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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 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMMTH
RNS Number : 5817F
Mithras Investment Trust PLC
21 February 2018
MITHRAS INVESTMENT TRUST PLC (the "Company")
Annual Financial Report Announcement of Audited Results for the year ended 31 December 2017.
This announcement contains regulated information.
Financial Summary
Group Financial Highlights
Hot Features
Premium
% change
Year ended Year ended compared
31 December 31 December to previous
2017 2016 year
--------------------- --------------------- ---------------------
Net assets attributable
to owners of GBP15.5 GBP31.5
the Company million million (50.8)
Number of Ordinary
shares in issue
at end of year 6,068,659 14,228,143 (57.3)
Net Asset Value
("NAV") per Ordinary
share 255.5 pence 221.2 pence 15.5
Mid market share
price
31 December 222.0 pence 181.3 pence 22.5
20 February(1) 228.0 pence 186.0 pence
Discount 13.1% 18.0% (4.9)
Cash distributions to shareholders during
the year (dividends paid plus tender offers)
- Dividends
paid GBP0.1 million GBP0.2 million
- Tender offer GBP18.2
proceeds million GBP9.0 million
---------- ----------
GBP18.3
million GBP9.2 million
---------- ----------
- Tender offer
proceeds per
Ordinary share 152.6 pence 45.9 pence
- Proposed dividends
per Ordinary
share(2) 4.0 pence 1.0 pence
Total return
before tax GBP2.5 million GBP7.0 million
Ongoing charges
(annualised)(3) 2.1% 1.6%
Total expense
ratio (annualised)(4) 3.1% 2.4%
(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"), are 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 57 and in the Financial Calendar on page 74 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 2017
Since
1 Year 3 Year 5 Year Flotation
% % % %
---------------- ---------------- ---------------- ----------------
Share price 23.0 57.9 101.8 479.4
NAV* 16.0 59.5 82.0 377.0
FTSE All-Share
Index 13.1 33.3 63.0 463.0
* 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
2017 was another good year for the Company both in terms of cash generation and growth in NAV. The Company's NAV increased from 221.2 pence per share to 255.5 pence per share, an increase of 15.5%. As a result of strong cash generation from the MCF portfolio, the Company completed two tender offers returning more than GBP18 million to shareholders. This represented significant progress in the long-term realisation strategy, which is now nearing its final
stages.
Our underlying fund managers continued to take advantage of the positive market conditions for private equity exits. During 2017, the Company received cash distributions totalling GBP18.7 million, more than double the GBP8.6 million received during the previous year. Encouragingly, good exits were achieved for some of our older and larger underlying portfolio companies, notably AdvancePierre Foods, Quironsalud and Xella. As a result of significant realisation proceeds being received after the Seventh Tender Offer in September, the Company had a net surplus cash position of GBP4.3 million as at 31 December 2017.
Due to the strong realisation performance, the underlying MCF portfolio has changed materially and is now more concentrated, comprising only 27 underlying portfolio companies, compared to 38 at the beginning of 2017. The portfolio is also less exposed to fluctuations in the US Dollar exchange rate.
During the year, the Company's share price increased from 181.3 pence per share to 222.0 pence per share, an increase of 22.5%. The Company's discount remained fairly constant throughout much of the year, just below 10%, but rose slightly at the year end to 13.1% compared to 18.0% last year.
As a result of continuing tight controls, and despite inflationary pressures and increasing regulatory demands, the Company's costs remained largely unchanged in 2017. There is, however, almost no scope for reducing costs with the Company in its current form. As anticipated, the Company's ongoing cost ratio rose to 2.1% compared to 1.6% as result of the reduction of net assets following the tender offers.
Update on the Realisation Strategy
The realisation strategy has served shareholders well. Since 2013, the Company has returned a gross total of GBP53.1 million to shareholders by way of seven tender offers, all at a minimal discount to NAV. This equates to a capital return of 144.2 pence per share or the cancellation of approximately 83% of the original shares in issue.
The Board is of the opinion that the cost ratio has now risen to a level where the costs of continuing to run the Company as an investment trust are close to being uneconomic. We believe therefore that the final stage of the realisation strategy should commence when the Company is in a position to make a further cash distribution to shareholders.
