REG - Baillie Gifford Euro - Annual Financial Report
26/11/2024 07:00
For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20241126:nRSZ5903Na&default-theme=true
RNS Number : 5903N Baillie Gifford European Growth Tst 26 November 2024
RNS Announcement
Baillie Gifford European Growth Trust plc
Legal Entity Identifier: 213800QNN9EHZ4SC1R12
Results for the year to 30 September 2024
Over the year to 30 September 2024, the Company's net asset value per share
(NAV) total return was 12.1% compared to a total return of 15.3% for the
comparative index. The share price total return for the same period was 9.3%.
· The Board has committed to a performance-triggered tender offer of
100% of the Company's issued share capital which will be triggered if the
Company's NAV total return per share (measuring debt at fair value)
underperforms the return of the FTSE European ex UK Index (in sterling terms)
over the four years to 30 September 2028.
· Public companies, now accounting for 94% of our portfolio, delivered
a total return of approximately 20% over the period.
· Positive contributors in the period included Spotify, which has been
able to increase its subscription prices with limited impact on demand and
Adyen, which has continued to grow its revenues by more than 20%.
· Negative contributors in the period included battery startup
Northvolt which was written down to reflect its struggles with operational
performance and McMakler which has been operating against a tough economic
backdrop in Germany.
· The portfolio continues to hold five unlisted companies accounting
for 5.6% of total assets as at 30 September 2024 (2023: 10.9% in four
companies).
· The net revenue for the year was 0.72p per share (2023: 2.68p). A
final dividend of 0.6p per share is being recommended (2023: 0.40p).
· Over the year a total of 6,365,921 shares have been bought back into
treasury representing approximately 1.78% of the issued share capital.
For a definition of terms see Glossary of terms and alternative performance
measures at the end of this announcement. Total return information is sourced
from Baillie Gifford/LSEG and relevant underlying index providers; see
disclaimer at the end of this announcement.
Baillie Gifford European Growth Trust's principal investment objective is to
achieve capital growth over the long-term from a diversified portfolio of
European securities.
The Company is managed by Baillie Gifford & Co, an Edinburgh based fund
management group with around £224 billion under management and advice as at
22 November 2024.
Past performance is not a guide to future performance. Baillie Gifford
European Growth Trust plc 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
plc on the Company's page of the Managers' website at bgeuropeangrowth.com
(https://bgeuropeangrowth.com/) (‡)
(‡) 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.
For further information please contact:
Naomi Cherry, Baillie Gifford & Co
Tel: 0131 275 2000
Jonathan Atkins, Four Communications
Tel: 0203 920 0555 or 07872 495396
Chairman's statement
Performance
The net asset value per share ('NAV') total return over the Company's
financial year was 12.1% compared to a total return of 15.3% for the FTSE
Europe ex UK Index, in sterling terms. The share price total return over the
year was 9.3% and so the discount to NAV of the Company's shares widened from
13.6% to 15.7%.
Our six-month interim period ending in March was a stronger period for the
Company, and growth investing more generally. The second half of the year,
however, felt like a pause for breath as various macroeconomic and election
data points were digested. This is a reminder that the recovery of our
performance will not be linear but it does not derail our belief in the
Managers and the view that operational progress and growth in cashflows will
be the main driver of value creation for the foreseeable future. The portfolio
is well positioned to benefit from this. Further details on performance are
provided in the Managers' report.
Since Baillie Gifford began managing the portfolio in November 2019, the NAV
total return has been 22.4% compared to a total return of 44.3% for the FTSE
Europe ex UK Index, in sterling terms. The share price total return has been
12.1%, with the discount widening from 7.5% to 15.7%. This has been
disappointing overall, but given the differentiation of our portfolio from the
index, periods of underperformance can be expected. The Board considers five
years to be the minimum period over which investment performance should be
properly assessed.
Performance-Triggered Tender Offer
At the annual strategy session of the Company held in September 2024, the
Board undertook a review of the performance of the Company and various related
matters including investment risk. Key areas of review included valuation and
diversification. The Board found the discussion around investment risk to be
highly informative. Aside from the damage done to valuation of long term
growth by a major shift in interest rates there is no doubt that stock-picking
mistakes have been made. We wanted reassurance that lessons had been learned,
however, and are optimistic on this score.
In the 21 months since the end of 2022, the European equity market has posted
positive returns. However, the Company has underperformed. While markets have
been up, it has not been a typical post-recession recovery. Indeed, the threat
of a recession has certainly played its part in creating a nervous
environment. The bulk of the index performance has been accounted for by 11 of
Europe's largest stocks. While market concentration has been a global
phenomenon, in Europe it has been steady, cash-generative companies that have
led this concentration rather than big tech (as in the US). As the Managers
are European growth investors, they typically have a large portion of the
Company's portfolio invested in small and mid-sized companies and therefore
the continued outperformance of large caps has harmed the Company's own
performance recovery to this point when gauged against an index weighted
towards large cap companies.
Following this in-depth review, the Board continues to hold a strong belief in
the Company's mandate and has confidence that, over the longer term, the
Managers have the ability to outperform as the current headwinds to growth
investing will not last forever. Valuations move around but time is on your
side if underlying idiosyncratic operational growth and opportunity is at the
heart of your investment analysis. Whilst maintaining this belief, the Board
is painfully aware of the disappointing absolute and relative performance of
the Company over the last three years and recognises that shareholders expect
the Company to outperform broad market indices over the medium term. It is
therefore proposed to commit to the following.
• A one-off performance-triggered tender offer of 100% of
the Company's issued share capital (excluding any shares held in Treasury)
which will be triggered if the Company's NAV total return per share (measuring
debt at fair value) underperforms the return of the FTSE European ex UK Index
(in sterling terms) over the four years to 30 September 2028. The tender
would be at a price close to NAV. If the tender offer is triggered, it is
expected to be subject to shareholder approval at the Company's Annual General
Meeting to be held in early 2029.
The Board believes that this commitment is in the best interests of
shareholders as a whole.
Earnings and Dividend
Revenue per share for the year was 0.72p (2.68p 2023) and the Board is
recommending a final dividend of 0.6p per share (0.40p 2023). Subject to
shareholder approval at the Annual General Meeting, the dividend will be paid
on 14 February 2025 to shareholders on the register on 10 January 2025. The
ex-dividend date will be 9 January 2025.
As noted in the Company's 2019 Annual Report, any dividend paid will be by way
of a final dividend and be the minimum required for the Company to maintain
its investment trust status.
Borrowings
The Company has two €30 million long-term debt facilities: the first has a
remaining duration of 16 years and is priced at a fixed rate of 1.57% and the
other has over 11 years outstanding at a fixed rate of 1.55%. The Company also
has an undrawn €30 million overdraft facility with The Northern Trust
Company, which at present is capped at €15 million following Board
agreement. At the year end, the Company had gearing of 13.6% of shareholders'
funds.
