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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Mithras Inv.Tst | LSE:MTH | London | Ordinary Share | GB0005962864 | ORD 2P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 240.00 | 0.00 | 00:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMMTH
RNS Number : 7274X
Mithras Investment Trust PLC
23 February 2017
MITHRAS INVESTMENT TRUST PLC (the "Company")
Annual Financial Report Announcement of Audited Results for the year ended 31 December 2016.
This announcement contains regulated information.
Financial Summary
Group Financial Highlights
% change Year ended Year ended compared 31 December 31 December to previous 2016 2015 year --------------------- --------------------- --------------------- Net assets attributable to owners of GBP31.5 GBP33.7 the Company million million (6.5) Number of Ordinary shares in issue at end of year 14,228,143 19,490,606 (27.0) Net Asset Value ("NAV") per Ordinary share 221.2 pence 173.0 pence 27.9 Mid market share price 31 December 181.3 pence 146.5 pence 23.8 22 February(1) 186.0 pence Discount 18.0% 15.3% 2.7 Cash distributions to shareholders during the year (dividends paid plus tender offers) - Dividends paid GBP0.2 million GBP0.2 million - Tender offer GBP9.0 million GBP6.1 million proceeds ---------- ---------- GBP9.2 million GBP6.3 million ---------- ---------- - Tender offer proceeds per Ordinary share 45.9 pence 25.8 pence - Proposed dividends per Ordinary share(2) 1.0 pence 1.0 pence Total return before tax GBP7.0 million GBP2.3 million Ongoing charges (annualised)(3) 1.6% 1.4% Total expense ratio (annualised)(4) 2.4% 2.1%
(1) Being the last practical date prior to approval of the Annual Financial Report.
(2) Proposed dividends, if approved by shareholders at the Annual General Meeting ("AGM"), is paid in the calendar year following proposal. Further information can be found in note 6 of this announcement and note 9 to the Financial Statements on page 54 and in the Financial Calendar on page 71 of the Annual Financial Report.
(3) The ongoing charges figures have been calculated using the Association of Investment Companies' ("AIC") recommended methodology and relate to the ongoing costs of running the Company. Subsidiary expenses, such as those incurred by Mithras Capital Partners LLP ("MCP") and non-recurring fees are therefore excluded from the calculation.
(4) The ratio reflects the ongoing expenses for the Group. This follows the AIC guidance in calculating ongoing charges, but includes ongoing expenses of all subsidiaries.
Performance (Total Return) at 31 December 2016
Since 1 Year 3 Year 5 Year Flotation % % % % ---------------- ---------------- ---------------- ---------------- Share price 24.4 34.0 88.2 396.0 NAV* 28.4 39.8 56.6 365.5 FTSE All-Share Index 16.8 19.3 61.8 397.8
* Returns based on NAV per share adjusted for dividends paid. The return since flotation is based on Group total return after tax before dividends, attributable to owners on opening owners' equity.
Chairman's Statement
Highlights for the Year
2016 was an excellent year for the Company both in terms of cash generation and NAV growth despite the background of considerable political and market volatility. The Company's NAV increased from 173.0 pence per share to 221.2 pence per share, an increase of 27.9%. The Company's NAV benefited significantly from the weakness of Sterling against the Euro and the Dollar especially after the Brexit vote.
Although there was a noticeable slowdown, in private equity deal activity immediately pre and post the EU Referendum, the exit environment throughout the year remained largely positive. Cash distributions received by the Company for the year amounted to GBP8.6 million, a small increase over the GBP8.4 million of distributions received during 2015. The number of underlying portfolio companies held through MCF decreased significantly from 53 to 38 during the year, which compares to the original total of 88. Encouragingly, significant progress was made in realising a number of the larger and older underlying portfolio companies.
The fifth and largest tender offer was completed in April 2016, returning GBP9.0 million to shareholders. The Company has now returned a gross total of GBP34.9 million to shareholders by way of tender offers. This equates to a capital return of 94.6 pence per share or the cancellation of approximately 61% of the original shares in issue.
During the year, the Company's share price increased from 146.5 pence per share to 181.3 pence per share, an increase of 23.8%. The Company's discount increased slightly from 15.3% to 18.0% although we hope that this discount will narrow as the Company moves closer towards its next tender offer.
Update on the Realisation Strategy
The Board continues to believe that the current strategy of returning cash to shareholders by way of tender offers at close to NAV is the best way to maximise value in the near term. The Company had a net surplus cash position, (after allowing for estimated outstanding commitments) of GBP4.8 million as at 31 December 2016. A number of realisations of underlying portfolio companies have been announced which we anticipate will complete in the next few months. As a consequence, the Board expects to be in a position to announce its next tender offer during the first half of 2017.
