British &
American Investment Trust PLC |
Annual Financial
Report
for the year ended 31 December 2018 |
Registered number:
00433137 |
Directors |
Registered
office |
David G Seligman
(Chairman) - appointed as Chairman 1 January 2018 |
Wessex House |
Jonathan C Woolf
(Managing Director) |
1 Chesham Street |
Dominic G Dreyfus
(Non-executive and Chairman of the Audit Committee) |
Telephone: 020 7201
3100 |
Ronald G Paterson
(Non-executive) – retired as Director 30 June 2018 |
|
Alex Tamlyn
(Non-executive) - appointed as Director 1 July 2018 |
Registered in
England |
|
No.00433137 |
|
30 April 2019 |
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
2018
|
2018
|
2017
|
|
|
Revenue
return |
Capital
return |
Total |
Revenue
return |
Capital
return |
Total |
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
Profit/(loss) before tax –
realised |
2,489 |
(2,991) |
(502) |
2,210 |
(1,694) |
516 |
Loss before tax – unrealised |
– |
(4,644) |
(4,644) |
– |
(5,249) |
(5,249) |
|
__________ |
__________ |
__________ |
__________ |
__________ |
__________ |
Profit/(loss) before tax –
total |
2,489 |
(7,635) |
(5,146) |
2,210 |
(6,943) |
(4,733) |
|
__________ |
__________ |
__________ |
__________ |
__________ |
__________ |
Earnings per £1 ordinary share –
basic |
8.68p |
(30.54)p |
(21.86)p |
7.58p |
(27.77)p |
(20.19)p |
|
__________ |
__________ |
__________ |
__________ |
__________ |
__________ |
Earnings per £1 ordinary share –
diluted |
7.21p |
(21.81)p |
(14.60)p |
6.41p |
(19.84)p |
(13.43)p |
|
__________ |
_________ |
__________ |
__________ |
_________ |
__________ |
Net assets |
|
|
7,919 |
|
|
15,534 |
|
|
|
__________ |
|
|
__________ |
Net assets per ordinary share |
|
|
|
|
|
|
– deducting preference
shares at par |
|
|
0p |
|
|
22p |
|
|
|
__________ |
|
|
__________ |
– diluted |
|
|
23p |
|
|
44p |
|
|
|
__________ |
|
|
__________ |
Diluted net asset value per ordinary share at 26 April 2019 |
|
|
34p |
|
|
|
|
|
|
__________ |
|
|
|
Dividends declared or
proposed for the period |
|
|
|
|
|
|
per ordinary share |
|
|
|
|
|
|
– interim paid |
|
|
2.7p |
|
|
2.7p |
– final proposed |
|
|
6.0p |
|
|
5.9p |
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 report our results for the year ended 31 December 2018.
Revenue
The return on the revenue account before tax amounted to £2.5
million (2017: £2.2 million), an increase of 13 percent. This
increase was due to higher levels of dividends received from our
subsidiary companies compared to the previous year.
Gross revenues totalled £3.1 million (2017: £2.7 million).
In addition, film income of £92,000 (2017: £101,000) and
property unit trust income of £14,000 (2017: £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 £5.1 million
(2017: £4.7 million loss), which comprised net revenue of
£2.5 million, a realised loss of £2.6 million and an unrealised
loss of £4.6 million. The revenue return per ordinary share was
8.7p (2017: 7.6p) on an undiluted basis and 7.2p (2017: 6.4p)
on a diluted basis.
Net Assets and Performance
Net assets at the year end were £7.9 million (2017: £15.5
million), a decrease of 49.0 percent. This compares to decreases in
the FTSE 100 and All Share indices of 12.5 percent and 13.0
percent, respectively, over the period. On a total return basis,
after adding back dividends paid during the year, our net assets
decreased by 32.9 percent compared to 9.0 percent and 9.5 percent
decreases in the FTSE 100 and All Share indices, respectively.
