Finsbury Growth & Income Trust looks to strengthen returns after weaker period

(Sharecast News) - Finsbury Growth & Income Trust said in its half-year report on Thursday that it would enhance its dividend policy, increase gearing and reduce management fees as the board looked to improve shareholder returns after a period of weak performance.

The FTSE 250 UK equity investment trust said net asset value per share total return was -14.0% for the six months ended 31 March, while the share price total return was -13.2%.

The FTSE All-Share Index returned 8.9% over the same period.

Net assets fell to �856.3m from �1.23bn at the end of September, while market capitalisation declined to �801.1m from �1.15bn.

NAV per share fell to 780.3p from 923.0p, and the share price declined to 730.0p from 861.0p.

The company paid a first interim dividend of 8.8p per share on 15 May, unchanged from a year earlier, and said it expected to declare and pay a second interim dividend in the autumn.

Following a review, the board said it would adopt an enhanced dividend policy from the financial year beginning 1 October 2026.

Under the new policy, the annual dividend will increase by at least 50% to about 30p per share, from around 20p currently, lifting the current yield from about 2.6% to 3.9%.

The trust said future dividends would be set on a pence-per-share basis rather than by reference to NAV or share price, giving shareholders greater clarity over income.

Dividend payments will also move to a quarterly schedule in February, May, August and November.

The board also said it planned to make fuller use of the trust's borrowing capacity.

Finsbury currently has a �40m committed facility and an accordion option allowing borrowings of up to �100m, of which �29.2m was drawn at the end of March.

The board said it had agreed with portfolio manager Lindsell Train that the company would use gearing of up to �100m, reflecting its view that UK equity valuations were particularly attractive.

Finsbury also said revised management fee arrangements, agreed in December 2025 and effective from 1 January, had delivered an immediate saving of �129,000 in the three months to March.

The board said the company had received strong shareholder support at its January annual general meeting, with more than 97% of votes cast in favour of continuation.

However, it said it remained mindful of recent performance and would keep under review whether another continuation vote may be appropriate, based on performance, market conditions and shareholder engagement.

Chairman Pars Purewal said recent performance had been disappointing, but added that early signs of stabilisation were emerging.

"Against a backdrop of compelling UK valuations, our confidence in the company's prospects is growing, and the board remains committed to doing whatever it takes to improve shareholder outcomes through disciplined investing, active balance sheet management, an enhanced dividend policy and careful discount management," he said.

During the period, the company bought back 23.3m shares into treasury at a cost of about �188.1m.

Since the half-year end, it has bought back a further 4.6m shares at a cost of �34.8m.

The discount to NAV narrowed slightly to 6.4% at the end of March from 6.7% at the start of the period.

Portfolio manager Nick Train said the portfolio remained concentrated in three main areas: data, software and platform companies; consumer brands; and stock market proxies, particularly asset managers.

He said the largest detractor from performance was the sell-off in data, software and platform holdings, including Experian, London Stock Exchange Group, RELX, Rightmove, Autotrader and Sage, amid investor concerns over artificial intelligence.

Train said he believed those companies were more likely to benefit from AI than be damaged by it, because of their proprietary, constantly updated data assets.

"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," he said.

Train said the trust would look to add to core holdings rather than sell, supported by increased borrowing.

"This really should be an opportunity to utilise the special powers of an investment trust to create additional value for its shareholders," he said.

At 0842 BST, shares in Finsbury Growth & Income Trust were down 0.77% at 749.18p.

Reporting by Josh White for Sharecast.com.

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