AVI GLOBAL TRUST PLC
(‘AGT’ or the ‘Company’)
LEI: 213800QUODCLWWRVI968
Annual Financial Report for the year ended 30 September 2022
A copy of the Company’s Annual Report for the year ended 30 September 2022 will shortly be available to view and download from the Company’s website, https://www.aviglobal.co.uk. Neither the contents of the Company’s website nor the contents of any website accessible from hyperlinks on the Company’s website (or any other website) is incorporated into, or forms part of, this announcement.
Copies of the Annual Report will be sent to shareholders shortly. Additional copies may be obtained from the Corporate Secretary, Link Company Matters Limited, on 01392 477500.
Notice of Annual General Meeting
The Annual General Meeting (‘AGM’) of the Company will be held on 20 December 2022 at 11.00am at 11 Cavendish Square, London, W1G 0AN. The formal Notice of AGM can be found within the full Annual Report.
Dividend
The Directors have proposed the payment of a final dividend of 2.1p per Ordinary Share which, if approved by shareholders at the forthcoming AGM, will be payable on 3 January 2023 to shareholders whose names appear on the register at the close of business on 2 December 2022 (ex-dividend 1 December 2022).
The following text is copied from the Annual Report and Accounts:
COMPANY PURPOSE
The Company is an investment trust. Its investment objective is to achieve capital growth through a focused portfolio of mainly listed investments, particularly in companies whose shares stand at a discount to estimated underlying net asset value.
BUSINESS MODEL
Strategy
The Company’s strategy is to seek out-of-favour companies whose assets are misunderstood by the market or under-researched, and which trade significantly below the estimated value of the underlying assets. A core part of this strategy is active engagement with management, in order to provide suggestions that could help narrow the discount and improve operations, thus releasing value for shareholders.
Investment Approach
The Company’s assets are managed by Asset Value Investors Limited (AVI, or the Investment Manager). AVI aims to deliver superior returns and specialises in finding companies that, for a number of reasons, may be selling on anomalous valuations.
The Investment Manager has the flexibility to invest around the world and is not constrained by any fixed geographic or sector weightings. There is no income target set and no more than 10% of the Company’s investments may be in unlisted securities. Over the past five years, there has been an average of 43 stocks held in the AGT portfolio.
KEY PERFORMANCE INDICATORS (‘KPIs’)
The Company uses KPIs as an effective measurement of the development, performance or position of the Company’s business, in order to set and measure performance reliably. These are net asset value total return, discount to net asset value and the expense ratio.
NAV TOTAL RETURNS TO 30 SEPTEMBER 2022*
| 1 Year | 10 Years (Annualised) |
| -7.3% | 9.4% |
DISCOUNT*
| 30 September 2022 | 30 September 2021 |
| 10.4% | 6.7% |
EXPENSE RATIO*
| 2022 | 2021 |
| 0.88% | 0.83% |
OTHER KEY STATISTICS
NET ASSET VALUE PER SHARE*
| 30 September 2022 | 30 September 2021 |
| 197.27p | 221.95p** |
NUMBER OF INVESTMENTS
| 30 September 2022 |
| 46 |
TOP TEN INVESTMENTS REPRESENT
| 30 September 2022 |
| 54.6% of net assets* |
ESTIMATED PERCENTAGE ADDED TO NET ASSET VALUE PER SHARE FROM BUYBACKS*
| 2022 | 2021 |
| 0.4% | 0.3% |
* For definitions, see Glossary in the full Annual Report.
** Restated for Share Split.
COMPANY PERFORMANCE
Financial Highlights
– Net asset value (NAV) per share total return was -7.3%.
– Final dividend of 2.1p, and total dividend maintained at 3.3p
– Share price total return of -10.8%
Performance Summary
| 30 September 2022 | 30 September 2021 | |
| Net asset value per share (total return) for the year1* | -7.3% | 36.2% |
| Share price total return for the year* | -10.8% | 40.3% |
| Comparator Benchmark | ||
| MSCI All Country World ex-US Index (£ adjusted total return † ) | -9.6% | 18.8% |
| Discount* | ||
| Share Price Discount (difference between share price and net asset value)2 | 10.4% | 6.7% |
| Year to 30 September 2022 | Year to 30 September 2021 | |
| Earnings and Dividends | ||
| Investment income | £23.10m | £20.40m |
| Revenue earnings per share | 3.24p | 2.74p3 |
| Capital earnings per share | (25.30)p | 54.62p3 |
| Total earnings per share | (22.06)p | 57.36p3 |
| Ordinary dividends per share | 3.30p | 3.30p3 |
| Expense Ratio* | ||
| Management, marketing and other expenses (as a percentage of average shareholders’ funds) | 0.88% | 0.83% |
| 2022 Year’s Highs/Lows | High | Low |
| Net asset value per share | 242.71p3 | 197.27p3 |
| Net asset value per share (debt at fair value)* | 239.44p3 | 195.11p3 |
| Share price (mid market) | 222.00p3 | 172.00p3 |
Buybacks
During the year, the Company purchased 19,115,057 Ordinary Shares3. 3,889,335 Ordinary Shares3 bought back were initially placed into treasury (2021: 17,192,025 Ordinary Shares3) and 15,225,722 Ordinary Shares3 were bought back for cancellation (2021: none). During the year, 27,737,419 Ordinary Shares3 which had been held in treasury were also cancelled (2021: none).
1 As per guidelines issued by the AIC, performance is calculated using net asset values per share inclusive of accrued income and debt marked to fair value.
2 As per guidelines issued by the AIC, the discount is calculated using the net asset value per share inclusive of accrued income and debt marked to fair value.
