British & American Investment Trust Plc - Annual Financial Report
British & American Investment Trust PLC
Annual Financial Report
for the year ended 31 December 2023
Registered number: 00433137
Directors
Registered office
David G Seligman (Chairman)
Wessex House
Jonathan C Woolf (Managing Director)
Telephone: 020 7201 3100
Registered in
No.00433137
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
2023 2022
Revenue Capital Total Revenue Capital Total
return return return return
£000 £000 £000 £000 £000 £000
Profit/(loss)
before tax – 797 (585) 212 658 (277) 381
realised
(Loss)/profit
before tax – – (2,196) (2,196) – 579 579
unrealised
__________ __________ __________ __________ __________ __________
(Loss)/profit
before tax – 797 (2,781) (1,984) 658 302 960
total
__________ __________ __________ __________ __________ __________
Earnings per
£1 ordinary
share – basic 1.86p (11.12)p (9.26)p 1.30p 1.21p 2.51p
and diluted*
__________ __________ __________ __________ __________ __________
Net assets 4,512 7,091
__________ __________
Net assets per
ordinary share
– deducting
preference
shares
at fully 13p 20p
diluted net
asset value**
__________ __________
– diluted 13p 20p
__________ __________
Diluted net
asset value
per ordinary 26p
share at 26
April 2024
__________
Dividends
declared or
proposed for
the period:
per ordinary
share
– interim paid 1.75p 1.75p
– final 0.0p 0.0p
proposed
per preference 1.75p 1.75p
share
*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 2.33p
(2022 – 1.93p) (revenue return) (Note 3).
**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
Revenue
The return on the revenue account before tax amounted to £0.8 million (2022: £0.7 million), a similar level to that of the previous year due. The bulk of this revenue was accounted for by dividends received from subsidiary companies arising from gains realised on our principal US investments. In addition, further one-off income of £236,000 was received from the proceeds of a class action suit settlement in the
Gross revenues totalled £1.3 million (2022: £1.2 million). In addition, film income of £74,000 (2022: £107,000) and property unit trust income of £nil (2022: £1,000) was received in our subsidiary companies. This reduction in property income reflected the sale of one of our investments during the year 2021. 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, comprising revenue and capital return, amounted to a loss of £2.0 million (2022: £1.0 million profit), representing net revenue of £0.8 million, a realised loss of £0.6 million and an unrealised loss of £2.2 million. The revenue return per ordinary share was 1.9p (2022: 1.3p) on an undiluted basis.
Net Assets and Performance
Net assets at the year end were £4.5 million (2022: £7.1 million), a decrease of 36.4 percent after payment of £0.6 million in dividends to shareholders during the year. This compares to an increase in the
This substantial underperformance for the year as a whole, despite the 20 percent out-performance recorded at the half-year, was due almost entirely to the significant decline of 34 percent in the value of our largest investment, Geron Corporation, in the last quarter of 2023. Thankfully this decline was reversed in the first quarter of 2024 with a rise of 36 percent to a level slightly higher than that recorded at the half year. As noted below, this has allowed us to register significant recovery in value of over £4 million so far this year, resulting in outperformance of approximately 95 percent since the beginning of 2023. The reasons for this volatility in the share price of Geron Corporation are explained in more detail in the Managing Director's report below.
Equity markets in the
Further strong impetus was given to markets at this time from significantly improved results from technology companies in the
Market strength over the last year seems, however, to have ignored the many and substantial challenges and uncertainties developed economies are facing politically, strategically, militarily and socially around the world.
These include the continuing war in
Voters now show a high level of distrust in their politician's ability to address their basic concerns - uncontrolled levels of immigration, lack of economic growth, high rates of tax, stagnation in middle class incomes, lack of investment and trust in government - precipitating movements towards political extremes and a hollowing out of the liberal political middle.
