Half-yearly Report
BLACKROCK SMALLER COMPANIES TRUST plc
Half yearly financial announcement of results in respect of the six months
ended 31 August 2012
Performance Record
Financial Highlights
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2012 2011 2012
Performance
Net asset value per share* 592.35p 551.65p 619.75p
Net asset value per share (capital 586.05p 545.73p 612.02p
only)*
Movement in net asset value per -4.4% -11.1% -0.2%
share
Movement in net asset value per -4.2% -11.1% -0.3%
share (capital only)
Movement in Numis Smaller Companies
plus AIM (ex Investment Companies)
Index -4.4% -10.9% -3.4%
Share price per share 498.00p 476.00p 503.00p
Movement in share price -1.0% -12.2% -7.2%
Revenue return per share 6.30p 5.92p 10.16p
Dividend per share 3.50p 2.42p 8.40p
Change in dividend +44.6% +10.0% +20.0%
Ongoing charges (including 0.9%** 1.0%*** 1.0%***
performance fees)‡
Ongoing charges (excluding 0.7%** 0.7%*** 0.7%***
performance fees)â€
* Debenture at par value.
** Approximate based on forecast costs for the full year and average assets to
31 August 2012.
*** Total expense ratio for the year ended 29 February 2012.
‡ Ongoing charges ratio calculated as a percentage of average net assets and
using operating expenses, including performance fees and taxation, excluding
finance costs.
†Ongoing charges ratio calculated as a percentage of average net assets and
using operating expenses (excluding performance fees, finance costs and
taxation).
Sources: BlackRock and Datastream.
Chairman's Statement
Overview
This is my first half yearly report to you as Chairman, covering the six months
ended 31 August 2012. During this period the Company's net asset value (NAV)
per share closed down by 4.4%, in line with the Company's benchmark index,
the Numis Smaller Companies plus AIM (excluding Investment Companies) Index;
the share price was down by 1.0%. (All percentages in Sterling terms without
income reinvested.) I believe this is a reasonably satisfactory outcome given
that the Company's portfolio is weighted in favour of genuinely small companies.
Whilst such companies tend to underperform in periods of particular uncertainty,
we believe their prospects for growth are superior in the medium to long term.
Since the end of August, the Company's NAV has increased by 6.6% and the share
price by 6.2%, compared with a rise in the benchmark of 5.5% (all calculated without
income reinvested).
Revenue return and dividends
The Company's revenue return per share for the six months to 31 August 2012
amounted to 6.30p per share compared with 5.92p per share for the corresponding
period in the previous year, a rise of 6.4%.
We announced in our last Annual Report that we intended to increase this year's
interim dividend disproportionately in order to move closer to a 40:60 split
between the interim and final dividends. Accordingly the Board is pleased to
declare an interim dividend of 3.50p per share (2011: 2.42p per share) which will
be paid on 7 December 2012 to shareholders on the Company's register on 9 November
2012. In the absence of unforeseen circumstances, your Board hopes to pay out
dividends totalling 9.50p per share for the year ending 28 February 2013 (year
ended 29 February 2012: total dividends paid 8.40p per share).
Gearing
During the period, the Board negotiated a three year £15 million multicurrency
revolving facility with Scotia (Ireland) Limited in order to be less dependent
on short term borrowings. This financing is in addition to the Company's existing
£15 million debenture and a £20 million uncommitted overdraft facility.
Gearing levels are reviewed regularly by the Board and will depend on prevailing
market conditions. However, it is intended that gearing will not exceed 15% of the
gross assets of the Company at the time of the drawdown of the relevant borrowings.
At 31 August 2012, the Company's gearing was 8.5% of gross assets and 9.4% of
shareholders' funds, a rise of 1.4% and 1.7% respectively since the start of the
period.
Discount
The Board closely monitors the level of discount at which the Company's shares
trade compared with NAV. During the period, the discount has narrowed and at the
end of the six months stood at 15.9%.
Board changes
Following the Annual General Meeting in June 2012, Richard Brewster stepped
down as Chairman and a non-executive Director after serving for more than
fourteen years. I would like to thank Richard for his outstanding contribution
to the Company. We wish him every happiness and success in the future.