Share Buybacks, Issuance and Discount
Over the course of the Company's financial year, the share price moved from a
13.6% discount to NAV to a 15.7% discount to NAV. During this period, the
Company bought back 6,365,921 shares at a total cost of approximately £6.0m.
The shares repurchased by the Company are held in Treasury and are available
to be reissued, at a premium, when market conditions allow.
The Board is of the view that the Company should retain the power to buy back
shares during the year and so, at the Annual General Meeting, is seeking to
renew the annual authority to repurchase up to 14.99% of the shares in the
Company in issue. When buying back shares, the Board does not have a formal
discount target and is prepared to buy back shares opportunistically and
accretively.
The Company also has authority to issue new shares and to reissue any shares
held in treasury for cash on a non-pre-emptive basis. Shares are
issued/reissued only at a premium to net asset value, thereby enhancing net
asset value per share for existing shareholders. The Directors are, once
again, seeking 10% share issuance authority at the Annual General Meeting. As
with the buy back authority, this authority would expire at the conclusion of
the Annual General Meeting to be held in 2026.
The Board
As detailed in the 2023 Annual Report, I plan to step down from the Board at
the upcoming Annual General Meeting and, as previously noted, David Barron
will replace me as Chair. In the light of my retirement, the Board undertook a
recruitment process seeking to appoint an additional non-executive director
and was pleased to announce the appointment of Davina Curling with effect from
1 November 2024. Davina has over 25 years of fund management experience. She
was managing director and head of Pan European equities at Russell
Investments. Prior to that she was head of European equities at F&C, ISIS
and Royal & Sun Alliance. Davina has also previously held positions at
Nikko Capital Management (UK) and Kleinwort Benson and was previously a
director of BlackRock Greater Europe Investment Trust plc. Her experience as
both fund manager and investment trust director strongly underpin her
appointment. Davina will stand for election at the upcoming Annual General
Meeting.
Annual General Meeting
The AGM will be held at 11am on 5 February 2025 at Baillie Gifford's offices
in Edinburgh. Please see pages 105 to 110 of the Annual Report and Financial
Statements that sets out the AGM location and directions thereto. It is the
Board's present intention to hold the Company's AGM in London and Edinburgh on
alternate years in order to reach as many shareholders as possible. The
Managers will make a presentation and I look forward to meeting shareholders
who are able to attend.
To accurately reflect the views of shareholders of the Company, the Board
intends to hold the AGM voting on a poll, rather than by a show of hands as
has been customary. This will ensure an exact and definitive result. The Board
encourages all shareholders to exercise their votes on the AGM resolutions by
completing and submitting the form of proxy enclosed with the Annual Report to
ensure that your votes are represented at the meeting (whether or not you
intend to attend in person). If you hold shares through a share platform or
other nominee, the Board encourages you to contact these organisations
directly as soon as possible to arrange for you to submit votes in advance of
the AGM. Alternatively, the Association of Investment Companies' ('AIC')
website theaic.co.uk/how-to-vote-your-shares
(https://www.theaic.co.uk/how-to-vote-your-shares) has information on how to
vote your shares if you hold them via one of the major platforms. The
following link will also take you through to the AIC website where there is
information on how your platform can help you attend the AGM in person
theaic.co.uk/aic/ready-to-invest/shareholdervoting/attending-an-agm
(https://www.theaic.co.uk/aic/ready-to-invest/shareholdervoting/attending-an-agm)
.
Should shareholders have questions for the Board or the Managers or any
queries as to how to vote, they are welcome, as always, to submit them by
email to trustenquiries@bailliegifford.com
(mailto:trustenquiries@bailliegifford.com) or call 0800 917 2112.
Information on the resolutions can be found on pages 56 to 58 of the Annual
Report and Financial Statements. The Directors consider that all resolutions
to be put to shareholders are in their and the Company's best interests as a
whole and recommend that shareholders vote in their favour.
Outlook
This is undeniably a time of accelerating change in geopolitics and much else
besides. Companies' ability to adapt to change is the single biggest reason
why equities beat inflation over sustained periods. Strong businesses with
attractive prospects and properly aligned, talented and hard working people
within them is the combination that wins over time. Winning is asymmetric in
equity investment. The upshot, for the patient, is high and rising returns on
capital and, typically, margins. We recognise that our shareholders are
absorbing volatility in both absolute and relative returns in order to harness
this effect. Our Managers have the skill to discern these businesses and the
courage to withstand the volatility that a long term growth strategy brings
with it. The Board feels that the measure we are setting in place will give
our Managers the best chance to deliver on your behalf while also offering
shareholders appropriate protection.
Michael MacPhee
Chairman
25 November 2024
Source: LSEG/Baillie Gifford and relevant underlying index providers. See
disclaimer below. All figures are stated on a total return basis. Total return
and discount are an alternative performance measures - see Glossary of terms
and alternative performance measures below.
Past performance is not a guide to future performance.
Managers' report
Equity markets around the world continue to grind higher as the dampening
effects on valuations from supply chain shocks and higher rates subside. The
start of a coordinated approach by central banks to lower rates buoyed
markets, as did the excitement around the progress of generative AI. In
Europe, some of that excitement wore off in the second half of the year,
following a snap election in France and some mixed economic data from the US
and China. At that point, those pointing to a soft landing started to doubt
themselves. In September, however, two major policy announcements restored
some confidence: a 50bps policy rate cut by the US Federal Reserve and a range
of stimulus measures from The People's Bank of China. Forecasting what comes
next and how it will impact equity markets is difficult, however, the
conditions we see in front of us appear to be much more favourable than they
have been for some time.
Before we lead you to conclude that we have become readers of the economic tea
leaves, let us reassure you. Our investment philosophy remains unchanged even
if the process has evolved and will continue to do so in light of lessons
learned. We are long-term growth investors focused on exploiting market
inefficiencies in valuing the rate and duration of growth. We search for
Europe's outliers - companies that can at least double in value over a
five-year period principally by increasing their cashflows and increasing the
returns on the cashflows they reinvest, beyond rates expected by the market.
When we find them, we aim to hold them for a very long time. This also means
that we will normally have a portfolio that looks very different from the
index, and most other managers. Having said that, we have strengthened our
processes around portfolio construction and valuation. This has helped us
better shape our portfolio to capture the maximum amount of upside while
minimising risk.
Some portfolio companies continue to grapple with complex short-term issues.
