Future Dividends and Gearing
News release: 18 November 2008
Shires Smaller Companies plc
Future dividends and gearing
The last two months have seen one of the most dramatic periods in the history of financial markets, the impact of which has tipped the U.K. into recession. The consequential volatility in the Stock Market has had a major impact on the Company's net asset value and the level of the Company's gearing. Moreover the deteriorating economic prospects are expected to adversely affect smaller companies' earnings and dividends albeit the Company's revenue account has remained robust this year. We expect the revenue account to face much greater pressure in 2009 as dividend cuts spread beyond the financial sector. In addition, interest earned on cash reserves will be reduced following the 1.5% reduction in Bank Rate. The market volatility has also significantly increased the structural risk of the Company's zero coupon financing.
The Board expects that the fourth interim dividend in respect of the year ending 31 December 2008 will be maintained at 4.90p per share to give a total dividend per share for the year of 15.10p.
The Company currently has cash reserves of £15.8 million and its gearing level is 171%. It is the intention to repay the December 2008 tranche of zero coupon finance on maturity at a value £11.1 million and, also on maturity, the September 2009 tranche (£5.4 million). This would leave outstanding the January 2010 tranche of zero coupon finance (maturity value £5.3 million) together with the term loan of £10 million. It is the current intention of the Board that it will not replace the December and September amounts of zero coupon finance with new borrowings. However, the Board intends to keep the structure of the Company under review in light of the Company's investment objective.
After discussion with its advisers and after careful consideration of its projected income and gearing levels over the next financial year, the Board anticipates being in the position to pay a total dividend per share for the year ending 31 December 2009 of not less than 7p per share, equivalent to a yield of 8% on the current share price of 86p. The Board anticipates that it will be able to maintain the quarterly dividends for the year ending 31 December 2009 at 1.75p per share, although the final interim dividend may be higher depending on the Company's net income for the full financial year.
The ability of the Company to maintain these levels of quarterly dividends will depend on the level of dividends and interest on the Company's portfolio and the future gearing level and structure of the Company. These statements of expected dividends are subject to market conditions and the absence of unforeseen circumstances.
Enquiries:
Aberdeen Asset Managers Limited
William Hemmings, Head of Investment Companies Tel: 020 7463 6000
Kenny Harper, Manager Investment Trust Investor Relations Tel: 07825 011075
G&N Collective Funds Services
Nigel Russell, Graeme Caton, Graham Reeves Tel: 0131 226 4411
This information is provided by RNS
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