Interim Results
Shires Smaller Companies PLC
05 September 2007
News Release
5 September 2007
Shires Smaller Companies plc
Interim Results for the
Six months to 30 June 2007
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 2007 31 December 2006
Total investments £98.6m £96.6m
Shareholders' funds £64.1m £63.9m
Net asset value per share 290.1p 289.0p
Share price 286.0p 268.25p
Premium/(Discount) (share price to adjusted
net asset value)*
0.2% (5.6%)
Dividends per share 8.1p 8.0p+
Fourth Interim Dividend (2006) 4.75p 4.75p
First Interim Dividend (2007) 3.35p 3.25p
Second Interim Dividend (2007)( ^ ) 3.35p 3.25p
+ Half year to 30 June 2006
( ^ ) The second Interim Dividend is not reflected in these accounts.
* Based on IFRS NAV reduced by the dividend adjustment of 4.75p
• First and second interim dividends for 2007 totalled 6.7p compared to 6.5p
in 2006 an increase of 3.1%.
• The total return on net assets for the six month period was 3.3% against
the benchmark return of 2.1%.
• Based on the last four quarterly dividends the yield on the Company's
shares at 30 June 2007 was 5.1% compared to 2.0% on FTSE SmallCap Index
(excl. Investment Companies), the Company's benchmark.
• The rating of the Company's shares improved in the six month period,
moving from a discount of 5.6% to a premium of 0.2% at 30 June 2007.
• Glasgow Investment Managers, the Company's Manager, have been acquired by
Aberdeen Asset Managers. The Board is confident Aberdeen will be able to
build on the success achieved by Glasgow Investment Managers Limited.
For further information, please contact:-
Kenneth Harper
Head of Investment Trusts
Glasgow Investment Managers,
0141 572 2700
K Hussain
Glasgow Investment Managers,
0141 572 2700
Chairman's Statement
Financial Highlights
I am pleased to report a further increase in your Company's dividend adding to
its attraction to investors seeking a higher level of income from their equity
investments. The first and second interim dividends for 2007 totalled 6.7p
compared to 6.5p in the previous year, giving a yield of 5.1% based upon a share
price of 286p as at 30 June 2007. Subject to any unforeseen circumstances
current estimates suggest that the dividend can be increased further in the
current year. However this should not be taken as a forecast of profits.
Investment Returns
The total return on net assets over the six months was 3.3%, which was higher
than the 2.1% return on the FTSE SmallCap Index (excluding Investment
Companies), the Company's benchmark. This outperformace was primarily due to
the strong stock selection within the equity portfolio which returned 5.1%.
This was partially offset by the poor performance of the fixed interest
portfolio due to rising interest rates.
The total return to shareholders or the share price total return was 10.8%.
This reflects the fact that discount at which the share price stood to the net
asset value at 31 December 2006 of 5.6%, has been turned to a premium of 0.2% at
30 June 2007.
Earnings and Dividends
As shown in the financial highlights section actual dividends paid to date in
respect of the 2007 financial year amounted to 6.7p compared to 6.5p for the
same period last year. This comprised two payments of 3.35p per share, made on
30 April 2007 and 31 July 2007 respectively.
Portfolio Profile
The distribution of assets table on page 12 shows 105.4% of net assets was
invested in ordinary shares at 30 June 2007. This compares to 99.4% at 31
December 2006. This increase was due to a net investment into equities of £1.8
million and the continued growth of equities in the period. Total gearing at 30
June 2007 was 53.7%, up slightly from 51.1% at 31 December 2006. The majority
of the Company's gearing continues to be invested in high-yielding fixed
interest securities of principally an investment grade nature. These fixed
interest securities make a major contribution to the high level of income paid
by the Company while allowing a full exposure to the equity market.
Outlook
The UK economic environment remains robust helped by strong global demand.
Against expectation, the price of oil and many commodities has re-accelerated
raising further concerns about the risks of higher inflation. The current high
interest rates in the UK are making life more difficult for consumers and
retailers in the second half of the year.
