TIDMARR
RNS Number : 0097E
Aurora Investment Trust PLC
30 October 2015
AURORA INVESTMENT TRUST plc
Half Yearly Financial Report
For the six months ended 31 August 2015
Investment Policy
The policy of the Company is to achieve capital appreciation
through investments listed mainly on the London Stock Exchange,
primarily comprising equities but with some exposure also to fixed
interest. The portfolio comprises a mix of large, mid and smaller
capitalised stocks. A distinctive feature is an emphasis on
investments in companies with exposure to economies growing at a
faster rate than the UK.
CHAIRMAN'S STATEMENT
The half year returns were:
At 28/02/15 At 31/08/15 Change At 31/08/14
Net Asset Value per
share 171.37p 161.64p (5.7%) 186.98p
Share price 147.50p 151.50p 2.7% 164.25p
Discount 13.9% 6.3% 7.6% 12.2%
Gearing (net)* 19.2% 6.01% (13.2%) 18.8%
*Borrowings less net current assets (excluding short term
borrowings) as a percentage of Net Asset Value
Review of the period
The six months to end August have been a difficult time for
global stock-markets. Investors have been stalked by a series of
worries ranging from the unsustainability of the levels of Greek
indebtedness, to the timing of the expected US interest rate
increase and growing confirmation of a slow-down in the Chinese
economy. The ramifications for the global economy, particularly
that part represented by emerging economies, have caused many
investors to raise cash and await developments from the sidelines.
The FTSE ALL-Share index declined by 8.3%, whereas the FTSE100
Index, on account of its high exposure to oils and commodities,
fell by 10.0%. In comparison the Net Asset Value of the portfolio
reduced by 5.7%, representing some welcome outperformance.
In the USA the rate of unemployment has continued to reduce
reaching its current level of 5.1%, close to the level which is
viewed as potentially inflationary. Despite this apparent good news
about the strength of the US economy, the Federal Reserve Board has
been cautious about raising rates, fearing the impact of a stronger
US $ abroad and on export industries.
Conversely, in China a period of tighter monetary policy and
reduced money supply earlier in the year brought the significant
bull market to an end in June with sharp retrenchment thereafter.
The devaluation of the Renmimbi by 3% in August added to bearish
sentiment. The Authorities have responded with a fourth interest
rate reduction this year and a relaxation of Reserve ratio
requirements to boost money supply. In consequence, the latest
evidence is demonstrating that house prices in Tier 1 and 2 cities
are rising rapidly once more. Although many recently published
economic statistics have proved disappointing, the likelihood is
that the economy may have already bottomed and that future reports
will be more positive.
In the UK, post the unexpected overall victory by the
Conservative Party in May, the economy has remained robust, led by
the services industries. The confidence of a further five years of
domestic political certainty has resulted in a spurt of increased
levels of investment by the private sector. Meanwhile in
Continental Europe, despite the adverse effects of economic
sanctions against Russia, there has been definite evidence of
improvement in certain economies, notably Germany, Spain and
Ireland, resulting from the belated introduction of Q.E., together
with the dramatic falls in commodity prices in general.
Against such a global background of inflation remaining very low
in most territories and the possibility of further stimulation of
the Chinese economy, investor sentiment could improve rapidly. With
deployment by both institutions and corporates of the high current
levels of liquidity a sharp bounce in equity valuations would be a
logical result.
Investment Policy
There has been no overall change in the Investment Policy. The
Manager has continued in the belief that Asian economies will grow
more strongly than the economies of developed nations in the West.
This major weighting in the portfolio is represented both by
smaller Chinese companies listed on the AIM market in London as
well as by a variety of larger UK quoted companies oriented to
energy and metals. Although these investments should benefit from
the recovery in the world economy they have performed poorly during
the period largely due to the unexpected weakness in all commodity
markets.
By contrast, the section of the portfolio represented by
housebuilders (Berkeley Group, Persimmon and Barratt Developments)
has continued to perform well at a time when UK consumer confidence
is returning in the UK on account of falling unemployment and
reduced oil prices. The Manager has reduced the level of gearing in
the portfolio.
Change of Management contract
As I announced at last year's AGM on 18 July 2014, the Manager
indicated an intention to retire within the next three years, as a
result of which no further Continuation Votes would be sought in
the future.
Since then, the Board has been in contact with a number of other
Investment Trusts to discuss possible merger options, with the
intent of selecting and putting a proposal to shareholders next
year.
