Final Results
Merchants Trust PLC
07 March 2006
For Immediate Release 7 March 2006
THE MERCHANTS TRUST PLC
ANNOUNCEMENT OF PRELIMINARY RESULTS
For the year ended 31 January 2006
Highlights
• Total return was 25.6%, compared with 22.8% for the FTSE 100 index.
• The Net Asset Value per share rose by 21.2% compared with a rise of
18.7% in the FTSE 100 Index.
• Net dividends were 18.90p per share in 2005/06, an increase of 5.0%,
the twenty-fourth consecutive annual increase.
• Ordinary shares yield 4.1% at 459p, compared with 3.1% on the FTSE
100 Index at the close of business on 6 March 2006.
Net Asset Value
The Net Asset Value per ordinary share at 31 January 2006 was 504.1p compared
with 415.8p* at 31 January 2005, an increase of 21.2%. This compares with an
increase of 18.7% recorded by the FTSE 100 Index and one of 17.9% recorded by
the FTSE 350 Higher Yield Index. Before allowance is made for the impact of
borrowings and costs, the capital return on the Company's portfolio was 18.2%.
Ordinary Dividend
The Board has declared a final dividend of 4.80p per share, payable on 10 May
2006 to holders of record at the close of business on 7 April 2006. This gives
a total of 18.90p for the year ended 31 January 2006, an increase of 5.0% when
compared with the total distribution of 18.00p paid in respect of the previous
year. The Trust has now recorded an unbroken record of dividend increases over
the last twenty-four years.
Total Return and Earnings
The Net Asset Value total return, reflecting both the increase in capital values
and dividends paid to Ordinary Shareholders in the last financial year, was
25.6%. The equivalent return recorded by the FTSE 100 index was 22.8%. Net
earnings per share rose from 17.58p* to 19.44p or by 10.6%.
*restated (refer to Note 5)
Page 2
Annual General Meeting
The Annual General Meeting of the Company will be held at 20 Moorgate, London
EC2R 6DA on Tuesday 9 May 2006 at 12.00 noon.
Share Buy Backs
The Board has decided to recommend to shareholders that the Company takes
renewed powers to buy back its Ordinary Shares. Full details will be sent to
shareholders in the forthcoming Annual Report and Accounts.
Investment Manager
From the end of May 2006 Nigel Lanning will be retiring from RCM and stepping
down as the principal fund manager for Merchants. He will be succeeded by Simon
Gergel, who has previously managed UK equity income funds at Phillips & Drew and
HSBC. Both Nigel and Simon will be attending the forthcoming AGM on 9 May.
Prospects
Many of the factors which drove shares higher in 2005/6 are still in place. In
particular take-over activity has re-asserted itself, especially in the FTSE100
segment of the UK market. Corporate profits and cash flows remain strong
although, after such an extended period of economic expansion, there is a risk
that forecasts may prove to be too optimistic. There are encouraging signs for
further growth in dividends and demand for higher yielding quality UK shares is
likely to remain strong.
By Order of the Board
K J Salt
Secretary
155 Bishopsgate
London EC2M 3AD
For further information, please contact:
RCM (UK) Ltd
Simon White
Head of Investment Trusts
RCM (UK) Limited
Tel: 020 7065 1539
Page 3
Unaudited preliminary results for the year ended 31 January 2006 were approved
for immediate release as undernoted:
RESULTS
INCOME STATEMENT
for the year ended 31 January 2006
2006
(£000s) (£000s) (£000s)
Revenue Capital Total Return
(Note 3)
Net gains on investments at fair value - 96,792 96,792
Income 24,714 - 24,714
Investment management fee (824) (1,530) (2,354)
Expenses of Administration (622) (6) (628)
Net return before finance costs and taxation 23,268 95,256 118,524
Finance costs: interest payable and similar charges (3,414) (6,219) (9,633)
Return on ordinary activities before taxation 19,854 89,037 108,891
Taxation - - -
Return attributable to Ordinary Shareholders 19,854 89,037 108,891
Return per Ordinary Share (Note 1) 19.44p 87.20p 106.64p
(basic and diliuted)
BALANCE SHEET as at 31 January 2006 2006 (£000s)
Investments at fair value 621,948
Net Current Assets 6,118
628,066
Creditors : Amounts falling due after more than one year (113,353)
Total Net Assets 514,713
Called up Share Capital 25,526
Share Premium Account 40
Capital Redemption Reserve 56
Capital Reserves : Realised 351,108
: Unrealised 118,104
Revenue Reserve 19,879
Equity Shareholders' Funds 514,713
Net asset value per Ordinary Share (Note 2) 504.1p
Page 4
RESULTS
INCOME STATEMENT
for the year ended 31 January 2005
2005
(£000s) (£000s) (£000s)
Revenue Capital Total Return
(restated) (restated) (restated)
(Note 3)
Net gains on investments at fair value - 65,860 65,860
Income 22,674 - 22,674
Investment management fee (722) (1,342) (2,064)
Expenses of administration (594) - (594)
Net return before finance costs and taxation 21,358 64,518 85,876
Finance costs : interest payable and similar charges (3,408) (6,210) (9,618)
Return on ordinary activities before taxation 17,950 58,308 76,258
Taxation - - -
Return attributable to Ordinary Shareholders 17,950 58,308 76,258
Return per Ordinary Share (Note 1) 17.58p 57.11p 74.69p
(basic and diluted)
BALANCE SHEET as at 31 January 2005 2005 (£000s)
(restated)
Investments at fair value 535,095
Net Current Assets 2,735
537,830
Creditors : Amounts falling due after more than one year (113,319)
Total Net Assets 424,511
