Half-yearly Report
Majedie Investments PLC
Half-Yearly Financial Report
31 March 2013
The Directors announce the unaudited half-yearly financial report for the six
months to 31 March 2013 as follows:-
Copies of the half yearly-report can be obtained from the following website:
www.majedie.co.uk
Majedie Investments PLC is an investment trust with total portfolio assets
under management of over £154 million as at 31 March 2013.
Our Objective is to maximise total shareholder return whilst increasing
dividends by more than the rate of inflation over the long term.
Financial Highlights for the half year ended 31 March 2013
net assets per share increased by 7.2% to 231.1p
Share price increased by 7.8% to 168.0p
Discount to net assets narrowed from 27.8% to 27.3%
Revenue Return per share unchanged at 2.8p
Interim dividend unchanged at 4.2p
Performance
Net asset value total return of 10.3%
Total shareholder return of 12.3%
Investment Objective and Policy Statement
Investment Objective
The Company's objective is to maximise total shareholder return whilst
increasing dividends by more than the rate of inflation over the long term.
Investment Policy
General
The Company invests principally in securities of publicly quoted companies
worldwide and in funds managed by Javelin Capital LLP, though it may invest in
unquoted securities up to levels set periodically by the Board, including its
investment in Majedie Asset Management Limited. Investments in unquoted
securities, other than those managed by Javelin Capital LLP, (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 per cent. of the value of its gross assets
save that the Company may invest up to 25 per cent. of its gross assets in any
single fund managed by Javelin Capital. The Company will only invest in funds
managed by Javelin Capital 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 are split into four major groups. These are the Core
Portfolio, funds managed by Javelin Capital LLP, and the Company's investments
in Majedie Asset Management Limited and Javelin Capital LLP.
Benchmark
The Company does not have one overall benchmark, rather each distinct group of
assets is viewed independently. For the actively managed Core Portfolio the
benchmark comprises 70% FTSE All-Share Index and 30% FTSE World ex-UK Index
(Sterling) on a total return basis. Any investments made into Javelin Capital
LLP products are measured against the relevant fund benchmark as contained in
the fund's prospectus. 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 ongoing 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.
Chairman's Statement
World equity markets continued their recovery in the six months to 31 March
2013. However, the economic environment remains relatively fragile. Whilst
evidence of growth can be seen in the US (and to a lesser extent in the UK),
Europe continues to flat line against a background of unprecedented Central
Bank intervention. The Company's investment portfolio produced a steady return
given its defensive nature and its holding in the low volatility Javelin
Capital UCITS Fund.
The NAV and share price performance over the period returned 10.3% and 12.3%
respectively, both on a total return basis. I highlight below various aspects
of performance for the period which is further detailed and explained in the
Investment Manager's Report below.
Results and Dividends
The Group results for the six months to 31 March 2013 include the consolidation
of the investment held in the Javelin Capital Emerging Markets Alpha Fund
(UCITS), held under the classification of `Investments Held for Sale', and the
small residual interest of the previous investment in the Javelin Capital
Global Equity Strategies Fund (QIF), currently in liquidation, both on a basis
consistent with prior periods.
The Group's net revenue return before tax for the six months to 31 March 2013
was £1.5m, which is the same as the prior year period. Group income however was
down to £2.3m from £2.7m in the prior year period reflecting a reduction in
dividend receipts from investee companies and Majedie Asset Management (MAM),
the latter being a timing difference as a result of a rebalancing of dividend
payments between interim and final. Group income for the period also included a
modest contribution from Javelin Capital LLP, comprising external fee income
earned.
Total Group costs for the six months to 31 March 2013 were £1.1m as compared to
£1.7m in the prior year period. The decrease reflects the closure of the QIF
and cost reductions achieved in Javelin Capital LLP with Company only costs
remaining at the same level as the prior year. Cost control remains a key focus
for the Company and at Javelin Capital LLP.
The Board has decided that the interim dividend is to be maintained at 4.2
pence per share, which is consistent with previous years. The interim dividend
will be paid on 26 June 2013 to shareholders on the register on 7 June 2013.
The investment in MAM is held at fair value in both the Company and Group
accounts with its valuation being reviewed by the Board regularly. In
conjunction with the sale of MAM shares, as detailed further below, the Board
has determined that the carrying value of the Company's holding be increased to
£43.5m as at 31 March 2013.
Javelin Capital is consolidated into the Group accounts, and the weekly
published Group NAV, at its net asset value of £2.5m, as required under IFRS,
but is held in the Company accounts as an investment at cost in accordance with
our policy for unquoted investments. The Board has also reviewed the valuation
of the investment in Javelin Capital and has determined that the valuation will
remain at cost of £8.0m, in the Company accounts, as at 31 March 2013.
With the closure of the QIF the Company now only has an investment in the
Javelin Capital UCITS fund. This investment is held at fair value, which is
£31.7m as at 31 March 2013.
