Interim Results
Shires Smaller Companies PLC
20 September 2006
News Release
20 September 2006
Shires Smaller Companies plc
Interim Results for the
Six months to 30 June 2006
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 2006 31 December 2005
Total investments £88.7m £89.9m
Shareholders' funds £56.0m £56.3m
Net asset value per share 253.4p 254.8p
Share price 240.0p 252.5p
(Discount)/Premium (share price to adjusted
net asset value)* (3.6%) 1.0%
Dividends per share 8.0p 7.75p+
Fourth Interim Dividend (2005) 4.75p 4.75p
First Interim Dividend (2006) 3.25p 3.00p
Second Interim Dividend (2006)^ 3.25p 3.00p
+ Half year to 30 June 2005
^ The second Interim Dividend is not reflected in these accounts.
* Based on IFRS NAV reduced by the dividend adjustment of 4.75p
•First and second interim dividends for 2006 totalled 6.5p compared to
6.0p in 2005
•Based on the last four quarterly dividends the yield on the Company's
shares at 30 June 2006 was 5.9% compared to 2.2% on FTSE SmallCap Index
(excl. Investment Companies), the Company's benchmark
•The total return on net assets for the six month period was 3.4% against
the benchmark return of 4.3%
•UK company balance sheets remain strong which should support further
dividend growth and share buy backs from smaller quoted companies
For further information, please contact:-
Mike Balfour,
Chief Executive,
Glasgow Investment Managers,
0141 572 2700
K Harper
Glasgow Investment Managers,
0141 572 2700
Chairman's Statement
Highlights
I am pleased to report that the dividends paid by the Company have increased
over the last six months. The first and second interim dividends for 2006 have
totalled 6.5p compared to 6.0p last year, giving a yield of 5.9% based upon a
share price of 240.0p as at 30 June 2006. This dividend increase of 8.3% was
facilitated by the reduction in interest payments on long term borrowings and
the growth in underlying company dividend receipts. Subject to any unforeseen
circumstances current estimates suggest that the dividend can be increased
further in the current year. However this should not be taken as a forecast of
profits.
Investment Returns
The total return on net assets over the six months was 3.4%, slightly lower than
the 4.3% return on the FTSE SmallCap Index (excluding Investment Companies), the
Company's benchmark. This underperformance was principally due to a fall in the
value of the corporate bond portfolio as expectations of a downward movement in
UK interest rates diminished.
The total return to shareholders, or share price total return, was -1.9%. This
reflects the fact that the discount at which the share price stood to the net
asset value per share (NAV) was 3.6% compared to a premium of 1.0% at 31
December 2005.
It should be noted that all net asset value returns, calculations of discounts
and regular NAV reporting are calculated excluding the IFRS dividend adjustment
detailed in the 2005 Annual Report. This treatment is in line with a
recommendation from the Association of Investment Trust companies.
Earnings and Dividends
As shown in the financial highlights section the first and second interim
dividends paid to date for the 2006 financial year amounted to 6.5p compared to
6.0p for the same period last year. This comprised two payments of 3.25p per
share, made on 28 April 2006 and 31 July 2006 respectively. You will recall that
a new £10 million loan was taken out following the repayment of the previous £10
million borrowings in December 2005. The interest rate on the new loan is fixed
at 5.49% compared to 9% on the old loan, thereby reducing costs. Lower costs
along with increased dividends received from investee companies have boosted the
revenue account allowing increased dividend payments by the Company.
Portfolio Profile
The distribution of assets shows 105.6% of net assets was invested in ordinary
shares at 30 June 2006. This compares to 101.3% at 31 December 2005. This rise
was due to continued growth in the value of equities in the six month period, a
net investment into equities of £584,000 and a fall in value of the corporate
bond portfolio. Total gearing at 30 June 2006 was 58.4% of net assets, down from
59.6% at 31 December 2005. The majority of the company's gearing continues to be
invested in high-yielding fixed interest securities which make a significant
contribution to the high level of income distributed to shareholders.
Outlook
Recent economic trends suggest that the current global economic growth cycle has
peaked. In the USA, the housing market and retail sales are starting to
decelerate, indicating that increased interest rates may be inducing a consumer
led slow down. It is therefore likely that US interest rates and inflation will
peak in the foreseeable future. In the UK, second quarter GDP, retail sales and
inflation were ahead of expectation. The increase in UK interest rates to 4.75%
was a direct consequence of this, with further increases probable if inflation
remains above target. Equity markets will remain highly sensitive to the peaking
of the economic growth, inflation, and interest rate cycles.
