Interim Results

Shires Income PLC 26 November 2004 News Release 26 November 2004 Shires Income plc Interim Results for the six months to 30 September 2004 Shires Income plc aims to provide shareholders with 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 2004 2004 Total assets less current liabilities £95.3m £93.0m Ordinary shareholders' funds £70.1m £68.1m Net asset value per ordinary share 236.1p 229.5p Ordinary share price 231.0p 224.0p Discount 2.2% 2.4% Revenue return per ordinary share 11.83p 7.18p* Dividends per ordinary share 8.80p 8.80p* *Half year to 30 September 2003 • Total return on net assets for the half year to 30 September 2004 was 6.7%, ahead of the FTSE All-Share Index benchmark return of 5.1%. • Total return to a shareholder over the period under review was 7.1%, reflecting the continued recovery in the rating of the Company's shares. The discount narrowed in the period from 2.4% at 31 March 2004 to 2.2% at 30 September 2004. • Revenue Return for the half year ended 30 September 2004 was 11.83p per ordinary share compared to 7.18p for the half year ended 30 September 2003, a rise of 64.8%. • A second interim dividend of 4.4p has been declared for payment on 31 January 2005. Dividends paid and declared to date total 8.8p, the same level as last year. • At a share price of 241.5p (24 Nov) and assuming the same dividends are paid this year as they were last, the shares yield 8.0%. For further information please contact: Mike Balfour, Managing Director Glasgow Investment Managers 0141 572 2700 Shires Income plc Interim Report 30 September 2004 Chairman's Statement Background The UK stockmarket performed steadily in the six months to 30 September 2004. Improving corporate earnings and the belief that interest rates are nearing their peak in the current cycle outweighed fears about rising world oil prices. This resulted in a total return of 5.1% on the FTSE All-Share Index, the Company's benchmark. Investment Returns In a period when equity prices moved in a narrow range the Company's investments performed well. The total return on net assets for the half year to 30 September 2004 was 6.7%, which was ahead of the benchmark. The total return to shareholders was higher at 7.1%, reflecting the continued recovery in the rating of the Company's shares as the discount narrowed slightly in the period to 2.2%. This discount is significantly lower than the average of other Investment Trusts within the Company's AITC UK Income & Growth category. Dividends The Revenue Return per ordinary share was 11.83p, up from 7.18p last year reflecting the growth in the dividends paid by investee companies and increased premiums from writing traded options as the market became more stable. The Board believes that continued growth in the dividends of UK listed companies combined with the other ways in which the portfolio generates income should enable the dividend for the current year to be kept at a similar level to last year. A second interim dividend of 4.4p has been declared, to be paid on 31 January 2005 to shareholders on the Register at close of business on 7 January 2005. A first interim dividend of 4.4p was paid on 29 October 2004. Dividends paid and declared to date for the current year total 8.8p, the same level as last year. Portfolio Profile Total gearing rose from 43.4% to 48.6% of net assets over the six months to September 2004 as short term borrowings were increased to invest in equities and take advantage of the rise in equity prices. This is illustrated by the growth in equity gearing from 16.6% to 21.1% over the period. Hedging The Company continued to maintain hedging of the ordinary share portfolio to protect against a significant downward movement in the general level of equity prices. With some of the hedging instruments expiring in September 2004 the structure was slightly altered, providing greater downside protection at most market levels at no additional cost to the Company. Outlook With the economy expected to grow steadily, although more slowly in 2005, and with any further rise in UK interest rates expected to be modest as the housing market starts to slow down, the outlook for equity prices is a favourable one. In comparison to historic ratings, equities still look attractive and offer the prospect of reasonable returns. Interim Report The Interim Report will be mailed to shareholders on 3 December 2004. 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 Statement of Total Return (incorporating the Revenue Account) for the half year ended 30 September 2004 Half year to 30 September 2004 (unaudited) Revenue Capital Total £000 £000 £000 Net gains on investments - 1,678 1,678 Income 4,316 - 4,316 Investment management fee (96) (96) (192) Other administrative expenses (180) - (180) --------- --------- --------- Net return before finance costs and taxation 4,040 1,582 5,622 Finance costs of borrowings (527) (527) (1,054) --------- --------- --------- Return on ordinary activities before taxation 3,513 1,055 4,568 Taxation - - - --------- --------- --------- Return on ordinary activities after taxation for the period 3,513 1,055 4,568 Preference dividend (1) - (1) --------- --------- --------- Return attributable to equity shareholders 3,512 1,055 4,567 Dividends on equity shares (2,612) - (2,612) --------- --------- --------- Transfer to reserves 900 1,055 1,955 --------- --------- --------- Returns per ordinary share 11.83p 3.56p 15.39p Dividends per ordinary share 8.80p Consolidated Statement of Total Return (incorporating the Revenue Account) for the half year ended 30 September 2004 Half year to 30 September 2003 Year to 31 March 2004 (unaudited) (audited) Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Net gains on investments - 15,385 15,385 - 18,065 18,065 Income 2,866 - 