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RNS
Shires Income PLC  -  SHRS   

Half Yearly Report

Released 07:00 20-Nov-2018

RNS Number : 8216H
Shires Income PLC
20 November 2018
 

SHIRES INCOME PLC

 

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

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).

 

 

HIGHLIGHTS

 


30 September 2018

31 March 2018

% change

Equity shareholders' funds (£'000)

81,797

80,465

+1.7

Net asset value per share

272.68p

268.24p

+1.7

Share price (mid-market)

253.00p

260.00p

-2.7

Discount to net asset value

7.2%

3.1%


Dividend yield

5.1%

5.0%


Net gearing

21.2%

20.8%


Ongoing charges ratio

0.95%

0.95%



 

 

PERFORMANCE (TOTAL RETURN)

 


6 months ended

1 year ended

3 years ended

5 years ended


30 September

30 September

30 September

30 September


2018

2018

2018

2018

Net asset value A

+4.3%

+1.0%

+35.1%

+47.4%

Share price A

-0.2%

-0.7%

+32.0%

+41.2%

FTSE All-Share Index

+8.3%

+5.9%

+38.4%

+43.5%

All figures are for total return and assume re-investment of net dividends excluding transaction costs.

 

For further information, please contact:

 

 

Scott Anderson                                                                                                                   

Aberdeen Asset Managers Limited

0131 222 1863

 

 



INTERIM  BOARD REPORT - CHAIRMAN'S STATEMENT

 

Market Background

The UK equity market delivered solid returns through the six month period to the end of September, with the benchmark FTSE All-Share Index rising by more than 8% in total return terms. The positive return was driven by continued outperformance of growth stocks and by the Oil & Gas sector, which was the best performing sector in the index due to rising oil prices in the period. In contrast, value and income sectors, which tend to be the mainstay of the portfolio, were weaker, with Telecoms and Financials the weakest of all. Furthermore, given investors' preoccupation with the potential negatives from Brexit, it is unsurprising that the performance of smaller companies lagged their larger counterparts by almost 4% over the period.

 

As it has done for the past two years, politics has dominated investor sentiment towards the UK market, with the threat of the impending exit from the EU causing many to steer clear of committing capital to the market. As we enter a crucial period of negotiations there is limited clarity on the outcome, but the Manager's base case remains for a deal to be agreed, avoiding the worst case scenario of a "hard Brexit".

 

While politics have weighed on the economy, causing GDP growth to lag other developed markets and Sterling to remain weak, many of the underlying economic indicators are more positive. Retail sales held up well in the period, purchasing managers' indices remain expansionary and unemployment is at a low level. Inflation has stabilised close to 3% and there are unlikely to be many more interest rate rises from the Bank of England in the medium term given the uncertainties over the growth outlook.  While challenges caused by less favourable demographics and the UK's poor productivity growth will not easily be resolved, the economy is not as bad as many fear.

 

Indeed, the potential is very much there, if political headwinds can abate, for the UK market to experience some form of bounce back from this point. UK equities remain on a significant valuation discount to other markets, and offer a material yield premium. In addition, the UK market is well diversified, with over half of revenue coming from overseas, mitigating any near term risks and creating an attractive opportunity for income investing.

 

Investment Performance

The Company's net asset value ("NAV") total return for the six month period ended 30 September 2018 was 4.3%. This compares to a total return of 8.3% from the benchmark, the FTSE All-Share Index. The share price total return for the period was -0.2%. This shorter term performance relative to the benchmark is disappointing, however the Company continues to deliver an income yield considerably in excess of the wider market, together with some capital appreciation.  It is also worth noting the Company's longer term performance record where the NAV total return has outperformed the benchmark index in four out of the past five financial years and, for the five year period ended 30 September 2018, produced a total return of 47.4% compared to a total return of 43.5% from the FTSE All-Share Index.   

