The Results Round-Up

Literacy Capital, BBGI Global Infrastructure, CT Private Equity and Chelverton UK Dividend Trust all reported this week, but which of the four is ranked No.1 out of ALL UK-listed investment companies in terms of NAV performance over the three years to June 2024?

By Frank Buhagiar•30 Aug, 2024

Literacy Capital (BOOK) Tops the Charts

BOOK’s Interim results for the six months ended 30 June 2024 opens with a one-line summary “Strong first half; celebrates third year anniversary with NAV performance ranked #1 out of all UK-listed investment companies.” As for what a strong first half looks like, how about a +4.4% NAV increase and +9.9% share price rise. That compares to the FTSE Investment Company Index’s +5.8% increase and the FTSE All-Share’s +7.4%.

And according to CEO, Richard Pindar, for the three years to June 2024 the fund was ranked #1, with its NAV performance being comfortably ahead of all other UK-listed investment companies. A thumbs up for BOOK’s strategy of “focusing on smaller businesses that are poorly served or ignored by traditional private equity funds, as well as the benefits that our fund structure can deliver to portfolio companies and BOOK’s shareholders. We believe it is worth continuing to emphasise these points, as they are still not widely understood by the market.” And right on cue, share price was unmoved on the day of the results. But more numbers like the above and likely won’t be too long before the market sits up and takes notice.

Winterflood: “Manager sees signs of UK domestic trading conditions improving. NAV TR +49% p.a. since IPO in June 2021; top performer across all UK investment trusts.”

BBGI Global Infrastructure (BBGI) Keeps Delivering

BBGI reported a +2.4% NAV total return for the six months to 30 June 2024. Other financial highlights at the half-year stage include zero drawings on the revolving credit facility; net cash of GBP20.6 million; and a 6% dividend increase. And it was the dividend that Chair, Sarah Whitney, chose to focus on “Our high-quality inflation-linked cash flows generated by our portfolio of availability-style core infrastructure assets has enabled us to meet consistently or exceed dividend targets since the IPO in 2011, providing our shareholders with predictable, progressive and fully cash-covered dividends for over a decade.” Whitney goes on to note how, at the current share price, the shares offer FY 2024 and FY 2025 dividend yields of 6.3% and 6.4% respectively.

CEO, Duncan Ball, meanwhile has his eyes fixed on the future “Stabilising, and potentially reducing interest rates, combined with an ever-increasing demand for infrastructure investments, presents a long-term growth opportunity for BBGI.” Shares barely budged on the day of the results – market clearly focusing on the long term.

Jefferies: “The portfolio valuation was little changed over the half, while cash flow generation was typically robust.”

Liberum: “The results were largely as expected with limited changes from the FY 23 results. We continue to prefer: (1) infrastructure funds with a higher terminal value and better scope for earnings growth at the investment level which can drive NAV growth.”

Winterflood: “With the shares trading at a current discount of 8% (relative to 11% 5-year average premium), we believe that BBGI is undervalued and hence we continue to recommend the fund for core Infrastructure exposure.”

Investec: “The portfolio continues to perform well operationally and financially, and the company remains well positioned with a conservative balance sheet. We remain comfortable with our Hold recommendation.”

Numis: “We view BBGI as a high-quality business but maintain a preference for the revenue diversification and higher inflation linkage on offer elsewhere in the Core infrastructure sub-sector.”

CT Private Equity Trust’s (CTPE) Growing Realisation

CTPE noted a pick-up in realisation activity during the first half – realisations and associated income came in at £52.3m, a +31.4% increase on the same period last year. What’s more, realisations were struck at a 35% premium to prior valuations. Other half-year vitals include a +0.8% NAV total return; and a 6.5% dividend yield based on the period-end share price. Letting the side down, however, a -4.5% share price total return on the back of a widening discount. Chairman, Richard Gray doesn’t sound overly concerned though, as “there now appears to be a mild but definite pick-up in activity.” This includes a “substantial increase in realisations over the course of this reporting period with some more significant ones to come in the near future.” As for why this is important “Realisations are usually at a significant premium to recent carrying value and so have the benefit of enhancing NAV as well as strengthening the balance sheet and creating more shareholder value.”

And doesn’t sound like reinvesting the proceeds from realisations will be all that hard either “There are many investable funds and co-investments being appraised by our managers. Experience shows that investments made during, or immediately after, economic slowdowns usually perform very well.” Market liked what it heard – shares tacked on 11.5p on results day to close at 454p.

Winterflood: “In our view, realisations of c.10% of NAV YTD at a +35% uplift offer transactional evidence to support the prevailing NAV, which is particularly relevant given a 36% share price discount, and represents a continuation of the trend across the sector.”

JPMorgan: “The shares are trading at a headline discount of 34.7%, but taking into account proforma net debt the implied discount on the unquoteds is narrower at 30.2%. This looks about fair relative to peers in our view and therefore we see no need to change our Neutral recommendation.”

Chelverton UK Dividend Trust’s (SDV) Year of Two Halves

SDV’s NAV total return of -7.5% for the full year doesn’t tell the whole story. For performance at the UK equity income trust picked up markedly in the second half of the year with NAV rising +20.3% in the six months to 30 April 2024, a nod to the improvement in sentiment seen towards the mid and small-cap stocks that SDV invests in. And according to the Investment Manager’s Report, the majority of the fund’s portfolio companies “continue to trade profitably, generate significant levels of cash and pay dividends.”

The relatively strong operational showing at the portfolio company level is not going unnoticed if an uptick in corporate activity is anything to go by – six of the fund’s holdings were the subject of corporate activity in the year to April 2024. The investment managers don’t sound 100% happy about this though “We must also hope that we do not lose too many of our holdings to takeovers at prices which do not reflect the full medium-term potential of the business. As long-term, fundamental investors, we would far rather continue to back the management teams of growing, cash generative businesses, than settle for a quick return based on current low levels of valuation.” Results were good for an initial 3p spike in the share price to 172p.

Winterflood: “Ordinary shares moved from 3.8% premium to 6.5% discount; 395k shares issued at a premium over FY. 2025 ZDPs moved from 4.6% to 6.3% discount.”