Half-yearly Report
SMALL COMPANIES DIVIDEND TRUST PLC
HALF - YEARLY REPORT FOR THE PERIOD ENDED 31 OCTOBER 2007
Introduction
Small Companies Dividend Trust PLC was launched on 12 May 1999, registered in
England No. 3749536.
The Company does not have a fixed life, the Articles of Association provide for
the continued life of the Company to be proposed at an extraordinary general
meeting to be held on 30 April 2014. In the event that the resolution is not
passed the Directors shall put forward proposals (`Restructuring Proposal') to
shareholders regarding the future of the Company not more than four months
after the EGM. If the Restructuring Proposal is not proposed or not passed a
resolution to voluntarily wind the Company up shall be put to shareholders.
Capital structure
The Company's share capital consists of Ordinary shares of 25p each.
The number of Ordinary shares in issue as at 31 October 2007 was 16,250,000.
Investment objective
The investment objective of the Company is to provide Ordinary shareholders
with a high income and opportunity for capital growth.
Investment policy
The Company's investment policy is that:
- funds will be invested principally in UK companies with a market
capitalisation of up to £500 million at the point of investment;
- a maximum of 20 per cent of the Company's portfolio may be invested in
companies without reference to their market capitalisation at the
discretion of the Investment Manager;
- the Company will invest in the ordinary shares of companies on the
Official List or traded on the London Stock Exchange's Main Market or
Alternative Investment Market;
- no investment will be made in preference shares, loan stock or notes,
convertible securities or fixed interest securities or any similar
securities convertible into shares; and
- the Company will not invest in the securities of other investment
trusts or in unquoted companies.
Interim Management Report
Results
This interim report covers the six months to 31 October 2007. The net asset
value per Ordinary share at 31 October 2007 was 218.87p, a decrease of 17.82%
in the past six months compared to an increase of 2.94% in the FTSE All-Share
Index and a fall of 5.41% in the FTSE Small Cap Index. Since the beginning of
the Company's financial year, the Ordinary share price has declined from
238.75p to 201.50p at 31 October 2007, a fall of 15.60% whilst the discount has
narrowed from 10.35% to 7.94% over the same period. Since then the share price
has fallen further to 165.00p as at 30 November 2007.
Dividend
A first interim dividend of 3.20p (2006: 3.00p) per Ordinary share was paid on
28 September 2007 an increase of 6.67%. The Board has declared a second interim
dividend of 3.20p per Ordinary share (2006: 3.00p) payable on 31 December 2007
to shareholders on the register on 14 December 2007, making a total for the
half year of 6.40p per Ordinary share (2006: 6.00p).
Shareholders should be aware that it is the Board's intention, in the absence
of unforeseen circumstances, to make two further interim dividend payments of
3.20p and 4.05p respectively to produce a total annual dividend of 13.65p, an
increase of 5.0% on the 13.00p relating to the year ended April 2007.
The Company is invested in the ordinary shares of forty-five Listed and
AIM-traded companies and one unquoted company, across twenty-six sectors. It
does not and never has invested in the shares of any investment trusts or
collectives.
During this period your fund benefited from a cash offer for Salvesen at a
seventy nine per cent premium to the prevailing market price.
New investments have been made in three companies; Avesco a media service
provider, Office2Office a leading independent supplier of office products and
Hilton Foods a specialist meat packing business supplying major international
food retailers in the UK and Europe. The latter holding was bought at the time
of the Company's IPO.
Outlook
The recent well documented concerns with regard to sub prime debt in the US and
increasing worries with respect to domestic economic growth have driven a
`flight to liquidity' in the UK equity market. Unfortunately, for us this has
led to a shift into companies with a large market capitalisation and an almost
indiscriminate sell off of small companies which has had a severe adverse
affect on short-term performance, with the net asset value per share falling to
218.87p.
Our investment remit means that our investment process is focused on investing
in companies with strong cash flows. Ultimately, valuation considerations at
the individual stock level and not market cap will become the paramount drivers
of investment performance. Whilst the exact timing of this is difficult to
predict, when it does happen, the relatively low price to cash ratings of our
stocks places them in an ideal position to recover strongly.
