RNS Number : 3496Z
abrdn UK Smaller Cos. Growth Trust
05 March 2025
abrdn UK Smaller Companies Growth Trust plc
Half Yearly Report for the Six Months Ended 31 December 2024
Legal Entity Identifier (LEI): 213800UUKA68SHSJBE37
Investment Objective
The Company's objective is to achieve long-term capital growth by investment in UK-quoted smaller companies.
Reference Index
The Company's reference index is the Deutsche Numis Smaller Companies including AIM (ex investment companies) Index.
PERFORMANCE HIGHLIGHTS AND FINANCIAL CALENDAR
Net asset value total returnA
Share price total returnA
Six months ended 31 December 2024
Six months ended 31 December 2024
+1.9%
+4.9%
Year ended 30 June 2024
+18.1%
Year ended 30 June 2024
+21.0%
Reference Index total return
Discount to net asset valueA
Six months ended 31 December 2024
As at 31 December 2024
+0.8%
10.1%
Year ended 30 June 2024
+10.0%
As at 30 June 2024
12.5%
Revenue return per share
Ongoing charges ratioA
Six months ended 31 December 2024
Forecast year ending 30 June 2025
5.93p
0.86%
Six months ended 31 December 2023
6.00p
Year ended 30 June 2024
0.92%
A Considered to be an Alternative Performance Measure.
Financial Calendar
Payment of interim dividend for the year ending 30 June 2025
18 April 2025
Financial year end
30 June 2025
Expected announcement of results for year ending 30 June 2025
September 2025
Annual General Meeting (London)
November 2025
Expected payment of final dividend for the year ending 30 June 2025
28 November 2025
Financial Highlights
31 December 2024
30 June 2024
% change
Capital return
Total assetsA
£428.9m
£453.1m
-5.3%
Equity shareholders' funds
£388.9m
£413.1m
-5.9%
Market capitalisation
£349.5m
£361.3m
-3.3%
Net asset value per shareB
558.70p
556.19p
+0.5%
Share price
502.00p
486.50p
+3.2%
Discount to net asset valueC
10.1%
12.5%
Net gearingC
6.6%
5.8%
Reference index
5,498.80
5,534.18
-0.6%
Dividends and earnings
Revenue return per Ordinary shareD
5.93p
6.00p
-1.2%
Interim dividend per share
3.70p
3.70p
-
Operating costs
Ongoing charges ratioCEF
0.86%
0.92%
A Defined as total assets per the Statement of Financial Position less current liabilities (before deduction of bank loans).
B With debt at par value.
C Considered to be an Alternative Performance Measure.
D Figure for 31 December 2024 is for the six months to that date. Figure for 30 June 2024 is for the six months to 31 December 2023.
E The ongoing charges ratio for the current year includes a forecast of costs, charges and assumes no change in net assets for the year to 30 June 2025.
F Calculated in accordance with AIC guidance issued in October 2020 to include the Company's share of costs of holdings in investment companies on a look-through basis.
Chairman's Statement
Dear Shareholders
I am pleased to report that your Company delivered positive share price and net asset value ("NAV") total returns during the first six months of its financial year, delivering modest outperformance over its reference index and enabling it to build on the substantial outperformance that it achieved in the previous year. I set out some details on this below.
Performance
The political landscape was a significant feature of the second half of 2024 when, among others, the electorates of the UK and the US both voted for change, the impact of which is very much in evidence. In the UK there was early optimism in the wake of the UK General Election. This drove the UK smaller companies asset class up almost 6% in July, as measured by the Deutsche Numis Smaller Companies including AIM (ex Investment Companies) Index, which is the Company's "reference index". This was not sustained as rumours as to what might be in the Budget on 30 October started to dominate the media and affected confidence. One of the big threats was the suggestion that the Inheritance Tax concession which has historically applied to some AIM listed companies might be removed. Although these concerns were only partially correct, the changes to Employer National Insurance thresholds and rates which will come in on 5 April 2025 have acted to dampen the outlook for UK plc, particularly where operations are predominantly onshore. Over the last couple of months of 2024, the market was largely flat.
The net asset value ("NAV") total return for the six month period was 1.9% while the share price delivered a total return of 4.9%. The difference between these returns is reflected in the movement in the discount, which narrowed from 12.5% on 30 June 2024 to 10.1% at the end of the period. The Company outperformed the reference index, which produced a total return of 0.8%.
The Investment Manager's Review provides further information on individual stock performance and portfolio activity during the period, as well as the Investment Manager's outlook for the portfolio and the wider smaller companies sector.
Total returns to
6 months
1 year
3 years
5 years
10 years
31 December 2024
%
%
%
%
%
NAVA
+1.9
+12.2
-27.9
-2.6
+119.6
Share priceA
+4.9
+12.4
-29.4
-13.3
+116.1
Reference IndexB
+0.8
+5.0
-15.4
+6.6
+60.9
Peer Group weighted average (NAV)
-1.7
+8.4
-13.4
+12.2
+93.3
Peer Group weighted average (share price)
-2.5
+6.0
-17.5
+1.8
+94.5
A Considered to be an Alternative Performance Measure.
B Deutsche Numis Smaller Companies including AIM (ex investment companies) Index, prior to 1 January 2018 Deutsche Numis Smaller Companies (ex investment companies) Index.