It goes without saying that these unfortunate and regressive developments will inevitably have a fundamental and destabilising effect on future economic outcomes, democratic freedoms and continued social development in those countries where governments fail to provide real leadership rather than gesture politics and fail to respond to their citizens' basic needs and expectations.
Dividend
In 2023, dividends of
The Board has become aware of an issue concerning technical compliance with the Companies Act 2006 (“Act”) in relation to the payment of this interim dividend on
It is our intention to pay an interim dividend this year of no less amount contingent on the profitable sales of investments during the year. The position regarding these investments is set out in more detail in the Managing Director’s report below.
Recent events and outlook
The extremely strong performance of investment markets over the last 6 months, based essentially on the prospect of declining interest rates, makes a future correction to what is now a 16 year rising market and a three year post-Covid bull market, somewhat inevitable, particularly given the serious global concerns noted above.
Our investment policy relies, as it has for some time, on the capture of value from our major investments in US biotechnology. Our largest investment, Geron Corporation, is now on the cusp of fulfilling its transformation from clinical development to product sales with the imminently expected approval of its oncology drug by the FDA.
The beginnings of this value enhancement were seen last month with a positive vote from the
As at
Managing Director's report
Following significant out-performance in the first half, our portfolio underperformed by a large margin for the year as a whole, as noted in the Chairman’s statement above.
This was due to a combination of two factors: a significant reversal in the share price of our largest investment, Geron Corporation, of over 35 percent in the second half of the year and continued strong growth in the US equity index of 10 percent and to a lesser extent in the
I had reported in detail at the interim stage on the reasons for and background to Geron’s strong upward price movement over the first six months of 2023 and the expectation of further positive gains given the stage it had reached in its clinical development programme prior to anticipated approval of its oncology drug by the
It will be recalled that in last year’s interim report and indeed in many previous reports, we have commented in detail on the lack of true price discovery and inexplicable levels of volatility in Geron’s stock price over many years. Unusual market-related activities, poor timing and execution of secondary share issues and manipulative trading practices have been cited as reasons for this and it would appear that some of such forces were again active in the second half of 2023.
That being said, I am very pleased to report that the decline in Geron’s share price at the end of 2023 has now been more than reversed this year to date with a rise of 80 percent.
On 14th March of this year, Geron received a positive vote from the FDA’s independent advisory committee of experts (ODAC –
With this penultimate step to approval now successfully achieved, we believe that the market has now finally started to attribute a somewhat more transparent and reasonable market value to Geron at this pre-approval stage of the process. This new level should only be built upon further as the approval date approaches, the anticipated approval is granted and sales commence.
As a result of this strong recovery in Geron’s share price, our portfolio has outperformed the indices by 95 percent in 2024 to date exceeding the outperformance of 20 percent registered at the half-year stage last year.
Investment climate outlook
The list of geopolitical, economic, financial and social concerns now facing the world is long and growing: Serious security issues in
These multiple and widespread conditions , all with negative long-term impact potential, are too numerous and complex to analyse in detail in a report such as this.
However, markets have been largely ignoring these risks and continue to maintain their all time high levels, albeit with some recently higher levels of volatility. That this should be the case seems somewhat extraordinary, particularly when the currently higher levels of interest rates are now expected to remain at these higher levels for longer as inflation in the US and European countries is also expected to remain higher for longer before returning to target levels.
In the absence of a significant and unexpected turnaround for the better in world affairs, it seems incontrovertible that these multiple risks must inevitably at some point prove negative for investment sentiment and performance going forward.
Consequently, we will be examining closely our hitherto policy of full investment in equity investments and when appropriate to our portfolio performance will be seeking to reduce exposure to equities, to be replaced by a more traditional and diverse balance of investments alongside equities, including cash, fixed interest, funds, commodities, real assets and where appropriate non-financial investments , within the parameters of our stated investment policy.
