TIDMBAF
British & American Investment Trust PLC
Annual Financial Report
for the year ended 31 December 2022
Registered number: 00433137
Directors Registered office
David G Seligman (Chairman) Wessex House
Jonathan C Woolf (Managing Director) 1 Chesham Street
Dominic G Dreyfus (Non-executive and Chairman of the Audit Telephone: 020 7201
Committee until 7 February 2022) 3100
Alex Tamlyn (Non-executive, acting Chairman of the Audit Committee Registered in England
until 31 May 2022)
Julia Le Blan (Non-executive and Chair of the Audit Committee from No.00433137
1 June 2022)
27 April 2023
This is the Annual Financial Report as required to be published under DTR 4 of
the UKLA Listing Rules.
Financial Highlights
For the year ended 31 December 2022
2022 2021
Revenue Capital Total Revenue Capital Total
return return return return
£000 £000 £000 £000 £000 £000
Profit/(loss) before tax - 658 (277) 381 978 (810) 168
realised
Profit before tax - - 579 579 - 1,028 1,028
unrealised
__________ __________ __________ __________ __________ __________
Profit before tax - total 658 302 960 978 218 1,196
__________ __________ __________ __________ __________ __________
Earnings per £1 ordinary
share - basic and diluted 1.30p 1.21p 2.51p 2.66p 0.87p 3.53p
__________ __________ __________ __________ __________ __________
Net assets 7,091 6,727
__________ __________
Net assets per ordinary
share
- deducting preference
shares 20p 19p
at fully diluted net
asset value*
__________ __________
- diluted 20p 19p
__________ __________
Diluted net asset value per 22p
ordinary share at 21 April
2023
__________
Dividends declared or
proposed for the period:
per ordinary share
- interim paid 1.75p 3.5p
- final proposed 0.0p 0.0p
per preference share 1.75p 3.5p
*Basic net assets are calculated using a value of fully diluted net asset value
for the preference shares.
Chairman's Statement
I report our results for the year ended 31 December 2022.
Revenue
The return on the revenue account before tax amounted to £0.7 million (2021: £
1.0 million), a lower level than in the previous year due to a lower level of
dividends received from external investments. A slightly higher level of
dividend income was received from our subsidiary companies derived from gains
realised on our principal US investments for subsequent distribution as
dividends.
Gross revenues totalled £1.2 million (2021: £1.4 million). In addition, film
income of £107,000 (2021: £171,000) and property unit trust income of £1,000
(2021: £2,000) was received in our subsidiary companies. This reduction in
property income reflected the sale of one of our investments during the year.
In accordance with IFRS10, these income streams are not included within the
revenue figures noted above because consolidated financial statements are not
prepared.
The total return before tax amounted to a profit of £1.0 million (2021: £1.2
million profit), which comprised net revenue of £0.7 million, a realised loss
of £0.3 million and an unrealised gain of £0.6 million. The revenue return per
ordinary share was 1.3p (2021: 2.7p) on an undiluted basis.
Net Assets and Performance
Net assets at the year end were £7.1 million (2021: £6.7 million), an increase
of 5.4 percent after payment of £0.6 million in dividends to shareholders
during the year. This compares to an increase in the FTSE 100 index of 0.9
percent and to a decrease in the UK All Share index of 3.2 percent over the
period. On a total return basis, after adding back dividends paid during the
year, our net assets increased by 14.5 percent compared to increases of 4.7
percent and 0.3 percent in the FTSE 100 and UK All Share indices, respectively.
In this transitional year reflecting the end of the Covid pandemic disruption
and the initiation of interest rate rise programmes by many central banks, we
significantly out-performed these benchmarks both on a portfolio and a total
return basis while also returning cash via dividends to shareholders at well
above market yields. This was made possible by a significant gain in the value
of our largest US investment (Geron Corporation) particularly in the mid part
of the year in anticipation of important clinical trial results in the early
weeks of 2023. Geron's share price increased by 140 percent over this four
month period and by 100 percent over the year as a whole in US dollar terms. In
sterling terms, this overall increase was over 120 percent due to the strength
of the US dollar in 2022. This out-performance for the year was despite a
retrenchment of over 40 percent in the value of our other large US investment,
Lineage Cell Therapeutics Inc following gains of 100 percent in that stock over
the previous two years.