Called up Share Capital 25,526
Share Premium Account 40
Capital Redemption Reserve 56
Capital Reserves : Realised 322,240
: Unrealised 57,963
Revenue Reserve 18,686
Equity Shareholders' funds 424,511
Net asset value per Ordinary Share (Note 2) 415.8p
Page 5
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 31 January 2006
(£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s)
Called up Share Preference Capital Capital Capital Revenue Total
Share Premium Share Redemption Realised Unrealised Reserve
Capital Account Capital Reserve Reserve Reserve
Net Assets at 31 25,526 40 1,178 56 331,129 (9,234) 9,925 358,620
January 2004 as
previously published
Reclassification of - - (1,178) - - - - (1,178)
3.65% Preference
Stock as a long term
creditor
Dividends on Ordinary - - - - - - 9,189 9,189
Shares not recognised
as a current
liability
Net Assets at 31 25,526 40 - 56 331,129 (9,234) 19,114 366,631
January 2004
(restated)
Revenue Return - - - - - - 17,950 17,950
Dividends on Ordinary - - - - - - (18,378) (18,378)
Shares
Capital Return - - - - (8,889) 67,197 - 58,308
Net Assets at 31 25,526 40 - 56 322,240 57,963 18,686 424,511
January 2005
(restated)
(£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s) (£000s)
Called up Share Preference Capital Capital Capital Revenue Total
Share Premium Share Redemption Realised Unrealised Reserve
Capital Account Capital Reserve Reserve Reserve
Net Assets at 31 25,526 40 1,178 56 322,240 57,963 9,497 416,500
January 2005 as
previously published
Reclassification of - - (1,178) - - - - (1,178)
3.65% Preference
Stock as a long term
creditor
Dividends on Ordinary - - - - - - 9,189 9,189
Shares not recognised
as a current
liability
Net Assets at 31 25,526 40 - 56 322,240 57,963 18,686 424,511
January
2005 (restated)
Adjustment to record - - - - - (28) - (28)
investments at bid
value
Revenue Return - - - - - - 19,854 19,854
Dividends on Ordinary - - - - - - (18,661) (18,661)
Shares
Capital Return - - - - 28,868 60,169 - 89,037
Net Assets at 31 25,526 40 - 56 351,108 118,104 19,879 514,713
January 2006
Page 6
CASH FLOW STATEMENT
For the years ended 31 January 2006 and 2005
2006 2006 2005
(£000s) (£000s) (£000s)
Net cash inflow from operating activities 22,806 22,381
Servicing of Finance
Interest paid (9,557) (9,543)
Dividends on Preference Stock (64) (43)
Net cash outflow on servicing of finance (9,621) (9,586)
Investing Activities
Payments to acquire fixed asset investments (139,141) (142,790)
Proceeds on disposal of fixed asset investments 146,799 145,334
Net cash inflow from investing activities 7,658 2,544
Equity dividends paid (18,661) (18,379)
Increase (decrease) in cash 2,182 (3,040)
Page 7
Note 1
The Returns per Ordinary Share have been calculated using a weighted average
number of shares in issue during the year of 102,103,936 shares (2005 -
102,103,936).
Note 2
The net asset value is based on 102,103,936 Ordinary Shares in issue at the
year-end (2005 - 102,103,936).
Note 3
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items derive from continuing operations. No operations
were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the Income Statement.
Note 4
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the years ended 31 January 2006 or 31 January
2005. The financial information for the year ended 31 January 2005 has been
extracted from the audited statutory accounts for that year and this information
has now been restated to reflect changes in certain accounting policies (refer
Note 5). The auditors report on those accounts was unqualified before this
restatement and did not contain a statement under either Section 237(2) or
Section 237(3) of the Companies Act 1985. The statutory accounts for the year
ended 31 January 2006 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.
Page 8
Note 5
The accounts have been prepared using the following changes in accounting
policies.
FRS 21: 'Events after the Balance Sheet date' requires that final dividends are
recognised as a liability when approved by shareholders. Interim dividends are
recognised only when paid.
FRS 25: 'Financial Instruments: Presentation and Disclosure' requires the
reclassification of the Company's 3.65% Cumulative Preference Stock as a
financial liability rather than as share capital (non-equity interests in the
balance sheet). Preference dividends are now to be treated as an interest
expense and shown accordingly in the profit and loss account.
FRS 26: 'Financial Instruments: Measurement' requires that fixed asset
investments held for trading are measured at their fair value which is deemed to
be the bid value of those investments held at the close of business on the
accounting date. Previous policy measured fixed asset investments at their
mid-market value. The Company however has taken advantage of paragraph 108D of
FRS 26, which allows exemption from restating the previous periods' fixed asset
investments to bid values.
Note 6
Dividends payable on Ordinary Shares in respect of earnings for each period are
as follows:
2006 2005
£'000s £'000s
Prior period unclaimed (24) -
dividends
First interim 4.6p 4,697 4.5p 4,595
Second interim 4.7p 4,799 4.5p 4,595
Third interim 4.8p* 4,901 4.5p* 4,595
Final 4.8p* 4,901 4.5p* 4,594
18.9p 19,274 18.0p 18,379
*These dividends are not recognised as a liability under FRS 21 (see Note 5).
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