Half-yearly report
AURORA INVESTMENT TRUST plc
Interim report for the six months ended 31 August 2007
INTERIM MANAGEMENT REPORT AND CHAIRMAN'S REVIEW
Half Year Results: NAV 228.4p (-7.5%)
I am afraid we have not done well in the first six months of our
year, our net asset value ("NAV") having declined by 7.5% to 228.4p
per share. Our stated objective is to make money and that we have
not done. To be fair we never can succeed in making a positive
return in every six month period but losing money is disappointing
nevertheless. To add to the disappointment was the fact that out
benchmark - the FTSE All-share Index - actually rose by a small
amount, 1.9%, and the fact that shareholders were good enough to vote
for a continuation of the life of the Company, after its first ten
year anniversary. It was not a good start to our second life.
We are concerned that the discount at which the shares trade is far
too wide at around 15%. We do watch it and we are determined to do
what we can to control it. A repurchase of shares by the Company was
made during the interim period last May and we have recently made
another.
The Portfolio:
Our valuation continued to suffer from the investments that we have
made in the smaller concept stocks. We have sold down our positions
in Emblaze, following the problems with the payment of VAT on
imported mobile phone handsets and on Monterrico Metals, following
the partial bid for the company but we retain holdings in the shares
of Gresham Computing, BTG, Global Coal Management and Medical
Marketing - all of which have the potential of significant upside in
their respective share prices and where the news-flow is beginning to
improve. However our commitment to the housing sector and to Ireland
- sectors which have rewarded us handsomely in the past - did not
prove to be profitable in this period. The share prices of Gartmore
Irish Growth, Persimmon, Anglo Irish and Barratt Developments, all
top ten holdings, performed poorly and contributed to the decline in
the net asset value.
As an offset to these difficulties, our significant commitment to
mining stocks (21% of the portfolio) was well rewarded and did
something to counter the effect of the above. The share price of Rio
Tinto, the holding in which is our second largest, rose 25% and has
risen significantly further since 31 August 2007. Good increases
were also recorded by the share prices of Xstrata (+21%) and
Antofagasta (+51%).
The related party transactions of the period are disclosed in note 7.
Prospects:
As far as the stock market is concerned we have clearly entered a difficult period. The first run on a bank -
Northern Rock - in 150 or so years is symptomatic of the consequences of loose monetary policies in the past few
years and of the consequences of those financial companies whose affairs have not been run as soundly as they
might have been. I suspect that there is more to come - quite probably from the private equity sector, which
has become so popular and which has made acquisitions on ever higher valuation bases, using ever larger amounts
of debt to fund the purchases. It may cause trouble for another major bank and that would not help investor
confidence. Credit problems can spill over into the general economy and may well do so; that too would not help
investor confidence.
Having stated a note of caution about the current investment environment, I should say that our own long-term
prospects depend largely on ourselves. In that respect it is important that we invest in the right sectors and
the right stocks within those sectors. James Barstow, our investment manager, has managed the portfolio on the
basis of an investment policy which singles out sectors with excellent long-term prospects. They include
housing, (which, despite its short-term difficulties, remains in acute short supply), Ireland (whose economy
continues to grow at a superior rate to that of the UK, albeit at a slower rate than previously) and mining
(which remains a major beneficiary of the strength of the global economy and, in particular, of the emergence of
the economies of China and India). I cannot say how long the short term difficulties, which the current
circumstances provoke, will last but I can say that we have confidence that we have chosen the right sectors and
the right stocks (of well managed companies) and that - in the longer term - it should result in good returns
being earned for shareholders. Having given a vote of confidence by electing to continue the life of the
Company, we owe it to shareholders to deliver good returns and we aim to do
so.
Alex Hammond-Chambers
30 October 2007
DIRECTORS' STATEMENT OF RESPONSIBILITY
FOR THE INTERIM REPORT
The Directors confirm to the best of their knowledge that:
* The condensed set of financial statements contained within the
half yearly financial report has been prepared in accordance with
International Accounting Standard 34 "Interim Financial
Reporting"; and
* The interim management report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FSA's Disclosure
and Transparency Rules.
The half yearly financial report was approved by the Board on 30
October 2007 and the above responsibility statement was signed on its
behalf by:
Alex Hammond-Chambers
Chairman
INVESTMENT POLICY
The policy of the Company is to achieve capital appreciation through
investments listed mainly on the London Stock Exchange, predominantly
comprising equities but allowing exposure to fixed interest and
equity related securities. A distinctive feature is an emphasis on
investments in companies with exposure to economies growing at a
faster rate than the UK.
