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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Shires Income Plc | LSE:SHRS | London | Ordinary Share | GB0008052507 | ORD 50P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -1.00 | -0.44% | 224.00 | 224.00 | 225.00 | 229.00 | 224.00 | 228.00 | 56,744 | 16:35:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Mgmt Invt Offices, Open-end | -372k | -2.03M | -0.0490 | -45.92 | 93.35M |
From Apr 2019 to Apr 2024
TIDMSHRS
RNS Number : 5374G
Shires Income PLC
26 November 2020
SHIRES INCOME PLC
HALF YEARLY FINANCIAL REPORT
FOR THE SIX MONTHSED 30 SEPTEMBER 2020
Legal Entity Identifier (LEI): 549300HVCIHNQNZAYA89
INVESTMENT OBJECTIVE
The Company's investment objective is to provide shareholders with a high level of income, together with the potential for growth of both income and capital from a diversified portfolio substantially invested in UK equities but also in preference shares, convertibles and fixed income securities.
BENCHMARK
The Company's benchmark is the FTSE All-Share Index (total return).
DIVIDS
The Company pays dividends to Ordinary shareholders on a quarterly basis.
HIGHLIGHTS
Hot Features
Premium
Net asset value total Share price total return Benchmark index
return per Ordinary per Ordinary share (A) total return
share (A)
Six months ended Six months ended Six months ended
30 September 30 September 30 September
2020 +13.8% 2020 +10.1% 2020 +7.0%
Year ended 31 Year ended 31 Year ended 31
March 2020 -18.0% March 2020 -21.2% March 2020 -18.5%
Revenue return Dividend yield(A) Discount to
per Ordinary net asset value(A)
share
Six months ended
30 September As at 30 September As at 30 September
2020 6.18p 2020 6.2% 2020 6.6%
Six months ended
30 September As at 31 March As at 31 March
2019 7.15p 2020 6.6% 2020 3.3%
(A) Considered to be an Alternative Performance Measure.
30 September 31 March 2020 % change
2020
Total assets (GBP'000) (A) 89,406 82,862 +7.9
Shareholders' funds (GBP'000) 70,408 63,864 +10.2
Net asset value per share 228.48p 207.39p +10.2
Share price (mid-market) 213.50p 200.50p +6.5
Discount to net asset value
(cum-income) (B) 6.6% 3.3%
Dividend yield (B) 6.2% 6.6%
Net gearing (B) 20.1% 23.7%
Ongoing charges ratio (B) 1.06% 0.96%
(A) Less current liabilities excluding bank loans of GBP9,000,000.
(B) Considered to be an Alternative Performance Measure.
PERFORMANCE (TOTAL RETURN)
Six months 12 months Three years Five years
ended ended ended ended
30 September 30 September 30 September 30 September
2020 2020 2020 2020
Net asset value (A) +13.8% -10.9% -6.0% +25.7%
Share price (A) +10.1% -14.2% -6.8% +23.8%
FTSE All-Share Index +7.0% -16.6% -9.3% +18.6%
(A) Considered to be an Alternative Performance Measure.
All figures are for total return and assume reinvestment of net
dividends excluding transaction costs.
For further information, please contact:
Scott Anderson
Aberdeen Asset Managers Limited
0131 222 1863
CHAIRMAN'S STATEMENT
Market Background
The backdrop for the stock market in the last six months has been dominated by the COVID-19 pandemic. The fact that the FTSE All-Share Index produced a total return of 7.0% over the six-month period reflects that there has been some equity market recovery from the Company's year end at the end of March, which was hopefully the lowest point the market will fall to as a result of the pandemic. Hospitalisations and the loss of life have slowed globally, albeit there are some countries where these are on the increase. This had allowed governments to reduce restrictions on mobility and hence to set economic activity on an upward trend.
However, the number of COVID-19 cases in most countries has increased significantly in the last few months and, as we enter the winter period, further restrictions, although not as severe as earlier in the year, are being implemented in order to try and control the spread of the disease. Approval of at least one vaccine over the next few months remains likely, particularly following the positive trial data recently issued by Pfizer and BioNTech, with good prospects of more vaccines to follow, boosting the chances that there can be a mass immunisation program in the first half of 2021. This will certainly help personal and business confidence and aid economic recovery, but the production and distribution of any vaccine will present significant challenges and it is unlikely to be 100% effective, meaning the world will still need to live with COVID for some time to come and its impact upon the way we live and work.
The effect on economies globally has been an unprecedented recession in terms of its sharpness and depth. In the second quarter of 2020, UK GDP was still 20% below the prior year. While figures for the third quarter will show a strong recovery, albeit one which will now have stalled to some extent by new restrictions as we move into the fourth quarter. Overall however, it is likely that the UK economy will still be around 10% smaller at the end of 2020 than where it started the year. Throughout this period, monetary policy has become even more loose with the likelihood that interest rates will remain negligible for a considerable period into the future. It remains uncertain as to whether the unprecedentedly loose monetary policy will at some stage herald higher inflation.
