10 Mar 2008 17:40
M&G Recovery Investment Company Limited
Third Interim Results Announcement
10 March 2008
Performance during the period
The Company's revenue earnings per Package Unit were 0.86p. In respect of thethree month review period, the Company declared a quarterly dividend of 0.5pper Ordinary Share (1.0p per Package Unit) which was unchanged on the amountdeclared at the same stage last year. On a net asset value (NAV) basis, eachPackage Unit produced a total return of -17.1% over the three months to 31January 2008. This was below the -12.8% total return on the FTSE All-ShareIndex over the same period. At the period end the Package Unit market price wasat a 0.3% discount to the NAV and on a mid-market price basis each Package Unitproduced a total return of -10.7%.The combination of the negative impact of gearing from both debt and ZeroDividend shares and the underperformance of high yield and mid-cap stocksresulted in this disappointing relative result. We have switched some of theCompany's M&G High Yield Corporate Bond Fund holding into less volatile shortdated Gilts.While the equity market has been preoccupied with the global banking creditcrisis, dividend growth and corporate results have been generally positive. Forexample BP, the Company's largest holding, increased its dividend by over 30%.Corporate activity, while at a slower pace, still continues and we haverecently seen our holding in Scottish & Newcastle bid for by Carlsberg and Emapsold to private equity.Although the UK economy will go through a period of slower growth, share pricesare already reflecting, and UK interest rates are expected to fall over thecourse of the year. We have holdings in large, well capitalised companies thatshould outperform during this volatile period and there will be opportunitiesto apply our contrarian approach to take advantage of share price weakness inselected stocks.Income Statement (unaudited)
2008 2007 Revenue Capital Total Revenue Capital Total for the three months ended 31 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000January Net (losses) / gains on - (24,458) (24,458) - 3,910 3,910investments Income 1,470 - 1,470 1,746 - 1,746 Investment management fee (204) (204) (408) (222) (222) (444) Other expenses (74) - (74) (49) - (49) Profit / (loss) before 1,192 (24,662) (23,470) 1,475 3,688 5,163finance costs and taxation Finance costs: Appropriations - (1,788) (1,788) - (1,674) (1,674) Finance costs: Dividends (1,180) - (1,180) (1,194) - (1,194) Interest payable and similar (182) (181) (363) (222) (222) (444)charges
(Loss) / profit on ordinary (170) (26,631) (26,801) 59 1,792 1,851 activities before taxation
Taxation - - - - - - (Loss) / profit for the (170) (26,631) (26,801) 59 1,792 1,851period Return per Zero Dividend - 0.92p 0.92p - 0.86p 0.86pShare Earnings / return per 0.43p (11.28)p (10.85)p 0.52p 0.75p 1.27pOrdinary Share Earnings / return per Package 0.86p (21.64)p (20.78)p 1.04p 2.36p 3.40pUnit 2008 2007 Revenue Capital Total Revenue Capital Total for the nine months ended 31 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000January Net (losses) / gains on - (27,757) (27,757) - 8,732 8,732investments Income 6,186 - 6,186 5,907 - 5,907 Investment management fee (629) (629) (1,258) (632) (632) (1,264) Other expenses (224) - (224) (184) - (184) Profit / (loss) before 5,333 (28,386) (23,053) 5,091 8,100 13,191finance costs and taxation Finance costs: Appropriations - (5,265) (5,265) - (4,956) (4,956) Finance costs: Dividends (5,428) - (5,428) (5,121) - (5,121) Interest payable and similar (567) (566) (1,133) (661) (659) (1,320)charges
(Loss) / profit on ordinary (662) (34,217) (34,879) (691) 2,485 1,794 activities before taxation
Taxation - - - - - - (Loss) / profit for the (662) (34,217) (34,879) (691) 2,485 1,794period Return per Zero Dividend - 2.72p 2.72p - 2.53p 2.53pShare Earnings / return per 2.02p (14.50)p (12.48)p 1.84p 1.03p 2.87pOrdinary Share Earnings / return per Package 4.04p (26.28)p (22.24)p 3.68p 4.59p 8.27pUnit
The total column of this statement is the profit and loss account of the Company, prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared under guidance from the Association of
Investment Companies.
All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. Each class of the Company's shares meets the definition of a liability and
therefore the Company has no equity shares. The profit / (loss) for the period is attributable to the Ordinary Shareholders. There are no minority interests.
