Interim Results
Merchants Trust PLC
22 September 2005
For immediate release 22 September 2005
THE MERCHANTS TRUST PLC
Announcement of Unaudited Interim Results
For the six months ended 31 July 2005
Highlights
• Earnings per ordinary share of 11.10 p, up 8.6 %.
• Dividends per share declared for the first six months up 3.3 %.
• Net Asset Value of 450.2 p per share, up 8.3 % compared with 8.9% rise in
the FTSE 100 Index.
• Historic dividend yield of 4.5% net at 398p per share.
Interim Results
These interim results have been re-stated in accordance with new UK Financial
Reporting Standards.
Earnings per share
In the first six months of the current year, earnings have risen by 8.6 % to
11.10 p per share. As in previous years, we expect dividend receipts to have
been weighted towards the first half of the current financial year.
Interim Dividends
The Board has declared a second quarterly dividend of 4.70p per share, payable
on 10 November 2005 to shareholders on the register at close of business on 7
October 2005. The total distribution declared for the first half of 2005/6 is
9.3 p net, an increase of 3.3 % when compared with the same period last year.
Net Asset Value
The net asset value per ordinary share was 450.2p at 31 July 2005. This
represents an increase of 8.3 % when compared with the equivalent figure at 31
January 2005 - the end of the last financial year. Before taking account of the
beneficial impact of the Trust's borrowings, the underlying rise in the Trust's
total assets, excluding expenses allocated to capital, was 7.3 %. Over the same
period the FTSE 100 Index rose by 8.9 %, whilst the FTSE Higher Yield Index rose
by 8.2 %.
- 2 -
Prospects
The first half of the current financial year has seen a useful appreciation in
the Trust's investments and dividend income has grown. With corporate liquidity
continuing to improve, there is every likelihood that these dividend trends can
continue in the second half of 2005/6. Given this background and the strength of
the Revenue Reserve, the Board is confident that the long term record of
dividend growth will be maintained in the current financial year.
By Order of the Board
K J Salt
Secretary
155 Bishopsgate
London EC2M 3AD
- 3 -
THE MERCHANTS TRUST PLC
Summary of Unaudited Results
STATEMENT OF TOTAL RETURN
For the six months ended 31 July 2005
2005
£'000s £'000s £'000s
Revenue Capital Total
(Note 2)
Net gains on investments - 37,542 37,542
Income from fixed asset investments 13,586 - 13,586
Other income 90 - 90
Investment management fee (391) (726) (1,117)
Other expenses (272) - (272)
Transaction costs - (669) (669)
Net return before finance costs and taxation 13,013 36,147 49,160
Finance costs: interest and similar charges (1,682) (3,124) (4,806)
Return before taxation 11,331 33,023 44,354
Taxation
UK corporation tax - - -
Return attributable to Ordinary Shareholders 11,331 33,023 44,354
Return per Ordinary Share (Note 1) 43.44p
2005
BALANCE SHEET as at 31 July 2005 £'000s
Fixed Asset Investments
564,290
Net Current Assets 8,722
573,012
Creditors - amounts falling due after more than one year (113,336)
Total Net Assets 459,676
Called up Share Capital : Ordinary 25,526
Share Premium Account 40
Capital Redemption Reserve 56
Capital Reserves : Realised 335,254
: Unrealised 77,972
Revenue Reserve 20,828
Shareholders' Funds 459,676
Net asset value per Ordinary Share 450.2p
The net asset value is based on 102,103,936 shares in issue at 31 July 2005.
- 4 -
THE MERCHANTS TRUST PLC
Summary of Unaudited Results
STATEMENT OF TOTAL RETURN
For the six months ended 31 July 2004
2004
£'000s £'000s £'000s
Revenue Capital Total
(restated) (restated) (restated)
(Note 2) (Note 2)
Net gains on investments - 8,227 8,227
Income from fixed asset investments 12,708 - 12,708
Other income 79 - 79
Investment management fee (355) (654) (1,009)
Other expenses (284) - (284)
Transaction costs - (606) (606)
Net return before finance costs and taxation 12,148 6,967 19,115
Finance costs: interest and similar charges (1,714) (3,111) (4,825)
Return before taxation 10,434 3,856 14,290
Taxation
UK corporation tax - - -
Return attributable to Ordinary Shareholders 10,434 3,856 14,290
Return per Ordinary Share (Note 1) 14.00p
2004
(restated)
BALANCE SHEET as at 31 July 2004 £'000s
Fixed Asset Investments 477,847
Net Current Assets 8,499
486,346
Creditors - amounts falling due after more than one year (114,614)
Total Net Assets 371,732
Called up Share Capital : Ordinary 25,526
Share Premium Account 40
Capital Redemption Reserve 56
Capital Reserves : Realised 322,467
: Unrealised 3,284
Revenue Reserve 20,359
Shareholders' Funds 371,732
Net asset value per Ordinary Share 364.1p
The net asset value is based on 102,103,936 shares in issue at 31 July 2004.
