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Aberdeen Smll Cos IT (ASCI)

  Print      Mail a friend       Annual reports

Wednesday 13 September, 2017

Aberdeen Smll Cos IT

Half-year Report

RNS Number : 5026Q
Aberdeen Smaller Co's Inc Tst PLC
13 September 2017
 

Aberdeen Smaller Companies Income Trust PLC

Half Yearly Financial Report for the six months to 30 June 2017

 

 

OBJECTIVE

The objective of the Company is 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.

 

BENCHMARK

FTSE SmallCap Index - excluding Investment Companies (total return).

 

HIGHLIGHTS

-         Aberdeen Smaller Companies Income Trust has delivered strong performance for the six months to 30 June 2017.  The net asset value rose 14.5% on a total return basis compared to a rise of 8.8% in the benchmark.

-         The Company's long term performance is good, delivering outperformance of 6.8% and 5.0%, relative to the benchmark, over three and five years respectively. 

-         From 2011 onwards, the Company's dividends have grown each year and this has continued into 2017 with an increased first and second quarter dividends of 1.75p each (2016 - 1.70p each).

 

 

For further information please contact:-

 

Jonathan Allison, Senior Investment Manager,                                                         020 7463 6240

Aberdeen Asset Management Limited

 

 

 

HIGHLIGHTS

 


30 June 2017

31 December 2016

% change

Equity shareholders' funds (£'000)

65,727

58,133

+13.1

Net asset value per share

297.28p

262.93p

+13.1

Share price (mid-market)

231.00p

203.50p

+13.5

Discount to adjusted net asset value{A}

21.8%

22.1%


Dividend yield

3.0%

3.4%



{A}        Based on IFRS net asset value above reduced by dividend adjustment of 1.75p (31 December 2016 - 1.75p).

 

PERFORMANCE (TOTAL RETURN)


Six months ended

1 year ended

3 years ended

5 years ended


30 June 2017

30 June 2017

30 June 2017

30 June 2017

Share price

+ 15.4%

+ 31.8%

+ 21.6%

+ 132.2%

Net asset value per share

+ 14.5%

+ 32.2%

+ 40.9%

+ 137.9%

FTSE SmallCap Index (ex IC's)

+ 8.8%

+ 28.4%

+ 34.1%

+ 132.9%

FTSE All-Share Index

+ 5.5%

+ 18.1%

+ 23.9%

+ 62.2%




All figures are for total return and assume re-investment of net dividends excluding transaction costs.

 

 

INTERIM BOARD REPORT - CHAIRMAN'S STATEMENT

Performance

It is pleasing to report that the Trust performed strongly over the six month period to 30 June 2017, with a total NAV return of 14.5%, outperforming its benchmark by 5.7%. Likewise, the share price too staged a strong recovery returning 15.4% and we have seen the discount narrow slightly over the period.  The Trust has also performed strongly over the longer term and outperformed its benchmark over both 3 and 5 year periods. 

 

After lagging their larger peers for much of 2016, UK smaller companies have led the way in performance terms during the first half of this year. The Trust's benchmark, the FTSE Small Cap ex-IT Index, was up 8.8% versus the FTSE 250 up 8.5% and FTSE 100 up 4.7%. Equity performance has outpaced that of bonds with the Government All Stocks and UK Corporate Bond indices up 0.3% and 2.7% respectively. All of the above percentages are in total return terms.

 

Overview

The June general election which resulted in a hung parliament has only increased uncertainty over the UK's political and economic outlook. UK GDP growth forecasts have been lowered and economic progress may be more challenging, at least in the short to medium term. The UK annual consumer price inflation (CPI) rose to 2.9% in June - a four-year high - although there are signs that some of the factors influencing this rise are reducing, most notably falling energy prices. This might well dissuade the Bank of England from raising interest rates too quickly.  Global GDP growth on the other hand continues to pick up and should hold up well for the remainder of this year and into 2018 which should be supportive for equities overall.

 

During the period under review, Scandinavian Tobacco Group was introduced into the portfolio, the Company's first investment into an overseas equity following the Board's authority to invest up to 10% of the Trust's assets into non-UK equities.  The diversification of the portfolio's holdings with earnings derived from both UK and overseas markets will assist the Company to deliver sound total return performance. 

 

Investee Company Stewardship

We support the Manager's emphasis on company stewardship and I would like to highlight two examples of recent engagement on that front. A meeting was held with Oxford Instruments' Chairman Alan Thomson to discuss what needed to be done to turn around what has been a difficult few years for that company. Amongst other things the Chairman talked about the increased rigour with which the Oxford Instruments' board is overseeing the management of each business unit with special emphasis on the recovery plans for loss-making operations within the Industrials division. A meeting with Elementis' CEO and CFO sought insight into Elementis' acquisition of the personal care and chemicals company, SummitReheis, particularly the due diligence around potential health issues associated with its use of aluminium in anti-perspirants. 