Investment Portfolio
The Investment Managers Report below provides the detailed commentary on the
Company's investment activity and performance in the period. However as in
previous periods I would like to provide an overview of the key issues
affecting the outturn for the period.
Firstly, the Core Portfolio performed below its benchmark. The portfolio whilst
being predominantly defensive has been slightly tilted towards more cyclical
exposure which in rising markets would normally outperform. Over the first half
this has not been the case and hence the underperformance of the portfolio. We
also compare our performance against a peer group of top income funds and
against these we have exceeded median returns.
Secondly, the funds managed by Javelin Capital LLP. These are now consolidated
in the UCITS Fund which is on the Goldman Sachs Platform. It produced a
negative return of 2.8% which is disappointing. This should be seen against a
background of negative returns in Emerging Markets in contrast to Developed
Markets combined with volatility falling to levels that have not been seen
previously.
Thirdly, MAM continues to perform well financially and in terms of investment
performance. The company recently marked its tenth anniversary since inception.
Given MAM's level of excess capital, your Company, alongside and in equal
proportion to the other founding shareholders, has sold shares equal to 3.5% of
the total MAM shares in issue. Some shares have been sold for cancellation and
some used to broaden the employee ownership of the company. The price received
is in excess of the historic carrying valuation of the business and therefore
the valuation of the stake has been increased at the interim stage. The
transaction has been legally agreed in May and will be settled in June.
Javelin Capital
The business continues to focus on gaining additional assets under management,
notwithstanding the difficult market conditions for long/short emerging market
managers, which is central to achieving the objectives as set out in its
business plan. The Javelin Capital management remains very cost conscious and
has continued to reduce its cost base over the last six months such that the
breakeven point for external AUM has fallen to circa £50m.
Summary
The Group has overall produced a steady return for the six months to 31 March
2013 and although not all investments have performed as I would like, the
spread of the investments, into the distinct and quite separate groups, should
enable us to maintain lower risk adjusted returns in what are still difficult
times, notwithstanding the strong equity markets recently.
Andrew J Adcock
Chairman
28 May 2013
Investment Manager's Report
Market Background & Outlook
Markets performed well over the first six months of the Company's financial
year, although most of the performance came in the second half of the period.
The deferral of the US `fiscal cliff' at the end of 2012 allowed markets to
rally strongly during January. However, although the outlook for US growth
brightened somewhat and the Japanese market picked up strongly on news of a
substantial new monetary initiative, the Eurozone in general showed no signs of
economic recovery and Italy, one of the largest economies, remained without a
government following an inconclusive General Election. . Cyprus, where
proposals to confiscate substantial bank deposits in order to bail out the
country's banking system, also cast a shadow over the economic prospects of the
more peripheral countries. In the UK, the downgrading of the economy's debt
rating and worries about the lack of growth caused sterling to fall against
most major currencies apart from a notably weak yen. Towards the end of the
period, the prospects for growth in China once again came into question,
exacerbating falls in the prices of most major commodities.
At a corporate level, results from a large number of global companies continued
to provide a degree of reassurance although merger and acquisition activity
fell to meagre levels, reflecting uncertainties about global growth prospects.
Corporate balance sheets in general are particularly robust, but there remains
a reticence to deploy hard cash whilst growth numbers for many major economies
are still being revised downwards. There appears, as yet, little sign of
inflationary pressures or a need for an early rise in interest rates globally
so it is possible that corporate activity will pick up as the year progresses.
The expansionary measures taken in Japan to counteract years of deflationary
pressures have had the effect of diverting cash flow into the equity market
there; this has not been an isolated phenomenon and there has been strong
evidence that globally investors have become more cautious of fixed interest
investments and have selectively been rotating funds into equities. The core
fund is positioned to take advantage of these trends as a natural initial home
for such funds are more defensive, higher yielding equities.
Investment Report
The Company's assets are managed in four distinct groups; the Core Portfolio,
Javelin Capital funds and the Company's investments in Majedie Asset Management
and Javelin Capital LLP. The Board believes this provides the correct asset
allocation to achieve the Investment Objective of maximising total shareholder
return whilst increasing dividends by more than the rate of inflation over the
long term.
The Development of Net Asset Value section below shows the impact that each
investment group has made on the Net Assets Performance during the period.
Core Portfolio
The Core Portfolio comprises holdings in large-cap UK and international stocks
and a small number of carefully selected mid-cap companies. The Portfolio is
managed under an equity income investment mandate, with a long term composite
benchmark of 70% FTSE All-Share, 30% FTSE World (ex-UK) on a total-return
basis. As at 31 March 2013, the value of the Core Portfolio was £74.2m,
representing 48.1% of the investment portfolio (as defined below).
During the period the Core Portfolio Total Return was +13.2%. This was a little
disappointing as it was 2.2% behind the benchmark return, but it was again some
way ahead of the return of a number of the large dedicated UK equity income
funds and was only 1.3% behind the FTSE All-Share index return, reflecting the
strength of non-UK markets in sterling terms. This has again been a relatively
strong period for global equities and the Core Portfolio, with an income
orientated mandate and somewhat more defensive stock and sector positioning,
tends to lag a little against the index during such times.
