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Shires Income Plc - Annual Financial Report

The Company

Shires Income PLC (the "Company") is an investment trust. Its Ordinary shares are listed on the premium segment of the London Stock Exchange.


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 other fixed income securities.



The Company's benchmark is the FTSE All-Share Index (total return).



The Company's Manager is Aberdeen Standard Fund Managers Limited ("ASFML", the "AIFM" or the "Manager") which has delegated the investment management of the Company to Aberdeen Asset Managers Limited ("AAML" or the "Investment Manager"). Both companies are wholly owned subsidiaries of Standard Life Aberdeen plc, which was formed by the merger of Aberdeen Asset Management PLC and Standard Life plc in August 2017. Aberdeen Standard Investments is a brand of the investment businesses of the merged entity.



Up to date information can be found on the Company's website:





Net asset total returnA



Share price total returnA












Benchmark index total return



Earnings per share (revenue)












Dividend per Ordinary share



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A Alternative Performance Measure




For further information, please contact:


Scott Anderson

Aberdeen Standard Fund Managers Limited    

0131 222 1863*


* Calls may be monitored and/or recorded to protect both you and us and help with our training. Call charges will vary.






It is my pleasure, in the Company's 90th year, to welcome you to the 2019 Annual Report.



In the year to 31 March 2019, the Company's net asset value ("NAV") per share increased by 4.0% on a total return basis, compared to a total return from the benchmark, the FTSE All-Share Index, of 6.4%. However, the Ordinary share price total return was stronger, at 8.0%, and at the end of the year the shares were trading at a premium of 0.6% to the NAV per share (including income).


While the overall relative return performance against the benchmark index for the year was disappointing, the Company's longer-term performance record remains good, delivering a positive capital return, outperforming the benchmark over three and five years and delivering an above average and growing dividend income.


The Board was encouraged by the total return of the equity portfolio, of 7.5%, which outperformed the return of 6.4% from the benchmark. However, the overall NAV total return was reduced by the performance of the Company's preference shares which, although continuing to make an important contribution to the Company's revenue stream and providing greater stability to the overall NAV, were impacted during the year by the performance of the underlying sectors.


Following a relatively strong start to the year, markets fell sharply in the final quarter of 2018, driven mainly by concerns over growth prospects across the US, Europe and Asia, and the prospects of a trade war between the US and China. These fears receded during the first quarter of 2019, with some progress on trade discussions between the US and China and a moderation of the outlook for interest rate increases. However, tensions have risen again recently and this looks likely to be a long running dispute. In the UK, there was continuing uncertainty over the outcome of Brexit negotiations between the UK and Europe and whether a deal would be agreed by the UK Parliament. The initial departure date of 29 March 2019 passed without an agreed deal and was extended until later in the year.


More detail on markets and the Company's performance for the year are covered in the Investment Manager's Review.



The Company's revenue return for the year was 13.06p per share, compared to 13.69p per share for the previous year. This decrease reflects fewer special dividends received during the year and lower income from option writing. 



The Board is proposing a final dividend of 4.20p per Ordinary share (2018 - 4.00p), which will be paid on 26 July 2019 to Shareholders on the register on 5 July 2019. This final dividend brings total Ordinary share dividends for the year to 13.20p per share (2018 - 13.00p), slightly higher than the revenue return for the year. The Company has significant accumulated revenue reserves which are available to fund the cost of the dividend to the extent that this exceeds current year earnings. Following the payment of the final dividend, the revenue reserve will represent 1.2 times the current annual Ordinary share dividend cost. 


Subject to unforeseen circumstances, it is proposed to continue to pay three quarterly interim dividends of 3.00p each per Ordinary share and, as in previous years, the Board will decide on next year's final dividend having reviewed the full year results.



As stated above, at the end of the year the Company's Ordinary shares were trading at a premium of 0.6% to the NAV per share (including income) compared to a discount of 3.1% at the end of the previous year. During the course of the year, with the shares trading at a premium to the NAV and in response to investor demand, the Company was able to issue a total of 157,000 new Ordinary shares on a non-dilutive basis. The Company has continued to issue shares since the year end.


The Board and Manager monitor the discount/premium of the Company's shares on an ongoing basis and will consider future issuance if there is sufficient investor demand. The Board will seek to renew the appropriate authorities at the Annual General Meeting.  



The Board continually monitors the level of gearing and, although the absolute level may look high as in previous years, strategically we take the view that it is deployed notionally into fixed interest securities which brings diversification to the Company's total revenue stream and with lower volatility than would be expected from a portfolio invested exclusively in equities. The Company's gearing level fell marginally during the year, decreasing from 20.8% to 19.6%. The Board takes the view that the enhanced balance of assets arising from a combination of fixed income securities and equities allows for an appropriate level of risk within the portfolio in order to achieve the overall investment objective. 


The Company has a £20 million loan facility, of which £19 million was drawn down at the year end. Details of the loan facility are set out in note 13 to the financial statements.


Annual General Meeting (including Voting Arrangements)

The Annual General Meeting ("AGM") will be held at 12 noon on Thursday 4 July 2019 at the offices of Standard Life Aberdeen in London. The Company's fund manager, Iain Pyle, will make a presentation and lunch will be available following the Meeting. This is a good opportunity for shareholders to meet the Board and Investment Manager, and to ask questions formally or informally, and we would encourage you to attend.


If you hold your shares in the Company via a share plan or a platform and would like to attend and/or vote at the AGM, then you will need to make arrangements with the administrator of your share plan or platform.


Further details on how to attend and vote at Company Meetings for holders of shares via other share plans and platforms can be found on the AIC's website at:


Electronic Communications

The Board is proposing to take advantage of the ability, under the Company's Articles of Association, to communicate electronically with shareholders as well as making documents available on its website instead of sending out paper versions. Increased use of electronic communications will deliver savings to the Company in terms of administration, printing and postage costs, as well as accelerating the provision of information to shareholders. The reduced use of paper will also bring environmental benefits. The Company will therefore be writing to you later in the year seeking your consent to communicate with you electronically noting that shareholders will be provided with regular opportunities to request a paper version.


Board Composition

Having served as a Director since 2008, Andrew Robson will retire from the Board at the Company's AGM in 2020. However, to facilitate a smooth transition of matters pertaining to the Audit Committee, Robin Archibald will be appointed as Chairman of the Audit Committee in place of Andrew immediately following the AGM on 4 July 2019. This will ensure an orderly handover of the Audit Committee Chair responsibilities while continuing to allow us to benefit from Andrew's detailed knowledge of the Company.


The Board has commenced a process to appoint a new independent non-executive Director which it hopes to complete later in the year.



Although stockmarkets have performed reasonably well since the start of 2019, there are reasons for caution. Economic data globally continues to indicate uncertainty over the growth and inflation outlook and a lack of confidence from businesses in the UK and in Continental Europe is leading to disappointing investment levels. In the UK, although the prospect of a no-deal exit from the EU seems unlikely, any departure will probably be followed by a new period of uncertainty regarding the UK's future relations with its largest trading partner.


However, as we have stated in previous years, we believe that the Company's portfolio is well diversified in terms of asset class, sector and geographic exposure and that, despite the various uncertainties facing markets at the current time, the Investment Manager's focus on investing in good quality companies with strong fundamentals should benefit the portfolio over the longer term in meeting the Company's income and growth investment objective.