RNS Number:9025Q
Britannic UK Income Trust PLC
14 October 2003
Britannic UK Income Trust PLC
14 October 2003
Announcement Begins
Chairman's Statement
The year to 10 August 2003 was dominated by political events in the Middle East
and concerns over the global economy which resulted in turbulent stock markets
around the world. Over the 12 months since 10 August 2002, the FTSE 350 Index,
the Company's benchmark, fell by 2.1%. More encouragingly, over the 6 months
since 10 February 2003, the FTSE 350 Index rose by 20.0%.
net assets
In the 12 months to 10 August 2003, the gross assets less current liabilities of
the Company declined 28% from #157m to #113m. During this period, the Company
repaid #25m of the loan which resulted in bank borrowing decreasing to #25m at
10 August 2003. Over the 6 months since 10 February 2003, the gross assets less
current liabilities of the Company increased 11% from #102m to #113m. The
movements over the 12 and 6 month periods can be attributed as follows:
12 months to 10 August 2003 6 months to 10 August 2003
Movements in value (#8.6m) #5.7m
of shares of split
capital investment
trusts
Movements in value (#3.9m) #7.4m
of UK equities
Movements in value (#1.3m) #0.2m
of bond portfolio
Costs charged to (#1.6m) (#0.9m)
capital
Investments sold to (#25.0m) -
fund repayment of
loan
The Report of the Manager in the Annual Report and Accounts contains a detailed
review of investment markets and of the investment performance of your Company.
dividends
The Company has not paid dividends on Ordinary shares since June 2002 and I
regret to report that without a substantial improvement in the stock market it
is unlikely that the Company will be in a position to pay dividends on Ordinary
shares during the course of this current year.
At the time of the flotation of the Company its investment manager, Britannic
Investment Managers Limited ("BIM"), provided a guarantee for the payment of the
dividends to Guaranteed Income Shareholders ("GIS"). Following the substantial
reduction in the net assets of the Company, the Company has been prohibited from
paying these dividends by S265 of the Companies Act even though the income it
receives from its portfolio is sufficient to fund them. Accordingly, the
Guarantee has been called in respect of eleven dividend payments, two of which
have subsequently been reimbursed to BIM. This means that when the Company is
next in a position to pay dividends or on a winding up, a sum of #3,937,000 at
the period end will be payable to BIM by the Company in respect of missed
dividend payments which have been paid instead by BIM under the Guarantee.
Under the terms of the Guarantee Provision Agreement, also entered into upon
flotation, BIM is expected to claim from the Company the full amount which it
pays under the Guarantee. As a result of the different tax regime that applies
to the payment of dividends by BIM under the Guarantee to the Guaranteed Income
shareholders, BIM must make these payments grossed up at the basic rate of
income tax. This has resulted in an additional amount paid by BIM of #1,357,000
in the year to 10 August 2003. As at 10 August 2003, the Company has included an
additional provision of #1,357,000 to cover these additional amounts paid by BIM
under the Guarantee but discussions are continuing between BIM and the Company
as to their recovery.
actions taken by the board
The proposals detailed in the shareholder circular of 21 February 2003 were
designed to address a number of issues that had arisen as a result of continued
weak markets and were intended to give the Company a greater degree of
flexibility in anticipation of improved market conditions. Although these
proposals met with support from a substantial number of shareholders, there was
insufficient support to meet the required 75% majority and, accordingly, the
proposals were not passed.
