Final Results
THE THROGMORTON TRUST PLC
PRELIMINARY ANNOUNCEMENT
FOR THE YEAR ENDED 30 NOVEMBER 2003
• Sustained outperformance by the Trust in strong SmallCap market
• Net Asset Value per ordinary share 104.9p (2002:77.5p) see table below
• Final dividend 1.0p (2002:1.0p) making a total of 1.5p (2002:1.5p)
NET ASSET VALUE
30.11.2003 30.11.2002 Year on year
% change
The Throgmorton Trust PLC 104.9p 77.5p +35.4
FTSE SmallCap (ex Inv. Cos.) 2,462.4 1,914.5 +28.6
FTSE All-Share 2,146.7 2,003.0 +7.2
THE CHAIRMAN, LORD STEWARTBY, COMMENTED:
During the year 2003 the SmallCap sector performed much more strongly than
other elements of the market. After a long period of decline in stock markets
it is a welcome relief to be able to report on a much more satisfactory year,
during which the small companies sector as a whole staged a strong recovery and
continued outperformance was achieved by the Trust. In the thirty months from
its peak (3,576), in September 2000, to its lowest point (1,640), in March
2003, the SmallCap Index lost more than 50 per cent of its value; but although
there is still a long way to go before earlier levels are regained, the upward
trend in the last few months has been soundly based.
Portfolio and Net Asset Value
As explained in the Managers' Review in the Report and Accounts, the portfolio
of the Trust is constructed to cover a broad range of sectors and a spread of
market capitalisation from AIM stocks to the lower end of the MidCap Index.
There is also a balanced approach to the assessment of risk, avoiding stocks
with undue volatility in the bulk of the portfolio while including some element
of more adventurous holdings when market circumstances are suitable and
particular opportunities become available. Above all, careful attention is
given to the selection of individual stocks, measuring them against the
criteria of strong management, clear objectives, tight financial control and a
positive market environment. It is gratifying to record that this formula has
proved its worth with outperformance in exceptionally volatile markets as well
as in steadier times.
At 30 November 2003 the net asset value was 104.9p per share against 77.5p at
the end of the previous November. The rise in the Trust's net asset value per
share over the twelve months of 35.4 per cent compares with an increase of 28.6
per cent in the FTSE SmallCap Index (excluding Investment Companies). Over the
same period the FTSE All Share Index rose by 7.2 per cent, and the FTSE 100
Index by 4.1 per cent, as investors identified better value in smaller
companies, which could benefit from the relatively stronger performance of the
domestic economy, than in large companies with more international exposure. In
December and January there have been further gains in the Trust's net asset
value, and outperformance against the indices has continued.
The £11 million outstanding of Convertible Loan Stock was redeemed at par at
maturity on 30 November 2003. The Association of Investment Trust Companies is
recommending that more emphasis should be placed on net asset values adjusted
for the so-called 'fair value' of debt instruments as if they were to be repaid
at current market value regardless of their date of maturity. Accordingly, the
theoretical net asset value adjusted on this basis is given with the balance
sheet. A word of warning should, however, be expressed in this connection. It
would be misleading as to the overall financial condition of a trust to use the
adjusted net asset value without taking account of other consequences of early
redemption of high coupon debt; such repayment would in most cases result in an
increase in distributable revenue (probably sufficient in the case of this
Trust to justify a higher dividend than currently paid).
Revenue and Dividend
The net revenue of the Trust, after tax, was £3.3 million, compared with £3.1
million in 2002. Over the past three years the Trust's income had been on a
reducing trend, following the decision to change the investment objective by
removing the income requirement, and the consequent repositioning of the
portfolio to a lower yield. One of the results of this has been that since 2001
the Trust's annual dividend has not been fully covered by its revenue; but with
income now rising and substantial revenue reserves held within the Company and
its financing subsidiaries, the Directors do not anticipate any need for a
reduction in the dividend. They therefore recommend a final dividend of 1.0p
per share, making a total of 1.5p for the year, both unchanged from 2002.
Corporate Governance
The past year has seen an array of new initiatives affecting the conduct and
composition of boards of directors of public companies, most notably in the
Higgs Report on Corporate Governance, the Smith Report on Audit Committees and
new Listing Rules for investment companies imposed by the Financial Services
Authority. Changes resulting from the new Combined Code, including increased
reporting requirements, do not apply in respect of the Trust's year ended 30
November 2003, but will do so henceforward. A full account of the Trust's
response will therefore be included in the Annual Report next year but, in
anticipation of this, increased information on some governance matters is given
in the present Report.
