Aberdeen UK Smaller Companies Growth Trust plc

(formerly abrdn UK Smaller Companies Growth Trust plc)

Half Yearly Report for the Six Months Ended 31 December 2025

Legal Entity Identifier (LEI):  213800UUKA68SHSJBE37

Investment Objective

The Company's objective is to achieve long-term capital growth by investment in UK-quoted smaller companies.

Reference Index

The Company's reference index is the Deutsche Numis Smaller Companies plus AIM (ex investment companies) Index.

Performance Highlights

Financial Calendar

Financial Highlights

Chair's Statement

Performance

The Board is disappointed to report a falling net asset value ("NAV") total return of 3.5% for the six-month period ended 31 December 2025, underperforming the positive total return of 4.6% from the reference index, the Deutsche Numis Smaller Companies plus AIM (ex-Investment Companies) Index.

The market backdrop in the second half of 2025 was much more focused on large cap, often multi-national and more defensive sectors, resulting in smaller companies underperforming their larger counterparts by some margin. The Company's underperformance of the reference index was driven principally by style factors and sector exposures. Growth and Quality, which are important features of the Investment Manager's process were out of favour during the period.

The Investment Manager's approach has been and remains focused on identifying companies that display Quality, Growth and Momentum characteristics, and the portfolio is positioned such that, when these characteristics come to the fore, it should deliver significant returns for shareholders.

It is always disappointing to report negative numbers and Shareholders can be assured that the Board is engaging closely with the Investment Manager to ensure that every effort is undertaken to improve the position.

The Investment Manager's Review provides further information on performance and portfolio activity during the period, as well as the Investment Manager's outlook for the portfolio and the wider smaller companies sector.

Earnings and Dividend

The headline numbers on the Statement of Comprehensive Income continue to be significantly affected by the share buy back programme, which has reduced the earnings capacity of the portfolio. While the net revenue after tax was down 10.3% to £3.9 million, revenue earnings per share ("EPS") for the six months to 31 December 2025 increased by 15.3% to 6.84p (2024: 5.93p).

The analysis of the income forecast continues to indicate that the Revenue Account for the year is on track to deliver an increase in the EPS for the full year, even if the aggregate level numbers are lower than 12 months ago. The Board's declared dividend policy is that it aims to pay around one-third of the expected total dividend for the year at the interim stage, with the balance being paid out once the annual results are known. Consequently, the Board is declaring an interim dividend of 4.50p per share (2025: 3.70p per share) which will be paid on 17 April 2026 to shareholders on the register on 20 March 2026 with an associated ex-dividend date of 19 March 2026.

Gearing

During the period, the Company negotiated a £40 million revolving credit facility ("RCF") with The Bank of America. This replaced the previous loan with Royal Bank of Scotland International which expired in November 2025. The new facility is 'evergreen' and is at a lower margin than was previously the case. At 31 December 2025, the facility was fully drawn and net gearing was 10.8% (30 June 2025: 6.6%).

Discount Control and Share Buy Backs

At close of business on 31 December 2025, the Company's share price was trading at a discount of 8.6% to its NAV per share. This was marginally narrower than the 9.0% discount at which the shares were trading at the end of June 2025. For the majority of the period, the share price traded at a discount of between 8% and 10%. However, throughout the period, with investor sentiment against the asset class, there were significantly more sellers than buyers of the Company's shares and, in order to address this imbalance, the Board considered that it was in the best interests of Shareholders as a whole to continue to buy back shares. Consequently, the Company was active in the market on most days and bought back 10.1 million shares (16.3% of the opening issued share capital) at a weighted average price of 513.23p per share, which equated to an average discount of 9.3%.

The buy backs acted to enhance the NAV per share by 1.6%.

The Board remains committed to the buy back programme and will continue to buy back shares if the share price is trading at a discount to the cum-income NAV of more than 8% in normal market conditions. The Board is acutely aware that the high level of share buy backs has resulted in a reduction in the size of the Company, but the general feedback from Shareholders is that they appreciate the efforts that the Board is making to protect the discount level.

General Meeting

At the Annual General Meeting in November 2025, Shareholders granted the Board authority to buy back up to 8.1 million shares, which represented 14.99% of the issued share capital at the date of the meeting. Between then and the date of this report, the Company has bought back 5.9 million shares and the Board has concluded that, in order to continue to help address any imbalance of supply and demand in the Company's shares and to try to maintain the discount within the stated target range, the Company will need to seek fresh Shareholder approval to renew the share buy back authority  before the next Annual General Meeting in November. Consequently, the Board has issued a Circular to convene a General Meeting with the express purpose of seeking Shareholders' approval for a further renewal of the authority. The General Meeting will be held on 31 March 2026, and the Board would very much encourage Shareholders to vote their shares.

