15th Sep 2008 15:50
M&G Recovery Investment Company Limited
First Interim Results Announcement
15 September 2008
Performance during the period
The Company's revenue earnings per Package Unit were 1.48p. In respect of the review period, the Company declared an interim dividend of 0.5p per Ordinary Share (1.0p per Package Unit) which was unchanged from the amount declared at the same stage last year. On a net asset value (NAV) basis, each Package Unit produced a total return of -15.8% over the three months to 31 July 2008. This was below the -10.6% total return on the FTSE All-Share Index over the same period. At the period end the Package Unit market price was at a 6.0% discount to the NAV and on a mid-market price basis each Package Unit produced a total return of -16.6%.
The combination of the negative impact of gearing from both debt and Zero Dividend shares and the underperformance of high yield and mid-cap stocks resulted in this disappointing relative result. The Company has reduced part of its holding in M&G High Yield Corporate Bond Fund in favour of short dated Gilts, given the short life of the Company and also reduced its equity exposure. Proceeds from disposals were used to repay outstanding amounts under the Company's Loan facility with Royal Bank of Scotland International and the related interest rate swap was closed in late June.
While the equity market has been preoccupied with the global banking credit crisis, dividend growth and corporate results have been generally positive with some cuts from banks and companies exposed to the UK consumer. For example BP, the Company's largest holding, increased its dividend by over 30%. Corporate activity, while at a slower pace, still continues and there have been recent bid approaches in relation to British Energy and Lonmin. The Company's holdings in pharmaceutical companies GlaxoSmithKline and AstraZeneca were bright features of an otherwise difficult quarter.
Although the UK and other international economies will go through a period ofslower growth at best but with some possibilities of recession, a relativelyfull weighting in blue chip stocks with strong balance sheets is helpful duringthis difficult period.Income Statement (unaudited) 2008 2007 Revenue Capital Total Revenue Capital Total
for the three months ended ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 31 July
Net losses on investments - (19,339) (19,339) - (8,350) (8,350)
Gain on closure of interest - 80 80 - - -rate swap Income 2,114 - 2,114 2,147 - 2,147 Investment management fee (177) (177) (354) (221) (221) (442) Other expenses (79) - (79) (76) - (76) Loss before finance cost and 1,858 (19,436) (17,578) 1,850 (8,571) (6,721)taxation Finance costs: - (1,853) (1,853) - (1,723) (1,723)Appropriations Finance costs: Dividends (3,422) - (3,422) (3,068) - (3,068)
Interest payable and similar (114) (113) (227) (208) (207) (415) charges
Loss on ordinary activities (1,678) (21,402) (23,080) (1,426) (10,501) (11,927)before taxation Taxation - - - - - - Loss for the period (1,678) (21,402) (23,080) (1,426) (10,501) (11,927) Return per Zero Dividend - 0.96p 0.96p - 0.89p 0.89pShare Earnings / return per 0.74p (9.07)p (8.33)p 0.70p (4.45)p (3.75)pOrdinary Share Earnings / return per 1.48p (17.18)p (15.70)p 1.40p (8.01)p (6.61)pPackage Unit
The total column of this statement is the Income Statement of the Company prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared under guidance from the Association of Investment Companies.
All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.
Each class of the Company's shares meets the definition of a liability and therefore the Company has no equity shares. The profit / (loss) for the period is attributable to the Ordinary Shareholders. There are no minority interests.
Statement Of Movements In Net Assets Attributable To Shareholders (unaudited) 2008 2007 for the three months ended 31 ‚£'000 ‚£'000July Loss for the period (23,080) (11,927) Add finance costs: 1,853 1,723Appropriations Net movement in fair value of 1 139swap Net movement in net assets (21,226) (10,065)attributable to shareholders Opening net assets attributable to 157,663 185,326shareholders (all non-equity) Closing net assets attributable to 136,437 175,261shareholders (all non-equity) Balance Sheet (unaudited) 31.07.2008 31.07.2007 30.04.2008 as at ‚£'000 ‚£'000 ‚£'000 Non-current assets Portfolio of investments 129,821 198,886 170,369 Current assets Debtors 1,072 778 2,319 Cash at bank and short-term deposits 9,051 999 9,388 10,123 1,777 11,707 Total assets 139,944 200,663 182,076 Current liabilities (3,507) (3,264) (24,413)
Total assets less current liabilities 136,437 197,399 157,663
Non-current liabilities - (22,138) -
Net assets attributable to shareholders 136,437 175,261 157,663 (all non-equity)
Net Assets Attributable To Shareholders (unaudited) 31.07.2008 31.07.2007 30.04.2008 as at ‚£'000 ‚£'000 ‚£'000 Zero Dividend Shareholders 102,048 94,678 100,152 Ordinary Shareholders 34,389 80,583 57,511
Net assets attributable to shareholders 136,437 175,261 157,663 (all non-equity)
Net Asset Values Applicable to Each Class of Shareholding (unaudited) as at 31.07.2008 31.07.2007 30.04.2008 Net asset value per Zero Dividend 52.76p 48.95p 51.78pShareholders
Net asset value per Ordinary Shareholders 14.57p 34.14p 24.36p
Net asset value per Package Unit 81.90p 117.23p 100.50p Cash Flow Statement (unaudited) 2008 2007 for the three months ended 31 ‚£'000 ‚£'000July Operating activities Loss on ordinary activities before taxation (23,080) (11,927) Adjustments for: Finance costs: Appropriations 1,853 1,723 Finance costs: Dividends 3,422 3,068 Interest payable and similar charges 227 415 Effective interest adjustments (14) (10) Stock dividends - (104) Investments held at fair value through profit or loss: Net losses on investments 19,339 8,350 Capital distributions 478 - Purchases of investments (17,060) (17,995) Sales of investments 37,362 23,110 Decrease in other receivables 1,079 1,030 (Decrease) / increase in other payables (11) 4 Net cash inflow from operating activities 23,595 7,664before servicing of finance Financing activities Dividends paid (non-equity) (1,180) (1,182) Interest paid on bank loan (352) (440) Repayment of bank loan (22,400) (5,600) Net cash used in financing activities (23,932) (7,222) Net (decrease) / increase cash and cash (337) 442equivalents Cash and cash equivalents at the start of the 9,388 557period Cash and cash equivalents at the end of the 9,051 999period
Basis of accounting: These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), comprising standards and interpretations approved by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB. The financial statements are presented in pounds sterling and have been prepared on a going concern basis under the historical cost convention except for the measurement of investments at fair value.
The FSA Handbook has been amended to implement the Transparency Obligations Directive (Disclosure and Transparency Rules) Instrument 2006 and as a result the Company is now required to prepare its financial statements under IFRS. Previously the financial statements were prepared in accordance with United Kingdom Generally Accepted Accounting Practice (UK GAAP) including the Statement of Recommended Practice: 'Financial Statements of Investment Trust Companies' (SORP) issued by the Association of Investment Companies in December 2005.
Kleinwort Benson (Channel Islands) Fund Services Limited Company Secretary 15 September 2008
M & G RECOVERY INVESTMENT COMPANY LIMITEDRelated Shares:
MGR.L