REG - Mercantile Inv Tst - Half-year Report
20/10/2025 07:00
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RNS Number : 9058D Mercantile Investment Trust(The)PLC 20 October 2025
LONDON STOCK EXCHANGE ANNOUNCEMENT
THE MERCANTILE INVESTMENT TRUST PLC
HALF YEAR REPORT & FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
31ST JULY 2025
Legal Entity Identifier: 549300BGX3CJIHLP2H42
Information disclosed in accordance with the DTR 4.1.3
The Mercantile Investment Trust plc (the 'Mercantile' or the 'Company')
announces its half year results for the 6-months ended 31st July 2025.
Highlights
· NAV total return of +6.0% (with debt at fair value(1)) for the
six months ended 31st July 2025, compared with +7.2% for the FTSE All-Share
Index (excluding FTSE 100 and investment trusts) (the 'Benchmark'). Share
price total return of +6.0%.
· Three years ended 31st July 2025, NAV total return (with debt at
fair value(1)) of +31.9% compared with +23.0% for the Benchmark. Share
price return of +38.7%.
· Five years ended 31st July 2025, NAV total return (with debt at
fair value(1)) of +65.5% compared with +58.9% for the Benchmark. Share
price return of +65.1%.
· Ten years ended 31(st) July 2025, NAV total return (with debt at
fair value(1)) of +93.2% compared with +61.3% for the Benchmark. Share
price return of +104.1%.
· Second quarterly interim dividend of 1.55p per share declared,
payable on 3rd November 2025. Total dividends for the year so far: 3.10p per
share (up from 3.00p for the equivalent period last year).
· The Company repurchased 26.8 million shares into Treasury during
the period to help manage the discount, at an average discount to NAV of 9.7%.
(1) J.P. Morgan/Morningstar, using cum income net asset value per share.
Rachel Beagles, Chair, commented:
"The Board continues to believe that investing in quality businesses in
growing markets, at attractive valuations, will generate index beating returns
over the long term... While ongoing risks from global policy uncertainty and
potential UK tax increases may dampen short-term confidence and investor
appetite for UK equities, UK corporate and consumer balance sheets remain
healthy, so once the Budget is delivered and uncertainty fades, both business
investment and consumption could rise. The government has also announced
measures to boost growth through regulatory cuts, planning reform and
infrastructure spending: any evidence of progress here would support the
outlook. Finally, the UK market offers compelling valuations, particularly
among medium and smaller companies."
Guy Anderson & Anthony Lynch, Portfolio Managers, commented:
"The outlook is always uncertain, and this year is no different, with valid
reasons to be apprehensive: the international geopolitical landscape appears
primed for generating unanticipated shocks... However, there are also reasons
for optimism. Despite well-known headwinds to growth, and widespread caution
heading into the upcoming budget, portfolio companies are mostly performing
well, and yet the valuation of the UK market remains at a marked discount to
both its own history and relative to other developed markets... We believe
that a portfolio of companies with these characteristics offers the best
prospect of delivering compelling returns and outperformance for our
shareholders over the long-term, just as it has done in the past."
CHAIR'S STATEMENT
Introduction and Market Background
It gives me pleasure to present my first half yearly report as the incoming
Chair of The Mercantile Investment Trust plc: a trust with a rich history
spanning over 140 years and one which has delivered great returns to its
shareholders over the long term.
The six months ended 31st July 2025 were a turbulent time. Whilst the UK
market finished up in substantially positive territory, this masked huge
volatility over the period as UK equities sold off sharply in March and April
in response to President Trump's 'Liberation Day' tariffs, only to rebound
strongly when he delayed their implementation pending further negotiations
with the U.S.'s trading partners.
Performance
During the six months ended 31st July 2025, the Company delivered a +6.0%
return on both net assets and share price (with dividends reinvested), albeit
this was slightly behind the benchmark. The Company's long term track record
of attractive absolute returns and outperformance remains positive. Over the
ten years to 31st July 2025, the Company's NAV has delivered an annualised
total return of +6.8% with debt at fair value, while the Company's share price
returned an annual average of +7.4%, both well ahead of the benchmark's
annualised total return of +4.9%.
