RNS Number:3886T
Polar Capital Technology Trust PLC
18 December 2003
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2003
18 December 2003
* Net assets per share rise 37.5%
* Signs of a pick-up in capital spending follow gathering
economic momentum
* Improved cash flows, refinanced balance sheets and recovering
profitability augur well for IT spending
* Anticipate strong fourth quarter earnings leading analysts to
upgrade their technology earnings forecasts
* Cyclical but not secular bull market well underway
FINANCIAL HIGHLIGHTS
--------------------
Half year ended Year ended Movement
31 October 2003 30 April 2003 %
Total net assets #306,156,000 #221,022,000 38.5%
Net assets
per ordinary share (undiluted) 203.9p 148.3p 37.5%
per ordinary share (diluted) 190.2p 141.3p 34.6%
Price
per ordinary share 169.75p 120.5p 40.9%
per warrant 71.0p 27.25p 160.6%
For further information please contact:
Brian Ashford-Russell Peter Binns / Jacqui Graves
Polar Capital Technology Trust PLC Binns & Co PR Limited
Tel: 020 7592 1500 or 07796 172173 Tel: 020 7786 9600
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2003
Chairman's Statement
The company enjoyed a strong recovery over the half year with net assets
climbing to #306m, a level first reached in the summer of 1999 but last seen in
March 2002. The net assets per share rose from 148.3p to 203.9p over the period,
an increase of 37.5%.
Equity market conditions over the half year proved benign with investor,
consumer and business sentiment improving markedly following the end of the war
in Iraq. Monetary conditions have been maintained at a relatively loose setting
and the initial sell-off in bond markets that followed the American capture of
Baghdad has given way to stability. The combination of low interest rates and
fiscal stimulus has ensured resilient demand from consumers. Business confidence
has also gradually improved, helped by a marked improvement in corporate profits
and cash flows. The result has been the beginning of a recovery in capital
spending.
The USA has led the global recovery with growth in the third calendar quarter
exceeding 8%, the highest level in many years. Europe's upturn has lagged behind
that in the States but should pick up some momentum from here. Asia has
continued to exert a positive influence on global growth with the Chinese
economy forging ahead and even Japan showing signs of a modest upturn.
Against this background, it is hardly surprising that technology shares should
have performed so well. The sector has always had pronounced cyclical
characteristics and the current recovery follows a period in which a sharp
downturn in capital spending devastated the industry's profitability. Demand for
the industry's output began to stabilise earlier this year but has now clearly
turned upwards. Moreover, it is doing so following a period in which many
technology companies have slashed costs. The result is that even a modest upturn
in demand is being translated into a very sharp recovery in earnings. Third
quarter results were very strong but will - we think - pale by comparison with
those in the December quarter.
Much of the industry's customer base has seen a stabilisation in operating
performance and, as a result of tight capital spending constraints, vastly
improved cash flows. Furthermore the telecommunications industry has taken steps
to refinance balance sheets. These actions are finally producing a greater
willingness to spend IT budgets and consider new projects. While we expect
spending to be far more measured than in the late 1990s, we are encouraged by
this change in attitudes and believe that it bodes well for those technology
companies selling solutions that offer their customers a high and easily
measurable return on investment.
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2003
In the consumer electronics market, a wave of new product introductions is
helping to drive demand. With product and systems demand recovering, conditions
are improving dramatically in the semiconductor industry. Moreover, strong unit
demand is likely to be supplemented by the replenishment of much depleted
inventories. The result will be a very pronounced earnings recovery.
Our strategy over most of the half year has remained unchanged. Although we had
originally expected to raise liquidity over the summer, our increasing
confidence in an upturn has led us to remain fully invested throughout most
of the period. Our geographical asset allocation showed some variation with a
decision to increase our Japanese weighting in April / May as a consequence of
greater confidence in economic policy and evidence of compelling value. That
asset allocation move was largely reversed in October. Over the half year,
Europe produced the best returns with Asia close behind and, in all areas,
smaller companies greatly outperformed their larger counterparts.
At a sectoral level, our positioning has been and remains critically influenced
by our belief in a cyclical upturn in the global economy. The consequence has
been that we have maintained relatively modest weightings in the more defensive
sectors such as healthcare, processing services and defence electronics.
