Half-year Report
BLACKROCK GREATER EUROPE INVESTMENT TRUST PLC
LEI: 5493003R8FJ6I76ZUW55
Half yearly financial announcement of results in respect of the six months ended 28 February 2022
Performance record
|
|
As at 28 February 2022 |
As at 31 August 2021 |
Change % |
| Net assets (£000)1 | 552,004 | 651,731 | -15.3 |
| Net asset value per ordinary share (pence) | 539.59 | 678.49 | -20.5 |
| Ordinary share price (mid-market) (pence) | 538.00 | 692.00 | -22.3 |
| (Discount)/premium to cum income net asset value2 | (0.3)% | 2.0% | |
| FTSE World Europe ex UK Index | 1,724.39 | 1,869.96 | -7.8 |
| ======== | ======== | ======== | |
| Performance (with dividends reinvested) | |||
| Net asset value per share2 | -20.0% | 49.4% | |
| Ordinary share price2 | -21.8% | 56.8% | |
| FTSE World Europe ex UK Index | -7.8% | 27.4% | |
| ======== | ======== |
|
|
For the six months ended 28 February 2022 |
For the six months ended 28 February 2021 |
Change % |
| Revenue | |||
| Net profit after taxation (£000) | 1,367 | 460 | 197.2 |
| Revenue profit per ordinary share (pence)3 | 1.37 | 0.54 | 153.7 |
| Dividends (pence) | |||
| Interim dividend | 1.75 | 1.75 | - |
| ======== | ======== | ======== |
1 The change in net assets reflects proceeds from share issuance, market movements and dividends paid.
2 Alternative Performance Measure, see Glossary in the Half Yearly Financial Report.
3 Further details are given in the Glossary in the Half Yearly Financial Report.
Chairman’s Statement
OVERVIEW
It has been a turbulent six months and a difficult period for your Company. At the start, markets appeared to be driven by concerns around high inflation and the response by the Federal Reserve, but company fundamentals came through in October as markets focused on the ongoing third quarter earnings season in Europe. Following a set-back at the end of November due to the ‘Omicron’ COVID-19 variant, markets returned to favour towards the end of December, as evidence suggested less severe symptoms in most cases.
It continued to be a bumpy ride for investors post the year end, with a sharp market rotation in January perpetuated by value stocks outperforming growth stocks amid rising inflation and higher interest rates. At the end of the period, Russia began a military invasion of Ukraine in a major escalation of the Russo-Ukrainian war that had begun in 2014. From a market perspective, this has resulted in foreign investors not being able to trade in Russian stocks.
PERFORMANCE
Against this backdrop, over the six months ended 28 February 2022, the Company’s net asset value per share (NAV) returned -20.0%, underperforming the FTSE World Europe ex UK Index which returned -7.8%. Over the same period, the Company’s share price returned -21.8% (all percentages calculated in Sterling terms with dividends reinvested). Exposure to Russian holdings at 28 February 2022 was 1.3% of net assets, 5.7% (£36.8m) as at 31 January 2022, and these were written down to zero after 28 February 2022 when the secondary listings of the ADRs/GDRs of Russian holdings were suspended. It is the Board's intention to sell the Company's Russian stocks, as and when circumstances permit, and it is appropriate to do so. The Company will not make any further purchases in Russian stocks for the foreseeable future. Further information on investment performance and the Company’s Russian holdings is given in the Investment Manager’s Report below.
Since the period end to 9 May 2022, the Company’s NAV has decreased by 13.8% compared with a fall in the FTSE World Europe ex UK Index of 5.2% over the same period.
REVENUE EARNINGS AND DIVIDENDS
The Company’s revenue return per share for the six month period ended 28 February 2022 amounted to 1.37p compared with 0.54p for the corresponding period in 2021, an increase of 153.7%. Revenue in the second half of the year, although strong, will be affected by the loss of income from our Russian holdings which had been expected to yield attractive income returns. The Board has declared an interim dividend of 1.75p (2021: 1.75p) per share. The dividend will be paid on 17 June 2022 to shareholders on the Company’s register on 20 May 2022, the ex-dividend date being 19 May 2022.
TENDER OFFERS
The Directors of the Company have the discretion to make semi-annual tender offers at the prevailing NAV, less 2%, for up to 20% of the issued share capital in May and November of each year. The Board announced on 30 September 2021 that it had decided not to proceed with a tender offer in November 2021 and on 29 March 2022 that the tender offer in May 2022 would not be implemented.
Over the six month period ended 28 February 2022, the Company’s shares traded at an average premium to NAV of 1.8% compared to a discount of 2.0% to NAV, the price at which any tender offer would be made. The Board has therefore concluded that it was not in the interests of shareholders as a whole to implement the latest semi-annual tender offer.
SHARE ISSUES
I am pleased to report, as indicated above, that the Company’s shares have, for the most part, traded at a premium rating and in the period to 28 February 2022, 4,300,000 shares were allotted and 1,945,000 shares were reissued from treasury at an average price of 681.87p per share for a total gross consideration of £42,632,000. All share issuance was carried out at a premium to NAV. The prices at which these shares have been issued also represent a substantial premium to the prices originally paid for them by the Company. Since the period end, and up to the date of this report, the Company has not reissued any further shares.
BOARD COMPOSITION
We are delighted to welcome Ian Sayers to the Board. Ian was appointed as a Director of the Company on 10 February 2022. Ian brings a wealth of experience having been the former Chief Executive of the Association of Investment Companies. He is also a qualified chartered accountant and chartered tax adviser.
OUTLOOK
Market volatility will likely remain elevated. In light of Russia's continuing war against Ukraine, a package of economic and individual sanctions have been imposed against Russia. A significant escalation of these sanctions has increased the cost to Russia and the rest of the world, and this could prevail for some time. The emergence of the new COVID-19 variant at the end of last year has also led to a stop-start recovery and affected global supply chains. Additionally, there is little doubt that we have now entered a more inflationary period and the impacts of the conflict are likely to increase fears of recession.
Your Company is a concentrated, high conviction portfolio with a long investment horizon and is therefore less sensitive to short-term macro and market narratives. Many of the Portfolio Managers’ strongest convictions in the European market have significantly derated this year, despite company updates showing strong earnings and positive outlooks for 2022. There are therefore opportunities to top up or add names where the Portfolio Managers see potential for strong earnings growth in the medium to long term.
ERIC SANDERSON
10 May 2022
Investment Manager’s report
OVERVIEW
The Company’s share price and NAV per share fell by 21.8% and 20.0%, respectively, over the six months to 28 February 2022. By way of comparison, the FTSE World Europe ex UK Index decreased by 7.8% during the same period. (All performance data is in Sterling terms with dividends reinvested.) The Company’s NAV therefore underperformed the FTSE World Europe ex UK Index by 12.2%, with 5.7% attributable to our holdings in Russia.
The last six months proved highly volatile, dominated by several sharp market rotations. The market was pre-occupied first by a macro narrative around high spot inflation figures and the path of monetary policy and then by the invasion of Ukraine by Russia.
During the period under review, the market at times aggressively moved into value assets which led to a mechanical derating of higher quality growth stocks. In January, all of this culminated in the most significant value rotation seen since the global financial crisis. This subsequently saw a sharp reversal in February as market participants grew concerned over the possibility of a policy mistake in an already slowing cycle and favoured defensive assets. This was significantly exacerbated by the invasion of Ukraine by Russia. Equity markets sold off heavily, while commodity prices including Brent crude oil, natural gas and wheat moved higher, as the market was quick to price potential supply disruptions as a result of this conflict.