In line with the realisation strategy, the Board monitors the balance between the prospects of NAV growth and cash generation and the ongoing costs of running the Company relative to NAV. The Company's costs for 2016 decreased slightly although the ongoing cost ratio was 1.6% (1.4% in 2015). This increase was largely a result of the reduction in net assets following the tender offer in the first half of the year. Whilst our current cost ratio remains comparable with our listed private equity peer group, completion of further tender offers will cause the ratio to rise.
As a consequence of the growth in NAV, MCF's net IRR as at 31 December 2016 was above the 8% hurdle rate and therefore a provision for carried interest of GBP1.4 million is included within the Company's MCF valuation. In previous years, MCF's carried interest scheme has been noted in the accounts as a potential liability.
If market conditions for private equity exits remain favourable, it is likely that within the next 12-18 months the costs of running the Company relative to NAV will rise to a level where continuing to run the Company as an investment trust ceases to be economic. At that point, the Board will commence the final stage of the realisation strategy. This is likely to involve either the Company being put in to liquidation or the Company's stake in MCF being sold.
At present the Board envisages that the Company will make at least two further tender offers prior to the final stage of the realisation strategy, with the next tender during the first half of 2017.
As always the Board remains open to value-enhancing offers from third parties. Any offers will be evaluated against the core strategy of further tender offers followed by a liquidation of the Company.
Outlook
The last 12 months have seen a remarkable change in the political landscape, most notably in the UK and US. It seems likely that political volatility will continue, particularly as a consequence of key elections in Continental Europe. Despite the uncertain political and economic backdrop, markets and valuations have proved resilient and the environment for private equity realisations remains positive.
The managers of our underlying funds are reporting that the trading performance of their portfolio companies is generally strong. As a result, the Board believes that the current portfolio still has good prospects for further NAV growth and cash generation.
At the AGM or around the time of the next tender offer, the Board intends to provide shareholders with a timeline for the final stages of the realisation strategy.
William Maltby
Chairman
23 February 2017
Investment Manager's Review
Results and Performance for the Year
The Company enjoyed a strong 2016 despite a continuation of volatility and uncertainty impacting financial markets. Strong underlying portfolio company performance and a fall in the value of Sterling have ensured that the Company's results for this year have been positive. The Company's share price increased from 146.5 pence per share to 181.3 pence per share. The Group's NAV increased from 173.0 pence per share to 221.2 pence per share during the year and the Group's total return for the year was 28.4% (2015: 7.3%) which compares to the Group's benchmark, the FTSE All-Share Index's return of 16.8% (2015: 1.0%). The Company's performance was helped by Sterling falling by 13.7% against the Euro and by 16.1% against the US Dollar during the year.
Consistent with the Company's realisation strategy, we will continue to pay a level of dividend required to maintain investment trust status. Shareholders should continue to expect the majority of future returns to be capital in nature. Accordingly, the Board has recommended a final dividend totalling 1.0 pence per Ordinary share (2015: 1.0 pence). If approved by shareholders, the proposed final dividend will be paid on 5 May 2017 to shareholders on the register on 3 March 2017.
Investment Activity
Given MCF's fully invested status, the Company was only required to provide GBP0.2 million of capital during the year to meet its ongoing obligations to MCF and this was funded by retained distribution proceeds. A number of value accretive add-on investments were made by underlying portfolio companies which did not require any new capital from MCF. PAI Europe V completed the add-on of Safegate to existing portfolio company ADB Airfield Solutions creating ADB Safegate and R&R Ice Cream completed a transaction with Nestlé which created Froneri, a new 50:50 joint venture in ice cream and frozen food operating across 22 countries. CVC Europe V completed an add-on acquisition to Ista and Doughty Hanson V completed several add-on acquisitions for TMF Group which were all funded directly by TMF Group.
Realisations and Repayments
The exit environment remained positive for the Company's mature portfolio despite the ongoing uncertainty surrounding the European Union ("EU") and Brexit with MCF making gross distributions to the Company totalling GBP8.6 million (2015: GBP8.4 million). These distribution proceeds comprised a number of full or partial exits, as well as some refinancing and dividend recapitalisation proceeds. A number of pending exits have been announced but are yet to complete, notably CVC Europe V's proposed sales of Quironsalud and Alix Partners, PAI Europe V's proposed sale of Xella and Cerba HealthCare and Doughty Hanson V's proposed sale of LM Wind Power. This should ensure that the Company's realisation strategy continues into 2017 on a positive note.
