11 Oct 2018 07:00
Legal Entity Identifier: 213800N1B1HCQG2W4V90
TR EUROPEAN GROWTH TRUST PLC
Annual Financial Results for the year ended 30 June 2018
This announcement contains regulated information
Investment Objective
The Company seeks capital growth by investing in smaller and medium sized companies which are quoted, domiciled, listed or have operations in Europe.
Highlights
· Net Asset Value total return1 of 0.6% compared to a total return from the benchmark2 of 6.9%
· Share price3 total return of -3.2%
· Total dividend of 19.00p for the year, up 21.7% on the prior year
· The discount4 widened to -11.0% (2017: -6.5%)
Total return performance for the year to 30 June 2018 (including dividends reinvested and excluding transaction costs) | ||||
1 year % | 3 years % | 5 years % | 10 years % | |
NAV5 | 0.6 | 75.3 | 148.2 | 184.8 |
Benchmark index | 6.9 | 65.6 | 109.3 | 164.2 |
Average sector NAV6 | 8.0 | 70.8 | 120.8 | 193.4 |
Share price | -3.2 | 71.4 | 171.0 | 185.3 |
Average sector share price7 | 5.3 | 66.4 | 133.8 | 215.3 |
Financial highlights
At 30 June 2018 | At 30 June 2017 | |
Shareholders' funds | ||
Net assets (£'000) | 574,591 | 569,459 |
NAV per ordinary share | 1,146.70p | 1,145.48p |
Share price | 1,020.00p | 1,071.00p |
Year ended 30 June 2018 | Year ended 30 June 2017 | |
Profit for year | ||
Net revenue profit (£'000) Net capital profit (£'000) | 11,025 | 8,509 191,031 |
(1,089) | ||
----------- | ||
Total return | 9,936 | 199,540 |
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Total return per ordinary share | ||
Revenue | 22.06p | 17.09p |
Capital | (2.18p) | 383.67p |
----------- | ||
Total return per ordinary share | 19.88p | 400.76p |
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Ongoing charge8 | 0.71% | 0.75% |
1. Net Asset Value ('NAV') total return per share (including dividends reinvested)
2. Euromoney Smaller European Companies Index (ex UK) total return and expressed in Sterling
3. Share price total return (including dividends reinvested) using mid-market closing price
4. Calculated using published daily NAVs including current year revenue
5. NAV per ordinary share with income reinvested for 1, 3 and 5 years and capital NAV plus income reinvested for 10 years
6. The sector is the AIC European Smaller Companies sector
7. Average share price for the AIC European Smaller Companies sector
8. Using total expense ratio methodology for 2011 and previous years; ongoing charge methodology thereafter. Data is not available for periods prior to 2010
Sources: Janus Henderson, Morningstar for the AIC, Datastream
Chairman's Statement
Performance
The 2018 financial year produced muted results following an exceptionally strong performance for the prior year. Our net asset value total return per share for the year ended 30 June 2018, was 0.6% compared to a total return for the benchmark of 6.9%. An explanation of the performance is given in the Fund Manager's Report. The share price total return for the year was -3.2%.
However, over the three year qualifying period for the performance fee, the Company has delivered a net asset value total return per share of 75.3% against a benchmark of 65.6%, and share price total return of 71.4%. As a consequence of the outperformance over the three year qualifying period we will be paying a performance fee to the Manager for the year of £1,300,000 (2017: £3,800,000). This is equal to 0.2% of net assets as at 30 June 2018 (2017: 0.7%).
Revenue and dividends
Revenue return per share was 22.06p (2017: 17.09p), a rise of 29.1%. We are proposing, subject to shareholder approval at our Annual General Meeting, a final dividend per ordinary share of 14.00p, an increase of 21.7% over last year's final dividend of 11.50p, bringing the total dividend for the year to 19.00p. This represents an overall increase of 31.0% in the dividends paid last year.
Share issues
In the early part of the year, the shares traded at a modest premium to net asset value enabling the Company to issue 395,000 shares, raising a total of £4,963,000.
Management fees
We are pleased to confirm that a reduction in the base fee has been agreed with the Manager. With effect from 1 October 2018 the fee will reduce from 0.6% to 0.5% of net assets over the value of £500m. For assets under this amount, the fee will remain unchanged.
The Board further considered the continuing use of a Performance Fee. We opted to retain this as it incentivises, and appropriately rewards good performance by, the Manager. Its inclusion enables the Company to maintain a lower base fee than its direct competitors.
Key Information Document
In line with the new European regulations for packaged investment products which took effect in January 2018, a Key Information Document ("KID") has been produced for the Company. The KID is based on prescribed guidelines with almost no room for deviation. The projected returns are derived from past performance and in the view of the Board should be treated with caution. The measure of risk is calculated according to the historic volatility of weekly returns and in our view is not likely to match the perception or meaning of risk for most private investors
Governance
We noted the revised UK Corporate Governance Code issued by the Financial Reporting Council in July 2018 (the "2018 Code"). The Board has reviewed its governance arrangements in light of the 2018 Code. All Directors will be standing for annual re-election commencing at the upcoming Annual General Meeting ("AGM") in November.