We are very pleased to have welcomed Michael Peacock to the Board with effect
from 1 July 2012. Michael is a chartered accountant and has become Chairman of
the Company's Audit Committee. He has extensive experience of smaller companies
and is currently a non-executive director of Regenersis PLC; he was group finance
director at Victrex plc until his retirement in October 2010.
Outlook
The momentum behind the global economic recovery weakened over the summer. This
in turn prompted further policy initiatives from the major central banks which
tended to have a beneficial effect on equity markets. Significant problems remain
unresolved, however, and are likely periodically to reassert a negative impact on
markets. Our Investment Manager remains focused on well managed, well financed
companies; we remain encouraged by the resilience with which many of the companies
in our portfolio are adapting to the current challenging environment. As confidence
in the smaller companies sector rebuilds, we expect to see better returns from your
Company's portfolio over the next few years.
Nicholas Fry
26 October 2012
Interim Management Report and Responsibility Statement
The Chairman's Statement and the Investment Manager's Report give details of
the important events which have occurred during the period and their impact on
the financial statements.
Principal risks and uncertainties
The principal risks faced by the Company can be divided into various areas as
follows:
- Performance;
- Income/dividend;
- Regulatory;
- Operational;
- Market; and
- Financial.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Financial Statements for the year ended 29
February 2012. A detailed explanation can be found in the Directors' Report on
page 18 and in note 19 on pages 50 to 54 of the Annual Report and Financial
Statements which are available on the website maintained by the Investment
Manager, BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/
brsc. In the view of the Board, there have not been any changes to the
fundamental nature of these risks since the previous report and these principal
risks and uncertainties as summarised are equally applicable to the remaining
six months of the financial year as they were to the six months under review.
Going concern
The Directors are satisfied that the Company has adequate resources to continue
in operational existence for the foreseeable future and is financially sound.
For this reason, they continue to adopt the going concern basis in preparing
the financial statements. The Company has a portfolio of investments which are
considered to be readily realisable and is able to meet all of its liabilities
from its assets and income generated from these assets.
Related party disclosure
The Investment Manager is regarded as a related party and details of the
management fees payable are set out in note 3 and note 10. The related party
disclosure in respect of the Directors is set out in note 10.
Directors' responsibility statement
The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority
require the Directors to confirm their responsibilities in relation to the
preparation and publication of the Interim Management Report and Financial
Statements.
The Directors confirm to the best of their knowledge that:
- the condensed set of financial statements contained within the half yearly
financial report has been prepared in accordance with applicable UK Accounting
Standards and the Accounting Standards Board's Statement `Half Yearly Financial
Reports'; and
- the interim management report, together with the Chairman's Statement and
Investment Manager's Report, include a fair review of the information required
by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.
This half yearly financial report has been reviewed by the Company's auditor.
The half yearly financial report was approved by the Board on 26 October 2012
and the above responsibility statement was signed on its behalf by the
Chairman.
Nicholas Fry
For and on behalf of the Board
26 October 2012
Investment Manager's Report
Six months ended 31 August 2012
Market review and overall investment performance
Stock markets remained volatile during the first half of the financial year.
Optimism in the early part of the calendar year was replaced by renewed
nervousness that southern European countries would not be able to service their
debts. Investors also had concerns about the slowing of the Chinese economy and
tensions in the Middle East. These uncertainties took their toll on stock
markets which fell heavily in May. Unsurprisingly, smaller, less liquid stocks
were hit hardest as sellers found it difficult to find buyers. We have
generally aimed to hold about 20% of the portfolio in companies with high
potential capitalised up to £100 million; share prices in these companies
generally underperformed.
Over the period the Company's NAV per share fell by 4.4% to 592.35p and the
benchmark also fell by 4.4% (both calculated in Sterling terms without income
reinvested). By comparison, the FTSE 100 Index fell by 2.7%.
Performance review
Stock selection was positive, but sector allocation and gearing both detracted
slightly from relative performance.
Looking at stock selection, the most significant positive contributors to
relative performance included a number of our core holdings, notably Oxford
Instruments, Elementis, Howden Joinery, Consort Medical and Booker. These
companies are very well run, have all continued to trade well, and should
continue to do so. Interestingly, both Howden Joinery and Booker derive almost
all their profits from the UK.