2,866 7,392 - 7,392 Investment managementfee (91) (91) (182) (186) (186) (372) Other administrative expenses (151) - (151) (380) - (380) ------- ------- ------- ------- ------- ------- Net return before finance costs and taxation 2,624 15,294 17,918 6,826 17,879 24,705 Finance costs of borrowings (506) (506) (1,012) (1,084) (1,084) (2,168) ------- ------- ------- ------- ------- ------- Return on ordinary activities before taxation 2,118 14,788 16,906 5,742 16,795 22,537 Taxation 13 - 13 30 - 30 ------- ------- ------- ------- ------- ------- Return on ordinary activities after taxation for the period 2,131 14,788 16,919 5,772 16,795 22,567 Preference dividend (1) - (1) (2) - (2) ------- ------- ------- ------- ------- ------- Return attributable to equity shareholders 2,130 14,788 16,918 5,770 16,795 22,565 Dividends on equity shares (2,612) - (2,612) (5,713) - (5,713) ------- ------- ------- ------- ------- ------- Transfer (from)/to reserves (482) 14,788 14,306 57 16,795 16,852 ------- ------- ------- ------- ------- ------- Returns per ordinary share 7.18p 49.83p 57.01p 19.45p 56.59p 76.04p Dividends per ordinary share 8.80p 19.25p Group Balance Sheet as at 30 September 2004 30 September 31 March 2004 30 September 2004 2003 (unaudited) (audited) (unaudited) £000 £000 £000 Listed investments Ordinary shares 80,704 74,536 69,193 Convertibles 7,090 6,970 7,297 Other fixed interest 12,215 11,280 7,602 ----------- ----------- ----------- 100,009 92,786 84,092 Unlisted investments 3,278 3,556 3,985 ----------- ----------- ----------- 103,287 96,342 88,077 Portfolio hedge instruments 907 1,414 2,136 ----------- ----------- ----------- 104,194 97,756 90,213 Net current liabilities (8,885) (4,711) (123) ----------- ----------- ----------- Total assets (less current liabilities) 95,309 93,045 90,090 Index-Linked Debenture Stocks (25,206) (24,897) (24,488) ----------- ----------- ----------- Net assets 70,103 68,148 65,602 ----------- ----------- ----------- Capital and Reserves Called up share capital 14,888 14,888 14,888 Share premium account 19,013 19,039 19,065 Other capital reserves Realised 25,248 27,898 30,596 Unrealised 5,999 2,268 (2,463) Revenue reserves Realised 4,679 3,779 3,240 Unrealised 276 276 276 ----------- ----------- ----------- 70,103 68,148 65,602 ----------- ----------- ----------- Net asset value per ordinary share 236.1p 229.5p 220.9p Note: These are not statutory accounts under section 240 of the Companies Act 1985 ('the Act') and are unaudited. The information relating to the year ended 31 March 2004 is extracted from the latest audited accounts which have been delivered to the Registrar of Companies; the report of the auditors on these accounts was unqualified and did not contain a statement under section 237(2) or (3) of the Act. Consolidated Cash Flow Statement for the half year ended 30 September 2004 Half year to Half year to Year to 30 September 30 September 31 March 2004 2003 2004 (unaudited) (unaudited) (audited) £000 £000 £000 Net cash inflow from operating activities 4,596 3,185 6,988 Servicing of finance (748) (639) (1,376) Taxation - - 98 Investing activities --------- --------- -------- Purchases of investments (47,524) (8,186) (69,083) Sales of investments 41,489 12,352 70,784 Net cash inflow/(outflow) for portfolio hedge instruments 29 (1,398) (1,913) --------- --------- -------- (6,006) 2,768 (212) Equity dividends paid (3,101) (3,101) (5,713) --------- --------- -------- Net cash (outflow)/ inflow before financing (5,259) 2,213 (215) Financing Debt due within one year - increase/(decrease) in short-term borrowings 4,650 (100) 1,150 --------- --------- -------- Decrease/(Increase) in cash (609) 2,113 935 --------- --------- -------- Reconciliation of net revenue before finance costs and taxation to net cash inflow from operating activities Net revenue before finance costs and taxation 4,040 2,624 6,826 Investment management fee charged to capital (96) (91) (186) Changes in working capital items 652 652 348 --------- --------- -------- Net cash inflow from operating activities 4,596 3,185 6,988 --------- --------- -------- Analysis of Changes in Net Debt At At 31 March Cash Non-cash 30 September 2004 flows changes 2004 (audited) (unaudited) (unaudited) (unaudited) £000 £000 £000 £000 Cash at bank and in hand 732 (609) - 123 Bank overdrafts - - - - Short-term borrowings (1,650) (4,650) - (6,300) 5% Index-Linked Debenture 2008/10 (24,897) - (309) (25,206) ------- -------- -------- --------- (25,815) (5,259) (309) (31,383) ------- -------- -------- --------- Distribution of Assets Valuation at Movements Valuation at during the period 31 March Apprecia- 30 September 2004 Purchases Sales tion/ 2004 (audited) (Depreci-ation) (unaudited) £000 % £000 £000 £000 £000 % Listed Investments Ordinary shares 74,536 109.4 16,899 (13,910) 3,179 80,704 115.1 Convertibles 6,970 10.2 3,213 (2,822) (271) 7,090 10.1 Other fixed interest 11,280 16.6 26,031 (24,606) (490) 12,215 17.4 Hedge instruments 1,414 2.0 72 (100) (479) 907 1.3 _______ _______ _______ _______ _______ _____ _______ 94,200 138.2 46,215 (41,438) 1,939 100,916 143.9 Unlisted investments 3,556 5.2 - - (278) 3,278 4.7 _______ _______ _______ _______ _______ _____ _______ 97,756 143.4 46,215 (41,438) 1,661 104,194 148.6 _______ _______ _______ Net current liabilities (4,711) (6.9) (8,885) (12.7) _______ _______ _____ _______ Total assets (less current liabilities) 93,045 136.5 95,309 135.9 Index-Linked Debenture Stocks (24,897) (36.5) (25,206) (35.9) _______ _______ _____ _______ Net assets 68,148 100.0 70,103 100.0 _______ _______ _____ _______ Net asset value per ordinary share 229.5p 236.1p This information is provided by RNS The company news service from the London Stock Exchange

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