Edinburgh posts gloomy outlook

Edinburgh Investment Trust said its new manager Invesco Asset Management had delivered “significantly better” performance than previous manager Fidelity as it announced its annual results.

But the investment company said a third had been wiped off its value last year, with net assets falling 31.1 per cent in the year to March 31.

Neil Woodford, the fund manager, warned investors that the economic downturn would be “deeper and more prolonged than the market is currently expecting”.

The board took the unusual step of ditching Fidelity for Invesco in September .

Under Fidelity’s management, EIT underperformed its index, the FTSE All Share, by 1.8 per cent, falling 7.6 per cent to September 15. The net asset value fell 26.3 per cent in the following six months under Invesco, less than the 28 per cent fall in the index.

But analysts at Oriel Securities rated the company as a “sell”, warning that the shares were vulnerable to a derating. Shares are trading on a 5 per cent premium to net asset value; historically, they have traded at a 10-15 per cent discount.

Analysts hailed the change of manager in September as a buying opportunity for investors, pointing to Mr Woodford’s strong long-term track record and star fund manager status.

But Mr Woodford’s decision to remain in defensive stocks has harmed the trust. Oriel analysts calculated that EIT’s NAV has fallen 9 per cent in the past six months, compared with a 6 per cent rise in the index.

EIT aims to increase its NAV more than the index, and to achieve growth in dividends per share above the rate of UK inflation.

The board is recommending a final dividend of 6.15p, bringing the total payment for the year to 20.4p, 2.5 per cent higher than the previous year.

Income growth investment trusts have seen their discounts narrow significantly this year as investors flocked to vehicles that pay a dividend. Many of the companies have significant dividend reserves.

EIT is now considering issuing new shares for the first time in at least 10 years. Shareholders will be asked to grant the board these powers at next month’s AGM.

Shareholders will also be asked to grant permission to invest up to 15 per cent of the assets of the company overseas. EIT shares closed Tuesday flat at 317¼p.