By Elliot Gulliver-Needham
The £14.2bn Scottish Mortgage Investment Trust has unveiled a £1bn share buyback programme after a rapid turnaround in the growth-focused trust’s fortunes over the last year.
The trust, which is the second largest in the UK, has recorded a strong performance over recent months despite a tumultuous few years before that, returning 18.1 per cent over the last year but dropping by 30.1 per cent over the last three.
Therefore, the trust said today it was now planning to distribute at least £1bn in buybacks to shareholders over the next two years.
Currently sitting on a 14.6 per cent discount, the trust said that it has focused on strengthening its balance sheet through debt reduction, bringing invested borrowing to 13 per cent of net assets at an average interest rate cost of 3.2 per cent.
Further, Scottish Mortgage said the cash flow of its portfolio companies had more than doubled over the past year, while private companies currently represented 26.2 per cent of the portfolio. However, this will rise to 28.3 per cent after the planned £1bn in buybacks.
The trust has already bought back around £353m of shares over the past two years.
Tom Slater, manager of Scottish Mortgage, said: “In a volatile period for growth investment, we own a portfolio of established companies achieving rapid expansion, propelled by enduring structural trends.
“Advances in foundational technologies are unlocking exciting new products, services, and business models. These well-funded public and private companies are shaping the future of the economy.
“The stock market has yet to fully recognise their progress, which creates the opportunity for us to buy the portfolio for less than its market value. In doing so, we can provide liquidity and augment returns for our shareholders. We intend to pursue this opportunity with conviction.”