Source: abrdn and Refinitiv Datastream
Earnings and Dividend
The headline numbers on the Statement of Comprehensive Income are significantly affected by the share buy back activity during the period, which is described in more detail in the section below. The share buy backs have reduced the size of the portfolio and thus its earnings capacity. However, while the net revenue after tax was down 15.3% to £4.3 million, revenue earnings per share ("EPS") for the six months to 31 December 2024 only declined by 1.2% to 5.93p (2023: 6.00p).
Against this backdrop, the Board is declaring a maintained interim dividend of 3.70p per share which will be paid on 18 April 2025 to shareholders on the register on 21 March 2025, with an associated ex-dividend date of 20 March 2025.
Gearing
The Company has a £40 million revolving credit facility ("RCF") with The Royal Bank of Scotland International which matures in November 2025. At the end of the period, the level of gearing, net of cash, was 6.6% (30 June 2024: 5.8%), with £40 million drawn down under the RCF at an interest rate of 6.25%. The Board will review proposals for the renewal of the facility prior to its maturity.
Discount Control and Share Buy Backs
As stated above, the Company's shares were trading at a discount of 10.1% to the NAV per share at the end of December, comparing to 12.5% at the start of the period. Although there was some narrowing in the discount towards the end of the period, it remained at a level where the Board felt it was in the best interests of shareholders as a whole to continue to buy back shares. Consequently, the Company was active in the market on most days and bought back 4.7 million shares (6.3% of the opening issued share capital) worth £23.5 million at an average discount of 11.1%. The buybacks acted to enhance the NAV per share by 0.7%.
The Board has a policy of using buybacks to target a maximum discount of the share price to the cum-income net asset value of 8% under normal market conditions. It considers that this policy helps provide investors with a degree of reassurance that the Board will endeavour to limit any widening of the discount beyond the target level and to reduce the volatility of the discount. This in turn should help increase demand for the shares, which should have a net positive effect on the discount, particularly when coupled with strong performance.
The Board considers that, given investor sentiment has remained negative towards the UK smaller companies sector as a whole, evidenced by outflows in the open ended sector, it is to be expected that the Company would face discount pressure in common with most of the peer group. As a result, the discount has been wider than the target level. Whilst the Board takes into account the wider investment trust sector discount levels when implementing its buyback policy, it remains committed to its long-term target of 8% and will continue to be active in the market when it believes it to be in the best interests of shareholders.
Outlook
After the political changes that dominated the news in 2024, we do now have visibility as to who is leading the agendas in the UK and the US. These are the two most important markets for your Company, the former because it is where most of the operations of the investee companies are based and the latter because decisions made in the US frequently impact on global businesses both directly and through fluctuations in the US Dollar. This removes one element of uncertainty, so disliked by markets. Having said that, there remain concerns about the outlook for the UK with the possibility of mild stagflation back in the frame despite the UK Government's avowed focus on growth. Indeed the Bank of England's interest rate cut in early February is against a backdrop of a likely increase in inflation over the next six months caused principally by high energy costs. With inflation now expected to peak by the autumn, reaching the Bank of England's target level of 2% seems to have been pushed out to 2027. Whilst further interest rate cuts are still expected this year, against this overall landscape, the economic outlook cannot be described as bright.
At the same time, the impact of President Trump's various pronouncements, in particular with respect to tariffs on global trade but also on expanding US influence and control in various geographies, have yet to be seen.
Notwithstanding the difficult investment environment, the portfolio managers have demonstrated that they have the processes and experience to navigate choppy waters. They put a great deal of effort in getting to know the management of the companies in which the portfolio is invested in order to gain an understanding of their ability to position their companies to adapt to the changing economic landscape. It is important to remember that the Company invests in companies, not markets, and the portfolio's holdings are frequently in companies which are market leaders in their particular specialism. There are investment opportunities out there, but the economic conditions and numerous other uncertainties indicate a challenging time ahead.
Liz Airey
Chairman
5 March 2025
Interim Management Report
Directors' Responsibility Statement
The Directors are responsible for preparing the Half Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:
- The condensed set of financial statements has been prepared in accordance with Financial Reporting Standard 104 'Interim Financial Reporting';
- The Interim Board Report (constituting the interim management report) includes a fair review of the information required by DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and
- The financial statements include a fair review of the information required by DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.
Principal and Emerging Risks and Uncertainties
The Board regularly reviews the principal and emerging risks and uncertainties faced by the Company together with the mitigating actions it has established to manage the risks. These are set out within the Strategic Report contained within the Annual Report for the year ended 30 June 2024 and comprise the following risk categories:
- Strategy
- Investment performance
- Key person risk
- Share price
- Financial instruments
- Financial obligations
- Regulatory
- Operational
- Geopolitical
There are a number of other risks which, if realised, could have a material adverse effect on the Company and its financial condition, performance and prospects. These include the conflicts in Ukraine and the Middle East, as well as continuing tensions between the US and China. The Board is also conscious of the impact of higher than forecast inflation and the implications for interest rates, and also the potential impact on economic growth of recently announced US trade tariffs. Other than these factors, the Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and no material change is foreseen in the principal risks over the remainder of the financial year.
Going Concern
The Company's assets consist mainly of equity shares in companies listed on recognised stock exchanges and are considered by the Board to be realisable within a short timescale under normal market conditions. The Board has set overall limits for borrowing and reviews regularly the Company's level of gearing, cash flow projections and compliance with banking covenants. The Board has also reviewed stress testing analysis and considered the liquidity of the portfolio.
