REG - European Opps. Trust - Half-year Report
07/02/2025 07:00
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RNS Number : 2400W European Opportunities Trust PLC 07 February 2025
European Opportunities Trust PLC (the 'Company')
Legal Entity Identifier: 549300XN7RXQWHN18849
Half Yearly Financial Report for the six months to 30 November 2024
Financial Highlights
· Net asset value total return (with dividends reinvested) of (8.4)%
and share price total return of (10.6)% for the period, compared with a total
return of (3.3)% for the Company's Benchmark, the MSCI Europe Total Return
Index in GBP.
· Net asset value total return (with dividends reinvested) of 988.5%
since launch on 20 November 2000 (equivalent to 10.5% compound per year),
outperforming the total return of the Benchmark of 287.3% over the same period
(equivalent to 5.8% compound per year).
· Continued buy back activity during the period, with a total of 2.9
million shares repurchased at a cost of £24.5 million since the beginning of
the financial year (as at 31 January).
· The Company's discount to NAV was 12.3% at the period end. The
Board proposes to make an additional tender offer for up to 25% of the issued
share capital of the Company, which is expected to take place in Q2 2025.
Summary of returns for the six months to 30 November 2024
30 November 31 May
2024 2024 % change
Net asset value per share (pence) 921.66 1008.48 (8.6)
Net asset value total return (with dividends reinvested)(*) (8.4)
Middle market share price (pence) 808.00 906.00 (10.8)
Share price total return (with dividends reinvested)* (10.6)
MSCI Europe Total Return Index in GBP (Benchmark) (3.3)
Discount to net asset value at period end (%) (12.3) (10.2)
* A dividend of 2.0p was paid on 2 November 2024.
Source: MSCI & Devon Equity Management Limited. Past performance is no
guide to the future.
Long term track record
Annualised return since launch
Since launch on 20.11.2000 %
%
3 years 5 years 10 years
To 30 November 2024 % % %
Net asset value total return (with dividends reinvested) 0.1 10.6 108.3 988.5 10.5
Share price total return (with dividends reinvested) (0.8) (0.8) 84.8 804.9 9.6
MSCI Europe Total Return Index in GBP (Benchmark) 19.7 41.8 107.9 287.3 5.8
Source: MSCI & Devon Equity Management Limited. Past performance is no
guide to the future.
Chair's Statement
I present the Company's interim results covering the six months ended 30
November 2024.
Performance overview
During the period under review the total return on the net asset value was
-8.4% (with the annual dividend reinvested), which compares with a total
return of -3.3% from our Benchmark, the MSCI Europe Total Return Index in GBP.
The total return on the market price of the Company's shares was -10.6%
(again, with the annual dividend reinvested).
Since launch, the Company has generated an annualised NAV total return of
10.5% and an annualised share price total return of 9.6% as at 30 November
2024, compared with 5.8% annualised for the Benchmark over the same period.
However the results and our returns in recent years are clearly disappointing.
Our Investment Manager pursues a differentiated, high conviction approach to
investment and we, as a Board, along with the team at Devon are fully
committed to returning the Company to its former ranking at the head of its
peer group.
Discount Management
The discount to NAV on the Company's shares was 12.3% on 30 November 2024,
widening from 10.2% on 31 May 2024, the Company's financial year end. This
compares with the 10.7% weighted-average discount on 30 November 2024 for the
Company's peers in the AIC Europe sector.
The Board has an active discount management policy, the primary purpose of
which is to reduce discount volatility. It seeks to maintain the discount in
single digits in normal market conditions through an active share buy back
programme. Reflecting this, a total of 2.9 million shares have been
repurchased into treasury at a cost of £24.5 million since the beginning of
the financial year (as at 31 January 2025).
This has followed on from the implementation in January 2024 of a tender offer
at close to NAV for up to 25% of the shares in issue, which was fully
subscribed. The Board also announced at that time proposals for a further
performance-related tender offer for up to 25% of the shares in issue in the
event that the Company's net asset value total return does not equal or exceed
the Benchmark total return over the three-year period ending on 31 May 2026.
