Half Yearly Report

RNS Number : 7977L

Athelney Trust PLC

05 August 2011

 

Embargoed 7am Friday August 5 2011

ATHELNEY TRUST plc: INTERIM RESULTS

Athelney Trust plc, the investor in small companies and junior markets, announces its unaudited results for the six months ended 30 June 2011.

·    Unaudited Net Asset Value up 20.7 per cent at 144.7p per share (June 2010: 119.9p)

·    Gross revenue at £72,844 (June 2010: £73,199)

·    Gross revenue on like for like basis up 20.2 per cent at £72,844 (June 2010: £60,611

·    Revenue return per ordinary share at 2.8p (June 2010: 3p)

·    Unaudited NAV as at 31 July 143.3p per share

Athelney Chairman Hugo Deschampsneufs said: "Gross revenue remained constant.  However, the same period last year included a special dividend of £12,588 from GVC Holdings.  If that is excluded altogether then, on a like for like basis, gross revenue increased by 20.2 per cent.

"Now is not the right time to raise interest rates.  The UK's economic performance over the past year is no surprise - when one tightens fiscal policy significantly after a major financial crisis, the result is no growth in bank lending, high interest rates for small businesses, flat or falling private consumption and retail sales, a lack of construction orders and declining real wages only partly offset by some expansion in exports.

"The majority of the Monetary Policy Committee is quite right to hold its nerve.  In fact the MPC should pursue more QE.

"The recent drop in oil prices should ease inflationary pressure and slow the trend towards higher interest rates in Europe and elsewhere and could revive consumer confidence and spending.  Company profits should continue to grow nicely, however investors are likely to remain on the defensive this summer".

Ends

For further information:

Robin Boyle, Managing Director

Athelney Trust PLC                                                                              020 7638 7937

Paul Quade                                                                                          020 7248 8010

CityRoad Communications                                                                    07947 186694

CHAIRMAN'S STATEMENT AND BUSINESS REVIEW

I announce the unaudited results for the six months to 30 June 2011.  The salient points are as follows:

·    Unaudited Net Asset Value (NAV) is 144.7p per share (31 December 2010: 142p, 30 June 2010: 119.9p), an increase of 1.9 per cent for the half year and an increase of 20.7 per cent over the past year.

·    Gross Revenue dropped by 2 per cent to £71,695 compared with the half year ended 30 June 2010 of £73,199 (full year to 31 December 2010 £142,303).

·    On a like-for-like basis gross revenue rose by 18.2 per cent to £71,695 compared with the half year ended 30 June 2010 of £60,611.

·    Revenue return per ordinary share was 2.8p, down 6.7 per cent from the previous half year to 30 June 2010 (31 December 2010: 5.7p, 30 June 2010: 3p).

·    A final dividend of 4.9p was paid in April 2011 (2010: interim dividend 4.75p).

Review of 1 January 2011 to 30 June 2011

I have learnt from my mistakes and feel sure that, with practice, I can repeat them. - Sir Arthur Streeb-Greebling (a creation of satirist Peter Cook).

Another half-year passes, this time without making any discernable dent in my forecast of a 10 per cent rise in equity markets for the year.  In fact, London actually fell by 0.7 per cent over the six months, compared with 4.2 per cent in Tokyo and 2.8 per cent in Shanghai, although New York, despite all the problems in pushing through a Budget, actually rose by 4 per cent.  Elsewhere, Venezuela (incomprehensible, this) Hungary and Germany did well with rises of 23 per cent, 6.4 per cent and 5.5 per cent respectively.  Laggards turned out to be Egypt (North African Spring, etc.), Greece (more, much more, of this later) and Brazil (an overheating economy) fell by 25.4 per cent, 10.5 per cent and 10.1 per cent respectively.

Not all of this is easily explained: true, the period could be described as lacklustre for equity investors and up-and-down for fixed income.  Blue chips were up a bit in the U.S., mostly down in Europe and weak in emerging markets.  However, there were some oddities, for instance basket cases Venezuela, Hungary and Iceland did well in comparison with healthier places like Switzerland, Canada and Australia.  Oil-producing countries did not benefit from soaring oil prices.  Smaller companies, counter to many forecasts, did better than blue chips.  Healthcare, utilities, gaming and tobacco did best in America, and it certainly paid not to be too clever, so leaving low quality banks, car manufacturers, gold miners and airlines alone.  Europe was much more mixed but Tokyo Electric Power down 84 per cent and Taiheiyo Cement up by 55 per cent says everything that you need to know about tsunami-struck Japan. But of all the problems which have beset international markets this year, the one that simply refuses to go away is Greece.

