Mercantile Investment Trust PLC · LSE:MRC
Mercantile Investment Trust — The Mercantile Investment Trust — Shareholder Meeting (May 2025)
41 slides from Mercantile Investment Trust's shareholder meeting presentation, May 2025
Slide 1: The Mercantile Investment Trust plc Annual General Meeting – May 2025
The Mercantile Investment Trust plc Annual General Meeting – May 2025 The home of tomorrow’s UK market leaders Guy Anderson Portfolio Manager This is a marketing communication. Please refer to the the legal documents and the KID before making any final investment decisions. Image source: Getty
Slide 2: Agenda
Agenda • The case for UK mid & small caps • Portfolio strategy • Performance review • Outlook and positioning 2
Slide 3: The case for UK mid and small caps
01 The case for UK mid and small caps 3
Slide 4: Long term outperformance of UK mid and small caps
Case for UK mid and small caps Long term outperformance of UK mid and small caps Cumulative returns S&P 500 FTSE 250 (ex IT) MSCI Europe (ex UK) FTSE 100 MSCI Emerging Markets TOPIX 3,500 3,000 2,500 2,000 1,500 1,000 500 0 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Slide 5: Long term outperformance of UK mid and small caps
Case for UK mid and small caps Long term outperformance of UK mid and small caps Cumulative returns Mercantile S&P 500 FTSE 250 (ex IT) MSCI Europe (ex UK) FTSE 100 MSCI Emerging Markets TOPIX 3,500 3,000 2,500 2,000 1,500 1,000 500 0 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '
Slide 6: Performance over last five years held back by 20% de-rating
Case for UK mid and small caps Performance over last five years held back by 20% de-rating Cumulative returns S&P 500 FTSE 100 FTSE 250 (ex IT) 220 200 180 160 FTSE 250 (ex IT) FTSE 250 (ex IT) 140 forward P/E 15x forward P/E 12x 120 100 80 60 Dec 2019 Dec 2020 Dec 2021 Dec 2022 Dec 2023 Dec 2024 So
Slide 7: Opportunities for extraordinary growth
Case for UK mid and small caps Opportunities for extraordinary growth Nimble Innovators Rapidly business or growing models disruptors markets 4imprint Rotork Softcat Image source: Shutterstock. The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted a
Slide 8: Value creation through M&A
Case for UK mid and small caps Value creation through M&A Proportion of index acquired (% of index starting market cap) 16% FTSE 100 FTSE 250 FTSE Small Cap FTSE 100 avg. FTSE 250 avg. FTSE Small Cap avg. 14% 12% 10% 8% 6% 4% 2% 0% '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19
Slide 9: Portfolio strategy
02 Portfolio strategy JPMorgan ASSET MANAGEMENT
Slide 10: Mercantile: the home of tomorrow’s UK market leaders
Portfolio strategy Mercantile: the home of tomorrow’s UK market leaders The Mercantile Investment Trust plc Annualised return % (net of fees) vs benchmark As at end of the financial year - 31 January 2025 16% ● Disciplined investment process Mercantile (NAV Cum FV) 14.1 Specialist ● Fundamental anal
Slide 11: Strong long-term investment performance…
Portfolio strategy Strong long-term investment performance… A track record of outperformance Cumulative returns – August 2012 to April 2025 400 Share Price NAV Cum FV NAV Cum Par FTSE All Share ex 100 ex IT FTSE 100 350 +246% +216% 300 +195% 250 +149% +139% 200 150 100 2012 2013 2014 2015 2016 2017
Slide 12: …complemented by a strong track record of income generation
Portfolio strategy …complemented by a strong track record of income generation Dividend policy smoothing income return 10.0 Dividend Special dividend Earnings per share Net revenue reserves 9.0 8.0 7.0 Pence per share 6.0 5.0 4.0 3.0 2.0 1.0 0.0 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Slide 13: Our investment philosophy
Portfolio strategy Our investment philosophy Rigorously identifying investments with specific characteristics Is it a good Is the outlook Is it attractively business? improving? valued? We consider the quality of the Assessing the operational We look at a company’s valuation company through its prof
Slide 14: Fundamental characteristics
