Half-year Report

RNS Number : 4411J

Global Smaller Cos. Trust PLC (The)

13 December 2022

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

The Global Smaller Companies Trust PLC

Unaudited Statement of Results

for the half-year ended 31 October 2022

Legal Entity Identifier: 2138008RRULYQP8VP386

Information disclosed in accordance with Disclosure Guidance and Transparency Rule 4.1

SUMMARY OF UNAUDITED RESULTS FOR THE HALF-YEAR ENDED 31 OCTOBER 2022

· Net Asset Value with debt at fair value ("NAV") decreased to 160.58p per share, giving a total return of -6.4% compared to the Benchmark total return of -3.8%

· The share price ended the period at 138.0p, delivering a total return to shareholders of -10.9%

· Interim dividend increased by 10.5% to 0.63p per ordinary share

Date:  12 December 2022

Contact:  Peter Ewins 

  Columbia Threadneedle Investment Business Limited 

  020 7628 8000

Lead Manager's Review

Going into this financial year, we were very conscious of the risks facing equity markets. Inflation was moving up on a widespread basis, the war in the Ukraine had further stoked this by driving gas prices significantly up, while the move to higher interest rates had already commenced. It is no great surprise, therefore, that the six months under review have been challenging for share prices and our portfolio in turn, with tighter monetary policy feeding through to a deteriorating growth outlook.

The relative performance of smaller companies compared to larger stocks varied by market. In Europe and the UK, higher market capitalisation stocks with greater global spread performed better, perhaps not surprisingly given the material impact on the European economy as a result of the Ukraine situation. Elsewhere, smaller company stocks more than held their own, with for example in the US, some of the large cap technology giants lagging most recently.

After outperformance in the last financial year, this was a tougher period for our own portfolio in absolute and relative terms. Taking the Company's long term liabilities at fair value, the Net Asset Value per share fell to 160.58p, a -6.4% total return for the six months, compared to a fall of 3.8% for the Company's Benchmark index (30% Numis UK Smaller Companies excluding investment companies Index/70% MSCI All Country World ex UK Small Cap Index). In both cases, the returns would have been worse had it not been for a fall in the value of sterling in the currency markets, particularly against the surging US dollar.

With investor confidence sliding, we saw net selling of investment trusts, especially by retail holders, leading to wider discounts. The Board continued to use its buyback powers, being active in the market very regularly, repurchasing just over 10.8m of the Company's shares and in the process adding some 0.2% to the NAV. Despite this, the discount was unable to buck the general market trend ending the period at 14.1%, compared to 9.6% at the start of the financial year. The share price fell to 138p, with a total return of -10.9% for the period taking account of the dividend paid in August.

Dividends

Last year witnessed a strong rebound in dividend receipts from the investment portfolio, as pandemic restrictions were eased across much of the globe. Despite the weaker general market background, we have seen a further good period in terms of income, with revenue return per share up 16.1% compared to the first six months of the 2021/22 financial year. Supported by the strong income performance the Board has decided to raise the interim dividend by 10.5% to 0.63p. Shareholders on the register on 30 December 2022 will receive this dividend on 26 January 2023.

Market background

The primary macro-related focus of investors in the period has been the inflation outlook and consequences for monetary policy. Unfortunately, the hope that inflation would fall once supply chain stresses eased was already fading heading into the financial year. While energy prices have been key in driving inflation up closer to home, in the US, arguably over-stimulation of the economy through the pandemic period in both a monetary and fiscal sense had contributed to inflationary pressures, augmented by a very tight local labour market. To address this, the US Federal Reserve has now significantly increased interest rates, moving its federal funds rate up by 2.75% over the six months and by a further 0.75% subsequently. Tighter US monetary policy, in combination with higher inflation elsewhere, have led to an increase in interest rates more or less globally, though Japan for now has yet to move in this direction, resulting in a weak yen.

The move to higher central bank interest rates and an increase in government bond yields as the period progressed led to pressure on equity market valuations This was particularly evident in premium rated growth stocks, where incorporating a higher discount rate in long term cashflow models had a significant impact on implied target prices. The rise in interest rates also heavily impacted individual stocks and sectors such as real estate, which is particularly impacted by the rising cost of borrowing. Sectors holding up better included more defensive areas such as Healthcare and Energy.

