Half-yearly Report
SMALL COMPANIES DIVIDEND TRUST PLC
Half-yearly Report
for the six months ended 31 October 2013
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 Small Companies Dividend Trust PLC (the "Company") is to provide
Ordinary shareholders with a high income and opportunity for capital growth, having provided
a capital return sufficient to repay the capital entitlement of the Zero Dividend Preference
shares issued by the subsidiary company, Small Companies ZDP PLC ("SCZ").
The Group's funds are invested principally in smaller capitalised UK companies. The portfolio
comprises companies listed on the Official List and companies admitted to trading on AIM. The
Group 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.
Financial highlights
31 October 30 April
2013 2013 % change
Capital
Total net assets (£'000) 29,788 22,579 31.93
Net asset value per Ordinary share 183.31p 138.95p 31.93
Mid-market price per Ordinary share 162.75p 128.50p 26.65
Discount 11.22% 7.52%
Net asset value per Zero Dividend Preference share 107.10p 104.00p 2.98
Mid-market price per Zero Dividend Preference share 115.00p 112.75p 2.00
Premium 7.38% 8.41%
Six months to Six months to
31 October 2013 31 October 2012 % change
Revenue
Return per Ordinary share 4.75p 3.68p 29.08
Dividend per Ordinary share* 2.95p 2.80p 5.36
Six months to Six months to
31 October 2013 31 October 2012
Total return
Total return on Group's net assets** 34.72% 13.60%
* Dividend per Ordinary share includes the first interim paid and second interim declared for
the period to 31 October 2013 and 2012 and will differ from the amounts disclosed within the
statement of changes in net equity.
** Adding back dividends distributed in the period.
Interim management report
Results
This half-yearly report covers the six months to 31 October 2013. The net asset value per Ordinary
share at 31 October 2013 was 183.31p, an increase of 31.93% in the past six months compared to an
increase of 15.67% in the MSCI Small Cap Index. Since the beginning of the Company's financial year,
the Ordinary share price has increased from 128.50p to 162.75p at 31 October 2013, a rise of 26.65%
whilst the discount has increased from 7.52% to 11.22% over the same period. Since then the share
price has increased to 172.25p as at 13 December 2013, whilst the discount to NAV has narrowed to
5.36%.
Dividend
A first interim dividend of 1.475p (2012: 1.40p) per Ordinary share was paid on 4 October 2013.
The Board has declared a second interim dividend of 1.475p per Ordinary share (2012: 1.40p) payable
on 10 January 2014 to shareholders on the register on 27 December 2013, making a total for the half
year of 2.95p per Ordinary share (2012: 2.80p). At present it is anticipated that the Company will
maintain this level of dividend for the third quarter.
Portfolio
In the last six months we have increased our investment in six of our existing holdings including
Alumasc and KCOM and we have added five new names to the portfolio. ACM Shipping is a shipbroker
specialising in the tanker market, Town Centre Securities is a property investment and development
company and Bloomsbury is a publishing business. We bought two well known names after earnings
disappointments, Ladbrokes where the contribution from the digital division was downgraded and
Greggs where the hot summer weather was partially to blame for downgrades. On 1 November 2013,
we added a further new name to the portfolio - GLI Finance which provides finance to SMEs. Funds
were raised from the sale of our holdings in Victoria, Close Brothers and Arbuthnot and by reducing
some of our larger weightings which are now on lower yields, including Sanderson, St Ives and Jarvis
Securities.
Outlook
Despite the new found optimism amongst equity investors the reality of the past couple of months
is that the rate of earnings upgrades has begun to slow. Whilst we are not overly concerned by this,
as it is more a reflection of analyst's expectations being too high rather than deterioration in
corporate earnings, it does highlight the need for a period of sustained earnings upgrades to move
the market from its current trading range. In this respect the busy March reporting season will
be crucial in setting the tone for the remainder of the year as a wide range of companies update us
on their prospects.
Whilst short term valuations will continue to be driven by changes in earnings expectations our focus
remains firmly on the longer term prospects for dividend growth and the underlying yield of our
investment universe. The discipline of only buying new stocks on prospective yields of above four
percent and selling holdings as yields fall below two percent gives us a tangible basis forvaluation.
