Interactive Investor

Results round-up: F&C IT and Henderson Smaller Companies IT

The duo, which are both members of interactive investor’s Super 60, both recently reported results.

6th August 2021 10:10

Kyle Caldwell from interactive investor

 The duo, which are both members of interactive investor’s Super 60, both recently reported results. 

F&C Investment Trust (LSE:FCIT) has pledged to raise dividends for the 51st consecutive year, while Henderson Smaller Companies Investment Trust (LSE:HSL) once again outperformed.

Those are the headlines, below we run through the full details.

F&C Investment Trust

The UK’s oldest investment trust, launched in 1868, has committed to a further rise in its dividend this year. This will be its 51st consecutive yearly increase in dividends.

In its half-year results to the end of June, the board noted that more than one year's worth of dividends is held in its revenue reserves, which will be utilised if required to top up the dividend.  

The first interim dividend of 3 pence for 2021 was paid on 2 August. Last year, the trust paid a total dividend of 12.1p. Of this, 2.4 pence per share was drawn from its revenue reserves. 

In terms of performance, the trust underperformed its benchmark in share price terms over the six-month period. Its share price total return was 8.3% against 12.3% for the FTSE All-World Index.

However, this was not down to the performance of its underlying investments falling short. Instead, it reflected a widening of its discount over the six-month period from 5.4% to 8.8%.

Its underlying investments outperformed the FTSE All-World Index, with the trust’s net asset value total return up 12.3%.

The global trust has £5.4 billion of assets under management and a well-diversified portfolio, holding more than 400 companies across 35 countries.

Paul Niven, fund manager of F&C Investment Trust, noted that higher inflation is currently the big risk for investors, but was upbeat on his outlook for the post-pandemic economic recovery.   

He says: “Growth rates in the global economy and in corporate earnings are likely to exceed many of the most optimistic forecasts in 2021, as the recovery accelerates following one of the sharpest downturns in history. Growth momentum is broadening globally and, while there remain risks, the backdrop should remain favourable. The recovery in earnings growth will result, with a lag, in an upturn in corporate dividends, which should help our revenue account.

“Beyond the near term, it seems likely that the balance of risks has shifted in favour of somewhat higher inflation. This will present challenges but modest rises in inflation, slightly higher interest rates, but still good rates of growth, present a favourable backdrop for our portfolio. In addition, while markets have been narrowly focused in terms of geographic, sectoral and stock leadership, the recovery should deliver more balanced performance.

Henderson Smaller Companies Investment Trust

Neil Hermon has steered Henderson Smaller Companies Investment Trust to another year of outperformance. Under his 18-year tenure, the trust has outperformed in 16 of those years.

For its financial year to the end of May, the trust’s share price total return was 69.3%, while its net asset value total return stood at 58.5%. Both were ahead of the benchmark return of 54.1% for the Numis Smaller Companies Index.

In addition, the trust has notched up its 18th consecutive year of dividend increases. The trust will pay 23.75p per share, an increase of 1.1% year-on-year. 

Hermon pointed out that smaller companies materially outperformed larger companies over the trust’s financial year, with the Numis Smaller Companies Index (excluding investment companies) outpacing the FTSE All-Share Index for the first time since 2015-16.

Hermon targets shares with good growth prospects, sound financial characteristics and a strong management team. In addition, he seeks to find shares trading at a valuation level under-appreciated by the market.

Hermon is also wary of higher inflation, which he described as “one of the major concerns facing the equity market”. He added: “There is much debate as to whether current indications of inflation, led by commodities and logistics costs, are temporary or of a more permanent nature, with central bankers tending to lean towards the former view. A sustained pick-up in wage inflation would probably force monetary authorities to act more quickly, although at the time of writing there is no evidence of this.”

Hermon, like Niven, struck a positive tone in terms of his market outlook.

“Although uncertainty remains around short-term economic conditions, the virus will pass and we are seeing the green shoots of recovery. The movements in equity markets have thrown up some fantastic buying opportunities and we expect many listed companies to emerge stronger from the downturn,” he said.

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