Interim Results
Throgmorton Trust PLC
5 July 2001
THE THROGMORTON TRUST PLC
INTERIM RESULTS FOR THE SIX MONTH PERIOD TO 31 MAY 2001
KEY POINTS
* Portfolio Outperformed SmallCap and All-Share Indices
* Net Asset Value per Ordinary Share at 31 May 2001, 120.0p
* Interim Dividend 0.5p (2000 - 0.5p)
NET ASSET VALUE
30.11.00 31.05.01 Change
The Throgmorton Trust PLC 114.28p 120.03p +5.0%
FTSE SmallCap (ex IC) 3,157.70 3,081.70 -2.4%
FTSE All-Share 2,945.06 2,811.22 -4.5%
THE CHAIRMAN, LORD STEWARTBY, COMMENTED:
Since the new objective for the Trust, dispensing with an income requirement,
was adopted last year, the portfolio has been repositioned in order to enable
the managers to concentrate on growth. The new approach to sector and stock
selection is explained in the Investment Managers' Report which follows, and
it is gratifying to record that during the six months to 31 May 2001 the
Trust comfortably outperformed its benchmark in a period of highly unsettled
economic and market conditions.
At 31 May 2001 the net asset value of the Trust was 120.0p per share,
compared with 114.3p at 30 November 2000, an increase of 5.0 per cent over
the six months. This compares with decreases in the FTSE SmallCap (excluding
Investment Companies) Index of 2.4 per cent and in the FTSE All-Share Index
(excluding Investment Companies) of 4.5 per cent over the same period.
The directors have declared an interim dividend of 0.5p per share, the same
as last year. As predicted, income for the six months is substantially lower
than during the equivalent period last year, largely as a result of the
replacement of a number of higher-yielding investments by growth stocks with
a lower yield.
Against the background of a slowing world economy the United Kingdom is
relatively well placed, although planned increases in public expenditure
ahead of the projected rate of economic growth could lead to some strain on
resources if consumer expenditure remains as buoyant as it has been.
Nevertheless, the small company sector looks healthy in the domestic context
and, being relatively less exposed to international weakness, continues to
offer interesting opportunities.
MANAGER'S REPORT
In the six months to 31 May 2001 we saw turbulent stock market conditions.
Poor news from technology companies around the world and the slow down in the
US economy led to extreme volatility. This left the UK smaller companies
sector vulnerable to international economic and stock market themes.
Our strategy, which worked well over the period, was to maintain the
discipline of a well structured portfolio diversified by market
capitalisation, industry sectors and number of companies. We concentrated on
areas of the economy that were trading well with good prospects and avoided
poor trading areas with deteriorating prospects.
Investment was focused on companies with strong management where earnings
were visible and valuations easily recognisable such as pharmaceutical
companies Bioglan and Intercare, and support service stocks Interserve, Amec,
and Connaught.
Evaluation of risk became key, profit warnings were typical of the period due
to slowing economic growth. We suffered our fair share of profit warnings but
concentrated on selling stocks in areas of weak trading and high valuations.
We remained underweight in the technology areas where high valuations and
poor news resulted in very weakshare price performance. Manufacturing
companies were also under pressure due to the strength of sterling and
weakening export markets, hence we reduced our holding in Volex, and sold
Fairey, Spirent, Enodis and Mayflower.
The media sector also looked vulnerable to share price falls. High valuations
and weakening advertising markets led us to reduce holdings in Scottish Radio
and sell GWR.
Corporate activity was again noticeable over the period with the Trust
benefiting from takeovers in Community Hospitals, Cannons, British Regional
Airways, Frogmore Estates, Peel Hunt and Bryant.
We believed that the UK was relatively well placed to withstand a global
economic slowdown for several reasons. Firstly, fairly full employment, a
strong housing market, decreases in taxation, falls in interest rates and
increases in wages meant consumer confidence was high. Thus, house building
stocks such as Crest Nicholson, leisure stocks such as pub retailing groups
SFI and Luminar and health and fitness club group, Cannons, rose in price.
Secondly, the government is heavily committed to increased spending on
transport infrastructure following the rail and petrol crises, this resulted
in share price rises for companies such as Mowlem and Jarvis. Further
spending commitments in health, education and government restructuring should
help outsourcing and Private Finance Initiative companies.
In addition, inflation remained below the Monetary Policy Committee's target
of 2.5% leaving scope for interest rates to be cut, especially with the risk
of the economy slowing due to international economic uncertainty.
We are optimistic about returns from UK smaller company investments. The
international economic outlook, although poor, does not appear to be
deteriorating further with poor news still confined to technology and capital
equipment spending areas. Aggressive interest rate cuts in the U.S. by the
Federal Reserve have had the desired stabilising effect and with that
backdrop we feel the fundamental strengths of the UK smaller companies sector
can be recognised.