 

The share price at the end of the period was 253.0p, reflecting a discount of 7.2% to the net asset value (including income) of 272.7p per share, compared to a discount of 3.1% at the beginning of the period. The average discount over the period was 3.3%, with the wider discount appearing towards the end of the period. The Board and Manager keep the level of discount under constant review.

 

The higher yielding Telecoms, Tobacco and Financials sectors all lagged the market during the period which, given the Company's relatively high exposure to these sectors, had a negative impact on relative performance.  Conversely, the Company has consistently had an underweight exposure to the Oil & Gas sector due to its cyclical nature and, in a period when oil prices rose strongly, this was also a detractor. Relative performance was also impacted by the widening of the discount to net asset value of Aberdeen Smaller Companies Income Trust and the performance of the preference share portfolio which, while delivering a high level of income,  tends to lag equities in a strongly rising market.

 

Portfolio Activity

The Manager has sought to take advantage of access to a larger UK equity team, following the recent merger of Aberdeen Asset Management and Standard Life, to add some high conviction ideas to the portfolio which meet the high quality and income criteria. Accordingly, five new holdings were introduced into the equity portfolio during the period. No new investments were made in preference shares or convertible securities.

 

John Laing is an investor in public infrastructure projects. The company has investments in around 40 projects globally and has significantly broadened its exposure in recent years away from being a primarily UK Public Private Partnership ("PPP") focused investor. The shares trade at a discount to the NAV, despite a track record of double digit NAV growth each year and the Manager believes that this is under appreciated by the market. A recent rights issue reflected the strong pipeline of opportunities that management sees in the next few years.

 

GVC is a leading gaming company. It runs online gambling sites and recently expanded in the UK through the acquisition of Ladbrokes. Over time, the management team has demonstrated an ability to grow the business and to position it for increased regulation of the industry. As one of the few operators with its own online technology and a strong reputation in the industry, GVC is well placed to benefit from the potential regulation of the US sports gambling industry. At less than a 15x earnings multiple and with a 3% dividend yield, the Manager believes that the shares are well priced given an outlook for double digit earnings growth.

 

Bodycote is a UK engineer with a strong market position in metal technology such as isostatic pressing. There have been improvements in the technical expertise of the business and the Manager is of the view that this is a company with under-estimated quality and strong momentum.

 

The Manager also initiated a position in Ashmore, a fund manager with a pre-eminent position in Emerging Market debt. Their fund flow is underpinned by the strength of their manufacturing team and the investment they have made developing their distribution across a broad range of clients and markets.  Throughout the cycle, Ashmore's robust balance sheet has allowed them to pay a decent dividend, invest/acquire selectively and grow from a position of strength. The Manager believes that the company's valuation is at an attractive level with a 4% yield.

 

Finally, Countryside Properties is a UK-focused housebuilder. While this is a highly cyclical sector, Countryside is differentiated from its peers by the fact that a large proportion of its business comes from a model based on partnership with local councils to develop affordable housing. This provides a much lower risk business, with a higher degree of certainty on revenue from longer duration projects, often running for periods in excess of ten years. In addition, the housebuilding part of the business is focused on affordable properties in areas of the country with high demand for new housing and continues to grow completion rates at 10-15% per year.

 

Four holdings were exited during the period.

 

Nestle was a sub-scale positon in the portfolio, and while the Manager recognised the long term growth potential and defensive nature of the business, the outlook for growth from consumer goods has slowed from recent years and the Manager did not believe that there was sufficient differentiation to merit a position in the portfolio, particularly as the dividend yield is below market levels.

 

The Manager also sold the holding in Rolls Royce.  The holding has performed well on a two year view, with new management delivering a compelling investment case based on significant improvement in free cash flow by 2020. The Manager has limited conviction in the delivery of this target, however, and the growth in free cashflow is likely to require significant cost cutting and restructuring. The market seems to already believe in delivery, with the stock trading on 24x 2020 earnings and with just a 1.5% dividend yield at the time of sale. The Manager is of the view that there are higher conviction ideas elsewhere.

 

The decision was taken to exit the position in Gima following updates from Gima's main client which indicated that volumes could be reduced, something that is not yet reflected in pricing expectations.

