Last checked at 
22 Dec 2016 16:06
ARTEMIS ALPHA TRUST PLC (the "Company")
Half-Yearly Financial Report for the six months ended 31 October 2016
This announcement contains regulated information
Chairman's Statement
Performance
In the six months to 31 October 2016, the Company's net asset value per share increased by 2.6 per cent on a total return basis. The FTSE All-Share Index returned 12.2 per cent over the same period.
The period covered by this report was dominated by political developments, and in particular by the UK's decision to leave the European Union. After an initial sell-off following the shock of the result, markets rebounded strongly, led by those companies which benefited from the resulting fall in sterling. This helped large-cap companies which tend to operate globally, rather than smaller companies, which are often more domestically focused. The Company has a large proportion of its assets in smaller companies and, as such, its net asset value lagged the market in the immediate aftermath of the result. Its holdings in real estate, housebuilders, pharmaceuticals and financials were the main areas of underperformance. The events in the US since the period end seem to echo the market's reaction to the Brexit vote, but it will be some time before the full effect of the election of Donald Trump will be seen.
In the Company's portfolio of unquoted investments, the period saw a partial realisation of Oxford Nanopore Technologies. The holding in Equus Petroleum, meanwhile, was acquired for cash as part of a takeover. The percentage of the portfolio represented by unquoted companies has been reduced from 28.7 per cent to 26.8 per cent in line with our stated intention.
Gearing remained largely unchanged during the period, increasing slightly from 5.4 per cent of net assets at the start of the period to 6.1 per cent at 31 October 2016.
Earnings & dividends
Revenue earnings per share for the six months to 31 October 2016 were 2.56p, an increase of 8 per cent (2015: 2.36p). The Company's dealing subsidiary contributed a further 0.67p per share. As previously reported, the Board has targeted a 10 per cent annual increase in the Company's dividend and, with this in mind, the Board has declared a first interim dividend of 1.55p per ordinary share (2015: 1.40p). This is an increase of 10.7 per cent over the equivalent dividend last year. The dividend will be paid on Friday, 27 January 2017, to shareholders on the register as at Friday, 6 January 2017, with an ex-dividend date of Thursday, 5 January 2017.
Share capital
At 31 October 2016 the share price stood at a 22.6 per cent discount to net asset value. As I have stated previously, this is wider than either the Board or Investment Manager would like. It reflects the market's current view of the Company, based on recent performance and its holdings in unquoted investments. The key to narrowing the discount, as stated previously, will be improved performance.
During the period 1,040,706 ordinary shares were bought back, at a cost of £2.4 million which has added 1.8p to the net asset value for continuing shareholders.
I welcome the fact that the fund managers have bought an additional 163,000 shares during the period.
Communication with shareholders
In the last few months, the directors have met a number of the Company's largest shareholders as well as those who attended the annual general meeting in October. The Board appreciates the concerns expressed about the performance of the Company and the level of discount; also, it recognises the need for performance to improve, particularly in the context of the requirement to hold a continuation vote in the autumn of 2018.
Although the Company's net asset value has increased over the period, the portfolio's composition has meant that this has been at a slower rate than the broader market. As outlined in the Annual Financial Report earlier in the year, the need for improved investment performance is paramount and the Board will provide whatever support is required to help the Investment Manager achieve this.
Some shareholders also raised concerns about the level of the Company's exposure to unquoted investments. The Investment Manager continues to work to reduce this exposure to below 10 per cent within two years. The directors have recently met with the management teams of three of the largest unquoted investments to familiarise themselves with these businesses and their prospects. Further meetings are planned.
Further information can be found on the website - artemisalphatrust.co.uk - which is updated monthly.
Outlook
Political uncertainty continues to loom large, rendering forward-looking statements even more speculative than usual. The UK has yet to define what 'Brexit' will mean. Arriving at a workable definition will demand contentious negotiations with European states that face formidable political challenges of their own. Meanwhile, the early indications are that President Trump will prove as unpredictable in office as he was on the campaign trail. For now, the market appears to welcome his promises of a more expansionary approach to fiscal policy and reforms to corporate taxation. Yet it is far from certain that this positive attitude will endure. Inflation appears to be creeping back into the financial system and monetary policy seems likely to tighten, in the US if not in Europe.
