Source - PRN
All information is at 31 March 2018 and unaudited.
Performance at month end with net income reinvested


1 April
Share price -3.1% -8.0% -1.4% 12.8% 44.1% 76.7%
Net asset value  -0.7% -7.2% 0.3% 15.4% 46.3% 67.0%
FTSE All-Share Total Return -1.8% -6.9% 1.2% 18.6% 37.6% 60.6%
Source: BlackRock


BlackRock took over the investment management of the Company with effect from 1 April 2012.


At month end
Net asset value - capital only: 193.99p
Net asset value - cum income*: 195.74p
Share price: 189.00p
Total assets (including income): £47.7m
Discount to cum-income NAV: 3.4%
Gearing: 5.4%
Net yield**: 3.5%
Ordinary shares in issue***: 24,354,268
Gearing range (as a % of net assets) 0-20%
Ongoing charges****: 1.1%


* includes net revenue of 1.75 pence per share
** The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 3.5% and includes the 2017 interim dividend of 2.50p per share declared on 26 June 2017 and paid to shareholders on 1 September 2017 and the 2017 final dividend of 4.10p per share declared on 20 December 2017 and paid to shareholders on 9 March 2018.
*** excludes 8,579,664 shares held in treasury
**** Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 31 October 2017.


Sector Analysis Total assets (%)
Banks 9.1
Oil & Gas Producers 8.4
Pharmaceuticals & Biotechnology 8.4
Financial Services 6.6
Media 6.4
Tobacco 6.4
Support Services 6.2
Non-Life Insurance 6.0
Food Producers 4.6
Construction & Materials 4.2
Industrial Engineering 4.2
General Retailers 3.7
Life Insurance 3.6
Travel & Leisure 3.3
Food & Drug Retailers 2.7
General Industrials 2.3
Household Goods & Home Construction 1.8
Chemicals 1.7
Fixed Line Telecommunications 1.6
Forestry & Paper 1.6
Gas, Water & Multiutilities 1.5
Real Estate Investment Trusts 1.0
Software & Computer Services 1.0
Beverages 0.9
Net Current Assets 2.8
Total 100.0


Ten Largest Equity Investments
Company Total assets (%)
British American Tobacco 5.5
Royal Dutch Shell ‘B’ 5.5
Unilever 4.6
Lloyds Banking Group 4.1
RELX 3.8
John Laing Group 3.6
Ferguson 3.2
Rentokil Initial 3.1
BP 3.0
AstraZeneca 2.9


Commenting on the markets, Adam Avigdori and David Goldman representing the Investment Manager noted:
Global equity markets have started the year with significant declines and volatility has increased. Global economic data has remained positive, notably in the US with more to come from fiscal easing, albeit with some softening from recent highs in Europe and China. Whilst there has been some thawing in tensions around North Korea, this has been more than overshadowed by concerns around trade protectionism led by the US’s tariffs on steel and aluminium with more being debated. In the UK, progress on the Brexit transition process was offset by heightened tensions with Russia; the domestic economy continues to prove more resilient than expected. Mid- and small-cap indices continued to outperform the FTSE 100, reflecting the difference in sectoral composition and international exposure as the strength of sterling versus the dollar has weighed on overseas earnings. The increase in bond yields weighed on defensive names given their perceived higher sensitivity to the rise in discount rates whilst cyclicals outperformed.

Over the quarter the Company delivered a return of -7.2%, underperforming the FTSE All-Share which delivered a return of -6.9%.

Negative contributions to performance came from defensive names, such as RELX and British American Tobacco where rising bond yields and earnings downgrades from currency translation were the common themes. RELX has faced a particular challenge in its academic journals business from a consortium of German universities but the impact of this, we believe, has been greatly overstated. British American Tobacco business is delivering operationally and generating revenue growth, however, the company remains highly geared, and has announced downgrades to earnings per share of 2%. Additionally, the industry is undergoing structural change which has put the shares under pressure. Not having any exposure to Sky in the fund acted as a detractor to performance as the shares rallied on two pieces of news: first, it announced an outcome to the triennial negotiations for Premier League football rights that was far more benign than expected with a decline in the price being paid; second, Comcast announced a possible all-cash offer for Sky at a premium to the existing offer from Twenty-First Century Fox.

John Laing shares rose following full year results and an announcement of a rights issue to raise £210m for future investment. Management are excited and confident that they have an attractive pipeline of opportunities to develop their expertise and partnerships in new markets, specifically in the US and Australasia. The shares trade at a 10% discount to NAV, which we believe will grow by around 10% per annum for the next few years. Accesso Technology has reported strong revenue performance ahead of expectations with good momentum across all lines of business. Ferguson posted a strong set of results with strength in the US and Canada businesses more than offsetting the unsurprising downgrades in the UK business. The company is looking to reduce its UK pension deficit and put money towards bolt-on M&A later in the year. Next was a strong performer as it raised full year profits after beating guidance for the Christmas period and demonstrating a particularly strong performance in its Online business. 

During the quarter we purchased new positions in insurance companies Prudential and Aviva as well as in packaging and paper company Mondi. As competition for capital remains high, purchases were financed through sales of holdings including Intercontinental Hotel Group, Vodafone and BAE systems. Additions include AstraZeneca, Unilever and Royal Dutch Shell, whilst reductions were made to Diageo, Sabre Insurance and BT Group.

The outlook for the UK economy is more uncertain given ongoing Brexit negotiations in contrast to the acceleration in growth seen elsewhere.  However, we believe these Brexit fears have provided us with the opportunity to own high quality franchises at attractive valuations. The UK is a hugely international market that is supported by very strong corporate governance, shareholder interaction, regulation, tax and accounting laws and transparency. This renders the UK market a fantastic hunting ground for some high quality international (and domestic) franchises that chose to list on the UK market.

We continue to like cash generative consumer staple companies, especially those exposed to the emerging market consumer given the improvement in the trading backdrop in key markets such as India and Brazil.  These companies often generate substantial cash flow which allows them to invest in innovation, marketing and distribution to ensure the longevity of their brands while also paying attractive and growing dividends to shareholders. We have also sought exposure to infrastructure and construction spend, both in the UK and overseas. US and European construction and infrastructure spend remains well below long-term averages and initiatives to boost this spend features prominently in politicians’ manifestos. However, as the last few months have demonstrated, it is crucial to be selective when investing in these industries and to focus on the strong operators that provide a differentiated service and that boast a strong balance sheet.
11 April 2018