 

Gearing/Debt

There has been no change to the level of borrowings with £7m of the total £10m facility currently deployed.

The Trust's gearing continues to be used largely to fund the fixed income portfolio, which provides a good yield enhancement on what is relatively attractively priced debt.

 

We continually assess our debt levels and feel quite comfortable that there is flexibility either to put money to work quickly should interesting opportunities arise or to reduce the fixed interest component of the portfolio if we felt it appropriate. 

 

Dividend

The Board has announced increased first and second quarter dividends of 1.75p each (2016 - 1.70p each). The Manager continues to look for fixed income opportunities to further enhance the yield but remains cautious on stretched bond valuations and for that reason the portfolio is likely to lean on the equity holdings as the source of both capital and income growth for the foreseeable future.

 

The revenue account was boosted by special dividends from both Elementis and Savills in the period but, on the whole, the level of specials has reduced this year compared to the previous two. This may reflect caution on the outlook for the years ahead or anticipate the emergence of interesting acquisition opportunities.

 

Good earnings growth from our portfolio companies has translated into solid dividend growth, leaving the revenue account in a healthy state. The Trust has a strong level of revenue reserves which can be called upon to support the dividend should more challenging conditions emerge.

 

Board Composition

As reported in the 2016 Annual Report I took over the chairmanship of the Company following Carolan Dobson's retirement from the Board at the AGM in April 2017.  We also reported at that time that the Board was undertaking a search for a new Director.  I am pleased to report the appointment of Dagmar Kent Kershaw as an independent non-executive director with effect from 2 May 2017.   Dagmar has over 20 years' investment experience specialising in credit and structured finance markets.

 

Manager

Shareholders will be aware that the holding company of the Company's Manager, Aberdeen Asset Management PLC, merged with Standard Life on 14 August 2017.  The Board will continue to monitor closely the impact of this merger on the Company and to ensure that satisfactory arrangements are in place for the continued effective management and successful performance of the Company.

 

Outlook

The uncertainty arising from Brexit and the risk of over-exposure to potentially slowing growth in the UK needs careful consideration. Unfortunately such consideration will remain difficult until we obtain more clarity on the likely direction of some of the key negotiating topics on Brexit including trade deals, customs unions and freedom of movement. Another important consideration is the impact of higher inflation on the companies in the Trust. What we do know is that businesses that have proven best equipped to counter inflationary forces tend to have stronger pricing power, flexible supply chains and diversified earning streams, the qualities on which the Manager places great importance.

 

As a Board we are reassured that the Manager remains optimistic about both the quality and diversity of companies on offer at the smaller end of the market and, with the Company's share price at a sizeable discount to its net asset value, this presents an attractive means of accessing this opportunity.

 

Robert Lister

Chairman

 

12 September 2017

 

 

INTERIM BOARD REPORT - OTHER

 

Principal Risks and Uncertainties

There are a number of risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. The Board has identified the principal risks and uncertainties facing the Company together with a description of the mitigating actions it has taken.  They can be summarised under the following headings:

 

-     Investment and Market

-     Investment Portfolio Management

-     Gearing

-     Income and Dividend

-     Reliance on Third Party Service Providers

 

Details of these risks are provided in detail on pages 5 to 6 of the 2016 Annual Report.   The principal risks have not changed nor are they expected to change in the second half of the financial year ended 31 December 2017.

 

The impact on the risks of the Company following the implementation of the 'Leave' decision of the EU Referendum is difficult to assess at this stage although it may affect the Company's risk profile by introducing potentially significant new uncertainties and instability in financial markets as the United Kingdom negotiates its exit terms.

 

Going Concern

In accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued in September 2014, the Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate. The Company's assets consist principally of equity shares in companies listed on the London Stock Exchange which are, in most circumstances, realisable within a short timescale.

 

The Directors have a reasonable expectation that the Company has adequate financial resources to continue in operational existence for the foreseeable future and at least 12 months from the date of approval of this Half Yearly Report. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 

 

Directors' Responsibility Statement

The Directors are responsible for preparing the Half Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

 

-        the condensed set of Financial Statements has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'

-        the Interim Board Report includes a fair review of the information required by rule 4.2.7R of the Disclosure and Transparency Rules (being an indication of 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 financial year)

-        the Interim Board Report includes a fair review of the information required by 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

 

The Half Yearly Financial Report for the six months to 30 June 2017 comprises the Interim Board Report and a condensed set of financial statements.

 

For and on behalf of the Board of Aberdeen Smaller Companies Income Trust PLC

 

Robert Lister

Chairman

 

12 September 2017

 

 

INVESTMENT MANAGER'S REVIEW

Equity Portfolio

The portfolio delivered strong performance for the first six months of 2017 with the Trust posting a total NAV return of 14.5% versus a return of 8.8% from the benchmark.  Stock selection from Industrials and Financials helped to deliver that outperformance with XP Power and Berendsen, within Industrials, and Burford Capital and Rathbones, within Financials, being the stand out performers.

