LONDON (dpa-AFX) - Scottish Mortgage Investment Trust plc (SMT.L), on Friday, said its Board has now decided to make available at least £1 billion to purchase its shares over the next two years.
The company stated that its public and private portfolio have shown substantial operational growth, as demonstrated by the portfolio companies' free cash flow doubling over the past year. The portfolio companies have collectively adapted to the higher cost of capital and are financing their future growth.
Taking into account these developments, and with the company's balance sheet being further strengthened, the Board has now decided to take more concerted action to address the discount to net asset value at which the company's shares are currently trading.
When considering the allocation of capital, the company takes into account a variety of factors, which include, but are not limited to, the level of gearing, exposure to private investments, and general market conditions. The Board has recently taken steps to further strengthen the company's balance sheet by reducing its debt, resulting in invested borrowings that account for 13% of net assets, at an average interest rate cost of 3.2%.
Meanwhile, Scottish Mortgage has continued to provide growth capital to private companies, demonstrating patience and a long-term perspective. Currently, private companies constitute 26.2% of the portfolio, a figure that would increase to 28.3% if £1 billion of share repurchases were made at current market levels.
Justin Dowley, Chair of Scottish Mortgage Investment Trust, said, 'We remain committed to using share repurchases strategically to enhance liquidity in our shares and to seek to facilitate trading around net asset value. Our Company has a strong balance sheet, and its portfolio companies are delivering strong operational results. We are acting upon this investment opportunity by materially increasing the capital available to our liquidity policy over the next two years with the aim of maximising returns for our shareholders.'
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