TIDMMRCH
RNS Number : 4955V
Merchants Trust PLC
05 April 2023
Replacement to RNS 3938V released on 5 April 2023 at 07:00
The Nav total return for the period was incorrectly stated as
7.9% in the Chairman's Statement. The correct figure is 7.6% and
has been amended below. The full amended text is shown below.
THE MERCHANTS TRUST PLC
Final Results for the year ended 31 January 2023
The following comprises extracts from the company's Annual
Report for the year ended 31 January 2023. The full Annual Report
is being made available to be viewed on or downloaded from the
company's website at www.merchantstrust.co.uk . Copies will be
posted to shareholders shortly.
MANAGEMENT REPORT
Chairman's Statement
Dear Shareholder
Another positive year against a difficult backdrop
In a year when the macro-economic and geopolitical landscapes
have been very challenging it is comforting to be able to write to
shareholders with positive news of Merchants. We are therefore
pleased to report that the Merchants has continued to deliver for
our shareholders, both in terms of a rising dividend and also
capital return.
Merchants' NAV total return for the period was 7.6% which was
well ahead of our benchmark index (the FTSE All-Share index) return
of 5.2%. Merchants was also second in its peer group (a group of
twenty one Investment Trusts with similar objectives) over the year
to 31 January 2023, reflecting a strong comparative year for the
underlying investment strategy.
Merchants also traded close to NAV or at a small premium for
much of the period under review, reflecting investor demand as a
result of resilient portfolio performance and strong NAV
performance against the benchmark.
2022 in general was a year where positive returns for investors
were difficult to achieve as most equity and bond indices were
down. Many listed closed-end funds found their discounts widening
considerably as investor's risk appetite dropped overall. Indeed
during 2022 collective investment vehicles under the umbrella of UK
Equity Income have continued to be out of favour with investors,
with some GBP1.5bn outflows from open-ended funds in the Investment
Association UK Equity Income sector over the 12 months to 31
January 2023.
Merchants' performance also remains strong over the longer term,
reflecting our consistent strategy and Merchants was also number
two in the peer group over three and five years (as at 31 January
2023).
With the proposed final dividend for the financial year, we will
achieve our 41st consecutive year of dividend increases, continuing
our focus on striving to provide a high and rising income for
shareholders.
Portfolio income
Shareholders will recall there was a sharp fall in dividends
paid by companies during 2020 because of the difficult economic
environment caused by the Covid pandemic. 2021 showed some signs of
recovery and 2022 has continued this improving trend. While levels
have not necessarily recovered to pre-pandemic levels across the
board due to some companies permanently rebasing their dividend
payments to lower levels, we are pleased to report that the
recovery in Merchants earnings from dividends is such that in the
2023 financial year we have returned to fully covering our own
dividend payment. We will therefore not need to utilise any revenue
reserve this year to pay our own dividend to Merchants'
shareholders.
Further details are given in the Investment Management Report on
pages [--] of the Annual Report. The portfolio revenue earnings per
share (EPS) for the year were up 12% over the corresponding period
last year to 28.7p (2022: 25.6p). Revenue reserves per share at the
end of the period stood at 16.3p (2022: 16.0p).
Dividend to shareholders
The board recognises the importance of a growing dividend to
shareholders in line with our objectives. Inflation also remains
high which makes a reliable income stream a priority for many. As
noted above the board proposes a 41st year of consecutive dividend
increases and this track record of providing a reliable and rising
income is, we believe, one of the major attractions of our shares
to investors.
We propose a final quarterly dividend for shareholder approval
of 7.0p which means for the full year to January 2023 an increased
dividend of 27.6p (2022: 27.3p). The annualised growth rate of the
dividend paid by the trust over 41 years stands at 6.6%, well above
the rate of inflation over that period which stands at 3.5%
annually as measured by the Consumer Prices Index (CPI). We are
very pleased to retain our AIC Dividend Hero status and continue to
provide one of the highest dividend yields in our peer group as
part of an attractive overall total return for investors.