I
ncome statement
For the year ended
2023 2022
Revenue Capital Total Revenue Capital Total
return return return return
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Investment income (note 2) 1,264 - 1,264 1,156 - 1,156
Holding (losses)/gains on
investments at fair value - (2,196) (2,196) - 579 579
through profit or loss
Losses on disposal of
investments at fair value - (175) (175) - (294) (294)
through profit or loss*
Foreign exchange 36 (119) (83) (40) 277 237
(losses)/gains
Expenses (453) (255) (708) (424) (250) (674)
________ ________ ________ ________ ________ ________
(Loss)/profit before 847 (2,745) (1,898) 692 312 1,004
finance costs and tax
Finance costs (50) (36) (86) (34) (10) (44)
________ ________ ________ ________ ________ ________
(Loss)/profit before tax 797 (2,781) (1,984) 658 302 960
Tax 17 - 17 16 - 16
________ ________ ________ ________ ________ ________
(Loss)/profit for the year 814 (2,781) (1,967) 674 302 976
________ ________ ________ ________ ________ ________
Earnings per share
Basic and diluted - 1.86p (11.12)p (9.26)p 1.30p 1.21p 2.51p
ordinary shares**
________ ________ ________ ________ ________ ________
The company does not have any income or expense that is not included in the (loss)/profit for the year. Accordingly, the ‘(Loss)/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
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 £45,000 (2022 – £9,000 gains) and Losses on provision for liabilities and charges of £220,000 (2022 – £303,000 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 2.33p (2022 – 1.93p) (revenue return).
Statement of changes in equity
For the year ended
Share Capital Retained Total
capital reserve earnings
£ 000 £ 000 £ 000 £ 000
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
Changes in equity for 2023
(Loss)/profit for the period - (2,781) 814 (1,967)
Ordinary dividend paid (note 4) - - (437) (437)
Preference dividend paid (note 4) - - (175) (175)
________ ________ ________ ________
Balance at 31 December 2023 35,000 (30,709) 221 4,512
________ ________ ________ ________
Registered number: 00433137
Balance Sheet
At
2023 2022
£ 000 £ 000
Non-current assets
Investments - at fair value through profit or loss 4,895 5,600
Investment in subsidiaries - at fair value through profit 6,665 7,712
or loss
__________ __________
11,560 13,312
Current assets
Receivables 362 442
Cash and cash equivalents 39 45
__________ __________
401 487
__________ __________
Total assets 11,961 13,799
__________ __________
Current liabilities
Trade and other payables 2,008 1,794
Bank credit facility 1,235 1,018
__________ __________
(3,243) (2,812)
__________ __________
Total assets less current liabilities 8,718 10,987
__________ __________
Non - current liabilities (4,206) (3,896)
__________ __________
Net assets 4,512 7,091
__________ __________
Equity attributable to equity holders
Ordinary share capital 25,000 25,000
Convertible preference share capital 10,000 10,000
Capital reserve (30,709) (27,928)
Retained revenue earnings 221 19
__________ __________
Total equity 4,512 7,091
__________ __________
Approved:
Cash flow statement
For the year ended
Year ended 2023 Year ended 2022
£ 000 £ 000
Cash flows from operating activities
(Loss)/profit before tax (1,984) 960
Adjustments for:
Losses/(gains) on investments 2,371 (285)
Proceeds on disposal of investments at fair 136 548
value through profit and loss
Purchases of investments at fair value through (536) (441)
profit and loss
Finance costs 73 44
__________ __________
Operating cash flows before movements in 60 826
working capital
Decrease in receivables 97 109
Decrease in payables (127) (1,351)
__________ __________
Net cash from operating activities before 30 (416)
interest
Interest paid (73) (21)
__________ __________
Net cash from operating activities (43) (437)
Cash flows from financing activities
Dividends paid on ordinary shares (180) -
Dividends paid on preference shares - -
__________ __________
Net cash used in financing activities (180) -
__________ __________
Net decrease in cash and cash equivalents (223) (437)
Cash and cash equivalents at beginning of year
(973) (536)
__________ __________
Cash and cash equivalents at end of year
(1,196) (973)
__________ __________
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
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
The auditors have reported on the
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
2023 2022
£ 000 £ 000
Income from investments
UK dividends 94 89
Dividend from subsidiary 867 1,001
_________ _________
961 1,090
Other income 303 66
_________ __________
Total income 1,264 1,156
_________ __________
Total income comprises:
Dividends 961 1,090
Other interest 64 66
Other income - settlement of US class action suit 239 -
_________ _________
1,264 1,156
_________ __________
Dividends from investments
Listed investments 94 89
Unlisted investments 867 1,001
_________ _________
961 1,090
_________ __________
During the year the company received a dividend of £867,000 (2022 - £1,001,000) 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.