During these market moves, only the energy sector delivered strong absolute returns while all remaining sectors fell in absolute terms. Consumer staples, utilities and financials fared slightly better, while technology, industrials and real estate sold off.
In our previous reports we highlighted how market volatility and a health crisis such as the COVID-19 pandemic posed a real test to our investment philosophy. This was also the case over the past, highly volatile six months. These times require adherence to our core investment beliefs: owning growing businesses which can maintain a spread between their returns on capital and their cost of capital. If company fundamentals remain unimpaired, volatility creates opportunities to selectively add to high conviction holdings that suffered in indiscriminate market sell-offs.
Besides our exposure to Russian companies, which we address in more detail below, it is important to highlight that negative share price performance was driven by factor moves (one style significantly outperforming or underperforming another) in the market rather than earnings disappointments or weaker business fundamentals. In fact, the full year 2021 earnings season has so far been positive with many of the Company’s investee companies delivering very strong results. When markets are driven by macroeconomic narratives and factor moves, earnings season can serve as a welcome ‘reality check’ that helps us remove ourselves from the market noise and instead concentrate on the operating environment for our companies.
Following the invasion of Ukraine, countries around the world and international organisations introduced economic sanctions against Russian individuals and entities. At the time of writing, the Central Bank of Russia has been sanctioned by the United States of America, the European Union and Japan. As a result, roughly half of Russia’s US$620 billion foreign currency reserves are now frozen – this pivotal measure has generated a dollar liquidity squeeze in Russia impacting external payments, as well as creating risks around Russia's banking system's ability to meet dollar deposit withdrawals. To stabilise the domestic market, Russia’s Central Bank has hiked interest rates to 20% (from 9.5%) and is enforcing mandatory conversion of export revenues into US dollars. This was only done three times before, in Iran, North Korea and Cuba, explaining the collapse in the Rouble exchange rates, as well as share prices of key Russian banks. Russian stock markets have been closed since 25 February 2022 and secondary listings of Russian companies trading on international exchanges have been suspended since 3 March 2022.
BlackRock suspended the purchase of all Russian securities in our active and index portfolios on 28 February 2022 and, following that, BlackRock’s Pricing Committee wrote down the value of Russian securities across all portfolios to a nominal value. A significant part of negative performance during the period resulted from our exposure to these Russian companies. As of 31 January 2022, the Company held 5.7% in Russian stocks. Post-invasion, and at the time of writing in early March 2022, Russian securities held by the Company are valued at a nominal value. Therefore, main detractors during the period included our holdings in Russian companies which all fell between 75% to 95% over the period. One of the Russian stocks, Sberbank, held by the Company is subject to sanctions and we are addressing how to deal with this.
Outside of the first order effects described above, it is important to consider second and third order effects. Following the invasion, markets were quick to price higher energy and agricultural commodity goods, given that Russia is the source of significant European oil and gas imports, while Russia and Ukraine together also account for 29% of global wheat exports (Source: The Economist, 12 March 2022). This may lead to a deterioration in spending power for consumers in the lower quartiles of the income distribution and will likely cause margin compression and/or demand destruction for energy intensive industries. The Company has little exposure to energy intensive industries and our consumer facing companies generally sell to higher-end consumers whose discretionary expenditure is relatively well insulated against higher prices.
PORTFOLIO
Coming to portfolio detractors and contributors, Lonza Group’s shares sold off despite the business demonstrating an exceptional operating performance. The health care company is adding about 30% new contract developers and manufacturers (customers) per year and its management team remains very confident in the outlook for the business given its impressive customer pipeline. The company now gives guidance up to 2025, giving very strong visibility of future earnings and cashflows.
Similarly, shares in DiaSorin struggled, although it remains one of the best positioned life sciences firms in Europe. The largely family owned, Italian diagnostics company is a well-run, high returning business, that can benefit from an increased public awareness of the role of diagnostic testing and continued decentralisation of specialties, such as providing smaller hospitals with lab equipment.
On top of the de-rating suffered by longer duration businesses (typically higher quality stocks), our position in Netcompany Group experienced stock specific weakness following the announcement of the Intrasoft acquisition and disappointing organic growth and margin guidance which has complicated the investment case. We took action to reduce the position size in December 2021.
In more positive news, our off-benchmark position RELX was the top performer over the period, as we have seen increased evidence of an acceleration of organic growth in its academic publishing and legal divisions. RELX can also benefit from structural growth in their data analytics business and generally boasts strong earnings visibility.
Novo Nordisk aided returns, showing great strength in its franchises for glucagon like peptides, as well as in the obesity market. More recently, the company delivered improved guidance on capacity for their Wegovy weight loss drug which came to the market in June 2021, expecting to be able to fill 100% of scripts through the first six months of 2022.
The Company’s position in LVMH, which we added to the portfolio in September 2021 following a volatile summer for the company’s shares, outperformed the falling market after reporting stellar results. The luxury group delivered exceptional numbers for full year 2021, with positive sentiment across almost all divisions and regions. The turnaround of the acquired Tiffany brand continues to be on track and sales in China accelerated despite continued local lockdowns. Having met with management several times over the period, we remain convinced that this is one of the best companies in Europe over the long term.
National Bank of Greece and Israeli ICL Group, both part of the Company’s Emerging European portfolio, also contributed positively to returns. The latter develops, produces and markets fertilizers, metals and other special-purpose chemical products and strongly benefited from a rise in fertilizer prices on the back of higher gas prices. We subsequently took profit in the shares and exited the stock.
Elsewhere, shares in travel related companies including Amadeus IT Group and Safran also performed well, rebounding as fears around Omicron abated which led to a more positive outlook for the travel and leisure industry.
As highlighted above, we have remained focused on our investment philosophy. Over the period we worked intensely on our well-established fundamental research process to confirm our investment cases, through meeting company management teams, forensically examining estimates of earnings and cashflows and having rigorous internal discussions about where we could be wrong. This is an ongoing process, but at present we have not seen any fundamental reasons to materially change the general composition of the portfolio. This is reflected in a portfolio turnover number of just under 13%.
Rather than selling our favourite companies based on other investors’ fears, we have taken advantage of weakness in share prices and topped up position sizes in companies whose business and operational performance are intact, or if anything growing stronger. This includes Lonza Group, ChemoMetec, Hermès and Ferrari.
As mentioned above, we also bought shares in LVMH, one of the global leaders in luxury goods, and Rational - a German manufacturer and retailer of combi-ovens, steamers and cooking appliances for commercial kitchens. Rational is one of Europe’s highly profitable businesses. The company has delivered return on capital of circa 35% over the past years, coupled with high-single-digit to low-double-digit organic growth rates.
OUTLOOK
The macro-economic and geopolitical environment remains highly uncertain. As bottom-up investors, we do not seek to forecast these outcomes, but it is likely that economic growth will slow and global fiscal support will fade. The damaging impacts of the Russia-Ukraine war may cause monetary policy makers to more closely weigh high spot inflation against a deteriorating growth outlook, which could ease some of the rate induced market volatility seen in January.
