Final Results
22 November 2005
PRELIMINARY ANNOUNCEMENT OF UNAUDITED RESULTS OF THE
MAJEDIE INVESTMENTS PLC GROUP
for the year ended 30 September 2005
Highlights
- Total shareholder return for the year: 38.2%;
- Net asset value total return for the year: 31.2%;
- Dividend up 3.4%: above inflation increase for 16th consecutive year;
- Majedie Asset Management's assets under management reach £2.3 billion within
three years of launch of business.
Summary
Year ended 30 Year ended 30 % change
September 2005 September 2004
Share price total return +38.2% +19.3%
Net asset value total +31.2% +11.6%
return
Benchmark* +24.4% +13.3%
Total dividend per share 9.05p 8.75p +3.4
* The benchmark is 70% FTSE All-Share Index + 30% FTSE World ex UK Index and is
calculated by The WM Company.
Chairman's Statement
I am delighted to report that over the last twelve months the consolidated net
revenue before taxation amounted to £5.5m - increasing from the previous year's
figure of £2.6m. Furthermore the total return to shareholders was 38.2%
exceeding our benchmark return of 24.4% by 13.8%. The underlying net asset
value total return was 31.2%: an outperformance of 6.8%. Our policy of actively
using the gearing of our long term debentures throughout the year has
materially assisted these results.
During the financial year the Company achieved a capital return on investments
of £47.9m. After adding income and deducting costs, interest, tax and dividends
there is an overall surplus in the combined revenue and capital account of
£43.2m which has been transferred to reserves.
This year the consolidated revenue account has been boosted by Majedie Asset
Management's net profit for the year of £2.1m - helping to almost eliminate the
revenue account deficit which was present last year. I refer later to the
progress of this business in greater detail.
We are continuing with our policy of seeking to maximise the total return for
shareholders including a progressive dividend policy. A final dividend of 5.85
pence per share is proposed. This gives a total for the year of 9.05 pence per
share representing an above inflation increase of 3.4% on last year. This is
the sixteenth consecutive year in which the dividend has increased by more than
the rate of inflation.
At the beginning of the year the portfolio started with an overweighting in the
global resources sector including mining and oil & gas. Gill Leates increased
this further during the year. This strategy is based on the long term demands
from the expanding Chinese and Indian economies within a global economy which
is likely to grow more slowly. The world economy has never before witnessed the
scale of structural change taking place in China. It is resulting in enormous
demands for commodities to supply major infrastructure and industrial projects
including the creation of new cities for a population of 1.3 billion. The
investment team has therefore continued to invest in companies which are likely
to benefit from these significant trends over the coming months and years. The
portfolio balance is maintained with higher yielding companies in the banks,
utilities and other industrial sectors.
The Board has considered in some depth the appropriate level of risk to be
borne in the portfolio with regard to the level of potential investment
returns. The Board sets reasonable risk limits for the portfolio while allowing
the investment management team sufficient scope and flexibility to generate
superior performance.
In order to maximise total investment return the executives pay attention to
both short term and longer term considerations. At the outset of a specific
investment decision Gill Leates and her colleagues identify the potential for
the share price of an individual stock to increase by more than the rest of the
market over time. It will take some stocks longer than others for this special
additional value to be reflected and realised. One of the many challenges of
investment management is to plan ahead so that the portfolio holds investments
which are likely to reach maturity at different times. It is also important
that we are not distracted by short term volatility in stock markets from our
objective of maximising investment return over the long term.
Our business development strategy has been evolving over several years. Majedie
Asset Management Limited is the first implemented stage of that strategy and
the business, specialising in UK equity fund management, is continuing to grow
profitably as referred to in further detail below. We are looking at ways of
developing a new equity fund management business in another area of
specialisation. Much has been learned from our experience and success with the
Majedie Asset Management business and we believe that there is a valuable
opportunity to build a new fund management operation over the next few years.
As a self-managed investment trust Majedie is different from other investment
trusts. The development of a specialist boutique fund management business and
the establishment of a separate new operation further distinguishes us from our
peers. This differentiated strategy is already contributing positively to the
revenue account and share price. Over the coming years we believe it will yield
significant further benefits for shareholders.
The Majedie Asset Management business has had another strong year with assets
under management increasing from £884 million at the start of the year to
£2.3 billion by the end. As already reported, during the year the business generated
a net profit of £2.1m - this compares with a loss of £0.6m in 2004. Majedie
Asset Management now has 15 employees and this August moved into new offices at
One Carey Lane.
