TIDMASCH
RNS Number : 3404X
Aberdeen Smaller Co's High Inc Tst
28 August 2015
Aberdeen Smaller Companies High Income Trust PLC
Half Yearly Financial Report for the six months to 30 June
2015
Objective
Aberdeen Smaller Companies High Income Trust PLC aims to provide
a high and growing dividend and capital growth from a portfolio
invested principally in the ordinary shares of smaller UK companies
and UK fixed income securities.
Highlights 30 June 2015 31 December % change
2014
Equity shareholders'
funds (GBP'000) 57,189 50,098 +14.2
Net asset value per
share 258.66p 226.59p +14.2
Share price (mid-market) 220.25p 184.00p +19.7
Discount to adjusted
net asset value{A} 14.3% 18.2%
Dividend yield 3.0% 3.5%
{A} Based on IFRS net asset value above reduced by
dividend adjustment of 1.65p (31 December 2014 -
1.65p).
Performance (total return) Six months 1 year 3 years 5 years
ended ended ended ended
30 June 30 June 30 June 30 June
2015 2015 2015 2015
Share price + 21.8% + 8.5% + 107.2% + 162.5%
Net asset value per share + 15.8% + 16.2% + 96.2% + 150.4%
FTSE SmallCap Index (ex
IC's) + 11.9% + 8.4% + 88.3% + 119.5%
FTSE All-Share Index + 3.0% + 2.6% + 29.2% + 96.7%
Markit iBoxx Sterling
Non-Gilts 1-15 Years
Index{A} - 0.1% + 5.5% + 19.8% + 34.6%
{A} Source: Aberdeen Asset Management, Markit iBoxx,
Morningstar & Factset.
All figures are for total return and assume re-investment
of net dividends excluding transaction costs.
INTERIM BOARD REPORT - CHAIRMAN'S STATEMENT
Performance
After a flat 2014 the first half of 2015 has seen the shares of
smaller companies deliver strong returns. Positive UK economic data
has been a favourable background for smaller companies whereas the
tougher global economic backdrop has impacted equity markets more
broadly. We have also seen a period of increased volatility in
Europe with the Greek default and referendum weighing heavily on
investor sentiment. This has led to generally lacklustre global
equity market performance with the FTSE 100 up 1.4%, S&P 500
0.3% and Europe (excluding UK) 4.4%. In contrast the FTSE Small-Cap
(ex-IT) benchmark rose 11.9% on a total return basis with the Trust
outperforming with a total return of 15.8%.
Splitting out the asset class performance, the Equity portfolio
returned 16.2%, Preference Shares and Convertibles 4.4% and 6.8%
respectively while Fixed Interest fell 0.2%. The split of assets at
the end of June has continued to tilt towards equity through
superior returns. The Manager has taken no further action in
reducing the allocation to fixed income. The Board and Manager are
also comfortable that the current split reflects our view on
valuations across the spectrum of investable assets.
The Board has supplemented the strong capital growth with
increased first and second quarter dividends to 1.65p per share. We
continue to believe in a progressive dividend policy although I
would reiterate that the current yield environment remains tough
across the asset class spectrum.
Overview
There have been a number of interesting themes through the first
half of 2015 none more so than the collapse in commodity prices.
The Manager has long felt, from a quality perspective, that these
sectors are tough given their volatility, difficulty in forecasting
commodity prices and lack of diversification. The Trust has
generally chosen to gain exposure to the sector through the service
providers including James Fisher, Aveva, Elementis and recent
introduction Exova. Whilst these companies have been impacted to
varying degrees, each is protected somewhat by flexibility in the
cost-base and divisional diversification. The Manager has been
conducting a detailed analysis of the sector as there is value on
offer although they are aware that cash-flow remains depressed and
balance sheets have come under pressure.
The earnings season was positive for the Trust with very few
company specific issues. That said the market quickly turns its
focus to the forward looking or outlook statements which as you
would expect, this early in the year, strike a cautious tone.
Profits visibility remains low and with emerging market weakness,
currency volatility and a tough commodity price environment
companies are facing headwinds. The Manager has conducted meetings
with the majority of their company-holdings over the last six
months and has been broadly encouraged by the conversations. These
meetings have also allowed the Manager to revisit the valuations
and with the strong returns seen over the first-half this has been
a good opportunity to reallocate capital to areas of relative
value. We have also been encouraged by the tone the Manager has
struck at recent Board meetings where they feel valuations are
looking more appealing.