Moving from macro to micro, we are of the view that we are only in the early stages of transformational shifts in many industries in Europe. Our portfolio is fundamentally set up to benefit from high-quality, long lasting investment spend to electrify the European economy, to reduce emissions from the existing building stock, and to accelerate the shift to decarbonise transport, to name but a few. Here, we focus our research hours on finding structural drivers and increased spending that can help companies deliver superior returns over the long term.
All in all, we expect greater dispersion between sector and stock outcomes and with that a need for continued selectivity. In our view, this environment will favour well-managed businesses with strong pricing power, which are able to execute in a tough market environment. We continue to believe that holding these businesses will be to the benefit of our shareholders over the medium to long term.
STEFAN GRIES AND SAM VECHT
BLACKROCK INVESTMENT MANAGEMENT (UK) LIMITED
10 May 2022
TEN LARGEST INVESTMENTS
The Company's ten largest investments represented 51.0% of the Company's portfolio as at 28 February 2022.
1 = ASML (2021: 1st)
Technology company
Market value: £45,907,000
Share of investments: 7.6%
A Dutch company which specialises in the supply of photolithography systems for the semiconductor industry. The company is at the forefront of technological change, investing in leading research and development to capture the structural growth opportunity coming from growth in mobile devices and microchip components. High barriers to entry within the industry give ASML a protected position with strong pricing power allowing growth in margins whilst they continue to innovate. The company is run by an exceptional management team which aims to create long-term value whilst returning excess cash to shareholders.
2 +
LVMH (2021: n/a)
Consumer Discretionary company
Market value: £45,025,000
Share of investments: 7.5%
A French multinational holding corporation specialising in luxury goods. The group has a strong and well-diversified portfolio of luxury brands ranging from handbags to spirits to cosmetics. LVMH’s business model enjoys high barriers to entry due to the heritage, provenance and exquisite quality of its product offering. Its consistent brand investment through economic cycles has helped to spur brand desirability and allowed for significant pricing power. LVMH’s management team also has an impressive track record of taking over struggling brands and accelerating their growth and returns profile over time.
3 + Novo Nordisk (2021: 6th)
Health Care company
Market value: £37,090,000
Share of investments: 6.1%
A Danish multinational pharmaceutical company which is a leader in diabetes care. We expect Novo Nordisk to post strong growth in earnings and cashflows driven by demand for ‘Ozempic’ which treats type 2 diabetes, as well as by its weight management drug Wegovy, which recently came to the market. Overall, we believe Novo Nordisk offers attractive long-term growth potential at high returns and sector leading cash flow conversion with any excess in cash being returned to shareholders.
4 - Sika (2021: 3rd)
Industrial company
Market value: £33,043,000
Share of investments: 5.5%
A speciality chemical company with a leading position in both construction chemicals and in bonding agents for the automotive industry. Sika has proprietary technology within adhesives, which has an increasing array of applications as technology advances. The company benefits from structural drivers of urbanisation and has exposure to multiple points in the construction cycle including new infrastructure projects, as well as maintenance or refurbishment of existing buildings. It is also likely to benefit from the EU Recovery Fund and the EU Green Deal channelling funds towards sustainable infrastructure projects. Sika’s decentralised structure of subsidiaries and strong culture of new product innovation continues to drive pricing power.
5 - Lonza Group (2021: 2nd)
Health Care company
Market value: £32,775,000
Share of investments: 5.4%
A Swiss health care services and life-sciences company. Lonza has established itself as one of the leading contract manufacturers of high-end biological drugs, as well as cell and gene therapy. Lonza’s competitive advantages stem from the complexity of the production process – where few peers can match its offering. This is cemented by high barriers to entry given that all production facilities are required to be certified by the Food and Drug Administration. Overall, we expect Lonza’s biologics business to grow in the mid-teens every year for the next ten years with positive pricing, as there is generally a shortage of capacity in the market.
6 + RELX (2021: 7th)
Consumer Discretionary company
Market value: £30,430,000
Share of investments: 5.0%
A multinational information and analytics company which has high barriers to entry in most of its divisions, including scientific publishing. This capital light business model allows for a high rate of cash flow conversion with repeatable revenues built on subscription-based models. The business also benefits from the structurally increasing usage of data globally, which supports their data analytics business.
7 -
DSV Panalpina (2021: 5th)
Industrial company
Market value: £25,649,000
Share of investments: 4.3%
A Danish freight forwarding and logistics company run by an excellent management team with a strong track record in creating value through acquisitions and by instilling a best-in-class culture in its organisation. Their success in making acquisitions has been facilitated by a strong IT platform which drives operational efficiencies leading to high conversion margins. In 2019, DSV took over Swiss peer Panalpina in its largest ever acquisition which they have been integrating successfully. In 2021, DSV announced the purchase of Kuwait-based Agility’s logistics business in a US$4.1 billion deal, becoming the third largest freight forwarder globally.
8 =
Royal Unibrew (2021: 8th)
Consumer Staples company
Market value: £22,739,000
Share of investments: 3.8%
A brewing and beverage company based in Denmark. Through a number of well-timed acquisitions, the group has transformed itself into a multi-beverage company offering attractive growth in soft drink niches at high returns with significant potential to export their brands with strong European heritage into international markets.
9 +
Hexagon (2021: 10th)
Technology company
Market value: £17,763,000
Share of investments: 2.9%
An industrial and software conglomerate. The business specialises in the provision of geo-mapping and monitoring software and sensors, as well as plant management and automation systems. Its products have applications in diverse end markets including smart phones, mining automation, construction surveying and agriculture optimisation.
10 + Hermès (2021: 15th)
Consumer Discretionary company
Market value: £17,263,000
Share of investments: 2.9%
A French luxury design house established in 1837. It specialises in leather goods, lifestyle accessories, home furnishings, perfumery, jewellery, watches and ready-to-wear. Due to deliberate brand management and craftmanship, this ultimate high-end brand is supply constraint and enjoys strong earnings visibility given some of its products are sold on allocation to clients on waiting lists. Hermès has also increased exposure to perfume and cosmetics which is particularly attractive for its growing online business.
All percentages reflect the value of the holding as a percentage of total investments.
Together, the ten largest investments represent 51.0% of the Company’s portfolio (31 August 2021: 46.7%).
