European Assets Tst - Half-year Report
08/08/2024 07:00
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RNS Number : 6118Z European Assets Trust PLC 08 August 2024
Date: 8 August 2024
Contact: Mine Tezgul (Lead Investment Manager) /
Scott McEllen (Investment Company Secretary)
Columbia
Threadneedle Investment Business Limited
0131 573
8300
LEI: 213800N61H8P3Z4I8726
European Assets Trust PLC
Unaudited Statement of Results
for the half-year ended 30 June 2024
Highlights for the half-year ended 30 June 2024:
· Net Asset Value total return of 3.5% in comparison to the Benchmark
return of 3.1%.
· Share price total return of 0.1%.
· An annual dividend of 5.9p per share for 2024 representing a dividend
yield of 7.0% based on the Company's closing share price of 84.4p on 6 August
2024.
"It was a positive period for the Company's portfolio with NAV total return
outperforming the Benchmark as the investment manager's stock picking was
rewarded. We see opportunities in the current market. Mine and the team favour
companies that have a competitive advantage and pricing power generated by
brands, patented processes, regulatory barriers to entry and strong market
positions. As smaller companies come back into favour later in the cycle we
expect to see the rewards."
Stuart Paterson
Chair
SUMMARY OF RESULTS
Half-year ended Half-year ended
30 June 2024 30 June 2023
Net Asset Value per share total return((1)) 3.5% 5.2%
Share price total return((1)) 0.1% -0.3%
Benchmark((2)) 3.1% 2.9%
Dividends per share:
Dividends paid per share - as at 30 June ((3)) 2.95p 2.90p
Dividends announced for the year 5.90p 5.80p
(1) Total Return - the return to Shareholders calculated on a per share
basis adding dividends paid in the period to the increase or decrease in the
Share Price or Net Asset Value in the period. The dividends are assumed to
have been re-invested in the form of shares or net assets, respectively, on
the date on which the shares were quoted ex-dividend.
(2) With effect from 1 June 2023 the benchmark changed from EMIX Smaller
European Companies (ex UK) Index (net) to MSCI Europe excluding United Kingdom
Small Mid Cap (net return) Index. For the six-month period ended 30 June
2023 a time-apportioned composite of both indices has therefore been
calculated and disclosed.
(3) The first interim dividend of 1.475p per share was paid on 31 January
2024, the second interim dividend of 1.475p per share on 30 April 2024 and the
third interim dividend of 1.475p per share on 31 July 2024. The fourth interim
dividend of 1.475p per share is payable to eligible Shareholders on 31 October
2024.
The Chair, commenting on the results, said:
Dear Shareholder,
For the six-month period ended 30 June 2024, European Assets Trust PLC ("the
Company") recorded a sterling Net Asset Value ("NAV") total return of 3.5%.
This compares to the total return from the Company's Benchmark of 3.1% for the
same period. The sterling share price total return for the period was 0.1%. At
30 June 2024 the NAV was 98.5p (31 December 2023: 98.3p) and the share price
was 86.8p (31 December 2023: 89.7p).
It was a positive period for the Company's portfolio with NAV total return
outperforming the Benchmark as the investment manager's stock picking was
rewarded.
The six-month period began on a positive note with investment gains achieved
mostly in the opening months. Markets in Europe and elsewhere were dominated
by volatile interest rate expectations and politics. Against this backdrop
smaller companies did well to hold their ground, but underperformed their
larger counterparts.
Portfolio Manager Change
On the 2nd of May 2024, the Board announced that following the further
integration of the European equities team by Columbia Threadneedle Investments
("the Manager"), Mine Tezgul would succeed Sam Cosh as the Company's Lead
Investment Manager.
Mine is a portfolio manager in the European equities team and Head of European
Small Cap Equities. Mine joined the Manager in 2018 as an equity analyst, and
since 2019 has been lead portfolio manager of the Columbia Threadneedle
European Smaller Companies strategy and co-manager of the Columbia
Threadneedle Pan European Small Cap Opportunities strategy. Prior to this,
Mine spent over ten years as an equity analyst focused on developed market
equities, working at Lansdowne Partners, SAC Global Investors and Highbridge
Capital Management. Mine started her career with Citigroup as a financial
analyst in its investment banking division and holds a BA in Economics with
General Honours from the University of Chicago and an MBA with Distinction
from INSEAD.
