25th Jun 2018 07:00
DUNEDIN SMALLER COMPANIES INVESTMENT TRUST PLC
Legal Entity Identifier (LEI): 213800CI43OQT8KBKE03
HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 30 APRIL 2018
The objective of Dunedin Smaller Companies Investment Trust PLC is to achieve long-term growth from a portfolio of smaller companies in the United Kingdom.
Financial Highlights | 30 April 2018 | 31 October 2017 | % change |
Total assetsA (£'000) | 162,869 | 157,630 | +3.3 |
Equity shareholders' funds (£'000) | 156,874 | 152,630 | +2.8 |
Net asset value per shareB | 327.80p | 318.93p | +2.8 |
Share price per share (mid-market) | 276.50p | 253.00p | +9.3 |
Interim dividend per share | 2.15p | 2.15pC | - |
Discount to net asset value | 15.6% | 20.7% | |
Ongoing charges ratioD - excluding performance fee | 0.73% | 0.77% | |
Ongoing charges ratioD - including performance fee | 1.05% | 1.36% | |
A Represents total assets less current liabilities excluding bank loans. | |||
B Including undistributed revenue for the period. | |||
C For six months ended 30 April 2017. | |||
D Considered to be an Alternative Performance Measure. Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses (annualised) divided by the average cum income net asset value throughout the year. The ratio for 30 April 2018 is based on forecast ongoing charges for the year ending 31 October 2018. | |||
Performance (total return)A | ||
Six months ended | Year ended | |
30 April 2018 | 31 October 2017 | |
Net asset value per share | +4.1% | +32.8% |
Share price | +11.0% | +28.8% |
FTSE SmallCap Index (ex Investment Companies) | +1.0% | +21.9% |
A The total return for share price and net asset value is calculated on the basis of reinvesting dividends to shareholders on the ex-dividend date and is considered to be an Alternative Performance Measure. | ||
Source: Aberdeen Fund Managers Limited, Morningstar & Factset. | ||
For further information, please contact:
Maria Allen
Aberdeen Fund Managers Limited 020 7463 6000
INTERIM BOARD REPORT - CHAIRMAN'S STATEMENT
This is my first Statement since I took over as Chairman from Norman Yarrow following the Company's Annual General Meeting on 8 February 2018. I would like to reiterate the Board's thanks to Norman for his service to the Company since his appointment as a Director in 1998 and as Chairman in 2015.
Future of the Company
On 21 June 2018, following a strategic review by your Board and the consideration of a number of options, your Board announced proposals for the merger of the Company with Standard Life UK Smaller Companies Trust plc, an investment trust with a similar mandate managed by the Company's Manager. We believe there are a number of benefits of the merger, and that it will result in a significant increase in the valuation of the Company's shareholders' investment. Further details are provided below under 'Merger Proposal'.
Performance
I am pleased to report that the Company's net asset value (''NAV'') total return for the six months ended 30 April 2018 was 4.1%, which compares favourably to a total return of 1.0% from the benchmark index, the FTSE SmallCap Index (excluding investment companies). The share price total return was 11.0%, reflecting a narrowing of the discount at which the shares trade to the NAV per share, from 20.7% to 15.6% at the end of the period.
While the UK equity market has so far seen relatively limited disjoint from Brexit, there has been an increase in volatility at the start of 2018. Economic data has been mixed in recent months, with quarterly GDP growth slowing in the first quarter and dampening expectations of an imminent rate-raise in May. Sterling weakness buoyed firms with overseas earnings as a result, while share prices in the energy sector have recently received a boost from the firmer oil price, with the price of crude oil exceeding its highest level in over four years since the end of the reporting period. In addition, merger and acquisition activity has remained notably elevated.
The Company benefited from the strong performance of a number of holdings in the portfolio. Dechra Pharmaceuticals, which is the largest position in the portfolio, traded strongly following the acquisition of two Dutch businesses in January and impressive interim results in February. Exemplifying the rise in bid activity, conveyor-belt maker Fenner received a takeover offer from French tyre manufacturer Michelin at an attractive 24% premium to the previous closing share price. In the software sector, AVEVA performed strongly as it enacted the reverse takeover of French engineering firm Schneider Electric's software assets.
