REG-British & American: Half-year Report
30/09/2022 11:00
BRITISH & AMERICAN INVESTMENT TRUST PLC
FINANCIAL HIGHLIGHTS
For the six months ended 30 June 2022
Unaudited Unaudited 6 months to 30 June 2021 £’000 Audited Year ended 31 December 2021 £’000
6 months to 30 June
2022 £’000
Revenue
Return before tax (193) 1,056 978
_________ _________ _________
(Loss)/earnings per £1 ordinary shares – basic (note 5) (0.74)p 3.58p 2.66p
_________ _________ _________
(Loss)/earnings per £1 ordinary shares – diluted (note 5) (0.74)p 3.06p 2.90p
_________ _________ _________
Capital
Total equity 6,131 7,169 6,727
_________ _________ _________
Revenue reserve (note 9) (227) 388 (43)
_________ _________ _________
Capital reserve (note 9) (28,642) (28,219) (28,230)
_________ _________ _________
Net assets per ordinary share (note 6)
- Basic £0.18 £0.20 £0.19
_________ _________ _________
- Diluted £0.18 £0.20 £0.19
_________ _________ _________
Diluted net assets per ordinary share at 27 September 2022 £0.24
_________
Dividends*
Dividends per ordinary share (note 4) 0.0p 3.5p 3.5p
_________ _________ _________
Dividends per preference share (note 4) 0.0p 3.5p 3.5p
_________ _________ _________
Basic net assets and earnings per share are calculated using a value of fully
diluted net asset value 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 2022
Company Nature of Business Valuation Percentageof portfolio
£’000 %
Lineage Cell Therapeutics (USA)* Biotechnology 1,902 15.46
Geron Corporation (USA)** Biomedical 1,342 10.91
Dunedin Income Growth Investment Trust 1,235 10.04
Aberdeen Diversified Income & Growth Investment Trust 485 3.94
ADVFN Other financial 63 0.51
________ ________
Braemar Shipping Services Transport 50 0.41
Relief Therapeutics (Switzerland) Healthcare 49 0.40
AgeX (USA) Biotechnology 48 0.39
NRX Pharmaceuticals (USA) Healthcare 6 0.05
Proteome Sciences Pharmaceuticals 4 0.03
________ ________
10 Largest investments (excluding subsidiaries) 5,184 42.14
Investment in subsidiaries 7,109 57.78
Other investments (number of holdings: 6) 10 0.08
________ ________
Total investments 12,303 100.00
________ ________
* Total value of investment including held by subsidiary companies -
£2,959,000
** Total value of investment including held by subsidiary companies -
£4,591,000
Unaudited Interim Report
As at 30 June 2022
Registered number: 433137
Directors Registered office
David G Seligman (Chairman) Wessex House
Jonathan C Woolf (Managing Director) 1 Chesham Street
Julia Le Blan (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 six months to 30 June 2022.
Revenue
The loss on the revenue account before tax amounted to £0.2 million (30 June
2021: profit £1.1 million), a decrease of 118.0 percent. This decrease was
the result of a lower level of income receipts from our subsidiary companies
compared to the same 6 month period in 2021.
Gross revenues totalled £0.08 million (30 June 2021: £1.29 million) during
the period. In addition, film income of £47,000 (30 June 2021: £57,000) was
received in our subsidiary companies. In accordance with IFRS10, film income
is not included within the revenue figures noted above.
A loss of £0.5 million (30 June 2021: £0.3 million gain) was registered on
the capital account before capitalised expenses and foreign exchange
gains/losses, comprising a realised loss of £0.2 million (30 June 2021: £0.5
million loss) and an unrealised loss of £0.3 million (30 June 2021: £0.8
million gain).
Revenue loss per ordinary share was (0.74) pence on a fully diluted basis (30
June 2021: earnings 3.1 pence).
Net Assets and performance
Company net assets were £6.1 million (£6.7 million, at 31 December 2021), a
decrease of 8.9 percent. Over the same six month period, the FTSE 100 index
decreased by 2.9 percent and the All Share index decreased by 6.3 percent.