Subject to a shareholder vote at our AGM on 18 May a final
dividend will be payable on 26 May 2023 to shareholders on the
register at close of business on 21 April 2023. A Dividend
Reinvestment Plan ('DRIP') is available for this dividend for which
the relevant Election Date is 5 May 2023 and the ex-dividend date
is 20 April 2023.
Issuance of new shares
Merchants' shares traded at a premium for much of the year and
during that time we were able to issue 12.4m new shares, worth
GBP69.3m. The table on page 8 of the Annual Report gives details of
the benefits to shareholders and shows how Merchants has issued new
shares over the past four years.
Fundamentals return (somewhat) to the fore
In some senses 2022 was a turning point for the global economy
and for markets. Since the Global Financial Crisis in 2008 interest
rates had remained exceptionally low, central banks had maintained
an easing stance and since prior to that time, inflation remained
low. Much of this changed in 2022 as inflation returned, partly due
to the sharp recovery in economic activity post pandemic and partly
as a consequence of Russia's invasion of Ukraine. As inflation
rose, central banks responded by unwinding a decade-long
quantitative easing programmes and raised interest rates to calm
heated economies.
Rising interest rates had an immediate mathematical effect on
the discount rate used to value future cash flows of companies.
Consequently, many Growth stocks with lower near-term earnings but
high valuations fell and, in some cases, fell dramatically. Having
had a stellar decade, Growth stocks had the furthest to fall and
strategies focused solely on high growth stocks struggled to
contain losses. By contrast companies with visible near-term cash
flows and lower valuations (Value stocks) were back in fashion and
there was a welcome boost to some stocks which had been
languishing, in many cases in spite of strong business models and
robust cash flows.
A feature of this type of change in sentiment was that markets
were extremely sensitive to news flow and reacted sometimes more on
emotion than on rigorous analysis. A by-product of this environment
is that on occasion markets misprice stocks and that can provide an
opportunity for a fundamental research-based investor such as
AllianzGI, the managers of the Merchants portfolio. Indeed, the
fall from grace of some Growth stocks has meant they have come onto
our manager's radar as their valuations become more reasonable. As
he often states, our manager largely eschews the simplistic notion
of Growth vs Value, but rather concentrates on aiming to own the
best companies whilst not overpaying for them.
The UK performs better
The UK itself has had a slightly tumultuous year full of changes
with a new monarch and three prime ministers in close succession,
an emerging cost of living crisis and a winter characterised by
strike action across many sectors. The stock market however fared
slightly better.
Against largely lacklustre global stock market returns, the UK
was for once a relative bright spot, with the FTSE All-Share
outperforming major global indices such as the NASDAQ, the
S&P500, the MSCI World Index and the FTSE World ex UK Index. It
is perhaps surprising therefore that investors in collective
investment vehicles have in aggregate reduced their exposure to the
UK. The fact that Merchants' shares have remained in demand and at
a modest premium to net asset value is a strong endorsement of our
strategy and performance. Taking advantage of this demand from
investors, we have issued 12.4m shares in the year to 31 January
2023 (2022: 6.7m) 9.7% of our share capital. This issuance was
amongst the largest in peer group over the calendar year and is to
the benefit of all shareholders because the fixed costs of managing
and administering the trust is now spread over a wider base, NAV is
enhanced due to shares only being issued at a premium to NAV and
the liquidity in the company's shares is improved. More details are
provided in the chart on page [9] of the Annual Report of the
shares issued over the past financial years.
Environmental, Social & Governance
Consideration ESG factors by investors continues to be a rapidly
developing field, which is to be welcomed. As we have mentioned in
previous shareholder letters it is still a relatively new area for
investors and it can be an incredibly complex landscape with its
own language and metrics and sometimes conflicting narratives. Your
board continues a robust dialogue with the manager AllianzGI about
its approach and the part ESG factors play in research, portfolio
construction and voting. We remain confident that our manager is at
the forefront of this important area of investing.
