Half Yearly Report

RNS Number : 6726V
F&C Global Smaller Companies PLC
16 December 2013
 



Date:                16 December 2013

 

Contact:           Peter Ewins                                                   

                        F&C Management Limited                              

                        020 7628 8000                                               

 

 

 

F&C Global Smaller Companies PLC

Unaudited statement of results

for the half-year ended 31 October 2013

 

 

 

 

Summary of Unaudited Results

 

 

 

Attributable to shareholders

 

 

31 October 2013

 

 

30 April 2013  

 

 

% Change

 

 

 

 

Share price

836.00p

764.50p

+9.4

 

 

 

 

Net asset value per share (debenture at nominal value)

831.13p

756.21p

+9.9

 

 

 

 

Net asset value per share (debenture at market value)

829.68p

752.47p

+10.3

 

 

 

 

Net assets

£396.6m

£340.1m

+16.6

 

 

 

 

 

Half-year ended

31 October 2013

Half-year ended

31 October 2012

 

% Change

 

 

 

 

Revenue return per share

5.15p

3.76p

+37.0

 

 

 

 

Interim dividend per share

2.50p*

2.00p

+25.0

 

* Payable on 31 January 2014 to shareholders on the register at 3 January 2014.

 

 

 

The Chairman, Anthony Townsend, said:

 

"I am delighted to report to shareholders that your Company has produced another period of strong returns, adding to the significant progress that has been made over the past five years, culminating in winning not one but two awards for "Best Global Investment Trust", from Money Observer and What Investment during the period.

 

Additionally, in line with our progressive policy and in order to reduce the disparity between the interim and final dividends, we have increased the interim dividend by 25%."

 



Manager's Review

 

Share prices in most markets around the world advanced in the period under review, building on the strong gains from the previous year. The key Central Banks in the US, UK, Europe and Japan persisted with policies aimed at supporting growth, providing further liquidity which lent strong support to financial markets as a whole.  Smaller company shares once again more than held their own compared to the broader equity indices as investors continued to be attracted to their superior growth dynamic.

 

Performance

 

The Company's NAV delivered a total return over the six months of 10.5% and the share price, excluding dividend income, rose by 9.4%. These gains were just behind the Benchmark total return of 10.8%*. Over the last five years the NAV total return has been 172.8% compared to the Benchmark performance of 151.7%. It is pleasing to report that the Company won both the "Money Observer" and "What Investment" Best Global Investment Trust awards for 2013, reflecting positively on performance over recent years.

 

The share price ended the period at a 0.8% premium to the NAV including the debenture at market value. The Company issued 2,750,000 new shares during the period to satisfy demand from the market.

 

* The Company's Benchmark is a blended index of the returns from the MSCI All Country World ex UK Small Cap Index (70%) and the Numis UK Smaller Companies (excluding investment companies) Index (30%).

 

Dividends

 

Many stocks held in the investment portfolio increased their dividend payments in the period and as noted in the 2013 Annual Report, the Company no longer bears F&C savings scheme costs. As a result of these favourable dynamics, and in order to reduce the disparity between the interim and final dividends, the Board has decided to raise the interim payment by 25% to 2.50p per share. This will be paid to shareholders on 31 January 2014.

 

Economic and market background

 

As usual over the course of six months, a number of economic and political factors have set the background for the performance of stock markets. Developments in the US are always important and this was certainly the case in this period. In the early Summer, the markets were shaken by the Chairman of the Federal Reserve Bank's suggestion that quantitative easing ("QE") could be tapered later in 2013 and wound down completely in 2014. The potential withdrawal of support for the US bond market led to a rapid move up in bond yields and global equity markets sold off. There was also significant pressure on the currencies of a number of the leading developing countries. Subsequently however, a weaker set of US economic data led to something of a U-turn from Ben Bernanke and tapering was delayed. Equity markets ended the period by rallying despite the distraction of the political wrangling over the US fiscal deficit in October.

 

Outside the US, newsflow was generally more positive. The UK economy accelerated with both the manufacturing and service sectors expanding at more normal rates commensurate with a proper economic recovery. Whilst things are not yet as rosy in Europe, even in the worst hit parts of the Continent economic activity appears to have stabilised and the euro gained against the US dollar.

 

Equity markets in Asia and particularly in Latin America were buffeted by the QE situation mentioned above. Economic growth in China and elsewhere in Asia has slowed and persistent high inflation in some countries, such as India, squeezed corporate profit margins. Within Latin America the largest equity market, Brazil, was undermined by civil unrest and a weakening currency.