The Board continues to review all options and consults closely with its
professional advisers and the fund manager. The Board also takes into account
its legal obligation to balance the rights and interests of the Ordinary
shareholders, the ZDP shareholders and the Guaranteed Income shareholders, as
well as having regard to its obligations to its bankers and the rights of the
guarantor, Britannic Investment Managers Limited. There are obviously a number
of different interests involved in the Company and the Directors place a great
deal of emphasis on trying to achieve the correct balance.
capital structure
As I noted in my Chairman's Statement last year, the structure of the Company is
complex. The capital comprises 75m Guaranteed Income shares, 150m Ordinary
shares and 45m Zero Dividend Preference shares. The Ordinary shares presently
have no current asset value, more encouragingly the ZDPs have seen a small
recovery in value; at the 10 August 2003 the value per ZDP was 21.5p compared to
0.2p at 10 February 2003. Although they have seen a modest recovery recently,
the ZDP shares continue to trade at a significant discount to net asset value.
gearing
The Company repaid #25m of bank borrowings on 6 December 2002 resulting in the
Company's indebtedness to the banks decreasing from #50m to #25m.
outlook
The prospects for the UK equity market are largely dependent on the corporate
earnings outlook which remains uncertain. However, the recent increase in
corporate activity suggests share prices are at attractive levels and investor
confidence is improving and your Board is encouraged by the manager's view that
markets will strengthen in the medium term.
Finally, I would like to thank my fellow Directors and also the manager and
other advisors for their advice and support during another difficult year.
David MacLellan
Chairman
group statement of total return
Year ended 10 August 2003 For the period 18 June 2001 to 10 August 2002
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Realised - (18,722) (18,722) - (31,153) (31,153)
losses on
investments
Unrealised - 2,130 2,130 - (111,443) (111,443)
gains / ------- ------- -------- ------- ------- -------
(losses) on
investments
Total losses - (16,592) (16,592) - (142,596) (142,596)
on
investments
Investment 8,176 - 8,176 20,476 - 20,476
income
Investment (810) (541) (1,351) (840) (2,520) (3,360)
management
fee
Other (1,798) - (1,798) (457) - (457)
expenses ------- ------- -------- ------- ------- -------
Net return on 5,568 (17,133) (11,565) 19,179 (145,116) (125,937)
ordinary
activities
before finance
costs and
taxation
Interest (1,657) (1,079) (2,736) (3,064) (9,083) (12,147)
payable and ------- ------- -------- ------- ------- -------
similar
charges
Return on 3,911 (18,212) (14,301) 16,115 (154,199) (138,084)
ordinary
activities
before tax
Tax on - - - - - -
ordinary ------- ------- -------- ------- ------- -------
activities
Return on 3,911 (18,212) (14,301) 16,115 (154,199) (138,084)
ordinary
activities
after tax
Non equity - (4,418) (4,418) - (4,052) (4,052)
minority ------- ------- -------- ------- ------- -------
interests
Return 3,911 (22,630) (18,719) 16,115 (158,251) (142,136)
attributable
to members of
the parent
company
Dividends and (5,250) (742) (5,992) (5,687) (735) (6,422)
appropriations ------- ------- -------- ------- ------- -------
in respect of
Guaranteed
Income
Shares
Return (1,339) (23,372) (24,711) 10,428 (158,986) (148,558)
attributable
to equity
shareholders
Dividends in - - - (9,000) - (9,000)
respect of ------- ------- -------- ------- ------- -------
Ordinary
shares
Transfer to / (1,339) (23,372) (24,711) 1,428 (158,986) (157,558)
(from) ======= ======= ======== ======= ======= =======
reserves
Return per
share (p):
Guaranteed 7.00 0.00 7.00 8.68 0.00 8.68
Income Shares
- non equity
Ordinary (0.89) (15.58) (16.47) 7.96 (121.33) (113.37)
shares -
equity
balance sheets
as at 10 August 2003 as at 10 August 2002
Group Company Group Company
#'000 #'000 #'000 #'000
Fixed assets
Investments 114,032 114,072 154,594 154,634
Current assets
Debtors 1,145 1,145 1,562 1,562
