Half-year Report

RNS Number : 0921P
Majedie Investments PLC
24 May 2018
 

Majedie Investments PLC

Half-Yearly Financial Report

31 March 2018

 

The Directors announce the unaudited half-yearly financial report for the six months to 31 March 2018 as follows:

 

Copies of the half-yearly report can be obtained from the following website:

www.majedieinvestments.com

 

Financial Highlights for the half year ended 31 March 2018

 

Total shareholder return (including dividends):

+2.3%

Net asset value (NAV) total return (debt at par including dividends):

- 4.1%

NAV total return (debt at fair value including dividends):

-2.8%

 

 

NAV per share (Debt at par value):

321.6p

NAV per share (Debt at fair value):

312.7p

 

 

Revenue Return per share:

7.6p

Interim Dividend:

4.0p

Directors' valuation of investment in Majedie Asset Management Limited:

£59.8m

Total assets*:

£192.4m

 

 

* Total assets are defined as total assets less current liabilities.

 

 

Investment Objective and Policy Statement

 

Investment Objective

 

The Company's investment objective is to maximise total shareholder return whilst increasing dividends by more than the rate of inflation over the long term.

 

General

 

The Company invests principally in securities of publicly quoted companies worldwide and in funds managed by its investment manager, though it may invest in unquoted securities up to levels set periodically by the Board, including its investment in Majedie Asset Management Limited (MAM). Investments in unquoted securities, other than those managed by its investment manager or made prior to the date of the adoption of this investment policy, (measured by reference to the Company's cost of investment) will not exceed 10% of the Company's gross assets.

 

Risk Diversification

 

Whilst the Company will at all times invest and manage its assets in a manner that is consistent with spreading investment risk, there will be no rigid industry, sector, region or country restrictions. The overall approach is based on an analysis of global economies 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 will not invest in any holding that would, at the time of investment, represent more than 15% of the value of its gross assets save that the Company may invest up to 25% of its gross assets in any single fund managed by its investment manager where the Board believes that the investment policy of such funds is consistent with the Company's objective of spreading investment risk.

 

The Company may utilise derivative instruments including index-linked notes, contracts for difference, covered options and other equity-related derivative instruments for efficient portfolio management and investment purposes.

 

Any use of derivatives for investment purposes will be made on the basis of the same principles of risk spreading and diversification that apply to the Company's direct investments, as described above.

 

Asset Allocation

 

The assets of the Company will be allocated principally between investments in publicly quoted companies worldwide and in investments intended to provide an absolute return (in each case either directly or through other funds or collective investment schemes managed by the Company's investment manager) and the Company's investment in MAM itself.

 

Benchmark

 

The Company does not have one overall benchmark, rather each distinct group of assets is viewed independently. Any investments made into funds managed by the Company's investment manager will be measured against the benchmark or benchmarks, if any, whose constituent investments appear to the Company to correspond most closely to those investments. It is important to note that in all cases 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 from time to time, which remain subject to the investment restrictions set out in this section.

 

Gearing

 

The Company uses gearing currently via long term debentures. The Board has the ability to borrow up to 100% of adjusted capital and reserves. The Board also reviews the level of net gearing (borrowings less cash) on an on-going basis and sets a range at its discretion as appropriate. 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.

 

Chief Executive's Report

 

In the six months to 31 March 2018 the NAV at par and NAV at FV (net asset value at par and fair value) fell by 4.1% and 2.8% respectively on a total return basis. The redemption of the 2020 9.5% Debentures, which was completed on 6 December 2017, resulted in a dilution of 1.6% to the NAV at par and 0.6% to the NAV at FV. The share price rose by 2.4% over the period, also on a total return basis. Over the six months the FTSE All-Share Index fell by 2.3% and the MSCI All Country World Index rose by 0.2%, in sterling terms.

 

The redemption of the 2020 9.5% Debentures, whilst dilutive to the NAV, was undertaken primarily to reduce gearing as stock markets reached all time highs. The Board perceived that both political and economic risks were rising as the interest rate cycle was turning following a long period of monetary expansion and that some lead indicators of economic activity were rolling over. The Company's gearing at 31 March 2018 was 10.1%, having declined from 17.1% at 30 September 2017. The dilution of NAV at par by 1.6% takes into account the interest payments (discounted to reflect the time value of money) that were contractually due to the debenture holders until maturity and this charge of £2.9m was taken against capital. The dilution of NAV at FV by 0.6% reflects the marginal dilution to the FV holding value by £0.8m. The repayment of the debenture was financed by a reduction of the Company's investments in Majedie Asset Management (MAM) Funds. No shares were sold in MAM.

 

Results and Dividends

 

The Company had a capital loss for the six months to 31 March 2018 of £11.4m, which includes a charge of £2.9m being the premium paid to the 2020 Debenture holders. The net investment result was a loss of £7.3m. The total income from investments was £4.7m compared to £4.4m in the six months to 31 March 2017. This increase is due to an increase of £0.5m in the dividend received from MAM to £3.5m; the income from the MAM Funds reduced following the sale of assets to finance the early repayment of the 2020 Debentures. Total administration expenses and management fees are marginally lower at £0.9m reflecting lower investment management fees. Finance costs fell by £0.4m due to the redemption of the 2020 Debentures. In the second half of the year total administration expenses and management fees are expected to fall further due to lower investment management fees and finance costs.

 

The net revenue return after taxation for the six months to 31 March 2018 was £4.1m compared to £3.7m in the six months to 31 March 2017.

 

The Board has declared an interim dividend of 4.0p per share (2017: 3.5p) which will be paid on 22 June 2018 to shareholders on the register on 8 June 2018.

