Half-yearly Report
SMALL COMPANIES DIVIDEND TRUST PLC
Half-yearly Report
for the six months ended 31 October 2012
The Half-yearly Report and Accounts can be accessed via the Investment
Manager's website at www.chelvertonam.com or by telephone 0207 222 8989.
Investment objective and policy
The investment objective of the Group is to provide Ordinary shareholders with
a high income and opportunity for capital growth, having provided a capital
return sufficient to repay the capital entitlement of the Zero Dividend
Preference shares issued by the subsidiary company, Small Companies ZDP PLC.
The Group's funds are invested principally in companies with a market
capitalisation of up to £500 million. The Group's portfolio comprises companies
listed on the Official List and companies admitted to trading on AIM. The Group
does not invest in other investment trusts or in unquoted companies. No
investment is made in preference shares, loan stock or notes, convertible
securities or fixed interest securities.
Capital structure
Small Companies Dividend Trust PLC ("the Company")
The Company has in issue one class of Ordinary share. In addition, it has
wholly owned subsidiary, Small Companies ZDP PLC, through which Zero Dividend
Preference shares have been issued.
Ordinary shares of 25p each ("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 the capital
entitlement of the Zero Dividend Preference share sand then of all other
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.
Small Companies ZDP PLC
Ordinary shares of 100p each ("ordinary shares") - 50,000 in issue (partly paid
up as to 25p each)
The ordinary shares are wholly owned by the Company. References to Ordinary
shares within this half-yearly report are the Ordinary shares of Small
Companies Dividend Trust PLC.
Capital
Following payment of the capital entitlement to the Zero Dividend Preference
shareholders, ordinary shareholders are entitled to any surplus assets of the
Company.
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.
Zero Dividend Preference shares of 100p each - 8,500,000 in issue
Dividends
Holders of Zero Dividend Preference shares are not entitled to dividends.
Capital
On a winding up of the Company, after the satisfaction of prior ranking
creditors and subject to sufficient assets being available, Zero Dividend
Preference shareholders are entitled to an amount equal to 100 pence per share
increased daily from 28 August 2012 at such compound rate as will give an
entitlement to 136.7 pence per share at 8 January 2018.
Voting
Each holder of Zero Dividend Preference shares on a show of hands will have one
vote at meetings where Zero Dividend Preference shareholders are entitled to
vote and on a poll will have one vote for every Zero Dividend Preference share
held.
Financial highlights
31 October 30 April
2012 2012 % change
Capital Total net assets (£'000) 18,907 17,180 10.05
Net asset value per Ordinary share* 116.35p 105.72p 10.05
Mid-market price per Ordinary share 100.25p 98.00p 2.30
Discount 13.84% 7.30%
Net asset value per Zero Dividend Preference share* 101.04p - n/a
Mid-market price per Zero Dividend Preference Share 107.00p - n/a
Premium 5.90% -
Six months to Six months to
31 October 31 October
2012 2011 % change
Revenue
Return per Ordinary share 3.68p 3.19p 15.36
Dividend per Ordinary share** 2.80p 2.70p 3.70
Total return
Total return on Group's net assets*** 13.60% (9.01)%
* 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 declared for the period to 31 October 2012 and 2011 and will differ
from the amounts disclosed within the statement of changes in net equity.
*** Adding back dividends distributed in the period.
Interim management report
As shareholders will know, at the end of August we raised £8.5 million through
the issue of Zero Dividend Preference shares and repaid bank debt of £4
million. The additional monies raised were invested into a combination of both
new and existing holdings. Over the period, we acquired holdings in eight new
investments. In accordance with our investment process, all of the new holdings
provide dividend yields over 4%. The new investments are Albermarle & Bond,
Centaur Media, Close Brothers Group, Kier Group, Numis, Printing.com, Acal and
NWF Group. Interestingly, the Company has held the latter two companies before,
but, recent falls in their share prices have brought them back into our
investible universe.
In adding new stocks we have further diversified the source of our income
across additional industries and sectors. At the same time we have also added
to a wide range of existing holdings. It is reassuring that even after a period
of good performance for small and mid caps generally, so many are still trading
at such attractive levels of valuation. The most significant additional
investments were in Brown (N) Group, Novae Group, Dairy Crest Group, TUI
Travel, Greencore Group, Photo-Me International and Nationwide Accident
Repairs. We have continued to reduce our exposure to a number of illiquid
larger weightings, including S&U, Sanderson Group and Arbuthnot Banking in the
last six months.
