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Chelverton Small Companies Dividend Trust underperforms benchmark during first half

Chelverton Small Companies Dividend Trust has announced its interim results for the half year ended 31 October 2016. During the period, the trust’s NAV fell by 2.97%, which it says compares against a rise in its benchmark index, the MSCI UK Small Cap Index, of 6.13%. The trust paid a dividend of 3.7p per share and, including this, provided a total return on its net assets of -0.21%. Since the beginning of the Company’s financial year, the Ordinary share price has increased from 190.5p to 191.5p at 31 October 2016, an increase of 0.5%, whilst the discount has decreased from 10.12% to 6.9% over the same period.

The announcement does not include details of the contributors and detractors to performance, so we cannot comment on that here. However, in terms of portfolio development, the company says that, in the last six months, it has increased its investments in seventeen of its existing holdings, taking advantage of lower share prices. It says this includes Alumasc Group, Belvoir Lettings, Braemar Shipping Services, Brewin Dolphin Holdings, Brown (N) Group, Centaur Media, DX Group, Foxtons Group, Galliford Try, Gattaca, Go-Ahead Group, Huntsworth, Low and Bonar, Martin McColls Retail Group, Regional REIT, RTC Group and St Ives.

During the period, three new names were added to the portfolio: Conviviality – drinks distributor and retailer, Victrex – producer of high performance polymers and Watkin Jones – property development and construction. The company says that funds were raised from the sale of nine holdings: Premier Farnell, Charlemagne Capital, Dee Valley Group and Avesco Group were all taken over in the period and NWF Group, RWS Holdings, Fenner, Ashmore Group and Electrocomponents were sold in their entirety. The company says that the following holdings were reduced as they had grown to become larger weightings on lower yields: Dairy Crest Group, GVC Holdings, Intermediate Capital Group, KCOM Group and Sanderson Group.

In terms of outlook, the company says that following a strong recovery in the second three months of the period, following the “knee-jerk” downward reaction by markets to the outcome of the Referendum vote, Small and Mid-Cap companies are now consolidating these gains. The company says that, as it expected, there has been a significant increase in takeover activity in the period and it is likely that there will be more takeovers in the next period. In its view, the European situation with respect to Brexit, the migrant crisis, the Italian situation, the ongoing problems in Greece and Portugal and the uncertainty from multiple national elections have cast a cloud over European economic performance. However, UK growth remains solid and it is hoped that growth in the Eurozone will gradually begin to move more positively in the near future. It says that the dividends of the underlying companies continue be increased in a healthy manner and it believes that this will continue into 2017 with company balance sheets currently in a strong state.

Chelverton Small Companies Dividend Trust underperforms benchmark during first half : SDV

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