The Board believes that Mine's experience is very well suited to deliver the
Company's investment objective for Shareholders in line with the revised
investment approach developed following the review of historic performance
which was conducted in the latter half of 2023.
Mine is supported by Philip Dicken. Philip is Head of European Equities and
International Equities at Columbia Threadneedle Investments. He joined
Columbia Threadneedle in 2004 and has managed the Pan European Smaller
Companies strategy since launch in 2005.
The Board looks forward to working with Mine and Phil. Following these changes
the Board will continue to monitor performance closely. The Company's
investment policy and objective remain unchanged.
The Board wishes to place on record its thanks to Sam Cosh and Lucy Morris for
their commitment to the Company during their respective periods as Lead
Investment Manager and Investment Manager.
Share Price Discount
As at 30 June 2024 the share price discount was 11.8%. This was in comparison
to 8.8% as at 31 December 2023. The discount also widened relative to those
reported by the Company's peer group and resulted in a subdued share price
total return for investors for the six-month period. The Board recognises the
importance of movements in the Company's discount upon the return that
investors receive and is monitoring closely the discount's absolute and
relative levels.
Dividends
The 2024 dividend of 5.90p per share is payable in four equal instalments of
1.475p. Three interim dividends have been paid on 31 January, 30 April and 31
July with a further instalment of 1.475p to be paid on 31 October 2024.
As at 6 August 2024, the latest practicable date prior to publication of this
announcement, an annual dividend of 5.9p per share represented a yield of 7.0%
calculated with reference to the Company's closing share price of 84.4p. The
level of dividend paid each year is determined in accordance with the
Company's distribution policy. The Company has stated that, barring unforeseen
circumstances, it will pay an annual dividend equivalent to six per cent of
its NAV at the end of the preceding year.
Investment Management Fee Amendment
On the 2nd of May 2024 the Board also announced an amendment to the basis of
calculation of the investment management fee payable to the Manager.
Previously, the Manager received a fee equal to 0.75% per annum of the value
of funds under management up to €400 million, and in cases where the value
of funds under management exceeded €400 million, the applicable rate over
such excess value was 0.6% per annum.
Following the amendment, which was effective from 1 January 2024, the funds
under management to which the applicable rate of 0.75% is applied has been
lowered from €400 million to €300 million. For funds under management in
excess of €300 million, the applicable rate has been reduced from 0.60% to
0.55% per annum. The basis of calculation for funds under management remains
unchanged.
Directorate Changes
The Company was incorporated on 12 November 2018. It should though be
remembered that it is the UK domiciled successor of its Dutch predecessor,
European Assets Trust NV ("EAT NV") which was dissolved on 16 March 2019. All
Directors of the Supervisory Board of EAT NV were appointed to the Board of
the Company on the date of its incorporation. Although they were separate
legal entities, for governance purposes, the Board regards the date of first
appointment to the Supervisory Board of EAT NV as the date of appointment to
the continuing business.
As part of the Board's succession plan and following a thorough selection
process which included the services of a search company, Kate Cornish-Bowden
was appointed to the Board with effect from 2 January 2024.
Julia Bond retired from the Board on 31 January 2024. Julia was appointed as a
Director of the Supervisory Board of EAT NV, in April 2014 and upon retirement
had served nine years between both entities. On behalf of the Board and all
Shareholders I thank Julia for her diligence and wise counsel throughout her
period of appointment.
Following the retirement of Julia Bond, Kate Cornish-Bowden was appointed the
Company's Senior Independent Director.
The former Chair of the Company, Jack Perry CBE, retired at the conclusion of
the Annual General Meeting ("AGM") held on 17 May 2024. He joined the Board of
EAT NV, in April 2014 and had served as Chair from April 2015. On behalf of
the Board and all Shareholders, I wish to thank Jack for his dedicated
leadership and commitment.
Following my assumption of the role of Chair, Kevin Troup was appointed Chair
of the Company's Audit and Risk Committee.
As a further part of this plan it is anticipated that Martin Breuer will
retire from the Board at the conclusion of the 2025 AGM.
Outlook
Following the invasion of Ukraine and the impact on energy prices and
inflation, central banks underestimated the inflation problem forcing them to
raise interest rates rapidly. Tighter monetary policy is now taking effect and
inflation is falling. European economic growth is gradually improving,
although manufacturing continues to lag the services sector.
