Final Results

RNS Number : 0874A

Personal Assets Trust PLC

02 June 2016

 

From:              Personal Assets Trust plc

Date:               2 June 2016

Results for the year ended 30 April 2016

The Directors of Personal Assets Trust ("PAT") are pleased to announce the Group's results for the year ended 30 April 2016.

The key points are as follows:

·      PAT is run expressly for private investors. Its investment policy is to protect and increase (in that order) the value of shareholders' funds per share over the long term.

·      Over the year to 30 April 2016 PAT's net asset value per share ("NAV") rose by 5.0%.  This compares to a fall of 9.0% in the FTSE All-Share Index.  PAT's share price rose by £21.80 during the year and at 30 April 2016 was £372.50.  An analysis of performance is provided in the Chairman's Statement and Investment Adviser's Report below.

·     Since PAT became independently managed in 1990 its NAV has increased by 547.9% compared to the FTSE All-Share's 228.0% and the RPI's 109.0%.

Capital returns to 30 April 2016:

	3 Years	5 Years	10 Years	Since 1990
NAV	4.3%	16.6%	43.3%	547.9%
FTSE All-Share	0.9%	8.5%	11.3%	228.0%
RPI	4.8%	11.5%	33.0%	109.0%

·     During the year the Company's shares continued to trade close to NAV. The Company issued 287 Ordinary shares, reissued 55,338 Ordinary shares from Treasury and purchased 53,739 Ordinary shares to be held in Treasury.

·      During the year, PAT continued to maintain a high level of liquidity. At 30 April 2016, liquidity was 56.0%. This included 22.6% in UK T-Bills, UK cash and cash equivalents and net current assets and 33.4% in various classes of non-equity risk assets: 17.0% in US TIPS; 11.0% in Gold Bullion; 1.0% in overseas cash and cash equivalents; and 4.4% in UK Index-Linked Gilts. This compared to holdings as at 30 April 2015 of 26.9% in UK T-Bills, UK cash and cash equivalents, Overseas T-Bills and net current assets and 33.0% in various classes of non-equity risk assets: 17.0% in US TIPS; 10.1% in Gold Bullion; 1.3% in overseas cash and cash equivalents; and 4.6% in UK Index-Linked Gilts.

·      Dividends are paid in July, October, January and April of each year. The first interim dividend of £1.40 per Ordinary share will be paid to shareholders on 14 July 2016. Barring unforeseen circumstances, three further interim dividends of £1.40 per Ordinary share are expected to be paid to shareholders in the year ending 30 April 2017, totalling £5.60 for the year.

The Chairman, Hamish Buchan, said:

"The investment policy of Personal Assets is to protect and increase (in that order) the value of shareholders' funds per share over the long term. In practical terms this means that we try to make as much profit as we safely can when markets rise and minimise losses or even achieve modest gains when markets fall. This we succeeded in doing over the twelve months to 30 April 2016. While the UK equity market as measured by the FTSE All-Share Index ("All-Share") fell by 9.0%, our share price rose by 6.2%. Having begun the year at £350.70, and after hitting an all-time high of £375.90 in April, it ended the year at £372.50.

In Quarterly No. 80, which accompanies this Report, Robin has set down some thoughts on performance and how we should measure it. Personal Assets has always been prepared to be 'different', if we think this is the right thing to do; and this includes being prepared to analyse our performance in an atypical way if we think this useful to shareholders. Over the coming year the Board will be devoting further thought to the subject, which is important not only for its own sake but also as a contribution to the efficient management of the portfolio. I commend the Quarterly to you and hope you will feel free to join in the debate.

I've mentioned before that we see two sides to performance ― the result achieved and the degree of risk accepted in achieving it. Personal Assets has always been risk averse, and how this works in practice is shown in the bottom chart on page 10. This illustrates how since 30 April 2000 Personal Assets has been not only less volatile than UK equities in general but also less volatile than most investment trusts in the AIC Global Sector, in which we were included until December 2015, and the AIC Flexible Sector, in which we have been included since January 2016. In pursuing our investment objectives we aim also to be able to sleep at night even during stormy market conditions.

