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LONDON (Alliance News) - Fidelity Special Values PLC on Wednesday reported a decrease in net assets, underperforming its benchmark, but was able to hike its interim dividend.
At February 28, the investment trust's NAV per share stood at 251.80 pence compared to 271.98p at the end of August, a 7.4% decrease.
Fidelity Special Values' net assets decreased 5.4% in the six months to the end of February to GBP686.1 million from GBP725.0 million.
Fidelity Special Values declared an interim dividend of 2.10p per share, 14% higher than the previous year's interim payout of 1.85p.
In the first half, the trust's NAV total return was negative 6.1%, worse than its benchmark, the FTSE All-Share Index, losing 3.7% in the same period.
Chair Andy Irvine said: "Whilst performance in the first half of the reporting period has been more challenging, there has been a strong recovery since the half year end and long term performance remains well ahead of the benchmark index over 3 and 5 years. The company's shares remain in high demand and continue to trade at a premium."
"At a stock level, online gaming group GVC Holdings PLC was the leading detractor weighed down by negative regulatory news. The company's investment in Citigroup Inc fell amid concerns over its earnings in a worsening global economic scenario and falling bond yields. However, the bank's recently announced fourth-quarter results showed profit growth that beat analysts' expectations on better than anticipated expense declines and loan losses. It also has substantial excess capital and the business remains fundamentally strong," said Portfolio Manager Alex Wright.
The same "negative sentiment" weighed down the trust's holding in Bank of Ireland Group PLC. Wright noted defence contractor Ultra Electronics Holdings PLC was "another notable detractor", as the company struggled amid Brexit worries as well as Saudi Arabian and US military spending cuts.
The trust's Royal Mail PLC hurt NAV after the postal service warned that its full year earnings were expected to fall sharply as it had failed to meet its cost saving targets.
Wright believes 2019 "could turn into a surprisingly positive" year for those "brave enough to buy UK equities before the good news happens".
"Not all UK stocks are equally attractive, and although many domestic businesses are being unfairly ignored, others are structurally compromised or financially unsound and therefore best avoided. I am happy buying unloved domestic stocks if I can see a balance sheet that can withstand a period of economic weakness, and a valuation that gives me some margin of safety," said Wright.
Shares in Fidelity Special Values were down 0.1% Wednesday at 265.82 pence each.