17th Nov 2016 11:32
LONDON (Alliance News) - UK equities focused investment trust Shires Income PLC Thursday said it outperformed the FTSE All-Share Index in its first half.
Shires Income delivered a total return on net asset value of 15.9% for the six months to the end of September, ahead of the 12.9% total return delivered by the FTSE All-Index.
The trust said markets had "enjoyed a good six months", with increases in oil and other commodities prices providing a "significant driver" of returns in the early part of the six months.
However, by early summer the UK's referendum on its membership in the European Union was influencing sentiment, and there was a significant negative reaction as a result of the surprise vote in favour of leaving the EU, resulting in a substantial weakening of the pound.
For larger UK companies, who derive a greater proportion of revenues and profits from overseas, this would result in a boost to profitability and in turn led the FTSE 100 Index to to stage a recovery and end June above its pre-referendum level.
During the half year Shires added two new holdings, FTSE 250-listed BBA Aviation PLC and Cobham PLC. Shires noted that it had not made changes in its investment portfolio in anticipation of the outcome of the referendum, but noted that its portfolio has "broad diversified international revenue streams" with less exposure to the "more cyclical and domestically orientated areas of the market", which helped its performance in the half year.
Shires Income proposed a second interim dividend of 3.0 pence, in line with the first interim dividend paid for the full year to the end of March, and said it expects to propose a further interim dividend at the same level prior to deciding on the rate of its final dividend.
Chairman Anthony Davidson plans to step down from the board at the conclusion of Shires's annual general meeting in July of next year, at which point he will be succeeded by Robert Talbut.
"Sterling has weakened as markets have focussed on the risks of a so called hard Brexit. It remains much too early to tell what the ramifications of leaving the EU will be though it is notable that as more data has become available some of the more downbeat commentators have been forced to shift to a less extreme position," said Davidson in a statement.
"In the meantime Sterling weakness is being regarded as a positive for the profitability of many UK companies, especially larger ones and this has benefited equity markets," Davidson added.
Shares in Shires Income were down 1.2% at 218.62 pence Thursday morning.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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