Half-yearly Report
Majedie Investments PLC
Half-Yearly Financial Report
31 March 2011
The Directors announce the unaudited half-yearly financial report for the six
months to 31 March 2011 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 £170 million as at 31 March 2011.
Our Objective is to maximise total shareholder return over the long term whilst
increasing dividends by more than the rate of inflation.
Financial Highlights for the half year ended 31 March 2011
net assets per share increased by 1.4% to 228.4p
Share price decreased by 6.0% to 180.0p
Discount to net assets widened from 15.0% to 21.2%
Revenue Return per share decreased by 80.0% to 2.6p
Interim dividend unchanged at 4.2p
Performance
Net asset value total return of 4.1%
Total shareholder return of -3.1%
Investment Objective and Policy Statement
Investment Objective
The Company's objective is to maximise total shareholder return over the long
term whilst increasing dividends by more than the rate of inflation.
Investment Policy
The Company invests principally in securities of publicly quoted companies
worldwide, though it may invest in unquoted securities up to levels set
periodically by the Board. This can include products managed by Javelin
Capital, its investment manager.
The overall approach is based on analysis of global economies and 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 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 (MAM) and Javelin Capital LLP. An analysis and
description of these groups is contained in the Investment Managers' Report.
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
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.
Although, exceptionally, derivative instruments may be employed, usually for
hedging purposes and with specific prior approval of the Board, generally the
Company is a long-only investor and would be unlikely to use such instruments.
The Company will not invest in any holding that would, at the time of
investment, represent more than 15% of the value of its gross assets.
The Company uses gearing, currently via longer term debentures. The Articles of
Association give the Board 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 â…”%,
and any additional indebtedness is not to exceed 20%, of adjusted capital and
reserves.
Chairman's Statement
The global economy in the six months to 31 March 2011 continued the recovery
from the period of the financial crisis but remained volatile. However,
considering that global markets had to contend with the natural disaster and
the tragic events in Japan, the political upheaval occurring across the Middle
East and other significant events, such as the credit downgrade of the US, it
is perhaps surprising that there wasn't a more negative reaction.
During the six month period to 31 March 2011 the NAV and share price, both on a
total return basis, returned 4.1% and -3.1% respectively. Further detailed
analysis of the performance for the period is included in the Investment
Manager's report below.
Results
The Group results for the six months to 31 March 2011 include Javelin Capital
for the entire period and for the first time the consolidation of the
investment made into the Javelin Capital Global Equity Strategies Fund (QIF) in
accordance with IFRS. This requirement, due to the Company's controlling
interest in the QIF, results in some large presentational and classificatory
impacts but has no material effect on the results for the six month period.
The Group's net revenue return before tax for the six months to 31 March 2011
was £1.4m compared to £6.8m for the prior year period. Group income for the
period was £2.8m which is £4.8m lower than the prior year period primarily
reflecting the fall in total income from Majedie Asset Management Limited
(MAM). Total income from MAM was £1.2m compared to £5.9m in the prior year
period which included a special dividend of £5.4m. Underlying dividend income
for the period from MAM, in accordance with the new shareholders agreement,
increased from £0.5m to £1.2m. Group income for the period was enhanced by
improved dividend receipts from investee companies which offset the anticipated
lower level of income from our £20m investment into the absolute return Javelin
Capital Global Equity Strategies Fund (QIF). Finally in the Group accounts
essentially all income from Javelin Capital for the six month period is derived
from within the Group and is eliminated on consolidation.
Total group costs were £2.2m for the period compared to £1.9m in the prior year
period. This increase reflects the inclusion of Javelin Capital and QIF
operating costs over the six months as compared to pre-launch costs in the
prior period. The core Company costs continued to reduce to just under £1m for
the six months to 31 March 2011 as compared to £1.1m for the prior period. Cost
control remains a key focus of the Board.
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 29 June 2011 to shareholders on the register on 3 June 2011.
The investment in MAM is held at fair value in both the Company and Group
accounts and its valuation is reviewed by the Board regularly. MAM continues to
perform well and the Board have determined that our holding will be maintained
at its carrying value of £30m as at 31 March 2011.
