REG - Personal Assets Tst. - Half-year Report
05/12/2023 07:15
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RNS Number : 6422V Personal Assets Trust PLC 05 December 2023
To:
RNS
From: Personal Assets Trust plc
LEI: 213800Z7ABM7RLQ41516
Date: 5 December 2023
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 OCTOBER 2023 (UNAUDITED)
FINANCIAL SUMMARY
• Personal Assets Trust ('PAT' or the 'Company') is an investment trust run
expressly for private investors.
• The Company's investment policy is to protect and increase (in that order) the
value of shareholders' funds per share over the long term.
• Over the six months to 31 October 2023 the Company's net asset value per share
('NAV') fell by 2.7% to 468.10 pence on a capital-only return basis. PAT's
share price fell by 18.00 pence to 463.00 pence over the same period, being a
discount of 1.1% to the Company's NAV at that date.
• During the period, the Company continued to be positioned very defensively as
follows:
% as at % as at
31 October 30 April
2023 2023
Equities 24.8 24.0
US TIPS* 36.4 33.9
US Treasuries (short dated) 11.7 14.8
UK Gilts (short dated) 10.4 13.6
UK Index-linked Bonds 3.2 -
Gold Bullion 10.8 9.5
Property 0.1 0.1
UK cash 3.2 2.6
Overseas cash 0.0 0.0
Net current (liabilities)/assets (0.6) 1.5
100.0 100.0
Total
* Weighted average duration of approximately 5.3 years.
• Over the six months PAT's shares continued to trade close to NAV under the
Company's discount and premium control policy. The Company bought back 24.3
million Ordinary shares (at a cost of £113.5 million) at a small discount.
These Ordinary shares are held in treasury.
• Dividends are paid in July, October, January and April of each year. The first
interim dividend of 1.4 pence per Ordinary share, was paid to shareholders on
28 July 2023((1)) and the second interim dividend of 1.4 pence was paid on 6
October 2023. A third interim dividend of 1.4 pence per Ordinary share will be
paid to shareholders on 24 January 2024 and it is the Board's intention,
barring unforeseen circumstances, that a fourth interim dividend of 1.4 pence
per Ordinary share will be paid in April 2024, making a total for the year of
5.6 pence per Ordinary share.
Key Features
As at As at
31 October 30 April
2023 2023
Market Capitalisation £1,700.6m £1,883.5m
Shareholders' Funds £1,719.3m £1,884.4m
Shares Outstanding 367,295,429 391,570,200
Share Price 463.00p 481.00p
NAV per Share 468.10p 481.23p
FTSE All-Share Index 3,954.35 4,283.83
Discount to NAV (1.1)% (0.0)%
Earnings per Share 4.74p((2)) 9.48p((3))
Dividend per Share 2.80p((2)) 7.70p((1)(3))
((1)) A special dividend of 2.1 pence per Ordinary share was also paid in July
2023 in relation to the year ended 30 April 2023. Further details on the
dividends paid for the year ended 30 April 2023 are set out in Note 3 below.
((2)) For the six month period to 31 October 2023.
((3)) Full year.
Investment Manager's Report
Over the half year to 31 October 2023, the net asset value per share ('NAV')
of the Company fell by -1.7% while the FTSE All-Share Index ('FTSE') fell by
-5.9%. These returns include reinvested dividends. The capital-only returns
were -2.7% and -7.7% respectively.
The largest contributors to positive returns were gold and a weakening
sterling against the US dollar, adding +0.4% and +0.9% to returns respectively
in the period. Equities were the largest detractor, with consumer staples
costing -1.5%, on the back of higher yields and concerns around the potential
impact from weight-loss drugs on future consumption.
A year ago, we noted that we expected the investment environment to remain
challenging. After 15 years of record low interest rates, investors had
started to experience the painful adjustment to a new regime of higher
interest rates and more volatile inflation. Since then, the interest rate
environment has become more restrictive with the Bank of England and the
Federal Reserve raising rates to over 5% for the first time since 2008 and
2007 respectively. The implications of this transition have been widespread.
The traditional safety and defensiveness provided by fixed income has been
absent, as yields have followed interest rates up and prices have fallen. For
equity investors, valuations rose across stock markets over the past decade as
investors became anchored to ever-higher multiples, justified by low interest
rates. Today a rising cost of capital has led to the trend reversing as
valuations are reappraised. We are gradually shifting back to a world of more
conventional valuations across all asset classes. Private equity and property
valuations will inevitably take longer to adjust, as they are not marked to
market on a daily basis. The reality remains that investors wishing to sell
these illiquid assets today are likely to have to accept a price far lower
than that which was on offer a couple of years ago. The return offered by cash
is a novelty for many, providing a genuine "risk-free rate" for the first time
since the global financial crisis.