More generally, equity markets in the USA and UK saw an overall declining trend
from the higher levels of the previous year which had reflected the significant
bounce-back in markets after the initial shock of the Covid pandemic. The
developing realisation that the extended era of ultra low interest rates was
coming to an end and that a period of steadily and possibly aggressive interest
rates rises was in prospect to challenge strong inflationary pressures weighed
on the markets which traded in a narrow but declining trend over the year. The
US Federal Reserve, having been in the forefront of these interest rate moves,
gave rise to the substantial strength seen in the US dollar over the year.
With significantly higher levels of interest rates now operating throughout the
developed world and prices having risen at their highest rates for a
generation, economic growth in 2022 has been subdued globally and is not
expected to resume for some time, although the fears of recession, particularly
in the UK and other European countries might not in the event materialise.
The second major influence in 2022 on global economic activity which
substantially affected equity markets was the war in Ukraine resulting from
Russia's unprovoked invasion of that country in February last year. This caused
severe disruption to international trade, energy prices and supply,
geopolitical relations and global security with the up-ending of the post-1945
international rules based system and undisguised nuclear threats by Russia.
The unprecedented economical, developmental and social effects of the war have
impacted not only of course Ukraine but all European and many other countries
throughout the World and indeed ultimately and strategically Russia itself. The
introduction of a comprehensive and hard-hitting sanctions regime on Russia has
resulted in a major re-ordering of international financial systems and flows,
the re-calibration of global energy markets and a re-examination of military
and strategic planning not seen since the end of the Cold War over 30 years
ago.
Dividend
In 2022, dividends of 1.75 pence per ordinary share and 1.75 pence per
preference share were paid as an interim payment during the year. This
represented a decrease of 50 percent for ordinary shareholders over the
previous year and a yield of approximately 9 percent on the ordinary share
price averaged over a period of 12 months.
It is our intention to pay an interim dividend this year as close as possible
in amount and on a similar timetable to the dividend paid in 2021, as and when
the profitable sales of investments permit. The position regarding these
investments is set out in more detail in the Managing Director's report below.
Recent events and outlook
A resolution to the unnecessary and bloody conflict in Ukraine is still not in
sight and the damage to the combatants and the World in general continues.
Against this background, we enter a more dangerous phase as Western and allied
democracies are forced to realign and confront those increasingly assertive and
in some cases nuclear-armed authoritarian nations which are seeking to
challenge a perceived to be weakening West. There can be no doubt that this
new era of insecurity and uncertainty now being played out on the global stage
can have no long term benefits to us or our planet as the risks of global
conflict increase and the implementation of the important and hard-won
provisions of the Global Climate Change Agreements (COP) to protect against the
long-term and damaging effects of global warming are delayed or rolled back.
All this inevitably introduces a great deal of uncertainty into financial
markets in both the short and medium terms which make the making of long-term
investment decisions particularly difficult. Consequently, we will continue to
limit our activities and major focus to our US biopharma investments which do
not tend to track general market movements and which we believe hold
significant investment promise as they progress ever closer towards
commercialisation of their ground-breaking and valuable technologies.
As at 21 April 2023, our net assets had increased to £7.7 million, an increase
of 8.6 percent since the beginning of the calendar year. This is equivalent to
22.0 pence per share (prior charges deducted at fully diluted value) and 22.0
pence per share on a diluted basis. Over the same period the FTSE 100 increased
6.2 percent and the All Share Index increased 5.5 percent.
David Seligman
27 April 2023
Managing Director's report
In the aftermath of the lengthy Covid pandemic and with the vicious and
globally disruptive war in Ukraine now continuing into a second year, the past
12 months have been characterised by a great deal of uncertainty, flux and
points of pivot in many of the major constituents of global financial and
investment markets.
Starting with interest rates, which are always the prime driver of movements in
markets, levels of economic growth in major world economies, equity and bond
markets, foreign exchange parities, inflation, cost of living, energy prices
and supply, geopolitics and even bank confidence have exhibited large swings
and disruption over the period, finding it extremely difficult to return to the
trends and greater certainties of the pre-Covid era.
At the interim stage last year, we focused comment on the interest rate
programmes being introduced by central banks, increasing rates from their
multi-year lows to confront the rapidly rising levels of inflation. These
inflation rises were initially the result of the unprecedented government
support schemes introduced during the Covid pandemic which had swollen
government debt levels and central bank balance sheets substantially. But then
the war in Ukraine further exacerbated inflation as the resulting international
sanctions regime against Russia disrupted supply chains, particularly in
relation to energy where prices increased dramatically.
However, despite some of the more extreme projections of inflation possibly
rising to levels of 20 percent being put forward by some analysts during the
year, we thought such levels would be unlikely as long as wage settlements did
not embed higher inflation into the system and that a relatively quick return
to more normal levels of inflation could be expected, particularly as the
higher energy costs related to the war began to drop out of the annual
calculation.
