Aurora UK Alpha’s first set of annual results since the merger with Artemis Alpha has been published. The report covers the 12 months ended 31 December 2024. Over that period, the NAV total return was -4.3%, which the chair describes as disappointing. As the discount widened from 10.0% to 11.4%, the share price return was -5.5%. By contrast, the All-Share return was +9.5%. The trust was able to claw back 89,096 shares that it had previously issued to its manager in settlement of a performance fee.

There is a continuation vote at this year’s AGM.

[Despite the underperformance last year, we would be very surprised if shareholders voted against continuation, particularly the ones that have only recently come on board via the merger.]

One dividend of 3p was declared for the period, down from 3.45p last year. The trust is not managed to produce any target level of income.

The top positive contributors in the year were Castelnau Group (which added 1.9% to the NAV after giving back some of its earlier gains), Netflix (+1.9%) and Lloyds Banking Group (+1.2%). Frasers Group (-5.8%) and Barratt Redrow (-2.4%) were the most significant detractors. The trust also held Hargreaves Lansdown ahead of the bid.

Extracts from Gary Channon’s manager’s report

It is an uncomfortable aspect of value investing that there is a disconnect between the work we do and the results we deliver. When it comes to communicating with investors it means that there is often a peculiar conundrum in that what we are able to talk authoritatively about, i.e. the fundamental performance of the portfolio and the value of our changes to it, bears little resemblance to the performance numbers that accompany our words. The numbers are real, they tell you how your investment has done, but over time periods like one year they won’t reflect the work we have done on your behalf. You end up with seemingly incongruous statements like I am about to write about 2024. It was a year of good fundamental progress in the portfolio, our actions added to the intrinsic value but the NAV declined.

To call it a year of good progress might sound delusional. Even if you give us a fairer and longer comparative period of 5 years there still isn’t outperformance, there isn’t even absolute performance, which is ultimately what we judge ourselves by. In the 5 years from December 2019 to December 2024 the share price has moved from 237p to 227p. In that same period though the intrinsic value of the portfolio, based upon our estimates of the individual intrinsic values of the portfolio holdings, has risen from 420p per share to 650p, and this I believe is a better measure of our efforts and the performance of our businesses.

The amount of upside to that level has increased from 60% to 171% and that is what we often refer to as the stretched elastic between price and value. Intrinsic value is our North Star for a reason, it anchors us on fundamentals and allows us to avoid or take advantage of the noise. Our decision making is rational and based upon values. Our history tells us that ultimately it ends up being the best predictor of what is to come.

ARR : Aurora UK Alpha faces continuation vote after disappointing year for returns