REG - abrdn Smll Co's IT - Half-year Report
13/09/2022 07:01
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RNS Number : 1645Z abrdn Smaller Companies Inc Tst plc 13 September 2022
abrdn Smaller Companies Income Trust plc
Half Yearly Financial Report for the six months to 30 June 2022
OBJECTIVE
The objective of the Company is to provide a high and growing dividend and
capital growth from a portfolio invested principally in the ordinary shares of
smaller UK companies and UK fixed income securities.
BENCHMARK
Numis Smaller Companies ex Investment Trusts Index - effective from 1 January
2020; FTSE Small Cap ex Investment Trusts Index (total return) - up to 31
December 2019
MANAGEMENT
The Company's alternative investment fund manager is abrdn Fund Managers
Limited ("aFML" or "the Manager"), previously named Aberdeen Standard Fund
Managers Limited, authorised and regulated by the Financial Conduct Authority.
The Company's portfolio is managed on a day-to-day basis by Aberdeen Asset
Managers Limited ("AAML" or "the Investment Manager") by way of a delegation
agreement in place between aFML and AAML.
Performance Highlights
Performance Highlights
Net asset value total return(A) Numis Smaller Companies ex Inv Trust Index
Six months ended 30 June 2022 Six months ended 30 June 2022
-30.0% -20.2%
Year ended 31 December 2021: +30.4% Year ended 31 December 2021: +21.9%
Earnings per Ordinary share (revenue) Share price total return(A)
Six months ended 30 June 2022 Six months ended 30 June 2022
6.10p -29.6%
Six months ended 30 June 2021: 4.14p Year ended 31 December 2021: +22.9%
Discount to net asset value(A) Net gearing(A)
As at 30 June 2022 As at 30 June 2022
15.7% 4.8%
As at 31 December 2021: 15.3% As at 31 December 2021: 4.5%
(A) Considered to be an Alternative Performance Measure. Further details can
be found below.
Performance (total return)
Six months ended 1 year ended 3 years ended 5 years ended
30 June 2022 30 June 2022 30 June 2022 30 June 2022
Share price(A) -29.6% -21.3% -1.5% +29.8%
Net asset value per Ordinary share(A) -30.0% -24.4% -0.9% +16.1%
Composite benchmark(B) -20.2% +17.2% +3.2% +0.3%
(A) Considered to be an Alternative Performance Measure. Further details can
be found below.
(B) Comprises the Numis Smaller Companies (exc Inv Trusts) from 1 January
2020 and the FTSE SmallCap Index (exc Inv Trusts) up to 31 December 2019.
Source: aFML, Lipper & Morningstar.
Financial Calendar, Dividends and Highlights
Payment dates of quarterly dividends January 2022
April 2022
July 2022
October 2022
Financial year end 31 December 2022
Expected announcement of results for year ending March 2023
31 December 2022
Annual General Meeting 4 May 2023
Financial Highlights
30 June 2022 31 December 2021 % change
Shareholders' funds (£'000) 67,679 97,840 -30.8
Net asset value per Ordinary share (with debt at par value) 306.10p 442.52p -30.8
Share price (mid-market) 258.00p 375.00p -31.2
Discount to net asset value per Ordinary share(A) 15.7% 15.3%
Net gearing(A) 4.8% 4.5%
Ongoing charges ratio(A) 1.31% 1.20%
(A) Considered to be an Alternative Performance Measure. Further details can
be found below.
Chair's Statement
Performance
In my first statement as Chair of your Company, I would have liked to convey a
more positive message on the Company's performance over the six month period
to the end of June 2022. However, in what has been a very difficult time for
smaller companies, the Company's net asset value returned -30.0%, versus a
benchmark return of -20.2%.
Looking over a five year period, however, the Company continues to outperform
the index; with a total return of +16.1% versus the composite benchmark of
+0.3% (the Company's benchmark prior to 1 January 2020 was the FTSE Smaller
Companies ex Investment Trust Index).
The first half of 2022 was an unremittingly poor half for global equity
markets driven by the conflict in Ukraine, ongoing fears over high inflation
and the risk of a global recession. This has resulted in a severe rotation
from "growth" stocks into "value" stocks; an environment in which your
Managers Quality, Growth and Momentum ("QGM") process has been out of favour.
Correspondingly, the Company's share price has underperformed over the first
six months. However, the quality focus inherent in the Investment Manager's
investment process means that the companies in which they invest are resilient
and capable of withstanding the current environment. The Board challenges
these views appropriately and maintains confidence in the current approach
over the longer term; nonetheless, we do understand that the performance in
this period has been disappointing.
Discount
Despite fluctuations over the period, the Company's discount to net asset
value as at 30 June 2022 was 15.7%, compared with 15.3% at the end of December
2021. The discount is regularly monitored by the Manager and the Board.
Company Gearing and Debt
The Company renewed its £5million revolving credit facility with the Royal
Bank of Scotland International Limited, London Branch for a two year period in
April 2022, and this sits alongside the Company's existing five year
£5million fixed rate loan which expires in April 2023.
Over both facilities combined a total of £7million is currently drawn down.
This takes the Company's gearing level to 4.8% at the end of June 2022,
compared with 4.5% at the end of December 2021. The slightly higher figure
does not reflect an increase in the Company's borrowing, merely a difference
in the asset values on which the gearing figures are calculated.
Dividend
For the first and second quarters of 2022, the Board announced dividends of
2.40p each per Ordinary share (2021 - 2.15p each), an increase on last year's
equivalent figures of 11.6%.
Investors have been through a volatile first half of the year; however, UK
dividends had a strong outturn. After a solid first quarter, the second
quarter did not disappoint. The total dividend pay-out jumped 38% year-on-year
reaching £37 billion, according to Link dividend monitor. The Mining, Banks
and Oil sectors, all of which are large cap dominated, accounted for three
quarters of the second quarter's year-on-year increase. Mining was the biggest
contributor, on the back of favourable cyclical fluctuations and rising mining
profits.
The Board has been pleased with the resilience of the dividends the Company
has received from its portfolio of smaller companies over the period and
special dividends have been paid out from six of its holdings. In spite of
solid dividend progression to date the Investment Manager believes that
headwinds will increase for 2023. A recession might curtail the ability and
willingness of many companies to raise dividends, as earnings come under
pressure and balance sheets under more scrutiny in that environment. However,
your Manager's focus on quality and balance sheet strength should provide
relative resilience, with the Company's holdings often better placed versus
peers to remain resilient when it comes to making their dividend payments.