The Company is also committed to putting a continuation vote to shareholders
at the 2026 AGM in accordance with its three-yearly continuation vote cycle.
Proposal for Additional Tender Offer
While the Board continues to place confidence in the people, process and
philosophy of our Investment Manager, we are mindful of the persistence of the
double-digit discount and the recently disappointing performance of the
Company's portfolio. Accordingly, to supplement the Board's continuing use of
share buy backs and to its existing commitments described above, the Board
proposes to make an additional tender offer in 2025 for up to 25% of the
issued share capital of the Company (the 'Tender Offer').
The Tender Offer, expected to take place in Q2 2025, will be priced at a two
per cent. discount to the prevailing net asset value at the time of
repurchase, less the costs of implementing the Tender Offer. The Tender Offer
will be subject to shareholder approval. A circular setting out the full
details of the Tender Offer and convening the necessary general meeting will
be sent to shareholders in due course.
Gearing
As of 30 November 2024, the net gearing level on our portfolio was 11.5%, a
notable increase from 1.3% on 30 November 2023. We believe that strategic
borrowing can play an important role in enhancing long-term returns and the
current level of gearing reflects our Investment Manager's confidence in the
outlook for our portfolio. The Company has a £85 million secured
multi-currency revolving credit facility with The Bank of Nova Scotia, London
Branch.
Shareholder engagement
Engagement with our shareholders is a top priority. Over the past year we have
interacted with a majority of our share register, gaining valuable insights
and feedback. We remain committed to maintaining an open dialogue with all
shareholders.
Outlook
Despite the current challenges, we and our Investment Manager continue to note
the superior characteristics and earnings growth of our portfolio and we
believe the Company is well-positioned to deliver attractive returns for our
shareholders.
I would like to express my sincere thanks to all of our shareholders and
stakeholders for their continuing support.
Matthew Dobbs
Chair
6 February 2025
Investment Manager's Review
Our positioning of the portfolio during the period under review recognises the
broad spectrum of challenges in Europe: slow growth, high costs and political
turmoil and is well positioned for a range of economic eventualities. It also
recognises the tremendous growth opportunities available to be exploited by
the best companies. Our investee companies are typically high margin,
intellectual property and technology based (as distinct from energy or
capital-intensive) service businesses that have significant revenues in the US
and elsewhere in the world,
There are identifiable themes in our portfolio: Artificial Intelligence (AI)
winners, technology leaders, electrification and disruptive business models.
As regards AI, we deem RELX, Experian and Deutsche Boerse to be beneficiaries,
irrespective of which AI technologies prevail. In all cases, owning the data
and flow of business is key. These companies enhance the quality of existing
services with the use of AI in a way that competitors which lack the data and
flows cannot. Our technology leaders span healthcare, with companies like
Camurus, payments companies like Edenred, and information technology companies
like Dassault Systèmes. As for electrification, we invest in Prysmian, which
is the world's leading cable company and an obvious beneficiary of the
electrification trend, and GTT which is a prime winner from the increasing use
of liquified natural gas, which is needed to satisfy growing electricity
demand, itself driven by demand from energy intensive data centres and AI.
Ryanair, Wise, and Genus are also strong examples of disruptive business
models in their respective sectors. Novo Nordisk, our biggest holding, is also
a disruptor, expanding into the prediabetic space, and blazing a trail with
new therapies to tackle obesity.
Performance
Notwithstanding our strategy to avoid the challenges of Europe and tap into
the faster growing global opportunities, our portfolio's performance fell
behind the Benchmark during the period under review. We discuss the key
contributors and detractors to this result below.
