Half-yearly Report
SMALL COMPANIES DIVIDEND TRUST PLC
Half-yearly Report
for the six months ended 31 October 2009
Investment objective and policy
The investment objective of the Company is to provide Ordinary shareholders
with a high income and opportunity for capital growth.
The Company's funds will be invested principally in UK companies with a market
capitalisation of up to £500 million at the point of investment. The Company
will invest in the ordinary shares of companies either on the Official List and
traded on the London Stock Exchange's main market or traded on AIM. The Company
will not invest in the securities of other investment trusts or in unquoted
companies. No investment will be made in preference shares, loan stock or
notes, convertible securities or fixed interest securities or any similar
securities convertible into shares. A maximum of 20% of the Company's portfolio
may be invested in companies without reference to their market capitalisation
at the discretion of the Investment Manager.
Capital structure
Borrowings
The Company has a £4.0 million fixed term loan facility with Lloyds Banking
Group.
Ordinary shares - 16,250,000 in issue
Dividends
Holders of Ordinary shares are entitled to dividends.
Capital
On a winding-up of the Company, Ordinary shareholders will be entitled to all
surplus assets of the Company available after payment of all liabilities.
Voting
Each holder on a show of hands will have one vote and on a poll will have one
vote for each Ordinary share held.
If you are in any doubt about the contents of this document or the action you
should take, you are recommended to seek immediately your own independent
financial advice from your stockbroker, bank manager, solicitor, accountant or
other financial adviser authorised under the Financial Services and Markets Act
2000.
Registered in England
No. 3749536
A member of the Association of Investment Companies
Financial highlights
Discount
31 October 30 April 31 October
Capital 2009 2009 % change 2009
Total net assets (£'000) 13,038 10,406 25.29
Net asset value per Ordinary share** 80.23p 64.04p 25.28
Mid-market price per Ordinary share 74.50p 53.25p 39.91 7.14%
FTSE All-Share Index 2,584.59 2,173.06 18.94
FTSE SmallCap Index 2,791.82 2,212.27 26.20
Six months to Six months to
31 October 31 October
Revenue 2009 2008 % change
Return per Ordinary share 2.22p 5.72p (61.19)
Dividend per Ordinary share*** 2.50p 4.40p (43.18)
Six months to Six months to
31 October 31 October
Total return 2009 2008
Total assets less current liabilities
(excluding bank borrowings) total return* 8.76% (51.76)%
Total return on Company's net assets* 12.88% (54.17)%
Total return FTSE All-Share Index 21.17% (28.24)%
Total return FTSE SmallCap Index 28.22% (37.44)%
* Adding back dividends distributed in the period.
** Net asset values per share have been calculated in accordance with
entitlements as at the period end and in accordance with the Company's Articles
of Association.
*** Dividend per Ordinary share includes the first interim paid and second
interim proposed for the period to 31 October 2009 and 2008 and will differ
from the amounts declared within the statement of changes in net equity.
Interim management report
Results
This report covers the six months to 31 October 2009. The net asset value per
Ordinary share at 31 October 2009 was 80.23p, an increase of 25.3% in the past
six months compared to an increase of 18.9% in the FTSE All-Share Index and an
increase of 26.2% in the FTSE SmallCap Index. Since the beginning of the
Company's financial year, the Ordinary share price has risen from 53.25p to
74.50p as at 31 October 2009, a rise of 39.9%, whilst the discount has narrowed
from 16.9% to 7.1% over the same period. Since then the share price has risen
further to 76.75p as at 2 December 2009.
Dividend
A first interim dividend of 1.25p (2008: 3.20p) per Ordinary share was paid on
7 October 2009. The Board has declared a second interim dividend of 1.25p per
Ordinary share (2008: 1.20p) payable on 7 January 2010 to shareholders on the
register at 11 December 2009, making a total for the half year of 2.50p per
Ordinary share (2008: 4.40p).
