Interim Management Statement

RNS Number : 0357T

Standard Life UK Small.Co's Tst PLC

14 November 2013

 

Standard Life UK Smaller Companies Trust PLC        

Interim Management Statement

Three months ended 30 September 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 July to 30 September 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). 

Material events

On 2 September 2013, the Company announced its Annual Financial Report for the year ended 30 June 2013.

As at 30 September 2013, the Company had a capital structure comprising 67,365,988 Ordinary shares of 25 pence each, with voting rights and £24,896,887 nominal amount of Convertible Unsecured Loan Stock 2018 ("CULS").  There were no Ordinary shares held in treasury.

On 11 October 2013, the Company issued 1,038,382 new Ordinary shares as a result of the conversion of CULS on 30 September 2013 and used its block listing authority granted on 28 April 2011("the April 2011 Block listing authority") to obtain listing for the shares.

In October and November 2013 the Company issued a total of 625,000 new Ordinary shares at a premium to net asset value under its annual non pre-emptive authorities in response to market demand for the Company's shares.  These new Ordinary shares were listed under the April 2011 Block listing authority.

As at the date of this IMS, the capital structure of the Company comprises 69,029,370 Ordinary shares in issue, with voting rights and £22,433,225 nominal amount of CULS.

All resolutions put to the Annual General Meeting of the Company held on 8 October 2013, were duly passed by shareholders, including approval of a final dividend of 2.90 pence per Ordinary share.  The final dividend was paid on 15 October 2013 to shareholders on the register as at close of business on 20 September 2013.  The ex-dividend date was 18 September 2013.

The Company has been able to issue new shares using its non pre-emptive allotment authority, demand in the secondary market and the premium rating on its shares.  The Company continues to look at ways to expand its equity base, recognising the benefits of being a larger closed-ended fund in a post RDR environment.

Manager's Investment Review and Outlook for the three months ended 30 September 2013

Market Review

The Company registered strong double-digit percentage gains during the third quarter. Smaller companies continued to outperform their large-cap peers.  Improving economic data throughout the summer buoyed the asset class.

Environment

UK small-caps enjoyed a strong quarter, significantly outperforming their large-cap peers.  The asset class performed particularly well in July as softer US Federal Reserve language regarding the economic conditions required for it to begin tapering its monetary stimulus measures bolstered sentiment generally. As the quarter progressed, smaller companies decoupled from their larger peers which, in contrast, appeared to be more affected by the uncertainties created by worldwide events during the quarter, such as developments in Syria.

Typically more sensitive to the domestic economy, smaller companies continued to perform well throughout the quarter, responding positively to the progressive improvement in UK economic data. In July, strong retail and auto sales data, the fastest expansion in the services sector since December 2006, the largest growth in the construction sector in three years and surging manufacturing output, the strongest since the end of 2010, all combined to support the asset class. Economic recovery became further entrenched in August, as the UK Office for National Statistics increased its growth projections, while further house price gains fuelled higher consumer confidence. The quarter ended with further strength in house building, where activity grew at the fastest rate in almost ten years, while manufacturing also marked its sixth consecutive month of growth.

Performance

The Company's best performers during the quarter were two retailers, Supergroup and online operator ASOS, both of which are trading very well. ASOS in particular announced excellent results, with UK sales rising 40%. In addition, engineering and construction services business Kentz was subject to a takeover offer from AMEC. While the bid was subsequently withdrawn, the holding was a notable positive contribution to performance. On the downside, performance was hurt by two of our insurance-related holdings, esure and Moneysupermarket.com, which alerted the market to a more difficult trading environment for their businesses. Growing price competition is a particular concern. Gaming business, Paddy Power, detracted from returns as weak trading at its competitors capped the share price, while data centre business Telecity was a further laggard as management announced a softening in product pricing.

Activity

The Company bought shares in Ocado, the on-line food retailer and distributor, during the quarter. The announcement of its joint venture with Wm. Morrison's puts the business on a sound financial footing, giving it a platform for strong growth. The Company also acquired a new holding in Delcam, the provider of computer-aided design software products to various industries. The business is well managed, enjoying earnings upgrades and fits the Company's investment process well. The Company also purchased shares in 4imprint, the manufacturer of branded corporate marketing and promotional products. The industry is highly fragmented and it is expected that the company will use its scale and operating leverage to acquire competitors and grow market share.  Notable sales included the disposal of Domino's Pizza, which is suffering delays to its German expansion, and scientific equipment manufacturer Oxford Instruments which is experiencing a concerning deterioration in demand. Telecity was also reduced significantly as the company reported waning pricing trends.

Outlook

While the domestic economy continues to improve, smaller company valuations have risen in recent months. We expect the stronger economic environment to boost aggregate market earnings and therefore support valuations in general. However, given the strong performance year to date and the macroeconomic and political uncertainties that remain, we prefer to focus on those companies in control of their own destinies. Such businesses, particularly those demonstrating durable earnings trends and an ability to generate strong cashflows whatever the market environment, should prove more resilient in the long term.

(Source: Standard Life Investments)

Largest Ten Holdings and Changes in Period

Ranking as at 30 Sep 2013	Ranking as at 30 June 2013	Investment	Market Value at 30 September 2013 (£)	Total Investments (%)
1	1	ASOS	12,551,135	5.9
2	2	Telecom Plus	10,187667	4.7
3	5	Rightmove	9,949,800	4.6
4	4	Hargreaves Lansdown	8,931,473	4.1
5	7	Abcam	8,612,373	4.0
6	3	Paddy Power	8,001,373	3.7
7	-	Supergroup	7,294,599	3.4
8	10	Ted Baker	7,253,065	3.4
9	6	Xaar	6,783,000	3.2
10	9	Dunelm	6,629,025	3.1
				40.1

Net assets breakdown as at 30 September 2013

	%
Consumer Services	28.3
Industrials	22.5
Financials	14.5
Information Technology	13.3
Consumer Goods	11.6
Health Care	6.6
Telecommunications	5.0
Oil & Gas	2.3
Basic Materials	1.0
Net Borrowings	(5.1)
Total	100.0

General description of Company's financial position and performance as at 30 September 2013

Trust Managers	Standard Life Investments (Since 01/09/2003)
Market Capitalisation	£198.1m
Gross Assets	£229.0m
Ordinary Share Price	294.0p
Ordinary Share Net Asset Value	293.8p*
(Discount)/Premium of Ordinary Share Price to Net Asset Value                                                                        12 Month High                                                                        12 Month Low	0.1% 6.2% (Source: DataStream) (6.4)% (Source: Datastream)
Yield (net) - (note: level of yield changes on a daily basis)	1.4%
Current equity gearing (note: level of gearing changes on a daily basis)	5.1%
3.5% Convertible Unsecured Loan Stock 2018 Conversion Price	237.2542p
3.5% Convertible Unsecured Loan Stock 2018 Price	123.3p
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.

Performance

	Q3 2013 (%)	1 year (%)	2 years (%)	3 years (%)	4 years (%)	5 years (%)
Share price	4.8	29.5	48.4	67.8	152.4	194.0
Net asset value	7.6	32.3	52.3	66.2	128.9	148.9
NSCI (ex Investment Companies)	10.9	30.4	56.6	52.4	72.2	111.9

Source: Thomson Datastream, capital returns. The percentage growth figures above are calculated over periods to 30 September 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 November 2013

 

END

 

 

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