A key part of the investment mandate is to maintain a balance between companies
where a significant component of their total return comprises of dividend
payments and other companies more orientated towards capital growth. A feature
of the period under review was that a small number of large global consumer
stocks such as Diageo and Reckitt Benckiser, unrepresented in the core
portfolio, rallied particularly strongly whilst some more defensive stocks such
as Royal Dutch Shell and BP drifted out of investor favour. The mining sector,
unusually in a rising market, was also a particularly poor performer as
commodity prices came under pressure. However, good performance was seen in
relatively recently introduced stocks such as ITV, GKN, Investec and Kellogg
whilst longer standing holdings in Europe such as Roche and Telenor also
performed well.
We also manage a small non-core realisation portfolio, consisting of early
stage investments that were initiated between 2005 and 2008. The objective of
this portfolio is to maximise the value and speed of capital return by seeking
to exit these positions, although by nature the positions are illiquid. As at
31 March 2013, the value of the non-core realisation portfolio was £2.0m. This
represents around 1.3% of the investment portfolio and will reduce over time as
further liquidations are achieved.
Javelin Capital Funds
In late September 2010 a £20m seed capital investment was made into the first
flagship product to be launched by Javelin Capital LLP, the Javelin Capital
Global Equity Strategies Fund (QIF). A second UCITS fund, the Javelin Capital
Emerging Markets Alpha Fund, was launched in early 2012 with a seed investment
of £15m, on a platform of funds managed by Goldman Sachs International, who
assist in the distribution of the fund through their global network. The first
fund has now ceased operations and is being wound up with the Company's
investment proceeds having been consolidated into the UCITS vehicle. Over the
half year, the UCITS fund has fallen in value by around 2.8% in Sterling terms.
As at 31 March 2013, the value of the Javelin Capital fund holding was £31.7m,
representing 20.6% of the investment portfolio.
Majedie Asset Management (MAM)
MAM was launched in 2002 using finance provided by the Company, which, at 31
March 2013, retains a near 30% equity interest. It now manages approximately £7
billion, for over 100 institutional clients and the business continues to
perform strongly. During the period we received £1.1m as a final dividend for
the year ended 30 September 2012 and sold £0.68m of shares to the MAM Employee
Benefit Trust. Furthermore in conjunction with the ten year anniversary it was
agreed, in May, that the Company would sell for cancellation further shares
equal to 3.5% of the total MAM shares in issue.
The Board has decided to increase the valuation of this holding to £43.5m,
representing 28.2% of the investment portfolio.
Javelin Capital LLP
Javelin Capital LLP was launched in September 2010 and currently has one fund
in operation. Significant progress has been made in reducing costs and the
business remains very focussed on gaining AUM on which its business plan is
predicated.
As at 31 March 2013 the net assets in Javelin Capital LLP have been included in
the Group accounts at £2.5m representing 1.6% of the investment portfolio. This
represents the investments made less start-up costs and losses to date and is
in accordance with consolidation accounting rules. In the Company accounts the
holding continues to be carried at cost being £8.0m.
Development of Net Asset Value
In aggregate, the NAV has increased by £8.1m. The Core Portfolio and MAM
contributed £8.9m and £6.3m respectively, both through a combination of
dividend income and capital appreciation, the Non-Core Realisation Portfolio
was down by £0.9m whilst the Javelin Capital UCITS fund lost £0.6m.
Total costs during the period were £2.3m of which net administration costs were
£0.9m, which include Javelin Capital LLP, and finance costs were £1.4m. A final
dividend of £3.3m (6.3p per share) was paid in January 2013.
Nick Rundle
Investment Director, Javelin Capital LLP
28 May 2013
Portfolio Information
at 31 March 2013
Fund Analysis
Market Value % of
£'000 Fund
Oil & Gas 11,323 7.3
Basic Materials 7,185 4.6
Industrials 9,190 6.0
Consumer Goods 6,783 4.4
Health Care 5,126 3.3
Consumer Services 7,503 4.9
Telecommunications 4,423 2.9
Utilities 3,865 2.5
Financials 14,298 9.3
Technology 779 0.5
Javelin Capital Global Emerging Markets Alpha 31,721 20.6
Fund
Unlisted (note 8) 45,519 29.5
Total Investments at Fair Value 147,715 95.8
Cash and other 6,508 4.2
154,223 100.0
United Kingdom 90,466 58.6
North America 13,723 8.9
Europe (ex UK) 6,439 4.2
Rest of World 5,366 3.5
Javelin Capital Global Emerging Markets Alpha 31,721 20.6
Fund
Total Investment' at Fair Value 147,715 95.8
Cash and other 6,508 4.2
154,223 100.0
The Fund as used in the analysis above and below comprises total investments
held at fair value through profit or loss of £115,994,000; the investment in
the JCEMA fund of £31,721,000; and cash/other (as adjusted for amounts due to/
from brokers for settlement and other net assets) of £6,508,000. Unlisted
investments comprise an amount of £43,500,000 in respect of the investment of
Majedie Asset Management and £2,019,000 in respect of equity investments in
various companies. Suspended stocks have been analysed in their listed sectors.