The Company's Name Change and Manager's Rebranding
You may recall that we announced a change of name for the Company in our last
Annual Report to abrdn Smaller Companies Income Trust plc, which took effect
on 7 January 2022.
This followed a change of name by Standard Life Aberdeen plc to abrdn plc in
July 2021 and an extensive rebranding and marketing campaign.
Since the period end the Manager's name has also been changed from Aberdeen
Standard Fund Managers Limited to abrdn Fund Managers Limited ("aFML" or the
"Manager"), with effect from 1 August 2022. We expect the Investment Manager
and Company Secretary (Aberdeen Asset Managers Limited and Aberdeen Asset
Management PLC respectively) to be renamed in the coming months.
Portfolio Manager
On 5 September 2022, the Company announced that Amanda Yeaman, who has been
Co-Manager of the Company's portfolio alongside Abby Glennie since November
2020, will become Lead Manager, supported by Abby.
This change will take effect from 1 January 2023.
Board Changes & AGM
Rosalyn Breedy was appointed as an independent Non-Executive Director in
January 2022 and elected to the Board by shareholders at the Company's Annual
General Meeting ("AGM") on 5 May 2022. Robert Lister retired as an independent
Non-Executive Director and Chairman of your Company at the conclusion of that
meeting and the Board extends their thanks again to Robert for his stewardship
during his tenure.
We were delighted to welcome shareholders to a physical AGM this year,
following a two year hiatus due to government restrictions imposed as a result
of the pandemic. For shareholders who were unable to attend or for those
wishing to hear it again, your Manager's presentation, which was delivered at
the meeting, has been uploaded to the Company's website,
abrdnsmallercompaniesincome.co.uk.
Outlook
The economic and political backdrop is challenging. Central banks have reacted
more forcefully than expected at the start of the year to stem rising
inflation. At the time of writing, economic indicators are suggesting a
recession although it remains to be seen how deep or prolonged that might be.
There is political uncertainty in terms of any implications the new Prime
Minister could have on fiscal policy and the UK's post-Brexit relationship
with Europe. Furthermore, the war in Ukraine continues to undermine the mood
of markets, with the threat of further interruptions to energy supplies and
pricing uncertainty; a persistent concern. The combination of these factors is
creating a persistently uncertain environment, which we anticipate will
continue to weigh on markets. In a recessionary or continued low economic
growth environment, your Board believes that the market will look more towards
quality companies with resilience, reliability, visible revenue streams and
strong balance sheets. In this case, on a relative basis, your Manager's
quality focus should become increasingly attractive.
In an economic environment where growth becomes scarcer, it becomes more
valuable, and your Manager's exposure to companies with QGM characteristics
enables them to identify companies that can deliver sustained earnings growth
in difficult macro-environments.
Dagmar Kent Kershaw
Chair
12 September 2022
Other Matters
Principal Risks and Uncertainties
There are a number of risks which, if realised, could have a material adverse
effect on the Company and its financial condition, performance and prospects.
The Board has identified the principal risks and uncertainties facing the
Company together with a description of the mitigating actions it has taken.
These can be summarised under the following headings:
- Investment and Market
- Investment Portfolio Management
- Gearing
- Income and Dividend
- Operational
- Major Market Event or Geopolitical Development
Details of these risks are provided in detail on pages 19 to 21 of the 2021
Annual Report.
The Board monitors these principal risks closely and has a process to identify
and assess emerging risks, such as climate change and geopolitical
developments.
The increasing political and economic uncertainty which could affect markets,
particularly in reaction to higher interest rates and the volatility
associated with the conflict in Ukraine, received particular focus in the
reporting period.
The Board is also aware of the elevated threat posed by climate change and
continues to monitor, through the Investment Manager, the potential risk that
the companies in the portfolio may fail to adapt to the requirements imposed
by climate change.
In all other respects, the Company's principal risks and uncertainties have
not changed materially since the year end, nor are they expected to change in
the second half of the financial year ended 31 December 2022.
Going Concern
In accordance with the Financial Reporting Council's Guidance on Risk
Management, Internal Control and Related Financial and Business Reporting
issued in September 2014, the Directors have undertaken a rigorous review and
consider both that there are no material uncertainties and that the adoption
of the going concern basis of accounting is appropriate. The Company's assets
consist principally of equity shares in companies listed on the London Stock
Exchange and in most circumstances are realisable within a short timescale.
The Directors have a reasonable expectation that the Company has adequate
financial resources to continue in operational existence for the foreseeable
future and at least twelve months from the date of approval of this Half
Yearly Report. Given that the Company's portfolio comprises primarily "Level
One" assets (listed on a recognisable exchange and realisable within a short
timescale), and the Company's relatively low level of gearing, the Directors
believe that adopting a going concern basis of accounting remains appropriate.
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 International Accounting Standard 34 'Interim Financial
Reporting'
- the Interim Board Report includes a fair review of the
information required by rule 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 financial year)
- the Interim Board Report includes a fair review of the
information required by 4.2.8R (being related party transactions that have
taken place during the first six months of the financial year and that have
materially affected the financial position of the Company during that period;
and any changes in the related party transactions described in the last Annual
Report that could do so).
The Half Yearly Financial Report for the six months to 30 June 2022 comprises
the Interim Board Report and a condensed set of financial statements.
For and on behalf of the Board
Dagmar Kent Kershaw,
Chair
12 September 2022
Investment Manager's Review
The Company delivered a NAV total return of -30.0%, underperforming the Numis
Smaller Companies (ex- Investment Trusts) return of -20.2% for the six month
period to 30 June 2022.
Equity markets
The UK stock market, as represented by the FTSE All-Share Index, fell by -4.6%
over the first half of 2022, although the UK market remains one of the
best-performing developed markets in 2022. The picture was more mixed beneath
the negative headline figure, with shares of large FTSE 100 Index companies
only falling by -1.0% but shares in the mid-sized companies of the FTSE 250
Index, which are typically more focused on the domestic UK economy, falling
heavily, by -19.4%. Smaller companies were also particularly weak, with the
Numis Smaller Companies (ex Investment Trusts) Index (total return) returning
-20.39%.
