)                                       3

Companies purchased (therefore no true comparison)                              9

Increased total dividends in the year                                                      29

Reduced total dividends in the year                                                         6

No change in dividend                                                                          11

Companies trade suspended (therefore no true comparison)                    1

 

 

 

 

 

 

 

Corporate Activity

Two companies went into Administration during the year - Smallbone and Aero Inventory.  Their shares have been valued at nil in these accounts. 

During the year the Company incurred actual realised capital profits arising on the sale of investments in the sum of £118,623.

Portfolio Review

Holdings of Alumasc, ATH Resources, Chesnara, Cineworld, Consort Medical, Fenner, Matchtech, McKay Securities, Mucklow Group and Town Centre Securities were all purchased for the first time.  Avesco, Creston, Dawson Holdings, FDM Group, Finsbury Food Group, Galliford Try, Gooch & Housego, Mallett, Nichols, OPD Group, Pennant International, Prime People, Shepherd Neame, Vantis, Victoria and Waterman Group were all sold.  In addition, a total of fourteen holdings were top-sliced to provide capital for the new purchases.

Dividend

On 13 January 2010 the Board had recommended the payment of an Interim Dividend of 4.75p per share.  Previously the Company had not paid an Interim Dividend.  Consequently the Board does not recommend the payment of a Final Dividend (2009: 4.7p)

 

Update

The unaudited NAV at 28 February 2010 was 124.8p whereas the share price on the same day stood at 123p.  Further updates can be found on www.athelneytrust.co.uk

Outlook

Last year it was the banks: this year it is countries.  The economic crisis, which seemed to have moderated in the latter part of 2009, is once again in full swing as the threat of sovereign default grows, with all eyes on Greece and other members of Club Med such as Spain, Portugal and Italy.  Not only that but policy changes abroad are worrying investors: China is reigning in lending due to concerns about asset-bubbles, Brazil's fiscal stimulus is being phased out, India's central bank has raised reserve requirements whereas other central banks are gradually unwinding the emergency liquidity facilities they introduced at the height of the crisis. QE, furthermore, is apparently coming to an end. 

All this has knocked confidence, share prices and commodities.  Optimism about a V-shaped recovery has been replaced by my own favourite, the L-shape, or a double-dip recession.  Japan has slipped back into deflation and domestic demand has stalled even in countries, such as Germany, where households have no excess debt to pay off. 

The way forward is clear: we must encourage productivity, investment and competition, free trade, cut spending rather than raising taxes and agree new financial regulations.  Oh yes, and we must reform public sector pensions, raise the retirement age and means-test benefits.  None of this will help markets in the short-term, which is why I am hoping for a small rise of 5-7 per cent this year rather than something more dramatic.

H.B. Deschampsneufs

Chairman

March 25 2010

ATHELNEY TRUST PLC

STATEMENT OF TOTAL RETURN

(incorporating the revenue account)

FOR THE YEAR ENDED 31 DECEMBER 2009

                                       Audited results to 31 December 2009                            Audited Results to 31 December 2008

	Revenue	Capital	Total	Revenue	Capital	Total
	£	£	£	£	£	£
Profits/(losses) on investments	-	650,678	650,678	-	(1,482,105)	(1,482,105)
Income	122,963	-	122,963	123,951	-	123,951
Investment management
expenses	(5,121)	(46,839)	(51,960)	(4,466)	(41,700)	(46,166)
Other expenses	(23,017)	(40,301)	(63,318)	(19,882)	(44,947)	(64,829)
Exceptional items	-	-	-	-	(128,782)	(128,782)
	________	_________	_________	________	_________	_________
Return on ordinary
activities before taxation	94,825	563,538	658,363	99,603	(1,697,534)	(1,597,931)
Taxation	-	-	-	-	256,283	256,283
	________	________	_________	________	________	_________
Return on ordinary
activities after taxation	94,825	563,538	658,363	99,603	(1,441,251)	(1,341,648)
	________	________	_________	________	________	_________
Return per ordinary share	5.3p	31.3p	36.5p	5.5p	(79.9)p	(74.4)p
Dividend paid per ordinary share
- Final dividend	4.7p			3.5p
The revenue column of this statement is the profit and loss account for the Company.
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued during the above financial years.
There have been no recognised gains or losses, other than the results for the financial years shown above.