 

Asset Allocation

 

The Company invests through a number of investment strategies managed by MAM and retains an equity holding in MAM of 17.1%. The Company has no overall benchmark; rather each fund has its own benchmark. The Company's total assets were £192.4m at 31 March 2018. In the six months to 31 March 2018 the main change was a reduction in total assets to finance the repurchase of the 2020 Debentures, with a sale of £6.5m from the MAM UK Segregated Portfolio, £6.9m from the MAM Tortoise Fund, £1.9m from the MAM UK Income Fund, £1.8m from the MAM Global Equity Fund, £0.6m from the MAM Global Focus Fund and £0.7m from the MAM US Equity Fund. There were no sales of MAM shares.

 

MAM Funds and Investment Performance

 

The MAM UK Equity Fund is the flagship product of MAM, having started in March 2003. Its objective is to produce a total return in excess of the FTSE All-Share Index over the long term. Since inception to 31 March 2018 it has returned 12.1% per annum net of fees, with a relative outperformance of 3.0% against its benchmark. The Company's assets are invested in a segregated portfolio that is managed pari passu to the MAM UK Equity Fund. The funds are predominantly invested in UK equities with overseas equities limited to 20% and the strategy incorporates a dedicated allocation to UK smaller companies. At 31 March 2018 the Company had an allocation of £55.3m, which represents 28.7% of total assets. In the six months to 31 March 2018 the Portfolio returned -4.8% net of fees which is an underperformance of 2.5% against its benchmark. The positive contributors were underweight positions in Tobacco, Household Goods and Construction and overweight positions in Software, Food Retailers and Oil Producers. The negative contributors were overweight positions in General Retailers, Support Services, Mining, Utilities and Fixed Line Telecommunications.

 

The MAM Tortoise Fund is a global equity absolute return fund which started in August 2007. Its objective is to achieve positive absolute returns in all market conditions over rolling three-year periods with lower volatility than a conventional long-only equity fund. The funds are invested primarily in long and synthetic short positions in equities. Since inception to 31 March 2018 the Fund has returned 7.2% per annum net of fees. At 31 March 2018, the Company had an allocation of £26.8m, which represents 13.9% of total assets. The Fund returned -5.5% net of fees for the six months to 31 March 2018. The positive contributors were long positions in Speciality Retailers, Food Retailers, Pharmaceuticals and Oil Producers and short positions in Banks. The negative contributors were long positions in Energy Services, Fixed and Mobile Telecommunications and Gold Miners and short positions in Distributors.

 

The MAM UK Income Fund started in December 2011. Its objective is to maintain an attractive yield whilst outperforming the FTSE All-Share Index over the long term, with up to 20% invested in overseas equities. The historic yield is currently 4.5%, well in excess of the yield on the FTSE All-Share Index of 3.7%. Since inception the fund has returned 13.7% per annum net of fees, which is an outperformance of 4.3% per annum against its benchmark. At 31 March 2018 the Company had an allocation of £15.2m, which represents 7.9% of the Company's total assets. In the six months to 31 March 2018 the Fund returned -0.3% net of fees, which represents an outperformance against its benchmark of 2.0%. The positive contributors were overweight positions in Financial Services, Media and Oil Producers and underweight positions in Tobacco and Support Services whilst the detractors were overweight positions in Utilities and Gold Miners and underweight positions in Pharmaceuticals and Industrial Miners.

 

The MAM Global Equity and Global Focus Funds were launched in June 2014. Their objectives are to provide total returns in excess of the MSCI All Country World Index over the long term through investment in a diversified portfolio (Global Equity Fund) or concentrated portfolio (Global Focus Fund) of global equities including emerging markets. Since inception to 31 March 2018 the funds have returned 12.3% and 11.4% per annum net of fees for the sterling share class, which represents an outperformance of 0.1% per annum for the MAM Global Equity Fund and an underperformance of 0.9% per annum for the MAM Global Focus Fund against the benchmark. At 31 March 2018 the Company had allocations of £20.0m and £7.0m respectively to the MAM Global Equity Fund and the MAM Global Focus Fund, representing 10.4% and 3.6% of total assets. In the six months to 31 March 2018 the funds returned -0.5% and -1.7% net of fees, which represents an underperformance of 0.7% and 1.9% respectively. The positive contributors at the sector level were overweight positions in Media, Oil Producers and Healthcare Providers and underweight positions in Pharmaceuticals whilst the detractors were overweight positions in Internet Software, Biotechnology and Wireless Telecommunications and underweights in Aerospace and Defence.

 

The MAM US Equity Fund was launched in June 2014 and since inception to 31 March 2018 has returned 14.2% per annum net of fees for the sterling share class. This represents an underperformance of 1.5% per annum against its benchmark S&P 500 Index. At 31 March 2018 the Company had an allocation of £7.6m, which represents 3.9% of total assets, and in the six months to 31 March 2018 the Fund returned -0.2% net of fees, which represents an underperformance of 1.1%. The positive contributors at the sector level were overweight positions in Speciality Retail, Media, Food Retail and Healthcare Providers and underweight positions in Industrials, whilst the detractors were overweight positions in Internet Software and Mining and underweight positions in Internet Retail and Semiconductors.

 

The aggregate geographic and sector exposures of the MAM UK Equity Segregated Portfolio, MAM UK Income Fund, MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund are shown below. The factsheets for all the MAM funds in which the Company invests are available on the Company website and show the largest overweight and underweight stock positions and other relevant information.

