Interim Results
Shires Smaller Companies PLC
22 September 2005
News Release
22 September 2005
Shires Smaller Companies plc
Interim Results for the
Six months to 30 June 2005
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 2005 31 December
2004
(Restated under
IFRS)
Total investments £83.3m £78.9m
Shareholders' funds £51.1m £47.9m
Net asset value per share 231.1p 218.9p
Share price 232.5p 225.5p
Premium (share price to net asset value) 0.6% 3.0%
Revenue return per share 6.4p 12.3p
Dividends per share 7.75p 7.75p*
* Half year to 30 June 2004
•The net asset value per share rose by 5.6% to 231.1p at 30 June 2005 from
218.9p at 31 December 2004.
•Total return on net assets was +9.1%, significantly above the return of
+6.0% on the FTSE SmallCap Index (excluding Investment Companies), the
Company's benchmark, and greater than the FTSE All-Share Index which
returned +8.2%.
•The yield on the company's ordinary shares was 5.9% at the closing price
of 232.5p on 30 June 2005.
•At 30 June 2005 total gearing was 63% of net assets, down from 64.7% at
31 December 2004, principally invested in fixed income securities.
•A second interim dividend of 3.0p per share was declared on 7 July and
paid to shareholders on 29 July 2005, the same as paid last year.
International Financial Reporting Standards (IFRS)
The results for the period have been prepared in accordance with IFRS and the
prior period has been restated to reflect these changes in accordance with IFRS
1, First Time Adoption of IFRS. Details of the changes on the transition to IFRS
are included in note 2 to the financial statements.
These preliminary financial statements may require adjustment before their
inclusion in the final IFRS financial statements for the year ended 31 December
2005 because of subsequent revisions or changes to IFRS, or guidance and
consensus on the application or interpretation of IFRS.
For further information, please contact:-
Mike Balfour,
Chief Executive,
Glasgow Investment Managers,
0141 572 2700
Chairman's Statement
Financial Highlights
The Company's net asset value per share rose by 5.6% from 218.9p at 31 December
2004 to 231.1p at 30 June 2005. Dividends paid and declared to date are at the
same level as last year, producing a dividend yield of 5.9% based upon the share
price of 232.5p at 30 June 2005.
International Financial Reporting Standards
These are the Company's first financial statements under the new International
Financial Reporting Standards (IFRS), which came into effect on 1 January 2005.
As a consequence of these new accounting rules, the financial statements look
quite different from those contained in previous reports. The Consolidated
Statement of Total Return has been replaced by the Consolidated Income
Statement. However, while the total column is the primary statement combining
elements that are of a revenue and capital nature, a three columned approach is
retained showing the division between revenue and capital as previously. This
enables you to identify the revenue available for distribution. There is,
however, a significant presentational change in respect of dividends. Previously
these were shown in the revenue column of the Statement of Total Return, but are
now included in a new statement, the Statement of Changes in Equity. There is a
further change to the incorporation of dividends which is discussed in more
detail below under Earnings and Dividends.
The NAV of the Company at 231.1p at 30 June 2005 is 0.6p higher than it would
have been under the old accounting rules. One of the major changes is the move
to valuing the zero coupon finance arrangement at market value (-2.6p), offset
by the exclusion of the second interim dividend of 2005 (+3.0p), expanded upon
in the Earnings and Dividends section below. The remaining small difference is
represented by the move from mid to bid value for investments (-0.2p) and a
change in the method for accounting for income on fixed interest securities
(+0.4p). A detailed note of the effects of the transition to IFRS is contained
in note 2 to the financial statements.
Investment Returns
The total return on net assets over the six months to 30 June 2005 was 9.1%,
significantly above the return of 6.0% on the FTSE SmallCap Index (excluding
Investment Companies), the Company's benchmark and greater than the return of
8.2% on the FTSE All-Share Index over the same period.
The total return to shareholders, or share price total return, at 6.5%, was
lower than the return on net assets, reflecting the fact that the premium of
3.0% at which the share price stood to net asset value per share at 31 December
2004 fell to a premium of 0.6% at 30 June 2005.