The following tables detail which stock positions in the Company's portfolio
had the greatest impact on performance during the six months under review,
both positive and negative. The impact is the result of price performance of
each stock over the period, calculated on a transaction basis and including
the impact of foreign currency:
Positive Contributors
Security Portfolio weight Benchmark weight at 30.11.2024 6 month price 6 month contribution
at 30.11.2024 % performance to portfolio return
% % %
Deutsche Boerse 7.4 0.4 18.0 1.1
RELX 7.7 0.8 9.0 0.6
Experian 8.1 0.4 4.8 0.3
Gaztransport & Technigaz (GTT) 3.9 0.0 2.3 0.1
Grenke* 0.0 0.0 (12.4) 0.1
( )
(*)Sold during the period under review.
Negative Contributors
Security Portfolio weight Benchmark weight at 30.11.2024 6 month price 6 month contribution
at 30.11.2024 % performance to portfolio return
% % %
Novo Nordisk 11.4 3.2 (20.1) (2.6)
Edenred 4.7 0.1 (27.7) (1.4)
Dassault Systèmes 6.9 0.2 (14.2) (1.0)
Infineon Technologies 4.2 0.4 (18.5) (0.9)
Worldline 1.2 - (47.7) (0.6)
The biggest positive contributor to our performance in the period under review
was Deutsche Boerse. The combination of leading technology capabilities, the
increase in exchange traded financial instruments and volatile energy and
interest rates, has driven the strong performance.
The next biggest contributors to our performance were RELX and Experian. Both
companies have strong proprietary data assets and have improved their offers
with the use of AI. RELX's legal information business is a clear beneficiary
in this respect. Indeed, the company raised its growth expectations on the
back of AI. Experian's core credit and analytics businesses have, too,
leveraged AI to buoy their offer. Whereas AI can be a disruption, we believe
that our companies, where relevant, gain from the use of this technology both
in improving their internal operations and in improving the quality of their
offerings.
GTT also performed well. It provides services to Liquified Natural Gas (LNG)
carriers. As a 'transition' fuel, LNG is an important element in the move to
more renewables in the energy mix.
Detractors
Whereas we believe the direction of politics in America is generally
favourable for our companies, this is not necessarily the case for a couple of
our holdings, notably Novo Nordisk, our biggest holding, and Genus. Both
detracted from our performance in the period under review. The nomination of
Robert F Kennedy Jr to be the next US health secretary has alarmed investors.
The nominee is deemed to have eccentric views which could disturb current
practices in healthcare and, in the case of Genus, animal husbandry.
The share price of Edenred, which offers specific-purpose payment solutions,
fell sharply. Notwithstanding the record of excellent results, investors
worried that politicians in France and Italy will seek to restrict returns
through new regulations. We recognise these regulatory threats. However, we
believe that Edenred can operate successfully even as regulations change.
Another detractor was Dassault Systèmes. The company has an excellent
long-term record. However, the shares performed badly over the last six months
as the rate of growth slowed. The main explanation is that European car
manufacturers are grappling with high costs, especially the costs of producing
electrical vehicles, and weak demand for those same electric vehicles. Their
competitive position versus the Asian players has deteriorated. Nevertheless,
we remain confident that Dassault Systèmes is an excellent company which will
again capitalise on its strong technology platforms.
Even if individual stocks explain much, we also acknowledge the impact of our
'style bias'. The best performing sector in the index was Financials, notably
the mainstream banks, a sector to which we have never had significant
exposure. Our rationale is that we find better long-term value from
innovative, world-leading companies in other sectors. However, in recent times
the European-based banks have delivered better returns thanks to high-interest
rate spreads, low loan losses and regulatory protection which keeps out new
entrants. Central banks' money printing policies ('quantitative easing') has
had the effect of extending the normal business cycle, supporting the banks'
asset quality. In due course, we are confident that the cycle will turn down,
vindicating our strategy.
Our strategy has also suffered from outflows from European equities. Private
sector savings have been squeezed by higher taxes, levied to help straitened
public finances. In addition, global asset allocators have avoided Europe,
disproportionately hurting big (as distinct from mega-sized) and mid-sized
stocks, parts of the market to which our portfolio has a greater than average
exposure.