The Company's goal, however, is not to anticipate political or economic change and it is not the Investment Manager's intention to anticipate short-term market movements. Instead, their efforts remain focused on investing in stocks whose unique products, services or intellectual property offer their shareholders the prospect of superior returns over the longer term. The Company's performance, both in net asset value and share-price terms, will be a measure of their success in that endeavour.
Duncan Budge
Chairman
22 December 2016
Investment Manager's Review
Performance
Over the six months under review, the Company's net asset value per share rose by 2.6 per cent on a total return basis versus a rise of 12.2 per cent in the FTSE All-Share Index.
The main reason for this underperformance was that, following the UK's vote to leave the European Union, the UK market was led higher by the strong performance of large-cap stocks. Such companies tend to have significant overseas earnings and so benefited from the fall in sterling after the vote. The Company, meanwhile, has a strong bias to smaller companies, many of which are more exposed to the domestic economy. These tended to perform poorly in the aftermath of the vote, although some of that underperformance has begun to be reversed more recently.
Review
Clearly, the major event in the period was the UK's Brexit vote. Although opinion polls were tight throughout the campaign, most observers were predicting a strong likelihood that the country would vote to 'remain', even as the first results were being announced. The outcome, however, was not the one that pollsters had anticipated. The surprise provoked the extreme volatility seen in the UK stock market in the aftermath of the result.
The first casualty of the vote was sterling, which immediately fell by 10 per cent against the US dollar. It continued to drift down in the days that followed and was initially accompanied by a general fall across the UK stock market. As the days passed, however, investors began to anticipate the strong positive effect that weak sterling would have on the overseas earnings of Britain's multinational companies. This triggered a surge in the share prices of these businesses, enabling the large-cap FTSE 100 index to rise significantly over the following weeks.
This rally was not mirrored in the performance of the more domestically-orientated companies, particularly among mid- and small-caps, which faced a period of uncertainty. Many of these companies put their investment decisions on hold in the wake of the referendum: businesses wanted to see what shape 'Brexit' might take (or, indeed, whether it would occur at all). The result was that the share prices of many mid- and small-cap stocks fell quite dramatically. Although this hurt the portfolio's performance in the short term, it has also created some interesting investment opportunities. In fact, a rally in some of the most heavily oversold sectors of the market, such as real estate and housebuilders, has already begun.
Portfolio
Of the positive contributors to returns in the period, the standout performer was Hurricane Energy. An exploration company with highly promising acreage off the west coast of Shetland; this is a longstanding holding. The problem it has faced in recent years has been that a period of low oil prices made it difficult to obtain financing for the drilling required to prove the potential of its discovery. This was resolved earlier in the year, when a specialist investor in natural resources underwrote a share issue that enabled the company to drill two wells in its Lancaster field. Those wells demonstrated that the field is likely to hold significantly more than the 200 million barrels recognised in its current reserves balance. Following this, Hurricane Energy raised further capital to drill two more wells to establish the full potential of the Greater Lancaster area. We eagerly await the results.
Elsewhere, Tesco performed well, as its rehabilitation under the leadership of Dave Lewis continued. Meanwhile, Avation's share price appreciated after it received an expression of interest for the purchase of its entire portfolio of turboprop aircraft. The company has stated it would only sell the portfolio at a premium to book value. The shares currently trade at a discount to net asset value so we await developments with interest.
Among the Company's holdings in fund management companies, Liontrust did well, as good performance encouraged strong inflows to its funds. Charlemagne Capital was acquired by Canada's Fiera Capital. City of London, meanwhile, benefited from the strong performance of its emerging market funds.
Five largest stock contributors
| Market | Contribution % |
Hurricane Energy | AIM | 2.3 |
Liontrust Asset Management | LSE | 0.9 |
Gundaline | Unquoted | 0.8 |
BP | LSE | 0.6 |
City of London Investment Group | LSE | 0.5 |
Five largest stock detractors
| Market | Contribution % |
Helical | LSE | (0.7) |
Vectura Group | LSE | (0.7) |
Majestic Wine | AIM | (0.6) |
Gama Aviation | AIM | (0.6) |
Ten Alps | AIM | (0.5) |
The weakest performer in the period was Helical, a property company, which suffered following the referendum. Much of the fall in its share price was driven by sentiment and since the end of this reporting period, it has published strong results that suggest London is likely to remain a highly desirable place to do business in spite of Brexit.
