Interim Results
Murray Income Trust PLC
28 February 2006
Murray Income Trust PLC
Results for the six months ended 31 December 2005
The Directors of Murray Income Trust PLC report the unaudited interim results
for the six months ended 31 December 2005.
Key Facts
• Murray Income's Net Asset Value total return for the six months to 31
December 2005 was 13.2%.
• Share price rose by 11.9% from 545.5p to 610.5p
• Second and third interim dividends of 4.7p each will be paid on 13 April
2006 and 14 July 2006 respectively.
Performance
The six months to 31 December 2005 was another good period for the UK stock
market, with the Net Asset Value Total Return for the Company rising 13.2%. This
compares favourably against the benchmark, the FTSE All-Share Index, which rose
by 12.8%.
Economic and Market Background
The market continued to push higher during the first six months of the Company's
financial year against a backdrop of muted economic growth.
Responding to slowing economic activity, the Monetary Policy Committee of the
Bank of England decided in August to cut UK base rates from 4.75% to 4.5%.
Despite this move, however, the UK economy weakened further during the second
half of 2005 as lower house price inflation and gently rising unemployment took
their toll on consumer confidence and expenditure. For 2005 as a whole the
economy grew at 1.7%, the lowest pace of growth for ten years.
To compound matters, the lacklustre performance of the economy was accompanied
by a year on year rise in the Consumer Price Index by 2.5% in September. This
figure was well above the Bank of England's inflation target and represented a
ten year high for the CPI. When viewed in this light, it is perhaps
understandable why interest rates were not cut further in the face of weakening
economic activity.
When this sluggish economic background is considered alongside certain other
unexpected events, such as the terrible terrorist incidents in London during
July, devastating hurricanes in the United States, and the ongoing rise in
commodity prices, the market's performance during the period seems all the more
impressive.
This can largely be put down to events at the individual company level, where
respectable profit growth and corporate activity have been very much in
evidence. Indeed, the latter has been a key theme over the past eighteen months
and shows little sign of slowing. Since July, Deutsche Post has bought the
logistics company, Exel; Saint Gobain of France bought the plasterboard
manufacturer, BPB; and Spain's Telefonica bought the mobile phone operator O2.
There has been consolidation in the house-building sector; P&O was the subject
of a takeover battle which was subsequently won by DPW; and Hilton Group sold
its hotel business to Hilton Corp. of the United States. There was also strong
takeover speculation surrounding numerous other companies including Scottish
Power, Centrica and BOC.
Portfolio Activity
During the six months a number of new positions were introduced to the
portfolio. An initial stake was taken in William Morrison Supermarkets. The
company's problems are well documented post the acquisition of Safeway, but the
Manager believes the shares are well supported by solid asset backing and offer
an attractive risk/reward trade-off. A holding in BAA was also purchased, which
offers an attractive yield and steady dividend growth. The pub operator
Mitchells & Butlers and life insurer Resolution were added to the portfolio. The
former is regarded as one of the best operators in its sector since its
de-merger from Six Continents in April 2003. Again, the business has solid asset
backing and financial flexibility to undertake earnings-enhancing acquisitions
or share buy-backs. Resolution is the holding company for the Britannic group of
companies. While the shares have performed well, the Manager believes
consolidation of closed life funds is in its infancy and Resolution will be a
major beneficiary of this trend. Additionally, management has committed to
dividend growth of at least 11% per annum over the next few years.
A holding in HMV was introduced and while the shares have not yet performed as
expected, recent private equity interest in the company has highlighted
potential value in the shares.
Bunzl and Smiths Industries were sold during the period due to stretched
valuations. Proceeds from the sale of HBOS were redistributed across the
remaining holdings in the banking sector that offer, in our view, more
compelling long term investments and Boots was sold due to a lack of growth
opportunities for the business. Pleasingly, a substantial profit was booked on
the sale of P&O following a bid approach for the company.
In recognition of the strong gains in the market and the backdrop of slowing
economic growth, it was felt prudent to introduce an element of protection into
the portfolio. This was done through the purchase of a 12 month put option
which will increase in value should the market decline. Although the position
is small it will protect around 16% of the portfolio in the event of a
significant market correction.
Financial Statements for the six months ended 31 December 2005
Rather than adopting International Financial Reporting Standards ('IFRS'), the
Board has decided to continue to adopt UK Generally Accepted Accounting
Principles ('UK GAAP') and therefore to comply with the new Financial Reporting
Standards issued as part of the programme to converge UK GAAP with IFRS. Figures
for the 6 months ended 31 December 2004 and the year ended 30 June 2005 have
been restated accordingly. Full details of the changes are provided in the
Supplementary Information at the end of the Financial Statements.