The Portfolio Managers' Report on page 14 in the Half Year Report provides
details of the drivers of recent returns and portfolio changes implemented
during the review period. Their report also discusses the market outlook over
the remainder of this year and beyond.
Dividends
The Company aims to provide shareholders with long-term dividend growth at
least in line with the rate of inflation over a five- to ten-year period, and
it has fulfilled this commitment. Over the ten years to 31st January 2025, the
Company's dividend grew at a rate of 6.8% per annum, well ahead of CPI
inflation of 3.1% per annum over the same period.
The Company has increased its dividend for more than ten consecutive years,
making it an AIC next-generation dividend hero, and it is on track to maintain
this record. A first quarterly interim dividend of 1.55 pence was paid on 1st
August 2025 and a second quarterly interim dividend of 1.55 pence per share
has been declared by the Board, payable on 3rd November 2025 to shareholders
on the register at the close of business on 26th September 2025. This brings
the dividend for the year so far to 3.10 pence, up from 3.00 pence for the
equivalent period last year. A third quarterly interim dividend will be
announced in December 2025. The level of the fourth quarterly interim dividend
will depend on income received by the Company for the full financial year.
Discount and Share Repurchases
The discount at which the Company's shares trade relative to its NAV (with
debt at fair value) widened slightly, from 9.2% at the previous financial year
end to 9.5% at the half year end. During the period, to help manage the
discount and its volatility, the Board purchased 26,785,148 shares. These
shares are held in Treasury and were purchased at an average discount to NAV
of 9.7%, producing a modest accretion to the NAV for continuing shareholders.
Since the end of the review period, the Company has purchased a further
14,482,533 shares. The discount currently stands at 9.7%.
Gearing
The Company's gearing policy is to operate within a range between 10% net cash
and 20% gearing under normal market conditions. The Company ended the
six-month reporting period with gearing at 14.5% (compared to 14.1% on 31st
January 2025), having averaged 15.0% over the period.
Gearing is regularly discussed by the Board and the Portfolio Managers and is
implemented via the use of long-dated, fixed-rate financing from several
sources, consistent with the Board's aim to ensure a diversification of
source, tenure and cost. Details of these instruments can be found on page 3
of the Half Year Report.
Board
I became Chair of the Board and the Nomination Committee following the
conclusion of the AGM in May 2025, having joined the Board in June 2021. I
took over from Angus Gordon Lennox who retired following nine years on the
Board, the last seven of which he served as Chairman. On behalf of the Board I
would like to take this opportunity to thank Angus once again for his
dedication to shareholders and insightful leadership during his tenure. Graham
Kitchen assumed the role of Senior Independent Director following my
appointment.
Broker Review
The Board recently conducted a broker review, inviting several brokerage
firms, including the Company's then existing joint brokers, Cavendish and
Winterflood, to submit proposals. After a thorough evaluation of the
submissions from these firms, the Board decided to appoint Peel Hunt LLP to
work alongside Winterflood as joint broker. It agreed that this combination of
brokers would best support the Company in maintaining its market presence, its
relationship with investors and in achieving its strategic objectives. This
decision underscores the Board's dedication to optimising broker relationships
and shareholder outcomes.
Benefits of Active Investing in UK Medium and Smaller Companies
The medium and smaller companies sector offers access to a diverse set of
businesses. Whilst more domestically focussed than FTSE100 constituents, they
often have more attractive long term growth prospects than their large cap UK
peers due to their smaller size. These companies are generally less well
researched by the broader market and consequently lend themselves better to
active stock picking rather than passive investing. Skilled portfolio managers
with access to in-house research can select those companies with strong
business propositions and undervalued shares, sizing positions according to
the opportunity and risks, avoiding lower quality or overpriced alternatives.
In contrast, passive products allocate capital according to the relative size
of the company. In addition, medium and smaller companies are more likely to
be targets of takeover activity (and therefore share price outperformance) due
to their more digestible size.
Benefits of the Investment Trust Structure
The Company seeks to invest in this attractive subset of UK companies within
the investment trust structure. There are several benefits to doing this.
