RNS Number:6561K
Royal London UK Eqty&Income Tst PLC
01 May 2003
ROYAL LONDON UK EQUITY & INCOME TRUST PLC
Preliminary Announcement of unaudited interim results for the half year ended 28
February 2003
Chairman's Statement
I regret to have to report that the last six months have again been particularly
difficult for investors. Equity markets world-wide have been both weak and
volatile and whilst your Company's equity portfolio has performed relatively
well against its benchmark, this is of little comfort to shareholders who have
seen absolute falls reducing total resources from #124.4 million to #86.3
million, although #20 million is accounted for by repayment of debt.
The background against which the Company has been operating during the six
months under review has been one of continuing deterioration in the economic
environment throughout the world.
In the United States the improvement in corporate profitability has been used to
repay debt, but there are few signs of a meaningful recovery in business
sentiment. Expectations of growth for Europe are still declining, with the
German economy in particular suffering from the effects of weak global trends
and the subdued nature of capital expenditure in the United States. In the
United Kingdom economic data has been relatively poor recently and the signs are
that trading conditions are likely to remain tough, particularly for the
manufacturing sectors.
It looks as though base rates will remain at, or around, current levels for some
time. In addition to these economic factors, world markets have had to cope with
the threat, and ultimate reality, of war with Iraq.
Against this background, the Company's equities have performed satisfactorily -
the portfolio being biased towards the more defensive higher yielding stocks,
which have performed best in an uncertain and volatile market. The best
performing sectors include mining, telecommunications, pharmaceuticals,
utilities and tobacco. Exposure to the more cyclical areas of the markets was
limited with, for example, a significant underweight position in media.
The bond portfolio had a rather mixed six months, but benefited from a
substantial weighting in high yielding secured debt. The overall yield on the
bond portfolio is approximately three percentage points above gilt yields.
The income portfolio continued to perform poorly. Many of these investments are
now trading at negligible value, reflecting the impact of the severe falls in
the equity market exacerbated by the high level of structural gearing within the
funds. The overall exposure to highly geared investment companies has now fallen
to under 5% and it is not envisaged that there will be a quick recovery in
values.
The structure of your Company has not changed greatly since I last wrote to you
in November, with bank debt remaining at #50 million. Your Board is still unable
to declare or pay dividends due to your Company's inability to meet the
requirements of Section 265 of the Companies Act 1985. The zero dividend
preference ('ZDP') share buy-back has continued, although on a reduced level
recently, due to weak markets and bank covenant restrictions. At the time of
writing, 6,575,900 ZDP shares have been purchased for cancellation, enhancing
the Group's net asset values by #3,426,000.
Against this background the Group's total assets, less current liabilities, fell
30.6% during the period under review.
#'000
NAV attributable to ordinary shareholders nil
NAV attributable to annuity shareholders 21,106
NAV attributable to ZDP shareholders 15,168
At 28 February 2003 the breakdown of the Group's assets was as follows:
Market Value
#'000 %
UK Equity Portfolio 53,982 62.6
Income Portfolio 3,834 4.4
UK Bond Portfolio 26,477 30.7
Cash (Net Liquidity) 1,981 2.3
86,274 100.0
Whilst the outlook for the markets continues to be very uncertain, and
volatility remains very high, your Manager favours UK equities as an asset class
as they offer comparatively modest valuations and good earning potential. Your
Board agrees with this view, reflected in your Company's asset allocation, and
whilst we are disappointed with recent returns, your Board continues to be fully
supportive of your Manager's efforts, and hopes that your Company will be in a
position to benefit from an upturn in the markets in which it is invested.
