Aberdeen Smaller Companies Income hit by widening discount – Aberdeen Smaller Companies Income reports that, for the year ended 31 December 2018, its performance was slightly behind that of its benchmark, the Small Cap (excl. investment trusts) Index, with a total return of -14.6%, versus a benchmark total return of -13.8%. Share price performance on the same basis was -20.2%, following a widening of the discount.
Income was enhanced by an increase in the number of special dividends received during the year, from Savills, Victrex and in particular Aveva. Overall this resulted in an increase in the revenue return for the year to 9.03p (2017 – 7.76p) and allowed the trust to increase the amount of its total dividend for the year ended 31 December 2018 to 7.35p compared to 7.05p for 2017, an increase of 4.3%, compared to an increase of 2.1% in the CPI in the year.
Abby Glennie took over the management of the portfolio from Jonathan Allison in September last year, having worked with Jonathan on the portfolio since March. Abby is part of the successful Standard Life Investments Smaller Companies team, headed up by Harry Nimmo.
Extract from the manager’s report
“The three biggest contributors to performance in 2018 were Burford Capital, Aveva and Telecom Plus. Burford was also one of the best contributors in 2017, highlighting its strength over the long term and why it remits a large position size despite being one of the lower yielders. The growth Burford has delivered is impressive, with attractive returns, and a bright outlook given increased funding. Burford is the leader in litigation finance, a market which is large and growing, and with a leading position it has created barriers to entry. It hasa track record of superior underwriting expertise, has developed a superb network of clients which gives it great origination abilities, and has access to a diversified investor base for capital requirements. Aveva has had a very solid year, driven by a combination of strong underlying growth, and the benefits of the merger with Schneider Software coming through. It has integrated the businesses quickly, with enhanced product portfolios, improved sales efficiencies, and cost cutting, with more benefits to flow through in 2019. This deal looks to have been a very smart one. Importantly we believe the business is less dependent or correlated to oil prices that it has been historically. The balance sheet is net cash, with attractive dividend growth. Lastly Telecom Plus has been a strong performer, particularly in Q4. After a long period of market disruption from low priced challengers, the environment is now going in its favour. Regulation has improved its position, with a price cap forthcoming, and with smaller challengers going bust, and price inflation at the lower end of the market, its competitive position has improved heavily and this increases our optimism of strong growth coming back into the business. Its balance sheet is well positioned, and provides a strong dividend yield.
ASCI : Aberdeen Smaller Companies Income hit by widening discount