RNS Number:6730I
Mithras Investment Trust PLC
13 March 2003
STOCK EXCHANGE ANNOUNCEMENT: 13 MARCH 2003
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
ANNOUNCEMENT OF UNAUDITED RESULTS
This preliminary announcement is prepared on the same basis as set out in the
report and accounts for the year ended 31 December 2001, except the Company has
adopted Financial Reporting Standard (FRS) 19 'Deferred Tax' this year; prior
year comparatives have been restated where necessary. The results and balance
sheet for the year ended 31 December 2002 are unaudited and do not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. The
statutory accounts have not yet been delivered to the Registrar. Full statutory
accounts for the period ended 31 December 2001 included an unqualified audit
report and were filed with the Registrar of Companies on 19 April 2002.
HIGHLIGHTS FOR THE YEAR ENDED 31 DECEMBER 2002
RETURN ON EQUITY*
Mithras Total Return* All-Share Index
Year ended 31 December 2002 (17.9%) (22.7%)
From flotation on 21 February 1994 to date 87.2% 47.7%
*Total return after tax on opening shareholders' funds
RESULTS AND DIVIDENDS
(Restated) % change
Year ended Year ended compared to
31 December 2002 31 December 2001 previous year
Core revenue #2.61 million #3.05 million (14.4%)
Net dividends per ordinary share
- final 1.80 pence 1.60 pence 12.5%
- special* 2.00 pence 1.80 pence 11.1%
Fully diluted net asset
value per share** 59.5 pence 75.0 pence (20.7%)
Diluted net asset
value per share 61.0 pence 78.3 pence (22.1%)
Mid market quoted share
price 38.5 pence 52.5 pence (26.7%)
* The special dividend declared in 2001 was in lieu of the 2002 interim
dividend and was paid in October 2002. The special dividend declared in 2002 is
in lieu of the 2003 interim dividend and is payable in October 2003.
** These numbers have included an accrual for the special dividend of 2.0 pence
per share (2001: 1.8 pence per share).
CHAIRMAN'S STATEMENT
OVERVIEW
Despite 2002 being a difficult year, Mithras realised #19.0 million of
investments, predominantly in mezzanine loans, and made #11.8 million of new
investments consisting of #6.6 million in mezzanine loans and #5.2 million in
unquoted equities. The Company has made good progress in increasing its equity
exposures and diversifying its mezzanine portfolio. The underlying trading
performance of the Company's equity portfolio has been satisfactory. It was
necessary to make substantial provisions in the mezzanine portfolio particularly
in regard to Interdean.
RESULTS AND DIVIDENDS
The Company's return on equity for the year was negative 17.9% (2001: negative
21.9%) compared to the Company's benchmark, the FTSE All Share Index of negative
22.7% (2001: negative 13.3%), giving an outperformance of 4.8%. As at 31
December 2002, the return since Mithras' flotation in February 1994 is 87.2%
against the benchmark return of 47.7%; over the period, Mithras has outperformed
the benchmark by 39.5%.
The Company's fully diluted net asset value, after proposed dividends, fell from
75.0 pence per share (restated) at the year end 2001 to 59.5 pence per share as
at 31 December 2002. The share price fell from 52.5 pence to 38.5 pence.
Despite the lower net asset value, the Company's revenue account was again
strong with return after tax of #2.0 million (2001: #1.9 million). Your Board
recommends a final dividend of 1.8 pence (2001: 1.6 pence) per share which, when
added to the 1.8 pence special dividend paid in October 2002 in lieu of an
interim dividend, represents a total dividend of 3.6 pence (2001: 5.1 pence)
paid for the year. The 3.6 pence paid for the year represents a yield of 8.4%
(2001: 7.5%) based on the average share price for the year.
The proposed final dividend, if approved by shareholders, will be paid on 13 May
2003 to shareholders on the register at the close of business on 21 March 2003.
As a result of the Company's higher revenue profits, the Board is again
recommending a special dividend of 2.0 pence per share to be paid on 24 October
2003 to shareholders on the register at the close of business on 19 September
2003. This special dividend, if approved by shareholders, will be paid in lieu
of the Company's 2003 interim dividend.
