Half Yearly Report

RNS Number : 9408N

Athelney Trust PLC

01 August 2014

 



Embargoed 7am Friday 1 August 2014

ATHELNEY TRUST plc: INTERIM RESULTS

Athelney Trust plc, the investment company focussed on small companies and junior markets, announces its unaudited results for the six months ended 30 June 2014.

Main points:

·    Unaudited Net Asset Value ("NAV") up 35.2 per cent at 224.8p (2013: 166.2p)

·    Gross revenue up 23.25 per cent at £101,530 (2013: £82,384)

·    Revenue return per ordinary share rose 27.3 per cent to 4.2p (2013: 3.3p)

·    Final dividend of 5.5p per share paid in April 2014

Chairman Hugo Deschampsneufs said: "The market is exhibiting an eerie calm, Zen like stillness I find unnerving.  Look around the world at Syria/Iraq, Israel/Palestine, Somalia/Kenya Russia/Ukraine and Nigeria.  Now China has laid claim to the whole of the South China Sea and is already in dispute with Japan, the Philipines, Vietnam and just about everyone else.

"Then there is the slowing Chinese economy with 107 million tons of iron ore on various docksides. QE has finished in the UK and will do so in America later this year.  We have the Scottish referendum and the General Election is now just months away.

"And to make sure your cup runneth over the Chinese property boom is the most important factor in the global economy.  In the past few years predictions that the sector is about to explode have not been borne out but it really could happen this time.

"Against that can be set that every investor is seemingly searching the world for dividend yield and the world is awash with liquidity - so that's all right then!

"Britain must seem like a Treasure Island in a sea of troubles.  Nevertheless there is a problem.  Either central banks are right to be worried about the economy so wish to keep interest rates low or they are wrong and will be forced to raise interest rates faster than the market expects.

"Either way seems likely to lead to more uncertainty and volatility.  Until the outlook becomes clearer investors will not want to give up on what has been a winning strategy of holding equities for capital growth and increasing income.  Equity investors are reluctant 'bulls' but there seems no alternative. Hold".

-ends-

For further information:

Robin Boyle, Managing Director

Athelney Trust                                                                          020 7628 7937

Paul Quade                                                                                          07947 186694

CityRoad Communications                                                                    020 7248 8010

CHAIRMAN'S STATEMENT AND BUSINESS REVIEW

I announce the unaudited results for the six months to 30 June 2014. The salient points are as follows:

·    Unaudited Net Asset Value (NAV) is 224.8p per share (31 December 2013: 219.3p, 30 June 2013: 166.2p), an increase of 2.5 per cent for the half year and an increase of 35.2 per cent over the past year.

·    Gross Revenue increased by 23.25 per cent to £101,530 compared with the half year ended 30 June 2013 of £82,384 (full year to 31 December 2013 £155,571).

·    Revenue return per ordinary share was 4.2p, an increase of 27.3 per cent from the previous half year to 30 June 2013 (31 December 2013: 6.1p, 30 June 2013: 3.3p).

·    A final dividend of 5.5p was paid in April 2014 (2013: final dividend 5p).

Review of 1 January 2014 to 30 June 2014

When management with a reputation for brilliance tackles a business with a reputation for poor fundamentals, it is the reputation of the business which remains intact - Warren Buffett

If Hitler invaded Hell, I would make at least a favourable reference to the Devil in the House of Commons - Winston Churchill.

The opera started at 8. At midnight I looked at my watch. It said 8.15. The observation by Hollywood producer Billy Wilder on watching Wagner's Ring Cycle.

He is a complete professional and the best of his type by a million miles - Andy Coulson, then editor of News of the World, gave a glowing endorsement for the cover of now disgraced public relations consultant Max Clifford's autobiography Read All About It in 2006.

The market is exhibiting an eerie, calm, Zen-like stillness that I find quite unnerving. Look around the world at Syria/Iraq, Israel/Palestine, Somalia/Kenya, Russia/Ukraine and Nigeria: now China has laid claim to the whole of the South China Sea and is already in dispute with Japan, the Philippines, Vietnam and just about everyone else. Then there is the slowing Chinese economy with 107 million tons of iron-ore on various dock-sides. QE has finished in the UK and will do so in America later this year. We have the Scottish referendum to look forward to (not) and the General Election is now just months away.

And to make sure that your cup runneth over, Chinese property is the most important factor in the global economy. In the past few years, predictions that the sector was about to explode have not been borne out, but it really could happen this time (more below). Against that can be set that every investor is seemingly searching the world for dividend yield and the world is awash with liquidity - so that's all right then.

