Half-yearly Report
Majedie Investments PLC
Half-Yearly Financial Report
31 March 2008
Majedie Investments PLC is a self-managed investment trust with total portfolio
assets under management of over £240 million.
Our Objective is to maximise total shareholder return over the long term whilst
increasing dividends by more than the rate of inflation.
Our Benchmark is 70% FTSE All-Share Index and 30% FTSE World ex UK Index
(Sterling) on a total return basis.
Financial Highlights
for the half year ended 31 March 2008
net assets per share decreased by 14.4% to 419.8p*
Share price decreased by 18.9% to 335.0p
Discount to net assets widened from 15.8% to 20.2%*
Earnings per share increased by 30.2% to 8.2p*
Interim dividend increased by 10.5% to 4.2p
Performance
Net asset value total return of -12.3%*
Total shareholder return of -16.5%
Benchmark total return of -9.6%
* Comparative figures have been restated following the change in accounting
treatment of the investment in Majedie Asset Management Limited ("MAM") as
disclosed in note 8.
Investment Objective and Policy Statement
Investment Objective
The Company's objective is to maximise total shareholder return over the long
term whilst increasing dividends by more than the rate of inflation.
Investment Policy
The Company invests principally in securities of publicly quoted companies
worldwide, though it may invest in unquoted securities up to levels set
periodically by the Board.
The overall approach is based on analysis of global economies and sector trends
with a focus on companies and sectors judged likely to deliver strong growth
over the long term. The number of investments held, together with the
geographic and sector diversity of the portfolio, enable the Company to spread
its risks with regard to liquidity, market volatility, currency movements and
revenue streams.
The Company's benchmark comprises 70% FTSE All-Share Index and 30% FTSE World
ex-UK Index (Sterling) on a total return basis. It is used to assess the
performance and risk of the Company and investment portfolio. Whilst
performance is measured against the benchmark, investment decisions and
portfolio construction are made on an independent basis. The Board however sets
various specific portfolio limits for stocks and sectors in order to restrict
risk levels.
Although exceptionally derivative instruments may be employed, usually for
hedging purposes and with specific prior approval of the Board, generally the
Company is a long only investor and would be unlikely to use such instruments.
The Company will not invest in any holding that would, at the time of
investment, represent more than 15% of the value of its gross assets.
The Company uses gearing to enhance the long term returns to shareholders. The
Articles of Association give the Board the ability to borrow up to 100% of
adjusted capital and reserves. The Company's current debenture borrowings are
limited by covenant to 66 2/3%, and any additional indebtedness is not to
exceed 20%, of adjusted capital and reserves.
Chairman's Statement
Throughout much of the six months to 31 March 2008 the broad structure of the
Group's portfolio delivered a performance close to the benchmark. However
during March market factors resulted in a negative impact on the portfolio,
partially offset by an increase in the valuation of our investment in Majedie
Asset Management resulting in the net asset value lagging the benchmark by 2.7%
for the six month period. The portfolio has continued to show outperformance
over the last three years with net asset value total return of 51.0% exceeding
the benchmark return of 31.5% by 19.5%.
Results
The Group's net profit before tax for the six months was £4.2m compared with £
3.2m for the restated prior year period. Group income for the six months was
enhanced by the fourth and final special dividend from Majedie Asset Management
Limited (MAM) of £2.6m compared with £1.7m for the same period last year but
does not include any share of net return of associate income due to the change
in accounting for MAM. Total group costs were £1.5m which include some costs in
relation to the restructuring, as described later, as well as increased staff
costs principally comprising higher bonuses resulting from higher special
dividend income. They are otherwise similar to the same period last year of £
1.3m. The significant increase in special dividends resulted in increased
earnings per share of 30.2% to 8.2p from a restated 6.3p for the same period
last year.
As I mentioned in last year's statement the Board is re-balancing the interim
dividend as a proportion of the total dividend for the year so that it will
represent approximately 40% of the total distribution. This year therefore the
interim dividend is being increased to 4.2 pence per share compared to 3.8
pence last year - an increase of 10.5%. The interim dividend will be paid on 30
June 2008 to shareholders on the register on 6 June 2008.
The increase in the final dividend is likely to be significantly less in
percentage terms so that again the likely overall increase in the total
dividend for the year will still be at a similar level to that experienced in
recent years - being slightly ahead of the rate of inflation. At the same time
the Board will also consider whether a second special dividend should be paid,
taking into account the fourth and final instalment of special dividends from
MAM. Thereafter the Majedie distributions will revert to the more normal level
of the past.
