The £378.6m Dunedin Income Growth trust has sold its positions in children’s retailer Mothercare and media conglomerate Daily Mail and General Trust in recent months.
Writing in the trust’s annual report, manager Jeremy Whitley says the decision to sell Mothercare in the second half of 2011 was made after “a good degree of soul searching” and based on the problems created by the company’s high operating leverage and large pension and lease base.
“Mothercare produced a series of disappointing trading updates as, despite the rapid growth in its international units, its core UK business came under significant pressure,” the Aberdeen manager explains.
“This was caused by tighter household budgets as well as more worrying structural concerns in the form of much more intense competition, especially in the online arena, where the company had failed to keep pace with the changes in consumer behaviour.”
Whitley had added to his position in Mothercare in June last year, when he took advantage of share price weakness in this stock.
The manager also exited the position in Daily Mail and General Trust last month, “given concerns over the structural challenges facing the company’s traditional operations”. He had also added to this stock in June 2011.
The fund’s annual report highlights Tesco as another holding that has detracted from returns after the supermarket posted “lacklustre” Christmas sales figures and a flat profit outlook after planning increased investment in its store base. The trust still holds the stock.
However, the report also notes some “robust individual company performances” over the year, drawing attention to power transmission network National Grid, publisher Pearson and oil and gas services company John Wood Group.
The results show the Dunedin Income Growth trust returned 2.9% in terms of net asset value per share over 2011, outperforming the FTSE All-Share Index benchmark which decreased by 0.3%.
Board chairman John Scott also announced that he would be retiring and will not seek re-election at the trust’s annual general meeting later this year. Scott will be replaced by Rory Macnamara.