TIDMASL
Aberforth Smaller Companies Trust plc
Audited Annual Results for the year to 31 December 2021
The following is an extract from the Company's Annual Report and Financial
Statements for the year to 31 December 2021. The Annual Report is expected to
be posted to shareholders by 7 February 2022. Members of the public may obtain
copies from Aberforth Partners LLP, 14 Melville Street, Edinburgh EH3 7NS or
from its website: www.aberforth.co.uk. A copy will also shortly be available
for inspection at the National Storage Mechanism at: https://data.fca.org.uk/#/
nsm/nationalstoragemechanism.
FINANCIAL HIGHLIGHTS
Net Asset Value per Ordinary Share Total +32.5%
Return
Numis Smaller Companies Index (excluding Investment Companies) Total +21.9%
Return
Ordinary Share Price Total +20.3%
Return
Total ordinary dividends of 35.2p per share for 2021 represent a 5.7%
increment when compared with 2020's 33.3p.
INVESTMENT OBJECTIVE
The investment objective of Aberforth Smaller Companies Trust plc (ASCoT) is to
achieve a net asset value total return (with dividends reinvested) greater than
that of the Numis Smaller Companies Index (excluding Investment Companies)
("NSCI (XIC)" or "benchmark") over the long term.
CHAIRMAN'S STATEMENT TO SHAREHOLDERS
Review of performance
It is pleasing to report on a good year for performance in 2021, one that
contrasts sharply with the difficulties of 2020. ASCoT's net asset value total
return was 32.5%. The share price total return was lower at 20.3%, which
reflects the widening of the discount from 3.4% to 12.6% over the course of
2021.
ASCoT's net asset value performance compared well with that of the investment
benchmark. The total return of the Numis Smaller Companies Index (excluding
Investment Companies) (NSCI (XIC)) was 21.9%. The share prices of large
companies also rose, though to a lesser extent with the FTSE All-Share up by
18.3% in total return terms.
The contrast between 2020 and 2021 was due among other things to the arrival of
the vaccines, which gave confidence to markets that the pandemic could be
controlled without reliance on lockdowns. The on-going uncertainties pertaining
to the Omicron variant show that the effects of the coronavirus linger and it
continues to extract a regrettable toll in terms of lives lost. However, from
the investment perspective, it does feel that the issue at hand is the pace of
recovery rather than recovery itself. In this context, it is encouraging that
the resilience shown by ASCoT's investee companies in 2020 allowed them to
benefit from the first stages of economic recovery in 2021. In turn, as the
Managers' Report describes in detail, profits and dividends are rebounding
well. The improvement in trading conditions is convincing, though it is
necessary to recognise the challenges from inflation and supply chain problems
that became increasingly evident through the latter part of the year.
Dividends
The recovery in the profits of small UK quoted companies is amply demonstrated
by ASCoT's Income Statement. A large increase in investment income through 2021
was always likely, given how far it had declined in 2020, which was the worst
year for UK dividend income in the post war period. However, the degree of the
pick-up has been greater than the Board had previously expected. Some of this
is due to two special dividends received by the Company during the year, but
the heavy lifting was done by numerous investee companies returning promptly to
pay dividends having passed them amid 2020's lockdown. This outcome is to the
credit of the resilience and stewardship of the companies in which ASCoT
invests.
The growth in investment income fed through to a 177% increase in the revenue
return per Ordinary Share to 36.76p, which has allowed the Board the
flexibility to propose a final dividend of 24.25p per Ordinary Share. This,
together with the interim dividend of 10.95 pence, would give a total dividend
of 35.20p per Ordinary Share in respect of the year to 31 December 2021. Growth
of 5.7% is consistent with the Board's aim to increase dividends in real terms.
Notably, the 35.20p total dividend is funded entirely from the year's revenue
return - there has been no need to use revenue reserves, which is a better
outcome than I had envisaged when I wrote my interim update.
Inflation running at its current elevated rate may prove a more demanding
hurdle for the Board's progressive dividend policy if the investee companies
struggle in the near term to pass on higher costs. However, the Board takes
encouragement from ASCoT's revenue reserves, which were 59.0p per Ordinary
Share at 31 December 2021 assuming approval of the final dividend.
Additionally, the Managers' dividend estimates for the portfolio plot a path
for ASCoT's investment income to exceed 2019's pre-pandemic levels over the
next couple of years.
Gearing
Throughout ASCoT's life, it has been the Board's policy to deploy gearing in a
tactical fashion. Decisions to gear are motivated by periods of stress in
equity markets. The pandemic and lockdown in 2020 produced such an episode,
which allowed ASCoT to gear for the fourth time in its 31 year history. The £
130m debt facility to enable this is provided by The Royal Bank of Scotland
International. It has a term running to June 2023, which is designed to align
with the three-yearly continuation vote cycle.
Gearing, which is the ratio of net debt to Shareholders' Funds, was 5.6% at 31
December 2021, down slightly from 6.1% at the start of the year. This reduction
in gearing reflects the increase in share prices and therefore in Shareholders'
Funds through the year. Despite this recovery, the Board and Managers consider
that continued use of the debt facility is appropriate. As the Managers' Report
explains, the portfolio's companies continue to make sound progress, while
valuations remain attractive.
Share buy-back
The Company seeks authority to buy back up to 14.99% of its Ordinary Shares at
the Annual General Meeting. The authority was renewed in March 2021. In the
year to 31 December 2021, 874,800 shares were bought back and cancelled. The
total value of these repurchases was £12.9m, on an average discount of 11.2%.
The Board continues to believe that, at the margin, buy-backs provide an
increase in liquidity for those Shareholders wishing to crystallise their
investment and, at the same time, deliver an economic uplift for those
Shareholders wishing to remain invested in the Company. Accordingly, the Board
will be seeking to renew the buy-back authority at the Annual General Meeting
on 3 March 2022.
Stewardship
In November, COP26 reinforced the increasing importance of environmental,
social and governance issues for economies and financial markets. As part of
its stewardship responsibilities, the Board regularly reviews the Managers'
approach to these issues, which is described in additional detail elsewhere in
this annual report. The Board endorses the Managers' stewardship policy, which
is set out in their submission as a signatory to the UK Stewardship Code 2020.
This, together with examples relating to voting and engagement with investee
companies, can be found in the literature library of the Managers' recently
refreshed and updated website at www.aberforth.co.uk.
Board changes
The Board regularly reviews its composition and structure in line with
corporate governance requirements. As part of the Board's succession planning,
Paula Hay-Plumb, who has been a Director for eight years, will not stand for
re-election at the forthcoming Annual General Meeting. Paula has made a
valuable contribution to the Board's deliberations and we wish her well for the
future.