Gearing
At the end of the interim period the Company's gearing stood at 5%, broadly
unchanged from the level at the end of the last financial year.
Dividend
A first interim dividend of 4.7p was paid on 18 January 2006 to Shareholders on
the register at close of business on 14 December 2005. A second interim dividend
of 4.7p will be paid on 13 April 2006 to Shareholders on the register as at the
close of business on 17 March 2006. The third interim dividend of 4.7p will be
paid on 14 July 2006 to Shareholders on the register as at the close of business
on 16 June 2006.
The interim dividends show an increase of 4.4% on those paid during the last
financial year and as the key reporting season for UK companies approaches, the
outlook for dividend growth remains solid.
Treasury Shares
At the Annual General Meeting in October 2005, shareholders approved the
authority for the company to hold shares bought back, as Treasury shares rather
than cancel them immediately. As of 27 February 2006 the number of ordinary
shares bought back and held in Treasury was 230,000. To date, no shares have
been reissued from treasury.
Outlook
The outlook for the economy is mixed. Unemployment continues to trend up, but
thankfully CPI inflation has fallen back to 2% and should ensure UK base rates
remain around current levels for the foreseeable future. There are also signs
that the housing market has stabilised with the prospect for modest low to
mid-single digit house price inflation this year. If this transpires, it is
likely that the worst of the UK consumer's retrenchment is over and economic
growth should improve slightly on last year's out-turn.
Since the market's lows in March 2003, we have enjoyed a period of strong profit
growth, which in recent months has been especially impressive in light of rising
input costs. While most companies have, thus far, been successful in absorbing
those costs, we are now seeing evidence that the ongoing rise in the price of
oil and other commodities is beginning to impact corporate profitability. As a
result, we expect company earnings to grow more slowly in the coming year.
After healthy gains in the second half of 2005 and a good start to 2006, a
period of consolidation in the market seems likely. The market remains
reasonably well underpinned, however, by low absolute levels of interest rates
and the corporate activity that such rates help to facilitate.
MURRAY INCOME TRUST PLC
INCOME STATEMENT
(FORMERLY THE STATEMENT OF TOTAL RETURN)
Six months to 31 December 2005
(unaudited)
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 45,525 45,525
Investment income 6,662 - 6,662
Other income 54 - 54
Management fees (672) (672) (1,344)
Other expenses (433) - (433)
_______ _______ _______
Net return before finance costs and taxation 5,611 44,853 50,464
Finance costs of borrowing (279) (278) (557)
_______ _______ _______
Return attributable to equity shareholders 5,332 44,575 49,907
_______ _______ _______
Return per ordinary share (pence) 8.0 67.1 75.1
_______ _______ _______
Notes:
The total column of this statement represents the profit and loss of the Company
The financial statements have been restated to reflect the change to accounting
policies as set out in the accompanying notes.
All items in the above statement derive from continuing operations.
Ordinary dividends on equity shares (£'000) 6,881 - 6,881
_______ _______ _______
MURRAY INCOME TRUST PLC
INCOME STATEMENT
(FORMERLY THE STATEMENT OF TOTAL RETURN)
Six months ended 31 December 2004
Revenue Capital Total
(restated - see
note 3)
(unaudited)
£'000 £'000 £'000
Gains on investments - 40,197 40,197
Investment income 6,329 - 6,329
Other income 98 - 98
Management fees (634) (634) (1,268)
Other expenses (404) - (404)
_______ _______ _______
Net return before finance costs and taxation 5,389 39,563 44,952
Finance costs of borrowing (342) (342) (684)
_______ _______ _______
Return attributable to equity shareholders 5,047 39,221 44,268
_______ _______ _______
Return per ordinary share (pence) 7.3 56.8 64.1
_______ _______ _______
Ordinary dividends on equity shares (£'000) 6,366 - 6,366
_______ _______ _______
MURRAY INCOME TRUST PLC
INCOME STATEMENT
(FORMERLY THE STATEMENT OF TOTAL RETURN)
Year ended 30 June 2005
Revenue Capital Total
(restated -
see note 3)
(audited)
£'000 £'000 £'000
Gains on investments - 66,145 66,145
Investment income 16,333 - 16,333
Other income 200 - 200
Management fees (1,287) (1,287) (2,574)
Other expenses (881) - (881)
_______ _______ _______
Net return before finance costs and taxation 14,365 64,858 79,223
Finance costs (654) (654) (1,308)
_______ _______ _______
Return attributable to equity shareholders 13,711 64,204 77,915
_______ _______ _______
Return per ordinary share (pence) 20.0 93.7 113.7
_______ _______ _______
Ordinary dividends on equity shares (£'000) 12,473 - 12,473
_______ _______ _______
MURRAY INCOME TRUST PLC
BALANCE SHEET
31 December 2005 31 December 2004 30 June
2005
(restated - see (restated - see
note 2) note 2)
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Fixed assets
Investments designated as held at fair value 462,453 401,942 417,552