Instead, we have emphasised semiconductors and software, both of which we regard
as potential beneficiaries of global recovery.
We continue to believe that the fourth quarter of 2003 will deliver earnings
well in excess of most analysts' forecasts. As a result, we expect to see
significant upward revisions to forecasts over the next three months. If so,
then we may finally see expectations catch up with and perhaps even overtake
reality. Should this happen, we may look to reduce our cyclical and increase our
defensive exposure.
Although we are greatly encouraged by the stabilisation and subsequent
improvement in technology demand and earnings prospects, we do not believe that
this marks the beginning of a secular bull market of the type enjoyed in the
1990s. Valuations remain - on average - too demanding; new drivers for
technology spending too sparse; and memories of the boom and subsequent crash
between 1999 and 2002 too fresh in the mind. Rather, we consider this to be a
strong cyclical uptrend in a technology market that we expect will - over the
next 3-5 years - be characterised by periods of out and under performance.
R K A Wakeling
Chairman
17 December 2003
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2003
Group Statement of Total Return (incorporating the Revenue Account)
for the half year ended 31 October 2003
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 October 2003 31 October 2002 30 April 2003
Revenue Capital Total Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
----------------------------------------------------------------------------------------------------------------------
Total capital gains/
(losses) from
investments - 84,874 84,874 - (77,096) (77,096) - (65,865) (65,865)
Repurchase of
warrants - (8) (8) - - - - 71 71
Income from
fixed asset
investments 944 - 944 876 - 876 2,092 - 2.092
Other interest
receivable and
similar income 240 - 240 645 - 645 891 - 891
---------------------------------------------------------------------------------------------------
Gross revenue
from capital
gains/(losses) 1,184 84,866 86,050 1,521 (77,096) (75,575) 2,983 (65,794) (62,811)
Management
fees (831) - (831) (1,116) - (1,116) (1,611) - (1,611)
Other
administrative
expenses (339) - (339) (410) - (410) (601) - (601)
---------------------------------------------------------------------------------------------------
Net return/(loss) on
ordinary activities
before interest
payable and
taxation 14 84,866 84,880 (5) (77,096) (77,101) 771 (65,794) (65,023)
Interest
payable and
similar
charges (297) - (297) (248) - (248) (567) - (567)
---------------------------------------------------------------------------------------------------
Net
(loss)/return
on ordinary
activities
before
taxation (283) 84,866 84,583 (253) (77,096) (77,349) 204 (65,794) (65,590)
Taxation on
ordinary
activities (76) - (76) (72) - (72) (134) - (134)
---------------------------------------------------------------------------------------------------
Net
(loss)/return
on ordinary
activities
after taxation (359) 84,866 84,507 (325) (77,096) (77,421) 70 (65,794) (65,724)
---------------------------------------------------------------------------------------------------
(Loss)/return per
ordinary share
(pence)
Basic (0.24p) 56.89p 56.65p (0.22p) (51.74p) (51.96p) 0.05p (44.16p) (44.11p)
---------------------------------------------------------------------------------------------------
Full Diluted (0.23p) 53.85p 53.62p (0.21p) (49.79p) (50.00p) 0.05p (42.71p) (42.66p)
The revenue columns of this statement represent the revenue accounts of the Group
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2003
Balance Sheets as at 31 October 2003
(Unaudited) (Unaudited) (Audited)
Group Company Group Company Group Company
Interim Interim Interim Interim Year End Year End
October 2003 October 2003 October 2002 October 2002 April 2003 April 2003
#'000 #'000 #'000 #'000 #'000 #'000
---------------------------------------------------------------------------------------------------------------------
Fixed asset
Investments at market value 291,243 289,740 205,909 205,909 216,410 216,410
--------------------------- ------------------------------ --------------------------
291,243 289,740 205,909 205,909 216,410 216,410
Unlisted at directors'
valuation
Subsidiary undertaking - 3,611 - 3,434 - 3,513
Other United Kingdom 795 795 345 345 444 444
Overseas - - 10 10 - -
--------------------------- ------------------------------ --------------------------
292,038 294,146 206,264 209,698 216,854 220,367
--------------------------- ------------------------------ --------------------------
Current assets
Debtors 66,223 69,151 3,654 6,389 51,761 54,661
Cash 59,507 54,471 33,925 27,756 36,760 30,347
--------------------------- ------------------------------ --------------------------
