RNS Number:5687Q
Charter European Trust plc
01 February 2007
For immediate release 1st February 2007
CHARTER EUROPEAN TRUST PLC
ANNOUNCEMENT OF UNAUDITED PRELIMINARY RESULTS
For the year ended 30th November 2006
Highlights
* Two year performance target for the Manager comfortably exceeded
* Total dividends up by 25% (Ordinary dividends up by 7.1%, special dividend
of 0.50p)
* Net Asset Value per share for the year under review up by 15.1%, compared
with a benchmark return of 15.6%
Net Asset Value
The Net Asset Value per Ordinary Share at 30th November 2006 was 220.1p, a rise
of 15.1% since 30th November 2005, compared to an increase in the Company's
benchmark index, the FTSE World Europe Index (#), of 15.6%.
Dividend
The Board recommends a final ordinary dividend of 1.80p per Ordinary Share,
payable on 5th April 2007 to shareholders on the Register at 3rd March 2007,
making a total dividend for the year to 30th November 2006 of 3.00p per Ordinary
Share (2005: 2.80p), an increase of 7.1%. In addition, the Board recommends a
special dividend of 0.50p per Ordinary Share, also payable on 5th April 2007 to
shareholders on the Register at 3rd March 2007.
Chairman's Statement
I am pleased to report that European equities again produced strong returns for
shareholders in the financial year to the end of November 2006, the fourth
successive year of double digit returns.
Net asset value per ordinary share has increased 15.1% to 220.1p a share, which
compares with a return on the benchmark index for the year, the FTSE World
Europe Index (#) of 15.6% in capital terms. You may remember that at the time
the Manager adopted a focused approach to the portfolio in November 2004, the
Board set a target of outperforming the benchmark index in capital terms by at
least 2% per annum. I am pleased to report that this target has been achieved
with an NAV capital return of 44.0% over the two-year period compared to 37.3%
on the benchmark index.
Dividend growth from European equities has also remained strong and this has
supported a 25% increase in the proposed total dividends this year to 3.50p.
Included in this total, we are this year recommending a special dividend of
0.50p as a number of our holdings in the Oil and Mining sectors, which have
enjoyed very buoyant trading conditions this year, have declared special
dividends, which may not recur in 2007. This factor, together with the impact
of our recent change in investment policy set out below, means that total
dividend distributions in the current financial year are likely to be lower.
We are, however, aiming to grow the ordinary dividends this year.
We have maintained our active approach to share buybacks during the financial
year. Although the Board would like to see the discount to net asset value
narrow further over time, the buyback policy has resulted in much lower
volatility in the discount level than historically.
During the course of the year we reviewed our current benchmark, the FTSE World
Europe Index (#), in conjunction with the Manager and our brokers, Winterflood
Investment Trusts. We have for many years followed a pan-European approach,
using a European benchmark which includes a UK weighting of approximately one
third. For many advisers who allocate their clients' overseas investments into
the major geographic regions, this high UK weighting is an unattractive feature
of the Trust, as they classify Continental Europe as a separate investment area
from the UK.
As set out in my letter of 13th December 2006 accompanying the EGM Circular, we
have concluded that a more appropriate benchmark for the Trust should be the
FTSE World Europe (ex UK) (#) and this change was approved by shareholders at an
Extraordinary General Meeting on 5th January 2007. Notwithstanding the change
in benchmark, the Manager will continue to have the flexibility to invest in UK
securities when the performance prospects of individual UK securities are
considered superior to those in Continental Europe. The UK content currently
stands at 16.5%. Investment in securities listed on markets which are not
constituents of the Company's benchmark index (including those in the UK) are
not normally expected to exceed 20% of the Company's total assets.
Sir Christopher Mallaby, a long serving Director of the Company and its
predecessor, will be retiring at the Annual General Meeting. Following a
distinguished career in the Diplomatic Service and coming from an investment
banking background, Christopher has been able to bring a unique perspective to
our policy discussions. We will miss his authoritative and insightful
contributions enormously. A search for a new Director is currently underway.
Looking ahead, the outlook for the world economy is to a large extent dependent
on the continuing strength of consumer demand in the United States, which is in
turn influenced by the health of the US housing market. Although there
certainly are some signs of a weakening economy, our Manager does not currently
anticipate that the housing slowdown will tip the US economy into recession.
Within Europe, there are encouraging signs that the German economy is now
accelerating after many years of lacklustre growth and the outlook remains
positive for the other large regional economies.