A recruitment process for a new Director, being run by the Board, is well
advanced.
Annual General Meeting ("AGM")
The AGM will be held at 14 Melville Street, Edinburgh EH3 7NS at 2.30 pm on 3
March 2022. Details of the resolutions to be considered by Shareholders are set
out in the Notice of the Meeting on page 56. Shareholders are encouraged to
submit their vote by proxy in advance of the meeting in case restrictions
related to the Covid-19 pandemic apply and it is therefore not possible for
shareholders to attend in person. The Company will issue a regulatory news
announcement, which will also be posted on the website, if the only attendees
permitted will be those required to allow the business of the meeting to be
conducted. The Board welcomes questions from Shareholders and invites them to
be submitted by email to enquiries@aberforth.co.uk before the meeting, in case
attendance is not allowed. Questions will be considered by the Board and
responses provided. In light of these circumstances a brief update on
performance and the portfolio will be available on the Managers' website
following the meeting. In accordance with normal practice, the results of the
AGM will be issued in a regulatory news announcement and also posted on the
website.
Conclusion
The enduring fascination of financial markets is that they never cease to
surprise. Had I been told at the start of 2021 that ten year government bond
yields would finish the year still below their pre-pandemic levels, I would
have concluded that nascent inflationary pressures had given way to the
disinflationary conditions with which we have become familiar since the global
financial crisis. And yet the year ended with inflation running at its highest
rates for decades. The Managers' Report explores this conundrum in more detail,
but, with the rhetoric from the central banks evolving, it does appear likely
that the coming year will bring some form of resolution.
The nature of the resolution will have important implications for the direction
of equities as a whole, for the Managers' value investment style and for
ASCoT's returns. I would note that financial markets ended 2021 in a familiar
manner - bond yields were low and growth stocks had resumed leadership within
equity markets. At the risk of being confounded again, I would venture to
suggest that the burden of proof does not sit with the value investor.
The second order effects of the pandemic, in the form of inflation and supply
chain challenges, threaten to hamper the profit recovery in 2022, but a year of
progress nevertheless seems likely. Political developments in many parts of the
world remain unpredictable and affect equity valuations. At home, it is
remarkable how rapidly political uncertainty has re-emerged after the decisive
general election result at the end of 2019. This has no doubt contributed to
the valuation of UK equities remaining below their global peers. It is notable,
however, that these valuations are attracting the attention of other companies
and private equity as M&A activity recovers to levels last seen before the EU
referendum.
While politics and economics will be important influences on ASCoT's near term
returns, the more important contribution over time is the fortunes of the
investee companies. I am struck by how well these businesses have fared through
the great challenges of the past two years. Their resilience is brought out in
the Managers' Report through analyses of balance sheet strength, good returns
on equity and growing dividends. Such characteristics may be considered to sit
oddly with a portfolio managed under a value investment philosophy. My
interpretation is that this is another instance of the financial markets'
ability to surprise and highlights the opportunity for ASCoT's shareholders
Finally, my fellow Directors and I very much welcome the views of Shareholders
and are available to talk to you directly.
My email address is noted below.
Richard Davidson
Chairman
28 January 2022
richard.davidson@aberforth.co.uk
MANAGERS' REPORT
Introduction
Equity markets performed well in 2021. In the UK, the total return of large
companies, represented by the FTSE All-Share, was 18.3%. This was surpassed by
the 21.9% return of the NSCI (XIC), which defines ASCoT's investment universe
of small UK quoted companies. The net asset value total return of ASCoT itself
was 32.5%, while the share price total return was 20.3%.
Following the negative returns of 2020, these numbers depict a welcome reversal
of fortunes for UK equity markets. However, it would be remiss to pass over the
contrast between this improvement and the development of the pandemic - the
world is likely to have seen more deaths associated with the coronavirus in
2021 than in 2020. The disparity between investment returns is explained by the
remarkably rapid development of the vaccines, which were announced towards the
end of 2020. These spurred a powerful rally in share prices and allowed equity
markets to fulfil their function by discounting a future in which the pandemic
can be controlled and economic activity can normalise. In due course, the
rollout of the vaccines allowed demand to begin its recovery, boosted by high
household savings, loose monetary policy and fiscal support. Corporate profits
followed, thus starting to justify the rebound in share prices.
The economic recovery progressed more or less as hoped through 2021. Support
measures, such as the UK's Job Retention Scheme, have been gradually phased out
without, as yet, a significant impact on activity. However, it is notable that
share prices struggled through the second half of the year. This reflects
uncertainties that stem both from the continuing effects of the coronavirus
itself and from the unintended consequences of the stimulus measures deployed
in 2020 to mitigate the economic damage of the pandemic. Three particular
issues stand out for their effects on equity valuations: variants of the virus,
supply chain constraints and inflation.
. Despite the success of the vaccines, the prospect of further
lockdowns has lingered owing to the emergence of new variants that might prove
more infectious, virulent or resistant to the vaccines. Through 2021 the Delta
and Omicron variants highlighted this risk and buffeted sentiment to companies
that were benefiting from the return to normal economic activity. This is a
factor that is likely to remain relevant until levels of immunity around the
world are high enough to compromise the virus's ability to evolve.
. Supply chains have been put under severe stress as demand has
surged and as the impact of 2020's lockdowns on industrial production and
investment plays out. Employment has also been a challenge: with indications
that elements of the labour force have been slow to re-engage after the
lockdowns, wage growth is accelerating. In the UK, Brexit is an additional
complication, though it is difficult to disentangle from the effects of the
pandemic. These issues have combined with rising energy prices to exert
pressure on households and on corporate profitability, which is being reflected
in the trading updates of companies around the world, including several of the
portfolio's holdings. In 2021, this factor has tended merely to take the gloss
off results that have been boosted by the demand recovery. However, the effect
on profits in 2022 is likely to be greater.
. Supply chain constraints, rising wages and energy prices have
combined to produce some of the highest rates of inflation in decades. In the
UK, the CPI rose by 5.1% year-on-year in December 2021, while the rate in the
US was 7.0%. As the effects of lockdown in 2020 washed through the data, it
became clear that this rise in inflation is not as transitory as was widely
expected at the start of the year. This is relevant to the performance of the
portfolio since there is evidence that the value investment style, as followed
by the Managers, fares relatively well when government bond yields rise, which
they often do in response to higher inflation. However, in the latter part of
2021, there was little evidence of that relationship. It would seem that equity
markets were focused on the possible responses from central banks, fearing that
tighter monetary conditions might lower both inflation and real economic
growth.
