Fidelity Special Values plc (LON:FSV) has announced its half-yearly results for the six months ended 28 February 2026 (unaudited)
Financial Highlights:
- The Board of Fidelity Special Values PLC declares an interim dividend of 3.49 pence per share, an increase of 3.9% from the prior year interim dividend.
- During the six months ended 28 February 2026, the Company reported an ordinary share price total return of +23.1% and Net Asset Value (NAV) total return of +17.1%.
- Over the same period, the Benchmark, the FTSE All-Share Index, returned +18.9%.
- Financials, select defensive positions and resources among top contributors.
- The Portfolio Managers believe UK market’s defensive sector composition should offer some resilience compared with other regions.
Chair’s Statement
Overview and Performance
This is my first report to you as Chair of the Company, and also the first time since February 2016 that we have included a statement from the Chair at the half-year stage. It is a privilege to have taken on this role, and in an increasingly fast-moving geopolitical and industry environment, my Board colleagues and I felt it would be useful to take this opportunity to provide a more frequent update to shareholders alongside your Portfolio Manager, Alex Wright’s regular interim review.
Your Company has continued to perform well in the period under review, with NAV and share price total returns of +17.1% and +23.1% respectively, compared with the FTSE All-Share Index (Benchmark) return of +18.9%. This is despite the fact that the performance of the UK equity market has continued to be driven principally by the largest companies, with mid-sized and smaller companies, which make up the greater part of your Company’s portfolio, lagging behind. (The FTSE 100 Index returned +20.0% in the six months to 28 February 2026, while the Mid-Cap FTSE 250 Index saw a total return of +11.5%). You can read more about the drivers of performance in the Portfolio Manager’s Review below, but in brief, the contributors to returns have included banks and defence stocks, merger and acquisition (M&A) activity, and not owning some highly valued larger companies such as Diageo and London Stock Exchange Group, which have performed poorly.
It is encouraging to see Alex and his co-Portfolio Manager Jonathan Winton’s value-orientated, contrarian approach continuing to keep up in an environment in which UK equities have again outperformed other developed markets (and particularly the US) in both sterling and US dollar terms. Your Company’s investment strategy has been proven to perform across investment cycles, with not only double-digit annualised returns over one, three, five and ten years, but also excellent returns since launch in 1994, and throughout Alex’s tenure from 2012. The Board continue to have confidence in this disciplined investment strategy, which we believe has increasing relevance in the current uncertain environment.
Dividends
While your Company’s investment approach is focused on long-term capital growth rather than income generation, dividends have historically formed an important part of the total shareholder return. The Board’s policy is to pay dividends twice a year, in order to smooth the dividend payments for the Company’s financial year.
The Company’s revenue return for the six months to 28 February 2026 was 2.48 pence per share (28.02.25: 3.51 pence), and the Board is recommending an interim dividend of 3.49 pence per share (28.02.25: 3.36 pence) to be paid on 22 June 2026 to shareholders on the register at the close of business on 15 May 2026 (ex-dividend date 14 May 2026). This represents an increase of 3.9% on the prior period interim dividend.
Fidelity Special Values has a strong and consistent dividend history, with the Board having maintained or grown the dividend in each of the past 16 years. The Company has substantial revenue reserves (£32m or 9.9 pence per share at end of February 2026) on which we have drawn only once, during the Covid pandemic in 2020. We remain committed to this track record of delivering income alongside capital growth, a record that places the Company towards the top of the Association of Investment Companies’ list of ‘next-generation dividend heroes’.
Discount Management and Share Issuance
Investment trust discounts remain wide, standing at an average of 13.4% on 28 February 2026, compared with 14.1% on 31 August 2025 1 . Against this backdrop it is encouraging to note that your Company’s rating has remained appreciably better than this, beginning the half-year period at a discount to NAV of 3.1% and ending it at a premium of 1.8%.
