Interim Results
Manchester & London Inv Tst PLC
26 February 2002
Chairman's Statement
Since reporting to shareholders in October last year, the market has staged a
significant recovery from the low point established 10 days after the terrorist
attack on New York and indeed, the consensus forecast of leading analysts for
2002 is for a year end FTSE 100 Index in the region of 5800, with the main
thrust of recovery occurring in the second half. Meanwhile, the year has started
in a subdued manner, with further evidence of chickens coming home to roost
after the excessive exuberance indulged by markets towards the end of the last
decade.
Our fully diluted net asset value per share at 31st January 2002, was marginally
higher at 231.9p (230.1p at 31st July 2001) which compares with a fall of 6.3%
in the FTSE All Share Index over the same period (from 2663.9 to 2496.0)
We still retain 31% of our funds in cash as we are not convinced that the
current bear market, which has now lasted some 3 years, has yet exhausted
itself. Historical precedent dictates that such a period is long enough to purge
all the excesses in the system, but there now seems to be a new factor which
complicates and possibly invalidates the recovery argument. For the first time
in thirty years there is virtually no inflation in the principal economic
regions of the world and indeed, in some areas there is deflation. This recent
phenomenon is severely cramping corporate profitability and, without some growth
in profits, it seems dangerous to anticipate a sound and well based economic
recovery. Particularly in the US there is much talk of a W shaped (or double-
dip) recession and, here in the UK, serious recession has so far been avoided by
undue reliance on a seemingly endless consumer and housing boom. Time will tell
whether this can continue to insulate the UK economy from recent shocks such as
the knock on effects of the Enron accounting scandal in the US, insurance
deficits, the adverse effect of FRS 17 on corporate pension funds, profit
warnings, excessive corporate debt and prospects of yet higher levels of
taxation; all this against a continuing worry of further terrorist activity.
Despite the uncertainty we continue to search for value in the stock market and
are well aware that it is frequently darkest just before the dawn. In the
meantime we intend to reduce the amount of un-invested cash in the remaining
half of the year.
As a consequence of the Company's intention to re-attain investment trust status
under the provisions of Section 842 of the Income and Corporation Taxes Act 1988
it is only permitted to retain a maximum of 15% of gross income from shares and
securities. It is principally for this reason that the interim dividend has been
increased from 0.6p to 2.5p.
Notwithstanding the taxation reasons for a substantial increase in the Interim
dividend and the shocks being administered to the capitalist system, the
Directors remain cautiously optimistic that the fundamental investment climate
should start to improve in due course. Our income flow continues to be assisted
by the zero cost of the £5.4m loan from our parent company which has confirmed
that this loan will be extended on similar terms for a further twelve months
period from 1st August 2002.
We have now achieved a greater degree of diversification within the Portfolio,
although it is still our policy to continue this process which will be partially
self-fulfilling as and when we feel sufficiently confident to invest our cash
resources.
During the half year under review, we have added to our holding in Paterson
Zochonis at a considerably lower level than the current market price, at which
our total investment in the company is now valued at approximately £2.7m. We
have also benefited from a foray into Woolworth where we purchased 4m shares and
subsequently now hold 1.5m, having taken a profit of £380,000 on the balance.
Another new addition to our Portfolio is Parkman, a young company operating in
the outsourcing field which came to the market at 125p via a placing in which we
participated to the extent of 800,000 shares. We believe that current Government
policy of involving the private sector in the operation of public services will
continue to be favourable to this type of operation.
Mindful of the share price discount to net asset value, our stockbrokers,
Galleon Assets Management Ltd, are now administering a cost free Manchester &
London Investment Trust ISA, details of which are enclosed with this Statement.
We are hopeful that this will help to improve liquidity in the shares and
provide new investors with the opportunity to learn more about the Company and
its record during the last 20 years.
P.H.A. Stanley F.C.A
Chairman 26th February 2002
Announcement of the interim group results
The Directors announce the unaudited interim figures
For the six months ended 31st January 2002
Consolidated Statement of Total Return (incorporating the revenue account)
For the six months ended 31st January 2002 (unaudited)
Six months ended 31st January 2002 Six months ended 31st January 2001
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Profit/(loss) on sale of investments - 213 213 - (190) (190)
(Decrease) in unrealised appreciation - (131) (131) - (6,223) (6,223)
Negative goodwill realised - - - - 307 307
Investment income 482 - 482 318 - 318
Investment management fee (29) (54) (83) (31) (57) (88)
Other expenses (81) - (81) (114) - (114)
Net return before finance costs 372 28 400 173 (6,163) (5,990)
Interest payable and similar charges - - - (4) (8) (12)
Return on ordinary activities 372 28 400 169 (6,171) (6,002)
Dividends in respect of non-equity
shares - preference shares (28) - (28) (28) - (28)
Return attributable to equity shareholders 344 28 372 141 (6,171) (6,030)
Dividends in respect of equity shares (188) - (188) (45) - (45)
Transfer to (from) reserves 156 28 184 96 (6,171) (6,075)
Return per ordinary share (pence)
Basic 4.59 0.37 4.96 1.88 (82.28) (80.40)
Fully diluted 3.55 0.27 3.82 1.61 (58.90) (57.29)
The revenue column of this statement is the consolidated profit and loss account
of the group.
