Mercantile Investment backs UK companies as interim revenue grows

Mercantile Investment Trust PLC on Thursday said the investment case for medium and smaller UK companies remains strong despite challenging conditions, as the trust outperformed its benchmark in the first half.

The London-based investment trust said net asset value per share rose 8.2% to 295.7 pence at July 31, up from 273.4 pence a year earlier.

Net asset value total return was 5.6% in the six months to July 31, compared with a 3.9% return for the company's benchmark, the FTSE All-Share Index excluding the FTSE 100 and investment trusts.

Primary contributors outlined by the company included Softcat PLC, whose strong financial performance benefited from its participation in Rosebank's capital raise, and Computacenter PLC, which benefited from strong technology demand. Mercantile also highlighted Hill & Smith PLC, the infrastructure engineer; Lion Finance Group PLC, the banking group; and Balfour Beatty PLC, the construction firm.

Mercantile said UK housebuilder Bellway PLC, which on Tuesday cautioned that economic uncertainty and higher mortgage rates were constraining customer demand, was a key detractor during the period. Other detractors included Serco Group PLC, Telecom Plus Group PLC and 3i Group PLC.

The company said medium and smaller UK company stocks posted respectable returns during a period marked by increased uncertainty, as the conflict in the Middle East raised fears of higher inflation. It said UK equities were supported by ongoing inflows despite further economic turbulence caused by Andy Burnham's successful leadership bid.

Mercantile declared a second quarterly dividend of 1.60 pence per share, up 3.2% from 1.55 pence a year earlier.

Looking ahead, Chair Rachel Beagles said: "The investment environment looks set to remain challenging for several reasons, most notably the risks to inflation and interest rates posed by ongoing Middle East tensions.

"In addition, apprehension about the new prime minister's first budget is likely to weigh on business and consumer sentiment. Nonetheless, the investment case for UK medium and smaller company stocks is still firmly in place. The board remains convinced that investing in quality businesses in growing end markets, at compelling valuations, will continue to generate attractive returns over the long term."

Beagles said the relatively low valuations of medium and smaller UK companies should encourage international investors. She predicted that the recent surge in merger and acquisition activity would continue, with these companies potentially benefiting from takeover interest because of their relative affordability.

"Despite a challenging backdrop, the investment case for UK medium and smaller companies remains firmly in place - and valuations are compelling," Beagles added.

Shares in Mercantile were up 0.2% at 273.95 pence per share on Thursday morning in London.

Copyright 2026 Alliance News Ltd. All Rights Reserved.