Annual General Meeting
Shareholders are encouraged to attend the AGM on Monday 19 November 2018 at 201 Bishopsgate, London, EC2M 3AE. The meeting will start at 12.30 pm and will include a presentation by the Fund Manager, Ollie Beckett, and be followed by an opportunity for shareholders to meet the Board and the management team.
The Notice of Meeting, and full details of the resolutions to be proposed, are included in a separate document which will be posted to shareholders with the Annual Report. The Directors recommend that shareholders vote in favour of all of the proposed resolutions as they intend to do in respect of their own beneficial holdings.
Outlook
It has been a more challenging year for the Company compared to last year, with a dip in performance and the discount widening from 6.5% at the start of the year to 11.0% by 30 June 2018, after briefly trading at a premium in late 2017.
However, the European smaller companies area of the stock market remains filled with opportunity despite a backdrop of noisy, high-conflict politics within Europe and beyond. No doubt the UK departure from the European Union at the end of March 2019 will attract some headlines in the coming year. We can but hope for clarity in the UK relationship with the EU thereafter. As interest rates in the US begin to increase for the first time in many years, our Fund Manager has a keen eye on the broader macroeconomic environment but, as ever, will continue to seek out attractively valued stocks that can generate returns for the Company and our shareholders.
Audley Twiston-Davies
Chairman
Fund Manager's report
The Fund Manager, Ollie Beckett, reports on the year to 31 June 2018. The Fund Manager is assisted by the Deputy Fund Manager, Rory Stokes.
Introduction
The year to June 2018 was unremarkable from a stock market perspective and disappointing from a fund perspective. Politics remained a source of drama, with Italian elections delivering a majority for the "populists" and German elections forcing a protracted coalition negotiation, which in turn seemed to undermine the Eurozone economic reform ambitions of French President Macron. In the US, President Trump continued to develop policy by Twitter and threatened trade wars. We have long subscribed to the view that politics in Europe is less important than the economics. The uncertainty in escalating global trade means there is potential for politics and economics to interact. More broadly the economic environment has been fine, but not as good as many market participants had perhaps hoped. A seemingly more hawkish Federal Reserve set on raising interest rates, the elevated risk of trade war and general concerns about the age of the economic cycle have interlinked to create increased volatility and incrementally raise the cost of capital. Our interpretation of the current situation is that if interest rates do rise it will be led by the US, slower than expected and not followed in the Eurozone with any real urgency. Trade wars are currently showing no sign of a quick resolution. However, it is very possible that ultimately we have a general lowering of tariffs globally and greater opening up of Chinese markets.
The financial year to June 2018 saw the portfolio give a total return of 0.6%, lagging the benchmark, which delivered 6.9%. The year was characterised by reasonable performance in the first nine months followed by poor performance in the final quarter of the financial year. This came off the back of a very strong year to 30 June 2017 which saw the Company outperform the benchmark by 18.2%.
Valuations have increased substantially in recent years within the European smaller companies sector. There is still relative value compared to most other asset classes, but companies need to be able to deliver earnings growth either through top line growth or by cost-cutting to justify valuations. Notwithstanding this, we continue to find undervalued opportunities and neglected stocks in which to invest the Company's capital.
The Portfolio
We have positioned the portfolio aiming to blend structural growth stories, self-help and mis-priced equity. What we pay for something is always a consideration. To that end, we have added French semiconductor material manufacturer S.O.I.T.E.C. to the portfolio as a structural growth story. S.O.I.T.E.C. sells products such as silicon-on-insulator substrates that improve power consumption, performance and cost for processors going into products from mobile telephony to automotive. The technology is being embraced by large players in the semiconductor industry and sales grew 26.4% in the year to March 2018. We also invested in Barco as a self-help story. Barco is a Belgian conglomerate that has market leading technology in cinema projectors, a high growth business in Clickshare, which is a wireless presentation system, and a control rooms business that installs and integrates screens for control room video walls. Each part of the business has its own challenges such as managing a technology cycle in projectors, high growth in Clickshare and margin improvement in control rooms. We believe the relatively new management team can drive each part of the business and create value. We also invested in Norway's leading electricity retailer that intends to consolidate the highly fragmented market.
Performance Attribution
The Company lagged the benchmark for the financial year due to a collection of stock specific issues causing earnings downgrades exacerbated by stock markets being highly focused on earnings momentum. The principal culprits weighing on the Company's performance were Italian clothing retailer OVS, which warned on trading after the poor weather in the first calendar quarter in 2018 and had to write down its investment, as well as further reducing exposure to its minority interest in Swiss retailer Charles Vogele. We do not think the business is fundamentally broken and consider the equity to be cheap. French flash sale site SRP Groupe persistently failed to hit forecast sales and margin projections. We disposed of the position as our growing reservations about the business model were exacerbated by our lack of faith in the management team. Ion Beam Appliances ("IBA"), a Belgian proton therapy equipment manufacturer whose products are used for treating cancer, suffered as it failed to deliver new orders following a couple of strong years which had boosted market expectations to levels that, it subsequently turned out, were not achievable. We have added to the position as we view the IBA market position as being strategic; there are only two serious players in proton therapy and we are of the view that it will take market share for cancer treatment in the years to come.
