TIDMBGEU
RNS Number : 1192N
Baillie Gifford European Grw Ts PLC
18 May 2020
RNS Announcement
Baillie Gifford European Growth Trust plc
Legal Entity Identifier: 213800QNN9EHZ4SC1R12
Regulated Information Classification: Half Yearly Financial
Report
Results for the six months to 31 March 2020
Over the six month period, the Company's net asset value (NAV)
total return was (10.0)% compared to a total return of (17.0)% for
the FTSE Europe ex UK index, in sterling terms. The share price
total return for the same period was (0.9)%.
-- Over the four months to end March, being the period under the
management of Baillie Gifford, the Company's NAV total return was
minus 10.7% compared to a total return of minus 17.0% for the FTSE
Europe ex UK index, in sterling terms. The share price total return
for the same period was minus 7.3%.
-- Outwith the portfolio reorganisation associated with the
transition from Edinburgh Partners, four holdings (Zooplus, BIM,
Coca-Cola Icecek and Schindler) were sold and four new positions
(Kuhne+Nagel, Rémy Cointreau, Pernod Ricard and Ubisoft) initiated
during the period.
-- Earnings per share were 1.17p compared to 7.90p in the
corresponding period last year. As highlighted previously, no
interim dividend will be paid, and any annual dividend will be paid
only to the extent needed for the Company to maintain its
investment trust status.
-- Despite the recent volatility, the portfolio managers remain
satisfied with the financial resilience of the underlying holdings
in aggregate and are optimistic about the scale of the long-term
opportunities ahead for those companies. The portfolio has invested
gearing of around 4% at present.
-- Other than the 10% tender, no shares were bought back during the period.
Past performance is not a guide to future performance
Total return information is sourced from Refinitiv, Baillie
Gifford and relevant underlying index providers. See disclaimer at
end of this announcement.
Baillie Gifford European Growth Trust aims to achieve capital
growth over the long term from a diversified portfolio of European
securities. At 31 March 2020 the Company had total assets of
GBP310.3m.
Baillie Gifford European Growth Trust is managed by Baillie
Gifford, an Edinburgh based fund management group with
approximately GBP 225.0 billion under management and advice as at
15 May 2020.
Baillie Gifford European Growth Trust is a listed UK company.
The value of its shares and any income from them can fall as well
as rise and investors may not get back the amount invested. The
Company is listed on the London Stock Exchange and is not
authorised or regulated by the Financial Conduct Authority. You can
find up to date performance information about Baillie Gifford
European Growth Trust at www.bgeuropeangrowth.com. Past performance
is not a guide to future performance. See disclaimer at end of this
announcement.
-- Neither the contents of the Managers' website nor the
contents of any website accessible from hyperlinks on the Managers'
website (or any other website) is incorporated into, or forms part
of, this announcement.
18 May 2020
For further information please contact:
Anzelm Cydzik, Baillie Gifford & Co
Tel: 0131 275 2000
Mark Knight, Four Communications
Tel : 0203 697 4200 or 07803 758810
The following is the unaudited Interim Financial Report for the six
months to 31 March 2020 which was approved by the Board on 15 May
2020.
Chairman's Statement
COVID-19
These are unsettling times. I would like to take this
opportunity to wish everybody well and to pass on my and the
Board's sincere best wishes to all those affected directly or
indirectly as a consequence of COVID-19.
Performance
Over the six months to 31 March 2020, the Company's net asset
value per share ('NAV') total return was -10.0% compared to a total
return of -17.0% for the FTSE Europe ex UK Index, in sterling
terms. Over the same period, the share price total return was -0.9%
as the discount narrowed from 12.8% to 4.1%.
The following table divides the six-month period in two, showing
the performance over the two months to the end of November 2019
when the portfolio was managed by Edinburgh Partners and the
four-month period when the portfolio has been managed by Baillie
Gifford & Co Limited ('Baillie Gifford').
