Interim Results
Shires Smaller Companies PLC
26 August 2004
News Release
26 August 2004
Shires Smaller Companies plc
Interim Results for the
Six months to 30 June 2004
Shires Smaller Companies plc aims to provide a high and growing dividend and
capital growth from a portfolio invested principally in the ordinary shares of
smaller UK companies and UK fixed income securities.
30 June 2004 31 December
2003
Total assets less current liabilities £69.52m £64.64m
Shareholders' funds £43.26m £38.87m
Net asset value per share 197.7p 177.6p
Share price 189.0p 184.0p
(Discount)/Premium (4.4%) 3.6%
(share price to net asset value)
Dividends per share 6.0p 6.0p*
* Half year to 30 June 2003
•The net asset value per share rose by 11.3% to 197.7p at 30 June 2004
from 177.6p at 31 December 2003.
•Total return on net assets was +14.7%, significantly above the return of
+6.0% on the FTSE SmallCap Index (excluding Investment Companies), the
Company's benchmark, and the FTSE All-Share Index which returned +2.8%.
•A second interim dividend of 3.0p was paid on 30 July 2004, making total
dividends for the period to 30 June 2004 6.0p, the same as last year.
•The yield on the company's ordinary shares was 7.3% at the closing price
of 189p on 30 June 2004.
•At 30 June 2004 total gearing was 65.6% of net assets, down from 72.2% at
31 December 2003, all invested in fixed income securities.
For further information, please contact:-
Mike Balfour,
Chief Executive,
Glasgow Investment Managers,
0141 572 2700
Chairman's Statement
Financial Highlights
I am pleased to report that the first half of the Company's financial year saw
continued progress. The net asset value per share rose by 11.3% from 177.6p to
197.7p. Dividends paid and declared to date are at the same level as last year,
producing a dividend yield of 7.3% based upon the share price of 189p at 30 June
2004.
Investment Returns
The total return on net assets was 14.7%, significantly above the return of 6.0%
on the FTSE SmallCap Index (excluding Investment Companies), the Company's
benchmark. Larger quoted UK companies continued to perform less well than
smaller companies with the FTSE All-Share Index rising by 2.8% over the same
period.
The total return to shareholders, at 6.0%, was lower than the return on net
assets, reflecting the fact that the premium of 3.6% at which the share price
stood to net asset value per share at 31 December 2003 gave way to a small
discount of 4.4% at 30 June 2004. The total return to shareholders was, however,
still in line with that of the Company's benchmark.
Earnings and Dividends
The revenue return per share was 6.9p over the six months to 30 June 2004. On 6
July 2004 the Board declared a second interim dividend of 3.0p per share which
was paid on 30 July 2004 to shareholders on the register at close of business on
16 July 2004. A first interim dividend of 3.0p per share was paid on 30 April
2004. Total dividends paid to date in 2004 therefore total 6.0p, the same level
as last year.
Portfolio Profile
The distribution of assets shows at 100.2% of net assets was invested in
ordinary shares compared with 98.7% at 31 December 2003. Total gearing at 30
June 2004 was 65.6% of net assets, down from 72.2%, due to the rise in value of
the Company's portfolio of ordinary shares. All of this gearing is invested in
the high-yielding fixed income securities which make a major contribution to the
high level of income distributed to shareholders.
Outlook
A moderate rise in UK interest rates is expected over the next twelve months.
This is aimed at slowing the consumer and housing sectors, and thereby reducing
the prospects of higher inflation. Smaller companies in general have produced
healthy increases in earnings and dividends in the last year and although
corporate earnings growth may slow somewhat in the future, further progress is
likely.
The Interim Report will be mailed to shareholders on 2 September 2004. Copies
may be obtained from the Managers, Glasgow Investment Managers Limited,
Sutherland House, 149 St Vincent Street, Glasgow G2 5DR after that date.
H S Cathcart
(Chairman)
Consolidated Statement of Total Return
(incorporating the Revenue Account)
for the half year ended 30 June 2004
Half year to 30 June 2004
(unaudited)
Revenue Capital Total
£000 £000 £000
Gains on investments - 5,067 5,067
Dividends and interest receivable 1,993 - 1,993
Profits less losses of dealing subsidiary 35 - 35
Underwriting commission 2 - 2
Investment management fee (143) (143) (286)
Other administrative expenses (128) - (128)
--------- -------- --------
Net return before finance costs and taxation 1,759 4,924 6,683
Finance costs of borrowings (247) (247) (494)
Zero coupon finance - (484) (484)
--------- -------- --------
Return on ordinary activities before taxation 1,512 4,193 5,705
Taxation - - -
--------- -------- --------
Return on ordinary activities after taxation
for the period 1,512 4,193 5,705
Dividends on equity shares (1,313) - (1,313)
--------- -------- --------
Transfer to reserves 199 4,193 4,392
--------- -------- --------
Return per share 6.91p 19.16p 26.07p
Dividends per share 6.00p
Consolidated Statement of Total Return
(Continued)
Half year to 30 June 2003 Year to 31 December 2003
(unaudited) (audited)
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains on investments - 4,721 4,721 - 8,709 8,709
