Half-year snapshot: NAV down 3.5% while the interim dividend rises to 4.50p
Aberdeen UK Smaller Companies Growth Trust plc – formerly abrdn UK Smaller Companies Growth Trust – has published its half-year report to 31 December 2025, with a correction confirming the interim dividend is 4.50p per share.
The six-month numbers were soft on performance but stronger on income. Net asset value (NAV) total return fell 3.5% and the share price total return slipped 3.0%, against a positive 4.6% from the reference index, the Deutsche Numis Smaller Companies plus AIM (ex investment companies) Index. The discount stood at 8.6% at period end.
Key numbers investors will care about
| Metric | Six months to 31 Dec 2025 / Period end | Prior period/comparator |
|---|---|---|
| NAV total return | -3.5% | +6.8% (year to 30 Jun 2025) |
| Share price total return | -3.0% | +11.4% (year to 30 Jun 2025) |
| Reference Index total return | +4.6% | +7.8% (year to 30 Jun 2025) |
| NAV per share | 551.55p | 581.37p (30 Jun 2025) |
| Share price | 504.00p | 529.00p (30 Jun 2025) |
| Discount to NAV | 8.6% | 9.0% (30 Jun 2025) |
| Revenue return per share | 6.84p | 5.93p (six months to 31 Dec 2024) |
| Interim dividend | 4.50p | 3.70p (prior interim) |
| Ongoing charges ratio | 0.81% (forecast) | 0.85% (FY to 30 Jun 2025) |
| Net gearing | 10.8% | 6.6% (30 Jun 2025) |
| Total assets | £325.2m | £399.2m (30 Jun 2025) |
What drove the underperformance versus the small-cap index
Management pins the relative shortfall on “style” and sector effects. Value shares were in favour, while Growth and Quality – the trust’s core hunting grounds – were out of favour. Index gains were also concentrated, with precious metals miners a notable pocket of strength. That mix was unhelpful given the trust’s positioning.
Detractors included ME (-119 bps), Jet2 (-87 bps), Hilton Food Group (-75 bps, later exited), Mortgage Advice Bureau (-75 bps) and Telecom Plus (-75 bps). On the positive side, Applied Nutrition (+113 bps) performed strongly post-IPO, while bid interest boosted Alpha Group (+79 bps, exited) and JTC (+59 bps, being sold down). Balfour Beatty (+42 bps) helped, and not holding Baltic Classifieds added +40 bps as its shares fell.
My take: this is classic small-cap style pain. When markets swing toward “old economy” cyclicals and miners, quality growth portfolios usually lag. The key question is how long that style headwind persists.
Dividend, income and costs: a brighter picture
The trust lifted the interim dividend to 4.50p per share, up 21.6% year-on-year. It will be paid on 17 April 2026 to shareholders on the register on 20 March 2026 (ex-dividend 19 March 2026).
Revenue per share rose 15.3% to 6.84p despite net revenue after tax falling 10.3% to £3.9 million. The driver here is share buybacks reducing the share count, which boosts earnings per share even if total pounds of income are lower. The Board still expects a higher full-year EPS versus last year.
Costs are moving in the right direction. The forecast ongoing charges ratio is 0.81% for the year to 30 June 2026, down from 0.85% last year.
Discount, buybacks and the trust’s structure
The discount averaged 8–10% during the period and ended at 8.6%. To support the rating, the trust bought back 10.1 million shares, equal to 16.3% of the opening share count, at an average 513.23p – roughly a 9.3% discount. Management estimates this enhanced NAV per share by 1.6%.
The Board remains committed to buying back shares when the discount is wider than 8% in normal conditions. Because much of the current authority has been used (5.9 million shares since the November AGM), a General Meeting on 31 March 2026 will seek a renewal of buyback powers.
Opinion: buybacks at a persistent discount are shareholder-friendly, but they do shrink the company – equity shareholders’ funds fell to £285.2 million – and concentrate costs over a smaller base. The Board has also created flexibility by cancelling the share premium account and transferring £170.146 million to a special distributable reserve, primarily to fund buybacks.
Gearing and the new loan facility
Net gearing rose to 10.8% after the trust fully drew a new £40 million secured “evergreen” revolving credit facility with Bank of America, replacing the previous RBSI facility. The margin is lower than before, and at 31 December 2025 the drawn facility bore interest of 4.97%.
That leverage can amplify future upside if small caps rerate, but it adds risk during drawdowns. With net current liabilities of £32.0 million, the Board emphasises portfolio liquidity and ongoing covenant compliance.
Portfolio moves and bid activity to note
Seven new holdings entered the portfolio: Balfour Beatty, International Personal Finance (bid shortly after entry), TBC Bank, Dunelm, Mitie, GB (GBG) and Big Yellow. Exits included Hilton Food Group, Alpha Group and Bytes Technology.
There was active rebalancing too: top-ups in Craneware, Volex, Bloomsbury Publishing, Rotork, Alfa, Galliford Try, Wickes and Applied Nutrition; trims in discoverIE, Next 15, Hill & Smith, Auction Technology, Hollywood Bowl and GlobalData; and reductions in Diploma and Games Workshop after their promotion to the FTSE 100.
Top positions at period end included Morgan Sindall (3.5%), Avon Technologies (3.4%), Cranswick (3.1%), Volution (3.0%) and Paragon Banking (2.8%).
Valuation backdrop and the managers’ outlook
The managers highlight compelling small-cap value. At the end of 2025 the small-cap reference index’s dividend yield was 3.4% versus 3.1% for the FTSE 100, and it traded on a 25% P/E discount – 13.8x vs 18.5x for large caps.
With interest rates already down and consensus expecting two more UK cuts in 2026, the setup could improve. Style-wise, Quality showed tentative signs of recovery after a difficult 2025. Revenue exposure is roughly 55% UK and 45% overseas, giving a balanced mix if domestic conditions firm up.
My read: the ingredients for a turn are there – cheaper valuations, potential rate relief and a style shift back towards quality growth. The missing piece has been inflows into UK small caps. If that changes, this trust’s tilt could go from headwind to tailwind.
Dates to circle in your diary
- General Meeting to renew buyback authority: 31 March 2026
- Ex-dividend date (interim 4.50p): 19 March 2026
- Record date: 20 March 2026
- Payment date: 17 April 2026
- Expected final dividend payment (FY 2026): 27 November 2026
- AGM (Edinburgh): November 2026
Josh’s take: why this update matters
– Performance: a disappointing six months, with a clear style explanation. That doesn’t soften the blow, but it does frame the risk/reward if Quality/Growth come back into favour.
– Income: revenue per share up and a 4.50p interim dividend is a solid signal. Cost discipline helps.
– Structure: heavy buybacks at c.9% discount are NAV-accretive and support the rating, but the trust is smaller and more geared at 10.8% – higher octane from here.
– Catalyst watch: renewed buyback authority, resolution of ongoing bid situations (e.g., JTC), and any evidence of flows back into UK small caps. If sentiment turns, the combination of a wider small-cap valuation discount and gearing could work strongly in shareholders’ favour.
Net-net, this is a patience test. If you believe the UK small-cap discount and style headwinds won’t last, today’s 8–10% share price discount and rising dividend are interesting. If you don’t, the increased leverage and ongoing volatility in small caps will feel uncomfortable. Choose your side of that debate and size accordingly.