It is often the case that the short term 'noise' created by a disappointing few months for earnings
can create a sound medium term investment opportunity for us as income investors.
The performance of the domestic equity market over the last six months has been driven by a renewed
confidence amongst investors and is a reflection of the improvement in the underlying economy. As GDP
growth has continued to accelerate the debate amongst commentators has shifted from whether or not
the economy is improving to a discussion about the strength of the recovery. This is positive for our
portfolio as the small companies that we invest in tend to be relatively highly exposed to the fortunes
of the domestic economy. Despite the strong rise in share prices, as interest rates are forecast to
remain low for the foreseeable future, the dividend yield on the stocks that we invest in and ultimately
on the fund itself will help to underpin valuations.
Chelverton Asset Management Limited
17 December 2013
Principal risks
The principal risks facing the Group are substantially unchanged since the date of the annual report
for the year ended 30 April 2013 and continue to be as set out in that report. Risks faced by the
Group include, but are not limited to, market risk, discount volatility, regulatory risk, financial
risk, risks associated with banking counterparties 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 IAS 34 'Interim
Financial Reporting' and gives a true and fair view of the assets, liabilities and financial position
of the Group; 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 Group 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 17 December 2013 and the above
responsibility statement was signed on its behalf by Lord Lamont, Chairman.
Condensed consolidated statement of comprehensive income (unaudited)
for the six months ended 31 October 2013
Six months to 31 October 2013 Year to 30 April 2013 Six months to 31 October 2012
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(audited)
Gains on
investments - 7,478 7,478 - 6,094 6,094 - 2,155 2,155
Investment
income 922 - 922 1,420 - 1,420 739 - 739
Expenses
(see note 2) (150) (148) (298) (265) (226) (491) (126) (99) (225)
Net return
before
finance costs
and taxation 722 7,330 8,102 1,155 5,868 7,023 613 2,056 2,669
Finance
costs
Bank interest
payable on
overdraft and
loan - - - (18) (54) (72) (18) (54) (72)
Movement in
fair value of
ineffective
element of
interest rate
swap - - - 3 10 13 3 10 13
Appropriations
in respect of
Zero Dividend
Preference
shares - (263) (263) - (340) (340) - (88) (88)
- (263) (263) (15) (384) (399) (15) (132) (147)
Net return
before taxation 772 7,067 7,839 1,140 5,484 6,624 598 1,924 2,522
Taxation
(see note 3) - - - - - - - - -
Net return
after
taxation 772 7,067 7,839 1,140 5,484 6,624 598 1,924 2,522
Other
comprehensive
income
Movement in
fair value of
cash flow
hedge - 52 52
Total comprehensive
income for the period 7,839 6,676 2,574
Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence pence pence pence
Return per
Ordinary share
(see note 4) 4.75 43.49 48.24 7.02 33.75 40.77 3.68 11.84 15.52
Zero Dividend
Preference share
(see note 4) - 3.10 3.10 - 4.00 4.00 - 1.04 1.04
The total column of this statement is the statement of comprehensive income of the Group prepared in
accordance with IFRS as adopted by the EU. All revenue and capital items in the above statement derive
from continuing operations. All of the net return for the period and the total comprehensive income for
the period is attributed to the Shareholders of the Group. 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")
Condensed consolidated statement of changes in net equity (unaudited)
for the six months ended 31 October 2013
Share
Share premium Capital Hedge Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Six months ended 31 October 2013
30 April 2013 4,063 11,917 5,273 - 1,326 22,579
Total comprehensive return for the period - - 7,067 - 772 7,839
Dividends paid (see note 5) - - - - (630) (630)
31 October 2013 4,063 11,917 12,340 - 1,468 29,788
Year ended 30 April 2013 (audited)
30 April 2013 4,063 11,917 2 (52) 1,250 17,180
Total comprehensive return for the year - - 5,484 52 1,140 6,676
