Half Yearly Report
Half-Yearly Report
Schroder UK Mid Cap Fund plc (the "Company") hereby submits its Half-Yearly Report for the period ended 31 March 2012 as required by the UK Listing Authority's Disclosure and Transparency Rule 4.2.
The Half-Yearly Report is also being published in hard copy format and an electronic copy of that document will shortly be available to download from the Company's website http://www.schroderukmidcapfund.com. Please click on the following link to view the document:
The Company has submitted a pdf of the hard copy format of its Half-Yearly Report to the National Storage Mechanism and it will shortly be available for inspection at www.Hemscott.com/nsm.do.
Enquiries:
Jonathan McGuire
Schroder Investment Management Limited Tel: 020 7658 3496
31 May 2012
Schroder UK Mid Cap Fund plc
Financial Highlights
31 March 2012 30 September 2011 % Change
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net asset value per share 311.42p 263.58p 18.15
Share price 264.00p 218.00p 21.10
Share price discount 15.2% 17.3%
Total borrowings (£'000) 10,000 10,000
Shareholders' funds (£'000) 112,558 95,269 18.15
Six months ended Six months ended
31 March 2012 31 March 2011
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Revenue return per share 2.56p 1.94p
FTSE Mid 250 (ex-Investment Companies)
Total Return Index* 20.3% 11.1%
Net asset value total return** 22.5% 16.2%
* Source: Thomson Financial Datastream
** Source: Morningstar (www.morningstar.co.uk)
Ten Largest Investments
As at 31 March 2012
Market value % of
of holding Shareholders'
Company and Activities £'000 funds
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Elementis 3,323 2.95
Manufacture and sale of chromium chemicals, pigments and other chemicals
Ashtead Group 3,096 2.75
Provider of rental plant and equipment
Travis Perkins 2,695 2.39
Builder's merchant
Diploma 2,695 2.39
International distributor of specialist equipment
Premier Oil 2,668 2.37
Oil and gas exploration development and production
Senior 2,594 2.30
Designs and manufactures high technology components for the civil aerospace
and defence markets
Lamprell 2,550 2.27
Specialist in rig upgrade and refurbishment
CSR 2,299 2.04
Designs and manufactures single-chip radio devices
William Hill 2,282 2.03
Fixed-odds bookmaking services and online casino
Berkeley Group Holdings 2,244 1.99
House builder
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Total 26,446 23.48
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
At 30 September 2011, the ten largest investments represented 22.35% of Shareholders' funds.
Interim Management Report
Chairman's Statement
Performance
I am pleased to report that the long term performance of the Company continues to be strong despite the prevailing economic conditions.
During the six month period ended 31 March 2012, the Company's net asset value produced a total return of 22.5%, comparing favourably to a total return of 20.3% produced by the Company's benchmark Index, the FTSE Mid 250 (ex-Investment Companies) Total Return Index.
Over the same period the share price increased by 21.1%, as the discount to net asset value narrowed from 17.5% to 15.2%.
Full details of investment performance over the medium and longer term, as well as portfolio activity, policy and outlook, may be found in the Investment Manager's Review.
Gearing Facility
The Company has a revolving £15 million unsecured credit facility of which £10 million has remained drawn during the period under review. The net effective gearing level (which also takes account of any cash held) was 2.7% at the beginning of the period and had reduced to 2.5% by the end of the period. The gearing continues to be utilised in line with the strict parameters established by the Board.
Share Purchases and Discount Management
The Board and Investment Manager continue to monitor the level at which the shares trade against the underlying net asset value both in absolute terms and relative to the peer group.
The Company did not purchase any shares for cancellation or holding in treasury during the period under review. The decision whether to purchase shares is addressed regularly in Board discussions. Whilst share buy-backs are one method of addressing discount levels, their effectiveness depends on the size and nature of the share register. Your Board believes that the most sustainable way to close the discount is to increase demand for the Company's shares by effective marketing over the longer term, and its strong performance track record. In the meantime, the Board will continue to consider whether share purchases should be made on a regular basis, alongside other means of discount control.