1 Source: Winterflood Investment Trusts, Refinitiv
Just as your Board seeks to maximise value for shareholders by using share buybacks to limit the discount when supply exceeds demand (and thereby enhance NAV per share), we also look to maintain an orderly market by issuing shares when excess demand pushes the price above the NAV per share. During the period under review, no shares were repurchased. However, with the shares trading at a premium to NAV from late January 2026 until the end of the reporting period, during February the Board was able to reissue all of the shares held in Treasury (1,050,000) as well as 250,000 new shares from its blocklisting. At the latest practicable date of this report, the share price remained at a premium to NAV of 0.6%.
While continued strong performance has undoubtedly helped to maintain demand for your Company’s shares, the Board would also like to note our appreciation of Fidelity’s ongoing efforts to raise the profile of the strategy, and in particular the time that both Alex and Jonathan take to promote the Company in the media and at investor events.
Board Changes
As noted above, I took over as Chair of the Company following the Company’s Annual General Meeting on 11 December 2025, succeeding Dean Buckley, who had served on the Board for 10 years and as Chair since December 2022. My fellow Directors and I thank him for his significant contribution and dedicated service over his tenure and wish him well in his future endeavours. I look forward to building on the strong foundations he and his predecessors have established, and to working with the Board and Fidelity in the interests of all shareholders.
Christopher Casey, who joined the Board in January 2025, takes on my previous roles as both Senior Independent Director and Chair of the Audit Committee. Chris has a strong background in investment trusts and accountancy and will bring rigour and accountability to both roles. We were also delighted to welcome Hamish Baillie to the Board as a non-executive Director at the start of 2026. Hamish brings a wealth of experience in investment trust management and closed-ended fund governance, and his perspective will be a valuable addition to the Board’s deliberations, further strengthening our collective expertise.
Board Strategy Day
In February 2026, the Board held its annual Strategy Day, which provides a valuable opportunity to step back from our day-to-day oversight and consider governance and strategy in a more top-down and forward-looking manner. We undertake a comprehensive analysis of the strengths, weaknesses, opportunities and threats facing the business, which can help to inform the Board’s priorities over the coming year. As part of the day, we met with Fidelity’s risk team to take a deeper dive into the opportunities and threats presented by artificial intelligence (AI), as well as addressing the management of cyber-risk in the broader business. The Strategy Day was also attended by a representative of our new auditor, PricewaterhouseCoopers LLP.
Outlook
Recent developments in global trade policy and the war between the US, Israel and Iran have further elevated ongoing geopolitical tensions and contributed to increased volatility in commodity markets and supply chains, increasing uncertainty around the global economy, and the trajectory of inflation and interest rates on both sides of the Atlantic. However, your Company has weathered many storms across more than thirty years, and we remain confident that Alex and Jonathan’s patient and contrarian approach to identifying unloved and undervalued companies, and their rigorous bottom-up investment process, will continue to deliver attractive performance over the long-term notwithstanding any shorter-term pressures for shareholders. As part of Fidelity, the managers have a strong team behind them, and we as your Board remain committed to robust governance and achieving long-term value for shareholders.
The success of the Company is borne out not only by its investment performance, but also its long-term dividend record, and by the fact that strong investor demand has meant that we have been able to issue new shares and grow the capital base. This was further underlined by the three-yearly continuation vote held at December’s AGM, in which 97.12% of those voting approved the continuation of the Company as an investment trust. I would like to thank all shareholders for their continued support, and I look forward to reporting further progress at the year end.
Claire Boyle
Chair, Fidelity Special Values plc
28 April 2026
Portfolio Manager’s Half-Yearly Review
Performance
In the six month reporting period to 28 February 2026, the Company recorded strong absolute returns with a net asset value (“NAV”) per share return of +17.1% and a share price return of +23.1%, compared to a +18.9% return for the FTSE All Share Index (the “Benchmark”), all on a total return basis. This report seeks to summarise the period, highlight the key drivers of performance and set out the Portfolio Manager’s forward-looking views.
The Company’s NAV underperformance against the Benchmark was primarily driven by the performance divergence between large and mid-cap stocks in the UK market. This was reflected in the FTSE 100’s gain of 20.0% compared with the FTSE 250’s rise of 11.5%. Given the Company’s substantial exposure to mid-cap stocks, this large-cap driven market environment weighed on relative returns, although this was partly mitigated by strong stock selection within large-cap companies.