STRATEGY
Mithras performed well for the first few years after flotation by investing
predominately in mezzanine loans with capital growth provided by equity kickers.
In recent years the market has seen significant changes in deal structures.
Mezzanine loans, with attractive equity kickers that provide substantial capital
return, are less available. Current deal structures reduce or replace equity
kickers with rolled up interest which is payable on exit. This change is likely
to reduce significantly Mithras' potential for asset growth if the Company
continues to invest predominantly in mezzanine opportunities.
CHAIRMAN'S STATEMENT (CONTINUED)
As a result, in 2000 the Board decided to change the Company's investment policy
to permit it to invest up to 25% of its gross assets in unlisted equities. A
number of equity investments were made between 2000 and 2002, both direct and
via Legal & General Ventures' annual partnership LGV2.
In view of the encouraging signs following the introduction of unquoted equity
investment to the portfolio, the Company has committed to invest #7.5 million
during 2003 in Legal & General Ventures' annual partnership - LGV3. LGV aims to
invest in three to five unquoted equity investments annually. Of Mithras' #7.5
million commitment to the LGV2 Limited Partnership, #4.9 million has been
invested and there is an outstanding commitment of #1.2 million reserved for
follow on investment. Should this be fully drawn, the total equity of #13.6
million would then represent 20% of the Company's gross assets.
Your Board recommends that the Company continues to move towards a balanced
strategy and to increase the limit on investment in unquoted equities from 25%
to 50% of gross assets of the Company. This limit is only likely to be reached
gradually over the next five years. The Board believes that investment in
unquoted equities will increase total returns through higher capital growth
although lower income as equities tend to yield less than mezzanine investments.
Over time this may impact on the Company's dividend policy. A resolution
proposing this increase in the equity investment limit will be put to
shareholders for their approval at the Annual General Meeting.
MANAGER'S INVESTMENT IN MITHRAS SHARES
As the Company's warrants (the "Warrants") approach their final exercise date
(being 30 days after the date on which this year's Annual General Meeting is
held), the Executives of LGV, Mithras' Manager, are keen to demonstrate their
support for the Company and the on-going investment strategy. Accordingly,
subject to shareholder approval, they have agreed to exercise 1,478,875 Warrants
(most of which are to be acquired from Legal & General Assurance Society Limited
("LGAS")). LGAS will not exercise the balance of Warrants held by it. Subject to
the approval of the Panel on Takeovers and Mergers, the Company will send a
circular to its shareholders setting out the details of the proposed acquisition
and exercise of the Warrants and seek their approval.
PERSONAL EQUITY PLANS AND INDIVIDUAL SAVINGS ACCOUNTS
Mithras' ordinary shares currently satisfy the PEP and ISA rules. The directors
understand that the Company has operated in accordance with the requirements to
make it an eligible investment for PEP and ISA holders.
OUTLOOK
Despite difficult market conditions, which continue to have an impact on some of
the portfolio companies, the investments made in the last two years are
performing satisfactorily and some progress has been made on the remaining
portfolio.
The strategy of increasing equity investments is to place more emphasis on the
growth and value of the portfolio. The strategy for broadening the portfolio
spread and reducing high exposure to individual companies has continued to be
implemented. The outlook for the Mithras portfolio is positive despite the
uncertain economic environment.
