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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Aberforth Smaller Companies Trust Plc | LSE:ASL | London | Ordinary Share | GB0000066554 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 14.00 | 0.96% | 1,476.00 | 1,470.00 | 1,478.00 | 1,476.00 | 1,476.00 | 1,476.00 | 25,665 | 08:25:53 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Mgmt Invt Offices, Open-end | 114.95M | 103.34M | 1.2246 | 12.05 | 1.25B |
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Aberforth Smaller Companies Trust plc
Legal Entity Identifier ("LEI"): 213800GZ9WC73A92Q326
Half Yearly Report
For the six months to 30 June 2017
The investment objective of ASCoT is to achieve a net asset value total return
(with dividends reinvested) greater than on the Numis Smaller Companies Index
(excluding Investment Companies) over the long term.
Aberforth Smaller Companies Trust plc (ASCoT) invests only in small UK quoted
companies and is managed by Aberforth Partners LLP. All data throughout this
Half Yearly Report is to, or as at, 30 June 2017 as applicable, unless
otherwise stated.
FINANCIAL HIGHLIGHTS
Total Return Performance %
Net Asset Value 13.8
Numis Smaller Companies Index 9.7
(XIC)
Ordinary Share Price 14.7
30 June 31 December 30 June
2017 2016 2016
Shareholders' Funds GBP1,362.0m GBP1,220.2m GBP1,034.8m
Market Capitalisation GBP1,174.6m GBP1,046.9m GBP859.9m
Actual Gearing 0.0% 2.7% 2.8%
Ordinary Share net asset 1,448.33p 1,292.57p 1,092.06p
value
Ordinary Share price 1,249.00p 1,109.00p 907.50p
Ordinary Share price 13.8% 14.2% 16.9%
discount
Chairman's Statement
Review of performance
For the six months to 30 June 2017, Aberforth Smaller Companies Trust plc
(ASCoT) achieved a net asset value total return of +13.8%, which compares with
a total return of +9.7% from the Company's investment benchmark, the Numis
Smaller Companies Index (excluding Investment Companies) (NSCI (XIC)). The FTSE
All-Share Index, which is dominated by larger companies, generated a return of
+5.5% over the same period.
At the end of June, the gap between the Company's share price and its net asset
value was 13.8%. This discount narrowed only slightly over the first six months
of the year, but it allowed the Company's share price to rise by 14.7% in total
return terms. More broadly, discounts within the AIC's UK Smaller Companies
subsector continue to be among the widest in the investment trust world, which
comes despite a good run of performance from the asset class. Brexit is the
likely explanation. While the worst fears in the aftermath of last year's EU
referendum have failed to materialise, small UK quoted companies are relatively
exposed to the UK's domestic economy and therefore remain vulnerable to an
acrimonious divorce. The bewildering political developments of the first half
of the year do not inspire the greatest confidence in our politicians to avoid
a chaotic exit.
After the disappointment of 2016, it is pleasing, as Chairman, to be reporting
on a stronger period: recent performance demonstrates the benefits of an
actively managed portfolio whose differentiation from its benchmark index is
significant, not least as a result of the Managers' value investment style. As
is usual, the Managers' report provides greater insight into the factors that
influenced the Company during the first half of 2017.
Annual General Meeting
I am delighted to report that at the Annual General Meeting on 1 March 2017,
99.9% of Shareholders' votes cast were in favour of the continuation of the
Company. Furthermore, all resolutions were passed, including the renewal of
authority to buy in up to 14.99% of ASCoT's Ordinary Shares.
Dividends
It is an inescapable truth that shareholders in small UK quoted companies have
enjoyed a golden period since the recovery in dividends began in 2010. The
first half of 2017 saw a continuation of the dividend friendly environment. The
Board is pleased to announce an interim dividend of 9.05p per Ordinary Share
for the six months to 30 June 2017. This represents an increase of 5.2%
compared with last year's interim dividend. The Board, in implementing its
progressive dividend policy, continues to be mindful of the fact that at some
point in the future the dividend climate will turn more hostile. In this
regard, the increase in the interim dividend should be viewed alongside the
Company's retained reserves which now stand at 52.5p per Ordinary Share,
approximately 1.9 times the total of the 2016 Ordinary Share final and 2017
interim dividends. The interim dividend will be paid on 24 August 2017 to
Shareholders on the register as at close of business on 4 August 2017. The ex
dividend date is 3 August 2017.
The Company operates a Dividend Reinvestment Plan. Details of the plan,
including the Form of Election, are available from Aberforth Partners LLP or on
its website, www.aberforth.co.uk.
