Half-year Report

RNS Number : 2757U

Shires Income PLC

02 December 2021

 

SHIRES INCOME PLC

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021

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).

DIVIDENDS

The Company pays dividends to Ordinary shareholders on a quarterly basis.

HIGHLIGHTS

Net asset value per Ordinary share total return A			Share price total return A			Benchmark index total return
Six months ended 30 September 2021	+12.3%		Six months ended 30 September 2021	+11.7%		Six months ended 30 September 2021	+8.0%
Year ended 31 March 2021	+34.0%		Year ended 31 March 2021	+31.2%		Year ended 31 March 2021	+26.7%
Earnings per Ordinary share (revenue)			Dividend yield A			Discount to net asset value A
Six months ended 30 September 2021	7.21p		As at 30 September 2021	4.9%		As at 30 September 2021	6.1%
Six months ended 30 September 2020	6.18p		As at 31 March 2021	5.3%		As at 31 March 2021	5.5%
A   Considered to be an Alternative Performance Measure.

	30 September 2021	31 March 2021	% change
Total assets (£'000) A	107,505	99,856	+7.7
Shareholders' funds (£'000)	88,506	80,857	+9.5
Net asset value per share	287.01p	262.41p	+9.4
Share price (mid-market)	269.50p	248.00p	+8.7
Discount to net asset value (cum-income) B	6.1%	5.5%
Dividend yield B	4.9%	5.3%
Net gearing B	20.7%	16.5%
Ongoing charges ratio B	1.17%	1.21%
A Less current liabilities excluding bank loans of £18,999,000.
B Considered to be an Alternative Performance Measure.

PERFORMANCE (TOTAL RETURN)

	Six months ended	Year ended	Three years ended	Five years ended
	30 September 2021	30 September 2021	30 September 2021	30 September 2021
Net asset value A	+12.3%	+32.2%	+22.9%	+42.3%
Share price A	+11.7%	+33.1%	+24.9%	+53.2%
FTSE All-Share Index	+8.0%	+27.9%	+9.5%	+29.8%
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:

Luke Mason

Aberdeen Asset Managers Limited

0207 463 6100

CHAIRMAN'S STATEMENT

Market Background

The first half of the financial year was a more stable environment as the global economy continued to recover from the Covid-19 pandemic.  Although we have seen spikes in case numbers in various geographies, including the UK, economic activity has picked up and, in the majority of countries, restrictions on movement and interaction have been significantly reduced compared to last year. Concerns certainly remain, especially as we enter winter in the Northern Hemisphere and the effectiveness of vaccination programmes begins to fade, but for the majority of companies the outlook is clearer than it has been for some time. The rapid resumption of economic activity has, however, brought its own issues.  Global supply chains have felt the strain, with shipping rates rising sharply and delays to the delivery of many goods. Commodity prices have risen and tightening labour markets have led to wage rises in a number of areas. Concerns around inflation have therefore increased and, although some supply chain effects will be transitory, there is every chance of more sustained price pressures than we have seen for some time. The ability of companies to manage these cost pressures will have a significant bearing on profit trends in 2022.

So far, central banks have continued with loose monetary policy and low interest rates. However, there are signs of this changing and commentary from central banks has flagged rate rises on the horizon.  The UK has been exposed to all of these economic changes. High vaccination rates and substantial consumer savings have led to a jump in activity, while supply chain issues and labour market tightness have likely been further increased by the exit from the EU. After a decade of falling interest rates and low inflation we should therefore be alive to a change in direction and the resultant potential impact on equity market valuations.

Despite these concerns, the economic background has been generally supportive for UK equities, with the recovery in earnings outweighing the impact of inflation and higher bond yields on valuations. The FTSE All-Share Index benchmark produced a total return of 8.0% in the six-month period, with the best performing sectors being energy (+20%) and healthcare (+19%). It is rare for these two sectors to both outperform simultaneously, but this market leadership reflects the rising oil price combined with a more defensive skew in the market through the summer as concerns around the effect of the Delta variant of Covid-19 increased.

Investment Performance

Over the first half of the financial year the Company's net asset value ("NAV") increased by 12.3% on a total return basis, outperforming the total return from the FTSE All-Share Index by 4.3%. The equity portfolio delivered positive relative performance, returning 12.0%, while the preference share portfolio returned 7.9%. By sector, the Company benefited from strong relative performance in consumer discretionary, financials and real estate holdings, offset by weaker relative performance from the portfolio's exposure to telecoms and industrials.

