German Smaller Co - Interim Results, etc
November 07 1997 - 12:55PM
UK Regulatory
RNS No 1906e
GERMAN SMALLER COMPANIES INVESTMENT TRUST PLC
7th November 19997
German Smaller Companies Investment Trust plc
Preliminary Results for the half-year ended 30 September 1997
The directors announce the unaudited results for the half-year ended 30
September 1997. The objective of the company is to achieve capital
appreciation through investment primarily in the equity securities of small
and medium-sized German companies.
No interim dividend has been declared but it is the directors' intention to
recommend a final dividend during 1998 in respect of the company's financial
year ending 31 March 1998.
The salient figures in the half-year report, which will be sent to
shareholders in December 1997 and made available to the public at the
company's registered office are:
Statement of Total Return
(incorporating the revenue account)
of the Company
Half-year ended Half-year ended
30 September 1997 30 September 1996
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Gains on investments* - 1,993 1,993 - 409 409
Overseas dividends 764 - 764 1,125 - 1,125
Bank interest and other 18 - 18 27 - 27
income
------ ------ ------ ------ ------ ------
782 1,993 2,775 1,152 409 1,561
Investment management fee (242) - (242) (237) - (237)
Other expenses (51) - (51) (73) - (73)
------ ------ ------ ------ ------ ------
Return on ordinary 489 1,993 2,482 842 409 1,251
activities before taxation
Tax on ordinary (161) - (161) (278) - (278)
activities
------ ------ ------ ------ ------ ------
Return on ordinary 328 1,993 2,321 564 409 973
activities after taxation
Dividends in respect of - - - - - -
ordinary shares
------ ------ ------ ------ ------ ------
Transfer to reserves 328 1,993 2,321 564 409 973
------ ------ ------ ------ ------ ------
Return per ordinary share 0.8p 4.7p 5.5p 1.3p 1.0p 2.3p
===== ===== ===== ===== ===== =====
*Net of exchange losses
The financial information set out above does not constitute the company's
statutory accounts for the year ended 31 March 1997 but is derived
from those accounts.
Statutory accounts for 1997 have been delivered to the registrar of companies.
The auditors have reported on those accounts; their reports did not contain
statements under section 237 (2) (accounting records or returns inadequate or
accounts not agreeing with records and returns) or (3) (failure to obtain
necessary information and explanations) of the Companies Act 1985.
German Smaller Companies Investment Trust plc is registered in England and
Wales No 1879372 and is an investment company within the meaning of section
266 of the Companies Act 1985. Registered office: 10 Fleet Place, London,
EC4M 7RH.
For further information contact:
Alison Powell or Michael Oliver
Hill Samuel Asset Management Limited
0171 203 3000
GSCIT Chairman's Statement
During the half-year to 30 September 1997, the net asset value per ordinary
share (NAV) increased by 4.2%, outperforming the sterling adjusted composite
DAX (ex DAX) Capital index by 6.8%. The share price increased by 3.3% to
109.0p with the discount to fully diluted net asset value (NAV) remaining
steady at 18%.
Exchange rate volatility has continued to impact results. In particular, the
sharp appreciation of sterling against the Deutschmark compared with a year
ago has adversely affected the translation of income into sterling. While the
Trust's final dividend will not be declared until May 1998, a major proportion
of the Trust's income has already been received due to the timing of most
German dividend payments. A reduction in the amount payable to ordinary
shareholders appears likely although this should be viewed against the strong
performance of the NAV which is the principal objective of the Trust.
Economic growth accelerated during the period under review with exports
remaining the key component as capital spending initially failed to respond to
the degree anticipated. Manufacturing order intake and industrial production
increased sharply over the summer and as inventory levels in addition remain
relatively low, investment should make a solid contribution to overall
economic growth for the full year. The momentum of the domestic economy was
further aided by rising consumer expenditure, a surprising development given
continuing high levels of unemployment (11.6% for Pan Germany in August) and
the collapse of the government's major tax reform package in September.
Economists are forecasting growth in 1997 of around 2.7%.
The Bundesbank continued to follow its loose monetary policy stance of the
last two years in the review period and this, in combination with the
continued depreciation of the Deutschmark until July provided a supportive
environment for business activity. In contrast, the German government failed
the corporate sector through its inability to make any real progress in
structural reform, most notably the simplification of the tax system. This
project is now shelved until after the general election in September 1998.
Given the improvement in the real economy, expectations rose over the summer
that interest rates might increase and this led to a 2% strengthening of the
Deutschmark on a trade weighted basis from July. The Bundesbank did nothing
to deter this speculation, which helped stabilise the Deutschmark/US Dollar
exchange rate. On 9th October 1997 the repo rate was raised to 3.3% from 3%
previously, and although this could be seen as a pre-emptive strike against
possible inflationary pressures next year when the economy is forecast to grow
by 3%, most commentators feel the Bundesbank was acting in concert with other
potential EMU participants, to aid the convergence of European money market
rates, ahead of the start date of monetary union. Further tightening for this
purpose is deemed likely over the next six months.
The German stock market enjoyed a spectacular run until August, in part
supported by the weaker Deutschmark and in anticipation of economic recovery.
Most notable was the influx of liquidity into the market both from domestic
and international sources. A change in the pattern of investment became
clear, away from sector rotation in favour of individual stocks, particularly
those involved in major restructuring and/or merger and acquisition activity.
Several of the Trust's large holdings benefited from this. In addition, there
was a perceptible shift from growth to value orientated companies and a number
of these were introduced into the Trust's portfolio. Following a substantial
correction in the market in August (down 14% in local currency terms) on fears
of US interest rate rises, there has been a rebound, led by smaller companies.
Many new companies are seeking stock market listings, particularly on the
newly launched Neuer Markt (New Market) for small issues, and this is
encouraging investors to look at opportunities outside the leader board.
The performance of the stock market is likely to remain volatile in the near
term with the possibility of further small increases in short term interest
rates. Earnings momentum will therefore be key to outperformance, and there
is still scope for this to be achieved from a reviving economy and from
corporate profits growth in excess of analysts' expectations. Nowhere is this
more likely than in the smaller company sector which makes up 70% of Germany's
Gross Domestic Product and which is particularly sensitive to improvements in
the domestic economy in the later stages of an economic cycle.
P D Minchin
5 November 1997
German Smaller Companies Investment Trust plc
Ten largest equity holdings
% of Trust's equity
holdings at 30
September 1997
Name and description
1. MLP Insurance 4.0
2. Hugo Boss Textiles 3.8
3. Fresenius Chemicals 3.5
4. SKW Trostberg Chemicals 3.4
5. Depfa Mortgage Banks 3.3
6. Kolnische Insurance 3.2
Ruckversicherung
7. Adidas Textiles 3.2
8. Adolf Ahlers Textiles 3.1
9. Fried Krupp Iron & Steel 2.8
Hoesch
10. Tarkett Construction 2.7
____
33.0
Other equity holdings 65.3
Cash awaiting 1.7
investment
____
100.0
====
Investment portfolio % of Trust % sector weightings
at equity C Dax (ex Dax) Index
30 September 1997 holdings
Automobiles 1.9 3.8
Breweries 1.8 1.5
Building & 12.9 8.6
Construction
Chemicals 9.0 15.5
Electricals 2.3 2.5
Financials 18.1 27.2
Engineering 12.6 9.1
Utilities 0.0 8.5
Textiles 13.1 4.4
Consumer goods & 20.5 9.0
services
Steel 7.2 4.4
Miscellaneous 0.6 3.1
Paper 0.0 2.4
____ ____
100.0 100.0
==== ====
END
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