RIT Capital Partners Regulatory News (RCP)

31 May 2007 17:06

RIT Capital Partners PLC31 May 2007 31 May 2007 FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2007 The following is derived from the Chairman's Statement which will appear in theannual report and accounts. Chairman's Statement In the year to 31 March 2007, your Company's net asset value per share increasedby 6.6%, from 982.7p to 1,047.3p, and its net worth by some £101 million. Inlast year's Annual Report, I commented on the setback in markets which occurredin May 2006 and the marked accumulation of risk in a number of areas, stressingthat shareholders should not expect returns comparable to the previous year,when the net asset value increased by 37.9%. The performance in the first half of your Company's year was affected by theportfolio's defensive position as markets strengthened from their lows in June.Your Company's performance since the start of the calendar year has beenencouraging, with net asset value per share increasing by 12.1% to 1,101.6p pershare at 24 May 2007. Although we are more concerned about market levels and risk than at this timelast year, we remain well positioned to take advantage of opportunities. By 24May our net assets had increased to £1,720.5 million and in addition we have putin place borrowings at relatively low levels of interest rates. We have recentlyadded to these with the completion of a £150 million three year multi-currencyloan, initially drawn in equal parts in Yen and US Dollars at effective rates of1.745% and 5.5925% respectively. Taken together with our $150 million loan,which bears an interest rate of 3.93%, and our €150 million loan (at 3.732%), wehave long-term borrowings equivalent to £328 million to add to our permanentcapital. ASSET ALLOCATION Set out below is our asset allocation at the year end.------------------------------------------------------------------------------- % of % of Portfolio at Portfolio at 31 March 2007 31 March 2006-------------------------------------------------------------------------------Quoted investments 57.6 62.0Government securities and money market funds 2.1 4.3Hedge funds 4.6 6.0Long equity funds 11.8 10.0Unquoted investments 14.9 10.4Private equity partnerships 7.1 5.7Property 1.9 1.6------------------------------------------------------------------------------- 100.0 100.0------------------------------------------------------------------------------- The principal change over the course of the year has been the increase in theunquoted portfolio, as a result of new investments and an increase in thevaluations of our existing investments. We ended the year with an investmentportfolio (excluding government securities and liquidity) equivalent to 111% ofunderlying net assets and with exposure to publicly traded equity markets of 84%(including hedge funds). In terms of geographical exposure, the balance of the portfolio has not greatlychanged from a year ago. On currencies, we have increased our Sterling and Euroexposure and reduced our exposure to the Yen and US Dollar. In addition, wecontinued to hedge a proportion of our US Dollar and Euro denominated holdings. QUOTED PORTFOLIO At the year end, £1,069.0 million, or 57.6% of the portfolio, was held in quotedinvestments, compared with 62.0% a year earlier. Of this amount, £571.8 millionwas managed internally. The balance, amounting to £497.2 million, was managed byexternal investment managers. During the past year we have allocated resourcesto some new managers to give us additional exposure to a diverse range ofsectors and geographies, including metals and mining, environmental stocks andUS high growth businesses. UNQUOTED PORTFOLIO (Including Private Equity Partnerships and Property) Our investments in this area have gone up over the year as a result of newinvestments made and increases in the valuations of our existing investments.During the year, the uplift in our directly held unquoted investments, aftertaking account of reductions in valuations, was £80.7 million, or the equivalentof 51.7p per share, contributing significantly to your Company's overallresults. We have benefited from the excellent performance of Harbourmaster, amanager of collateralised debt/loan obligations which has seen its profitsincrease from £11.1 million to £17.6 million over the year and which now has£4.3 billion in assets under management. We increased the valuation of ourholding in Harbourmaster by £20.7 million to £41.6 million. The other maincontributor was our interest in Robin Hood Holdings, a generic pharmaceuticalscompany, whose carrying value has been increased by £18.0 million to £39.8million as a result of strong growth in revenues and the launch of new products. Our exposure to unquoted investments and private equity partnerships amounted to£407.4 million, or 22.0% of the portfolio