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Small Companies Dividend Trust convincingly beats benchmark in H1

Small Companies Dividend Trust has announced its interim results for the six-months ended 31 October 2015. During the period, the NAV per ordinary share rose 11.6% beating the MSCI Small Cap Index, which fell 2.02%. The ordinary share price increased by 17.1% during the period and the discount narrowed from 16.99% to 12.90%. A second interim dividend of 1.7p has been declared bringing the total for the first half to 3.4p (2014: 3.15p) an increase of 7.9%. The company says that it anticipates maintaining the dividend at this level for the third quarter and that the fourth interim dividend will be at the same level as last year.

In terms of portfolio activity, the company has increased its investment in 20 of its existing holdings during the last six months. They say that this has been to take advantage of lower share prices. The names added to are Belvoir Lettings, Kier Group, Numis, Mucklow (A & J) Group, NWF Group, Shoe Zone, DX Group, Jarvis Securities, Games Workshop Group, Connect Group, Castings, Moss Bros Group, Charlemagne Capital, Brown (N) Group, Grafenia, Coral Products, Brewin Dolphin Holdings, Chamberlin, Dee Valley Group and GLI Finance.

The company has also added 13 new names to the portfolio: RWS Group – intellectual property translation and filing; Fenner – a previous holding and a manufacturer of industrial belting and other polymer products; Orchard Funding Group – funding for accounting firms and small businesses; Cape – specialist energy and industrial services; RPS Group – energy resources and industrial consultancy; Amino Technologies – digital entertainment solutions; RTC Group – recruitment; StatPro Group – software for asset management; Ashmore Group – asset manager specialising in emerging markets; UBM – multinational media; Foxtons Group – estate agents and property management; Curtis Banks Group – provider of SIPPS and SSAS; and Galliford Try – construction and housebuilding. Curtis Banks Group and Orchard Funding Group were new issues that floated in the period.

The company says that funds were raised from the sale of six of our holdings during the period. The companies were Amlin, Nationwide Accident Repair and Phoenix IT Group (all taken over in the period), Ladbrokes, Majestic Wine and Marshalls. The following holdings were reduced as the company says that they grew to become larger weightings on lower yields: Portmeirion Group, Novae Group, Menzies (John), Sanderson Group, Trifast, Dairy Crest Group, Epwin Group, Go-Ahead Group, Acal, Intermediate Capital Group, Stadium Group, Macfarlane Group, Alumasc Group (The) and Curtis Banks Group. One holding, William Sinclair Holdings, went into administration in the period. The company says that this was a result of over-ambitious expansion and cost overruns on moving a processing plant.

In terms of outlook, the managers say that Small and Mid-Cap companies are now consolidating the gains achieved over the past six months and that, in their view, the reported earnings in the first quarter of 2016 will need to show steady improvement to continue this share price progress. They think it likely that there will be more takeovers in the next period.

The managers also say that they are encouraged by UK growth and it is hoped that growth in the Eurozone will gradually begin to move more positively in the near future. However they say that the EU referendum, the migrant crisis and the ongoing problems in Greece and Portugal continue to cloud the economic outlook. However, the dividends of the underlying companies continue to be increased in a robust fashion and they believe that this will continue into 2016.

Small Companies Dividend Trust convincingly beats benchmark in H1 : SDV

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