Board

Tim Scholefield will have been on the Board of the Company for more than nine years when the Directors stand for re-election at the Annual General Meeting in November. Consequently, in line with good corporate governance, Tim has indicated that he will not be standing for re-election. As a result, the Board has initiated a search for a replacement for Tim and it hopes to have identified the successful candidate in the next couple of months, so that he / she will be able to join the Board by May and be able to shadow Tim until he retires in November. Tim has been, and continues to be, a huge asset to the Board and we have all appreciated his wise counsel and we will be very sad to see him go.

Outlook

There is a broad consensus that the UK equity market is undervalued by comparison to other equity markets and furthermore that UK small caps are trading on lower multiples relative to UK large caps than they have for some time. This should be a positive backdrop for companies such as ours as it implies that we are due a correction, with UK multiples reverting towards long-term averages and small caps rebasing against large caps. The conundrum is that this outlook has persisted for at least 12 months and, while everyone seems to agree, we are not yet seeing much evidence of investors backing this analysis with the much needed investment flows.  

 Quality is a key attribute that your Investment Managers target in their process of selecting companies for the portfolio.  This characteristic has been very much out of favour with investors for a long period during which they have tended to prefer the Value characteristic and this has continually detracted from the performance of your portfolio. However, during times of heightened tensions and geo-political uncertainty such as we are experiencing, the UK is normally seen as more defensive in nature than other markets as a result of its specific sector biases. In this environment investors may well put more emphasis on the quality of companies in which they invest, so we might expect to see some positive flows into companies such as those in your portfolio.  Your Board believes this is long overdue.

Liz Airey
Chair
4 March 2026

Interim Management Report

Directors' Responsibility Statement

The Directors are responsible for preparing the Half Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of
their knowledge:

-  The condensed set of financial statements has been prepared in accordance with Financial Reporting Standard 104 'Interim Financial Reporting';

-  The Interim Board Report (constituting the interim management report) includes a fair review of the information required by DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

-  The financial statements include a fair review of the information required by DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the financial year and that have materially affected the financial position or performance of the Company during that period, and any changes in the related party transactions described in the last Annual Report that could do so.

Principal and Emerging Risks and Uncertainties

The Board regularly reviews the principal and emerging risks and uncertainties faced by the Company together with the mitigating actions it has established to manage the risks. These are set out within the Strategic Report contained within the Annual Report for the year ended 30 June 2025 and comprise the following risk categories:

-  Strategy

-  Investment performance

-  Staff turnover

-  Share price

-  Financial instruments

-  Financial obligations

-  Regulatory

-  Operational

-  Geopolitical

The Company's principal risks and uncertainties have not changed materially since the date of the Annual Report and are not expected to change materially for the remaining six months of the Company's financial year.

Going Concern

The Company's assets consist mainly of equity shares in companies listed on recognised stock exchanges and are considered by the Board to be realisable within a short timescale under normal market conditions. The Board has set overall limits for borrowing and reviews regularly the Company's level of gearing, cash flow projections and compliance with banking covenants. The Board has also reviewed stress testing and liquidity analysis of the portfolio. 

As at 31 December 2025, the Company had a secured £40 million 'evergreen' loan facility with Bank of America.  The facility was fully drawn down at the end of the period.

The Directors are mindful of the Principal Risks and Uncertainties summarised above and they believe that the Company has adequate financial resources to continue in operational existence for a period of not less than 12 months from the date of approval of this Report. They have arrived at this conclusion having confirmed that the Company's diversified portfolio of realisable securities is sufficiently liquid and could be used to meet short-term funding requirements were they to arise, as well as share buy back commitments. The Directors have also reviewed the revenue and ongoing expenses forecasts for the coming year and considered the Company's Condensed Statement of Financial Position as at 31 December 2025 which shows net current liabilities of £32.0 million at that date, and do not consider this to be a concern due to the liquidity of the portfolio which would enable the Company to meet any short term liabilities if required.

Taking all of this into account, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements.

On behalf of the Board
Liz Airey
Chair
4 March 2026

Investment Manager's Review

The net asset value ("NAV") of the Company for the six months to 31 December 2025 fell by 3.5% on a total return basis while the share price recorded a negative total return of 3.0%. By comparison, the UK smaller companies sector as represented by the Deutsche Numis Smaller Companies plus AIM (ex investment companies) Index (the "reference index") delivered a positive total return of 4.6%.