This very poor end of year result followed the strong and market
out-performing advance in net asset value which we were able to
report at the half year stage of 12.8 percent and was the result of
an unexpected setback in late September in the value of our largest
US investment, Geron Corporation. Although the value of this
investment had risen by 95 percent in the first 6 months of 2018
and by 260 percent towards the end of the third quarter, the very
unexpected decision by Johnson and Johnson on 27th
September to discontinue its clinical trial collaboration with
Geron resulted in a collapse of over 80 percent in Geron’s stock
price over the fourth quarter, and a fall of 44 percent for the
year as a whole. At the time, Johnson and Johnson cited
general portfolio reasons for the discontinuation and not any
perceived problems with the collaboration or the trials. This drop
in Geron’s stock price also coincided with a substantial reversal
in US equity markets in December of 14 percent, which was the
steepest intra-month fall in stock prices since the Great Recession
of 2008.
The circumstances surrounding this unfortunate development and
the outlook are discussed in greater detail in the managing
director’s report below. The shock of the unexpected loss of
Johnson and Johnson as Geron’s collaborator resulted in the
immediate and severe market downgrade in Geron’s value noted above.
However, the efficacy and potential of Geron’s haematological
cancer treatment, Imetelstat, was nevertheless publicly reconfirmed
at the American Society of Haematology (ASH) international
conference some two months later in December, since when the value
of Geron has recovered significantly. Geron is continuing its plans
to initiate Phase 3 clinical trials on its own by mid 2019, having
recently added a number of highly regarded and experienced clinical
trial executives to its team (including the executive at Johnson
and Johnson who had led the collaboration). This should allow the
stock price to consolidate its recovery and hopefully regain the
price levels seen in mid 2018, particularly since Geron now once
again owns 100 percent of the technology having received back
Johnson and Johnson’s 80 percent share. Since the year end,
however, the value of Geron has recovered substantially and has
made strong gains of 91 percent, accounting for the substantial
improvement in the company’s net asset value as at 26 April 2019 shown below.
More generally in 2018, equity markets in the USA and UK made little or no progress overall.
In the USA, a substantial fall of
10 percent at the beginning of the year caused by market reaction
to erratic policy making in international trade and foreign
relations by the White House was gradually reversed over the
following months as investors began to expect a moderation in the
previously expected course of rising US dollar interest rates for
the rest of the year. By mid-year the market regained its opening
year values, which had represented multi-year highs, but from
October declined dramatically again by almost 20 percent to the end
of the year as the continued war of words between the USA and China
on trade policy and damaging trade sanctions between the two
countries began to raise investor concerns about the impact on
global growth levels going forward.
In the UK, the equity market followed the pattern set by the US
market to mid-year, then declined steadily to the year end, falling
12.5 percent in the second half. Market performance was completely
dominated by the ongoing travails of Brexit and the concomitant
movements in sterling. The ongoing lack of progress in negotiations
and the inexorable approach of the exit date of end March 2019 heralding a hard and ‘no deal’ Brexit
began to weigh on levels of corporate investment in the UK,
unnerving investors. By contrast, however, as sterling weakened in
response to these concerns, it provided some support to the market,
as large corporates’ foreign earnings streams became better valued.
The downward trend over this period was therefore punctuated by
periods of stabilisation, but the overall decline to the year end
was maintained with no progress being made on finding a solution to
the most significant political and economic event in the UK’s
history for generations.
Dividend
We are pleased to recommend an increased final dividend of 6.0p
per ordinary share, which together with the interim dividend makes
a total payment for the year of 8.7p (2017: 8.6p) per
ordinary share. This represents an increase of 1.2 percent over the
previous year's total dividend and a yield of 18.3 percent based on
the share price of 47.5p at the end of the year. The final dividend
will be payable on 27 June 2019 to
shareholders on the register at 24 May
2019. 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 once again for the third year
running as one of the 20 investment trusts which have maintained a
consistent 20 year record of increasing dividends.