Top 20 Holdings as at 31 October 2007
Company %
1 Alumasc Group 3.4
2 Braemar Shipping 3.2
3 United Utilities 2.8
4 Arbuthnot Banking Group 2.8
5 Chesnara 2.6
6 Personal Group 2.5
7 Highway Insurance Holdings 2.4
8 ATH Resources 2.3
9 Davenham Group 2.3
10 THB Group 2.2
11 Macfarlane Group 2.2
12 Dawson Holdings 2.2
13 Nichols 2.1
14 Dee Valley Group 2.1
15 Hilton Food Group 2.1
16 Marshalls Group 2.1
17 Abacus Group 2.0
18 TT Electronics 2.0
19 Cattles 2.0
20 BT Group 1.9
Balance held in 46 holdings 52.8
100.0
David Horner
Chelverton Asset Management Limited
Investment Manager
12 December 2007
Responsibility statement
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements has been prepared in
accordance with the Statement on Half-Yearly Financial Reports issued
by the UK Accounting Standards Board;
- the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed set of
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related
party transactions that have taken place in the first six months of the
current financial year and that have materially affected the financial
position or performance of the entity during that period; and any
changes in the related party transactions described in the last annual
report that could do so.
This Half-Yearly Report was approved by the Board of Directors on 12 December
2007 and the above responsibility statement was signed on its behalf by Lord
Lamont, Chairman.
The Directors announce the unaudited results for the period 1 May 2007 to 31
October 2007 as follows:
Income statement (unaudited)
for the six months ended 31 October
2007
Six months to 31 Year to 30 April Six months to 31
October 2007 2007 October 2006
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investments
(Losses)/ - (7,032) (7,032) - 5,306 5,306 - 1,058 1,058
gains on
investments
Investment 1,565 - 1,565 2,846 - 2,846 1,430 - 1,430
income
Expenses
Investment (67) (235) (302) (177) (531) (708) (87) (261) (348)
management fee
Other expenses (124) - (124) (233) - (233) (398) - (398)
Exceptional - - - - (269) (269) - - -
items
(191) (235) (426) (410) (800) (1,210) (485) (261) (746)
Net return 1,374 (7,267) (5,893) 2,436 4,506 6,942 945 797 1,742
before finance
costs and
taxation
Finance costs
Bank interest (139) (418) (557) (127) (383) (510) (67) (202) (269)
payable
Provision for - (24) (24) - (9) (9) - - -
loss in former
subsidiary
company
Appropriations - - - - (855) (855) - (423) (423)
in respect of
Zero Dividend
Preference
shares
Appropriations - - - - (4) (4) - (2) (2)
in respect of
Preference
shares
Amortisation - - - - (32) (32) - (16) (16)
of Zero
Dividend
Preference
share issue
costs
Net return 1,235 (7,709) (6,474) 2,309 3,223 5,532 878 154 1,032
before
taxation
Taxation (4) - (4) (11) - (11) (7) - (7)
Net return 1,231 (7,709) (6,478) 2,298 3,223 5,521 871 154 1,025
after taxation
Return per : pence pence pence pence pence pence pence pence pence
(see note 3)
Ordinary share 7.58 (47.44) (39.86) 14.14 19.84 33.98 5.36 0.95 6.31
Zero Dividend - - - - - - - 6.76 6.76
Preference
share
Preference - - - - - - - 6.76 6.76
share
The total column of this statement is the income statement of the Company.
All items in the above statement derive from continuing operations. No
operations were acquired or discontinued during the period.
These accounts are unaudited and are not the Company's statutory accounts.
