Interim Results
Shires Smaller Companies PLC
21 August 2003
News Release
21 August 2003
Shires Smaller Companies plc
Interim Results for the
Six months to 30 June 2003
Shires Smaller Companies 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.
30 June 2003 31 December
2002
Total assets less current liabilities £61.19m £56.49m
Shareholders' funds £36.50m £32.31m
Net asset value per share 166.8p 147.6p
Share price 157.0p 139.5p
Discount (share price to net asset value) 5.9% 5.5%
Dividends per share 6.0p 6.0p*
* Half year to 30 June 2002
• Total return on net assets was +17.1%, slightly lower than the return of
+18.6% on the FTSE SmallCap Index (excluding Investment Companies), the
Company's benchmark, but significantly above the FTSE All-Share Index which
returned +6.3%.
• A second interim dividend of 3.0p has been declared, making total
dividends for the period to 30 June 2003 6.0p, the same as last year.
• The yield on the company's ordinary shares was 8.0% at the closing price
of 171.5p on 31 July 2003.
• The discount of share price to net asset value per share, 5.9% at 30 June
2003, showed little change from 5.5% at 31 December 2002.
• At 30 June 2003 investments in ordinary shares amounted to 95.4% of net
assets. Total gearing was 73.8% of net assets, all invested in fixed income
securities.
For further information, please contact:-
David Williams,
Managing Director,
Glasgow Investment Managers,
0141 572 2700
Chairman's Statement
Background
In the early months of the year equity prices around the world fell as investor,
business and consumer confidence declined in response to the growing prospect of
war in Iraq. However, stock markets began to recover once military action
commenced, ending the period of uncertainty, and the share prices of UK smaller
companies rose quite spectacularly in the second quarter.
Over the half year to 30 June 2003 the FTSE Small Cap Index (excluding
Investment Companies), the Company's benchmark, returned 18.6%, well ahead of
the total return of 6.3% on the All-Share Index, perhaps because its
constituents were less exposed than larger companies to the weakness of the US
Dollar and the problems of the Eurozone.
Investment Returns
The total return on net assets over the six months under review was 17.1%.
Earnings and Dividends
Earnings per share of 7.05p were higher than the 6.08p earned in the first half
last year, not only because dividends and interest receivable rose but also
because the investment management fee and the finance costs of borrowings fell.
The Board has declared a second interim dividend of 3.0p per share, to be paid
on 30 September 2003 to shareholders on the Register at close of business on 5
September 2003. A first interim dividend of 3.0p was paid on 30 June 2003. Total
dividends paid and declared to date this year are at the same level as last
year.
The yield on the Company's shares was 8.0% at the closing price of 171.5p on 31
July 2003.
Share Price Rating
The discount at which the ordinary share price normally stands to underlying net
asset value per share widened as UK ordinary share prices fell during the first
quarter then narrowed in the second quarter as the stock market recovered. At 30
June 2003 it stood at 5.9%, which compared with 5.5% at the beginning of the
half year under review. As a result the total return to shareholders, at 16.8%,
was a little lower than the return on net assets.
Portfolio Profile
As detailed in the Distribution of Assets Statement below, total gearing at 30
June 2003, was 73.8% of net assets, down from 84.7% at 31 December 2002
principally due to the rise in value of the Company's portfolio of ordinary
shares. All of this gearing is invested in the fixed income securities which
contribute the major proportion of the income which the Company distributes.
Outlook
Consensus forecasts suggest that the combination of low interest rates, growing
public expenditure and lower oil prices will stimulate a general recovery in
confidence and business activity, led by the USA, from the second half of this
year. With investor sentiment no longer dominated by the conflict in Iraq and
equities modestly rated these conditions should support continued progress in
the general level of share prices.
Board
I am sorry to have to report that John Stubbs, a founding director of the
Company when it was launched in 1992 and chairman from March 1995 until ill
health caused him to step down recently, died in July. His informed guidance of
the Board's deliberations will be sadly missed.