As at 31 December 2024, the Company had a £40 million unsecured revolving credit facility with The Royal Bank of Scotland International Limited which matures on 1 November 2025. The facility was fully drawn down at the end of the period. The Board will review proposals for the renewal of the facility prior to its maturity.
The Directors are mindful of the Principal Risks and Uncertainties summarised above and they believe that the Company has adequate financial resources to continue in operational existence for a period of not less than 12 months from the date of approval of this Report. They have arrived at this conclusion having confirmed that the Company's diversified portfolio of realisable securities is sufficiently liquid and could be used to meet short-term funding requirements were they to arise, as well as share buy back commitments. The Directors have also reviewed the revenue and ongoing expenses forecasts for the coming year and considered the Company's Condensed Statement of Financial Position as at 31 December 2024 which shows net current liabilities of £27.5 million at that date, and do not consider this to be a concern due to the liquidity of the portfolio which would enable the Company to meet any short term liabilities if required.
Taking all of this into account, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.
On behalf of the Board
Liz Airey
Chairman
5 March 2025
Investment Manager's Review
The net asset value ("NAV") total return for the Company for the six months to 31 December 2024 was 1.9% while the share price total return was 4.9%. By comparison, the UK smaller companies sector as represented by the Deutsche Numis Smaller Companies including AIM (ex investment companies) Index (the "reference index") delivered a total return of 0.8%.
Overview
The second half of 2024 was a busy period for macro news, with the results of the UK and US elections removing the incumbents and replacing them with new leaders making new promises. In October, the UK government promised growth in its budget but, despite its pro-growth agenda, some of the tax and regulatory measures announced are widely considered to be anti-growth. Yet, the UK equity and bond markets have largely moved sideways since the Budget, suggesting no major surprise in the policy overall. In the near-term, UK businesses are working though the implications of the proposed tax rises and changes to Employers' National Insurance rates and will have to do much to contain cost inflation. Automation programmes to improve productivity are set to become more of a focus for UK businesses.
2024 proved to be a year of two halves, with optimism in the first half rapidly evaporating in the second half, and recovery in certain sectors has been slower to materialise than the market expected, leading to profit warnings. While savers have been benefiting from elevated savings rates, an expected recovery in big ticket discretionary consumer spending that is linked to lower interest rates remains subdued. We sense that replacement cycles for these types of items are lengthening, not helped by a slow housing transaction market. Having said that, holiday spending has remained a sacrosanct as households continue to prioritise spending in this area. The Industrials sector had a tough six months, taking longer than expected to rebuild order books. There have been a range of macro data points and manager surveys to scrutinise since the Budget, but it is too early to determine how the economy will progress and the pace at which interest rates fall or if inflation will creep back into the system. We will take our lead directly from engagement with the management teams of the companies in the portfolio and regular meetings with them enable us to take the temperature of UK businesses across a range of sectors.
We are bottom-up, not top-down, investors and 2024 was a more normal year for the economy and stock markets in the sense that there was not a disturbance caused by large and unusual external shocks. In this environment, markets were more rational and good stock picking was rewarded. Our focus on Quality served us well and the companies held in the portfolio have delivered operationally and earnings have been resilient. We have backed new ideas with conviction, and portfolio turnover has been slightly higher than average driven by two factors. Firstly, our stock screening tool, the Matrix, has helped us be nimble and to identify an appealing array of new Quality, Growth & Momentum ("QGM") ideas which we have added to the portfolio. Our new ideas have been found across a range of sectors, with no themes dominating. Secondly, the recovery has been more drawn out than the market expected for some holdings and, faced with sluggish momentum in some of these, we exited. Stocks that we exited in the first half of 2024 suffered continued weakness in the second half of the year, reassuring us that it was right to move on from those. We have maintained a high level of engagement with management teams, including site visits and meetings with new executive teams and Chairs.
Performance
The period under review lacked momentum as investors awaited the outcome of the Budget. A key aspect of the Budget for UK smaller companies was the reduction in the tax benefit of investing in AIM-listed companies for Inheritance Tax purposes. Whilst not as bad as worst fears, we still believe this reduces the attractiveness of the AIM market for investors, particularly for companies coming to this market in the future. Quality stocks performed well, and we believe that is largely due to earnings resilience - companies achieving and exceeding expectations. Profit warnings have been prevalent across the market and, while the portfolio hasn't been immune to them, avoiding many of them was crucial as even shares of companies on lower ratings sharply underperformed on warnings. The portfolio's relative out-performance was consistent throughout the period, with limited monthly volatility and the Matrix strength and consistency of performance in factors were notable.
The five top contributors to performance during the period were as follows:
Morgan Sindall (1.56% contribution, closing weight 4.8%) - had strong operational delivery and solid financial performance which has driven an exceptionally strong run in the shares, boosted by a high level of activity in fit out and construction.
Cairn Homes (0.92% contribution, closing weight 3.2%) - delivered an excellent first half, driven by scaling its output of highly efficient new homes in Ireland, and its strong order book drove upgrades to outer years.
Raspberry Pi (0.58% contribution, closing weight 1.5%) - has made solid progress, demonstrating both commercial and technology progress with its channel strategy, improving the supply chain position, traction with custom products and new product launches despite muted updates from the wider industry.
