British &
American Investment Trust PLC |
Annual Financial
Report
for the year ended 31 December 2017 |
Registered number:
00433137 |
Directors |
Registered
office |
J Anthony V Townsend
(Chairman) – retired 31 December 2017 |
Wessex House |
Jonathan C Woolf
(Managing Director) |
1 Chesham Street |
David G
Seligman (Non-executive) – appointed as Director 26 September
2017
and as Chairman 1 January 2018 |
London SW1X 8ND |
Dominic G Dreyfus
(Non-executive and Chairman of the Audit Committee) |
Telephone: 020 7201
3100 |
Ronald G Paterson
(Non-executive) |
Registered in
England |
|
No.00433137 |
|
27 April 2018 |
This is the Annual Financial Report as required to be published
under DTR 4 of the UKLA Listing Rules.
Financial Highlights
For the year ended 31 December
2017
|
2017
|
2016
|
|
|
Revenue
return |
Capital
return |
Total |
Revenue
return |
Capital
return |
Total |
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
Profit/(loss) before tax –
realised |
2,210 |
(1,694) |
516 |
1,474 |
(2,502) |
(1,028) |
Loss before tax – unrealised |
– |
(5,249) |
(5,249) |
– |
(4,134) |
(4,134) |
|
__________ |
__________ |
__________ |
__________ |
__________ |
__________ |
Profit/(loss) before tax –
total |
2,210 |
(6,943) |
(4,733) |
1,474 |
(6,636) |
(5,162) |
|
__________ |
__________ |
__________ |
__________ |
__________ |
__________ |
Earnings per £1 ordinary share –
basic |
7.58p |
(27.77)p |
(20.19)p |
4.63p |
(26.55)p |
(21.92)p |
|
__________ |
__________ |
__________ |
__________ |
__________ |
__________ |
Earnings per £1 ordinary share –
diluted |
6.41p |
(19.84)p |
(13.43)p |
4.31p |
(18.96)p |
(14.65)p |
|
__________ |
_________ |
__________ |
__________ |
_________ |
__________ |
Net assets |
|
|
15,534 |
|
|
22,682 |
|
|
|
__________ |
|
|
__________ |
Net assets per ordinary share |
|
|
|
|
|
|
– deducting preference
shares at par |
|
|
22p |
|
|
51p |
|
|
|
__________ |
|
|
__________ |
– diluted |
|
|
44p |
|
|
65p |
|
|
|
__________ |
|
|
__________ |
Diluted net asset
value per ordinary share at 25 April 2018 |
|
|
58p |
|
|
|
|
|
|
__________ |
|
|
|
Dividends declared or
proposed for the period |
|
|
|
|
|
|
per ordinary share |
|
|
|
|
|
|
– interim paid |
|
|
2.7p |
|
|
2.7p |
– final proposed |
|
|
5.9p |
|
|
5.7p |
per preference
share |
|
|
3.5p |
|
|
3.5p |
Basic net assets and earnings per share are calculated using a
value of par for the preference shares.
Consequently, when the net asset value attributed to ordinary
shares remains below par the diluted net asset value will show a
higher value than the basic net asset value. |
|
|
|
|
|
|
|
|
Chairman’s Statement
I am pleased to report for the first time as Chairman our
results for the year ended 31 December
2017. I would also like to thank my predecessor,
Anthony Townsend, who retired from
the board at the end of 2017 for his many years of excellent
service as Chairman and director of the company.
Revenue
The return on the revenue account before tax amounted to £2.2
million (2016: £1.5 million), an increase of 50 percent. This
increase was due to higher levels of both external dividend
receipts and dividends received from subsidiary companies compared
to the previous year.
Gross revenues totalled £2.7 million (2016: £2.3 million).
Film income of £101,000 (2016: £85,000) and property unit
trust income of £15,000 (2016: £15,000) was received in our
subsidiary companies. In accordance with IFRS10, these income
streams are not included within the revenue figures noted
above.
The total return before tax amounted to a loss of £4.7 million
(2016: £5.2 million loss), which comprised net revenue of
£2.2 million, a realised loss of £1.4 million and an unrealised
loss of £5.2 million. The revenue return per ordinary share was
7.6p (2016: 4.6p) on an undiluted basis and 6.4p (2016:
4.3p) on a diluted basis.
Net Assets and Performance
Net assets at the year end were £15.5 million (2016: £22.7
million), a decrease of 31.5 percent. This compares to increases in
the FTSE 100 and All Share indices of 7.6 percent and 9.0 percent,
respectively, over the period. On a total return basis, after
adding back dividends paid during the year, our net assets
decreased by 20.7 percent compared to a 11.0 percent increase and a
12.0 percent increase in the FTSE 100 and All Share indices,
respectively.
