Interim Management Statement

RNS Number : 6542E

Standard Life UK Small.Co's Tst PLC

14 May 2013

 

Standard Life UK Smaller Companies Trust PLC        

Interim Management Statement

Three months ended 31 March 2013

To the members of Standard Life UK Smaller Companies Trust plc ('the Company')

This Interim Management Statement ('IMS') has been produced solely to provide additional information to shareholders as a body to meet the relevant requirements of the UK Listing Authority's Disclosure and Transparency Rules. It should not be relied upon by any other party or for any other purpose.

This IMS relates to the period from 1 January to 31 March 2013 and contains information that covers this period and up to the date of publication of this IMS, unless otherwise specified.

Investment objective

The objective of the Company is to achieve long term capital growth by investment in UK quoted smaller companies.

Benchmark

Numis Smaller Companies Index (excluding Investment Companies).  The benchmark was renamed on 11 April 2012, having previously been named the RBS Hoare Govett Smaller Companies Index (excluding Investment Companies).

Material events

On 20 February 2013, the Company announced its Half-Yearly Financial Report for the 6 months ended 31 December 2012.

An interim dividend of 1.15 pence per Ordinary share was paid on 8 April 2013 to those shareholders on the register as at 15 March 2013 with an associated ex-dividend date of 13 March 2013.

As at 31 March 2013, the Company had a capital structure comprising £24,923,960 nominal amount of Convertible Unsecured Loan Stock 2018 ("CULS") and 66,654,584 Ordinary shares of 25 pence each, with voting rights.  There were no Ordinary shares held in treasury.

On 30 January 2013, the Company issued 100,000 new Ordinary shares under its block listing authority granted on 28 April 2011("the April 2011 Block listing authority).

On 8 April 2013, the Company issued 11,404 new Ordinary shares under the April 2011 Block listing authority further to the conversion date of 31 March 2013 in relation to the CULS.

As at the date of this IMS the capital structure of the Company comprises £24,896,887 nominal amount of CULS and 66,665,988 Ordinary shares in issue, with voting rights. 

Manager's Investment Review and Outlook for the three months ended 30 September 2012

Market Review

UK smaller companies built on prior gains with a strong start to the year.  The US "fiscal cliff" deal and improving global economic data supported sentiment.  UK data remain mixed, with weak retail sales and GDP but improving employment.

Environment

UK smaller companies continued their upward progress during the quarter, again outperforming large cap equities, albeit by a more modest margin.  The Numis Smaller Companies Index (excluding Investment Companies) rose by 11.8%, compared to 9.9% for the FTSE 100 Index and 10.3% for the FTSE All-Share Index. 

The last-minute US "fiscal cliff" deal, which delayed otherwise automatic spending cuts and tax increases, boosted equities in January as investors were heartened by the diminished risk of global recession.  Better economic data from China and the US in particular lent their support to the improved investor confidence.

The rise in UK equities came despite increasingly mixed domestic economic newsflow.  While employment data continued to improve, soft retail sales and weak fourth quarter GDP disappointed.  This heightened speculation that the Bank of England would add to its quantitative easing programme, which further supported equities.  Moody's downgrade of the UK's "AAA" sovereign rating clearly reflected the lacklustre UK economy, but was largely expected.  Indeed, the agency's retention of a "stable" outlook, in direct contrast to previous downgrades of France and the US, whose outlooks both became "negative", cheered investors.  Markets grew more cautious in March, as they renewed their focus on Europe and, in particular, the evolving crisis in Cyprus.

Performance

EMIS, which designs software for the healthcare industry, was one of the Trust's weakest performers over the quarter.  This was due to a profits warning, prior to which there had been sizeable director share sales.  The holding in luxury leather goods maker Mulberry also detracted from returns as the company issued a sluggish trading report, the result of weakness in demand for its high-end handbags.  New Britain Palm Oil was also a laggard.  The company issued a profit warning, announcing that earnings would be below market expectations due to persistent wet weather impacting production activity.

The key positive contributor to performance was investment broker Hargreaves Lansdown, whose shares rallied following the company issuing a strong set of results.  It appears to be benefiting from the broadly positive market environment, and also from the industry changes resulting from implementation of the retail distribution review.  The Trust's large holding in online fashion retailer ASOS also continued to do well.  The shares responded positively to extremely strong financial results, which demonstrated continued robust trading, both overseas and in the UK.