With the war in Ukraine and tensions in relation to Taiwan, geo-politics has remained relevant, with Chinese stocks notable laggards compared to most Asian markets. More locally in the UK, the recent period of political turmoil contributed to a further period of weakness for sterling, which favoured larger companies in the market as opposed to the more domestically orientated small caps.

Regional portfolio performance

The table below shows how the different geographical regional portfolios performed over the period versus the local smaller companies indices, with all total returns measured in sterling.

Geographical performance (total return sterling adjusted)
for the half-year ended 31 October 2022
	Portfolio	Local smaller companies index
North America	-0.5%	+8.8%
UK	-14.6%	-13.1%
Europe	-15.1%	-12.7%
Japan	+2.2%	-0.1%
Rest of World	-9.0%	-11.7% (Asia Pacific ex Japan)   +5.9% (Latin America)
Source: Columbia Threadneedle Investments

North America

In the previous financial year, we did much better than the small cap comparator index, the Russell 2000, with the portfolio delivering a 7.8% total return in sterling terms compared to -8.3% from the index. As the table above shows, this latest six months proved far more challenging for our holdings.

Stock selection was particularly negative in three parts of the portfolio. A roll-over in industrial metals prices due to a global slowdown in demand, lower gold prices largely as a consequence of the higher interest rates and company specific production issues, led to poor performance by our mining related holdings; Lundin Mining , SSR Mining and Wheaton Precious Metals . Within the consumer sectors, Spectrum Brands fell 45.8% as the disposal of its hardware and home improvement business was blocked by regulators. Agricultural services business The Andersons fell on a weak first quarter's results. Boot Barn , in common with many retail businesses, saw slower footwear and clothing sales against tough prior year comparisons, leading to earnings downgrades. Health and wellness business Medifast also suffered from a slowdown in customer recruitment and retention. The third area of weakness in this period was Healthcare, with shares in Catalent and Syneos Health both falling sharply. Both companies have suffered from lower spending patterns within the biotechnology sector as funding has become tighter. Somewhat counterintuitively, later in the period biotechnology stocks rallied, which also hurt our relative performance given we do not hold these stocks on risk grounds.

A number of other individual stocks impacted negatively on performance. Cognyte Software fell 59.9% as it suffered from a major reduction in business from one of its key government customers in the security field. Home connectivity products business MaxLinear , was also down as the benefits of the pandemic driven demand surge dropped away and the semiconductor cycle turned, while in the telecoms equipment market, Infinera produced a sluggish sales performance leading us to exit our holding. Shares in swimming pool supplies business Hayward Holdings dropped as de-stocking took hold on the back of an easing in both demand and the earlier supply chain problems which had created over-ordering previously.

The quality of a good number of holdings however shone through despite the challenges. With cost pressures evident almost everywhere, companies demonstrating pricing power like box-board packaging supplier Graphic Packaging , were rewarded, with the shares up as the company delivered a strong operating profit margin performance. Long standing holding LKQ Corp , the recycled car parts supplier, was up 12.1% as it produced encouraging results despite headwinds from currency movements and lower scrap metal prices. Although in overall terms, as already mentioned, we struggled in Healthcare, two stocks in this area did well for us: managed care business Molina Healthcare , which won some large new contracts, and care homes operator The Ensign Group , which continued its track record of superior operational performance, at a time when many of its peers have been struggling to cope with labour cost pressures. Outsourcing business Genpact also performed well, with the company winning new contracts and delivering well on the margin side.

With interest rates moving up rapidly, this was a strong period for bank stocks and West Virginia based United Bankshares did well as the outlook for the net interest income improved. Also in financials, Jefferies Financial Group shares rose 11.9% as the company continued to take share in the investment banking sphere, made some further progress on divestitures of non-core businesses and bought in its own shares. Companies exposed to defence demand were lifted by the increased geo-political tensions and a new holding in engineering business Curtiss-Wright was strong given a good exposure to this area. Finally, our decision to increase our holding in transportation business Kirby paid off, as the company is seeing a recovery in both its barge and energy services businesses.

