Aberforth Smaller - Final Results

The 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) over the long term.

The trust's portfolio is diversified and will normally consist of investments in around 80 individual companies.

In seeking investments the approach will be fundamental in nature involving regular contact with the management of prospective and existing investments in conjunction with rigorous financial analysis of these companies. The emphasis within the portfolio will reflect the desire to invest in companies whose shares represent relatively attractive value and a preference for holdings with low or no gearing.

Results

They have recently published final results for the full year to 31st December 2018 (link via Investegate)

In contrast to the gains of recent years, 2018 has not been such a good year with share price total return of -11.8% compared to its benchmark index, Numis Smaller Companies index Total Return of -15.3%. The return for the FTSE All Share in 2018 was down -9.5% by way of comparison.

It appears that Brexit concerns have disproportionately affected UK smaller companies this past year, however I also note the portfolio is overweight in oil & gas producers compared to the index. With climate change taking center stage, this is a concern for me and I have written to the management suggesting they may wish to review their holding in this sector and consider renewable energy alternatives for the portfolio. I will be interested to hear their response!

5 Years v FTSE All Share
(click to enlarge)

Dividend

The board are proposing a final dividend of 20.75p payable in March, making a full year increase of 5.0% to 30.25p per share. In addition, as last year, a special dividend of 7.75p is proposed as the trust has received special dividends from several portfolio holdings. Revenue reserves have increased by a further 10% to £88m (2017 £79.9m).

At the current price of around £12.10, the trust has a natural yield of 2.5% (and 3.0% including the special dividend).

I would not advocate a large holding of small caps in any portfolio, however a weighting of between 5% - 10% is likely to boost total returns for the long term investor.

Over the past year or so I have disposed of quite a few of my investment trusts however, depending on the response from management, I am happy to continue with Aberforth for the longer term. My current holding is around 2% of my total portfolio so either way it's not going to make a huge difference.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!