In contrast the investment in Javelin Capital is consolidated in the Group
accounts at net asset value 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 reviewed the valuation of Javelin Capital and
notwithstanding the slower than anticipated AUM growth so far and related
losses to date the Board has determined that as at 31 March 2011 the valuation
of Javelin Capital will be kept at £4.5m in the Company accounts.
Investment Portfolio
As I indicated in my statement on 24 November 2010 that accompanied the full
year report and accounts to 30 September 2010, the Company's assets are managed
in four distinct groups. I also pointed out that following the appointment of
Javelin Capital LLP as the Company's investment manager we would provide a
separate Investment Manager's Report and we have continued with this format for
the Interim Report and this can be found below.
Javelin Capital and Board Composition
Since the launch of Javelin Capital in September 2010 its first flagship fund,
the Javelin Capital Global Equities Strategies Fund (QIF), has performed in
line with industry peers on a risk adjusted basis and has outperformed the
return on cash and 10 year treasury notes. Its inclusion within the broader
Company portfolio has already brought diversification and risk reduction
benefits. Although the QIF has attracted interest from potential investors its
current assets of US$31.3m are nearly wholly comprised of the seed investment
by the Company, and it is clear that in the current environment it will be
necessary to establish a longer term track record to attract external assets
under management. Javelin Capital will therefore take longer than originally
anticipated to reach profitability. In view of investor feedback, Javelin
Capital intends to launch a second, UCITS-compliant, fund, the Javelin Capital
Emerging Markets Alpha Fund in July 2011, which the Company intends to seed
with a £15m investment.
As announced on 21 April 2011 the Board proposes to make further equity
investments of up to, in aggregate, £3.5m in Javelin Capital to provide
additional regulatory and working capital and to secure its long term funding
until it reaches profitability. At the same time, the limited liability
partnership agreement relating to Javelin Capital will be revised as a
consequence of the capital contribution. This augments the initial equity of
£4.5m invested in September 2010. At the time of the AGM the Board expressed the
view that further investment may be required in Javelin Capital as the process
of attracting external assets under management was taking longer than
anticipated in the business plan. In providing the additional equity capital
the Company and Javelin Capital have decided to reduce the existing level of
overheads in the business.
Gerry Aherne, who led the formation and launch of Javelin Capital and has
served on the Board since May 2006, has decided to resign as a partner
(including his role as managing member) of Javelin Capital and as a Director of
the Company, each with effect from 21 April 2011. Victor Pina has been
appointed as managing member of Javelin Capital and will continue as CIO of
Javelin Alternative Strategies along with his team.
The assets of the Company will continue to be managed by Nick Rundle, who as a
partner of Javelin Capital reports to the Board, to ensure that the overall
regulatory conditions are met for an investment trust and that the investments
are in accordance with the stated objectives of the Company.
As Javelin Capital is a related party of the Company, the further equity
injection requires the approval of shareholders. The Board believes that the
further investment in Javelin Capital and the investment in the Emerging
Markets Alpha fund will require a modification to the Company's investment
policy and objective.
The modification to the investment objective is to reflect the difficulty of
trying to increase dividends by more than the rate of inflation in the short
term given the current high levels of inflation. The Board expects that a
significant proportion of the current year's dividends will be funded from the
Company's revenue reserves rather than current year income. It is highly
unlikely that the Company will be able to increase dividends in the short term
by more than current rates of inflation and the Company's ability to do this
will be increasingly challenged if the current inflationary and investment
return environments exist. The Board wishes to keep the objective to increase
dividends by more than the rate of inflation as a long term investment
objective.
Although the Company does not propose to make any further investments in
Majedie Asset Management Limited or Javelin Capital (other than as above), the
Company may invest in future funds launched by Javelin Capital including the
intended £15m investment in the Emerging Markets Alpha fund. Accordingly the
Board is also proposing that the investment policy will be changed to permit
these investments.
Under the listing rules, the Company is required to seek shareholder approval
for any material change to its investment objective and policy.
A circular will be posted to shareholders as soon as practicable giving further
details and convening the necessary EGM.
The Board remains committed to the long term future and success of Javelin
Capital.
Review of Investment Trust Tax Rules
In my statement of 24 November 2010 I stated that I would report on
developments in respect of the review of the Investment Trust Tax rules. The
proposals included two aspects that, if implemented would have had a
detrimental effect on your Company, which were in respect of close company and
income retention rules.
