Interim Results
Midas Income & Growth Trust PLC
21 December 2006
MIDAS INCOME & GROWTH TRUST PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS
for the six months to 31 October 2006
Chairman's Statement
Highlights
• Progressive dividend policy established
• Quarterly dividends increased by 5 per cent
• Returns significantly ahead of benchmark since Manager's appointment in
August 2005
• Shares have traded at a premium to Net Asset Value throughout the period
Performance
The Company's fully diluted net asset value total return for the period
(including dividends) was 2.19%. The equivalent figure for the period since
Midas Capital assumed control of the portfolio on 19 August 2005 is 19.02%,
compared to the benchmark return of 9.68%. The share price rose 0.9% over the
period, which with dividends reinvested, gave a total return of 1.8%. (Source:
Bloomberg). At the period end the Company's shares were trading at a premium to
diluted net asset value of 2% and the shares did not trade at a discount at any
time throughout the period.
Market Commentary
A positive return has been achieved over the period despite the significant
falls recorded by equity markets in May and early June. The Trust's portfolio
held up well through this period of weakness, demonstrating its potential to
preserve capital, and has been moving ahead steadily over recent months.
Concerns over the outlook for the economy in the United States and the potential
for an up-tick in inflation in the developed economies have provided cause for
concern. Investor sentiment has also been tested by geo-political problems in
North Korea, Thailand and the Middle East. However, merger and acquisition
activity and broadly positive corporate results over the period have provided
support to markets, together with the generally still accommodative interest
rate policies from central banks. In addition, more positive economic news has
been seen in Germany and the Japanese economy still appears set to benefit from
a more positive investment cycle and improving domestic demand.
Equity markets have recovered from the severe falls seen early in the period but
the overall returns have been barely positive. The strength of the pound against
most major currencies over the 6 months under review has meant that the slightly
disappointing outturns from international equities, has been further dissipated
on conversion to sterling. In particular the Yen has come under severe pressure
as the expected increase in interest rates failed to materialise.
Major bond markets have proven problematic for investors seeking returns, and
the potential for some limited uplift in inflation as raw material costs rise
has further undermined the case for long dated bonds.
UK commercial property has been very much in demand with investors appearing to
expect the very strong returns of the last 5 years to continue. Strong fund
flows have continued to support valuations but there are concerns that the
underlying prospect for rental growth is not supportive of such high levels of
investor confidence.
Dividends
A first interim dividend of 1.45p per Ordinary share was paid on 18 September
2006 and a second interim dividend of 1.45p was announced in November and paid
on 15 December 2006. These dividends represent a 5% increase over the quarterly
dividends paid in respect of the previous financial year. The importance of
regular and growing dividends is fully appreciated by your Board.
Exercise of Warrants
There were 1,043,589 warrants exercised at 100p at the end of August, which
leaves a further 2,034,111 in issue. Your Board would like to welcome these new
shareholders to the Company's register.
Gearing
Over the period there has been £750,000 drawn down from the Company's existing
short term borrowing facility provided by Allied Irish Bank. At the 31 October
the Company had total borrowings of £3,250,000, which gives a gearing figure of
6%. There remains a further £2,250,000 available from the existing £5.5 million
borrowing facility. The Company currently has no long term borrowings.
Broker
I am pleased to announce that your Board has appointed Intelli Corporate Finance
as corporate broker to the Company. Shareholders will be aware that Intelli
advised the Company during the successful C share issue in early 2006 and we are
delighted to extend this relationship.
Outlook
The anticipated slow-down in the rate of growth within the United States economy
is likely to be the key determinant of investment returns for both equity and
bond investors over the next 6-12 months. Equity markets still appear to offer
some value, but returns cannot be expected to match those seen in recent years.
In Europe, merger and acquisition activity remains high and this, coupled with
large equity buy back programmes, appears to underpin equity markets. In
addition, dividend growth looks set to remain strong, which should further
assist investor confidence. However, risk aversion amongst investors still
remains low and it is possible that future equity market advances may be
accompanied by increased levels of volatility. Midas Capital remain optimistic
that they are continuing to identify attractive investment opportunities across
the very diverse range of assets in which they invest - commensurate with
delivering good risk adjusted returns in line with the Trust's investment
objectives.