During the year the company recognised £154,000 of a foreign exchange loss (2022 – £317,000 gain) on the loan of
Under IFRS 10 the income analysis is for the parent company only rather than that of the consolidated group. Thus, film revenues of £74,000 (2022 – £107,000) received by the subsidiary
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:
2023 2022
Revenue Capital Total Revenue Capital Total
return return return return
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Earnings:
Basic and diluted 464 (2,781) (2,317) 324 302 626
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 (2022: 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 (2022: 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 2.33p (2022 – 1.93p) (revenue return).
4 Dividends
2023 2022
£ 000 £ 000
Amounts recognised as distributions to equity holders in
the period
Dividends on ordinary shares:
Final dividend for the year ended 31 December 2022 of 0.0p
- -
(2021: 0.0p) per share
Interim dividend for the year ended 31 December 2023 of
1.75p 437 437
(2022: 1.75p) per share
__________ __________
437 437
__________ __________
Proposed final dividend for the year ended 31 December
2023 of 0.0p (2022: 0.0p) per share - -
__________ __________
Dividends on 3.5% cumulative convertible preference
shares:
Preference dividend for the 6 months ended 31 December
2022 of 0.00p (2021: 0.00p) per share - -
Preference dividend for the 6 months ended 30 June 2023 of
1.75p (2022: 0.00p) per share 175 -
Preference dividend for the 6 months ended 31 December
2023 of 0.00p (2022: 1.75p) per share - 175
__________ __________
175 175
__________ __________
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
2023 2022
£ 000 £ 000
Dividends on ordinary shares:
Interim dividend for the year ended 31 December 2023 of
1.75p
437 437
(2022: 1.75p) per share
Proposed final dividend for the year ended 31 December
2023 of 0.0p (2022: 0.0p) per share - -
__________ __________
437 437
__________ __________
Dividends on 3.5% cumulative convertible preference
shares:
Preference dividend for the 6 months ended 30 June 2023 of
1.75p (2022: 0.00p) per share 175 -
Preference dividend for the 6 months ended 31 December
2023 of 0.00p (2022: 1.75p) per share - 175
__________ __________
175 175
__________ __________
The non-payment in
An interim dividend declared for the year ended
5 Net asset values
Net asset
value per share
2023 2022
Ordinary shares £ £
Diluted 0.13 0.20
Undiluted 0.13 0.20
Net assets attributable
2023 2022
£ 000 £ 000
Total net assets 4,512 7,091
Less convertible preference shares at fully (1,289) (2,026)
diluted value
__________ __________
Net assets attributable to ordinary 3,223 5,065
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 2023 Annual Report and Accounts, but remain unchanged from those published in the 2022 Annual Report and Accounts.
Related party transactions
The company rents its offices from
The salaries and pensions of the company’s employees, except for the non-executive directors and one employee are paid by
During the year the company entered into investment transactions with
At
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 (2022 – £35,000,000) being 25,000,000 ordinary shares of £1 (2022 – 25,000,000) and 10,000,000 non-voting convertible preference shares of £1 each (2022 – 10,000,000). The rights attaching to the shares will be explained in more detail in the notes to the 2023 Annual Report and Accounts, but remain unchanged from those published in the 2022 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 Wednesday