The Board is committed to maintaining high standards of corporate governance. A
majority of the directors are independent on any definition. Nevertheless, in
order to comply with the new Listing Rules, I intend to step down as Chairman
of the Company at the Annual General Meeting in 2005.
Outlook
A year ago, at a time of deep pessimism, I ventured to suggest that after three
very difficult years some improvement in economic outlook and market
performance might become evident by the end of 2003. Such hopes have indeed
been fulfilled, with signs of greater confidence in the world economy and a
return to growth, albeit at a modest rate in many countries. Together with the
resolution of the main hostilities in Iraq, these conditions enabled markets to
recover sufficiently to lift the valuation of individual stocks to more
realistic levels, so that advances from here onwards are likely to be less
spectacular than those of the last six months. Prospects for the United Kingdom
domestic economy, which is particularly relevant for the Small Cap sector, are
now reasonably positive, and with returning confidence in markets we would
expect some further progress in 2004.
Lord Stewartby
Chairman
5 February 2004
The Throgmorton Trust PLC
Preliminary statement for the year ended 30 November 2003
Statement of Total Recognised Gains and Losses
Year to 30 November 2003
(unaudited)
Revenue Capital Total
£000s £000s £000s
Realised gains and losses - (2,199) (2,199)
Unrealised gains and losses - 69,913 69,913
Income 7,383 - 7,383
Management fee (1,138) (1,138) (2,276)
Other expenses (372) - (372)
Net return before finance costs and 5,873 66,576 72,449
taxation
Interest payable and similar (2,550) (2,425) (4,975)
charges
Return on ordinary activities 3,323 64,151 67,474
before taxation
Tax on ordinary activities - - -
Return on ordinary activities after 3,323 64,151 67,474
taxation attributable to equity
shareholders
Dividends in respect of equity (3,494) - (3,494)
shares
Transfer (from)/to reserves (171) 64,151 63,980
Return per ordinary share
- basic 1.40p 27.09p 28.49p
- assuming conversion of loan stock n/a n/a n/a
The revenue column of this statement is the profit and loss account of the
company. All revenue and capital items in this statement derive from continuing
operations. No operations were acquired or discontinued in the year.
The Throgmorton Trust PLC
Preliminary statement for the year ended 30 November 2003
Statement of Total Recognised Gains and Losses (Continued)
Year to 30 November 2002
(audited)
Revenue Capital Total
£000s £000s £000s
Realised gains and losses - (5,569) (5,569)
Unrealised gains and losses - (51,576) (51,576)
Income 7,177 - 7,177
Management fee (1,181) (1,181) (2,362)
Other expenses (291) - (291)
Net return before finance costs and 5,705 (58,326) (52,621)
taxation
Interest payable and similar (2,582) (2,425) (5,007)
charges
Return on ordinary activities 3,123 (60,751) (57,628)
before taxation
Tax on ordinary activities (58) 58 -
Return on ordinary activities after 3,065 (60,693) (57,628)
taxation attributable to equity
shareholders
Dividends in respect of equity (3,559) - (3,559)
shares
Transfer from reserves (494) (60,693) (61,187)
Return per ordinary share
- basic 1.29p (25.58p) (24.29p)
- assuming conversion of loan stock 1.41p (24.51p) (23.10p)
The Revenue column of this statement is the profit and loss account of the
company. All revenue and capital items in this statement derive from continuing
operations. No operations were acquired or discontinued in the year.
The Throgmorton Trust PLC
Preliminary statement for the year ended 30 November 2003
Revenue Account
for the year ended 30 November £000s 2003 £000s 2002
(unaudited) (audited)
£000s £000s
Income from fixed asset investments 6,318 5,741
Franked income 580 1,056
Unfranked income
6,898 6,797
Other income 367 281
Interest receivable 118 99
Fees and commissions
485 380
Gross Income 7,383 7,177
Expenses and interest 1,138 1,181
Management fee 372 291
Administration expenses 2,550 2,582
Interest payable
4,060 4,054
Net revenue from ordinary 3,323 3,123
activities before taxation
Tax on net revenue from ordinary - 58
activities
Net revenue from ordinary 3,323 3,065
activities after taxation
Dividends 1,186 1,186
Ordinary shares: 2,308 2,373
Interim
Final
3,494 3,559
Transfer from reserves (171) (494)
Earnings per share - basic 1.40p 1.29p
- diluted - 1.41p
The revenue account is a fuller version of the profit and loss account of the
Company.