As profitability has increased so your Company's shareholding has reduced in
line with pre-agreed targets - this year from 65% to 55%. The Board has
assessed the value of the Company's investment as at 30 September 2005 as
£10.1m and this is included in the Company Balance Sheet. However, as Majedie
Asset Management Limited is a consolidated subsidiary, this value is not
reflected in the Group Balance Sheet.
Group administrative expenses for the year were £6.2m compared with £3.9m in
2004. These figures include respectively £4.3m and £2.1m for the costs of
Majedie Asset Management Limited - the increase reflecting the growth in that
business and related staff remuneration.
The results for the 2005 financial year, to which I have referred, are very
encouraging. However it is particularly pleasing that total shareholder return
over three years is well ahead of the benchmark. During the year the
Remuneration Committee commissioned an independent review of executive
directors' remuneration. As a result of that review and the subsequent
consultation with institutional shareholders and shareholder representative
groups, a new Long Term Incentive Plan and bonus structure is being tabled for
approval at the Annual General Meeting. It includes share awards with five year
performance conditions and an element of the annual bonus to be awarded in
shares which will be deferred for three years. Further details of the new
arrangements will be provided in a special circular to be sent to shareholders
with the annual report on 8 December 2005. Careful consideration has been given
to the structure. The objective is to provide financial incentives which will
encourage the executive directors to manage the portfolio effectively and to
grow the business for the benefit of all shareholders over the coming
years - building on the progress which has recently been made.
Over the coming year we will be implementing new compulsory changes to
disclosures in the annual report. This time they take the form of conversion to
International Financial Reporting Standards as a result of a directive from the
European Commission. Although in theory there may be benefits associated with
international standardisation and more disclosure, I question whether our
accounts will be more comprehensible to the non-professional than they were
25 or 30 years ago. I believe the professional bodies concerned would do well to
consider this.
In last year's annual report I paid tribute to the contributions of Sir John
Barlow and David Ritchie who retired during the current year at the Annual
General Meeting in January 2005. I would like to reiterate to each of them our
best wishes for the future.
Much has been achieved this year including strong investment performance in the
portfolio. I would like to thank all employees for their hard work and for
their contributions to these achievements. I am also very grateful to my fellow
directors for their diligence and dedication in carrying out their duties over
the course of a busy year.
Henry S Barlow Chairman
21 November 2005
For further information please contact Robert Clarke, Chief Executive on 020
7645 8711; e-mail: rec@majedie.co.uk
CONSOLIDATED STATEMENT OF TOTAL RETURN
for the year ended 30 September 2005
Notes Year ended 30 September Year ended 30 September
2005 2004
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Net realised gains on 13,315 13,315 7,479 7,479
sales
Increase in unrealised 27,607 27,607 9,238 9,238
appreciation
Total capital return on 40,922 40,922 16,717 16,717
investments
Dividends and interest 4,669 4,669 4,783 4,783
Other income 6,554 6,554 1,574 1,574
Gross revenue and capital 11,223 40,922 52,145 6,357 16,717 23,074
return
Administrative expenses (5,000) (1,205) (6,205) (2,874) (1,069) (3,943)
Return on ordinary 6,223 39,717 45,940 3,483 15,648 19,131
activities before finance
costs and taxation
Finance costs (700) (2,101) (2,801) (836) (2,507) (3,343)
Premium on debenture (992) (992)
stock repurchased for
cancellation
Return on ordinary 5,523 37,616 43,139 2,647 12,149 14,796
activities before
taxation
Taxation on ordinary (43) (43) (93) (93)
activities
Return on ordinary 5,480 37,616 43,096 2,554 12,149 14,703
activities after taxation
Minority interest 1 (808) (808) 184 184
Return attributable to 4,672 37,616 42,288 2,738 12,149 14,887
equity shareholders
Dividends 2 (4,708) (4,708) (4,562) (4,562)
Transfer (from)/to (36) 37,616 37,580 (1,824) 12,149 10,325
reserves
Basic and diluted 3 8.97p 72.24p 81.21p 5.25p 23.28p 28.53p
return per ordinary
share
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. No operations were acquired or discontinued in the year.
