TIDMSST
RNS Number : 5277L
Scottish Oriental Smlr Co Tst PLC
20 April 2018
THE SCOTTISH ORIENTAL SMALLER COMPANIES TRUST PLC
Interim results for the six months to 28 February 2018
(Extracted from the Interim Report)
The Board of The Scottish Oriental Smaller Companies Trust plc
is pleased to announce the results for the six months to 28
February 2018.
Financial Highlights
Total Return Performance for the six months
to 28 February 2018 (Unaudited)
Net Asset Value
(capital return
with dividends MSCI AC Asia ex
reinvested) (2.3)% Japan Index (GBP) 3.4%
MSCI AC Asia ex
Japan Small Cap
Share Price (7.1)% Index (GBP) 4.2%
FTSE All-Share
Index (GBP) (0.9)%
Summary Data at 28 February 2018 (Unaudited)
Shares in issue 30,948,163 Shareholders' GBP355.01m
Funds
Net Asset Value 1,147.10p Market Capitalisation GBP303.29m
per share
Share Price Discount
Share Price 980.00p to Net Asset Value 14.6%
------------------ ----------- ---------------------- -----------
Corporate Objective
The investment objective of The Scottish Oriental Smaller
Companies Trust plc ("Scottish Oriental", "the Company" or "the
Trust") is to achieve long-term capital growth by investing in
mainly smaller Asian quoted companies with market capitalisations
of below US$1,500m, or the equivalent thereof, at the time of
investment. For investment purposes, this includes the Indian
sub-continent but excludes Japan and Australasia.
This is an abridged version of Scottish Oriental's investment
policy and objective. A full statement of Scottish Oriental's
investment policy can be found on page 19 of the Annual Report and
Accounts* for the year ending 31 August 2017 ("the Annual Report
and Accounts").
Principal Risks and Uncertainties
Given the nature of its investment activities, the principal
risks that Scottish Oriental faces from its financial instruments
are market risk (comprising interest rate, currency and other price
risks) and credit risk. The principal risks and uncertainties have
not changed since the publication of the Annual Report and
Accounts. A detailed explanation of these risks and how they are
managed is set out in Note 15 on pages 54 to 58 of the Annual
Report and Accounts. As Scottish Oriental's assets mainly comprise
readily realisable securities, other than in exceptional
circumstances there should be no significant liquidity risk.
Scottish Oriental's investment portfolio is exposed to market price
fluctuations and currency fluctuations which are monitored by the
Investment Manager. The Company is also exposed to minimal interest
rate risk on interest receivable from bank deposits and interest
payable on bank overdraft positions.
Going Concern
After making inquiries, and bearing in mind the nature of the
Company's business and assets, which are considered to be readily
realisable if required, the Directors believe that there are no
material uncertainties and that the Company has adequate resources
to continue operating for at least twelve months from the date of
approval of the condensed financial statements. For this reason,
they continue to adopt the going concern basis in preparing the
accounts.
*The Company's Annual Report and Accounts for the year ending 31
August 2017 can be found on the Company's website at:
www.scottishoriental.com.
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:
(a) the condensed set of financial statements within the
half-yearly financial report, prepared in accordance with the
Financial Reporting Standard 104 (Interim Financial Reporting),
gives a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
(b) the Interim Management Report includes a fair review of the
information required by 4.2.7R of the Financial Conduct Authority's
Disclosure Guidance and Transparency Rules (important events that
have occurred in the first six months of the Company's financial
year, together with their effect on the half-yearly financial
statements to 28 February 2018 and a description of the principal
risks and uncertainties for the remaining six months of the
financial year). Rule 4.2.8R requires information on related party
transactions. No related party transactions have taken place during
the first six months of the financial year that have materially
affected the financial position of the Company during that period
and there have been no changes in the related party transactions
described in the last Annual Report and Accounts that could do
so.
The half-yearly report for the six months to 28 February 2018
comprises the Interim Management Report, the Directors'
Responsibility Statement and a condensed set of financial
statements and has not been audited or reviewed by auditors
pursuant to the Auditing Practices Board guidance on Review of
Interim Financial Information.
By order of the Board
James Ferguson
Chairman
19 April 2018
Interim Management Report
Investment performance
Over the six months ending 28 February 2018, Scottish Oriental's
net asset value ("NAV") per share decreased by 2.3 per cent in
total return terms, while the MSCI AC Asia ex Japan Index recorded
a sterling adjusted increase of 3.4 per cent and the MSCI AC Asia
ex Japan Small Cap Index a rise of 4.2 per cent on the same basis.
The Trust's share price fell by 7.1 per cent in total return terms
over the period. The Trust underperformed the FTSE All-Share Index,
which fell by 0.9 per cent in total return terms over the six month
period.