All revenue and capital items in the above statement derive from continuing
operations.
The statement for the period ended 31st January 2002 is unaudited and is not the
Company's statutory statement.
Dividends per preference share accrue at the rate of 7.6% p.a.
Interim dividend proposed per 25p ordinary share 2.5p (2001: 0.6p)
The ordinary interim dividend is payable on 19th April 2002 to shareholders on
the Register at the close of business on 22nd March 2002.
Consolidated Balance Sheet
At 31st January 2002 (unaudited)
As at 31st January 2002 As at 31st January 2001
£'000 £'000 £'000 £'000
Fixed Assets
Investments 20,622 29,080
Current Assets
Debtors 358 88
Cash and short term deposits 9,269 3
9,627 91
Creditors
Amounts falling due within one year (5,953) (1,914)
Net Current Assets/(Liabilities) 3,674 (1,823)
Total assets less current liabilities 24,296 27,257
Creditors
Amounts falling due after more than one year - (5,413)
Net Assets 24,296 21,844
Capital and Reserves
Called-up Share Capital 2,619 2,619
Capital reserves 19,090 16,983
Revenue reserve 2,587 2,242
Total shareholders' funds 24,296 21,844
Equity interests - Ordinary shares 23,552 21,100
Non-equity interests - Preference shares 744 744
24,296 21,844
Net Asset Value per share
Ordinary shares - basic 314.0p 281.3p
Ordinary shares - fully diluted 231.9p 208.5p
Notes :
The accounts at 31st January are unaudited and are not the Company's statutory
accounts. The information for the period ended 31st January 2001 does not
constitute statutory accounts but has been extracted from the latest published
audited accounts which have been filed with the Registrar of Companies. The
report of the auditors on those accounts contained no qualification or statement
under Section 237(2) or (3) of the Companies Act 1985.
Consolidated Cash Flow Statement
For the six months ended 31st January 2002 (unaudited)
Six months ended Six months ended
31 January 2002 31 January 2001
£'000 £'000 £'000 £'000
Operating activities
Net dividends and interest received from investments 313 265
Deposit interest received 190 59
Other income - 23
Investment management fees paid (99) (94)
Other cash payments (102) (50)
Net cash inflow from operating activities 302 203
Servicing of finance
Interest paid - (8)
Preference dividend paid (28) (28)
Net cash outflow from servicing of finance (28) (36)
Taxation
UK taxes recovered - -
Financial investment
Purchase of investments (3,534) (8,135)
Sale of investments - (2001: Includes the redemption of
Toronto - Dominion Bank loan notes acquired with the
purchase of Galleon Securities Limited) 2,740 11,298
Net cash inflow from financial investment (794) 3,163
Acquisition of subsidiary undertaking
Purchase of Galleon Securities Limited - repayment of
indebtedness to Manchester & Metropolitan Investment
Limited and acquisition costs - (5,997)
Overdraft acquired with subsidiary - (480)
- (6,477)
Equity dividend paid (142) (112)
Decrease in cash (662) (3,259)
Reconciliation of net cash flow to movement in net debt
Decrease in cash in period (662) (3,259)
Non cash loan transaction - loan note issued on
acquisition of Galleon Securities Limited - (5,413)
Net funds at beginning of the period 9,931 1,512
Net funds (debt) at end of the period 9,269 (7,160)
Major Holdings
At 31st January 2002
Holdings Market Value £'000 % of Portfolio
Andrews Sykes Group
Ordinary 20p 5,193,945 4,856 16.10
BAE SYSTEMS
Ordinary 2.5p 1,050,000 3,570 11.84
TDG Ordinary 1p 1,875,000 3,497 11.59
Paterson Zochonis Ordinary
and 'A' Ordinary 10p 467,250 2,893 9.59
Parkman Group
Ordinary 1p 1,470,000 2,477 8.21
AEA Technology
Ordinary 10p 800,000 2,080 6.90
Largest 6 Holdings 19,373 64.23
Short term cash deposits
and dealing debtor 9,540 31.63
28,913 95.86
This information is provided by RNS
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