abrdn UK Smaller Companies Growth Trust — Solid relative performance recovery continues

abrdn UK Smaller Companies Growth Trust (LSE: AUSC)

Last close As at 10/10/2024

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Market capitalisation

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Research: Investment Companies

abrdn UK Smaller Companies Growth Trust — Solid relative performance recovery continues

abrdn UK Smaller Companies Growth Trust’s (AUSC’s) relative performance continues to improve as managers Abby Glennie and Amanda Yeaman build on the solid outperformance of the trust versus the reference index in FY24. Their bottom-up stock selection process, which includes the use of a screen known as the Matrix, remains unchanged; the market has been more bottom-up rather than top-down focused and is rewarding good company updates. Portfolio companies are trading well, and their businesses have strong underlying momentum. Market share gains have been evident across the portfolio as management teams successfully execute their strategies.

Melanie Jenner

Written by

Mel Jenner

Director, Investment Trusts

Investment Companies

abrdn UK Smaller Companies Growth Trust

Solid relative performance recovery continues

Investment trusts
UK smaller companies

25 September 2024

Price

499.0p

Market cap

£365m

Total assets

£440m

NAV*

564.1p

Discount to NAV

11.5%

*Including income. At 20 September 2024.

Yield

2.4%

Ordinary shares in issue

73.2m

Code/ISIN

AUSC/GB0002959582

Primary exchange

LSE

AIC sector

UK Smaller Companies

Financial year end

30 June

Share 52-week high/low

534.0p

370.0p

NAV* 52-week high/low

598.8p

438.1p

*Including income.

Net gearing*

6.5%

*At 20 September 2024.

Fund objective

abrdn UK Smaller Companies Growth Trust aims to achieve long-term capital growth through investment in a diversified portfolio consisting of UK-quoted smaller companies. Performance is measured against the Deutsche Numis Smaller Companies plus AIM ex-Investment Companies Index (the reference index).

Bull points

Long-term record of strong absolute and relative performance.

Consistent proprietary investment process driven by the Matrix.

Over the long term, shares of smaller companies tend to perform relatively better than those of larger businesses.

Bear points

Relative performance tends to struggle when investor focus is on macroeconomic events rather than on company fundamentals.

Less appetite for small-cap stocks during periods of elevated investor risk aversion.

In general, the operations of UK small-cap companies are more leveraged to the domestic economy.

Analyst

Mel Jenner

+44 (0)20 3077 5700

abrdn UK Smaller Companies Growth Trust is a research client of Edison Investment Research Limited

abrdn UK Smaller Companies Growth Trust’s (AUSC’s) relative performance continues to improve as managers Abby Glennie and Amanda Yeaman build on the solid outperformance of the trust versus the reference index in FY24. Their bottom-up stock selection process, which includes the use of a screen known as the Matrix, remains unchanged; the market has been more bottom-up rather than top-down focused and is rewarding good company updates. Portfolio companies are trading well, and their businesses have strong underlying momentum. Market share gains have been evident across the portfolio as management teams successfully execute their strategies.

NAV performance versus the reference index continues to improve

Source: LSEG Data & Analytics, Edison Investment Research

Why consider AUSC?

While the managers say that ‘time in the market’ is more important than ‘timing the market’, now could be an interesting time to consider AUSC given its performance improvement and the outlook for further interest rate cuts, which typically lead to small- and mid-cap share price outperformance versus large caps. The trust’s portfolio is trading at a four-point forward P/E premium to the reference index, which is at the low end of the three- to 13-point historical range.

The Matrix is a proprietary multifactor model that screens the investment universe for companies with quality, growth and momentum attributes. It focuses the research effort by highlighting both potential new holdings and aiding portfolio construction. The Matrix has proved successful for more than 25 years, through multiple business cycles.

Guided by the Matrix, Glennie and Yeaman have been sharper at building up new positions and faster to cut poorly performing stocks. They say this has proved effective, such as when the Matrix highlighted the improving metrics at Premier Foods, which after further research was subsequently added to the portfolio.

There is scope for AUSC to be afforded a higher valuation, when investor appetite for UK small-cap stocks further improves, especially given the trust’s improving short-term and robust long-term performance record. The company also has a progressive dividend yield and an active share buyback policy.

