27 Mar 2007 14:59
EUROPEAN UTILITIES TRUST PLC
PRELIMINARY ANNOUNCEMENT OF INTERIM RESULTS
Dear Shareholder
Despite further interest rate increases over the period, equity markets have once again proved strong, with the strength of earnings and dividends outweighing rising concerns over inflation and interest rate increases.
The European utility sector has been dominated by dramatic fluctuations in the values of fossil fuels and of electricity and CO2 markets. The more commodity sensitive utilities such as E.ON, RWE and Centrica have seen significant volatility in their share prices, although the trend has generally been positive, most notably in the latter half of 2006. Corporate activity has also proved a recurrent theme over the period with a bid by Iberdrola for Scottish Power. Meanwhile in Spain the long awaited saga of the bid for Endesa appears to be drawing to a close.
Performance
Over the period from the 1 August 2006 to 31 January 2007, the total assets of your Company rose from ‚£34.728m to ‚£38.232m, representing an increase of 10.09%. After allowing for the accrual on the Company's Zero Coupon Preference ("ZCP") shares of 3.59%, net assets attributable to the Company's Ordinary Income shares rose from ‚£21.75m to ‚£25.04m, or an increase of 15.13%. As a result net asset value per Ordinary Income share rose from 240.25p to 276.56p.
Terminal value per Ordinary Income share (i.e. the residual value of each share after allowing for the full accrual of the ZCP shares at the proposed winding up date being 31 December 2010) rose from 202.50p to 242.54p. Terminal asset value has now risen from ‚£19.10m to ‚£21.96m since the Company's reconstruction in January 2004.
The hurdle rate is the amount by which the total assets of the Company need to increase (or decline), expressed as an annual percentage rate, in order to achieve predetermined values for the Ordinary Income shares. Thus the hurdle rate required to achieve the 100p initial value of the Company's Ordinary Income shares is now minus 8.9% whilst to achieve the share price at the period end of 243.75p the hurdle rate is 1.0%.
The Company's Ordinary Income shares generally reflected the sound performance of its assets, the share price increasing from 192.50p to 243.75p at the period end or an increase of 26.62%. The ZCP shares rose from 308.00p to 322.50p. At the period end the ZCPs were trading at an 8.23% premium to their accrued entitlement to assets and the Ordinary Income shares traded on a discount to net asset value of 11.86%. The Company's overall market capitalisation was at a discount of 6.23% to total net assets.
Revenue and dividends.
Your Company generated a revenue surplus before payment of dividends for the period of ‚£150,000, or 1.66p per share. Given the strong asset performance of the Company and also the robust outlook for dividends from the sector, your Board feels that an increase in the first interim dividend is appropriate. Thus the first interim dividend will rise from 1.97p last year to 2.07p for this year, an increase of around 5%. The dividend will be paid on 25 April 2007 to Ordinary Income shareholders on the register at the close of business on 10 April 2007.
Outlook
Stock markets generally have risen strongly over the last three years and valuations appear full. However, the utility sector is still very much in favour with investors and corporate activity shows little sign of slowing. Historically balance sheets are also very under geared allowing plenty of scope for equity friendly moves such as share buybacks and special dividends. If inflation and interest rates remain under control I would hope that the sector should have another sound period of performance in the second half of the year.