The biggest detractors from investment performance were Scottish
Oriental's relatively low exposure to Chinese companies as well as
poor returns from the Trust's investments in Indonesia and the
Philippines. The Trust's relatively large cash holdings also
detracted from investment performance.
The Trust's shares traded at a discount ranging from 7.5 per
cent to 14.6 per cent during the period, reflecting the volatility
in Asian markets and continued investor caution, and stood at a
discount to NAV of 14.6 per cent on 28 February 2018. The Trust
bought back 12,000 shares during the six months under review, at a
discount to NAV of 13.8 per cent. These shares will be held in
Treasury for future re-issue.
The Trust's cash level was GBP31.9 million at the end of the
period, representing 9.0 per cent of net assets. We will seek to
invest this money gradually once suitable long term investment
opportunities have been identified.
Review
Asian stock markets rose over the six months ending 28 February
2018. Investor sentiment was positive with a number of markets
producing double digit returns in local currency terms. However the
pound strengthened notably against most Asian currencies over the
period which resulted in more moderate returns when converted to
sterling. The US raised interest rates in December continuing its
policy of gradual increases. Expectations are for further increases
in 2018. There have been few policy rate changes made by Asian
central banks.
The Vietnamese stock market performed exceptionally strongly
over the period with company results reflecting the strong economy.
Thailand also performed very well with many of its companies
benefiting from the rebound in the oil price. The three poorest
performing markets were India, the Philippines and Sri Lanka. All
produced positive local returns but suffered from weak currencies
relative to sterling.
Asian smaller companies modestly outperformed their larger
counterparts. Returns were considerably better for smaller
companies in India, South Korea and Taiwan.
During the period the number of portfolio holdings was further
reduced from 67 to 58 stocks. Companies were typically sold because
their valuations became too high or because of a weak growth
outlook. Examples of the former category are Godrej Properties,
Jubilant Foodworks and Kansai Nerolac Paints in India; and the
latter category being Hong Kong's Public Financial Holdings,
Singapore's Delfi and Taiwan's Standard Foods. We initiated ten new
investments in companies such as Pakistan's Pak Suzuki Motors, the
Philippines' Century Pacific Food and Taiwan's Silergy which all
have the potential to become much larger companies. We also added
to some existing holdings including India's Blue Dart Express and
Singapore's Raffles Medical Group where weakness in these
companies' share prices saw valuations become more attractive.
As a result of portfolio activity, Scottish Oriental's exposure
to the Philippines rose and Hong Kong and India fell. At a sector
level, exposure to Industrials and Healthcare rose whereas
Financials and Real Estate fell. But more importantly, the Trust
portfolio is now concentrated on faster growing companies which, we
believe, have the potential to deliver multi-year growth and emerge
as winners in their respective industries.
Outlook
2017 saw a strong recovery in global growth and this has been
reflected through strong share price performance by Asia's
companies - particularly those in more cyclical sectors. Our
concern remains that this improvement in growth has happened
against a backdrop of rising debt levels at a time when interest
rates are near all-time low levels. Although interest rates have
started to rise, the pace of these increases has been modest.
Inflation has remained benign and this, combined with a weakening
US dollar, has given Asia's central bankers the luxury of not
needing to follow the US Federal Reserve in raising policy rates.
This has resulted in accommodative monetary conditions in most of
Asia which has allowed Asia's stock markets to continue to perform
well. Debt levels cannot continue to rise forever but this will
perhaps not become obvious until interest rates normalise and the
cost of servicing debt becomes more significant.
Until such normalisation occurs, we will continue to be
cautious. We remain wary of highly leveraged companies and also
countries where we believe recent growth has been borrowed from the
future by increased borrowing by the government, corporations and
consumers. A large portion of Scottish Oriental's funds are
invested in India, Indonesia and the Philippines - countries where
we have found the most companies recently that we believe have
strong long term growth ahead of them. These three countries have
relatively low levels of debt when compared to GDP with recent
growth being fuelled by structural domestic factors rather than
cheap, borrowed money. Our caution also means that the Trust still
has relatively high levels of cash.
Whilst we are keen for the portfolio to be fully invested,
valuations of quality Asian companies remain as high as we can
remember. With this in mind we will look to deploy the Trust's cash
reserves as and when we find companies that meet our investment
criteria at valuations where we believe the likely returns over the
medium term are reasonable.
Dividend
A dividend of 11.5p per share was paid on 19 January 2018 for
the year ending 31 August 2017 (31 August 2016: 11.5p per share).
It is too early to make a forecast of the distribution for the
current financial year.
