REG - Scottish Oriental - Half-year Report
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RNS Number : 8967G Scottish Oriental Smlr Co Tst PLC 01 May 2025
THE SCOTTISH ORIENTAL SMALLER COMPANIES TRUST PLC
Interim results for the six months to 28 February 2025
(Extracted from the Interim Report)
The Board of The Scottish Oriental Smaller Companies Trust plc announces the
results for the six months to 28 February 2025.
Financial Highlights
Total Return Performance (unaudited) for the six months to 28 February 2025
Net Asset Value per share (1.2)% MSCI AC Asia ex Japan Small Cap (5.6)%
Index (£)
Share price 0.1% MSCI AC Asia ex Japan Index (£) 6.7%
FTSE All-Share Index (£) 5.2%
Summary Data (unaudited) at 28 February 2025
Shares in Issue 116,123,330 Shareholders' Funds £388.86m
Net Asset Value per share 334.86p Market Capitalisation £336.76m
Share price 290.00p Share Price Discount to 13.4%
Net Asset Value
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$5,000m, or the equivalent thereof, at
the time of investment. For investment purposes, this includes Australasia,
the Indian sub-continent and Japan.
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 24 of the Annual Report and Accounts* for the year ending 31
August 2024 (''the Annual Report and Accounts'').
* The Company's Annual Report and Accounts for the year ending 31 August 2024
can be found on the Company's website at www.scottishoriental.com
(http://www.scottishoriental.com)
Share Split
To assist monthly savers and those who reinvest their dividends or look to
invest smaller amounts, following shareholder approval at the Annual General
Meeting in January 2025, the Company's Ordinary shares were split on a 5 for 1
basis on 28 February 2025. This should improve the liquidity in and
marketability of the Company's shares, which will benefit all shareholders.
Each Ordinary share of 25 pence each (the "Existing Ordinary shares") was
subdivided into five new Ordinary shares of 5 pence each in the capital of the
Company (the "New Ordinary shares"). A holding of the New Ordinary shares
following the Share Split represents the same proportion of the issued
ordinary share capital of the Company as the corresponding holding of Existing
Ordinary shares immediately prior to the Share Split. The New Ordinary shares
rank pari passu with each other and carry the same rights and are subject to
the same restrictions as the Existing Ordinary shares, including the same
rights to participate in dividends paid by the Company.
Investment Management Team
Sreevardhan Agarwal assumed responsibility as Lead Manager of Scottish
Oriental from 28 November 2024. Sree acted as the Company's Deputy Manager
and, latterly, Co-Manager for 5 years and played an increasingly important
role in managing the portfolio over this period. Sree is supported by Martin
Lau, Managing Partner of FSSA Investment Managers ("FSSA"), and the wider
resources of FSSA.
This appointment followed the Board being informed by FSSA that Vinay Agarwal,
the Lead Manager for the Company, left FSSA by mutual agreement. The Board is
grateful to Vinay for his contribution to the success of the Company and
wishes him the very best in his future endeavours.
Interim Management Report
Investment Performance
Over the six months ending 28 February 2025, Scottish Oriental's net asset
value ("NAV") per share decreased by 1.2 per cent in total return terms,
while the MSCI AC Asia ex Japan Small Cap Index decreased by 5.6 per cent on
the same basis. The Company's share price increased by 0.1 per cent in total
return terms.
The strong performance of the Company on a relative basis was partly due to a
shift in allocation from India to China over the last twelve months as well as
stock selection. The Company's exposure to India reduced from 43.1% at the end
of February 2024 to 27.1% at the end of the reporting period. The exposure to
China and Hong Kong increased from 18.5% at the end of February 2024 to 28.3%
at the end of the reporting period. In addition, specific stock selection in
both countries contributed positively to the Company's performance.
Dividend
A final dividend of 14.0p and a special dividend of 8.0p, were paid on 7
February 2025 for the year ended 31 August 2024 (31 August 2023: 13.0p per
share).
Review
During the same period last year, Asian stock markets, with the exception of
China, had performed strongly. The current period reversed this trend of
performance, with most major stock markets in Asia recording declines, with
the exception of China and Hong Kong. The key reason for the strong
performance of China and Hong Kong was the government's focus on strengthening
the economic recovery by supporting consumer demand, which has been slow since
the pandemic. This stance led to a re-rating of valuations in China, which had
suffered in recent years from the poor economic sentiment. In contrast,
markets including India, Taiwan, Indonesia and Philippines were negatively
impacted by the economic and geo-political uncertainty after the new
government was elected in the United States of America.
