Final Results
July 29 2003 - 12:34PM
UK Regulatory
EXETER SELECTIVE ASSETS INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED ANNUAL RESULTS
The Directors announce the unaudited statement of results for the year ended 31
March 2003 as follows:-
COMPANY STATEMENT OF TOTAL RETURN
(incorporating the revenue account* of the Company)
1 April 2002 to 31 March 1 February 2001 to 31 March
2003 2002
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Losses on investments - (34,250) (34,250) - (68,861) (68,861)
Dividends and interest 2,365 - 2,365 8,522 - 8,522
Other income - - - 3 - 3
Investment management (95) (190) (285) (554) (832) (1,386)
fee
Other expenses (304) (156) (460) (444) - (444)
Return before financing
costs
and taxation 1,966 (34,596) (32,630) 7,527 (69,693) (62,166)
Interest payable and
similar
charges (949) (3,109) (4,058) (6,082) (3,681) (9,763)
Return on ordinary
activities
before and after 1,017 (37,705) (36,688) 1,445 (73,374) (71,929)
taxation
for the financial
period
Dividends in respect of
Dividend
Growth shares - - - (3,719) - (3,719)
Retained surplus/
(deficit) for the
Period 1,017 (37,705) (36,688) (2,274) (73,374) (75,648)
Returns per share Pence Pence Pence Pence Pence Pence
(Articles basis):**
- Ordinary share n/a n/a n/a (1.71) (37.32) (39.03)
- Progressive Growth 0.00 (19.23) (19.23) 0.00 (76.34) (76.34)
share
- Dynamic Growth share 0.00 (73.39) (73.39) 0.00 (20.73) (20.73)
- Dividend Growth share 2.35 (25.21) (22.86) 10.30 (74.39) (64.09)
- Exiting share n/a n/a n/a (0.07) (108.27) (108.34)
* The revenue column of this statement is the revenue account of the Company.
** The figures for the period to 31 March 2002 were calculated in accordance
with share classes and attributable returns on an actual basis, based on net
revenues generated whilst each class of share was in issue during the period.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year.
Theses accounts have been prepared using the accounting standards and policies
adopted at the end of the previous accounting period.
SUMMARISED COMPANY BALANCE SHEET
As at 31 March As at 31 March
2003 2002
�'000 �'000
Fixed assets
Investments 23,497 84,903
Current assets
Debtors 391 3,032
Cash at bank 1,376 11,538
1,767 14,570
Creditors - amounts falling due within one
year:
Other creditors 156 1,176
Lloyds TSB loan facility 2009 11,695 -
Bank of Scotland loan facility 2009 15,615 -
27,466 1,176
Net current (liabilities)/assets (25,699) 13,394
Total assets less current liabilities (2,202) 98,297
Creditors - amounts falling due after one
year:
Lloyds TSB loan facility 2009 - 26,645
Bank of Scotland loan facility 2009 - 37,166
Net (liabilities)/assets (2,202) 34,486
Net asset value per share (Articles basis): Pence Pence
- Progressive Growth - 19.23
share
- Dynamic Growth - 73.39
share
- Dividend Growth - 22.86
share
SUMMARISED STATEMENT OF CASHFLOWS
1 April 2002 to 1 February 2001
to
31 March 2003 31 March 2002
�'000 �'000
Net cash inflow from operating activities 2,030 6,483
Servicing of finance
- Interest paid (3,216) (2,444)
- Premium on early repayment of 2002 - (2,508)
facilities
- Breakage costs incurred on early repayment (1,211) -
of 2009 facilities
- Expenses of long-term loans - (130)
Net cash outflow from servicing of finance (4,427) (5,082)
Taxation
Total taxation recovered - 191
Capital expenditure and financial investment
- Purchases of investments (4,795) (111,699)
- Sales of investments 33,780 93,416
Net cash inflow/(outflow) from capital
expenditure and
financial investment 28,985 (18,283)
Equity dividends paid (605) (3,113)
Net cash inflow/(outflow) before financing 25,983 (19,804)
Financing
- Proceeds of share issue - 54,418
- Expenses of share issue - (3,866)
- Loan proceeds - 62,227
- Repayment of 2002 facilities - (76,046)
- Partial repayment of 2009 facilities (36,145) -
- Repayment of Exiting shares - (7,532)
Net cash (outflow)/inflow from financing (36,145) 29,201
(Decrease)/increase in cash (10,162) 9,397
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 March 2003 or the period ended 31
March 2002. The financial information for 2002 is derived from the statutory
accounts for 2002, which have been delivered to the Registrar of Companies. The
auditors have reported on those accounts; their report was unqualified and did
not contain a statement under section 237 (2) or (3) of the Companies Act 1985.
The statutory accounts for 2003 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.
REPORT TO SHAREHOLDERS
It has been a deeply depressing year for the Company. Net assets have fallen
from �34.5 million at 31 March 2002 to a deficit of �2.2 million at 31 March
2003. Although the Company's overall financial position remains weak, the
capital reorganisation which took place in April has provided a degree of
stability. In addition, market recovery has taken net assets back up to �3.9
million as at 25 July 2003.