XPS Pensions (0.58% contribution, closing weight 4.0%) - delivered strong growth and upgrades to earnings driven by strong client demand and a supportive regulatory backdrop.
Volution (0.56% contribution, closing weight 2.6%) - produced another period of impressive delivery as the business continues to benefit from its focus on the structurally attractive ventilation category and its broad geographic platform. The shares reacted well to the acquisition of the Fantech group, a provider of commercial and residential ventilation solutions in the Australian and New Zealand markets, a strategically relevant deal at a good price.
The five biggest detractors to performance during the period were as follows:
Ashtead Technology (-0.91% contribution, closing weight 2.6%) - despite solid half year results which demonstrated ongoing strong demand and good organic growth, meeting expectations and providing in-line guidance were not enough to support the shares after a strong run over the past 18 months. Its shares are AIM listed and so were also impacted by changes to AIM tax benefits detailed in the Budget.
Hunting (-0.79% contribution, closing weight 1.9%) - despite US headwinds, the non-US business and its diversification over recent years was fuelling significant growth. That growth continues but, with the US slowdown tougher than had been expected, the company has reined its guidance back in towards the bottom of its initial guided range for the year.
Mortgage Advice Bureau (-0.63% contribution, closing weight 1.9%) - the shares have been held back by an FCA market study into pure protection products despite being well positioned for good customer outcomes in this area. Its shares are AIM listed.
Next 15 (-0.60% contribution, closing weight 0.8%) - the shares reacted badly to downgrades to earnings reflecting a softer macro backdrop and loss of a significant contract. Its shares are AIM listed.
Bytes Technology (-0.37% contribution, closing weight 1.2%) - the shares weakened on concerns around IT spend and Microsoft exposure despite good management communication about the short term factors that impact the share price.
Portfolio Activity
Seven new holdings were added to the portfolio during the period.
Savills is a globally diverse real estate agent, predominantly focused on commercial property markets, with leading positions in the UK and Asia. Savills undertakes transactional services (capital markets/leasing), property management, consultancy and investment management. Profits have been depressed as transactions have slowed and, in contrast to its peers, management has continued to invest in the business since Covid. We expect macro headwinds to progressively abate, in response to improved price transparency in commercial markets and a moderation in interest rate expectations. The key catalyst will be a recovery in capital market transactions and leasing volumes in the global real estate market. Savills' different geographies will recover at different times/rates and factors such as debt maturities and higher property yields should prompt progressively higher volumes going forward.
Trustpilot is the world's largest open review-management platform by number of reviews and consumer engagement. It has a huge addressable market across the UK, North America and Europe & Rest of World. Product suite, vertical end-market and global geographic expansion increase Trustpilot's opportunities, and the business is forecast to grow revenues substantially in the coming years. Given the strong network effects of the model, which drive higher growth as penetration rises, this supports long-term revenue growth. As a platform business, there is strong operational leverage and there is margin improvement to enjoy. Trustpilot has demonstrated its ability to deliver profitable growth. Cash generation is strong, as is the balance sheet, and the business benefits from organic growth as well as an ability to do bolt-on M&A and/or return excess cash to shareholders.
ME Group is a high-quality UK-based designer, manufacturer and operator of automated vending machines in high-footfall locations. Photo.ME is a market leader in the automated vending machines segment, with a dominant market share. The business has a newer Wash.ME division which is high growth and high margin. There is potential for further estate expansion in existing geographies, as well as moving into new ones. Further expansion should contribute favourably to the product mix and improve group level margins.
Applied Nutrition is a leading sports nutrition, health and wellness brand, which formulates and creates nutrition products targeted at a wide range of consumers in over 80 countries via a business to business ("B2B") model, The founder has built a strong global disruptive brand with a lean operating base with vertically integrated manufacturing in a market with structural growth dynamics. The B2B model, where distributors control the relationships with end customers in their local markets, is unique in this industry and is a differentiator underpinning future success.
Bloomsbury Publishing is unique both in its independence as a medium-sized publisher and its combination of both general and academic publishing. A strategy focussed on building a 'portfolio of portfolios' ensures good diversification by channel (e.g. digital products, print, eBooks, audio), territory, and markets (academic and consumer publishing). Such diversification means there is more than one way of monetising an asset, thereby adding value and longevity to its portfolio. The Bloomsbury virtuous circle sees investment in quality content driving demand and strong cash flows, which can then be reinvested in further content.
Avon Technologies has a market-leading respirator and helmet portfolio. The business is enjoying good momentum with recent new contract wins and opportunities for operational improvement. The business has a relatively new CEO, Jos Sclater (appointed January 2023) who is executing well and improving financial performance. Avon enjoys strong positions (sole source in many cases) on several multi-year contracts, providing a helpful underpinning and predictability to sales.
Breedon supplies a range of quarried materials and related products/services in the UK, Ireland, and, most recently, the US Midwest (through the 2024 acquisition of BMC). Looking forward, we believe the business is well-placed given its asset-backing, exposure to infrastructure activity, and decentralised local model. These factors alongside management's track record of under-promising and over-delivering are key elements of the investment case. We are positive on Breedon's prospects, driven by a macro recovery in due course, margin normalisation to target/historical levels, and a continuation of its successful M&A track record.
We exited seven holdings during the period.
Big Technologies has been through a period of slower momentum, having missed out on a large bid in the UK, losing a Colombian contract and the business is facing a litigation claim. The combination of this and increased organic investment in the US, has led to downgrades and a loss of investor confidence.