On the negative side, the largest detractors from relative performance were our
holdings in Hargreaves Services, Yule Catto and Avocet Mining. Hargreaves
Services announced that they had encountered problems driving out a new face at
the underground coal mine at Maltby. Sadly, the risks inherent in deep mining
cannot be totally mitigated.
Yule Catto indicated that it was seeing an increased supply of nitrile polymers
from competitors and at reduced prices. Nitrile polymers are used mainly to
coat disposable synthetic rubber gloves used in surgical, clean room, food
handling and other applications. After some destocking, demand is expected to
resume its historic growth which benefits from a structural shift away from
natural rubber. We see value in the stock but profits from nitrile polymers are
going to take a while to recover.
Avocet Mining announced that their Inata gold mine had experienced what they believe
will be temporarily lower grades and reduced production guidance; cash costs are
higher than expected. Avocet remains profitable, has net cash and its shares
now trade well below estimated net asset value.
We have slightly reduced our holdings in these companies but believe they have
medium term attractions and are now lowly valued.
Activity
New holdings included Devro, Young & Co's Brewery and Coastal Energy. Devro is
the world's leading supplier of collagen casings for food, used by customers
mainly in the production of a wide variety of sausages. Global protein
consumption is expected to continue to increase especially in emerging markets.
Young & Co's Brewery own a high quality estate of predominantly London pubs,
aimed mainly at the premium end of the market. Coastal Energy is an
international oil and gas exploration and production company with assets in
Thailand; oil production exceeds 20,000 bopd and has been growing strongly.
Bid activity in our portfolio has again been a feature with bids for WSP and
Nautical Petroleum, although neither were large holdings.
Sector allocation was only marginally negative. It is worth noting that during
the period we held on average 16% of the portfolio in oil and mining shares,
roughly a benchmark weighting. These sectors were very weak during the period
and in aggregate led to a 3.5% fall in our NAV per share. However, given our
neutral sector weighting, they had no impact on relative performance. These are
high beta sectors and our strategy has been to maintain a roughly neutral
weighting; in this period our strategy has negatively impacted absolute
performance but in the past this has worked well.
Gearing was maintained in the 9% to 10% range and this had a slightly negative
impact on relative performance.
Portfolio positioning
We have sought to take a fairly defensive stance over the last six months given
the uncertain global economic backdrop. We have maintained exposure to high
quality, well managed and well financed companies. However, we have reduced
exposure to some holdings that are more capital spending orientated and thus
exposed to delayed decision making in uncertain times. We have increased
exposure to more defensive growth companies such as Devro, Young & Co's Brewery
and Coastal Energy.
Our high exposure to both sub £100 million market cap, AIM and resources
companies has been unhelpful during the six month period. However, we believe
that many of these holdings are in very interesting growth companies and have
the potential to perform strongly in more confident markets; they are, however,
unlikely to start to perform well in the early stages of recovery.
Although we have felt more cautious we have retained our gearing. This reflects
our view that many of the problems that are regularly aired are macro-economic
and that our holdings are typically able to benefit in such times at the
expense of less well run, less well financed competitors. It remains the case
that many of our holdings have net cash and few have significant net debt.
Outlook
Markets are likely to remain uncertain until reliable resolutions have been
found to the problems of the Eurozone. The recent announcements by the European
Central Bank seem much more encouraging and could help rebuild the confidence
of financial markets and encourage companies to push forward with investment
plans.
We expect good buying opportunities to continue to arise for those with a
medium term perspective; we take such a medium term perspective. Over the very
long term, and over most medium term timescales, shares in smaller companies
have significantly outperformed their larger counterparts. As confidence
rebuilds, we expect the share prices of good quality smaller companies to start
to perform well.
We continue to believe that equities look very attractive relative to most
government bonds. UK equities offer exposure far beyond the UK's shores and can
give excellent exposure to so many growth economies and companies, and
companies which are also required to adhere to good corporate governance
standards. Smaller companies offer much greater growth prospects than most
large companies and our portfolio contains a good mix of proven leading small
and mid-caps, together with exposure to some potentially exciting micro-caps.
We expect better returns over the next few years.