Eight new holdings were purchased during the period. We continued to add to
our holdings in China, with relatively cheap valuations leading to some
attractive opportunities on a bottom-up basis. These include Haitian
International and Stella Holdings, both of which are leading manufacturing
businesses. Haitian International is the largest plastic injection moulding
machine manufacturer in China. Stella Holdings is a manufacturer of shoes for
leading global brands ranging from Nike to the luxury conglomerate Louis
Vuitton Moët Hennessy. In India, we purchased holdings in Niva Bupa Health
Insurance and Godrej Agrovet. Niva Bupa is a leading health insurance company
in India, 63% owned by Bupa. It has been gaining market share consistently in
the under-penetrated health insurance segment, which has the potential to grow
rapidly in the years ahead. Godrej Agrovet is a diversified agricultural
business. The business has witnessed several changes in recent years to
simplify its operations and improve its return on capital employed. In ASEAN,
we purchased holdings in Unilever Indonesia and GT Capital. Unilever has been
the market leader in the Indonesian fast moving consumer goods ("FMCG")
industry for several decades. In recent years, the business has suffered due
to an increase in competitive intensity. The company is taking several steps
to fix these issues and improve its growth prospects. GT Capital is a holding
company which owns a majority stake in Toyota Motor Philippines, a significant
stake in Metropolitan Bank, as well as operations in insurance, real estate
and infrastructure. Several of these businesses enjoy strong market positions
and should benefit from steady growth. In Taiwan, we purchased a holding in
Sporton International, a leading testing company focused on the mobile
smartphone and electronics industries. We also purchased a holding in Guzman Y
Gomez, the leading Mexican focused quick service restaurant operator in
Australia. The company has received a strong customer response to its offering
of fast-food without added preservatives, additives and colours. It has the
potential to be significantly larger than its current size.
We disposed of three holdings during the period. Mphasis was sold after its
valuations increased to expensive levels. Astra Otoparts and Tokai Carbon
Korea were sold as both companies were facing industry headwinds which are
unlikely to subside over the medium-term. These disposals were also aimed at
consolidating the portfolio among higher conviction holdings.
Outlook
Subsequent to the reporting period, economic uncertainty has increased
following the actions of the newly elected government in the United States of
America. We don't pretend to know the end-result of the significant disruption
to global trade and are not trying to predict such outcomes either. However,
it is in times such as this that the conservative approach with which Scottish
Oriental's portfolio is managed comes to the fore. We believe our holdings in
market-leading businesses are likely to remain resilient through this period.
Our confidence in the portfolio's outcomes is based on the following:
• The vast majority of holdings in the portfolio comprise domestically
focused businesses. Due to their domestic focus, these companies tend to be
minimally impacted by global trade issues. The small number of exporters we
own in the portfolio have strong competitive advantages. While a period of
disruption might impact their business over the near-term, they are likely to
emerge as long-term winners.
• The balance sheets of almost all holdings are net cash. This provides them
with a significant opportunity to invest counter-cyclically or use mergers
& acquisitions as opportunities arise to gain market share as many of
their smaller peers may struggle to survive.
• The owners and managers of the portfolio companies have witnessed several
such periods of disruption, most recently during the pandemic. They have
established track records of navigating such periods of uncertainty well.
• The long-term outlook is for attractive growth, led by rising incomes
among a broad range of Asian economies, and this remains unchanged.
As we look back at the history of Scottish Oriental, we are reminded that the
Company was established 30 years ago amidst a similar period of uncertainty.
The Company's first Annual Report spoke about the impact of the Mexican Peso
crisis and its impact on the business environment across emerging markets. A
few years later, we faced the Asian Financial Crisis and the bursting of the
global technology bubble. Our investment philosophy has held the Company in
good stead through these times. We are confident that this will hold true in
the future as well.