The largest detractor to performance during the period was funeral and crematoria services company Dignity, which was impacted by significant new price competition within the sector. The Investment Manager became concerned about the company's prospects and the holding was disposed of prior to the end of the period.
Earnings and Dividends
The Company's revenue earnings per share for the period were 3.22p, compared to 2.38p in the equivalent period last year. The main reason for the increase in earnings was the receipt of special dividends from Victrex and also AVEVA, following the deal with Schneider referred to above.
Your Board has declared an unchanged interim dividend of 2.15p per share which will be paid on 27 July 2018 to shareholders on the register on 6 July 2018.
Discount
As stated above, the discount at the end of the period was 15.6%. The Directors monitor the Company's discount on an ongoing basis relative to its peer group and the wider investment trust sector and, subject to market conditions, may use the Company's share buyback authority if considered appropriate.
Merger Proposal
Notwithstanding the Company's recent favourable performance on an NAV total return basis, your Board is aware that the Company's size and the secondary market liquidity in its shares make it challenging to attract new investors in the Company. Your Board also believes that these factors have contributed to the discount at which the Company's shares trade. In addition, the recent merger of the Company's Manager Aberdeen Asset Management PLC with Standard Life plc has resulted in the Company being managed alongside a company with a very similar UK smaller companies mandate. As a consequence of these factors, your Board decided to undertake a strategic review of the Company and its position in the UK smaller companies sector.
Having considered a number of options and following consultation with the Company's largest shareholders, your Board believes that shareholders, as a whole, still wish to retain exposure to UK smaller companies via an investment trust with a similar mandate managed by the Company's Manager, Aberdeen Standard Investments1. Consequently, the Company has agreed, in principle, the terms of a merger with Standard Life UK Smaller Companies Trust plc ("SLS").
Your Board believes that the merger of the Company and SLS would provide the Company's shareholders with an investment in a significantly larger investment trust, with a strong investment track record, a stronger rating, a robust discount control mechanism and substantially greater secondary market liquidity, all of which should appeal to a broader range of investors. In particular, your Board believes that a merger would result in a significant increase in the valuation of the Company's shareholders' investment (over the 12 months ended 19 June 2018, the shares of the Company and of SLS traded at average discounts of 17.4% and 3.8% respectively2).
The merger would be effected by way of a scheme of reconstruction of the Company under section 110 of the Insolvency Act 1986 resulting in the voluntary liquidation of the Company and shareholders rolling over their investment in the Company into SLS on the basis of an all-share, nil premium (to NAV) merger, save that the aggregate costs of the Company and SLS would be borne by the Company's shareholders. The transaction would be subject to, inter alia, approval by the shareholders of each of the Company and SLS.
The Directors expect to declare, pre-merger, a final interim dividend. Although the merger of the Company and SLS is expected to result in a reduction in the aggregate annual dividends received by the Company's shareholders, the final interim dividend is expected to be at least equivalent to that reduction during the 12 months following the merger3.
A circular convening a general meeting to approve the transaction is expected to be sent to shareholders in due course. Shareholders will also receive a prospectus issued by SLS containing details of the SLS shares that you will receive in exchange for your Ordinary shares in the Company under the merger proposals.
Note: 1Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.2Discounts are based on the respective net asset values (cum-income, with debt at fair value) and share prices of the Company and SLS over the 12 months ended 19 June 2018. 3Based on the dividends declared by the Company and SLS respectively during the 12 months prior to and ending on 19 June 2018.
Gearing
As reported in the recent Annual Report, the Company's loan facilities matured on 24 November 2017 and the Company replaced them with new facility agreements entered into with Scotiabank Europe PLC (the "New Facilities"). The New Facilities were for a five year period to 24 November 2022 and, as with the previous facilities, comprised a £5 million fixed rate term loan and a £5 million revolving credit facility. At the period-end, the £5 million term loan had been fully drawn down at an all-in interest rate of 2.78% per annum and £1 million was drawn down under the revolving credit facility. Total borrowings (net of cash) amounted to £1.9 million at the period end, representing a modestly geared position of 1.2% of shareholders' funds.
However, in light of the Company's plans regarding its future, your Board believes it is prudent to repay both facilities in full as soon as practicable. Accordingly, both loans have been repaid since the end of the period. There was no break cost in relation to the early repayment of the fixed term facility.
