Final Results
RIT Capital Partners PLC
16 May 2002
16 May 2002
PRELIMINARY ANNOUNCEMENT
ASSET VALUE MAINTAINED
FOR THE YEAR ENDED
31 MARCH 2002
INVESTMENT PERFORMANCE
During the year under review, world stock markets experienced exceptionally
difficult conditions, with recessionary trends accentuated by the cataclysmic
events of September 11th. In view of this, it is some comfort to be able to
report that the Company preserved shareholders' capital during this turbulent
period. Protection against adverse market conditions was provided by the
Company's liquidity, the diversity within the portfolio and the increased
investment in asset classes which are less directly correlated to markets.
During the year to 31 March 2002, the Company's net asset value per share
increased by 0.5%, from 484.3p to 486.5p (before deducting the proposed
dividend). In contrast, over the same period, the Morgan Stanley Capital
International Index (in Sterling), the FTSE All-Share Index and the Investment
Trust Net Assets Index declined by 6.2%, 7.0% and 9.5% respectively.
As nearly half of the portfolio is held in investments whose value is not
directly correlated to stock markets, a strict comparison with indices over the
short term is misleading. Moreover, even within the quoted element of the
portfolio the Company has never followed a rigid geographical asset allocation
policy, based on the weighting of a particular benchmark index. Nevertheless,
the Company aims, over time, to deliver for its shareholders increases in
capital value in excess of the relevant indices. Since its inception in 1988,
RITCP has significantly outperformed these indices and has continued to do so
during the period under review.
The most recent net asset value per share at 14 May, after deducting the
proposed dividend, was 486.6p.
Set out below is the asset allocation at the year end.
% of Portfolio % of Portfolio
at 31 March 2002 at 31 March 2001
Quoted investments 38.7 33.1
Hedge funds 17.1 17.4
Unquoted investments 18.2 18.8
Private equity partnerships 7.0 6.9
Government securities (liquidity) 15.6 20.2
Property 3.4 3.6
The main change in the asset allocation over the past year has been the increase
in quoted investments from 33.1% to 38.7%, financed by a reduction in the
holdings of government securities (liquidity) from 20.2% to 15.6%.
This resulted from a cautious increase in the Company's market exposure towards
the end of the year. However, in response to the uncertain outlook the Company
believes it is prudent to retain an element of liquidity within the portfolio.
At the year end, 45.8% of the portfolio was invested in the USA, 22.1% in the
UK, 14.7% in Germany, 3.8% in Canada and 3.1% in Japan, with the balance of
10.5% in other countries.
THE QUOTED PORTFOLIO
At the year end, £298 million, or 38.7% of the portfolio, was held directly in
quoted investments. A further £131.8 million, or 17.1% of the portfolio, was
held in hedge funds which mainly invest in quoted securities. Taking these two
categories together (but excluding the holdings of government securities), some
56% of the portfolio was invested, either directly or indirectly, in quoted or
other marketable securities.
The Company has been an investor in selected hedge funds since its inception in
1988, in the pursuit of absolute and relatively consistent returns. RITCP
continues to believe that they offer shareholders access to specialist money
managers whose funds are, in many cases, closed to new investors.
THE UNQUOTED PORTFOLIO
The Company's exposure to unquoted investments results either from investments
made directly by RITCP's own management, or through investments in externally
managed partnerships. In total, some £193.7 million, or 25.2% of the portfolio,
was invested in this sector at the year end: £139.9 million, or 18.2%, through
its own management and £53.8 million, or 7.0%, through its investments in
limited partnerships managed by third parties.
The valuations of the Company's unquoted investments are monitored throughout
the year, with a formal review, overseen by a committee of non-executive
directors, at the half year and year-end. The overall valuation of the direct
holdings in unquoted investments remained broadly the same over the past year.
Although the valuations of a small number of holdings have been written down,
others have been increased to reflect marked improvements in their prospects or
operating performance.
Similarly, the Company's investments in externally managed partnerships have
been reviewed, with provisions made where appropriate. In fact, some of these
holdings had already been written down, in anticipation of lower valuations,
during the previous financial year. The investments in externally managed
partnerships are largely restricted to leading US private equity firms. The
Company has been a participant in this sector for a number of years and intends
to limit any new commitments to a select group of the leading firms.