Earnings and Dividends
As shown in the financial highlights the revenue return per share is 6.4p for
the six months to 30 June 2005. Actual dividends paid to date for the 2005
financial year amount to 6.0p, comprising the first and second interim dividend
payments, each of 3.0p per share, made on 29 April 2005 and 29 July 2005
respectively.
However, under the new IFRS requirements, only dividends which are declared in
the financial period are included in the financial statements and shown in the
Consolidated Statement of Changes in Equity. As a result the total dividend
reflected in these accounts and shown in the financial highlights is 7.75p,
comprising the fourth interim dividend from 2004 of 4.75p which was declared on
5 January 2005, and the first interim dividend of 2005 of 3.0p declared on 7
April 2005. The second interim dividend, declared on 5 July 2005 is excluded as
the declaration date is post this reporting period end of 30 June 2005. This
gives rise to the distorted comparison in the financial highlights section
between a revenue return per share of 6.4p for the first six months of 2005 with
a dividend payment of 7.75p which comprises dividend distributions from both
2004 and 2005.
Portfolio Profile
The distribution of assets shows that 101.5% of net assets was invested in
ordinary shares at 30 June 2005, the same level as at 31 December 2004. Total
gearing at 30 June 2005 was 63% of net assets, down from 64.7% at 31 December
2004. This gearing is invested in the high-yielding fixed interest securities
which contribute to the high level of income distributed to shareholders.
Outlook
The outlook for the UK equity market remains positive. The UK corporate sector
is in a healthy financial position and is well positioned to increase dividend
payments and announce further share repurchases. The recent rise in the oil
price has reduced the scope for a further reduction in short-term interest rates
this year as the Bank of England Monetary Policy Committee want to ensure their
inflation target is not jeopardised. The market valuation is supported by sound
earnings growth and historically is lowly rated when compared with conventional
fixed interest securities.
The Interim Report will be mailed to shareholders on 23 September 2005. Copies
may be obtained from the Managers, Glasgow Investment Managers Limited,
Sutherland House, 149 St Vincent Street, Glasgow G2 5DR after that date.
H S Cathcart
(Chairman)
Consolidated Income Statement
for the half year ended 30 June 2005
Half year to 30 June 2005
(unaudited)
Revenue Capital Total
£000 £000 £000
Gains
Gains on investments - 4,174 4,174
Revenue
Dividend income 1,048 - 1,048
Interest income from investments 988 - 988
Deposit interest 5 - 5
Other revenue - - -
Net loss of dealing subsidiary (15) - (15)
--------- -------- --------
2,026 4,174 6,200
--------- -------- --------
Expenses
Investment management fee (178) (178) (356)
Other administrative expenses (128) - (128)
Cost of investment transactions - (96) (96)
Finance cost of borrowings (302) (302) (604)
Zero coupon finance costs - (639) (639)
--------- -------- --------
(608) (1,215) (1,823)
--------- -------- --------
Profit before tax 1,418 2,959 4,377
Tax expense - - -
--------- -------- --------
Profit for the period 1,418 2,959 4,377
--------- -------- --------
Profit attributable to equity holders of the
Company 1,418 2,959 4,377
--------- -------- --------
Earnings per ordinary share (pence) 19.8p
The total column of this statement represents the Group's Income Statement,
prepared in accordance with IFRS. The revenue and capital columns are
supplementary to this and are prepared under guidance published by the
Association of Investment Trust Companies.
All items shown in the above statement derive from continuing operations.
