REG-British & American: Half-year Report
27/09/2019 15:50
BRITISH & AMERICAN INVESTMENT TRUST PLC
FINANCIAL HIGHLIGHTS
For the six months ended 30 June 2019
Unaudited Unaudited 6 months to 30 June 2018 £’000 Audited Year ended 31 December 2018 £’000
6 months to 30 June
2019 £’000
Revenue
Return before tax 356 864 2,489
_________ _________ _________
Earnings per £1 ordinary shares – basic (note 5) 0.77p 2.81p 8.68p
_________ _________ _________
Earnings per £1 ordinary shares – diluted (note 5) 1.05p 2.51p 7.20p
_________ _________ _________
Capital
Total equity 8,243 17,518 7,919
_________ _________ _________
Revenue reserve (note 9) 414 929 1,721
_________ _________ _________
Capital reserve (note 9) (27,171) (18,411) (28,802)
_________ _________ _________
Net assets per ordinary share (note 6)
- Basic* £0.24 £0.50 £0.23
_________ _________ _________
- Diluted £0.24 £0.50 £0.23
_________ _________ _________
Diluted net assets per ordinary share at 25 September 2019 £0.23
_________
Dividends**
Dividends per ordinary share (note 4) 2.7p 2.7p 8.7p
_________ _________ _________
Dividends per preference share (note 4) 1.75p 1.75p 3.5p
_________ _________ _________
*Basic net assets and earnings per share are calculated using a value of fully
diluted net asset value for the preference shares. Basic net assets per
ordinary share at 30 June 2018 and at 31 December 2018 have been restated
using a value of fully diluted net asset value for the preference shares
instead of using a value of par for the preference shares.
**Dividends declared for the period. Dividends shown in the accounts are, by
contrast, dividends paid or approved
in the period.
Copies of this report will be posted to shareholders and be available for
download at the company’s website: www.baitgroup.co.uk.
INVESTMENT PORTFOLIO
As at 30 June 2019
Company Nature of Business Valuation Percentageof portfolio
£’000 %
Dunedin Income Growth Investment Trust 2,750 18.21
Geron Corporation (USA) Biomedical 2,507 16.60
Biotime Inc (USA) Biotechnology 1,849 12.24
Aberdeen Diversified Income & Growth Investment Trust 771 5.11
Invesco Income Growth Trust Investment Trust 543 3.60
________ ________
Merchants Trust Investment Trust 490 3.25
AgeX (USA) Biotechnology 349 2.31
Braemar Shipping Services Transport 87 0.58
Angle Support Services 57 0.37
ADVFN Other financial 34 0.22
________ ________
10 Largest investments (excluding subsidiaries) 9,437 62.49
Investment in subsidiaries 5,537 36.66
Other investments (number of holdings : 11) 128 0.85
________ ________
Total investments 15,102 100.00
________ ________
Unaudited Interim Report
As at 30 June 2019
Registered number: 433137
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) London SW1X 8ND
Alex Tamlyn (Non-executive) Telephone: 020 7201 3100
Website: www.baitgroup.co.uk
Chairman’s Statement
I report our results for the 6 months to 30 June 2019.
Revenue
The profit on the revenue account before tax amounted to £0.4 million (30
June 2018: £0.9 million), a decrease of 54.9 percent. This difference was
primarily due to a reduction in income received during the period from
subsidiary companies but also a reduction in dividends received from external
investments.
The figures presented above relate to the parent company only and not to the
consolidated group, as required by accounting rule IFRS10. For information
purposes, we show in Note 3 to the accounts the film and other income of our
subsidiaries. This shows that film income of £31,000 (30 June 2018: £36,000)
and property unit trust income of £7,000 (30 June 2018: £7,000) was
received.
A gain of £1.8 million (30 June 2018: £2.8 million gain) was registered on
the capital account before capitalised expenses, comprising a realised loss of
£0.1 million (30 June 2018: £0.6 million loss) and an unrealised gain of
£1.9 million (30 June 2018: £3.4 million gain).
Revenue earnings per ordinary share were 0.8 pence on an undiluted basis (30
June 2018: 2.8 pence) and 1.0 pence on a fully diluted basis (30 June 2018:
2.5 pence).
Net Assets and performance
Company net assets were £8.2 million (£7.9 million, at 31 December 2018), an
increase of 4.1 percent. Over the same six month period, the FTSE 100 index
increased by 10.4 percent and the All Share index increased by 10.4 percent.
On a total return basis, after adding back dividends paid during the period,
company net assets increased by 25.2 percent compared to an increase of the
total return on the FTSE 100 index of approximately 13.5 percent. The net
asset value per £1 ordinary share was 24 pence on a fully diluted basis.
The increase in net assets over the period reflected gains of 35 percent in
the value of our largest US holding, Geron Corporation, over the
period. Despite this substantial rise in value from the lows reached at the
end of 2018 following the withdrawal of its partner Johnson & Johnson in
September last year, it was not sufficient to produce outperformance in the
portfolio as a whole when measured against the benchmarks which had themselves
showed strong performances in the first 6 months of 2019. However, on a
total return basis, the portfolio significantly outperformed the benchmarks
notwithstanding their strong performance.