After these falls in inflation, the interest rate environment in both Europe
and the US appears more benign. The European Central Bank has begun to ease
monetary policy, as have Switzerland and Sweden; the US Federal Reserve is
expected to follow suit later this year. Lower interest rates have
historically benefited smaller companies to a greater extent than larger
companies. The improvement in the interest rate environment should benefit
European smaller companies which are currently valued at historic lows.
A recession can be avoided, although this is a delicate balancing act for
central banks. Global geopolitical tensions are a concern, as are the possible
repercussions for energy prices. There is also some political uncertainty,
including November's presidential election in the US. The second round of
voting in France has resulted in a hung parliament, averting a hard-right
victory.
In European small and mid-cap equities, there are reasons to remain
optimistic. Earnings have been resilient despite higher interest rates and,
over the longer-term, share prices tend to follow earnings. Good companies
continue to grow, and we see opportunities in the current market. The
Managers' focus is on stock selection. Mine and the team favour companies that
have a competitive advantage and pricing power generated by brands, patented
processes, regulatory barriers to entry and strong market positions. As
smaller companies come back into favour later in the cycle we expect to see
the rewards.
Stuart Paterson
Chair
The Investment Manager, commenting on the results, said:
Market Backdrop
Sentiment towards equities remained strong over the first half of 2024, and
optimism that major economies would navigate a soft landing resulted in gains
for European markets. The Company's Benchmark index rose by 3.1% in sterling
terms; most of this was achieved in the first quarter. The question of when
interest rate cuts would be implemented continued to preoccupy investors,
leading to volatility. Geopolitical tension in the Middle East boosted energy
prices. Inflation in major markets trended closer to central-bank targets but
missed expectations in some instances, so markets scaled back rate-cut
expectations. Central banks struck a dovish tone at meetings early in the year
but then backpedalled, citing concerns about services inflation and wage
growth. The European Central Bank implemented a 25-basis-point rate cut in
June. Economic sentiment in the eurozone dipped: June's preliminary composite
purchasing managers' index (PMI) fell: services growth slowed while the
decline in manufacturing output accelerated. Political uncertainty was key,
prompted by weak support for the French and German ruling parties in the EU
parliamentary elections. French equities were weak following President
Macron's decision to call a French parliamentary election. The first round saw
support for Marine Le Pen's far-right party National Rally (RN), but the
second round resulted in a broad split between the three main blocs.
Performance
It is pleasing to report that Net Asset Value per share performance was
positive, and slightly ahead of the index. Our technology stocks were strong
contributors to this performance. Karnov, the Swedish-based provider of online
legal information services, led the outperformance. The company received a bid
at a 28% premium to the prevailing share price from two private equity groups,
agreed by management. However the bid was subsequently rejected by a number of
the larger shareholders who felt the level was insufficient, and as a result
the private equity groups retreated. Even though this caused some retracement
in the share price after the end of the period, the shares are still trading
higher than they were before the bid. Operational results have been strong,
with the company showing good growth and gaining benefits from new acquisition
synergies as well as successful cost reductions. Cash flow generation will
enable them to reduce borrowings, which has been a concern for some investors
in the past.
Our holding in CTS Eventim has also boosted returns. This German company is
the world's leading platform for event ticketing - for concerts, theatres,
festivals and sporting events for example. Covid lockdowns were a major
drawback for the business model, as ticket sales everywhere for all events
plummeted. That phase is now over, and the company is well on the path to
recovery, winning market share and new contracts. The company is a major
contractor to the Paris Olympic and Paralympic games, and more recently has
signed for Los Angeles in 2028. Recent results have beaten expectations, with
the Adele tour and other events providing a welcome fillip.
Ringkjoebing Landbobank was another strong contributor to the portfolio's
performance over the period. Reluctance by central banks to lower interest
rates at too fast a rate opens the door to improved margins. Deposit margins
remain low, and this area is not too competitive. But lending margins have
been expanding, and this is likely to continue to drive profits. Even in the
tougher times, when interest rates were low or negative, the quality of the
bank's operations was sufficient to ensure enviable and sustainable returns
for many years - growth has exceeded 8% per annum since the global financial
crisis in 2007/8.
Cairn, the Irish housebuilder, continued to outperform, as their results
reflected ongoing higher demand in the real estate market, together with
limited supply which is boosting values. Cairn as one of the largest builders
in the Irish market with a substantial landbank is well placed to benefit from
its strong market position. The stock pays an attractive and growing dividend
which has provided further support for the shares. Dalata Hotels has in
contrast suffered owing to shortterm weakness in the hotel trade in Ireland,
coupled with more hotel openings creating an excess of supply. The company
expects this to reverse as the summer approaches, and the shares look
attractively valued after recent falls.
