9th Oct 2019 12:21
(Alliance News) - Mercantile Investment Trust on Wednesday raised its interim dividend as it outperformed its benchmark in the period.
In the six months to July 31, Mercantile Investment's net assets rose by 8.8% to GBP1.91 billion from GBP1.75 billion at the end of January. Net asset value per share rose by 8.9% to 240.90 pence from 221.30p.
Shares in the company were up 0.2% at 204.59p apiece in London on Wednesday morning.
Mercantile reported an 11% return on net assets, beating the benchmark return of 5.2%.
In the year to-date, the company has paid a dividend of 2.70p per share, up 8.0% year-on-year from 2.50p. In addition, it has declared a third quarterly dividend of 1.35p.
Mercantile said: "Although the UK equity market progressed, it remained out of favour with international investors troubled by the prolonged Brexit uncertainty. Globally, equity markets defied expectations, recovering strongly from the falls witnessed in the final quarter of 2018.
"Trade tensions have ratcheted up further this year with the US and China appearing no closer to settling their many differences. This protracted dispute between the world's leading economic powerhouses is hampering economic growth and increasing uncertainty."
The company's largest holding, asset manager Intermediate Capital Group PLC, continued to perform strongly, Mercantile said.
Also trading positively during the half was investee Spirax-Sarco Engineering PLC, the steam management systems manufacturer was promoted to the FTSE 100 index during the period.
Mercantile also benefited from its holding in software firm AVEVA Group PLC, whose shares "reached new highs" in the first half.
In contrast, the trust said it was hurt by not having an interest in Cobham PLC.
Mercantile explained: "Not owning aerospace and defence systems supplier Cobham, which we avoided because it is in the midst of a protracted and challenging business turnaround, hurt relative performance as the aerospace and defence systems supplier's share price rose sharply when it agreed to be bought by a US private equity firm in late July."
Looking towards the second half, the trust forecasts weaker momentum in the global economy with no resolution to the tit-for-tat trade spat between the US and China.
Domestically, Brexit uncertainty is low consumer confidence is impacting companies in the UK.
The trust said: "Thankfully there are positives: UK companies' earnings and dividends have proved resilient, the UK labour market is strong with unemployment remaining low whilst the employment rate nudges historic highs and we are seeing real wage growth for the first time since before the EU referendum. These latter points could provide a platform for an economic upturn.
"While the coming months may well be challenging we are confident that we can still unearth and invest in companies that are both fundamentally robust and have the potential to be long-term future winners. We also maintain our view that the favourable dynamics of medium- and small-sized companies can continue to drive superior returns, outperforming larger companies over the long-term."
By Eric Cunha; [email protected]
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Related Shares:
Mercantile Investment Trust PLCCobhamAVV.LSpirax-Sarco