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We are going to conclude today though with a look at Nick Train, the manager of the Finsbury Growth and Income Trust, ticker Holly, half-year results were recently put out. Let's start with performance. There's not much of an update here because in short, it's still going quite badly. Unfortunately, yeah, no real good news on this front.
The trust has been doing quite badly for several years now, so this isn't a sort of a one-off, unfortunately. But yeah, over the 6 months in question, both the trust and the asset value per share total return and its share price total return were around minus 14%. At the same time, the trust benchmark, the FTSE All-Share Index, rose 8.9%.
And yeah, this is just sort of carrying on several years of the trust really lagging behind behind its benchmark. So, yeah, understandable for shareholders to be feeling a bit restless at the moment. Yeah, the 6-month period to the 31st of March really captures I think the absolute worst that performance has deteriorated notably against the benchmark as well, hasn't it?
I mean, it's not done particularly well for some time now and it's underperformed, but really it's almost gone in the opposite direction to the Well, it has to the All-Share over that period. Over the couple of months since then, I mean, it's more in line with the benchmark, but it's not really made haven't really made much in the way of improvement, shall we say?
We'll come back to performance later on, but let's talk about some of the changes being introduced now, announced in these half-year results. Trust had already cut fees effectively, but there are some other things it's doing now. Let's start with dividends because there's been a quite a big change here both in terms of the what the yield will be going forward and how it's calculated.
Yeah, so basically, they're going to from the 1st of October this year enacting an enhanced dividend policy, and this will lead to quite a big increase in the annual dividend. So, they've said it rise by at least half. As a result, the moment it's about 2.6% it'll go up to 3.9%. That's more in line with the sort of A I C sector average for UK equity income trusts.
Um, whereas before it sort of sat right at the bottom of the the league table of dividend yields as it were. Um, and it's going to switch to paying those on a quarterly basis rather than a semi-annual. And also like you said, how it calculates it it'll go on a pence per share basis going forward. So, um, yeah, quite big big change in that sense.
Yeah, previously that I mean typically they can reference NAV or the share price, but pence per share should at least provide greater clarity, greater certainty. At least that's what they're they're hoping and and shareholders will will hope for as well. There's also been a change to the uh gearing or at least there is going to be more use of gearing in future.
Yeah, so it's had quite a limited use of gearing that up until now. So, it's got a 100 million pound borrowing facility and it's always kept that how much of that it uses quite low. So, currently it's just under 30 million. And basically the trust has said that it wants to really lean into that feature of it being an investment trust cuz you know, you can't use gearing if it's an open-ended fund and they want to be able to use that to you know, boost be shareholder returns.
Um, and they've basically said, you know, we've got a lot of conviction in the fact that UK equities are undervalued and that we believe in the long-term those equity returns will exceed the cost of taking on that extra debt. Of course, with gearing with leverage there's always a risk and perhaps it's particularly the case here because Nick Train does like to take concentrated positions.
Yeah, exactly. So, gearing could work really well if, you know, things are going well then you'll get accelerated NAV improvement. Then it does amplify things if things are going wrong. So, you know, if these portfolio companies do continue to underperform then we're just going to see those losses grow even more.
And yeah, I think it it's worth pointing out how concentrated the portfolio is. So, it's top 10 holdings account for 85% of its total assets. So, you just need a couple of those those companies to do badly and it could have a really significant impact on the portfolio. Mhm. And part of the reason we should say why the trust performance has been so bad over the 6 months to March is it's really been at the epicenter of the the software sell-off.
It holds most of the UK shares that have been badly hit by concerns about AI disruption, London Stock Exchange, Relx, Rightmove, Sage. And these have really been quite badly hit. We think I think in a lot of cases that some of those have been overdone those sell-offs. So, there has been a bit of a rebound for some of them albeit from a very low level.
The other side of things is the consumer staples side. So, Diageo another one which has had a really bad time of it. I mean, I think in a lot of cases clearly Train has had a very bad period and people who've been invested with him for a long time are sitting on some pretty heavy paper losses. But I can see the logic to what they're doing now in terms of the gearing.
So, it does feel like a lot of these shares are actually looking pretty good value now. So, one would hope given that top 10 is concentrated in those companies that that that is realized that value is realized in the months ahead particularly if the the gearing is there. The other thing we should talk about is M&A because partly as a result of low valuations clearly there's been a lot of M&A in the UK market.
A couple of Train's holdings have been taken out or in the process of that happening. Schroders was one. Intertek is one where there's an accepted offer now. I think Train has questioned whether that will go through but he does hold the company so that's a a bit of a boost there. I think with Schroders he was a bit more ambivalent because he thought there was more value to be made from holding the shares over a longer period of time.
He He talk a little bit about other potential targets in the half-year review. What did he say there? Yeah, so if we go look look at the consumer brand side, he has said he thinks that's a area that's really ripe for sort of M&A because, you know, that that industry has had such a tough time. Companies are looking, you know, some companies are looking to cut costs, others are looking to acquire brands at low valuations.
And we did already see Unilever's food brands going to be combining with McCormick. And Nick has said that obviously, as you mentioned, Diageo has has done very badly, but he thinks it would be a really good M&A candidate in this space at the moment. So, it's sort of thinking that quite positively, particularly as Brown-Forman have said that sort of in merger talks at the moment, and they've got quite similar company profiles, I guess.
So, one of Brown-Forman's biggest brands is Jack Daniel's, so you've got that sort of heritage alcohol space. So, Nick Train said he's, you know, feeling quite positive on that side. We'll be watching that what happens with that deal quite closely. And then, yeah, on the asset manager side, as you as you've mentioned, there's there's been the bid for Schroders at the beginning of the year.
And again, he thinks that's another sector that's that's ripe for consolidation. So, the trust does hold hold Rathbones, and that's kind of it there. More premium end of the wealth asset management. So, again, yeah, it's it's they're very keen to sort of retain the holding there on the basis that again, it could be a good M&A candidate going forward.
Yeah, it's always a double-edged sword, isn't it? You you want in some ways, you want them to be good candidates for a takeout, but then sometimes you see the offer price, and it might not be quite as high as one hoped. Uh the Brown-Forman discussions, we should say they have ended without without a deal, but clearly that doesn't imply and does confirm very much that these kind of companies are in play, and there are going to be people circling one would assume at current valuation levels.
Well, one would hope that this is we've written about before whether the nadir for Nick Train has arrived. One would hope that it has now been and gone. But we're going to keep a close eye on that as we do on all UK shares and all UK funds.
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