Overview

During the six month period to 31 December 2025, the asset class of UK smaller companies delivered a positive total return of 4.6%, although this lagged the strong performance of large‑cap equities. The environment remained challenging for the small‑cap asset class, with investors continuing to favour traditional "old economy" sectors such as Banks, Defence, and Mining.

Smaller companies faced persistent headwinds. Uncertainty surrounding the timing and content of the November Budget weighed particularly heavily on domestically exposed businesses. Although the eventual policy outcome was relatively modest, the extended period of speculation reduced risk appetite and contributed to subdued demand for small‑cap equities.

Despite these pressures, valuations in the small‑cap universe remain well below historical averages. This provides a supportive backdrop for long term investors, particularly given the presence of companies demonstrating earnings resilience and growth from attractive starting valuations.

Performance

The period under review was a challenging one for the performance of the Company. The Company's NAV fell by 3.5% over the period on a total return basis, compared with a positive 4.6% return from the reference index. This underperformance was driven principally by style factors and sector exposures. Value remained firmly in favour, while Growth struggled and Quality - an important feature of our investment process - was deeply out of favour in the UK market.

The performance of the reference index during the period was also quite concentrated, in particular the Precious Metals Miners did particularly well, with the gold price strength being the key driver.

UK markets were challenging for us as portfolio managers last year. Whilst we identified companies that met and, in many cases, beat their earnings expectations, even those businesses often suffered a derating. The awareness of what the market is willing to pay in respect of earnings execution, resilience of revenue and profit streams has been a learning in this period. Despite the high levels of uncertainty, valuations of companies with quality and earnings delivery did not hold up.

While earnings momentum was rewarded in parts of the market, the strongest performers within that theme were often outside the portfolio. Mining strength was driven by commodity price moves in 2025, which management teams have no control over, however prospects have improved given the elongated period of commodity price strength, so we are considering the suitability of companies in that sector. Whilst some businesses have seen end markets improving, we have been cautious about how sustained this might be. For example, Cyclical Industrials, Housebuilding and Recruitment all continued to exhibit false starts, reinforcing our cautious stance to some recovery areas.

Positive performance came from a varied blend of holdings, including domestically focused companies such as Balfour Beatty in infrastructure. We were pleased to see Applied Nutrition (which we bought at IPO) contribute well, and the Company also benefitted from two bids; JTC and Alpha Group.

In addition to the holdings mentioned below, detractors included XPS Pensions, Cranswick, Avon Technologies, Gamma Communications and Premier Foods. We also saw slower than expected recoveries in some end markets, which impacted companies such as Ashtead Technology in the Oil & Gas sector, and Auction Technology in Global Auction Markets.

We are enthused by the new ideas we are considering for investment, as well as the return opportunities in many existing holdings, particularly given current valuations. 

The five top positive contributors to relative performance during the period were as follows:

Applied Nutrition (relative contribution +113bps, closing weight 2.7%) has had an excellent period following the IPO of late 2024. Strong trading has driven upgrades, with its consumer relevance and new product development being key drivers. The company has continued to deepen its global presence, creating listings with key retailers and distribution partners globally. Execution from the founder led management team has been flawless to date.

Alpha Group (relative contribution +79bps) was bid for by US listed company Corpay, producing a strong share price return. We have subsequently exited the holding.

JTC (relative contribution +59bps, closing weight 1.5%) is currently in a recommended bid situation from private equity firm Permira. We have been reducing the exposure to the company following the announcement.

Balfour Beatty (relative contribution +42bps, closing weight 2.8%) has been a strongly performing newer addition to the portfolio. Infrastructure end markets are providing growth environments, with committed and visible investment levels, and secure order books providing high levels of revenue coverage. The company is well positioned particularly in the areas of Energy, Defence and Transport.

Baltic Classified (relative contribution +40bps) was not held in the portfolio, which was a benefit to performance as its shares fell by 44% during the period. The business was challenged this year, with a variety of factors including tax changes in Estonia, investment spend, and margin compression.

The five biggest detractors to relative performance during the period were as follows:

ME (relative contribution -119bps, closing weight 2.3%) announced in late June that the Board was considering strategic options and there has been a dearth of information since that time, which has frustrated the market. This continued for the entire period, with no research available from brokers. In December, we finally heard that the review had concluded, with no bids for the company being completed. During the period, ME traded satisfactorily, however the good weather acted as a headwind for the laundry business. It has continued to make progress in the rollout of laundry machines across the UK in particular.