We have reviewed our approach to accounting for our investment in MAM in the
consolidated accounts as set out more fully in note 8. Therefore we will no
longer use the equity accounting method in the consolidated accounts but rather
will include MAM at its fair value, bringing it into line with the carrying
value of MAM in the Company's own balance sheet.
In summary the change increases group net assets per share by 18.3p and 26.3p
at 31 March and 30 September 2007 respectively and the group's total return per
share by 7.0p for the year to 30 September 2007. Furthermore the net asset
value as reported weekly will also now include MAM at its fair value. The
comparative figures have been restated.
The MAM business has continued to perform strongly with profitability and
balance sheet net assets growing significantly during the year to date. As such
our 30% investment has been valued by the Board at £22.5m as at 31 March 2008.
The next fair value review will be completed for the September 2008 annual
report.
Portfolio
Against one of the worst financial crises in recent years we have remained
fully invested over the period because we believe that the US and others will
take whatever steps are necessary to resolve the credit crisis and the stock
market will improve over the longer term. The Federal Reserve and the other
Central Banks have been tackling the problems robustly and with positive
effects by easing monetary policy and all other means at their disposal.
Although the longer term performance is positive the performance for this
reporting period is disappointing. There has been heavy selling in the market
of a large number of our smaller company shareholdings as retail shareholders
sought to crystallise gains before the changes in capital gains tax. In
addition hedge funds sold down holdings to meet their margin calls which were
dramatically raised from 20% to 80% and above following the near collapse of
Bear Stearns. The resulting movements in the share prices of some of our larger
positions have not reflected the investment fundamentals which have
significantly improved for them, for example Accsys Technologies which was
awarded major new contracts in the Middle East and China.
In the short term maintaining full investment in a falling market has meant
that our gearing has adversely impacted the short term performance by around
2%.
However, historically, difficult times have provided excellent long term
investment opportunities and we believe the current situation will prove to be
no different.
Restructuring
As announced on 31 March 2008 and following a comprehensive strategic review of
the Company's structure and organisation it was decided that the Board should
be composed of wholly non-executive directors and that the role of Chief
Executive should cease to exist.
Accordingly Mr Robert Clarke resigned from the Board and as Chief Executive by
mutual consent with effect from 31 March and will leave Majedie's employment on
30 June 2008, having assisted with the transition process. Mrs Gill Leates,
Investment Director, agreed to resign as a director but continues to have full
responsibility for the management of the Company's portfolio. In addition she
has taken Robert Clarke's place as a non-executive director of Majedie Asset
Management Limited, our successful associate in which we retain a 30%
shareholding.
The resulting non-executive Board has been strengthened by the appointment of
Mr Andrew Adcock as a director from 1 April 2008. Mr Adcock has been Vice
Chairman, Citigroup Corporate Broking since 2002. Previously he was a Partner
for three years at Lazards LLC which followed ten years at BZW as the Managing
Director of De Zoete & Bevan Limited. He is also a non-executive director of F&
C Global Smaller Companies PLC.
Following these changes the Board now comprises:
Mr HS Barlow (Chairman)
Mr HV Reid (Deputy Chairman and Senior Independent Director)
Mr A Adcock
Mr GP Aherne
Mr JWM Barlow
The Group remains committed to seeking new business development opportunities
which can contribute to our strategic objective of generating superior returns
for shareholders.
I would like to acknowledge the significant contribution which Robert Clarke
has made to the development of the Company over the last twelve years and to
record our thanks and best wishes for his future career.
I am also grateful to Gill Leates for agreeing to step down as a director after
nearly nine years to facilitate the change in Board composition.
It is a pleasure to welcome Andrew Adcock to the Board of Majedie Investments
PLC and we look forward to working with him and having the benefit of his
considerable financial expertise.
Reporting
This year's Half-Yearly Financial Report has been completed under the new
Listing Rules requirements. These include the requirement for a responsibility
statement and additional disclosures. As mentioned in last year's annual report
we are also required to publish our investment policy statement in this
Half-Yearly Financial Report and in our annual reports. Finally following
recent industry guidance, as from 31 May 2008 our weekly net asset value will
be calculated and published including current period net income.