Despite this uncertain backdrop, the UK corporate profits environment remains
positive. UK company balance sheets remain strong which will support further
dividend growth and share buy backs. Dividend payments are well covered by
earnings and are growing above the rate of inflation. Investors need to be
prepared for continued volatility of share prices but dividend payments by
portfolio companies should remain healthy and progress gradually. Given this,
together with reasonable valuation levels, it suggests that the stockmarket
should make further gains.
The Interim Report will be mailed to shareholders on 22 September 2006. 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 Income Statement
for the half year ended 30 June 2006
Half year to 30 June 2006
(unaudited)
Revenue Capital Total
Gains £000 £000 £000
Gains on investments at fair value - 612 612
Zero coupon finance costs - (112) (112)
Revenue
Dividend income 1,286 - 1,286
Interest income from investments 740 (32) 708
Deposit Interest 4 - 4
Net (loss)/gain on financial assets held for
trading (59) - (59)
--------- -------- --------
1,971 468 2,439
--------- -------- --------
Expenses
Investment management fee (204) (204) (408)
Other administrative expenses (147) - (147)
Finance costs of borrowings (219) (219) (438)
--------- -------- --------
(570) (423) (993)
--------- -------- --------
Profit before tax 1,401 45 1,446
Tax expense - - -
--------- -------- --------
Profit for the year 1,401 45 1,446
--------- -------- --------
Profit attributable to equity holders of the
company 1,401 45 1,446
--------- -------- --------
Earnings per ordinary share (pence) 6.5p
The Total column is the Income Statement of the
Group
There are no discontinued operations
Consolidated Income Statement
(Continued)
Half year to 30 June 2005 Year to 31 December 2005
(unaudited) (audited)
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains
Gains on investments at
fair value - 4,143 4,143 - 9,903 9,903
Zero coupon finance
costs - (639) (639) - (1,128) (1,128)
Revenue
Dividend income 1,048 - 1,048 2,794 - 2,794
Interest income from
investments 988 (65) 923 1,674 (69) 1,605
Deposit Interest 5 - 5 18 - 18
Net (loss)/gain on
financial assets held
for trading (15) - (15) 58 - 58
------- ------- ------- ------- ------- -------
2,026 3,439 5,465 4,544 8,706 13,250
------- ------- ------- ------- ------- -------
Expenses
Investment management
fee (178) (178) (356) (368) (368) (736)
Other administrative
expenses (128) - (128) (298) - (298)
Finance costs of
borrowings (302) (302) (604) (606) (606) (1,212)
------- ------- ------- ------- ------- -------
(608) (480) (1,088) (1,272) (974) (2,246)
------- ------- ------- ------- ------- -------
Profit before tax 1,418 2,959 4,377 3,272 7,732 11,004
Tax expense - - - - - -
------- ------- ------- ------- ------- -------
Profit for the year 1,418 2,959 4,377 3,272 7,732 11,004
------- ------- ------- ------- ------- -------
Profit attributable to
equity holders of the
Company 1,418 2,959 4,377 3,272 7,732 11,004
------- ------- ------- ------- ------- -------
Earnings per ordinary
share (pence) 19.8p 49.8p
Group Balance Sheet
as at 30 June 2006
30 June 31 December 30 June
2006 2005 2005
(unaudited) (audited) (unaudited)
£000 £000 £000
Non current assets
Ordinary shares 59,149 57,086 51,853
Convertibles 2,186 2,029 2,354
Corporate bonds 21,264 22,738 22,784
Other fixed interest 6,117 8,065 6,285
Zero coupon finance call options 3,919 3,281 1,121
Zero coupon finance put options 819 1,385 313
---------- ---------- ----------
93,454 94,584 84,710
---------- ---------- ----------
Current assets
Trade and other receivables - 580 1,911
Accrued income and prepayments 947 1,148 1,066
Financial assets of dealing 306 365 319
subsidiary
Cash and cash equivalents 719 1,140 1
Zero coupon finance put options - - 1,759
---------- ---------- ----------
1,972 3,233 5,056
---------- ---------- ----------
Current liabilities
Current portion of long-term loan - - (9,997)
Trade and other payables (417) (1,505) (813)
Short-term borrowings (5,720) (6,885) (6,803)
Zero coupon finance put options - - (5,744)
---------- ---------- ----------
(6,137) (8,390) (23,357)
---------- ---------- ----------
Non current liabilities
Long term loan (10,000) (10,000) -
Zero coupon finance call options (17,712) (16,547) (10,862)
Zero coupon finance put options (5,558) (6,539) (4,452)
