RNS Number:5590T
Ivory & Sime Optimum Inc Tst PLC
22 December 2003
Ivory & Sime Optimum Income Trust plc
To: Company Announcements
From: Ivory & Sime Optimum Income Trust plc
Date: 19* December 2003
Interim Results - Six Months Ended 30 November 2003
Mr Alex Hammond-Chambers, the Chairman, said:
The Company's life is expected to come to an end on 26 March 2004 and the Board
is working on proposals to put to shareholders early in the New Year, the aim of
which is to offer shareholders two options - one is to receive cash for the
underlying value of their shares and the other is to exchange their shares for
shares in another investment company/trust.
It has been an up and down six and a half years, the first half of which saw the
tail end of a twenty-five year bull market and the second half a thoroughly
vicious bear market. Fortunately, company profits and dividends were not so
volatile and, as a consequence of this and of some astute portfolio management,
the Company has been able to keep faith with its primary goal - the payment of a
high and growing level of dividends to ordinary shareholders.
Our first quarterly dividend, paid in November 1997, amounted to 1.80p per
share; the last quarterly dividend paid was 2.275p per ordinary share (the
latest dividend of 2.30p per ordinary share is announced with these half year
results and will be paid in February 2004), which means that they have grown at
a rate of 4.0% per annum over the period. This performance has beaten the rate
of inflation (2.3%) and also the dividend growth rate of UK shares generally
(1.2% for the FTSE All-Share Index companies). During that time ordinary
shareholders have received 25 dividend payments amounting to just over 50p per
share. The dividend record at least is a satisfactory result.
The capital results for the ordinary shares have, however, been less than
satisfactory. As of 30 November 2003 the net asset value stood at 19.15p per
share and represents a fall of 80.5% over the last six and a half years. The
reason for it is quite clear: we started with Zero Dividend Preference Shares
(ZDPs) with #44.7m and an obligation to increase their worth by 8.78% pa. The
growth of those obligations amounted to #33.5m, eating into the total assets and
leaving less and less for ordinary shareholders. The bear market to which I
referred above means that, in hindsight we started with too high an obligation
to the ZDP shares- but that was the structure needed to pay the initial
quarterly dividends of 1.80p per share.
As at 30 November 2003 the total assets stood at #85.0 million, 7.3% higher than
the #79.2 million at the launch in March 1997. It is a little better performance
than that of the FTSE All-Share Index, our benchmark, which rose 2.5%. Beating
the benchmark with a portfolio that has an above average yield is, I believe, a
good accomplishment.
During the last three years we have looked at a number of ideas designed to
mitigate the effect of the bear market, but it was difficult to achieve anything
without altering the basic rights of the two classes of shares. If the life of
the Company had been longer, it might have helped; if the amount attributable to
the ZDP shareholders at the outset had been less, it would have helped but
ordinary shareholders would have received lesser dividends. These comments are
offered as reasons, not excuses and neither I nor any of my colleagues can be or
indeed are satisfied with the outcome.
It is difficult to assess quite what the next three months will produce as far
as the net asset value is concerned. The Company's balance sheet is highly
geared with #78.2 million of the current total assets of #85.0 million
attributable to the ZDP shareholders. The table at the foot of this statement
provides a simple guide to what might happen if the stock market stands still,
rises or falls by 6.1%, 10% and 15%. We anticipate announcing one more dividend
after the payment of the current one, and we expect this to be no less than
2.00p per ordinary share.
If Market: falls 15% falls 10% falls 6.1% unchanged rises 6.1% rises 10% rises 15%
The Market (FTSE 1,842.3 1,950.7 2,035.2 2,167.4 2,299.6 2,384.1 2,492.5
All-Share Index)
Total Assets #72.8m #77.1m #80.5m #85.7m #90.9m #94.3m #98.6m
Net Asset Value of nil nil nil 15.0p 29.8p 39.5p 51.7p
ordinary shares at 26
March 2004
Net Asset Value of ZDP 206.8p 219.0p 228.4p 228.4p 228.4p 228.4p 228.4p
shares at 26 March
2004
Notes
Assumes that total assets move in line with the market and makes no allowance for liquidation costs.
The final redemption value of the ZDP shares is #80.4m on 26 March 2004.
Total assets of #85.7m as at 18 December 2003.
