Half yearly financial report
Merchants Trust PLC
18 September 2007
For immediate release
18 September 2007
THE MERCHANTS TRUST PLC
Half yearly financial report
For the six months ended 31 July 2007
Highlights
• Dividends of 10.8 p per share declared for the first six months, up 10.2 %.
• Net Asset Value of 570.1p per share, up 0.5 % compared with 2.53 % rise in
the FTSE 100 Index.
• Historic dividend yield of 4.2 % net at 493 p per share on 18 September 2007.
Interim management report
Earnings per share
In the first six months of the current year, earnings have risen by 7.8 % to
12.78 p per share. As in previous years, we expect dividend receipts to have
been weighted towards the first half of the current financial year.
Interim dividends
The Board has declared a second quarterly dividend of 5.4 p per share, payable
on 15 November 2007 to shareholders on the register at close of business on 19
October 2007. The total distribution declared for the first half of 2006/7 is
10.8 p net, an increase of 10.2% when compared with the same period last year.
Net asset value
The net asset value per ordinary share was 570.1p at 31 July 2007. This
represents an increase of 0.5 % when compared with the equivalent figure at 31
January 2007 - the end of the last financial year. Before taking account of the
impact of the Trust's borrowings, the underlying rise in the Trust's total
assets, excluding expenses allocated to capital, was 1.1%. Over the same period
the FTSE 100 Index rose by 2.53%, whilst the FTSE 350 Higher Yield Index rose by
0.24% (Capital Return).
Material events and transactions
In the six month period ended 31 July 2007 the following material events and
transactions have taken place.
At the Annual General Meeting of the Company held on 14 May 2007, all the
resolutions put to shareholders were passed. At the conclusion of the AGM, Sir
John Banham retired from the Board.
The third quarterly dividend of 5.1p per share was paid on 16 February to
shareholders on the register on 26 January 2007.
A final dividend of 5.1p per share was paid on 16 May 2007 to shareholders on
the register on 13 April 2007. The total payment for the year ended 31 January
2007 was 20.0p.
There were no related party transactions in the period.
Since the period end, the first quarterly dividend (for the year ending 31
January 2008), of 5.4p per share was paid on 16 August 2007 to shareholders on
the register on 20 July 2007.
Share buy backs
For the first time since 2001, and in response to a widening of the discount of
the share price to net asset value, 413,000 shares have been bought back for
cancellation (at an average price of 517.5p) during the period. Further buy
backs totalling 62,000 shares have taken place since the period end.
Responsibility statement
The Directors confirm to the best of their knowledge that:
• the condensed set of financial statements contained within the half
yearly financial report has been prepared in accordance with the Accounting
Standards Board's Statement 'Half-Yearly Financial Reports'; and
• the interim management report includes a fair review of the
information required by Disclosure and Transparency Rule 4.2.7 R, 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, and a description of
the principal risks and uncertainties for the remaining six months of the
financial year; and
• the interim management report includes a fair review of the
information concerning related parties transactions as required by Disclosure
and Transparency Rule 4.2.8 R.
The half yearly financial report was approved by the Board on 18 September 2007
and the above responsibility statement was signed on its behalf by the
Chairman.
Prospects
Interest rate increases earlier in the year are likely to weigh on UK consumer
spending as mortgage costs rise. In addition, a disruption in the availability
of credit, if sustained, is likely to slow economic growth and we continue to
monitor the US economy closely. However UK unemployment is low, business and
consumer confidence remains high and global demand should provide support. On
balance, we remain broadly optimistic about the prospects for corporate profits
and dividend growth.
Valuations in the FTSE 100 are not high by historic standards, with many stocks
offering high and growing dividend yields. Tightening credit markets are likely
to reduce the amount of merger and acquisition activity from the recent high
level but the portfolio's emphasis on the largest UK companies should provide
some protection since the valuations of these companies appear attractive even
without the benefits of any potential mergers or acquisitions.
We will seek to take advantage of market volatility if it provides opportunities
to buy into companies with strong franchises at attractive long term valuations.
