Dunedin Inc.Growth - Half-year Report
01/10/2024 07:00
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RNS Number : 3280G Dunedin Income Growth Inv Tst PLC 01 October 2024
DUNEDIN INCOME GROWTH INVESTMENT TRUST PLC
HALF YEARLY REPORT FOR THE SIX MONTHS ENDED 31 JULY 2024
Legal Entity Identifier (LEI): 549300PXLZPR5JTL763
INVESTMENT OBJECTIVE
The objective of Dunedin Income Growth Investment Trust PLC is to achieve
growth of income and capital from a portfolio invested mainly in companies
listed or quoted in the United Kingdom that meet the Company's sustainable and
responsible investing criteria as set by the Board.
BENCHMARK
The Company's benchmark is the FTSE All-Share Index (total return).
Performance is measured on a net asset value total return basis over the
long-term.
PERFORMANCE HIGHLIGHTS
Net asset value total return per Ordinary share(AB) Share price total return per Ordinary share(A)
Six months ended 31 July 2024 +8.2% Six months ended 31 July 2024 +10.5%
Year ended 31 January 2024 +6.7% Year ended 31 January 2024 (1.6)%
Revenue return per Ordinary share FTSE All-Share Index total return
Six months ended 31 July 2024 8.92p Six months ended 31 July 2024 +12.3%
Six months ended 31 July 2023 8.25p Year ended 31 January 2024 +1.9%
Dividend yield(A) Discount to net asset value(AB)
As at 31 July 2024 4.6% As at 31 July 2024 9.0%
As at 31 January 2024 5.0% As at 31 January 2024 10.7%
(A) Considered to be an Alternative Performance Measure.
(B) With debt at fair value (including income).
FINANCIAL CALENDAR
Expected payment dates of quarterly dividends 29 November 2024
28 February 2025
30 May 2025
29 August 2025
Financial year end 31 January 2025
Expected announcement of results March 2025
for year ended 31 January 2025
Annual General Meeting (Edinburgh) May 2025
FINANCIAL HIGHLIGHTS
31 July 2024 31 January 2024 % change
Total assets (£'000)(A) 509,218 488,867 +4.2
Equity shareholders' funds (£'000) 460,429 445,815 +3.3
Market capitalisation (£'000) 424,040 403,437 +5.1
Net asset value per Ordinary share 322.49p 304.99p +5.7
Net asset value per Ordinary share with debt at fair value(B) 326.53p 308.98p +5.7
Share price per Ordinary share (mid) 297.00p 276.00p +7.6
Discount to net asset value with debt at fair value(B) 9.0% 10.7%
Revenue return per Ordinary share(C) 8.92p 8.25p +8.1
Net gearing(B) 9.5% 6.8%
(A) Defined as total assets per the Statement of Financial Position less
current liabilities (before deduction of bank loans and Loan Notes).
(B) Considered to be an Alternative Performance Measure.
(C) Figure for 31 July 2024 is for six months to that date. Figure for 31
January 2024 is for the six months to 31 July 2023.
For further information, please contact:
Ben Heatley
abrdn Fund Managers Limited
0131 372 2200
Chairman's Statement
Review of the Period
The UK equity market delivered a strong total return over the six months under
review, driven by an improving domestic macroeconomic landscape and attractive
starting valuations. The Bank of England's recent base rate cut in August
signals a potential peak in the current interest rate cycle, marking a shift
towards a more accommodative monetary policy. Lower inflation alleviates cost
pressures on businesses, enhances consumer purchasing power, and provides
central banks with more flexibility to ease interest rates, collectively
supporting economic stability and growth.
In a politically charged year, marked by elections in over 100 countries,
representing nearly half of the global population, the UK general election
outcome in July was largely as expected. Following the decisive outcome of the
election, there are signs of renewed interest in UK equities as institutional
investors re-engage with the UK market and turn their focus more to economic
and business fundamentals. This, along with an increase in UK merger and
acquisition activity, signals a potential shift in sentiment which could
support a UK market recovery.
Against this backdrop, the Company's net asset value ("NAV") total return for
the six months ended 31 July 2024 was 8.2%. This compares to a total return of
12.3% from the FTSE All-Share Index. The share price total return for the
period was 10.5%, reflecting a narrowing of the discount at which the shares
trade relative to the NAV, from 10.7% to 9.0% at the end of the period.
The Company's performance relative to the market reflects the portfolio of
high quality companies which were out of favour during the period. The
portfolio continues to showcase strong quality characteristics while
delivering a premium yield and stronger dividend growth compared to the FTSE
All-Share Index. Furthermore, the portfolio remains concentrated, exhibiting a
high active share and stock-specific risk, which underscores the Company's
differentiated approach to generating income and capital growth in contrast to
many UK income equity investment trust peers.