Expenses of Zero Dividend Preference
share issue - - (213) - - (213)
Dividends paid - - - - (1,064) (1,064)
30 April 2013 4,063 11,917 5,273 - 1,326 22,579
Six months ended
31 October 2012
30 April 2012 4,063 11,917 2 (52) 1,250 17,180
Total comprehensive return for the period - - 1,924 52 598 2,574
Expenses of Zero Dividend Preference
share issue - - (237) - - (237)
Dividends paid - - - - (610) (610)
31 October 2012 4,063 11,917 1,689 - 1,238 18,907
Condensed consolidated balance sheet (unaudited)
as at 31 October 2013
31 October 30 April 31 October
2013 2013 2012
£'000 £'000 £'000
(audited)
Non-current assets
Investments at fair value through profit or loss 38,384 31,318 27,103
Current assets
Trade and other receivables 619 194 215
Cash and cash equivalents 30 39 287
649 233 502
Total assets 39,033 31,551 27,605
Current liabilities
Trade and other payables (142) (132) (110)
(142) (132) (110)
Total assets less current liabilities 38,891 31,419 27,495
Non-current liabilities
Zero Dividend Preference shares (9,103) (8,840) (8,588)
(9,103) (8,840) (8,588)
Total liabilities (9,245) (8,972) (8,698)
Net assets 29,788 22,579 18,907
Represented by:
Share capital 4,063 4,063 4,063
Share premium account 11,917 11,917 11,917
Capital reserve 12,340 5,273 1,689
Revenue reserve 1,468 1,326 1,238
Equity shareholders' funds 29,788 22,579 18,907
Net asset value per: (see note 6) pence pence pence
Ordinary share 183.31 138.95 116.35
Zero Dividend Preference share 107.10 104.00 101.04
Condensed consolidated statement of cash flows (unaudited)
for the six months ended 31 October 2013
Six months to Year to Six months to
31 October 30 April 31 October
2013 2013 2012
£'000 £'000 £'000
(audited)
Operating activities
Investment income received 945 1,432 767
Investment management fee paid (165) (254) (180)
Administration and secretarial fees paid (31) (60) (30)
Other cash payments (102) (146) (86)
Cash generated from operations 647 972 471
Loan interest paid - (101) (101)
Net cash inflow from operating activities (see note 7) 647 871 370
Investing activities
Purchases of investments (3,774) (7,643) (4,073)
Sales of investments 3,748 4,538 1,293
Net cash outflow from investing activities (26) (3,105) (2,780)
Financing activities
Issue of Zero Dividend Preference shares - 8,500 8,500
Expenses of Zero Dividend Preference share issue - (213) (243)
Repayment of bank loan - (4,000) (4,000)
Dividends paid (630) (1,064) (610)
Net cash outflow/(inflow) from financing activities (630) 3,233 3,647
(Decrease)/increase in cash and cash
equivalents for period (9) 989 1,237
Cash and cash equivalents at start of period 39 (950) (950)
Cash and cash equivalents at end of period 30 39 287
Notes to the condensed half-yearly report
for the six months ended 31 October 2013
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 2013, 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 by the AIC in January 2009, except to any extent where
it conflicts with IFRS.
The Group has considerable financial resources and therefore the Directors believe that the Group is
well placed to manage its business risks and also believe that the Group 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.
This half-yearly report has not been reviewed by the Group's Auditors.
This half-yearly report has been prepared using accounting policies adopted in the audited financial
statements for the year ended 30 April 2013. This report has also been prepared in compliance with
IAS 34 'Interim Financial Reporting'.
2. Expenses
31 October 30 April 31 October
2013 2013 2012
£'000 £'000 £'000
Investment management fee 184 277 124
Subsidiary operating costs 10 18 6
Other expenses 104 196 95
298 491 225
Transfer to capital* (148) (226) (99)
150 265 126
* 75% of the investment management fees and 100% of the subsidiary operating costs are taken to
capital.
3. Taxation
The Company has an effective tax rate of 0%. The estimated effective tax rate is 0% as investment
gains are exempt from tax owing to the Company's status as an Investment Trust and there is
expected to be an excess of management expenses over taxable income and thus there is no charge
for corporation tax.