Following consultation, the Government announced on 16 December 2010 that these
specific proposals would no longer be adopted although changes would be made in
respect of close company rules which would not impact existing investment
trusts.
It is important to note, as well, that the proposals also included various
amendments which seek to incorporate modern investment practices and allow a
wider range of investment strategies for investment trust companies. These
changes include:
â— a new spread of risk test (replacing mechanistic portfolio holding limits);
â— certainty on transactions treated as investment (through a new "white list"
which will allow increased use of derivatives);
â— an advance approval process for investment trust status (rather than the
annual retrospective method currently used); and
â— reform of the income requirements to allow income receipts from a wider range
of sources.
The Government has announced that draft legislation will be completed in April
and the changes will be included in the Finance Bill 2011. It is anticipated
that this Bill will be passed by the autumn and the changes expected to come
into force in either late 2011 or early in the new year.
This represents a good outcome for your Company and I will continue to keep you
informed of developments in the future.
Outlook
The global equity market and economy has continued to recover and valuations do
not appear too stretched at this juncture. This is impressive given the
numerous geo-political shocks that have occurred. There are tentative signs
that a greater level of stability is emerging although we still regard the
immediate future with some caution.
In this regard the investment in the QIF and proposed investment in the UCITS
fund should provide additional security given their absolute return
characteristics which will be valuable should there be a period of further
volatility. This has an additional attraction given the long term gearing
within the Company.
Andrew J Adcock
Chairman
27 May 2011
Investment Manager's Report
Market Background & Outlook
The global economy has continued to tread a cautious path towards stability.
The worst of the recession is almost certainly behind us, but hurdles continue
to emerge on a regular basis. Most major countries are expected to deliver GDP
growth in the near term, although the outlook for emerging markets,
particularly China and India is considerably better than developed markets.
Equity markets began the period quietly, before rising by 8-12% between
December and February. March was a particularly interesting month. The majority
of markets ultimately ended the month virtually unchanged, despite the natural
disaster in Japan, geo-political issues in the Middle East, an escalation of
European debt problems and the tangible emergence of global inflationary
pressures.
Many companies have emerged from the recession in healthy financial positions,
having reduced their indebtedness and reassessed their cost bases. The strength
of corporate balance sheets is starting to show through in higher levels of
capital spending, M&A activity, share buy backs and increased dividend payouts.
The finances of Western governments and consumers are, however, less robust.
Governments are addressing deep rooted budget imbalances by increasing tax
rates and reducing spending in real or absolute terms. This is negatively
affecting consumers, who are already feeling the pressure of inflation on
disposable incomes. Central banks face the unenviable task of attempting to
head off inflation whilst being aware that increased interest rates may have a
detrimental impact on growth prospects.
Even after the strong recovery over the past two years, equity markets remain,
on a number of valuation criteria, relatively inexpensive when considered
against historic trends and the returns available from other asset classes.
Over long periods, share prices are driven by the fundamentals of financial
strength and earnings opportunity. However, the short term is determined by
investor risk appetite, as demonstrated by the significant and sudden shifts in
share prices that continue to be experienced. This volatility is likely to
remain evident for some time as the global economic recovery continues to be
unpredictable.
Investment Report
The Company's assets are managed in four distinct groups; the Core Portfolio
(which includes a small Non-Core Realisation Portfolio), Javelin Global Equity
Strategies Fund 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 shareholder return
in the long term whilst increasing dividends by more than the rate of
inflation. 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 2011, the value of the Core Portfolio, including cash
available for investment, was £95.6m, representing 63% of the Company's Total
Investments.
During the period the Core Portfolio Total Return was +8.0% which is comparable
to the performance of dedicated UK and global equity income funds. Investment
performance was 1.7% behind that of the benchmark, which is understandable as
the equity income asset class has trailed general indices, with investors
continuing to prefer higher risk growth stocks over mature dividend paying
companies.
