Final Results
British Portfolio Trust PLC
18 December 2007
For Immediate Release 18th December 2007
BRITISH PORTFOLIO TRUST plc
ANNOUNCEMENT OF UNAUDITED PRELIMINARY RESULTS
For the year ended 31st October 2007
CHAIRMAN'S STATEMENT
The Board announces the results for the year to 31st October 2007. A final
dividend has been declared of 2.00p per Ordinary Share, which will be payable on
3rd March 2008 to shareholders on the register at the close of business on 1st
February 2008, making a total distribution for the year ended 31st October 2007
of 5.00p per Ordinary Share, which compares with 4.60p in the previous financial
year, an increase of 8.7%.
The net asset value per Ordinary Share at 31st October 2007 was 201.4p compared
with 184.3p at 31st October 2006, an increase of 9.3%. Over the same period the
benchmark index, the FTSE All-Share Index, increased by 10.0%.
On 23rd May 2007 the Company transferred 2,914,502 new Ordinary Shares out of
treasury to holders of Loan Notes issued by Greene King Acquisitions (No. 3)
Limited, and we welcome these new shareholders.
During the year under review the Company bought back 723,200 Ordinary Shares for
cancellation and a further 316,000 Ordinary Shares have been purchased to be
held in treasury since the year end. The Company also bought back 1,316,666
Ordinary Shares to be held in treasury for reissue into the market or
cancellation at a future date. 10,000 Ordinary Shares held in treasury were
cancelled during the year. The Board intends to seek renewed authority from
shareholders to buy back up to 15% of the issued share capital of the Company.
I am pleased to report that, following the ruling of the European Court of
Justice in the VAT case brought by JP Morgan Fleming Claverhouse Trust plc in
conjunction with the AIC, HM Revenue and Customs have confirmed that VAT does
not have to be paid on management fees paid by investment trusts. Discussions
are ongoing with the Manager, RCM (UK) Limited, about recovery of VAT paid in
the past, which is likely to have a modest beneficial impact on the Company's
returns when the final figure is agreed.
INVESTMENT MANAGER'S REVIEW
This reporting period has seen solid returns from UK equities, but towards the
end of the period investors had to cope with a much more problematic
environment, as liquidity in a number of key credit markets deteriorated
sharply. This background has led to a high level of risk aversion and a move to
more liquid stocks within equity markets.
In the UK the highest profile casualty has been Northern Rock, which has been
put up for sale because it is no longer able to fund itself in the wholesale
credit markets and has needed support by from the Bank of England. The credit
crisis is proving to have knock-on implications for companies and consumers;
the cost of debt has risen and banks understandably are now being more cautious
in their lending decisions.
The UK economy started the year in good health with both the housing market and
consumer spending strong. However, after a period of successive interest rate
rises both these areas have shown signs of slowing down. Recent mortgage
approval data, which is a good lead indicator for the future direction of the
housing market, is now looking weak and the retail sector goes into Christmas in
a nervous state. There are also other more anecdotal signs that the UK housing
market is slowing in response to the lower availability and increased cost of
mortgage financing. However, the long run demand for UK housing continues to
exceed supply and the market is currently more stable structurally than the US
housing market, which has a growing inventory of unsold stock. In addition,
having been reticent to do anything in the Autumn, recent reports from the Bank
of England point to a strategy of interest rate cuts in 2008 which should help
consumer confidence.
The Chinese and Middle Eastern economies continued to surprise on the upside in
2007, with the Chinese economy continuing to grow at double digit levels, which
proved positive for the Mining sector and the fund's holding in Prosperity
Minerals, a local cement producer, listed in London. Companies which have a
presence in the Middle East have also proved good performers, as the area
benefited from the high oil price. Holdings such as Hyder Consulting and
Carillion, which have significant exposure to the area, have strong order books.
Merger and acquisition activity has remained at buoyant levels with high profile
names such as Reuters and Hanson involved. As we saw in 2006 the size of
takeover deals has increased with BHP Billiton recently announcing a £68bn
merger proposal with Rio Tinto. This is a huge deal and if pulled off will have
significant ramifications for the rest of the global Mining sector. Private
Equity is unlikely to enjoy the success it has in the recent past because, with
the cost of funding having risen so dramatically and less liquidity available,
they will be restricted in what they can do. We remain confident that companies
with healthy balance sheets will continue to do deals, but not on the terms we
witnessed earlier in the year.