 

Majedie Asset Management

 

The Company retains its holding in MAM. The percentage holding has increased from 16.8% to 17.1% following a small buyback of stock, for cancellation, by MAM in January 2018. The Company has no current intention to sell any shares in MAM other than the obligation, if required, to sell shares in proportion to other founder shareholders to the MAM Employee Benefit Trust, up to a maximum of 1% each year. The Board has increased the value of its holding in MAM to £59.8m, which represents 31.1% of total assets. The valuation is based on the formulaic valuation which reflects three year historic average earnings and cash held on the balance sheet and the Board believes that it reflects fair value.

 

MAM's assets under management fell from £14.6bn to £13.8bn in the six months to 31 March 2018, which reflects weaker stock markets and a small net outflow. The newer Global Funds, having passed their three year milestones, received positive net new business flows over the period and continue to receive broad endorsements from a number of investment consultants.

 

The increase in dividend from MAM reflects a good operational performance and a strong balance sheet.

 

Summary

 

The overall investment performance in the six months to 31 March 2018 was disappointing. There were two main reasons. First, the Company is meaningfully exposed to the UK stock market and following the Brexit vote the UK has been deeply out of favour with investors. In the momentum driven market of 2017 and, particularly, during the final quarter, this negative sentiment reached extreme levels leaving the UK market looking historically cheap relative to Global markets and gilts.  It is notable that in recent months corporate activity in the form of takeover activity suggests industry players see good value in the UK market. The UK market also offers defensive qualities due to its sector composition and an attractive yield. On a look through basis the FTSE All-Share index derives up to 70% of its earnings from overseas which are more attractively valued on the UK market than elsewhere.

 

Secondly MAM's long only funds, apart from the MAM UK Income Fund, underperformed their respective markets in the six months to 31 March 2018. This was principally due to the managers tilting portfolios towards a value position in the face of strong market momentum, in the last quarter of 2017. They were concerned that global markets were overlooking the economic headwinds of the phased ending of Quantitative Easing and increasing bond yields which could signal the end of the benign monetary policies pursued in recent years, just as some lead economic indicators are turning down.  The funds are largely now ahead of their respective benchmarks for the calendar year to date. The Tortoise Fund as an absolute return fund is designed, in part, to reduce the downside volatility of returns to shareholders. In times of rapidly rising markets, such as 2017, this holding can depress returns which should be recouped as markets become more volatile.

 

Notwithstanding the slightly subdued returns in the six months to 31 March 2018 the portfolio is defensively positioned and should prove relatively resilient should equity market volatility return.

 

Development of Net Asset Value (NAV)

 

The chart below shows the NAV development during the six months to 31 March 2018. In aggregate the NAV has decreased by £10.6m, having recorded total investment income and losses of £2.7m, having incurred net administration and finance costs of £1.7m, paid a premium on the redemption of the 9.5% March 2020 debenture of £2.9m, and having paid out dividends of £3.3m.

 

NAV 30.09.2017

£182.5m

UKES Portfolio

(£2.5m)

MAM

+£1.7m

MAM Funds

(£1.9m)

Debenture Premium

(£2.9m)

Admin Costs & Other

(£0.7m)

Finance Costs

(£1.0m)

Dividend Paid

(£3.3m)

NAV 31.03.2018

£171.9m

 

Allocation of Total Assets at 31 March 2018

 

 

Value

£000s

% of Total

Assets

MAM UK Equity Segregated Portfolio

55,277

28.7

MAM UK Income Fund

15,195

7.9

MAM Global Equity Fund

20,007

10.4

MAM Global Focus Fund

6,994

3.6

MAM US Equity Fund

7,562

3.9

MAM Tortoise Fund

26,774

13.9

MAM

59,824

31.1

Net Cash/realisation portfolio*

743

0.4

 

192,376

100.0

 

 

 

* Net Cash and realisation portfolio do not include cash held in the MAM UK Equity Segregated Portfolio or MAM funds.

 

MAM Fund Performance

 

 

6 months to 31 March 2018

Since MI invested

 

%

Fund

return

%

Benchmark

return

%

Relative performance

%

Fund

return

%

Benchmark

return

%

Relative performance

MAM UK Equity Segregated Portfolio

(4.8)

(2.3)

(2.5)

21.1

24.0

(2.9)

MAM UK Income Fund

(0.3)

(2.3)

2.0

33.0

28.2

4.8

MAM Global Equity Fund

(0.5)

0.2

(0.7)

55.6

54.3

1.3

MAM Global Focus Fund

(1.7)

0.2

(1.9)

51.3

54.3

(3.0)

MAM US Equity Fund

(0.2)

0.9

(1.1)

64.7

72.8

(8.1)

MAM Tortoise Fund

(5.5)

 

 

(2.6)

 

 

 

Notes:

 

All Fund returns are quoted in Sterling, net of fees.

The initial investment in the MAM UK Equity Segregated Portfolio was made on 22 January 2014.

The initial investment in the MAM UK Income Fund was made on 29 January 2014.

The initial investments in MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund were made on 30 June 2014 and 26 June 2014 respectively, at the inception of each fund. The Company is invested in the Sterling share classes.

The initial investment in the MAM Tortoise Fund was made on 29 January 2014.