Your Company remains very defensively positioned, with approximately 25% in
equities, while the adjustment described above is ongoing. We suspect it has a
year or two to run, although this could be impacted by external factors,
including an increasingly fractious geopolitical backdrop denoted by growing
tensions around Taiwan, the war in Ukraine, and the tragic situation in the
Middle East.
Equity investors should also consider the risk that profits do not continue to
grow as steadily as the market currently expects. In the past, central banks
raised interest rates slowly and cut quickly. This time interest rates have
increased at the fastest rate since Paul Volker's successful attempt to rein
in inflation in the late 1970s. From an inflation-reducing perspective, his
measures were effective, and he was subsequently hailed for his
inflation-fighting credentials. However, his monetary medicine had the painful
side-effects of contributing to a deep recession in the early 1980s. While
there is much talk of an expected soft landing for the economy today, we
suspect the risks of a recession are rising and they are not currently priced
into stock markets. Corporate earnings are highly sensitive to tighter
monetary conditions. Bank lending standards are already tightening - the
National Federation of Independent Business reports US smaller companies have
seen their cost of interest more than double from 4% to almost 10% over the
past three years. Larger corporates have wisely termed out their debt but face
a headwind of rising interest costs in the future as bonds mature. Corporate
earnings often weaken 18-24 months after the peak in interest rates. This is
only just beginning to play out and we must remain patient.
During the past six months we have in aggregate reduced our equity exposure,
selling into the strength of the recent bear market rally. This is with one
notable exception; we began a new holding in Heineken. Heineken is a company
we have followed for many years. The business had a challenging pandemic as
pubs and bars were closed, but re-opening was not much better, with inflation
driving costs higher and affecting profit margins. Many of these issues are
now behind the company but the shares have meaningfully de-rated as investors
have become disillusioned. The less liquid Heineken Holding shares trade on
13x 12-month forward earnings, while their more liquid NV shares are valued at
a hardly racy sub-16x multiple. The share price is at the same level as late
2015. We like to buy into good businesses when others are looking the other
way, and the purchase of Heineken is a good example of this patient approach.
Back in 2019, we sold all of the Company's holdings in UK index-linked bonds
with real yields lower than -2%, meaning that an investor holding to maturity
receives a return 2% below inflation. Real yields troughed at below -3% in
2021. As fixed income yields have risen, real yields have followed them up to
+1%. We believe that a government-guaranteed return of inflation plus 1% is
attractive compared with returns available elsewhere and we have begun to buy
some linkers for the portfolio. We have been careful not to take excessive
duration risk, bearing in mind the new regime we have entered which has
punished investors flirting with material duration.
Over the past 18 months the investment trust sector has seen discounts to NAV
blow out. Shareholders in the Company have been protected from their shares
trading at a material discount, thanks to the discount control mechanism
('DCM'). Having issued shares in 2020-2022, we began to buy back shares
earlier in the year to ensure the share price did not trade at a meaningful
discount to NAV. Over the six months to 31 October 2023 we acquired 24.3
million shares for a consideration of £113.5 million. The DCM ensures
shareholders do not suffer from the double whammy of a falling NAV and a
widening discount to NAV. The buybacks were enhancing to shareholders' NAV to
the tune of £0.55 million.
The bear market, which began in stock markets at the beginning of 2022, has
some way to go. We are positioned accordingly but are prepared to shift more
positively as and when we see improved valuations. It is by buying good
companies well that we will drive future returns for the Company.
