We enjoy the exercise of reviewing the annual reports for our companies

July 2024

We enjoy the exercise of reviewing the annual reports for our companies. It’s always worthwhile seeing what it is that management wants shareholders to hear – with the understanding that this will be given a positive spin. Perhaps more importantly, it’s useful to see what the auditors feel comfortable signing off – for the financial statements, for the dry-but-important notes to the financial statements, and also for any “Key Audit Matters”, the areas that are material yet involve a higher level of subjectivity.

Take Vtech’s annual report this year as an example. It’s a clean report, showing a relatively simple business with understandable financial statements (a highlight being the debt-free balance sheet), and limited comment from the auditors. This backs up our investment thesis nicely – the products are well-positioned in their markets, make good returns in profits and cash flows, and the company pays out almost all of these returns in dividends. This leads to a 9% (covered) dividend yield. Such simplicity is compelling.

Recent results from other companies highlight similar stories: Metropole Television’s results show a company paying a 10% dividend with net cash on the balance sheet and a stable profit history. Equinor also recently reported robust results, only increasing our confidence in a company which has paid out almost 20% of the current market cap in shareholder returns in the last year.

Finally, we are also pleased to attach the latest fund factsheet.