Firstly, this structure offers a relatively fixed pool of capital which means
that your Portfolio Managers can invest in companies for the long term without
worrying about liquidity needs, unlike open ended funds which can suffer from
lumpy and unpredictable redemptions. Secondly, this structure allows the use
of gearing, which over the cycle, should continue to augment performance, as
it has done for your Company in the past. Finally, by being able to build up
revenue reserves in the good years, dividends can be supported by reserves in
any difficult periods, providing investment trusts such as The Mercantile a
greater prospect of delivering attractive and dependable dividend growth
throughout investment cycles.
The Mercantile offers active management within this appealing investment space
with an attractive cost structure. An ongoing charges ratio of 0.50%(1) in
conjunction with benchmark beating performance over three, five and ten years,
is, in the Board's opinion, highly competitive against open ended, passive and
other investment trust peers.
(1) Source: J.P. Morgan/Morningstar.
Stay Informed
The Company delivers email updates on its progress with regular news and
views, as well as the latest performance. If you have not already signed up to
receive these communications, you can opt in via
www.Mercantile-Registration.co.uk, or by scanning the QR code in the Half Year
Report.
Outlook
The Board continues to believe that investing in quality businesses in growing
markets, at attractive valuations, will generate index beating returns over
the long term.
There are, as ever, risks to countenance. The Trump administration's approach
to trade and international relations, and U.S. government policy in general
has created uncertainty that is having an adverse impact on economic activity
in the U.S., and around the world. Domestically, concerns over tax raising
measures in the November Budget are likely to impact on short term consumer
and business confidence and may, in the near term, also dampen investors'
appetite for UK equities.
Looking beyond this though, UK corporate and consumer balance sheets remain
healthy, so once the Budget is delivered and uncertainty fades, both business
investment and consumption could rise. The government has also announced
measures to boost growth through regulatory cuts, planning reform and
infrastructure spending: any evidence of progress here would support the
outlook. Finally, the UK market offers compelling valuations, particularly
among medium and smaller companies.
Your Portfolio Managers have a long and successful track record of investing
in UK medium and smaller companies. Your Board is confident in their ability
to steer the portfolio through any forthcoming challenges, take advantages of
investment and valuation opportunities and to keep delivering positive returns
and outperformance for shareholders over the long term, as they have in the
past.
Rachel Beagles
Chair
17th October 2025
PORTFOLIO MANAGERS' REPORT
Setting the scene: navigating challenges
The UK market delivered a positive return through the first half of this
financial year, with our target market of UK medium and smaller companies (the
'Benchmark') delivering a return of +7.2%, broadly in line with the wider UK
market.
This headline figure masks the underlying turbulence caused primarily by the
sequence of announcements from the President of the United States, focused on
the imposition and possible relaxation of trade tariffs. At its nadir, our
Benchmark had fallen by 15%, before rallying over 25% into the period end.
Domestic economic growth has been lacklustre, and the UK economy does appear
to be running below capacity. After the imposition of various taxation
increases last year, the government has thus far been unwilling to curtail
public sector spending, which has led to widespread concern and now
expectation that further increases in taxation will follow. As a result,
businesses appear less willing to invest in capital or to hire more labour,
while consumer confidence and spending remains cautious. Inflation has proven
to be persistent, again in part self-inflicted, hence monetary loosening has
been limited.
Despite this complex and uncertain geopolitical and economic environment, and
mixed corporate earnings, the UK market has experienced a flurry of incoming
takeover activity, with over 25 bids valued at greater than £100 million so
far this year. Furthermore, and again reflecting the deeply discounted
valuation of the UK market, corporates continue to repurchase their own shares
at elevated levels.
Mercantile performance
Against this backdrop, for the six months to 31st July 2025, the Company
delivered a return on net assets of +6.0% at both fair value and par value,
trailing the Benchmark's +7.2% return. The Company's underperformance was
driven by stock selection, while our use of gearing, which averaged 15%, was
additive to returns. Despite this, the Company continues its track record of
long-term outperformance, with share price returns ahead of Benchmark over
three, five, and ten years.
Performance in this half-year was bolstered by strong returns from our
holdings in the Industrial Support Services sector, particularly Serco, the
government outsourcer, which was our top contributor on the back of improving
contract win momentum and thus an anticipated acceleration in growth. In the
Retail sector, our position in Dunelm, the homewares retailer, performed well,
as it reported robust trading trends. Plus500, the provider of online trading
services, our largest new investment last year, also delivered continued
gains, following the significant growth in its new US futures business and as
it benefitted from broader market volatility.