Mike Prentis
BlackRock Investment Management (UK) Limited
26 October 2012
Investment Exposure
Investment Size as at 31 August 2012
Number of
investments % of Portfolio
<£1m 71 13.4
£1m to £2m 58 27.0
£2m to £3m 23 18.0
£3m to £4m 19 20.6
£4m to £5m 4 5.5
£5m to £6m 4 7.0
£6m to £7m 3 6.1
£7m to £8m 1 2.4
Source: BlackRock.
Market Capitalisation as at 31 August 2012
% of Portfolio
< £100m 19.8
£100m to £400m 37.7
£400m to £1bn 25.8
>£1bn 16.7
Source: BlackRock.
Twenty Largest Holdings
as at 31 August 2012
Market
value % of
Company £'000 investments Business activity
Oxford Instruments 7,649 2.4 Design and manufacture of tools
and systems to analyse and
manipulate matter at the atomic
level
Bellway 6,531 2.1 House building
Aveva Group 6,528 2.1 Development and marketing of
engineering computer software
Senior 6,080 1.9 Manufacture and supply of
components for the aerospace and
automotive sectors
Ashtead Group 5,869 1.9 Hire of plant, predominantly in
the US
Howden Joinery Group 5,477 1.8 Design and manufacture of kitchens
sold to local builders
Booker Group 5,435 1.7 Wholesale of grocery products
Victrex 5,103 1.6 Manufacture and supply of PEEK
thermoplastic products
ITE Group 4,730 1.5 Organisation of trade exhibitions
mainly in Russia and other high
growth countries
Elementis 4,312 1.4 Manufacture of additives that
enhance the feel, flow and finish
of everyday products
Fidessa group 4,174 1.3 Development and marketing of
financial trading and connectivity
software
Galliford Try 4,117 1.3 House building and construction
Consort Medical 3,980 1.3 Manufacture of drug delivery
devices
City of London Investment 3,944 1.3 Management of investment funds
Group primarily invested in emerging
markets
Workspace Group 3,759 1.2 Supply of flexible workspace to
businesses in London
Restaurant Group 3,730 1.2 Operation of branded restaurants
St Modwen Properties 3,646 1.2 Property investment and
development
Dunelm 3,609 1.2 Retail of home furnishings
Inchcape 3,590 1.1 Distribution and retail of cars
and aftermarket services
Paypoint 3,439 1.1 Provision of payment solutions
------- -----
Total of 20 largest
investments 95,702 30.6
Remaining investments 216,797 69.4
------- -----
Total 312,499 100.0
------- -----
Distribution of Investments
as at 31 August 2012
Analysis of portfolio value by sector
Analysis of portfolio %
Oil & Gas Producers 7.9
Oil Equipment, Services & Distribution 1.4
Chemicals 5.2
Industrial Metals & Mining 0.3
Mining 5.6
Construction & Materials 1.8
Aerospace & Defence 2.3
General Industrials 0.8
Electronic & Electrical Equipment 6.8
Industrial Engineering 2.1
Industrial Transportation 2.0
Support Services 8.3
Beverages 0.1
Food Producers 0.8
Household Goods & Home Construction 4.4
Personal Goods 0.2
Health Care Services & Equipment 3.4
Pharmaceuticals & Biotechnology 4.8
Food & Drug Retailers 2.3
General Retailers 5.9
Media 5.6
Travel & Leisure 5.5
Fixed-Line Telecommunication Services 1.5
Wireless Telecommunication Services 0.1
Gas, Water and Multi-Utilities 0.4
Real Estate Investment & Services 3.1
Real Estate Investment Trusts 1.4
Financial Services 6.4
Software & Computer Services 8.4
Technology Hardware & Equipment 0.9
Other 0.3
Source: BlackRock.