at the year end. Of this, £276.2million, or 14.9%, represents investments made directly by our management. Thebalance of £131.2 million, or 7.1%, is invested in limited partnerships managedby third parties, compared with £100.1 million at 31 March 2006. Our undrawncommitments to these externally managed partnerships amounted to £168.9 millionat the year-end. This figure includes a £50 million commitment, announced at the interim stage,to Darwin Private Equity, a new fund established by three talented individualsfrom two leading private equity companies. We are cornerstone investors in thisnew firm, which will focus on the lower to middle market buyout sector. The valuation of our investments in property was increased by £5.9 million to£34.8 million, or 1.9% of the portfolio, following a professional valuation. DIVIDEND We are proposing to pay a dividend of 3.1p per share on 25 July 2007 toshareholders on the register at 15 June 2007, the same level of dividend as lastyear. The focus of your Company remains one of achieving capital growth ratherthan increases in dividend income. BOARD In March we announced the retirement from the Board of Baron Lambert, who hadserved on the Board and its Committees since 1988. I would like, on behalf ofthe shareholders and his colleagues, to thank him for his substantialcontribution and support over many years. We also announced in March the appointment of John Elkann as an independentnon-executive director, and I am delighted to welcome him to the Board. Aged 31,John Elkann is a Vice Chairman of IFIL, the Agnelli family investment company,and is also Vice Chairman of Fiat Group. OUTLOOK We have witnessed four years of exceptional growth with most stock marketindices at or close to their all time highs. Corporate earnings growth has beenstrong and stock market valuations of around 16 times prospective earnings forthe MSCI World Index are not unreasonable. The International Monetary Fundforecasts a global growth of 5% for this year and if inflationary expectationsof around 3.5% are realised, then it is by no means impossible that we willenjoy a fifth year of positive global markets for equities. Paradoxically, while investors' appetite for risk has risen to new heights, thelevel of risk would seem to have become, if anything, more severe. This year'sWorld Economic Forum's "Global Risk Report" groups risk into five categories -economic, environmental, geo-political, societal and technological. Allcategories affect investment, and stock markets have to take into account therisks of inflation, global imbalances, some slow-down in economic growth,"bubbles" - possibly China and other emerging markets, along with real estateand housing - and over-accommodating credit and risk management standards. In the circumstances it is timely to remind ourselves of Ben Graham's famouswords that in the short run the market is a "voting machine" but in the long runit is a "weighing machine". At the moment, we feel the balance is towards"voting" rather than "weighing". We have therefore decided in the past few weeksto make some reduction in our overall exposure to equities. Although stockmarkets and asset classes have become more correlated, we continue to believe inthe merits of diversification. In the field of investment "the world is by nomeans flat"; indeed it is likely to become less "flat" and more challenging inthe year ahead but we remain confident of our ability to find investmentopportunities at attractive valuations. Rothschild31 May 2007 CONSOLIDATED INCOME STATEMENTFor the year ended 31 March 2007------------------------------------------------------------------------------- Revenue Capital return return Total £ million £ million £ million-------------------------------------------------------------------------------IncomeInvestment income 32.6 - 32.6Other income 1.1 - 1.1Losses on dealing investments held at fair value (43.2) - (43.2)-------------------------------------------------------------------------------Total income (9.5) - (9.5)Gains on portfolio investments held at fairvalue - 116.0 116.0Other capital items - 28.4 28.4------------------------------------------------------------------------------- (9.5) 144.4 134.9-------------------------------------------------------------------------------ExpensesAdministrative expenses (11.1) (1.4) (12.5)Investment management fees (5.9) (1.4) (7.3)-------------------------------------------------------------------------------Profit before finance costs and tax (26.5) 141.6 115.1Finance costs (9.0) - (9.0)-------------------------------------------------------------------------------Profit before tax (35.5) 141.6 106.1Taxation (1.4) (0.1) (1.5)-------------------------------------------------------------------------------Profit for the period (36.9) 141.5 