Total Return 30 September 30 September 30 November to
to 31 March (%) to 30 November 31 March (%)
(%)
NAV -10.0 0.8 -10.7
----------------- ---------------- ---------------
Share Price -0.9 6.9 -7.3
----------------- ---------------- ---------------
FTSE Europe ex
UK, in sterling -17.0 -0.1 -17.0
----------------- ---------------- ---------------
Management Arrangements
As highlighted in my statement to shareholders in the Company's
2019 Annual Report, the Board served notice on Edinburgh Partners,
terminating its appointment and replacing it with Baillie Gifford
as the Company's alternative investment fund manager, company
secretary and administrator; the move took effect at the end of
November 2019. As part of the move, the Company's name was changed
from The European Investment Trust plc, as were its London Stock
Exchange ticker and web address (to BGEU and
www.bgeuropeangrowth.com respectively). As part of the transition,
Baillie Gifford agreed to waive its management fee for six
months.
Portfolio Re-organisation
Following the move to Baillie Gifford, the portfolio was
reorganised extensively in the first half of December, with only
one holding, Ryanair, being retained and 40 new ones bought. This
was necessary to reposition the portfolio to growth equities;
Baillie Gifford having built its reputation as a growth investor.
The cost of the portfolio restructuring was a little over 1% of the
Company's net asset value.
Objective and Investment Policy
At the Annual General Meeting ('AGM') held on 23 January 2020,
shareholders approved changes to the Company's objective and
investment policy. As detailed in the 2019 Annual Report, the
objective needed to be revised to reflect Baillie Gifford's
investment style following the transition of the portfolio from
Edinburgh Partners. The investment policy was also revised,
principally to allow for up to 10% of the Company's total assets,
as measured at the time of initial investment, to be invested in
unlisted investments (there are none held at present). The changes
to the objective and investment policy were approved by 99.3% of
the votes lodged.
Dividend and Expense Allocation Policy
The final dividend of 21.5p was paid on 31 January 2020 to all
shareholders on the register at the close of business on 3 January
2020. As flagged in the Annual Report, following the move to
Baillie Gifford, the Company's dividend policy has been changed
such that no interim dividend will be paid, and any annual dividend
will be paid only to the extent needed for the Company to maintain
its investment trust status.
In March, the Company announced a change to its expense
allocation policy as the revised investment objective explicitly
seeks to achieve capital growth. Effective 1 April 2020, the
allocation policy has been amended to 80% to capital and 20% to
revenue to replace the prior policy of two-thirds to capital and
one-third to revenue. This change is in line with the Board's
continued aim of matching expenses against the estimated division
of the Company's long-term returns.
Tender, Discount and Share Buy Backs
Following approval by shareholders at the General Meeting that
immediately followed the AGM, at the end of January the Company
undertook a tender for 10% of its ordinary shares in issue at a 2%
discount to the prevailing NAV; these shares are now held in
treasury and may be re-issued at prices in excess of NAV.
When buying back shares, the Board does not have a formal
discount target, but monitors the discount closely and is prepared
to buy back shares opportunistically. Excluding the tender, no
shares were bought back during the period.
The Board
As previously announced, to avoid a conflict Sue Inglis stood
down from the Board at the end of November. In addition, Michael
Moule has intimated his intention to retire from the Board at the
conclusion of the AGM to be held in 2021. It is the Board's
intention to appoint a new Director. We believe that four Directors
is the right number again after the period of change and review
that has been required.
Outlook
Europe is home to some of the world's most impressive,
investor-friendly and well-aligned growth companies. Despite the
uncertain backdrop, the portfolio managers remain focused on
finding the companies that will progress through current events and
emerge with an even more dominant position and strong prospects. In
some ways, and for some businesses, this crisis could be described
as accelerating our path towards a likely future. Stock market
volatility is providing investment opportunities at attractive
valuations and the portfolio now has invested gearing of around 4%.
Comments on the longer-term prospects for the companies in the
portfolio can be found in the Managers' Report.
Michael MacPhee
Chairman
15 May 2020
Interim Management Report
Investment Philosophy
We are long-term growth investors managing a concentrated
portfolio of what we think are Europe's most exceptional companies.
Their free cash flow and market returns mean that these companies
generate a disproportionate amount of wealth within and for
society. They endure and prosper due to having attractive growth
opportunities and strong competitive positions. They create wealth
over time by aligning the interests of customers, employees,
managers and owners. In Europe, these exceptional businesses can be
structurally mispriced for long periods of time. The following
three principles underpinning our investment philosophy give us the
best chance of exploiting this inefficiency.
