REG - Merchants Trust. - Final Results
09/04/2025 07:00
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RNS Number : 2126E Merchants Trust PLC 09 April 2025
For immediate release
8 April 2025
THE MERCHANTS TRUST PLC
LEI: 5299008VJFXCUD2EG312
FINAL RESULTS FOR THE YEAR ENDED 31 JANUARY 2025
The following comprises extracts from the company's Annual Report for the year
ended 31 January 2025. 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
UK Governance - Global Reach
Welcome to the Merchants Trust Annual Report for the financial year ending 31
January 2025.
In a period marked by uncertainty in capital markets, I would like to take
this opportunity to highlight one of the key advantages of investing in a
portfolio of UK-listed shares, such as Merchants Trust, for the long term.
Many of the businesses in which we invest have substantial global exposure,
generating significant revenue from markets around the world, and several are
recognised global leaders in their respective sectors. While we also hold some
companies with a more domestic focus, even a considerable number of mid-cap
stocks have multinational operations or global distribution models. These
companies derive a significant portion of their revenues - and profits - from
outside the UK.
It is important to remember that being UK-listed does not mean a company's
fortunes are tied solely to the UK economy. This is particularly relevant at a
time, such as now, when international investors, and sometimes even UK
investors, are gloomy about the domestic economic outlook.
The global exposure of our holdings is evident in the examples provided on the
inside front cover of the Annual Report. While consolidated revenue data for
the entire portfolio is not readily available due to the differing reporting
standards of portfolio companies, the global reach of our investments is
clearly shown in these examples.
Importantly, a UK listing places these companies under one of the world's most
rigorous governance frameworks, which offers several advantages, including
enhanced transparency, robust shareholder protection, a lower risk of
corporate failure, and alignment with ESG (Environmental, Social, and
Governance) principles. As illustrated on page 24 in the Annual Report, our
investment manager Allianz Global Investors (AllianzGI) voted against only 6%
of resolutions at UK general meetings last year, compared to over 30% in
markets like the US, highlighting the strength of UK governance standards.
In summary, Merchants' shareholders get the benefit of investing in companies
with a UK listing at the same time as investment exposure to some of the
world's best companies with revenues from around the globe.
Optimism Shifts to Uncertainty
The past year for UK stock market investors can be characterised as a tale of
two halves. The first half was marked by optimism, which buoyed market
performance, only for the second half to see a retreat as investor sentiment
soured due to mounting uncertainties about the business environment and global
economic outlook.
The election of a new UK Government in July, which secured a strong mandate,
sparked a renewed sense from domestic and international investors that the
attractively priced UK market was 'investible' again. However, the new Labour
government faced early setbacks, grappling with fiscal policy decisions and a
series of unpopular monetary policies. This, in turn, created market jitters
and reignited concerns. Furthermore, while the global economic background had
been promising mid-year, the prospects for growth, inflation containment, and
falling interest rates became uncertain. As is often the case, markets had
priced in much of the positive news early in the year, leaving them vulnerable
to negative developments.
Investment Performance
The long-term performance of the Merchants Trust portfolio has remained
strong, meeting shareholder objectives by delivering solid capital returns and
rising income. This has been achieved through a value-based investment
approach, where we seek well-managed companies with strong prospects, trading
at attractive valuations. Your board is confident that, over the medium term,
this approach will continue to yield solid returns.
Over the year, the FTSE All-Share Index delivered an impressive +17.1% total
return. While this was a strong absolute return when compared to many regional
peers, it lagged significantly behind the strong performance of the tech-heavy
US market. In particular, the US technology sector produced nearly twice the
returns of the UK market, albeit with greater volatility.
Merchants Trust also achieved a positive and solid return of +13.5% on a total
return basis although it did not match the very strong UK market performance.
In his detailed commentary on page 16, our lead portfolio manager, Simon
Gergel, delves deeper into the reasons behind this, but in summary, the UK
market's leadership by large-cap stocks proved challenging for our portfolio.
The Merchants Trust portfolio, which is more heavily weighted towards mid- and
small-cap stocks, was affected by the market's favouring of larger companies.
