Gresham House Strategic - Final Results
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Gresham House Strategic plc -
Full Year results for the year ending 31 March 2020
GHS outperforms, raises dividend and expands investment opportunity pipeline
Gresham House Strategic plc (GHS or the Company) is pleased to announce its audited results for the year-ended 31 March 2020.
Stand-out performance versus closed- and open-ended peers, despite market conditions, over the year
NAV of 1,062.2 pence/share, down 14.3% during the period, impacted by 1Q20 market downturn
- Outperformed FTSE Small Cap ex IT index, by +10.5%
Total Shareholder Return (TSR) of -5.2% over the year, and +16.2% on 3-year basis
- Beating FTSE Small Cap ex IT by +18.5% and +41.4%, over 1 and 3-year periods respectively
Top-tier performance rankings, compared to both closed and open-ended peers over 3 years:
- 2nd of 26 AIC UK Smaller Companies funds for 3-year NAV (+4.1% vs sector average -8.4%)
- 2nd among the 50 equivalent UK Smaller Companies sector OEIC funds (GHS TSR vs sector average +4.8%)
Since inception, NAV total return up 13% and TSR of 24.5%, well ahead of relevant indices
- FTSE Small Cap down 11.6% and FTSE AIM All-Share losing 5.1% over the same period
Tightening share price discount, despite COVID-19 market sell-off
- Discount narrowed from 22.6% to 15% over the financial year, peaking at 3.4% in December 2019
- £1.7 million of share buybacks support Board objective to maintain narrower discount
Board reaffirms 15% dividend increase for FY2020/21, repeating prior year commitment
- Final dividend of 12.8 pence per share proposed, bringing total dividends for the year to 22.9 pence per share
Continued outperformance since year-end
- NAV has rallied 14.3% since 31 March 2020, materially outperforming FTSE AIM All-Share index by +20.9%, but remains ?7.7% lower on 12-month basis
- Positive TSR of 0.4% compares to declines in UK indices and AIC / OEIC smaller companies' sector
Investment Management highlights
Strong investment performance, in particular from:
- Augean plc, UK's largest hazardous waste business
- IMImobile plc, material investment in mobile communications specialist, fully exited post year-end
- Successful December 2019 IPO of asset management business services provider MJ Hudson
Five new investments made, with exciting return outlooks, low valuations and clear catalysts, timing often linked to the companies' need for capital, including:
- Leading housing digital conveyancing platform ULS Technology plc
- English whisky distillery Lakes Distillery, via secured convertible loan note at 20% per annum return
- Market-leading piling, foundation services and equipment specialist Van Elle Holdings plc
Operational and turnaround support in under-performing investments, and five smaller holdings exited
Built team capacity and capability through the hire of Richard Staveley, an experienced small-cap fund manager, and Paul Dudley, a corporate finance specialist
- Structural dearth of smaller companies' research continues to drive sector opportunity post-MiFID II
- COVID-19 downturn creating a surge in company re-financing needs and thus many more investment opportunities
- Consistent commitment to value, free cash flow generation and medium term investment time horizon
- Concentrated, engaged, SPE approach and portfolio are well positioned for the challenges ahead
- Board will continue to consider all opportunities to grow GHS.
The Directors have recommended a final dividend of 12.8 pence per share in respect of the year ended 31 March 2020. This will be put to shareholders at the AGM which is to be held at 10am on 17 September 2020. If approved, the dividend will be paid on 30 September 2020, to shareholders on the register of members on 4 September 2020, the ex-dividend date will be 3 September 2020.
David Potter, Chairman of Gresham House Strategic plc, commented:
"We outperformed the market and indices over the period, despite the downward market adjustment during February and March. Our portfolio included only one company exposed to sectors most affected by COVID-19, and we entered the market collapse with nearly 20% of the fund in cash. Our Investment Manager has been closely engaged with our portfolio companies to assess their situation which has allowed us to move fast to help those who needed finance. The past year has highlighted the benefits of the closed-ended structure and beyond the immediate opportunities which are visible, the structural attractions of our long-term, strategic public equity approach are strong".
Anthony Dalwood, Fund Manager, Chairman of the Investment Committee and CEO of Gresham House plc said:
"This is an exciting time for our Strategic Public Equity approach. Our long-term focus has paid off during the past year and we are working hard to unearth the very best investment opportunities the current market and economic environment are generating. We continue to work closely with our portfolio companies to unlock and grow shareholder value."
Richard Staveley, Fund Manager and Managing Director of Strategic Public Equity, Gresham House plc, added:
"With ongoing uncertainty regarding near-term economic activity, UK small caps are particularly cheap compared to large caps. This is reminiscent of the fantastic investment opportunities in the financial crisis more than a decade ago. Within small caps, value stocks are the cheapest compared to growth stocks in a decade. We expect the re-financing opportunity set to last for some time, as companies seek to raise equity capital and the upside is large for those investors willing to engage with smaller companies, due diligence the risks and support their development. In time, the priority will move from those which need urgent liquidity, to those with ambitious growth plans to unlock, and we remain highly focused on finding the very best investments to materially grow NAV."