Half Yearly Report

RNS Number : 5043H
F&C U.S. Smaller Companies PLC
22 February 2010
 



Date:                22 February 2010

 

Contact:           Robert Siddles                                               

                        F&C Management Limited                              

                        020 7628 8000                                               

 

 

 

F&C US Smaller Companies PLC

Unaudited statement of results

for the half-year ended 31 December 2009

 

 

 

 

Summary of Unaudited Results

 

 

Attributable to equity shareholders

 

 

31 December 2009

 

 

30 June 2009  

 

 

% Change





Net assets

£73.48m

£60.61m

21.2

 

 

 

 

Net asset value per share

354.85p

292.69p

21.2





Russell 2000 Index (sterling adjusted)

387.27

308.64

25.5





Share price

304.50p

253.50p

20.1

 




Increase in net asset value per share since inception on

8 March 1993



 

267.7%

 

Increase in the Russell 2000 Index (sterling adjusted) since 8 March 1993



 

 

145.0%

 



 

Chairman's Statement

 

During the period under review the US stock market continued the rally that began in March. Shares were helped by substantial monetary stimulus and the revival was in spite of a poor economic background and rising unemployment. The exchange rate between the dollar and sterling was relatively stable.

 

Performance

 

I am pleased to report that the net asset value ("NAV") per share of your Company rose significantly in the six month period to 31 December 2009, gaining 21.2%. The Company's benchmark, the sterling-adjusted Russell 2000 Index, advanced 25.5% which was somewhat better than the NAV performance. It is worth pointing out that the six month period under review followed an extended period of strong performance by the Company compared to its benchmark: over the two years to 31 December 2009, NAV per share grew 23.2% compared to an increase of only 0.6% for the benchmark.

 

The recovery in the stock market is most welcome and the size of the gain was quite remarkable, rivalling the other great recovery rallies of modern history, such as the ones beginning in 1974 and 1982. The advance reflects the enormous amount of monetary and other stimuli.

 

Market review

 

During the six month period, the US equity market rallied strongly. The Russell 2000 Index gained 23.0% in dollar terms, which was more than the Standard & Poors Composite Index, which advanced 21.3% but slightly less than the technology-orientated NASDAQ Composite Index, which added 23.7%.

 

Sterling investors benefited slightly from the exchange rate as the US dollar gained 2.0% over the six months. The exchange rate was far more stable in this period than in the previous six months. It seems that the earlier flight from the dollar, when investors moved back into risky assets, is over.

 

Smaller companies paused twice in their run up in the period, firstly in early July and secondly in late October. In both cases, after a short rest, the bulls returned and pushed the Russell 2000 to new highs. Given the extraordinary low level of interest rates, this kind of behaviour is not surprising. Although the decisive turn in the market occurred in March, when credit markets eased, it was not until late summer that the first firm signs that the economy might be heading out of recession appeared. The Institute of Supply Managers Index broke through the critical level of 50 in August, indicating that manufacturing was once again expanding, after having spent 18 months below that level.

 

The overall sentiment in the market was towards economic recovery, and this was reflected in the leading and laggard sectors: best performing sectors were energy, materials and processing, and consumer discretionary, whereas the laggards were utilities, healthcare and consumer staples.

 

Portfolio review

 

The portfolio benefited most from ACCO Brands, Bottomline Technologies and Avocent. New management at office supplies manufacturer ACCO Brands appears to have brought the company back from the brink with drastic action on costs and underperforming businesses, as well as a successful refinancing. Bottomline Technologies began to see dramatic improvements in profitability from its new payment automation software and an alliance with Bank of America. Avocent, whose products automate data centres, received an agreed bid from Emerson Electric. On the negative side, retailer Conn's fell as a result of a weak Texas economy, discounting and the need to tighten customer credit. United Community Banks suffered from deteriorating commercial real estate conditions and the need to raise additional capital. Premiere Global Services fell as its conference calling business was hit by the lagged effect of falling employment.



 

Over the six months to 31 December, the manager focused on two areas for new investment, both of which had lagged the market. The first was aerospace and defence, where new stocks included Orbital Sciences, a manufacturer of small rockets, and FLIR Systems, a producer of infrared vision equipment. The second area was defensive stocks, such as, baked products company, Flowers Foods and regional telecommunications provider, NTELOS Holdings. As the oil price rose, profits were taken in energy-related stocks, and several positions were sold in their entirety, including Helmerich and Payne and Pride International, two energy service companies. Sales were also made where stocks had largely recovered from balance sheet concerns and growth prospects were thought to be limited, for example, Community Health Systems, the rural hospital operator. Very strong performance by metals-related Walter Energy (a metallurgical coal producer) also led to a sale, as did the bid for Avocent. Foundation Coal received a bid from Alpha Natural Resources, another coal mining company, and we accepted shares in Alpha because of that company's strong balance sheet and respected management.

