Thursday, 21 May 2015

Edinburgh IT - Final Results

Edinburgh is one of the largest investment trusts on the market with assets of over £1.3bn. The trust invests primarily in UK securities with the long term objective of achieving:

  •  an increase of the Net Asset Value per share by more than the growth in the FTSE All-Share Index; and,
  •  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 portfolio held in both Sipp drawdown and ISA. It has today issued its results for the full year to 31st March 2015 (link via investegate).

The Company's net asset value, including reinvested dividends, rose by 16.5% during the year, compared to a rise of 6.6% (total return) by the FTSE All-Share Index..

2 yr chart EDIN v FTSE All Share

The board have proposed a final dividend of 8.6p making a total of 23.85p for the full year - an increase of just 1.5% on the previous year which is a little disappointing. However, I have no complaints with an overall return some 10% above the FTSE All Share.

Due to the 15% increase in the share price over the past 12 months, the yield has now fallen to 3.45% based on the current  price of 690p.

In his report, new manager Mark Barnett said :
"The recent performance of the UK equity market has seen further strong positive returns, with the FTSE All-Share Index recently hitting a new all-time high, which makes the near term outlook more subdued.

The continued rerating of equities primarily as a result of the policies of central banks has resulted in boosting asset values to the point where the market looks more fully valued than for many years. This high level of valuation coupled with a low level of earnings growth is the primary risk to the current level of share prices".

Shareholders have benefitted from a reduction in charges - £7.6m compared to £12.5m last year and £18.2m the previous year. This is largely due to removing the performance fee. This is the first year that performance fees have been abolished and replaced with a flat fee of 0.55%. Ongoing charges for the year was a more modest 0.61% (2014 1.0%).

Shareholders have further gained from the significant savings of ~£8m in borrowing costs as the £100m 11.5% debenture was replaced from last June.

All in all, a very pleasing outcome - share price up 15%, a modest increase in the dividend and a big reduction in charges. I am happy to continue with this trust for the duration.

4 comments:

  1. Dear diyinvestor uk,

    An excellent core holding investment trust to have.



    Having read your post I checked up on my holding. I purchased it on the 14th December 2009 and the price to date has risen 85%.

    

Could I have done that with everyone of my individual share selections? Generally no, so I am content.

    Regards

    Louis Gunn

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    1. Certainly a good one to hold in the 'basket'. I first acquired this in my SIPP in 2010 and decided to add to my ISA the following year. I topped up when the sp dipped following the Neil Woodford departure news.

      As you say, it would be difficult to match its performance - although on my part it is not for lack of trying! Mark Barnett seems to be doing a decent job as the new man at the helm.

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  2. Sounds like a great year all round, not least the abolition of the performance fee. Could the board have made that the price for retaining Invesco Perpetual after Woodford's departure? If so, an example of one advantage of an IT over a Unit Trust--the Board is there to act in the interests of investors. For unit trusts there is nobody to represent the fund investors.

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    Replies
    1. You could well be right FI, I think the decision was made around the same time they were negotiating whether to stay with IP or stick with Neil Woodford. The directors of the investment trust should always act in the best interests of the trusts shareholders - i.e. investors.

      Performance fees are becoming less common with most of the larger ITs which is a good thing.

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