Half-year Report

Shires Income PLC

13 December 2023

 

SHIRES INCOME PLC

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2023

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.

Performance Highlights

Net asset value per Ordinary share total returnA ​			Share price total returnA ​
Six months ended 30 September 2023			Six months ended 30 September 2023
+0.9% ​			(3.1)% ​
Year ended 31 March 2023	(2.2)%		Year ended 31 March 2023	(5.5)%
Benchmark index total return ​			Earnings per Ordinary share (revenue) ​
Six months ended 30 September 2023			Six months ended 30 September 2023
+1.4% ​			7.66p ​
Year ended 31 March 2023	+2.9%		Six months ended 30 September 2022	7.50p
Dividend yieldA			Discount to net asset valueA
As at 30 September 2023			As at 30 September 2023
6.1% ​			(7.0)% ​
As at 31 March 2023	5.7%		As at 31 March 2023	(3.1)%
A Considered to be an Alternative Performance Measure. ​ ​ ​

Financial Calendar and Financial Highlights

Financial Calendar

Expected payment dates of quarterly dividends	27 October 2023 31 January 2024 26 April 2024 26 July 2024
Financial year end	31 March 2024
Expected announcement of results for year ended 31 March 2024	May 2024
Annual General Meeting	July 2024

Financial Highlights

	30 September 2023	31 March 2023	% change
Total assets (£'000)A	96,310	98,864	-2.6
Shareholders' funds (£'000)	77,353	79,913	-3.2
Net asset value per share	252.20p	257.92p	-2.2
Share price (mid-market)	234.50p	250.00p	-6.2
Discount to net asset value (cum-income)B	(7.0)%	(3.1)%
Dividend yieldB	6.1%	5.7%
Net gearingB	23.1%	22.2%
Ongoing charges ratioB	1.26%	1.17%
A Less current liabilities excluding bank loans of £9,000,000.
B Considered to be an Alternative Performance Measure. ​ ​

Performance (total return)

	Six months ended	Year ended	Three years ended	Five years ended
	30 September 2023	30 September 2023	30 September 2023	30 September 2023
Net asset valueA	+0.9%	+12.1%	+29.4%	+20.3%
Share priceA	-3.1%	+8.2%	+29.2%	+21.3%
FTSE All-Share Index	+1.4%	+13.8%	+39.8%	+19.7%
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:

Paul Finlayson

abrdn Investments Limited

0131 372 9376

Chairman's Statement

Introduction

I am pleased to present the Half Yearly Report for the period ended 30 September 2023. I would like to welcome those new shareholders who have rolled over their shareholdings from abrdn Smaller Companies Income Trust PLC ("aSCIT"), following the completion of the combination of our two companies on 1 December 2023.  The transaction offers significant benefits for both sets of shareholders, which I will describe in more detail later in this statement and in the subsequent events note. 

It has been an eventful period for the Company and I'm pleased to be able to end it on this positive note.

Market Background

The main macro-economic trend in the six-month period was the continued rise in interest rates as central banks attempted to tackle inflation. The US Federal Reserve increased rates from 4.75% in March to 5.5% at the end of September and the Bank of England increased interest rates from 4.0% to 5.25%. In both cases rising short rates together with the corresponding rises in longer-term bond yields, have seen a rapid tightening of financial conditions since the end of 2021. Markets have accepted the likelihood that interest rates will remain higher for longer, and that the previous period of ultra-low interest rates will not be returned to. It is, however, increasingly likely that we are close to the peak in interest rates. Inflation has started to decline as key input costs such as energy and agricultural commodities fall, and although more persistent inputs such as wage inflation remain high, recent data suggests that economic growth is slowing, giving central banks some room to consider interest rate cuts as we move into 2024.

Over the last twelve months the UK economy has defied the pessimists with economic growth being far more resilient than feared and more recent data has also indicated that the recovery post Covid has been at least as strong as elsewhere in the world. In the US, the economy has performed reasonably well, driven by robust consumer and business balance sheets and, alongside moderating inflation, this has increased the probability of a soft landing. By contrast, the Chinese and European economies are facing some headwinds. The Chinese property market is heavily indebted and in considerable excess supply, with developer and homebuyer confidence very low. However, policy is now easing, which should prevent further downside outcomes and deflation becoming embedded in the economy, and this could even surprise markets on the upside. But in the Eurozone and the UK, the pass-through of earlier monetary policy tightening reflected in both short and longer-term interest rates, is still likely to mean that economic growth remains subdued in 2024 given the effects on mortgage rates and corporate borrowing costs.

Despite these forces, equity markets have been resilient, with the MSCI World Index up 3% over the six-month period, although it was up by as much as 10% at its high at the end of July. The UK FTSE All-Share Index benchmark did not quite keep pace, rising by 1.4% over the period in total return terms. Performance by sector was mixed. Technology was the best performing sector in the UK, rising by 14.5%, but remains a small weight in the market. Energy (+11.5%) and Financials (+4.3%) performed well. Conversely, those sectors which are negatively correlated to rising bond yields, such as Consumer Staples (-5.0%) and Real Estate (-4.8%) lagged the market.