The stocks that weighed on performance were partially offset by strong performance from names such as French investment company Tikehau Capital, which focuses on alternative assets. The stock performed well in the period and remains attractively valued. Performance from Dutch listed speciality metal and mineral products company AMG Advanced Metallurgical was also strong, partly due to the attractive Tantalum price, but mostly as a result of a re-rating of the equity as the stock market understood that their lithium business was very well positioned in a world where lithium ion batteries are likely to be the principal energy source for cars. We benefited from the investment in French supplier of linings for Liquified Natural Gas ("LNG") container ships, Gaztransport & Technigaz, which began to receive orders after a quiet spell whilst energy prices were low. Their very high market share and the strong demand backdrop for LNG leave this company well placed for the future.
Geographical and Sector Distribution
Our investment process is fundamentally one of bottom-up stock picking, rather than allocating capital to specific sectors or geographies, though we keep a keen eye on the overall portfolio structure in order to avoid risk concentrations. We do not use the benchmark as a guide to structure and are content to run the portfolio with substantial divergence from the benchmark.
We remain significantly overweight in Germany as we continue to find terrific businesses offering attractive valuations or substantial growth. We added names such as meal-kit provider HelloFresh, which grew revenue 51.6% in 2017 as consumers embrace their model of supplying pre-measured fresh ingredients for the preparation of healthy meals. We also added automotive engineering consultancy EDAG, which had suffered due to the uncertainty around the German automotive industry caused by "dieselgate", allowing us to buy at an attractive price, but which is now benefiting as the Automotive original equipment manufacturers in Germany scramble to catch up on electric vehicles. We bought into pharmaceutical product and medical device company Dermapharmaceutical, which provides products such as mega-dosage vitamin D tablets, Dekristol.
We are overweight in Finland where we added specialty paper company Ahlstrom-Munksjo to the portfolio. Ahlstrom-Munksjo provides niche paper products such as release papers that are used for labels, health care materials and specialist filtration products. The business has been focused on improving margins and repricing the products, which it has done successfully despite the headwind of a rising pulp price.
The Netherlands is another country where the portfolio is significantly overweight compared to the benchmark. We have added names such as value-added distributor B&S, marine services such as dredging and salvage business Boskalis Westminster, monopile foundations for offshore wind turbine manufacturer SIF and navigation technology company TomTom.
The portfolio is underweight in Spain and Sweden, where we struggle to find appealingly valued stocks.
The sector exposure of the portfolio is heavily overweight in the Technology sector, a position that we have consistently held for the last few years. We added names such as PVA Tepla, which produces high-tech industrial materials for the semiconductor industry. We also bought back into Dialog Semiconductor, which has suffered due to Apple taking the production of the iPhone power management chips, which Dialog developed, in-house. We see good value in a break-up and sale of the company. We also added Italian supplier of HVAC control systems, Carel Industries. The portfolio is overweight to the Industrial sector and added names such as mining and minerals processing equipment manufacturer Outotec and provider of lithium ion batteries for buses and other large vehicles, Akasol.
The portfolio is underweight in the Real Estate sector, where we struggle to find mis-valued opportunities with significant upside, and the Food, Beverage and Tobacco sector, where valuations look too high for businesses offering underwhelming returns.
Other Purchases
Other substantial purchases included Caverion in Finland, which provides building systems and industrial services in the Nordic countries and Russia. We also invested in Swiss-listed industrial conglomerate Metall Zug that makes products ranging from wire processing machines to washing machines.
Other Disposals
We fully exited our position in Belgian listed EVS Broadcast Equipment, which makes equipment for the live production of television. The company has struggled to grow and we developed concerns about the strategic positioning of their offering as broadcast markets for sports fragment with internet broadcasting. We also exited our position in Europcar, which has wrestled with delivering on market forecasts of earnings. We exited our position in Dutch technology hardware manufacturer ASM International as we developed reservations about the quality of the earnings. We sold our position in Puma on valuation grounds after a successful turnaround of the business.
Brexit
The Company rarely invests directly in UK listed businesses, but will do so if the company is domiciled in Europe or has significant exposure to European economies. We are currently invested in Irish building material distributor Grafton, which has a UK listing and meaningful UK economy exposure. Furthermore, a number of other stocks within the portfolio do have substantial sales in the UK. In the instance of an economically dislocating event around Brexit these stocks may suffer. We continue to monitor the situation actively.
