Interim Results
November 03 2003 - 11:15AM
UK Regulatory
EXETER SELECTIVE ASSETS INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS
The Directors announce the unaudited statement of results for the period ended
30 September 2003 as follows:-
SUMMARISED STATEMENT OF TOTAL RETURN
(incorporating the revenue account* of the Company)
1 April 2003 to 30 1 April 2002 to 30 September
September 2003 2002
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Gains/(losses) on - 9,050 9,050 - (32,252) (32,252)
investments
Dividends and interest 703 - 703 1,559 - 1,559
Investment management (9) (18) (27) (95) (190) (285)
fee
Other expenses (71) 1 (70) (223) - (223)
Return before financing
costs
and taxation 623 9,033 9,656 1,241 (32,442) (31,201)
Interest payable and
similar
charges** (270) (1,113) (1,383) (620) (2,228) (2,848)
Return on ordinary
activities
before and after
taxation
transferred to/(from) 353 7,920 8,273 621 (34,670) (34,049)
reserves
Returns per Share: Pence Pence Pence Pence Pence Pence
- New Ordinary Share ** 1.27 28.41 29.68 2.23 (124.36) (122.13)
*
* The revenue column of this statement is the revenue account of the Company.
** Interest payable and similar charges for the six months to 30 September 2003
includes �574,000 (2002:�989,000) in respect of breakage costs incurred on
early repayment of loan facilities during the period. This expense has been
charged in full to the capital reserve.
*** Returns per share for the period to 30 September 2003 have been based on
the revenue and capital return for the six months to 30 September 2003 and on
27,878,923 New Ordinary Shares being the number of shares in issue following
the reconstruction of the Company on 7 April 2003 when the previous three
classes of share were converted into one New Ordinary Share class.
In accordance with Financial Reporting Standard No. 14: Earnings per Share, the
returns per share for the six month period ended 30 September 2002 have been
restated to show the revenue and capital returns per share for the prior period
based on the number of New Ordinary Shares in issue following the
reconstruction referred to above.
These accounts have been prepared using accounting standards and policies
adopted at the previous year end.
These accounts are unaudited and are not the Company's statutory accounts.
SUMMARISED BALANCE SHEET
30 31 March 30
September 2003 September
2003 2002
�000 �000 �000
Fixed assets
Listed 23,427 23,497 30,005
investments
Current
assets
Debtors 943 391 406
Cash at bank 650 1,376 2,924
1,593 1,767 3,330
Creditors -
amount
falling due
within one
year
Other 62 156 70
creditors
Bank of 10,761 15,615 18,957
Scotland
loan
facility*
Lloyds TSB 8,126 11,695 13,871
loan
facility*
18,949 27,466 32,898
Net current (17,356) (25,699) (29,568)
liabilities
Total assets 6,071 (2,202) 437
less current
liabilities
Net assets 6,071 (2,202) 437
Pence Pence Pence
Net asset
value per
Share**
(including
current
period
revenue):
- New 21.78 - 1.57
Ordinary
Share
* In July 2002 the Company breached its banking covenants under the terms of
its loan facility agreements with Bank of Scotland and Lloyds TSB, and
consequently the loans became repayable on demand. With effect from 13 March
2003 the Lloyds TSB zero coupon loan facility 2009 was converted into an on
demand loan facility. On the basis of these events, both the Bank of Scotland
and Lloyds TSB loan facilities have been shown as falling due within one year
at 30 September 2002, 31 March 2003 and 30 September 2003.
** The net asset values per share as at 30 September 2002 and 31 March 2003
have been restated to reflect the capital structure introduced following the
reconstruction on 7 April 2003, as this is considered to provide a more
meaningful comparison for shareholders than disclosing the net asset values
under the previous structure.
These accounts are unaudited and are not the Company's statutory accounts.