Richard Bell, ISIS Asset Management plc: 0131 465 1000
Martin Cassels, ISIS Asset Management plc: 0131 465 1000
Unaudited Statement of Total Return (Incorporating the Revenue Account) of the Company
Six months to 30 November 2003
Revenue Capital Total
#'000 #'000 #'000
Gains on investments - 6,358 6,358
Income 1,622 - 1,622
Investment management fee (138) (257) (395)
Other expenses (122) (10) (132)
Return on ordinary activities 1,362 6,091 7,453
before tax
Tax on ordinary activities (15) 15 -
Return on ordinary activities after tax 1,347 6,106 7,453
Appropriations in respect of
Zero Dividend Preference Shares - (3,222) (3,222)
Return attributable to equity shareholders 1,347 2,884 4,231
Dividends in respect of equity shares (1,611) - (1,611)
Transfer (from)/to reserves (264) 2,884 2,620
Return per Ordinary Share:
Basic 3.82p 8.19p 12.01p
Unaudited Statement of Total Return (Incorporating the Revenue Account) of the Company
Six months to 30 November 2002
Revenue Capital Total
#'000 #'000 #'000
Losses on investments - (19,514) (19,514)
Income 1,582 - 1,582
Investment management fee (137) (254) (391)
Other expenses (143) (10) (153)
Return on ordinary activities 1,302 (19,778) (18,476)
before tax
Tax on ordinary activities (25) 25 -
Return on ordinary activities after tax 1,277 (19,753) (18,476)
Appropriations in respect of
Zero Dividend Preference Shares - (2,962) (2,962)
Return attributable to equity shareholders 1,277 (22,715) (21,438)
Dividends in respect of equity shares (1,559) - (1,559)
Transfer from reserves (282) (22,715) (22,997)
Return per Ordinary Share:
Basic 3.63p (64.49)p (60.86)p
Unaudited Statement of Total Return (Incorporating the Revenue Account) of the Company
For the year to 31 May 2003
Revenue Capital Total
#'000 #'000 #'000
Losses on investments - (21,183) (21,183)
Income 3,396 - 3,396
Investment management fee (259) (482) (741)
Other expenses (326) (31) (357)
Return on ordinary activities 2,811 (21,696) (18,885)
before tax
Tax on ordinary activities (45) 45 -
Return on ordinary activities after tax 2,766 (21,651) (18,885)
Appropriations in respect of
Zero Dividend Preference Shares - (6,051) (6,051)
Return attributable to equity shareholders 2,766 (27,702) (24,936)
Dividends in respect of equity shares (3,153) - (3,153)
Transfer from reserves (387) (27,702) (28,089)
Return per Ordinary Share:
Basic 7.85p (78.65)p (70.80)p
Unaudited Balance Sheet
As at As at As at
30 November 30 November 31 May
2003 2002 2003
# # #
Fixed assets
Investments 83,789 78,126 75,079
Current assets
Debtors 348 203 469
Cash at bank and on deposit 1,883 3,829 4,636
------- ------- -------
2,231 4,032 5,105
Creditors: amount falling due within one year (1,052) (1,029) (1,058)
Net current assets 1,179 3,003 4,047
-------- -------- --------
Total assets less current liabilities 84,968 81,129 79,126
===== ===== =====
Financed by:
Share capital 38,746 38,746 38,746
Special distributable reserve 40,607 40,607 40,607
Redemption reserve 42,998 36,687 39,776
Capital reserve - realised (43,490) (33,817) (38,766)
Capital reserve - unrealised 6,098 (1,472) (1,510)
Revenue Reserve 9 378 273
--------- --------- ---------
84,968 81,129 79,126
===== ===== =====
Equity shareholders' funds 6,746 9,219 4,126
Zero Dividend Preference shareholders' funds 78,222 71,910 75,000
---------- ---------- ---------
84,968 81,129 79,126
===== ===== =====
Net asset value per Ordinary Share: 19.15p 26.17p 11.71p
Net asset value per Zero Dividend Preference Share 222.07p 204.15p 212.93p
Summarised Unaudited Statement of Cash Flows
Six months to Six months to Year to
30 November 30 November 31 May
2003 2002 2003
#'000 #'000 #'000
Net cash flow from operating activities 1,196 1,189 2,196
Financial investments (2,346) (4,042) (2,665)
Equity dividends paid (1,603) (1,550) (3,127)
Net cash flow before financing (2,753) (4,403) (3,596)
Decrease in cash (2,753) (4,403) (3,596)
Reconciliation of net cash flow to movement in net funds
Changes in net funds resulting from cash flows (2,753) (4,403) (3,596)
Net funds at 1 June 4,636 8,232 8,232
Net funds at 30 November/31 May 1,883 3,829 4,636
Reconciliation of operating profit to net cash flow from operating activities
Net return before taxation 1,362 1,302 2,811
Management fee charged to capital (257) (254) (482)
Changes in working capital and other non-cash items 91 128 (133)
Net cash flow from operating activities 1,196 1,176 2,196
Notes
1. The unaudited interim results have been prepared on the basis of the accounting policies set out in the
statutory accounts of the Company for the year ended 31 May 2003.
2. Earnings for the first six months should not be taken as a guide to the results of the full period.
3. The return per ordinary share is based on 35,223,639 ordinary shares, being the weighted average number of
shares in issue at 30 November 2003 (30 November 2002: same, 31 May 2003: same).
4. The preference capital increases on a monthly basis by 8.78 per cent per annum compounded annually, reflecting
the increase in the repayment entitlements attached to the Zero Dividend Preference Shares.
5. The second interim dividend of 2.3 pence per ordinary share will be paid on 2 February 2004 to ordinary
shareholders on the register at the close of business on 16 January 2004. The ex-dividend date will be 14 January
2004.
6. 65 per cent of the investment management fee of the period has been charged to the realised capital reserve.
7. These are not statutory accounts in terms of Section 240 of the Companies Act 1985 and are unaudited.
Statutory accounts for the year to 31 May 2003, which were unqualified, have been lodged with the Registrar of
Companies. No full accounts in respect of any period after 31 May 2003 have been reported on by the Company's
auditors or delivered to the Registrar of Companies.
8. Copies of the Interim Report, which have been reviewed by the Company's auditors, will be posted to
shareholders and will be available for inspection at the Registered Office of the Company at 80 George Street,
Edinburgh EH2 3BU.
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