Finsbury Growth & Income Trust Plc - Half-year Report

31 March 2024

This Announcement is not the Company’s Half Year Report & Accounts. It is an abridged version of the Company’s full Half Year Report & Accounts for the six months ended 31 March 2024. The full Half Year Report & Accounts, together with a copy of this announcement, will shortly be available on the Company’s website at www.finsburygt.com where up to date information on the Company, including daily NAV, share prices and fact sheets, can also be found.

The Company's Half Year Report & Accounts for the six months ended 31 March 2024 has been submitted to the UK Listing Authority, and will shortly be available for inspection on the National Storage Mechanism (NSM): https://data.fca.org.uk/#/nsm/nationalstoragemechanism

COMPANY SUMMARY

Finsbury Growth & Income Trust PLC is a listed investment company; its shares are quoted on the premium segment of the Official List and traded on the main market of the London Stock Exchange. The Company is a member of the Association of Investment Companies (“AIC”).

INVESTMENT OBJECTIVE AND PERFORMANCE MEASUREMENT

The Company aims to achieve capital and income growth and to provide Shareholders with a total return in excess of that of the FTSE All-Share Index (the Company’s benchmark).

INVESTMENT POLICY

The Company’s investment policy is to invest principally in the securities of companies either listed in the UK or otherwise incorporated, domiciled or having significant business operations within the UK. Up to a maximum of 20% of the Company’s portfolio, at the time of acquisition, can be invested in companies not meeting these criteria.

The portfolio will normally comprise up to 30 investments. This level of concentration is likely to lead to an investment return which is materially different from the Company’s benchmark index and is likely to be more volatile and carry more risk.*

Unless driven by market movements, securities in FTSE 100 companies and comparable companies listed on an overseas stock exchange will normally represent between 50% and 100% of the portfolio; securities in FTSE 350 companies and comparable companies listed on overseas stock exchanges will normally represent at least 70% of the portfolio.

The Company will not invest more than 15% of the Company’s net assets, at the time of acquisition, in the securities of any single issuer. For the purposes of this limit only, net assets shall exclude the value of the Company’s investment in Frostrow Capital LLP.

The Company does not and will not invest more than 15%, in aggregate, of the value of the gross assets of the Company in other listed closed ended investment companies. Further, the Company does not and will not invest more than 10%, in aggregate, of the value of its gross assets in other listed closed ended investment companies except where the investment companies themselves have stated investment policies to invest no more than 15% of their gross assets in other listed closed ended investment companies.

The Company has the ability to invest up to 25% of its gross assets in preference shares, bonds and other debt instruments, although no more than 10% of any one issue may be held.

In addition, a maximum of 10% of the Company’s gross assets can be held in cash, where the Portfolio Manager believes market or economic conditions make equity investment unattractive or while seeking appropriate investment opportunities or to maintain liquidity.

The Company’s gearing policy is that gearing will not exceed 25% of the Company’s net assets.

No investment will be made in any fund or investment company managed by Lindsell Train Limited without the prior approval of the Board.

In accordance with the Listing Rules of the Financial Conduct Authority (“FCA”), the Company can only make a material change to its investment policy with the approval of its Shareholders and HMRC.

* The Company publishes its Active Share scores in its monthly fact sheet for investors and in both the annual and half-yearly reports to highlight how different the portfolio is from the Company's benchmark index.

PERFORMANCE

Whilst performance is measured against the FTSE All-Share Index, the Company's portfolio is constructed and managed without reference to a stock market index with the Portfolio Manager selecting investments based on their assessment of their long-term value.

The Company’s net assets as at 31 March 2024 were £1,747.3 million (30 September 2023: £1,822.7 million) and the market capitalisation was £1,619.5 million (30 September 2023: £1,742.5 million).

MANAGEMENT

Frostrow Capital LLP (“Frostrow”) is the appointed Alternative Investment Fund Manager (“AIFM”) and provides company management, company secretarial, administrative and marketing services. Lindsell Train Limited (“Lindsell Train”) is the appointed Portfolio Manager.

DIVIDENDS

An interim dividend of 8.8p per share (2023: 8.5p) was paid on 17 May 2024 to Shareholders who were registered at the close of business on 5 April 2024. The associated ex-dividend date was 4 April 2024.

It is expected that a second interim dividend will be declared and paid in the Autumn.

DIVIDEND POLICY

The Company’s aim is to increase or at least maintain the total dividend each year. A first interim dividend is typically paid in May and a second interim in November in lieu of a final dividend.

The level of dividend growth is dependent upon the growth and performance of the companies within the investment portfolio. The decision as to the level of dividend paid takes into account the income forecasts maintained by the Company’s AIFM and Portfolio Manager as well as the level of revenue reserves. These forecasts consider dividends earned from the portfolio together with predicted future earnings and are regularly reviewed by the Board.

All dividends have been distributed from current year income and revenue reserves.

CAPITAL STRUCTURE

At 31 March 2024 the Company had 187,444,294 shares of 25p each in issue (excluding 37,547,009 shares held in treasury) (30 September 2023: 204,519,434; excluding 20,471,869 shares held in treasury). During the six months under review 17,075,140 shares were bought back to be held in treasury. Since the end of the half year to 23 May 2024, being the latest practicable date, a further 4,839,479 shares were bought back to be held in treasury.

GEARING

As at the half year end the Company was in the second year of its three-year secured fixed term revolving credit facility (the “facility”) of £60 million with Scotiabank Europe PLC (“Scotiabank”) and there is an additional £40 million facility available if required. As at 31 March 2024 £29.2 million has been drawn down from this facility.