As we have outlined before, Merchants does not exclude sectors
on sustainability grounds, however consideration of ESG risks is an
inherent part of the investment process as is engagement and proxy
voting. This year we have addressed climate risks and opportunities
in a discussion between AllianzGI's Head of Sustainability Research
and Stewardship in the UK, Mark Wade, and Audit Committee Chair,
Timon Drakesmith. This narrative follows the framework of the
Taskforce on Climate-related Financial Disclosures (TCFD) reporting
and can be found on page 33 of the Annual Report.
Strategy
As part of an annual process, your board once again met this
year to discuss the strategic direction of the company. In addition
to a review of our manager's long term philosophy and style of
investing, our long-term performance and our ESG approach, a key
focus was on our relationship with our shareholders and the fact
that an increasingly large portion of our shareholders are now
investing through platforms rather than direct or through
discretionary third party managers. Your board continues to believe
that clear and informative communications with our shareholders is
of paramount importance, and we will continue to give it the
highest priority.
Gearing continues to be utilised. In November the board drew
down the remainder of Merchants' revolving credit facility (RCF) to
take gearing back up to 15%. This was as a result of the manager's
view on current opportunities and general valuation level of the
market. We remain comfortable with the current level of gearing
(13.5% as at 31 January 2023) with the level still falling well
within the bounds of our stated policy range of 10 - 25%.
Board
Whereas there have been no changes to the board to report over
the period, the board has been discussing industry guidelines
regarding board membership, diversity and inclusion and the range
of the board's skills and experiences when considering succession
planning for the next few years.
Awards
We are proud to report that over the year Merchants received
three industry awards. In the first half of the year we received,
for the third year in a row, the AIC's best Report & Accounts
(Generalist) in their Shareholder Communications Awards. A large
amount of work from the board and the manager goes into producing
this document. We aim to ensure that reporting is considered,
appropriate and informative for shareholders and were pleased
therefore to receive this award once again.
In the latter part of the year Merchants received the Winner's
award in the UK Equity Income category of Citywire's 2022
Investment Trust Awards. We were also nominated in Investment
Week's Investment Company of the Year Awards in the UK Equity
Income category. Although we did not win that award, the judges
awarded a 'Highly Commended' recognition which we were also proud
to receive.
Alternative Investment Fund Manager
We noted last year that Allianz Global Investors was pursuing an
FCA authorisation for AllianzGI UK as a UK entity and we are
pleased to report on their behalf that the authorisation was
granted during the period. The company's Alternative Investment
Fund Manager (AIFM) will therefore become AllianzGI UK Limited in
May 2023 and we continue to view this as being in the best
interests of Merchants shareholders. There will be no change to the
investment process, strategy or the teams involved with managing
Merchants.
Annual General Meeting
Last year we were pleased to be able to return to holding a
physical AGM and to welcome shareholders back in person. 2023 will
once again be a physical event with the AGM being held at Grocers'
Hall on Thursday 18 May and full details can be found in the notice
of meeting on page 119 of the Annual Report.
I would like to take the opportunity to remind shareholders that
you have the right to vote on important matters that affect
Merchants, such as the proposed renewal of share issuance
authorities and the appointment of directors. It is an important
aspect of an investment trust that shareholders can and are
encouraged to make their voices heard by voting on all business
matters, as detailed in this report. We continue to be pleased to
see moves in the investment platform industry to democratise
shareholder access for nominee holders with information being made
more readily available by platforms to shareholders when companies
have votes open and giving the ability for shareholders to
participate in those votes. This past year in December, one of the
largest platforms, Hargreaves Lansdown, joined Interactive Investor
in offering an online voting service for its clients.
Should you be a Merchants shareholder through a platform which
offers the opportunity to vote then we encourage you to take
advantage of those arrangements for casting your votes and thus
having your say in the running of your company.
Outlook
At the time I wrote to shareholders last year, the situation in
Ukraine was rapidly unfolding and the world was coming to terms
with the implications, though collectively we all hoped there would
be a rapid end on the horizon. Unfortunately, over a year on, that
hasn't proved to be the case and the conflict continues. Closer to
home we also continue to grapple with the effects of inflation and
associated strain on the cost of living. The world certainly
continues to be unsettled and as investors, our task is to try to
find an effective way to navigate this backdrop.