A past Greek finance minister, fed up with waste and extravagance in his country, claimed that he could save money by closing down the national railway and driving everyone about in taxis.  Of course no-one believed him, yet in 2009 revenues were €174m: meanwhile, wages cost €246m and the loss for the year was €937m.  Greece's austerity plan looks doomed to fail - it does too little to prevent the folly of the railway system and other ruinous schemes, it will screw down too hard on ordinary  hard-working Greeks in the private sector with new taxes, spending cuts and a rushed privatisation scheme and most likely condemn Greece to recession, strife and an eventual default.

A much better idea would be to make the economy work more efficiently by defeating the public-sector unions, important allies for the politicians.  It would mean ending the system of patronage on which politicians thrive: whether one is after a government job, a licence or a favourable tax assessment, politicians are essential allies.  Indeed, it is the politicians who believe that, as long as they pretend to fix the economy, the EU will hand over the money whether the plan works or not. After all, who wants to pull the plug on Greece if that risks contagion across the euro zone?  Every quarter, before the EU and the IMF release the next block of money, they must decide whether Greece is on track.  Every quarter, it will become clearer that the answer is, 'No.'

So what is to be done, not just about Greece but also Portugal and Ireland?  Muddling through might be all right but it would be much better to have a genuine strategy of debt reduction for insolvent countries, recapitalization of banks that would suffer from that reconstruction and the building of a firewall between the solvent and the rest.  Debt reduction must begin with Greece, the country which is most obviously bust.  The task of building a firewall around the solvent core has to be shared between the countries at risk and the euro zone as a whole.  Trouble is, Germany and others are opposed to any solution that could imply open-handed transfers to feckless southerners, not least because guaranteeing others may raise their own borrowing costs.

For the moment, the U.K. seems to be in a sea of calm although there are obvious concerns about inflation and the weak growth in the economy.  As for the former, June CPI inflation is running at 4.2 per cent: the decline from 4.5 per cent reflects attempts by retailers to trim prices and tempt consumers into spending a little more.  So strenuous are their efforts that the real inflation rate may be lower than the official one. How so? Retailers increasingly use promotions - discounts on specially displayed goods - to lure customers.  Promotions accounted for 34.8 per cent of grocery sales in the year to March, with the figure for supermarket chains accounting for 43.5 per cent of their branded grocery sales. Such gimmicks often take the form of BOGOF (buy one and get one free) which creates a dilemma for statisticians.  BOGOF goods cannot be treated as half-price since shoppers who want only one item still pay full price.  So while tough trading conditions remain, then official inflation figures will continue to overstate the cost of a trip to the supermarket.

Now is not the right time to raise interest rates.  The U.K.'s economic performance over the past year is no surprise - when one tightens fiscal policy significantly after a major financial crisis, the result is no growth in bank lending, high interest rates for small businesses, flat or falling private consumption and retail sales, a lack of construction orders and declining real wages, only partly offset by some expansion in exports.  Recent consumer price inflation results from this year's VAT increase and the recent energy price shock - removing these factors, U.K. inflation has averaged only 1.5 per cent over the past year.  The majority of the Monetary Policy Committee is quite right to have held its nerve against calls for rate hikes.  The squeeze on public spending and households paying down debt will continue and wages will grow more slowly than productivity.  Headline CPI will decline towards the 2 per cent target, where core inflation already is: in fact, the MPC should go further and pursue more QE.

So William and Kate are married and sales of memorabilia are doing a brisk trade.  Two billion viewers and three times as many broadcast trucks as at any other royal event illustrates that the British royal family retains a global fascination.  That makes the House of Windsor a brand which should rank in the same league as iPad yet, while Apple makes millions from its elegant products, the U.K. has trouble monetising its best-known brand, beyond the bobble-headed dolls, replica engagement rings and the like.  Surely there must be tasteful money to be made from such opportunities.  Any ideas?