As no dividends were paid during the period, the total return on net assets
remains the same and the total return for the FTSE 100 and All Share indices
was an increase of 0.6 percent and a decrease of 2.8 percent, respectively.
The net asset value per £1 ordinary share was 17.5 pence on a fully diluted
basis.
This underperformance in net assets over the period was the result of a
significant fall in the value of one of our large US dollar investments,
Lineage Cell Therapeutics Inc, which declined by over 35 percent during the
period, a fall which was not fully offset by the increase of 27 percent in
value of our other large US dollar investment, Geron Corporation Inc.
Since the period end, the value of our investment in Geron has further
increased substantially to register a gain of 48 percent from the beginning of
the year, as discussed in more detail in the Managing Director’s report
below. This movement, when coupled with the strong 20 percent gain in the
value of the US dollar over the year to date, has resulted in our portfolio
achieving significant outperformance of 31 percent over the leading UK equity
indices since the beginning of the year.
Over the first six months of the year, as the effects of the Covid pandemic
diminished, equity markets in the USA and UK reacted primarily to two major
influences, the invasion of Ukraine by Russia in late February and a growing
expectation that inflation levels were likely to be significantly higher than
previously expected, leading to higher levels of interest rates as a result.
After opening relatively flat at the beginning of the year, the indices fell
by almost 10 percent after the invasion, only to recover quickly by the end of
the first quarter. However, a further drop of around 10 percent occurred at
the beginning of the second quarter as the inflationary and disruptive effects
of the war, particularly in the context of the unprecedented financial, trade
and energy-related sanctions placed on Russia began to take effect. A more
pronounced and steady decline in the US equity indices was in fact seen in the
second quarter with the US Federal Reserve being the first central bank to
indicate and implement a programme of significantly steeper interest rate
rises.
Dividends
With the recovery in value of one of our largest investments noted above, we
intend to pay an interim dividend of 1.75 pence per ordinary share for the
year to 31st December 2022 on 8th December 2022. A preference dividend of
1.75 pence per preference share will be paid on the same date.
This dividend payment represents a yield of approximately 7 percent on the
ordinary share price averaged over the first six month period of the year.
Recent events
Since I last reported some five months ago, two major and unexpected events
have occurred in the UK with the departure of a sitting Prime Minister and the
election of his replacement and the sad death this month of Her Majesty Queen
Elizabeth II.
These events, if nothing else, have shown the resilience, stability and
substance of both the institutions and constitutional underpinnings of our
nation and of the British people themselves.
The Board and I join with the rest of the British people, the Commonwealth and
indeed many around the world in thanking Her Majesty for her steadfastness,
wisdom and the great sense of duty which she brought to her reign of 70
years.
We send our sincere condolences to the new King Charles III and the royal
family and wish him well as he embarks on his reign and a new chapter for the
British people.
Outlook
The first major war of aggression on the continent of Europe since World War
II has continued to rage since the beginning of the year and is expected to do
so for some considerable time to come. This, together with the many
reactions to it including the imposition of unprecedented sanctions on the
aggressor, the cutting off of energy supplies to Europe, and the displacement
of people and the re-calibration of trade flows around the World has
inevitably resulted in substantial and long term economic and financial
disruption globally.
This war has prevented the re-establishment of the patterns of growth and
development which had persisted for many years prior to the intervention of
the Covid pandemic in 2020 as the pandemic started to eased towards the end of
last year. While businesses generally have been able to recover or adapt to
the new realities of working and social interaction post-the pandemic, the
outlook for business and economies remains very uncertain as significant
levels of inflation and consequentially higher interest rates return after
many years of exceptionally low levels. This is quite apart from the
uncertainties presented by an ongoing war in which one of the combatants is a
major nuclear power and the challenges represented by the ongoing re-alignment
of global alliances into two separately operating and antagonistic blocks.