The Company is developing a detailed plan for the final stage of the realisation strategy. This may entail the Company being placed into voluntary liquidation coupled either with a secondary sale of the Company's commitment to MCF or with a longer-term liquidation of the Company's assets. In the meantime, the Company is open to value-enhancing proposals from third parties.
Outlook
2017 was a largely benign year for markets and for the private equity exit environment. In recent weeks, however, markets have become significantly more volatile mainly as a consequence of inflationary pressures in the US being more apparent. Although the remaining portfolio is significantly smaller than at the start of 2017, it is still exposed to the overall market environment and currency movements, especially the Euro exchange rate.
The sale of two of MCF's largest underlying portfolio companies, TMF and Kiloutou, have been announced but have not yet completed. Together, these represent about 30% of the Group's investments as at 31 December 2017. Exit processes for further underlying portfolio companies are in progress.
The timing of the final stage of the realisation strategy now depends on the outcome of these exit processes. We expect to be in a position to provide shareholders with more details about the final stages of the realisation strategy at the forthcoming AGM.
William Maltby
Chairman
21 February 2018
Investment Manager's Review
Results and Performance for the Year
The Company enjoyed another positive year benefitting from the continuation of a positive environment for private equity exits and an encouraging performance from underlying companies within the MCF portfolio. The Company's share price increased from 181.3 pence per share to 222.0 pence per share and the Group's NAV increased from 221.2 pence per share to 255.5 pence per share during the year. The Group's total return for the year was 16.0% (2016: 28.4%) which compares to the Group's benchmark, the FTSE All-Share Index's return of 13.1% (2016: 16.8%). Currency movements were less of a factor than in recent years with Sterling weakening by 4.0% against the Euro but strengthening by 8.7% against the US Dollar.
Shareholders should expect to receive the bulk of future returns in the form of capital distributions although the Board will continue to recommend a level of dividend required to maintain investment trust status. To meet this requirement, the Board has recommended an increased final dividend for 2017 totalling 4.0 pence per Ordinary share (2016: 1.0 pence). This increase is the result of a rise in the level of investment income received during the year, principally from CVC Europe V, and a significant reduction in the number of shares in issue. If approved by shareholders, the proposed final dividend will be paid on 4 May 2018 to shareholders on the register on 2 March 2018.
Investment Activity
Given MCF's fully invested state, the Company was required to provide only GBP0.3 million of capital during the year (2016: GBP0.2 million) to meet ongoing obligations to MCF. As in previous years, this was funded by retained distribution proceeds. In terms of investment activity within the underlying funds, Doughty Hanson V completed a number of add-on acquisitions for TMF Group which were funded directly by TMF; and CVC Europe V called funds for the add-on acquisition of Medipole by Elsan, the French private hospital operator.
Realisations and Repayments
Our underlying fund managers continued to take advantage of healthy market conditions for exits. In a record year for the Company in terms of distributions received, MCF made gross distributions totalling GBP18.7 million (2016: GBP8.6 million). These distribution proceeds comprised a number of full or partial exits as well as some refinancing and dividend recapitalisation proceeds. A number of ongoing exit processes have been announced prior to the year end but are yet to complete, such as Doughty Hanson V's proposed sale of TMF Group and PAI Europe V's sale of Kiloutou. Completion of these exits will bring the Company closer towards the final stage of its realisation strategy.
CVC Europe V and PAI Europe V were the two most active underlying funds in terms of number of exits, with each exiting four portfolio companies. CVC Europe V completed the disposals of Quironsalud and AlixPartners for multiples in excess of 4.0x cost, and also sold Ista and Leslie's. These disposals, coupled with recapitalisation proceeds and other partial disposals, enabled CVC Europe V to distribute GBP6.9 million in aggregate to the Company. PAI Europe V completed the disposals of Xella and Cerba HealthCare at multiples in excess of 2.0x cost, and exited both IPH and ADB Safegate during the second half of 2017 at multiples in excess of 3.0x cost, resulting in total distribution proceeds for the Company of GBP4.4 million for the year. OCM Principal Opportunities Fund IV completed the sale of previously listed AdvancePierre Foods, our largest underlying portfolio company investment at the start of 2017, returning GBP6.3 million of distribution proceeds to the Company. Doughty Hanson V exited LM Wind Power returning GBP0.9 million and Riverside Europe III distributed GBP0.2 million.
