RNS Number:8698N
Aberdeen Preferred Income Trust PLC
28 November 2001
ABERDEEN PREFERRED INCOME TRUST PLC
ANNOUNCEMENT OF UNAUDITED GROUP INTERIM RESULTS
for the six months ended 31 August 2001
Chairman's Statement
The markets for equities, high-yielding corporate bonds and the shares of
split capital investment trusts saw large falls in the first half of the
Company's year. These falls, exacerbated by the Company's gearing, led to a
substantial reduction in the Company's net asset value ("NAV") per share from
91.4p at 28 February 2001 to 32.6p at 31 August 2001, a fall of 64 per cent.
Since 31 August 2001 the market in income shares has significantly declined so
that as at 26 November 2001 the NAV of both the Ordinary shares and the 2008
Zero Dividend Preference shares had been reduced to nil. The NAV of 280.93p
per 2003 Zero Dividend Preference share was less than their entitlement of
285.80p at that date.
The Company has paid monthly dividends totalling 8p per Ordinary share for the
period ended 31 August 2001. Due to the market declines mentioned above, on 17
October 2001 the Company announced that it would have to suspend payment of
further dividends on the Ordinary shares because the Company could not satisfy
the statutory requirements concerning net assets contained within Section
264(1) of the Companies Act 1985. The Board intends, subject to the
satisfactory completion of a fund raising and capital reorganisation, to pay
the suspended dividends as soon as practicable; details of the timing and
amount of the payment will be communicated to shareholders together with the
proposals referred to below.
Income shares have seen large mark-downs in share prices, as the effects of
weak markets have been compounded by negative sentiment about split capital
investment trusts, and particularly those that invest in the shares of other
investment trusts. In many cases the size of recent falls has eroded their
asset value materially and concerns increased over the ability of some to
continue paying their previous forecast of dividends.
Since our half-year end, equity markets have hit four-year lows and
high-yielding corporate bonds have continued to default. Highly geared
investment trusts, especially those that invest in other income shares, have
come under further pressure due to their levels of bank debt, causing many to
get close to or breach their bank covenants. In the 12 months up to the period
end the FTSE 100 Index fell by over 19 per cent. Since then it has fallen by a
further 17 per cent. to a low on 21 September 2001. These falls have had a
dramatic effect on the income share sector. However, more recently split trust
shares have benefited from a rebound in the equity market and are now showing
strong signs of recovery.
The period has also been difficult for the high-yield bond market, which was
suffering even before the tragic events of September. Slower economic growth
has generally resulted in lower corporate earnings and the extent of such a
decline may have a knock-on effect on a company's credit rating. Lower credit
ratings would usually result in an increase in the required yield premium of a
corporate borrower compared with the underlying benchmark government stock.
We are witnessing a very aggressive reduction in US short interest rates,
which are now at a 40-year low. In the UK the Monetary Policy Committee of the
Bank of England has also reduced rates sharply. We still expect the UK economy
to be more buoyant than USA and Europe. Whilst there continues to be concerns
over further deterioration in Europe, which was already showing rising
unemployment and falling output, any further interest rate cuts by the
European Central Bank are to be welcomed.
On 17 October 2001 the Directors announced that they intended to put proposals
to shareholders in order to address certain consequences of the decline in
value of the Company's assets. The Board expects to write to shareholders in
this connection within the next few weeks. In the event that such proposals
are not implemented there would be an increased risk of the Company breaching
its banking covenants in the future. In this event, the bank would have the
right to demand repayment of the bank loans at a time when the Company may
have difficulty in realising sufficient assets to satisfy repayment. In such
adverse circumstances the Going Concern basis of accounting may not be
appropriate.
Derek Morgan
Chairman
28 November 2001
The unaudited results were:
Consolidated Statement of Total Return
(incorporating the Revenue Account of the Group*)
Six months ended
31 August 2001
(unaudited)
Revenue Capital Total
#'000 #'000 #'000
Losses on investments - (90,725) (90,725)
Income 23,457 - 23,457
Investment management fees (1,017) (677) (1,694)
Other expenses (506) - (506)
________ ________ ________
Net return/(loss) before finance
costs and taxation 21,934 (91,402) (69,468)
Interest payable and similar charges (3,642) (2,427) (6,069)
Penalty cost on redemption of Debenture - (2,247) (2,247)
Indexation of Debenture - (121) (121)
Zero Dividend Preference
shares of subsidiary - (5,006) (5,006)
________ ________ ________
Return/(loss) on ordinary activities
before taxation 18,292 (101,203) (82,911)
Tax on ordinary activities (1,826) 1,642 (184)
________ ________ ________
Return/(loss) attributable to
equity shareholders 16,466 (99,561) (83,095)
Dividends in respect of equity shares (16,208) - (16,208)
________ ________ ________
Transfer to/(from) reserves 258 (99,561) (99,303)
======== ======== ========
Return/(loss) per share (pence):
Ordinary 9.75 (58.97) (49.22)
======== ======== ========
Six months ended
31 August 2000
(unaudited)
Revenue Capital Total
#'000 #'000 #'000
Gains on investments - 10,428 10,428
Income 16,341 - 16,341
Investment management fees (891) (593) (1,484)
Other expenses (424) - (424)
________ ________ ________
Net return before finance
costs and taxation 15,026 9,835 24,861
Interest payable and similar charges (2,577) (1,709) (4,286)
Indexation of Debenture - (206) (206)
Zero Dividend Preference
shares of subsidiary - (4,219) (4,219)
________ ________ ________
Return on ordinary activities
before taxation 12,449 3,701 16,150
Tax on ordinary activities (1,507) 753 (754)
________ ________ ________
Return attributable to
equity shareholders 10,942 4,454 15,396
Dividends in respect of equity shares (11,337) - (11,337)
________ ________ ________
Transfer (from)/to reserves (395) 4,454 4,059
======== ======== ========
Return per share (pence):
Ordinary 8.49 3.46 11.95
======== ======== ========
* The revenue column of this statement represents the revenue account of the
Group.