Most of the talk now is over the future role that fiscal policy can play in supporting recovery, irrespective of the size of government deficits that already exist in the UK and overseas. Notwithstanding this monetary and fiscal largess, we expect it will take a number of years before global economic output returns to pre-COVID levels and there will be significant structural change in the economy. Some sectors and companies will be winners but there will be many losers including some who will never recover to their previous economic state. The real challenge in the UK and elsewhere will be how to sustainably boost economic productivity and underlying growth rates over many years in order to fundamentally address some of the key issues faced by the UK and many other developed economies.
Since the end of March, the market has rewarded companies with resilient and defensive earnings. In the UK, the best performing sectors in 2020 have been technology, materials and consumer staples. More cyclical sectors like energy, financials and industrials have struggled. The timing of the Company's half year means there has been a reversal in market direction since the end of March with a strong rally, but the relative performance of different sectors has remained consistent - investors are understandably cautious and have been avoiding the higher risk sectors that face structural challenge from the pandemic. However, the euphoric equity market reaction to positive news on the vaccine saw a massive spike in unloved "value "sectors. Whilst there has subsequently been some correction to this move, it does highlight that the divergence between "growth" and "value" is at an extreme and even a slight unwinding of this may lead to significant swings towards the very unloved value segments of the market.
Investment Performance
The Company's Net Asset Value ("NAV") outperformed its benchmark, the FTSE All-Share Index over the six-month period ended 30 September 2020, returning 13.8% compared to the benchmark at 7.0%. The equity portfolio returned 7.8% and the preference share portfolio had a strong recovery, delivering a return of 20.0% during the period. The Company also benefited from the use of gearing in a rising market.
Within the equity portfolio, the need to deliver a high level of income has created a challenge for investment returns. Typical high yield sectors, such as utilities, telecoms and energy were the worst performing sectors over the period. As such, sector allocation detracted from performance - but this was more than offset by stock selection and the focus on higher quality positions which have continued to benefit performance. We have also seen strong performance from a number of companies heavily exposed to the effects of the virus that have recovered since the lows of March. For example, office provider IWG increased in value by 54%, gaming company GVC by 69% and oil services company Wood Group by 37%. Maintaining these positions despite significant short-term headwinds has helped during a period of equity market recovery.
While the Company has benefited from underweight positions in banks and oil companies, we have still been exposed to some underperforming names. The greatest performance detractors during the period included John Laing, Equiniti and Close Brothers. Underweight positions in consumer staples and technology also weighed on relative performance, but given the low yield of these sectors they are not natural holdings in a portfolio designed to deliver stable income.
Portfolio Activity
During the period, the Manager initiated new positions in three companies and exited four. The predominant reason for portfolio changes has been to support sustainable income from the portfolio. Re-investment has been into names which are likely to offer more secure dividends, while exits have been from companies where the businesses are more structurally challenged or where there is a reduced prospect of a meaningful dividend.
The first new addition was French oil company Total. Although the oil majors face a number of challenges, they remain cash generative at relatively low oil prices. Total pays a high yield which is covered with the oil price below $40 per barrel and also has one of the best positions in renewable energy - a position the Manager feels is not reflected in the current valuation. Given the yield premium and better growth prospects than for the UK listed oil companies, the Manager switched some Royal Dutch Shell into Total.
The next new addition was LondonMetric Property, a property company focused on logistics assets across the UK. While many property companies exposed to office or retail space may face an uncertain outlook, demand for high quality logistics space is high due to the increase in online shopping. The company offers an attractive yield and is well managed.
Finally, the Manager initiated a position in Dechra Pharmaceuticals. The company develops and manufactures animal pharmaceuticals drugs for use in pets and livestock. It has grown rapidly through organic growth and acquisitions and has a highly defensive position in a growing sector. Although the headline yield is not high, the company has a strong track record of dividend growth.
The Company disposed of its holding in Unibail Rodamco, an operator of high-end shopping malls in Europe and the UK. The outlook for the company's assets has deteriorated significantly and with a stretched balance sheet, the Manager saw little prospect for a dividend in the near term. Another company facing structural change and carrying too much debt is Cineworld, which the Manager also exited. While the business offered attractive growth and high yield ahead of the virus, the outlook has changed significantly and, with uncertainty around when film studios will release films, it is hard to have clarity on future cash generation from the business. The Company also exited Abcam. Although the company has continued to perform well, management have highlighted the need to invest more rapidly over the next few years, meaning the dividend is not likely to be re-instated soon. Finally, the Company exited St James Place, which has been a good performer but which the Manager now sees as more fairly valued, with fund flows likely to slow in the second half of 2020.
Investment Income
The revenue earnings per share for the period were 6.18p, which compares to 7.15p for the equivalent period last year.