 

Lastly, the Manager sold the position in Sage. Over the holding period this has been a strong performer for the Company, but sales growth rates have started to disappoint and a disconnect between management and the workforce has become apparent, causing the Chief Executive Officer to leave earlier this year. The business faces competition from more nimble peers.

 

Dividends

A first interim dividend of 3.0p per share in respect of the year ending 31 March 2019 was paid on 26 October 2018. The Board declares a second interim dividend of 3.0p per share, payable on 25 January 2019 to shareholders on the register at close of business on 4 January 2019. 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.

 

The current annual rate of dividend is 13.00p per share, representing a dividend yield of 5.1% based on the share price of 253.0p at 30 September 2018. 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 significant revenue reserves, which amounted to 1.3 times the annual dividend cost as at 30 September 2018 hence providing added security on the sustainability of the dividend.

 

Gearing

The Company has a £20 million loan facility of which a total of £19 million was drawn down at the period end. Net of cash, this represented gearing of 21.2%, compared to 20.8% at the start of the period.  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 interest securities which bring diversification to the Company's total revenue stream and with lower volatility than would be expected from a portfolio invested exclusively in equities. The Board takes the view that the 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.

 

Investment Income

The revenue earnings per share for the period was 6.6p, which compares to 7.4p for the equivalent period last year which reflects the reduced level of special dividends compared to the corresponding period last year.  Underlying income across the portfolio has been well supported, with meaningful dividend increases from many holdings and in particular Imperial Brands, BP, HSBC, Experian, Assura and BBA Aviation. In addition, there was a 3% increase in the level of dividend paid by Aberdeen Smaller Companies Income Trust. Only one company in the portfolio, Inmarsat, reduced its underlying dividend during the period, although relative currency moves mean there is a slight decline in per share dividends from Royal Dutch Shell.

 

Income from the preference share portfolio has been maintained and continues to deliver a stable source of income to the Company.

 

The income forecast for the remainder of the financial year is stable, even without the inclusion of potential special dividends, and with a healthy level of revenue reserves, the Company remains in a good position to continue delivering a high level of income.

 

Shareholder Participation at General Meetings

The Board is keen to have shareholder participation and voting at general meetings of the Company, particularly as so much of the share register is retail held, whether held directly or through nominees.  Accordingly, investors are encouraged to acquaint themselves with how to receive annual accounts, or other circulars issued by the Company convening meetings, and how to return their votes on resolutions being proposed.

 

Outlook

Since the end of the period, there has been increased volatility in markets, with a combination of rising interest rates and global geopolitical concerns causing some material sector and stock moves. However, with economic growth globally still positive and earnings growth remaining strong, the Manager remains reasonably confident on the potential for equities to deliver positive returns. 

 

While the UK economy continues to move at a slower pace than many developed economies, there are clear attractions to UK equities and the Manager recently upgraded the UK to be its preferred equity market.  Brexit worries have driven international investors away from the UK and the market is relatively inexpensive. While the shape of Brexit remains uncertain, many companies are insulated by their overseas earnings and dividends paid by UK companies are a significant contributor to total return.

 

The Board continues to believe that the Company's portfolio is well diversified in terms of asset class, sector and geographic exposure and that, despite the various uncertainties facing markets at the current time, the Investment Manager's focus on investing in good quality companies with strong fundamentals should benefit the portfolio over the longer term in meeting the Company's investment objective.