Activity

The Trust participated in the initial public offering of insurance business Esure during the quarter.  The Sheila's Wheels brand owner is currently benefiting from an improving industry pricing environment, while it also came to market at an attractive valuation.  The Trust bought shares in PayPoint, the transaction services provider, which is seeing strong growth in demand for its convenience store payment systems.  The Trust also purchased Workspace, the provider of short-term office space and services to smaller companies, which is enjoying strong occupancy rates and earnings upgrades.

Shares were sold in mining group First Quantum Minerals as it has grown in size to the extent that it no longer falls within the smaller company category.  The Trust also sold sportswear retailer JD Sports given lower levels of conviction in this particular stock.  The holding in ASOS was reduced further, mainly for portfolio construction reasons: following its strong performance, the holding had become very large and it was therefore decided to take profits.

Outlook

The market appears to have taken the Cyprus crisis in its stride, although there remains scope for future Euro-zone related scares.  Nevertheless, the on-going stream of positive economic data worldwide confirms our view that equities will make further progress in 2013.  Lower-quality recovery stocks may continue to outperform for now but, in the longer term and in a more normal environment, we are confident that our preference for quality growth stocks will reward investors.  Indeed, we continue to focus on bottom-up stock-picking and to identify growth- oriented companies with strong earnings momentum which should prove relatively resilient in the current market environment.

(Source: Standard Life Investments)

Largest Ten holdings and Changes in Period

Ranking as at 31 March 2013	Ranking as at 31 December 2012	Investment	Market Value at 31 March 2013 (£)	Total Investments (%)
1	1	ASOS	10,497,966	5.2
2	2	Paddy Power	9,634,125	4.8
3	4	Hargreaves Lansdown	8,680,000	4.3
4	3	Telecom Plus	8,538,900	4.2
5	6	Abcam	7,616,674	3.8
6	8	Moneysupermarket.com	7,551,360	3.7
7	7	Rightmove	7,480,200	3.7
8	10	Dunelm	5,994,103	3.0
9	9	Aveva	5,831,136	2.9
10	12	Domino's Pizza	5,727,094	2.8
				38.4

Net assets breakdown as at 31 March 2013

	%
Consumer Services	29.9
Industrials	25.9
Information Technology	14.4
Financials	14.3
Consumer Goods	10.3
Health Care	8.1
Telecommunications	4.7
Basic Materials	2.5
Oil & Gas	1.8
Net Borrowings	-11.9
Total	100.0

General description of Company's financial position and performance as at 31 March 2013

Trust Managers	Standard Life Investments (Since 01/09/2003)
Market Capitalisation	£170.6m
Gross Assets	£205.2m
Share Price	256.0p
Net Asset Value*	265.7p
(Discount)/Premium of Ordinary Share Price to Net Asset Value                                                                         12 Month High                                                                         12 Month Low	-3.6% 4.8% (Source: Datastream) -8.1% (Source: Datastream)
Yield (net) - (note: level of yield changes on a daily basis)	1.3%
Current equity gearing (note: level of gearing changes on a daily basis)	-11.9%
3.5% Convertible Unsecured Loan Stock 2018 Conversion Price	237.2542p
3.5% Convertible Unsecured Loan Stock 2018 Price	121.0p
CULS Conversion and Interest Payment Dates	31 March and 30 September
Trust Annual Management Fee	0.85% of Gross Assets
Dividends Semi Annually	April/October

* Diluted net asset value including income

Source: Standard Life Investments unless indicated otherwise

Performance

	Q1 2013 (%)	1 year (%)	2 years (%)	3 years (%)	4 years (%)	5 years (%)
Share price	7.3	22.5	20.2	87.5	193.4	130.1
Net asset value	14.1	24.5	25.9	80.3	177.1	106.3
NSCI (ex Investment Companies)	11.8	19.9	23.1	44.6	136.9	48.7

Source: Thomson Datastream, capital returns. The percentage growth figures above are calculated over periods to 31 March 2013 on a mid to mid basis.

For the Manager's current Investment Review & Outlook, please refer to the latest Trust Quarterly Update which is available via the Company's web-page at www.standardlifeinvestments.com/its

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise.  Investors may not get back the amount they originally invested.

For Standard Life UK Smaller Companies Trust PLC

Maven Capital Partners UK LLP, Secretaries

14 May 2013

 

END

 

 

IMSGGUAPAUPWURC