Interim Results
Manchester & London Inv Tst PLC
07 March 2006
Manchester & London Investment Trust plc
ANNOUNCEMENT OF THE UNAUDITED INTERIM GROUP RESULTS
For the six months ended 31st January 2006
Attached pages 1-11
Enquiries:
Manchester & London Investment Trust plc
Brian S Sheppard
Tel: 0161-228-1709
Brokers:
Midas Investment Management Limited
Mark B B Sheppard
Tel: 0161-228-1709
Manchester & London Investment Trust plc
Announcement of the interim group results
The Directors announce the unaudited interim figures
For the six months ended 31st January 2006
Chairman's Statement
The first half of the current year has seen further growth in the net assets of
the company, reflecting a continuation of buoyant conditions on stock markets,
and London in particular. During this period we became substantially fully
invested, and greater exposure to the markets has resulted in our performance
virtually matching that of our benchmark, the FTSE Actuaries All-Share Index.
The Portfolio remains substantially the same as when we reported to shareholders
in October last year, with the holdings in Royal Dutch Shell B, BAE Systems,
Mouchel Parkman, Standard Chartered and PZ Cussons remaining in place. We
continue to believe that the latter two and the long-standing holding in
Scottish & Newcastle, could ultimately become acquisition targets.
Stock markets are currently in the grip of bid frenzy, fuelled by cheap global
credit which has seen several famous UK business names disappearing into foreign
hands and, to a limited extent, we have participated in this activity which has
contributed to the increase in our net asset value per share.
The question is; for how long can the benign financial conditions which are
fuelling this hyperactivity continue to exist. The answer seems to be as long as
currency markets remain stable, and the ever-increasing deficits in the major
Western countries continue to be financed by those nations whose exports recycle
those deficits. Logic indicates that Western interest rates must rise against
such a background, albeit gently, a trend which eventually should choke off the
'irrational exuberance' which the now retired Mr Greenspan was grappling with as
long as five years ago. Indeed, the Federal Reserve has been steadily raising
interest rates for the last 18 months from a low of 1% to the current 4.5%, with
the expectation that rates may stabilize at 5% at some point in the future. By
comparison both Sterling and Euro rates have hardly moved but are now expected
to harden as the Dollar moves onto a firmer base.
Against this background, we have made a core investment in Gazprom (the Russian
company, which owns one third of the world's known gas reserves). Whilst there
is clearly a political risk in this investment (which is reflected in the 75%
share price discount to comparable Western companies) there would seem to be
minimal commercial risk in the trading aspect for a company with such a large
percentage of clean energy. We are looking for a gradual re-rating and lessening
of the political risk to deliver the anticipated return on this investment.
Shareholders will notice that this is the first occasion that we have reported
our results under International Financial Reporting Standards (IFRS). The
financial statements are in the new format and included in the notes is a
reconciliation of the differences from the figures previously reported under UK
GAAP.
There is a significant change relating to the treatment of dividends which are
now recorded in the financial statements only when the obligation arises and
disclosed in a new statement, the Statement of Changes in Equity. The other
major change affects the portfolio which is now valued at bid price rather than
the mid price which was used previously - the effect on net asset value is
minimal and will be more than offset at the financial year end by the change in
the treatment of dividends.
Transaction costs which, in the past, were included as part of the cost of the
investment, are now expensed separately in the Income Statement. The only other
change to note relates to the disclosure of our preference shares which, until
now, have been shown as part of shareholders' funds but, under IFRS, are
classified as debt in the Balance Sheet notwithstanding the fact that this debt
will disappear upon conversion to ordinary shares.
Whilst we remain reasonably confident about the prospects for the remainder of
the current year, we are mindful that the tendency towards increasing interest
rates introduces an element of caution.
In line with our recent policy, we have declared at our Board Meeting in January
2006 an interim dividend of 2.5p per share which will be paid on 19th April 2006
to shareholders on the register at the close of business on the 31st March 2006.
