So, good day everybody. As you might imagine, I would much rather not start this presentation with the slide I'm about to show you. But nonetheless, I am duty bound to start the presentation with this slide, and what this slide illustrates is the fact that Finsbury Growth and Income Trust's net asset value and share price performance has been disappointing now for the last four or five years.
I'm very sorry about that. And you know, this slide demonstrates this unfortunate circumstance. I'm ashamed to report to you that the peak of Finsbury's share price was set as long ago as late 2019, when the NAV was around £940. As you can see, subsequent to that, despite a few attempts to break out, the share price has flatlined, with the NAV just a little bit better. A little bit better over this long period.
Now, what can I say? Of course, what matters from here is what happens next. Looking at this chart, would you deduce that Finsbury's portfolio is a kind of busted flush? Or can I persuade you — as of course I want to believe myself — can I persuade you that what this chart is actually showing is that Finsbury's net asset value is like a coiled spring, and that any moment now Finsbury's NAV is going to smash through 10 and the share price is going to follow?
Well, do you know, I think I am going to try and persuade you of that latter perspective. But first, just a bit of context, because I think it's important to convey to shareholders that there has in fact been quite a material shift in the structure of Finsbury's portfolio since that 2019 share price peak. And I've illustrated those changes here. And simply stated, there are three material changes.
First of all, there has been a marked increase in Finsbury's exposure to London-listed digital winners. Second, as you can see, that increased exposure to digital winners has in part been funded by a deliberate reduction in the exposure to consumer branded goods companies, though we still like the consumer brands that we're still invested in. And then finally, I would ask you to note that today 100% of Finsbury's portfolio is invested in UK companies.
And that reflects our frustration and our response to this prolonged period of disappointing returns by the UK equity market. We just got to the point where we felt that enough was enough. It was getting ridiculous. We could access world-class companies, world-class UK companies trading at marked discounts for no better reason than the fact that they're domiciled on the London market. And we felt that we had to react to that opportunity. And as you can see, we have done so.
Now, in order to meet my aspirations for future NAV performance for Finsbury, and I'm sure other shareholders' aspirations for NAV performance, for those aspirations to be met, the core idea in Finsbury's portfolio needs to work. And I want to convey to you that there is both a core idea and that, in our opinion, it's a compelling core idea. And let me just, as succinctly as possible, convey that idea to you.
Changes in technology are increasing the value of those companies that own, create or curate proprietary data. Companies with unique data sets are being offered the opportunity as a result of technology change — specifically, in many cases, artificial intelligence technology change. They're being presented with an opportunity to create more value out of that proprietary data that they own.
Now, what I'm showing you here is a framework — a framework for success for companies in an AI, artificial intelligence era. And this framework was devised by Bank of America back in 2023. And you can see here their list of criteria for AI-enhanced success. What I've done is I've parachuted on top of that Bank of America framework the companies that we own in Finsbury that have these valuable unique data sets. And what I'd like you to agree is that there's a big overlap, there's a big consistency between the assets these companies own and those credentials for success.
Two further things I want to communicate here. The first is, be in no doubt, there are some globally highly significant companies that we own in Finsbury participating in this theme. For instance, Experian. Experian has persuaded 200 million individuals around the world, very, very many of those in the United States, to share with Experian their personal financial affairs. That is a unique asset. There's no comparable asset. None of Experian's competitors have a comparable asset, and it's of enormous strategic value.
Or think about Clarkson's. Clarkson's every day generates more and more data about the $2 trillion global maritime industry. And maybe, I think it's now actually more widely recognised, Relx has been one of the first data companies in the world — one of the first data companies to demonstrate the commercial value of the application of AI tools to professional data, with the success that Relx has enjoyed with its LexisNexis legal division.
I'd also ask you to note that Finsbury's exposure to this core theme is high. It's high in absolute terms. It's also high relative to the shape of the UK stock market. Now, here's the nub of things. Here's the absolute nub of things. And the nub is provided here by this quote from my colleague Madeleine Wright. Madeleine is just about to leave us, actually, on maternity leave. Best wishes, Madeleine, but please do remember to come back. We need you.