Market Review
The reporting period for this investment review is 1 September 2025 to 28 February 2026. As a result, the performance review and positioning update relate to this period and therefore precede the events taking place in the Middle East since early March 2026. We have, however, incorporated a forward-looking perspective in the outlook section to reflect more recent developments. As this remains a rapidly developing situation, the investment team’s views are subject to change as events evolve.
UK equities delivered strong performance, supported by attractive relative valuations, diversification by international investors and a gradually improving global monetary backdrop. The period began with cautiousness ahead of the UK Autumn Budget, as fiscal uncertainty weighed on investor sentiment, particularly in domestically focused stocks. Mixed signals over possible revenue measures added to the speculation. However, the final announcement revealed fewer near-term fiscal surprises and reassured markets. Global central banks continued to ease their policy stance, with both the US Federal Reserve and the Bank of England delivering rate cuts before the end of the year.
2026 started on a strong note, supported by an improving growth narrative and continued rotation towards more value-oriented areas of the market. Performance was broad-based, with gains across the market-cap spectrum, led by mid and small-caps. However, this was short lived, as February’s rally was driven strongly by large-cap stocks, given its favourable sector mix and rotation away from artificial intelligence (“AI”) companies. Global geopolitics remained an important theme, contributing to volatility in energy and metals prices. For the UK market this proved broadly supportive, given its sizeable exposure to oil majors and mining companies, which benefited from firmer commodity pricing.
From a sector perspective, market gains were primarily led by basic materials, utilities and health care, supported by a constructive environment for commodity prices, while defensive sectors benefited from earnings resilience and a more favourable growth backdrop. Technology was the only sector to post negative returns, reflecting market concerns around AI disruption, notably in software and information services companies. Against this backdrop, both value and growth segments advanced, but value outperformed by a significant margin. Similarly, large-cap stocks were the strongest performers, as investors favoured greater international revenue exposure, while mid and small-cap stocks underperformed.
Portfolio Review
Over the period, the Company’s NAV delivered strong absolute returns but underperformed its Benchmark.
Beverages company C&C Group declined against a challenging backdrop for the hospitality sector. The company reported results below expectations, primarily due to weaker performance in its distribution channels, reflecting softness in wine and spirits and evidence of customers trading down across product categories. However, its branded business (Tennent’s and Bulmers) delivered robust growth, and the company is actively strengthening distribution channels and product categories to improve profitability.
Elsewhere, shares in staffing companies Hays and PageGroup were a source of weakness. Both companies were weighed down by weak underlying recruitment markets, reflecting caution among both corporates and candidates when it comes to undertaking job searches. Investor concerns have also centred around the potential for disintermediation and job displacement from AI. We believe these concerns are overstated and have yet to see clear evidence that AI has structurally impaired these businesses. Current challenges appear largely cyclical, and we are already seeing signs of improvement in staffing activity in certain markets, such as the US, where AI adoption is the most advanced.
Within the consumer discretionary sector, our holdings in media agency WPP and digital media company Future declined. WPP’s performance has been weaker than expected, as we had believed the company was further along in its turnaround journey following its previous restructuring. The company has since lost meaningful market share, driven by client account losses and a cyclical downturn in advertising spending. Concerns around potential disruption from AI have also weighed on its shares. However, WPP remains an interesting turnaround opportunity and its shares are trading at very attractive levels. The company is under new management and has seen recent improvements in client account wins. Future’s underperformance was driven by a valuation de-rating, reflecting concerns over the impact of AI on its web traffic. The company has taken steps to mitigate this, improving the diversification and monetisation of its content, including a shift towards more direct, owned distribution channels. Its shares are trading on low single-digit multiples, with the valuation underpinned by its price comparison business. The company is highly cash generative and is carrying out significant share buybacks, which is highly accretive to its earnings power.
Stock selection among large-cap companies contributed positively to performance, driven by our lack of exposure to expensive ‘quality’ companies. Several of these companies were impacted by market fears of AI disruption, such as RELX, Experian, Compass and London Stock Exchange Group. Collectively, they witnessed a sharp de-rating from their stretched valuation multiples. In addition, not holding Diageo and 3i Group contributed positively, as both companies came under pressure from weaker earnings, and in Diageo’s case, structural concerns around future demand for spirits.