PORTFOLIO ANALYSIS AS AT 28 FEBRUARY 2022
|
|
% France |
% Switzerland |
% Ireland |
% Germany |
% Sweden |
% Netherlands |
% Denmark |
% Belgium |
% Finland |
% Spain |
% Italy |
% Central Eastern Europe & other |
% Portfolio 28.02.22 |
% Portfolio 31.08.21 |
FTSE World Europe ex UK 28.02.22 |
| Basic Materials | – | – | – | – | – | 2.7 | – | – | – | – | – | – | 2.7 | 4.0 | 5.1 |
| Consumer Discretionary | 10.4 | – | – | – | – | – | – | – | – | – | 1.7 | 5.5 | 17.6 | 15.6 | 13.2 |
| Consumer Staples | – | 1.7 | – | – | – | – | 3.8 | – | – | – | – | – | 5.5 | 4.6 | 9.5 |
| Energy | – | – | – | – | – | – | – | – | – | – | – | 0.5 | 0.5 | 3.7 | 4.2 |
| Financials | – | 2.2 | – | – | 1.5 | – | – | – | – | – | 1.7 | 3.8 | 9.2 | 8.1 | 16.3 |
| Health Care | – | 9.4 | – | – | – | – | 8.4 | – | – | – | 1.4 | – | 19.2 | 16.5 | 15.9 |
| Industrials | 3.2 | 7.3 | 2.1 | 1.1 | 3.5 | 3.2 | 4.3 | – | – | – | – | – | 24.7 | 23.2 | 17.3 |
| Real Estate | – | – | – | – | – | – | – | – | – | – | – | – | – | – | 1.6 |
| Technology | 1.4 | 2.0 | – | – | 2.9 | 11.9 | 0.1 | – | – | 2.3 | – | – | 20.6 | 24.3 | 8.9 |
| Telecommunications | – | – | – | – | – | – | – | – | – | – | – | – | – | – | 3.5 |
| Utilities | – | – | – | – | – | – | – | – | – | – | – | – | – | – | 4.5 |
| % Portfolio 28.02.22 | 15.0 | 22.6 | 2.1 | 1.1 | 7.9 | 17.8 | 16.6 | – | – | 2.3 | 4.8 | 9.8 | 100.0 | – | – |
| % Portfolio 31.08.21 | 11.4 | 20.9 | 1.7 | 0.8 | 7.4 | 18.2 | 17.3 | – | 2.1 | 1.8 | 4.7 | 13.7 | – | 100.0 | – |
| FTSE World Europe ex UK 28.02.22 | 21.4 | 20.6 | 0.5 | 17.2 | 6.9 | 9.8 | 5.1 | 1.9 | 2.7 | 4.9 | 4.5 | 4.5 | – | – | 100.0 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ======== | ========= | ======== | ======== | ========= |
Percentages in the table above are a % of total investments.
INVESTMENTS AS AT 28 FEBRUARY 2022
| Country of operation |
Market value £000 |
% of investments |
|
| Industrials | |||
| Sika | Switzerland | 33,043 | 5.5 |
| DSV Panalpina | Denmark | 25,649 | 4.3 |
| Adyen | Netherlands | 13,894 | 2.3 |
| Safran | France | 13,376 | 2.2 |
| Kingspan | Ireland | 12,428 | 2.1 |
| Atlas Copco | Sweden | 12,044 | 2.0 |
| VAT Group | Switzerland | 10,980 | 1.8 |
| Epiroc | Sweden | 9,362 | 1.5 |
| Rational | Germany | 6,828 | 1.1 |
| ALD | France | 6,279 | 1.0 |
| Marel | Netherlands | 5,230 | 0.9 |
| --------------- | --------------- | ||
| 149,113 | 24.7 | ||
| ========= | ========= | ||
| Technology | |||
| ASML | Netherlands | 45,907 | 7.6 |
| Hexagon | Sweden | 17,763 | 2.9 |
| BE Semiconductor | Netherlands | 16,708 | 2.8 |
| Amadeus IT Group | Spain | 13,955 | 2.3 |
| Logitech International | Switzerland | 11,844 | 2.0 |
| ASM International | Netherlands | 9,379 | 1.5 |
| Dassault Systèmes | France | 8,350 | 1.4 |
| Netcompany Group | Denmark | 343 | 0.1 |
| --------------- | --------------- | ||
| 124,249 | 20.6 | ||
| ========= | ========= | ||
| Health Care | |||
| Novo Nordisk | Denmark | 37,090 | 6.1 |
| Lonza Group | Switzerland | 32,775 | 5.4 |
| Straumann | Switzerland | 14,972 | 2.5 |
| ChemoMetec | Denmark | 13,813 | 2.3 |
| PolyPeptide Group | Switzerland | 9,132 | 1.5 |
| DiaSorin | Italy | 8,271 | 1.4 |
| --------------- | --------------- | ||
| 116,053 | 19.2 | ||
| ========= | ========= | ||
| Consumer Discretionary | |||
| LVMH | France | 45,025 | 7.5 |
| RELX | United Kingdom | 30,430 | 5.0 |
| Hermès | France | 17,263 | 2.9 |
| Ferrari | Italy | 10,410 | 1.7 |
| Ozon Holdings | Russia | 2,428 | 0.4 |
| Fix Price Group | Russia | 376 | 0.1 |
| --------------- | --------------- | ||
| 105,932 | 17.6 | ||
| ========= | ========= | ||
| Financials | |||
| Partners Group | Switzerland | 13,087 | 2.2 |
| FinecoBank | Italy | 10,287 | 1.7 |
| Avanza Bank Holding | Sweden | 9,015 | 1.5 |
| National Bank of Greece | Greece | 8,502 | 1.4 |
| Allfunds Group | United Kingdom | 6,867 | 1.1 |
| Bank Pekao | Poland | 6,470 | 1.1 |
| Sberbank | Russia | 1,095 | 0.2 |
| --------------- | --------------- | ||
| 55,323 | 9.2 | ||
| ========= | ========= | ||
| Consumer Staples | |||
| Royal Unibrew | Denmark | 22,739 | 3.8 |
| Lindt | Switzerland | 10,045 | 1.7 |
| --------------- | --------------- | ||
| 32,784 | 5.5 | ||
| ========= | ========= | ||
| Basic Materials | |||
| IMCD | Netherlands | 16,502 | 2.7 |
| --------------- | --------------- | ||
| 16,502 | 2.7 | ||
| ========= | ========= | ||
| Energy | |||
| Lukoil | Russia | 3,050 | 0.5 |
| --------------- | --------------- | ||
| 3,050 | 0.5 | ||
| ========= | ========= | ||
| Total investments | 603,006 | 100.0 | |
| ========= | ========= |
All investments are in ordinary shares unless otherwise stated. The total number of investments held at 28 February 2022 was 42 (31 August 2021: 44).
Industry classifications in the table above are based on the Industrial Classification Benchmark standard for categorisation of companies by industry and sector.
As at 28 February 2022, the Company did not hold any equity interests comprising more than 3% of any company's share capital.
INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT
The Chairman’s Statement and the Investment Manager’s Report above give details of the important events which have occurred during the period and their impact on the financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks faced by the Company can be divided into various areas as follows:
· Counterparty;
· Investment performance;
· Legal & regulatory compliance;
· Market;
· Operational;
· Financial; and
· Marketing.
The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 31 August 2021. A detailed explanation can be found in the Strategic Report on pages 31 to 34 and in note 15 on pages 86 to 92 of the Annual Report and Financial Statements which are available on the website maintained by BlackRock at www.blackrock.com/uk/brge.
In the view of the Board, there have not been any changes to the fundamental nature of the principal risks and uncertainties since the previous report and these are equally applicable to the remaining six months of the financial year as they were to the six months under review.
GOING CONCERN
The Directors, having considered the nature and liquidity of the portfolio, the Company’s investment objective and the Company’s projected income and expenditure, are satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future and is financially sound. The Board is still mindful of the continuing uncertainty surrounding the potential duration of the COVID-19 pandemic and its longer-term effects on the global economy and recovery of economies. The Board believes that the Company and its key third-party service providers have in place appropriate business continuity plans and these services have continued to be supplied without interruption throughout the COVID-19 pandemic.
The Company has a portfolio of investments which are predominantly readily realisable and is able to meet all of its liabilities from its assets and income generated from these assets. Accounting revenue and expense forecasts are maintained and reported to the Board regularly and it is expected that the Company will be able to meet all its obligations.