Twenty Largest UK Investments
at 31 March 2013
Company Market % of Company Market % of
Value Fund Value Fund
£'000 £'000
Majedie Asset Management 43,500 28.2 Antofagasta 1,230 0.8
Royal Dutch Shell `B' 3,933 2.6 ITV 1,165 0.8
BP 3,104 2.0 Smiths Group 1,131 0.7
HSBC 2,810 1.8 Unilever 1,114 0.7
GlaxoSmithKline 2,462 1.6 GKN 1,058 0.7
Vodafone 2,286 1.5 Legal & General 1,036 0.7
Rio Tinto 2,005 1.3 BG Group 1,016 0.7
BHP Billiton 1,628 1.1 SSE 965 0.6
Barclays 1,601 1.0 Aviva 963 0.6
Centrica 1,287 0.8 British Land 951 0.6
Ten Largest Overseas Investments
at 31 March 2013
Company Market % of Company Market % of
Value Fund Value Fund
£'000 £'000
Javelin Capital Emerging
Markets Alpha (Lux) 31,721 20.6 Schlumberger (USA) 887 0.6
McDonalds (USA) 952 0.6 Wells Fargo (USA) 876 0.6
Telenor (Norway) 937 0.6 Southern Copper 865 0.6
(USA)
Roche (Europe) 922 0.6 Siemens (Germany) 852 0.6
Altria (USA) 905 0.6 AT&T (USA) 846 0.5
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
Chairman's Statement and Investment Manager's Report as set out above.
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, such that it is believed that the Company
has adequate financial resources to continue to operate for the foreseeable
future.
The principal risks facing the company are substantially unchanged since the
date of the Annual Report for the year ended 30 September 2012 and continue to
be as set out in that report 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 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
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 Chairman's Statement and Investment Manager's Report includes a fair
review of the information required to be disclosed under the Disclosure 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 Group's Annual Report for the year ended 30
September 2012 that would have had a material effect on the financial
position or performance of the Group in the first six months of the current
financial year.
Andrew J Adcock
Chairman
For and on behalf of the Board
28 May 2013
Independent Review Report to Majedie Investments PLC
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the Half-Yearly Financial Report for the six months ended
31 March 2013 which comprises the Condensed Consolidated Statement of
Comprehensive Income, Condensed Consolidated Statement of Changes in Equity,
Condensed Consolidated Balance Sheet, Condensed Consolidated Cash Flow
Statement and related notes 1 to 14.
We have read the other information contained in the Half-Yearly Financial
Report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with guidance contained
in International Standard on Review Engagements 2410 (UK and Ireland) "Review
of Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The Half-Yearly Financial Report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
Half-Yearly Financial Report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this Half-Yearly Financial
Report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the Half-Yearly Financial Report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK and Ireland), "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the Half-Yearly
Financial Report for the six months ended 31 March 2013 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Ernst & Young LLP
London
28 May 2013
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 31 March 2013
Half year ended Half year ended Year ended
31 March 2013 31 March 2012 30 September 2012
Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
return return £'000 return return £'000 return return £'000
£'000 £'000 £'000 £'000 £'000 £'000
Investments
Gains on 11,534 11,534 7,794 7,794 7,832 7,832
investments at
fair value (840) (840)
through profit
or loss
Exchange loss
on disposal of
foreign
subsidiary
Net investment 11,534 11,534 7,794 7,794 6,992 6,992
result
Income
Income from 2 2,287 2,287 2,639 2,639 5,100 5,100
investments
Other income 2 53 53 27 27 63 63
Total income 2,340 2,340 2,666 2,666 5,163 5,163
Expenses
Administration (489) (615) (1,104) (804) (887) (1,691) (1,777) (1,442) (3,219)
expenses
Return before 1,851 10,919 12,770 1,862 6,907 8,769 3,386 5,550 8,936
finance costs
and taxation
Finance costs (351) (1,052) (1,403) (353) (1,061) (1,414) (705) (2,115) (2,820)
Net return 1,500 9,867 11,367 1,509 5,846 7,355 2,681 3,435 6,116
before taxation
Taxation 3 (50) (50) (53) (53) (132) (132)
Net return 1,450 9,867 11,317 1,456 5,846 7,302 2,549 3,435 5,984
after taxation
for the period
Other
comprehensive
income -
exchange
differences on
translation of
foreign
operations
Attributable
to:
Equity holders (492) (492) 37 37
of the company
Non-controlling (7) (7)
interest
Total 1,450 9,867 11,317 1,456 5,347 6,803 2,549 3,472 6,021
comprehensive
income for the
period
Net return
after taxation
attributable
to:
Equity holders 1,450 9,867 11,317 1,457 5,852 7,309 2,552 3,445 5,997
of the Company
Non-controlling (1) (6) (7) (3) (10) (13)
interest
1,450 9,867 11,317 1,456 5,846 7,302 2,549 3,435 5,984
Return per pence pence pence pence pence pence pence pence pence
ordinary share:
Basic and 4 2.8 19.0 21.8 2.8 11.2 14.0 4.9 6.6 11.5
diluted
The total column of this statement is the Consolidated Statement of
Comprehensive Income of the Group, prepared in accordance with International
Financial Reporting Standards (IFRS). The supplementary revenue return and
capital return columns are prepared under guidance published by the Association
of Investment Companies. All items in the above statement relate to continuing
operations. See notes 1 to 14.
