REG-British & American: Annual Financial Report
28/04/2022 12:15
British & American Investment Trust PLC
Annual Financial Report for the year ended 31 December 2021
Registered number: 00433137
Directors Registered office
David G Seligman (Chairman) Wessex House
Jonathan C Woolf (Managing Director) 1 Chesham Street
Dominic G Dreyfus (Non-executive and Chairman of the Audit Committee until 7 February 2022) Telephone: 020 7201 3100
Alex Tamlyn (Non-executive and acting Chairman of the Audit Committee) Registered in England
Julia Le Blan (Non-executive from 1 June 2022) No.00433137
28 April 2022
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 2021
2021 2020
Revenue return Capital return Total Revenue return Capital return Total
£000 £000 £000 £000 £000 £000
Profit/(loss) before tax – realised 978 (810) 168 879 (1,230) (351)
Profit before tax – unrealised – 1,028 1,028 – 1,388 1,388
__________ __________ __________ __________ __________ __________
Profit before tax – total 978 218 1,196 879 158 1,037
__________ __________ __________ __________ __________ __________
Earnings per £1 ordinary share – basic 2.66p 0.87p 3.53p 2.23p 0.63p 2.86p
__________ __________ __________ __________ __________ __________
Earnings per £1 ordinary share – diluted 2.90p 0.62p 3.52p 2.59p 0.45p 3.04p
__________ _________ __________ __________ _________ __________
Net assets 6,727 6,720
__________ __________
Net assets per ordinary share
– deducting preference shares at fully diluted net asset value* 19p 19p
__________ __________
– diluted 19p 19p
__________ __________
Diluted net asset value per ordinary share at 25 April 2022 17p
__________
Dividends declared or proposed for the period:
per ordinary share
– interim paid 3.5p 2.7p
– final proposed 0.0p 0.0p
per preference share 3.5p 1.75p
*Basic net assets are calculated using a value of fully diluted net asset value for the preference shares.
Chairman’s Statement
I report our results for the year ended 31 December 2021.
Revenue
The return on the revenue account before tax amounted to £1.0 million (2020:
£0.9 million), similar to 2020 but a significantly lower level from prior
years when higher levels of dividends from external investments were being
received and the portfolio value was higher. In 2021, a large majority of
dividend income was received from our subsidiary companies in accordance with
our strategy of realising gains when available on our principal US investments
for later distribution as dividends.
Gross revenues totalled £1.4 million (2020: £1.4 million). In addition, film
income of £171,000 (2020: £84,000) and property unit trust income of £2,000
(2020: £14,000) was received in our subsidiary companies. This reduction in
property income reflected the sale of one of our investments during the
year. In accordance with IFRS10, these income streams are not included
within the revenue figures noted above.
The total return before tax amounted to a profit of £1.2 million (2020: £1.0
million profit), which comprised net revenue of £1.0 million, a realised loss
of £0.8 million and an unrealised gain of £1.0 million. The revenue return
per ordinary share was 2.7p (2020: 2.2p) on an undiluted basis and 2.9p (2020:
2.6p) on a diluted basis.
Net Assets and Performance
Net assets at the year end were £6.7 million (2020: £6.7 million), unchanged
after payment of £0.9 million in dividends to shareholders during the year.
This compares to increases in the FTSE 100 and All Share indices of 14.3
percent and 14.5 percent, respectively, over the period. On a total return
basis, after adding back dividends paid during the year, our net assets
increased by 18.3 percent compared to increases of 18.4 percent and 18.3
percent in the FTSE 100 and All Share indices, respectively.
During this second year of significant disruption due to the Covid pandemic,
when markets rallied strongly from the substantial falls of the previous year,
we were able to match these gains on a total return basis while also returning
cash via dividends to shareholders at more than three times the market level
of return. This was made possible by a second year of substantial gains in
sterling terms (over 40 percent in 2021 and 60 percent in 2020) in one of our
two largest US investments, Lineage Cell Therapeutics Inc (a combination of
two previously held regenerative medicine stem cell companies, Biotime Inc and
Asterias Biotherapeutics Inc). This was despite losses of over 20 percent in
the year in the value of our other large US investment, Geron Corporation. In
addition, a periodic and independent revaluation of the feature films held in
our subsidiary company, yielded a favourable upwards revaluation based on the
strength and consistency of historic revenues and the buoyant market
conditions in recent years for intellectual copyright content such as films
and music.