It is not easy to give any robust predictions on what direction
the economy might take or for that matter what short term
challenges may arise, or what geopolitical issues the coming year
may have in store. Whilst the issue appears to be contained,
shareholders will be aware that during the first quarter of the
current financial year the banking sector has come under pressure
due to the collapse of Silicon Valley Bank in the USA and the
takeover of Credit Suisse by UBS. Our investment manager gives a
timely reminder in his investment review, though, that
concentration on this type of issue is not the key focus in the
investment process. Rather the concentration is on finding sound
companies with attractive business models and to understand how
those business models might react under different macroeconomic
scenarios. As noted, sentiment-driven market volatility can be a
good source of opportunity for the dedicated stock picker and a
genuinely long-term investor needs to have the (not easy) skill of
looking through short term pain to the potential of the mid- to
long-term, whilst understanding where the risks lie to that
potential for each individual business model.
Valuations in the UK market ultimately remain low compared to
their own history and relative to other markets, giving our
investment manager added confidence in the potential for generating
long-term returns for Merchants shareholders. While Merchants'
investment strategy is not dependent on any outperformance of the
'value' investment style, should we see structurally higher
interest rates persisting over the coming year, that should provide
a welcome tailwind for the portfolio as investors will continue to
favour nearer-term tangible cash flows from companies over future
potential cash flows from higher growth companies.
The board thanks our investment manager for presiding over
another positive year for shareholders, while having a firm view
out to the future and a staunch focus on maintaining Merchants'
tried and tested investment approach.
Colin Clark
Chairman
4 April 2023
Risk policy
The board operates a risk management policy to ensure that the
level of risk taken in pursuit of the board's objectives and in
implementing its strategy is understood. The principal risks
identified by the board are listed below, together with the actions
taken to mitigate them, and set out in the Risk Map on page 57 of
the Annual Report.
A more detailed version of the chart is reviewed and updated by
the audit committee at least twice yearly. This sets out risk
types, key risks identified and their status, the controls and
mitigation in place to address these risks, together with the
evidence of controls and gives an assessment of the risk using a
traffic-light system, as shown at the bottom of the chart, to
confirm the outcome of the assessment of the risk.
The board has carried out a robust assessment of the principal
and emerging risks facing the company, including those that would
threaten its business model, future performance, solvency or
liquidity and emerging risks and how they monitor and manage them
and disclose them in the annual report. The process by which the
directors monitor risk is described in the Audit Committee Report
on page 81 of the Annual Report.
Principal risks
The principal risks are now considered to be emerging risks,
followed by the risks of market decline. During the year these
risks had eased but they have now become the major risks faced and
so have held their position in the risk map, with emerging risks
now seen as likely to have a higher impact. Those identified as
having the highest impact and the greatest likelihood are the
following:
-- Emerging risks, such as significant geopolitical risks and virus variant threats.
Some principal risks have been assessed as being as likely to
occur as last year.
-- Market decline adversely affecting investments and returns.
-- Investment strategy: for example, asset allocation or the
level of gearing may lead to a failure to meet the company's
objectives, such as income generation and dividend growth.
-- Investment performance: for example, poor stock selection for
the portfolio leads to decline in the rating and attraction of the
company.
Risk appetite
The board identifies risks, considers controls and mitigation,
the probability of the event, and assesses residual risk. It then
evaluates whether its risk appetite is satisfied. The board
confirms for the year ended 31 January 2023 that its assessment of
risk is in line with its risk appetite for all key risks.