In the event, while inflation did reach levels not seen for many decades, the
timely and sustained interest rate rises by central banks, particularly in the
USA, have served to stabilise inflation and the headline rates have now started
to reduce gradually, even though increases in most household cost of living
baskets remain well into double digits, continuing to drive demand for
substantial compensatory wage rises.
At this stage, it remains to be seen whether large wage settlements will embed
inflation levels at above policy levels for the longer term. However, as a
mitigating factor, the huge energy price rises seen last year as a result of
the war in Ukraine, with crude oil rising by 50 percent (following a 100
percent rise in the previous year as the world economy re-awakened from the
Covid pandemic) and natural gas prices rising by up to 300 percent as Russian
gas supplies were cut off, have now receded to substantially below pre-war
prices.
These lower prices will likely result in significant reductions in headline
inflation levels over the next few months. This expectation is also driving
governments, particularly in the UK and Europe, to stand firm and delay the
agreement of above inflation public sector wage settlements despite significant
industrial and public sector unrest until such time as the inflation background
looks more benign. In the meantime and in order to avoid embedding higher
inflation into the system, settlements have focused on one-off compensatory
catch-up payments rather than multi-year increases in general pay.
In the absence of clarity around inflation and given the uncertainty about the
duration and extent of central bank interest rate increase programmes,
financial markets inevitably performed poorly in 2022 with the post-Covid
recovery stalling and the major equity markets ended the year in negative
territory, as noted in the Chairman's statement above.
A more significant effect, however, was seen in the bond markets which suffered
their sharpest falls since 2008 as the higher interest rate environment
impacted prices significantly and large-scale government bond issuance
programmes were implemented to repair central bank balance sheets following
their multi-year quantitative easing programmes and to finance government
deficits. These drivers pushed up yields for all issuers, governmental and
corporate alike, and over all maturities.
In the UK in particular, this strain on the government bond market was
exacerbated by the ill-advised but thankfully short-lived policy errors of the
equally short-lived Truss government which in September attempted to introduce
un-costed and unfunded tax reductions at a time of high government debt and
financing needs, leading to meltdown in a particular part of the Gilt market in
relation to pension funds which required fast and significant Bank of England
intervention.
Since that time, bond market volatility and valuation issues derived from
interest rate increases have caused other significant areas of difficulty.
Notably, in relation to confidence in banks, particularly those with certain
vulnerabilities for example a record of poor management or repeated scandals
(such as Credit Suisse in Switzerland) or an underlying portfolio risk
management problem (such as Silicon Valley Bank in the USA). Even though very
large in size and considered solvent and ostensibly operating well within their
regulatory capital requirements, confidence in even these institutions
disappeared quickly over the last few months as deposits were withdrawn by
their customers and their share prices collapsed, precipitating further deposit
withdrawals and ultimately requiring rescues to be engineered by their
respective governments in order to preserve vital confidence in the wider
banking market.
This was a wholly unexpected and worrying development which prompts further and
more specific examination of the workings of banks within today's much more
dynamic and customer/investor empowered world where deposits can be withdrawn
or switched at the press of a button, even by smaller retail customers using
internet banking apps, or by professional funds taking advantage of a
speculative and self-fulfilling interplay between listed banks' stock market
values and confidence in their deposit bases.
It appears that, in addition to their loan portfolios, banks must now consider
concentration and quality of risk in their deposit bases, which have proved to
be more volatile and susceptible to adverse publicity than expected, if they
are to avoid the contagion which has been seen in recent months between falling
bank equity prices - likely exacerbated by professional short selling funds -
and deposit withdrawals, leading ultimately to failure or enforced rescue by
the authorities.
Further work is now also being undertaken by governments to re-assess the
strength and coverage of bank capital adequacy rules, which had for instance
been weakened in the USA in the case of banks not considered systemic during
the Trump administration, and was possibly a contributing factor in the Silicon
Valley Bank failure. An examination of the adequacy of state deposit guarantee
schemes is also now being called for in response to the new and systemic risks
to confidence in banks posed by the promulgation of misinformation via social
media and 24 hour reporting.
This recent unexpected vulnerability in the banking sector, taken together with
the undoubted pain which substantially higher rates have brought to companies,
home owners and indeed investors as wages fall in real terms, mortgage interest
payments double and the asset bubbles built up over years of ultra-low interest
rates collapse will now be giving central banks some moment of reflection in
relation to their continued programmes of interest rate rises and monetary
tightening. As reductions in inflation levels become more evident, central
banks will have to balance the risks of keeping inflation higher for longer
with the risks of possible long term damage to their economies if interest
rates are kept too high for too long.
