Edinburgh Worldwide reports that over the year to 31 October 2016, the net asset value per share, cum income with debt at fair value, increased by 18.0% and the share price by 10.3%. The comparative index, the S&P Global Small Cap Index, increased by 29.0% in sterling terms. There is no final dividend.
The manager’s report examines the reasons for the company’s underperformance of its performance benchmark. They say that the significant exposure within the portfolio to healthcare companies, particularly early-stage biotechnology businesses, in aggregate performed poorly. Second, the high exposure to UK-listed companies; post the Brexit vote the UK market has been one of the weaker developed-world equity markets and Edinburgh Worldwide’s positioning towards younger, less proven businesses penalised them further.
The holding in the electronic bond trading platform MarketAxess again made a notable positive contribution to performance. On a less positive note, the holding in Alnylam Pharmaceuticals, the gene silencing company, performed poorly due in part to disappointing clinical trial data for one of its drugs in development. IP Group is mentioned as another detractor from performance.
They can invest up to 5% of total assets in unlisted equity investments, in aggregate, at time of acquisition. Two holdings were purchased over the course of the past financial year, Skyscanner Holdings and Unity Biotechnology, taking the portfolio weighting in unlisted equity investments to 2.8% of total assets (2015 – 1.7% of total assets), invested in four holdings as at the year end. Since then it has been announced that Ctrip.com, a Chinese online travel company, is close to acquiring Skyscanner, with the transaction expected to be completed by the end of 2016. The ability to invest in unlisted equities through a closed ended vehicle is one of the notable benefits of the investment trust structure and a differentiating factor versus open ended peers. The Board and Managers are excited by the business models of the remaining investments and their potential as long term investments within the portfolio.
EWI : Edinburgh Worldwide held back by healthcare exposure