Hamish Leslie Melville
13 March 2003
For further information please contact:
Clare Carson 020 7528 6883
CONSOLIDATED STATEMENT OF TOTAL RETURN
(INCORPORATING THE REVENUE ACCOUNT)
(Restated)
Year ended Year ended
31 December 2002 31 December 2001
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Losses on investments - (6,979) (6,979) - (11,606) (11,606)
Other losses - - - - (17) (17)
Income 6,750 - 6,750 8,987 - 8,987
Total gross return 6,750 (6,979) (229) 8,987 (11,623) (2,636)
Investment management fees (516) (516) (1,032) (650) (650) (1,300)
Other expenses (1,558) - (1,558) (1,837) - (1,837)
Net return before finance
costs and tax 4,676 (7,495) (2,819) 6,500 (12,273) (5,773)
Interest payable and
similar charges (2,063) - (2,063) (3,455) - (3,455)
Return on ordinary activities
before tax 2,613 (7,495) (4,882) 3,045 (12,273) (9,228)
Tax (charge)/credit on
ordinary activities (593) (201) (794) (1,134) 1,116 (18)
Return on ordinary activities
after tax for the year 2,020 (7,696) (5,676) 1,911 (11,157) (9,246)
Dividends in respect of
equity shares (1,530) - (1,530) (1,376) - (1,376)
490 (7,696) (7,206) 535 (11,157) (10,622)
Return per ordinary share
Basic (pence) 5.0 (19.1) (14.1) 4.8 (27.5) (22.7)
Diluted (pence)+ 5.0 (19.1) (14.1) - - -
Net asset value per share
Undiluted (pence)* 61.0 78.9
Diluted (pence)* 61.0 78.3
Fully diluted (pence)* 59.5 75.0
+ The diluted returns per share are equal to the basic returns per share,
because the share price is currently below the warrant exercise price.
* These numbers are prepared including an accrual for the special dividend of
2.0 pence per share (2001: 1.8 pence per share).
CONSOLIDATED BALANCE SHEET
(Restated)
31 December 2002 31 December 2001
#'000 #'000 #'000 #'000
Fixed asset investments 61,262 71,861
Current assets
Debtors 3,102 4,726
Cash at bank and in hand 1,385 2,041
4,487 6,767
Current liabilities
Creditors: amounts falling due
within one year (7,607) (46,858)
Net current liabilities (3,120) (40,091)
Total assets less current liabilities 58,142 31,770
Creditors: amounts falling due after more
than one year (33,578) -
Net assets 24,564 31,770
Capital and reserves
Called up share capital 805 805
Reserves
Share premium account 7,488 7,488
Warrant reserve 1,681 1,681
Capital reserve - realised 33,457 30,739
Capital reserve - unrealised (23,759) (13,345)
Revenue reserve 4,892 4,402
23,759 30,965
Shareholders' funds (all equity interests) 24,564 31,770
CONSOLIDATED CASH FLOW STATEMENT
31 December 2002 31 December 2001
#'000 #'000 #'000 #'000
Net cash inflow from operating activities 1,775 3,813
Returns on investments and servicing of finance
Interest paid (2,097) (3,694)
Tax received 1,115 117
Financial investment
Acquisition of investments (11,748) (22,519)
Disposal of investments 19,006 28,626
7,258 6,107
Equity dividends paid (1,369) (2,431)
Cashflow before use of liquid resources
and financing 6,682 3,912
Management of liquid resources
Disposal of bonds - 7,606
- 7,606
Financing
Issue of shares from
warrants exercised - 100
Buyback of warrants for cancellation - (14)
Term and other unsecured loans 9,762 25,517
Repayment of borrowings (17,112) (45,386)
(7,350) (19,783)
Decrease in cash (668) (8,265)
NOTES TO THE FINANCIAL STATEMENTS
1 PRINCIPAL ACCOUNTING POLICIES
(a) Accounting convention
The financial statements have been prepared under the historical cost convention
as modified by the revaluation of investments and in accordance with applicable
accounting standards and with the Statement of Recommended Practice for
Investment Trust Companies. The Company has adopted Financial Reporting Standard
(FRS) 19 "Deferred Tax" this year and prior year comparatives have been restated
where necessary. The impact of adopting FRS 19 on the 2002 results is an
increase to the tax charge of #386,000 (2001: #84,000) and to decrease return on
ordinary activities after tax by #386,000 (2001: #84,000).
(b) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
Mithras and its subsidiary Mithras Investments Limited ("MIL").
