Final Results
04/04/2024 07:00
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RNS Number : 2398J Merchants Trust PLC 04 April 2024
LEI: 5299008VJFXCUD2EG312
THE MERCHANTS TRUST PLC
Final Results for the year ended 31 January 2024
The following comprises extracts from the company's Annual Report for the year
ended 31 January 2024. The full Annual Report is being made available to be
viewed on or downloaded from the company's website at www.merchantstrust.co.uk
(http://www.merchantstrust.co.uk) . Copies will be posted to shareholders
shortly.
MANAGEMENT REPORT
Chairman's Statement
Dear Shareholder
The Merchants Trust was established in 1889, so in 2024 we mark the one
hundred and thirty fifth anniversary. We are all proud to be involved with a
company that has not just endured for such a long time, but remains relevant
to shareholders today. Merchants is one of the oldest listed investment
trusts. Our name, as with some of our eldest peers, hints at our history and
origins and Merchants was originally incorporated to invest in railroad assets
in the burgeoning North American market. One of the most important factors in
Merchants success over such an extended period of time has been its
adaptability and its continued focus on the needs of investors and an ability
to navigate investment markets to continue to deliver attractive investment
returns.
Merchants shareholders have witnessed both World Wars, many smaller scale
conflicts, and significant geopolitical and economic shifts in the world.
During the past 42 years, including the proposal this year, I am proud to
report that the company has managed to provide a rising dividend every year.
Whilst investing is never 'easy', the financial year to the end of January
2024 was especially challenging. Some days heralded recovery and others felt
like economies and markets were falling badly backwards. The newsworthy events
of 2023 could justify an article in their own right and included (overseas)
bank failures, equal measures of utopian and dystopian views of a future
shaped by AI, war & conflict (sadly now more than one major ongoing
conflict) and natural disasters. Geopolitics often felt 'on the brink', but we
seem at least to have stayed just the right side of the line for now, to avoid
wider global involvement. Some events affect markets more than others and
Merchants' lead portfolio manager, Simon Gergel, reflects on the noteworthy
events from a financial markets perspective in his Portfolio Manager's Report
starting on page 18 of the Annual Report.
The market backdrop was generally one of concern over inflation and how
central banks would use interest rates to control it, but at the same time
maintain growth. Bond markets reflected the volatility of investor's
expectations and risk appetite oscillated during the year. In turn this drove
equity market fluctuation. For global investors the year was positive, though
those gains were generally narrow and led by a small number of US tech stocks,
particularly on the back of 'AI fever' triggered by the launch of Chat GPT's
GPT-4 model in March. A new narrative for future economic development was born
at that point, and markets followed it with eagerness.
The UK market was not buoyed in the same way by Tech and AI stocks. Its
returns were more muted and produced only a modest positive total return. This
positive total return was a great example of how dividends can make a
difference. The FTSE All-Share started the period at 4,255.7 and ended at
4,173.1 - a fall of 1.9%. Total return however, including dividends of 3.8%,
produced a positive total return of 1.9%.
Performance
Even though the UK market finished the period marginally up on a total return
basis as noted above, Merchants' Net Asset Value total return for the year
unfortunately lagged the benchmark, recording a fall of 3.1%. This is
obviously very disappointing and the board has engaged with the portfolio
manager and the AllianzGI team to understand the contributions, both positive
and negative, to this result. Whilst we clearly need to monitor short term
performance, this disappointing result comes after two very good years when
the portfolio outperformed the benchmark and we recognise that the longer term
(3 and 5 year) track record of the trust is extremely strong.
Shareholders will be aware that the UK stock market is still a mix of both
lowly priced stocks some of which offer 'value' and higher rated 'growth'
stocks. Unfortunately, the period under review was a difficult one for the
more modestly priced stocks that our manager tends to favour due to his
'value' investment style. Whilst this produced a relatively disappointing
1-year picture for Merchants shareholders, the longer-term record remains
strong, with outperformance of both the industry benchmark, as well as the
sector peer average, over 3 and 5 years.
For a value-oriented investor, a run of poor relative performance can often
reflect simple under-pricing of particular types of companies, or certain
cyclical sectors. With any disciplined, active management investment approach,
there will always be periods when it is difficult to outperform the benchmark
if the strongest performance comes from the areas of the market that do not
meet the portfolio manager's investment criteria. It should also be remembered
that a period such as the year to January 2024 can often be a time when the
best new ideas for investing are generated, often ahead of any improvement in
sentiment or cyclical upturn.
