Thursday, 14 December 2017

Finsbury Trust - Final Results

I have held FGT in my ISA for the past 6 years. It continues to deliver year after year and remains one of the top UK Income Trust in terms of net asset value and share price performance over five and ten years, its returns far outstripping those of the FTSE All-Share index. A sum of £1,000 invested 10 yrs ago would now be worth £3,052 compared to a total return of £1,752 from the benchmark FTSE All Share index.

Its aim is capital appreciation and income combined, with a total return in excess of the FTSE All-Share.

Long standing manager Nick Train’s approach is based on that of Warren Buffett’s and involves building a concentrated portfolio of “quality” companies that have strong brands and/or powerful market franchises.

The characteristics that define a quality company for Lindsell and Train are:

·                     durability – companies that can prosper through business cycles for many years to come;
·                     high return on equity – companies with the ability to grow earnings year-in, year-out are favoured over those with rapid short term growth, but uncertain long term prospects; and
·                     low capital intensity/high free cash flow generation – companies that do not have to make heavy balance sheet investment to generate earnings growth.

3 Yr Chart FGT v All Share Index
(click image to enlarge)

He holds shares for the long term regardless of short-term volatility, aiming for them to double or more in value over time. This results in extremely low portfolio turnover, which saves on transaction costs. The trust's total expense ratio remains reasonably low at around 0.7%.


The trust has this week announced 
results for the full year to 30th Sept 2017 (link via Investegate). The trust has outperformed the all share index in each of the past 5 years and once again, this year is no exception. Share price total return is 14.2% compared to 11.9% return for the FTSE All Share.

Top five portfolio holdings are: Unilever 10.1%, Diageo 10.0%, Relx 9.3%, London Stock Exchange 8.6% and Hargreaves Lansdown 7.0%.

Over the past year the dividend has increased by a respectable 8.4% to 14.2p (2016 13.1p). Revenues were 15.8p (2016 15.2p) and therefore there is a surplus after accounting for payments of dividends which will further bolster the dividend reserves.

It is worth noting that Nick Train has made a significant addition to his personal share holding and now holds 1.2m shares in the Company which represents the whole of his personal investment in UK equity and is a significant portion of his total assets.

Commenting on the results, manager Train said  "
We know that currently some shareholders worry about Brexit and other macro-economic or political issues, but we continue to believe that the most rational way to respond to these concerns is to work on the following assumption. “Everything will work out just fine in the end.” This may read as complacency, but the truth is that ever since the FT All Share was first calculated, back in 1962, there has always been something to worry about. The index had a base value of 100 in 1962 and now stands at 4130 – that’s a 7% pa compound return, excluding dividends. Those returns, earned from the compounding profits of well-run UK companies, have accrued despite dramatic political, economic and social changes. We think it sensible to assume steady wealth creation will continue. And this is why I have continued to add to my own holding in Finsbury throughout 2017".

The shares are currently trading at 760p and I have recently reduced my holding by 20% to provide a little more 'income' from the capital appreciation over recent years. I am happy to continue holding the remainder for the coming year and beyond.

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!

Feel free to leave a comment below if you hold this investment trust in your portfolio.

1 comment:

  1. Hi DIY,
    Thanks for sharing as always. Finsbury is on my watch list to add as I am low on my IT over my portfolio, but not yet pulled the trigger.... soon... soon!