FIDELITY SPECIAL VALUES PLC
Final Results for the year ended 31 August 2022
Financial Highlights:
- The Board of Fidelity Special Values PLC (the “Company”) recommends a final dividend of 5.45 pence which together with the interim dividend payment of 2.30 pence per share (totalling 7.75 pence) represents an increase of 16.2% over the dividend of 6.67 pence paid in the prior year.
- As of 31 August 2022, the net asset value (“NAV”) and the share price performance of the Company remains ahead of the Benchmark Index (FTSE All-Share Index) over three, five and ten years.
- The Portfolio Manager marked his ten-year anniversary of managing the Company on 1 September 2022, producing a share price total return of +208.9% compared to the Benchmark Index of +92.7% throughout his tenure.
Contacts
For further information, please contact:
Smita Amin
Company Secretary
01737 836347
FIL Investments International
CHAIRMAN’S STATEMENT
The year under review has been overshadowed by Russia’s invasion of Ukraine. The ongoing ramifications of this tragic war are being felt by people, businesses and economies around the world. It has been a particularly challenging environment for investors to navigate with high degrees of volatility and uncertainty. Most notably, high inflation, rising interest rates, the spiralling cost of living and an energy crisis have had significant effects on returns.
While the economic outlook remains challenging and this may persist for some time, there is room for optimism for stock pickers looking to invest in opportunities others have overlooked. Fidelity Special Values PLC is run with a contrarian, value-style approach. It looks for ‘special situations’, predominantly in UK companies, with a well-diversified portfolio across sectors, including small and mid-cap companies. This provides ample opportunity for the many research ideas employed to bear fruit over time as others in the market come to recognise the value of previously unloved stocks.
The Portfolio Manager, Alex Wright, who recently completed ten years at the helm of the Company, explains in his review why he believes UK equities are attractively valued relative to other international markets. He sees great potential in unloved stocks and sectors. Though the environment is uncertain, he believes that these markets will provide attractive investment opportunities. For example, the current environment of higher inflation and interest rates is beneficial for banks and he has been adding to names in the sector where positive earnings have bucked wider trends.
PERFORMANCE
The Company’s performance for the reporting year has lagged the Benchmark Index (FTSE All-Share Index), with a net asset value (“NAV”) return of -4.4% and a share price return of -13.5%. In comparison, the Benchmark Index returned +1.0%. However, both the NAV and share price performance over three, five and ten years remains ahead of the Index as can be seen from the chart on the Financial Highlights page in the Annual Report The year end marked ten years of Alex’s tenure as Portfolio Manager and performance over this period has been very strong with a NAV return of +183.3% and a share price return of +208.9%, compared to a Benchmark Index return of +92.7%. (All performance data on a total return basis). Alex is to be congratulated on achieving this remarkable performance over his tenure.
OUTLOOK
At the time of writing, the UK Government had announced a series of fiscal measures to kick-start UK economic growth. Markets have reacted negatively so far. Gilt yields have risen sharply and sterling has been under pressure against the euro and the dollar. There is significant scepticism as to whether these measures will work as intended. It is against this backdrop that the Company and its investee companies operate. There will doubtless be further periods of heightened volatility in the share price and Shareholders would do well to take a long term view of the investment horizon. The investment strategy of the Company remains resolute.
OTHER MATTERS
DISCOUNT/PREMIUM AND SHARE REPURCHASES/ISSUES
Under the Company’s discount management policy, the Board seeks to maintain the discount in single digits in normal market conditions and will repurchase shares to help stabilise the share price discount.
The Board will approve the issuance of shares if the Company’s shares are trading at a sufficient level of premium to ensure that it adds value for Shareholders and that the issue of shares is not dilutive. Issuing shares increases the size of the Company, making it more liquid and allowing costs to be spread over a larger pool of assets.
Over the reporting year, the Company’s shares traded between a premium of 2.1% and a discount of 10.7% and closed at a discount of 8.5% at the year ended 31 August 2022. The peer group average discount as at that date was 10.4%.
Until April 2022, the Company’s shares mostly traded at a premium and in order to meet demand, the Company issued a total of 11,070,000 ordinary shares from its block listing facilities. In order to ensure that the Company was able to meet demand for shares, it acquired a block listing from the UK Listing Authority for 30,000,000 shares which was effective from 7 February 2022. Since the end of the reporting year and as at the date of this Annual Report, the Company has not issued any further shares.
The Company did not carry out any share repurchases in the reporting year.
The Board continues to monitor the level of the Company’s discount/premium closely and will take action when it believes that it will be effective and to the benefit of Shareholders.
GEARING
The Board has agreed with the Portfolio Manager that if he is able to find attractive opportunities in the market, then the Company’s gearing should be allowed to rise. Combined with Alex’s contrarian and value-focused investment philosophy, and also making good use of the Company’s structural advantages over its open-ended counterparts, this should continue to add value for Shareholders over the long term.
It is the current intention of the Board that, in normal market conditions, the Portfolio Manager will maintain net gearing in the range of 0% to 25%. The Company remained within these levels throughout the reporting year. The maximum level of gross gearing allowed is 40%.
DIVIDEND
The Board’s policy is to pay dividends twice yearly in order to smooth the dividend payments for the Company’s financial year. The Company’s revenue return for the year to 31 August 2022 was 9.42 pence per share (2021: 7.22p), and an interim dividend of 2.30 pence per share was paid on 22 June 2022 (2021: 2.17p).
