RNS Number:2031L
Aurora Investment Trust PLC
16 May 2003
Aurora Investment Trust plc
PRELIMINARY ANNOUNCEMENT OF RESULTS
For the year ended 28 February 2003
CHAIRMAN'S STATEMENT
Roger Adams
It is with very great sadness that shareholders will receive the news of Roger
Adams' untimely death after a short illness. As you will know he was
instrumental in setting up your Company and played an important part in its
success to date. His sage professionalism, advice, enthusiasm and good humour at
all times will be sorely missed by your Board of Directors. Indeed he will be
much missed by the financial community at large and especially by many of those
involved in the investment trust business. He worked for a number of
institutions during his City executive career, finishing at UBS Warburg where he
helped to establish its investment trust team as the leading investment banking
investment trust team in the City. Roger undoubtedly played an important part
in its success, contributing great knowledge, experience, wisdom and creativity.
Performance: NAV 120.20p, -13.4%, FTSE All-Share Index -28.7%
It is disappointing to report that the net asset value ("NAV") per share fell
from 138.8p to 120.2p, a decline of 13.4%; it is disappointing because it is our
prime objective to make money for our shareholders and during the past year we
were unable to do so. However, your Board has two secondary goals which are to
perform better than our peer group competition and than our benchmark index, the
FTSE All-Share Index. In respect of the former, I am able to report that,
according to TrustNet, our net asset value performance ranked in the top decile
of the twenty-five investment trusts which invested in equities with a similar
objective to ours; in respect of our benchmark, I am happy to report that our
net asset value declined materially less than the Index - it declining by 28.7%.
I should caution shareholders that we will not always do quite so well on a
relative basis each year, but I would expect good results over the longer term.
The background to the decline in our net asset value will be familiar to our
shareholders. For the third year in succession, the past year has proved to be
a difficult one for investors worldwide; to add to this has been the volatility
of markets generally and the extreme volatility of certain shares. Not only are
markets having to cope with the aftermath of the "high tech" bubble - which
peaked three years ago - but, during the last year specifically, investors have
had to cope with bad corporate news (especially of corporate malfeasance in
America) and with the prospect of war in Iraq. While these two matters have had
a depressing effect on share prices generally, they are hopefully of a shorter
term nature; the longer term concern for investors centres around a fear of
global deflation which, if it were to happen, would make investing in equities
generally difficult. I will refer to this later in my statement, but I would
like to say that in this difficult year James Barstow, our manager, did an
excellent job in containing our decline to considerably less than our benchmark.
Dividend: 2.7p + 0.4p extra (recommended)
The Company's profit after tax for the year was #606,000, which compares with
#401,000 last year. As a consequence the Board has decided to recommend to
shareholders a dividend of 2.7p per share, plus an extra of 0.4p per share, the
two dividends representing an increase of 18.8% over last year's single payment.
The dividend policy of the Board is to increase the dividend at a rate greater
than inflation (the Retail Price Index) over the longer term. However the
amount earned each year will vary according to the structure of the portfolio
during the year, so that from time to time the dividend in any given year may be
ahead or behind that year's inflation; this year the increase to 2.7p per share
keeps us ahead of inflation both for the longer term and for the year. The
extra represents the extra amount that we are proposing be paid - over and above
the long term trend.
Share price and discount: 95p (21%)
As markets declined, so the general level of investment trust discounts rose; I
am afraid that affected us too with our share price falling by 21% during the
year, leaving the discount at which our shares sell in relation to their
underlying net asset value at 21% - coincidentally. Shareholders are aware that
they gave the Board powers to buy-in shares at the last Annual General Meeting.
To date we have not used these powers although it is our intention to do so if
an attractive opportunity arises. The advantage of buying in shares is that it
increases the net asset value per share and may reduce the discount; the
disadvantage is that it reduces the liquidity of the shares: all three of these
matters are of concern to shareholders. Meanwhile, James continues to meet with
investors to explain the policy and prospects for your Company; we hope that
this may help improve the demand for the shares and thereby help to reduce the
discount. I am happy to be able to report that the discount has narrowed
considerably since the year end - it was 10% at the time of writing - but it
should be remembered that discounts are volatile and can and will vary from day
to day.
