Honeycomb let down by widening discount – For the year ended 31 December 2019, Honeycomb Investment Trust reported a return on NAV of 7.8%, a little down from the 8.4% generated in 2018. Shareholders were left with a loss for the year, however, as the shares moved from trading at an 11.3% premium to a 4.2% discount. The dividend was maintained at 80p (an 8% yield on the original issue price). Ongoing charges rose to 1.8% from 1.6% – this seems a bit high to us but isn’t out of line with the rest of the sector.
The discount widening was associated with the sale of a big block of shares by Woodford Investment Management. Some of these shares were bought back but the share register is now a lot broader.
COVID-19 has put another spanner in the works, however. The discount has widened again and now stands at 27.4%. The chairman says “The board considers the emergence and spread of COVID-19 to be a non-adjusting post balance sheet event. It is not practicable at this time to provide a reliable quantitative estimate of the impact on the group because of the inherent uncertainty around the length of the lockdown period, the effect of the various government initiatives and the behaviour of borrowers after any payment holiday period expires. The board is monitoring the situation closely and will ensure investors are kept informed of the latest developments in the monthly newsletter.” In other words, it is too early to tell how this will pan out for the company.
The company’s main debt facility has been refinanced, with the maturity extended to May 2021. Excess cash from the portfolio is being used to pay down debt. Provisions for bad debts were increased a little at the end of March (these results are coming out a long time after the financial year end).
HONY : Honeycomb let down by widening discount