The FTSE 100 Index is home to many energy and mining companies, whose shares
have benefited from high commodity prices, particularly after Russia's
invasion of Ukraine. However, the small cap market in the UK has sold off
sharply, driven by the risk of trade where investors typically make a flight
towards the perceived safety of larger cap areas. Smaller companies also do
not benefit from the support of the large weightings in areas such as
resources, banks and energy that are prevalent within the FTSE 100 Index.
Growth stocks in particular have underperformed in the rising rate
environment, with information technology being one of the worst-performing
sectors over the six month period. Consumer discretionary stocks also led the
market weakness as this cyclical sector was affected by rising consumer
prices. Utilities and energy were the only sectors to generate positive
returns: investors were attracted by the defensive attributes of utilities, in
view of fears that the weakening economic outlook could lead to a recession;
and the energy sector was boosted by surging oil and gas prices, particularly
after the outbreak of war in Eastern Europe.
Inflation continued to rise in the UK over the period, with annual consumer
price inflation ("CPI") climbing steadily to hit a 40-year high of 9.4% in
June 2022, from 5.5% in January 2022. The Bank of England reacted to rising
inflation with five consecutive interest-rate rises, with the Base Rate
reaching 1.25% in June 2022.
We expected the UK consumer to see disposable income squeezed; however, that
squeeze has tightened even more with the rise in the energy cap in April 2022,
food prices now rising by some 7-8% year-on-year and petrol/diesel approaching
200p per litre and with tax rises and the tax take at the highest level since
the 1950's. It appears that consumers are continuing to spend their pandemic
'enforced savings' and consumer credit is growing again. Looking forward, the
energy cap is likely to rise considerably if the Russia/Ukraine conflict
continues to constrain gas supplies to Europe. Markets also remain concerned
over a wage-price spiral.
One thing that the market weakness has helped to drive is continued buoyant
Mergers and Acquisitions ("M&A"), with UK companies looking even cheaper
to overseas buyers. However, there is uncertainty over new policies now that
the new Prime Minister has taken office.
Performance
The period was a challenging one for performance for the Company with our
style being out of favour in the market as "top down" global macro factors
have taken the lead over "bottom up" stock picking. Smaller companies markets
have been difficult, seeing dramatic falls during 2022 in contrast with the
last half of 2021, which was a strong period for the Company, with quality
growth names proving resilient to the stop/start nature of the pandemic
recovery. However, there has been a strong value tilt to the market since the
turn of the year, with investors favouring cheaper, value companies. Profit
taking has occurred extensively in our typical quality growth businesses
despite their earnings resilience and continuing growth.
Telecom Plus, the UK's only fully integrated multiservice provider to
households has been the top contributor to performance over the period, as its
business model and offering is ideally placed against the current market
backdrop. Trading under the brand name 'Utility Warehouse' the business
derives significant operating efficiencies by spreading a single set of
overheads across multiple revenue streams they receive from their customers.
Telecom Plus provides savings (c. £300 pa) for multi-service customers, which
is significant given the scale of the increase in the cost of living.
Furthermore, the energy supply market has recently gone through fundamental
change, with half of the suppliers ceasing to trade last year, giving market
share gain opportunities. We are increasingly confident that the marketplace
for energy supply has permanently changed and that the Telecom Plus model is
well positioned for the new market conditions. The business has seen a
significant improvement in new customer growth as the energy and cost of
living crisis has unfolded, supported by a more engaged salesforce
post-pandemic, driving upgrades to earnings.
Assura owns primary healthcare properties in the UK, comprising local GP
surgeries and larger primary care centres. Assura has been a positive
contributor driven by the defensive nature of the business, namely their
assets, lease structures, balance sheet strength and demographic trends during
a period of heightened uncertainty for wider equity markets. As an owner of
primary healthcare facilities across the UK, Assura benefits from long-dated
leases (twelve year average) of which 82% are underpinned by the NHS. A
significant proportion of the NHS estate and primary healthcare facilities
across the UK are deemed unfit for purpose; and, as a developer, Assura
remains well placed to develop, finance and operate new, modern, energy
efficient (often net zero) buildings at a time when the government's focus is
on both the resilience of the healthcare system (and its cost) in the wake of
the pandemic. Primary healthcare, where the cost of patient treatment is
significantly lower than other settings, remains well placed to benefit from
any investment. Lease structures also lend themselves to resilience in periods
of heightened inflation. One third of income across the portfolio benefits
from fixed, retail prices index ("RPI"), CPI or other uplifts, while
two-thirds is subject to open market review. Open market reviews are assessed
versus a building replacement cost index, with significant construction cost
inflation rental growth only now beginning to accelerate from a low base,
adding to the attraction of the income (c.4% dividend yield). Assura was
assigned an A- (stable outlook) rating from Fitch in the period (January 2022)
highlighting its resilience, despite market uncertainty.
Chesnara outperformed its peers and the broader market in the first half of
the year, following an increase in the pace of bolt-on acquisitions (two deals
closed in the first half and another was announced in July 2022). Importantly,
it has funded this out of cash resources and £200m sub debt issue in January
2022, which has effectively 'pre-funded' future M&A. This inorganic
expansion has built book value through purchase at a discount to book values,
and improved visibility on cash coverage for the dividend, which has grown at
a steady 3% pace since the company listed in 2004. This track record is
unmatched among UK insurers. The 8% yield has been a big part of the total
return relative to the market.
Retailers Seraphine and Halfords detracted from performance in the period. The
retail sector has had a torrid start to the year on fears of a consumer
collapse and there have been downgrades across the sector. Consequently, share
prices have fallen in the face of macro concerns and rising costs.
Halfords' full year results, were better than expected as the business has
executed against its strategy to become an increasingly services led
multi-channel specialist. In the outlook statement, however, they flagged that
the backdrop had deteriorated rapidly in the first six months of 2022,
primarily due to the pressure from rampant cost inflation. While the business
is leaning into favourable secular trends and has strategic and operational
initiatives, they flagged headwinds from foreign exchange, discretionary
squeeze and fuel prices, all of which lead to downgrades to earnings.