The Investment Manager generally aims to be fully invested and it is anticipated that gearing will not exceed 15% of net asset value (NAV) at the time of drawdown of the relevant borrowings. Borrowings under the overdraft facility shall at no time exceed £70 million or 15% of the Company’s net asset value (whichever is lower) and this covenant was complied with during the period. Based on the above, the Board is satisfied that it is appropriate to continue to adopt the going concern basis in preparing the financial statements. Ongoing charges for the year ended 31 August 2021 were approximately 1.02% of net assets.
RELATED PARTY DISCLOSURE AND TRANSACTIONS WITH THE MANAGER
BlackRock Fund Managers Limited (BFM) was appointed as the Company’s Alternative Investment Fund Manager (AIFM) with effect from 2 July 2014. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Both BFM and BIM (UK) are regarded as related parties under the Listing Rules. Details of the fees payable are set out in note 4 and note 12 below. The related party transactions with the Directors are set out in note 11 below.
DIRECTORS’ RESPONSIBILITY STATEMENT
The Disclosure Guidance and Transparency Rules (DTR) of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.
The Directors confirm to the best of their knowledge that:
· the condensed set of financial statements contained within the Half Yearly Financial Report has been prepared in accordance with applicable UK Accounting Standards and the Accounting Standards Board’s Statement ‘Half Yearly Financial Reports’; and
· the Interim Management Report, together with the Chairman’s Statement and Investment Manager’s Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FCA’s Disclosure Guidance and Transparency Rules.
This Half Yearly Financial Report has not been audited or reviewed by the Company’s auditor.
The Half Yearly Financial Report was approved by the Board on 10 May 2022 and the above responsibility statement was signed on its behalf by the Chairman.
ERIC SANDERSON
FOR AND ON BEHALF OF THE BOARD
10 May 2022
INCOME STATEMENT FOR THE SIX MONTHS ENDED 28 FEBRUARY 2022
|
|
|
Six months ended 28 February 2022 (unaudited) |
Six months ended 28 February 2021 (unaudited) |
Year ended 31 August 2021 (audited) |
||||||
|
|
Notes |
Revenue £000 |
Capital £000 |
Total £000 |
Revenue £000 |
Capital £000 |
Total £000 |
Revenue £000 |
Capital £000 |
Total £000 |
| (Losses)/gains on investments held at fair value through profit or loss | – | (138,558) | (138,558) | – | 53,538 | 53,538 | – | 195,351 | 195,351 | |
| Gains on foreign exchange | – | 1,807 | 1,807 | – | 967 | 967 | – | 1,177 | 1,177 | |
| Income from investments held at fair value through profit or loss | 3 | 2,338 | – | 2,338 | 1,369 | – | 1,369 | 5,951 | – | 5,951 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Total income/(losses) | 2,338 | (136,751) | (134,413) | 1,369 | 54,505 | 55,874 | 5,951 | 196,528 | 202,479 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Expenses | ||||||||||
| Investment management fee | 4 | (538) | (2,151) | (2,689) | (352) | (1,410) | (1,762) | (831) | (3,325) | (4,156) |
| Other operating expenses | 5 | (281) | (12) | (293) | (372) | (9) | (381) | (787) | (19) | (806) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Total operating expenses | (819) | (2,163) | (2,982) | (724) | (1,419) | (2,143) | (1,618) | (3,344) | (4,962) | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Net profit/(loss) on ordinary activities before finance costs and taxation | 1,519 | (138,914) | (137,395) | 645 | 53,086 | 53,731 | 4,333 | 193,184 | 197,517 | |
| Finance costs | (54) | (216) | (270) | (28) | (112) | (140) | (51) | (204) | (255) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Net profit/(loss) on ordinary activities before taxation | 1,465 | (139,130) | (137,665) | 617 | 52,974 | 53,591 | 4,282 | 192,980 | 197,262 | |
| Taxation charge | (98) | – | (98) | (157) | – | (157) | (687) | – | (687) | |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| Net profit/(loss) on ordinary activities after taxation | 7 | 1,367 | (139,130) | (137,763) | 460 | 52,974 | 53,434 | 3,595 | 192,980 | 196,575 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| Earnings/(losses) per ordinary share (pence) | 7 | 1.37 | (139.64) | (138.27) | 0.54 | 62.75 | 63.29 | 4.13 | 221.66 | 225.79 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
The total column of this statement represents the Company’s profit and loss account. The supplementary revenue and capital accounts are both prepared under guidance published 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. All income is attributable to the equity holders of the Company.
The net profit/(loss) on ordinary activities for the period disclosed above represents the Company’s total comprehensive income/(loss).
STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 28 FEBRUARY 2022
|
|
Note |
Called up share capital £000 |
Share premium account £000 |
Capital redemption reserve £000 |
Special reserve £000 |
Capital reserves £000 |
Revenue reserve £000 |
Total £000 |
| For the six months ended 28 February 2022 (unaudited) | ||||||||
| At 31 August 2021 | 113 | 48,340 | 130 | 71,541 | 522,321 | 9,286 | 651,731 | |
| Total comprehensive income: | ||||||||
| Net (loss)/profit for the period | – | – | – | – | (139,130) | 1,367 | (137,763) | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Ordinary shares issued | 5 | 30,067 | – | – | – | – | 30,072 | |
| Ordinary shares reissued from treasury | – | 6,974 | – | 2,843 | 2,743 | – | 12,560 | |
| Share issue costs | – | (58) | – | – | – | – | (58) | |
| Share reissue costs - treasury | – | – | – | (11) | (12) | – | (23) | |
| Tender offer costs written back | – | – | – | 14 | – | – | 14 | |
| Dividends paid1 | 6 | – | – | – | – | – | (4,529) | (4,529) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 28 February 2022 | 118 | 85,323 | 130 | 74,387 | 385,922 | 6,124 | 552,004 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| For the six months ended 28 February 2021 (unaudited) | ||||||||
| At 31 August 2020 | 110 | – | 130 | 47,339 | 329,341 | 10,941 | 387,861 | |
| Total comprehensive income: | ||||||||
| Net profit for the period | – | – | – | – | 52,974 | 460 | 53,434 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Ordinary shares issued from treasury | – | 3,373 | – | 2,458 | – | – | 5,831 | |
| Share issue costs | – | – | – | (12) | – | – | (12) | |
| Dividends paid2 | 6 | – | – | – | – | – | (3,710) | (3,710) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 28 February 2021 | 110 | 3,373 | 130 | 49,785 | 382,315 | 7,691 | 443,404 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ||
| For the year ended 31 August 2021 (audited) | ||||||||
| At 31 August 2020 | 110 | – | 130 | 47,339 | 329,341 | 10,941 | 387,861 | |
| Total comprehensive income: | ||||||||
| Net profit for the year | – | – | – | – | 192,980 | 3,595 | 196,575 | |
| Transactions with owners, recorded directly to equity: | ||||||||
| Ordinary shares issued | 3 | 22,304 | – | – | – | – | 22,307 | |
| Ordinary shares reissued from treasury | – | 26,081 | – | 24,220 | – | – | 50,301 | |
| Share issue costs | – | (45) | – | – | – | – | (45) | |
| Share reissue costs - treasury | – | – | – | (101) | – | – | (101) | |
| Tender costs written back | – | – | – | 83 | – | – | 83 | |
| Dividends paid3 | 6 | – | – | – | – | – | (5,250) | (5,250) |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | ||
| At 31 August 2021 | 113 | 48,340 | 130 | 71,541 | 522,321 | 9,286 | 651,731 | |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= |
1 Final dividend paid in respect of the year ended 31 August 2021 of 4.55p per share was declared on 4 November 2021 and paid on 17 December 2021.