The Company made significant progress in terms of realisations during the year with seven of the top ten largest investments as at 31 December 2016 having been sold or a sale announced. This includes our largest current underlying investment, TMF Group, where the sale has been announced but has yet to complete. MCF's residual portfolio comprises 27 underlying investments and the average hold period for the remaining portfolio has increased from 6.1 to 7.1 years.
Liquidity and Outstanding Commitments
The Group's liquidity position remains strong and the Group's cash balance as at 31 December 2017 was GBP5.4 million (2016: GBP5.7 million).
Excluding subsidiary company cash balances, the Company's cash balance was GBP4.6 million. This compares against maximum outstanding commitments of GBP3.2 million. Of this only GBP0.3 million is expected to be drawn, resulting in the Company having a net surplus cash position of GBP4.3 million as at 31 December 2017.
Outlook
The Company made excellent progress in terms of its realisation strategy, completing two further tender offers during 2017 and reporting both NAV and share price growth.
The exit pipeline in the short-term remains strong, the success and timing of which will have a direct bearing on when the final stage of the realisation strategy is triggered. The Investment Manager is working with the Board to develop detailed plans for the final stage of the exit strategy and we look forward to updating shareholders at the AGM in April 2018.
Mithras Capital Partners LLP
Investment Manager
21 February 2018
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 64 to 67 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 26 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 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 Corporation Tax Act 2010 ("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 19 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 22 to 26 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 (2016: GBP64,000) to MCP, of which GBP16,000 was outstanding at 31 December 2017 (2016: GBP16,000).
(b) Legal and General Assurance Society Limited ("LGAS") held 27.89% of the Ordinary share capital of the Company as at 31 December 2017 (2016: 32.92%).
(c) Mr Boylan, the Managing Partner and Designated Member of MCP, in his personal capacity held 0.66% (2016: 0.39%) of the Ordinary share capital of the Company as at 31 December 2017. Mr Boylan is a member of MCP and has a profit entitlement of 15% of the profits in MCP (2016: 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 (2016: GBP149,000) paid as guaranteed drawings. Profit share distributed to the Non-controlling Interests (members of MCP) amounted to GBP34,000 (2016: GBP34,000). The compensation payable to the Directors can be found in note 7 on page 55 of the Annual Financial Report. Mr Mackie also receives a fee of GBP5,000 per annum as the Company's designated representative on the board of MCP.
(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 2017, MCF's net fund IRR was 8.9% and a provision of GBP3.2 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
The Directors confirm to the best of their knowledge:
-- The Group Financial Statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union 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
21 February 2018
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2017
2017 2016
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 - 1,985 1,985 - 6,992 6,992
Investment income 5 803 - 803 300 - 300
452 - 452 459 - 459
Other income ---------- --------- ---------- ---------- --------- ----------
1,255 1,985 3,240 759 6,992 7,751
---------- --------- --------- ---------- --------- ---------
Expenses
(722) - (722) (728) - (728)
Operating expenses ---------- --------- --------- ---------- --------- ---------
Profit before 533 1,985 2,518 31 6,992 7,023
taxation ---------- --------- --------- ---------- --------- ---------
(107) - (107) 12 - 12
Taxation ---------- --------- --------- ---------- --------- ---------
Profit and total
comprehensive
income for the 426 1,985 2,411 43 6,992 7,035
year ====== ===== ====== ====== ===== ======
Attributable to:
Owners of the
Company 7 392 1,985 2,377 9 6,992 7,001
Non-controlling
Interests 34 - 34 34 - 34
Basic and diluted
earnings
per Ordinary 3.8 19.1 22.9 0.1 43.9 44.0
share (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 2017
Total
equity
attributable
Capital to owners 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
2015 390 445 28,239 4,644 33,718 21 33,739
Profit and
total
comprehensive
income for
the year - - 6,992 9 7,001 34 7,035
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
offer (105) 105 (9,046) - (9,046) - (9,046)
agreement -------- ------------ ----------- ---------- ---------- --------- --------