Condensed Consolidated Statement of Changes in Equity
for the half year ended 31 March 2013
Notes Share Share Capital Share Capital Revenue Own Currency Non- Total
capital premium redemption options reserve reserve shares translation Controlling £'000
£'000 £'000 reserve reserve £'000 £'000 reserve reserve interest
£'000 £'000 £'000 £'000 £'000
Half year ended
31 March 2013
30 September 5,253 785 56 (147) 87,822 20,093 (1,628) 112,234
2012
Net return 9,867 1,450 11,317
after tax for
the period
Share options 5 13 13
expense
Dividends 7 (3,279) (3,279)
declared and
paid in period
31 March 2013 5,253 785 56 (134) 97,689 18,264 (1,628) 120,285
Half year ended
31 March 2012
30 September 5,253 785 56 (178) 84,377 23,006 (1,628) (37) 248 111,882
2011
Net return 5,852 1,457 (7) 7,302
after tax for
the period
Other (492) (7) (499)
comprehensive
income
Share options 5 15 15
expense
Dividends 7 (3,279) (3,279)
declared and
paid in period
31 March 2012 5,253 785 56 (163) 90,229 21,184 (1,628) (529) 234 115,421
Year ended 30
September 2012
30 September 5,253 785 56 (178) 84,377 23,006 (1,628) (37) 248 111,882
2011
Net return for 3,445 2,552 (13) 5,984
the year
Other 37 37
comprehensive
income
Share options 5 31 31
expense
Dividends 7 (5,465) (5,465)
declared and
paid in year
Cessation of (235) (235)
Non-controlling
interest
30 September 5,253 785 56 (147) 87,822 20,093 (1,628) 112,234
2012
Condensed Consolidated Balance Sheet
at 31 March 2013
Notes 31 March 31 March 30 September
2013 2012 2012
£'000 £'000 £'000
Non-current assets
Property and equipment 170 331 247
Investments at fair value through 8 115,994 111,479 108,217
profit or loss
116,164 111,810 108,464
Current assets
Derivative instruments 235
Trade and other receivables 2,636 1,437 1,418
Cash and cash equivalents 5,122 22,858 23,287
7,758 24,530 24,705
Asset classified as held for sale 8 43,911 14,817 14,199
Total current assets 51,669 39,347 38,904
Total assets 167,833 151,157 147,368
Current liabilities
Trade and other payables (1,524) (1,396) (1,256)
Financial liabilities at fair (439)
value through profit or loss
(1,524) (1,835) (1,256)
Liabilities directly associated 8 (12,190) (89) (55)
with the assets classified as
held for sale
Total current liabilities (13,714) (1,924) (1,311)
Total assets less current 154,119 149,233 146,057
liabilities
Non-current liabilities
Debentures (33,834) (33,812) (33,823)
Total liabilities (47,548) (35,736) (35,134)
Net assets 120,285 115,421 112,234
Represented by:
Ordinary share capital 5,253 5,253 5,253
Share premium 785 785 785
Capital redemption reserve 56 56 56
Share options reserve (134) (163) (147)
Capital reserve 97,689 90,229 87,822
Revenue reserve 18,264 21,184 20,093
Own shares reserve (1,628) (1,628) (1,628)
Currency translation reserve (529)
Equity Shareholders' Funds 120,285 115,187 112,234
Non-controlling interest 234
Total equity 120,285 115,421 112,234
Net asset value per share pence pence pence
Basic and fully diluted 10 231.1 221.3 215.6
Condensed Consolidated Cash Flow Statement
for the half year ended 31 March 2013
Notes Half year ended Half year ended Year ended
31 March 31 March 30 September
2013 2012 2012
£'000 £'000 £'000
Net cash Inflow/(out 11 4,656 (10,010) 8,989
flow) from operating
activities
Investing activities
Purchases of tangible (2) (3)
assets
Investment in Javelin (18,150) (14,990)
UCITS fund classified
as asset held for sale
Net cash outflow from (18,150) (2) (14,993)
investing activities
Financing activities
Interest paid (1,392) (1,404) (2,797)
Dividends paid (3,279) (3,279) (5,465)
Net cash outflow from (4,671) (4,683) (8,262)
financing activities
Decrease in cash and 12 (18,165) (14,695) (14,266)
cash equivalents for
period
Cash and cash 23,287 37,553 37,553
equivalents at start of
period
Cash and cash 5,122 22,858 23,287
equivalents at end of
period
Notes to the Condensed Consolidated Financial Statements
as at 31 March 2013
1. Accounting Policies
The Condensed Consolidated Financial Statements above comprise the unaudited
results of the Company and subsidiaries for the six months to 31 March 2013 and
are presented in pounds sterling, as this is the functional currency of the
Group.