In particular, during the second half of the year, when inflation and interest
rates did not fall as expected, concerns over government fiscal policy led UK
investors to shy away from smaller companies that were seen as more exposed to
domestic economic fluctuations. Instead, investors were attracted to larger
companies within the index. Additionally, there was a continued trend of UK
investors shifting capital out of domestic equities and into overseas markets,
particularly the US.
While Merchants Trust does maintain a significant exposure to the larger
companies in the index, our investment philosophy prioritises value. This
leads to a larger allocation in mid- and small-cap stocks, which tend to be
more domestically focused and cyclical in nature. As equity markets during
this period were driven by momentum, growth, and technology stocks, these
smaller companies underperformed.
Income
Income from Merchants' investment portfolio saw a modest year-on-year decline
from the record year in 2024, with revenue earnings per ordinary share at
29.4p (2024: 30.5p), representing a 3.6% reduction.
Despite this, earnings fully covered the total proposed and declared dividends
for the year, allowing for a small addition to revenue reserves, which stood
at 18.8p per ordinary share at year-end.
Shareholders will appreciate that one of the key advantages of the investment
trust structure is its ability to smooth income distributions-drawing on
reserves during challenging market conditions and replenishing them in
stronger periods. It is encouraging to see that, following the Board's
strategic use of reserves to sustain dividends through the COVID-19 period, we
have now been able to rebuild reserves over recent years. (see chart of
reserve accumulation on page 6 in the Annual Report)
43 years of dividend growth
The Board proposes a final dividend of 7.3p per share for shareholder approval
at Merchants' upcoming AGM on 20 May 2025. If approved, the dividend will be
paid on 29 May 2025 to shareholders on the register at the close of business
on 22 April 2025, with an ex-dividend date of 17 April 2025. A Dividend
Reinvestment Plan (DRIP) is available, with an election deadline of 7 May
2025.
This brings the total proposed dividend for the year to 29.1p (2024: 28.4p),
representing a 2.5% increase over the previous year. Notably, this marks
Merchants' 43rd consecutive year of dividend growth, reinforcing our position
as an Association of Investment Companies' (AIC) Dividend Hero.
We believe it is essential to highlight the critical role that income plays in
overall total returns. While this year's total return fell short of the
benchmark, we have delivered both a meaningful capital return and another year
of consecutive dividend growth, providing shareholders with a competitive
level of income. Looking ahead, we remain confident that our current
positioning will generate strong total return above the benchmark. However,
our commitment to delivering a high and rising income remains a core priority,
as we recognise its importance to Merchants' shareholders.
Share price relative to Net Asset Value (NAV) and the generation of demand
As shareholders may be aware, Merchants' shares have been trading at a
discount to NAV toward the end of the reporting period and into the new
financial year. This follows an extended period where the company's shares
consistently traded at or above NAV, allowing us to issue additional shares in
response to strong investor demand.
In light of this, we are actively working with the manager to ensure that
appropriate measures are in place to promote Merchants through targeted sales
and marketing efforts. The Board is aware that share buybacks can help to
manage the discount and will continue to assess these options carefully.
We believe that the emergence of a discount is primarily due to the
portfolio's relative short-term underperformance against the benchmark as
outlined earlier, and a general lack of appetite for UK Equities. However, the
Board remains confident in the manager's established investment approach,
which has delivered strong long-term results for shareholders. We firmly
expect that relative performance will improve over time.
Additionally, we encourage shareholders and investors to stay informed through
regular updates from our Investment Management team. These include the A
Value View podcast, available on our website as well as on major platforms
such as Spotify, Apple Podcasts, and Google Podcasts.
Shareholders will be pleased to note that the Company's ongoing expenses
charge has decreased to 0.52% of the average net asset value over the year
(2024: 0.55%).
Gearing Strategy and Refinancing
Merchants employs gearing within the portfolio, based on the belief that, as
long as the manager is confident in generating returns above the cost of debt,
it can enhance long-term performance in both income and capital growth.
The manager views gearing as a structural component of the portfolio
management strategy rather than a tactical tool to respond to short-term
market movements. While gearing can amplify gains in rising markets, it can
also magnify losses during market downturns.
Currently, our gearing level stands at 11.9%, placing it in the lower half of
our policy range (10%-25%, see page 50 in the Annual Report). Gearing is
financed through borrowings, and with our Revolving Credit Facility (RCF)
maturing towards the end of the financial year under review, we have
successfully completed a refinancing process.