More generally, equity markets in the USA and UK continued to build strongly
and consistently in the second half of 2021 on the recovery seen in the first
half, as reported on at length at the interim stage. The highly successful
global vaccination programme initiated at the beginning of the year allowed
the social and corporate disruptions of the previous year gradually to be
mitigated and markets and leading economy GDPs mostly regained their pre-Covid
levels, which at the time had been at all time highs, at varying stages during
the year. In addition, central banks kept interest rates at their historically
low levels for longer than expected and only in recent months have begun what
is likely to be an extended process of returning rates closer to more normal
levels.
The list of structural damage and disruption to economies and societies caused
by the Covid pandemic is extremely long and widespread. It includes
permanently lost production, substantially increased levels of government and
private debt, increased fiscal deficits, higher taxes, significantly higher
levels of inflation leading to severe cost of living pressures particularly
related to energy prices, employment shortages, long-term disruption or
alteration to supply lines, trade, travel, working practices and the creation
of asset bubbles in sectors such as housing and natural resources.
However, all consideration of these many problems has been recently and
substantially overshadowed by Russia’s invasion of Ukraine in February 2022,
representing an unacceptable and unprovoked challenge to the global
rules-based system which has been in place since the Second World War. The
immediately resulting economic and humanitarian effects have already been
substantial. The unprecedentedly severe sanctions swiftly imposed by Western
countries on Russia in response to limit and ultimately deter its illegal war
of aggression will inevitably have substantial global consequences for a
considerable period to come, whatever the final military outcome. This
includes a major recalibration after many years of relative weakness in the
West’s defensive posture through NATO and a potential re-alignment of global
alliances and operations giving rise to political, strategic, economic and
social effects for years if not generations to come, even if a more wide-scale
European conflict can be avoided.
Dividend
In 2021, dividends of 3.5 pence per ordinary share and 3.5 pence per
preference share were paid as two interim payments during the year. This
represented an increase of 30 percent for ordinary shareholders over the
previous year and a yield of approximately 11 percent on the ordinary share
price averaged over a period of 12 months.
It is our intention to pay further interim dividends this year as close as
possible in amount and timing to the dividends paid in 2021, as and when the
profitable sales of investments permit. The position regarding these
investments is set out in more detail in the Managing Director’s report
below.
Board of Directors
On 10(th) February 2022, we sadly announced the untimely death of Dominic
Dreyfus, non-executive director since 1995 and chairman of the Audit Committee
since its formation in 2001. He had battled for some time with his illness
and throughout continued to show the great sense of duty, commitment and
professionalism which had marked his long and successful time on our board and
as an exceptional chairman of our Audit Committee. He will be greatly missed
by the board and his other colleagues.
On 27th April 2022, we were pleased to announce the appointment of Julia Le
Blan as a non-executive director and chairman of the Audit Committee with
effect from 1(st) June 2022. Julia is a chartered accountant and has worked in
the financial services industry for over 30 years. She was formerly a partner
at Deloitte with particular familiarity with the investment trust industry,
having sat for two terms on the AIC's technical committee. Julia is currently
a director of the Biotech Growth Trust plc and Aberforth Smaller Companies
Trust plc.
Recent events and outlook
The long list of problems enumerated above which have piled up following two
years of Covid pandemic would have provided uncertainty enough from an
investment perspective, but now markets are faced with the first major war of
aggression on the continent of Europe by a nuclear-armed superpower, seemingly
intent on prosecuting its aims at no matter what cost to civilians, the world
order, peace and indeed itself.