4. Return per share
Ordinary shares
Revenue return per Ordinary share is based on revenue on ordinary activities after taxation of
£772,000 (30 April 2013: £1,140,000, 31 October 2012: £598,000) and on 16,250,000
(30 April 2013: 16,250,000, 31 October 2012:16,250,000) Ordinary shares, being the weighted average
number of Ordinary shares in issue during the period.
Capital return per Ordinary share is based on the capital profit of £7,067,000(30 April 2013: £5,484,000,
31 October 2012: £1,924,000) and on 16,250,000(30 April 2013: 16,250,000, 31 October 2012: 16,250,000)
Ordinary shares, being the weighted average number of Ordinary shares in issue during the period.
Zero Dividend Preference shares
Capital return per Zero Dividend Preference share is based on allocations from the Company of £263,000
(30 April 2013: £340,000, 31 October 2012: £88,000) and on 8,500,000 (30 April 2013: 8,500,000,
31 October 2012: £8,500,000) Zero Dividend Preference shares being the weighted average number of
Zero Dividend Preference shares in issue during the period.
5. Dividends
During the period, a fourth interim dividend of 2.40p per Ordinary share for the year ended 30 April 2013,
together with a first interim dividend of 1.475p per Ordinary share for the year ending 30 April 2014,
have been paid to shareholders.
In addition the Board has declared a second interim dividend of 1.475p per Ordinary share payable on
10 January 2014 to shareholders on the register at 27 December 2013.
6. Net asset values
Ordinary shares
The net asset value per Ordinary share is based on assets attributable of £29,788,000
(30 April 2013: £22,579,000, 31 October 2012: £18,907,000) and on 16,250,000 (30 April 2013: 16,250,000,
31 October 2012: 16,250,000) Ordinary shares being the number of shares in issue at the period end.
Zero Dividend Preference shares
The net asset value per Zero Dividend Preference share is based on assets attributable of £9,103,000
(30 April 2013: £8,840,000, 31 October 2012: £8,588,000) and on 8,500,000 (30 April 2013: 8,500,000,
31 October 2012: 8,500,000) Zero Dividend Preference shares being the number of shares in issue at the
period end.
7. Reconciliation of net return before and after taxation to net cash inflow
from operating activities
31 October 30 April 31 October
2013 2013 2012
£'000 £'000 £'000
Net return before and after taxation 7,839 6,624 2,522
Net capital return (7,067) (5,484) (1,924)
Movement in fair value of ineffective element of
interest rate swap - (13) (13)
Decrease in receivables 13 11 21
Increase/(decrease) in payables 10 3 (93)
Interest and expenses charged to the capital reserve (148) (270) (143)
Net cash inflow from operating activities 647 871 370
8. Related party transactions
The Group's 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 period to 31 October 2013 were £184,000 (year ended 30 April 2013: £277,000,
period to 31 October 2012: £124,000).
At 31 October 2013 there were amounts outstanding to be paid to the Investment Manager of
£98,000 (year ended 30 April 2013: £79,000, period to 31 October 2012: £nil).
During the year ended 30 April 2013 Chelverton Asset Management Limited contributed £100,000
towards the issue costs relating to the Zero Dividend Preference share issue.