Although personal balance sheets may be strained, the corporate sector remains
well financed. Companies continue to announce higher dividends and share buy
back schemes. During the recent stock market correction, caused by worries about
US sub prime mortgages and a credit crunch, valuations have adjusted to more
realistic levels. This is particularly true of the FTSE 250 Mid Cap section of
the stock market which was expensive but has now lost its takeover premium.
Smaller companies continue to generate inflation beating earnings and dividend
growth despite more nervous financial times. In the next few months, the
strategy is to take advantage of periods of volatility to invest selectively for
yield and value.
Investment Manager
On 24th August 2007 Glasgow Investment Managers Limited, the Company's Managers,
were acquired by Aberdeen Asset Managers plc. Aberdeen is a global investment
manager, has considerable experience in the investment trust sector and will
complement their existing range of Investment Trusts with the acquisition of
Glasgow. The Board has agreed that Aberdeen will manage the Company going
forward and is confident they will be able to build on the success achieved by
Glasgow Investment Managers Limited. The Glasgow investment team, led by Iain
Lynn, will be joining the Aberdeen Group to ensure continuity of management.
The Interim Report will be mailed to shareholders on 10 September 2007. 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 2007
Half year to 30 June 2007
(unaudited)
Revenue Capital Total
Gains £000 £000 £000
Gains on investments at fair value - 525 525
Zero coupon finance costs - (238) (238)
Revenue
Dividend income 2,021 - 2,021
Interest income from investments 803 (59) 744
Deposit Interest 3 - 3
Net gain/(loss) on financial assets held for trading 11 - 11
2,838 228 3,066
Expenses
Investment management fee (222) (222) (444)
Other administrative expenses (121) - (121)
Finance costs of borrowings (238) (238) (476)
(581) (460) (1,041)
Profit before tax 2,257 (232) 2,025
Tax expense - - -
Profit for the year 2,257 (232) 2,025
Profit attributable to equity holders of the company 2,257 (232) 2,025
Earnings per ordinary share (pence) 9.16p
The Total column is the Income Statement of the Group
There are no discontinued operations
Consolidated Income Statement
(Continued)
Half year to 30 June 2006 Year to 31 December 2006
(unaudited) (audited)
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains
Gains on investments at fair value - 612 612 - 8,859 8,859
Zero coupon finance costs - (112) (112) - (455) (455)
Revenue
Dividend income 1,286 - 1,286 2,985 - 2,985
Interest income from investments 740 (32) 708 1,472 (73) 1,399
Deposit Interest 4 - 4 13 - 13
Net (loss)/gain on financial assets held for (59) - (59) 5 - 5
trading
1,971 468 2,439 4,475 8,331 12,806
Expenses
Investment management fee (204) (204) (408) (409) (409) (818)
Other administrative expenses (147) - (147) (325) - (325)
Finance costs of borrowings (219) (219) (438) (447) (447) (894)
(570) (423) (993) (1,181) (856) (2,037)
Profit before tax 1,401 45 1,446 3,294 7,475 10,769
Tax expense - - - - - -
Profit for the year 1,401 45 1,446 3,294 7,475 10,769
Profit attributable to equity holders of the
Company 1,401 45 1,446 3,294 7,475 10,769
Earnings per ordinary share (pence) 6.5p 48.71p
Group Balance Sheet
as at 30 June 2007
30 June 31 December 30 June
2007 2006 2006
(unaudited) (audited) (unaudited)
£000 £000 £000
Non current assets
Ordinary shares 67,600 63,537 59,149
Convertibles 1,568 1,548 2,186
Corporate bonds 20,481 21,220 21,264
Other fixed interest 8,951 10,270 6,117
Zero coupon finance derivatives at fair value 7,576 5,752 4,738
106,176 102,327 93,454
Current assets
Trade and other receivables 2,901 1,456 -