 

Portfolio performance

 

Geographical performance (total return sterling adjusted)

for the half year ended 31 October 2013

 

Portfolio

Local smaller companies index

USA

+10.5%

+13.2%

UK

+18.6%

+17.2%

Continental Europe

+15.7%

+19.1%

Japan

+1.1%

-1.0%

Rest of World

-4.7%

-4.5%  (Pacific ex Japan)

-22.8%  (Latin America)

Source: F&C Management Limited

 

 

We started the new financial year on the back of two years of consistent outperformance in all five regional sub-portfolios. In the first six months we were again ahead of the local small cap indices in the UK and Japan. While our absolute returns in Europe and the US were strong, we were unable to keep up with the rising local indices over this period. Returns from the Rest of the World portfolio were disappointing, in common with the market backdrop.

 

While we underperformed in the US, there were nevertheless a number of good performers at the individual stock level. Retailer Conn's rose as a result of an improving product offering augmented by new store openings. ViaSat reported improving new subscriber growth for its enhanced broadband satellite service. Grand Canyon Education was lifted by strong student enrolment numbers and Alere gained as cost cuts and reduced debt levels pleased the markets. Oil stocks have generally struggled on a global basis but there are always exceptions and Rex Energy rose as the market warmed to its production growth prospects.

 

On the downside, the worst contributor was Allied Nevada Gold. A fall in the gold price combined with production problems and management change led us to lose confidence and the position was sold at a loss. Conferencing business Premiere Global was another underperformer as its organic revenue growth fell. Pernix Therapeutics was weak, suffering from downgrades as it sold its generic drugs business and its Chief Executive stepped down. America's Car-Mart lagged the rising market as greater availability of finance led to a switch towards new car purchases, and Allscripts Heathcare Solutions fell back as it lost an important customer.

 

The UK portfolio performed well. A number of our holdings with exposure to residential property rose significantly, with Workspace Group benefiting as it advanced several redevelopment schemes across its London estate. An improving consumer spending environment helped a number of companies including car dealer Vertu Motors and Restaurant Group. Enterprise Inns was strong as the market became more prepared to invest in highly leveraged stocks, and the company produced solid results. From the more recently acquired holdings Polar Capital was the star, lifted by surging fund inflows into its broadening range of equity funds. Another winner was recruitment company Robert Walters, which rose as employment trends improved.

 

In terms of weaker stocks in the UK, IT services and commodity related stocks were a feature. SDL, Anite and Idox all downgraded their expectations for sales and profits while generally disappointing exploration news undermined Salamander Energy and delays beset Cameroon based Bowleven. Synergy Healthcare was a laggard as new business proved slower to arrive.

 

Within the European portfolio generally, the areas that performed well were in either the value areas of the portfolio or the cyclical stocks. The major contributions came from financials with Aareal Bank performing particularly well. There was no stock specific news to drive this, rather an increased risk appetite that drove investors to invest in assets which had been excessively discounted. Azimut, the Italian asset manager, produced strong first half results during the Summer when they announced that they had reached their full year flow targets. The cyclical stocks that performed well were companies that sell products into either the truck or automobile market. Within this area Plastic Omnium stood out as investors took a more positive view on Europe's economic outlook, whilst also reassessing the intrinsic growth potential of the business. The other strong performer of note was Origin Enterprises, the leading agronomist in the UK, which produced strong first half results in the face of tough market conditions. They also announced that they were handing a substantial amount of cash to shareholders through a tender offer.

 

The two standout poor performers were Providence Resources and Andritz. Providence performed poorly due to delay of the farm-out process associated with their Barryroe oilfield. Andritz struggled following a profit warning earlier in the year, due to poor project execution. Other weak performers were C&C Group, Tomra, and Kuka which had suffered more from lagging the rally rather than any stock specific news.

 

We obtain exposure to Japan through collectives and we introduced a new holding in the Aberdeen Global-Japanese Smaller Companies Fund. This has a good long-term record and is managed in much the same way as the Aberdeen Global-Asian Smaller Companies Fund, which has performed well for us. This purchase was funded by the sale of the iShares Exchange Traded Fund.

 

Our Rest of World portfolio did not change materially over the period. Once again our holding in The Scottish Oriental Smaller Companies Trust helped our performance. This fund and the Utilico Emerging Markets fund benefited from their generally defensive country and sector positioning against the weak market background. The Advance Brazil Leblon Equities Fund by contrast was well down, although it performed satisfactorily compared to the very weak local market. We added to our holding in the Advance Frontier Markets Fund. Frontier markets have benefited from increased investor interest and this is expected to continue in the medium term.