AUSC: Now could be a particularly good entry point

Having experienced a difficult 2022, as rising interest rates put pressure on the valuations of growth stocks, AUSC’s relative performance is solidly back on track. The trust’s investment process involves bottom-up stock picking focused on quality, growth and momentum factors, and has proved successful through five economic cycles. In broad terms, AUSC tends to perform better when company fundamentals are driving markets, when markets are challenged and in periods of low growth. The trust tends to do less well in top-down driven markets or when the value style of investing is in favour.

Perspectives from AUSC’s managers

Glennie and Yeaman comment that the investment environment has been kinder, with eight months of lower market volatility, and the UK has performed relatively better due to its low valuation and positive GDP revisions. As UK inflation has moderated there has been increased discussion about lower interest rates.

The managers emphasise that AUSC’s outperformance in FY24 was primarily due to successful stock picking. They highlight the trust’s well-defined process but note that its quality growth style of investing had been out of favour. Sentiment towards UK equities in general looks to be improving after a period of apathy, including more interest in UK small-cap growth stocks. The UK is dealing with its inflation issue, is seen as politically stable and GDP growth has exceeded consensus expectations (albeit off a modest base). Shares in UK small companies have been hit hard, so Glennie and Yeaman think there is potential for a strong bounce back. They note that quality growth stocks are yet to shine but their investment style is no longer facing headwinds.

The managers say that the UK market remains attractively valued and note that the UK savings rate is above the historical average, so if it is unlocked, it should be positive for household consumption. They suggest that the outlook for UK consumers is better compared with history, and also better than the outlook for consumers in other regions. Glennie and Yeaman highlight that the UK market tends to perform well when interest rates come down, with small- and mid-cap stocks outperforming over the subsequent six and 12 months.

Lower interest rates tend to improve sentiment towards and the operational performance of small-cap companies. They encourage businesses to expand, and give consumers more spending power, which is important for smaller companies that are often more dependent on the domestic economy rather than international economies. The managers note that over the last two years, investee companies that have continued to operate well, growing earnings and paying dividends, have not been rewarded by the market, leading to very attractive valuations.

Current portfolio positioning

In the 12 months to the end of August 2024, the number of stocks in AUSC’s portfolio was reduced by seven to 49, which is just below the low end of the typical 50–60 range. The trust’s top 10 concentration over the period increased from 31.6% to 35.5%. At the end of August 2024, the fund’s active share was 81.2%, which was lower than 83.6% at the end of August 2023 (0% is full index replication and 100% is no commonality).

Exhibit 1: Top 10 holdings (at 31 August 2024)

Company

Sector

Portfolio weight %

31 August 2024

31 August 2023*

JTC

Investment banking & brokerage services

4.0

3.1

Diploma

Industrial support services

4.0

3.5

Hill & Smith Holdings

Industrial metals & mining

3.9

3.8

Cranswick

Food producers

3.6

2.9

Hilton Food Group

Food producers

3.5

2.7

XPS Pensions

Investment banking & brokerage services

3.5

N/A

Morgan Sindall Group

Construction & materials

3.4

2.9

Paragon Banking Group

Investment banking & brokerage services

3.3

N/A

Ashtead Technology Holdings

Subsea equipment

3.2

N/A

Volution

Construction & materials

3.1

N/A

Top 10 (% of portfolio)

35.5

31.6

Source: AUSC, Edison Investment Research. Note *N/A where not in end-August 2023 top 10 but may be held elsewhere in the portfolio.

Exhibit 2 shows AUSC’s portfolio breakdown by sector. Trading activity and market moves have resulted in some notable changes in sector weightings over the 12 months to the end of August 2024. There was an 8.9pp reduction in exposure to the technology sector and an 8.2pp increase in the weighting to financial stocks. The trust retains a zero weighting in utility stocks as these companies do not have the required quality, growth and momentum attributes.

Exhibit 2: Portfolio sector exposure (ex-cash and gearing, % unless stated)

Portfolio end-August 2024

Portfolio end-August 2023

Change (pp)

Industrials

24.4

24.3

0.1

Financials

22.2

14.0

8.2

Consumer discretionary

19.0

21.3

(2.3)

Consumer staples

9.5

5.9

3.6

Energy

6.1

2.9

3.2

Basic materials

5.0

5.7

(0.8)

Technology

4.5

13.4

(8.9)

Telecommunications

4.2

5.1

(0.8)

Real estate

3.5

4.8

(1.3)

Healthcare

1.6

2.7

(1.1)

100.0

100.0

Source: AUSC, Edison Investment Research

Portfolio activity

During FY24, there were 13 new additions to AUSC’s portfolio, including Raspberry Pi, which the trust acquired at its recent IPO and 18 complete disposals. Portfolio turnover of 28% was moderately higher versus a more normal 20% as the stage of the business cycle has brought opportunities and the portfolio has experienced increased bid activity; the managers have been investing in several new ideas that have been highlighted by the Matrix.