The Condensed Consolidated Financial Statements have been prepared in
accordance with International Accounting Standard IAS 34 "Interim Financial
Reporting". They do not include all financial information required for full
annual 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 2012.
2. Income
Half year ended Half year ended Year ended
31 March 31 March 30 September
2013 2012 2012
£'000 £'000 £'000
Income from
investments
Franked investment 1,800 2,256 4,113
income*
UK unfranked 91 135
investment income
Overseas dividends 396 369 835
Fixed interest and 14 17
convertible bonds
2,287 2,639 5,100
Other income
Deposit interest 14 25 32
Sundry income 39 2 31
53 27 63
Total income 2,340 2,666 5,163
Total income
comprises:
Dividends 2,287 2,625 5,083
Interest 14 39 49
Other income 39 2 31
2,340 2,666 5,163
Income from
investments
Listed UK 761 934 2,033
Listed overseas 396 369 852
Unlisted* 1,130 1,336 2,215
2,287 2,639 5,100
* Includes MAM dividend income of £1,130,000 (31 March 2012 & 30 September
2012: £1,322,000 and £2,215,000).
3. Taxation
The charge for the half year to 31 March 2013 is £50,000 (half year to 31 March
2012: £53,000; year ended 30 September 2012: £132,000). 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 Investment Trust and
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 52,044,613 (half year
ended 31 March 2012 and year ended 30 September 2012: 52,044,613) shares, being
the weighted average number of shares in issue after adjustment for the shares
held by the Employee Incentive Trust.
There is no dilution to the basic return per ordinary share since share
options, if exercised, would be satisfied by shares already held by the
Employee Incentive Trust.
5. Share-based payments
The Group currently operates one share-based payment scheme being the 2006 Long
Term Incentive Plan which in turn has two sections relating to TSR-based Awards
and Matching Awards. With the introduction of Javelin Capital LLP and the
resultant employee transfers from the Company no further awards will be made
under the LTIP. Javelin Capital LLP does not operate any share-based payment
schemes.
The number of outstanding options granted by the Company are summarised in the
table below:
31 March 31 March 30 September
2013 2012 2012
Number of outstanding options
LTIP: TSR-based Awards 197,725 185,232 190,453
LTIP: Matching Awards 11,574 10,842 11,148
209,299 196,074 201,601
During the half-year ended 31 March 2013 the number of options outstanding
under the LTIP TSR-based and Matching awards increased by 7,272 and 426
respectively. This is as a result of the 2012 6.3p final dividend, which is in
accordance with the LTIP rules.
During the half year to 31 March 2013 the Group recognised a total charge for
share-based payment transactions of £13,000 (half year ended 31 March 2012:
£15,000; year ended 30 September 2012: £31,000).
The total shareholding of the Majedie Investments PLC Incentive Trust is
483,387 (31 March 2012: 483,387; 30 September 2012: 483,387) ordinary shares.
The shares are held by the Trust until the relevant options are exercised or
until they lapse. The cost of the shares is presented in the Condensed
Consolidated Balance Sheet under the heading `Own shares reserve', as a
deduction from shareholders' funds in accordance with IFRS 2: Share-based
payments.
6. Segment reporting
As detailed in the Company's Annual Report for the year ended 30 September
2012, geographical segments are considered to be the Group's primary reporting
segment and business segments the secondary reporting segment. The Group has
two business segments: its activity as an Investment Trust, which is the
business of the parent company, and the business of the subsidiary, Javelin
Capital LLP, which provides management services within the United Kingdom only.
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.
Investment management services
To complement this investment objective and create income and capital for the
Group, Javelin Capital LLP has been launched to market a range of funds to
third party investors and provide investment management and advisory services.
Half year ended Half year ended Year ended
31 March 31 March 30 September
2013 2012 2012
Investing Investment Investing Investment Investing Investment
activities management activities management activities management
£'000 and £'000 and £'000 and
advisory advisory advisory
services services services
£'000 £'000 £'000
Revenue from 2,324* 16 2,664* 2 5,145* 18
external
customers
Carrying amount 117,781 2,504 113,403 2,018 109,609 2,625
of net assets
* The investment and other income of the parent company and the Javelin Capital
funds (QIF and UCITS).
7. Dividends
In accordance with International Accounting Standard 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 Half year ended Year ended
31 March 31 March 30 September
2013 2012 2012
£'000 £'000 £'000
2012 Final dividend of 6.30p 3,279
paid on 23 January 2013
2012 Interim dividend of 2,186
4.20p paid on 27 June 2012
2011 Final dividend of 6.30p 3,279 3,279
paid on 25 January 2012
3,279 3,279 5,465
The Directors propose an interim dividend for 2013 of 4.2p per share, to be
paid on 26 June 2013.