The greatest positive contributor to performance on a single stock basis was Sirius Real Estate which rose in value by 50% in the period. The company continued to grow rental income steadily and improved its balance sheet position through a successful bond issue. The German market, on which Sirius is focused, normalised during the period and the premium to NAV for its shares increased.

The next greatest positive contribution came from online gambling firm Entain, which rose by 40%. Entain has continued to trade well, posting growing revenues and with its US joint venture with MGM winning market share in the fast-growing US sports gaming market. At the end of the period Entain was subject to a bid from rival company Draft Kings. Although a final offer was not made in this case due to the complexity of the proposed transaction, Entain has continued to trade well and the Investment Manager continues to see upside to the shares.

Another strong performer was John Laing, which was sold to a private equity firm during the period. We have seen a range of UK companies being sold in the past six months as positive economic data and cheap valuations make the market attractive for acquirers.

The positive rebound in the UK economy could also be seen in a number of domestic industrial names. Morgan Sindall, which provides office fit-out work and construction, delivered a 38% return after being added to the portfolio, while Howden Joinery returned 27% as consumer demand for kitchens remained strong.

Finally, the portfolio also benefitted from strong performance from the holding in Aberdeen Smaller Companies Income Trust, which increased in value by 26%.

The greatest detractors from relative performance in the period were large companies that are not held within the portfolio and which performed well: Glencore, Relx, Ashtead and Experian all delivered strong returns in the period and therefore detracted from relative performance. In each case, the Investment Manager sees either a lack of income or quality as a reason not to hold these companies.

Of the companies held in the portfolio, only two disappointed notably during the period. Both Standard Chartered and Ashmore are financial companies exposed to emerging markets. As emerging markets, and especially China, performed poorly through the summer these two stocks lagged the market, with Standard Chartered falling 13% and Ashmore 15%. In the Investment Manager's view both companies are undervalued and offer exposure to a region with strong growth potential, and remain attractive on a longer-term view.

Portfolio Activity

During the period, the Investment Manager added eight new positions to the portfolio and exited four. The imbalance reflects a number of attractive opportunities to enhance the income generated by the portfolio. Overall, there has been a mild skew to add some more value to the portfolio and also some leverage to improving economic growth and a higher interest rate outlook, hence a number of new positions in banks and UK domestic names.

Electrocomponents is a distributor and supplier of electrical components to industry. It has delivered a strong track record of earnings growth over time, building customer loyalty through the breadth and depth of its product offering. The company also has the ability to accelerate growth through acquisitions and delivers a reasonable yield.

Balfour Beaty was added following the exit of John Laing, maintaining exposure to UK infrastructure investment which the Investment Manager sees as an attractive area given the point in the economic cycle. Government support for spending is likely to give higher visibility on projects and revenue than has been seen for some time and the pipeline should support mid-single-digit earnings growth on an attractive price/earnings multiple. The headline yield is around market level but the potential for growth and special dividends makes it attractive for the portfolio.

Bridgepoint was another new addition that maintains some exposure in the portfolio to private markets. It is a leading investor in private growth businesses which listed on the UK market earlier this year. It gives access to a higher growth part of the market with potential for an above market cash return over time.

Nordea Bank is a Swedish listed bank. It has come through the Covid-19 pandemic with a strengthened capital position and is now able to return material capital to shareholders over the next few years. Combined with a high return on capital for the sector and exposure to a rising interest rate environment, this makes it attractive for income.

The Investment Manager also initiated a position in a second European bank, Bawag, which is listed in Austria and focused on Central and Eastern Europe. The bank is a high return business and has grown through acquisitions, yet also sits with a large amount of excess capital, allowing for a period of elevated distributions which makes it attractive for income investing.

A number of additions to the portfolio looked to increase the portfolio's exposure to the UK domestic economy as it rebounds from the pandemic. OneSavingsBank ("OSB") is a UK lender specialising in loans to professional landlords. The area it operates in results in the bank earning a higher return on capital than large scale UK banks.  It should benefit from the recovery in the UK economy and a tight property market. Redrow is a UK housebuilder and offers similar exposure to UK growth. The business is cash generative and attractively valued compared to peers, with an above market level dividend yield. With the housing market remaining tight and continued demand for new-build properties, the Investment Manager has a positive outlook for the sector.