Against this background, the strong and continuing recovery in the value of
our major US investment, Geron Corporation, which we believe reflects the
increasing proximity of its important clinical trial results due to be
published in January next year and the anticipated subsequent approval and
commercialisation of its new oncology drug should serve us well to offset the
investment uncertainties noted above. This and our other US biopharma
investments which we believe hold significant investment promise as they
progress steadily towards commercialisation of their ground-breaking and
valuable technologies provide our portfolio with a path to growth independent
of general market movements.
As at 27 September, company net assets were £8.4 million, an increase of 38.0
percent since the period end and equivalent to 24.1 pence per share on a fully
diluted basis. Over the same period, the FTSE 100 index decreased by 2.6
percent, the All Share index decreased by 3.3 percent and the NASDAQ decreased
by 1.8 percent.
David Seligman
30 September 2022
Managing Director’s Report
The two factors driving movements in markets in the current year – inflation
and the war in Ukraine – have been noted in the Chairman’s statement
above.
These are of course connected. Today’s inflationary forces had their origins
in the Covid pandemic, deriving specifically from the unprecedented levels of
government financial assistance given to citizens and companies, the
prolongation of historically low levels of official interest rates - and even
negative rates in some cases, the huge expansion of central bank balance
sheets through the policies of quantitive easing, the ballooning of government
deficits and debts and the disruption to global supply chains.
However, just at the time when the pandemic had started to ease following the
hugely successful global vaccination programme in 2020/21, when economic and
business growth had started to rebound and governments had started to withdraw
the emergency assistance programmes, this recovery to normal operation was
disrupted by the invasion of Ukraine at the beginning of 2022.
The effects of this war and developed economies’ response to it have been
global and substantial in nature. The anticipated return to normal levels of
economic growth has been interrupted and recession is now expected over the
coming months in the USA, the UK, Europe and other G20 countries. Supplies
of energy from Russia have either been reduced or stopped completely,
resulting in energy prices - particularly of gas - rising to many times their
pre-invasion levels. This has required governments in the UK and Europe to
put in place extensive and very expensive programmes of price stabilisation
for citizens and companies over the forthcoming winter to offset the otherwise
unaffordable costs.
All these developments – from the pandemic to the war – have directly led
to an accelerated and substantial increase in inflation, with levels today in
the West not seen for 40 years. In response, central banks have begun to
implement programmes of progressive and larger than expected interest rate
increases. The inevitable result of this over the period to come is further
downward pressure on growth and the financial positions of individuals,
companies and governments themselves. Ultimately, in the absence of
compensatory growth which seems difficult under the current circumstances and
outlook, governments will be faced with the choice between increases in tax or
cuts to services to return national balances to more normal and sustainable
levels. In fact, this very question became a major theme of the debate in
the contest to elect a new Prime Minister in the UK over the summer.
In response to analysts’ projections painting a gloomy and worsening outlook
in terms of growth, financial stability and inflation, markets have reacted
with substantially higher levels of volatility and lacklustre performance
overall for most of this year. Some projections, however, such as those from
a few leading banks which have forecast UK inflation to rise to over 20
percent in 2023, appear to be somewhat excessive, particularly in the light of
a recent softening in energy prices from their highs of the summer. These
commodities now constitute a much larger weighting by value in the inflation
basket calculations due to their higher prices and since most of these
increases occurred in the early part of the year when the war broke out, the
effect of these higher prices should begin to drop out of the calculation
entirely in the first half of 2023. In addition, further significant upward
pressure on inflation is being dampened by the already changing patterns of
behaviour of individuals and companies in their consumption and investment
choices - particularly in the area of energy – which are resulting in
increasing levels of demand destruction.
Given that most of the inflation being seen at this point derives principally
from the external price shock of energy prices and the disruption to
international trade rather than being domestically generated (as confirmed by
movements in the UK M4 broad money supply which peaked sharply in 2020 at the
start of the Covid pandemic but then quickly reverted to prior levels and has
not risen significantly since), this more optimistic scenario of peaking and
declining inflation remains a distinct possibility in the absence of further
external shocks.