VAT
You may be aware that following a decision by the European Courts of Justice,
HM Revenue & Customs has announced that investment management fees to
investment trusts should be exempt from UK VAT resulting in recoveries of VAT
paid in prior periods. As a self-managed investment trust the Company is not
charged an investment management fee and as such is unaffected by the ruling.
Outlook
The banking credit crisis has been one of the most serious threats to global
financial stability for many years. However, whilst there is likely to be some
further provisioning over the next few months, it is reasonable to assume that
the necessary steps have been and will continue to be taken to restore
financial health to the credit markets over the medium term. Indeed governments
and central bankers around the world have stated that they are discussing
further measures to remove the worst of some of the mortgage securities from
the market. The major US banks have all raised huge amounts of capital to shore
up their balance sheets and many are now reasonably secure.
As a result of the banking crisis there have been real fears of this leading to
a major recession. Indeed a minor recession may still happen. However, the
monetary and fiscal easing around the world by central bankers, particularly in
the US, shows that they are endeavouring to avert a major recession. Against
the uncertainty of inflation in energy and food the Federal Reserve has been
very aggressive in cutting rates to date and has pledged to cut them further as
necessary.
Obviously a fall in the housing market, in the US and the UK, has the effect of
dampening consumer confidence. However, this current situation differs from
previous falls in the housing markets because so far it has not been
accompanied by rapidly rising unemployment. Although it cannot be ruled out as
a potential risk to growth, it would require further government action to
stimulate the economy.
The growth outlook in the main emerging markets of China and India remains
strong. The internal infrastructure projects and general industrial growth for
both countries continues to provide a robust fundamental base for the high
level of many commodity prices. For these reasons the portfolio remains
overweight in the resources sector. The key difference of the economic
soundness of China and India's economies at this time, rather than the emerging
markets of the 1990's, (when for instance Brazil was growing rapidly), is that
their growth is funded by huge cash reserves and not by borrowing.
The stockmarket has clearly been through a difficult period but many stocks and
sectors have been reduced to prices that fully discount an economic downturn of
greater proportions than currently looks probable. Many stocks in the portfolio
appear oversold and represent good value over the long term. We continue to
identify sectors and invest in companies with good management and strong long
term prospects. These include oils, gas and mining, renewables, software,
utilities, oil and mining service companies.
Geographically the portfolio remains overweight in the UK, due to its lower
rating and higher yield, and because we can achieve a high degree of geographic
diversification through the operations of these companies. In addition, the
pound is our reporting currency and we remain cautious on the dollar, as we
have been for several years, so we are underweight in the US. Japan remains
unattractive. The fund has a growing exposure to the petrodollar economies and
emerging markets either directly or through companies with operations in those
areas.
In conclusion, in the short term we expect stockmarkets to remain volatile but
we do not envisage a prolonged global recession, although it cannot be ruled
out. Over time we would expect the measures being taken by governments and
central bankers to alleviate the credit crunch and allow markets and the global
economy to improve.
Henry S Barlow
Chairman
20 May 2008
Portfolio Information
at 31 March 2008
Fund Analysis
Market Value % of
£000 Fund
Oil & Gas 22,813 9.2
Basic Materials 45,400 18.4
Industrials 24,945 10.1
Consumer Goods 6,524 2.6
Health Care 6,294 2.6
Consumer Services 11,713 4.8
Telecommunications 9,324 3.8
Utilities 14,927 6.1
Financials 54,826 22.3
Technology 15,319 6.2
Unlisted (note 7) 31,128 12.6
Total Investments at Fair Value 243,213 98.7
Cash 3,257 1.3
246,470 100.0
United Kingdom 187,692 76.2
Canada 7,295 2.9
Australia 11,397 4.6
United States 17,026 6.9
Continental Europe 4,191 1.7
Japan 928 0.4
South Africa 5,841 2.4
Asia 8,843 3.6
Total Investments at Fair Value 243,213 98.7
Cash 3,257 1.3
246,470 100.0
The portfolio information comprises the investments at fair value of £
243,213,000 (including MAM at £22,500,000) and cash (as adjusted for amounts
due to/from brokers for settlement) of £3,257,000.