Investment Performance

Over the six-month period to 30 September 2023 the Company's Net Asset Value ("NAV") increased by 0.9% on a total return basis. This compares to the FTSE All-Share Index total return of 1.4% referred to above, and the average return from the open-ended UK Equity Income Sector of 0.5%. The main driver of performance was a recovery in the Company's preference shares in the last few months as bond yields started to peak. The total return from the preference share portfolio during the period was 5.8%. Given the tough economic and equity market background we believe that this was a creditable performance from the Investment Manager.

Disappointingly, the share price total return for the period was -3.1%, reflecting a widening of the discount at which the Ordinary shares trade relative to the NAV, from 3.1% at the start of the period to 7.0% at 30 September 2023. This is addressed in more detail below, under Discount and Share Buy Backs. The average discount over the 12 month period to 30 September 2023 was 3.1%, demonstrating that the discount widening has been a recent development.

On an individual equity basis, the greatest positive contribution to performance came from the holding in Standard Chartered, where the shares rallied by 13% over the period as concerns around contagion from US banks at the start of the year receded and the company continued to report good performance. HSBC Holdings (+15%) benefitted from the same trends. There were also strong performances from a number of more cyclical UK companies, with Morgan Sindall (+26%), Direct Line Insurance (+26%), Melrose Industries (+15%) and Vistry Group (+21%) all performing well. Dechra Pharmaceuticals was a standout performer, with its shares rising by more than 30% following a bid from a private equity firm. A rally in energy stocks in September was also positive, with TotalEnergies and Shell both performing well. The holding in aSCIT (+4%) also outperformed the benchmark, with the discount narrowing as a result of the proposal for the combination with the Company, as referred to above.

Negative performers were more concentrated, with a number of portfolio holdings disappointing meaningfully. OSB (OneSavingsBank) fell by 30% after having to adjust assumptions made in its credit book in response to higher interest rates. The Investment Manager sees this as a one-off hit to the bank and considers the shares to be good value. Since the period end the shares have regained some lost ground after a reassuring update. Genus (-30%) was also weak as it faces headwinds from cyclical weakness in the Chinese pork market. Drax (-25%) has also been weak as the market has grown concerned about the viability of its BECCS biomass power generation project.

Portfolio Activity

Activity in the portfolio was, as ever, driven by the Investment Manager's views on individual companies rather than a change in strategy. However, if we were to characterise the aim of trading during the period, it was to increase the resilience and strength of income from the portfolio. The Investment Manager's view at the end of the 2023 financial year was that upwards progress from equity markets would be challenging in the short-term and that a period of some economic weakness was a reasonable possibility in the next 12-18 months. At the same time, rising interest rates and bond yields meant that cash and bonds were a reasonable alternative for investors looking for income. It is therefore important that the portfolio continues to provide a high level of income, and that this income generation will be resilient in any macro-economic downturn.

In April, the Investment Manager made a number of trades to enhance income from the portfolio. It sold out of the position in Nordea. While it continues to like the company, it saw better value elsewhere in the sector and initiated a position in Dutch bank ING Group which it considers to be a low risk, well-funded and attractively priced bank.

The Investment Manager also started a new position in Genus, which develops genetics for livestock. While the company is lower yielding than would usually be considered for the portfolio, it does pay a dividend and is very high quality, with a strong market position. The Investment Manager considers that the shares are valued attractively compared to their historic levels and that there are potential catalysts from gene editing development within the investment time horizon.

Similar to the trades in European banks, the Investment Manager changed the UK bank exposure at the start of the period by switching from NatWest to Lloyds Banking Group. This trade took advantage of the timing of dividend payments to enhance income and gives the Company exposure to a retail bank with a high level of sustainable returns and likely increasing distribution capacity as interest rates normalise and the group's pension fund deficit is eliminated, reducing the drag on statutory profits.

In May, the Investment Manager bought back into Sirius Real Estate. It exited this position late in 2022, with increasing concerns around commercial real estate.  However, the shares were recently upgraded and the company has delivered strong cashflow and an increase in its dividend, signalling management's confidence in cashflows to come. The Investment Manager therefore saw an opportunity to add back some weight in real estate to the portfolio, with the view that the sector could rally sharply once bond yields peak, provided demand remains resilient in the sector.

The Investment Manager sold the Company's holding in British American Tobacco, which had been a source of significant income in the portfolio for a long period of time. However, recent sales data had disappointed in its key US market and, after reducing the position over time, the Investment Manager decided to exit. The Company continues to hold a position in Imperial Brands, where the Investment Manager sees continued operational improvement after recent management change and a strategy focused on driving cash generation, which protects the dividend.