Although our yield may be low, we know how important the dividend is to some shareholders of long standing. At a General Meeting on 15 April 2015 shareholders voted overwhelmingly to amend the Company's Articles of Association to permit the Company to distribute realised profits as dividend. This has enabled the Board to commit to paying the dividend at the present annual rate of £5.60 for the foreseeable future without having to resort to scrabbling for income in a yield-starved world in a way that would inevitably have lowered the quality of the portfolio. In future years we will use any surplus income to 'repay' the capital so distributed before increasing the dividend.

You may have noticed that after last year's slimming down of the Annual Report and Accounts from 50 pages to 33 the length this year has increased to 36 pages. This, however, is entirely the result of the expansion of the Independent Auditor's Report from two pages to five. 

During the year we issued or sold from Treasury 55,625 shares for a total consideration of £20.5 million and bought back 53,739 for £18.4 million. This was in keeping with the Board's undertaking, enshrined in our Articles of Association, that our shares will always trade at close to net asset value ("NAV") through a combination of share buybacks at a small discount to NAV and the issue of new or Treasury shares at a small premium to NAV when demand exceeds supply. At 30 April 2016 we had 1,744,842 shares outstanding and a market capitalisation of £650 million.

23 June sees the long-awaited referendum on 'Brexit' ― in other words, whether the UK should remain a member of the European Union or should leave it. The Board is taking no collective stance on the question itself, but has followed the debate keenly. Like many other investment trust Boards, we are of the opinion that no action can usefully be taken before the result of the referendum is announced. By the time of the Annual General Meeting the result will have been known for a month and it should then be possible to have a clearer idea of what lies ahead for the UK economy and stock market.

Finally, I am delighted to announce that Jean Sharp has accepted our invitation to join the Board of Personal Assets. She is a Chartered Accountant and since 1998 has been Chief Taxation Officer of Aviva and its predecessor companies. Jean, who has for many years been an enthusiastic private shareholder in the Company, will take up her appointment at the conclusion of the Annual General Meeting and we look forward to welcoming her to our deliberations."

The Investment Adviser, Sebastian Lyon, said:

"Last year I began by noting that over the twelve months to 30 April 2015 our net asset value per share ("NAV") had risen by 4.8%. This year conditions in the UK equity market were less favourable, UK equities as measured by the FTSE All-Share Index falling by 9.0% compared to last year's gain of 3.9%. Despite this, our NAV rose by 5.0% ― an almost identical amount to last year. Making gains where we prudently can and then holding on to them when markets fall is central to our investment approach. Over the last five years our NAV is up by 16.6% even allowing for the ill effects of our disappointing 2013-14.

The late Yogi Berra said that, "It's tough to make predictions, especially about the future". How right he was! This cycle, since 2009, has been notable for the over-optimism of policy makers, economists and strategists. Falling inflation from the mid-1980s allowed for lower interest rates, encouraging consumers to save less, spend more and take on ever more debt. This peaked in the mid-2000s, coinciding with the top of the US housing market. Consumers then grew nervous and stopped borrowing, leaving governments and companies to take up the slack. Accordingly, growth in GDP and corporate earnings has slowed to a snail's pace. Extravagant baby boomers who were 20-35 years old in 1985 now face retirement ― not a time of life to be spending. This may explain why, despite record low interest rates, borrowing has been losing its appeal to individuals. Companies are happier to take on debt but are not prepared to invest when demand has been so feeble, preferring instead to buy back stock to massage upwards their earnings (and sometimes, indirectly, their directors' remuneration).