104.6------------------------------------------------------------------------------- Earnings per ordinary share (23.6)p 90.6p 67.0p------------------------------------------------------------------------------- £ millionNote: Proposed final dividend 4.8 Proposed final dividend per ordinary share 3.1p The total column of this statement represents the Group's Income Statement,prepared in accordance with International Financial Reporting Standards. Thesupplementary revenue return and capital return columns are both prepared underguidance published by the Association of Investment Companies. All items in theabove statement derive from continuing operations. CONSOLIDATED INCOME STATEMENTFor the year ended 31 March 2006------------------------------------------------------------------------------- Revenue Capital return return Total £ million £ million £ million-------------------------------------------------------------------------------IncomeInvestment income 27.0 - 27.0Other income 1.1 - 1.1Losses on dealing investments held at fair value (20.8) - (20.8)-------------------------------------------------------------------------------Total income 7.3 - 7.3Gains on portfolio investments held at fair - 461.8 461.8valueOther capital items - 1.9 1.9------------------------------------------------------------------------------- 7.3 463.7 471.0-------------------------------------------------------------------------------ExpensesAdministrative expenses (11.0) (8.4) (19.4)Investment management fees (5.7) (8.6) (14.3)-------------------------------------------------------------------------------Profit before finance costs and tax (9.4) 446.7 437.3Finance costs (7.3) - (7.3)-------------------------------------------------------------------------------Profit before tax (16.7) 446.7 430.0Taxation 0.1 (7.9) (7.8)-------------------------------------------------------------------------------Profit for the period (16.6) 438.8 422.2-------------------------------------------------------------------------------Earnings per ordinary share (10.6)p 280.9p 270.3p------------------------------------------------------------------------------- £ millionNote: Final dividend 4.8 Final dividend per ordinary share 3.1p The total column of this statement represents the Group's Income Statement,prepared in accordance with International Financial Reporting Standards. Thesupplementary revenue return and capital return columns are both prepared underguidance published by the Association of Investment Companies. All items in theabove statement derive from continuing operations. CONSOLIDATED BALANCE SHEET------------------------------------------------------------------------------- 31 March 2007 31 March 2006 £ million £ million-------------------------------------------------------------------------------Non-current assetsInvestments held at fair value 1,819.3 1,720.8Investment property 34.8 28.9Property, plant and equipment 0.3 0.2Derivative financial instruments 5.4 4.1Retirement benefit asset 1.7 1.4Deferred tax asset 2.3 2.4------------------------------------------------------------------------------- 1,863.8 1,757.8-------------------------------------------------------------------------------Current assetsDealing investments held at fair value 0.3 2.7Sales for future settlement 8.0 10.9Other receivables 6.7 11.9Tax receivable 0.5 0.2Cash at bank 131.6 65.1------------------------------------------------------------------------------- 147.1 90.8-------------------------------------------------------------------------------Total assets 2,010.9 1,848.6-------------------------------------------------------------------------------Current liabilitiesBank loans and overdrafts (151.1) (67.2)Securities sold short (2.2) (9.5)Purchases for future settlement (21.3) (21.5)Tax payable (0.4) (0.3)Other payables (11.6) (10.1)------------------------------------------------------------------------------- (186.6) (108.6)-------------------------------------------------------------------------------Net current liabilities (39.5) (17.8)-------------------------------------------------------------------------------Total assets less current liabilities 1,824.3 1,740.0------------------------------------------------------------------------------- Non-current liabilitiesBank loans (178.2) (191.0)Provisions (10.5) (14.3)------------------------------------------------------------------------------- (188.7) (205.3)-------------------------------------------------------------------------------Net assets 1,635.6 1,534.7------------------------------------------------------------------------------- Equity attributable to equity holdersCalled up share capital 156.2 156.2Capital redemption reserve 34.0 34.0Cash flow hedging reserve 5.4 4.1Foreign currency translation reserve (0.2) 0.1Capital reserve-realised 1,193.3 932.1Capital reserve-unrealised 301.2 