TIDMFCS
RNS Number : 6738T
F&C Global Smaller Companies PLC
17 December 2012
Date: 17 December 2012
Contact: Peter Ewins
F&C Management Limited
020 7628 8000
F&C Global Smaller Companies PLC
Unaudited statement of results
for the half-year ended 31 October 2012
Summary of Unaudited Results
Attributable to shareholders 31 October 2012 30 April 2012 % Change
-------------------------------------------------------- ----------------- ----------------- ----------
Share price 611.50p 588.00p +4.0
-------------------------------------------------------- ----------------- ----------------- ----------
Net asset value per share (debenture at nominal value) 623.35p 596.35p +4.5
-------------------------------------------------------- ----------------- ----------------- ----------
Net asset value per share (debenture at market value) 618.82p 590.60p +4.8
-------------------------------------------------------- ----------------- ----------------- ----------
Net assets GBP264.8m GBP246.8m +7.3
-------------------------------------------------------- ----------------- ----------------- ----------
Half-year ended Half-year ended % Change
31 October 2012 31 October 2011
-------------------------------------------------------- ----------------- ----------------- ----------
Revenue return per share 3.76p 3.41p +10.3
-------------------------------------------------------- ----------------- ----------------- ----------
Interim dividend per share 2.00p* 1.63p +22.7
-------------------------------------------------------- ----------------- ----------------- ----------
* Payable on 31 January 2013 to shareholders on the register at
28 December 2012.
Manager's Review
The tough macroeconomic backdrop which held back share prices in
the 2011/12 financial year, continued to create a headwind in the
early months of the current year. However, despite this, the value
of the Company's investment portfolio rose as share prices received
a lift from the concerted efforts of the world's Central Banks to
bolster the global economic outlook.
Performance and the discount
The Company's Benchmark is a blended index of the returns from
the Numis UK Smaller Companies (excluding investment companies)
Index (30%) and the MSCI World All Country ex UK Small Cap Index
(70%), and in the period this showed a total return of 2.5%. Strong
stock selection meant that the net asset value per share ("NAV")
total return for the period was ahead of this, at 5.2%. In
recognition of good performance in recent years, we were pleased to
hear that the fund had won the Global Investment Trust of the year
for 2012 award from Money Observer magazine.
Over the six months, the share price rose by 4%. The discount to
NAV, taking the debenture at fair value and including current
period income, ended the period at 1.2%. During the period,
1,105,326 new shares were issued (2.7% of the initial share
capital), on occasions when the share price was standing at a
premium to the prevailing NAV, to meet demand for the shares in the
market. It is pleasing that the Company's shares have for some time
now been trading close to NAV and the Board is keen to use issuance
and potentially buyback powers in the future to ensure that this
continues to be the case.
Dividends
After a strong year for income in 2011/12, the new period has
maintained this trend with many of the stocks on our portfolio
paying higher dividends. In the Report and Accounts for 2011/12,
the Chairman flagged that the Board was looking to reduce the
disparity between the Company's interim and final dividend
payments. As a consequence of this and the encouraging start to the
year for the revenue account, the interim dividend for this year is
being increased by 22.7%, which should represent a higher
proportion of the total year's dividend.
Economic and market background
The travails of Europe continued to weigh heavily in the period,
with the well versed problems of Greece being mirrored elsewhere in
the Eurozone, most critically in Spain, with tax rises and
government spending reductions having a predictably negative impact
on unemployment and the housing market. The high level of Spain's
and several other countries' government bond interest rates,
prompted moves from the European authorities towards potentially
unlimited European Central Bank directed government bond purchases.
It remains possible that some countries may be forced to leave the
Eurozone in due course.
The US economy made progress in the period, although the pace of
expansion slowed during the Summer in the run-up to the
presidential election. More positively, there are signs that the
housing market may be improving and jobs are being created, with
positive repercussions for consumer confidence and the banks.
Closer to home, the UK economy pulled out of a short technical
recession in the summer, but the weakness of European export
markets continues to hamper progress and we have yet to see the
full effect of the austerity squeeze.
Elsewhere the leading Asian and Latin American economies are
also facing challenges. The investment and export driven boom of
China is slowing at the same time that the political leadership of
the country is changing. The moderation of pace is not a surprise
given the rapid development of the last few years, and may indeed
be a positive if the bubble in some parts of the real estate market
deflates in a controlled fashion. Japan's economy appears to have
gone back into reverse in recent months with exports under
pressure, confounding our earlier hopes that the post 2011
earthquake rebuilding process would lift the economy for a more
prolonged period. The commodity driven economy of Brazil is
experiencing a much weaker period, not helped by government
interference in a number of sectors, though a series of interest
rate cuts in 2012 should help the outlook.