SUMMARISED STATEMENT OF CASHFLOWS
1 April 2003 to 1 April 2002
30 September to 30 September
2003 2002
�'000 �'000
Net cash inflow from operating activities 559 1,369
Servicing of finance
- Interest paid (788) (1,861)
- Breakage costs incurred on early repayment
of Bank of
Scotland and Lloyds TSB loan facilities (574) (989)
Net cash outflow from servicing of finance (1,362) (2,850)
Capital expenditure and financial investment
- Purchases of investments - (4,386)
- Sales of investments 8,512 28,858
Net cash inflow from capital expenditure and 8,512 24,472
financial investment
Equity dividends paid - (605)
Net cash inflow before financing 7,709 22,386
Financing
- Partial repayment of Bank of Scotland and
Lloyds TSB
loan facilities (8,435) (31,000)
Net cash outflow from financing (8,435) (31,000)
Decrease in cash (726) (8,614)
The above financial information does not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985. The audited accounts for the
period to 31 March 2003, which contained an unqualified auditors' report, have
been lodged with the Registrar of Companies and did not contain a statement
required under section 237(2) or (3) of the Companies Act 1985.
REPORT TO SHAREHOLDERS
The six month period ended 30 September 2003 has seen a significant improvement
in the Company's financial position. At 30 September net assets were �6.1
million (21.78p per ordinary share), which compares with a deficit of �2.2
million at 31 March.
As explained in the Annual Report for the year ended 31 March 2003, the Company
is making periodic repayments of its outstanding loans from Bank of Scotland
and Lloyds TSB ("the Bank Loans"). During the period under review the Company
repaid a total of �8.4 million and the amount outstanding at 30 September 2003
was �18.9 million. The Company has agreed in principle to make further
repayments to the Banks at a rate of �1.5 million per month until 31 December
2003 when its loan agreements will be reviewed. Shareholders are reminded that
the Bank Loans continue to be repayable on demand. As a result, there is some
residual uncertainty with regard to the future viability of the Company.
The FTSE All-Share Index rose by 16.8% over the six month period with the bulk
of this rise coming in the weeks following the ending of major hostilities in
Iraq. The investment trust sector, in which the Company exclusively invests,
performed particularly well with the FTSE Investment Companies Index up 28.3%.
The rally in equity markets worldwide has led to increased buying of investment
trust shares, notably from private investors, and in many cases discounts have
narrowed sharply.
In order to meet the Company's repayment obligation to its lenders, it has been
necessary to dispose of a substantial proportion of the conventional trusts
within the portfolio, albeit at significantly higher values than those
pertaining six months ago. The changing composition of the portfolio is shown
in the table below:
30 September 2003 31 March 2003
�m % �m %
Conventional Trusts 5.7 24.2 10.5 44.7
Split Capital - Zero 7.3 31.1 4.4 18.8
Split Capital - Income/Highly 6.0 25.9 5.2 22.1
Geared Ordinary
Split Capital - Capital 1.6 6.9 1.2 4.9
Fixed Income 2.8 11.9 2.2 9.5
Investments 23.4 100 23.5 100
Total assets 25.0 25.1
The marked response of zero dividend preference shares ("zeros") to rising
equity markets is particularly noteworthy, with the zeros in the Company's
portfolio returning nearly 80%. As such securities move closer to their
repayment dates a considerable `pull to redemption' is exerted on their market
prices particularly if such prices stand at substantial discounts to net asset
values. In contrast, the income and highly geared ordinary shares, which
provide the bulk of the Company's income and currently have an income yield of
16%, are vulnerable to capital erosion in the absence of further rises in
underlying asset values.
In the light of the financial position of the Company, the Board waived its
entire 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. Following a review of the Company's progress in late June, it
was agreed that from 1 July 2003 all parties would again be remunerated ,
albeit at lower levels than previously.
Since I last wrote less than three months ago, there has been a change in
expectations of future movements in short-term interest rates. Many forecasters
now expect the next movement in interest rates to be up rather than down.
However, the authorities in both the UK and the US are wary of nipping the pick
up in economic activity in the bud, and recognise that historically high levels
of consumer debts mean that only a relatively small rise in interest rates
should have a significant effect on consumer spending power. Bond yields have
risen further, which has reduced the indicative breakage costs on the Company's
outstanding fixed rate loans to �0.3 million.
Everyone involved with the Company has been striving over the last year or more
to recover value for shareholders. Further complex negotiations with the Banks
lie ahead. The Company's ordinary shares remain highly geared and most of the
Company's investments provide geared returns. However, in the light of the
recovery in markets over recent months, there is a clear possibility that the
ordinary shares will have a positive residual value after allowing for the debt
repayment obligations.
TIM KIMBER
Chairman
3 November 2003
END