As noted in my statement of 30(th) April, Geron’s share price had started to
recover in the early months of 2019 after the sudden shock of Johnson &
Johnson’s withdrawal which had resulted in a drop of over 80 percent in the
fourth quarter of 2018. In April we had been able to report a gain of 90
percent since the beginning of the year, but this had reduced to 35 percent by
the half year, following the substantial fall in stock markets generally in
the second quarter, as discussed in more detail below. More detailed
commentary on the performance and prospects of Geron Corporation and the
portfolio as a whole is set out in the Managing Director’s Report below.
The general investment climate has not changed markedly from when I reported
in April. The two principal drivers of interest rate expectations and
progress or otherwise in the trade stand-off between the USA and China have
continued to dominate short-term equity market movements in the USA and the
UK.
In addition in the UK, the continuing and substantial political and economic
uncertainties of the Brexit process have added an element of high volatility
to pound sterling values with concomitant effects on UK large capitalisation
stocks with high foreign earnings. Between the second and third quarters,
sterling fell by 10 percent as the likelihood of a no-deal Brexit increased on
the back of the political stalemate in Parliament, the extension of the 31(st)
March deadline to 31(st) October and the change of prime-minister in June.
However, the cheaper currency helped to support UK equity prices which climbed
more than 8 percent over this period despite the worsening outlook and a
slowdown in economic growth to nil over the summer months.
In the USA, equities rose by almost 15 percent in the first half of 2019,
supported by the continuing effects of Trump’s 2017 tax cuts on corporate
earnings and increased expectations of a standstill or even reversal in the
Federal Reserve’s prior year policy of gradually increasing interest
rates. Even though economic growth and reported earnings continued
relatively firm, the growing strains and uncertainties placed on businesses by
the deteriorating trade dispute with China was beginning to change the
outlook, with expectations developing of a possible recession in 2020. This
was further underlined by the reversion in the US dollar yield curve in
August, an indicator which usually presages a reversal in economic growth in
the short to medium term.
Dividend
We intend to pay an interim dividend of 2.7 pence per ordinary share on 12
December 2019 to shareholders on the register at 22 November 2019. This
represents an unchanged dividend from last year’s interim dividend. A
preference dividend of 1.75 pence will be paid to preference shareholders on
the same date.
As noted in my full year statement in April, we generate a significant
proportion of our income reserves from gains earned by our subsidiary
companies and this allows us to pay dividends considerably in excess of
overall portfolio yield. Unless the value of our largest investment, Geron
Corporation, recovers further over the coming period towards the levels seen
during 2018 we will not be able to maintain our dividend going forward at
current levels.
Outlook
The determination of markets to ignore the growing political and economic
headwinds and uncertainties reported in my last statement in April seems to
have faltered. Equity markets in the USA and UK retrenched considerably in
the second quarter showing increased levels of volatility and this has
continued into the third quarter. While the current major unresolved
politico-economic issues such as Brexit, the China/USA trade war and looming
global economic downturn remain unresolved, markets appear likely to remain
below the peaks achieved in 2018 following years of monetary and fiscal
stimulus. Without a positive resolution of these issues or a return to
substantial monetary intervention by central banks which seems unlikely,
markets generally seem to be preparing for a period of underperformance.
In the light of this, we have trimmed some of our long term investment
positions in recent months. We believe, however, the value of our principal US
investment will continue to recover and then grow as its outstanding results
and prospects become valued again by the market after the unexpected shock
experienced last year. We are, therefore, currently focused on capturing the
uplift in value which we believe this investment will bring to the portfolio.
As at 25 September, company net assets were £8.0 million, a decrease of 2.9
percent since 30 June. This compares with a decrease in the FTSE 100 index of
1.8 percent and a decrease of 1.3 percent in the All Share index over the same
period, and is equivalent to 22.9 pence per share (prior charges deducted at
fully diluted value) and 22.9 pence per share on a fully diluted basis.
David Seligman
27 September 2019
Managing Director’s Report
The arrival of 2019 saw US and UK equity markets enter one of the longest
periods of uninterrupted growth on record, with the UK market growing by 105
percent and the US market growing by 275 percent over the last 10 years.
This followed the falls of 50 percent in these markets in the aftermath of the
‘great recession’ of 2008.
In 2008/9, central banks commenced a programme of unprecedented monetary
stimulus measures which included many years of near zero or even negative
interest rates and large quantitative easing programmes to promote what turned
out to be only a gradual and slow multi-year recovery in developed country
economies. In 2017, the Trump White House added to these measures with a
substantial late-cycle and politically-motivated fiscal stimulus in the form
of large-scale corporate tax reductions and reliefs, which had the effect of
temporarily boosting growth and employment statistics in the USA.