While the effect of these issues on ASCoT's portfolio will become clearer
through 2022, reassurance can be taken from the experience of the past two
years. The sensitivity of the portfolio companies to economic conditions was
clearly displayed both on the way down in 2020 and in the recovery phase in
2021. The resilience of ASCoT's holdings comes with attractive valuations,
despite the strong returns achieved in 2021.
Analysis of performance
To recap, ASCoT's net asset value total return in 2021 was 32.5%, which
exceeded the NSCI (XIC)'s return of 21.9%. The table below and following
paragraphs explain this performance and provide additional detail about the
portfolio.
Performance for the 12 months ended 31 December Basis points
2021
Attributable to the portfolio of investments, 928
based on mid prices
(after transaction costs of 20 basis points)
Movement in mid to bid price spread 10
Cash/gearing 202
Purchase of ordinary shares 15
Management fee (87)
Other expenses (7)
Total attribution based on bid prices 1,061
Note: 100 basis points = 1%. Total Attribution is the difference between
the total return of the NAV and the Benchmark Index (i.e. NAV = 32.53%;
Benchmark Index = 21.92%; difference is 10.61% being 1,061 basis points).
Style
After the adverse experience of 2020, the value investment style in equity
markets around the world benefited from the vaccine rally. This boosted ASCoT's
performance over 2021 as a whole, though its influence waned in the second half
in response to the three challenges to equity valuations described above.
According to the London Business School, which analyses style effects within
the NSCI (XIC) using price to book ratios, value stocks out-performed growth
stocks by just under 10% in 2021. This quantification of the style factor is a
useful but imprecise gauge of the Managers' approach to value investment. The
Managers have always used a broader range of valuation metrics - notably EV/
EBITA, the price earnings ratio, free cash flow yield and dividend yield - to
determine the price targets for ASCoT's holdings. Moreover, their investment
cases are based on more than a statistically low valuation, additionally taking
into account factors such as the development of profits, market position,
pricing power and track record. Consideration is also given to risks and
opportunities emerging from environmental, social and governance (ESG) issues.
Size
The following comments focus on the size effect within the NSCI (XIC), rather
than on comparing the performances of large companies and small companies. The
NSCI (XIC) is defined as the bottom ten percent by value of the total UK
stockmarket. This means that the largest constituent's market capitalisation is
around £1.6bn and that roughly two thirds of the NSCI (XIC)'s value is
represented by companies that are also members of the FTSE 250. For several
years, the Managers have chosen to invest the portfolio in the index's "smaller
small" constituents, which can be thought of as non-FTSE 250 companies. The
motivation for this was that the "smaller smalls" enjoyed much more attractive
valuations, without having to compromise in terms of profit growth, returns on
equity or leverage. For most of the period since the global financial crisis,
this positioning was unhelpful to ASCoT's returns as general concerns about
liquidity overshadowed the opportunity. However, the advent of the vaccines
appears to have been a catalyst for a re-evaluation of the "smaller smalls". A
gauge of this is the relative performance of the FTSE SmallCap, representative
of "smaller smalls", against the FTSE 250. After a strong end to 2020, the
former went on to out-perform the latter by 13% in 2021, which is the best
calendar year relative performance since 1999. Size was therefore beneficial to
ASCoT's performance in 2021.
Geography
The EU referendum in 2016 and the subsequent weakness in sterling led to a
phase of share price under-performance by companies with greater exposure to
the UK's domestic economy. Just as greater political clarity seemed forthcoming
at the end of 2019, domestically oriented businesses were put under renewed
pressure by 2020's lockdown, which was particularly troublesome for businesses
in the retail, travel and leisure sectors. Moving into 2021, geographical
exposure remained relevant, with the share prices of domestically oriented
businesses rebounding more powerfully amid the vaccine rally, before giving up
some of that out-performance through the middle of the year. Notably, the
fourth quarter witnessed under-performance by the overseas oriented companies,
which reflects their greater exposure, at least in the near term, to the supply
chain issues described in the opening paragraphs. Over 2021 as a whole, the
share prices of domestic businesses out-performed those of overseas businesses
by 8%. This was helpful to ASCoT's performance, since the portfolio has a
weighting of 58% in the domestics, higher than the NSCI (XIC)'s 51%.
Dividends
The swings in the income experience of the portfolio and of small UK quoted
companies in general have reflected their capital performance over the past two
years. The London Business School calculated that NSCI (XIC) dividends fell by
52% in 2020, the worst outcome in the post war era. In 2021, dividends
rebounded by 70%. ASCoT has benefited: the proposed total dividends in respect
of 2021 are funded entirely by the year's earnings. Even at the time of the
interim results, the Managers had estimated that it would be necessary to draw
on revenue reserves, albeit to a lesser extent than in 2020.
Behind this improvement was a better than expected underlying dividend
experience, supplemented by two special dividends paid by investee companies to
ASCoT. The dividend experience is portrayed in the following table, which
categorises the portfolio's 77 holdings at 31 December 2021 by their most
recent dividend action.
Nil Payer Cutter Unchanged Increased Payer Returner Other*
Payer
24 5 5 16 25 2
* Other denotes companies paying dividends for the first time
The important categories are Returners and Nil Payers. The former captures
those holdings that did not pay a dividend in 2020 but that have resumed
distributions in 2021. There are more of these than the Managers had expected
at the start of 2021, which is testament to the resilience and good stewardship
of the investee companies in extremely challenging circumstances. These have
provided a significant boost to ASCoT's Income Statement. The Nil Payers
category hints at the scope for further impetus. The Managers estimate that 14
of the Nil Payers will make dividend payments in the next two years. The other
Nil Payers, which may be thought of as structural Nil Payers, are likely to
take longer as their cash flows are prioritised for investment or debt
repayment.
Balance sheets
The strong dividend performance described above is influenced by the resilience
of balance sheets both within the portfolio and among small companies in
general. The table below sets out the weight of the portfolio and the tracked
universe in four leverage categories. Using the Managers' estimates, it also
shows those weights both at the end of 2021 and at the end of 2023. The tracked
universe is those companies in the NSCI (XIC) that the Managers follow closely
and represents 97% by value of the NSCI (XIC).
Weight in companies Net cash Net debt/ Net debt/ Other*
with: EBITDA < 2x EBITDA > 2x
Portfolio: 2021 32% 47% 11% 10%
Portfolio: 2023 43% 43% 7% 7%
Tracked universe: 29% 34% 24% 13%
2021
Tracked universe: 41% 32% 20% 7%
2023
*Includes loss-makers and lenders
The resilience of small companies is evident from the table. Both the portfolio
and the tracked universe are emerging from the pandemic with a skew to
companies boasting strong balance sheets. Some of that resilience is due to
equity issues in 2020, though these were fewer than the Managers had expected.