Gearing
Gearing levels varied between 9% and 15% over the course of the financial year. We use the debt facility to maintain flexibility and freedom of action over the year as investment opportunities arose, freeing us from the need to urgently raise cash by selling assets at poor prices. The gearing also offers the potential to enhance returns in a rising market.
Market Capitalisation Range
We have continued to focus the portfolio towards small and medium sized companies, with a weighted average market capitalisation of £1.2bn as of 30 June 2018. The largest company in the portfolio was FinecoBank at £5.2bn and the smallest was Silmaasema at £69m.
Unquoted Investments
The Company has substantially reduced the exposure to unquoted investments during the reporting period and into the early part of the 2019 financial year. At the date of this report, these investments had been reduced to nil compared to representing 2.1% of the portfolio a year ago.
Investments in Doughty Hanson & Co. Fund III and 21 Centrale Partners represented less than 0.1% of NAV as at 30 June 2018, with distributions from the former being received in full by the end of August 2018. In the early part of the current financial year, we disposed of our holding in BrainLab, which represented 2.9% of NAV as at 30 June 2018.
Currency
The Company remains denominated in Sterling and invests in largely Euro denominated assets. We do not hedge this currency exposure.
Outlook
Stock markets are currently grappling with understanding the implications of rising rates in the US, the end of Quantitative Easing in Europe, the threat of trade wars, slowing economic growth in China, the disruptive effects of technology and an economic cycle that is now ten years old. Whilst the global economic backdrop is still reasonably positive, the cycle looks somewhat stale and volatility is likely to remain an ongoing feature. Global politics will remain a source of noise, not least in Europe where noisy extremists on the left and the right continue to take ground in national elections across the continent.
However, Europe continues to be a source of outstanding companies producing world leading products in high-tech and high-growth niche markets. We continue to find businesses that have been neglected by the wider market or are misunderstood self-help stories. The stock markets have been through a ten year period of chasing momentum over value that has reached extreme levels in recent months. There are a large number of good businesses that are mispriced for no reason other than they have not delivered earnings upgrades in recent quarters. We note that other pools of capital such as trade buyers and private equity are less focused on the recent earnings performance of a company and more upon the fundamental value and cash generation properties of these businesses. As the cycle matures further we would expect a pick-up in mergers and acquisitions activity which will favour funds invested in attractively priced stocks.
Europe has closed some of the gap with the broader global economy in the last year, but there is still a considerable earnings gap with the broader global economy in terms of recovery from the financial crisis. Whilst valuations are no longer outright cheap, this growth potential leaves European smaller companies looking like an attractive hunting ground. We are not struggling to find exciting investment opportunities to which the Company can allocate capital. Recent performance has been disappointing, but we remain confident that we can deliver good returns for our investors in the coming year.
Ollie Beckett and Rory Stokes
10 October 2018
Sector exposure at 30 June 2018 (% of portfolio excluding cash)
2018 % | 2017 % | |
Industrial Goods | 22.7 | 20.3 |
Technology | 16.4 | 17.2 |
Basic Materials | 15.9 | 13.4 |
Financial | 15.2 | 13.5 |
Consumer Goods | 11.0 | 10.2 |
Business Providers | 10.7 | 16.4 |
Retail Providers | 7.5 | 8.5 |
Natural Resources | 0.6 | 0.5 |
Geographic exposure at 30 June 2018 (% of portfolio excluding cash)
2018 % | 2017 % | |
Austria | 2.1 | 1.4 |
Belgium | 4.3 | 3.6 |
Denmark | 2.4 | 3.5 |
Finland | 11.1 | 9.3 |
France | 12.0 | 12.2 |
Germany | 19.0 | 21.2 |
Greece | 0.6 | 1.0 |
Ireland | 2.5 | 0.8 |
Italy | 8.5 | 12.3 |
Netherlands | 12.5 | 8.8 |
Norway | 6.3 | 5.1 |
Portugal | 0.8 | 1.6 |
Spain | 0.7 | 3.0 |
Sweden | 8.9 | 6.7 |
Switzerland | 8.3 | 9.5 |
Principal risks
The Board, with the assistance of the Manager, has carried out a robust assessment of the principal risks and uncertainties facing the Company that would threaten its business model, future performance, solvency and liquidity. A matrix of these risks has been drawn up and steps taken to mitigate these. The principal risks and mitigating measures are as follows and remain unchanged throughout the year under review:
· Investment activity and performance
An inappropriate investment strategy (for example, in terms of asset allocation or the level of gearing) may result in underperformance against the Company's benchmark index and the companies in its peer group.
The Board monitors investment performance at each Board meeting and regularly reviews the extent of its borrowings.
· Portfolio and market price
Although the Company invests almost entirely in securities that are listed on recognised markets, share prices may move rapidly. The companies in which investments are made may operate unsuccessfully, or fail entirely. Investments in European stock markets may be impacted by political events. A fall in the market value of the Company's portfolio would have an adverse effect on shareholders' funds.
The Fund Manager seeks to maintain a diversified portfolio to mitigate against this risk. The Board regularly reviews the portfolio, activities and performance.