Sebastian Lyon, Investment Manager
Portfolio as at 31 October
2023
Shareholders' Funds Valuation
31 October 2023
Security Country Equity Sector % £'000
Equities
Unilever UK Food Producer 3.5 60,736
Nestlé Switzerland Food Producer 2.8 48,414
Visa USA Financial Services 2.7 46,043
Diageo UK Beverages 2.3 39,359
Microsoft USA Technology 1.9 33,295
Becton Dickinson USA Pharmaceuticals 1.9 32,550
Alphabet USA Technology 1.7 28,625
Procter & Gamble USA Household Products 1.5 25,481
American Express USA Financial Services 1.3 23,233
Franco Nevada Canada Mining 1.0 17,336
Heineken Netherlands Beverages 1.0 17,017
Pernod-Ricard France Beverages 0.9 15,755
Agilent Technologies USA Healthcare 0.7 12,868
Experian UK Industrial 0.6 9,590
Heineken Holding Netherlands Beverages 0.5 8,729
Moody's USA Financial Services 0.5 8,102
Total Equities 24.8 427,133
Other Investments
US TIPS USA 36.4 626,235
US Treasuries USA 11.7 201,740
UK Gilts UK 10.4 179,168
UK Index-linked Bonds UK 3.2 54,358
Gold Bullion 10.8 185,827
Total Other Investments 72.5 1,247,328
Total Investments 97.3 1,674,461
Property 0.1 1,730
UK cash 3.2 55,026
Overseas cash 0.0 219
Net current liabilities (0.6) (12,111)
Total Portfolio 100.0 1,719,325
Geographic Analysis of Investments and Currency Exposure As At 31 October
2023
UK USA Canada France Switzerland Netherlands Total
% % % % % % %
Equities 6.4 12.2 1.0 0.9 2.8 1.5 24.8
Index-linked Bonds 3.2 36.4 - - - - 39.6
Gilts 10.4 - - - - - 10.4
Treasuries - 11.7 - - - - 11.7
Gold Bullion - 10.8 - - - - 10.8
Property 0.1 - - - - - 0.1
Cash 3.2 0.0 - - - - 3.2
Net current liabilities (0.6) - - - - - (0.6)
Total 22.7 71.1 1.0 0.9 2.8 1.5 100.0
Net currency exposure 58.1 36.7 - 0.9 2.8 1.5 100.0
Statement of Principal Risks and Uncertainties
The Board believes that the principal risks to shareholders, which it seeks to
mitigate through continual review of its investments and through shareholder
communication, are events or developments which can affect the general level
of share prices and other financial assets, including, for instance, inflation
or deflation, economic recessions and movements in interest rates and
currencies.
The Board acknowledges that the continuing uncertainties for global economies
and financial markets, with higher levels of inflation and volatility in
markets and heightened geopolitical tensions, create risks and uncertainties
for the Company. The Board continues to work with the Investment Manager, the
Company Secretary and its other advisers to manage these risks as far as
possible.
The Board has established and maintains, with the assistance of the Company
Secretary, a risk matrix which identifies the key risks to the Company. This
register is formally reviewed on a regular basis. Emerging risks that could
impact the Company are considered and discussed at each Board meeting, or on
an ad hoc basis as required, along with any proposed mitigating actions.
The principal risks and uncertainties faced, and the way in which they are
managed, are described in more detail under the heading Principal Risks and
Risk Management within the Strategic Report in the Company's Annual Report for
the year ended 30 April 2023.
The Company's principal risks and uncertainties have not changed since the
date of the Annual Report and are not expected to change for the remaining six
months of the Company's financial year.
Going Concern
The Directors believe, in the light of the controls and review processes noted
above and bearing in mind the nature of the Company's business and assets,
which are considered readily realisable if required, that the Company has
adequate resources to continue operating for the foreseeable future. For this
reason, they continue to adopt the going concern basis in preparing the
financial statements.
Related Party Transactions
Details of related party transactions are contained in the Annual Report for
the year ended 30 April 2023. There have been no material changes in the
nature and type of the related party transactions as stated within the Annual
Report.
Directors' Responsibility Statement in Respect of the Interim Report
We confirm that to the best of our knowledge:
· the condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting';
· the Investment Manager's Report include a fair review of the
information required by the Disclosure Guidance and Transparency Rules (DTR)
4.2.7R, being an indication of important events that have occurred during the
first six months of the financial year and their impact on the condensed set
of financial statements;
· the Statement of Principal Risks and Uncertainties shown above is a
fair review of the information required by DTR 4.2.7R; and
· the condensed financial statements include a fair review of the
information required by DTR 4.2.8R, being related party transactions that have
taken place in the first six months of the current financial year and that
have materially affected the financial position or performance of the Company
during the period, and any changes in the related party transactions described
in the last Annual Report that could do so.
