Menhaden PLC
(the “Company”)
HALF YEAR REPORT
FOR THE SIX MONTHS ENDED 30 JUNE 2019
FINANCIAL
HIGHLIGHTS |
|
|
Performance |
As at 30 June
2019 |
As at 31 December
2018 |
Net asset value per share |
101.7p |
90.6p |
Share price |
83.0p |
67.0p |
Discount |
18.4% |
26.1% |
|
|
|
Total
return |
Six months to 30
June 2019 |
Year to 31 December
2018 |
Net asset value per share |
13.0% |
(1.6%) |
Share price |
25.0% |
(2.2%) |
|
|
|
|
Six months to 30
June 2019 |
Year to 31 December
2018 |
Ongoing charges* |
2.1% |
2.1% |
Source: Frostrow Capital LLP / Bloomberg
* Ongoing charges are calculated as a percentage of
shareholders’ funds using average net assets over the period and
calculated in line with the AIC’s recommended methodology.
CHAIRMAN’S STATEMENT
I am pleased to report on your Company’s activities in the six
months to 30 June 2019 and on its
financial position as at that date; almost four years since its
launch.
Performance
During the first half of the year, the Company’s net asset value
(“NAV”) per share rose 13.0% on a total return basis (2018: fell
1.6%). At the same time, the market value of the Company’s shares
increased by 25.0% (2018: declined by 2.2%) so that, at the end of
June, the share price stood at a 18.4% discount to the NAV per
share, having narrowed from 26.1% at the end of 2018.
While the Company does not have a formal benchmark and our
Portfolio Manager does not invest by reference to any index, over
the same period the MSCI World Total Return Index (in sterling)
rose by 17.1% (2018: fell by 3.0%). By way of additional
comparison, the WilderHill New Energy Global Innovation Index (in
sterling) increased by 21.3% and the AIC Environmental Sector grew
by 20.3%.
The increase in the Company’s NAV was primarily due to the
public equities and yield investments in the portfolio. In
particular, Airbus, Air Products and Brookfield Renewable Partners
performed well. Our Portfolio Manager has provided a
comprehensive analysis of all the factors contributing to the
Company’s performance during the period in their report.
Discount
The Board is pleased with the share price performance over the
first half of the year, with the discount to the NAV per share
narrowing significantly. The improvement is due to both the
good performance of the portfolio over the first half of the year
and the continuing focus on the Company’s marketing and
distribution strategies.
Nevertheless, we remain conscious of the level of the share
price discount. Overall, the Board remains of the opinion
that share buybacks would not be in the interests of shareholders
as they reduce the size of the Company, increase the ongoing
charges ratio and reduce the liquidity of the Company’s shares.
Instead, the Board will continue to focus on investment performance
and the marketing effort, keeping the situation under close
review.
Dividend
The Board recommended to shareholders the payment of a small
dividend of 0.7p per share in respect of the year ended
31 December 2018, as required by
investment trust rules. This was approved by shareholders at
the annual general meeting held on 29 May
2019 and paid on 5 June 2019.
The Board has not declared an interim dividend for this half
year.
Corporate Governance
The Board continuously monitors the performance of the Company’s
principal service providers and formally assesses the Company’s
management arrangements annually. As the Company enters its
fifth year of trading and approaches its first continuation vote in
May 2020, the Board will be
undertaking a comprehensive review of costs in order to ensure that
shareholders are achieving value for money. The review will include
an audit tender, led by the Audit Committee reporting to the Board,
with a view to the selected firm auditing the financial statements
for this year ending 31 December 2019. The tender process
will take place between October and December
2019 with the final decision expected to be announced in
late December 2019. The process, together with the results of
the wider review, will be described in the next annual report.
Outlook
Global growth continues to slow and geopolitical, environmental
and technological risks continue to cause uncertainty and
volatility in stock markets. However, there has been a
notably improved focus on tackling the global climate crisis and
the investment community is well placed to engage with
sustainability issues and achieve a real impact. Our
Portfolio Manager is optimistic about the long-term outlook for the
companies in your portfolio and will continue to focus on selecting
competitively advantaged businesses which deliver or benefit from
the efficient use of resources. The Board supports this
investment strategy and believes that the premise on which the
Company was launched is more compelling than ever.