During the period the Trust has seen bids made for two of its
holdings. The first of these was Domino Printing that received a
recommended bid from Brother Industries at a 43% premium to the
prevailing share price. The offer price reflected a full valuation
considering the uncertainty in the market, especially in China. The
position was halved above the offer price with the remainder of the
holding tendered. We also had a bid for Anite which sells telecom
testing software into the handset and network markets. On this
occasion the Manager felt the approach from Keysight Technologies
didn't reflect the full value of the company. The Manager,
therefore, engaged with Keysight and the Board and management team
of Anite on this issue to reflect their concerns on the valuation
being offered. They were disappointed that this offer was
recommended by the Board at what they believed was a difficult time
for the company given end market weakness. Their efforts on this
matter didn't have the desired outcome but as a Board we were
encouraged by the actions taken to seek value for our shareholders.
Post the period end Aveva have decided to put their business
together with Schneider's Invensys assets. The deal looks logical
from initial due diligence and the Manager feels the potential
synergies will provide some decent upside over the medium term. It
remains early in the discussion process and the Manager has further
work to conduct before finalising their thoughts.
The Manager used the proceeds from the Domino acquisition to
introduce two new positions, Exova and Xaar. Exova provide
laboratory based testing into the Aerospace, Oil & Gas,
Industrial, Health Sciences, Fire and Transportation markets. These
markets are growing in large part due to the critical nature of the
products, high cost of failure and regulation. Within Aerospace,
for example, they stress test parts for Rolls Royce coming off the
production line to make sure that they meet the tolerances and
pressures required. There is therefore a high degree of recurring
revenue where this is mandated or required work. Xaar is a leading
designer and manufacturer of digital print heads. The business
possesses a significant amount of intellectual property and
benefits from high barriers to entry. Demand for their products is
undergoing structural growth driven by a number of end markets and
the growth in digital printing as a whole. The timing and
development of these markets is unpredictable leading to lumpiness
in profits, but with expectation of growth over the long term. The
lumpiness can cause fluctuations in the share price and it was such
an event that created the opportunity for us to build an initial
position in a company we have followed for some time.
Bond markets have been volatile this year with the European
Central Bank's decision to finally confirm the imminent
Quantitative Easing programme which was positively received. That
said the markets have become heavily skewed with yields negative
across parts of Northern Europe which is not a sustainable
position. Because of this we are seeing investors chase high yield
debt and also hybrid securities which are more akin to equity and
therefore carry a much higher risk profile. The pursuit of yield
and a disregard for risk in parts of the market is a strategy which
the Board remains wary of. Closer to home the UK market has also
been broadly supportive of yields tightening with unemployment
continuing to decline, inflation low and growth trending around the
2.5% level.
At a portfolio level we continue to run the same strategy with a
blue-chip short duration conservative portfolio. The fixed income
portfolio represents 4.4% of the total assets of the Trust which is
reflective of our thoughts around valuation. The Manager has found
it difficult to find reinvestment opportunities where bonds have
matured and doesn't expect this to change in the short-term. In
terms of activity the NatWest 5.9779% was eventually called at par
in January. This had been one of the Trust's top performers over
the last few years having traded at a huge discount to par through
the financial crisis. This yield could not be replaced without
taking on considerable risk which is perhaps driving some of the
behaviour mentioned above. Our Stagecoach 5.75% bond is also due to
mature in 2016 and whilst the yield is tighter again we will
continue to face a reinvestment headwind. In this environment, and
one where we don't want to add equity gearing, the Manager has
sought opportunities in equity markets to improve the yield. This
Manager does not feel this is at the expense of potential growth
and has been a valuation call by the Manager as part of the work
conducted post the recent round of management meetings.
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:31 ET (06:31 GMT)
The preference share and convertible portfolio has delivered
decent returns over the first half. This was mainly driven by the
General Accident and Aviva holdings which rose near to all-time
highs. This has been driven by the performance of the underlying
business but these are also unique assets in the current low yield
environment. They have weakened of late but remain core to the
revenue generation of the Trust despite being a small part of the
total assets.
Gearing/Debt
The Board have discussed the structure of the portfolio and the
level of gearing we feel is appropriate for the current
environment. Following on from our discussion in the 2015 Annual
Report the first agenda item this year was the refinancing of the
Trust's debt facility which was due to mature in June. The Board
had three objectives with the new facilities. First of all we
wanted to provide some protection to interest rate rises by fixing
half of the facility. Secondly, to stagger the maturity terms which
provides the Board and Manager optionality should we find ourselves
in a tougher lending environment, as was seen during the financial
crisis. Finally the Board wanted to deliver this flexibility and
protection at the on the best possible terms. We managed to deliver
on all fronts which leaves the Trust in a strong financial position
with 3 and 5 year debt secured at rates that attractive rates.