The downbeat global economic news was unhelpful for equity
markets, but the move in the US to another round of quantitative
easing, mirrored by similar moves in the UK and Japan, and the
initiatives by the ECB to underpin the stability of the Eurozone,
led to a much improved performance in the latter part of the six
months.
Portfolio performance
In the 2011/12 financial year, all five regional portfolio blocs
were ahead of the local small cap indices, and it is good to be
able to report that we have again delivered consistent
outperformance in the first six months of the year.
Geographical performance (total return sterling adjusted)
for the half year ended 31 October 2012
Local smaller companies
Portfolio index
USA +5.7% +1.8%
UK +9.2% +6.5%
Continental Europe +6.8% +2.1%
Japan -3.9% -5.1%
Rest of World +4.2% +1.0% (Pacific
ex Japan)
+3.5% (Latin America)
------------------------ -------------------------
Source: F&C Management Limited
In the US the best contribution came from a retailer, Conn's,
which benefited from good sales in furniture and bedding lines. We
have been generally cautious on banks, but Cardinal Financial is
one in which we have confidence, and this was repaid as the company
posted strong results with low credit losses and accelerating
lending growth. A number of housing related stocks were lifted by
signs of improvement in the underlying market, and Mohawk
Industries, the flooring supplier rose as its profit margins
jumped. LKQ, a distributor of recycled car parts did well, with the
market warming to the potential of its recent acquisitions in the
US and UK. It was pleasing to see that the purchase of Vail
Resorts, a ski resort operator, gave us an early positive return.
We had bought in after the shares fell back as a consequence of
unhelpful winter weather. On the downside, two consultancy
businesses FTI Consulting and ICF International underperformed, the
latter due to fears of government related business falling away.
Elsewhere The Andersons, an agribusiness fell back on the back of
the disappointing US grain harvest.
The UK portfolio produced the best return over the period. Two
of the more important contributors to this were Lupus Capital,
which supplies window related products, and plant hire company
Ashtead Group. Both have significant businesses in the US and have
benefited from the tentative upturn in the US construction market.
Shares in marine services business James Fisher jumped as on-going
investment in port infrastructure in Asian countries and an upturn
in spending in offshore markets lifted its performance. Car sales
in the UK have been surprisingly strong, helping Vertu Motors'
performance while of the recent new holdings, Quindell Portfolio, a
software and consultancy business serving the telecoms and
insurance sector, did particularly well as it expanded its contract
base. There has been some consolidation in the North Sea, and
Nautical Petroleum was taken over at a good premium to the
prevailing price. Among the weaker performers were translation
software business SDL, where growth has slowed, causing a de-rating
of the shares, and Hargreaves Services, where geological problems
at a mine led to a profits warning.
Despite the macro issues besetting Continental Europe, we were
again able to record some good gains as individual companies
prospered. Glanbia, which we highlighted in the last two Report and
Accounts rose again as the Company reported further good results.
It also announced a significant JV with its Irish dairy operations
which has led analysts and investors to focus on the more exciting
nutritional products side of the business. We have been cautious on
European cyclical industrial stocks on the basis that margins in
many businesses may have peaked, but Andritz which supplies capital
equipment mainly into the pulp and paper markets did well as it
announced a positively received acquisition. Another capital
equipment business Kuka which makes robotic automation technology
for the automotive sector was strong against a weak backdrop for
this sector; it appears to be winning an increased market share.
Our move to increase our exposure to financial stocks earlier in
the year proved to be timely, with shares picking up after the ECB
initiatives eased concerns about the European financial system.
Azimut, an Italian based fund manager, was strong as its assets
under management benefited from new product launches. Topdanmark,
the Danish insurer, also produced solid results. Of the weaker
performers in the period, SAF Holland and Kendrion were both hit by
underlying market weakness in the truck and automotive areas, with
Kendrion, unlike Kuka, seeing some of its automotive industry
orders cancelled.
We continue to use third party managed funds to gain exposure to
Japan, Asia and Latin America, as we believe we get better returns
from these than from selecting a portfolio of individual holdings
in these markets. Returns in Japan were disappointing in the six
months, but at least our fund holdings beat the local small cap
market return. Once again theAberdeen Global-Asian Smaller
Companies Fund and The Scottish Oriental Smaller Companies Trust
performed strongly, but the best return came from the holding in
Utilico Investments Limited.