Sir Ian Cheshire
Chairman
24 September 2019
Investment Themes
Theme |
Description |
Clean energy production |
Companies producing power from clean
sources such as solar or wind |
Resource and energy efficiency |
Companies focused on improving
energy efficiency (e.g. in buildings or manufacturing processes) or
creating emissions reduction products or services |
Sustainable transport |
Companies in the transport sector
focused on helping to reduce harmful air emissions / distance
travelled |
Water and waste management |
Companies with products or services
that enable reductions in usage / volumes and / or better ways to
manage water and waste |
PORTFOLIO SUMMARY as at 30 June 2019 |
|
|
|
Investment |
Country |
|
Fair
Value
£’000 |
%
of
net assets |
|
X-ELIO*1 |
Spain |
|
16,523 |
20.3 |
|
Safran |
France |
|
7,886 |
9.7 |
|
Alphabet |
United States |
|
7,609 |
9.4 |
|
Charter
Communications |
United States |
|
6,493 |
8.0 |
|
ADO
Group2* |
Germany |
|
5,676 |
7.0 |
|
Brookfield Renewable
Partners |
Canada |
|
4,908 |
6.0 |
|
Canadian Pacific |
Canada |
|
4,250 |
5.2 |
|
Calvin
Capital*3 |
UK |
|
4,072 |
5.0 |
|
Union Pacific |
United States |
|
3,880 |
4.8 |
|
Airbus |
France |
|
3,585 |
4.4 |
|
Top 10
investments |
|
|
64,882 |
79.8 |
|
Terraform Power |
United States |
|
3,368 |
4.1 |
|
Ocean Wilsons
Holdings |
Bermuda |
|
2,914 |
3.6 |
|
Perfin Apollo 12* |
Brazil |
|
1,943 |
2.4 |
|
Waste Management |
United States |
|
1,700 |
2.1 |
|
Air Products &
Chemicals |
United States |
|
1,695 |
2.1 |
|
Microsoft |
United States |
|
1,684 |
2.1 |
|
TCI Real Estate |
United States |
|
1,570 |
1.9 |
|
WCP Growth Fund
LP*4 |
UK |
|
1,017 |
1.3 |
|
Total
investments |
|
|
80,773 |
99.3 |
|
Net current assets
(including cash) |
|
|
569 |
0.7 |
|
Total net
assets |
|
|
81,342 |
100.0 |
|
|
|
|
|
|
|
|
|
1 Investment made through CGE Investments
2 Investment made through Helios Co-Invest L.P.
3 Investment made through KKR Evergreen Co-Invest
L.P.
4The data regarding the WCP Growth Fund LP (the
“Partnership”) does not necessarily reflect the current or expected
future performance of the Partnership and should not be used to
compare returns of the Partnership against returns of other private
equity funds.
* Unquoted
Investment |
Business Description |
Theme |
X-ELIO*1 |
Develops and operates solar
energy assets |
Clean energy production |
Safran |
Supplies energy-efficient systems
& equipment for aerospace, defence & security |
Sustainable transport |
Alphabet |
Parent company of Google which
uses 100% renewable energy |
Resource and energy efficiency |
Charter Communications |
Telecomms company providing
infrastructure for the ‘internet of things’ |
Resource and energy efficiency |
ADO Group* |
Invests in energy-efficient real
estate in Berlin |
Resource and energy efficiency |
Brookfield Renewable Partners |
Open-ended fund investing in
hydroelectric and wind facilities |
Clean energy production |
Canadian Pacific |
Owns and operates
(fuel-efficient) freight railways in Canada and the USA. |
Sustainable transport |
Calvin Capital*2 |
Invests in utility infrastructure
assets including smart meters |
Resource and energy efficiency |
Union Pacific |
Provides (fuel-efficient) rail
freight services across the USA |
Sustainable transport |
Airbus |
Designs and manufactures aircraft
with fuel-efficient engines |
Sustainable transport |
Terraform Power |
Operates contracted renewable
energy assets |
Clean energy production |
Ocean Wilsons Holding |
Operates ports and
provides (lower climate impact) maritime services in
Brazil |
Resource and energy efficiency |
Perfin Apollo 12* |
Builds and operates electricity
transmissions lines in Brazil |
Resource and energy efficiency |
Waste Management |
North American provider of waste
management and environmental services |
Water and waste management |
Air Products & Chemicals |
Sells gases and chemicals which
help industries use energy more efficiently |
Resource and energy efficiency |
Microsoft |
Multinational technology company
which provides energy-efficient cloud-based datacenters, amongst
other products and services |
Resource and energy efficiency |
TCI Real Estate |
Invests in energy-efficient real
estate projects |
Resource and energy efficiency |
WCP Growth Fund LP*4 |
Growth capital fund managed by
specialist environmental PE firm, Alpina Partners |
Resource and energy efficiency |
PORTFOLIO MANAGER’S REVIEW
Performance
During the first half of 2019, the Company’s NAV per share
increased from 90.6p to 101.7p. This represents a total return of
13.0% and compares to the MSCI World Index (sterling) total return
of 17.1%. The Company’s share price traded at a 18.4% discount to
NAV as at 30 June 2019.