Long Term
We believe that the market increasingly rewards a patient
investment approach, because genuine long-term investing is
difficult to implement consistently in practice. We focus on being
long-term co-owners of businesses and typically invest for at least
five years, so turnover of the portfolio is expected to be lower
than 20% p.a. This is to ensure that we capture the benefits of
those exceptional growth companies that tend to manifest over many
years.
Active
Exploiting any inefficiency must start with a willingness to be
different. For us, that means carrying out fundamental company
analysis and looking for tomorrow's leading companies without any
reference to the index. We then back our conviction by holding our
ideas in a suitably concentrated portfolio. Our active share - how
different the portfolio is to the index - is close to 90% and, when
added to low turnover, increases our chances of outperforming.
Growth Focused
Owning companies whose sales and profits will grow sustainably
over the long-term is shown to be a reliable path to strong
investment returns. A significant market opportunity is only the
starting point: growth must be valuable. We seek companies with a
defensible and strengthening competitive advantage that are run by
people whose interests are aligned with long-term value creation.
Both these factors are often evident in a willingness to sacrifice
short-term profit maximisation in return for long-term rewards.
Portfolio Positioning and Recent Activity
Our portfolio is built from the bottom-up so any biases in
portfolio composition are purely the result of where we find
exceptional investment ideas. What you will see in the portfolio is
a bias towards Northern Europe, to Industrials, Consumer
Discretionary and IT companies, to mid-sized companies and to those
owned and managed by founders and families.
In our minds, the companies found here are among the most
innovative and resilient in Europe and share similar
characteristics in terms of large growth opportunities, entrenched
competitive positions and well-aligned management teams. This also
means that we are less likely to invest in some of the largest
companies in Europe, particularly in industries like Banking,
Consumer Staples and Pharmaceuticals. There are far fewer companies
here that excite us and, if anything, these are the areas which
will face most disruption over the coming years.
At the beginning of the year we sold online pet food retailer
Zooplus, Turkish grocery retailer BIM and bottler Coca-Cola Icecek.
Reasons included increasing competitive threats and slowing growth.
We reinvested the proceeds in three new companies; the low-cost
logistics platform Kuhne+Nagel, premium Cognac producer Rémy
Cointreau and French computer games developer Ubisoft. These are
companies we have followed for many years and we believe that they
have a good chance of at least doubling in value over the next five
years primarily though sales growth and increasing margins and
returns on capital.
Notwithstanding the COVID-19 crisis, we have maintained a
deliberate and long-term approach, as we see little need for panic.
To begin with we offered our support to the management teams we
invest in, encouraging them to remain focused on the long term and
to look after employees and customers. At the same time, we
reassessed the financial resilience of each company - the first
order of the day in any crisis is survival - and as expected we did
not find anything that worried us. This is because we have always
preferred companies with strong balance sheets. We therefore think
most of the companies in the portfolio will emerge from this crisis
in a stronger position, helped by weaker competitors ceding market
share or through opportunistic acquisitions, or both. Exposure to
trends that seem to be accelerating in the current crisis, such as
e-commerce, digitalisation and outsourcing, also give us confidence
that longer term prospects are still very attractive.
Towards the end of March, we sold Schindler, the Swiss elevator
business, and bought a new position in Pernod Ricard, the world's
second largest wine and spirits producer. We feel that its ability
to generate profitable growth from China and India has been
underestimated. We also made small additions to companies where
falling valuations had dislocated from future value creation. These
included online classifieds business Adevinta, sportswear giant
adidas and two technology focused holding companies, Kinnevik and
Prosus. The latter has a large stake in Tencent, the Chinese social
media and gaming company, which we think is one of the world's most
attractive businesses.
Gearing
As believers in long term equity returns we expect to utilise
gearing strategically, with 10% being a neutral position. We
utilised some borrowings as part of the Company's 10% tender
transaction at the end of January and invested gearing currently
stands at around 4%. We have the ability to increase our gearing
levels further to take advantage of any opportunities arising at an
individual stock level.
