Schroders PLC · LSE:SDR
Schroders — Schroder Income Growth Fund — FY2023 Earnings Presentation
34 slides from Schroders's earnings presentation, November 2023
Slide 1: Schroder Income Growth Fund plc Annual Results Webinar
Schroder Income Growth Fund plc Annual Results Webinar Sue Noffke Matt Bennison November 2023 Roland Jones Head of UK Equities Marketing material UK Equity Fund Manager Head of Listed Equity and Investment Trust Sales
Slide 2: Sue Noffke and Matt Bennison
Sue Noffke Head of UK Equities – Head of UK Equities since 2019 – Manager of Schroder Income Growth Fund plc. from 2010 – 33 years investment experience Matt Bennison Fund Manager – Co-manager of Schroder Income Growth Fund plc. from 2017 – Joined Prime UK Equity team in 2015 initially as an analyst
Slide 3: Annual Results 2023: Capital
Annual Results 2023: Capital Schroder Income Growth plc – 12 months to 31 August 2023 5% 4% ▪ Volatile period for UK equity markets 3% 4.7% ▪ FTSE All Share total return 5.2% over the year 2% ▪ Underperformance from bias towards mid and small 1% sized companies and stock selection 0% ▪ Discount to N
Slide 4: NAV/Share Price/Index Total Returns
NAV/Share Price/Index Total Returns Schroder Income Growth plc – 10 years to 31 August 2023 120.6% 113.8% 70.6% Past performance is not a guide to future performance and may not be repeated. The value of investment can go down as well as up and is not guaranteed. The return may increase or decrease
Slide 5: Performance disclosures
Performance disclosures Net asset value (”NAV”) per share The NAV per share of 293.58p (2022: 295.26p) represents the net assets attributable to equity shareholders of £203,932,000 (2022: £205,100,000) divided by the number of shares in issue of 69,463,343 (2022: 69,463,343). The change in the NAV a
Slide 6: Performance – discrete 12 month periods
Performance – discrete 12 month periods Schroder Income Growth Fund plc Past performance is not a guide to future performance and may not be repeated. The value of investment can go down as well as up and is not guaranteed. The return may increase or decrease as a result of currency fluctuations Per
Slide 7: Risk considerations
Risk considerations Schroder Income Growth Fund plc Past performance is not a guide to future performance and may not be repeated. The value of investment can go down as well as up and is not guaranteed. The return may increase or decrease as a result of currency fluctuations The company may be conc
Slide 8: Attribution – industry
Attribution – industry Schroder Income Growth Fund PLC 12 Months to 31 August 2023 (%) Portfolio weight Active weight Relative return Allocation Selection Total effect Consumer Staples 6.1 -9.0 11.6 0.9 0.7 +1.7 Consumer Discretionary 18.1 +6.2 3.2 0.9 0.4 +1.3 Financials 24.1 +1.4 5.5 -0.1 1.2 +1.1
Slide 9: Attribution – stock
Attribution – stock Schroder Income Growth Fund PLC 12 Months to 31 August 2023 Top 5 contributors Portfolio weight (%)1 Weight relative to index (%)1 Relative performance (%)2 Impact (%)3 British American Tobacco 0.0 -2.9 -23.3 +0.8 Hollywood Bowl Group 2.0 2.0 40.2 +0.7 Diageo 0.0 -3.5 -17.0 +0.6
Slide 10: Annual Results 2023: Income
Annual Results 2023: Income Schroder Income Growth plc – 12 months to 31 August 2023 Past performance is not a guide to future performance and may not be repeated. Down 5.9% Up 4.5% Down 6.0% ▪ Earnings pressured by lower mining dividends and 13.96 14 13.14 13.2 13.8 switch by corporates to share bu
Slide 11: Trust dividends have outpaced inflation over 10 years
Trust dividends have outpaced inflation over 10 years Schroder Income Growth plc Dividends per share versus the rate of inflation for the ten years ended 31 August 2023 129% = 2.6% p.a. 141% = 3.5% p.a. ▪ Met objectives of dividend growth in real terms over 10 years and life of trust ▪ 5-year divide
Slide 12: Distribution history
Distribution history Schroder Income Growth plc Annual dividends1 (pence per share) 15 14 13 12 11 10 ▪ Unbroken 28-year record of annual distribution 9 increases for shareholders 8 7 ▪ AIC Dividend Hero 6 5 ▪ Annualised dividend growth of 4.2% 1996-2023 4 (versus inflation of 2.3%)1 3 2 ▪ Real term
Slide 13: Dividend Cover
Schroder Income Growth plc Dividend Cover 1.2 Global Financial Crisis Covid Pandemic Dividend covered 1.1 1.0 0.9 Dividend uncovered 0.8 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Past performance i
Slide 14: Revenue reserves bolstered in benign years; utilised in challenging periods
Revenue reserves bolstered in benign years for income; utilised in more challenging periods Retained revenue and dividends per share (pence) 14 12 10 8 6 4 2 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Slide 15: Portfolio holdings: Winners and Losers
Portfolio holdings: Winners and Losers Dividend Growth: 12 months to end August 2023 Past performance is not a guide to future performance and may not be repeated. Source: Schroders. Logos are the property of the companies shown. tocks shown are for illustrative purposes and should not be viewed as
Slide 16: Portfolio activity – 12 months to 31 August
Portfolio activity – 12 months to 31 August Schroder Income Growth Fund plc New additions Complete sales BP Direct Line Schroder Cranswick Income Growth Haleon Fund plc Mobico Glencore ITV Petershill Partners Victrix Rio Tinto SThree XPS Pensions Unite Stocks shown are illustrative of portfolio acti
Slide 17: Q&A / Outlook
Q&A / Outlook ——-
Slide 18: Consumer price inflation