The property investments, valued at £26.3 million, or 3.4% of the portfolio, are
concentrated in St James's Place, in central London, and the valuations remain
largely unchanged.
SHARE BUY-BACK
RITCP did not buy back any shares for cancellation during the year under review.
This was largely due to the fact that the share price remained at a relatively
low discount to the underlying value for most of the relevant period. In
future, the Company will be prepared to use this facility in the light of market
conditions and the level of the discount.
The Company will therefore be seeking shareholders' approval at this year's AGM
for the renewal of its buy-back facility.
RESULTS AND DIVIDENDS
The total increase in net assets for the year under review was £4.9 million, of
which £3.6 million was attributable to revenue and £1.3 million to capital. In
the previous year, the total reduction in net assets was £40.1 million, of which
£62.8 million related to capital, partly offset by a £22.7 million revenue
profit. These figures exclude taxation, the proposed dividend and the cost of
the share buy-back.
The Company proposes to pay a dividend of 3.1p per share on 5 July 2002 to
shareholders on the register at 7 June 2002, the same dividend as last year.
However, shareholders should be aware that this level of dividend might not be
sustainable in future years. As always, the focus of the Company is on
achieving capital growth rather than providing dividend income.
For further information please contact: Duncan Budge 020-7514 1928
CONSOLIDATED STATEMENT OF TOTAL RETURN
For the year ended 31 March 2002
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 1,909 1,909
Dealing losses (4,155) - (4,155)
Investment income 16,897 - 16,897
Other income 485 - 485
Administrative expenses (6,341) - (6,341)
Investment management fees (3,009) (492) (3,501)
Other capital items - (144) (144)
Net return before finance costs
and taxation 3,877 1,273 5,150
Interest payable and similar
charges (271) - (271)
Return on ordinary activities
before taxation 3,606 1,273 4,879
Taxation on ordinary activities (858) (657) (1,515)
Return on ordinary activities
after taxation attributable to
equity shareholders 2,748 616 3,364
Dividends (4,862) - (4,862)
Transfer (from)/to reserves (2,114) 616 (1,498)
Return per ordinary share 1.8p 0.4p 2.2p
Net asset value per ordinary share 483.4p
The revenue column of this statement is the consolidated profit and loss account of the Group.
The accompanying notes are an integral part of this statement.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
CONSOLIDATED STATEMENT OF TOTAL RETURN
Restated for the year ended 31 March 2001
Revenue Capital Total
£'000 £'000 £'000
Losses on investments - (59,402) (59,402)
Dealing profits 10,104 - 10,104
Investment income 22,312 - 22,312
Other income 498 - 498
Administrative expenses (5,985) - (5,985)
Investment management fees (3,647) - (3,647)
Other capital items - (3,398) (3,398)
Net return before finance costs
and taxation 23,282 (62,800) (39,518)
Interest payable and similar (560) - (560)
charges
Return/(loss) on ordinary activities
before taxation 22,722 (62,800) (40,078)
Taxation on ordinary activities (5,664) 432 (5,232)
Return/(loss) on ordinary activities
after taxation attributable to
equity shareholders 17,058 (62,368) (45,310)
Dividends (4,802) - (4,802)
Transfer to/(from) reserves 12,256 (62,368) (50,112)
Return/(loss) per ordinary share 10.8p (39.6p) (28.8p)
Net asset value per ordinary share 484.3p
The revenue column of this statement is the consolidated profit and loss account
of the Group.
