The board of the AVI Global Trust has bought back millions of pounds worth of shares this year as its discount widened in a “challenging period” for the trust.
In its yearly results, published to the stock exchange this morning (November 12), the £825m trust reported it had purchased 1.7m of ordinary shares in the year to September 30 for the sum of £12.6m.
The trust then cancelled the 13.5m shares held in its treasury in an effort to boost the share price, as buying back shares has the effect of reducing the number of shares in existence.
The trust’s share price as at this morning is £7.55, up from £7.45 at the end of October but down from £7.80 at the end of July.
The financial year to September 2019 was a challenging period and our investments were buffeted by the effects of the US-China trade war, unrest in Hong Kong, slowing global economic growth and the fear of recessionSusan Noble, chairwomanThe smaller the size of the trust the less revenue is generated for its manager, Asset Value Investors.
The trust’s chairman Susan Noble said: “[The 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.
“We intervened when the board believed that the discount was unnaturally wide and intend to continue to follow this approach.”
Its yearly results showed its net asset value discount — where the companies in the trust are worth more than the shares — had widened from 8.5 per cent to 10.9 per cent in the year to September 30.
But the Nav per share had increased by 2.1 per cent year-on-year while strong revenues allowed its total dividend to increase by 26.9 per cent to 16.50p.
AVI Global Trust has ranked 12th out of 16 trusts in the Investment Trust Global Sector over the past five years, returning 64 per cent compared with a sector average of 83 per cent.
Over the past year, the trust returned 9 per cent compared with an 11 per cent average among its peers.
Ms Noble said: “The financial year to September 2019 was a challenging period and our investments were buffeted by the effects of the US-China trade war, unrest in Hong Kong, slowing global economic growth and the fear of recession.
“Closer to home, the continuing uncertainty over Brexit has affected the economy and the stock market.”
Ms Noble added the challenges of the past year continued to be a problem as the macroeconomic situation remained difficult and the trade war between the US and China was still affecting economic growth in both countries.
She said: “It is important that the investment manager looks through the background turbulence and seeks to make money for our shareholders by finding and exploiting good value.
“[The board] believes that the store of value in the portfolio provides both some security in challenging times and the opportunity for attractive returns over the longer term.”
imogen.tew@ft.com
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