Corporate Developments
On 3 July 2002 the Company breached the minimum asset to loan ratio covenant of
1.65 times required under its loan arrangements. As a consequence, the loans
became repayable on demand in their entirety. Whilst its lenders did not demand
immediate repayment in full, they have required the Company to make a series of
debt repayments.
Since then, the Board, together with the Manager and its advisers, have sought
to preserve the Company's existence and have made periodic debt repayments in
the hope that the value of the Company's assets would recover in due course.
In December, it became apparent, given the marketability of the Company's
assets, that the Company would not be able to continue to meet its debt
repayment obligations without selling Dynamic Growth Pool assets to fund
repayments of borrowings allocated to the other two pools. The Directors
reluctantly concluded that the only practicable way forward was to simplify the
Company's capital structure creating a single class of new ordinary shares and
merging the three existing pools of assets. The conversion terms reflected the
substantially greater underlying asset value attaching to the Dynamic Growth
shares relative to the other two classes given that assets attributable to the
Dynamic Growth shares would need to be sold to meet repayment obligations in
respect of borrowings allocated to other pools.
Going Concern
The Company has agreed in principle an extension to its loan agreements with
Bank of Scotland and Lloyds TSB ("the Bank Loans") until January 2004, subject
to a repayment schedule. The Bank Loans remain repayable on demand. Therefore,
although the Directors have prepared the Company's accounts on a going concern
basis, a fundamental uncertainty remains with regard to the future viability of
the Company.
Market Background
The FTSE All-Share Index fell by 32.1% over the twelve month period under
review with the bulk of this fall occurring during the first six months.
Overseas markets were also very weak with the S&P 500 Index in the United
States down 33.4%, the FTSE Europe ex UK Index down 35.4% and the Japanese
Nikkei 225 falling 27.2% (all in sterling terms), also largely in the period up
to 30 September 2002. With the global economic slowdown putting pressure on
corporate profitability, and in the aftermath of accounting malpractice in the
US, investors' confidence in corporate profits was shaken; it was indeed a
dismal period for equity markets. The final quarter of 2002 witnessed a modest
recovery but nervousness returned ahead of a resolution of the Iraqi crisis.
Investment Trusts
The investment trust sector, in which the Company is exclusively invested,
suffered badly from the worldwide weakness in equity markets. The FTSE
Investment Companies Index fell 36.5% over the twelve month period. Securities
issued by split capital trusts generally experienced more dramatic falls. The
factors which contributed to this exceptionally weak performance will be
described further in the Manager's Report in the Company's Annual Report which
will be published shortly.
Results
Although the Company repaid �37 million of borrowings during the year, the
severe decline in markets resulted in the Company having net liabilities at the
year-end as shown in the table below:
Dynamic Progressive Dividend Total
Growth Pool Growth Pool Growth Pool
�m �m �m �m
31 March 2002 Net Assets 19.3 5.3 9.9 34.5
31 March 2003 Net Assets/ 8.3 (2.5) (8.0) (2.2)
(Liabilities)*
* In accordance with the Company's previous Articles of Association the
shortfalls of assets against liabilities within both the Progressive Growth
Pool and the Dividend Growth Pool would have been met from the assets of the
Dynamic Growth Pool. Following the restructuring approved by shareholders, the
pools no longer exist and the total assets attributable to shareholders are �
3.9 million as at 25 July 2003.
The revenue return per Dividend Growth share for the year ended 31 March 2003
was 2.35p. However, as the distribution tests of the Companies Act 1985 are not
satisfied, the Company is unable to make dividend payments.
Fee waivers
In light of the financial position of the Company, the Board waived its
remuneration for the period of nine months ending 30 June 2003. Exeter Asset
Management Limited also waived its fees for the provision of investment
management services and administration and company secretarial duties during
the same period.
Board
Following the implementation of the capital reorganisation, the Directors have
reviewed the size of the Board. They have decided that the Company can now
operate efficiently with a three member Board. Sir Richard Brooke, Bt. and Sir
Stephen Waley-Cohen, Bt. are resigning at the forthcoming Annual General
Meeting. I would like to thank them for their work for the Company over many
years, but in particular for their contribution in the recent difficult times.
Outlook
Since the end of March stock markets have been boosted by the coalition's
successful ousting of the Iraqi regime. The outlook for corporate profitability
has been improving but with high consumer and corporate debts, and worries
about deflation, there may be further setbacks for equity markets.
Conventional investment trusts and zero dividend preference shares, in
particular, have responded positively over the last four months. However, if
the Company is to return significant value to shareholders having met its
continuing debt repayment obligations in full, then the Company's assets will
have to recover substantially over the coming year.
The Directors, and indeed everyone who is involved with the Company, deeply
regret the losses which shareholders have incurred over the last two years. We
will continue to do all we can to bring about a recovery in the Company's
fortunes.
************.
T R H Kimber, Chairman
29 July 2003
END