Manager's Review
Following the change in benchmark, the portfolio has been realigned. The UK
exposure has been reduced to 16.5% of the invested portfolio at the time of
writing, through the sales of ten of our UK holdings, including Land Securities,
Man Group and GlaxoSmithKline, and the purchase of a similar number of
continental European securities, including Danone, the French food manufacturer,
and SAP, the leading German software firm.
The outlook for the European economy overall remains good and our expectation is
that the recent VAT hike in Germany is unlikely to derail the more encouraging
growth path established in recent months. German companies are also continuing
to progress with restructuring of their businesses on more shareholder friendly
grounds. In France, the forthcoming Presidential election is likely to
intensify the debate on globalisation and 'Anglo Saxon' corporate culture. It
remains to be seen whether this will impact French policy on regulation of the
labour market and the economy after the election. The accession of Bulgaria and
Romania is likely to continue the positive impact of EU enlargement, increasing
labour market flexibility and mobility.
Market expectations are that the European Central Bank will continue to raise
interest rates with a peak in the current cycle likely to exceed 4%. The
valuation of equity markets compared to long-term financing costs will continue
to provide a highly favourable environment for companies to enhance equity
earnings per share through increased leverage, buybacks or acquisitions.
European equity market valuations remain reasonable, although rising interest
rates may temper enthusiasm for equities in the short term.
Annual General Meeting
The fifth Annual General Meeting of the Company will be held at the City Club,
19 Old Broad Street, London EC2N 1DS on 20th March 2007 at 12.30pm.
Share Buy Backs
During the year under review the Company repurchased 3,056,000 Ordinary Shares
for cancellation and 2,385,000 Ordinary Shares into treasury, enhancing the
Company's Net Asset Value by 1.3p. In the period from the year end to 30th
January 2007, a further 325,000 Ordinary Shares have been repurchased for
cancellation. The Board has decided to recommend to shareholders that the
Company takes renewed powers to buy back up to 14.99% of its Ordinary Shares.
155 Bishopsgate By Order of the Board
London EC2M 3AD P W I Ingram
1st February 2007 Secretary
For further information, please contact:-
Simon White
Head of Investment Trusts, RCM (UK) Limited
Tel: 020 7065 1539
Unaudited preliminary results for the year ended 30th November 2006 were
approved for immediate release as undernoted:-
INCOME STATEMENT
for the year to 30th November 2006
#'000s #'000s #'000s
Revenue Capital Total
(Note 2)
Net gains on investments at fair value - 8,021 8,021
Net gains on foreign currency loan - 68 68
Other capital charges - (3) (3)
Income 1,958 - 1,958
Investment management fee (160) (476) (636)
Expenses of administration (240) - (240)
Net return before finance costs and taxation
1,558 7,610 9,168
Finance costs: interest payable and similar charges (49) (140) (189)
Return on ordinary activities before taxation 1,509 7,470 8,979
Taxation (245) 83 (162)
Return attributable to Ordinary Shareholders 1,264 7,553 8,817
Return per Ordinary Share (Note 1) 4.23p 25.29p 29.52p
(basic and diluted)
BALANCE SHEET
as at 30th November 2006
2006
#'000s
Investments held at fair value through profit or loss 61,027
Net Current Assets 3,918
Total Assets less Current Liabilities 64,945
Creditors: Amounts falling due after one year (3,033)
Total Net Assets 61,912
Called up Share Capital 296
Capital Redemption Reserve 240
Special Reserve 44,439
Capital Reserves: Realised 1,925
Unrealised 13,569
Revenue Reserve 1,443
Equity Shareholders' Funds 61,912
Net asset value per Ordinary Share 220.1p
The net asset value is based on 28,126,688 Ordinary Shares in issue.
The financial information for the year ended 30th November 2005 is derived from
the statutory accounts for that year, which have been delivered to the Registrar
of Companies, and on which the auditors gave an unqualified report and have been
restated where appropriate to reflect two changes in accounting policies as
explained in Notes 3,4 and 5.
