Merchants Trust Share News (MRCH)

(Alliance News) - Merchants Trust PLC on Monday said that macroeconomic predictions are fraught with uncertainty, citing US trade policy, conflicts in Ukraine and Gaza amid advances in artificial intelligence and automation.

The investment trust, which dates back to 1889, invests in high-yielding UK large-cap companies.

Merchants Trust said net asset value per share with debt at par was 588.5 pence as at July 31, up 2.8% from 572.6p.

NAV total return was 5.4% in the six months to July 31, underperforming against its benchmark, the FTSE All-Share index, which had a total return of 7.5%.

The company noted that its holding in London-based advertising agency WPP PLC "has been very disappointing. The marketing services company reported weak results and lowered guidance several times in recent months. We had believed that a major repositioning of the business under Chief Executive Officer Mark Reed, simplifying the corporate structure and investing in digital and AI capabilities, would lead to improved performance. However, the business has continued to underperform peers, notably Publicis. We took the difficult decision to sell the position in July, despite a depressed valuation, on concerns that there would have to be further restructuring of the business under a new chief executive. We decided to focus on investments where we have higher conviction."

Meanwhile, Lloyds Banking Group PLC and OSB Group PLC rallied with rising bank profitability and cash generation.

Meanwhile, Sirius Real Estate Ltd benefited from strong trading performance and optimism about German industrial and defence spending.

Merchants Trust said geopolitical risks remain high as US trade policy reshapes global commerce, as conflicts in Ukraine and Gaza continue, while artificial intelligence and automation reshapes industries and labour markets with impacts for productivity and employment.

The company declared a final dividend of 7.3 pence per share, up 2.8% from 7.1p a year ago. That brings the total payout to 14.6p, up 0.7% from 14.5p. The company has increased its dividend for 43 consecutive years.

Looking ahead, the firm said: "In summary, we are confident that there are considerable inefficiencies in the UK stock market. These inefficiencies can be exploited by owning a diversified collection of strong businesses, trading well below their fair value and paying a high dividend stream. We believe that Merchants' portfolio can deliver strong capital returns and income to meet the company's objectives."

Merchants Trust shares were 0.6% higher at 553.50 pence each on Monday morning in London.

By Tom Budszus, Alliance News slot editor

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