Portfolio activity
Portfolio turnover in the six months was 22.7% annualised (defined as
purchases as a percentage of net assets). Sales in the period totalled
£76.5m, almost half of which was the sale of Darktrace, following an agreed
offer for the company by a private equity firm. The next biggest sale was that
of Soitec, as better opportunities were found elsewhere. The silicon carbide
'story' Soitec has stalled in line with the slowing growth in sales of
Electric Vehicles (EVs). We also exited the position in Grenke. Having started
selling on the back of good results earlier in the year as asset quality
deteriorated, we accelerated selling. The lightening of holdings in Novo
Nordisk and RELX was because of the size of the weightings, rather than any
concern about the quality of the respective businesses.
Significant new investments included Universal Music Group (UMG), the world's
leading music company. It is the owner of a huge catalogue of recorded music.
Digital technology allows UMG to develop new services, platforms and business
models and thereby better monetise their catalogue. We also established
positions in BE Semiconductor Industries (Besi) and Yubico. Besi is a Dutch
technology company, a world leader in packaging processes and hybrid bonding
for the semi- conductor industry. Swedish-listed Yubico, is a world leader in
multi-factor authentication, a hardware solution widely regarded as being the
best way to foil cyber-attacks. Other smaller purchases included the French
company, Exosens, which is the world leader in the manufacture of image
intensifier tubes, the key component of night vision goggles. Finally, we
bought shares in Wise, a London based global payments technology company.
Outlook
We believe that our portfolio is better value than at any time since 2017. Our
earnings forecasts for the portfolio companies are markedly higher than those
projected for the wider market. Yet the valuation premium on our portfolio is
modest. We project that our portfolio will grow earnings at 9.9% and 20.7% in
2025 and 2026 respectively (as at 31 January 2025). The current year valuation
premium for this earnings growth is low by historic standards. Moreover, we
expect earnings momentum for our companies to continue in 2027.
It is worth noting that the reduction in the valuation premium of the
portfolio relative to the Benchmark since 2022 has been achieved without
compromising our investment approach. Typically, our companies also have less
debt than most European listed companies, which we regard as prudent. The
portfolio also has higher returns on invested capital than the Benchmark.
At a macro level, slower economic growth in Europe will stymie the banks'
earnings. Our strategy is to identify 'winners through the cycle', a strategy
that has been thwarted somewhat by the huge money printing programmes of the
COVID era. The extended business cycle will turn down at which point our
companies' earnings resilience will be clear. Typically, our investee
companies have high recurrent revenues and benefit from exposure to faster
growing economies like the US.
Despite the direction of fund flows and Europe's intractable problems, within
this portfolio we do see numerous potential catalysts from our companies this
year which would drive share prices. Although December 2024 saw disappointing
phase three trial results for Novo Nordisk's next generation drug Cagrisema,
the company has a bright future as a global leader in treating diabetes and
obesity. Our healthcare, technology and payments companies should all make
good progress. We remain confident that our strategy of picking companies that
compete and succeed on the world stage will be vindicated.
