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Polar Capital Global Healthcare Trust - Results and dividend for the year ended 30th September



Polar Capital Global Healthcare Trust (PCGH.L, FTSE Small Cap, Mkt cap. £378m, 318.5p and 7.5% of the Funds’ Portfolio, 7.5 per cent target.  

 

Yesterday, it released its results for the year ended 30th September. The full release can be found HERE.

 

It declared a second interim dividend of 1.2p (ex-dividend 1st February 2024), which makes 2.2p for the year, up 4.8 per cent on the previous year.

 

Conclusion: It is good that it outperformed its benchmark -more of the same, please. What was not so good was the timing of my purchase in February, which can be seen in the chart below. It is down 5.0 per cent since I bought the position. My timing could have been better, but this is a long-term holding, and I expect that in ten years, it really won’t have mattered much. I think there are many compelling reasons why one should have exposure to healthcare. Global healthcare expenditure is likely to continue growing due to ageing populations in the West (requiring greater medical interventions), technological advances providing solutions to current health problems, growing populations in developing nations, and developing nations becoming wealthier. This trust seems as good a way as any to gain exposure across the spectrum of health expenditure. The long-term chart from 2010 looks to be trending nicely from the bottom left to the top right, with the fall-off this year (bottoming on 7th November) looking like the other ten or so pullbacks over the last thirteen years. I’m not really in this trust for dividends (it yields only 0.7 per cent), but they help the total return.  It currently stands on an 8.0 per cent discount to NAV (in 2019, it briefly stood at parity). I am a Happy Holder, with a 7.5 per cent position in the Funds’ Portfolio.

 

Chair’s statement.

 

Dear Shareholders,

 

On behalf of the Board, I am pleased to provide to you the Company's Annual Report for the year ended 30 September 2023.

 

Performance

 

The Company has performed well this year, ending the year 3.02% ahead of its benchmark (MSCI ACWI Healthcare Index, Total Return), performing well against the peer group and returning a NAV per share total return of 4.21%. This was despite the year under review continuing to be a difficult period for markets with challenging macro-economic conditions and geo-political events, which have sadly continued into the current year.

 

Whilst we are now seeing inflation and interest rates somewhat stabilising, the longer term effects of this continue to be felt and we have seen discounts across the investment trust sector in general widen considerably. At the financial year end the discount was 7.7% compared to the prior year figure of 5.6%.

 

The outperformance was driven by strong stock selection, largely out of the focus on the three key themes highlighted in last year's Annual report and Financial Statements, namely: rising utilisation, disrupting the delivery of healthcare and consolidation.

 

Further detail is provided within the Manager's Report.

 

Outlook

 

Whilst the healthcare sector has been somewhat out of favour against the broader market, fundamentals remain extremely strong with valuations still very attractive. There is much to be excited about, as demonstrated during the year by the delivery and announcement of ground-breaking medical developments e.g. in Alzheimer's research and the introduction onto the market of highly effective weight-loss medications.

 

The Managers believe that while the themes that generated performance last year will still be relevant, there are three further areas which may drive shorter term returns: innovation, the growing use of technology, such as AI and robotics, and Emerging Markets. Further detail is provided in the Manager's Report.

 

We believe all of these factors support our optimism for continued strong performance for the Company during the current financial year.

 

Dividends

 

The Company's focus continues to remain on capital growth and consequently dividends are expected to represent a relatively small part of Shareholders' total return. The Company has a policy to pay two small dividends per year.

 

In August 2023 the Company paid an interim dividend of 1.00p per ordinary share. The Board has declared a further interim dividend of 1.20p per ordinary share payable to shareholders on the register as at 2 February 2024. This will bring the total dividend paid for the financial year under review to 2.20p per ordinary share, a small increase on the previous financial year.

 

Share Capital

 

The Company has 121,270,000 ordinary shares in issue as at the date of writing and no shares have been bought back or issued during the financial year under review. The Company's share price on 30 September 2023 was 319.00p (2022: 315.00p). The Company's market capitalisation at the financial year end was £386.9m (2022: £382.0m). The Board has reconfirmed the authority given to the Manager to use discretion to purchase shares in the market when deemed appropriate to do so.

 

Subsidiary Undertaking

 

The Company is parent to a wholly owned subsidiary, PCGH ZDP Plc. The subsidiary was created as part of the Company's restructure in 2017; the purpose of the subsidiary is to issue zero dividend preference ("ZDP") shares and provide a loan to the parent in the form of structural gearing. The subsidiary has a fixed life whereby the loan will be repaid and the ZDP shares will be redeemed in June 2024 at which time the entity will be liquidated. The Company remains in a strong position to repay the outstanding loan amount at the time of redemption. Options for repayment are either through new alternative gearing facilities or by raising cash via the sale of stock within the portfolio. The Company has no current intention to refinance the loan. Further information on the redemption process is provided on the Company's website www.polarcapitalglobalhealthcaretrust.co.uk.




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