The other side of the decision was how we deploy the GBP10
million facility which until recently was fully drawn and invested.
The Manager had been 4% geared into Equities at the outset of the
year but we felt that a neutral position was more appropriate given
the recent performance. We also reviewed the level of gearing we
wanted into the fixed income market. As you are aware we have been
running a short duration portfolio to protect the downside. We have
seen a number of bonds reach maturity or yields compress to levels
which made the investment uneconomical. We have therefore repaid
GBP2 million of the GBP5 million revolving debt facility. Total
gearing (against Net Asset Value) of the Trust was 12.6% as at 30
June 2015 compared to 16.5% at the outset of the year. As markets
are dynamic, we will continue to monitor this at our forthcoming
Board meetings.
Dividend
The dividend outlook hasn't changed much from the comments I
made at the full-year. The equity portfolio continues to deliver
steady mid-single digit dividend growth on average which is broadly
in line with the earnings per share growth. The headwind has been
driven by the fixed income portfolio which we discussed above
although this is coming towards an end. It is also a less
significant part of the Trust's revenue today (7%). It is also
worth noting that we have managed to grow the dividend through this
period whilst also reducing the gearing. It would have been easier
for the Board to grow the dividend had we decided to take a less
conservative approach to the fixed income portfolio or to keep a
higher level of gearing in place. As a Board we will not sacrifice
the long-term strategy for short-term gains which is the message
that we have consistently presented to our shareholders.
Our focus on balance sheet strength has also seen four of our
holdings announce special dividends; Elementis, Victrex, Hiscox and
Greggs. I would remind you that we don't factor these into the
assumptions for the Trust's dividend growth. We view these as
one-off in nature and whilst they don't accrue in dividend
increases they do go into the Trust's revenue reserves which the
Board has used to top up the dividend in tougher times.
The Board therefore feel the Trust is well placed to deliver a
progressive dividend despite the challenges that we are facing in
the market.
Outlook
The Manager has been encouraged by the operational performance
of the Trust's holdings at the beginning of 2015. We felt at the
outset of the year that the Trust could deliver single digit
earnings per share growth supplemented by steady dividend growth
and mid-way through the year we stand by this outlook. We have seen
volatility increase over the last month with a slowdown in China
the main concern. Whilst smaller companies are not immune from this
weakness the Trust has minimal exposure to the region. We are,
however, encouraged that we are seeing value appear which in part
is due to this volatility and we will use these opportunities to
add to holdings where we feel share prices don't reflect company
fundamentals. That said the Board is acutely aware of the returns
that smaller companies have delivered over the last five years to
our shareholders and preservation of capital therefore remains at
the forefront of discussions at our Board meetings.
Carolan Dobson
Chairman
27 August 2015
INTERIM BOARD REPORT - OTHER
Principal Risks and Uncertainties
The principal risks facing the Company relate to the Company's
investment activities and include market risk (comprising interest
rate risk and other price risk), liquidity risk and credit risk.
The Board has adopted a matrix of the key risks that affect its
business.
Investment Risk
The Directors are responsible for determining the investment
policy and the investment objectives of the Company, while the
day-to-day management of the Company's assets has been delegated to
the Manager under investment guidelines determined by the Board.
The Board regularly reviews these guidelines to ensure they remain
appropriate and Board approval is required before any exceptions
are permitted.
Equity Investment Process
The equity investment process is active and bottom-up, based on
a disciplined evaluation of companies through direct visits by the
Manager. Stock selection is the major source of added value,
concentrating on company quality first, then value.
Great emphasis is placed on understanding the business and
understanding how it should be valued. New investments are not made
without the Manager having first met management of the investee
company, undertaken further analysis and written detailed notes to
outline the underlying investment merits. Top-down investment
factors are secondary in the equity portfolio construction, with
diversification rather than formal controls guiding stock and
sector weights.
Fixed Income Investment Process
The fixed income investment process is an active investment
style which identifies value between individual securities.
This is achieved by combining bottom-up security selection with
a top-down investment approach. Investments in corporate bonds and
preference shares are also managed by investment guidelines drawn
up by the Board in conjunction with the Manager which include:
- No holding in a single fixed interest security to exceed 5% of
the total bond issue of the investee company
- Maximum acquisition cost of an investment grade bond is GBP1
million and of an non-investment grade bond is GBP500,000
Gearing Risk
Gearing has the effect of accentuating market falls and market
gains. The Company's gearing currently in place is a GBP10 million
facility comprising a GBP5 million three year fixed loan and GBP5
million five year floating rate loan. As at 30 June 2015 GBP8
million of the total facility was drawn down.