Hubert Reid
Chairman
21 December 2006
Income Statement (unaudited)
Six months ended Six months ended
31 October 2006 31 October 2005
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 855 855 - 1,248 1,248
Income 1,369 - 1,369 452 - 452
Investment management fee (155) (155) (310) (95) (94) (189)
Administrative expenses (135) - (135) (123) (313) (436)
Exchange gains - - - - 5 5
Net return before finance costs and taxation 1,079 700 1,779 234 846 1,080
Finance costs (49) (32) (81) (41) (40) (81)
Net return on ordinary activities before taxation 1,030 668 1,698 193 806 999
Taxation on ordinary activities - - - - - -
Return on ordinary activities after taxation 1,030 668 1,698 193 806 999
Return per share (pence):
Basic 3.13 2.02 5.15 1.21 5.06 6.27
Diluted 3.03 1.97 5.00 1.15 4.81 5.96
During the 6 months to 31 October 2006 a first interim dividend of 1.45 pence
per share was paid on 18 September 2006. In addition, a second interim dividend
of 1.45 pence per share was paid on 15 December 2006.
The total column of this statement represents the profit and loss account of the
Company.
A Statement of Total Recognised Gains and Losses has not been prepared as all
gains and losses are recognised in the Income Statement.
All revenue and capital items in the above statement derive from continuing
operations.
Balance Sheet
As at As at As at
31 October 31 October 30 April
2006 2005 2006
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Non-current assets
Investments at fair value through profit or loss 56,926 24,954 55,537
Current assets
Debtors and prepayments 421 536 367
Cash and short term deposits 1,325 1,118 272
1,746 1,654 639
Creditors: amounts falling due within one year
Bank loan (3,250) - (2,500)
Other creditors (104) (83) (206)
(3,354) (83) (2,706)
Net current (liabilities)/assets (1,608) 1,571 (2,067)
Total assets less current liabilities 55,318 26,525 53,470
Creditors: amounts falling due after more than one year
Bank loan - (2,500) -
Net assets 55,318 24,025 53,470
Capital and reserves
Called-up share capital 8,408 3,985 8,147
Share premium account 23,182 - 22,067
Special reserve 10,538 10,538 10,538
Warrant reserve 648 980 980
Capital reserve - realised 8,988 8,588 8,527
Capital reserve - unrealised 2,895 (399) 2,688
Revenue reserve 659 333 523
Equity Shareholders' funds 55,318 24,025 53,470
Net asset value per Ordinary share (pence):
Basic 164.47 150.72 164.07
Diluted 160.80 142.51 158.54
Reconciliation of Movement in Shareholders' Funds
(unaudited)
Six months ended 31 October 2006
Share Capital Capital
Share premium Special Warrant reserve reserve Revenue
capital account reserve reserve - realised -unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 April 2006 8,147 22,067 10,538 980 8,527 2,688 523 53,470
Exercise of Warrants 261 1,115 - (332) - - - 1,044
Return on ordinary activities after - - - - 461 207 1,030 1,698
taxation
Dividends paid - - - - - - (894) (894)
Balance at 31 October 2006 8,408 23,182 10,538 648 8,988 2,895 659 55,318
Six months ended 31 October 2005
Share Capital Capital
Share premium Special Warrant reserve reserve Revenue
capital account reserve reserve - realised -unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 30 April 2005
(restated) 3,984 - 10,536 981 550 6,832 220 23,103
Exercise of Warrants 1 - 2 (1) 1 - - 3
Return on ordinary activities after - - - - 8,037 (7,231) 193 999
taxation
Dividends paid - - - - - - (80) (80)
Balance at 31 October 2005 3,985 - 10,538 980 8,588 (399) 333 24,025
Cash Flow Statement (unaudited)
Six months ended Six months ended
31 October 2006 31 October 2005
£'000 £'000
Net return on ordinary activities before finance costs and 1,779 1,080
taxation
Adjustments for:
Gains on investments (855) (1,248)
Exchange gains - (5)
Decrease in accrued income 130 22
Increase in other debtors (9) (8)
Decrease in creditors (88) (14)
Net cash inflow/(outflow) from operating activities 957 (173)
Net cash outflow from servicing of finance (93) (120)
Net cash (outflow)/inflow from financial investment (711) 1,389
Equity dividends paid (894) (80)
Net cash (outflow)/inflow before financing (741) 1,016
Net cash inflow from financing 1,794 4
Increase in cash 1,053 1,020
Reconciliation of net cash flow to movement in net debt
Increase in cash as above 1,053 1,020
Foreign exchange movements - (4)
Drawdown of additional loan (750) -
Movement in net debt in the period 303 1,016
Net debt at 1 May 2006 (2,228) (2,398)
Net debt at 31 October 2006 (1,925) (1,382)
Represented by:
Cash at bank and in hand 1,325 1,118
Debt falling due within one year (3,250) -
Debt falling due after more than one year - (2,500)
(1,925) (1,382)
Notes
Accounting policies
1. (a) The financial statements have been prepared on the going concern basis
in accordance with applicable UK Accounting Standards and with the
Statement of Recommended Practice for 'Financial Statements of
Investment Trust Companies' (issued January 2003 and revised in
December 2005). They have also been prepared on the assumption that
the approval as an investment trust will continue to be granted.
