F&C Investment Trust plc (LON:FCIT) has announced its results for the year ended 31 December 2024.
· F&C’s share price was 1,108 pence representing a total return of +16.9%, against its benchmark, the FTSE All-World Index, of +19.3%.
· F&C’s Net Asset Value (NAV) total return of +21.0%, with debt at market value, ahead of the benchmark.
· The Company has delivered a total shareholder return of 212.2% over the ten-year period to the end of 2024, equivalent to 12.1% per annum which compares with a return of 200.2% (equivalent to 11.6% per annum) from our benchmark index.
· The final dividend will be 4.8 pence per share, subject to shareholder approval, and will bring the total dividend for the year to 15.6 pence per share. This will be a 6.1% increase and the 54th consecutive annual increase.
Commenting on the markets, Paul Niven, F&C Investment Trust Fund Manager said:
“Despite a volatile and rapidly changing market backdrop, our consistent approach has served shareholders very well over the long term.”
The Chairman, Beatrice Hollond, commented:
“F&C’s NAV total return has beaten the benchmark and its global peer group over one, three, five and ten years. Over twenty years, our return is equivalent to 10.4% per annum. The growth in our dividends over the past decade is significantly higher than UK inflation.”
Chairman’s Statement
Dear Shareholder,
2024 was another strong year for global equity markets with US equities rising by more than 25%. This was the first time since the late 1990s that US investors have enjoyed successive annual gains of greater than 20%. As was the case in 2023, the US outperformed both analysts’ expectations and other major equity markets. The so-called ‘Magnificent Seven’ US mega-cap technology stocks delivered returns well in excess of the broader market. Indeed, this collection of exceptional companies, which include Nvidia, Microsoft and Amazon, delivered a 67% dollar-based gain on the year, pushing the market weight of these companies in the US index to new highs.
US equity market performance was driven by better-than-expected economic data and, as the year progressed, initial fears of recession gave way to robust US growth, while inflation fell to levels which enabled central banks to begin cutting interest rates. While the scale of resultant interest rate cuts was below initial expectations, the combination of strong earnings growth in the US, declining inflation and interest rates, alongside ongoing optimism over the impact of Artificial Intelligence (‘AI’) propelled equity markets to new record highs. Furthermore, despite uncertainty over policy, the election of Donald Trump as US President for a second term, with promises of corporate tax cuts and deregulation, gave further impetus to investor risk appetite in the final part of the year.
The picture was more mixed outside of the US. While the global economy avoided a recession over the year, there was reasonable dispersion across regions. Sluggish economic data, along with lower inflation in Europe and the UK, led to an easing of interest rate policy by the European Central Bank and the Bank of England.
Our Net Asset Value (‘NAV’) total return, taking debt at market value, of +21.0% outperformed the return from our benchmark index of +19.3%. Our share price and our NAV total returns exceeded those delivered from our closed ended peers in 2024. Indeed, both our returns exceed that of our open and closed ended peers over one, three, five and ten years. This outperformance, over all these periods is unique in our closed ended sector. As a diversified global investment trust, designed to provide consistency in terms of performance outcome, it is pleasing to report these strong and consistent returns for shareholders. Furthermore, as our NAV total return has also exceeded that of our market benchmark over one, three, five and ten years, we believe that this is a strong proof statement on the effectiveness of our investment approach.
Although our share price and NAV reached new record highs, in common with many of our peers in the investment trust sector we saw a widening in our share price discount to NAV in 2024. Our discount moved from 5.9% at the start of the year, to end the year at 9.2%. This detracted from shareholder returns, resulting in a share price total return of +16.9%, lower than our NAV total return of +21.0%. Our NAV, with debt at market value, rose from 1,022.1p to 1,219.6p per share and our share price rose from 962p to 1,108p. We bought back 5.3% of our issued share capital, a total of 27.3m shares. We remain committed towards our objective of achieving a sustainably low deviation between our share price and NAV, as well as reducing the volatility of the discount.
Performance from our underlying listed strategies was strong over the year, with each component of our portfolio delivering a gain in absolute terms. Performance was particularly strong in North America, Japan and from our Global Focus strategy, which has exposure to quality growth stocks. While we were relatively underweight compared to the benchmark index to some of the Magnificent Seven stocks, overall our listed portfolio modestly outperformed its benchmark index. The decision by our Fund Manager to reduce our allocations to emerging markets and Europe in the first half of 2024 served us well as both regions underperformed the broader benchmark over the year. While our private equity portfolio produced respectable absolute returns over the year, performance lagged that of the listed global equity benchmark.
As our investment portfolio has significant investments in US assets the modest decline in sterling (of -1.8%) against the US dollar was beneficial to returns. In a year where markets rose strongly, our gearing added value over the year.