Seven years into a cyclical bull market, equities are living on borrowed time and the link between profit and performance is all but broken. In the past two years UK company earnings have fallen while 16 FTSE 100 constituents have cut or passed their dividends (in some cases twice). In the United States S&P 500 earnings have fallen for six straight quarters, while the gap between Generally Accepted Accounting Principles ("GAAP") profits and flattering 'adjusted earnings' has been wider only during the recessions of 2001 and 2008. Falling earnings and latterly dividends, with only very modest declines in the stock market from all-time highs, have pumped up valuations even higher. Why? Because investors have felt compelled to pay more for less ― not in the expectation of better growth in future but owing to the lack of other options and the stark need for yield.

Portfolio turnover is a tax on investment returns and we resist the temptation to tinker ― over the past year the turnover of the equity part of the portfolio was only 3%. We reduced our holdings of Altria, Becton Dickinson and Sage on the grounds of ever rising valuations and added to American Express and Berkshire Hathaway. During the sharp sell-off in August we acquired a new holding in Procter & Gamble, which has a 59-year unbroken dividend track record, at a yield of 3.8%.

The world's central bankers, today's reluctant captains of economic policy, are finding it hard to extricate themselves from their unorthodox polices. On the contrary, attempts at normalisation of interest rates have encountered the law of diminishing returns. Recent decisions by the Bank of Japan and the European Central Bank aimed at debasing their currencies have been own goals while the US Federal Reserve's decision to increase interest rates for the first time in nine years is looking like a clamber up the interest rate hill while the prevailing path slopes downwards. Our holding in gold bullion remains an essential insurance against central bankers losing control of their monetary policies.

Investors today find themselves in an unenviable position. They can lock in very low returns by investing in high risk bonds and equities, or they can wait for better opportunities and the prospect of improved future rewards while accepting even lower returns in the short term. Our approach has always been to assess the likelihood and the possible extent of the downside rather than make the tempting mistake of extrapolating the upside. Dividend growth, once the engine of share price growth, cannot today be relied upon ― equities offer not just capital risk but income risk as well. We sense that a reappraisal of stock valuations has begun. Once it has taken place, we look forward to being more fully invested. To quote Yogi Berra again, "The future ain't what it used to be"."

For further information contact:

Robin Angus

Executive Director

Tel:  [phone]

Sebastian Lyon

Investment Adviser

Tel:  [phone]

Steven Davidson

Company Secretary

Tel:  [phone]

The Group's Income Statement, Group and Company Statements of Financial Position, Group and Company Statements of Changes in Equity and Group and Company Cash Flow Statements follow.

Group Income Statement

	Year ended 30 April 2016
	Revenue	Capital
	return	return	Total
	£'000	£'000	£'000
Income
Investment income	11,283	-	11,283
Other operating income	619	-	619
	11,902	-	11,902
Gains on investments held at fair value through profit or loss	-	41,467	41,467
Foreign exchange losses	-	(8,475)	(8,475)
Total income	11,902	32,992	44,894
Expenses	(3,054)	(2,691)	(5,745)
Profit before taxation	8,848	30,301	39,149
Taxation	(594)	-	(594)
Profit for the year	8,254	30,301	38,555
Return per share	£4.78	£17.55	£22.33
The "Profit/(loss) for the Year" is also the "Total Comprehensive Income for the Year", as defined in IAS1 (revised) and no separate Statement of Comprehensive Income has been presented. The "Total" column of this statement represents the Group's Income Statement, prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRSs").  The Revenue and Capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. Return per share is calculated on 1,726,867 (2015: 1,736,658) shares, being the weighted average number in issue during the year. All items in the above statement derive from continuing operations.
Dividend Information	2016		2015
Dividends per share	£5.60		£5.60
Dividends paid	£'000		£'000
First interim dividend of £1.40 per share (2015: £1.40 per share)	2,447		2,392
Second interim dividend of £1.40 per share (2015: £1.40 per share)	2,440		2,413
Third interim dividend of £1.40 per share (2015: £1.40 per share)	2,424		2,419
Fourth interim dividend of £1.40 per share (2015: £1.40 per share)	2,380		2,440
	9,691		9,664