We have ridden the tricky financial markets over the last year and the
portfolio is well placed to benefit from investment in growth companies with
strong management as we find opportunities in these volatile markets.
We believe the success of the UK economy will continue and provide a positive
background for smaller companies. High growth companies are normally focused
niche companies, which tend to be smaller companies. The entrepreneurial
attitude in forward-looking industries should allow these companies to grow
faster with more opportunities. The high value added areas are aerospace,
electronics, software and information technology, biotechnology and
healthcare, media, outsourcing, intellectual property rights and finance,
areas which we believe the UK excels in globally. Domestic related industries
should continue to benefit from government spending, strong consumer spending
and economic growth.
The Trust should be well placed to produce good returns over the shorter and
longer term.
Framlington Investment Management Limited
5 July 2001
Contacts: Paul Branigan - 020 7330 6544
Roger Whiteoak - 020 7330 6551
The Throgmorton Trust PLC
Interim Revenue Statement
Six months to Six months Full year
31 May 2001 To 31 May 2000 to 30 Nov 2000
£000s £000s £000s
(unaudited) (unaudited)
Income from fixed asset
investments
UK dividend income 3,098 4,340 8,045
Unfranked income 379 433 849
3,477 4,773 8,894
Other income
Dividends from subsidiary 8 - 10
undertakings
Interest receivable 264 75 302
Sundry income 40 56 93
312 131 405
Total income 3,789 4,904 9,299
Management fee (825) (880) (1,734)
Administration expenses (160) (142) (309)
Interest payable (1,308) (1,311) (2,616)
Net revenue from ordinary 1,496 2,571 4,640
activities before taxation
Tax on net revenue from (96) (78) (166)
ordinary activities
Net revenue from ordinary 1,400 2,493 4,474
activities after taxation
Dividends
5 Ordinary (1,192) (1,296) (1,294)
shares - Interim 0.5p
(0.5p)
4 - Final 18 - (2,472)
- (1.0p)
(1,174) (1,296) (3,766)
Net revenue retained 226 1,197 708
Revenue reserve brought 4,302 3,594 3,594
forward
Revenue reserve carried 4,528 4,791 4,302
forward
Earnings per share - basic 0.58p 0.92p 1.70p
Earnings per share - 0.64p 0.96p 1.79p
fully diluted
The Throgmorton Trust PLC
Summarised Balance Sheet
31 May 2001 31 May 2000 30 Nov 2000
£000s £000s £000s
(unaudited) (unaudited)
Fixed asset investments
Portfolio investments 313,288 333,181 324,318
Subsidiary undertakings 3,285 3,577 3,285
316,573 336,758 327,603
Current assets
Debtors 2,428 3,384 589
Cash at bank 19,727 3,038 9,130
22,155 6,422 9,719
4 Creditors - due within 1 (7,457) (6,368) (8,478)
year
Total assets less current 331,271 336,812 328,844
liabilities
Creditors - due after 1 year:
Debenture stock (19,119) (19,119) (19,119)
Convertible loan (11,008) (11,008) (11,008)
Loan from group company (15,000) (15,000) (15,000)
(45,127) (45,127) (45,127)
286,144 291,685 283,717
Capital and reserves
Share capital 11,919 12,980 12,414
Share premium 35,267 35,267 35,267
4 Revenue reserves 4,528 4,791 4,302
Other reserves 234,430 238,647 231,734
Total shareholders' funds 286,144 291,685 283,717
6 Net Asset Value per 120.03p 112.36p 114.28p
ordinary funds
Number of ordinary shares in issue 238,388,592 259,603,592 248,273,592
The Throgmorton Trust PLC
Statement of Total Recognised Gains and Losses
Six Months to 31 May 2001
Revenue Capital Total
£000s £000s £000s
(unaudited) (unaudited) (unaudited)
Realised gains and - 17,303 17,303
losses
Unrealised gains and - (3,513) (3,513)
losses
Income 3,789 - 3,789
Investment management (825) (825) (1,650)
fee
Other expenses (160) - (160)
Net return before 2,804 12,965 15,769
finance costs and
taxation
Interest payable and (1,308) (1,212) (2,520)
similar charges
Return on ordinary 1,496 11,753 13,249
activities before
taxation
Tax on ordinary (96) 96 -
activities
Return on ordinary 1,400 11,849 13,249
activities after
taxation attributable
to equity shareholders
Dividends in respect (1,174) - (1,174)
of equity shares
Transfer to/from 226 11,849 12,075
reserves
Return per ordinary 0.58p 4.90p 5.48p
share
- basic
- assuming conversion 0.64p 4.81p 5.45p
of loan stock
The Throgmorton Trust PLC
Statement of Total Recognised Gains and Losses - continued
Six Months to 31 May 2000
Revenue Capital Total
£000s £000s £000s
(unaudited) (unaudited) (unaudited)
Realised gains and - 27,395 27,395
losses
Unrealised gains and - (36,532) (36,532)
losses
Income 4,904 - 4,904
Investment management (880) (880) (1,760)
fee
Other expenses (142) - (142)