This significant underperformance was due to substantial falls
in the value of our US investments. Geron Corporation, our largest
investment, fell 13.0 percent in US dollar terms over the year and
20.5 percent in sterling terms. Although the value of this
investment had risen by 34 percent in the first 6 months of 2017 as
reported at the interim stage, the share price suffered a drop of
over 25 percent in August following the announcement of a short
delay in reporting on its clinical oncology trials which was taken
badly by the markets. The main reasons for the delay were
firstly that one of the primary endpoints of the trial, median
overall survival (50 percent of patients), had not been reached and
secondly that considerably higher response rates to the drug had
been discovered in a particular subset of patients and it had been
decided to add a further 20 such patients to the trial for
confirmation purposes. Although these two findings would in
normal circumstances be construed as positive developments, the
fact that the trial results which had been expected to be announced
in the fourth quarter of 2017 would be delayed by a further up to
12 months resulted in a strong and somewhat unjustified adverse
market reaction.
The value of our other holdings in US stocks, Biotime Inc and
Asterias Biotherapeutics, also decreased in 2017 following
equity fundraisings in the first half of the year in those
stocks from which their prices did not recover, resulting in
falls of 41 and 51 percent, respectively, in US dollar terms over
the year. Furthermore, given the depreciation of the US dollar
against sterling of 10 percent over the year, the effect of these
declines in sterling terms on net asset value was even more
pronounced.
Since the year end, however, the value of Geron has recovered
substantially and has made strong gains. A further and very
positive update of the trial was announced in early March this year
which has resulted in Geron’s value increasing by 136 percent in
the first quarter of 2018. These developments are explained in more
detail in the Managing Director’s report below and account for the
substantial improvement in the company’s net asset value as at
25 April 2018 shown below.
More generally in 2017, the UK and US equity markets showed
strong and abnormally steady growth throughout the year of 8
percent and 25 percent, respectively, to reach all time highs by
the end of the year. This was despite a wide number of unfolding
political and financial events over the year which could easily
have had a destabilising effect. These included a snap general
election in the UK with an unexpected result which lost the
Conservative government its majority, many months of impasse and
frustration in the Brexit negotiation process with no initial
agreements achieved until the end of the year, and an angry
political stand-off between the USA and North
Korea over its nuclear ambitions. In addition, confrontation
between Congress and the Trump administration and a dysfunctional
White House which brought into doubt the administration’s ability
to deliver on its promised reflationary programme of tax cuts and
infrastructure investment with the resulting uncertainties on the
pace and size of US dollar interest rate normalisation over the
year. Despite all this, volatility remained at its lowest levels
for many years as markets decided to ignore the risks associated
with these events. The main reason for the strong market
advances was the recognition that most world economies had entered
into a period of synchronised growth with corporate profitability
showing strong performance against a background of cheap money and
low inflationary pressures. Although central banks had
started to the follow the lead of the Federal Reserve in reducing
the monetary stimulus of earlier years by ending or moderating the
levels of quantitative easing applied to their economies, they were
also careful to make it known that any rises in rates would be
gradual and limited. Consequently, while bond prices
continued to adjust downwards to reflect likely increases in rates
in the forthcoming periods, it was not a disorderly reaction and
equities by contrast enjoyed strong support pushing valuations
forward to record levels.
This strength in equities was further magnified at the year end
when the Trump administration finally pushed through a programme of
tax cuts which was considered very favourable to business,
particularly companies operating in the digital economy and other
sectors with significant accrued profits held overseas. The
fact that this large and unfunded tax cut would add significantly
to the already large US budget deficit in the coming years was not
sufficient to curb enthusiasm in the market and stocks rose a
further 9 percent in the USA over
the end of the year.
Since that time, however, a significant reversal in US stock
prices occurred in the first quarter of 2018. At one point
the DOW index retreated by 9 percent in the first week of February
after suffering the largest intra-day fall on record of 1600
points or 7 percent. The market had finally been destabilised by
statistics which suggested a significant increase in hourly labour
costs in the USA, indicating a
return of inflationary pressures and a potentially faster rise in
US dollar interest rates than previously indicated by the Federal
Reserve. Shortly thereafter, the Trump administration embarked upon
a new and more aggressive trade policy threatening and even
welcoming the prospect of an international trade war. This
had the effect of destabilising the market further just
as it had begun to recover from the falls experienced at the
beginning of February. By the end of the quarter, the US equity
market had fallen by 9.5 percent since the high point achieved at
the end of January and the UK market had fallen by 9.0 percent
reversing all of the gains achieved in 2017.
Dividend
We are pleased to recommend an increased final dividend of 5.9p
per ordinary share, which together with the interim dividend makes
a total payment for the year of 8.6p (2016: 8.4p) per
ordinary share. This represents an increase of 2.4 percent over the
previous year's total dividend and a yield of 12.3 percent based on
the share price of 70p at the end of the year. The final dividend
will be payable on 28 June 2018 to
shareholders on the register at 25 May
2018. A dividend of 1.75p will be paid to preference
shareholders resulting in a total payment for the year of 3.5p per
share.