The new holdings, most of which we have covered in our previous research reports, were: Ashtead Technology (subsea equipment rental); Boku (mobile payment solutions); Cairn Homes (Irish housebuilder); Chemring (defence and cyber); Clarkson (shipbroking); Hunting (oil services); Jet2 (package holidays; the company has been in the portfolio before); Johnson Service (textile rental); Premier Foods (branded food products); Renew Holdings (engineering services); Volex (power products); and XPS Pensions (pensions advisory, administrative and actuarial business).

Raspberry Pi is the first UK IPO in a while and since listing, its shares have performed well. The company makes single-board computers and has sold 60m units in just over a decade. Raspberry Pi is a founder-run business with significant intellectual property, which helps create barriers to entry and generate attractive margins, while keeping prices low. AUSC’s managers believe that this is a unique listed UK asset.

Four of the disposals were as a result of corporate actions: Ergomed (clinical research); Mattioli Woods (financial services); Smart Metering Systems (metering services and grid battery storage); and Spirent (testing and network solutions). Most of the other sales, listed here, were in cyclical businesses, with limited visibility around a business recovery: FDM (specialist recruitment); Focusrite (hardware for content production); Future (specialist media platform); GB Group (identity verification and fraud detection); Henry Boot (land and property development); Impax (sustainable investment); Kainos (digitisation programmes); Marshalls (landscaping products); Motorpoint (second-hand car sales); Safestore (self-storage); Serica (oil and gas production); Team 17 (video games); XP Power (components for power products); and Watches of Switzerland (premium watches and jewellery).

Performance: Positive momentum is growing

There are 24 funds in the AIC UK Smaller Companies sector. In Exhibit 3 we show the 12 largest companies with market caps above £100m. Within this selected peer group, AUSC’s NAV total returns are above average over the last 12 months, while lagging over the other periods shown. It should be remembered that the peers have different investment approaches.

Morningstar data show that within the selected peer group there are only three funds classified as small-cap growth funds: AUSC, Montanaro UK Smaller Companies Investment Trust (MTU) and Odyssean Investment Trust (ODI), which has a much more concentrated portfolio. Comparing their performance, AUSC has the highest NAV total returns of the three funds over the last year and of the two funds over the last decade. The three portfolios have a similar exposure to defensive sectors (anticyclical – 12–13%) but AUSC has the highest exposure to cyclical sectors (high sensitivity to the business cycle – 39% versus 31% and 24%) and the lowest exposure to sensitive sectors (moderate correlation to the business cycle – 49% versus 56% and 63%).

Within the selected peer group, AUSC’s discount is wider than average in a group where just one fund is trading at a premium. The trust has a below-average ongoing charge, an average level of gearing and a dividend yield that is 40bp above the mean.

Exhibit 3: Selected peer group at 23 September 2024*

% unless stated

Market cap £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount (cum-fair)

Ongoing charge

Perf.
fee

Net gearing

Dividend yield (%)

abrdn UK Smaller Companies Growth

365.1

19.8

(28.2)

14.5

118.0

(11.4)

0.9

No

106

2.4

Aberforth Smaller Companies

1,309.2

24.7

6.2

41.4

88.0

(10.0)

0.8

No

106

2.7

BlackRock Smaller Companies

689.5

14.2

(25.4)

16.9

111.6

(9.6)

0.7

No

111

3.0

BlackRock Throgmorton Trust

549.1

15.2

(27.8)

25.4

150.5

(11.2)

0.5

Yes

115

2.4

Henderson Smaller Companies

645.7

21.8

(24.3)

17.4

100.1

(11.5)

0.4

Yes

116

3.1

Invesco Perpetual UK Smaller

147.7

12.2

(23.3)

8.8

102.8

(12.2)

1.0

No

104

0.0

JPMorgan UK Small Cap Grow & Inc

456.3

25.0

(15.3)

53.7

146.2

(4.9)

1.0

No

111

3.0

Montanaro UK Smaller Companies

176.6

13.3

(23.6)

12.6

57.3

(12.5)

