Murray Income (MUT) has published annual results for the year ended 30 June 2025. The net asset value (NAV) total return was 2.7% (debt at fair value), with the share price rising 4.3%. Both fell well short of the FTSE All-Share’s 11.2% return, extending a multi-year period of relative underperformance.

The board launched a strategic review in July to evaluate options for improving performance and shareholder returns. This followed extended engagement with the manager and consultation with major shareholders. Proposals are being considered from a range of parties, including the incumbent manager, other investment managers and peer investment companies. The board says it is assessing not only performance track records but also portfolio construction, investment philosophy, income generation and commitment to the investment trust structure. The review is expected to conclude before the end of 2025. The announcement has already helped narrow the discount, which moved from 9.6% at the year end to 6.9% by early September.

Revenue income and dividend

The trust has once again delivered a dividend increase, raising the annual distribution by 3.9% to 40.0p per share (2024: 38.5p), marking the 52nd consecutive year of growth. Revenue earnings rose 3.2% to 38.6p per share, leaving the dividend fractionally uncovered, but revenue reserves remain healthy at 54% of the current annual dividend. At the year end, the shares offered a yield of 4.7%.

Discount, buybacks and gearing

The trust repurchased 6.8m shares during the year, equivalent to 6.5% of the opening share count, at an average discount of 10.9%. This added around 0.7% to NAV total return. Net gearing increased to 11.1% (2024: 9.1%). The company also refinanced its £30m revolving credit facility in October 2024, of which £6.1m was drawn at the year end, alongside £100m of long-term loan notes.

Performance attribution

Management attributes much of the underperformance to style factors, with “quality” companies lagging “value” as real yields rose, in contrast to the strong relative performance quality enjoyed when yields were lower. The trust’s zero exposure to tobacco and an underweight position in banks also held back relative returns.

Stock selection in industrials proved particularly costly, detracting 4.4%, while consumer staples, financials and energy also weighed on performance. Positive relative contributions came from underweights in Shell and Glencore, and holdings in AstraZeneca, DBS and Games Workshop. Detractors included not holding Rolls-Royce, which continued its sharp recovery, and the structural avoidance of British American Tobacco. Positions in HSBC, TotalEnergies and Diageo also dragged on performance, the latter reflecting continued earnings downgrades.

Portfolio activity

The manager continued to recycle capital into what it sees as high-quality “leaders in their field”, often taking advantage of weaker sentiment to add names at more attractive valuations. New positions included ASML, DBS, Bunzl, Dunelm, Gamma Communications, LondonMetric, Reckitt Benckiser, Rio Tinto and Telecom Plus. Sales included BP, GSK, BHP, Coca-Cola HBC, Direct Line, LVMH and Novo Nordisk.

Manager’s perspective – an apology from Charles Luke and three key questions

Lead manager Charles Luke apologised to shareholders for the disappointing relative performance, stressing that he too has a significant personal investment in the trust and shares their frustration. In his review, he sought to address three questions:

• Is there a clear and sensible strategy? He points to the trust’s long-term focus on dependable, diversified and differentiated investments – high-quality companies with sustainable competitive advantages, strong balance sheets and the capacity for dividend growth.
• Is the portfolio doing what it says on the tin? Luke argues that the trust is delivering on its quality-income remit, holding companies such as AstraZeneca, Bunzl, Experian and L’Oréal that demonstrate recurring revenues, pricing power and leadership in niches, while exposure to themes like ageing populations, digital transformation, energy transition and rising global wealth supports structural growth.
• Is there any reason the portfolio cannot outperform in future? He maintains the current portfolio is attractively valued, trading close to a 20% discount to his estimate of intrinsic value, with many holdings themselves engaged in buybacks. He believes quality companies are well-placed to deliver superior long-term returns once style headwinds ease, particularly if real yields decline from elevated levels.

Underperformance has continued since year end

MUT says that, from 30 June to 8 September 2025, it has provided an NAV return (with debt at fair value) of 2.8% compared with 5.3% for its benchmark, while the share price rose 5.9% as the discount narrowed further following the review announcement.

Shareholder engagement

The board will update shareholders further as the strategic review progresses and expects to conclude it in the fourth quarter 2025. In addition, the AGM will take place at 12.30pm on Tuesday 4 November 2025 at Wallacespace Spitalfields, London. A shareholder webinar is also planned once the review is complete, giving investors an opportunity to hear directly from the board and management.

QD comment from Matthew Read: Murray Income’s results underline the tension that sits at the heart of many long-standing equity income funds: a rock-solid dividend record but disappointing relative returns. On one hand, MUT’s 52nd year of dividend growth will be welcomed by shareholders and will maintain the trust’s status as an AIC Dividend Hero. However, five years of underperformance has also hurt them – the manager included – and it is right that the board decided to launch the strategic review. With the discount tightening sharply since the announcement in July, the market appears to welcome the move, seeing the potential for some form of change.

The manager continues to make the case that the portfolio is packed with undervalued “leaders in their field” exposed to long-term growth themes, and if bond yields ease the style bias could quickly turn from headwind to tailwind. This is fair but the question is whether shareholders will be prepared to wait. For now, the trust’s attractions are the reliable 4.7% yield, consistent buybacks, and the prospect that the review may catalyse a clearer strategy to close the discount and restore competitive performance.