The more important influences were the control of costs, recovering demand and
a focus on free cash generation. It is also notable that, if anything, the
portfolio's companies look more conservatively financed than does the tracked
universe. The latter has a higher exposure to more highly leveraged companies
with net debt / EBITDA ratios above 2x.
The likely strengthening of balance sheets in the wake of the pandemic is
consistent with the experience of the global financial crisis. Company boards
are naturally slower to utilise their balance sheet strength in the aftermath
of such events. Such caution is understandable, but it can be taken too far. A
lack of investment is detrimental to the longer term prospects of individual
companies and, by extension, to the economy as a whole. Furthermore, in the
absence of attractive investment opportunities, excess cash can be returned to
shareholders, as long as it does not jeopardise the underlying business's
viability.
Return on equity
There is a widespread view that companies in the value cohort of an index
should generate much lower returns on equity (RoE) than do the growth cohort.
This makes sense since, if the stockmarket is pricing efficiently, companies
with high returns on equity should be on higher valuations, all else being
equal. In turn, value investors would tend to find more opportunities among
companies whose returns on equity and valuations are depressed by some issue
but can revert to more normal levels once the issue is addressed.
Weight in "Loss makers" "Laggards" "Value "Stars"
companies creators"
with:
RoE < 0% RoE 0-10% RoE 10-20% RoE > 20%
2019 2020 2019 2020 2019 2020 2019 2020
Portfolio 6% 25% 24% 37% 40% 19% 29% 19%
Tracked 11% 21% 22% 30% 36% 22% 31% 26%
universe
The table shows the exposure of the portfolio and of the tracked universe to
companies categorised by their RoE. The impact of 2020's lockdown-induced
recession is clear, with weightings in "loss makers" and "laggards" rising as
profits declined. A more useful picture is painted by the data for relatively
normal conditions of 2019. In that year, the portfolio's exposures to the four
categories compare well with those of the tracked universe. This contradicts
the widespread view that value investors are condemned to owning less
profitable companies. The explanation for this counterintuitive but encouraging
finding lies in the portfolio's relatively high exposure to the more
attractively valued smaller small companies, which is addressed in more detail
in the commentary on valuations below.
Corporate activity
The international appeal of UK assets diminished with 2016's EU referendum.
This was reflected in sterling weakness, in a widening of the valuation
discount between UK and global equities and in a decline in takeover activity
within the NSCI (XIC). However, the past year has seen some appetite return. UK
equities have continued to under-perform their global peers, but sterling is
above pre pandemic levels and ten percent above the nadir in the wake of the
referendum. Of more direct relevance to the portfolio, the incidence of M&A
within the NSCI (XIC) was at its highest level in 2021 since 2015. Private
equity and other companies, both domestically based and overseas, have been
keen to take advantage of the considerable value available within the UK equity
market.
Nineteen constituents of the NSCI (XIC) were acquired last year, with offers
for another six still outstanding at 31 December 2021. Of these 25 companies,
the portfolio had holdings in six. In addition, there were public approaches
for two holdings that were rejected by shareholders and other approaches that
the Managers helped rebuff before disclosure was required. It remains the case
that the stockmarket valuations for many investee companies are so low that the
typical 20-30% premium for control does not get close enough to the Managers'
target prices.
ASCoT's interim report described an upsurge in IPO activity in the first half
of 2021, with most of the companies brought to the market on high valuations
and with more appeal to the growth investor. There were few IPOs in the second
half, but the year as a whole saw 23 companies float with current market
capitalisations that brought them into the NSCI (XIC) on its 2022 rebalancing.
The net effect of this rebalancing increased the number of constituents in the
NSCI (XIC) from 334 at 1 January 2021 to 337 at 1 January 2022. The largest
constituent in the 2022 vintage at 1 January 2022 had a market capitalisation
of £1,645m.
Portfolio Turnover
Portfolio turnover is defined as the lower of purchases and sales divided by
average portfolio value. Over the twelve months to 31 December 2021, the rate
was 26%. This is in the middle of the range since the financial crisis, with
turnover as low as the mid teens and as high as around 40%. There is often a
relationship between ASCoT's turnover and the relative performance of the
portfolio. If the share prices of holdings rise close to the Managers' targets,
there is the opportunity to realise value and redeploy the proceeds in other
companies with higher upsides. The Managers term this the "value roll". On the
other hand, weaker performance implies that the gaps between share prices and
the Managers' targets prices are widening and so, all else being equal, there
is less incentive to change the portfolio.
Active share
Active share is a measure of how different a portfolio is from an index. It is
calculated as half of the sum of the absolute differences between each stock's
weighting in an index and its weighting in the portfolio. The higher a
portfolio's active share, the higher its chance of either out or
under-performing the index. At 31 December 2021, the portfolio's active share
was 76% relative to the NSCI (XIC), which was well above the Managers' target
ratio of at least 70%.
Valuations
Before examining the valuations of the portfolio, it is worth noting that UK
equities remain lowly valued in the global context. Research by JP Morgan shows
that UK equities have under-performed their US peers by 50% and their European
peers by 25% since the EU referendum in 2016. This has left UK valuations
relative to global equities over two standard deviations below their long term
averages. A significant valuation discount persists even when valuations are
adjusted for the UK stockmarket's heavy exposure to the financials and
commodities sectors. Though less exposed to these sectors, ASCoT's investment
universe and portfolio would appear to bear a UK discount.
Portfolio characteristics 31 December 2021 31 December 2020
ASCoT NSCI (XIC) ASCoT NSCI (XIC)
Number of companies 77 337 80 334
Weighted average market £624m £934m £587m £866m
capitalisation
Price earnings (PE) ratio 13.3x 16.6x 7.3x 10.8x
(historical)
Dividend yield (historical) 1.9% 2.1% 2.2% 1.5%
Dividend cover 4.0x 2.9x 6.1x 6.2x
The historical PE ratios of the portfolio and of the NSCI (XIC) rose through
2021. This was driven both by the recovery in share prices through the year and
by companies reporting lower earnings in respect of the recession year of 2020.
The long term average PE for the portfolio is 11.6x, while that of the NSCI
(XIC) is 13.4x. At 31 December 2021, therefore, both the portfolio and index
are more highly rated than usual. This reflects the fact that recovery in
earnings has further to go - the Managers anticipate that pre-pandemic levels
of profitability will be reached again in 2023. In relative terms, the
portfolio PE is 20% lower than that of the NSCI (XIC) at 31 December 2021. This
compares with an average discount over the long term of 13%.
