Finsbury Growth & Income Trust (FGT), managed by Nick Train, is proposing to renew its share buyback policy in an effort to narrow the discount between its share price and its net asset value (NAV). The board of the £1.6 billion trust has called a general meeting for August 23 to seek shareholder approval for this renewal. The trust's current policy dictates share buybacks when the discount approaches 5%, however, the discount presently stands at 9.5%, according to AIC data, with the NAV at £911.3 million.
Since its Annual General Meeting on January 23, 2024, FGT has spent £175.1 million on share buybacks, acquiring 20,633,230 shares, which represents 70% of its existing authority. The board expressed concern that without renewal, they might be unable to continue the buyback policy if the current authority is fully utilized before the next AGM. This move is aimed at preventing a situation where the trust is unable to implement its policy to support the share price.
Despite these buyback efforts, FGT's share price performance has been underwhelming. Over one, three, and five years, its share price has fallen by 7%, 1.3%, and 1.8% respectively. This contrasts sharply with its peers in the IT UK Equity Income sector, which have seen gains of 9.8%, 21.4%, and 32.1% over the same periods. The trust's concentrated portfolio includes major holdings like London Stock Exchange Group (12.7%), RELX (12.5%), Experian (12.1%), Sage Group (11.3%), and Diageo (10.6%).
Nick Train has previously expressed approval of share buybacks, noting that many of his portfolio companies have engaged in them, signaling their boards' confidence in their intrinsic value. He highlighted that eight of FGT's holdings have either announced or recently completed buyback programs, with some aiming to reduce equity by significant percentages, such as Diageo's £1.7 billion buyback potentially retiring 6% of equity by 2023. This reflects Train's belief that such actions indicate that shares may be undervalued.