A detailed review of portfolio activity during the period is contained in the
Investment Manager's Review.
Earnings and Dividends
Revenue earnings per share increased by 8.1% during the period, to 8.92p per
share compared to 8.25p per share for the first six months of last year. This
was due principally to an increase in income generated from option writing
activity, along with the impact of the reduction in the number of shares in
issue as a result of the share buy back activity. Underlying dividend income
from the portfolio was broadly unchanged compared to the same period last
year, but the Investment Manager has seen a number of dividend declarations
well ahead of their expectations and they expect to see further progress in
the second half of the financial year. Further details are provided in the
Investment Manager's Review.
A first interim dividend in respect of the year ending 31 January 2025, of
3.2p (2024: 3.2p) per share, was paid on 30 August 2024 and the Board has
declared a second interim dividend of 3.2p (2024: 3.2p) per share, which will
be paid on 29 November 2024 to shareholders on the register on 1 November
2024.
Based on last year's annual dividend of 13.75p per share, the dividend yield
on the Company's shares was 4.6% at the end of the period. This is one of the
higher yields available from the AIC's UK Equity Sector and is approximately
20% higher than the yield available from the UK equity market as measured by
the FTSE All-Share Index.
Our distribution policy remains to grow the dividend faster than inflation
over the medium term and, with the Company's robust revenue and capital
reserves and the healthy underlying dividend and earnings growth of the
companies within the portfolio, we believe that the policy remains very
well supported.
Regulatory Change
In line with my statement in the Annual Report on the UK's sustainability
disclosure requirements and investment labels regime (together "SDR"), the
Board has continued to consult with the Investment Manager on the application
of the new regime to the Company.
As background, shareholders will be aware that the Company adopted a
sustainable investment overlay to its investment objective in 2021 and full
details of the sustainable and responsible investing criteria adopted by the
Board are set out in the Company's Annual Report each year. The move reflected
an evolution of the investment process and formalised the existing approach to
quality investing, which incorporates an assessment of long term
environmental, social and governance risks and opportunities.
At the time of writing, our understanding of the way in which the new regime
will apply to the Company continues to evolve but the Board wishes to
emphasise that it intends to be fully compliant with the SDR regime from its
implementation date on 2 December 2024 and the Investment Manager is not
intending to change its strategy in managing the Company's portfolio.
Gearing
The level of gearing (net of cash) was 9.5% as at 30 June 2024, compared to
6.8% at the beginning of the period. During the period, the Investment Manager
drew down an additional £6 million from the Company's revolving credit
facility ("RCF") to enable it to take advantage of some of the attractive
investment opportunities in the market. Gearing also increased as a result of
a lower cash balance held at the period end than at the start of the period,
and through the impact of share buy backs, which reduce the Company's capital
base.
Since the end of the period, the Company has announced the renewal of its
multi-currency RCF with Bank of America, N.A., London Branch (the "Lender") on
a secured basis. The facility replaced the previous, unsecured, £30 million
facility with Bank of Nova Scotia London Branch, which expired on 8 August
2024.
Under the terms of the new facility, the Company has the option to increase
the level of the commitment from £30 million to £40 million at any time,
subject to the Lender's consent. The facility sits alongside the Company's
£30 million secured 30 year loan note, which is drawn down in full until 8
December 2045 at an all-in rate of 3.99%.
Following the renewal of the facility, the level of the Company's borrowings
remains unchanged.
Discount
As stated above, at the end of the period the Company's shares traded at a
discount of 9.0% (on a cum-income basis with borrowings stated at fair value),
compared to a discount of 10.7% at the beginning of the period. We continued
to buy back shares during the period, buying back 3.4 million shares (2.3% of
the share capital) at an average discount of 10.9%, thereby providing a small
enhancement to the NAV per share for shareholders. Since the end of the period
we have bought back a further 1.5 million shares.
As we have previously stated, the Board believes a consistent rating of the
Company's shares close to the underlying asset value is of
significant benefit to shareholders. As well as a strong focus on execution
of the investment strategy, the Board continues to support efforts to attract
new investors and retain existing ones through clear messaging and regular
engagement with investors. We are confident that the Company's attractive
dividend yield and differentiated positioning are a good basis to support a
strong rating for its shares over the medium term. The Company will continue
to buy back shares to provide liquidity and address any imbalances between
buyers and sellers.