Investments are typically in well financed, high quality companies with a
proven track record of delivering profit and dividend growth. There is a
particular bias towards stocks that we believe are better placed to benefit
from their involvement in the faster growing areas of the global economy,
especially those exposed directly or indirectly to emerging economies. As such,
the portfolio retains considerable exposure to engineering companies such as
Alstom, Illinois Tool Works, IMI and Charter and, unusually for income funds,
mining companies including Antofagasta, BHP Billiton and Rio Tinto. Significant
investments have also been made in telecommunication companies and major oil
producers due to the attraction of their stable cash generation and high
dividend payments. The portfolio remains under-exposed to developed market
consumers and governments as these areas are likely to remain tough for the
foreseeable future as fiscal entrenchment takes effect. Exposure to financials
is consistent with market weightings but represents a preference for life
insurers over banks, where the effect of the financial crisis may not yet be
fully transparent.
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. Further
progress has been made through realisations during the period and since the
period end.
As at 31 March 2011 the value of the non-core realisation portfolio was £5.8m,
including £0.4m of cash. This represents less than 4% of the Company's Total
Investments and will reduce over time as further liquidations are achieved.
Javelin Global Equity Strategies Fund
In late September 2010 a $31.1m seed capital investment was made into the first
flagship product to be launched by the Javelin Capital LLP. The fund takes long
and short positions in global equities, including emerging markets, and has
been designed to target lower volatility and reduced risk than a typical
absolute return fund. Since inception the fund has delivered a positive
investment performance of 1%, although this has been more than offset by
sterling strength.
As at 31 March 2011, the value of the JGESF holding was $31.4m (£19.6m)
representing 13% of the Company's Total Investments.
Majedie Asset Management
Majedie Asset Management was launched in 2002 using finance provided by the
Company, which retains a 30% equity interest. It now manages approximately
£6billion, for over 90 institutional clients. The business continues to perform
strongly, remaining extremely well financed and profitable. In December 2010 an
institutional global equity business was launched, to complement existing UK
long-only and UK long-short offerings. During the period we received almost
£1.2m in final dividend for its year ended 30 September 2010.
The Board has decided to retain the valuation of our holding at £30m,
representing almost 20% of the Company's Total Assets.
Development of Net Asset Value
In aggregate, the NAV has increased by £1.6m having generated an investment
return of £8.5m, incurred total expenses of £3.6m and distributed £3.3m in
dividends.
The Core Portfolio contributed £7.9m through a combination of dividend income
and capital appreciation, a £1.2m dividend was received from Majedie Asset
Management, Non-Core Realisation Portfolio made limited impact whilst the
Javelin Capital Global Equity Strategies Fund (JCGESF) lost £0.6m due to the
translation effect of adverse currency movements.
Total expenses during the period were £3.6m of which Administration Costs were
£2.2m, which includes Javelin Capital operating expenses, and Finance Costs
were £1.4m. A final dividend of £3.3m (6.3p per share) was paid in January
2011.
Nick Rundle
Investment Director
Javelin Capital LLP
27 May 2011
Portfolio Information
at 31 March 2011
Fund Analysis
Market Value % of
£000 Fund
Oil & Gas 15,695 10.3
Basic Materials 9,831 6.4
Industrials 12,630 8.3
Consumer Goods 7,738 5.1
Health Care 7,033 4.6
Consumer Services 10,024 6.6
Telecommunications 8,175 5.4
Utilities 3,691 2.4
Financials 19,023 12.5
Technology 4,671 3.1
Unlisted (note 8) 34,661 22.8
Total Investments at Fair Value 133,172 87.5
Cash 18,949 12.5
152,121 100.0
United Kingdom 99,663 65.5
United States 15,284 10.0
Continental Europe 8,277 5.4
Rest of the World 9,948 6.6
Total Investments at Fair Value 133,172 87.5
Cash 18,949 12.5
152,121 100.0
The portfolio information below is shown on a 'net' basis and comprises the
investments at fair value of £133,172,000 (including MAM at £30,000,000) and
cash (as adjusted for amounts due to/from brokers for settlement) of
£18,949,000.