Group Income Statement

	Year ended 30 April 2015
	Revenue	Capital
	return	return	Total
	£'000	£'000	£'000
Income
Investment income	9,278	-	9,278
Other operating income	530	-	530
	9,808	-	9,808
Gains on investments held at fair value through profit or loss	-	45,838	45,838
Foreign exchange losses	-	(12,313)	(12,313)
Total income	9,808	33,525	43,333
Expenses	(2,892)	(2,626)	(5,518)
Profit before taxation	6,916	30,899	37,815
Taxation	(575)	-	(575)
Profit for the year	6,341	30,899	37,240
Return per share	£3.65	£17.79	£21.44

Group Statement of Financial Position

			As at 30 April 2016			As at 30 April 2015
			£'000			£'000
Non-current assets
Investments held at fair value though profit or loss			599,789			593,945
Current assets
Financial assets			2,896			6,743
Receivables			1,963			1,585
Cash and cash equivalents			37,278			15,844
Total Assets			641,926			618,117
Current liabilities
Payables			(1,302)			(8,372)
Total liabilities			(1,302)			(8,372)
Net assets			640,624			609,745
Capital and reserves
Ordinary share capital			21,848			21,845
Share premium			406,302			404,762
Capital redemption reserve			219			219
Special reserve			22,517			22,517
Treasury share reserve			(1,039)			(1,511)
Capital reserve			190,743			161,177
Revenue reserve			34			736
Total equity			640,624			609,745
Shares in issue at year end			1,744,842			1,742,956
Net asset value per Ordinary share			£367.15			£349.83

Company Statement of Financial Position

			As at 30 April 2016			As at 30 April 2015
			£'000			£'000
Non-current assets
Investments held at fair value through profit or loss			600,173			594,326
Current assets
Financial assets			2,896			6,743
Receivables			1,918			1,559
Cash and cash equivalents			36,913			15,457
Total Assets			641,900			618,085
Current liabilities
Payables			(1,276)			(8,340)
Total liabilities			(1,276)			(8,340)
Net assets			640,624			609,745
Capital and reserves
Ordinary share capital			21,848			21,845
Share premium			406,302			404,762
Capital redemption reserve			219			219
Special reserve			22,517			22,517
Treasury share reserve			(1,039)			(1,511)
Capital reserve			190,777			161,207
Revenue reserve			-			706
Total equity			640,624			609,745
Shares in issue at year end			1,744,842			1,742,956
Net asset value per Ordinary share			£367.15			£349.83

Group and Company Statement of Changes in Equity *

For the year ended 30 April 2016	Ordinary share capital	Share premium	Capital redemption reserve	Special reserve	Treasury share reserve	Capital reserve‡	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2015	21,845	404,762	219	22,517	(1,511)	161,177	736	609,745
Profit for the year	-	-	-	-	-	30,301	8,254	38,555
Ordinary dividends paid	-	-	-	-	-	(735)	(8,956)	(9,691)
Issue and reissue of Ordinary shares	3	1,540	-	-	18,917	-	-	20,460
Buybacks of Ordinary shares	-	-	-	-	(18,445)	-	-	(18,445)
Balance as at 30 April 2016	21,848	406,302	219	22,517	(1,039)	190,743	34	640,624
For the year ended 30 April 2015	Ordinary share capital	Share premium	Capital redemption reserve	Special reserve	Treasury share reserve	Capital reserve	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2014	21,845	404,089	219	22,517	(9,770)	130,278	4,059	573,237
Profit for the year	-	-	-	-	-	30,899	6,341	37,240
Ordinary dividends paid	-	-	-	-	-	-	(9,664)	(9,664)
Reissue of Ordinary shares	-	673	-	-	11,633	-	-	12,306
Buybacks of Ordinary shares	-	-	-	-	(3,374)	-	-	(3,374)
Balance as at 30 April 2015	21,845	404,762	219	22,517	(1,511)	161,177	736	609,745

* The Company's reserves are the same as the Group's other than the Capital Reserve, which is £190,777,000 (2015: £161,207,000), and the Revenue Reserve, which is £nil (2015: £706,000). The differences relates to the profit generated by the Company's subsidiary.