However, when we think about the current environment we are in, and the
fundamentals of the companies we own, we continue to look at the future with a
great deal of optimism
Performance
Over the last financial year, the Company's NAV delivered a total return of
12.1% (14.5% with loans at book value) while the FTSE Europe ex-UK index
returned 15.3% in sterling terms. The Company's share price total return was
9.3%, representing a discount of 15.7% to the NAV. This compares to a discount
of 13.6% at the beginning of the period. This is again disappointing given
many of the headwinds that caused underperformance in prior years have abated.
Breaking attribution down further gives a clearer picture of what has been
working and what hasn't.
Encouragingly, our public companies, now accounting for 94% of our portfolio,
delivered a total return of around 20% over the year. Offsetting this were
significant write-downs to two of our private companies, Northvolt and
McMakler, and a widening of the Company's discount to NAV. These resulted in a
negative contribution of -6.5% and -2.8% respectively. An increase in the fair
value of our loans also resulted in a negative contribution of -2.4%, making
the total from these factors around -12%. In highlighting this we do not mean
to wash our hands of the responsibility for the Company's investment
performance - quite the opposite. Conditions for our style of investing are
much improved which provides a great platform for both us and the companies we
invest in. Our underperformance has mainly come from stock-picking, including
two private companies we chose to invest in that are having problems with
their end markets and raising capital.
Public companies
As we noted in the Interim report, many of our listed holdings are now
starting to benefit from inflection points both in terms of demand but also
profitability. Companies that chose to invest in their businesses over the
past few years are now in the position to increase prices faster than costs.
Spotify, for example, has been able to increase its subscription prices with
limited impact on demand, but it has also become much more efficient in how it
spends money. This means that the world's largest streaming platform with over
600 million monthly active users, has now exceeded its medium-term target of
10% operating profit margins after an extended period of losses.
Adyen, the Dutch payment company, is in a similar place. It continues to grow
revenues more than 20% by winning new clients and expanding business with
existing clients. It is, however, growing its profits faster than this as it
slows down its aggressive hiring programme.
Schibsted, the Nordic online classifieds platform, also performed well. Part
of this related to the sale of its News Media business and a majority stake in
Adevinta, its European classifieds platform, which was bought by a private
equity consortium. What is left is a much cleaner business with a lot of scope
to increase prices for its services while benefitting from a recovery in
demand.
Another inflection point drove the share price of Hypoport significantly
higher. As Germany's largest online marketplace for mortgages and home loans,
it benefited as transaction volumes picked up following the worst downturn in
decades.
Overall, we take encouragement that fundamentals are back to driving share
prices, rather than valuation multiples.
Some companies didn't fare as well. Kering, the parent of luxury brands like
Gucci and Saint Laurent, suffered from weaker Chinese demand which affected
most of its peers to varying degrees. This downturn has been especially tough
as Gucci's extraordinary growth of recent years came to an end and those who
led it left the business. We think the turnaround will take longer than
expected so we sold our position.
HelloFresh, which we noted as another sale in the interim report, also
provided a drag to performance. Its core meal kit business appeared to be more
mature than expected and we were not convinced on the attractions of its new
ready-to-eat business.
Soitec, a manufacturer of engineered substrates or wafers for semiconductors
used in mobile phones, cars and connected devices, didn't perform like many
other semiconductor companies. It is still dealing with excess inventories at
its customers so is yet to see orders rebound. We believe this is just a
matter of time, and with almost all its customers now making positive
comments, we've been adding to our position during this period of share
price weakness.
Private companies
At the end of the financial year, our five private companies accounted for
around 5.7% of total investments. We are very pleased with the operational
progress at three of them.
Bending Spoons, the Italian software company which owns mobile digital
applications like Evernote, Splice, and Meetup, continues to both improve the
growth and profitability of the apps it owns, and acquire new apps at
attractive prices.
sennder, the digital freight-forwarder, recently acquired CH Robinson's
European ground transportation business, effectively doubling its revenue and
accelerating its path to profitability.
Flix, the global travel-tech business which manages bus operations like
FlixBus and Greyhound, also continues to grow profitably. It had been
exploring a summer IPO but decided to remain private and team up with a
consortium of investors including EQT, the listed Swedish private equity
business which we also own directly, which acquired a significant stake. We
think this structure increases the probability of an excellent long-term
outcome even if it deprives us of the opportunity for external validation in
the near term.
Our other two private companies - Northvolt and McMakler - have faced highly
contrasting fortunes. We have been forced to take significant write-downs in
both investments. McMakler, the German real-estate broker, has, much like
Hypoport, been operating against a tough economic backdrop in Germany. That
the entire investment was written off reflects the precarious position the
company found itself in and the conservative approach we take to valuation.
Helped by our relationship with the company, we were able to support its
recapitalisation and give it the cash runway to see it through to better
times. This was done on extremely favourable terms, and if business continues
to improve as it has for Hypoport, we would expect the value of our new
investment to rise materially.
Northvolt, the Swedish battery company, is a much bigger and higher profile
company. While confidentiality agreements limit what we can disclose about all
our private companies, there have been numerous newspaper articles reporting
on Northvolt's recent troubles. Operational progress is not where it should
be, and its customers are increasingly facing Chinese competition. The scaling
back of European subsidies has also resulted in weaker demand, making
fundraising for any business involved with electric battery production much
more difficult. Northvolt's ambition is admirable, but while it remains of
strategic importance to Europe, there are still significant challenges to
overcome. It also seems clear now that this ambition caused them to overreach.
The company has been forced to reduce the size of its workforce by around 20%
and focus almost exclusively on the first phase of its Swedish gigafactory.
This will have a significant impact on Northvolt's output by the end of the
decade, and its ability to generate cash. Given these difficulties, it was
decided to make a substantial write-down on the value of our investment. Since
the end of our financial year however, Northvolt has continued to face
liquidity problems and has filed for Chapter 11 reorganisation. It's CEO,
Peter Carlsson, has also resigned. While companies can often emerge from this
process in a much stronger position, we have decided to write this investment
down to zero. From such a promising start, this has been incredibly
frustrating and disappointing for us as managers, our fellow shareholders, and
for Europe.
With two of our five private company investments in distress, it is fair to
ask whether we ought to stick to public markets. We have tended to be
selective in our private company investments, but always cognisant that over
time, some would produce great returns, and some would not. Fundamentally, we
believe strongly that this is an area where we can offer something quite
unique with the potential for worthwhile and asymmetric payoffs. If anything,
our long-termism and privileged access to companies, mean that we should have
an even stronger advantage in private markets. It is here that we are meeting
some of the most innovative companies in the world. The last few years have
been difficult for many public growth companies, but even more so for private
companies. It is normal that some companies need to reset and refocus, and
others fail. Entrepreneurialism and innovation will, however, enable some of
these companies to achieve great things. On this we remain confident. A
successful IPO or realisation event in this segment of the market may have a
significant impact on sentiment given the current situation.