On the negative side of the ledger, the Software & Computer Services
sector was the largest detractor, with Bytes Technology, the value-added
technology reseller, experiencing a significant decline after announcing a
profit warning just weeks after the full-year results. This was in part due to
challenges in the implementation of an internal sales team reorganisation but
also as a consequence of a weakening demand backdrop. Our holding in 4imprint,
the supplier of promotional branded merchandise, was the largest individual
detractor, due to increased uncertainty on its growth outlook following the
tariff announcements. Performance from our two holdings in the Housebuilding
sector, namely Bellway and Barratt Redrow, was also disappointing, as the
shares weakened following increasing evidence that the long-awaited recovery
in housebuilding activity remains elusive.
While there has not been any material change to the overall shape of the
portfolio, or indeed to the level of gearing, through the first half of this
financial year, there have been various stock-specific alterations. By
coincidence, we have added 12 new holdings to the portfolio and removed the
same number. The three largest new additions are in the Financials sector, and
constitute IG Group, the provider of online trading services, Just Group, the
life insurer, and Quilter, the wealth manager. In other sectors the major
additions include Greencore, the convenience food manufacturer, Rosebank
Industries, a business following a 'buy, improve, sell' model, and Safestore,
the self-storage operator.
Major exits include the aforementioned Bytes Technology, Greggs, the
food-to-go retailer, and Auto Trader, the operator of the UK's leading digital
automotive marketplace. This final name had been held in the portfolio since
its IPO in March 2015, and having delivered excellent returns over that period
is now a FTSE100 company.
Outlook
The outlook is always uncertain, and this year is no different, with valid
reasons to be apprehensive: the international geopolitical landscape appears
primed for generating unanticipated shocks, and the continued rise of populism
could have damaging consequences; domestic economic growth is low, and the
government's ability to deliver productive change appears limited; the rapid
pace of technological development will both create and destroy industries, and
thus winners and losers. As always, we will endeavour to invest in more of
the former, and avoid the latter.
In the near-term, financial markets will be buffeted by changes to the above,
as well as by the inter-connected forces of inflation, monetary policy, and
their impact upon economic and thus corporate earnings growth expectations.
However, there are also reasons for optimism, which may help to explain our
level of gearing, at around 15%. Despite these well-known headwinds to growth,
and widespread caution heading into the upcoming budget, portfolio companies
are mostly performing well, and yet the valuation of the UK market remains at
a marked discount to both its own history and relative to other developed
markets. This fact has not gone unnoticed, as we have seen a continued stream
of corporate acquisitions, while the volume of share buybacks being executed
by management teams remains elevated. Furthermore, while persistent inflation
has led the Bank of England to pause monetary easing, should this recommence
it is likely to be a material tailwind to the performance of smaller
companies.
Looking ahead, we will maintain our focus on investing in structurally robust
businesses that operate in growing end markets and possess the ability to
invest capital at attractive returns while being able to adapt to the changing
environments in which they operate. We believe that a portfolio of companies
with these characteristics offers the best prospect of delivering compelling
returns and outperformance for our shareholders over the long-term, just as it
has done in the past.
Guy Anderson
Anthony Lynch
Portfolio Managers
17th October 2025
INTERIM MANAGEMENT REPORT
The Company is required to make the following disclosures in its half year
report.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Company include, but are
not limited to, investment under-performance, geopolitical instability, cyber
crime, discount control, legal and regulatory change and corporate strategy.
Information on each of these is given in the Strategic Report within the
Annual Report and Financial Statements for the year ended 31st January 2025.
In the view of the Board, these principal risks and uncertainties are as much
applicable to the remaining six months of the financial year as they were to
the six months under review.
Related parties transactions
During the first six months of the current financial year, no transactions
with related parties have taken place which have materially affected the
financial position or the performance of the Company.
Going concern
The Directors believe, having considered the Company's investment objectives,
risk management policies, capital management policies and procedures, nature
of the portfolio and expenditure projections, that the Company has adequate
resources, an appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the foreseeable
future and, more specifically, that there are no material uncertainties
pertaining to the Company that would prevent its ability to continue in such
operational existence for at least 12 months from the date of the approval of
this half year financial report. For these reasons, they consider there is
sufficient evidence to continue to adopt the going concern basis in preparing
the accounts.
