Half-yearly Report
SMALL COMPANIES DIVIDEND TRUST PLC
Half-yearly Report
for the six months ended 31 October 2011
The Half-yearly Report and Accounts can be accessed via the Investment
Manager's website at www.chelvertonam.com or by contacting the Company
Secretary on telephone 01392 412122.
Investment objective and policy
The investment objective of the Company is to provide Ordinary shareholders
with a high income and opportunity for capital growth.
The Company's funds are invested principally in companies with a market
capitalisation of up to
£500 million. The Company's portfolio comprises companies listed on the
Official List and companies admitted to trading on AIM. The Company does not
invest in other investment trusts or in unquoted companies. No investment is
made in preference shares, loan stock or notes, convertible securities or fixed
interest securities.
Capital structure
Borrowings
The Company has a £4 million fixed term loan facility with Lloyds TSB Bank plc
and a £1 million overdraft facility with HSBC Bank plc.
Ordinary shares of 25p each - 16,250,000 in issue
Dividends
Holders of Ordinary shares are entitled to dividends.
Capital
On a winding-up of the Company, Ordinary shareholders will be entitled to all
surplus assets of the Company available after payment of all liabilities.
Voting
Each holder on a show of hands will have one vote and on a poll will have one
vote for each Ordinary share held.
If you are in any doubt about the contents of this document or the action you
should take, you are recommended to seek immediately your own independent
financial advice from your stockbroker, bank manager, solicitor, accountant or
other financial adviser authorised under the Financial Services and Markets Act
2000.
Financial highlights
Discount
31 October 30 April 31 October
2011 2011 % change 2011
Capital
Total net assets (£'000) 15,973 18,208 (12.27)
Net asset value per 98.30p 112.05p (12.27)
Ordinary share**
Mid-market price per 91.50p 100.50p (8.96) 6.92%
Ordinary share
FTSE All-Share Index 2,860.86 3,155.03 (9.32)
FTSE SmallCap Index 2,858.22 3,311.47 (13.69)
Six months Six months
to to
31 October 31 October
2011 2010 % change
Revenue
Return per Ordinary share 3.19p 3.22p (0.93)
Dividend per Ordinary 2.70p 2.60p 3.85
share***
Six months to Six months to
31 October 31 October
2011 2010
Total return
Total assets less current (6.16)% 5.54%
liabilities (excluding
bank borrowings) total
return*
Total return on Company's (9.01)% 7.49%
net assets*
Total return FTSE (7.76)% 4.20%
All-Share Index
Total return FTSE SmallCap (12.40)% 5.43%
Index
* Adding back dividends distributed in the period.
** 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.
*** Dividend per Ordinary share includes the first interim paid and second
interim declared for the period to 31 October 2011 and 2010 and will differ
from the amounts disclosed within the statement of changes in net equity.
Interim management report
Results
This report covers the six months to 31 October 2011. The net asset value per
Ordinary share at 31 October 2011 was 98.30p, a decrease of 12.27% in the past
six months compared to a decrease of 9.32% in the FTSE All-Share Index and a
decrease of 13.69% in the FTSE SmallCap Index. Since the beginning of the
Company's financial year, the Ordinary share price has fallen from 100.50p to
91.50p as at 31 October 2011, whilst the discount has narrowed from 10.31% to
6.92% over the same period. Since then the share price has fallen further to
89.25p as at 30 November 2011 with the discount 7.65% at the same date.
Dividend
A first interim dividend of 1.35p (2010: 1.30p) per Ordinary share was paid on
3 October 2011. The Board has declared a second interim dividend of 1.35p per
Ordinary share (2010: 1.30p) payable on 6 January 2012 to shareholders on the
register at 16 December 2011, making a total for the half year of 2.70p per
Ordinary share (2010: 2.60p).