Performance
Holdings in the portfolio that performed well over the period
included online food delivery service company Delivery Hero, which
made an attractive acquisition in South Korea; lab equipment
provider Sartorius Stedim; and IT provider Bechtle. These companies
have held up well during the crisis but, more importantly, benefit
from structural growth that should endure long after the crisis has
abated. Low-cost airline Ryanair, rubber compounder Hexpol, and oil
and gas pipe manufacturer Tenaris were noticeably weak although
this was unsurprising given the impact of COVID-19 on their
respective industries and also the consequent oil price shock,
particularly for Tenaris. Importantly though, each of these
companies is well capitalised and stands to benefit from
consolidation and market share gains from weaker competitors.
This is a very short period over which to judge our performance,
however, we are pleased that stock picking continues to drive
relative outperformance despite the fall in absolute terms. We do
not know how or when the current crisis is going to end. What we do
know is that, if we continue to find exceptional businesses run by
people whom we trust, the impact from this most unfortunate crisis
will be relatively insignificant in the context of longer-term
returns.
The principal risks and uncertainties facing the Company are set
out at the back of this announcement.
Baillie Gifford & Co
Past performance is not a guide to future performance.
For a definition of terms see Glossary of Terms and Alternative
Performance Measures, see below.
Total return information is sourced from Refinitiv, Baillie
Gifford and relevant underlying index providers. See disclaimer at
the end of this announcement.
List of Investments as at 31 March 2020
(unaudited)
========================================= =========================================================================
% of
Value Total
Name Business Country GBP'000 Assets
======================================== ========================================= ============ ======== =======
Bechtle IT systems integrator Germany 17,063 5.5
IMCD Speciality chemical distributor Netherlands 13,518 4.4
Prosus Media and e-commerce company Netherlands 12,891 4.1
Atlas Copco Industrial compressors manufacturer Sweden 12,391 4.0
International heating technology
NIBE Industrier company Sweden 12,032 3.9
adidas Sports shoes and equipment manufacturer Germany 11,741 3.8
L'Oreal Personal care France 11,207 3.6
Zalando Online fashion retailer Germany 10,710 3.4
ASML Semiconductor equipment manufacturer Netherlands 9,930 3.2
Delivery Hero Online food delivery service Germany 9,589 3.1
Spotify Online music streaming service Sweden 9,573 3.1
Provider of high performance insulation
and building
Kingspan envelope technologies Ireland 9,498 3.1
Ryanair Low cost European airline Ireland 8,843 2.9
Distributor of medical and laboratory
equipment
Addlife in Northern and Central Europe Sweden 8,336 2.7
DSV Transport and logistics company Denmark 8,123 2.6
International pharmaceutical and
Sartorius Stedim laboratory equipment
Biotech supplier France 8,069 2.6
Kering Luxury brand conglomerate France 7,363 2.4
Adyen Global payment company Netherlands 7,303 2.4
Carl Zeiss Meditec Medical technology for ophthalmology Germany 7,230 2.3
Adevinta Provider of internet based services Norway 6,675 2.2
Global specialist in electrical and
digital building
Legrand infrastructures France 6,495 2.1
Investor Industrial holding company Sweden 6,452 2.1
Takeaway.com Online food ordering and home delivery Netherlands 5,925 2.0
MorphoSys Antibody based drug discovery platform Germany 5,834 1.9
Manufacturer of rubber and plastic
Hexpol components Sweden 5,748 1.8
Manufacturer and distributor of premium
wines
Rémy Cointreau and spirits worldwide France 5,615 1.8
Manufacturer of precision weighing
Mettler-Toledo equipment Switzerland 5,342 1.7
Ubisoft Entertainment Video games publisher France 5,341 1.7
Richemont Luxury goods company Switzerland 5,265 1.7
Novozymes Enzyme manufacturer Denmark 5,261 1.7
Beijer Refrigeration and air conditioning Sweden 4,628 1.5
Kuehne + Nagel Worldwide freight forwarder Switzerland 4,623 1.5
Inditex International clothing retailer Spain 4,577 1.5
List of Investments as at 31 March 2020 (unaudited) (Ctd)
% of
Value Total
Name Business Country GBP'000 Assets
========================= ======================================= ============ ======== =======
Alfa Laval Industrial conglomerate Sweden 4,487 1.4
Edenred Voucher scheme outsourcer France 4,481 1.4
Svenska Handelsbanken Retail bank Sweden 4,168 1.3
Invests in and builds digital consumer
Kinnevik businesses Sweden 3,806 1.2
Supplier to mining and construction
Epiroc industries Sweden 3,786 1.2
Tenaris Seamless steel pipe manufacturer Luxemburg 3,268 1.0
Pernod Ricard Global spirits manufacturer France 2,934 0.9