Directors' responsibilities
The Board of Directors confirms that, to the best of its knowledge:
(i) the condensed set of financial statements contained within the half
year financial report has been prepared in accordance with FRS 104 'Interim
Financial Reporting' and gives a true and fair view of the state of affairs of
the Company, and of the assets, liabilities, financial position and net return
of the Company as at 31st July 2025 as required by the UK Listing Authority
Disclosure Guidance and Transparency Rules ('DTRs') 4.2.4R; and
(ii) the interim management report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the DTRs.
In order to provide these confirmations, and in preparing these financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the
financial statements;
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business; and
• notify the Company's shareholders in writing about the use, if
any, of disclosure exemptions in FRS 102 in the preparation of the financial
statements;
and the Directors confirm that they have done so.
For and on behalf of the Board
Rachel Beagles
Chair
17th October 2025
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st July 2025 31st July 2024 31st January 2025
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments held at
fair value through profit or loss - 70,232 70,232 - 293,772 293,772 - 187,228 187,228
Net foreign currency
gains/(losses) - 75 75 - 39 39 - (4) (4)
Income from investments 44,053 - 44,053 45,420 - 45,420 76,726 387 77,113
Interest receivable and similar
income 1,082 - 1,082 802 - 802 1,497 - 1,497
Gross return 45,135 70,307 115,442 46,222 293,811 340,033 78,223 187,611 265,834
Management fee (1,171) (2,733) (3,904) (1,156) (2,699) (3,855) (2,385) (5,564) (7,949)
Other administrative expenses (798) - (798) (768) - (768) (1,642) - (1,642)
Net return before finance costs
and taxation 43,166 67,574 110,740 44,298 291,112 335,410 74,196 182,047 256,243
Finance costs (2,087) (4,869) (6,956) (2,086) (4,864) (6,950) (4,172) (9,735) (13,907)
Net return before taxation 41,079 62,705 103,784 42,212 286,248 328,460 70,024 172,312 242,336
Taxation (note 3) 311 - 311 (558) - (558) (958) - (958)
Net return after taxation 41,390 62,705 104,095 41,654 286,248 327,902 69,066 172,312 241,378
Return per share (note 4) 5.66p 8.57p 14.23p 5.36p 36.86p 42.22p 8.96p 22.34p 31.30p
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
The 'Total' column of this statement is the profit and loss account of the
Company and the 'Revenue' and 'Capital' columns represent supplementary
information prepared under guidance issued by the Association of Investment
Companies.
The return per share represents the profit per share for the period/year and
also the total comprehensive income per share.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Called up Capital
share Share redemption Capital Revenue
capital premium reserve reserves(1) reserve(1) Total
£'000 £'000 £'000 £'000 £'000 £'000
Six months ended 31st July 2025 (Unaudited)
At 31st January 2025 23,612 23,459 13,158 1,819,986 85,253 1,965,468
Repurchase of shares into Treasury - - - (65,026) - (65,026)
Net return - - - 62,705 41,390 104,095
Dividends paid in the period (note 5) - - - - (36,183) (36,183)
Proceeds from forfeiture of unclaimed
dividends(2) (note 5) - - - - 3 3
At 31st July 2025 23,612 23,459 13,158 1,817,665 90,463 1,968,357
Six months ended 31st July 2024 (Unaudited)
At 31st January 2024 23,612 23,459 13,158 1,729,199 76,191 1,865,619
Repurchase of shares into Treasury - - - (16,148) - (16,148)
Proceeds from share forfeiture(2) - - - 616 - 616
Net return - - - 286,248 41,654 327,902
Dividends paid in the period (note 5) - - - - (37,254) (37,254)
Proceeds from forfeiture of unclaimed
dividends(2) (note 5) - - - - 276 276
At 31st July 2024 23,612 23,459 13,158 1,999,915 80,867 2,141,011
Year ended 31st January 2025 (Audited)
At 31st January 2024 23,612 23,459 13,158 1,729,199 76,191 1,865,619
Repurchase of shares into Treasury - - - (82,121) - (82,121)
Proceeds from share forfeiture(2) - - - 596 - 596
Net return - - - 172,312 69,066 241,378
Dividends paid in the year (note 5) - - - - (60,280) (60,280)
Proceeds from forfeiture of unclaimed
dividends(2) (note 5) - - - - 276 276
At 31st January 2025 23,612 23,459 13,158 1,819,986 85,253 1,965,468
( )
(1) These reserves form the distributable reserves of the Company and
can be used to fund distributions to investors via dividend payments.