Consolidated Income Statement
(Continued)
Half year to 30 June 2004 Year to 31 December 2004
Restated Restated
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains
Gains on investments - 5,291 5,291 - 10,670 10,670
Revenue
Dividend income 783 - 783 1,728 - 1,728
Interest income from
investments 991 - 991 1,987 - 1,987
Deposit interest 4 - 4 6 - 6
Other revenue 2 - 2 2 - 2
Net gain of dealing
subsidiary 36 - 36 64 - 64
------- ------- ------- ------- ------- -------
1,816 5,291 7,107 3,787 10,670 14,457
------- ------- ------- ------- ------- -------
Expenses
Investment management
fee (143) (143) (286) (302) (302) (604)
Other administrative
expenses (128) - (128) (278) - (278)
Cost of investment
transactions - (13) (13) - (84) (84)
Finance cost of
borrowings (247) (247) (494) (514) (514) (1,028)
Zero coupon finance
costs - 96 96 - (479) (479)
------- ------- ------- ------- ------- -------
(518) (307) (825) (1,094) (1,379) (2,473)
------- ------- ------- ------- ------- -------
Profit before tax 1,298 4,984 6,282 2,693 9,291 11,984
Tax expense - - - - - -
------- ------- ------- ------- ------- -------
Profit for the period 1,298 4,984 6,282 2,693 9,291 11,984
------- ------- ------- ------- ------- -------
Profit attributable to
equity holders of the
Company 1,298 4,984 6,282 2,693 9,291 11,984
------- ------- ------- ------- ------- -------
Earnings per ordinary
share (pence) 28.7p 54.8p
Note: These are not statutory accounts under section 240 of the Companies Act
1985 and are unaudited. The figures and financial information for the year ended
31 December 2004 have been extracted from the 2004 report and accounts (as
adjusted under IFRS) 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.
Group Balance Sheet
as at 30 June 2005
30 June 31 December 30 June
2005 2004 2004
Restated Restated
(unaudited) (audited) (unaudited)
£000 £000 £000
Non current assets
Ordinary shares 51,853 48,605 43,292
Convertibles 2,354 2,354 2,640
Corporate bonds 22,784 23,790 23,070
Other fixed interest 6,285 4,147 2,572
Zero coupon finance call options 1,121 859 1,010
Zero coupon finance put options 313 586 3,486
---------- ---------- ----------
84,710 80,341 76,070
---------- ---------- ----------
Current assets
Zero coupon finance put option 1,759 2,294 -
Trade and other receivables 1,911 1,038 -
Accrued income and prepayments 1,066 926 857
Investments of dealing subsidiary 319 - -
Cash and cash equivalents 1 - -
---------- ---------- ----------
5,056 4,258 857
---------- ---------- ----------
Total assets 89,766 84,599 76,927
Current liabilities
Current portion of long-term loan (9,997) (9,994) -
Zero coupon finance put option (5,744) (6,183) -
Trade and other payables (813) (250) (214)
Short-term borrowings (6,803) (5,483) (2,055)
---------- ---------- ----------
(23,357) (21,910) (2,269)
---------- ---------- ----------
Non current liabilities
Long-term loan - - (9,992)
Zero coupon finance call options (10,862) (9,690) (9,063)
Zero coupon finance put options (4,452) (5,092) (12,085)
---------- ---------- ----------
(15,314) (14,782) (31,140)
---------- ---------- ----------
---------- ---------- ----------
Net assets 51,095 47,907 43,518
---------- ---------- ----------
Issued capital and reserves
attributable to
equity holders of the parent
Called up share capital 11,055 10,943 10,943
Share premium account 11,892 11,490 11,490
Capital redemption reserve 2,032 2,032 2,032
Retained earnings
Realised capital reserve 12,179 9,193 8,600
Unrealised capital reserve 12,298 12,325 8,611
Revenue reserve 1,639 1,924 1,842
---------- ---------- ----------
51,095 47,907 43,518
---------- ---------- ----------
Net asset value per ordinary share
(pence) 231.1p 218.9p 198.8p
Consolidated Cash Flow Statement