 

The first half of the year takes in the intensive earnings season following the release of many of our businesses' full year results. For the most part these have been in line with expectations with some steady earnings progress and pleasing dividend increases. We have also had a productive period for company meetings which has allowed us to solidify our views on some of the businesses we have been following more recently and there have been some exciting new additions to the Trust.

 

Two material events in the period included the successful bid for Exova by Element Materials Technology Group. This was slightly unfortunate as despite the boost to the share price we wouldn't have chosen to exit at this price. We engaged with the Chairman and management team to express our concerns, which they took on board, but unfortunately we were not in a position to influence the outcome in this instance. We recycled that capital into increasing our weight in Manx Telecom which has a strong 5.5% yield which should grow steadily over time. Secondly, Berendsen received a set of bids from French textile cleaning business Elis. The first two were unanimously rejected by the board but a third higher offer of 1250p plus interim dividend was accepted. Again this was slightly disappointing given we felt that management, in recent meetings, had presented a fairly comprehensive plan to deliver significant value to shareholders over time and we didn't feel that this capex led potential uplift was adequately reflected in the take-out multiple.

 

We introduced four new holdings during the period in Victoria, Scandinavian Tobacco Group, Workspace and Unite Group. Victoria is a carpet manufacturer (originally founded in 1895 from one small factory weaving tapestry carpets in Victoria Road, Kirkcaldy, Scotland!) with strong positions in the UK and Australia and a growing presence in Europe. The company sees a substantial opportunity to grow the business through acquisitions over the next couple of years and in doing so create a much larger group able to return substantial cash to shareholders or be attractive to a large US trade buyer. There are also opportunities to improve profitability through a restructuring of the manufacturing footprint and more efficient use of their logistics infrastructure.

 

Scandinavian Tobacco Group (STG) operates in the cigar niche of the tobacco industry with sales skewed to the developed markets of the US and Europe (c45% each) with penetration of cigars low in Asia but growing. Reflecting the maturity of the business, the group targets a 70% payout ratio and management expect to deliver steady revenue growth in the long term with operating profit growing at a slightly higher rate as they improve costs and leverage their scale. The shares currently yield around 5% and trade on an attractive low teens PE multiple.

 

Workspace is a real estate investment trust that provides fully serviced, flexible workspace solutions, typically to small and medium sized businesses in the London area, on short flexible leases. Alongside strong reversionary rent potential and increasing demand for flexible working space there is also considerable value sitting in their current re-development projects. The balance sheet is robust with a loan-to-value at the half year of 14% and the shares trade on an attractive 0.8x NAV with a prospective 2.8% dividend yield.

 

Finally Unite Group is a property investment company that specialises in the development, ownership and management of student accommodation in the UK. The attraction of this niche is the high operating yields plus real rental growth driven by rising numbers in higher education. Universities have to guarantee accommodation to all their first year students and there is a significant shortage of available beds which sees them having to turn to private providers such as Unite. It has a strong balance sheet with loan-to-value of 30% and shares trade on attractive 0.9x NAV with a 3.3% dividend yield.

 

Outside of those introductions we also participated in a small placing of Acal shares to fund its acquisition of a business called Variohm which is a manufacturer of switches and sensors. Its sales are concentrated in Acal's target markets of medical, transportation and industrial and the deal is accretive to earnings.

 

In terms of sales we took the decision to halve our weight in TT Electronics. Having reviewed our industrial holdings we concluded that this was one of our lower quality investments with a more challenging growth outlook in the medium to longer term. Transportation Sensing and Control, a core division and a major focus of the turnaround plan, is heavily exposed to the European auto cycle and in growth markets like China and the US they estimate it'll be another 5-8 years before they can generate meaningful revenues.

 

Interserve had an extremely difficult 2016 culminating in the resignation of CEO Adrian Ringrose late in the year. We have had a number of meetings with the management and new Chairman Glyn Barker over the last 12 months to understand the extent of the problem - largely stemming from some troublesome energy from waste contracts -  the remedial action they're taking to correct it and the harm this has done to the business overall. The balance sheet is stretched but they should remain well clear of their covenant levels and they have additional options on the table to bring debt down should they need to move more quickly. He also spoke very highly of the new CEO they have managed to recruit, Debbie White, who joins from French catering business Sodexo. He believes she has the energy and ambition to turn around the business and return the focus to the divisions with the most potential, namely Support and Equipment Services.

 

Our actions in the latter half of the period have been concentrated on improving the equity yield in the portfolio. A busy period of company meetings allowed us to re-appraise a number of top-up ideas and fortunately this coincided with strong performance from a number of lower yielders allowing capital to be re-allocated into higher yielders with attractive dividend growth prospects.

