Friday, 1 June 2018
Edinburgh IT - Final Results
Edinburgh is one of the largest investment trusts on the market with assets of over £1.6bn. It is managed by Mark Barnett.
The trust invests primarily in UK securities with the long term objective of achieving:
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.
The trust holds just over 50% FTSE 100 companies, 28% second tier FTSE 250 and 8% of the portfolio comprise overseas listed holdings. This is probably not one for ethical investors - of the top 10 holdings, 3 are tobacco companies, 2 oil & gas and one aerospace/defence and these 6 holdings together account for just over 25% of the portfolio.
Edinburgh has been one of the cornerstones of my UK income portfolio held in both Sipp drawdown and ISA for many years. The sum of £1,000 invested in 2008 would now be worth £2,487.
It has recently issued results for the 12 months to 31st March 2018 (link via investegate).
This has not been a good year for Mr. Barnett.
The Company's net asset value, including reinvested dividends, fell by -5.9% during the year, compared to gain of 1.2% (total return) for the benchmark FTSE All-Share Index. The trust has been adversely affected by holdings in a number of poorly performing companies such as Provident Financial, Capita, BT and a sell-off in tobacco stocks. There is more detail on this in the managers report.
To be frank, I am quite capable of selecting my own portfolio of dogs at much less cost. I would hope with all the experience, research and analysis from a large team, the manager could do better than this.
Fortunately I hold this as one of a 'basket' of investment trusts and the returns from the likes of Finsbury, Scottish Mortgage and TR Property have compensated for the shortfall from EDIN.
Income per share over the year has increased by 5% to 29.3p. The board have proposed a final dividend of 9.2p making a total of 26.6p for the full year - an increase of 4.9% which is a small improvement on the previous year. Based on the current price of 690p, the yield is therefore 3.8%.
Last year the trust underperformed the benchmark by -8% and this year it has fallen short by -6%. Over 10 years, the return is very good but over 5 years the record is below average and dividend growth is below par at just 2.5% p.a. This is the 4th year in charge for Mark Barnett after taking over from Neil Woodford in January 2014.
There are some managers who can consistently outperform the market but the evidence shows that over time most fail and this is why I have been moving a larger proportion of my portfolio into low cost index funds over the past couple of years.
Last year I trimmed back my holdings in this trust to give Mr Barnett a little more time to see if he is one of the few who can consistently beat the benchmark over the longer periods. I am now losing confidence and I think it will not be long before the remaining investment is sold and the proceeds reinvested elsewhere.
As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!