Our industrials performed less well, in a reversal of the previous trend.
Carel Industries, which is an Italian-based supplier of technology for
heating, ventilation and air conditioning (HVAC) suffered as the demand for
heat pumps has faltered, with less governmental support in for example
Germany; customer destocking also hampered demand compared to a strong period
the previous year. The market for their refrigeration products has stagnated,
but we are confident that the worst is over, and Carel is experiencing strong
demand from computer data centres, where temperature control is critical to
their operation, and where AI is boosting the underlying market. Stabilus,
which provides gas springs and motion control products (for example the device
that controls the opening of car boots and tailgates), published disappointing
results and a profits warning owing to weaker demand for high-end cars. We
have been in frequent contact with management, and it is clear that the
problems are geographically limited - the company sees good growth in China
and Asia more generally, and many of the challenges are limited to the
American market.
Remy Cointreau has been a disappointing performer. The spirits sector is
challenged by the threat of tariffs, particularly in the key Chinese market,
and slowing global demand. Remy also has significant exposure to the US
market, where the political backdrop poses threats to importers, and sales are
already under pressure. The shares have warranted a premium rating owing to
the value of the brands and of the capital stock, but this now means that
there is little valuation support and other areas of the luxury goods market
offer greater attractions.
Portfolio Activity
Portfolio turnover is in line with long term averages and idea generation
continues to be aided by the greater research capabilities at Columbia
Threadneedle.
In addition, since the second half of 2023 the level of gearing employed has
increased to take advantage of market opportunities. As at 30 June 2024 the
level of gearing employed was 6.0% (30 June 2023: 1.4%).
We bought new positions in Prysmian, Moncler and CVC. Prysmian is a provider
of cables for the energy and telecommunications industries; the company
benefits from its oligopolistic position and strength in the high-margin
subsea market (which benefits from growth in offshore wind power). Prysmian is
a leader in highvoltage direct current (HVDC) electric power transmission,
where demand exceeds supply, giving the company pricing power and a strong
order book. Moncler is a company which is well known to the Columbia
Threadneedle team and boasts brand strength; the company is performing
strongly in the Chinese market, where its retail presence is key. The Stone
Island sportswear acquisition continues to boost returns, with a restructured
collection and greater focus on events to drive future sales. CVC is one of
the world's leading private equity houses, and the recent IPO gave us a rare
opportunity to gain exposure to this sector. The shares continue to trade at a
healthy premium to the issue price.
We sold our position in Merlin Properties, as the share price had been strong
and the valuation no longer reflected the risks to property valuations posed
by higher levels of interest rates, particularly for retail shopping centres.
The market for real estate for data centres, their other area of
specialisation, is more resilient, but capital investment will be required to
capitalise on this.
We reduced the holdings in Ringkjoebing Landbobank and Karnov following share
price strength, and entirely disposed of our position in Remy Cointreau.
Outlook
Europe suffered a worse energy shock than the US from the Ukraine war.
Inflation soared resulting in real incomes falling significantly. However,
natural gas prices have now fallen approximately 90% from the highs of
mid-2022. A cautious European Central Bank cut interest rates by only 25 basis
points in June, as evidence begins to emerge that inflation has been brought
under control, and real wages have begun to recover. To further assist
consumption, European households still retain post-pandemic savings,
equivalent to 12.5% of GDP.
This improving macroeconomic backdrop should support a recovery in European
equities, and smaller companies in particular.
There are reasons for some caution as the political backdrop is far from
stable. Support for Ukraine, and US relations with China, which is critical
for European trade, remain contentious, and will be dependent on the outcome
of the US Presidential election in November. A Trump victory could bring
threats of US tariffs for European companies exporting to China and increase
global trade tension more generally. European domestic politics also faces
uncertainties. The hung election result in France means no government has yet
been formed. Both the left and right wing in France want to increase spending
even though debt remains high across Europe: France has a debt-to-GDP ratio of
112%, Italy 137%. France's public sector deficit will be 5% in 2024 and 2025.