Consequently, provided that current inflation levels are not worsened or
prolonged by excessive wage demands in the short term, which would risk
causing an inflationary spiral to match that experienced in the UK in the
1970s, the prospects that inflation could by contrast contract to considerably
lower levels in 2023 remain quite high. There is, however, already a great
deal of pressure on Government and employers through strikes and high levels
of job vacancies to agree inflation-linked wage demands now, but if these can
be resisted, at least for the next few months when inflation rates could
subside from current levels, there will be a better chance of avoiding a
domestically generated wage/price spiral which would embed higher rates of
inflation for the foreseeable future.
In the UK, the impact of the large financial and fiscal interventions
announced by the new government over the past few days is likely to be mixed
in terms of future levels of inflation by pulling in opposite directions and
contradictory in terms of future growth. While the substantial energy cost
stabilisation programmes for homes and businesses will have a significant
dampening effect on prospective inflation rates in the shorter term, in
anticipated amounts of up to 5 percent depending on the evolution of
international energy prices, the large and unfunded tax cuts intended to boost
demand will add greatly to government borrowing levels and therefore are
likely to result in higher and longer lasting levels of interest rates over
the medium term, with a negative effect on growth. Furthermore, the
unprecedented fall in the value of sterling which greeted these fiscal
adjustments will, if sustained, also increase levels of imported inflation
with a further dampening effect on growth.
While performing poorly this year and trading within a relatively narrow
range, markets have not sustained significant falls this year below the high
levels reached in 2021 following their recovery from the Covid pandemic shock
in 2020. If UK markets felt that above 20 percent inflation was a real
prospect in the short term, together with the resultant considerably higher
rates of interest going forward and for the longer term, a much more
precipitous downward movement into bear market territory would have been
likely to have been seen by now.
Geron Corporation.
The price of Geron stock has increased by a factor of 3 times (200 percent
increase) during the course of this year, indicating a much needed re-rating
of the stock from its previously very undervalued levels and allowing us to
resume payment of dividends to shareholders.
This re-rating is likely to reflect the proximity of the very important
announcement of Geron’s Phase 3 clinical trial results in Myelodysplastic
Syndrome (“MDS”) which has been confirmed to be no more than a few months
away in early January next year. If positive as expected, this will be
followed by FDA approval not long after and the commencement of commercial
sales of its novel and ground-breaking oncology drug, Imetelstat.
Geron’s market capitalisation has now regained the US$1 billion plus level
it stood at prior to the withdrawal of Johnson & Johnson from its
collaboration with the company – exactly 4 years ago this week in 2018 -
when Geron’s share price collapsed by over 80 percent in a matter of
weeks. It remained suppressed at these historically low levels over the
subsequent years, during which time Geron successfully completed two Phase 2
trials in MDS and Myelofibrosis (“MF”) and commenced two Phase 3 trials,
one of which - in MDS - is due to complete in just over 3 months time. It has
also commenced a number of other early stage haematological drug programmes
and partnerships with leading pharma companies. Geron also now owns 100
percent of its drug technology rather than the previous only 20 percent under
its former partnership with Johnson & Johnson and can therefore now expect 5
times greater returns from its technology once approved and commercialised.
Geron has been our major and strategic investment for well over 10 years and
our portfolio has suffered greatly - and particularly since 2018 - from
Geron’s unjustifiably low share price which, as noted on many occasions, we
felt did not reflect in any way the value of its ground-breaking and
proprietary technology and its potential. With its current re-rating and
assisted by the recent and substantial strength in the US dollar, Geron’s
value has now returned to its cost price in our portfolio and we look forward
to considerable further growth as Geron moves swiftly from a clinical to a
commercial biotechnology company in the months and years ahead.
