AVI GLOBAL TRUST PLC
Annual Financial Report for the year ended 30 September 2021
A copy of the Company's Annual Report for the year ended 30 September 2021 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.
The Annual General Meeting ('AGM') of the Company will be held on 16 December 2021 at 11.00am at 11 Cavendish Square, London, W1G 0AN.
The Directors have proposed the payment of a final dividend of 10.50p per Ordinary Share which, if approved by shareholders at the forthcoming AGM, will be payable on 4 January 2022 to shareholders whose names appear on the register at the close of business on 3 December 2021 (ex-dividend 2 December 2021).
The following text is copied from the Annual Report and Accounts:
STRATEGIC REPORT
COMPANY PURPOSE
The Company is an investment trust. Its investment objective is to achieve capital growth through a focused portfolio of investments, particularly in companies whose shares stand at a discount to estimated underlying net asset value.
BUSINESS MODEL
Strategy
Our 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. Often, we engage actively with management in order to provide suggestions for improvements that we believe could help narrow the discount or improve operations, thus releasing value for shareholders.
Investment Approach
As an investment trust, one of the Company's most important relationships is with the Investment Manager.
The Company's assets are managed by Asset Value Investors Limited ('AVI'). 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 2021
|
1 Year |
10 Years (Annualised) |
|
36.2% |
11.3% |
DISCOUNT
|
30 September 2021 |
30 September 2020 |
|
6.7% |
9.3% |
EXPENSE RATIO
|
2021 |
2020 |
|
0.83% |
0.89% |
OTHER KEY STATISTICS
NET ASSET VALUE PER SHARE
|
30 September 2021 |
30 September 2020 |
|
1,109.77p |
837.13p |
TOP TEN INVESTMENTS REPRESENT
|
52.7% |
|
of portfolio* |
ESTIMATED PERCENTAGE ADDED TO NET ASSET VALUE PER SHARE FROM BUYBACKS
|
2021 |
2020 |
|
0.3% |
0.5% |
COMPANY PERFORMANCE
Financial Highlights
- Net asset value ('NAV') per share on a total return basis was 36.2%.
- Final dividend of 10.5p and total dividend maintained at 16.5p
- Share price total return of 40.3%
Performance Summary
|
|
30 September 2021 |
30 September 2020 |
|
|
|
|
|
|
|
Net asset value per share (total return) for the year1* |
36.2% |
0.0% |
|
|
|
|
|
|
|
Share price total return for the year* |
40.3% |
2.0% |
|
|
|
|
|
|
|
Comparator Benchmark |
|
|
|
|
MSCI All Country World ex-US Index (£ adjusted total return † ) |
18.8% |
-1.8% |
|
|
|
|
|
|
|
Discount* |
|
|
|
|
Share Price Discount (difference between share price and net asset value)2 |
6.7% |
9.3% |
|
|
|
|
|
|
|
|
Year to 30 September 2021 |
Year to 30 September 2020 |
|
|
Earnings and Dividends |
|
||
|
Investment income |
£20.40m |
£15.16m |
|
|
Revenue earnings per share |
13.68p |
9.36p |
|
|
Capital earnings per share |
273.10p |
(11.18)p |
|
|
Total earnings per share |
286.78p |
(1.82)p |
|
|
Ordinary dividends per share |
16.50p |
16.50p |
|
|
|
|
|
|
|
Expense Ratio* |
|
|
|
|
Management, marketing and other expenses (as a percentage of average shareholders' funds) |
0.83% |
0.89% |
|
|
|
|
|
|
|
2020 Year's Highs/Lows |
High |
Low |
|
|
Net asset value per share |
1,115.86p |
835.39p |
|
|
Net asset value per share (debt at fair value)* |
1,099.81p |
815.30p |
|
|
Share price (mid market) |
1,020.00p |
729.00p |
|
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.
† 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 2021 and 30 September 2020 would have been 19.3% and -1.4%, respectively.
