Last checked at 
29 Aug 2008 07:00
Embargoed 7 am August 29 2008
ATHELNEY TRUST PLC: INTERIM RESULTS
Athelney Trust plc, the AIM-traded investor in junior markets and small companies, announces its unaudited result for the six months ended June 30 2008.
Main points:
Gross revenue up 11.6 per cent at £62,481 (2007: £56,010)
Revenue on like for like basis up 27.4 per cent, dividend income up 22.4 per cent
NAV at 145.5 p (December 2007: 173.1p; June 2007: 201.3p)
Revenue return per share rose 36 per cent to 2.6p (2007: 1.9p)
Application made for full LSE listing
Chairman Hugo Deschampsneufs said: "For 10 years Mr Brown bombarded us with tales of his success - growth, low inflation and high employment - in a way that looked hubristic, even boastful. But, when he stands at the bar of History, I think most will remind him he unleashed a torrent of public spending that we could just about afford in the good times, but not in the bad.
"Now, the parlous state of the Government's finances and the nasty cocktail of the house price bubble, the credit boom and the low savings rate has left our economy looking particularly fragile.
"However, there are two reasons for being cheerful: falling growth, bank lending and company profits combined with rising unemployment are much more likely to produce deflation than inflation. In my opinion as growth slips back in Western economies, demand for commodities will fall, supply will increase and a significant reduction in prices will occur.
"As night follows day this equity market will turn round but it is absolutely impossible to pinpoint exactly when the turn will come. But, I genuinely believe that the risks of being out of this market are greater than those of being in.
"Shareholders will be aware by now that the Board has made application for full listing on the London Stock Exchange and for the corresponding delisting from AIM".
-ends-
For further information:
Robin Boyle, Managing Director
Athelney Trust plc 020 7628 7937
Paul Quade 020 7248 8010
CityRoad Communications 07947 186694
CHAIRMAN'S STATEMENT AND BUSINESS REVIEW
I announce the unaudited results for the six months to 30 June 2008. The salient points are as follows:
Unaudited Net Asset Value ("NAV") is 145.4p per share (31 December 2007: 173.1p, 30 June 2007: 201.3p), a fall of 16 per cent and a decrease of 27.8 per cent over the past year.
Gross Revenue rose by 10.9 per cent to £62,140 compared with the half year ended 30 June 2007 of £56,010 and the full year to 31 December 2007 of £120,488.
On a like-for-like basis revenue increased by 26.7 per cent and dividend income rose by 22.4 per cent.
Revenue return per ordinary share was 2.6p, up 36.8 per cent from the previous half year (31 December 2007: 3.9p, 30 June 2007: 1.9p).
A dividend of 3.5p was paid in May 2008 (2007: 3.25p) and, as is the Board's practice, no further dividend will be paid until the full year's results are known.
Review of 1 January to 30 June 2008
It has been a grim twelve months since Bear Sterns, a U.S. investment bank, announced that one of its hedge funds investing in sub-prime mortgage securities had been wiped out. Most international markets have performed poorly this year: Europe (-21 per cent); China (-45 per cent); Australia (-17 per cent); India (-30 per cent); the FTSE 100 Index, which is now 36 per cent weighted to mining and oil and therefore gives too optimistic a result at the moment, (-12 per cent). All that I can find on the up-side is Brazil (+3.1 per cent). As far as the shares of small companies are concerned, the FT Small Caps Index fell by 16.1 per cent and the Athelney Trust NAV retreated by 16 per cent. Shareholders of a nervous disposition might choose to move directly to the paragraph headed Outlook.
It is easy to spell out all the adverse factors, such as the credit crunch, food price inflation, the oil price, the blow-up in the U.S. housing market and so on and it is equally easy to point to the U.K. as, of all the world's major economies, it looks to be the most vulnerable. The parlous state of the Government's finances and the nasty cocktail of the house price bubble, the credit boom and the low savings rate has left our economy looking particularly fragile. Furthermore, two inter-linked sectors, financial services and property, account for a disproportionately large part of the U.K. economy. It is also true that retail spending was often financed by over-extended credit cards and equity released from over-valued homes. The next phase of the slowdown will be a rise in unemployment - the speed with which the house-builders have slashed jobs in recent weeks suggests that employers in bad sectors are feeling the need to take speedy action. It is interesting to note that financial services, construction and retailing account for an amazing 50 per cent of all jobs in the U.K.
Inflation has risen to 3.8 per cent compared with the Government's target of 2.5 per cent and, according to the Bank of England's Monetary Policy Committee, is likely to rise further to 4 per cent and more in the coming months. However, there are at least two reasons for being cheerful: falling growth, bank lending and company profits combined with rising unemployment are much more likely to produce deflation than inflation.
