REG - Personal Assets Tst. - Half-year Report
04/12/2024 07:00
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RNS Number : 6759O Personal Assets Trust PLC 04 December 2024
To:
RNS
From: Personal Assets Trust plc
LEI: 213800Z7ABM7RLQ41516
Date: 4 December 2024
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 OCTOBER 2024 (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 2024 the Company's net asset value per share
("NAV") rose by 2.4% to 498.80 pence. PAT's share price rose by 10 pence to
493.00 pence over the same period, being a discount of 1.2% to the Company's
NAV at that date.
• During the period, the Company continued to be positioned defensively as
follows:
% as at % as at
31 October 30 April
2024 2024
Equities 26.9 27.5
US TIPS 32.5 36.5
US Treasuries 14.5 11.6
UK Gilts 7.6 7.0
UK Index-Linked Bonds 1.7 3.3
Gold Bullion 12.7 12.5
Property 0.1 0.1
UK cash 4.0 1.8
Overseas cash 0.0 0.0
Net current liabilities (0.0) (0.3)
100.0 100.0
Total
• 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 19.3
million Ordinary shares (at a cost of £94.9 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
31 July 2024((1)) and the second interim dividend of 1.4 pence was paid on 4
October 2024. A third interim dividend of 1.4 pence per Ordinary share will be
paid to shareholders on 24 January 2025 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 2025, making a total for the year of
5.6 pence per Ordinary share.
Key Features
As at As at
31 October 30 April
2024 2024
Market Capitalisation £1,592.6m £1,653.4m
Shareholders' Funds £1,611.3m £1,667.3m
Shares Outstanding 323,033,372 342,325,372
Share Price 493.00p 483.00p
NAV per Share 498.80p 487.05p
FTSE All-Share Index 4,431.83 4,430.25
Consumer Price Index 135.0 133.5
Discount to NAV (1.2)% (0.8)%
Earnings per Share 4.67p((2)) 8.77p((3))
Dividend per Share 2.80p((2)) 5.60p((1)(3))
((1)) A special dividend equivalent to 1.60 pence per Ordinary share was also
paid in July 2024 in relation to the year ended 30 April 2024. Further details
on the dividends paid for the year ended 30 April 2024 are set out in Note 3
below.
((2)) For the six month period to 31 October 2024.
((3)) Full Year.
Investment Manager's Report
Over the half year to 31 October 2024, the net asset value per share ('NAV')
of Personal Assets Trust (the 'Company') rose by +3.4% while the FTSE
All-Share Index ('FTSE') rose by +1.8%. These returns include reinvested
dividends. The capital-only returns were +2.4% and +0.0% respectively.
Inflation over the period was subdued and CPI rose by 1.1%.
The largest contributors to returns were gold and US Treasury Inflation
Protection Securities ('TIPS'), adding +2.0% and +1.5% respectively. The only
negative contributor was currency, costing -0.7% as sterling strengthened
against the US dollar, partially offset by the currency hedge.
The summer saw the first cut to UK interest rates since March 2020, with the
Bank of England cutting from 5.25% to 5.0% in July. The Federal Reserve
followed in September with a 0.5% cut to 5.0% interest rates. Some market
participants are cheering the fall in rates as the start of the next bull
market cycle; history suggests they may be disappointed. The first cuts in the
US rate cutting cycle occurred in January 2001, August 2007 and July 2019. On
each of these occasions, the US stock market was trading close to its highs
and subsequently fell -44%, -53% and -25% respectively. Our view is that
central banks are cutting interest rates as they see early indicators of the
economy slowing. While it is possible that this is a rare 'soft-landing'
situation, where interest rates are cut without the economy entering a
recession, experience suggests an economic downturn is the more likely
outcome. In this context, it is concerning that valuations remain stretched
with the market capitalisation of the US equity market at 205% of GDP, close
to a 20-year high. The elevated starting valuations today suggest equity
markets are likely to deliver poor returns for investors if a recession
materialises or if interest rates are not cut as expected. Your Company
retains a cautious equity weight at 27%, reflecting the low prospective
returns that we think are on offer.
