LONDON (Alliance News) - Perpetual Income & Growth Investment Trust PLC reported Monday that it underperformed its benchmark index in the first half of its financial year and warned UK stock valuations are "elevated".
Perpetual Income reported its total return on a net asset value basis for the six months to September 30 was 4.8%, with its share price total return at 4.9%. The FTSE All-Share index increased by 12.9% over the same period.
The net asset value per share of the trust stood at 404.4 pence at September 30, increased from 395.6p at March 31. The net assets of the trust as a whole increased to GBP985.2 million from GBP960.4 million.
The share price of Perpetual Income stood at 384.5p at September 30 with its discount to net asset value at 4.7%, narrowed from March 31 when its share price was 37.6p and its discount to net asset value was 5.1%.
Shares in Perpetual Income were down 0.3% at 368.87p Monday.
The trust declared a second interim dividend of 3p per share for the three months to September 30.
Mark Barnett, portfolio manager of the trust, said the performance of the trust compared to the benchmark was held back by a lack of holdings in the mining sector and HSBC Holdings PLC and Royal Dutch Shell PLC, both strong performers due to weakened sterling.
Barnett also noted weak performance from holdings in the domestic and travel sectors, hit by the result of the UK's vote to leave the European Union and weaker sterling respectively.
"There are several challenges which may force a reassessment of the current valuations that are being applied to the UK equity market. The first is the lack of overall profit growth, which, absent a significant devaluation in sterling, would have seen another year of no growth in 2016. The underlying earnings outlook for next year looks similarly muted. Second, a more difficult
near-term UK economic picture is likely to emerge. The reappearance of inflation - largely as a result of the movement in sterling - will pressurise consumer budgets and hinder overall levels of economic growth," said Barnett.
"Notwithstanding the elevated level of stock market valuation, there are bottom-up opportunities for the long-term investor, which have started to emerge as a result of the substantial sector rotations that have occurred since the June Referendum. Where new opportunities arise, the
emphasis will continue to be on companies that can demonstrate a sustainable top line growth and translate that into profit, free cash flow and dividends without excessive financial leverage," added Barnett.
By Adam Clark; adamclark@alliancenews.com
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