The record longevity of the current equity bull market can only be ascribed to
these unprecedentedly large and extended measures since, at the same time, and
particularly over the last two years, investors have had to contend with a
growing number and severity of international political and economic concerns
and disruptions which would normally dampen investor appetite for equity
holding.
As we have reported here in previous periods, these have ranged from haphazard
policy making, erratic international relations and isolationism from the USA,
potential nuclear stand-off in the Korean peninsula, a damaging trade war
between the USA and China, unprecedented and uncontrolled levels of political
and economic migration into Europe and the USA leading to civil disquiet and
distorted policy making, Brexit, interference by a recidivist Russia in the
elections, sovereignty and security of other countries, disruption of
traditional industries by AI and the new digital economy and the gradual
erosion of norms relating to the international rules based system through
populism which have provided an important measure of long term certainty and
stability for corporate planning and investment. Despite all this, equity
markets have forged ahead continuously over the last decade without
significant correction and seemingly oblivious to the worrying world political
and economic trends which were establishing themselves.
In recent months, however, signs have emerged that investors’ resilience to
these concerns may now be on the wane, particularly in the UK where the
continuing and unresolved Brexit drama is now weighing on the real economy
with growth and investment stalling in the second quarter. In the USA, the
Federal Reserve’s prior policy of gradually increasing interest rates has
been reversed with the first cut in rates last July since 2008 and a further
cut announced this month as economic growth rates decline under pressure from
self-imposed international trade tariffs. In Europe growth in the major
economies of Germany and France has stalled as international economic growth
and activity declines. All these developments have started to dampen
investor sentiment with volatility levels rising, fixed interest yields
falling again and recently an inversion in the US dollar yield curve
occurring, albeit with a small margin and for a short period of time. All
these events would appear to indicate a measure of realism creeping into
investor calculations and a period of weakness ahead in equity markets.
As indicated in prior reports and in recognition of the above described
concerns, we have preferred not to take on new investment positions but have
reduced borrowing and made some modest reductions in some of our longer held
fund positions. We continue to place our main focus on achieving our capital
growth objectives through exposure to our targeted US biotechnology
investments and our income objectives through our existing UK fund
investments, capturing special dividends and income received from group
subsidiaries.
Geron Corporation
A detailed report of the events which occurred at the end of last year and
which adversely affected the value of our largest investment, Geron
Corporation, was given April in our annual report. The unexpected withdrawal
of Johnson & Johnson from its partnership with Geron in September 2018
resulted in a substantial fall of 80 percent in Geron’s stock value in the
fourth quarter of 2018. Subsequently, however, the stock value recovered by 90
percent in the first four months of 2019 from its end 2018 lows, following the
publication in December 2018 of outstanding Phase 2 clinical trial results in
two major hematologic cancer indications (MDS and MF) in which Geron’s drug,
Imetelstat, outperformed the drugs currently on the market and in development
for these diseases. Also, in the first quarter of 2019, Geron announced the
hiring of a number of highly experienced clinical trial executives who until
last September had led Imetelstat’s clinical trials at Johnson & Johnson
which had produced such impressive Phase 2 results.
Since April, additional updated clinical trial results have been reported
showing further improved results and additional highly experienced clinical
trial executives previously with Johnson & Johnson have been hired. The formal
transfer from Johnson & Johnson to Geron of 100 percent of Imetelstat, its
intellectual and trial data and materials, was completed and in August Geron
also made the important announcement of the initiation of Phase 3 clinical
trials in MDS.
All these positive developments have helped Geron’s stock price recover
somewhat in 2019 as the market begins to move past the shock of the unexpected
event of 2018 and begins to value again Geron’s future potential as it had
begun to do in 2018. In recent months, three leading industry analysts have
assigned short to medium term price targets to Geron’s stock at three times
its current level, based on the results of the clinical trials to date and the
size of its potential market and the lack of alternative effective drugs in
the these markets. As at 25 September 2019, Geron’s stock price has
recovered by 38.8 percent from the end 2018 lows.
For these reasons, we believe that Geron continues to represent a strong and
compelling investment opportunity and it remains the focus of our efforts to
realise capital gain in the portfolio given the current outlook for the wider
investment markets, as discussed above.