Twenty Largest UK Investments
at 31 March 2008
Market % of Market % of
Value Value
Company £000 Fund Company £000 Fund
Majedie Asset 22,500 9.1 Royal Bank of 3,337 1.4
Management Scotland
First Quantum 8,217 3.3 Royal Dutch Shell 3,108 1.3
Minerals
HSBC Holdings 7,304 3.0 BT 3,107 1.3
United Utilities 6,575 2.7 BAE Systems 2,842 1.2
Barclays 5,749 2.3 London Capital 2,778 1.1
Accsys Technologies 5,690 2.3 BP 2,673 1.1
Lloyds TSB 4,587 1.9 Standard Chartered 2,394 1.0
Vodafone 4,167 1.7 GlaxoSmithKline 2,233 0.9
Hydrodec 4,095 1.7 Prudential 2,229 0.9
Majedie Asset Corac 2,174 0.9
Management
UK Opportunities 3,600 1.5
Ten Largest Overseas Investments
at 31 March 2008
Market % of Market % of
Value Value
Company £000 Fund Company £000 Fund
Phorm (USA) 8,714 3.5 KSK Power Venture
International Ferro (Asia) 2,393 1.0
Metals
(South Africa) 5,841 2.4 Petaquilla Copper
Mintails (Canada) 2,047 0.8
(Australia) 2,511 1.0 Eserv Global 2,024 0.8
(Australia)
Capital Lease AVIA Oilexco (Canada) 1,953 0.8
(Asia) 2,438 1.0 Rock Well Petroleum
HipCricket (USA) 2,404 1.0 (USA) 1,509 0.6
Responsibility Statement of the Directors in respect of the Half-Yearly
Financial Report
In accordance with the Disclosure and Transparency Rules 4.2.7R and 4.2.8R, we
confirm that to the best of our knowledge:
(a) The condensed set of financial statements has been prepared in accordance
with International Accounting Standard 34, Interim Financial Reporting, as
adopted by the European Union, as required by the Disclosure and Transparency
Rule 4.2.4R;
(b) The Chairman's Statement includes a fair review of the information required
to be disclosed under the Disclosure and Transparency Rule 4.2.7R, interim
management report. This includes (i) 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 presented in the
half-yearly financial report and (ii) a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
(c) There were no changes in the transactions or arrangements with related
parties as described in the Group's annual report for the year ended 30
September 2007 that would have had a material effect on the financial position
or performance of the Group in the first six months of the current financial
year.
Henry S Barlow Chairman
For and on behalf of the Board
20 May 2008
Independent Review Report to Majedie Investments PLC
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the Half-Yearly Financial Report for the six months ended 31
March 2008 which comprises the Condensed Consolidated Income Statement,
Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated
Balance Sheet, Condensed Consolidated Cash Flow Statement and the related notes
1 to 13. We have read the other information contained in the Half-Yearly
Financial Report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with guidance contained
in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our work, for this
report, or for the conclusions we have formed.
Directors' Responsibilities
The Half-Yearly Financial Report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
Half-Yearly Financial Report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this Half-Yearly Financial
Report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the Half-Yearly Financial Report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the Half-Yearly
Financial Report for the six months ended 31 March 2008 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Ernst & Young LLP
London
20 May 2008
Notes: A review does not provide assurance on the maintenance and integrity of
the website, including controls used to achieve this, and in particular on
whether any changes may have occurred to the financial information since first
published. These matters are the responsibility of the directors but no control
procedures can provide absolute assurance in this area.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information differs from legislation in other jurisdictions.
Condensed Consolidated Income Statement
for the half year ended 31 March 2008
Half year ended Half year ended Half year ended
31 March 2008 31 March 2007 30 September 2007
as restated* as restated*
Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Investments
(Losses)/gains (33,711) (33,711) 31,838 31,838 46,748 46,748
on investments
at fair value
through profit
or loss
Net investment (33,711) (33,711) 31,838 31,838 46,748 46,748
result
Income
Dividends and 2,623 2,623 2,433 2,433 5,155 5,155
interest
Special 2,599 2,599 1,698 1,698 3,808 3,808
dividend
income
Other income 43 43 74 74 120 120
Total income 5,265 5,265 4,205 4,205 9,083 9,083
Expenses
Administration (673) (833) (1,506) (600) (746) (1,346) (1,288) (1,568) (2,856)
expenses
Return/ 4,592 (34,544) (29,952) 3,605 31,092 34,697 7,795 45,180 52,975
(deficit)
before finance
costs and
taxation
Finance costs (350) (1,049) (1,399) (350) (1,049) (1,399) (700) (2,098) (2,798)
Net return/ 4,242 (35,593) (31,351) 3,255 30,043 33,298 7,095 43,082 50,177
(deficit)
before
taxation
Taxation 2 (8) (8) (6) (6) (51) (51)
Net return/ 4,234 (35,593) (31,359) 3,249 30,043 33,292 7,044 43,082 50,126
(deficit)
after taxation
for the period
Return/ pence pence pence pence pence pence pence pence pence
(deficit) per
ordinary
share:
Basic and 3 8.2 (69.2) (61.0) 6.3 57.9 64.2 13.6 83.2 96.8
diluted
The total column of this statement is the Consolidated Income Statement of the
Group, prepared in accordance with IFRS. The supplementary revenue return and
capital return columns are prepared under guidance published by the Association
of Investment Companies. All items in the above statement relate to continuing
operations.