For the six months ended 30 June 2014, New York and London edged up by 2.4 per cent and 1 per cent respectively but other major markets did less well with Tokyo down by 5.7 per cent and Shanghai by 2.6 per cent. In smaller markets, Argentina, India and Denmark improved by 51.3 per cent, 22.1 per cent and 20.2 per cent respectively. Venezuela, on the other hand, fell by 22.3 per cent. Returning to London, the Athelney Trust unaudited net asset value rose by 2.5 per cent (or 5 per cent with income reinvested) and the FTSE Small Cap, Fledgling and AIM All-share indices improved by 0.3 per cent, 1.8 per cent and 0.8 per cent respectively.

I am indebted to Private Eye and its Brazil correspondent Rio de Ferdinand for the following.

When the England team flew into Brazil and began to acclimatize to the very different conditions in the developing world, there was a real sense of shock at this first impression. I couldn't believe how poor they were said one Brazilian eye witness. In this day and age it is difficult to believe that they are allowed to get in this state. The poverty of their defence is genuinely shocking and as for their forwards, well, it beggars belief. Another Brazilian observer admitted to feeling guilty when confronted by the England squad. You have to feel sorry for them. It's a pitiful sight but we've been told not to give them any goals because that sort of charity doesn't work.

The year 2014 is a momentous one: it is the 100th anniversary of the start of the Great War, the 70th anniversary of D-Day and the 25th anniversaries of the collapse of the Soviet empire and the savage crackdown in Tiananmen Square. One hundred years ago, Europe's fragile order fell apart. Seventy years ago, the democracies launched an assault on Fascist Europe. Twenty-five years ago, Europe became whole and free, while China chose a strange combination of market economics and the party state.

In 1913, Western Europe was the economic and political centre of the world with European empires controlling vast colonies. This world was torn apart by the Great War to be replaced by America, which became the world's largest creditor.

The post-second World war division of Europe was a tragedy, though an inevitable one - America was never going to fight the Soviet Union immediately after its alliance with it. But the U.S. did protect Western Europe through NATO, the Marshall Plan, the OECD and the General Agreement on Tariffs and Trade (GATT).

We have now lived for a quarter of a century in an era of global capitalism driven by the acceptance of the market economy and the digital revolution. This happened under the EU and global institutions such as the International Monetary Fund and the World Trade Organization. However, the pressures of our times are becoming clearer. The Great Recession, like the Great Depression before it, has damaged globalization. Russia is now revanchist (seeking to recover lost territory) and China (see above) is increasingly assertive.

If there is one lesson to be drawn from this brief history, it is that we must learn to co-operate, yet we remain tribal. If John Maynard Keynes were alive today, he would sigh at the risks of this economic and political nationalism.

Black cab drivers protested in June against Uber, a web-based minicab company. They did so by driving slowly around London, causing traffic jams. But I thought that's what they did anyway……………

Chinese property is the most important sector in the global economy. It has been essential to the country's economic development and has sucked in commodity imports from all over the world. But property activity has been falling from mid-2013 and a simple downturn now threatens to turn into a bust. There are risks in the so-called shadow banking sector (i.e. any lending organization which is not a bank) and the rapid rise in local government debt. Property investment has grown to about 13 per cent of GDP (roughly double the situation in the U.S. at the height of the property bubble) and 16 per cent if one includes steel, cement, construction materials and machinery and accounts for about 25 per cent of all capital investment. It also accounts for about 20 per cent of all commercial bank loans but is used as security in 40 per cent of all lending. Now the position is that the overhang of unsold properties in the Tier 2 cities has risen to about 15 months' supply and 24 months in Tier 3 and Tier 4 cities. Beijing's resolve not to respond to weakening prices and activity is unlikely to hold: we should expect extra spending on infrastructure and environmental programmes, faster urbanization, relaxation on home-buying restraints and mortgage deposits and, perhaps later, more monetary easing.

Temporary relief, perhaps, but these measures may undermine the essential strategy of rebalancing the economy towards consumer spending and the negative effects would be larger and last longer. China is different from a western economy in so many different ways but the real results of a burst bubble are the same the world over. Beijing will have to cope with them in the coming years but the rest of us will worry about the deflationary consequences in a still fragile global economic recovery.