Turning to dividend yields, the portfolio's 1.9% is lower than the 3.2% long
term average. While dividends recovered more quickly than expected through
2021, they remain below their pre-pandemic levels. Again, those levels are
likely to be seen again in 2023. Consistent with this, the Managers' estimates
suggest a portfolio yield two years out of 3.1%. As dividends grow again, the
presently high dividend cover of 4.0x should reduce closer to the long term
average of 2.7x.
The table below sets out the forward valuations of the portfolio, the tracked
universe and certain subdivisions of the tracked universe. The metric displayed
is enterprise value to earnings before interest, tax and amortisation (EV/
EBITA), which the Managers use most often in valuing companies. The estimates
underlying the ratios are the Managers'. There follows a series of observations
about the table.
EV/EBITA 2020 2021 2022 2023
ASCoT 12.4x 9.4x 8.1x 7.2x
Tracked Universe (245 15.0x 12.9x 10.9x 9.2x
stocks)
* 46 growth stocks 21.9x 21.2x 20.2x 18.2x
* 199 other stocks 13.5x 11.6x 9.7x 8.0x
* 105 stocks > £600m 14.6x 13.4x 11.5x 9.6x
market cap
* 140 stocks < £600m 16.1x 11.5x 9.5x 8.3x
market cap
. The decline in ASCoT's EV/EBITA from 2020 to 2023 is driven by
recovering profits and by a reduction in EV as free cash flow is generated to
reduce debt. The 7.2x multiple in 2023 is based on profits that are expected to
be back roughly to 2019 levels.
. Consistent with the Managers' value investment philosophy, the
portfolio is more attractively rated than the tracked universe, with a discount
of 17% in 2020 expanding to 22% in 2023.
. The valuation stretch among small companies is shown in the EV/
EBITA difference between the growth stocks and the rest of the tracked
universe. It is in this latter cohort that the Managers focus their attention,
though growth stocks do encounter trading issues and can offer opportunities as
well.
. The bottom two rows demonstrate the present importance of size.
Stocks with market capitalisations above £600m are an approximate match for
those NSCI (XIC) constituents that are also members of the FTSE 250. Those with
market capitalisations below £600m are the "smaller smalls". Despite their
better share price performance in 2021, these remain more attractively valued
than their mid cap peers, but they are not inferior in terms of their growth
potential, balance sheets and returns on equity. Since the global financial
crisis, the stockmarket has penalised these companies for their small size and
relative illiquidity. Through its diversified portfolio ASCoT has taken
advantage of this and has a meaningfully higher exposure than does the index to
the "smaller smalls".
. Turning back to M&A within the NSCI (XIC), the average 2021 EV/
EBITA multiple of the takeover targets (excluding property companies) was 17x.
This is markedly higher than the 2021 valuation multiples of both the tracked
universe and the portfolio, which illustrates the value available among small
companies.
The EV/EBITA multiples usefully demonstrate the attractive valuations within
the portfolio, but they are not the only element of the Managers' investment
cases. Each holding is ascribed a target price, which is usually based upon an
estimate of normalised profits to which a multiple is applied. The emphasis of
the investment process is assessment of the appropriate multiple, taking into
account factors such as the company's market position, its record, ESG risks
and opportunities, management and longer term prospects. The ranking by upside
to price targets allows the Managers to circulate capital from companies whose
share prices are near their calculated values to those with a larger gap
between the two. Over time this "value roll" can make a meaningful contribution
to investment returns. It is the full investment cases of the holdings that is
the main influence on the Managers' consideration of ASCoT's tactical gearing
facility. Since attractive valuations continue to unpin significant estimated
upside, it is appropriate that the portfolio remains geared.
Outlook and Conclusion
Equity returns are determined by the progress of corporate profits and the
rating ascribed to those profits by investors. Inflation and monetary policy
are important influences on the latter since they affect the discount rates
used to value financial assets. One of the curiosities of 2021 is that the
highest rates of inflation for decades have not had a greater impact on the
pricing of financial assets. Government bond yields in both the UK and US are
still below their pre-pandemic levels, while growth stocks returned to the fore
after weaker relative performance amidst the vaccine rally. So far, therefore,
the markets appear to be anticipating economic and financial conditions little
changed from those that have pervaded since the global financial crisis: low
real economic growth, low inflation, low interest rates and low bond yields.
It is not clear that today's inflationary pressures will be short-lived and
easily controlled. The supply chain problems will be sorted in time, but there
may be more intractable influences. Under-investment in oil and gas development
projects in recent years could keep energy prices high. Meanwhile, there is
concern that the supply of labour has been affected by issues stemming from the
pandemic and, in the UK at least, by Brexit. Macro-economic data and anecdotes
from companies indicate that wages are accelerating.
Inflation raises the stakes. While its recent resurgence clearly does not
prevent a return to the disinflationary conditions of the past dozen years, it
is perplexing that the financial markets do not yet harbour more doubt. The
chance that bond yields prove too low and that growth stocks are too highly
valued is higher today than before the pandemic, but that is not reflected in
current valuations. Were more doubt to creep into valuations, ASCoT's value
investment style should benefit in terms of relative performance. However, we
should be careful what we wish for - equities struggle when monetary policy
belatedly plays catch-up and relative gains might be achieved against the
backdrop of lower share prices.
Turning back to corporate profits, the outlook is encouraging as economic
activity normalises and demand continues its rebound from the 2020 recession.
Such recovery remains a common theme from the Managers' recent engagement with
ASCoT's investee companies. There are, though, risks. First, the pandemic is
still with us and may elicit further measures by governments. However, the
efficacy of the vaccines means that such measures should affect the pace of
recovery rather than threaten the recovery itself. Second, there are the supply
chain problems, which are another recurring feature of company trading updates
and will take time to resolve. Indeed, energy and labour costs may put
sustained pressure on corporate margins, with demand also threatened by the
impact of energy costs on consumer spending. Third, there is the chance that
central bankers tighten monetary policy to control inflation and thus bring
about economic slowdown. At this stage, this risk is more speculative since
monetary tightening, such as the Bank of England's 0.15% increase in interest
rates in December, has so far been modest - in most western economies interest
rates remain deeply negative in real terms.