Investment Objective
Shareholders may notice that at the front of the annual report there has been a
small change made to the Objective of the Company, whereby the word mainly has
been inserted into the sentence describing the objective. We will continue to
invest most of our assets in the shares of companies listed on the London Stock
Exchange; however we do think it is sensible to allow a small proportion
(normally well less than 20%) to be invested in shares quoted on other exchanges
on the occasions when investment opportunities arise and when there are no
appropriate shares quoted on the LSE.
AGM
The Annual General Meeting will take place at 12.30 p.m. on Friday 27 June 2003
at Crusader House, 145-157 St John's Street London EC1 4RU. We do encourage as
many shareholders as possible to attend the meeting so that they have a chance
to meet the Directors and James in particular and to ask questions of or indeed
make suggestions to the Board. It is important to us as Directors that we are
able to meet with shareholders and learn about your views of and concerns for
the Company.
Investment Policy and Prospects
James - as he has explained in a number of his Manager's Reviews - is of the
view that the UK economy and indeed the global economy, are experiencing
disinflationary conditions and that those may well turn into deflationary
conditions. Part of the reason for these circumstances is that in many areas of
the economy there is surplus capacity and consequently intense competition.
Generally speaking, companies find it very difficult to pass on cost increases,
having little or no "pricing power". In such an environment economies are
likely to grow only slowly and interest rates are likely to remain low. Based
on this longer-term macroeconomic view, James has formulated an investment
policy that concentrates on those relatively few areas where there are
reasonable growth prospects and some "pricing power" for the companies operating
in them. The Board concurs with his views and investment policy.
As a consequence of all of this, the portfolio is focused on those few growth
areas, which include housing, transportation and an exposure to the Irish
economy, and on some exposure to fixed interest securities which tend to do well
in disinflationary times. The commitment to the housing sector is particularly
large (30%) and deserves some explanation: it is benefiting from low interest
rates and from the fact that, because of the very restrictive planning
environment in the UK, fewer houses were built in 2002 than at any time - WWII
apart - since 1924. To add to this are the facts that the house building
business is particularly profitable and the shares of house builders sell at low
price earnings ratios. The Board is encouraged about the prospects for the
sector but, because its share prices have performed so well, we have made a
small reduction to it recently.
The prospects for the stock market are difficult to assess at this point in
time. The lead up to the war in Iraq caused a good deal of uncertainty for both
consumers and for companies and led to economic and stock market weaknesses in
the UK, USA and Europe. Now that the war is effectively over, there has been
some bounce back but it is too early to say whether strong economic growth will
resume. On balance the prospects for the USA look reasonable given that fiscal
and monetary policies are expansive and given the flow of migrants into the
country. The prospects for Japan and Germany look bleak but to counter that the
other economies of the Far East (notably that of China) look quite encouraging -
although SARS is causing short term problems. Given this international economic
environment and given the huge fiscal stimulus generated by the Government's
expenditure, the UK economy should continue to grow, albeit at a slower rate
than in the recent past. Although it is unlikely that the level of the UK stock
market will soon return to the peaks of the high tech boom, there will be good
opportunities to make money in shares priced at much lower levels than they were
three years ago. Your non-executive Directors believe that James has the right
policy and stock-picking ability to allow us to take advantage of them and, in
the medium term at least, make money for shareholders.