· Tax and regulatory
A breach of Section 1158/1159 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation tax. A breach of the Listing Rules could result in suspension of the Company's shares, while a breach of the Act could lead to criminal proceedings, or financial or reputational damage.
The Manager provides investment, company secretarial, administration and accounting services through qualified professionals. The Board receives internal control reports produced by the Manager on a quarterly basis, which confirm regulatory compliance.
· Operational
Disruption to, or failure of, the Manager's accounting, dealing or payment systems or the custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. The Company is exposed to the operational risk that one or more of its service providers may not provide the required level of service.
The Board monitors the services provided by its third-party service providers and receives reports on the key elements in place to provide effective internal control.
Viability Statement
The Board considers the Company's viability over a three year period. The Directors believe this is a reasonable period reflecting the longer-term investment horizon of the Company, as well as that of its investors, and the inherent shorter term uncertainties in equity markets.
The Board considers the Company's viability as part of their continuing programme of monitoring risk. In carrying out their assessment, the Board takes account of the likely impact of the principal risks facing the Company materialising in severe, but plausible, scenarios. In particular, the Board considers the investment strategy, market risk, level of gearing, specifically the duration of the Company's borrowing facilities and how a breach of any covenants could impact on the Company's net asset value and share price, and the liquidity of the portfolio. The evaluation of the mitigating controls currently in place, and their effectiveness, forms part of the assessment.
The Board concluded that the Company's assets are liquid, its commitments are limited and the Company intends to continue operating as an investment trust. No significant changes to the current principal risks and the mitigating controls in place are anticipated. The Board does not currently envisage any material change in the Investment Objective or Policy, and are not aware of any events that would prevent the Company from continuing to operate in its current capacity.
Based on this assessment, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next three year period from the date of this announcement.
Related party transactions
The Company's transactions with related parties in the year were with the Directors, the subsidiary and the Manager, Janus Henderson. There have been no material transactions between the Company and its Directors during the year. The only amounts paid to them were in respect of expenses and remuneration for which there were no outstanding amounts payable at the year end. The Company has paid expenses on behalf of the subsidiary as set out in the Annual Report.
In relation to the provision of services by the Manager, other than fees payable by the Company in the ordinary course of business, which included marketing services, there have been no material transactions affecting the financial position of the Company during the year under review.
Directors' responsibility STATEMENTS
Each of the Directors confirms that, to the best of his or her knowledge:
· the Group financial statements prepared in accordance with IFRSs adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit and loss of the issuer and the undertakings included in the consolidation taken as a whole; and
· the Strategic Report includes a fair review of the development and performance of the business and the position of the Group and Parent Company, together with a description of the principal risks and uncertainties that it faces.
For and on behalf of the Board
Christopher Casey
Director
Consolidated Statement of Comprehensive Income
Year ended 30 June 2018 | Year ended 30 June 2017 | |||||
Revenue return £'000 | Capital return £'000 | Total return £'000 | Revenue return £'000 | Capital return £'000 | Total return £'000 | |
Investment income | 13,669 | - | 13,669 | 10,656 | - | 10,656 |
Gains on investments held at fair value through profit or loss | - | 3,694 | 3,694 | - | 197,673 | 197,673 |
--------- | ---------- | ----------- | --------- | ---------- | ----------- | |
Total income | 13,669 | 3,694 | 17,363 | 10,656 | 197,673 | 208,329 |
Expenses | ||||||
Management and performance fees (note 2) | (701) | (4,103) | (4,804) | (597) | (6,186) | (6,783) |
Other operating expenses | (715) | - | (715) | (582) | - | (582) |
--------- | ---------- | ---------- | --------- | ---------- | ---------- | |
Profit/(loss) before finance costs and taxation | 12,253 | (409) | 11,844 | 9,477 | 191,487 | 200,964 |
Finance costs | (170) | (680) | (850) | (114) | (456) | (570) |
--------- | -------- | --------- | --------- | -------- | --------- | |
Profit/(loss) before taxation | 12,083 | (1,089) | 10,994 | 9,363 | 191,031 | 200,394 |
Taxation | (1,058) | - | (1,058) | (854) | - | (854) |
--------- | --------- | ---------- | --------- | --------- | ---------- | |
Profit/(loss) for the year and total comprehensive income | 11,025 | (1,089) | 9,936 | 8,509 | 191,031 | 199,540 |
===== | ====== | ====== | ===== | ====== | ====== | |
Return per ordinary share - basic and diluted (note 3) | 22.06p | (2.18p) | 19.88p | 17.09p | 383.67p | 400.76p |
====== | ====== | ====== | ====== | ====== | ====== | |
The total column of this statement represents the Consolidated Statement of Comprehensive Income, prepared in accordance with IFRSs, as adopted by the European Union.