So, from the strategic perspective, 2022 feels like a pivotal year as the
inflation debate comes to a head. Equity valuations will be affected, including
those of small UK quoted companies. In such uncertain circumstances, the
records of these companies offer reassurance. They have coped with the global
financial crisis, the Eurozone crisis, Brexit and the pandemic. Despite their
cyclicality they have displayed great resilience through each episode. ASCoT
itself benefits from a diversified portfolio of companies, with wide ranging
activities and geographical exposures. These companies boast strong balance
sheets and generate returns on equity that point to profitable and growing
underlying businesses. Remarkably, these characteristics are available to the
Managers without having to compromise on the value investment philosophy.
Why should that be? Many aspects of ASCoT's investment policy and strategy -
investment in small UK quoted companies with a value philosophy - have been out
of favour for several years.
. Since the financial crisis, smallness has come with concerns
about low liquidity. These have trumped the longer term associations of smaller
size with faster growth and higher total returns.
. Since the EU referendum, UK assets have been out of favour and
remain lowly valued in the global context. This is despite the recent upsurge
in M&A, which recognises the deep valuation discounts.
. Quoted companies are increasingly being seen as outmoded, with
private equity meanwhile lauded for long termism and its ability to use more
leverage. However, as mainstream funds increasingly look to take stakes in
private businesses, it is notable that the private equity firms themselves are
seeking stock exchange listings. Moreover, it is notable that illiquidity is
not a concern when it comes to private equity.
. Finally, value investment has been challenged by the environment
of low inflation and low interest rates since the global financial crisis. But
a continuation of these conditions is not a given, especially in view of
current inflationary pressures.
A reversal of one or more of these headwinds could supplement the progress of
the underlying businesses in which the portfolio invests to boost returns for
ASCoT's shareholders. This optionality, in combination with the resilience of
the investee companies, underlines the relevance of ASCoT's investment
proposition. These attributes and the upside they suggest are good reason for
ASCoT to retain the tactical gearing of the portfolio, which has been in place
since June 2020. They have also motivated the Managers to add further to their
individual shareholdings in ASCoT.
Aberforth Partners
Managers
28 January 2022
DIRECTORS' RESPONSIBILITY STATEMENT
Each of the Directors confirms to the best of their knowledge that:
(a) the financial statements, which have been prepared in accordance with
applicable accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
(b) the Strategic Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces; and
(c) the Annual Report, taken as a whole, is fair, balanced and understandable
and provides information necessary for Shareholders to assess the Company's
position and performance, business model and strategy.
On behalf of the Board
Richard Davidson
Chairman
28 January 2022
PRINCIPAL RISKS
The Board carefully considers the risks faced by the Company and seeks to
manage these risks through continual review, evaluation, mitigating controls
and action as necessary. A risk matrix for the Company is maintained. It groups
actual and emerging risks into the following categories: portfolio management;
investor relations; regulatory and legal; and financial reporting. Further
information regarding the Board's governance oversight of risk, its review
process and the context for risks such as conflicts of interest and ESG can be
found in the Corporate Governance Report. The Audit Committee Report (pages 30
to 32 of the Annual Report) details matters considered and actions taken on
internal controls and risks during the year. The Company outsources all the
main operational activities to recognised, well-established firms and the Board
receives internal control reports from these firms, where available, to review
the effectiveness of their control frameworks. Since the Covid-19 pandemic,
these firms have deployed alternative operational practices, including staff
working remotely, to ensure continued business service.
Emerging risks are those that could have a future impact on the Company. The
Board regularly reviews them and, during the year, it added to the risk matrix
potential economic risks arising from inflation, reversal of quantitative
easing and supply chain constraints. This risk was grouped under the principal
risk category of market risk, as described below. The Board regularly monitors
how the Managers integrate such risks into the investment decision making.
Principal risks are those risks derived from the matrix that have the highest
risk ratings. They tend to be relatively consistent from year to year given the
nature of the Company and its business. The principal risks faced by the
Company, together with the approach taken by the Board towards them, are
summarised below. To indicate the level of monitoring required during this year
each principal risk has been categorised as either dynamic risk, requiring
detailed monitoring as it can change regularly, or stable risk, requiring less
monitoring.
(i) Investment policy/performance risk - The Company's investment policy and
strategy exposes the portfolio to share price movements. The performance of the
investment portfolio typically differs from the performance of the benchmark
and is influenced by stock selection, liquidity and market risk (see (ii) below
and Note 19 to the financial statements for further details). Investment in
small companies is generally perceived to carry more risk than investment in
large companies. While this is reasonable when comparing individual companies,
it is much less so when comparing the risks inherent in diversified portfolios
of small and large companies. The Board monitors performance against the
investment objective over the long term by ensuring the investment portfolio is
managed appropriately, in accordance with the investment policy and strategy.
The Board has outsourced portfolio management to experienced investment
managers with a clearly defined investment philosophy and investment
process. The Board receives regular and detailed reports on investment
performance including detailed portfolio analysis, risk profile and
attribution analysis. Senior representatives of Aberforth Partners attend each
Board meeting. Peer group performance is also regularly monitored by the
Board. This remains a dynamic risk, with detailed consideration during the
year. The Managers' Report contains information on portfolio investment
performance and risk.
(ii) Market risk - Investment performance is affected by external market risk
factors, including those creating uncertainty about future price movements of
investments. The Board delegates consideration of market risk to the Managers
to be carried out as part of the investment process. The Managers regularly
assess the exposure to market risk when making investment decisions and the
Board monitors the results via the Managers' quarterly and other reporting. The
Board and Managers closely monitor significant economic and political
developments and, in particular, are mindful of the continued uncertainty
following the departure of the UK from the EU, the impacts of the Covid-19
pandemic and government responses, and the potential effects of climate change.
This remained a dynamic risk during the year, in which the Managers reported on
market risks including inflation and supply-chain pressures and other
geo-political issues as referred to in the Managers' Report.
(iii) Share price discount - Investment trust shares tend to trade at discounts
to their underlying net asset values, but a significant share price discount,
or related volatility, could reduce shareholder returns and confidence. The
Board and the Managers monitor the discount daily, both in absolute terms and
relative to ASCoT's peers. In this context, the Board intends to continue to
use the buy-back authority as described in the Directors' Report. This is
considered a dynamic risk as the discount moves daily.
(iv) Gearing risk - In rising markets, gearing enhances returns, but in falling
markets it reduces returns to Shareholders. The Board and the Managers have
specifically considered the gearing strategy and associated risks during the
year. At present this is a dynamic risk as the Company's tactical gearing
facility is partially deployed.
(v) Reputational risk - The reputation of the Company is important in
maintaining the confidence of shareholders. The Board and the Managers monitor
factors that may affect the reputation of the Company and/or of its main
service providers and take action if appropriate. The Board reviews relevant
internal control reporting for critical outsourced service providers. This has
been monitored as a stable risk.