Despite short-term headwinds, we were delighted to collect the Citywire award
for Best UK Equity Income trust at their annual investment trust awards in
November. The award is based around 3-year performance as well as other
factors, and is therefore a welcome recognition of the returns to shareholders
over the long term.
The board remains confident that the tried and tested investment strategy
followed by the manager remains appropriate to meet Merchants' objectives for
shareholders over the long term.
Income
In terms of the income generated by the underlying portfolio, it was a strong
year with revenue earnings per ordinary share rising 6.3% to a record 30.5p
(2023: 28.7p) as dividend income received by the trust has fully recovered
from the impact of the pandemic. This meant the dividend declared for the year
was fully covered by earnings, as well as allowing the board to add 1.8p per
ordinary share to revenue reserves.
I have written before about the importance of investment trusts being able to
build revenue reserves in order to provide some protection against difficult
times. This was amply demonstrated during COVID years when our revenue
reserves built in good years enabled the board to maintain dividends to our
shareholders even though dividend receipts from the Merchants portfolio of
investments were weak. Now that dividend receipts from the portfolio have
recovered the board thinks it important that we should build up reserves once
again, as illustrated by the chart on page 6 of the Annual Report.
At the end of the financial year, the revenue reserve stands at 18.1p per
ordinary share.
Dividend
The board is pleased to propose a final dividend of 7.1p for shareholder
approval at Merchants' upcoming AGM on 16 May 2024. Subject to that approval,
that will mean a full year dividend of 28.4p (2023: 27.6p), a rise of 2.9%.
The annualised growth rate of the dividend paid by the trust over 42 years
stands at 6.4%, remaining well above the rate of inflation over that period
which stands at 3.8% annually as measured by the Consumer Prices Index (CPI)
despite the particularly high inflation numbers evident over the past two
years. The company continues to pay a high dividend, representing a yield of
some 5.2% at the period end. This remains well above the sector average
(4.5%), placing it in the top-ten yielders in the sector.
With 42 years of unbroken annual dividend rises, Merchants also retains its
place on the Association of Investment Companies' (AIC) Dividend Hero list -
those companies having managed to consistently raise their dividend for twenty
years or more.
Shareholder demand
During the year the company's shares traded at a premium to its Net Asset
Value for much of the time - averaging 0.9% for 2024 (2023: 1.0%) as demand
for the shares continued to be strong. This led Merchants to have a good
record of share issuance over the period (£46m) - something that was not
evident amongst the majority of our sector peers or, indeed, within the wider
investment trust landscape. The wider investment trust sector had an extremely
difficult 2023 as average discounts hit high levels not seen since the 2008
financial crisis. Interestingly, open ended UK Equity Income funds, continued
in aggregate to suffer further significant outflows.
Once again, I have written before about the attractiveness for the
shareholders of the trust of Merchants issuing the shares when they are
trading at a premium. Increasing the size of the trust in this way improves
the liquidity of the shares and spreads the costs of managing the portfolio
(many of which are fixed costs) over a bigger pool of assets.
We attribute the success of the company in issuing shares in large part to its
strong support amongst 'direct' private investors, the majority of whom now
tend to purchase their shares via the UK's so-called investment platforms.
There are numerous platforms, though there continue to be just a few very
dominant ones (generally, as well as on the Merchants' shareholder register).
During our annual strategy session we were interested to review a chart
showing the growth of platforms over time, as compared to shares held in
aggregate by Wealth Managers and Independent Financial Advisors and shares
held in aggregate by financial institutions. We felt this was an interesting
illustration of the way Merchants' shareholder register has changed over
recent years and therefore we have included this as a chart on page 10 of the
Annual Report.
We believe that our strong focus on providing a high and rising income stream
for investors, as well as long term capital growth, is a key attraction for
investors. Alongside that, Merchants retains a competitive ongoing charge of
0.55% for 2024 (2023: 0.56%).
We continue to support AllianzGI's sales and marketing efforts to introduce
Merchants to as wide an investor base as possible. Part of that programme
involves ensuring there are sufficient updates for existing and potential
shareholders within the year, in multiple formats such as written reports,
videos, podcasts, events, meetings and webinars.
Gearing
Merchants continues to employ gearing, believing it is additive to long term
performance in terms of both income and capital returns, so long as the
manager has confidence in being able to generate returns in excess of the cost
of the debt.