In December 2024, we announced the issuance of two £25 million fixed-rate,
15-year secured private placement notes at a coupon of 5.91%, raising a total
of £50 million. This new borrowing extends the weighted average duration of
our drawn debt from 10.6 years to 16.4 years, while the overall average cost
of debt remains at 5.2%.
Board
As shareholders are aware, the board plays a vital role in overseeing the
governance of the company. This includes overseeing our investment manager
AllianzGI, ensuring effective communication with shareholders, maintaining
robust financial processes and reporting, and fulfilling our responsibilities
related to the stock exchange listing. The Merchants Trust has been fortunate
over the years to attract a high calibre of directors who have contributed
significantly to its success.
In keeping with good governance practices, our directors typically serve a
maximum of nine years on the board. Later in 2025, Timon Drakesmith will reach
this milestone, and he will therefore step down at the AGM on 20 May 2025. The
board has already initiated the process of identifying a new director to
replace him and has appointed an independent executive search firm to assist
in this important task.
I would like to take this opportunity to express my sincere thanks to Timon
for his valuable contribution over the years. His excellent leadership
Chairman of the Audit Committee and his guidance and support to me personally
have been greatly appreciated. Timon's insightful and constructive input to
the board will be sorely missed. Mal Patel, who has served on the board since
March 2024, has agreed to become Chairman of the Audit Committee when Timon
steps down.
2025 Annual General Meeting
The 2025 Annual General Meeting (AGM) of the Company will be held at Grocers'
Hall on Tuesday, 20 May. Full details can be found in the Notice of Meeting on
page 113 in the Annual Report. This year marks a significant milestone for
Merchants, as it will be the first AGM where shareholders can choose to attend
either in person or online. Further details on the event and how to register
for online participation are available in the Notice of Meeting on page 116 in
the Annual Report.
As always, I would like to remind shareholders of their right to vote on key
matters affecting Merchants, such as the renewal of share issuance authorities
and the appointment of directors. Shareholder voting is a fundamental aspect
of an investment trust, and I strongly encourage all shareholders to exercise
this right and have their voices heard. Please note that voting at the AGM
will be conducted by poll, and there will be no live voting functionality for
those attending online. Shareholders are therefore encouraged to submit their
votes in advance using the proxy voting process.
There have been ongoing improvements in how investment platforms facilitate
shareholder voting for nominee holders. Many platforms now provide better
access to voting information and have made the process more straightforward.
If you hold your Merchants shares through a platform that offers voting
opportunities, we strongly encourage you to take advantage of this and
participate in the decision-making process.
Additionally, for shareholders investing via a platform who may be unaware, it
is possible to attend the AGM in person. To do so, you simply need to request
a 'Letter of Representation' from your platform, which will enable you to
register for in-person or online attendance.
We also commend and fully support the AIC My Share, My Vote campaign, which
aims to improve voting rights for retail shareholders holding shares through
investment platforms or nominee services. The campaign advocates for changes
in company law to enhance shareholder enfranchisement. More details can be
found at www.theaic.co.uk/my-share-my-vote.
Outlook
As ever, it remains challenging to predict when investor interest will return
to the UK stock market, when UK valuations will re-rate to more "normal"
levels, or where markets will stand in 12 months' time. In theory, the recent
sharp sell-off in equity markets, led by the high-growth and technology stocks
in the US, could serve as a catalyst, prompting investors to broaden their
horizons and seek out quality and value - themes we believe would benefit our
portfolio's performance. However, we approach this possibility with humility,
as we have made similar observations before. Investing is never
straightforward, and it is rarely predictable.
The new US administration marks a significant shift, not only in global
geopolitics, with Ukraine and the Middle East continuing to dominate
headlines, but also in areas requiring the close attention of our manager.
These include radical changes in trade and tariff policies, which will have
implications for inflation and interest rate decisions, and global growth and
profit outlooks. Domestically, following a Labour government's first budget,
which many commentators viewed as challenging for UK businesses, the market
will be keenly focused on the fiscal and monetary policy actions of the UK
Chancellor throughout 2025.
