TIDMPNL
RNS Number : 6422V
Personal Assets Trust PLC
05 December 2023
To: RNS
From: Personal Assets Trust plc
LEI: 213800Z7ABM7RLQ41516
Date: 5 December 2023
INTERIM REPORT FOR THE SIX MONTHSED 31 OCTOBER 2023
(UNAUDITED)
FINANCIAL SUMMARY
-- Personal Assets Trust ('PAT' or the 'Company') is an investment
trust run expressly for private investors.
-- The Company's investment policy is to protect and increase
(in that order) the value of shareholders' funds per share
over the long term.
-- Over the six months to 31 October 2023 the Company's net
asset value per share ('NAV') fell by 2.7% to 468.10 pence
on a capital-only return basis. PAT's share price fell by
18.00 pence to 463.00 pence over the same period, being
a discount of 1.1% to the Company's NAV at that date .
-- During the period, the Company continued to be positioned
very defensively as follows:
% as at % as at
31 October 30 April
2023 2023
Equities 24.8 24.0
US TIPS* 36.4 33.9
US Treasuries (short dated) 11.7 14.8
UK Gilts (short dated) 10.4 13.6
UK Index-linked Bonds 3.2 -
Gold Bullion 10.8 9.5
Property 0.1 0.1
UK cash 3.2 2.6
Overseas cash 0.0 0.0
Net current (liabilities)/assets (0.6) 1.5
--------------------------------------- ------------------------------------ -----------------------------
Total 100.0 100.0
* Weighted average duration of approximately 5.3 years.
-- Over the six months PAT's shares continued to trade close
to NAV under the Company's discount and premium control
policy. The Company bought back 24.3 million Ordinary shares
(at a cost of GBP113.5 million) at a small discount. These
Ordinary shares are held in treasury .
-- Dividends are paid in July, October, January and April of
each year. The first interim dividend of 1.4 pence per Ordinary
share, was paid to shareholders on 28 July 2023 (1) and
the second interim dividend of 1.4 pence was paid on 6 October
2023. A third interim dividend of 1.4 pence per Ordinary
share will be paid to shareholders on 24 January 2024 and
it is the Board's intention, barring unforeseen circumstances,
that a fourth interim dividend of 1.4 pence per Ordinary
share will be paid in April 2024, making a total for the
year of 5.6 pence per Ordinary share.
Key Features
As at As at
31 October 30 April
2023 2023
Market Capitalisation GBP1,700.6m GBP1,883.5m
Shareholders' Funds GBP1,719.3m GBP1,884.4m
Shares Outstanding 367,295,429 391,570,200
Share Price 463.00p 481.00p
NAV per Share 468.10p 481.23p
FTSE All-Share Index 3,954.35 4,283.83
------------------------------ --------------- ---------------
Discount to NAV (1.1)% (0.0)%
------------------------------ --------------- ---------------
Earnings per Share 4.74p(2) 9.48p(3)
Dividend per Share 2.80p(2) 7.70p(1)(3)
(1) A special dividend of 2.1 pence per Ordinary share
was also paid in July 2023 in relation to the year ended
30 April 2023. Further details on the dividends paid for
the year ended 30 April 2023 are set out in Note 3 below
.
(2) For the six month period to 31 October 2023.
(3) Full year.
Investment Manager's Report
Over the half year to 31 October 2023, the net asset value per
share ('NAV') of the Company fell by -1.7% while the FTSE All-Share
Index ('FTSE') fell by -5.9%. These returns include reinvested
dividends. The capital-only returns were -2.7% and -7.7%
respectively.
The largest contributors to positive returns were gold and a
weakening sterling against the US dollar, adding +0.4% and +0.9% to
returns respectively in the period. Equities were the largest
detractor, with consumer staples costing -1.5%, on the back of
higher yields and concerns around the potential impact from
weight-loss drugs on future consumption.