Gearing
During the first half, following an extensive tendering process, the Board
replaced the Company's borrowing facility, which was due to expire on 15 June
2017, with a new GBP125m facility from The Royal Bank of Scotland plc, which is
on broadly similar terms and will run for a period of three years. Gearing
levels are reviewed on a regular basis by the Board though ASCoT was not geared
at 30 June 2017. The Board remains comfortable that the Company has access to
sufficient liquidity for investment purposes and also for share buy-in, as and
when appropriate. It remains the Company's policy to use gearing in a tactical
manner.
Share buy-in
The Company's share buy-in authority is renewed annually at the Annual General
Meeting. During the six months to 30 June 2017, 361,800 shares (0.4% of the
issued share capital) were purchased for a total consideration of GBP4,507,000 at
an average discount of 15.5% to the net asset value. Any shares purchased are
automatically cancelled, rather than being held in treasury, thereby reducing
the Company's issued share capital.
The Board keeps under review the circumstances in which the authority is
utilised.
Conclusion
In a period of twelve months, the UK has gone from being viewed as possessing a
stable political and economic backdrop to being confronted by significant
change and challenge. Such periods clearly bring risks for the investor but
they will be resolved with the passage of time and can also offer attractive
opportunities. In contrast to the UK, the outlook for the global economy has
improved over the past year, with a greater synchronisation of recovery among
individual economies than at any point since the financial crisis. At this
level, the predicament facing financial markets is whether the recent rise in
yields is a harbinger of sustained global reflation. Were this to be the case,
equities as an asset class would benefit and the value investment style would
likely out-perform, to the advantage of the relative performance of the
Company. In contrast, a return to deflationary pressures would in all
probability see a continuation of the broad trends witnessed since the
financial crisis and equities would see leadership revert to their quality and
growth cohorts. Such global shifts, which can seem very remote from the
Company's investments in small UK quoted companies, may well have a greater
long term significance than today's domestic issues.
Paul Trickett
Chairman
27 July 2017
paul.trickett@aberforth.co.uk
Managers' Report
Introduction
In common with many stockmarkets around the world, UK equities performed well
in the first six months of 2017. The FTSE All-Share, which is illustrative of
large companies, produced a total return of 5.5%. This was surpassed by the
9.7% return from the small companies that make up the NSCI (XIC). ASCoT's NAV
total return in the six months was 13.8%, which, in comparison with the NSCI
(XIC), represents a pleasing recovery in performance from the disappointment of
2016.
The superior performance of small companies so far in 2017 has seen them
recover all of the ground lost against large companies in the immediate
aftermath of the EU referendum result in June 2016. That initial negative
reaction was prompted by the greater exposure of the NSCI (XIC)'s constituents
to the domestic economy, which is vulnerable to a poorly handled Brexit. It
would be pleasing to conclude from the subsequent recovery in small company
share prices that Brexit has been well handled and that its attendant risks
have diminished - unfortunately this is not the case. Rather, the bounce back
enjoyed by small companies has been led by overseas oriented sectors.
Nevertheless, domestic sectors have made positive absolute returns, which
reflect the fact that fears of an immediate impact on economic activity from
the "out" vote have not come to pass. Indeed, macro economic data and the
trading progress of domestically oriented small companies have proved
remarkably resilient, which is also testament to how tightly run these
businesses are. However, challenges remain, as the weakness of the pound in the
wake of the referendum puts pressure on costs, eating into real wages, and as
Brexit threatens the movement of labour.
On top of these issues, the outcome of the latest General Election introduces
further uncertainty. While political surprises in recent times have not been
confined to the UK, the days of its status as a haven of political stability
now seem long gone. From the perspective of the typical small UK quoted
company, the implications of the Conservative Party's failure to secure an
overall majority are moot. The chances of a badly handled divorce from the EU
have undoubtedly risen, but so have the chances of a "softer" Brexit, which may
explain the phlegmatic reaction thus far of sterling and of share prices to the
result.
Indeed, the strength of equity markets since early 2016 has been notable
despite heightened political uncertainty around the globe. This buoyancy has
its roots in improved economic activity in both China and Europe and received a
boost with the election of Donald Trump and his promise of increased fiscal
stimulus. Commodities were the initial beneficiaries, but the effect spread
through other cyclical sectors of the stockmarket to the benefit of the value
investment style followed by the Managers. Within financial markets, which are
fond of snappy terms for complex developments, this pick-up in activity and
optimism has been termed the "reflation trade". It has certainly influenced
ASCoT's good returns in the first half of 2017.