In the UK, investors have spent much of the last six months considering the
potential impact of Labour's first budget in 14 years. Markets were quick to
digest the news once it arrived. UK gilts sold off aggressively (yields
higher, with prices lower) with 10-year yields rising around +0.3% to 4.5%.
Bond investors are likely questioning the impact on inflation in the UK, as
two thirds of the additional spending announced is on current expenses as
opposed to capital spending. Question marks also remain as to whether the gilt
market can absorb an additional £32bn of debt issuance (bringing the total to
~£300bn this fiscal year, a record excluding Covid) as well as how much tax
will actually be raised, since some of the increase in tax revenue relies on
changes to capital gains where owners are generally not forced to sell assets.
The yield differential between German and UK 10-year debt rose to above 2%,
close to the highs seen after the Truss mini-budget two years ago. According
to Louis XIV's finance minister, Jean-Baptiste Colbert, "the art of taxation
consists in so plucking the goose as to obtain the largest possible amount of
feathers with the smallest amount of hissing". Judging by the response to the
rise in Employer's National Insurance, the new government is reaching a point
of resistance. The decision is likely to suppress the demand for labour in the
UK, although the direct impact on the portfolio from the budget was limited,
with the average company held deriving only ~3.5% of sales from the UK. We
also do not own any UK bonds with a duration over three years. The volatility
in domestic assets has strengthened our long-held preference for owning
businesses with geographically diverse sales.
Within the portfolio we sold the small holding in Becton Dickinson and added
Verisign and Chubb to the portfolio. Verisign interacts with every user of the
internet every day, but few are aware of the essential role it plays. The
company is the exclusive registry for .com and .net domains, meaning any
company that buys a .com web address is ultimately purchasing it from them
(via a reseller like GoDaddy). As well as keeping a record of 'who owns what',
they operate the Domain Name System ('DNS'). The system points users who enter
a web address to the correct server billions of times a day and Verisign has
operated it with zero downtime for over 20 years. For this service they charge
only ~$10 per domain per year. This is a very low price to most customers and
the switching costs for domains are high. The shares' valuation halved over
the last three years, giving us the opportunity to own a business we have long
admired.
Chubb is a better-known business, being the largest property and casualty
('P&C') insurer in the world, operating in 54 countries around the world
but with the majority of revenues from the US. The primary appeal of owning
Chubb is they have demonstrated that they are consistently excellent
underwriters. The evidence can be seen in their market-leading profit margins
that avoid many of the wild swings seen at other insurers. Chubb also receives
payment of premiums before they pay out claims, meaning there is an
opportunity for them to materially grow investment income as they invest the
'float' in higher bond yields. Chubb's current yield on their float is below
5% compared to a market yield that is closer to 6%. As bonds mature, they are
reinvested at a better yield, driving higher investment income. We expect to
add to the holdings in Chubb and Verisign over time, as opportunities arise.
Gold continued to contribute strongly to returns, rising +15% in sterling over
the last six months. More remarkable is that this return was achieved through
a period of relatively high real yields, an environment that has typically
been a headwind to the gold price. Western investors also appear to have been
selling gold in recent years, with ETF holdings falling 226 tons since the
start of 2023. The key buyers have been central banks. Since the freezing of
Russia's dollar assets in 2022, central banks around the world have acquired
record amounts of gold. Large buyers include the central banks of India,
Poland, China and Turkey. We expect central bank purchases to continue for
several years, although in the short-term demand could be variable after
gold's very strong price rise. In order to manage this risk, we have reduced
the holding. As at the end of October, the Company maintained a ~13% gold
weighting, held in physical bullion in an allocated account in London.
In our view, the equity market fails to reflect the rise in the cost of
capital in recent years or the risks from the economy slowing. We are keen to
increase the allocation to equities when we feel prospective returns are good.
