Global sector company, F&C (FCIT), has reported its annual results to 31 December 2020. The company’s growth and income mandate is carried out through investments in public markets, unquoted investments and private equity. With a market cap of £4.14bn, it is amongst the largest closed-end investment companies and was the first investment trust to launch, back in 1868.
- Over the financial year, FCIT’s share price was 787.0 pence, representing a total return of 4.6% and its NAV total return came to 12.3%. The NAV return was marginally behind the 12.4% from its benchmark, the FTSE all-world index.
- The difference between the strong gains as reflected in FCIT’s NAV total return and the share price total return was the result of the shares moving from a premium rating at the beginning of the year to a 5.4% discount by its end.
- The listed and private equity holdings posted strong gains with those from the North American, Japanese and European holdings offsetting underperformance from the Global Strategies and Emerging Markets. This and a rise in the fair value of outstanding debt contributed to the in-line benchmark performance.
- FCIT expects its borrowings to add value to shareholders until maturity many years into the future but, with market interest rates falling, ‘marking to market’ of the debt to reflect its current fair value detracted from its NAV total return in 2020.
- The final dividend will be 3.4 pence per share, subject to shareholder approval, and will bring the total dividend for the year to 12.1 pence per share. This will be a 4.3% increase, the 50th consecutive annual increase, and well ahead of the Consumer Price Index of 0.6%.
- FCIT is committing to transition its portfolio to net-zero carbon emissions by 2050 at the latest.
‘Much of the good news priced in’
FCIT’s chair, Beatrice Hollond, noted the following in her outlook statement: “Coming years are likely to provide further challenges. COVID-19 remains a significant threat to near-term growth prospects and while the news on vaccine effectiveness and deployment presents the prospect of a return to normality, risks to the outlook are numerous.
While we do expect better growth as this year progresses, and a consequent improvement in corporate earnings, equity markets have already discounted much of the good news. Valuations are being buoyed by unprecedented monetary and fiscal stimulus and, while we should expect support for some time to come, disappointment on earnings delivery or, critically, on inflation, could give rise to volatility and even a sharp setback in equity markets.”
FCIT: F&C proposed final dividend would represent the 50th consecutive annual increase