Subsequently, my colleagues on the Board invited me to take over as chairman.
The Interim Report will be mailed to shareholders on 28 August 2003. Copies may
be obtained from the Mangers, Glasgow Investment Managers Limited, Sutherland
House, 149 St Vincent Street, Glasgow G2 5DR after that date.
H S Cathcart
(Chairman)
Consolidated Statement of Total Return
(incorporating the Revenue Account)
for the half year ended 30 June 2003
Half year to 30 June 2003
(unaudited)
Revenue Capital Total
£000 £000 £000
Gains/(losses) on investments - 4,721 4,721
Dividends and interest receivable 2,125 - 2,125
Profits less losses of dealing subsidiary 16 - 16
Underwriting commission - - -
Investment management fee (121) (121) (242)
Other administrative expenses (129) - (129)
--------- -------- --------
Net return before finance costs and taxation 1,891 4,600 6,491
Finance costs of borrowings (243) (243) (486)
Zero coupon finance - (503) (503)
--------- -------- --------
Return on ordinary activities before taxation 1,648 3,854 5,502
Taxation (104) 104 -
--------- -------- --------
Return on ordinary activities after taxation
??for the period 1,544 3,958 5,502
Dividends on equity shares (1,313) - (1,313)
--------- -------- --------
Transfer to/(from) reserves 231 3,958 4,189
--------- -------- --------
Return per share 7.05p 18.08p 25.13p
Dividends per share 6.00p
Consolidated Statement of Total Return
(Continued)
Half year to 30 June 2002 Year to 31 December 2002
(unaudited) (audited)
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains/(losses)
on investments - (624) (624) - (10,148) (10,148)
Dividends and
interest
receivable 1,969 - 1,969 4,213 - 4,213
Profits less
losses of dealing
subsidiary (30) - (30) (31) - (31)
Underwriting
commission 2 - 2 2 - 2
Investment
management fee (156) (156) (312) (289) (289) (578)
Other
administrative
expenses (135) - (135) (254) - (254)
------- ------- ------- ------- ------- -------
Net return
before finance
costs and taxation 1,650 (780) 870 3,641 (10,437) (6,796)
Finance costs
of borrowings (309) (309) (618) (612) (612) (1,224)
Zero coupon
finance - (469) (469) - (955) (955)
------- ------- ------- ------- ------- -------
Return on
ordinary
activities
before
taxation 1,341 (1,558) (217) 3,029 (12,004) (8,975)
Taxation (10) 10 - (15) 15 -
------- ------- ------- ------- ------- -------
Return on
ordinary
activities
after taxation
for the period 1,331 (1,548) (217) 3,014 (11,989) (8,975)
Dividends on
equity shares (1,313) - (1,313) (3,009) - (3,009)
------- ------- ------- ------- ------- -------
Transfer to/
(from) reserves 18 (1,548) (1,530) 5 (11,989) (11,984)
------- ------- ------- ------- ------- -------
Return per 6.08p (7.07)p (0.99)p 13.77p (54.78)p (41.01)p
share
Dividends per 6.00p 13.75p
share
Group Balance Sheet
as at 30 June 2003
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Fixed assets
Listed investments
Ordinary shares 34,813 48,934 32,706
Convertibles 3,736 4,428 3,577
Corporate bonds 23,664 22,165 22,547
Other fixed interest 1,227 - 831
---------- ---------- ----------
63,440 75,527 59,661
Current assets
Debtors 886 2,372 961
Dealing Investments 156 141 140
Cash at bank and in hand - - 89
---------- ---------- ----------
1,042 2,513 1,190
Creditors: amounts falling
due within one year (3,296) (11,584) (4,360)
---------- ---------- ----------
Net current liabilities (2,254) (9,071) (3,170)
---------- ---------- ----------
Total assets less current
liabilities 61,186 66,456 56,491
Creditors: amounts falling due
after more than one year
Long-term loan (9,987) (9,981) (9,984)
Zero coupon finance (14,702) (13,713) (14,199)
---------- ---------- ----------
Net assets 36,497 42,762 32,308
---------- ---------- ----------
Capital and reserves
Called up share capital 10,943 10,943 10,943
Share premium account 11,490 11,490 11,490
Capital redemption reserve 2,032 2,032 2,032
Realised capital reserve 10,537 13,370 13,926
Unrealised capital reserve 442 4,092 (6,905)
Revenue reserve 1,053 835 822
---------- ---------- ----------
Equity shareholders' funds 36,497 42,762 32,308
---------- ---------- ----------
Net asset value per share 166.8p 195.4p 147.6p
Note: These are not statutory accounts under section 240 of the Companies Act
1985 and are unaudited. The information relating to the group balance sheet at
31 December 2002 is an extract from the latest audited accounts which have been
delivered to the Registrar of Companies; the report of the auditors on these
accounts was unqualified and did not contain a statement under Section 237(2) or
(3) of the Companies Act 1985.