---------- ---------- ----------
(33,270) (33,086) (15,314)
---------- ---------- ----------
Net assets 56,019 56,341 51,095
---------- ---------- ----------
Issued capital and reserves
attributable
To equity holders of the parent
Called up share capital 11,055 11,055 11,055
Share premium account 11,892 11,892 11,892
Capital premium reserve 2,032 2,032 2,032
Realised capital reserve 16,907 16,115 12,179
Unrealised capital reserve 12,227 12,974 12,298
Revenue reserve 1,906 2,273 1,639
---------- ---------- ----------
Equity shareholders' funds 56,019 56,341 51,095
---------- ---------- ----------
Net asset value per ordinary share
(pence) 253.4p 254.8p 231.1p
Note: These are not statutory accounts under section 240 of the Companies Act
1985 and are unaudited. The figures and financial information for the year ended
31 December 2005 have been extracted from the 2005 report and 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 2006
Half year to Half year to Year to
30 June 30 June 31 December
2006 2005 2005
(unaudited)
£000 £000 £000
Cash flows from operating activities
Investment income received 2,233 2,005 4,204
Deposit interest received 6 5 17
Investment management fee paid (421) (350) (743)
Sales less purchases of current
financial assets
held for trading - (334) (307)
Other cash receipts - 350 350
Other cash expenses (186) (117) (229)
---------- ---------- ----------
Cash generated from operations 1,632 1,559 3,292
Interest paid (449) (594) (1,186)
Taxation - - -
---------- ---------- ----------
Net cash inflows from operating
activities 1,183 965 2,106
---------- ---------- ----------
Cash flows from investing activities
Purchases of investments (11,915) (14,551) (41,714)
Sales of investments 13,245 13,456 41,796
---------- ---------- ----------
Net cash inflow/(outflow) from
investing
activities 1,330 (1,095) 82
---------- ---------- ----------
Cash flows from financing activities
Proceeds of issue of shares - 514 514
Equity dividends paid (1,769) (1,703) (3,030)
Redemption of zero coupon finance - - -
Cost payable on maturity - (4,000)
Zero coupon finance - proceeds from
new
investment - 4,066
---------- ---------- ----------
Net increase/(decrease) in cash and
Cash equivalents 744 (1,319) (262)
---------- ---------- ----------
Cash and cash equivalents at start of
period (5,745) (5,483) (5,483)
---------- ---------- ----------
Cash and cash equivalents at end of
period (5,001) (6,802) (5,745)
---------- ---------- ----------
Cash and cash equivalents comprise:
Cash and cash equivalents 719 1 1,140
Short -term borrowings (5,720) (6,803) (6,885)
---------- ---------- ----------
(5,001) (6,802) (5,745)
---------- ---------- ----------
Consolidated Statement of Changes in Equity
for the half year ended 30 June 2006
Share Share Capital Realised Unrealised Retained
Capital Premium Redemption Capital Capital Revenue
Reserve Reserve Reserve Reserve Total
£000 £000 £000 £000 £000 £000 £000
As at 31
December
2005 11,055 11,892 2,032 16,115 12,974 2,273 56,341
------- ------- --------- -------- -------- ------- -------
Revenue
for the
Period - - - - - 1,401 1,401
Capital
profits
for
the - - - 792 (747) - 45
period
Equity
dividends - - - - - (1,768) (1,768)
------- ------- --------- -------- -------- ------- -------
As at 30
June 11,055 11,892 2,032 16,907 12,227 1,906 56,019
2006 ------- ------- --------- -------- -------- ------- -------
Distribution of Assets
Valuation at Purchases Sales Appreciation/ Valuation at
31 December 2005 (Depreciation) 30 June 2006
(audited) (unaudited)
£000 % £000 £000 £000 £000 %
Listed
investments
Ordinary 57,086 101.3 9,087 (8,503) 1,479 59,149 105.6
shares
Convertibles 2,029 3.6 - - 157 2,186 3.9
Corporate 22,738 40.4 1,552 (2,107) (919) 21,264 38.0
bonds
Other fixed
interest 8,065 14.3 244 (2,055) (137) 6,117 10.9
------- ------- -------- ------- --------- ------- ------
89,918 159.6 10,883 (12,665) 580 88,716 158.4
-------- ------- ---------
Other non
current 4,666 8.3 4,738 8.4
Assets
Current 3,233 5.7 1,972 3.5
assets
Current
liabilities (8,390) (14.9) (6,137) (10.9)
Non current
liabilities (33,086) (58.7) (33,270) (59.4)
------- ------- ------- ------
Net assets 56,341 100.0 56,019 100.0
------- ------- ------- ------
Net asset
value
per share 254.8p 253.4p
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 31st May 2024
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