8. 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, 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.
Unlisted investments are formally valued on a semi-annual basis by the Board of
Directors taking into account relevant information as appropriate including
market prices, latest dealings, accounting information, professional advice and
the guidelines issued by the International Private Equity and Venture Capital
Association. In between the formal valuations the Directors review these
investments for any significant changes and incorporate such changes as they
consider necessary.
Unlisted investments disclosed in the Portfolio Information set out above total
£45,519,000 of which £2,019,000 is invested in 6 companies and £43,500,000 is
the carrying value of our investment in MAM as detailed in note 9 below.
Assets classified as held-for-sale
The Company has made two investments into the Javelin Capital Emerging Markets
Alpha Fund (JCEMA), a UCITS fund, being £15million on 16 January 2012 and
£18.15million on 2 November 2012 which represent a controlling interest and in
accordance with IFRS 5 this holding has been classified as a non-current asset
held-for-sale.
Whilst this fund continues to be actively marketed to third party investors
market conditions have meant that the Company retains a controlling interest.
The Company currently anticipates that the Investment entities amendment to
IFRS 10 will be adopted by the European Union such that in the 2013 Annual
Report the Company will be able to adopt the amendment with the effect that
this investment will no longer be required to be consolidated and will be held
as an investment held at fair value through profit and loss in a manner
consistent with its other existing investments.
During the period ended 31 March 2013 the Group recorded an unrealised loss of
£398,000 (half year ended 31 March 2012: unrealised loss of £262,000; year
ended 30 September 2012: realised loss of £10,000 and an unrealised loss of
£716,000) in respect of this holding.
9. Majedie Asset Management Limited (MAM)
During the period the Company owned a near 30% equity shareholding in MAM which
provides investment management and advisory services primarily relating to UK
equities.
The carrying value of the investment in MAM is included in the Condensed
Consolidated Balance Sheet as part of investments at fair value through profit
or loss:
31 March 31 March 30 September
2013 2012 2012
£'000 £'000 £'000
Deemed cost of investment 1,179 1,197 1,197
Holding gains 42,321 37,493 37,803
Fair value at period end 43,500 38,690 39,000
During the period the Company disposed of a small part of its equity
shareholding to the MAM Employee Benefit Trust as disclosed in note 13.
Additionally it has been agreed in May 2013 that the Company will sell further
equity shares equal to 3.5% of the MAM total shares in issue, for cancellation
in its case, as part of a package aimed at broadening employee ownership
following its tenth anniversary.
The carrying value of MAM in the 31 March 2013 Condensed Consolidated Financial
Statements is its fair value as assessed at 31 March 2013.
10. Net Asset Value
The net asset value per share has been calculated based on equity Shareholders'
funds and on 52,044,613 (31 March 2012 and 30 September 2012: 52,044,613)
ordinary shares, being the shares in issue at the period end having deducted
the number of shares held by the Employee Incentive Trust.
11. Reconciliation of Operating Profit to Operating Cash Flow
Half year ended Half year ended Year ended
31 March 31 March 30 September
2013 2012 2012
£'000 £'000 £'000
Consolidated net return before 11,367 7,355 6,116
taxation
Adjustments for:
Gains on investments (11,534) (7,794) (7,832)
Exchange movements (499)
Share-based remuneration 13 15 31
Depreciation 77 81 166
Purchases of investments* (4,132) (221,250) (116,131)
Sales of investments* 8,080 210,672 125,175
Proceeds from derivative 322 (911)
contracts
3,871 (11,098) 6,614
Finance costs 1,403 1,415 2,820
Operating cash flows before 5,274 (9,683) 9,434
movements in working capital
Decrease in trade and other (112) (592) (528)
payables
(Increase)/decrease in trade (450) 316 204
and other receivables
Net cash inflow/(outflow) from 4,712 (9,959) 9,110
operating activities before tax
Tax recovered 7 11 37
Tax on unfranked income (63) (62) (158)
Net cash inflow/(outflow) from 4,656 (10,010) 8,989
operating activities
* Reflects the high turnover investment strategy in the QIF in line with its
investment approach and industry peers. Values have reduced in the current
period due to the QIF ceasing operations in September 2012.
12. Reconciliation of Net Cash Flow to Movement in Net Debt
Half year ended Half year ended Year ended
31 March 31 March 30 September
2013 2012 2012
£'000 £'000 £'000
Decrease in cash (18,165) (14,695) (14,266)
Non cash items (11) (11) (22)
Change in net debt (18,176) (14,706) (14,288)
Net (debt)/funds beginning of (10,536) 3,752 3,752
period
Net debt at end of period (28,712) (10,954) (10,536)
13. Related Party Transactions
Javelin Capital LLP
Javelin Capital LLP (Javelin Capital) is the investment manager and general
administrator to the Company and is also the parent entity of Javelin Capital
Services Limited (JCS) which is consolidated in the Group accounts. Javelin
Capital Fund Management Limited (JCFM) ceased operations on 19 June 2012.