Outlook
Although the recovery in the Company's net asset value in the first half of the year has been encouraging, further uncertainty in the Eurozone has lead to share prices falling back again since the end of March. In this environment of considerable economic and political uncertainty, the Board takes comfort from the Manager's comments on the resilience of the companies in the portfolio. It seems inevitable, however, that this resilience will continue to be tested, with little immediate prospect of most industries' trading environment improving materially and the possibility of further dislocation in the Eurozone. Share valuations discount much of this uncertainty, but the Manager's emphasis on companies with valuable franchises, sound balance sheets, and pricing power still seems very suitable.
Peter Timms, CBE
Chairman
31 May 2012
Investment Manager's Review
Performance
Over the six months to 31 March 2012, the Company's net asset value on a total return basis rose by 22.5%. This compared with a 20.3% increase in the benchmark (FTSE Mid 250 Index ex-Investment Companies), which was adopted from 1 April 2011 [source: Schroders].
Over the period from 1 May 2003 (when Schroders took responsibility for the management of the portfolio) to 31 March 2012, the net asset value produced a total return of 322.7%, compared to a total return of 219.0% for the benchmark and 338.1% for the share price over the same period [source: Schroders].
The portfolio benefitted less from bid activity than in some previous years. Nevertheless outperformance was sustained with the help of strong contributions from several companies exposed to a recovering US economy and strong US dollar, notably Ashtead Group (construction equipment hire), Diploma (seals for construction equipment), Senior (aerospace parts) and Regus (serviced offices). There were also good performances from companies where we supported fund-raisings last year to finance acquisitions, such as Oxford Instruments (nanotechnology).
The principal detractors to performance in the period included companies exposed to cutbacks in public expenditure, such as Kier (construction) and Shanks (waste disposal). Certain more defensive stocks stood still in absolute terms but lagged the strong rally in a relative sense, for example Dignity (funeral services) and Dechra Pharma (veterinary products).
Market Background
The six months to 31 March 2012 saw a strong rally in equities, fuelled by the introduction of the European LTRO scheme which gave beleaguered European banks a breathing space to restructure their debts. The rally was particularly manifested in financial stocks and those companies with above average levels of debt. In addition the central bank moves stimulated a strong oil price, boosting valuations in the E&P sector. More recently however there has been a sharp correction in equity markets as worries about the future of the Euro and the fragility of the global banking system have resurfaced.
Portfolio Update
New purchases in the past six months have included Avera (computer aided design software), Filtrona (producer of specialist plastic, fibre and foam products), W.S. Atkins (consulting engineers) and Yule Catto (producer of natural and synthetic latex, adhesives and resins). These were funded by the complete disposal of the holding in Croda upon its promotion to the FTSE 100 Index, and by some profit taking in Taylor Wimpey.
Outlook
Deleveraging by banks, private equity, consumers and governments is set to continue. This is likely to generate a recession in most of Europe and a lacklustre economy in the UK. Social unrest and a political backlash against austerity measures remain concerns. The US appears a relative bright spot as it benefits from cheap indigenous natural gas produced as a by-product of fracking. We expect this to be a valuable competitive advantage in future years and to stimulate more investment in power and chemical plants.
Corporate balance sheets remain strong in the quoted arena and we expect more corporate activity in the UK, with equities becoming ever more scarce - the number of stocks in the FTSE All-Share Index, excluding investment companies, has fallen by around a third in the past ten years.
Our focus remains on investments with valuable franchises, sound balance sheets, and, where possible, pricing power. The recent market correction is beginning to throw up opportunities to invest in such franchises at more attractive valuations than in recent months.
Schroder Investment Management Limited
31 May 2012
Principal Risks and Uncertainties
The principal risks and uncertainties associated with the Company's business fall into the following categories: financial risk; gearing; strategic risk; and accounting, legal and regulatory risk. A detailed explanation of the risks and uncertainties in each of these categories can be found on page 13 of the Company's published Annual Report and Accounts for the year ended 30 September 2011. These risks and uncertainties have not materially changed during the six months ended 31 March 2012.
Going Concern
The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections; that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.
Related Party Transactions
Details of related party transactions can be found on page 34 of the Company's published Annual Report and Accounts for the year ended 30 September 2011. There have been no material transactions with the Company's related parties during the six months ended 31 March 2012.
