Mercantile Investment Trust PLC · LSE:MRC
Mercantile Investment Trust — The Mercantile Investment Trust — Shareholder Meeting (May 2018)
25 slides from Mercantile Investment Trust's shareholder meeting presentation, May 23, 2018
Slide 1: The Mercantile Investment Trust plc AGM
The Mercantile Investment Trust plc AGM Discovering tomorrow’s market leaders 23rd May 2018 Guy Anderson, Portfolio Manager, The Mercantile Investment Trust
Slide 2: Agenda
Agenda Overview of trust strategy Performance review Outlook and positioning Appendix 2
Slide 3: Overview of trust strategy
Overview of trust strategy JPMorgan 3 Asset Management
Slide 4: Investment Objective and Key Features
Overview of trust strategy The Mercantile Investment Trust plc A Diversified Portfolio of UK Mid and Small Cap Companies • Long term capital growth from a portfolio of UK mid and small cap companies Investment Objective • Benchmarked against the FTSE All-Share ex. FTSE 100 and Investment Trusts • On
Slide 5: Our investment philosophy & process
Overview of trust strategy Our investment philosophy & process Rigorously identifying investments with specific characteristics Attractively Valued Solid Fundamentals Positive Outlook Relative valuation measures Earnings sustainability Macro environment, industry dynamics or company specifics
Slide 6: Spirax-Sarco
Overview of trust strategy Spirax-Sarco Global leader in industrial pumps and steam systems Investment case EPS and share price trajectory GBP GBP 65 2.5 Share Price (LHS) Track record of organic revenue growth & margin expansion 2.4 60 EPS18 e (RHS) 2.3 55 2.2 2.1 50 ROS +460bps Supported ROACE +53
Slide 7: Performance review
Performance review Performance review 7
Slide 8: Five year performance
Performance review Five year performance The Mercantile Investment Trust plc – 31st January 2013 to 31st January 2018 Cumulative returns 240 Share price +110% 220 NAV +101% FTSE All Share ex. 100 ex. IT +80% 200 FTSE 100 +45% 180 160 140 120 100 80 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Ju
Slide 9: Financial year performance
Performance review Financial year performance 30% 10.9% 0.5% -0.6% 25.4% -0.5% 0.6% 25.5% 25.5% 25% 20% 14.6% 15% 10% 5% 0.0% 0% t s ur n n c g ur n se ck ur n g r n et at io ef fe rin et n a et n in tu r ea r -b r de re ta l ll oc sh fg ta l x pe uy ta l i e a a /e b /w ic k to or /c to to re to ng
Slide 10: Largest contributors to performance
Performance review Largest contributors to performance The Mercantile Investment Trust plc – 31st January 2017 to 31st January 2018 Sector level attribution Stock level attribution Financial Services (o) Sophos (o) Support Services (u) Capita (u) Software & Computer Services (o) Intermediate Capital
Slide 11: Outlook and positioning
Outlook and positioning Outlook and positioning 11
Slide 12: UK mid and small caps have outperformed large caps over the long term
Outlook and positioning UK mid and small caps have outperformed large caps over the long term Distribution of annual relative returns Cumulative return with dividends reinvested 2017 1800 FTSE 250 ex.IT 2015 2006 1600 FTSE 100 2005 20 2004 2000 1400 1996 1994 1988 1200 15 1985 2016 1984 1000 2014 19
Slide 13: Opportunities for extraordinary growth
Outlook and positioning Opportunities for extraordinary growth Stock example: Fevertree 1200 120 Innovators and disruptors Sales, £m (RHS) 1000 100 Total return (LHS) 800 80 Nimble business 600 60 models 400 40 200 20 Rapidly growing new markets 0 0 H2'14 H1'15 H2'15 H1'16 H2'16 H1'17 H2'17 The comp
Slide 14: Value creation through M&A
Outlook and positioning Value creation through M&A Buy-side Sell-side Smaller companies Larger companies Percentage of index acquired FTSE 12% 100 FTSE 10% 250 Corporate Family ownership 8% ownership 6% 4% Less efficient or Fewer opportunities sub-scale for business 2% businesses improvement 0% 2001
Slide 15: Opportunities for active managers in under-researched companies
Outlook and positioning Opportunities for active managers in under-researched companies Games Workshop – single analyst coverage £ 19 sell-side analysts covering 30 25 Price (LHS) FY18 EPS (RHS) 2 1.8 each FTSE 100 company 1.6 20 1.4 Vs 1.2 15 1 8 sell-side analysts covering 10 0.8 0.6 each FTSE 250
Slide 16: UK economy – current market indicators
Outlook and positioning UK economy – current market indicators UK Composite PMI – two years UK Consumer Confidence – ten years 60 10 58 0 56 -10 54 -20 52 -30 50 -40 48 46 -50 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 May-08 May-10 May-12 May-14 May-16 Source (LHS): Markit/CIPS UK Composite PMI, Bloomberg;
Slide 17: Global Purchasing Managers’ Index (PMI) for manufacturing
Outlook and positioning Global Purchasing Managers’ Index (PMI) for manufacturing GTM – Europe | Page 5 17
Slide 18: Portfolio positioning
Outlook and positioning Portfolio positioning 31st January 2018 Sector weighting – 31 st Jan 2018 Top 10 holdings – 31st Jan 2018 Weight (%) Bellway 2.6 31.7 Industrials 29.2 Intermediate Capital Group 2.6 Financials 26.2 Spirax-Sarco Engineering 2.2 25.4 22.2 Man Group 2.1 Consumer Services 21.4 Ha
Slide 19: Summary
Summary Domestic prospects mixed but global economy remains strong Structural reasons for long-term outperformance for UK mid & small cap A specialist team identifying winners in a diversified universe of stocks The Mercantile Investment Trust plc provides the pure-play solution to UK mid and
Slide 20: Appendix
Appendix JPMorgan 20 Asset Management
Slide 21: Benefits of mid & small cap strategy in an actively managed closed ended structure
Benefits of mid & small cap strategy in an actively managed closed ended structure Mercantile Investment Trust plc’s dividend policy has Benefits smoothed income return Pence per share 70 Liquid access to a less No inflows/ outflows liquid asset class 60 50 Dividend policy has Active use of gearing
Slide 22: Gearing
Gearing 5 years' historic gearing levels vs. benchmark Gearing Level Index 20% 8500 7500 15% 6500 10% 5500 5% 4500 0% 3500 -5% 2500 -10% 1500 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17 Jan 18 Apr 18 Month end g
Slide 23: Share price discount
Share price discount The Mercantile Investment Trust plc Net Asset Value (NAV) vs. Share Price Net Asset Value 2400 Last Price 2000 1600 1200 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Premium/Discount to NAV 0 -5 -10 -15 -20 Apr '15 Oct '15 Apr '16 Oct '16 Apr '17 Oct '17 Apr '18 Source: Fact
Slide 24: Investment objective and specific risks
Investment objective and specific risks The Mercantile Investment Trust plc Investment objective – Long term capital growth from a portfolio of UK medium and smaller companies Specific risks – External factors may cause an entire asset class to decline in value. Prices and values of all shares o
Slide 25: The Mercantile Investment Trust plc
The Mercantile Investment Trust plc This is a marketing communication and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any r
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