All revenue is derived from continuing operations.
No operations were acquired or discontinued during the year.
The Throgmorton Trust PLC
Preliminary statement for the year ended 30 November 2003
Balance Sheet
as at 30 November £000s 2003 £000s 2002
(unaudited) (audited)
£000s £000s
Fixed asset investments 279,647 220,396
Listed 44 41
- United Kingdom 2,889 3,186
- Overseas
Subsidiary undertakings
282,580 223,623
Current assets 2,564 1,357
Debtors - 8,572
Cash at bank
2,564 9,929
Creditors: 1,773 -
Amounts falling due within one year 1,248 1,512
Trade creditors 885 714
Amounts owed to subsidiary 1,373 -
undertakings
2,308 2,373
Sundry creditors
Bank overdraft
Proposed dividend on ordinary
shares
7,587 4,599
Net current (liabilities)/assets (5,023) 5,330
Total assets less current 277,557 228,953
liabilities
(34,119) (45,126)
Creditors:
Amounts falling due after one year
Debentures, convertible debt and
loans
Net assets 243,438 183,827
Capital and reserves 3,590 11,600 3,327 11,863
Called up share capital 26,399 35,272 (43,514) 35,272
Share premium account 163,128 193,117 173,259 133,072
Capital reserves 3,449 3,620
Capital redemption reserve
Revaluation reserve
Realised capital profits
Revenue reserve
Total equity shareholders' funds 243,438 183,827
Net asset value per share 104.93p 77.48p
Net asset value adjusted for 'fair 99.39p 71.67p
value' of debt
The Throgmorton Trust PLC
Preliminary statement for the year ended 30 November 2003
Reconciliation of Movements in Shareholders' Funds
for the year ended 30 November 2003 2002
(unaudited) (audited)
£000s £000s
Net surplus revenue for distribution 3,323 3,065
Dividends (3,494) (3,559)
Net transferred from reserves (171) (494)
Non distributable capital gain/(deficit) 64,151 (60,693)
Repurchase of ordinary shares (4,369) (369)
Release of provision for previous subsidiary - 177
undertaking
Net increase/(reduction) to shareholders' funds 59,611 (61,379)
Opening shareholders' funds 183,827 245,206
Closing shareholders' funds 243,438 183,827
The Throgmorton Trust PLC
Preliminary statement for the year ended 30 November 2003
Cash Flow Statement
for the year ended 30 November 2003 2002
(unaudited) (audited)
£000s £000s
Operating activities 6,506 6,722
Cash received from investments 367 281
Interest received 89 89
Underwriting commission (1,089) (1,312)
Management fee (101) (98)
Cash paid to and on behalf of the directors (226) (222)
Other cash payments
Net cash inflow from operating activities 5,546 5,460
Servicing of finance (2,550) (2,582)
Interest paid - revenue
Capital expenditure and financial investment (82,460) (77,614)
Purchase of investments 91,841 77,690
Sale of investments (1,089) (1,312)
Capital management fee (2,425) (2,424)
Interest charged to capital 105 (72)
Net payments from/(to) subsidiaries
Net cash inflow/(outflow) from investing 5,972 (3,732)
activities
Dividends (3,559) (3,559)
Dividends paid - equity shares
Net cash inflow/(outflow) before financing 5,409 (4,413)
Financing (4,347) (369)
Repurchase of ordinary shares
Repayment of convertible loan stock (11,007) -
Net cash outflow from financing (15,354) (369)
Decrease in cash (9,945) (4,782)
Notes:
The financial information set out in the announcement does not constitute the
Company's statutory accounts for the years ended 30 November 2003 or 2002. The
financial information for the year ended 30 November 2002 is derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies. The auditors reported on those accounts; their report was
unqualified and did not contain a statement under s237(2) or (3) Companies Act
1985. The statutory accounts for the year ended 30 November 2003 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.
The financial information has been prepared on the basis of the accounting
policies set out in the Company's financial statements for the year ended 30
November 2002, apart from that the statement of total recognised gains and
losses is shown as the primary statement rather than the revenue account.
The board has recommended the payment of a final dividend of 1.0p per share in
respect of the year ended 30 November 2003. Subject to approval by shareholders
at the Company's annual general meeting, the dividend will be paid on 31 March
2004 to shareholders on the register of the Company on 5 March 2004.
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