Review
The period has been dominated by a reduction in domestic growth forecasts and
increasing fears of recession as a result of the problems in the Eurozone, and
a slowdown in both the US and China. Bond yields have continued to rise in a
number of Eurozone countries as governments continue to search for a solution
to slowing growth and increasing deficits. Unsurprisingly, equity markets have
been volatile throughout and investors have become much more cautious. In such
a `risk off' environment our small cap size bias has counted against us, but
the cash flow and yield characteristics of our investments have been a positive
as we have outperformed small caps but lagged behind the market as a whole. The
slowdown at the macro level has led to a `bottom up' downgrading of corporate
earnings estimates for both this year and next which has put added strain on UK
equity valuations.
In the portfolio we have been looking to gradually improve the underlying yield
in the portfolio and to this end we have added new holdings in Fairpoint, St
Ives, Marstons and Kcom and have added to a number of our higher yielders such
as Braemar Shipping Services and Morgan Sindall Group. Funds were raised from
the partial sale of some of the lower yielders after periods of good
performance such as Avesco Group, Trifast, Castings, Consort Medical and
Stadium Group. We have also been reducing our exposure to some of our larger
weightings in the portfolio where they are illiquid by selling a number of
shares in Alumasc Group, Portmeirion Group, Sinclair (William) Holdings and
Victoria. Despite consensus earnings estimates being reduced for a broad range
of UK Companies, dividend growth has continued to beat expectations.
Outlook
As investors in small and mid cap companies we remain geared to the domestic
economy and we expect that the downgrade cycle in corporate earnings will
continue into the New Year. The companies that we invest in and meet regularly
are now more unsure as to their short-term trading outlook than at any time
since the start of the banking crisis, largely because of the lack of an
obvious solution to the Eurozone crisis. The majority of them, however,
continue to trade well, generate cash and pay increasing levels of dividend.
This ability to pay relatively high and growing dividends has been gradually
rerated as a measure of performance by investors and company directors are now
increasingly aware of the positive message that real dividend growth sends to
the market. Our focus across the whole portfolio on cash flows and income will
benefit our portfolio as markets are set to remain volatile for the foreseeable
future.
Chelverton Asset Management Limited
9 December 2011
Principal risks
The principal risks facing the Company are substantially unchanged since the
date of the annual report for the year ended 30 April 2011 and continue to be
as set out in that report. Risks faced by the Company include, but are not
limited to, market risk, discount volatility, regulatory risk, financial risk,
risks associated with banking and hedging and the risk of non-compliance with
Section 1158 of the Corporation Tax Act 2010.
Responsibility statement of the Directors in respect of the half-yearly report
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in compliance
with the IAS34 "Interim Financial Reporting" and gives a true and fair view of
the assets, liabilities and financial position of the Company; and
• the interim management report and notes to the half-yearly report include a
fair view of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
the 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 company 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 9 December
2011 and the above responsibility statement was signed on its behalf by Lord
Lamont, Chairman.
Statement of comprehensive income (unaudited)
for the six months ended 31 October 2011
Six months to 31 Year to 30 April Six months to 31
October 2011 2011 October 2010
Revenue Capital Total Revenue Capital Total Revenue Capital Total
(audited)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investments
(Losses)/ - (2,063) (2,063) - 2,818 2,818 - 810 810
gains on
investments
Investment 677 - 677 1,187 - 1,187 684 - 684
income
Expenses
Investment (28) (83) (111) (54) (162) (216) (25) (76) (101)
management
fee
Other (92) - (92) (181) - (181) (95) - (95)
expenses
(120) (83) (203) (235) (162) (397) (120) (76) (196)
Net return 557 (2,146) (1,589) 952 2,656 3,608 564 734 1,298
before
finance costs
and taxation
Finance costs
Bank interest (44) (134) (178) (87) (261) (348) (44) (131) (175)
payable on
overdraft and
loan
Movement in 6 19 25 10 29 39 3 8 11
fair value of
ineffective
element of
interest rate
swap
(38) (115) (153) (77) (232) (309) (41) (123) (164)
Net return 519 (2,261) (1,742) 875 2,424 3,299 523 611 1,134
before
taxation
Taxation (see - - - - - - - - -
note 4)
Net return 519 (2,261) (1,742) 875 2,424 3,299 523 611 1,134
after
taxation
Other
comprehensive
income
Movement in 100 156 46
fair value of
cash flow
hedge
Total (1,642) 3,455 1,180
comprehensive
income for
the period
Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence pence pence pence
Return per 3.19 (13.91) (10.72) 5.38 14.92 20.30 3.22 3.76 6.98
Ordinary
share (see
note 2)
The total column of this statement is the statement of comprehensive income of
the Company prepared under International Financial Reporting Standards (`IFRS')
as adopted by the EU. All revenue and capital items in the above statement derive
from continuing operations. The Company does not have any income or expense
that is not included in the net return for the period, and therefore the "net return
for the period" is also the "Total comprehensive income for the period", as defined in
International Accounting Standard 1 (revised). All of the net return for the period
and the total comprehensive income for the period is attributed to the Shareholders
of the Company. The supplementary revenue and capital return columns are presented
for information purposes as recommended by the Statement of Recommended Practice issued
by the Association of Investment Companies (`AIC'). These accounts are unaudited and are
not the Company's statutory accounts.