Within the portfolio, there have been a number of companies that have cut or suspended dividends. In some cases, this is due to regulatory pressure, with the large UK banks such as Standard Chartered and HSBC barred from distributing capital by the PRA. In other cases, the companies face a short-term impact on their cashflow which means suspension of dividends is prudent: Howden Joinery and Mondi would be examples of this. Finally, some companies have no choice due to a significant change in the outlook, with Cineworld an example. Overall, however, income from the portfolio has remained resilient compared to the benchmark and wider market.
Income from the preference shares has been very stable. In this sense, the preference shares have delivered as we would expect, providing a high level of consistent, defensive income through even an extreme cycle. Overall, the income forecast for the current financial year has recovered in recent months as companies resume dividend payments and the Manager makes some adjustments to enhance income. With a healthy level of revenue reserves, the Company remains in a good position to continue delivering a high level of income to shareholders.
Dividends
A first interim dividend of 3.0p per share in respect of the year ending 31 March 2021 was paid on 23 October 2020. The Board declares a second interim dividend of 3.0p per share, payable on 29 January 2021 to shareholders on the register at close of business on 8 January 2021. The current annual rate of dividend is 13.20p per share, representing a dividend yield of 6.2% based on the share price of 213.50p at 30 September 2020.
The Board considers that one of the key attractions of the Company is its high level of income and recognises that, in the current economic environment, there is likely to be a continuing demand for an attractive and reliable level of income. Whilst the Company aims to cover its annual dividend cost with net income, the Board is conscious of the Company's significant revenue reserves, which amounted to 1.1 times the annual dividend cost as at 31 March 2020, hence providing added security on the sustainability of the dividend.
The Board takes the view that, despite the uncertainties over the economic and corporate outlook, the Company is in a relatively good position, with its diversified sources of income and a good level of reserves. Therefore, subject to unforeseen circumstances, it is proposed to pay a further interim dividend of 3.0p per share prior to the Board deciding on the rate of final dividend at the time of reviewing the full year results, also taking into account the general outlook for the economy in 2021 and beyond and the portfolio's investment income and future forecasts at that time.
Gearing
The Company's gearing level (net of cash) was 20.1% as at 30 September 2020 compared to 23.7% as at 31 March 2020. The Company has a GBP20 million loan facility, of which GBP19 million was drawn down at the period end. GBP9 million of this amount is drawn down on a short-term basis through a revolving credit facility and can be repaid without incurring any financial penalties giving the Company considerable flexibility if it were to be required. The facility matures in September 2022.
The Board continually monitors the level of gearing and, although the absolute level may look high relative to some other investment trusts, strategically we take the view that it is deployed notionally into fixed income securities which bring diversification to the Company's total revenue stream and have lower volatility than would be expected from a portfolio invested exclusively in equities. The Board believes that the enhanced balance of assets arising from a combination of fixed income securities and equities allows for an appropriate level of risk within the portfolio in order to achieve the overall investment objective.
Outlook
The outlook over the next six to 12 months remains primarily driven by how the pandemic develops and how governments and economies react. We should expect some continuation of uncertainty and volatility, with the US Presidential election and its aftermath and the UK's exit from the European Union further complicating the outlook. However, the Manager has always tried to invest for the long term so that the Company owns high quality companies that should perform well in most scenarios. As we look further out, the chances of effective vaccines for COVID-19 appear high and we should expect much of the world's economic activity to normalise.
The sharp shock to the global economy has also reset the economic cycle. Prior to the health crisis, many investors were waiting for the next recession. That has now come and there is a chance of a period of sustained recovery and growth as businesses restock, initiate new investment plans, and consumers spend savings that many have been able to build up over the past year. Many businesses have found ways to be more efficient in the last six months and productivity gains should be consolidated. Such a period should also lead to changes in market leadership, with economic growth driven by additional government spending, likely to benefit value and income stocks to a greater degree than has been the case for some time where growth companies have dominated equity market returns. However, it may take some time to get to this environment, and hence more growth-oriented businesses are likely to remain attractive to investors. Overall therefore, the Manager aims to invest in a range of companies that will both survive any short-term volatility and participate as growth resumes, and this should allow the Company to continue to deliver both a high level of income to shareholders combined with the potential for capital growth.
Robert Talbut
Chairman
26 November 2020
OTHER MATTERS
Directors' Responsibility Statement
The Directors are responsible for preparing the Half Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements within the Half Yearly Financial Report has been prepared in accordance with IAS 34 'Interim Financial Reporting'; and
- the Interim Board Report (constituting the Interim Management Report) includes a fair review of the information required by rules 4.2.7R of the Disclosure Guidance and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year) and 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could so do).
Principal and Emerging Risks and Uncertainties
The Board regularly reviews the principal and emerging risks and uncertainties faced by the Company together with the mitigating actions it has established to manage the risks. These are set out within the Strategic Report contained within the Annual Report for the year ended 31 March 2020 and comprise the following risk headings:
- Strategic objectives and investment policy - Investment performance - Failure to maintain and grow the dividend over the longer term - Widening of discount - Gearing - Regulatory obligations - Operational - Exogenous risks such as health, social, financial and geo-political
In particular, the Board is conscious of the continuing impact on the global economy and financial markets caused by the outbreak of the COVID-19 pandemic around the world. The Board is also conscious of the ongoing negotiations regarding the UK's departure from the EU. The Board considers that each of these issues are risks that could have further implications for financial markets and, in the case of COVID-19, the operating environment of the Company.