Review
Share prices rose throughout the period as investor confidence continued to
improve and corporate profitability was generally in line with downgraded
expectations. As the worst fears of further falls in earnings failed to
materialise, strong cash generation was a notable feature of a broad range of
company results and a focus on paying down debt is a recurring theme amongst
many of our investee companies. After a recovery in equities that was initially
broadly based, in the latter part of the period it was the overseas earners
that led the way as investors became increasingly concerned by the outlook for
the domestic economy. We think that in the short-term the potential divergence
between UK and non UK earnings is now more than fully reflected in valuations.
We bought a number of new holdings for the Company: Abbey Protection is a
leading supplier of legal and professional fees insurance to UK Small, Medium
Enterprises; Braemar Seascope is a full service shipbroker; Beazley is an
insurance business that we bought at a discount to asset value; Fiberweb is a
multinational manufacturer of non-woven fabrics; Brulines provides remote
measuring of operational data for licensed premises and HMV is a music and book
retailer. Funds were raised from the sale of our holding in BT after a dividend
cut and by the sale of part of our holdings in Arbuthnot, Portmeirion and
Nichols.
Outlook
At the moment there appears to be a two way pull between an improving outlook
in some global economies, notably the US and emerging markets, and a
deteriorating one in the UK. At the same time, despite the substantial degree
of quantitative easing by central banks and the recent increases in prices of
assets such as equities and property, there still remains a lack of liquidity
in the banking system which will continue to have an adverse affect on the UK
corporate sector for the foreseeable future. A continued background of low
interest rates will, however, continue to provide support to equities.
After the recent rise in share prices we need to see tangible evidence of
earnings upgrades for the fundamentals to justify further gains, and the timing
of these remains uncertain. In the meantime, the yields of our underlying
investments make them relatively attractive while we wait for the recovery.
Reassuringly, in these difficult and uncertain times for businesses everywhere,
we continue to see a wide range of attractively valued investment opportunities
in our niche area of the market.
Chelverton Asset Management Limited
8 December 2009
Principal risks
The principal risks facing the Company are substantially unchanged since the
date of the annual report for the year ended 30 April 2009 and continue to be
as set out in that report. Risks faced by the Company include, but are not
limited to, market risk, discount volatility, regulatory risk, financial risk,
risks associated with banking and hedging and the risk of non-compliance with
Section 842 of the Income and Corporation Taxes Act 1988.
Responsibility statement of the Directors in respect of the half-yearly report
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in compliance
with the IAS34 "Interim Financial Reporting" and gives a true and fair view of
the assets, liabilities and financial position of the Company; and
• the interim management report and notes to the half-yearly report include a
fair view of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of the 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 year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
This half-yearly report was approved by the Board of Directors on 8 December
2009 and the above responsibility statement was signed on its behalf by Lord
Lamont, Chairman.
Condensed income statement (unaudited)
for the six months ended 31 October 2009
Six months to 31 October 2009 Year to 30 April 2009 Six months to 31 October 2008
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investments (audited)
Gains/(losses) on investments - 2,851 2,851 - (12,949) (12,949) - (12,493) (12,493)
Investment income 517 - 517 1,698 - 1,698 1,196 - 1,196
Expenses
Investment management fee (21) (62) (83) (44) (132) (176) (26) (78) (104)
Recovery of VAT on
investment management fee - - - 121 253 374 - - -
Other expenses (91) - (91) (181) - (181) (96) - (96)
Recovery of loss in
former subsidiary company - 6 6 - - - - - -
(112) (56) (168) (104) 121 17 (122) (78) (200)
Net return before
finance costs and taxation 405 2,795 3,200 1,594 (12,828) (11,234) 1,074 (12,571) (11,497)
Finance costs
Bank interest payable on
overdraft and loan (43) (130) (173) (120) (358) (478) (79) (235) (314)
Cost of cancellation of portion
of interest rate
no longer effective - - - (57) (171) (228) (57) (171) (228)
Cost of ineffective loan swap 4 14 18 (31) (95) (126) - - -
(39) (116) (155) (208) (624) (832) (136) (406) (542)
Net return before taxation 366 2,679 3,045 1,386 (13,452) (12,066) 938 (12,977) (12,039)
Taxation (5) - (5) (13) - (13) (8) - (8)
Net return after taxation 361 2,679 3,040 1,373 (13,452) (12,079) 930 (12,977) (12,047)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence pence pence pence
Return per Ordinary share
(see note 2) 2.22 16.49 18.71 8.45 (82.78) (74.33) 5.72 (79.86) (74.14)
The Company does not have any income or expense that is not included in the net
return for the period, and therefore the "net return for the period" is also
the "Total comprehensive income for the period", as defined in International
Accounting Standard 1 (revised). All of the net return for the period and the
total comprehensive income for the period is attributed to the Shareholders of
the Company.