(2) During the year ended 31st January 2025, the Company undertook an
Asset Reunification Program to reunite inactive shareholders with their shares
and unclaimed dividends. Pursuant to the Company's Articles of Association,
the Company has exercised its right to reclaim the shares of shareholders whom
the Company, through its previous Registrar, has been unable to locate for a
period of 12 years or more. These forfeited shares were sold in the open
market by the previous Registrar and the proceeds, net of costs, were returned
to the Company. In addition, any unclaimed dividends older than 12 years from
the date of payment of such dividends were also forfeited and returned to the
Company.
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Audited)
31st July 2025 31st July 20241 31st January 2025
£'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 2,253,898 2,434,904 2,242,684
Current assets
Debtors 10,780 12,362 4,100
Current asset investments(1) 40,854 31,768 36,903
Cash at bank(1) 250 250 20,245
51,884 44,380 61,248
Current liabilities
Creditors: amounts falling due within one year (9,329) (10,286) (10,420)
Net current assets 42,555 34,094 50,828
Total assets less current liabilities 2,296,453 2,468,998 2,293,512
Creditors: amounts falling due after more than one year (328,096) (327,987) (328,044)
Net assets 1,968,357 2,141,011 1,965,468
Capital and reserves
Called up share capital 23,612 23,612 23,612
Share premium 23,459 23,459 23,459
Capital redemption reserve 13,158 13,158 13,158
Capital reserves 1,817,665 1,999,915 1,819,986
Revenue reserve 90,463 80,867 85,253
Total shareholders' funds 1,968,357 2,141,011 1,965,468
Net asset value per share (note 6) 273.4p 276.3p 263.2p
( )
(1) For the six months ended 31st July 2024, the 'Cash and cash
equivalents' line item in the Statement of Financial Position has been revised
to 'Cash at bank' and 'Current asset investments.' This revision separately
reports the investment in the JPMorgan GBP Liquidity Fund as 'Current asset
investments' in accordance with the statutory format required by the Companies
Act 2006. This adjustment does not affect any other line items in the
Statement of Financial Position or the total current assets.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st July 2025 31st July 2024 31st January 2025
£'000 £'000 £'000
Cash flows from operating activities
Net return before finance costs and taxation 110,740 335,410 256,243
Adjustment for:
Net gains on investments held at fair value through profit
or loss (70,232) (293,772) (187,228)
Net foreign currency (gains)/losses (75) (39) 4
Dividend income (44,053) (45,420) (77,113)
Interest income (1,082) (802) (1,497)
Realised gains/(losses) on foreign exchange transactions 75 - (4)
Increase in other debtors (32) (46) (39)
(Decrease)/increase in accrued expenses (321) 2 263
Net cash outflow from operations before dividends, interest
and taxation (4,980) (4,667) (9,371)
Dividends received 39,663 40,382 75,567
Interest received 1,082 802 1,497
Overseas withholding tax recovered 665 161 448
Net cash inflow from operating activities 36,430 36,678 68,141
Purchases of investments (248,438) (257,266) (437,321)
Sales of investments 304,414 223,137 491,572
Net cash inflow/(outflow) from investing activities 55,976 (34,129) 54,251
Equity dividends paid (note 5) (36,183) (37,254) (60,280)
Proceeds from forfeiture of unclaimed dividends (note 5) 3 276 276
Repurchase of shares into Treasury (65,366) (16,802) (81,569)
Proceeds from share forfeiture - 616 596
Loan and overdraft interest paid (6,904) (6,897) (13,797)
Net cash outflow from financing activities (108,450) (60,061) (154,774)
Decrease in cash and cash equivalents (16,044) (57,512) (32,382)
Cash and cash equivalents at start of period/year 57,148 89,530 89,530
Cash and cash equivalents at end of period/year 41,104 32,018 57,148
Cash and cash equivalents consist of:
Cash at bank 250 250 20,245
Current asset investment in JPMorgan GBP Liquidity Fund 40,854 31,768 36,903
Total 41,104 32,018 57,148
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the six months ended 31st July 2025
1. Financial statements
The information contained within these condensed financial statements in this
half year report has not been audited or reviewed by the Company's auditors.