Twenty Largest UK Investments
at 31 March 2011
Company Market % of Company Market % of
Value Fund Value Fund
£000 £000
Majedie Asset Management 30,000 19.7 Barclays 1,804 1.2
Royal Dutch Shell `B' 6,102 4.0 Unilever 1,710 1.1
HSBC 5,609 3.7 Antofagasta 1,701 1.1
Vodafone 4,104 2.7 Legal & General 1,670 1.1
BP 4,086 2.7 BG Group 1,629 1.1
GlaxoSmithKline 3,806 2.5 Charter 1,454 1.0
International
Rio Tinto 3,284 2.2 Imperial Tobacco 1,253 0.8
BHP Billiton 3,198 2.1 British Land 1,243 0.8
Vostok Energy 2,857 1.9 Babcock 1,242 0.8
International
Aviva 1,839 1.2 Inchcape 1,212 0.8
Ten Largest Overseas Investments
at 31 March 2011
Company Market % of Company Market % of
Value Fund Value Fund
£000 £000
Schlumberger (USA) 1,280 0.8 Wells Fargo (USA) 989 0.7
Alstom (France) 1,108 0.7 AT&T (USA) 955 0.6
Sanofi-Aventis 1,040 0.7 ENI (Italy) 951 0.6
(France)
Toyota (Japan) 1,031 0.7 JP Morgan Chase 935 0.6
(USA)
Illinois Tools (USA) 1,005 0.7 Coca Cola (USA) 931 0.6
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 above.
The principal risks facing the Company are substantially unchanged since the
date of the Annual Report for the year ended 30 September 2010 and continue to
be as set out in that report. 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 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 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 2010 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
27 May 2011
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 2011 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 Services 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 2011 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
27 May 2011
Condensed Consolidated Income Statement
for the half year ended 31 March 2011
Half year ended Half year ended Year ended
31 March 2011 31 March 2010 30 September 2010
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/(losses) 6,470 6,470 6,218 6,218 (2,361) (2,361)
on investments
at fair value
through profit
or loss
Net investment 6,470 6,470 6,218 6,218 (2,361) (2,361)
result
Income
Income from 2 2,745 2,745 7,584 7,584 10,011 10,011
investments
Other income 2 25 25 48 48 82 82
Total income 2,770 2,770 7,632 7,632 10,093 10,093
Expenses
Administration (972) (1,206) (2,178) (478) (1,434) (1,912) (3,105) (2,017) (5,122)
expenses
Return/ 1,798 5,264 7,062 7,154 4,784 11,938 6,988 (4,378) 2,610
(deficit)
before finance
costs and
taxation
Finance costs (362) (1,086) (1,448) (350) (1,051) (1,401) (701) (2,101) (2,802)
Net return/ 1,436 4,178 5,614 6,804 3,733 10,537 6,287 (6,479) (192)
(deficit)
before taxation
Taxation 3 (73) (73) (50) (50) (131) (131)
Net return/ 1,363 4,178 5,541 6,754 3,733 10,487 6,156 (6,479) (323)
(deficit) after
taxation for
the period
Other (613) (613)
comprehensive
income -
exchange
differences on
translation of
foreign
operations
Total 1,363 3,565 4,928 6,754 3,733 10,487 6,156 (6,479) (323)
comprehensive
income for the
period
Net return/
(deficit) after
taxation
attributable
to:
Equity holders 1,364 4,176 5,540 6,754 3,733 10,487 6,156 (6,479) (323)
of the Company
Non-controlling (1) 2 1
interest
Return/ pence pence pence pence pence pence pence pence pence
(deficit) per
ordinary share:
Basic and 4 2.6 8.0 10.6 13.0 7.2 20.2 11.8 (12.4) (0.6)
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.
Condensed Consolidated Statement of Changes in Equity
for the half year ended 31 March 2011
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 5,253 785 56 (220) 86,945 26,042 (1,702) 117,159
31 March 2011
30 September
2010
Net return 4,176 1,364 1 5,541
after tax for
the period
Other (613) (613)
comprehensive
income
Share options 5 30 30
expense
Dividends 7 (3,277) (3,277)
declared and
paid in period
Introduction of 5 86 91
non-controlling
interest in the
QIF
Own shares (19) 19
(sold)/
purchased by
Employee
Incentive Trust
(EIT)
31 March 2011 5,253 785 56 (209) 91,121 24,129 (1,683) (608) 87 118,931
Half year ended
31 March 2010
30 September 5,253 785 56 (284) 93,424 26,649 (1,702) 124,181
2009
Net return/ 3,733 6,754 10,487
(deficit) after
tax for the
period
Share options 5 29 29
expense
Dividends 7 (4,578) (4,578)
declared and
paid in period
31 March 2010 5,253 785 56 (255) 97,157 28,825 (1,702) 130,119
Year ended 30
September 2010
30 September 5,253 785 56 (284) 93,424 26,649 (1,702) 124,181
2009
Net return (6,479) 6,156 (323)
after tax for
the year
Share options 5 64 64
expense
Dividends 7 (6,763) (6,763)
declared and
paid in year
30 September 5,253 785 56 (220) 86,945 26,042 (1,702) 117,159
2010
See notes below.