Even at this early stage it is evident that very little will stay the same in
terms of global relationships, trade and supply lines which have formed the
engine of world growth over the last decades. Recent projections from the
World Trade Organisation (WTO) and the IMF, for example, cut their estimates
of world trade growth for the current year by between a third and a half due
to the war and are forecasting a cut to world GDP of approximately 1 percent,
representing a decline of over one quarter. And there is no reason to expect
that such effect on world growth will be limited to the current year given the
likely long term and widespread effects of the war on so many aspects of
international behaviour and endeavour.
Nevertheless, after a short and sharp reversal of up to 8 percent in February
at the outbreak of the war, equity markets (except in Russia and in China for
other reasons) resumed their steady climb by the end of the first quarter to
regain their pre-Covid levels in the UK if not exactly so in the USA. The
continued ultra-low interest rate regimes in developed countries and a newly
adopted expectation that rates may not now be raised as high or as quickly as
previously thought to combat the currently high levels of inflation because of
the war has contributed to this persistent strength in the markets.
Despite this seeming steadfastness in major markets in the face of these
challenges, to say nothing of the fact that Covid continues to remain a strong
and disruptive threat in many parts of the world, particularly in China, we
cannot ignore these major challenges going forward and will continue to limit
our activities and major focus to our US biopharma investments which do not
tend to track general market movements and which we believe hold significant
investment promise as they progress ever closer towards commercialisation of
their ground-breaking and valuable technologies.
As at 25 April 2022, our net assets had decreased to £6.0 million, a decrease
of 10.8 percent since the beginning of the calendar year. This is equivalent
to 17.1 pence per share (prior charges deducted at fully diluted value) and
17.1 pence per share on a diluted basis. Over the same period the FTSE 100
decreased 0.1 percent, the All Share Index decreased 2.4 percent and NASDAQ
decreased 18.8 percent.
David Seligman
28 April 2022
Managing Director's report
At the interim stage, this report focussed on the likely after-effects of
Covid in terms of financial, fiscal, production and growth prospects in the
short to medium term. Swollen government budget deficits and substantially
increased debt levels when combined with rapidly increasing inflation and
disruption to world trade and supply lines were in the process of creating a
very unstable platform for a longer-term rebound in growth and prosperity.
The financial and social costs of combating Covid were always going to have to
be reckoned with at some stage but it had been expected, and markets had
supported that expectation, that these costs could be handled in a manageable
way over an extended period of time. Central banks imagined that the
immediate short- term consequences of considerably higher inflation could be
handled through a gradual tightening of interest rates from their ultra-low
levels and that the measured introduction of tax rises would address fiscal
imbalances. While the major and much vaunted plans in the USA and UK for
capital expenditure and ‘levelling up’ might have to wait a little, the
judgement was that if well calibrated, these classic interventions would both
cool down and rebalance the resurgent demand which was causing inflation,
employment shortages, trade dislocations and assets bubbles without resulting
in a return to recession.
Up to the end of the year, this approach was generally seen as working,
despite inflation threatening to move above the higher levels of 4 to 5
percent which had been expected. Markets continued their steady recovery, as
noted above, encouraged by the strong resumption of corporate activity in most
sectors and the gradualist application of financial and fiscal measures. The
threat of inflation getting out of control and more stringent measures having
to be taken was always there in the background but, when set against the
historically low short-term and indeed long-term interest rate environment,
the availability of cheap money continued to support the markets.
All this changed, however, in the first quarter of 2022 with the wholly
unexpected and unjustifiable invasion of Ukraine by Russia on 24(th) February
and the unprecedentedly wide-ranging and united response by Western
governments in terms of sanctions and the supply of weaponry and other support
to Ukraine. All the best-laid financial and fiscal plans to return to
post-Covid normality were immediately overturned as inflation moved even
higher, to levels not seen for 40 years in the USA and 30 years in the UK, on
the back of rocketing energy, food and fertiliser prices adding to the effects
of the already existing supply chain disruptions in products such as
semi-conductors, processed metals, rare earth and other natural resources.
This has prompted renewed expectations of accelerated and higher interest rate
rises and re-introduced significant volatility to financial markets.