Board Composition
In light of the announcement regarding the Company's future, your Board does not intend to make any changes to its composition.
Manager
Pending the results of the proposal to merge the Company with SLS, your Company will continue to be managed in accordance with the terms of its current mandate by the Aberdeen Standard Investments UK Smaller Companies Team, but the portfolio is likely to be increasingly aligned with that of SLS. The realignment process has already begun and includes disposing of existing holdings and the acquisition of new holdings, but a significant proportion of the portfolio is also likely to be retained, given the similarities that exist between the two portfolios.
Your Board would also like to take the opportunity to thank Ed Beal for his hard work in managing the Company's portfolio over the past 14 years.
Outlook
Despite recent stock market volatility, prospects for the global economy are still generally supportive, with a combination of improving growth, subdued inflation, and gradual central bank tightening continuing to support equity markets. The unsettling impact of a number of geo-political uncertainties remain to the fore, however, and are likely to continue to exercise the minds of investors.
Even with a market that has become increasingly focused on short term news flow, the companies in the portfolio have had a broadly positive reporting season, although the impact of weaker consumer confidence has been evident with more UK companies in the wider market warning of tougher times ahead. The existing portfolio remains underweight in its exposure to the more cyclical domestic-focused businesses. Going forward, the Manager remains vigilant for opportunities that may be presented by such a market backdrop, both in implementing the realignment process referred to above, but also in general for investing in their preferred companies at attractive valuations.
James Barnes
Chairman
22 June 2018
INTERIM BOARD REPORT - OTHER MATTERS
Directors' Responsibilities Statement
The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:
• the condensed set of financial statements within the Half-Yearly Financial Report has been prepared in accordance with Financial Reporting Standard 104 'Interim Financial Reporting';
• the Interim Board Report (constituting the interim management report) includes a fair review of the information required by rule 4.2.7R of the Disclosure Guidance 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 financial year) and 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could so do).
Principal Risks and Uncertainties
The Board regularly reviews the principal risks and uncertainties which it has identified, together with the mitigation actions it has established to manage the risks. These are set out within the Strategic Report contained within the Annual Report for the year ended 31 October 2017. The Board has identified the principal risks and uncertainties facing that Company which can be summarised under the following headings:
• Investment strategy and objectives
• Investment management
• Income/dividends
• Financial obligations
• Gearing
• Regulatory
• Operational
The Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the remaining six months of the Company's financial year.
Going Concern
The Company's assets consist substantially of equity shares in companies traded on the London Stock Exchange which are, in most circumstances, realisable within a short timescale. The Board has set limits for borrowing and regularly reviews actual exposures, cash flow projections and compliance with banking covenants. As such, the Directors believe that the Company has adequate financial resources to continue in operational existence for the foreseeable future and at least 12 months from the date of this Report.
As explained in the Chairman's Statement, the Board has announced proposals for the merger of the Company with Standard Life UK Smaller Companies Trust plc ("SLS"), an investment trust with a similar mandate managed by the Company's Manager. As stated in the Chairman's Statement, the Board believes there are a number of benefits of the merger. The merger would be effected by way of a scheme of reconstruction of the Company under section 110 of the Insolvency Act 1986 resulting in the voluntary liquidation of the Company and a roll-over of shares in the Company into SLS.
The Directors are aware that should this transaction proceed to completion, the Company will no longer exist as a corporate entity. In accordance with accounting standards, this obviously constitutes a material uncertainty that may cast significant doubt upon the Company's ability to continue as a going concern. The Directors clearly still consider that in the event that the merger doesn't proceed, the Company would continue as a going concern.
Performance to 30 April 2018
1 year return | 3 year return | 5 year return | |
Total return* | % | % | % |
Share price | 27.5 | 52.9 | 66.8 |
Net asset value per share | 19.1 | 46.4 | 90.9 |
FTSE SmallCap Index (ex IC's) | 6.1 | 34.7 | 84.3 |
* The total return for share price and net asset value is calculated on the basis of reinvesting dividends to shareholders on the ex-dividend date.