CVC Europe V was again the most active underlying fund in terms of the number of exits, realising six portfolio companies and distributing a total of GBP1.6 million to the Company. This included the sales of Avolon and Raet for multiples in excess of 2.0x cost and the exit of Sunrise Communications for a multiple in excess of 3.0x cost. OCM Principal Opportunities Fund IV provided the largest distribution proceeds returning GBP2.8 million, having made good progress during the year monetising the remaining mature portfolio. OCM Principal Opportunities Fund IV exited Fu Sheng, Alliance Healthcare Services, Alstria Office and successfully floated AdvancePierre Foods during the latter part of 2016 with MCF also receiving partial distribution proceeds from the flotation. PAI Europe V distributed GBP2.1 million following the sales of Swissport at a gross multiple of 3.1x cost and Hunkemoeller at a gross multiple of 2.2x cost. Riverside Europe III exited Diatron for a gross multiple of 2.6x cost.
As at 31 December 2016, the MCF portfolio comprised 38 underlying investments with the largest investment, AdvancePierre Foods equating to 20% of the MCF portfolio (although the Company received a further distribution of GBP1.6 million from MCF in February 2017, following a further sell down of shares post IPO). The Company has made good progress with its realisation strategy with seven of the top ten largest underlying portfolio companies as at 31 December 2015 having been sold, listed or are in the process of being exited. The average hold period for the remaining portfolio has increased from 5.6 to 6.1 years.
Liquidity and Outstanding Commitments
The Group's liquidity position remains strong and the Group's cash balance as at 31 December 2016 was GBP5.7 million (2015: GBP6.8 million).
Excluding subsidiary company cash balances, the Company's cash balance was GBP5.2 million. This compares to maximum outstanding commitments of GBP3.5 million, of which only GBP0.4 million is expected to be drawn. This gives the Company a net surplus cash position of GBP4.8 million as at 31 December 2016.
Outlook
The Company enjoyed a strong 2016 both in terms of NAV and share price growth helped by good underlying portfolio company performance and a fall in the value of Sterling. The Company has made significant further progress with its realisation strategy and the pipeline of potential exits remains strong for 2017.
Whilst the Company's future performance remains sensitive to the value of both the Euro and the US Dollar and the exit environment generally, we believe the Company is well placed to deliver further growth in shareholder value as it moves towards the final stages of the realisation strategy.
Mithras Capital Partners LLP
Investment Manager
23 February 2017
Principal Risks and Uncertainties
The Board, in conjunction with MCP, has established a risk management framework within the context of the Company's overall objective. The Board and the Audit Committee are responsible for the risk management framework, which enables the Company to assess the overall risk and exposure of the Company and to review and monitor such risk. The Board confirms that it has carried out a robust assessment of the principal risks facing the Company as noted below together with how they are being managed or mitigated.
General Risks Associated with Investment in Private Equity:
The Group invests in private equity through its exposure to MCF which mitigates some of these general risks through diversification. MCF investments are illiquid and might be difficult to realise, particularly within a short timeframe.
Financial Risks:
By its nature as an investment trust, the Company's business activities are exposed to market risk (which includes price risk and currency risk), credit risk, liquidity risk and interest rate risk. These are monitored by the Board. Details of these risks and how they are managed are set out in note 20 to the Financial Statements on pages 61 to 64 of the Annual Financial Report.
Operational Risks:
As the Company's main functions are delegated to MCP and third party service providers, operational risk would arise from failures of internal control of those service providers. This would include, for example, non-compliance with statutes and regulations governing the functions of the Company. Operational risks are regularly assessed by the Board, which receives timely reports from MCP and its main service providers as to the internal control processes in place within those organisations. These serve to minimise the risk exposure to the Company. Further details regarding the Group's internal controls and management of risks are set out within the Corporate Governance Statement on page 25 of the Annual Financial Report.
Investment and Strategy Risks:
The Board considers at each meeting the performance of the investment portfolio and has established investment restrictions and guidelines within which MCP operates.
Valuation Risks:
The Group's exposure to valuation risk mainly comprises movements in the value of its underlying investments. The Company's investment in MCF is valued at fair value by the Directors in accordance with the current International Private Equity and Venture Capital ("IPEV") Guidelines. Valuation risks are mitigated by a comprehensive review of underlying investments carried out by MCP bi-annually. These valuations are then considered and approved by the Audit Committee and the Board.
Regulatory Risks:
A breach of the Corporation Tax Act 2010 ("CTA") could result in the Company losing its status as an investment trust and becoming subject to Corporation Tax on capital gains. MCP monitors the CTA qualification criteria and provides a report to the Board at each meeting. As an entity listed on the London Stock Exchange, the Company must also comply with the Listing, Prospectus and Disclosure Guidance and Transparency Rules (the "Rules") of the Financial Conduct Authority ("FCA") as well as the Companies Act 2006 (the "Act"). MCP and the Company Secretary provide regular reports to the Board on compliance with relevant provisions and report breaches without delay. The Board relies on MCP, the Company Secretary and professional third party advisers to ensure compliance with laws and regulations. In particular, under the Rules, the Company is required to maintain at least 25% of its shares in "public hands". The definition of "public hands" excludes any holdings by shareholders owning more than 5% of the issued share capital as well as the Directors own shareholdings. Details of the Company's substantial shareholders are disclosed on page 18 of the Annual Financial Report. Any inadvertent breach of this test could result in the Company's share listing being suspended and the loss of investment trust status.