Just as a broken clock is right twice a day, sooner or later those who have been calling the bottom of U.S. housing market since 2007 will be correct.  For the time being, though, those who are optimistic are subdued.  Even if the price declines are heading towards uncharted territory (only the Great Depression was worse), the effect of the steady erosion of consumer confidence and bank balance sheets is well understood.  Less clear is what the rising number of underwater homeowners - those with negative equity (an amazing 28 per cent of the total) - will do to the economy.  For comparison, in the U.K. during the mid-1990s, a period often remembered as the slump of all slumps, 11 per cent of mortgages were in negative equity.  American house owners in this situation may be tempted to collect 'squatter's rent' by living in their homes for months or years without paying either interest or principal on their mortgages.  This form of 'saving', which runs into tens of billions of dollars already, has helped to hold up consumer spending.  But the whittling down of home equity will harm consumer spending more than it helps in the long run by wiping out a key source of household wealth and collateral for future borrowing.  The view from beneath the waves is lovely until the oxygen runs out.

No problem with falling property prices in China, where rising interest rates aim to restrain inflation - so far with little success.  In the past year, pork prices in China have rocketed by 57 per cent: the Chinese are among the world's top pork consumers, tucking away some 37 kg per person per year.  That appetite, which has grown hugely in recent years as Chinese have grown more prosperous, means that pork prices figure prominently in calculating monthly consumer price inflation.  In June, pork prices were the single biggest driver of food inflation, which hit 14.1 per cent and contributed 1.4 per cent to headline inflation of 6.4 per cent.  Too high!

Finally, under this sub-heading, I am indebted to Private Eye for the following quotation from Rupert Murdoch, interviewed by Thomas Kiernan in Citizen Murdoch, Dodd Mead, New York, 1986.   You tell these bl**dy politicians whatever they want to hear, and once the deal is done you don't worry about it.  They're not going to chase after you later if they suddenly decide what you said wasn't what they wanted to hear.  Otherwise they're made to look bad, and they can't abide that.  So they just stick their heads up their a**es and wait for the blow to pass.  Is this the same Rupert Murdoch who was battling until recently to take full control of British Sky Broadcasting?  Yes it is!

Results

Gross revenue remained constant at £71,695 compared to the same period last year of £73,199. However the same period last year included a special dividend of £12,588 from GVC Holdings, if that is excluded altogether then, on a like-for-like basis Gross Revenue increased by 18.2 percent.

                                                                                                        Number

Companies paying dividends                                                                 64

Companies purchased (therefore no true comparison)                             2

Increased total dividends in the half year                                               24

Reduced total dividends in the half year                                                16

No change in dividend                                                                           6

Dividends accrued                                                                               16

Portfolio Review

Holdings of Begbies Traynor, Bruline Group, Hansard Global plc, KCom, Smiths News and UK Mail were all purchased for the first time. Additional holdings of Haynes Publishing, Jarvis Securities, Matchtech, McKay Securities and Phoenix IT were also acquired. ATH Resources, Fenner, HMV and Omega Insurance were sold and the following holdings were top sliced Braemar Shipping Services, Camellia, Chime Communications, Clarkson, Park Group, RWS Holdings, Treatt, Umeco and XP Power Limited.

Dividend

As is the Board's practice, consideration of a dividend will be left until the final results are known. 

Update

The unaudited NAV at 31 July 2011 was 143.3p whereas the quoted share price on the same day stood at 135p. Further updates can be found on www.athelneytrust.co.uk

Risks

The Company's assets consist mainly of listed securities and its principal risks are therefore market-related.  The Company is also exposed to currency risk in respect of a small number of investments held in overseas markets. 

The major risks associated with the Company are market and liquidity risk.  The Company has established a framework for managing these risks.  The directors have guidelines for the management of investments and financial instruments.

Market Risk

Market risk arises from changes in interest rates, valuations awarded to equities, movements in prices and the liquidity of financial instruments.

Liquidity Risk

Liquidity Risk is the risk that the Company may have difficulty in meeting obligations associated with financial liabilities.  The Company has no borrowings; therefore there is no exposure to interest rate changes.

The company is able to reposition its investment portfolio when required so as to accommodate liquidity needs.

 

 

Outlook

Turning to prospects for markets, the recent drop in oil prices should ease inflationary pressures and slow the trend towards higher interest rates in Europe and elsewhere and could revive consumer confidence and spending.  Motor production and sales should rebound as the availability of Japanese cars increases following the supply disruptions caused by Japan's earthquake.  Company profits should continue to grow nicely.  Investors are likely to remain on the defensive this summer until these factors become more visible - and so onto an improving third quarter!