Outlook
The upward trend in the performance of UK small and mid caps over the past six
months was driven in the first instance by a rerating of domestic earnings.
Investors perceived negative news in the UK to be largely incorporated into
valuations. We benefitted from holding stocks which in general tended to be
more geared to the domestic economy than the market as a whole. Although we
expect macro news will continue to be volatile for the foreseeable future,
investors do appear to be considering the relative merits of equities against
other asset classes.
The message that our investee companies relay to us has remained largely
consistent for the past two years i.e. life is not easy but we continue to
generate cash and, in aggregate, increase dividends. Despite this, market
expectations with respect to earnings growth appear to be somewhat optimistic
and there have recently been a number of earnings downgrades. For earnings to
grow on a sustained basis, companies need the confidence to increase investment
spending and that still appears to be some way off.
Chelverton Asset Management Limited
11 December 2012
Principal risks
The principal risks facing the Group are substantially unchanged since the date
of the annual report for the year ended 30 April 2012 and continue to be as set
out in that report. Risks faced by the Group include, but are not limited to,
market risk, discount volatility, regulatory risk, financial risk, risks
associated with banking and the risk of non-compliance with Section 1158 of the
Corporation Tax Act 2010.
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 IAS 34 "Interim Financial Reporting" and gives a true and fair view of the
assets, liabilities and financial position of the Group; 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 Group 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 11 December
2012 and the above responsibility statement was signed on its behalf by Lord
Lamont, Chairman.
Condensed consolidated statement of comprehensive income (unaudited)
for the six months ended 31 October 2012
Six months to Year to Six months to
31 October 2012 30 April 2012 31 October 2011
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(audited)
Gains/(losses)
on investments - 2,155 2,155 - (699) (699) - (2,063) (2,063)
Investment
income 739 - 739 1,167 - 1,167 677 - 677
Expenses (see note 4) (126) (99) (225) (190) (166) (356) (120) (83) (203)
Net return
before finance
costs and
taxation 613 2,056 2,669 977 (865) 112 557 (2,146) (1,589)
Finance costs
Bank interest
payable on
overdraft and
loan (18) (54) (72) (91) (273) (364) (44) (134) (178)
Movement in
fair value of
ineffective
element of
interest rate
swap 3 10 13 13 38 51 6 19 25
Appropriations in respect of
Zero Dividend
Preference
shares - (88) (88) - - - - - -
(15) (132) (147) (78) (235) (313) (38) (115) (153)
Net return
before taxation 598 1,924 2,522 899 (1,100) (201) 519 (2,261) (1,742)
Taxation (see
note 5) - - - - - - - - -
Net return after
taxation 598 1,924 2,522 899 (1,100) (201) 519 (2,261) (1,742)
Other
comprehensive
income
Movement in
fair value of
cash flow hedge 52 205 100
Total
comprehensive
income for the
period 2,574 4 (1,642)
Return per: Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence pence pence pence
Ordinary share
(see note 2) 3.68 11.84 15.52 5.53 (6.77) (1.24) 3.19 (13.91) (10.72)
Zero Dividend
Preference
share (see
note 2) - 1.04 1.04 - - - - - -
The total column of this statement is the statement of comprehensive income of
the Group prepared in accordance with IFRS as adopted by the EU. All revenue
and capital items in the above statement derive from continuing operations. All
of the net return for the period and the total comprehensive income for the
period is attributable to the shareholders of the Group. The supplementary
revenue and capital columns are presented for information purposes as
recommended by the Statement of Recommended Practice issued by the Association
of Investment Companies ("AIC").