Source: Aberdeen Fund Managers Limited, Morningstar & Factset
On behalf of the Board
James Barnes
Chairman
22 June 2018
INDEPENDENT REVIEW REPORT TO DUNEDIN SMALLER COMPANIES INVESTMENT TRUST PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial statements in the Half-Yearly Financial Report for the six months ended 30 April 2018 which comprises the Condensed Statement of Comprehensive Income, Condensed Statement of Financial Position, Condensed Statement of Changes in Equity and Condensed Statement of Cash Flows and the related explanatory notes.
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 for the six months ended 30 April 2018 is not prepared, in all material respects, in accordance with FRS 104 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules (the "DTR") of the UK's Financial Conduct Authority (the "UK FCA").
Material Uncertainty Related to Going Concern
We draw attention to note 1(b) of the financial statements which indicates that the Board has announced proposals for the merger of the Company with Standard Life UK Smaller Companies Trust plc ("SLS"). The merger would result in the voluntary liquidation of the Company and a roll-over of shares in the Company into SLS. The proposed transaction gives rise to a material uncertainty that may cast significant doubt upon the ability of the Company to continue as a going concern. Our conclusion is not modified in respect of this matter.
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 UK. 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. We read the other information contained in the Half-Yearly Financial Report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) 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.
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 DTR of the UK FCA.
The annual financial statements of the Company are prepared in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. The Directors are responsible for preparing the condensed set of financial statements included in the Half-Yearly Financial Report in accordance with FRS 104 'Interim Financial Reporting'.
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.
The Purpose of Our Review Work and to Whom We Owe Our Responsibilities
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
John Waterson
For and on behalf of KPMG LLP
Chartered Accountants
Saltire Court
20 Castle Terrace
Edinburgh EH1 2EG
22 June 2018
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Six months ended | ||||
30 April 2018 | ||||
Revenue | Capital | Total | ||
Note | £'000 | £'000 | £'000 | |
Gains on investments | - | 5,519 | 5,519 | |
Income | 2 | 1,912 | - | 1,912 |
Investment management and performance fee | (80) | (724) | (804) | |
Administrative expenses | (270) | - | (270) | |
__________ | __________ | __________ | ||
Net return before finance costs and taxation | 1,562 | 4,795 | 6,357 | |
Finance costs | (21) | (63) | (84) | |
__________ | __________ | __________ | ||
Net return before taxation | 1,541 | 4,732 | 6,273 | |
Taxation | - | - | - | |
__________ | __________ | __________ | ||
Net return attributable to equity shareholders | 1,541 | 4,732 | 6,273 | |
__________ | __________ | __________ | ||
Return per Ordinary share (pence) | 4 | 3.22 | 9.89 | 13.11 |
__________ | __________ | __________ | ||
The total column of this statement represents the profit and loss account of the Company. | ||||
All revenue and capital items in the above statement derive from continuing operations. | ||||
The accompanying notes are an integral part of this condensed set of interim financial statements. | ||||
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) (Cont'd)
Six months ended | ||||
30 April 2017 | ||||
Revenue | Capital | Total | ||
Note | £'000 | £'000 | £'000 | |
Gains on investments | - | 17,814 | 17,814 | |
Income | 2 | 1,455 | - | 1,455 |
Investment management and performance fee | (66) | (199) | (265) | |
Administrative expenses | (233) | - | (233) | |
__________ | __________ | __________ | ||
Net return before finance costs and taxation | 1,156 | 17,615 | 18,771 | |
Finance costs | (15) | (46) | (61) | |
__________ | __________ | __________ | ||
Net return before taxation | 1,141 | 17,569 | 18,710 | |
Taxation | - | - | - | |
__________ | __________ | __________ | ||
Net return attributable to equity shareholders | 1,141 | 17,569 | 18,710 | |
__________ | __________ | __________ | ||
Return per Ordinary share (pence) | 4 | 2.38 | 36.71 | 39.09 |
__________ | __________ | __________ | ||
The accompanying notes are an integral part of this condensed set of interim financial statements. | ||||
CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
As at | As at | ||