Board Succession
It is the Company's stated policy that Directors should stand down after nine
years on the Board. Jasper Judd, who is Chairman of the Audit Committee, and
I, both joined the Board in February 2016. As stated in the Annual Report, we
will therefore stand down from the Board at the conclusion of the Company's
AGM in 2025. The Board will recruit a further Director during the course of
this financial year who, it is intended, will take over from Jasper as
Chairman of the Audit Committee. The number of Directors will therefore
increase to six for a short period to allow for an orderly handover and smooth
succession. Howard Williams, who has been a Director since April 2018, will
succeed me as Chair of the Company and it is the Board's intention to recruit
a fifth Director in 2025 to bring the number of Directors back to five.
Outlook
The UK macroeconomic picture, while still subdued, looks more encouraging than
it did at the turn of the year. Inflation has fallen to close to the Bank of
England's 2% target, there is the prospect of further interest rate reductions
and economic growth is expected to gradually improve.
There remain a number of geo-political risks. The details of the new
government's first budget will be important in setting the economic and fiscal
landscape in the UK. Protracted conflicts in Ukraine and the Middle East
continue to pose potential upside risks to commodity prices. The outcome of
the upcoming US presidential election in November adds a layer of uncertainty
that could significantly impact global international relations. While the UK
macro environment is showing signs of improvement, the US economy is projected
to experience a moderation in growth, although it is expected to avoid a
significant recession. Meanwhile, the Chinese economy faces substantial
challenges, including weak domestic demand and an unstable real estate sector.
The Investment Manager continues to select high-quality, sustainable companies
that can provide income resilience and capital growth across various economic
conditions, and remains optimistic for the outlook for the companies in the
portfolio. The concentrated portfolio reflects the Investment Manager's best
investment ideas to meet this objective. While performance can lag the
benchmark in periods where businesses exposed to rising commodity prices and
positively geared to rising interest rates are in favour, the Investment
Manager believes that limiting exposure to the most cyclical companies with
high financial and operating risks, while favouring those exposed to
structural growth and stronger balance sheets will support long term
shareholder total returns.
David Barron
Chairman
1 October 2024
Interim Management Statement
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 Risks and Uncertainties
The Board regularly reviews the principal 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 31 January 2024 and comprise the following
risk categories:
- Investment objectives
- Investment strategies
- Investment performance
- Income/dividends
- Financial/market
- Gearing
- Regulatory
- ESG risks
- Operational (including cyber-crime)
- Geo-political
The Company's principal risks and uncertainties have not changed materially
since the date of the Annual Report and are not expected to change materially
for the remaining six months of the Company's financial year.
In addition to those principal risks and uncertainties, the Board considers
that the development of Artificial Intelligence ("AI") presents potential
risks to businesses in almost every sector. The extent of the risk presented
by AI is extremely hard to assess at this point but the Board considers that
it is an emerging risk and, together with the Manager, will monitor
developments in this area.
Going Concern
The Company's assets consist mainly of equity shares in companies listed on
the London Stock Exchange and in most circumstances are considered to be
realisable within a short timescale. The Board has set limits for borrowing
and derivative contract positions and regularly reviews actual exposures, cash
flow projections and compliance with loan covenants. The Directors have
considered the fact that the Company's investments comprise readily realisable
securities which can be sold to meet funding requirements if necessary. The
Directors have also performed stress testing on the portfolio and the loan
financial covenants.
Having taken these matters into account, the Directors believe that the
Company has adequate financial resources to continue in operational existence
for the foreseeable future and for at least twelve months from the date of
this Report. Accordingly, they continue to adopt the going concern basis of
accounting in preparing the financial statements.
On behalf of the Board
David Barron
Chairman
1 October 2024
Investment Manager's Review
Performance and Market Review
The UK equity market experienced a strong appreciation in the first half of
the Company's financial year, driven by a continued decline in the inflation
rate, which has now reached target levels, alongside improving sentiment
regarding both UK and global economic activity. The Bank of England joined the
global rate cutting cycle at the end of the period, with the first reduction
in rates since April 2020.
Against this backdrop, the Company's net asset value ("NAV") total return for
the six months to 31 July 2024 was 8.2%, which compared to a total return of
12.3% from the FTSE All-Share Index. In the first quarter of the year,
cyclical sectors, particularly banks, energy, and mining companies, led the
market, with mid-cap stocks outperforming as risk appetite grew and signs of a
more resilient global economy emerged. The market exhibited a wide dispersion
of stock returns, with investors willing to reward high performers while
penalising those missing expectations.