Portfolio strategy Fundamental characteristics 14.0% Mercantile Benchmark 9.5% High quality ROIC -1.0% Promising outlook -5.2% EPS %Chg 8.5% Attractively valued 7.8% Hist FCF yield Source: J.P. Morgan Asset Management. Data as of 30 April 2025. Benchmark is the FTSE All-Share (ex FTSE 100, ex Invest
Slide 15: The investment process in action – Bellway
Portfolio strategy The investment process in action – Bellway Bellway – Total Return (Last Three Years) Bellway Benchmark High quality ● Strong land buying track record 180 business ● Conservative balance sheet 160 Added 140 to position Promising ● Cyclical recovery in sales rates outlook 120 %* ● H
Slide 16: The investment process in action – Plus500
Portfolio strategy The investment process in action – Plus500 Plus500 – Total Return Plus500 Benchmark High quality ● Track record of attractive economics 200 business ● Effective customer acquisition and retention 180 Added to Added to position position 160 Promising ● Growth opportunity from new U
Slide 17: Performance review
03 Performance review 17 JPMorgan ASSET MANAGEMENT
Slide 18: Delivering performance through a volatile period
Performance review Delivering performance through a volatile period Mercantile NAV versus Benchmark (FTSE All Share ex 100 ex IT) 120 UK election Mercantile Benchmark 115 UK inflation at 2.0% 110 UK exits recession Bank of England begins rate cuts 105 UK Budget, US election 100 US tariff announcemen
Slide 19: Performance breakdown
Performance review Performance breakdown Contributors to total return Mercantile versus Benchmark (FTSE All Share ex 100 ex IT) for 12 months to 31 January 2025 20% 18% 16% 14% 12% 10% 18.9% 8% 13.6% 13.7% 14.1% 6% 12.3% 4% 2% 0% Source: PAT, J.P. Morgan Asset Management, Morningstar. All figures ar
Slide 20: Performance attribution
Performance review Performance attribution Stock attribution for one year ending 31 January 2025 Mercantile NAV versus Benchmark (FTSE All Share ex 100 ex IT) 3i Group (o) 1.37% Intermediate Capital (o) 0.98% Beazley (o) 0.71% Games Workshop (o) 0.65% Diploma (o) 0.57% Bellway (o) -0.46% Next Fiftee
Slide 21: Outlook and positioning
04 Outlook and positioning 21
Slide 22: US trade policy changes are significant
Outlook and positioning US trade policy changes are significant US effective tariff rate %, import duties collected as a share of total import value 30 25 2 April announcements 20 Campaign promises 15 10 Current estimate End-March announcements 5 0 1930 1950 1970 1990 2010 Source: Cato Institute, U.
Slide 23: Recovery in confidence stalled by Autumn Budget and US tariffs
Outlook and positioning Recovery in confidence stalled by Autumn Budget and US tariffs GfK UK consumer confidence Lloyds Business Barometer Index level Index level 20 80 10 60 0 40 -10 -20 20 -30 0 -40 GFK headline consumer confidence GFK consumer future personal finances -20 -50 -60 -40 2014 2016 2
Slide 24: The domestic consumer remains resilient
Outlook and positioning The domestic consumer remains resilient UK real wage growth UK excess savings rates % % points, savings rates relative to 2015-2019 average 12 25 UK real average weekly earnings (%YoY, 3 month average) UK nominal average weekly earnings (%YoY, 3 month average) 10 UK CPI infla
Slide 25: Lower inflation has enabled monetary policy easing to begin
Outlook and positioning Lower inflation has enabled monetary policy easing to begin Headline CPI Bank of England policy rate expectations % YoY % 12 7 UK US Eurozone Recession 6 10 5 8 4 6 3 4 2 2 1 0 0 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22 '24 '26 '28 BoE base rate Market expectations on
Slide 26: UK valuations present compelling opportunity
Outlook and positioning UK valuations present compelling opportunity Relative equity valuations %, relative discount/premium based on 12-month forward P/E ratios 0 -10 Discount widening vs. the US market -20 -30 -40 -50 -60 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 Europe ex-UK
Slide 27: UK mid and small cap rarely as attractively valued versus large caps
Outlook and positioning UK mid and small cap rarely as attractively valued versus large caps FTSE 250 (ex. IT) versus FTSE 100 forward P/E x, multiple 25 100% FTSE 250 premium (RHS) FTSE 250 FTSE 100 80% 20 60% 15 40% 10 20% 5 0% 0 -20% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 201