We have been able to maintain our progressive dividend policy
over these years and particularly in recent years through an active
programme of targeted investment at opportune times in higher
yielding but mainstream investments together with the realisation
of capital profits through our group subsidiary companies.
When such profits are realised in these companies they can be paid
out to our shareholders in dividends, as was the case this past
year for example, when we were able to realise profits on part of
our holdings in Geron Corporation when its stock price rose
substantially over the first three quarters of 2018. However,
following the severe decline in Geron’s stock price in the last
quarter of 2018, the continued availability of profits from this
source will be constrained unless the stock price returns to the
levels seen in the earlier part of 2018. Without this, it is
unlikely that we will be able to maintain our progressive dividend
policy going forward.
Outlook
The multiple economic and political uncertainties which
currently present themselves would normally presage deep concerns
for investors generally. However, although markets have now
been showing considerably higher levels of volatility than in
recent years, as already noted, they remain at around historically
high levels and do not for the time being appear to show an
appetite for a sustained retrenchment into bear market
territory. This is likely to be the result of the continued
overhang of the unprecedented monetary easing programmes of prior
years and more recently some early and possibly
politically-motivated policy modulations by the Federal Reserve and
other central banks to address the slowdown in global growth which
was beginning to be seen in 2018. Time will tell whether such
monetary interventions or the forces of politics in fiscal and
trade policy will have a greater effect on sustaining current and
future levels of economic growth in the world. For the time
being, however, and despite the headwinds of trade wars and Brexit,
markets appear to have found a level with which they seem to be
relatively comfortable.
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 26 April 2019, our net
assets had increased to £11.8 million, an increase of 49.3 percent
since the beginning of the calendar year due principally to the
91.0 percent increase in the share price of Geron Corporation over
this period. This is equivalent to 7.3
pence per share (prior charges deducted at par) and
33.8 pence per share on a diluted
basis. Over the same period the FTSE 100 increased 10.4 percent and
the All Share Index increased 10.8 percent.
David Seligman
30 April 2019
Managing Director's report
In 2018, our portfolio value was substantially affected by large
positive and negative movements in the stock price of our largest
investment, Geron Corporation. At the half year, we were able to
report an increase in our NAV of 12.8 percent, outperforming the
market by over 20 percent on a total return basis. This was largely
due to the 91 percent increase in Geron’s stock price over that
period. Geron’s price then continued to increase to the end of
September by a further 80 percent. However, on 27th
September Geron’s price dropped substantially for the reasons
detailed below and the value of our portfolio dropped by over 60
percent in the final quarter, resulting in significant end of year
underperformance, as already noted above. This drop in the fourth
quarter was exacerbated by a sharp fall in US and UK equity markets
generally over the same period of 20 percent and 14 percent,
respectively, and particularly in December when the US market
experienced its largest one month fall for over ten years. Our
other substantial US investments were therefore also affected by
this last quarter movement in stock prices, contributing further to
the decline in our portfolio valuation.
In the second half of 2018, it seemed as though the ten year
bull market in US equities might reassert itself after a more
volatile first half which had included at least two instances of
technical correction. Despite the political headwinds emanating
from the USA already noted above,
economic strength and corporate profitability in the USA was persisting, buoyed along by the tax
cuts of the previous year. For this reason, the Federal Reserve had
mapped out a course of gradually increasing interest rates for 2018
which was generally being well digested by the market.
However, as the year developed and progress in resolving the
US/China trade dispute remained
stalled, real economic consequences began to be shown through lower
levels of growth in China, an
increased trade deficit in the USA
and signs of lower levels of corporate investment. This sapped
investor confidence in the fourth quarter resulting in the large
market sell-off in the final three months.