The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
All income is attributable to the equity holders of TR European Growth Trust PLC, the Parent Company.
| ||||||
Consolidated Statement of Changes in Equity
Year ended 30 June 2018 | ||||||
Called up share capital £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Other capital reserves £'000 | Revenue reserve £'000 | Total £'000 | |
Total equity at 1 July 2017 | 6,214 | 115,451 | 13,964 | 407,102 | 26,728 | 569,459 |
Total comprehensive income: | ||||||
(Loss)/profit for the year | - | - | - | (1,089) | 11,025 | 9,936 |
Transactions with owners, recorded directly to equity: | ||||||
Ordinary dividends paid | - | - | - | - | (9,767) | (9,767) |
Proceeds from the issue of ordinary shares | 50 | 4,913 | - | - | - | 4,963 |
------- | ---------- | --------- | ---------- | --------- | ---------- | |
Total equity at 30 June 2018 | 6,264 | 120,364 | 13,964 | 406,013 | 27,986 | 574,591 |
==== | ====== | ===== | ====== | ===== | ====== | |
Year ended 30 June 2017 | ||||||
Called up share capital £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Other capital reserves £'000 | Revenue reserve £'000 | Total £'000 | |
Total equity at 1 July 2016 | 6,247 | 115,451 | 13,931 | 218,118 | 23,936 | 377,683 |
Total comprehensive income: | ||||||
Profit for the year | - | - | - | 191,031 | 8,509 | 199,540 |
Transactions with owners, recorded directly to equity: | ||||||
Ordinary dividends paid | - | - | - | - | (5,717) | (5,717) |
Buy back of ordinary shares for cancellation | (33) | - | 33 | (2,047) | - | (2,047) |
------- | ---------- | --------- | ---------- | --------- | ---------- | |
Total equity at 30 June 2017 | 6,214 | 115,451 | 13,964 | 407,102 | 26,728 | 569,459 |
===== | ====== | ===== | ====== | ===== | ====== | |
Parent Company Statement of Changes in Equity
Year ended 30 June 2018 | ||||||
Called up share capital £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Other capital reserves £'000 | Revenue reserve £'000 | Total £'000 | |
Total equity at 1 July 2017 | 6,214 | 115,451 | 13,964 | 408,143 | 25,687 | 569,459 |
Total comprehensive income: | ||||||
(Loss)/Profit for the year | - | - | - | (1,090) | 11,026 | 9,936 |
Transactions with owners, recorded directly to equity: | ||||||
Ordinary dividends paid | - | - | - | - | (9,767) | (9,767) |
Proceeds from issue of ordinary shares | 50 | 4,913 | - | - | - | 4,963 |
Total equity at 30 June 2018 | 6,264 | 120,364 | 13,964 | 407,053 | 26,946 | 574,591 |
==== | ====== | ===== | ====== | ===== | ====== | |
Year ended 30 June 2017 | ||||||
Called up share capital £'000 | Share premium account £'000 | Capital redemption reserve £'000 | Other capital reserves £'000 | Revenue reserve £'000 | Total £'000 | |
Total equity at 1 July 2016 | 6,247 | 115,451 | 13,931 | 219,161 | 22,893 | 377,683 |
Total comprehensive income: | ||||||
Profit for the year | - | - | - | 191,029 | 8,511 | 199,540 |
Transactions with owners, recorded directly to equity: | ||||||
Ordinary dividends paid | - | - | - | - | (5,717) | (5,717) |
Buy-back of Ordinary shares for cancellation | (33) | - | 33 | (2,047) | - | (2,047) |
-------- | ---------- | --------- | ---------- | --------- | ---------- | |
Total equity at 30 June 2017 | 6,214 | 115,451 | 13,964 | 408,143 | 25,687 | 569,459 |
==== | ====== | ===== | ====== | ===== | ====== | |
Consolidated and Parent Company Balance Sheets
At 30 June 2018 Consolidated £'000 | At 30 June 2017 Consolidated £'000 | At 30 June 2018 Company £'000 | At 30 June 2017 Company £'000 | |
Non current assets | ||||
Investments held at fair value through profit or loss | 626,057 | 621,237 | 627,028 | 622,209 |
----------- | ----------- | ----------- | ----------- | |
Current assets | ||||
Receivables | 2,170 | 3,711 | 2,170 | 3,711 |
Cash and cash equivalents | 121 | 57 | 118 | 54 |
---------- | ---------- | ---------- | ---------- | |
2,291 | 3,768 | 2,288 | 3,765 | |
---------- | ---------- | ---------- | ---------- | |
Total assets | 628,348 | 625,005 | 629,316 | 625,974 |
---------- | ---------- | ---------- | ---------- | |
Current liabilities | ||||
Payables | (7,627) | (6,360) | (8,595) | (7,329) |
Bank overdrafts | (46,130) | (49,186) | (46,130) | (49,186) |
---------- | ---------- | ---------- | ---------- | |
(53,757) | (55,546) | (54,725) | (56,515) | |
---------- | ---------- | ---------- | ---------- | |
