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29 Feb 2008 16:17
NEW STAR INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED HALF YEAR RESULTS
The Directors announce the unaudited statement of condensed results for the six months ended 31st December 2007 as follows:
FINANCIAL HIGHLIGHTS 31st December 2007 30th June 2007 % change PERFORMANCE Net assets (‚£'000) 106,725 123,689 (13.7) Net asset value per Ordinary 150.27p 174.15p (13.7)share Mid-market price per Ordinary 121.00p 156.25p (22.6)share Discount of price to net asset 19.5% 10.3% -value FTSE World Index 132.45 129.72 2.1 FTSE All-Share Index 3,286.67 3,404.14 (3.5) Six months ended Six months ended 31st December 2006 31st December 2007 REVENUE Return per Ordinary share 0.62p 0.60p Dividend per Ordinary share - - TOTAL RETURN Net assets total return (13.7%) 8.0% FTSE All-Share total return (2.1%) 10.0% CHAIRMAN'S STATEMENT
The six months to 31st December 2007 was a disappointing period for your Company, with total assets falling 13.7% to ‚£106.7 million. This compares with a 3.5% fall in the FTSE All-Share Index. At the period end, the net asset value per Ordinary share was 150.3p. This compares with the launch price of 100p in May 2000. The FTSE All-Share Index over the same period rose by 10.5%.
Net revenue before tax for the period was ‚£489,000. In common with previous years, your directors are not recommending the payment of an interim dividend to shareholders.
Global equities faced volatile and challenging conditions during the period under review, with the MSCI World Total Return Index gaining just 0.9% in sterling terms amid fears that contagion from the US sub-prime lending crisis could seriously damage the global economy. Japan fell 6.1% in sterling terms while the US fell 0.3%. By contrast, Asia excluding Japan gained 20.7% and Latin America gained 19.5%. Within Europe, the UK was relatively weak while Europe excluding the UK rose 3.9% in sterling, aided by the euro's strength.
The weakest sectors were those that suffered directly from the credit market dislocation and from fears of a consumer-led US slowdown. Media fell 8.5% in sterling terms, banks fell 5.2%, general financial services fell 3.3% and retailing fell 2.3%. The best-performing areas included defensive sectors and sectors that stood to benefit from emerging market economic growth. Chemicals gained 22.9%, energy returned 17.4%, basic resources gained 17.2% and telecommunications gained 16.0%.
In the commodities market, oil rose 34.1% to $94.92 in response to fears of supply shortages while gold responded to the weakening dollar, fears of financial instability and inflationary pressures by gaining 28.6% to $836.15.
With risk aversion increasing despite monetary easing in the US and the UK, government bonds benefited from a "flight to quality", with UK gilts returning 8.6%. By contrast, lower-quality bonds underperformed. The JPM EMBI+ Total Return Index, which tracks emerging market sovereign debt, returned 6.67% in sterling while high-yielding corporate bonds fell 0.50%.
During the period under review, your Company sold its holdings in Arena Leisure, the New Star Apollo Hedge Fund, the New Star Firefly Hedge Fund and the New Star Select Opportunities Fund and reduced its holdings in the New Star European Growth Fund, the New Star Pan-European Equity Fund and the New Star UK Growth Fund. The proceeds were invested in the New Star Euro High Yield Fund, the New Star Financial Opportunities Fund, the New Star Heart of Africa Fund, the New Star Private Equity Investment Trust and the Skandia UK Strategic Best Ideas Fund.
Your Company ended the period with 64.4% of its invested assets in retail funds, 20.8% in hedge funds and the remaining 14.8% in its holding in New Star Asset Management, investment trust shares and equities.
In recent weeks, economic conditions have deteriorated, with problems exacerbated by credit market dislocation. Momentum in emerging markets and positive money supply trends may result in a soft landing but the credit crunch has increased the risks of more serious dislocation. Central banks have responded with looser monetary policies but their room for further interest rate cuts may be constrained by increased inflationary pressures.
Such conditions may affect government bonds. The central bankers' shifting focus from bearing down on prices towards addressing financial market dislocation, however, could result in rotation back into equities, assuming the world economy avoids a full-scale recession.
The unaudited net asset value at 31st January 2008 was 138.16p per Ordinaryshare.James RoeChairman29th February 2008 INTERIM MANAGEMENT REPORT Performance
In the six months to 31st December 2007 the net asset value per share declined 13.7% to 150.27p. In the same period the share price fell 22.6% to 121.00p: Further details of the Company's performance may be found in the Chairman's Statement.
Share capital
At 31st December 2007, the Company had 71,023,695 1p Ordinary shares in issue. There were no changes to the issued share capital of the Company during the period.