0.9

No

103

4.4

Odyssean Investment Trust

225.6

12.0

6.2

68.9

0.7

1.5

Yes

100

0.0

Oryx International Growth

196.0

16.1

(6.1)

82.1

250.2

(23.5)

1.5

No

100

0.0

Rights & Issues Investment Trust

124.1

23.7

(6.0)

36.7

137.7

(8.7)

0.9

No

100

1.8

Strategic Equity Capital

165.7

14.3

8.9

46.5

118.9

(6.4)

1.2

Yes

100

0.7

Simple average

420.9

17.7

(13.2)

35.4

125.6

(10.1)

1.0

106

2.0

Rank (out of 12 funds)

6

5

12

10

6

8

7

6

7

Source: Morningstar, Edison Investment Research. Note: *Performance at 23 September 2024 based on ex-par NAV. TR, total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

In FY24 (ending 30 June) AUSC’s NAV and share price total returns of +18.1% and +21.0%, respectively, meaningfully outperformed the reference index’s +10.0% total return. Encouragingly, the trust outperformed in nine out of 12 months. Four acquisitions of portfolio companies (Ergomed, Mattioli Woods, Smart Metering Systems and Spirent) added around 2% to relative performance; the majority of AUSC’s outperformance was due to successful stock selection.

The three largest contributors to the trust’s relative performance in FY24 were: Ashtead (+153bp – a new position during the financial year, the company’s strong operational performance has led to a series of earnings upgrades); Ergomed (+102bp – received a takeover bid from European private equity firm Permira); and Diploma (+98bp – this company has continued to build on its successful long-term growth record). On the other side of the ledger, the three largest performance detractors in FY24 were: CVS Group (-130bp – the veterinary industry was subject to a review by the Competition Markets Authority focusing on price, consumer visibility and branding; the managers expect any outcome to be manageable); Big Technologies (-115bp – the company has suffered from a contract loss and a lack of large contract wins); and XP Power (-75bp – a series of disappointments and a lack of confidence in the management team meant this position was sold ahead of an equity raise).

Exhibit 4: Investment trust performance to 31 August 2024

Price, NAV and index total return performance, one-year rebased

Price, NAV and index total return performance (%)

Source: LSEG Data & Analytics, Edison Investment Research. Note: Three-, five- and 10-year performance figures annualised. Index is Deutsche Numis Smaller Cos plus AIM ex-Investment Companies (Deutsche Numis Smaller Cos ex-Investment Companies to 31 December 2017).

Exhibit 5: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to index*

(1.8)

0.9

4.2

11.1

(17.4)

(5.5)

30.9

NAV relative to index*

(0.3)

2.0

5.0

9.4

(12.5)

(1.3)

38.8

Price rel to Deutsche Numis Smaller Cos plus AIM ex-ICs

(1.8)

0.9

4.2

11.1

(17.4)

(5.5)

32.9

NAV rel to Deutsche Numis Smaller Cos plus AIM ex-ICs

(0.3)

2.0

5.0

9.4

(12.5)

(1.3)

40.9

Price relative to CBOE UK Smaller Companies

(1.3)

2.5

(0.6)

(2.0)

(40.7)

(33.2)

(3.6)

NAV relative to CBOE UK Smaller Companies

0.2

3.6

0.2

(3.5)

(37.1)

(30.2)

2.3

Price relative to CBOE UK All Companies

(3.8)

(0.4)

5.0

8.6

(43.7)

(13.7)

18.3

NAV relative to CBOE UK All Companies

(2.4)

0.8

5.8

6.9

(40.3)

(9.9)

25.4

Source: LSEG Data & Analytics, Edison Investment Research. Note: Data to end-August 2024. Geometric calculation. *Index is Deutsche Numis Smaller Cos plus AIM ex-Investment Companies (Deutsche Numis Smaller Cos ex-Investment Companies to 31 December 2017).

Exhibit 6: NAV total return performance relative to reference index over three years

Source: LSEG Data & Analytics, Edison Investment Research

This year has seen a solid improvement in AUSC’s relative performance. The trust is bouncing back from a period when rising interest rates negatively affected the valuation of growth stocks and investors focused on macroeconomic developments rather than on company fundamentals. AUSC is now ahead of the reference index over one year and its NAV is modestly behind over the last five years (Exhibit 5). The trust retains its commendable outperformance over the last decade.