Global Positioning Systems (GPS)
developer for a
U-Blox range of markets Switzerland 2,168 0.7
Schindler Elevator and escalator manufacturer Switzerland 2,023 0.7
Genetic engineering for cell based
Cellectis therapies France 1,316 0.4
Coca-Cola Icecek Bottler and distributor of soft drinks Turkey 404 0.1
========================= ======================================= ============ ======== =======
Total Equity Investments 306,032 98.6
Net Liquid Assets 4,226 1.4
================================================================================ ======== =======
Total Assets 310,258 100.0
Borrowings (14,100) (4.8)
================================================================================ ======== =======
Net Assets 296,158 95.2
================================================================================ ======== =======
Income Statement (unaudited)
For the six months For the six months For the year ended
ended ended 30 September 2019
31 March 2020 31 March 2019
(audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================= ======== ======== ======== ======== ======== ======== ======== ========= ========
Losses on investments - (30,699) (30,699) - (36,129) (36,129) - (32,508) (32,508)
Currency (losses)/gains (7) (1,055) (1,062) (53) 180 127 24 80 104
Income from investments
and interest receivable 984 - 984 4,023 - 4,023 14,523 - 14,523
Investment management
fee (note 3) (175) (350) (525) (302) (604) (906) (600) (1,199) (1,799)
Other administrative
expenses (246) - (246) (251) (6) (257) (484) (6) (490)
========================= ======== ======== ======== ======== ======== ======== ======== ========= ========
Net return before
finance costs
and taxation 556 (32,104) (31,548) 3,417 (36,559) (33,142) 13,463 (33,633) (20,170)
Finance costs (17) (33) (50) (15) (17) (32) (21) (24) (45)
========================= ======== ======== ======== ======== ======== ======== ======== ========= ========
Net return on
ordinary activities
before taxation 539 (32,137) (31,598) 3,402 (36,576) (33,174) 13,442 (33,657) (20,215)
Tax on ordinary
activities (83) - (83) (188) - (188) (837) - (837)
========================= ======== ======== ======== ======== ======== ======== ======== ========= ========
Net return on
ordinary activities
after taxation 456 (32,137) (31,681) 3,214 (36,576) (33,362) 12,605 (33,657) (21,052)
========================= ======== ======== ======== ======== ======== ======== ======== ========= ========
Net return per
ordinary share
(note 4) 1.17p (82.42p) (81.25p) 7.90p (89.70p) (81.80p) 31.00p (82.80p) (51.80p)
========================= ======== ======== ======== ======== ======== ======== ======== ========= ========
Note:
Dividends paid
and payable per
share (note 5) Nil 18.00p 31.00p
========================= ======== ======== ======== ======== ======== ======== ======== ========= ========
The total column of this statement is the profit and loss
account of the Company. The supplementary revenue and capital
columns are prepared under guidance published by the Association of
Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations.
A Statement of Comprehensive Income is not required as all gains
and losses of the Company have been reflected in the above
statement.
Balance Sheet (unaudited)
At 31 March At 30 September
2020 2019
(audited)
GBP'000 GBP'000
Fixed assets
Investments held at fair value through
profit or loss (note 6) 306,032 369,064
======================================= =========== ===============
Current assets
Debtors 4,044 2,729
Cash and deposits 1,198 2,301
======================================= =========== ===============
5,242 5,030
======================================= =========== ===============
Creditors
Amounts falling due within one year:
Other creditors (1,016) (237)
Bank overdraft (note 7) (14,100) -
======================================= =========== ===============
(15,116) (237)
======================================= =========== ===============
Net current (liabilities)/assets (9,874) 4,793
======================================= =========== ===============
296,158 373,857
======================================= =========== ===============
Capital and reserves
Called-up share capital 10,061 10,061
Share premium account 123,749 123,749
Capital redemption reserve 8,750 8,750
Capital reserve 148,483 217,985
Revenue reserve 5,115 13,312
======================================= =========== ===============
Shareholders' funds 296,158 373,857
======================================= =========== ===============
Net asset value per ordinary share* 817.7p 929.0p
======================================= =========== ===============
Ordinary shares in issue (note 8) 36,219,933 40,244,369
======================================= =========== ===============
* See Glossary of Terms and Alternative Performance Measures at
the end of this announcement.
