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Pin to quick picksLindsell Train Regulatory News (LTI)

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Change to the LTL Valuation Methodology

7 Apr 2022 07:00

The Lindsell Train Investment Trust Plc - Change to the LTL Valuation Methodology

The Lindsell Train Investment Trust Plc - Change to the LTL Valuation Methodology

PR Newswire

London, April 6

7 April 2022

The Lindsell Train Investment Trust plc

(the “Company” or “LTIT”)

Change to the Lindsell Train Limited (“LTL”) Valuation Methodology

The Independent Directors of The Lindsell Train Investment Trust plc (“LTIT”) have conducted a review of the methodology in respect of the valuation of LTIT’s holding in LTL and have agreed to adopt a new methodology after taking professional advice. It will apply to monthly valuations starting on 31 March 2022.

In adopting the new methodology the Board seeks to capture the changing economics and prospects for LTL’s business. It is designed to be as transparent as possible so that shareholders can themselves calculate how any change to the inputs would effect the resultant valuation. 

The new methodology is simpler as it has a single component based on a percentage of LTL’s FUM, with the percentage applied being reviewed monthly and adjusted to reflect the ongoing profitability of LTL. After the end of each month the ratio of LTL’s notional annualised net profits* to LTL’s FUM is calculated and, depending on its result, the percentage of FUM is adjusted according to the table below.

Notional annualised net profits*/FUM (%)Valuation of LTL -Percentage of FUM
0.15 – 0.161.70%
0.16 – 0.171.75%
0.17 – 0.181.80%
0.18 – 0.191.85%
0.19 – 0.201.90%
0.20 – 0.211.95%
0.21 – 0.222.00%
0.22 – 0.232.05%
0.23 – 0.242.10%
0.24 - 0.252.15%
0.25 - 0.262.20%
0.26 - 0.272.25%

At the 31 March 2022 LTL’s annualised notional net profits were £42.6m and its FUM was £20.45bn. The ratio between the two as a percentage was calculated at 0.208 resulting in a percentage of FUM of 1.95% and a valuation of LTL of £15,024.84 per share.

The Board believes that a change from the old methodology was necessary as in recent years the valuation difference between its two components has widened considerably. This reflected the effect of the operating leverage in LTL’s business as its FUM increased.

The old methodology has been a simple average of two components:

1.5% of LTL’s most recent funds under management (‘FUM’); and LTL’s net profits (adjusted for a notional increase in staff costs to 45% of revenues excluding performance fees) calculated with reference to LTL’s most recent end month’s FUM, divided by the annual average redemption yield on the longest dated UK government fixed rate bond, currently UK Treasury 1.625% 2071, calculated using weekly data, plus a premium of 0.5%, subject to a minimum yield of 4%, plus an equity risk premium of 4.5%.

In making this change, the Board notes that the new methodology correlates closely to the result of the old one (when the average of the two components in the old methodology is expressed as a percentage of FUM) both on 31st March 2022 and historically as depicted in the graph, which can be downloaded by opening the following hyperlink. At the 31 March 2022 LTL’s valuation based on the old methodology would have been £15,219.25, a difference of just 1.3% from the valuation using the new methodology, detailed above. 

https://mma.prnewswire.com/media/1782444/Chart.pdf

The Board will continue to monitor a number of alternative approaches to the valuation of LTL to ensure that the result of the new valuation methodology makes sense in the context of the future prospects for LTL and also when it is compared with similar businesses.

In summary, the Board’s view is that this new methodology simplifies the valuation of LTL whilst capturing the changing operating leverage of the business and is also historically consistent with results from the old one.

*LTL’s notional net profits are calculated by applying a fee rate (averaged over the last six months) to the most recent end-month FUM to produce annualised fee revenues excluding performance fees. Notional staff costs of 45% of revenues, annualised fixed costs and tax are deducted from revenues to then produce notional annualised net profits.

- END -

Contact information:

Victoria HaleFrostrow Capital LLPCompany SecretaryTelephone: 020 3 170 8732

Date   Source Headline
27th Mar 202412:07 pmPRNNet Asset Value(s)
21st Mar 20249:54 amPRNMonthly Report as at 29 February 2024
20th Mar 20249:49 amPRNDirector/PDMR Shareholding
20th Mar 20249:49 amPRNDirector/PDMR Shareholding
20th Mar 20249:45 amPRNNet Asset Value(s)
18th Mar 20244:55 pmPRNDirector/PDMR Shareholding
12th Mar 20246:01 pmPRNDirector/PDMR Shareholding
12th Mar 20246:01 pmPRNDirector/PDMR Shareholding
12th Mar 202412:34 pmPRNNet Asset Value(s)
12th Mar 202410:33 amPRNNet Asset Value(s)
11th Mar 202412:31 pmPRNNet Asset Value(s)
4th Mar 202411:01 amPRNNet Asset Value(s)
21st Feb 20243:16 pmPRNNet Asset Value(s)
19th Feb 202410:06 amPRNMonthly Report as at 31 January 2024
13th Feb 20245:59 pmPRNDirector/PDMR Shareholding
13th Feb 20242:32 pmPRNNet Asset Value(s)
13th Feb 20241:35 pmPRNNet Asset Value(s)
12th Feb 20244:59 pmPRNDirector/PDMR Shareholding
7th Feb 202412:30 pmPRNNet Asset Value(s)
2nd Feb 202411:34 amPRNNet Asset Value(s)
25th Jan 202410:55 amPRNNet Asset Value(s)
22nd Jan 20244:48 pmPRNNet Asset Value(s)
19th Jan 20241:53 pmPRNMonthly Report as at 31 December 2023
18th Jan 20243:17 pmPRNSale of Lindsell Train Limited Shares
16th Jan 20246:16 pmPRNDirector/PDMR Shareholding
16th Jan 20244:03 pmPRNDirector/PDMR Shareholding
16th Jan 20242:22 pmPRNDirector/PDMR Shareholding
15th Jan 202412:55 pmPRNNet Asset Value(s)
12th Jan 202410:15 amPRNNet Asset Value(s)
3rd Jan 20245:15 pmPRNNet Asset Value(s)
2nd Jan 202412:11 pmPRNNet Asset Value(s)
29th Dec 202310:49 amPRNBoard Changes
20th Dec 20232:45 pmPRNMonthly Report as at 30 November 2023
15th Dec 20232:52 pmPRNNet Asset Value(s)
15th Dec 20237:25 amPRNDirector/PDMR Shareholding
14th Dec 20235:20 pmPRNNet Asset Value(s)
12th Dec 202311:19 amPRNNet Asset Value(s)
5th Dec 20237:00 amPRNHalf-year Report
4th Dec 202311:59 amPRNNet Asset Value(s)
21st Nov 202312:36 pmPRNNet Asset Value(s)
16th Nov 20233:05 pmPRNMonthly Report as at 31 October 2023
16th Nov 20232:03 pmPRNNet Asset Value(s)
16th Nov 20232:00 pmPRNNet Asset Value(s)
9th Nov 202312:35 pmPRNNet Asset Value(s)
3rd Nov 202311:32 amPRNNet Asset Value(s)
25th Oct 20239:35 amPRNNet Asset Value(s)
24th Oct 20231:27 pmPRNMonthly Report as at 30 September 2023
23rd Oct 202310:42 amPRNNet Asset Value(s)
18th Oct 20235:04 pmPRNDirector/PDMR Shareholding
17th Oct 20234:16 pmPRNDirector/PDMR Shareholding

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