Portfolio activity
Over the past year our turnover has doubled, to just over 18%. This still
indicates an average holding period of more than five years but also that
competition for capital is increasing. We are finding more and more companies
that we admire trading on extremely low valuation multiples. In the first half
of our financial year, we bought Lonza, Genmab, Camurus, and Assa Abloy.
Continued innovation in healthcare underpins the first three, while the
capacity to carry out value-accretive acquisitions underpins the latter. These
themes are also evident in the four new purchases we made in the second half
of the year:
• Vitec, a serial acquirer in the VMS (vertical market
software) industry, is very similar to Topicus, one of our highest conviction
names. We expect similar growth rates - around the 20% level - driven mostly
by acquisitions. Vitec's headline valuation multiples might appear high, but
we think the market is still underestimating the company's prospects for
profitably consolidating an extremely fragmented industry.
• Instalco is another serial acquirer from Sweden, this time
in the technical installation industry, which comprises a broad range of
markets including plumbing and scaffolding. This also has a huge market to
consolidate, is owned and managed by a founder and a young entrepreneurial
CEO, and like many other serial acquirers we invest in, gets better as it gets
bigger. We considered buying it last year, but we were cautious about the
ongoing downturn in Nordic construction markets, so waited and continued to
learn from the sidelines. This turned out to be the right thing to do, as we
got a better entry point when we recently bought some shares.
• Dino Polska, a founder-run retailer with a network of
convenience stores across Poland's countryside, has a slightly different
approach to capital allocation. Rather than acquire, it reinvests all its free
cashflow organically at very high rates of return, mainly by rolling out new
stores. Deflation and price competition between Lidl and Biedronka have made
life difficult for Polish retailers, but these forces should abate. Dino is
one of the highest quality retailers we have ever seen, and the current
valuation looks attractive to us.
• Novo Nordisk is the current global leader in insulin and
GLP-1 drugs for diabetes and obesity. It has performed extremely well in
recent years and thus been a painful omission from our portfolio. We initially
doubted the scale of potential for its obesity franchise. What matters now is
whether the share price can continue to perform strongly over the next decade,
and our view is that there is a lot to like. First, we have more conviction in
the growth potential from its obesity drugs despite the competition. There are
decades of innovation left in GLP-1s and combination therapies, and the
potential 1bn patient population has barely been penetrated. Health economic
data and better drug efficacy will help broaden access here and to support
cost benefits. Secondly, as well as its track record in innovation, Novo has
distribution and manufacturing advantages through increasing scale which will
help cement its position as lowest cost provider. Finally, having looked at
several other ways to access the potential of this paradigm shifting
technology, we think Novo is the best value. There are very few companies in
Europe, or even in the world, that have the potential to grow revenue at 15%
for more than a decade while making incredibly high returns on capital.
Sources of funds
As well as Kering, we have also moved on from adidas, Delivery Hero, and
Evotec. adidas has had its problems over the years with inventory building up,
brand-tarnishing ambassadors, and a perceived lack of innovation. The
turnaround is well underway under new CEO Bjørn Gulden, but expectations are
quite high now and the market seems to be pricing in a return to peak margins.
Elsewhere, our thesis that competition would become more rational in the
online food delivery business was disproven, so we moved on from Delivery Hero
in favour of better companies. We also sold Evotec, a CRO (contract research
organisation), following revelations of insider trading by the now fired CEO.
He was an important part of the investment case given his vision and
experience; however, we remain interested bystanders as the attractive core
business may well prove to be less dependent on one man than we currently
think
Reasons for rational exuberance, or at least optimism
We try to be as objective as possible when it comes to investing, and to learn
from our mistakes. This is why we think a team-based approach is the optimal
structure for fostering long-term outperformance. We also spend a lot of time
thinking about how we can improve and where we can exploit market
inefficiencies. We would offer the following analysis:
• Our diversified portfolio is exposed to themes that should
underpin structural growth for years, if not decades. We have serial acquirers
consolidating fragmented markets, innovative healthcare companies meeting
unmet medical needs and driving costs out of the system, some of the largest
and most powerful e-commerce and digital entertainment platforms in the world,
companies providing hardware and software for the further advancement of
Moore's Law, solutions providers helping us to transition to a lower carbon
economy, capital allocators investing in private markets, and a collection of
the highest quality luxury brands.
• In terms of cyclical tailwinds, broader macroeconomic
conditions are more supportive than they have been for many years. Interest
rates and inflation are either falling or stabilising, normal ordering
patterns are resuming in many industries we are exposed to, M&A activity
is picking up, as are the number of IPOs, and the outlook for demand seems to
be improving from a low base.
• The most compelling reason, however, is that we believe
valuations do not reflect this upside. Looking at the portfolio in aggregate
(characteristics below), we can see that when compared to the index, our
companies have been and are likely to continue growing faster, are generating
higher returns on equity and invested capital, and have stronger balance
sheets. For these qualities we would expect to pay a valuation premium versus
the index, but even this has been narrowing significantly. In our minds, this
understates the fundamental, durable attractions of our portfolio. We also see
record levels of discounts right across Europe, across the small and mid-cap
sector, and on Investment Trusts and other listed holding companies. This
Investment Trust is now trading on a record wide discount of around 16% to its
own NAV.
We are clearly very disappointed with the recent period of sharp
underperformance. The Board has set us a four-year performance-based
challenge, and as Managers, we acknowledge and accept this. We strongly
believe that the starting point for future investment returns hasn't been this
favourable for many years. We are confident that we will return to delivering
the performance our shareholders have every right to expect.
Stephen Paice
Chris Davies
Baillie Gifford
25 November 2024
For a definition of terms see Glossary of terms and alternative performance
measures at the end of this announcement.
Past performance is not a guide to future performance.