COMPANY STATEMENT OF TOTAL RETURN
for the year ended 30 September 2005
Notes Year ended 30 September Year ended 30 September
2005 2004
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Net realised gains on 13,413 13,413 7,451 7,451
sales
Increase in unrealised 27,607 27,607 9,238 9,238
appreciation
Revaluation of 1 6,842 6,842
investment in
subsidiary undertaking
Total capital return on 47,862 47,862 16,689 16,689
investments
Dividends and interest 4,664 4,664 4,762 4,762
Other income 85 85 74 74
Gross revenue and capital 4,749 47,862 52,611 4,836 16,689 21,525
return
Administrative expenses (672) (1,205) (1,877) (745) (1,069) (1,814)
Return on ordinary 4,077 46,657 50,734 4,091 15,620 19,711
activities before finance
costs and taxation
Finance costs (700) (2,101) (2,801) (836) (2,507) (3,343)
Premium on debenture (992) (992)
stock repurchased for
cancellation
Return on ordinary 3,377 44,556 47,933 3,255 12,121 15,376
activities before
taxation
Taxation on ordinary (43) (43) (93) (93)
activities
Return attributable to 3,334 44,556 47,890 3,162 12,121 15,283
equity shareholders
Dividends 2 (4,708) (4,708) (4,562) (4,562)
Transfer (from)/to (1,374) 44,556 43,182 (1,400) 12,121 10,721
reserves
Basic and diluted 3 6.40p 85.57p 91.97p 6.06p 23.22p 29.28p
return per ordinary
share
The revenue column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year.
CONSOLIDATED BALANCE SHEET
Notes 30 September 30 September
2005 2004
£000 £000
Fixed assets:
Intangible assets 360 425
Tangible assets 613 435
Investments 4 207,236 167,386
208,209 168,246
Current assets:
Debtors 4,946 5,159
Cash at bank and on deposit 4,421 13,537
9,367 18,696
Creditors: Amounts falling due within one 7,217 14,798
year
Net current assets 2,150 3,898
Total assets less current liabilities 210,359 172,144
Creditors: Amounts falling due after more 33,755 33,687
than one year
Net assets 176,604 138,457
Capital and reserves
Called up share capital 5,253 5,253
Share premium account 785 785
Capital redemption reserve 56 56
Capital reserve - realised 89,507 79,498
Capital reserve - unrealised 58,303 30,696
Revenue reserve 23,717 23,753
Own shares reserve (1,422) (1,148)
Equity shareholders' funds 176,199 138,893
Minority interest 1 405 (436)
176,604 138,457
Net asset value per share 5 338.7p 266.5p
COMPANY BALANCE SHEET
Notes 30 September 30 September
2005 2004
£000 £000
Fixed assets:
Investments 4 207,236 167,386
Investment in subsidiaries 1 10,294 3,452
217,530 170,838
Current assets:
Debtors 2,201 4,395
Cash at bank and on deposit 2,202 12,982
4,403 17,377
Creditors: Amounts falling due within one 4,891 14,094
year
Net current (liabilities)/assets (488) 3,283
Total assets less current liabilities 217,042 174,121
Creditors: Amounts falling due after more 33,700 33,687
than one year
Net assets 183,342 140,434
Capital and reserves
Called up share capital 5,253 5,253
Share premium account 785 785
Capital redemption reserve 56 56
Capital reserve - realised 89,574 79,467
Capital reserve - unrealised 64,339 29,890
Revenue reserve 24,757 26,131
Own shares reserve (1,422) (1,148)
Equity shareholders' funds 183,342 140,434
Net asset value per share 5 352.4p 269.5p
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 September 2005
30 30
September September
2005 2004
£000 £000
Operating activities
Cash received from investments 3,403 3,839
Cash received from fee income 5,296 718
Interest received 319 534
Cash payments (4,385) (2,769)
Net cash inflow from operating activities 4,633 2,322
Servicing of finance
Interest paid (2,788) (3,238)
Premium on debenture stock repurchased for - (992)
cancellation
Net cash outflow from servicing of finance (2,788) (4,230)
Taxation
Tax recovered 4 16
Capital expenditure and financial investment
Purchases of investments (119,611) (139,895)
Sales of investments 113,861 148,546
Purchases of tangible assets (384) (140)
Net cash (outflow)/inflow from capital expenditure (6,134) 8,511
and financial investment
Equity dividends paid (4,557) (4,412)
Cash (outflow)/inflow before financing (8,842) 2,207
Financing
Purchases of own shares (274) (242)
Debenture stock repurchased - (5,800)
Net cash outflow from financing (274) (6,042)
Decrease in cash in the year (9,116) (3,835)
NOTES
1 Majedie Asset Management Limited
At the start of the year the Company had a 65% equity shareholding in Majedie
Asset Management Limited. On 31 July 2005 the holding reduced to 55% as a
result of the business reaching pre-agreed profitability targets. The remaining
45% of the equity is held by the management team. The results of that company
for the year ended 30 September 2005 amount to a profit of £2,145,000, and are
included within 'Return on ordinary activities before finance costs and
taxation' in the Consolidated Statement of Total Return (2004: loss of
£610,000). The minority interest disclosed on the Consolidated Statement of
Total Return represents 35% of Majedie Asset Management Limited's profit
(2004:loss) from ordinary activities after taxation for the first ten months of the
year to 30 September 2005 and 45% of the profit for the last two months
(2004:30% of the loss for the first six months of the year to 30 September 2004 and
35% of the loss for the latter six months). The minority interest figure
disclosed on the Consolidated Balance Sheet relates to 45% of the net surplus
(2004: 35% of the net deficit) attributable to Majedie Asset Management
Limited's equity shareholders having taken into account the rights attaching to
preference shares and other creditors.