The accompanying notes are an integral part of this statement.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
CONSOLIDATED BALANCE SHEET
Restated
31 March 31 March
2002 2001
£'000 £'000
Fixed assets
Investments 769,467 745,486
Tangible fixed assets 206 259
769,673 745,745
Current assets 44,434 64,255
Creditors: Amounts falling due
within one year (24,921) (41,699)
Net current assets 19,513 22,556
Total assets less current
liabilities 789,186 768,301
Creditors: Amounts falling due after
more than one year:
Bank loans (21,167) -
Provisions for liabilities (9,744) (8,527)
and charges
758,275 759,774
Capital and reserves
Called up share capital 156,848 156,848
Capital redemption reserve 33,308 33,308
Capital reserve - realised 536,654 518,383
Capital reserve - unrealised 6,541 24,196
Revenue reserve 24,924 27,039
Equity shareholders' funds 758,275 759,774
CONSOLIDATED CASH FLOW STATEMENT
Year Ended Year Ended
31 March 31 March
2002 2001
£'000 £'000
Cash inflow from
operating activities 6,327 20,692
Servicing of finance
Bank and loan interest paid (274) (563)
Net cash outflow from servicing
of finance (274) (563)
Taxation
UK tax paid (436) (1,240)
Overseas tax paid (565) (953)
Net cash outflow from taxation (1,001) (2,193)
Financial investment
Purchase of investments (449,127) (562,814)
Sale of investments 398,695 626,294
Net cash (outflow)/inflow from (50,432) 63,480
financial investment
Capital expenditure
Purchase of fixed assets (59) (247)
Sale of fixed assets 10 71
Net cash outflow from capital (49) (176)
expenditure
Equity dividends paid (4,862) (4,882)
Net cash (outflow)/inflow before (50,291) 76,358
management of liquid resources
and financing
Management of liquid resources
Purchase of government (363,451) (560,524)
securities
Sale of government securities 391,271 497,540
Net cash inflow/(outflow) from 27,820 (62,984)
management of liquid resources
Financing
Buy-back of ordinary shares - (10,968)
Increase in term loans 21,167 -
Net cash inflow/(outflow) from 21,167 (10,968)
financing
(Decrease)/increase in cash in the (1,304) 2,406
year
NOTES
1 PRIOR YEAR ADJUSTMENT
The Group has implemented the provisions of Financial Reporting Standard 19 on
deferred tax which requires full provision to be made for deferred tax assets
and liabilities arising from timing differences between recognition in the
financial statements and in the tax computations. The adoption of FRS19 has
resulted in a deferred tax asset of £4.6 million being recognised as at 31 March
2002 and the capital reserve and the revenue reserve as at 31 March 2001 have
been increased by £6.4 million and £0.2 million respectively as prior year
adjustments.
2 RETURN/(LOSS) PER ORDINARY SHARE
The return per share for the year ended 31 March 2002 is based on the revenue
return after tax of £2.7 million (31 March 2001 restated: £17.1 million) and the
capital return after tax of £0.6 million (31 March 2001 restated: capital loss
of £62.4 million) and the weighted average number of ordinary shares in issue
during the year of 156.8 million (31 March 2001: 157.3 million).
3 NET ASSET VALUE PER ORDINARY SHARE
The net asset value per share at 31 March 2002 is based on the net assets
attributable to ordinary shareholders of £758.3 million (31 March 2001 restated:
£759.8 million) and the number of ordinary shares in issue at 31 March 2002 of
156.8 million (31 March 2001: 156.8 million).
4 MOVEMENTS IN FIXED ASSET INVESTMENTS
Unquoted
and Government Funds and
Quoted Property Securities Partnerships Total
£'000 £'000 £'000 £'000 £'000
At 31 March 2001 246,642 166,807 150,641 181,396 745,486
Reclassifications 4,479 (4,479) - - -
Additions 414,331 14,380 363,451 25,875 818,037
Disposals (373,160) (9,484) (392,054) (15,379) (790,077)
Revaluation 5,736 (1,078) (2,292) (6,345) (3,979)
At 31 March 2002 298,028 166,146 119,746 185,547 769,467
Funds and partnerships comprise hedge funds and private equity partnerships.
5 LITIGATION
The Report and Accounts for the year ended 31 March 2001 contained a statement
in relation to the litigation proceedings issued in New York by Richbell
Information Services Inc.
On 11 March 2002 the New York Court dismissed the proceedings in their entirety.
On 2 April 2002 the plaintiffs filed an appeal against that decision.
Based upon legal advice received, the Directors believe that neither the appeal
nor the underlying proceedings, should they be reinstated, will have a material
effect on the financial position of the Company.
6 UNAUDITED STATEMENTS
The results for the year ended 31 March 2002 are unaudited and do not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
Statutory accounts for the year ended 31 March 2001 have been delivered to the
Registrar of Companies. The auditors have made a report under Section 235 of
the Companies Act 1985 on those statutory accounts which was unqualified and did
not contain a statement under Section 237 (2) or (3) of the Companies Act 1985.
7 ANNUAL REPORT
The Company's annual Report and Accounts for the year ended 31 March 2002 will
be posted to shareholders on or before Friday 31 May 2002. Copies of this
announcement and the annual Report will be available to the public at the
Company's registered office at 27 St James's Place, London SW1A 1NR.
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