 

Asset allocation

 

Geographical distribution of the investment portfolio


 

 


Portfolio weighting

 

31 October 2013

%

30 April 2013

%

North America

38.9

40.4

UK

30.8

27.5

Continental Europe

12.5

12.0

Rest of World

9.8

11.7

Japan

8.0

8.4

Source: F&C Management Limited

 


 

Early in the period we decided to increase our exposure to the UK market. In part, this was because we felt that a recovering UK economy could lift sterling but, more pertinently, we had also been able to identify some promising new investments in the UK market. We were overweight in Japan through the whole period on the basis that the pick-up in the local economy was likely to be supportive for both corporate earnings and hence share prices. In practice however, Japanese small caps lagged most of the other markets as some of the initial euphoria surrounding the Abe administration's agenda faded. We are sticking to our positive view on this market looking into the rest of the year.

 

With absolute valuations higher than elsewhere and relatively few new stock ideas coming through, we have been a little more cautious in relation to the US and the extent of our underweight stance increased during the first half. In contrast we remained overweight towards Europe, where valuations look more appealing, and the markets rewarded us by performing well. Fund managers are now more prepared to invest in Europe and flows into the markets have already experienced something of a re-rating.

 

With Asian and Latin American markets lagging it has been tempting to add to our Rest of World exposure. We have, however, been concerned by the path of local corporate earnings and the managers of a number of the funds in which we invest to gain exposure to these markets have themselves been cautious on near-term prospects.

 

 

 

 

Outlook

 

While there are still gains to be had at an individual stock level, the extent of the move up in global equity prices in 2013 argues for caution near-term. As a result at this stage the Company is ungeared, with cash balances exceeding the value of the debenture liability. We firmly believe that the Company's investment mandate continues to offer the potential for strong returns taking a longer term perspective.

 

 

Peter Ewins

16 December 2013 

Unaudited Condensed Income Statement

                                                                                                                             

 

for the half-year ended 31 October

2013

2012

 

Revenue

Capital

Total

Revenue

Capital

Total

 

£'000s

£'000s

£'000s

£'000s

£'000s

£'000s

 

 

 

 

 

 

 

Gains on investments

-

35,740

35,740

-

13,396

13,396

Foreign exchange gains/(losses)

3

(323)

(320)

(2)

(100)

(102)

Income

3,069

-

3,069

2,515

-

2,515

Management and performance fees

(172)

(516)

(688)

(117)

(1,146)

(1,263)

Other expenses

(287)

(14)

(301)

(556)

(11)

(567)

Return before finance costs and taxation

2,613

34,887

37,500

1,840

12,139

13,979

Finance costs

(145)

(434)

(579)

(145)

(434)

(579)

Return on ordinary activities before taxation

2,468

34,453

36,921

1,695

11,705

13,400

Taxation on ordinary activities

(78)

-

(78)

(111)

-

(111)

Return attributable to shareholders

2,390

34,453

36,843

1,584

11,705

13,289

 

 

 

 

 

 

 

Return per share - pence

5.15

74.31

79.46

3.76

27.78

31.54

 

The total column of this statement is the profit and loss account of the Company. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

A statement of total recognised gains and losses is not required as all gains and losses of the Company have been reflected in the above statement.

 

Unaudited Condensed Reconciliation of Movements in Shareholders' Funds

 

 

Half-year ended 31 October 2013

Called up

 

Share

 

Capital



 

Total


share

premium

redemption

Capital

Revenue

shareholders'


capital

account

reserve

reserves

reserve

funds


£'000s

£'000s

£'000s

£'000s

£'000s

£'000s








Balance at 30 April 2013

11,243

53,009

16,158

250,760

8,920

340,090

Movements during the half-year ended

31 October 2013







Dividends paid

-

-

-

-

(2,071)

(2,071)

Shares issued

688

21,092

-

-

-

21,780

Return attributable to equity shareholders

-

-

-

34,453

2,390

36,843

Balance at 31 October 2013

11,931

74,101

16,158

285,213

9,239

396,642

 

 

Half-year ended 31 October 2012

Called up

 

Share

 

Capital



 

Total


share

premium

redemption

Capital

Revenue

shareholders'


capital

account

reserve

reserves

reserve

funds


£'000s

£'000s

£'000s

£'000s

£'000s

£'000s








Balance at 30 April 2012

10,345

29,818

16,158

182,046

8,409

246,776

Movements during the half-year ended

31 October 2012







Dividends paid

-

-

-

-

(1,676)