Equity markets have recently begun to sense the approach of a potential pivot
point in interest rates and have shown some resilience since the sell-off in
the fourth quarter of 2022 following the mis-handled UK 'mini-budget' which had
repercussions in both the bond and equity markets, and despite moments of
uncertainty in the first quarter of 2023 when fears of a more widespread
contagion in banks persisted and temporarily depressed markets.
This equity market resilience has been further supported by the unexpectedly
firm economic performance of leading economies which so far have avoided
expectations of downturns by the end of 2022 and into 2023, remaining flat
instead. In the case of the USA, the economy grew by 2.5 percent in 2022 and
is expected to grow by 3.0 percent in the current year.
In the UK, an expected technical recession in the last quarter of 2022,
particularly in the aftermath of the mis-handled autumn mini-budget, did not
materialise and the government expects recession to be avoided in 2023 with
activity in retail, hospitality and construction continuing to perform better
than expected, despite the recently announced misgivings of the IMF which has
consistently under-estimated UK growth levels in recent years.
The reasons for this unexpected resilience in the UK economy could be partly
the result of the high levels of savings built up during the Covid years when
salaries were still being paid through government support schemes but not fully
utilised due to general inactivity associated with the pandemic lockdowns.
Since then, the sense of relief in the population at the end of the pandemic
has encouraged a burst of spending, particularly in hospitality and travel,
which has so far not been totally restrained by the sharply rising interest
rates and costs of living.
Geron Corporation
As noted in the Chairman's statement above, the value of our largest US
investment in Geron Corporation increased substantially in 2022, by 120 percent
in sterling terms, allowing our portfolio to outperform for the year as a
whole, as the stock price rose strongly in anticipation of important Phase 3
clinical trial results due in early 2023.
Those results were duly announced on 4th January and were as positive as the
market had been expecting, confirming in a larger patient population the
results of the prior Phase 2 trials which had showed significant and
unprecedented success in the treatment of Myelodysplastic Syndrome (MDS), a
serious haematological cancer disorder with no long-term cure requiring
lifetime and debilitating blood transfusions and leading ultimately to an early
death.
Immediately upon announcement of the news, Geron's share price rose by 67
percent from $2.40 to $4.00, building on the large gain already registered in
2022 as a whole. During the day, however, the share price steadily declined to
$3.12 on large volume of approximately 120 million shares, being 50 times
normal levels and representing around 30 percent of the total shares
outstanding. It was not until after market close on the same day, however,
that the company announced a previously unexpected and un-flagged secondary
share offering led by a new financier to the company, to be priced on a
book-building basis for new shares representing approximately 20 percent of the
market capitalisation of the company. On the next day, the stock price
decreased further to $2.48 on volume of 40 million shares and after market
close that day, the company announced that the secondary offering of over 90
million shares and warrants, including over-allotment shares, had been priced
at $2.45.
It seems quite extraordinary that price sensitive information of such
importance and of such potentially price negative effect could reasonably have
been withheld and not released at the same time as the good and price positive
news concerning the successful clinical trial results announced at the
beginning of the same day. The withholding of this price sensitive information
during the day's trading session had the effect of artificially inflating the
stock price in the absence of full publication of relevant information, leading
investors to purchase stock at prices based on incomplete information and
indeed giving those potential investors participating in the contemporaneous
but at that time unannounced secondary issue the opportunity to short stock
ahead of the pricing of the issue and thereby to profit from the exercise, at
the expense of existing investors.
It should be said that such activities, were they to have occurred in the UK,
could well have been in breach of the regulations relating to market abuse and
the Listing Rules of the London Stock Exchange. It is extraordinary and highly
damaging that such activities could be permitted under the rules of any
properly regulated stock exchange interested in protecting the interests of
investors trading on that exchange.
The correct approach would have been for the company either to make a full
announcement of the results and equity financing simultaneously in the normal
way to avoid a false market in its stock or to allow the stock price to find a
new and price-discovered level in the market after the release of the positive
results prior to proceeding with the financing at a later stage. Such financing
could then be based on a properly re-valued stock price. In this way, the
managers of the financing would have been required to do the job they were paid
for of finding new investors in the company at a fair price both to the company
and existing investors given all the circumstances and not to be able to take
advantage of a highly predictable yet false price movement in the market to the
financial detriment of the company and its investors.