Liontrust Asset Management. The franchise remains competitive and highly geared to an improvement in the operating environment, yet it is currently difficult to gauge when conditions might turn positive.
Robert Walters. Recruitment consultants are facing a prolonged period of challenging conditions, against a backdrop of fee income declines across all regions. Whilst management reiterated its assertion that any material improvement in confidence levels will be gradual, and not likely to commence until calendar year 2025, the business suffered a weaker than anticipated September trading period which compounds pressure on near term forecasts.
YouGov issued an unexpected profit warning in June, driven by tough trading conditions, operational miss steps and increased competition. After profit warnings of this magnitude, the time taken for managements to rebuild credibility with investors can be considerable. With growth prospects severely downgraded we exited the position.
We also exited the positions in Midwich and Marlowe due to uncertainty over their future prospects and Alpha Financial Markets Consulting following a bid from Bridgepoint.
Top Ups for the period included Cairn Homes, Paragon Banking, AJ Bell, Trustpilot, Raspberry Pi, Alpha Group International and Coats. All are trading well and producing positive Matrix scores.
We reduced exposure to GlobalData, JTC, Bytes Technology, 4imprint and Diploma to control the position sizes.
Revenue Account
Revenue earnings per share for the six month period were 5.93p, compared to 6.00p for the comparable period last year. The level of investment income generated from the portfolio was 14.4% lower, due principally to the impact of share buy backs conducted during 2024 which reduce the Company's capital base.
Dividends paid by investee companies were generally in line with expectations. It is worth noting that buy backs have been a feature in the market which has limited the cash that would have been available for dividends.
Outlook
Equity markets have been volatile since the period end, with share-price fluctuations driven by macroeconomic concerns that have ranged from the likely paths for inflation and interest rates, to international trade and the value of Sterling as well as the UK employment market and household expenditure. Policy will be determined by the trajectory of inflation in the coming months as well as the wider growth outlook.
Our investment process has worked well in the current interest rate environment, proving that we do not need interest rates to be at or near zero for quality smaller companies to perform. We saw strong earnings updates in January from a number of companies in the portfolio, accompanied with positive share-price reactions. Earnings resilience and avoiding profit warnings in the portfolio is particularly important against the volatile market backdrop.
The undervaluation of the UK market has been a persistent theme for a number of years, and this remains the case. While UK equities advanced over the course of 2024, they remain undervalued versus history as well as other major markets, providing a foundation on which to build over the course of 2025. Through this uncertainty, we are sticking to our tried and-tested investment process, and backing quality companies that demonstrate earnings momentum and resilience.
Abby Glennie and Amanda Yeaman
abrdn
5 March 2025
Investment Portfolio
At 31 December 2024
Market
Total
value
assets
Company
Industry
£'000
%
Morgan Sindall
Construction and Materials
20,672
4.8
XPS Pensions
Investment Banking and Brokerage Services
17,103
4.0
JTC
Investment Banking and Brokerage Services
15,224
3.5
Cranswick
Food Producers
15,130
3.5
Cairn Homes
Household Goods and Home Construction
13,613
3.2
Hilton Food
Food Producers
13,289
3.1
AJ Bell
Investment Banking and Brokerage Services
12,662
3.0
Hill & Smith
Industrial Metals and Mining
12,659
3.0
Coats
General Industrials
12,506
2.9
Paragon Banking
Finance and Credit Services
12,184
2.8
Top ten investments
145,042
33.8
Gamma Communications
Telecommunications Service Providers
12,137
2.8
Jet2
Travel and Leisure
11,838
2.8
Ashtead Technology
Oil, Gas and Coal
11,215
2.6
Volution
Construction and Materials
10,960
2.6
Premier Foods
Food Producers
10,957
2.6
Alpha Group
Investment Banking and Brokerage Services
10,787
2.5
Diploma
Industrial Support Services
10,455
2.4
Games Workshop
Leisure Goods
10,099
2.4
Tatton Asset Management
Investment Banking and Brokerage Services
9,736
2.3
Hollywood Bowl
Travel and Leisure
9,606
2.2
Top twenty investments
252,832
59.0
Sirius Real Estate
Real Estate Investment Trusts
8,802
2.1
Trustpilot
Software and Computer Services
8,520
2.0
Mortgage Advice Bureau
Finance and Credit Services
8,338
1.9
Hunting
Oil, Gas and Coal
8,325
1.9
Johnson Service
Industrial Support Services
8,132
1.9
4imprint
Media
7,834
1.8
ME Group
Leisure Goods
6,884
1.6
Craneware
Health Care Providers
6,673
1.6
Clarkson
Industrial Transportation
6,550
1.5
GlobalData
Media
6,495
1.5
Top thirty investments
329,385
76.8
Raspberry Pi
Technology Hardware and Equipment
6,417
1.5
Telecom Plus
Telecommunications Service Providers
6,337
1.5
discoverIE
Electronic and Electrical Equipment
5,909
1.3
Chemring
Aerospace and Defense
5,781
1.3
Savills
Real Estate Investment and Services
5,510
1.3
CVS
Consumer Services
5,176
1.2
Bytes Technology
Software and Computer Services
5,094
1.2
Auction Technology
Software and Computer Services
5,085
1.2
Boku
Industrial Support Services
5,044
1.2
Applied Nutrition
Food Producers
4,993
1.2
Top forty investments
384,731
89.7
Renew Holdings
Construction and Materials
4,282
1.0
Volex
Electronic and Electrical Equipment
4,237
1.0
Breedon
Construction and Materials
4,216
1.0
Treatt
Chemicals
4,119
1.0
LBG Media
Media
3,985
0.9
Bloomsbury Publishing
Media
3,624
0.8
Next 15
Media
3,599
0.8
Ricardo
Construction and Materials
2,844
0.7
Avon Technologies
Aerospace and Defense
779
0.2
Total portfolio
416,416
97.1
Net current assetsA
12,490
2.9
Total assets
428,906
100.0
A Current assets less current liabilities. Excludes bank loans of £39,978,000.