Commodity prices rose, notably for oil amid escalating tensions in the Middle
East, and for copper, driven by strong demand against a backdrop of
constrained supply, although prices retreated toward the end of the period.
Overall, global economic data remained mixed but generally exceeded initial
expectations for the year. However, China stands out as an exception, with
economic activity continuing to lag and persistent concerns surrounding its
real estate market.
At the company level the portfolio benefitted from a number of positive
performers. Intermediate Capital has delivered strong performance, with the
company forecasting a positive outlook for fundraising within private credit.
Morgan Sindall has also excelled, with its fit-out division demonstrating
significant growth as clients invest to upgrade office space standards. This
has led to strong profit growth and a further significant dividend increase.
Unilever has also performed well as the company's strategy under the new CEO,
Hein Schumacher, starts to take hold, delivering accelerating revenue growth
and greater than expected margin expansion.
There were a number of companies that underperformed over the period. These
included the French digital services and payments company Edenred, which was
impacted by the political uncertainty generated by the recent elections,
expectations of falling interest rates and declining inflation impacting its
income, and a regulatory investigation into contract tendering processes in
its Italian business. Despite these headwinds, the company has maintained its
guidance for double-digit revenue growth, highlighting new client wins and the
rollout of new products while the valuation and dividend yield look
increasingly attractive. Meanwhile, Diageo's shares also underperformed,
primarily due to weakened consumer demand in Latin America and the Caribbean,
compounded by a prolonged destocking cycle in the United States. We believe
the downgrade cycle is coming closer to an end, while the underlying valuation
remains attractive, presenting an opportunity to continue to back a
high-quality business going through a challenging cyclical period. The
Company's underweight exposure to the banking sector also detracted from
performance during the period under review, where we remain somewhat cautious
on the sustainability of profitability and, by extension, dividend generation.
Portfolio Activity
We have introduced several new companies to the portfolio. One notable
addition is Genuit, a leading manufacturer of piping solutions for water,
climate, and ventilation management. The company has a strong focus on
sustainability and, while it is cyclical, is well-positioned for long-term
structural growth and offers potential margin expansion. We also added
Convatec, which specialises in advanced wound care, ostomy care, continence
care, and infusion care. Convatec benefits from favourable demographic trends,
including an aging population and an increasing incidence of chronic
conditions. The company has strong brands and is experiencing accelerated
growth due to product innovation and improved execution. We believe it has the
potential to enhance its operating margins, a positive outlook that is not yet
reflected in its valuation.
Additionally, we initiated a position in Azelis, a Belgian-listed specialty
chemical distributor. We see strong long-term growth prospects as it supplies
chemicals to fast-growing end markets, such as life sciences. Azelis operates
a capital-light business model and has a network of application laboratories
that provide technical guidance on product development. Finally, we acquired a
stake in Gaztransport & Technigaz ("GTT"), a French-listed industrial
engineering design firm known for its design of membranes used in LNG carrier
ships for the storage of liquefied natural gas ("LNG"). GTT's capital-light
model is supported by strong pricing power, with growth driven by the
expansion of the global LNG fleet, premium pricing on new designs, and the
application of its technology in areas like hydrogen. The company has a net
cash balance sheet, generates high cash conversion rates, and returns excess
liquidity to investors, positioning it well to provide a growing dividend
stream.
We added to positions in UK mid-cap companies such as Assura, and Softcat,
where we see attractive total return prospects in this segment of the market.
We also increased the holding in animal genetics company Genus, given its
depressed valuation relative to historical levels and its strong long-term
potential. In addition, we significantly increased the Company's investment in
National Grid at the time of its rights issue, which has strengthened the
company's capital position and enabled significant future growth.
To fund these purchases, we reduced the position in Intermediate Capital after
a significant increase in its share price exceeded our risk appetite. We
exited a small position in Moonpig following a strong recovery in its share
price, as well as in the specialty chemicals manufacturer Croda, where we have
lower conviction in the firm's competitive position. We divested the holding
in Scandinavian bank Nordea after it paid its large annual dividend, trimmed
the position in Marshalls following a strong share price recovery, and reduced
the substantial position in AstraZeneca, as we believe its prospects no longer
justify such a significant allocation of the Company's capital.
We continued to generate income from option writing. We wrote a number of
options to both generate income and to position the portfolio. This included
puts over branded consumer health company Haleon which we are looking to
introduce to the portfolio. In addition, we wrote puts over TotalEnergies,
Genus, Azelis and Prudential where we are happy to increase the holdings, and
calls over Taylor Wimpey, Croda and Intermediate Capital.