INCOME STATEMENT
for the year to 30th November 2005
#'000s #'000s #'000s
Revenue Capital Total
(restated) (restated) (restated)
(Note 2)
Net gains on investments at fair value - 12,822 12,822
Net gains on foreign currency loan - 20 20
Other capital charges - (7)
(7)
Income 1,704 1,704
-
Investment management fee (147) (739)
(592)
Marketing and administration expenses (334) - (334)
Net return before finance costs and taxation 1,223 12,243 13,466
Finance costs: interest payable and similar charges (8) (23) (31)
Return on ordinary activities before taxation 1,215 12,220 13,435
Taxation (159) 32 (127)
Return attributable to Ordinary Shareholders 1,056 12,252 13,308
Return per Ordinary Share (Note 1) 3.06p 35.46p 38.52p
(basic and diluted)
BALANCE SHEET
as at 30 November 2005
2005
#'000s
(restated)
Investments held at fair value through profit or loss 67,086
Net Current Liabilities (143)
Total Assets less Current Liabilities 66,943
Creditors: Amounts falling due after one year (2,725)
Total Net Assets 64,218
Called up Share Capital 336
Capital Redemption Reserve 200
Special Reserve 54,697
Capital Reserves: Realised (2,597)
Unrealised 10,538
Revenue Reserve 1,044
Equity Shareholders' Funds 64,218
Net asset value per Ordinary Share 191.3p
The net asset value is based on 33,567,688 Ordinary Shares in issue.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the years ended 30th November 2005 and 30th November 2006
Called up Capital Capital Capital
Share Redemption Special Reserve Reserve Revenue
Capital Reserve Reserve Realised Unrealised Reserve Total
#'000s #'000s #'000s #'000s #'000s #'000s #'000s
Net Assets at 30th November 2004
as previously stated 400 136 63,912 (6,424) 2,168 293 60,485
Dividends on Ordinary Shares not
recognised as a current liability - - - - - 540 540
Adjustment to record investments - - - - -
at bid prices (55)
(55)
Net Assets at 30th November 2004 400 136 63,912 (6,424) 2,113 833 60,970
(restated)
Revenue Return - - - - - 1,056 1,056
Shares repurchased during the year (64) 64 (9,215) - - - (9,215)
Dividends on Ordinary Shares - - - - - (845) (845)
Capital Return - - - 3,827 8,425 - 12,252
Net Assets at 30th November 2005 336 200 54,697 (2,597) 10,538 1,044 64,218
(restated)
Net Assets at 30th November 2005 336 200 54,697 (2,597) 10,598 473 63,707
as previously stated
Dividends on Ordinary Shares not - - - - - 571 571
recognised as a current liability
Adjustment to record investments - - - - (60) - (60)
at bid prices
Net Assets at 30th November 2005 336 200 54,697 (2,597) 10,538 1,044 64,218
(restated)
Revenue Return - - - - - 1,264 1,264
Shares repurchased during the year (40) 40 (10,258) - - - (10,258)
Dividends on Ordinary Shares - - - - - (865) (865)
Capital Return - - - 4,522 3,031 - 7,553
Net Assets at 30th November 2006 296 240 44,439 1,925 13,569 1,443 61,912
CASH FLOW STATEMENT
for the year ended 30th November 2006
2006 2006 2005
#'000s #'000s #'000s
Net cash inflow from operating activities 1,099 599
Servicing of finance
Interest paid (186) (26)
Investing Activities
Purchase of fixed asset investments (15,427) (34,551)
Sale of fixed asset investments 30,559 39,813
Net cash inflow from investing activities 15,132 5,262
Equity dividends paid (865) (845)
Net cash inflow before financing 15,180 4,990
Financing
Purchase of Ordinary Shares for cancellation and held in treasury (10,258) (9,215)
Drawdown of Euro loan 3,392 2,745
Repayment of Euro loan (3,017) -
Net cash outflow from financing (9,883) (6,470)
Increase (decrease) in cash 5,297 (1,480)
TOP 20 HOLDINGS AS AT 30th November 2006
Valuation % of
30th November 2006 Net
#'000s Assets Principal Activities
Informa 3,289 5.1 Media
Swatch Group 3,273 5.0 Personal Goods
Statoil 3,112 4.8 Oil and Gas Producers
E.ON 3,104 4.8 Gas, Water and Multi-utilities
GlaxoSmithKline 2,837 4.4 Pharmaceuticals and Biotechnology
Allianz 2,825 4.3 Non-Life Insurance
Total 2,767 4.3 Oil and Gas Producers
BNP Paribas 2,395 3.7 Banks
Man Group 2,318 3.6 General Financial
Acciona 2,232 3.4 Construction and Materials
Reuters Group 2,110 3.2 Media
Dassault Systemes 1,997 3.1 Software and Computer Services
UBS 1,790 2.8 Banks
Societe Generale 1,789 2.7 Banks
Schneider Electric 1,722 2.6 Electronic and Electrical Equipment
BG Group 1,691 2.6 Oil and Gas Producers
Intercontinental Hotels 1,643 2.5 Travel and Leisure
Land Securities 1,634 2.5 Real Estate
Enel 1,476 2.3 Electricity
National Grid 1,457 2.2 Gas, Water and Multi-utilities
45,461 69.9
Note 1
The Returns per Ordinary Share have been calculated using a weighted average
number of shares in issue during the period of 29,862,958 shares (2005 -
34,545,482 shares).