Income Statement
for the six months ended 31 August 2012
Revenue £'000 Capital £'000 Total £'000
Year Year Year
Six months ended ended Six months ended ended Six months ended ended
31.08.12 31.08.11 29.02.12 31.08.12 31.08.11 29.02.12 31.08.12 31.08.11 29.02.12
Notes(unaudited)(unaudited) (audited) (unaudited)(unaudited) (audited)(unaudited)(unaudited) (audited)
(Losses)/
gains on
investments
held at
fair value
through
profit or
loss 2 - - - (11,608) (31,749) 1,039 (11,608) (31,749) 1,039
Income
from
investments
held at
fair value
through
profit
or loss 2 3,587 3,405 5,948 - - - 3,587 3,405 5,948
Other
income 2 8 2 3 - - - 8 2 3
Investment
management
and
performance
fees 3 (191) (195) (384) (1,103) (1,326) (1,932) (1,294) (1,521) (2,316)
Other
operating
expenses (204) (197) (372) - - - (204) (197) (372)
----- ----- ----- ------ ----- ----- ----- ----- -----
Net
return/(loss)
before
finance
costs and
taxation 3,200 3,015 5,195 (12,711) (33,075) (893) (9,511) (30,060) 4,302
Finance
costs (185) (178) (329) (558) (534) (984) (743) (712) (1,313)
----- ----- ----- ------ ------ ----- ----- ----- -----
Return/(loss)
on ordinary
activities
before
taxation 3,015 2,837 4,866 (13,269) (33,609) (1,877) (10,254) (30,772) 2,989
Taxation on
ordinary
activities - (2) (1) - - - - (2) (1)
----- ----- ----- ----- ----- ----- ----- ----- -----
Return/(loss)
on ordinary
activities
after taxation 3,015 2,835 4,865 (13,269) (33,609) (1,877) (10,254) (30,774) 2,988
===== ===== ===== ====== ====== ===== ====== ====== =====
Return/(loss)
per ordinary
share 4 6.30p 5.92p 10.16p (27.72p) (70.19p) (3.92p) (21.42p) (64.27p) 6.24p
===== ===== ====== ====== ====== ===== ====== ====== =====
The total column of this statement represents the Income Statement of the
Company. The supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment Companies (AIC). The
Company has no recognised gains or losses other than those disclosed in the
Income Statement and the Reconciliation of Movements in Shareholders' Funds.
All items in the above statement derive from continuing operations. No
operations were acquired or discontinued during the period.
Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 August 2012
Called-up Share Capital
share premium redemption Capital Revenue
capital account reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
For the six months ended
31 August 2012 (unaudited)
At 29 February 2012 12,498 38,952 1,982 233,770 9,531 296,733
Net (loss)/return for the - - - (13,269) 3,015 (10,254)
period
Dividends paid (a) - - - - (2,863) (2,863)
------ ------ ----- ------- ----- -------
At 31 August 2012 12,498 38,952 1,982 220,501 9,683 283,616
====== ====== ===== ======= ===== =======
For the six months ended
31 August 2011 (unaudited)
At 28 February 2011 12,498 38,952 1,982 235,647 8,123 297,202
Net (loss)/return
for the period - - - (33,609) 2,835 (30,774)
Dividends paid (b) - - - - (2,298) (2,298)
------ ------ ----- ------- ----- -------
At 31 August 2011 12,498 38,952 1,982 202,038 8,660 264,130
====== ====== ===== ======= ===== =======
For the year ended
29 February 2012 (audited)
At 28 February 2011 12,498 38,952 1,982 235,647 8,123 297,202
Net (loss)/return for the
year - - - (1,877) 4,865 2,988
Dividends
paid (c) - - - - (3,457) (3,457)
------ ------ ----- ------- ----- -------
At 29 February 2012 12,498 38,952 1,982 233,770 9,531 296,733
====== ====== ===== ======= ===== =======
(a) Final dividend of 5.98p per share for the year ended 29 February 2012,
declared on 26 April 2012 and paid on 4 July 2012.
(b) Final dividend of 4.80p per share for the year ended 28 February 2011,
declared on 14 April 2011 and paid on 21 June 2011.
(c) Final dividend of 4.80p per share for the year ended 28 February 2011,
declared on 14 April 2011 and paid on 21 June 2011 and interim dividend of
2.42p per share for the six months ended 31 August 2011, declared on 20 October
2011 and paid on 2 December 2011.
