TIDMADIG
RNS Number : 3197R
abrdn Diversified Income and Growth
26 October 2023
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION
WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF THAT JURISDICTION.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
26 October 2023
For Immediate Release
abrdn Diversified Income and Growth plc
Conclusion of Strategic Review,
Capital Return via an Enhanced Distribution Programme
and announcement of Special Dividend
Summary
The Board of abrdn Diversified Income and Growth plc ("ADIG" or
the "Company") announces the outcome of the strategic review
process that commenced on 20 June 2023.
Strategic review
The strategic review sought to address the material discount to
net asset value ("NAV") at which the Company's shares have traded
and consider how best to deliver value to shareholders. Following
careful consideration of the options available to the Company,
including asset sales and discussions with third parties, the Board
has determined that it is in the best interests of its shareholders
to continue the Company's existing investment strategy and to
return optimal value by means of enhanced distributions, comprising
realised gains and surplus available cash, through a combination of
special dividends and a tender offer (the "Enhanced Distribution
Programme"). The Enhanced Distribution Programme is expected to
return between GBP30 million and GBP35 million to shareholders by
the end of 2024 and further enhanced returns of value, including
special dividends, are envisaged during 2025 and 2026 as a
substantial part of the Company's private markets portfolio
matures.
Having considered a number of potential options under the
strategic review, the Company continues to be committed to offering
shareholders an attractive and differentiated investment
proposition characterised by a genuinely diversified portfolio
which provides access to a wide selection of asset classes, an
attractive level of dependable income and defensive characteristics
relative to the volatility of equity markets.
Special interim dividend
Pursuant to the Enhanced Distribution Programme, the Board is
pleased to declare a special interim dividend of 1.65 pence per
ordinary share, amounting to c.GBP5 million in aggregate, following
gains realised from the private markets portfolio over recent
months. The special dividend will be paid on 1 December 2023 to
shareholders on the register on 3 November 2023.
Tender Offer
A tender offer of between GBP25 million and GBP30 million, at an
expected discount of approximately 15 per cent. to the Company's
prevailing NAV, will also be offered to all shareholders during
2024 subject to the passing of the continuation vote at the
Company's annual general meeting in February 2024 (the "Tender
Offer"). Full details of the Tender Offer, which also requires
shareholder approval, will be set out in a circular to be published
in 2024. The exact timing of the Tender Offer will take account of
the Board's assessment of portfolio considerations and wider market
conditions.
Ongoing assessment of strategic options
Approximately 33 per cent. of the Company's current NAV,
comprising existing private market investments, is expected to
mature by the end of 2026. At that time, the Board will be well
positioned to assess the effectiveness of the Enhanced Distribution
Programme in narrowing the discount at which the Company's shares
trade relative to NAV through returning value to shareholders by
means of special dividends or buying shares under the Tender Offer
at closer to NAV. Subject to the outcome of this assessment, the
Board will consider whether to extend the Enhanced Distribution
Programme alongside other strategic options.
Outcome of the strategic review
As noted at the outset of the strategic review, the Board has
been encouraged that, in exceptionally volatile markets, Nalaka De
Silva and the Company's wider investment team have continued to
deliver steady performance under the Company's investment strategy
adopted in 2020. However, despite this, the Company's shares have
continued to trade at a material and persistent discount to their
NAV and, accordingly, the Board announced on 20 June 2023 that it
was commencing a strategic review to consider how the Company can
best deliver value to shareholders.
Having consulted with abrdn Investments Limited (the "Investment
Manager" or "abrdn") and taken third party advice regarding the
market for secondary fund interests, the Board concluded that the
early disposal of private market investments in current market
conditions would necessitate a substantial discount to their long
term realisable values, and thereby limit the value that could be
achieved for shareholders. Accordingly, the Board has sought to
avoid an outcome of the strategic review that would require
material realisations of private market investments in the current
market environment.
The Company received a number of proposals in response to the
strategic review and, in particular, was engaged in discussions
regarding potential combinations with other investment trusts that
the Board believed could achieve the aims of the strategic review.
Whilst these discussions were encouraging, the Board ultimately
concluded that none of the third party proposals put forward would
optimise shareholder value at this time, and determined that
shareholder interests would be better served over the near to
medium term by realising value from the Company's existing
investment strategy and portfolio.
Enhanced Distribution Programme
In recognition of the discount to NAV at which the Company's
shares continue to trade and the current position of the Company's
portfolio (with a significant proportion of the Company's private
market assets expected to mature in the period from 2024 to 2026),
the Board has therefore resolved that shareholder value is best
served by enhancing distributions to shareholders at closer to
NAV.