The contribution to the NAV per share increase over the year is
summarised below:
|
30 June
2019 |
|
Asset
Category |
NAV % |
Contribution
% |
Public Equities |
51.3 |
11.6 |
Private
Investments |
35.9 |
(0.5) |
Yield Investments |
12.1 |
3.1 |
Liquidity |
1.7 |
- |
Foreign exchange
forwards |
(1.1) |
(0.0) |
Dividend Paid |
|
(0.8) |
Expenses |
|
(1.1) |
Net Assets |
100.0 |
|
Net Return |
|
12.2 |
Reinvested
Dividend |
|
0.8 |
Total
Return |
|
13.0 |
Figure 1. Source: Frostrow Capital LLP
Following a difficult end to 2018, equity markets rapidly
bounced back with the S&P 500 managing to reach a new all-time
high in the first half of this year. Investors who moved to cash in
the fourth quarter likely had cause to regret their timing.
As always we remain patient and fully aware of the risks of
trying to correctly time financial markets. Although our portfolio
outperformed the market in 2018, we still recorded a small loss of
1.6%. Consequently, we are pleased with the return to positive
performance so far this year, with our quoted and yield investments
performing particularly well.
Public Equities
Our portfolio of public equities represented 51.3% of our total
NAV as at 30 June 2019 and added
11.6% to our NAV. These results substantially outperformed the MSCI
World Index (sterling) by 8.2% on a total return basis.
Investment |
Increase/Decrease % |
Contribution to NAV % |
Airbus |
49.3 |
4.2 |
Safran |
24.2 |
2.3 |
Canadian Pacific |
33.1 |
1.4 |
Air Products and Chemicals |
43.0 |
1.1 |
Union Pacific |
23.6 |
1.0 |
Charter Communications |
11.7 |
0.8 |
Waste Management |
30.8 |
0.6 |
Alphabet |
3.5 |
0.3 |
Microsoft |
15.8 |
0.2 |
Ocean Wilsons |
(5.1) |
(0.2) |
NJS |
(10.9) |
(0.1) |
Infigen |
(4.2) |
(0.0) |
Total |
|
11.6 |
Figure 2. Source: Frostrow Capital LLP
Airbus was the single biggest contributor to our
performance. The group is working hard to help transition the
aviation industry to a more sustainable footing with its new
A320neo aircraft delivering 20% fuel efficiency savings compared to
its predecessor. This will represent a key lever for the whole
industry to achieve its goal of stabilising carbon emissions from
2020 to 2035 and to then reduce emissions to half of 2005 levels by
2050, under the Carbon Offsetting and Reduction Scheme for
International Aviation (CORSIA). Operationally, Airbus reported
strong annual results in February, announced its intention to
incrementally raise the production of its A320 program by 2021 and
the planned end of production on its loss-making A380 program.
Airbus also enjoyed a strong showing at this year’s Paris Air Show,
with new orders for 363 commercial aircraft, including 149 firm
orders and 214 commitments. We chose to crystallise a portion of
our substantial gains in Airbus during the period because, due to
the shares’ stellar performance, we believed the forward returns no
longer justified such an outsized position.
Meanwhile Safran, the aircraft engine manufacturer,
continues to perform strongly. As part of the wider aviation
industry’s drive towards a more sustainable platform, the group
continues to develop more efficient means of aircraft propulsion.
Deliveries of the new LEAP engine, which offers 15% fuel efficiency
savings compared to its predecessor, continue to ramp up and the
firm is also investing to help develop new electric power systems
for aircraft. More broadly, the group is benefiting from robust
organic growth across its product and services portfolio, with the
civil aftermarket continuing to enjoy double digit growth. Over the
Paris Air Show, Safran recorded new orders and commitments for
>1,150 LEAP engines and long-term services agreements equivalent
to USD 50.2 billion at list prices.