Income and Dividend Risk
The ability of the Company to pay dividends and any future
dividend growth will depend primarily on the level of income
generated from its investments and the timing of receipt of such
income by the Company and the size of the Company's revenue
reserves, accordingly there is no guarantee that the Company's
dividend objective will continue to be met. The Board monitors this
risk through the receipt of detailed income forecasts and considers
the level of income at each meeting.
Going Concern
In accordance with the Financial Reporting Council's Guidance on
Risk Management, Internal Control and Related Financial and
Business Reporting issued in September 2014, the Directors have
undertaken a rigorous review and consider both that there are no
material uncertainties and that the adoption of the going concern
basis of accounting is appropriate. The Company's assets consist
entirely of equity shares in companies listed on the London Stock
Exchange which are, in most circumstances, realisable within a
short timescale.
Directors' Responsibility Statement
The Directors are responsible for preparing the Half-Yearly
Financial Report in accordance with applicable law and regulations.
The Directors confirm that to the best of their knowledge:
- the condensed set of Financial Statements has been prepared in
accordance with International Accounting Standard 34 'Interim
Financial Reporting'
- the Half-Yearly Board Report includes a fair review of the
information required by rule 4.2.7R of the Disclosure and
Transparency Rules (being an indication of important events that
have occurred during the first six months of the financial year and
their impact on the condensed set of Financial Statements and a
description of the principal risks and uncertainties for the
remaining six months of the financial year)
- the Half-Yearly Board Report includes a fair review of the
information required by 4.2.8R (being related party transactions
that have taken place during the first six months of the financial
year and that have materially affected the financial position of
the Company during that period; and any changes in the related
party transactions described in the last Annual Report that could
do so).
The Half Yearly Financial Report for the six months to 30 June
2015 comprises the Interim Board Report, the Directors'
Responsibility Statement and a condensed set of financial
statements.
For and on behalf of the Board of Aberdeen Smaller Companies
High Income Trust PLC
Carolan Dobson
Chairman
27 August 2015
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:31 ET (06:31 GMT)
Distribution of Assets and Liabilities
Valuation Movement during the Valuation
at period at
31 December Gains/ 30 June
2014 Purchases Sales Other{A} (losses) 2015
GBP'000 % GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 %
Listed investments
Ordinary
shares 50,748 101.3 4,691 (5,093) - 7,015 57,361 100.3
Convertibles 1,016 2.0 - - - 37 1,053 1.8
Corporate
Bonds 3,234 6.5 521 (968) (29) (25) 2,733 4.8
Other fixed
interest 3,224 6.4 - - - 50 3,274 5.7
_______ _______ _______ _______ _______ _______ _______ _______
58,222 116.2 5,212 (6,061) (29) 7,077 64,421 112.6
_______ _______ _______ _______ _______ _______ _______ _______
Current assets 2,115 4.2 1,003 1.8
Other current
liabilities (239) (0.5) (235) (0.4)
Long-term
loan (10,000) (19.9) (8,000) (14.0)
_______ _______ _______ _______
Net assets 50,098 100.0 57,189 100.0
_______ _______ _______ _______
Net asset
value per
share 226.6p 258.7p
_______ _______
{A} Represents amortisation costs on debt securities
of GBP29,000.
Condensed Statement of Comprehensive Income
Six months ended
30 June 2015
(unaudited)
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
Dividend income 2 1,159 - 1,159
Interest income from investments 2 122 (29) 93
Other income 2 1 - 1
Gains/(losses) on investments
held at fair value - 7,077 7,077
_________ _________ _________
Total income 1,282 7,048 8,330
_________ _________ _________
Expenses
Investment management
fees (71) (166) (237)
Other administrative expenses (186) - (186)
Finance costs of borrowing (26) (60) (86)
_________ _________ _________
Profit/(loss) before taxation 999 6,822 7,821
_________ _________ _________
Taxation 3 - - -
Profit/(loss) attributable
to equity holders 4 999 6,822 7,821
_________ _________ _________
Return per Ordinary share
(pence) 5 4.52 30.86 35.37
_________ _________ _________
The total column of this statement represents
the Company's Statement of Comprehensive Income,
prepared in accordance with IFRS. The supplementary
revenue and capital columns are both prepared
under guidance published by the Association of
Investment Companies.
The Company does not have any income or expense
that is not included in profit for the period,
and therefore the "Profit attributable to equity
holders" is also the "Total comprehensive income
attributable to equity holders".
All items in the above statement derive from continuing
operations.
