- Net Asset Value (NAV) total return per share rose by of 12.4%, ahead of the benchmark index
- Dividends for the half year increased by 0.6% to 9.40p
- Earnings per ordinary share increased by 35.7% to 11.4p
- Share price total return rose by 18.2%
Performance
Against a continuing background over the period of competing positive and negative factors for companies to navigate, the company’s Net Asset Value per ordinary share recorded an increase of 12.4% on a total return basis. The benchmark total return (70% FTSE World Index Ex UK and 30% FTSE All-Share Index) increased by 11.3% over the period.
Continued focus on dividends
The board has declared a second interim dividend of 4.70p per ordinary share payable on 16 September 2021 to holders on the register of members at the close of business on 6 August 2021.
Portfolio Review
Over the six-month period to the end of May 2021, the Trust’s equity portfolio delivered a satisfactory performance, resulting in an NAV total return of 12.4% after expenses and the movement in the value of the debt, compared with the benchmark return of 11.3%.
The strongest contributors came from holdings in more cyclical industries, whilst the companies whose earnings are considered to be defensive tended to lag. The portfolio construction approach aims to make stock selection the primary driver of risk and return, as opposed to macro-economic or factor biases. The investment manager’s approach is to focus on longer term fundamental drivers that will outlast the shorter-term ups and downs of economic and financial market cycles.
Market Outlook
Carolan Dobson, Chairman, comments: “It is unclear how nations and economies will emerge from the pandemic over the coming months. That said, there appear to be good levels of confidence overall in the global recovery and potential headwinds are unlikely to derail well run businesses. Individual sectors still show a diverse range of outcomes though, depending on how they are being affected by the ongoing machinations of the pandemic. One of the biggest talking points right now is the spectre of rising inflation – however this is not a one size fits all scenario. Indeed, for many companies having strong pricing power, it could prove advantageous at controlled levels.
“Against this backdrop our investment manager looks through the noise of economic recovery and geopolitics, concentrating instead on the longer-term prospects for individual companies and the trends that will drive their growth. That approach underpins the Brunner investment philosophy and we would refer you to the manager’s Investment Report where this is explored in more detail, both in terms of the events and performance of the past six months, and also the outlook for the future.”
Matthew Tillet, Portfolio Manager, comments: “As financial markets start to look beyond COVID-19, the subject of inflation has emerged, not only as a risk factor but also as a potential catalyst for a sustained shift in market leadership away from the growth stocks that have driven the market in recent years. The key question is whether shorter term inflationary pressures are sustained into 2022 and beyond.
“From an investment perspective, we believe owning quality companies on sensible valuations provides the best defence against a volatile and unpredictable inflationary environment. Such business models typically enjoy strong pricing power making them well equipped to pass on the impact of higher costs to their end customers whilst protecting their own profitability. In contrast, highly capital-intensive business models may suffer as they grapple with cost pressures and rising capex bills. Very highly valued growth stocks that are extremely sensitive to interest rates may also suffer if interest rates rise along with inflation. The trust’s portfolio has a strong bias towards quality, whilst also having a keen eye on valuation, and is therefore well positioned to deal with inflation should it arise.”