Jonathan Woolf
30 September 2022
CONDENSED INCOME STATEMENT
Six months ended 30 June 2022
Unaudited Unaudited 6 months to 30 June 2021 Audited Year ended 31 December 2021
6 months to 30 June 2022
Note Revenuereturn £’000 Capital Return £’000 Total £’000 Revenue Return £’000 Capital Return £’000 Total £’000 Revenue Return £’000 Capital Return £’000 Total £’000
Investment income 3 79 - 79 1,286 - 1,286 1,439 - 1,439
Holding (losses)/gains on investments at fair value through profit or loss - (333) (333) - 848 848 - 1,028 1,028
Losses on disposal of investments at fair value through profit or loss - (206) (206) - (471) (471) - (585) (585)
Foreign exchange gains/(losses) (39) 253 214 3 (27) (24) (4) 22 18
Expenses (217) (124) (341) (214) (119) (333) (422) (243) (665)
_____ _____ _____ _____ _____ _____ _____ _____ _____
(Loss)/profit before finance costs and tax (177) (410) (587) 1,075 231 1,306 1,013 222 1,235
Finance costs (16) (2) (18) (19) (2) (21) (35) (4) (39)
_____ _____ _____ _____ _____ _____ _____ _____ _____
(Loss)/profit before tax (193) (412) (605) 1,056 229 1,285 978 218 1,196
Taxation 9 - 9 14 - 14 36 - 36
_____ _____ _____ _____ _____ _____ _____ _____ _____
(Loss)/profit for the period (184) (412) (596) 1,070 229 1,299 1,014 218 1,232
_____ _____ _____ _____ _____ _____ _____ _____ _____
(Loss)/earnings per ordinary share 5
Basic (0.74)p (1.65)p (2.39)p 3.58p 0.92p 4.50p 2.66p 0.87p 3.53p
Diluted* (0.74)p (1.65)p (2.39)p 3.06p 0.65p 3.71p 2.90p 0.62p 3.52p
The company does not have any income or expense that is not included in profit
for the period and all items derive from continuing operations. Accordingly,
the ‘(Loss)/profit 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.
*Calculated in accordance with International Accounting Standard 33
‘Earnings per Share’. Upon conversion of the preference shares to ordinary
shares the anti-diluted loss per share would be 0.53p (revenue return) and
1.18p (capital return).
CONDENSED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2022
Unaudited
Six months ended 30 June 2022
Share capital* £’000 Capital Reserve £’000 Retained Earnings £’000 Total £’000
Balance at 31 December 2021 35,000 (28,230) (43) 6,727
Loss for the period - (412) (184) (596)
________ ________ ________ ________
Balance at 30 June 2022 35,000 (28,642) (227) 6,131
________ ________ ________ ________
Unaudited Six months ended 30 June 2021
Share capital* £’000 Capital Reserve £’000 Retained Earnings £’000 Total £’000
Balance at 31 December 2020 35,000 (28,448) 168 6,720
Profit for the period - 229 1,070 1,299
Ordinary dividend paid - - (675) (675)
Preference dividend paid - - (175) (175)
________ ________ ________ ________
Balance at 30 June 2021 35,000 (28,219) 388 7,169
________ ________ ________ ________
Audited Year ended 31 December 2021
Share capital* £’000 Capital Reserve £’000 Retained Earnings £’000 Total £’000
Balance at 31 December 2020 35,000 (28,448) 168 6,720
Profit for the period - 218 1,014 1,232
Ordinary dividend paid - - (875) (875)
Preference dividend paid - - (350) (350)
________ ________ ________ ________
Balance at 31 December 2021 35,000 (28,230) (43) 6,727
________ ________ ________ ________
*The company’s share capital comprises £35,000,000 (2021 - £35,000,000)
being 25,000,000 ordinary shares of £1 (2021 - 25,000,000) and 10,000,000
non-voting convertible preference shares of £1 each (2021 - 10,000,000).
