Edinburgh Investment Trust (EDIN)

27/11/2025

Results analysis from Kepler Trust Intelligence

Edinburgh Investment Trust (EDIN) has released its half-year results for the six months to September 2025, reporting NAV total returns of 7.9% and a share price total return of 10.2%, underperforming the FTSE All-Share Index return of 11.6%. Performance was supported by retail and consumer holdings such as Tesco, Whitbread and Dunelm, but a lack of exposure to Rolls-Royce and an overweight to Haleon detracted from relative returns over the period.

The first interim dividend was declared at 7.6p, with the second expected to match, leaving the payout modestly uncovered. The board remains comfortable, prioritising sustainable dividend growth ahead of UK inflation. This is supported by a 6.7% rise in earnings and healthy revenue reserves, which cover 1.1× last year's dividend, providing additional support. The board is guiding that, assuming stable conditions, full-year dividends are expected to total 32.0p per share, representing around 11.1% growth on the previous year and a forward yield of 4.1%. At this year's AGM, shareholders will also vote on replacing the final dividend with a fourth interim payment, enabling four evenly spaced dividends each year from 2026/27 onwards.

Kepler View

Imran Sattar, lead manager of Edinburgh Investment Trust (EDIN), and his team remain cautiously optimistic on the UK stock market. Several factors support this view: UK debt levels are among the lowest in the G7, inflation is expected to moderate, and the Bank of England retains scope to cut interest rates further. Whilst investor sentiment remains subdued amid persistent concerns around growth and political uncertainty, we think the UK equity market appears potentially mispriced, with valuations near historic lows. Beneath this clouded economic outlook, the corporate landscape is resilient. Many UK-listed businesses are demonstrating stronger balance sheets, improved cash generation, and disciplined capital allocation. Further, around 70% of FTSE All-Share earnings are derived from international markets, which can help insulate equity returns from domestic economic pressures. Inbound M&A activity, largely led by overseas buyers, also signals that international investors are recognising value in parts of the market. Together, these factors create fertile ground for active, fundamentals-driven investors.

Within this environment, we think EDIN is well-placed to provide shareholders access to the UK's undervalued potential, particularly given Imran's focus on fundamentals. He prioritises companies where pricing power, strong balance sheets, elevated margins and a clear competitive advantage that rivals struggle to replicate align to compound value over the long-term. Imran has capitalised on recent share price weakness to top up positions in globally oriented businesses he thinks meet these criteria, such as Haleon. He has also increased exposure to LSEG, whose wide economic moat, built on proprietary data and entrenched customer relationships, positions it to leverage AI and accelerate growth. Opportunities have also arisen on the domestic front, with new positions added in Marshalls, the building products manufacturer. A further reflection of his confidence in the UK market can be seen in EDIN's exposure to non-UK stocks, which is now 5.5%, the lowest in several years, primarily reflecting the strong supply of attractively priced opportunities available in the UK.

Whilst the latest period reflects these stock-specific challenges, a longer-term perspective provides a clearer view of progress, in our view. Since Liontrust's Global Fundamental team began managing EDIN in March 2020, the trust has delivered an annualised NAV total return of 15.4%, ahead of the FTSE All-Share's 13.1%. Share price returns have been even stronger, at 16.7%, aided by discount narrowing and reinvestment of dividends at attractive entry points. This performance has been achieved across varied market conditions, demonstrating the potential resilience of the strategy.

Importantly, the trust continues to offer an attractive profile of dividend growth and Imran's focus on high-quality companies capable of delivering both capital growth and rising income positions the portfolio to weather periods of uncertainty whilst participating in any broader market recovery. If dividend momentum persists, economic conditions stabilise and performance picks up, we see potential for its discount to narrow further. In our view, EDIN continues to offer a compelling blend of defensive characteristics and recovery potential, making it a core holding for investors seeking both resilience and participation.

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