Integrated utility company SSE was the top owned contributor to relative performance. Its shares rose after it announced a multi-year investment plan focused on regulated networks and renewables. In November, the company unveiled a £33 billion five-year investment programme, including a £2 billion equity raise, as it seeks to upgrade the UK’s regulated electricity networks, bolster its renewables business and strengthen its balance sheet. Geotechnical engineering company Keller also outperformed, supported by a continued run of earnings upgrades. The business has become more streamlined and is benefiting from strong demand linked to data centre activity and infrastructure-related projects in the US.
Gold miners have benefited from the continued shift in central bank reserves away from US Treasuries, as well as strong retail demand for precious metals, both of which underpinned the rally in the commodity price. South Africa-focused gold miner Pan African Resources advanced against this backdrop, alongside delivering strong production updates and the ramp up of its new mine.
Defence remained a key market theme, supporting our holdings in defence contractor Babcock and outsourcing company Serco. Babcock’s highly specialised operations, growing international order book and ongoing self-help initiatives continued to support share price performance. Serco, which has around 40% revenue exposure to defence, gained from securing major contract wins and renewals in both the US and the UK, helping to offset headwinds from the loss of the Australian immigration contract. Elsewhere, the position in Mitie rallied after the company delivered a robust half-year trading update, beating revenue expectations and highlighting strong pipeline momentum. This strength has been driven by growth in energy efficiency and data-centre related projects as well as greater opportunities in the public-sector.
Within the banking sector, Standard Chartered was among the top contributors, following a strong trading update in October 2025 that highlighted robust growth in its global banking and wealth divisions. Not holding a position in HSBC detracted from relative performance. However, we prefer Standard Chartered as its wealth management business starts from a lower base and offers stronger growth prospects.
Portfolio Positioning
We have actively recycled capital from areas of strong performance and leaned into unloved businesses with attractive turnaround potential. While the investment process is driven by bottom-up stock selection, we group the market into four super sectors – financials, resources, defensives and other GDP sensitive companies.
Financials remain our largest absolute sector weight, but this is highly diversified across a variety of sub-sectors, geographies and business models. We maintain a positive view on banks and continue to see value across our holdings. These include emerging market-focused Standard Chartered, domestic lenders Lloyds Banking Group, NatWest Group and Close Brothers, Irish banks AIB Group and Permanent TSB Group Holdings, as well as a couple of smaller banking positions. Over the period, we recycled part of our NatWest holding into Lloyds. Our insurance exposure moderated as we took profits, while the Just Group position acts as a cash proxy following the takeover bid from Brookfield Wealth Solutions. We also selectively added to asset managers Jupiter and Man Group, where valuations looked particularly attractive. Both companies subsequently made further progress in their turnarounds.
Defensive companies generally performed well, and we have opportunistically taken profits in several positions. These included consumer goods company Reckitt Benckiser, tobacco companies Imperial Brands and British American Tobacco, regulated grid operator National Grid and defence-related businesses Babcock and Serco. In contrast, we added to our DCC position. The company has shifted focus towards its core energy business with the disposal of its health care business last year and planned sale of its technology division. While the market has been cautious around the restructuring and the challenges of navigating the energy transition, we believe these concerns are overdone and the company is focusing on its higher return business.
We increased our position in a variety of cyclical areas, where we see attractive valuations and turnaround potential. For example, staffing companies (Hays, PageGroup and Sthree) are trading at trough valuation levels and offer an attractive risk/reward profile over three to five years. Current valuations reflect significant disruption to the businesses, while offering substantial upside should a recovery in hiring materialise. We also see opportunities in consumer-related sectors, alongside housing and construction, where valuations remain depressed and stocks are pricing in significant negativity. Many of these businesses combine attractive stock-specific opportunities with depressed industry volumes, offering multiple catalysts to support a turnaround. We exited low-cost carrier Ryanair following strong performance, as the investment thesis had largely played out. Similarly, we sold Rolls Royce after strong execution in its civil aerospace business and a significant improvement in margins, delivered strong share price performance which led to more demanding valuations levels.