Other weak performers included Vectura Group, following its merger with Skyepharma, and Majestic Wine, which faltered following an ill-fated marketing campaign in the US. We expect both businesses to recover: Vectura Group following the bedding down of its takeover, and Majestic Wine once new management can show demonstrable progress of its three-year plan. Elsewhere, Ten Alps and Gottex Fund Management Holdings disappointed.
Transactions
The most significant purchase in the period was Sports Direct, the largest retailer of sportswear in the UK. Although the company's problems over the past 12 months have been well-publicised, its share price had fallen to a level we felt substantially undervalued the business, particularly given its substantial market share in the UK. Having acknowledged past mistakes and accepted the resignation of its chief executive, we believe the company's majority shareholder, Mike Ashley, is focused on dealing with its problems and restoring its profitability.
Other purchases over the reporting period included St Modwen Properties, a diversified property investment and development company whose shares were trading on a significant discount to its net asset value. We also bought Gottex Fund Management Holdings, an independent investment group.
Among sales, Penna Consulting was taken over by Adecco, yielding a substantial profit on our initial investment. We sold the entirety of our holding in BP following its strong performance. Elsewhere, we took profits in Liontrust after a strong run higher in its share price and reduced our position in Brewin Dolphin. We also took profits in Telford Homes and Booker Group. Both are longstanding holdings for the Company and we retain a holding in both stocks and remain supportive of their restructuring efforts.
Unquoted investments
Some positive progress was seen in the unquoted portfolio over the period. The highlight was Gundaline, an Australian agricultural business holding valuable water rights. The value of these water rights has increased dramatically over the last 12 months and this has led to a 50 per cent increase in the value of the holding. We are looking to exit this investment over the coming 12 months.
Elsewhere URICA, which allows small and medium-sized companies to settle invoices early through its online platform, made strong progress. Through the Business Finance Partnership, it has the backing of the UK government. It has also been working closely with Euler Hermes, the worldwide leader in trade credit insurance, to develop a new online credit insurance product in France.
Our larger unquoted holdings, Starcount and MetaPack, are both performing in line with expectations.
As we stated in the Annual Financial Report, our target is to reduce the Company's overall exposure to unquoted investments. During the review period, we sold a substantial portion of the holding in Oxford Nanopore Technologies, realising a considerable profit. We also received a cash bid for the holding in Equus Petroleum. We are now in the process of selling the holding in Lamp Group.
Subsequent to the reporting period end there was an upward revaluation of our holding in Oxford Sciences Innovation, which successfully raised a further £230 million to provide capital and support for businesses developed at the University of Oxford. The revaluation added 0.2 per cent to the Company's net assets.
Outlook
Even under 'normal' conditions, attempts to anticipate the short-term gyrations in financial markets are apt to teach humility to would-be forecasters. Today, however, political flux in the UK, Europe and the US renders predictions all but redundant. In the UK, the definition of what Brexit will eventually mean remains opaque. For its part, the rest of Europe must deal not only with the consequences of the UK's departure but with political uncertainties of its own. To this point, the market has taken Italy's rejection of constitutional reform and loss of political direction with equanimity. Yet the serious problems facing the country's banking sector remain unresolved. Next year, meanwhile, will bring contentious elections in France and Germany. And although President-elect Trump's promises to rebuild US infrastructure have been welcomed by the equity market, what his administration will mean for global trade and international relations remains a matter of conjecture. So the only thing we can assert with any real confidence is that a measure of politically inspired turbulence seems likely in 2017.
Despite that, there are reasons to look forward with cautious optimism. Globally, the worries about deflation that have gripped the market periodically since the financial crisis have receded. In the US at least, there are signs of a welcome return to more normal financial conditions: bond yields are rising, wages are rising and interest rates seem likely to rise further. The UK economy, meanwhile, appears in far better shape than most forecasters predicted in June. There are also encouraging signs that the market is more willing to value small and mid-sized companies on merit than it was in the summer. That renewed focus on fundamentals and companies' long-term prospects should, we hope, suit our stockpicking approach.