Cyclical factors could also benefit European stocks. Capital expenditure is
refocusing from China to closer to home. Tax cuts and subsidies including the
€270 billion from Europe's Green Deal Industrial Plan, will provide a
welcome boost. Labour markets have held up well, and while they may look less
rosy if interest rate cuts are too slow, this is more of a concern in the US
than in Europe.
European smaller companies have underperformed in the recent difficult
backdrop and are now very cheap relative to history and to larger companies.
Many investors have shunned the sector and are now underweight. We are
cautiously optimistic for the future, and looking to exploit the opportunities
as the economic environment improves.
Mine Tezgul
Lead Investment Manager
Columbia Threadneedle Investment Business Limited
Forward -looking statements
This interim report may contain forward-looking statements with respect to the
financial condition, results of operations and business of the Company. Such
statements involve risk and uncertainty because they relate to future events
and circumstances that could cause actual results to differ materially from
those expressed or implied by forward-looking statements. The forward-looking
statements are based on the Board's' current view and on information known to
them at the date of this report. Nothing should be construed as a profit
forecast.
Directors' Statement of Principal Risks and Uncertainties
Most of the Company's principal risks and uncertainties are market related and
no different from those of other investment trusts investing in listed
equities. They are described in more detail under the heading "Principal Risks
and Changes in the Year" within the Strategic Report in the Company's Report
and Accounts for the year ended 31 December 2023.
The principal risks identified in the Report and Accounts for the year ended
31 December 2023 were:
· Poor absolute and/or relative performance;
· Relevance/attractiveness of the investment strategy and policy;
· Risk of failure of the Manager's business or loss of senior staff;
· Regulatory and compliance failure (including ESG reporting);
· Service provider failure;
· The sustainability of the Company's dividend policy; and
· Geopolitical issues and their impact.
Since the publication of the Report and Accounts for the year ended 31
December 2023, the Directors have upgraded cyber related business interruption
to a principal risk.
At present the global economy continues to suffer considerable disruption due
to the war in Ukraine, events in the Middle East, disputes in the South China
Sea and the after-effects of a high inflation environment. The Directors
continue to review the key risk register for the Company which identifies the
risks that the Company is exposed to, the controls in place and the actions
being taken to mitigate them.
It is also noted that:
· An analysis of the performance of the Company since 1 January 2024 is
included within the Chair's Statement and the Investment Manager's Review
above.
· The Company has a multi-currency loan with a maximum facility of
€60 million with The Royal Bank of Scotland International (London Branch).
As at 30 June 2024 €35.0 million was drawn down, which represents gearing of
6.0%.
· Note 4 below details the Board's consideration for the continued
applicability of the principle of Going Concern when preparing this report.
On behalf of the Board
Stuart Paterson
Chair
7 August 2024
Directors' Statement of Responsibilities in Respect of the Half-Yearly
Financial Report
In accordance with Chapter 4 of the Disclosure and Transparency Rules the
Directors confirm, that to the best of their knowledge:
· the condensed set of financial statements have been
prepared in accordance with applicable UK-adopted International Accounting
Standards on a going concern basis and give a true and fair view of the
assets, liabilities, financial position and return of the Company;
· the Chair's Statement, Investment Manager's Review and
the Directors' Statement of Principal Risks and Uncertainties (together
constituting the Interim Management Report) include a fair review of the
information required by the Disclosure Guidance and Transparency Rule ('DTR')
4.2.7R, being an indication of important events that have occurred during the
first six months of the financial year and their impact on the financial
statements;
· the Directors' Statement of Principal Risks and
Uncertainties shown above is a fair review of the principal risks and
uncertainties for the remainder of the financial year; and
· the half-yearly report includes a fair review of the
information required by DTR 4.2.8R, being related party transactions that have
taken place in the first six months of the current financial year and that
have materially affected the financial position or performance of the Company
during the period, and any changes in the related party transactions described
in the last Annual Report that could do so.