Statement of changes in net equity
(unaudited)
for the six months ended 31 October 2007
Share Share Capital Revenue Total
capital premium reserve reserve
account
£'000 £'000 £'000 £'000 £'000
Six months ended 31 October 2007
30 April 2007 4,063 11,917 25,435 1,861 43,276
Net return after taxation for the - - (7,709) 1,231 (6,478)
period
Dividends paid - - - (1,170) (1,170)
31 October 2007 4,063 11,917 17,726 1,922 35,628
Year ended 30 April 2007
30 April 2006 4,063 11,917 22,212 1,635 39,827
Net return after taxation for the - - 3,223 2,298 5,521
year
Dividends paid - - - (2,072) (2,072)
30 April 2007 4,063 11,917 25,435 1,861 43,276
Six months ended 31 October 2006
30 April 2006 4,063 11,917 22,265 1,582 39,827
Net return after taxation for the - - 154 871 1,025
period
Dividends paid - - - (1,097) (1,097)
31 October 2006 4,063 11,917 22,419 1,356 39,755
Balance Sheet (unaudited)
as at 31 October 2007
31 October 30 April 31 October
2007 2007 2006
£'000 £'000 £'000
Non-current assets
Fair value through profit or loss 51,443 59,001 60,491
investments
Current assets
Fair value through profit or loss - - 26
investments held by former Subsidiary
Debtors 162 877 138
Cash and cash equivalents 172 247 111
334 1,124 275
Total assets 51,777 60,125 60,766
Current liabilities
Other creditors (365) (363) (524)
Bank loan (10,000) - (5,000)
Bank overdraft (5,784) (4,912) (4,339)
Zero Dividend Preference shares - - (11,092)
Loan note - (6,258) -
Preference shares - - (56)
Commitment to subscribe for shares - (5,316) -
(16,149) (16,849) (21,011)
Total assets less current liabilities 35,628 43,276 39,755
Total liabilities (16,149) (16,849) (21,011)
Net assets 35,628 43,276 39,755
Represented by:
Share capital 4,063 4,063 4,063
Share premium account 11,917 11,917 11,917
Capital reserve 17,726 25,435 22,419
Revenue reserve 1,922 1,861 1,356
Issued capital and reserves 35,628 43,276 39,755
Net asset value per: (see note 4) pence pence pence
Ordinary share 218.87 266.32 245.94
Zero Dividend Preference share - - 177.72
Preference share - - 177.72
Statement of cash flows (unaudited)
for the six months ended 31 October 2007
Six months Year to Six months
to to
31 October 30 April 31 October
2007 2007 2006
£'000 £'000 £'000
Operating activities
Investment income received 2,048 2,858 1,967
Bank deposit interest received 5 8 4
Investment management fee paid (339) (709) (348)
Investment management performance fee - (243) (243)
paid
Administration and secretarial fees (27) (57) (26)
paid
Exceptional expenses paid - (195) -
Other cash payments (134) (169) (191)
Cash generated from operations 1,553 1,493 1,163
Bank interest paid (495) (532) (270)
Net cash inflow from operating 1,058 961 893
activities
Investing activities
Purchases of investments (6,213) (14,502) (9,107)
Sales of investments 6,975 20,110 9,242
Net cash inflow from investing 762 5,608 135
activities
Financing activities
Advance/ (repayment) of loan 10,000 (5,000) -
Dividends paid (1,170) (2,072) (1,097)
Repayment of Zero Dividend Preference (11,539) - -
shares
Repayment of Preference shares (58) - -
Net cash outflow from financing (2,767) (7,072) (1,097)
activities
Decrease in cash and cash equivalents (947) (503) (69)
for period
Cash and cash equivalents at start of (4,665) (4,162) (4,160)
period
Cash and cash equivalents at end of (5,612) (4,665) (4,229)
period
Notes
For the six months ended 31 October 2007
1 General information
The financial information contained in this interim report does not constitute
statutory financial statements as defined in Section 240 of the Companies Act
1985. The statutory financial statements for the year ended 30 April 2007,
which contained an unqualified auditors' report, have been lodged with the
Registrar of Companies and did not contain a statement required under Section
237(2) or (3) of the Companies act 1985. These statutory financial statements
were prepared under International Financial Reporting Standards (`IFRS') and in
accordance with the Statement of Recommended Practice: Financial Statements of
Investment Trust Companies, revised December 2005. The financial statements
have been prepared using the accounting policies adopted in the audited
financial statements for the year ended 30 April 2007 (see note 2).
2 Change in allocation of expenses
With effect from 1 May 2006, the Board changed the Company's allocation of
investment management fees and bank interest between revenue and capital. These
expenses are allocated 25% to revenue and 75% to capital, previously they were
allocated 40% to revenue and 60% to capital. The investment management
performance fee remains 100% charged to capital. This change in allocation is
not considered to be a change in accounting policy and therefore no restatement
of prior period figures is required.
3 Return per share
The return per share is based on 31 October 2007: 16,250,000, (30 April 2007:
16,250,000, 31 October 2006: 16,250,000) Ordinary shares, and in the six months
to 31 October 2006: 6,250,000 Zero Dividend Preference shares and 31,260
Preference shares being the weighted average number of shares in issue during
the period.
4 Net asset values
Net asset values per share have been calculated in accordance with entitlements
as at the period end and in accordance with the Company's Articles of
Association and exclude current period revenue for the unaudited values at 31
October 2007 and 2006.
The net asset value per Ordinary share is based on assets attributable of £
35,567,000 (30 April 2007: £43,276,000, 31 October 2006: £39,965,000) and on
16,250,000 (30 April 2007: 16,250,000, 31 October 2006: 16,250,000) Ordinary
shares, being the number of Ordinary shares in issue at the period end.