John Dodd & Adrian Paterson
Fund managers
Artemis Fund Managers Limited
22 December 2016
Responsibility Statement of the Directors in respect of the Half-Yearly Financial Report
The Directors confirm that to the best of their knowledge, in respect of the Half-Yearly Financial Report for the six months ended 31 October 2016:
- the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' issued by the International Accounting Standards Board as adopted by the EU;
- having considered the expected cash flows and operational costs of the Company for the 18 months from the period end, the Directors are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, the going concern basis of accounting continues to be used in the preparation of the Half-Yearly Financial Report;
- the interim management report includes a fair review of the information required by:
(a) Disclosure Guidance and Transparency Rule 4.2.7R (indication of important events during the first six months; and a description of the principal risks and uncertainties for the remaining six months of the year); and
(b) Disclosure Guidance and Transparency Rule 4.2.8R (related party transactions).
The Half-Yearly Financial Report for the six months ended 31 October 2016 was approved by the Board and the above responsibility statement was signed on its behalf by:
For and on behalf of the Board
Duncan Budge
Chairman
22 December 2016
Condensed income statement
For the six months ended 31 October 2016
| Six months ended 31 October 2016 (unaudited) | Six months ended 31 October 2015 (restated) (unaudited) | Year ended 30 April 2016 (restated) (audited) | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Investment income | 1,317 | - | 1,317 | 1,321 | - | 1,321 | 2,584 | - | 2,584 |
Other income | 4 | - | 4 | 3 | - | 3 | 6 | - | 6 |
Total revenue | 1,321 | - | 1,321 | 1,324 | - | 1,324 | 2,590 | - | 2,590 |
Gains/(losses) on investments | - | 1,887 | 1,887 | - | (5,158) | (5,158) | - | (9,577) | (9,577) |
Currency losses | - | - | - | - | (39) | (39) | - | (41) | (41) |
Total income/(loss) | 1,321 | 1,887 | 3,208 | 1,324 | (5,197) | (3,873) | 2,590 | (9,618) | (7,028) |
Expenses |
|
|
|
|
|
|
|
|
|
Investment management fee | (37) | (332) | (369) | (43) | (389) | (432) | (80) | (722) | (802) |
Other expenses | (210) | (8) | (218) | (236) | (2) | (238) | (429) | (7) | (436) |
Profit/(loss) before finance costs and tax | 1,074 | 1,547 | 2,621 | 1,045 | (5,588) | (4,543) | 2,081 | (10,347) | (8,266) |
Finance costs | (18) | (159) | (177) | (21) | (193) | (214) | (41) | (366) | (407) |
Profit/(loss) before tax | 1,056 | 1,388 | 2,444 | 1,024 | (5,781) | (4,757) | 2,040 | (10,713) | (8,673) |
Tax | 14 | - | 14 | (11) | - | (11) | (11) | - | (11) |
Profit/(loss) for the period per ordinary share | 1,070 | 1,388 | 2,458 | 1,013 | (5,781) | (4,768) | 2,029 | (10,713) | (8,684) |
Earnings/(loss) for the period | 2.56p | 3.33p | 5.89p | 2.36p | (13.49)p | (11.13)p | 4.75p | (25.09)p | (20.34)p |
The total column of this statement represents the Statement of Comprehensive Income of the Company, prepared in accordance with International Financial Reporting Standards. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.