Cash at bank and 3,846 3,820 2,849 2,824
in hand -------- -------- -------- --------
4,991 4,965 4,411 4,386
Creditors: 6,166 6,216 2,339 2,389
amounts falling
due within one
year
Net current (1,175) (1,251) 2,072 1,997
liabilities -------- -------- -------- --------
Total assets 112,857 112,821 156,666 156,631
less current
liabilities
Creditors:
amounts falling
due after more
than one year
Bank loan 26,428 26,428 50,687 50,687
Amounts due to - 53,460 - 49,042
subsidiary -------- -------- -------- --------
Net assets 86,429 32,933 105,979 56,902
======== ======== ======== ========
Capital and
reserves
Called-up share 2,250 2,250 2,250 2,250
capital
Share premium 136,500 136,500 136,500 136,500
account
Special 75,000 75,000 75,000 75,000
reserve
Capital reserve (73,044) (73,044) (47,543) (47,543)
- realised
Capital reserve (109,313) (109,313) (111,443) (111,443)
- unrealised
Redemption 1,477 1,477 735 735
reserve
Revenue 89 63 1,428 1,403
reserve -------- -------- -------- --------
Total equity 32,959 32,933 56,927 56,902
shareholders'
funds
Non equity 53,470 - 49,052 -
minority -------- -------- -------- --------
interests
86,429 32,933 105,979 56,902
======== ======== ======== ========
Attributable to:
Guaranteed 76,664 76,664 71,985 71,985
income shares -
non equity
Ordinary shares (43,705) (43,731) (15,058) (15,083)
- equity -------- -------- -------- --------
32,959 32,933 56,927 56,902
-------- -------- -------- --------
Net asset value
per share (p):
Guaranteed 102.22 95.98
Income shares -
non equity
Ordinary shares (29.14) (10.04)
- equity
group cash flow statement
Year ended Period 18 June 2001 to 10 August 2002
10 August 2003
#000 #000
net cash inflow 5,982 16,520
from operating
activities
returns on
investments and
servicing of
finance
loan & overdraft (2,379) (10,824)
interest paid
non-equity (2,188) (4,812)
dividends paid
capital
expenditure and
financial
investment
purchases of (49,608) (462,833)
investments
sales of 72,508 164,889
investments
gains on future 1,841 -
transactions --------- ----------
Net cash inflow/ 24,741 (297,944)
(outflow) from
capital
expenditure and
financial
investment
equity dividends - (9,000)
paid --------- ----------
cash outflow 26,156 (306,060)
before financing
financing
issue of shares - 225,000
issue of - 45,000
preference shares
to minority
shareholders
new loan repayable - 130,000
2006
early loan (25,000) (80,000)
repayment
launch expenses - (11,250)
--------- ----------
increase in cash 1,156 2,690
========= ==========
Notes:
1. The financial statements have been prepared on the going concern basis,
which assumes that the Group will continue in operational existence for the
foreseeable future and be able to meet its liabilities as they fall due.
2. The statement of total return (incorporating the revenue account),
balance sheet and cashflow statement set out above do not represent full
accounts in accordance with Section 240 of the Companies act 1985. The accounts
have been prepared in accordance with the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies". The financial statements
for the year to 10 August 2003 contain an unqualified audit report and will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting which will be held at the Company's registered office on 10 November
2003.
3. The same accounting policies have been applied in preparing the
financial statements throughout the year.
4. Investment management fees and loan finance costs have been allocated
as follows:
From 18 June 2001 to 10 August 2002: 75% to capital 25% to revenue
From 11 August 2003 to 10 August 2003: 40% to capital 60% to revenue
5. The Group accounts include the consolidation of Britannic UK Income
Securities PLC.
6. Copies of the Annual Report will be posted to shareholders on 17
October 2003 and will be available to the public at Britannic Investment
Managers Limited, Britannic Court, 50 Bothwell St, Glasgow G2 6HR.
For further information contact:
Donna Reid
Britannic Investment Managers Limited Britannic Asset Management Press Office
0141-222-8257 0141-222-8225/6/7
Announcement Ends
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