Condensed statement of changes in net equity (unaudited)
for the six months ended 31 October 2011
Share
Share premium Capital Hedge Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Six months ended
31 October 2011
30 April 2011 4,063 11,917 1,102 (257) 1,383 18,208
Total comprehensive - - (2,261) 100 519 (1,642)
income for the period
Dividends paid - - - - (593) (593)
31 October 2011 4,063 11,917 (1,159) (157) 1,309 15,973
Year ended 30 April 2011
(audited)
30 April 2010 4,063 11,917 (1,322) (413) 1,507 15,752
Total comprehensive - - 2,424 156 875 3,455
income for the year
Dividends paid - - - - (999) (999)
30 April 2011 4,063 11,917 1,102 (257) 1,383 18,208
Six months ended
31 October 2010
30 April 2010 4,063 11,917 (1,322) (413) 1,507 15,752
Total comprehensive - - 611 46 523 1,180
income for the period
Dividends paid - - - - (577) (577)
31 October 2010 4,063 11,917 (711) (367) 1,453 16,355
Condensed balance sheet (unaudited)
as at 31 October 2011
31 October 30 April 31 October
2011 2011 2010
£'000 £'000 £'000
(audited)
Non-current assets
Investments at fair value 20,664 22,689 20,724
through profit or loss
Current assets
Trade and other receivables 216 275 89
Cash and cash equivalents - 1 218
216 276 307
Total assets 20,880 22,965 21,031
Current liabilities
Bank overdraft (610) (248) -
Trade and other payables (101) (188) (217)
(711) (436) (217)
Total assets less current 20,169 22,529 20,814
liabilities
Non-current liabilities
Bank loan (4,000) (4,000) (4,000)
Derivative financial (196) (321) (459)
instruments
(4,196) (4,321) (4,459)
Total liabilities (4,907) (4,757) (4,676)
Net assets 15,973 18,208 16,355
Represented by:
Share capital 4,063 4,063 4,063
Share premium account 11,917 11,917 11,917
Capital reserve (1,159) 1,102 (711)
Hedge reserve (157) (257) (367)
Revenue reserve 1,309 1,383 1,453
Issued capital and reserves 15,973 18,208 16,355
Net asset value per: (see pence pence pence
note 3)
Ordinary share 98.30 112.05 100.65
Condensed statement of cash flows (unaudited)
for the six months ended 31 October 2011
Six months to Year to Six months to
31 October 30 April 31 October
2011 2011 2010
£'000 £'000 £'000
(audited)
Operating activities
Investment income received 739 1,195 818
Investment management fee paid (116) (210) (100)
(see note 6)
Administration and secretarial (29) (60) (32)
fees paid
Other cash payments (82) (125) (85)
Cash generated from operations 512 800 601
Loan interest paid (176) (346) (171)
Net cash inflow from operating 336 454 430
activities (see note 5)
Investing activities
Purchases of investments (3,339) (4,295) (2,473)
Sales of investments 3,233 4,235 2,480
Net cash (outflow)/inflow from (106) (60) 7
investing activities
Financing activities
Dividends paid (593) (999) (577)
Net cash outflow from (593) (999) (577)
financing activities
Decrease in cash and cash (363) (605) (140)
equivalents for period
Cash and cash equivalents at (247) 358 358
start of period
Cash and cash equivalents at (610) (247) 218
end of period
Notes to the condensed half-yearly report
for the six months ended 31 October 2011
1 General information
The financial information contained in this half-yearly report does not
constitute statutory financial statements as defined in Section 434 of the
Companies Act 2006. The statutory financial statements for the year ended
30 April 2011, which contained an unqualified auditors' report, have been lodged
with the Registrar of Companies and did not contain a statement required under
the Companies Act 2006. 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 and Venture Capital Trusts issued in January 2009.