Corporate Governance and Shareholder Relations Risks:
Details of the Company's compliance with corporate governance best practice guidelines, including compliance with the AIC Code of Corporate Governance (the "AIC Code") and the maintenance of good communication with shareholders, are set out in the Corporate Governance Statement on pages 21 to 25 of the Annual Financial Report.
Related Party Transactions and Disclosures
The following note provides details of the Group and Company's related party disclosures and related party transactions during the year:
(a) Under the Investment Management Agreement, dated 27 March 2009, the Company paid fees of GBP64,000 (2015: GBP64,000) to MCP, of which GBP16,000 was outstanding at 31 December 2016 (2015: GBP16,000).
(b) Legal and General Assurance Society Limited ("LGAS") held 32.92% of the Ordinary share capital of the Company as at 31 December 2016 (2015: 33.50%). The Company announced on 23 July 2015 that LGAS had sold its 49.99% stake in MCF to Pomona Capital, VIII LP.
(c) Mr Boylan, the Managing Partner and Designated Member of MCP, in his personal capacity held 0.39% (2015: 0.36%) of the Ordinary share capital of the Company as at 31 December 2016. Mr Boylan is a member of MCP and has a profit entitlement of 15% of the profits in MCP (2015: 15%).
(d) Under a Retention Arrangement dated 5 November 2014 Mr Boylan would become entitled, on completion of the realisation strategy, to a sum of GBP200,000 in consideration for acquiring his 15% minority interest in MCP (referred to as the Non-controlling Interest within the Consolidated Financial Statements). The circumstances that will give rise to the completion of the realisation strategy could vary depending upon the choice of exit route taken by the Company and the arrangement is subject to good leaver provisions.
(e) The compensation payable to key management personnel (which includes members of MCP but excludes Directors of the Company) amounted to GBP149,000 (2015: GBP149,000) paid as guaranteed drawings. Profit share distributed to the Non-controlling Interests (members of MCP) amounted to GBP34,000 (2015: GBP32,000). The compensation payable to the Directors can be found in note 7 on page 52 of the Annual Financial Report.
(f) The Company invests in MCF, which is managed by MCP. A carried interest scheme operates for the benefit of the founder partners in the scheme. The founder partners are Ms Gillian Brown, Mr Adrian Johnson and Mr Boylan. Carried interest of 10% of investment profits could become payable once MCF has returned all capital contributed by investors as well as exceeding a net IRR of 8% per annum. As at 31 December 2016, MCF's net fund IRR was 8.3% and a provision of GBP1.4 million was made against the valuation of MCF. No carried interest payments were made during the period or have been since the inception of MCF.
Extract from Statement of Directors' Responsibilities
Pursuant to Rule 4 of the Disclosure Guidance and Transparency Rules, each of the Directors, whose names and functions are listed on page 16 of the Annual Financial Report confirm that, to the best of their knowledge:
-- The Group Financial Statements have been prepared in accordance with IFRSs as adopted by the EU and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group.
-- The Annual Financial Report includes a fair review of the development and performance of the business and the financial position of the Group and the Company, together with a description of the principal risks and uncertainties that they face.
On behalf of the Board
William Maltby
Chairman
23 February 2017
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
2016 2015 Revenue Capital Total Revenue Capital Total return return return return return return Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------- ---------- ---------- ---------- ---------- ---------- Income Net gains on investments 4 - 6,992 6,992 - 1,920 1,920 Investment income 5 300 - 300 602 - 602 459 - 459 461 - 461 Other income ---------- --------- ---------- ---------- --------- ---------- 759 6,992 7,751 1,063 1,920 2,983 ---------- --------- --------- ---------- --------- --------- Expenses (728) - (728) (729) - (729) Operating expenses ---------- --------- --------- ---------- --------- --------- Profit before 31 6,992 7,023 334 1,920 2,254 taxation ---------- --------- --------- ---------- --------- --------- 12 - 12 (20) - (20) Taxation ---------- --------- --------- ---------- --------- --------- Profit and total comprehensive income for the 43 6,992 7,035 314 1,920 2,234 year ====== ===== ====== ====== ===== ====== Attributable to: Owners of the Company 7 9 6,992 7,001 282 1,920 2,202 Non-controlling Interests 34 - 34 32 - 32 Basic and diluted earnings per Ordinary share 0.1 43.9 44.0 1.3 9.1 10.4 (pence) 7 ====== ===== ====== ====== ===== ======
The total return column of this statement represents the Consolidated Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under the guidance published by the AIC.