 

Overall, the portfolio emphasises manufacturing, with a focus on, among others, metals and aerospace. Energy is still over-weighted but less than it was. Within financials we still favour insurance. Health and technology are underweight, reflecting the Company's risk averse investment philosophy.

 

 

Buy-backs and discount

 

The Company bought back no shares in the six-month period. The Board will continue to apply its policy of buying back shares at appropriate times with a view to limiting the discount in the longer term to around 10%.

 

The discount widened from 13.4% at 30 June 2009 to 14.2% at 31 December 2009. As at 18 February 2010, the discount was 12.9%. One factor affecting the discount at the year end was the speed of the market's rise in December, which meant that the price of the Company's shares did not always keep up.

 

Outlook

 

The manufacturing side of the US economy appears to be gradually recovering; however the prospects for the consumer appear less favourable given the continuing weakness in the housing market and weak employment trends. The stock market is supported by very low interest rates and anticipation of improving corporate profits. Rates may rise and there is a danger that investor psychology may become too optimistic: either factor could lead to a correction in equities. Small companies should benefit from economic recovery and provide a hedge, should inflation accelerate. The outlook for the dollar could improve as the economy regains strength.

 

 

 

Gordon Grender

22 February 2010

 



 

 

Directors' Statement of Principal Risks and Uncertainties

 

The Company's assets consist mainly of listed equities and its principal risks are therefore market related.

 

Other key risks faced by the Company relate to investment strategy, currency, gearing, investment management resources, regulation, financial control and counterparties (including custodian default).  These risks, and the way in which they are managed, are described in more detail under the heading "Principal risks and their management" within the Directors' Report and Business Review contained within the Company's annual report for the year ended 30 June 2009.  The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remainder of the Company's financial year.

 

Directors' Statement of Responsibilities in Respect of the Financial Statements

In accordance with Chapter 4 of the Disclosure and Transparency Rules the Directors confirm, in respect of the report and accounts for the half-year ended 31 December 2009 of which this statement is an extract, that to the best of their knowledge:

 

·              the condensed set of financial statements has been prepared in accordance with applicable UK Accounting Standards and gives a true and fair view of the assets, liabilities, financial position and return of the Company;

·              the half-yearly report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;

·              the Directors' Statement of Principal Risks and Uncertainties shown above is fair review of the principal risks and uncertainties for the remainder of the financial year; and

·              the half-yearly report includes details on related party transactions.

 

 

 

Signed on behalf of the Board

Gordon Grender

Chairman

22 February 2010

 

 

 



Unaudited Condensed Income Statement

                                                                                                                             

 

for the half-year ended 31 December

2009

2008

 

Revenue

Capital

Total

Revenue

Capital

Total

 

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

 




 

 

 

Gains on investments

-

12,983

12,983

-

3,995

3,995

Foreign exchange gains

-

41

41

-

768

768

Income

319

-

319

418

-

418

Management fee

(295)

-

(295)

(249)

-

(249)

Performance fee

-

-

-

-

(10)

(10)

Other expenses

(132)

(2)

(134)

(115)

(5)

(120)

Net return before finance costs and taxation

(108)

13,022

12,914

54

4,748

4,802

Finance costs

-

-

-

-

-

-

Net return on ordinary activities before taxation

 

(108)

 

13,022

 

12,914

 

54

 

4,748

 

4,802

Taxation on ordinary activities

(41)

-

(41)

(59)

-

(59)

Net return attributable to equity shareholders

(149)

13,022

12,873

(5)

4,748

4,743

 

 

 

 

 

 

 

Return per share - pence

(0.72)

62.89

62.17

(0.02)

22.88

22.86

 

 

The total column is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

A statement of total recognised gains and losses is not required as all gains and losses of the Company have been reflected in the above statement.

 



Unaudited Condensed Reconciliation of Movements in Shareholders' Funds

 

 

Half-year ended 31 December 2009


 

Share

 

Non-

 

Capital



 

Total equity


Share

premium

distributable

redemption

Capital

Revenue

shareholders'


capital

account

reserve

reserve

reserves

reserve

funds


£'000s

£'000s

£'000

£'000s

£'000s

£'000s

£'000s









Balance at 30 June 2009

5,177

2,468

841

8,175

45,018

(1,072)

60,607

Movements during the half-year ended 31 December 2009








Return attributable to equity shareholders

 

-

 

-

 

-

 

-

 

13,022

 

(149)

 

12,873

Balance at 31 December 2009

5,177

2,468

841

8,175

58,040

(1,221)

73,480

 

 

Half-year ended 31 December 2008


 

Share

 

Non-

 

Capital



 

Total equity


Share

premium

distributable

redemption

Capital

Revenue

shareholders'


capital

account

reserve

reserve

reserves

reserve

funds


£'000s

£'000s

£'000

£'000s

£'000s

£'000s

£'000s









Balance at 30 June 2008

5,197

2,468

841

8,155

40,400

(1,079)

