Bellevue Healthcare Trust (BBH) released its annual report for the 12 months ending 30 November 2023.
- Over the period BBH reported a negative NAV total return of -12.7%, and a negative share price total return of -12.7%. This compares to the -7.1% negative return of its benchmark, the MSCI World Healthcare Index total return. This is the third financial year that BBH has underperformed its benchmark.
- BBH’s investment manager highlights that healthcare was very much out of favour amongst generalist investors over 2023. In the case of BBH, the team feels that its bias to dollar denominated mid-cap healthcare and low benchmark correlation led its investment style to be negatively correlated with wider market performance over the past year. Small-and-mid cap healthcare was a positive attribute over 2023 until the collapse of Silicone Valley Bank in March 2023. The market was also divided into winners and losers based on their exposure to the GLP-1 obesity drugs, which negatively impacted BBH’s performance.
- The team characterises its trading activity over the year as “taking advantage of these repeated mispricing events to position the portfolio as best we could to benefit from a recovery in sentiment, which we felt was inevitably coming (and duly did in the last two months of 2023 and into January 2024). This is most evident in our increased allocations to Tools, Healthcare IT and Healthcare Technology and the reduced exposure to Diversified Therapeutics.”
- Over the year 0.2m shares were issued as part of the scrip dividend programme. In November 2023 BBH received notice for the redemption of 77.4m shares. The board repurchased 16.4m shares over the period under its buyback facility. This reduced the total circulation from 587m at the start of the financial year to 463m by the end. They note that the date of redemption for 2024 has been changed to 2 September.
- On 3 November 2023, the board announced that it was calling a general meeting to seek shareholder approval for a special resolution to cancel BBH’s share premium account.
- BBH targets an annual dividend of 3.5% of preceding year-end NAV, paid out in two equal instalments. BBH paid an interim dividend of 2.995p in respect of the financial year 2023 and proposed a final dividend of 2.995p. For the financial year 2024, the board is proposing a total dividend of 5.04p per ordinary share, composed of interim and final dividends of 2.52p.
BBH’s managers, Paul Major and Brett Darke, comment:
“We are pleased to report that the Company’s performance in the three months to the end of February 2024 has been positive on a relative and absolute basis and the macroeconomic situation is coalescing around a more constructive, narrower range of outcomes, even if the geopolitical circumstances remain febrile.
“It bears repeating that our strategy of investing in `healthcare change’ remains a powerful and compelling one. Healthcare continues to be the secular growth story of our age. Recession or not, there are ever more people and they are ageing. More and more countries are becoming developed economies and scientific progress continues to open up new avenues to relieve the burden of human suffering, raising expectations of what products and services will be available to this ever-greater number of people.
“However, society needs to pay for all of this and the current model is neither easily scalable nor financially sound. If we cannot bend the cost curve and change the delivery paradigm, the services will need to be cut or the system will go bankrupt. Ergo, healthcare must change. There is no alternative. We have already seen profound changes implemented since the pandemic. The tools, products and services that are enabling the re-imagining of healthcare can be accessed through the public equity realm, creating a persuasive investment opportunity. The past few years may have been very challenging, but the fundamentals remain very attractive.”