Alexander Darwall
CIO, Devon Equity Management Limited
6 February 2025
Investment Portfolio
as at 30 November 2024
Company Market Portfolio weight / % Benchmark weight / %
Value
£'000
Novo Nordisk 73,355 11.4 3.2
Experian 52,514 8.1 0.4
RELX 49,988 7.7 0.8
Deutsche Boerse 47,920 7.4 0.4
Dassault Systèmes 44,766 6.9 0.2
Intermediate Capital Group (ICG) 36,006 5.6 -
Genus 32,111 5.0 -
Edenred 30,171 4.7 0.1
Prysmian 29,090 4.5 0.2
Infineon Technologies 26,891 4.2 0.4
Gaztransport Et Technigaz (GTT) 25,155 3.9 -
BioMérieux 25,010 3.9 -
Camurus 23,553 3.7 -
Grifols 22,457 3.5 -
Ryanair Holdings 19,900 3.1 -
Oxford Instruments 15,882 2.5 -
Genmab 10,232 1.6 0.1
BAE Systems 9,808 1.5 0.4
CTS Eventim 9,857 1.5 0.1
Universal Music Group 8,999 1.4 0.2
Thales 8,228 1.3 0.1
Worldline 7,798 1.2 -
Air Liquide 7,775 1.2 0.9
BFF Bank 7,231 1.1 -
Bachem 5,970 0.9 -
BE Semiconductor Industries 4,693 0.7 0.1
Yubico 4,337 0.7 -
Wise 3,528 0.5 0.1
Exosens 1,865 0.3 -
Total Investments 645,090 100
Classification of Investments
as at 30 November 2024
Country of Listing % of Investments % of Investments
30 November 2024 31 May 2024
Denmark 13.0 15.4
France 23.3 24.2
Germany 13.2 12.3
Ireland 3.1 2.8
Italy 5.6 4.7
Netherlands 9.9 7.7
Spain 3.5 3.5
Sweden 4.3 3.4
Switzerland 0.9 1.0
UK 23.3 25.0
Total 100.0 100.0
% of Investments % of Investments
Industry Sector 30 November 2024 31 May 2024
Communication Services 2.9 0.8
Energy 3.9 2.8
Financials 20.6 13.4
Health Care 29.9 31.3
Industrials 26.5 23.2
IT 15.0 27.5
Materials 1.2 1.0
Total 100.0 100.0
Statement of Directors' Responsibilities in Relation to the Financial
Statements
Going concern
The Half Yearly Financial Report has been prepared on a going concern basis.
The Directors consider that this is the appropriate basis as they have a
reasonable expectation that the Company has adequate resources to continue in
operational existence and meet its financial commitments as they fall due for
a period of at least twelve months from the date of approval of the unaudited
financial statements. In considering this, the Directors took into account the
Company's investment objective, risk management policies and capital
management policies, the diversified portfolio of readily realisable
securities which can be used to meet short-term funding commitments and the
ability of the Company to meet all of its liabilities and ongoing expenses.
The Directors continue to pay particular attention to the operational
resilience and ongoing viability of the Investment Manager and the Company's
other key service providers. Following review, the Directors are satisfied
that Devon and the Company's other key service providers, notably JP Morgan,
have the necessary contingency planning measures in place to ensure that
operational functionality continues to be maintained.
The Directors continue to adopt the going concern basis of accounting in
preparing the unaudited financial statements while recognising that the
Articles of Association of the Company require a continuation vote at every
third AGM, the next of which will take place at the AGM in 2026.
Principal and emerging risks and uncertainties
The principal risks facing the Company are investment strategy risk, market
risk, operational risk and legal and regulatory risk. Full details of these
risks and how they are managed are set out on pages 24 to 26 of the Company's
Annual Report for the year ended 31 May 2024, which is available on the
Company's website at www.europeanopportunities.com. The principal risks have
not changed since those detailed in the Annual Report. The Board continues to
monitor the principal risks facing the Company.
In addition, the Board monitors emerging risks. No new emerging risks were
identified during the period under review. As part of its assessment of the
viability of the Company, the Board has reviewed and considered the principal
risks and uncertainties that may affect the Company, including emerging risks
and ongoing matters relating to the ongoing global conflicts, rises in
interest rates and inflation across Europe and worldwide. The Board has also
considered the Company's business model including its investment objective and
investment policy, a forecast of the Company's projected income and expenses
and the liquidity of the Company's portfolio to ensure that it will be able to
meet its liabilities as they fall due.
Directors' Responsibility Statement
We, the directors of European Opportunities Trust PLC, confirm to the best of
our knowledge that:
(a) the condensed set of financial statements have been prepared in
accordance with the Accounting Standards Board's statement 'Half Yearly
Financial Reports' and give a true and fair view of the assets, liabilities,
financial position and profit/(loss) of the Company for the period ended 30
November 2024;
(b) the Half-Yearly Financial Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule 4.2.7R; and
(c) the Half-Yearly Financial Report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule 4.2.8R on
related party transactions.
