Finsbury Growth and Income Trust has had an undeniably challenging half-year, sliding 14% on NAV terms in the six months to 31 March, while the FTSE All Share was up 8.9%.
However, following strong support at the firm’s AGM earlier this year, the board has opted to take advantage of the investment trust structure and double down on its convictions.
Gearing will rise to £100m, up from its previously “modest” £29.2m, reflecting the board’s conviction in attractive UK equity valuations and the potential for long-term returns to exceed debt.
Pars Purewal, chair of the trust, said: “While recent performance has been disappointing, we are seeing early signs of stabilisation and remain firmly committed to the portfolio manager’s disciplined, long-term approach focused on high-quality businesses with resilient franchises and hard-to-replicate data assets.”
Manager Nick Train added: “Writing this report reinforces our conviction that your portfolio is comprised of a collection of outstanding, in most cases world-class, UK-listed companies that have, for a variety of reasons, fallen out of favour with investors.
“In particular, we believe that the sell-off in London-listed data, software and platform companies could offer a once-in-a-decade opportunity to access exceptional growth assets at fundamentally the wrong price.”
See also: Nick Train: ‘We acknowledge the strategyhas not been working for too long a time’
Matthew Read, analyst at QuotedData, said the uptick in gearing was the “clearest statement of intent.”
“Rather than changing course at a point when the strategy is deeply out of favour, the board and manager are doubling down to exploit what they see as a valuation opportunity in the aftermath of the ‘SaaSpocalypse’” Read said.
If Train proves correct in his conviction on data, software and platform businesses, current valuations may look anomalously cheap, but if he’s wrong, further gearing may only lead to more pain, the QuotedData analyst explained.
On top of this, the board has introduced an enhanced dividend policy, bringing the yield closer to the sector average.
Purewal said: “While the company has a long and successful record of paying and growing dividends, the board recognises the existing policy has resulted in the company offering a comparatively low yield relative to its peer group.”
Starting on 1 October, the annual dividend yield will be boosted to 3.9%, up from the current 2.6%, a 50% rise. This will be facilitated by a rise in annual dividend from 20p per share to 30p per share, with all dividends moving forward set on a pence per share basis.
Alongside this, dividend payouts will move to a quarterly schedule.
Purewal added: “Taken together, these measures are intended to provide shareholders with a more appealing dividend policy and offer improved clarity and certainty over their future income.”
The trust has also committed to reducing management fees, set to save £129,000 in the three months to 31 March 2026.