Seraphine, the online maternity wear retailer suffered a profit warning due to
supply-chain pressure and poor financial management in of duties in other
territories. We significantly reduced exposure to the name given its poor
matrix score, ongoing supply-chain and inflationary challenges and weakening
consumer backdrop.
Asset manager Liontrust saw downgrades to earnings as the Assets under
Management (AuM) outturn was lower, reflecting its exposures to UK Retail and
equities and also its growth style. This, together with small net outflows
resulted in a reduction to analysts' earnings estimates. The de-rating of the
shares has been severe and we expect upside once markets stabilise and flows
recover. It is also supported by the well underpinned 8% dividend yield.
Portfolio Activity
Since the end of 2021, we have added a new position in Pets at Home, the
largest specialist pet care retailer in the UK, operating two main divisions;
retail, which sells pet products including food and accessories, and vet
practices. The company scores well on our matrix, demonstrating the
operational and earnings momentum in the business which is allowing it to take
more market share in a growing market. We are also seeing a transformation of
the vet business with growth and significant margin expansion potential ahead.
The shares have an attractive free cashflow yield of 5.5% giving a well-funded
3% dividend yield. The balance sheet is net cash, providing optionality for
M&A. More detail on this company is provided in the case study on page 16
of the Half Yearly Report.
We added a new position in the high matrix scoring and high yielding
developer, Watkin Jones. We had two very strong meetings with the management
team and believe that prospects for the business are excellent. End market
demand for high quality student accommodation, built-to-rent and affordable
housing are supportive and are likely to remain so. Moreover, the company's
expanded pipeline has scope to grow further, improving visibility and
de-risking future delivery. Their value add is in site selection, design, and
construction, and because they are paid on a percentage of completion basis,
the return on capital is very high. The risk is the cyclicality of the
business model, which is mitigated by consistently having a net cash balance
sheet, together with typically only commencing construction when the company
has agreed a contract with an institution who will own it.
A new position was added in defence company, Chemring. Over a short time, we
have watched the management team realign the portfolio and transition to a
higher quality business. Strong progress has been made, evidenced by solid
earnings growth, cash conversion of EBITDA >100% in each of the last three
financial years, and improved safety metrics. Visibility has improved,
underpinned by a strong order book and sole source positions on key growth
programmes. Such improvements in the business have been evidenced by the
delivery of consistent upgrades to earnings. Russia's invasion of Ukraine has
seen a sea change in opinion towards defence spending in the West, and it has
also seen a reset in terms of how the sector is viewed from an Environmental,
Social and Governance ("ESG") perspective. While there remains much
uncertainty as to the speed at which defence spend materialises into orders
for the sector, we appear to be entering a multi-year period of elevated
defence and security spending and Chemring's refocused portfolio is well
aligned to areas of growing spend. In addition to end market strength we see
multiple stock specific drivers particularly around 'Roke' a high margin
division with expertise around Artificial Intelligence, Machine Learning and
Cyber and Data Networks. Chemring's significantly improved balance sheet also
provides optionality for M&A alongside returns to shareholders. Chemring
has a high matrix score and the shares yield c.2.2%.
More recently, we added a new position in North Sea based exploration and gas
production company Serica Energy ("Serica"). Five years of underinvestment in
the North Sea had already led to acute gas shortages even before Russia's
invasion of Ukraine. The invasion of Ukraine is expected to be prolonged and
lead to a long term embargo on Russian gas across Europe. The consensus on
twelve month earnings expectations for the Exploration & Production sector
as a whole is strong, which is reflective of forecasts for tight oil and gas
markets that are set to extend through the second half of the year, into 2023.
We favour Serica against this backdrop as the credential of the business fits
our Quality Growth and Momentum process. The management team have a good track
record of execution, the balance sheet is net cash and at the recent AGM,
management reiterated production guidance and increased the capital return
through an additional interim dividend on top of the existing final dividend.
This raised the total annual dividend to 15p per share and dividend yield to
c5%. The shape and impact of the windfall profits tax on the business is
certain, and ESG credentials are strong, reflected in the company's MSCI A
rating.
We sold our position in Moneysupermarket. A series of concerns ranging from
management change to regulation to volatile end markets has led to a gradually
declining earnings momentum. The business has had to deal with supply shocks
in all of its key segments. While the money and travel segments are seeing
recovery post pandemic, trading in the home services division remains
difficult due to the ongoing energy crisis, and a regulatory review clouds the
insurance market outlook. Whilst the forecast free cash flow should be
sufficient to support the dividend, the poor matrix score, together with
concerns over the future trajectory of the competitive landscape lead us to
exit the position.
We exited our position in language translation company, RWS, following a
strategic review that pointed to slower growth for the business, and near term
margin pressure. We also exited our position in Clipper Logistics following
the bid from US listed GXO.
The June 2022 update from retailer ProCook revealed that, while they are
gaining market share, the kitchenware sector has struggled in recent months
due to weaker footfall and conversion. The business has good long term growth
prospects; however, the challenges around earnings progression meant that we
took the decision to exit the position.
We reduced the portfolio's overall exposure to the retail sector during the
period under review. Consumers are facing an erosion of spending power,
meaning that retailers' margins will carry some of the pain. Consumers seem
well disposed to enjoy the summer; however, autumn is when we expect them to
feel the impact of weaker spending power, which will really impact retail
volumes. While the retail companies in the Company's portfolio are structural
growth stocks, offering market share gains, attractive return on capital
employed excellent cash conversion, lower operational gearing/lower downgrade
risk and compelling long term growth prospects, we consider it prudent to
reduce expose to the sector in this environment.
Fixed income
As with other financial markets corporate bonds suffered a very difficult
first six months of the year. Inflation continued to rise and policymakers
moved to a more hawkish stance in many jurisdictions. This has caused yields
to rise on expectations of higher rates and credit spreads to widen as
economic slowdown has been priced-in. Although it is fair to assume that
inflation expectations will fall from here, the impact of higher rates,
combined with the challenges being faced by consumers as well as corporates
from higher prices will be negative on economic activity. A soft landing has
been priced-in to corporate bond markets and spreads offer some good value
over the medium term despite some downside risk.