Hugh Stevenson
Chairman
155 Bishopsgate
London EC2M 3AD
THE MERCHANTS TRUST PLC
Summary of Unaudited Results
INCOME STATEMENT
For the six months ended 31 July 2007
2007
Revenue Capital Total Return
£'000s £'000s £'000s
(Note 2)
Net gains on investments at fair value - 3,849 3,849
Income from investments 15,560 - 15,560
Other income 228 - 228
Investment management fee (517) (961) (1,478)
Administration expenses (335) (1) (336)
Net return before finance costs and taxation 14,936 2,887 17,823
Finance costs: interest payable and similar charges (1,681) (3,081) (4,762)
Net return on ordinary activities before taxation 13,255 (194) 13,061
Taxation - - -
Net return attributable to Ordinary Shareholders 13,255 (194) 13,061
Return per Ordinary Share (Note 1)
(basic and diluted) 12.78p (0.19)p 12.59p
2007
BALANCE SHEET as at 31 July 2007 £'000s
Investments held at fair value through profit or loss 696,876
Net current assets 5,808
Total Assets Less Current Liabilities 702,684
Creditors - amounts falling due after one year (113,513)
Total Net Assets 589,171
Called up Share Capital 25,837
Share Premium Account 7,527
Capital Redemption Reserve 159
Capital Reserves: Realised 420,712
Unrealised 109,496
Revenue Reserve 25,440
Equity Shareholders' Funds 589,171
Net Asset Value per Ordinary Share 570.1p
The net asset value is based on 103,346,877 Ordinary Shares in issue at 31 July
2007.
THE MERCHANTS TRUST PLC
Summary of Unaudited Results
INCOME STATEMENT
For the six months ended 31 July 2006
2006
Revenue Capital Total Return
£'000s £'000s £'000s
(Note 2)
Net gains on investments at fair value - 27,002 27,002
Income from investments 14,446 - 14,446
Other income 142 - 142
Investment management fee (468) (869) (1,337)
Administration expenses (291) (3) (294)
Net return before finance costs and taxation 13,829 26,130 39,959
Finance costs: interest payable and similar charges (1,699) (3,116) (4,815)
Net return on ordinary activities before taxation 12,130 23,014 35,144
Taxation
- - -
Net return attributable to Ordinary Shareholders 12,130 23,014 35,144
Return per Ordinary Share (Note 1)
(basic and diluted) 11.85p 22.47p 34.32p
2006
BALANCE SHEET as at 31 July 2006 £'000s
Investments held at fair value through profit or loss 662,034
Net current liabilities (697)
Total Assets Less Current Liabilities 661,337
Creditors - amounts falling due after one year (113,375)
Total Net Assets 547,962
Called up Share Capital 25,940
Share Premium Account 7,527
Capital Redemption Reserve 56
Capital Reserves: Realised 376,269
Unrealised 115,958
Revenue Reserve 22,212
Equity Shareholders' Funds 547,962
Net Asset Value per Ordinary Share 528.1p
The net asset value is based on 103,759,877 Ordinary Shares in issue at 31 July
2006.
THE MERCHANTS TRUST PLC
INCOME STATEMENT
for the year ended 31 January 2007
2007
Revenue Capital Total Return
£'000s £'000s £'000s
(Note 2)
Net gains on investments at fair value - 71,441 71,441
Income from investments 27,342 - 27,342
Other income 409 - 409
Investment management fee (962) (1,786) (2,748)
Administration expenses (488) (3) (491)
Net return before finance costs and taxation 26,301 69,652 95,953
Finance costs: interest payable and similar charges (3,447) (6,321) (9,768)
Net return on ordinary activities before taxation 22,854 63,331 86,185
Taxation - - -
Net return attributable to Ordinary Shareholders 22,854 63,331 86,185
Return per Ordinary Share (Note 1)
(basic and diluted) 22.17p 61.44p 83.61p
2007
BALANCE SHEET as at 31 January 2007 £'000s
Investments held at fair value through profit or loss 695,770
Net current assets 6,613
Total Assets Less Current Liabilities 702,383
Creditors - amounts falling due after one year (113,548)
588,835
Total Net Assets
Called up Share Capital 25,940
Share Premium Account 7,527
Capital Redemption Reserve 56
Capital Reserves: Realised 401,295
Unrealised 131,248
Revenue Reserve 22,769
Equity Shareholders' Funds 588,835
Net Asset Value per Ordinary Share 567.5p
The net asset value is based on 103,759,877 Ordinary Shares in issue at 31
January 2007.