In June, the Investment Manager exited the position in Dechra Pharmaceuticals. This was a recent purchase, in November last year. However, the company received a bid from a private equity buyer in April and the share price moved higher, giving an attractive 30%+ return in a short period of time. The proceeds from the sale were invested in a new holding, IP Group, which is an investor in early-stage companies focused on three areas: Life Sciences, Clean Energy and Advanced Technology.

The Investment Manager started one new position in July, buying Italian utility Enel. The holding provides exposure to long term investment growth in renewable power generation.. To fund the purchase and control the level of overseas exposure, the Investment Manager sold the remaining position in Bawag, which had done well since purchase but where the Investment Manager saw less attractive risk/reward.

During August, the Investment Manager started a new position in Convatec, which produces medical supplies in areas such as wound care, infusion and stomas. To fund the purchase, the Investment Manager sold out of the holding in Smith & Nephew, where it saw less consistent delivery. Finally, the Investment Manager sold out of a small remaining position in Vodafone, where it saw the dividend as unlikely to grow and where the quality did not meet the level it looks for in portfolio companies. 

Earnings and Dividends

The revenue earnings per share for the period were 7.66p, which compares to 7.50p for the equivalent period last year. Across the portfolio, there has been a modest increase in dividend income as companies continue to increase distributions from levels re-based during the Covid pandemic. Companies in certain sectors have seen tailwinds to earnings, with energy companies benefitting from higher commodity prices and banks from higher interest rates. One marked trend has been an increased preference for share buybacks amongst UK companies. This is understandable given the need to maintain flexibility with distributions and also the recognition that UK equities are lowly valued compared to history and other developed markets. The UK now has a higher buyback yield than the US, the long-time leader in this regard, providing an additional source of shareholder returns.  Portfolio changes have also been made with the aim of enhancing the income generation. At a time of higher inflation and an uncertain economic outlook, the Investment Manager considers a high level of income as being important for the total return potential of the Company.

A first interim dividend of 3.2p per Ordinary share in respect of the year ending 31 March 2024 was paid on 27 October 2023 (2023: first interim dividend - 3.2p).  The Board is declaring a second interim dividend of 3.2p per Ordinary share, payable on 31 January 2024 to shareholders on the register at close of business on 5 January 2024. Subject to unforeseen circumstances, it is proposed to pay a further interim dividend of 3.2p per Ordinary 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 14.20p per Ordinary share, and represented a dividend yield of 6.1% based on the share price at the end of the period. The Board considers that one of the key attractions of the Company is its high level of dividend 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 remains on track to cover its annual dividend cost with net income, the Board is conscious of the Company's accumulated revenue reserves which add security to the sustainability of the dividend.

Discount and Share Buy Backs

As stated above, the discount at which the price of the Company's Ordinary shares trade relative to the NAV widened during the period, to 7.0% as at 30 September 2023. This is consistent with a general widening of discounts across the whole investment trust sector, but exacerbated by the transfer of the abrdn investment trust saving plans to Interactive Investor. Consequently, to help address the imbalance of supply and demand for the shares, and in accordance with the share buy-back authority provided by shareholders at the Annual General Meeting, the Company bought back 312,673 Ordinary shares during the period at a cost of £720,000 and an average discount of 9.2%, thereby providing an enhancement to the NAV for continuing shareholders.  Since the period end, the Company has bought back a further 432,895 shares at a cost of £954,000. The Board will continue to make use of the share buy-back authority if it considers it in the interests of shareholders to do so. All shares bought back are held in treasury for future resale at a premium to the NAV.

Gearing

The Company has a £20 million loan facility of which £19 million was drawn down at the period end. Net of cash, this represented gearing of 23.1%, compared to 22.2% at the start of the period. The weighted average borrowing cost at the period end was 5.3% (31 March 2023 - 4.7%). The Board continually monitors the level of gearing and continues to take 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 with various yields. The Board believes that this combination should enable the Company to achieve a high and potentially growing level of dividend, and also deliver some capital appreciation for shareholders.

Board Changes

At the AGM in July 2024, I shall be stepping down from the Board having served for nine years. Having conducted a full succession process involving the evaluation of external candidates, the Board has reached the decision that Robin Archibald, who is the current Chair of the Audit Committee and Senior Independent Director, should replace me as Chairman upon my retirement. Jane Pearce will become the new Chair of the Audit Committee, and Helen Sinclair will become the new Senior Independent Director. We have separately announced that Simon White, who was Head of Investment Trusts at BlackRock from 2011 until June 2022 will be joining the Board as an independent non-executive Director on 1 January 2024. With these changes, the Board remains confident that we have the appropriate collective skills and experience to take the Company forward.