Currently our gearing level of 12.4% is in the lower half of the policy range
(10%-25%, see page 56 of the Annual Report) that we are happy to operate
within. The manager operates gearing generally as a structural element of the
portfolio management strategy, rather than a tactical allocation based on any
short-term market movements. Shareholders should remember that whilst gearing
can amplify returns in a rising market, it will also serve to exacerbate any
negative movements. During the course of 2024 we will be considering
refinancing or paying down our revolving credit facility, which expires in
January 2025.
Board
As part of the normal programme of board succession, there are two retirements
and two appointments which I must notify to shareholders. One of each happened
within the period, and a further of each happened after the reporting period.
Having attained nine years as a non-executive director of the Company, Mary
Ann Sieghart duly retired from the board on 25 January 2024, just before the
end of the financial year. Mary Ann witnessed a period of real transformation
for the company in terms of engagement with private shareholders - I would
like to thank Mary Ann for her contribution and wish her all the very best for
her future endeavours.
Sybella Stanley, who was the Senior Independent Director (SID), also attained
nine years as a non-executive director of the Company. She duly retired from
the board on 21 March 2024. I would like to thank Sybella for her outstanding
commitment as SID for the trust, her expertise in corporate strategy and
investment practice and to also wish her well for her future endeavours. Karen
McKellar became SID with effect from Sybella's retirement from the board.
Lisa Edgar joined as a non-executive director of the Company on 1 January
2024. Lisa was until very recently Chief Customer Officer on the Executive
Leadership Team at Saga PLC and is founder / CEO of the Big Window Consulting,
a consumer and B2B insight agency with considerable expertise in financial
services. Lisa became a member of the Audit Committee, Nomination Committee,
Management Engagement Committee and Remuneration Committee on appointment. In
a period where we look to the next stage in Merchants' development as a key
holding for the retail investor, Lisa's experience in consumer marketing
trends and practice will prove invaluable.
Mal Patel was appointed as a non-executive director of the Company on 1 March
2024. Mal is Head of Investor Relations at Spirax Group and has held senior
roles in IR and corporate development in a number of large UK companies. Mal
is a chartered accountant and he became a member of the Audit Committee,
Nomination Committee, Management Engagement Committee and Remuneration
Committee on appointment.
Investment manager
We first noted in 2022 that AllianzGI was pursuing an FCA authorisation for
AllianzGI UK as a UK entity and reported again last year that the
authorisation had been granted. The company's Alternative Investment Fund
Manager (AIFM) therefore subsequently became AllianzGI UK Limited in May 2023.
As noted in previous reporting, we view this change as being in the best
interests of Merchants' shareholders.
There was no change to the investment process, strategy or the teams involved
with managing Merchants as a result of the entity change, nor is it envisaged
that this would prompt any future changes.
AGM
Last year we were pleased to host the second physical AGM, welcoming back
shareholders in person, since the cessation of lockdown conditions. 2024 will
once again see the AGM being held at Grocers' Hall on Thursday 16 May and full
details can be found in the notice of meeting on page 126 of the Annual
Report.
As usual, 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 vote and all shareholders are therefore 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
open up shareholder access for nominee holders. Information is being made more
readily available by platforms to shareholders when companies have votes and
platforms are improving the ease with which shareholders can participate in
those votes. 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
As ever it is difficult to predict the 'macro' direction for economies and
markets. There are many factors which may influence short term sentiment and
consequential market movements and returns. However, fortunately, that is of
less consequence to the Merchants' investment strategy which is predicated on
good stock picking with a long-term time horizon - finding individual
companies which have good prospects, but which are trading below our manager's
estimation of their intrinsic worth.
The negative sentiment which has overshadowed the UK market in recent years
has led to a market which is lowly-rated by international comparison and by
extension, to a lowly-rated Merchants portfolio. With the manager's value
'tilt' in terms of share selection this has been a drag on recent performance
as noted earlier. Our investment managers, however have a strongly held 'glass
half full' attitude to the current UK market outlook. They remain optimistic
for the long-term for the UK market and believe that there is considerable
pent-up value in the market. That value, they believe, is both evident in the
aggregate valuation of the market compared to global peers, but also between
the more lowly-priced and the higher rated segments of the UK market.
We remain confident that the current investment approach is well suited to
meeting Merchants' stated objectives for shareholders over the long term.