The accompanying notes form an integral part of these Financial Statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Total equity attributable Capital to holders Non- Share redemption Capital Revenue of the controlling Total Notes capital reserve reserve reserve Company interest equity GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- 31 December 2014 467 368 32,415 4,595 37,845 21 37,866 Profit and total comprehensive income for the year - - 1,920 282 2,202 32 2,234 Contributions by and distributions to owners Dividends 6 - - - (233) (233) - (233) Profit share paid to members in a subsidiary - - - - - (32) (32) Cost of shares purchased for cancellation under tender (77) 77 (6,096) - (6,096) - (6,096) offer -------- ------------ ----------- ---------- ---------- --------- -------- Total contribution by and distributions (77) 77 (6,096) (233) (6,392) (32) (6,361) to owners -------- -------- -------- -------- -------- -------- -------- 31 December 2015 390 445 28,239 4,644 33,718 21 33,739 Profit and total comprehensive income for - - 6,992 9 7,001 34 7,035 the year ----------- ------------ ----------- ------------ ------------ ------------ ----------- Contributions by and distributions to owners Dividends 6 - - - (195) (195) - (195) Profit share paid to members in a subsidiary - - - - - (34) (34) Cost of shares purchased for cancellation under tender (105) 105 (9,046) - (9,046) - (9,046)
offer -------- ------------ ----------- --------- ---------- --------- -------- Total contributions by and distributions (105) 105 (9,046) (195) (9,241) (34) (9,275) to owners -------- -------- -------- -------- -------- -------- -------- 31 December 285 550 26,185 4,458 31,478 21 31,499 2016 ==== ======= ====== ===== ====== ===== =====
The accompanying notes form an integral part of these Financial Statements.
Consolidated Balance Sheet
As at 31 December 2016
2016 2015 Notes GBP'000 GBP'000 ----------- ----------- Non-current assets Investments at fair value through profit or loss 26,113 27,218 ----------- ----------- Current assets Receivables 20 21 Current tax receivable 42 58 5,691 6,824 Cash and cash equivalents ----------- ----------- 5,753 6,903 ----------- ----------- 31,866 34,121 Total assets ----------- ----------- Current liabilities Payables (154) (140) (13) (42) Current tax liability ----------- ----------- (167) (182) ----------- ----------- Total assets less current 31,699 33,939 liabilities ----------- ----------- Non-current liabilities Retention arrangement (200) (200) for key management personnel ----------- ----------- Net assets 31,499 33,739 ======= ======= Equity attributable to owners of the Company Share capital 285 390 Capital redemption reserve 550 445 Capital reserve 26,185 28,239 4,458 4,644 Revenue reserve ------------ ------------ Equity attributable to owners of the Company 31,478 33,718 21 21 Non-controlling Interest ------------ ------------ 31,499 33,739 Total equity ======= ======= Net assets per Ordinary share (pence) 221.2 173.0 - basic and diluted 8 ======= =======
The Financial Statements were approved by the Board of Directors and authorised for issue on 23 February 2017.
The accompanying notes form an integral part of these Financial Statements.
They were signed on the Board's behalf by William Maltby, Chairman and David Shearer, Chairman of the Audit Committee.
Consolidated Cash Flow Statement
For the year ended 31 December 2016
2016 2015 Notes GBP'000 GBP'000 ----------- ----------- Cash flows from operating activities Investment income received 300 602 Interest income received 20 21 Investment management fees received 440 440 Cash paid to service providers (565) (613) Compensation to key management personnel (149) (149) Taxation paid (1) (13) Call on commitment (209) (1,112) Proceeds on partial 8,306 7,793 disposal of investment ------------ ------------ Net cash flow from 8,142 6,969 operating activities ------------ ------------ Cash flows from financing activities Equity dividends paid 6 (195) (233) Profit share distributed to Non-controlling Interest (34) (32) (9,046) (6,131) Tender offer proceeds ------------ ------------ Net cash flow from (9,275) (6,396) financing activities ------------ ------------ Net (decrease)/increase in cash and cash equivalents (1,133) 573 Cash and cash equivalents 6,824 6,251 at beginning of year ------------ ------------ Cash and cash equivalents 5,691 6,824 at end of year ======= =======
The accompanying notes form an integral part of these Financial Statements.
Annual Financial Report
This Annual Financial Report announcement does not constitute statutory accounts for the year ended 31 December 2016 as defined in Section 434 of the Act.
Statutory accounts for the year ended 31 December 2015 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2015 and the year ended 31 December 2016 both received an audit report which was unqualified and did not include reference to any matters to which the Auditors drew attention by way of emphasis without qualifying the report and did not include statements under Section 498 of the Act. The statutory accounts for the year ended 31 December 2016 have not yet been delivered to the Registrar of Companies and will be delivered following the AGM.
