The Results Round-Up – The Week’s Investment Trust Results
Gore Street Energy Storage announces a new dividend policy alongside its full-year results. Brunner mentions the Medicis in its Half-year Report after the share price tacks on 26%, while Polar Capital Technology reveals it is looking to lower its share price after a strong run.
ByFrank Buhagiar•19 Jul, 2024•
Gore Street Energy Storage (GSF), strongly placed
GSF’s NAV per share for the year came in at 107.0p compared to 115.6p 12months earlier. The lower outcome is largely down to external factors including the high interest/inflation rate environment. Chair, Pat Cox, doesn’t sound overly worried “We expect to see improving market conditions as inflation continues to subside and rates come down.” Dividends for the year totalled 7.5p per share, meaning the fund has generated a +48.4% NAV total return since the 2018 IPO. As Cox points out “Despite challenging market conditions, the Company has achieved significant growth by raising new funds and expanding our diversified energy storage portfolio to approximately 1.25 GW across five markets.” What’s more, with £60.7 million in cash plus a further £58.6 million in debt headroom, the company is in a strong financial position to drive further growth and “take another significant step forward in scale”.
Shares didn’t react too well to the results though – closing down 6.6% on the day while the discount widened to -39.73% from -35.45%. At first glance, the reaction is somewhat puzzling for, as JPMorgan points out “The revenue and NAV had been well flagged”. There was news on the dividend front, however, including a target for the current financial year of 7p per share. That’s lower than the 7.5p for the year just gone. The company highlights “This is consistent with investors’ expectations based on the current NAV.” That’s not all “from the 2024/25 financial year, the profile and quantum of dividend distributions will be more closely aligned with operational and other cashflows rather than NAV.” The prospect of lower and more variable dividends, a possible cause for the underwhelming share price reaction then.
JPMorgan: “(The change in dividend policy) looks a sensible move given that NAV is not directly related to current cash flows, and when dividend cover is <1.00, the payments have to be part funded by expensive debt.”
Jefferies: “The decision to align dividends with operational cash flows instead of NAV makes sense. Furthermore, increased operational capacity in FY25, in turn strengthening dividend cover, will enhance the fund’s capital allocation flexibility.”
Liberum: “The weakness of the GB market has been well documented in 2024. As a result, the diversification of geographic markets remains a positive for the GSF portfolio, allowing poor revenue performance in GB markets to be partially offset by a strong performance in the Irish and Texan markets in FY 24. We view the current discount to NAV as providing an attractive opportunity.”
Numis: “Given the significant increase in capacity expected in the portfolio, GSF has scope to meaningfully grow its revenues and ebitda in the coming months and makes it our preferred play amongst the pure play battery peers.”
Brunner (BUT) and the Medicis
BUT’s +12.8% NAV total return for the half year, not far off the +13.9% posted by the composite benchmark (70% FTSE World Index Ex UK and 30% FTSE All-Share Index). BUT theglobal investor’s share price outshone them all, rising +26% as the discount narrowed to -5.5% from -15.4%. A vote of confidence in the trust’s bottom-up approach which, as Chair, Carolan Dobson, explains, is favoured because “in short it is much easier to predict the future behaviour and potential performance of an individual company than it is an entire economy or geographic region.” Can’t argue with that. “For this reason, our managers concentrate staunchly on building the company’s portfolio from the ground up, finding companies that meet Brunner’s strict investment policy”.
The investment managers see reasons to be positive. That’s because “After the mono-dimensional markets of the past few years it is interesting to see such different types of equity investments leading this year.” These include “companies which are creating scarcely believable technologies” on the one hand. While on the other, “traditional banks – a business model which dates to the Medicis – are having a field day. This wider market breadth is reassuring and suits Brunner’s balanced approach.” The market liked what it heard – share price added 10p on the day to finish at 1385p.
Winterflood: “BUT benefited from overweight positions in Industrials and Financials, as well as underweight in Consumer Staples. Key detractors included not owning Nvidia”.
Polar Capital Technology (PCT), looking to lower the share price
PCT saw its NAV per share rise by an eye-catching +40.8% over the full year, outperforming the already impressive +38.9% posted by the benchmark (sterling terms). The NAV growth, a vindication of a pivot towards AI, particularly the semiconductor and component subsectors. That strong performance has meant the share price regularly trades above the £30 level now. Turns out having such a high share price can be problematic for some investors. As Chair, Catherine Cripps, explains “a higher share price might be a barrier to investment for certain investors including regular savers who may wish to invest smaller amounts per transaction on a regular basis.” So, the Board is proposing to subdivide each existing share into 10 new shares to lower the share price. Subject to approval at the upcoming AGM, shareholders can therefore expect a sharp drop in the share price, albeit for a good reason.
Looking ahead, sounds like the Investment Managers are not losing any sleep over the global economy “whether there is a recession or not and what equity markets do over the next six to 12 months perhaps misses the point. Astounding new innovations such as AI augur well for a longer-term innovation-led growth and prosperity cycle.” Shares closed down on the day by almost 5% at 3235p, a case of shareholders taking profits after such a strong run perhaps.
Numis: “We continue to rate Ben Rogoff highly and think that Polar Capital Technology is an attractive way to gain diversified exposure to global technology stocks.”.
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