British Empire, chaired by Strone Macpherson (pictured), has reported total returns of 7.2% on both its net assets and shares for the six months ended 31 March 2015. These numbers are behind the returns on all the indices that British Empire uses to benchmark its performance. The Morgan Stanley Capital International All Country World ex-US Index total return was 8.8%. The Morningstar Investment Trust Global Index return was 12.3% and the Morgan Stanley Capital International
All Country World Index total return was 12.4%. The interim dividend is being maintained at 2p.
The report says that being underweight Japan was one of the principal reasons for underperforming. The largest positive contributions to performance came from holdings in Investor AB A shares, Jardine Matheson, Hudson Bay Co., TUI and AP Alternative Assets. Together these five investments added 4.7% to the NAV. The largest negative contributions came from investments in Aker, Dundee Corp, Dolphin Capital, Mitra Energy and SC Fondul Proprietatea which collectively took 3.1% off the NAV.
Investor AB, their largest holding and the biggest positive contributor to performance, delivered a NAV return over the period of 22.3% and a share price return of over 36% over the period. Aker, the Norwegian oil services holding company, was a substantial drag on the portfolio. With many of its assets focused on companies involved in oil exploration and oil services, the very sharp decline in the oil price since June of last year weighed heavily on its NAV. In much the same way that a company like Investor AB has benefited from the “double-whammy” of strong NAV growth and discount contraction, Aker has suffered from a sharp decline in NAV that has been compounded by the widening of its discount. They say a prudent dividend cut this year leaves the shares on a near 6% dividend yield and they think the upside from here could be substantial as not only are the valuations of its assets depressed, but the holding company now trades on a discount of 36% to its NAV.
BTEM : British Empire’s Japan underweight proves costly