F&C modestly outperforms in a strong year

F&C (FCIT) has published its annual results for the year ended 31 December 2024. During the year, FCIT provided NAV and share price total returns of 21.0% and 16.9% respectively, which it says compares against a return of 19.3% for its All-World Index benchmark

FCIT’s discount widened over 2024 from 5.9% at the start of the year, to end the year at 9.2%, which is reflected in the difference between the Nav and share price performances. FCIT bought back 5.3% of its issued share capital during the year (a total of 27.3m shares).

FCIT 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 its benchmark. A final dividend of 4.8p per share is being proposed, which will bring the total dividend for the year to 15.6p pence per share. This will be a 6.1% increase and the 54th consecutive annual increase.

FCIT says that the performance from its underlying listed strategies was strong over the year, with each component of its portfolio delivering a gain in absolute terms. Performance was particularly strong in North America, Japan and from the Global Focus strategy, which has exposure to quality growth stocks. While FCIT was relatively underweight compared to the benchmark index to some of the Magnificent Seven stocks, it says that, overall, its listed portfolio modestly outperformed its benchmark index. The decision by the manager to reduce the allocations to emerging markets and Europe in the first half of 2024 served FCIT well as both regions underperformed the broader benchmark over the year. It adds that, while its private equity portfolio produced respectable absolute returns over the year, performance lagged that of the listed global equity benchmark.

Furthermore, as its 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, FCIT’s gearing added value over the year.

54th consecutive annual dividend increase

FCIT’s gross and net income generated in 2024 represented a new record high. Gross income rose by 4.9% to £111.8m and 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 FCIt’s income by £3.4m (2023: -£0.6m), although the net revenue return per share rose by 7.5% on the year to 17.01p, from 15.83p per share in 2023.

FCIT aims to deliver real rises in dividends for shareholders over the long-term that are sustainable. As noted above, it increasing its dividend again this year, which will again be fully covered by revenue. Subject to approval, shareholders will receive a final dividend of 4.8p 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 FCIT’s dividends has exceeded UK inflation over one, three, five and ten years.

FCIT says that its continues to benefit from a strong financial position with respect to both its revenue reserves (£116.2m), which represent approximately one year of dividend payments, and its capital reserves which stood at £5.3bn at the year end. As both are potentially distributable, the board says that it remains very well placed to continue FCIT’s track record of increasing annual dividends well into the future.

Ongoing charges

In 2024, FCIT’s ongoing charges ratio figure fell to 0.45% from 0.49% in 2023. This reduction in charges was driven, in part, by the benefits of scale applying to its fee arrangement with its manager and by greater efficiency in terms of our expenses, relative to an increased asset base.

From 1 January 2025, FCIT’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.

Borrowings

FCIT did not add to its total borrowings of £578.7m over the course of the year. Its cash and cash equivalents including short-dated Government bonds were reduced from £166.5m to £91.1m and there was no Government bond exposure at the year end. The trust’s 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.

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