Although the group is exposed to Boeing’s lower rate of production
of the 737 MAX, the near-term financial impact is very limited.
This is because Safran earns the vast majority of its profits on
the LEAP engine from aftermarket service revenues many years into
the future. Admittedly, if Safran’s installed base of engines did
not grow as anticipated, due in part to permanently lower 737 MAX
deliveries, this would be negative. However, we do not expect this
scenario to occur with Boeing currently working hard to return the
MAX to the skies.
Our Northern American freight rail operators, Canadian
Pacific and Union Pacific, both delivered significant
gains. We believe that freight rail operators can continue to take
share from the trucking sector, especially on long distance routes.
Rail is the most environmentally friendly way to transport freight
over land, with current locomotives four times more fuel efficient
than trucking on a per unit basis. Canadian Pacific recovered
strongly from severe winter weather at the start of the year, with
volumes set to continue to benefit from multiple new contracts and
facility expansions by existing customers over the coming years.
Meanwhile Union Pacific is still in the early stages of its planned
precision scheduled railroading (PSR) implementation which holds
the potential to expand operating margins through improving asset
efficiency and labour productivity.
After a relatively uneventful 2018, Air Products surged
higher. Importantly, the group’s products and services enable its
customers to avoid 54 million tons of carbon dioxide emissions,
equivalent to 11 million cars and almost double the group’s own
direct and indirect carbon dioxide emissions. Whilst we continue to
like the business model and expect the current development pipeline
to underpin strong earnings growth, we exited our position after
the half year because we believed the group’s elevated multiple
would likely hinder future returns.
Our position in Alphabet remains one of our core
holdings, with the position currently representing 9.5% of NAV. We
took advantage of volatility in the group’s share price, in the
wake of the group’s first quarter results, to incrementally add to
our position. The market negatively interpreted the management’s
comments around the likely pace of future growth, soon after which
the US Department of Justice announced a new probe into potential
antitrust issues related to Google’s dominant position in search.
In our view the Alphabet’s dominant position in search and its
ability to monetise its unparalleled levels of user interaction can
underpin revenue growth for many years. Furthermore, we believe
that the group has the potential to increase its operating margins
beyond market expectations, as its different business units
(YouTube, Cloud and Hardware) mature and improve their
profitability. Although the market has yet to agree with us, we are
content to remain patient.
In April we used the proceeds of our partial sale of Airbus to
initiate a position in US cable business Charter
Communications, where we saw a materially higher upside with
lower associated risk. We view Charter’s hybrid fibre coax network,
which encompasses 50 million households in the US, as a key piece
of infrastructure for enabling the development of the ‘internet of
things’ (IoT). The IoT is already transforming the way resources
are produced, distributed and consumed, and has the potential to
drive significant energy efficiency savings, with McKinsey
previously estimating these could be worth $540 billion across residential and commercial
buildings. We believe that Charter can deliver meaningfully higher
free cash flow in the years ahead based upon a combination of
modest revenue growth, falling capital intensity and lower customer
churn. Although it is still early in our investment time horizon,
we are pleased by recent performance.
We also initiated a position in Microsoft in the same
month. Microsoft is at the forefront of putting the growth of data
(and data centres) on a sustainable footing with its Azure Cloud
services being up to 93% more energy efficient than traditional
enterprise datacentres. We believe that Microsoft benefits from
immense economies of scale, high switching costs and established
enterprise sales relationships which should underpin Azure’s rapid
growth trajectory, whilst we think Office 365 should continue to
profit from entrenched network effects and the benefits associated
with cloud-based subscriptions compared to traditional
licenses.
Finally, we exited our positions in Australian renewable power
operator, Infigen, and Japanese water consultancy firm, NJS, in
April as well. With no clear resolution in sight on renewables
policy in Australia and limited
prospect of a takeover at a higher price, we decided that we could
put our funds deployed in Infigen to better use elsewhere. Whilst
NJS remains undeniably cheap, with its cash holding nearly
equivalent to its market capitalisation alone, the lack of a clear
timeline as to when this anomaly would correct meant we similarly
decided to redeploy capital into other opportunities.