The level of investment income rose healthily year on year, boosted by the
timing of option income, with dividend income more or less flat. Overall, the
income delivery from the portfolio was solid, with a number of declarations
well ahead of our expectations. While the decision by Close Brothers to pass
its dividend given the ongoing regulatory investigation into its auto lending
business was frustrating, we were able to largely make up the lost income from
other sources.
Gearing
In May we took the decision to increase the level of gearing by just over 1%,
drawing down an additional £6 million from the revolving credit facility,
reflecting the very healthy pipeline of potential investment opportunities
that we have open to us. The last time we increased borrowings was in March
2020 amidst the market turmoil sparked by the pandemic. The Company also
continued to buy back its own shares in the market - we consider the current
discount to NAV as attractive, particularly when we believe the underlying
portfolio is on an undemanding rating.
Outlook
Despite recent market volatility, the UK macroeconomic landscape is gradually
improving, with growth set to recover slowly, inflation moderating, and
consumer confidence picking up, painting a more encouraging picture than at
the turn of the year. The recent change in government in the UK has brought a
degree of political stability that reassures markets, although attention is
now focused on the upcoming autumn budget, which is expected to have
significant implications for various sectors.
The current valuation of the market and the portfolio reflects muted
expectations, potentially providing a springboard for strong prospective
returns. Mergers and acquisitions remain a prominent feature, while share
buybacks continue to provide support. There have also been some encouraging
early signs of international investors returning to the UK market. A
confluence of a steadily improving economic landscape, declining interest
rates, and a softer currency could present a compelling investment case for UK
equities, particularly in the mid-cap sector, where the Company holds a
strategic overweight position.
However, risks remain, and elevated tensions in the Middle East and Ukraine,
along with their potential impact on energy prices, warrant close monitoring.
Likewise, the Chinese economy continues to struggle and there are increasing
signs of a slowdown in the United States, both factors to remain vigilant
to. As ever, we shall continue to seek a balance in our positioning of the
portfolio, giving the Company the potential to perform in a range of market
environments while keeping watch for new opportunities in high-quality
companies with attractive long-term prospects that align with the Company's
sustainable and responsible investing criteria.
Ben Ritchie and Rebecca Maclean
abrdn Investments Limited
1 October 2024
Investment Portfolio
At 31 July 2024
Market value Total assets
Company Sector £'000 %
Unilever Personal Care, Drug and Grocery Stores 35,008 6.9
National Grid Gas, Water and Multi-utilities 28,990 5.7
AstraZeneca Pharmaceuticals and Biotechnology 27,492 5.4
RELX Media 26,829 5.3
TotalEnergies Oil, Gas and Coal 26,823 5.3
London Stock Exchange Finance and Credit Services 22,065 4.3
Diageo Beverages 19,205 3.8
Chesnara Life Insurance 15,302 3.0
SSE Electricity 14,448 2.8
Morgan Sindall Construction and Materials 14,074 2.7
Ten largest equity investments 230,236 45.2
Intermediate Capital Investment Banking and Brokerage Services 12,735 2.5
Games Workshop Leisure Goods 12,689 2.5
Hiscox Non-life Insurance 12,275 2.4
Sirius Real Estate Real Estate Investment Trusts 11,861 2.3
Sage Software and Computer Services 11,782 2.3
M&G Investment Banking and Brokerage Services 11,754 2.3
Weir Group Industrial Engineering 11,685 2.3
Telecom Plus Telecommunications Service Providers 11,623 2.3
ASML Technology Hardware and Equipment 11,600 2.3
Prudential Life Insurance 11,116 2.2
Twenty largest equity investments 349,356 68.6
Taylor Wimpey Household Goods and Home Construction 11,099 2.2
Assura Real Estate Investment Trusts 10,659 2.1
Edenred Industrial Support Services 10,495 2.1
Novo-Nordisk Pharmaceuticals and Biotechnology 10,476 2.1
Oxford Instruments Electronic and Electrical Equipment 10,433 2.0
Softcat Software and Computer Services 10,125 2.0
Volvo Industrial Transportation 10,120 2.0
Genus Pharmaceuticals and Biotechnology 9,995 2.0
Convatec Medical Equipment and Services 9,917 1.9
Pets At Home Retailers 9,794 1.9
Thirty largest equity investments 452,469 88.9
Marshalls Construction and Materials 9,397 1.8
Mercedes-Benz Automobiles & Parts 9,124 1.8
Genuit Construction and Materials 8,796 1.7
Azelis Industrial Support Services 8,685 1.7
Gaztransport & Technigaz Oil, Gas and Coal 8,101 1.6
Close Brothers Banks 5,144 1.0
Total equity investments 501,716 98.5
Net current assets(A) 7,488 1.5
Total assets less current liabilities (excluding borrowings) 509,204 100.0
(A) Excluding bank loan of £19,040,000.