THE MERCHANTS TRUST PLC
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Called Up Share Capital Capital Capital Revenue Total
Share Premium Redemption Reserve Reserve Reserve
Capital Account Reserve Realised Unrealised
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
Six months ended 31 July
2007
Net Assets at 31 January 25,940 7,527 56 401,295 131,248 22,769 588,835
2007
Revenue Return - - - - - 13,255 13,255
Dividends on Ordinary - - - - - (10,584) (10,584)
Shares
Capital Return - - - 21,558 (21,752) - (194)
Shares repurchased during (103) - 103 (2,141) - - (2,141)
the period
Net Assets at 31 July 2007 25,837 7,527 159 420,712 109,496 25,440 589,171
Six months ended 31 July
2006
Net Assets at 31 January 25,526 40 56 351,107 118,105 19,879 514,713
2006
Revenue Return - - - - - 12,130 12,130
Dividends on Ordinary - - - - - (9,797) (9,797)
Shares
Capital Return - - - 25,161 (2,147) - 23,014
Shares issued during the 414 7,487 - 1 - - 7,902
period
Net Assets at 31 July 2006 25,940 7,527 56 376,269 115,958 22,212 547,962
Year ended 31 January 2007
Net Assets at 31 January 25,526 40 56 351,107 118,105 19,879 514,713
2006
Revenue Return - - - - - 22,854 22,854
Dividends on Ordinary - - - - - (19,964) (19,964)
Shares
Capital Return - - - 50,188 13,143 - 63,331
Shares issued during the 414 7,487 - - - - 7,901
year
Net Assets at 31 January 25,940 7,527 56 401,295 131,248 22,769 588,835
2007
THE MERCHANTS TRUST PLC
CASH FLOW STATEMENT
for the six months ended 31 July 2007 and comparative periods
Six Months to 31 Six Months to 31 Year to
July 2007 July 2006 31 January 2007
£'000s £'000s £'000s
Net cash inflow from operating activities 13,820 11,789 28,262
Servicing of finance
Interest paid (4,793) (4,780) (9,530)
Dividends paid on Preference Stock (21) (21) (43)
Net cash outflow on servicing of finance (4,814) (4,801) (9,573)
Financial investment
Purchase of fixed asset investments (99,124) (128,364) (236,519)
Sale of fixed asset investments 99,873 124,557 238,514
Net cash inflow (outflow) from financial
investment
749 (3,807) 1,995
Equity dividends paid (10,584) (9,797) (19,964)
Net cash (outflow) inflow before financial
investment (829) (6,616) 720
Financing
Purchase of Ordinary Shares for cancellation (2,144) - -
Cash transferred from Allianz Dresdner Income - 909 908
Growth Investment Trust plc in connection with the
issue of Ordinary Shares
Net cash (outflow) inflow from financing (2,144) 909 908
(Decrease) Increase in cash (2,973) (5,707) 1,628
Reconciliation of Return on Ordinary Activities
before Taxation to Net Cash Flow from Operating
Activities
Revenue before taxation 13,061 35,144 86,185
Add: Finance costs: interest payable and similar 4,762
charges
4,815 9,768
Add: Special dividends credited to capital - - 4,854
Less: Net gains on investments at fair value (3,849) (27,002) (71,441)
13,974 12,957 29,366
Increase in debtors (200) (500) (458)
Increase (Decrease) in creditors 46 (668) (646)
Net cash inflow from operating activities 13,820 11,789 28,262
Reconciliation of net cash flow to movement in net
debt
Net cash (outflow) inflow (2,973) (5,707) 1,628
Decrease (Increase) in long term loans 35 (21) (194)
Movement in net funds (2,938) (5,728) 1,434
Net debt brought forward (106,545) (107,979) (107,979)
Net debt carried forward (109,483) (113,707) (106,545)
THE MERCHANTS TRUST PLC
TWENTY LARGEST EQUITY HOLDINGS AS AT 31 JULY 2007
Valuation % of
Total
£'000s Assets* Principal Activities
Royal Dutch Shell 58,191 8.28 Oil & Gas Producers
GlaxoSmithKline 54,223 7.72 Pharmaceuticals & Biotechnology
BP 52,946 7.54 Oil & Gas Producers
HSBC 47,894 6.82 Banking
Vodafone 44,657 6.36 Mobile Telecommunications
Royal Bank of Scotland 37,474 5.34 Banking
Barclays 25,477 3.63 Banking
HBOS 21,289 3.03 Banking
Anglo American 19,529 2.78 Mining
Reed Elsevier 18,498 2.63 Media
British American Tobacco 17,349 2.47 Tobacco
Aviva 16,503 2.35 Life Insurance
Scottish & Southern Energy 15,577 2.22 Electricity
Lloyds TSB 15,429 2.20 Banking
BAE Systems 14,567 2.07 Aerospace & Defence
Rexam 13,403 1.91 General Industrials
Rio Tinto 12,794 1.82 Mining
Lonmin 12,425 1.77 Mining
BT 12,080 1.72 Fixed Line Telecommunications
Centrica 12,068 1.72 Gas, Water & Multiutilities
522,373 74.38
* Total Assets include current liabilities
PORTFOLIO ANALYSIS AS AT 31 JULY 2007
UK Total
% %
Listed equities 99.2 99.2
Net current liabilities 0.8 0.8
Total Assets 100.0 100.0
THE MERCHANTS TRUST PLC
NOTES
Note 1
The return per Ordinary Share is based on a weighted average number of shares in
issue during the period of 103,739,616 shares. (31 July 2006 - 102,396,699
shares; 31 January 2007 - 103,083,890 shares).