Performance over the period lagged the index, although was in the upper half of
the AIC UK Growth sector peer group by NAV and share price. This year has seen
a much wider dispersion of individual share price returns than previously, and
the strength in the market has been driven by a relatively small number of
shares. In the Mining sector we did not hold Rio Tinto, the best performing of
the miners, holding Xstrata instead, which has picked up more recently. Another
of our resource stocks, Energy XXI, which remains a key holding in the fund,
moved sideways over the reporting period, even though the company continues to
benefit from a higher oil price.
We have a lower exposure than the market generally to the consumer facing
sectors such as General Retailers and Media and also a significant underweight
the Banks sector, which has proved correct. We have been concerned that the High
Street will remain highly competitive and the poor weather over the summer has
not helped retailers. Consumer facing media companies continue to be impacted by
the squeeze on advertising spend and the move to more business online
advertising.
The Banks sector remains not only the largest sector in the UK stock market but
also is the largest provider of dividend income. However, until there is
greater clarity on their capital positions we expect to keep the large
underweighting to the banking sector. The Northern Rock holding was sold earlier
in the period at £11.92.
Other positions which impacted performance positively included BDI Mining, which
was taken over by Gem Diamonds, and Morgan Crucible, which benefited from new
management initiatives. On the other hand, not owning any Unilever and Diageo
was detrimental to performance as both saw positive returns, due to their
perceived defensive characteristics in more uncertain times.
Towards the end of the period a number of new holdings were added, which we
believe offer attractive long term growth characteristics including Serco,
Qinetiq and Capita. These companies' business models are not dependent on
accelerating economic growth. In addition, given the current high level of
uncertainty, we have a preference for companies with secure earnings growth
outlooks. This approach has led to the disposal of the holding in WPP and a
reduction in Aberdeen Asset Management.
OUTLOOK
The key to equity markets regaining their poise in the near future is both
greater stability and confidence in credit markets and further cuts in interest
rates. In addition, the sub-prime problems must not be seen to be spreading to
other parts of the economy outside financials and housing. Whether this is now
happening is currently difficult to gauge. Valuations look attractive for UK
equities but we are concerned that 2008 earnings forecasts look under pressure,
especially in cyclical sectors, and are therefore focusing on companies where we
see good earnings visibility.
STATUS
The Company operates as an approved investment trust within the meaning of
Section 842 of the Income and Corporation Taxes Act 1988. Approval was granted
for the year ended 31st October 2006, and is expected to be granted for the year
under review. The Company is not a close company.
ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held at 12.30pm on 8th
February 2008.
155 Bishopsgate By Order of the Board
London EC2M 3AD P W I Ingram
18th December 2007 Company Secretary
UNAUDITED INCOME STATEMENT
For the year ended 31st October 2007
Revenue Capital Total Return
£'000s £'000s £'000s
(Note 2)
Net gains on investments at fair value - 7,549 7,549
Income 2,906 - 2,906
Investment management fee (284) (689) (973)
Administration expenses (219) (5) (224)
Net return before finance costs and taxation 2,403 6,855 9,258
Finance costs: interest payable and similar charges (88) (259) (347)
Net return on ordinary activities before taxation 2,315 6,596 8,911
Taxation
Overseas taxation (2) - (2)
Net return attributable to Ordinary Shareholders 2,313 6,596 8,909
Return per Ordinary Share (Note 1) 5.66p 16.13p 21.79p
UNAUDITED BALANCE SHEET
as at 31st October 2007
£'000s
Investments held at fair value through profit or loss 88,152
Net current assets 1,817
Total assets less current liabilities 89,969
Creditors: Amounts falling due after more than one year (6,000)
Total Net Assets 83,969
Called up Share Capital 436
Share Premium Account 14,819
Capital Redemption Reserve 113
Special Reserve 43,215
Capital Reserves:
Realised 7,092
Unrealised 16,268
Hedging Reserve (56)
Revenue Reserve 2,082
Shareholders' Funds (all equity interests) 83,969
Net asset value per Ordinary Share 201.4p
The Net Asset Value is based on 41,702,610 Ordinary Shares in issue at the year
end.