Consequently, any prior visibility into the near or medium term future which
might have existed at the year-end quickly dissipated. Furthermore, with the
war still in its early stages and already of a size, ferocity and brutality
not seen in Europe since the Second World War, it is impossible to predict how
much more and substantial damage this unnecessary and criminal action by
Russia’s terrorist regime will cause in the months to come to global
security, society, growth, trade and markets, quite apart from the total
upheaval which has already occurred in the decades-long international
rules-based order. The world’s previously progressive path towards
globalisation, climate change reduction and nuclear weapons stability has now
been put in real jeopardy.
US Biotech Investments
For some time now, the performance of our portfolio has been closely linked to
the fortunes of our major investments in US biotech companies which by their
nature are volatile. 2021 was no exception to this.
Lineage Cell Therapeutics Inc (“LCTX”) achieved a second year of
substantial price growth in 2021 of 40 percent. At the year end, LCTX
announced an important and transformative partnership with Roche and Genentech
in respect of one of its regenerative medicine treatments for ocular disease,
specifically Dry Eye Age-Related Macular Degeneration (AMD), a chronic disease
resulting in blindness with no approved medications and currently in Phase 2
clinical trials. Under this partnership, Roche/Genentech pay for the
future development and trial costs of the treatment and LCTX receives an
upfront payment of $50 million and a further up to $670 million of milestone
payments together with a royalty share.
Partnerships with big and leading pharma companies such as these are
fundamental to and the principal goal of independent biotech companies such as
LCTX. These partnerships provide not only funding for and confirmation of the
value of their technologies but also, and sometimes most importantly,
validation, influence and expertise in the further development, clinical
trials and eventual commercialisation of these new technologies.
These days, partnerships of this kind are typically struck at the Phase 2 or
early Phase 3 clinical trial stages as the safety and efficacy of the
treatments begin to be seen and when substantial funding starts to be required
by the biotechs as the trials grow in size and complexity. It is at this
point of partnership that a substantial increase is seen in the biotech’s
share price and LCTX’s share price moved up by almost 50 percent on the
news, building on the significant rises already seen over the year. It
could, however, have been expected to rise considerably further given the size
and prestige of the pharma companies involved in the partnership but
surprisingly the price has in fact dropped in the months since to return to
the levels of the beginning of 2021.
In the patent absence of any bad news, it is believed that this was a
market-inspired movement based on the rumour that the company would be seeking
to raise additional funds on the back of its improved share price to fund its
other lines of activity, even though no such fund raising was indicated by the
company itself, the company had just received a substantial cash payment and
no such fundraising has materialised in the four months since the price
reversal. Comments on this sort of undeserved and contrary market movement
have been made in this report in the past and are made again below in greater
detail in respect of our other major biotech investment, Geron Corporation.
Geron Corporation (“GERN”), languished in value in 2021, falling by 20
percent by the year end to a level recorded two years prior to that. This was
despite having in 2021 commenced a second Phase 3 clinical trial in
Myelofibrosis (“MF”) to add to its first Phase 3 trial in Myelodysplastic
Syndrome (“MDS”) now nearing completion, both being chronic haematologic
cancer diseases with poor outcomes. In addition during the year, the company
(i) published continued strong results in both of its trials which
substantially out-performed current best available treatments in terms of
efficacy and patient survival, (ii) announced an application for fast-track
consideration and approval under the UK’s new and more adaptable post-Brexit
medicines licensing regime at the MRHA, (iii) announced further high calibre
hirings from leading pharma companies, including its former partner Johnson
and Johnson, in multiple departments including those related to clinical
trials, product registration, corporate development and international
marketing, indicating its confidence and that of the new appointments in the
progress and eventual success of the trials and (iv) continued to maintain
strong levels of cash to fund the ongoing and expanding trials.