 

William Barlow

Chief Executive
For and on behalf of the Board

 

23 May 2018

 

Fund Analysis

at 31 March 2018

 

Geographic and Sector Analysis at 31 March 2018

 

 

%

United Kingdom

%

North America

 

%

Europe

%

Emerging Markets

%
Asia Pacific

 

%

Cash

 

%

Total

Basic Materials

4.8

2.1

 

0.6

 

 

7.5

Consumer Goods

1.5

1.7

0.4

0.5

0.9

 

5.0

Consumer Services

13.3

3.6

1.0

1.4

0.4

 

19.7

Financials

12.7

4.3

 

0.7

0.2

 

17.9

Healthcare

2.5

2.3

0.9

 

0.2

 

5.9

Industrials

6.3

0.5

0.6

0.2

 

 

7.6

Oil & Gas

13.7

1.5

0.2

 

 

 

15.4

Technology

1.3

4.0

0.1

1.5

 

 

6.9

Telecommunications

3.3

0.5

4.0

 

0.8

 

8.6

Utilities

2.5

0.6

 

 

 

 

3.1

Cash

 

 

 

 

 

2.4

2.4

 

61.9

21.1

7.2

4.9

2.5

2.4

100.0

 

Notes:

The assets analysed above are the aggregate exposure of MAM UK Equity Segregated Portfolio, MAM UK Income Fund, MAM Global Equity Fund, MAM Global Focus Fund and MAM US Equity Fund. The aggregate represents a total of 54.5% of the Company's total assets.

 

Exposures are classified on the stock exchange on which the underlying equity is listed and FTSE sector classification.

 

Twenty Largest MAM UK Equity Segregated Portfolio Holdings 

at 31 March 2018

 

 

Company

Fair Value

£000

% of MAM UK Equity Segregated Portfolio

MAM UK Smaller Companies Fund

5,001

9.0%

Royal Dutch Shell PLC

3,998

7.2%

BP PLC

3,761

6.8%

Tesco PLC 

2,645

4.8%

HSBC Holdings PLC

2,535

4.6%

GlaxoSmithKiline PLC

1,914

3.5%

Vodafone Group PLC

1,669

3.0%

WM Morrison Supermarkets PLC

1,655

3.0%

Centrica PLC

1,475

2.7%

Orange SA

1,469

2.7%

Barclays PLC 

1,357

2.5%

Royal Bank of Scotland PLC

1,094

2.0%

Electrocomponents PLC

1,032

1.9%

Aviva PLC

968

1.8%

BT Holdings PLC

966

1.7%

Marks & Spencer PLC

837

1.5%

BAE Systems PLC

831

1.5%

Pearson PLC

776

1.4%

Ryanair Holdings PLC

763

1.4%

J Sainsbury PLC

734

1.3%

Sub-total

35,480

64.2%

Other (including cash)

19,797

35.8%

Total

55,277

100.0%

 

Interim Management Report              

 

The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal uncertainties for the remaining six months of the financial year are set out in the Chief Executive's Report above. This half-yearly financial report has not been audited or reviewed by the Company's auditor.

 

The financial statements continue to be prepared on a going concern basis. The approach used for the Annual Report is applied, including proper consideration of financial and cashflow forecasts, and it is believed that the Company has adequate financial resources to continue to operate for the foreseeable future.

 

The principal risks facing the Company remain unchanged since the date of the Annual Report for the year ended 30 September 2017, as set out in the Business Review within the Strategic Report (pages 15 and 16), with no particular subsequent heightened uncertainty. Risks faced by the Company include, but are not limited to, market risk, discount volatility, regulatory risk, financial risk, risks associated with banking and hedging and non-compliance with Section 1158 of the Corporation Tax Act 2010.

 

Responsibility Statement of the Directors in respect of the Half-Yearly Financial Report

 

In accordance with the Disclosure Guidance 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 (IAS) 34, Interim Financial Reporting, as adopted by the European Union, as required by the Disclosure Guidance and Transparency Rule 4.2.4R, and gives a true and fair view of the assets, liabilities and financial position of the Company;

(b)        the Chief Executive's Report includes a fair review of the information required to be disclosed under the Disclosure Guidance 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 Annual Report for the year ended 30 September 2017 that would have had a material effect on the financial position or performance of the Company in the first six months of the current financial year.

 

Andrew J Adcock

Chairman

For and on behalf of the Board

23 May 2018

Condensed Statement of Comprehensive Income  

for the half year ended 31 March 2018

 

 

 

 

 

 

 

 

Half year ended
31 March 2018

(unaudited)

Half year ended
31 March 2017

(unaudited)

Year ended
30 September 2017

(audited)

 

Notes

Revenue
return
£'000

Capital
return
£'000

Total
£'000

Revenue
return
£'000

Capital
return
£'000

Total
£'000

Revenue
return
£'000

Capital
return
£'000

Total
£'000

 

 

 

 

 

 

 

 

 

 

 

Investments

 

 

 

 

 

 

 

 

 

 

(Losses)/gains on investments at fair value through profit or loss

 

 

(7,303)

(7,303)

 

12,063

12,063

 

14,680

14,680

Net investment result

 

 

(7,303)

(7,303)

 

12,063

12,063

 

14,680

14,680

Income

 

 

 

 

 

 

 

 

 

 

Income from investments

2

4,678

 

4,678

4,378

 

4,378

7,414

 

7,414

Other income

2

29

 

29

30

 

30

49

 

49

Total income

 

4,707

 

4,707

4,408

 

4,408

7,463

 

7,463

Management fees

 

(55)

(165)

(220)

(61)

(185)

(246)

(122)

(364)

(486)

Performance fees

 

 

 

 

 

(5)

(5)

 

(4)

(4)

Administration expenses

 

(322)

(334)

(656)

(345)

(338)

(683)

(673)

(650)

(1,323)

(Loss)/return before finance costs and taxation

 

4,330

(7,802)

(3,472)

4,002

11,535

15,537

6,668

13,662

20,330

Finance costs

 

(249)

(747)

(996)

(351)

(1,056)

(1,407)

(704)

(2,112)

(2,816)

Premium paid on redemption of 9.50% March 2020 debenture

14

 

(2,869)

(2,869)

 

 

 

 

 

 

Net (loss)/ return before taxation

 

4,081

(11,418)

(7,337)

3,651

10,479

14,130

5,964

11,550

17,514

Taxation

3

(5)

 

(5)

(3)

 

(3)

(13)

 

(13)

 

Net (loss)/return after taxation for the period

 

4,076

(11,418)

(7,342)

3,648

10,479

14,127

5,951

11,550

17,501

 

 

 

 

 

 

 

 

 

 

 

Return per ordinary share:

 

pence

pence

pence

pence

pence

pence

pence

pence

pence

Basic

4

7.6

(21.4)

(13.8)

6.8

19.6

26.4

11.1

21.6

32.7

 

The total column of this statement is the Statement of Comprehensive Income of the Company, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The supplementary revenue return and capital return columns are prepared under guidance published by the Association of Investment Companies (AIC).