Statement of Directors' Responsibilities
The directors are responsible for preparing the Annual Report,
the Directors' Remuneration Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice including FRS 102
"The Financial Reporting Standard applicable in the UK and Republic
of Ireland" (United Kingdom Accounting Standards and applicable
law). Under company law the directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the company and of
the profit of the company for that period. In preparing these
financial statements, the directors are required to:
- select suitable accounting policies and then apply them consistently;
- state whether applicable UK Accounting Standards have been
followed, comprising FRS 102, subject to any material departures
disclosed and explained in the financial statements;
- make judgements and accounting estimates that are reasonable and prudent; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The directors confirm that they have complied with the above
requirements in preparing the financial statements.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements and the Directors' Remuneration Report
comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The directors each have a duty to make themselves aware of any
"relevant audit information" and ensure that the auditors have been
made aware of that information. A disclosure stating that each
director has complied with that duty is given in the Directors'
Report on page 68 of the Annual Report.
The directors are responsible for ensuring that the Annual
Report, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
company's position and performance, business model and
strategy.
The financial statements are published on
www.merchantstrust.co.uk, which is a website maintained by the
company's investment manager, AllianzGI. The directors are
responsible for the maintenance and integrity of the company's
website. The work undertaken by the auditors does not involve
consideration of the maintenance and integrity of the website and,
accordingly, the auditors accept no responsibility for any changes
that have occurred to the financial statements since they were
initially presented on the website. Visitors to the website need to
be aware that legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Statement under Disclosure and Transparency Rule 4.1.12
The directors at the date of approval of this report, each
confirm to the best of their knowledge that:
- the financial statements, prepared in accordance with
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit of the
company;
- the Strategic Report includes a fair review of the development
and performance of the business and the position of the company,
together with a description of the principal risks and
uncertainties that they face; and
- the annual report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the company's position and
performance, business model and strategy.
For and on behalf of the board
Colin Clark
Chairman
4 April 2023
LISTED EQUITY HOLDINGS as at 31 January
2023
% of
listed
Name Value (GBP'000) holdings Principal Activities
Shell 39,487 4.3 Oil, Gas & Coal
Rio Tinto 34,755 3.8 Industrial Metals & Mining
GSK 33,598 3.7 Pharmaceuticals And Biotechnology
British American Tobacco 32,038 3.5 Tobacco
BP 30,883 3.4 Oil, Gas & Coal
Imperial Brands 30,668 3.4 Tobacco
DCC 29,926 3.3 Industrial Support Services
IG Group 25,287 2.8 Investment Banking & Brokerage
SSE 24,905 2.7 Electricity
WPP 24,052 2.6 Media
Top Ten Holdings 305,599 33.5
St. James's Place 23,636 2.6 Investment Banking & Brokerage
Tate & Lyle 23,611 2.6 Food Producers
CRH 23,084 2.5 Construction & Materials
Personal Care, Drug And
Unilever 21,816 2.4 Grocer
Redrow 21,611 2.4 Household Goods & Home Construction
BAE Systems 21,200 2.3 Aerospace & Defence
Barclays 20,535 2.3 Banks
Next 19,523 2.1 Retailers
Landsec 18,923 2.1 Real Estate Investment Trusts
Grafton Group 18,554 2.0 Industrial Support Services
Personal Care, Drug & Grocery
Tesco 17,705 1.9 Stores
National Grid 16,144 1.8 Gas, Water & Multiutilities
Natwest 16,473 1.8 Banks