Since these events in January, Geron's stock price fell further below the
secondary issue price by more than 20 percent and to well below its
pre-announcement level. It has also underperformed the Nasdaq and Biotechnology
indices by 35 percent and 45 percent, respectively, over this short period of
10 weeks. It would appear, therefore, that despite Geron's very promising
future prospects, as confirmed by the positive trial results announced in
January, investor confidence in the stock has again been badly shaken by these
damaging and investor-unfriendly market operations, which are similar to those
we have had cause to comment upon and criticise many times in the past.
Investor confidence was then further undermined in February when senior
management sold significant numbers of shares upon the expiry of in-the-money
share options under the company's senior management share option programme,
giving a further poor signal to the market.
It is very disappointing to see that even at times of imminent success, Geron's
management and by extension its stock price fail to perform in line with what
the company's long-term investors reasonably deserve and can justifiably
expect. Notwithstanding this market-related disappointment, the value of
Geron's technology will we believe eventually be properly priced through a
transparent and un-adulterated price discovery process in the market and will
yield superior returns to its long term investors such as ourselves. We
believe this re-rating can be expected within a short time frame given the
end-point now successfully reached by Geron in this particular clinical trials
process, either emanating from a long-overdue corporate action within the
sector or upon gaining the anticipated official approval later this year of its
ground-breaking Imetelstat drug and commencement of commercial sales, for which
the company confirmed it had the necessary funding even before the recent
equity issue.
Short selling
Finally, given its relevance to the major holdings in our portfolio, it is
worth again drawing attention to what can be the very detrimental effects of
shorting on market transparency, corporate well-being and shareholder interests
in specific sectors of the market.
While many consider that shorting provides much needed liquidity to markets,
unless it is properly controlled and understood, which in many instances it
seems not to be, it can also have seriously negative and damaging effects on a
number of vital market sectors.
It will be recalled for instance that at the time of the financial crisis in
2008/9, regulators imposed co-ordinated bans on shorting bank stocks to limit
contagious bank runs and preserve confidence generally in the banking system.
The prescience of this move has been underlined in recent weeks in the case of
the bank failures/rescues described above where the interplay between the stock
prices of listed banks - likely further depressed at the time by shorting - and
the consequential mass withdrawals of their deposits, no doubt magnified by a
'rinse and repeat' effect, played a major part in these failures.
Shorting can have a similarly detrimental effect on certain other industries
requiring high levels of liquidity based primarily on confidence rather than
underlying financial worth. Biotechnology is such an industry, where companies
rely in their early stages of development on the injection of considerable
amounts of bank or equity finance for long periods of time to support their
multi-year development programmes with no underlying sales, income or tangible
assets during this period to support their valuations and share prices or to
secure their loans. It is therefore essentially financing based on an albeit
calculated hope of future success.
Short sellers know very well that these companies require substantial
injections of funds consistently over a long period of time and they therefore
become an easy target for unscrupulous market operators who are able to sell
down the stock to any desired level because of the lack of any verifiable value
basis, prior to being able to close such positions either sooner or later via
the company's next new stock issuance at a price lower than that at which they
had previously shorted and at little risk, therefore, to themselves. The fact
that in the majority of cases each new equity issuance in a series of equity
issuances over the years is generally struck at an ever declining price (a
function of the share dilution inherent in the process) provides validation of
this lucrative but pernicious business model for short sellers.
While it cannot be avoided that biotech and other similar long-development
technology companies are ultimately in the hands of those entities providing
them with finance, the uncontrolled ability of these providers to manipulate
the outcomes of these operations to their own financial advantage and limited
risk but to the disadvantage of the companies and their shareholders is very
damaging to the proper valuation and operation of these important business
going forward and eventually to the market in general. A review of these
practices and their operation in the public markets is therefore urgently
called for.
Jonathan Woolf
27 April 2023
Income statement
For the year ended 31 December 2022
2022 2021
Revenue Capital Total Revenue Capital Total
return return return return
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Investment income (note 2) 1,156 - 1,156 1,439 - 1,439
Holding gains on investments 579 579 1,028 1,028
at fair value through profit - -
or loss
Losses on disposal of
investments at fair value - (294) (294) - (585) (585)
through profit or loss*
Foreign exchange gains/ (40) 277 237 (4) 22 18
(losses)
Expenses (424) (250) (674) (422) (243) (665)
________ ________ ________ ________ ________ ________
Profit before finance costs 692 312 1,004 1,013 222 1,235
and tax
Finance costs (34) (10) (44) (35) (4) (39)
________ ________ ________ ________ ________ ________
Profit before tax 658 302 960 978 218 1,196
Tax 16 - 16 36 - 36
________ ________ ________ ________ ________ ________
Profit for the year 674 302 976 1,014 218 1,232
________ ________ ________ ________ ________ ________
Earnings per share
Basic and diluted - ordinary 1.30p 1.21p 2.51p 2.66p 0.87p 3.53p
shares**
________ ________ ________ ________ ________ ________
The company does not have any income or expense that is not included in the
profit/(loss) for the year. Accordingly, the 'Profit for the year' is also the
'Total Comprehensive Income for the year' as defined in IAS 1 (revised) and no
separate Statement of Comprehensive Income has been presented.
