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abrdn Smaller Cos warns inflation still dominant as asset value falls

14th Sep 2023 14:01

(Alliance News) - abrdn Smaller Companies Income Trust PLC on Thursday said its net asset value lost almost 10 pence over the last six months, and said markets continue to be dominated by inflation and interest rate rises.

The Edinburgh-based investor, which backs UK small-cap stocks, said its NAV at June 30 was 277.69 pence per share, down 3.3% from 287.29p at December 31.

The stock was down 0.8% at 256.95p in London on Thursday afternoon.

abrdn Smaller said its NAV total return for the first half of 2023 was negative 0.7%, an improvement on the negative 33% return delivered the previous year. However its benchmark, the Numis Smaller Companies ex Inv Trist Index, delivered a positive 1.4% return for the period, compared to negative 18%a year prior.

"UK equities made steady gains over the first six months of 2023 but underperformed major markets in Europe and North America," said Amanda Yeaman and Abby Glennie of abrdn Investments Ltd, the firm's investment manager. "Persistently high inflation rates, further increases in interest rates and a gloomy economic outlook were detrimental to the UK market."

abrdn Smaller initiated a strategic review in February due to its shares trading at a discount to NAV, culminating in its merger with Shires Income PLC for which the heads of terms agreement was announced in July. It expects to pay out most of its accumulated revenue reserves through a pre-liquidation dividend if shareholders approve its voluntary winding up and scheme of reconstruction, to implement the combination of its and Shires's assets.

Going forward, Yeaman and Glennie said global markets "continue to be dominated by macro conditions, predominantly the pathway of inflation and interest rates," but added that "We continue to believe there are opportunities for quality growth businesses, which deliver well on earnings expectations, to outperform."

Chair Dagmar Kent Kershaw thanked shareholders for their support "through some very challenging times for the smaller companies sector."

She continued: "Whilst many of the challenges may remain, your board believes that shareholders will continue to benefit from the investment manager's focus on high income and the potential upside presented under the merger proposals."

By Emma Curzon, Alliance News reporter

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Copyright 2023 Alliance News Ltd. All Rights Reserved.

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