Balance Sheet
as at 31 August 2012
31 August 31 August 29 February
2012 2011 2012
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Fixed assets
Investments held at fair
value through profit or
loss 312,499 284,932 321,270
------- ------- -------
Current assets
Debtors 525 3,898 2,183
Creditors - amounts falling
due within one year
Bank overdraft (1,043) (6,516) (7,934)
Other creditors (3,009) (3,343) (3,937)
------- ------- -------
Net current liabilities (3,527) (5,961) (9,688)
======= ======= =======
Total assets less current
liabilities 308,972 278,971 311,582
Creditors - amounts falling
due after more than one
year 6 (25,356) (14,841) (14,849)
------- ------- -------
Net assets 283,616 264,130 296,733
======= ======= =======
Capital and reserves
Called-up share capital 7 12,498 12,498 12,498
Share premium account 38,952 38,952 38,952
Capital redemption reserve 1,982 1,982 1,982
Capital reserves 220,501 202,038 233,770
Revenue reserve 9,683 8,660 9,531
------- ------- -------
Total equity shareholders'
funds 4 283,616 264,130 296,733
======= ======= =======
Net asset value per
ordinary share
(debt at par value) 4 592.35p 551.65p 619.75p
======= ======= =======
Net asset value per
ordinary share
(debt at fair value) 4 588.16p 547.43p 615.55p
======= ======= =======
Cash Flow Statement
for the six months ended 31 August 2012
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2012 2011 2012
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Net cash inflow from
operating activities 2,095 1,331 3,617
Servicing of finance (722) (674) (1,286)
Taxation
Tax received 20 7 14
Overseas withholding tax
paid - - (5)
Capital expenditure and
financial investment
Purchases of investments (59,291) (76,492) (140,086)
Proceeds from sales of
investments 57,152 85,415 147,074
------ ------ -------
Net cash (outflow)/inflow
from capital expenditure
and financial investment (2,139) 8,923 6,988
Financing activities
Equity dividends paid (2,863) (2,298) (3,457)
Inflow from drawdown of
revolving facility 10,500 - -
------ ------ -------
Net cash inflow/(outflow)
from financing 7,637 (2,298) (3,457)
------ ------ ------
Increase in cash in the
period 8 6,891 7,289 5,871
====== ====== ======
Reconciliation of Net Return before Finance Costs and Taxation to Net Cash Flow
from Operating Activities
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2012 2011 2012
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net (loss)/return before finance
costs and taxation (9,511) (30,060) 4,302
Add: capital loss before finance
costs and taxation 12,711 33,075 893
------ ------ ------
Net revenue return before finance
costs and taxation 3,200 3,015 5,195
Investment management and
performance fees charged to
capital (1,103) (1,326) (1,932)
Increase in accrued income (196) (346) (60)
Increase/(decrease) in creditors 194 (12) 414
------ ------ ------
Net cash inflow from operating
activities 2,095 1,331 3,617
====== ====== ======
Notes to the Financial Statements
1. Principal activity and basis of preparation
The Company conducts its business so as to qualify as an investment trust
company within the meaning of sub-sections 1158 - 1165 of the Corporation Tax
Act 2010. The half yearly financial statements have been prepared using the
same accounting policies set out in the Company's financial statements for the
year ended 29 February 2012.
Under FRS 26 "Financial Instruments: Recognition and Measurement" the Company
has designated its assets and liabilities as being measured at "fair value
through profit or loss". The fair value of the financial instruments is based
on their quoted bid price or last traded price at the balance sheet date on the
exchange on which the investment is quoted, without deduction for estimated
future selling costs. Unquoted investments are valued by the Directors at fair
value using International Private Equity and Venture Capital Valuation
Guidelines. This policy applies to all current and non current asset investments
of the Company. The taxation charge has been calculated by applying an estimate
of the annual effective tax rate to any profit for the period.
The Company's financial statements have been prepared in accordance with UK
Generally Accepted Accounting Practice (UK GAAP) and the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies"
(SORP) revised in January 2009.