Combination of aSCIT and Shires

On 26 July 2023, the Company announced that it had agreed terms with the Board of aSCIT for a proposed combination of the assets of the Company with those of aSCIT. This was achieved by a scheme of reconstruction and winding up of aSCIT, where assets were transferred to the Company in exchange for the issue of new Ordinary shares to aSCIT shareholders. A cash exit was also available under the scheme. aSCIT and Shires shareholders approved the scheme on 20 November 2023 and the scheme completed on 1 December.  Shires issued 11,268,494 new Ordinary shares to aSCIT shareholders, with the new Shares admitted to trading on 4 December 2023. The terms of the scheme were such that Shires shareholders did not suffer any dilution in their interests from the costs of the scheme.

The combination has increased the size of Shires by more than 35%, to net assets of £101 million at the point when aSCIT's assets transferred.  As a result, the Company will benefit from the reducing tiered management fee structure at higher levels of assets under management, reducing the Ongoing Charges Ratio ("OCR"), and there should be improved secondary liquidity in the Company's shares, as well as greater scale to promote the Company from. The Company will continue with its existing investment objective and policy and management arrangements, but will have a direct exposure to UK smaller companies rather than obtaining its exposure through investing in aSCIT. The Company's gearing ratio has fallen as a result of the combination, from 23.1% at 30 September 2023 to 13.5% at the time of writing, which includes £4.4 million of cash awaiting investment.

aSCIT's shares were trading at a 12-month average discount of 15.7% before the announcement of its strategic review on 13 February 2023. aSCIT shareholders who have received new Shires shares will benefit from a much lower OCR, a significant increase in dividend yield outlook and an improved rating for their shareholding.

We believe it has been a successful transaction for all concerned.

Outlook

UK equities look good value, trading at a material discount to other developed markets which is not justified by the fundamentals of earnings and dividends. Economic growth has been similar to other large economies and while inflation has been higher this is now falling. The yield available on UK equities is ahead of other markets and delivers an attractive rate of return. The preference shares held in the portfolio also offer a high yield and the potential decline in bond yields should provide a tailwind to their valuation. However, the Investment Manager remains cautious on equities globally, as it believes on a medium-term view that markets are pricing in an overly benign outlook for macro-economic outcomes and interest rates.

By sector, the expected peaking of interest rates creates opportunities for income investors in the UK, although the Investment Manager continues to look for higher quality and more defensive areas of the market. Certain high yield sectors, such as Utilities and Real Estate, are negatively correlated with bond yields and can perform well. Utilities, in particular, offer defensive exposure to falling bond yields and longer-term structural growth due to higher investment requirements through a period of energy transition. Sectors which are more economically sensitive and consumer exposed, such as Consumer Discretionary, look less attractive.

It is reassuring to see more government attention on potential solutions to some issues around UK market valuations, including liquidity and a lack of home-grown investors into equities. While these will likely take time to bear fruit, it highlights that there remain relatively cheap valuations ascribed to UK equities that should provide rewards to patient investors. The combination of the Company and abrdn Smaller Companies Income Trust will increase direct exposure to small and mid-cap names in the portfolio. Despite the issues currently facing smaller companies, the Investment Manager sees this as an attractive area for new opportunities, and continues to invest in companies that have sufficient quality and income characteristics, independent of their size.

Overall, while market conditions may remain challenging in the shorter-term, the Board remains confident in the defensive nature of the portfolio, its ability to deliver long term capital growth and, most importantly, the resilience of income, supported by substantial revenue reserves. 

Robert Talbut
Chairman
13 December 2023

Interim Management Statement

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 2023 and comprise the following risk headings:

-       Strategic objectives and investment policy

-       Investment performance

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

-       Share price and shareholder relations

-       Gearing

-       Accounting and financial reporting

-       Regulatory and governance

-       Operational

Exogenous risks such as health, social, financial, economic, climate and geo-political

In addition to these risks, the Board is conscious of the continuing impact of the conflicts in Ukraine and, more recently, the Middle East, as well as continuing tensions between the US and China. The Board is also conscious of the impact of inflation and higher interest on financial markets. The Board considers that these are risks that could have further implications for financial markets.

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 foreseeable circumstances, the majority of the Company's investments are realisable within a relatively
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 May 2027. £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.

The Board has also taken into account the impact on the Company of its combination with abrdn Smaller Companies Income Trust PLC since the period end.

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 31 December 2023, 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
13 December 2023