Jonathan Carr
Chairman
1 May 2003
Consolidated Statement of Total Return (unaudited)
(incorporating the revenue account)
for the half year ended 28 February 2003
(Unaudited) (Unaudited) (Audited)
Notes Half year ended Period from 31 August 2001 Period from 31 August 2001
28 February 2003 To 28 February 2002 to 31 August 2002
Revenue Capital Total Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Losses from - (13,223) (13,223) - (15,870) (15,870) - (60,816) (60,816)
investments
Income from 2,424 - 2,424 5,834 - 5,834 10,753 - 10,753
fixed asset
investments
Other 52 - 52 347 - 347 408 - 408
interest -------- ------- -------- -------- ------- ------- -------- -------- --------
receivable
and similar
income
Gross revenue 2,476 (13,223) (10,747) 6,181 (15,870) (9,689) 11,161 (60,816) (49,655)
and capital
losses
Management fee (208) (312) (520) (405) (608) (1,013) (738) (1,108) (1,846)
Other (186) - (186) (159) - (159) (372) - (372)
administrative ------- ------- ------- ------- ------- ------- -------- -------- --------
expenses
Net 2,082 (13,535) (11,453) 5,617 (16,478) (10,861) 10,051 (61,924) (51,873)
return/(loss)
on ordinary
activities
before
interest
payable and
taxation
Interest (1,120) (1,680) (2,800) (922) (1,382) (2,304) (2,120) (3,179) (5,299)
payable ------- ------- ------- ------- ------- ------- ------- ------- -------
Net 962 (15,215) (14,253) 4,695 (17,860) (13,165) 7,931 (65,103) (57,172)
return/(loss)
on ordinary
activities
before
taxation
Taxation on - - - (716) 590 (126) (919) 919 -
net ------- ------- ------- ------- ------- ------- ------- ------- -------
return/(loss)
on ordinary
activities
Net 962 (15,215) (14,253) 3,979 (17,270) (13,291) 7,012 (64,184) (57,172)
return/(loss)
on ordinary
activities
after taxation
Dividends and
other
appropriations:
Minority - (741) (741) - (782) (782) - (1,679) (1,679)
interest:
provision for
ZDP shares
(in
subsidiary)
Gain on - 3,426 3,426 - - - - - -
redemption of
ZDP shares
Dividends on
annuity
shares:
First interim - - - (537) - (537) (537) - (537)
2002: 1.79p
Second - - - (638) - (638) (638) - (638)
interim 2002:
2.125p
Appropriation (1,275) - (1,275) - - - (1,375) - (1,375)
of dividend -------- -------- -------- -------- -------- -------- -------- -------- --------
attributable
to annuity
shareholders
(1,275) 2,685 1,410 (1,175) (782) (1,957) (2,550) (1,679) (4,229)
-------- -------- ------- ------- -------- -------- -------- -------- --------
Net (313) (12,530) (12,843) 2,804 (18,052) (15,248) 4,462 (65,863) (61,401)
(loss)/return
and capital
loss
attributable
to ordinary
shares
Dividends on
ordinary
shares:
First Interim - - - (1,400) - (1,400) (1,400) - (1,400)
2002: 2.0p
Second - - - (1,400) - (1,400) (1,400) - (1,400)
interim 2002: ------- ------- ------- ------- ------- ------- ------- ------- -------
2.0p
- - - (2,800) - (2,800) (2,800) - (2,800)
------- ------- ------- ------- ------- ------- ------- ------- -------
Transfer (313) (12,530) (12,843) 4 (18,052) (18,048) 1,662 (65,863) (64,201)
(from)/to ====== ====== ====== ====== ====== ====== ====== ====== ======
reserves
(Loss)/return
per share
(FRS 4 basis):
Ordinary 1 (0.45p) (17.90p) (18.35p) 4.01p (25.79p) (21.78p) 6.37p (94.09p) (87.72p)
ZDP (in 1 - 4.59p 4.59p - 3.91p 3.91p - 8.40p 8.40p
subsidiary)
Annuity 1 4.25p - 4.25p 3.92p - 3.92p 8.50p - 8.50p
The revenue column of this statement represents the revenue account of the Group.