Following our re-admission to the FTSE100 index in 2022, I am pleased to report that we not only maintained this position, but we actually rose within the index, cementing our position as one of the UK’s leading listed companies. As noted in our 2023 Annual Report, we have previously been a FTSE100 constituent, but this current period is the longest that we have remained in the index.
| Contributors to total returns in 2024 (%) | |
| Portfolio return(1) | 19.1 |
| Management fees | (0.3) |
| Interest and other expenses | (0.5) |
| Share buybacks | 0.5 |
| Change of value of debt | 0.6 |
| Gearing/other | 1.6 |
| NAV total return | 21.0 |
| Change in share price discount | (4.1) |
| Share price total return | 16.9 |
| FTSE All-World total return | 19.3 |
Source: Columbia Threadneedle Investments
Long-term results
We remain resolutely focused on our investment objective of securing growth in both capital and income for shareholders over the long term. Over the ten years to the end of 2024 your Company delivered a total shareholder return of +212.2%, equivalent to +12.1% per annum. Returns have remained remarkably consistent, with limited losses on an annual basis over the past decade.
Over a twenty-year period to 31 December 2024 the Company’s NAV return was +627.3%, equivalent to 10.4% per annum. Our capital-only return (i.e. without dividends reinvested) over the past twenty years was +469.7% (9.1% per annum) and our shareholder total return was +751.6% (11.3% per annum). Dividends paid to shareholders have risen by 5.3% per annum over the past decade and by 6.8% over the past twenty years. Such results continue to demonstrate the importance of compounding income and capital gains over the long term, in the process of value creation for shareholders.
Fifty fourth consecutive annual dividend increase
Our gross and net income generated in 2024 represented a new record high. Gross income rose by 4.9% to £111.8m and our net revenue rose by 3.5% to £84.6m. Special dividends fell slightly to £3.6m (2023: £4.4m). The impact of currency movements reduced our income by £3.4m (2023: -£0.6m). Our Net Revenue Return per share rose by 7.5% on the year to 17.01 pence, from 15.83 pence per share in 2023.
The UK rate of inflation (as measured by CPI) declined during the year, falling from 4% to 2.5%. This represents a significant reduction in inflation from that seen during the inflationary spike post the Covid pandemic and the invasion of Ukraine, but inflation remains above the target of the Bank of England and slightly higher than levels seen in the years before Covid. It remains the ambition of the Board to deliver real rises in dividends for shareholders over the long-term that are sustainable. I am therefore delighted to report another rise in the proposed annual dividend, which will again be fully covered by our revenue earned in the year. Subject to approval at the Annual General Meeting (‘AGM’), shareholders will receive a final dividend of 4.8 pence per share on 7 May 2025, bringing the total dividend for 2024 to 15.6 pence: an increase of 6.1% over that of 2023. The increase compares to the 2.5% rise in CPI and means that the growth in our dividends has exceeded UK inflation over one, three, five and ten years. Indeed, the growth in our dividends over the past decade, at 67.7%, is almost double that of UK inflation over the equivalent period (35.4%). Furthermore, our full year 2024 dividend, as well as being our fifty fourth consecutive rise in annual dividends, is our one hundred and fifty seventh annual dividend payment for shareholders.
We continue to benefit from a strong financial position with respect to both our revenue reserves (£116.2m), which represent approximately one year of dividend payments, and our capital reserves which stood at £5.3bn at the year end. As both are potentially distributable, we remain very well placed to continue our track record of increasing annual dividends well into the future.
Efficiency
I am pleased to report that our 2024 Ongoing Charges figure fell to 0.45%, down from 0.49% in 2023. This reduction in charges was driven, in part, by the benefits of scale applying to our fee arrangement with our Manager and by greater efficiency in terms of our expenses, relative to an increased asset base.
The Board remains focused on delivering value for money for shareholders as part of its performance objectives and the Manager is also supportive of providing benefits of scale for their clients. Following constructive discussions with the Manager, I am pleased to advise that, from 1 January 2025, the Company’s management fee will be paid at the rate of 0.3% on the first £3.5bn of the market value of the Company (down from £4bn at present) and at 0.25% on the value of the Company between £3.5bn and £6bn. A new tier has been introduced, with a fee of 0.2% on market value above £6bn applying. From 1 January 2026, the level at which the 0.3% fee will start to apply will fall further, to £3bn. These revised fee arrangements will ensure that your Company remains extremely competitively positioned relative to peers and the Board believes that, along with our delivered investment performance, this should position the Company to both attract and retain new shareholders over time.
Borrowings
We did not add to our total borrowings of £578.7m over the course of the year. Our cash and cash equivalents including short-dated Government bonds were reduced from £166.5m to £91.1m. There was no Government bond exposure at the year end. Our effective gearing level (with debt at par and considering Government bonds as part of our investment portfolio) fell to 8.6% from 9.9% at the start of the year.