Colin Clark
Chairman
3 April 2024
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 61 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 84 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:
· Emerging risks, such as significant geopolitical and economic
risks.
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 2024
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 72 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
3 April 2024
LISTED EQUITY HOLDINGS as at 31 January 2024
% of listed
Name Value (£'000) holdings Principal Activities
GSK 45,394 5.2 Pharmaceuticals & Biotechnology
Shell 35,579 4.1 Oil, Gas & Coal
British American Tobacco 32,973 3.8 Tobacco
BP 28,774 3.3 Oil, Gas & Coal
IG Group 27,548 3.1 Investment Banking & Brokerage
DCC 27,129 3.1 Industrial Support Services
SSE 26,539 3.0 Electricity
Barclays 25,751 2.9 Banks
Inchcape 25,347 2.9 Industrial Support Services
WPP 25,263 2.9 Media
Top Ten Holdings 300,297 34.3
Tate & Lyle 24,215 2.8 Food Producers
Rio Tinto 24,213 2.8 Industrial Metals & Mining
Drax Group 23,659 2.7 Electricity
Redrow 23,226 2.7 Household Goods & Home Construction
Lloyds Banking Group 22,544 2.6 Banks
Imperial Brands 21,599 2.5 Tobacco
National Grid 21,364 2.4 Gas, Water & Multiutilities
Unilever 19,850 2.3 Personal Care, Drug & Grocery Stores
Energean 19,360 2.2 Oil, Gas & Coal
Legal & General 18,870 2.2 Life Insurance
Land Securities Group 17,892 2.1 Real Estate Investment Trusts
Grafton Group 17,425 2.0 Industrial Support Services
Pets At Home Group 17,372 2.0 Retailers
Morgan Advanced 16,531 1.9 Electronic & Electrical Equipment
Man Group 16,104 1.8 Investment Banking & Brokerage
Tesco 15,763 1.8 Personal Care, Drug & Grocery Stores
Keller 15,215 1.7 Construction & Materials
Next 14,819 1.7 Retailers
Lancashire Holdings 14,774 1.7 Non-Life Insurance
SThree 13,351 1.5 Industrial Support Services
OSB Group 13,278 1.5 Finance & Credit Services
Bellway 13,156 1.5 Household Goods & Home Construction
Tyman 13,083 1.5 Construction & Materials
PZ Cussons 12,706 1.5 Personal Care, Drug & Grocery Stores
Haleon 12,378 1.4 Pharmaceuticals & Biotechnology
Conduit Holdings 12,125 1.4 Non-Life Insurance
Marshalls 11,671 1.3 Construction & Materials
Aena 10,788 1.2 Industrial Transportation
Close Brothers Group 9,919 1.1 Banks
Assura 9,799 1.1 Real Estate Investment Trusts
CRH 9,561 1.1 Construction & Materials
Entain 9,534 1.1 Travel & Leisure
SCOR 9,202 1.1 Non-Life Insurance
Atalaya Mining 7,634 0.9 Precious Metals & Mining
CLS Holdings 7,099 0.8 Real Estate Investment & Services
Admiral Group 7,030 0.8 Non-Life Insurance
DFS Furniture 6,437 0.7 Retailers
Diversified Energy Company 6,073 0.7 Oil, Gas & Coal
Norcros 5,667 0.6 Construction & Materials
XP Power 5,274 0.6 Electronic & Electrical Equipment
Duke Royalty 3,811 0.4 Investment Banking & Brokerage
Total Listed Equities 874,668 100.0
Written Call Options
As at 31 January 2024, the market value of the open option positions was
£(57,000) (2023: £(20,000)), resulting in an underlying exposure to 1.9% of
the portfolio (valued at strike price).