Condensed Statement of Comprehensive Income
(Continued)
Six months ended Year ended
30 June 2014 31 December 2014
(unaudited) (audited)
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Dividend income 2 1,008 - 1,008 1,840 - 1,840
Interest income
from investments 2 131 (18) 113 265 (34) 231
Other income 2 - - - 12 - 12
Gains/(losses)
on investments
held at fair value - (1,880) (1,880) - (2,207) (2,207)
_______ _______ _______ _______ _______ _______
Total income 1,139 (1,898) (759) 2,117 (2,241) (124)
_______ _______ _______ _______ _______ _______
Expenses
Investment management
fees (70) (164) (234) (137) (319) (456)
Other administrative
expenses (161) - (161) (347) - (347)
Finance costs of
borrowing (26) (62) (88) (54) (124) (178)
_______ _______ _______ _______ _______ _______
Profit/(loss) before
taxation 882 (2,124) (1,242) 1,579 (2,684) (1,105)
_______ _______ _______ _______ _______ _______
Taxation 3 - - - - - -
Profit/(loss) attributable
to equity holders 4 882 (2,124) (1,242) 1,579 (2,684) (1,105)
_______ _______ _______ _______ _______ _______
Return per Ordinary
share (pence) 5 3.99 (9.61) (5.62) 7.14 (12.14) (5.00)
_______ _______ _______ _______ _______ _______
Condensed Balance Sheet
As at As at As at
30 June 30 June 31 December
2015 2014 2014
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Ordinary shares 57,361 52,596 50,748
Convertibles 1,053 1,043 1,016
Corporate bonds 2,733 3,193 3,234
Preference shares 3,274 3,246 3,224
____________ ____________ ____________
Securities at fair
value 64,421 60,078 58,222
____________ ____________ ____________
Current assets
Cash and cash equivalents 679 386 1,747
Other receivables 324 426 368
____________ ____________ ____________
Total current assets 1,003 812 2,115
____________ ____________ ____________
Total assets 65,424 60,890 60,337
Current liabilities
Short-term loan (3,000) - (10,000)
Trade and other payables (235) (221) (239)
____________ ____________ ____________
Total current liabilities (3,235) (221) (10,239)
____________ ____________ ____________
Non-current liabilities
Long-term loan (5,000) (10,000) -
____________ ____________ ____________
Total liabilities (8,235) (10,221) (10,239)
____________ ____________ ____________
Net assets 57,189 50,669 50,098
____________ ____________ ____________
Issued capital and
reserves attributable
to equity holders
Called-up share capital 11,055 11,055 11,055
Share premium account 11,892 11,892 11,892
Capital redemption
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:31 ET (06:31 GMT)
reserve 2,032 2,032 2,032
Capital reserve 6 29,725 23,463 22,903
Revenue reserve 2,485 2,227 2,216
____________ ____________ ____________
Equity shareholders'
funds 57,189 50,669 50,098
____________ ____________ ____________
Net asset value per
Ordinary share (pence) 5 258.66 229.17 226.59
____________ ____________ ____________
Condensed Statement of Changes in Equity
Six months ended
30 June 2015
(unaudited)
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31
December 2014 11,055 11,892 2,032 22,903 2,216 50,098
Revenue profit
for the period - - - - 999 999
Capital loss
for the period - - - 6,822 - 6,822
Equity dividends 4 - - - - (730) (730)
______ ______ ______ ______ ______ ______
Balance at 30
June 2015 11,055 11,892 2,032 29,725 2,485 57,189
______ ______ ______ ______ ______ ______
Six months ended
30 June 2014
(unaudited)
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31
December 2013 11,055 11,892 2,032 25,587 2,052 52,618
Revenue profit
for the period - - - - 882 882
Capital profit
for the period - - - (2,124) - (2,124)
Equity dividends 4 - - - - (707) (707)
______ ______ ______ ______ ______ ______
Balance at 30
June 2014 11,055 11,892 2,032 23,463 2,227 50,669
______ ______ ______ ______ ______ ______
Year ended 31
December 2014
(audited)
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31
December 2013 11,055 11,892 2,032 25,587 2,052 52,618
Revenue profit
for the year - - - - 1,579 1,579
Capital profit
for the year - - - (2,684) - (2,684)
Equity dividends 4 - - - - (1,415) (1,415)
______ ______ ______ ______ ______ ______
Balance at 31
December 2014 11,055 11,892 2,032 22,903 2,216 50,098
______ ______ ______ ______ ______ ______
Condensed Cash Flow Statement
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2015 2014 2014
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Investment income received 1,274 1,069 2,121
Deposit interest received 1 - -
Investment management
fees paid (307) (234) (460)
Other cash expenses (177) (158) (320)
___________ ___________ ___________
Cash generated from operations 791 677 1,341
Interest paid (83) (89) (178)