In all other respects, the Company's principal and emerging risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the remaining six months of the Company's financial year.
Going Concern
The Company's assets consist mainly of equity shares in companies listed on the London Stock Exchange and in most circumstances, including in the current market environment caused by the COVID-19 pandemic, are considered to be realisable within a short timescale . The Board has set limits for borrowing and regularly reviews actual exposures, cash flow projections and compliance with banking covenants, including the headroom available. The Company has a GBP20 million loan facility which matures in September 2022. GBP9 million of this amount is drawn down on a short-term basis through a revolving credit facility and can be repaid without incurring any financial penalties.
Having taken these factors into account, as well as the impact on the Company of the spread of the COVID-19 virus, the Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future and has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of this Report. For these reasons, they continue to adopt the going concern basis of accounting in preparing the financial statements.
On behalf of the Board
Robert Talbut
Chairman
26 November 2020
DISTRIBUTION OF ASSETS AND LIABILITIES
Valuation at Movement during the Valuation at
period
31 March 2020 Purchases Sales Gains 30 September
2020
GBP'000 % GBP'000 GBP'000 GBP'000 GBP'000 %
Listed investments
Equities 57,499 90.0 7,014 (7,694) 3,095 59,914 85.1
Convertibles 490 0.8 - (500) 10 - -
Preference shares 20,412 32.0 - - 3,831 24,243 34.4
______ ______ ______ ______ ______ ______ ______
Total investments 78,401 122.8 7,014 (8,194) 6,936 84,157 119.5
Current assets 4,744 7.4 5,584 7.9
Current liabilities (9,283) (14.5) (9,335) (13.2)
Non-current liabilities (9,998) (15.7) (9,998) (14.2)
______ ______ ______ ______
Net assets 63,864 100.0 70,408 100.0
______ ______ ______ ______
Net asset value per
Ordinary share 207.39p 228.48p
______ ______
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
30 September 2020
(unaudited)
Revenue Capital Total
Note GBP'000 GBP'000 GBP'000
Gains on investments at fair
value - 6,943 6,943
Currency gains - 7 7
Investment income
Dividend income 2,153 - 2,153
Interest income - - -
Stock dividends 49 - 49
Traded option premiums 88 - 88
_______ _______ _______
2,290 6,950 9,240
_______ _______ _______
Expenses
Management fee (92) (92) (184)
Administrative expenses (201) - (201)
Finance costs (68) (67) (135)
_______ _______ _______
(361) (159) (520)
_______ _______ _______
Profit before taxation 1,929 6,791 8,720
Taxation 2 (26) - (26)
Profit attributable to equity
holders 1,903 6,791 8,694
_______ _______ _______
Return per Ordinary share (pence) 4 6.18 22.06 28.24
_______ _______ _______
The Company does not have any income or expense that is not included
in the profit for the period, and therefore the profit for the
period is also the "Total comprehensive income for the period",
as defined in IAS 1 (revised).
The total column of this statement represents the Condensed Statement
of Comprehensive Income of the Company, prepared in accordance
with IFRS. The revenue and capital columns are supplementary to
this and are prepared under guidance published by the Association
of Investment Companies.
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)
30 September 2019
(unaudited)
Revenue Capital Total
Note GBP'000 GBP'000 GBP'000
Gains on investments at fair
value - 1,843 1,843
Currency losses - (7) (7)
Investment income
Dividend income 2,374 - 2,374
Interest income 8 - 8
Stock dividends 123 - 123
Traded option premiums 100 - 100
_______ _______ _______
2,605 1,836 4,441
_______ _______ _______
Expenses
Management fee (104) (104) (208)
Administrative expenses (211) - (211)
Finance costs (106) (106) (212)
_______ _______ _______
(421) (210) (631)
_______ _______ _______
Profit before taxation 2,184 1,626 3,810
Taxation 2 (11) - (11)
_______ _______ _______
Profit attributable to equity
holders 2,173 1,626 3,799
_______ _______ _______
Return per Ordinary share
(pence) 4 7.15 5.35 12.50
_______ _______ _______
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)
31 March 2020
(audited)
Revenue Capital Total
Note GBP'000 GBP'000 GBP'000
Losses on investments at fair
value - (17,449) (17,449)
Currency gains - 9 9
Investment income
Dividend income 4,428 - 4,428
Interest income 15 - 15
Stock dividends 206 - 206
Traded option premiums 158 - 158
_______ _______ _______
4,807 (17,440) (12,633)
_______ _______ _______
Expenses
Management fee (206) (206) (412)
Administrative expenses (420) - (420)
Finance costs (185) (185) (370)
_______ _______ _______
(811) (391) (1,202)
_______ _______ _______
Profit/(loss) before taxation 3,996 (17,831) (13,835)