COMPANY PERFORMANCE

AS AT 31 MARCH 2024

^ Alternative Performance Measure (see glossary)

† UK GAAP Measure

* Source – Morningstar

** Source – FTSE International Limited (“FTSE”) © FTSE 2024* (see glossary)

CHAIRMAN’S STATEMENT

PERFORMANCE

In the six months to 31 March 2024 the Company delivered a net asset value per share total return^ of 5.9% and a share price total return^ of 2.7%. It is disappointing to report that the Company underperformed its benchmark, the FTSE All-Share Index, which, measured on a total return basis, rose by 6.9% over the same period. The principal contributors to the Company’s net asset value performance were RELX, Experian and Sage. The main detractors were Burberry, Remy Cointreau and Schroders.

Further information on the Company’s portfolio can be found in our Portfolio Manager’s Review.

Your Board takes the recent performance record of the Company’s portfolio extremely seriously, and shares the Portfolio Manager’s and, no doubt, Shareholders’ disappointment with recent results. We continue to hold the Portfolio Manager to account for the Company’s performance and support the evolution of the companies and themes represented in the portfolio. We believe the companies we own have the capacity to deliver both attractive returns and outperformance that Shareholders should expect.

SHARE CAPITAL

The Board continues to keep the Company’s discount under close review and is committed to buying back its own shares when the discount approaches or exceeds the 5% level. While share buy-backs will not necessarily prevent the discount from widening beyond this level, the Board believes that buy-backs enhance the net asset value per share for remaining Shareholders, provide some additional liquidity and help to mitigate discount volatility which can damage shareholder returns.

During the six months under review the Company bought back a total of 17,075,140 shares into treasury at a cost of £144 million. As at 31 March 2024 the discount was 7.3% and at the time of writing (at the close of the UK market on 23 May 2024), the discount was 8.4%. Over the six months the discount averaged 6.5%, compared with 4.5% over the course of the previous financial year.

Since 1 April 2024 to the date of this report, a further 4,839,479 shares were bought back into treasury at a cost of £40.5 million. As at 23 May 2024, the Company had 182,604,815 shares in issue (excluding 42,386,488 shares held in treasury).

DIVIDEND

The Board declared a first interim dividend of 8.8p per share (2023: 8.5p) with respect to the year ending 30 September 2024. That dividend was paid on Friday, 17 May 2024 to Shareholders who were on the register on Friday, 5 April 2024. The associated ex-dividend date was Thursday, 4 April 2024.

The Board expects to declare the second interim dividend for the year ending 30 September 2024 in the Autumn.

BOARD CHANGES

After nine years as a Director of the Company, I have notified the Board of my intention to stand down at the conclusion of the Company’s Annual General Meeting in January 2025. I am delighted that Pars Purewal, who joined the Board in November 2022, has been chosen by my Board colleagues to succeed me as Chairman.

CHANGE OF AUDITOR

During the period the Board initiated a formal competitive tender process for our external audit engagement and appointed Deloitte LLP as its auditor. At the next Annual General Meeting, the Board will propose that Deloitte LLP be appointed as the Company’s external auditor. Full details of this process will be reported in the Company’s Annual Report for the year ending 30 September 2024.

A copy of the resignation statement from PricewaterhouseCoopers LLP (“PwC”) has been sent to Shareholders for information and is available to view on the Company’s website. The Board would like to take this opportunity to thank PwC for its services to the Company.

OUTLOOK

Your Company owns what we and the Portfolio Manager believe to be a portfolio of high-quality companies, with durable and market-leading franchises or data assets which offer the potential for significant long-term returns. This potential is augmented by the fact that many of these companies currently trade at valuations that represent a substantial discount to peers listed elsewhere.

The Board believes this combination of a portfolio of world-class companies held for the long term and attractively priced offers real grounds for optimism and the capacity to generate significant returns for Shareholders.

Simon Hayes

Chairman

24 May 2024

^ Alternative Performance Measure (see glossary).

PORTFOLIO MANAGER’S REVIEW

To be candid I find this a difficult report to write. As you will have seen from the Chairman’s Statement, this was yet another six month period when I, with my colleagues at Lindsell Train Limited, underperformed our benchmark, the total return on the UK FTSE All-Share Index. We really should be able to do better than this and if we can’t, then I absolutely share Shareholders’ growing impatience.

At the same time, as a career-long UK Equity manager, I am frustrated by the malaise gripping the UK Equity market. A malaise which is, in my opinion, only partly justified.

What I find difficult to write is not the acknowledging of our poor investment performance or apologising for it. We do acknowledge and apologise for it. No, what is difficult is finding a credible way to convey to Shareholders why we remain optimistic about the Company’s investment portfolio. It is difficult, because I am conscious that I have been vocally optimistic about its prospects throughout the three years and more of underperformance. So why should I be right this time?

Nonetheless, I must retry to convey that optimism, because, in my opinion, there is tremendous value building in the portfolio. Specifically, I believe we own significant positions in a number of businesses that could grow their market capitalisations multiple times over the next decade or more.

There are always many factors behind any sustained period of poor performance and here I must acknowledge that not owning UK-listed Oil and Mining company shares has been a persistent drag on our performance since the world economy emerged from Covid-19 lockdowns. But in my comments here I want to focus on just one factor. To my mind it is the overarching reason we have had a tough time over the last three years. In addressing the issue, I will also illustrate how we have addressed it in terms of changes in portfolio construction and constituents.

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