RNS Number:8471I
Mercury Grosvenor Trust PLC
18 March 2003
Embargoed until 7.00 a.m. 18 March 2003
MERCURY GROSVENOR TRUST plc
Preliminary announcement of results in respect of the year
ended 31 December 2002,
proposed new management arrangements,
change of name to HgCapital Trust plc
and
extension of the life of the Company
HIGHLIGHTS
- Net asset value per share fell over the year by 12.5% from 380.3p at the beginning of the year to 332.9p
on 31 December 2002. Over the same period, the FTSE All-Share Index and the FTSE SmallCap Index fell by
25.0% and 29.4% respectively, all in capital-only terms.
- The Company invested #24.0 million (2001: #22.7 million) in new and follow-on investments and realised
#20.2 million in cash (2001: #19.5 million).
- Revenue before taxation of #2.8 million (2001: #3.1 million).
- Earnings per share of 8.53p (2001: 9.61p).
- Unchanged dividend of 8.00p per share.
- Proposed new management arrangements with HgCapital.
- Proposed change of name to HgCapital Trust plc and extension of the life of the Company.
David Bucks, the Chairman, comments:
"World economic uncertainty and the current situation in the Middle East will continue to have a negative impact on the
outlook for 2003. Despite this, we remain optimistic that the Company is well placed for the longer term.
"Although none of the Company's ordinary shares were bought back during the year, this matter is kept under constant
review by the Board and we will again be seeking a renewal of the power to purchase shares in the market for
cancellation at the forthcoming Annual General Meeting.
"Lastly, discussions in respect of the direct contractual relationship between the Company and HgCapital rather than
via Merrill Lynch Investment Managers have now been completed. The terms of the new management arrangements and
related resolutions will be put to shareholders for approval at an Extraordinary General Meeting, details of which will
be set out in a circular to be posted to shareholders shortly."
Commenting on the outlook for the Company, Ian Armitage, Chief Executive of HgCapital, the Investment Manager, notes:
"The weak economic environment during 2002 looks likely to persist in 2003 with any positive trends being overshadowed
by the overall downturn of the world's two largest economies, the US and Japan. This gloomy outlook is exacerbated by
uncertainties in the Middle East.
"While the UK economy has continued to outperform its peers, there are indications that activity will slow down and
recession will become a reality for many businesses. However, there are some signs of optimism, particularly for
industries such as healthcare, which are benefiting from the rapid expansion in Government spending.
"The slump in the capital markets that prevailed throughout 2002 is unlikely to be reversed in the foreseeable future.
As corporate valuations fall, the unrealistic pricing expectations of vendors, apparent in 2002, will lessen. We are
taking advantage of these favourable buying conditions to make new investments and to support companies within the
portfolio to make acquisitions at good prices.
"In Germany, where the economic environment is bleaker still, financial pressures are forcing corporations to focus on
core business interests and to dispose of peripheral activities. Notwithstanding the decision by some investors, most
notably several larger banks, to reduce their presence in Germany, we are cautiously optimistic about the opportunity
to deploy capital.
"During the year, the Company invested a total of #24.0 million (2001: #22.7 million) and participated in four new
investments. The largest investment was in the Euro149 million management buy-out of automotive supplier, FTE Automotive
GmbH, HgCapital's fourth deal in the German market. Two other leveraged buy-outs were completed, both in the
healthcare sector: the Euro90 million secondary buy-out of Dutch clinical research company, Pharma Bio-Research BV, and
the #56 million management buy-out of Castlebeck Group Ltd, a care homes operator. In addition, a small number of
shares were purchased in Ardagh plc, the largest manufacturer of glass containers in the UK.
"Realisation proceeds amounted to #20.2 million (2001: #19.5 million), most notably from the sale of PII Group to GE
Power Systems.
"The Company's investment performance over the year compared favourably with returns produced by quoted securities but
was, nonetheless disappointing. However, the portfolio is prudently valued and is positioned well for long-term
capital gains."
Proposals
Agreement has been reached with HgCapital on the terms of new management arrangements. To reflect this direct
contractual relationship, it is proposed to change the name of the Company to HgCapital Trust plc and effectively to
extend the duration of the Company for a further six year period.