Condensed Consolidated Balance Sheet
at 31 March 2011
Notes 31 March 31 March 30 September
2011 2010 2010
£000 £000 £000
Non-current assets
Property and equipment 8 494 287 531
Investments at fair value 133,172 151,052 145,423
through profit or loss
133,666 151,339 145,954
Current assets
Trade and other receivables 20,240 1,508 1,691
Cash and cash equivalents 19,857 12,218 5,538
40,097 13,726 7,229
Total assets 173,763 165,065 153,183
Current liabilities
Trade and other payables (21,042) (1,175) (2,243)
Total assets less current 152,721 163,890 150,940
liabilities
Non-current liabilities
Debentures (33,790) (33,771) (33,781)
Total liabilities (54,832) (34,946) (36,024)
Net assets 118,931 130,119 117,159
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 (209) (255) (220)
Capital reserve 91,121 97,157 86,945
Revenue reserve 24,129 28,825 26,042
Own shares reserve (1,683) (1,702) (1,702)
Currency translation reserve (608)
Equity Shareholders' Funds' 118,844 130,119 117,159
Non-controlling interest 87
Total equity 118,931 130,119 117,159
Net asset value per share pence pence pence
Basic and fully diluted 10 228.4 250.1 225.2
See notes below.
Condensed Consolidated Cash Flow Statement
for the half year ended 31 March 2011
Notes Half year ended Half year ended Year ended
31 March 31 March 30 September
2011 2010 2010
£000 £000 £000
Net cash inflow from 11 19,032 5,897 3,091
operating activities
Investing activities
Purchases of tangible (85) (93) (420)
assets
Disposals of tangible 29
assets
Net cash outflow from (85) (93) (391)
investing activities
Financing activities
Interest paid (1,438) (1,392) (2,783)
Dividends paid (3,277) (4,578) (6,763)
Increase in 87
non-controlling
interest
Net cash outflow from (4,628) (5,970) (9,546)
financing activities
Increase/(decrease) in 12 14,319 (166) (6,846)
cash and cash
equivalents for period
Cash and cash 5,538 12,384 12,384
equivalents at start of
period
Cash and cash 19,857 12,218 5,538
equivalents at end of
period
See notes below.
Notes to the Condensed Consolidated Financial Statements
as at 31 March 2011
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 2011 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 Financial Reporting 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 2010. Certain
presentational changes have been made which have no effect on the net assets of
the Group.
2. Income
Notes Half year ended Half year ended Year ended
31 March 31 March
2011 2010 30 September
£'000 £'000 2010
£'000
Income from
investments
Franked investment 2,275 7,131 8,778
income*
UK unfranked (14) 21 21
investment income
Overseas dividends 464 404 1,156
Fixed interest and 20 28 56
convertible bonds
2,745 7,584 10,011
Other income
Deposit interest 3 27 44
Sundry income 22 21 38
25 48 82
Total income 2,770 7,632 10,093
Total income
comprises:
Dividends 2,725 7,556 9,955
Fixed interest 20 28 56
Interest 3 27 44
Other income 22 21 38
2,770 7,632 10,093
Income from
investments
Listed UK 1,097 1,284 2,618
Listed overseas 464 404 1,156
Unlisted* 1,184 5,896 6,237
2,745 7,584 10,011
* Includes MAM special dividend income of £nil (31 March 2010 & 30 September
2010: £5,400,000).