Investment performance
Over the six months to 30 June 2017, ASCoT's NAV total return was 13.8% against
9.7% for the NSCI (XIC). The following table, which analyses the difference
between these numbers, shows a large positive contribution from stock
selection. While that outcome is influenced by other factors, which are
addressed in the subsequent paragraphs, it is noteworthy that several of the
portfolio's larger holdings performed particularly well and that there were few
significant large share price declines among the holdings - this will not
always be the case!
For the six months ended 30 June 2017 Basis points
Stock selection 368
Sector selection 46
______
Attributable to the portfolio of investments, 414
based on mid prices
(after transaction costs of 12 basis points)
Movement in mid to bid price spread 4
Cash/gearing 29
Purchase of ordinary shares 6
Management fee (38)
Other expenses (3)
______
Total attribution based on bid prices 412
______
Note: 100 basis points = 1%. Total Attribution is the difference between
the total return of the NAV and the Benchmark Index (i.e. NAV = 13.84%;
Benchmark Index = 9.72%; difference is 4.12% being 412 basis points).
Size & Style
For reasons set out in the Valuations section below, ASCoT retains a relatively
high exposure to the "smaller small" companies within the NSCI (XIC). To assess
the appropriateness of this positioning the return from the FTSE SmallCap may
be compared with that from the FTSE 250 index. Over the first half of 2017, the
FTSE SmallCap performed slightly better, suggesting that size had a small
positive effect on ASCoT's return relative to the NSCI (XIC) in that period.
The style picture is altogether more complicated. The Managers use analysis
from the London Business School and Style Research to assess style influences
on ASCoT's performance. Both these houses suggest that the NSCI (XIC)'s growth
stocks generated much better returns than did its value stocks in the first
half of 2017, which would have represented a headwind to ASCoT. However, it is
unlikely that ASCoT's relative performance would have been so strong had
investment style proved adverse.
So what was going on? Although these style series are a useful indicator over
longer time periods, they can be susceptible to other influences in the short
term. In the six months under review, the Managers believe that a sector effect
introduced such noise. So far in 2017, the resources companies that performed
so well through 2016 have given up some of their gains. Most of these are still
classified as value stocks and so their weakness disproportionately affected
the value component of the NSCI (XIC). Excluding resources companies from the
analysis, there was little to choose between the returns from value and growth
over the past six months.
Corporate activity
Both M&A and IPO activity were subdued in the opening months of 2017. This
probably reflected the on-going uncertainty stemming from last year's EU
referendum and the additional impact of June's General Election. Through the
six months to 30 June 2017, six new bids or approaches for companies in the
NSCI (XIC) were made and remain likely to complete. Meanwhile, IPO activity was
confined to eight new listings. An upturn in M&A still looks likely: small
company valuations remain relatively low, particularly for overseas buyers who
can take advantage of sterling's weakness since the Brexit vote.
Strong balance sheets
Balance sheets of both ASCoT's investee companies and the broader NSCI (XIC)
remain in robust shape. In the case of the portfolio, 20% is invested in
companies with net cash on their balance sheets. While still high, this
proportion has declined from 36% three years ago. The Managers consider the
reduction to be healthy since it reflects greater confidence on the part of
company boards to invest, acquire or return surplus cash balances to
shareholders. Appetite for investment may be gauged by the ratio of capital
expenditure to depreciation: a ratio above one indicates investment for future
growth. The Managers follow closely a subset 281 companies within the NSCI
(XIC), which represents 98% by value of the overall index and is termed the
"tracked universe". Even with capital intensive resources companies excluded,
the capital expenditure to depreciation ratio for the tracked universe was 1.5x
in 2016. All else being equal, this augurs well for future profit growth for
small companies.
Income
Supported by those strong balance sheets, the dividend environment for the
portfolio and for small companies in general remained encouraging through the
first half of 2017. As the table below shows, almost half of the 84 holdings at
30 June 2017 announced higher dividends.
Down Nil payers No change Increase Other
7 14 19 41 3
Dividend growth has also been buoyed by healthy dividend cover of 2.8x for the
portfolio and 2.7x for the NSCI (XIC). These are higher than the averages since
1990 - 2.6x in both cases - and much higher than the FTSE All-Share's present
dividend cover of 1.3x. It should be noted that fashion has played a part in
the strong dividend growth record of recent years. One of the longer lasting
legacies of the TMT bubble was that "dividend" became a dirty word for many
companies, an admission of failure to find something else to do with
shareholders' money. However, as bond yields have fallen in the period since
the financial crisis, the investment world has experienced income starvation.
