Interim Results
Throgmorton Trust PLC
4 July 2002
THE THROGMORTON TRUST PLC
INTERIM RESULTS FOR THE SIX MONTH PERIOD TO 31 MAY 2002
KEY POINTS
• Portfolio Outperformed SmallCap and All-Share Indices
• Net Asset Value per Ordinary Share at 31 May 2002, 106.4p
• Interim Dividend 0.5p (2001 - 0.5p)
NET ASSET VALUE
30.11.01 31.05.02 Change
The Throgmorton Trust PLC 103.15p 106.41p +3.2%
FTSE SmallCap (ex IC) 2,600.18 2,569.60 -1.2%
FTSE All-Share 2,514.07 2,475.57 -1.5%
THE CHAIRMAN, LORD STEWARTBY, COMMENTED:
The six months to 31 May 2002 saw a continuation of the outperformance by the
Trust's portfolio of smaller companies that had been achieved during the
previous year. The approach to sector and stock selection described in the
Investment Manager's Report which follows has enabled the Trust to perform well
during a period of continuing volatility in stock markets.
At 31 May 2002 the net asset value of the Trust was 106.4p per share, compared
with 103.2p at 30 November 2001, an increase of 3.2 per cent over the six
months. This compares with decreases in the FTSE SmallCap (excluding Investment
Companies) Index of 1.2 per cent and in the FTSE All-Share Index of 1.5 per cent
over the same period.
The Directors have declared an interim dividend of 0.5p per share, the same as
last year.
All investments are currently subject not only to fragile sentiment in the face
of continuing uncertainties about the strength of world economic recovery, but
also since the Enron scandal to anxieties about corporate governance and
accounting. Against this background stock markets are likely to remain short of
confidence in the coming months, although in relative terms the outlook for
small companies in the United Kingdom remains favourable.
INVESTMENT MANAGER'S REPORT
Review
During the six month period to 31 May 2002 the Trust's net asset value increased
by 3.2% compared to a fall of 1.2% in the FTSE SmallCap ex investment companies
index. This was highly creditable bearing in mind the market's turbulent
conditions. The repercussions of the world economic slowdown and heightened
political instability led to huge swings in sentiment and combated hopes of a
domestic recovery.
The Trust took advantage of this volatility, buying into high reward stocks on
market falls and taking profits from fully valued companies on rises. Stock
picking remained key. The stated strategy of backing companies with a good asset
base and superior quality of management continued to bear fruit over the period.
The scandal surrounding Enron illustrated the need for such a focus.
Significant interest rate cuts by central banks following the events of 11
September led initially to expectations of a strong economic recovery. These
expectations rose or fell following each new economic release or political
incident, with market sentiment reacting accordingly, often to the Trust's
benefit.
Low valuations and progress in exploration provided a sound footing for a rise
in oil exploration and production stocks, particularly given the background of a
rising oil price. Companies held such as Dana, Paladin and Expro posted
significant gains. They should continue to support the portfolio if political
tension in the Middle or the Far East escalates further.
Expectations that the weak economic conditions would take their toll on consumer
spending left car retail and housebuilding stocks on low ratings. However, the
Trust benefited from maintaining good investments in these sectors as these
fears were slow to materialise. The consumer continued to spend and both
industries enjoyed strong profits growth following a number of years of
restructuring. The holdings in Countryside, Crest Nicholson and Redrow performed
well amongst the housebuilders, while amongst the car retailers Vardy and CD
Bramall were strong and Sytner received a bid at a 50% premium.
The Government's continued emphasis on spending to improve public services and
infrastructure helped the Trust's investments in construction and the private
finance initiative. Mowlem, Amec, Interserve and Galliford Try all improved on
the back of increased spending on schools, hospitals and transport. Findel's
education supplies business also performed strongly. The abolition of betting
tax and the deregulation of casinos led to a strong performance from the holding
in Stanley Leisure.
The barrage of bad news from technology stocks heightened investor risk aversion
leaving the sector weak in February and March which provided the opportunity to
buy the stronger companies on lower valuations.
The biotechnology and healthcare sectors performed poorly although disciplined
stock selection helped mitigate some of the losses. This risk/reward looks
favourable for Gyrus, a non-invasive surgical device company, Axis Shield, a
diagnostics company and Acambis, a leader in vaccines.
A pick-up in corporate activity highlighted the attractive valuations of many
small companies over the period. The Trust benefited from the takeovers of
Sytner, Lynx and T J Hughes. In addition, takeover approaches were made for
Alphameric and Comino, both in the technology sector, as well as for Budgens,
the food retailer.