A year ago, we noted that we expected the investment environment
to remain challenging. After 15 years of record low interest rates,
investors had started to experience the painful adjustment to a new
regime of higher interest rates and more volatile inflation. Since
then, the interest rate environment has become more restrictive
with the Bank of England and the Federal Reserve raising rates to
over 5% for the first time since 2008 and 2007 respectively. The
implications of this transition have been widespread. The
traditional safety and defensiveness provided by fixed income has
been absent, as yields have followed interest rates up and prices
have fallen. For equity investors, valuations rose across stock
markets over the past decade as investors became anchored to
ever-higher multiples, justified by low interest rates. Today a
rising cost of capital has led to the trend reversing as valuations
are reappraised. We are gradually shifting back to a world of more
conventional valuations across all asset classes. Private equity
and property valuations will inevitably take longer to adjust, as
they are not marked to market on a daily basis. The reality remains
that investors wishing to sell these illiquid assets today are
likely to have to accept a price far lower than that which was on
offer a couple of years ago. The return offered by cash is a
novelty for many, providing a genuine "risk-free rate" for the
first time since the global financial crisis.
Your Company remains very defensively positioned, with
approximately 25% in equities, while the adjustment described above
is ongoing. We suspect it has a year or two to run, although this
could be impacted by external factors, including an increasingly
fractious geopolitical backdrop denoted by growing tensions around
Taiwan, the war in Ukraine, and the tragic situation in the Middle
East.
Equity investors should also consider the risk that profits do
not continue to grow as steadily as the market currently expects.
In the past, central banks raised interest rates slowly and cut
quickly. This time interest rates have increased at the fastest
rate since Paul Volker's successful attempt to rein in inflation in
the late 1970s. From an inflation-reducing perspective, his
measures were effective, and he was subsequently hailed for his
inflation-fighting credentials. However, his monetary medicine had
the painful side-effects of contributing to a deep recession in the
early 1980s. While there is much talk of an expected soft landing
for the economy today, we suspect the risks of a recession are
rising and they are not currently priced into stock markets.
Corporate earnings are highly sensitive to tighter monetary
conditions. Bank lending standards are already tightening - the
National Federation of Independent Business reports US smaller
companies have seen their cost of interest more than double from 4%
to almost 10% over the past three years. Larger corporates have
wisely termed out their debt but face a headwind of rising interest
costs in the future as bonds mature. Corporate earnings often
weaken 18-24 months after the peak in interest rates. This is only
just beginning to play out and we must remain patient.
During the past six months we have in aggregate reduced our
equity exposure, selling into the strength of the recent bear
market rally. This is with one notable exception; we began a new
holding in Heineken. Heineken is a company we have followed for
many years. The business had a challenging pandemic as pubs and
bars were closed, but re-opening was not much better, with
inflation driving costs higher and affecting profit margins. Many
of these issues are now behind the company but the shares have
meaningfully de-rated as investors have become disillusioned. The
less liquid Heineken Holding shares trade on 13x 12-month forward
earnings, while their more liquid NV shares are valued at a hardly
racy sub-16x multiple. The share price is at the same level as late
2015. We like to buy into good businesses when others are looking
the other way, and the purchase of Heineken is a good example of
this patient approach.
Back in 2019, we sold all of the Company's holdings in UK
index-linked bonds with real yields lower than -2%, meaning that an
investor holding to maturity receives a return 2% below inflation.
Real yields troughed at below -3% in 2021. As fixed income yields
have risen, real yields have followed them up to +1%. We believe
that a government-guaranteed return of inflation plus 1% is
attractive compared with returns available elsewhere and we have
begun to buy some linkers for the portfolio. We have been careful
not to take excessive duration risk, bearing in mind the new regime
we have entered which has punished investors flirting with material
duration.