Statement of Changes in Equity (unaudited)
For the six months ended 31 March 2020
Share Capital
Share premium redemption Capital Revenue Shareholders'
capital account reserve reserve reserve funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================== ========= ========= =========== ======== ======== =============
Shareholders' funds at 1 October
2019 10,061 123,749 8,750 217,985 13,312 373,857
Net return on ordinary activities
after taxation - - - (32,137) 456 (31,681)
Dividends paid (note 5) - - - - (8,653) (8,653)
Shares bought back into treasury - - - (37,365) - (37,365)
================================== ========= ========= =========== ======== ======== =============
Shareholders' funds at 31
March 2020 10,061 123,749 8,750 148,483 5,115 296,158
================================== ========= ========= =========== ======== ======== =============
For the six months ended 31 March 2019
Share Capital
Share premium redemption Capital Revenue Shareholders'
capital account reserve reserve reserve funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================== ========= ========= =========== =================== ======== =============
Shareholders' funds at 1
October 2018 10,314 123,749 8,497 259,842 11,917 414,319
Net return on ordinary activities
after taxation - - - (36,576) 3,214 (33,362)
Dividends paid (note 5) - - - - (7,387) (7,387)
Shares purchased for cancellation (215) - 215 (6,957) - (6,957)
================================== ========= ========= =========== =================== ======== =============
Shareholders' funds at 31
March 2019 10,099 123,749 8,712 216,309 7,744 366,613
================================== ========= ========= =========== =================== ======== =============
Notes to the condensed financial statements (unaudited)
1. The condensed Financial Statements for the six months to 31 March
2020 comprise the statements set out on the previous pages together
with the related notes below. They have been prepared in accordance
with FRS 104 'Interim Financial Reporting' and the AIC's Statement
of Recommended Practice issued in November 2014 and updated in
October 2019 with consequential amendments and have not been audited
or reviewed by the Auditor pursuant to the Auditing Practices Board
Guidance 'Review of Interim Financial Information'. The Financial
Statements for the six months to 31 March 2020 have been prepared
on the basis of the same accounting policies as set out in the
Company's Annual Report and Financial Statements at 30 September
2019.
Going Concern
The Directors have considered the nature of the Company's principal
risks and uncertainties, as set out below, as well as the implications
of the current COVID-19 pandemic. In addition, the Company's investment
objective and policy, assets and liabilities and projected income
and expenditure, together with the dividend policy have been taken
into consideration and it is the Directors' opinion that the Company
has adequate resources to continue in operational existence for
the foreseeable future. The Company's assets, all of which are
investments in quoted securities which are readily realisable,
exceed its liabilities significantly. All borrowings require the
prior approval of the Board and gearing levels are reviewed by
the Board on a regular basis. The Directors consider it appropriate
to adopt the going concern basis of accounting in preparing these
Financial Statements and confirm that they are not aware of any
material uncertainties which may affect the Company's ability to
continue to do so over a period of at least twelve months from
the date of approval of these Financial Statements.
2. The financial information contained within the Interim Financial
Report does not constitute statutory accounts as defined in sections
434 to 436 of the Companies Act 2006. The financial information
for the year ended 30 September 2019 has been extracted from the
statutory accounts which have been filed with the Registrar of
Companies. The Auditor's Report on those accounts was not qualified,
did not include a reference to any matters to which the Auditor
drew attention by way of emphasis without qualifying their report,
and did not contain a statement under sections 498(2) or (3) of
the Companies Act 2006.