Company boards have realised that they can help address this problem by paying
higher dividends and have no doubt been encouraged to do so by positive share
price reaction to the announcement of a more progressive pay-out policy. The
Managers suspect that the next economic downturn will prove that not all such
dividend decisions will prove sustainable.
Turnover
Annualised portfolio turnover over the six months to 30 June 2017 was 24%. This
is up from 16% in the first half of 2016. The increase is related to the
improvement in ASCoT's performance: as share prices of investee companies rise
and price targets are achieved, the Managers typically look to recycle capital
into companies with greater upside.
Active share
Active share is a gauge of how different a portfolio is from an index. The
higher the ratio, the higher the likelihood that the performance of the
portfolio will differ from that of the index. The Managers target a ratio of at
least 70%, though would tolerate a temporarily lower number. At 30 June 2017,
the active share ratio was 76%.
Valuations
Portfolio characteristics 30 June 2017 30 June 2016
ASCoT NSCI (XIC) ASCoT NSCI (XIC)
Number of companies 84 339 83 339
Weighted average market GBP660m GBP894m GBP514m GBP823m
capitalisation
Price earnings (PE) ratio 11.8x 13.8x 10.5x 12.4x
(historic)
Dividend yield (historic) 3.0% 2.7% 3.4% 2.8%
Dividend cover 2.8x 2.7x 2.8x 2.9x
The table above shows the average PE ratio and dividend yield of ASCoT's
portfolio and of the NSCI (XIC). Consistent with the Managers' value investment
style, the portfolio compares well on both measures. A more stark contrast at
the present time is with large companies: the historic PE of the FTSE All-Share
was 20.8x at the end of June. This premium valuation reflects the greater bias
of large companies to overseas markets that would be less vulnerable to a badly
handled Brexit. However, the premium is very wide: over ASCoT's history, large
companies have been 23% more expensive than the portfolio on average; currently
they are 76% more expensive. The Managers are therefore of the view that much
of the risk associated with Brexit may already be incorporated in share prices.
EV/EBITA 2016 2017 2018
ASCoT 11.9x 11.3x 9.4x
Tracked universe (281 stocks) 13.8x 13.0x 11.4x
- 40 growth stocks 19.6x 16.9x 14.8x
- 241 other stocks 13.0x 12.3x 10.9x
This next table sets out the valuation of the portfolio on the Managers'
favoured metric, the ratio of enterprise value to earnings before interest, tax
and amortisation (EV/EBITA). It also sets out the corresponding ratios for the
tracked universe and two subsets, being 40 growth stocks and 241 other stocks.
Again, the portfolio compares well on this analysis, with the premium of the
growth stocks to the portfolio particularly wide at 50% for 2017.
One of the reasons for the portfolio's relatively attractive valuation is
brought out in the following table, which shows the EV/EBITA ratio for four
market capitalisation bands, along with the exposure of both the portfolio and
the tracked universe to those bands. The message is that, in today's UK
stockmarket, the smaller the company the lower the valuation, which is an
unusual state of affairs since the "smaller small" companies have superior
growth prospects. At work is a general reluctance on the part of investors
since the financial crisis to entertain relatively illiquid investment
propositions. As a closed end fund able to adopt a long term investment
horizon, ASCoT is well placed to exploit this anomaly and therefore has above
average exposure to the NSCI (XIC)'s "smaller small" companies.
Market capitalisation < GBP100m GBP100-250m GBP250-750m > GBP750m
range:
Portfolio weight 3% 17% 42% 38%
Tracked universe weight 1% 5% 30% 64%
Tracked universe 2017 EV 9.2x 10.6x 12.4x 13.6x
/EBITA
Outlook & Conclusion
ASCoT has enjoyed a period of strong performance as the effects of the
reflation trade, with its positive implications for the value investment style,
permeated the universe of small UK quoted companies. Given the leads and lags
that characterise this relatively inefficient part of the stockmarket, and the
inconvenience of stockmarket trends seldom fitting neatly into calendar years,
it is perhaps more useful to view this particularly strong period in the
context of the weaker relative returns of 2016. What the past one and a half
years demonstrates is that value style fares better when optimism about
economic activity rises. Conversely, and as explained in several Managers'
Reports over recent years, deflationary forces represent a challenge to value
but a boon to the growth style.