ALEX HAMMOND-CHAMBERS
16 May 2003
CONSOLIDATED STATEMENT OF TOTAL RETURN
FOR THE YEAR ENDED 28 FEBRUARY 2003
Year ended 28 February 2003 Year ended 28 February 2002
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Losses on investments - (2,407) (2,407) - (5,674) (5,674)
Exchange differences on overdraft - (325) (325) 137 137
Realised gains/(losses) of 2 - 2 (395) - (395)
trading subsidiary
Income 995 - 995 852 - 852
Investment management fee (104) (104) (208) (124) (124) (248)
Other expenses (144) - (144) (150) - (150)
Return before finance costs and 749 (2,836) (2,087) 183 (5,661) (5,478)
taxation
Interest payable and similar (124) (124) (248) (165) (165) (330)
charges
Return before taxation 625 (2,960) (2,335) 18 (5,826) (5,808)
Taxation - - - - - -
Return on ordinary activities 625 (2,960) (2,335) 18 (5,826) (5,808)
after taxation
Ordinary dividends payable (468) - (468) (394) - (394)
Transfer to reserves 157 (2,960) (2,803) (376) (5,826) (6,202)
Return per ordinary share 4.14p (19.59p) (15.45p) 0.12p (38.56p) (38.44p)
CONSOLIDATED BALANCE SHEET
AT 28 FEBRUARY 2003
2003 2002
#'000 #'000
FIXED ASSETS
Investments at market value 21,763 25,752
CURRENT ASSETS
Sales for future settlement 300 -
Other debtors 85 81
Taxation recoverable 34 21
Total debtors 419 102
Cash at bank and in hand 407 119
826 221
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR:
Purchases for future settlement 91 -
Bank overdraft 3,729 4,508
Other creditors 141 108
Dividends payable 468 394
4,429 5,010
NET CURRENT LIABILITIES (3,603) (4,789)
TOTAL ASSETS LESS CURRENT LIABILITIES 18,160 20,963
CAPITAL AND RESERVES
Called up share capital 3,777 3,777
Share premium account 10,997 10,997
Realised capital reserve 5,314 5,108
Unrealised capital reserve (2,282) 884
Revenue reserve 354 197
EQUITY SHAREHOLDERS' FUNDS 18,160 20,963
Net assets per ordinary share 120.20p 138.76p
COMPANY BALANCE SHEET
AT 28 FEBRUARY 2003
2003 2002
#'000 #'000
FIXED ASSETS
Investments at market value 21,763 25,752
Investment in subsidiary 306 54
22,069 25,806
CURRENT ASSETS
Sales for future settlement - -
Other debtors 85 81
Taxation recoverable 32 21
Total debtors 117 102
Cash at bank and in hand 403 65
520 167
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR:
Purchases for future settlement 91 -
Bank overdraft 3,729 4,508
Other creditors 141 108
Dividends payable 468 394
4,429 5,010
NET CURRENT LIABILITIES (3,909) (4,843)
TOTAL NET ASSETS 18,160 20,963
CAPITAL AND RESERVES
Called up share capital 3,777 3,777
Share premium account 10,997 10,997
Realised capital reserves 5,314 5,108
Unrealised capital reserve (2,503) 644
Revenue reserve 575 437
EQUITY SHAREHOLDERS' FUNDS 18,160 20,963
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 28 FEBRUARY 2003
2003 2002
#'000 #'000
NET CASH INFLOW FROM OPERATING ACTIVITIES 361 39
SERVICING OF FINANCE
Interest paid (248) (330)
TAXATION
Tax recovered - 12
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire fixed asset investments (8,617) (3,130)
Receipts on disposal of fixed asset investments 10,290 5,418
NET CASH INFLOW FROM INVESTING ACTIVITIES 1,673 2,288
EQUITY DIVIDENDS PAID (394) (438)
NET CASH INFLOW BEFORE FINANCING 1,392 1,571
INCREASE IN CASH 1,392 1,571
Notes:
The revenue column of the Statement of Total Return is the consolidated profit
and loss account of the Group, comprising Aurora Investment Trust plc and AIT
Trading Limited.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the period.
There were no extraordinary items.
Returns and net asset values per ordinary share are based on 15,107,250 ordinary
shares in issue.
Dividend
The directors recommend an ordinary dividend of 2.7p per share, plus a
supplementary ordinary dividend of 0.4p per share, together absorbing #468,325.
If approved by the Annual General Meeting, this dividend will be paid on 4 July
2003 to shareholders on the register at 6 June 2003.
Status of this Report
The financial information set out above does not constitute the Company and
Group's statutory accounts for the year ended 28 February 2003 but is derived
from those accounts. Statutory accounts for the year ended 28 February 2003 are
to be delivered to the Registrar of Companies following the Annual General
Meeting.
The above results for the year ended 28 February 2003 are unaudited. Those for
the year ended 28 February 2002 are an abridged version of the Group's full
accounts, which received an unqualified audit report, not containing statements
under section 237(2) or 237(3) of the Companies Act 1985, and which have been
filed with the Registrar of Companies.
The accounting policies set out in the most recently published full accounts
have been followed in this statement.
Company Secretary and Registered Office:
Cavendish Administration Limited
Crusader House, 145-157 St. John Street
London EC1V 4RU
This information is provided by RNS
The company news service from the London Stock Exchange
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