It is essential to avoid being sucked into a long-running bull market at what
may prove to be close to the top. The environment can change quickly and the
Company holds substantial 'dry powder' that we expect to add to existing and
new equity holdings when the opportunity arises.
Sebastian Lyon, Investment Manager
4 December 2024
Portfolio as at 31 October 2024
Shareholders' Funds Valuation
31 October 2024
Security Country Equity Sector % £'000
Equities
Unilever UK Food Producer 4.6 73,870
Visa USA Financial Services 3.3 53,503
Nestlé Switzerland Food Producer 2.5 40,003
Microsoft USA Technology 2.3 37,699
Alphabet USA Technology 2.3 37,188
Diageo UK Beverages 2.2 36,026
Verisign USA Technology 1.5 24,113
Heineken Netherlands Beverages 1.3 20,890
Chubb USA Financial Services 1.1 17,675
American Express USA Financial Services 1.0 16,358
Agilent Technologies USA Healthcare 0.9 15,280
Experian UK Industrial 0.9 14,538
Procter & Gamble USA Household Products 0.9 14,376
Moody's USA Financial Services 0.7 11,256
Heineken holding Netherlands Beverages 0.7 10,676
Pernod-Ricard France Beverages 0.7 10,416
Total Equities 26.9 433,867
Other Investments
US TIPS USA 32.5 524,290
US Treasuries USA 14.5 233,757
UK Gilts/ T-Bills UK 7.6 123,144
UK Index-Linked Bonds Bonds UK 1.7 27,010
Gold Bullion 12.7 203,810
Total Other Investments 69.0 1,112,011
Total Investments 95.9 1,545,878
Property 0.1 1,730
UK cash 4.0 63,672
Overseas cash 0.0 20
Net current liabilities (0.0) (13)
TOTAL PORTFOLIO 100.0 1,611,287
Geographic Analysis of Investments and Currency Exposure As At 31 October
2024
UK USA France Switzerland Netherlands Total
% % % % % %
Equities 7.7 14.0 0.7 2.5 2.0 26.9
Index-Linked Bonds 1.7 32.5 - - - 34.2
Gilts/ T-Bills 7.6 - - - - 7.6
Treasuries - 14.5 - - - 14.5
Gold Bullion - 12.7 - - - 12.7
Property 0.1 - - - - 0.1
Cash 4.0 0.0 - - - 4.0
Net current liabilities (0.0) - - - - (0.0)
Total 21.1 73.7 0.7 2.5 2.0 100.0
Net currency exposure 57.4 37.4 0.7 2.5 2.0 100.0
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 2024.
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 2024. 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 includes 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 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
4 December 2024
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 2024
(Unaudited)
Six months ended
31 October 2024
Revenue Capital
Return Return Total
£'000 £'000 £'000
Investment income 21,060 - 21,060
Other operating income 426 - 426
Gains on investments held at fair value through profit or loss - 21,026 21,026
Foreign exchange gains - 19,258 19,258
Total income 21,486 40,284 61,770
Expenses (2,654) (2,973) (5,627)
Return before taxation 18,832 37,311 56,143
Taxation (3,278) 743 (2,535)
Return for the period 15,554 38,054 53,608
Return per share (pence) 4.67 11.42 16.09
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 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/(loss) 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)
Condensed Income Statement
For the year ended 30 April 2024
(Audited)
Year ended
30 April 2024
Revenue Capital
Return Return Total
£'000 £'000 £'000
Investment income 44,866 - 44,866
Other operating income 991 - 991
Gains on investments held at fair value through profit or loss - 20,816 20,816
Foreign exchange losses - (4,132) (4,132)
Total income 45,857 16,684 62,541
Expenses (5,047) (6,242) (11,289)
Return before taxation 40,810 10,442 51,252
Taxation (8,552) 1,560 (6,992)
Return for the period 32,258 12,002 44,260
Return per share (pence) 8.77 3.26 12.03
Condensed Statement of Financial Position
As at 31 October
2024
(Unaudited) (Unaudited) (Audited)
31 October 31 October 30 April
2024 2023 2024
£'000 £'000 £'000
Non-current assets
Investments held at fair value through profit or loss
1,545,878 1,674,461 1,640,632
Property 1,730 1,730 1,730
Total non-current assets 1,547,608 1,676,191 1,642,362
1,547,608
Net current assets 63,679 43,134 24,919
Net assets 1,611,287 1,719,325 1,667,281
Total equity 1,611,287 1,719,325 1,667,281
