Final Results
SMALL COMPANIES DIVIDEND TRUST PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED RESULTS
The Directors announce the unaudited statement of consolidated results for the
year
1 May 2004 to 30 April 2005 as follows:
Highlights:
• Net Asset Value (NAV) up 15.57% at 175.19p per Ordinary share (2004:
151.59p)
• NAV increase more than double the rise in FTSE All-Share and FTSE Small
Cap indices
• Final dividend of 3.70p per Ordinary share (2004: 3.60p) making total
for the year of 10.75p (2004: 10.35p) a 3.9% increase
• Current NAV as at 16 June 2005 of 185.11p per Ordinary share up 9.92p
since year-end
CONSOLIDATED STATEMENT OF TOTAL RETURN
(*incorporating the revenue account)
1 May 2004 to 1 May 2003 to
30 April 2005 30 April 2004
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 6,572 6,572 - 11,994 11,994
Dividends and interest 2,488 - 2,488 2,224 - 2,224
Other income 9 - 9 5 - 5
Investment management - (1,698) (1,698) - (1,064) (1,064)
performance fee
Investment management (186) (279) (465) (166) (248) (414)
fee
Other expenses (218) - (218) (209) (5) (214)
Net return before
finance costs and 2,093 4,595 6,688 1,854 10,677 12,531
taxation
Interest payable and (217) (325) (542) (172) (258) (430)
similar charges
Appropriations in
respect of:
- Zero Dividend - (733) (733) - (680) (680)
Preference shares
- Preference shares - (4) (4) - (4) (4)
Issue costs of Zero
Dividend Preference - (31) (31) - (31) (31)
shares
Return on ordinary
activities
before and after 1,876 3,502 5,378 1,682 9,704 11,386
taxation
First interim dividend (370) - (370) (354) - (354)
paid of 2.35p (2004:
2.25p)
Second interim (370) - (370) (354) - (354)
dividend paid of 2.35p
(2004: 2.25p)
Third interim dividend (370) - (370) (355) - (355)
paid of 2.35p (2004:
2.25p)
Fourth interim (583) - (583) (567) - (567)
dividend declared of
3.70p (2004: 3.60p)
Transfer to reserves 183 3,502 3,685 52 9,704 9,756
Return per: pence pence pence pence pence pence
Ordinary share 11.91 22.23 34.14 10.68 61.61 72.29
Zero Dividend - 11.72 11.72 - 10.88 10.88
Preference share
Preference share - 11.72 11.72 - 10.88 10.88
* The revenue column of this statement is the revenue account of the Group.
CONSOLIDATED BALANCE SHEET
As at As at
30 April 30 April
2005 2004
£'000 £'000
Investments 46,957 44,265
Current assets
Debtors 1,705 514
Cash at bank 232 25
1,937 539
Current liabilities
Creditors 2,506 1,850
Bank overdraft 3,853 4,872
6,359 6,722
Net current liabilities (4,422) (6,183)
Total assets less current liabilities 42,535 38,082
Creditors - amounts falling due after
more than one year (14,880) (14,112)
27,655 23,970
Share capital and reserves
Share capital 3,938 3,938
Share premium 11,126 11,126
Capital reserve 11,745 8,243
Revenue reserve 846 663
Shareholders funds 27,655 23,970
Net asset value per:
Ordinary share 175.19p 151.59p
Zero Dividend Preference share 158.30p 146.58p
Preference share 158.30p 146.58p
CONSOLIDATED STATEMENT OF CASHFLOWS
1 May 2004 to 1 May 2003 to
30 April 2005 30 April 2004
£'000 £'000
Net cash inflow from operating activities 550 1,662
Servicing of finance
Interest paid (540) (422)
Net cash outflow from servicing of (540) (422)
finance
Taxation recovered - -
Capital expenditure and financial
investment
Purchase of investments (10,558) (11,966)
Sale of investments 13,451 9,660
Net cash inflow/ (outflow) from capital
expenditure and financial investment 2,893 (2,306)
Equity dividends paid (1,677) (1,599)
Financing
Loan drawndown - 5,000
Net cash inflow 1,226 2,335
Increase in cash 1,226 2,335
NOTE
1. The above unaudited financial information for the year ended 30 April 2005
which does not constitute statutory accounts as defined in Section 240 of the
Companies Act 1985 has been prepared on the basis of the accounting policies
set out in the statutory accounts of the Group for the year ended 30 April
2004. The auditors have reported on those accounts; their reports were
unqualified and did not contain a statement under section 237 (2) or (3) of the
Companies Act 1985. The April 2004 statutory accounts have been delivered to
the Registrar of Companies. Statutory financial statements for the year ended
30 April 2005 will be delivered to the Registrar.
2. The Directors declared on 1 June 2005 a fourth dividend of 3.70p (2004:
3.60p) per Ordinary share, payable on 30 June 2005 to the holders of Ordinary
shares on the Register at 10 June 2005.
3. The revenue return per Ordinary share is based on earnings of £1,876,000
(2004: £1,682,000) and on 15,750,000 (2004: 15,750,000) Ordinary shares, being
the weighted average number of Ordinary shares in issue during the year.
4. The capital return per Ordinary share is based on net capital gains of £
3,502,000 (2004: gains of £9,704,000) and on 15,750,000 (2004: 15,750,000)
Ordinary shares, being the weighted average number of Ordinary shares in issue
during the year.
5. An amount of £2,302,000 (2004: £1,575,000) has been charged to capital in
respect of management fees, investment management performance fees and interest
in accordance with the Company's accounting policy.