Buybacks
During the year, the Company purchased 3,438,405 Ordinary Shares, all of which were placed into treasury, at a cost of £32.6m (4,573,938 ordinary shares at a cost of £31.1m in 2020).
CHAIRMAN'S STATEMENT
“NAV total return over the year was +36.2%, driven primarily by excellent stock selection.”
Overview of the Year
I am pleased to report that the NAV total return over the year to 30 September 2021 was +36.2% driven primarily by excellent stock selection, which compares very well with the comparator benchmark return of +18.8%. Performance during the year under review was naturally linked to the extent and timing of expected economic recovery from the effects of the COVID-19 pandemic but, as described in the Investment Manager's Report, several other factors were also important drivers of investment returns. It was encouraging to note that returns were driven both by the active decision by the Investment manager to position part of the portfolio for the post-COVID economic recovery and also by companies which are less directly economically sensitive, demonstrating the broad and balanced exposure of our investments.
Our Investment Manager's approach focuses on investments where the value of underlying assets can be clearly assessed and AVI invests in companies whose share price is trading below our view of intrinsic value and when there is a realistic prospect of releasing that value. As well as current value, the Investment Manager focuses on the growth prospects of underlying businesses. Performance this year was driven by a combination of these factors, with both the increase in values of underlying businesses and discounts to intrinsic value contributing to the strong NAV return.
Income and Dividend
Our revenue account has recovered somewhat from the effects of the pandemic and revenue earnings per share were 13.68p, compared with 9.36p for the previous accounting year. The Company paid an interim dividend of 6.0p per share on 2 July 2021. We are proposing a final dividend of 10.5p per share for approval at the AGM which will bring the total dividend for the year to 16.5p, which is unchanged from last year.
The Board recognises the importance of income to many shareholders and so has again elected to use revenue reserves, which have been built up over many years as a buffer and are a key advantage of the investment trust structure, to maintain the dividend level. As I have emphasised before, we do not constrain our Investment Manager by setting a revenue target and their mandate is to produce total returns which may be via any combination of capital growth and income. The Board's current intention remains to maintain the dividend at current levels. We have now been operating for over 18 months in an unprecedented environment and therefore our dividend policy remains under careful and regular review.
Gearing
In light of the attractive valuations identified by the Investment Manager and the value added by gearing in recent years, in August the Board agreed a modest increase in the amount of debt available by increasing the Company's revolving credit facility from JPY9.0bn to JPY12.0bn, an increase of approximately £19.5 million in sterling terms. Although the primary currency of the facility is in Japanese Yen, drawings can also be made in Sterling, US Dollars and Euros. As at 30 September 2021, the total debt available, if fully drawn, would produce gearing of 13.5% and net of cash in the portfolio actual gearing was 5.5%*. As I have said in previous statements, any increase or decrease in cash and gearing levels is driven primarily by the Investment Manager's view on investment opportunities, and having appropriate available liquidity, and not by views on the future direction of markets.
Share Price Rating and Marketing
The shares ended the financial year trading at a discount of 6.7%%, which was narrower than the 9.3% at the same point last year.
Your Board continues to believe that it is in the best interests of shareholders to use share buybacks with the intention of limiting any volatility in the discount. During the accounting year under review, some 3.4 million shares were bought back. As in previous years we intervened when the Board believed that the discount was unnaturally wide and intend to continue to follow this approach, which is also an approach that our Investment Manager encourages for many of our investee companies. 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 a small uplift in value to the benefit of continuing shareholders, by approximately 0.3%.
Each year, we take powers to issue new shares. These powers would only be used if shares could be issued at, or above, the prevailing NAV per share. Again, the primary purpose of the ability to issue new shares is with a view to containing the volatility of the discount and any new issue would only be made if it were demonstrably beneficial to existing shareholders.
As well as addressing the supply of shares using buybacks we seek to increase demand through proactive marketing by the Investment Manager of the Company and its shares. We promote the Company to a variety of investors and potential investors, from private individuals to professional fund managers and through a variety of traditional and digital media. We aim to provide detailed and informative commentary, which can be accessed via our website www.aviglobal.co.uk .