30 April 2018 | 31 October 2017 | ||
Note | £'000 | £'000 | |
Non-current assets | |||
Investments at fair value through profit or loss | 158,595 | 154,803 | |
__________ | __________ | ||
Current assets | |||
Debtors and prepayments | 988 | 339 | |
Cash and short term deposits | 4,098 | 3,747 | |
__________ | __________ | ||
5,086 | 4,086 | ||
__________ | __________ | ||
Creditors: amounts falling due within one year | |||
Bank loan | 5 | (1,000) | (5,000) |
Other creditors | (812) | (1,259) | |
__________ | __________ | ||
(1,812) | (6,259) | ||
__________ | __________ | ||
Net current assets/(liabilities) | 3,274 | (2,173) | |
__________ | __________ | ||
Total assets less current liabilities | 161,869 | 152,630 | |
__________ | __________ | ||
Creditors: amounts falling due after more than one year | |||
Bank loan | 5 | (4,995) | - |
__________ | __________ | ||
Net assets | 156,874 | 152,630 | |
__________ | __________ | ||
Capital and reserves | |||
Called-up share capital | 7 | 2,393 | 2,393 |
Share premium account | 30 | 30 | |
Capital redemption reserve | 2,233 | 2,233 | |
Capital reserve | 8 | 148,233 | 143,501 |
Revenue reserve | 3,985 | 4,473 | |
__________ | __________ | ||
Equity shareholders' funds | 156,874 | 152,630 | |
__________ | __________ | ||
Net asset value per Ordinary share (pence) | 9 | 327.80 | 318.93 |
__________ | __________ | ||
The accompanying notes are an integral part of this condensed set of interim financial statements. | |||
CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Six months ended 30 April 2018 | |||||||
Share | Capital | ||||||
Share | premium | redemption | Capital | Revenue | |||
capital | account | reserve | reserve | reserve | Total | ||
Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Balance at 31 October 2017 | 2,393 | 30 | 2,233 | 143,501 | 4,473 | 152,630 | |
Net return attributable to equity shareholders | - | - | - | 4,732 | 1,541 | 6,273 | |
Dividends paid | 3 | - | - | - | - | (2,029) | (2,029) |
_____ | ______ | _______ | ______ | ______ | ______ | ||
Balance at 30 April 2018 | 2,393 | 30 | 2,233 | 148,233 | 3,985 | 156,874 | |
_____ | ______ | _______ | ______ | ______ | ______ | ||
Six months ended 30 April 2017 | |||||||
Share | Capital | ||||||
Share | premium | redemption | Capital | Revenue | |||
capital | account | reserve | reserve | reserve | Total | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Balance at 31 October 2016 | 2,393 | 30 | 2,233 | 108,139 | 4,823 | 117,618 | |
Net return attributable to equity shareholders | - | - | - | 17,569 | 1,141 | 18,710 | |
Dividends paid | 3 | - | - | - | - | (1,914) | (1,914) |
_____ | ______ | _______ | ______ | ______ | ______ | ||
Balance at 30 April 2017 | 2,393 | 30 | 2,233 | 125,708 | 4,050 | 134,414 | |
_____ | ______ | _______ | ______ | ______ | ______ | ||
The accompanying notes are an integral part of this condensed set of interim financial statements. | |||||||
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
Six months ended | Six months ended | |
30 April 2018 | 30 April 2017 | |
£'000 | £'000 | |
Operating activities | ||
Net return before finance costs and taxation | 6,357 | 18,771 |
Adjustment for: | ||
Gains on investments | (5,519) | (17,814) |
Scrip dividends included in investment income | (42) | - |
Increase in accrued dividend income | (455) | (551) |
(Increase)/decrease in other debtors | (1) | 11 |
Decrease in creditors | (249) | (13) |
__________ | __________ | |
Net cash flow from operating activities | 91 | 404 |
Investing activities | ||
Purchases of investments | (12,486) | (8,367) |
Sales of investments | 13,857 | 7,683 |
__________ | __________ | |
Net cash inflow/(outflow) from investing activities | 1,371 | (684) |
Financing activities | ||
Interest paid | (82) | (62) |
Equity dividends paid | (2,029) | (1,914) |
Bank loan drawn down | 1,000 | - |
__________ | __________ | |
Net cash flow used in financing activities | (1,111) | (1,976) |
__________ | __________ | |
Increase/(decrease) in cash and cash equivalents | 351 | (2,256) |
__________ | __________ | |
Analysis of changes in cash and cash equivalents during the period | ||
Opening balance | 3,747 | 8,122 |
Increase/(decrease) in cash above | 351 | (2,256) |
__________ | __________ | |
Closing balance | 4,098 | 5,866 |
__________ | __________ | |
The accompanying notes are an integral part of this condensed set of interim financial statements. | ||
Notes to the Financial Statements
1. | Accounting policies |
(a) Basis of preparation | |
The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting) and the principles of the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014 and updated in February 2018 with consequential updates (applicable for accounting periods beginning on or after 1 January 2019 but adopted early). | |
