Final Results
Merchants Trust PLC
18 March 2008
For Immediate Release 18 March 2008
THE MERCHANTS TRUST PLC
ANNOUNCEMENT OF PRELIMINARY RESULTS
For the year ended 31 January 2008
Highlights
• Net dividends are 21.6p per share in 2007/08, an increase of 8.0%, the
twenty-sixth consecutive annual increase.
• Ordinary shares yield 5.5% at 382p, compared with 4.1% on the FTSE 100
Index at the close of business on 17 March 2008.
• Total return was -9.6%, compared with -8.3% for the FTSE 350 Higher Yield
Total Return Index and -1.9% for the FTSE 100 Total Return index.
Performance of the underlying portfolio exceeded that of the Higher Yield
Index by 1.7%* but the Net Asset Value was adversely affected by gearing
over the period.
• The Net Asset Value per share fell by 13.3% compared with a fall of 12.1%
in the FTSE 350 Higher Yield Price Index and 5.2% in the FTSE 100 Price
Index.
Net Asset Value
The Net Asset Value per ordinary share at 31 January 2008 was 492.3p compared
with 567.5p at 31 January 2007, a decrease of 13.3%. This compares with a
decrease of 12.1% recorded by the FTSE 350 Higher Yield Price Index and one of
5.2% recorded by the FTSE 100 Price Index. The performance of the underlying
portfolio exceeded the return on the FTSE 350 Higher Yield Index by 1.7%*. In a
falling market, however, the net asset value per share return was adversely
impacted by the Trust's long term gearing.
Ordinary Dividend
The Board has declared a final dividend of 5.4p per share, payable on 14 May
2008 to shareholders on the register at the close of business on 11 April 2008.
This gives a total of 21.6p for the year ended 31 January 2008, an increase of
8.0% when compared with the total distribution of 20.0p paid in respect of the
previous year. The Trust has now recorded an unbroken record of dividend
increases over the last twenty-six years.
Total Return and Earnings
The Net Asset Value total return, reflecting both the decrease in capital values
and increase in dividends paid to Ordinary Shareholders in the last financial
year, was -9.6%. The equivalent return recorded by the FTSE 350 Higher Yield
Total Return Index and the FTSE 100 Total Return Index was -8.3% and -1.9%
respectively. Net revenue earnings per share rose from 22.17p to 22.86p or by
3.1%. Earnings in the financial year included £0.5m from special dividends; in
the previous financial year special dividends totalled £1.3m.
Page 2
Share Buy Backs
During the financial year 946,413 shares were bought back for cancellation,
representing 0.91% of the Trust's shares in issue at the beginning of the year.
The Board will recommend to shareholders that the Company takes renewed powers
to buy back its Ordinary Shares. Full details will be sent to shareholders in
the forthcoming Annual Financial Report.
Market and Portfolio Background
During the year the stock market became increasingly volatile as the disruption
in credit markets spread to other asset classes. Volatility of individual
sectors was even higher than at the level of the market as a whole. Higher
yielding shares, which generally comprise Merchants' portfolio, performed
particularly poorly as higher dividend yields provided little support. This
area of the market is also heavily biased towards financials (which were very
weak) and has no mining shares (which rose significantly). Another notable
feature was the underperformance of medium sized companies often more exposed to
the domestic economy.
Prospects
Over the coming months the disruption in the banking and credit markets is
likely to shape developments in the wider economy. US growth is slowing rapidly
and the risks of a significant economic slowdown in the UK have increased.
Share prices are likely to remain volatile until a measure of confidence returns
to the financial markets.
Sir Bob Reid
Sir Bob Reid, who joined the Board in January 1995, will be retiring from the
Board after the AGM in May this year. Sir Bob has made an exceptional
contribution to the Trust over many years, bringing great breadth of experience
in the commercial and financial world to our discussions. We shall miss him
enormously.
Plans are well advanced to enable us to appoint at least one new director in
2008.