The total column of this statement represents the 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.
All profit and total comprehensive income is attributable to the equity holders
of the company.
*Losses on disposal of investments at fair value through profit or loss include
Gains on sales of £9,000 (2021 - £270,000 losses) and Losses on provision for
liabilities and charges of £303,000 (2021 - £315,000 losses).
**Calculated in accordance with International Accounting Standard 33 'Earnings
per Share'. Conversion of the preference shares will have an antidilutive
effect. Upon conversion of the preference shares to ordinary shares the
anti-diluted earnings per share would be 1.93p (2021 - 2.90p) (revenue return).
Statement of changes in equity
For the year ended 31 December 2022
Share Capital Retained Total
capital reserve earnings
£ 000 £ 000 £ 000 £ 000
Balance at 31 December 2020 35,000 (28,448) 168 6,720
Changes in equity for 2021
Profit for the period - 218 1,014 1,232
Ordinary dividend paid (note 4) - - (875) (875)
Preference dividend paid (note 4) - - (350) (350)
________ ________ ________ ________
Balance at 31 December 2021 35,000 (28,230) (43) 6,727
Changes in equity for 2022
Profit for the period - 302 674 976
Ordinary dividend paid (note 4) - - (437) (437)
Preference dividend paid (note 4) - - (175) (175)
________ ________ ________ ________
Balance at 31 December 2022 35,000 (27,928) 19 7,091
________ ________ ________ ________
Registered number: 00433137
Balance Sheet
At 31 December 2022
2022 2021
£ 000 £ 000
Non-current assets
Investments - at fair value through profit or 5,600 6,124
loss
Investment in subsidiaries - at fair value 7,712 6,707
through profit or loss
__________ __________
13,312 12,831
Current assets
Receivables 442 535
Cash and cash equivalents 45 83
__________ __________
487 618
__________ __________
Total assets 13,799 13,449
__________ __________
Current liabilities
Trade and other payables 1,794 2,129
Bank credit facility 1,018 619
__________ __________
(2,812) (2,748)
__________ __________
Total assets less current liabilities 10,987 10,701
__________ __________
Non - current liabilities (3,896) (3,974)
__________ __________
Net assets 7,091 6,727
__________ __________
Equity attributable to equity holders
Ordinary share capital 25,000 25,000
Convertible preference share capital 10,000 10,000
Capital reserve (27,928) (28,230)
Retained revenue earnings 19 (43)
__________ __________
Total equity 7,091 6,727
__________ __________
Approved: 27 April 2023
Cash flow statement
For the year ended 31 December 2022
Year ended Year ended
2022 2021
£ 000 £ 000
Cash flows from operating activities
Profit before tax 960 1,196
Adjustments for:
Gains on investments (285) (443)
Dividends in specie - (78)
Proceeds on disposal of investments at fair 548 1,708
value through profit and loss
Purchases of investments at fair value through (441) (1,610)
profit and loss
Finance costs 44 39
__________ __________
Operating cash flows before movements in working 826 812
capital
Decrease in receivables 109 551
Decrease in payables (1,351) (549)
__________ __________
Net cash from operating activities before (416) 814
interest
Interest paid (21) (7)
__________ __________
Net cash from operating activities (437) 807
Cash flows from financing activities
Dividends paid on ordinary shares - (875)
Dividends paid on preference shares - (175)
__________ __________
Net cash used in financing activities - (1,050)
__________ __________
Net decrease in cash and cash equivalents (437) (243)
Cash and cash equivalents at beginning of year
(536) (293)
__________ __________
Cash and cash equivalents at end of year
(973) (536)
__________ __________
Purchases and sales of investments are considered to be operating activities of
the company, given its purpose, rather than investing activities. Cash and cash
equivalents at year end shows net movement on the bank facility.