3 Restated for Share Split.
The Share Split
The Share Split which was approved by shareholders at the 2021 Annual General Meeting took effect on 17 January 2022, and where relevant the numbers quoted in this report take account of the fact that each existing share was replaced by five new shares.
† The Company uses the net version of the MSCI All Country World ex-USA Index, which accounts for withholding taxes incurred. If the gross version of the Index had been used, the comparative figures for the years ending 30 September 2022 and 30 September 2021 would have been -9.1% and 19.3%, respectively.
* Alternative Performance Measures
For all Alternative Performance Measures included in this Strategic Report, please see definitions in the Glossary in the full Annual Report.
CHAIRMAN’S STATEMENT
“It would be unwise to predict a smooth path, but my fellow Directors and I are confident that over the long term your Company will be able to produce attractive returns for shareholders.”
Overview of the Year
The clouds have darkened considerably since I wrote to you this time last year.
During this period it has become clear that inflation is not the transitory phenomenon that it was once hoped. All of this has been accentuated and exacerbated by Russia’s invasion of Ukraine, which has led to higher energy prices and a spiralling cost of living.
Western Central banks have been steadfast in their determination to bring inflation back under control, raising interest rates and tightening financial conditions. This has put considerable downward pressure on asset prices – from high-flying tech stocks to index linked bonds – and on global economic growth.
Within this context, over the twelve months under review the Company’s NAV Total Return was -7.3%. Over the same period, the comparator benchmark, the MSCI AC World ex-US, returned -9.6%. We always remind shareholders that our Investment Manager invests for the long term, and over five years the NAV total return was +41.9%, compared with a benchmark return of +15.4%, while over ten years the return was +144.6%, compared with 94.5%.
Share Split*
Shareholders approved a Share Split at the 2021 Annual General Meeting (AGM) and this took effect on 17 January 2022. The numbers quoted in this report take account of the fact that each existing share was replaced by five new shares in January.
Revenue and Dividends
Our revenue account showed a marked improvement over the previous year, with net revenue of 3.24 pence per share, compared with 2.74 pence last year. The Company paid an interim dividend of 1.2p per share on 15 July 2022. We are proposing a final dividend of 2.1p per share for approval at the AGM which will bring the total dividend for the year to 3.3p, which is unchanged from last year.
As I have noted in the past, the portfolio is managed primarily for capital growth and we do not place income constraints on the investment portfolio. However, the Board does recognise that a dividend which is steady and able to rise over time is attractive to many shareholders.
Gearing
On 7 July 2022, taking advantage of low interest rates, we announced the issue of Japanese Yen (JPY) 8bn fixed rate debt at an annual interest rate of 1.38% and with a life of ten years. The amount issued was equivalent to £49 million at the date of issue.
While the Board oversees the strategy and discusses gearing at every meeting, deployment of debt is a portfolio management decision which is delegated to our Investment Manager. AVI have taken a cautious approach to usage of gearing over recent months, which has so far proven to be a correct decision. As set out in the Investment Manager’s report, they have recently invested some of the cash which was on the balance sheet at the year end and have significant capacity to invest in further opportunities. As always, I would emphasise that deployment of debt is based on views of the value available in individual investments, rather than attempting to time overall market movements.
Share Price Rating and Marketing
At the end of September 2022, the shares were trading at a discount of 10.2%, which was wider than the 6.7% at the 30 September 2021 year end. We use share buybacks when the Board believes that these are in the best interests of shareholders and with the intention of limiting the volatility in the discount. During the twelve months under review, 19.1 million* shares were bought back, representing 3.7%* of the shares in issue as at the start of the period under review.
Shares were bought back when the Board believed that the discount was unnaturally wide and will continue to follow this approach, which is also an approach that our Investment Manager encourages for many of our investee companies. At times when the market was volatile this has meant buying back shares on most days. As well as benefitting shareholders by limiting the discount at which they could sell shares if they so wish, buying back shares at a discount also produced an uplift in value to the benefit of continuing shareholders, by approximately 0.4%.
The Board
As previously announced, I will retire from the Board at this year’s AGM. It has been a pleasure to work with AVI and all those involved with running AGT. I would like to record my thanks for all of the help and support that I have received throughout my time as a Director.
My fellow Directors have agreed that Graham Kitchen will take over the role of Chairman when I retire on 20th December. Graham has been a Director since January 2019, and I am sure that I am leaving the Board and the Company in very capable hands.
Annual General Meeting
I am pleased to be able to invite all shareholders to attend our AGM at 11 Cavendish Square on Tuesday 20th December 2022. We do recognise that some shareholders may be unable to attend the AGM and if you have any questions about the Annual Report, the investment portfolio or any other matter relevant to the Company, please write to us either via email at agm@aviglobal.co.uk or by post to The Company Secretary, AVI Global Trust PLC, Beaufort House, 51 New North Road, Exeter, Devon, EX4 4EP.
If you are unable to attend the AGM, I urge you to submit your proxy votes in good time for the meeting, following the instructions enclosed with the proxy form. If you vote against any of the resolutions, we would be interested to hear from you so that we can understand the reasons behind any objections.
Outlook
This is a time of great economic uncertainty. In reaction to high and apparently persistent levels of inflation, central banks have been raising interest rates while signaling that further increases are likely. It remains to be seen whether government and central bank policies will be able to tread the fine line between controlling inflation and avoiding a recession.
Whilst we are in difficult times, as illustrated by the fall in net asset value covered by this report, your Investment Manager has demonstrated an ability to navigate turbulent markets, and indeed exploit them. It would be unwise to predict a smooth path, but my fellow directors and I are confident that over the long term your Company will be able to produce attractive returns for shareholders.
Susan Noble
Chairman
7 November 2022