420.8Revenue reserve (54.3) (12.6)-------------------------------------------------------------------------------Total shareholders' equity 1,635.6 1,534.7-------------------------------------------------------------------------------Net asset value per ordinary share 1,047.3p 982.7p------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF CHANGES IN EQUITYYear ended 31 March 2007 ---------------------------------------------------------------------------------------------------------------- Cash Foreign Capital flow currency Share redemption hedging translation Capital Revenue Minority Capital reserve reserve reserve reserve reserve interests Total £ million £ million £ million £ million £ million £ million £ million £ million----------------------------------------------------------------------------------------------------------------- Balance at 31March 2006 156.2 34.0 4.1 0.1 1,352.9 (12.6) - 1,534.7Profit for the period - - - - 141.6 (36.9) - 104.7Cash flow hedges Gains/(losses) taken to equity - - 1.5 - - - - 1.5 Transferred to the income statement for the period - - (0.2) - - - - (0.2)Exchange movementsarising on consolidation - - - (0.3) - - - (0.3)Ordinary dividend paid - - - - - (4.8) - (4.8)-----------------------------------------------------------------------------------------------------------------Balance at 31March 2007 156.2 34.0 5.4 (0.2) 1,494.5 (54.3) - 1,635.6----------------------------------------------------------------------------------------------------------------- Year ended 31 March 2006 ---------------------------------------------------------------------------------------------------------------- Cash Foreign Capital flow currency Share redemption hedging translation Capital Revenue Minority Capital reserve reserve reserve reserve reserve interests Total £ million £ million £ million £ million £ million £ million £ million £ million---------------------------------------------------------------------------------------------------------------- Balance at 31March 2005 156.2 34.0 - - 914.2 8.8 0.1 1,113.3Profit for the period - - - - 438.7 (16.6) - 422.1Cash flow hedges Gains/(losses) taken to equity - - 3.5 - - - - 3.5 Transferred to the income statement for the period - - 0.6 - - - - 0.6Disposal of subsidiaries - - - - - - (0.1) (0.1)Exchange movementsarising on consolidation - - - 0.1 - - - 0.1Ordinary dividend paidid - - - - - (4.8) - (4.8)----------------------------------------------------------------------------------------------------------------Balance at 31March 2006 156.2 34.0 4.1 0.1 1,352.9 (12.6) - 1,534.7---------------------------------------------------------------------------------------------------------------- CONSOLIDATED CASH FLOW STATEMENT ------------------------------------------------------------------------------- Year ended Year ended 31 March 2007 31 March 2006 £ million £ million-------------------------------------------------------------------------------Cash outflow from Operating Activities (9.0) (145.5)-------------------------------------------------------------------------------Investing ActivitiesPurchase of property, plant and equipment (0.2) (0.2)Sale of property, plant and equipment - 0.1-------------------------------------------------------------------------------Net cash outflow from Investing Activities (0.2) (0.1)-------------------------------------------------------------------------------Financing ActivitiesIncrease in term loan - 103.4Equity dividend paid (4.8) (4.8)Minority interests - (0.1)-------------------------------------------------------------------------------Net cash (outflow)/inflow from Financing Activities (4.8) 98.5-------------------------------------------------------------------------------Decrease in cash and cash equivalents in theperiod (14.0) (47.1)Cash and cash equivalents at the start of theperiod 27.0 77.4Effect of foreign exchange rate changes (2.2) (3.3)-------------------------------------------------------------------------------Cash and cash equivalents at the period end 10.8 27.0-------------------------------------------------------------------------------Reconciliation:Cash at bank 131.6 65.1Money market funds (included in portfolioinvestments) 30.3 29.1Bank loans and overdrafts (151.1) (67.2)-------------------------------------------------------------------------------Cash and cash equivalents at the period end 10.8 27.0------------------------------------------------------------------------------- NOTES 1. ACCOUNTING POLICIES The Group's consolidated financial statements for the year ended 31 March 2007have been drawn up in accordance with International Financial ReportingStandards as adopted by the EU. The accounting policies are unchanged fromthose adopted by the Group and disclosed within the report and accounts for theyear ended 31 March 2006. 