Inflation in western economies is akin to Sherlock Holmes' curious incident of the dog that did nothing - Holmes said that that was a curious incident. In clothing, cars, communications, health, household goods and housing, price inflation is non-existent or weak. The problems are those goods and services directly affected by the surge in prices in energy, food and strategic metals. Thus while headline inflation has been shooting up, core inflation, which discounts these factors, has remained steady at 1.6 per cent - nor is there any sign that workers are intent on pushing through extravagant pay rises. In my opinion, as growth slips back in Western economies, demand for commodities will fall, supply will increase and a significant reduction in prices will occur. We should use this window of opportunity to encourage capital spending in energy, abandon over-generous bio-fuel subsidies, free agricultural trade and promote farming technologies. If our response is weak, the curious, but not unexpected, incident will be that we did nothing.
When sorrows come, they come not single spies, but in battalions said Claudius in Hamlet. For ten years, Mr Brown bombarded us with tales of his success - growth, low inflation and high employment - in a way that looked hubristic, even boastful. No matter that those years saw prolonged growth throughout much of the world, beyond the power of any British politician to help or hinder. Yes, you can criticize him for 42 days detention without trial, the 10p income tax abolition, car tax, his dithering over the election (or non-election, rather) but when he stands at the bar of History, I think that most will remind him that he unleashed a torrent of public spending that we could just about afford in good times, but not in bad.
How ironic that Mr. Brown should achieve his life-long ambition to become Prime Minister at the very moment that the
global economy went awry. With his party now well behind in the opinion polls, he may yet recall the even bleaker words from King Lear The worst is not, So long as we can say, 'This is the worst.'
The Great Oil Shock of 2008 (the price of a barrel of oil rose by 49 per cent to $143.67 in the first six months of this year) is bad enough for us here in the Western world but I wonder how the developing economies in Asia will manage to cope. Cheap transport has played a big part in the economic success of China and other Asian economies: goods are shipped in a criss-cross fashion to exploit competitive advantage. Products are sent to China for final assembly, then shipped again to Western markets but the cost of a container from Shanghai to Rotterdam has risen threefold since the price of oil started its steep rise. Energy subsidies have disguised the damage - China has held down electricity prices though global coal costs have tripled since early last year. BP's Statistical Review says that China's use of energy per unit of GDP is three times that of the U.S., five times Japan's and eight times Britain's. Already, 2331 shoe factories have closed down in Guangdong province this year as the effects of high commodity costs, 20 per cent wage inflation and lower import demand from the U.S., Canada, Britain, France and Spain are felt. Declared inflation is just 7.7 per cent but that statistic does not begin to capture the scale of repressed prices from fuel to fertilisers. Inflation merely steals growth from the future and allows politicians to defer monetary tightening until matters get out of hand, which is close to where we are now - e.g. Vietnam 30 per cent, India 11 per cent, the Philippines 11 per cent and Thailand 9 per cent. No wonder the Shanghai stock exchange index has fallen by 56 per cent since last October!
Three other things occur to me about the oil market at the moment, perhaps counter-intuitive: first, that high oil prices are not caused by technical factors such as speculation but have been driven upward by the fastest period of economic growth since the early 1970s and concentrated in those developing countries that subsidize fuel prices such as China (see above), India and the oil-producing countries themselves. Yet supply has struggled to keep up: production in OPEC countries fell by 350,000 barrels of oil a day last year and North Sea gas production in the British sector fell by 10 per cent in 2007. U.K. oil output increased slightly last year but this was exceptional, being the result of opening one large new field - production remains on a downward trend. Growth in non-OPEC production will, in future, have to come from oil shale in the U.S., tar sands in Canada, the Arctic and the deep waters of the Gulf of Mexico. In the recent past, growing demand for oil from China and India has been met almost barrel for barrel by increasing supply from Russia but production has started to decline in that country and such are the travails of TNK-BP and Royal Dutch Shell that it is unlikely that many Western oil companies would be keen to go and help the Russians out. The second point is that the world is not running out of hydrocarbons, with 40 years of proven oil reserves, 60 years of natural gas and 130 years of coal. And point three is that we cannot switch quickly to a low-carbon economy. We will remain dependent on fossil fuels for the foreseeable future with coal being the fastest growing of all the fuel types. While bio-fuels, wind and solar energy are growing rapidly, they still only account for a tiny share (less the two per cent) of global energy production. The common sense way forward is to invest in energy efficiency, new production, new technology and new energy sources such as wind, solar and nuclear.