On behalf of the Board,
Iain Ferguson, Chairman
5 December 2023
For further information, contact:
Sebastian Lyon
Investment Manager
Tel: 0207 499 4030
Carron Dobson
Juniper Partners Limited, Company Secretary
Tel: 0131 378 0500
Condensed Income Statement
For the six months ended 31 October 2023
(Unaudited)
Six months ended
31 October 2023
Revenue Capital
return return Total
£'000 £'000 £'000
Investment income 24,743 - 24,743
Other operating income 394 - 394
Losses on investments held at fair value through profit or loss - (28,214) (28,214)
Foreign exchange losses - (20,040) (20,040)
Total income 25,137 (48,254) (23,117)
Expenses (2,788) (3,172) (5,960)
Return before taxation 22,349 (51,426) (29,077)
Taxation (4,324) 793 (3,531)
Return for the period 18,025 (50,633) (32,608)
Return per share (pence) 4.74 (13.31) (8.57)
The 'Return for the Period' is also the 'Total Comprehensive Income for the
Period', as defined in IAS1 (revised), and no separate Statement of
Comprehensive Income has been presented.
The 'Total' column of this statement represents the Company's Income
Statement, prepared in accordance with International Financial Reporting
Standards.
The Revenue Return and Capital Return columns are supplementary to this and
are prepared under guidance published by the Association of Investment
Companies.
All items in the above statement derive from continuing operations.
Condensed Income Statement
For the six months ended 31 October 2022
(Unaudited)
Six months ended
31 October 2022
Revenue Capital
return return Total
£'000 £'000 £'000
Investment income 23,283 - 23,283
Other operating income 218 - 218
Losses on investments held at fair value through profit or loss - (29,380) (29,380)
Foreign exchange losses - (52,475) (52,475)
Total income 23,501 (81,855) (58,354)
Expenses (2,610) (3,330) (5,940)
Return before taxation 20,891 (85,185) (64,294)
Taxation (3,971) 633 (3,338)
Return for the period 16,920 (84,552) (67,632)
Return per share (pence) 4.44 (22.19) (17.75)
Condensed Income Statement
For the year ended 30 April 2023
(Audited)
Year ended
30 April 2023
Revenue Capital
return return Total
£'000 £'000 £'000
Investment income 48,274 - 48,274
Other operating income 1,107 - 1,107
Losses on investments held at fair value through profit or loss - (54,976) (54,976)
Foreign exchange gains - 9,419 9,419
Total income 49,381 (45,557) 3,824
Expenses (5,304) (6,660) (11,964)
Return before taxation 44,077 (52,217) (8,140)
Taxation (7,436) 1,290 (6,146)
Return for the period 36,641 (50,927) (14,286)
Return per share (pence) 9.48 (13.18) (3.70)
Condensed Statement of Financial Position
As at 31 October
2023
(Unaudited) (Unaudited) (Audited)
31 October 31 October 30 April
2023 2022 2023
£'000 £'000 £'000
Non-current assets
Investments held at fair value through profit or loss
1,674,461 1,714,919 1,805,933
Property 1,730 2,144 1,730
Net current assets 43,134 104,803 76,689
Net assets 1,719,325 1,821,866 1,884,352
Total equity 1,719,325 1,821,866 1,884,352
Net asset value per Ordinary share (pence) 468.10 470.27 481.23
Condensed Statement of Changes in Equity
For the six months ended 31 October 2023
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2023 2022 2023
£'000 £'000 £'000
Opening equity shareholders' funds 1,884,352 1,814,360 1,814,360
Return for the period (32,608) (67,632) (14,286)
Ordinary dividends paid (18,867) (15,970) (26,919)
Issue of Ordinary shares - 95,502 121,384
Buyback of Ordinary shares (113,552) (4,394) (10,187)
Closing equity shareholders' funds 1,719,325 1,821,866 1,884,352
Condensed Cash Flow Statement
For the six months ended 31 October 2023
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2023 2022 2023
£'000 £'000 £'000
Net cash inflow/(outflow) from operating activities
5,839 (2,139) (2,146)
Net cash inflow/(outflow) from investing
activities 130,005 (11,841) (81,532)
Net cash inflow/(outflow) before financing
activities 135,844 (13,980) (83,678)
Net cash (outflow)/inflow from financing
activities (131,028) 78,174 87,324
Net increase in cash and
cash equivalents 4,816 64,194 3,646
Cash and cash equivalents at the start of
the period 50,014 47,944 47,944
Effect of exchange rate changes 415 (2,090) (1,576)
Cash and cash equivalents at the end of
the period 55,245 110,048 50,014
NOTES
1. The condensed financial statements have been prepared in accordance
with International Financial Reporting Standard ('IFRS') IAS 34 'Interim
Financial Reporting' and the accounting policies set out in the statutory
accounts of the Company for the year ended 30 April 2023. The condensed
financial statements do not include all of the information required for a
complete set of IFRS financial statements and should be read in conjunction
with the financial statements of the Company for the year ended 30 April 2023,
which were prepared under full IFRS requirements.