Net return before 3,882 (10,017) (6,135)
finance costs and
taxation
Interest payable and (1,311) (1,212) (2,523)
similar charges
Return on ordinary 2,571 (11,229) (8,658)
activities before
taxation
Tax on ordinary (78) 74 (4)
activities
Return on ordinary 2,493 (11,155) (8,662)
activities after
taxation attributable
to equity shareholders
Dividends in respect (1,296) - (1,296)
of equity shares
Transfer to/from 1,197 (11,155) (9,958)
reserves
Return per ordinary 0.92p (4.12)p (3.20)p
share
- basic
- assuming conversion 0.96p (3.92)p (2.96)p
of loan stock
The Throgmorton Trust PLC
Statement of Total Recognised Gains and Losses - continued
Full Year to 30 November 2000
Revenue Capital Total
£000s £000s £000s
Realised gains and - 47,010 47,010
losses
Unrealised gains and - (50,476) (50,476)
losses
Income 9,299 - 9,299
Investment management (1,734) (1,734) (3,468)
fee
Other expenses (309) - (309)
Net return before 7,256 (5,200) 2,056
finance costs and
taxation
Interest payable and (2,616) (2,424) (5,040)
similar charges
Return on ordinary 4,640 (7,624) (2,984)
activities before
taxation
Tax on ordinary (166) 163 (3)
activities
Return on ordinary 4,474 (7,461) (2,987)
activities after
taxation attributable
to equity shareholders
Dividends in respect of (3,766) - (3,766)
equity shares
Transfer to/from 708 (7,461) (6,753)
reserves
Return per ordinary 1.70p (2.84)p (1.14)p
share
- basic
- assuming conversion 1.79p (2.60)p (0.81)p
of loan stock
The Throgmorton Trust PLC
Cash Flow Statement for 6 months to 31 May 2001
At 31 May At 31 May At 30 Nov
2001 2000 2000
£000s £000s £000s
Operating activities
Cash received from investments 2,448 4,740 10,037
Interest received 365 173 321
Underwriting commission 18 53 60
Management fee (822) (907) (1,767)
Cash paid to and on behalf of (52) (62) (120)
directors
Other cash payments (139) (219) (203)
Net cash inflow from operating 1,818 3,778 8,328
activities
Servicing of finance
Interest paid - revenue (1,308) (1,312) (2,261)
Taxation
Taxation recovered/(paid) 6 (32) (33)
Capital expenditure and financial
investment
Net sales of investments 24,216 29,390 46,580
Capital management fee (822) (907) (1,767)
Interest charged to capital (1,212) (1,212) (2,425)
Dividends
Dividends paid (2,454) (4,315)
Net cash inflow before financing 20,244 25,390 42,812
Financing
Repurchase of ordinary shares (9,647) (26,395) (37,725)
Net cash outflow from financing (9,647) (26,395) (37,725)
Increase/(decrease) in cash 10,597 (1,005) 5,087
The Throgmorton Trust PLC
Notes
1. The Trust's figures to 31 May 2001 and the comparative figures for the
corresponding period are unaudited; those for the year to 30 November 2000
are based on the trust's accounts for that period, which carry an unqualified
report from the auditors and have been filed with the Registrar of Companies.
2. In accordance with financial reporting standard 16 Current Taxation, UK
dividend income has been shown net of its attributable tax credits.
3. Management fees payable and finance costs of debt are each currently
allocated 50% to capital and 50% to revenue.
4. Due to share buy backs between the date that the accounts were signed and the
ex-dividend date of the 2000 final dividend, the total final dividend paid
was less than that accrued in the 2000 accounts. The adjustment has been
reflected in the current accounting period. Between 1 December 2000 and 31
May 2001 the Company repurchased 9,885,000 ordinary shares at a cost of £9.6
million.
5. The directors have declared an interim dividend of 0.5p per share (2000 -
0.5p) payable on 10 August 2001 to shareholders on the register at the close
of business on 31 July 2001.
6. The net asset value per ordinary share of 5p (loan stock not converted and
prior charges at par value) is based on the shares in issue, the market value
of listed investments and other net assets and liabilities. Unlisted
investments are carried at directors' valuations. There have been no
additions to unlisted investments since 30 November 2000.
7. Copies of the 2000 annual report and further copies of the interim results
are available from the Trust's registered office, 155 Bishopsgate, London
EC2M 3XJ.
8. The Trust's balance sheets as at 31 May 2001 and 30 November 2000 are shown
in summary form and have been extracted from unaudited and audited accounts
respectively as described in Note 1.
9. Group accounts have not been prepared as, in the opinion of the directors,
the inclusion of the remaining subsidiary undertakings, taken together, is
not material for the purpose of giving a true and fair view.