Interim Results
Shires Income PLC
27 November 2006
News Release
27 November 2006
Shires Income plc
Interim Results for the
Six months to 30 September 2006
Shires Income plc aims to provide a high level of income together with growth of
both income and capital from a portfolio substantially invested in UK Equities.
30 September 31 March 2006
2006
Total investments £127.0m £131.7m
Ordinary Shareholders' funds £93.5m £97.5m
Net asset value 315.0p 328.4p
Share price 306.0p 313.5p
Premium/(Discount) (share price to
adjusted net asset value)^ 0.5% (1.4%)
Revenue return per ordinary share 10.3p 9.2p*
Dividends per ordinary share 10.45p 10.45p*
^ Excluding IFRS Dividend adjustment of 10.45p
* Half year to 30 September 2005
•The yield on the company's ordinary shares was 6.3% at the closing price
of 306.0p on 30 September 2006. This compared to a yield on the FTSE
All-Share Index of 3.1%.
•The Total return on net assets for the period was -0.6%. The total return
to shareholders was higher at 1.0%. The total return on the FTSE All-Share
Index, the Company's benchmark, was 1.7%.
•The rating of the Company's shares improved in the six month period,
moving from a discount of 1.4% to a premium of 0.5% at 30 September 2006.
•The improvement in the rating allowed the Company to issue 13,675
ordinary shares in the six month period. A further 6,923 ordinary shares
were issued in October. These were the first shares issued since September
2001.
•A second interim dividend of 4.4p has been declared for payment on 31
January 2006 to shareholders on the Register at close on 5 January 2007.
Dividends paid and declared to date total 8.8p, the same level as last year.
For further information, please contact:-
Mike Balfour, Kenneth Harper
Chief Executive,
Glasgow Investment Managers,
0141 572 2700
Chairman's Statement
Background
The UK stockmarket was fairly volatile in the six months to 30 September 2006,
although it ended the period almost unchanged. The FTSE All-Share Index, the
Company's benchmark, returned 1.7% on a total return basis as corporate earnings
continued to improve, although fears of higher interest rates in both the UK and
abroad were a restraining factor.
Investment Returns
The total return on net assets of your Company over the six months to 30
September 2006 was -0.6%, which was below the return on the Company's benchmark.
The equity portfolio performed well in the period, but this good performance was
more than offset by the decline in value of the preference and convertible
securities held in the portfolio due to the rise in UK interest rates.
The total return to shareholders, or share price total return, at 1.0%, was
higher than the return on net assets, reflecting the fact that the discount of
1.4%, at which the share price stood to the net asset value per share at 31
March 2006, moved to a premium of 0.5% at 30 September 2006.
Earnings and Dividends
The revenue return per share was 10.3p for the six months to 30 September 2006.
Actual dividends paid to date for the 2006/07 financial year amount to 4.4p,
comprising the first interim dividend payment, made on 31 October 2006. A second
interim dividend of 4.4p has been declared for payment on 31 January 2007 to
shareholders on the Register at close of business on 5 January 2007. As
explained in previous reports, under IFRS only dividends paid in the period are
included in the financial statements. As a result, the total dividend reflected
in these accounts and shown in the financial highlights is 10.45p, comprising
the third interim dividend from the 2005/2006 financial year of 4.4p paid on 28
April 2006 and the final dividend in respect of 2005/2006 of 6.05p paid on 31
July 2006.
Portfolio Profile
The distribution of assets shows that total gearing rose slightly in the six
months to September 2006 from 35.1% to 35.8%. Equity gearing also rose from 3.9%
to 4.3% as a result of the equity portfolio performing better than the fixed
interest portfolio in the period. The majority of the gearing continues to be
invested in fixed interest investments which helps maintain the high level of
income distributed to shareholders.
International Financial Reporting Standards (IFRS)
As detailed in the 2006 Annual Report, Shires Income plc increased its holding
in the Mackintosh High Income OEIC on 4 April 2006 to over 50% of that fund.