Taxation 2 (35) - (35)
_______ _______ _______
Profit/(loss) attributable to
equity holders 3,961 (17,831) (13,870)
_______ _______ _______
Return per Ordinary share (pence) 4 12.98 (58.42) (45.44)
_______ _______ _______
CONDENSED BALANCE SHEET
As at As at As at
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
Non-current assets
Equities 59,914 71,828 57,499
Convertibles - 520 490
Preference shares 24,243 25,112 20,412
_______ _______ _______
Securities at fair value 84,157 97,460 78,401
_______ _______ _______
Current assets
Trade and other receivables - 21 136
Accrued income and prepayments 721 763 817
Cash and cash equivalents 4,863 3,733 3,791
_______ _______ _______
5,584 4,517 4,744
_______ _______ _______
Creditors: amounts falling
due within one year
Trade and other payables (335) (292) (283)
Short-term borrowings (9,000) (9,000) (9,000)
_______ _______ _______
(9,335) (9,292) (9,283)
_______ _______ _______
Net current liabilities (3,751) (4,775) (4,539)
_______ _______ _______
Total assets less current
liabilities 80,406 92,685 73,862
Non-current liabilities
Long-term borrowings (9,998) (9,997) (9,998)
_______ _______ _______
Net assets 70,408 82,688 63,864
_______ _______ _______
Share capital and reserves
Called-up share capital 6 15,447 15,312 15,435
Share premium account 21,052 20,446 21,005
Capital reserve 7 27,445 40,111 20,654
Revenue reserve 6,464 6,819 6,770
_______ _______ _______
Equity shareholders' funds 70,408 82,688 63,864
_______ _______ _______
Net asset value per Ordinary
share (pence) 5 228.48 270.73 207.39
_______ _______ _______
The accompanying notes are an integral part of the financial
statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 September
2020 (unaudited)
Share
Share premium Capital Revenue
capital account reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31 March 2020 15,435 21,005 20,654 6,770 63,864
Issue of Ordinary shares 12 47 - - 59
Profit for the period - - 6,791 1,903 8,694
Equity dividends - - - (2,209) (2,209)
_______ _______ _______ _______ _______
As at 30 September 2020 15,447 21,052 27,445 6,464 70,408
_______ _______ _______ _______ _______
Six months ended 30 September
2019 (unaudited)
Share
Share premium Capital Revenue
capital account reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31 March 2019 15,127 19,626 38,485 6,819 80,057
Issue of Ordinary shares 185 820 - - 1,005
Profit for the period - - 1,626 2,173 3,799
Equity dividends - - - (2,173) (2,173)
_______ _______ _______ _______ _______
As at 30 September 2019 15,312 20,446 40,111 6,819 82,688
_______ _______ _______ _______ _______
Year ended 31 March 2020 (audited)
Share
Share premium Capital Revenue
capital account reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 31 March 2019 15,127 19,626 38,485 6,819 80,057
Issue of Ordinary shares 308 1,379 - - 1,687
(Loss)/profit for the year - - (17,831) 3,961 (13,870)
Equity dividends - - - (4,010) (4,010)
_______ _______ _______ _______ _______
As at 31 March 2020 15,435 21,005 20,654 6,770 63,864
_______ _______ _______ _______ _______
CONDENSED CASH FLOW STATEMENT
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Net cash inflow from operating
activities
Dividend income received 2,302 2,626 4,643
Interest income received - 8 16
Options premium received 106 109 162
Management fee paid (97) (203) (413)
Other cash expenses (189) (181) (400)
__________ __________ __________
Cash generated from operations 2,122 2,359 4,008
Interest paid (136) (208) (367)
Loan breakage costs - (32) (32)
Overseas tax paid (32) (31) (59)
__________ __________ __________
Net cash inflows from operating
activities 1,954 2,088 3,550
__________ __________ __________
Cash flows from investing activities
Purchases of investments (7,069) (8,114) (16,722)
Sales of investments 8,330 8,027 16,370
__________ __________ __________
Net cash inflow/(outflow) from
investing activities 1,261 (87) (352)
__________ __________ __________
Cash flows from financing activities
Equity dividends paid (2,209) (2,173) (4,010)
Issue of Ordinary shares 59 1,005 1,687
Loan arrangement fees - (6) (6)
__________ __________ __________
Net cash outflow from financing
activities (2,150) (1,174) (2,329)
__________ __________ __________
Net increase in cash and cash
equivalents 1,065 827 869
__________ __________ __________
Reconciliation of net cash flow
to movements in cash and cash
equivalents
Increase in cash and cash equivalents
as above 1,065 827 869
Net cash and cash equivalents
at start of period 3,791 2,913 2,913
Effect of foreign exchange rate
changes 7 (7) 9
__________ __________ __________
Cash and cash equivalents at
end of period 4,863 3,733 3,791
__________ __________ __________
Non-cash transactions during the period comprised stock dividends
of GBP49,000 (30 September 2019 - GBP136,000; 31 March 2020
- GBP219,000).