Charles WilkinsonChairman27 March 2007
The Directors announce the unaudited statement of results for the six months ended 31 January 2007 as follows:
INCOME STATEMENT (unaudited)
for the period ended 31 January 2007
Six months to 31 January Six months to 31 January 2007 2006 Revenue Capital Total* Revenue Capital Total* ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Gains on investments at - 3,945 3,945 - 2,609 2,609 fair value through profit or loss
Dividends and interest 434 - 434 388 - 388
Investment management fee (68) (68) (136) (57) (57) (114)
Other expenses (133) - (133) (111) - (111) Exchange gains - 31 31 - 14 14
Movement in fair value of - 45 45 - 86 86
derivative financial instruments Return on ordinary 233 3,953 4,186 220 2,652 2,872 activities before finance costs and taxation Interest payable and (46) (46) (92) (51) (51) (102)similar charges
Appropriations in respect - (338) (338) - (316) (316) of Zero Coupon Preference
shares Return on ordinary 187 3,569 3,756 169 2,285 2,454 activities before taxation Taxation on ordinary (37) 19 (18) (11) - (11)activities Return on ordinary 150 3,588 3,738 158 2,285 2,443 activities after taxation Return per share: Ordinary Income share 1.66 39.63 41.29 1.75 25.24 26.99 Zero Coupon Preference - 10.33 10.33 - 9.64 9.64 share
* The total column of this statement is the income statement of the Company. The supplementary revenue return and capital return columns have been prepared in accordance with the AIC's SORP
Weighted Average number of shares in issue
Ordinary Income shares 9,052,500 9,052,500 Zero Coupon Preference shares 3,275,000 3,275,000
These accounts are unaudited and are not the Company's statutory accounts.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS FUNDS (unaudited)
Share Special Capital Capital Capital Revenue Total capital reserve redemption reserve reserve reserve ‚£'000 ‚£'000 ‚£'000 reserve realised unrealised ‚£'000 ‚£'000 ‚£'000 ‚£'000 At 31 July 2006 90 7,918 27 9,022 3,953 739 21,749 Return for the - - - 419 3,169 150 3,738 period Dividends paid - - - - - (451) (451)in the period As at 31 90 7,918 27 9,441 7,122 438 25,036 January 2007 At 31 July 2005 90 7,918 27 5,271 3,612 602 17,520 as restated Return for the - - - 1,481 804 158 2,443 period Dividends paid - - - - - (410) (410)in the period As at 31 90 7,918 27 6,752 4,416 350 19,553 January 2006 BALANCE SHEET (unaudited)as at 31 January 2007 31 January 31 July 31 January 2007 2006 2006 ‚£'000 ‚£'000 ‚£'000 Fixed assets Investments at fair value 34,945 30,420 27,313 through profit or loss Interest rate swap 23 - - 34,968 30,420 27,313 Current assets Debtors 178 373 174 Cash at bank 3,159 5,262 4,920 3,337 5,635 5,094 Creditors - amounts falling due 73 1,327 108 Within one year Net current assets 3,264 4,308 4,986 Total assets less current 38,232 34,728 32,299 liabilities Creditors - amounts falling due after more than one year Bank loan 3,438 3,539 3,535 Interest rate swap - 20 112 Zero Coupon Preference 9,758 9,420 9,099 share entitlement 13,196 12,979 12,746 Net assets 25,036 21,749 19,553 Equity Share capital 90 90 90 Special reserve 7,918 7,918 7,918 Capital redemption reserve 27 27 27 Capital reserve - realised 9,441 9,022 6,752 Capital reserve - unrealised 7,122 3,953 4,416 Revenue reserve 438 739 350 Total equity attributable to 25,036 21,749 19,553 equity shareholders Net asset value per share pence pence pence Ordinary Income share:* 276.56 240.25 216.00 Zero Coupon Preference share: 297.97 287.64 277.83
Ordinary Income shares in issue 9,052,500 9,052,500 9,052,500
Zero Coupon Preference shares 3,275,000 3,275,000 3,275,000 in issue
\* The net asset values per Ordinary Income share as at 31 January 2007 and 31 January 2006 include unaudited current period loss. The net asset value per Ordinary Income share as at 31 July 2006 includes the audited current period revenue for the year.
STATEMENT OF CASH FLOWS (unaudited)
for the period ended 31 January 2007
Six months to Six months to 31 January 31 January 2007 2006 ‚£'000 ‚£'000 Net cash inflow from operating activities 336 305 Returns on investments and servicing of finance Interest paid (91) (100) Net cash outflow from returns on investment (91) (100)and servicing of finance Taxation 21 11 Withholding tax recovered Total Taxation recovered 21 11 Financial investment Purchases of investments (14,287) (12,824) Sales of investments 12,369 12,444 Net cash outflow from financial investment (1,918) (380) Equity dividends paid (451) (410) Net cash outflow before and after financing (2,103) (574) Decrease in cash (2,103) (574)NOTES1. BASIS OF PREPARATION
This financial information has been prepared under the historical cost convention as modified by the revaluation of certain investments and in accordance with applicable law and Accounting Standards in the United Kingdom and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" (`SORP') issued in January 2003 and revised December 2005, and in accordance with accounting policies set out in the statutory accounts for the year ended 31 July 2006.
2. DIVIDENDS
The Directors have declared an interim dividend of 2.07p net per Ordinary Income share, payable on 25 April 2007 to the holders of Ordinary Income shares on the Register at 10 April 2007.
3. FINANCIAL INFORMATION
The financial information contained in this announcement does not constitute full statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information for the six months ended 31 January 2007 and 31 January 2006 has not been audited.
The information for the year ended 31 July 2006 has been extracted from the latest published audited accounts. Those accounts have been filed with the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under Sections 237(2) or (3) of the Companies Act 1985.
EUROPEAN UTILITIES TRUST PLC