Over the past 18 months the investment trust sector has seen
discounts to NAV blow out. Shareholders in the Company have been
protected from their shares trading at a material discount, thanks
to the discount control mechanism ('DCM'). Having issued shares in
2020-2022, we began to buy back shares earlier in the year to
ensure the share price did not trade at a meaningful discount to
NAV. Over the six months to 31 October 2023 we acquired 24.3
million shares for a consideration of GBP113.5 million. The DCM
ensures shareholders do not suffer from the double whammy of a
falling NAV and a widening discount to NAV. The buybacks were
enhancing to shareholders' NAV to the tune of GBP0.55 million.
The bear market, which began in stock markets at the beginning
of 2022, has some way to go. We are positioned accordingly but are
prepared to shift more positively as and when we see improved
valuations. It is by buying good companies well that we will drive
future returns for the Company.
Sebastian Lyon, Investment Manager
Portfolio as at 31 October 2023
Shareholders' Valuation
Funds 31 October
2023
Security Country Equity Sector % GBP'000
------------------------- ------------- -------------------- -------------- ------------
Equities
Unilever UK Food Producer 3.5 60,736
Nestlé Switzerland Food Producer 2.8 48,414
Visa USA Financial Services 2.7 46,043
Diageo UK Beverages 2.3 39,359
Microsoft USA Technology 1.9 33,295
Becton Dickinson USA Pharmaceuticals 1.9 32,550
Alphabet USA Technology 1.7 28,625
Procter & Gamble USA Household Products 1.5 25,481
American Express USA Financial Services 1.3 23,233
Franco Nevada Canada Mining 1.0 17,336
Heineken Netherlands Beverages 1.0 17,017
Pernod-Ricard France Beverages 0.9 15,755
Agilent Technologies USA Healthcare 0.7 12,868
Experian UK Industrial 0.6 9,590
Heineken Holding Netherlands Beverages 0.5 8,729
Moody's USA Financial Services 0.5 8,102
------------------------- ------------- -------------------- -------------- ------------
Total Equities 24.8 427,133
-------------------------------------------------------------- -------------- ------------
Other Investments
US TIPS USA 36.4 626,235
US Treasuries USA 11.7 201,740
UK Gilts UK 10.4 179,168
UK Index-linked
Bonds UK 3.2 54,358
Gold Bullion 10.8 185,827
-------------------------------------------------------------- -------------- ------------
Total Other Investments 72.5 1,247,328
-------------------------------------------------------------- -------------- ------------
Total Investments 97.3 1,674,461
---------------------------------------- -------------------- -------------- ------------
Property 0.1 1,730
UK cash 3.2 55,026
Overseas cash 0.0 219
Net current liabilities (0.6) (12,111)
---------------------------------------- -------------------- -------------- ------------
Total Portfolio 100.0 1,719,325
---------------------------------------- -------------------- -------------- ------------
Geographic Analysis of Investments and Currency Exposure As At
31 October 2023
UK USA Canada France Switzerland Netherlands Total
% % % % % % %
Equities 6.4 12.2 1.0 0.9 2.8 1.5 24.8
Index-linked Bonds 3.2 36.4 - - - - 39.6
Gilts 10.4 - - - - - 10.4
Treasuries - 11.7 - - - - 11.7
Gold Bullion - 10.8 - - - - 10.8
Property 0.1 - - - - - 0.1
Cash 3.2 0.0 - - - - 3.2
Net current liabilities (0.6) - - - - - (0.6)
------------------------- ------ ----- ------- ------- ------------ ------------ ------
Total 22.7 71.1 1.0 0.9 2.8 1.5 100.0
------------------------- ------ ----- ------- ------- ------------ ------------ ------
Net currency exposure 58.1 36.7 - 0.9 2.8 1.5 100.0
------------------------- ------ ----- ------- ------- ------------ ------------ ------
Statement of Principal Risks and Uncertainties
The Board believes that the principal risks to shareholders,
which it seeks to mitigate through continual review of its
investments and through shareholder communication, are events or
developments which can affect the general level of share prices and
other financial assets, including, for instance, inflation or
deflation, economic recessions and movements in interest rates and
currencies.