We are pleased to have been named as a ‘Dividend Hero’ by the
Association of Investment Companies for the second year running as
one of the 20 investment trusts which have maintained a consistent
20 year record of increasing dividends. This is obviously good news
for the company and shareholders alike.
Investment Policy
We made various modifications to our published investment policy
during the year which were approved by shareholders at the Annual
General Meeting held on 27 June 2017.
These changes were set out in detail in last year’s annual
report.
Outlook
With the unprecedented run of low volatility and unabated growth
in equities in 2017, we took the opportunity to take profits in
some of our UK fund investments and reduce debt after having exited
our fixed interest positions in the previous year.
The sustained pattern of growth in equity markets in the US and
UK has now broken down and in the USA the market has now experienced two albeit
brief technical corrections of 10 percent in the first 4 months of
the year, perhaps presaging a possible end to the bull market which
has run since 2009.
Erratic and seemingly ‘on the hoof’ policy making from the Trump
administration together with the UK entering the politically
difficult period of the final 12 months prior to Brexit do not bode
well for strength in equity markets over the medium term, even if
in the short term economic growth and corporate earnings remain
firm.
Against this background, we remain invested in our US
biotechnology stocks waiting to capture the gains expected as their
programmes advance and reach maturity but we do not expect to add
to our other long term investments at this point.
As at 25 April 2018, our net
assets had increased to £20.4 million, an increase of 31.4 percent
since the beginning of the calendar year due principally to the
132.8 percent increase in the share price of Geron Corporation over
this period. This is equivalent to 41.7
pence per share (prior charges deducted at par) and
58.3 pence per share on a diluted
basis. Over the same period the FTSE 100 decreased 4.0 percent and
the All Share Index decreased 3.8 percent.
David Seligman
27 April 2018
Managing Director's report
2017 was characterised by strong growth in equity markets, very
low levels of volatility, synchronised growth in the world’s major
economies, good corporate earnings and continued if moderating
levels of monetary stimulus provided by central banks. Equity
markets in the USA and UK reached
all time highs after a year of high and steady growth although the
UK market was somewhat less buoyant as a steady recovery in
sterling from its post-Brexit lows created a headwind for UK stocks
with significant foreign earnings.
As the year progressed, doubts began to grow about the
sustainability of this pattern of strong market performance against
a background of increasing political risk. In the USA concerns grew that the legislative
confrontation between Congress and the Trump administration and
erratic policy making and management by a White House pre-occupied
by the special counsel’s investigations into Russian involvement in
the US presidential election would derail the administration’s
reflationary programme of tax cuts and infrastructure investment.
In the UK, the unexpected snap general election result and lack of
progress on Brexit negotiations within the tight timetable had the
effect of dampening growth and delaying corporate investment
decisions as visibility on the UK’s status post Brexit in terms of
trade and investment remained unclear.
Nevertheless, markets chose to ignore these concerns, focusing
instead on the arrival of the long awaited synchronised growth in
major economies and strong earnings momentum. When the promised tax
cuts in the USA were finally
agreed in late November, equities received a further boost as it
became clear that instead of benefiting middle America as
originally promised during the presidential campaign, the bulk of
the cuts were mainly aimed at corporate America. This also meant,
however, that the general trickle down effects of the tax cuts on
middle income earners and the economy in general would be less
likely to occur. Corporates and their wealthier owners would be
more likely to retain the windfall benefits of the cuts and
therefore the increases to an already bloated US government debt
caused by the tax cuts over the medium term would be less likely to
be offset by increases in general economic activity.
Since the year end, equity markets have become increasingly
volatile, falling back considerably from their end-January highs.
This follows concerns of overheating in the USA, the potential revival of inflation and
higher interest rates as the recent tax cuts give an unnecessary
fiscal stimulus to an already growing economy. In addition, the
Trump administration’s apparent eagerness to promote an
international trade war together with recent unwarranted attacks on
the operations of Amazon have served to undermine further
confidence in equities at this time.
Following gradual reductions in our portfolio’s exposure to
fixed interest and UK fund investments over the past 18 months in
response to perceived over-valuations, we have reduced our modest
debt position while continuing to maintain our progressive dividend
policy in anticipation of a period of greater volatility in equity
markets and a return to valuation levels more commensurate with the
medium term background risks noted above and in the Chairman’s
statement.
Our main focus for the time being is on achieving our capital
growth objectives through our exposure to our US biotechnology
investments and our income objectives through our existing UK fund
investments, capturing of special dividends and income received
from group subsidiaries. As already noted, after a long
period of weakness, Geron’s share price has recently recovered
strongly as the next and important stage in its clinical trials
process in collaboration with Johnson & Johnson reaches a
conclusion. Greater detail on the background to this is given
below.
