abrdn Japan underperforms in challenging year but avoids continuation vote – abrdn Japan (AJIT) has published its annual results for the year to 31 March 2022, during which time its NAV total return was -10% and its share price total return was -10.9%. This compares with a -2.7% return from its benchmark.
Meanwhile, the company’s revenue return per share for the financial year was 8.5p. An interim dividend of 6.0p has already been declared and was paid to shareholders in December and the board proposes a final dividend of 9.0p, making a total dividend of 15.0p.
Over the year 697,191 shares were bought back into treasury at a cost of £.4.9m and since the year end, a further 45,358 shares have been repurchased at a cost of £265,000. Overall, the discount averaged 9.4% over the last 90 days of the company’s financial year and there is therefore no requirement under the company’s articles of association to put forward a continuation vote to shareholders.
Chair’s outlook
Japan has a large, sophisticated economy which remains at the forefront of technological innovation and occupies a key role in the global economy with a huge export sector. The country hosts a wealth of successful companies of all sizes, many with leading global market shares and strong products. In view of this, the Board is optimistic about the long term future for Japanese equities. Despite the multiple challenges posed by the ongoing pandemic, rising commodity prices and the global outlook for inflation, companies with strong business models and management teams have coped and, in some cases, thrived. Alongside structural improvements in governance in Japan, we remain resolute in our belief that these companies will do well. Weighing the risk-reward in the market, valuations look attractive for these companies for the medium term.
On a global scale, risks remain in the system. The Omicron variant of Covid-19 resulted in less severe illness and governments globally have treated the surge differently, some with fewer lockdowns and less severe restrictions. Nevertheless, infection rates are still high globally. The effects of high energy prices following Russia’s invasion of Ukraine are feeding through into widespread price inflation – the impact is only just being felt by the Japanese consumer. For now, the slow growth in the Japanese economy means that the Bank of Japan will keep rates low – it remains to be seen if rising inflationary pressures or a weakening currency will change that calculation later in 2022.
Your portfolio of investments, in companies with healthy balance sheets and ample free cash flow, puts us in a strong position. A solid fundamental base, coupled with management teams’ experience in navigating the pandemic and previous crises, should allow these companies to continue their recovery and progress. Many investee companies have built dominant positions in their own fields and should continue to thrive regardless of the external pressures faced.
The Board recognises that in such a difficult and complex environment, it is more important than ever to check and challenge the positioning of the portfolio and the investment decisions taken by the Manager. However, the Manager’s process of seeking out the best companies – whether small, mid or large capitalisation stocks – through stringent screening and regular meetings with senior management is designed to deliver the best long-term growth prospects of the underlying investments in your Company’s portfolio. The Manager’s ESG focus, which is very much core to the investment process, should also help to encourage effective engagement at all levels. We expect better and more sustainable practices, and subsequently better share price ratings, as a result of their efforts.
Your Board recognises that investors have the choice of a range of investment funds through which they can obtain exposure to Japan. We believe that the Company’s strategy of seeking high quality companies, run by capable management teams, with good governance, will serve our shareholders well over the long term.
AJIT : abrdn Japan underperforms in challenging year but avoids continuation vote