Risk Management
The principal risks the Company faces in the management of the portfolio are:
Foreign currency risk: a proportion of the Group's portfolio is invested in investments denominated in foreign currencies and movements in exchange rates can significantly affect their sterling value. The Investment Manager takes account of foreign currency risk when making investment decisions. The Company does not normally hedge against foreign currency movements affecting the value of the investment portfolio, although hedging techniques may be employed in appropriate circumstances.
Interest rate risk: the Investment Manager takes account of interest rate risk when making investment decisions.
Market price risks: the downward movement of shares contained in the portfolio would lead to a reduction in the Company's net asset value per share. It is the Board's policy to hold an appropriate spread of investments in order to reduce any risk arising from factors specific to particular sectors.
Related parties
During the period, Mr Duffield was chairman and a shareholder of New Star Asset Management Group PLC, the holding company of New Star Asset Management Limited.
Pursuant to an agreement dated 29th January 2001 the Company's investments are managed by New Star Asset Management Limited. The management fee is payable quarterly in arrears and is calculated at a rate of 3/16% per quarter of the total assets of the company and its subsidiaries after deduction of the value of any Jupiter managed investments and any New Star managed assets (as defined in the management agreement). Either party may terminate the appointment of the Investment Manager by giving not less than three months written notice to expire on the last day of any calendar month. In the six months ended 31st December 2007, New Star Asset Management Limited received investment management fees of ‚£139,000 from the Company.
The Company's investments include funds managed by subsidiaries of New Star Asset Management Group PLC.
Auditors
The half-yearly financial report has not been audited or reviewed by the auditors
Responsibility Statement
The Directors confirm that to the best of their knowledge:
* The consolidated set of financial statements contained within the half yearly report to 31st December 2007 has been prepared in accordance with International Financial Reporting Standard 34 as adopted by the European Union; and * The interim management report includes a fair review of the information required by DTR 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.
New Star Asset Management Limited
29th February 2008.
CONSOLIDATED INCOME STATEMENT for the six months to 31st December 2007 (unaudited) Six months ended Six months ended 31st December 2007 31st December 2006 Notes Revenue Capital Total Revenue Capital Total return return ‚£'000 return return ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Income Investment income 701 - 701 704 - 704 Other operating 108 - 108 15 - 15income Total income 2 809 - 809 719 - 719 Gains and losses on investments (Losses)/gains on - (16,431) (16,431) - 7,522 7,522investments at fair value through profit or loss (Losses)/gains on - (23) (23) - 478 478forward currency contracts Other exchange - (23) (23) - 8 8(losses)/gains 809 (16,477) (15,668) 719 8,008 8,727 Expenses Management fees (139) - (139) (133) - (133) Other expenses (121) - (121) (104) - (104) (Loss)/profit 549 (16,477) (15,928) 482 8,008 8,490before finance costs and tax Finance costs (60) - (60) (21) - (21) (Loss)/profit 489 (16,477) (15,988) 461 8,008 8,469before tax Tax (50) (216) (266) (38) - (38) (Loss)/profit for 439 (16,693) (16,254) 423 8,008 8,431the period Earnings per share
Ordinary shares 3 0.62 (23.50) (22.88) 0.60 11.27 11.87 (pence)
The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.