Consolidated Cash Flow Statement
for the half year ended 30 June 2003
Half year to Half year to Year to
30 June 30 June 31 December
2003 2002 2002
(unaudited) (unaudited) (audited)
£000 £000 £000
Net cash inflow from operating
activities 1,694 1,634 3,300
Servicing of finance
Interest paid (480) (610) (1,228)
Taxation
Corporation tax paid - - (4)
Investing activities
Purchases of investments (10,341) (9,292) (34,400)
Sales of investments 11,372 7,047 38,609
---------- ---------- ----------
1,031 (2,245) 4,209
Equity dividends paid (1,696) (1,697) (3,009)
---------- ---------- ----------
Net cash inflow/(outflow) before
financing 549 (2,918) 3,268
Financing
Debt due within one year
- (decrease)/increase in
short-term borrowings (2,000) 2,500 (2,000)
---------- ---------- ----------
(Decrease)/increase in cash (1,451) (418) 1,268
---------- ---------- ----------
Analysis of Changes in Net Debt
As at Other As at
31 December Cash non-cash 30 June
2002 flows changes 2003
£000 £000 £000 £000
Cash at bank and in hand 89 (89) - -
Bank overdrafts - (1,362) - (1,362)
Short-term borrowings (3,000) 2,000 - (1,000)
Long-term loan (9,984) - (3) (9,987)
Zero coupon finance (14,199) - (503) (14,702)
---------- --------- --------- -------
(27,094) 549 (506) (27,051)
---------- --------- --------- -------
Distribution of Assets
Valuation at Valuation at
31 December 2002 Purchases Sales Apprecia-tion 30 June 2003
(audited) (unaudited)
£000 % £000 £000 £000 £000 %
Listed
investments
Ordinary
shares 32,706 101.2 4,258 (5,550) 3,399 34,813 95.4
Convertibles 3,577 11.1 969 (926) 116 3,736 10.2
Corporate 22,547 69.8 2,686 (2,769) 1,200 23,664 64.8
bonds
Other fixed 831 2.6 2,517 (2,127) 6 1,227 3.4
interest ------- ------- -------- ------- ------- ------- ------
59,661 184.7 10,430 (11,372) 4,721 63,440 173.8
-------- ------- -------
Net current
liabilities (3,170) (9.8) (2,254) (6.2)
Total assets
less current
liabilities 56,491 174.9 61,186 167.6
Long-term loan (9,984) (30.9) (9,987) (27.3)
Zero coupon
finance (14,199) (44.0) (14,702) (40.3)
------- ------- ------- ------
Net assets 32,308 100.0 36,497 100.0
------- ------- ------- ------
Net asset
value per share 147.6p 166.8p
This information is provided by RNS
The company news service from the London Stock Exchange
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