Exhibit 7: Five-year discrete performance data

12 months ending

Share price
(%)

NAV
(%)

Index*
(%)

CBOE UK Smaller Companies (%)

CBOE UK All Companies (%)

31/08/20

14.3

13.4

(0.2)

(10.2)

(13.5)

31/08/21

47.3

46.3

47.6

66.6

27.1

31/08/22

(36.9)

(34.8)

(22.6)

(7.9)

1.8

31/08/23

(11.8)

(8.1)

(3.2)

(0.1)

5.5

31/08/24

27.4

25.4

14.6

29.9

17.3

Source: LSEG Data & Analytics. Note: All % on a total return basis in pounds sterling. *Index is Deutsche Numis Smaller Cos plus AIM ex-Investment Companies.

Upside/downside capture

AUSC’s upside/downside capture over the last decade is shown in Exhibit 8. Its upside capture rate of 120% suggests that the trust is likely to outperform by around 20% in months when UK small-cap shares are moving up. The 109% downside capture rate implies that AUSC is likely to underperform by around 9% during periods of UK small-cap share price weakness.

Exhibit 8: AUSC’s upside/downside capture

Source: LSEG Data & Analytics, Edison Investment Research. Note: Cumulative upside/downside capture calculated as the geometric average NAV total return (TR) of the fund during months with positive/negative reference index TRs, divided by the geometric average reference index TR during these months. A 100% upside/downside indicates that the fund's TR was in line with the reference index’s during months with positive/negative returns. Data points for the initial 12 months have been omitted in the exhibit due to the limited number of observations used to calculate the cumulative upside/downside capture ratios.

Dividends: Further dividend progression in FY24

In FY24, the trust’s revenue earnings were 13.12p per share, which was a 5.5% increase versus 12.44p per share in FY23. This growth is back to a more sustainable level, following two years of elevated growth after the global COVID-19 pandemic. Only around 2.5% of FY24 revenue came from special dividends (Bytes Technology and Hollywood Bowl), which compares to around 20% of revenue 10 years ago.

AUSC pays semi-annual dividends in April and October. The board aims to pay out around a third of the total annual distribution as the interim dividend, with around two-thirds as the final dividend. The board is proposing an FY24 full-year dividend of 12.0p per share, which is 9.1% higher year-on-year and will allow 2.2p per share to be added to revenue reserves. There are four companies in the portfolio that the managers do not expect to pay a dividend soon, as they are reinvesting for future growth: Auction Technology Group, Big Technologies, Boku and Marlowe.

Exhibit 9: Dividend history over the last 10 financial years

Source: AUSC, Edison Investment Research

Valuation: Performance merits a narrower discount

AUSC’s board is frustrated that the trust’s improved performance has not led to a higher valuation. Unfortunately, AUSC has not been immune to the trend of wider investment trust discounts during a period of elevated investor risk aversion, with small-cap shares particularly out of favour. However, the trust’s 11.5% discount is narrower than the 12.6% and 11.7% averages over the last one and three years, respectively. It is also towards the top end of the broad 10.0% to 15.0% range of discounts since the start of 2022 (Exhibit 10) and looks to be on an improving trend.

Exhibit 10: Discount over three years (%)

Exhibit 11: Buybacks and issuance

Source: LSEG Data & Analytics, Edison Investment Research

Source: Morningstar, Edison Investment Research

Exhibit 10: Discount over three years (%)

Source: LSEG Data & Analytics, Edison Investment Research

Exhibit 11: Buybacks and issuance

Source: Morningstar, Edison Investment Research

The board employs a discount control mechanism, targeting a maximum 8.0% share price discount to cum-income NAV in normal market conditions. Renewed annually, it has the authority to repurchase up to 14.99% of AUSC’s share capital. During FY24, c 14.1m shares (c 15.9% of the share base) were bought back at a cost of c £60.5m. The weighted average discount at which the shares were repurchased was 13.1% and the board calculates that this added 10.7p per share to the trust’s NAV.

AUSC’s board’s 14.99% share repurchase authority was granted at the November 2023 AGM. Given the pace of share buybacks in FY24, a further 14.99% share repurchase authority was granted at a general meeting on 3 June 2024, ahead of the next AGM, which is expected in November 2024.

The trust also has a discretionary tender mechanism in place, although no tenders have taken place since June 2015, as share buybacks are the primary method to manage AUSC’s discount.