Sreevardhan Agarwal
FSSA Investment Managers
30 April 2025
Income Statement
Six months to Six months to
28 February 2025 29 February 2024
(unaudited) (unaudited)
Revenue Capital Total* Revenue Capital Total*
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (7,923) (7,923) - 29,007 29,007
Income from investments 2,807 - 2,807 2,930 - 2,930
Other income 78 - 78 46 - 46
Investment management fee (1,461) - (1,461) (1,346) - (1,346)
Currency losses - (25) (25) - (72) (72)
Other administrative expenses (477) - (477) (395) - (395)
Net return on ordinary activities
before finance costs and taxation 947 (7,948) (7,001) 1,235 28,935 30,170
Finance costs (416) - (416) (406) - (406)
Net return on ordinary activities before taxation
531 (7,948) (7,417) 829 28,935 29,764
Tax on ordinary activities (note 3) (265) 3,813 3,548 (254) (4,412) (4,666)
Net return attributable to equity
shareholders 266 (4,135) (3,869) 575 24,523 25,098
Net return per ordinary share 0.23p† (3.52)p† (3.29)p† 0.48p† 20.30p† 20.78p†
* 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. This statement is,
therefore, the single statement of comprehensive income of the Company.
All revenue and capital items derive from continuing operations.
† Adjusted for the five for one share split of the Ordinary shares on 28
February 2025.
Statement of Financial Position
At At
28 February 31 August
2025 2024
(unaudited) (audited)
£'000 £'000
FIXED ASSET EQUITY INVESTMENTS
Australia 886 -
China 101,939 77,895
Hong Kong 8,150 7,828
India 105,088 164,682
Indonesia 42,703 47,669
New Zealand 7,859 6,174
Philippines 42,229 41,872
Singapore 8,147 6,096
South Korea 6,597 11,663
Taiwan 47,161 36,560
Vietnam 8,873 9,319
Total Equities 379,632 409,758
Net Current Assets 40,892 31,858
Non-Current Liabilities (note 3) (31,669) (38,548)
Total Assets less Liabilities 388,855 403,068
CAPITAL AND RESERVES
Ordinary share capital 7,853 7,853
Share premium account 34,259 34,259
Capital redemption reserve 58 58
Capital reserves 340,306 349,645
Revenue reserve 6,379 11,253
Equity Shareholders' Funds 388,855 403,068
Net asset value per share 334.86p 341.91p†
† Adjusted for the five for one share split of the Ordinary shares on 28 February 2025.
Cash Flow Statement
Six months to Six months to
28 February 29 February 2024
2025
(unaudited) (unaudited)
Note £'000 £'000
Net cash outflow from operations before dividends, interest, purchases and
sales of investments
9 (2,091) (4,074)
Dividends received from investments 3,069 3,340
Interest received from deposits 78 46
Cash inflow/(outflow) from operations 1,056 (688)
Taxation (252) (241)
Net cash inflow/ (outflow) from operating activities 804 (929)
Investing activities
Purchases of investments (65,329) (57,665)
Sales of investments 81,401 70,661
Capital gains tax paid on the sale of investments (3,069) (2,359)
Net cash inflow from investing activities 13,003 10,637
Financing activities
Equity dividend(s) paid (5,140) (3,138)
Buyback of ordinary shares (5,213) (5,159)
Interest paid (425) (415)
Net cash outflow from financing activities (10,778) (8,712)
Increase in cash and cash equivalents 3,029 996
Cash and cash equivalents at the start of the period 37,972 18,089
Effect of currency losses (25) (72)
Cash and cash equivalents at the end of the period* 40,976 19,013
*Cash and cash equivalents represents cash at bank.
Statement of Changes in Equity
For the six months ended 28 February 2025
Share Premium Capital
Share Capital Account Redemption Capital Revenue
Reserve Reserves Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 August 2024
7,853 34,259 58 349,645 11,253 403,068
Total comprehensive income:
Return for the period - - - (4,135) 266 (3,869)
Transactions with owners recognised directly in equity:
Dividends paid in the period - - - - (5,140) (5,140)
Buyback of Ordinary shares - - - (5,204) - (5,204)
Balance at 28 February 2025
7,853 34,259 58 340,306 6,379 388,855
For the six months ended 29 February 2024
Share Premium Capital
Share Capital Account Redemption Capital Revenue
Reserve Reserves Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 August 2023
7,853 34,259 58 304,661 7,746 354,577
Total comprehensive income:
Return for the period - - - 24,523 575 25,098
Transactions with owners recognised directly in equity:
Dividend paid in the period - - - - (3,138) (3,138)
Buyback of Ordinary shares - - - (5,198) - (5,198)
Balance at 29 February 2024
7,853 34,259 58 323,986 5,183 371,339
Notes to Accounts
1. The condensed Financial Statements for the six months
to 28 February 2025 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', UK Generally Accepted Accounting Principles
("UK GAAP") and the AIC's Statement of Recommended Practice issued in July
2022.