Under IFRS Shires Income plc is deemed to be controlling the OEIC and is
required to consolidate the full value of the OEIC into these financial
statements. This has resulted in the net asset value of the Company being
£2,878,000 higher than if the OEIC had been accounted for as a normal
investment. This figure is the minority interest shown in the balance sheet, and
represents the value of the OEIC not owned by the Company. It should be noted
that all performance figures, calculation of premium/ discounts and gearing
figures quoted in this report exclude this uplift in net asset value. The OEIC
has been deemed as being held for sale, as it is the Board's intention that the
Company will not hold more than 50% of the units in issue as at 31 March 2007.
Share Capital
For the first time since September 2001, the Company was able to issue shares.
On 2 August 2006, 13,675 shares were issued at a price of 300.2p under the
blocklisting facility. This price represented a premium of 2.4% to the
underlying net asset value. On 18 October 2006 a further 6,923 shares were
issued under the blocklisting at a premium of 3.3% to the underlying net asset
value. The fact that the Company has been able to issue these shares underlines
the current strong rating of the Company's shares in the stockmarket.
Outlook
Short-term interest rates were increased by 25 basis points to 4.75% in August,
and further increased to 5.0% in November. The Bank of England Monetary Policy
Committee has responded to the rise in consumer price inflation, which is
presently above its 2% target. The rise in inflation has mainly come from energy
prices, with core inflation remaining at a subdued level, indicating future
rises in interest rates should not be significant.
Equity share prices and valuations are strongly influenced by the growth in
companies' earnings and dividends. If the consensus GDP forecast of 2.4% for
2007 is achieved, further real growth in earnings and dividends can be expected
over the next year. Consensus forecasts currently project growth in earnings per
share of 6.5% in 2007, with dividends forecast to increase by 7.5% over the same
period. These rates of growth are attractive in a low inflation, low interest
rate environment and should mean equities, at current valuation levels, continue
to offer the prospect of reasonable returns.
The Interim Report will be mailed to shareholders on 1 December 2006. Copies may
be obtained from the Managers, Glasgow Investment Managers Limited, Sutherland
House, 149 St Vincent Street, Glasgow G2 5DR after that date.
J Martin Haldane
Chairman
Consolidated Income Statement
for the half year ended 30 September 2006
Half year to 30 September 2006
(unaudited)
Revenue Capital Total
£000 £000 £000
Gains
Gains on investments at fair value - (414) (414)
Revenue
Dividend income 3,502 - 3,502
Interest income 140 (51) 89
Traded Option premiums 434 - 434
Deposit interest 19 - 19
Other revenue 2 - 2
Net loss of dealing subsidiary (43) - (43)
--------- -------- --------
4,054 (465) 3,589
--------- -------- --------
Expenses
Investment management fee (131) (131) (262)
Other administrative expenses (150) - (150)
Finance cost of borrowings (602) (628) (1,230)
--------- -------- --------
(883) (759) (1,642)
--------- -------- --------
Profit before tax 3,171 (1,224) 1,947
Tax expense - - -
--------- -------- --------
Profit for the period 3,171 (1,224) 1,947
--------- -------- --------
Profit attributable to equity holders of the
Company 3,064 (3,995) (931)
Minority Interest 107 2,771 2,878
--------- -------- --------
3,171 (1,224) 1,947
Earnings per ordinary share excluding
Minority Interest (pence) (3.1p)
Including Minority Interest 6.6p
The total column of this statement represents the Group's Income Statement,
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 shown in the above statement derive from continuing operations.