for the half year ended 30 June 2005
Half year to Half year to Year to
30 June 30 June 31 December
2005 2004 2004
Restated Restated
(unaudited) (unaudited) (audited)
£000 £000 £000
Cash flows from operating
activities
Investment income received 2,005 1,928 3,935
Deposit interest received 5 5 6
Investment management fee paid (350) (287) (606)
Sales less purchases of dealing
subsidiary (334) 182 211
Other cash receipts 350 2 2
Other cash payments (117) (135) (588)
---------- ---------- ----------
Cash generated from operations 1,559 1,695 2,960
Interest paid (594) (940) (1,472)
Taxation - 4 4
---------- ---------- ----------
Net cash inflows from operating
activities 965 759 1,492
---------- ---------- ----------
Cash flows from investing
activities
Purchases of investments (14,484) (15,004) (26,498)
Sales of investments 13,480 15,383 24,102
Transaction costs (91) (12) (85)
---------- ---------- ----------
(1,095) 367 (2,481)
---------- ---------- ----------
Cash flows from financing
activities
Proceeds of issue of shares 514 - -
Equity dividends paid (1,703) (1,696) (3,009)
---------- ---------- ----------
Net decrease in cash and cash
equivalents (1,319) (570) (3,998)
---------- ---------- ----------
Cash and cash equivalents at start
of (5,483) (1,485) (1,485)
period
---------- ---------- ----------
Cash and cash equivalents at end of
period (6,802) (2,055) (5,483)
---------- ---------- ----------
Cash and cash equivalents comprise:
Cash and cash equivalents 1 - -
Short-term borrowings (6,803) (2,055) (5,483)
---------- ---------- ----------
(6,802) (2,055) (5,483)
---------- ---------- ----------
Consolidated Statement of Changes in Equity
Share Share Capital Realised Unrealised Retained Total
Capital Premium Redemption Capital Capital Revenue
Reserve Reserve Reserve Reserve
£000 £000 £000 £000 £000 £000 £000
As at 1
January
2004 10,943 11,490 2,032 8,068 4,159 2,240 38,932
(restated)
Revenue
for - - - - - 1,298 1,298
the period
Capital
profits - - - 532 4,452 - 4,984
Equity
dividends - - - - - (1,696) (1,696)
------- -------- --------- -------- -------- -------- -------
As at 30
June
2004 10,943 11,490 2,032 8,600 8,611 1,842 43,518
(restated)
Revenue
for - - - - - 1,395 1,395
the period
Capital
profits - - - 593 3,714 - 4,307
Equity
dividends - - - - - (1,313) (1,313)
------- -------- --------- -------- -------- -------- -------
As at 31
December
2004 10,943 11,490 2,032 9,193 12,325 1,924 47,907
(restated)
Revenue
for - - - - - 1,418 1,418
the period
Capital
profits - - - 2,986 (27) - 2,959
Equity
dividends - - - - - (1,703) (1,703)
Issues of
share 112 402 - - - - 514
capital ------- -------- --------- -------- -------- -------- -------
As at 30
June 11,055 11,892 2,032 12,179 12,298 1,639 51,095
2005 ------- -------- --------- -------- -------- -------- -------
Distribution of Assets
Valuation at Purchases Sales Appreciation/ Valuation at
31 December 2004 (Depreciation) 30 June 2005
Restated (unaudited)
(audited)
£000 % £000 £000 £000 £000 %
Listed
investments
Ordinary
shares 48,605 101.5 9,797 (10,512) 3,963 51,853 101.5
Convertibles 2,354 4.9 - - - 2,354 4.6
Corporate
bonds 23,790 49.7 3,235 (4,195) (46) 22,784 44.6
Other fixed
interest 4,147 8.6 1,985 - 153 6,285 12.3
------- ------- -------- ------- --------- ------- ------
78,896 164.7 15,017 (14,707) 4,070 83,276 163.0
-------- ------- ---------
Other non
current assets 1,445 3.0 1,434 2.8
Current assets 4,258 8.9 5,056 9.9
Current
liabilities (21,910) (45.7) (23,357) (45.7)
Non current
liabilities (14,782) (30.9) (15,314) (30.0)
------- ------- ------- ------
Net assets 47,907 100.0 51,095 100.0
------- ------- ------- ------
Net asset
value 218.9p 231.1p
per share
This information is provided by RNS
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