Outlook
Despite current nervous stockmarket conditions caused by accounting issues in
the US, political instability in the Middle and Far East and global economic
uncertainty, the UK domestic economy remains fairly robust. Inflation remains
low and interest rates are unlikely to rise significantly. On this basis the
return from the UK smaller companies sector could be good. Increased risk
aversion over the last year has blinded investors to strong fundamentals in many
areas of the smaller company market. As sentiment in the economy and stockmarket
recovers, investors should return to higher risk reward areas which should
benefit the smaller company arena.
Government spending is sustaining job prospects in an economy with already
fairly full employment. This should continue to buoy the consumer and benefit
domestic companies. It is currently evident in the strong trading from
housebuilders, car and clothes retailers, construction, leisure, transport and
property companies - all sectors with a good representation in the Trust.
In addition, we believe sectors where UK companies remain globally competitive
will benefit further from the accelerated economic growth. These include sectors
such as health and biotechnology, media, information technology, aerospace and
oil exploration.
In conclusion, we believe the Trust is strategically placed to benefit from
domestic and international recovery themes and by maintaining the discipline of
a well diversified portfolio spread, the Trust should continue to benefit
against an improving smaller company background.
Framlington Investment Management Limited
4 July 2002
Contacts: Paul Branigan - 020 7330 6544
Roger Whiteoak - 020 7330 6551
Six months to Six months to Full year to
31 May 2002 31 May 2001 30 Nov 2001
£000s £000s £000s
Notes (unaudited) (unaudited) (audited)
Income from fixed asset investments
Franked income 2,935 3,098 6,476
Unfranked income 27 379 648
2,962 3,477 7,124
Other income
Dividends from subsidiary undertakings 110 8 158
Interest receivable 189 264 675
Sundry income 89 40 135
388 312 968
Total income 3,350 3,789 8,092
Management fee (638) (825) (1,604)
Administration expenses (155) (160) (322)
Interest payable (1,293) (1,308) (2,611)
Net revenue from ordinary activities before taxation 1,264 1,496 3,555
Tax on net revenue from ordinary activities (36) (96) (196)
Net revenue from ordinary activities after taxation 1,228 1,400 3,359
Dividends
4 Ordinary shares -Interim 0.50p (0.50p) (1,186) (1,192) (1,192)
- Final - (1.00p) - 18 (2,355)
(1,186) (1,174) (3,547)
Net revenue retained 42 226 (188)
Revenue reserve brought forward 4,114 4,302 4,302
Revenue reserve carried forward 4,156 4,528 4,114
Earnings per share - basic 0.52p 0.58p 1.40p
Earnings per share - fully diluted 0.58p 0.64p 1.52p
The Throgmorton Trust PLC
Summarised Balance Sheet
31 May 2002 31 May 2001 30 Nov 2001
£000s £000s £000s
Notes (unaudited) (unaudited) (audited)
Fixed asset investments
Portfolio investments 291,928 313,288 277,024
Subsidiary undertakings 3,743 3,285 3,743
295,671 316,573 280,767
Current assets
Debtors 2,197 2,428 1,680
Cash at bank 4,617 19,727 13,354
6,814 22,155 15,034
Creditors - due within 1 year (4,885) (7,457) (5,469)
Total assets less current liabilities 297,600 331,271 290,332
Creditors - due after 1 year:
Debenture stock (19,119) (19,119) (19,119)
Convertible loan (11,007) (11,008) (11,007)
Loan from group company (15,000) (15,000) (15,000)
(45,126) (45,127) (45,126)
252,474 286,144 245,206
Capital and reserves
Share capital 11,863 11,919 11,886
Share premium 35,272 35,267 35,272
Revenue reserves 4,156 4,528 4,114
Other reserves 201,183 234,430 193,934
Total shareholders' funds 252,474 286,144 245,206
5 Net Asset Value per ordinary share 106.41p 120.03p 103.15p
Number of ordinary shares in issue 237,258,869 238,388,869 237,713,869
The Throgmorton Trust PLC
Statement of Total Recognised Gains and Losses
Six Months to 31 May 2002
Revenue Capital Total
£000s £000s £000s
(unaudited) (unaudited) (unaudited)
Realised gains and losses - 1,748 1,748
Unrealised gains and losses - 7,661 7,661
Income 3,350 - 3,350
Investment management fee (638) (638) (1,276)
Other expenses (155) - (155)
Net return before finance costs and taxation 2,557 8,771 11,328
Interest payable and similar charges (1,293) (1,212) (2,505)
Return on ordinary activities before taxation 1,264 7,559 8,823
Tax on ordinary activities (36) 36 -
Return on ordinary activities after taxation 1,228 7,595 8,823
attributable to equity shareholders
Dividends in respect of equity shares (1,186) - (1,186)
Transfer to reserves 42 7,595 7,637
Return per ordinary share
- basic 0.52p 3.20p 3.72p
- assuming conversion of loan stock 0.58p 3.17p 3.75p