Jet2 (relative contribution -87bps, closing weight 2.5%) has suffered from a period of consumer caution on spending, with later booking patterns being seen across the industry, which challenges the company's ability to maximise its inventory. Its market position remains strong, brand loyalty apparent, the "Jet2 holiday meme" having increased awareness globally, and it secured a strong new entry into Gatwick Airport. The UK Budget headlines have been a key driver of consumers' spending mentality and with that behind us and pricing for summer 2026 having reduced across the industry and some capacity come out, the environment looks more constructive.

Hilton Food Group (relative contribution -75bps) was weak on disappointing earnings results, with downgrades to forecasts. The company has been challenged by the higher pricing of both beef and fish proteins which, given it is unable to fully pass on that cost to consumers without a negative impact on volume consumption, means an impact on margins. The company also had a listeria outbreak in one of its fish facilities. We remain concerned about the outlook for the company and exited the position during the period.

Mortgage Advice Bureau (relative contribution -75bps, closing weight 2.5%) has had a tough trading period, with the optimism on housing activity improving not coming to pass through 2025. The company does, however, have strong exposure to remortgaging activity, where we expect to see a pickup in due course. The business continues to have a strong market position and a well invested technology platform, and we are confident it will be well placed when end markets improve.

Telecom Plus (relative contribution -75bps, closing weight 2.0%) was weak during the period despite resilient reporting. One new growth angle is the acquisition of customer bases from other providers. However, some investors are concerned this highlights that the company's core opportunities to grow revenue are less attractive. We have been long term investors in Telecom Plus and remain comfortable with the outlook and the ability of the management team to execute these types of bolt-on customer acquisitions which can create additional value through cross selling more services.

Portfolio Activity

Seven new holdings were added to the portfolio during the period.

Balfour Beatty is a construction company that provides the portfolio with exposure to quality visible revenue streams, with high order book coverage of forecast revenue, from a company priced at an attractive valuation. The business is benefitting from structural growth in power, defence and transport infrastructure across the UK, US, and Hong Kong.

International Personal Finance operates a differentiated, agent-led lending model across Europe, Mexico and digital markets, with growth driven by credit cards and mobile wallets. Its deepening customer relationships improve the quality of earnings and its exposures were also considered to provide diversification in the portfolio. The company was bid for shortly after we initiated a position, unfortunately before we could build a full position size in the portfolio.

TBC Bank is a Georgia-based financials company that demonstrates high quality and growth characteristics, but which is valued on a cheap multiple compared to its UK banking peers. Georgian GDP growth is very strong, supporting growth in the business. TBC continues to deliver strong double-digit earnings growth and attractive net interest margins. Its entry into Uzbekistan enhances the growth potential of the business. 

Dunelm is a well-positioned cash-generative retailer with disciplined margins and a clear growth path. Market share has risen, supported by furniture expansion, digital sales, and new store formats. The valuation of the shares looks attractive compared to history, with a 4% dividend yield and low leverage. Recent updates evidence that Dunelm is outperforming a sluggish sector, while improving UK consumer conditions - lower inflation, rising real wages, and stable interest rates - should support demand.

Mitie is the UK's leading Facilities Management provider with a 14% market share, double its nearest competitor, and a strong blue chip client base. Its revenue is supported by long-term contracts and technology-driven platforms. The company is well positioned for growth through organic expansion, cross-selling higher-margin compliance services (the acquisition of Marlowe created a broader service offering), and further strategic acquisitions.  Its three-year plan targets high single-digit revenue growth, expanding operating margins underpinned by AI automation and a robust balance sheet with low leverage.

GB provides technology services exposed to the global growth areas of digital identity, location intelligence and fraud prevention. We believe self-help initiatives aimed at accelerating organic growth and improving profitability will improve the business outlook. The platform consolidation, sales realignment and subscription conversion are already showing early traction. The new CEO is driving a clear strategy focused on turning around its Americas Identity business and scaling its GBG Go platform as a single global solution, whilst internally streamlining operations for better efficiency. The company has strong financial foundations, with high cash conversion and a low net debt/EBITDA, providing flexibility for investment and shareholder returns.

Big Yellow, the self-storage business with a strong London asset base, has undergone a lacklustre few years, and was added to the portfolio at the end of the period. There has been a normalisation of trading in the self-storage sector since the Covid pandemic, during a period when the macro environment has been of limited help, and cost pressures have dampened profitability. With the shares trading on a 25% discount to book value, and trading in 2025 looking to have taken a more positive turn, we felt that building a new position was an attractive investment opportunity. Shareholder returns are supported by a 4% dividend yield and, whilst Blackstone stepped away from a bid prior to our entry, we wouldn't be surprised to see other bidders for Big Yellow in the future.