The Board acknowledges that the continuing uncertainties for
global economies and financial markets, with higher levels of
inflation and volatility in markets and heightened geopolitical
tensions, create risks and uncertainties for the Company. The Board
continues to work with the Investment Manager, the Company
Secretary and its other advisers to manage these risks as far as
possible.
The Board has established and maintains, with the assistance of
the Company Secretary, a risk matrix which identifies the key risks
to the Company. This register is formally reviewed on a regular
basis. Emerging risks that could impact the Company are considered
and discussed at each Board meeting, or on an ad hoc basis as
required, along with any proposed mitigating actions.
The principal risks and uncertainties faced, and the way in
which they are managed, are described in more detail under the
heading Principal Risks and Risk Management within the Strategic
Report in the Company's Annual Report for the year ended 30 April
2023.
The Company's principal risks and uncertainties have not changed
since the date of the Annual Report and are not expected to change
for the remaining six months of the Company's financial year.
Going Concern
The Directors believe, in the light of the controls and review
processes noted above and bearing in mind the nature of the
Company's business and assets, which are considered readily
realisable if required, that the Company has adequate resources to
continue operating for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements.
Related Party Transactions
Details of related party transactions are contained in the
Annual Report for the year ended 30 April 2023. There have been no
material changes in the nature and type of the related party
transactions as stated within the Annual Report.
Directors' Responsibility Statement in Respect of the Interim
Report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
-- the Investment Manager's Report include a fair review of the
information required by the Disclosure Guidance and Transparency
Rules (DTR) 4.2.7R, being an indication of important events that
have occurred during the first six months of the financial year and
their impact on the condensed set of financial statements;
-- the Statement of Principal Risks and Uncertainties shown
above is a fair review of the information required by DTR 4.2.7R;
and
-- the condensed financial statements include a fair review of
the information required by DTR 4.2.8R, being related party
transactions that have taken place in the first six months of the
current financial year and that have materially affected the
financial position or performance of the Company during the period,
and any changes in the related party transactions described in the
last Annual Report that could do so.
On behalf of the Board,
Iain Ferguson, Chairman
5 December 2023
For further information, contact:
Sebastian Lyon
Investment Manager
Tel: 0207 499 4030
Carron Dobson
Juniper Partners Limited, Company Secretary
Tel: 0131 378 0500
Condensed Income Statement
For the six months ended 31 October 2023
(Unaudited)
Six months ended
31 October 2023
Revenue Capital
return return Total
GBP'000 GBP'000 GBP'000
Investment income 24,743 - 24,743
Other operating income 394 - 394
Losses on investments held at
fair value through profit or loss - (28,214) (28,214)
Foreign exchange losses - (20,040) (20,040)
Total income 25,137 (48,254) (23,117)
Expenses (2,788) (3,172) (5,960)
Return before taxation 22,349 (51,426) (29,077)
Taxation (4,324) 793 (3,531)
Return for the period 18,025 (50,633) (32,608)
Return per share (pence) 4.74 (13.31) (8.57)
The 'Return for the Period' is also the 'Total Comprehensive
Income for the Period', as defined in IAS1 (revised), and no
separate Statement of Comprehensive Income has been presented.
The 'Total' column of this statement represents the Company's
Income Statement, prepared in accordance with International
Financial Reporting Standards.
The Revenue Return and Capital Return columns are supplementary
to this and are prepared under guidance published by the
Association of Investment Companies.
All items in the above statement derive from continuing
operations.
