HALF-YEARLY FINANCIAL REPORT 2024 - Flipbook - Page 6
4 / STRATEGIC REPORT / THE EDINBURGH INVESTMENT TRUST PLC
CHAIR’S STATEMENT
PERFORMANCE
ELISABETH STHEEMAN
CHAIR
Your Company has delivered a Net Asset Value
(“NAV”) total return of 8.3% over the period and
a share price return of 10.8%. These compare with
6.1% for the comparator FTSE All-Share Index.
The share price return was higher than the NAV
return, as the discount narrowed. I discuss the
discount, and how we are addressing it, below.
The Board declared a first interim dividend of
6.90p per share in October this year, up 3.0%
from 6.70p at the equivalent point last year and
exceeding CPI inflation of 1.7%.
The majority of the NAV outperformance has
come, as we would expect, from stock selection.
The most significant contributions came from
NatWest, Tesco, Baltic Classifieds and Auto
Trader, all of which produced returns in excess
of 20% over the period. The latter two are
particularly welcome as they were bought as
part of the portfolio changes that Imran Sattar
made upon becoming your Portfolio Manager
in February. Imran and the Deputy Portfolio
Manager, Emily Barnard, expand on the market
backdrop and performance in their section of
this report.
Longer-term performance should be assessed
since March 2020, the point at which Liontrust’s
Global Fundamental team (led by Imran, and
before him his colleague James de Uphaugh)
began managing the Company. Over these four
and a half years, the cumulative NAV total return
is 103.8%, versus a rise in the FTSE All-Share
Index of 69.5%. The share price total return is
111.7%, ahead of the NAV return as the discount
has narrowed since March 2020. More generally,
over one, three, five and ten years, the financial
performance of your Company has been strong:
both in absolute terms and compared against
the FTSE All-Share Index, and both in NAV and
share price terms.
DIVIDEND
As outlined above, the Board declared a first
interim dividend of 6.90p per share in October
this year, up 3.0% from 6.70p at the equivalent
point last year. Underlying this, these interim
accounts record six-month income comprising
dividends and interest of £21.5m. This compares
with £20.9m over the same period last year.
After deducting an allocation for expenses
(mainly investment management fees, interest
on debt and other costs), net income for this
period is £19.6m (2023: £18.9m). As was the
case last year, we expect the level of dividends
to shareholders to modestly exceed this level
of income – and we expect a similar outcome
for the financial year as a whole. As a Board
we are comfortable with this position which
will result in a small reduction to our very
substantial balance sheet reserves.
BORROWINGS
There have not been any changes to the debt
profile of the Company. We continue to operate
with £120m of debt in nominal terms which is
c.10% of NAV. Net gearing measured at fair
value is a more modest 2.1% of NAV – this is
a function of the fair value of the debt being
lower than the par value, and of the portfolio’s
cash balance. The Company’s debt has an
average of 23 years to run and a blended cost
of a fixed 2.4% per annum. This debt remains
a source of long-term competitive advantage,
and helped boost NAV returns in this period as
the value of the portfolio rose.
SHARE PRICE DISCOUNT TO NAV
The Company’s shares continue to trade at
a discount. This narrowed slightly over the
period, moving from 11.5% to 9.7%. At the
time of writing, it is 10.9%. In addition to the
absolute level of the discount, we also monitor
the discount relative to peers, as well as
against the Company’s own history. Over the
period we bought back 2% of the Company’s
shares, buybacks should help manage the
volatility of the discount, and will enhance
NAV for remaining shareholders. In addition to
share buybacks, we have other tools to help us
“crack the discount nut”. These include further
raising the profile of the management team
and their investment results and promotion of
the Company through a range of marketing
initiatives.