Investment Portfolio - Equities

As at 30 September 2023 ​ ​
	Market	Total
	value	portfolio
Company	£'000	%
abrdn Smaller Companies Income Trust	7,715	8.2
Shell	4,379	4.6
AstraZeneca	4,032	4.2
BP	3,268	3.5
Diversified Energy	2,727	2.9
Diageo	2,408	2.5
Anglo American	2,293	2.4
SSE	2,053	2.2
TotalEnergies	2,052	2.2
HSBC Holdings	2,016	2.1
Ten largest investments	32,943	34.8
Standard Chartered	1,857	1.9
Energean	1,641	1.7
Rio Tinto	1,614	1.7
National Grid	1,523	1.6
Unilever	1,318	1.4
Intermediate Capital Group	1,209	1.3
Novo-Nordisk	1,205	1.3
Melrose Industries	1,199	1.3
Lloyds Banking Group	1,193	1.3
Imperial Brands	1,191	1.3
Twenty largest investments	46,893	49.6
Inchcape	1,184	1.2
Chesnara	1,106	1.2
Morgan Sindall	1,059	1.1
M&G	1,033	1.1
Balfour Beaty	988	1.0
Engie	952	1.0
Sirius Real Estate	950	1.0
Close Brothers	934	1.0
IP Group	920	1.0
Prudential	914	1.0
Thirty largest investments	56,933	60.2
Mondi	903	1.0
Hiscox	879	0.9
Convatec	875	0.9
Softcat	869	0.9
GSK	860	0.9
Howden Joinery	835	0.9
XP Power	819	0.9
AXA	771	0.8
Oxford Instruments	716	0.8
Games Workshop Group	707	0.7
Forty largest investments	65,167	68.9
ING Group	674	0.7
OSB	667	0.7
Dr. Martens	659	0.7
Vistry Group	632	0.7
Enel	624	0.6
Telecom Plus	586	0.6
Telenor	569	0.6
Wood Group	564	0.6
Bodycote	546	0.6
Coca-Cola HBC	534	0.6
Fifty largest investments	71,222	75.3
Genus	532	0.6
Ashmore	442	0.5
Direct Line Insurance	435	0.4
Drax	412	0.4
Marshalls	349	0.4
Redrow	328	0.4
Total equity investments	73,720	78.0

Investment Portfolio - Other Investments

As at 30 September 2023
	Market	Total
	value	portfolio
Company	£'000	%
Preference sharesA
Ecclesiastical Insurance Office 8 5/8%	5,215	5.5
Royal & Sun Alliance 7 3/8%	4,611	4.9
General Accident 7.875%	3,796	4.0
Santander 10.375%	3,685	3.9
Standard Chartered 8.25%	2,991	3.1
R.E.A Holdings 9%	552	0.6
Total preference shares	20,850	22.0
Total equity investments	73,720	78.0
Total investments	94,570	100.0
A None of the preference shares listed above has a fixed redemption date.

Distribution of Assets and Liabilities

	Valuation at ​		Movement during the period ​ ​			Valuation at ​
	31 March 2023 ​		Purchases	Sales	Losses	30 September 2023 ​
	£'000	%	£'000	£'000	£'000	£'000	%
Listed investments
Equities	75,760	94.8	11,489	(12,200)	(1,329)	73,720	95.3
Preference shares	20,895	26.2	-	-	(45)	20,850	27.0
Total investments	96,655	121.0	11,489	(12,200)	(1,374)	94,570	122.3
Current assets	2,559	3.2				2,154	2.8
Current liabilities	(9,350)	(11.7)				(9,414)	(12.2)
Non-current liabilities	(9,951)	(12.5)				(9,957)	(12.9)
Net assets	79,913	100.0				77,353	100.0
Net asset value per Ordinary share	257.92p					252.20p

Condensed Statement of Comprehensive Income

		30 September 2023  ​ ​			30 September 2022  ​ ​			31 March 2023  ​ ​
		(unaudited)  ​ ​			(unaudited)  ​ ​			(audited)  ​ ​
		Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Losses on investments at fair value		-	(1,374)	(1,374)	-	(12,177)	(12,177)	-	(6,084)	(6,084)
Currency (losses)/gains		-	(39)	(39)	-	5	5	-	39	39
Investment income
Dividend income		2,920	-	2,920	2,814	-	2,814	5,586	-	5,586
Interest income		16	-	16	-	-	-	7	-	7
Traded option premiums		79	-	79	31	-	31	73	-	73
Money market interest		8	-	8	-	-	-	7	-	7
		3,023	(1,413)	1,610	2,845	(12,172)	(9,327)	5,673	(6,045)	(372)
Expenses
Management fee		(100)	(100)	(200)	(103)	(103)	(206)	(207)	(207)	(414)
Administrative expenses		(240)	(24)	(264)	(220)	-	(220)	(417)	-	(417)
Finance costs		(245)	(245)	(490)	(152)	(152)	(304)	(363)	(363)	(726)
		(585)	(369)	(954)	(475)	(255)	(730)	(987)	(570)	(1,557)
Profit/(loss) before taxation		2,438	(1,782)	656	2,370	(12,427)	(10,057)	4,686	(6,615)	(1,929)
Taxation	2	(80)	-	(80)	(54)	-	(54)	(102)	-	(102)
Profit/(loss) attributable to equity holders		2,358	(1,782)	576	2,316	(12,427)	(10,111)	4,584	(6,615)	(2,031)
Earnings per Ordinary share (pence)	4	7.66	(5.79)	1.87	7.50	(40.25)	(32.75)	14.83	(21.40)	(6.57)
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 Statement of Comprehensive Income of the Company, prepared in accordance with  UK adopted International Accounting Standards. 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 Balance Sheet