List of investments
As at 30 September 2024
Name Geography Business 2024 2024
Value % of total
£'000 assets
Prosus Netherlands Portfolio of online consumer companies 23,328 5.6
Topicus.com Netherlands Acquirer of vertical market software companies 21,090 5.1
DSV Denmark Freight forwarder 19,414 4.7
Schibsted Norway Media and classifieds advertising platforms 17,971 4.3
Ryanair Ireland Low-cost airline 16,662 4.0
ASML Netherlands Semiconductor equipment manufacturer 15,666 3.8
Hypoport Germany FinTech platform 15,625 3.7
Adyen Netherlands Online payments platform 15,294 3.7
Atlas Copco Sweden Industrial group 13,923 3.3
Allegro.eu Poland Ecommerce platform 13,478 3.2
Nexans France Cable manufacturing company 13,111 3.1
Kingspan Ireland Building materials provider 12,932 3.1
IMCD Netherlands Speciality chemicals distributor 12,080 2.9
Reply Italy IT consulting and systems integration provider 12,019 2.9
EXOR Netherlands Investment company specialising in industrials 11,834 2.8
Spotify Sweden Online audio streaming service 10,445 2.5
Bending Spoons(§) Italy Mobile application software developer 9,862 2.4
EQT Sweden Investment firm, investing in equity, ventures, infrastructure and real estate 9,748 2.3
Lonza(*) Switzerland Contract development and manufacturing organisation 9,656 2.3
Novo Nordisk(*) Denmark Pharmaceutical company 8,553 2.0
Moncler Italy Manufactures luxury apparel products 8,179 2.0
Soitec France Manufactures engineered substrates for semiconductor wafers 8,156 2.0
Dassault Systèmes France Develops software for 3D computer-aided design 7,879 1.9
sennder(§†) Germany Freight forwarder focused on road logistics 7,603 1.8
Richemont Switzerland Owner of luxury goods companies 7,306 1.8
Assa Abloy(*) Sweden Developer, designer and manufacturer in access solutions market 7,256 1.7
Sartorius Stedim Biotech France Pharmaceutical and laboratory equipment provider 6,876 1.7
Instalco(*) Sweden Serial acquirer of technical installation businesses 6,561 1.6
Royal Unibrew Denmark Alcoholic and non-alcoholic beverages 5,562 1.3
Epiroc Sweden Mining and infrastructure equipment provider 5,253 1.3
Camurus(*) Sweden Develops and commercialises therapeutic medications 5,154 1.2
Vitec Software(*) Sweden Serial acquirer of vertical market software businesses 4,861 1.2
Beijer Ref Sweden Wholesaler of cooling technology 4,381 1.1
LVMH France Luxury goods 4,264 1.0
Tonies Germany Musical storybox toys for children 4,218 1.0
Flix(§) Germany Long-distance bus and train provider 4,213 1.0
Kinnevik Sweden Investment company specialising in digital consumer businesses 4,044 1.0
Dino Polska(*) Poland Grocery store chain 3,876 0.9
Wizz Air Hungary Low-cost airline 3,459 0.8
Genmab(*) Denmark Antibody based drug development 3,458 0.8
Avanza Bank Sweden Online investment platform 3,383 0.8
Mettler-Toledo Switzerland Manufacturer of precision instruments for laboratories 3,303 0.8
Eurofins France Analytical testing services 2,916 0.7
VNV Global Sweden Investment company specialising in early-stage technologies 2,734 0.7
CRISPR Therapeutics Switzerland Developer of treatments based on gene editing technology 2,544 0.6
AutoStore Norway Warehouse automation and cubic storage systems 2,048 0.5
Northvolt(§) Sweden Battery developer and manufacturer 965 0.3
McMakler(§) Germany Digital real estate broker 832 0.2
Total Investments 413,975 99.4
Net liquid assets 2,300 0.6
Total assets 416,275 100.0
Borrowings (49,844) (12.0)
Shareholders' funds 366,431 88.0
(§) Denotes unlisted investment (private company).
· New holdings bought during the year (Adevinta, adidas, AUTO1,
Cellectis, Delivery Hero, Evotec, HelloFresh, Hemnet, Hexpol, Keri and Zalando
were sold during the period).
† Includes convertible loan note.
Income statement
For the year ended 30 September
Notes 2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 43,968 43,968 - 19,795 19,795
Currency (losses)/gains (51) 2,073 2,022 (40) 533 493
Income 2 4,013 - 4,013 3,912 - 3,912
Investment management fee 3 (370) (1,477) (1,847) (354) (1,416) (1,770)
Other administrative expenses (630) - (630) (564) - (564)
Net return before finance costs and taxation 2,962 44,564 47,526 2,954 18,912 21,866
Finance costs of borrowings (160) (640) (800) (164) (653) (817)
Net return before taxation 2,802 43,924 46,726 2,790 18,259 21,049
Tax on ordinary activities (255) - (255) 6,835 - 6,835
Net return after taxation 2,547 43,924 46,471 9,625 18,259 27,884
Net return per ordinary share 4 0.72p 12.35p 13.07p 2.68p 5.09p 7.77p
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue and capital return columns are prepared
under guidance published by the Association of Investment Companies.
All revenue and capital items in this 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.
The accompanying notes are an integral part of the Financial Statements.
Balance sheet
As at 30 September
Notes 2024 2024 2023 2023
£'000 £'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 6 413,975 377,812
Current assets
Debtors 1,331 2,406
Cash at bank 1,856 907
3,187 3,313
Creditors
Amounts falling due within one years (887) (1,775)
Net current assets 2,300 1,538
Total assets less current liabilities 416,275 379,350
Creditors
Amounts falling due after more than one year: 7 (49,844) (51,960)
Net assets 366,431 327,390
Capital and reserves
Share capital 8 10,061 10,061
Share premium account 125,050 125,050
Capital redemption reserve 8,750 8,750
Capital reserve 214,138 176,215
Revenue reserve 8,432 7,314
Shareholders' funds 366,431 327,390
Net asset value per ordinary share(*) 104.2p 91.4p
(borrowings at book value)
Net asset value per ordinary share(*) 108.0p 96.7p
(borrowings at fair value)
The Financial Statements of Baillie Gifford European Growth Trust plc (Company
registration number 1055384) were approved and authorised for issue by the
Board and were signed on 25 November 2024.
Michael MacPhee
Chairman
The accompanying notes are an integral part of the Financial Statements.
(*) See Glossary of terms and alternative performance measures at the
end of this announcement.
Statement of changes in equity
For the year ended 30 September 2024
Notes Share Share Capital Capital Revenue Shareholders'
capital premium redemption reserve reserve funds
£'000 account reserve £'000 £'000 £'000
£'000 £'000
Shareholders' funds at 1 October 2023 10,061 125,050 8,750 176,215 7,314 327,390
Dividends paid during the year 5 - - - - (1,429) (1,429)
Shares bought back into treasury - - - (6,001) - (6,001)
Net return after taxation - - - 43,924 2,547 46,471
Shareholders' funds at 30 September 2024 10,061 125,050 8,750 214,138 8,432 366,431
For the year ended 30 September 2023
Notes Share Share Capital Capital Revenue Shareholders'
capital premium redemption reserve reserve funds
£'000 account reserve £'000 £'000 £'000
£'000 £'000
Shareholders' funds at 1 October 2022 10,061 125,050 8,750 158,457 8,079 310,397
Dividends paid during the year 5 - - - - (10,390) (10,390)
Shares bought back into treasury - - - (501) - (501)
Net return after taxation - - - 18,259 9,625 27,884
Shareholders' funds at 30 September 2023 10,061 125,050 8,750 176,215 7,314 327,390
The accompanying notes are an integral part of the Financial Statements.