The final new position was in Drax. Drax is a UK power producer, with attractive positioning in the near term as it is a beneficiary of high energy costs, and particularly UK natural gas prices. In the longer term, Drax is attractive due to its shift to generate power using biomass which, when combined with a carbon capture scheme, allows it to generate negative carbon emissions.

The exits from the portfolio fell into two parts: Either companies which were bid for and where the Investment Manager took profits, or where the Investment Manager saw them as fully valued after outperformance and chose to move on. In the first category, Avast and John Laing received bids.  In the second category, Londonmetric Property and Dechra Pharmaceuticals both performed well and, with less upside, were sold. 

Investment Income

The revenue earnings per share for the period were 7.21p, which compares to 6.18p for the equivalent period last year. Across the portfolio there have been increases in investment income. This partially reflects the resumption of dividends by companies after the pandemic impacted shareholder returns last year. Companies generally have a more confident outlook, while regulatory barriers to payments, for example in the banking sector, have now been lifted. 

By company, there were meaningful increases in dividends from BHP and Rio Tinto, which have benefited from a period of particularly high iron ore prices. In the energy sector, Diversified Energy has continued to grow its dividend and BP and Royal Dutch Shell have increased their dividends after cutting them sharply in 2020. Banks in general have come out of the pandemic with a high level of capital and, after suspending dividend payments, are able to return excess capital this year. This has largely come back to shareholders in the form of buybacks, but recent additions to the portfolio, Bawag and Nordea Bank, have enhanced overall income generation.

Dividends

A first interim dividend of 3.2p per Ordinary share in respect of the year ending 31 March 2022 (2021: first interim dividend - 3.0p) was paid on 29 October 2021.  The Board declares a second interim dividend of 3.2p per Ordinary share (2021: second interim dividend - 3.0p), payable on 28 January 2022 to shareholders on the register at close of business on 7 January 2022.

Subject to unforeseen circumstances, it is proposed to pay a further interim dividend of 3.2p per Ordinary share in respect of the financial year and, as in previous years, the Board will decide on the level of final dividend having reviewed the full year's results, taking into account the outcome of the revenue account for the year and the general outlook for the portfolio's investment income at that time. However, it is the Board's current intention that the final dividend will be no less than 4.2p per Ordinary share (2021: 4.2p), resulting in a total dividend for the year of at least 13.8p per Ordinary share (2021: 13.2p).

Gearing

The Company's gearing level (net of cash) was 20.7% as at 30 September 2021 compared to 16.5% at the start of the period. There were no changes to the Company's borrowing arrangements during the period, with £19 million of the Company's £20 million facility being drawn down at the period end. £9 million of this amount continues to be drawn down on a short-term basis through a revolving credit facility and can be repaid without incurring any financial penalties. The facility matures in September 2022.

As in previous years, the Board takes the view that the borrowings are notionally invested in the less volatile fixed income part of the portfolio which generates a high level of income, giving the Investment Manager greater ability to invest in a range of equity stocks, some with higher yields but other strongly growing businesses with much lower yields but with the prospect of stronger growth. This combination means that the Company can achieve a high level of dividend but also deliver some capital appreciation to shareholders.

Outlook

Going into 2022, the global economy faces a number of headwinds which are likely to result in growth slowing when compared with 2021. These include an economic slowdown in China and some degree of interest rate normalisation across the globe as many central banks have already signalled a more hawkish stance going forward. In addition, the outlook for the next six months is clouded to some extent by the impact of Covid-19 as we go through the winter period, including the recently discovered Omicron variant. It seems quite possible that we will see continued rising case numbers and there is the potential for increased restrictions being imposed in the UK and elsewhere at some stage although renewed lockdowns in the UK appear unlikely at present. Any measures that would inhibit the current growth trajectory would clearly be taken negatively by financial markets and does therefore create a short-term risk.  Provided lockdowns can be avoided, the economy looks in good health and activity is likely to remain high with good economic growth prospects into 2022, although we should expect to see more commentary on cost and wage inflation and its impact on company earnings. This creates a risk to the earnings outlook which, combined with the likely start of the process of normalisation of interest rates, may restrict the upside in equity valuations.