6. The Company has conducted its affairs so that it satisfies the conditions
for approval as an investment trust company set out in section 842 of the
Income and Corporation Tax Act 1988. It is the intention of the Directors that
the Company continues to meet these conditions.
7. There are 31,260 Preference and 6,250,000 Zero Dividend Preference shares in
issue. They each have an initial capital entitlement of 100p per share, growing
to 184.63p on 30 April 2007. The accrued entitlement as at 30 April 2005
calculated in accordance with the Company's Articles of Association, was
158.30p per Zero Dividend Preference share (2004: 146.58p) and 158.30p per
Preference share (2004: 146.58p). A total amount of £737,000 (2004: £684,000)
has been charged to capital during the year, in respect of their accrued
entitlement.
8. The net assets attributable and the net asset value per share are calculated
in accordance with the Company's Articles of Association. Shareholders funds
shown in the balance sheet are in accordance with FRS4.
9. The Group's funds are invested principally in companies with a market
capitalisation of less than £100 million. The Group's portfolio comprises
companies listed on the official list and companies admitted to trading on AIM.
The Group may also invest up to 5% of its portfolio in unquoted securities.
Whilst the majority of the Group's funds are invested in ordinary shares of
companies, up to 30% may be invested in convertible securities. The Group does
not invest in other investment trusts.
CHAIRMAN'S STATEMENT
RESULTS
This Report covers the twelve months ended 30 April 2005.
The recovery from the lows of 2003 continued in the year under review, after
the small reduction which occurred in the first quarter, the capital value of
your shares has shown further good progress at the year-end.
The Company's net asset value per Ordinary share at 30 April 2005 was 175.19p
(2004: 151.59p), an increase over the year of 15.6%. During this period the
FTSE All-Share Index increased by 7.1%, the FTSE Small-Cap Index increased by
6.8% and the FTSE Fledgling Index increased by 11.4%. Since Listing, on 12 May
1999, the FTSE All-Share has fallen by 18.7% and the net asset value per
Ordinary share has risen by 82.5%.
Since the year-end the net asset value per Ordinary share has risen to 185.11p
as at 16 June 2005 (including the revenue reserve to 30 April 2005).
The Board has declared a final dividend of 3.70p per Ordinary share (2004:
3.60p) which, when added to the three quarterly interim dividends of 2.35p,
equates to a total dividend for the year of 10.75p per Ordinary Share (2004:
10.35p), an increase of 3.9% over the previous year. The Board is pleased to be
able to increase the dividend by more than the rate of inflation, as it has
been able to do for each year of the six-year life of the Company.
BACKGROUND
The past year has been a good one for your Company with increased earnings and
dividend growth being reported by almost all of our investee companies. This
positive background has also led to an increase in corporate activity and this
has been reflected in the five takeovers within the portfolio during the year.
Whilst there are always concerns about the level of interest rates it would
appear with rates now at 4.75%, and held there for the past nine months, there
is an expectation that we are now very close to the peak in this cycle.
Inflation remains relatively subdued with the slow-down in consumer spending
helping to restrain any price rises.
Further concerns abound about the price of energy, steel and raw materials and
the recent strength in the dollar will of course increase the sterling cost of
these inputs to UK companies. Anecdotal evidence would indicate a general
slow-down in activity across the whole economy.
INVESTMENT MANAGER
In the light of the fundamental uncertainty surrounding BFS Investments plc
('BFS'), the Investment Manager, the Board took the decision on 1 December 2004
to serve notice under the terms of the investment management agreement. The
notice period of twelve months commenced from that date and is due to end on
the 30 November 2005.
Given the contractual and operational relationship between BFS and Chelverton
Asset Management Limited ('Chelverton'), the Investment Adviser, the management
of the assets of your Company has not changed in any way. Over the life of the
Company the investment management of the Company's assets has in fact been
carried out exclusively by Chelverton, as agreed between BFS and Chelverton.
The Board are in discussions with Chelverton in respect of the continuing
management of the Company's assets.
As part of the resolution of the Split Capital sector's issues it was pleasing
to see that the FSA was finally able to reach an agreement with eighteen of the
twenty two companies by 24 December 2004. Unfortunately BFS Investments plc was
not one of these parties and neither was it one of the two other parties who
have reached an agreement with the FSA since that date.
Reflecting the Board's and certain shareholders continued concerns, Mr Tony
Reid, the managing director of BFS, resigned from the Board on 24 February
2005.
SPLIT CAPITAL SECTOR
With the settlement referred to above, the rise of the market over past two
years and the liquidation of a number of troubled split capital trusts over the
past eighteen months, the sector is in better health than it has been for some
time. Whilst there is little prospect, at the moment, of a resurgence in this
type of structure for providing gearing for collective investments it would
appear that there is growing realisation that existing successful companies in
this sector should be supported.
As I have said before there is nothing fundamentally wrong with a split capital
structure as it exists in your Company if the underlying investments are
appropriate for the gearing.
The Company itself does not invest in other investment trusts, split capital or
otherwise.
PROSPECTS
The Company is invested in 65 companies across 22 sectors and this spread
provides the strength and stability for the Company. After several years of low
interest rates, growing profits and cash generation, company balance sheets
have been strengthened with the level of Bank debt at low levels enabling
dividends to be increased and for share buy-back programmes to be implemented.
The Board is encouraged by the progress in the past year and believes that we
should, given the forecast growth in revenue, be able to report an increased
total dividend in respect of the Ordinary Shares for next year.
Bryan Lenygon
21 June 2005
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