UK

This was a difficult period for the UK small cap sector, not helped by the recent political whirlwind, and our portfolio underperformed, though less meaningfully than in North America. More cyclical and industrially focused names were especially out of favour and our holdings in Trifast and XP Power fell 41.7% and 45.6% respectively. Both saw weaker demand patterns and suffered from margin pressure, reflecting lags in passing prices through, with XP Power also impacted by disruption to its Chinese facilities due to the pandemic. Companies exposed to demand derived from the housing and construction sectors tended to lag as interest rates moved up and our holdings in aggregates business Breedon , pipes and building products business Genuit Group and electrical and lighting components business Luceco Group all fell as profit expectations were scaled back, the latter hit hard by de-stocking in its main sales channel.

Consumer facing stocks also struggled in the face of the higher interest rates and companies like Restaurant Group , online fashion operator In The Style Group and travel agency business On the Beach Group were all weak after downgrades to estimates came through. Two other disappointing consumer-facing stocks for us were Hotel Chocolat and natural ingredients supplier Treatt . Hotel Chocolat announced a sudden pull-back from international expansion of the brand, undermining a key part of the investment case and we decided to sell at a loss. We have held on to Treatt, however. We deemed the mismanagement of currency hedging and a disappointing new product launch by a customer to be short term issues and the medium-term outlook for the company remains attractive after a period of investment in the business' infrastructure. Other weak performers in the period included media services company Next Fifteen Communications and in financials Molten Ventures and Just Group . Next Fifteen's shares fell partly on the market-wide de-rating of higher growth names, but they were also impacted by a protracted and eventual unsuccessful takeover approach for a media sector peer. Molten Ventures shares suffered as the outlook for private equity valuations for technology orientated businesses deteriorated, while annuities business Just Group's shares fell as a result of general credit market weakness which hurt sentiment towards the sector.

Performance in the period was helped by takeover activity, as had been the case in the previous year. Our holdings in Euromoney Institutional Investor and Biffa received offers from private equity businesses. Environmental consultancy business RPS Group also agreed to a bid from a US peer, which beat an earlier offer from Canadian based WSP Group , which we hold on our North American portfolio.

Aside from takeovers one of the most significant contributions to relative performance came from the 27.9% rise in the shares of Telecom Plus . This utilities services business operating under the "Utility Warehouse" brand has been signing up a lot of new customers, helped by the cost of living crisis. Two recent new holdings Ricardo Group and Ashtead Technology also advanced in the period. The former company is successfully evolving its business away from a historic focus on internal combustion engines into new greener spheres using its significant technical and consultancy expertise. Specialist offshore equipment rental business Ashtead Technology is benefitting from higher demand in both the traditional energy arena and the offshore renewables market. Energean , whose principal asset is offshore Israel gas, rose 20.9% as the company's major development project came into production and it announced more exploration success in the vicinity. Given the present shortage of gas in Europe this is very timely.

Several other holdings in different niches also did well, bucking the general market direction. Financial broking and trading business TP ICAP rose 39.6%, with business activity levels helped by the volatility in financial markets. Begbies Traynor , mainly focused on insolvency services was also up, as the likelihood of more companies falling into trouble rose. Specialist gaming machine components business Quixant Group gained as the casinos market re-opened after the pandemic in some key territories. Distributor Kitwave Group , serving the convenience store channel, was also up as profits beat expectations and the stock gained greater recognition from investors.

Europe

European equities endured a difficult period, with the direct and indirect impacts of the war in Ukraine becoming increasingly evident. With bad news coming out across a broader swathe of the market, this was a tough period too for our portfolio.

Several holdings suffered from a post pandemic hangover, with perceived "Covid beneficiaries" such as meal kits provider HelloFresh , helmets business MIPS and roof racking and leisure equipment provider Thule Group three examples of this. All saw downgrades as trading weakened; in the case of MIPS and Thule Group, there has been a period of de-stocking in sales channels in particular within the bicycle retail sector. In a similar way and in common with Hayward Holdings in the US, swimming pool equipment and consumables business Fluidra , saw a substantial reduction in business levels through the latter part of the period. It will take time for excess stocks to be run-down in the industry. A new holding in healthcare services company Siegfried , also fell back after our purchase, with some Covid driven contract work falling away.

