16th Feb 2023 11:46
(Alliance News) - Herald Investment Trust PLC on Thursday said its net asset value fell due to recent stock market declines, and expressed "many reasons to be anxious" about its outlook.
The London-based investment trust focusing on technology, media and communications companies said NAV per share on December 31 was 2,099.1 pence, down from 2,719.3p a year earlier.
This represented an annual 23% fall, underperforming the negative 22% total return of its comparator benchmark the Numis Smaller Companies plus AIM excluding investment companies Index.
However, it outperformed the Russell 2000 Technology Index of small cap stocks, whose annual return was negative 28%.
Shares in Herald Investment were up 1.2% to 1,928.62p each in London on Thursday morning.
Herald Investment noted the falling performance was "surprisingly uniform" across all four of its region: the UK, North America, continental Europe and Asia.
More positively, it said it saw profits growth in aggregate within the portfolio and "generally resilient" trading in investee companies.
Although for Herald Investment's overall operations, it swung to a pretax loss in 2022 of GBP405.0 million from a profit of GBP280.9 million in 2021.
It did not recommend a dividend payment to shareholders, unchanged from a year earlier.
"Recent stock market declines have inevitably affected the company and it is disappointing to report a decline in net asset value per share of 22.8% in 2022," said Chair Tom Black, who will retire at the forthcoming annual general meeting in April, after ten years on the board.
"Whilst we remain confident about the longer-term prospects for the majority of the investee companies, we have concerns about the state of financial markets, particularly for smaller companies. The UK smaller quoted companies market is the most challenged, with particularly poor liquidity. This is an existential threat."
Investment Manager Katie Potts added: "There are many reasons to be anxious as we look forward. Excess government leverage globally in an environment where the cost of capital is normalising, geopolitical tensions across the globe and energy market turmoil all play their part. In this environment, it is challenging to reduce risk in any portfolio."
But Potts still noted she was optimistic of good buying opportunities ahead: "Against this background, smaller companies with genuine growth prospects and intellectual property seem appealing. This is where the company operates, and the best returns have been made from investments in 2002-3 post the internet boom and 2008-9 in the financial crisis."
By Greg Rosenvinge, Alliance News reporter
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