These accounts have been prepared in compliance with the recognition and
measurement criteria of IFRS.
* Comparative figures have been restated following the change in accounting
treatment of the investment in Majedie Asset Management Limited ("MAM") as
disclosed in note 8.
Condensed Consolidated Statement of Changes in Equity
for the half year ended 31 March 2008
Notes Share Share Capital Share Capital Capital Retained Own Total
capital premium redemption options reserve reserve earnings shares
reserve reserve - - reserve
realised unrealised
£000 £000 £000 £000 £000 £000 £000 £000 £000
Half year
ended 31
March 2008
30 5,253 785 56 262 133,083 86,534 30,296 (3,053) 253,216
September
2007 as
restated
Net return 4,211 (39,804) 4,234 (31,359)
/(deficit)
after tax
for the
period
Share 4 112 112
options
expense
Dividends 6 (5,506) (5,506)
declared
and paid
in period
Own shares
purchased
by
Employee (914) (914)
Incentive
Trust
31 March 5,253 785 56 374 137,294 46,730 29,024 (3,967) 215,549
2008
Half year
ended 31
March 2007
30 5,253 785 56 85 118,723 47,502 28,723 (1,908) 199,219
September
2006 as
previously
stated
Prior year 10,310 (340) 9,970
adjustment
30 5,253 785 56 85 118,723 57,812 28,383 (1,908) 209,189
September
2006 as
restated
Net return 8,883 21,160 3,249 33,292
after tax
for the
period
Share 4 56 56
options
expense
Dividends 6 (3,165) (3,165)
declared
and paid
in period
Own shares
purchased
by
Employee (548) (548)
Incentive
Trust
31 March 5,253 785 56 141 127,606 78,972 28,467 (2,456) 238,824
2007
Year ended
30
September
2007
30 5,253 785 56 85 118,723 47,502 28,723 (1,908) 199,219
September
2006 as
previously
stated
Prior year 10,310 (340) 9,970
adjustment
30 5,253 785 56 85 118,723 57,812 28,383 (1,908) 209,189
September
2006 as
restated
Net return 14,360 28,722 7,044 50,126
after tax
for the
year
Share 4 177 177
options
expense
Dividends 6 (5,131) (5,131)
declared
and paid
in year
Own shares
purchased
by
Employee (1,145) (1,145)
Incentive
Trust
30 5,253 785 56 262 133,083 86,534 30,296 (3,053) 253,216
September
2007
* Comparative figures have been restated for the change in accounting treatment
of the investment in Majedie Asset Management Limited ("MAM") as disclosed in note 8.
These accounts have been prepared in compliance with the recognition and
measurement criteria of IFRS.
Condensed Consolidated Balance Sheet
at 31 March 2008
Notes 31 March 31 March 30 September
2008 2007 2007
£000 £000 £000
as restated* as restated*
Non-current assets
Property, plant and equipment 60 78 69
Investments at fair value through 7, 8 243,213 264,827 278,338
profit or loss
243,273 264,905 278,407
Current assets
Trade and other receivables 4,244 3,556 3,221
Cash and cash equivalents 3,495 7,918 6,764
7,739 11,474 9,985
Total assets 251,012 276,379 288,392
Current liabilities
Trade and other payables (1,727) (3,834) (1,448)
Total assets less current 249,285 272,545 286,944
liabilities
Non-current liabilities
Debenture stock (33,736) (33,721) (33,728)
Total liabilities (35,463) (37,555) (35,176)
Net assets 215,549 238,824 253,216
Notes 31 March 31 Marc 30 September
2008 2007 2007
£000 £000 £000
as restated* as restated*
Represented by:
Ordinary share capital 5,253 5,253 5,253
Share premium 785 785 785
Capital redemption reserve 56 56 56
Share options reserve 374 141 262
Capital reserve - realised 137,294 127,606 133,083
Capital reserve - unrealised 46,730 78,972 86,534
Retained earnings 29,024 28,467 30,296
Own shares reserve 4 (3,967) (2,456) (3,053)
Total equity 215,549 238,824 253,216
Net asset value per share pence pence pence
Basic and fully diluted 9 419.8 461.5 490.7
* Comparative figures have been restated for the change in accounting treatment
of the investment in Majedie Asset Management Limited ("MAM") as disclosed in
note 8.