(1,676)

Shares issued

276

6,175

-

-

-

6,451

Return attributable to equity shareholders

-

-

-

11,705

1,584

13,289

Balance at 31 October 2012

10,621

35,993

16,158

193,751

8,317

264,840

 

 

Year ended 30 April 2013

Called up

 

Share

 

Capital



 

Total


share

premium

redemption

Capital

Revenue

shareholders'


capital

account

reserve

reserves

reserve

funds


£'000s

£'000s

£'000s

£'000s

£'000s

£'000s








Balance at 30 April 2012

10,345

29,818

16,158

182,046

8,409

246,776

Movements during the year ended 30 April 2013







Dividends paid

-

-

-

-

(2,533)

(2,533)

Shares issued

898

23,191

-

-

-

24,089

Return attributable to equity shareholders

-

-

-

68,714

3,044

71,758

Balance at 30 April 2013

11,243

53,009

16,158

250,760

8,920

340,090

 



Unaudited Condensed Balance Sheet

 

 

 

31 October 2013

31 October 2012

30 April 2013

 

£'000s

£'000s

£'000s

Fixed assets

 

 

 

Investments

386,317

270,086

334,036

Current assets

 

 

 

Debtors

1,283

866

2,372

Cash at bank and short-term deposits

20,602

7,004

20,771

 

21,885

7,870

23,143

 

 

 

 

Creditors: amounts falling due within one year

(1,560)

(3,116)

(7,089)

Net current assets

20,325

4,754

16,054

 

 

 

 

Total assets less current liabilities

406,642

274,840

350,090

Creditors: amounts falling due after more than one year

 

 

 

Debenture

(10,000)

(10,000)

(10,000)

Net assets

396,642

264,840

340,090

 

 

 

 

Capital and reserves

 

 

 

Called up share capital

11,931

10,621

11,243

Share premium account

74,101

35,993

53,009

Capital redemption reserve

16,158

16,158

16,158

Capital reserves

285,213

193,751

250,760

Revenue reserve

9,239

8,317

8,920

Total shareholders' funds

396,642

264,840

340,090

 

 

 

 

Net asset value per share - pence

831.13

623.35

756.21

 

Unaudited Condensed Cash Flow Statement

 

 

 

Half-year ended

Half-year ended

 

31 October 2013

31 October 2012

 

£'000s

£'000s

Net cash inflow from operating activities

166

677

Cash outflow from servicing of finance

(577)

(577)

Net cash outflow from financial investment

(19,315)

(3,320)

Equity dividends paid

(2,071)

(1,676)

Net cash outflow before use of liquid resources and financing

(21,797)

(4,896)

Movement in short-term deposits

-

-

Net cash inflow from financing

21,949

6,451

Increase in cash

152

1,555

 

 

 

Reconciliation of net cash flow to movement in net cash/(debt)

 

 

Increase in cash

152

1,555

Movement in short-term deposits

-

-

Movement in net cash/(debt) resulting from cash flows

152

1,555

Foreign exchange movement

(321)

(101)

Movement in net cash/(debt)

(169)

1,454

Net cash/(debt) brought forward

10,771

(4,450)

Net cash/(debt) carried forward

10,602

(2,996)

 

 

 

Represented by:

 

 

Cash at bank

20,602

7,004

Short-term deposits

-

-

 

20,602

7,004

Debenture

(10,000)

(10,000)

 

10,602

(2,996)

Unaudited Notes on the Condensed Accounts

 

1    Significant accounting policies

 

These financial statements have been prepared on the basis of the accounting policies set out in the Company's financial statements at 30 April 2013. These accounting policies are expected to be followed throughout the year ending 30 April 2014.

 

2    Return per share

 

 

Half-year ended

Half-year ended

 

31 October 2013

31 October 2012

Revenue return per share - pence

5.15

3.76

Revenue return attributable to

shareholders - £'000s 

2,390

1,584

Capital return per share - pence

74.31

27.78

Capital return attributable to

shareholders - £'000s 

34,453

11,705

Weighted average number of ordinary shares in issue

during the period

46,365,005

42,138,490

 

3    Dividends

 

Dividends on ordinary shares

Register date

Payment date

Half-year

ended

31 October

2013

£'000s

Half-year

ended

31 October

2012

£'000s

Final for the year ended

30 April 2013 of 4.50p

 

19 Jul 2013

 

16 Aug 2013

 

2,071

 

-

Final for the year ended

30 April 2012 of 4.00p

 

6 Jul 2012

 

16 Aug 2012

 

-

 

1,676

 

 

 

 

2,071

 

1,676

 

The Directors have declared an interim dividend in respect of the year ending 30 April 2014 of 2.50p per share, payable on 31 January 2014 to all shareholders on the register at close of business on 3 January 2014. The amount of this dividend will be £1,210,000 based on 48,416,102 shares in issue at 12 December 2013. This amount has not been accrued in the results for the half-year ended 31 October 2013.

