- Title:
Interim Results - 6 Months Ended 30 September 1999 - Time:
08:01:00 - Date:
28 Oct 1999 - Category:
Results - ID:
1018_
Released : 28/10/1999 07:01
RIT CAPITAL PARTNERS PLC
28 October 1999
PRELIMINARY ANNOUNCEMENT FOR THE SIX MONTHS ENDED
30 SEPTEMBER 1999
INVESTMENT PERFORMANCE
During the half year to 30 September, the Company's net asset value per share
(on a fully diluted basis) increased by 5.4% from 398.6p to 420.2p. Over the
same period, the Morgan Stanley Capital International Index (in Sterling) and
the Investment Trust Net Assets Index increased by 0.6% and 5.7% respectively,
while the FTSE All-Share Index declined by 2.4%.
RITCP's net asset value per share on 26 October 1999 was 420.2p.
As nearly a third of the portfolio is invested in unquoted investments,
specialist funds and property, a strict comparison with indices over the short
term is misleading. In addition, even within the quoted element of the
portfolio we have never followed a rigid geographical asset allocation policy,
based on the weighting of a particular benchmark index. As the size and
balance of the portfolio changes over time through the buy-back of shares, any
benchmarking of RITCP to indices, particularly over relatively short periods,
becomes less relevant.
Nevertheless, we aim, over time, to deliver for our shareholders increases in
capital value in excess of the relevant indices. Since its inception in 1988,
RITCP has significantly outperformed these indices with an increase in capital
value of 296.8%, compared to increases of 178.5%, 156.5% and 192.3%
respectively for the indices mentioned above.
INVESTMENT PORTFOLIO
Most major world stock markets, other than Japan, have given up most of the
gains made earlier this year, anticipating an increase in US interest rates.
In view of this climate of uncertainty, we have maintained a relatively high
degree of liquidity in the portfolio, which has served us well, particularly
in the volatile market conditions of the past
few weeks.
At the half year stage, about half the portfolio was invested in quoted
equities, 21% in government securities (as liquidity), 17% in unquoted
investments, 9% in specialist funds and 4% in property.
The size of RITCP's portfolio has been reduced by the repurchase of £93
million of our shares and the repayment of our US$150 million borrowings, in
favour of more flexible, shorter term facilities (which are currently not
being used).
FUND MANAGEMENT
Over the last six months or so there have been a number of developments which
are worthy of comment.
In August we announced that, after many years of successful association with
RITCP, Nils Taube would be relinquishing his role as the principal investment
adviser for the quoted portfolio. We are particularly grateful to Nils for
his contribution over the years and wish him well for the future.
We also announced that £200 million of this part of the portfolio would be
allocated to Sofaer Capital Inc. Sofaer Capital is a well established global
money management firm with which RITCP has had a long association. We are
pleased that Michael Sofaer has joined the Board of RITCP as a non-
executive director. He and his team will be investing internationally and
will focus principally on substantial companies in which there is ready
liquidity.
In the 1998 Chairman's Statement we commented that, as a self-managed company,
RITCP seeks to diversify the management of its portfolio by complementing the
skills available to us. At that time we announced that we had formed an
association with an investment manager, James Findlay, who, together with his
partner, Charles Park, have invested US$30 million of RITCP's portfolio in
small to medium sized US companies, their particular area of expertise.
Since then, we have continued this process and have allocated similar or
lesser amounts to a small number of other managers who offer expertise in a
particular geographical or industry sector. RITCP has allocated £20 million
to Talal Shakerchi, who invests in European equities with an emphasis on
medium sized companies. He established an outstanding track record as manager
of the Old Mutual European Unit Trust, until he left last year to set up his
own fund management company.
We have also allocated US$30 million to Jeffrey Gendell, a US fund manager who
left Odyssey Partners of New York to set up his own firm in 1996. He aims to
identify companies where the long-term earnings potential has not been fully
appreciated by the stock market.
The funds managed in this way are usually structured as segregated accounts,
established specially for RITCP. The amounts are included within the 'quoted
investments' part of RITCP's portfolio.