Statement Of Movements In Net Assets Attributable To Shareholders (unaudited) 2008 2007
for the nine months ended 31 ‚£'000
‚£'000January (Loss) / gain for the period (34,879) 1,794 Add finance costs: 5,265 4,956Appropriations
Net movement in fair value of (209)
445swap Repurchase of Package Units -
(2,102)
(including related costs) Net movement in net assets (29,823)
5,093
attributable to shareholders Opening net assets attributable to 185,326 173,638shareholders (all non-equity) Closing net assets attributable to 155,503 178,731shareholders (all non-equity) Balance Sheet (unaudited) 31.01.2008 31.01.2007 30.04.2007 as at ‚£'000 ‚£'000 ‚£'000 Non-current assets Portfolio of investments 176,054 205,461 211,731 Current assets Debtors 1,347 750 2,666
Cash at bank and short-term deposits 915 1,978
557 2,262 2,728 3,223 Total assets 178,316 208,189 214,954 Current liabilities (326) (1,546) (1,754) Total assets less current liabilities 177,990 206,643 213,200 Non-current liabilities (22,487) (27,912) (27,874) Net assets attributable to shareholders 155,503 178,731 185,326(all non-equity)
Net Assets Attributable To Shareholders
(unaudited) 31.01.2008 31.01.2007 30.04.2007 ‚£'000 ‚£'000 ‚£'000 Zero Dividend Shareholders 98,318 91,919 92,918 Ordinary Shareholders 57,185 86,812 92,408 Net assets attributable to shareholders 155,503 178,731 185,326(all non-equity)
Net Asset Values Applicable to Each Class of Shareholding (unaudited)
as at 31 January 2008 2007 Net asset value per Zero Dividend 50.83p 47.17 pShareholders Net asset value per Ordinary Shareholders 24.23p
36.34p
Net asset value per Package Unit 99.29p
119.85p
Cash Flow Statement (unaudited)
2008 2007for the nine months ended 31 January ‚£'000 ‚£'000Operating activities(Loss) / profit before taxation
(34,879) 1,794Adjustments for:Finance costs: Appropriations 5,265 4,956Finance costs: Dividends 5,428 5,121
Interest payable and similar charges 1,133 1,320Effective interest adjustments (10) 39Stock dividends (292) (102)
Investments held at fair value through profit or loss: Net losses / (gains) on investments
27,757 (8,732)Capital distributions 344 1,579Purchases of investments (43,416) (36,533)Sales of investments 51,309 38,795
Decrease in other receivables 1,063 1,132Increase / (decrease) in other payables 22 (28)Net cash inflow from operating activities before servicing of finance
13,724 9,341Dividends paid (non-equity) (6,610) (5,142)Repurchase of package units - (2,102)Annual monitoring fee paid (2) -Bank Interest paid - (2)Interest paid on bank loan (1,154) (1,286)
Net cash inflow from operating activities 5,958 809Financing activitiesRepayment of bank loan (5,600) -Net increase in cash and cash equivalents 358 809Cash and cash equivalents at the start of the period 557 1,169Cash and cash equivalents at the end of the period 915 1,978Basis of accounting: These financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS), comprising standards and interpretations approved by the International Accounting
Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (IFRIC). The financial statements are presented in pounds sterling and have been prepared on a going concern basis under the historical cost convention except for the measurement of investments at fair value. The FSA Handbook has been amended to implement the Transparency Obligations
Directive (Disclosure and Transparency Rules) Instrument 2006 and as a result the Company is now required to prepare its financial statements under IFRS.
Previously the financial statements were prepared in accordance with United Kingdom Generally Accepted Accounting Practice (UK GAAP) including the
Statement of Recommended Practice: 'Financial Statements of Investment Trust Companies' (SORP) issued by the Association of Investment Companies in
December 2005. First time adoption of IFRS: These are the first financial statements of the Company to be prepared in accordance with IFRS. The date of transition to IFRSfor the Company is 1 May 2006. The adoption of IFRS and the retrospective application of the IFRS accounting polices to the opening balance sheet as at 1 May 2006 and all subsequent periods has not resulted in any changes to the opening or closing balance sheet or income statement. Presentational changes have been made to the cash flow statement to reanalyse Dividends paid to Ordinary Shareholders and Bank interest paid as financing activities; and capital distributions, purchases of investments and sales of investments as
operating activities.
Kleinwort Benson (Channel Islands)
Fund Services Limited Company Secretary 10 March 2008
M & G RECOVERY INVESTMENT COMPANY LIMITED