At the same time in the UK, no signs of a conclusion to the
Brexit process was evident despite the looming approach of the
29th March 2019 exit
deadline. Corporates were forced therefore to take contingency
measures involving changes to their HQ or operational locations and
emergency stock ordering programmes to guard against the disruption
to their operations presented by a potential disorderly Brexit. The
Government’s own contingency preparations also attracted sustained
criticism for inadequacies for example arrangements by the NHS to
ensure adequate supplies of essential medicines or the availability
of additional cross-Channel ferry freight operations. As the
atmosphere of uncertainty increased during 2018, it transferred to
the investment process generally in the UK, with corporates
restraining their investment plans until a higher level of
visibility was evident, the residential property market growing at
its slowest rate for 6 years, in fact recording negative real
annual growth for the first time since 2012, and financial
investors showing little appetite for equities. The pound sterling
was also under pressure at times when the path of the Brexit
negotiations and the associated political dynamic indicated that
the chances of a disorderly Brexit were becoming more likely. In
the last few weeks, the previous March deadline has been extended
by up to a further seven months, and the immediate pressure on
corporates and politicians alike has been relieved with the
likelihood of a disorderly Brexit now reduced. However, until a
majority is able to be found in Parliament on a way forward, the
basic questions surrounding the UK’s relationship with its main
trading partner will remain, prolonging the uncertainties for
business and exposing the currently fractured and dysfunctional
parliamentary setup.
While these significant political and macro-economic
uncertainties persist, our main focus remains 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.
Geron Corporation
As reported in detail in last year’s interim report, Geron’s
stock price increased substantially during the first part of 2018
to its highest level for over 10 years, resulting in a fourfold
increase in its market capitalisation from $320 million to over $1.2
billion. This was a function of favourable clinical trial
results news and a strong expectation in the market that Johnson
and Johnson would confirm by the fourth quarter the continuation of
their four year collaboration with Geron to take their jointly
owned oncology drug, Imetelstat, through the final clinical trial
stage and on to approval and marketing. This decision point was to
be the catalyst for the payment of future milestones of almost
$1 billion to Geron plus substantial
future royalty payments based on the drug’s revenues.
Numerous indications of a positive continuation decision in the
months leading up to the decision were evident from a number of
sources. These included the acceleration by Johnson and Johnson
earlier in the year of the decision date, positive interim clinical
trial results published in early 2018, inclusion of Imetelstat as
Johnson and Johnson’s leading oncology drug candidate for approval
in 2020 in their corporate review in August 2018, inclusion of Imetelstat on Johnson
and Johnson’s list of compassionate use drugs, and numerous job
postings by Johnson and Johnson worldwide for executives to work on
pricing/marketing strategy for its Myelodysplastic Syndrome (MDS)
product pipeline (Imetelstat being its only such candidate
drug).
The wholly unexpected decision by Johnson and Johnson on
27th September not to continue the collaboration for
general portfolio reasons and with no explanation of substance
being given at the time not surprisingly resulted in a large-scale
sell off of the stock and a precipitous fall in the stock price.
Without any confirmation, either from Johnson and Johnson or Geron,
of the continued reliability of Imetelstat’s previously published
results and its continued viability, market confidence in
Imetelstat was badly shaken.
Geron’s management had felt unable to provide even minimal
confirmation of this at the time as the company was subject to an
information embargo related to a number of important presentations
due to be given at the prestigious American Society of
Haematology (ASH) conference some weeks later in early
December. They were, however, able to announce that Geron intended
to take the MDS trials forward themselves into the already planned
Phase 3 phase by mid-2019.
At the ASH conference, the reports by the leading clinical trial
investigators on Imetelstat’s efficacy in treating patients with
MDS and MF were even better than expected, showing never before
seen improvements in blood transfusion independence and overall
survival in these two diseases. The results showed that
Imetelstat outperformed the current standard of care in the
selected patient populations who rely on the drugs Jaka? in
MF and Revlimid in MDS, which represent multi-billion dollar
markets for their owners. Imetelstat was also shown to outperform
another new drug in MDS, Luspatercept, for which Celgene is
currently completing Phase 3 trials. In early 2019, Celgene
which also owns Revlimid received a takeover bid from Bristol-Myers
Squibb valued at $75 billion,
indicating the value levels placed on drugs which can stabilise if
not cure MDS, an ultimately fatal haematological cancer with a 3 to
5 year life expectancy on currently available drugs.
