Dunedin Smaller Companies has published its interim accounts. The company’s net asset value total return for the six month ended 30 April 2016 saw a small increase of 0.7%. This compares to a marginally higher total return of 1.3% from the benchmark index, the FTSE Small Cap Index (excluding investment companies).
They say, although markets increased over the period as a whole, there was significant volatility, with sentiment dominated by concerns over slowing growth in China and the weakness of commodity prices, in particular oil, which fell to below $30 per barrel for the first time in 12 years. Towards the end of the period, sentiment improved as the Chinese authorities and European Central Bank announced further measures to stimulate their economies, resulting in an increase in investor appetite for risk.
The portfolio’s better performers during the period included; plastics and packaging business RPC, specialist power convertor XP Power, industrial transportation company James Fisher, linen and textile rental manager Berendsen and a recent introduction to the portfolio, Smart Metering Systems. All of these companies traded well during the period. Conversely, as commodity prices staged something of a recovery during 2016, the portfolio’s lack of exposure to small company mining stocks hurt performance. The manager continues to be wary of the risks inherent in many of their business models. Other factors that have had a negative effect on performance have been the portfolio’s secondary exposure to oil and gas markets where, for example, speciality chemicals producer Victrex saw reduced demand for its products that are sold into these end markets. In addition, Mothercare and The Restaurant Group both issued profits warnings and Aveva, the software company, saw its share price fall after a mooted deal with Schneider failed to complete.
The company’s revenue earnings per share for the period were 2.97p, a slight reduction compared to the amount of 3.17p recorded in the equivalent period last year. There are a number of one-off factors that caused the decline in earnings per share, including a lower level of special dividends.
Whilst the company’s objective is to achieve long term growth, the Board recognises the importance of income to shareholders and, in order to grow or maintain the dividend in future years, the Board intends, if necessary, to use the company’s substantial revenue and capital reserves to support any portion of the dividend not covered by the year’s earnings. The Board has declared an unchanged interim dividend of 2.15p per share which will be paid on 29 July 2016 to shareholders on the register on 8 July 2016. Subject to unforeseen circumstances, in respect of the current financial year it is the intention of the Board to at least maintain last year’s total dividends of 6.0p per share.
DNDL : Dunedin Smaller in line with benchmark