How are UK-listed companies using buybacks as a capital allocation tool?

Views and opinions expressed by the investment team are correct at the time of writing but are subject to change. Not to be construed as investment advice. Case studies selected for illustrative purposes only.

Our UK equity team provide a detailed analysis and insights on the impact of share buybacks in the UK market post-COVID

Key takeaways

• The UK market in aggregate has seen a significant uptick in buyback activity post-COVID
• Whilst depressed equity valuations strengthened the case for buybacks in the immediate aftermath of the pandemic, the case since Q4 2022 is less compelling in an environment of rising valuations and rising cash interest rates
• Lacklustre return on equity development in this period calls into question whether elevated buyback activity has led to long-term value creation for the market in aggregate
• In select cases, buybacks may have been deployed to provide short-term share price support in a net outflow environment, and/or have been encouraged by misaligned LTIP incentives
• However, on a company specific basis there are clear examples of sensible buyback programmes which should lead to long-term shareholder value creation
• Disciplined stock selection and active engagement are key to monitoring and shaping companies’ capital allocation decisions

Download the full PDF to explore how economic shifts and corporate strategies are shaping the future of UK equities.

Download the full PDF

Authors

David Bickerstaffe Associate Director, Public Equity	George Karidis Investment Analyst, Public Equity

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