What Madeleine says, and I agree, is that investors may be underestimating the potential for revenue growth acceleration in these data-owning businesses as a result of the new products and services that they're currently bringing to their customers. Just to put some flesh on this, I'm showing you here the FTSE 100 companies that meet this theme in the portfolio. I'm just showing their average revenue growth over the last couple of years and comparing it to what we expect revenue growth to be in 2025. As you can see, there is a marked acceleration in their growth rates.
We've just had the Q1, quarter one revenue performance from, LSE, London Stock Exchange Group. There was an acceleration in the group's growth rate, in part driven by the new products and services that LSE has created in its joint venture with Microsoft. A notable acceleration in Rightmove's growth. 250 million client contacts for Rightmove's platform every single day. Those 250 million data points creating new insights and effectively new products almost daily.
Now, this type of acceleration of growth for these sorts of companies is important because history, and specifically the history of NASDAQ over the last decade, has taught us that when data businesses, digital businesses of this type, exhibit secular acceleration in their sales growth, you can often see a big change, a big upward change in the way that their shares are valued. And I just thought it might be interesting to discuss an important Finsbury holding in this context, which is Sage.
Now, as you can see, Sage is currently valued on five times its annual revenues, and that's notably lower than the valuation of some of its peers, mostly US peers. Now, some of those peers are growing more quickly than Sage, sure, but some of them aren't. But actually, here's the point I want to make about Sage. Over the last couple of meetings we've had with Sage executives, at those meetings, Sage executives have voluntarily suggested to us — they voluntarily suggested that they think there's a chance that Sage may be becoming a business that's exhibiting the rule of 40.
Now, you know the rule of 40. That's when you add the operating margins of a business to its revenue growth. And if you get 40% or higher, that's good. And those companies, particularly on NASDAQ, that have sustained the rule of 40 for a period of time, have often been rewarded with much higher valuations. And I don't know — I mean, Sage's executives didn't have to tell us that it might get to the rule of 40, but if it does, then maybe Sage could be valued at more like 10 times its annual sales rather than the current five, you know, if it can deliver.
Now, listen, I'm going to say one more perhaps bold thing about Sage. But just to give you an idea, Sage arguably began to really get its act together as a business back in 2019-2020. And since 2019, Sage's shares have risen up the ranking of the FT All-Share index. Sage is now about 30 places higher in the All-Share than it was back in 2019. Today, Sage is something like the 36th biggest company in the market.
Now, today Sage has a market-beating winning software product in the United States, Sage Intacct. If Sage Intacct can continue being a market-winning product in the United States, and if in addition Sage can help Sage Intacct become a global winning accounting software product — and it's showing good signs of succeeding in that — then to us there's every chance that Sage can carry on going up in the FTSE 100 rankings.
How about Sage becoming a top 10 company listed on the London market? That would take something like a fivefold increase in Sage's current 12 billion market cap. But when you consider the nature of the company and the possible acceleration of the growth rate, maybe, maybe that's not out of the question.
Now, perhaps that's enough on Sage, but just sticking to that prospect that that might not be out of the question, that Sage becomes a top 10 UK company. Consider the history of Relx, the biggest holding today in Finsbury. We've owned it for 20 years or more. Relx began the 21st century as the 68th biggest company in the FTSE 100. Today, Relx is the fifth biggest company in the FTSE 100. Last year, it overtook British Petroleum. It's now a bigger company than BP to become the fifth biggest company in the UK stock market.
And I've mentioned earlier that one of the reasons for that is the acceleration of growth in Relx's legal division, LexisNexis. But consider that Relx's scientific publishing division is three times the size of the legal division in terms of its profits. And yet the introduction of efficiency-enhancing AI-type products to Relx's scientific division is a number of years behind the legal division.
If Relx can achieve for its research division what it has done for its legal division, then maybe, maybe in the next few years we might see Relx actually as the biggest company in the FTSE 100. Why not? Why not? It's a very, very significant global business with a very significant global opportunity.