(vi) Regulatory risk - Failure to comply with applicable legal and regulatory
requirements could lead to suspension of the Company's share price listing,
financial penalties or a qualified audit report. A breach of Section 1158 of
the Corporation Tax Act 2010 could lead to the Company losing investment trust
status and, as a consequence, any capital gains would then be subject to
capital gains tax. The Board receives quarterly compliance reports from the
Secretaries to evidence compliance with rules and regulations, together with
information on future developments. This is a stable risk.
Going Concern
The Audit Committee has undertaken and documented an assessment of whether the
Company is a going concern for the period of at least 12 months from the date
of approval of the financial statements. This assessment included the impact on
the Company of Covid-19. The Committee reported the results of its assessment
to the Board.
The Company's business activities, capital structure and borrowing facilities,
together with the factors likely to affect its development and performance, are
set out in the Strategic Report in the Annual Report. In addition, the Annual
Report includes the Company's objectives, policies and processes for managing
its capital and financial risk, along with details of its financial instruments
and its exposures to credit risk and liquidity risk. The Company's assets
comprise mainly readily realisable equity securities and funding flexibility
can typically be achieved through the use of the borrowing facilities which are
described in notes 12 and 13 to the financial statements. The Company has
adequate financial resources to enable it to meet its day-to-day working
capital requirements.
In summary and taking into consideration all available information, the
Directors have concluded it is appropriate to continue to prepare the financial
statements on a going concern basis.
The Income Statement, Balance Sheet, Reconciliation of Movements in
Shareholders' Funds and summary Cash Flow Statement are set out below.
INCOME STATEMENT
For the year ended 31 December 2021
(audited)
For the year ended For the year ended
31 December 2021 31 December 2020
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net gains/(losses) on - 344,608 344,608 - (223,279) (223,279)
investments
Investment income 37,331 - 37,331 15,656 - 15,656
Other income 125 - 125 - - -
Investment management fee (3,752) (6,253) (10,005) (2,717) (4,529) (7,246)
Portfolio transaction costs - (2,790) (2,790) - (2,747) (2,747)
Other expenses (811) - (811) (731) - (731)
-------- -------- -------- -------- -------- --------
Net return before finance 32,893 335,565 368,458 12,208 (230,555) (218,347)
costs
and tax
Finance costs (349) (583) (932) (301) (502) (803)
-------- -------- -------- -------- -------- --------
Return on ordinary 32,544 334,982 367,526 11,907 (231,057) (219,150)
activities
before tax
Tax on ordinary activities - - - (48) - (48)
-------- -------- -------- -------- -------- --------
Return attributable to
equity shareholders 32,544 334,982 367,526 11,859 (231,057) (219,198)
====== ======= ======= ====== ======= =======
Returns per Ordinary Share 36.76p 378.43p 415.19p 13.28p (258.78)p (245.50)p
(Note 4)
The Board declared on 28 January 2022 a final dividend of 24.25p per Ordinary
Share. The Board declared on 27 July 2021 an interim dividend of 10.95p per
Ordinary Share.
The total column of this statement is the profit and loss account of the
Company. All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued in the year.
A Statement of Comprehensive Income is not required as all gains and losses of
the Company have been reflected in the above statement.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 31 December 2021
(audited)
Capital
Share redemption Special Capital Revenue
Capital reserve reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance as at 31 December 2020 888 100 96,663 979,563 70,716 1,147,930
Return on ordinary activities - - - 334,982 32,544 367,526
after taxation
Equity dividends paid (Note 3) - - - - (30,005) (30,005)
Purchase of Ordinary Shares (9) 9 (12,886) - - (12,886)
-------- -------- -------- -------- -------- --------
Balance as at 31 December 2021 879 109 83,777 1,314,545 73,255 1,472,565
====== ====== ====== ====== ====== ======
For the year ended 31 December 2020
(audited)
Capital
Share redemption Special Capital Revenue
Capital reserve reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance as at 31 December 2019 895 93 102,753 1,210,620 91,439 1,405,800
Return on ordinary activities - - - (231,057) 11,859 (219,198)
after taxation
Equity dividends paid (Note 3) - - - - (32,582) (32,582)
Purchase of Ordinary Shares (7) 7 (6,090) - - (6,090)
-------- -------- -------- -------- -------- --------
Balance as at 31 December 2020 888 100 96,663 979,563 70,716 1,147,930
====== ====== ====== ====== ====== ======
BALANCE SHEET
As at 31 December 2021
(audited)
31 December 31 December
2021 2020
£'000 £'000
Fixed assets
Investments at fair value through profit or 1,554,585 1,218,073
loss (Note 5)
---------- ----------
Current assets
Debtors 1,875 968
Cash at bank 3,418 2,963
---------- ----------
5,293 3,931
Creditors (amounts falling due within one (905) (1,231)
year)
---------- ----------
Net current assets 4,388 2,700
---------- ----------
Total Assets less Current Liabilities 1,558,973 1,220,773
Creditors (amounts falling due after more (86,408) (72,843)
than one year)
---------- ----------
Total Net Assets 1,472,565 1,147,930
======= =======
Capital and reserves: equity interests
Called up share capital 879 888
Capital redemption reserve 109 100
Special reserve 83,777 96,663
Capital reserve 1,314,545 979,563
Revenue reserve 73,255 70,716
---------- ----------
Total Shareholders' Funds 1,472,565 1,147,930
======= =======
Net Asset Value per Ordinary Share (Note 6) 1,674.35p 1,292.38p
CASH FLOW STATEMENT
For the year ended 31 December 2021
(audited)
31 December 2021 31 December 2020
£'000 £'000
Operating activities
Net revenue before finance costs and tax 32,893 12,208
Scrip dividends received
- (904)
Taxation - (48)
Investment management fee charged to (6,253) (4,529)
capital
(Increase)/Decrease in debtors (812) 1,841
Decrease in other creditors 37 -
-------- --------
Net cash inflow from operating activities 25,865 8,568
===== =====
Investing activities
Purchases of investments (381,045) (341,319)
Sales of investments 385,146 315,913
-------- --------
Cash Inflow / (outflow) from investment 4,101 (25,406)
activities
===== =====
Financing activities
Purchases of Ordinary Shares (12,156) (6,090)
Equity dividends paid (Note 3) (30,005) (32,582)
Interest and fees paid (850) (964)
Gross drawdowns of bank debt facilities (before any 134,000 182,250
costs)
Gross repayments of bank debt facilities (120,500) (123,000)
(before any costs)
-------- --------
Cash (outflow) / inflow from financing (29,511) 19,614
activities
===== =====
Change in cash during the period 455 2,776
===== =====
Cash at the start of the period 2,963 187
Cash at the end of the period 3,418 2,963
====== ======
SUMMARY NOTES TO THE FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been presented under Financial Reporting Standard
102 ("FRS 102") and under the AIC's Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital Trusts"
("SORP") issued in 2021. The financial statements have been prepared on a going
concern basis under the historical cost convention, modified to include the
revaluation of the Company's investments as described below. The Directors'
assessment of the basis of going concern is described above. The functional and
presentation currency is pounds sterling, which is the currency of the
environment in which the Company operates. The Board confirms that no critical
accounting judgements or significant sources of estimation uncertainty have
been applied to the financial statements and therefore there is not a
significant risk of a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
2. INVESTMENT MANAGEMENT FEE
The Managers, Aberforth Partners LLP, receive an annual management fee, payable
quarterly in advance, equal to 0.75% of net assets up to £1 billion, and 0.65%
thereafter. The investment management fee has been allocated 62.5% to capital
reserve and 37.5% to revenue reserve, in line with the Board's expected long
term split of returns, in the form of capital gains and income respectively,
from the investment portfolio of the Company.
