PREMIER HIGH INCOME TRUST PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED RESULTS
David Hankinson, Chairman of the Company, today commented:
On 30 June 2003, the Company had completed two-thirds of its six-year life and
a brief review of the past four years may add some useful perspective on
performance so far, as well as conditioning expectations through to the wind-up
date of 30 June 2005.
At the time of its flotation in June 1999, the FTSE 100 index stood at 6,318
and the FTSE 350 index at 3032. At the end of this financial year, these
indices had fallen to 4,031 and 2,011 respectively, down 36.2% and 33.7%.
Bank Base Rate, 5% at the time of flotation, had been reduced to 3.5% at 30
June 2003.
The Company's initial portfolio was invested 70% in the shares of larger UK
companies with above-average yields, 15% in global fixed interest bonds and 15%
in high yielding split-capital investment trusts. An element of gearing,
amounting to 15% of gross assets was achieved through bank borrowings.
Taking each element in turn:-
* Although the UK equity section of the portfolio suffered by having to be
invested into a falling market in the post flotation period, the four year
story is one of out performance, with a decline in value of 27% compared
with an average fall in the relevant indices of approximately 35%.
* The fixed interest investments have also been well managed through a period
of falling interest rates to achieve capital gains while protecting income
as much as possible.
* The split-capital investment trust sector collapse has, when combined with
realisations considered appropriate in difficult circumstances, resulted in
this section of the portfolio falling quite heavily, with serious
consequences for both capital values and income.
* Borrowings, originally planned as fixed-rate, were moved onto a
variable-rate basis shortly after flotation. As a result, the average cost
of interest has been approximately 4.9% as compared to an assumed cost in
the original prospectus of 6.2%.
The gearing provided by both the bank debt and the Zero Dividend Preference
shares has greatly exacerbated the effect of falling equity values on the net
asset value of the Ordinary shares. Finally, it must be remembered that 75% of
investment management fees and interest costs have been charged to capital,
rather than to the revenue account.
Despite adverse market pressures, dividends were paid to Ordinary shareholders
at the annual rate of 7.25p per share until 31 December 2002. In the second
half of the current financial year, reduced dividends of 1.5p per quarter have
been declared.
As far as the financial year ended 30 June 2003 is concerned, history has
largely repeated itself. Gross Assets less current liabilities fell during the
year from �24.7m to �20.7m on a comparable basis and, because of the gearing
effect of the Zero Dividend Preference shares and the bank debt, this
translates into a fall in the net asset value of each Ordinary share from
26.94p to 2.73p.
The net asset value of each Zero Dividend Preference share has increased from
126.59p to 136.71p, in accordance with their predetermined entitlement.
Provided the assets of the Company grow by 6.6% per annum for the next two
years, Zero Dividend Preference shareholders will receive their full
entitlement of 159.44p on 30 June 2005.
Ordinary shareholders have less reason for qualified optimism and will see an
improvement from the current net asset value of 2.73p only if the Company's
assets grow by more than 7.8% per annum over the final two years of the
Company's life.
During the year the Company took advantage of general market weakness to
purchase, for cancellation, 645,000 Zero Dividend Preference shares at an
average price of 90.7p which represented a substantial discount to their
accrued net asset value, thereby enhancing the asset value for the Ordinary
shareholder and enhancing the cover for the Zero Dividend Preference
shareholder. The Board will continue with such purchases as and when market
conditions allow.
Dividend cuts by companies within the UK equity and split-capital sections of
the Company's overall portfolio have for some time been adversely affecting the
income account and a reduction from 1.8p to 1.5p was made in the dividend
declared for the third quarter on the Company's Ordinary shares. For the final
quarter the Board is again declaring a dividend of 1.5p, making a total of 6.6p
for the year.
The circumstances required to show future benefits for each class of
shareholder have been explained earlier and, while bond and equity markets
remain so uncertain, your Board does not at this stage feel able to comment
further on what may happen over the remainder of the Company's lifespan, except
to confirm that we shall continue to distribute substantially all income after
expenses.