Holdings in the Company are investment grade rated and credit quality in this
market remains strong. Corporates in all sectors have displayed prudence in
the aftermath of the pandemic and leverage remains relatively low on an
historic basis. The Corporate Bond All Maturities Index was down over 14% over
the period, with the back up in government yields being the main driver. The
bonds issued by Barclays, HSBC and NatWest in the financial sector all fell in
value as the banking sector was one of the sterling market's underperformers.
Shorter dated issues in the Company were the best performers with Heathrow
5.225% 2023 down only 0.43%, while the longest maturity, issued by NatWest,
was down slightly more than 11%. Following the end of the period a recovery in
spreads has been noted and the Company's holdings have delivered some positive
returns.
ESG
Without impacting the long term stability and strength of our matrix-driven
QGM investment process we have built comprehensive ESG more formally into our
thinking in recent years. Through the "quality" aspects of our process, we
have subliminally been doing this for many years. ESG is embedded in all our
research and investment decisions. abrdn has a well-resourced ESG investment
team, with whom we work closely. We also have a dedicated smaller companies on
desk ESG analyst, Tzoulianna Leventi. When analysing the ESG credentials of
businesses, we are looking for both risks and opportunities. As a long term
shareholder, many companies are keen to engage with us, and we can use our
in-house ESG expertise to provide guidance. The large AUM we manage in UK
smaller companies delivers excellent engagement opportunities with management
teams, and the ability to help those companies to improve both their ESG
qualities but also how they demonstrate those to the market. Where we can help
a company to improve their ESG credentials, this is beneficial as it may lead
to a higher stock rating, and can also reduce the risk of holding that
investment.
Outlook
It is disappointing that our investment process has not provided the
resilience in this bear market that it provided in previous tougher economic
environments. The markets focus over the first six months of the year has been
very much top-down and macro-driven. The market started the year with optimism
about the recovery from the pandemic, where value and recovery stocks were in
favour. With the emergence of persistent inflation, constrained supply chains,
and the conflict in Ukraine, markets have sold off hitting growth stocks
aggressively which has driven the underperformance of our investment process.
At the time of writing, the market is still macro and geopolitical driven and
the sell-off continues. Market recoveries tend to come at the 'point of
maximum pain' and economic data suggests that we are not there yet.
As we tip towards recession we believe quality will be more of a driver of
markets as investors seek resilience. In which case, on a relative basis, our
quality focus should become increasingly attractive to the market. In this
environment where growth becomes scarcer, companies still achieving earnings
growth tend to become more valuable. Our ability to identify companies which
can deliver sustained earnings growth should be rewarded. In the Global
Financial Crisis, the market cared about quality and earnings; it did not care
about value as seen through the underperformance of perceived
cheap stocks.
We are seeing a period of increasing earnings downgrades across the market
and, with that, comes the importance of stock selection and an active
approach. Resilience of earnings is also linked to dividends, so is a
particular focus for this Company.
Small and mid-cap markets are inherently higher risk than large cap and, in
this market sell-off, we've seen them, as we have many times in history,
sell-off more aggressively. This has been exacerbated by the dominance of
sectors such as resources and banks in the FTSE 100, holding up the large cap
returns well relative to mid-caps and other geographies. We believe small and
mid-caps will once again have their time, and tend to lead in a market
recovery. Timing can be challenging, especially in markets with such
volatility as these, so we encourage investors to take a long term view with a
strategic allocation to the asset class.
Abby Glennie & Amanda Yeaman
Aberdeen Asset Managers Limited
12 September 2022
Ten Largest Investments
As at 30 June 2022
Telecom Plus Morgan Sindall
Reseller of telecom and utilities service, under the Utility Warehouse brand. UK leading business in construction and regeneration work.
Safestore Softcat
Safestore is the UK's largest and Europe's second largest provider of Value added technology reseller in UK.
self-storage.
Sirius Real Estate Alpha Financial Markets Consulting
Leading owner and operator of business parks, offices and industrial complexes Leading global consulting company to assist asset management, wealth
in Germany. management and insurance industries.
Tatton Asset Management discoverIE Group
UK discretionary fund manager providing services to UK's financial advisers International group of businesses that designs, manufactures and supplies
enabling them to provide a better service to their clients. highly differentiated components for electronic applications.
Robert Walters Games Workshop
Specialist professional recruiter. Global retailer of hobbyist products, selling through own retail stores,
online, and through trade partners. Owner of the IP of Warhammer.
Portfolio - Equities
At 30 June 2022
Valuation Total
2022 portfolio
Company Sector Classification £'000 %
Telecom Plus Telecommunications Service Providers 4,129 5.8
Morgan Sindall Construction & Materials 2,647 3.8
Safestore Real Estate Investment Trusts 2,440 3.5
Softcat Software & Computer Services 2,200 3.1
Sirius Real Estate Real Estate Investment & Services 2,098 3.1
Alpha Financial Markets Consulting Industrial Support Services 2,018 2.9
Tatton Asset Management Investment Banking & Brokerage Services 1,995 2.8
DiscoverIE Group Technology Hardware & Equipment 1,936 2.7
Robert Walters Industrial Support Services 1,930 2.7
Games Workshop Leisure Goods 1,928 2.7
Ten largest investments 23,321 33.1
Assura Real Estate Investment Trusts 1,923 2.7
Somero Enterprises Industrial Engineering 1,861 2.6
Bytes Technology Software & Computer Services 1,849 2.6
Hilton Food Group Food Producers 1,819 2.6
Hollywood Bowl Travel & Leisure 1,798 2.5
Chesnara Life Insurance 1,653 2.3
Intermediate Capital Group Investment Banking & Brokerage Services 1,637 2.3
Mortgage Advice Bureau Finance and Credit Services 1,594 2.3
Kesko(A) Personal Care, Drug & Grocery Stores 1,586 2.3
Forterra Construction & Materials 1,459 2.1
Twenty largest investments 40,500 57.4
Midwich Industrial Support Services 1,451 2.1
AJ Bell Investment Banking & Brokerage Services 1,426 2.0
Dunelm Retailers 1,420 2.0
FDM Industrial Support Services 1,363 1.9
Greggs Personal Care, Drug & Grocery Stores 1,322 1.9
Close Brothers Banks 1,311 1.9
Chemring Group Aerospace & Defence 1,273 1.8
Rathbone Brothers Investment Banking & Brokerage Services 1,179 1.7
Liontrust Asset Management Investment Banking & Brokerage Services 1,172 1.7
Victrex Chemicals 1,168 1.6
Thirty largest investments 53,585 76.0
Pets at Home Group Retailers 1,152 1.6
Strix Group Electronic & Electrical Equipment 1,111 1.6
Unite Group Real Estate Investment Trusts 1,054 1.5
Halfords Retailers 1,049 1.5
Marshalls Construction & Materials 1,043 1.5
XP Power Electronic & Electrical Equipment 1,027 1.5
Polar Capital Holdings Investment Banking & Brokerage Services 1,010 1.4
MJ Gleeson Household Goods & Home Construction 938 1.3
Synthomer Chemicals 925 1.3
Gateley Holdings Industrial Support Services 922 1.3
Forty largest investments 63,816 90.5
Severfield Construction & Materials 918 1.3
Impax Asset Management Investment Banking & Brokerage Services 786 1.1
Watkin Jones Household Goods & Home Construction 783 1.1
Serica Energy Oil, Gas & Coal 682 1.0
CMC Markets Investment Banking & Brokerage Services 666 0.9
Hill & Smith Holdings Industrial Metals & Mining 656 0.9
Seraphine Personal Goods 56 0.1
Total Equity Investments 68,363 96.9
(A) All investments are listed on the London Stock Exchange (sterling based),
except where marked, which is listed on an overseas exchange (sterling based).
