Interim Results
MONTANARO UK SMALLER COMPANIES INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS
The Directors announce the unaudited statement of results for the period 1
April 2005 to 30 September 2005 as follows:-
SUMMARISED STATEMENT OF TOTAL RETURN
(incorporating the revenue account*)
Six months to Six months to Year to
30 September 2005 30 September 2004 31 March 2005
(restated**) (restated**)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Capital gains - 14,111 14,111 - 2,002 2,002 - 15,048 15,048
on
investments
Dividends and 1,129 - 1,129 1,009 - 1,009 1,729 - 1,729
interest
Investment (269) (566) (835) (205) (205) (410) (440) (440) (880)
Management fee
Costs of - (218) (218) - (161) (161) - (334) (334)
investment
transactions
Other expenses (160) - (160) (119) - (119) (248) - (248)
Return before 700 13,327 14,027 685 1,636 2,321 1,041 14,274 15,315
interest and
taxation
Interest (119) (119) (238) (110) (110) (220) (221) (221) (442)
payable and
similar
charges
Return on 581 13,208 13,789 575 1,526 2,101 820 14,053 14,873
ordinary
activities
before and
after taxation
Return per 39.67p 5.96p 42.78p
ordinary share
***
* The total column of this statement is the profit and loss account of the
Company.
** For details of the restatement of the Company's comparative figures please
refer to note 1.
*** The calculation of returns per ordinary share exclude shares held in
treasury, so the weighted average number of shares in issue during the period
been adjusted to reflect this.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
SUMMARISED BALANCE SHEET
As at As at As at
30 September 31 March 30 September
2005 2005 2004
£'000 £'000 £'000
(restated*) (restated*)
Investments at fair value 98,958 83,224 65,757
Net current assets/(liabilities) 992 (274) 2,999
Long term credit facility (10,000) (7,500) (7,500)
Net assets 89,950 75,450 61,256
Share capital and reserves
Share capital 3,561 3,652 3,652
Share premium account 19,307 18,937 18,680
Capital redemption reserve 1,149 1,058 1,058
Special reserve 9,835 11,075 11,075
Capital reserves 54,706 41,498 28,970
Revenue reserve 1,392 1,818 1,573
Own shares held in treasury - (2,588) (3,752)
Shareholders' funds 89,950 75,450 61,256
less current period revenue (581) - (575)
Dividend adjustments** 20 - (9)
Total net assets for the purpose of 89,389 75,450 60,672
calculating net asset value per
ordinary share
Net asset value per ordinary share*** 251.02p 217.93p 179.68p
* For details of the restatement of the Company's comparative figures please
refer to note 1.
** See note 3
*** See note 2
SUMMARISED STATEMENT OF CASHFLOWS
Six months to Six months to Year to
30 September 30 September 31 March
2005 2004 2005
£'000 £'000 £'000
Net cash inflow from operating 506 528 695
activities
Servicing of finance
- Interest and similar charges paid (218) (218) (442)
Net cash outflow from servicing of (218) (218) (442)
finance
Capital expenditure and financial
investment
- Purchases of investments (22,430) (15,440) (30,149)
- Sales of investments 18,948 13,876 21,931
Net cash outflow from capital
expenditure
and financial investment (3,482) (1,564) (5,218)
Equity dividends paid (1,007) (1,041) (1041)
Net cash outflow before financing (4,201) (2,295) (6,006)
Financing
- Proceeds from credit facility 2,500 - -
- Ordinary shares sold from treasury 1,719 - 1,421
- Ordinary shares purchased for - (443) (443)
cancellation
- Ordinary shares purchased and held - (3,752) (3,752)
in treasury
Net cash inflow/(outflow) from 4,219 (4,195) (2,774)
financing
Increase/(decrease) in cash 18 (6,490) (8,780)
Notes:
1. CHANGES IN ACCOUNTING POLICIES
This Interim Report has been prepared using new accounting standards which have
been issued to begin the process of converging UK standards with International
Financial Reporting Standards. The small effect on the net asset value of these
changes is laid out in the table in note 2.
With effect from 1 April 2005 the Company has adopted the following new
Financial Reporting Standards ('revised UK GAAP'), and the comparative figures
have been restated accordingly:
FRS 21: EVENTS AFTER THE BALANCE SHEET DATE
(a) Dividends paid by the Company are accounted for in the period in which the
dividend has been declared. Previously, the Company recognised dividends in the
period in which net revenue, to which those dividends related, was accounted
for.
FRS 25: FINANCIAL INSTRUMENTS: DISCLOSURE AND PRESENTATION; AND
FRS 26: FINANCIAL INSTRUMENTS: MEASUREMENT
(b) All investments held by the Company are designated as at `fair value
through profit or loss'. For investments traded in active markets, fair value
is generally determined by reference to Stock Exchange quoted market bid prices
at the close of business on the balance sheet date. Previously all listed
investments were valued using closing mid market prices at the balance sheet
date. In addition, transaction costs incurred on the purchase and sale of
investments are now allocated to capital as a realised expense in the period in
which they are incurred. Previously such costs were included within the cost of
the investment or deducted from the proceeds of a sale.
