THE LAXEY INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT OF HALF-YEARLY RESULTS FOR THE PERIOD ENDED
31 MARCH 2008
The Directors announce the unaudited statement of results for the period ended
31 March 2008 as follows:
INVESTMENT MANAGER'S REPORT
The unaudited results for the six months ended 31 March 2008 show a gross
revenue of �134,973 (31 March 2007: �162,222), (30 September 2007: �318,049)
and after deducting management expenses and taxation there was a deficit of �
60,901 (31 March 2007: profit �14,949), (30 September 2007: �89,289). There was
also a capital surplus of �229,767 (31 March 2007: deficit �1,196,090), (30
September 2007: �739,879). The combined revenue and capital returns resulted in
a profit for six months ended 31 March 2008 of �168,866 (31 March 2007: loss �
1,181,141),
(30 September 2007: �650,590) and a welcome increase in the net asset value of
The Laxey Investment Trust to 105.41p (31 March 2007: 86.46p), (30 September
2007: 103.81p) representing an increase over the six months of 1.5%.
On the 6 March 2007 The Laxey Investment Trust ("LIT") entered into a two year
realisation/transition phase that will see its existing investments in various
Sri Lankan tea companies realised and the proceeds re-invested in accordance
with its new investment policy. That policy is one of an active value investor
and represents the core strategy of the Investment Manager, Laxey Partners (UK)
Limited. Under the Articles of Association and following the continuation vote
in 2007, a further EGM or AGM must be held before the end of the two year
continuation period that is on or before 6 March 2009 to determine whether or
not The Laxey Investment Trust should continue as an investment trust for a
further period (not exceeding three years). Shareholders will be given the
opportunity to redeem all or a proportion of their shares at or close to Net
Asset Value at that time or, if the Company is able to raise additional funds,
to continue on with the new strategy.
In pursuance of this policy change the Investment Manager has since March 2007
embarked on a divestment programme and acquired liquid assets. At the 31 March
2008 approximately 25% of the LIT portfolio remained in Sri Lankan investments.
The Company's Sri Lankan unlisted investments have been subject to an
independent valuation which has produced a range of valuations for each of the
three companies, the lower of which has been used in each case. Details of the
valuation are available on request from the Company Secretary.
At the start of 2008, the Sri Lankan government formally declared that the 2002
ceasefire agreement between it and the Liberation Tigers of Tamil Eelam ("LTTE"
or the "Tamil Tigers") was off. The government believes that Sri Lanka is in
the last stages of war, a war it is close to winning. Observers believe
otherwise. The consequences of an escalation in hostilities from an economic
standpoint can only aggravate Sri Lanka's prospects. In 2007, inflation reached
almost 16%, rising fuel costs are expected to worsen the Sri Lankan budget
deficit as 30% of that currently goes on fuel subsidies, which indirectly or
directly will eventually be passed on to Sri Lankans, and this is before the
government takes account of how much increased military action will cost.
Tea prices have, however, remained strong as Sri Lankan prices continue to
reflect the fall out from the 2007 Presidential Election in Kenya.
Outside Sri Lanka, current market conditions reflect the uncertain position of
banks' and financial institutions. It
has evertheless been possible for LIT to identify investment opportunities.
We shall continue to be an active investor ensuring that the management of the
investee companies is held to account by its shareholders. We see the year
ahead as one of many opportunities for well financed and stable companies.
Consequently, we will continue to take market exposure where we feel we are
being rewarded for it, and we will continue to maintain low levels of leverage
so that we can take advantage of opportunities when they arise.
Portfolio Review
Background
Implenia was formed following the merger of two leading Swiss construction
companies in early 2006. It provides general contracting, industrial and
commercial construction services as well as real estate development. With a
market cap of approximately $600m, Implenia has a high quality balance sheet,
as well as a land bank with substantial value potential. Due to its attractive
positioning in Switzerland - Implenia is the undisputed market leader at around
3x the size of its closest rival - it is of strategic interest for leading
European contractors.
Across all funds, Laxey owns approximately 38% having steadily increased the
stake since we first became invested in early 2006. On 2 November 2007, having
amassed more than a 33 1/3% stake, we announced a mandatory cash bid for
Implenia at CHF33.23 per share.