‡ The Group and Company Capital reserve at 30 April 2016 includes realised capital reserves of £62,486,000 (2015: £64,416,000).

Share premium. The share premium represents the difference between the nominal value of new Ordinary shares issued and the consideration the Company receives for these shares.

Capital redemption reserve. The capital redemption reserve represents the nominal value of Ordinary shares bought back for cancellation since authority to do this was first obtained at a General Meeting in April 1999.

Special reserve. The cost of any shares bought back for cancellation is deducted from the special reserve, which is a distributable reserve and was created from the share premium, also following a General Meeting in April 1999.

Treasury share reserve. The net cost of any shares bought back to be held in Treasury.

Capital reserve. Gains and losses on the realisation of investments, gains and losses on the realisation of FTSE 100 Future contracts, realised exchange differences of a capital nature and returns of capital are accounted for in this Reserve. Increases and decreases in the valuation of investments held at the year end, unrealised gains and losses on FTSE 100 Future contracts and unrealised exchange differences of a capital nature are also accounted for in this Reserve.

Revenue reserve. Any surplus/deficit arising from the revenue profit/loss for the year is taken to/from this Reserve.

Group Cash Flow Statement

	Year Ended 30 April	Year Ended 30 April
	2016	2015
	£'000	£'000
Cash flows from operating activities
Profit before taxation	39,149	37,815
Gains on investments including effective yield	(43,230)	(46,462)
Foreign exchange losses	8,475	12,313
Operating cash flows before movements in working capital	4,394	3,666
Increase in other receivables	(150)	(69)
Increase in other payables	55	85
Net cash from operating activities before taxation	4,299	3,682
Taxation	(750)	(591)
Net cash inflow from operating activities	3,549	3,091
Investing activities
Purchases of investments - equity shares	(21,283)	(19,564)
Purchases of investments - fixed interest and other investments	(418,189)	(463,877)
Disposal of investments - equity shares	14,941	60,754
Disposal of investments - fixed interest and other investments	454,792	407,887
Net cash inflow/(outflow) from investing activities	30,261	(14,800)
Financing activities
Equity dividends paid	(9,691)	(9,664)
Issue of Ordinary shares	101	-
Cost of share buybacks	(18,445)	(3,374)
Reissue of Ordinary shares from Treasury	20,287	12,306
Net cash outflow from financing activities	(7,748)	(732)
Increase/(decrease) in cash and cash equivalents	26,062	(12,441)
Cash and cash equivalents at the start of the year	15,844	45,068
Effect of foreign exchange rate changes	(4,628)	(16,783)
Cash and cash equivalents at the end of the year	37,278	15,844
Net cash inflow from operating activities includes the following:
Dividends received	7,891	7,556
Interest received	1,691	1,119

Company Cash Flow Statement

	Year Ended 30 April	Year Ended 30 April
	2016	2015
	£'000	£'000
Cash flows from operating activities
Profit before taxation	39,146	37,809
Gains on investments including effective yield	(43,230)	(46,462)
Foreign exchange losses	8,475	12,313
Operating cash flows before movements in working capital	4,391	3,660
Increase in other receivables	(131)	(93)
Increase in other payables	61	91
Net cash from operating activities before taxation	4,321	3,658
Taxation	(750)	(591)
Net cash inflow from operating activities	3,571	3,067
Investing activities
Purchases of investments - equity shares	(21,283)	(19,904)
Purchases of investments - fixed interest and other investments	(418,189)	(463,877)
Disposal of investments - equity shares	14,941	60,754
Disposal of investments - fixed interest and other investments	454,792	407,887
Net cash inflow/(outflow) from investing activities	30,261	(15,140)
Financing activities
Equity dividends paid	(9,691)	(9,664)
Issue of Ordinary shares	101	-
Cost of share buybacks	(18,445)	(3,374)
Reissue of Ordinary shares from Treasury	20,287	12,306
Net cash outflow from financing activities	(7,748)	(732)
Increase/(decrease) in cash and cash equivalents	26,084	(12,805)
Cash and cash equivalents at the start of the year	15,457	45,045
Effect of foreign exchange rate changes	(4,628)	(16,783)
Cash and cash equivalents at the end of the year	36,913	15,457