- 5 -
THE MERCHANTS TRUST PLC
STATEMENT OF TOTAL RETURN
for the year ended 31 January 2005
2005
£'000s £'000s £'000s
Revenue Capital Total
(restated) (restated) (restated)
(Note 2)
Net gains on investments - 67,133 67,133
Income from fixed asset investments 22,517 - 22,517
Other income 158 - 158
Investment management fee (723) (1,342) (2,065)
Other expenses (594) - (594)
Transaction costs - (1,273) (1,273)
Net return before finance costs and taxation 21,358 64,518 85,876
Finance costs: interest and similar charges (3,408) (6,210) (9,618)
Return on ordinary activities before taxation 17,950 58,308 76,258
Taxation
UK Corporation tax - - -
Return attributable to Ordinary Shareholders 17,950 58,308 76,258
Return per Ordinary Share (Note 1) 74.69p
2005
(restated)
BALANCE SHEET as at 31 January 2005 £'000s
Fixed Asset Investments 535,095
Net Current Assets 2,736
537,831
Creditors - amounts falling due after more than one year (113,320)
Total Net Assets 424,511
Called up Share Capital : Ordinary 25,526
Share Premium Account 40
Capital Redemption Reserve 56
Capital Reserves : Realised 322,240
: Unrealised 57,963
Revenue Reserve 18,686
Shareholders' Funds 424,511
Net asset value per Ordinary Share 415.8p
The net asset value is based on 102,103,936 shares in issue at 31 January 2005.
- 6 -
THE MERCHANTS TRUST PLC
Cash Flow Statement
for the six months ended 31 July 2005 and comparative periods
Six Months to 31 Six Months to 31 Year to
July 2005 July 2004 31 January 2005
(£'000s) (£'000s) (£'000s)
Net cash inflow from operating activities 11,966 11,306 22,381
Servicing of finance
Interest paid (4,774) (4,795) (9,543)
Preference dividends paid (21) (43) (43)
Net cash outflow on servicing of finance (4,795) (4,838) (9,586)
Investing Activities
Payments to acquire fixed asset investments (79,751) (66,869) (142,790)
Proceeds on disposal of fixed asset investments 87,429 67,959 145,334
Net cash inflow from investing activities 7,678 1,090 2,544
Equity dividends paid (9,189) (9,189) (18,379)
Increase (decrease) in cash 5,660 (1,631) (3,040)
- 7 -
THE MERCHANTS TRUST PLC
Twenty Largest Equity Holdings as at 31 July 2005
Valuation % of
31.07.05 Total
£'000s Assets* Principal Activities
BP 50,360 8.79 Oil and gas production
HSBC Holdings 44,649 7.79 Banking
Royal Dutch Shell 39,179 6.84 Oil and gas production
GlaxoSmithKline 29,770 5.20 Pharmaceuticals
Royal Bank of Scotland 24,394 4.26 Banking
Lloyds TSB 21,811 3.81 Banking
HBOS 19,861 3.47 Banking
BT 18,769 3.28 Telecommunications
Vodafone 15,910 2.78 Telecommunications
Barclays 14,204 2.48 Banking
Scottish & Southern Energy 11,968 2.09 Electricity
Land Securities 11,074 1.93 Real estate
Rio Tinto 10,784 1.88 Mining
Slough Estates 10,700 1.87 Real estate
Anglo American 10,649 1.86 Mining
Alliance & Leicester 8,638 1.51 Banking
Severn Trent 8,411 1.47 Water
Diageo 8,355 1.46 Beverages
Legal & General 7,883 1.38 Life and general insurance
Bradford & Bingley 7,566 1.32 Banking
374,935 65.47
* Total Assets include current liabilities
The Merchants Trust PLC
Portfolio Analysis as at 31 July 2005
UK Other Total
% % %
Listed equities 98.5 - 98.5
Unlisted equities - - -
Net current assets 1.5 - 1.5
Total Assets 100.0 - 100.0
- 8 -
Note 1
The Returns per Ordinary Share attributable to each period are as follows:
Six months to Six months to Year to
31 July 31 July 31 January
2005 2004 2005
£'000s £'000s £'000s
Revenue 11.10p 10.22p 17.58p
Capital 32.34p 3.78p 57.11p
Total 43.44p 14.00p 74.69p
The Returns per Ordinary Share have been calculated using a weighted average
number of shares in issue during the period of 102,103,936 shares. (31 July
2004 - 102,103,936 shares; 31 January 2005 - 102,103,936 shares).
Note 2
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 period.
Note 3
The interim statements have been prepared using the following changes in
accounting policies. Restatement of prior year results are explained in notes 5,
6 and 7.
FRS 21: 'Events after the Balance Sheet date' requires that final dividends are
recognised as a liability when approved by shareholders. Interim dividends are
recognised only when paid
FRS 25: 'Financial Instruments: Presentation and Disclosure' requires the
reclassification of the Company's 3.65% Cumulative Preference Stock as a
financial liability rather than as share capital (non-equity interests in the
balance sheet). Preference dividends are now to be treated as an interest
expense and shown accordingly in the profit and loss account.