Current assets
Debtors 1,162 959 1,455
Cash 3,639 3,399 2,700
__________ __________ __________
4,801 4,358 4,155
Creditors
Amounts falling due within one year (3,524) (3,422) (4,144)
__________ __________ __________
Net current assets 1,277 936 11
__________ __________ __________
Total assets less current liabilities 463,730 402,878 417,563
__________ __________ __________
Creditors
Amounts falling due after more than one year (23,000) (20,000) (16,000)
__________ __________ __________
Net assets 440,730 382,878 401,563
__________ __________ __________
Capital and reserves
Called-up share capital 16,593 17,192 16,765
Share premium account 7,955 7,955 7,955
Capital redemption reserve 5,008 4,410 4,836
Capital reserve - realised 272,528 266,093 262,455
Capital reserve - unrealised 123,364 72,954 92,721
Revenue reserve 15,282 14,274 16,831
__________ __________ __________
Equity Shareholders' funds 440,730 382,878 401,563
__________ __________ __________
Net asset value per Ordinary share (pence) 664.0 556.8 598.8
__________ __________ __________
The financial statements have been restated to reflect the change to accounting
policies as set out in the accompanying notes.
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
Six months ended 31 December 2005
Share Capital Capital Capital
Share premium redemption reserve reserve Revenue
capital account reserve -realised -unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 June 2005 (restated) 16,765 7,955 4,836 262,455 92,721 16,831 401,563
Repurchase of shares (172) - 172 (3,859) - - (3,859)
Net return on ordinary activities - - - 13,932 30,643 5,332 49,907
after taxation
Dividends paid - - - - - (6,881) (6,881)
_________ _________ _________ _________ _________ _________ _________
Balance at 31 December 2005 16,593 7,955 5,008 272,528 123,364 15,282 440,730
_________ _________ _________ _________ _________ _________ _________
Six months ended 31 December 2004
Share Capital Capital Capital
Share premium redemption reserve reserve Revenue
capital account reserve -realised -unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 June 2004 (restated) 17,391 7,955 4,210 262,238 41,050 15,593 348,437
Repurchase of shares (199) - 200 (3,461) - - (3,460)
Net return on ordinary activities - - - 7,316 5,047 44,267
after taxation 31,904
Dividends paid - - - - - (6,366)
(6,366)
_________ _________ _________ _________ _________ _________ _________
Balance at 31 December 2004 17,192 7,955 4,410 266,093 72,954 14,274 382,878
_________ _________ _________ _________ _________ _________ _________
Year ended 30 June 2005
Share Capital Capital Capital
Share premium redemption reserve reserve Revenue
capital account reserve -realised -unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 June 2004 (restated) 17,391 7,955 4,210 262,238 41,050 15,593 348,437
Repurchase of shares (626) - 626 (12,316) - - (12,316)
Net return on ordinary activities - - - 12,533 13,711 77,915
after taxation 51,671
Dividends paid - - - - - (12,473) (12,473)
_________ _________ _________ _________ _________ _________ _________
Balance at 30 June 2005 16,765 7,955 4,836 262,455 92,721 16,831 401,563
_________ _________ _________ _________ _________ _________ _________
MURRAY INCOME TRUST PLC
CASH FLOW STATEMENT
Six months ended Six months ended Year
ended
31 December 2005 31 December 2004 30 June 2005
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment income received 6,971 7,110 16,601
Interest received 53 99 198
Investment management fees paid (1,331) (1,264) (2,568)
Cash paid to and on behalf of Directors (35) (39) (72)
Other cash payments (377) (400) (789)
__________ __________ __________
Net cash inflow from operating activities 5,281 5,506 13,370
Servicing of finance
Interest paid (552) (708) (1,351)
__________ __________ __________
Net cash outflow from servicing of finance (552) (708) (1,351)
Financial investment
Purchase of fair value investments (54,024) (59,227) (93,962)
Sales of fair value investments 54,293 87,458 132,887
__________ __________ __________
Net cash inflow from financial investment 269 28,231 38,925
Management of liquid resources
Cash drawn/(placed) on short-term deposit - (3,045) (104)
__________ __________ __________
Net cash outflow from management of liquid resources - (3,045) (104)
__________ __________ __________
Net cash inflow before financing 4,998 29,984 50,840
Equity dividends paid (6,797) (6,408) (12,570)
Financing
Drawdown/(Repayment of loans) 7,000 (20,000) (24,000)
Repurchase of shares (4,262) (3,461) (11,913)
__________ __________ __________
Net cash inflow/(outflow) from financing 2,738 (23,461) (35,913)
__________ __________ __________
Net increase in cash 939 115 2,357
__________ __________ __________
Notes to the Financial Statements
Note 1 Accounting policies
The accounts have been prepared under the historical cost convention, as
modified to include the revaluation of investments and in accordance with
applicable Accounting Standards and with the Statement of Recommended Practice
for 'Financial Statements of Investment Trust Companies'.