 

Relatedly, we took the decision to exit our small remaining weights in both Helical Bar and Enquest. The decision on Helical was driven by ongoing concerns about its concentrated London office exposure and stretched balance sheet. We used those proceeds to top-up Assura and Workspace as well as introduce a starter weight in Unite Group; all three have stronger yields with better growth prospects. After some additional research work by the team on the future prospects for oil & gas company Enquest we decided it would be sensible to exit the small sub-par weight in that name too. There has been some share price recovery over the course of the last 12 months and we felt that the capital upside potential, for one of the zero yielders in the portfolio, was no longer strong enough to outweigh the balance sheet and operational risks that persist.

 

Fixed Income Portfolio

At the portfolio level we continue to run a strategy of investing in short dated sterling bonds of high quality well financed companies. This will help to protect capital values in a rising yield environment.

 

Bond markets started the period with the expectation of global growth, but alongside this there were concerns that rising inflation may lead to both the withdrawal of quantitative easing in developed markets and an upward turn in the interest rate cycle. Total returns from the UK fixed income markets have been positive.  Corporate bonds have been the main beneficiary as investors continued the hunt for yield in an environment of low yielding government bonds.

 

At the start of the year we sold out of our position in the medium dated EDF 6% 2026 hybrid debt post their balance sheet refinancing and ahead of the French elections. Numerous questions still remain on both its nuclear power and large capex programmes. Going forward, low government bond yields in the UK may continue for some time possibly looking through higher inflation which has been distorted from sterling's depreciation following the Brexit vote.  Corporate bonds remain in demand and new issuance continues to be successfully absorbed. A prolonged period of rising yields may threaten the asset class but economic data and corporate earnings both remain relatively supportive for the time being.

 

Outlook

Political news both domestically and abroad continues to take centre stage but despite witnessing patches of volatility equity markets on the whole seem intent on climbing higher which does make us more than a little cautious although we still see good relative value at the smaller end of the market. Our portfolio actions and positioning will continue to be dictated by our rigorous, bottom up approach to stock selection, focusing on diversity of earnings, resilient business models and management teams that maintain a keen focus on cash flow.

 

Aberdeen Asset Managers Limited

 

12 September 2017

 

 



Distribution of Assets and Liabilities

As at 30 June 2017

 


Valuation at

Movement during the period

Valuation at


31 December




Gains/

30 June


2016

Purchases

Sales

Other{A}

(losses)

2017


£'000

%

£'000

£'000

£'000

£'000

£'000

%

Listed investments









Ordinary shares

57,527

99.0

8,025

(7,334)

-

7,334

65,552

99.7

Convertibles

1,055

1.8

-

-

-

(31)

1,024

1.6

Corporate Bonds

2,518

4.3

-

(485)

(13)

26

2,046

3.1

Other fixed interest

3,417

5.9

-

-

-

331

3,748

5.7


_______

_______

_______

_______

_______

_______

_______

_______


64,517

111.0

8,025

(7,819)

(13)

7,660

72,370

110.1


_______

_______

_______

_______

_______

_______

_______

_______

Current assets

818

1.4





509

0.8

Other current liabilities

(202)

(0.3)





(152)

(0.2)

Short-term Loan

(2,000)

(3.5)





(7,000)

(10.7)

Long-term loan

(5,000)

(8.6)





-

-


_______

_______





_______

_______

Net assets

58,133

100.0





65,727

100.0


_______

_______





_______

_______

Net asset value per share

262.9p






297.3p



_______






_______











{A}        Represents amortisation costs on debt securities of £13,000.

 

 

Condensed Statement of Comprehensive Income  

 



 Six months ended



 30 June 2017



 (unaudited)



 Revenue

 Capital

 Total


Notes

 £'000

 £'000

 £'000

Gains/(losses) on investments at fair value


-

7,660

7,660

Currency losses


-

-

-






Revenue





Dividend income

2

1,173

-

1,173

Interest income/(expense) from investments

2

101

(13)

88

Other income

2

2

-

2



_________

_________

_________



1,276

7,647

8,923



_________

_________

_________

Expenses





Investment management fees


(78)

(183)

(261)

Other administrative expenses


(204)

-

(204)

Finance costs


(25)

(57)

(82)



_________

_________

_________

Profit/(loss) before tax


969

7,407

8,376



_________

_________

_________

Tax expense

3

(8)

-

(8)



_________

_________

_________

Profit/(loss) attributable to equity holders

4

961

7,407

8,368



_________

_________

_________






Return per Ordinary share (pence)

5

4.35

33.51

37.86



_________

_________

_________






The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.

The Company does not have any income or expense that is not included in profit for the period, and therefore the "Profit/(loss) attributable to equity holders" is also the "Total comprehensive income attributable to equity holders".

All items in the above statement derive from continuing operations.

