Performance
For the year ended 30 June 2024, the Company's net asset value ("NAV") total return, calculated on the basis that all dividends received are reinvested in additional shares, was 18.1% (2023: -7.4%). The share price total return, calculated on the same basis, was 21.0% (2023: -6.8%). In addition to the absolute returns generated, both the NAV and the share price outperformed the total return of the Company's reference index, the Deutsche Numis Smaller Companies plus AIM (ex investment companies) Index (the "reference index"), of 10.0%.
Performance (total return)
| 1 year return % | 3 years return % | 5 years return % | 10 years return % | |
|---|---|---|---|---|
| Net asset valueAB | +18.1 | -20.5 | +12.3 | +118.2 |
| Share priceB | +21.0 | -26.0 | +8.6 | +105.9 |
| Reference IndexC | +10.0 | -13.5 | +17.6 | +57.6 |
| Peer Group weighted average (NAV) | +16.8 | -8.8 | +27.4 | +94.8 |
| Peer Group weighted average (share price) | +19.0 | -13.1 | +25.9 | +104.8 |
ACum-income NAV with debt at fair value.
BConsidered to be an Alternative Performance Measure.
CDeutsche Numis Smaller Companies plus AIM (ex investment companies) Index.
Source: Morningstar
Past performance is not a guide to future results.
Discreet performance (%)
| 30/06/24 | 30/06/23 | 30/06/22 | 30/06/21 | 30/06/20 | |
|---|---|---|---|---|---|
| Share price | 17.5 |
(8.6) |
(35.1) | 44.8 | (1.9) |
| NAV | 15.2 | (8.9) | (28.1) | 40.1 | (2.2) |
| Reference Index | 10.0 | (2.8) | (19.0) | 52.3 | (10.7) |
Source: Workspace Datastream, total returns. The percentage growth figures above are calculated over periods on a mid to mid basis. NAV total returns are on a cum-income basis.
Past performance is not a guide to future results.
Earnings and Dividends
The revenue return per share ("EPS") for the year ended 30 June 2024 was 13.12 pence (2023: 12.44 pence). The rate of increase of 5.5% has settled down to more reasonable and sustainable levels, following two years where increases have averaged over 39% per annum. This is in large part down to the recovery in the prospects of the underlying companies, but there has also been a contribution from the effect of share buy backs enhancing the EPS and the NAV per share. Included in the EPS is the enhancement to earnings of 1.21 pence per share (9.7%) as a result of share buy backs undertaken during the year. Recurring income is increasingly the predominant source of dividends, with only 2.5% of total revenue (excluding capital dividends) coming from special dividends. This can be compared to the position 10 years ago when around 20% of the revenue generated was classified as special.
The Board is declaring a final dividend for the financial year of 8.3 pence per share, which will take the full year dividend to 12.0 pence per share, an increase of 9.1% on the full year dividend paid in 2023. This will permit around 2.2 pence per share to be transferred to revenue reserves to provide against any future shortfalls in income generated. Subject to approval by shareholders at the Annual General Meeting, the final dividend will be paid on 29 November 2024 to shareholders on the register on 1 November 2024, with an associated ex-dividend date of 31 October 2024.
Discount Control and Share Buy Backs
At the year end the discount of the share price to the NAV was 12.5% (2023: 14.3%).
Over the year, the Board bought back 14.1 million shares, equating to 15.9% of the Company's issued share capital, at a total cost of £60.5 million and a weighted average price of 427.66 pence per share. The weighted average discount at which the shares were repurchased was 13.1%. The Board calculates that this has added 10.7 pence per share to the NAV for remaining shareholders.
The Board has remained committed to its discount target of 8% or lower and will continue to be active in the market when it believes it to be in the best interests of shareholders. It is, however, slightly frustrated that the sustained improvement in performance throughout the year, outstripping its reference index and many of its close peers, is not being reflected in the share price performance relative to the NAV.
Full details of the Board's discount control policy can be found in the Strategic Report. It should be noted that the Board has implemented its discount control policy against an industry backdrop of widening discounts generally and it will continue to keep the nature of the policy and its level under review.
Since the end of the financial year, the discount of the share price to the NAV has continued to trade between 11% and 13% while the Company's performance continues to outperform the reference index and most of its close peers.
Annual General Meeting
The Company's Annual General Meeting ("AGM") will take place at 12 noon on Thursday 21 November 2024 at abrdn's office at 1 George Street, Edinburgh EH2 2LL. The meeting will include a presentation from the Investment Manager and will be followed by lunch. This is a good opportunity for shareholders to meet the Board and Manager and we would encourage you to attend.
Outlook
This time last year, I wrote about concerns surrounding high rates of inflation and the level of interest rates. Roll forward 12 months and we have seen inflation fall and market conditions for UK smaller companies improve. Rachel Reeves, the Chancellor of the Exchequer, sees growth as UK's national mission, however investors are still unsure of the actions likely from Sir Keir Starmer's government following the landslide victory in July. Markets wait to see how conflicting positions on budgetary possibilities and growth agendas are reconciled and whether cutting costs or promoting growth will take precedence.
While we should end 2024 with better visibility as to the political direction of travel, given that over half the world's population will not have to visit the ballot box for a number of years, the same cannot be said about the geopolitical landscape, with the continuing war in Ukraine and the threat of an escalating conflict in Gaza and the Middle East. The UK, in a global context, looks reassuringly well positioned, given economic data, employment rates, manageable inflation levels, and levers on interest rates to use.
The future is by its very nature uncertain, but the Board has been pleased by the manner in which the Investment Manager has managed the portfolio and navigated the challenges in the last 12 months. The focus remains on the resilience of the companies in which the portfolio is invested and the experience and flexibility of the management teams to adapt their companies to the changes to the economic environment that are occurring.
Read the full Annual Financial report here.
Important information
Risk factors you should consider prior to investing:
- The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.
- Past performance is not a guide to future results.
- Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
- There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
- As with all stock exchange investments the value of the Trust shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
- The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
- The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
- Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.
- The Company may charge expenses to capital which may erode the capital value of the investment.
- The Alternative Investment Market (AIM) is a flexible, international market that offers small and growing companies the benefits of trading on a world-class public market within a regulatory environment designed specifically for them. AIM is owned and operated by the London Stock Exchange. Companies that trade on AIM may be harder to buy and sell than larger companies and their share prices may move up and down very sharply because they have lower trading volumes and also because of the nature of the companies themselves. In times of economic difficulty, companies listed on AIM could fail altogether and you could lose all your money.
- The Company invests in smaller companies which are likely to carry a higher degree of risk than larger companies.
- Specialist funds which invest in small markets or sectors of industry are likely to be more volatile than more diversified trusts.
Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG, authorised and regulated by the Financial Conduct Authority in the UK.
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