Nevertheless, Geron’s share price has over this time disappointingly failed
to match this significant progress to potential trial success and
commercialisation. Comments have been made in this report a number of times in
the past on the seeming dislocation between Geron’s market value and the
real world progress in its activities. Over the years, there have been a
number of contrary trends and movements in the share price and in addition a
history of well above average amounts of short trading activity and short
positions being taken in this stock. As an example, a tumultuous and most
abnormal one-day trading spike occurred on 18(th) June 2021 with a price rise
of 60 percent and volume traded of 20 times normal following which the price
returned to its prior level. No reason for this was given at the time and
there has been no explanation since.
Biotech companies generate little or no income in what can be long drawn out
and multi-year development stages. The absence of income (which for normal
trading companies provides a minimum level of share price support) together
with the ongoing and growing need for funding to support that development,
makes biotech and other early-stage development companies particularly prone
to be the target of short selling traders and funds which can take valuable
advantage of this inherent weakness and periodic vulnerability.
To illustrate this, last month Geron unexpectedly announced a secondary share
issue despite having previously confirmed the availability of a sufficient
cash runway through to the completion of its first Phase 3 trial in MDS,
scheduled for the first quarter of 2023. Geron’s share price had shown
significant and consistent weakness in the months prior to the announcement of
this share issue, falling by 40 percent while the Nasdaq fell by 15 percent
and the Biotech index fell by 20 percent. In the weeks prior to the share
issue, the short position which had been relatively steady over the previous
six months grew by almost 50 percent. On 1(st) April 2022, Geron issued 53
million shares with warrants attached at an overall discount to the market
price of over 20 percent. However, on the following day and most unusually
Geron’s share price rose above the issue price by over 50 percent and in the
following two weeks the short position fell by over 20 percent with this
higher price level being sustained since the issue. Participants in the issue
thus made an immediate return of 50 percent or approximately $30 million on
their commitments, plus similar future profits on the warrants and any
additional gains they may have realised on closing out any short position they
may have held over the prior months during which Geron’s share price
declined by 40 percent by taking up the issue of new shares.
While circumstantial, the above occurrences would nevertheless tend to support
the widely held view that in the US market, a very lucrative and potentially
unscrupulous strategy can be effected by the aggressive short selling of those
stocks which are perceived to have a near-term funding need and then closing
such positions through the new shares issued at a discount by the company.
This sort of strategy effectively negates the positive developments built up
over time by such companies which could otherwise have assisted the raising of
new finance at a more realistic price level and preserved value for existing
long-term shareholders (such as ourselves, for example) who see the underlying
value in the company’s assets, achievements and prospects. Practices of this
kind can only do damage to companies seeking to develop new, useful and in the
case of biotech much needed and potentially life-saving technologies and
should be actively discouraged by the regulators. It would be relatively easy
to prevent such damaging profiteering by, for example, prohibiting funds or
traders from participating in a share issue of any company in which they or
their clients hold a short position.
As a pointed coda to this, a recently announced takeover of a biotech company
very closely similar to Geron illustrates how, and perhaps because of the
above described market activity, Geron’s share price fails to capture even a
small part of its future potential. On 12th April 2022, the major British
pharmaceutical company, GlaxoSmithKline, announced the takeover of Sierra
Oncology for $1.9 billion. Sierra’s only product, Momelotinib, is a
monoclonal antibody drug in just completed Phase 3 trials for the palliative
symptom relief treatment of MF. As noted above, Geron is in Phase 3 trials
of its MF treatment, Imetelstat, which has actually and more powerfully
demonstrated life extending and potentially disease modifying (curative)
effects on MF in its trials. The price paid for Sierra is based on estimated
peak annual sales of $750 million. In their most recent quarterly results
presentation this month, Geron’s management estimated potential peak annual
sales of £3 billion for its combined treatments of MF and the closely-related
MDS diseases, both in Phase 3 trials, with the MDS trial being less than 12
months behind Sierra’s MF trial. On a comparable basis and without any
discount for uncertainty, this would value Geron at $4.5 billion which is
approximately 8 times its current market capitalisation. It represents a
share price of $11.50, which is considerably in excess of even the high end of
the price target range of $4.00 to $7.00 which leading industry brokers have
maintained on Geron for some time and compares to a current share price of
$1.50.