Directors' Responsibility Statement
The Directors confirm that, to the best of their knowledge, this set of condensed financial statements has been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (UK GAAP) and with the Statement of Recommended Practice: Financial Statements of Investment Companies and Venture Capital Trusts (SORP) issued in January 2009 and the Interim Management Report as set out above includes a fair review of the information required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.
Income Statement
(Unaudited) (Unaudited) (Audited)
For the six months For the six months For the year
ended 31 March 2012 ended 31 March 2011 ended 30 September 2011
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Gains/(losses) on
investments held at
fair value - 19,048 19,048 - 13,996 13,996 - (2,601) (2,601)
Income 2 1,171 14 1,185 974 12 986 2,955 12 2,967
Investment management
fee 3 (40) (359) (399) (40) (361) (401) (80) (717) (797)
Performance fee - - - - - - - (325) (325)
Administrative expenses (196) - (196) (226) - (226) (413) - (413)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net return/(loss) before
finance costs and
taxation 935 18,703 19,638 708 13,647 14,355 2,462 (3,631) (1,169)
Interest payable and
similar charges 3 (11) (99) (110) (10) (88) (98) (20) (180) (200)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net return/(loss) on
ordinary activities
before taxation 924 18,604 19,528 698 13,559 14,257 2,442 (3,811) (1,369)
Taxation on ordinary
activities 2 - 2 2 - 2 (5) - (5)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net return/(loss)
attributable to equity
shareholders 926 18,604 19,530 700 13,559 14,259 2,437 (3,811) (1,374)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net return/(loss) per
ordinary share 4 2.56p 51.47p 54.03p 1.94p 37.51p 39.45p 6.74p (10.54)p (3.80)p
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
The Total column of this statement is the profit and loss account of the Company. The Revenue and Capital columns are both provided in accordance with guidance issued by The Association of Investment Companies. The Company has no recognised gains or losses other than those disclosed in the Income Statement and the Reconciliation of Movements in Shareholders' Funds. Accordingly no Statement of Total Recognised Gains and Losses is presented.
All Revenue and Capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.
The notes below form an integral part of these accounts.
Reconciliation of Movements in Shareholders' Funds
For the six months ended 31 March 2012 (Unaudited)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Called-up Capital Share Share
Share redemption premium Merger purchase Capital Revenue
capital reserve account reserve reserve reserve reserve* Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Balance at
1 October 2011 9,036 220 13,971 2,184 15,477 50,787 3,594 95,269
Net return on
ordinary activities - - - - - 18,604 926 19,530
Ordinary dividend
paid - - - - - - (2,241) (2,241)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
At 31 March 2012 9,036 220 13,971 2,184 15,477 69,391 2,279 112,558
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
For the six months ended 31 March 2011 (Unaudited)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Called-up Capital Share Share
share redemption premium Merger purchase Capital Revenue
capital reserve account reserve reserve reserve reserve* Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Balance at
1 October 2010 9,036 220 13,971 2,184 15,477 54,598 3,264 98,750
Net return on
ordinary activities - - - - - 13,559 700 14,259
Ordinary dividend
paid - - - - - - (2,107) (2,107)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
At 31 March 2011 9,036 220 13,971 2,184 15,477 68,157 1,857 110,902
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
For the year ended 30 September 2011 (Audited)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Called-up Capital Share Share
share redemption premium Merger purchase Capital Revenue
capital reserve account reserve reserve reserve reserve* Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Balance at
1 October 2010 9,036 220 13,971 2,184 15,477 54,598 3,264 98,750
Net (loss)/return on
ordinary activities - - - - - (3,811) 2,437 (1,374)
Ordinary dividend
paid - - - - - - (2,107) (2,107)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
At 30 September 2011 9,036 220 13,971 2,184 15,477 50,787 3,594 95,269
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
*The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.
The notes below form an integral part of these accounts.