This half-yearly report has been prepared using the accounting policies adopted
in the audited financial statements for the year ended 30 April 2011 and in
compliance with IAS 34 `Interim Financial Reporting'. This report has not been
reviewed by the Company's Auditors.
The Company has considerable financial resources and therefore the Directors
believe that the Company is well placed to manage its business risks and also
believe that the Company will have sufficient resources to continue in
operational existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing this half-yearly report.
2 Return per Ordinary share
The return per Ordinary share is based on 16,250,000 (30 April 2011:
16,250,000, 31 October 2010: 16,250,000) Ordinary shares.
3 Net asset value
Net asset value per share has been calculated in accordance with entitlements
as at the period end and in accordance with the Company's Articles of
Association and include current period revenue.
The net asset value per Ordinary share is based on assets attributable of £
15,973,000 (30 April 2011: £18,208,000, 31 October 2010: £16,355,000) and on
16,250,000 (30 April 2011: 16,250,000, 31 October 2010: 16,250,000) Ordinary
shares, being the number of Ordinary shares in issue at the period end.
4 Taxation
31 October 30 April 31 October
2011 2011 2010
£'000 £'000 £'000
Based on the revenue
return for the period
Current tax - - -
The current tax charge for the year is lower than the averaged standard rate of
corporation tax in the UK of 26% (2010: 28%).The differences are explained
below:
31 October 30 April 31 October
2011 2011 2010
£'000 £'000 £'000
Revenue on ordinary activities before (1,742) 3,299 1,134
taxation
Theoretical tax at UK corporation
rate of 26%
(30 April 2011: 27.82%, 31 October (453) 918 318
2010: 28%)
Effects of:
Capital items not taxable 536 (784) (227)
UK and foreign dividends which are (176) (330) (192)
not taxable in the UK
Excess expenses in the period 93 196 101
Accrued income brought forward - - 6
Accrued income considered taxable in - - (6)
prior period but now considered
exempt
Actual current tax charged to the - - -
revenue account
The Company has unrelieved excess expenses of £17,187,000 at 31 October 2011
(30 April 2011: £16,831,000, 31 October 2010: £16,344,000). 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 been recognised.
5 Reconciliation of net return before and after taxation to net cash inflow
from operating activities
31 October 30 April 31 October
2011 2011 2010
£'000 £'000 £'000
Net return before taxation (1,742) 3,299 1,134
Net capital return 2,261 (2,424) (611)
Movement in fair value of (25) (39) (11)
ineffective element of interest rate
swap
Decrease in receivables 59 2 123
(Decrease)/increase in payables (19) 10 (6)
Interest and expenses charged to the (198) (394) (199)
capital reserve
Net cash inflow from operating 336 454 430
activities
6 Related party transactions
The investments are managed by Chelverton Asset Management Limited, a company
in which Mr van Heesewijk, a Director of the Company, has an interest. The amounts
paid to the Investment Manager in the six months to 31 October 2011 were £111,000
(year ended 30 April 2011: £216,000, six months to 31 October 2010: £101,000).
At 31 October 2011 there were amounts outstanding to be paid to the Investment
Manager of £52,000 (30 April 2011: £57,000, 31 October 2010: £52,000).
7 Dividends
During the period, a fourth interim dividend of 2.30p per Ordinary share for
the year ended 30 April 2011, together with a first interim dividend of 1.35p
per Ordinary share for the year ending 30 April 2012, have been paid to
shareholders.
