- Lockdowns are beginning to ease across Europe. Along with this, news over the weekend that China would lower real lending rates, has pushed stocks higher this morning.
- In a quarterly update to 31 March, private equity sector company, HgCapital Trust (HGT), delivered a total NAV return of (6.2%). In it’s outlook statement, HGT noted: “We expect some headwinds from lower global growth in 2020, with the IMF forecasting in mid-April a 6.1% decline in developed nations’ GDP in 20201, materially worse than the global financial crisis. Notwithstanding this, whilst HGT expects that the portfolio will, in aggregate, continue to deliver growth over the long term, it is possible that some investments may deliver year on year declines in organic performance. Although public market valuations were unusually volatile within the quarter, by quarter end they had recovered from the lows, which coincided with the company’s update of 24 March. By quarter end, the S&P 500 Software and Services index, which has historically correlated well with our portfolio, had returned to Q1-2019 valuation multiples. we expect the pandemic to have only a limited direct impact on HGT’s portfolio, given the defensive growth characteristics of the portfolio and our low exposure to the most immediately affected industries. Our companies remain focused on selling business-critical and non-discretionary software and services to their underlying customers, typically with highly predictable business models and robust levels of recurring revenue.”
- UK equity income sector company, Troy Income & Growth (TIGT) released interim results to 31 March 2020 (NAV total return of (16.0%) over the six months to 31 March 2020 while over the same period the share price total return was (14.5%)). TIGT noted: “Many listed UK companies who have received support such as business rates relief, government-funded furloughing of employees or preferential loans have chosen to suspend or cut their dividends, meaning that dividend income from the UK equity market in 2020 is forecast to be somewhere between one third and a half below that of 2019. For many companies in the consumer service and retail sectors revenues will be down by over 90% during the lockdown, so whatever government support is available, a strong balance sheet has been the best protection. Until covid-19 infection rates start to abate and governments can be clearer about their plans to restart their economies, the equity market is likely to remain volatile. The managers do expect that from mid-May there should be the opportunity in the UK to begin this process and it will be possible for the UK government to have learnt from the experiences of other countries which are further along the pandemic curve.”
We also have updates from Civitas Social Housing, Gresham House Energy and Phoenix Spree Deutschland.