(c) Foreign currency translation
Assets and liabilities denominated in foreign currencies are translated at the
rates of exchange ruling at the balance sheet date. Any exchange differences on
revenue items are dealt with through the revenue account. Exchange differences
arising on capital items are dealt with in the capital reserve. Exchange
differences on foreign currency borrowings to the extent that they are used to
finance or provide a hedge against foreign currency investments are taken
directly to capital reserve, together with the exchange differences on the
carrying amount of the related investment.
(d) Investment income
Interest income is accounted for on an accruals basis except where there is
uncertainty as to whether the interest will be received. Franked investment
income is recognised on the appropriate ex-dividend date.
Income distributions received from limited partnership funds are recognised in
the revenue account.
Capitalised and rolled up income are accounted for on an effective yield basis.
Capitalised interest is added to the cost of the investment at the end of each
relevant interest period. Rolled up interest is accrued and shown in debtors
until the earlier of the sale or maturity of the investment.
(e) Valuation policy
Investments are valued in accordance with the valuation policies set out below:
1. Where an external quotation is available (eg, full listing, AIM,
etc.) the mid-market value is used. This may be modified (downwards only)
according to the reason for holding the investment, the size of the investment
and the size of reported bargains.
2. Where no such external quotation is available, but other
independent indicators are available (eg an auditor's valuation published by the
company for the purpose of fixing the price of employees options or other share
prices) this may be used in preference to internally generated valuations.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
3. Unquoted preference shares and loan stocks are valued at
directors valuation, unless there are reasons, eg non-payment of dividends or
interest, that indicate that a provision should be made.
4. Where no such external quotation or indicator is available the
valuation of equity stocks is determined by whichever the following methods is
appropriate:-
4.1 The valuation of a stock is at cost until the first audited
annual statements are available, unless one of the above independent indicators
becomes available in the meantime or there are reasons (e.g. non-payment of
dividends or poor performance) that indicate a provision should be made.
4.2 In certain circumstances where a valuation calculated with
reference to profits is inappropriate the holding may be valued on a net assets
basis which may be discounted.
4.3 After the first annual audited results following the acquisition
of the investment are available, if the investee company is profitable its
valuation is determined by the following formula:-
Profit before interest and tax
Less full tax charge
Fully taxed notional ungeared profit
Multiplied by a discounted sector P/E
Gross capitalisation
Less net debt and preference shares
Available to fully diluted ordinary shares
Less illiquidity discount
Expressed per ordinary share
Sector P/E ratios are usually discounted. The illiquidity discount is usually
33.3%, but may be adjusted. If the annual audited results of the investee
company show a loss at the PBIT level or the calculation produces a value of
less than cost, a provision is applied unless the progress of the investee
company is in accordance with its original targets.
Where subsequent trading shows a downwards trend consideration is given to
reverting to cost or making a provision. Profit before interest and tax will
usually be derived from the most recent audited accounts, where reliable
forecasts or estimates are available for a complete subsequent period these may
be used.
The effective PE is calculated by deducting the illiquidity discount from the
enterprise value, and dividing that sum by the fully taxed notional ungeared
profit.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
1 PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
5 The Manager may in its discretion override these policies in
consultation with the directors and produce a more appropriate valuation basis.
(f) Management expenses
The management fee (inclusive of any irrecoverable VAT thereon) is charged half
to the revenue account and half to the capital account. Tax relief attributable
to the management fees charged to the capital account is credited to capital
reserves. The directors consider this apportionment to be appropriate having
regard to the expected investment returns on the revenue and capital accounts.
(g) Finance costs
Finance costs are accounted for on an accruals basis and are wholly charged to
the revenue account. This treatment recognises that interest income from
mezzanine and loan stock investments, included in the revenue account, are
mainly financed by bank borrowings.
(h) Capital reserves
Realised and unrealised capital gains and losses are dealt with through the
non-distributable capital reserves.
(i) Deferred tax
Deferred tax is provided in full on timing differences which result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Deferred tax assets are recognised to the extent that
it is more likely than not that they will be recovered. Deferred tax assets and
liabilities are not discounted.