The statements of total return presented above are in accordance with the
Statement of Recommended Practice for Financial Statements of Investment Trust
Companies.
Summarised Consolidated Balance Sheet
At At At
31 August 31 August 28 February
2001 2000 2001
(unaudited) (unaudited) (audited)
#'000 #'000 #'000
Fixed assets
Investments 344,250 377,900 448,952
_________ _________ _________
Current assets
Debtors 9,020 21,335 25,594
Cash at bank and in hand 9,866 - 589
_________ _________ _________
18,886 21,335 26,183
Current liabilities
Creditors: amounts falling
due within one year (9,858) (23,618) (29,151)
_________ _________ _________
Net current assets/(liabilities) 9,028 (2,283) (2,968)
_________ _________ _________
Total assets less current liabilities 353,278 375,617 445,984
Creditors: amounts falling due after
one year
RPI-linked Debenture Stock 2007 (23,139) (20,192) (20,662)
Subordinated Unsecured Loan Stock 2023 (18,833) (18,810) (18,821)
Bank loans (132,885) (81,000) (133,825)
_________ _________ _________
(174,857) (120,002) (173,308)
_________ _________ _________
Zero Dividend Preference shares (123,394) (104,016) (118,388)
_________ _________ _________
Net assets 55,027 151,599 154,288
========= ========= =========
Share capital and reserves
Called-up share capital 16,883 12,883 16,883
Share premium account 14,993 149,888 15,076
Special reserve 182,844 - 182,844
Merger reserve 15,958 15,958 15,958
Capital reserves:
Realised (including accrued finance costs) (67,339) (23,401) (32,728)
Unrealised (109,074) (3,692) (44,249)
Revenue reserve 762 (37) 504
_________ _________ _________
Total equity shareholders' funds 55,027 151,599 154,288
========= ========= =========
Net asset value per share (pence):
Ordinary 32.59 117.67 91.38
========= ========= =========
Consolidated Cash Flow Statement
Six months Six months
ended ended
31 August 2001 31 August 2000
(unaudited) (unaudited)
Net cash inflow from operating activities 23,103 14,616
Net cash outflow from servicing of finance (5,998) (4,223)
Net tax recovered 125 279
Net cash inflow from financial investment 19,240 6,118
Equity dividends paid (18,909) (11,337)
_________ _________
Net cash inflow before financing 17,561 5,453
Net cash outflow from financing (87) -
_________ _________
Increase in cash 17,474 5,453
========= =========
Reconciliation of operating revenue to net cash
inflow from operating activities
Net revenue before interest payable and taxation 21,934 15,026
Decrease in accrued income 2,294 1,648
Increase in other debtors (29) (25)
(Decrease)/increase in other creditors (92) 47
Capitalised expenses taken to non-distributable reserves (677) (595)
UK Income tax deducted at source (299) (1,479)
Overseas withholding tax suffered (28) (6)
_________ _________
23,103 14,616
========= =========
Reconciliation of net cash flow to movement in
net funds/(debt)
Increase in cash as above 17,474 5,453
Increase in valuation of debt (7,495) (4,444)
Exchange movements 954 -
_________ _________
Movement in net funds in the period 10,933 1,009
Net debt at 1 March (299,318) (240,090)
_________ _________
Net debt at 31 August (288,385) (239,081)
========= =========
Represented by:
Cash at bank 9,866 -
Bank overdraft - (15,063)
Debt falling due after more than one year (298,251) (224,018)
_________ _________
(288,385) (239,081)
========= =========
Notes:-
1 The breakdown of income for the periods to 31 August 2001 and 31 August
2000 was as follows:
31 Aug 31 Aug
2001 2000
#'000 #'000
Income from investments
Franked investment income (net) 13,074 7,502
Unfranked investment income 10,171 8,720
______ ______
23,245 16,222
Other income
Deposit interest 211 119
Underwriting income 1 -
______ ______
212 119
______ ______
Total income 23,457 16,341
====== ======
2 The revenue return per Ordinary share is based on net revenue on ordinary
activities after taxation of #16,466,000 (2000 - #10,942,000) and on
168,834,529 (2000 - 128,834,529) Ordinary shares, being the weighted average
number of Ordinary shares in issue for the period.
The capital return per Ordinary share is based on net capital losses of
#99,561,000 (2000 - gains of #4,454,000) for the period, after deductions in
respect of the Zero Dividend Preference shares of #5,006,000 (2000 -
#4,219,000) and on 168,834,529 (2000 - 128,834,529) Ordinary shares, being the
weighted average number of Ordinary shares in issue for the period.
3 The net asset value per Ordinary share is based on net shareholders' funds
at the period end and on 168,834,529 (31 August 2000 - 128,834,529; 28
February 2001 - 168,834,529) Ordinary shares, being the number of Ordinary
shares in issue at the period end.
4 The financial statements for the six months ended 31 August 2001 and 31
August 2000 comprises non-statutory accounts within the meaning of Section 240
of the Companies Act 1985. The financial information for the year ended 28
February 2001 has been abridged from published accounts that have been
delivered to the Registrar of Companies and on which the report of the
auditors was unqualified.
Aberdeen Asset Management PLC
Secretaries
28 November 2001
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