The directors have carried out a review of the fair value of the investment in
Majedie Asset Management Limited. As at 30 September 2005 the investment is
valued in the Company Balance Sheet at £10,100,000 (2004: £3,258,000)
consisting of £2,100,000 for preference shares and £8,000,000 for equity shares
(2004: £2,100,000 for preference shares and £1,158,000 for equity shares). As a
result of this review the directors' valuation of the investment has increased
by £6,842,000 compared with last year.
2 Discretionary share option scheme
Following the granting of further share options to directors and employees on
21 December 2004 under the Discretionary Share Option Scheme, 96,632 shares
costing £274,000 were purchased by the Majedie Investments PLC Employee
Incentive Trust during the year ended 30 September 2005. The total number of
options granted by the Company is now 714,156 and the total shareholding of the
Majedie Investments PLC Incentive Trust is 505,963 ordinary shares. The shares
will be held by the trust until the relevant options are exercised or until
they lapse and are accounted for in accordance with UITF Abstract 38:
'Accounting for ESOP Trusts'. This requires that the consideration paid for own
shares be presented as a deduction from shareholders' funds and not recognised
as an asset.
The Employee Incentive Trust has waived its rights to receive dividends from
the Company and therefore the total dividend included in the Statement of Total
Return has been reduced accordingly.
3 Calculation of returns per ordinary share (Consolidated and Company)
Basic returns per ordinary share are based on 52,069,819 (2004:52,188,484)
ordinary shares, being the weighted average number of shares in issue having
adjusted for the shares held by the employee incentive trust referred to above.
Basic returns per ordinary share are based on the return on ordinary activities
after taxation attributable to equity shareholders.
There is no dilution to the basic return per ordinary share shown for the years
ended 30 September 2004 and 2005 since the share options referred to above
would, if exercised, be satisfied by the shares already held by the employee
incentive trust.
4 Fixed asset investments
Listed investments are valued at closing mid-market value. Unlisted investments
are stated at the Board's estimate of their fair value.
5 Net Asset Value per ordinary share
The consolidated net asset value per share has been calculated based on the
Group equity shareholders' funds of £176,199,000 (2004: £138,893,000) and on
52,022,037 (2004: 52,118,669) ordinary shares, being the shares in issue at the
year end having deducted the number of shares held by the employee incentive
trust.
The Company net asset value per share has been calculated based on equity
shareholders' funds of £183,342,000 (2004: £140,434,000) and on the same number
of shares as used for the calculation of the consolidated net asset value per
share.
6 Financial information for the years ended 30 September 2005 and 2004
The preliminary unaudited figures for the year ended 30 September 2005 are an
extract from the Company's latest accounts, prepared under the same accounting
standards and policies, consistently applied, as the audited financial
statements for the year ended 30 September 2004.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30 September 2005 or 2004. The financial
information for the year ended 30 September 2004 is derived from the statutory
accounts for that year which have been delivered to the Registrar of Companies.
The auditors have reported on those accounts; their report was unqualified and
did not contain statements under Section 237(2) or Section 237(3) of the
Companies Act 1985. The statutory accounts for the year ended 30 September 2005
will be finalised on the basis of the financial information presented by the
directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
ANNUAL REPORT
The annual report and accounts will be sent to shareholders on 8 December 2005
from which time copies will be available to the public at the Company's
registered office: 1 Minster Court, Mincing Lane, London EC3R 7ZZ.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at 12.15pm on Wednesday 18 January 2006
at the London Underwriting Centre, 3 Minster Court, Mincing Lane, London EC3R
7DD.
DIVIDEND
The proposed final dividend of 5.85p per share will be paid on 25 January 2006
to shareholders on the register at the close of business on 6 January 2006.
NOTES FOR EDITORS
Majedie Investments PLC is a self managed investment trust with total portfolio
assets under management of over £210 million. Our specialist fund management
subsidiary, Majedie Asset Management Limited, has client assets of £2.3
billion. The Company's objective is to maximise total shareholder return over
the long term whilst increasing dividends by more than the rate of inflation.
The Company's benchmark is 70% FTSE All-Share Index and 30% FTSE World ex UK
Index (Sterling) on a total return basis.
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