Accrued income and prepayments 1,439 1,399 947
Financial assets of dealing subsidiary 628 617 306
Cash and cash equivalents - - 719
4,968 3,472 1,972
Current liabilities
Trade and other payables (3,306) (346) (417)
Short-term borrowings (7,012) (6,922) (5,720)
(10,318) (7,268) (6,137)
Non current liabilities
Long term loan (10,000) (10,000) (10,000)
Zero coupon finance derivatives at fair value (26,688) (24,627) (23,270)
(36,688) (34,627) (33,270)
Net assets 64,138 63,904 56,019
Issued capital and reserves attributable
To equity holders of the parent
Called up share capital 11,055 11,055 11,055
Share premium account 11,892 11,892 11,892
Capital premium reserve 2,032 2,032 2,032
Retained Earnings
Realised capital reserve 23,561 21,090 16,907
Unrealised capital reserve 12,771 15,474 12,227
Revenue reserve 2,827 2,361 1,906
Equity shareholders' funds 64,138 63,904 56,019
Net asset value per ordinary share (pence) 290.1p 289.0p 253.4p
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 2006 have been extracted from the 2006 report and 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 2007
Half year to Half year to Year to
30 June 30 June 31 December
2007 2006 2006
(unaudited)
£000 £000 £000
Cash flows from operating activities
Investment income received 2,785 2,233 4,204
Deposit interest received 3 6 16
Investment management fee paid (432) (421) (818)
Sales less purchases of current financial assets
held for trading - - (247)
Other cash receipts - - -
Other cash expenses (152) (186) (324)
Cash generated from operations 2,204 1,632 2,831
Interest paid (475) (449) (896)
Taxation - - -
Net cash inflows from operating activities 1,729 1,183 1,935
Cash flows from investing activities
Purchases of investments (24,277) (11,915) (43,956)
Sales of investments 24,249 13,245 44,050
Net cash (outflow)/ inflow from investing activities (28) 1,330 94
Cash flows from financing activities
Equity dividends paid (1,791) (1,769) (3,206)
Net (decrease)/ increase in cash and
Cash equivalents (90) 744 (1,177)
Cash and cash equivalents at start of period (6,922) (5,745) (5,745)
Cash and cash equivalents at end of period (7,012) (5,001) (6,922)
Cash and cash equivalents comprise:
Cash and cash equivalents - 719 -
Short -term borrowings (7,012) (5,720) (6,922)
(7,012) (5,001) (6,922)
Consolidated Statement of Changes in Equity
for the half year ended 30 June 2007
Share Share Capital Realised Unrealised Retained
Capital Premium Redemption Capital Capital Revenue
Reserve Reserve Reserve Reserve Total
£000 £000 £000 £000 £000 £000 £000
As at 31 December
2006 11,055 11,892 2,032 21,090 15,474 2,361 63,904
Revenue profit for
the period - - - - - 2,257 2,257
Capital profits for
the period - - - 2,471 (2,703) - (232)
Equity dividends - - - - - (1,791) (1,791)
As at 30 June 2007 11,055 11,892 2,032 23,561 12,771 2,827 64,138
Distribution of Assets and Liabilities
Valuation at Valuation at
31 December 2006 Purchases Sales Appreciation/ 30 June 2007
(audited) (Depreciation) (unaudited)
£000 % £000 £000 £000 £000 %
Listed investments
Ordinary shares 63,537 99.4 16,815 (14,960) 2,208 67,600 105.4
Convertibles 1,548 2.4 - - 20 1,568 2.4
Corporate bonds 21,220 33.2 1,798 (1,775) (762) 20,481 31.9
Other fixed interest 10,270 16.1 8,639 (8,959) (999) 8,951 14.0
96,575 151.1 27,252 (25,694) 467 98,600 153.7
Other non current
Assets 5,752 9.0 7,576 11.8
Current assets 3,472 5.4 4,968 7.8
Current liabilities (7,268) (11.4) (10,318) (16.1)
Non current liabilities (34,627) (54.1) (36,688) (57.2)
Net assets 63,904 100.0 64,138 100.0
Net asset value
per share 289.0p 290.1p
This information is provided by RNS
The company news service from the London Stock Exchange
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