Geron Corporation
As set out in detail in last year’s annual report, Geron
Corporation is in the process of conducting clinical trials of its
telomerase inhibitor drug, Imetelstat, in collaboration with its
partner Johnson & Johnson in two haematological malignancies
(blood cancer), Myelofibrosis (MF) and Myelodysplastic syndrome
(MDS). Under the collaboration agreement entered into in 2014,
Johnson & Johnson co-funds and manages these trials and will
pay Geron a series of substantial milestone payments totalling
US$ 1 billion as the trials proceed
through the various trial stages to approval and
commercialisation.
A significant stage was due to be reached in the last quarter of
2017 when interim results from the MF trial were due to be released
at which time Johnson & Johnson would make a one-time decision
whether to continue with the trial and trigger the next in the
series of milestone payments. As noted in the Chairman’s
statement above, this decision point was delayed in August last
year for up to a further 12 months because data released at that
time in relation to median overall survival and enhanced efficacy
in a subset of patients suggested further time to collect
additional results would provide a more compelling set of data on
which to base the eventual submission to the FDA to approve the
drug for commercialisation.
Although these interim trial results announced in August were
very positive for the ultimate success of the drug, the market
focused more on the delay rather than the reason for the delay. The
fact that the median overall survival rate had not been reached
indicates more patients were surviving for longer on the drug. The
fact that a subset of patients responded even more vigorously to
the drug, requiring additional recruiting of such patients to
confirm the outstanding result, is a further sign of the potential
success and likely approval of the drug. Nevertheless, the market
price of Geron fell 20 percent at this time and drifted to a low
point by year end.
However, a further and very positive update of the trial was
recently announced in early March this year indicating that median
overall survival had still not been reached and bringing forward
the Johnson & Johnson decision point to the third quarter of
this year. In addition the trial was permitted to be extended by
the FDA beyond its original end date to allow patients to continue
benefiting from the drug.
The fact that median overall survival has still not been reached
after a further six months is a significant result as it shows that
Geron’s drug offers MF patients significantly longer life
expectancy by a factor of two or three times more than the leading
alternative drug on the market, the single-product owner of which
is valued at US$ 20 billion.
This latest news was well received and served to re-invigorate
Geron’s market value, with the price climbing over 150 percent from
its earlier levels after this announcement.
As previously noted, our strategy is to achieve the portfolio’s
growth objectives though our US investments. Geron’s latest
promising results and recent re-rating by the market bodes well for
our continued holding of this investment. Furthermore, having been
granted Fast Track status by the FDA at the end of last year, there
is now also the potential for the normal trial and approval process
timetable to be accelerated.
Packaged Retail and Insurance-based
Investment Products (PRIIPs)
Under the EU’s PRIIPs regulation, collective investment schemes,
including this company as an investment trust, are required from
this year to produce a Key Information Document (KID) to be
published on their websites setting out various performance and
cost statistics. The format and calculation of the statistics are
strictly prescribed by the regulation and, particularly in respect
of the performance statistics, differ significantly from the ways
in which we report our financial information in our accounts. This
is because the calculation required by PRIIPs of future performance
using various possible scenarios is based wholly on past
performance only. As market participants have pointed out, making
future projections based on past performance is a potentially
misleading exercise and is normally vigorously avoided.
Furthermore, integral to these calculations is a projection of
future dividends which, under Stock Exchange rules, has long been a
basic error which listed companies have been meticulous to avoid in
their reporting or presentations as such projections require formal
verification in an accountant’s report.
Following strong objections by participants, the FCA moved in
January to relax the rule, allowing participants to include
performance statistics as previously reported and with all the
caveats existing and future shareholders would expect to see with
regard to projections of future performance and dividends. Our
treatment of the statistics under the KID is shown and explained in
more detail on our website where the KID is required to be
published. It is regrettable that such basic errors which flout
normal listed company reporting rules were not identified and
amended earlier by the regulators before being brought into
effect. Prior consultation with market participants and
professionals would have quickly identified the serious problems
inherent in the new rules.
Markets in Financial Instruments
Directive II (MiFID II)
Another area where regulators have regrettably fallen short has
been in relation to the mishandled introduction at the beginning of
this year of the EU’s rules under MiFID II. These rules had
been brought in to amend and broaden the rules of transparency in
reporting and markets as implemented by the original MiFID in 2007
which had singularly failed to achieve their original objectives,
in fact making markets less transparent in many ways.
The introduction of MifID II was also less than optimal as major
clearing exchanges were not ready for the implementation and had to
be granted wholesale and multi-year exemptions from the rules (ICE
Futures Europe, London Metal Exchange and Eurex Clearing). On a
participant level, MiFID II’s additional regulation on trading
procedures, reporting and risk has imposed such levels of
administrative burden on market traders and brokers that best
execution is not always achievable within an acceptable timeframe.