Consumer facing stocks also came under pressure as the risk of recession loomed larger. Sligro Food , a distributor into the Benelux hospitality sector was down by some 34.3%, despite solid results to date. Danish brewer Royal Unibrew 's recent trading, however, has already been hit, with higher costs not able to be fully passed on. As in other markets, technology stocks came under scrutiny. Weaker demand from the German public sector, combined with some disappointing business execution within IT hardware reseller CANCOM , led to poor results from this company; we have sold out given diminished confidence. Nordic Semiconductor shares also fell back, with recent guidance lacklustre, partly due to issues and restrictions in relation to silicon sourcing. Shares in trading platforms business flatexDEGIRO fell as lower customer activity levels fed through into downgrades, only part offset by higher interest payments on cash deposits. Most recent quarterly results from outsourcing business Coor Service Holding were disappointing on the margin side, with inflationary pressures and start-up costs on new contracts two of the issues facing the company. One other weak performer was events ticketing business CTS Eventim . This was a little surprising given the strong rebound in concert attendance, but the company has been de-rated in the period, in common with many growth stocks.

Fortunately, there were some good performers despite the tough general market background. Shares in Tecan Group , the laboratory equipment and automation business, were up by 24.3%, with strong interim results and good news on the orderbook too. Our holding in Lotus Bakeries , best known for the Biscoff biscuit, performed well, with a clear demonstration of resilient margins and pricing power showing through in results. Management are expanding capacity in both the US and Asia given success in the international growth of the business, and this should realise cost efficiencies too. Glass bottle manufacturer Verralia also performed well, helped by some timely and well-executed hedging of energy costs; the industry is capacity constrained at present which is helping on the pricing power front.

While industrial facing companies were generally impacted by weaker demand patterns and in some cases margin pressures, two of our holdings were able to buck this trend. Hexpol , the polymer compounding business, produced better than anticipated results, helped by more than half of revenue coming from the stronger US economy and pricing power was also evident in the company's numbers. Interpump , which had been hit hard on concerns over a shortage of gas for the company's manufacturing facilities in Italy, rebounded as results proved better than expected, with margins maintained at high levels and order backlog also strong. Rising interest rates even now in Europe, fed through to good performance in two of our bank holdings, the long-standing Denmark based Ringkjoebing Landbobank and the more recent holding Bank of Ireland . Net interest income is increasing and for now provisions remain modest in both cases.

Japan

Weakness of the yen was again a feature, with the Bank of Japan continuing to target very low bond yields and keeping its key interest rate at -0.1%. The economy has been relatively stable, with inflation higher but remaining well below western levels at around 3%, reducing the pressure on the authorities to impose any tightening measures. Fiscal policy continues to be aimed at stimulating the economy after the difficulties of the pandemic. Company earnings are being supported by the lower yen and the culture in the country of having no or negligible debt at the corporate level, is a plus at this point in time in comparison to western markets.

Our three fund holdings managed by Eastspring, abrdn and Baillie Gifford all managed to outperform the MSCI Japan Small Cap index in the six months, despite having very different portfolio styles and investments. We have recently topped up our holdings in these funds as part of a slight increase in allocation to Japan, given the superior near-term corporate earnings dynamics and lower valuations compared to most other global markets.

Rest of World

Our fund holdings here give us exposure to smaller companies listed in Asia and Latin America in the main, plus certain other global emerging markets. Over the period, we beat the MSCI All Country Asia-Pacific ex Japan Small Cap Index, which is pleasing as Asia is the prime focus of the funds we hold. We do have some exposure too to Latin American markets within the portfolio. This region enjoyed a strong period of performance, helped by the key Brazilian market doing well, despite political uncertainty ahead of the October elections.

The best performing funds that we held through this period were The Scottish Oriental Smaller Companies Trust and the Schroder ISF Global Emerging Markets Smaller Companies Fund . The former benefitted from strong stock selection in, and a high allocation to, the strongly performing Indian and Indonesian markets. It was also helped by not having as much exposure to technology-heavy North Asian markets closely tied to China like Korea and Taiwan. The Schroder fund, being emerging markets focused, benefited from having a good allocation to Latin American stocks. The HSBC managed Asia ex Japan smaller company fund was the weakest performer of our holdings. This had too high an exposure to China/Hong Kong and its sector tilt was also detrimental to relative performance. During the period we decided to sell one holding, an Asian facing fund managed by Abrdn, which had not been performing well for a protracted period. We added to some of the other fund holdings with part of the proceeds of this sale and continue to research a number of other collectives.