The proposed management arrangements will provide for the payment of a fixed fee of 1.5% per annum on the value of the
net assets under management (excluding investments in other collective investment funds) and a performance related
profit share.
The performance related profit share will be based on the growth in the three year moving average net asset value of
the Company, will be adjusted for dividends paid and will amount to 20% of such growth in excess of a true hurdle rate
of 8% per annum. The Company currently pays an annual management fee of 2.25% of the unquoted portfolio and an
aggregate of 0.75% of the cash and quoted portfolio.
Transitional arrangements will be in place for the first three years, effective 1 January 2003, by which the total
amount receivable by HgCapital will be no less than the fees that would have been paid under the existing fee
arrangement.
The adoption of a performance related scheme based on total returns over a true hurdle will more closely align the
interests of HgCapital and the Company's shareholders. As a consequence, and by publicly linking the name of the
Company to that of HgCapital together with an extension of the life of the Company, the Board believes that HgCapital
will have a significant incentive to optimise its performance.
The proposals will be put to shareholders for approval at an Extraordinary General Meeting. A circular containing full
details together with the relevant resolutions is expected to be posted to shareholders shortly.
For further information please contact:
David Bucks - Chairman, Mercury Grosvenor Trust plc
Tel: 020 7603 0466
Ian Armitage - Chief Executive, HgCapital
Tel: 020 7089 7979
Chris Steele - Holborn Public Relations
Tel: 020 7929 5599
REVENUE STATEMENT
for the year ended 31 December 2002
Year ended Year ended
31 December 31 December
2002 2001
#'000 #'000
(audited) (audited)
Income 3,528 3,893
Investment management fee (396) (449)
Other expenses (322) (329)
Net revenue before finance costs and taxation 2,810 3,115
Interest payable and similar charges (22) (22)
Revenue on ordinary activities before taxation 2,788 3,093
Taxation on ordinary activities (640) (673)
Revenue on ordinary activities after taxation 2,148 2,420
Dividend in respect of equity shares (2,015) (2,015)
Transfer to reserves 133 405
TOTAL RETURN PER ORDINARY SHARE
for the year ended 31 December 2002
Year ended Year ended
31 December 31 December
2002 2001
(audited) (audited)
Earnings 8.53p 9.61p
Capital return (48.01p) (32.28p)
Total return (39.48p) (22.67p)
Dividend per ordinary share 8.00p 8.00p
BALANCE SHEET
as at 31 December 2002
31 December 31 December
2002 2001
#'000 #'000
(audited) (audited)
Fixed assets
Investments
- Listed at mid-market valuation 5,112 14,238
- Unquoted at directors' valuation 62,559 60,970
67,671 75,208
Current assets
Debtors 3,881 4,371
Government securities 13,843 18,548
Cash 1,031 313
18,755 23,232
Creditors - amounts falling due within one year (2,589) (2,645)
Net current assets 16,166 20,587
Net assets 83,837 95,795
Capital and reserves
Called up share capital 6,296 6,296
Share premium account 14,123 14,123
Capital redemption reserve 1,248 1,248
Capital reserve - realised 78,079 68,723
Capital reserve - unrealised (19,059) 2,388
Revenue reserve 3,150 3,017
Total equity shareholders' funds 83,837 95,795
Net asset value per ordinary share 332.9p 380.3p
CASH FLOW STATEMENT
for the year ended 31 December 2002
Year ended Year ended
31 December 31 December
2002 2001
#'000 #'000
(audited) (audited)
Net cash flow from operating activities 2,161 2,043
Returns on investments and servicing of finance (7) 104
Taxation received/(paid) 383 (493)
Capital expenditure and financial investment
Purchase of fixed asset investments (24,033) (22,696)
Proceeds from the sale of fixed asset investments 20,246 19,470
Net cash outflow for capital expenditure and financial
investment (3,787) (3,226)
Equity dividends paid (2,015) (3,652)
Net cash outflow before management of liquid
resources (3,265) (5,224)
Management of liquid resources
Purchase of Government securities (53,996) (50,687)
Sale/redemption of Government securities 57,979 47,185
Net cash inflow/(outflow) from management of liquid
resources 3,983 (3,502)
Increase/(decrease) in cash in the period 718 (8,726)
RECONCILIATION OF NET REVENUE RETURN BEFORE FINANCE COSTS AND TAXATION TO NET
CASH FLOW FROM OPERATING ACTIVITIES
Year ended Year ended
31 December 31 December
2002 2001
#'000 #'000
(audited) (audited)
Net revenue return before finance costs and taxation 2,810 3,115
Investment management fee and finance costs charged to
capital (1,253) (1,412)
Interest receivable (15) (104)
Decrease in accrued income 357 687
Decrease in creditors (56) (67)
Effective yield adjustment 832 462
Tax on investment income included within gross income (514) (638)
Net cash flow from operating activities 2,161 2,043
GEARING
The Company had no gearing at 31 December 2002 (2001: nil).
