Scottish Mortgage Investment Trust to spend up to £1bn on buybacks

The FTSE 100 entity said the decision came as its portfolio continued to deliver robust performance, with free cash flow from portfolio companies more than doubling over the last year.

Besides its operational success, the board said it had taken steps to strengthen the company's balance sheet in recent months.

Debt reduction had been a key focus, with invested borrowings now standing at 13% of net assets, at an average interest rate cost of 3.2%.

Scottish Mortgage still continued to provide growth capital, particularly to private companies, which currently represented 26.2% of the portfolio.

Share buybacks had been identified as a strategic tool to address the discount to net asset value and to provide shareholders with significant benefits, the company explained.

It said buybacks would improve liquidity in its shares, and would also immediately enhance the net asset value per share and demonstrate confidence in the underlying valuation of the portfolio.

Over the last two years, Scottish Mortgage had repurchased about £353m of its shares, and with the newly-allocated £1bn, it aimed to further enhance shareholder value.

“We remain committed to using share repurchases strategically to enhance liquidity in our shares and to seek to facilitate trading around net asset value,” said chair Justin Dowley.

“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.”

At 0846 GMT, shares in Scottish Mortgage Investment Trust were up 1.52% at 792.88p.

Reporting by Josh White for Sharecast.com.