In addition, the Board has declared a second interim dividend of 1.35p per
Ordinary share payable on 6 January 2012 to shareholders on the register at 16
December 2011.
Principal portfolio investments
as at 31 October 2011
Top 20 holdings
Market value % of
Industrial classification £'000 portfolio
Sinclair (William) Household Goods 822 4.0
Holdings
S & U General Financial 679 3.3
Macfarlane Group General Industrials 648 3.1
Office2Office Support Services 594 2.9
Avesco Group Media 576 2.8
Cineworld Group Travel & Leisure 572 2.8
Sanderson Group Software & Computer 560 2.7
Services
Alumasc Group Construction & Materials 556 2.7
Hansard Global Life Insurance 536 2.6
Portmeirion Group Household Goods 528 2.6
Chesnara Life Insurance 487 2.4
Personal Group Holdings Non Life Insurance 486 2.3
Braemar Shipping Industrial Transportation 465 2.2
Services
Interior Services Support Services 445 2.2
Abbey Protection Non Life Insurance 443 2.1
Jarvis Securities General Financial 442 2.1
Beazley Non Life Insurance 440 2.1
Marshalls Construction & Materials 430 2.1
Smiths News Support Services 430 2.1
Timeweave Software & Computer 426 2.0
Services
Top 20 companies 10,565 51.1
Balance held in 41 10,099 48.9
companies
Total portfolio 20,664 100.0
Breakdown of portfolio by industry
Portfolio by industry % of portfolio
Support Services 14.1
General Financial 11.9
Non Life Insurance 11.3
Household Goods 8.5
Construction & Materials 8.3
Travel & Leisure 7.1
Media 6.9
Industrial Engineering 5.8
Life Insurance 5.0
Software & Computer Services 4.8
General Industrials 3.1
Industrial Transportation 2.8
Electronic & Electrical Equipment 1.8
Food Producers 1.8
Chemicals 1.5
Gas, Water & Multi Utilities 1.5
Health Care, Equipment & Services 1.3
Fixed Line Telecommunication 1.0
Mining 1.0
General Retailers 0.5
Shareholder information
Financial calendar
Company's year end 30 April
Interim dividends paid April, July, October and January
Annual results announced July
Annual General Meeting September
Company's half-year 31 October
Half-year results announced December
Share prices and performance information
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'.
The net asset values are announced weekly to the London Stock Exchange and
published monthly via the Association of Investment Companies.
Information about the Company can be obtained on the Chelverton internet site
at www.chelvertonam.com. Any enquiries can also be e-mailed to
cam@chelvertonam.com.
Share register enquiries
The register for the Ordinary shares is maintained by Share Registrars Limited.
In the event of queries regarding your holding, please contact the Registrar on
01252 821390. Changes of name and/or address must be notified in writing to the
Registrar.
Directors and Advisers
Directors Lord Lamont of Lerwick (Chairman)
David Harris
William van Heesewijk
Howard Myles
Investment Manager Chelverton Asset Management Limited
12b George Street
Bath BA1 2EH
Tel: 01225 483030
Secretary and Registered Capita Sinclair Henderson Limited
Office
(trading as Capita Financial Group -
Specialist Fund Services)
Beaufort House
51 New North Road
Exeter EX4 4EP
Tel: 01392 412122
Registrar and Transfer Office Share Registrars Limited
Suite E, First Floor
9 Lion and Lamb Yard
Farnham
Surrey GU9 7LL
Tel: 01252 821390
www.shareregistrars.uk.com
Bankers Lloyds TSB Bank Plc
25 Gresham Street
London EC2V 7HN
Auditors Hazlewoods LLP
Windsor House
Bayshill Road
Cheltenham
GL50 3AT
Custodian HSBC Global Services
Level 27
8 Canada Square
London E14 5HQ
Registered in England
No. 3749536
National Storage Mechanism
A copy of the Half-yearly Report will be submitted shortly to the National
Storage Mechanism ("NSM") and will be available for inspection at the NSM,
which is situated at: www.hemscott.com/nsm.do.
END
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on this announcement (or any other website) is
incorporated into, or forms part of, this announcement.
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