SECTOR BREAKDOWN
versus FTSE All-Share Index
As at 31 August 2007
SECTOR FTSE AURORA
All-Share
% %
Basic Industries 8.81 15.73
General Industries 7.98 1.58
Cyclical Services 22.48 11.51
Non - Cyclical 7.41 .14
Services
Information Technology 7.88 6.17
General 29.57 29.68
Financials
Resources 11.62 27.00
Utilities 4.25 8.19
100.00 100.00
Ordinary N/A 98.84
Fixed Interest Securities N/A 1.16
N/A 100.00
TOP TEN HOLDINGS
at 31 August 2007
Stock Description Valuation % of
All holdings shown are of £'000 Portfolio
ordinary shares, unless shown
otherwise
Gartmore Irish Growth Investment Trust 3,661 9.03
Rio Tinto Support Services 3,425 8.45
Persimmon Construction 3,355 8.28
Anglo Irish Bank Bank, Retail 3,103 7.65
Drax Group Construction 1,904 4.70
Arriva Transport 1,816 4.48
Xstrata Software 1,524 3.76
Scottish Southern Energy Electricity 1,416 3.49
Barratt Developments Construction 1,392 3.43
Medical Marketing Pharmaceutical 1,375 3.39
International development
Total top ten holdings 22,971 56.66
Other investments 17,573 43.34
Total non-current asset 40,544 100.00
investments
CONSOLIDATED INCOME STATEMENT
6 months to 6 months to 6 months to 6 months to 6 months to 6 months to
31 Aug. 31 Aug. 31 Aug. 31 Aug.2006 31 Aug. 31 Aug.
2007 2007 2007 2006 2006
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains and
losses on
investments
Losses on (22) (2,393) (2,415) (355) (2,325) (2,680)
fair value
through
profit or
loss
investments
Income
Investment 721 - 721 379 - 379
income
Other 3 11 - 11 4 - 4
operating
income
732 - 732 383 - 383
Expenses
Investment (100) (100) (200) (98) (98) (196)
management
fees
Other (170) - (170) (103) - (103)
expenses
(270) (100) (370) (201) (98) (299)
Profit/(loss) 440 (2,493) (2,053) (173) (2,423) (2,596)
before
finance costs
and tax
Finance costs (152) (152) (304) (127) (127) (254)
Exchange - 28 28 - 99 99
differences
on overdraft
(152) (124) (276) (127) (28) (155)
Profit/(loss) 288 (2,617) (2,329) (300) (2,451) (2,751)
before tax
Tax (4) - (4) (5) - (5)
Profit/(loss) 284 (2,617) (2,333) (305) (2,451) (2,756)
for the
period
Earnings per 5 1.90p (17.51p) (15.61p) (2.02p) (16.22p) (18.24p)
share
The total column of this statement represents the Group's Income
Statement, prepared in accordance with IFRS. The supplementary
revenue return and capital return 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 holders of the parent company.