I was sad to see the report of the early death of comic actor Rik Mayall. I well remember his wonderful portrayal of Alan Beresford B'Stard, Thatcherite MP, and his quote, "The really great thing about a fudged coalition is that neither of us need to carry out a single promise of our election manifestoes."

For most of the 20th century ICI was Britain's leading industrial company. It was formed in 1926 through the merger of four chemical companies - Brunner Mond, Nobel Explosives, United Alkali and British Dyestuffs. After the war, the ICI board decided that the new frontier of chemistry was pharmaceuticals (pharma). James Black, a young physiologist, was recruited for the new team: despite the high quality of its research chemists, the pharma division lost money for nearly twenty years. In the 1960s, Black discovered beta-blockers, the first effective drug for treating high blood pressure.

Other products followed and the division became the fastest growing part of ICI. Black moved on to SmithKline, where he discovered Tagamet, which relieved many from the misery of stomach ulcers. Glaxo later discovered Zantac and Astra of Sweden the proton pump inhibitor, both treatments for ulcers.

In 1991, ICI was under threat of a take-over so spun off pharma (now called Zeneca) which subsequently merged with Astra. The rump chemicals business of ICI started its long decline into oblivion. But the world of pharma was changing: Pfizer was the company that many admired - cutting costs and filling gaps in its range via acquisitions were to be preferred to, for instance, Merck's great research history.

But business built to last is about people and products, not corporate adventures and tax advantages. Sir James Black, I am sure, created more shareholder value than any financier or deal-maker in the history of British business. For that reason, Astra Zeneca's board and most of its shareholders were quite right to turn down the Pfizer take-over offer.

Is London's new issue market turning into a racket? Prospectuses are frequently published only after conditional dealings have started, hard-bitten investment analysts are brought on board, thus stifling criticism while any potential investor asking awkward questions is likely to be left out altogether. Tempted by the latest one? Perhaps you should go and lie on a hot beach until the feeling goes away.

In 1931, Hugh Macmillan, a Scottish judge, wrote in his report that British engineering and shipbuilding businesses were doing badly compared with their German and American competitors because of the lack of finance, the so-called Macmillan gap. It can come as no surprise that the gap is still there 83 years later. If anything, things are getting worse - bank lending to SMEs (small and medium enterprises) has been falling for four years and by a quarter to all businesses. SMEs have been the ugly duckling of the banking world, representing only 2 per cent of bank assets. SME lending officers seem to have disappeared off the map: where once we had banks that liked to say yes now we have computers programmed to say no.

One idea to improve matters is to create a high quality data-base on companies' credit history and revenues making it freely available to prospective lenders, both old and new. Why would one do this? Because about 80 per cent of SMEs' banking relationships are with the big four banks: data is not shared at present which makes life hard for new entrants to get a foot in the SME door. Measures proposed by the Government last year might help but it would be good to go further and create a one-stop-shop for information on companies available to all lenders. This would be called a credit register.

Lowering barriers to entry would boost competition in the SME lending market, reducing costs and improving access to credit. For the U.K., it would be a big step but, as usual, we are behind everyone else. Almost 100 countries already have a credit register, including over half of the countries in the EU. The Macmillan gap has probably existed for about a century - let us close it once and for all.

The modern Greek state has spent more than half its existence in default on its debt. Even before its historic restructuring in 2012, Greece had defaulted five times since the 1820s - in 1826, 1843, 1860, 1893 and 1932. Yet in April, investors were desperate for the chance to buy new Greek debt despite growth rates too sluggish to make a serious dent in the country's steep debt pile. Alexander Pope's Hope springs eternal comes to mind………..

Anyone who enjoys the sight of economists eating their hat is in for a treat soon. When the U.K. adopts new international standards for national income accounting, three great truths are likely to be shown up as being wrong. Some of the changes have been flagged for years. The level of gross domestic product (GDP) will rise because things like research and development, the manufacture of weapons systems and intangibles like prostitution and drug dealing will be included for the first time. If that was it, the overall effect would be small (somewhere between 2.5 and 5 per cent) but there is another much more important change.

Now you must read carefully because I shall be asking questions later! We are moving from cash to accruals accounting principles for funded pension schemes. There, I knew it - you've fallen asleep! The three great truths are: households do not save; companies are sitting on huge piles of cash and household incomes have stopped rising with GDP. None are true. Including funded pension schemes will increase household saving from 5.5 per cent of disposable income to about 11 per cent. British households will ditch their reputation for profligacy overnight.