NOTES ON THE PRELIMINARY RESULTS
1. Principal activity
The principal activity of the Company is that of an investment trust
within the meaning of section 842 of the Income and Corporation Taxes
Act 1988.
2. Basis of preparation
The preliminary financial statements have been prepared on the basis of
the accounting policies set out in the Company's financial statements as
at 31 December 2002. Income and operating expenses have been accrued in
accordance with the same principles used in the preparation of the
previous year's financial statements. The taxation charge has been
calculated by applying an estimate of the annual effective tax rate to
the profit for the period.
3. Income 2002 2001
#'000 #'000
Income from investments
UK listed dividends 193 205
UK unquoted investment income 2,209 2,622
Overseas listed dividends 26 6
2,428 2,833
Other income
Gilt interest 1,060 954
Deposit interest 15 104
Other fees 25 2
1,100 1,060
Total income 3,528 3,893
Total income comprises:
Dividends 219 211
Interest 3,284 3,680
Other fees 25 2
3,528 3,893
4. Dividend
The directors have proposed a final dividend of 8.00p per share
(2001: 8.00p). The dividend will be paid on 1 May 2003 to shareholders on
the register of members at the close of business on 28 March 2003. The
shares will be quoted ex-dividend on 26 March 2003.
5. Investment management fee
Revenue Capital Total
2002 2001 2002 2001 2002 2001
Investment management
fee 337 382 1,010 1,146 1,347 1,528
Irrecoverable VAT
thereon 59 67 177 200 236 267
396 449 1,187 1,346 1,583 1,795
The investment management fee is levied quarterly in arrears and is charged 25%
to the revenue account and 75% to capital reserve - realised.
6. Ordinary shares
31 December 2002 31 December 2001
The number of ordinary shares in issue at the end of the period
on which net asset value per share was calculated was:
25,186,755 25,186,755
Share price 219.5p 294.0p
7. Publication of non-statutory accounts
The financial information contained in this preliminary statement does not
constitute statutory accounts as defined in section 240 of the Companies
Act 1985.
8. The figures set out above have been reported upon by the independent
auditor. The comparative figures are derived from the audited financial
statements of Mercury Grosvenor Trust plc for the year ended
31 December 2001 which have been filed with the Registrar of Companies.
The report of the independent auditor for the years ended 31 December 2001
and 2002 contain no qualification or statement under section 237(2) or (3)
of the Companies Act 1985.
9. The full annual report and financial statements for the year ended
31 December 2002 will be filed with the Registrar of Companies after the
Annual General Meeting.
10. The Annual General Meeting of the Company will be held at the offices of
CMS Cameron McKenna, Mitre House, 160 Aldersgate Street, London EC1A 4DD
on Tuesday 29 April 2003 at 11.30 a.m.
11. Copies of the annual report will be sent to members shortly and will be
available from the registered office, c/o The Company Secretary, Mercury
Grosvenor Trust plc, 33 King William Street, London EC4R 9AS.
18 March 2003
33 King William Street
London EC4R 9AS
This information is provided by RNS
The company news service from the London Stock Exchange
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