These accounts have been prepared in compliance with the recognition and
measurement criteria of IFRS.
Condensed Consolidated Cash Flow Statement
for the half year ended 31 March 2008
Notes Half year Half year Half year
ended ended ended
31 March 31 March 30 September
2008 2007 2007
£000 £000 £000
Net cash inflow from operating 10 2,572 2,109 6,229
activities
Investing activities
Purchases of investments (22,097) (59,372) (108,693)
Sales of investments 24,071 65,743 113,749
Purchases of tangible assets (3) (3) (7)
Net cash inflow from investing 1,971 6,368 5,049
activities
Financing activities
Interest paid (1,392) (1,392) (2,784)
Equity dividends paid (5,506) (3,165) (5,131)
Purchases of own shares (914) (548) (1,145)
Net cash outflow from financing (7,812) (5,105) (9,060)
activities
(Decrease)/increase in cash and 11 (3,269) 3,372 2,218
cash equivalents
for period
Cash and cash equivalents at start 6,764 4,546 4,546
of period
Cash and cash equivalents at end of 3,495 7,918 6,764
period
These accounts have been prepared in compliance with the recognition and
measurement criteria of IFRS.
Notes to the Condensed Consolidated Financial Statements
as at 31 March 2008
1. Accounting Policies
The Condensed Consolidated Financial Statements comprise the unaudited results
of the Company and subsidiaries for the six months to 31 March 2008 and are
presented in pounds sterling, as this is the principal currency in which the
Group's transactions are undertaken.
The Condensed Consolidated Financial Statements have been prepared in
accordance with International Financial Reporting Standard (`IFRS') for interim
financial statements; IAS 34 Interim Financial Reporting. They do not include
all financial information required for full annual financial statements. The
Condensed Consolidated Financial Statements have been prepared using the
accounting policies adopted in the audited financial statements for the year
ended 30 September 2007.
2. Taxation
The charge for the half year to 31 March 2008 is £8,000 (half year to 31 March
2007: £6,000; year ended 30 September 2007: £51,000). These amounts represent
irrecoverable withholding tax paid on overseas investment income.
The Company has an effective tax rate of 0%. The estimated effective tax rate
is 0% as investment gains are exempt from tax owing to the Company's status as
an Investment Trust and there is expected to be an excess of management
expenses over taxable income and thus there is no charge for corporation tax.
3. Calculation of Returns per Ordinary Share
Basic returns per ordinary share in each period are based on the return on
ordinary activities after taxation attributable to equity shareholders. Basic
return per ordinary share for the period is based on 51,461,928 (half year
ended 31 March 2007: 51,857,162; year ended 30 September 2007: 51,791,114)
shares, being the weighted average number of shares in issue after adjustment
for the shares held by the Employee Incentive Trust.
There is no dilution to the basic return per ordinary share since share
options, if exercised, would be satisfied by shares already held by the
Employee Incentive Trust.
4. Share-based payments
The Group operates two share-based payment schemes: the Discretionary Share
Option Scheme 2000 and the 2006 Long Term Incentive Plan which in turn has two
sections relating to TSR-based Awards and Matching Awards. The LTIP replaces
the Discretionary Share Option Scheme 2000 for executive directors and senior
executives.
The number of outstanding options granted by the Company are summarised in the
table below:
31 March 31 March 30
September
2008 2007 2007
Number of outstanding options
Discretionary Share Option Scheme 2000 655,265 655,265 655,265
LTIP: TSR-based Awards 364,906 205,571 207,344
LTIP: Matching Awards 156,336 59,593 122,424
1,176,507 920,429 985,033
During the half year ended 31 March 2008 the number of options outstanding
under the LTIP TSR-based Awards increased by 157,562. This comprised 147,072
options granted on 3 December 2007 and an additional 10,490 options as a result
of the 2007 6.2p final dividend and 4.5p special dividend which is in
accordance with the LTIP rules.