The risk reporting procedures now required in respect of complex
instruments, trading strategies or specialised market sectors such
as traded options, CFD trading, short sales or even whole asset
classes such as investment trusts has in some cases resulted in
brokers withdrawing coverage of these instruments or practices
completely from their clients.
Lastly, the new rules surrounding transparency in the cost of
providing research has discouraged many firms from sourcing or
providing any research to clients at all and as a result yet
further barriers are placed between retail investors and their
existing or prospective investments.
Altogether, this can hardly be considered an effective way of
promoting transparency in markets, efficiency and competition in
trading or effectiveness in investing. Once again, rules developed
by EU bureaucrats without the due benefit of professional and
market-based input have, in many respects, resulted in outcomes
diametrically opposite to those intended.
Jonathan Woolf
27 April 2018
Income statement
For the year ended 31 December
2017
|
2017
|
2016
|
|
Revenue
return |
Capital
return |
Total |
Revenue
return |
Capital
return |
Total |
|
£ 000 |
£ 000 |
£ 000 |
£ 000 |
£ 000 |
£ 000 |
Investment income
(note 2) |
2,732 |
- |
2,732 |
2,263 |
- |
2,263 |
Holding losses on
investments at fair value through profit or loss |
- |
(5,249) |
(5,249) |
- |
(4,134) |
(4,134) |
Losses on disposal of
investments at fair value through profit or loss |
- |
(1,442) |
(1,442) |
- |
(2,081) |
(2,081) |
Foreign exchange
gains/(losses) |
53 |
53 |
106 |
(143) |
(138) |
(281) |
Expenses |
(526) |
(272) |
(798) |
(596) |
(267) |
(863) |
|
________ |
________ |
________ |
________ |
________ |
________ |
Profit/(loss) before finance
costs and tax |
2,259 |
(6,910) |
(4,651) |
1,524 |
(6,620) |
(5,096) |
Finance costs |
(49) |
(33) |
(82) |
(50) |
(16) |
(66) |
|
________ |
________ |
________ |
________ |
________ |
________ |
Profit/(loss) before tax |
2,210 |
(6,943) |
(4,733) |
1,474 |
(6,636) |
(5,162) |
Tax |
35 |
- |
35 |
33 |
- |
33 |
|
________ |
________ |
________ |
________ |
________ |
________ |
Profit/(loss) for the
period |
2,245 |
(6,943) |
(4,698) |
1,507 |
(6,636) |
(5,129) |
|
________ |
________ |
________ |
________ |
________ |
________ |
Earnings per share |
|
|
|
|
|
|
Basic – ordinary shares |
7.58p |
(27.77)p |
(20.19)p |
4.63p |
(26.55)p |
(21.92)p |
|
________ |
________ |
________ |
________ |
________ |
________ |
Diluted – ordinary shares |
6.41p |
(19.84)p |
(13.43)p |
4.31p |
(18.96)p |
(14.65)p |
|
________ |
________ |
________ |
________ |
________ |
________ |
The company does not have any income or expense that is not
included in the profit/(loss) for the period. Accordingly, the
‘Profit/(loss) for the period’ is also the ‘Total Comprehensive
Income for the period’ as defined in IAS 1 (revised) and no
separate Statement of Comprehensive Income has been presented.
The total column of this statement represents the Income
Statement, prepared in accordance with IFRS. The supplementary
revenue return and capital return columns are both prepared under
guidance published by the Association of Investment Companies. All
items in the above statement derive from continuing operations.
All profit and total comprehensive income is attributable to the
equity holders of the company.