Condensed balance sheet
As at 31 October 2016
| 31 October 2016 (unaudited) £'000 | 31 October 2015 (restated) (unaudited) £'000 | 30 April 2016 (restated) (audited) £'000 |
Non-current assets |
|
|
|
Investments | 134,117 | 137,164 | 134,647 |
Investment in subsidiary undertaking | 2,528 | 2,111 | 2,250 |
| 136,645 | 139,275 | 136,897 |
Current assets |
|
|
|
Other receivables | 244 | 325 | 469 |
Cash and cash equivalents | 719 | 2,018 | 1,587 |
| 963 | 2,343 | 2,056 |
Total assets | 137,608 | 141,618 | 138,953 |
Current liabilities |
|
|
|
Other payables | (2,132) | (1,087) | (2,512) |
Bank loan | (8,500) | (6,500) | (8,500) |
| (10,632) | (7,587) | (11,012) |
Net assets | 126,976 | 134,031 | 127,941 |
Equity attributable to equity holders |
|
|
|
Share capital | 498 | 500 | 498 |
Share premium | 647 | 645 | 645 |
Special reserve | 50,647 | 54,598 | 53,022 |
Capital redemption reserve | 92 | 90 | 92 |
Retained earnings - revenue | 2,020 | 1,582 | 2,000 |
Retained earnings - capital | 73,072 | 76,616 | 71,684 |
Total equity | 126,976 | 134,031 | 127,941 |
Net asset value per ordinary share | 308.76p | 312.86p | 303.43p |
Condensed statement of changes in equity
For the six months ended 31 October 2016
| Six months ended 31 October 2016 (unaudited)
| ||||||
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|
|
| Retained earnings
|
| |
| Share Capital | Share Premium | Special reserve | Capital redemption reserve | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
At 1 May 2016 | 498 | 645 | 53,022 | 92 | 2,000 | 71,684 | 127,941 |
Total comprehensive income: |
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Profit for the period | - | - | - | - | 1,070 | 1,388 | 2,458 |
Transactions with owners recorded directly to equity: |
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|
|
|
Repurchase of ordinary shares into treasury | - | - | (2,375) | - | - | - | (2,375) |
Conversion of subscription shares | - | 2 | - | - | - | - | 2 |
Dividends paid | - | - | - | - | (1,050) | - | (1,050) |
At 31 October 2016 | 498 | 647 | 50,647 | 92 | 2,020 | 73,072 | 126,976 |
| Six months ended 31 October 2015 (restated) (unaudited)
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| Retained earnings
|
| |
| Share capital | Share premium | Special reserve | Capital redemption reserve | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
At 1 May 2015 | 503 | 644 | 54,598 | 87 | 1,554 | 82,397 | 139,783 |
Total comprehensive income: |
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|
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Profit/(loss) for the period | - | - | - | - | 1,013 | (5,781) | (4,768) |
Transactions with owners recorded directly to equity: |
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|
|
|
Cancellation of ordinary shares from treasury | (3) | - | - | 3 | - | - | - |
Conversion of subscription shares | - | 1 | - | - | - | - | 1 |
Dividends paid | - | - | - | - | (985) | - | (985) |
At 31 October 2015 | 500 | 645 | 54,598 | 90 | 1,582 | 76,616 | 134,031 |
| Year ended 30 April 2016 (restated) (audited)
| ||||||
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| Retained earnings
|
| |
| Share capital | Share premium | Special reserve | Capital redemption reserve | Revenue | Capital | Total |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
At 1 May 2015 | 503 | 644 | 54,598 | 87 | 1,554 | 82,397 | 139,783 |
Total comprehensive income: |
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Profit/(loss) for the year | - | - | - | - | 2,029 | (10,713) | (8,684) |
Transactions with owners recorded directly to equity: |
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|
|
|
Repurchase of ordinary shares into treasury | - | - | (1,576) | - | - | - | (1,576) |
Cancellation of ordinary shares from treasury | (5) | - | - | 5 | - | - | - |
Conversion of subscription shares | - | 1 | - | - | - | - | 1 |
Dividends paid | - | - | - | - | (1,583) | - | (1,583) |
At 30 April 2016 | 498 | 645 | 53,022 | 92 | 2,000 | 71,684 | 127,941 |
For the six months ended 31 October 2016
| Six months ended 31 October 2016 (unaudited) £'000 | Six months ended 31 October 2015 (restated) (unaudited) £'000 | Year ended 30 April 2016 (restated) (audited) £'000 |
Operating activities |
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|
|
Profit/(loss) before tax | 2,444 | (4,757) | (8,673) |
Interest paid | 177 | 214 | 407 |
(Gains)/losses on investments | (1,887) | 5,158 | 9,577 |
Currency losses | - | 39 | 41 |
Decrease in other receivables | 61 | 20 | 57 |
Increase/(decrease) in other payables | 3 | (43) | (110) |
