(Alliance News) - Standard Life UK Smaller Companies Trust PLC on Wednesday said it outperformed its benchmark in its most recent financial year, though reported its second year of negative absolute returns.
For its financial year ended June 30, the Edinburgh, Scotland-based investment trust reported a negative 0.5% net asset value total return, calculated on the basis that all dividends received are reinvested in additional shares. Its reference index, the Numis Smaller Companies plus AIM index, excluding investment companies, had a far worse negative 10.7% return for the same period.
"This is, regrettably, the second year in a row that we have had to report negative absolute returns to you albeit also a second year of meaningful outperformance against the reference index. However, given the market collapse in March, when the portfolio lost almost over 40% of its value, the fact that we are reporting a NAV total return that is down only 0.5% underlines the pace of the recovery in share prices from the initial severe market reaction to the pandemic," said Chair Liz Airey.
The company's NAV per share fell to 527.73 pence as at June 30 from 539.54p a year before.
The firm's basis revenue return per share for its financial year was 6.74p, down from 8.80p in financial 2019 due to dividend cuts and suspensions by investee companies, mostly in March and April, in response to the Covid-19 pandemic.
This earnings decline meant that Standard Life UK Smaller Companies Trust did not generate enough income after costs to fully cover a dividend of the same 7.70p per share amount paid in financial 2019.
Having considered its options, the trust said it has opted to use revenue reserves to make up the shortfall and so has decided to propose a final 5.00p per share dividend, taking the annual payment to 7.70p per share, equal to 2019. This will require a GBP959,000 or 0.96p per share drawdown from revenue reserves.
Airey said: "In line with the likely path of the recovery, it is eminently possible that the company will face set backs in the short term, and the investment manager has stressed that the portfolio often underperforms in times of sharp recovery, when the share prices of companies most affected by a downturn often bounce very quickly from the depressed levels at which they had been trading, however the board remains confident that the investment manager's process is robust and should continue to deliver outperformance over the long term."
Shares in Standard Life UK Smaller Companies Trust were up 0.8% at 532.00p at midday in London.
By Anna Farley; annafarley@alliancenews.com
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