Note 2
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items derive from continuing operations. No operations
were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the Income Statement.
Included in the costs of investments are transaction costs on purchases
amounting to #67,293 (2005 - #141,848) and transaction costs on sales amounting
to #57,200 (2005 - #76,747).
Note 3
Investments are designated as held at fair value through profit or loss in
accordance with FRS 26 'Financial Instruments: Measurement'. Listed investments
are valued at bid market prices. This represents a change in accounting policy,
with the restatement of opening balances shown in Note 5.
Note 4
In accordance with FRS21 'Events After the Balance Sheet Date' the final
dividend payable on Ordinary Shares is recognised as a liability when approved
by shareholders. Interim dividends are recognised only when paid. This is a
change in accounting policy and results in a restatement of the prior year
creditors and a consequential increase in the prior year Net Asset Value.
Dividends paid on Ordinary Shares in respect of earnings for each period are as
follows:
Year to Year to
30th November 2006 30th November 2005
#'000s #'000s
(restated)
Final dividend 1.70p paid 4th April 2006 (2005 - 1.35p) 514 473
Interim dividend 1.20p paid 24th August 2006 (2005 - 351 372
1.10p)
865 845
The above dividends are after adjusting for dividends proposed but not paid due
to share buybacks.
Dividends payable at the year end are not recognised as a liability under FRS 21
'Events after the Balance Sheet Date'. Details of these dividends are set out
below.
Year to Year to
30th November 2006 30th November 2005
#'000s #'000s
Final dividend 1.80p payable 5th April 2007 (2006 - 1.70p) 506 571
Special dividend 0.50p payable 5th April 2007 (2006-Nil) 141 -
647 571
The proposed final dividend above is based on the number of shares in issue at
the period end. However, the dividend payable will be based on the number of
shares in issue on the record date and will reflect any purchases or
cancellations of shares by the Company settled subsequent to the period end.
Note 5
Restatement of Opening Balances
As previously Adjustment Restated
stated
30th November 2004 30th November 2004
#'000s #'000s #'000s
Fixed Assets Investments 60,959 (55) 2 60,904
Net Current (Liabilities) Assets (474) 540 1 66
Total Assets less Current Liabilities 60,485 485 60,970
Less: Creditors - amounts falling due - - -
after one year
Total Net Assets 60,485 485 60,970
Capital and Reserves
Called up Share Capital 400 - 400
Capital Redemption Reserve 136 - 136
Special Reserve 63,912 - 63,912
Capital Reserves: Realised (6,424) - (6,424)
Unrealised 2,168 (55) 2 2,113
Revenue Reserve 293 540 1 833
Shareholders' Funds 60,485 485 60,970
Net Asset Value per Ordinary Share 151.3p 1.2p 152.5p
As previously Adjustment Restated
stated
30th November 2005 30th November 2005
#'000s #'000s #'000s
Fixed Assets Investments 67,146 (60) 2 67,086
Net Current Liabilities (714) 571 1 (143)
Total Assets less Current Liabilities 66,432 511 66,943
Less: Creditors - amounts falling due (2,725) - (2,725)
after one year
Total Net Assets 63,707 511 64,218
Capital and Reserves
Called up Share Capital 336 336
Capital Redemption Reserve 200 200
Special Reserve 54,697 54,697
Capital Reserves: Realised (2,597) (2,597)
Unrealised 10,598 (60) 2 10,538
Revenue Reserve 473 571 1 1,044
Shareholders' Funds 63,707 511 64,218
Net Asset Value per Ordinary Share 189.8p 1.5p 191.3p
1 Represents the effect of not recognising the final dividend (FRS 21 'Events
after the Balance Sheet Date').
2 Represents the effect of the adoption of bid prices on the value of listed
investments (FRS 26 'Financial Investments: Measurement).
Note 6
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the period ended 30th November 2006. The
statutory accounts for the period ended 30th November 2006 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.
Note 7
The annual report will be sent to shareholders in late February 2007 and will be
available to members of the public from the Company's registered office at 155
Bishopsgate, London EC2M 3AD.
Note 8
The Preliminary Results for the year to 30th November 2006 have been produced in
accordance with the Statement of Recommended Practice for the Financial
Statements of Investment Trust Companies issued in 2003 and revised in 2005.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EALAFEDLXEFE
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