 

 

Condensed Statement of Comprehensive Income 

(Continued)

 



Six months ended

Year ended



30 June 2016

31 December 2016



(unaudited)

(audited)



Revenue

Capital

Total

Revenue

Capital


Notes

£'000

£'000

£'000

£'000

£'000

Gains/(losses) on investments at fair value


-

(4,220)

(4,220)

-

3,223

Currency losses


-

-

-

-

(3)








Revenue







Dividend income

2

1,120

-

1,120

1,887

-

Interest income/(expense) from investments

2

133

(14)

119

256

(27)

Other income

2

5

-

5

7

-



_______

_______

_______

_______

_______



1,258

(4,234)

(2,976)

2,150

3,193



_______

_______

_______

_______

_______

Expenses







Investment management fees


(67)

(156)

(223)

(138)

(322)

Other administrative expenses


(176)

-

(176)

(339)

-

Finance costs


(26)

(60)

(86)

(51)

(119)



_______

_______

_______

_______

_______

Profit/(loss) before tax


989

(4,450)

(3,461)

1,622

2,752



_______

_______

_______

_______

_______

Tax expense

3

-

-

-

-

-



_______

_______

_______

_______

_______

_______

Profit/(loss) attributable to equity holders

4

989

(4,450)

(3,461)

1,622

2,752

4,374



_______

_______

_______

_______

_______








Return per Ordinary share (pence)

5

4.47

(20.12)

(15.65)

7.34

12.45

19.79



_______

_______

_______

_______

_______








All items in the above statement derive from continuing operations.

 

 

Condensed Balance Sheet

 



As at

As at

As at



30 June
2017

30 June
2016

31 December 2016



(unaudited)

(unaudited)

(audited)


Notes

£'000

£'000

£'000

Non-current assets





Ordinary shares


65,552

49,696

57,527

Convertibles


1,024

980

1,055

Corporate bonds


2,046

2,540

2,518

Other fixed interest


3,748

3,249

3,417



____________

____________

____________

Securities at fair value


72,370

56,465

64,517



____________

____________

____________

Current assets





Cash and cash equivalents


191

1,410

547

Other receivables


318

328

271



____________

____________

____________



509

1,738

818



____________

____________

____________

Current liabilities





Short-term loan


(7,000)

(2,000)

(2,000)

Trade and other payables


(152)

(153)

(202)



____________

____________

____________



(7,152)

(2,153)

(2,202)



____________

____________

____________

Net current liabilities


(6,643)

(415)

(1,384)



____________

____________

____________

Total assets less current liabilities


65,727

56,050

63,133






Non-current liabilities





Long-term loan


-

(5,000)

(5,000)

Net assets


65,727

51,050

58,133



____________

____________

____________

Issued capital and reserves attributable to equity holders





Called-up share capital


11,055

11,055

11,055

Share premium account


11,892

11,892

11,892

Capital redemption reserve


2,032

2,032

2,032

Capital reserve

6

38,020

23,411

30,613

Revenue reserve


2,728

2,660

2,541



____________

____________

____________

Equity shareholders' funds


65,727

51,050

58,133



____________

____________

____________






Net asset value per Ordinary share (pence)

5

297.28

230.89

262.93



____________

____________

____________

 

 

Condensed Statement of Changes in Equity

 

Six months ended 30 June 2017 (unaudited)











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 December 2016


11,055

11,892

2,032

30,613

2,541

58,133

Revenue profit for the period


-

-

-

-

961

961

Net capital gain for the period


-

-

-

7,407

-

7,407

Dividends paid in the period


-

-

-

-

(774)

(774)



______

______

______

______

______

______

Balance at 30 June 2017


11,055

11,892

2,032

38,020

2,728

65,727



______

______

______

______

______

______









Six months ended 30 June 2016 (unaudited)











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 December 2015


11,055

11,892

2,032

27,861

2,423

55,263

Revenue profit for the period


-

-

-

-

989

989

Net capital loss for the period


-

-

-

(4,450)

-

(4,450)

Dividends paid in the period


-

-

-

-

(752)

(752)



______

______

______

______

______

______

Balance at 30 June 2016


11,055

11,892

2,032

23,411

2,660

51,050



______

______

______

______

______

______









Year ended 31 December 2016 (audited)











Share

Capital






Share

premium

redemption

Capital

Revenue




capital

account

reserve

reserve

reserve

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 December 2015


11,055

11,892

2,032

27,861

2,423

55,263

Revenue profit for the year


-

-

-

-

1,622

1,622

Net capital gain for the period


-

-

-

2,752

-

2,752

Dividends paid in the year


-

-

-

-

(1,504)

(1,504)



______

______

______

______

______

______

Balance at 31 December 2016


11,055

11,892

2,032

30,613

2,541

58,133



______

______

______

______

______

______



 

 

Condensed Cash Flow Statement

 


