Monks Inv.Trust - Results for the six months to 31 October 2018

¾  Anthem and Amazon were the notable positive contributors to absolute returns in the period. Naspers and Prudential were the largest detractors.

¾  Earnings per share were 2.54p compared to 1.77p in the corresponding period. No interim dividend is to be paid.

¾  The Managers remain optimistic about the potential future returns from long-term equity investing and the portfolio remains well diversified by geography and industry, with exposure to a broad range of strong growth companies.

 

*With borrowings deducted at fair value.

 

Past performance is not a guide to future performance. Total return information is sourced from Baillie Gifford /Morningstar. See disclaimer at the end of this announcement. For a definition of terms see Glossary of Terms at the end of this announcement.

         

The Monks Investment Trust PLC invests globally in order to achieve capital growth. This takes priority over income and dividends. Monks is managed by Baillie Gifford, an independent fund management group with over £185 billion under management and advice as at 3 December 2018.

Monks is a listed UK company. The value of its shares and any income from them can fall as well as rise and investors may not get back the amount invested. The Company is listed on the London Stock Exchange and is not authorised or regulated by the Financial Conduct Authority. You can find up to date performance information about Monks at www.monksinvestmenttrust.co.uk. Past performance is not a guide to future performance. See disclaimer at the end of this announcement.

Interim Management Report

After a period of generally steadily rising markets, the past six months have seen a return of volatility and a shift in market sentiment. This is far from unusual or unhealthy as markets rarely move in straight lines and are subject to unpredictable mood swings. The managers are bottom-up investors who do not attempt to time or forecast market moves but who instead focus on identifying and holding a portfolio of the best growth companies from around the world. They believe that retaining a long-term view that focuses on corporate fundamentals is the best way to produce superior returns.

During the period, the Company produced a negative net asset value (NAV)* return of 0.9% compared to an increase of 4.5% for the comparative index (FTSE World in sterling), both in total return terms. Over the period, the share price total return declined by 1.9% with the premium to NAV* falling from 3.4% to 2.4%. While this was evidently not a profitable period for the Company, the board and managers believe that performance should be judged over the longer term. Since the current team took over management of Monks Investment Trust on 27 March 2015, the comparative index total return has been 46.7%, the NAV* total return 56.0% and the share price total return 82.4%.

Not surprisingly given the market volatility and performance described above, several holdings in the portfolio saw material share price declines. A number of Asian consumer holdings got caught up in the negative sentiment towards Emerging Markets, which in turn was partly driven by trade war rhetoric. Whilst, as described below, the managers have been diversifying the portfolio somewhat in recent months, they have retained their enthusiasm for Asian companies which they believe offer exceptional long-term growth prospects, but in the short term have held back portfolio performance.

Gearing

The level of actual gearing at the period end stood at 6.6%, compared to 4.6% six months earlier. We increased borrowings moderately during the period by drawing on our existing facilities. It is expected that gearing will be maintained in the range of minus 15% to plus 15%, with the intention of plus 10% as a long-term neutral position.

Dividend

No interim dividend is being paid. A single final dividend will typically be paid after the full year results, reflecting the Company's focus on capital growth.

Current Positioning and Outlook

The managers remain optimistic about the long-term opportunities afforded by the companies held in the portfolio. The operating performance of the vast majority of these investments remains strong.

The managers retain great enthusiasm for Asian growth and the portfolio contains many exciting technology and consumer companies across the region. During the period two new Asian insurance holdings were purchased. Ping An Insurance, which brings exposure to mainland China, and ICICI Prudential in India. This, along with Prudential PLC and AIA, brings the number of Asian insurance focused holdings to four. This enthusiasm is based on an Asian middle-class population which is around six times the size of that of the G7, but where spending on social welfare is only one-sixth of western levels.

Technology, disruption and innovation also remain at the heart of the portfolio. Many of the holdings are seeking to disrupt traditional business models and benefit from the huge growth in cloud computing and storage. Diversification remains a key portfolio characteristic, which we believe will support the performance of the portfolio through a range of economic and market environments.

The principal risks and uncertainties facing the Company are set out in note 12.

On behalf of the Board

JGD Ferguson

Chairman

December 2018

Balance Sheet (unaudited)   

 

 

 

At 31 October 2018  

£'000  

(Audited)

At 30 April 2018

£'000

Fixed assets

 

 

Investments held at fair value through profit or loss (note 7)

1,749,179 

1,730,513 

Current assets

 

 

Debtors

3,571 

9,009 

Cash and short term deposits

8,479 

22,974 

 

12,050 

31,983 

Creditors

 

 

Amounts falling due within one year:

 

 

Bank loans (note 8)

(77,480)

(63,165)

Other creditors

(2,432)

(2,955)

 

(79,912)

(66,120)

Net current liabilities

(67,862)

(34,137)

Total assets less current liabilities

1,681,317 

1,696,376 

Creditors

 

 

Amounts falling due after more than one year:

 

 

Debenture stock (note 8)

(39,859)

(39,842)

 

1,641,458 

1,656,534 

 

 

 

Capital and reserves

 

 

Share capital

10,891 

10,857 

Share premium account

41,632 

35,973 

Capital redemption reserve

8,700 

8,700 

Capital reserve

1,526,316 

1,549,551 

Revenue reserve

53,919 

51,453 

Shareholders' funds (note 9)

1,641,458 

1,656,534 

Shareholders' funds per ordinary share

(after deducting borrowings at book value) (note 9)

753.6p

762.9p

Net asset value per ordinary share

(after deducting borrowings at par) (note 9)

753.5p

762.8p

Net asset value per ordinary share

(after deducting borrowings at fair value) (note 8)

750.7p

759.0p

Ordinary shares in issue (note 10)

217,818,859 

217,143,859