The total column of this statement is the statement of comprehensive income of
the Company prepared under International Financial Standards ('IFRS'). The
supplementary revenue and capital return columns are presented for information
purposes as recommended by the Statement of Recommended Practice issued by the
Association of Investment Companies ('AIC'). All revenue and capital items in
the above statement derive from continuing operations. These accounts are
unaudited and are not the Company's statutory accounts.
Condensed statement of changes in net equity (unaudited)
for the six months ended 31 October 2009
Share
Share premium Capital Hedge Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Six months ended 31 October 2009
30 April 2009 4,063 11,917 (6,712) (503) 1,641 10,406
Net return after taxation for the period - - 2,679 - 361 3,040
Dividends paid - - - - (479) (479)
Movement in cashflow hedge taken
to equity - - - 71 - 71
31 October 2009 4,063 11,917 (4,033) (432) 1,523 13,038
Year ended 30 April 2009 (audited)
30 April 2008 4,063 11,917 6,740 (291) 1,836 24,265
Net return after taxation for the year - - (13,452) - 1,373 (12,079)
Dividends paid - - - - (1,568) (1,568)
Transfer to profit and loss - - - 175 - 175
Movement in cashflow hedge taken
to equity - - - (387) - (387)
30 April 2009 4,063 11,917 (6,712) (503) 1,641 10,406
Six months ended 31 October 2008
30 April 2008 4,063 11,917 6,740 (291) 1,836 24,265
Net return after taxation for the period - - (12,977) - 930 (12,047)
Dividends paid - - - - (1,178) (1,178)
Movement in cashflow hedge taken
to equity - - - (83) - (83)
31 October 2008 4,063 11,917 (6,237) (374) 1,588 10,957
Condensed balance sheet (unaudited)
as at 31 October 2009
31 October 30 April 31 October
2009 2009 2008
£'000 £'000 £'000
(audited)
Non-current assets
Fair value through profit or loss investments 17,253 14,369 16,109
Current assets
Trade and other receivables 93 440 65
Cash and cash equivalents 322 318 489
415 758 554
Total assets 17,668 15,127 16,663
Current liabilities
Trade and other payables (90) (92) (104)
(90) (92) (104)
Total assets less current liabilities 17,578 15,035 16,559
Non-current liabilities
Bank loan (4,000) (4,000) (5,000)
Derivative financial instruments (540) (629) (602)
(4,540) (4,629) (5,602)
Total liabilities (4,630) (4,721) (5,706)
Net assets 13,038 10,406 10,957
Represented by:
Share capital 4,063 4,063 4,063
Share premium account 11,917 11,917 11,917
Capital reserve (4,033) (6,712) (6,237)
Hedge reserve (432) (503) (374)
Revenue reserve 1,523 1,641 1,588
Issued capital and reserves 13,038 10,406 10,957
Net asset value per: (see note 3) pence pence pence
Ordinary share 80.23 64.04 67.43
Condensed statement of cash flows (unaudited)
for the six months ended 31 October 2009
Six months to Year to Six months to
31 October 30 April 31 October
2009 2009 2008
£'000 £'000 £'000
(audited)
Operating activities
Investment income received 680 1,983 1,688
Bank deposit interest received - 17 13
Investment management fee paid (76) (225) (149)
Administration and secretarial fees paid (24) (57) (29)
Refund of VAT paid on investment
management fees 189 185 -
Recovery of loss in former subsidiary company 6 - -
Other cash payments (89) (129) (90)
Cash generated from operations 686 1,774 1,433
Loan interest paid (170) (731) (325)
Net cash inflow from operating activities 516 1,043 1,108
Investing activities
Purchases of investments (1,664) (1,017) (1,017)
Sales of investments 1,631 7,781 6,497
Net cash (outflow)/inflow from investing activities (33) 6,764 5,480
Financing activities
Repayment of loan - (6,000) (5,000)
Dividends paid (479) (1,568) (1,178)
Net cash outflow from financing activities (479) (7,568) (6,178)
Increase in cash and cash equivalents for period 4 239 410
Cash and cash equivalents at start of period 318 79 79
Cash and cash equivalents at end of period 322 318 489
Notes to the condensed half-yearly report
for the six months ended 31 October 2009
1 General information
The financial information contained in this half-yearly report does not
constitute statutory financial statements as defined in Section 434 of the
Companies Act 2006. The statutory financial statements for the year ended 30
April 2009, which contained an unqualified auditors' report, have been lodged
with the Registrar of Companies and did not contain a statement required under
the Companies Act 2006. These statutory financial statements were prepared
under International Financial Reporting Standards ('IFRS') and in accordance
with the Statement of Recommended Practice: Financial Statements of Investment
Trust Companies and Venture Capital Trusts issued in January 2009.