2. The return per Ordinary share figure is based on the net loss for
the six months of £32,608,000 (six months ended 31 October 2022: net loss of
£67,632,000; year ended 30 April 2023: net loss of £14,286,000) and on
380,501,888 (six months ended 31 October 2022: 380,991,218; year ended 30
April 2023: 386,416,856) Ordinary shares, being the weighted average number of
Ordinary shares in issue during the respective periods.
3. In respect of the year ending 30 April 2024 the Board has declared
a first interim dividend of 1.4 pence per Ordinary share, which was paid on 28
July 2023 and a second interim dividend of 1.4 pence per Ordinary share, which
was paid on 6 October 2023. A third interim dividend of 1.4 pence per Ordinary
share will be paid to shareholders on 24 January 2024 and it is the Board's
intention, barring unforeseen circumstances, that a fourth interim dividend of
1.4 pence per Ordinary share will be paid in April 2024, making a total for
the year of 5.6 pence per Ordinary share. In respect of the year ended 30
April 2023 the Board declared four interim dividends equivalent to 1.4 pence
per Ordinary share and a special dividend equivalent to 2.1 pence per Ordinary
share. This gave a total dividend for the year ended 30 April 2023 of 7.7
pence per Ordinary share.
4. At 31 October 2023 there were 367,295,429 Ordinary shares in issue
(31 October 2022: 387,409,400; 30 April 2023: 391,570,200). During the six
months ended 31 October 2023 the Company bought back 24,274,771 Ordinary
shares.
5. The Board has considered the requirements of IFRS 8 'Operating
Segments'. The Board is of the view that the Company is engaged in a single
segment of business, being that of investing in equity shares, fixed interest
securities and other investments, and that therefore the Company has only a
single operating segment.
6. The Company held the following categories of financial instruments
as at 31 October 2023:
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments 1,674,461 - - 1,674,461
Current liabilities - (17,282) - (17,282)
Total 1,674,461 (17,282) - 1,657,179
The above table provides an analysis of investments based on the fair value
hierarchy described below and which reflects the reliability and significance
of the information used to measure their fair value. The levels are determined
by the lowest (that is, the least reliable or least independently observable)
level of impact that is significant to the fair value measurement for the
individual investment in its entirety as follows:
Level 1 reflects financial instruments quoted in an active market. The
Company's investment in Gold Bullion has been included in this level.
Level 2 reflects financial instruments the fair value of which is evidenced by
comparison with other observable current market transactions in the same
instrument or based on a valuation technique the variables of which include
only data from observable markets. The Company's forward currency contract has
been included in this level as fair value is achieved using the foreign
exchange spot rate and forward points which vary depending on the duration of
the contract.
Level 3 reflects financial instruments the fair value of which is determined
in whole or in part using a valuation technique based on assumptions that are
not supported by prices from observable market transactions in the same
instrument and not based on available observable market data.
There were no transfers of investments between levels in the period ended 31
October 2023.
The following table summarises the Company's Level 1 investments that were
accounted for at fair value in the period to 31 October 2023.
£'000
Opening book cost 1,626,845
Opening fair value adjustment 179,088
Opening valuation 1,805,933
Movement in the period:
Purchases at cost 250,570
Effective yield adjustment 11,267
Sales - proceeds (365,095)
- losses on sales (527)
Decrease in fair value adjustment (27,687)
Closing valuation at 31 October 2023 1,674,461
Closing book cost 1,523,060
Closing fair value adjustment 151,401
Closing valuation at 31 October 2023 1,674,461
Other aspects of the Company's financial risk management objectives and
policies are consistent with those disclosed in the consolidated financial
statements as at and for the year ended 30 April 2023.
The fair value of the Company's financial assets and liabilities as at 31
October 2023 was not materially different from their carrying values in the
financial statements.
7. These are not full statutory accounts in terms of Section 434 of
the Companies Act 2006 and are unaudited. Statutory accounts for the year
ended 30 April 2023, which received an unqualified audit report and which did
not contain a statement under Section 498 of the Companies Act 2006, have been
lodged with the Registrar of Companies. No full statutory accounts in respect
of any period after 30 April 2023 have been reported on by the Company's
auditors or delivered to the Registrar of Companies.
8. A copy of the Interim Report is available on the Company's website
at www.patplc.co.uk (http://www.patplc.co.uk) . Shareholders are encouraged to
visit the website for further information on the Company.
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