Annual General Meeting
The Annual General Meeting of the Company will be held on Tuesday 13 May 2008 at
12.00 noon.
Hugh Stevenson
Chairman
155 Bishopsgate
London EC2M 3AD
* Source: Wilshire
For further information, please contact:
RCM (UK) Ltd
Simon White
Head of Investment Trusts
RCM (UK) Limited
Tel: 020 7065 1539
Page 3
Unaudited preliminary results for the year ended 31 January 2008 were approved
for immediate release as undernoted:
RESULTS
INCOME STATEMENT
for the year ended 31 January 2008
2008
Revenue Capital Total
Return Return Return
(£000s) (£000s) (£000s)
(Note 3)
Net losses on investments at fair value - (72,106) (72,106)
Income 28,495 - 28,495
Investment management fee (899) (1,670) (2,569)
Administration expenses (587) (2) (589)
Net return before finance costs and taxation 27,009 (73,778) (46,769)
Finance costs: interest payable and similar charges (3,342) (6,117) (9,459)
Net return on ordinary activities before taxation 23,667 (79,895) (56,228)
Taxation (18) - (18)
Net return attributable to Ordinary Shareholders 23,649 (79,895) (56,246)
Return per Ordinary Share (Note 1) 22.86p (77.23)p (54.37)p
(basic and diluted)
2008
BALANCE SHEET as at 31 January 2008 (£000s)
Investments held at fair value through profit or loss 608,451
Net Current Assets 11,150
619,601
Creditors : Amounts falling due after more than one year (113,414)
Total Net Assets 506,187
Called up Share Capital 25,703
Share Premium Account 7,527
Capital Redemption Reserve 293
Capital Reserves : Realised 431,359
: Unrealised 16,645
Revenue Reserve 24,660
Equity Shareholders' Funds 506,187
Net Asset Value per Ordinary Share (Note 2) 492.3p
Page 4
Unaudited preliminary results for the year ended 31 January 2007 were approved
for immediate release as undernoted:
RESULTS
INCOME STATEMENT
for the year ended 31 January 2007
2007
Revenue Capital Total
Return Return Return
(£000s) (£000s) (£000s)
(Note 3)
Net gains on investments at fair value - 71,441 71,441
Income 27,750 - 27,750
Investment management fee (961) (1,786) (2,747)
Administration expenses (488) (3) (491)
Net return before finance costs and taxation 26,301 69,652 95,953
Finance costs: interest payable and similar charges (3,447) (6,321) (9,768)
Net return on ordinary activities before taxation 22,854 63,331 86,185
Taxation - - -
Net return attributable to Ordinary Shareholders 22,854 63,331 86,185
Return per Ordinary Share (Note 1) 22.17p 61.44p 83.61p
(basic and diluted)
2007
BALANCE SHEET as at 31 January 2007 (£000s)
Investments held at fair value through profit or loss 695,770
Net Current Assets 6,613
702,383
Creditors : Amounts falling due after more than one year (113,548)
Total Net Assets 588,835
Called up Share Capital 25,940
Share Premium Account 7,527
Capital Redemption Reserve 56
Capital Reserves : Realised 401,296
: Unrealised 131,247
Revenue Reserve 22,769
Equity Shareholders' Funds 588,835
Net Asset Value per Ordinary Share (Note 2) 567.5p
Page 5
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 31 January 2008
Called up Share Capital Capital Capital Revenue Total
Share Premium Redemption Reserve Reserve Reserve
Capital Account Reserve Realised Unrealised
(£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s)
Net Assets at 31
January 2006 25,526 40 56 351,108 118,104 19,879 514,713
Revenue Return - - - - - 22,854 22,854
Dividends on Ordinary - - - - - (19,964) (19,964)
Shares
Capital Return - - - 50,188 13,143 - 63,331
Shares issued during 414 7,487 - - - - 7,901
the year
Net Assets at 31
January 2007
25,940 7,527 56 401,296 131,247 22,769 588,835
Net Assets at 31
January 2007 25,940 7,527 56 401,296 131,247 22,769 588,835
Revenue Return - - - - - 23,649 23,649
Dividends on Ordinary - - - - - (21,758) (21,758)
Shares
Capital Return - - - 34,707 (114,602) - (79,895)
Shares repurchased (237) - 237 (4,644) - - (4,644)