CONDENSED BALANCE SHEET
As at 30 June 2022
Note Unaudited 30 June 2022 £’000 Unaudited 30 June 2021 £’000 Audited 31 December 2021 £’000
Non-current assets
Investments – fair value through profit or loss (note 1) 5,194 7,068 6,124
Subsidiaries – fair value through profit or loss 7,109 5,794 6,707
_________ _________ _________
12,303 12,862 12,831
Current assets
Receivables 487 1,067 535
Cash and cash equivalents 23 320 83
_________ _________ _________
510 1,387 618
_________ _________ _________
Total assets 12,813 14,249 13,449
_________ _________ _________
Current liabilities
Trade and other payables (2,018) (2,565) (2,129)
Bank loan (814) (637) (619)
_________ _________ _________
(2,832) (3,202) (2,748)
_________ _________ _________
Total assets less current liabilities 9,981 11,047 10,701
_________ _________ _________
Non – current liabilities (3,850) (3,878) (3,974)
_________ _________ _________
Net assets 6,131 7,169 6,727
_________ _________ _________
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 (28,642) (28,219) (28,230)
Retained revenue earnings (227) 388 (43)
_________ _________ _________
Total equity 6,131 7,169 6,727
_________ _________ _________
Net assets per ordinary share – basic 6 £0.18 £0.20 £0.19
_________ _________ _________
Net assets per ordinary share – diluted 6 £0.18 £0.20 £0.19
_________ _________ _________
CONDENSED CASHFLOW STATEMENT
Six months ended 30 June 2022
Unaudited 6 months to 30 June Unaudited 6 months to 30 June 2021 £’000 Audited Year ended 31 December 2021 £’000
2022 £’000
Cash flow from operating activities
(Loss)/profit before tax (605) 1,285 1,196
Adjustment for:
Losses/(gains) on investments 539 (377) (443)
Dividends in specie - (78) (78)
Proceeds on disposal of investments at fair value
through profit or loss 313 1,089 1,708
Purchases of investments at fair value
through profit or loss (126) (1,270) (1,610)
Interest 18 21 39
________ ________ ________
Operating cash flows before movements
in working capital 139 670 812
(Increase)/decrease in receivables (264) 64 551
Increase/(decrease) in payables 49 95 (549)
________ ________ ________
Net cash from operating activities
before interest (76) 829 814
Interest paid (4) (3) (7)
________ ________ ________
Net cash flows from operating activities (80) 826 807
________ ________ ________
Cash flows from financing activities
Dividends paid on ordinary shares - (675) (875)
Dividends paid on preference shares (175) (175) (175)
Bank loan 195 (50) (68)
________ ________ ________
Net cash used in financing activities 20 (900) (1,118)
________ ________ ________
Net decrease in cash and cash equivalents (60) (74) (311)
Cash and cash equivalents at beginning of period 83 394 394
________ ________ ________
Cash and cash equivalents at end of period 23 320 83
________ ________ ________
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’ an International Financial Reporting Standard adopted by the
United Kingdom and on the basis of the accounting policies set out in the
company’s Annual Report and financial statements at 31 December 2021.
The company’s condensed financial statements should be read in conjunction
with the annual financial statements for the year ended 31 December 2021 which
are prepared in accordance with UK adopted International Financial Reporting
Standards (IFRS) and the Companies Act 2006.
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 2021 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 & 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 for liabilities is made on the balance sheet equal
to the value of the net liabilities of the subsidiary company where the
ultimate parent company has entered into a guarantee to pay the liabilities as
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% (2021 – 50%) to revenue and 50% (2021 – 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
information is provided.
3. Income
Unaudited Unaudited 6 months to 30 June 2021 £’000 Audited Year ended 31 December 2021 £’000
6 months
to 30 June
2022
£’000
Income from investments 47 1,248 1,298
Other income 32 38 141
_________ _________ _________
79 1,286 1,439
_______ _______ _______
Of the £47,000 (30 June 2021 – £1,248,000, 31 December 2021 –
£1,298,000) dividends received, £nil (30 June 2021 – £204,000, 31
December 2021 – £204,000) related to special and other dividends received
from investee companies that were bought after the dividend announcement.
