Edinburgh Investment Trust reports positive returns, raises dividend

(Sharecast News) - Edinburgh Investment Trust reported positive annual returns and raised its dividend by 11.1% on Thursday, although it underperformed the wider UK equity market after a difficult year for parts of its portfolio.

The FTSE 250 company said its net asset value total return was 7.2% for the year ended 31 March, while its share price total return was 8.5%.

That compared with a 21.5% return from the FTSE All-Share Index.

The share price stood at 773p at the year end, up from 740p a year earlier, while the discount to net asset value narrowed to 8.6% from 9.4%.

Net asset value, with debt at fair value, rose to 846.04p per share from 817.16p.

Ordinary shareholders' funds fell to £1.06bn from £1.13bn, reflecting share buybacks during the year.

The board proposed a final dividend of 8.4p per share, taking total dividends for the year to 32.0p, up 11.1% from 28.8p and ahead of UK inflation of 3.3%.

Revenue return per share increased 6.3% to 26.6p.

Chair Elisabeth Stheeman said the trust's returns over the year were disappointing relative to the benchmark, despite being positive in absolute terms, and had affected its three- and five-year performance.

She said underperformance reflected three main factors: share price weakness in holdings perceived by the market to be losers from artificial intelligence, operational underperformance in a small number of holdings, and being underweight in some larger value-oriented companies.

However, Stheeman said performance since Liontrust began managing the portfolio in March 2020 remained encouraging.

Over that period, the trust's annualised NAV total return was 13.9% and its share price total return was 15.0%, compared with 13.6% for the FTSE All-Share.

Edinburgh ranked fourth among 17 UK equity income peer investment trusts over the same period.

The company bought back 12.67m shares during the year, equivalent to 8.8% of shares outstanding, which enhanced NAV by 0.7%.

Net gearing, with debt at fair value, stood at 5.8%.

Portfolio manager Imran Sattar said the portfolio had been biased towards quality growth stocks over the past year, which proved a headwind as value-oriented parts of the UK market performed strongly.

He said several holdings, including Rightmove, Autotrader and Baltic Classifieds, had suffered from concerns that AI could disrupt capital-light platform businesses, although the manager believed the market had mischaracterised them as "AI losers".

Sattar said notable purchases during the year included de-rated data and analytics businesses expected to benefit from AI, such as additions to London Stock Exchange Group, RELX and Sage, and a new position in Softcat.

The trust also added to Renishaw and Oxford Instruments, which Sattar described as specialised instrumentation companies facing short-term cyclical weakness but attractive long-term structural growth opportunities.

New positions were also taken in Marshalls and Ibstock, both described as lower-valuation, cyclically depressed UK construction and repair, maintenance and improvement stocks with turnaround potential.

Sales during the year included Thermo Fisher Scientific, BAE Systems and a reduction in Whitbread.

Sattar said the trust remained focused on bottom-up stock selection and building a diversified portfolio across the style spectrum.

He said the managers had become more balanced in style positioning, while retaining a quality growth bias given macroeconomic and geopolitical risks.

"We continue to identify many opportunities to invest in high quality businesses in the UK at attractive valuations," he said.

"We remain focused on bottom-up stock selection and constructing a diversified portfolio to deliver attractive returns over the long term."

At 1140 BST, shares in Edinburgh Investment Trust were down 0.63% at 788p.

Reporting by Josh White for Sharecast.com.

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Edinburgh Investment Trust PLC