Cash flow statement
For the year ended 30 September
Notes 2024 2024 2023 2023
£'000 £'000 £'000 £'000
Cash flows from operating activities
Net return before taxation 46,726 21,049
Net losses/(gains) on investments (43,968) (19,795)
Currency gains (2,073) (533)
Finance costs of borrowings 800 817
Tax repayment received - 7,034
Overseas withholding tax suffered (255) (199)
Overseas withholding tax received 240 451
Changes in debtors(*) (149) (170)
Changes in creditors(*) 73 29
Cash from operations(†) 1,394 8,683
Interest paid (804) (813)
Net cash inflow from operating activities 590 7,870
Cash flows from investing activities
Acquisitions of investments(#) (82,256) (46,765)
Disposals of investments(#) 90,091 47,203
Net cash inflow from investing activities 7,835 438
Cash flows from financing activities
Shares bought back into treasury (5,998) (509)
Equity dividends paid (1,429) (10,390)
Net cash outflow from financing activities (7,427) (10,899)
Increase/(decrease) in cash at hand 998 (2,591)
Exchange movements (49) (73)
Cash at bank at start of year 907 3,571
Cash at bank at end of year 1,856 907
Comprising:
Cash at bank 1,856 907
1,856 907
(*) Change in debtors is made up of changes in accrued income, prepaid
expenses and taxation recoverable (excluding overseas withholding tax received
in the year) - see note 10 in Annual Report. Change in creditors is made up of
changes in other creditors and accruals - see note 11 in Annual Report.
(†) Cash from operations includes dividends received of £3,760,000
(2023 - £2,839,000) and interest received of £75,000 (2023 - £919,000).
(#) Acquisitions of investments is made up of the current year purchases
at cost (see note 9 in the Annual Report), plus opening purchases for
subsequent settlement, less closing purchases for subsequent settlement (see
note 11 in the Annual Report). Disposals of investments is made up of the
current year sales proceeds (see note 9 in the Annual Report), plus opening
investment sales awaiting settlement, less closing investment sales awaiting
settlement (see note 10 in the Annual Report).
The accompanying notes are an integral part of the Financial Statements.
Notes to the Condensed Financial Statements
1. The Financial Statements for the year to 30 September 2024
have been prepared in accordance with FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland' on the basis of the
accounting policies set out below which are consistent with those applied for
the year ended 30 September 2024.
2. Income
2024 2023
£'000 £'000
Income from investments
Overseas dividends 3,818 2,890
Overseas interest 120 103
Other income
Interest 75 919
Total income 4,013 3,912
Interest for 2023 includes £869,000 interest received from HMRC with the tax
repayment (see note 6 on page 92 of the Annual Report).
3. Investment management fee
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 370 1,477 1,847 354 1,416 1,770
Details of the Investment Management Agreement are disclosed on pages 54 and
55 of the Annual Report and Financial Statements. Baillie Gifford & Co
Limited's 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 £500 million, and 0.50% of the amount
of the lower of the Company's market capitalisation or net asset value above
£500 million, calculated and payable quarterly.
Baillie Gifford & Co Limited, a wholly owned subsidiary of Baillie Gifford
& Co, was appointed as the Company's Alternative Investment Fund Manager
('AIFM') and Company Secretaries on 29 November 2019. Baillie Gifford &
Co Limited has delegated portfolio management services to Baillie Gifford
& Co. Dealing activity and transaction reporting has been further
sub-delegated to Baillie Gifford Overseas Limited and Baillie Gifford Asia
(Hong Kong) Limited.
The Investment Management Agreement between the AIFM and the Company sets out
the matters over which the Managers have authority in accordance with the
policies and directions of, and subject to restrictions imposed by, the Board.
The Investment Management Agreement is terminable on not less than three
months' notice or on shorter notice in certain circumstances. Compensation
would only be payable if termination occurred prior to the expiry of the
notice period. 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 £500 million, and 0.50% of the
amount of the lower of the Company's market capitalisation or net asset value
above £500 million, calculated and payable quarterly.
4. Net return per ordinary share
2024 2024 2024 2023 2023 2023
Revenue Capital Total Revenue Capital Total
Net return per ordinary share 0.72p 12.35p 13.07p 2.68p 5.09p 7.77p
Revenue return per ordinary share is based on the net revenue return after
taxation of £2,547,000 (2023 - £9,625,000), and on 355,716,719 (2023 -
358,552,904) ordinary shares, being the weighted average number of ordinary
shares in issue during each year.
Capital return per ordinary share is based on the net capital gain for the
financial year of £43,924,000 (2023 - £18,259,000), and on 355,716,719 (2023
- 358,552,904) ordinary shares, being the weighted average number of ordinary
shares in issue during each year.
There are no dilutive or potentially dilutive shares in issue.
5. Ordinary dividends
2024 2023 2024 2023
£'000 £'000
Amounts recognised as distributions in the period:
Previous year's final (paid 2 February 2024) 0.40p 0.70p 1,429 2,511
Special Interim Dividend (paid 15 September 2023) - 2.20p - 7,879
0.40p 2.90p 1,429 10,390
Also set out below are the total dividends paid and proposed in respect of the
financial year, which is the basis on which the requirements of section 1158
of the Corporation Tax Act 2010 are considered. The revenue available for
distribution by way of dividend for the year is £2,547,000 (2023 -
£9,625,000).
2024 2023 2024 2023
£'000 £'000
Dividends paid and proposed in the period:
Special interim dividend (paid 15 September 2023) - 2.20p - 7,879
Proposed final dividend per ordinary share (payable 14 February 2025) 0.6p 0.40p 2,111 1,433
0.6p 2.60p 2,111 9,312
6. Investments
As at 30 September 2024 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Securities
Listed equities 390,500 - - 390,500
Unlisted equities - - 23,475 23,475
Total financial asset investments 390,500 - 23,475 413,975
As at 30 September 2023 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Securities
Listed equities 336,369 - - 336,369
Unlisted equities - - 41,443 41,443
Total financial asset investments 336,369 - 41,443 377,812
Investments in securities are financial assets designated at fair value
through profit or loss on initial recognition. In accordance with FRS 102 the
tables above provide an analysis of these investments based on the fair value
hierarchy described below which reflects the reliability and significance of
the information used to measure their fair value.
Fair value hierarchy
The levels are determined by the lowest (that is the least reliable or least
independently observable) level of input that is significant to the fair value
measurement for the individual investment in its entirety as follows:
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).
The valuation techniques used by the Company are explained in the accounting
policies on pages 88 and 89 of the Annual Report and Financial Statements. A
sensitivity analysis by valuation technique of the unlisted securities is on
pages 100 to 102 of the Annual Report and Financial Statements.