Net assets | 574,591 | 569,459 | 574,591 | 569,459 |
====== | ====== | ====== | ====== | |
Equity attributable to equity shareholders of the parent company | ||||
Called up share capital | 6,264 | 6,214 | 6,264 | 6,214 |
Share premium account | 120,364 | 115,451 | 120,364 | 115,451 |
Capital redemption reserve | 13,964 | 13,964 | 13,964 | 13,964 |
Retained earnings: | ||||
Other capital reserves | 406,013 | 407,102 | 407,053 | 408,143 |
Revenue reserve | 27,986 | 26,728 | 26,946 | 25,687 |
---------- | ---------- | ----------- | ----------- | |
Total equity (note 4) | 574,591 | 569,459 | 574,591 | 569,459 |
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Net asset value per ordinary share - basic and diluted (note 4) | 1,146.70p | 1,145.48p | 1,146.70p | 1,145.48p |
======= | ====== | ======= | ====== | |
The net profit of the Parent Company for the year was £9,936,000 (2017: £199,540,000). | ||||
Consolidated and Parent Company Cash Flow Statements
Year ended 30 June 2018 | Year ended 30 June 2017 | |||
Consolidated £'000 | Company £'000 | Consolidated £'000 | Company £'000 | |
Operating activities | ||||
Profit before taxation | 10,994 | 10,994 | 200,394 | 200,394 |
Add back: interest payable | 850 | 850 | 570 | 570 |
Less: gains on investments held at fair value through profit or loss | (3,694) | (3,693) | (197,673) | (197,670) |
Sales of investments held at fair value through profit or loss | 389,344 | 389,344 | 286,750 | 286,750 |
Purchases of investments held at fair value through profit or loss | (390,048) | (390,048) | (295,407) | (295,407) |
Withholding tax on dividends deducted at source | (1,689) | (1,689) | (1,304) | (1,304) |
Decrease/(increase) in prepayments and accrued income | 66 | 66 | (173) | (173) |
Decrease/(increase) in amounts due from brokers | 1,840 | 1,840 | (2,025) | (2,025) |
(Decrease)/increase in accruals and deferred income | (2,472) | (2,473) | 2,742 | 2,739 |
Increase/(decrease) in amounts due to brokers | 3,739 | 3,739 | (148) | (148) |
---------- | ---------- | ---------- | ---------- | |
Net cash inflow/(outflow) from operating activities before interest and taxation | 8,930 | 8,930 | (6,274) | (6,274) |
---------- | ---------- | ---------- | ---------- | |
Interest paid | (850) | (850) | (570) | (570) |
Taxation recovered | 266 | 266 | 459 | 459 |
---------- | ---------- | ---------- | ---------- | |
Net cash inflow/(outflow) from operating activities | 8,346 | 8,346 | (6,385) | (6,385) |
---------- | ---------- | ---------- | ---------- | |
Financing activities | ||||
Equity dividends paid (net of refund of unclaimed Dividends - see note 5) | (9,767) | (9,767) | (5,717) | (5,717) |
Issue of ordinary shares | 4,963 | 4,963 | - | - |
Buy back of ordinary shares for cancellation | - | - | (2,047) | (2,047) |
Net (repayment)/drawdown of bank overdraft | (3,478) | (3,478) | 14,133 | 14,133 |
---------- | ---------- | ---------- | ---------- | |
Net cash used in financing | (8,282) | (8,282) | 6,369 | 6,369 |
---------- | ---------- | ---------- | ---------- | |
Increase/(Decrease) in cash and cash equivalents | 64 | 64 | (16) | (16) |
Cash and cash equivalents at the start of year | 57 | 54 | 73 | 70 |
---------- | ---------- | ---------- | ---------- | |
Cash and cash equivalents at the end of year | 121 | 118 | 57 | 54 |
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Comprising: | ||||
Cash at bank | 121 | 118 | 57 | 54 |
---------- | ---------- | ---------- | ---------- | |
121 | 118 | 57 | 54 | |
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Notes to the Financial Statements
1. Accounting policies TR European Growth Trust PLC is a Company incorporated and domiciled in the United Kingdom under the Companies Act 2006. The consolidated and Parent Company financial statements for the year ended 30 June 2018 have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and with those parts of the Companies Act 2006 (the "Act") applicable to companies reporting under IFRSs. IFRSs comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), together with interpretations of the International Accounting Standards and Standing Interpretations Committee ("IFRS IC") that remain in effect to the extent that IFRSs have been adopted by the European Union. The accounting policies have been consistently applied in the current and previous year.
