Final Results
Edinburgh Investment Trust PLC
28 May 2024
The Edinburgh Investment Trust plc
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 31 MARCH 2024
28 May 2024 - The Directors of the Edinburgh Investment Trust plc ("the Company") have today announced the annual results for the year ended 31 March 2024.
Highlights
· Net asset value ("NAV") per share (with debt at fair value) on a total return basis increased by 13.4%, exceeding the 8.4% return on the FTSE All-Share Index. The share price total return was 8.9%
· Final dividend proposed of 6.9p per share. Dividends for the financial year +3.8% compared with the previous year, equivalent to a yield of 3.9%
· Net gearing at 31 March 2024 of 3.1%, compared with 4.7% in the previous year
· New fee agreed with the Manager, resulting in a pro-forma 11% reduction in the annual management fee
· Despite positive performance, share price discount to NAV widened to 11.5% from 7.5% reflecting widening discounts in the sector
Elisabeth Stheeman, Chair, said: "When comparing the Company's performance against its two key objectives - increasing the NAV per share in excess of the FTSE All-Share Index and growth in dividends per share in excess of inflation - the year to 31 March 2024 has been a positive one. The NAV total return rose by 13.4% compared to 8.4% for the index. Despite the challenging backdrop for UK equities, a double digit return for the Company is an excellent outcome. Dividends are set to rise this year by 3.8%, compared with CPI inflation of 3.2%.
"This year has also seen an internal change of the Liontrust portfolio management team - from James de Uphaugh and Chris Field to Imran Sattar and Emily Barnard. The Board would like to express their sincere thanks to James and Chris and wish them well in their retirement. The Board is equally excited to have Imran and Emily in place as the new management team.
"Many UK equity market constituents in the Company's portfolio continue to stand at a valuation discount to their international peers. These valuation anomalies are being exploited by the companies themselves, through share buy backs and also from time to time by takeovers by third parties. Whether through these types of actions or through greater demand for UK equities over time, the Company is well placed to continue to meet its key objectives and generate attractive returns for shareholders."
Imran Sattar, Portfolio Manager, said: "It is a great honour to take over as the management team of the Company. Emily and I were fortunate to work closely with James and Chris, and we look forward to building on the strong foundations and excellent track record that they put in place.
"UK equities are out of fashion, for a host of well-rehearsed reasons. Quite what the catalyst for an improvement in fortunes will be is hard to say, but strong businesses generating attractive returns don't go unnoticed for long. We believe the UK equity market offers a compelling universe of businesses at attractive valuations. Further, some of the very best investment opportunities arise when sentiment is poor. It strikes us that we are in one of those times now.
"Over the financial year, a diversified set of stocks has driven the portfolio's excess returns. Key outperformers included Marks & Spencer, BAE Systems and Centrica. These three stocks are all excellent examples of businesses that were purchased when out of favour, and which have enjoyed significant share price appreciation as their operating models have improved.
"We are mindful of changing expectations for the path of interest rate normalisation, as inflation remains more entrenched than expected. This period of heightened monetary policy uncertainty coincides with a period of elevated geopolitical risks - making a flexible and pragmatic approach important. We expect risks to remain high, with 2024 seeing a significant number of elections globally - most notably the US, India, and the UK. China continues to face growth headwinds as the economy seeks to transition from investment-led to consumption-led growth.
"With the elevated uncertainty, our focus remains on owning businesses where growth is helped by exposure to structural growth tailwinds, or where there is a change in industry structure or company strategy which will enable future profit growth. Our confidence in the portfolio comes from owning strong businesses, managed by intelligent management teams executing on their business plans to drive total shareholder growth."
Note key performers:
PORTFOLIO RETURNS AND ATTRIBUTION
The portfolio that James and Chris had in place this time last year has delivered a fourth consecutive year of NAV outperformance. Over the financial year, a diversified set of stocks - in keeping with the aim of the investment process - has driven the portfolio's excess returns. Key outperformers included Marks & Spencer (Retailers), BAE Systems (Aerospace and Defence) and Centrica (Gas, Water and Multi-Utilities). These three stocks are all excellent examples of businesses that were purchased when out of favour, and which have enjoyed significant share price appreciation as their operating models have been restructured and improved. All remained prominent holdings at the year end. Other significant contributors to excess returns came from avoiding large index constituents whose share prices fell, such as Diageo (Alcoholic Beverages), Reckitt Benckiser (Consumer Goods), Prudential (insurance) and British American Tobacco.
On the negative ledger, the holdings in Anglo American (Industrial Metals and Mining) and RS (Industrial Support Services) were weaker, making them the two largest stock-specific headwinds. We also missed out on two index constituents that performed well, namely Rolls-Royce (Engineering/Aerospace) and RELX (Media).
https://www.investegate.co.uk/announcem ... ts/8224097I hold EDIN, along with LWDB, DIG and SHRS in the same sector.