Asset allocation and gearing
The underlying pattern of macroeconomic news is largely
unchanged, so we remained content with the geographic mix of the
portfolio. We did add to our European holdings gradually over the
period on the basis that sentiment towards the region could not get
much worse. In the US we ended the period a little below the
Benchmark in terms of weighting. The budget deficit of the US is
comparable in scale to that of many European countries, and
political wrangling as to how this should be addressed continues.
It is likely that a combination of spending cuts and tax rises will
be agreed, but these will hamper the performance of the US economy
in 2013.
The slowdown in the major Asian and Latin American economies is
causing problems for corporate earnings in these markets. Over the
long term, we are likely to increase our exposure to these faster
growing parts of the world, but in this period we took a relatively
cautious approach.
Our overweight stance to Japan did not pay off in the first half
of the year. We continue to feel that stock valuations in this
market are attractive at multi-year lows, and while the current
political spat with China is unhelpful, we expect the market to do
better in the months ahead.
Geographical distribution of the investment
portfolio
Portfolio weighting
31 October 30 April
2012 2012
% %
------------------------ ------------ ---------
North America 39.7 39.8
UK 29.4 29.0
Rest of World 11.9 12.6
Continental Europe 11.6 10.8
Japan 7.4 7.8
Source: F&C Management Limited
The Company ended the period with relatively modest gearing of
1.5%.
Outlook
At this stage it seems likely that global GDP growth in 2013
will be sluggish as the fiscal brakes are applied at last in the
US. Despite the present challenges, it is encouraging just how well
a lot of smaller companies are doing at the moment. We continue to
believe that prudent stock selection within the universe of global
small cap companies should deliver positive returns over the medium
term.
Peter Ewins
17 December 2012
Unaudited Condensed Income Statement
for the half-year ended 31 October 2012 2011
Revenue Capital Total Revenue Capital Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------------------------- --------- --------- --------- --------- --------- ---------
Gains/(losses) on investments - 13,396 13,396 - (21,845) (21,845)
Foreign exchange losses (2) (100) (102) (4) (46) (50)
Income 2,515 - 2,515 2,239 - 2,239
Management and performance fees (117) (1,146) (1,263) (106) (996) (1,102)
Other expenses (556) (11) (567) (502) (6) (508)
----------------------------------------------- --------- --------- --------- --------- --------- ---------
Return before finance costs and taxation 1,840 12,139 13,979 1,627 (22,893) (21,266)
Finance costs (145) (434) (579) (145) (436) (581)
----------------------------------------------- --------- --------- --------- --------- --------- ---------
Return on ordinary activities before taxation 1,695 11,705 13,400 1,482 (23,329) (21,847)
Taxation on ordinary activities (111) - (111) (106) - (106)
----------------------------------------------- --------- --------- --------- --------- --------- ---------
Return attributable to shareholders 1,584 11,705 13,289 1,376 (23,329) (21,953)
----------------------------------------------- --------- --------- --------- --------- --------- ---------
Return per share - pence 3.76 27.78 31.54 3.41 (57.75) (54.34)
----------------------------------------------- --------- --------- --------- --------- --------- ---------
The total column of this statement is the profit and loss
account of the Company. The revenue return and capital return
columns are supplementary to this and are prepared under guidance
published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations.
A statement of total recognised gains and losses is not required
as all gains and losses of the Company have been reflected in the
above statement.