This half-yearly report has been prepared using the accounting policies adopted
in the audited financial statements for the year ended 30 April 2009 and in
compliance with IAS 34 'Interim Financial Reporting'. This report has not been
reviewed by the Company's Auditors.
2 Return per Ordinary share
The return per share is based on 16,250,000 (30 April 2009: 16,250,000, 31
October 2008: 16,250,000) Ordinary shares.
3 Net asset values
Net asset values per Ordinary share have been calculated in accordance with
entitlements as at the period end and in accordance with the Company's Articles
of Association and include current period revenue.
The net asset value per Ordinary share is based on assets attributable of £
13,038,00 (30 April 2009: £10,406,000, 31 October 2008: £10,957,000) and on
16,250,000 (30 April 2009: 16,250,000, 31 October 2008: 16,250,000) Ordinary
shares, being the number of Ordinary shares in issue at the period end.
4 Taxation
31 October 30 April 31 October
2009 2009 2008
£'000 £'000 £'000
Based on the revenue return for the period
Current tax 5 13 8
The current tax charge for the year is lower than the averaged standard rate of
corporation tax in the UK of 28% (30 April 2009: 28%, 31 October 2008: 29%).The
differences are explained below:
31 October 30 April 31 October
2009 2009 2008
£'000 £'000 £'000
Revenue on ordinary activities before taxation 3,045 (12,066) (12,039)
Theoretical tax at UK corporation rate of 28%
(30 April 2009: 28%, 31 October 2008: 29%) 853 (3,378) (3,491)
Effects of:
Capital items not taxable (800) 3,626 3,763
UK dividends which are not taxable (134) (447) (327)
Overseas dividends which are not taxable (10) - -
Excess expenses in the year 82 199 55
Accrued income brought forward 9 - -
Withholding tax suffered on unfranked foreign dividend income 5 13 8
Actual current tax charged to the revenue account 5 13 8
The Company has unrelieved excess expenses of £15,767,000 at 31 October 2009
(30 April 2009: £15,630,000, 31 October 2008: £15,403,000). It is unlikely that
the Company will generate sufficient taxable profits in the future to utilise
these expenses and therefore no deferred tax asset has been recognised.
5 Reconciliation of net return before and after taxation to net cash inflow
from operating activities
31 October 30 April 31 October
2009 2009 2008
£'000 £'000 £'000
Net return before taxation 3,045 (12,066) (12,039)
Taxation (5) (13) (8)
Net return after taxation 3,040 (12,079) (12,047)
Net capital return (2,679) 13,452 12,977
Cost of ineffective loan swap (18) 126 -
Decrease in receivables 347 128 503
(Decrease)/increase in payables (2) (81) 159
Interest and expenses charged to the capital reserve (172) (503) (484)
Net cash inflow from operating activities 516 1,043 1,108
6 Related party transactions
The investments are managed by Chelverton Asset Management Limited, a company
in which Mr van Heesewijk, a Director of the Company, has an interest. The
amounts paid to the Investment Manager in the period to 31 October 2009 were £
83,000 (year ended 30 April 2009: £176,000, period to 31 October 2008: £
104,000).