The proper realisation by the market of the true potential and therefore value
of our major US biotech investments plays a significant part in our own
ongoing dividend distribution policy. Levels of income reserves available to
us for distribution to shareholders have reduced in recent years following the
Covid pandemic when overall market income returns diminished significantly.
Additionally, the portfolio size on which we generate income is now much
smaller following the high and above market levels of distributions made to
shareholders over many years and the erratic capital performance of our US
investments, as described above. Going forward we have positioned ourselves
to take advantage of the capital growth we expect in these investments to fund
a major part of our future dividends.
Film Library Valuation
As noted in the Chairman’s statement above, we have conducted a 5 year
periodic review of the value of the revenue earning feature films owned by our
group subsidiary company, including Oliver!, The Day of the Jackal and The
Odessa File.
This review has been based on an updated financial calculation of the
discounted future estimated cash flows projected to be generated by the films
over the full period of copyright (previously only for 10 years), adjusted for
recent trends in revenue receipts and long-term interest rates. In addition,
an independent valuation by an industry professional has been received, taking
into account the nature of the rights held, the periods of copyright, the
quality and long-term marketability of the films and current values achieved
in the film distribution and media rights acquisition markets.
As a result of this combined review, the valuation of the films has been
increased by 170 percent to £2 million.
Jonathan Woolf
28 April 2022
Income statement
For the year ended 31 December 2021
2021 2020
Revenue return Capital return Total Revenue return Capital return Total
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Investment income (note 2) 1,439 - 1,439 1,372 - 1,372
Holding gains on investments at fair value through profit or loss - 1,028 1,028 - 1,388 1,388
Losses on disposal of investments at fair value through profit or loss* - (585) (585) - (960) (960)
Foreign exchange gains/(losses) (4) 22 18 (44) (13) (57)
Expenses (422) (243) (665) (400) (242) (642)
________ ________ ________ ________ ________ ________
Profit before finance costs and tax 1,013 222 1,235 928 173 1,101
Finance costs (35) (4) (39) (49) (15) (64)
________ ________ ________ ________ ________ ________
Profit before tax 978 218 1,196 879 158 1,037
Tax 36 - 36 29 - 29
________ ________ ________ ________ ________ ________
Profit for the year 1,014 218 1,232 908 158 1,066
________ ________ ________ ________ ________ ________
Earnings per share
Basic – ordinary shares 2.66p 0.87p 3.53p 2.23p 0.63p 2.86p
________ ________ ________ ________ ________ ________
Diluted – ordinary shares 2.90p 0.62p 3.52p 2.59p 0.45p 3.04p
________ ________ ________ ________ ________ ________
The company does not have any income or expense that is not included in the
profit/(loss) for the year. Accordingly, the ‘Profit 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 £270,000 (2020 – £613,000 losses) and Losses on
provision for liabilities and charges of £315,000 (2020 – £347,000
losses).