Statement of changes in equity
For the year ended 31 December
2017
|
|
Share
capital |
Capital
reserve
|
Retained
earnings |
Total
|
|
|
£ 000 |
£ 000 |
£ 000 |
£ 000 |
Balance at 31 December 2015 |
|
35,000 |
(7,588) |
2,799 |
30,211 |
Changes in equity
for 2016 |
|
|
|
|
|
(Loss)/profit for the
period |
|
- |
(6,636) |
1,507 |
(5,129) |
Ordinary dividend paid
(note 4) |
|
- |
- |
(2,050) |
(2,050) |
Preference dividend paid (note
4) |
|
- |
- |
(350) |
(350) |
|
|
________ |
________ |
________ |
________ |
Balance at 31
December 2016 |
|
35,000 |
(14,224) |
1,906 |
22,682 |
Changes in equity for
2017 |
|
|
|
|
|
Profit/(loss) for the period |
|
- |
(6,943) |
2,245 |
(4,698) |
Ordinary dividend paid (note 4) |
|
- |
- |
(2,100) |
(2,100) |
Preference dividend paid (note
4) |
|
- |
- |
(350) |
(350) |
|
|
________ |
________ |
________ |
________ |
Balance at 31 December
2017 |
|
35,000 |
(21,167) |
1,701 |
15,534 |
|
|
________ |
________ |
________ |
________ |
Registered number: 00433137
Balance Sheet
For the year ended 31 December
2017
|
|
2017 |
2016 |
|
|
|
|
|
|
£ 000 |
£ 000 |
Non-current assets |
|
|
|
Investments - fair value through
profit or loss |
|
15,565 |
23,654 |
Subsidiaries - fair value through
profit or loss |
|
5,277 |
6,058 |
|
|
__________ |
__________ |
Current assets |
|
20,842 |
29,712 |
Receivables |
|
2,399 |
1,469 |
Cash and cash
equivalents |
|
2,213 |
423 |
|
|
__________ |
__________ |
|
|
4,612 |
1,892 |
|
|
__________ |
__________ |
Total assets |
|
25,454 |
31,604 |
|
|
__________ |
__________ |
Current liabilities |
|
|
|
Trade and other payables |
|
1,010 |
1,000 |
Bank loan |
|
4,244 |
3,490 |
|
|
__________ |
__________ |
|
|
(5,254) |
(4,490) |
|
|
__________ |
__________ |
|
|
|
|
Total assets less current
liabilities |
|
20,200 |
27,114 |
|
|
__________ |
__________ |
|
|
|
|
Non - current
liabilities |
|
(4,666) |
(4,432) |
|
|
__________ |
__________ |
Net assets |
|
15,534 |
22,682 |
|
|
__________ |
__________ |
Equity attributable to equity
holders |
|
|
|
Ordinary share capital |
|
25,000 |
25,000 |
Convertible preference share
capital |
|
10,000 |
10,000 |
Capital reserve |
|
(21,167) |
(14,224) |
Retained revenue earnings |
|
1,701 |
1,906 |
|
|
__________ |
__________ |
Total equity |
|
15,534 |
22,682 |
|
|
__________ |
__________ |
Approved: 27
April 2018
Cash flow statement
For the year ended 31 December
2017
|
|
Year
ended 2017 |
Year
ended 2016 |
|
|
£ 000 |
£ 000 |
Cash flows from operating
activities |
|
|
|
Loss before tax |
|
(4,733) |
(5,162) |
Adjustments for: |
|
|
|
Losses on
investments |
|
6,691 |
6,215 |
Scrip dividends |
|
- |
(4) |
Proceeds on disposal of
investments at fair value through profit and loss |
|
13,867 |
31,918 |
Purchases of investments at fair
value through profit and loss |
|
(11,570) |
(23,689) |
Finance costs |
|
82 |
66 |
|
|
__________ |
__________ |
Operating cash flows before
movements in working capital |
|
4,337 |
9,344 |
(Increase)/decrease in
receivables |
|
(780) |
174 |
Increase/(decrease) in
payables |
|
4 |
(8,138) |
|
|
__________ |
__________ |
Net cash from operating
activities before interest |
|
3,561 |
1,380 |
Interest paid |
|
(75) |
(52) |
|
|
__________ |
__________ |
Net cash from operating
activities |
|
3,486 |
1,328 |
Cash flows from financing
activities |
|
|
|
Dividends paid on ordinary
shares |
|
(2,100) |
(2,050) |
Dividends paid on preference
shares |
|
(350) |
(350) |
Bank loan |
|
754 |
1,151 |
|
|
__________ |
__________ |
Net cash used in financing
activities |
|
(1,696) |
(1,249) |
|
|
__________ |
__________ |
Net increase in cash and cash
equivalents |
|
1,790 |
79 |
Cash and cash equivalents at
beginning of year |
|
423 |
344 |
|
|
__________ |
__________ |
Cash and cash equivalents at end
of year |
|
2,213 |
423 |
|
|
__________ |
__________ |
Purchases and sales of investments are considered to be
operating activities of the company, given its purpose, rather than
investing activities.
1 Basis of preparation and going concern
The financial information set out above contains the financial
information of the company for the year ended 31 December 2017. The company has prepared its
financial statements under IFRS. The financial statements have been
prepared on a going concern basis adopting the historical cost
convention except for the measurement at fair value of investments,
derivative financial instruments and subsidiaries.
The information for the year ended 31
December 2017 is an extract from the statutory accounts to
that date. Statutory company accounts for 2016, which were prepared
under IFRS as adopted by the EU, have been delivered to the
registrar of companies and company statutory accounts for 2017,
prepared under IFRS as adopted by the EU, will be delivered in due
course.
The auditors have reported on the 31
December 2017 year end accounts and their reports were
unqualified and did not include references to any matters to which
the auditors drew attention by way of emphasis without qualifying
their reports and did not contain statements under section 498(2)
or (3) of the Companies Act 2006.