The Throgmorton Trust PLC
Statement of Total Recognised Gains and Losses - continued
Six Months to 31 May 2001
Revenue Capital Total
£000s £000s £000s
(unaudited) (unaudited) (unaudited)
Realised gains and losses - 17,303 17,303
Unrealised gains and losses - (3,513) (3,513)
Income 3,789 - 3,789
Investment management fee (825) (825) (1,650)
Other expenses (160) - (160)
Net return before finance costs and taxation 2,804 12,965 15,769
Interest payable and similar charges (1,308) (1,212) (2,520)
Return on ordinary activities before taxation 1,496 11,753 13,249
Tax on ordinary activities (96) 96 -
Return on ordinary activities after taxation 1,400 11,849 13,249
attributable to equity shareholders
Dividends in respect of equity shares (1,174) - (1,174)
Transfer to reserves 226 11,849 12,075
Return per ordinary share
- basic 0.58p 4.90p 5.48p
- assuming conversion of loan stock 0.64p 4.81p 5.45p
The Throgmorton Trust PLC
Statement of Total Recognised Gains and Losses - continued
Full Year to 30 November 2001
Revenue Capital Total
£000s £000s £000s
(audited) (audited) (audited)
Realised gains and losses - 20,427 20,427
Unrealised gains and losses - (44,777) (44,777)
Income 8,092 - 8,092
Investment management fee (1,604) (1,604) (3,208)
Other expenses (322) - (322)
Net return before finance costs and taxation 6,166 (25,954) (19,788)
Interest payable and similar charges (2,611) (2,424) (5,035)
Return on ordinary activities before taxation 3,555 (28,378) (24,823)
Tax on ordinary activities (196) 196 -
Return on ordinary activities after taxation 3,359 (28,182) (24,823)
attributable to equity shareholders
Dividends in respect of equity shares (3,547) - (3,547)
Transfer from reserves (188) (28,182) (28,370)
Return per ordinary share
- basic 1.40p (11.74p) (10.34p)
- assuming conversion of loan stock 1.51p (11.17p) (9.66p)
The Throgmorton Trust PLC
Cash Flow Statement
Six months to Six months to Full year to
31 May 2002 31 May 2001 At 30 Nov 2001
£000s £000s £000s
(unaudited) (unaudited) (audited)
Operating activities
Cash received from investments 2,394 2,448 7,095
Interest received 268 365 675
Underwriting commission 46 18 146
Management fee (703) (822) (1,626)
Cash paid to and on behalf of directors (44) (52) (99)
Other cash payments (130) (139) (251)
Net cash inflow from operating activities 1,831 1,818 5,940
Servicing of finance
Interest paid - revenue (1,293) (1,308) (2,611)
Taxation
Taxation recovered/(paid) - 6 (302)
Capital expenditure and financial investment
Net (purchases)/sales of investments (4,618) 24,216 19,789
Capital management fee (703) (822) (1,626)
Interest charged to capital (1,212) (1,212) (2,425)
Net payments to subsidiaries - - (738)
Dividends
Dividends paid (2,373) (2,454) (3,646)
Net cash (outflow)/inflow before financing (8,368) 20,244 14,381
Financing
Repurchase of ordinary shares (369) (9,647) (10,156)
Net cash outflow from financing (369) (9,647) (10,156)
(Decrease)/increase in cash (8,737) 10,597 4,225
The Throgmorton Trust PLC
Notes
1. The Trust's figures to 31 May 2002 and the comparative figures for the
corresponding period are unaudited; those for the year to 30 November 2001
are based on the Trust's accounts for that period, which carry an
unqualified report from the auditors and have been filed with the Registrar
of Companies.
2. In accordance with financial reporting standard 16 Current
Taxation, UK dividend income has been shown net of its attributable tax
credits.
3. Management fees payable and finance costs of debt are each
currently allocated 50% to capital and 50% to revenue.
4. The directors have declared and interim dividend of 0.5p per
share (2001 - 0.5p) payable on 8 August 2002 to shareholders on the
register at the close of business on 12 July 2002.
5. The net asset value per ordinary share of 5p (loan stock not
converted and prior charges at par value) is based on the shares in
issue, the market value of listed investments and other net assets and
liabilities. Unlisted investments are carried at directors' valuations.
There have been no additions to unlisted investments since 30 November
2001.
6. Copies of the 2001 annual report and further copies of these
interim results are available from the Trust's registered office, 155
Bishopsgate, London EC2M 3XJ.
7. The Trust's balance sheets as at 31 May 2002 and 30 November 2001
are shown in summary form and have been extracted from unaudited and
audited accounts respectively as described in Note 1.
8. Group accounts have not been prepared, as in the opinion of the
directors, the inclusion of the remaining subsidiary undertakings, taken
together, is not material for the purpose of giving a true and fair
view.
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