Worldwide Healthcare Trust (WWH) has released its annual report for the year ended 31 March 2023. The company’s net asset value per share total return was -0.1% and the share price total return was -4.1%, underperforming the benchmark MSCI World Health Care Index measured on a net total return, sterling adjusted basis, which returned +2.5% during the year (2022: +20.4%). The disparity was reflected in the widening of the company’s discount from 5.5% as at 31 March 2022 to 9.3% at 31 March 2023. The results follow a disappointing return in 2022 where share price total return was -10.8% compared to the index which was up 20.4%.
A principal contributor to performance in the year, both in relative and absolute terms, came from emerging biotechnology stocks (defined primarily as small-and mid-capitalisation stocks). A key part of the portfolio manager’s strategy is to be overweight the emerging biotechnology sector, reflecting the high levels of innovation and growth found in these companies. However, for some time, part of this strategy has included an overweight position in emerging market stocks, particularly in China, which has not been successful.
More broadly, the company’s results over the past two years have dragged down medium-term performance. While NAV per share compound annual return over five years has been a respectable +8.2%, it was lower than that of the benchmark (+12.9%).
Commenting on the outlook for the company, chair, Doug McCutcheon noted:
“Global stock markets continue to experience higher than usual levels of uncertainty, with persistent inflation, central bank borrowing rates at much higher levels than they were one year ago, a developing ongoing economic downturn and several overhanging geopolitical issues. It is unsurprising, therefore, that investors remain relatively risk-averse for the moment, favouring more predictable businesses over the faster growing companies that make up much of our portfolio and sector.
“Against this challenging short-term background, however, our portfolio manager OrbiMed continues to remain positive on the outlook for healthcare and our company. They expect the current accelerated levels of mergers and acquisitions to continue, supported by attractive valuations, healthy balance sheets and, within the pharmaceutical sector, a need to address future patent expirations. Regardless of the market backdrop, the pace of scientific and technological development within the sector continues unabated while clinical and regulatory catalysts will continue to provide a regular flow of key share price moving events. They further believe that the sector’s defensive growth characteristics should continue to prove attractive in times of global uncertainty.
“Your board shares OrbiMed’s perspective. We believe that long-term investors in this sector will be rewarded and that the company will continue to perform strongly over time. Thus far, in the current financial year, performance is off to a positive start, both in absolute and relative terms. From 1 April 2023 to the date of this letter, our net asset value per share has increased by +6.2%, compared to +0.9% for our Benchmark.”
WWH : Another down year for Worldwide Healthcare