The financial statements and the net asset value per share figures have
been prepared in accordance with UK Generally Accepted Accounting Practice
('UK GAAP').
The interim accounts have been prepared using the same accounting policies
as the preceding annual accounts.
(b) Dividends payable - Dividends are recognised in the period in which
they are paid.
2. Dividends
Ordinary dividends on equity shares deducted from reserves are analysed below:
Six months ended Six months ended
31 October 2006 31 October 2005
£'000 £'000
2005 final dividend - 0.5p - 80
2006 second interim dividend - 1.38p 220 -
2006 special dividend - 0.75p (C Shareholders only) 201 -
2007 first interim dividend - 1.45p 473 -
894 80
The Company has declared a second interim dividend in respect of the year ending
30 April 2007 of 1.45p net (2006 - 1.38p) per Ordinary 25p share which was paid
on 15 December 2006 to Ordinary Shareholders on the register on 24 November
2006.
Six months ended Six months ended
31 October 31 October
2006 2005
3. Income £'000 £'000
Income from investments
UK dividend income 728 277
UK interest income - 96
Overseas dividends 618 15
1,346 388
Other income
Deposit interest 19 64
Other commission 4 -
23 64
Total income 1,369 452
Six months ended Six months ended
31 October 2006 31 October 2005
4. Return per share p p
Revenue return 3.13 1.21
Capital return 2.02 5.06
Total return 5.15 6.27
The figures are based on the following attributable assets:
£'000 £'000
Revenue return 1,030 193
Capital return 668 806
Total return 1,698 999
Weighted average number of Ordinary shares in issue 32,941,180 15,937,017
As at As at
5. Net asset value per share 31 October 2006 31 October 2005
Basic
Attributable net assets (£'000) 55,318 24,025
Number of Ordinary shares in issue 33,633,125 15,939,900
Net asset value per Ordinary share (p) 164.47 150.72
Diluted
Attributable net assets (£'000) 57,352 27,103
Diluted number of Ordinary shares in issue 35,667,236 19,017,600
Net asset value per Ordinary share (p) 160.80 142.51
6. Transaction costs
During the six months ended 31 October 2006 expenses were incurred in
acquiring or disposing of investments classified as fair value through
profit or loss. These have been expensed through capital and are included
within gains on investments in the Income Statement. The total costs were
as follows:
Six months ended Six months ended
31 October 2006 31 October 2005
£'000 £'000
Purchases 7 130
Sales 8 65
15 195
7. The financial information in this report does not comprise statutory
accounts within the meaning of Section 240 of the Companies Act 1985. The
financial information for the year ended 30 April 2006 has been extracted
from published accounts that have been delivered to the Registrar of
Companies and on which the report of the auditors was unqualified under
Section 235 of the Companies Act 1985. These accounts contain no statement
under Section 237 of the Companies Act 1985. The interim accounts have been
prepared using the same accounting policies as the preceding annual
accounts.
Aberdeen Asset Management PLC
Secretaries
21 December 2006
Independent Review Report to Midas Income & Growth Trust PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 October 2006 which comprise the Income Statement,
Balance Sheet, Reconciliation of Movements in Shareholders' Funds, Cash Flow
Statement and the related notes 1 to 7. We have read the other information
contained in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' 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 interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making
enquiries of management and applying analytical procedures to the financial
information and underlying financial data, and based thereon, assessing whether
the accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
International Standards on Auditing (UK and Ireland) and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 October 2006.
Ernst &Young LLP
London
21 December 2006
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