The struggling Aberdeen UK Smaller Companies trust (AUSC) has posted its final set of full-year results, reporting a share price decline of 6.2% as it moves to a combination with JPMorgan UK SmallCap Growth and Income (JUGI).
Total assets had fallen by roughly 30%, while the net asset total return slid 4.1%, and share price total return was also down by 3.6%
Richard Williams, senior analyst at QuotedData, said: “The 4.1% decline in NAV total return compares unfavourably with the benchmark’s 6.1% gain and extends the trust’s underperformance across one, three and five years.
“While UK smaller companies have faced a challenging backdrop, the board acknowledges that stock selection, rather than sector positioning, was primarily responsible for the shortfall.”
A statement from the trust’s chair added: “The analysis shows that stock-specific issues were the major component to the company’s underperformance rather than asset allocation.
Indeed, the trust conceded that while the first half of the year’s underperformance can be attributed to a style headwind, specific stocks such as ME Group, Pan African Resources, Trustpilot and Jet2 all served as significant detractors.
However, for QuotedData’s Williams, the approach to share buybacks was more interesting.
“Perhaps more telling is the scale of share buybacks required to contain the discount, with AUSC repurchasing 26.5% of its issued share capital during the year alone, which has substantially reduced the trust’s size.”
The chair added that over the past five years, the trust has bought back over half of its issued share capital to limit the discount.
“The board is concerned about the impact that ongoing share buybacks are likely to continue to have on the size and scale of the company, the liquidity in the company’s shares and the company’s ability to appeal to investors and grow over time,” the statement said.
As a result, the combination with JUGI is a “pragmatic solution” offering investors access to a larger, more liquid and better performing trust, or the chance to exit at close to NAV, according to QuotedData’s Williams.