2. EARNINGS PER ORDINARY SHARE The earnings per ordinary share for the year ended 31 March 2007 is based on thenet gain of £104.6 million (year ended 31 March 2006: £422.2 million) and theweighted average number of ordinary shares in issue during the period of 156.2million (year ended 31 March 2006: 156.2 million). 3. NET ASSET VALUE PER ORDINARY SHARE The net asset value per ordinary share as at 31 March 2007 is based on the netassets attributable to the equity shareholders of £1,635.6 million (31 March2006: £1,534.7 million) and the number of ordinary shares in issue at 31 March2007 of 156.2 million (31 March 2006: 156.2 million). 4. MOVEMENTS IN INVESTMENTS ------------------------------------------------------------------------------- Unquoted and Funds and Other Quoted property partnerships securities Total £ million £ million £ million £ million £ million------------------------------------------------------------------------------- Cost at 31 March 2006 759.5 211.0 255.5 75.4 1,301.4Appreciation/(depreciation)at 31 March 2006 324.6 (0.2) 124.0 (0.1) 448.3-------------------------------------------------------------------------------Valuation at 31March 2006 1,084.1 210.8 379.5 75.3 1,749.7Reclassifications 0.9 (0.9) - - -Additions 980.2 81.8 200.6 252.6 1,515.2Disposals (1,016.1) (42.5) (181.5) (288.7) (1,528.8)Revaluation 19.9 61.8 36.7 (0.4) 118.0-------------------------------------------------------------------------------Valuation at 31March 2007 1,069.0 311.0 435.3 38.8 1,854.1-------------------------------------------------------------------------------Cost at 31 March 2007 882.0 249.0 350.2 39.2 1,520.4-------------------------------------------------------------------------------Appreciation/(depreciation)at 31 March 2007 187.0 62.0 85.1 (0.4) 333.7------------------------------------------------------------------------------- Portfolio investments 1,819.3Investment property 34.8-------------------------------------------------------------------------------Fair value of investments 1,854.1------------------------------------------------------------------------------- Investment properties were valued at 31 March 2007 by Jones Lang LaSalle inaccordance with the Appraisal and Valuation Manual of the Royal Institution ofChartered Surveyors on the basis of open market value. Funds and partnerships comprise hedge funds, long equity funds and privateequity partnerships. Other securities comprise government securities andinvestments in money market funds. 5. OTHER CAPITAL ITEMS Other capital items include profits arising on forward currency contracts,exchange movements, index futures and movements on provisions. 6. TAXATION Year ended 31 March 2007 £ million-------------------------------------------------------------------------------UK corporation tax charge 0.2Adjustment in respect of prior years (0.1)Overseas taxation 1.5Double taxation relief (0.2)-------------------------------------------------------------------------------Current tax charge 1.4Deferred tax charge 0.4Adjustment in respect of prior years (0.3)-------------------------------------------------------------------------------Taxation charge 1.5------------------------------------------------------------------------------- Year ended 31 March 2006 £ million-------------------------------------------------------------------------------UK corporation tax charge 0.3Adjustment in respect of prior years (0.1)Overseas taxation 1.6Double taxation relief (0.3)-------------------------------------------------------------------------------Current tax charge 1.5Deferred tax charge 6.5Adjustment in respect of prior years (0.2)-------------------------------------------------------------------------------Taxation charge 7.8------------------------------------------------------------------------------- 7. LITIGATION The litigation involving H-G Holdings Inc was discontinued and dismissed withprejudice in October 2006 and the Company did not incur any material costs inrespect of these proceedings. 8. AUDITED STATEMENTS The results for the year ended 31 March 2007 are audited. The financialinformation contained in this announcement does not constitute statutoryaccounts within the meaning of Section 240 of the Companies Act 1985. Statutoryaccounts for the year ended 31 March 2007 include the auditors' unqualifiedreport under Section 235 of the Companies Act 1985 and do not contain astatement under Section 237 (2) or (3) of the Companies Act 1985. 9. ANNUAL REPORT It is intended that the Company's Annual Report and Accounts for the year ended31 March 2007 will be posted to shareholders on Friday 8 June 2007. Copies ofthis announcement and the Annual Report will be available to the public at theCompany's registered office at 27 St James's Place, London SW1A 1NR. 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