Within resources, our underweight position increased as the basic materials sector sharply outperformed, notably precious metals and mining companies. Against this strong performance backdrop, we trimmed our two small gold mining positions and exited two copper miners. While we remain underweight large-cap miners, reflecting our negative view on iron ore, we added to our Glencore position, supported by its attractive commodity mix and our constructive long-term outlook for copper. We also hold Kazatomprom, the world’s largest uranium producer, which benefits from its low-cost position and favourable supply and demand dynamics. The Company holds around 4.5% in oil companies, representing a meaningful underweight relative to the UK benchmark and reflecting our cautious medium-term outlook and sector valuations. Our largest position is French-listed TotalEnergies, which remains our preferred oil major compared with UK peers.
Use of Gearing
We have continued to use contracts for difference (CFDs) to gear the portfolio’s long exposure and eliminate some of the currency exposure for those holdings listed outside of the UK. Overall, the Company’s net gearing increased from 5.4% at the beginning of the period to 8.5% at the end of February 2026.
Outlook
We remain positive on the long-term outlook for UK equities. UK valuations continue to trade at meaningful discounts to other major regions – both on absolute price to earnings multiples and after adjusting for structural sector differences, such as the heavy weighting of technology in US indices. The UK still offers many pockets of value, particularly among smaller and mid-sized companies.
There were early signs of an economic inflection, particularly across industrial and consumer-facing sectors that have faced a prolonged period of weakness. However, developments in the Middle East (as at 30 March) have clearly added complexity and increased near-term uncertainty. The duration of the conflict remains a key focus for markets, given its impact on oil prices, inflation, interest rate policy, growth expectations and broader risk sentiment. On a relative basis, the UK market’s defensive sector composition and meaningful exposure to health care, utilities, consumer staples and oil majors should offer some resilience compared with other regions.
As in previous periods of uncertainty, we are spending significant time engaging with companies to understand how current conditions are affecting them and the resilience of balance sheets. We are closely monitoring developments and leveraging Fidelity’s extensive analyst network, both globally and across industries, to see how wider trends could impact the portfolio. Our focus remains on bottom-up fundamentals, with positioning decisions driven by valuations and contrarian investment opportunities, rather than macro-economic events.
Another recent development has been increased volatility linked to AI. Companies perceived to be sensitive to AI disruption have sold off sharply. Markets have indiscriminately punished anything with even indirect AI exposure, often without clear evidence of structural impairment. We believe this environment increasingly tilts in favour of value investors and plays to Fidelity’s strengths in fundamental research. Companies trading on rich multiples leave little margin for error. When investors assume a company’s monopoly advantage will endure, even a modest shift in competitive dynamics, including the risk of AI-driven disruption, can justify a meaningful de-rating. We have seen this dynamic in information services and software businesses, where valuations have rightly fallen from very high levels. However, in most cases they still remain expensive, although there are areas of opportunity. Generally, the outlook for many industries is less predictable and businesses regarded as having unassailable moats or monopoly positions may not enjoy the same dominance in the future.
We avoid companies where their stretched valuations rely on long-term certainty. Instead, we focus on attractively valued businesses where the market has overreacted to perceived AI threats and where balance sheets provide strong downside support. The low valuation multiples we pay for stocks means that we do not need to take a decisive view on the outlook beyond the next ten years. We also look for cheap, underappreciated beneficiaries – companies with genuine exposure to structural change that the market has yet to fully recognise, such as outsourcing company Mitie, which supports the design and delivery of data centres. Integrated utility company SSE also benefits from AI-related growth through higher need for electricity grids and renewable energy demands.
We continue to believe that market conditions favour our value contrarian investment style. When uncertainty is rife, this typically results in more opportunities to pick up very attractively valued stocks. The large divergences in performance between different parts of the market create good opportunities to make attractive returns over a three-to-five-year view. The portfolio benefits from a favourable upside/downside profile and our holdings trade at a meaningful discount to the broader UK market, despite having the potential for robust earnings growth, strong returns on capital and relatively low levels of debt. This quality profile reinforces our confidence in delivering attractive long-term returns for investors.
Alex Wright
Portfolio Manager
28 April 2026