It is expected that the Enhanced Distribution Programme, which
will be in addition to the reliable level of dividend income that
the Company already offers, can be funded from the Company's
surplus available cash, after taking into account the Company's
undrawn commitments to private funds, together with realised gains
over the short to medium term. The Board intends to keep the level
of gearing under review but does not currently intend to repay the
Company's existing secured bonds.. The Enhanced Distribution
Programme is expected to return between GBP30 million and GBP35
million to shareholders by the end of 2024, through the Tender
Offer and the First Special Dividend, with further enhanced returns
of value, including special dividends, envisaged during 2025 and
2026 as a substantial part of the Company's private markets
portfolio matures. The Company recognises that reliable dividend
income is important to many of its shareholders and the Enhanced
Distribution Programme, which will be funded from realised gains
and surplus available cash, is intended to augment the attractive
level of income that the Company already provides. Notwithstanding
the Enhanced Distribution Programme, the Board and the Investment
Manager expect that the Company's investment strategy will continue
to produce a dependable level of dividend income on an ongoing
basis.
The effectiveness of the Enhanced Distribution Programme will be
kept under review and the Board and the Investment Manager will
explore other potential opportunities to realise income and capital
value for shareholders. In particular, the Board notes that
approximately 33 per cent. of the Company's current net asset value
is invested in private market assets that are expected to be
realised by the end of 2026. At that time, the Board will be well
positioned to assess the effectiveness of the Enhanced Distribution
Programme in managing the discount at which the Company's shares
have traded to their net asset value and the performance achieved
on the Company's private market investments. Subject to the outcome
of this assessment, the Board will consider whether to extend the
Enhanced Distribution Programme alongside other strategic
options.
Tender Offer
Subject to the passing of the continuation vote at the Company's
annual general meeting in February 2024 (the "2024 AGM"), the
Tender Offer will be offered to all shareholders during 2024 at an
expected discount of approximately 15 per cent. to the Company's
prevailing net asset value. The Board believes that, by undertaking
a material Tender Offer at an appropriate discount to the
prevailing net asset value, the Company can generate attractive
returns from the Company's available liquid resources for the
benefit of continuing shareholders. It is expected that between
GBP25 million and GBP30 million will be returned to shareholders
under the Tender Offer.
In addition to returning surplus cash and generating an enhanced
return for continuing shareholders, the Tender Offer will also
enable those shareholders who wish to sell some of their shares to
elect to do so, subject to the overall limits of the Tender Offer
and certain restrictions in respect of overseas shareholders.
Full details of the Tender Offer, which also requires
shareholder approval, will be set out in a circular to be published
in 2024. The exact timing of the Tender Offer will take account of
the Board's assessment of portfolio considerations and wider market
conditions.
Special dividends
The Company also intends to return realised profits to
shareholders through a number of special dividends throughout the
course of the Enhanced Distribution Programme. The Board is pleased
to declare a special interim dividend of 1.65 pence per ordinary
share in the capital of the Company in respect of the financial
year ended 30 September 2023 (the "First Special Dividend").
The First Special Dividend, amounting to c.GBP5 million in
aggregate, reflects realised gains from the Company's investments
over recent months and will be paid on 1 December 2023 to
shareholders on the register on 3 November 2023. The ex-dividend
date is 2 November 2023.
Dividend policy
In addition to the special dividends referred to above, it is
expected that the Company will continue to pay four quarterly
interim dividends per year in line with its dividend policy. At
present the Company offers an attractive 7.5 per cent. dividend
yield, the highest in the AIC's Flexible Investment sector, and the
Board remains committed to offering shareholders a dependable level
of dividend income on an ongoing basis.
The Board also recognises that some shareholders may wish to
reinvest their dividends, including special dividends, and benefit
from the compounding of these returns over time. The Company
facilitates dividend reinvestment in an efficient manner through
its registrar and will provide details to investors that wish to do
so, including in its annual report and accounts for the year ended
30 September 2023.
Future realisations and returns of capital
The Investment Manager expects that further realised gains from
a number of the Company's private market investments will be
received and distributed to shareholders during the course of the
Enhanced Distribution Programme. As noted above, approximately 33
per cent. of the Company's current NAV, comprising existing private
market investments, is expected to mature by the end of 2026. The
remainder of the private markets portfolio is expected to mature
between 2029 and 2032.
There can be no certainty as to the precise timing or quantum of
any future distributions or returns of capital, which will also be
dependent on the Company's liabilities, undrawn fund commitments
and general working capital requirements. Given the current market
volatility, the market approach to valuing private market
investments and the timing of the availability of returns of cash
on investments, the Board does not believe that implementing a
share buy back policy that targets a fixed or maximum discount
level is in the best interests of shareholders. However, when
considering the offer price for any future tender offers, or other
share buy backs, the Board will take into account prevailing market
conditions and the net present value of the Company's anticipated
future cash flows from its portfolio.