The Company's Annual Financial Report for the year ended 31 December 2016 will be posted to shareholders in March 2017. Copies of the Annual Financial Report will be available from the Registered Office of the Company at 10 Harewood Avenue, London, NW1 6AA and on the website, www.mithrasinvestmenttrust.com, which is a website maintained by the Company's Investment Manager. The Company's AGM will be held at 12 noon on Wednesday, 26 April 2017 at the offices of BNP Paribas Fortis, 5 Aldermanbury Square, London, EC2V 7BP. A copy of the Annual Financial Report for the year ended 31 December 2016 will be submitted to the National Storage Mechanism of the UK Listing Authority and will shortly be available for inspection at: www.Hemscott.com/nsm.do.
Key Notes extracted from the Financial Statements
1. General Information
The Company is a company incorporated and domiciled in the United Kingdom. The Consolidated Financial Statements of the Group for the year ended 31 December 2016 comprise the Company and its subsidiaries, Mithras Investments Limited ("MIL"), Mithras Capital Holdings Limited ("MCH"), Mithras Capital Partners LLP ("MCP"), Mithras Capital Partners GP Limited ("MCGP") and Mithras Capital Scottish GP LLP ("MCSGP"), together referred to as the "Group". The nature of the Group's operations and its principal activities are set out in note 3 Segment Reporting on page 50 and in the Strategic Report on pages 12 to 15 in the Annual Financial Report. The Group's organisational structure is disclosed in note 17 on pages 59 and 60 in the Annual Financial Report.
2. Summary of Significant Accounting Policies
A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below.
a) Basis of Preparation
The Consolidated Financial Statements of the Group have been prepared in accordance with IFRS, as adopted by the EU.
The preparation of Financial Statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the Balance Sheet date and the amounts reported for revenue and expenses during the year. The valuation of unquoted investments requires estimates and assumptions. The nature of the estimations means that actual outcomes could differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
The Consolidated Financial Statements have been prepared on the historic cost basis, except for the revaluation of financial assets at fair value through profit or loss. Investments are held at fair value with unrealised gains and losses on investments and impairment of investments recognised in the Consolidated Statement of Comprehensive Income and allocated to capital. Gains and losses on investments sold are calculated as the difference between sale proceeds and cost and allocated to capital. All other assets and liabilities are held at carrying amounts, which approximate to their fair values unless otherwise stated.
In determining the analysis of total income and expenses as between capital return and revenue return, the Directors have followed the guidance contained in the Statement of Recommended Practice (the "SORP") for investment trusts issued by the AIC as revised in 2014, to the extent that this is not inconsistent with the requirements of IFRS.
To reflect the activities of an investment trust company, supplementary information which analyses the Consolidated Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Consolidated Statement of Comprehensive Income. In accordance with the Company's status as a UK investment company under Section 833 of the Act, net capital returns may not be distributed by way of dividend.
b) New IFRSs, Interpretations and Amendments Not Yet Effective
None of the new standards, interpretations or amendments which are effective for the first time in the Financial Statements has had a material impact on the Financial Statements.
The following relevant standards and interpretations were issued by the International Accounting Standards Board or the International Financial Reporting Interpretations Committee before the period end but are as yet not effective for the 2016 year end:
IFRS 9 Financial Instruments (effective for annual periods beginning on or after 1 January 2018)
IFRS 15 Revenue from Contract with Customers (effective for annual reporting period beginning on or after 1 January 2018)
The Group is currently assessing the impact, if any, that these standards will have on the presentation of, and recognition in, its consolidated results in future periods.
c) Basis of Consolidation
The Consolidated Financial Statements incorporate the results of the Company and its subsidiaries. Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Where necessary, the accounting policies of subsidiaries have been aligned to ensure consistency with the policies adopted by the Group.
The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
MIT has a 49.9875% interest in MCF. MIT does not control MCF because there are certain removal clauses in the MCF limited partnership agreement which allow for the removal of its general partners without cause by the other significant independent investor (Pomona Capital VIII, LP). Therefore MCF does not form part of the Group Structure and is instead included in the Company's Consolidated Balance Sheet as the Company's sole investment.
d) Presentation of Consolidated Statement of Comprehensive Income
In order to reflect better the activities of an investment trust company and in accordance with the SORP, supplementary information which analyses the income statement and statement of comprehensive income between items of a revenue and capital nature has been presented. Additionally, the net revenue is the measure the Directors believe appropriate in assessing the Group's compliance with certain requirements set out in Section 1158 of the CTA.
e) Financial Instruments
Investments
Additions in the form of calls on commitments and disposals of investments are accounted for at the settlement date for unquoted investments. On initial recognition, being the date that the Group is committed to the call on investment, the Group and the Company have designated all investments, including investments in the subsidiaries, as held at fair value through profit or loss, with all gains and losses reflected in the Consolidated Statement of Comprehensive Income, including foreign currency gains and losses on translation of investments at the Balance Sheet date. The Group manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy and information about the Group is provided internally on this basis to the entity's key management personnel.