In the meantime, the Phoenix Asset Management Partners
("Phoenix") approached the Board with a proposal to take on the
management of Aurora.
An announcement was made by the Board to the London Stock
Exchange advising that it had agreed in principle to proposals
which it believes will achieve the Board's objective of offering an
attractive continuing vehicle and cash exit for shareholders. The
proposal is for the Company's existing Manager to be acquired by
Phoenix. It is then intended that the Company's investment policy
and strategy will reflect the successful investment style adopted
by Phoenix since its establishment in 1998.
Since its founding in 1998, the Phoenix UK Fund has risen by
435.1% compared to 110.6% for the FTSE All-Share Index, including
dividends.
It is intended that a new Investment Management Agreement will
be entered into, under which Phoenix will receive no base
management fee but will be entitled to a performance fee based on
annual outperformance of the FTSE All-Share Total Return.
The Board also intends to implement a tender offer for all
shareholders at a 2% discount to the NAV per share, less the direct
costs of the tender offer, provided the tender offer offers
shareholders a lower discount to NAV than can be achieved through
the market.
The proposals are subject to the approval in a General Meeting
of the Company's shareholders. A shareholder circular with further
detail of the proposals accompanies the Half Year Report.
Lord Flight
Chairman
30 October 2015
INTERIM MANAGEMENT REPORT
MANAGER'S REVIEW
The half year just ended started on a promising note with the
London stock-market continuing to make gains until the end of
April; thereafter it started to retrench. It then enjoyed a sudden
spurt as a result of the surprise victory by the Conservatives in
the General Election in May; this boosted both investor and
consumer confidence for a brief period. With the onset of the
summer months global events, particularly the unexpected
devaluation of the Chinese currency (albeit by only 3%) undermined
the rosy domestic picture, resulting in steadily falling markets
ever since.
Despite such a difficult background, the Fund managed to
outperform the benchmark, the FTALL-Share index by 2.6%.
The investment policy has remained broadly unchanged during the
period with the exception of the level of gearing which has been
halved.
Despite the poor performance of commodity producers and small
Chinese oriented companies, as well as by the large holding in
Aberdeen Asset Management, the Fund has outperformed during the six
months. The stocks which performed notably well were the
housebuilders, Persimmon and Berkeley Group, as a result of both
increasing margins and volumes against a background of political
pressure encouraging the industry to raise production. This sector
remains a long standing favourite of the Manager. It is, during
this disinflationary era in which we live, one of the very few
sectors with high relative pricing power caused by the shortage of
new supply in relation to rapid household formation and the influx
of foreign buyers, combined with substantial inward migration.
The surprise takeover, which came out of the blue,' of Amlin by
Mitsui towards the end of the period also boosted the
performance.
Ashtead meanwhile continues to produce one set of excellent
results after another, far in excess of its peers. Sadly, these are
currently not reflected in the share price, probably in view of
misconstrued worries over its exposure, which is minimal, to
slow-down in the oil and gas industry.
At a time when the majority of Developed Economies appear to be
strengthening and when the prospects for interest rates to remain
low are set fair, the level of investor sentiment is unduly
negative against a background of high institutional liquidity.
Accordingly, a sudden rebound in equity markets could easily occur
in the near term, with a likely catalyst being the faintest glimpse
of improved economic statistics emanating from China, where some
are already of the firm opinion that the leading indicators have
turned upwards.