		As at	As at	As at
		30 September 2023	30 September 2022	31 March 2023
		(unaudited)	(unaudited)	(audited)
	Note	£'000	£'000	£'000
Non-current assets
Equities		73,720	70,571	75,760
Preference shares		20,850	20,819	20,895
Securities at fair value		94,570	91,390	96,655
Current assets
Accrued income and prepayments		988	890	1,383
Cash and cash equivalents		1,166	1,442	1,176
		2,154	2,332	2,559
Creditors: amounts falling due within one year
Trade and other payables		(414)	(968)	(350)
Short-term borrowings		(9,000)	(9,000)	(9,000)
		(9,414)	(9,968)	(9,350)
Net current liabilities		(7,260)	(7,636)	(6,791)
Total assets less current liabilities		87,310	83,754	89,864
Non-current liabilities
Long-term borrowings		(9,957)	(9,945)	(9,951)
Net assets		77,353	73,809	79,913
Share capital and reserves
Called-up share capital	6	15,532	15,532	15,532
Share premium account		21,411	21,412	21,411
Capital reserve	7	33,428	30,118	35,930
Revenue reserve		6,982	6,747	7,040
Equity shareholders' funds		77,353	73,809	79,913
Net asset value per Ordinary share (pence)	5	252.20	238.20	257.92
The accompanying notes are an integral part of the financial statements. ​ ​ ​ ​

Condensed Statement of Changes in Equity

Six months ended 30 September 2023 (unaudited) ​ ​ ​ ​ ​
		Share
	Share	premium	Capital	Revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
As at 31 March 2023	15,532	21,411	35,930	7,040	79,913
Repurchase of ordinary shares into treasury	-	-	(720)	-	(720)
(Loss)/profit for the period	-	-	(1,782)	2,358	576
Equity dividends	-	-	-	(2,416)	(2,416)
As at 30 September 2023	15,532	21,411	33,428	6,982	77,353
Six months ended 30 September 2022 (unaudited) ​ ​ ​ ​ ​
		Share
	Share	premium	Capital	Revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
As at 31 March 2022	15,460	21,109	42,545	6,705	85,819
Issue of Ordinary shares	72	303	-	-	375
(Loss)/profit for the period	-	-	(12,427)	2,316	(10,111)
Equity dividends	-	-	-	(2,274)	(2,274)
As at 30 September 2022	15,532	21,412	30,118	6,747	73,809
Year ended 31 March 2023 (audited) ​ ​ ​ ​ ​
		Share
	Share	premium	Capital	Revenue
	capital	account	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000
As at 31 March 2022	15,460	21,109	42,545	6,705	85,819
Issue of Ordinary shares	72	302	-	-	374
(Loss)/profit for the period	-	-	(6,615)	4,584	(2,031)
Equity dividends	-	-	-	(4,249)	(4,249)
As at 31 March 2023	15,532	21,411	35,930	7,040	79,913

Condensed Cash Flow Statement

	Six months ended	Six months ended	Year ended
	30 September 2023	30 September 2022	31 March 2023
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Net cash inflow from operating activities
Dividend income received	3,301	3,134	5,478
Options premium received	81	31	71
Interest received from money market funds	9	-	7
Bank interest received	13	2	7
Management fee paid	(206)	(212)	(415)
Other cash expenses	(247)	(200)	(432)
Cash generated from operations	2,951	2,755	4,716
Interest paid	(503)	(183)	(684)
Overseas tax paid	(79)	(88)	(184)
Net cash inflow from operating activities	2,369	2,484	3,848
Cash flows from investing activities
Purchases of investments	(11,404)	(5,731)	(16,518)
Sales of investments	12,200	5,100	16,199
Net cash inflow/(outflow) from investing activities	796	(631)	(319)
Cash flows from financing activities
Equity dividends paid	(2,416)	(2,274)	(4,249)
Issue of Ordinary shares	-	375	374
Repurchase of ordinary shares into treasury	(720)	-	-
Loan repayment	-	-	(19,000)
Loan drawdown	-	-	19,000
Net cash outflow from financing activities	(3,136)	(1,899)	(3,875)
Net increase/(decrease) in cash and cash equivalents	29	(46)	(346)
Reconciliation of net cash flow to movements in cash and cash equivalents
Increase/(decrease) in cash and cash equivalents as above	29	(46)	(346)
Net cash and cash equivalents at start of period	1,176	1,483	1,483
Effect of foreign exchange rate changes	(39)	5	39
Cash and cash equivalents at end of period	1,166	1,442	1,176

Notes to the Financial Statements

For the six months ended 30 September 2023

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 2023 financial statements, which were 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 2023	30 September 2022	31 March 2023
		£'000	£'000	£'000
	Revenue	2,358	2,316	4,584
	Dividends declared	(1,962)A	(1,982)B	(4,397)C
		396	334	187
	A Dividends declared relate to first two interim dividends (3.20p each) in respect of the financial year 2023/24. ​ ​ ​
	B Dividends declared relate to first two interim dividends (3.20p each) in respect of the financial year 2022/23. ​ ​ ​
	C Three interim dividends (3.20p each), and the final dividend (4.60p) declared in respect of the financial year 2022/23. ​ ​ ​

