The year to the end of October 2014 was a difficult one for shareholders in Dunedin Smaller Companies. It underperformed its benchmark a little – generating a return on net assets of -3.6% against the FTSE Small Cap.’s -2.4% but notably its discount widened from 4.4% to 16.9% resulting in a return to shareholders of -16.2%. On the plus side, the dividend was raised a bit, from 5.15p to 5.25p.
The Chairman’s statement does not lay out a plan for narrowing the discount beyond suggesting that the company will buy back its shares when the directors feel the time is right. He does note that the discount has narrowed a little since the period end to 14.1%.
The manager’s report draws attention to three stocks that cost them money during the year. Aveva, the 3D design software company, fell after noting a slowdown in oil and gas related orders especially from Brazil and South Korea; Devro, the global leader in the production of collagen cases for sausages, was hit by weakness in European demand and a competitor trying to take share via lower pricing; and Oxford Instruments, a market leader in the provision of high technology tools used for the analysis and characterisation of matter on the molecular scale, experienced some weak demand as US research budgets came under pressure, one-off orders did recur and some niche but deeply cyclical end markets slowed markedly. They topped up each of these holdings.