Proposed Share Split
The price of the Company's existing ordinary shares ('Existing Ordinary Shares') has increased in recent years to the point where shares regularly trade at a price of over 1,000 pence. The Directors are proposing the sub-division of each Existing Ordinary Share into 5 new ordinary shares ('New Ordinary Shares'). The Directors believe that this Share Split may improve the liquidity in the Company's shares, which would benefit all shareholders.
The Share Split will not itself affect the overall value of any shareholder's holding in the Company, and we have made arrangements to ensure that there will be no interruption in trading the shares on the London Stock Exchange when the Share Split takes place.
The New Ordinary Shares will rank pari passu with each other and will carry the same rights and be subject to the same restrictions as the Existing Shares, including the same rights to participate in dividends paid by the Company. The Share Split requires the approval of shareholders and, accordingly, resolution 11 in the Notice of AGM seeks this approval. The Share Split is conditional on the New Ordinary Shares being admitted to the Official List of the Financial Conduct Authority and to trading on the London Stock Exchange's main market for listed securities. If resolution 11 is passed, the Share Split will become effective on admission of the New Shares to the Official List. Further details of the Share Split are set out in the Directors' Report and in the Notice of AGM, both contained in the full Annual Report.
Management Arrangements
For much of the year under review our Investment Manager and other key service providers continued to operate parts of their business with staff working from home, but from our perspective operations and service delivery remained efficient and effective. We are now witnessing a return to the office but with contingency plans having been thoroughly tested. Communications via various media: video conference, telephone and email, have remained effective. The Board took a close interest in assuring that all parts of the Company's infrastructure remained operational and efficient and we would again like to record our thanks to all of our suppliers and the staff working on our account for their support and commitment in such difficult times.
Directors
As announced last year, Nigel Rich will retire at this year's AGM. I would like to record the thanks of his fellow Directors and of the Investment Manager for Nigel's invaluable insights and guidance over the last nine years.
Following Nigel's retirement Calum Thomson will take over the role of Senior Independent Director.
Neil Galloway was appointed as a non-executive Director of the Company with effect from 1 September 2021. Neil is currently Executive Vice President of IWG PLC and is based in London, immediately prior to which he was an Executive Director and CFO of Dairy Farm International Holdings Limited based in Hong Kong. He brings 25 years' experience living and working internationally. Neil has spent most of his career working in Asia but also has experience in the Americas, Europe and the Middle East. Following a successful banking career, he has held senior finance and management roles, almost entirely with or for family-controlled companies, overseeing finance, treasury, risk management, legal, IT, projects and business development, with experience in significant transformation programmes in large and complex businesses. His industry experience spans banking, hospitality, retail (mass market, luxury and franchise operations), real estate and services industries.
We also announced last year that I will retire from the Board at the AGM in 2022. My fellow Directors plan to recruit a new non-executive Director during the course of next year.
Annual General Meeting
Having been obliged to hold last year's AGM behind closed doors, I am pleased to be able to invite all shareholders to attend our AGM in person at 11 Cavendish Square on Thursday 16th December 2021. While we hope that you are able to attend, the Directors are aware that government guidance or regulation to contain the spread of COVID-19 might change and if we are obliged to change the arrangements for the AGM after publishing this document, details will be published via RNS and our website. Shareholders who plan to attend the AGM are encouraged to check the website before travelling.
We do recognise that some shareholders may be unable to come to 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 meeting, 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
Investment performance over the year to 30 September 2021 was strong and it is natural to express some caution on the environment in which we operate, as the world seeks to deal with the continuing effects of the pandemic, resurgent inflation and supply chain issues. Nevertheless, our Investment Manager has demonstrated great skill in navigating the recent challenges and has continued to outperform since the financial year end by +3.7%**. Disciplined focus on tangible, unrealised value alongside solid growth prospects continues to produce a portfolio of investments which the Board believes will serve shareholders well over the long term.
Susan Noble
Chairman
8 November 2021