3. As explained in the Annual Report for the year to 30 September
2019, the agreement with Edinburgh Partners AIFM Limited was terminated
on 29 November 2019. Baillie Gifford & Co Limited, a wholly owned
subsidiary of Baillie Gifford & Co, was appointed by the Company
as its Alternative Investment Fund Manager (AIFM) and Company Secretary
on 29 November 2019.The investment management function has been
delegated to Baillie Gifford & Co. The management agreement can
be terminated on three months' notice. The annual management fee
is 0.55% of the lower of (i) the Company's market capitalisation
and (ii) the Company's net asset value (which shall include income),
in either case up to GBP500 million, and 0.50% of the amount of
the lower of the Company's market capitalisation or net asset value
above GBP500 million. Baillie Gifford agreed to waive its management
fee for six months from its appointment as AIFM.
=====================================================================================
4. Net return per ordinary share Year to
Six months Six months 30 September
to to 2019
31 March 31 March (audited)
2020 2019
GBP'000 GBP'000 GBP'000
============================================ =========== =========== =============
Revenue return on ordinary activities after
taxation 456 3,214 12,605
Capital return on ordinary activities after
taxation (32,137) (36,576) (33,657)
================================================ =========== =========== =============
Total net return (31,681) (33,362) (21,052)
================================================ =========== =========== =============
Weighted average number of ordinary shares
in issue 38,990,856 40,777,284 40,626,941
================================================ =========== =========== =============
The net return per ordinary share is based on the above totals
of revenue and capital and the weighted average number of ordinary
shares in issue during each period.
There are no dilutive or potentially dilutive shares in issue.
=========================================================================================
Notes to the condensed financial statements (unaudited)
(ctd)
5. Dividends Six months Six months to
to 31 March 2019
31 March
2020 GBP'000
GBP'000
============================================================= ============= ==============
Amounts recognised as distributions in
the period:
Final dividend of 21.5p (2019 - 18.0p),
paid 31 January 2020 8,653 7,387
8,653 7,387
=================================================================== ============= ==============
Dividends proposed in the period: -
Interim dividend - Nil (2019 - 9.5p) - 3,823
============================================================== ==== ============= ==============
- 3,823
------------------------------------------------------------------- ------------- --------------
Following the payment of the final dividend of 21.5p on 31 January
2020, the Company changed its dividend policy such that no interim
dividend will be paid and any annual dividend will be paid only
to the extent needed for the Company to maintain its investment
trust status.
6. Fair Value Hierarchy
The Company's investments are financial assets held at fair value
through profit or loss. The fair value hierarchy used to analyse
the basis on which the fair values of financial instruments held
at fair value through the profit or loss account are measured is
described below. Fair value measurements are categorised on the
basis of the lowest level input that is significant to the fair
value measurement.
Level 1 - using unadjusted quoted prices for identical instruments
in an active market;
Level 2 - using inputs, other than quoted prices included within
Level 1, that are directly or indirectly observable (based
on market data); and
Level 3 - using inputs that are unobservable (for which market
data is unavailable).
All of the Company's investments fall into Level 1 for the periods
reported.
7. The Company has a EUR30 million overdraft credit facility with
The Northern Trust Company for the purpose of pursuing its investment
objective. At 31 March 2020, EUR15.9 million (GBP14.1 million),
(31 March 2019 - EUR20.2 million (GBP17.4 million)), (30 September
2019 - Nil) had been drawn down under the facility. Interest is
charged at 1.25% above the European Central Bank Main Refinancing
Rate.
8. During the six months to 31 March 2020, the Company undertook a
tender offer for 10% of its ordinary shares in issue at a 2% discount
to the prevailing NAV and bought back 4,024,436 ordinary shares
into treasury at a total cost of GBP37,365,000. During the six
months to 31 March 2019, 861,000 ordinary shares were bought back
and cancelled at a total cost of GBP6,957,000. During the year
to 30 September 2019, 1,011,099 ordinary shares were bought back
and cancelled at a total cost of GBP8,200,000. No shares were issued
during the six months to 31 March 2020.
9. During the period, transaction costs on equity purchases amounted
to GBP435,000 and on equity sales GBP114,000.
10. Related party transactions
There have been no transactions with related parties during the
first six months of the current financial year that have materially
affected the financial position or the performance of the Company
during that period and there have been no changes in the related
party transactions described in the last Annual Report and Financial
Statements that could have had such an effect on the Company during
that period. Baillie Gifford & Co Limited, a wholly owned subsidiary
of Baillie Gifford & Co, was appointed by the Company as its Alternative
Investment Fund Manager and Company Secretary on 29 November 2019.