There are no minority interests.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months Six months
ended Ended Year ended
31 August 31 August 28 February
2007 2006 2007
Notes
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Opening balance 37,297 37,010 37,010
Profit/(loss) for
the financial
period/year (2,333) (2,756) 733
Purchase of own
shares 4 (581) - -
Dividends paid or
legally committed to
be paid on ordinary
shares 6 (453) (446) (446)
Closing balance 33,930 33,808 37,297
CONSOLIDATED BALANCE SHEET
At 31 August At 31 August At 28 February
2007 2006 2007
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Non-current assets
Investments - fair value 40,544 40,404 44,864
through profit or loss
Current assets
Investments held for 398 1,116 -
trading
Other receivables 227 684 81
Cash and cash 262 451 337
equivalents
887 2,251 418
Current liabilities
Bank overdraft (7,357) (8,700) (7,740)
Other payables (144) (147) (245)
(7,501) (8,847) (7,985)
Total assets less 33,930 33,808 37,297
current liabilities
Equity attributable to
equity holders
Share capital 3,777 3,777 3,777
Share premium account 10,997 10,997 10,997
Capital reserves 19,227 19,466 22,425
Revenue reserve (71) (432) 98
33,930 33,808 37,297
Net asset value per ordinary 228.37p 223.79p 246.88p
share
No. of ordinary shares in 14,857,250 15,107,250 15,107,250
issue (excluding shares
held in
Treasury)
No. of ordinary shares held 250,000 - -
in Treasury
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 31 August 2007
2007 2006
£'000 £'000
(unaudited) (unaudited)
Cash flows from Operating Activities
Cash inflow from disposal of non-current 4,446 4,656
operating assets
Cash outflow from purchase of non-current (2,639) (3,902)
operating assets
Cash inflow from revenue income 586 383
Cash outflow from trading current asset (420) (361)
investments
Cash outflow from revenue expenses (377) (276)
Tax paid (4) (5)
Net cash flow from operating activities 1,592 495
Financing
Purchase of own shares (581) -
Equity dividends Paid (453) (446)
Interest paid (277) (229)
(Decrease)/increase in bank borrowings (383) 434
Net cash flow from financing activities (1,694) (241)
Net decrease)/increase in cash and cash (102) 254
equivalents
Cash and cash equivalents at beginning of 337 98
period
Increase/(decrease) in cash (102) 254
Effect of foreign exchange rate changes 27 99
Cash and cash equivalents at end of period 262 451
NOTES
1. Status of the financial statements
These financial statements are not the Group's statutory accounts as
defined in section 240 of the Companies Act 1985. The financial
information for the half years ended 31 August 2007 and 31 August
2006 has not been audited.
The information for the year ended 28 February 2007 has been
extracted from the latest published audited financial statements.
The audited financial statements for the year ended 28 February 2007
have been filed with the Registrar of Companies. The report of the
auditors on those accounts contained no qualification or statement
under section 237(2) or (3) of the Companies Act 1985.
The directors approved the interim report on 30 October 2007. This
interim report is being sent to shareholders and copies will be made
available to the public at the registered office of the Group.
2. Accounting policies
The interim financial information has been prepared on the basis of
the recognition and measurement requirements of International
Financial Reporting Standards (IFRS). The accounting policies are
unchanged from those used in the last annual financial statements
except where otherwise stated.
3. Other operating income
Other operating income comprises bank interest.
4. Purchase of own shares
During the period ended 31 August 2007, the Company purchased 250,000
of its own shares. These shares are being held in Treasury and are
available for re-sale. Since the period end a further 235,000 shares
have been purchased and are held in Treasury.
5. Earnings per share
Returns for the period ended on 28 February 2007 are stated by
reference to the weighted average of 14,941,489 shares in issue
during the period, excluding shares held in Treasury (2006:15,107,250
shares in issue).
6. Dividends
In accordance with the stated policy of the Group, the directors do
not recommend an interim dividend.
The final dividend in respect of the year ending on 28 February 2007
was declared by the Annual General Meeting on 28 June 2007 and was
paid on 9 July 2007. This dividend was not reflected in the
financial statements as at 28 February 2007, but is reflected in the
financial statements as at 31 August 2007.
7. Related party transactions
Fees payable to the Manager are shown in the Consolidated Income
Statement. £33,000 was payable to the Administrator in respect of
the period. At 31 August 2007 fees were accrued of £30,000 to the
Manager and £5,000 to the Administrator. All figures include VAT.
DIRECTORS AND ADVISERS
DIRECTORS INVESTMENT MANAGER
RA Hammond-Chambers (chairman) Mars Asset Management Limited
MJ Barstow FCA Audrey House
MF Heathcoat Amory Ely Place
DH Hunter London EC1N 6SN
Tel: 0207-410-0025
STOCKBROKER SECRETARY & REGISTERED OFFICE
Cenkos Securities plc Cavendish Administration Limited
6.7.8 Tokenhouse Yard 145-157 St John Street
London EC2R 7AS London EC1V 4RU
BANKERS ADMINISTRATORS
Lloyds TSB Bank plc Cavendish Administration Limited
34 Moorgate 145-157 St John Street
London EC2R 6PL London EC1V 4RU
CUSTODIAN AUDITORS
The Northern Trust Company Grant Thornton UK LLP
50 Bank Street 30 Finsbury Square
London E14 5NT London EC2P 2YU
REGISTRARS SOLICITORS
Capita Registrars CMS Cameron McKenna
The Registry Mitre House
34 Beckenham Road 160 Aldersgate Street
Beckenham London EC1A 4DD
Kent BR3 4TU
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