The Group invests in unquoted limited partnerships through its commitment to MCF. The Company's valuation process is set out in note 11 on page 56 and 57 of the Annual Financial Report.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held with banks or "AAA" rated money market liquidity fund investments.
f) Receivables
Other receivables are short-term in nature and are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less provision for estimated irrecoverable amounts.
g) Payables
Accrued expenses are recognised initially at fair value and subsequently stated at amortised cost using the effective interest method.
h) Revenue Recognition
Investment income includes dividends and interest on investments, while interest income on cash and cash equivalents is shown as a component of other income in the revenue return column of the Consolidated Statement of Comprehensive Income.
Income from limited partnership funds is recognised when the income is distributed and received. The limited partnership funds allocate income once a year, after the general partners' priority profit share has been allocated in the partnerships' annual tax returns.
Investment management fee income is accrued over the period for which the service is provided. Interest income is recognised on a time proportion basis using the effective interest method.
i) Expenses
All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Consolidated Statement of Comprehensive Income, all expenses have been presented as revenue items except as follows:
(i) Expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment.
(ii) Expenses are presented as capital items where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. The investment management fee has been allocated 50% to revenue and 50% to capital. Tax relief attributable to the investment management fees charged to capital is credited to the capital return. The Directors consider this apportionment to be appropriate, having regard to the quantum of investment management fee which is also an intercompany transaction eliminated on consolidation.
The Directors consider the retention arrangement to be capital in nature and this amount has been charged in full to the Capital Reserve.
(iii) Transaction costs are disclosed within the net gains and losses on investment. j) Foreign Currency Transactions and Translation
The Company's functional and presentation currency is Sterling. Transactions in currencies other than Sterling are translated at the rates of exchange prevailing on the dates of the transactions. At each Balance Sheet date, financial assets and liabilities denominated in foreign currencies are translated at the rates prevailing. Gains and losses arising on translation are included in the Consolidated Statement of Comprehensive Income and presented as revenue or capital as appropriate.
k) Non-controlling Interest
The interest of the non-controlling member is stated as the non-controlling member's proportion of the fair values of the assets and liabilities recognised. Subsequently, the Non-controlling Interest represents the proportion of profit or loss for the year and net assets not held by the Group and are presented separately in the Consolidated Statement of Comprehensive Income and within Total Equity in the Consolidated Balance Sheet, separately from shareholders' equity.
l) Taxation
Tax recognised in the Consolidated Statement of Comprehensive Income represents the sum of current tax and deferred tax charged or credited in the year. In line with the recommendations of the SORP, the tax effect of different items of expense is allocated between revenue and capital on the same basis as the particular item to which it relates, using the marginal method.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the Financial Statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Investment trusts which have approval under Section 1158 of the CTA are not liable for taxation on capital gains.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the asset is realised or the liability settled based on tax rates that have been enacted or substantively enacted by the Balance Sheet date.
m) Dividends
Dividends paid to the Company's shareholders are recognised as a liability in the period in which the dividends are approved by the Company's shareholders.
n) Reserves
(i) Capital Redemption Reserve - the nominal value of shares bought back for cancellation is added to this reserve. This reserve is non-distributable.
(ii) Capital Reserve - an accumulation of holding gains and losses, gains and losses on the disposal of investments and exchange adjustments to overseas currencies are taken to the Capital Reserve together with the proportion of management fees and taxation allocated to capital.
(iii) Revenue Reserve - the net profit arising in the revenue column of the Statement of Comprehensive Income is added to this reserve. Dividends paid during the year may be deducted from this reserve.
3. Segment Reporting
Year ended 31 December Year ended 31 December 2016 2015 Private Private equity equity Investing fund-of-funds Investing fund-of-funds Activities management Consolidated Activities management Consolidated GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------- ---------- ---------- ---------- ---------- ---------- Net gains on investments 6,992 - 6,992 1,920 - 1,920 Investment income 300 - 300 602 - 602 Interest income 19 - 19 21 - 21 Other income - 440 440 - 440 440 Operating (468) (260) (728) (452) (277) (729) expenses ---------- ----------- ------------ ---------- ----------- ------------ Profit before taxation 6,843 180 7,023 2,091 163 2,254 12 - 12 (20) - (20) Taxation ---------- ----------- ------------ ---------- ----------- ------------ Profit for the 6,855 180 7,035 2,071 163 2,234 year ====== ====== ======= ====== ====== ======= Segment assets 31,707 159 31,866 33,967 154 34,121 Segment (349) (18) (367) (364) (18) (382) liabilities ---------- ----------- ----------- ---------- ----------- ----------- Net segment 31,358 141 31,499 33,603 136 33,739 assets ====== ====== ======= ====== ====== =======
The Group makes investments into various geographical areas and the information about the total gains and losses and income on investments and their fair value, analysed by geographical location, is presented in notes 4 and 5 on page 51 and note 11 on pages 55 to 57 to the Financial Statements in the Annual Financial Report.