Geron’s stock price remained weak through to the beginning of
December awaiting clarity from the ASH presentations, with the
stock trading only just above Geron’s cash value of $185 million, thus effectively valuing the
Imetelstat platform at close to zero. However, despite the
excellent trial results announced at ASH, the value of Geron did
not improve materially into the New Year and in fact reached a low
around the Christmas week, accounting for the weakness in our
portfolio value at the year end. The shock of Johnson and Johnson’s
unexpected decision and mistrust of management’s ability to take
the drug forward into the planned Phase 3 trials alone was
sufficient to damage confidence in the stock despite it having the
funding to do so.
However, in February, Geron began to announce a series of
important initiatives to underpin its plans to take Imetelstat
forward into the Phase 3 trials this summer. It included the hiring
of a number of highly experienced clinical trial executives,
including the executive who until last September had led
Imetelstat’s clinical trials at Johnson and Johnson which had
produced such impressive results at ASH in December. A world
leading Contract Research Organisation (CRO) was also engaged to
manage the regulatory and administrative aspects of the trial.
These moves gave the market some confidence in Geron’s ability
to deliver on Imetelstat’s clear potential by taking the drug
through the final trial on to eventual approval and
commercialisation. As a result, Geron’s stock price has recovered
by over 90 percent since the beginning of the year.
Over the past year, our investment in Geron has proved to be
even more volatile than usual, in both positive and negative
senses. We nevertheless remain committed to this investment in
which we continue to expect major upside potential in the near
future. Geron now owns 100 percent of Imetelstat again with the 80
percent share previously transferred to Johnson and Johnson being
returned to it as a result of the ending of the partnership last
year. This being the case, there would seem to be no reason
why on valuation grounds the stock price of Geron should not return
to at least those levels seen last year when the market was looking
forward to positive final Phase 2 trial results, which have since
been more than confirmed, and the anticipation of progress into
Phase 3 and eventual approval and commercialisation. We also
believe that given the circumstances of last year’s discontinuation
of the collaboration with Johnson and Johnson, the excellent Phase
2 trial results announced since then and the imminent commencement
of Phase 3 trials, Geron should present an attractive and valuable
target to other major pharmaceutical companies looking to
consolidate or establish a position in the treatment of
haematologic malignancies by acquiring or partnering with Geron’s
drug, Imetelstat, which is demonstrating results superior to other
drugs currently or expected on the market.
Jonathan Woolf
30 April 2019
Income statement
For the year ended 31 December
2018
|
2018
|
2017
|
|
Revenue
return |
Capital
return |
Total |
Revenue
return |
Capital
return |
Total |
|
£ 000 |
£ 000 |
£ 000 |
£ 000 |
£ 000 |
£ 000 |
Investment income
(note 2) |
3,056 |
- |
3,056 |
2,732 |
- |
2,732 |
Holding losses on
investments at fair value through profit or loss |
- |
(4,644) |
(4,644) |
- |
(5,249) |
(5,249) |
Losses on disposal of
investments at fair value through profit or loss* |
- |
(2,647) |
(2,647) |
- |
(1,442) |
(1,442) |
Foreign exchange
(losses)/gains |
(61) |
(62) |
(123) |
53 |
53 |
106 |
Expenses |
(457) |
(237) |
(694) |
(526) |
(272) |
(798) |
|
________ |
________ |
________ |
________ |
________ |
________ |
Profit/(loss) before finance
costs and tax |
2,538 |
(7,590) |
(5,052) |
2,259 |
(6,910) |
(4,651) |
Finance costs |
(49) |
(45) |
(94) |
(49) |
(33) |
(82) |
|
________ |
________ |
________ |
________ |
________ |
________ |
Profit/(loss) before tax |
2,489 |
(7,635) |
(5,146) |
2,210 |
(6,943) |
(4,733) |
Tax |
31 |
- |
31 |
35 |
- |
35 |
|
________ |
________ |
________ |
________ |
________ |
________ |
Profit/(loss) for the
year |
2,520 |
(7,635) |
(5,115) |
2,245 |
(6,943) |
(4,698) |
|
________ |
________ |
________ |
________ |
________ |
________ |
Earnings per share |
|
|
|
|
|
|
Basic – ordinary shares |
8.68p |
(30.54)p |
(21.86)p |
7.58p |
(27.77)p |
(20.19)p |
|
________ |
________ |
________ |
________ |
________ |
________ |
Diluted – ordinary shares |
7.20p |
(21.81)p |
(14.61)p |
6.41p |
(19.84)p |
(13.43)p |
|
________ |
________ |
________ |
________ |
________ |
________ |
The company does not have any income or expense that is not
included in the profit/(loss) for the year. Accordingly, the
‘Profit/(loss) for the year’ is also the ‘Total Comprehensive
Income for the year’ 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.