Slide 28: Sector positioning
Outlook and positioning Sector positioning Sector actives – 31 January 2024 Sector actives – 30 April 2025 Technology 5.7% Financials 6.5% Consumer Discretionary 4.6% Consumer Discretionary 4.7% Industrials 4.3% Technology 2.3% Consumer Staples 1.8% Industrials 1.5% Telecommunications 0.3% Consumer
Slide 29: Sub sector positioning
Outlook and positioning Sub sector positioning Plus500 20 IntegraFin 31 January 2024 Mitie 30 April 2025 15 Page / Hays Auto Trader 10 Volution Ibstock 5 0 Household Goods and Home Construction and Materials Finance and Credit Services Media Industrial Support Services Software and Computer Services
Slide 30: Portfolio positions
Outlook and positioning Portfolio positions The Mercantile Investment Trust plc as of 30 April 2025 Benchmark FTSE All-Share (ex FTSE 100, ex Inv Companies) Top 10 holdings Stock Sector Portfolio weight (%) Bellway Household Goods And Home Construction 5.1 3i Group Investment Banking And Brokerage S
Slide 31: Gearing reflects positive view
Outlook and positioning Gearing reflects positive view The Mercantile Investment Trust plc as of 30 April 2025 Historic gearing levels vs benchmark 20% 10000 Month end gearing levels - LHS FTSE All Share ex 100 ex IT (total return index) - RHS 15% 10% 8000 5% 0% 6000 -5% -10% 4000 2013 2014 2015 201
Slide 32: Summary
05 Summary 32 JPMorgan ASSET MANAGEMENT
Slide 33: Summary
Summary Summary ● Mercantile: disciplined investment process and strong long-term investment performance ● Policy-induced economic uncertainty; UK relatively well positioned ● Focus on strong businesses and attractive valuations provide compelling long-term opportunity The Mercantile Investment Trus
Slide 34: Appendix
06 Appendix JPMorgan 34 ASSET MANAGEMENT
Slide 35: Differentiated geographic positioning
Appendix Differentiated geographic positioning Geographic revenue mix as of 30 April 2025 FTSE 100 FTSE All-Share ex 100 ex IT The Mercantile Investment Trust plc 9.1% 4.8% 4.2% 23.3% 11.3% 13.3% 13.6% 12.4% 11.8% 58.0% 28.0% 25.9% 14.2% 9.8% 60.3% United Kingdom Emerging Markets United Kingdom Emer
Slide 36: Capital structure
Appendix Capital structure £2,500m Financing Principal Rate Maturity Annual NAV cost Debt £2,000m £175m Debenture Stock £174,452,250 6.13% 25-Feb-30 0.54% Perpetual Debenture £3,850,000 4.25% - 0.01% £1,500m Private Placement £54,893,704 1.98% 08-Sep-41 0.06% £1,000m Private Placement £49,897,688 2.
Slide 37: Portfolio turnover
Appendix Portfolio turnover The Mercantile Investment Trust plc Rolling portfolio turnover 50% 6 month turnover 12 month turnover 40% 30% 20% 10% 0% Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-23 Dec-24 Source: J.P. Morgan Asset Management. Data from December 2016 to December 2024. Turnover
Slide 38: Performance
Performance The Mercantile Investment Trust plc Market Value As of 31 January 2025 The Mercantile Investment Trust plc GBP 2.2bn Performance, net of fees (%) Six One Three Five Ten Three months months year years p.a. years p.a. years p.a. Mercantile NAV (cum income, debt at fair value) 3.3 -3.0 14.1
Slide 39: Share price discount
Appendix Share price discount The Mercantile Investment Trust plc Net Asset Value (NAV) vs. Share Price 350 Net Asset Value Last Price 300 250 200 150 100 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Dec-24 Mar-25 Premium/Discount to NAV (%) 15% 10% 5% 0% -5% -10% -15
Slide 40: Investment objective and risk profile
Appendix Investment objective and risk profile The Mercantile Investment Trust plc (the Company) as of 30 April 2025 INVESTMENT OBJECTIVE The Company aims to achieve long-term capital growth through investing in a diversified portfolio of UK medium and smaller companies. It pays quarterly dividends
Slide 41: Important information
Appendix Important information This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a recommendation, to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole d
The Mercantile Investment Trust — Shareholder Meeting (May 2025) on 6ix