The first six months of 2017 highlighted threats to the continuation of the
reflation trade. In the US, Donald Trump's ability to deliver his vaunted
fiscal stimulus has been undermined by the investigation into Russian
interference in the election. Meanwhile, it would appear unlikely that the
political fluidity that has characterised the UK in recent years is set to
change in the near future, notwithstanding the higher chance of a softer Brexit
that has come with the election result. Indeed, given such political
uncertainty, it is remarkable that economies themselves have not proved more
vulnerable. As the half year mark approached, a further complication arose.
Whether coincidental or co-ordinated, the actions and comments from central
banks in the last week of June suggested concern about reflationary pressures
and a more hawkish stance on monetary policy. As long as the central bankers
have correctly assessed the risks, higher interest rates and by extension
higher government bond yields should be good news: ten years from the start of
the financial crisis, a normalisation of monetary conditions would suggest
improved economic prospects and would bode well for the value style. However,
the condition at the start of the previous sentence is important: if interest
rate rises prove too aggressive, they will stifle the recovery, suppress bond
yields and prolong the stockmarket trends with which we have become familiar
since the financial crisis.
While the issues addressed in the preceding paragraph will influence ASCoT's
returns over the short term, they should have limited relevance over the long
term as economic and financial conditions normalise and stagnation proves not
to be inevitable. Looked at through a longer term lens, the more significant
influences on ASCoT's prospects are likely to be the underlying companies in
which ASCoT invests, how these are combined in a portfolio, and the valuations
presently accorded to these companies by the stockmarket. In each respect, the
Managers remain confident. ASCoT's typical holding is in a business that was
well tested in the financial crisis and subsequent recession, and that is now,
supported by a strong balance sheet and growing profits, able both to invest
for future progress and to pay its shareholders an acceptable dividend.
Although the typical holding may be classified as cyclical rather than
defensive, the cycles to which each of the 84 holdings is exposed are not the
same and individual cyclical risks are diluted within the context of the
portfolio. Moreover, in view of the attractive valuations of the portfolio, it
is likely that some of the risk of a Brexit-inspired economic downturn is
already embedded in share prices.
Indeed, herein lies the specific opportunity for ASCoT today. Fear of
volatility and illiquidity has been elevated since the financial crisis and
remains so. The valuations of companies whose profits grow, albeit not in a
smooth fashion, are penalised, all the more so if these companies are small and
their shares happen to be traded infrequently. The Managers believe that,
unless we are now doomed to a future without economic progress, it is likely
that the valuations presently available to ASCoT will continue to support
further good rates of returns for shareholders over the long term.
Aberforth Partners LLP
Managers
27 July 2017
INTERIM MANAGEMENT REPORT
A review of the half year and the outlook for the Company can be found in the
Chairman's Statement and the Managers' Report.
Risks and Uncertainties
The Directors have established an ongoing process for identifying, evaluating
and managing the principal risks faced by the Company. The Board believes that
the Company has a relatively low risk profile in the context of the investment
trust industry. This belief arises from the fact that the Company has a simple
capital structure; invests only in small UK quoted companies; has never been
exposed to derivatives and does not presently intend any such exposure; and
outsources all the main operational activities to recognised, well established
firms.
The principal risks faced by the Company relate to investment policy/
performance, share price discount, gearing, reputational risk, and regulatory
risk. An explanation of these risks and how they are managed can be found in
the Strategic Report contained within the 2016 Annual Report. These principal
risks and uncertainties have not changed from those disclosed in the 2016
Annual Report.
Going Concern
The Directors are satisfied that the Company has sufficient resources to
continue in operation for the foreseeable future, a period of not less than 12
months from the date of this report. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that, to the best of their knowledge:
(i) the condensed set of financial statements has been prepared in accordance
with the Statement "Half-yearly financial reports" issued by the Financial
Reporting Council; and
(ii) the Half Yearly Report includes a fair review of information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events during the first six months of the year and
their impact on the financial statements together with a description of the
principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
disclosure of related party transactions and changes therein.
(iii) the Half Yearly Report, taken as a whole, is fair, balanced and
understandable and provides information necessary for Shareholders to assess
the Company's performance, objective and strategy.