Correspondingly, the savings of the corporate sector will decline. Since incomes will appear higher, much of the puzzle of why households did not appear to benefit from recent rises to GDP will disappear. We should go further and include central government's unfunded final salary schemes in the same way, which would make the U.K.'s public financed look even uglier than they are.

The last time Britain attempted to control bank lending by administrative fiat, Spandau Ballet were in the charts, the Conservative government had just given council house tenants the right to buy their properties and Margaret Thatcher was still to make her not for turning speech. Did it work last time? No, don't think that it did……..  

A new smartphone app will be popular with manufacturers keen to make money from energy ministers' inability to plan. The app will tell industrialists when the power distributor will pay them for not making things so that the domestic householder can continue to brew tea while ignoring the TV ads. It reminds me of Joseph Heller's great novel Catch 22. Discovering that the U.S government paid subsidies to reduce alfalfa production, he worked without rest at not growing alfalfa…..and soon was not growing more alfalfa than any man in the country.

National Grid implies that there is a danger of the lights going out in 2015/16. That winter, it expects to have recruited sufficient manufacturers to reduce demand by 1,800 megawatts at any point if needed. They will receive £10,000 for each MW they forswear regardless of whether National Grid actually calls on them plus another up to £15,000 per MW hour for power actually forfeited. At a time when we are desperate to encourage manufacturing industry, you couldn't make it up, could you?

Results

Gross revenue increased to £101,530 compared to the same period last year of £82,384.

                                                                                                            Number

Companies paying dividends                                                                 71

Companies purchased (therefore no true comparison)                             5

Increased total dividends in the half year                                                38

Reduced total dividends in the half year                                                   9

No change in dividend                                                                          19

Dividends accrued                                                                                17

Portfolio Review

Holdings of Games Workshop, UK Commercial Property Trust, Novae Group, McColls Retail Group, Hiscox, Brit, Beazley and Andrews Sykes Group were all purchased for the first time. Additional holdings of Vianet, Amlin, Catlin, Schroder Real Estate Investment Trust, Lancashire Holdings, Londonmetric, M & C Saatchi and Picton Property Income were also acquired. Arbuthnot Banking Group, H & T Group and Macfarlane Group, were sold, Abbey Protection was taken over. In addition a total of 15 holdings were top-sliced to provide capital for new purchases.

Dividend

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

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

Britain (and America, come to think of it) must seem like a Treasure Island in a sea of troubles. Nevertheless, there is a problem: either central banks are right to be worried about the economy so wish to keep interest rates low or they are wrong and will be forced to raise rates faster than markets expect. Either way seems likely to lead to more uncertainty and volatility. Until the outlook becomes clear, investors will not want to give up on what has been a winning strategy of holding equities for capital growth and an increasing income. Equity investors are reluctant 'bulls' but there seems no alternative. Hold.

H.B. Deschampsneufs

31 July 2014

HALF YEARLY INCOME STATEMENT

(INCORPORATING THE REVENUE ACCOUNT)

											Audited
											Year ended
	Unaudited					Unaudited					31 December
	6 months ended 30 June 2014					6 months ended 30 June 2013						2013
	Revenue	Capital		Total		Revenue		Capital		Total		Total
	£	£		£		£		£		£		£
Gains on investments held at fair value	-	309,890		309,890		-		104,470		104,470		1,466,773
Income from investments	101,530	-		101,530		82,384		-		82,384		155,571
Investment Management expenses	(2,780)	(25,432)		(28,212)		(2,829)		(25,913)		(28,742)		(58,799)
Other expenses	(14,441)	(21,056)		(35,497)		(14,309)		(22,356)		(36,665)		(70,726)
Net return on ordinary
activities before taxation	84,309	263,402		347,711		65,246		56,201		121,447		1,492,819
Taxation	-	-		-		-		-		-		-
Net return on ordinary
activities after taxation	84,309	263,402		347,711		65,246		56,201		121,447		1,492,819
Dividends Paid:
Dividend	(109,069)	-		(109,069)		(99,154)		-		(99,154)		(99,154)
Transferred to reserves	(24,760)	263,402		238,642		(33,908)		56,201		22,293		1,393,665
Return per ordinary share	4.2p	13.3p		17.5p		3.3p		2.8p		6.1p		75.3p

The total 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 periods.

A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above Statement.