Condensed Statement of Comprehensive Income (unaudited)
Six months ended Six months ended
31 July 2024 31 July 2023
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 23,080 23,080 - 7,192 7,192
Income 2 14,409 - 14,409 13,776 - 13,776
Investment management fees (349) (523) (872) (352) (527) (879)
Administrative expenses (357) - (357) (541) - (541)
Currency gains - 52 52 - 227 227
Net return before finance costs and tax 13,703 22,609 36,312 12,883 6,892 19,775
Finance costs (411) (610) (1,021) (353) (523) (876)
Return before taxation 13,292 21,999 35,291 12,530 6,369 18,899
Taxation 3 (402) - (402) (305) - (305)
Return after taxation 12,890 21,999 34,889 12,225 6,369 18,594
Return per Ordinary share (pence) 5 8.92 15.22 24.14 8.25 4.29 12.54
The total column of the Condensed Statement of Comprehensive Income is 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 July 2024 31 January 2024
Note £'000 £'000
Non-current assets
Investments at fair value through profit or loss 9 501,716 474,087
Current assets
Debtors 3,750 2,925
Cash and short-term deposits 4,844 12,868
8,594 15,793
Creditors: amounts falling due within one year
Bank loan (19,040) (13,307)
Other creditors (1,092) (1,013)
(20,132) (14,320)
Net current (liabilities)/assets (11,538) 1,473
Total assets less current liabilities 490,178 475,560
Creditors: amounts falling due after more than one year
Loan Notes 2045 (29,749) (29,745)
Net assets 460,429 445,815
Capital and reserves
Called-up share capital 38,419 38,419
Share premium account 4,908 4,908
Capital redemption reserve 1,606 1,606
Capital reserve 6 389,393 376,996
Revenue reserve 26,103 23,886
Equity shareholders' funds 460,429 445,815
Net asset value per Ordinary share (pence) 7 322.49 304.99
The accompanying notes are an integral part of the financial statements.
Condensed Statement of Changes in Equity (unaudited)
Six months ended 31 July 2024
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 January 2024 38,419 4,908 1,606 376,996 23,886 445,815
Return after taxation - - - 21,999 12,890 34,889
Purchase of own shares for treasury - - - (9,602) - (9,602)
Dividends paid 4 - - - - (10,673) (10,673)
Balance at 31 July 2024 38,419 4,908 1,606 389,393 26,103 460,429
Six months ended 31 July 2023
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 January 2023 38,419 4,908 1,606 379,839 23,833 448,605
Return after taxation - - - 6,369 12,225 18,594
Issue of shares from treasury - - - (62) - (62)
Dividends paid 4 - - - - (10,527) (10,527)
Balance at 31 July 2023 38,419 4,908 1,606 386,146 25,531 456,610
The Revenue reserve and the part of the Capital reserve represented by
realised capital gains represent the amount of the Company's reserves
distributable by way of dividend.
The accompanying notes are an integral part of the financial statements.
Condensed Statement of Cash Flows (unaudited)
Six months ended Six months ended
31 July 2024 31 July 2023
£'000 £'000
Operating activities
Net return before finance costs and taxation 36,312 19,775
Adjustments for:
Gains on investments (23,080) (7,192)
Currency gains (52) (227)
Decrease/(increase) in accrued dividend income 722 (623)
Stock dividends included in dividend income (915) (432)
(Increase)/decrease in other debtors excluding tax (157) 144
Increase in other creditors 128 111
Net tax paid (698) (944)
Net cash inflow from operating activities 12,260 10,612
Investing activities
Purchases of investments (73,396) (57,296)
Sales of investments 68,604 44,824
Net cash used in investing activities (4,792) (12,472)
Financing activities
Interest paid (1,007) (921)
Dividends paid (10,673) (10,527)
Buyback of Ordinary shares for treasury (9,597) -
Purchase of own shares for treasury - (6)
Drawdown of loan 5,733 -
Loan repayment - (394)
Net cash used in financing activities (15,544) (11,848)
Decrease in cash and cash equivalents (8,076) (13,708)
Analysis of changes in cash and cash equivalents during the period
Opening balance 12,868 12,267
Effect of exchange rate fluctuations on cash held 52 227
Decrease in cash as above (8,076) (13,708)
Closing balance 4,844 (1,214)
The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements (unaudited)
For the year ended 31 July 2024
1. Accounting policies
Basis of preparation. 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 2022.