Furthermore during the half year to 31 March 2008 the number of options
outstanding under matching awards increased by 33,912. This reflects an award
of 29,418 options granted on 3 December 2007 along with an incremental 4,494
options in respect of the 2007 6.2p final dividend and 4.5p special dividend.
During the half year to 31 March 2008 the Group recognised a total expense for
share-based payment transactions of £112,000 (half year ended 31 March 2007: £
56,000; year ended 30 September 2007: £177,000).
The total shareholding of Majedie Investments PLC Incentive Trust is 1,178,030
(31 March 2007: 783,908; 30 September 2007: 927,833) ordinary shares. The
shares will be held by the trust until the relevant options are exercised or
until they lapse. The cost of the shares is presented in the Condensed
Consolidated Balance Sheet under the heading `Own shares reserve', as a
deduction from shareholders' funds in accordance with IFRS 2: Share-based
Payment.
5. Segment reporting
Under IAS14 neither the nature or the extent of the activities of the Group is
appropriate for separate disclosure.
6. Dividends
In accordance with International Accounting Standard 10: Events After the
Balance Sheet Date, interim dividends are not accounted for until paid, and
final dividends are recognised when approved in General Meeting. The following
table summarises the amounts recognised as distributions to equity holders in
the period:
Half year Half year Half year
ended ended ended
31 March 31 March 30 September
2008 2007 2007
£000 £000 £000
2007 Final dividend of 6.20p paid on 3,190
23 January 2008
2007 Special dividend of 4.50p paid on 2,316
23 January 2008
2007 Interim dividend of 3.80p paid on 1,966
29 June 2007
2006 Final dividend of 6.10p paid on 3,165 3,165
24 January 2007
5,506 3,165 5,131
The directors propose an interim dividend for 2008 of 4.2p per share, to be
paid on 30 June 2008.
7. Investments
All investments are accounted at fair value through profit or loss as defined
by IAS 39.
All investments are designated upon initial recognition as held at fair value
through profit or loss, and are measured at subsequent reporting dates at fair
value, which is either the bid price or the last traded price, depending on the
convention of the exchange on which the investment is quoted. Investments in
unit trusts or open ended investment companies are valued at the closing price,
the bid price or the single price as appropriate, released by the relevant
investment manager.
Unlisted investments are normally valued on an annual basis by the Board of
directors taking into account relevant information as appropriate including
market prices, latest dealings, accounting information, professional advice and
the guidelines issued by the International Private Equity and Venture Capital
Association.
Unlisted investments disclosed in the Portfolio Information total £31,128,000
which comprise £8,628,000 invested in the placings for 16 separate companies
which are expected to become listed securities after 31 March 2008 and £
22,500,000 for our investments in MAM as detailed in note 8 below.
8. Majedie Asset Management Limited (MAM)
Majedie Investments PLC owns a 30% equity shareholding in MAM, which provides
investment management and advisory services relating to UK equities.
We have reviewed how our investment in MAM is accounted for in the consolidated
financial statements and as such will now treat MAM as an investment to be
valued at fair value with movements taken through profit or loss in accordance
with the way in which we had designated and accounted for it in the parent
company's accounts at the time it became an associate. Previously we had
applied the equity accounting method which did not take account of such
designation. As an investment company this change results in a more complete
view of our investment in MAM to the group and aligns MAM with our other
unlisted investments. It also brings conformity to the accounting treatment of
the MAM investment between the Company and the Group.
Special dividends continue to be recognised in income and there are no changes
in respect of the Company financial statements.
The carrying value of our investment in MAM is now included in the consolidated
balance sheet as part of investments at fair value through profit and loss:
31 March 31 March 30
September
2008 2007 2007
£000 £000 £000
Deemed cost of investment 1,207 1,207 1,207
Unrealised gains 21,293 10,310 14,978
Fair value at period end 22,500 11,517 16,185
The carrying value of MAM in the 31 March 2008 Condensed Consolidated Financial
Statements is its fair value as assessed at 31 March 2008. The Board will next
review the fair value of MAM for the September 2008 Annual Report. In the
meantime the weekly net asset value, released to the London Stock Exchange,
will include MAM at fair value.