Net cash inflow from operating activities before interest and tax | 798 | 631 | 1,299 |
Interest paid | (177) | (214) | (407) |
Irrecoverable overseas tax | 14 | (11) | (11) |
Net cash inflow from operating activities | 635 | 406 | 881 |
Investing activities |
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|
|
Purchase of investments | (18,917) | (22,531) | (37,988) |
Sales of investments | 20,891 | 31,725 | 46,091 |
Net cash inflow from investing activities | 1,974 | 9,194 | 8,103 |
Financing activities |
|
|
|
Repurchase of ordinary shares into treasury | (2,447) | - | (1,359) |
Conversion of subscription shares | 2 | 1 | 1 |
Dividends paid | (1,050) | (985) | (1,583) |
Increase in inter-company loan | 18 | 252 | 396 |
Net cash outflow from financing activities | (3,477) | (732) | (2,545) |
Net (increase)/decrease in net debt | (868) | 8,868 | 6,439 |
Net debt at the start of the period | (6,913) | (13,311) | (13,311) |
Effect of foreign exchange rate changes | - | (39) | (41) |
Net debt at the end of the period | (7,781) | (4,482) | (6,913) |
Bank loan | (8,500) | (6,500) | (8,500) |
Cash and cash equivalents | 719 | 2,018 | 1,587 |
| (7,781) | (4,482) | (6,913) |
Notes
1. Accounting policies
The Group's Half-Yearly Financial Report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', the provisions of the Companies Act 2006 and with the guidance set out in the Statement of Recommended Practice for Investment Trust Companies and Venture Capital Trusts ("SORP") issued by the Association of Investment Companies in November 2014.
The Half-Yearly Financial Report has been prepared under the same accounting policies as the Annual Financial Report for the year ended 30 April 2016.
The Half-Yearly Financial Report has been prepared under the same accounting policies as the Annual Financial Report for the year ended 30 April 2016 with the exception of the incorporation of Investment Entities: Applying the Consolidation Exemption (Amendments to IFRS 10, IFRS 12 and IAS 28) which was adopted by the European Union for accounting periods commencing on or after 1 January 2016.
This amendment removes the requirement to consolidate subsidiaries, where these subsidiaries can themselves be classified as investment entities in their own right and instead the subsidiary is treated as an investment at fair value through profit on loss. As the Company's dealing subsidiary, Alpha Securities Trading Limited, meets the criteria to be treated as an investment entity, the Company is now required to prepare its financial statements on a stand alone basis.
There is no impact on the net asset value per ordinary share resulting from this change, nor on the total earnings per ordinary share for the current or prior periods.
2. Earnings per ordinary share
| Six months | Six months ended | Year ended |
| ended | 31 October | 30 April |
| 31 October | 2015 | 2016 |
| 2016 | (restated) | (restated) |
Earnings/(loss) per ordinary share is based on: |
|
|
|
Revenue earnings (£'000) | 1,070 | 1,013 | 2,029 |
Capital earnings/(loss) (£'000) | 1,388 | (5,781) | (10,713) |
Total earnings/(loss) (£'000) | 2,458 | (4,768) | (8,684) |
Weighted average number of ordinary shares in issue during the period (basic and diluted) | 41,750,646 | 42,841,041 | 42,694,142 |
3. Net asset value per ordinary share
| As at | As at | As at |
| 31 October | 31 October | 30 April |
| 2016 | 2015 | 2016 |
Net asset value per ordinary share is based on: |
|
|
|
Net assets (£'000) | 126,976 | 134,031 | 127,941 |
Number of shares in issue at the end of the period(basic and diluted) | 41,125,090 | 42,841,142 | 42,165,142 |
During the period the Company bought back 1,040,706 ordinary shares into treasury (six months ended 31 October 2015: Nil; year ended 30 April 2016: 676,000). 645 subscription shares were exercised during the period and the same number of ordinary shares were issued in respect of these (six months ended 31 October 2015: 265; year ended 30 April 2016: 265).
4. Dividends
| Six months ended | Six months ended | Year ended |
| 31 October | 31 October | 30 April |
| 2016 | 2015 | 2016 |
| £'000 | £'000 | £'000 |
Second interim dividend for the year ended 30 April 2015 - 2.30p | - | 985 | 985 |
First interim dividend for the year ended 30 April 2016 - 1.40p | - | - | 598 |
Second interim dividend for the year ended 30 April 2016 - 2.50p | 1,050 | - | - |
| 1,050 | 985 | 1,583 |
A first interim dividend for the year ending 30 April 2017 of £637,000 (1.55p per ordinary share) has been declared. This will be paid on 27 January 2017 to those shareholders on the register at close of business on 6 January 2017.