27 September 2019
CONDENSED INCOME STATEMENT
Six months ended 30 June 2019
Unaudited Unaudited 6 months to 30 June 2018 Audited Year ended 31 December 2018
6 months to 30 June 2019
Note Revenue Capital Total Revenue return £’000 Capital return £’000 Total £’000 Revenue return £’000 Capital return £’000 Total £’000
return return £’000
£’000 £’000
Investment income 3 597 - 597 1,104 - 1,104 3,056 - 3,056
Holding gains/(losses) on investments at fair value through profit or loss - 1,925 1,925 - 3,549 3,549 - (4,644) (4,644)
Losses on disposal of investments at fair value through profit or loss - (152) (152) - (643) (643) - (2,647) (2,647)
Foreign exchange losses (1) (1) (2) (12) (12) (24) (61) (62) (123)
Expenses (215) (116) (331) (203) (116) (319) (457) (237) (694)
_____ _____ _____ _____ _____ _____ _____ _____ _____
Profit/(loss) before finance costs and tax 381 1,656 2,037 889 2,778 3,667 2,538 (7,590) (5,052)
Finance costs (25) (25) (50) (25) (22) (47) (49) (45) (94)
_____ _____ _____ _____ _____ _____ _____ _____ _____
Profit/(loss) before tax 356 1,631 1,987 864 2,756 3,620 2,489 (7,635) (5,146)
Taxation 12 - 12 14 - 14 31 - 31
_____ _____ _____ _____ _____ _____ _____ _____ _____
Profit/(loss) for the period 368 1,631 1,999 878 2,756 3,634 2,520 (7,635) (5,115)
_____ _____ _____ _____ _____ _____ _____ _____ _____
Earnings per ordinary share 5
Basic 0.77p 6.52p 7.29p 2.81p 11.03p 13.84p 8.68p (30.54)p (21.86)p
Diluted 1.05p 4.66p 5.71p 2.51p 7.87p 10.38p 7.20p (21.81)p (14.61)p
The company does not have any income or expense that is not included in
profit/(loss) for the period and all items derive from continuing
operations. Accordingly, the ‘Profit/(loss)’ for the period is also the
‘Total Comprehensive Income for the period’ as defined in IAS 1(revised)
and no separate Statement of Comprehensive Income has been presented.
The total column of this statement is the company’s Income Statement,
prepared in accordance with IFRS. The supplementary revenue return and
capital return columns are both prepared under guidelines published by the
Association of Investment Companies.
All profit and total comprehensive income is attributable to the equity
holders of the company.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2019
Unaudited
Six months ended 30 June 2019
Share Capital Retained Total £’000
capital* reserve earnings
£’000 £’000 £’000
Balance at 31 December 2018 35,000 (28,802) 1,721 7,919
Profit for the period - 1,631 368 1,999
Ordinary dividend paid - - (1,500) (1,500)
Preference dividend paid - - (175) (175)
________ ________ ________ ________
Balance at 30 June 2019 35,000 (27,171) 414 8,243
________ ________ ________ ________
Unaudited Six months ended 30 June 2018
Share capital* £’000 Capital reserve £’000 Retained earnings £’000 Total £’000
Balance at 31 December 2017 35,000 (21,167) 1,701 15,534
Profit for the period - 2,756 878 3,634
Ordinary dividend paid - - (1,475) (1,475)
Preference dividend paid - - (175) (175)
________ ________ ________ ________
Balance at 30 June 2018 35,000 (18,411) 929 17,518
________ ________ ________ ________
Audited Year ended 31 December 2018
Share capital* £’000 Capital reserve £’000 Retained earnings £’000 Total £’000
Balance at 31 December 2017 35,000 (21,167) 1,701 15,534
Profit/(loss) for the period - (7,635) 2,520 (5,115)
Ordinary dividend paid - - (2,150) (2,150)
Preference dividend paid - - (350) (350)
________ ________ ________ ________
Balance at 31 December 2018 35,000 (28,802) 1,721 7,919
________ ________ ________ ________
*The company’s share capital comprises £35,000,000 (2018 - £35,000,000)
being 25,000,000 ordinary shares of £1 (2018 - 25,000,000) and 10,000,000
non-voting convertible preference shares of £1 each (2018 - 10,000,000).