Energean 16,063 1.8 Oil, Gas And Coal
Man Group 16,031 1.8 Investment Banking & Brokerage
Legal & General 15,240 1.7 Life Insurance
Pets At Home Group 14,792 1.6 Retailers
Personal Care, Drug & Grocery
PZ Cussons 13,888 1.5 Stores
Bellway 13,809 1.5 Household Goods & Home Construction
SThree 13,707 1.5 Industrial Support Services
Haleon 13,294 1.5 Pharmaceuticals And Biotechnology
Close Brothers Group 13,130 1.4 Banks
13,094 1.4 Electronic & Electrical
Morgan Advanced Equipment
Keller 12,935 1.4 Construction & Materials
Swiss Re 12,837 1.4 Non-Life Insurance
Tyman 12,815 1.4 Construction & Materials
Drax Group 12,469 1.4 Electricity
Conduit Holdings 11,883 1.3 Non-Life Insurance
Bayerische Motoren 11,756 1.3 Automobiles And Parts
Werke
Entain 11,680 1.3 Travel & Leisure
Admiral Group 11,453 1.3 Non-Life Insurance
OSB Group 11,319 1.2 Finance And Credit Services
Sanofi 11,075 1.2 Pharmaceuticals & Biotechnology
National Express Group 10,322 1.1 Travel & Leisure
Diversified Energy
Company 10,074 1.1 Oil, Gas & Coal
Telecommunications Service
Vodafone Group 9,721 1.1 Providers
SCOR 9,578 1.1 Non-Life Insurance
Real Estate Investment And
CLS Holdings 8,645 1.0 Services
DFS Furniture 8,436 0.9 Retailers
Norcros 6,262 0.7 Construction & Materials
Ashmore Group 5,683 0.6 Investment Banking & Brokerage
Atalaya Mining 5,305 0.8 Precious Metals And Mining
Duke Royalty 3,928 0.4 Investment Banking & Brokerage
Total Listed Equities 909,638 100.0
Written Call Options
As at 31 January 2023, the market value of the open option
positions was GBP(20,000) (2022: GBP(615,000)), resulting in an
underlying exposure to 2.5% of the portfolio (valued at strike
price).
INCOME STATEMENT
for the year ended 31 January 2023
Revenue Capital Total Return
GBP'000s GBP'000s GBP'000s
Note C
Gains on investments held at
fair value through profit or
loss - 6,037 6,037
Losses on foreign currencies - (64) (64)
Income 42,821 - 42,821
Investment management fee (1,031) (1,915) (2,946)
Administration expenses (1,171) (3) (1,174)
Profit before finance costs
and taxation 40,619 4,055 44,674
Finance costs: interest payable
and similar charges (1,388) (2,495) (3,883)
Profit on ordinary activities
before taxation 39,231 1,560 40,791
Taxation (605) - (605)
Profit after taxation attributable
to ordinary shareholders 38,626 1,560 40,186
Earnings per ordinary share
(basic and diluted) 28.70p 1.16p 29.86p
BALANCE SHEET
at 31 January 2023
GBP'000s GBP'000s
---------------------------------------- --------- ---------
Fixed assets
Investments held at fair value through
profit or loss 909,638
Current assets
Other receivables 1,899
Cash and cash equivalents 11,465
---------
13,364
Current liabilities
Other payables (43,798)
Derivative financial instruments (20)
(43,818)
---------
Net current liabilities (30,454)
---------
Total assets less current liabilities 879,184
Creditors: amounts falling due after
more than one year (66,809)
Total net assets 812,375
---------
Capital and Reserves
Called up share capital 35,034
Share premium account 184,239
Capital redemption reserve 293
Capital reserve 569,912
Revenue reserve 22,897
---------
Equity shareholders' funds 812,375
---------
Net asset value per ordinary share 579.7p
INCOME STATEMENT
for the year ended 31 January 2022
Revenue Capital Total Return
GBP'000s GBP'000s GBP'000s
Note C
Gains on investments held at
fair value through profit or
loss - 154,247 154,247
(Losses) on foreign currencies - (2) (2)
Income 35,292 - 35,292
Investment management fee (931) (1,728) (2,659)
Administration expenses (933) (2) (935)
Profit before finance costs
and taxation 33,428 152,515 185,943
Finance costs: interest payable
and similar charges (1,183) (2,102) (3,285)
Profit on ordinary activities
before taxation 32,245 150,413 182,658
Taxation (410) - (410)
Profit after taxation attributable
to ordinary shareholders 31,835 150,413 182,248
Earnings per ordinary share
(basic and diluted) 25.64p 121.15p 146.79p
BALANCE SHEET
at 31 January 2022
GBP'000s GBP'000s
---------------------------------------- --------- ---------
Fixed assets
Investments held at fair value through
