April was a good month for the Trust on an absolute basis and relative to its FTSE All-Share benchmark. The Trust’s net asset value rose 6.4%, relative to a 4.3% rise in the FTSE All-Share and a 4.8% rise in the AIC UK Equity Income Sector.

Among the best performers during the month was engineer IMI, which reported stronger than expected organic sales growth during the first quarter, as well as higher longer-term margin targets across the business. Vehicle hire firm Redde Northgate also performed well on the expectation that as the UK comes out of lockdown demand for their flexible hire vehicles will increase. The drivers of underperformance during the month were predominantly being underweight large index constituents that performed well, including HSBC and AstraZeneca (which rose 7.0% and 6.5% respectively in April). Specialist materials designer and manufacturer Morgan Advanced Materials also underperformed on no company-specific news, although there are concerns across a number of industrial companies of input cost pressures and supply chain outages causing disruption. We continue to hold a sizeable position on the view that management cost savings during the course of the pandemic are underappreciated and will lead to higher margins in the future than the business has generated historically.

We have now seen first quarter trading updates for much of the portfolio and the progress is broadly encouraging. For example, the banks held have largely surprised positively and in some cases are beginning to write back a portion of the material loan loss provisions taken last year. The industrial companies held are also (broadly) seeing a pick-up in organic growth, although there remain pockets of weakness, such as civil aerospace, and some supply chain outages that are proving disruptive in some markets, such as automobiles. Over the last month trading activity within the portfolio was quite muted as we carefully monitor the progress of the domestic and global economic recovery.



Net asset value (NAV) - The total value of a fund's assets less its liabilities.