7. Creditors - amounts falling due after more than one year
2024 2023
£'000 £'000
Unsecured loan notes:
€30m 1.55% 24 June 2036 24,938 25,998
€30m 1.57% 8 December 2040 24,906 25,962
49,844 51,960
The Company has €30 million of long-term, fixed rate, senior, unsecured
privately placed loan notes, with a fixed coupon of 1.57% to be repaid on 8
December 2040 and a further €30 million of long-term, fixed rate, senior,
unsecured privately placed loan notes with a fixed coupon of 1.55% to be
repaid on 24 June 2036.
The main covenants which are tested monthly are: (i) Net tangible assets shall
not fall below £200,000,000. (ii) Total borrowings shall not exceed 30% of
the Company's adjusted assets (as defined by the loan agreement). (iii) The
Company's number of holdings shall not fall below 30.
8. Share capital
2024 2024 2023 2023
Number £'000 Number £'000
Allotted, called up and fully paid ordinary shares of 2.5p each 351,783,279 8,795 358,149,200 8,954
Treasury shares of 2.5p each 50,660,411 1,266 44,294,490 1,107
Total 402,443,690 10,061 402,443,690 10,061
The Company's shareholder authority permits it to hold shares bought back in
treasury. Under such authority, treasury shares may be subsequently either
sold for cash (at a premium to net asset value per ordinary share) or
cancelled. At 30 September 2024 the Company had authority to buy back
48,283,377 ordinary shares. During the year to 30 September 2024 no ordinary
shares (2023 - nil) were bought back for cancellation and 6,365,921 (2023 -
538,471) ordinary shares were bought back into treasury at a cost of
£6,001,000 (2023 - £501,000). Under the provisions of the Company's Articles
of Association share buy-backs are funded from the capital reserve. The
Company has authority to allot shares under section 551 of the Companies Act
2006. The Board has authorised use of this authority to issue new shares at a
premium to net asset value per share in order to enhance the net asset value
per share for existing shareholders and improve the liquidity of the Company's
shares. During the year to 30 September 2024 no shares were issued (in the
year to 30 September 2023 - no shares were issued).
9. Analysis of change in net debt
1 October Cash flows Other non-cash Exchange 30 September
2023 £'000 changes movement 2024
£'000 £'000 £'000 £'000
Cash at bank 907 998 - (49) 1,856
Loans due in more than one year (51,960) - (6) 2,122 (49,844)
(51,053) 998 (6) 2,073 (47,988)
10. Transactions with related parties and the managers and secretaries
The Directors' fees for the year and interests in the Company's shares at the
end of the year are detailed in the Directors' Remuneration Report on pages 72
and 73 of the Annual Report and Financial Statements. The Directors' Fees are
included in note 4. No Director has a contract of service with the Company.
During the years reported, no Director was interested in any contract or other
matter requiring disclosure under section 412 of the Companies Act 2006.
The Management fee due to Baillie Gifford & Co Limited is set out in note
3 and the amount accrued at 30 September 2023 is set out in note 11. Details
of the Investment Management Agreement are set out on page 5 of the Annual
Report and Financial Statements
The Company is part of a marketing programme which includes all the investment
trusts managed by the Manager. The Company's marketing contribution,
recharged by the Manager, was £95,000 (2023 - £95,000) as disclosed in note
4.
11. On 15 November 2024 the value of the holdings in Northvolt were
written down to nil, the value of the holdings as at 30 September 2024 was
£965,000, 0.3% of total assets. This was reflected in the published NAV as at
15 November 2024. The Company is not aware of any other subsequent events.
12. The Annual Report and Financial Statements will be available on
the Company's page of the Managers' website at bgeuropeangrowth.com
(http://www.bgeuropeangrowth.com/) on or around 9 December 2024.
None of the views expressed in this document should be construed as advice to
buy or sell a particular investment.
Automatic exchange of information
In order to fulfil its obligations under UK tax legislation relating to the
automatic exchange of information, the Company 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. As an affected company, 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.
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
gov.uk/government/publications/exchange-of-information-account-holders
(https://www.gov.uk/government/publications/exchange-of-information-account-holders)
.
Third party data provider disclaimer
No third party data provider ('Provider') makes any warranty, express or
implied, as to the accuracy, completeness or timeliness of the data contained
herewith nor as to the results to be obtained by recipients of the data.
No Provider shall in any way be liable to any recipient of the data for any
inaccuracies, errors or omissions in the index data included in this document,
regardless of cause, or for any damages (whether direct or indirect) resulting
therefrom. No Provider has any obligation to update, modify or amend the data
or to otherwise notify a recipient thereof in the event that any matter stated
herein changes or subsequently becomes inaccurate.
Without limiting the foregoing, no Provider shall have any liability
whatsoever to you, whether in contract (including under an indemnity), in tort
(including negligence), under a warranty, under statute or otherwise, in
respect of any loss or damage suffered by you as a result of or in connection
with any opinions, recommendations, forecasts, judgements, or any other
conclusions, or any course of action determined, by you or any third party,
whether or not based on the content, information or materials contained
herein.
FTSE Index data
Source: London Stock Exchange Group plc and its group undertakings
(collectively, the 'LSE Group'). ©LSE Group 2024. FTSE Russell is a trading
name of certain of the LSE Group companies. 'FTSE(®)' 'Russell(®)', 'FTSE
Russell(®), are trade marks of the relevant LSE Group companies and are used
by any other LSE Group company under license. All rights in the FTSE Russell
indices or data vest in the relevant LSE Group company which owns the index or
the data. Neither LSE Group nor its licensors accept any liability for any
errors or omissions in the indices or data and no party may rely on any
indices or data contained in this communication. No further distribution of
data from the LSE Group is permitted without the relevant LSE Group company's
express written consent. The LSE Group does not promote, sponsor or endorse
the content of this communication.
Sustainable Finance Disclosure Regulation ('SFDR') (unaudited)
The EU Sustainable Finance Disclosure Regulation ('SFDR') does not have a
direct impact in the UK due to Brexit, however, it applies to third-country
products marketed in the EU. As Baillie Gifford European Growth Trust is
marketed in the EU by the AIFM, Baillie Gifford & Co Limited, via the
National Private Placement Regime ('NPPR') the following disclosures have been
provided to comply with the high-level requirements of SFDR.
The AIFM has adopted Baillie Gifford & Co's ESG Principles and Guidelines
as its policy on integration of sustainability risks in investment decisions.
Baillie Gifford & Co believes that a company cannot be financially
sustainable in the long run if its approach to business is fundamentally out
of line with changing societal expectations. It defines 'sustainability' as a
deliberately broad concept which encapsulates a company's purpose, values,
business model, culture, and operating practices.