profit or loss 814,895
Current assets
Other receivables 2,993
Cash and cash equivalents 18,626
---------
21,619
Current liabilities
Other payables (30,095)
Derivative financial instruments (615)
(30,710)
---------
Net current liabilities (9,091)
---------
Total assets less current liabilities 805,804
Creditors: amounts falling due after
more than one year (66,754)
Total net assets 739,050
---------
Capital and Reserves
Called up share capital 31,926
Share premium account 118,047
Capital redemption reserve 293
Capital reserve 568,352
Revenue reserve 20,432
---------
Equity shareholders' funds 739,050
---------
Net asset value per ordinary share 578.7p
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 January 2023
Called Share Capital Total
up Premium Redemption Capital Revenue GBP'000
Share Account Reserve Reserve Reserve
Capital GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
--------------------- ---------- ---------- ------------- ---------- ---------- ----------
Net assets at
1 February 2022 31,926 118,047 293 568,352 20,432 739,050
Revenue profit - - - - 38,626 38,626
Dividends on
ordinary shares - - - - (36,248) (36,248)
Unclaimed dividends - - - - 87 87
Capital profit - - - 1,560 - 1,560
Shares issued
during the year 3,108 66,192 - - - 69,300
---------- ---------- ------------- ---------- ---------- ----------
Net assets at
31 January 2023 35,034 184,239 293 569,912 22,897 812,375
---------- ---------- ------------- ---------- ---------- ----------
Net assets at
1 February 2021 30,246 84,137 293 417,939 22,102 554,717
Revenue profit - - - - 31,835 31,835
Dividends on
ordinary shares - - - - (33,505) (33,505)
Capital profit - - - 150,413 - 150,413
Shares issued
during the year 1,680 33,910 - - - 35,590
---------- ---------- ------------- ---------- ---------- ----------
Net assets at
31 January 2022 31,926 118,047 293 568,352 20,432 739,050
---------- ---------- ------------- ---------- ---------- ----------
CASH FLOW STATEMENT
For the year ended 31 January 2023
2023 2022
GBP'000 GBP'000
Operating activities
Profit before finance costs and taxation* 44,674 185,943
Less: Gains on investments held at fair
value (7,843) (155,443)
Add: Special dividends credited to capital -
** 3,472
Add: Losses on foreign currency 64 2
Purchase of fixed asset investments held
at fair value through profit or loss (300,664) (230,959)
Sales of fixed asset investments held
at fair value through profit or loss 208,995 215,351
Transaction costs (1,806) (1,196)
Decrease in other receivables 383 419
Increase in other payables 67 196
Less: Overseas tax suffered (605) (410)
Net cash (outflow) inflow from operating
activities (53,263) 13,903
Financing activities
Interest paid (3,641) (3,229)
Drawdown on Revolving Credit Facility 16,000 -
Dividends paid on cumulative preference
stock (43) (43)
Dividends paid on ordinary shares (36,248) (33,505)
Unclaimed dividends over 12 years 87 -
Share issue proceeds 70,011 34,879
Net cash inflow (outflow) from financing
activities 46,166 (1,898)
(Decrease) increase in cash and cash
equivalents (7,097) 12,005
Cash and cash equivalents at the start
of the year 18,626 6,623
Effect of foreign exchange rates (64) (2)
Cash and cash equivalents at the end of
the year 11,465 18,626
Comprising:
Cash and cash equivalents 11,465 18,626
* Cash inflow from dividends was GBP40,877,000 (2022: GBP33,412,000)
and cash inflow from interest was GBP90,240 (2022: GBPnil).
** Tate and Lyle Special dividend paid following the sale of a
subsidiary.
Notes
Note A
The financial statements have been prepared prepared under the
historical cost convention, except for the revaluation of financial
instruments held at fair value through profit or loss and in
accordance with applicable United Kingdom law and UK Accounting
Standards (UK GAAP), including Financial Reporting Standard 102 -
the Financial Reporting Standard applicable in the United Kingdom
and Republic of Ireland (FRS 102) and in line with the Statement of
Recommended Practice "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" issued by the Association of
Investment Companies (AIC SORP) in April 2022.
