RNS Number:0648C
Old Mutual South Africa Trust PLC
26 April 2006
Old Mutual South Africa Trust plc
Preliminary Announcement of the Interim Results for the six months ended
28 February 2006
Investment Manager's Report
Review of Performance
For the six months to 28 February 2006 the Trust outperformed its benchmark by
1.5%, returning 34.4% in sterling capital terms. Over twelve months the Trust
returned 45.6% in sterling capital terms underperforming its benchmark by 0.7%.
Since the benchmark change on 1 January 2002 the Trust has outperformed its
benchmark by 40.5% in sterling capital terms, returning 235.8%.
Overweight positions in retail and gross domestic fixed investment ('GDFI')
shares added to performance over the six month period. The benign domestic
economic environment for consumers driven by lower interest rates, a strong
currency and stable inflation has buoyed consumer spending and credit demand.
Underweight positions in rand sensitive industrial shares also added to
performance. We continue to believe that these rand sensitive industrial shares
are overvalued relative to their earnings prospects. Detracting from performance
during the six month period were underweight positions in gold and platinum
shares. Within the resources sector we continue to favour the diversified
resource companies.
The South African Economy
Against the background of solid global growth, the South African economy
remained healthy in 2005, expanding by nearly 5%, the best annual growth
performance since 1984.
There was a slight slowdown in growth during the fourth quarter of 2005, driven
by a weakening in manufacturing and mining, with the strong rand and a
disruption in the output of the fuel refineries being the main contributors.
However, we continue to believe that solid domestic demand and the coming public
sector infrastructure drive will keep the economy growing at a similar rate to
2005 over the next two years.
Inflation is expected to remain comfortably in the 3% to 6% target range for
2006. Signs of a moderate acceleration in food inflation and sustained strong
domestic demand growth do hold some inflation risks and will keep the South
African Reserve Bank vigilant. There are several opposing factors influencing
interest rates but they are expected to remain relatively flat during most of
2006.
The economic outlook for South Africa continues to remain positive. The strong
rand, low inflation and interest rates and expansionary fiscal policy have
caused a surge in consumer and business confidence and a boom in domestic
demand.
The South African Equity Market
After a strong run in the South African equity market, with the FTSE/JSE All
Share Index reaching record highs, it fell 3%, in rand terms, in February 2006,
on the back of some profit taking. A temporary pullback in precious metal prices
and other select commodities saw the resource sector decline by more than 7% in
rand terms.
The February 2006 budget was growth and equity-friendly, with the Minister
providing significant tax concessions. The equity market rallied in response,
with banks, construction and durable retailers rising in anticipation of the
positive impact the budget is likely to have on these sectors.
Company earnings continued to meet the market's expectations, with very strong
earnings from mining companies, banks, construction companies and diversified
industrials. These healthy company results vindicate our view that justifiably
high confidence levels of investors are driving the strong performance of the
South African equity market.
Outlook
The impressive run in equities last year and early this year is probably not
sustainable. However, we believe there are still a number of factors supporting
equity market returns. The positive macro-environment should continue to provide
a backdrop for solid earnings growth. Foreigners may continue to buy South
Africa equities given the economy's positive prospects. Economic policy should
remain supportive. The balance sheets of South African companies are healthy and
cash rich. In summary, South Africa is still an equity-friendly environment
despite the market trading on higher multiples than the past.
Old Mutual Asset Managers (Bermuda) Limited
26 April 2006
Income Statement
for the six months to 28 February 2006
Restated* Restated*
Unaudited Unaudited Audited
Six months to Six months to Year ended
28 February 2006 28 February 2005 31 August 2005
Revenue Capital Total+ Revenue Capital Total+ Revenue Capital Total+
#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000
Gains on investments
held at fair
value through
profit or loss - 25,575 25,575 - 18,143 18,143 - 23,661 23,661
Exchange - (263) (263) - (184) (184) - 13 13
(losses) /gains
on capital items
Income 1,101 - 1,101 750 - 750 1,984 - 1,984
Management fee (77) (231) (308) (55) (164) (219) (112) (336) (448)
Performance fee - - - - (560) (560) - (350) (350)
Other
administrative
expenses (161) - (161) (174) - (174) (323) - (323)
------------ ---------- --------- ----------- --------- --------- ----------- --------- ---------
Net return on
ordinary
activities
before finance
costs 863 25,081 25,944 521 17,235 17,756 1,549 22,988 24,537
Finance costs (47) (141) (188) (24) (73) (97) (74) (222) (296)
------------ ---------- --------- ----------- --------- --------- ----------- --------- ---------
Net return on
ordinary
activities
before taxation
816 24,940 25,756 497 17,162 17,659 1,475 22,766 24,241
Taxation on
ordinary
activities (232) 111 (121) (147) 231 84 (418) 187 (231)
------------ ---------- --------- ----------- --------- --------- ----------- --------- ---------
Net return on
ordinary
activities 584 25,051 25,635 350 17,393 17,743 1,057 22,953 24,010
after taxation
====== ====== ===== ===== ===== ===== ======= ===== =====
Return per
ordinary share
(note 2) 1.17p 50.30p 51.47p 0.70p 34.93p 35.63p 2.12p 46.09p 48.21p
====== ====== ===== ===== ===== ===== ======= ===== =====
+The total columns of this statement represent the profit and loss account of
the Company.
