Murray Income Trust Plc
Q2 2026 update

Portfolio transition

In the weeks following our appointment as manager of the Murray Income Trust plc on 2 March 2026, we reorganised the portfolio so that by 1 April, it replicated our long-standing Artemis Income strategy. Despite volatile markets in March, we were pleased with the outcome of the transition, which was done at better prices and speeds than were modelled.

Performance for the quarter ending 30 June 2026

Since the transition was completed, in the three months to 30 June 2026, the trust’s net asset value (NAV) has increased by 9.1% and its share price has risen by 11.5%. The trust’s benchmark, the FTSE All-Share index, gained 4.7% during this timeframe.

Past performance is not a guide to the future. Source: Lipper Limited/Artemis to 30 June 2026. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the trust. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class. 

*Artemis assumed management of the trust on 2 March 2026. From that date to 30 June 2026, the trust’s NAV return was -1.2%, its share price return was -0.4% and the FTSE All-Share index returned -2.3%. The trust’s portfolio was transitioned to the Artemis Income strategy by 1 April 2026.

Contributors

The trust’s best-performing holdings during the three months to 30 June 2026 included IG Group, Informa, Pearson, Segro and easyJet. Being underweight Shell was a significant contributor to relative returns, as the price of oil fell in reaction to ceasefire negotiations in the Middle East. Being overweight BP detracted for the same reason, but the balance of the two was positive for the trust's performance.

IG Group shares hit an all-time high in May after a positive trading update. Assets under administration passed £20bn and management upgraded revenue growth guidance to between 10 and 15% for the full year. Improvements in culture and innovation introduced by IG's relatively new management team, which has been in situ since 2024, are now manifesting in operational performance. Revenue growth is accelerating and active customers have increased for the fifth consecutive quarter. 

Chief executive officer Breon Corcoran announced a strategic review in March "to make sure IG maximises shareholder value", which was well received by investors. Notwithstanding some recent profit taking thanks to a run of strong performance, we think the setup going forward looks attractive. IG has an undemanding valuation with a 10% free cashflow yield and a strong balance sheet, with about 20% of the company’s market capitalisation in cash.

Pearson rebounded after a difficult spell in February when the company appeared to have been added to the ‘AI loser’ basket. We think the opposite. Pearson is one of relatively few businesses that could benefit from the integration of AI into its offering, thanks to its ownership of difficult-to-replicate proprietary data. We see its assessments and qualifications business as especially valuable in a world that requires ever more proof and verification. Pearson has also been buying back a significant amount of its own shares.

Segro performed strongly following an unsolicited bid from US logistics giant Prologis. The bid took the form of an all-paper offer at net asset value (NAV), to which the board raised a robust and welcome defence. Segro went on to reject Prologis’ third bid on 17 July.

Informa recovered as sentiment improved regarding its exposure to the Middle East. We think the market underappreciates (and perhaps misunderstands) the economics of Informa's industry events. These are long-term, highly profitable assets with strong cash conversion. They also create huge amounts of valuable and unique first-party data. Having invested materially in its technology, Informa is beginning to monetise this data by offering digital lead generation and improving the customer value proposition at its events, serving to make them 'unmissable'. Informa has an 8% free cashflow yield and a 13x forward P/E. We think it offers significant value considering it generates high returns on capital and is a global leader in an industry underpinned by structural growth.

EasyJet rallied after being approached by US private equity firm Castlelake. It rejected Castlelake’s first four proposals before agreeing in principle to a sweetened offer in early July. Apollo Global Management then entered the race on 8 July with a higher proposal, which easyJet has backed. We are reassured to see more widespread recognition of the undervaluation in easyJet's shares.

Detractors

The trust's lack of exposure to HSBC and Rolls-Royce was detrimental to relative returns, but their absence from the portfolio reflects our belief that we have found better ideas for the trust's capital.

