Interim Results
MAJEDIE INVESTMENTS PLC
27 May 2004
INTERIM RESULTS
for the six months ended 31 March 2004
Financial Highlights
ï€ net assets per share increased by 6.6% to 262.8p
ï€ earnings per share decreased by 43.9% to 2.35p
ï€ interim dividend remains unchanged at 3.2p
ï€ new subsidiary grows assets under management to £535m as at 26 May 2004
Performance
ï€ net asset value total return of 8.7%
ï€ share price total return of 17.6%
ï€ benchmark total return of 9.1%
Interim Chairman's Statement
The economic background since the beginning of the financial year has been one
of synchronised global recovery led by the US. In all the major markets
profitability is recovering strongly as corporate restructuring has cut costs
and demand has risen. The dollar has strengthened a little taking pressure off
the European Central Bank (ECB) to cut interest rates. In the UK interest rates
have risen, but are yet to dampen consumer spending and the strong housing
market.
Meantime in Japan economic growth continues to exceed forecasts and China has
now replaced the US as its largest export market. Metal commodities continue to
trade at high levels due to global recovery and Chinese demand. The oil price
has continued to rise, not helped by OPEC cutting quotas earlier this year.
Saudi Arabia is now increasing its output to alleviate this situation.
Against this background the NAV total return over the six months to 31 March
was 8.7%, just below the benchmark figure of 9.1%. The share price total return
over the period was 17.6% helped by a reduction in the discount.
Interim Dividend
The Board intends to pay an interim dividend of 3.2p per share - the same as
last year. It will be paid on 2 July 2004 to shareholders on the register at
the close of business on 11 June 2004.
Portfolio
The portfolio strategy over the interim period has been multi-faceted. In order
to participate in the recovery, the portfolio has a selective exposure across
sectors which are benefiting from earnings upgrades e.g. diversified
industrials, media, property and construction companies. Elsewhere it is
invested in companies whose growth in value lies outside the general economic
revival. For instance Cairn Energy, which recently made a huge oil find in
India and Roche, which has a strong drug pipeline. Other examples are companies
returning value to shareholders either through special dividends like Mitchells
& Butlers or through share buybacks like Stagecoach. In Europe growth and
protection has been sought by having a strong position in the banking sector.
This is currently undergoing major restructuring, which underpins the rise in
profits. A large position in mining companies covering copper, aluminium, coal,
nickel and iron ore gives exposure to both the global recovery and the long
term structural growth of China which, with its fast growing economy, has a
huge demand for minerals and oil. The portfolio has also benefited from
consolidation in a number of industries with Amersham, Alvis and AT&T Wireless
all being bid for.
The allocations to the US, Europe and Japan have been increased to an
overweight stance, whereas holdings in the UK have been reduced somewhat -
albeit still representing the largest segment of the portfolio at 67.3% of
invested assets. Japan was the best performing market in the second quarter
rising 17.8%, whilst in the first quarter Europe was the best performer rising
12.4%.
Majedie Asset Management Limited
We are very pleased that after its first full year of managing client monies
our new specialist fund management business has grown its assets under
management to £535m, increasing from £150.7m as at 30 September 2003. MAM will
soon be trading profitably and we are confident that the business will continue
to grow strongly.
Outlook
The US economy remains the key focus. Job creation is now emerging strongly and
consumer spending continues to be robust. US interest rates look certain to
start to rise this summer. This is likely to be a gradual process due to the
Federal Reserve Board's concern over jeopardising the recovery, and circa 5%
economic growth. In contrast the relatively slower growth in Europe of under 2%
means that the ECB must still consider reducing rates. In the UK the economy
continues to grow at around the historic trend of 2.5%. Interest rates are
likely to rise further in response to strong consumer spending, increasing
labour rates and the continuing rise in house prices. However the MPC remains
aware that the economy cannot be pressed too hard in this regard without
suffering. Despite the recent stock market volatility the general outlook
remains one of synchronised global recovery in 2004 with the portfolio invested
in companies which will benefit from the current growth environment.