 

4    Management and performance fees

 

There have been no changes to the terms of the management and performance fee agreements with F&C Management Limited, which are set out in detail in the Report and Accounts to 30 April 2013. Management fees have been allocated 75% to capital reserves in accordance with accounting policies. No performance fee, allocated 100% to capital reserves in accordance with accounting policies, has been accrued in the period to 31 October 2013 as the Company's net asset value per share underperformed the Benchmark (half-year ended 31 October 2012: £795,000 and year ended 30 April 2013: £1,478,000).

5    Investments

 

 

Level 1*

£'000s

Level 2*

£'000s

Level 3*

£'000s

Total

£'000s

Cost at 30 April 2013

235,330

-

1,228

236,558

Gains at 30 April 2013

95,563

-

1,915

97,478

Valuation at 30 April 2013

330,893

-

3,143

334,036

Movement in the period:

 

 

 

 

Purchases at cost

65,340

-

4

65,344

Sales proceeds

(48,803)

-

-

(48,803)

Gains on investments sold in period

12,917

-

-

12,917

Gains on investments held at period end

22,718

-

105

22,823

Valuation of investments held at 31 October 2013

383,065

-

3,252

386,317

 

 

 

Level 1*

£'000s

Level 2*

£'000s

Level 3*

£'000s

Total

£'000s

Cost at 31 October 2013

264,784

-

1,232

266,016

Gains at 31 October 2013

118,281

-

2,020

120,301

Valuation at 31 October 2013

383,065

-

3,252

386,317

 

*Level 1 includes investments listed on any recognised stock exchange or quoted on AIM in the UK.

 Level 2 includes investments for which the quoted price has been suspended.

 Level 3 includes any unquoted investments which are held at net asset value.

 

 

6    Results

 

The results for the half-year ended 31 October 2013 and 31 October 2012, which are unaudited and which have not been reviewed by the Company's auditors pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information', constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 30 April 2013; the report of the auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The abridged financial statements shown above for the year ended 30 April 2013 are an extract from those accounts.

 

7    Report and accounts

                                                                         

The report and accounts for the half-year ended 31 October 2013 will be posted to shareholders and made available on the website www.fandcglobalsmallers.com shortly. Copies may also be obtained from the Company's registered office, Exchange House, Primrose Street, London EC2A 2NY.

 

By order of the Board

F&C Management Limited, Secretary

Exchange House, Primrose Street, London EC2A 2NY

16 December 2013

 

 

Directors' Statement of Principal Risks and Uncertainties

 

 

 

The Company's assets consist mainly of listed equities and its principal risks are therefore market related. The large number of investments held, together with the geographic and sector diversity of the portfolio, enables the Company to spread its risk with regard to liquidity, market volatility, currency movements and revenue streams.

 

In addition to the risks arising from the ongoing global financial instability, key risks faced by the Company relate to investment strategy, management and resources, regulatory issues, operational matters, financial controls, counterparty failure and custody of assets.  These risks, and the way in which they are managed, are described in more detail under the heading "Principal risks and their management" within the Directors' Report and Business Review contained within the Company's annual report for the year ended 30 April 2013.  The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remainder of the Company's financial year. 

 

 

 

 

Statement of Directors' Responsibilities in Respect of the Half-Yearly Financial Report

In accordance with Chapter 4 of the Disclosure and Transparency Rules the Directors confirm, in respect of the report and accounts for the half-year ended 31 October 2013 of which this statement is an extract, that to the best of their knowledge:

 

·              the condensed set of financial statements has been prepared in accordance with applicable UK Accounting Standards on a going concern basis and gives a true and fair view of the assets, liabilities, financial position and net return of the Company;

·              the half-yearly report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;

·              the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year;

·              the half-yearly report includes a fair review of the related party transactions; and

·              in light of the controls and monitoring processes that are in place, the Company has adequate resources and arrangements to continue operating within its stated objective and policy for the foreseeable future. Accordingly, the accounts continue to be drawn up on the basis that the Company is a going concern.

 

 

On behalf of the Board

Anthony Townsend

Chairman

16 December 2013

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
IR ZMMMZVVFGFZM
UK 100

Latest directors dealings