 

See notes 1 to 16.

 

Condensed Statement of Changes in Equity

for the half year ended 31 March 2018

 

 

Notes

Share
capital
£'000

Share
premium
£'000

Capital
redemption
reserve
£'000

Capital
reserve
£'000

Revenue
reserve
£'000

Total
£'000

 

 

 

 

 

 

 

 

Half year ended 31 March 2018 (unaudited)

 

 

 

 

 

 

 

30 September 2017

 

5,344

3,054

56

149,499

24,591

182,544

Net return after taxation for the period

 

 

 

 

(11,418)

4,076

(7,342)

Dividends declared and paid in period

6

 

 

 

 

(3,340)

(3,340)

31 March 2018

 

5,344

3,054

56

138,081

25,327

171,862

 

 

 

 

 

 

 

 

Half year ended 31 March 2017 (unaudited)

 

 

 

 

 

 

 

30 September 2016

 

5,344

3,054

56

137,949

23,583

169,986

Net return after taxation for the period

 

 

 

 

10,479

3,648

14,127

Dividends declared and paid in period

6

 

 

 

 

(3,073)

(3,073)

31 March 2017

 

5,344

3,054

56

148,428

24,158

181,040

 

 

 

 

 

 

 

 

Year ended 30 September 2017 (audited)

 

 

 

 

 

 

 

30 September 2016

 

5,344

3,054

56

137,949

23,583

169,986

Net return after taxation for the period

 

 

 

 

11,550

5,951

17,501

Dividends declared and paid in year

6

 

 

 

 

(4,943)

(4,943)

30 September 2017

 

5,344

3,054

56

149,499

24,591

182,544

 

Condensed Balance Sheet

at 31 March 2018

 

 

Notes

31 March
2018

(unaudited)
£'000

31 March
2017

(unaudited)
£'000

30 September
2017

(audited)
£'000

Non-current assets

 

 

 

 

Property and equipment

 

44

63

50

Investments at fair value through profit or loss

8

189,785

210,403

213,748

 

 

189,829

210,466

213,798

Current assets

 

 

 

 

Trade and other receivables

 

334

385

228

Cash and cash equivalents

 

3,219

5,215

3,566

 

 

3,553

5,600

3,794

 

Total assets

 

193,382

 

216,066

 

217,592

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

(1,006)

(1,079)

(1,085)

Total assets less current liabilities

 

192,376

214,987

216,507

 

 

 

 

 

Non-current liabilities

 

 

 

 

Debentures

 

(20,514)

(33,947)

(33,963)

 

Total liabilities

 

(21,520)

 

(35,026)

(35,048)

 

Net assets

 

171,862

 

181,040

182,544

 

 

Notes

31 March
2018

(unaudited)
£'000

31 March
2017

(unaudited)
£'000

30 September
2017

(audited)
£'000

Represented by:

 

 

 

 

Ordinary share capital

 

5,344

5,344

5,344

Share premium account

 

3,054

3,054

3,054

Capital redemption reserve

 

56

56

56

Capital reserve

 

138,081

152,127

149,499

Revenue reserve

 

25,327

20,459

24,591

 

Equity Shareholders' Funds

 

171,862

 181,040

182,544

 

 

 

 

 

Net asset value per share

 

pence

pence

pence

Basic

 

321.6

338.8

341.6

 

Condensed Cash Flow Statement

for the half year ended 31 March 2018

 

 

Notes

Half year ended
31 March
2018

(unaudited)
£'000

Half year ended
31 March
2017

(unaudited)
£'000

Year ended
30 September
2017

(audited)
£'000

 

 

 

 

 

Net cash inflow from operating activities

12

20,314

6,236

7,848

 

 

 

 

 

Investing activities

Purchase of tangible assets

 

(7)

 

(23)

(23)

Net cash outflow from investing  activities

 

(7)

 

(23)

(23)

Financing activities

 

 

 

 

Interest paid

 

(987)

(1,392)

(2,783)

Dividends paid

 

(3,340)

(3,073)

(4,943)

Redemption of 9.50% March 2020 debenture

 

14

(16,327)

 

 

 

 

 

 

 

Net cash outflow from financing activities

 

(20,654)

(4,465)

(7,726)

(Decrease)/increase in cash and cash equivalents for the period

 

(347)

1,748

99

 

 

 

 

 

Cash and cash equivalents at start of period

 

3,566

3,467

3,467

 

 

 

 

 

Cash and cash equivalents at end of period

 

3,219

5,215

3,566

 

Notes to the Accounts

as at 31 March 2018

 

1. Accounting Policies

The Condensed Financial Statements above comprise the unaudited results of the Company for the six months to 31 March 2018 and are presented in pounds sterling, as this is the functional currency of the Company.

 

The Condensed Financial Statements have been prepared in accordance with IAS 34 "Interim Financial Reporting". They do not include all financial information required for full 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 2017.