Baillie Gifford & Co's approach to investment is based on identifying and
holding high quality growth businesses that enjoy sustainable competitive
advantages in their marketplace. To do this it looks beyond current financial
performance, undertaking proprietary research to build up an in-depth
knowledge of an individual company and a view on its long-term prospects. This
includes the consideration of sustainability factors (environmental, social
and/or governance matters) which it believes will positively or negatively
influence the financial returns of an investment.
The likely impact on the return of the portfolio from a potential or actual
material decline in the value of investment due to the occurrence of an
environmental, social or governance event or condition will vary and will
depend on several factors including but not limited to the type, extent,
complexity and duration of an event or condition, prevailing market conditions
and existence of any mitigating factors. Whilst consideration is given to
sustainability matters, there are no restrictions on the investment universe
of the Company, unless otherwise stated within in its Investment Objective
& Policy. Baillie Gifford & Co can invest in any companies it believes
could create beneficial long(-)term returns for investors. However, this might
result in investments being made in companies that ultimately cause a negative
outcome for the environment or society. More detail on the Manager's approach
to sustainability can be found in the ESG Principles and Guidelines document,
available publicly on the Baillie Gifford website bailliegifford.com
(https://www.bailliegifford.com/) and by scanning the QR code below. The
underlying investments do not take into account the EU criteria for
environmentally sustainable economic activities established under the EU
Taxonomy Regulation.
Glossary of terms and alternative performance measures ('APM')
An alternative performance measure ('APM') is a financial measure of
historical or future financial performance, financial position, or cash flows,
other than a financial measure defined or specified in the applicable
financial reporting framework. The APMs noted below are commonly used measures
within the investment trust industry and serve to improve comparability
between investment trusts.
Total assets
This is the Company's definition of Adjusted Total Assets, being the total
value of all assets less current liabilities, before deduction of all
borrowings.
Shareholders' funds
Shareholders' Funds is the value of all assets held less all liabilities, with
borrowings deducted at book value.
Net asset value
Net Asset Value is the value of total assets less liabilities with borrowings
deducted at either book value or fair value as described below. The net asset
value per share (NAV) is calculated by dividing this amount by the number of
ordinary shares in issue (excluding treasury shares).
Net asset value (borrowings at fair value) (APM)
Borrowings are valued at an estimate of market worth. The fair value of the
Company's loan notes is set out in note 19 on page 103 of the Annual Report
and Financial Statements.
A reconciliation from shareholders' funds (borrowings at book value) to net
asset value after deducting borrowings at fair value is provided below.
2024 2024 2023 2023
£'000 per share £'000 per share
Shareholders' funds (borrowings at book value) 366,431 104.2p 327,390 91.4p
Add: book value of borrowings 49,844 14.2p 51,960 14.5p
Less: fair value of borrowings (36,425) (10.4p) (32,869) (9.2p)
Net asset value (borrowings at fair value) 379,850 108.0p 346,481 96.7p
The per share figures above are based on 351,783,279 (2023 - 358,149,200)
ordinary shares of 2.5p, being the number of ordinary shares in issue at the
year end.
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. When the share price is lower than the NAV it is
said to be trading at a discount. The size of the discount is calculated by
subtracting the NAV from the share price and is usually expressed as a
percentage of the NAV. If the share price is higher than the NAV, it is said
to be trading at a premium.
2024 2024 2023 2023
NAV (book) NAV (fair) NAV (book) NAV (fair)
Closing NAV 104.2p 108.0p 91.4p 96.7p
Closing share price 91.0p 91.0p 83.6p 83.6p
Discount 12.7% 15.7% 8.5% 13.6%
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.
2024 2024 2023 2023
NAV (fair) Share price NAV (fair) Share price
Closing NAV/share price (a) 108.0p 91.0p 96.7p 83.6p
Dividend adjustment factor(*) (b) 1.0039 1.0045 1.0286 1.0328
Adjusted closing NAV/share price (c) = (a) x (b) 108.4p 91.4p 99.5p 86.3p
Opening NAV/share price (d) 96.7p 83.6p 91.9p 79.5p
Total return (c) ÷ (d) -1 12.1% 9.3% 8.3% 8.6%
(*) The dividend adjustment factor is calculated on the assumption that
the final dividend of 0.4p (2023 - dividends of 0.7p and 2.20p) paid by the
Company during the year were reinvested into shares of the Company at the cum
income NAV/share price, as appropriate, at the ex-dividend date.
The NAV(fair) total return for the period since Baillie Gifford began managing
the portfolio in November 2019 can be calculated using the methodology shown
in the table above and an opening NAV of 93.7p, a dividend adjustment factor
of 1.0615 and a closing NAV of 108.0p.
Ongoing charges (APM)
The total expenses (excluding borrowing costs) incurred by the Company as a
percentage of the average net asset value with borrowings at fair value. The
ongoing charges have been calculated on the basis prescribed by the
Association of Investment Companies.
A reconciliation from the expenses detailed in the Income Statement is
provided below.
2024 2023
Investment management fee £1,847,000 £1,770,000
Other administrative expenses £630,000 £564,000
Total expenses (a) £2,477,000 £2,334,000
Average net asset value (with borrowings deducted at fair value) (b) £383,617,000 £379,519,000
Ongoing charges ((a) ÷ (b) expressed as a percentage) 0.65% 0.62%
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 shareholders' funds is called
'gearing'. If the Company's assets grow, shareholders' funds 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.
Gearing is the Company's borrowings adjusted for cash at bank expressed as a
percentage of shareholders' funds.
Gross gearing is the Company's borrowings expressed as a percentage of
shareholders' funds.
Leverage (APM)
For the purposes of the Alternative Investment Fund Managers (AIFM)
Regulations, leverage is any method which increases the Company's exposure,
including the borrowing of cash and the use of derivatives. It is expressed as
a ratio between the Company's exposure and its net asset value and can be
calculated on a gross and a commitment method. Under the gross method,
exposure represents the sum of the Company's positions after the deduction of
sterling cash balances, without taking into account any hedging and netting
arrangements. Under the commitment method, exposure is calculated without the
deduction of sterling cash balances and after certain hedging and netting
positions are offset against each other.
Active share (APM)
Active share, a measure of how actively a portfolio is managed, is the
percentage of the 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.
-end-
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR DZMZMGKZGDZZRecent news on Baillie Gifford European Growth Trust
See all newsREG - Baillie Gifford Euro - Transaction in Own Shares
AnnouncementREG - Baillie Gifford Euro - Net Asset Value(s)
AnnouncementREG - Baillie Gifford Euro - Transaction in Own Shares
AnnouncementREG - Baillie Gifford Euro - Net Asset Value(s)
AnnouncementREG - Baillie Gifford Euro - Transaction in Own Shares
Announcement