On behalf of the Board
Paul Trickett
Chairman
27 July 2017
The Income Statement, Reconciliation of Movements in Shareholders' Funds,
Balance Sheet and the Cash Flow Statement are set out below:-
INCOME STATEMENT (unaudited)
For the six months ended 30 June 2017
Revenue Capital Total
GBP 000 GBP 000 GBP 000
Realised net gains on sales - 38,833 38,833
Movement in fair value - 109,981 109,981
_______ _______ _______
Net gains on investments - 148,814 148,814
Investment income 24,573 - 24,573
Other income - - -
Investment management fee (Note 2) (1,736) (2,893) (4,629)
Transaction costs - (1,503) (1,503)
Other expenses (380) - (380)
_______ _______ _______
Net return before finance costs and 22,457 144,418 166,875
tax
Finance costs (102) (171) (273)
_______ _______ _______
Net return on ordinary activities 22,355 144,247 166,602
before tax
Tax on ordinary activities - - -
_______ _______ _______
Return attributable to equity 22,355 144,247 166,602
shareholders
_______ _______ _______
Returns per Ordinary Share (Note 4) 23.71p 152.99p 176.70p
Dividends
On 27 July 2017, the Board declared an interim dividend for the year ending 31
December 2017 of 9.05p per Ordinary Share (2016 - 8.60p) which will be paid on
24 August 2017.
INCOME STATEMENT (unaudited)
For the six months ended 30 June 2016
Revenue Capital Total
GBP 000 GBP 000 GBP 000
Realised net losses on sales - (5,633) (5,633)
Movement in fair value - (147,059) (147,059)
_______ _______ _______
Net losses on investments - (152,692) (152,692)
Investment income 23,577 251 23,828
Other income - - -
Investment management fee (Note 2) (1,588) (2,647) (4,235)
Transaction costs - (1,003) (1,003)
Other expenses (319) - (319)
_______ _______ _______
Net return before finance costs and 21,670 (156,091) (134,421)
tax
Finance costs (125) (208) (333)
_______ _______ _______
Net return on ordinary activities 21,545 (156,299) (134,754)
before tax
Tax on ordinary activities (39) - (39)
_______ _______ _______
Return attributable to equity 21,506 (156,299) (134,793)
shareholders
_______ _______ _______
Returns per Ordinary Share (Note 4) 22.67p (164.75)p (142.08)p
INCOME STATEMENT (unaudited)
For the year ended 31 December 2016
Revenue Capital Total
GBP 000 GBP 000 GBP 000
Realised net losses on sales - 15,577 15,577
Movement in fair value - 14,097 14,097
_______ _______ _______
Net losses on investments - 29,674 29,674
Investment income 39,027 5,229 44,256
Other income 46 - 46
Investment management fee (Note 2) (3,111) (5,185) (8,296)
Transaction costs - (1,925) (1,925)
Other expenses (689) - (689)
_______ _______ _______
Net return before finance costs and 35,273 27,793 63,066
tax
Finance costs (254) (424) (678)
_______ _______ _______
Net return on ordinary activities 35,019 27,369 62,388
before tax
Tax on ordinary activities (36) - (36)
_______ _______ _______
Return attributable to equity 34,983 27,369 62,352
shareholders
_______ _______ _______
Returns per Ordinary Share (Note 4) 36.93p 28.89p 65.82p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited)
For the six months ended 30 June 2017
Capital
Share Redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
Balance as at
31 December 2016 944 44 166,343 983,250 69,647 1,220,228
Return on ordinary
activities after tax - - - 144,247 22,355 166,602
Equity dividends paid - - - - (20,291) (20,291)
Purchase of Ordinary (4) 4 (4,507) - - (4,507)
Shares
_______ _______ _______ _______ _______ _______
Balance as at 30 June 940 48 161,836 1,127,497 71,711 1,362,032
2017
_______ _______ _______ _______ _______ _______
For the six months ended 30 June 2016
Capital
Share Redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
Balance as at
31 December 2015 950 38 172,625 955,881 62,385 1,191,879
Return on ordinary
activities after - - - (156,299) 21,506 (134,793)
tax
Equity dividends - - - - (19,575) (19,575)
paid
Purchase of (2) 2 (2,751) - - (2,751)
Ordinary Shares
_______ _______ _______ _______ _______ _______
Balance as 948 40 169,874 799,582 64,316 1,034,760
at 30
June 2016
_______ _______ _______ _______ _______ _______
For the year ended 31 December 2016
Capital
Share Redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
GBP 000 GBP 000 GBP 000 GBP 000 GBP 000 GBP 000
Balance as at
31 December 2015 950 38 172,625 955,881 62,385 1,191,879
Return on
ordinary - - - 27,369 34,983 62,352
activities after
tax
Equity dividends - - - - (27,721) (27,721)
paid
Purchase of (6) 6 (6,282) - - (6,282)
Ordinary Shares
_______ _______ _______ _______ _______ _______
Balance as at