Fund profile: High-conviction UK small-cap equities

Launched in August 1993, AUSC is quoted on the Main Market of the London Stock Exchange. Since 1 January 2023, the trust has been managed by Abby Glennie, who replaced long-standing lead manager Harry Nimmo; they had worked closely together since January 2016, and Glennie had been AUSC’s co-manager since 17 November 2020. Amanda Yeaman is the trust’s deputy manager; she joined abrdn in 2019. Glennie and Yeaman aim to generate long-term capital growth from a diversified portfolio of UK-quoted smaller companies.

AUSC’s portfolio is made up of 50–60 of the managers’ highest-conviction investment ideas. The trust’s performance is measured against the Deutsche Numis Smaller Companies plus AIM ex-Investment Companies Index (the Deutsche Numis Smaller Companies ex-Investment Companies Index before 1 January 2018). To mitigate risk, at the time of purchase, AUSC may hold no more than 5% of total assets in a single position, no more than 5% in companies with a market cap below £50m and the managers tend not to invest in ‘blue sky’ (not yet profitable) companies, although up to 5% is permitted. Up to 50% of the portfolio may be invested in companies that are constituents of the broad AIM index. The managers may vary the trust’s level of gearing between a net cash position of 5% and net gearing of 25% of NAV (at the time of drawdown). Over the last decade, the financial year-end position has ranged from 0.3% net cash to 5.8% net gearing.

AUSC started life as Edinburgh Smaller Companies in 1993, with Standard Life Investments (now abrdn) assuming management in 2003. The trust merged with Gartmore Smaller Companies Trust in 2009 and with Dunedin Smaller Companies Investment Trust in October 2018. With effect from 25 October 2021, the trust’s name was changed, following shareholder approval, from Standard Life UK Smaller Companies Trust (ticker: SLS) to abrdn UK Smaller Companies Growth Trust. The board deemed that the addition of ‘growth’ better reflects what the trust is seeking to achieve.

Investment process: Using the proprietary Matrix

The managers follow seven principles for successful small-cap investing:

Focus on quality to enhance return and reduce risk – factors include strong financials, the strength of a company’s relationship with its customers and an element of pricing power.

Look for sustainable growth – companies that can deliver consistent year-on-year earnings growth.

Momentum – run your winners and cut losers.

Concentrate your efforts – use of the Matrix helps identify suitable portfolio companies and reduces the risk of spending on stocks that do not meet the required criteria.

Invest for the long term – identify the great companies of tomorrow and hold them for the long term, which helps to maximise returns and reduce trading costs.

Management quality – high ownership and involvement by founders and CEOs with long tenures are viewed positively.

Valuation aware – company valuations are embedded within the Matrix and the decision-making process but are not a primary focus.

In their search for long-term capital growth, Glennie and Yeaman use the Matrix. This screening tool is based on a series of 12 quality, growth, momentum and valuation factors, including forecast earnings and dividend growth, earnings revisions, share price momentum, balance sheet strength and the level of directors’ dealing, to whittle down the investible universe of around 500 stocks to around 100 that are deemed worthy of further consideration. The most important factor, at c 40% of the Matrix weighting, is earnings revision momentum because back-testing shows this is the most predictive measure of future share price performance. Stocks are assigned a Matrix score between +40 and 40, with those between +10 and +40 deemed potential buy candidates and those between 10 and 40 potential sells. Companies considered for inclusion in AUSC’s portfolio are subject to further in-depth analysis and meeting company managements is an integral part of the research process. In keeping with other abrdn investment teams, the managers have a strong focus on a company’s ESG credentials.

Positions may be trimmed or sold if there is a deterioration in the Matrix score, the original investment thesis no longer holds true, they have grown to more than 5% of the portfolio or there is a higher-conviction name identified. The disciplined investment process has been employed since abrdn took over management of the fund in 2003 and has delivered creditable performance through economic and market cycles.

AUSC’s approach to ESG

abrdn has more than 800 investment professionals, including c 50 ESG specialists around the world. It encourages companies in which it invests to adhere to best practice in the areas of ESG stewardship. abrdn believes this can be achieved by entering into a dialogue with company managements to encourage them, where necessary, to improve their corporate standards, transparency and accountability. By making ESG central to its investment capabilities, abrdn seeks to deliver robust outcomes as well as actively contributing to a fairer, more sustainable world. It considers ESG factors are financially material and affect corporate performance; companies that have higher standards tend to outperform those that do not.