FRS 26: 'Financial Instruments: Measurement' requires that fixed asset
investments held for trading are measured at their fair value which is deemed to
be the bid value of those investments held at the close of business on the
accounting date. Previous policy measured fixed asset investments at their
mid-market value. The Company however has taken advantage of paragraph 108D of
FRS 26, which allows exemption from restating the previous periods' fixed asset
investments to bid values. Note 7 discloses the effect of such a restatement.
Also, in accordance with FRS 26, transaction costs relating to the purchase and
sale of investments are stated separately in the Statement of Total Return.
Note 4
Dividends payable on Ordinary Shares in respect of earnings for each period are
as follows:
Six months to Six months to Year to
31 July 31 July 31 January
2005 2004 2005
£'000s £'000s £'000s
First interim 4.6p* 4,697 4.5p* 4,595 4.5p 4,595
Second interim 4.7p* 4,799 4.5p* 4,595 4.5p 4,595
Third interim - - 4.5p* 4,595
Final - - 4.5p* 4,594
9.3p 9,496 9.0p 9,190 18.0p 18,379
* These dividends are not recognised as a liability under FRS 21 (see Note 3).
Note 5
Statement of changes in equity for each period as follows:
Six months to Six months to Year to
31 July 31 July 31 January
2005 2004 2005
£'000s £'000s £'000s
(restated) (restated)
Revenue reserves
Revenue profit available for 11,331 10,434 17,950
distribution
Dividends appropriated in the year (9,189) (9,190) (18,379)
Transfer to (from) distributable 2,142 1,244 (429)
reserve
Other reserves
Recognised net capital gains 33,023 3,856 58,308
transferred to capital reserves
Net increase in Shareholders' Funds 35,165 5,100 57,879
Opening Shareholders' Funds 424,511 366,632 366,632
Closing Shareholders' Funds 459,676 371,732 424,511
Note 6
Restatement of opening balances
As previously Restated
stated
31 July 2004 Adjustment 31 July 2004
£'000s £'000s £'000s
Fixed Assets Investments 477,847 477,847
-
Net Current (Liabilities) Assets (691) 9,190 1 8,499
477,156 9,190 486,346
Less: Creditors - amounts falling due
after more than one year (113,436) (1,178) 2 (114,614)
Total Net Assets 363,720 8,012 371,732
Capital and Reserves
Called up Share Capital: - Ordinary 25,526 - 25,526
- Preference 1,178 (1,178) 2 -
Share Premium Account 40 - 40
Capital Redemption Reserve 56 - 56
Capital Reserves: - Realised 322,467 - 322,467
- Unrealised 3,284 - 3,284
Revenue Reserve 11,169 9,190 1 20,359
Shareholders' Funds 363,720 8,012 371,732
Net asset value per Ordinary Share 355.1p 364.1p
As previously Restated
stated 31 January
31 January 2005 Adjustment 2005
£'000s £'000s £'000s
Fixed Assets Investments 535,095 - 535,095
Net Current Liabilities (Assets) (6,454) 9,190 1 2,736
528,641 9,190 537,831
Less: Creditors - amounts falling due
after more than one year (112,142) (1,178) 2 (113,320)
Total Net Assets 416,499 8,012 424,511
Capital and Reserves
Called up Share Capital: - Ordinary 25,526 - 25,526
- Preference 1,178 (1,178) 2 -
Share Premium Account 40 - 40
Capital Redemption Reserve 56 - 56
Capital Reserves: - Realised 322,240 - 322,240
- Unrealised 57,963 - 57,963
Revenue Reserve 9,496 9,190 1 18,686
Shareholders' Funds 416,499 8,012 424,511
Net asset value per Ordinary Share 406.8p 415.8p
1Represents the effect of not recognising the interim and final dividends (FRS 21).
2Represents the effect of recognising the preference stock holding as a liability and not non-equity
shareholder funds (FRS 25).
Note 7
FRS 26 requires that the fixed asset investments be measured at their fair value
which is deemed to be the bid price. Had the Company not elected to take
advantage of the exemption under paragraph 108D of FRS 26, the effect of
revaluing the fixed asset investments at 31 January 2005 from mid to bid would
be to lower the value of the investments by £28,000 to £535,067,000 and
subsequently reduce the total net assets of the Company by the same amount.
Note 8
The interim statement has been neither audited nor reviewed by the Company's
auditors. The financial information for the year ended 31 January 2005 has been
extracted from the statutory accounts for that year which have been delivered to
the Registrar of Companies and restated by reference to the changes in
accounting policy detailed above. 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 Interim Report will be sent to Shareholders shortly and made available to
the public at the Registered Office of the Company, 155 Bishopsgate, London,
EC2M 3AD.
For further information, please contact:
RCM (UK) Limited
Simon White, Head of Investment Trusts
Tel: 020 7065 1539
or
RCM (UK) Limited
Nigel Lanning, Fund Manager
Tel: 020 7065 1474
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