They have also been prepared on a going concern basis and on the assumption
that status as an investment trust will be maintained.
The half yearly financial statements have been prepared using the same
accounting policies and methods of computation as the preceding annual
financial statements (year ended 31 January 2024), which were prepared in
accordance with Financial Reporting Standard 102.
2. Income
Six months ended Six months ended
31 July 2024 31 July 2023
£'000 £'000
Income from investments
UK dividend income 6,832 6,983
Overseas dividends 5,137 5,642
Stock dividends 915 432
12,884 13,057
Other income
Income on derivatives 1,497 684
Interest income 28 35
1,525 719
Total income 14,409 13,776
3. Taxation
The taxation charge for the period, and the comparative period, represents
withholding tax suffered on overseas dividend income.
4. Ordinary dividends on equity shares
Six months ended Six months ended
31 July 2024 31 July 2023
£'000 £'000
Third interim dividend 2024 of 3.20p (2023 - 3.00p) 4,677 4,448
Final dividend 2024 of 4.15p (2023 - 4.10p) 5,996 6,079
10,673 10,527
A first interim dividend in respect of the year ending 31 January 2025 of
3.20p per Ordinary share (2024 - 3.20p) was paid on 30 August 2024 to
shareholders on the register on 2 August 2024. The ex-dividend date was 1
August 2024.
5. Returns per share
Six months ended Six months ended
31 July 2024 31 July 2023
p p
Revenue return 8.92 8.25
Capital return 15.22 4.29
Total return 24.14 12.54
The returns per share are based on the following:
Six months ended Six months ended
31 July 2024 31 July 2023
£'000 £'000
Revenue return 12,890 12,225
Capital return 21,999 6,369
Total return 34,889 18,594
Weighted average number of Ordinary shares 144,501,086 148,264,249
6. Capital reserves
The capital reserve reflected in the Condensed Statement of Financial Position
at 31 July 2024 includes gains of £80,539,000 (31 January 2024 - gains of
£64,644,000) which relate to the revaluation of investments held at the
reporting date.
7. Net asset value
Equity shareholders' funds have been calculated in accordance with the
provisions of Financial Reporting Standard 102. The analysis of equity
shareholders' funds on the face of the Condensed Statement of Financial
Position does not reflect 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, adjusted to reflect the deduction of the Loan
Notes at par. A reconciliation between the two sets of figures is as follows:
31 July 2024 31 January 2024
Net assets attributable (£'000) 460,429 445,815
Number of Ordinary shares in issue at the period end(A) 142,774,382 146,172,889
Net asset value per Ordinary share 322.49p 304.99p
(A) Excluding shares held in treasury
31 July 2024 31 January 2024
Adjusted net assets £'000 £'000
Net assets attributable (as above) 460,429 445,815
Unamortised Loan Notes issue expenses (251) (255)
Adjusted net assets attributable 460,178 445,560
Number of Ordinary shares in issue at the period end(A) 142,774,382 146,172,889
Adjusted net asset value per Ordinary share 322.31p 304.82p
(A) Excluding shares held in treasury.
31 July 2024 31 January 2024
Net assets - debt at fair value £'000 £'000
Net assets attributable 460,429 445,815
Amortised cost Loan Notes 29,749 29,745
Market value Loan Notes (23,978) (23,916)
Net assets attributable 466,200 451,644
Number of Ordinary shares in issue at the period end(A) 142,774,382 146,172,889
Net asset value per Ordinary share - debt at fair value 326.53p 308.98p
(A) Excluding shares held in treasury.
8. 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/(losses) on investments
in the Condensed Statement of Comprehensive Income. The total costs were as
follows:
Six months ended Six months ended
31 July 2024 31 July 2023
£'000 £'000
Purchases 246 151
Sales 42 25
288 176
9. 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 has 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.
The financial assets and liabilities measured at fair value in the Condensed
Statement of Financial Position are grouped into the fair value hierarchy at
the reporting date as follows:
Level 1 Level 2 Level 3 Total
As at 31 July 2024 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 501,716 - - 501,716
Total 501,716 - - 501,716
Level 1 Level 2 Level 3 Total
As at 31 January 2024 Note £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss
Quoted equities a) 474,087 - - 474,087
Total 474,087 - - 474,087
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.