Among the stocks we do own, Imperial Brands was the biggest detractor, as ‘risk on’ sentiment returned and investors rotated away from more defensive areas. A weaker-than-expected first-half update also played a part, with management making cautious comments around market share losses in the company’s top five markets. 

As we have discussed in the past, we continue to scratch our heads over our allocation to tobacco. On the one hand, valuations are undemanding, cash generation remains substantial and shareholders stand to make decent returns through a combination of dividends and share buybacks. (Imperial Brands has bought back about 15% of its market cap in the past three years). On the other hand, we see mounting risks of a more stringent regulatory environment for next-generation products, particularly vapes. At a free cashflow yield of more than 10% – which could grow rapidly through operational execution and share buybacks – we believe the shares offer attractive value.

Smith & Nephew sold off along with healthcare more broadly. We believe the market continues to mis-analyse this company and is too focused on its admittedly challenged orthopaedics business, which contributes about 40% of Smith & Nephew's revenues and a third of its cashflow. However, its other divisions – sports medicine and wound management – are high-quality, high-margin businesses that are among the market leaders in industries underpinned by structural growth. As these two divisions continue to grow, they should account for an ever-larger proportion of group sales, earnings and cashflows. Furthermore, we have seen signs over the past 12 months that the orthopaedics division is stabilising and we believe more ‘self-help’ measures could be enacted. All in all, we believe the current valuation (a P/E of 14x and a 6% free cashflow yield) offers attractive long-term risk/reward.

Tesco shares declined in May, largely in response to the market remaining extremely competitive. At times, Tesco can be seen as a bellwether of the UK and something of a political football, albeit a small one. We believe Tesco possesses the scale, balance sheet and management team to remain the market leader. Perhaps contrary to what one might expect, Tesco has a much higher online market share (35%) than Ocado (15%). Its command of technology is a particular advantage and we think the value of its Clubcard data is significantly underestimated. We were not surprised to see the shares sell off – they have been strong performers of late, as investors have favoured companies with little risk of AI disruption. Nonetheless, we continue to view Tesco as a core holding that looks well placed to compound cashflow, dividends and total returns.

Activity

We initiated a holding in Reckitt during the second quarter. Reckitt's market cap fell by almost £15bn from March to May, a drawdown of some 30%. After this fall, the shares offered a dividend yield of close to 5% and traded at their lowest P/E of the past two decades. We have owned Reckitt in the past – selling the shares in 2017 – so we retain a working knowledge of the business and we could see no new fundamental reason for the share price to reflect an impaired outlook. One explanation given was that Reckitt derives more than 40% of its revenue from emerging markets. This was interpreted negatively by investors, given oil price sensitivity and the Iran conflict. We can’t but help look at it another way. We think emerging markets exposure is positive for long-term shareholders. We also note the amount of M&A in the consumer goods sector and would not be surprised to see Reckitt attracting interest due to its portfolio of brands, category mix and long-term growth potential.

Outlook

The volume of macroeconomic noise is understandably loud at the moment. We don't see any merit in trying to second guess markets in the short term; over the long term, we believe cashflow, dividends and valuations are what will set the course for returns. This is where we remain focused: building a diversified portfolio of cashflows that are underappreciated by the market and where we believe each holding offers something in its own right. 

The bids for Segro and easyJet illustrate how undervalued parts of the UK equity market are. We believe several more companies in our portfolio could be vulnerable to an approach. This should underpin share prices as M&A activity ticks up for UK companies. 

Meanwhile, we take comfort in a portfolio that trades on an undemanding valuation of 12.4x earnings, with a higher dividend yield than the benchmark (3.7% versus 3.2%) that is well covered by free cashflow. We believe the portfolio offers compelling risk/reward and are optimistic as to its prospective returns over the medium to long term. Given the current discount to NAV, the ongoing management fee holiday and the commitment to retain the trust’s Dividend Hero status, we believe Murray Income represents an attractively valued and compelling investment.