Statement of changes in equity
For the year ended 31 December 2021
Share capital Capital reserve Retained earnings Total
£ 000 £ 000 £ 000 £ 000
Balance at 31 December 2019 35,000 (28,606) 110 6,504
Changes in equity for 2020
Profit for the period - 158 908 1,066
Ordinary dividend paid (note 4) - - (675) (675)
Preference dividend paid (note 4) - - (175) (175)
________ ________ ________ ________
Balance at 31 December 2020 35,000 (28,448) 168 6,720
Changes in equity for 2021
Profit for the period - 218 1,014 1,232
Ordinary dividend paid (note 4) - - (875) (875)
Preference dividend paid (note 4) - - (350) (350)
________ ________ ________ ________
Balance at 31 December 2021 35,000 (28,230) (43) 6,727
________ ________ ________ ________
Registered number: 00433137
Balance Sheet
At 31 December 2021
2021 2020
£ 000 £ 000
Non-current assets
Investments - fair value through profit or loss 6,124 6,436
Subsidiaries - fair value through profit or loss 6,707 5,719
__________ __________
12,831 12,155
Current assets
Receivables 535 1,605
Cash and cash equivalents 83 394
__________ __________
618 1,999
__________ __________
Total assets 13,449 14,154
__________ __________
Current liabilities
Trade and other payables 2,129 3,003
Bank loan 619 687
__________ __________
(2,748) (3,690)
__________ __________
Total assets less current liabilities 10,701 10,464
__________ __________
Non - current liabilities (3,974) (3,744)
__________ __________
Net assets 6,727 6,720
__________ __________
Equity attributable to equity holders
Ordinary share capital 25,000 25,000
Convertible preference share capital 10,000 10,000
Capital reserve (28,230) (28,448)
Retained revenue earnings (43) 168
__________ __________
Total equity 6,727 6,720
__________ __________
Approved: 28 April 2022
Cash flow statement
For the year ended 31 December 2021
Year ended 2021 Year ended 2020
£ 000 £ 000
Cash flows from operating activities
Profit before tax 1,196 1,037
Adjustments for:
Gains on investments (443) (428)
Dividends in specie (78) -
Proceeds on disposal of investments at fair value through profit and loss 1,708 2,619
Purchases of investments at fair value through profit and loss (1,610) (2,415)
Finance costs 39 64
__________ __________
Operating cash flows before movements in working capital 812 877
Decrease in receivables 551 34
Decrease in payables (549) (192)
__________ __________
Net cash from operating activities before interest 814 719
Interest paid (7) (31)
__________ __________
Net cash from operating activities 807 688
Cash flows from financing activities
Dividends paid on ordinary shares (875) (675)
Dividends paid on preference shares (175) (175)
Bank loan (68) (1,948)
__________ __________
Net cash used in financing activities (1,118) (2,798)
__________ __________
Net decrease in cash and cash equivalents (311) (2,110)
Cash and cash equivalents at beginning of year 394 2,504
__________ __________
Cash and cash equivalents at end of year 83 394
__________ __________
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 2021. 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 2021 is an extract from the
statutory accounts to that date. Statutory company accounts for 2020, which
were prepared under IFRS as adopted by the EU, have been delivered to the
registrar of companies and company statutory accounts for 2021, prepared under
IFRS as adopted by the EU, will be delivered in due course.
The auditors have reported on the 31 December 2021 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
2021 2020
£ 000 £ 000
Income from investments
UK dividends 391 221
Dividend from subsidiary 907 1,066
_________ _________
1,298 1,287
Other income 71 85
Other 70 -
_________ __________
Total income 1,439 1,372
_________ __________
Total income comprises:
Dividends 1,298 1,287
Other interest 141 85
_________ __________
1,439 1,372
_________ __________
Dividends from investments
Listed investments 391 221
Unlisted investments 907 1,066
_________ __________
1,298 1,287
_________ __________
Of the £1,298,000 (2020 – £1,287,000) dividends received, £204,000 (2020
– £90,000) related to special and other dividends received from investee
companies that were bought after the dividend announcement. There was a
corresponding capital loss of £249,000 (2020 – £324,000), 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 £171,000 (2020 –
£84,000) received by the subsidiary British & American Films Limited and
property unit trust income of £2,000 (2020 – £14,000) 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:
2021 2020
Revenue return Capital return Total Revenue return Capital return Total
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Earnings:
Basic 664 218 882 558 158 716
Preference dividend 350 - 350 350 - 350
__________ __________ __________ __________ __________ __________
Diluted 1,014 218 1,232 908 158 1,066
__________ __________ __________ __________ __________ __________
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 (2020: 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 (2020: 35
million) ordinary and preference shares in issue.