125,730 123,622 37,579 34,145 88,521 85,008
--------------------------- ------------------------------ --------------------------
Creditors: amounts falling
due within one year (64,058) (64,058) (23,074) (23,074) (73,336) (73,336)
--------------------------- ------------------------------ --------------------------
Net current assets 61,672 59,564 14,505 11,071 15,185 11,672
--------------------------- ------------------------------ --------------------------
Total assets less current
liabilities 353,710 353,710 220,769 220,769 232,039 232,039
Creditors: amounts falling
due after more than one year (47,554) (47,554) (10,957) (10,957) (11,017) (11,017)
--------------------------- ------------------------------ --------------------------
Total net assets 306,156 306,156 209,812 209,812 221,022 221,022
--------------------------- ------------------------------ --------------------------
Capital and reserves
Called up share capital 37,545 37,545 37,250 37,250 37,250 37,250
Share premium 88,842 88,842 87,959 87,959 87,959 87,959
Warrant reserve 7,147 7,147 8,558 8,558 8,070 8,070
Warrant exercise reserve 940 940 567 567 568 568
Other capital reserves 225,703 229,314 129,535 132,969 140,837 144,350
Revenue reserve (54,021) (57,632) (54,057) (57,491) (53,662) (57,175)
--------------------------- ------------------------------ --------------------------
Equity shareholders' funds 306,156 306,156 209,812 209,812 221,022 221,022
--------------------------- ------------------------------ --------------------------
Net asset value per ordinary 203.86p 203.86p 140.81p 140.81p 148.34p 148.34p
share - undiluted --------------------------- ------------------------------ --------------------------
- diluted 190.24p 190.24p 134.53p 134.53p 141.25p 1.41.25p
--------------------------- ------------------------------ --------------------------
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2003
Group Cash Flow Statement
for the half year ended 31 October
2003
(Unaudited) (Unaudited) (Audited)
Half year ended Half year ended Year ended
31 October 2003 31 October 2002 30 April 2003
#'000 #'000 #'000
------------------------------------------------------------------------------------------------------------
Net cash (outflow)/inflow from operating activities (557) 339 32
Net cash outflow from servicing of finance (376) (128) (478)
Net tax recovered 17 - 10
Net cash inflow from forward currency contracts 689 - -
Net cash inflow/(outflow) from financial investment 8,659 (3,423) 890
---------- ---------- ----------
Net cash inflow/(outflow) before financing 8,412 (3,212) 454
Net cash inflow/(outflow) from financing 14,839 5 (413)
---------- ---------- ----------
Increase /(decrease) in cash 23,251 (3,207) 41
---------- ---------- ----------
Reconciliation of operating revenue to net cash
(outflow)/inflow from operating activities
Net result before interest payable and taxation 14 (5) 771
(Increase)/decrease in accrued income (49) 45 101
Decrease/(increase) in other debtors 12 22 (48)
(Decrease)/increase in other creditors (210) 348 158
Overseas withholding tax suffered (67) (71) (129)
Scrip dividends included in investment income - - (59)
Interest accumulations included in investment income (277) - (762)
---------- ---------- ----------
(577) 339 32
---------- ---------- ----------
Reconciliation of net cash flow to movement in net funds
Increase/(decrease) in cash 23,251 (3,207) 41
Movement in long term loans (14,221) - -
---------- ---------- ----------
Change in net debt resulting from cash flows 9,030 (3,207) 41
Exchange movements (1,782) 218 (372)
---------- ---------- ----------
Movement in net debt in the year 7,248 (2,989) (331)
Net funds at the beginning of the period 4,705 5,036 5,036
---------- ---------- ----------
Net funds at end of the period 11,953 2,047 4,705
---------- ---------- ----------
Represented by:
Bank balances and short term deposits 59,507 33,925 36,760
Debt falling due within one year - (20,921) (21,038)
Debt falling due after more than one year (47,554) (10,957) (11,017)
---------- ---------- ----------
11,953 2,047 4,705
---------- ---------- ----------
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2003
Notes
1. Management fees
Polar Capital Partners Ltd. ("Polar Capital") were appointed investment
managers in February 2001. As part of the investment management contract
with Polar Capital the Company contractually agreed for the full amount of
compensation paid to Henderson, the previous investment managers, plus
legal and other professional advisers fees and costs together with extra
fees paid to the directors for work incurred in the change of investment
manager to be recovered from Polar Capital. These costs amounted to
#3,466,000 and have been offset against the management fee payable to Polar
Capital over the 10 quarters from February 2001 to July 2003.