Consolidated Balance Sheet (unaudited)
at 28 February 2003
(Unaudited) (Unaudited) (Audited)
28 February 2003 28 February 2002 31 August 2002
Notes #'000 #'000 #'000
Fixed asset investments
Listed investments 84,293 178,402 112,751
------------ ------------ ------------
Current assets
Debtors 863 2,492 1,365
Cash at bank and short term deposits 2,041 2,219 12,105
------------ ------------ ------------
2,904 4,711 13,470
Creditors: amounts falling due within one year (923) (4,879) (1,868)
------------ ------------ ------------
Net current assets/(liabilities) 1,981 (168) 11,602
------------ ------------ ------------
Total assets less current liabilities 86,274 178,234 124,353
Creditors: amounts falling due after more than one
year
Bank loan (50,000) (80,000) (70,000)
------------ ------------ ------------
Total net assets 36,274 98,234 54,353
======= ======= =======
Share capital and reserves
Called up share capital 1,000 1,000 1,000
Share premium 94,500 94,500 94,500
Capital reserve - realised (8,253) (773) (4,583)
Capital reserve - unrealised (70,140) (17,279) (61,280)
Revenue reserve 3,999 4 3,037
------------ ------------ ------------
Total shareholders' funds 21,106 77,452 32,674
Minority interest - ZDP shares 15,168 20,782 21,679
------------ ------------ ------------
Shareholders' funds 36,274 98,234 54,353
======= ======= =======
Attributable on an Articles basis:
Annuity shares - Non-equity 21,106 22,500 23,875
Ordinary shares - Equity - 54,952 8,799
------------ ------------ ------------
Total 21,106 77,452 32,674
======= ======= =======
Net asset value per share on an Articles basis:
Annuity - Non-equity 2 70.35p 75.00p 79.58p
Ordinary - Equity 2 - 78.50p 12.57p
ZDP (in subsidiary) 2 112.99p 103.91p 108.40p
Attributable on an FRS 4 basis:
Annuity shares - Non-equity 25,150 22,500 23,875
Ordinary shares - Equity (4,044) 54,952 8,799
------------ ------------ ------------
Total 21,106 77,452 32,764
======= ======= =======
Net asset value per share on an FRS 4 basis:
Annuity - Non-equity 2 83.83p 75.00p 79.58p
Ordinary - Equity 2 (5.78p) 78.50p 12.57p
ZDP (in subsidiary) 2 112.99p 103.91p 108.40p
Approved by the Board of Directors on 1 May 2003
Jonathan Carr
Chairman
Consolidated Cash Flow Statement (unaudited)
for the half year ended 28 February 2003
(Unaudited) (Unaudited) (Audited)
Half year ended Period from 31 August 2001 Period from 31 August 2001 to
28 February 2003 to 28 February 2002 31 August 2002
Notes #'000 #'000 #'000 #'000 #'000 #'000
Net cash inflow 2,110 3,307 7,915
from operating
activities
Servicing of
finance
Interest paid (3,140) (1,104) (4,211)
Dividend on - ------------- (537) ------------- (1,175) --------------
non-equity shares ------------- ------------- - --------------
(3,140) (1,641) (5,386)
------------- ------------- --------------
Financial
Investment
Acquisition of (10,007) (306,013) (326,140)
investments
Sale of 25,242 ------------- 111,580 ------------- 152,573 --------------
investments ------------- ------------- - --------------
Net cash 15,235 (194,433) (173,567)
inflow/(outflow) ------------- ------------- --------------
from financial
investment
Equity dividends - (1,400) (2,800)
paid ------------ ------------ ------------
Net cash 14,205 (194,167) (173,838)
inflow/(outflow)
before financing
Financing
Gross proceeds - 100,000 100,000
from issue of
ordinary and
annuity shares
Purchase of ZDP (3,826) -
shares in
subsidiary
Gross proceeds - 20,000 20,000
from issue of ZDP
shares by
subsidiary
Issue expenses (443) (3,614) (4,057)
paid in respect
of share issues
Loan draw down - 80,000 80,000
Loan repayment (20,000) ------------- - ------------- (10,000) --------------
------------- ------------- --------------
Net cash (24,269) 196,386 185,943
(outflow)/inflow ------------- ------------- --------------
from financing
(Decrease)/increase (10,064) 2,219 12,105
in cash ======== ======== ========
Reconciliation of
net cash
inflow/(outflow)
to movement in
net debt
(Decrease)/increase (10,064) 2,219 12,105
in cash as above
Net cash 20,000 (80,000) (70,000)
outflow/(inflow)
from loans
Net debt at (57,895) - -
beginning of the ======== ======== ========
period
Net debt at end (47,959) (77,781) (57,895)
of the period ======== ======== ========
NOTES TO THE ACCOUNTS
1. (Loss)/return per share
The revenue loss per ordinary share is based on the net revenue loss for the
half year ended 28 February 2003 of #313,000 (period ended 28 February 2002:
gains #2,804,000; period ended 31 August 2002: #4,462,000) and on 70,000,000
ordinary shares (period ended 28 February 2002 and period ended 31 August 2002:
70,000,000), being the weighted average number of ordinary shares in issue
during the half year ended 28 February 2003.