Condensed consolidated statement of changes in net equity (unaudited)
for the six months ended 31 October 2012
Share
Share premium Capital Hedge Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Six months ended
31 October 2012
30 April 2012 4,063 11,917 2 (52) 1,250 17,180
Total comprehensive income
for the period - - 1,924 52 598 2,574
Expenses of Zero Dividend
Preference share issue - - (237) - - (237)
Dividends paid - - - - (610) (610)
31 October 2012 4,063 11,917 1,689 - 1,238 18,907
Year ended 30 April 2012
(audited)
30 April 2011 4,063 11,917 1,102 (257) 1,383 18,208
Total comprehensive income
for the year - - (1,100) 205 899 4
Dividends paid - - - - (1,032) (1,032)
30 April 2012 4,063 11,917 2 (52) 1,250 17,180
Six months ended
31 October 2011
30 April 2011 4,063 11,917 1,102 (257) 1,383 18,208
Total comprehensive income
for the period - - (2,261) 100 519 (1,642)
Dividends paid - - - - (593) (593)
31 October 2011 4,063 11,917 (1,159) (157) 1,309 15,973
Condensed consolidated balance sheet (unaudited)
as at 31 October 2012
31 October 30 April 31 October
2012 2012 2011
£'000 £'000 £'000
(audited)
Non-current assets
Investments at fair value through
profit or loss 27,103 22,120 20,664
Current assets
Trade and other receivables 215 205 216
Cash and cash equivalents 287 - -
502 205 216
Current liabilities
Bank overdraft - (950) (610)
Trade and other payables (110) (130) (101)
Derivative financial instruments - (65) -
(110) (1,145) (711)
Total assets less current liabilities 27,495 21,180 20,169
Non-current liabilities
Bank loan - (4,000) (4,000)
Derivative financial instruments - - (196)
Zero Dividend Preference shares (8,588) - -
(8,588) (4,000) (4,196)
Net assets 18,907 17,180 15,973
Represented by:
Share capital 4,063 4,063 4,063
Share premium account 11,917 11,917 11,917
Capital reserve 1,689 2 (1,159)
Hedge reserve - (52) (157)
Revenue reserve 1,238 1,250 1,309
Equity shareholders' funds 18,907 17,180 15,973
Net asset value per: (see note 3) pence pence pence
Ordinary share 116.35 105.72 98.30
Zero Dividend Preference share 101.04 - -
Condensed consolidated statement of cash flows (unaudited)
for the six months ended 31 October 2012
Six months to Year to Six months to
31 October 30 April 31 October
2012 2012 2011
£'000 £'000 £'000
(audited)
Operating activities
Investment income received 767 1,162 739
Interest income received - 6 -
Investment management fee paid
(see note 7) (180) (222) (116)
Administration and secretarial fees paid (30) (58) (29)
Refund of VAT paid on administration and secretarial fees - 45 -
Other cash payments (86) (119) (82)
Cash generated from operations 471 814 512
Loan interest paid (101) (352) (176)
Net cash inflow from operating activities (see note 6) 370 462 336
Investing activities
Purchases of investments (4,073) (5,703) (3,339)
Sales of investments 1,293 5,570 3,233
Net cash outflow from investing
activities (2,780) (133) (106)
Financing activities
Issue of Zero Dividend Preference
shares 8,500 - -
Expenses of Zero Dividend
Preference share issue (243) - -
Repayment of bank loan (4,000) - -
Dividends paid (610) (1,032) (593)
Net cash inflow/(outflow) from
financing activities 3,647 (1,032) (593)
Increase/(decrease) in cash and
cash equivalents for period 1,237 (703) (363)
Cash and cash equivalents at
start of period (950) (247) (247)
Cash and cash equivalents at end
of period 287 (950) (610)
Notes to the condensed half-yearly report
for the six months ended 31 October 2012
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 2012, 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 which 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 by the AIC in
January 2009.
The Group has considerable financial resources and therefore the Directors
believe that the Group is well placed to manage its business risks and also
believe that the Group will have sufficient resources to continue in
operational existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing this half-yearly report.
This half-yearly report has not been reviewed by the Group's Auditors.
New subsidiary
Small Companies ZDP PLC was incorporated on 13 July 2012 and has a capital
structure comprising unlisted ordinary shares and Zero Dividend Preference
shares listed on the Official List and traded on the London Stock Exchange.
Small Companies ZDP PLC is a wholly owned subsidiary of Small Companies
Dividend Trust PLC (the "Company") together referred to as the "Group". Small
Companies ZDP PLC was specifically incorporated for the issue of Zero Dividend
Preference shares. On 28 August 2012, Small Companies ZDP PLC issued 8,500,000
Zero Dividend Preference shares at 100p per share and with net proceeds of £8.3
million. The expenses of the placing were borne by the Company. Pursuant to a
loan agreement between Small Companies ZDP PLC and the Company, Small Companies
ZDP PLC has lent the proceeds of the placing to the Company. The loan is
non-interest bearing and is repayable three business days before the Zero
Dividend Preference share redemption date of 8 January 2018 or, if required by
Small Companies ZDP PLC, at any time prior to that date. The funds are to be
managed in accordance with the investment policy of the Company.
A contribution agreement between the Company and its subsidiary has also been
made whereby the Company will undertake to contribute such funds as would
ensure that the Company will have in aggregate sufficient assets on 8 January
2018 to satisfy the final capital entitlement of the Zero Dividend Preference
shares.