The chief operating decision-maker has been identified as the Board of Directors. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. The Board has determined the operating segments based on these reports.
The Board considers the operating segments to be investment holdings and private equity fund-of funds management. The Board assesses the performance of the Group based upon the KPI's as stated in the Strategic Report on pages 12 to 15 in the Annual Financial Report.
Investing holdings represent the Group and Company's operations and commitment to MCF. Comprehensive income for this segment is derived from gains and losses on investments, income from investments, interest income and other income. The private equity fund-of-funds management business is undertaken by MCP. Revenue for this segment is primarily derived from management services provided to MCF.
4. Net Gains on Investment
Group Group Year ended Year ended 31 December 31 December 2016 2015 Total Total GBP'000 GBP'000 ---------- ---------- Realised gain on disposal based on carrying values at previous Balance Sheet date 2,760 4,189 Unrealised gain/(loss) on investment held at fair value through profit 4,232 (2,269) and loss ----------- ----------- 6,992 1,920 ====== ====== Segmental Analysis of Underlying Funds Continental Europe 5,804 1,080 North America 2,709 1,127 Asia 202 (40) (297) (247) United Kingdom ----------- ----------- 8,418 1,920 MCF carried interest (1,426) - provision ----------- ----------- 6,992 1,920 ====== ======
The total fair value movement estimated using a valuation methodology detailed in note 2 on page 47 of the Annual Financial Report was an increase of GBP4,232,000 (2015: GBP2,269,000 decrease).
5. Investment Income
Group Group Year ended Year ended 31 December 31 December 2016 2015 Total Total GBP'000 GBP'000 ---------- ---------- Interest income on unquoted investment 251 386 Dividend income 49 216 on unquoted investment ----------- ----------- 300 602 ======== ======== Segmental Analysis Continental Europe 179 602 North America 121 - ======= =======
6. Dividends
The final dividend of 1.0 pence per Ordinary share, for the year ended 31 December 2015, was paid on 6 May 2016 on 19,490,606 shares.
Year ended Year ended 31 December 31 December 2016 2015 GBP'000 GBP'000 ---------- ---------- Final dividend: 1.0 pence (2015: 1.0 pence) per 195 233 Ordinary 2 pence share ======= =======
The Company proposes the following dividend for the year ended 31 December 2016 which is subject to approval by shareholders at the forthcoming AGM. This proposed dividend, which is required to comply with Section 1158 of the CTA, has not been included as a liability in these Financial Statements.
Year ended Year ended 31 December 31 December 2016 2015 GBP'000 GBP'000 ---------- ---------- Proposed final dividend: 1.0 pence (2015: 1.0 pence) 142 195 per Ordinary 2 pence share ======= ========
7. Earnings per Ordinary Share
The calculation of the basic and diluted earnings per Ordinary share is based on the following data:
Year ended Year ended 31 December 31 December 2016 2015 Revenue Capital Revenue Capital return return Total return return Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------- ---------- ---------- ---------- ---------- ---------- Earnings for the purposes of basic and diluted earnings per share being net profit attributable 9 6,992 7,001 282 1,920 2,202 to owners ====== ====== ====== ====== ====== ====== Basic and diluted earnings per Ordinary 0.1 43.9 44.0 1.3 9.1 10.4 share (pence) ====== ====== ====== ====== ====== ======
The weighted average number of Ordinary shares for the purpose of calculating the basic and diluted earnings per share was 15,924,784 (2015: 21,200,011).
8. Net Assets per Ordinary Share
The basic total net assets per Ordinary share is based on the net assets attributable to owners shown in the Consolidated Balance Sheet at 31 December 2016 and on 14,228,143 (2015: 19,490,606) Ordinary shares, being the number of Ordinary shares in issue at 31 December 2016.
There is no dilution effect and therefore no difference between the diluted total net assets per Ordinary share and the basic total net assets per Ordinary share stated on page 42 of the Annual Financial Report.
For further information, please contact:
Susan Gledhill
For and on behalf of
BNP Paribas Secretarial Services Limited
Tel: 020 7410 5971
23 February 2017
This information is provided by RNS
The company news service from the London Stock Exchange
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