For the accounting period beginning on 1 July 2005 the Company had the option to
prepare its financial statements in accordance with International Financial
Reporting Standards ('IFRS'), as adopted by the International Accounting
Standards Board ('IASB'). The Board has elected to continue to adopt UK
Generally Accepted Accounting Principles ('UK GAAP') and therefore with the new
Financial Reporting Standards issued as part of the programme to converge UK
GAAP with IFRS. Figures for the period ended 31 December 2004 and year ended 30
June 2005 have been restated accordingly.
The same accounting policies used for the year ended 30 June 2005 have been
applied with the following exceptions:
(a) Investments are measured initially at cost and are recognised at trade
date. For financial assets acquired, the cost is the fair value of the
consideration, with changes in fair value going to the profit and loss account.
Subsequent to initial recognition investments are valued at fair value. For
listed investments this is assumed to be bid market prices.
(b) Under FRS 21 'Events after the Balance Sheet Date', dividends should
only be accrued in the accounts if they are a liability at the Balance Sheet
date. No provision has been made for the second interim dividend for the period
ended 31 December 2005. As the final dividend for the year is approved by the
Shareholders at the AGM each year, no provision has been made for the final
dividend for the year ended 30 June 2005.
The impact of these changes are shown in notes 2 and 3.
Note 2 Reconciliation of Balance Sheets
As at As at As at
30 June 31 December 30 June
2005 2004 2004
(audited) (unaudited) (audited)
£'000 £'000 £'000
Net assets previously reported 397,812 379,791 345,138
Restatement of investments at bid value (8) (8) (5)
Reversal of provision of interim dividend - 3,095 -
Reversal of provision of 2004 final dividend - - 3,304
Reversal of provision of 2005 final dividend 3,759 -
_________ _________ _________
Restated net assets 401,563 382,878 348,437
_________ _________ _________
Note 3 Reconciliation of the Income Statements
Six months Year
ended ended
31 December 30 June
2004 2005
(unaudited) (audited)
£'000 £'000
Total Transfer to reserves per original reported Statement
of Total Return 38,114 64,990
Change from mid to bid basis at 30 June 2004 5 5
Change from mid to bid basis at 31 December 2004 (8) -
Change from mid to bid basis at 30 June 2005 - (8)
Add interim dividends on Ordinary shares 6,157 -
Add 2005 dividends on Ordinary shares - 12,928
Restated transfer to reserves 44,268 77,915
Ordinary dividends on equity shares deducted from reserves:
Six months ended Six months Year
ended ended
31 December 2005 31 December 30 June
2004 2005
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
2004 final dividend paid - 4.75p - 3,271 3,271
2005 first interim dividend paid - 4.50p - 3,095 3,095
2005 second interim dividend paid - - - 3,070
4.50p
2005 third interim dividend paid - 4.50p - - 3,037
2005 final dividend paid - 5.65p 3,759 - -
2006 first interim dividend paid - 4.70p 3,122 - -
6,881 6,366 12,473
Note 4 Return per share
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2005 2004 2005
(restated) (restated)
p p p
Revenue return 8.0 7.3 20.0
Capital return 67.1 56.9 93.7
Total return 75.1 64.2 113.7
The figures are based on the following attributable assets:
Six months ended Six months ended Year ended
31 December 2005 31 December 2004 30 June 2005
(restated) (restated)
£'000 £'000 £'000
Revenue return 5,332 5,047 13,711
Capital return 44,575 39,221 64,204
Total return 49,907 44,268 77,915
Weighted average number of Ordinary 66,468,871 68,992,331 68,511,130
shares in issue
Note 5 Net asset value per share
As at As at As at
31 December 2005 31 December 2004 30 June 2005
(restated) (restated)
Attributable net assets (£'000) 440,730 382,878 401,563
Number of Ordinary shares in issue 66,371,458 68,767,046 67,057,458
NAV per Ordinary share (p) 664.0 556.8 598.8
Note 6 Transaction costs
The following transaction costs were incurred during the period:
Six months ended Six months ended Year ended
31 December 2005 31 December 2004 30 June 2005
£'000 £'000 £'000
Purchases 346 410 655
Sales 96 160 249
442 570 904
Note 7
The share capital of the Company as at 31 December 2005 was 66,371,458 Ordinary
Shares and 45,000 Treasury shares. Since 31 December 2005, a further 185,000
Ordinary Shares have been bought back into Treasury and the share capital at 27
February 2006 is therefore 66,231,458 Ordinary shares and 230,000 Treasury
shares.