On behalf of the Board
Stuart Paterson
Chair
7 August 2024
Condensed Statement of Comprehensive Income
Half-year ended Half-year ended
30 June 2024 30 June 2023
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
£'000s £'000s £'000s £'000s £'000s £'000s
Gains on investments held at fair value through profit or loss - 14,656 14,656 - 25,944 25,944
Foreign exchange (losses)/gains (24) 398 374 1 300 301
Income 7,447 - 7,447 5,883 - 5,883
Management fees (261) (1,045) (1,306) (285) (1,139) (1,424)
Other expenses (554) (21) (575) (465) (28) (493)
Profit before finance costs and taxation 6,608 13,988 20,596 5,134 25,077 30,211
Finance costs (146) (584) (730) (58) (230) (288)
Profit before taxation 6,462 13,404 19,866 5,076 24,847 29,923
Taxation (618) - (618) (551) - (551)
Profit for the period and total comprehensive income 5,844 13,404 19,248 4,525 24,847 29,372
Earnings per share - pence 1.62 3.73 5.35 1.26 6.90 8.16
The total column of this statement represents the Company's Income Statement
and Statement of Comprehensive Income, prepared in accordance with UK-adopted
International Accounting Standards. The supplementary revenue and capital
return columns are both prepared under guidance published by the Association
of Investment Companies.
All revenue and capital items in the above statement derive from
continuing operations.
Condensed Statement of Changes in Equity
Cumulative Total
Half-year ended 30 June 2024 Share Capital Distributable Reserve Capital Reserve Revenue Reserve Translation Reserve Shareholders' Funds
(Unaudited) £'000s £'000s £'000s £'000s £'000s £'000s
Balance at 31 December 2023 37,506 281,605 38,015 - (3,130) 353,996
Movements during the half-year ended 30 June 2024
Interim dividends paid - (7,724) - (2,898) - (10,622)
Total comprehensive income - - 13,404 5,844 - 19,248
Cumulative translation adjustment - - - - (8,108) (8,108)
Balance at 30 June 2024 37,506 273,881 51,419 2,946 (11,238) 354,514
Half-year ended 30 June 2023
(Unaudited)
Balance at 31 December 2022 37,506 296,945 8,671 - 4,505 347,627
Movements during the half-year ended 30 June 2023
Interim dividends paid - (8,015) - (2,427) - (10,442)
Total comprehensive income - - 24,847 4,525 - 29,372
Cumulative translation adjustment - - - - (11,341) (11,341)
Balance at 30 June 2023 37,506 288,930 33,518 2,098 (6,836) 355,216
Condensed Statement of Financial Position
30 June 2024 30 June 2023 31 December 2023
(Unaudited) (Unaudited) (Audited)
£'000s £'000s £'000s
Non-current assets
Investments at fair value through profit or loss 372,735 354,437 375,066
Current assets
Other receivables 2,897 5,714 3,063
Derivative financial instruments held at fair value through profit or loss 252 342 -
Cash and cash equivalents 8,538 12,097 2,089
Total current assets 11,687 18,153 5,152
Current liabilities
Other payables (234) (211) (226)
Bank Loan (29,674) (17,163) (25,996)
Total current liabilities (29,908) (17,374) (26,222)
Net current (liabilities)/assets (18,221) 779 (21,070)
Net assets 354,514 355,216 353,996
Capital and reserves
Share capital 37,506 37,506 37,506
Distributable reserve 273,881 288,930 281,605
Capital reserve 51,419 33,518 38,015
Revenue reserve 2,946 2,098 -
Cumulative translation reserve (11,238) (6,836) (3,130)
Total Shareholders' funds 354,514 355,216 353,996
Net Asset Value per ordinary share - pence 98.46 98.65 98.31
Condensed Statement of Cash Flows
Half-year ended Half-year ended
30 June 2024 30 June 2023
(Unaudited) (Unaudited)
£'000s £'000s
Cash flows from operating activities before dividends and interest received
and interest paid
(1,855) (2,489)
Dividends received 7,119 5,309
Interest received 134 146
Interest paid (720) (263)
Cash flows from operating activities 4,678 2,703
Investing activities
Purchase of investments (61,745) (63,040)
Sale of investments 70,451 61,532
Derivative financial instruments purchased for future settlement (252) (342)
Other capital expenses (21) (28)
Cash flows from investing activities 8,433 (1,878)
Cash flows before financing activities 13,111 825
Financing activities
Equity dividends paid (10,622) (10,442)
Drawdown of bank loan 4,301 8,879
Cash flows from financing activities (6,321) (1,563)
Net movement in cash and cash equivalents 6,790 (738)
Cash and cash equivalents at the beginning of the period 2,089 13,317
Effect of movement in foreign exchange 374 301
Translation adjustment (715) (783)
Cash and cash equivalents at the end of the period 8,538 12,097
Represented by:
Cash at bank 42 6
Short term deposits 8,496 12,091
8,538 12,097
Notes
1 Basis of preparation
These condensed financial statements, which are unaudited, have been prepared
on a going concern basis in accordance with the Companies Act 2006, UK-adopted
International Accounting Standards and the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital
Trusts" ("SORP") issued by the AIC.