 

Robert Talbut

Chairman

19 November 2018

 

 



INTERIM BOARD REPORT - 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 Risks and Uncertainties

The Board regularly reviews the principal 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 2018 and comprise the following risk headings:

 

-           Investment performance

-           Failure to maintain and grow the dividend over the longer term

-           Widening of discount

-           Financial and economic

-           Gearing

-           Regulatory

-           Operational

 

In addition to these risks, the outcome and potential impact of the UK Government's discussions with the European Union are still unclear at the time of writing, and this remains an economic risk for the Company in the meantime. In all other respects, the Company's principal 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 comprise mainly readily realisable securities which can be sold to meet funding commitments if necessary. The Board has set limits for borrowing and regularly reviews actual exposures, cash flow projections and compliance with banking covenants. 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

19 November 2018

 

 



DISTRIBUTION OF ASSETS AND LIABILITIES

 


Valuation at

Movement during the period

Valuation at


31 March 2018

Purchases

Sales

Gains

30 September 2018


£'000

%

£'000

£'000

£'000

£'000

%

Listed investments








Ordinary shares

69,419

86.2

9,311

(8,948)

2,997

72,779

89.0

Convertibles

550

0.7

-

-

(5)

545

0.6

Preference shares

26,572

33.0

-

-

(1,360)

25,212

30.8


______

______

______

______

______

______

______

Total investments

96,541

119.9

9,311

(8,948)

1,632

98,536

120.4

Current assets

3,197

4.0




2,515

3.1

Current liabilities

(9,276)

(11.5)




(9,256)

(11.3)

Non-current liabilities

(9,997)

(12.4)




(9,998)

(12.2)


______

______

______

______

______

______

______

Net assets

80,465

100.0




81,797

100.0


______

______

______

______

______

______

______

Net asset value per Ordinary share

268.24p





272.68p



______





______


 

 



CONDENSED STATEMENT OF COMPREHENSIVE INCOME

 



 30 September 2018



 (unaudited)



 Revenue

 Capital

 Total


Note

 £'000

 £'000

 £'000

Gains/(losses) on investments at fair value


-

1,636

1,636

Currency gains/(losses)


-

1

1






Investment income





Dividend income


2,274

-

2,274

Interest income/(expense)


1

-

1

Stock dividends


40

-

40

Traded option premiums


61

-

61

Money market interest


2

-

2



_______

_______

_______



2,378

1,637

4,015



_______

_______

_______

Expenses





Management fee


(105)

(105)

(210)

Administrative expenses


(186)

-

(186)

Finance costs


(85)

(85)

(170)



_______

_______

_______



(376)

(190)

(566)



_______

_______

_______

Profit/(loss) before taxation


2,002

1,447

3,449






Taxation

2

(22)

-

(22)



_______

_______

_______

Profit/(loss) attributable to equity holders

4

1,980

1,447

3,427



_______

_______

_______

Returns per Ordinary share (pence)

4

6.60

4.82

11.42



_______

_______

_______






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 2017



 (unaudited)



 Revenue

 Capital

 Total


Note

 £'000

 £'000

 £'000

Gains/(losses) on investments at fair value


-

3,352

3,352

Currency gains/(losses)


-

(21)

(21)






Investment income





Dividend income


2,265

-

2,265

Interest income/(expense)


284

(52)

232

Stock dividends


17

-

17

Traded option premiums


81

-

81

Money market interest


1

-

1



_______

_______

_______



2,648

3,279

5,927



_______

_______

_______

Expenses





Management fee


(108)

(108)

(216)

Administrative expenses


(203)

-

(203)

Finance costs


(79)

(79)

(158)



_______

_______

_______



(390)

(187)

(577)



_______

_______

_______

Profit/(loss) before taxation


2,258

3,092

5,350






Taxation

2

(26)

22

(4)



_______

_______

_______

Profit/(loss) attributable to equity holders

4

2,232

3,114

5,346



_______

_______

_______

Returns per Ordinary share (pence)

4

7.44

10.38

17.82



_______

_______

_______

 

 



CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)

 



31 March 2018



(audited)



 Revenue

 Capital

 Total


Note

 £'000

 £'000

 £'000

Gains/(losses) on investments at fair value


-

(2,357)

(2,357)

Currency gains/(losses)


-

(37)

(37)






Investment income





Dividend income


4,665

-

4,665

Interest income/(expense)


1

1,482

1,483

Stock dividends


79

-

79

Traded option premiums


167

-

167

Money market interest


4

-

4



_______

_______

_______



4,916

(912)