Yield Investments
Our portfolio of yield investments represented 12.1% of our
total NAV as at 30 June 2019 and
added 3.1% to our NAV. Although our yield investments outperformed
the MSCI World Index (sterling) by 11.9% on a total return basis in
the first half of the year, we do not expect this to repeat
frequently.
Investment |
Increase/Decrease % |
Contribution to NAV % |
Brookfield Renewable Partners |
37.9 |
1.8 |
Terraform Power |
34.2 |
1.3 |
TCI Real Estate Partners Fund
III |
13.1 |
0.3 |
Atlantica Yield |
(9.1) |
(0.3) |
Total |
|
3.1 |
Figure 3. Source: Frostrow Capital LLP
After a poor end to 2018, Brookfield Renewable Partners
eagerly bounced back with the shares reaching new all-time highs in
the first half of this year. As we wrote previously, we were
perplexed by the shares’ weakness throughout last year even as US
treasury yields began to roll over in the fourth quarter. We
attribute the rally to a better appreciation of the group’s
improving dividend coverage and lower US treasury yields.
Regardless, in our view Brookfield Renewable Partners remains both
a best in class operator and allocator of capital, which possesses
a portfolio of advantaged renewable power assets. With the current
organic development pipeline and contract escalators underpinning
both cash flow and distribution growth, we continue to see a bright
future ahead for the group.
Brookfield Renewable Partners’ subsidiary, Terraform
Power, also delivered a standout performance. Management
continues to execute well on its plan to deliver mid-single digit
distribution growth over the coming years from organic initiatives,
whilst the possibility of a better than expected regulated return
on Spanish solar assets offers upside.
Meanwhile we are patiently waiting for the TCI Real Estate
Partners Fund III, which currently represents 1.8% of NAV, to
draw down additional capital from our US $15
million commitment, of which US $13.1
million remains undrawn. This fund will provide asset-backed
loans to prime real estate development projects that are best in
class in terms of energy efficiency and environmental standards. We
believe these loans offer an outstanding risk-reward proposition
with multiple layers of downside protection including seniority in
the capital structure, loan-to-value ratios of below 65% and third
party guarantees as additional collateral where required. The
strategy has historically generated returns of circa 11% annually
since inception.
In January we sold our position in Atlantica Yield and
crystallised a loss in the period. We reacted to fears related to
the bankruptcy of California
utility PG&E, which is the offtaker for Atlantica’s
Mojave solar project (280MW).
Although we believed that a positive resolution, which would
safeguard payments to Atlantica, was achievable, we decided that
Brookfield Renewable Partners offered better probability-weighted
future returns at that moment and swiftly reallocated our
capital.
Private Investments
Our portfolio of private investments represented 35.9% of our
total NAV as at 30 June 2019 and
detracted 0.5% from our NAV.
Investment |
Increase/Decrease % |
Contribution to NAV % |
Perfin Apollo 12 |
158.9 |
1.6 |
X-ELIO |
6.0 |
1.3 |
Calvin Capital |
5.2 |
0.3 |
ADO Group |
(32.6) |
(3.8) |
WCP Growth |
6.0 |
0.1 |
Total |
|
(0.5) |
Figure 4. Source: Frostrow Capital LLP
Although X-ELIO, the Spanish solar operator and
developer, remained our single largest holding representing 19.5%
of NAV at the half year end, Brookfield Renewable Partners and KKR
announced an agreement to form a 50/50 joint venture for the group
at the start of July. Brookfield will acquire a 50% stake in X-ELIO
from existing investors for a total commitment in the region of
$500 million, with the deal expected
to close in Q4 2019. We intend to sell 50-75% of our holding in the
transaction. If the deal completes as expected, this will be the
first significant successful realisation from our portfolio of
private investments.
In March we received a positive update from Perfin Apollo
12, which is developing electricity transmission line
infrastructure in Brazil. Each of
Perfin’s three greenfield projects are progressing ahead of
schedule. Moreover, the group has been able to increase its use of
project financing and achieve a lower cost of debt than was
originally forecast. Consequently, in light of improved visibility
on both construction costs and debt financing, the manager marked
up the value of our investment.
In the same month, we also entered into an agreement for a new
co-investment managed by private equity firm Apollo. This is a
private investment alongside General Oriental, the Goldsmith family
investment vehicle, in the listed Israeli holding company, ADO
Group, which effectively controls ADO Properties. This
effectively provides us with exposure to the Berlin real estate portfolio owned by ADO
Properties at a discount. In line with our previous co-investments,
this will be on a fee-free basis. Importantly, ADO Properties
offers a near symbiotic relationship between increasing energy
efficiency (from upgrading its building stock) and growing real
estate values (derived from higher rents).