Asset allocation

The chart below shows the exposure of the portfolio across the different markets. Over the period, we increased the weighting in North America and Japan at the expense of the other markets. Maintaining an overweight to the Benchmark stance in North America has been a good strategy in the year to date, reflecting the strength of the US dollar. As already mentioned, we recently topped up exposure to Japan given a more positive outlook for corporate earnings in this market. Asset allocation positioning contributed positively to the Company's relative performance for the six months.

Geographical distribution of the investment portfolio
	Portfolio weighting
	31 October 2022 %	30 April 2022 %
North America	46.2	43.4
UK	24.1	26.8
Rest of World	11.3	12.2
Europe	10.3	10.8
Japan	8.1	6.8
Source: Columbia Threadneedle Investments

Gearing

Gearing ended the six months at 4.2%, slightly down on the 4.6% at the end of April. A cautious approach to leverage has been appropriate given the general direction of markets and the threat of recession in parts of the world. Borrowings at the end of the period continue to be sterling, euro and yen denominated, with the majority in sterling at a fixed rate of 2.26% through the private placing note issue of 2019.

Outlook

Looking ahead, the near-term prospects for global economic growth have deteriorated due to the impact of tighter monetary policy. As we have seen recently in the UK, some countries are now having to impose tougher fiscal policies to address their budgetary shortfalls. This is feeding through into a poorer prognosis for company earnings into 2023. It's unclear at this stage how much further interest rates will need to rise and when inflation will fall back to more normal levels around the world, not least due to the complications of the ongoing war in Ukraine. China's approach to Covid-19 is continuing to create challenges for global supply chains and the local economy, while at the same time leading to social unrest in the country.

While the underlying background for equities is hardly ideal, this is already well recognised. Many share prices have fallen a long way from their peaks, especially in the more cyclical parts of the markets. We think that there are some good opportunities to take advantage of in this environment. In a period where cost pressures will remain in focus, we will continue to closely monitor how the managements of our holdings are faring in addressing these.

Peter Ewins

Lead Manager

12 December 2022

Unaudited Condensed Income Statement

for the half-year ended 31 October	2021			2021
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Gains on investments	-	(74,769)	(74,769)	-	54,226	54,226
Foreign exchange gains/(losses)	33	555	588	6	(3,037)	(3,031)
Income	7,648	1,296	8,944	6,945	-	6,945
Management fees	(544)	(1,633)	(2,177)	(644)	(1,933)	(2,577)
Other expenses	(589)	(17)	(606)	(505)	(10)	(515)
Net return before finance costs and taxation	6,548	(74,568)	(68,020)	5,802	49,246	55,048
Finance costs	(120)	(361)	(481)	(115)	(347)	(462)
Net return on ordinary activities before taxation	6,428	(74,929)	(68,501)	5,687	48,899	54,586
Taxation on ordinary activities	(577)	-	(577)	(403)	-	(403)
Net return attributable to shareholders	5,851	(74,929)	(69,078)	5,284	48,899	54,183
Return per share - pence	1.08	(13.77)	(12.69)	0.93	8.57	9.50

The total column of this statement is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

Unaudited Condensed Statement of Changes in Equity

Half-year ended 31 October 2022		Share	Capital			Total
	Share	premium	redemption	Capital	Revenue	shareholders'
	capital	account	reserve	reserves	reserve	funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 April 2022	15,513	212,639	16,158	685,538	15,456	945,304
Movements during the half-year ended 31 October 2022
Dividends paid Shares repurchased by the Company and held in treasury	- -	- -	- -	- (15,376)	(6,941) -	(6,941) (15,376)
Net return attributable to equity shareholders	-	-	-	(74,929)	5,851	(69,078)
Balance at 31 October 2022	15,513	212,639	16,158	595,233	14,366	853,909