With our substantial long-term borrowings and low fixed rates on our loans that extend to 2061, we remain very well positioned to add value through investment in assets which should be expected to deliver a superior return. Our loans have a blended interest rate of approximately 2.4%, which is far below current prospective rates which we would pay for short and long-dated loans.
reducing Carbon Intensity
The Board remains committed to transitioning the Company’s portfolio to net zero carbon emissions by 2050 (‘Net Zero’). The Manager’s approach to Responsible Investment is set out in the Annual Report and shareholders will note that the portfolio’s carbon intensity has increased in the last two years as a result of changes within the portfolio. It is important to be aware that progress towards Net Zero will not be in the form of a straight-line trajectory and that there are several reasons for this. The Company has an investment objective to deliver growth in capital and income over time and the Board considers that this remains the primary objective for the Fund Manager. In the short term, delivering on the investment returns objective might periodically mean increases in the overall carbon intensity of the portfolio but, over time, we intend to reduce it both through investments in renewable energy and other decarbonisation technologies, as well as engaging with companies across our portfolio to ensure their activities are aligned or aligning to Net Zero. As a result of that engagement, companies are assessed as to whether they are aligned, aligning, committed, or not aligned to Net Zero and we also pay close attention to progress on this alignment. More detail is given in the Responsible Investment section of the Annual Report. The Board is also cognisant that there might be short term disruption and challenges in achieving its Net Zero target and it has identified the failure to transition to Net Zero as a principal risk.
Board Composition
Richard Robinson was appointed to the Board on 3 May 2024, replacing Tom Joy who stepped down from the Board on 31 March 2024. Richard has been the Investment Director of the Paul Hamlyn Foundation since 2009 and has considerable investment management experience.
Edward Knapp will have served as a Director for nine years in July this year. He will seek re-election at the forthcoming AGM but will step down from the Board in the second half of this year. We shall miss Edward’s outstanding combination of investment, operational and general management experience. His contributions to the Board’s discussions on strategy and risk have been particularly valuable. We will commence the process to recruit his successor shortly and an announcement will be made in due course.
F&C Lecture
In June 2024, we held our biennial lecture. As well as wanting to engage with our existing shareholders, we continue our efforts to attract young investors and the event was branded “F&C Live”, with the theme “Smart choices: Navigating an Age of Social Change”. We had some thought-provoking speakers who covered areas such as artificial intelligence, demographics, disruptive technology and geopolitics. It was very well received by those who attended and you can view a recording of the event, and interviews with the speakers, on our website at fandc.com.
Annual General Meeting
This year’s AGM will be a “hybrid” meeting, which will enable shareholders who cannot attend in person to view the AGM online and to participate by asking questions and voting if they wish. Full details of how to do so are set out in the letter that accompanies your Form of Proxy or Form of Direction.
Voting will be conducted by way of a poll, and you are requested to lodge your votes ahead of the meeting by completing your Form of Proxy or Form of Direction in accordance with the instructions. Its completion and return will not preclude you from attending the meeting and voting in person. If you are unable to attend the AGM, you are requested to submit any questions you may have with regard to the resolutions proposed at the AGM, or the performance of the Company, in advance of the meeting to F&[email protected]. Following the AGM, the Fund Manager’s presentation will be available on the Company’s website at fandc.com.
Outlook
2024 saw a continuation of many of the market themes from 2023. Performance from the Magnificent Seven sent US equities to record highs and to record levels of market concentration. It is noteworthy that recent equity market gains have been fuelled by such a small number of companies. However, there are expectations for a broadening out of returns across equity markets over the coming year.
The forecast for economic growth remains mixed for 2025. In the US, inflation is now expected to remain above target for longer, with jobs and underlying activity still showing strong readings. This is likely to leave only limited room for the Federal Reserve to cut interest rates from current levels. In Europe and the UK, signs of slowing economic growth means central banks are expected to cut rates over the coming year.
Equity markets, particularly the US, appear to be valued with little room for disappointment. Whilst there is investor enthusiasm for an expansionary policy mix that includes tax cuts and extra fiscal spending from the new US administration, investors continue to be concerned over potential tariffs and the route the new US administration will pursue regarding foreign policy. These could act as headwinds for global growth and investor sentiment in 2025. Furthermore, the current dominance of a small cohort of leading companies may face challenges from a number of areas including increased competition or regulatory challenges.
Our robust corporate structure and long-term perspective on investment opportunities is one of our great strengths. Our long-dated senior notes provide fixed, low-cost borrowings from which we can fund investments. Our dividend, rising for a fifty-fourth consecutive year, is fully covered. We continue to hold significant revenue reserves, which should help us to continue to meet our objective of delivering above inflation increases in the dividend over the coming years. Our Private Equity portfolio, mainly focused on mid-market opportunities, remains well positioned, after a relatively fallow period, to benefit from future growth. Realisations in our portfolio managed by Columbia Threadneedle Investments increased in 2024 and we hope to see that continue into 2025. Our recent Growth and Venture Capital investments remain in the early stages of their investment programmes, but we remain optimistic over longer-term prospects there. There are many reasons for caution and indeed recent events relating to potential lower cost advances in AI illustrate the potential for both market volatility and shocks but, equally, the backdrop for financial markets does appear positive for the coming years. Regardless of potential short-term volatility, we remain resolutely focused on long-term opportunities.
Beatrice Hollond
14 March 2025, F&C Investment Trust Plc