4.	Earnings per Ordinary share
		Six months ended	Six months ended	Year ended
		30 September 2023	30 September 2022	31 March 2023
		£'000	£'000	£'000
	Returns are based on the following figures:
	Revenue return	2,358	2,316	4,584
	Capital return	(1,782)	(12,427)	(6,615)
	Total return	576	(10,111)	(2,031)
	Weighted average number of Ordinary shares in issue	30,795,219	30,874,580	30,919,854
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 2023	30 September 2022	31 March 2023
		(unaudited)	(unaudited)	(audited)
	Net assets per Condensed Balance Sheet (£'000)	77,353	73,809	79,913
	3.5% Cumulative Preference shares of £1 each (£'000)	(50)	(50)	(50)
	Attributable net assets (£'000)	77,303	73,759	79,863
	Number of Ordinary shares in issue	30,651,907	30,964,580	30,964,580
	Net asset value per Ordinary share (p)	252.20	238.20	257.92
	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 2023 ​		30 September 2022 ​		31 March 2023 ​
		Number	£'000	Number	£'000	Number	£'000
	Allotted, called up and fully paid Ordinary shares of 50 pence each:
	Balance brought forward	30,964,580	15,482	30,819,580	15,410	30,819,580	15,410
	Ordinary shares issued	-	-	145,000	72	145,000	72
	Ordinary shares bought back	(312,673)	(156)	-	-	-	-
	Balance carried forward	30,651,907	15,326	30,964,580	15,482	30,964,580	15,482
	Treasury shares:
	Ordinary shares bought back to treasury	312,673	156	-	-	-	-
	Balance carried forward	312,673	156	-	-	-	-
	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
			15,532		15,532		15,532
	During the six months ended 30 September 2023, 312,673 Ordinary shares were bought back to treasury at a total cost of £720,000.  ​ ​ ​ ​ ​ ​
	No Ordinary shares were issued during the period (six months ended 30 September 2022 - 145,000 for proceeds of £374,000; year ended 31 March 2023 - 145,000 for proceeds of £374,000). ​ ​ ​ ​ ​ ​

7.

Capital reserve

The capital reserve reflected in the Condensed Balance Sheet at 30 September 2023 includes unrealised gains of £6,691,000 (30 September 2022 - unrealised gains of £2,800,000; 31 March 2023 - unrealised gains of £7,045,000) which relate to the revaluation of investments held at the reporting date. The balance relates to realised gains of £26,737,000 (30 September 2022 - £27,318,000; 31 March 2023 - £28,885,000).

8.	Analysis of changes in financial liabilities ​ ​ ​
		Six months ended	Six months ended	Year ended
		30 September 2023	30 September 2022	31 March 2023
		£'000	£'000	£'000
	Opening balance at 1 April	(18,951)	(19,000)	(19,000)
	Cashflow	-	60	60
	Other movementsA	(6)	(5)	(11)
	Closing balance	(18,957)	(18,945)	(18,951)
	A The other movements represent the amortisation of the loan arrangement fees. ​ ​ ​
	On 3 May 2022, the Company entered into a new five year £20 million loan facility with The Royal Bank of Scotland International Limited, London Branch. £10 million of the new loan facility has been drawn down and fixed at an all-in interest rate of 3.903%. £9 million of the facility has been drawn down on a short-term basis at an all-in interest rate of 6.836%, maturing 4 October 2023. The new loan facility matures on 30 April 2027. ​ ​ ​

9.	Transactions with the Manager
	The Company has an agreement with abrdn 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 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 2023 was £200,000 (30 September 2022 - £206,000; 31 March 2023 - £414,000) and the balance due to aFML at the period end was £100,000. (30 September 2022 - £101,000; 31 March 2023 - £105,000). The Company held an interest in a commonly managed investment trust, abrdn Smaller Companies Income Trust plc, in the portfolio during the period to 30 September 2023 (30 September 2022 and 31 March 2023 - same). The value attributable to this holding was excluded from the calculation of the management fee payable by the Company.
	The management agreement with aFML also provides for the provision of promotional activities, which aFML has delegated to abrdn Investments Limited. The total fees paid and payable in relation to promotional activities were £20,000 (30 September 2022 - £20,000; 31 March 2023 - £40,000) and the balance due to aFML at the period end was £20,000 (30 September 2022 - £20,000; 31 March 2023 - £10,000). The Company's management agreement with aFML also provides for the provision of company secretarial and administration services to the Company; no separate fee was charged to the Company during the period in respect of these services, which have been delegated to abrdn Holdings Limited.

