In QuotedData’s morning briefing 23 November 2022:
- Worldwide Healthcare (WWH) has announced its interim results for the six months ended 30 September 2022. During the period, WWH provided an NAV total return of 3.1%, modestly outperforming its benchmark, the MSCI World Healthcare Index, which returned 2.1% during the period. In absolute terms, net asset value performance was helped by the continued weakness of sterling, which depreciated by 15.2% against the U.S. dollar, the currency in which the majority of the WWH’s investments are denominated. WWH’s share price total return of +1.9%, while still positive, fared slightly less well and, as a result, the discount of the Company’s share price to its net asset value per share widened to 6.6% as at 30 September 2022 (from 5.5% at the beginning of the half year), having been wider at times during the period. The principal reason for the WWH’s positive performance was its continuing significant overweight position in Emerging Biotechnology. The strategy had not worked well during the previous financial year, but WWH’s chairman, Doug McCutcheon, says that it is now benefiting from investors beginning to again focus more on sector related news flow and fundamentals rather than on macro-related issues. Looking at specific names in the portfolio, the largest contributions during the reporting period came from Global Blood Therapeutics, the US biopharmaceutical company that was acquired by Pfizer, and the US health insurance company Humana. The principal detractors from performance were the US pharmaceutical company Horizon Therapeutics and Intuitive Surgical, which focuses on the development and manufacture of robotic technology used in medical procedures. WWH had, on average, leverage of 11.3% during the period, which contributed 0.4% to performance. As at the half year-end leverage stood at 11.5% compared to 10.9% at the beginning of the period. WWH is able to invest up to 10% of the portfolio, at the time of acquisition, in unquoted securities. Exposure to unquoted equities accounted for 7.1% of the total portfolio at the half year-end, and these holdings made a positive contribution of 0.7% to the WWH’s performance during the period under review.
- Edinburgh Investment Trust (EDIN) has announced its interim results for the six months ended 30 September 2022. During the period, EDIN provided an NAV total return of -8.3%, fractionally underperforming its All-Share benchmark, which returned -8.2%. EDIN’s manager, James de Uphaugh, describes the portfolio’s performance against the index over this period as “a little weak”. He says that part of the underperformance was a function of weakness among several of the midcap holdings in the portfolio. Given the weakness in equity markets, and of the portfolio as a whole, the effect of leverage slightly increased the underlying underperformance. In terms of stock specifics, there was weakness among some of the mining stocks, such as Newmont and Anglo American (James says that he remains happy with both, but has reduced Newmont a little); and mid cap holdings such as Ascential, Marshalls and Dunelm. The latter two have significant exposure to the UK and are seeing trade slow but their market positions remain strong. Positive contributors included BAE Systems (events in Ukraine are a prompt for investment in defence systems around the world), NatWest (James says that this bank should generate further improving returns for shareholders even in the face of softer economic growth); and TotalEnergies, which continues to drive its portfolio into renewable energy.
- HICL Infrastructure (HICL) has announced its interim results for the six months ended 30 September 2022. During the period, HICL provided NAV growth of 1.2p per share to 164.3p (March 2022: 163.1p) and an annualised NAV total return of 6.7% (September 2021: 9.8%). HICL increased the portfolio’s weighed average discount rate by 50 basis points (0.5%) to 7.1% at 30 September 2022 (31 March 2022: 6.6%) recognising the uplift in long-term government bond yields, particularly in the UK. However, the financial impact of the change in discount rates was offset by higher actual and forecast inflation (HICL says that this demonstrates the benefit of its highly diversified portfolio, which it report as having the highest inflation correlation in the listed core infrastructure peer group at 0.8x). The Directors’ valuation increased by 17% to £3,865.6m at 30 September 2022 (31 March 2022: £3,311.0m). Four significant high-quality core infrastructure acquisitions were announced in the period, totaling approximately £616m. HICL says that these investments, spanning both traditional and modern economy sectors, will bolster its resilience through increased sector and geographic diversity and contribute positively to key portfolio performance metrics. The Board has reaffirmed that HICL is on track to deliver its target dividend of 8.25p per share for the year to March 2023, with cash cover in the period improving to 1.58x, or 1.03x excluding profits on disposal versus original cost (30 September 2021: 1.04x / 1.02x). HICL raised gross proceeds of £160m via an oversubscribed tap issue during the period, which restored capacity in its revolving credit facility (RCF) and provided additional financial resources to pursue its pipeline. At 30 September 2022, HICL had £713m of headroom in its RCF and £79m of cash to fund its commitments to invest in ADTiM, Texas Nevada Transmission and Aotearoa Towers of around £513m. HICL comments that its portfolio is well positioned to withstand heightened market volatility, with assets that have robust capital structures and a portfolio that offers low overall beta to wider equity markets, a high yield and strong inflation protection.
- Rockwood Strategic (RKW) has announced its unaudited results for the six months ended 30 September 2022. During the period, RKW provided an NAV total return of -10.4% to 1446.7p/share which RKW says compares to returns from the FTSE Small Cap (ex-ITs) Index of -20.3% and the FTSE AIM All Share Index of -22.6%. The share price total return during the period was -0.35% and, at the period end, RKW was trading at a 2.2% discount to NAV. RKW says that investment gains realised in the Lakes Distillery Bond delivered a 21.6% IRR and £3.1m in cash and that it had net cash at the end of the period of £2.4m (representing 6.6% of NAV). Seven new investments were made across a range of industry sectors and the investment manager says that it is comfortable that overall the portfolio is well financed: 9 holdings have a net cash position, 4 are lowly leveraged and 2 have elevated debt.
- LondonMetric Property (LMP) has posted a 12.2% fall in EPRA net tangible assets (NTA) for the six months to 30 September 2022 – highlighting the material impact of high interest rates on real estate valuations. The group’s portfolio of urban logistics and long-income assets was valued at £3,455m (March 2022: £3,598m), reflecting a 47-basis points expansion in yields. On the occupational front, net rental income increased 13.5% to £72.1m, while EPRA earnings were up 5.5% to 5.14p per share. Dividends were up 4.5% to 4.6p, 112% covered by earnings. The company says continued dividend progression is expected for the full year. LTV was 32.1% with weighted average debt maturity of 5.8 years and cost of debt at 3.2% (85% hedged). Post period end, the company secure a new £225m revolving credit facility, which increases debt maturity to 6.2 years and provides it with available undrawn facilities of £235m.
- Utilico Emerging Markets (UEM) has announced its unaudited financial results for the six months ended 30 September 2022. During the period, UEM provided an NAV total return of -2.8%, which is a significant outperformance of the MSCI Emerging Markets Total Return Index which returned -7.6% over the same. The announcement doesn’t provide any detail on performance attribution for the period, so we can’t talk about that here, but, looking forward, the chairman, John Rennocks, comments that interest rates are likely to fall in EM benefiting UEM’s portfolio as the cost of capital reduces; China’s policies are likely to see a rising of “near shoring” to the benefit of countries such as Vietnam and India; and the war in Ukraine is likely to see Latin America benefit from heightened commodity pricing and the increased focus on “supply chain security”. Rennocks also notes that one key event to come is the reversal of the Chinese zero-Covid policy. China is rapidly eroding much of the economic and social gains it has made over recent years due to the zero-Covid policy which is socially unsustainable. When it reverses, UEM expects a very significant surge in demand, and a sharp rise in commodities and trade. Rennocks says that UEM’s portfolio should benefit from this.
We also have news of a new investment by SDCL Energy Efficiency