___________ ___________ ___________
Net cash inflows from
operating activities 708 588 1,163
___________ ___________ ___________
Cash flows from investing
activities
Purchases of investments (5,153) (4,077) (7,068)
Sales of investments 6,107 2,899 7,384
___________ ___________ ___________
Net cash inflows/(outflows)
from investing activities 954 (1,178) 316
___________ ___________ ___________
Cash flows from financing
activities
Loan repaid (7,000) - -
Loan drawdown 5,000 - -
Equity dividends paid (730) (707) (1,415)
___________ ___________ ___________
Net cash outflows from
financing activities (2,730) (707) (1,415)
___________ ___________ ___________
Net (decrease)/increase
in cash and cash equivalents (1,068) (1,297) 64
Cash and cash equivalents
at the start of the period 1,747 1,683 1,683
___________ ___________ ___________
Cash and cash equivalents
at the end of the period 679 386 1,747
___________ ___________ ___________
Cash and cash equivalents
comprise:
Cash and cash equivalents 679 386 1,747
___________ ___________ ___________
1. Accounting policies
(a) Basis of preparation
The financial statements have been prepared
in accordance with International Financial
Reporting Standards ('IFRS') 34 - 'Interim
Financial Reporting', as adopted by the International
Accounting Standards Board ('IASB'), and
interpretations issued by the International
Financial Reporting Interpretations Committee
('IFRIC') of the IASB. They have also been
prepared using the same accounting policies
applied for the year ended 31 December 2014
financial statements, which received an unqualified
audit report.
At the date of authorisation of these financial
statements, various Standards, amendments
to Standards and Interpretations which have
not been applied to these financial statements,
were in issue but were not yet effective.
The following are the Standards and amendments
to existing Standards which may be relevant
but not yet effective. Other Standards, Interpretations
and amendments to Standards which are not
yet effective and not relevant have not been
included;
IFRS 9 - Financial Instruments: Classification
and Measurement (current proposed effective
date for implementation 1 January 2018)
IAS 34 - Interim Financial Reporting regarding
disclosure of information (current proposed
effective date for implementation 1 January
2016)
(b) Dividends payable
Dividends are recognised in the period in
which they are paid.
Six months Six months Year
ended ended ended
30 30 31 December
June June 2014
2015 2014
2. Income GBP'000 GBP'000 GBP'000
Income from investments
Dividend income from UK
equity securities 969 847 1,547
Dividend income from overseas
equity securities 171 126 185
Stock dividends - 32 93
Property income distribution 19 3 15
Interest income from investments 122 131 265
__________ __________ __________
1,281 1,139 2,105
__________ __________ __________
Six months Six months Year
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:31 ET (06:31 GMT)
ended ended ended
30 30 31 December
June June 2014
2015 2014
Other Income GBP'000 GBP'000 GBP'000
Bank interest 1 - 1
Underwriting commission - - 11
__________ __________ __________
1 - 12
__________ __________ __________
The Company amortises the premium or discount
on acquisition on debt securities against unrealised
capital reserve. For the six months to 30 June
2015 this represented GBP29,000 (30 June 2014
- GBP18,000; 31 December 2014 - GBP34,000) which
has been reflected in the capital column of
the Condensed Statement of Comprehensive Income.
3. Taxation
The taxation expense reflected in the Condensed
Statement of Comprehensive Income is based on
management's best estimate of the weighted average
annual corporation tax rate expected for the
full financial year. The estimated average annual
tax rate used for the year to 31 December 2015
is 20.25%.
4. Dividends
The following table shows the revenue for each
period less the dividends declared in respect
of the financial period to which they relate.
Six months Six months Year
ended ended ended
30 30 31 December
June June 2014
2015 2014
GBP'000 GBP'000 GBP'000
Revenue 999 882 1,579
Dividends declared (730){A} (707){B} (1,426){C}
__________ __________ __________
269 175 153
__________ __________ __________
{A} Dividends declared relate to first two interim
dividends (both 1.65p each) declared in respect
of the financial year 2015.
{B} Dividends declared relate to first two interim
dividends (both 1.60p each) declared in respect
of the financial year 2014.
{C} Dividends declared relate to the four interim
dividends declared in respect of the financial
year 2014 totalling 6.45p.