Initially, we incurred a significant write-down on this
investment, which was driven by fears around the impact of a
proposed local government bill to freeze rents on residential
properties in Berlin for five
years. With the draft bill appearing unlikely to alleviate the
current shortage of residential apartments in the city, we did not
believe the intrinsic value of the underlying real estate portfolio
ever changed despite the market reaction. Consequently, we were
pleased when it was recently announced that ADLER Real Estate AG
had entered into a merger agreement with ADO Group in September,
with the agreed consideration representing a premium to our
original investment price. The transaction is expected to close in
December this year.
Foreign Exchange Forwards
Our currency hedging strategy remains unchanged and we continue
to use the foreign exchange forwards, which we initiated in 2017.
Our sole aim is to lower the volatility of our sterling denominated
returns by reducing our non-sterling exposure related to our
investments denominated in other currencies. We expect to continue
employing this strategy.
Outlook
Our quoted portfolio consists of competitively advantaged
businesses, which benefit from robust barriers to entry and which
can deliver material earnings growth over the long term. We expect
our yield investments to be bolstered by the TCI Real Estate
Partners III Fund as it calls down capital in due course. We
believe our private investments represent a source of value which
will continue to emerge over time. Meanwhile the completion of the
partial sale of our stake in X-ELIO will provide us with fresh
liquidity for new opportunities which meet our strict investment
criteria, while realising a significant gain for shareholders.
We remain conscious that global economic growth is slowing.
Meanwhile investors today are having to contend with significant
external risks to business models, such as the threat from climate
change, disruption from technological innovation and rapidly
evolving consumer tastes and expectations. By their very nature,
these risks are difficult to quantify and evaluate. Consequently,
we will continue to own businesses which are both sustainable and
competitively advantaged, with real and resilient barriers to
entry. In our view, such businesses possess the best prospects in a
world of rapid change, increasing environmental challenges and
growing disruption.
We remain fully aligned with shareholders, with our own capital
invested in the Company, and will maintain a focus on capital
preservation by deploying it into opportunities which offer the
best balance between risk and reward across asset classes.
Menhaden Capital Management LLP
Portfolio Manager
24 September 2019
REGULATORY DISCLOSURES
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company were
explained in detail within the Company’s prospectus issued in
July 2015 (the “Prospectus”) and the
Annual Report for the year ended 31 December
2018 (the “Annual Report”). The Directors are not aware of
any new risks or uncertainties for the Company and its investors
for the period under review and moving forward, beyond those stated
within the Prospectus and the Annual Report.
Related Parties Transactions
During the first six months of the current financial year, no
transactions with related parties have taken place which have
materially affected the financial position or the performance of
the Company.
Going Concern
The Directors believe, having considered the Company’s
investment objective, risk management policies, capital management
policies and procedures, the nature of the portfolio and the
expenditure projections, that the Company has adequate resources,
an appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the
foreseeable future and, more specifically, that there are no
material uncertainties pertaining to the Company that would prevent
its ability to continue in such operational existence for at least
twelve months from the date of the approval of this half year
report. For these reasons, the Directors consider there is
reasonable evidence to continue to adopt the going concern basis in
preparing the accounts.
Directors’ Responsibilities
Statement
The Board of Directors confirms that, to the best of its
knowledge:
- the condensed set of financial statements contained within the
half year report has been prepared in accordance with FRS 104
‘Interim Financial Reporting’ and gives a true and fair view of the
assets, liabilities, financial position and return of the Company;
and
- the interim management report includes a fair review of the
information required by sections 4.2.7R and 4.2.8R of the UK
Listing Authority Disclosure and Transparency Rules.
In order to provide these confirmations, and in preparing these
financial statements, the Directors are required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and accounting estimates that are reasonable
and prudent;
- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business;
and the Directors confirm that they have done so.
This half year report contains certain forward-looking
statements. These statements are made by the Directors in
good faith based on the information available to them up to the
date of this report and such statements should be treated with
caution due to the inherent uncertainties, including both economic
and business risk factors, underlying any such forward-looking
information.