55,982

Movements during the half-year ended 31 December 2008








Shares purchased and cancelled by the Company

 

(12)

 

-

 

-

 

12

 

(129)

 

-

 

(129)

Return attributable to equity shareholders

 

-

 

-

 

-

 

-

 

4,748

 

(5)

 

4,743

Balance at 31 December 2008

5,185

2,468

841

8,167

45,019

(1,084)

60,596

 

 

Year ended 30 June 2009


 

Share

 

Non-

 

Capital



 

Total equity


Share

premium

distributable

redemption

Capital

Revenue

shareholders'


capital

account

reserve

reserve

reserves

reserve

funds


£'000s

£'000s

£'000

£'000s

£'000s

£'000s

£'000s









Balance at 30 June 2008

5,197

2,468

841

8,155

40,400

(1,079)

55,982

Movements during the year ended 30 June 2009








Shares purchased and cancelled by the Company

 

(20)

 

-

 

-

 

20

 

(198)

 

-

 

(198)

Return attributable to equity shareholders

 

-

 

-

 

-

 

-

 

4,816

 

7

 

4,823

Balance at 30 June 2009

5,177

2,468

841

8,175

45,018

(1,072)

60,607

 



Unaudited Condensed Balance Sheet

 

 

 

31 Dec 2009

31 Dec 2008

30 June

2009

 

£'000s

£'000s

£'000s

Fixed assets


 

 

Listed investments

72,185

57,363

58,101

Current assets

 

 

 

Debtors

191

454

250

Cash at bank and short-term deposits

1,393

3,092

3,182

 

1,584

3,546

3,432

Creditors: amounts falling due within one year

(289)

(313)

(926)

Net current assets

1,295

3,233

2,506

Net assets

73,480

60,596

60,607


 

 

 

Capital and reserves

 

 

 

Share capital

5,177

5,185

5,177

Share premium account

2,468

2,468

2,468

Non-distributable reserve

841

841

841

Capital redemption reserve

8,175

8,167

8,175

Capital reserves

58,040

45,019

45,018

Revenue reserve

(1,221)

(1,084)

(1,072)

Total shareholders' funds

73,480

60,596

60,607

 

 

 

 

Net asset value per share - pence

354.85

292.21

292.69

 



Unaudited Condensed Cash Flow Statement

 

Half-year ended

Half-year ended

 

31 Dec 2009

31 Dec 2008

 

£'000s

£'000s

Net cash (outflow)/inflow from operating activities

(594)

15

Net cash (outflow)/inflow from financial investment

(1,200)

757

Net cash (outflow)/inflow before use of liquid resources and financing

 

(1,794)

 

772

Decrease/(increase) in short-term deposits

1,889

(612)

Net cash outflow from financing

-

(129)

Increase in cash during the period

95

31

 

 

 

Reconciliation of net cash flow to movement in net funds

 

 

Increase in cash

95

31

(Decrease)/increase in short-term deposits

(1,889)

612

Foreign exchange movement

41

768

Movement in net funds

(1,753)

1,411

Net funds at the beginning of the period

3,144

1,681

Net funds at the end of the period

1,391

3,092

 

 

 

Represented by:

 

 

Short-term deposits

1,393

3,074

(Bank overdraft)/cash at bank

(2)

18

 

1,391

3,092



Notes

 

1    Accounting policies

 

These financial statements have been prepared on the basis of the accounting policies set out in the Company's financial statements at 30 June 2009. These accounting policies are expected to be followed throughout the year ending 30 June 2010.

 

2    Dividend

 

The Directors do not propose to pay an interim dividend.

 

3    Return per share

 

Return per share attributable to shareholders reflects the overall performance of the Company in the period.  Net revenue recognised in the first six months is not indicative of the total likely to be received in the full accounting year.

 

 

Half-year ended

Half-year ended

 

31 Dec 2009

£'000s

31 Dec 2008

£'000s

Revenue return

(149)

(5)

Capital return

13,022

4,748

Total return

12,873

4,743

Weighted average number of shares in issue

20,707,135

20,753,803

 

 

4    Results

 

The results for the half-year ended 31 December 2009 and 31 December 2008, which are unaudited, constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 30 June 2009; the report of the independent auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The abridged financial statements shown above for the year ended 30 June 2009 are an extract from those accounts.

 

5    Report and accounts

 

The report and accounts for the half-year ended 31 December 2009 will be posted to shareholders and made available on the website www.fandcussmallers.com shortly. Copies may also be obtained from the Company's registered office, Exchange House, Primrose Street, London EC2A 2NY.

 

By order of the Board

F&C Management Limited, Secretary

Exchange House, Primrose Street, London EC2A 2NY

22 February 2010

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR LLFFRFFIFFII
UK 100