Mercantile Investment Trust PLC · LSE:MRC
Mercantile Investment Trust — The Mercantile Investment Trust — Shareholder Meeting (May 2022)
29 slides from Mercantile Investment Trust's shareholder meeting presentation, May 17, 2022
Slide 1: The Mercantile Investment Trust plc AGM 2022
HALF IMAGE PLACEMENT HOLDER (HORIZONTAL) Resize image to cover grey box The Mercantile Investment Trust plc The home of tomorrow’s UK market leaders Annual General Meeting – 17th May 2022 Guy Anderson, Portfolio Manager Image source: J.P.Morgan.
Slide 2: Agenda
Agenda The case for UK mid & small caps Portfolio strategy Performance review Outlook and positioning 1
Slide 3: The case for UK mid and small caps
The case for UK mid and small caps 2
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 Source: returns Cumulative 2500 S&P 500 FTSE 250 (ex IT) 2000 MSCI Europe (ex UK) MSCI Emerging Markets FTSE 100 1500 TOPIX 1000 500 0 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Slide 5: Long term outperformance of Mercantile and UK mid and small caps
Case for UK mid and small caps Long term outperformance of Mercantile and UK mid and small caps Source: returns Cumulative 2500 Mercantile S&P 500 2000 FTSE 250 (ex IT) MSCI Europe (ex UK) MSCI Emerging Markets FTSE 100 1500 TOPIX 1000 500 0 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '1
Slide 6: Portfolio strategy
Portfolio strategy J.PMorgan 5 Asset Management
Slide 7: Mercantile: the home of tomorrow's UK market leaders
Portfolio strategy Mercantile: the home of tomorrow’s UK market leaders A diversified portfolio of mid and small cap companies with strong long-term relative performance The Mercantile Investment Trust plc Annualised return % (net of fees) vs benchmark Disciplined investment process 15% Mercantile
Slide 8: Long term performance
Portfolio strategy Long term performance A track record of outperformance Cumulative returns – 31 August 2012 to 31 January 2022 400 NAV Share Price FTSE All Share ex 100 ex IT FTSE 100 350 +220% 300 +189% 250 +145% 200 +85% 150 100 Aug 12 May 13 Feb 14 Nov 14 Aug 15 May 16 Feb 17 Nov 17 Aug 18 May
Slide 9: A strong track record of income generation
Portfolio strategy A strong track record of income generation Dividend policy smoothing income return 9 Pence per share 8 7 6 5 4 3 2 1 0 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 Dividend Special dividend Earnings per share Net revenue reserves
Slide 10: Our investment philosophy
Portfolio strategy Our investment philosophy Rigorously identifying investments with specific characteristics Is it a good business? We consider the quality of the company through its profitability, sustainability of earnings and capital allocation discipline Is the outlook improving? Assessing the
Slide 11: Softcat
Portfolio strategy Softcat The investment process in action High quality business Softcat – Total Return 1200 • Excellent organic growth track record • Strong selling culture with incentivised staff 1000 Trimmed position Promising outlook 800 Added to position Trimmed position 600 • Pandemic acceler
Slide 12: IMI
Portfolio strategy IMI The investment process in action Improving business IMI – Total Return 150 • Structurally solid but historically underperforming business Added to position • New management team promoting commercial focus Added to position Promising outlook 100 • Commercialisation efforts driv
Slide 13: Performance review
Performance review 12 JPMorgan Asset Management
Slide 14: Performance through the year
Performance review Performance through the year Mercantile NAV versus Benchmark (FTSE All Share ex 100 ex IT) 140 135 BOE raises base Delta variant 130 rate Growth sell-off 125 120 Third lockdown, UK CPI inflation hits 7.0% 115 vaccine rollout 110 Energy prices begin to rise 105 sharply Omicron vari
Slide 15: Performance decomposition