Consolidated Income Statement
(Continued)
Half year to 30 September Year to 31 March 2006
2005
(audited)
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Gains
Gains on investments
at fair value - 5,788 5,788 - 18,088 18,088
Revenue
Dividend income 3,178 - 3,178 6,282 - 6,282
Interest income 37 - 37 123 (102) 21
Traded Option premiums 518 - 518 1,138 - 1,138
Deposit interest 4 - 4 15 - 15
Other revenue 2 - 2 10 - 10
Net loss of dealing
subsidiary (89) - (89) 173 - 173
------- ------- ------- ------- ------- -------
3,650 5,788 9,438 7,741 17,986 25,727
------- ------- ------- ------- ------- -------
Expenses
Investment management
fee (116) (116) (232) (246) (246) (492)
Other administrative
expenses (198) - (198) (409) - (409)
Finance cost of
borrowings (618) (644) (1,262) (1,294) (1,345) (2,639)
------- ------- ------- ------- ------- -------
(932) (760) (1,692) (1,949) (1,591) (3,540)
------- ------- ------- ------- ------- -------
Profit before tax 2,718 5,028 7,746 5,792 16,395 22,187
Tax expense - - - - - -
------- ------- ------- ------- ------- -------
Profit for the period 2,718 5,028 7,746 5,792 16,395 22,187
------- ------- ------- ------- ------- -------
Profit attributable to
equity holders of the
Company 2,718 5,028 7,746 5,792 16,395 22,187
Minority Interest - - - - - -
------- ------- ------- ------- ------- -------
2,718 5,028 7,746 5,792 16,395 22,187
------- ------- ------- ------- ------- -------
Earnings per ordinary
share excluding
Minority Interest
(pence) 26.1p 74.75p
Including Minority - -
Interest
Group Balance Sheet
as at 30 September 2006
30 September 31 March 30 September
2006 2005
2006
(unaudited)
£000 £000 £000
Non current assets
Ordinary shares 84,418 90,493 86,666
Convertibles 4,278 6,955 6,262
Other fixed interest 29,508 30,406 24,526
Hedge Instruments 442 362 505
Unlisted Investments 3,550 3,498 2,910
---------- ---------- ----------
122,196 131,714 120,869
---------- ---------- ----------
Current assets
Trade and other receivables 959 30 98
Accrued income and
prepayments 1,538 1,614 1,298
Financial assets of dealing
subsidiary 348 501 371
Cash and cash equivalents 99 1,212 50
Assets Held for Sale 12,615 - -
---------- ---------- ----------
15,559 3,357 1,817
---------- ---------- ----------
Current liabilities
Trade and other payables (1,431) (733) (442)
Short-term borrowings (8,263) (10,315) (9,060)
Hedge Instruments - - (1,323)
Liabilities held for Sale (4,889) - -
---------- ---------- ----------
(14,583) (11,048) (10,825)
---------- ---------- ----------
Non current liabilities
Index Linked Debenture
Stock (26,762) (26,499) (26,012)
---------- ---------- ----------
(26,762) (26,499) (26,012)
---------- ---------- ----------
Net assets 96,410 97,524 85,849
---------- ---------- ----------
Issued capital and reserves
attributable to
equity holders of the parent
Called up share capital 14,895 14,888 14,888
Share premium account 18,944 18,936 18,961
Realised capital reserve 35,658 32,667 24,485
Unrealised capital reserve 16,655 23,615 20,861
Revenue reserve 7,380 7,418 6,654
---------- ---------- ----------
Shareholders Equity (excl.
Minority Interests) 93,532 97,524 85,849
Minority Interests 2,878 - -
---------- ---------- ----------
Total Shareholders Equity 96,410 97,524 85,849
---------- ---------- ----------
Net asset value per ordinary share
(pence)
- excluding minority
interest 315.0p 328.4p 289.1p
- Including minority
interest 324.7p - -
Note:. The financial information contained within this interim report does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information for the year ended 31 March 2006 has been
extracted from the statutory accounts and restated as disclosed in note 2 in the
financial statements. Those accounts have been filed with the Registrar of
Companies and contain an unqualified Auditors' and do not contain a statement
under Section 237(2) or (3) of the Companies Act 1985.