The Half-Yearly Financial Report has not been audited or reviewed by the
Company's auditors.
By order of the Board
Matthew Dobbs
Chair
6 February 2025
Income Statement
for the six months ended 30 November 2024
Notes Six months ended Six months ended
30 November 2024 30 November 2023
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments - (55,669) (55,669) - 34,914 34,914
Other exchange gains/(losses) - 19 19 - (100) (100)
Income from investments 4,241 - 4,241 5,985 - 5,985
Other income 26 - 26 38 - 38
Total income/(loss) 4,267 (55,650) (51,383) 6,023 34,814 40,837
Investment management fee 7 (2,458) - (2,458) (3,425) - (3,425)
Other expenses (387) - (387) (627) - (627)
Total expenses (2,845) - (2,845) (4,052) - (4,052)
Net return/(loss) before finance costs and taxation 1,422 (55,650) (54,228) 1,971 34,814 36,785
Finance costs (1,914) - (1,914) (1,780) - (1,780)
(Loss)/return before taxation* (492) (55,650) (56,142) 191 34,814 35,005
Taxation (497) - (497) (341) - (341)
Net (loss)/return after taxation* (989) (55,650) (56,639) (150) 34,814 34,664
(Loss)/return per ordinary share 2 (1.54)p (86.47)p (88.01)p (0.15)p 35.85p 35.70p
* There is no other comprehensive income and therefore the 'Net (loss)/return
after taxation' is the total comprehensive (loss)/income for the financial
period.
The total column of this statement is the income statement of the Company,
prepared in accordance with IFRS.
The supplementary revenue return and capital return columns are both prepared
under guidance produced by the Association of Investment Companies (AIC). All
items in the above statement derive from continuing operations.
No operations were acquired or discontinued during the period.
Statement of Financial Position
as at 30 November 2024
Notes 30 November 31 May
2024 2024
(unaudited) (audited)
£'000 £'000
Fixed assets
Investments 6 645,090 709,898
Current assets
Debtors 2,324 2,882
Cash and cash equivalents 5,026 5,615
7,350 8,497
Total assets 652,440 718,395
Current liabilities
Creditors - amounts falling due within 1 year (72,659) (61,957)
Total assets less current liabilities 579,781 656,438
Capital and reserves
Called up share capital 888 888
Share premium 204,133 204,133
Special reserve 33,687 33,687
Capital redemption reserve 286 286
Reserves 3 340,787 417,444
Total shareholders' funds 579,781 656,438
Net asset value per ordinary share 4 921.66p 1008.48p
Statement of Changes in Equity
for the six months to 30 November 2024
For the six months to Share Capital Share Premium £'000 Special Reserve £'000 Capital Retained Earnings Total
30 November 2024 (unaudited) £'000 Redemption £'000 £'000
Reserve
£'000
Balance as at 1 June 2024 888 204,133 33,687 286 417,444 656,438
Net loss after taxation - - - - (56,639) (56,639)
Repurchase of ordinary shares into treasury - - - - (18,753) (18,753)
Dividends declared and paid* - - - - (1,265) (1,265)
Balance as at 30 November 2024 888 204,133 33,687 286 340,787 579,781
For the six months to Share Capital Share Premium Special Reserve Capital Retained Earnings Total
30 November 2023 (unaudited) £'000 £'000 £'000 Redemption Reserve £'000 £'000
£'000
Balance as at 1 June 2023 1,129 204,133 33,687 45 623,944 862,938
Net profit after taxation - - - - 34,664 34,664
Repurchase of ordinary shares into treasury - - - - (17,153) (17,153)
Dividends declared and paid* - - - - (3,375) (3,375)
Balance as at 30 November 2023 1,129 204,133 33,687 45 638,080 877,074
* Dividends paid during the period were paid out of revenue reserves.