Henry S Barlow Chairman
27 May 2004
For further information please contact Robert Clarke, Managing Director on 020
7645 8711;
E-mail: rec@majedie.co.uk
UNAUDITED CONSOLIDATED STATEMENT OF TOTAL RETURN
for the half year ended 31 March 2004
Notes Half year ended 31 March Restated* Restated*
2004
Half year ended 31 March Year ended 30 September
2003 2003
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000 £000 £000 £000
Total capital 10,616 10,616 (9,354) (9,354) 8,631 8,631
gain/(loss) on
investments
Dividends and 2,451 2,451 3,476 3,476 6,671 6,671
interest
Other income 338 338 19 19 71 71
Gross revenue 2,789 10,616 13,405 3,495 (9,354) (5,859) 6,742 8,631 15,373
and capital
gain/(loss)
Administrative (1,287) (528) (1,815) (1,022) (657) (1,679) (2,346) (1,226) (3,572)
expenses
Return on 1,502 10,088 11,590 2,473 (10,011) (7,538) 4,396 7,405 11,801
ordinary
activities
before finance
costs and
taxation
Finance costs (406) (1,219) (1,625) (406) (1,219) (1,625) (813) (2,437) (3,250)
Return on 1,096 8,869 9,965 2,067 (11,230) (9,163) 3,583 4,968 8,551
ordinary
activities
before
taxation
Taxation on (41) (41) (45) (45) (77) (77)
ordinary
activities
Return on 1,055 8,869 9,924 2,022 (11,230) (9,208) 3,506 4,968 8,474
ordinary
activities
after taxation
Minority 1 174 174 166 166 421 421
interest
Return 1,229 8,869 10,098 2,188 (11,230) (9,042) 3,927 4,968 8,895
attributable
to equity
shareholders
Dividends
Interim 2 (1,670) (1,670) (1,671) (1,671) (1,671) (1,671)
ordinary of
3.2p (2003:
3.2p)
Final ordinary (2,742) (2,742)
of 5.25p
Transfer (441) 8,869 8,428 517 (11,230) (10,713) (486) 4,968 4,482
(from)/to
reserves
Basic return 3 2.35p 16.98p 19.33p 4.19p (21.50)p (17.31)p 7.52p 9.51p 17.03p
per ordinary
share
The revenue column of this statement is the consolidated profit and loss
account of the Group.
The results for the first six months should not be taken as a guide to the
results for the full year.
All revenue and capital items in the above statement derive from continuing
operations.
These accounts have been prepared using accounting standards and policies
adopted at the year end with the exception of treatment of own shares held -
see note 2.
* Restated for the change in accounting treatment for own shares held - see
note 2.
UNAUDITED SUMMARISED CONSOLIDATED BALANCE SHEET
at 31 March 2004
Notes 31 March 2004 Restated* Restated*
31 March 2003 30 September
2003
£000 £000 £000
Intangible assets 4 458 458 458
Tangible fixed assets 419 446 450
Fixed asset 5 165,538 131,264 152,185
investments
Cash at bank and on 11,927 18,708 17,372
deposit
Dividends (1,670) (1,671) (2,742)
Other assets and (523) 3,851 278
liabilities
Debenture stock (39,389) (39,376) (39,382)
Total net assets 136,760 113,680 128,619
Called up share 5,253 5,253 5,253
capital
Share premium account 785 785 785
Capital redemption 56 56 56
reserve
Capital reserve - 81,033 79,487 76,587
realised
Capital reserve - 25,881 2,360 21,458
unrealised
Revenue reserve 25,136 26,580 25,577
`Own shares held' (1,019) (906) (906)
reserve
Equity shareholders' 137,125 113,615 128,810
funds
Minority interest 1 (365) 65 (191)
136,760 113,680 128,619
Net asset value per 6 262.8p 217.5p 246.6p
share
Middle market price 227.5p 166.0p 198.0p
per share
* Restated for the change in accounting treatment for own shares held - see
note 2.UNAUDITED SUMMARISED CONSOLIDATED
CASH FLOW STATEMENT
For the half year ended 31 March 2004
31 March 31 March Year ended
2004 2003 30 September
2003
£000 £000 £000
Net cash inflow from operating 617 900 3,230
activities
Servicing of finance
Interest paid (1,619) (1,619) (3,237)
Net cash outflow from servicing (1,619) (1,619) (3,237)
of finance
Taxation
Tax recovered 2 5 17
Capital expenditure and
financial investment
Purchases of investments (82,750) (25,978) (58,073)
Sales of investments 81,198 31,443 63,220
Purchases of tangible assets (38) (138) (218)
Sales of tangible assets 9
Net cash (outflow)/inflow from (1,590) 5,327 4,938
capital
expenditure and financial
investment
Equity dividends paid (2,742) (2,585) (4,256)
Cash (outflow)/inflow before (5,332) 2,028 692
financing
Financing
Purchases of own shares (113)
Minority interest purchase of 150 150
shares in subsidiary
Net cash (outflow)/inflow from (113) 150 150
financing
(Decrease)/increase in cash in (5,445) 2,178 842
the period
NOTES
1 Majedie Asset Management Limited (MAM)
The new fund management business of Majedie Asset Management Limited (MAM) was
launched on 13 January 2003. Majedie Investments PLC owned 70% of the equity of
MAM up until 31 March 2004, on which date the percentage reduced to 65% as a
result of the business reaching a pre-agreed target. The results of MAM for the
six months to 31 March 2004 amount to a loss of £580,000 (six months to 31
March 2003: loss of £554,000). Administrative expenses on the Consolidated
Statement of Total Return of £1,815,000 (six months to 31 March 2003: £
1,679,000) include £908,000 (2003: £563,000) relating to MAM. The minority
interest figure disclosed on the Statement of Total Return represents 30% of
MAM's loss from ordinary activities after taxation. The minority interest
figure disclosed on the Consolidated Balance Sheet represents 30% of MAM's
equity share capital and reserves.