Consolidated Cash Flow Statement
for the half year ended 30 September 2006
Half year to Half year to Year to
30 September 30 September 31 March
2006 2005 2006
(unaudited)
£000 £000 £000
Cash flows from operating
activities
Investment income received 3,631 3,833 6,550
Deposit interest received - 3 12
Investment management fee paid (268) (241) (506)
Sales less purchases of current
financial assets held for trading 110 535 667
Other cash receipts 528 469 1,099
Other cash expenses (240) (211) (332)
---------- ---------- ----------
Cash generated from operations 3,761 4,388 7,490
Interest paid (955) (962) (1,854)
Taxation - - -
---------- ---------- ----------
Net cash inflows from operating
activities 2,806 3,426 5,636
---------- ---------- ----------
Cash flows from investing
activities
Purchases of investments (15,076) (21,367) (55,325)
Sales of investments 16,269 24,405 60,125
Net cash (outflow) / inflow for
hedge instruments - (1,271) (2,722)
---------- ---------- ----------
1,193 1,767 2,078
---------- ---------- ----------
Cash flows from financing
activities
Proceeds of Share Issues 41 - -
Equity dividends paid (3,101) (3,101) (5,715)
---------- ---------- ----------
Net increase /(decrease) in cash
and 939 2,092 1,999
cash equivalents ---------- ---------- ----------
Cash and cash equivalents at start
of period (9,103) (11,102) (11,102)
---------- ---------- ----------
Cash and cash equivalents at end of
period (8,164) (9,010) (9,103)
---------- ---------- ----------
Cash and cash equivalents comprise:
Cash and cash equivalents 99 50 1,212
Short-term borrowings (8,263) (9,060) (10,315)
---------- ---------- ----------
(8,164) (9,010) (9,103)
---------- ---------- ----------
Consolidated Statement of Changes in Equity
For the half year ended 30 September 2006
Share Share Premium Realised Unrealised Retained Minority Total
Capital Reserve Capital Reserve Revenue Reserve
Capital Interest
£000 £000 £000 £000 £000 £000 £000
As at 31
March 14,888 18,936 32,667 23,615 7,418 - 97,524
2006 ------- -------- -------- -------- -------- ------- -------
Revenue
for - - - - 3,064 107 3,171
the
period
Capital
profits
for - (26) 2,991 (6,960) - 2,771 (1,224)
the
period
Equity
dividends (3,102) - (3,102)
Issue of
Share 7 34 - - - - 41
Capital ------- -------- -------- -------- -------- ------- -------
As at 30
September 14,895 18,944 35,658 16,655 7,380 2,878 96,410
2006 ------- -------- -------- -------- -------- ------- -------
Note 1:
The assets held for sale and the liabilities held for sale shown in the Balance
sheet represent the total assets and liabilities of the Mackintosh High Income
OEIC as at 30 September 2006. The Minority Interest represents the value of the
units in the Mackintosh High Income OEIC not held by Shires Income plc. As at 30
September 2006, Shires Income plc held 4,989,011 units of the OEIC, representing
62.8% of the number of units in issue.
Distribution of Assets
Valuation at Purchases Sales Appreciation/ Valuation at
31 March 2006 (Depreciation) 30 September 2006
(unaudited)
£000 % £000 £000 £000 £000 %
Listed
investments
Ordinary 90,493 92.8 13,531 (14,114) (644) 89,266 95.4
shares
Convertibles 6,955 7.1 - (1,207) (1,470) 4,278 4.6
Other fixed
interest 30,406 31.2 2,208 (1,907) (1,199) 29,508 31.5
Hedging
Instruments 362 0.4 - - 80 442 0.5
------- ------ -------- ------- --------- ------- ------
128,216 131.5 15,739 (17,228) (3,233) 123,494 132.0
Unlisted
Investments 3,498 3.6 - - 52 3,550 3.8
------- ------ -------- ------- --------- ------- ------
131,714 135.1 (3,181) 127,044 135.8
Other
Current 3,357 3.4 2,944 3.1
assets
Other
Current (11,048) (11.3) (9,694) (10.3)
liabilities
Non current
liabilities (26,499) (27.2) (26,762) (28.6)
------- ------ ------- ------
Net assets
(excl
Minority 97,524 100.0 93,532 100.0
Interest) ------- ------ ------- ------
Net asset 328.4p 315.0p
value
per ordinary
share
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