Performance review Performance decomposition Contributors to total return Mercantile NAV versus Benchmark (FTSE All Share ex 100 ex IT) 16% 15.3% 14% 13.4% 13.7% 13.2% 12% 10% 8% 8.3% 6% 4% 2% 0% Source: PAT, J.P. Morgan Asset Management, Morningstar. All figures are on a total return basis. Perform
Slide 16: Performance attribution
Performance review Performance attribution Stock attribution for one year ending 31 January 2022 Mercantile NAV versus Benchmark (FTSE All Share ex 100 ex IT) Watches of Switzerland (o) 1.75% Future (o) 0.77% Morgan Sindall (o) 0.42% Beazley (o) 0.34% OSB (o) 0.34% AVEVA (o) -0.48% Meggitt (u) -0.52
Slide 17: Outlook and positioning
Outlook and positioning 16 J.PMorgan Asset Management
Slide 18: Consumers face inflationary headwinds
Outlook and positioning Consumers face inflationary headwinds UK CPI inflation – median of economists’ forecasts UK GFK consumer confidence % change year on year, quarterly average 15 10 Start of Q4 2021 Start of Q1 2022 Latest 9 8 0 7 6 5 -15 4 3 2 -30 1 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 -45 2021 202
Slide 19: However, labour and housing markets remain supportive
Outlook and positioning However, labour and housing markets remain supportive UK job vacancies (thousands) UK house price index (GBP) 1400 280,000 270,000 1200 260,000 1000 250,000 240,000 800 230,000 600 220,000 400 210,000 200,000 200 190,000 0 180,000 2001 2003 2005 2007 2009 2011 2013 2015 2017
Slide 20: Industrial recovery constrained by supply chain challenges
Outlook and positioning Industrial recovery constrained by supply chain challenges Demand backdrop robust, but Russia’s invasion adds to elevated input cost inflation JPMorgan Global Manufacturing PMI Commodity prices (index, rebased to 100 at January 2007) 275 80 New orders Future output Crude oil
Slide 21: UK equity valuations are highly attractive
Outlook and positioning UK equity valuations are highly attractive UK FTSE All-Share forward P/E relative to DM equities % premium / discount of FTSE All-Share relative to MSCI World 5 0 -5 -10 -15 -20 -25 -30 -35 -40 2006 2008 2010 2012 2014 2016 2018 2020 2022 Source: IBES, MSCI, Refinitiv Datastr
Slide 22: Portfolio positions
Outlook and positioning Portfolio positions Top 10 holdings as of 31 March 2022 Benchmark FTSE All-Share (ex FTSE 100, ex Inv Companies) Stock Portfolio weight (%) Sector Watches of Switzerland Group 4.8 Personal Goods Softcat 3.9 Software And Computer Services Intermediate Capital Grp 3.7 Investmen
Slide 23: Historic gearing levels
Outlook and positioning Historic gearing levels The Mercantile Investment Trust plc as of 30 April 2022 Historic gearing levels vs benchmark 20% 10000 Month end gearing levels - LHS FTSE All Share ex 100 ex IT (total return index) - RHS 9000 15% 8000 7000 10% 6000 5% 5000 4000 0% 3000 2000 -5% 1000
Slide 24: Summary
Summary 23 J.PMorgan Asset Management
Slide 25: Summary
Summary Summary Mercantile: disciplined investment process and strong long-term investment performance Inflation and supply chain challenges, compounded by geopolitics, impacting economic growth Focus on strong businesses and attractive market valuations create compelling long-term opportunity
Slide 26: Appendix
Appendix JPMorgan 25 Asset Management
Slide 27: Performance
Appendix Performance The Mercantile Investment Trust plc as of 31 January 2022 Market value The Mercantile Investment Trust plc GBP 2.5bn Performance, net of fees (%) One Three Five Ten Three months year years p.a. years p.a. years p.a. Mercantile NAV (cum income, debt at par value) -7.2 13.2 10.8 9
Slide 28: Investment objective and risk profile
Investment objective and risk profile The Mercantile Investment Trust plc (the Company) Investment objective The Company aims to achieve capital growth through investing in a diversified portfolio of UK medium and smaller companies. It pays quarterly dividends and aims to grow its dividend at least
Slide 29: Important information
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 discretion
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