HALF-YEARLY RECONCILIATION OF SHAREHOLDERS' FUNDS 

		For the Six Months Ended 30 June 2014 (Unaudited)
	Called-up		Capital	Capital		Total
	Share	Share	reserve	reserve	Revenue	Shareholders'
	Capital	Premium	realised	unrealised	Reserve	Funds
	£	£	£	£	£	£
Balance at 1 January 2014	495,770	545,281	953,991	2,108,854	245,797	4,349,693
Net gains on realisation
of investments	-	-	309,890	-	-	309,890
Decrease in unrealised
Appreciation	-	-	-	(129,917)	-	(129,917)
Expenses allocated to
Capital	-	-	(46,488)	-	-	(46,488)
Profit for the period	-	-	-	-	84,309	84,309
Dividend paid in year	-	-	-	-	(109,069)	(109,069)
Shareholders' Funds at 30 June 2014	495,770	545,281	1,217,393	1,978,937	221,037	4,458,418

HALF YEARLY BALANCE SHEET AS AT 30 JUNE 2014

							Audited
			Unaudited		Unaudited		31 December
			30 June 2014		30 June 2013		2013
			£		£		£
Fixed assets
Investments held at fair value through profit and loss			4,372,861		3,256,734		4,298,919
Current assets
Debtors			50,399		34,526		41,782
Cash at bank and in hand			47,410		17,971		24,709
			97,809		52,497		66,491
Creditors: amounts falling due within one year			(12,252)		(12,847)		(15,717)
Net current assets			85,557		39,650		50,774
Total assets less current liabilities			4,458,418		3,296,384		4,349,693
Provisions for liabilities and charges			-		-		-
Net assets			4,458,418		3,296,384		4,349,693
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			1,217,393		808,229		953,991
Capital reserve - unrealised			1,978,937		1,257,945		2,108,854
Revenue reserve			221,037		189,159		245,797
Shareholders' funds - all equity			4,458,418		3,296,384		4,349,693
Net Asset Value per share			224.8p		166.2p		219.3p
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 2014

		Unaudited							Unaudited			Audited
		6 months ended							6 months ended			Year ended 31 December
		30 June 2014							30 June 2013			2013
		£				£			£	£		£
Net cash inflow from
operating activities						25,738				70,286		74,969
Taxation
Corporation tax paid						-				-		-
Financial Investment
Purchases of investments			(426,702)						(189,204)			(722,310)
Sales of investments			532,734						214,674			749,835
Net cash inflow from Financial Investment						106,032				25,470		27,525
Dividends paid						(109,069)				(99,154)		(99,154)
Financing
Issue of ordinary share capital						-				-		-
Share issue costs
Decrease  in cash in the year						22,701				(3,398)		3,340
Reconciliation of operating net revenue to
net cash  inflow/ (outflow) from operating activities						£				£		£
Revenue return on ordinary activities before taxation						84,309				65,246		121,884
Increase/(decrease) in debtors						(8,618)				55,683		48,427
Decrease in creditors						(3,465)				(2,374)		496
Investment management expenses charged   to capital						(25,432)				(25,913)		(53,034)
Other expenses charged to capital						(21,056)				(22,356)		(42,804)
						25,738				70,286		74,969

Reconciliation of net cashflow to movement in net fund
	Net funds at             31/12/13                   £	Cashflow                   £	Net fund at            30/6/14                  £
Cash at bank and in hand	24,709	22,701	47,410

                NOTES TO THE HALF YEARLY FINANCIAL STATEMENTS

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 2013 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 2014 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 2013 and in accordance with the Financial Reporting Council'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 2014 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 2014 (Unaudited)				6 months ended 30 June 2013 (Unaudited)
	Revenue	Capital	Total		Revenue	Capital		Total
	£	£	£		£	£		£
Attributable return on
ordinary activities after  taxation	84,309	263,402	347,711		65,246	56,201		121,447
Weighted average number of shares	1,983,081				1,983,081
Return per ordinary share	4.2p	13.3p	17.5p		3.3p	2.8p		6.1p
	12 months ended 31 December 2013 (Audited)
	Revenue	Capital	Total
	£	£	£
Attributable return on
ordinary activities after  taxation	121,884	1,370,935	1,492,819
Weighted average number of shares	1,983,081
Return per ordinary share	6.1p	69.1p	75.3p

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 2014 of 1,983,081 (30 June 2013: 1,983,081 and 31 December 2013: 1,983,081).

6.             Copies of the Half Yearly Financial Statements for the six months ended 30 June 2014 will be available on the Company's website www.athelneytrust.co.uk as soon as practicable.  

 

END

 

 

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