Portfolio - Other Investments
At 30 June 2022
Valuation Total
2022 portfolio
Company £'000 %
Corporate Bonds(A)
NGG Finance 5.625% 377 0.5
Barclays Bank 9% Perp 335 0.5
HSBC Holdings 6.5% 313 0.5
Heathrow Funding 5.225% 303 0.4
Northumbrian Water 1.625% 280 0.4
Anglian Water Service Finance 4.5% 209 0.3
Informa 3.125% 192 0.3
NatWest Group 2.105% 172 0.2
Total Corporate Bonds 2,181 3.1
Total Investments 70,544 100.0
(A) All investments are listed on the London Stock Exchange (Sterling based).
Distribution of Assets and Liabilities
As at 30 June 2022
Valuation at Valuation at
31 December 2021 Movement during the period 30 June 2022
(Losses)/
Purchases Sales gains
£'000 % £'000 £'000 £'000 £'000 %
Listed investments
Equity investments 100,566 102.8 8,320 (10,502) (30,022) 68,363 101.8
Corporate bonds 1,617 1.7 1,009 (300) (145) 2,181 3.3
102,183 104.5 9,329 (10,802) (30,167) 70,544 105.1
Current assets 2,968 3.0 4,392 6.5
Other current liabilities (316) (0.3) (791) (1.2)
Loans (6,995) (7.2) (6,997) (10.4)
Net assets 97,840 100.0 67,148 100.0
Net asset value per Ordinary share 442.52p 306.10p
Condensed Statement of Comprehensive Income
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments at fair value - (30,167) (30,167) - 14,682 14,682 - 21,035 21,035
Income
Dividend income 2 1,656 - 1,656 1,202 - 1,202 2,741 - 2,741
Interest income from investments 2 46 - 46 43 - 43 80 - 80
Other income 2 9 - 9 - - - 1 - 1
1,711 (30,167) (28,456) 1,245 14,682 15,927 2,822 21,035 23,857
Expenses
Investment management fee (88) (205) (293) (95) (221) (316) (203) (472) (675)
Other administrative expenses (226) - (226) (194) - (194) (394) - (394)
Finance costs (33) (77) (110) (26) (62) (88) (56) (130) (186)
Profit/(loss) before tax 1,364 (30,449) (29,085) 930 14,399 15,329 2,169 20,433 22,602
Taxation 3 (15) - (15) (14) - (14) (26) - (26)
Profit/(loss) attributable to equity holders 1,349 (30,449) (29,100) 916 14,399 15,315 2,143 20,433 22,576
Return per Ordinary share (pence) 5 6.10 (137.72) (131.62) 4.14 65.13 69.27 9.69 92.42 102.11
The total column of this statement represents the Company's Statement of
Comprehensive Income, prepared in accordance with IFRS. The supplementary
revenue and capital columns are both prepared under guidance published by the
Association of Investment Companies (AIC). All items in the above statement
derive from continuing operations.
The Company does not have any income or expense that is not included in profit
for the period, and therefore the "Profit/(loss) attributable to equity
holders" is also the "Total comprehensive income attributable to equity
holders" as defined in IAS 1 (revised).
The accompanying notes are an integral part of these condensed financial
statements.
Condensed Balance Sheet
As at As at As at
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
Non-current assets
Equities 68,363 91,951 100,566
Corporate Bonds 2,181 1,667 1,617
Securities at fair value 70,544 93,618 102,183
Current assets
Cash and cash equivalents 3,741 5,414 2,592
Other receivables 651 393 376
4,392 5,807 2,968
Current liabilities
Bank loan (6,997) (2,000) (2,000)
Trade and other payables (260) (904) (316)
(7,257) (2,904) (2,316)
Net current (liabilities)/assets (2,865) 2,903 652
Total assets less current liabilities 67,679 96,521 102,835
Non-current liabilities
Bank loan - (4,993) (4,995)
Net assets 67,679 91,528 97,840
Share capital and reserves
Called-up share capital 11,055 11,055 11,055
Share premium account 11,892 11,892 11,892
Capital redemption reserve 2,032 2,032 2,032
Capital reserve 39,212 63,627 69,661
Revenue reserve 3,488 2,922 3,200
Shareholders' funds 67,679 91,528 97,840
Net asset value per Ordinary share (pence) 6 306.10 413.97 442.52
The accompanying notes are an integral part of these condensed financial
statements.