* See notes 6c and 6e.
Reconciliation of Movements in Shareholders' Funds
Share Share Warrant Capital Special Capital Revenue
capital premium reserve redemption reserves reserves reserve
exercised reserve
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Six months to 28 February
2006
At 31 August 2005 (as 4,980 19,001 26 252 19,802 27,716 2,035
restated see note 6d)
Net return from ordinary - - - - - 25,051 584
activities
Dividend paid in respect of - - - - - - (1,056)
year ended 31 August 2005
------------ ----------- ----------- ----------- ----------- ----------- -----------
At 28 February 2006 4,980 19,001 26 252 19,802 52,767 1,563
======= ======= ======= ======= ======= ======= ======
Six months to 28 February
2005
At 31 August 2004 (as 4,980 19,001 26 252 19,802 4,763 1,740
restated see note 6a)
Net return from ordinary - - - - - 17,393 350
activities
Dividend paid in respect of - - - - - - (762)
year ended 31 August 2004
------------ ----------- ----------- ----------- ----------- ----------- -----------
At 28 February 2005 4,980 19,001 26 252 19,802 22,156 1,328
======= ======= ======= ======= ======= ======= ======
Year ended 31 August 2005
At 31 August 2004 (as 4,980 19,001 26 252 19,802 4,763 1,740
restated see note 6a)
Net return from ordinary - - - - - 22,953 1,057
activities
Dividend paid in respect of - - - - - - (762)
year ended 31 August 2004
------------ ----------- ----------- ------------ ----------- ----------- -----------
At 31 August 2005 4,980 19,001 26 252 19,802 27,716 2,035
======= ======= ======= ======= ======= ======= ======
Balance Sheet
as at 28 February 2006
Restated* Restated*
Unaudited Unaudited Audited
28 February 2006 28 February 2005 31 August 2005
#'000 #'000 #'000
Fixed asset investments held at fair value
through profit or loss
Listed at market value 103,336 69,352 79,020
------------ ------------ ------------
Current assets
Debtors 1,204 687 137
Cash at bank 162 1,586 120
------------ ------------ ------------
1,366 2,273 257
------------ ------------ ------------
Creditors - amounts falling due within one (6,311) (4,080) (5,465)
year
------------ ------------ ------------
Net current liabilities (4,945) (1,807) (5,208)
------------ ------------ ------------
Net assets 98,391 67,545 73,812
======= ======= =======
Capital and reserves
Called-up share capital 4,980 4,980 4,980
Share premium account 19,001 19,001 19,001
Warrant reserve - exercised 26 26 26
Capital redemption reserve 252 252 252
Special reserve 19,802 19,802 19,802
Capital reserve
- realised 10,256 2,220 3,370
-unrealised 42,511 19,936 24,346
Revenue reserve 1,563 1,328 2,035
------------ ------------ ------------
Equity shareholders' funds 98,391 67,545 73,812
======= ======= =======
Net asset value per ordinary share 197.6p 135.6p 148.2p
======= ======= =======
*see notes 6b and 6d
Statement of Cash Flows
for the six months to 28 February 2006
Unaudited Unaudited Audited
Six months to Six months to Year ended
28 February 2006 28 February 2005 31 August 2005
#'000 #'000 #'000
Net cash inflow from operating activities 285 551 1,301
Interest paid (190) (93) (293)
Taxation - - (26)
Net cash inflow/(outflow) from purchases 1,250 (61) (3,725)
and sales of investments
Equity dividends paid (1,056) (762) (762)
-------------- -------------- --------------
Net cash inflow/(outflow)before financing 289 (365) (3,505)
Net cash inflow from financing 50 1,963 3,545
-------------- -------------- --------------
Increase in cash 339 1,598 40
======== ======== ========
Reconciliation of operating revenue before
finance costs and taxation to net cash flow
from operating activities
Net revenue before interest payable and 863 521 1,549
taxation
(Increase)/decrease in accrued income (28) 66 (7)
Decrease in other debtors 1 13 -
(Decrease)/increase in creditors (320) 675 445
Investment management and performance fees (231) (724) (686)
charged to capital
-------------- -------------- --------------
Net cash inflow from operating activities 285 551 1,301
======== ======== ========
Reconciliation of net cash flow to movement
in net debt
Increase in cash as above 339 1,598 40
Cash inflow from financing (50) (1,963) (3,545)
-------------- -------------- --------------
Change in net debt resulting from cash 289 (365) (3,505)
flows
Exchange movements (263) (184) 13
-------------- -------------- --------------
Movement In net debt during the period 26 (549) (3,492)
