The Corporate Box

GABI wind-up, SMT’s £1 billion buyback, Henderson trust mergers, and the latest dividend updates. Frank Buhagiar delivers the latest insights in The Corporate Box.

The Corporate Box
GABI wind-up, SMT’s £1 billion buyback, Henderson trust mergers, and the latest dividend updates. Frank Buhagiar delivers the latest insights in The Corporate Box!

GCP Asset Backed Income winding itself up
GCP Asset Backed Income(GABI) becomes the latest sub-scale fund to call it a day. After engaging extensively with its shareholders “…the Board has reached the conclusion that shareholder value will be best served by a proposed orderly realisation and return of capital…Shareholders will be given the opportunity to vote on a discontinuation of the Company at the Company’s annual general meeting on 15 May 2024.” – GABI announcement 14 March 2024.

Scottish Mortgage sets aside £1 billion for buybacks
Scottish Mortgage (SMT) gets the “bazooka” out in an effort to blow away the discount cobwebs once and for all. “Scottish Mortgage’s public and private portfolio is delivering strong operational results, evidenced in part by free cashflow from the portfolio companies having more than doubled over the past year. Collectively, portfolio companies have adapted to a higher cost of capital and are funding their future growth. Against this backdrop and having further strengthened the Company’s balance sheet, the Board now intends to take more concerted action to address the discount to net asset value at which the Company’s shares continue to trade.” SMT announcement 15 March 2024.

The brokers seem impressed:

Jefferies: “This is the largest ever investment trust share buyback programme in absolute terms, representing 9% of SMT’s shares at the current price.”

Winterflood: “Reminiscent of Mario Draghi’s ‘Bazooka’ moment at the ECB, the SMT Board has decided on a bold move, aiming to jolt the market into a correction.”

JPMorgan: “This is a bold announcement from SMT’s Board, and represents a material step up from the previous level of buybacks, though SMT had been constrained in the past by both its level of gearing and the relatively high percentage in private holdings (which are restricted by shareholders to 30% of total assets).”

Henderson European Focus and Henderson EuroTrust to tie the knot
Henderson European Focus (HEFT) and Henderson EuroTrust (HNE), the latest additions to the growing list of mergers in London’s investment company space. The proposed merger “…will be subject to approval by both HEFT and HNE shareholders and are expected to result in the Combined Trust having net assets of circa £750 million (based on valuations as at 29 February 2024). The Combined Trust is also expected to be eligible for inclusion in the FTSE 250 Index. Shareholders representing 35.4% and 37.6% of the respective issued share capital of HEFT and HNE have indicated their intention to vote in favour of the recommended Proposals.” HEFT announcement 14 March 2024.

Winterflood thinks the merger makes sense: “This proposed merger represents a continuation on the theme of consolidation within the investment trust sector over recent years, and it is the latest of a number of mergers between investment trusts in the same management group stable. In our view, this transaction makes a lot of sense, given the commonality of investment strategy and management group.”

Dividend Watch
Schroder Asian Total Return (ATR) plans to increase its final dividend of the year by 4.5%. “The Board has recommended a final dividend of 11.50p per share for the year ended 31 December 2023, an increase of 4.5% over the final dividend of 11.00p per share paid in respect of the previous financial year.” ATR’s Final Results.

Foresight Solar Fund (FSFL) is targeting an above inflation rise for its 2024 dividend: “Our operational strength, the powerhouse behind our progressive dividend, enabled us to comfortably meet our dividend target of 7.55p per share for 2023 and allows us to propose an above inflation increase of 6.0% for the 2024 target dividend of 8.0p per share.” FSFL Annual Results.