 

New standards, interpretations and amendments adopted by the Company  

The accounting policies adopted in the preparation of the interim condensed financial statements are consistent with those followed in the preparation of the Company's annual financial statements for the year ended 30 September 2017. Since 1 October 2017 the Disclosure Initiative Amendments to IFRS 7 Statement of Cash Flows have been adopted by the Company. This has resulted in additional disclosure (see note 14), but has had no impact on the Company's financial performance or position.

 

2. Income

 

 

 

 

 

Half year ended
31 March
2018
£'000

Half year ended
31 March
2017
£'000

Year ended

30 September
2017
£'000

Income from investments

 

 

 

UK investment income*

4,505

4,235

6,967

Accumulation income

138

119

338

Overseas dividends

35

24

109

 

4,678

4,378

7,414

 

 

 

 

Other income

 

 

 

Deposit interest

 

 

3

Sundry income

29

30

46

 

29

30

49

 

 

 

 

Total income

4,707

4,408

7,463

 

 

 

 

Total income comprises:

 

 

 

Dividends

4,678

4,378

7,414

Interest

 

 

3

Other income

29

30

46

 

4,707

4,408

7,463

 

 

 

 

Income from investments

 

 

 

Listed UK

755

831

1,910

Listed overseas

35

24

109

Unlisted - MAM Funds

437

532

1,253

Unlisted

3,451

2,991

4,142

 

4,678

4,378

7,414

 

 

 

 

                 

* Includes MAM dividend income of £3,451,000 (half year to 31 March 2017: £2,991,000 and year ended 30 September 2017: £4,142,000).

 

3. Taxation

The charge for the half year to 31 March 2018 is £5,000 (half year to 31 March 2017: £3,000; year ended 30 September 2017: £13,000). These amounts represent irrecoverable withholding tax paid on overseas investment income.

 

The Company has an effective corporation tax rate of 0%. As investment gains are exempt from tax owing to the Company's status as an approved Investment Trust, and as there is expected to be an excess of management expenses over taxable income there is no charge for corporation tax.

 

4. 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 53,439,000 shares (half year ended 31 March 2017 and the year ended 30 September 2017: 53,439,000), being the weighted average number of shares in issue.

 

5. Business segments

For management purposes the Company is organised into one principal activity, being investing activities, as described below:

 

Investing activities

The Company's investment objective is to maximise total shareholder return whilst increasing dividends by more than the rate of inflation over the long term. The Company operates as an investment trust company and its portfolio contains investments in companies listed in a number of countries. Geographical information about the portfolio is provided above.

 

6. Dividends

In accordance with IAS 10: Events After the Balance Sheet Date, interim dividends are not accounted for until paid. The following table summarises the amounts recognised as distributions to equity holders in the relevant period:

 

 

Half year ended 31 March
2018

£'000

Half year ended 31 March
2017

£'000

Year ended

30 September
2017

£'000

2017 Final dividend of 6.25p paid on

24 January 2018

 

3,340

 

 

2017 Interim dividend of 3.50p paid on

16 June 2017

 

 

 

1,870

2016 Final dividend of 5.75p paid on

25 January 2017

 

 

3,073

 

3,073

 

3,340

3,073

4,943

 

Distributable reserves of the Company comprise the Capital and Revenue Reserves.

 

Dividends for the half year ended 31 March 2018 (and for the half year ended 31 March 2017 and the year ended 30 September 2017) have been solely made from the Revenue Reserve.

 

7. Investments

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 for listed securities, 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.

 

Fair values for unquoted investments, or investments for which the market is inactive, are established by using various valuation techniques in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEV). These may include recent arm's length market transactions, the current fair value of another instrument which has substantially the same earnings multiples, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised.

 

8. Fair Value Hierarchy

Except for the Company's 7.25% 2025 Debenture Stock, which is measured at amortised cost under the effective interest rate method, financial assets and liabilities of the Company (re investments) are carried in the Balance Sheet at their fair value. Additionally the balance sheet amount is a reasonable approximation of fair value (re amounts in respect of sales for future settlement, dividends receivable, cash at bank, and purchases for future settlement). The fair value is the amount at which the asset could be sold or the liability transferred in a current transaction between market participants, other than a forced or liquidation sale.

 

The table below sets out fair value measurements of financial assets in accordance with the IFRS fair value hierarchy system:

 

 

Half year ended 31 March 2018

 

 

Level 1

Level 2

Level 3

Total

Financial assets

£'000

£'000

£'000

£'000

Financial assets held at fair value through profit or loss

 

 

 

 

Equities and managed funds

 

 

 

 

Listed equity securities

53,335

 

 

53,335

Unlisted equity securities (MAM Funds)

 

76,532

 

76,532

Unlisted equity securities

 

 

59,918

59,918

 

53,335

76,532

59,918

189,785

 

 

Half year ended 31 March 2017*

 

 

Level 1

Level 2

Level 3

Total

Financial assets

£'000

£'000

£'000

£'000

Financial assets held at fair value through profit or loss

 

 

 

 

Equities and managed funds

 

 

 

 

Listed equity securities

60,745

23

 

60,768

Unlisted equity securities (MAM Funds)

 

91,188

 

91,188

Unlisted equity securities

 

 

58,447

58,447

 

60,745

91,211

58,447

210,403

 

*Restated to reflect the transfer of MAM funds from listed to unlisted.

 

 

 

Year ended 30 September 2017

 

 

Level 1

Level 2

Level 3

Total

Financial assets

£'000

£'000

£'000

£'000

Financial assets held at fair value through profit or loss

 

 

 

 

Equities and managed funds

 

 

 

 

Listed equity securities

55,934

 

 

55,934

Unlisted equity securities (MAM Funds)

 

96,122

 

96,122

Unlisted equity securities

 

 

61,692

61,692

 

55,934

96,122

61,692

213,748

 

There have been no transfers during the period between Levels 1 and 2, and one sale out of Level 3.