4,004



_______

_______

_______

Expenses





Management fee


(215)

(215)

(430)

Administrative expenses


(404)

-

(404)

Finance costs


(172)

(172)

(344)



_______

_______

_______



(791)

(387)

(1,178)



_______

_______

_______

Profit/(loss) before taxation


4,125

(1,299)

2,826






Taxation

2

(19)

-

(19)



_______

_______

_______

Profit/(loss) attributable to equity holders

4

4,106

(1,299)

2,807



_______

_______

_______

Returns per Ordinary share (pence)

4

13.69

(4.33)

9.36



_______

_______

_______

 

 



CONDENSED BALANCE SHEET

 



As at

As at

As at



30 September 2018

30 September 2017

31 March
2018



(unaudited)

(unaudited)

(audited)


Note

£'000

£'000

£'000

Non-current assets





Equities


72,779

71,723

69,419

Convertibles


545

553

550

Other fixed interest


25,212

27,668

26,572



_______

_______

_______

Securities at fair value


98,536

99,944

96,541



_______

_______

_______

Current assets





Trade and other receivables


19

30

18

Accrued income and prepayments


803

844

917

Cash and cash equivalents


1,693

3,362

2,262



_______

_______

_______



2,515

4,236

3,197



_______

_______

_______

Creditors: amounts falling due within one year





Trade and other payables


(256)

(375)

(276)

Short-term borrowings


(9,000)

(19,000)

(9,000)



_______

_______

_______



(9,256)

(19,375)

(9,276)



_______

_______

_______

Net current liabilities


(6,741)

(15,139)

(6,079)



_______

_______

_______

Total assets less current liabilities


91,795

84,805

90,462






Non-current liabilities





Long-term borrowings


(9,998)

-

(9,997)



_______

_______

_______

Net assets


81,797

84,805

80,465



_______

_______

_______

Share capital and reserves





Called-up share capital


15,049

15,049

15,049

Share premium account


19,308

19,308

19,308

Capital reserve

6

40,760

43,726

39,313

Revenue reserve


6,680

6,722

6,795



_______

_______

_______

Equity shareholders' funds


81,797

84,805

80,465



_______

_______

_______






Net asset value per Ordinary share (pence)

5

272.68

282.71

268.24



_______

_______

_______

 

 

CONDENSED STATEMENT OF CHANGES IN EQUITY

 

Six months ended 30 September 2018 (unaudited)








Share


Retained



Share

premium

Capital

revenue



capital

account

reserve

reserve

Total


£'000

£'000

£'000

£'000

£'000

As at 31 March 2018

15,049

19,308

39,313

6,795

80,465

Profit for the period

-

-

1,447

1,980

3,427

Equity dividends

-

-

-

(2,095)

(2,095)


_______

_______

_______

_______

_______

As at 30 September 2018

15,049

19,308

40,760

6,680

81,797


_______

_______

_______

_______

_______







Six months ended 30 September 2017 (unaudited)








Share


Retained



Share

premium

Capital

revenue



capital

account

reserve

reserve

Total


£'000

£'000

£'000

£'000

£'000

As at 31 March 2017

15,049

19,308

40,612

6,508

81,477

Profit for the period

-

-

3,114

2,232

5,346

Equity dividends

-

-

-

(2,018)

(2,018)


_______

_______

_______

_______

_______

As at 30 September 2017

15,049

19,308

43,726

6,722

84,805


_______

_______

_______

_______

_______







Year ended 31 March 2018 (audited)








Share


Retained



Share

premium

Capital

revenue



capital

account

reserve

reserve

Total


£'000

£'000

£'000

£'000

£'000

As at 31 March 2017

15,049

19,308

40,612

6,508

81,477

(Loss)/profit for the year

-

-

(1,299)

4,106

2,807

Equity dividends

-

-

-

(3,819)

(3,819)


_______

_______

_______

_______

_______

As at 31 March 2018

15,049

19,308

39,313

6,795

80,465


_______

_______

_______

_______

_______

 