The net asset value per Zero Dividend Preference share in the period to 31
October 2006 is based on assets attributable of £11,108,000 and on 6,250,000
Zero Dividend Preference shares, being the number of Zero Dividend Preference
shares in issue at that period end.
The net asset value per Preference share in the period to 31 October 2006 is
based on assets attributable of £56,000 and on 31,260 Preference shares, being
the number of Preference shares in issue at that period end.
5 Taxation
31 October 30 April 31 October
2007 2007 2006
£'000 £'000 £'000
Based on the revenue return for the year
Current tax 4 11 7
The current tax charge for the year is lower than the standard rate of
corporation tax in the UK of 30% (2006: 30%). The differences are explained
below:
31 October 30 April 31 October
2007 2007 2006
£'000 £'000 £'000
Revenue on ordinary activities before 1,235 2,309 878
taxation
Theoretical tax of UK corporation rate of 371 693 263
30%
Effects of:
UK dividends which are not taxable (461) (830) (412)
Excess expenses in the year 90 137 149
Withholding tax suffered on unfranked 4 11 7
foreign
dividend income
Actual current tax charged to the revenue 4 11 7
account
The Company has unrelieved excess expenses of £12,494,000 at 31 October 2007
(30 April 2007: £12,194,000, 31 October 2006: £12,132,000). It is unlikely that
the Company will generate sufficient taxable profits in the future to utilise
these expenses and therefore no deferred tax asset has to been recognised.
6 Reconciliation of net return before and after taxation to net cash flow from
operating activities
31 October 30 April 31 October
2007 2007 2006
£'000 £'000 £'000
Net return before taxation (6,474) 5,532 1,032
Taxation (4) (11) (7)
Net return after taxation (6,478) 5,521 1,025
Net capital return 7,709 (3,223) (154)
Decrease in debtors 477 34 537
Increase/(decrease) in creditors 3 (188) (52)
Interest and expenses charged to the Capital (653) (1,183) (463)
reserve
Net cash flow from operating activities 1,058 961 893
7 Related party transactions
The Investments are managed by Chelverton, a company in which Mr van Heesewijk,
a Director of the Company, has an interest. The amounts paid in the period to
31 October 2007 were £302,000 (year ended 30 April 2007: £708,000, period to 31
October 2006: £348,000).
Lord Lamont of Lerwick
Chairman
12 December 2007
Shareholder Information
Share dealing
Shares can be traded through a stockbroker or other authorised intermediary.
The Company's shares are fully qualifying investments for inclusion in Personal
Equity Plans (`PEPs') up to the maximum permitted limit and for Individual
Savings Accounts (ISAs).
Share register enquiries
The register for the Ordinary shares is maintained by Equiniti Limited
(previous name Lloyds TSB Registrars). In the event of queries regarding your
holding, please contact the Registrar on 0870 600 3970 or visit the website
www.shareview.co.uk. Changes of name/or address must be notified in writing to
the Registrar.
Share capital and net asset value information
Ordinary 25p shares 16,250,000
SEDOL number 0661582
ISIN number GB0006615826
Bloomberg symbol SDV
The Company's Ordinary shares are traded on the London Stock Exchange.
The Company releases its net asset value per Ordinary share to the London Stock
Exchange on a weekly basis.
Share prices
The Company's Ordinary shares are listed on the London Stock Exchange. The
mid-market prices are quoted daily in the Financial Times under `Investment
Companies' and in The Daily Telegraph under `Investment Trusts'.
Annual and Half-yearly reports
Copies of the annual and half-yearly reports are available from the Company
Secretary and can be downloaded from the Company's website
www.chelvertonam.com.
Enquiries can be emailed to cam@chelvertonam.com
Company Secretary Telephone: 01392 412122.
The Association of Investment Companies
The Company is a member of the Association of Investment Companies.
www.theaic.co.uk
Directors and Advisers
Directors (all non-executive): Registered Office:
Lord Lamont Beaufort House
Bryan Lenygon 51 New North Road
David Harris Exeter
William van Heesewijk EX4 4EP
Investment Manager: Company Secretary:
Chelverton Asset Management Ltd Capita Sinclair Henderson Limited
11 George Street Beaufort House
Bath 51 New North Road
BA1 2EH Exeter
EX4 4EP
Registrars:
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex, BN99 6DA
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