3. Taxation
The charge for the half year to 31 March 2011 is £ 73,000 (half year to 31
March 2010: £50,000; year ended 30 September 2010: £ 131,000). 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 52,022,541 (half year
ended 31 March 2010: 52,022,510; year ended 30 September 2010: 52,022,510)
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. The previous scheme, The Discretionary Share Option Scheme
2000, closed in the year ended 30 September 2010. 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 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
2011 2010 2010
Number of outstanding options
LTIP: TSR-based Awards 307,389 291,268 291,268
LTIP: Matching Awards 13,097 17,812 17,812
320,486 309,080 309,080
During the half year ended 31 March 2011 the number of options outstanding
under the LTIP TSR-based Awards showed a net increase of 16,121. This comprised
an additional 16,121 options as a result of the 2010 4.2p interim dividend and
2010 6.3p final dividend which is in accordance with the LTIP rules.
Additionally the number of options outstanding under LTIP Matching Awards
showed a net decrease of 4,715. This reflects an exercise of 5,701 options on
31 March 2011 and an increase in options in respect of the 2010 4.2p interim
dividend and 2010 6.3p final dividend in accordance with the LTIP rules.
During the half year to 31 March 2011 the Group recognised a total expense for
share-based payment transactions of £30,000 (half year ended 31 March 2010:
£29,000; year ended 30 September 2010: £64,000).
The total shareholding of Majedie Investments PLC Incentive Trust is 499,789
(31 March 2010: 505,490; 30 September 2010: 505,490) ordinary shares. The
shares will be 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
2010, 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 shareholder return over the
long term whilst increasing dividends by more than the rate of inflation.
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
2011 2010 2010
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 2,769* 1 7,632* 10,091* 2
external
customers
Carrying amount 121,739 (2,895) 130,119 119,471 (2,312)
of assets
* The investment and other income of the parent company and the Javelin Capital
Strategies fund
7. Dividends
In accordance with International Accounting Standard 10: Events After the
Balance Sheet Date, 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
2011 2010 2010
£000 £000 £000
2010 Final dividend of 6.30p 3,277
paid on 26 January 2011
2010 Interim dividend of 2,185
4.20p paid on 30 June 2010
2009 Final dividend of 6.30p 3,277 3,277
paid on 27 January 2010
2010 Special dividend of 1,301 1,301
2.50p paid on 8 March 2010
3,277 4,578 6,763
The directors propose an interim dividend for 2011 of 4.2p per share, to be
paid on 29 June 2011.
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 above total
£34,661,000 of which £4,661,000 is invested in 23 companies and £30,000,000 is
the carrying value of our investment in MAM as detailed in note 9 below.
9. Majedie Asset Management Limited (MAM)
Majedie Investments PLC owns a 30% equity shareholding in MAM, which provides
investment management and advisory services relating to UK equities.
The carrying value of our 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
2011 2010 2010
£000 £000 £000
Deemed cost of investment 1,207 1,207 1,207
Holding gains 28,793 28,793 28,793
Fair value at period end 30,000 30,000 30,000
The carrying value of MAM in the 31 March 2011 Condensed Consolidated Financial
Statements is its fair value as assessed at 31 March 2011. The Board regularly
monitors the investment in MAM to ensure that the carrying value remains
appropriate.
10. Net Asset Value
The net asset value per share has been calculated based on equity shareholders funds and on
52,028,211 (31 March 2010: 52,022,510; 30 September 2010: 52,022,510) 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
2011 2010 2010
£000 £000 £000
Consolidated net return/ 5,614 10,537 (192)
(deficit) before taxation
Adjustments for:
(Gains)/losses on investments (6,470) (6,218) 2,361
Exchange Movements (613)
Dividends reinvested (5) (32) (45)
Share based remuneration 30 29 64
Depreciation 122 30 84
Purchase of investments* (609,010) (24,372) (57,963)
Sales of investments* 628,877 24,805 55,741
18,545 4,779 50
Finance costs 1,448 1,401 2,802
Operating cash flows before 19,993 6,180 2,852
movements in working capital
(Decrease)/increase in trade (213) (60) 410
and other payables
Increase in trade and other (685) (166) (18)
receivables
Net cash inflow from operating 19,095 5,954 3,244
activities before tax
Tax recovered 28 4 10
Tax on unfranked income (91) (61) (163)
Net cash inflow from operating 19,032 5,897 3,091
activities
* The large increase in investment transactions in the six months to 31 March
2011 reflects the high volume trading activity in the QIF in line with its
investment approach and industry peers.