Sir Ian Cheshire
Chairman
24 September 2019
CONDENSED INCOME STATEMENT |
|
|
Six months to 30 June 2019
(unaudited)
(unaudited) |
Six months to 30 June 2018
(unaudited) |
|
Note |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Gains/(losses) on
investments at fair value through profit or loss |
|
- |
9,442 |
9,442 |
- |
1,185 |
1,185 |
Income from
investments |
5 |
792 |
- |
792 |
989 |
- |
989 |
AIFM and portfolio
management fees |
6 |
(116) |
(464) |
(580) |
(106) |
(423) |
(529) |
Other expenses |
|
(222) |
- |
(222) |
(201) |
- |
(201) |
Net return before
taxation |
|
454 |
8,978 |
9,432 |
682 |
762 |
1,444 |
Taxation on net
return |
|
(38) |
- |
(38) |
(101) |
- |
(101) |
Net return after
taxation |
|
416 |
8,978 |
9,394 |
581 |
762 |
1,343 |
Return per
share |
7 |
0.5p |
11.2p |
11.7p |
0.7p |
1.0p |
1.7p |
The total column of this statement is the profit and loss
account of the Company. The supplementary revenue and capital
columns are prepared under guidance issued by the Association of
Investment Companies’ Statement of Recommended Practice.
All revenue and capital items in the above statement derive from
continuing operations.
There are no recognised gains or losses other than those shown
above and therefore no Statement of Total Comprehensive Income has
been presented.
CONDENSED STATEMENT OF CHANGES IN EQUITY
|
Share
capital £’000 |
Special reserve £’000 |
Capital reserve £’000 |
Revenue reserve £’000 |
Total
£’000 |
Six months to 30 June 2018 (unaudited) |
|
|
|
|
|
Balance at 31
December 2017 |
800 |
77,371 |
(4,539) |
60 |
73,692 |
Net return after
taxation |
- |
- |
762 |
581 |
1,343 |
Balance at 30 June
2018 |
800 |
77,371 |
(3,777) |
641 |
75,035 |
Six months to 30 June 2019 (unaudited) |
|
|
|
|
|
Balance at 31
December 2018 |
800 |
77,371 |
(6,447) |
784 |
72,508 |
Net return after
taxation |
- |
- |
8,978 |
416 |
9,394 |
Dividends paid |
- |
- |
- |
(560) |
(560) |
Balance at 30 June
2019 |
800 |
77,371 |
2,531 |
640 |
81,342 |
CONDENSED STATEMENT OF FINANCIAL POSITION
|
As at
30 June 2019 (unaudited)
£’000 |
As at
31 December 2018
(audited)
£’000 |
Note
Fixed assets |
|
|
Investments at fair
value through profit or loss |
80,773 |
65,611 |
Current
assets |
|
|
Debtors |
110 |
131 |
Cash |
1,512 |
7,732 |
|
1,622 |
7,863 |
Current
liabilities |
|
|
Derivative financial
instruments at fair value through profit or loss |
(866) |
(784) |
Creditors: amounts
falling due within one year |
(187) |
(182) |
|
(1,053) |
(966) |
|
|
|
Net current
assets |
569 |
6,897 |
Net assets |
81,342 |
72,508 |
Capital and
reserves |
|
|
Ordinary share
capital |
800 |
800 |
Special reserve |
77,371 |
77,371 |
Capital reserve |
2,531 |
(6,447) |
Revenue reserve |
640 |
784 |
Equity
shareholders’ funds |
81,342 |
72,508 |
Net asset value per
share
8 |
101.7p |
90.6p |
CONDENSDED CASH FLOW STATEMENT
|
|
Six
months to 30 June 2019
(unaudited)
£’000 |
Six
months to 30 June 2018
(unaudited)
£’000 |
|
|
|
|
Net cash (outflow)
/ inflow from operating activities |
|
(24) |
83 |
Investing
activities |
|
|
|
Purchases of
investments |
|
(18,713) |
(20,100) |
Sales of
investments |
|
13,077 |
18,258 |
Net cash outflow
from investing activities |
|
(5,636) |
(1,842) |
Financing
activities |
|
|
|
Dividends paid |
|
(560) |
- |
Decrease in cash
and cash equivalents |
|
(6,220) |
(1,759) |
Cash and cash
equivalents at beginning of period |
|
7,732 |
9,987 |
Cash and cash
equivalents at end of period |
|
1,512 |
8,228 |
Notes to the Condensed Interim
Financial Statements
1. Financial
Statements
The condensed financial statements contained in this interim
financial report do not constitute statutory accounts as defined in
s434 of the Companies Act 2006. The financial information for the
six months to 30 June 2019 and
30 June 2018 has not been audited or
reviewed by the Company’s external auditors.