So, is this the right time to be a patient contrarian investor? Our manager
believes that many opportunities exist to invest in well-managed, financially
strong companies on attractive valuations. This approach lies at the heart of
our investment strategy which has delivered solid long-term returns and rising
dividends for shareholders over the years. Your board continues to believe
that Merchants is currently well placed and we are optimistic regarding our
potential to continue meeting Merchants' long-term objectives for
shareholders.
Thank you, as always, for your continued support. I look forward to seeing
many of you at our AGM in May.
Colin Clark
Chairman
8 April 2025
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 55 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 77 of the Annual Report.
Principal risks
The principal risks are now considered to be emerging risks, followed by the
risks relating to investment strategy and investment performance. Those
identified as having the highest impact and the greatest likelihood are the
following:
· Geopolitical.
· Climate.
Some principal risks have been assessed as being as likely to occur as last
year.
· 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 2025
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 66 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
8 April 2025
PORTFOLIO BREAKDOWN at 31 January 2025
Name Principal Activities Value £'000s % of listed holdings Benchmark weighting
British American Tobacco Tobacco 47,284 4.9 2.6
GSK Pharmaceuticals & Biotechnology 46,576 4.9 2.3
Shell Oil, Gas & Coal 35,644 3.7 6.7
Lloyds Banking Group Banks 35,522 3.7 1.5
BP Oil, Gas & Coal 32,372 3.4 2.7
DCC Industrial Support Services 30,380 3.2 0.2
WPP Media 28,770 3.0 0.3
Rio Tinto Industrial Metals & Mining 28,612 3.0 2.1
Tate & Lyle Food Producers 28,120 2.9 0.1
Inchcape Retailers 27,000 2.8 0.1
Barclays Banks 25,691 2.7 1.7
SSE Electricity 25,362 2.7 0.7
National Grid Gas, Water & Multiutilities 23,425 2.5 1.9
IG Group Investment Banking & Brokerage 23,386 2.5 0.1
Legal & General Life Insurance 22,037 2.3 0.6
Barratt Redrow Household Goods & Home Construction 22,006 2.3 0.2
Pets at Home Group Retailers 21,677 2.3 0.0
Drax Group Electricity 19,637 2.1 0.1
Whitbread Travel & Leisure 19,410 2.0 0.2
Imperial Brands Tobacco 18,904 2.0 0.9
Man Group Investment Banking & Brokerage 18,488 1.9 0.1
Land Securities Group Real Estate Investment Trusts 17,910 1.9 0.2
Dowlais Group Automobiles & Parts 17,278 1.8 0.0
Harbour Energy Oil, Gas & Coal 17,176 1.8 0.1
Energean Oil, Gas & Coal 16,926 1.8 0.1
Unilever Personal Care, Drug & Grocery Stores 16,675 1.7 4.6
Morgan Advanced Electronic & Electrical Equipment 16,411 1.7 0.0
Grafton Group Industrial Support Services 15,841 1.7 0.1
Assura Real Estate Investment Trusts 15,725 1.6 0.0
Unite Group Real Estate Investment Trusts 15,032 1.6 0.1
Burberry Group Personal Goods 14,900 1.6 0.2
Bellway Household Goods & Home Construction 14,462 1.5 0.1
OSB Group Finance & Credit Services 12,747 1.3 0.1
Marshalls Construction & Materials 12,570 1.3 0.0
Entain Travel & Leisure 12,390 1.3 0.2
Aena(1) Industrial Transportation 11,333 1.2 -
SCOR(1) Non-Life Insurance 11,309 1.2 -
Bank of Ireland Group(1) Banks 11,277 1.2 -
Haleon Pharmaceuticals & Biotechnology 11,238 1.2 1.2
Lancashire Holdings Non-Life Insurance 11,176 1.2 0.1
Conduit Holdings Non-Life Insurance 10,783 1.1 -
Atalaya Mining Precious Metals & Mining 10,062 1.1 -
PZ Cussons Personal Care, Drug & Grocery Stores 9,327 1.0 0.0
Next Retailers 8,957 0.9 0.5
Tesco Personal Care, Drug & Grocery Stores 8,747 0.9 1.0
Close Brothers Group Banks 8,704 0.9 0.0
Keller Construction & Materials 8,546 0.9 0.0
SThree Industrial Support Services 8,312 0.9 0.0
DFS Furniture Retailers 7,395 0.8 0.0
Norcros Construction & Materials 6,675 0.7 0.0
CLS Holdings Real Estate Investment & Services 5,184 0.5 0.0
XP Power Electronic & Electrical Equipment 4,917 0.5 0.0
Duke Royalty Finance & Credit Services 4,226 0.4 -
Total Invested Funds 954,514 100.0
(1) International stock
Written Call Options
As at 31 January 2025, the market value of the open option positions was
£(238,500) (2024: £(56,825)), resulting in an underlying exposure to 1.48%
of the portfolio (valued at strike price).