All of the Company's operations are of a continuing nature. The functional
currency of the Company is the euro and presentational currency is the pound
sterling as the Board believe this will provide clarity of the Company's
financial statements for its Shareholders, the overwhelming majority of whom
are located in the United Kingdom.
All transactions during the period are translated on the date of execution and
the Statement of Financial Position as at the period end date.
The accounting policies applied in the condensed set of financial statements
are set out in the Company's annual report for the year ended 31 December
2023.
2 Earnings per share
Earnings per ordinary share attributable to Shareholders reflects the overall
performance of the Company in the period. Net revenue recognised in the
first six months is not necessarily indicative of the total likely to be
received in the full accounting year.
Half-year ended Half-year ended
30 June 2024 30 June 2023
£'000s £'000s
Revenue return 5,844 4,525
Capital return 13,404 24,847
Total return 19,248 29,372
Number Number
Weighted average ordinary shares in issue 360,069,279 360,069,279
Earnings per share - pence 5.35 8.16
3 Dividend
The fourth interim dividend of 1.475p per share in respect of the year ending
31 December 2024 will be paid on 31 October 2024 to eligible Shareholders on
the register. The total cost of this dividend based on 360,069,279 shares in
issue is £5,311,000.
4 Going concern
In assessing the going concern basis of accounting the Directors have had
regard to the guidance issued by the Financial Reporting Council. They have
also considered the Company's objective, strategy and policy, the current cash
position of the Company, the availability of the loan facility and compliance
with its covenants and the operational resilience of the Company and its
service providers.
At present the global economy continues to suffer disruption due to the war in
Ukraine, events in the Middle East, disputes in the South China Sea and the
after-effects of a high inflation environment and the Directors have given
careful consideration to the consequences for this Company.
The Company has a multi-currency loan with a maximum facility of €60.0
million with Royal Bank of Scotland International (London Branch). As at 30
June 2024 €35.0 million (£29.7 million) was drawn down.
The Company has a number of banking covenants and at present the Company's
financial position does not suggest that any of these are close to being
breached. The primary risk is that there is a very substantial decrease in the
Net Asset Value of the Company in the short to medium term.
As at 6 August 2024, the latest practicable date before the publication of
this report, borrowings amounted to €35.0 million (£30.1 million). This is
in comparison to a Net Asset Value of €396.4 million (£341.0 million). In
accordance with its investment policy the Company is invested mainly in
readily realisable listed securities. These can be sold if necessary, to repay
the loan facility and fund the cash requirements for future dividend payments.
The Company operates within a robust regulatory environment. The Company
retains title to all assets held by the Custodian. Cash is held with banks
approved and regularly reviewed by the Manager and the Board.
The Company's annual dividend, which is declared in sterling, is determined by
reference to the year-end Net Asset Value. The Company manages any
sterling/euro exchange rate exposure which may arise from the declaration of a
sterling denominated dividend by entering into specific matched forward
currency hedging contracts. As at 30 June 2024 the Company had a Distributable
Reserve of £273.9 million.
Based on this information the Directors believe that the Company has the
ability to meet its financial obligations as they fall due for a period of at
least twelve months from the date of approval of these financial statements.
Accordingly, these financial statements have been prepared on a going concern
basis.
5 Results
The results for the half-year ended 30 June 2024 and 30 June 2023, which are
unaudited, constitute non-statutory accounts within the meaning of Section 434
of the Companies Act 2006. The latest published accounts which have been
delivered to the Registrar of Companies are for the year ended 31 December
2023; the report of the independent auditors thereon was unqualified and did
not contain a statement under Section 498 of the Companies Act 2006. The
condensed financial statements shown above for the year ended 31 December 2023
are an extract from those accounts.
6 Half-yearly report and accounts
The report and accounts for the half-year ended 30 June 2024 will be posted to
Shareholders and made available on the website www.europeanassets.co.uk
shortly. Copies may also be obtained by mailing the Company's registered
office, Cannon Place, 78 Cannon Street, London EC4N 6AG.
By order of the Board
Columbia Threadneedle Investment Business Limited, Secretary
6th Floor, Quartermile 4, 7a Nightingale Way, Edinburgh EH3 9EG
7 August 2024
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