Wednesday, 28 May 2014
Edinburgh IT - Full Year Results
1. an increase of the Net Asset Value per share by more than the growth in the FTSE All-Share Index; and,
2. growth in dividends per share by more than the rate of UK inflation.
20% of the portfolio comprise overseas listed holdings including Swiss Pharma, Roche and US tobacco firms Reynolds and Altria.
Edinburgh has been one of the cornerstones of my income portfolios, held in both Sipp drawdown and ISA. There has been quite a bit of share price volatility following the announcement last October that Neil Woodford’s was leaving to set up his own investment boutique. After some deliberation, the independent board decided to stay with Invesco and appointed Mark Barnett to take over as lead manager from end January 2014. It has today published its results for the full year to 31st March 2014 (link via investegate).
The Company's net asset value, including reinvested dividends, rose by 12.5% during the year, compared to a rise of 8.8% (total return) by the FTSE All-Share Index. The share price return was 8.0% due to the widening of the discount to NAV.
The board have proposed a final dividend of 8.5p making a total of 23.5p for the full year - an increase of 3.1% on the previous year. The current yield is 3.9% based on the current share price of 602p.
The new manager is departing from the overweight positions in big pharma favoured by Woodford who liked to hold around 18% of the portfolio between GSK and AZN. These two now account for under 10% whilst the weighting to financials has been increased. The top ten holdings now account for just 45% of the portfolio - down from Woodfords 60%+. Additions to the portfolio include Babcock, Beazley, N. Brown, CLS, Compass, KCOM, LSE, Reed Elsevier, Thomas Cook and Vectura. Tobacco shares still feature prominently and account for around 18% of the portfolio.
In his report, Mark Barnett said : “Under my management the portfolio will continue with a strong preference for companies that have proven ability to grow revenues, profits and free cash flow in what is a fairly low growth world. We favour management teams that are fully cognisant of the need to deliver sustainable, long term, dividend growth. It is this type of investment opportunity that forms the majority of the portfolio and that I believe offers the potential to deliver good risk adjusted returns over the long term.”
Shareholders have benefited from a reduction in charges - £12.5m compared to £18.2m the previous year. This is largely due to a reduction in the performance fee. For the coming year, performance fees have been abolished and there will be a flat fee of 0.55%. TER for the year was a more modest 1.0% (2013 1.6%).
Shareholders should also benefit from the significant savings in borrowing costs as the £100m 11.5% debenture is replaced from next month.
I took the opportunity to top up my holding in my ISA last November - all in all, I am happy to continue holding Edinburgh with its new manager and lower charges and borrowing costs.