2. Income
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2012 2011 2012
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment income:
UK listed dividends 3,406 3,221 5,657
Property income dividends 54 70 105
Overseas listed dividends 127 114 186
----- ----- -----
3,587 3,405 5,948
----- ----- -----
Other income:
Deposit interest - - 1
Underwriting commission 8 2 2
----- ----- -----
8 2 3
----- ----- -----
Total 3,595 3,407 5,951
===== ===== =====
(Losses)/gains on investments held at fair value through profit or loss
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2012 2011 2012
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Realised gains on sales 14,127 16,502 30,191
Decrease in investment holding gains (25,735) (48,251) (29,152)
------ ------ ------
(11,608) (31,749) 1,039
====== ====== ======
3. Investment management and performance fees
Six months ended Six months ended Year ended
31 August 2012 31 August 2011 29 February 2012
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment
management fee 191 575 766 195 585 780 384 1,151 1,535
Performance fee - 528 528 - 741 741 - 781 781
--- ----- ----- --- ----- ----- --- ----- -----
191 1,103 1,294 195 1,326 1,521 384 1,932 2,316
=== ===== ===== === ===== ===== === ===== =====
The investment management fee is calculated based on 0.65% in respect of the
first £50 million of the Company's total assets less current liabilities,
reducing to 0.5% thereafter. A performance fee is payable at the rate of 10% of
the annualised outperformance over the benchmark, the Numis Smaller Companies
plus AIM (excluding Investment Companies) Index, in the two previous financial
years, applied to the average of the total assets less current liabilities of
the Company. The fee is payable annually in April and is capped at 0.25% of the
average of the total assets less current liabilities.
Performance fees have been wholly allocated to capital reserves as the
performance has been predominantly generated through capital returns of the
investment portfolio. A performance fee of £528,000 has been accrued for the
six month period to 31 August 2012 (six months ended 31 August 2011: £741,000
and year ended 29 February 2012: £781,000). This is based on outperformance of
1.7% against the benchmark resulting from an NAV return of -2.2% against the
benchmark return of -3.9%. These percentage returns are the annualised performance
from 28 February 2011 to 28 February 2013 using actual performance for the period
28 February 2011 to 31 August 2012, and assuming the performance is in line with
the benchmark for the six months ended 28 February 2013.
4. Returns and net asset value per ordinary share
Revenue and capital returns per share are shown below and have been calculated
using the following:
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2012 2011 2012
(unaudited) (unaudited) (audited)
Net revenue return attributable
to ordinary shareholders (£'000) 3,015 2,835 4,865
Net capital loss attributable to
ordinary shareholders (£'000) (13,269) (33,609) (1,877)
---------- ---------- ----------
Total (loss)/return (£'000) (10,254) (30,774) 2,988
========== ========== ==========
Equity shareholders' funds
(£'000) 283,616 264,130 296,733
---------- ---------- ----------
The actual and weighted number of
ordinary shares in issue at the
end of each period, on which the
return and net asset value per
ordinary share was calculated,
was: 47,879,792 47,879,792 47,879,792
---------- ---------- ----------
Revenue return per ordinary share 6.30p 5.92p 10.16p
Capital loss per ordinary share (27.72p) (70.19p) (3.92p)
------ ------ ------
Total (loss)/return per ordinary
share (21.42p) (64.27p) 6.24p
======= ======= =======
Net asset value per ordinary
share (debt at par value) 592.35p 551.65p 619.75p
======= ======= =======
Net asset value per ordinary
share (debt at fair value) 588.16p 547.43p 615.55p
======= ======= =======
5. Dividend
The Board has declared an interim dividend of 3.50p per share (2011: 2.42p per
share), payable on 7 December 2012 to shareholders on the register as at
9 November 2012; the ex dividend date is 7 November 2012. The total cost of this
dividend, based on 47,879,792 shares in issue at 26 October 2012, is £1,676,000 (2011:
£1,159,000).
6. Creditors - Amounts falling due after more than one year
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2012 2011 2012
(unaudited) (unaudited) (audited)
Revolving facility 10,500 - -
7.75% debenture stock 2022 14,856 14,841 14,849
------ ------ ------
25,356 14,841 14,849
====== ====== ======
7. Called-up share capital
Ordinary Treasury Nominal
shares shares Total value
(number) (number) shares £'000
Allotted, issued and
fully paid share
capital comprised:
Ordinary shares of 25p
each
---------- --------- ---------- ------
At 1 March and
31 August 2012 47,879,792 2,113,731 49,993,523 12,498
========== ========= ========== ======
8. Movement in net debt
Six months Six months Year
ended ended ended
31 August 31 August 29 February
2012 2011 2012
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Reconciliation of net cash flow to
movement in net debt
Increase in cash in the period 6,891 7,289 5,871
Drawdown of revolving facility (10,500) - -
Amortised debenture stock issue
expenses (7) (7) (15)
------ ------ ------
Movement in net (debt)/funds in the
period (3,616) 7,282 5,856
Opening net debt (22,783) (28,639) (28,639)
------ ------ ------
Closing net debt (26,399) (21,357) (22,783)
====== ====== ======
9. Publication of non statutory accounts
The financial information contained in this half yearly financial report does
not constitute statutory accounts as defined in the Companies Act 2006. The
financial information for the six months ended 31 August 2012 and 31 August
2011 has not been audited.
