UK TMT proves a positive hunting ground for Herald Investment Trust – The Herald Investment Trust (HRI), which invests in smaller Technology, Media and Telecommunications (TMT) companies has delivered its Annual Financial Report to year ending 31st December 2017.
The NAV of the Company increased by 26.9% during the year and the share price increased by 32.7% to 1171.0p. There is no relevant benchmark, so a hybrid / composite is used as a measure of performance, which is 2/3rd the Numis Smaller Companies Index including AIM in the UK (+18.9%) and 1/3rd the Russell 2000 Technology Index (+7.3%) in the US, all in GBP. The discount was 14.8%, narrowing from18.5% in 2016
Returns were primarily driven by the UK portfolio TR of 35.2%. The US portfolio, although still ahead of benchmark, was weaker with a +18.2% return. Asia appreciated by 24.3%
£27.6m was spent on share buy-backs during the period (c. 3.8% of the outstanding shares).
The company reported that a significant proportion of the positive performance was derived from a small number of portfolio holdings, 24 of which appreciated in value by more than 100%. Between them, they accounted for only 8.2% of the Company at the start of the year, but they contributed 63% of the aggregate return. The report goes on to report that IQE was the star performer by value, appreciating by nearly £30m.
In previous years, the investment managers have commented on the high level of takeover activity. In 2017, takeovers and bid approaches continued. There were 13 in total with an aggregate value of £52m, the largest of which was SQS (c.£18m). Six of these were in the UK, six in North America and one in Asia. But unlike previous years, 2017 has also seen a much healthier level of IPOs and secondary offerings. There have been a few US IPOs, but there have been more takeovers, so in the US the number of listed technology companies continues to shrink. The AIM market in the UK, on the other hand, has been relatively vibrant. The manager has participated in Initial Public Offerings (IPOs) and follow-on fundraisings to an aggregate value of £55.6m. Out of a total of 67 of these fund raising events, six were IPOs and 50 were in the UK. AIM has proved to be a healthy market for development capital, but when companies become cash generative they are often taken over by private equity houses or trade buyers.
More on Herald Investment Trust (HRI)
The company seeks to achieve capital appreciation through investments in smaller quoted companies, in the areas of technology, communications and multi-media. Investments will be made throughout the world. The business activities of investee companies will include information technology, broadcasting, printing and publishing and the supply of components, equipment and services to these companies.
HRI : UK TMT proves a positive hunting ground for Herald Investment Trust