4 Dividends
2021 2020
£ 000 £ 000
Amounts recognised as distributions to equity holders in the period
Dividends on ordinary shares:
Final dividend for the year ended 31 December 2020 of 0.0p (2019: 0.0p) per share - -
First interim dividend for the year ended 31 December 2021 of 2.7p (2020: 2.7p) per share 675 675
Second interim dividend for the year ended 31 December 2021 of 0.8p (2020: 0.0p) per share 200 -
__________ __________
875 675
__________ __________
Proposed final dividend for the year ended 31 December 2021 of 0.0p (2020: 0.0p) per share - -
__________ __________
Dividends on 3.5% cumulative convertible preference shares:
Preference dividend for the 6 months ended 31 December 2020 of 0.00p (2019: 0.00p) per share - -
Preference dividend for the 6 months ended 30 June 2021 of 1.75p (2020: 1.75p) per share 175 175
Preference dividend for the 6 months ended 31 December 2021 of 1.75p (2020: 0.00p) per share 175 -
__________ __________
350 175
__________ __________
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
2021 2020
£ 000 £ 000
Dividends on ordinary shares:
First interim dividend for the year ended 31 December 2021 of 2.7p (2020: 2.7p) per share 675 675
Second interim dividend for the year ended 31 December 2021 of 0.8p (2020: 0.0p) per share 200 -
Proposed final dividend for the year ended 31 December 2021 of 0.0p (2020: 0.0p) per share - -
__________ __________
875 675
__________ __________
Dividends on 3.5% cumulative convertible preference shares:
Preference dividend for the year ended 31 December 2021 of 1.75p (2020: 1.75p) per share 175 175
Preference dividend for the year ended 31 December 2021 of 1.75p (2020: 0.00p) per share 175 -
__________ __________
350 175
__________ __________
The non-payment in December 2019 and in December 2020 of the dividend of 1.75
pence per share on the 3.5% cumulative convertible preference shares,
consequent upon the non-payment of a final dividend on the ordinary shares for
the year ended 31 December 2019 and for the year ended 31 December 2020, has
resulted in arrears of £350,000 on the 3.5% cumulative convertible preference
shares.
1st interim dividend declared for the year ended 31 December 2021 of 2.7 pence
per ordinary share was paid on 24 June 2021 to shareholders on the register at
11 June 2021. A preference dividend of 1.75 pence was paid to preference
shareholders on the same date.
2nd interim dividend declared for the year ended 31 December 2021 of 0.8 pence
per ordinary share was paid on 9 December 2021 to shareholders on the register
at 12 November 2021. A preference dividend of 1.75 pence was payable to
preference shareholders on the same date.
The 2nd interim dividend declared and paid in the second half of 2021 was paid
from available distributable reserves shown in the published interim accounts
of 30 June 2021.
5 Net asset values
Net asset value per share
2021 2020
Ordinary shares £ £
Diluted 0.19 0.19
Undiluted 0.19 0.19
2021 2020
£ 000 £ 000
Total net assets 6,727 6,720
Less convertible preference shares at fully diluted value (1,922) (1,920)
__________ __________
Net assets attributable to ordinary shareholders 4,805 4,800
__________ __________
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.
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 2021 Annual Report and Accounts, but remain
unchanged from those published in the 2020 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 three
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 £772,000 (2020 – £nil) to British & American Films Limited and
for £532,000 (2020 – £455,000) to BritAm Investments Limited.
During the year the company entered into the investment transaction to
purchase stock for £1,243,000 (2020 – £nil) from 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 (2020 – £35,000,000) being
25,000,000 ordinary shares of £1 (2020 – 25,000,000) and 10,000,000
non-voting convertible preference shares of £1 each (2020 – 10,000,000).
The rights attaching to the shares will be explained in more detail in the
notes to the 2021 Annual Report and Accounts, but remain unchanged from those
published in the 2020 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 Tuesday 28 June
2022 at 12.15pm at Wessex House, 1 Chesham Street, London SW1X 8ND.
Copyright (c) 2022 PR Newswire Association,LLC. All Rights ReservedRecent news on British and American Investment Trust
See all newsREG-British & American Investment Trust Plc: Net Asset Value(s)
AnnouncementREG-British & American Investment Trust Plc: Annual Financial Report
AnnouncementREG-British & American Investment Trust Plc: Net Asset Value(s)
AnnouncementREG-British & American Investment Trust Plc: Net Asset Value(s)
AnnouncementREG-British & American Investment Trust Plc: Net Asset Value(s)
Announcement