INCOME STATEMENT
for the year ended 31 January 2025
2025 2025 2025 2024 2024 2024
Revenue Capital Total Return Revenue Capital Total Return
£'000s £'000s £'000s £'000s £'000s £'000s
Gains (losses) on investments held at fair value through profit or loss - 66,566 66,566 - (69,095) (69,095)
Losses on derivatives - (202) (202) - (20) (20)
Gains (losses) on foreign currencies - 43 43 - (58) (58)
Income 48,482 - 48,482 49,563 - 49,563
Investment management fee (1,160) (2,153) (3,313) (1,093) (2,031) (3,124)
Administration expenses (1,108) (4) (1.112) (1,229) (4) (1,233)
Profit (loss) before finance costs and taxation 46,214 64,250 110,464 47,241 (71,208) (23,967)
Finance costs: interest payable and similar charges (2,009) (3,648) (5,657) (1,954) (3,549) (5,503)
Profit (loss) on ordinary activities before taxation 44,205 60,602 104,807 45,287 (74,757) (29,470)
Taxation (534) - (534) (778) - (778)
Profit (loss) after taxation attributable to ordinary shareholders 43,671 60,602 104,273 44,509 (74,757) (30,248)
Earnings (loss) per ordinary share (basic & diluted) 29.43p 40.84p 70.27p 30.53p (51.28p) (20.75p)
Dividends in respect of the financial year ended 31 January 2025 total 29.10p
(2024: 28.40p), amounting to £43,184,000 (2024: £41,916,000). Details are
set out in Note 6 on page 97 in the Annual Report.
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.
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 January 2025
Called up Share Capital Capital Reserve Revenue Total
Share Capital Premium Redemption £'000s Reserve £'000s
£'000s Account Reserve £'000s
£'000s £'000s
37,081 228,174 293 495,155 26,819 787,522
Net assets at
1 February 2024
Revenue profit - - - - 43,671 43,671
Dividends on ordinary shares - - - - (42,576) (42,576)
Unclaimed dividends - - - - 26 26
Capital profit - - - 60,602 - 60,602
Shares issued during the year 25 552 - - - 577
Net assets at 37,106 228,726 293 555,757 27,940 849,822
31 January 2025
35,034 184,239 293 569,912 22,897 812,375
Net assets at
1 February 2023
Revenue profit - - - - 44,509 44,509
Dividends on ordinary shares - - - - (40,638) (40,638)
Unclaimed dividends - - - - 51 51
Capital loss - - - (74,757) - (74,757)
Shares issued during the year 2,047 43,935 - - - 45,982
Net assets at 37,081 228,174 293 495,155 26,819 787,522
31 January 2024
BALANCE SHEET
at 31 January 2025
2025 2025 £'000s 2024 £'000s
£'000s
Fixed assets
Investments held at fair value through profit or loss 954,514 874,668
Current Assets
Other receivables 1,891 1,923
Cash at bank and in hand 15,604 22,886
17,495 24,809
Current Liabilities
Other payables (5,167) (45,032)
Derivative financial instruments (239) (57)
(5,406) (45,089)
Net current assets (liabilities) 12,089 (20,280)
Total assets less current liabilities 966,603 854,388
Creditors: amounts falling due after more than one year (116,781) (66,866)
Total net assets 849,822 787,522
Capital and Reserves
Called up share capital 37,106 37,081
Share premium account 228,726 228,174
Capital redemption reserve 293 293
Capital reserve 555,757 495,155
Revenue reserve 27,940 26,819
Equity shareholders' funds 849,822 787,522
Net asset value per Ordinary share 572.6p 530.9p
The financial statements of The Merchants Trust PLC on pages 88 to 91 in the
Annual Report were approved and authorised for issue by the board of directors
on 8 April 2025 and signed on its behalf by:
Colin Clark
Chairman
CASH FLOW STATEMENT
For the year ended 31 January 2025
2025 2024
£'000s £'000s
Operating activities
Profit (loss) before finance costs and taxation(1) 110,464 (23,967)
(Less) add: (gains) losses on investments held at fair value (67,746) 67,949
Add: losses on derivatives 182 20
(Less) add: (gains) losses on foreign currency (43) 58
Proceeds from special dividend credited to capital(2) 565 -
Purchase of fixed asset investments held at fair value through profit or loss (221,421) (242,189)