The directors, having made enquiries, consider that the company
has adequate financial resources to enable it to continue in
operational existence for the foreseeable future. Accordingly, the
directors believe that it is appropriate to continue to adopt the
going concern basis in preparing the company's accounts.
2 Income
|
|
|
2017 |
2016 |
|
|
|
£ 000 |
£ 000 |
Income from
investments |
|
|
|
|
|
|
|
|
|
UK dividends |
|
|
2,260 |
1,951 |
Overseas dividends |
|
|
44 |
214 |
Scrip and in specie
dividends |
|
|
- |
4 |
Dividend from
subsidiary |
|
|
400 |
- |
Interest on fixed income
securities |
|
|
3 |
70 |
|
|
|
__________ |
__________ |
|
|
|
2,707 |
2,239 |
|
|
|
|
|
__________ |
__________ |
|
|
|
|
|
Other income |
|
|
25 |
24 |
|
|
|
|
|
__________ |
__________ |
Total income |
|
|
2,732 |
2,263 |
|
|
|
|
|
__________ |
__________ |
|
|
|
|
|
Total income
comprises: |
|
|
|
|
|
|
|
|
|
Dividends |
|
|
2,704 |
2,169 |
Interest |
|
|
3 |
70 |
Other interest |
|
|
25 |
24 |
|
|
|
__________ |
__________ |
|
|
|
2,732 |
2,263 |
|
|
|
|
|
__________ |
__________ |
Dividends from
investments |
|
|
|
|
|
|
|
|
|
Listed investments |
|
|
2,304 |
2,169 |
Unlisted
investments |
|
|
400 |
- |
|
|
|
__________ |
__________ |
|
|
|
2,704 |
2,169 |
|
|
|
|
|
__________ |
__________ |
Of the £2,304,000 (2016 – £2,169,000) dividends received,
£1,891,000 (2016 – £1,693,000) related to special and other
dividends received from investee companies that were bought after
the dividend announcement. There was a corresponding capital loss
of £1,949,000 (2016 – £1,976,000), on these investments.
Under IFRS 10 the income analysis is for the parent company only
rather than that of the consolidated group. Thus film revenues of
£101,000 (2016 – £85,000) received by the subsidiary British and
American Films Limited and property unit trust income of £15,000
(2016 – £15,000) received by the subsidiary BritAm Investments
Limited are shown separately in this paragraph.
3 Earnings per ordinary share
The calculation of the basic (after deduction of preference
dividend) and diluted earnings per share is based on the following
data:
|
2017 |
2016 |
|
Revenue
return
|
Capital
return |
Total |
Revenue
return
|
Capital
return |
Total |
|
£ 000 |
£ 000 |
£ 000 |
£ 000 |
£ 000 |
£ 000 |
Earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
1,895 |
(6,943) |
(5,048) |
1,157 |
(6,636) |
(5,479) |
Preference dividend |
350 |
- |
350 |
350 |
- |
350 |
|
__________ |
__________ |
__________ |
__________ |
__________ |
__________ |
Diluted |
2,245 |
(6,943) |
(4,698) |
1,507 |
(6,636) |
(5,129) |
|
__________ |
__________ |
__________ |
__________ |
__________ |
__________ |
Basic revenue, capital and total return per ordinary share is
based on the net revenue, capital and total return for the period
after tax and after deduction of dividends in respect of preference
shares and on 25 million (2016: 25 million) ordinary shares in
issue.
The diluted revenue, capital and total return is based on the
net revenue, capital and total return for the period after tax and
on 35 million (2016: 35 million) ordinary and preference shares in
issue.
4 Dividends
|
2017 |
2016 |
|
£ 000 |
£ 000 |
Amounts recognised as distributions
to equity holders in the period: |
|
|
Dividends on ordinary shares: |
|
|
Final dividend for the year ended 31
December 2016 of 5.7p (2015:5.5p) per share |
1,425 |
1,375 |
Interim dividend for the year ended
31 December 2017 of 2.7p
(2016:2.7p) per share |
675 |
675 |
|
|
|
|
__________ |
__________ |
|
2,100 |
2,050 |
|
__________ |
__________ |
Proposed final dividend for the year
ended 31 December 2017 of 5.9p (2016:5.7p) per share |
1,475 |
1,425 |
|
__________ |
__________ |
|
|
|
Dividends on 3.5% cumulative
convertible preference shares: |
|
|
Preference dividend for the 6 months
ended 31 December 2016 of 1.75p (2015:1.75p) per share |
175 |
175 |
Preference dividend for the 6 months
ended 30 June 2017 of 1.75p (2016:1.75p) per share |
175 |
175 |
|
__________ |
__________ |
|
350 |
350 |
|
__________ |
__________ |
Proposed preference dividend for the
6 months ended 31 December 2017 of 1.75p (2016:1.75p) per
share |
175 |
175 |
|
__________ |
__________ |
|
|
|
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements in accordance
with IFRS.