Income Statement for the six months to 28 February 2018
Six months to Six months to
28 February 2018 28 February 2017
(unaudited) (unaudited)
Revenue Capital Total* Revenue Capital Total*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ----------- ----------- ----------- --------- ---------
(Losses)/gains
on investments - (8,076) (8,076) - 23,307 23,307
Income from investments 1,740 - 1,740 1,818 - 1,818
Other income 10 - 10 26 - 26
Investment management
fee (1,375) - (1,375) (1,254) - (1,254)
Currency (losses)/gains - (1,497) (1,497) - 1,352 1,352
Other administrative
expenses (490) - (490) (314) - (314)
--------------- ----------- ----------- ----------- --------- ---------
Net return before
finance costs and
taxation (115) (9,573) (9,688) 276 24,659 24,935
Finance costs of
borrowing - - - (311) - (311)
--------------- ----------- ----------- ----------- --------- ---------
Net return on ordinary
activities before
taxation (115) (9,573) (9,688) (35) 24,659 24,624
Tax on ordinary
activities (121) (758) (879) (132) - (132)
--------------- ----------- ----------- ----------- --------- ---------
Net return attributable
to equity
shareholders (236) (10,331) (10,567) (167) 24,659 24,492
--------------- ----------- ----------- ----------- --------- ---------
Net return per
ordinary share (0.76p) (33.38p) (34.14p) (0.54p) 79.58p 79.04p
* The total column of this statement is the Profit & Loss
Account of the Company. The revenue and capital columns are
supplementary to this and are prepared under guidance published by
the Association of Investment Companies.
There are no items of other comprehensive income, therefore this
statement is the single statement of comprehensive income of the
Company.
All revenue and capital items derive from continuing
operations.
Statement of Financial Position as at 28 February 2018
At 28 At 31
February August 2017
2018
GBP'000 GBP'000
(unaudited) (audited)
FIXED ASSETS - EQUITY INVESTMENTS
Bangladesh 5,234 5,127
China 39,042 35,237
Hong Kong 17,364 26,591
India 86,455 94,060
Indonesia 27,549 30,067
Malaysia 9,269 10,988
Pakistan 5,065 3,602
Philippines 35,227 27,679
Singapore 18,185 19,578
South Korea 7,590 12,302
Sri Lanka 17,030 17,980
Taiwan 41,035 41,976
Thailand 8,151 8,989
Vietnam 6,577 4,209
Total Equities 323,773 338,385
Net Current Assets 31,234 30,871
------------- -------------
Total Assets less Current Liabilities 355,007 369,256
CAPITAL AND RESERVES
Ordinary share capital 7,853 7,853
Share premium account 34,259 34,259
Capital redemption reserve 58 58
Capital reserve 308,057 318,511
Revenue reserve 4,780 8,575
------------- -------------
Equity Shareholders' Funds 355,007 369,256
============= =============
Net asset value per share 1,147.10p 1,192.68p
Cash Flow Statement for the six months to 28 February 2018
Six months Six months
to to
28 February 28 February
2018 2017
GBP'000 GBP'000
(unaudited) (unaudited)
Note
Net cash outflow from operations
before dividends, interest,
purchases and sales 8 (1,810) (1,213)
Dividends received from investments 2,156 2,439
Interest received from deposits 10 26
Purchases of investments (75,320) (93,890)
Sales of investments 80,093 100,551
---------- ----------
Cash from operations 5,129 7,913
Taxation (892) (167)
---------- ----------
Net cash inflow from operating
activities 4,237 7,746
Financing activities
Interest paid on borrowings - (314)
Equity dividend paid (3,559) (3,560)
Buyback of ordinary shares (123) (542)
---------- ----------
Net cash outflow from financing
activities (3,682) (4,416)
Increase in cash and cash
equivalents 555 3,330
Cash and cash equivalents
at the start of the period 32,816 47,352
Effect of currency (losses)/gains (1,497) 1,352
Cash and cash equivalents
at the end of the period*
31,874 52,034
---------- ----------
*Cash and cash equivalents represents cash at bank
Statement of Changes in Equity
For the six months ended
28 February 2018
Share Capital
Share Premium Redemption Capital Revenue
Capital Account Reserve Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- --------- ------------ ----------- ---------- -----------
Balance at
31 August 2017 7,853 34,259 58 318,511 8,575 369,256
---------------------- ---------- --------- ------------ ----------- ---------- -----------
Total comprehensive
income:
Return for
the period - - - (10,331) (236) (10,567)
Transactions
with owners
recognised
directly in
equity:
Buyback of
ordinary shares - - - (123) - (123)
Dividend paid
in the period - - - - (3,559) (3,559)
Balance at
28 February
2018 7,853 34,259 58 308,057 4,780 355,007
---------------------- ---------- --------- ------------ ----------- ---------- -----------
For the six months ended
28 February 2017
Share Capital
Share Premium Redemption Capital Revenue
Capital Account Reserve Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ---------- --------- ------------ ---------- ---------- ----------
Balance at 31
August 2016 7,853 34,259 58 272,611 10,038 324,819
----------------------- ---------- --------- ------------ ---------- ---------- ----------
Total comprehensive
income:
Return for the
period - - - 24,659 (167) 24,492
Transactions
with owners
recognised directly
in equity:
Buyback of ordinary
shares - - - (542) - (542)
Dividend paid
in the period - - - - (3,560) (3,560)
Balance at 28
February 2017 7,853 34,259 58 296,728 6,311 345,209
----------------------- ---------- --------- ------------ ---------- ---------- ----------
Notes to Accounts
(1) The condensed Financial Statements for the six months to 28
February 2018 comprise the Income Statement, Statement of Financial
Position, Cash Flow Statement and Statement of Changes in Equity,
together with the notes set out below. They have been prepared in
accordance with FRS 104 'Interim Financial Reporting' and the AIC's
Statement of Recommended Practice issued in November 2014 and
updated in January 2017 with consequential amendments.