ATHELNEY TRUST PLC

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

	Called up		Capital	Capital		Total
	Share	Share	reserve	reserve	Revenue	Shareholders'
	Capital	Premium	realised	unrealised	reserve	Funds
	£	£	£	£	£	£
Balance brought forward at 1 January 2008	450,700	405,605	892,893	1,239,083	132,441	3,120,722
Net gains on realisation
of investments	-	-	(88,385)	-	-	(88,385)
Decrease in unrealised
appreciation	-	-	-	(1,393,720)	-	(1,393,720)
Expenses allocated to
capital	-	-	(215,429)		-	(215,429)
Taxation	-	-	-	256,283	-	256,283
Profit for the year	-	-	-	-	99,603	99,603
Dividend paid in year	-	-	-	-	(63,098)	(63,098)
Shareholders' Funds at 31 December 2008	450,700	405,605	589,079	101,646	168,946	1,715,976

Balance brought forward at 1 January 2009	450,700	405,605	589,079	101,646	168,946	1,715,976
Net profits on realisation
of investments	-	-	118,623	-	-	118,623
Increase in unrealised
appreciation	-	-	-	532,055	-	532,055
Expenses allocated to
capital	-	-	(87,140)	-	-	(87,140)
Taxation	-	-	-	-	-	-
Profit for the year	-	-	-	-	94,825	94,825
Dividend paid in year	-	-	-	-	(84,732)	(84,732)
Shareholders' Funds at 31 December 2009	450,700	405,605	620,562	633,701	179,039	2,289,607

ATHELNEY TRUST PLC

BALANCE SHEET

AS AT 31 DECEMBER 2009

	2009 (audited)		2008 (audited)
	£		£
Fixed assets
Investments at fair value through profit and loss	2,184,507		1,657,321
	_________		_________
Current assets
Debtors	96,088		65,090
Cash at bank and in hand	26,321		26,038
	_________		_________
	122,409		91,128
Creditors: amounts falling due within one year	(17,309)		(32,473)
	_________		_________
Net current assets	105,100		58,655
	_________		_________
Total assets less current liabilities	2,289,607		1,715,976
Provisions for liabilities and charges	-		-
	_________		_________
Net assets	2,289,607		1,715,976
	_________		_________
Capital and reserves
Called up share capital	450,700		450,700
Share premium account	405,605		405,605
Other reserves - non distributable
Capital reserve - realised	620,562		589,079
Capital reserve - unrealised	633,701		101,646
Revenue reserve	179,039		168,946
	_________		_________
Shareholders' funds - all equity	2,289,607		1,715,976
	_________		_________
Net Asset Value per share	127p		95.2p

ATHELNEY TRUST PLC

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2009

		2009 (audited)			2008 (audited)
	£	£		£	£
Net cash (outflow)/inflow from                  operating activities		(38,477)			39,973
Taxation
Corporation tax paid		-			(24,564)
Capital Expenditure and Financial Investment
Purchases of investments	(442,039)			(975,591)
Sale of investments	565,531			1,003,983
Net cash inflow from Financial Investments		123,492			28,392
Equity dividends paid		(84,732)			(63,098)
		________			________
Increase/(decrease) in cash in the year		283			(19,297)
		________			________

Notes:

1.   The figures included in the above statement are an abridged version of Athelney's audited results for the year ended 31 December 2009 and do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006.  The figures for the year ended 31 December 2008 are extracted from the statutory accounts filed with the Registrar of Companies and which contained an unqualified audit report.

2.   The calculation for the return per ordinary share is based on the return on ordinary activities after taxation shown below and on the average weighted number of shares in issue during the period of 1,802,802 (2008  1,802,802 ).

2009			2008
Revenue	Capital	Total	Revenue	Capital	Total
£	£	£	£	£	£
94,825	563,538	658,363	99,603	(1,441,251)	(1,341,648)

3.   Dividend information:

Ex dividend date	03 March 2010
Dividend payable to shareholders registered on	05 March 2010
Dividend payable on	01 April 2010

4.   Copies of the full financial statements will be available on Athelney's website www.athelneytrust.co.uk on 25 March 2010.  Paper copies of the full financial statements specifically requested by some shareholders will be posted on 25 March 2010.

25 March 2010

END

 

END

 

 

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