The Board recommends a final dividend of 5.45 pence per share for the year ended 31 August 2022 (2021: 4.50 pence) for approval by Shareholders at the Annual General Meeting (“AGM”) on 14 December 2022. The interim and final dividends (total of 7.75 pence) represent an increase of 1.08 pence (16.2%) over the 6.67 pence paid for the year ended 31 August 2021. Post the pandemic, the Company returned to paying dividends entirely from the revenue earned in the prior year and is doing the same for this year’s dividend.
The final dividend will be payable on 11 January 2023 to Shareholders on the register at close of business on 2 December 2022 (ex-dividend date 1 December 2022).
BOARD OF DIRECTORS
As part of the Board’s succession plan, I will retire as Chairman of the Board and as a Non-Executive Director at the AGM on 14 December 2022. I am pleased to say that Dean Buckley will succeed me as Chairman of the Board and Nigel Foster will succeed Dean as Senior Independent Director at the same time.
Following a formal recruitment process, I am pleased to welcome Ominder Dhillon to the Board as a Non-Executive Director with effect from 23 June 2022. Ominder is a Non-Executive Director for The City of London Investment Trust plc and a Senior Advisor to IC Research, a fintech institutional market intelligence platform. He is also a Trustee to a UK charity, Facing History & Ourselves. He has more than 29 years’ experience of asset management covering institutional, wholesale and retail channels. Being newly appointed, Ominder will stand for election at the AGM on 14 December 2022.
In accordance with the UK Corporate Governance Code for Directors of FTSE 350 companies, all Directors, with my exception, are subject to annual re-election at the AGM on 14 December 2022. The Directors’ biographies can be found in the Annual Report, and, between them, they have a wide range of appropriate skills and experience to form a balanced Board for the Company.
CONTINUATION VOTE
In accordance with the Company’s Articles of Association, the Company is subject to a continuation vote every three years. The next such vote is at this year’s AGM on 14 December 2022.
The Company’s performance record has been strong since it launched on 17 November 1994. An investment of £1,000 at launch would have returned £21,300 as at 31 August 2022 (with dividends reinvested). Although the one year NAV and share price returns have underperformed the Benchmark Index, performance over three and five years remains strong and well ahead of the Benchmark Index. In addition, the prospects of the Company over a five year investment horizon can be found in the Viability Statement below. Therefore, your Board recommends that Shareholders vote in favour of the continuation. (All performance data is on a total returns basis).
FINAL THOUGHTS
Having served for over six years as Chairman and twelve years as a Non-Executive Director, I shall retire from the Board at the conclusion of the AGM on 14 December 2022. It has been such a privilege to serve on your Board and be part of a great team of Non-Executive Directors and Managers, past and present. As a team, we have all worked together to promote the success of the Company for the benefit of the investors.
I would like to thank all of our loyal Shareholders for investing in the Company, and my fellow Directors and the team at Fidelity for all the outstanding support I have been given. I look forward to seeing the Company going from strength to strength.
Meanwhile, I hope to see some of you at our AGM on 14 December 2022. Details of the Company’s AGM are below.
ANDY IRVINE
Chairman
3 November 2022
ANNUAL GENERAL MEETING – WEDNESDAY, 14 DECEMBER 2022 AT 11.30 AM
The AGM of the Company will be held at 11.00 am on Wednesday, 14 December 2022 at 4 Cannon Street, London EC4M 5AB (nearest tube stations are St Paul’s or Mansion House) and virtually via the online Lumi AGM meeting platform. Full details of the meeting are given in the Notice of Meeting in the Annual Report.
For those shareholders who would prefer not to attend in person or for whom travel is not convenient, we will live-stream the formal business and presentations of the meeting online.
Alex Wright, the Portfolio Manager, will be making a presentation to shareholders highlighting the achievements and challenges of the year past and the prospects for the year to come. He and the Board will be very happy to answer any questions that shareholders may have. Copies of his presentation can be requested by email at investmenttrusts@fil.com or in writing to the Secretary at FIL Investments International, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey KT20 6RP.
Properly registered shareholders joining the AGM virtually will be able to vote on the proposed resolutions. Please see Note 8 to the Notes to the Notice of Meeting in the Annual Report for details on how to vote virtually. Investors viewing the AGM online will be able to submit live written questions to the Board and the Portfolio Manager and we will answer as many of these as possible at an appropriate juncture during the meeting.
Further information and links to the Lumi platform may be found on the Company’s website www.fidelity.co.uk/specialvalues. On the day of the AGM, in order to join electronically and ask questions via the Lumi platform, shareholders will need to connect to the website https://web.lumiagm.com.
Please note that investors on platforms such as Fidelity Personal Investing, Hargreaves Lansdown, Interactive Investor or AJ Bell Youinvest will need to request attendance at the AGM in accordance with the policies of your chosen platform. They may request that you submit electronic votes in advance of the meeting. If you are unable to obtain a unique IVC and PIN from your nominee or platform, we will also welcome online participation as a guest. Once you have accessed https://web.lumiagm.com from your web browser on a tablet or computer, you will need to enter the Lumi Meeting ID which is 110-440-023. You should then select the ‘Guest Access’ option before entering your name and who you are representing, if applicable. This will allow you to view the meeting and ask questions but you will not be able to vote.