Condensed Statement of Comprehensive Income (unaudited)
Six months ended
Six months ended
31 December 2024
31 December 2023
Revenue
Capital
Total
Revenue
Capital
Total
Notes
£'000
£'000
£'000
£'000
£'000
£'000
Net gains on investments held at fair value
-
3,044
3,044
-
19,511
19,511
Income
2
5,378
-
5,378
6,223
-
6,223
Investment management fee
(347)
(1,042)
(1,389)
(354)
(1,063)
(1,417)
Administrative expenses
(398)
-
(398)
(510)
-
(510)
Net return before finance costs and taxation
4,633
2,002
6,635
5,359
18,448
23,807
Finance costs
(321)
(963)
(1,284)
(267)
(663)
(930)
Return before taxation
4,312
1,039
5,351
5,092
17,785
22,877
Taxation
3
-
-
-
-
-
-
Return after taxation
4,312
1,039
5,351
5,092
17,785
22,877
Return per Ordinary share (pence)
5
5.93
1.43
7.36
6.00
20.93
26.93
The total column of the condensed Statement of Comprehensive Income represents the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.
Condensed Statement of Financial Position (unaudited)
As at
As at
31 December 2024
30 June 2024
Notes
£'000
£'000
Non-current assets
Investments held at fair value through profit or loss
416,416
436,689
Current assets
Debtors
631
2,541
Investments in AAA-rated money-market funds
14,432
15,627
Cash and short-term deposits
1
293
15,064
18,461
Current liabilities
Creditors: amounts falling due within one year
(2,574)
(2,097)
Bank loan
8
(39,978)
(39,964)
(42,552)
(42,061)
Net current liabilities
(27,488)
(23,600)
Net assets
388,928
413,089
Capital and reserves
Called-up share capital
26,041
26,041
Share premium account
170,146
170,146
Capital reserve
180,905
203,375
Revenue reserve
11,836
13,527
Equity shareholders' funds
388,928
413,089
Net asset value per Ordinary share (pence)
7
558.70
556.19
The accompanying notes are an integral part of the financial statements.
Condensed Statement of Changes in Equity (unaudited)
Six months ended 31 December 2024
Share
Share
premium
Capital
Revenue
capital
account
reserve
reserve
Total
£'000
£'000
£'000
£'000
£'000
Balance at 30 June 2024
26,041
170,146
203,375
13,527
413,089
Return after taxation
-
-
1,039
4,312
5,351
Buyback of shares into Treasury
-
-
(23,509)
-
(23,509)
Dividends paid (see note 4)
-
-
-
(6,003)
(6,003)
Balance at 31 December 2024
26,041
170,146
180,905
11,836
388,928
Six months ended 31 December 2023
Share
Share
premium
Capital
Revenue
capital
account
reserve
reserve
Total
£'000
£'000
£'000
£'000
£'000
Balance at 30 June 2023
26,041
170,146
217,927
12,473
426,587
Return after taxation
-
-
17,785
5,092
22,877
Buyback of shares into Treasury
-
-
(29,579)
-
(29,579)
Dividends paid (see note 4)
-
-
-
(6,711)
(6,711)
Balance at 31 December 2023
26,041
170,146
206,133
10,854
413,174
The capital reserve at 31 December 2024 is split between realised of £97,624,000 and unrealised of £83,281,000 (31 December 2023 - realised £134,329,000 and unrealised £71,804,000).
The accompanying notes are an integral part of the financial statements.
Condensed Statement of Cash Flows (unaudited)
Six months ended
Six months ended
31 December 2024
31 December 2023
£'000
£'000
Operating activities
Net return before finance costs and taxation
6,635
23,807
Adjustment for:
Gains on investments
(3,044)
(19,511)
Decrease in accrued income
439
846
Increase in other debtors
(4)
(7)
Decrease in other creditors
(56)
(354)
Net cash inflow from operating activities
3,970
4,781
Investing activities
Purchases of investments
(64,626)
(66,559)
Sales of investments
89,915
101,676
Purchases of AAA-rated money-market funds
(53,386)
(67,314)
Sales of AAA-rated money-market funds
54,581
64,594
Net cash inflow from investing activities
26,484
32,397
Financing activities
Interest paid
(1,308)
(888)
Equity dividends paid
(6,003)
(6,711)
Buyback of shares
(23,435)
(29,579)
Net cash outflow from financing activities
(30,746)
(37,178)
Decrease in cash and short-term deposits
(292)
-
Analysis of changes in cash during the period
Opening cash and short-term deposits
293
294
Decrease in cash and short-term deposits as above
(292)
-
Closing cash and short-term deposits
1
294
The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements (unaudited)
For the year ended 31 December 2024
1.