(2) The position as at 31 August 2017 is an abridged version of
that contained in the Annual Report and Accounts, which received an
unqualified audit report and which have been filed with the
Registrar of Companies. This Interim Report has been prepared under
the same accounting policies adopted for the year to 31 August
2017.
(3) The return per ordinary share figure is based on the net
loss for the six months ended 28 February 2018 of GBP10,567,000
(six months ended 28 February 2017: net profit of GBP24,492,000)
and on 30,954,196 (six months ended 28 February 2017: 30,986,885)
ordinary shares, being the weighted average number of ordinary
shares in issue during the respective periods.
(4) At 28 February 2018 there were 30,948,163 ordinary shares in
issue and 465,500 ordinary shares held in Treasury (31 August 2017:
30,960,163 in issue and 453,500 held in Treasury). During the six
months ended 28 February 2018, the Company bought back 12,000
ordinary shares at a total cost of GBP123,000, all of which have
been held in Treasury for future re-issue. Since the half-year end,
the Company has bought back a further 37,000 ordinary shares to be
held in Treasury at a cost of GBP352,000.
(5) Dividends
At At
28 February 28 February
2018 2017
GBP'000 GBP'000
Amounts recognised as distributions
in the period:
Dividend for the year ending
31 August 2017 of 11.5p (2016
- 11.5p), paid 19 January 2018 3,559 3,560
------------- -------------
(6) Under the terms of the Investment Management Agreement, an
annual performance fee may be payable to the Investment Manager at
the end of the year. A detailed explanation of the performance fee
computation is set out on page 49 of the Annual Report and
Accounts. The total fee payable to the Investment Manager is capped
at 1.5% per annum of the Company's net assets.
Assuming no change in share price, MSCI AC Asia ex Japan Index
Total Return and shares in issue between 28 February and 31 August
2018, the estimated performance fee for the year ending 31 August
2018 would amount to GBPnil. No performance fee has been accrued in
the six months to 28 February 2018.
(7) Investments in securities are financial assets designated at
fair value through profit or loss on initial recognition. In
accordance with FRS 102 and FRS 104, these investments are analysed
using the far value hierarchy described below. Short term balances
are excluded as their carrying value at the reporting date
approximates to their fair value.
The levels are determined by the lowest (that is, the least
reliable or least independently observable) level of input that is
significant to the fair value measurement for the individual
investment in its entirety as follows:
Level 1 - Investments with prices quoted in an active
market;
Level 2 - Investments whose fair value is based directly on
observable current market prices or is indirectly being derived
from market prices; and
Level 3 - Investments whose fair value is determined using a
valuation technique based on assumptions that are not supported by
observable current market prices or are not based on observable
market data.
All of the Company's investments were categorised as Level 1 for
the six month period to 28 February 2018.
(8) Reconciliation of total return on ordinary activities before
finance costs and taxation to net cash outflow before dividends,
interest, purchases and sales
Six months to Six months to
28 February 28 February
2018 2017
GBP'000 GBP'000
Net return on activities before finance
costs and taxation (9,688) 24,935
Net losses/(gains) on investments 8,076 (23,307)
Currency losses/(gains) 1,497 (1,352)
Dividend income (1,740) (1,818)
Interest income (10) (26)
(Decrease)/increase in creditors (3) 5
Decrease in debtors 58 350
------------- -------------
Net cash outflow from operations before
dividends,
interest, purchases and sales (1,810) (1,213)
-- The terms of the interim report and this announcement were
approved by the Board on 19 April 2018.
-- Copies of the Interim Report will be posted to shareholders
shortly and will be available thereafter on the Company's website:
www.scottishoriental.com and from the Company Secretary's office at
21 Walker Street, Edinburgh EH3 7HX.
Enquiries:
PATAC Limited, Edinburgh, +44 (0)131 538 6610
19 April 2018
This information is provided by RNS
The company news service from the London Stock Exchange
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