 

Investments whose values are based on quoted market prices in active markets, and are therefore classified as Level 1, include active listed equities. The Company does not adjust the quoted price for these instruments in normal market conditions (although it may invoke its fair value pricing policy in times of market disruption - this was not the case for 31 March 2018, 30 September 2017 or 31 March 2017).

 

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified as Level 2. As Level 2 instruments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information (the MAM funds are priced daily, remain highly liquid and are not subject to any such adjustments).

 

Instruments classified within Level 3 have significant unobservable inputs. Level 3 instruments include private equity and corporate debt securities. As observable prices are not available for these securities, the Company has used valuation techniques to derive fair value. In respect of unquoted instruments, or where the market for a financial instrument is not active, fair value is established by using recognised valuation methodologies, in accordance with IPEV Valuation Guidelines. New instruments are initially valued at cost, for a limited period, being the price of the most recent investment in the investee. This is in accordance with IPEV Guidelines as the cost of recent investments will generally provide a good indication of fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

The Company's current level 3 classified investments comprise certain individually immaterial unlisted investments, which total in aggregate £94,000, and the investment in MAM valued at £59,824,000. The carrying value of MAM is normally assessed twice a year by the Audit Committee and is approved by the Board. The fair value of MAM is based on a price at which the Company may sell its shares back to MAM and its employees, which is currently considered to be the sole market for the Company's shares. The significant input in assessing the price is the earnings of MAM and a 5.0% increase/decrease in MAM's earnings would result in an increase/decrease of 4.4% in the carrying value of MAM.

 

The table below sets out the movement in Level 3 instruments for the period:

 

 

31 March 2018

 

 

Total
£'000

Equity investments
£'000

Opening balance

61,692

61,692

Sale proceeds recorded in the period

(70)

(70)

Total net loss for the period included in the Condensed Statement of Comprehensive Income

 

 

(1,704)

 

 

(1,704)

 

59,918

59,918

 

The fair value of the Company's debenture stock is calculated using a standard present value methodology and by reference to the market yields of a comparable UK Treasury Bond instrument with a 2.50% risk premium being added.

 

 

Half year ended

31 March 2018

Half year ended

31 March 2017

Year ended

30 September 2017

Financial liabilities

Book value
£'000

Fair value
£'000

Book value
£'000

Fair

value
£'000

Book value
£'000

Fair value
£'000

£13.5m (2016: £13.5m) 9.50% 2020 debenture stock*

 

 

13,452

16,159

13,459

15,620

£20.7m (2016: £20.7m) 7.25% 2025 debenture stock

20,514

25,267

20,495

26,373

20,504

25,706

 

20,514

25,267

33,947

42,532

 

33,963

41,326

 

* The 9.50% March 2020 debenture stock was redeemed in November 2017. Further information is contained in the Chief Executive's Report above.

 

The above financial liabilities would be classified as Level 2 financial investments in the Fair Value Hierarchy.

 

9. Principal financial risks

The principal financial risks which the Company faces include exposure to:

 

• Market risk

• Foreign currency risk

• Interest rate risk

• Other price risk

• Credit risk

• Liquidity risk

 

Further details of the Company's management of these risks and the exposure to them are set out in Note 25 of the Company's Annual Report for the year ended 30 September 2017, as issued on 4 December 2017. There have been no changes to the management of these risks since that date. However on 6 November 2017, the Company redeemed, for cash with settlement on 6 December 2017, the entire amount outstanding of its 9.50% March 2020 debenture stock (further details are in the Chief Executive's Report above). As such the Company's exposure to various risks has decreased proportionately.

 

10. Majedie Asset Management Limited (MAM)

As at 31 March 2018, the Company had a 17.1% equity shareholding in MAM, which provides investment management and advisory services across a range of UK and global equity strategies.

 

The carrying value of the investment in MAM is included in the Condensed Balance Sheet as part of investments at fair value through profit or loss:

 

 

31 March
2018
£'000

31 March
2017
£'000

30 September
2017
£'000

 

 

 

 

Cost of investment

540

540

540

Holding gains

59,284

57,788

61,010

Fair value at period end

59,824

58,328

61,550

 

The carrying value of MAM in the 31 March 2018 Condensed Financial Statements is its fair value as assessed by the Audit Committee and approved by the Board as at 31 March 2018.

 

11. Net Asset Value

The net asset value per share has been calculated based on Equity Shareholders' Funds and on 53,439,000 (31 March 2017 and 30 September 2017: 53,439,000) ordinary shares, being the number of shares in issue at the period end.

 

12. Reconciliation of Operating Profit to Operating Cash Flow

 

 

Half year ended
31 March
2018
£'000

Half year ended
31 March
2017
£'000

Year ended
30 September
2017
£'000

Net (loss)/return before taxation

(7,337)

14,130

17,514

Adjustments for:

 

 

 

Losses/(gains) on investments

7,303

(12,063)

(14,680)

Accumulation dividends

(138)

(119)

(338)

Depreciation

14

12

25

Foreign exchange (gains)/losses

(1)

2

(1)

Purchases of investments

(5,426)

(18,447)

(26,043)

Sales of investments

22,135

21,470

28,580

 

16,550

4,985 

5,057

 

 

 

 

Finance costs

996

1,407

2,816

Premium paid on the redemption of 9.50% March 2020 debenture

2,869

 

 

Operating cash flows before movements in working capital

20,415

6,392

7,873

(Decrease)/increase in trade and other payables

(42)

(4)