Condensed Statement of Changes in Equity
Six months ended 30 June 2022 (unaudited)
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
As at 31 December 2021 11,055 11,892 2,032 69,661 3,200 97,840
(Loss)/profit for the period - - - (30,449) 1,349 (29,100)
Dividends paid in the period - - - - (1,061) (1,061)
As at 30 June 2022 11,055 11,892 2,032 39,212 3,488 67,679
Six months ended 30 June 2021 (unaudited)
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
As at 31 December 2020 11,055 11,892 2,032 49,228 2,937 77,144
Profit for the period - - - 14,399 916 15,315
Dividends paid in the period - - - - (931) (931)
As at 30 June 2021 11,055 11,892 2,032 63,627 2,922 91,528
Year ended 31 December 2021 (audited)
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
As at 31 December 2020 11,055 11,892 2,032 49,228 2,937 77,144
Profit for the year - - - 20,433 2,143 22,576
Dividends paid in the year - - - - (1,880) (1,880)
As at 31 December 2021 11,055 11,892 2,032 69,661 3,200 97,840
The accompanying notes are an integral part of these condensed financial
statements.
Condensed Statement of Cash Flows
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Cash flows from operating activities
Dividend income received 1,369 1,183 2,699
Interest income received 57 - 98
Other income received 6 - 1
Investment management fee paid (322) (297) (650)
Other cash expenses (252) (233) (379)
Cash generated from operations 858 653 1,769
Interest paid (122) (88) (166)
Overseas taxation suffered (9) (25) (38)
Net cash inflows from operating activities 727 540 1,565
Cash flows from investing activities
Purchases of investments (9,319) (6,493) (20,109)
Sales of investments 10,802 10,683 21,401
Net cash inflows from investing activities 1,483 4,190 1,292
Cash flows from financing activities
Equity dividends paid (1,061) (931) (1,880)
Net cash outflows from financing activities (1,061) (931) (1,880)
Net increase in cash and cash equivalents 1,149 3,799 977
Analysis of changes in cash and cash equivalents during the period
Opening balance 2,592 1,615 1,615
Increase in cash and cash equivalents as above 1,149 3,799 977
Cash and cash equivalents at the end of the period 3,741 5,414 2,592
The accompanying notes are an integral part of these condensed financial
statements.
Notes to the Financial Statements
For the year ended 30 June 2022
1. Accounting policies
Basis of preparation. The condensed financial statements have been prepared in
accordance with International Financial Reporting Standards ('IFRS') 34 -
'Interim Financial Reporting', as adopted by the International Accounting
Standards Board ('IASB'), and interpretations issued by the International
Financial Reporting Interpretations Committee ('IFRIC') of the IASB. They have
been prepared using the same accounting policies applied for the year ended 31
December 2021 financial statements, which received an unqualified audit
report.
The financial statements have been prepared on a going concern basis. In
accordance with the Financial Reporting Council's guidance on 'Going Concern
and Liquidity Risk' the Directors have undertaken a review of the Company's
assets which principally consist of equity shares in companies listed on the
London Stock Exchange.
2. Income
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Income from investments
Dividend income from UK equity securities 1,269 873 2,136
Dividend income from overseas equity securities 260 196 403
Property income distribution 127 133 202
1,656 1,202 2,741
Interest income from investments 46 43 80
1,702 1,245 2,821
Other income
Bank interest 1 - 1
Interest from AAA-rated money market funds 8 - -
9 - 1
Total revenue income 1,711 1,245 2,822
3. Taxation
The tax expense reflected in the Condensed Statement of Comprehensive Income
represents irrecoverable withholding tax suffered on overseas dividend income.
4. Dividends
The following table shows the revenue for each period less the dividends
declared in respect of the financial period to which they relate.
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Profit attributable 1,349 916 2,143
Dividends declared (1,061)(A) (951)(B) (1,956)(C)
288 (35) 187
(A) Dividends declared relate to the first two interim dividends (both 2.40p
each) declared in respect of the financial year 2022.
(B) Dividends declared relate to the first two interim dividends (both 2.15p
each) declared in respect of the financial year 2021.
(C) Dividends declared relate to the three interim dividends (2.15p each)
and final interim dividend (2.40p) declared in respect of the financial year
2021 totalling 8.85p.
5. Return per Ordinary share
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
p p p
Revenue return 6.10 4.14 9.69
Capital return (137.72) 65.13 92.42
Net return (131.62) 69.27 102.11
The returns per Ordinary share are based on the following figures:
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Revenue return 1,349 916 2,143
Capital return (30,449) 14,399 20,433
Net return (29,100) 15,315 22,576
Weighted average number of Ordinary shares in issue 22,109,765 22,109,765 22,109,765
6. Net asset value per Ordinary share
The net asset value per Ordinary share and the net assets attributable to
Ordinary shareholders at the period end calculated in accordance with the
Articles of Association were as follows:
As at As at As at
30 June 2022 30 June 2021 31 December 2021
(unaudited) (unaudited) (audited)
Attributable net assets (£'000) 67,679 91,528 97,840
Number of Ordinary shares in issue 22,109,765 22,109,765 22,109,765
Net asset value per Ordinary share (p) 306.10 413.97 442.52
7. Transaction costs
During the period expenses were incurred in acquiring or disposing of
investments classified as fair value. These have been expensed through capital
and are included within (losses)/gains on investments at fair value in the
Condensed Statement of Comprehensive Income. The total costs were as follows:
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Purchases 32 30 76
Sales 9 8 16
41 38 92
8. Analysis of changes in financing liabilities during the period
The following table shows the movements during the period of financing
liabilities in the Condensed Balance Sheet:
Six months ended Six months ended Year ended
30 June 2022 30 June 2021 31 December 2021
£'000 £'000 £'000
Opening balance 6,995 6,991 6,991
Amortisation of arrangement costs 2 2 4
Closing balance 6,997 6,993 6,995
9. Fair value hierarchy
Under IFRS 13 'Fair Value Measurement' an entity is required to classify fair
value measurements using a fair value hierarchy that reflects the significance
of the inputs used in making measurements. The fair value hierarchy has the
following levels:
Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are
observable for the assets or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The financial assets measured at fair value in the Condensed Balance Sheet are
grouped into the fair value hierarchy as follows:
Level 1 Level 2 Level 3 Total
At 30 June 2022 (unaudited) Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 68,363 - - 68,363
Quoted bonds b) - 2,181 - 2,181
68,363 2,181 - 70,544
Level 1 Level 2 Level 3 Total
At 30 June 2021 (unaudited) Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 91,951 - - 91,951
Quoted bonds b) - 1,667 - 1,667
91,951 1,667 - 93,618
Level 1 Level 2 Level 3 Total
At 31 December 2021 Note £'000 £'000 £'000 £'000
(audited)
Financial assets at fair value through profit or loss
Quoted equities a) 100,566 - - 100,566
Quoted bonds b) - 1,617 - 1,617
100,566 1,617 - 102,183
a) Quoted equities. The fair value of the Company's investments in quoted
equities has been determined by reference to their quoted bid prices at the
reporting date. Quoted equities included in Fair Value Level 1 are actively
traded on recognised stock exchanges.
b) Quoted bonds. The fair value of the Company's investments in quoted bonds
has been determined by reference to their quoted bid prices at the reporting
date. Investments categorised as Level 2 are not considered to trade in active
markets.