The Implenia board considers our actions hostile and continues to refuse to
properly register the full voting rights of our holding beyond a 4.9% stake.
Furthermore, the Swiss Federal Banking Commission has ruled that Laxey Partners
violated disclosure rules when building our stake but we strongly disagree.
As at 31 March 2008 LIT had a 0.52% economic interest in Implenia AG, worth �
1,482,185, 13.32% of the fund's NAV.
Update: Implenia AG
It is somewhat ironic to receive criticism from the Swiss about disclosure. It
is also yet another example of how far management will go to protect their
position. Where else could management seriously attempt to disenfranchise an
international investor who had abided by the rules as they stood when the
investment was made? We will pursue this attempted disenfranchisement not just
for our benefit, but for all shareholders in Implenia and in Swiss companies
generally.
CFDs are international instruments widely used by international investors in
international markets that should be well understood by the regulators
responsible for those markets. We have quite openly stated that disclosure
rules should be changed so that CFD disclosure is the same as it is for
ordinary shares. Until that happens no investor can possibly be under any
obligation in any market other than to adhere to the law as it exists at the
time.
The changes in Swiss disclosure became law in December 2007. We had declared
our full stake in Implenia long before that. The problem is that for some
reason the Swiss Banking Commission is trying to apply the law changes
retrospectively and is refusing to accept, or even listen to, arguments as to
what a CFD actually is and what it is internationally accepted to be. The Swiss
Banking Commission has shown a poor understanding of international markets.
Even under the new Swiss disclosure rules, it doesn't seem clear how the
disclosure of CFDs would work in practice.
CivicaPLC
Civica PLC provides specialised software to the UK public sector. The company
has been benefiting from the need for local authorities to update their systems
to adjust to new and increasing legislation and from a trend towards
e-government platforms that enable the public to interact with authorities via
the internet. The company has a strong order book and a very good revenue
visibility given its software maintenance revenue.
In a rapidly consolidating sector - with its competitor Northgate IS plc
already under offer from KKR - on the 28 March 2008 Civica announced that 3i
Investors had made an offer for the entire company. This offer became
unconditional on the 21 April 2008, with acceptances from over 90% of the
shareholder register; including the stake held by the funds of Laxey Partners.
We had expected Civica to benefit from this trend and the company itself had
confirmed its confidence in its prospects at its AGM on the 27 February 2008.
We acquired Civica at an average cost price of 184p per share against a tender
price of 270p per share; an uplift of approximately 47%.
As at 31 March 2008 LIT had a 0.79% economic interest in Civica, worth �
1,331,250, 11.96% of the fund's NAV.
Update: Sambu Construction Company Limited ("Sambu")
A Korean company, Sambu specialises in government construction projects and
building office blocks, industrial plants, hotels, apartments, schools and
shopping malls.
Since our last update, Laxey Partners, which holds a 7.39% stake in Sambu, used
the company's March AGM in Korea to call for a clear mandate that Sambu develop
its considerable land holdings, which include areas in Seoul's prestigious
Kangnam district. We believe that a more focused business strategy is the key
to unlocking shareholder value.
We continue to maintain that Sambu has numerous assets and an excellent
business that our research tells us is deeply discounted to its intrinsic
value. We also believe that its very desirable asset base would be of great
interest to a financial or strategic buyer especially as one of it's assets,
the Renaissance Hotel, is located on Tehran Road in Kangnam, where office
vacancy rates are almost zero.
The holding has produced an ROI of 61% since first investment to the 31 March
2008.
As at 31 March 2008 LIT had a 0.76% economic interest in Sambu, worth �
1,320,701, 11.87% of the fund's NAV.