CONDENSED BALANCE SHEET
As at 30 June 2019
Note Unaudited Unaudited 30 June 2018 £’000 Audited 31 December 2018 £’000
30 June
2019 £’000
Non-current assets
Investments – fair value through profit or loss (note 1) 9,565 15,866 8,722
Subsidiaries – fair value through profit or loss 5,537 6,375 5,269
_________ _________ _________
15,102 22,241 13,991
Current assets
Receivables 3,543 4,055 3,417
Cash and cash equivalents 232 725 244
_________ _________ _________
3,775 4,780 3,661
_________ _________ _________
Total assets 18,877 27,021 17,652
_________ _________ _________
Current liabilities
Trade and other payables (1,593) (2,006) (547)
Bank loan (2,772) (2,717) (2,790)
_________ _________ _________
(4,365) (4,723) (3,337)
_________ _________ _________
Total assets less current liabilities 14,512 22,298 14,315
_________ _________ _________
Non – current liabilities (6,269) (4,780) (6,396)
_________ _________ _________
Net assets 8,243 17,518 7,919
_________ _________ _________
Equity attributable to equity holders
Ordinary share capital 25,000 25,000 25,000
Convertible preference share capital 10,000 10,000 10,000
Capital reserve (27,171) (18,411) (28,802)
Retained revenue earnings 414 929 1,721
_________ _________ _________
Total equity 8,243 17,518 7,919
_________ _________ _________
Net assets per ordinary share – basic 6 £0.24 £0.50 £0.23
_________ _________ _________
Net assets per ordinary share – diluted 6 £0.24 £0.50 £0.23
_________ _________ _________
CONDENSED CASHFLOW STATEMENT
Six months ended 30 June 2019
Unaudited Unaudited 6 months to 30 June 2018 £’000 Audited Year ended 31 December 2018 £’000
6 months to
30 June
2019 £’000
Cash flow from operating activities
Profit/(loss) before tax 1,987 3,620 (5,146)
Adjustment for:
(Gains)/losses on investments (1,739) (2,906) 7,291
Scrip dividends - - (290)
Proceeds on disposal of investments at fair value
through profit or loss 7,459 7,699 13,635
Purchases of investments at fair value
through profit or loss (7,638) (5,967) (12,335)
Interest 50 47 94
________ ________ ________
Operating cash flows before movements
in working capital 119 2,493 3,249
Decrease/(increase) in receivables 567 (269) (712)
Decrease in payables (12) (491) (773)
________ ________ ________
Net cash from operating activities
before interest 674 1,733 1,764
Interest paid (50) (44) (90)
________ ________ ________
Net cash flows from operating activities 624 1,689 1,674
________ ________ ________
Cash flows from financing activities
Dividends paid on ordinary shares (618) (1,475) (1,839)
Dividends paid on preference shares - (175) (350)
Bank loan (18) (1,527) (1,454)
________ ________ ________
Net cash used in financing activities (636) (3,177) (3,643)
________ ________ ________
Net decrease in cash and cash equivalents (12) (1,488) (1,969)
Cash and cash equivalents at beginning of period 244 2,213 2,213
________ ________ ________
Cash and cash equivalents at end of period 232 725 244
________ ________ ________
NOTES TO THE COMPANY’S CONDENSED FINANCIAL STATEMENT
1. Accounting policies
Basis of preparation and statement of compliance
This interim report is prepared in accordance with IAS 34 ‘Interim Financial
Reporting’ and on the basis of the accounting policies set out in the
company’s Annual Report and financial statements at 31 December 2018 with
the exception of the application of new accounting standards.
The company’s condensed financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union, which comprise standards and interpretations approved
by the IASB and International Accounting Standards and Standing
Interpretations Committee interpretations approved by the IASC that remain in
effect, and to the extent they have been adopted by the European Union.
In accordance with IFRS 10, the group does not consolidate its subsidiaries
and therefore instead of preparing group accounts it prepares separate
financial statements for the parent entity only.
The financial statements have been prepared on the historical cost basis
except for the measurement at fair value of investments, derivative financial
instruments, and subsidiaries. The same accounting policies as those published
in the statutory accounts for 31 December 2018 have been applied.
Significant accounting policies
In order to better reflect the activities of an investment trust company and
in accordance with guidance issued by the Association of Investment Companies
(AIC), supplementary information which analyses the income statement between
items of a revenue and capital nature has been presented alongside the income
statement.
As the entity’s business is investing in financial assets with a view to
profiting from their total return in the form of interest, dividends or
increases in fair value, listed equities and fixed income securities are
designated as fair value through profit or loss on initial recognition. The
company manages and evaluates the performance of these investments on a fair
value basis in accordance with its investment strategy, and information about
the group is provided internally on this basis to the entity’s key
management personnel.
Investments held at fair value through profit or loss, including derivatives
held for trading, are initially recognised at fair value.
All purchases and sales of investments are recognised on the trade date.
After initial recognition, investments, which are designated as at fair value
through profit or loss, are measured at fair value. Gains or losses on
investments designated at fair value through profit or loss are included in
profit or loss as a capital item, and material transaction costs on
acquisition and disposal of investments are expensed and included in the
capital column of the income statement. For investments that are actively
traded in organised financial markets, fair value is determined by reference
to Stock Exchange quoted market closing prices or last traded prices,
depending upon the convention of the exchange on which the investment is
quoted at the close of business on the balance sheet date. Investments in
units of unit trusts or shares in OEICs are valued at the closing price
released by the relevant investment manager.
In respect of unquoted investments, or where the market for a financial
instrument is not active, fair value is established by using an appropriate
valuation technique.
Investments of the company in subsidiary companies are held at the fair value
of their underlying assets and liabilities.
This includes the valuation of film rights in British and American Films
Limited and thus the fair value of its immediate parent BritAm Investments
Limited. In determining the fair value of the film rights, estimates are made.
These include future film revenues which are estimated by the management.
Estimations made have taken into account historical results, current trends
and other relevant factors.
Where a subsidiary has negative net assets it is included in investments at
£nil value and a provision is made for it on the balance sheet where the
ultimate parent company has entered into a guarantee to pay the liabilities if
they fall due.
Dividend income from investments is recognised as income when the
shareholders’ rights to receive payment has been established, normally the
ex-dividend date.
Interest income on fixed interest securities is recognised on a time
apportionment basis so as to reflect the effective interest rate of the
security.