Cash Flow Statement
for the six months to 30 November 2024
Six months ended Six months ended
30 November 2024 30 November 2023
(unaudited) (unaudited)
£'000 £'000
Cash flows from operating activities
Investment income received (gross) 4,457 6,812
Deposit interest received 26 38
Investment management fee paid (2,620) (3,674)
Other cash expenses (105) (659)
Net cash inflow from operating activities before taxation and interest 1,758 2,517
Interest paid (1,284) (2,412)
Taxation (203) (332)
Net cash inflow/(outflow) from operating activities 271 (227)
Cash flows from investing activities
Purchases of investments (67,352) (70,849)
Sales of investments 76,491 157,850
Net cash inflow from investing activities 9,139 87,001
Cash flows from financing activities
Repurchase of ordinary shares into treasury (18,753) (22,195)
Equity dividends paid (1,265) (3,375)
Repayment of loan (20,000) (65,000)
Drawdown of loan 30,000 -
Net cash outflow from financing activities (10,018) (90,570)
Decrease in cash (608) (3,796)
Cash and cash equivalents at the start of the period 5,615 6,951
Realised gain/(loss) on foreign currency 19 (100)
Cash and cash equivalents at end of period 5,026 3,055
Notes to the Financial Statements
1. Material accounting Policies
The Accounts comprise the unaudited financial results of the Company for the
period to 30 November 2024. The functional and reporting currency of the
Company is sterling because that is the currency of the prime economic
environment in which the Company operates. All value are rounded to the
nearest thousand pounds (£'000) except where indicated.
The Accounts have been prepared in accordance with UK-adopted International
Accounting Standards and the requirements of the Companies Act 2006.
Where presentational guidance set out in the Statement of Recommended Practice
for Investment Trusts issued by the Association of Investment Companies in
April 2021 (the 'AIC SORP') is consistent with the requirements of UK-adopted
International Accounting Standards in conformity with the Companies Act 2006,
the Directors have sought to prepare the financial statements on a basis
compliant with the recommendations of the AIC SORP. The Accounts have also
been prepared in accordance with the Disclosure and Transparency Rules issued
by the Financial Conduct Authority. The accounting policies applied are
consistent with those of the audited annual financial statements for the year
ended 31 May 2024 and are described in those financial statements. In this
regard, comparative figures from previous periods are prepared to the same
standards as the current period, unless otherwise stated.
The Board continues to adopt the going concern basis in the preparation of the
financial statements.
(a) Income recognition
Ordinary dividends from investments are recognised when the investment is
quoted ex-dividend on or before the date of the Statement of Financial
Position. All overseas dividend income is disclosed net of withholding tax.
Ordinary dividends receivable from equity shares are taken to the revenue
return column of the Income Statement. Deposit and other interest receivable
are accounted for on an accruals basis. These are classified within operating
activities in the cash flow statement. Special dividends are reviewed on a
case-by-case basis to determine if the dividend is to be treated as revenue or
capital.
(b) Presentation of Income Statement
In order to better reflect the activities of an investment trust company and
in accordance with guidance issued by the Association of Investment Companies
(AIC), supplementary information which analyses the Income Statement between
items of a revenue and capital nature has been presented. In accordance with
the Company's Articles of Association, net capital returns may not be
distributed by way of dividend. An analysis of retained earnings broken down
into revenue (distributable) items and capital (non-distributable) items is
given in Note 3. All other operational costs including administration expenses
and finance costs are charged to revenue.
(c) Basis of valuation of investments
Investments are recognised and derecognised on a trade date where a purchase
and sale of an investment is under contract whose terms require delivery of
the investment within the timeframe established by the market concerned.
Investments are included initially at fair value which is taken to be their
cost, excluding expenses incidental to purchase which are written off to
capital at the time of acquisition.
All investments are classified as held at fair value through profit or loss.
All investments are measured at fair value with changes in their fair value
recognised in the Income Statement in the period in which they arise. The fair
value of listed investments is based on their quoted bid price at the
reporting date without any deduction for estimated future selling costs.
Foreign exchange gains and losses on fair value through profit or loss
investments are included within the changes in the fair value of the
investments.