None of the views expressed in this document should be construed as
advice to buy or sell a particular investment.
Principal Risks and Uncertainties
The principal risks facing the Company are investment and
strategy risk, discount volatility risk, market risk (comprising
interest rate risk, currency risk and price risk), liquidity risk,
credit risk, gearing risk, regulatory risk, operational risk and
other financial risk. An explanation of these risks and how they
are managed is set out on pages 24 and 25 of the Company's Annual
Report and Financial Statements for the year to 30 September 2019
which is available on the Company's website:
www.bgeuropeangrowth.com ++ . The principal risks and uncertainties
have not changed since the date of the Annual Report with the
exception of the current situation surrounding the COVID-19
pandemic. The Board and Investment Manager are working closely to
monitor the situation as it develops and will continue to do
so.
Responsibility Statement
We confirm that to the best of our knowledge:
a) the condensed set of Financial Statements has been prepared
in accordance with FRS 104 'Interim Financial Reporting';
b) the Interim Management Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.7R (indication of important events during the first six months,
their impact on the Financial Statements and a description of the
principal risks and uncertainties for the remaining six months of
the year); and
c) the Interim Financial Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule
4.2.8R (disclosure of related party transactions and changes
therein).
By order of the Board
Michael MacPhee
Chairman
15 May 2020
Glossary of Terms and Alternative Performance Measures (APM)
Total Assets
Total assets less current liabilities, before deduction of all borrowings.
Net Asset Value
Net Asset Value (NAV) is the value of total assets less liabilities
(including borrowings). The NAV per share is calculated by dividing
this amount by the number of ordinary shares in issue.
Net Liquid Assets
Net liquid assets comprise current assets less current liabilities,
excluding borrowings.
Discount/Premium (APM)
As stockmarkets and share prices vary, an investment trust's share price
is rarely the same as its NAV per share. When the share price is lower
than the NAV per share it is said to be trading at a discount. The size
of the discount is calculated by subtracting the share price from the
NAV per share and is usually expressed as a percentage of the NAV per
share. If the share price is higher than the NAV per share, it is said
to be trading at a premium.
Total Return (APM)
The total return is the return to shareholders after reinvesting the
net dividend on the date that the share price goes ex-dividend.
Gearing (APM)
At its simplest, gearing is borrowing. Just like any other public company,
an investment trust can borrow money to invest in additional investments
for its portfolio. The effect of the borrowing on the shareholders'
assets is called 'gearing'. If the Company's assets grow, the shareholders'
assets grow proportionately more because the debt remains the same.
But if the value of the Company's assets falls, the situation is reversed.
Gearing can therefore enhance performance in rising markets but can
adversely impact performance in falling markets.
Potential gearing is the Company's borrowings expressed as a percentage
of shareholders' funds.
Gearing represents borrowings less cash and cash equivalents expressed
as a percentage of shareholders' funds.
Active Share (APM)
Active share, a measure of how actively a portfolio is managed, is the
percentage of the listed equity portfolio that differs from its comparative
index. It is calculated by deducting from 100 the percentage of the
portfolio that overlaps with the comparative index. An active share
of 100 indicates no overlap with the index and an active share of zero
indicates a portfolio that tracks the index.
The Interim Financial Report will be available on the Company's page
on the Managers' website www.bgeuropeangrowth.com ++ on or around 26
May 2020.
Automatic Exchange of Information
In order to fulfil its obligations under UK tax legislation
relating to the automatic exchange of information, Baillie Gifford
European Growth Trust is required to collect and report certain
information about certain shareholders.
The legislation requires investment trust companies to provide
personal information to HMRC on certain investors who purchase
shares in investment trusts. Accordingly, Baillie Gifford European
Growth Trust will have to provide information annually to the local
tax authority on the tax residencies of a number of non-UK based
certificated shareholders and corporate entities.
New shareholders, excluding those whose shares are held in
CREST, who come on to the share register will be sent a
certification form for the purposes of collecting this
information.
For further information, please see HMRC's Quick Guide:
Automatic Exchange of Information - information for account holders
https://www.gov.uk/government/publications/exchange-of-information-account-holders
.
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END
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