The Results Round-Up – The Week’s Investment Trust Results

Seraphim Space Investment Trust (SSIT) saw a £14.1m rise in its spacetech portfolio to £201.5m for the year ending June 2024, driven by new investments and gains. Despite raising c.$900m and strong portfolio growth, its share price remained flat. However, SSIT remains 2024’s top-performing alternatives fund, benefiting from growing demand in cybersecurity, defence, and space technology.

By Frank Buhagiar

Seraphim Space (SSIT) reaches for the stars

SSIT reported a £14.1m increase in the value of its spacetech portfolio to £201.5m over the course of the year ended 30 June 2024. The increase was driven by “additional investments, increased fair value net gains and minimal FX gain.” Growing interest in spacetech couldn’t have hurt though. As CEO, Mark Boggett, notes “the portfolio has defied the difficulties of the wider macroeconomic climate by collectively managing to raise c.$900m from both the private and public capital markets over the course of the year.”

Easy to see why that amount was raised given the “encouraging performance of the portfolio companies. “Buoyed by increasing demand from government customers, the private companies within the top 10 holdings (which together constitute 81.8% of the portfolio fair value and 72.2% of NAV) collectively saw their revenues increase year-on-year by an average of 71% (in Sterling) and 224% (on a fair value weighted basis).” A stellar performance then. But not enough to move the share price higher on the day of the results, although perhaps that was always on the cards as the shares have been this year’s best performer in the alternatives space.

Liberum: “SSIT is still the best returning (>£50m market cap) alternatives fund in share price terms YTD, with its discount narrowing by c.17ppts.”

Numis: “In our view, the fund’s addressable market is extensive, with growing demand in a wide variety of areas such as cybersecurity, defence spend and climate change, where using technology in space is becoming increasingly essential. The fund benefits from a team that is well engrained in what is a nascent but growing sector, facilitated by the ‘democratisation’ of the spacetech industry through cost efficiencies stemming from the remarkable progress of SpaceX.”

Winterflood: “This represents a solid set of results, with few surprises. With a range of companies making operational strides, and at a 47% discount, we continue to believe this represents an attractive proposition.”

Invesco Perpetual Smaller Companies (IPU) sounding confident

IPU’s +13.8% NAV total return beat the Deutsche Numis Smaller Companies (+ AIM) index’s +12.1% over the The Results Round-Up
The Results Round-U. That will go down well with shareholders who voted for the continuation of the fund at the recent AGM. So too, the promise to pay a special dividend to shareholders.

In terms of the year’s performance drivers, according to the Portfolio Managers, “An improving consumer outlook meant that the consumer discretionary sector was the most positive contributor to portfolio performance, with leisure and media stocks performing well. We also benefitted from our exposure to financials, with rising markets driving the outperformance.” And the managers sound confident for the future “with an improving economic outlook, a continued high level of take-over activity, and the relatively low valuation of UK smaller companies, we believe the sector can continue to make good progress over the next year.” The market is a believer – share price tacked on 5p to close at 418p on the day.

Winterflood: “DPS (dividend per share) 7.7p (H1 FY23: 7.7p), maintaining target yield of 4% on year-end share price. Post period-end, special dividend of 484.85p paid to return capital to shareholders who elected for it. Three-yearly continuation vote passed at AGM in June.”

Mercantile (MRC) geared up for growth

MRC clocked up a +17.6% total return on net assets for the half year, comfortably ahead of the benchmark’s +15%. Share price fared even better with a +25.8% return. That means, the fund’s long-term record of outperformance has improved further – over the ten years to 31 July, the fund has generated an annualised return of +8.5% in NAV terms compared to the benchmark’s +6.1%. And MRC is not just a capital growth play. As the dividend has increased for more than ten successive years, the fund has been recognised by the AIC as a next generation dividend hero.

The Portfolio Managers think this is just the beginning in terms of performance “we believe that we are in the early phases of the potential market recovery, with an improving domestic economic outlook combined with low valuations of UK-listed assets providing an exciting investment opportunity.” Add in “the generally strong financial performance being delivered by our portfolio companies and the breadth of new investment ideas” and it’s easy to why the Portfolio Managers are feeling confident. Also helps explain “our current elevated level of gearing, sitting at around 15%.” Investors liked what they heard – shares closed up 3.5p at 241.5p.

Winterflood: “Outperformance driven by stock selection and gearing. Gearing at period-end was 13.7% (31 January 2024: 13.4%), reflecting managers’ confidence in UK mid and small cap companies.”

Ashoka India Equity’s (AIE) crystal ball earns its keep

AIE had a good year – share price/NAV per share total return came in at +35.9% and 35.5% respectively. To be fair, it was a good year all round as the MSCI India Investable Market Index total return (sterling) topped the lot with a +37.7% total return. The slight underperformance this time round not enough to dent the long-term track record – since the fund’s inception in July 2018, NAV is up +185.0%, share price not far behind up +184.0%, while the index is only up +121.5%.

Chairman, Andrew Watkins, gives the investment management team a mention in despatches “the high regard in which my fellow Directors and I hold the Company’s Investment Manager and Adviser grows by the day.” Before going on to provide an insight into what goes on at the Board’s quarterly meetings “Believe me when I tell you that your Board spends some time at each quarterly meeting with the equivalent of a crystal ball in an attempt to foresee bumps in the road ahead.” As for what the crystal ball is currently saying “Nobody expects the trajectory to be unbroken or without such bumps but, right at this moment, with a (mostly) successful general election behind it, the Modi government looks set fair to continue on its path of growth”. Share price closed a tad lower at 274p following the results – after such a strong share price rise, shareholders perhaps tempted to take some profits off the table.

Numis: “Ashoka India has grown substantially since raising £46m at IPO and now has a market cap of c.£450m. This is a product of both strong NAV performance and secondary issuance, which has resulted in an increased number of portfolio holdings”.