Results Round-up: UK trusts bounce back from liberation day lulls
Schroder UK Mid Cap (SCP )
Performance
SCP is back to outperformance, with managers Jean Roche and Andy Brough successfully capturing a resurgence in defence names, according to full year results.
Over the 12 months to the end of September, the £234m trust delivered a net asset value (NAV) total return of 10.8%, compared to the 6.7% gain made by its FTSE 250 ex-investment trusts benchmark.
Industrials were the biggest boost to performance, driven by an overweight to aerospace and defence. The managers highlighted Chemring, Babcock International and QinetiQ as standouts.
Corporate action
SCP’s discount narrowed from 12.3% to 7% over the period, with 269k shares repurchased, equivalent to 0.8% of share capital.
This follows the board’s announcement of a cluster of strategic initiatives back in March, including a more active buyback policy and fee cuts which have helped reduce the trust’s ongoing charges figure (OCF) from 1.05% to 0.92%.
What the analysts say?
Kepler’s Jean-Baptiste Andrieux said: ‘While SCP’s performance has been strong, it is worth noting that UK large-caps have outperformed both SCP and the FTSE 250 ex-Investment Trusts index.
‘This has led to a widening valuation gap between UK large- and mid-caps, resulting in mid-caps offering a higher dividend yield and potentially a more attractive starting point.’
SCP’s full-year dividend amounted to 22.4p, up about 4.2% year-on-year.
‘These levels of valuations have attracted private equity buyers and industry consolidators, with M&A activity providing an additional potential source of alpha,’ he added.
Baillie Gifford UK Growth (BGUK )
Performance
Baillie Gifford’s UK growth trust inched ahead of solid gains made by the FTSE All-Share in its latest interims.
Over the six months to the end of October, the £239m trust, run by Iain McCombie and Milena Mileva, saw its net asset value rise 16.2% including dividends reinvested.
This compared with a 16% jump for the index, while its share price rose 17.7%.
Top contributors included annuity insurer Just Group, which agreed to a takeover bid, wealth advice manager St James’s Place and investment platform AJ Bell. Large holdings in Autotrader, Wise and Experian, as well as not owning banks and Rolls Royce, detracted.
Portfolio activity
Engineering business Spirax was the one new position – a company best known for its steam management systems; while a position in software company First Derivatives was exited following a takeover.
A number of other positions were reduced to fund the new purchase and share buybacks.
Corporate action
The trust stuck to its single digit discount target announced back in January, buying back 11.1m shares over the period, the figure closing at 9.6% by the end of October.
It has since widened back out marginally to 10.32% as of yesterday.
Board commentary
Chair Neil Rogan, said the results were ‘both encouraging and disappointing at the same time.’
‘Encouraging because the UK equity market has risen despite an almost constant flow of poor economic and political news… Disappointing because the lack of growth in the economy has meant little opportunity for UK growth stocks to shine and so the style headwind that Baillie Gifford has suffered over the past four years has continued.’
Edinburgh (EDIN )
Performance
Another set of UK equity interims came from Edinburgh last week. Over the six months to the end of September, its net asset value climbed 7.9% and its share price 10.2% including dividends reinvested.
This meant it fell just short of the FTSE All Share, which was up 11.6%.
Gains were driven by retail and consumer holdings such as Tesco, Whitbread and Dunelm, while not holding Rolls-Royce and an overweight to consumer healthcare company Haleon detracted.
EDIN declared a first interim dividend of 7.6p, up 10.1% on the same period last year.
Portfolio activity
The main changes over the period were managers ‘taking advantage of some short-term share price weakness’ in existing holdings, by adding to Haleon and LSEG.
What analysts say
Investec analyst Alan Brierley said: ‘Since Liontrust received the portfolio from the transition manager in March 2020, the NAV total return has beaten the FTSE All Share by an annualised 1.7%.’
‘While we are acutely aware of the doom-loop surrounding UK equities in recent years, it is pertinent to highlight that the shareholder total return of 146.9% compares favourably with a MSCI AC World total return of 124.8%.’
Kepler’s Josef Licsauer reflected that manager Imran Sattar’s confidence in the UK market can be read in EDIN’s exposure to non-UK stocks.
‘Over the reported period, he reduced the position in US-listed Verisk, a leading data and analytics provider to the insurance industry. This brings EDIN’s exposure to non-UK stocks to 5.5%, the lowest in several years, primarily reflecting the strong supply of attractively price opportunities in the UK,’ he said.
JPMorgan European Growth & Income (JEGI )
Performance
The £567m European equity trust was the best performing trust in its sector over the six months to the end of September, posting net asset value total returns of 14.2% versus 10.7% for its benchmark.
Its share price gained 18%, as the discount narrowed to 2.4%. It closed further to 0.95% as of yesterday.
Outperformance was attributed to stock selection, with Materials and Commercial & Professional Services sectors contributing the most. German Heidelberg Materials was the standout pick.
This offset losses from Food, Beverage & Tobacco, weighed down by Carlsberg – Danish multinational brewing group – which reported weaker than expected volumes, particularly in Asia.
Portfolio activity
A new position was taken in Siemens Energy, with the managers ‘seeing strong growth supported by grid infrastructure and gas capacity additions driven by data centre demand’, along with Mercedes-Benz.
An existing position in global consumer internet group Prosus was also added to, largely on the back of strong results from Tencent − Prosus’ roughly 25% stake accounting for over 80% of the company’s NAV.
Funding these purchases, managers cut down the portfolio’s positioning to several asset-light names in the software and information exchange sectors, and sold out of Deutsche Boerse and Euronext citing stretched valuations.
Outlook
Managers Alexander Fitzalan-Howard, Zenah Shuhaiber and Tim Lewis said: ‘Looking forward there are, as always, plenty of issues to be concerned about including ongoing tariff negotiations, domestic political issues particularly in France, rising deficits and the conflicts in Ukraine and the Middle East.
‘However, despite this there is much to be optimistic about. The consumer remains in a robust condition and here are signs of recovery in the manufacturing sector. Fiscal stimulus initiatives are expected to be central to driving growth in 2026. Europe’s renewed emphasis on strategic resilience… is strengthening its domestic industrial base.
‘These policy changes are encouraging greater capital spending and advancing long-term priorities such as decarbonisation and the restructuring of supply chains. Moreover, valuations of European companies remain attractive, particularly relative to their US counterparts, and investment flows into European markets have started to pick up.’