31 December 2016 944 44 166,343 983,250 69,647 1,220,228
_______ _______ _______ _______ _______ _______
BALANCE SHEET
(unaudited)
As at 30 June 2017
30 June 31 December 30 June
2017 2016 2016
GBP 000 GBP 000 GBP 000
Fixed assets
Investments at fair value through 1,361,652 1,253,247 1,063,649
profit or loss
_______ _______ _______
Current assets
Amounts due from brokers 1,232 - 191
Other debtors 5,277 2,881 6,329
Cash at bank 265 241 59
_______ _______ _______
6,774 3,122 6,579
_______ _______ _______
Creditors (amounts falling due
within one year)
Amounts due to brokers (161) (234) (2,102)
Bank debt facility - (35,732) (33,212)
Other creditors (168) (175) (154)
_______ _______ _______
(329) (36,141) (35,468)
_______ _______ _______
Net current assets/(liabilities) 6,445 (33,019) (28,889)
_______ _______ _______
Total assets less current 1,368,097 1,220,228 1,034,760
liabilities
Creditors (amounts falling due
after more than one year) (6,065) - -
Bank debt facility
_______ _______ _______
TOTAL NET ASSETS 1,362,032 1,220,228 1,034,760
_______ _______ _______
Capital and reserves: equity
interests
Called up share capital 940 944 948
(Ordinary Shares)
Reserves:
Capital redemption reserve 48 44 40
Special reserve 161,836 166,343 169,874
Capital reserve 1,127,497 983,250 799,582
Revenue reserve 71,711 69,647 64,316
_______ _______ _______
TOTAL SHAREHOLDERS' FUNDS 1,362,032 1,220,228 1,034,760
_______ _______ _______
Net Asset Value per share (Note 6) 1,448.33p 1,292.57p 1,092.06p
Share Price 1,249.00p 1,109.00p 907.50p
CASH FLOW STATEMENT
(unaudited)
For the six months ended 30 June 2017
Six months Six months ended Year ended
ended 30 June 2016 31 December
30 June 2017 GBP 000 2016
GBP 000 GBP 000
Net cash inflow from operating 17,153 15,561 35,085
activities
Investing activities
Payments to acquire investments (162,276) (112,037) (231,112)
Receipts from sales of investments 199,877 91,892 201,136
_______ _______ _______
Cash inflow/(outflow) from 37,601 (20,145) (29,976)
investing activities
Financing activities
Purchase of Ordinary Shares (4,507) (2,751) (6,282)
Equity dividends paid (20,291) (19,575) (27,721)
Interest and fees paid (432) (306) (640)
Net drawdown/(repayment) of bank
debt facilities (before costs) (29,500) 26,250 28,750
_______ _______ _______
Cash (outflow)/inflow from (54,730) 3,618 (5,893)
financing activities
Change in cash during the period 24 (966) (784)
_______ _______ _______
Cash at the start of the period 241 1,025 1,025
Cash at the end of the period 265 59 241
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING STANDARDS
The financial statements have been prepared on a going concern basis and in
accordance with the Financial Reporting Standard 104 and the AIC's Statement of
Recommended Practice "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" issued in 2014 and updated in 2017. The total column of
the Income Statement is the profit and loss account of the Company. All revenue
and capital items in the Income Statement are derived from continuing
operations. No operations were acquired or discontinued in the period. The
same accounting policies used for the year ended 31 December 2016 have been
applied.
2. INVESTMENT MANAGEMENT FEE
The Managers, Aberforth Partners LLP, receive an annual management fee, payable
quarterly in advance, equal to 0.75% of net assets up to GBP1 billion, and 0.65%
thereafter.
The investment management fee has been allocated 62.5% to capital reserve and
37.5% to revenue reserve, in line with the Board's expected long term split of
returns, in the form of capital gains and income respectively, from the
investment portfolio of the Company.
3. DIVIDS
Six months Six Year ended
Amounts recognised as distributions to ended months ended 31 December
equity holders in the period: 30 June 30 June 2016 2016
2017 GBP 000 GBP 000
GBP 000
Final dividend of 17.85p for the year - 16,962 16,962
ended
31 December 2015
Special dividend of 2.75p for the year - 2,613 2,613
ended
31 December 2015
Interim dividend of 8.60p for the year - - 8,146
ended
31 December 2016
Final dividend of 18.75p for the year 17,696 - -
ended
31 December 2016
Special dividend of 2.75p for the year 2,595 - -
ended
31 December 2016
______ ______ ______
20,291 19,575 27,721
______ ______ ______
The interim dividend for the year ending 31 December 2017 of 9.05p (2016 -
8.60p) will be paid on 24 August 2017 to shareholders on the register on 4
August 2017. The ex-dividend date is 3 August 2017. The interim dividend has
not been included as a liability in these financial statements.