Net debt at beginning of the period (4,538) (1,046) (1,046)
-------------- -------------- --------------
Net debt at the end of the period (4,512) (1,595) (4,538)
======== ======== ========
Represented by:
Cash at bank 162 1,586 120
Debt falling due within one year (4,674) (3,181) (4,658)
-------------- -------------- --------------
(4,512) (1,595) (4,538)
======== ======== ========
Notes to the Accounts
as at 28 February 2006
1. Accounting Policies
a) Changes in presentation
The Company has adopted the provisions of the Revised Statement of Recommended
Practice - Financial Statements of Investment Trust Companies dated December
2005 and revised UK Accounting Standards which has resulted in some changes to
the presentation of the Company's accounts.
The Statement of Total Return is now called the Income Statement. Dividends
payable to equity shareholders are no longer reflected in the Income Statement,
although they continue to be shown in the Reconciliation of Movements in
Shareholders' Funds which is now presented as a primary statement.
b) Changes in accounting policies
The Company has changed its accounting policy for the valuation of listed
investments and the recognition of dividends payable to equity shareholders in
accordance with the provisions of FRS 26 - Financial instruments: Recognition
and Measurement ('FRS 26') and FRS 21 - Events after the balance sheet date ('
FRS 21') respectively. These changes in policy and the associated impact on the
results of the company are referred to below. With the exception of the above,
all accounting policies remain the same.
c) Valuation of fixed asset investments
Investments - prior to 1 September 2005, listed investments were valued at
middle market prices. Following the introduction of FRS 26, listed investments
have been designated by the Board as held at fair value through profit or loss
and accordingly are valued at fair value, deemed to be bid market prices. The
adoption of bid market prices at 1 September 2005 decreased the value of listed
investments by #239,000 (28 February 2005: #220,000 and 31 August 2004:
#116,000).
Changes in the fair value of investments held at fair value through profit or
loss and gains and losses on disposal are recognised in the Income Statement as
"Gains or losses on investments held at fair value through profit or loss". Also
included within this caption are expenses such as brokerage fees and stamp duty,
incurred as part of the process of buying and selling investments. Purchase
transaction costs for the six months to 28 February 2006 were #43,000 (Year
ended 31 August 2005: #153,000 and six months to 28 February 2005: #114,000).
These comprise mainly stamp duty and commission. Sale transaction costs for the
six months to 28 February 2006 were #18,000 (Year ended 31 August 2005: #36,000
and six months to 28 February 2005: #28,000). All purchases and sales are
accounted for on a trade date basis.
d) Dividends payable to equity shareholders
Under FRS 21 dividends should not be accrued in the accounts unless they have
been approved by shareholders before the Balance Sheet date. Dividends payable
to equity shareholders are recognised in the Reconciliation of Movements in
Shareholders' Funds when they have been approved by shareholders and become a
liability of the Company.
There is no impact from this change on the recognised gains and losses in 2005.
However, the net assets at 31 August 2005 have been impacted as disclosed in
note 6d. The effect of this change is to increase net assets at 31 August 2005
by #1,056,000 (or 2.12p per share) (31 August 2004: #762,000 or 1.53p per
share).
2. Return per ordinary share
Revenue return per ordinary share is based on the net revenue on ordinary
activities after taxation of #584,000 (six months to 28 February 2005: #350,000;
year ended 31 August 2005: #1,057,000) and on 49,801,063 ordinary shares (six
months to 28 February 2005: 49,801,063; year ended 31 August 2005: 49,801,063)
being the weighted average number of ordinary shares in issue during the period.
Capital gain per ordinary share is based on net capital gains of #25,051,000
(six months to 28 February 2005: gain of #17,393,000; year ended 31 August 2005:
gain of #22,953,000) and on 49,801,063 ordinary shares (six months to 28
February 2005: 49,801,063; year ended 31 August 2005: 49,801,063) being the
weighted average number of ordinary shares in issue during the period.