We have set out below the total dividend payable in respect of
the financial year, which is the basis on which the retention
requirements of Section 1158 of the Corporation Tax Act 2010 are
considered.
Dividends proposed for
the period |
|
|
|
2017 |
2016 |
|
£ 000 |
£ 000 |
Dividends on ordinary shares: |
|
|
Interim dividend for the year ended
31 December 2017 of 2.7p (2016:2.7p) per share |
675 |
675 |
|
|
|
Proposed final dividend for the year
ended 31 December 2017 of 5.9p (2016:5.7p) per share |
1,475 |
1,425 |
|
__________ |
__________ |
|
2,150 |
2,100 |
|
__________ |
__________ |
Dividends on 3.5% cumulative
convertible preference shares: |
|
|
Preference dividend for the year
ended 31 December 2017 of 1.75p (2016:1.75p) per share |
175 |
175 |
Proposed preference dividend for the
year ended 31 December 2017 of 1.75p (2016:1.75p) per share |
175 |
175 |
|
__________ |
__________ |
|
350 |
350 |
|
__________ |
__________ |
5 Net asset values
|
|
Net
asset
value per share |
|
|
Net
asset
attributable |
|
2017 |
2016 |
|
2017 |
2016 |
|
£ |
£ |
|
£
000 |
£
000 |
Ordinary shares |
|
|
|
|
|
Undiluted |
0.22 |
0.51 |
|
5,534 |
12,682 |
Diluted |
0.44 |
0.65 |
|
15,534 |
22,682 |
The undiluted and diluted net asset values per £1 ordinary share
are based on net assets at the year end and 25 million (undiluted)
ordinary and 35 million (diluted) ordinary and preference shares in
issue.
The undiluted net asset value per convertible £1 preference
share is the par value of £1. The diluted net asset value per
ordinary share assumes the conversion of the preference shares to
ordinary shares.
Principal risks and uncertainties
The principal risks facing the company relate to its investment
activities and include market risk (other price risk, interest rate
risk and currency risk), liquidity risk and credit risk. The other
principal risks to the company are loss of investment trust status
and operational risk. These will be explained in more detail in the
notes to the 2017 Annual Report and Accounts, but remain unchanged
from those published in the 2016 Annual Report and Accounts.
Related party transactions
The company rents its offices from Romulus Films Limited, and is
also charged for its office overheads.
The salaries and pensions of the company’s employees, except for
the four non-executive directors and one employee are paid by Remus
Films Limited and Romulus Films Limited and are recharged to the
company.
During the year the company had no investment transactions to
sell stock (2016 - £163,497) to BritAm Investments Limited.
During the year the company entered into an investment
transaction with Geminion Investments Limited, a company in which
Mr J C Woolf has an interest and is a director. The purpose of this
transaction, which was conducted through a London Stock Exchange
broker, was for the company to purchase a cum dividend stock and
sell the stock ex dividend so as to capture the associated dividend
as disclosed in Note 2 of the financial statements to generate
distributable reserves to achieve the company’s objective to
sustain a progressive dividend policy. The aggregate value of this
transaction was purchases of £6,055,000 (31
December 2016 – £20,788,000), dividend received of £639,000
(31 December 2016 – £1,484,000) and
sales of £5,377,000 (31 December 2016
– £19,017,000) giving a net loss of £39,000 (31 December 2016 – £287,000 loss). At the year
end the amount of £45,000 (2016 - £82,829 due from) was due to
Geminion investments Limited.
There have been no other related party transactions during the
period, which have materially affected the financial position or
performance of the company.
Capital Structure
The company's capital comprises £35,000,000 (2016 – £35,000,000)
being 25,000,000 ordinary shares of £1 (2016 – 25,000,000) and
10,000,000 non-voting convertible preference shares of £1 each
(2016 – 10,000,000). The rights attaching to the shares will be
explained in more detail in the notes to the 2017 Annual Report and
Accounts, but remain unchanged from those published in the 2016
Annual Report and Accounts.
Directors’ responsibility
statement
The directors are responsible for preparing the financial
statements in accordance with applicable law and regulations. The
directors confirm that to the best of their knowledge the financial
statements prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets,
liabilities, financial position and the (loss)/profit of the
company and that the Chairman’s Statement, Managing Director's
Report and the Directors’ report include a fair review of the
information required by rules 4.1.8R to 4.2.11R of the FSA’s
Disclosure and Transparency Rules, together with a description of
the principal risks and uncertainties that the company faces.
Annual General Meeting
This year’s Annual General Meeting has been convened for
Wednesday 27 June 2018 at
12.15pm at Wessex House, 1 Chesham
Street, London SW1X 8ND.