Six months ended

Six months ended

Year
ended


30 June
2017

30 June
2016

31 December 2016


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000

Cash flows from operating activities




Investment income received

1,250

1,193

2,134

Investment management fees paid

(296)

(226)

(420)

Other cash expenses

(217)

(180)

(343)


___________

___________

___________

Cash generated from operations

737

787

1,371





Interest paid

(85)

(88)

(170)

Overseas taxation suffered

(14)

-

-


___________

___________

___________

Net cash inflows from operating activities

638

699

1,201


___________

___________

___________

Cash flows from investing activities




Purchases of investments

(8,025)

(5,967)

(9,365)

Sales of investments

7,805

4,416

7,201


___________

___________

___________

Net cash outflows from investing activities

(220)

(1,551)

(2,164)


___________

___________

___________

Cash flows from financing activities




Equity dividends paid

(774)

(752)

(1,504)


___________

___________

___________

Net cash outflows from financing activities

(774)

(752)

(1,504)


___________

___________

___________

Net decrease in cash and cash equivalents

(356)

(1,604)

(2,467)

Cash and cash equivalents at the start of the period

547

3,014

3,014


___________

___________

___________

Cash and cash equivalents at the end of the period

191

1,410

547


___________

___________

___________

Cash and cash equivalents comprise:




Cash held at bank

191

1,410

547


___________

___________

___________

 

 



NOTES TO THE ACCOUNTS

 

1.

Accounting policies


Basis of preparation


The condensed financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') 34 - 'Interim Financial Reporting', as adopted by the International Accounting Standards Board ('IASB'), and interpretations issued by the International Financial Reporting Interpretations Committee ('IFRIC') of the IASB. They have also been prepared using the same accounting policies applied for the year ended 31 December 2016 financial statements, which received an unqualified audit report.




The financial statements have been prepared on a going concern basis. In accordance with the Financial Reporting Council's guidance on 'Going Concern and Liquidity Risk' the Directors have undertaken a review of the Company's assets which principally consist of a diverse portfolio of listed equity shares which, in most circumstances, are realisable within a very short timescale.

 



 Six months ended

 Six months ended

 Year
ended



 30 June
2017

 30 June
2016

 31 December 2016

2.

Income

£'000

£'000

£'000


Income from investments





Dividend income from UK equity securities

939

959

1,619


Dividend income from overseas equity securities

195

142

222


Property income distribution

39

19

46



___________

___________

___________



1,173

1,120

1,887


Interest income from investments

101

133

256



___________

___________

___________



1,274

1,253

2,143



___________

___________

___________








 Six months ended

 Six months ended

 Year
ended



 30 June
2017

 30 June
2016

 31 December 2016


Other income

£'000

£'000

£'000


Bank interest

-

1

2


Underwriting commission

2

4

5



___________

___________

___________



2

5

7



___________

___________

___________







The Company amortises the premium or discount on acquisition on debt securities against the capital reserve. For the six months to 30 June 2017 this represented £13,000 (30 June 2016 - £14,000; 31 December 2016 - £27,000) which has been reflected in the capital column of the Condensed Statement of Comprehensive Income.

 

3.

Taxation


The tax expense reflected in the Condensed Statement of Comprehensive Income represents irrecoverable withholding tax suffered on overseas dividend income.

 

4.

Dividends


The following table shows the revenue for each period less the dividends declared in respect of the financial period to which they relate.








Six months ended

Six months ended

Year ended



30 June 2017

30 June 2016

31 December 2016



£'000

£'000

£'000


Revenue

961

989

1,622


Dividends declared

(774){A}

(752){B}

(1,515){C}



207

237

107


{A}      Dividends declared relate to first two interim dividends (both 1.75p each) declared in respect of the financial year 2017.


{B}      Dividends declared relate to first two interim dividends (both 1.70p each) declared in respect of the financial year 2016.


{C}      Dividends declared relate to the four interim dividends declared in respect of the financial year 2016 totalling 6.85p.

 



 Six months ended

 Six months ended

 Year ended



 30 June 2017

 30 June 2016

 31 December 2016

5.

Return and net asset value per share

 p

 p

 p


Revenue return

4.35

4.47

7.34


Capital return

33.51

(20.12)

12.45



___________

___________

___________


Total return

37.86

(15.65)

19.79



___________

___________

___________


The returns per share are based on the following figures:








 Six months ended

 Six months ended

 Year ended



 30 June 2017

 30 June 2016

 31 December 2016



 £'000

 £'000

 £'000


Revenue return

961

989

1,622


Capital return

7,407

(4,450)

2,752



___________

___________

___________


Total return

8,368

(3,461)

4,374



___________

___________

___________


Weighted average number of shares in issue

22,109,765

22,109,765

22,109,765



___________

___________

___________







The net asset value per share is based on net assets attributable to shareholders of £65,727,000 (30 June 2016 - £51,050,000; 31 December 2016 - £58,133,000) and on 22,109,765 (30 June 2016 - 22,109,765; 31 December 2016 - 22,109,765) Ordinary shares in issue at each period end.