*Losses on disposal of investments at fair value through profit
or loss include Losses on sales of £917,000 (2017 – £1,208,000
losses) and Losses on provision for liabilities and charges of
£1,730,000 (2017 – £234,000 losses).
Statement of changes in equity
For the year ended 31 December
2018
|
|
Share
capital |
Capital
reserve
|
Retained
earnings |
Total
|
|
|
£ 000 |
£ 000 |
£ 000 |
£ 000 |
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 |
Changes in equity for
2018 |
|
|
|
|
|
Profit/(loss) for the period |
|
- |
(7,635) |
2,520 |
(5,115) |
Ordinary dividend paid (note 4) |
|
- |
- |
(2,150) |
(2,150) |
Preference dividend paid (note
4) |
|
- |
- |
(350) |
(350) |
|
|
________ |
________ |
________ |
________ |
Balance at 31 December
2018 |
|
35,000 |
(28,802) |
1,721 |
7,919 |
|
|
________ |
________ |
________ |
________ |
Registered number: 00433137
Balance Sheet
At 31 December 2018
|
|
2018 |
2017 |
|
|
|
|
|
|
£ 000 |
£ 000 |
Non-current assets |
|
|
|
Investments - fair value through
profit or loss |
|
8,722 |
15,565 |
Subsidiaries - fair value through
profit or loss |
|
5,269 |
5,277 |
|
|
__________ |
__________ |
Current assets |
|
13,991 |
20,842 |
Receivables |
|
3,417 |
2,399 |
Cash and cash
equivalents |
|
244 |
2,213 |
|
|
__________ |
__________ |
|
|
3,661 |
4,612 |
|
|
__________ |
__________ |
Total assets |
|
17,652 |
25,454 |
|
|
__________ |
__________ |
Current liabilities |
|
|
|
Trade and other payables |
|
547 |
1,010 |
Bank loan |
|
2,790 |
4,244 |
|
|
__________ |
__________ |
|
|
(3,337) |
(5,254) |
|
|
__________ |
__________ |
|
|
|
|
Total assets less current
liabilities |
|
14,315 |
20,200 |
|
|
__________ |
__________ |
|
|
|
|
Non - current
liabilities |
|
(6,396) |
(4,666) |
|
|
__________ |
__________ |
Net assets |
|
7,919 |
15,534 |
|
|
__________ |
__________ |
Equity attributable to equity
holders |
|
|
|
Ordinary share capital |
|
25,000 |
25,000 |
Convertible preference share
capital |
|
10,000 |
10,000 |
Capital reserve |
|
(28,802) |
(21,167) |
Retained revenue earnings |
|
1,721 |
1,701 |
|
|
__________ |
__________ |
Total equity |
|
7,919 |
15,534 |
|
|
__________ |
__________ |
Approved: 30
April 2019
Cash flow statement
For the year ended 31 December
2018
|
|
Year
ended 2018 |
Year
ended 2017 |
|
|
£ 000 |
£ 000 |
Cash flows from operating
activities |
|
|
|
Loss before tax |
|
(5,146) |
(4,733) |
Adjustments for: |
|
|
|
Losses on
investments |
|
7,291 |
6,691 |
Dividends in
specie |
|
(290) |
- |
Proceeds on disposal of
investments at fair value through profit and loss |
|
13,635 |
13,867 |
Purchases of
investments at fair value through profit and loss |
|
(12,335) |
(11,570) |
Finance costs |
|
94 |
82 |
|
|
__________ |
__________ |
Operating cash flows before
movements in working capital |
|
3,249 |
4,337 |
Increase in
receivables |
|
(712) |
(780) |
(Decrease)/increase in
payables |
|
(773) |
4 |
|
|
__________ |
__________ |
Net cash from operating
activities before interest |
|
1,764 |
3,561 |
Interest paid |
|
(90) |
(75) |
|
|
__________ |
__________ |
Net cash from operating
activities |
|
1,674 |
3,486 |
Cash flows from financing
activities |
|
|
|
Dividends paid on ordinary
shares |
|
(1,839) |
(2,100) |