Unaudited Condensed Reconciliation of Movements in Shareholders'
Funds
Half-year ended 31 October 2012 Called up
Share Capital Total
share premium redemption Capital Revenue shareholders'
capital account reserve reserves reserve funds
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------------------------------------- ---------- --------- ----------- --------- --------- --------------
Balance at 30 April 2012 10,345 29,818 16,158 182,046 8,409 246,776
Movements during the half-year ended
31 October 2012
Dividends paid - - - - (1,676) (1,676)
Shares issued 276 6,175 - - - 6,451
Return attributable to equity shareholders - - - 11,705 1,584 13,289
-------------------------------------------- ---------- --------- ----------- --------- --------- --------------
Balance at 31 October 2012 10,621 35,993 16,158 193,751 8,317 264,840
-------------------------------------------- ---------- --------- ----------- --------- --------- --------------
Half-year ended 31 October 2011 Called up
Share Capital Total
share premium redemption Capital Revenue shareholders'
capital account reserve reserves reserve funds
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------------------------------------- ---------- --------- ----------- --------- --------- --------------
Balance at 30 April 2011 10,025 23,132 16,158 184,606 7,683 241,604
Movements during the half-year ended
31 October 2011
Dividends paid - - - - (1,403) (1,403)
Shares issued 194 3,917 - - - 4,111
Return attributable to equity shareholders - - - (23,329) 1,376 (21,953)
-------------------------------------------- ---------- --------- ----------- --------- --------- --------------
Balance at 31 October 2011 10,219 27,049 16,158 161,277 7,656 222,359
-------------------------------------------- ---------- --------- ----------- --------- --------- --------------
Year ended 30 April 2012 Called up
Share Capital Total
share premium redemption Capital Revenue shareholders'
capital account reserve reserves reserve funds
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
-------------------------------------------- ---------- --------- ----------- --------- --------- --------------
Balance at 30 April 2011 10,025 23,132 16,158 184,606 7,683 241,604
Movements during the year ended 30 April
2012
Dividends paid - - - - (2,073) (2,073)
Shares issued 320 6,686 - - - 7,006
Return attributable to equity shareholders - - - (2,560) 2,799 239
-------------------------------------------- ---------- --------- ----------- --------- --------- --------------
Balance at 30 April 2012 10,345 29,818 16,158 182,046 8,409 246,776
-------------------------------------------- ---------- --------- ----------- --------- --------- --------------
Unaudited Condensed Balance Sheet
31 October 2012 31 October 2011 30 April 2012
GBP'000s GBP'000s GBP'000s
--------------------------------------------------------- ---------------- ---------------- --------------
Fixed assets
Investments 270,086 228,170 252,184
--------------------------------------------------------- ---------------- ---------------- --------------
Current assets
Debtors 866 980 2,007
Cash at bank and short-term deposits 7,004 5,281 5,550
--------------------------------------------------------- ---------------- ---------------- --------------
7,870 6,261 7,557
--------------------------------------------------------- ---------------- ---------------- --------------
Creditors: amounts falling due within one year (3,116) (2,072) (2,965)
--------------------------------------------------------- ---------------- ---------------- --------------
Net current assets 4,754 4,189 4,592
--------------------------------------------------------- ---------------- ---------------- --------------
Total assets less current liabilities 274,840 232,359 256,776
Creditors: amounts falling due after more than one year
Debenture (10,000) (10,000) (10,000)
--------------------------------------------------------- ---------------- ---------------- --------------
Net assets 264,840 222,359 246,776
--------------------------------------------------------- ---------------- ---------------- --------------
Capital and reserves
Called up share capital 10,621 10,219 10,345
Share premium account 35,993 27,049 29,818
Capital redemption reserve 16,158 16,158 16,158
Capital reserves 193,751 161,277 182,046
Revenue reserve 8,317 7,656 8,409
--------------------------------------------------------- ---------------- ---------------- --------------
Total shareholders' funds 264,840 222,359 246,776
--------------------------------------------------------- ---------------- ---------------- --------------
Net asset value per share - pence 623.35 543.98 596.35
--------------------------------------------------------- ---------------- ---------------- --------------
Unaudited Condensed Cash Flow Statement
Half-year ended Half-year ended
31 October 2012 31 October 2011
GBP'000s GBP'000s
--------------------------------------------------------------- ---------------- ----------------
Net cash inflow from operating activities 677 1,166
Cash outflow from servicing of finance (577) (576)
Net cash outflow from financial investment (3,320) (1,614)
Equity dividends paid (1,676) (1,403)
--------------------------------------------------------------- ---------------- ----------------
Net cash outflow before use of liquid resources and financing (4,896) (2,427)
Movement in short-term deposits - -
Net cash inflow from financing 6,451 3,916
--------------------------------------------------------------- ---------------- ----------------
Increase in cash 1,555 1,489
--------------------------------------------------------------- ---------------- ----------------
Reconciliation of net cash flow to movement in net debt
Increase in cash 1,555 1,489
Movement in short-term deposits - -
--------------------------------------------------------------- ---------------- ----------------
Movement in net debt resulting from cash flows 1,555 1,489
Foreign exchange movement (101) (51)
--------------------------------------------------------------- ---------------- ----------------
Movement in net debt 1,454 1,438
Net debt brought forward (4,450) (6,157)
--------------------------------------------------------------- ---------------- ----------------
Net debt carried forward (2,996) (4,719)
--------------------------------------------------------------- ---------------- ----------------
Represented by:
Cash at bank 7,004 5,281
Short-term deposits - -
--------------------------------------------------------------- ---------------- ----------------
7,004 5,281
Debenture (10,000) (10,000)
--------------------------------------------------------------- ---------------- ----------------
(2,996) (4,719)
--------------------------------------------------------------- ---------------- ----------------
Unaudited Notes on the Condensed Accounts
1 Significant accounting policies
These financial statements have been prepared on the basis of
the accounting policies set out in the Company's financial
statements at 30 April 2012. These accounting policies are expected
to be followed throughout the year ending 30 April 2013.
