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(Alliance News) - Strategic Equity Capital PLC on Wednesday reported a rise in net asset value over its most recently ended financial year, outperforming its benchmark.
At June 30, the trust's NAV per share stood at 265.12 pence compared to 260.16p at the same point a year prior, a 1.9% rise.
Strategic Equity's net assets, however, slipped 3.0% over the 12 months to GBP169.0 million from GBP174.3 million. During the period, the trust bought back 3.2 million shares, accounting for the discrepancy.
The trust declared a final dividend of 1.50p, 50% higher than the 1.0p distributed the year before. However, Strategic Equity said shareholder returns will "derive primarily from the capital appreciation" of its shares rather than dividends.
Over the twelve months, Strategic Equity's NAV total return was 2.2%, significantly ahead of its benchmark - the FTSE Small Cap ex Investment Trusts Total Return Index - which lost 8.6% in the same period.
Chair Richard Hills said: "The year under review has proved to be difficult for both domestic and global stock markets. Fears of a full-blown trade war between the USA and China, coupled with the on-going Brexit negotiations have certainly undermined business and investor confidence in Europe and the United Kingdom leading to lower economic growth prospects in these areas. The whole UK stock market, on a global basis, is now generally considered to be cheap while simultaneously 'uninvestible' given the uncertain backdrop."
Jeff Harris and Adam Khanbhai, the trust's investment managers, added: "Portfolio companies performed well demonstrating encouraging operational and strategic progress, with one or two exceptions. This was, in our view, only reflected to an extent in share price performance, and there were broad, often indiscriminate de-ratings across the market over the year. Whilst these have been closed to an extent through some specific re-rating, or by way of transaction, in many cases, 'price' hasn't yet followed the 'value' of several portfolio holdings in our view."
The managers cited Proactis Holdings PLC as the "major disappointment". Proactis shares have dropped more than 60% on AIM so far in 2019.
Throughout the period, Strategic Equity Capital increased its exposure to the healthcare sector, with 22.5% of NAV now weighted towards the sector, up from 18.5%. Technology reduced to 16.8% from 22.1%. Financials also reduced, falling to 11.2% from 14.2%.
Looking ahead, Hills said: "With so many permutations ahead of us on the political and economic front, both at home and abroad, trying to predict anything seems irrational. On this basis we continue to keep to our plan of investing in undervalued companies in the expectation that their value will be recognised in due course, whatever the outcome."
Shares in Strategic Equity Capital were untraded in London on Wednesday but last closed at 219.26 pence each.
By Paul McGowan; paulmcgowan@alliancenews.com
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