Dividends paid on preference
shares |
|
(350) |
(350) |
Bank loan |
|
(1,454) |
754 |
|
|
__________ |
__________ |
Net cash used in financing
activities |
|
(3,643) |
(1,696) |
|
|
__________ |
__________ |
Net (decrease)/increase in cash
and cash equivalents |
|
(1,969) |
1,790 |
Cash and cash equivalents at
beginning of year |
|
2,213 |
423 |
|
|
__________ |
__________ |
Cash and cash equivalents at end
of year |
|
244 |
2,213 |
|
|
__________ |
__________ |
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 2018. 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 2018 is an extract from the statutory accounts to
that date. Statutory company accounts for 2017, which were prepared
under IFRS as adopted by the EU, have been delivered to the
registrar of companies and company statutory accounts for 2018,
prepared under IFRS as adopted by the EU, will be delivered in due
course.
The auditors have reported on the 31
December 2018 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
|
|
|
2018 |
2017 |
|
|
|
£ 000 |
£ 000 |
Income from
investments |
|
|
|
|
|
|
|
|
|
UK dividends |
|
|
1,180 |
2,260 |
Overseas dividends |
|
|
92 |
44 |
Scrip and in specie
dividends |
|
|
290 |
- |
Dividend from
subsidiary |
|
|
1,445 |
400 |
Interest on fixed income
securities |
|
|
1 |
3 |
|
|
|
__________ |
__________ |
|
|
|
3,008 |
2,707 |
|
|
|
|
|
__________ |
__________ |
|
|
|
|
|
Other income |
|
|
48 |
25 |
|
|
|
|
|
__________ |
__________ |
Total income |
|
|
3,056 |
2,732 |
|
|
|
|
|
__________ |
__________ |
|
|
|
|
|
Total income
comprises: |
|
|
|
|
|
|
|
|
|
Dividends |
|
|
3,007 |
2,704 |
Interest |
|
|
1 |
3 |
Other interest |
|
|
48 |
25 |
|
|
|
__________ |
__________ |
|
|
|
3,056 |
2,732 |
|
|
|
|
|
__________ |
__________ |
Dividends from
investments |
|
|
|
|
|
|
|
|
|
Listed investments |
|
|
1,562 |
2,304 |
Unlisted
investments |
|
|
1,445 |
400 |
|
|
|
__________ |
__________ |
|
|
|
3,007 |
2,704 |
|
|
|
|
|
__________ |
__________ |
Of the £3,007,000 (2017 – £2,704,000) dividends received,
£997,000 (2017 – £1,891,000) related to special and other dividends
received from investee companies that were bought after the
dividend announcement. There was a corresponding capital loss of
£1,007,000 (2017 – £1,949,000), 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
£92,000 (2017 – £101,000) received by the subsidiary British and
American Films Limited and property unit trust income of £14,000
(2017 – £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:
|
2018 |
2017 |
|
Revenue
return
|
Capital
return |
Total |
Revenue
return
|
Capital
return |
Total |
|
£ 000 |
£ 000 |
£ 000 |
£ 000 |
£ 000 |
£ 000 |
Earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
2,170 |
(7,635) |
(5,465) |
1,895 |
(6,943) |
(5,048) |
Preference dividend |
350 |
- |
350 |
350 |
- |
350 |
|
__________ |
__________ |
__________ |
__________ |
__________ |
__________ |
Diluted |
2,520 |
(7,635) |
(5,115) |
2,245 |
(6,943) |
(4,698) |
|
__________ |
__________ |
__________ |
__________ |
__________ |
__________ |
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 (2017: 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 (2017: 35 million) ordinary and preference shares in
issue.