Laxey Partners (UK) Limited
30 May 2008
Investment Holdings
As at 31 March 2008 As at 30 September 2007
% of
total
Country of net
Operation Holding Market value assets Holding Market value
Listed Investments � �
Implenia AG Switzerland 96,800 1,482,185 13.32 96,800 1,321,849
Civica PLC UK 500,000 1,331,250 11.96 - -
Sambu Construction Korea 57,640 1,320,701 11.87 57,640 1,879,618
James Finlay Sri Lanka 1,395,418 1,056,728 9.49 1,395,418 905,657
Commercial Group UK 675,000 789,750 7.10 675,000 1,417,500
Metropolitan Resource Holdings Sri Lanka 2,481,027 648,476 5.83 2,481,027 432,081
Everest Babcock & Brown NVP Australia 539,871 617,420 5.55 - -
AG Capital Interr Fund Russia 876,000 577,389 5.19 1,200,000 777,481
Raven Russia Russia 615,598 489,400 4.40 615,598 610,981
Vision Opportunity Guernsey 800,000 406,541 3.65 - -
Kegalle Plantation Sri Lanka 1,294,200 362,432 3.26 1,294,200 235,190
Land Securities GP UK 22,900 345,561 3.10 - -
Brewin Dolphin UK 236,943 326,981 2.94 100,000 183,750
AG Capital Interr Fund (RUB) Russia 313,000 221,563 1.99 - -
Hyundai H&S Korea 5,412 202,092 1.82 - -
Nippon Commercial REIT Japan 91 173,420 1.56 91 193,786
Bulgarian Land Development Fund Bulgaria 200,000 144,000 1.29 200,000 164,000
Pacific Alliance Asia China 143,170 99,409 0.89 205,270 123,927
Hammerson UK 8,000 89,120 0.80 - -
Ceiba Investments Cuba 101,000 84,549 0.76 100,000 76,783
Kelani Valley Plantations Sri Lanka 116,900 36,966 0.33 116,900 27,819
Maskeliya Plantations Sri Lanka 296,600 35,993 0.32 296,600 29,517
Inland UK 72,200 21,299 0.19 72,200 29,602
ITACare Capital Brazil 41,000 19,185 0.17 41,000 19,520
United International Securities Singapore 26,000 15,662 0.14 26,000 14,958
MCO CR-REIT Korea 3,470 15,408 0.14 3,470 14,517
Amanah Millenia Fund Malaysia 417,900 0 0.00 417,900 65,012
10,913,480 98.06 8,523,548
Unlisted Investments*
East European Development+ Poland 38,726 1,683,283 15.13 38,726 1,473,783
Forbes Plantations (Pvt) Limited* Sri Lanka 12,500,000 950,981 8.54 12,500,000 383,464
Ceytea Plantation Management Limited* Sri Lanka 3,136,500 745,139 6.70 3,136,500 580,705
Aitken Spence Plantations Management Limited* Sri Lanka 2,500,000 712,827 6.40 2,500,000 499,855
EMAC Illyrian Land Fund II+ East Europe 50,000 39,806 0.36 50,000 13,961
4,132,036 37.13 2,951,768
Contracts for difference
CFD Investments Various 0 0.00 174
0 0.00 174
Investments 15,045,516 135.19 11,475,490
Net Current Liabilities (3,916,202) (35.19) (515,042)
Net Assets 11,129,314 100.00 10,960,448
The total number of investments at 31 March 2008 was 33.
* Unquoted investments value provided by an independent valuer.
+ Valued at Director's valuation.
Income Statement (unaudited)
For the six months to For the six months to For the year to
31 March 2008 31 March 2007 30 September 2007
Revenue Capital Total Revenue Capital Total Revenue Capital Total
� � � � � � � � �
Gains/(losses)
on investments
at fair value - 366,093 366,093 - (1,174,492) (1,174,492) - 802,547 802,547
Income from
investments 133,473 - 133,473 155,677 - 155,677 284,630 13,865 298,495
Exchange
(losses)/gains on
capital items - (41,495) (41,495) - 2,868 2,868 - 3,838 3,838
Interest
receivable and other
income 1,500 - 1,500 6,545 - 6,545 33,419 - 33,419
134,973 324,598 459,571 162,222 (1,171,624) (1,009,402) 318,049 820,250 1,138,299
Investment
management fee (26,802) (26,801) (53,603) (24,465) (24,466) (48,931) (49,972) (49,972) (99,944)
Other
administrative
expenses (105,946) (14,921) (120,867) (112,982) - (112,982) (307,389) - (307,389)
Return on ordinary activities
before finance costs and
taxation 2,225 282,876 285,101 24,775 (1,196,090) (1,171,315) (39,312) 770,278 730,966
Interest payable and similar
charges (53,109) (53,109) (106,218) (41) - (41) (30,398) (30,399) (60,797)
Return on ordinary activities
before taxation (50,884) 229,767 178,883 24,734 (1,196,090) (1,171,356) (69,710) 739,879 670,169
Taxation (10,017) - (10,017) (9,785) - (9,785) (19,579) - (19,579)
Return on
ordinary activities
after taxation (60,901) 229,767 168,866 14,949 (1,196,090) (1,181,141) (89,289) 739,879 650,590
Return per
Ordinary share
(pence) 0.58) 2.18 1.60 0.14 (11.33) (11.19) (0.85) 7.01 6.16
The total column of this statement is the profit and loss account of the Company.