2 Final dividend paid in respect of the year ended 31 August 2020 of 4.40p per share was declared on 22 October 2020 and paid on 9 December 2020.
3 Interim dividend paid in respect of the year ended 31 August 2021 of 1.75p per share was declared on 23 April 2021 and paid on 4 June 2021. Final dividend paid in respect of the year ended 31 August 2020 of 4.40p per share was declared on 22 October 2020 and paid on 9 December 2020.
For information on the Company’s distributable reserves, please refer to note 9 below.
BALANCE SHEET AS AT 28 FEBRUARY 2022
|
|
Notes |
28 February 2022 (unaudited) £000 |
28 February 2021 (unaudited) £000 |
31 August 2021 (audited) £000 |
| Fixed assets | ||||
| Investments held at fair value through profit or loss | 603,006 | 475,020 | 682,774 | |
| Current assets | ||||
| Current tax asset | 1,222 | 846 | 1,240 | |
| Debtors | 1,293 | 1,435 | 6,424 | |
| Cash and cash equivalents | 1 | – | – | |
| --------------- | --------------- | --------------- | ||
| Total current assets | 2,516 | 2,281 | 7,664 | |
| ========= | ========= | ========= | ||
| Creditors – amounts falling due within one year | ||||
| Bank overdraft | (49,089) | (31,538) | (27,721) | |
| Other creditors | (4,429) | (2,359) | (10,986) | |
| --------------- | --------------- | --------------- | ||
| Total current liabilities | (53,518) | (33,897) | (38,707) | |
| --------------- | --------------- | --------------- | ||
| Net current liabilities | (51,002) | (31,616) | (31,043) | |
| ========= | ========= | ========= | ||
| Net assets | 552,004 | 443,404 | 651,731 | |
| ========= | ========= | ========= | ||
| Capital and reserves | ||||
| Called up share capital | 8 | 118 | 110 | 113 |
| Share premium account | 85,323 | 3,373 | 48,340 | |
| Capital redemption reserve | 130 | 130 | 130 | |
| Special reserve | 74,387 | 49,785 | 71,541 | |
| Capital reserves | 385,922 | 382,315 | 522,321 | |
| Revenue reserve | 6,124 | 7,691 | 9,286 | |
| --------------- | --------------- | --------------- | ||
| Total shareholders’ funds | 552,004 | 443,404 | 651,731 | |
| ========= | ========= | ========= | ||
| Net asset value per ordinary share (pence) | 7 | 539.59 | 519.22 | 678.49 |
| ========= | ========= | ========= |
STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2022
|
|
Six months ended 28 February 2022 (unaudited) £000 |
Six months ended 28 February 2021 (unaudited) £000 |
Year ended 31 August 2021 (audited) £000 |
| Operating activities | |||
| Net (loss)/profit on ordinary activities before taxation | (137,665) | 53,591 | 197,262 |
| Add back finance costs | 270 | 140 | 255 |
| Losses/(gains) on investments held at fair value through profit or loss | 138,558 | (53,538) | (195,351) |
| Gains on foreign exchange | (1,807) | (967) | (1,177) |
| Sales of investments held at fair value through profit or loss | 86,473 | 53,760 | 96,003 |
| Purchase of investments held at fair value through profit or loss | (151,233) | (66,578) | (168,909) |
| Decrease in debtors | 159 | 389 | 276 |
| Increase in other creditors | 1,511 | 223 | 865 |
| Taxation on investment income | (176) | (291) | (1,272) |
| Interest paid | (270) | (140) | (255) |
| Refund of withholding tax reclaims | 96 | 686 | 743 |
| --------------- | --------------- | --------------- | |
| Net cash used in operating activities | (64,084) | (12,725) | (71,560) |
| ========= | ========= | ========= | |
| Financing activities | |||
| Proceeds from ordinary shares issued | 32,946 | – | 19,388 |
| Proceeds from ordinary shares reissued from treasury | 12,560 | 5,618 | 50,200 |
| Share reissue costs | (67) | (12) | – |
| Dividends paid | (4,529) | (3,710) | (5,250) |
| --------------- | --------------- | --------------- | |
| Net cash generated from financing activities | 40,910 | 1,896 | 64,338 |
| ========= | ========= | ========= | |
| Decrease in cash and cash equivalents | (23,174) | (10,829) | (7,222) |
| Cash and cash equivalents at the beginning of the period/year | (27,721) | (21,676) | (21,676) |
| Effect of foreign exchange rate changes | 1,807 | 967 | 1,177 |
| --------------- | --------------- | --------------- | |
| Cash and cash equivalents at the end of the period/year | (49,088) | (31,538) | (27,721) |
| ========= | ========= | ========= | |
| Comprised of: | |||
| Cash at bank | 1 | – | – |
| Bank overdraft | (49,089) | (31,538) | (27,721) |
| --------------- | --------------- | --------------- | |
| (49,088) | (31,538) | (27,721) | |
| ========= | ========= | ========= |
NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2022
1. PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment trust company within the meaning of Section 1158 of the Corporation Tax Act 2010.
2. BASIS OF PREPARATION
The financial statements of the Company are prepared on a going concern basis in accordance with Financial Reporting Standard 104 Interim Financial Reporting (FRS 104) applicable in the United Kingdom and Republic of Ireland and the revised Statement of Recommended Practice – ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (SORP) issued by the Association of Investment Companies (AIC) in April 2021 and the provisions of the Companies Act 2006.
The accounting policies and estimation techniques applied for the condensed set of financial statements are as set out in the Company’s Annual Report and Financial Statements for the year ended 31 August 2021.
3. INCOME
|
|
Six months ended 28 February 2022 (unaudited) £000 |
Six months ended 28 February 2021 (unaudited) £000 |
Year ended 31 August 2021 (audited) £000 |
| Investment income: | |||
| UK dividends | – | – | 438 |
| Overseas dividends | 2,234 | 1,346 | 5,490 |
| Overseas special dividends | 104 | 23 | 23 |
| --------------- | --------------- | --------------- | |
| Total income | 2,338 | 1,369 | 5,951 |
| ========= | ========= | ========= |
Dividends and interest received in cash during the period amounted to £2,396,000 and £nil respectively (six months ended 28 February 2021: £1,369,000 and £nil; year ended 31 August 2021: £5,031,000 and £nil).
No special dividends have been recognised in capital during the period (six months ended 28 February 2021: £nil; year ended 31 August 2021: £nil).
4. INVESTMENT MANAGEMENT FEE
|
|
Six months ended 28 February 2022 (unaudited) |
Six months ended 28 February 2021 (unaudited) |
Year ended 31 August 2021 (audited) |
||||||
|
|
Revenue £000 |
Capital £000 |
Total £000 |
Revenue £000 |
Capital £000 |
Total £000 |
Revenue £000 |
Capital £000 |
Total £000 |
| Investment management fee | 538 | 2,151 | 2,689 | 352 | 1,410 | 1,762 | 831 | 3,325 | 4,156 |
| --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | --------------- | |
| Total income | 538 | 2,151 | 2,689 | 352 | 1,410 | 1,762 | 831 | 3,325 | 4,156 |
| ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | ========= | |
The investment management fee is levied quarterly, based on 0.85% per annum of net asset value on the last day of each month. The investment management fee is allocated 80% to capital reserves and 20% to the revenue reserve. There is no additional fee for company secretarial and administration services.