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
2011 2010 2010
£000 £000 £000
Increase/(decrease) in cash 14,319 (166) (6,846)
Non cash items (9) (9) (19)
Change in net debt 14,310 (175) (6,865)
Net debt beginning of period (28,243) (21,378) (21,378)
Net debt at end of period (13,933) (21,553) (28,243)
13. Related Party Transactions
Javelin Capital
Javelin Capital LLP (Javelin Capital) is the investment manager and general
administrator to the Company and is also the parent entity of Javelin Capital
Fund Management Limited
(JCFM) and Javelin Capital Services Limited (JCS) all of which are consolidated
in the group accounts.
Javelin Capital Strategies plc is an Irish Stock Exchange listed Qualifying
Investment Fund "QIF". It currently has one sub-fund called the Javelin Capital
Global Equity Strategies Fund, which due to the relative size of the Company's
investment in the sub-fund is also consolidated into the group accounts.
Javelin Capital and JCFM act as investment manager and manager for the QIF
respectively and are entitled to receive management and performance fees.
In addition to any fees received from the QIF, Javelin Capital is also entitled
to receive management, performance and administration fees from the Company
itself in accordance with the relevant agreements.
JCS provides administrative services to the group. In performing these services
it incurs expenses, including a lease charge from the Company for the use of
some of its fixed assets, which are recovered by way of recharges and
management fees.
The Company has a £20m investment in the Javelin Capital Global Equity
Strategies Fund. This investment is subject to management and performance fees
in accordance with the fund's prospectus and supplement.
The Company incurs certain costs on behalf of Majedie Portfolio Management
Limited (MPM) for operating the Majedie Investments PLC Share Plan. These
costs, net of any income in MPM, are recharged to MPM.
The table below details the related party transactions described above and
includes the balances owing between the various group companies:
Half year ended Half year ended Year ended
31 March 31 March 30 September
2011 2010 2010
£'000 £'000 £'000
QIF fee revenue due to the 165,000 7,000
manager
QIF fee revenue due to the 134,000
investment manager
Company management fee revenue 358,000 58,000
due to Javelin Capital
Company administration fee 132,000 25,000
revenue due to Javelin Capital
Company lease charge to JCS 23,000 4,000
JCS management fee income from 1,462,000 2,356,000
Javelin Capital
MPM costs recharged by the 16,000 17,000 35,000
Company
Balances outstanding at the
end of the period:
Between JCS and the Company 322,000 283,000
Between JCS and Javelin 363,000 37,000
Capital
Between JCS and JCFM 15,000
Between the Company and MPM 93,000 92,000 92,000
Between JCFM and Javelin 137,000
Capital
Between JCFM and the QIF 68,000 7,000
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 in both the Company and Group accounts
and is valued at fair value through profit or loss.
The table below details the transactions between MAM and the Company during the
period:
Half year ended Half year ended Year ended
31 March 31 March 30 September
2011 2010 2010
£000 £000 £000
Ordinary dividends received in 1,164 781 468
the period
Special dividends received in 5,400 5,400
the period
Balances outstanding at the
end of the period
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
2011 and 31 March 2010 have not been audited, but have been reviewed by the
Company's auditors and their report is shown above.
The information for the year ended 30 September 2010 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
H V Reid, Deputy Chairman Tower 42
C J Arnheim 25 Old Broad Street
J W M Barlow London EC2N 1HQ
P D Gadd Telephone: 020 7382 8170
All Directors are non-executive Fax: 020 7382 4854
Email: info@javelincapital.com
Registered Office
Tower 42 Registrars
25 Old Broad Street Computershare Investor Services PLC
London EC2N 1HQ The Pavilions
Bridgwater Road
Telephone: 020 7626 1243 Bristol BS99 6ZZ
Email: majedie@majedie.co.uk Telephone: 0870 707 1159
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 Stockbrokers
Exeter Cenkos Securities plc
EX4 4EP 6.7.8 Tokenhouse Yard
London EC2R 7AS
Telephone: 01392 412122
Facsimile: 01392 253282 Website
www.majedie.co.uk
National Storage Mechanism
A copy of the Half-Yearly Report will be submitted shortly to the National
Storage Mechanism ("NSM") and will be available for inspection at the NSM,
which is situated at: www.hemscott.com/nsm.do.
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on this announcement (or any other website) is
incorporated into, or forms part of, this announcement.
Friday, 31st May 2024
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