24th Sep 2018 12:46
LONDON (Alliance News) - Merchants Trust PLC on Monday said it outperformed its benchmark in the first half of the year, while Chairman Simon Fraser announced he will retire "during the course of next year".
In the six months ended July, the trust, which invests in higher yielding FTSE 100 companies, had a net asset value total return of 7.4%, compared to the 5.0% return of the FTSE All-Share Index.
Merchants Trust NAV per share at the end of the period increased by 5.9% to 569.7p from 537.8p a year before, and by 4.4% from 545.8p at the end of January.
The trust's total net assets also increased by 5.9% to GBP619.5 million from GBP584.8 million a year ago and by 4.4% from GBP593.5 million at the end of the previous half.
Merchants Trust said not owning any tobacco shares for "most of the period" was beneficial to the performance of its portfolio as that sector's poor performance held back the overall FTSE 100 index.
Tobacco shares struggled due to poor industry volume trends in several major markets as well as slowing growth of next generation tobacco products in Japan, a key market.
The largest single positive impact for Merchants Trust's portfolio came from not owning British American Tobacco PLC stock.
Elsewhere, several of the trust's holdings benefited from takeover activity. NEX Group PLC, UBM PLC, J Sainsbury PLC and Inmarsat PLC all saw rises due to merger & acquisition activity and proposals.
Merchant Trust declared a second quarterly dividend of 6.5p per share, on top of a first quarter dividend of 6.4p, giving a total dividend for the period of 12.5p per share. An increase of 1.6% from the previous year.
Looking ahead, the trust believes it can "deliver a healthy level of income, income growth and capital returns in the medium to long term" despite a "number of risks to the outlook for economies and markets".
These risks include: "continuing uncertainty" of the Brexit negotiations, a "weak and divided" Conservative government in the UK, a "socialist opposition with sharply different views on economic policy and the role of the state", and increasing trade tensions around the world.
All of which Merchant believes "may put pressure on share prices".
Chairman Fraser also announced he will step down from the company. By the time of company's next annual general meeting in 2019 Fraser will have served nine years as chairman, and it is "the current intention" he will retire "during the course of next year".
The search for a new chairman has begun, led by Senior Independent Director Sybella Stanley.
Shares in Merchant Trust were marginally lower at 503.85 pence each.