5. OTHER OPERATING EXPENSES
|
|
Six months ended 28 February 2022 (unaudited) £000 |
Six months ended 28 February 2021 (unaudited) £000 |
Year ended 31 August 2021 (audited) £000 |
| Allocated to revenue: | |||
| Broker fees | 21 | 23 | 48 |
| Custody fees | 35 | 29 | 58 |
| Depositary fees | 37 | 23 | 53 |
| Audit fees | 26 | 25 | 43 |
| Legal fees | 13 | 13 | 26 |
| Registrar’s fees | 41 | 38 | 84 |
| Directors’ emoluments | 66 | 63 | 130 |
| Marketing fees | 48 | 53 | 118 |
| Postage and printing fees | 39 | 19 | 67 |
| AIC fees | 11 | 12 | 21 |
| Professional fees | 6 | 9 | 18 |
| Stock exchange listing fees | 9 | 6 | 129 |
| Write back of prior year expense accruals1 | (116) | – | (73) |
| Other administration costs | 45 | 59 | 65 |
| --------------- | --------------- | --------------- | |
| 281 | 372 | 787 | |
| ========= | ========= | ========= | |
| Allocated to capital: | |||
| Custody transaction costs2 | 12 | 9 | 19 |
| --------------- | --------------- | --------------- | |
| 293 | 381 | 806 | |
| ========= | ========= | ========= |
1 Relates to prior year accrual for printing and postage fees, legal fees, reclaim of VAT and miscellaneous fees being written back during the year.
2 For the six month period ended 28 February 2022, expenses of £12,000 (six months ended 28 February 2021: £9,000; year ended 31 August 2021: £19,000) were charged to the capital column of the Income Statement. These relate to transaction costs charged by the custodian on sale and purchase trades.
The direct transaction costs incurred on the acquisition of investments amounted to £221,000 for the six months ended 28 February 2022 (six months ended 28 February 2021: £63,000; year ended 31 August 2021: £140,000). Costs relating to the disposal of investments amounted to £30,000 for the six months ended 28 February 2022 (six months ended 28 February 2021: £38,000; year ended 31 August 2021: £54,000). All transaction costs have been included within the capital reserves.
6. DIVIDENDS
The Directors have declared an interim dividend of 1.75p per share for the period ended 28 February 2022, payable on 17 June 2022 to shareholders on the register on 20 May 2022. The total cost of the dividend based on 102,300,411 ordinary shares in issue at 10 May 2022 was £1,790,000 (28 February 2021: £1,528,000).
In accordance with FRS 102, Section 32 ‘Events After the End of the Reporting Period’, the interim dividend payable on the ordinary shares has not been included as a liability in the financial statements, as interim dividends are only recognised when they have been paid.
7. EARNINGS AND NET ASSET VALUE PER ORDINARY SHARE
Revenue and capital returns per share and net asset value per share are shown below and have been calculated using the following:
|
|
Six months ended 28 February 2022 (unaudited) |
Six months ended 28 February 2021 (unaudited) |
Year ended 31 August 2021 (audited) |
| Net revenue profit attributable to ordinary shareholders (£000) | 1,367 | 460 | 3,595 |
| Net capital (loss)/profit attributable to ordinary shareholders (£000) | (139,130) | 52,974 | 192,980 |
| --------------- | --------------- | --------------- | |
| Total (loss)/profit attributable to ordinary shareholders (£000) | (137,763) | 53,434 | 196,575 |
| --------------- | --------------- | --------------- | |
| Total shareholders’ funds (£000) | 552,004 | 443,404 | 651,731 |
| ========= | ========= | ========= | |
| Earnings per share | |||
| The weighted average number of ordinary shares in issue during the period, on which the (loss)/earnings per ordinary share was calculated was: | 99,633,726 | 84,431,258 | 87,062,072 |
| The actual number of ordinary shares in issue at the period end, on which the net asset value per ordinary share was calculated was: | 102,300,411 | 85,398,101 | 96,055,411 |
| Calculated on weighted average number of ordinary shares: | |||
| Revenue earnings per share (pence) – basic and diluted | 1.37 | 0.54 | 4.13 |
| Capital (loss)/earnings per share (pence) – basic and diluted | (139.64) | 62.75 | 221.66 |
| --------------- | --------------- | --------------- | |
| Total earnings per share (pence) – basic and diluted | (138.27) | 63.29 | 225.79 |
| ========= | ========= | ========= |
| As at 28 February 2022 (unaudited) |
As at 28 February 2021 (unaudited) |
As at 31 August 2021 (audited) |
|
| Net asset value per share (pence) | 539.59 | 519.22 | 678.49 |
| Ordinary share price (pence) | 538.00 | 526.00 | 692.00 |
| ========= | ========= | ========= |
There were no dilutive securities at 28 February 2022 (28 February 2021: nil; 31 August 2021: nil).
8. CALLED UP SHARE CAPITAL
|
(unaudited) |
Ordinary shares number |
Treasury shares number |
Total shares number |
Nominal value £000 |
| Allotted, called up and fully paid share capital comprised: | ||||
| Ordinary shares of 0.1p each: | ||||
| At 31 August 2021 | 96,055,411 | 17,573,527 | 113,628,938 | 113 |
| Ordinary shares issued | 4,300,000 | – | 4,300,000 | 5 |
| Ordinary shares reissued from treasury | 1,945,000 | (1,945,000) | – | – |
| --------------- | --------------- | --------------- | --------------- | |
| At 28 February 2022 | 102,300,411 | 15,628,527 | 117,928,938 | 118 |
| ========= | ========= | ========= | ========= |
During the six months ended 28 February 2022, 1,945,000 ordinary shares were reissued from treasury (six months ended 28 February 2021: 1,075,000; year ended 31 August 2021: 8,432,310) for a net consideration after expenses, of £12,537,000 (six months ended 28 February 2021: £5,819,000; year ended 31 August 2021: £50,200,000). During the period to 28 February 2022, 4,300,000 new shares were issued (six months ended 28 February 2021: nil; year ended 31 August 2021: 3,300,000) for a net consideration after expenses, of £30,014,000 (six months ended 28 February 2021: £nil; year ended 31 August 2021: £22,262,000). Since the period end and up to the date of this report, no further shares have been reissued from treasury or issued.
During the six months ended 28 February 2022, no shares were repurchased.
9. RESERVES
The share premium account and capital redemption reserve are not distributable reserves under the Companies Act 2006. In accordance with ICAEW Technical Release 02/17BL on Guidance on Realised and Distributable Profits under the Companies Act 2006, the capital reserves may be used as distributable reserves for all purposes and, in particular, the repurchase by the Company of its ordinary shares and for payments as dividends. In accordance with the Company’s Articles of Association, capital reserves and the revenue reserve may be distributed by way of dividend. The capital reserves arising on the revaluation of investments of £137,621,000 (28 February 2021: gain of £153,171,000; 31 August 2021: gain of £288,750,000) is subject to fair value movements and may not be readily realisable at short notice; as such it may not be entirely distributable. The investments are subject to financial risks; as such capital reserves (arising on investments sold) and the revenue reserve may not be entirely distributable if a loss occurred during the realisation of these investments.