Half-year ended 31 October 2021		Share	Capital			Total
	Share	premium	redemption	Capital	Revenue	shareholders'
	capital	account	reserve	reserves	reserve	funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 April 2021	15,513	212,639	16,158	747,951	15,247	1,007,508
Movements during the half-year ended 31 October 2021
Dividends paid Shares repurchased by the Company and held in treasury	- -	- -	- -	- (20,091)	(6,847) -	(6,847) (20,091)
Net return attributable to equity shareholders	-	-	-	48,899	5,284	54,183
Balance at 31 October 2021	15,513	212,639	16,158	776,759	13,684	1,034,753

Year ended 30 April 2022		Share	Capital				Total
	Share	premium	redemption	Capital		Revenue		shareholders'
	capital	account	reserve	reserves		reserve		funds
	£'000s	£'000s	£'000s	£'000s		£'000s		£'000s
Balance at 30 April 2021	15,513	212,639	16,158	747,951		15,247		1,007,508
Movements during the year ended 30 April 2022
Dividends paid	-	-	-	-		(10,032)		(10,092)
Shares repurchased by the Company and held in treasury	-	-	-	(42,910)		-		(42,910)
Net return attributable to equity shareholders	-	-	-	(19,503)		10,241		(9,262)
Balance at 30 April 2022	15,513	212,639	16,158	685,538		15,456		945,304

Unaudited Condensed Balance Sheet

	31 October 2022	31 October 2021	30 April 2021
	£'000s	£'000s	£'000s
Fixed assets
Investments	889,706	1,076,252	987,083
Current assets
Debtors	1,302	5,958	3,604
Cash and cash equivalents	22,350	9,833	13,354
Total current assets	23,652	15,791	16,958
Creditors: amounts falling due within one year
Bank loans	(16,874)	(20,043)	(19,782)
Creditors	(7,575)	(2,247)	(3,955)
Total current liabilities	(24,449)	(22,290)	(23,737)
Net current liabilities	(797)	(6,499)	(6,779)
Total assets less current liabilities	888,909	1,069,753	980,304
Creditors: amounts falling due after more than one year
Loan notes	(35,000)	(35,000)	(35,000)
Net assets	853,909	1,034,753	945,304
Capital and reserves
Called-up share capital	15,513	15,513	15,513
Share premium account	212,639	212,639	212,639
Capital redemption reserve	16,158	16,158	16,158
Capital reserves	595,233	776,759	685,538
Revenue reserve	14,366	13,684	15,456
Total shareholders' funds	853,909	1,034,753	945,304
Net asset value per share (debt at par value) - pence	158.52	183.62	172.04

Unaudited Condensed Statement of Cash Flows

	Half-year ended	Half-year ended
	31 October 2022	31 October 2021
	£'000s	£'000s
Cash flows from operating activities before dividends received and interest paid	(3,245)	(3,281)
Dividends received	8,744	7,473
Interest paid	(477)	(451)
Cash flows from operating activities	5,022	3,741
Investing activities
Purchases of investments	(87,071)	(103,805)
Sales of investments	116,165	121,863
Transaction costs	(218)	(182)
Other capital charges	(15)	(11)
Cash flows from investing activities	28,861	17,865
Cash flows before financing activities	33,883	21,606
Financing activities
Ordinary dividends paid	(6,941)	(6,847)
Cash flows from share buybacks for treasury shares	(15,626)	(20,287)
Repayment of bank loans	(2,563)	-
Drawdown of bank loans	-	11,625
Cash flows from financing activities	(25,130)	(15,509)
Net movement in cash and cash equivalents	8,753	6,097
Cash and cash equivalents at the beginning of the period	13,354	6,870
Effect of movement in foreign exchange	243	(3,134)
Cash and cash equivalents at the end of the period	22,350	9,833
Represented by:
Cash at bank	1,140	931
Short term deposits	21,210	8,902
Cash and cash equivalents at the end of the period	22,350	9,833

Unaudited Notes on the Condensed Accounts

1  Accounting policies

These condensed financial statements have been prepared on a going concern basis in accordance with the Companies Act 2006, FRS 102, Interim Financial Reporting (FRS 104) and the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" (SORP) issued by the AIC in April

2021.