When special dividends are received, the underlying circumstances are reviewed
on a case by case basis in determining whether the amount is capital or income
in nature. Amounts recognised as income will form part of the company's
distribution. Any tax thereon will follow the accounting treatment of the
principal amount.
All expenses are accounted for on an accruals basis. Expenses are charged as
revenue items in the income statement except as follows:
– transaction costs which are incurred on the purchase or sale of an
investment designated as fair value through profit or loss are expensed and
included in the capital column of the income statement;
– expenses are split and presented partly as capital items where a
connection with the maintenance or enhancement of the value of the investments
held can be demonstrated, and accordingly investment management and related
costs have been allocated 50% (2018 – 50%) to revenue and 50% (2018 – 50%)
to capital, in order to reflect the directors' long-term view of the nature of
the expected investment returns of the company.
The 3.5% cumulative convertible non-redeemable preference shares issued by the
company are classified as equity instruments in accordance with IAS 32
‘Financial Instruments – Presentation’ as the company has no contractual
obligation to redeem the preference shares for cash or pay preference
dividends unless similar dividends are declared to ordinary shareholders.
2. Segmental reporting
The directors are of the opinion that the company is engaged in a single
segment of business, that is investment business, and therefore no segmental
reporting is provided.
3. Income
Unaudited Unaudited 6 months to 30 June 2018 £’000 Audited Year ended 31 December 2018 £’000
6 months
to 30 June
2019
£’000
Income from investments 568 1,083 3,008
Other income 29 21 48
_________ _________ _________
597 1,104 3,056
_______ _______ _______
Of the £568,000 (30 June 2018 – £783,000, 31 December 2018 –
£1,562,000) dividends received from listed investments in the company
accounts, £434,000 (30 June 2018 – £641,000, 31 December 2018 –
£997,000) related to special and other dividends received from investee
companies that were bought after the dividend announcement. There was a
corresponding capital loss of £498,000 (30 June 2018 – £573,000, 31
December 2018 – £1,007,000) 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 £31,000 (30 June 2018 -
£36,000, 31 December 2018 - £92,000) received by the subsidiary British &
American Films Limited and property unit trust income of £7,000 (30 June 2018
- £7,000, 31 December 2018 - £14,000) received by the subsidiary BritAm
Investments Limited are shown separately in this paragraph for information
purposes.
4. Proposed dividends
Unaudited 6 months to 30 June 2019 Unaudited 6 months to 30 June 2018 Audited Year ended 31 December 2018
Interim Interim Final
Pence per share £’000 Pence per share £’000 Pence per share £’000
Ordinary shares 2.7 675 2.7 675 6.0 1,500
Preference shares – fixed 1.75 175 1.75 175 1.75 175
_________ _________ _________
850 850 1,675
_______ _______ _______
The directors have declared an interim dividend of 2.7p (2018 – 2.7p) per
ordinary share, payable on 12 December 2019 to shareholders registered on 22
November 2019. The shares will be quoted ex–dividend on 21 November 2019.
The dividends on ordinary shares are based on 25,000,000 ordinary £1 shares.
Dividends on preference shares are based on 10,000,000 non-voting 3.5%
convertible preference shares of £1.
The holders of the 3.5% convertible preference shares will be paid a dividend
of £175,000 being 1.75p per share. The payment will be made on the same date
as the dividend to the ordinary shareholders.
Amounts recognised as distributions to ordinary shareholders in the period:
Unaudited 6 months to 30 June 2019 Unaudited 6 months to 30 June 2018 Audited Year ended 31 December 2018
Pence per share £’000 Pence per share £’000 Pence per share £’000
Ordinary shares – final 6.0 1,500 5.9 1,475 5.9 1,475
Ordinary shares – interim - - - - 2.7 675
Preference shares – fixed 1.75 175 1.75 175 3.5 350
_________ _________ _________
1,675 1,650 2,500
_______ _______ _______
5. Earnings per ordinary share
Unaudited Unaudited 6 months to 30 June 2018 £’000 Audited Year ended 31 December 2018 £’000
6 months
to 30 June
2019
£’000
Basic earnings per share
Calculated on the basis of:
Net revenue profit after preference dividends 193 703 2,170
Net capital gain/(loss) 1,631 2,756 (7,635)
_________ _________ _________
Net total earnings after preference dividends 1,824 3,459 (5,465)
_______ _______ _______
Number’000 Number’000 Number’000
Ordinary shares in issue 25,000 25,000 25,000
_______ _______ _______
Diluted earnings per share
Calculated on the basis of:
Net revenue profit 368 878 2,520
Net capital gain/(loss) 1,631 2,756 (7,635)
_________ _________ _________
Profit/(loss) after taxation 1,999 3,634 (5,115)
_______ _______ _______
Number’000 Number’000 Number’000
Ordinary and preference shares in issue 35,000 35,000 35,000
_______ _______ _______
Diluted earnings per share is calculated taking into account the preference
shares which are convertible to ordinary shares on a one for one basis, under
certain conditions, at any time during the period 1 January 2006 to 31
December 2025 (both dates inclusive).