The defensive nature of the portfolio should provide protection against too much downside and the Investment Manager continues to see plenty of upside potential for the companies in the portfolio. Banks will be significant beneficiaries of any higher rates, for example, and, more broadly, those companies that can pass through cost inflation to clients will benefit from revenue growth. This latter ability is something the Investment Manager increasingly looks for when they assess the quality of companies in the portfolio.  Importantly, the Investment Manager also sees continued potential for income growth from the portfolio after the dividend cuts of 2020 are unwound. This combination should give confidence in the future prospects from the portfolio and for the Company overall.

Robert Talbut

Chairman

2 December 2021

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 2021 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 addition to these risks, the Board is conscious of the continuing impact on the global economy and financial markets caused by the Covid-19 pandemic which emerged in early 2020. The Board considers that this is a risk that could have further implications for financial markets and 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. The Board has performed stress testing and liquidity analysis on the portfolio and considers that, in most circumstances, including in the current market environment, the Company's investments are 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 £20 million loan facility which matures in September 2022. £9 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, 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 the period to 2 December 2022, which is 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

2 December 2021

DISTRIBUTION OF ASSETS AND LIABILITIES

	Valuation at		Movement during the period			Valuation at
	31 March 2021		Purchases	Sales	Gains	30 September 2021
	£'000	%	£'000	£'000	£'000	£'000	%
Listed investments
Equities	68,058	84.2	11,442	(6,549)	6,356	79,307	89.6
Preference shares	25,487	31.5	-	-	1,375	26,862	30.4
	______	______	______	______	______	______	______
Total investments	93,545	115.7	11,442	(6,549)	7,731	106,169	120.0
Current assets	6,642	8.2				1,565	1.7
Current liabilities	(9,331)	(11.5)				(19,228)	(21.7)
Non-current liabilities	(9,999)	(12.4)				-	-
	______	______				______	______
Net assets	80,857	100.0				88,506	100.0
	______	______				______	______
Net asset value per Ordinary share	262.4p					287.0p
	______					______

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

		30 September 2021
		(unaudited)
		Revenue	Capital	Total
	Note	'000	'000	'000
Gains on investments at fair value		-	7,739	7,739
Currency gains/(losses)		-	6	6
Investment income
Dividend income		2,448	-	2,448
Stock dividends		164	-	164
Traded option premiums		29	-	29
		_______	_______	_______
		2,641	7,745	10,386
		_______	_______	_______
Expenses
Management fee		(106)	(106)	(212)
Administrative expenses		(212)	-	(212)
Finance costs		(66)	(65)	(131)
		_______	_______	_______
		(384)	(171)	(555)
		_______	_______	_______
Profit before taxation		2,257	7,574	9,831
Taxation	2	(34)	-	(34)
		_______	_______	_______
Profit attributable to equity holders		2,223	7,574	9,797
		_______	_______	_______
Earnings per Ordinary share (pence)	4	7.21	24.59	31.80
		_______	_______	_______
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 2020
		(unaudited)
		Revenue	Capital	Total
	Note	'000	'000	'000
Gains on investments at fair value		-	6,943	6,943
Currency gains/(losses)		-	7	7
Investment income
Dividend income		2,153	-	2,153
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
		_______	_______	_______
Earnings per Ordinary share (pence)	4	6.18	22.06	28.24
		_______	_______	_______

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (Cont'd)

		31 March 2021
		(audited)
		Revenue	Capital	Total
	Note	'000	'000	'000
Gains on investments at fair value		-	17,514	17,514
Currency gains/(losses)		-	(5)	(5)
Investment income
Dividend income		4,278	-	4,278
Stock dividends		75	-	75
Traded option premiums		_______	_______	_______
		4,529	17,509	22,038
		_______	_______	_______
Expenses
Management fee		(189)	(190)	(379)
Administrative expenses		(358)	-	(358)
Finance costs		(132)	(132)	(264)
		_______	_______	_______
		(679)	(322)	(1,001)
		_______	_______	_______
Profit before taxation		3,850	17,187	21,037
Taxation	2	(54)	-	(54)
		_______	_______	_______
Profit attributable to equity holders		3,796	17,187	20,983
		_______	_______	_______
Earnings per Ordinary share (pence)	4	12.33	55.82	68.15
		_______	_______	_______