during the year
Net Assets at 31 25,703 7,527 293 431,359 16,645 24,660 506,187
January 2008
Page 6
CASH FLOW STATEMENT
For the years ended 31 January 2008 and 2007
2008 2008 2007
(£000s) (£000s) (£000s)
Net cash inflow from operating activities 33,678 28,262
Servicing of Finance
Interest paid (9,553) (9,530)
Dividends on Preference Stock (43) (43)
Net cash outflow from servicing of finance (9,596) (9,573)
Investing Activities
Purchases of fixed asset investments (188,448) (236,518)
Sales of fixed asset investments 189,710 238,513
Net cash inflow from investing activities 1,262 1,995
Equity dividends paid (21,758) (19,964)
Net cash inflow before financing 3,586 720
Financing
Purchase of Ordinary shares for cancellation (4,644) -
Cash transferred from Allianz Dresdner Income Growth - 908
Investment Trust Plc in connection with the issue of
Ordinary Shares
Increase in cash (1,058) 1,628
Page 7
Note 1
The Returns per Ordinary Share have been calculated using a weighted average
number of shares in issue during the year of 103,451,633 shares (2007 -
103,083,890).
Note 2
The net asset value is based on 102,813,464 Ordinary Shares in issue at the
year-end (2007 - 103,759,877).
Note 3
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items derive from continuing operations. No operations
were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the Income Statement.
Included in the cost of investments are transaction costs on purchases amounting
to £1,176,671 (2007: £1,502,518) and transaction costs on sales amounting to
£291,295 (2007: £369,855).
Note 4
Dividends paid on Ordinary Shares in respect of earnings for each period are as
follows:
Year to Year to
31 January 2008 31 January 2007
£'000s £'000s
Third Interim dividend 5.1p paid 16 February 2007 (2006 5,292 4,901
- 4.8p)
Final dividend 5.1p paid 16 May 2007 (2006 - 4.8p) 5,292 4,901
First Interim dividend 5.4p paid 16 August 2007 (2006 - 5,597 5,084
4.9p)
Second Interim dividend - 5.4p paid 15 November 2007 5,577 5,084
(2006 - 4.9p)
Unpaid dividends from prior years - (6)
21,758 19,964
Page 8
Dividends payable at the year end are not recognised as a liability under FRS 21
'Events after the Balance Sheet Date'. Details of these dividends are set out
below.
Year to Year to
31 January 2008 31 January 2007
£'000s £'000s
Third Interim dividend 5.4p paid 13 February 2008 (2007 - 5,552 5,292
5.1p)
Final proposed dividend 5.4p payable 14 May 2008 (2007 - 5,552 5,292
5.1p)
11,104 10,584
The total cash cost of the proposed final dividend is based on the number of
shares in issue at the year end. However, the dividend payable will be based on
the number of shares in issue on the record date and will reflect any purchases
and cancellations of shares by the Company settled subsequent to the year end.
Note 5
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the years ended 31 January 2008 or 31 January
2007. The financial information for the year ended 31 January 2007 has been
extracted from the audited statutory accounts for that year. The auditors report
on those accounts was unqualified and did not contain a statement under either
Section 237(2) or Section 237(3) of the Companies Act 1985. The statutory
accounts for the year ended 31 January 2008 will be finalised on the basis of
the financial information presented by the directors in this preliminary
announcement and will be delivered to the Registrar of Companies following the
Company's Annual General Meeting.
Note 6
The annual report will be sent to shareholders in mid April 2008 and will be
available to members of the public on the website www.merchantstrust.co.uk or
from the Company's registered office at 155 Bishopsgate, London EC2M 3AD.
This information is provided by RNS
The company news service from the London Stock Exchange
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