2 Discretionary share option scheme
Options in issue and shares held
Following the granting of further share options to directors and employees on
18 March 2004 under the discretionary share option scheme, the total number of
options granted by the Company is now 630,647 and the total shareholding of the
Majedie Investments PLC Incentive Trust is 351,409 ordinary shares. The shares
will be held by the trust until the relevant options are exercised or until
they lapse, and are accounted for in accordance with the recently issued UITF
Abstract 38 `Accounting for ESOP Trusts'. This requires that the consideration
paid for own shares held be presented as a deduction from shareholders' funds,
and not recognised as assets. Previously, such shares were included as
investments at the lower of market value or exercise price, and unrealised
appreciation or depreciation accounted for through the unrealised capital
reserve.
Restatement
As required by UITF 38, the comparative figures have been restated. The effect
on the prior periods shown is to decrease net assets at 31 March 2003 by £
501,000 (30 September 2003: £594,000), increase the unrealised capital reserve
at 31 March 2003 by £405,000 (30 September 2003: £312,000), and to introduce an
`own shares held' reserve of £(906,000) at both 31 March 2003 and 30 September
2003. Returns per share and net asset values per share remain unaffected, as
own shares held are excluded from these calculations.
Dividends
The trust has waived its rights to receive dividends from the Company and
therefore the total interim dividend included in the Statement of Total Return
has been reduced accordingly.
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 is based on 52,224,542 shares, being the weighted
average number of shares in issue having adjusted for the shares held by the
employee incentive trust (half year ended 31 March 2003: 52,226,591 shares;
year ended 30 September 2003: 52,226,591). No diluted return per ordinary share
is shown for the half year to 31 March 2004 or for the comparative periods
since the conditions attached to the share options referred to in note 2 were
not met at the reporting dates.
4 Intangible Fixed Assets
Intangible fixed assets consists of goodwill on consolidation. This arose from
costs incurred in setting up MAM, which are included in the carrying value of
the investment in the parent company balance sheet. The Directors consider that
MAM has an indefinite useful economic life so goodwill is not being amortised.
5 Fixed Asset Investments
Listed investments are valued at closing mid-market value. Unlisted investments
are stated at the Board's estimate of their fair value.
6 Net Asset Value per Ordinary Share
The net asset value per share has been calculated based on equity shareholders'
funds and on 52,176,591 ordinary shares (31 March 2003: 52,226,591; 30
September 2003: 52,226,591) being the shares in issue at the period end having
deducted the number of shares held by the employee incentive trust.
7 Financial Information for the year ended 30 September 2003
The figures and the financial information for the year ended 30 September 2003
have been compiled from an extract of the latest published accounts and do not
constitute the statutory accounts for the 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 Section 237(3) of the Companies Act 1985.
INTERIM REPORT
The Interim Report will be sent to shareholders on 10 June 2004 from which time
copies will be available to the public at the Company's registered office: 1
Minster Court, Mincing Lane, London EC3R 7ZZ.
DIVIDEND
The dividend of 3.2p per share will be paid on 2 July 2004 to shareholders on
the register at the close of business on 11 June 2004.
NOTES FOR EDITORS
Majedie Investments PLC is an investment trust with total assets under
management of over £175 million. The Company's objective is to maximise total
shareholder return over the long term whilst increasing dividends by more than
the rate of inflation. The Company's benchmark is 70% FTSE All-Share Index and
30% FTSE World ex UK Index (sterling) on a total return basis.
The Majedie Share Plan is a straightforward and low cost way of investing in
Majedie shares with a minimum lump sum of £250, or on a regular monthly basis
with £25 or more. The Majedie Corporate ISA provides a tax efficient way of
investing or saving in Majedie shares at low cost. There is no initial or
annual management fee. Both maxi and mini ISAs are available with a minimum
lump sum investment of £500 or £50 per month for direct debit subscribers.
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