Accounting policies
Basis of accounting. The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 'Interim Financial Reporting' and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in July 2023. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.
The half-yearly financial statements have been prepared using the same accounting policies as the preceding annual accounts.
2.
Income
Six months ended
Six months ended
31 December 2024
31 December 2023
£'000
£'000
Income from investments
UK dividend income
4,237
4,915
Property income distributions
286
98
Overseas dividend income
278
560
Special dividends
155
214
4,956
5,787
Interest income
Interest from AAA-rated money-market funds
422
427
Bank interest
-
9
422
436
Total income
5,378
6,223
3.
Taxation
The taxation expense reflected in the Condensed Statement of Comprehensive Income is based on management's best estimate of the weighted annual corporation tax rate expected for the full financial year. The estimated annual tax rate used for the year to 30 June 2025 is 25%.
4.
Ordinary dividend on equity shares
Six months ended
Six months ended
31 December 2024
31 December 2023
£'000
£'000
2024 final dividend of 8.30p per share (2023 - 8.00p)
6,003
6,711
5.
Return per share
Six months ended
Six months ended
31 December 2024
31 December 2023
p
p
Revenue return
5.93
6.00
Capital return
1.43
20.93
Total return
7.36
26.93
Weighted average number of Ordinary shares
72,666,094
84,942,293
The figures above are based on the following:
Six months ended
Six months ended
31 December 2024
31 December 2023
£'000
£'000
Revenue return
4,312
5,092
Capital return
1,039
17,785
Total return
5,351
22,877
6.
Transaction costs
During the period, expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:
Six months ended
Six months ended
31 December 2024
31 December 2023
£'000
£'000
Purchases
315
237
Sales
61
65
376
302
7.
Net asset value per share
Total shareholders' funds have been calculated in accordance with the provisions of applicable accounting standards. The analysis of total shareholders' funds on the face of the Condensed Statement of Financial Position reflects the rights, under the Articles of Association, of the Ordinary shareholders on a return of assets.
These rights are reflected in the net asset value and the net asset value per share attributable to Ordinary shareholders at the period end.
As at
As at
31 December 2024
30 June 2024
Total shareholders' funds (£'000)
388,928
413,089
Number of Ordinary shares in issue at the period endA
69,613,014
74,270,535
Net asset value per share (pence)
558.70
556.19
A Excluding shares held in treasury.
During the six months ended 31 December 2024 the Company repurchased 4,657,521 Ordinary shares to be held in treasury (31 December 2023 - 7,148,645) at a cost of £23,509,000 (31 December 2023 - £29,579,000).
As at 31 December 2024 there were 69,613,014 Ordinary shares in issue (30 June 2024 - 74,270,535). There were also 34,551,408 Ordinary shares (30 June 2024 - 29,893,887) held in treasury.
8.
Loans
On 2 November 2022, the Company entered into a new three year revolving credit facility of £40 million (the "RCF") with The Royal Bank of Scotland International Limited. The RCF has a further uncommitted accordion provision allowing the Company to request an increase, subject to lender's approval, of up to an additional £25 million. At 31 December 2024 £40 million was drawn down under the RCF at an interest rate of 6.25%.
The RCF is shown in the Condensed Statement of Financial Position net of unamortised expenses of £22,000 (30 June 2024 - £36,000).
The terms of the RCF contain covenants that the Consolidated Net Tangible Assets as defined in the agreement must not be less than £200 million, the percentage of borrowings against the Adjusted Portfolio Value as defined in the agreement shall not exceed 30%, and the portfolio contains a minimum of thirty eligible investments (investments made in accordance with the Company's investment policy). The Company complied with all covenants throughout the year.
9.
Analysis of changes in net debt
At
Non-cash
At
30 June 2024
Cash flows
movements
31 December 2024
£'000
£'000
£'000
£'000
Cash and short-term deposits
293
(292)
-
1
Investments in AAA-rated money-market funds
15,627
(1,195)
-
14,432
Debt due in less than one year
(39,964)
-
(14)
(39,978)
Total net debt
(24,044)
(1,487)
(14)
(25,545)
At
Non-cash
At
30 June 2023
Cash flows
movements
31 December 2023
£'000
£'000
£'000
£'000
Cash and short-term deposits
294
-
-
294
Investments in AAA-rated money-market funds
14,129
2,719
-
16,848
Debt due in less than one year
(24,938)
-
(13)
(24,951)
Total net debt
(10,515)
2,719
(13)
(7,809)
10.
Fair value hierarchy
FRS 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy shall have the following classifications:
Level 1:
unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.
Level 2:
inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.
Level 3:
inputs are unobservable (ie for which market data is unavailable) for the asset or liability.
All of the Company's investments are in quoted equities (30 June 2024 - same) that are actively traded on recognised stock exchanges, with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the investments (31 December 2024 - £416,416,000; 30 June 2024 - £436,689,000) have therefore been deemed as Level 1.
The investment in AAA rated money-market funds of £14,432,000 (30 June 2024 - £15,627,000) is considered to be Level 2 under the fair value hierarchy of FRS 102 due to not trading in an active market.
11.