There have been no transfers of assets between levels of the fair value
hierarchy during any of the periods covered in this Report.
10. Related party transactions
There were no related party transactions during the period.
11. Transactions with the Manager
The Company has agreements with abrdn Fund Managers Limited ("aFML" or "the
Manager") for the provision of investment management, secretarial, accounting
and administration and promotional activities.
The management fee is calculated at an annual rate of 0.75% of the net assets
of the Company, calculated and paid monthly. During the period £293,000 (30
June 2021 - £316,000; 31 December 2021 - £675,000) of investment management
fees were payable to the Manager, with a balance of £89,000 (30 June 2021 -
£113,000; 31 December 2021 - £119,000) being payable to aFML at the period
end. During the period and at the period end, the Company held £3,498,000 (30
June 2021 - £5,105,000; 31 December 2021 - £2,406,000) in Aberdeen Standard
Liquidity Fund (Lux) - Sterling Fund which is managed and administered by
Aberdeen Standard Investments Luxembourg S.A. The Company pays a management
fee on the value of these holdings but no fee is chargeable at the underlying
fund level. The management fee is chargeable 30% to revenue and 70% to
capital.
During the period expenses of £28,000 (30 June 2021 - £22,000; 31 December
2021 - £49,000) were payable to the Manager in connection with the promotion
of the Company. The balance outstanding at the period end was £14,000 (30
June 2021 - £22,000; 31 December 2021 - £37,000).
12. Segmental information
The Company is engaged in a single segment of business, which is to invest in
equity securities and debt instruments. All of the Company's activities are
interrelated, and each activity is dependent on the others. Accordingly, all
significant operating decisions are based on the Company as one segment.
13. Publication of non-statutory accounts
The financial information contained in this Half Yearly Financial Report does
not constitute statutory accounts as defined in Sections 434 - 436 of the
Companies Act 2006. The financial information for the six months ended 30 June
2022 and 30 June 2021 has not been audited.
The information for the year ended 31 December 2021 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.
14. This Half Yearly Financial Report was approved by the Board on 12 September
2022.
Please note that past performance is not necessarily a guide to the future and
that 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
For further information please contact:-
Holly Kidd
Aberdeen Asset Management PLC
Company Secretary
Tel: 0131 372 1503
Alternative Performance Measures
Alternative performance measures 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 IFRS 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.
Discount to Net Asset Value per Ordinary share
The amount by which the market price per Ordinary share is lower than the net
asset value per Ordinary share, expressed as a percentage of the net asset
value per Ordinary share.
30 June 2022 31 December 2021
NAV per Ordinary share (p) a 306.10 442.52
Share price (p) b 258.00 375.00
Discount (b-a)/a 15.7% 15.3%
Net gearing
Net gearing measures total borrowings less cash and cash equivalents divided
by shareholders' funds, expressed as a percentage. Under AIC reporting
guidance cash and cash equivalents includes net amounts due to and from
brokers at the period end as well as cash.
30 June 2022 31 December 2021
Borrowings (£'000) a 6,997 6,995
Cash (£'000) b 243 186
Investments in AAA-rated money market funds c 3,498 2,406
Amounts due to brokers (£'000) d 15 5
Amounts due from brokers (£'000) e - -
Shareholders' funds (£'000) f 67,679 97,840
Net gearing (a-b-c+d-e)/f 4.8% 4.5%
Ongoing charges
The ongoing charges ratio has been calculated in accordance with guidance
issued by the AIC as the total of investment management fees and
administrative expenses and expressed as a percentage of the average published
daily net asset values with debt at fair value throughout the year. The ratio
for 30 June 2022 is based on forecast ongoing charges for the year ending 31
December 2022.
30 June 2022 31 December 2021
Investment management fees (£'000) 546 675
Administrative expenses (£'000) 409 393
Less: non-recurring charges(A) (£'000) (30) (25)
Ongoing charges (£'000) 925 1,043
Average net assets (£'000) 73,080 89,659
Ongoing charges ratio (excluding look-through costs) 1.27% 1.16%
Look-through costs(B) 0.04% 0.04%
Ongoing charges ratio (including look-through costs) 1.31% 1.20%
(A) Professional services comprising new director recruitment costs and legal
fees considered unlikely to recur.
(B) 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.
The ongoing charges ratio provided in the Company's Key Information Document
is calculated in line with the PRIIPs regulations, which includes amongst
other things, financing and transaction costs.
Total return
NAV and share price total returns show how the NAV and share price has
performed over a period of time in percentage terms, taking into account both
capital returns and dividends paid to shareholders. Share price and NAV total
returns are monitored against open-ended and closed-ended competitors, and the
benchmark, respectively.
Share
Six months ended 30 June 2022 NAV Price
Opening at 1 January 2022 a 442.5p 375.0p
Closing at 30 June 2022(A) b 303.7p 258.0p
Price movements c=(b/a)-1 -31.4% -31.2%
Dividend reinvestment(B) d 1.4% 1.6%
Total return c+d -30.0% -29.6%
Share
Year ended 31 December 2021 NAV Price
Opening at 1 January 2021 a 348.9p 313.0p
Closing at 31 December 2021 b 442.5p 375.0p
Price movements c=(b/a)-1 26.8% 19.8%
Dividend reinvestment(B) d 3.6% 3.1%
Total return c+d +30.4% +22.9%
(A) Closing NAV reflects the value per the Condensed Balance Sheet above of
306.1p less the value of the second interim dividend for the year of 2.4p.
(B) NAV total return involves investing the dividend in the NAV of the Company
with debt at fair value on the date on which that dividend goes ex-dividend.
Share price total return involves reinvesting the dividend in the share price
of the Company on the date on which that dividend goes ex-dividend.
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