2. Return/(loss) per ordinary share
Revenue/(loss) return per ordinary share is based on the net loss after
taxation attributable to the ordinary shares of #359,000 (31 October 2002 -
losses of #325,500; 30 April 2003 - return of #70,000) and on 149,179,442
(31 October 2002 - 148,996,157; 30 April 2003 - 148,998,143) ordinary
shares, being the weighted average number of shares in issue during the
year.
Basic capital return/(loss) per ordinary share is based on net capital
gains of #84,866,000 (31 October 2002 - losses of #77,096,000; 30 April
2003 - losses of #65,794,000) and the weighted average number of shares in
issue during the year as shown above.
3. Net asset value per ordinary share
Undiluted net asset value per ordinary share is based on net assets
attributable to ordinary shares of #306,156,000 (31 October 2002 -
#209,812,000; 30 April 2003 - #221,022,000) and on 150,178,288 (31 October
2002 and 30 April 2003 - 149,000,162) ordinary shares being the number of
ordinary shares in issue at the end of the period.
Diluted net asset value per ordinary share is calculated on the assumption
that the 22,662,533 warrants in issue at 31 October 2003 (31 October 2002 -
27,140,659; 30 April 2003 - 25,590,659) were converted into ordinary shares
at the exercise price of 100p. Dilution is assumed to occur only if the
diluted net asset value is greater than the subscription price of 100p.
4. Dividend
In accordance with stated policy no interim dividend has been declared for
the period (31 October 2002 and 30 April 2003 - nil).
5. Accounts for the period ended 30 April 2003
The figures and financial information for the period ended 30 April 2003
are extracted from the latest published accounts of the Group and do not
constitute statutory accounts for that year. These accounts have been
delivered to the Registrar of Companies and included the report of the
auditors which was unqualified and did not contain a statement under either
section 237(2) or 237 (3) of the Companies Act 1985.
7. Interim Report
The interim report was approved by the directors on 17 December 2003 and
will be posted to shareholders in January 2004. Copies will be available
from the Secretary at the Registered Office, Cayzer House, 30 Buckingham
Gate, London SW1E 6NN.
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2003
Portfolio Review
Equity Investments over 1% of net assets at 31
October 2003
North America
#'000 Stock Activity % of net assets
------------------------------------------------------------------------------
3,671 Genentech Biotechnology 1.2%
------------------------------------------------------------------------------
3,557 Electronic Arts Gaming software 1.2%
------------------------------------------------------------------------------
3,516 Maxim Analogue ICs 1.2%
------------------------------------------------------------------------------
3,397 Symantec Security software 1.1%
------------------------------------------------------------------------------
3,378 Adobe Publishing software 1.1%
------------------------------------------------------------------------------
3,246 Qualcomm Wireless communications 1.1%
------------------------------------------------------------------------------
3,164 IBM Computer hardware and 1.0%
services
------------------------------------------------------------------------------
23,929 Total investments over 7.9%
1%
131,597 Other investments 43.4%
------- -------
155,526 Total North American investments 51.3%
------- -------
Europe
#'000 Stock Activity % of net assets
------------------------------------------------------------------------------
4,273 Filtronic Wireless communications 1.4%
------------------------------------------------------------------------------
4,009 ASM Lithography Semiconductor production 1.4%
equipment
------------------------------------------------------------------------------
3,753 Nokia Mobile telephony 1.2%
------------------------------------------------------------------------------