Notes to the Financial Statements
For the six months ended 30 September 2020
1. Accounting policies - Basis of accounting. The condensed
interim financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS)
34 'Interim Financial Reporting', as adopted by the International
Accounting Standards Board (IASB), and interpretations issued
by the International Financial Reporting Interpretations
Committee of the IASB (IFRIC). They have also been prepared
using the same accounting policies applied for the year
ended 31 March 2020 financial statements, which was prepared
in accordance with International Financial Reporting Standards
(IFRS) and received an unqualified audit report.
The financial statements have been prepared on a going concern
basis. In accordance with the Financial Reporting Council's
guidance on 'Going Concern and Liquidity Risk', the Directors
have undertaken a review of the Company's assets which primarily
consist of a diverse portfolio of listed equity shares and
in most circumstances, are realisable within a very short
timescale.
2. Taxation. The taxation charge for the period represents
withholding tax suffered on overseas dividend income.
3. Dividends. The following table shows the revenue for each
period less the dividends declared in respect of the financial
period to which they relate.
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2020 2019 2020
GBP'000 GBP'000 GBP'000
Revenue 1,903 2,173 3,961
Dividends declared (1,848) (A) (1,831) (B) (4,051) (C)
__________ __________ __________
55 342 (90)
__________ __________ __________
(A) Dividends declared relate to first two interim dividends
(3.00p each) in respect of the financial year 2020/21.
(B) Dividends declared relate to first two interim dividends
(3.00p each) in respect of the financial year 2019/20.
(C) First three interim dividends (3.00p each) and the
final dividend (4.20p) declared in respect of the financial
year 2019/20.
4. Returns per Ordinary
share
Six months Six months Year ended
ended ended
30 September 30 September 31 March
2020 2019 2020
GBP'000 GBP'000 GBP'000
Returns are based
on the following figures:
Revenue return 1,903 2,173 3,961
Capital return 6,791 1,626 (17,831)
__________ __________ __________
Total return 8,694 3,799 (13,870)
__________ __________ __________
Weighted average number
of Ordinary shares
in issue 30,781,875 30,394,580 30,521,561
__________ __________ __________
5. Net asset value per Ordinary share. The net asset value
per Ordinary share and the net asset values attributable
to Ordinary shareholders at the period end were as follows:
As at As at As at
30 September 30 September 31 March
2020 2019 2020
(unaudited) (unaudited) (audited)
Net assets (GBP'000)
per Condensed Balance
Sheet 70,408 82,688 63,864
3.5% Cumulative Preference
shares of GBP1 each
(GBP'000) (50) (50) (50)
__________ __________ __________
Attributable net assets
(GBP'000) 70,358 82,638 63,814
__________ __________ __________
Number of Ordinary
shares in issue 30,794,580 30,524,580 30,769,580
__________ __________ __________
Net asset value per
Ordinary share (p) 228.48 270.73 207.39
__________ __________ __________
The Company has a policy of calculating the net asset value
per Ordinary share based on net assets less an amount due
to holders of 3.5% Cumulative Preference shares of GBP1
each equating to GBP1 per share (GBP50,000), divided by
the number of Ordinary shares in issue.
6. Called up share capital
30 September 30 September 31 March 2020
2020 2019
Number GBP'000 Number GBP'000 Number GBP'000
Allotted, called
up and fully
paid Ordinary
shares of 50
pence each:
Balance brought
forward 30,769,580 15,385 30,154,580 15,077 30,154,580 15,077
Ordinary shares
issued 25,000 12 370,000 185 615,000 308
_________ ______ _________ ______ _________ ______
Balance carried
forward 30,794,580 15,397 30,524,580 15,262 30,769,580 15,385
_________ ______ _________ ______ ________ ______
Allotted, called
up and fully
paid 3.5% Cumulative
Preference shares
of GBP1 each
Balance brought
forward and
carried forward 50,000 50 50,000 50 50,000 50
______ ______ ______
15,447 15,312 15,435
______ ______ ______
During the six months ended 30 September 2020 the Company
issued 25,000 Ordinary shares of 50p each (six months ended
30 September 2019 - 370,000; year ended 31 March 2020 -
615,000) for proceeds of GBP59,000 (six months ended 30
September 2019 - GBP1,005,000; year ended 31 March 2020
- GBP1,687,000).
7. Capital reserve. The capital reserve reflected in the Condensed
Balance Sheet at 30 September 2020 includes unrealised gains
of GBP2,742,000 (30 September 2019 - gains of GBP15,076,000;
31 March 2020 - losses of GBP6,381,000) which relate to
the revaluation of investments held at the reporting date
plus realised gains of GBP24,703,000 (30 September 2019
- GBP25,035,000: 31 March 2020 - GBP27,035,000).