Total
contributions
by and
distributions (105) 105 (9,046) (195) (9,241) (34) (9,275)
to owners -------- -------- -------- -------- -------- -------- --------
31 December
2016 285 550 26,185 4,458 31,478 21 31,499
Profit and
total
comprehensive
income for - - 1,985 392 2,377 34 2,411
the year ----------- ------------ ----------- ------------ ------------ ------------ -----------
Contributions
by and
distributions
to owners
Dividends 6 - - - (142) (142) - (142)
Profit share
paid to
members
in a
subsidiary - - - - - (34) (34)
Cost of
shares
purchased
for
cancellation
under tender
offer (164) 164 (18,207) - (18,207) - (18,207)
agreement -------- ------------ ----------- --------- ---------- --------- --------
Total
contributions
by and
distributions (164) 164 (18,207) (142) (18,349) (34) (18,383)
to owners -------- -------- -------- -------- -------- -------- --------
31 December 121 714 9,963 4,708 15,506 21 15,527
2017 ==== ======= ====== ===== ====== ===== =====
The accompanying notes form an integral part of these Financial Statements.
Consolidated Balance Sheet
As at 31 December 2017
2017 2016
Notes GBP'000 GBP'000
----------- -----------
Non-current assets
Investments at fair value
through profit or loss 10,515 26,113
----------- -----------
Current assets
Receivables 23 20
Current tax receivable - 42
5,363 5,691
Cash and cash equivalents ----------- -----------
5,386 5,753
----------- -----------
15,901 31,866
Total assets ----------- -----------
Current liabilities
Retention arrangement
for key personnel (200) -
Payables (123) (154)
(51) (13)
Current tax liability ----------- -----------
(374) (167)
----------- -----------
Total assets less current 15,527 31,699
liabilities ----------- -----------
Non-current liabilities
Retention arrangement - (200)
for key management personnel ----------- -----------
Net assets 15,527 31,499
======= =======
Equity attributable to
owners of the Company
Share capital 121 285
Capital redemption reserve 714 550
Capital reserve 9,963 26,185
4,708 4,458
Revenue reserve ------------ ------------
Equity attributable to
owners of the Company 15,506 31,478
21 21
Non-controlling Interest ------------ ------------
15,527 31,499
Total equity ======= =======
Net assets per Ordinary
share (pence)
255.5 221.2
- basic and diluted 8 ======= =======
The Financial Statements were approved by the Board of Directors and authorised for issue on 21 February 2018.
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 2017
2017 2016
Notes GBP'000 GBP'000
----------- -----------
Cash flows from operating
activities
Investment income received 803 300
Interest income received 12 20
Investment management
fees received 440 440
Cash paid to service
providers (607) (565)
Compensation to key
management personnel (149) (149)
Taxation paid (27) (1)
Call on commitment (372) (209)
Proceeds on partial 17,955 8,306
disposal of investment ------------ ------------
Net cash flow from 18,055 8,142
operating activities ------------ ------------
Cash flows from financing
activities
Equity dividends paid 6 (142) (195)
Profit share distributed
to Non-controlling
Interest (34) (34)
(18,207) (9,046)
Tender offer proceeds ------------ ------------
Net cash flow from (18,383) (9,275)
financing activities ------------ ------------
Net decrease in cash
and cash equivalents (328) (1,133)
Cash and cash equivalents 5,691 6,824
at beginning of year ------------ ------------
Cash and cash equivalents 5,363 5,691
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 2017 as defined in Section 434 of the Act.
Statutory accounts for the year ended 31 December 2016 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2016 and the year ended 31 December 2017 both received an independent audit report which was unqualified and did not include statements under Section 498 of the Act. The current years independent audit report includes an emphasis of matter to reflect the Financial Statements being prepared on a basis other than of a going concern. The statutory accounts for the year ended 31 December 2017 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 2017 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, 25 April 2018 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 2017 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 2017 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 of this announcement, Segment Reporting, 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 62 and 63 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 and on a basis other than going concern, due to the Directors' expectation that the final stage of the realisation strategy will be triggered within the next 12 months, which may entail the Company being placed into voluntary liquidation. No adjustments have arisen as a result of this basis of preparation.