4 Dividends
|
2018 |
2017 |
|
£ 000 |
£ 000 |
Amounts recognised as distributions
to equity holders in the period: |
|
|
Dividends on ordinary shares: |
|
|
Final dividend for the year ended 31
December 2017 of 5.9p (2016:5.7p) per share |
1,475 |
1,425 |
Interim dividend for the year ended
31 December 2018 of 2.7p
(2017:2.7p) per share |
675 |
675 |
|
|
|
|
__________ |
__________ |
|
2,150 |
2,100 |
|
__________ |
__________ |
Proposed final dividend for the year
ended 31 December 2018 of 6.0p (2017:5.9p) per share |
1,500 |
1,475 |
|
__________ |
__________ |
|
|
|
Dividends on 3.5% cumulative
convertible preference shares: |
|
|
Preference dividend for the 6 months
ended 31 December 2017 of 1.75p (2016:1.75p) per share |
175 |
175 |
Preference dividend for the 6 months
ended 30 June 2018 of 1.75p (2017:1.75p) per share |
175 |
175 |
|
__________ |
__________ |
|
350 |
350 |
|
__________ |
__________ |
Proposed preference dividend for the
6 months ended 31 December 2018 of 1.75p (2017:1.75p) 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 |
|
|
|
2018 |
2017 |
|
£ 000 |
£ 000 |
Dividends on ordinary shares: |
|
|
Interim dividend for the year ended
31 December 2018 of 2.7p (2017:2.7p) per share |
675 |
675 |
|
|
|
Proposed final dividend for the year
ended 31 December 2018 of 6.0p (2017:5.9p) per share |
1,500 |
1,475 |
|
__________ |
__________ |
|
2,175 |
2,150 |
|
__________ |
__________ |
Dividends on 3.5% cumulative
convertible preference shares: |
|
|
Preference dividend for the year
ended 31 December 2018 of 1.75p (2017:1.75p) per share |
175 |
175 |
Proposed preference dividend for the
year ended 31 December 2018 of 1.75p (2017:1.75p) per share |
175 |
175 |
|
__________ |
__________ |
|
350 |
350 |
|
__________ |
__________ |
5 Net asset values
|
|
Net
asset
value per share |
|
|
Net
asset
attributable |
|
2018 |
2017 |
|
2018 |
2017 |
|
£ |
£ |
|
£
000 |
£
000 |
Ordinary shares |
|
|
|
|
|
Undiluted |
- |
0.22 |
|
- |
5,534 |
Diluted |
0.23 |
0.44 |
|
7,919 |
15,534 |
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 2018 Annual Report and Accounts, but remain unchanged
from those published in the 2017 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 entered into the investment
transactions to sell stock for £346,709 (2017 - £nil) to Second
BritAm Investments Limited and for £2,472 (2017 - £nil) to BritAm
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 (2017 – £35,000,000)
being 25,000,000 ordinary shares of £1 (2017 – 25,000,000) and
10,000,000 non-voting convertible preference shares of £1 each
(2017 – 10,000,000). The rights attaching to the shares will be
explained in more detail in the notes to the 2018 Annual Report and
Accounts, but remain unchanged from those published in the 2017
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 26 June 2019 at
12.15pm at Wessex House, 1 Chesham
Street, London SW1X 8ND.