Principal portfolio investments
as at 31 October 2013
Top 20 holdings
Market
value % of
Industrial classification £'000 portfolio
Avesco Group Media 1,015 2.6
Photo-Me International Leisure Goods 998 2.6
Jarvis Securities Financial Services 960 2.5
Randall & Quilter Non Life Insurance 921 2.4
St Ives Support Services 905 2.3
Braemar Shipping
Services Industrial Transportation 886 2.3
Chesnara Life Insurance 876 2.3
Marshalls Construction & Materials 870 2.3
Wilmington Group Media 865 2.2
Smiths News Support Services 840 2.2
Alumasc Group Construction & Materials 819 2.1
Clarke (T) Construction & Materials 804 2.1
ISG Support Services 795 2.1
Morgan Sindall Group Construction & Materials 792 2.1
Macfarlane Group General Industrials 770 2.0
Hansard Global Life Insurance 756 2.0
Cineworld Group Travel & Leisure 742 1.9
Personal Group Holdings Non Life Insurance 726 1.9
Dairy Crest Group Food Producers 725 1.9
Kier Group Construction & Materials 724 1.9
Top 20 companies 16,789 43.7
Balance held in 53 companies 21,595 56.3
Total portfolio 38,384 100.0
Breakdown of portfolio by industry
Portfolio by industry % of portfolio (per table above)
Support Services 16.9
Financial Services 13.4
Construction & Materials 10.8
Non Life Insurance 8.8
Travel & Leisure 8.3
Media 8.2
Life Insurance 4.3
Industrial Transportation 3.6
Leisure Goods 3.6
Industrial Engineering 3.5
Software & Computer Services 2.9
Food Producers 2.7
General Industrials 2.7
Household Goods 2.6
Fixed Line Telecommunications 1.8
Electronic & Electric Equipment 1.6
Food and Drug Retailers 1.2
General Retailers 1.1
Real Estate Investment Trusts 1.1
Gas, Water & Multi Utilities 1.0
Shareholder information
Financial calendar
Group's year end 30 April
Interim dividends paid April, July, October and January
Annual results announced July
Annual General Meeting September
Group half-year 31 October
Half-year results announced December
Share prices and performance information
The Company's Ordinary and Zero Dividend Preference shares issued through SCZ are listed on the
London Stock Exchange.
The net asset values are announced weekly to the London Stock Exchange and published monthly via the AIC.
Information about the Group 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 registers for the Ordinary and Zero Dividend Preference shares are 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.
Interim management statements
Under the EU Disclosure and Transparency Rules DTR 4.3.2R the Company is required to publish
interim management statements. These statements are released to the London Stock Exchange and
are also available on the Investment Manager's website www.chelvertonam.com
Capital structure
Small Companies Dividend Trust PLC (the 'Company')
The Company has in issue one class of Ordinary share. In addition, it has a wholly owned subsidiary SCZ,
through which Zero Dividend Preference shares have been issued.
Ordinary shares of 25p each ('Ordinary shares')- 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 the Company's liabilities including the capital entitlement of
the Zero Dividend Preference shares.
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.
Small Companies ZDP PLC ('SCZ') )'the Company')
Ordinary shares of 100p each ('ordinary shares') - 50,000 in issue (partly paid up as to 25p each)
The ordinary shares are wholly owned by the Company. References to Ordinary shares within this
half-yearly report are to the Ordinary shares of Small Companies Dividend Trust PLC.
Capital
Following payment of any liabilities and the capital entitlement to the Zero Dividend Preference
shareholders, ordinary shareholders are entitled to any surplus assets of SCZ.
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.
Zero Dividend Preference shares of 100p each - 8,500,000 in issue
Dividends
Holders of Zero Dividend Preference shares are not entitled to dividends.
Capital
On a winding up of SCZ, after the satisfaction of prior ranking creditors and subject to sufficient
assets being available, Zero Dividend Preference shareholders are entitled to an amount equal to
100p per share increased daily from 28 August 2012 at such compound rate as will give an entitlement
to 136.7 pence per share at 8 January 2018.
Voting
Each holder of Zero Dividend Preference shares, on a show of hands, will have one vote at meetings
where Zero Dividend Preference shareholders are entitled to vote and on a poll will have one vote for
every Zero Dividend Preference share held.
Holders of Zero Dividend Preference shares are not entitled to attend, speak or vote at general
meetings unless the business of the meeting includes a resolution to vary, modify or abrogate the
rights attached to the Zero Dividend Preference shares.
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
Office Capita Sinclair Henderson Limited
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
Auditors Hazlewoods LLP
Windsor House
Bayshill Road
Cheltenham
GL50 3AT
Custodian Jarvis Investment Management Limited
78 Mount Ephraim
Tunbridge Wells
Kent
TN4 8BS
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.morningstar.co.uk/uk/nsm
ssible from
hyperlinks on this announcement (or any other website) is incorporated into, or forms part of,
this announcement.
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