German Smaller Co - Interim Results
November 11 1998 - 9:46AM
UK Regulatory
RNS No 5276d
GERMAN SMALLER COMPANIES INVESTMENT TRUST PLC
11th November 1998
Preliminary Results for the half-year ended 30 September 1998
The directors announce the unaudited results for the half-year ended 30
September 1998. 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 1999 in respect of the company's financial
year ending 31 March 1999.
The salient figures in the half-year report, which will be sent to
shareholders in December 1998 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 1998 30 September 1997
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Gains on investments* - 1,834 1,834 - 1,993 1,993
Overseas dividends 931 - 931 764 - 764
Bank interest and other 42 - 42 18 - 18
income
973 1,834 2,807 782 1,993 2,775
Investment management fee (281) - (281) (242) - (242)
Other expenses (60) - (60) (51) - (51)
Net return on ordinary 632 1,834 2,466 489 1,993 2,482
before finance costs and
taxation (2) - (2) - - -
Interest payable and 630 1,834 2,464 489 1,993 2,482
similar charges
Return on ordinary
activities before tax
Tax on ordinary (186) - (186) (161) - (161)
activities
Return on ordinary 444 1,834 2,278 328 1,993 2,321
activities after taxation
Dividends in respect of - - - - - -
ordinary shares
Transfer to reserves 444 1,834 2,278 328 1,993 2,321
Return per ordinary share 1.1p 4.5p 5.6p 0.8p 4.7p 5.5p
*Net of exchange losses
Statutory accounts for 1998 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.
Registered office: 10 Fleet Place, London, EC4M 7RH.
Ten largest investments
% of Trust's
equity holdings
at
30 September
1998
Name and description
1. MLP Financials 5.1
2. Hugo Boss Textiles 4.4
3. Mobilcom Consumer goods & 3.8
services
4. Depfa Bank Financials 3.7
5. Koenig & Bauer Consumer goods & 3.4
services
6. Kolnische Financials 2.8
Ruckversicherung
7. Kamps Consumer goods & 2.6
services
8. AVA Consumer goods & 2.3
services
9. SKW Trostberg Chemicals 2.2
10. Fresenius Chemicals 2.2
32.5
Other equity holdings 65.0
Total equity holdings 97.5
Cash awaiting 2.5
investment
(in Deutschmarks)
100.0
Investment portfolio % of Trust equity % sector
at holdings weightings
30 September 1998 C Dax (ex Dax)
Index
Consumer goods & 26.4 9.4
services
Financials 19.8 30.5
Textiles 9.5 1.2
Building & 6.8 5.4
construction
Engineering 16.5 10.2
Chemicals 5.4 12.0
Steel 1.4 2.9
Electricals 7.9 5.0
Automobiles 1.9 3.5
Breweries 1.5 1.4
Miscellaneous 2.9 3.4
Utilities - 13.2
Paper - 1.9
100.0 100.0
Statement by the Chairman
During the half-year the undiluted net asset value per ordinary share
increased by 3.2%. This was in contrast to a 6.0% reduction in the composite
CDAX (ex DAX) Capital Index, adjusted for sterling, over the same period.
The six month reporting period for the Trust, from April to September 1998 has
been dominated by events of the late summer when the cumulative impact of
economic failures in the Far East, Russia and Japan unleashed major
corrections on world stock markets. German equity prices could not withstand
this escalation in uncertainty and weakened markedly in August and September.
German economic growth in the second quarter of 1998 slowed slightly. This
can in part be explained by technical factors: fewer working days and the
distorting effects of the increase in VAT from 1 April which encouraged
consumer spending ahead of that date. It seems clear, however, that after a
very strong start to the year net exports and investment decelerated, although
both are still expected to show positive growth rates for the full year. The
latest report of the Bundesbank suggests a year on year decline in German
exports to South East Asia and Japan in the second quarter of 26% and 14%
respectively although jointly this area only accounts for 7.5% of Germany's
total exports. The US (10% export share), Western Europe (60% share) and
Eastern Europe (11% share) were still showing double digit growth rates for
this same period, thus more than offsetting the Asian recession.
Domestic demand showed signs of picking up and replacing foreign demand as the
main engine of growth. A decline in the unemployment rate to 10.9% in July,
higher wage agreements and price stability - inflation is currently running at
0.7% - all contributed to a better consumer climate. This has been further
boosted recently by the replacement of the Conservative coalition government
under Chancellor Kohl by a left of centre SPD/Green coalition with its
commitment to reducing the tax burden, particularly for lower wage earners.
Economic forecasters are beginning to err on the side of caution and have
recently scaled back forecasts for growth this year and the first half of
1999, as exports and investment assumptions are reined in. Consequently, the
outlook for interest rates has improved; with slower growth and little
inflation most commentators believe that the new European Central Bank after 1
January 1999 will at least keep rates where they are, if not reduce them
further. In addition, arrival of the Euro is being greeted with some
optimism; it is seen as a potentially stable and attractive investment
currency likely to promote portfolio shifts into the Euro area leading to
initial Euro strength against the US Dollar.
The German Stock Market performed well until mid July and the Trust has
benefited from its exposure to growth companies, including newly listed
technology stocks on the Neuer Markt (New Market). Since its launch in March
1997 this market has grown in popularity, especially among domestic retail
investors, and there has been widespread media coverage of the spectacular
gains made by several of its new listings. Since the stock market peak in mid
July the total German market has fallen over 30% with blue chips faring worse
than the more domestically oriented second liners. The Neuer Markt has shown
the best relative performance over this period in spite of greater day-to-day
volatility. As the domestic economy continues to offer the main stimulus to
growth, smaller company stocks as an asset class are likely to continue their
out-performance.
The Trust is positioned for the long term in well managed companies whose
business activities are centred on Germany and Europe. Exposure to the Far
East is minimal and any negative impact from currency fluctuations is limited
or, as far as one can ascertain, prudently covered. The manager is confident
that the portfolio should therefore not only withstand any further shocks but
should also benefit from renewed interest in the small company sector as a
relatively safe haven.
P D Minchin
10 November 1998
For further information please contact:
Alison Powell, Hill Samuel Asset Management - 0171 203 3272
or
Michael Oliver, Hill Samuel Asset Management - 0171 203 3494
END
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