3.
DIVIDS
Year to 31 December Year to 31
2021 December 2020
£'000 £'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 20,318 19,697
December 2020 of 22.90p (2019: 22.00p)
paid on 9 March 2021
Special dividend for the year ended 31 - 3,581
December 2020 of nil (2019: 4.00p)
Interim dividend for the year ended 31 9,687 9,304
December 2021 of 10.95p (2020: 10.40p)
paid on 5 August 2021
------------ ------------
30,005 32,582
------------ ------------
The final dividend for the year ended 31 December 2021 of 24.25p (2020: 22.90p)
will be paid, subject to shareholder approval, on 8 March 2022. These dividends
for 2021 and 2020 have not been included as a liability in the financial
statements.
4. RETURNS PER ORDINARY
SHARE
Year to 31 Year to 31
December 2021 December 2020
The returns per Ordinary Share are based
on: £ £(219,198,000)
Returns attributable to Ordinary 367,526,000
Shareholders
Weighted average number of shares in issue 88,519,932 89,285,989
during the year
Return per Ordinary 415.19p (245.50)p
Share
There are no dilutive or potentially dilutive shares in issue.
5. INVESTMENTS AT FAIR VALUE
In accordance with FRS 102 fair value measurements have been classified using
the fair value hierarchy:
Level 1 - using unadjusted quoted prices for identical instruments in an active
market;
Level 2 - using inputs, other than quoted prices included within Level 1, that
are directly or indirectly observable (based on market data); and
Level 3 - using inputs that are unobservable (for which market data is
unavailable).
Investments held as fair value through profit or loss
Level 1 Level 2 Level 3 Total
As at 31 December 2021 £'000 £'000 £'000 £'000
Listed equities 1,554,585 - - 1,554,585
Unlisted equities - - - -
------------ ------------ ------------ ------------
Total financial asset 1,554,585 - - 1,554,585
investments
------------ ------------ ------------ ------------
During the year, an investment, Lookers, with a book cost of £16,538,000, was
transferred back from Level 3 to Level 1 when its shares relisted on 29 January
2021.
Level 1 Level 2 Level 3 Total
As at 31 December £'000 £'000 £'000 £'000
2020
Listed equities 1,214,140 - 3,933 1,218,073
Unlisted equities - - - -
------------ ------------ ------------ ------------
Total financial asset 1,214,140 - 3,933 1,218,073
investments
------------ ------------ ------------ ------------
6. NET ASSET VALUES
The Net Asset Value per share and the net assets attributable to the Ordinary
Shares at the year end are calculated in accordance with their entitlements in
the Articles of Association and were as
follows.
31 December 2021 31 December 2020
Net assets attributable £ £
1,472,565,000 1,147,930,000
Ordinary Shares in issue at the end 87,948,266 88,823,066
of the year
Net Asset Value per Ordinary Share 1,674.35p 1,292.38p
7. SHARE CAPITAL
During the year, the Company bought back and cancelled 874,800 shares (2020:
710,000) at a total cost of £12,886,000 (2020: £6,090,000). During the period 1
January to 28 January 2022, 220,000 shares have been bought back for
cancellation.
8. RELATED PARTY TRANSACTIONS
The Directors have been identified as related parties and their fees and
shareholdings are detailed in the Directors' Remuneration Report on pages 34
and 35 of the Annual Report. During the year no Director was interested in any
contract or other matter requiring disclosure under section 412 of the
Companies Act 2006.
9. INDEPENT AUDITOR
During the year an audit tender process was conducted by the Audit Committee
and the Board has agreed to appoint Johnston Carmichael LLP as auditor for the
financial year ending 31 December 2022. In view of its length of tenure to
date, Deloitte LLP was not invited to tender. Deloitte LLP remains in office as
auditor until the forthcoming Annual General Meeting at which a resolution for
the appointment of Johnston Carmichael LLP will be proposed.
10. FURTHER INFORMATION
The foregoing do not constitute statutory accounts (as defined in section 434
(3) of the Companies Act 2006) of the Company. The statutory accounts for the
year ended 31 December 2020 which contained an unqualified Report of the
Auditors, have been lodged with the Registrar of Companies and did not contain
a statement required under section 498(2) or (3) of the Companies Act 2006.
Certain statements in this announcement are forward looking statements. By
their nature, forward looking statements involve a number of risks,
uncertainties or assumptions that could cause actual results or events to
differ materially from those expressed or implied by those statements. Forward
looking statements regarding past trends or activities should not be taken as
representation that such trends or activities will continue in the future.
Accordingly, undue reliance should not be placed on forward looking statements.
The Annual Report is expected to be posted to shareholders by 7 February 2022.
Members of the public may obtain copies from Aberforth Partners LLP, 14
Melville Street, Edinburgh EH3 7NS or from its website: www.aberforth.co.uk.
CONTACT: Euan Macdonald or Jeremy Hall, Aberforth Partners LLP, 0131 220 0733
Aberforth Partners LLP, Secretaries - 28 January 2022
ANNOUNCEMENT ENDS
END
(END) Dow Jones Newswires
January 28, 2022 10:04 ET (15:04 GMT)
Aberforth Smaller Compan... (LSE:ASL)
Historical Stock Chart
From Apr 2024 to May 2024
Aberforth Smaller Compan... (LSE:ASL)
Historical Stock Chart
From May 2023 to May 2024