1 Basis of preparation and going concern
The financial information set out above contains the financial information of
the company for the year ended 31 December 2022. The company has prepared its
financial statements under IFRS. The financial statements have been prepared on
a going concern basis adopting the historical cost convention except for the
measurement at fair value of investments, derivative financial instruments and
subsidiaries.
The information for the year ended 31 December 2022 is an extract from the
statutory accounts to that date. Statutory company accounts for 2021, which
were prepared under IFRS as adopted by the UK, have been delivered to the
registrar of companies and company statutory accounts for 2022, prepared under
IFRS as adopted by the UK, will be delivered in due course.
The auditors have reported on the 31 December 2022 year end accounts and their
report was unqualified and did not include references to any matters to which
the auditors drew attention by way of emphasis without qualifying their reports
and did not contain statements under section 498(2) or (3) of the Companies Act
2006.
The directors, having made enquiries, consider that the company has adequate
financial resources to enable it to continue in operational existence for the
foreseeable future. Accordingly, the directors believe that it is appropriate
to continue to adopt the going concern basis in preparing the company's
accounts.
2 Income
2022 2021
£ 000 £ 000
Income from investments
UK dividends 89 391
Dividend from subsidiary 1,001 907
_________ _________
1,090 1,298
Other income 66 71
Other - 70
_________ __________
Total income 1,156 1,439
_________ __________
Total income comprises:
Dividends 1,090 1,298
Other interest 66 141
_________ __________
1,156 1,439
_________ __________
Dividends from investments
Listed investments 89 391
Unlisted investments 1,001 907
_________ __________
1,090 1,298
_________ __________
During the year the company received a dividend of £1,001,000 (2021 - £907,000)
from a subsidiary which was generated from gains made on the realisation of
investments held by that company. As a result of the receipt of this dividend a
corresponding reduction was recognised in the value of the investment in the
subsidiary company.
Of the £1,090,000 (2021 - £1,298,000) dividends received, £nil (2021 - £
204,000) related to special and other dividends received from investee
companies that were bought after the dividend announcement. There was a
corresponding capital loss of £nil (2021 - £249,000), on these investments.
During the year the company recognised £317,000 of a foreign exchange gain on
the loan of $3,526,000 to a subsidiary. As a result of this gain, the
corresponding movement was recognised in the value of the investment in the
subsidiary company.
Under IFRS 10 the income analysis is for the parent company only rather than
that of the consolidated group. Thus, film revenues of £107,000 (2021 - £
171,000) received by the subsidiary British & American Films Limited and
property unit trust income of £1,000 (2021 - £2,000) received by the subsidiary
BritAm Investments Limited are shown separately in this paragraph.
3 Earnings per ordinary share
The calculation of the basic (after deduction of preference dividend) and
diluted earnings per share is based on the following data:
2022 2021
Revenue Capital Total Revenue Capital Total
return return return return
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Earnings:
Basic and 324 302 626 664 218 882
diluted
Basic revenue, capital and total return per ordinary share is based on the net
revenue, capital and total return for the period after tax and after deduction
of dividends in respect of preference shares and on 25 million (2021: 25
million) ordinary shares in issue.
The diluted revenue, capital and total return is based on the net revenue,
capital and total return for the period after tax and on 35 million (2021: 35
million) ordinary and preference shares in issue.
*Calculated in accordance with International Accounting Standard 33 'Earnings
per Share'. Conversion of the preference shares will have an antidilutive
effect. Upon conversion of the preference shares to ordinary shares the
anti-diluted earnings per share would be 1.93p (2021 - 2.90p) (revenue return).
4 Dividends
2022 2021
£ 000 £ 000
Amounts recognised as distributions to equity
holders in the period
Dividends on ordinary shares:
Final dividend for the year ended 31 December 2021
of 0.0p - -
(2020: 0.0p) per share
First interim dividend for the year ended 31
December 2022 of 1.75p 437 675
(2021: 2.7p) per share
Second interim dividend for the year ended 31
December 2022 of 0.0p - 200
(2021: 0.8p) per share
__________ __________
437 875
__________ __________
Proposed final dividend for the year ended 31
December 2022 of 0.0p (2021: 0.0p) per share - -
__________ __________
Dividends on 3.5% cumulative convertible
preference shares:
Preference dividend for the 6 months ended 31
December 2021 of 0.00p (2020: 0.00p) per share - -
Preference dividend for the 6 months ended 30 June
2022 of 0.0p (2021: 1.75p) per share - 175
Preference dividend for the 6 months ended 31
December 2022 of 1.75p (2021: 1.75p) per share 175 175
__________ __________
175 350
__________ __________
We have set out below the total dividend payable in respect of the financial
year, which is the basis on which the retention requirements of Section 1158 of
the Corporation Tax Act 2010 are considered.