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 issued in November 2014 and updated in January 2017, 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 2017 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)
It is not expected that any Financial Statements will be prepared under the new accounting standards.
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
To reflect 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, 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 pages 59 and 60 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 presentational 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 attributable to owners of the Company arising in the revenue column of the Consolidated 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
2017 2016
Private Private
equity equity
Investment fund-of-funds Investment fund-of-funds
holdings management Consolidated holdings management Consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ---------- ---------- ----------
Net gains
on investments 1,985 - 1,985 6,992 - 6,992
Investment
income 803 - 803 300 - 300
Interest
income 12 - 12 19 - 19
Other income - 440 440 - 440 440
Operating (461) (261) (722) (468) (260) (728)
expenses ---------- ----------- ------------ ---------- ----------- ------------
Profit
before
taxation 2,339 179 2,518 6,843 180 7,023
(107) - (107) 12 - 12
Taxation ---------- ----------- ------------ ---------- ----------- ------------
Profit
for the 2,232 179 2,411 6,855 180 7,035
year ====== ====== ======= ====== ====== =======
Segment
assets 15,741 160 15,901 31,707 159 31,866
Segment (355) (19) (374) (349) (18) (367)
liabilities ---------- ----------- ----------- ---------- ----------- -----------
Net segment 15,386 141 15,527 31,358 141 31,499
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 54 and note 11 on pages 58 to 60 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 of the Annual Financial Report. Investment 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
2017 2016
Total Total
GBP'000 GBP'000
---------- ----------
Realised gain on disposal
based on carrying values
at previous Balance
Sheet date 6,575 2,760
Unrealised (loss)/gain
on investment held at
fair value through profit
and loss (2,819) 5,658
Movement in MCF carried (1,771) (1,426)
interest provision ----------- -----------
1,985 6,992
====== ======
Segmental Analysis of
Underlying Funds
Continental Europe 3,065 5,804
North America 482 2,709
Asia - 202
209 (297)
United Kingdom ----------- -----------
3,756 8,418
Movement in MCF carried (1,771) (1,426)
interest provision ----------- -----------
1,985 6,992
====== ======
The total fair value movement estimated using a valuation methodology detailed in note 2 on page 50 of the Annual Financial Report was a decrease of GBP4,590,000 (2016: GBP4,232,000 increase).
5. Investment Income
Group Group
Year ended Year ended
31 December 31 December
2017 2016
Total Total
GBP'000 GBP'000
---------- ----------
Interest income
on unquoted investment 451 251
Dividend income 352 49
on unquoted investment ----------- -----------
803 300
======== ========
Segmental Analysis
Continental Europe 769 179
North America 34 121
======= =======
6. Dividends
The final dividend of 1.0 pence per Ordinary share, for the year ended 31 December 2016, was paid on 5 May 2017 on 14,228,143 shares.
Year ended Year ended
31 December 31 December
2017 2016
GBP'000 GBP'000
---------- ----------
Final dividend: 1.0 pence
(2016: 1.0 pence) per 142 195
Ordinary 2 pence share ======= =======
The Company proposes the following dividend for the year ended 31 December 2017 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
2017 2016
GBP'000 GBP'000
---------- ----------
Proposed final dividend:
4.0 pence (2016: 1.0 pence) 243 142
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
2017 2016
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 392 1,985 2,377 9 6,992 7,001
to owners ====== ====== ====== ====== ====== ======
Basic and diluted
earnings per Ordinary 3.8 19.1 22.9 0.1 43.9 44.0
share (pence) ====== ====== ====== ====== ====== ======
The weighted average number of Ordinary shares for the purpose of calculating the basic and diluted earnings per share was 10,388,446 (2016: 15,924,784).
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 2017 and on 6,068,659 (2016: 14,228,143) Ordinary shares, being the number of Ordinary shares in issue at 31 December 2017.
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 45 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
21 February 2018
This information is provided by RNS
The company news service from the London Stock Exchange
END
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