The figures and financial information for the year ended 31st January 2025 are
extracted from the latest published financial statements of the Company and do
not constitute statutory accounts for that year. Those financial statements
have been delivered to the Registrar of Companies and include the report of
the auditors which was unqualified and did not contain a statement under
either section 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
The condensed financial statements are prepared under the historical cost
convention, modified to include fixed asset investments at fair value, in
accordance with the Companies Act 2006, United Kingdom Generally Accepted
Accounting Practice ('UK GAAP'), including FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland' and with the Statement
of Recommended Practice 'Financial Statements of Investment Trust Companies
and Venture Capital Trusts' (the 'SORP') issued by the Association of
Investment Companies in July 2022.
FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting
Council ('FRC') in March 2015 has been applied in preparing this condensed
set of financial statements for the six months ended 31st July 2025.
All of the Company's operations are of a continuing nature.
The accounting policies applied to this condensed set of financial statements
are consistent with those applied in the financial statements for the year
ended 31st January 2025.
3. Taxation
The Company's effective corporation tax rate is 25%, however as the current
period deductible expenses exceed taxable income, no income tax is payable.
Furthermore, the Company does not pay tax on capital gains due to its status
as an investment trust company. The tax recognised in the period comprises
overseas withholding tax. Withholding tax amounts that were initially
considered irrecoverable but have been recovered during the period are
recognised as a tax credit in that period.
4. Return per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st July 2025 31st July 2024 31st January 2025
£'000 £'000 £'000
Return per share is based on the following:
Revenue return 41,390 41,654 69,066
Capital return 62,705 286,248 172,312
Total return 104,095 327,902 241,378
Weighted average number of shares in issue 731,616,104 776,683,471 771,172,156
Revenue return per share 5.66p 5.36p 8.96p
Capital return per share 8.57p 36.86p 22.34p
Total return per share 14.23p 42.22p 31.30p
5. Dividends paid
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st July 2025 31st July 2024 31st January 2025
Pence £'000 Pence £'000 Pence £'000
Dividend paid
Fourth quarterly dividend in respect of prior year 3.40 24,884 3.30 25,626 3.30 25,626
First quarterly dividend(1) 1.55 11,299 1.50 11,628 1.50 11,628
Second quarterly dividend(1) - - - - 1.50 11,622
Third quarterly dividend(1) - - - - 1.50 11,404
Total dividends paid in the period/year 4.95 36,183 4.80 37,254 7.80 60,280
Forfeiture of unclaimed dividends over 12 years old(2) (3) (276) (276)
Net dividends 4.95 36,180 4.80 36,978 7.80 60,004
( )
(1) The Company irrevocably transfers the funds to its Registrar in
the month prior to which the dividend is paid to shareholders.
(2) The unclaimed dividends were forfeited following an extensive
exercise which attempted to reunite the dividends with owners.
All dividends paid in the period/year have been funded from the revenue
reserve.
The first 2026 quarterly dividend of 1.55p (2025: 1.50p) per share, amounting
to £11,299,000 (2025: £11,628,000) was paid on 1st August 2025 in respect
of the six months period ended 31st July 2025.
A second 2026 quarterly dividend of 1.55p (2025: 1.50p) per share, amounting
to £10,993,000 (2025: £11,622,000), has been declared payable in respect of
the six months period ended 31st July 2025.
6. Net asset value per share
The net asset value per Ordinary share and the net asset value attributable to
the Ordinary shares at the period/year end are shown below. These were
calculated using 719,883,043 (31st July 2024: 774,800,303, 31st January 2025:
746,668,191) Ordinary shares in issue at the period/year end (excluding
Treasury shares).