Six months Six months Year
ended ended ended
30 30 31 December
June June 2014
2015 2014
5. Return and net asset value p p p
per share
Revenue return 4.52 3.99 7.14
Capital return 30.86 (9.61) (12.14)
__________ __________ __________
Total return 35.37 (5.62) (5.00)
__________ __________ __________
The returns per share are based on the following
figures:
Six months Six months Year
ended ended ended
30 30 31 December
June June 2014
2015 2014
GBP'000 GBP'000 GBP'000
Revenue return 999 882 1,579
Capital return 6,822 (2,124) (2,684)
__________ __________ __________
Total return 7,821 (1,242) (1,105)
__________ __________ __________
Weighted average number
of Ordinary shares in issue 22,109,765 22,109,765 22,109,765
__________ __________ __________
The net asset value per share is based on net
assets attributable to shareholders of GBP57,189,000
(30 June 2014 - GBP50,669,000; 31 December 2014
- GBP50,098,000) and on 22,109,765 (30 June
2014 - 22,109,765; 31 December 2014 - 22,109,765)
Ordinary shares in issue at each period end.
6. Capital reserves
The capital reserve reflected in the Balance
Sheet at 30 June 2015 includes gains of GBP20,798,000
(30 June 2014 - gains of GBP17,497,000; 31 December
2014 - gains of GBP15,527,000) which relate
to the revaluation of investments held at the
reporting date.
7. Transaction costs
During the period expenses were incurred in
acquiring or disposing of investments classified
as fair value though profit or loss. These have
been expensed through capital and are included
within gains on investments held at fair value
in the Statement of Comprehensive Income. The
total costs were as follows:
Six months Six months Year
ended ended ended
30 30 31 December
June June 2014
2015 2014
GBP'000 GBP'000 GBP'000
Purchases 21 17 27
Sales 5 3 7
__________ __________ __________
26 20 34
__________ __________ __________
8. Fair value hierarchy
IFRS 13 'Fair Value Measurement' requires an
entity to classify fair value measurements using
a fair value hierarchy that reflects the significance
of the inputs used in making measurements. The
fair value hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active
markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included
within Level 1 that are observable for the assets
or liability, either directly (ie as prices)
or indirectly (ie derived from prices); and
Level 3: inputs for the asset or liability that
are not based on observable market data (unobservable
inputs).
The financial assets and liabilities measured
at fair value in the Balance Sheet are grouped
into the fair value hierarchy as follows:
Level Level Level Total
1 2 3
At 30 June 2015 (unaudited) Note GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
at fair value through
profit or loss
Quoted equities a) 60,635 - - 60,635
Quoted bonds b) 3,786 - - 3,786
________ ________ ________ ________
64,421 - - 64,421
Financial liabilities
at fair value through
profit or loss
Financial liabilities
at amortised cost c) - (8,000) - (8,000)
________ ________ ________ ________
Net fair value 64,421 (8,000) - 56,421
________ ________ ________ ________
Level Level Level Total
1 2 3
At 30 June 2014 (unaudited) Note GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
at fair value through
profit or loss
Quoted equities a) 55,842 - - 55,842
Quoted bonds b) 4,236 - - 4,236
________ ________ ________ ________
60,078 - - 60,078
Financial liabilities
at fair value through
profit or loss
Financial liabilities
at amortised cost c) - (10,000) - (10,000)
________ ________ ________ ________
Net fair value 60,078 (10,000) - 50,078
________ ________ ________ ________
Level Level Level Total
1 2 3
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:31 ET (06:31 GMT)
At 31 December 2014 Note GBP'000 GBP'000 GBP'000 GBP'000
(audited)
Financial assets
at fair value through
profit or loss
Quoted equities a) 53,972 - - 53,972
Quoted bonds b) 4,250 - - 4,250
________ ________ ________ ________
58,222 - - 58,222
Financial liabilities
at fair value through
profit or loss
Financial liabilities
at amortised cost c) - (10,000) - (10,000)
________ ________ ________ ________
Net fair value 58,222 (10,000) - 48,222
________ ________ ________ ________
a) Quoted equities
The fair value of the Company's investments
in quoted equities has been determined by reference
to their quoted bid prices at the reporting
date. Quoted equities included in Fair Value
Level 1 are actively traded on recognised stock
exchanges.
b) Quoted bonds
The fair value of the Company's investments
in corporate quoted bonds has been determined
by reference to their quoted bid prices at the
reporting date.
c) Financial liabilities at amortised cost
Financial liabilities in the form of short-term
and long-term borrowings are held at amortised
cost. The fair value is considered to approximate
the carrying value.
There have been no transfers of assets or liabilities
between levels of the fair value hierarchy during
any of the above periods.
9. Publication of non-statutory accounts
The financial information contained in this
Half-Yearly Financial Report does not constitute
statutory accounts as defined in Sections 434
- 436 of the Companies Act 2006. The financial
information for the six months ended 30 June
2015 and 30 June 2014 has not been audited.