 



CONDENSED CASH FLOW STATEMENT


Six months ended

Six months ended

Year
ended


30 September 2018

30 September 2017

31 March
2018


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000

Net cash inflow from operating activities




Dividend income received

2,390

2,409

4,740

Interest income received

1

283

-

Options premium received

46

76

176

Money market interest received

3

1

4

Management fee paid

(211)

(211)

(426)

Other cash expenses

(190)

(222)

(415)


__________

__________

__________

Cash generated from operations

2,039

2,336

4,079





Interest paid

(168)

(158)

(310)

Overseas taxation

(23)

(8)

(26)


__________

__________

__________

Net cash inflows from operating activities

1,848

2,170

3,743


__________

__________

__________

Cash flows from investing activities




Purchases of investments

(9,281)

(4,011)

(11,251)

Sales of investments

8,958

5,469

11,859


__________

__________

__________

Net cash (outflow)/inflow from investing activities

(323)

1,458

608


__________

__________

__________

Cash flows from financing activities




Equity dividends paid

(2,095)

(2,018)

(3,819)

Loan arrangement fees

-

-

(6)


__________

__________

__________

Net cash outflow from financing activities

(2,095)

(2,018)

(3,825)


__________

__________

__________

Net (decrease)/increase in cash and cash equivalents

(570)

1,610

526


__________

__________

__________

Reconciliation of net cash flow to movements in cash and cash equivalents




(Decrease)/increase in cash and cash equivalents as above

(570)

1,610

526

Net cash and cash equivalents at start of period

2,262

1,773

1,773

Effect of foreign exchange rate changes

1

(21)

(37)


__________

__________

__________

Cash and cash equivalents at end of period

1,693

3,362

2,262


__________

__________

__________


Non-cash transactions during the period comprised stock dividends of £40,000 (30 September 2017 - £17,000; 31 March 2018 - £79,000).

For the six months ended 30 September 2018

 

1.

Accounting policies - Basis of accounting


The 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 2018 financial statements, which 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 which, in most circumstances, are realisable within a very short timescale.

 

2.

Taxation


The taxation expense reflected in the Condensed Statement of Comprehensive Income is based on the estimated annual tax rate expected for the full financial year. The estimated annual corporation tax rate used for the year to 31 March 2019 is a rate of 19%.




Detailed below is an analysis of the tax charge for the following periods:





Six months ended

Six months ended

Year ended



30 September 2018

30 September 2017

31 March 2018



Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total


Taxation

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000


UK Corporation tax

-

-

-

22

(22)

-

-

-

-


Overseas tax suffered

22

-

22

4

-

4

19

-

19



_______

______

____

_______

______

____

_______

______

____


Total tax charge

22

-

22

26

(22)

4

19

-

19



_______

______

____

_______

______

____

_______

______

____

 

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 ended

Six months ended

Year ended



30 September 2018

30 September 2017

31 March 2018



£'000

£'000

£'000


Revenue

1,980

2,232

4,106


Dividends declared

(1,800) ᴬ

(1,800)

(3,900) c



__________

__________

__________



180

432

206



__________

__________

__________







ᴬ          Dividends declared relate to first two interim dividends (both 3.00p each) in respect of the financial year 2018/19.


ᴮ          Dividends declared relate to first two interim dividends (both 3.00p each) in respect of the financial year 2017/18.


c         First three interim dividends (each 3.00p) and the final dividend (4.00p) declared in respect of the financial year 2017/18.

 



Six months ended

Six months ended

Year ended



30 September 2018

30 September 2017

31 March 2018

4.

Returns per Ordinary share

£'000

£'000

£'000


Returns are based on the following figures:





Revenue return

1,980

2,232

4,106


Capital return

1,447

3,114

(1,299)



__________

__________

__________


Total return

3,427

5,346

2,807



__________

__________

__________


Weighted average number of Ordinary shares in issue

29,997,580

29,997,580

29,997,580



__________

__________

__________

 

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 2018

30 September 2017

31 March 2018



(unaudited)

(unaudited)

(audited)


Attributable net assets (£'000) per Condensed Balance Sheet

81,797

84,805

80,465


Number of Ordinary shares in issue

29,997,580

29,997,580

29,997,580


Net asset value per Ordinary share (p)

272.68

282.71

268.24

 

6.