Consumer price inflation % change on year earlier 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Past performance is not a guide to future performance and may not be repeated. Source: R
Slide 19: Bank of England – Central Bank Rate
Bank of England – Central Bank Rate Back to 2008 levels 8 7 6 5 4 3 2 1 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Refinitiv Workspace, October 2023 19
Slide 20: UK a strong hunting ground for income seekers
UK a strong hunting ground for income seekers But gilts now offer comparable nominal yields Income from key markets (%1) UK Income (% 1) 5.0 5.0 4.0 4.0 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 MSCI USA MSCI Japan MSCI EM MSCI Europe FTSE All Top 100 Mid 250 10 year UK gilts Instant access ex UK Share (sourc
Slide 21: But remember equities are real assets
But remember equities are real assets Historical returns in excess of inflation since 1926 Past performance is not a guide to the future and may not be repeated 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1-month 3-months 12-months 3-years 5-years 10-years 20-years Large cap stocks Cash Past perform
Slide 22: Outlook for UK dividends
Outlook for UK dividends Lower special dividends weighing on total payouts in 2023 UK dividends: calendar years and 2023 estimate1 ▪ Headwind from steep falls in mining company dividends and much lower one-off special payouts ▪ Special dividends fell in 2022, looks set to fall again in 2023 ▪ Shareh
Slide 23: Composition of shareholder yield
Composition of shareholder yield Shareholder returns significantly bolstered by share buybacks 7% 6% 5% 2% 4% 3% 2% 4% 1% 0% Dividend Buybacks Past performance is not a guide to future performance and may not be repeated. 1. Source: Computershare Q3 2023 Dividend Monitor. 23
Slide 24: Share buybacks by geography
Share buybacks by geography Buybacks increased in popularity outside of the US Proportion of large companies which reduced their number of shares by at least 1% 50% 45% 45% 40% 40% 35% 35% 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% MSCI USA MSCI UK MSCI Japan MSCI France MSCI MSCI EM 2010 2
Slide 25: UK is attractively valued
UK is attractively valued Cheap versus other regions and history ▪ 12m forward Price to Earnings (P/E) multiple ▪ MSCI Regions ▪ Data for last 20 years Past performance is not a guide to future performance and may not be repeated. Source: FactSet, Goldman Sachs Global Investment Research, 20 years t
Slide 26: FTSE 250 vs FTSE 100 relative performance
FTSE 250 vs FTSE 100 relative performance Lower than initial Brexit low 3.4 3.2 3 2.8 2.6 2.4 2.2 2 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Past performance is not a guide to future performance and may not be repeated. Source: Schroders, FactSet estimates to 31 October 2023. 26
Slide 27: Long term Mid 250 outperformance
Long term Mid 250 outperformance …of most developed market indices over the last 25 years FTSE 250 ex Investment Trusts vs Large developed markets, Total Return, % 1000 800 600 400 200 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 202
Slide 28: UK 30 Baggers Class of 2022: Who are they?
UK 30 Baggers Class of 2022: Who are they? A selection of the UK’s 65 “30 baggers” in the 30 years to 28 November 2022 (>12% CAGR) For illustrative purposes only and should not be viewed as a recommendation to buy or sell. Logos are the property of the companies shown. Schroders has expressed its ow
Slide 29: Why are we optimistic on small & mid cap returns from here?
Why are we optimistic on small & mid cap returns from here? Buying on weakness has given the best long-term returns UK small Cap performance vs. FTSE 100 index % … subsequent 3 year 30 27.9% performance 22.0% 20.1% 20 16.2% 16.9% 12.5% 10 8.2% … subsequent 5 year 1.1% performance 0 -10 Small Cap -20
Slide 30: FTSE 250 vs FTSE 100 relative dividend yield
FTSE 250 vs FTSE 100 relative dividend yield Creating significant income opportunities in attractively valued mid cap companies 1.4 1.3 Global Financial Crisis 1.2 1.1 1 0.9 Brexit 0.8 Dot com bubble 0.7 0.6 0.5 0.4 Past performance is not a guide to future performance and may not be repeated. Sourc
Slide 31: Size analysis: active weights
Size analysis: active weights Schroder Income Growth plc: October 2023 Active weight (%) Top 10 Positions Position size % Shell 7.3 100% Astrazeneca 6.7 84.78% HSBC 4.4 75.8% RELX 4.3 80% GlaxoSmithKline 4.2 Glencore 4.0 60% Unilever 3.5 Pearson 3.2 SSE 2.8 40% Legal and General 2.7 23.7% Top 10 Act
Slide 32: Questions on a fund manager's mind in 2023
Questions on a fund manager’s mind in 2023 Geo-political, de-globalisation and Soft vs Hard landing Central Bank Policy supply security Valuations Inflation Climate change markets, stocks M&A Market rotation Bond Yields Activism Value vs growth Source: Schroders. For illustrative purposes and are no
Slide 33: Important information
Important information The material is not intended to provide, and should not be relied on for accounting, legal or tax advice. Reliance should not be placed on any views or information in the material when taking individual investment and/or strategic decisions. Any references to securities, sector
Slide 34: Important information
Important information Marketing material • Any reference to regions/ countries/ sectors/ stocks/ securities is for illustrative purposes only and not a recommendation to buy or sell any financial instruments or adopt a specific investment strategy. • The material is not intended to provide, and shou
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