2. The position as at 31 August 2024 above 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 2024.
3. The Company has incurred £3,069,000 of capital gains
tax on the sale of investments in the six months to 28 February 2025 (six
months to 29 February 2024: £2,359,000).
The Company has recognised a deferred tax liability of £1,824,000 (31 August
2024: £8,706,000) on capital gains which may arise if Indian investments are
sold.
4. The return per Ordinary share figure is based on the
net loss for the six months to 28 February 2025 of £3,869,000 (six months to
29 February 2024: net profit of £25,098,000) and on 117,494,515 (six months
to 29 February 2024: 120,740,520) Ordinary shares, being the weighted average
number of Ordinary shares in issue during the respective periods adjusted for
the share split on 28 February 2025.
5. On 28 February 2025 there were 116,123,330 Ordinary
shares in issue and 40,944,985 Ordinary shares held in Treasury (31 August
2024: 117,888,830 in issue and 39,179,485 held in Treasury, adjusted for the
share split). During the six months to 28 February 2025, the Company bought
back the equivalent of 1,765,500 new Ordinary shares (year to 31 August 2024;
the Company bought back the equivalent of 3,910,425 new Ordinary shares).
6. Dividends
At At
28 February 29 February
2025 2024
£'000 £'000
Amounts recognised as distributions in the period (pre share split):
Final dividend of 14.0p (2024 - 13.0p) 3,271 3,138
Special dividend of 8.0p (2024 - nil) 1,869 -
5,140 3,138
7. 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. The total fee payable to the Investment Manager is
capped at 1.5% per annum of the Company's net assets. As at 28 February 2025,
the estimated performance fee for the year ending 31 August 2025 is £nil.
8. 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
fair 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.
Financial assets at fair value through profit or loss
28 February 2025 31 August 2024
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£000 £000 £000 £000 £000 £000 £000 £000
Listed investments 346,772 32,860 - 379,632 385,316 24,442 - 409,758
Total 346,772 32,860 - 379,632 385,316 24,442 - 409,758
Listed investments included in fair value Level 1 are actively traded on
recognised stock exchanges and the fair value of these investments has been
determined by reference to their quoted prices at the reporting date.
Listed investments included in Level 2 are deemed to be illiquid. The fair
value of these investments has been determined by reference to their quoted
prices at the reporting date.
9. Reconciliation of total return on ordinary
activities before finance costs and tax to net cash outflow before dividends,
interest, purchases and sales:
Six months to Six months to
28 February 29 February
2025 2024
£'000 £'000
Net return on activities before finance costs and taxation (7,001) 30,170
Net losses/(gains) on investments 7,923 (29,007)
Currency losses 25 72
Dividend income (2,807) (2,930)
Interest income (78) (46)
Decrease in creditors (149) (2,228)
Increase in debtors (4) (105)
Net cash outflow from operations before dividends,
interest, purchases and sales (2,091) (4,074)
Principal Risks and Uncertainties
The principal and emerging risks faced by the Company are; investment
objective and strategy, investment performance, financial and economic, share
price discount/premium to net asset value, operational and regulatory. These
risks have not changed since the publication of the Annual Report and
Accounts. The principal and emerging risks and uncertainties facing the
Company, together with a summary of the mitigating action the Board takes to
manage these risks, are set out on pages 30 and 31 of the Annual Report and
Accounts. The Investment Manager monitors portfolio liquidity and manages this
to ensure the Company maintains sufficient levels of liquidity to operate
effectively. 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 enquiries and bearing in mind the nature of the Company's
business and assets, the Directors believe 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 financial statements.
Directors' Responsibility Statement
The Directors are responsible for preparing the half-yearly financial report
in accordance with applicable law and regulations. The Directors confirm that,
to the best of their knowledge:
(a) the condensed set of financial statements within the half-yearly financial
report, prepared in accordance with 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 2025 and a description of the
principal risks and uncertainties for the remaining six months of the
financial year).
(c) 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 2025 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
Jeremy Whitley
Chairman
30 April 2025
· The terms of the half-yearly financial report and this
announcement were approved by the Board on 30 April 2025.
· Copies of the half-yearly financial 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
28 Walker Street, Edinburgh EH3 7HR.
Enquiries:
Juniper Partners Limited, Edinburgh, +44 (0)131 378 0500
1 May 2025
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