H.B. Deschampsneufs

August 5 2011

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEARLY FINANCIAL REPORT

We confirm to the best of our knowledge:

1.     The condensed set of Financial Statements has been prepared in accordance with the UK Accounting Standards Board's statement "Half-Yearly Financial Reports."

2.     The Chairman's Statement includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (indication of important events during the first six months and their impact on the Financial Statements and a description of principal risks and uncertainties for the remaining six months of the year).

3.     The Half-Yearly Financial Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board dated 3 August 2011

H.B. Deschampsneufs

Director and Non-executive Chairman

HALF-YEARLY RECONCILIATION OF SHAREHOLDERS' FUNDS 

		For the Six Months Ended 30 June 2011 (Unaudited)
	Called-up		Capital	Capital		Total
	Share	Share	reserve	reserve	Revenue	Shareholders'
	Capital	Premium	realised	unrealised	reserve	Funds
	£	£	£	£	£	£
Balance at 1 January 2011	495,770	545,281	620,251	951,712	203,148	2,816,162
Issue of ordinary shares
Net gains on realisation			162,196			162,196
of investments
Decrease in unrealised				(19,641)		(19,641)
appreciation
Expenses allocated to			(48,205)			(48,205)
capital
Adjustment to opening balance			(23,568)	23,568		-
Profit for the period					55,217	55,217
Dividend paid in year					(97,171)	(97,171)
Shareholders' Funds at 30 June 2011	495,770	545,281	710,674	955,639	161,194	2,868,558

		For the Six Months Ended 30 June 2010 (Unaudited)
	Called-up		Capital	Capital		Total
	Share	Share	reserve	reserve	Revenue	Shareholders'
	Capital	Premium	realised	unrealised	reserve	Funds
	£	£	£	£	£	£
Balance at 1 January 2010	450,700	405,605	620,562	633,701	179,039	2,289,607
Issue of ordinary shares	45,070	139,676	-	-	-	184,746
Net gains on realisation
of investments	-	-	20,816	-	-	20,816
Decrease in unrealised
appreciation	-	-	-	(39,413)	-	(39,413)
Expenses allocated to
capital	-	-	(49,117)	-	-	(49,117)
Taxation	-	-	-	-	-	-
Profit for the year	-	-	-	-	56,210	56,210
Dividend paid in year	-	-	-	-	(85,633)	(85,633)
Shareholders' Funds at 30 June 2010	495,770	545,281	592,261	594,288	149,616	2,377,216

		For the Year Ended 31 December 2010 (Audited)
	Called-up		Capital	Capital		Total
	Share	Share	reserve	reserve	Revenue	Shareholders'
	Capital	Premium	realised	unrealised	reserve	Funds
	£	£	£	£	£	£
Balance at 1 January 2010	450,700	405,605	620,562	633,701	179,039	2,289,607
Net gains on realisation
of investments			93,459			93,459
Increase in unrealised				318,011		318,011
appreciation
Expenses allocated to			(93,770)			(93,770)
capital
Issue of ordinary shares	45,070	139,676				184,746
Profit for the year					109,742	109,742
Dividend paid in year					(85,633)	(85,633)
Shareholders' Funds at 31 December 2010	495,770	545,281	620,251	951,712	203,148	2,816,162

HALF YEARLY BALANCE SHEET AS AT 30 JUNE 2011

							Audited
			Unaudited		Unaudited		31 December
			30 June 2011		30 June 2010		2010
			£		£		£
Fixed assets
Investments held at fair value through profit and loss account			2,834,353		2,321,340		2,766,686
Current assets
Debtors			31,530		57,040		32,245
Cash at bank and in hand			19,905		15,539		32,241
			51,435		72,579		64,486
Creditors: amounts falling due within one year			(17,230)		(16,703)		(15,010)
Net current assets			34,205		55,876		49,476
Total assets less current liabilities			2,868,558		2,377,216		2,816,162
Provisions for liabilities and charges			-		-		-
Net assets			2,868,558		2,377,216		2,816,162
Capital and reserves
Called up share capital			495,770		495,770		495,770
Share premium account			545,281		545,281		545,281
Other reserves (non distributable)
Capital reserve - realised			710,674		592,261		620,251
Capital reserve - unrealised			955,639		594,288		951,712
Revenue reserve			161,194		149,616		203,148
Shareholders' funds - all equity			2,868,558		2,377,216		2,816,162
Net Asset Value per share			144.7p		119.9p		142p
Number of shares in issue			1,983,081		1,983,081		1,983,081