Sales of fixed asset investments held at fair value through profit or loss 212,511 211,377
Transaction costs (1,180) (1,146)
Decrease (increase) in other receivables 72 (24)
(Decrease) increase in other payables (184) 60
Less: Overseas tax suffered (534) (778)
Net cash inflow from operating activities 32,686 11,360
Financing activities
Interest paid (5,845) (5,233)
Issue costs in relation to the 5.91% Fixed Rate Notes 2040 (150) -
Proceeds from 5.91% Fixed Rate Notes 2040 A 25,000 -
Proceeds from 5.91% Fixed Rate Notes 2040 B 25,000 -
Repayment of Revolving Credit Facility(3) (42,000) -
Dividends paid on cumulative preference stock (43) (43)
Dividends paid on ordinary shares (42,576) (40,638)
Unclaimed dividends over 12 years 26 51
Share issue proceeds 577 45,982
Net cash (outflow) inflow from financing activities (40,011) 119
(Decrease) increase in cash and cash equivalents (7,325) 11,479
Cash and cash equivalents at the start of the year 22,886 11,465
Effect of foreign exchange rates 43 (58)
Cash and cash equivalents at the end of the year 15,604 22,886
Comprising:
Cash at bank and in hand 15,604 22,886
(1) Cash inflow from dividends was £46,700,000 (2024: £47,137,000) and cash
inflow from interest was £280,000 (2024: £409,000).
(2) Tyman dividend paid in relation to the acquisition by Quanex Building
Products.
(3) Revolving Credit Facility drawdowns and repayments are presented on a net
basis.
Notes
Note A
The financial statements have been 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 July 2022.
Note B
The earnings per ordinary share is based on a weighted number of shares
148,372,564 (2024: 145,769,940) ordinary shares in issue.
Note C
In order to better reflect the activities of an investment trust company, and
in accordance with guidance issued by the AIC, supplementary information which
analyses the Income Statement between items of revenue and capital nature has
been presented alongside the Income Statement. In accordance with the
company's Articles of Association, net capital returns may be distributed by
way of dividend.
Note D
The directors believe that it is appropriate to continue to adopt the going
concern basis in preparing the financial statements as the assets of the
company consist mainly of securities, which are readily realisable and
significantly exceed liabilities. Accordingly, the directors believe that the
company has adequate financial resources, to continue in operational existence
for the foreseeable future. The directors have also considered the risks and
consequences of unanticipated shocks on the company, including geopolitical
and macroeconomic events and have concluded that the company has the ability
to continue in operation and meet its objectives for twelve months after the
approval of the financial statements.
Note E
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.
Note F
2025 2024
£'000s £'000s
Dividends paid on ordinary shares
Third interim dividend 7.1p paid 14 March 2024 (2023 - 6.9p) 10,531 9,669
Final dividend 7.1p paid 22 May 2024 (2023 - 7.0p) 10,531 10,115
First interim dividend 7.2p paid 22 August 2024 (2023 - 7.1p) 10,679 10,412
Second dividend 7.3p paid 15 November 2024 (2023 - 7.1p) 10,835 10,442
42,576 40,638
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 103 of
the Annual Report - Statement of Accounting Policies). Details of these
dividends are set out below.
2025 2024
£'000s £'000s
Third interim dividend 7.3p paid 19 March 2025 (2024: 7.1p) 10,835 10,531
Final proposed dividend 7.3p payable 29 May 2025 (2024: 7.1p) 10,835 10,531
21,670 21,062
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 G
Post Balance Sheet events:
Since the year end no further shares have been issued, as at 8 April 2025.
Note H
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 2025 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 2024 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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