SHARE BUY-BACK
Following the preliminary announcement of RITCP's results on 6 May 1999, RITCP
has been able to buy back its own shares without the adverse tax consequences
which would have resulted previously. We have subsequently bought for
cancellation 25.65 million shares, representing over 14% of RITCP's issued
share capital, at a total cost of £93 million. You may remember that we had
shareholders' permission to buy back up to 15% of RITCP's shares over the
period to the end of September, the largest amount allowed by market purchases
under the rules of the Stock Exchange. We are pleased that we have been able
to make such full use of this facility despite being restricted to a five
month period. As these shares were acquired at a discount to the underlying
value, the Company's net asset value has been boosted by 9p per share.
At the AGM in July shareholders gave their permission for RITCP to buy back up
to 15% of its shares in the period to 30 September 2000. This further
facility will be available for us to use from tomorrow.
RESULTS
The total return before tax for the six months to 30 September was £26.7
million. In line with our established policy, RITCP will not be paying an
interim dividend.
For further information please contact:
Duncan Budge 0171-514 1928
CONSOLIDATED STATEMENT OF TOTAL RETURN
for the six months ended 30 September 1999
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 19,885 19,885
Dealing profits 65 - 65
Investment income 13,853 - 13,853
Other income 545 - 545
Administrative expenses (2,294) - (2,294)
Investment management fees (1,383) - (1,383)
Premium on purchase of
convertible stock - (828) (828)
Other capital items - (2,529)
(2,529)
------ ------ ------
Net return before finance costs
and taxation 10,786 16,528 27,314
Interest payable and similar
charges (644) - (644)
------ ------ ------
Return on ordinary activities
before taxation 10,142 16,528 26,670
Taxation on ordinary activities (2,238) 630 (1,608)
------ ------ ------
Return on ordinary activities
after taxation attributable to
equity shareholders 7,904 17,158 25,062
Dividends 329 - 329
------ ------ ------
Transfer to reserves 8,233 17,158 25,391
====== ====== ======
Return per ordinary share
Basic 4.6p 10.1p 14.7p
Fully diluted 4.5p 9.6p 14.1p
The revenue column of this statement is the consolidated profit and loss
account of the Group.
The accompanying notes are an integral part of this statement.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the period.
CONSOLIDATED STATEMENT OF TOTAL RETURN
for the six months ended 30 September 1998
Revenue Capital Total
£'000 £'000 £'000
Losses on investments - (56,751) (56,751)
Dealing profits 740 - 740
Investment income 12,590 - 12,590
Other income 462 - 462
Administrative expenses (1,972) - (1,972)
Investment management fees (878) - (878)
Premium on purchase of
convertible stock - (3,654) (3,654)
Currency translation of loan - 1,307 1,307
notes
Other capital items - (987) (987)
------ ------ ------
Net return before finance costs
and taxation 10,942 (60,085) (49,143)
Interest payable and similar
charges (3,900) - (3,900)
------ ------ ------
Return on ordinary activities
before taxation 7,042 (60,085) (53,043)
Taxation on ordinary activities (2,216) 1,259 (957)
------ ------ ------
Return on ordinary activities
after taxation attributable to
equity shareholders 4,826 (58,826) (54,000)
Dividends - - -
------ ------ ------
Transfer to/(from) reserves 4,826 (58,826) (54,000)
====== ====== ======
Return/(loss) per ordinary
share
Basic 2.7p (32.3)p (29.6)p
Fully diluted 2.6p - -
The revenue column of this statement is the consolidated profit and loss
account of the Group.
The accompanying notes are an integral part of this statement.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the period.
CONSOLIDATED BALANCE SHEET
30 September 30 March 30 September
1999 1999 1998
£'000 £'000 £'000
Fixed assets
Investments 663,637 832,867 756,215
Tangible fixed assets 190 218 243
------- ------- -------
663,827 833,085 756,458
------- ------- -------
Current assets 67,799 55,689 53,389
Creditors: Amounts falling
due within one year (41,454) (131,935) (33,812)
------- ------- -------
Net current assets/
(liabilities) 26,345 (76,246) 19,577
------- ------- -------
Total assets less current
liabilities 690,172 756,839 776,035
Creditors: Amounts falling
due after more than one
year
Convertible stock - - (8,608)
US Dollar loan notes - - (88,029)
Provisions for liabilities
and charges (5,712) (5,773) (5,981)
------- ------- -------
684,460 751,066 673,417
======= ======= =======
Capital and reserves
Called up share capital 157,372 181,959 181,959
Capital redemption reserve 25,648 - -
Capital reserve - realised 430,372 466,670 480,210
Capital reserve - 57,533 97,096 1,841
unrealised
Revenue reserve 13,535 5,341 9,407
------- ------- -------
Equity shareholders' funds 684,460 751,066 673,417
======= ======= =======
Diluted net asset value
per share 420.2p 398.6p 357.9p
Undiluted net asset value
per share 434.9p 412.8p 370.1p
Diluted net assets £691.7m £759.7m £682.0m
NOTES
1 ACCOUNTING POLICIES
The accounting policies used by the Group in the preparation of this interim
report are consistent with those applied in preparing statutory accounts for
the year ended 31 March 1999, with the exception of the valuation of the
current asset investments held by the dealing subsidiary which are now stated
in the balance sheet at market value.