The capital loss per ordinary share is based on the net capital losses, after
deduction of appropriations attributable to Zero Dividend Preference ('ZDP')
shares, of #12,530,000 (period ended 28 February 2002: #18,052,000; period ended
31 August 2002: #65,863,000) and on 70,000,000 ordinary shares (period ended 28
February 2002 and period ended 31 August 2002: 70,000,000), being the weighted
average number of ordinary shares in issue during the half year ended 28
February 2003.
The capital return per ZDP share in the subsidiary is based on appropriations of
#741,000 (period ended 28 February 2002: #782,000; period ended 31 August 2002:
#1,679,000), and on 16,146,622 ZDP shares (period ended 28 February 2002; period
ended 31 August 2002: 20,000,000), being the weighted average number of ZDP
shares in issue during the half year ended 28 February 2003.
The revenue return per annuity share is based on appropriations of #1,275,000
(period ended 28 February 2002: #1,175,000; period ended 31 August 2002:
#2,550,000) and on 30,000,000 (period ended 28 February 2002 and period ended 31
August 2002: 30,000,000) annuity shares, being the weighted average number of
annuity shares in issue during the half year ended 28 February 2003.
2. Net asset value per share on an Articles basis
The net asset value per annuity share is based on net annuity shareholders'
funds of #21,106,000 (28 February 2002: #22,500,000; 31 August 2002:
#23,875,000) and on 30,000,000 annuity shares being the number of annuity shares
in issue at the end of each period.
The net asset value per ordinary share is based on net ordinary shareholders'
funds of #nil (28 February 2002: #54,952,000; 31 August 2002: #8,799,000) and on
70,000,000 ordinary shares, being the number of ordinary shares in issue at the
end of each period.
The net asset value per ZDP share is based on net ZDP shareholders' funds of
#15,168,000 (28 February 2002: #20,782,000; 31 August 2002: #21,679,000) and on
13,424,100 (2002: 20,000,000) ZDP shares, being the number of ZDP shares in
issue at 28 February 2003.
Net asset value per share on an FRS 4 basis
The net asset value per annuity share is based on net annuity shareholders'
funds of #25,150,000 (28 February 2002: #22,500,000; 31 August 2002:
#23,875,000) and on 30,000,000 annuity shares, being the number of annuity
shares in issue at the end of each period.
The net asset value per ordinary share is based on negative net ordinary
shareholders' funds of #4,044,000 (28 February 2002: positive net assets of
#54,952,000; 31 August 2002: positive net assets of #8,799,000) and on
70,000,000 ordinary shares, being the number of ordinary shares in issue at the
end of each period.
The net asset value per ZDP share is based on net ZDP shareholders' funds of
#15,168,000 (28 February 2002: #20,782,000; 31 August 2002: #21,679,000) and on
13,424,100 (2002: 20,000,000) ZDP shares, being the number of ZDP shares in
issue at 28 February 2003.
3. 2003 interim accounts
The figures and financial information for the period ended 28 February 2003 do
not constitute statutory accounts under Section 240 of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
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