P H A Stanley
Chairman
7th March 2006
Manchester & London Investment Trust plc
Largest Holdings
As at 31st January 2006
Valuation £'000 % of Sector
Net assets
PZ Cussons Ordinary 10p 6,504 17.78 Personal Goods
Royal Dutch Shell 'B' Ordinary EUR
0.07 5,345 14.60 Oil & Gas
Producers
BAE SYSTEMS Ordinary 2.5p 4,712 12.87 Aerospace &
Defence
Mouchel Parkman Ordinary 0.25p 3,572 9.76 Support
Services
Rank Group Ordinary 10p 3,396 9.28 Travel &
Leisure
Standard Chartered Ordinary USD
0.50 3,348 9.15 Banks
Gazprom ADS (Repr 10 Ord Rub 10)
REGS 2,639 7.21 Overseas Gas
Producers
Inspace Ordinary 2p 2,100 5.74 AIM -
Industrials
Scottish & Newcastle Ordinary 20p 2,000 5.46 Beverages
TDG Ordinary 1p 1,773 4.84 Industrial
Transportation
Other investments 786 2.15
Total investments 36,175 98.84
Net current assets 1,113 3.04
Non-current liabilities (687) (1.88)
Total net assets 36,601 100.00
Manchester & London Investment Trust plc
Consolidated Income Statement
For the six months ended 31st January 2006
(Unaudited) (Unaudited) (Audited)
6 months ended 6 months ended Year ended
31st January 2006 31st January 2005 31st July 2005
Revenue Capital Total Revenue Restated Total Revenue Restated Total
Capital Capital
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment
Income 528 - 528 489 - 489 1,184 - 1,184
Gains
Gains on
investments - 3,443 3,443 - 2,689 2,689 - 4,763 4,763
Cost of
investment
transactions - (27) (27) - (21) (21) - (63) (63)
Total income 528 3,416 3,944 489 2,668 3,157 1,184 4,700 5,884
Expenses
Investment
management (38) (82) (120) (28) (59) (87) (71) (132) (203)
fee
Other
operating
expenses (88) - (88) (101) - (101) (198) - (198)
Finance (28) - (28) (28) - (28) (57) - (57)
costs
Total (154) (82) (236) (157) (59) (216) (326) (132) (458)
expenses
Profit
before 374 3,334 3,708 332 2,609 2,941 858 4,568 5,426
tax
Taxation - - - - - - - - -
Profit
attributable
to equity 374 3,334 3,708 332 2,609 2,941 858 4,568 5,426
shareholders
Earnings per
ordinary
share 4.99 44.45 49.44 4.42 34.79 39.21 11.44 60.91 72.35
(pence)
Basic
Fully 3.84 31.82 35.66 3.44 24.90 28.34 8.73 43.60 52.33
diluted
The total column of this statement represents the Group's Income Statement,
prepared in accordance with IFRS. The supplementary revenue return and capital
return columns are both prepared under guidance published by the Association of
Investment Trust Companies.
All items in the above statement derive from continuing operations.
Manchester & London Investment Trust plc
Consolidated Statement of Changes in Equity
For the six months ended 31st January 2006
Equity
Share Own conversion Goodwill Capital Capital Retained Total
capital shares reserve reserve reserve reserve earnings
£'000 £'000 £'000 £'000 (unrealised) (realised)
£'000 £'000 £'000 £'000
At 1st
August
2004 1,875 - 57 (79) 5,024 18,828 3,196 28,901
(restated)
Profit for
the - - - - - - 2,941 2,941
period
Transfer of
capital
profits - - - - 2,740 (131) (2,609) -
Dividends
paid
to equity - - - - - - (525) (525)
shareholders
Interim
equity
dividend - - - - - - (188) (188)
declared
At 31st
January 2005
(restated) 1,875 - 57 (79) 7,764 18,697 2,815 31,129
Profit for
the - - - - - - 2,485 2,485
period
Transfer of
capital
profits - - - - 1,690 269 (1,959) -
Purchase of
own shares - (3) - - - - - (3)
At 31st July
2005
(restated) 1,875 (3) 57 (79) 9,454 18,966 3,341 33,611
Profit for
the - - - - - - 3,708 3,708
period
Transfer of
capital
profits - - - - 3,614 (280) (3,334) -
Dividends
paid
to equity - - - - - - (525) (525)
shareholders
Interim
equity
dividend - - - - - - (188) (188)
declared
Purchase of
own shares - (5) - - - - - (5)
At 31st
January 2006 1,875 (8) 57 (79) 13,068 18,686 3,002 36,601
Manchester & London Investment Trust plc
Consolidated Balance Sheet
As at 31st January 2006
(Unaudited) (Unaudited) (Audited)
31st January 31st January 31stJuly 2005
2006 2005
Restated Restated
£'000 £'000 £'000
Non-current assets
Investments held at
fair value through
profit or loss 36,175 24,389 30,182
Current Assets
Trade and other
receivables 47 70 64
Cash and cash
equivalents 1,358 7,663 4,191
1,405 7,733 4,255
Current Liabilities
Trade and other
payables (104) (118) (139)
Interim equity
dividend payable (188) (188) -
Net Current Assets 1,113 7,427 4,116
Total assets less