Balance Sheet
(Unaudited) (Unaudited) (Audited)
At 31 March At 31 March At 30 September
2012 2011 2011
Note £'000 £'000 £'000
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Fixed assets
Investments held at fair value through
profit or loss 115,573 111,765 97,991
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
115,573 111,765 97,991
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Current assets
Debtors 721 304 639
Cash at bank and short-term deposits 6,973 10,885 7,341
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
7,694 11,189 7,980
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Current liabilities
Creditors - amounts falling due within
one year 5 (10,709) (12,052) (10,702)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net current liabilities (3,015) (863) (2,722)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net assets 112,558 110,902 95,269
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Capital and reserves
Called-up share capital 9,036 9,036 9,036
Capital redemption reserve 220 220 220
Share premium account 13,971 13,971 13,971
Merger reserve 2,184 2,184 2,184
Share purchase reserve 15,477 15,477 15,477
Capital reserve 69,391 68,157 50,787
Revenue reserve 2,279 1,857 3,594
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Equity shareholders' funds 112,558 110,902 95,269
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net asset value per ordinary share 6 311.42p 306.84p 263.58p
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
The notes below form an integral part of these accounts.
Cash Flow Statement
(Unaudited) (Unaudited) (Audited)
For the six months For the six months For the year ended
ended 31 March ended 31 March 30 September
2012 2011 2011
£'000 £'000 £'000
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net cash inflow from operating activities 586 259 1,376
Net cash outflow from servicing of finance (106) (98) (201)
Taxation paid - - (4)
Net cash inflow from investment activities 1,393 5,917 1,363
Equity dividends paid (2,241) (2,107) (2,107)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net cash (outflow)/inflow (368) 3,971 427
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Reconciliation of net cash flow to movement in net (debt)/funds
Net cash (outflow)/inflow (368) 3,971 427
Net debt brought forward (2,659) (3,086) (3,086)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net (debt)/funds at period end (3,027) 885 (2,659)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Comprising:
Cash at bank 6,973 10,885 7,341
Bank loan (10,000) (10,000) (10,000)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
(3,027) 885 (2,659)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
The notes below form an integral part of these accounts.
Notes to the Accounts
1. Accounting Policies
The financial information for each of the six month periods ended 31 March 2012 and 31 March 2011 comprises non-statutory accounts within the meaning of Sections 434 - 436 of the Companies Act 2006. The financial information for the year ended 30 September 2011 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
The Company's accounting policies have not varied from those described in the Report and Accounts for the year ended 30 September 2011.
2. Income
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months ended months ended year ended
31 March 2012 31 March 2011 30 September 2011
£'000 £'000 £'000
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Revenue:
Income from investments:
UK franked dividend income 1,041 849 2,570
Unfranked dividends 12 41 250
Stock dividends 103 66 94
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
1,156 956 2,914
Interest on deposits 15 18 41
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
1,171 974 2,955
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Capital:
Special dividends allocated to capital 14 12 12
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
1,185 986 2,967
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
3. Investment management fee and interest payable
The investment management fee and any finance costs on borrowings for investment purposes are apportioned 10% to revenue and 90% to capital.
4. Return/(loss) per ordinary share
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months ended months ended year ended
31 March 2012 31 March 2011 30 September 2011
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Revenue (£'000) 926 700 2,437
Capital (£'000) 18,604 13,559 (3,811)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Total 19,530 14,259 (1,374)
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Weighted average number of ordinary shares in issue 36,143,690 36,143,690 36,143,690
Revenue 2.56p 1.94p 6.74p
Capital 51.47p 37.51p (10.54)p
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Total 54.03p 39.45p (3.80)p
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
5. Creditors: amounts falling due within one year
Included within creditors of £10.7 million is a loan of £10 million (31 March 2011 and 30 September 2011: £10 million), drawn down from the Company's 364 day £15 million unsecured loan facility with ING Bank N.V. The facility is chargeable at a floating rate linked to LIBOR.
6. Net asset value per ordinary share
(Unaudited) (Unaudited) (Audited)
31 March 31 March 30 September
2012 2011 2011
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net assets attributable to ordinary shareholders (£'000) 112,558 110,902 95,269
Ordinary shares in issue at end of period 36,143,690 36,143,690 36,143,690
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
Net asset value per ordinary share 311.42p 306.84p 263.58p
――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――――
This information is provided by RNS
COMPANIES COVERED:
Latest directors dealings
- 13 hours ago Burberry Group
- 14 hours ago Mitie Group
- 14 hours ago Vistry Group
- 14 hours ago Ithaca Energy
- 14 hours ago Pearson