Javelin Capital Strategies plc is an Irish Stock Exchange listed Qualifying
Investment Fund (QIF) and is currently in liquidation. The Company receives any
residual interest on liquidation and is consolidated into the Group accounts on
that basis.
The Javelin Capital Emerging Markets Alpha Fund (UCITS) is a sub-fund of the
SICAV platform in Luxembourg established by Goldman Sachs International and
Javelin Capital receives management and performance fees from the fund in
accordance with the agreements, including from the Company.
In addition to any fees received from the UCITS, Javelin Capital is also
entitled to receive management, performance and administration fees as from the
Company itself in accordance with the relevant agreements. These agreements
take account of any fees charged at the fund level so that no double charging
occurs.
JCS provides administrative services to the Group. In performing these services
it incurs expenses which are recovered by way of recharges and management fees.
The Company allows the Javelin Capital group entities use of various assets to
perform their respective functions for which it receives a lease fee, however
this can be waived by the Company at its discretion.
The Company has made a £33.15m investment in the Javelin Capital Emerging
Markets Alpha Fund, which is currently valued at £31.7m. This investment is
subject to management and performance fees in accordance with the fund's
prospectus and supplement.
Javelin Capital as investment manager is required to, or chooses to do so,
under certain circumstances make payments to its funds or managed accounts in
order to reimburse them for expense rebates or compensation payments.
The Company pays certain costs on behalf of Majedie Portfolio Management
Limited (MPM) in connection with the Majedie Investments PLC Share Plan and
additionally is charged a management fee by MPM. Any such costs paid by the
Company are recharged to MPM net of any management fees due.
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
2013 2012 2012
£'000 £0'000 £'000
Transactions during the
period:
QIF fee revenue due to JCFM or 125 240
Javelin Capital
Advisory fee revenue due to 104 145
Javelin Capital from JCFM
UCITS fee revenue due to 190 39 145
Javelin Capital (including
from the Company)
Company management fee revenue 274 286 549
due to Javelin Capital
Company administration fee 132 132 265
revenue due to Javelin Capital
Company lease charge to JCS
JCS management fee income from 720 1,030 1,878
Javelin Capital
Javelin Capital payments to 1
funds
MPM costs recharged by the 18 18 35
Company
Balances outstanding at the
end of the period:
Between JCS and the Company 469 369 426
Between JCS and Javelin 275 34 131
Capital
Between JCS and JCFM 1 2 1
Between Javelin Capital and 103 104 104
the Company or UCITS/QIF
Between the Company and MPM 95 94 95
Between JCFM and Javelin 9 33 18
Capital
Between JCFM and the QIF 20
Transactions between group companies during the period were made on terms
equivalent to those that occur in arm's length transactions.
Majedie Asset Management (MAM)
MAM is accounted for as an investment held at fair value through profit or loss
in both the Company and Group accounts. During the period the Company sold
shares to the MAM Employee Benefit Trust for consideration of £686,000, none of
which was outstanding at the period end (half year ended 31 March 2012:
£324,000 and nil; year ended 30 September 2012: £324,000 and nil). Additionally
the Company received dividends from MAM of £1,130,000 of which none was
outstanding at period end (half year ended 31 March 2012: £1,322,000 and nil;
year ended 30 September 2012: £2,215,000 and nil). The Company has no
investments in any MAM funds.
14. 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 financial information for the six months ended 31 March
2013 and 31 March 2012 have not been audited, but have been reviewed by the
Company's auditors and their report is above.
The information for the year ended 30 September 2012 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
International Financial Reporting Standards, as adopted by the European Union.
Company Information
Board of Directors Investment Manager
A J Adcock, Chairman Javelin Capital LLP
J W M Barlow Tower 42
P D Gadd 25 Old Broad Street
R D C Henderson London EC2N 1HQ
J W M Barlow (Executive) Telephone: 020 7382 8170
All Directors are non-executive unless Fax: 020 7382 4854
indicated Email: info@javelincapital.com
Registered Office Registrars
Tower 42 Computershare Investor Services PLC
25 Old Broad Street The Pavilions
London EC2N 1HQ Bridgwater Road
Bristol BS99 6ZZ
Telephone: 020 7626 1243 Telephone: 0870 707 1159
E-mail: majedie@majedie.co.uk
Registered number: 109305 England
Auditors
Company Secretary Ernst & Young LLP
Capita Sinclair Henderson Limited 1 More London Place
(trading as Capita Financial Group - London SE1 2AF
Specialist Fund Services)
Beaufort House
51 New North Road
Exeter EX4 4EP
Telephone: 01392 412122
Fax: 01392 253282 Stockbrokers
Cenkos Securities plc
6.7.8 Tokenhouse Yard
London EC2R 7AS
Website
www.majedie.co.uk
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