3,358 TietoEnator IT services 1.1%
------------------------------------------------------------------------------
3,151 SAP ERP software 1.0%
------------------------------------------------------------------------------
3,115 Sage Software & computer 1.0%
technology
------------------------------------------------------------------------------
21,659 Total investments over 7.1%
1%
62,748 Other investments 20.6%
------- -------
84,407 Total European 27.7%
------- investments -------
Asia
#'000 Stock Activity % of net assets
------------------------------------------------------------------------------
4,158 Venture Manufacturing Electronic manufacturing 1.4%
services
------------------------------------------------------------------------------
4,008 NEC Diversified electronics 1.3%
manufacturers
------------------------------------------------------------------------------
3,978 Samsung Electronic Diversified electronics 1.3%
manufacturers
------------------------------------------------------------------------------
3,342 Sankyo Seiki Electronic components 1.1%
------------------------------------------------------------------------------
3,138 Taiwan Semiconductor Wafer foundry 1.0%
Manufacturing
------------------------------------------------------------------------------
18,624 Total investments over 6.1%
1%
33,481 Other investments 11.0%
------- -------
52,105 Total Asian investments 17.1%
------- -------
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2003
Portfolio Review
Classification of Investments - at 31 October 2003
TOTAL TOTAL
North America Europe Asia 31 October 2003 30 April 2003
% % % % %
--------------------------------------------------------------------------
Computing 7.1 - - 7.1 10.6
Components 10.6 4.3 11.7 26.6 17.1
Software 12.7 8.3 4.5 25.5 17.4
Services 2.1 4.2 - 6.3 8.6
Communications 5.4 4.7 - 10.1 10.0
Life Sciences 8.5 2.0 - 10.5 13.4
Consumer,Media and Internet 2.3 1.6 0.9 4.8 5.9
Other Technology 2.6 1.9 - 4.5 7.2
Unquoted Investments - 0.7 - 0.7 0.2
--------------------------------------------------------------------------
EQUITY INVESTMENTS 51.3 27.7 17.1 96.1 90.4
--------------------------------------------------------------------------
Fixed Interest - - - - 7.8
Forward Currency Contracts (20.2) 21.2 - 1.0 -
Net Current Assets - 18.4 - 18.4 16.3
Loans - - (15.5) (15.5) (14.5)
--------------------------------------------------------------------------
OTHER NET ASSETS (20.2) 39.6 (15.5) 3.9 9.6
--------------------------------------------------------------------------
GRAND TOTAL
(net assets of #306,156,000) 31.1 67.3 1.6 100.0 -
--------------------------------------------------------------------------
At 30 April 2003 51.7 46.9 1.4 - 100.0
(net assets of # 221,022,000)
--------------------------------------------------------------------------
Fund Distribution by Market Capitalisation
as at 31 October 2003
Market Capitalisation % of invested assets
< $500m 11.1%
$500m-$2bn 18.4%
$2bn-$10bn 29.7%
$10bn-$20bn 18.8%
$20bn-$50bn 11.6%
> $50bn 10.4%
POLAR CAPITAL TECHNOLOGY TRUST PLC
Unaudited Interim Results for the Six Months ended 31 October 2003
INDEX CHANGES (total return) over the half year to 31 October 2003
Local Currency Sterling
Adjusted
Technology Indices: % %
Dow Jones World Technology 36.7 28.7
PSE (USA) Technology 33.7 25.9
MS Eurotec (based in US dollars) 65.0 55.4
FTSE Techmark 100 52.5 52.5
TecDax 44.7 42.0
TSE Electronics 41.3 44.4
DS Asia Ex Japan Electronics 56.1 47.0
Market Indices:
S&P 500 Composite 15.6 8.9
FTSE All-Share 14.2 14.2
FTSE World Europe (ex UK) - 13.5
Tokyo SE (Topix) 31.5 34.4
FTSE World Pacific Basin (ex Japan) - 29.7
FTSE World - 13.3
EXCHANGE RATES 31 October 2003 30 April 2003
US$ to # 1.6970 1.5982
Japanese Yen to # 186.55 190.61
Euro to # 1.4597 1.4321
This information is provided by RNS
The company news service from the London Stock Exchange
END
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