The information for the year ended 31 December
2014 has been extracted from the latest published
audited financial statements which have been
filed with the Registrar of Companies. The report
of the auditors on those accounts contained
no qualification or statement under Section
498 (2), (3) or (4) of the Companies Act 2006.
10. This Half-Yearly Financial Report was approved
by the Board on 27 August 2015.
Please note that past performance is not necessarily a guide to
the future and that the value of investments and the income from
them may fall as well as rise. Investors may not get back the
amount they originally invested
Investment Portfolio - Ordinary Shares
As at 30 June 2015
Market Total
value portfolio
Company Sector GBP'000 %
RPC Group 2,388 3.7
Europe's leading manufacturer General Industrials
of rigid plastic packaging
which is benefiting from
lightweighting, product
innovation, and a pan-european
footprint giving them
the ability to target
the large FMCG companies.
Wilmington 2,359 3.7
Provider of B2B digital Media
services in niche areas
of compliance, pensions,
and Insurance. The model
is predominantly subscription
based with high level
of recurring revenue.
XP Power 2,354 3.7
XP Power designs and produces Electronic
power control components. & Electrical
They sell critical high Equipment
cost of failure low value
equipment to healthcare,
industrial and technology
industries. Their investment
into new facilities and
R&D is driving future
growth.
Dechra Pharmaceuticals 1,996 3.1
Develops, manufactures Pharmaceuticals
and distributes veterinary & Biotechnology
pharmaceuticals with excellent
opportunities to expand
further into both Europe
and the US.
Euromoney Institutional
Investor 1,874 2.9
Online media business Media
aimed at servicing the
financial sector through
their market leading BCA
business. High recurring
subscription base provides
a solid backdrop.
Acal 1,794 2.8
Manufacturer and supplier Support Services
of custom designed and
built electronics to the
industrial and medical
sectors.
Berendsen 1,692 2.6
European textile services Support Services
business with high barriers
to entry and strong customer
relationships. Business
has been focused around
core growth opportunities
which are gaining traction.
Interserve 1,671 2.6
Interserve provides advice, Support Services
design, construction and
maintenance services for
buildings and infrastructure,
runs the operational systems
and back-office that support
them and provides a range
of plant and equipment
in specialist fields.
Devro 1,655 2.6
Producer of collagen-based Food Producers
casings for the food industry
including sausages, salami,
hams and other cooked
meats.
Helical Bar 1,610 2.5
Develops, invests and Real Estate
trades property in the Investment
United Kingdom, deriving & Services
rental income from retail,
office and industrial
properties.
Ten largest investments 19,393 30.2
Investment Portfolio - Ordinary Shares
As at 30 June 2015
Market Total
value portfolio
Company Sector GBP'000 %
Chesnara Life Insurance 1,589 2.5
Real Estate Investment
Hansteen Trusts 1,581 2.5
Software & Computer
Aveva Group Services 1,564 2.4
Close Brothers Financial Services 1,559 2.4
Morgan Sindall Construction & Materials 1,553 2.4
Mothercare General Retailers 1,544 2.4
Elementis Chemicals 1,506 2.3
Software & Computer
Anite Services 1,502 2.3
Fenner Industrial Engineering 1,474 2.3
Robert Walters Support Services 1,405 2.2
Twenty largest investments 34,670 53.9
Manx Telecom Fixed Line Telecommunications 1,297 2.0
Victrex Chemicals 1,274 2.0
BBA Aviation Industrial Transportation 1,273 2.0
Rathbone Brothers Financial Services 1,256 2.0
Fuller Smith & Turner
'A' Travel & Leisure 1,204 1.9
Electronic & Electrical
TT Electronics Equipment 1,185 1.8
Dignity General Retailers 1,157 1.8
Fisher James Industrial Transportation 1,150 1.8
Electronic & Electrical
Oxford Instruments Equipment 1,108 1.7
Intermediate Capital
Group Financial Services 1,088 1.7
Thirty largest investments 46,662 72.6
Real Estate Investment
Savills & Services 1,060 1.7
Hiscox Non- Life Insurance 1,059 1.6
Pharmaceuticals &
Abcam Biotechnology 1,036 1.6
Bloomsbury Publishing Media 912 1.4
Huntsworth Media 869 1.3
Household Goods &
Bellway Home Construction 866 1.3
Keller Group Construction & Materials 834 1.3
Exova Support Services 797 1.2
Greggs Food & Drug Retailers 722 1.1
Electronic & Electrical
Xaar Equipment 656 1.0
Forty largest investments 55,473 86.1
The Restaurant Group Travel & Leisure 647 1.0
(MORE TO FOLLOW) Dow Jones Newswires
August 28, 2015 02:31 ET (06:31 GMT)
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