The interim financial statements have been prepared using the same accounting policies as the preceding annual financial statements. | |
(b) Going concern | |
As explained in the Chairman's Statement, the Board has announced proposals for the merger of the Company with Standard Life UK Smaller Companies Trust plc ("SLS"). The Directors are aware that should this transaction proceed to completion, the Company will no longer exist as a corporate entity. In accordance with accounting standards, this obviously constitutes a material uncertainty that may cast significant doubt upon the Company's ability to continue as a going concern. The Directors clearly still consider that in the event that the merger doesn't proceed, the Company would continue as a going concern. |
Six months ended | Six months ended | ||
30 April 2018 | 30 April 2017 | ||
2. | Income | £'000 | £'000 |
Income from investments | |||
UK dividend income | 1,714 | 1,277 | |
Overseas dividend income | 96 | 104 | |
Property income distributions | 55 | 63 | |
UK scrip dividend income | 42 | - | |
__________ | __________ | ||
1,907 | 1,444 | ||
__________ | __________ | ||
Other income | |||
Deposit interest | 5 | 1 | |
Underwriting commission | - | 10 | |
__________ | __________ | ||
5 | 11 | ||
__________ | __________ | ||
Total income | 1,912 | 1,455 | |
__________ | __________ |
Six months ended | Six months ended | ||
30 April 2018 | 30 April 2017 | ||
3. | Ordinary dividends on equity shares | £'000 | £'000 |
Final dividend for 2017 - 4.24p (2016 - 4.00p) | 2,029 | 1,914 | |
__________ | __________ | ||
An interim dividend of 2.15p per share for the year to 31 October 2018 will be paid on 27 July 2018 to shareholders on the register on 6 July 2018. The ex-dividend date is 5 July 2018. | |||
Six months ended | Six months ended | ||
30 April 2018 | 30 April 2017 | ||
4. | Return per Ordinary share | p | p |
Revenue return | 3.22 | 2.38 | |
Capital return | 9.89 | 36.71 | |
__________ | __________ | ||
Total return | 13.11 | 39.09 | |
__________ | __________ | ||
The figures above are based on the following: | |||
Six months ended | Six months ended | ||
30 April 2018 | 30 April 2017 | ||
£'000 | £'000 | ||
Revenue return | 1,541 | 1,141 | |
Capital return | 4,732 | 17,569 | |
__________ | __________ | ||
Total return | 6,273 | 18,710 | |
__________ | __________ | ||
Weighted average number of Ordinary shares in issue | 47,857,317 | 47,857,317 | |
__________ | __________ |
5. | Bank loan |
On 24 November 2017, the Company renewed its £5 million revolving facility agreement as well as agreeing a new five year term loan facility of £5 million with Scotiabank Europe. £5 million was currently drawn down at the period end at a fixed interest rate of 2.78% until 24 November 2022. The loan was repaid in full on 22 June 2018. £1 million was drawn down from the revolving facility at an interest rate of 2.20325% per annum at the period end and was repaid in full on 18 June 2018. The terms of the loan facility covenants specify that the minimum net assets of the Company should not be less than £70 million and the percentage of borrowings against net assets should not be more than 25%. |
6. | Transaction costs | ||
During the period, expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows: | |||
Six months ended | Six months ended | ||
30 April 2018 | 30 April 2017 | ||
£'000 | £'000 | ||
Purchases | 49 | 28 | |
Sales | 8 | 4 | |
__________ | __________ | ||
57 | 32 | ||
__________ | __________ | ||
7. | Called-up share capital |
As at 30 April 2018 there were 47,857,317 (31 October 2017 - 47,857,317) Ordinary shares of 5p each in issue. |
8. | Capital reserves |
The capital reserve reflected in the Condensed Statement of Financial Position at 30 April 2018 includes gains of £68,544,000 (31 October 2017 - gains of £62,807,000) which relate to the revaluation of investments held at the reporting date. |
As at | As at | ||
9. | Net asset value per share | 30 April2018 | 31 October 2017 |
Equity shareholders' funds | £156,874,000 | £152,630,000 | |
Number of Ordinary shares in issue at period end | 47,857,317 | 47,857,317 | |
Equity shareholders' funds per share | 327.80p | 318.93p |
10. | Fair value hierarchy | |
FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following classifications: | ||
Level 1: | quoted prices (unadjusted) in active markets for identical assets or liabilities; | |
Level 2: | inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and | |
Level 3: | inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). | |