8. Analysis of changes in financial liabilities
Six months Six months Year ended
ended ended
30 September 30 September 31 March 2020
2020 2019
GBP'000 GBP'000 GBP'000
Opening balance at
1 April (18,998) (18,998) (18,998)
Cashflow (59) 3 (1,684)
Other movements (A) 59 (2) 1,684
______ ______ ______
Closing balance (18,998) (18,997) (18,998)
______ ______ ______
(A) The other movements represent the proceeds from the
issue of Ordinary shares and the amortisation of the loan
arrangement fees.
The Company has an agreement with Scotiabank Europe PLC
to provide a loan facility to 20 September 2022 for up to
GBP20,000,000. A GBP10,000,000 fixed rate loan was drawn
down on 20 September 2019 at a rate of 1.706%. This rate
is fixed until maturity on 20 September 2022. In addition,
at the period end GBP9,000,000 had been drawn down on a
revolving basis at an all-in interest rate of 0.949% maturing
on 19 October 2020. At the date of this Report, GBP9,000,000
was drawn down on a revolving basis at an all-in interest
rate of 0.945%.
9. Transactions with the Manager. The Company has an agreement
with Aberdeen Standard Fund Managers Limited ("ASFML") for
the provision of management, secretarial, accounting and
administration services and for the carrying out of promotional
activities and saving scheme services in relation to the
Company.
The management fee is based on 0.45% per annum up to GBP100
million and 0.40% per annum over GBP100 million, by reference
to the net assets of the Company and including any borrowings
up to a maximum of GBP30 million, and excluding commonly
managed funds, calculated monthly and paid quarterly. The
fee is allocated 50% to revenue and 50% to capital. The
agreement is terminable on not less than six months' notice.
The total of the fees paid and payable during the period
to 30 September 2020 was GBP184,000 (30 September 2019 -
GBP208,000; 31 March 2020 - GBP412,000) and the balance
due to ASFML at the period end was GBP184,000 (30 September
2019 - GBP104,000; 31 March 2020 - GBP97,000). The Company
held an interest in a commonly managed fund, Aberdeen Smaller
Companies Income Trust PLC, in the portfolio during the
period to 30 September 2020 (30 September 2019 and 31 March
2020 - same). The value attributable to this holding is
excluded from the calculation of the management fee payable
by the Company.
The management agreement with ASFML also provides for the
provision of promotional activities, which ASFML has delegated
to Aberdeen Asset Managers Limited. The total fees paid
and payable in relation to promotional activities were GBP28,000
(30 September 2019 - GBP26,000; 31 March 2020 - GBP49,000)
and the balance due to ASFML at the period end was GBP28,000
(30 September 2019 - GBP13,000; 31 March 2020 - GBP13,000).
The Company's management agreement with ASFML also provides
for the provision of company secretarial and administration
services to the Company; no separate fee is charged to the
Company in respect of these services, which have been delegated
to Aberdeen Asset Management PLC.
10. Segmental information. For management purposes, the Company
is organised into one main operating segment, which invests
in equity securities and debt instruments. All of the Company's
activities are interrelated, and each activity is dependent
on the others. Accordingly, all significant operating decisions
are based upon analysis of the Company as one segment. The
financial results from this segment are equivalent to the
financial statements of the Company as a whole.
11. Fair value hierarchy. IFRS 13 'Fair Value Measurement'
requires an entity to classify fair value measurements using
a fair value hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value
hierarchy has the following levels:
Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2: inputs other than quoted prices included within
Level 1 that are observable for the assets or liability,
either directly (ie as prices) or indirectly (ie derived
from prices); and
Level 3: inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
The financial assets and liabilities measured at fair value
in the Condensed Balance Sheet are grouped into the fair
value hierarchy as follows:
Level Level Level Total
1 2 3
At 30 September 2020 Note GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair
value through profit or loss
Quoted investments a) 84,157 - - 84,157
Financial liabilities at
fair value through profit
or loss
Derivatives b) - (23) - (23)
______ ______ ______ ______
Net fair value 84,157 (23) - 84,134
______ ______ ______ ______
Level Level Level Total
1 2 3
At 30 September 2019 Note GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair
value through profit or loss
Quoted investments a) 97,460 - - 97,460
Financial liabilities at
fair value through profit
or loss
Derivatives b) - (65) - (65)
______ ______ ______ ______
Net fair value 97,460 (65) - 97,395
______ ______ ______ ______
Level Level Level Total
1 2 3
As at 31 March 2020 Note GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair
value through profit or loss
Quoted investments a) 78,401 - - 78,401
Financial liabilities at
fair value through profit
or loss
Derivatives b) - (10) - (10)
______ ______ ______ ______
Net fair value 78,401 (10) - 78,391
______ ______ ______ ______
a) Quoted investments. The fair value of the Company's
quoted investments has been determined by reference to
their quoted bid prices at the reporting date. Quoted
investments included in Fair Value Level 1 are actively
traded on recognised stock exchanges.
b) Derivatives. The fair value of the Company's investments
in Exchange Traded Options has been determined using
observable market inputs on an exchange traded basis
although not actively traded and therefore have been
classed as Level 2.