Now, you'll have noticed on the previous slide, not only has Relx gone up a lot over the last 20 years, it's also outperformed the FT All-Share index. Relx has also, over the 21st century, outperformed the NASDAQ on a total return basis in sterling. And outperforming the NASDAQ has become kind of a sort of stock selection screen for us at Lindsell Train.
We're interested in finding companies, particularly on an overlooked market like the UK. We're interested in finding companies that have done better than the NASDAQ over an appreciable period of time, a decade or a couple of decades or whatever, thinking that if companies have done better than NASDAQ over a meaningful period of time, almost certainly there's something value-creating going on in those companies. After all, NASDAQ has been a tough hurdle to beat in the 21st century.
Now, from that perspective, is it a surprise to you to see on this slide — is it a surprise to see that both Diageo and Unilever have outperformed the NASDAQ in the 21st century on a total return basis in sterling? Diageo has outperformed even after its torrid last couple of years, with Unilever it's not even that close, as you can see. And well done to Unilever for having delivered a double-digit per annum total return for the best part of a quarter of a century.
Now, I'm not showing you this slide because I'm predicting that Unilever and Diageo are going to outperform NASDAQ over the next 25 years. Of course, I have no idea, and maybe I somewhat doubt it. But nonetheless, I think there are two things that this slide conveys. The first is that it does matter when you access a growth index like NASDAQ — maybe at times a speculative growth index like NASDAQ. If you invest in it at the wrong time, then you could have to wait a while before returns start accumulating.
But the second point I want to make here is: is it really such a surprise that Diageo and Unilever should have generated acceptable per annum returns over a measurable period of time? And I would say, well, actually, it's not that much of a surprise. Here are global businesses with global brands that people all around the world aspire to consume, with companies with clear marketing acumen. I know it's just individual brands, but you know, when you look at what Diageo is achieving with Guinness currently, when you look at the continuing growth that Unilever is deriving from its biggest brand, which is the Dove family of brands, at the very, very least, it seems to us that there's good reasons to think that these companies can continue to grind out acceptable per annum returns.
So, just sticking to this 'does it beat NASDAQ' idea, I just wanted to highlight the two newest holdings in Finsbury's portfolio — the two newest that we've disclosed anyway: Clarkson and Intertek. And Clarkson and Intertek are both world-class companies that just happen to be listed on the London market. They're both the best, or amongst the very, very best, at what they do. They both have global clientele. That global clientele clearly highly values the products and services that Clarkson and Intertek provide them.
Both of them, as you can see, have outperformed NASDAQ over a meaningful period of time. And actually, both Clarkson and Intertek have seen some share price weakness, particularly over the last six to nine months. Share price weakness occasioned by the advent of the 47th president of the United States. And to us, that has created an opportunity — an opportunity to accumulate positions in these outstanding, outstanding businesses.
Here's my final slide. It's obvious, Finsbury has a highly concentrated portfolio, as you can see, the top 10 holdings account for over 90% of the total. And listen, let me show you the scars. I know the extent to which that sort of portfolio concentration can cut both ways. But nonetheless — and I don't know if I need to apologize for it, I'm not sure — but nonetheless, I, in all humility, truly, truly in all humility, in all humility, I think we have to continue to take the lessons that Warren Buffett has taught us.
And those lessons are that a way to generate exceptional returns — a way to do it is to run a highly concentrated portfolio concentrated on exceptional businesses. Now, we may have disagreements, you and I, as to whether all of the companies that you see in this top 10 are exceptional. I think we're willing to argue the case for that, but absolutely we've created the concentration.
And I want to remind you, this is an investment trust. It's an investment trust... an open-ended fund couldn't run a portfolio like this. It couldn't be as concentrated. No open-ended fund could run its winners for as long as we can in Finsbury's portfolio. I've got to believe that over time that's a significant competitive advantage for Finsbury, and I've just got to believe that the winning companies that we have here are going to start winning again, or more of them are going to start winning again at the same time, because that's what we need to get this NAV moving.
Thanks so much for your attention. Now, happy to take any questions that I'm sure that you will put to me.