HALF YEARLY CASHFLOW STATEMENT FOR THE SIX MONTHS ENDING

30 JUNE 2011

		Unaudited									Unaudited					Audited
		6 months ended									6 months ended					Year ended 31 December
		30 June 2011									30 June 2010					2010
		£					£				£		£			£
Net cash inflow/ (outflow) from
operating activities							11,096						45,535			77,516
Taxation
Corporation tax paid							-						-			-
Financial Investment
Purchases of investments			(264,091)								(227,963)					(433,724)
Sales of investments			337,830								72,533					263,015
Net cash inflow/ (outflow) from Financial Investment							73,739						(155,430)			(170,709)
Dividends paid							(97,171)						(85,633)			(85,633)
Financing
Issue of ordinary share capital														184,746		216,605
Share issue costs																(31,859)
Increase/ (decrease) in cash in the year								(12,336)					(10,782)			5,920
Reconciliation of operating net revenue to
net cash  inflow/ (outflow) from operating activities								£					£			£
Revenue return on ordinary activities before taxation								56,366					56,210			109,742
(Increase)/ decrease in debtors								715					39,048			63,843
(Decrease)/ increase in creditors								2,220					(606)			(2,299)
Investment management expenses charged   to capital								(26,286)					(26,265)			(52,752)
Other expenses charged to capital								(21,919)					(22,852)			(41,018)
								11,096					45,535			77,516

Reconciliation of net cashflow to movement in net fund
	Net funds at              31/12/10                   £	Cashflow                   £	Net fund at             30/6/11                  £
Cash at bank and in hand	32,241	(12,336)	19,905

NOTES TO THE HALF YEARLY FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2011

1.             The financial information contained in these Half Yearly Financial Statements comprises non-statutory accounts as defined in Sections 434 to 436 of the Companies Act 2006.  The financial information for the year ended 31 December 2010 has been extracted from the statutory accounts which have been filed with the Registrar of Companies and which contain an unqualified Auditors' Report and do not contain a statement under Sections 498(2) or 498(3) of the Companies Act 2006.

2.             The condensed financial statements for the period ended 30 June 2011 have been prepared on the basis of the same accounting policies adopted as set out in the Annual Report for the year ended 31 December 2010 and in accordance with the ASB's Statement "Half Yearly Financial Reports". They have not been audited or reviewed by the auditors pursuant to the Auditing Practices Board Guidance on "Review of Interim Financial Information"   

3.             To the best of our knowledge and belief there are no related party transactions within the meaning required by the Disclosure and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein).

4.             The calculation of earnings per share for the six months ended 30 June 2011 is based on the attributable return on ordinary activities after taxation and on the weighted average number of shares in issue during the period.

	6 months ended 30 June 2011 (Unaudited)				6 months ended 30 June 2010 (Unaudited)
	Revenue	Capital	Total		Revenue	Capital		Total
	£	£	£		£	£		£
Attributable return on
ordinary activities after  taxation	55,217	113,991	169,208		56,210	(67,714)		(11,504)
Weighted average number of shares	1,983,081				1,862,895
Return per ordinary share	2.8p	5.7p	8.5p		3.0p	(3.6)p		(0.6)p
	12 months ended 31 December 2010 (Audited)
	Revenue	Capital	Total
	£	£	£
Attributable return on
ordinary activities after  taxation	109,742	317,700	427,442
Weighted average number of shares	1,922,988
Return per ordinary share	5.7p	16.5p	22.2p

5.             Net Asset Value (NAV) per share is calculated by dividing shareholders funds by the weighted average number of shares in issue at 30 June 2011 of 1,983,081 (30 June 2010: 1,862,895 and 31 December 2010: 1,922,988).

6.             Copies of the Half Yearly Financial Statements for the six months ended 30 June 2011 will be available on the Company's website www.athelneytrust.co.uk as soon as practicable. 

 

END

 

 

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