INCOME STATEMENT
for the year ended 31 January 2024
Revenue Capital Total Return
£'000s £'000s £'000s
Note C
Losses on investments held at fair value through profit or loss - (69,095) (69,095)
Losses on derivatives - (20) (20)
Losses on foreign currencies - (58) (58)
Income 49,563 - 49,563
Investment management fee (1,093) (2,031) (3,124)
Administration expenses (1,229) (4) (1,233)
Profit (loss) before finance costs and taxation 47,241 (71,208) (23,967)
Finance costs: interest payable and similar charges (1,954) (3,549) (5,503)
Profit (loss) on ordinary activities before taxation 45,287 (74,757) (29,470)
Taxation (778) - (778)
Profit (loss) after taxation attributable to ordinary shareholders 44,509 (74,757) (30,248)
Earnings (loss) per ordinary share (basic and diluted) 30.53p (51.28p) (20.75p)
BALANCE SHEET
at 31 January 2024
£'000s £'000s
Fixed assets
Investments held at fair value through profit or loss 874,668
Current assets
Other receivables 1,923
Cash at bank and in hand 22,886
24,809
Current liabilities
Other payables (45,032)
Derivative financial instruments (57)
(45,089)
Net current liabilities (20,280)
Total assets less current liabilities 854,388
Creditors: amounts falling due after more than one year (66,866)
Total net assets 787,522
Capital and Reserves
Called up share capital 37,081
Share premium account 228,174
Capital redemption reserve 293
Capital reserve 495,155
Revenue reserve 26,819
Equity shareholders' funds 787,522
Net asset value per ordinary share 530.9p
INCOME STATEMENT
for the year ended 31 January 2023
Revenue Capital Total Return
£'000s £'000s £'000s
Note C
Gains on investments held at fair value through profit or loss - 5,499 5,499
Gains on derivatives 538 538
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
£'000s £'000s
Fixed assets
Investments held at fair value through profit or loss 909,638
Current assets
Other receivables 1,899
Cash at bank and in hand 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
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 January 2024
Called up Share Premium Account Capital Redemption Reserve Total
Share £'000 £'000 Capital Revenue £'000
Capital Reserve Reserve
£'000 £'000 £'000
Net assets at 1 February 2023 35,034 184,239 293 569,912 22,897 812,375
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 31 January 2024 37,081 228,174 293 495,155 26,819 787,522
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
CASH FLOW STATEMENT
For the year ended 31 January 2024
2024 2023
£'000 £'000
Operating activities
(Loss) profit before finance costs and taxation* (23,967) 44,674
Add (Less): Losses (gains) on investments held at fair value 67,949 (7,305)
Add (Less): Losses (gains) on derivatives 20 (538)
Add: Special dividends credited to capital** - 3,472
Add: Losses on foreign currency 58 64
Purchase of fixed asset investments held at fair value through profit or loss (242,189) (300,664)
Sales of fixed asset investments held at fair value through profit or loss 211,377 208,995
Transaction costs (1,146) (1,806)
(Increase) decrease in other receivables (24) 383
Increase in other payables 60 67
Less: Overseas tax suffered (778) (605)
Net cash inflow (outflow) from operating activities 11,360 (53,263)
Financing activities
Interest paid (5,233) (3,641)
Drawdown on Revolving Credit Facility*** - 16,000
Dividends paid on cumulative preference stock (43) (43)
Dividends paid on ordinary shares (40,638) (36,248)
Unclaimed dividends over 12 years 51 87
Share issue proceeds 45,982 70,011
Net cash inflow from financing activities 119 46,166
Increase (decrease) in cash and cash equivalents 11,479 (7,097)
Cash and cash equivalents at the start of the year 11,465 18,626
Effect of foreign exchange rates (58) (64)
Cash and cash equivalents at the end of the year 23,886 11,465
Comprising:
Cash at bank and in hand 23,886 11,465
* Cash inflow from dividends was £47,137,000 (2023: £40,877,000) and cash
inflow from interest was £409,000 (2023: £90,000).
** Tate and Lyle Special dividend paid following the sale of a subsidiary.
*** 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
145,769,940 (2023: 134,599,189) 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.
Note E
2024 2023
£ £
Dividends paid on ordinary shares of 25p:
Third interim dividend 6.9p paid 15 March 2023 (2022 - 6.85p) 9,669 8,758
Final dividend 7.0p paid 26 May 2023 (2022 - 6.85p) 10,115 8,950
First dividend 7.1p paid 24 August 2023 (2022 - 6.85p) 10,412 9,208
Second dividend 7.1p paid 10 November 2023 (2022 - 6.85p) 10,442 9,332
40,638 36,248
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.
2024 2023
£ £
Third interim dividend 7.1p paid 14 March 2024 (2023: 6.9p) 10,531 9,669
Final proposed dividend 7.1p payable 22 May 2024 (2023: 7.0p) 10,531 9,809
21,062 19,478
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 no further shares have been issued, as at 3 April 2024.
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
(http://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 2024 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 2023 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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