The Directors announce the unaudited statement of results for the year
1 July 2002 to 30 June 2003 as follows:
STATEMENT OF TOTAL RETURN
(*incorporating the revenue account)
1 July 2002 to 1 July 2001 to
30 June 2003 30 June 2002
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Losses on investments - (2,858) (2,858) - (5,555) (5,555)
Foreign exchange - (31) (31) - (90) (90)
losses on capital
items
Dividends and interest 1,344 - 1,344 1,722 - 1,722
Other income 92 - 92 52 - 52
Investment management (61) (184) (245) (77) (232) (309)
fee
Other expenses (188) - (188) (152) - (152)
Net return before
finance costs and 1,187 (3,073) (1,886) 1,545 (5,877) (4,332)
taxation
Interest payable and (69) (209) (278) (75) (225) (300)
similar charges
Return on ordinary
activities
before taxation 1,118 (3,282) (2,164) 1,470 (6,102) (4,632)
Taxation on ordinary (71) 71 - (99) 99 -
activities
Return on ordinary
activities
after taxation for the 1,047 (3,211) (2,164) 1,371 (6,003) (4,632)
year
Appropriations in
respect of:
- Zero Dividend - (1,614) (1,614) - (1,513) (1,513)
Preference shares
Return attributable to 1,047 (4,825) (3,778) 1,371 (7,516) (6,145)
Ordinary shareholders
First interim dividend (350) - (350) (350) - (350)
paid of 1.80p
(2002: 1.80p)
Second interim (350) - (350) (350) - (350)
dividend paid of 1.80p
(2002: 1.80p)
Third interim dividend (292) - (292) (350) - (350)
paid of 1.50p
(2002: 1.80p)
Fourth interim (292) - (292) (360) - (360)
dividend proposed of
1.50p
(2002: 1.85p)
Transfer from reserves (237) (4,825) (5,062) (39) (7,516) (7,555)
Return per: pence pence pence pence pence Pence
Ordinary share 5.38 (24.80) (19.42) 7.05 (38.63) (31.58)
Zero Dividend - 10.66 10.66 - 9.82 9.82
Preference share
SUMMARISED BALANCE SHEET
As at As at
30 June 30 June
2003 2002
�'000 �'000
Investments 25,718 27,540
Net current (liabilities)/ assets (5,012) 2,856
Total assets less current liabilities 20,706 30,396
Creditors - amounts falling due after
more than one year - (5,657)
Net assets 20,706 24,739
Net asset value per:
Ordinary share 2.73p 26.94p
Zero Dividend Preference share 136.71p 126.59p
SUMMARISED STATEMENT OF CASHFLOWS
1 July 2002 to 1 July 2001 to
30 June 2003 30 June 2002
�'000 �'000
Net cash inflow from operating activities 1,135 1,407
Servicing of finance
Interest paid (260) (294)
Net cash outflow from servicing of (260) (294)
finance
Capital expenditure and financial
investments
Purchase of investments (16,006) (10,739)
Sale of investments 14,795 11,573
Exchange gains/ (losses) on settlement 1 (11)
Exchange gains/ (losses) on forward 41 (25)
currency contracts
Net cash (outflow)/inflow from capital
expenditure and financial investments (1,169) 798
Equity dividends paid (1,352) (1,410)
Net cash (outflow)/inflow before (1,646) 501
financing
Financing
Purchase of Zero Dividend Preference (585) -
shares for cancellation
Net cash outflow from financing (585) -
(Decrease)/ increase in cash (2,231) 501
NOTE
1. The unaudited financial information does not constitute statutory accounts
as defined in section 240 of the Companies Act 1985. Statutory accounts for the
period ended 30 June 2002 have been delivered to the Registrar of Companies.
The Auditors have reported on those accounts; their report was unqualified and
did not contain statements under section 237(2) or (3) of the Companies Act
1985. The statement of total return, summarised balance sheet and summarised
statement of cash flows have been prepared using the accounting standards and
policies adopted at 30 June 2002. Statutory accounts for the year ended 30 June
2003 have not yet been approved, audited or filed with the Registrar of
Companies.
2. The Directors have declared a fourth interim dividend of 1.50p (2002: 1.85p)
net per Ordinary share, payable on 31 August 2003 to the holders of Ordinary
shares on the Register at 15 August 2003. The Directors do not recommend the
payment of a final dividend.
3. The revenue return per Ordinary share is based on earnings of �1,047,000
(2002: �1,371,000) and on 19,455,570 (2002: 19,455,570) Ordinary shares in
issue throughout the year.
4. The capital return per Ordinary share is based on net capital losses of �
4,825,000 (2002: losses of �7,516,000) and on 19,455,570 (2002: 19,455,570)
Ordinary shares in issue throughout the year.
5. An amount of �393,000 (2002: �457,000) has been charged to capital in
respect of management fees, other expenses and interest in accordance with
accounting policy.
6. It is the intention of the Directors to conduct the affairs of the Company
so that it satisfies the conditions for approval as an investment trust company
set out on Section 842 of the Income and Corporation Taxes Act 1988.
7. There are 14,757,326 (2002: 15,402,326) Zero Dividend Preference shares in
issue. The Zero Dividend Preference shareholders are entitled to receive
159.44p per share on 30 June 2005. In accordance with Financial Reporting
Standard No: 4, the accrued compound growth entitlement of �1,614,000 (2002: �
1,513,000) which takes into account the allocation of share issue expenses to
the Zero Dividend Preference shareholders, has been charged against the capital
reserve.
The net asset value per Zero Dividend Preference share of 136.71p (2002:
126.59p) at 30 June 2003 has been calculated in accordance with the Articles of
Association.
For further information, please contact:
Mike O'Shea, Premier Fund Managers Limited - 01483 306090
END