Dividends proposed for the period
2022 2021
£ 000 £ 000
Dividends on ordinary shares:
First interim dividend for the year ended 31
December 2022 of 1.75p 437 675
(2021: 2.7p) per share
Second interim dividend for the year ended 31
December 2022 of 0.0p - 200
(2021: 0.8p) per share
Proposed final dividend for the year ended 31
December 2022 of 0.0p (2021: 0.0p) per share - -
__________ __________
437 875
__________ __________
Dividends on 3.5% cumulative convertible
preference shares:
Preference dividend for the 6 months ended 30 June
2022 of 0.00p (2021: 1.75p) per share - 175
Preference dividend for the 6 months ended 31
December 2022 of 1.75p (2021: 1.75p) per share 175 175
__________ __________
175 350
__________ __________
The non-payment in December 2019, December 2020 and June 2022 of the dividend
of 1.75 pence per share on the 3.5% cumulative convertible preference shares,
consequent upon the non-payment of a final dividend on the Ordinary shares for
the year ended 31 December 2019, for the year ended 31 December 2020 and for
the period ended 30 June 2022, has resulted in arrears of £525,000 on the 3.5%
cumulative convertible preference shares. These arrears will become payable in
the event that the ordinary shares receive, in any financial year, a dividend
on par value in excess of 3.5%.
Interim dividend declared for the year ended 31 December 2022 of 1.75 pence per
ordinary share was paid on 22 December 2022 to shareholders on the register at
9 December 2022. A preference dividend of 1.75 pence was paid to preference
shareholders on the same date.
5 Net asset values
Net asset
value per share
2022 2021
Ordinary shares £ £
Diluted 0.20 0.19
Undiluted 0.20 0.19
Net assets
attributable
2022 2021
£ 000 £ 000
Total net assets 7,091 6,727
Less convertible preference shares at (2,026) (1,922)
fully diluted value
__________ __________
Net assets attributable to ordinary 5,065 4,805
shareholders
__________ __________
The undiluted and diluted net asset values per £1 ordinary share are based on
net assets at the year end and 25 million (undiluted) ordinary and 35 million
(diluted) ordinary and preference shares in issue.
Principal risks and uncertainties
The principal risks facing the company relate to its investment activities and
include market risk (other price risk, interest rate risk and currency risk),
liquidity risk and credit risk. The other principal risks to the company are
loss of investment trust status and operational risk. These will be explained
in more detail in the notes to the 2022 Annual Report and Accounts, but remain
unchanged from those published in the 2021 Annual Report and Accounts.
Related party transactions
The company rents its offices from Romulus Films Limited, and is also charged
for its office overheads.
The salaries and pensions of the company's employees, except for the
non-executive directors and one employee are paid by Remus Films Limited and
Romulus Films Limited and are recharged to the company.
During the year the company did not enter into any investment transactions with
British & American Films Limited (2021 - £772,000 sale) or BritAm Investments
Limited (2021 - £711,000 purchase).
At 31 December 2022 £4,132,163 (2021 - £4,084,909) was owed by British &
American Films Limited to Romulus Films Limited under an existing loan
agreement.
There have been no other related party transactions during the period, which
have materially affected the financial position or performance of the company.
Capital Structure
The company's capital comprises £35,000,000 (2021 - £35,000,000) being
25,000,000 ordinary shares of £1 (2021 - 25,000,000) and 10,000,000 non-voting
convertible preference shares of £1 each (2021 - 10,000,000). The rights
attaching to the shares will be explained in more detail in the notes to the
2022 Annual Report and Accounts, but remain unchanged from those published in
the 2021 Annual Report and Accounts.
Directors' responsibility statement
The directors are responsible for preparing the financial statements in
accordance with applicable law and regulations. The directors confirm that to
the best of their knowledge the financial statements prepared in accordance
with the applicable set of accounting standards, give a true and fair view of
the assets, liabilities, financial position and the (loss)/profit of the
company and that the Chairman's Statement, Managing Director's Report and the
Directors' report include a fair review of the information required by rules
4.1.8R to 4.2.11R of the FSA's Disclosure and Transparency Rules, together with
a description of the principal risks and uncertainties that the company faces.
Annual General Meeting
This year's Annual General Meeting has been convened for Thursday 29 June 2023
at 12.15pm at Wessex House, 1 Chesham Street, London SW1X 8ND.
END
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April 28, 2023 04:53 ET (08:53 GMT)
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