 

6.

Capital reserves


The capital reserve reflected in the Condensed Balance Sheet at 30 June 2017 includes gains of £21,773,000 (30 June 2016 - gains of £10,385,000; 31 December 2016 - gains of £16,838,000) which relate to the revaluation of investments held at the reporting date.

 

7.

Transaction costs


During the period expenses were incurred in acquiring or disposing of investments classified as fair value. These have been expensed through capital and are included within gains/(losses) on investments held at fair value in the Condensed Statement of Comprehensive Income. The total costs were as follows:





Six months ended

Six months ended

Year
ended



30 June
2017

30 June
2016

31 December 2016



£'000

£'000

£'000


Purchases

32

22

37


Sales

5

5

6



37

27

43

 

8.

Fair value hierarchy


IFRS 13 'Fair Value Measurement' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making measurements. The fair value hierarchy has the following levels:




Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;


Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and


Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).




The financial assets and liabilities measured at fair value in the Condensed Balance Sheet are grouped into the fair value hierarchy as follows:











Level 1

Level 2

Level 3

Total


At 30 June 2017 (unaudited)

Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted equities

a)

72,370

-

-

72,370


Quoted bonds

b)

-

3,070

-

3,070




________

________

________

________




72,370

3,070

-

75,440




________

________

________

________











Level 1

Level 2

Level 3

Total


At 30 June 2016 (unaudited)

Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted equities

a)

52,945

-

-

52,945


Quoted bonds

b)

-

3,520

-

3,520




________

________

________

________




52,945

3,520

-

56,465




________

________

________

________











Level 1

Level 2

Level 3

Total


At 31 December 2016 (audited)

Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted equities

a)

60,944

-

-

60,944


Quoted bonds

b)

-

3,573

-

3,573




________

________

________

________




60,944

3,573

-

64,517




________

________

________

________









a) Quoted equities


The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.




b) Quoted bonds


The fair value of the Company's investments in quoted corporate bonds has been determined by reference to their quoted bid prices at the reporting date. 




There have been no transfers of assets or liabilities between levels of the fair value hierarchy during any of the above periods.

 

9.

Related party transactions


There were no related party transactions during the period.

 

10.

Transactions with the Manager


The Company has agreements with Aberdeen Fund Managers Limited ("AFML" or the "Manager") for the provision of investment management, secretarial, accounting and administration and promotional activities.




The management fee is at an annual rate of 0.75% of the net assets of the Company adding back bank debt, calculated and paid monthly. During the period £261,000 (30 June 2016 - £223,000 ; 31 December 2016 - £460,000) of investment management fees were payable to the Manager, with a balance of £45,000 (30 June 2016 - £36,000; 31 December 2016 - £80,000) being payable to AFML at the period end. There were no commonly managed funds held in the portfolio during the period to 30 June 2017 (30 June 2016 and 31 December 2016 - none). The management fee is chargeable 30% to revenue and 70% to capital.




Expenses of £30,000 (30 June 2016 £27,000; 31 December 2015 - £55,000) were payable to the Manager in connection with the promotion of the Company. The balance outstanding at the period end was £15,000 (30 June 2016 - £14,000; 31 December 2016 - £14,000).

 

11.

Segmental information


The Company is engaged in a single segment of business, which is to invest in equity securities and debt instruments. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment.

 

12.

Publication of non-statutory accounts


The financial information contained in this Half Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 June 2017 and 30 June 2016 has not been audited.




The information for the year ended 31 December 2016 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 accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006.

 

13.

 This Half Yearly Financial Report was approved by the Board on 12 September 2017.

 

Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise.  Investors may not get back the amount they originally invested

 

 

Investment Portfolio - Ordinary Shares

As at 30 June 2017

 



Market

Total



value

portfolio

Company

Sector

£'000

%

XP Power


2,667

3.7

A power solutions business that designs and manufactures power convertors used by customers to ensure their electronic equipment can function safely and efficiently. With over 5,000 different products, XP Power can provide a full value add capability to its customers. 

Electronic & Electrical Equipment



Assura


2,297

3.2

Assura is a long-term investor and developer of primary care property, working with general practitioners, health professionals and National Health Services to deliver patient care.

Real Estate Investment Trusts



Acal


2,286

3.2

Acal is a supplier of niche electronic products, manufacturing customs designed and built electronics to industrial and medical companies across Europe and South Africa.

Support Services



Berendsen


2,267

3.1

Support services business specialising in the sourcing, leasing and maintenance of textiles for industry, commerce and public sector organisations.  It provides a crucial service to its customers, keeping their operations running smoothly and cost effectively.

Support Services



Chesnara


2,238

3.1

Chesnara is a holding company engaged in the management of life and pension books in the UK, Sweden and the Netherlands. The overriding strategy is to deliver a reliable dividend stream to shareholders funded from the emergence of surplus cash from their various life assurance subsidiaries.