CONDENSED BALANCE SHEET

		As at	As at	As at
		30 September 2021	30 September 2020	31 March 2021
		(unaudited)	(unaudited)	(audited)
	Note	£'000	£'000	£'000
Non-current assets
Equities		79,307	59,914	68,058
Preference shares		26,862	24,243	25,487
		_______	_______	_______
Securities at fair value		106,169	84,157	93,545
		_______	_______	_______
Current assets
Accrued income and prepayments		895	721	988
Cash and cash equivalents		670	4,863	5,654
		_______	_______	_______
		1,565	5,584	6,642
		_______	_______	_______
Creditors: amounts falling due within one year
Trade and other payables		(229)	(335)	(331)
Short-term borrowings		(18,999)	(9,000)	(9,000)
		_______	_______	_______
		(19,228)	(9,335)	(9,331)
		_______	_______	_______
Net current liabilities		(17,663)	(3,751)	(2,689)
		_______	_______	_______
Total assets less current liabilities		88,506	80,406	90,856
Non-current liabilities
Long-term borrowings		-	(9,998)	(9,999)
		_______	_______	_______
Net assets		88,506	70,408	80,857
		_______	_______	_______
Share capital and reserves
Called-up share capital	6	15,460	15,447	15,447
Share premium account		21,109	21,052	21,052
Capital reserve	7	45,415	27,445	37,841
Revenue reserve		6,522	6,464	6,517
		_______	_______	_______
Equity shareholders' funds		88,506	70,408	80,857
		_______	_______	_______
Net asset value per Ordinary share (pence)	5	287.01	228.48	262.41
		_______	_______	_______
The accompanying notes are an integral part of the financial statements.

CONDENSED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 September 2021 (unaudited)
		Share
	Share	premium	Capital	Revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
As at 31 March 2021	15,447	21,052	37,841	6,517	80,857
Issue of Ordinary shares	13	57	-	-	70
Profit for the period	-	-	7,574	2,223	9,797
Equity dividends	-	-	-	(2,218)	(2,218)
	_______	_______	_______	_______	_______
As at 30 September 2021	15,460	21,109	45,415	6,522	88,506
	_______	_______	_______	_______	_______
Six months ended 30 September 2020 (unaudited)
		Share
	Share	premium	Capital	Revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'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
	_______	_______	_______	_______	_______
Year ended 31 March 2021 (audited)
		Share
	Share	premium	Capital	Revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'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 year	-	-	17,187	3,796	20,983
Equity dividends	-	-	-	(4,049)	(4,049)
	_______	_______	_______	_______	_______
As at 31 March 2021	15,447	21,052	37,841	6,517	80,857
	_______	_______	_______	_______	_______

CONDENSED CASH FLOW STATEMENT

	Six months ended	Six months ended	Year ended
	30 September 2021	30 September 2020	31 March 2021
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Net cash inflow from operating activities
Dividend income received	2,561	2,302	4,105
Options premium received	42	106	172
Management fee paid	(299)	(97)	(281)
Other cash expenses	(226)	(189)	(353)
	__________	__________	__________
Cash generated from operations	2,078	2,122	3,643
Interest paid	(143)	(136)	(252)
Overseas tax paid	(48)	(32)	(58)
	__________	__________	__________
Net cash inflows from operating activities	1,887	1,954	3,333
	__________	__________	__________
Cash flows from investing activities
Purchases of investments	(11,278)	(7,069)	(10,252)
Sales of investments	6,549	8,330	12,777
	__________	__________	__________
Net cash (outflow)/inflow from investing activities	(4,729)	1,261	2,525
	__________	__________	__________
Cash flows from financing activities
Equity dividends paid	(2,218)	(2,209)	(4,049)
Issue of Ordinary shares	70	59	59
	__________	__________	__________
Net cash outflow from financing activities	(2,148)	(2,150)	(3,990)
	__________	__________	__________
Net (decrease)/increase in cash and cash equivalents	(4,990)	1,065	1,868
	__________	__________	__________
Reconciliation of net cash flow to movements in cash and cash equivalents
(Decrease)/increase in cash and cash equivalents as above	(4,990)	1,065	1,868
Net cash and cash equivalents at start of period	5,654	3,791	3,791
Effect of foreign exchange rate changes	6	7	(5)
	__________	__________	__________
Cash and cash equivalents at end of period	670	4,863	5,654
	__________	__________	__________
Non-cash transactions during the period comprised stock dividends of £164,000 (30 September 2020 - £49,000; 31 March 2021 - £75,000).