There was a corresponding capital loss of £nil (30 June 2021 – £249,000,
31 December 2021 – £249,000) on these investments.
Under IFRS 10 the income analysis above includes the parent company only
rather than that of the group. In addition to the income above film revenues
of £47,000 (30 June 2021 – £57,000, 31 December 2021 –
£171,000) received by the subsidiary British & American Films Limited and
property unit trust income of £nil (30 June 2021 – £nil, 31 December 2021
– £2,000) was received by the subsidiary BritAm Investments Limited and
forms part of the net profit of those companies available for distribution to
the parent company.
4. Dividends
Unaudited 6 months to 30 June 2022 Unaudited 6 months to 30 June 2021 Audited Year ended 31 December 2021
Interim Interim Final
Pence per share £’000 Pence per share £’000 Pence per share £’000
Ordinary shares - paid - - 2.7 675 3.5 875
Ordinary shares - proposed - - 0.8 200 - -
Preference shares – paid - - 1.75 175 3.5 350
Preference shares – proposed - - 1.75 175 - -
________ ________ ________
- 1,225 1,225
________ ________ ________
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 non-payment in December 2019, in December 2020 and in June 2022 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, for the year ended 31 December
2020 and for the period ended 30 June 2022, has resulted in arrears of
£525,000 on the 3.5% cumulative convertible preference shares. These arrears
will become payable in the event that the ordinary shares receive, in any
financial year, a dividend on par value in excess of 3.5%.
Amounts recognised as distributions in respect of dividends paid in each
period:
Unaudited 6 months to 30 June 2022 Unaudited 6 months to 30 June 2021 Audited Year ended 31 December 2021
Pence per share £’000 Pence per share £’000 Pence per share £’000
Ordinary shares – Final - - - - - -
Ordinary shares – Interim - - 2.7 675 3.5 875
Preference shares – Fixed - - 1.75 175 3.5 350
_________ _________ _________
- 850 1,225
_______ _______ _______
5. (Loss)/earnings per ordinary share
Unaudited Unaudited 6 months to 30 June 2021 £’000 Audited Year ended 31 December 2021 £’000
6 months
to 30 June
2022
£’000
Basic (loss)/earnings per share
Calculated on the basis of:
Net revenue (loss)/profit after preference dividends (184) 895 664
Net capital (loss)/gain (412) 229 218
_________ _________ _________
Net total (loss)/earnings after preference dividends (596) 1,124 882
_______ _______ _______
Number’000 Number’000 Number’000
Ordinary shares in issue 25,000 25,000 25,000
_______ _______ _______
Diluted (loss)/earnings per share*
Calculated on the basis of: £’000 £’000 £’000
Net revenue (loss)/profit (184) 1,070 1,014
Net capital (loss)/gain (412) 229 218
_________ _________ _________
(Loss)/profit after taxation (596) 1,299 1,232
_______ _______ _______
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).
*Calculated in accordance with International Accounting Standard 33
‘Earnings per Share’. Upon conversion of the preference shares to ordinary
shares the anti-diluted loss per share would be 0.53p (revenue return) and
1.18p (capital return).
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 2021 £’000 Audited 31 December 2021 £’000
30 June
2022
£’000
Total net assets 6,131 7,169 6,727
Less convertible preference shares at fully diluted value (1,752) (2,048) (1,922)
__________ __________ __________
Net assets attributable to ordinary shareholders 4,379 5,121 4,805
________ ________ ________
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 per share is calculated using a value of fully diluted net
asset value for the preference shares.
7. Non – current liabilities
Guarantee of subsidiary liability Unaudited Unaudited 30 June 2021 £’000 Audited 31 December 2021 £’000
30 June
2022
£’000
Opening provision 3,974 3,744 3,744
(Decrease)/increase in period (124) 134 230
__________ __________ __________
Closing provision 3,850 3,878 3,974
________ ________ ________
The provision relates to a guarantee made by the company in respect of amounts
owed by Second BritAm Investments Limited to BritAm Investments Limited and
British & American Films Limited. There is no current intention for these
liabilities to be called for immediate payment by the subsidiary companies.