This half-yearly report has been prepared using accounting policies adopted in
the audited financial statements for the year ended 30 April 2012 and with the
new accounting policies detailed below with regards to the new subsidiary and
the Zero Dividend Preference share issue. This report has also been prepared in
compliance with IAS 34 "Interim Financial Reporting".
New accounting policies
Basis of consolidation
The Group condensed financial statements consolidate the financial statements
of Small Companies Dividend Trust PLC and its wholly owned subsidiary
undertaking, the Company, drawn up to the same accounting date.
Expenses of subsidiary
The operating expenses of the subsidiary are borne by Small Companies Dividend
Trust PLC and taken 100% to capital.
Zero Dividend Preference shares
Shares issued by the Company's subsidiary are treated as a liability of the
Group, and are shown in the balance sheet at their redemption value at the
balance sheet date. The appropriations in respect of the Zero Dividend
Preference shares necessary to increase the subsidiary's liabilities to the
redemption values are allocated to capital in the statement of comprehensive
income. This treatment reflects the Board's long-term expectations that the
entitlements of the Zero Dividend Preference shareholders will be satisfied out
of gains arising on investments held primarily for capital growth.
Share issue costs
Costs incurred directly in relation to the issue of shares in Small Companies
ZDP PLC were borne by the Company and taken 100% to capital.
2 Return per share
Ordinary shares
Revenue return per Ordinary share is based on revenue on ordinary activities
after taxation of £598,000 (30 April 2012: £899,000, 31 October 2011: £519,000)
and on 16,250,000 (30 April 2012: 16,250,000, 31 October 2012: 16,250,000)
Ordinary shares, being the weighted average number of Ordinary shares in issue
during the period.
Capital return per Ordinary share is based on the capital profit of £1,924,000
(30 April 2012: capital loss of £1,100,000, 31 October 2011: capital loss of £
2,261,000) and on 16,250,000 (30 April 2012: 16,250,000, 31 October 2011:
16,250,000) Ordinary shares, being the weighted average number of Ordinary
shares in issue during the period.
Zero Dividend Preference shares
Capital return per Zero Dividend Preference share is based on allocations from
the parent company of £88,000 and on 8,500,000 Zero Dividend Preference shares.
3 Net asset values
Net asset values per share have been calculated in accordance with entitlements
as at the period end and in accordance with the Articles of Association.
Ordinary shares
The net asset value per Ordinary share is based on assets attributable of £
18,907,000 (30 April 2012: £17,180,000, 31 October 2011: £15,973,000) and on
16,250,000 (30 April 2012: 16,250,000, 31 October 2011: 16,250,000) Ordinary
shares, being the number of shares in issue at the period end.
Zero Dividend Preference shares
The net asset value per Zero Dividend Preference share is based on assets
attributable of £8,588,000 and on 8,500,000 Zero Dividend Preference shares,
being the number of shares in issue at the period end.
4 Expenses
31 October 30 April 31 October
2012 2012 2011
£'000 £'000 £'000
Investment management fee 124 221 111
Recovery of VAT on administration
and secretarial fees - (45) -
Subsidiary operating costs 6 - -
Other expenses 95 180 92
225 356 203
Transfer to capital* (99) (166) (83)
126 190 120
* 75% of the investment management fees and 100% of the subsidiary operating
costs are taken to capital.
5 Taxation
The Company has an effective tax rate of 0%. The estimated effective tax rate
is 0% as investment gains are exempt from tax owing to the Company's status as
an Investment Trust and there is expected to be an excess of management
expenses over taxable income and thus there is no charge for corporation tax.
6 Reconciliation of net return before and after taxation to net cash inflow
from operating activities
31 October 30 April 31 October
2012 2012 2011
£'000 £'000 £'000
Net return before taxation 2,522 (201) (1,742)
Net capital return (1,924) 1,100 2,261
Movement in fair value of ineffective element of
interest rate swap (13) (51) (25)
Decrease in receivables 21 5 59
(Decrease)/increase in payables (93) 10 (19)
Interest and expenses charged to the capital
reserve (143) (401) (198)
Net cash inflow from operating activities 370 462 336
7 Related party transactions
The Group's investments are managed by Chelverton Asset Management Limited, a
company in which Mr van Heesewijk, a Director of the Company and the
subsidiary, has an interest. The amounts paid to the Investment Manager in the
period to 31 October 2012 were £124,000 (year ended 30 April 2012: £221,000,
period to 31 October 2011: £111,000).