All of the Company's activities derive from continuing operations.
Comparative figures have been extracted from the accounts for the period ended
31 March 2007 and the statutory accounts
for the year ended 30 September 2007.
Condensed Balance Sheet (unaudited)
As at As at As at
31 March 2008 31 March 30 September
2007 2007
� � �
Assets
Investments at fair value through profit
or loss 15,045,516 8,047,051 11,475,490
Current assets
Debtors 92,553 99,103 2,998,472
Cash at bank 23,263 1,766,882 8,953
115,816 1,865,985 3,007,425
Creditors ; amounts falling due within one
year
Creditors 591,662 784,319 284,801
Overdraft facility 3,440,356 - 3,237,666
4,032,018 784,319 3,522,467
Net current (liabilities)/assets (3,916,202) 1,081,666 (515,042)
Net assets 11,129,314 9,128,717 10,960,448
Capital and reserves
Called-up share capital 2,639,429 2,639,429 2,639,429
Share premium account 5,662,800 5,662,800 5,662,800
Capital reserve 3,308,478 1,142,742 3,078,711
Revenue reserve (481,393) (316,254) (420,492)
Shareholders' funds 11,129,314 9,128,717 10,960,448
Net Asset Value per Ordinary share
(excluding current period revenue loss) 105.99p 86.32p 104.66p
Net Asset Value per Ordinary share
(including current period revenue loss) 105.41p 86.46p 103.81p
The Net Asset Value per Ordinary share is based on 10,557,717 Ordinary shares
in issue.
Reconciliation of Movements In Shareholders' Funds (unaudited)
Share Share Capital Revenue
capital premium reserve reserve Total
� � � � �
Six months ended 31
March 2008
At 1 October 2007 2,639,429 5,662,800 3,078,711 (420,492) 10,960,448
Net return after
taxation for the period - - 229,767 (60,901) 168,866
At 31 March 2008 2,639,429 5,662,800 3,308,478 (481,393) 11,129,314
Six months ended 31
March 2007
At 1 October 2006 2,639,429 5,662,800 2,338,832 (331,203) 10,309,858
Net return after
taxation for the period - - (1,196,090) 14,949 (1,181,141)
At 31 March 2007 2,639,429 5,662,800 1,142,742 (316,254) 9,128,717
Year ended 30 September
2007
At 1 October 2006 2,639,429 5,662,800 2,338,832 (331,203) 10,309,858
Net return after
taxation for the year - - 739,879 (89,289) 650,590
At 30 September 2007 2,639,429 5,662,800 3,078,711 (420,492) 10,960,448
Condensed Cash Flow Statement (unaudited)
For the For the For the
six six
year to
months months to
to 30
31 March September
31 March 2007 2007
2008
� � �
Net cash outflow from operating activities (77,632) (4,503) (83,293)
Servicing of finance (107,866) (41) (42,038)
Income taxes paid (10,017) (9,785) (19,579)
Net cash inflow/(outflow) from capital
expenditure and financial investment 47,085 2,436,583 (3,456,150)
Effect of foreign exchange rate changes (39,950) 2,868 3,838
(Decrease)/increase in cash (188,380) 2,425,122 (3,597,222)
Notes to the Financial Statements
1. ACCOUNTING POLICIES
A summary of the principal accounting policies, all of which have been
consistently applied throughout the period, is
set out below:
a) Basis of accounting
The financial statements are prepared in accordance with United Kingdom
applicable accounting standards and with the
Statement of Recommended Practice 'Financial Statements of Investment Trust
Companies', issued in 2003 and revised in
December 2005.
b) Valuation of investments
All investments are classified as 'fair value through profit or loss'.