Life Insurance



Morgan Sindall


2,161

3.0

Morgan Sindall operates a specialist construction group in the United Kingdom and the Channel Islands. The main activities include office design, fitting out, refurbishment, building contracting, property investment and related specialist services.

Construction & Materials



Euromoney Institutional Investor


1,913

2.6

International business-to-business information company. Euromoney's publications provide extensive financial and business information and are delivered largely in digital format on a yearly subscription basis which ensures a strong stream of recurring revenues.

Media



Elementis


1,894

2.6

Elementis is a global specialty chemicals company that specialises in three areas: Specialty products, Surfactants and Chromium. The products they produce are used by customers to enhance the operating performance of their own products and so are a small, but critical element of the supply chain ensuring strong pricing power.

Chemicals



Oxford Instruments


1,890

2.6

Oxford Instruments produces advanced instrumentation for use in scientific research, chemical analysis, patient monitoring, semiconductor processing and diagnostic imaging.

Electronic & Electrical Equipment



BBA Aviation


1,857

2.6

BBA Aviation is a market leading provider of global aviation support and aftermarket services. The core Flight Support business provides specialist on-airport services like refuelling and ground handling to private, business and commercial aircraft. The company operates in over 300 locations across 5 continents.

Industrial Transportation



Ten largest investments


21,470

29.7

 

 

Investment Portfolio - Other

as at 30 June 2017

 



Market

Total



value

portfolio

Company

Sector

£'000

%

Manx Telecom

Fixed Line Telecommunications

1,807

2.5

Aveva Group

Software & Computer Services

1,770

2.4

Dechra Pharmaceuticals

Pharmaceuticals & Biotechnology

1,749

2.4

Hansteen

Real Estate Investment Trusts

1,748

2.4

Rathbone Brothers

Financial Services

1,701

2.4

Victrex

Chemicals

1,651

2.3

Close Brothers

Financial Services

1,630

2.3

Wilmington

Media

1,584

2.2

Dignity

General Retailers

1,559

2.1

Fisher (James) & Sons

Industrial Transportation

1,512

2.1

Twenty largest investments


38,181

52.8

Robert Walters

Support Services

1,468

2.0

Burford Capital

Financial Services

1,457

2.0

Devro

Food Producers

1,426

2.0

Smart Metering Systems

Support Services

1,419

2.0

Barr (AG)

Beverages

1,414

2.0

Cairn Homes

Household Goods & Home Construction

1,343

1.9

Xaar

Electronic & Electrical Equipment

1,321

1.8

RPC Group

General Industries

1,311

1.8

Stock Spirits Group

Beverages

1,270

1.7

Abcam

Pharmaceuticals & Biotechnology

1,266

1.7

Thirty largest investments


51,876

71.7

Savills

Real Estate Investment & Services

1,239

1.7

Genus

Pharmaceuticals & Biotechnology

1,228

1.7

Intermediate Capital Group

Financial Services

1,136

1.6

Hiscox

Non-Life Insurance

1,115

1.5

Fenner

Industrial Engineering

1,081

1.5

Scandinavian Tobacco

General Retailers

1,067

1.5

Fuller Smith & Turner 'A'

Travel & Leisure

1,052

1.4

Workspace

Real Estate Investment Trusts

1,009

1.4

Interserve

Support Services

847

1.2

Huntsworth

Media

792

1.1

Forty largest investments


62,442

86.3

Mothercare

General Retailers

659

0.9

Unite Group

Real Estate Investment Trusts

659

0.9

Victoria

Household Goods & Home Construction

656

0.9

Keller Group

Construction & Materials

623

0.9

TT Electronics

Electronic & Electrical Equipment

468

0.6

Andes Energia

Electronic & Electrical Equipment

45

0.1

Total Ordinary shares


65,552

90.6

 

 

Investment Portfolio - Other Investments

As at 30 June 2017

 


Market

Total


value

portfolio

Company

£'000

%

Convertibles



Balfour Beatty Cum Conv 10.75%

1,024

1.4


________

________

Total Convertibles

1,024

1.4

Corporate Bonds

________

________

Anglian Water 4.5% 2026

575

0.8

Wales & West Utilities Finance 6.75% 2036

534

0.7

SSE 3.875% Var Perp              

513

0.7

HBOS Cap Funding 6.461% Var Perp

424

0.6


________

________

Total Corporate Bonds

2,046

2.8

Preference shares

________

________

General Accident 8.875%

1,449

2.0

Aviva 8.75%

1,441

2.0

Ecclesiastical Insurance 8.625%

858

1.2

Total Preference shares

3,748

5.2


________

________

Total Other Investments

6,818

9.4


________

________

Total Investments

72,370

100.0


________

________


All investments are listed on the London Stock Exchange (Sterling based).

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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