UNAUDITED INCOME STATEMENT
For the year ended 31st October 2006
Revenue Capital Total Return
£'000s £'000s £'000s
(Note 2)
Net gains on investments at fair value - 10,410 10,410
Income 2,768 - 2,768
Investment management fee (298) (718) (1,016)
Administration expenses (179) (3) (182)
Net return before finance costs and taxation 2,291 9,689 11,980
Finance costs: interest payable and similar charges (73) (215) (288)
Net return on ordinary activities before taxation 2,218 9,474 11,692
Taxation
Overseas taxation (1) - (1)
Net return attributable to Ordinary Shareholders 2,217 9,474 11,691
Return per Ordinary Share (Note 1) 5.21p 22.25p 27.46p
UNAUDITED BALANCE SHEET
as at 31st October 2006
£'000s
Investments held at fair value through profit or loss 81,281
Net current liabilities (31)
Total assets less current liabilities 81,250
Creditors: Amounts falling due after more than one year (6,000)
Total Net Assets 75,250
Called up Share Capital 443
Share Premium Account 13,388
Capital Redemption Reserve 106
Special Reserve 42,576
Capital Reserves:
Realised 3,181
Unrealised 13,581
Hedging Reserve (106)
Revenue Reserve 2,081
Shareholders' Funds (all equity interests) 75,250
Net asset value per Ordinary Share 184.3p
The Net Asset Value is based on 40,827,974 Ordinary Shares in issue at the year
end.
UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 31st October 2007
Called up Share Capital Special Capital Capital Hedging Revenue Total
Share Premium Redemption Reserve Reserve Reserve Reserve Reserve
Capital Account Reserve Realised Unrealised
(£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s)
Net Assets at 31st
October 2005 460 12,378 84 51,068 (1,055) 8,395 - 1,626 72,956
Adjustment to
record investments
at bid value - - - - - (52) - - (52)
Recognition of
Interest Rate Swaps - - - - - - (106) - (106)
Revenue Return - - - - - - - 2,217 2,217
Shares repurchased
during the year (22) - 22 (8,492) - - - - (8,492)
Shares issued
during the year 5 1,010 - - - - - - 1,015
Dividends on
Ordinary Shares - - - - - - - (1,762) (1,762)
Capital Return - - - - 4,236 5,238 - - 9,474
Net Assets at 31st
October 2006 443 13,388 106 42,576 3,181 13,581 (106) 2,081 75,250
Called Share Capital Special Capital Capital Hedging Revenue Total
up Premium Redemption Reserve Reserve Reserve Reserve Reserve
Share Account Reserve Realised Unrealised
Capital (£000s) (£000s (£000s) (£000s) (£000s) (£000s) (£000s) (£000s)
(£000s)
Net Assets at
31st October 2006 443 13,388 106 42,576 3,181 13,581 (106) 2,081 75,250
Recognition of
Interest Rate Swaps - - - - - - 50 - 50
Revenue Return - - - - - - - 2,313 2,313
Shares repurchased
during the year (7) - 7 (3,751) - - - - (3,751)
Reissue of ordinary
shares held in
treasury - 1,431 - 4,390 2 - - - 5,823
Cancellation - - - - - - - - -
of ordinary shares
held in treasury
Dividends on
Ordinary Shares - - - - - - - (2,312) (2,312)
Capital Return - - - - 3,909 2,687 - 6,596
Net Assets at
31st October 2007 436 14,819 113 43,215 7,092 16,268 (56) 2,082 83,969
UNAUDITED CASH FLOW STATEMENT
For the year ended 31st October 2007 and 31st October 2006.
