Register Log-in Investor Type

News

Murray Income merger benefits

For the 12 months ended 30 June 2021, Murray Income returned 20.6% in NAV terms against 21.4% for the All-Share Index. The return to shareholders was 18.5% as the discount widened from 5.0% to 6.8%. However, since the period end the trust’s relative performance has improved.

The dividend was increased marginally from 34.25p to 34.5p (marking 48 consecutive years of increases) and part of this was paid from revenue reserves as the net revenue per share was 33.7p.

These are the first results since the merger with Perpetual Income & Growth. Net assets are now over £1.1bn, trading volumes are higher and there has been an approximate halving of the bid-offer spread when trading. The stock is now a constituent of the 250 Index.

Extract from the manager’s report

The portfolio outperformed in the first and final quarters of the financial year but underperformed during the second and third quarters.  Given the portfolio’s focus on high quality companies, we would always expect to underperform in a ‘dash to trash’ rally.  Indeed, in November following news of the efficaciousness of a number of vaccines, poor quality companies that had previously performed very poorly and where the market had questioned their ability to survive, rebounded strongly (albeit their income has not returned to previous levels). As this scenario can only occur once, it is perhaps more insightful to judge performance relative to the benchmark through a longer term lens.   Moreover, it is also important to consider risk-adjusted returns or in other words how much performance is being generated for each unit of risk.  One measure of this is the ‘information ratio’ and it was pleasing that the Company was awarded the Citywire UK Equity Income Investment Trust of the Year award during the period for a three year information ratio considerably ahead of all of its peers. 

On a total return basis, the Company’s share price increased by 18.5% which reflected a marginal widening of the discount to Net Asset Value at which the shares traded compared to the previous year end. Most of this widening occurred in the last month of the Year, but it has now been reversed, with the discount falling from 6.8% to 5.8% as at 16 September 2021, the latest practicable date prior to approval of this Report. 

In absolute terms, following the addition of PLI’s £60m of senior secured fixed rate notes 2029 to the Company’s existing £40m of senior secured fixed rate notes 2027 and approximately £6m drawn down from an unsecured multi-currency revolving credit loan facility agreement with Scotia Bank Europe PLC, debt increased to £118.5m at the end of the period. The period end net gearing of 10.3% compared to a level of 5.3% at the end of the prior period. 

The performance attribution for the Year is complicated by changes in sector classification during the year such that a number of sub sectors appear in two over-arching sectors. For example, beverages is represented in both Consumer Staples and Consumer Goods. In a broad reversal of the prior year’s performance, the more cyclical, economically-sensitive areas of the market such as mining, industrials and, travel and leisure companies generally performed strongly, while defensive areas of the market such as tobacco, pharmaceuticals and utilities underperformed. 

From a size perspective, repeating the pattern of the prior year, the FTSE 100 Index underperformed both the Mid 250 and Small Cap Index. The FTSE 350 High Yield Index marginally outperformed the FTSE 350 Low Yield index during the period. 

Looking specifically at the Company’s portfolio, stock selection was negative and asset allocation positive over the Year. Both factors were positive over three and five years, with stock selection being a more significant positive contributor than asset allocation. Negative stock selection during the Year represented not owning poorer quality companies that performed strongly during this financial year but had been very weak in the prior period.

Turning to the individual holdings, there were numerous companies that demonstrated strong share price increases. The share prices of Dechra Pharmaceuticals, Howden Joinery, Sirius Real Estate, Weir and Inchcape all increased by over 50% during the Year.

Nearly all the holdings performed as expected or better than expected from an operational standpoint. However, the two poorest share price performances were from Telecom Plus and GlaxoSmithKline whose share prices fell by 17.0% and 8.1% respectively.  In addition to their more defensive characteristics which were not in vogue during the period, Telecom Plus suffered as its agents found it more challenging to visit customers’ homes, and GlaxoSmithKline’s share price performance reflected a lack of success in its pharmaceutical pipeline.”

Leave a Reply

Your email address will not be published. Required fields are marked *

Please review our cookie, privacy & data protection and terms and conditions policies and, if you accept, please select your place of residence and whether you are a private or professional investor.

You live in…

You are a…