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 2023			Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments			a)	94,570	-	-	94,570
	Net fair value				94,570	-	-	94,570
					Level 1	Level 2	Level 3	Total
	At 30 September 2022			Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments			a)	91,390	-	-	91,390
	Net fair value				91,390	-	-	91,390
					Level 1	Level 2	Level 3	Total
	At 31 March 2023			Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted investments			a)	96,655	-	-	96,655
	Net fair value				96,655	-	-	96,655
	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. ​ ​ ​ ​ ​

12.	Subsequent events
	On 26 July 2023 the Company announced that it had agreed terms with the board of abrdn Smaller Companies Income Trust plc ("aSCIT") in respect of a proposed combination of the assets of the Company with those of aSCIT. Shareholders were sent documentation in October explaining that this combination was to be effected by way of a scheme of reconstruction and winding up of aSCIT under section 110 of the Insolvency Act 1986 (the "Scheme") and the associated transfer of the assets of aSCIT to the Company in exchange for the issue of new Ordinary shares in the Company to those aSCIT shareholders who rolled their shareholdings into the Company in accordance with the Scheme.
	Shareholders approved the Scheme proposals at the Company's General Meeting held on 20 November 2023 and aSCIT's shareholders approved the Scheme proposals at their General Meeting held on the same day. The Scheme completed on 1 December. On that date the Company issued 11,268,494 new Ordinary shares to aSCIT shareholders in accordance with the Scheme. The new shares were admitted to trading on 4 December 2023.
	As part of the Scheme, since the end of the period the Company has received an exceptional terminal dividend of £445,000 from its holding in aSCIT.
	The management fee arrangements of the Company are unchanged, other than through the introduction of an administration fee of £120,000 per annum plus VAT, payable to the Manager.
	Further details are contained in the Chairman's Statement.

13.	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 2023 and 30 September 2022 has not been reviewed or audited by the Company's independent auditor.
	The information for the year ended 31 March 2023 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.

14.	This Half Yearly Financial Report was approved by the Board on 13 December 2023.

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 IAS 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. ​ ​ ​
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 2023	31 March 2023
NAV per Ordinary share (p)		a	252.20	250.00
Share price (p)		b	234.50	257.92
Discount		(a-b)/a	(7.0)%	(3.1)%
Dividend yield
The annual dividend divided by the share price, expressed as a percentage. ​ ​ ​
			30 September 2023A	31 March 2023
Annual dividend per Ordinary share (p)		a	14.20	14.20
Share price (p)		b	234.50	250.00
Dividend yield		a/b	6.1%	5.7%
A Based on annual dividend declared for previous year.
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 2023	31 March 2023
Borrowings (£'000)	a		18,957	18,951
Cash (£'000)	b		1,166	1,176
Amounts due to brokers (£'000)	c		85	-
Amounts due from brokers (£'000)	d		-	-
Shareholders' funds (£'000)	e		77,353	79,913
Net gearing	(a-b+c-d)/e		23.1%	22.2%
Ongoing charges ​ ​ ​
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 daily net asset values published throughout the year. The ratio for 30 September 2023 is based on forecast ongoing charges for the year ending 31 March 2024. ​ ​ ​
			30 September 2023	31 March 2023
Investment management fees (£'000)			400	414
Administrative expenses (£'000)			476	417
Less: non-recurring chargesA(£'000)			(24)	-
Ongoing charges (£'000)			852	831
Average net assets (£'000)			78,175	80,617
Ongoing charges ratio (excluding look-through costs)			1.09%	1.03%
Look-through costsB			0.17%	0.14%
Ongoing charges ratio (including look-through costs)			1.26%	1.17%
A Comprises promotional activity fees not expected to recur. ​ ​ ​
B Calculated in accordance with AIC guidance issued in October 2020 to include the Company's share of costs of holdings in investment companies on a look-through basis.  ​ ​ ​
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. ​ ​ ​
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. Share price and NAV total returns are monitored against open-ended and closed-ended competitors, and the Benchmark, respectively.  ​ ​ ​
				Share
Six months ended 30 September 2023			NAV	Price
Opening at 1 April 2023		a	257.92p	250.00p
Closing at 30 September 2023		b	252.20p	234.50p
Price movements		c=(b/a)-1	(2.2)%	(6.2)%
Dividend reinvestmentA		d	3.1%	3.1%
Total return		c+d	0.9%	(3.1)%
				Share
Year ended 31 March 2023			NAV	Price
Opening at 1 April 2022		a	278.29p	279.00p
Closing at 31 March 2023		b	257.92p	250.00p
Price movements		c=(b/a)-1	(7.3)%	(10.4)%
Dividend reinvestmentA		d	5.1%	4.9%
Total return		c+d	(2.2)%	(5.5)%
A NAV total return involves investing 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 reinvesting the net dividend in the share price of the Company on the date on which that dividend goes ex-dividend.  ​ ​ ​

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

abrdn Holdings Limited

Company Secretary

13 December 2023

* 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