Condensed Income Statement
For the six months ended 31 October 2022
(Unaudited)
Six months ended
31 October 2022
Revenue Capital
return return Total
GBP'000 GBP'000 GBP'000
Investment income 23,283 - 23,283
Other operating income 218 - 218
Losses on investments held at
fair value through profit or loss - (29,380) (29,380)
Foreign exchange losses - (52,475) (52,475)
Total income 23,501 (81,855) (58,354)
Expenses (2,610) (3,330) (5,940)
Return before taxation 20,891 (85,185) (64,294)
Taxation (3,971) 633 (3,338)
Return for the period 16,920 (84,552) (67,632)
Return per share (pence) 4.44 (22.19) (17.75)
Condensed Income Statement
For the year ended 30 April 2023
(Audited)
Year ended
30 April 2023
Revenue Capital
return return Total
GBP'000 GBP'000 GBP'000
Investment income 48,274 - 48,274
Other operating income 1,107 - 1,107
Losses on investments held at
fair value through profit or
loss - (54,976) (54,976)
Foreign exchange gains - 9,419 9,419
Total income 49,381 (45,557) 3,824
Expenses (5,304) (6,660) (11,964)
Return before taxation 44,077 (52,217) (8,140)
Taxation (7,436) 1,290 (6,146)
Return for the period 36,641 (50,927) (14,286)
Return per share (pence) 9.48 (13.18) (3.70)
Condensed Statement of Financial Position
As at 31 October 2023
(Unaudited) (Unaudited) (Audited)
31 October 31 October 30 April
2023 2022 2023
GBP'000 GBP'000 GBP'000
Non-current assets
Investments held at fair value
through profit or loss 1,674,461 1,714,919 1,805,933
Property 1,730 2,144 1,730
Net current assets 43,134 104,803 76,689
Net assets 1,719,325 1,821,866 1,884,352
Total equity 1,719,325 1,821,866 1,884,352
Net asset value per Ordinary
share (pence) 468.10 470.27 481.23
Condensed Statement of Changes in Equity
For the six months ended 31 October 2023
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2023 2022 2023
GBP'000 GBP'000 GBP'000
Opening equity shareholders'
funds 1,884,352 1,814,360 1,814,360
Return for the period (32,608) (67,632) (14,286)
Ordinary dividends paid (18,867) (15,970) (26,919)
Issue of Ordinary shares - 95,502 121,384
Buyback of Ordinary shares (113,552) (4,394) (10,187)
Closing equity shareholders'
funds 1,719,325 1,821,866 1,884,352
Condensed Cash Flow Statement
For the six months ended 31 October 2023
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
31 October 31 October 30 April
2023 2022 2023
GBP'000 GBP'000 GBP'000
Net cash inflow/(outflow) from
operating activities 5,839 (2,139) (2,146)
Net cash inflow/(outflow) from
investing
activities 130,005 (11,841) (81,532)
Net cash inflow/(outflow) before
financing
activities 135,844 (13,980) (83,678)
Net cash (outflow)/inflow from
financing
activities (131,028) 78,174 87,324
Net increase in cash and
cash equivalents 4,816 64,194 3,646
Cash and cash equivalents at the
start of
the period 50,014 47,944 47,944
Effect of exchange rate changes 415 (2,090) (1,576)
Cash and cash equivalents at
the end of
the period 55,245 110,048 50,014
NOTES
1. The condensed financial statements have been prepared in
accordance with International Financial Reporting Standard ('IFRS')
IAS 34 'Interim Financial Reporting' and the accounting policies
set out in the statutory accounts of the Company for the year ended
30 April 2023. The condensed financial statements do not include
all of the information required for a complete set of IFRS
financial statements and should be read in conjunction with the
financial statements of the Company for the year ended 30 April
2023, which were prepared under full IFRS requirements.
2. The return per Ordinary share figure is based on the net loss
for the six months of GBP32,608,000 (six months ended 31 October
2022: net loss of GBP67,632,000; year ended 30 April 2023: net loss
of GBP14,286,000) and on 380,501,888 (six months ended 31 October
2022: 380,991,218; year ended 30 April 2023: 386,416,856) Ordinary
shares, being the weighted average number of Ordinary shares in
issue during the respective periods.