Investment objective, policy and strategy
The Company's investment objective is to seek to provide income
and capital appreciation over the long term through investment in a
globally diversified multi-asset portfolio. The Board continues to
have confidence in the Investment Manager's strategy in pursuance
of this objective and there are no plans to amend the Company's
investment objective and policy at this time.
The Company continues to be committed to offering shareholders
an attractive investment proposition characterised by a genuinely
diversified portfolio which provides access to a wide selection of
asset classes, an attractive and dependable level of income and
defensive characteristics relative to the volatility of equity
markets.
Portfolio modification
Going forward, the Investment Manager notes that the Company
will seek exposure to alternative asset classes primarily through
private investments rather than listed funds. In the light of the
Enhanced Distribution Programme and as the existing private market
investments mature (and undrawn commitments reduce), it is expected
that the private market investments will represent a higher
proportion of the Company's portfolio.
Additional disclosures on valuations
The Investment Manager notes that the high level of valuation
uncertainty in the current market is attributable to a range of
factors including high inflation, rising interest rates,
deglobalisation and escalating geopolitical tension. This
uncertainty results in higher cost of capital, lower real growth
and volatile capital markets. As a result, the Investment Manager
believes that investors remain cautious and are currently
positioning themselves in cash and cash equivalents until market
conditions become more settled.
58.5 per cent. of the Company's existing portfolio is invested
in private markets with the balance being held in listed
investments and bonds (as at 30 September 2023). The Investment
Manager believes that ADIG's listed and private portfolio has a
much greater intrinsic value than that currently reflected in the
share price. This value can be assessed on an asset's financial
performance, growth prospects and risk characteristics. Going
forward, the Investment Manager will provide additional disclosures
on the investments within the Company's portfolio to provide the
market with a greater ability to understand this intrinsic value
and reduce the impact of short term price fluctuations influenced
by near term market forces.
Investment outlook
A benefit of having long term patient capital is the ability
take advantage of market dislocations and allow returns to be
generated as valuations normalise. In the present market
environment, abrdn believes that investing in both public and
private markets presents excellent opportunities for carefully
chosen investments. In particular, the Investment Manager believes
that ADIG is well positioned to benefit from newly arising
opportunities that could generate Net IRRs* of 10-15 per cent. Such
opportunities include both new sectors, such as green
infrastructure, and opportunities to provide capital where
traditional providers have stepped back, such as private credit. In
the light of these attractive short to medium term investment
opportunities, the Investment Manager will continue to make new
investments provided that it is satisfied that such investments
offer a compelling investment opportunity for the Company taking
into account the Enhanced Distribution Programme and the Board's
assessment of its effectiveness in 2026.
*Net IRR (net internal rate of return) is a performance measure
used to estimate the profitability of potential investments after
fees and carried interest.
Davina Walter, Chairman of ADIG, commented:
" Throughout the strategic review process, the Board's primary
objective has always been the enhancement of shareholder value.
Having carefully considered a number of options, including
potential combinations with other investment trusts, we have
ultimately concluded that the best way to achieve this objective
will be to return value to shareholders through an Enhanced
Distribution Programme of special dividends and a tender offer.
Whilst this process is ongoing, our investment managers, ably
led by Nalaka De Silva, will continue to manage the portfolio
proactively. The Board will assess the effectiveness of the
Enhanced Distribution Programme on an ongoing basis and explore
other potential opportunities to realise income and capital value
for return for shareholders as the portfolio matures.
We will, as always, continue to engage in active dialogue and
take feedback from our shareholders throughout this process."
For further information, please contact:
abrdn Diversified Income and Growth plc
Davina Walter (Chairman) Via Buchanan
abrdn
Helen Mattia (Investor Relations) +44 (0)755 4010 422
Dickson Minto Advisers
Douglas Armstrong +44 (0)20 7649 6823
Buchanan
Helen Tarbet / Henry Wilson +44 (0)20 7466 5000
George Beale / Verity Parker ADIG@buchanancomms.co.uk
Important Information
This announcement is released by the Company and the information
contained within this announcement is deemed by the Company to
constitute inside information for the purposes of Article 7 of the
UK version of the EU Market Abuse Regulation (Regulation (EU)
No.596/2014) which forms part of UK law by virtue of the European
Union (Withdrawal) Act 2018, as amended. Upon the publication of
this announcement via a Regulatory Information Service, such
information is now considered to be in the public domain.
Legal Entity Identifier (LEI): 2138003QINEGCHYGW702
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