Capital reserve


The capital reserve reflected in the Condensed Balance Sheet at 30 September 2018 includes unrealised gains of £18,900,000 (30 September 2017 - gains of £25,597,000; 31 March 2018 - gains of £20,508,000) which relate to the revaluation of investments held at the reporting date.

 

7.

Transaction costs


During the period expenses were incurred in acquiring or disposing of investments classified as fair value though profit or loss. These have been expensed through capital and are included within gains/(losses) on investments at fair value in the Condensed Statement of Comprehensive Income. The total costs were as follows:








Six months ended

Six months ended

Year ended



30 September 2018

30 September 2017

31 March 2018



£'000

£'000

£'000


Purchases

34

16

41


Sales

3

2

3



__________

__________

__________



37

18

44



__________

__________

__________







The above transaction costs are calculated in line with the AIC SORP. The transaction costs in the Company's Key Information Document are calculated on a different basis and in line with the PRIIPs regulations.

 



Six months ended

Six months ended

Year ended



30 September 2018

30 September 2017

31 March 2018

8.

Analysis of changes in financing

£'000

£'000

£'000


Opening balance at 1 March

18,997

19,000

19,000


Cashflow:





Loan arrangement fees

-

-

(6)


Non cash:





Amortisation of loan arrangement fees

1

-

-


Unamortised loan arrangement fees

-

-

3



__________

__________

__________


Closing balance

18,998

19,000

18,997



__________

__________

__________

 

9.

Transactions with the Manager


The Company has an agreement with Aberdeen Fund Managers Limited ("AFML") for the provision of management, secretarial, accounting and administration services and for the carrying out of promotional activities in relation to the Company.




The management fee is based on 0.45% per annum up to £100 million and 0.40% per annum over £100 million, by reference to the net assets of the Company and any borrowings up to a maximum of £30 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 2018 was £211,000 (30 September 2017 - £216,000; 31 March 2018 - £430,000) and the balance due to AFML at the period end was £105,000 (30 September 2017 - £107,000; 31 March 2018 - £105,000). 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 2018 (30 September 2017 and 31 March 2018  - same). The value attributable to this holding is excluded from the calculation of the management fee payable by the Company.




The total fees paid and payable under the management agreement in relation to promotional activities were £32,000 (30 September 2017 - £39,000; 31 March 2018 - £78,000) and the balance due to AFML at the period end was £13,000 (30 September 2017 - £19,000; 31 March 2018 - £19,000). The Company's management agreement with AFML 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 1

Level 2

Level 3

Total


At 30 September 2018

Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted investments

a)

98,536

-

-

98,536









Financial liabilities at fair value through profit or loss







Derivatives

b)

-

(33)

-

(33)




________

________

________

________


Net fair value


98,536

(33)

-

98,503




________

________

________

________











Level 1

Level 2

Level 3

Total


At 30 September 2017

Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted investments

a)

99,944

-

-

99,944









Financial liabilities at fair value through profit or loss







Derivatives

b)

-

(39)

-

(39)




________

________

________

________


Net fair value


99,944

(39)

-

99,905




________

________

________

________











Level 1

Level 2

Level 3

Total


As at 31 March 2018

Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted investments

a)

96,541

-

-

96,541









Financial liabilities at fair value through profit or loss







Derivatives

b)

-

(48)

-

(48)




________

________

________

________


Net fair value


96,541

(48)

-

96,493




________

________

________

________









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 2018 and 30 September 2017 has not been reviewed or audited by the Company's independent auditor.




The information for the year ended 31 March 2018 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 19 November 2018.

 

 

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

19 November 2018

 

* Neither the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

 


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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Half Yearly Report - RNS