The financial statements have been prepared on a going concern basis. They have also been prepared on the historical cost basis, except for the revaluation of certain financial instruments at fair value through profit or loss. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice ("SORP") for investment trusts issued by the Association of Investment Companies ("AIC") in November 2014 and updated in February 2018 with consequential amendments is consistent with the requirements of IFRSs, the Directors have sought to prepare the financial statements on a basis consistent with the recommendations of the SORP. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Going concern The Group's shareholders are asked every three years to vote for the continuation of the Company. An ordinary resolution to this effect was put to the Annual General Meeting ("AGM") held on 21 November 2016 and passed by the substantial majority of the shareholders. The next such resolution will be put to the shareholders at the AGM in 2019. The assets of the Group consist mainly of securities that are listed and readily realisable and, accordingly, the Directors believe that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. Having assessed these factors, the principal risks and other matters discussed in connection with the Viability Statement, the Board has decided that it is appropriate for the financial statements to be prepared on a going concern basis. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2. Management and performance fees | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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3. Return per ordinary share The return per ordinary share figure is based on the net profit for the year of £9,936,000 (2017: £199,540,000) and on the weighted average number of ordinary shares in issue during the year of 49,987,260 (2017: 49,790,368).
The return per ordinary share figure detailed above can be further analysed between revenue and capital, as below. The Company has no securities in issue that could dilute the return per ordinary share. Therefore the basic and diluted return per ordinary share are the same. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 £'000 | 2017 £'000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net revenue profit | 11,205 | 8,509 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net capital (loss)/profit | (1,089) | 191,031 | ||||||||||||||||||||||||||||||||||||||||||||||||||
---------- | ---------- | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net profit | 9,936 | 199,540 | ||||||||||||||||||||||||||||||||||||||||||||||||||
====== | ===== | |||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted average number of ordinary shares in issue during the year | 49,987,260 | 49,790,368 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2018 Pence | 2017 Pence | |||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue return per ordinary share | 22.06 | 17.09 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Capital return per ordinary share | (2.18) | 383.67 | ||||||||||||||||||||||||||||||||||||||||||||||||||
-------- | ------- | |||||||||||||||||||||||||||||||||||||||||||||||||||
Total return per ordinary share | 19.88 | 400.76 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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4. Net asset value per ordinary share The NAV per ordinary share is based on the net assets attributable to the ordinary shares of £574,591,000 (2017: £569,459,000) and on the 50,108,397 ordinary shares in issue at 30 June 2018 (2017: 49,713,397). The NAV per ordinary share at 30 June 2018 was 1,146.70p (2017: 1,145.48p). | ||||||||||||||||||||||||||||||||||||||||||||||||||||
The movements during the year in assets attributable to the ordinary shares were as follows: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 £'000 | 2017 £'000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets attributable to ordinary shares at start of year | 569,459 | 377,683 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Profit for the year | 9,936 | 199,540 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends paid in the year | (9,767) | (5,717) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Proceeds from issue of ordinary shares | 4,963 | - | ||||||||||||||||||||||||||||||||||||||||||||||||||
Buy back of ordinary shares for cancellation | - | (2,047) | ||||||||||||||||||||||||||||||||||||||||||||||||||
----------- | ----------- | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net assets at 30 June | 574,591 | 569,459 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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5. Dividends
The final dividend of 11.50p and the special dividend of 3.00p per ordinary share in respect of the year ended 30 June 2017 were paid on 30 November 2017 to shareholders on the Register of Members at the close of business on 3 November 2017. The total dividend paid amounted to £7,261,000.
Subject to approval at the AGM in November 2018, the proposed final dividend of 14.00p per ordinary share will be paid on 30 November 2018 to shareholders on the Register of Members at the close of business on 26 October 2018. The shares will be quoted ex-dividend on 25 October 2018.
The proposed final dividend for the year ended 30 June 2018 has not been included as a liability in these financial statements. Under IFRSs, these dividends are not recognised until approved by shareholders.
The total dividends payable in respect of the financial year which form the basis of the test under Section 1158 are set out below: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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6. Called up share capital (Group & Company)
During the year 395,000 ordinary shares were issued (2017: 262,500 bought back for cancellation) for proceeds of £4,963,000 (2017: £2,047,000 cost). In the current financial year to date, the Company has not repurchased any shares for cancellation. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
7. 2018 Financial information The figures and financial information for 2018 are extracted from the Annual Report for the year ended 30 June 2018 and do not constitute the statutory accounts for the year. The Annual Report includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006. The Annual Report has not yet been delivered to the Registrar of Companies. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
8. 2017 Financial information The figures and financial information for 2017 are extracted from the Annual Report for the year ended 30 June 2017 and do not constitute the statutory accounts for the year. The Annual Report includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006. The Annual Report has been delivered to the Registrar of Companies. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
9. Annual Report The Annual Report will be posted to shareholders in mid-October 2018 and will be available on the Company's website (www.treuropeangrowthtrust.com) or in paper copy format from the Company's registered office, 201 Bishopsgate, London EC2M 3AE thereafter. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
10. Annual General Meeting The Annual General Meeting will be held on Monday 19 November 2018 at 12.30 pm at the Registered Office address. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
For further information please contact:
Ollie Beckett Fund Manager TR European Growth Trust PLC Telephone: 020 7818 4331/3997 | Laura Thomas Investment Trust PR Manager Janus Henderson Investors Telephone: 020 7818 2636
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Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.