Complete your registration today for a chance to win £50 John Lewis vouchers in our weekly draw Enter now
Josef Licsauer
View profile
Updated 22 Nov 2023
Save Article Download

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Edinburgh Investment Trust. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

  • Edinburgh Investment Trust (EDIN) has published its half year results covering six months to the end of September 2023. Over this period, the trust saw NAV total returns of 4.5% and a share price total return of 3.3%, which compares favourably to the FTSE All-Share Index total return of 1.4%.
  • Performance since James de Uphaugh and Chris Field became managers in March 2020 has been impressive, with NAV total returns increasing 73.3%, comfortably ahead of the 49.5% total return from the FTSE All-Share.
  • Over the period, the fair value of EDIN’s debt, which now has an average of 24 years to run at a blended cost of 2.4%, fell in line with bond markets, by roughly £10m, boosting the NAV by roughly 0.9%. Net gearing sat at 4.1% at the end of the period.  
  • The board declared a first interim dividend of 6.7p per share, compared to 6.4p per share the previous year, representing an increase of 4.7%.
  • Both James and Chris have announced their retirement from the industry, though James will continue managing EDIN until February 2024. From then, Imran Sattar, another seasoned investor at Liontrust, will become the lead manager of EDIN, with the message moving forward being one of continuity.
  • Chair of the board Elisabeth Stheeman said: “Once in place as the company’s portfolio manager, Imran will continue to apply the same flexible investment process that has been the hallmark of the portfolio since March 2020.” She also noted: “It is pleasing to be able to record that the NAV return now also exceeds that of the index over five and ten years, albeit modestly in the case of the five-year return. The majority of this outperformance has come, as we would expect, from stock selection.”

Kepler View

These are good results for Edinburgh Investment Trust (EDIN), with NAV total returns comfortably ahead of the index, contributing to the strong track record since the change of management in March 2020.

Over his time as manager, James placed a particular emphasis on total return, seeking out companies offering both a growing dividend over time and some capital growth, preferring not to prioritise one over the other or get stuck chasing a higher yield. This is something Imran is set to continue with when he takes over. James also didn’t want to be wedded to one single investment style, instead preferring a balance of stocks that offer above-average earnings potential as well as some latent recovery, something that underpins his total return approach. As the chair notes above, a primary driver of the outperformance has come from the managers’ approach to stock selection and is evidenced by a number of different stocks, with multiple drivers of returns, contributing to returns, including Centrica and Marks & Spencer.  

Something that sets EDIN apart from peers is its exposure to mid-cap companies. While these companies offer more sensitivity to the market versus their larger counterparts, they tend to have better growth prospects, which lends itself to the managers’ total return ethos. It also further reflects the managers’ desire for businesses from all areas of the market to contribute to returns, not just the larger, well-established names everyone is familiar with. Moreover, having more exposure further down the market cap scale meant the portfolio wasn’t invested in some of the larger names that fell over the period, including Diageo and British American Tobacco. These omissions were supportive factors of outperformance.

Over the period, the board announced an interim dividend of 6.7p per share, which represents an increase of 4.7% from the previous year. Underlying earnings did fall over the period, but the year prior they welcomed several special dividends which helped boost the total income earned. While EDIN’s historical yield, roughly 4.1%, is not one of the highest in the sector, we would argue it’s in a more sustainable position versus history and offers potential for good long-term dividend growth, which should help deliver a stronger income stream, along with capital growth.

Overall, we think EDIN offers investors exposure to good quality companies, across a diverse range of sectors with the potential for earnings growth which should feed into rising dividends. In our view it’s well positioned to be a core holding for investors seeking a balance between capital growth, current income and income growth, and the managers’ focus on identifying multiple drivers of growth should help reduce the risk of the portfolio, which we think is positive given the uncertain nature of the current economic backdrop. If the strong run of performance continues and dividends continue to grow year-on-year, then we also think there is clear potential for the discount to narrow, which could also provide an extra kicker to shareholder returns.

Press continue to read the full article...

Kepler Trust Intelligence provides research and information for professional and private investors. In order to ensure that we provide you with the right kind of content, and to ensure that the content we provide is compliant, you need to tell us what type of investor you are.

Continue

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.