Finally, under this heading, in contrast with the rather hysterical surveys from the main mortgage lenders, the Land Registry said that house price inflation fell close to zero in the first six months of 2008, rather than showing a heavy fall in prices. Having said that, the trend in all house-price measures have been the same. House prices have fallen in most months this year and there is no sign yet of any recovery. Prices were 1 per cent lower than in May and only 0.1 per cent higher than in June 2007 and down 2.6 per cent on their January peak.
Results
Gross revenue rose by 10.9 per cent compared with the six months to 30 June 2007: after allowance is made for the special dividend paid by Mallett in 2007, like-for-like growth was 26.7 per cent.
Number
Companies paying dividends 77
Companies sold (therefore no true comparison) 8
Companies purchased (therefore no true comparison) 14
Increased total dividends in the half year 41
Reduced total dividends in the half year 9
No change in dividend 5
Corporate Activity
Broker Network Holdings was taken over for cash producing a profit of 54 per cent. Since 30 June, Gibbs and Dandy has agreed to a cash offer which has resulted in Athelney booking a profit of 548 per cent.
Portfolio Review
Holdings of Pendragon and Gaming VC were both purchased for the first time. Acertec, International Greetings, Media Square, Flying Brands, SCS Upholstery and Enterprise Inns were all sold. In addition, a total of seven holdings were top-sliced to provide capital for the new purchases.
Dividend
As is the Board's practice, consideration of a dividend will be left until the final results are known. However, having increased the annual dividend from 1p per share in 1996 to 3.5p in 2008, the Board is keen to maintain Athelney's progressive record, remaining within the context of what can be afforded without undue financial strain.
Update
The unaudited NAV at 31 July 2007 was 135.8p whereas the share price on the same day stood at 145p. Further updates can be found on www.athelneytrust.co.uk
Outlook
It is notoriously difficult to get markets right - John Maynard Keynes, for example, had a gruelling time during the 1929-32 bear market before making it back and more later. Charlie Munger, Warren Buffett's business partner had three straight down years in the early Seventies. George Soros got thumped in the 1987 crash despite having correctly predicted that something of the sort was coming - he made the wrong choice of market to avoid. Coming up-to-date, Julian Robertson, the feared hedge fund manager, gave up the business altogether because he was unable to make any sense of the dot.com bubble (me neither) and Tony Dye, who sadly died recently, was sacked in 2000 for being too early in ridiculing the growth stock mania of the time. As night follows day, this equity market will turn round but it is absolutely impossible to pinpoint exactly when the turn will come. Ingredients would be: steady/lower interest rates; declining headline inflation; signs that the banks are willing to lend to each other again and that write-offs on sub-prime mortgage securities are sufficient; the crude oil price starts to decline; food prices fall (this may already be happening) and the U.S. Dollar ends its precipitate fall. When will this happen? Who knows - but I genuinely believe that the risks of being out of this market are greater that those of being in!
Full Listing
As announced on 22 August, the Company intends to cancel the quotation of its shares on AIM (the "Cancellation"). The Cancellation is conditional on the Company's shares being admitted to the Official List and to trading on the main market of the London Stock Exchange and this is expected to take place on 24 September 2008. It is expected that, from 24 September 2008 onwards, shareholders will be able to trade their shares on the main market. The Board believes that such a move would be beneficial to shareholders.
H.B. Deschampsneufs
29 August 2008
Athelney Trust plc
HALF YEARLY INCOME STATEMENT
(INCORPORATING THE REVENUE ACCOUNT)
| Year ended | |||||||||
| Unaudited | Unaudited | 31 December | |||||||
| 6 months ended 30 June 2008 | 6 months ended 30 June 2007 | 2007 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Total | |||
| £ | £ | £ | £ | £ | £ | £ | |||
| Profits on investments | - | (540,095) | (540,095) | - | 295,354 | 295,354 | (362,778) | ||
| Income | 62,140 | - | 62,140 | 56,010 | - | 56,010 | 120,488 | ||