3. Net asset value per ordinary share
The net asset value per ordinary share is based on net assets attributable to
ordinary shareholders of #98,391,000 (28 February 2005: #67,545,000 and 31
August 2005: #73,812,000) and on the 49,801,063 ordinary shares in issue (28
February 2005: 49,801,063 and 31 August 2005: 49,801,063).
4. Issued share capital
At 28 February 2006 there were 49,801,063 ordinary shares in issue (28 February
2005: 49,801,063 and 31 August 2005: 49,801,063).
5. 2005 Accounts
The figures and financial information for the year ended 31 August 2005 as
restated are extracted from the latest published accounts of the Company and do
not constitute statutory accounts for that year.
Those accounts have been delivered to the Registrar of Companies and included
the report of the Auditors which was unqualified and did not contain a statement
under either Section 237(2) or 237(3) of the Companies Act 1985.
6a. Restatement of opening balances at 31 August 2004
Notes Previously reported 31 Adjustments Restated 31 August 2004
August 2004
#'000 #'000 #'000
Fixed assets
Investments 1 51,240 (116) 51,124
-------------- -------------- --------------
Current assets 833 - 833
Creditors: Amounts falling due 2 (2,155) 762 (1,393)
within one year
-------------- -------------- --------------
Net current liabilities (1,322) 762 (560)
-------------- -------------- --------------
Net Assets 49,918 646 50,564
======== ======== ========
Capital and reserves
Ordinary called-up share capital 4,980 - 4,980
Share premium 19,001 - 19,001
Warrant reserve - exercised 26 - 26
Capital redemption reserve 252 - 252
Special reserve 19,802 - 19,802
Capital reserves 1 4,879 (116) 4,763
Revenue reserve 2 978 762 1,740
-------------- -------------- --------------
49,918 646 50,564
======== ========= =========
Net asset per ordinary share 100.2p 1.3p 101.5p
======== ========= =========
Notes to the reconciliation
1. Following the introduction of FRS 26, listed investments have been designated
as held at fair value through profit or loss and are valued at fair value
deemed to be bid market prices. The adoption of bid market prices at 31
August 2004 decreases the value of listed investments by #116,000.
2. Under FRS 21 dividends should not be accrued in the accounts unless they have
been approved by shareholders before the balance sheet date. Dividends
payable to equity shareholders are recognised in the Reconciliation of
Movements in Shareholders' Funds when they have been approved by
shareholders and become a liability of the Company. The effect of this
change is to increase net assets at 31 August 2004 by #762,000.
6b Restatement of balances at 28 February 2005
Note Previously reported 28 Adjustments Restated 28 February 2005
February 2005
#'000 #'000 #'000
Fixed assets
Investments 1 69,572 (220) 69,352
-------------- -------------- -------------
Current assets 2,273 - 2,273
Creditors: Amounts falling due (4,080) - (4,080)
within one year
-------------- -------------- --------------
Net current liabilities (1,807) - (1,807)
-------------- -------------- -------------
Net assets 67,765 (220) 67,545
======== ======== ========
Capital and reserves
Ordinary called-up share capital 4,980 - 4,980
Share premium 19,001 - 19,001
Warrant reserve - exercised 26 - 26
Capital redemption reserve 252 - 252
Special reserve 19,802 - 19,802
Capital reserves 1 22,376 (220) 22,156
Revenue reserve 1,328 - 1,328
------------- --------------- ---------------
67,765 (220) 67,545
======== ========= =========
Net asset per ordinary share 136.1p (0.5)p 135.6p
======== ========= =========
Notes to the reconciliation
1. Following the introduction of FRS 26, listed investments have been designated
as held at fair value through profit or loss and are valued at fair value
deemed to be bid market prices. The adoption of bid market prices at 28
February 2005 decreased the value of listed investments by #220,000.
6c Reconciliation of the Statement of Total Return to the Income Statement for
the six months to 28 February 2005
#'000
Net return from ordinary activities after taxation per Statement of Total Return 17,847
Change from mid to bid basis at 31 August 2004* 116
Change from mid to bid basis at 28 February 2005* (220)
--------------
Net return from ordinary activities after taxation per Income Statement 17,743
========
* Investments at 31 August 2004 and 28 February 2005 are required to be fair
valued under FRS 26.
These values differ from the previous valuations by #116,000 and #220,000
respectively.