7 Dividends
During the period, a fourth interim dividend of 1.70p per Ordinary share for
the year ended 30 April 2009, together with a first interim dividend of 1.25p
per Ordinary share for the year ended 30 April 2010, have been paid to
shareholders.
In addition, the Board has declared a second interim dividend of 1.25p per
Ordinary share payable on 7 January 2010 to shareholders on the register at 11
December 2009.
Principal portfolio investments
as at 31 October 2009
Top 20 holdings
Market value % of
Industrial classification £'000 portfolio
Portmeirion Group Household Goods & Home Construction 689 4.0
Hilton Food Group Food Producers 666 3.9
Clarke (T) Construction & Materials 659 3.8
Macfarlane Group Support Services 639 3.7
Brit Insurance Holdings Non Life Insurance 625 3.6
S&U General Financial 620 3.6
Victoria Household Goods & Home Construction 618 3.6
Dee Valley Group Gas, Water & Multi-utilities 592 3.4
Jarvis Securities General Financial 585 3.4
Alumasc Group Construction & Materials 554 3.2
Zotefoams Chemicals 543 3.1
Nichols Beverages 531 3.1
Sinclair (Williams) Holdings Household Goods & Home Construction 520 3.0
TT Electronics Electronic & Electrical Equipment 509 3.0
Office2office Support Services 480 2.8
Cineworld Group Travel & Leisure 473 2.7
Marshalls Group Construction & Materials 467 2.7
Arbuthnot Banking Group General Financial 463 2.7
Chesnara Life Insurance 456 2.6
Stadium Group Electronic & Electrical Equipment 378 2.2
Top 20 companies 11,067 64.1
Balance held in 37 companies 6,186 35.9
Total portfolio 17,253 100.0
Breakdown of portfolio by industry
Portfolio by industry Percentage
Support Services 13%
Construction & Materials 11%
Household Goods 11%
General Financial 10%
Travel & Leisure 8%
Non-Life Insurance 7%
Life Insurance 5%
Electronic & Electrical Equipment 5%
General Industrials 5%
Food Producers 4%
Industrial Engineering 3%
Chemicals 3%
Beverages 3%
Gas, Water & Multi-utilities 3%
Mining 2%
Industrial Transport 2%
General Retailers 2%
Software & Computing Services 1%
Personal Goods 1%
Media 1%
Shareholder information
Financial calendar
Company's year end 30 April
Interim dividends paid March, June, September and January
Annual results announced July
Annual General Meeting September
Company's half-year 31 October
Half-year results announced December
Share prices and performance information
The Company's Ordinary shares are listed on the London Stock Exchange. The
mid-market prices are quoted daily in the Financial Times under 'Investment
Companies'.
The net asset values are announced weekly to the London Stock Exchange and
published monthly via the Association of Investment Companies.
Information about the Company can be obtained on the Chelverton internet site
at www.chelvertonam.com. Any enquiries can also be e-mailed to
cam@chelvertonam.com.
Share register enquiries
The register for the Ordinary shares is maintained by Share Registrars Limited.
In the event of queries regarding your holding, please contact the Registrar on
01252 821390. Changes of name and/or address must be notified in writing to the
Registrar.
Directors and Advisers
Directors Lord Lamont of Lerwick (Chairman)
Bryan Lenygon
David Harris
William van Heesewijk
Investment Manager Chelverton Asset Management Limited
11 George Street
Bath BA1 2EH
Tel: 01225 483030
Secretary and Registered Capita Sinclair Henderson Limited
Office
(trading as Capita Financial Group - Specialist Fund
Services)
Beaufort House
51 New North Road
Exeter EX4 4EP
Tel: 01392 412122
Registrar and Transfer Share Registrars Limited
Office
Suite E, First Floor
9 Lion and Lamb Yard
Farnham
Surrey GU9 7LL
Tel: 01252 821390
www.shareregistrars.uk.com
Bankers Lloyds TSB Bank Plc
25 Gresham Street
London EC2V 7HN
Auditors Hazlewoods LLP
Windsor House
Barnett Way
Barnwood
Gloucester GL4 3RT
Custodian HSBC Global Services
Level 27
8 Canada Square
London E14 5HQ
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