| Investment Management expenses | (1,872) | (17,767) | (19,639) | (4,776) | (14,150) | (18,926) | (38,872) | ||
| Other expenses | (13,899) | (21,621) | (35,520) | (24,314) | - | (24,314) | (52,362) | ||
| Return on ordinary | |||||||||
| activities before taxation | 46,369 | (579,483) | (533,114) | 26,920 | 281,204 | 308,124 | (333,524) | ||
| Taxation | - | 97,444 | 97,444 | 7,723 | (48,722) | (40,999) | 93,543 | ||
| Return on ordinary | |||||||||
| activities after taxation | 46,369 | (482,039) | (435,670) | 34,643 | 232,482 | 267,125 | (239,981) | ||
| Dividends Paid: | |||||||||
| Dividend | (63,098) | - | (63,098) | (58,591) | - | (58,591) | (58,591) | ||
| (16,729) | (482,035) | (498,768) | (23,948) | 232,482 | 208,534 | (298,572) | |||
| Return per ordinary share | 2.6p | (26.7)p | (24.2)p | 1.9p | 12.9p | 14.8p | (13.3)p | ||
Athelney Trust plc
HALF YEARLY BALANCE SHEET AS AT 30 JUNE 2008
| Unaudited | Unaudited | 31 December | ||||
| 30 June 2008 | 30 June 2007 | 2007 | ||||
| £ | £ | £ | ||||
| Fixed assets | ||||||
| Investments | 2,517,964 | 3,991,243 | 3,167,818 | |||
| Current assets | ||||||
| Stock | 1,147 | - | - | |||
| Debtors | 256,553 | 80,367 | 205,773 | |||
| Cash at bank and in hand | 42,636 | 22,153 | 45,335 | |||
| 300,336 | 102,520 | 251,108 | ||||
| Creditors: amounts falling due within one year | (36,795) | (103,321) | (41,921) | |||
| Net current assets (liabilities) | 263,541 | (801) | 209,187 | |||
| Total assets less current liabilities | 2,781,505 | 3,990,442 | 3,377,005 | |||
| Provisions for liabilities and charges | (159,551) | (361,757) | (256,283) | |||
| Net assets | 2,621,954 | 3,628,685 | 3,120,722 | |||
| Capital and reserves | ||||||
| Called up share capital | 450,700 | 450,700 | 450,700 | |||
| Share premium account | 405,605 | 405,605 | 405,605 | |||
| Other reserves (non distributable) | ||||||
| Capital reserve - realised | 825,084 | 985,293 | 892,893 | |||
| Capital reserve - unrealised | 824,853 | 1,690,531 | 1,239,083 | |||
| Revenue reserve | 115,712 | 96,556 | 132,441 | |||
|
|
| |||||
| Shareholders' funds - all equity | 2,621,954 | 3,628,685 | 3,120,722 | |||
| Net Asset Value per share | 145.4p | 201.3p | 173.1p | |||
| The revenue column of this statement is the profit and loss account for the Company. |
| All revenue and capital items in the above statement derive from continuing operations. |
| No operations were acquired or discontinued during the above financial years. |
| There have been no recognised gains or losses, other than the results for the financial years shown above. |
Athelney Trust plc
CASHFLOW STATEMENT FOR THE SIX MONTHS ENDING 30 JUNE 2008
| Unaudited | Unaudited | Year ended | |||||||||
| 6 months ended | 6 months ended | 31 December | |||||||||
| 30 June 2008 | 30 June 2007 | 2007 | |||||||||
| £ | £ | £ | £ | £ | |||||||
| Net cash (outflow) / inflow from | |||||||||||
| operating activities | (49,360) | 37,755 | (69,440) | ||||||||
| Servicing of finance | |||||||||||
| Dividends paid | (63,098) | (58,591) | (58,591) | ||||||||
| Net cash (outflow) from servicing | (63,098) | (58,591) | (58,591) | ||||||||
| of finance | |||||||||||
| Taxation | |||||||||||
| Corporation tax paid | - | - | (34,916) | ||||||||
| Investing activities | |||||||||||
| Purchases of investments | (638,352) | (577,437) | (1,247,174) | ||||||||
| Sales of investments | 748,111 | 587,940 | 1,422,970 | ||||||||
| Net cash inflow / (outflow) from | |||||||||||
| Investing activities | 109,759 | 10,503 | 175,796 | ||||||||
| (Decrease) in cash in the year | (2,699) | (10,333) | 12,849 | ||||||||
| Reconciliation of operating net revenue to | |||||||||||
| net cash (outflow) / inflow from operating activities | £ | £ | £ | ||||||||
| Revenue return on ordinary activities before taxation | 46,369 | 26,920 | 58,233 | ||||||||
| (Increase) in debtors | (51,927) | 25,235 | (100,170) | ||||||||
| (Decrease)/ increase in creditors | (4,414) | (250) | 1,476 | ||||||||
| Management expenses charged to capital | (39,388) | (14,150) | (28,979) | ||||||||
| (49,360) | 37,755 | (69,440) | |||||||||
Notes:
| 2008 | 2007 | ||||
| Revenue | Capital | Total | Revenue | Capital | Total |
| £ | £ | £ | £ | £ | £ |
| 46,369 | (482,039) | (435,670) | 34,643 | 232,482 | 267,125 |
3. Copies of the full Half Yearly Financial Statements will be available on Athelney’s website www.athelneytrust.co.uk on 29 August 2008. Paper copies of the full Half Yearly Financial Statements specifically requested by some shareholders will be posted on 29 August 2008.
29 August 2008
END