Investments are initially recognised at cost
being the fair value of consideration given.
After initial recognition investments are measured at fair value, with
unrealised gains and losses on investments and
impairment of investments recognised in the income statement and allocated to
capital. Realised gains and losses on
investments sold are calculated as the difference between sale proceeds and
cost.
The entity manages and evaluates the performance of these investments on a fair
value basis in accordance with its
investment strategy.
Unquoted Plantation Management Companies have been fair valued by an external
valuer at the period end. These
valuations have been adopted by the Directors.
Other unquoted investments are valued by the Directors, at fair value based on
latest dealing prices, stockbroker
valuations or other information, as appropriate. This valuation incorporates
all factors that market participants would
consider in setting a price.
Quoted investments are valued at closing bid market prices or last traded price
where bid prices are not regularly and
readily available.
Contracts for difference are synthetic equities and the unrealised gain or loss
is disclosed with reference to the
investments' underlying bid prices.
The Company is taking advantage of FRS9 which enables it to treat holdings over
20% of a company's share capital as a
normal investment and not as an associate.
c) Foreign currency
Transactions denominated in foreign currencies are recorded at actual exchange
rates as at the date of the transaction
or, where appropriate, at the rate of exchange in a related forward contract.
Monetary assets and liabilities
denominated in foreign currencies at the period end are reported at the rates
of exchange prevailing at the period end
or, where appropriate, at the rate of exchange in a related forward exchange
contract. Any gain or loss arising from a
change in exchange rates subsequent to the date of the transaction is included
as an exchange gain or loss in capital
reserve or in the revenue account depending on whether the gain or loss is of a
capital or revenue nature respectively.
d) Income
Dividends receivable on investments are included in the income statement on an
ex-dividend basis. Dividends receivable
on equity shares where no ex-dividend date is quoted are brought into account
when the Company's right to receive
payment is established.
Fixed returns on debt securities are recognised on a time apportionment basis
so as to reflect the effective yield on
the debt security. Bank deposit interest is accounted for on an accruals basis.
e) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the revenue column of the income
statement except as follows:
- management fee and interest payable has been allocated 50% to capital
and 50% to revenue which represents the
Directors' expectation of the split of long term returns between
capital and revenue
- expenses which are incidental to the acquisition or disposal of an
investment are treated as capital and
separately identified and disclosed.
f) Taxation
The taxation charge is based on taxable income for the period. Withholding tax
deducted from income received is treated
as part of the taxation charge. Deferred tax is recognised in respect of all
timing differences that have originated
but not reversed at the balance sheet date where transactions or events result
in an obligation to pay more, or right
to pay less tax in the future have occurred at the balance sheet date.
This is subject to deferred tax assets only being recognised if it is
considered more likely than not that there will
be profits from which the future reversal of the underlying timing differences
can be deducted. Timing differences are
differences between the Company's taxable profits and its results as stated in
the financial statements which are
capable of reversal in one or more subsequent periods.
g) Capital reserves
Capital Reserve - Realised
The following are accounted for in this reserve:
- gains and losses on the realisation of investments
- realised exchange differences of a capital nature
- expenses, together with related taxation effect, in accordance with the
above policies
Capital Reserve - Unrealised
The following are accounted for in this reserve:
- increases and decreases in the valuation of investments held at the
period end
- unrealised exchange differences of a capital nature
2. INCOME
6 months to 6 months to Year to
31 March 2008 31 March 2007 30 September 2007
� � �
Income from investments
UK net dividend income 48,663 - -
Unfranked investment income - 57,144 57,144
Overseas dividends 84,810 98,533 241,351
133,473 155,677 298,495
Other income
Deposit interest 1,500 6,545 33,419
Total income 134,973 162,222 331,914
Total income comprises:
Dividends 133,473 98,533 241,351
Deposit interest 1,500 63,689 90,563
134,973 162,222 331,914
3. GAINS/(LOSSES) ON INVESTMENTS
6 months 6 months
to to Year to
31 March 31 March 30 September
2008 2007 2007
� � �
Realised (losses)/gains on sales (106,989) 645,233 3,363,476
Increase/(decrease) in unrealised
appreciation/(depreciation) 473,082 (1,819,725) (2,560,929)
366,093 (1,174,492) 802,547
4. TAXATION
6 months to 6 months to Year to
31 March 2008 31 March 2007 30 September 2007
� � �
Foreign tax suffered 10,017 9,785 19,579
The tax assessed for the period is higher than the standard rate of corporation
tax of 30% (2007: 30%) due to the
payment of overseas tax which is not recoverable.