6d Restatement of balances at 31 August 2005
Notes Previously reported 31 Adjustments #'000 Restated 31 August
August 2005 #'000 2005 #'000
Fixed assets
Investments 1 79,259 (239) 79,020
------------ ------------ -------------
Current assets 257 - 257
Creditors: amounts falling due within one 2 (6,521) 1,056 (5,465)
year
------------ ------------ -------------
Net current liabilities (6,264) 1,056 (5,208)
------------ ------------ ------------
Net assets 72,995 817 73,812
======= ======= =======
Capital and reserves
Ordinary called- up share capital 4,980 - 4,980
Share premium 19,001 - 19,001
Warrant reserve - exercised 26 - 26
Capital redemption reserve 252 - 252
Special reserve 19,802 - 19,802
Capital reserves 1 27,955 (239) 27,716
Revenue reserve 2 979 1,056 2,035
------------ ------------ ------------
72,995 817 73,812
======= ======= =======
Net asset per ordinary share 146.6p 1.6p 148.2p
======= ======= =======
Notes to the reconciliation
1. Following the introduction of FRS 26, listed investments have been designated
at fair value through profit or loss and are valued at fair value deemed to
be bid market prices. The adoption of bid market prices at 31 August 2005
decreased the value of listed investments by #239,000.
2. Under FRS 21 dividends should not be accrued in the accounts unless they have
been approved by shareholders before the balance sheet date. Dividends
payable to equity shareholders are recognised in the Reconciliation of
Movements in Shareholders' Funds when they have been approved by
shareholders and become a liability of the Company. The effect of this
change is to increase net assets at 31 August 2005 by #1,056,000.
6e Reconciliation of the Statement of Total Return to the Income Statement for
the year ended 31 August 2005
#'000
Net return from ordinary activities after taxation per Statement of Total Return 24,133
Change from mid to bid basis at 31 August 2004* 116
Change from mid to bid basis at 31 August 2005* (239)
-------------
Net return from ordinary activities after taxation per Income Statement 24,010
========
* Investments at 31 August 2004 and 31 August 2005 are required to be fair
valued under FRS 26.
These values differ from the previous valuations by #116,000 and #239,000
respectively.
Portfolio and Trust Information
Investment Portfolio
Ten largest holdings as at 28 February 2006
Sector Market value of holdings % of total net assets
(#'000)
Anglo American Mining Finance 15,399 15.6
BHP Billiton Other Mineral Extractors 12,758 13.0
Sasol Oil and Gas 7,937 8.1
Standard Bank Group Banks 7,496 7.6
MTN Group Telecommunications 7,179 7.3
FirstRand Banks 4,649 4.7
Imperial Holdings Industrial Transportation 4,348 4.4
Remgro Investment Companies 3,968 4.0
SABMiller Beverages 3,901 4.0
Naspers Media 3,740 3.8
-------- --------
Total 71,375 72.5
===== =====
The net assets had a total value of #98,391,000 (R1,063,007,000), using an
exchange rate of R10.8039 to #1 on 28 February 2006.
Structure of the Trust
as at 28 February 2006
#m % of total net assets
Industrial shares 41.2 41.9
Financial shares 23.9 24.3
Resource shares 38.2 38.8
------------ ------------
Total direct investment* 103.3 105.0
Net current liabilities (4.9) (5.0)
------------ ------------
Total net assets 98.4 100.0
======= ========
Structure of the Trust by market capitalisation
as at 28 February 2006
% of direct investment* % of FTSE/JSE All Share Index
Large-market capitalisation (top 40) 82.5 85.4
Mid-market capitalisation (next 60) 13.3 12.2
Small-market capitlisation 4.2 2.4
(remaining companies)
---------- ----------
Total 100.0 100.0
====== ======
* Total direct investment is taken to include ordinary shares, preference shares
and loan stocks issued by South African Companies.
NAV and share price in sterling terms
as at 28 February 2006
2006 2005
Net asset value ('NAV') (pence) 197.6 135.6*
Ordinary share price (pence) 198.3 121.0
Performance comparison percentage change in sterling terms
to 28 February 2006 (capital returns)
Share price FTSE/JSE All Share NAV
6 months since 31 August 2005 40.1 32.9 34.4
1 year since 28 February 2005 63.9 46.3 45.6
2 years since 29 February 2004 145.4 100.1 108.4
3 years since 28 February 2003 236.0 167.1 181.6
4 years 2 months since 31 December 2001 306.7 195.3 235.8
* Restated - see note 6b
The interim report will be issued to shareholders in early May 2006 and further
copies will be available from the Company's registered office: 55 Moorgate,
London EC2R 6PA.
For further information, contact:
Susan Venables
BNP Paribas Secretarial Services Limited
Tel: 020 7410 5971
26 April 2006
This information is provided by RNS
The company news service from the London Stock Exchange
END
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