The managers explain that for AUSC, ESG is really embedded at the core of the research process and is an important aspect of the focus on quality and the lower-risk approach. There is an ESG specialist on abrdn’s small-cap desk, and the managers also work closely with abrdn’s large and knowledgeable central ESG investment team. Glennie and Yeaman regularly engage with company management teams, including on ESG aspects. They say that it is important to highlight a couple of nuances for smaller companies. While external ESG data are used, it is not an ideal process because many of the companies are not covered at all, or are covered badly, providing a real opportunity for the managers to add value by conducting ESG fundamental research themselves. Also, smaller companies often have limited internal resources to focus on ESG, so many are keen to engage with the managers, who are able to help advise them and encourage them towards those ESG aspects required by shareholders.

Gearing

AUSC has a £40m revolving credit facility (RCF) with Royal Bank of Scotland International, which expires on 1 November 2025 (and has a further £25m uncommitted accordion provision). At the beginning of FY24, £25m of the RCF was drawn down, with a further £15m utilised in March 2024, reflecting the managers’ increased confidence in the positive outlook for UK smaller companies.

Fees and charges

With effect from 1 July 2023, the management fee is calculated quarterly in arrears at a rate of 0.75% per year on the first £175m of NAV, 0.65% per year on NAV between £175m and £550m, and 0.55% per year above £550m. From 1 January 2024, the manager no longer receives a secretarial and administration fee, which had been £75k plus VAT. However, it does receive a separate fee to provide AUSC with promotional activities; this was £207.5k plus VAT in FY24, which was considerably lower than £301.0k plus VAT in FY23. These changes contributed to a lower ongoing charges ratio of 0.92% in FY24 (FY23: 0.95%).

Capital structure

AUSC is a conventional investment trust with one class of share. There are c 73.2m ordinary shares in issue and c 31.0m held in treasury. Its average daily trading volume over the last 12 months is c 185k shares.

Exhibit 12: Major shareholders

Exhibit 13: Average daily volume

Source: Bloomberg. Note: At 30 June 2024.

Source: LSEG. Note: 12 months to 23 September 2024.

Exhibit 12: Major shareholders

Source: Bloomberg. Note: At 30 June 2024.

Exhibit 13: Average daily volume

Source: LSEG. Note: 12 months to 23 September 2024.

The board

Exhibit 14: AUSC’s board of directors

Board member

Date of appointment

Remuneration in FY24

Shareholdings at end-FY24

Liz Airey (chairman since 1 April 2020)

21 August 2019

£40,700

50,000

Tim Scholefield

20 February 2017

£29,400

8,200

Ashton Bradbury

2 July 2018

£27,500

10,000

Alexa Henderson

8 October 2018

£27,500

4,391

Manju Malhotra

1 May 2023

£30,695

Nil

Source: AUSC

General disclaimer and copyright

This report has been commissioned by abrdn UK Smaller Companies Growth Trust and prepared and issued by Edison, in consideration of a fee payable by abrdn UK Smaller Companies Growth Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

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This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by abrdn UK Smaller Companies Growth Trust and prepared and issued by Edison, in consideration of a fee payable by abrdn UK Smaller Companies Growth Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by abrdn UK Smaller Companies Growth Trust and prepared and issued by Edison, in consideration of a fee payable by abrdn UK Smaller Companies Growth Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by abrdn UK Smaller Companies Growth Trust and prepared and issued by Edison, in consideration of a fee payable by abrdn UK Smaller Companies Growth Trust. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Sylvania reported FY24 EPS of 2.7c against our expectation of 5.8c and down 85% on the prior year due to mainly a 35% lower PGM 4E basket price. In addition, the company suffered the effects of much lower platinum group metal (PGM) prices, a delayed recovery in production and elevated levels of expense. The results included more granularity on the Thaba joint venture (JV), including accounting treatment and the outlook to FY28. However, thanks to high chrome prices and a better understanding of the price that Sylvania will receive at mine gate, we have lifted our near-term JV forecasts. We have further incorporated management guidance around higher Sylvania Dump Operations (SDO) ZAR costs for FY25. We have cut our FY25 EPS forecast by 33.7% to 5.1c to allow for the higher costs but have increased our FY26 forecast by 6% to 10.7c, allowing for more aggressive chrome price assumptions and a normalisation of SDO costs. We forecast 8.9% EPS growth to 11.7c in FY27. We have cut our valuation by 5.7% to 105.8p/share due to ZAR appreciation, affecting US dollar cost forecasts.

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