Interim Results

Ivory & Sime UK Smlr.Co's Trust PLC 07 November 2003 IVORY & SIME UK SMALLER COMPANIES TRUST PLC Date: 7 November 2003 INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2003 Investment Objective Ivory & Sime UK Smaller Companies Trust plc aims to achieve capital growth by investing primarily in a portfolio of smaller companies quoted on the London Stock Exchange. Financial Highlights • Net asset value per share increased by 42.8% • Unchanged interim dividend of 1.0p per share Results Over the six months to 30 September 2003, the Company's net asset value rose by 42.8 per cent compared with a rise of 45.0 per cent the FTSE SmallCap (ex Investment Companies) Index. The period under review witnessed strong gains in small company share prices. In contrast to previous stockmarket recoveries smaller, rather than larger, companies lead the rally. The rally was sustained primarily by the cyclical areas, highly leveraged businesses and sectors such as Information Technology, which had been so markedly out of favour during the severe stockmarket falls. The extent of the sharp divergence in performance between cyclical areas and the more defensive does not appear justified, given the outlook for earnings in those areas. During the early stages of a recovery, economic data tend to be mixed and not always consistent with a recovery scenario. This has been especially true of the US. However, it is apparent that the Federal Reserve is committed to reviving US economic growth that is likely to imply a protracted period of low global interest rates. This should allow the emerging recovery in UK equities and corporate profitability to continue. Earnings and Dividends Group earnings per Ordinary Share were 2.71 pence in respect of the six months ended 30 September 2003 (2002-2.12 pence). The Board has declared an unchanged interim dividend of 1.00 pence per Ordinary Share payable on 9 January 2004 to shareholders on the register on 12 December 2003. Investment Policy and Portfolio Within the portfolio the majority of the performance is attributable to cyclicals, Information Technology stocks and financials. Companies posting strong gains included Brewin Dolphin, ITIS Holdings, Thus Group, MTL Instruments, Spirent, Kewill Systems and Robotic Technology Systems. Elsewhere, the most notable contributor was Parkman Group, which rose in response to its proposed merger with a larger competitor, Mouchel Group. The Managers have been active in scaling back their exposure to companies where prices are discounting a significant degree of recovery and have reinvested the proceeds in companies with more tangible earnings and dividend streams. The Board is pleased to note that the majority of the investee companies continue to deliver in terms of their business plans and are reporting earnings and dividend increases. Shareholder Value Despite the improvement in market conditions, there has been little change in the discount at which the Company's shares trade. The Board is mindful of investor concerns over the level of discount and strongly believes that the most effective way to address the discount issue lies in achieving strong long-term investment performance. Given the appreciation in the Company's net asset value and the apparent improvement in investor sentiment, the Board has encouraged the Managers to be more proactive in communicating their strategy to a wider audience of potential shareholders. Gearing The Managers have been steadily reducing the cash holdings within the portfolio and at the time of writing the Company's level of gearing is 5.6%. The Board is not uncomfortable with this position given the anticipated improvement in business prospects and would be prepared to consider a further rise in gearing as suitable opportunities arise. Board Following the retirement of Mr Ian Inglis at the Annual General Meeting in June, Mr Bruce Graham was appointed as a Director and Chairman of the Audit Committee. Outlook The global commitment to looser monetary policy should provide a supportive background for equities. That said, the business environment remains a challenging one for most companies and, hence, the Board continues to emphasise the importance of selectivity in investments. The Board would hope to see further progress in the second half of the financial year. Group Balance Sheet (Unaudited) As at 30 As at 30 As at 31 September 2003 September 2002 March 2003 £'000 £'000 £'000 Fixed Assets Investments 44,974 32,230 35,247 _______ _______ _______ Current Assets Debtors 174 1,266 1,681 Cash at bank and on deposit 4,960 3,043 1,181 _______ _______ _______ 5,134 4,309 2,862 Creditors Amounts falling due within one year (331) (312) (1,144) _______ _______ _______ Net Current Assets 4,803 3,997 1,718 _______ _______ _______ Total Assets less current liabilities 49,777 36,227 36,965 Creditors amounts falling due after more than one year (7,000) (7,000) (7,000) _______ _______ _______ Net Assets 42,777 29,227 29,965 _______ _______ _______ Capital and reserves Called-up share capital 10,836 10,936 10,836 Share premium account 3,935 3,935 3,935 Capital redemption reserve 100 - 100 Capital reserve -realised 24,406 33,372 31,062 - unrealised 2,174 (20,305) (16,923) Revenue reserve 1,326 1,289 955 _______ _______ _______ Equity Shareholders' funds 42,777 29,227 29,965 _______ _______ _______ Net asset value per Ordinary Share 197.40p 133.64p 138.28p _______ _______ _______ Group Statement Of Total Return (Unaudited) (Incorporating the Revenue Account) Six Months to 30 September 2003 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 12,727 12,727 Income 880 - 880 Investment management and secretarial fees (89) (123) (212) Other expenses (115) - (115) ______ ______ ______ Net return before finance costs and taxation 676 12,604 13,280 Interest payable (88) (163) (251) ______ ______ ______ Return on ordinary activities before taxation 588 12,441 13,029 Tax on ordinary activities - - - ______ ______ ______ Return attributable to shareholders 588 12,441 13,029 Dividends in respect of Ordinary Shares (217) - (217) ______ ______ ______ Transfer to reserves 371 12,441 12,812 ______ ______ ______ Return per Ordinary Share 2.71p 57.41p 60.12p _______ _______ _______ Group Statement Of Total Return (Unaudited) (Incorporating the Revenue Account) Six Months to 30 September 2002 Revenue Capital Total £'000 £'000 £'000 Losses on investments - (14,892) (14,892) Income 806 - 806 Investment management and secretarial fees (103) (143) (246) Other expenses (118) - (118) ______ ______ ______ Net return before finance costs and taxation 585 (15,035) (14,450) Interest payable (88) (163) (251) ______ ______ ______ Return on ordinary activities before taxation 497 (15,198) (14,701) Tax on ordinary activities (33) 33 - ______ ______ ______ Return attributable to shareholders 464 (15,165) (14,701) Dividends in respect of Ordinary Shares (219) - (219) ______ ______ ______ Transfer to/(from) reserves 245 (15,165) (14,920) ______ ______ ______ Return per Ordinary Share 2.12p (69.34)p (67.22)p _______ _______ _______ Group Statement of Total Return (Unaudited) (Incorporating the Revenue Account) Year to 31 March 2003 Revenue Capital Total £'000 £'000 £'000 Losses on investments - (13,306) (13,306) Income 1,381 - 1,381 Investment management and secretarial fees (189) (254) (443) Other expenses (236) - (236) ________ _______ ________ Net return before finance costs and taxation 956 (13,560) (12,604) Interest payable (176) (326) (502) ________ _______ _______ Return on ordinary activities before taxation 780 (13,886) (13,106) Tax on ordinary activities - - - ________ _______ _______ Return attributable to shareholders 780 (13,886) (13,106) Dividends in respect of Ordinary Shares (869) - (869) ________ _______ _______ Transfer from reserves (89) (13,886) (13,975) ________ _______ _______ Return per Ordinary Share 3.57p (63.51)p (59.94)p ________ _______ _______ Summarised Group Statement of Cash Flows (Unaudited) Six months to Six months to Year to 30 September 30 September 31 March 2003 2002 2003 £'000 £'000 £'000 Net cash inflow from operating activities 493 385 783 Servicing of finance (251) (251) (504) Financial investments 4,291 1,727 42 Equity dividends paid (650) (656) (875) Net cash inflow / (outflow) before financing 3,883 1,205 (554) Financing (104) - (103) Increase / (decrease) in cash 3,779 1,205 (657) Reconciliation of net cash flow to movement in net debt Increase / (decrease) in cash 3,779 1,205 (657) Net debt at 1 April (5,819) (5,162) (5,162) Net debt at 30 September/31 March (2,040) (3,957) (5,819) Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities Net return before finance costs and taxation 676 585 956 Investment management fee charged to capital (123) (143) (254) Changes in working capital and other non-cash items (60) (57) 81 Net cash inflow from operating activities 493 385 783 Notes 1. The unaudited interim results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Group for the year ended 31 March 2003. 2. Earnings for the first six months should not be taken as a guide to the results for the full year. 3. Basic return per Ordinary Share is based on a weighted average of 21,670,260 Ordinary Shares in issue during the period (2002 - 21,870,260). 4. The interim dividend of 1.00 pence per Ordinary Share will be paid on 9 January 2004 to shareholders on the Register on 12 December 2003. 5. There were 21,670,260 Ordinary Shares in issue at 30 September 2003 (31 March 2003-21,670,260 and 30 September 2002 - 21,870,260). 6. The group results consolidate those of I&S UK Securities Limited, a wholly owned subsidiary which deals in securities. 7. These are not statutory accounts in terms of Section 240 of the Companies Act 1985 and are unaudited. Statutory accounts for the year to 31 March 2003, which received an unqualified audit report, have been lodged with the Registrar of Companies. No statutory accounts in respect of any period after 31 March 2003 have been reported on by the Company's auditors or delivered to the Registrar of Companies. 8. Copies of the Interim Report, which has been reviewed by the Company's auditors, will be mailed to shareholders and will be available for inspection at the Registered Office of the Company, 80 George Street, Edinburgh, EH2 3BU. For further information contact: Stephen Grant/Gordon Hay Smith ISIS Asset Management plc : tel. 0131 465 1000 This information is provided by RNS The company news service from the London Stock Exchange

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