The information for the year ended 29 February 2012 has been extracted from the
latest published audited financial statements which have been filed with the
Registrar of Companies. The report of the auditor on those accounts contained
no qualification or statement under sections 498(2) or 498(3) of the Companies
Act 2006.
10. Related party disclosure
The fee due to the Investment Manager for the six months ended 31 August 2012
amounted to £1,294,000 (six months ended 31 August 2011: £1,521,000 and year
ended 29 February 2012: £2,316,000). At the period end, £1,702,000 was
outstanding in respect of investment management and performance fees (six
months ended 31 August 2011: £1,108,000 and year ended 29 February 2012: £
1,535,000).
The Board consists of five non-executive Directors, all of whom are considered
to be independent by the Board. None of the Directors has a service contract
with the Company. The Chairman receives an annual fee of £31,200, the Chairman
of the Audit Committee receives an annual fee of £23,920, and each of the other
Directors receives an annual fee of £20,800. Four members of the Board hold
shares in the Company. Mr Fry holds 40,000 shares, Mrs Nott 11,500 shares, Mr
Robertson 83,571 shares and Ms Burton 3,000 shares. Mr Peacock does not hold
any shares in the Company.
11. Contingent liabilities
There were no contingent liabilities at 31 August 2012 (31 August 2011 and 29
February 2012: nil).
12. Annual results
The Board expects to announce the annual results for the year ended 28 February
2013, in late April 2013. Copies of the annual results announcement can be
obtained from the Secretary on 020 7743 3000. The annual report should be
available by the beginning of May 2013 with the Annual General Meeting being
held in June 2013.
Independent Review Report
to BlackRock Smaller Companies Trust plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half yearly financial report for the six month period ended
31 August 2012 which comprises the Income Statement, Reconciliation of
Movements in Shareholders' Funds, Balance Sheet, Cash Flow Statement,
Reconciliation of Net Return before Finance Costs and Taxation to Net Cash Flow
from Operating Activities, and the related notes 1 to 12. We have read the
other information contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with guidance contained
in International Standard on Review Engagements 2410 (UK and Ireland) "Review
of Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the
Company, for our work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half yearly financial report is the responsibility of, and has been
approved by, the Directors. The Directors are responsible for preparing the
half yearly financial report in accordance with the Listing Rules of the
Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Company are
prepared in accordance with United Kingdom Generally Accepted Accounting
Practice. The condensed set of financial statements included in this half
yearly financial report has been prepared in accordance with the Accounting
Standards Board Statement "Half Yearly Financial Reports".
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half yearly financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters and applying analytical and other review
procedures. A review is substantially less in scope than an audit performed in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half yearly
financial report does not give a true and fair view of the financial position
of the Company as at 31 August 2012, and of its financial performance and its
cash flows for the six month period then ended, in accordance with the
Accounting Standards Board Statement "Half Yearly Financial Reports" and the
Disclosure and Transparency Rules of the United Kingdom's Financial Services
Authority.
Scott-Moncrieff
Chartered Accountants
Edinburgh
26 October 2012
ENDS
The Half Yearly Financial Report will also be available on the BlackRock
Investment Management website at: http://www.blackrock.co.uk/content/groups/
uksite/documents/literature/blackrock-smaller-companies-trust-plc-half-yearly-report.pdf
Neither the contents of the Manager's website nor the contents of any website
accessible from hyperlinks on the Manager's website (or any other website) is
incorporated into, or forms part of, this announcement.
For further information, please contact:
Simon White, Managing Director Investment Companies - 020 7743 5284
Mike Prentis, Fund Manager - 020 7743 2312
Emma Phillips, Media & Communications - 020 7743 2922
BlackRock Investment Management (UK) Limited
12 Throgmorton Avenue
London
EC2N 2DL
26 October 2012
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