current liabilities 37,288 31,816 34,298
Non-current liabilities
Preference shares (687) (687) (687)
Net Assets 36,601 31,129 33,611
Capital and Reserves
Called-up Share
Capital 1,875 1,875 1,875
Own shares (8) - (3)
Equity conversion
reserve 57 57 57
Other reserves
Capital reserve -
realised 18,686 18,697 18,966
Capital reserve -
unrealised 13,068 7,764 9,454
Goodwill reserve (79) (79) (79)
Revenue reserve 3,002 2,815 3,341
Total equity
shareholders' funds 36,601 31,129 33,611
Net Asset Value per share (pence)
Ordinary shares -
basic 488.2 415.1 448.2
Ordinary shares -
fully diluted 356.0 303.7 327.4
Manchester & London Investment Trust plc
Consolidated Cash Flow Statement
For the six months ended 31st January 2006
(Unaudited) (Unaudited) (Audited)
6months to 6 months to Year to
31st January 31st January 31stJuly 2005
2006 2005
Restated Restated
£'000 £'000 £'000
Operating activities
Operating profit 3,708 2,941 5,426
Gains on investments (3,443) (2,689) (4,763)
Financing costs 28 28 57
Decrease in
receivables 17 5 11
(Decrease) increase in
payables (35) 3 21
Net cash inflow from
operating activities 275 288 752
Investing activities
Purchase of
investments (9,067) (2,236) (9,693)
Sale of investments 6,512 6,848 10,586
Net cash (outflow)
inflow from investing
activities (2,555) 4,612 893
Financing activities
Interest paid on
borrowings (28) (28) (57)
Equity dividends paid (525) (525) (713)
Net cash outflow from
financing (553) (553) (770)
(Decrease) increase in
cash and cash
equivalents (2,833) 4,347 875
Cash and cash
equivalents at start
of period 4,191 3,316 3,316
Cash and cash
equivalents at end of
period 1,358 7,663 4,191
Manchester & London Investment Trust plc
Notes
1 Accounting policies
The interim report has been prepared in accordance with International Financial
Reporting Standards (IFRS) and the disclosures required by IFRS 1 relating to
the transition from UK GAAP to IFRS are laid out in note 5. The financial
statements of the Group for the year ending 31st July 2006 will also be prepared
in accordance with IFRS.
2 Interim dividend
The directors declared an interim dividend of 2.5p (2005 - 2.5p) on 17th January
2006 payable on 19th April 2006 to shareholders on the register at the close of
business on 31st March 2006.
3 Comparative information
The financial information contained in this interim report does not constitute
statutory accounts and that relating to the six month periods to 31st January
2006 and 31st January 2005 has not been audited.
The financial information for the year ended 31st July 2005 has been extracted
from the latest published audited accounts which have been filed with the
Registrar of Companies restated to comply with IFRS. The report of the auditors
on those accounts contained no qualification or statement under Section 237 (2)
or (3) of the Companies Act 1985.
4 Differences between UK GAAP and IFRS
• Under UK GAAP the Consolidated Profit and Loss account of the Group was the
revenue column of the Statement of Total Return. Under IFRS the Profit and Loss
account is the total column of the Income Statement and as such there is no
differentiation between capital and revenue gains and losses.
• Under UK GAAP dividends declared were recognised in the period to which they
related whilst under IFRS they are only recognised when the obligation arises.
• Under UK GAAP investments were valued at mid prices whilst under IFRS
investments held at fair value through profit or loss are valued at bid prices.
• Under IFRS transaction costs relating to investments are expensed through the
capital column of the Consolidated Income Statement.
• Under IFRS the Company's 7.6% convertible preference shares are deemed to
contain both a liability and an equity component. Accordingly, the liability
component is classified as debt in the Balance Sheet.
Manchester & London Investment Trust plc
Notes continued
5 Explanation of transition to IFRS
For the year ended 31st July 2005
a) Restatement of balances at 31st July 2005
In accordance with IFRS 1, first time adoption of International Financial
Reporting Standards, the following is a reconciliation of the figures at 31st
July 2005 previously reported under the applicable UK Accounting Standards and
with the Statement of Recommended Practice.