6. Net asset value attributable to each share
Basic net asset value attributable to each share has been calculated by
reference to 25,000,000 ordinary shares, and company net assets attributable
to shareholders as follows:
Unaudited Unaudited 30 June 2018 £’000 Audited 31 December 2018 £’000
30 June
2019
£’000
restated restated
Total net assets 8,243 17,518 7,919
Less convertible preference shares at fully diluted value (2,355) (5,005) (2,263)
__________ __________ __________
Net assets attributable to ordinary shareholders 5,888 12,513* 5,656*
________ ________ ________
Diluted net asset value is calculated on the total net assets in the table
above and on 35,000,000 shares, taking into account the preference shares
which are convertible to ordinary shares on a one for one basis, under certain
conditions, at any time during the period 1 January 2006 to 31 December 2025
(both dates inclusive).
Basic net assets and earnings per share are calculated using a value of fully
diluted net asset value for the preference shares.
*Net assets attributable to ordinary shareholders at 30 June 2018 and at 31
December 2018 have been restated using a value of fully diluted net asset
value for the preference shares instead of using a value of par for the
preference shares.
7. Non – current liabilities
Guarantee of subsidiary liability Unaudited Unaudited 30 June 2018 £’000 Audited 31 December 2018 £’000
30 June
2019
£’000
Opening provision 6,396 4,666 4,666
(Decrease)/increase in period (127) 114 1,730
__________ __________ __________
Closing provision 6,269 4,780 6,396
________ ________ ________
The provision is in respect of a guarantee made by the company for liabilities
between its wholly owned subsidiaries, Second BritAm Investments Limited,
BritAm Investments Limited and British and American Films Limited. The
guarantee is to pay out the liabilities of Second BritAm Investments Limited
if they fall due. There is no current intention for these liabilities to be
called.
8. Related party transactions
Romulus Films Limited and Remus Films Limited have significant shareholdings
in the company: 6,902,812 (27.6%) ordinary shares held by Romulus Films
Limited and 7,868,750 (31.5%) ordinary shares held by Remus Films Limited).
Romulus Films Limited also holds 10,000,000 cumulative convertible preference
shares.
The company rents its offices from Romulus Films Limited, and is also charged
for its office overheads. During the period the company paid £17,000 (30 June
2018 – £17,000 and 31 December 2018 – £34,000) in respect of those
services.
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. Amounts charged by
these companies in the period to 30 June 2019 were £179,000 (30 June 2018 –
£172,000 and 31 December 2018 – £364,000) in respect of salary costs and
£23,000 (30 June 2018 – £23,000 and 31 December 2018 – £40,000) in
respect of pensions.
At the period end an amount of £876,000 (30 June 2018 – £44,000 and 31
December 2018 – £67,000) was due to Romulus Films Limited and £560,000 (30
June 2018 – £8,000 and 31 December 2018 – £36,000) was due to Remus
Films Limited.
During the period subsidiary BritAm Investments Limited paid dividends of
£nil (30 June 2018 – £300,000 and 31 December 2018 – £1,445,000) to the
parent company, British & American Investment Trust PLC.
British & American Investment Trust PLC has guaranteed the liabilities of
£6,269,000 (30 June 2018 – £4,780,000 and 31 December 2018 –
£6,396,000) due from Second BritAm Investments Limited to its fellow
subsidiaries if they should fall due.
During the period the company paid interest of £nil (30 June 2018 – £3,000
and 31 December 2018 – £3,000) on the loan due to Second BritAm Investments
Limited.
During the period the company received interest of £8,000 (30 June 2018 –
£7,000 and 31 December 2018 – £14,000) from British and American Films
Limited, £2,000 (30 June 2018 – £nil and 31 December 2018 – £1,000)
from Second BritAm Investments Limited and £19,000 (30 June 2018 – £14,000
and 31 December 2018 – £33,000) from BritAm Investments Limited.
All transactions with subsidiaries were made on an arm’s length basis.
9. Retained earnings
The table below shows the movement in the retained earnings analysed between
revenue and capital items.
Capital reserve £’000 Retained earnings £’000
1 January 2019 (28,802) 1,721
Allocation of profit for the period 1,631 368
Ordinary and preference dividends paid - (1,675)
_________ _________
At 30 June 2019 (27,171) 414
_______ _______
The capital reserve includes £7,255,000 of investment holding losses (30 June
2018 – £2,624,000 loss, 31 December 2018 – £9,839,000 loss).
10. Financial instruments
Financial instruments carried at fair value
All investments are carried at fair value. Other financial assets and
liabilities of the company are held at amounts that approximate to fair value.
The book value of cash at bank and bank loans included in these financial
statements approximate to fair value because of their short-term maturity.
Fair value hierarchy
The table below analyses recurring fair value measurements for financial
assets and financial liabilities.