Note B
The earnings per ordinary share is based on a weighted number of
shares 134,599,189 (2022 : 124,156,079) ordinary shares in
issue.
Note C
The total return column of this statement is the profit and loss
account of the company. The supplementary revenue return and
capital return columns are both prepared under the guidance
published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the year.
The net profit for the year disclosed above represents the
company's total comprehensive income.
Note D
As the company's business is investing in financial assets with
a view to profiting from their total return in the form of
increases in fair value, financial assets are designated as held at
fair value through profit or loss in accordance with FRS 102
Section 11: 'Basic Financial Instruments' and Section 12: 'Other
Financial Instruments'. The company manages and evaluates the
performance of these investments on a fair value basis in
accordance with its investment strategy, and information about the
investments is provided on this basis to the board.
Investments held at fair value through profit or loss are
initially recognised at fair value. After initial recognition,
these continue to be measured at fair value, which for quoted
investments is either the bid price or the last traded price
depending on the convention of the exchange on which the investment
is listed. Gains or losses on investments are recognised in the
capital column of the Income Statement. Purchases and sales of the
financial assets are recognised on the trade date, being the date
which the company commits to purchase or sell the assets.
Unlisted investments are valued by the Directors based upon the
latest dealing prices, stockbrokers' valuations, net asset values,
earnings and other known accounting informationin accordance with
the principles set out by the International Private Equity and
Venture Capital Valuation Guidelines issued in December 2022
After initial recognition unquoted stocks are valued by the
board on an annual basis.
Note E
2023 2022
GBP GBP
Dividends paid on ordinary shares of 25p:
Third interim dividend 6.85p paid 15 March
2022 (2021 - 6.8p) 8,758 8,227
Fourth quarterly dividend 6.85p paid 24
May 2022 (2021 - 6.8p) 8,950 8,345
First quarterly dividend 6.85p paid 24
August 2022 (2021 - 6.8p) 9,208 8,451
Second quarterly dividend 6.85p paid 10
November 2022 (2021 - 6.8p) 9,332 8,482
36,248 33,505
Dividends payable at the year end are not recognised as a
liability under FRS 102 Section 32 'Events After the End of the
Reporting Period' (see page 98 of the Annual Report - Statement of
Accounting Policies). Details of these dividends are set out
below.
2023 2022
GBP GBP
Third interim dividend 6.85p paid 15 March
2023 (2022: 6.85p) 9,669 8,748
Final proposed dividend 7.0p payable 26
May 2023 (2022: 6.85p) 9,809 8,748
-------- ----------
19,478 17,496
The declared final dividend accrued is based on the number of
shares in issue at the year end. However, the dividend payable will
be based on the numbers of shares in issue on the record date and
will reflect any changes in the share capital between the year end
and the record date.
All dividends disclosed in the tables above have been paid or
are payable from the revenue reserves.
Note F
Post Balance Sheet events:
Since the year end a further 2,515,000 shares have been issued,
as at 31 March 2023.
Note G
The full annual report will shortly be available to be viewed or
downloaded from the company's website at www.merchantstrust.co.uk .
Neither the contents of the company's website nor the contents of
any website accessible from hyperlinks on the company's website (or
any other website) is incorporated into, or forms part of this
announcement.
The financial information for the year ended 31 January 2023 has
been extracted from the statutory accounts for that year. The
auditor's report on these accounts was unqualified and did not
contain a statement under either Section 498(2) or (3) of the
Companies Act 2006. The annual report has not yet been delivered to
the Registrar of Companies.
The financial information for the year ended 31 January 2022 has
been extracted from the statutory accounts for that year which have
been delivered to the Registrar of Companies. The auditor's report
on these accounts was unqualified and did not contain a statement
under either Section 498(2) or (3) of the Companies Act 2006.
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END
FR SSMFSIEDSEDL
(END) Dow Jones Newswires
April 05, 2023 06:39 ET (10:39 GMT)
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