10. FINANCIAL RISKS AND VALUATION OF FINANCIAL INSTRUMENTS
The Company’s investment activities expose it to the various types of risk which are associated with the financial instruments and markets in which it invests. The risks are substantially consistent with those disclosed in the previous annual financial statements with the exception of those outlined below.
Market risk arising from price risk
Price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar financial instruments traded in the market. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issue, recessions, or other events could have a significant impact on the Company and the market price of its investments.
The coronavirus outbreak has had a profound impact on all aspects of society in recent years. While there is a growing consensus in developed economies that the worst of the impact is now over, there is an expectation that travel restrictions, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in health care service preparation and delivery, cancellations, supply chain disruptions, and lower consumer demand will create ongoing challenges. While widescale vaccination programmes are now in place in many countries and are having a positive effect, the impact of COVID-19 continues to adversely affect the economies of many nations across the globe and this impact may be greater where vaccination rates are lower, such as in certain emerging markets. Although it is difficult to make timing predictions, it is expected that the economic effects of COVID-19 will continue to be felt for a period after the virus itself has moved from being pandemic to endemic in nature, and this in turn may continue to impact investments held by the Company.
Valuation of financial instruments
Financial assets and financial liabilities are either carried in the Balance Sheet at their fair value (investments) or at an amount which is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers, accruals, cash and cash equivalents and overdrafts). Section 34 of FRS 102 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note on page 78 of the Annual Report and Financial Statements for the year ended 31 August 2021.
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset.
The fair value hierarchy has the following levels:
Level 1 – Quoted market price for identical instruments in active markets
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The Company does not adjust the quoted price for these instruments.
Level 2 – Valuation techniques using observable inputs
This category includes instruments valued using quoted prices for similar instruments in markets that are considered less active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.
Level 3 – Valuation techniques using significant unobservable inputs
This category includes all instruments where the valuation technique includes inputs not based on market data and these inputs could have a significant impact on the instrument’s valuation.
This category also includes instruments that are valued based on quoted prices for similar instruments where significant entity determined adjustments or assumptions are required to reflect differences between the instruments and instruments for which there is no active market. The Investment Manager considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market.
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes ‘observable’ inputs requires significant judgement by the Investment Manager.
Fair values of financial assets and financial liabilities
The table below is the analysis of the Company’s financial instruments measured at fair value at the balance sheet date.
| Financial assets at fair value through profit or loss at 28 February 2022 (unaudited) |
Level 1 £000 |
Level 2 £000 |
Level 3 £000 |
Total £000 |
| Equity investments | 603,006 | – | – | 603,006 |
| ========= | ========= | ========= | ========= |
| Financial assets at fair value through profit or loss at 28 February 2021 (unaudited) |
Level 1 £000 |
Level 2 £000 |
Level 3 £000 |
Total £000 |
| Equity investments | 475,020 | – | – | 475,020 |
| ========= | ========= | ========= | ========= |
| Financial assets at fair value through profit or loss at 31 August 2021 (audited) |
Level 1 £000 |
Level 2 £000 |
Level 3 £000 |
Total £000 |
| Equity investments | 682,774 | – | – | 682,774 |
| ========= | ========= | ========= | ========= |
There were no transfers between levels for financial assets and financial liabilities during the period/year recorded at fair value as at 28 February 2022, 28 February 2021 and 31 August 2021. The Company did not hold any Level 3 securities throughout the six month period ended 28 February 2022 (six month period ended 28 February 2021: nil; year ended 31 August 2021: nil).
11. RELATED PARTY DISCLOSURE
The Board consists of five non-executive Directors, all of whom are considered to be independent by the Board. None of the Directors has a service contract with the Company. The Chairman receives an annual fee of £42,500, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £33,500 and each of the other Directors receives an annual fee of £29,000.
As at 28 February 2022, the following members of the Board held shares in the Company: Eric Sanderson held 4,000 ordinary shares, Peter Baxter held 5,000 ordinary shares and Paola Subacchi held 5,550 ordinary shares.
Since the period end and up to the date of this report there have been no changes in Directors’ holdings.
The transactions with the AIFM and Investment Manager are stated in note 12.
12. TRANSACTIONS WITH THE MANAGER AND THE INVESTMENT MANAGER
BlackRock Fund Managers Limited (BFM) provides management and administration services to the Company under a contract which is terminable on six months’ notice. BFM has (with the Company’s consent) delegated certain portfolio and risk management services, and other ancillary services, to BlackRock Investment Management (UK) Limited (BIM (UK)). Further details of the investment management contract are disclosed in the Directors’ Report on pages 41 and 42 in the Annual Report and Financial Statements for the year ended 31 August 2021.
The investment management fee is levied quarterly, based on 0.85% per annum of net asset value on the last day of each month. The investment management fee due for the six months ended 28 February 2022 amounted to £2,689,000 (six months ended 28 February 2021: £1,762,000; year ended 31 August 2021: £4,156,000). At the period end, £3,992,000 was outstanding in respect of the management fee (28 February 2021: £1,762,000; 31 August 2021: £2,376,000).
In addition to the above services, BIM (UK) provided the Company with marketing services. The total fees paid or payable for these services for the six months ended 28 February 2022 amounted to £48,000 excluding VAT (six months ended 28 February 2021: £53,000; year ended 31 August 2021: £118,000). Marketing fees of £112,000 excluding VAT were outstanding at 28 February 2022 (28 February 2021: £126,000; 31 August 2021: £64,000).
The ultimate holding company of the Manager and the Investment Manager is BlackRock, Inc., a company incorporated in Delaware USA.
13. CONTINGENT LIABILITIES
There were no contingent liabilities at 28 February 2022 (28 February 2021: £nil; 31 August 2021: £nil).
14. PUBLICATION OF NON STATUTORY ACCOUNTS
The financial information contained in this half yearly report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The financial information for the six months ended 28 February 2022 and 28 February 2021 has not been audited.
The information for the year ended 31 August 2021 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the auditor on those accounts contained no qualification or statement under Sections 498 (2) or (3) of the Companies Act 2006.
15. ANNUAL RESULTS
The Board expects to announce the annual results for the year ending 31 August 2022 in early November 2022. Copies of the annual results announcement can be obtained from the Secretary on 020 7743 3000 or cosec@blackrock.com. The Annual Report should be available by November 2022 with the Annual General Meeting being held in December 2022.
12 Throgmorton Avenue
London
EC2N 2DL
10 May 2022
For further information please contact:
Melissa Gallagher, Co-Head, Closed End Funds, BlackRock Investment Management (UK) Limited – 020 7743 3893
Stefan Gries, Fund Manager, BlackRock Investment Management (UK) Limited – 020 7743 3000
Emma Phillips, Media & Communications, BlackRock Investment Management (UK) Limited – Tel: 020 7743 2922
Press enquires:
Ed Hooper, Lansons Communications
Tel: 020 7294 3620
E-mail: BlackRockInvestmentTrusts@lansons.com or EdH@lansons.com
END
The Half Yearly Financial Report will also be available on the BlackRock website at www.blackrock.com/uk/brge. Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.
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