Note 8
A summary of investment changes during the period and the twenty largest
investments at 31 December 2005 are attached.
Note 9
The financial information for the six months ended 31 December 2005 and 31
December 2004 comprises non-statutory accounts within the meaning of Section 240
of the Companies Act 1985. The financial information for the year ended 30 June
2005 has been abridged from published accounts that have been delivered to the
Registrar of Companies and on which the report of the Auditors was unqualified.
The interim accounts have been prepared on the same basis as the Annual Report
with the exception of the disclosures in Note 1.
By order of the Board
ABERDEEN ASSET MANAGEMENT PLC, SECRETARY
28 February 2006
Copies of this announcement will be printed and issued to shareholders and will
be available to the public at the registered office of the Company, 123 St
Vincent Street, Glasgow.
MURRAY INCOME TRUST PLC
SUMMARY OF INVESTMENT CHANGES
FOR THE SIX MONTHS TO 31 DECEMBER 2005
Valuation Appreciation/ Valuation
30 June 2005 Transactions Depreciation 31 December 2005
£'000 % £'000 £'000 £'000 %
United Kingdom
Equities 417,552 100.0 (624) 45,525 462,453 99.7
______ ______ ______ ______ ______ ______
Total Investments 417,552 100.0 (624) 45,525 462,453 99.7
Net current assets 11 - 1,266 - 1,277 0.3
______ ______ ______ ______ ______ ______
Total assets 417,563 100.0 642 45,525 463,730 100.0
______ ______ ______ ______ ______ ______
Note: Opening positions have been restated to reflect changes in accounting policies
SUMMARY OF NET ASSETS
Valuation
31 December 2005
£'000 %
Equities 462,453 104.9
Net current assets 1,277 0.3
Borrowings (23,000) (5.2)
______ ______
Equity Shareholders' interest 440,730 100.0
______ ______
SHARE CAPITAL
As at 31 December 2005
Ordinary shares of 25p each 66,371,458
________
Treasury shares of 25p each 45,000
________
TWENTY LARGEST INVESTMENTS
AS AT 31 DECEMBER 2005
Valuation Total Assets
Investment Sector £'000 %
Royal Dutch Shell Oil & Gas 31,712 6.8
BP Amoco Oil & Gas 29,248 6.3
HSBC Holdings Banks 25,424 5.5
Barclays Banks 20,242 4.4
Royal Bank of Scotland Group Banks 19,375 4.2
GlaxoSmithKline Pharmaceuticals 17,799 3.8
British American Tobacco Tobacco 14,895 3.2
Aviva Life Assurance 14,558 3.1
Anglo American Mining 12,884 2.8
Diageo Beverages 12,638 2.7
Lloyds TSB Group Banks 12,359 2.7
Slough Estates Real Estate 11,910 2.6
Centrica Utilities - Other 11,033 2.4
Rio Tinto Mining 9,558 2.1
BOC Group Chemicals 8,923 1.9
BBA Group Engineering and Machinery 8,790 1.9
BT Group Telecommunication Services 8,705 1.9
Vodafone Group Telecommunication Services 8,660 1.9
Unilever Food Producers & Processors 8,534 1.8
Scottish Power Electricity 8,098 1.7
________ ________
Top Twenty Investments 295,345 63.7
________ ________
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