The information for the year ended 31
December 2018 has been extracted from the latest published
audited financial statements. Those statutory financial statements
have been filed with the Registrar of Companies and included the
report of the auditors, which was unqualified and did not contain a
statement under Sections 498(2) or (3) of the Companies Act
2006.
2. Accounting
policies
These condensed financial statements have been prepared on a
going concern basis in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority, FRS 104
‘Interim Financial Reporting’, the Statement of Recommended
Practice ‘Financial Statements of Investment Trust Companies and
Venture Capital Trusts’ issued in November
2014 and updated in January
2019 and using the same accounting policies as set out in
the Company’s Annual Report for the year ended 31 December 2018.
3. Going
concern
After making enquiries, and having reviewed the investments,
Statement of Financial Position and projected income and
expenditure for the next 12 months, the Directors have a reasonable
expectation that the Company has adequate resources to continue in
operation for the foreseeable future. The Directors have therefore
adopted the going concern basis in preparing these financial
statements.
4. Principal
Risks and Uncertainties
The principal risks facing the Company together with an
explanation of these risks and how they are managed is contained in
the Strategic Report and note 14 of the Company’s Annual Report for
the year ended 31 December 2018.
5. Income
|
Six
months to
30 June 2019
£’000 |
Six
months to
30 June 2018
£’000 |
Income from
investments |
|
|
UK dividends |
- |
71 |
Overseas
dividends |
785 |
911 |
Fixed interest
income |
7 |
7 |
Total
income |
792 |
989 |
6. AIFM
and portfolio management fees
|
Six months to 30 June 2019 (unaudited) |
Six months to 30 June 2018 (unaudited) |
|
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
AIFM fee |
18 |
71 |
89 |
16 |
65 |
81 |
Portfolio management
fee |
98 |
393 |
491 |
90 |
358 |
448 |
|
116 |
464 |
580 |
106 |
423 |
529 |
7. Return
per share
The revenue and capital returns per share are based on
80,000,001 shares, being the weighted average number of Ordinary
shares in issue during the six months to 30
June 2019 and 30 June
2018.
The calculation of the total, revenue and capital losses per
share is carried out in accordance with IAS 33, “Earnings per
Share”.
8. Net
asset value per share
The net asset value per share is based on the number of shares
in issue at 30 June 2019 and
31 December 2018 of 80,000,001.
9. Transaction
Costs
Purchase transaction costs for the six months ended 30 June 2019 were £2,000 (six months ended
30 June 2018: £7,000). These comprise
mainly commission and stamp duty. Sales transaction costs for
the six months ended 30 June 2019
were £9,000 (six months ended 30 June
2018: £12,000). These comprise mainly commission.
10. Fair
value hierarchy
The methods of fair value measurement are classified into a
hierarchy based on reliability of the information used to determine
the valuation.
Level 1 |
- Quoted prices in
active markets. |
Level 2 |
- Inputs other than
quoted prices included within Level 1 that are observable (i.e.
developed using market data), either directly or indirectly. |
Level 3 |
- Inputs are
unobservable (i.e. for which market data is unavailable) |
The table below sets out the Company’s fair value hierarchy
investments as at 30 June 2019.
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
As at 30 June 2019 |
|
|
|
|
Investments |
49,971 |
- |
30,802 |
80,773 |
Derivatives |
- |
(866) |
- |
(866) |
|
|
|
|
|
As at 31 December 2018 |
|
|
|
|
Investments |
42,814 |
159 |
22,638 |
65,611 |
Derivatives |
- |
(784) |
- |
(784) |
For further information please contact:
Frostrow Capital LLP
Company Secretary
020 3709 8734
www.frostrow.com
A copy of the Half Year Report has been submitted to the
National Storage Mechanism and will shortly be available for
inspection at http://www.morningstar.co.uk/uk/NSM
The Half Year Report will also shortly be available on the
Company's website at www.menhaden.com where up to date
information on the Company, including NAV, share prices and fact
sheets, can also be found.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into or forms part of this
announcement.
ENDS