3. In respect of the year ending 30 April 2024 the Board has
declared a first interim dividend of 1.4 pence per Ordinary share,
which was paid on 28 July 2023 and a second interim dividend of 1.4
pence per Ordinary share, which was paid on 6 October 2023. A third
interim dividend of 1.4 pence per Ordinary share will be paid to
shareholders on 24 January 2024 and it is the Board's intention,
barring unforeseen circumstances, that a fourth interim dividend of
1.4 pence per Ordinary share will be paid in April 2024, making a
total for the year of 5.6 pence per Ordinary share. In respect of
the year ended 30 April 2023 the Board declared four interim
dividends equivalent to 1.4 pence per Ordinary share and a special
dividend equivalent to 2.1 pence per Ordinary share. This gave a
total dividend for the year ended 30 April 2023 of 7.7 pence per
Ordinary share.
4. At 31 October 2023 there were 367,295,429 Ordinary shares in
issue (31 October 2022: 387,409,400; 30 April 2023: 391,570,200).
During the six months ended 31 October 2023 the Company bought back
24,274,771 Ordinary shares.
5. The Board has considered the requirements of IFRS 8
'Operating Segments'. The Board is of the view that the Company is
engaged in a single segment of business, being that of investing in
equity shares, fixed interest securities and other investments, and
that therefore the Company has only a single operating segment.
6. The Company held the following categories of financial instruments as at 31 October 2023:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
Investments 1,674,461 - - 1,674,461
Current liabilities - (17,282) - (17,282)
--------------------- ---------- --------- --------- ----------
Total 1,674,461 (17,282) - 1,657,179
--------------------- ---------- --------- --------- ----------
The above table provides an analysis of investments based on the
fair value hierarchy described below and which reflects the
reliability and significance of the information used to measure
their fair value. The levels are determined by the lowest (that is,
the least reliable or least independently observable) level of
impact that is significant to the fair value measurement for the
individual investment in its entirety as follows:
Level 1 reflects financial instruments quoted in an active
market. The Company's investment in Gold Bullion has been included
in this level.
Level 2 reflects financial instruments the fair value of which
is evidenced by comparison with other observable current market
transactions in the same instrument or based on a valuation
technique the variables of which include only data from observable
markets. The Company's forward currency contract has been included
in this level as fair value is achieved using the foreign exchange
spot rate and forward points which vary depending on the duration
of the contract.
Level 3 reflects financial instruments the fair value of which
is determined in whole or in part using a valuation technique based
on assumptions that are not supported by prices from observable
market transactions in the same instrument and not based on
available observable market data.
There were no transfers of investments between levels in the
period ended 31 October 2023.
The following table summarises the Company's Level 1 investments
that were accounted for at fair value in the period to 31 October
2023.
GBP'000
Opening book cost 1,626,845
Opening fair value adjustment 179,088
===================================== ============
Opening valuation 1,805,933
Movement in the period:
Purchases at cost 250,570
Effective yield adjustment 11,267
Sales - proceeds (365,095)
- losses on sales (527)
Decrease in fair value adjustment (27,687)
===================================== ============
Closing valuation at 31 October 2023 1,674,461
===================================== ============
Closing book cost 1,523,060
Closing fair value adjustment 151,401
===================================== ============
Closing valuation at 31 October 2023 1,674,461
===================================== ============
Other aspects of the Company's financial risk management
objectives and policies are consistent with those disclosed in the
consolidated financial statements as at and for the year ended 30
April 2023.
The fair value of the Company's financial assets and liabilities
as at 31 October 2023 was not materially different from their
carrying values in the financial statements.
7. These are not full statutory accounts in terms of Section 434
of the Companies Act 2006 and are unaudited. Statutory accounts for
the year ended 30 April 2023, which received an unqualified audit
report and which did not contain a statement under Section 498 of
the Companies Act 2006, have been lodged with the Registrar of
Companies. No full statutory accounts in respect of any period
after 30 April 2023 have been reported on by the Company's auditors
or delivered to the Registrar of Companies.
8. A copy of the Interim Report is available on the Company's
website at www.patplc.co.uk . Shareholders are encouraged to visit
the website for further information on the Company.
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