5. Analysis of retained earnings - capital
| As at 31 October 2016 £'000 | As at 31 October 2015 (restated) £'000 | As at 30 April 2016 (restated) £'000 |
Retained earnings - capital (realised) | 85,339 | 86,551 | 87,360 |
Retained earnings - capital (unrealised) | (12,267) | (9,935) | (15,676) |
| 73,072 | 76,616 | 71,684 |
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6. Comparative information
The financial information for the six months ended 31 October 2016 and 31 October 2015 has not been audited and does not constitute statutory financial statements as defined in Section 234 of the Companies Act 2006.
The information for the year ended 30 April 2016 has been extracted from the Annual Financial Report for the year ended 30 April 2016. These financial statements contained an unqualified auditor's report and have been lodged with the Registrar of Companies and did not contain a statement required under Section 498 of the Companies Act 2006.
7. Principal risks and uncertainties
Pursuant to DTR 4.2.7R of the Disclosure Guidelines and Transparency Rules, the principal risks faced by the Company include general market price risk, liquidity risk, regulatory, and financial risks.
These risks, which have not materially changed since the Annual Financial Report for the year ended 30 April 2016, and the way in which they are managed, are described in more detail in the Annual Financial Report for the year ended 30 April 2016 which is available on the website artemisalphatrust.co.uk.
8. Related party transactions
There were no related party transactions during the period. The existence of an independent Board of Directors demonstrates that the Company is free to pursue its own financial and operating policies and therefore, under IAS 24: Related Party Disclosures, the Investment Manager is not considered to be a related party.
9. Valuation of investments
IFRS 7 'Financial Instruments: Disclosures' requires an entity to provide an analysis of investments held at fair value through profit and loss using a fair value hierarchy that reflects the significance of the inputs used in making the measurements of fair value. The hierarchy used to analyse the fair values of financial assets is set out below.
Level 1 - investments with quoted prices in an active market;
Level 2 - investments whose fair value is based directly on observable current market prices or is indirectly derived from market prices; and
Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices, or are not based on observable market data.
The investments held at the balance sheet date fell in to the categories, Level 1, Level 2 and Level 3. The values in these categories are summarised as part of this note. Any investments that are delisted or suspended from a listed stock exchange are transferred from Level 1 to Level 3.
| As at 31 October 2016 £'000 | As at 31 October 2015 £'000 | As at 30 April 2016 £'000 |
UK quoted investments (Level 1) |
|
|
|
- UK listed | 46,233 | 40,217 | 43,895 |
- AIM quoted | 43,428 | 52,153 | 47,553 |
- Preference shares | 235 | 207 | 227 |
Overseas quoted investments (Level 1) | 5,766 | 2,341 | 2,676 |
Mutual funds (Level 2) | 4,416 | 3,503 | 3,554 |
Unquoted investments (Level 3) |
|
|
|
- Equities and warrants | 29,677 | 34,958 | 32,743 |
- Fixed interest | 3,043 | 2,646 | 2,750 |
- Preference shares | 655 | 494 | 636 |
- Other | 664 | 645 | 613 |
| 134,117 | 137,164 | 134,647 |
Subsidiary undertaking (Level 3) | 2,528 | 2,111 | 2,250 |
| 136,645 | 139,275 | 136,897 |
The valuation of the Level 3 investments would not be significantly different had reasonably possible alternative valuation bases been applied.
Details of the movements in Level 3 assets during the six months ended 31 October 2016 are set out in the table below.
| £'000 |
Level 3 investments |
|
Opening book cost | 44,164 |
Opening fair value adjustment | (5,172) |
Opening valuation | 38,992 |
Movements in the period: |
|
Purchases at cost | 2,841 |
Sales - proceeds | (8,141) |
- realised gains on sales | 2,051 |
Transfer to unquoted investments (cost) | 386 |
Transfer from unquoted investments (unrealised loss) | (386) |
Increase/(decrease) in fair value adjustment | 824 |
Closing valuation | 36,567 |
Closing book cost | 41,301 |
Closing fair value adjustment | (4,734) |
| 36,567 |
10. Restatement of prior periods
The tables below present, in respect of the prior periods, the resulting changes for each financial statement line item affected by the change in presentation of the financial statements as set out in note 1.