10. Analysis of changes in net debt
At Currency Non-cash At
31 January 2024 differences Cash flows movements 31 July 2024
£'000 £'000 £'000 £'000 £'000
Cash and cash equivalents 12,868 52 (8,076) - 4,844
Debt due within one year (13,307) (47) (5,686) - (19,040)
Debt due after more than one year (29,745) - - (4) (29,749)
(30,184) 5 (13,762) (4) (43,945)
At Currency Non-cash At
31 January 2023 differences Cash flows movements 31 July 2023
Analysis of changes in net debt £'000 £'000 £'000 £'000 £'000
Cash and cash equivalents/(bank overdraft) 12,267 227 (13,708) - (1,214)
Debt due within one year (13,762) 43 351 - (13,368)
Debt due after more than one year (29,738) - - (4) (29,742)
(31,233) 270 (13,357) (4) (44,324)
A statement reconciling the movement in net funds to the net cash flow has not
been presented as there are no differences from the above analysis.
11. Transactions with the Manager
The Company has an agreement with abrdn Fund Managers Limited (the "Manager")
for the provision of investment management, secretarial, accounting and
administration and promotional activity services.
The management fee is calculated and charged, on a monthly basis, at 0.45% per
annum on the first £225 million, 0.35% per annum on the next £200 million
and 0.25% per annum on amounts over £425 million of the net assets of the
Company, with debt at par and excluding commonly managed funds. The management
fee is chargeable 40% to revenue and 60% to capital. During the period
£872,000 (31 July 2023 - £879,000) of investment management fees were
payable to the Manager, with a balance of £292,000 (31 July 2023 - £291,000)
being due at the period end. There were no commonly managed funds held in the
portfolio during the six months to 31 July 2024 (2023 - none).
The management agreement may be terminated by either party on not less than
six months' written notice. On termination by the Company on less than the
agreed notice period the Manager would be entitled to receive fees which would
otherwise have been due up to that date.
The Manager also receives a separate promotional activities fee which is based
on a current annual amount of £200,000 payable quarterly in arrears. During
the period £100,000 (31 July 2023 - £125,000) of fees were payable to the
Manager, with a balance of £17,000 (31 July 2023 - £83,000) being due at the
period end.
12. Segmental information
The Company is engaged in a single segment of business, which is to invest
mainly in equity securities. 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. Half Yearly Financial Report
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 31 July
2024 and 31 July 2023 has not been audited.
The information for the year ended 31 January 2024 has been extracted from the
latest published audited financial statements which have been filed with the
Registrar of Companies. The report of the auditor on those accounts contained
no qualification or statement under Section 498 of the Companies Act 2006.
14. Approval
This Half Yearly Financial Report was approved by the Board on 1 October 2024.
Alternative Performance Measures ("APMs")
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 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.
Discount to net asset value per share with debt at fair value
The discount is the amount by which the share price is lower than the net
asset value per share with debt at fair value, expressed as a percentage of
the net asset value with debt at fair value.
31 July 2024 31 January 2024
Share price (p) a 297.00p 276.00p
NAV per Ordinary share (p) b 326.53p 308.98p
Discount (a-b)/a 9.0% 10.7%
Dividend yield
Dividend yield is calculated using the Company's historic annual dividend per
Ordinary share divided by the share price, expressed as a percentage.
31 July 2024 31 January 2024
Annual dividend per Ordinary share (p) a 13.75p 13.75p
Share price (p) b 297.00p 276.00p
Dividend yield a/b 4.6% 5.0%
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 and short term deposits.
31 July 2024 31 January 2024
Borrowings (£'000) a 48,789 43,052
Cash (£'000) b 4,844 12,868
Amounts due to brokers (£'000) c - 92
Amounts due from brokers (£'000) d - -
Shareholders' funds (£'000) e 460,429 445,815
Net gearing (a-b+c-d)/e 9.5% 6.8%
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
Reference Index, respectively.
Share
Six months ended 31 July 2024 NAV Price
Opening at 1 February 2024 a 309.0p 276.0p
Closing at 31 July 2024 b 326.5p 297.0p
Price movements c=(b/a)-1 +5.7% +7.6%
Dividend re-investment(A) d +2.5% +2.9%
Total return c+d +8.2% +10.5%
Share
Year ended 31 January 2024 NAV Price
Opening at 1 February 2023 a 302.8p 294.0p
Closing at 31 January 2024 b 309.0p 276.0p
Price movements c=(b/a)-1 +2.0% (6.1)%
Dividend re-investment(A) d +4.7% +4.5%
Total return c+d +6.7% (1.6)%
(A) NAV total return involves investing the net 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 net dividend in
the share price of the Company on the date on which that dividend goes
ex-dividend.
By order of the Board
abrdn Holdings Limited
Company Secretary
1 October 2024
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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