All income is attributable to the equity holders of the parent company. There are no minority interests.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 31 December 2007 (Unaudited) Share Share Special Retained Total Capital Premium Reserve Earnings ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 At 30th June 2007 710 21,573 56,908 44,498 123,689 Loss for the period - - - (16,254) (16,254) Dividends paid - - - (710) (710) At 31st December 2007 710 21,573 56,908 27,534 106,725 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 31 December 2006 (Unaudited) Share Share Special Retained Total Capital Premium Reserve Earnings ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 At 30th June 2006 710 21,573 56,908 24,922 104,113 Profit for the period - - - 8,431 8,431 Dividends paid - - - (71) (71) At 31st December 2006 710 21,573 56,908 33,282 112,473 CONSOLIDATED BALANCE SHEET at 31st December 2007 31st December 31st December 30th 2007 2006 June (unaudited) (unaudited) 2007 (audited) Notes ‚£'000 ‚£'000 ‚£'000 NON-CURRENT ASSETS Investments at fair value 96,264 110,976 118,168through profit or loss CURRENT ASSETS Other receivables 77 1,110 1,392 Cash and cash equivalents 11,434 571 4,883 11,511 1,681 6,275 TOTAL ASSETS 107,775 112,657 124,443 Current liabilities Other payables (1,050) (184) (754) NET ASSETS 106,725 112,473 123,689 CAPITAL AND RESERVES Called-up share capital 710 710 710 Share premium 21,573 21,573 21,573 Special reserve 56,908 56,908 56,908 Retained earnings 4 27,534 33,282 44,498 TOTAL EQUITY 106,725 112,473 123,689 NET ASSET VALUE PER 5 150.27 158.36 174.15ORDINARY SHARE (PENCE) CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31st December 2007 (unaudited) Six months Six months ended ended 31st December 31st December 2007 2006 Notes ‚£'000 CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/profit before finance costs and tax (15,928) 8,490 Adjustments for: Losses/(gains) on investments 21,904 (7,612) Operating cash flows before movements in 5,976 878working capital Decrease/(Increase) in receivables 1,320 (403) Increase/(decrease) in payables 87 (19) Net cash from operating activities before 7,383 456income taxes Income taxes paid (55) (38) NET CASH FROM OPERATING ACTIVITIES 6 7,328 418 CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (710) (71) Interest paid (67) (5) NET CASH USED IN FINANCING ACTIVITIES (777) (76) NET INCREASE IN CASH AND CASH EQUIVALENTS 6,551 342 Cash and cash equivalents at beginning of 4,883 229period CASH AND CASH EQUIVALENTS AT END OF PERIOD 11,434 571 NOTES TO THE ACCOUNTS for the six months ended 31 December 2007
1. Accounting Policies
The consolidated financial statements on pages 9 to 16 comprise the unaudited financial results of the Group for the six months to 31st December 2007, and do not constitute statutory accounts under section 240 of the Companies Act 1985. Full statutory accounts for the year to 30th June 2007 included an unqualified audit report and were filed with the Registrar of Companies on 13th November 2007. The auditors report contained no statement under section 237(2) or 237(3) of the Companies Act 1985.
The interim financial report has been prepared in compliance with International Accounting Standard 34: Interim Financial Reporting ("IAS34").
The same accounting policies have been followed in the interim financial report as compared to the accounts for the year ended 30th June 2007.
2. Total Income For the six months For the six months ended 31st December ended 31st December 2007 2006 ‚£'000 ‚£'000 Income from listed investments UK net dividend income 391 466 UK unfranked investment income 310 238 701 704 Other Operating Income Bank interest receivable 108 15 108 15 Total Income Comprises Dividends 701 704 Other income 108 15 809 719
3. Return per ordinary share
For the six For the six months months ended ended 31st December 31st December 2006 2007 ‚£'000 ‚£'000 Revenue return 439 423 Capital return (16,693) 8,008 Total return (16,254) 8,431 Weighted average number 71,023,695 71,023,695of shares in issue Revenue return 0.62p 0.60p Capital return (23.50)p 11.27p Total return (22.88)p 11.87p
4. Retained earnings and capital reserve
The components of retained earnings are set out below:
31st December 31st December 30th 2007 2006 June 2007 ‚£'000 ‚£'000 ‚£'000 Capital reserve - 3,046 (10,868) (3,318)realised Capital reserve - 23,688 43,521 46,745unrealised Revenue reserve 800 629 1,071 27,534 33,282 44,498
5. Net asset value per ordinary share
31st December 31st December 30th 2007 2006 June 2007 ‚£'000 ‚£'000 ‚£'000 Net assets attributable to 106,725 112,473 123,689ordinary shareholders Ordinary shares in issue at 71,023,695 71,023,695 71,023,695end of period Net asset value per 150.27p 158.36p 174.15pordinary share
6. Notes to the cash flow statement
Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.
Purchases and sales of investments are considered to be operating activities of the company, given its purpose, rather than investing activities. However, the cash flows associated with these activities are presented below:
Six months ended Six months ended 31st December 2007 31st December 2006 ‚£'000 ‚£'000 Proceeds on disposal of fair value 19,451 4,248through profit and loss investments Purchases of fair value through profit (13,977) (5,441)and loss investments 5,474 (1,193)7. Contingent Asset
In 2004 the AIC lodged a joint appeal for the payment of investment trust management fees to be exempt from VAT. In November 2007 HM Revenue & Customs (HMRC) declared its acceptance that fund management services to investment trusts are exempt from VAT. This means that VAT is no longer charged on investment management fees and that the Company is entitled to seek reimbursement of VAT paid in the past. The Manager has confirmed that it has lodged claims with HMRC to recover VAT paid from January 2001.
In the absence of a definitive agreement with the Manager or specific guidance from HMRC on the mechanisms of the reclaim process it is not yet possible to quantify the amount or timing of any recovery. Accordingly no asset has been recognised in the accounts at 31st December 2007.
NEW STAR INVESTMENT TRUST PLC