Net asset value per Ordinary share (pence) 498.80 468.10 487.05
Condensed Statement of Changes in Equity
For the six months ended 31 October 2024
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2024 2023 2024
£'000 £'000 £'000
Opening equity shareholders' funds 1,667,281 1,884,352 1,884,352
Return for the period 53,608 (32,608) 44,260
Ordinary dividends paid (14,735) (18,867) (28,812)
Buy back of Ordinary shares (94,874) (113,552) (232,467)
Cost of reduction and reclassification of share premium account 7 - (52)
*
Closing equity shareholders' funds 1,611,287 1,719,325 1,667,281
Condensed Cash Flow Statement
For the six months ended 31 October 2024
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2024 2023 2024
£'000 £'000 £'000
Net cash inflow from operating activities
4,750 5,389 8,065
Net cash inflow from investing
activities 138,387 130,005 232,144
Net cash inflow before financing
activities 143,137 135,844 240,209
Net cash outflow from financing
activities (108,870) (131,028) (260,848)
Net increase/(decrease) in cash and
cash equivalents 34,267 4,816 (20,639)
Cash and cash equivalents at the start of
the period 29,475 50,014 50,014
Effect of exchange rate changes (50) 415 100
Cash and cash equivalents at the end of
the period 63,692 55,245 29,475
NOTES
1. The condensed consolidated 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 2024. 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 2024, which were prepared under full IFRS requirements.
2. The return per Ordinary share figure is based on the net gain for
the six months of £53,608,000 (six months ended 31 October 2023: net loss of
£32,608,000; year ended 30 April 2024: net gain of £44,260,000) and on
333,282,921 (six months ended 31 October 2023: 380,501,888; year ended 30
April 2024: 367,849,279) 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 2025 the Board has declared
a first interim dividend of 1.4 pence per Ordinary share, which was paid on 31
July 2024 and a second interim dividend of 1.4 pence per Ordinary share, which
was paid on 4 October 2024. A third interim dividend of 1.4 pence per Ordinary
share will be paid to shareholders on 24 January 2025 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 2025, making a total for
the year of 5.6 pence per Ordinary share. In respect of the year ended 30
April 2024 the Board declared four interim dividends of 1.4 pence per Ordinary
share and a special dividend of 1.6 pence per Ordinary share. This gave a
total dividend for the year ended 30 April 2024 of 7.2 pence per Ordinary
share.
4. At 31 October 2024 there were 323,033,372 Ordinary shares in issue
(31 October 2023: 367,295,429; 30 April 2024: 342,325,372). During the six
months ended 31 October 2024 the Company bought back 19,292,000 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 2024:
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments 1,545,878 - - 1,545,878
Current liabilities - (3,463) - (3,463)
Total 1,545,878 (3,463) - 1,542,415
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 contracts
have 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 2024.
The following table summarises the Company's Level 1 investments that were
accounted for at fair value in the period to 31 October 2024.
£'000
Opening book cost 1,432,679
Opening fair value adjustment 207,953
Opening valuation 1,640,632
Movement in the period:
Purchases at cost 245,541
Effective yield adjustment 8,579
Sales - proceeds (369,900)
- gains on sales 38,268
Decrease in fair value adjustment (17,242)
Closing valuation at 31 October 2024 1,545,878
Closing book cost 1,355,167
Closing fair value adjustment 190,711
Closing valuation at 31 October 2024 1,545,878
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 2024.
The fair value of the Company's financial assets and liabilities as at 31
October 2024 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 2024, 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 2024 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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