The Edinburgh Investment Trust (EDIN) has released its annual financial report for the year ended 31 March 2025, during which its net asset value (NAV) rose by 8.3% on a total return basis, underperforming its All-Share Index benchmark, which EDIN says increased by 10.5%. The share price advanced 11.3%, closing the year at 740p, reflecting a narrowing of the discount from 11.5% to 9.4%. This was aided by a robust share buyback programme, which contributed 0.4% to NAV over the year. The results mark five years since Liontrust took over as manager of the trust, during which time the company has delivered compelling outperformance versus its benchmark.
Notable contributors to performance included NatWest Group, Baltic Classifieds, and Verisk – the latter two being new holdings. Meanwhile, weakness in consumer-facing names such as Greggs and Dunelm, as well as Spirax-Sarco, held back returns. The portfolio remained underweight HSBC, which performed strongly during the year, and this also detracted from relative performance. At year-end, approximately 6.7% of the portfolio was invested overseas (Verisk and Thermo Fisher in the US, and KONE in Finland), with the remainder in UK-listed stocks. The managers, Imran Sattar and Emily Barnard, continue to emphasise quality businesses with durable competitive advantages and structural growth drivers.
Dividend and income
The board has proposed a final dividend of 7.5p per share, bringing the total dividend for the year to 28.8p, up 5.9% from 27.2p in FY2024. This comfortably exceeded the UK inflation rate of 2.3%, in line with the trust’s stated objective of delivering real dividend growth. The current dividend yield stands at 3.9%, and the managers say the portfolio is well placed to continue delivering mid-single-digit dividend growth over the medium term.
Earnings per share rose from 23.9p to 25.0p, and while the dividend was marginally uncovered, the board was comfortable drawing modestly on reserves to maintain a progressive policy. The underlying income yield of the portfolio was 3.4%, but when factoring in share buybacks by portfolio companies, the managers estimate an effective “buyback yield” of around 1.9%, which boosts shareholder returns even if it doesn’t show up in the income statement.
Share buybacks and discount management
The trust continued its active buyback programme, repurchasing 4.7% of its share capital during the year – and 17.4% cumulatively since March 2020. The board noted that this had added a cumulative 1.7% to NAV. While the discount averaged around 10% during the year, it has narrowed further since the year-end, it is c 8% at the time of writing. The board confirmed that it continues to explore a range of options to address the discount and remains open to further measures, including tenders or continuation votes, should they be deemed in shareholders’ best interests.
Long-term performance
The trust’s long-term numbers are encouraging. Over three years, the NAV total return is 32.6% versus 23.3% for the benchmark. Over five years, the NAV total return is 103.9%, well ahead of the benchmark’s 76.5%. While over ten years the NAV return of 75.1% lags the benchmark’s 81.7%, the share price total return over that period is slightly ahead.
Gearing and balance sheet
EDIN maintains long-term borrowings of £120m (at par), arranged in 2021 at an attractive blended fixed coupon of 2.4% and with an average maturity of 23 years. Rising bond yields have pushed the fair value of that debt down to £67m, meaning that on a fair value basis, net gearing at the year-end was just 5% of NAV, providing the trust with useful financial flexibility. Cash represented 0.6% of NAV.
Manager’s commentary and market outlook
Imran Sattar and Emily Barnard commented that the portfolio’s earnings and dividend performance were broadly in line with expectations, and the companies held continue to show strong strategic and operational progress. They noted, however, that volatility stemming from the re-election of Donald Trump and the imposition of new US tariffs, as well as domestic headwinds like increased employer National Insurance contributions, pose potential challenges.
Nevertheless, they remain confident in the long-term outlook, citing high levels of corporate resilience and earnings quality across the portfolio. They continue to favour a “macro-from-the-micro” research approach and are actively engaging with portfolio companies on strategy, capital allocation, and shareholder communication.
Recent changes and additions
New holdings in the year included National Grid (following a balance sheet reset), LSEG, Grainger, and Segro — all chosen for their structural growth potential and attractive risk-reward characteristics. Sales included Marks & Spencer and Centrica — both of which had undergone successful turnarounds, though the managers acknowledged they exited Centrica too early — and packaging group Mondi, due to strategic and cyclical concerns.
Board and governance
The board remains unchanged and continues to comply with the AIC and UK Corporate Governance Codes, including on diversity and tenure. A formal board evaluation was conducted and confirmed effective performance. The trust’s ongoing charges ratio fell again to 0.51%, reflecting strong cost discipline and a lower investment management fee.
Marketing and engagement
The trust has ramped up its marketing efforts, launching podcasts, videos, and events to engage with shareholders and raise awareness. The board believes this is critical to attracting and retaining investors and will continue to evaluate its effectiveness using key performance indicators. Events are scheduled for July (AGM) in Edinburgh and October in London.
Investment objective update
The board is seeking shareholder approval to simplify the wording of the investment objective and policy, aiming to make it clearer without changing the underlying strategy. The new wording emphasises long-term total return outperformance of the FTSE All-Share Index and dividend growth ahead of UK inflation.
Outlook
Looking ahead, the trust believes that its stock-driven approach, flexible investment style, and diversified portfolio of “advantaged” businesses should serve shareholders well in a world of economic uncertainty and shifting geopolitical dynamics. The managers reiterated their confidence in the long-term outlook for earnings growth and dividend sustainability across the portfolio.
[QD comment MR: Although EDIN’s NAV has underperformed its benchmark during the last year, we are now five years on from Liontrust’s appointment and the trust’s performance under the current manager is now well ahead of the benchmark and its dividend is comfortably outpacing inflation. Share buybacks are providing helpful NAV-accretion and have chipped away at the discount, while marketing efforts and portfolio transparency are clearly aimed at broadening the shareholder base.
With political and macro headwinds still very much in play – including Trump’s re-election and UK tax changes – the portfolio’s flexibility and income resilience will continue to be tested. But with a growing dividend, improving sentiment towards UK equities, and a commitment to narrowing the discount, Edinburgh could reward patient shareholders.]