During the year ended 31 December 2019 as part of a transaction to hedge the
company against exchange effects of the foreign currency loan, an amount
corresponding to the $USD value was loaned by British & American Investment
Trust PLC to Second BritAm Investments Limited. As a result of this, and other
related intercompany transactions, £2,860,000 of amounts previously
guaranteed became an asset of the company and the provision brought forward
against this has been transferred to become an allowance against doubtful
debt. During the period to 30 June 2022, an allowance against doubtful debt
has increased by £322,000 (30 June 2021 - decreased by £1,000 and 31
December 2021 - increased by £85,000).
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 £14,000 (30 June
2021 – £15,000 and 31 December 2021 – £30,000) 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 2022 were £197,000 (30 June 2021 –
£188,000 and 31 December 2021 – £391,000) in respect of salary costs and
£22,000 (30 June 2021 – £21,000 and 31 December 2021 – £41,000) in
respect of pensions.
At the period end an amount of £nil (30 June 2021 – £482,000 and 31
December 2021 – £nil) was due to Romulus Films Limited and the amount of
£26,000 was due from Romulus Films Limited (30 June 2021 – £nil and 31
December 2021 – £103,000) and £436,000 (30 June 2021 – £543,000 and 31
December 2021 – £397,000) was due to Remus Films Limited.
During the period subsidiary BritAm Investments Limited paid dividends of
£nil (30 June 2021 – £907,000 and 31 December 2021 – £907,000) to the
parent company, British & American Investment Trust PLC.
British & American Investment Trust PLC has guaranteed the liabilities of
£4,417,000 (30 June 2021 – £4,330,000 and 31 December 2021 –
£4,374,000) due from Second BritAm Investments Limited to its fellow
subsidiaries if they should fall due.
During the period the company paid interest of £15,000 (30 June 2021 –
£17,000 and 31 December 2021 – £32,000) on the loan due to BritAm
Investments Limited.
During the period the company received interest of £1,000 (30 June 2021 –
£10,000 and 31 December 2021 – £14,000) from British & American Films
Limited, £31,000 (30 June 2021 – £28,000 and 31 December 2021 –
£57,000) from Second BritAm Investments Limited.
During the prior periods the company entered into investment transactions to
sell stock to BritAm Investments Limited (30 June 2021 – £532,000 and 31
December 2021 – £532,000) and British & American Films Limited (30 June
2021 – £772,000 and 31 December 2021 – £772,000).
During the prior periods the company entered into investment transaction to
purchase stock from British & American Films Limited (30 June 2021 –
£1,243,000 and 31 December 2021 – £1,243,000).
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 2022 (28,230) (43)
Allocation of loss for the period (412) (184)
_________ _________
At 30 June 2022 (28,642) (227)
_______ _______
The capital reserve includes £2,999,000 of investment holding losses (30 June
2021 – £3,137,000 loss, 31 December 2021 – £2,727,000 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 2022 Level 1 £’000 Level 2 £’000 Level 3 £’000 Total £’000
Investments:
Investments held at fair value through profit or loss 5,193 - 1 5,194
Subsidiary held at fair value through profit or loss - - 7,109 7,109
Total financial assets and liabilities carried at fair value 5,193 - 7,110 12,303
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 2022 6,708
Investment holding gains 402
Closing fair value at 30 June 2022 7,110
Subsidiaries
The fair value of the subsidiaries is determined to be equal to the net asset
values of the subsidiaries at period end plus the uplift in the revaluation of
film rights in British & American Films Limited, a subsidiary of BritAm
Investments Limited.
The directors of British & American Films Limited have determined a
conservative valuation of £2 million for the five feature films in the
library. This valuation has been arrived at from a combination of discounting
expected cash flows over the full period of copyright at current long term
interest rates and a recently received independent third party professional
valuation.
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 2022 and 30 June 2021 have
not been audited by the Company’s Auditor pursuant to the Auditing Practices
Board guidance. The information for the year to 31 December 2021 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 2021.
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 30 September 2022 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 2022 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 2022 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
30 September 2022
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