The fair value of the Company's investments in Over the
Counter Options has been determined using observable
market inputs other than quoted prices included within
Level 2.
12. The financial information contained in this Half Yearly
Financial Report does not constitute statutory accounts
as defined in Sections 434 - 436 of the Companies Act 2006.
The financial information for the six months ended 30 September
2020 and 30 September 2019 has not been reviewed or audited
by the Company's independent auditor.
The information for the year ended 31 March 2020 has been
extracted from the latest published audited financial statements
which have been filed with the Registrar of Companies. The
report of the independent auditor on those accounts contained
no qualification or statement under Section 498 (2), (3)
or (4) of the Companies Act 2006.
13. This Half Yearly Financial Report was approved by the Board
on 26 November 2020.
ALTERNATIVE PERFORMANCE MEASURES
Alternative performance measures are numerical measures of the
Company's current, historical or future performance, financial
position or cash flows, other than financial measures defined
or specified in the applicable financial framework. The Company's
applicable financial framework includes IFRS and the AIC SORP.
The Directors assess the Company's performance against a range
of criteria which are viewed as particularly relevant for closed-end
investment companies.
Total Return. NAV and share price total returns show how the
NAV and share price has performed over a period of time in percentage
terms, taking into account both capital returns and dividends
paid to shareholders. NAV total return involves a calculation
that invests the net dividend in the NAV of the Company with
debt at fair value on the date on which that dividend goes ex-dividend.
Share price total return involves a calculation that invests
the net dividend in the share price of the Company on the date
on which that dividend goes ex-dividend.
The tables below provide information relating to the NAVs and
share prices of the Company on the dividend reinvestment dates
during the six months ended 30 September 2020 and 30 September
2019 and assumes reinvestment of net dividends excluding transaction
costs (the "Adjustment factor").
Dividend Share
30 September 2020 rate NAV price
31 March 2020 (a) 207.39p 200.50p
2 April 2020 3.00p 199.79p 188.75p
2 July 2020 4.20p 234.93p 236.00p
30 September 2020 (b) 228.48p 213.50p
__________ __________
Adjustment factor (c) 1.032956 1.033960
__________ __________
30 September 2020 adjusted (d)=(b*c) 236.01p 220.75p
__________ __________
Total return (d/a) +13.8% +10.1%
__________ __________
Dividend Share
30 September 2019 rate NAV price
31 March 2019 (a) 265.49p 267.00p
4 April 2019 3.00p 265.05p 268.50p
4 July 2019 4.20p 273.51p 278.00p
30 September 2019 (b) 270.73p 263.00p
__________ __________
Adjustment factor (c) 1.026637 1.026478
__________ __________
30 September 2019 adjusted (d)=(b*c) 277.94p 269.96p
__________ __________
Total return (d/a) +4.7% +1.1%
__________ __________
Discount to net asset value per Ordinary share. The discount
is the amount by which the share price of 213.50p (31 March
2020 - 200.50p) is lower than the net asset value per share
of 228.48p (31 March 2020 - 207.26p), expressed as a percentage
of the net asset value.
Dividend yield. The annual dividend of 13.20p per Ordinary
share (31 March 2020 - 13.20p) divided by the share price of
213.50p (31 March 2020 - 200.50p), expressed as a percentage.
Net gearing. Net gearing measures the total borrowings of GBP18,998,000
(31 March 2020 - GBP18,998,000) less cash and cash equivalents
of GBP4,863,000 (31 March 2020 - GBP3,872,000) divided by shareholders'
funds of GBP70,458,000 (31 March 2020 - GBP63,864,000), expressed
as a percentage. Under AIC reporting guidance cash and cash
equivalents includes net amounts due to and by brokers at the
period end of GBPnil (31 March 2020 - due from brokers GBP81,000)
as well as cash and short term deposits of GBP4,863,000 (31
March 2020 - GBP3,791,000).
Ongoing charges. Ongoing charges is considered to be an alternative
performance measure. The ongoing charges ratio has been calculated
in accordance with guidance issued by the AIC as the total of
investment management fees and administrative expenses and expressed
as a percentage of the average net asset values throughout the
year. The ratio for 30 September 2020 is based on forecast ongoing
charges for the year ending 31 March 2021.
30 September 31 March
2020 2020
Investment management fees (GBP'000) 367 412
Administrative expenses (GBP'000) 380 420
Less: non-recurring charges (A) (GBP'000) - (42)
__________ __________
Ongoing charges (GBP'000) 747 790
__________ __________
Average net assets (GBP'000) 70,559 81,866
__________ __________
Ongoing charges ratio 1.06% 0.96%
__________ __________
(A) Comprises professional fees not expected to recur.
The ongoing charges ratio provided in the Company's Key Information
Document is calculated in line with the PRIIPs regulations which,
amongst other things, includes the cost of borrowings and transaction
costs.
Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested
By order of the Board
Aberdeen Asset Management PLC
Company Secretary
26 November 2020
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END
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