Three holdings were exited over the period. Hilton Food Group and Alpha Group are both explained above. Bytes Technology, the UK provider of software and services, was also exited. Decisions internally around sales restructuring looked to be poorly timed, given the Microsoft commission changes also ongoing. Bytes looks to have lacked the execution that other providers have demonstrated in driving resilient growth in their businesses.

Positions which were topped up during the period include Craneware, Volex, Bloomsbury Publishing, Rotork, Alfa, Galliford Try, Wickes, and Applied Nutrition.

Positions were reduced in discoverIE, Next 15, Hill & Smith, Auction Technology, Hollywood Bowl, and GlobalData. We controlled position sizes by taking profits in companies such as Cranswick, Cairn Homes, Paragon Banking, Tatton Asset Management, and Morgan Sindall. We also reduced exposure to Diploma and Games Workshop, whose successes have led to their promotion into the FTSE 100 Index. We continue to optimise positions to identify opportunities in markets and deploy capital into new ideas. Lastly, as explained above, JTC is under a recommended bid situation, from Permira private equity, and we have therefore been selling down that position to reinvest in other companies.

Revenue Account

Revenue earnings per share for the six-month period were 6.84p, compared to 5.93p for the comparable period last year. The level of investment income generated from the portfolio was 8.8% lower, due to the impact of share buy backs conducted during the period which reduce the Company's capital base. However, the Company benefited from strong dividend growth from a number of investee companies. 

Outlook

Following a difficult period for the Company, we remain confident in the strength of our established investment process, which has delivered long‑term outperformance through multiple market cycles. Our focus on Quality, Growth and Momentum - applied through disciplined stock selection - remains central to our approach.

Quality, having been deeply out of favour in 2025, has showed signs of improvement. We will remain highly aware of the market environment, and whilst our investment approach will continue to have tilts to Quality, Growth and Momentum, we believe our focus on stock selection is critical in delivering long term returns to shareholders.

Although smaller companies have lagged larger companies, there is compelling value in this asset class, and the long term growth potential remains a reason to be confident in the outlook. For the first time in 23 years, the small cap reference index has a higher dividend yield than the large cap index, 3.4% at the end of 2025, compared to 3.1% for the FTSE 100 Index. In addition, the reference index is trading on a 25% P/E discount, at 13.8x P/E vs large cap which is now on 18.5x.  

Interest rates have fallen in line with market expectations, which should be supportive for smaller companies. Consensus expectations are for another two interest rate reductions in the UK during 2026. Although media headlines often read very negatively, the consumer is not in general in an unfavourable position - with high savings rates, and unemployment rates remaining at relatively low levels. The outlook is not without question marks, but GDP globally is slowly improving.

Within the market we see significant opportunities and we are excited about the ideas coming to fore for the portfolio. The UK continues to be an attractive market for listed companies, and we see attractive return investment cases in both overseas and domestically exposed companies. The portfolio currently sits with around 55% of revenue generated within the UK, and 45% overseas. As always, we will continue to look for opportunities to invest in both markets. Within UK domestic companies, in many cases valuations and forecasts are both at low levels, and improvements in end markets can result in strong share price reactions.

UK markets might be forgotten, but they are not dead. Let's not forget the strength in returns in UK large cap indices last year, which does at least evidence there is capital to be deployed into UK markets. We believe the characteristics of UK smaller companies demonstrate that opportunity. The outlook for 2026 is not without uncertainties, but the experience from 2025 -  particularly around market behaviour and style dynamics -  prepares us as portfolio managers to navigate them, and with current P/E levels sitting near multi‑year lows, we believe this provides a supportive backdrop for the portfolio.

Abby Glennie and Amanda Yeaman
Aberdeen
4 March 2026

Investment Portfolio

Condensed Statement of Comprehensive Income (unaudited)

Condensed Statement of Financial Position (unaudited)

Condensed Statement of Changes in Equity (unaudited)

Condensed Statement of Cash Flows (unaudited)

Notes to the Financial Statements (unaudited)

For the year ended 31 December 2025

Alternative Performance Measures

By order of the Board

abrdn Holdings Limited

Company Secretary

4 March 2026

Please note that past performance is not necessarily a guide to the future and the value of investments and the income from them may fall as well as rise.  Investors may not get back the amount they originally invested