Notes to the Accounts

For the six months ended 30 September 2021

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 2021 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 ended	Six months ended	Year ended
		30 September 2021	30 September 2020	31 March 2021
		£'000	£'000	£'000
	Revenue	2,223	1,903	3,796
	Dividends declared	(1,972) A	(1,848) B	(4,065) C
		__________	__________	__________
		251	55	(269)
		__________	__________	__________
	A   Dividends declared relate to first two interim dividends (3.20p each) in respect of the financial year 2021/22.
	B   Dividends declared relate to first two interim dividends (3.00p each) in respect of the financial year 2020/21.
	C   First three interim dividends (3.00p each) and the final dividend (4.20p) declared in respect of the financial year 2020/21.

4.	Earnings per Ordinary share
		Six months ended	Six months ended	Year ended
		30 September 2021	30 September 2020	31 March 2021
		£'000	£'000	£'000
	Returns are based on the following figures:
	Revenue return	2,223	1,903	3,796
	Capital return	7,574	6,791	17,187
		__________	__________	__________
	Total return	9,797	8,694	20,983
		__________	__________	__________
	Weighted average number of Ordinary shares in issue	30,804,963	30,781,875	30,788,210
		__________	__________	__________

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 2021	30 September 2020	31 March 2021
		(unaudited)	(unaudited)	(audited)
	Net assets per Condensed Balance Sheet (£'000)	88,506	70,408	80,857
	3.5% Cumulative Preference shares of £1 each (£'000)	(50)	(50)	(50)
		__________	__________	__________
	Attributable net assets (£'000)	88,456	70,358	80,807
		__________	__________	__________
	Number of Ordinary shares in issue	30,819,580	30,794,580	30,794,580
		__________	__________	__________
	Net asset value per Ordinary share (p)	287.01	228.48	262.41
		__________	__________	__________
	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 £1 each equating to £1 per share (£50,000), divided by the number of Ordinary shares in issue.

6.	Called up share capital
		30 September 2021		30 September 2020		31 March 2021
		Number	£'000	Number	£'000	Number	£'000
	Allotted, called up and fully paid Ordinary shares of 50 pence each:
	Balance brought forward	30,794,580	15,397	30,769,580	15,385	30,769,580	15,385
	Ordinary shares issued	25,000	13	25,000	12	25,000	12
		__________	_______	__________	_______	__________	_______
	Balance carried forward	30,819,580	15,410	30,794,580	15,397	30,794,580	15,397
		__________	_______	__________	_______	__________	_______
	Allotted, called up and fully paid 3.5% Cumulative Preference shares of £1 each
	Balance brought forward and carried forward	50,000	50	50,000	50	50,000	50
			_______		_______		_______
			15,460		15,447		15,447
			_______		_______		_______
	During the six months ended 30 September 2021 the Company issued 25,000 Ordinary shares of 50p each (six months ended 30 September 2020 - 25,000; year ended 31 March 2021 - 25,000) for proceeds of £70,000 (six months ended 30 September 2020 - £59,000; year ended 31 March 2021 - £59,000).

7.

Capital reserve. The capital reserve reflected in the Condensed Balance Sheet at 30 September 2021 includes unrealised gains of £19,147,000 (30 September 2020 - gains of £2,742,000; 31 March 2021 - gains of £13,165,000) which relate to the revaluation of investments held at the reporting date. The balance relates to realised gains of £26,268,000 (30 September 2020 - £24,703,000; 31 March 2021 - £24,676,000).

8.	Analysis of changes in financial liabilities
		Six months ended	Six months ended	Year ended
		30 September 2021	30 September 2020	31 March 2021
		£'000	£'000	£'000
	Opening balance at 1 April	(18,999)	(18,998)	(18,998)
	Cashflow	(70)	(59)	(59)
	Other movements A	70	59	58
		__________	_______	__________
	Closing balance	(18,999)	(18,998)	(18,999)
		__________	_______	__________
	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 £20,000,000. A £10,000,000 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 £9,000,000 had been drawn down on a revolving basis at an all-in interest rate of  0.94688%, maturing on 20 October 2021. At the date of this Report, £9,000,000 was drawn down on a revolving basis at an all-in interest rate of 0.9796%.