Transactions with the Manager
The Company has an agreement with abrdn Fund Managers Limited ("aFML") for the provision of investment management, secretarial, accounting and administration and promotional activity services. The Company agreed a new managament fee charged on net assets (total assets less total liabilities), effective as of 1 July 2023. During the six months ended 31 December 2024 the management fee paid to aFML was charged by applying a tiered rate of 0.75% to the first £175 million of net assets, 0.65% of net assets between £175 million and £550 million and 0.55% of net assets above £550 million. The contract is terminable by either party on six months' notice.
During the period £1,389,000 (31 December 2023 - £1,417,000) of investment management fees were earned by aFML, with a balance of £676,000 (31 December 2023 - £1,417,000) due at the period end.
The Company also had an agreement with aFML for the provision of secretarial services. It was agreed between the Company and the Manager that payment under this agreement for secretarial services would cease with effect from 1 January 2024. During the period, fees of £nil (31 December 2023 - £37,000) exclusive of VAT were earned by aFML for the provision of secretarial and administration services. The balance due to aFML at the period end was £nil (31 December 2023 - £94,000) exclusive of VAT.
The Manager also receives a separate promotional activities fee which during the period was based on an annual amount of £206,000 exclusive of VAT payable quarterly in arrears. During the period, a fee of £103,000 (31 December 2023 - £109,000) exclusive of VAT was payable to the Manager, with a balance of £51,500 (31 December 2023 - £55,000) exclusive of VAT being due at the period end.
12.
Subsequent events
Subsequent to the period end, up to the date of approval of this Report, the Company repurchased a further 3,445,984 Ordinary shares to be held in treasury at a cost of £17,311,000.
13.
Half-Yearly Financial Report
The financial information in this Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the year ended 30 June 2024 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006. The half-yearly financial statements have been prepared using the same accounting policies as the preceding annual accounts.
14.
This Half-Yearly Financial Report was approved by the Board on 5 March 2025.
Alternative Performance Measures
Alternative performance measures ("APMs") are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes FRS 102 and the AIC SORP.
The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies. Where the calculation of an APM is not detailed within the financial statements, an explanation of the methodology employed is provided below:
Discount
A discount is the percentage by which the market price is lower than the Net Asset Value ("NAV") per share.
31 December 2024
30 June 2024
Share price
a
502.00p
486.50p
Net Asset Value per share
b
558.70p
556.19p
Discount
(a/b)-1
10.1%
12.5%
Net gearing
Net gearing measures the total borrowings less cash and cash equivalents divided by shareholders' funds, expressed as a percentage. Under AIC reporting guidance cash and cash equivalents includes amounts due from and to brokers at the period end as well as cash and short-term deposits.
31 December 2024
30 June 2024
£'000
£'000
Total borrowings
a
(39,978)
(39,964)
Cash and short-term deposits
1
293
Investments in AAA-rated money-market funds
14,432
15,627
Amounts due from brokers
-
-
Amounts payable to brokers
-
-
Total cash and cash equivalents
b
14,433
15,920
Net gearing (borrowings less cash & cash equivalents)
c=a+b
(25,545)
(24,044)
Shareholders' funds
d
388,928
413,089
Net gearing (borrowings less cash & cash equivalents)
e=c/d
6.6%
5.8%
Ongoing charges ratio
The ongoing charges ratio has been calculated in accordance with guidance issued by the AIC, which is defined as the total of investment management fees and recurring administrative expenses and expressed as a percentage of the average daily net asset values published throughout the year. The ratio reported at 31 December 2024 includes actual costs and charges for the six months and includes a forecast for costs, charges and the asset base for the remaining six months of the financial year ending 30 June 2025.
31 December 2024A
30 June 2024B
£'000
£'000
Investment management fees
a
2,755
2,817
Administrative expenses
b
789
876
Less: non-recurring chargesC
c
(5)
(5)
Ongoing charges
d=a+b+c
3,539
3,688
Average net assets
e
413,819
402,438
Ongoing charges ratio (excluding look-through costs)
f=d/e
0.86%
0.92%
Look-through costsD
g
-
-
Ongoing charges ratio (including look-through costs)
h=f+g
0.86%
0.92%
A Forecast for the year ending 30 June 2025 based on estimates as at 31 December 2024.
B For the year ended 30 June 2024.
C Comprises professional fees not expected to recur.
D Calculated in accordance with AIC guidance issued in October 2020 to include the Company's share of costs of holdings in investment companies on a look-through basis.
Total return
NAV and share price total returns show how the NAV and share price have performed over a period of time in percentage terms, taking into account both capital returns and dividends paid to shareholders. NAV total return assumes reinvesting the net dividend paid by the Company back into the NAV of the Company with debt at fair value on the date on which that dividend goes ex-dividend. Share price total return assumes reinvesting the net dividend back into the share price of the Company on the date on which that dividend goes ex-dividend.
Share
Six months ended 31 December 2024
NAV
price
Opening (p)
a
556.19
486.50
Closing (p)
b
558.70
502.00
Increase (p)
c=b-a
2.51
15.50
% increase
d=c/a
0.5%
3.2%
Uplift from reinvestment of dividendsA
e
1.4%
1.7%
Total return increase
d+e
1.9%
4.9%
A The uplift from reinvestment of dividends assumes that the dividend of 8.30p paid by the Company in November 2024 was reinvested in the NAV and share price of the Company on the ex-dividend date.
By order of the Board
abrdn Holdings Limited
Company Secretary
5 March 2025
Please note that past performance is not necessarily a guide to the future and the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested
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