2007 2006
£'000s £'000s
Net cash inflow from operating activities 2,023 2,363
Returns on investments and servicing of finance
Interest paid (296) (393)
Capital expenditure and financial investments
Purchase of fixed asset investments (37,132) (28,056)
Sale of fixed asset investments 43,106 29,007
Net cash inflow from capital expenditure and financial
investments 5,974 951
Equity dividends paid (2,312) (1,762)
Net cash inflow before financing 5,389 1,159
Financing
Purchase of Ordinary Shares for cancellation / treasury (3,750) (8,491)
Cash transferred from Allianz Dresdner Second Endowment Policy
Trust plc - 68
Cash transferred from Greene King Acquisitions (No.3) Limited 236 -
Net cash outflow from financing (3,514) (8,423)
Increase (Decrease) in cash 1,875 (7,264)
BRITISH PORTFOLIO TRUST PLC
TOP 20 EQUITY HOLDINGS AS AT 31st October 2007
Valuation % of
31.10.07 Total
£'000s Assets Principal Activities
Royal Dutch Shell 'B' Shares 4,873 5.80 Oil and Gas Producers
BP 4,595 5.47 Oil and Gas Producers
Vodafone Group 4,362 5.19 Mobile Telecommunications
Energy XXI 3,505 4.17 Oil and Gas Producers
HSBC Holdings 3,184 3.79 Banks
GlaxoSmithKline 3,155 3.76 Pharmaceuticals and Biotechnology
Anglo American 2,495 2.97 Mining
Royal Bank of Scotland 2,311 2.75 Banks
BT Group 2,257 2.69 Fixed Line Telecommunications
National Grid 2,233 2.66 Gas, Water and Multiutilities
Barclays 2,222 2.65 Banks
Prudential 1,925 2.29 Life Assurance
BG Group 1,821 2.17 Oil and Gas Producers
AstraZeneca 1,801 2.15 Pharmaceuticals and Biotechnology
Xstrata 1,792 2.13 Mining
British American Tobacco 1,751 2.09 Tobacco
BHP Billiton 1,553 1.85 Mining
Morgan Crucible 1,543 1.84 Electronic and Electrical Equipment
Imperial Tobacco 1,508 1.80 Tobacco
SIG 1,377 1.64 Support Services
50,263 59.86
Note 1
The return per Ordinary Share is based on a weighted average number of shares in
issue during the year of 40,881,996 (2006: 42,580,602).
Note 2
The total return column of this statement is the profit and loss account of the
Company.
All revenue and capital items derive from continuing operations. No operations
were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the Income Statement.
Included in the cost of investments are transaction costs on purchases amounting
to £171,602 (2006: £147,346) and transaction costs on sales amounting to £41,789
(2006: £48,271).
Note 3
Investments are designated as held at fair value through profit or loss in
accordance with FRS 26 'Financial Instruments: Recognition and Measurement'.
Listed investments are valued at bid market prices.
Interest rate swaps are held at fair value through profit or loss.
Note 4
In accordance with FRS 21 'Events after the Balance Sheet Date', the final
dividend payable on Ordinary Shares is recognised as a liability when approved
by shareholders. Interim dividends are recognised only when paid.
Dividends paid on Ordinary Shares in respect of earnings for each year are as
follows:
Year ended Year ended
31st October 2007 31st October 2006
£'000s £'000s
Interim dividend 1.75p paid 14th June 2007 (2006 -1.75p) 685 736
Special dividend 1.25p paid 14th June 2007 (2006-Nil) 496 -
Final dividend 2.85p paid 2nd March 2007 (2006 -2.40p) 1,163 1,091
Prior year over accrual (32) (65)
2,312 1,762
Dividends payable at the year end are not recognised as a liability under FRS 21
'Events after the Balance Sheet Date'. Details of these dividends are set out
below.
Year ended Year ended
31st October 2007 31st October 2006
£'000s £'000s
Final dividend 2.00p payable 3rd March 2008 (2007 -2.85p) 834 1,163
The proposed final dividend above is based on the number of shares in issue at
the year end. However, the dividend payable will be based on the number of
shares in issue on the record date and will reflect any purchases and
cancellations of shares by the Company settled subsequent to the year end.
Note 5
The announcement is prepared on the basis of the accounting policies as stated
in the previous year's financial statements. The financial information set out
in this announcement does not constitute the Company's statutory accounts for
the years ended 31st October 2007 or 31st October 2006. The financial
information for the year ended 31st October 2006 has been extracted from the
statutory accounts for that year, which were filed with the Registrar of
Companies on 9th May 2007. The auditors' report on those accounts was
unqualified before this restatement and did not contain a statement under either
section 237(2) or (3) of the Companies Act 1985. The statutory accounts for the
year ended 31st October 2007 will be finalised on the basis of the financial
information presented by the Directors in this preliminary announcement and will
be delivered to the Registrar of Companies following the Company's Annual
General Meeting. The audit report on the full financial statements has yet to be
signed.
Note 6
The annual report will be sent to shareholders in mid January 2008 and will be
available to members of the public from the Company's registered office at 155
Bishopsgate, London EC2M 3AD.
For further information, please contact:
Simon White, Head of Investment Trusts
RCM (UK) Limited
Tel: 020 7065 1539
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