2 GAINS/(LOSSES) ON INVESTMENTS
Group Group
Unquoted Investments Year Year
Limited ended ended
Partnership Equity Mezzanine 31.12.02 31.12.01
#'000 #'000 #'000 #'000 #'000
Realised gains/(losses)
on investments - 3,041 (13,500) (10,459) 1,540
Revaluations recognised
in prior periods - (1,331) 13,000 11,669 593
Realised current year - 1,710 (500) 1,210 2,133
Revaluations/(provisions)
net of foreign currency
losses on borrowings used
to finance investments 374 2,835 (11,398) (8,189) (13,739)
374 4,545 (11,898) (6,979) (11,606)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2 GAINS/(LOSSES) ON INVESTMENTS (CONTINUED)
During the year, material disposals and write downs of the following investments
were made:-
Disposals Valuation at
Cost Proceeds 31 December 2001
#'000 #'000 #'000
Young's Bluecrest 6,095 8,581 7,525
Bourne Leisure Group 6,290 6,290 6,196
Scotoil 1,557 2,040 1,603
HMG Holdings 960 960 960
Provisions Amount of Valuation at
Cost Write Down 31 December 2001
#'000 #'000 #'000
Interdean 10,458 (10,458) 9,657
Hay Hall 1,453 (853) 1,453
3 OTHER LOSSES
Group Group
Year ended Year ended
31 December 2002 31 December 2001
#'000 #'000
Loss on sale of bonds - (14)
Loss on warrant buyback - (3)
- (17)
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 DIVIDENDS
Group and Company Group and Company
Year ended Year ended
31 December 2002 31 December 2001
Pence per share #'000 Pence per share #'000
Interim paid - - - 7
Final proposed - normal 1.80 725 1.60 644
- special 2.00 805 1.80 725
3.80 1,530 3.40 1,376
A final dividend of 1.80 pence per share and a special dividend of 2.00 pence
per share are proposed in respect of the year ended 31 December 2002. There were
40,273,958 shares in issue at 31 December 2002 and these dividends will absorb
#1,530,410. The final dividend will be paid on 13 May 2003 to shareholders on
the register at the close of business on 21 March 2003 and the special dividend
will be paid on 24 October 2003, to the shareholders on the register at 19
September 2003.
5 NET ASSET VALUE PER SHARE
Undiluted
Undiluted net asset value per ordinary share is based on the net assets shown in
the consolidated balance sheet at the year end, and on 40,273,958 (2001:
40,273,958) ordinary shares being the number of ordinary shares in issue at the
year end.
Diluted
Diluted net asset value per ordinary share is based on the net assets shown in
the consolidated balance sheet at the year end, and on 40,273,958 (2001:
40,570,484) shares. The number of shares is based upon the number of shares in
issue at the year end with nil (2001: 296,526) shares deemed to have been issued
at nil consideration pursuant to warrants outstanding at the year end, because
the share price is currently below the warrant exercise price.
Fully diluted
Fully diluted net asset value per ordinary share is calculated on the assumption
that the share warrants in issue at the year end were fully converted at #0.50
per share increasing the net assets shown in the consolidated balance sheet at
the year end by the subscription proceeds and giving a total of 46,501,000
(2001: 46,501,000) shares.
Unaudited Statements
The results for the year ended 31 December 2002 are unaudited. Statutory
accounts for the year ended 31 December 2001 have been delivered to the
Registrar of Companies. The auditors have made a report under Section 232 of the
Companies Act 1985 on those statutory accounts which was unqualified and did not
contain a statement under Section 237 (2) or (3) of the Companies Act 1985.
Annual Report and Accounts
The Company's Annual Report and Accounts for the year ended 31 December 2002
will be posted to shareholders on 28 March 2003 and the Annual General Meeting
will be held on 28 April 2003. Copies of both this announcement and the Annual
Report and Accounts will be available to the public at the Company's registered
office at Temple Court, 11 Queen Victoria Street, London EC4N 4TP.
This information is provided by RNS
The company news service from the London Stock Exchange
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