Standard Life ranks seventh out of 21 peers in the UK Growth & Income sector based on net asset value total return for the six months ended 31 March 2011 (source JP Morgan Cazenove).
“The Board is declaring an interim dividend of 3.55p per share, an increase of 12.7% on the interim dividend compared with 2010. This increase mainly reflects the Board’s aim of rebalancing the interim and final dividends. The Board continues to target an increase in the dividend in real terms over the longer-term and the Board intends at least to maintain the level of the final dividend.
“During the period under review, the Manager increased the Company’s borrowings to £15m, resulting in a gearing level of 12% at the period end and reflecting the Manager’s confidence in the long-term outlook for the UK equity market.
“The Company’s holding in DS Smith made the largest contribution towards performance as the paper and packaging company issued a good set of results. Auto parts manufacturer GKN was also positive following strong results and earnings upgrades. Meanwhile, an underweight position in Barclays proved beneficial as the stock fell due to capital concerns in the sector following Standard Chartered’s rights issue.
“Furthermore, the Company profited from exposure to mining companies Xstrata and Rio Tinto. Both were beneficiaries of higher commodity prices as well as decreasing concerns over Chinese monetary tightening. In the financial sector, the Company’s exposure to life companies such as Aviva and Legal & General added value. These stocks bounced following weakness at the end of 2010.
“The Board is pleased to welcome Jo Dixon as an independent, non-executive Director to the Company. Jo was appointed on 1 May 2011 and is a Chartered Accountant whose career included a variety of roles in the Nat West Group, Finance Director of Newcastle United plc and Commercial Director of Serco Group. Jo is also a director of Worldwide Healthcare Trust plc and Baring Emerging Europe plc.”
Charles Wood OBE, Chairman, Standard Life Equity Income Trust Plc:
“During the period, we started a position in Hays as there was evidence of improvement in the recruitment market. The firm also has strong international growth prospects, and the stock offers a 5% yield. Shares were purchased in Babcock International. The company’s top-line growth looked robust, and it has started to win new overseas contracts.
“In January, the Company added to its position in paper and packaging group Mondi. The firm has issued good results and its dividend is ahead of expectations. We also invested in publisher Reed Elsevier as the company was attractively priced following a period of underperformance. Finally, we bought shares in Close Brothers. The company is benefiting from a very strong competitive position in its niche banking business.
“Sales during the period included building companies Barratt Developments and Bovis Homes, following increasingly negative news on the UK housing market. Soft drinks manufacturer Britvic was also sold after it experienced earnings downgrades that were largely a result of higher raw material costs. A further disposal was retailer Dixons. The company had suffered downgrades on the back of more muted consumer spending. Similarly, we sold Thomas Cook given concerns over the effect lower spending would have on the travel industry.
“Having seen earnings upgrades through the course of 2010, the UK equity market in aggregate has seen continuing earnings upgrades through the first quarter of 2011. The valuation that investors are placing on these earnings has remained low, reflecting scepticism over the sustainability of economic recovery. This is despite earnings estimates being driven by upgrades to top-line growth expectations, which should arguably command a higher rating than cost cutting-driven growth. While the UK equity market remains exposed to swings in macroeconomic sentiment, there is bottom-up support from continuing robust earnings momentum and balance sheet strength, neither of which appear to be priced in at current low valuations. Overall, we remain positive on the prospects for UK equities for 2011.”
Source : Standard Life Press Release