The effect of the change in accounting for MAM on the Consolidated Balance
Sheet is calculated as follows:
31 March 31 March 30 30
September September
2008 2007 2007 2006
£000 £000 £000 £000
Net assets as previously stated 196,356 229,318 239,636 199,219
Decrease in investment in (3,307) (2,011) (2,605) (1,547)
associate
Increase in investments at fair 22,500 11,517 16,185 11,517
value
Net assets as restated 215,549 238,824 253,216 209,189
The effect of the change in accounting for MAM on the Consolidated Income
Statement is calculated as follows:
31 March 31 March 30 30
September September
2008 2007 2007 2006
£000 £000 £000 £000
Net return as previously stated (36,972) 33,756 46,516 27,182
Decrease in revenue for share of (702) (464) (1,058) (340)
net return
on associate
Increase in capital return for 6,315 4,668 9,970
investments at
fair value
Net return as restated (31,359) 33,292 50,126 36,812
9. Net Asset Value
The net asset value per share has been calculated based on total equity and on
51,349,970 (31 March 2007: 51,744,092; 30 September 2007: 51,600,167) ordinary
shares, being the shares in issue at the period end having deducted the number
of shares held by the Employee Incentive Trust.
10. Reconciliation of Operating Profit to Operating Cash Flow
Half year Half year Year ended
ended ended 30 September
31 March 31 March 2007
2008 2007
as restated as restated
£000 £000 £000
Consolidated net (deficit)/return (31,351) 33,298 50,177
before taxation
Adjustments for:
Movements on investments 33,711 (31,838) (46,748)
Dividends reinvested (69) (24)
Depreciation 12 14 27
Share based remuneration 112 56 177
2,415 1,530 3,609
Finance costs 1,399 1,399 2,798
Operating cash flows before movements 3,814 2,929 6,407
in
working capital
(Decrease)/increase in trade and other (124) (148) 443
payables
Increase in trade and other (1,110) (688) (589)
receivables
Net cash inflow from operating 2,580 2,093 6,261
activities before tax
Tax recovered 20 20
Tax on unfranked income (8) (4) (52)
Net cash inflow from operating 2,572 2,109 6,229
activities
11. Reconciliation of Net Cash Flow to Movement in Net Debt
Half year Half year Year ended
ended ended 30 September
31 March 31 March 2007
2008 2007
£000 £000 £000
(Decrease)/increase in cash (3,269) 3,372 2,218
Non cash items (8) (7) (14)
Change in net debt (3,277) 3,365 2,204
Net debt beginning of period (26,964) (29,168) (29,168)
Net debt at end of period (30,241) (25,803) (26,964)
12. Related Party Transactions
Majedie Asset Management Limited is considered to be a related party under
IFRS. Significant related party transactions with Majedie Asset Management
Limited are disclosed in the table below.
Half year Half year Year ended
ended ended 30 September
31 March 31 March 2007
2008 2007
£000 £000 £000
Special dividends receivable in the 2,599 1,698 3,808
period
Amounts owed to the group at the end 2,599 1,704 2,110
of the period
13. Financial Information
The financial information contained in this Half-Yearly Financial Report does
not constitute full statutory accounts as defined in Section 240 of the
Companies Act 1985. The financial information for the six months ended 31 March
2008 and 31 March 2007 has not been audited.
The information for the year ended 30 September 2007 has been extracted from
the latest published audited accounts restated as disclosed in note 8. Those
accounts have been filed with 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 (3) of the Companies Act 1985. Those statutory
accounts were prepared in accordance with International Financial Reporting
Standards.
Company Information
Board of Directors
H S Barlow OBE, Chairman
H V Reid, Deputy Chairman
J W M Barlow
G P Aherne
A Adcock
All directors are non executive
Registered Office
1 Minster Court
Mincing Lane
London EC3R 7AA
Telephone 020 7626 1243
Facsimile 020 7929 0904
E-mail majedie@majedie.co.uk
Registered number 109305 England
Secretary
Capita Sinclair Henderson Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Telephone 01392 412122
Facsimile 01392 253282
Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone 0870 707 1159
Auditors
Ernst & Young LLP
1 More London Place
London SE1 2AF
Financial Adviser and Broker
Landsbanki Securities (UK) Limited
Website
www.majedie.co.uk
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