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 £100 million and 0.40% per annum over £100 million, by reference to the net assets of the Company and including 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 2021 was £212,000 (30 September 2020 - £184,000; 31 March 2021 - £379,000) and the balance due to ASFML at the period end was £107,000 (30 September 2020 - £184,000; 31 March 2021 - £195,000). 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 2021 (30 September 2020 and 31 March 2021 - 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 £24,000 (30 September 2020 - £28,000; 31 March 2021 - £48,000) and the balance due to ASFML at the period end was £12,000 (30 September 2020 - £28,000; 31 March 2021 - £12,000). 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 1	Level 2	Level 3	Total
	At 30 September 2021		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments		a)	106,169	-	-	106,169
	Financial liabilities at fair value through profit or loss
	Derivatives		b)	-	(10)	-	(10)
				_______	_______	_______	_______
	Net fair value			106,169	(10)	-	106,159
				_______	_______	_______	_______
				Level 1	Level 2	Level 3	Total
	At 30 September 2020		Note	£'000	£'000	£'000	£'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 1	Level 2	Level 3	Total
	At 31 March 2021		Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments		a)	93,545	-	-	93,545
	Financial liabilities at fair value through profit or loss
	Derivatives		b)	-	-	-	-
				_______	_______	_______	_______
	Net fair value			93,545	-	-	93,545
				_______	_______	_______	_______
	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 2021 and 30 September 2020 has not been reviewed or audited by the Company's independent auditor.
	The information for the year ended 31 March 2021 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 2 December 2021.

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 2021 and 30 September 2020 and assumes reinvestment of net dividends excluding transaction costs (the "Adjustment factor").
	Dividend		Share
30 September 2021	rate	NAV	price
31 March 2021 (a)		262.41p	248.00p
8 April 2021	3.00p	266.85p	257.50p
8 July 2021	4.20p	275.58p	269.00p
30 September 2021 (b)		287.01p	269.50p
Adjustment factor (c)		1.026655	1.027429
		__________	__________
30 September 2021 adjusted (d)=(b*c)		294.66p	276.89p
		__________	__________
Total return (d/a)		+12.3%	+11.7%
		__________	__________
	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%
		__________	__________
Discount to net asset value per Ordinary share. The difference between the share price and the net asset value per Ordinary share expressed as a percentage of the net asset value per Ordinary share.
		30 September 2021	31 March 2021
NAV per Ordinary share (p)	a	287.01	262.41
Share price (p)	b	269.50	248.00
Discount	(a-b)/a	6.1%	5.5%
		__________	__________
Dividend yield. The annual dividend divided by the share price, expressed as a percentage.
		30 September 2021	31 March 2021
Annual dividend per Ordinary share (p)	a	13.20p	13.20p
Share price (p)	b	269.50p	248.00p
Dividend yield	a/b	4.9%	5.3%
		__________	__________
Net gearing. Net gearing measures total borrowings less cash and cash equivalents divided by shareholders' funds, expressed as a percentage. Under AIC reporting guidance, cash and cash equivalents includes net amounts due to and from brokers at the period end as well as cash and short term deposits.
		30 September 2021	31 March 2021
Borrowings (£'000)	a	18,999	18,999
Cash (£'000)	b	670	5,654
Amounts due to brokers (£'000)	c	-	-
Amounts due from brokers (£'000)	d	-	-
Shareholders' funds (£'000)	e	88,506	80,857
		__________	__________
Net gearing	(a-b+c-d)/e	20.7%	16.5%
		__________	__________
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 2021 is based on forecast ongoing charges for the year ending 31 March 2022.
		30 September 2021	31 March 2021
Investment management fees (£'000)		427	379
Administrative expenses (£'000)		399	358
		__________	__________
Ongoing charges (£'000)		826	737
		__________	__________
Average net assets (£'000)		87,364	73,999
		__________	__________
Ongoing charges ratio (excluding look-through costs)		0.95%	1.00%
		__________	__________
Look-through costs A		0.22%	0.21%
		__________	__________
Ongoing charges ratio (including look-through costs)		1.17%	1.21%
		__________	__________
A   Costs associated with holdings in collective investment schemes as defined by the Committee of European Securities Regulators' guidelines on the methodology for the calculation of the ongoing charges figure, issued on 1 July 2010.
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

2 December 2021

* 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.

 

END

 

 

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