2 Return per share
Half-year ended Half-year ended
31 October 2012 31 October 2011
----------------------------------------------------- ---------------- ----------------
Revenue return per share - pence 3.76 3.41
Revenue return attributable to
shareholders - GBP'000s 1,584 1,376
Capital return per share - pence 27.78 (57.75)
Capital return attributable to
shareholders - GBP'000s 11,705 (23,329)
Weighted average number of ordinary shares in issue
during the period 42,138,490 40,397,864
----------------------------------------------------- ---------------- ----------------
3 Dividends
Half-year Half-year
ended ended
31 October 31 October
2012 2011
Dividends on ordinary shares Register date Payment date GBP'000s GBP'000s
------------------------------ --------------- -------------- ------------ ------------
Final for the year ended 6 Jul 2012 16 Aug 2012 1,676 -
30 April 2012 of 4.00p
Final for the year ended
30 April 2011 of 3.50p 1 Jul 2011 8 Aug 2011 - 1,403
------------------------------ --------------- -------------- ------------ ------------
1,676 1,403
------------------------------------------------------------- ------------ ------------
The Directors have declared an interim dividend in respect of
the year ending 30 April 2013 of 2.00p per share, payable on 31
January 2013 to all shareholders on the register at close of
business on 28 December 2012. The amount of this dividend will be
GBP854,000 based on 42,709,410 shares in issue at 13 December 2012.
This amount has not been accrued in the results for the half-year
ended 31 October 2012.
4 Management and performance fees
There have been no changes to the terms of the management and
performance fee agreements with F&C Management Limited, which
are set out in detail in the Report and Accounts to 30 April 2012.
Management fees have been allocated 75% to capital reserves in
accordance with accounting policies. A performance fee of
GBP795,000, allocated 100% to capital reserves in accordance with
accounting policies, has been accrued in the period to 31 October
2012 as the Company's net asset value per share outperformed the
Benchmark (half-year ended 31 October 2011: GBP677,000 and year
ended 30 April 2012: GBP893,000).
5 Results
The results for the half-year ended 31 October 2012 and 31
October 2011, 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 2012; the report of the auditors thereon was unqualified and
did not contain a statement under Section 498 of the Companies Act
2006. The abridged financial statements shown above for the year
ended 30 April 2012 are an extract from those accounts.
6 Report and accounts
The report and accounts for the half-year ended 31 October 2012
will be posted to shareholders and made available on the website
www.fandcglobalsmallers.com shortly. Copies may also be obtained
from the Company's registered office, Exchange House, Primrose
Street, London EC2A 2NY.
By order of the Board
F&C Management Limited, Secretary
Exchange House, Primrose Street, London EC2A 2NY
17 December 2012
Directors' Statement of Principal Risks and Uncertainties
The Company's assets consist mainly of listed equities and its
principal risks are therefore market related. The large number of
investments held, together with the geographic and sector diversity
of the portfolio, enables the Company to spread its risk with
regard to liquidity, market volatility, currency movements and
revenue streams.
In addition to the risks arising from the ongoing global
financial instability, key risks faced by the Company relate to
investment strategy, management and resources, regulatory issues,
operational matters, financial controls, counterparty failure and
custody of assets. These risks, and the way in which they are
managed, are described in more detail under the heading "Principal
risks and their management" within the Directors' Report and
Business Review contained within the Company's annual report for
the year ended 30 April 2012. The Company's principal risks and
uncertainties have not changed materially since the date of that
report and are not expected to change materially for the remainder
of the Company's financial year.
Statement of Directors' Responsibilities in Respect of the
Financial Statements
In accordance with Chapter 4 of the Disclosure and Transparency
Rules the Directors confirm, in respect of the report and accounts
for the half-year ended 31 October 2012 of which this statement is
an extract, that to the best of their knowledge:
-- the condensed set of financial statements has been prepared
in accordance with applicable UK accounting standards and gives a
true and fair view of the assets, liabilities, financial position
and 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
-- the half-yearly report includes details on related party transactions.
On behalf of the Board
Anthony Townsend
Chairman
17 December 2012
This information is provided by RNS
The company news service from the London Stock Exchange
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