At 31 October 2012 there were amounts outstanding to be paid to the Investment
Manager of £nil (year ended 30 April 2012: £56,000, period to 31 October 2011:
£52,000).
Chelverton Asset Management Limited contributed £100,000 towards the issue
costs relating to the Zero Dividend Preference share issue.
8 Dividends
During the period, a fourth interim dividend of 2.35p per Ordinary share for
the year ended 30 April 2012, together with a first interim dividend of 1.40p
per Ordinary share for the year ending 30 April 2013, have been paid to
shareholders.
In addition, the Board has declared a second interim dividend of 1.40p per
Ordinary share payable on 7 January 2013 to shareholders on the register at 14
December 2012.
Principal portfolio investments
as at 31 October 2012
Top 20 holdings
Market value % of
Industrial classification £'000 portfolio
Macfarlane Group General Industrials 840 3.1
St Ives Support Services 820 3.0
Smiths News Support Services 777 2.9
Sanderson Group Software & Computer Services 697 2.6
GVC Holdings Travel & Leisure 696 2.6
Wilmington Group Media 639 2.4
Avesco Group Media 632 2.3
Abbey Protection Non-Life Insurance 618 2.3
Personal Group Non-Life Insurance 592 2.2
Arbuthnot Banking General Financial 581 2.1
Vp Support Services 578 2.1
Portmeirion Group Household Goods 570 2.1
Interior Services Support Services 568 2.1
Braemar Shipping Industrial Transportation 568 2.1
Chesnara Life Insurance 562 2.1
Marshalls Construction & Materials 539 2.0
Brown (N) Group General Retailers 538 2.0
Dairy Crest Group Food Producers 535 2.0
Intermediate Capital Group General Financial 534 1.9
Morgan Sindall Group Construction & Materials 529 1.9
Top 20 companies 12,413 45.8
Balance held in 52 companies 14,690 54.2
Total portfolio 27,103 100.0
Breakdown of portfolio by industry
Industrial classification % of portfolio
Support Services 18.1
General Financial 12.9
Non Life Insurance 9.5
Travel & Leisure 8.7
Construction & Materials 8.0
Media 7.6
Industrial Engineering 4.6
Software & Computer Services 4.5
Food Producers 4.2
Household Goods 4.0
Life Insurance 3.2
General Industrials 3.1
Industrial Transportation 2.5
General Retailers 2.0
Leisure Goods 1.8
Chemicals 1.8
Electronic & Electrical Equipment 1.2
Gas, Water & Multi Utilities 1.2
Fixed Line Telecommunications 1.1
100.0
Shareholder information
Financial calendar
Group's year end 30 April
Interim dividends paid April, July, October and January
Annual results announced July
Annual General Meeting September
Group's half-year 31 October
Half-year results announced December
Share prices and performance information
The Group's Ordinary and Zero Dividend Preference shares are listed on the
London Stock Exchange.
The net asset values are announced weekly to the London Stock Exchange and
published monthly via the Association of Investment Companies.
Information about the Group 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 registers for the Ordinary and Zero Dividend Preference shares are
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.
Interim management statements
Under the EU Disclosure and Transparency Rules DTR 4.3.2R the Company is
required to publish interim management statements. These statements are
released to the London Stock Exchange and are also available on the Investment
Manager's website www.chelvertonam.com
Directors and Advisers
Directors Lord Lamont of Lerwick (Chairman)
David Harris
William van Heesewijk
Howard Myles
Investment Manager Chelverton Asset Management Limited
12b George Street
Bath BA1 2EH
Tel: 01225 483030
Secretary and Registered Office Capita Sinclair Henderson Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Tel: 01392 412122
Registrar and Transfer Office Share Registrars Limited
Suite E, First Floor
9 Lion and Lamb Yard
Farnham
Surrey GU9 7LL
Tel: 01252 821390
www.shareregistrars.uk.com
Auditors Hazlewoods LLP
Windsor House
Bayshill Road
Cheltenham
GL50 3AT
Custodian HSBC Global Custody Services
Level 27
8 Canada Square
London E14 5HQ
Registered in England
No. 3749536
National Storage Mechanism
A copy of the Half-yearly Report will be submitted shortly to the National
Storage Mechanism ("NSM") and will be available for inspection at the NSM,
which is situated at: www.morningstar.co.uk/uk/nsm.
END
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on this announcement (or any other website) is
incorporated into, or forms part of, this announcement.
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