2 DIVIDEND
During the period the Company purchased some of its own shares prior to the
ex-dividend date. As a result, there was a reduction of £0.3 million in the
dividend for the year ended 31 March 1999 which was paid to shareholders on 9
July 1999. This amount has been credited to the revenue account in the
current period.
3 RETURN PER ORDINARY SHARE
The return per share for the six months ended 30 September 1999 is based on
the revenue return after tax of £7.9 million and the capital return after tax
of £17.2 million, and the weighted average number of ordinary shares in issue
during the period of 170.5 million.
The fully diluted return per share for the six months ended 30 September 1999
is based on the revenue return after tax of £8 million and the capital return
after tax of £17.2 million, and the weighted average fully diluted number of
ordinary shares of 178 million. The fully diluted return per share based on
the capital loss after tax for the period ended 30 September 1998 exceeded the
undiluted return per share and, in accordance with standard accounting
practice, is not disclosed.
4 MOVEMENTS IN FIXED ASSET INVESTMENTS
Unquoted
Government and Specialist
Quoted Securities Property Funds Total
£million £million £million £million £million
At 31 March 1999 578.2 75.2 124.7 54.8 832.9
Additions 101.2 347.6 14.5 6.8 470.1
Disposals (347.7) (281.2) (0.4) (6.2) (635.5)
Revaluation (5.9) (0.7) (2.4) 5.1 (3.9)
----- ----- ----- ---- -----
At 30 September 325.8 140.9 136.4 60.5 663.6
1999 ===== ===== ===== ==== =====
5 CONVERTIBLE STOCK
£'000
At 31 March 1999 8,608
Purchased during the period and subsequently
cancelled (300)
Converted into ordinary shares (1,061)
------
At 30 September 1999 7,247
======
During the period the Company purchased £300,000 convertible stock at a cost
of £1.1 million. The Company intends to convert the convertible stock into
ordinary shares on 31 March 2000 provided this is not detrimental to the
interests of stockholders.
6 SHARE CAPITAL
£'000
At 31 March 1999 181,959
Purchased during the period and subsequently
cancelled (25,648)
Issued on conversion of convertible stock 1,061
-------
At 30 September 1999 157,372
=======
During the period the Company purchased 25.6 million ordinary shares at a cost
of £93 million. This amount has been charged to Capital Reserve. The
authorised share capital of the Company is 320 million ordinary £1 shares, of
which 7.2 million are reserved for the conversion of the convertible stock.
7 DILUTED NET ASSET VALUE PER SHARE
The diluted net asset value per share is based on diluted net assets of £691.7
million and diluted share capital of 164.6 million ordinary shares. This
assumes that all of the convertible stock was converted at the balance sheet
date.
8 CONTINGENCIES AND FINANCIAL COMMITMENTS
There has been no material change to the position reported at 31 March 1999 in
connection with the litigation proceedings issued in New York by Richbell
Information Services Inc.
9 YEAR 2000 COMPLIANCE
The Company's in-house systems have all been upgraded to be Year 2000
compliant and are presently undergoing comprehensive testing. The Company
does not anticipate any adverse repercussions from the functionality of either
its own systems or those of third party suppliers.
10 STATUTORY ACCOUNTS
The financial information in this publication is unaudited and does not
constitute statutory accounts. The statutory accounts for the year ended 31
March 1999 have been delivered to the UK Registrar of Companies and the report
of the auditors on those accounts was unqualified.
11 INTERIM REPORT
The Company's Interim Report for the six months ended 30 September 1999 will
be posted to shareholders on Wednesday, 3 November 1999. Copies of this
announcement and the Interim Report will be available to the public at the
Company's registered office at 27 St James's Place, London SW1A 1NR.
Interim Results - 6 Months Ended 30 September 199908:01:0028 Oct 1999Results1018_