Net cash inflow from operating activities includes the following:
Dividends received	7,891	7,556
Interest received	1,691	1,119

 

Principal Risks and Risk Management

The Board believes that the principal risks to shareholders, which it seeks to mitigate through continual review of its investments and through shareholder communication, are events or developments which can affect the general level of share prices, including, for instance, inflation or deflation, economic recessions and movements in interest rates and currencies.

Other risks faced by the Company include breach of regulatory rules which could lead to suspension of the Company's Stock Exchange listing, financial penalties, or a qualified audit report. Breach of Section 1158 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on capital gains.

In the mitigation and management of these risks, the Board regularly monitors the investment environment and the management of the Company's investment portfolio, and applies the principles detailed in the guidance provided by the Financial Reporting Council.

Statement of Directors' Responsibilities in Respect of the Annual Financial Report

In accordance with the Disclosure and Transparency Rules, we confirm that to the best of our knowledge:

·      The financial statements contained within the Annual Report for the year ended 30 April 2016, of which this statement of results is an extract, have been prepared in accordance with applicable International Financial Reporting Standards, on a going concern basis, and give a true and fair view of the assets, liabilities, financial position and return of the Company and the undertakings included in the consolidation taken as a whole;

·      The Chairman's Statement and Investment Adviser's Report include a fair review of the important events that have occurred during the financial year and their impact on the financial statements;

·      'Principal Risks and Risk Management' includes a description of the Company's principal risks and uncertainties; and

·      The Annual Report includes details of related party transactions, if any, that have taken place during the financial year.

Notes:

1.         The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (''IFRSs''). These comprise standards and interpretations approved by the International Accounting Standards Board (''IASB''), together with such interpretations by the International Accounting Standards and Standing Interpretations Committee as have been approved by the IASB and still remain in effect, to the extent that these have been adopted by the European Union.

The financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.

The principal accounting policies adopted are set out below. Where the presentational guidance set out in the Statement of Recommended Practice (the ''SORP'') for investment trusts issued by the Association of Investment Companies (the ''AIC'') in November 2014 is consistent with the requirements of IFRSs, the Directors have sought to prepare the financial statements on a basis compliant with the recommendation of the SORP.

A number of new standards, including IFRS 9 Financial Instruments, have been issued but are not effective for this accounting period. These have not been adopted early and the Group does not consider that the future adoption of any new standards, in the form currently available, will have any material impact on the financial statements as presented.

2.         During the year the Directors issued 287 new Ordinary shares for proceed of £102,000, and reissued 55,338 Ordinary shares from Treasury for proceeds of £20,358,000. The Company also purchased 53,739 Ordinary shares to be held in Treasury for a total consideration of £18,445,000.

3.         At 30 April 2016 the sterling value of the US Treasury stocks and part of the US equities were protected by a forward currency contract.

4.         These are not statutory accounts in terms of Section 434 of the Companies Act 2006.  Full audited accounts for the year to 30 April 2016 will be sent to shareholders in June 2016 and will be available for inspection at 10 St Colme Street, Edinburgh, the registered office of the Company. The full annual report and accounts will be available on the Company's website www.patplc.co.uk.

5.         The audited accounts for the year ended 30 April 2016 will be lodged with the Registrar of Companies.

 

END

 

 

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