2. NET ASSET VALUE PER SHARE
Net asset values per share are calculated based on the number of ordinary
shares in issue at the period end excluding shares held in treasury at that
date. In accordance with AITC guidance the net asset value per share published
in respect of 30 September 2005 was calculated on the basis of accounting
policies in use prior to the introduction of the new accounting standards
referred to in note 1.
A reconciliation from net asset values as published to net asset values as
presented in this interim report under the new accounting standards is shown
below:
30 September 31 March 30 September
2005 2005 2004
£'000 Pence £'000 Pence £'000 Pence
Net assets as 89,794* 252.16 75,121 216.98 61,309* 181.56
previously
published
(a) Increase due - - 987 2.85 - -
to
dividend
accounting
change
(b) Reduction due (405) (1.14) (658) (1.90) (637) (1.88)
to
using bid prices
Net assets per 89,389* 251.02 75,450 217.93 60,672* 179.68
revised UK GAAP
* excluding current period revenue.
(a) and (b) - see note 1 for explanations.
3. DIVIDEND ADJUSTMENTS
30 September 2005:
Prior to the dividend record date of 10 June 2005, the Company re-sold 700,000
shares which had been held in treasury at 31 March 2005. The holders of such
shares therefore became entitled to receive a dividend, which was not the case
when the shares were held in treasury. As a result, the total paid in respect
of the final dividend relating to the year ended 31 March 2005 was £19,000 more
than previously disclosed.
30 September 2004:
The Company repurchased and cancelled 320,000 ordinary shares following the 31
March 2004 year end, prior to the ex-dividend date of the final dividend. As no
dividend is payable on shares that have been repurchased the dividends due on
such shares, totalling £9,000, reverted back to the Company.
4. FINANCIAL INFORMATION
The financial information contained in this report does not constitute full
statutory accounts as defined in section 240 of the Companies Act 1985. The
financial information for the six months ended 30 September 2005 and 30
September 2004 has not been audited.
The information for the year ended 31 March 2005, other than that which has
been restated as described above, has been extracted from the latest published
audited financial statements, which have been filed with the Registrar of
Companies. The report of the auditors on those financial statements contained
no qualification or statement under sections 237 (2) or (3) of the Companies
Act 1985.
David Gamble
Chairman
INVESTMENT MANAGER'S REPORT
Charles Montanaro commented:
'PERFORMANCE
Over the six months ended 30 September 2005, the Company's net asset value
('NAV') increased by 15% compared with a 6% capital return by its benchmark the
FTSE SmallCap (excluding investment companies) Index ('the SmallCap'). These
figures have been produced under new accounting standards which have been
issued to begin the process of converging UK standards with International
Financial Reporting Standards. The net asset value figures are based on bid
prices.
From the launch of the Company in March 1995 to the end of September 2005, the
NAV has increased by 155% compared with 81% by the SmallCap.
REVIEW
Prior to the start of the Company's current financial year on 1 April 2005, the
UK small companies market had been strong. The previous six months had seen
gains of 14% and positive returns in five of the previous six months. A pause
for breath came as little surprise and the first quarter ended 30 June 2005 saw
the SmallCap close almost unchanged.
The second quarter ended 30 September 2005 saw a resumption of the strong
upward trend for UK small companies. The SmallCap gained by almost 7% with oil
and gas companies leading the way. The average Brent oil price in the first
half of this year was around $50 per barrel, an increase of almost 50% year on
year. The Oil & Gas sector has risen by almost two thirds in 2005.
Over the six month period ended 30 September 2005, the NAV of the Company
outperformed its benchmark for six consecutive months and by 9% in total.
OUTLOOK
From the low point of the recent bear market of 1,640 on 12 March 2003, the
SmallCap has recovered 87% to 3,071 by the end of September 2005. This
performance has been fully justified by a strong recovery in earnings such that
the 2005 forecast price/earnings valuation for the UK small company market is
around 15x, in line with the average of recent years. Earnings are forecast to
grow in 2006 for both large and small companies at 12% - 14%, which would
suggest that valuations remain attractive.
However, we expect to see a marked disparity in sector performance next year as
has been the case in 2005. Companies with exposure to consumers are likely to
continue to find life difficult. Retailers face margin pressure from rising
rents and wages at the same time as a slow down in demand. This will have a
knock on effect on other sectors such as advertising markets, which may feel
the impact of retailers cutting costs.
On the other hand, the outlook for government spending remains positive which
will help support service companies involved in outsourcing and training.
Rising oil and commodity prices will benefit many companies but will also hurt
those unable to pass on increasing raw material and fuel costs. This highlights
the importance of identifying companies with strong business models.
Finally, we fully expect take-over activity to be a notable feature of the
stock market over the next year. According to the Bank of England, cash held by
institutions is at the highest level in years and private equity coffers are
overflowing. The cost of borrowing remains low by historic standards which
means that debt funded deals are earnings enhancing. Rising dividends and a
steady stream of take-overs result in yet more liquidity seeking a home at a
time when alternative assets appear less attractive.
We expect equity markets to be well supported by high cash levels and take over
activity in 2006 and that good stock selection within UK small companies will
continue to be well rewarded.'
28 November 2005
Friday, 31st May 2024
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