Previously Adjustments Restated
reported
£'000 £'000 £'000
Investments held at fair value
through profit or loss 30,274 (92) 30,182
Current assets 4,255 - 4,255
Current liabilities (664) 525 (139)
Total assets less current
liabilities 33,865 433 34,298
Preference shares - (687) (687)
Net assets 33,865 (254) 33,611
Capital and reserves
Share capital 2,619 (744) 1,875
Own shares (3) - (3)
Equity conversion reserve - 57 57
Capital reserve - realised 19,049 (83) 18,966
Capital reserve - unrealised 9,463 (9) 9,454
Goodwill reserve (79) - (79)
Revenue reserve 2,816 525 3,341
Total equity shareholders'
funds 33,865 (254) 33,611
b) Reconciliation of profit or loss for the year ended
31st July 2005
£'000
Reported revenue gain under UK
GAAP 915
Reported capital gain under UK
GAAP 4,571
Total return under UK GAAP 5,486
Movement in mid to bid 31st
July 2004 89
Movement in mid to bid 31st
July 2005 (92)
Reclassification of preference
dividend (57)
Reported income under IFRS 5,426
Manchester & London Investment Trust plc
Notes continued
c) Reconciliation of cashflow for the year ended 31st July
2005
Previously Adjustments Restated
reported
£'000 £'000 £'000
Net cashflow from operating
activities 815 (63) 752
Net cashflow from servicing of
finance (57) 57 -
Net cashflow from investing
activities 830 63 893
Equity dividends paid (713) 713 -
Net cashflow before financing 875 770 1,645
Financing - (770) (770)
Net change in cash and cash
equivalents 875 - 875
For the six months ended 31st January 2005
a) Restatement of balances at 31st January 2005
In accordance with IFRS 1, first time adoption of International Financial
Reporting Standards, the following is a reconciliation of the figures at 31st
January 2005 previously reported under the applicable UK Accounting Standards and
with the Statement of Recommended Practice.
Previously Adjustments Restated
reported
£'000 £'000 £'000
Investments held at fair value
through profit or loss 24,426 (37) 24,389
Current assets 7,733 - 7,733
Current liabilities (306) - (306)
Total assets less current
liabilities 31,853 (37) 31,816
Preference shares - (687) (687)
Net assets 31,853 (724) 31,129
Capital and reserves
Share capital 2,619 (744) 1,875
Equity conversion reserve - 57 57
Capital reserve - realised 18,756 (59) 18,697
Capital reserve - unrealised 7,742 22 7,764
Goodwill reserve (79) - (79)
Revenue reserve 2,815 - 2,815
Total equity shareholders'
funds 31,853 (724) 31,129
b) Reconciliation of profit or loss for the six months ended 31st January 2005
£'000
Reported revenue gain under UK
GAAP 360
Reported capital gain under UK
GAAP 2,557
Total return under UK GAAP 2,917
Movement in mid to bid 31st
July 2004 89
Movement in mid to bid 31st
January 2005 (37)
Reclassification of preference
dividend (28)
Reported income under IFRS 2,941
Manchester & London Investment Trust plc
Notes continued
c) Reconciliation of cashflow for the six months ended
31st January 2005
Previously Adjustments Restated
reported
£'000 £'000 £'000
Net cashflow from operating
activities 307 (19) 288
Net cashflow from servicing of
finance (28) 28 -
Net cashflow from investing
activities 4,593 19 4,612
Equity dividends paid (525) 525 -
Net cashflow before financing 4,347 553 4,900
Financing - (553) (553)
Net change in cash and cash
equivalents 4,347 - 4,347
For the year ended ended 31st July 2004
a) Restatement of balances at 31st July 2004
In accordance with IFRS 1, first time adoption of International Financial
Reporting Standards, the following is a reconciliation of the figures at 31st
July 2004 previously reported under the applicable UK Accounting Standards and
with the Statement of Recommended Practice.
Previously Adjustments Restated
reported
£'000 £'000 £'000
Investments held at fair value
through profit or loss 26,401 (89) 26,312
Current assets 3,391 - 3,391
Current liabilities (640) 525 (115)
Total assets less current
liabilities 29,152 436 29,588
Preference shares - (687) (687)
Net assets 29,152 (251) 28,901
Capital and reserves
Share capital 2,619 (744) 1,875
Equity conversion reserve - 57 57
Capital reserve - realised 18,866 (38) 18,828
Capital reserve - unrealised 5,075 (51) 5,024
Goodwill reserve (79) - (79)
Revenue reserve 2,671 525 3,196
Total equity shareholders'
funds 29,152 (251) 28,901
Manchester & London Investment Trust plc
Notes continued
b) Reconciliation of profit or loss for the year ended 31st July 2004
£'000
Reported revenue gain under UK
GAAP 835
Reported capital gain under UK
GAAP 4,237
Total return under UK GAAP 5,072
Movement in mid to bid 31st
July 2003 586
Movement in mid to bid 31st
July 2004 (89)
Reclassification of preference
dividend (57)
Reported income under IFRS 5,512
c) Reconciliation of cashflow for the year ended 31st
July 2004
Previously Adjustments Restated
reported
£'000 £'000 £'000
Net cashflow from operating
activities 796 (48) 748
Net cashflow from servicing of
finance (57) 57 -
Net cashflow from investing
activities (1,998) 48 (1,950)
Equity dividends paid (713) 713 -
Net cashflow before financing (1,972) 770 (1,202)
Financing (5,413) (770) (6,183)
Net change in cash and cash
equivalents (7,385) - (7,385)
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