Note 2
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 period.
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.
Included in the cost of investments are transaction costs on purchases which
amounted to £611,882 (31 July 2006 - £866,297; 31 January 2007 - £1,502,518) and
transaction costs on sales which amounted to £147,407 (31 July 2006 - £203,769;
31 January 2007 - £369,855).
Note 3
Investments are designated as held at fair value through profit or loss in
accordance with FRS 26 'Financial Instruments : Recognition and Measurement'.
Listed investments are valued at bid market prices.
Note 4
In accordance with FRS 21 'Events after the Balance Sheet Date', the final
dividend payable on Ordinary Shares is recognised as a liability when approved
by shareholders. Interim dividends are recognised only when paid.
Dividends paid on Ordinary Shares in respect of earnings for each period are as
follows:
Six months to Six months to Year to
31 July 31 July 31 January
2007 2006 2007
£'000s £'000s £'000s
Third Interim dividend 4.80p paid 17 February 2006 - 4,901 4,901
Final dividend 4.80p paid 10 May 2006 - 4,901 4,901
First Interim dividend 4.90p paid 17 August 2006 - - 5,084
Second Interim dividend 4.90p paid 14 November 2006 - - 5,084
Third Interim dividend 5.10p paid 16 February 2007 5,292 - -
Final dividend 5.10p paid 16 May 2007 5,292 - -
Uncollected dividends from prior years - (5) (6)
10,584 9,797 19,964
THE MERCHANTS TRUST PLC
NOTES CONTINUED
Dividends payable at the period end are not recognised as a liability under FRS
21 'Events after the Balance Sheet Date'. Details of these dividends are set
out below.
Six months to Six months to Year to
31 July 31 July 31 January
2007 2006 2007
£'000s £'000s £'000s
Third Interim dividend 5.10p paid 16 February - - 5,292
2007
Final dividend 5.10p paid 16 May 2007 - - 5,292
First Interim dividend 5.40p paid 16 August 2007
(2006 - 4.90p) 5,603 5,084 -
Second Interim dividend 5.40p payable 15 November 5,581 5,084 -
2007 (2006 - 4.90p)
11,184 10,168 10,584
The second interim dividend noted above is based on the number of shares at
period end. However, the dividend subsequently paid will be based on the number
of shares in issue on the record date and will reflect any purchase or
cancellations of shares by the Company settled subsequent to the period end.
Note 5
The half yearly report has been neither audited nor reviewed by the Company's
auditors. The financial information for the year ended 31 January 2007 has been
extracted from the statutory accounts for that year which have been delivered to
the Registrar of Companies. The accounting policies and presentation are
consistent with those applied in the latest published annual accounts. The
auditors' report on those accounts was unqualified and did not contain a
statement under either Section 237(2) or Section 237(3) of the Companies Act
1985.
In accordance with recently introduced changes to the UK's disclosure
requirements for listed companies, the Company is now required to make limited
additional and updated disclosures, mainly relating to the first and third
quarters of the financial year. These Interim Management Statements will be
released via the Regulatory News Service and posted on the Company's website
www.merchantstrust.co.uk on or shortly before 19 June and 19 December each
year.
This half yearly financial report, which will include a Fund Managers' Report,
will be sent to Shareholders shortly and made available to the public at the
Registered Office of the Company, 155 Bishopsgate, London, EC2M 3AD.
For further information, please contact:
RCM (UK) Limited
Simon White, Head of Investment Trusts
Tel: 020 7065 1539
or
RCM (UK) Limited
Simon Gergel, Fund Manager
Tel: 020 7065 1431
This information is provided by RNS
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