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st July 2025 31st July 2024 31st January 2025
Net asset value Net asset value Net asset value
attributable attributable attributable
£'000 pence £'000 pence £'000 pence
Net asset value - debt at par value 1,968,357 273.4 2,141,011 276.3 1,965,468 263.2
£175 million 6.125% debenture stock:
Add back: amortised cost 174,549 24.3 174,452 22.5 174,501 23.4
Deduct: fair value (189,498) (26.3) (191,929) (24.8) (188,209) (25.2)
£3.85 million 4.25% perpetual debenture stock:
Add back: amortised cost 3,850 0.5 3,850 0.5 3,850 0.5
Deduct: fair value (2,733) (0.4) (3,119) (0.4) (2,854) (0.4)
£150 million senior unsecured privately placed
loan notes:
Add back: amortised cost 149,697 20.8 149,685 19.3 149,693 20.1
Deduct: fair value (76,001) (10.6) (83,341) (10.7) (78,706) (10.6)
Net asset value - debt at fair value 2,028,221 281.7 2,190,609 282.7 2,023,743 271.0
7. Fair valuation of investments
The fair value hierarchy analysis for investments held at fair value at the
period/year end is as follows:
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st July 2025 31st July 2024(2) 31st January 2025(2)
Assets Liabilities Assets Liabilities Assets Liabilities
£'000 £'000 £'000 £'000 £'000 £'000
Level 1 2,248,493 - 2,428,522 - 2,236,302 -
Level 2(1) 40,854 - 31,768 - 36,903 -
Level 3(3) 5,405 - 6,382 - 6,382 -
Total 2,294,752 - 2,466,672 - 2,279,587 -
( )
(1) Current asset investments in the JPMorgan GBP Liquidity Fund, a
money market fund.
(2) The figures for 31st July 2024 and 31st January 2025 have been
restated to include the Level 2 investments.
(3) Consists only of holdings in Tennants Consolidated Limited
(ordinary shares and preference shares), an unquoted stock, which is still
held at 31st July 2025.
A reconciliation of the fair value measurements using valuation techniques and
non-observable data (Level 3) is set out below.
Six months ended Six months ended Year ended
31st July 2025 (Unaudited) 31st July 2024 (Unaudited) 31st January 2025 (Audited)
Fixed Fixed Fixed
Equity Interest Equity Interest Equity Interest
Investments Investment Total Investments Investment Total Investments Investment Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Level 3
Opening balance 6,288 94 6,382 6,116 94 6,210 6,116 94 6,210
Change in fair (977) - (977) 172 - 172 172 - 172
value of
unquoted
investment
during the
period/year
Closing 5,311 94 5,405 6,288 94 6,382 6,288 94 6,382
balance
8. Analysis of changes in net debt
Interest and
As at amortisation As at
31st January 2025 Cash flows charges 31st July 2025
£'000 £'000 £'000 £'000
Cash and cash equivalents
Cash at bank 20,245 (19,995) - 250
Current asset investments(1) 36,903 3,951 - 40,854
57,148 (16,044) - 41,104
Borrowings
Debentures falling due after more than
one year (178,351) 5,441 (5,489) (178,399)
Privately placed loan notes due after more (149,693) 1,455 (1,459) (149,697)
than one year
Bank overdraft interest(2) - 8 (8) -
(328,044) 6,904 (6,956) (328,096)
Net debt (270,896) (9,140) (6,956) (286,992)
( )
(1) JPMorgan GBP Liquidity Fund, a money market fund.
(2) A settlement overdraft is available from the custodian to cover
timing differences between settlement of cash inflows and outflows. Bank
overdraft interest is charged by the custodian when overdrawn. The Company
does not utilise an overdraft for the purpose of long-term borrowing.
JPMORGAN FUNDS LIMITED
20th October 2025
For further information, please contact:
Sachu Saji
For and on behalf of
JPMorgan Funds Limited
Telephone: 0800 20 40 20 or or +44 1268 44 44 70
E-mail: jpmam.investment.trusts@jpmorgan.com
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.
ENDS
A copy of the Half Year Report will be submitted to the National Storage
Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The Half Year Report will also shortly be available on the Company's website
at www.mercantileit.co.uk where up to date information on the Company,
including daily NAV and share prices, factsheets and portfolio information can
also be found.
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