5

Increase in trade and other receivables

(58)

(170)

(46)

 

 

 

 

Net cash flow from operating activities before tax

20,315

6,218

7,832

Tax recovered

4

22 

31

Tax on overseas dividends

(5)

(4)

(15)

 

 

 

 

Net cash inflow from operating activities

20,314

6,236

7,848

 

13. Reconciliation of Net Cash Flow to Movement in Net Debt

 

 

Half year ended
31 March
2018
£'000

Half year ended
31 March
2017
£'000

Year ended
30 September
2017
£'000

(Decrease)/increase in cash

(347)

1,748

99

Non cash items

13,449

(16)

(32)

 

 

 

 

Change in net debt

13,102

1,732

67

 

 

 

 

Net debt beginning of period

(30,397)

(30,464)

(30,464)

Net debt at end of period

(17,295)

        (28,732)

(30,397)

 

14. Reconciliation of changes in liabilities arising from financing activities

 

 

Non-cash charges

 

 

30 September 2017

 £000

Cash flows

£000

Premium on

redemption

£000

Amortisation

of expenses

£000

31 March

2018

£000

Long term borrowings

 

 

 

 

 

£13.5m 9.50% 2020

debenture stock

13,459

(16,327)

2,869

(1)

 

£20.7m 7.25% 2025

debenture stock

 

20,504

 

 

10

20,514

Total liabilities from

financing activities

33,963

(16,327)

2,869

9

20,514

 

15. Related Party Transactions

Majedie Asset Management (MAM)

MAM is the Company's Investment Manager providing investment management services under an Investment Agreement. The agreement provides for MAM to manage the Company's investment assets on both a segregated portfolio basis and also by investments into various MAM collective investment vehicles or funds. Details of the Investment Agreement are contained in the material contracts section of the Directors' Report in the Company's Annual Report for the year ended 30 September 2017. As Investment Manager, MAM is entitled to receive investment management fees. In respect of the Segregated Portfolio these are charged directly to the Company and are shown as an expense in its accounts. Any management fees due in respect of the investments made into any MAM funds are charged in the fund and are therefore included as part of the investment value of the relevant holding. MAM is also entitled to performance fees in respect of the investment in the MAM Tortoise fund. The fees crystallise annually on 30 September and are calculated and charged against each individual investor. As such these are also shown as an expense in the Company's accounts and are charged wholly to capital. Details concerning the Company's investments in the period in the MAM funds are shown in the Chief Executive's Report above.

 

In addition to the above, the Company retains an investment in MAM itself. Mr JWM Barlow is a non-executive director of MAM but receives no remuneration for this role. MAM is accounted for as an investment in the Company accounts and is valued at fair value through profit or loss. Details concerning the Company's investment in MAM are included in the Chief Executive's Report above.

 

The table below discloses the transactions and balances between those entities:

               

 

Half year ended

Half year ended

Year ended

 

31 March

31 March

30 September

 

2018

£'000

2017

£0'000

2017

£'000

Transactions during the period:

 

 

 

 

 

 

 

Dividend income received from MAM

3,451

2,991

4,142

Performance fee income due to MAM (MAM Tortoise fund only)

 

5

4

Management fee income due to MAM (Segregated Portfolio only)

220

246

486

 

 

 

 

Balances outstanding at the period end:

 

 

 

Between the Company and MAM (Segregated Portfolio investment management fees)

 

107

 

119

122

Value of the Company's investment in MAM

59,824

58,328

61,550

 

Transactions between related party companies during the period were made on terms equivalent to those that occur in arm's length transactions.

 

16. Financial Information

The financial information contained in this Half-Yearly Financial Report does not constitute full statutory accounts as defined in section 434 of the Companies Act 2006.

 

The information for the year ended 30 September 2017 has been extracted from the latest published audited accounts. 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 section 498(2) or (3) of the Companies Act 2006. Those statutory accounts were prepared in accordance with IFRS, as adopted by the European Union.

 

Company Information

 

Board of Directors

Depositary

A J Adcock, Chairman

BNY Mellon (International) Limited

P D Gadd

1 Canada Square

R D C Henderson

London E14 5AL

J W M Barlow (Executive)

 

All Directors are non-executive unless indicated

The Depositary has delegated the safe keeping of the Company's assets to the Custodian, The Bank of New York Mellon SA/NV, London Branch.

 

 

Registered Office

AIFM

1 King's Arms Yard

Majedie Investments PLC

London EC2R 7AF

 

 

 

Telephone: 020 7382 8170

Registrars

E-mail: majedie@majedieinvestments.com

Computershare Investor Services PLC

Registered number: 109305 England

The Pavilions

 

Bridgwater Road

Company Secretary

Bristol BS99 6ZZ

Link Company Matters Limited

Telephone: 0870 707 1159

The Registry

 

34 Beckenham Road

Auditors

Beckenham

Ernst & Young LLP

Kent BR3 4TU

25 Churchill Place

 

Canary Wharf

Investment Manager

London E14 5EY

Majedie Asset Management Limited

 

10 Old Bailey

Stockbrokers

London EC4M 7NG

J.P. Morgan Cazenove

Telephone: 020 7618 3900

25 Bank Street

E-mail: info@majedie.com

London E14 5JP

 

 

 

Website

 

www.majedieinvestments.com

 

 

Financial Calendar

 

Year end

30 September

Annual results

December

Half year results

May

Annual General Meeting

January

Dividends paid

January and June

 

 

2018 Interim Dividend Timetable

 

The interim dividend for the period ended 31 March 2018 is 4.0p per share.

 

 

Ex-dividend date

7 June

Record date

8 June

Payment date

22 June

 

 

 

 

       

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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