Condensed income statement
| Six months ended 31 October 2015 | Year ended 30 April 2016 | ||||
| As previously reported £'000 | Adjustments £'000 | As restated £'000 | As previously reported £'000 | Adjustments £'000 | As restated £'000 |
Investment income | 1,342 | (21) | 1,321 | 2,632 | (48) | 2,584 |
Other income | 14 | (11) | 3 | (87) | 93 | 6 |
Total revenue | 1,356 | (32) | 1,324 | 2,545 | 45 | 2,590 |
Gains/(losses) on investments | (5,013) | (145) | (5,158) | (9,571) | (6) | (9,577) |
Gains/(losses) on current asset investments | (183) | 183 | - | 40 | (40) | - |
Currency losses | (39) | - | (39) | (41) | - | (41) |
Total income/(loss) | (3,879) | 6 | (3,873) | (7,027) | (1) | (7,028) |
Expenses |
|
|
|
|
|
|
Investment management fee | (432) | - | (432) | (802) | - | (802) |
Other expenses | (240) | 2 | (238) | (442) | 6 | (436) |
Profit/(loss) before finance costs and tax | (4,551) | 8 | (4,543) | (8,271) | 5 | (8,266) |
Finance costs | (206) | (8) | (214) | (400) | (7) | (407) |
Profit/(loss) before tax | (4,757) | - | (4,757) | (8,671) | (2) | (8,673) |
Tax | (11) | - | (11) | (13) | 2 | (11) |
Profit/(loss) for the period per ordinary share | (4,768) | - | (4,768) | (8,684) | - | (8,684) |
Condensed balance sheet
| 31 October 2015 | 30 April 2016 | ||||
| As previously reported £'000 | Adjustments £'000 | As restated £'000 | As previously reported £'000 | Adjustments £'000 | As restated £'000 |
Non-current assets |
|
|
|
|
|
|
Investments | 137,164 | - | 137,164 | 134,647 | - | 134,647 |
Investment in subsidiary | -
| 2,111 | 2,111 | - | 2,250 | 2,250 |
| 137,164 | 2,111 | 139,275 | 134,647 | 2,250 | 136,897 |
Current assets |
|
|
|
|
|
|
Investments held by subsidiary | 1,382 | (1,382) | - | 1,243 | (1,243) | - |
Other receivables | 338 | (13) | 325 | 506 | (37) | 469 |
Cash and cash equivalents | 2,048 | (30) | 2,018 | 1,753 | (166) | 1,587 |
| 3,768 | (1,425) | 2,343 | 3,502 | (1,446) | 2,056 |
Total assets | 140,932 | 686 | 141,618 | 138,149 | 804 | 138,953 |
Current liabilities |
|
|
|
|
|
|
Other payables | (401) | (686) | (1,087) | (1,708) | (804) | (2,512) |
Bank loan | (6,500) | - | (6,500) | (8,500) | - | (8,500) |
| (6,901) | (686) | (7,587) | (10,208) | (804) | (11,012) |
Net assets | 134,031 | - | 134,031 | 127,941 | - | 127,941 |
Equity attributableto equity holders |
|
|
|
|
|
|
Share capital | 500 | - | 500 | 498 | - | 498 |
Share premium | 645 | - | 645 | 645 | - | 645 |
Special reserve | 54,598 | - | 54,598 | 53,022 | - | 53,022 |
Capital redemption reserve | 90 | - | 90 | 92 | - | 92 |
Retained earnings - revenue | 3,244 | (1,662) | 1,582 | 3,804 | (1,804) | 2,000 |
Retained earnings - capital | 74,954 | 1,662 | 76,616 | 69,880 | 1,804 | 71,684 |
Total equity | 134,031 | - | 134,031 | 127,941 | - | 127,941 |
Copies of the Half-Yearly Financial Report for the six months ended 31 October 2016 will be sent to shareholders shortly and will be available from the registered office at Cassini House, 57 St James's Street, London SW1A 1LD as well as on the website, artemisalphatrust.co.uk.
Artemis Fund Managers Limited
Company Secretary
For further information, please contact:
Artemis Fund Managers Limited
Telephone: 0131 225 7300
22 December 2016