5. RETURN PER ORDINARY SHARE
Revenue return per Ordinary share is based on the net loss on ordinary
activities after taxation of �60,901 (31 March
2007: gain �14,949) (30 September 2007: �89,289) and on 10,557,717 (31 March
2007: 10,557,717) (30 September 2007:
10,557,717) Ordinary shares, being the weighted average number of shares in
issue throughout the period.
Capital return per Ordinary share is based on the net capital gains for the
period of �229,767 (31 March 2007: losses
�1,196,090) (30 September 2007: �739,879) and on 10,557,717 (31 March 2007:
10,557,717) (30 September 2007: 10,557,717)
Ordinary shares, being the weighted average number of shares in issue
throughout the period.
Total return per Ordinary share is based on the net profit on ordinary
activities after taxation of �168,866 (31 March
2007: loss �1,181,141) (30 September 2007: �650,590) and on 10,557,717 (31
March 2007: 10,557,717) (30 September 2007:
10,557,717) Ordinary shares, being the weighted average number of shares in
issue throughout the period.
6. CALLED UP SHARE CAPITAL
6 months to 6 months to Year to
31 March 31 March 30 September
2008 2007 2007
� � �
Authorised
18,000,000 Ordinary shares of 25p
each 4,500,000 4,500,000 4,500,000
Allotted, called-up and fully
paid
10,557,717 Ordinary shares of 25p
each 2,639,429 2,639,429 2,639,429
7. RECONCILIATION OF NET RETURN TO NET CASH OUTFLOW FROM OPERATING ACTIIVITIES
6 months 6 months
to to Year to
31 March 31 March 30 September
2008 2007 2007
� � �
Return on ordinary activities before
finance costs and taxation 285,101 (1,171,315) 730,966
Net capital return before finance costs (282,876) 1,196,090 (770,278)
Investment management fee charged to
capital (26,801) (24,466) (49,972)
Costs relating to investments charged to
capital (14,921) - -
Reinvested dividends - - (15,000)
Increase in debtors (62,769) (44,478) (500)
Increase in creditors 24,634 39,666 7,626
Capital dividend received - - 13,865
Net cash outflow from operating activities (77,632) (4,503) (83,293)
8. POST BALANCE SHEET EVENTS
On 1 May 2008 Jonathan Colvile retired from the Board of Directors.
9. RELATED PARTY TRANSACTIONS
Laxey Partners (UK) Limited, the Investment Manager, of which Colin Kingsnorth
is a director, is a related party.
The total investment management charge payable to Laxey Partners (UK) Limited
in the income statement for the period
was �53,603 (31 March 2007: �48,931) (30 September 2007: �99,944).
Responsibility Statement
The Directors have chosen to prepare the financial statements for the Company
in accordance with United Kingdom
Generally Accepted Accounting Practice ("UK GAAP")
In preparing these condensed financial statements for the period to 31 March
2008, we the Directors, confirm that to
the best of our knowledge:
(a)*the condensed set of financial statements has been prepared in accordance
with pronouncement on interim reporting
issued by **.Accounting Standards Board;
(b)*the Investment Manager's Report includes a fair review of the information
required by DTR 4.2.7R (indication of
important events during ** the first six months and description of
principal risks and uncertainties for the
remaining six months of the year);
(c)*the condensed set of financial statements give a true an fair view in
accordance with UK GAAP of the state of
affairs of the Company and **.of the profit and loss of the Company for
that period and comply with UK GAAP and
Companies Act 1985 and;
(d)*the Investment Manager's Report includes a fair review of the information
required by DTR 4.2.8R (disclosure of
related parties' **.transactions and changes therein).
This Half-yearly Financial Report has not been audited or reviewed by the
auditors.
By Order of the Board
David Panter
Chairman
30 May 2008
END
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