All of the Company's investments are in quoted equities (31 October 2017 - same) actively traded on recognised stock exchanges, with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the investments as at 30 April 2018 of £158,595,000 (31 October 2017 - £154,803,000) have therefore been deemed as Level 1. | ||
The fair value of the term loan facility is determined by aggregating the expected future cash flows for the loan discounted at a rate comprising the borrower's margin plus one year LIBOR. | ||
The financial liability in the form of the short-term revolving facility is held at amortised cost. | ||
The fair value of borrowings as at 30 April 2018 has been estimated at £6,060,000 (31 October 2017 - £5,000,000). Under the fair value hierarchy, these borrowings are classified as Level 2. | ||
There were no transfers of assets or liabilities between levels of the fair value hierarchy during the six months ended 30 April 2018 (year ended 31 October 2017 - same). | ||
11. | Related party transactions and transactions with the Manager |
The Company has agreements with Aberdeen Fund Managers Limited ("AFML" or the "Manager") for the provision of investment management, secretarial, accounting and administration and promotional services. | |
The management fee is calculated at 0.4% per annum of the gross assets of the Company after deducting current liabilities and excluding commonly managed funds ('adjusted gross assets'). The management fee is chargeable 25% to revenue and 75% to capital. During the period £318,000 (30 April 2017 - £265,000) of investment management fees were earned by the Manager, with a balance of £161,000 (30 April 2017 - £138,000) being payable to AFML at the period end. There were no commonly managed funds held in the portfolio during the six months to 30 April 2018 (2017 - none). | |
In addition, the Manager is entitled to an annual performance-related fee calculated at a rate of 0.1% per annum (up to a maximum of 0.5% per annum) of the adjusted gross assets, as at 31 October each year, for every 1% by which the Company's net asset value performance outperforms the capital performance of the FTSE SmallCap Index (ex Investment Companies) over the previous twelve month period. | |
At the period end £485,000 (30 April 2017 - £nil) was accrued for a twelve months' fee based on the performance of the Company over the six month period and is included within other creditors. | |
The management agreement may be terminated by either party on the expiry of three months' written notice. In the event of termination by the Company on less than the agreed notice period, compensation is payable to the Manager in lieu of the unexpired notice period. | |
The fee for promotional activities is based on a current annual amount of £66,000 inclusive of VAT, payable quarterly in arrears. During the period £34,000 (30 April 2017 - £24,000) of fees were earned, with a balance of £5,000 (30 April 2017 - £16,000) being payable to AFML at the period end. | |
The fee for secretarial services is based on a current annual amount of £107,000 inclusive of VAT, payable quarterly in arrears. During the period £54,000 (30 April 2017 - £52,000) of fees were earned, with a balance of £54,000 (30 April 2017 - £26,000) being payable to AFML at the period end. |
12. | Segmental information |
The Company is engaged in a single segment of business, which is to invest in equity securities. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment. |
13. | Subsequent events |
Subsequent to the period, on 21 June 2018, the Company announced proposals for the merger of the Company with Standard Life UK Smaller Companies Trust plc, following a strategic review and the consideration of a number of options. Further details are provided within the 'Merger Proposal' section of the Chairman's Statement. |
14. | The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 April 2018 and 30 April 2017 has not been audited. |
The information for the year ended 31 October 2017 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 Section 498 of the Companies Act 2006. | |
The auditor has reviewed the financial information for the six months ended 30 April 2018 pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information. The report of the auditor is included above. |
15. | This Half-Yearly Financial Report was approved by the Board on 22 June 2018. |
By order of the Board
Aberdeen Asset Management PLC
Company Secretary
22 June 2018
Please note that past performance is not necessarily a guide to the future and the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested.
Related Shares:
Dunedin Smaller Cos. Investment Trust PLC