Dunedin Enterprise Investment Trust came off the boil in the first half when growth in net asset value trailed behind its benchmark after two years of outperformance.
The net asset value per share in the (pounds) 97m trust that invests in growth companies, managed by Dunedin Capital Partners, increased by 1.7% against a 35.9% rise in the FTSE Small Cap index in the six months to October 31.
However, Ross Marshall, managing director of Dunedin Capital, noted first-half growth in NAV was held back by a conservative policy for recognising improvements in the performance of portfolio companies.
The trust had continued to do much better than its benchmark on a 10-year measure, with NAV per share increasing 104.6%, against a rise of
39.4% in the FTSE small-cap index.
With economic growth
likely to accelerate in the key UK market, and mergers and acquisitions activity picking up although the Scottish market remained quiet, he said the outlook for the trust was a very
positive one.
In a first half in which Dunedin Enterprise generated more cash by selling stakes than it invested, a significant share of the increase in NAV came from a (pounds) 0.5m gain on the sale of its holding in the Fife-based Thomson Brothers architectural ironmongery business.
The stake was acquired for (pounds) 3.5m in 1999.
The company, which has been busy in England in 2003, completed one investment in the period, leading the (pounds) 21m buy-out of the Hickson & Welch chemical business in Yorkshire. The trust provided (pounds) 4.5m for a 30% stake.
Goals, the Glasgow-based five-a-side soccer operator, was among the companies receiving an undisclosed share of (pounds) 1.4m follow-on funding.
The board decided to cut the interim dividend by one third, from 2.85p per share to 1.9p, to maintain the trust's reserves.
Marshall noted Dunedin Enterprise recognised poor performance by investee companies immediately but only recognised returns evidenced by audited accounts.
Stock exchange investors did not insist on such hard evidence before marking up shares.
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