4. RETURNS PER ORDINARY SHARE
30 June 30 June 31 December
The returns per Ordinary Share are based 2017 2017 2016
on:
GBP62,352,000
Returns attributable to Ordinary GBP GBP
Shareholders 166,602,000 (134,793,000)
Weighted average number of shares in
issue during the period 94,287,735 94,869,880 94,730,414
Return per Ordinary Share 176.70p (142.08)p 65.82p
5. INVESTMENTS AT FAIR VALUE
In accordance with FRS 102 and FRS 104, fair value measurements have been
classified using the fair value hierarchy:
Level 1 - using unadjusted quoted prices for identical instruments in an active
market;
Level 2 - using inputs, other than quoted prices included within Level 1, that
are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is
unavailable).
Investments held at fair value through profit or loss:
Level 1 Level 2 Level 3 Total
As at 30 June 2017 GBP'000 GBP'000 GBP'000 GBP'000
Listed equities 1,361,652 - - 1,361,652
Unlisted equities - - - -
_______ _______ _______ _______
Total financial asset 1,361,652 - - 1,361,652
investments
_______ _______ _______ _______
Level 1 Level 2 Level 3 Total
As at 31 December 2016 GBP'000 GBP'000 GBP'000 GBP'000
Listed equities 1,253,247 - - 1,253,247
Unlisted equities - - - -
_______ _______ _______ _______
Total financial asset 1,253,247 - - 1,253,247
investments
_______ _______ _______ _______
Level 1 Level 2 Level 3 Total
As at 30 June 2016 GBP'000 GBP'000 GBP'000 GBP'000
Listed equities 1,043,371 20,278 - 1,063,649
Unlisted equities - - - -
_______ _______ _______ _______
Total financial asset 1,043,371 20,278 - 1,063,649
investments
_______ _______ _______ _______
6. NET ASSET VALUE PER ORDINARY SHARE
The net assets and the net asset value per share attributable to the Ordinary
Shares at each period end are calculated in accordance with their entitlements
in the Articles of Association and were as follows:
31 December
30 June 2016 30 June 2016
2017 GBP 000 GBP 000
GBP 000
Net assets attributable 1,362,032 1,220,228 1,034,760
Ordinary Shares in issue at end of 94,041,492 94,403,292 94,752,792
period 1,448.33p 1,292.57p 1,092.06p
Net asset value attributable per
Ordinary Share
7. SHARE CAPITAL
During the period, the Company bought in and cancelled 361,800 shares (2016:
271,000) at a total cost of GBP4,507,000 (2016: GBP2,751,000). 115,336 shares have
been bought back for cancellation between 1 July 2017 and 27 July 2017 at a
total cost of GBP1,478,000.
8. RELATED PARTY TRANSACTIONS
There were no matters during the six months ended 30 June 2017 requiring
disclosure under section 412 of the Companies Act 2006.
9. FURTHER INFORMATION
The foregoing do not constitute statutory accounts (as defined in section 434
(4) of the Companies Act 2006) of the Company. The financial information for
the year ended 31 December 2016 has been extracted from the statutory accounts
which have been filed with the Registrar of Companies. The Auditor issued an
unqualified opinion on those accounts and did not make any statements under
section 498(2) or (3) of the Companies Act 2006. All information shown for the
six months ended 30 June 2017 is unaudited.
Certain statements in this announcement are forward looking. By their nature,
forward looking statements involve a number of risks, uncertainties or
assumptions that could cause actual results or events to differ materially from
those expressed or implied by those statements. Forward looking statements
regarding past trends or activities should not be taken as representation that
such trends or activities will continue in the future. Accordingly, undue
reliance should not be placed on forward looking statements. The Half Yearly Report is expected to be posted to shareholders on or before 1 August 2017. Members of the public may obtain copies from Aberforth Partners LLP, 14 Melville Street, Edinburgh EH3 7NS or from its website at www.aberforth.co.uk. CONTACT: Alistair Whyte/Euan Macdonald (Telephone: 0131 220 0733) Aberforth Partners LLP, Secretaries 27 July 2017 END
(END) Dow Jones Newswires
July 27, 2017 06:05 ET (10:05 GMT)
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