Dividends and interest
receivable 2,125 - 2,125 4,197 - 4,197
Profits less losses of
dealing
subsidiary 16 - 16 7 - 7
Underwriting
commission - - - 1 - 1
Investment management
fee (121) (121) (242) (260) (260) (520)
Other administrative
expenses (129) - (129) (283) - (283)
------- ------- ------- ------- ------- -------
Net return before
finance costs
and taxation 1,891 4,600 6,491 3,662 8,449 12,111
Finance costs of
borrowings (243) (243) (486) (497) (497) (994)
Zero coupon finance - (503) (503) - (1,546) (1,546)
------- ------- ------- ------- ------- -------
Return on ordinary
activities
before taxation 1,648 3,854 5,502 3,165 6,406 9,571
Taxation (104) 104 - - - -
------- ------- ------- ------- ------- -------
Return on ordinary
activities
after taxation for the
period 1,544 3,958 5,502 3,165 6,406 9,571
Dividends on equity
shares (1,313) - (1,313) (3,009) - (3,009)
------- ------- ------- ------- ------- -------
Transfer to reserves 231 3,958 4,189 156 6,406 6,562
------- ------- ------- ------- ------- -------
Return per share 7.05p 18.08p 25.13p 14.46p 29.27p 43.73p
Dividends per share 6.00p 13.75p
Group Balance Sheet
as at 30 June 2004
30 June 31 December 30 June
2004 2003 2003
(unaudited) (audited) (unaudited)
£000 £000 £000
Fixed assets
Listed investments
Ordinary shares 43,360 38,354 34,813
Convertibles 2,646 2,912 3,736
Corporate bonds 23,070 23,074 23,664
Other fixed interest 2,577 2,613 1,227
---------- ---------- ----------
71,653 66,953 63,440
Current assets
Debtors 795 734 886
Dealing Investments - 147 156
Cash at bank and in hand - 465 -
---------- ---------- ----------
795 1,346 1,042
Creditors: amounts falling
due within one year (2,925) (3,655) (3,296)
---------- ---------- ----------
Net current liabilities (2,130) (2,309) (2,254)
---------- ---------- ----------
Total assets less current liabilities 69,523 64,644 61,186
Creditors: amounts falling due
after more than one year
Long-term loan (9,992) (9,989) (9,987)
Zero coupon finance (16,269) (15,785) (14,702)
---------- ---------- ----------
Net assets 43,262 38,870 36,497
---------- ---------- ----------
Capital and reserves
Called up share capital 10,943 10,943 10,943
Share premium account 11,490 11,490 11,490
Capital redemption reserve 2,032 2,032 2,032
Realised capital reserve 9,010 9,031 10,537
Unrealised capital reserve 8,610 4,396 442
Revenue reserve 1,177 978 1,053
---------- ---------- ----------
Equity shareholders' funds 43,262 38,870 36,497
---------- ---------- ----------
Net asset value per share 197.7p 177.6p 166.8p
Note: These are not statutory accounts under section 240 of the Companies Act
1985 and are unaudited. The information relating to the group balance sheet at
31 December 2003 is an extract from the latest audited accounts which have been
delivered to the Registrar of Companies; the report of the auditors on these
accounts was unqualified and did not contain a statement under Section 237(2) or
(3) of the Companies Act 1985.
Consolidated Cash Flow Statement
for the half year ended 30 June 2004
Half year to Half year to Year to
30 June 30 June 31 December
2004 2003 2003
(unaudited) (unaudited) (audited)
£000 £000 £000
Net cash inflow from operating
activities 1,695 1,694 3,513
Servicing of finance
Interest paid (940) (480) (535)
Taxation
Corporation tax 4 - -
Investing activities
---------- ---------- ----------
Purchases of investments (15,005) (10,341) (24,158)
Sales of investments 15,372 11,372 25,575
---------- ---------- ----------
367 1,031 1,417
Equity dividends paid (1,696) (1,696) (3,009)
---------- ---------- ----------
Net cash (outflow)/inflow before
financing (570) 549 1,386
Financing
Zero coupon finance - - 40
Debt due within one year
- increase/(decrease) in short-term
borrowings 50 (2,000) (1,050)
---------- ---------- ----------
(Decrease)/increase in cash (520) (1,451) 376
---------- ---------- ----------
Analysis of Changes in Net Debt
As at Other As at
31 December Cash non-cash 30 June
2003 flows changes 2004
£000 £000 £000 £000
Cash at bank and in hand 465 (465) - -
Bank overdrafts - (55) - (55)
Short-term borrowings (1,950) (50) - (2,000)
Long-term loan (9,989) - (3) (9,992)
Zero coupon finance (15,785) - (484) (16,269)
---------- --------- --------- -------
(27,259) (570) (487) (28,316)
---------- --------- --------- -------
Distribution of Assets
Valuation at Purchases Sales Appreciation/ Valuation at
31 December 2003 (Depreciation) 30 June 2004
(audited) (unaudited)
£000 % £000 £000 £000 £000 %
Listed
investments
Ordinary
shares 38,354 98.7 3,906 (5,072) 6,172 43,360 100.2
Convertibles 2,912 7.5 - - (266) 2,646 6.1
Corporate
bonds 23,074 59.3 5,661 (5,113) (552) 23,070 53.3
Other fixed
interest 2,613 6.7 5,438 (5,187) (287) 2,577 6.0
------- ------- -------- ------- --------- ------- ------
66,953 172.2 15,005 (15,372) 5,067 71,653 165.6
-------- ------- ---------
Net current (2,309) (5.9) (2,130) (4.9)
liabilities
Total assets
less 64,644 166.3 69,523 160.7
current
liabilities
Long-term loan (9,989) (25.7) (9,992) (23.1)
Zero coupon (15,785) (40.6) (16,269) (37.6)
finance
------- ------- ------- ------
Net assets 38,870 100.0 43,262 100.0
------- ------- ------- ------
Net asset
value 177.6p 197.7p
per share
This information is provided by RNS
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