For investments that are not actively traded and/or where active stock
exchange quoted bid prices are not available, fair value is determined by
reference to a variety of valuation techniques. These techniques may draw,
without limitation, on one or more of: the latest arm's length traded prices
for the instrument concerned; financial modelling based on other observable
market data; independent broker research; or the published accounts relating
to the issuer of the investment concerned.
2. Return per share
The table below shows the return per share analysed between revenue and
capital.
Six months to Six months to
30 November 2024 30 November 2023
£'000 £'000
Net revenue loss (989) (150)
Net capital (loss) / return (55,650) 34,814
Net total (loss) / return (56,639) 34,664
Weighted average number of ordinary
shares in issue during the period
64,354,393 97,105,597
Revenue loss per ordinary share (p) (1.54) (0.15)
Capital (loss)/return per ordinary share (p) (86.47) 35.85
Total (loss)/return per ordinary share (p) (88.01) 35.70
3. Retained earnings
The table below shows the movement in the retained earnings analysed between
revenue and capital items.
Revenue* Capital Total
£'000 £'000 £'000
At 1 June 2024 8,673 408,771 417,444
Net loss for the period (989) (55,650) (56,639)
Repurchase of ordinary shares into treasury - (18,753) (18,753)
Dividends declared and paid - (1,265) (1,265)
At 30 November 2024 7,684 333,103 340,787
* These reserves form the distributable reserves of the Company and may be
used to fund distribution of profits to investors via dividend payments.
4. Net asset value per share
The net asset value per share is based on the net assets attributable to
shareholders of £579,781,000 (31 May 2024: £656,438,000) and on 62,905,995
(31 May 2024: 65,091,784) shares, being the number of shares in issue at the
period end.
5. Comparative information
The financial information contained in this interim report does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. The
financial information for the six months to 30 November 2024 and 30 November
2023 has not been audited. The information for the year ended 31 May 2024 has
been extracted from the latest published audited financial statements. The
audited financial statements for the year ended 31 May 2024 have been filed
with the Register of Companies. The report of the auditors on those accounts
contained no qualification or statement under section 498(2) of the Companies
Act 2006.
6. Fair value of investments
IFRS 13 Fair Value Measurement requires an entity to classify fair value
measurements using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value hierarchy shall
have the following levels:
Level 1 reflects financial instruments quoted in an active market.
Level 2 reflects financial instruments whose fair value is evidenced by
comparison with other observable current market transactions in the same
instrument or based on a valuation technique whose variables includes only
data from observable markets.
Level 3 reflects financial instruments whose fair value is determined in whole
or in part using a valuation technique based on assumptions that are not
supported by prices from observable market transactions in the same instrument
and not based on available observable market data.
The fair value hierarchy for investments held at fair value at the period end
is as follows:
30 November 2024 31 May 2024
Level 1 £'000 Level 2 £'000 Level 3 £'000 Total £'000 Level 1 £'000 Level 2 £'000 Level 3 £'000 Total £'000
Investments 645,090 - - 645,090 709,898 - - 709,898
7. Related parties
Devon Equity Management Limited ('Devon') has served as Investment Manager to
the Company since 15 November 2019 and became AIFM on 1 July 2022.
Devon is entitled to aggregate management fees of 0.80% per annum of net
assets up to £1 billion; 0.70% per annum on
any net assets over £1 billion up to £1.25 billion; and 0.60% per annum on
any net assets over this amount.
8. Availability of Half Yearly Financial Report
The Half Yearly Financial Report will shortly be available for download from
the Company's website www.europeanopportunities.com
A copy of the Half Yearly Financial Report will also be submitted to the FCA's
National Storage Mechanism and will soon be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
For further information, please contact:
Devon Equity Management Limited
Company Secretaries to European Opportunities Trust PLC
Richard Pavry
020 3985 0445
enquiries@devonem.com (mailto:enquiries@devonem.com)
6 February 2025
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) are
incorporated into, or form part of, this announcement.
END
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