The accounting policies applied for the condensed set of financial statements are set out in the Company's annual report for the year ended 30 April 2022.

2  Dividend

The Directors have declared an interim dividend in respect of the year ending 30 April 2023 of 0.63p per share, payable on 26 January 2023 to all shareholders on the register at close of business on 30 December 2022. The amount of this dividend will be £3,376,000 based on 535,897,759 shares in issue at 8 December 2022. This amount has not been accrued in the results for the half-year ended 31 October 2022.

3  Going concern

In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. They have also considered the Company's objective, strategy and policy, the current cash position of the Company, the availability of its loan facility, compliance with its covenants and the operational resilience of the Company and its service providers.

It is recognised that the Company is mainly invested in readily realisable, globally listed securities that can be sold, if necessary, to repay indebtedness.

Based on this information, the Directors believe that the Company has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of these financial statements. Accordingly, these financial statements have been prepared on a going concern basis.

4  Results

The results for the half-year ended 31 October 2022 and 31 October 2021, which are unaudited and which have not been reviewed by the Company's auditors pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information', constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 30 April 2022; the report of the auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The condensed financial statements shown above for the year ended 30 April 2022 are an extract from those accounts.

By order of the Board

Columbia Threadneedle Investment Business Limited, Company Secretary

Exchange House, Primrose Street, London EC2A 2NY

12 December 2022

Directors' Statement of Principal Risks and Uncertainties

The Company's principal risks and uncertainties are described in detail under the heading "Principal risks and future prospects" within the strategic report in the Company's annual report for the year ended 30 April 2022. They include:

· Errors, fraud or control failures at service providers or loss of data through business continuity failure or cyber-attacks could damage reputation or investors' interests or result in loss. Cyber risks remain heightened.

· Inappropriate business strategy or policy, or ineffective implementation, could result in poor returns for shareholders. Failure to access the targeted market or meet investor needs or expectations, including ESG and climate change in particular, leading to significant pressure on the share price. Political risk factors could also impact performance as could market shocks such as those experienced in relation to Covid-19.

· A significant share price discount or premium to the Company's NAV per share, or related volatility, could lead to high levels of uncertainty or speculation and the potential to reduce investor confidence. Increased uncertainty in markets could lead to further falls and volatility in the Company's NAV.

The Directors continue to review the key risk register for the Company which identifies the risks that the Company is exposed to, the controls in place and the actions being taken to mitigate them. This is set against a backdrop of continuing uncertainty as a result of the significant macro economic influences of higher inflation, interest rates and the ongoing impact of the Covid-19 pandemic.

The Bank of Montreal's sale of BMO GAM's business in Europe, the Middle East and Africa, to Ameriprise Inc., which became effective in November 2021, and the merger of its operations with Columbia Threadneedle Investments, has introduced potential risk of disruption to BMO GAM's staff and to its operations and service delivery. The level of risk will be elevated until the two firms' systems and processes have been integrated and bedded down. As a result of assurances it has received from the new owner, the Board considers that this risk has not changed materially.

The Board believes that there have not been any material changes to the nature of the risks outlined above since the previous annual report and that the principal risks and uncertainties, as summarised, remain applicable to the remaining six months of the financial year. The Board has considered this in relation to going concern, as set out in note 3.

Statement of Directors' Responsibilities in Respect of the Half-Yearly Financial Report

In accordance with Chapter 4 of the Disclosure Guidance and Transparency Rules, the Directors confirm that to the best of their knowledge: 

· the condensed set of financial statements has been prepared in accordance with applicable UK Accounting Standards on a going concern basis, and gives a true and fair view of the assets, liabilities, financial position and net return of the Company;

· the half-yearly report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;

· the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year; and

· During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.

On behalf of the Board

Anja Balfour

Chairman

12 Dece mber 2022

ENDS

A copy of the Half Year Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at data.fca.org.uk/#/nsm/nationalstoragemechanism  

The Half Year Report for the six months ended 31 October 2022 will be posted to shareholders and made available shortly on the Company's website at globalsmallercompanies.co.uk, where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found . Copies may also be obtained from the Company's registered office, Exchange House, Primrose Street, London EC2A 2NY.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

END

 

 

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