These fair value measurements are categorised into different levels in the
fair value hierarchy based on the inputs to valuation techniques used. The
different levels are defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or
liabilities that the company can access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly:
1. Prices of recent transactions for identical instruments.
2. Valuation techniques using observable market data.
Level 3: Unobservable inputs for the asset or liability.
Financial assets and financial liabilities at fair value through profit or loss at 30 June 2019 Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
Investments:
Investments held at fair value through profit or loss 9,564 - 1 9,565
Subsidiary held at fair value through profit or loss - - 5,537 5,537
Total financial assets and liabilities carried at fair value 9,564 - 5,538 15,102
With the exception of the Sarossa Capital, BritAm Investments Limited
(unquoted subsidiary) and Second BritAm Investments Limited (unquoted
subsidiary), which are categorised as Level 3, all other investments are
categorised as Level 1.
Fair Value Assets in Level 3
The following table shows the reconciliation from the opening balances to the
closing balances for fair value measurement in Level 3 of the fair value
hierarchy.
Level 3
£’000
Opening fair value at 1 January 2019 5,277
Purchases -
Sales proceeds (8)
Gains on sales -
Investment holding gains 268
Closing fair value at 30 June 2019 5,537
Subsidiaries
The fair value of the subsidiaries is determined to be equal to the net asset
values of the subsidiaries at year end plus the uplift in the revaluation of
film rights in British and American Films Limited, a subsidiary of BritAm
Investments Limited.
The fair value of the film rights have been determined by estimating the
present value of the pre-tax film revenues in the next 10 years discounted at
a discount rate of 5%. The directors’ valuation of British & American Films
Limited has been based on pre-tax profits as sufficient group relief exists to
mitigate the tax effect.
There have been no transfers between levels of the fair value hierarchy during
the period. Transfers between levels of fair value hierarchy are deemed to
have occurred at the date of the event or change in circumstances that caused
the transfer.
11. Financial information
The financial information contained in this report does not constitute
statutory accounts as defined in Section 435 of the Companies Act 2006. The
financial information for the period ended 30 June 2019 and 30 June 2018 have
not been audited by the Company’s Auditor pursuant to the Auditing Practices
Board guidance. The information for the year to 31 December 2018 has been
extracted from the latest published Annual Report and Financial Statements,
which have been lodged with the Registrar of Companies, contained an
unqualified auditors’ report and did not contain a statement required under
Section 498(2) or (3) of the Companies Act 2006.
DIRECTORS’ STATEMENT
Principal risks and uncertainties
The principal risks and uncertainties faced by the company continue to be as
described in the previous annual accounts. Further information on each of
these areas, together with the risks associated with the company's financial
instruments are shown in the Directors' Report and notes to the financial
statements within the Annual Report and Accounts for the year ended 31
December 2018.
The Chairman’s Statement and Managing Director’s report include commentary
on the main factors affecting the investment portfolio during the period and
the outlook for the remainder of the year.
Directors’ Responsibilities Statement
The Directors are responsible for preparing the half-yearly report in
accordance with applicable law and regulations. The Directors confirm that to
the best of their knowledge the interim financial statements, within the
half-yearly report, have been prepared in accordance with IAS 34 'Interim
Financial Reporting'. The Directors are required to prepare the financial
statements on the going concern basis unless it is inappropriate to presume
that the company will continue in business. The Directors further confirm that
the Chairman’s Statement and Managing Director's Report includes a fair
review of the information required by 4.2.7R and 4.2.8R of the FCA’s
Disclosure and Transparency Rules.
The Directors of the company are listed in the section preceding the
Chairman’s Statement.
The half-yearly report was approved by the Board on 27 September 2019 and the
above responsibility statement was signed on its behalf by:
Jonathan C Woolf
Managing Director
Independent review report to the members of British & American Investment
Trust PLC
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report of British & American
Investment Trust PLC for the six months ended 30 June 2019 which comprises the
Condensed Income Statement, the Condensed Statement of Changes in Equity, the
Condensed Balance Sheet, the Condensed Cashflow Statement and related Notes to
the Company results. We have read the other information contained in the
half-yearly financial report being the Financial Highlights, the Chairman's
Statement, the Managing Director's Report, the Investment Portfolio and the
Directors' Statement, and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the company are
prepared in accordance with International Financial Reporting Standards as
adopted by the European Union. The condensed set of financial statements
included in this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34, 'Interim Financial Reporting', as
adopted by the European Union.
Our responsibility
Our responsibility is to express a conclusion on the condensed set of
financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2019 is not prepared, in all
material respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Use of our report
This report is made solely to the company, in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim
Financial Information performed by the Independent Auditor of the Entity'
issued by the Auditing Practices Board. Our review work has been undertaken so
that we might state to the company those matters we are required to state to
it in an independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company for our review work, for this report, or for the
conclusion we have formed.
HAZLEWOODS LLP
AUDITOR
Cheltenham
27 September 2019
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