MJ Barstow
Mars Asset Management Ltd
30 October 2015
(MORE TO FOLLOW) Dow Jones Newswires
October 30, 2015 07:04 ET (11:04 GMT)
ANALYSIS OF NET ASSET VALUE RETURNS
Movement Attribution
of
in net assets change to
NAV
GBP'000 pence per
share
Revenue income 483 4.65p
Trading gains 326 3.13p
Expenses, costs
and tax (310) (2.98p)
Dividend paid (400) (3.85p)
Capital losses (1,110) (10.68p)
Of which:
Change in market (1,756) (16.89p)
Net gearing (1,999) (19.23p)
Stock selection 2,645 25.44p
Total movement in
NAV (1,011) (9.73p)
-------------- ------------
SECTOR BREAKDOWN
As at 31 August 2015
SECTOR AURORA
%
Oil & Gas 7.2
Construction & Materials 27.4
Consumer Services 17.1
Financials 18.2
Information Technology 8.4
Resources (Mining) 5.1
Support Services 7.9
Consumer Goods 3.6
Industrials 0.6
Alternative Energy 1.8
97.3
-------
Fixed Interest Securities 2.7
100.0
-------
TOP TEN HOLDINGS
Consolidated portfolio
As at 31 August 2015
All holdings shown are GBP'000 Portfolio
of ordinary shares,
unless shown otherwise
Berkeley Group Housebuilding 1,853 10.4%
BTG Health Care 1,830 10.3%
Persimmon Housebuilding 1,682 9.4%
Ashtead Group Support Services 1,418 8.0%
West China Cement Building Materials 1,224 6.9%
Gresham Computing Software 1,089 6.1%
Royal Dutch Petroleum
'B' Oil Integrated 1,024 5.7%
Aberdeen Asset Management Investment 957 5.4%
Amlin Insurance 773 4.3%
Jupiter Fund Investment 668 3.8%
Total top ten holdings 12,518 70.3%
------- ---------
Other investments 5,298 29.7%
------- ---------
17,816 100.0%
------- ---------
FORMAL DECLARATIONS
The Chairman's Statement on pages 1 and 2 and the Manager's
Review on pages 4 to 5 provide details on the performance of the
Company. Those reports also include an indication of the important
events that have occurred during the first six months of the
financial year ending 28 February 2016 and the impact of those
events on the condensed set of financial statements included in
this Half-yearly financial report.
Details of the largest ten investments held at the period end
and the structure of the portfolio at the period end are provided
on page 6.
Principal Risks and Uncertainties
The Board considers that the main risks and uncertainties faced
by the Company fall into the categories of (i) Market risks and
(ii) Corporate governance and internal control risks. A detailed
explanation of these risks and uncertainties can be found in the
Company's most recent Annual Report for the year ended 28 February
2015. Except as disclosed in the Chairman's Statement and Manager's
Review, the principal risks and uncertainties facing the Company
remain unchanged from those disclosed in the Annual Report.
Related Party Transactions
Details of the investment management arrangements were provided
in the Annual Report. There have been no material changes to the
related party transactions described in the Annual Report that
could have an effect on the financial position or performance of
the Company. Amounts payable to the investment manager in the
period are detailed in the Income Statement on page 9.
Board of Directors
30 October 2015
DIRECTORS STATEMENT OF RESPONSIBILITY
FOR THE HALF YEARLY REPORT
The Directors confirm to the best of their knowledge that:
-- The condensed set of financial statements contained within
the half yearly financial report has been prepared in accordance
with International Accounting Standard 34 "Interim Financial
Reporting"; and
-- The interim management report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FSA's Disclosure
and Transparency Rules.
The half yearly financial report was approved by the Board on **
October 2015 and the above responsibility statement was signed on
its behalf by:
Lord Flight
Chairman
30 October 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months to 31 August 2015 6 months to 31 August 2014
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains
on investments
designated
at fair value
through profit
or loss 326* (1,110) (784) (17)* (303) (320)
-------- ---------- -------- ------------------- -------- --------
Income
Investment
income 483 - 483 536 - 536
483 - 483 536 - 536
-------- ---------- -------- ------------------- -------- --------
Expenses
Investment
management
fees (37) (37) (74) (45) (45) (90)
Other expenses (150) - (150) (126) - (126)
-------- ---------- -------- ------------------- -------- --------
(187) (37) (224) (171) (45) (216)
-------- ---------- -------- ------------------- -------- --------
Profit/(loss)
before finance
costs and
tax 622 (1,147) (525) 348 (348) -
Finance costs (42) (42) (84) (52) (52) (104)
Profit/(loss)
before tax 580 (1,189) (609) 296 (400) (104)
Tax (2) - (2) - - -
-------- ---------- -------- ------------------- -------- --------
Profit/(loss)
and total
comprehensive
income for
the period 578 (1,189) (611) 296 (400) (104)
-------- ---------- -------- ------------------- -------- --------
Earnings per
share 5.56p (11.44p) (5.88p) 2.85p (3.85p) (1.00p)
The total column of this statement represents the Group's 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
income is attributable to the equity holders of the parent company.
There are no minority interests.
*Trading subsidiary (losses) and gains.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months Six months
Ended Ended Year ended
31 August 2014 31 August 28 February
2014 2015
Notes
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Opening equity 17,817 19,939 19,939
Total comprehensive
income for the financial
period/year (611) (104) (1,727)
Dividends paid (400) (395) (395)
Closing equity 16,806 19,440 17,817
-------------- ----------- -----------
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October 30, 2015 07:04 ET (11:04 GMT)
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