Half Yearly Report

RNS Number : 1095O

Jupiter European Opps. Trust PLC

04 February 2016

 

Jupiter European Opportunities Trust PLC

Half Yearly Financial Report for the six months to 30 November 2015 (unaudited)

Financial Highlights

Capital Performance

	30 November 2015	31 May 2015	% Change
Total assets less current liabilities (£'000)	612,301	558,389	+9.7

Ordinary Share Performance

	30 November 2015	31 May 2015	% Change
Net Asset Value (pence)	563.03	546.27	+3.1*
Mid Market Price (pence)	585.00	551.00	+6.2
FTSE World Europe ex-UK Total return Index**	966.61	1,014.49	-4.7
Premium to Net Asset Value (%)	3.9	0.9

*  Ongoing Charges figure for the period was 1.06% (31.05.15: 1.20% restated based on average NAV).

** This document contains information based on the FTSE World Europe ex UK Total Return Index. 'FTSE®' is a trade mark jointly owned by the London Stock Exchange Plc and The Financial Times Limited and is used by FTSE International Limited ('FTSE') under licence. The FTSE World Europe ex UK Total Return Index is calculated by FTSE. FTSE does not sponsor, endorse or promote the product referred to in this document and is not in any way connected to it and does not accept any liability in relation to its issue, operation and trading. All copyright and database rights in the index values and constituent list vest in FTSE.

Performance since launch

			Year-
			on-year
		Net Asset	change in	Year-
	Total Assets	Value	Net Asset	on-year
	less	per	Value per	change in
	Current	Ordinary	Ordinary	Benchmark
	Liabilities	Share	Share	Index
Year ended 31 May	£'000	p	%	%
20 November 2000 (launch)	93,969	94.66	-	-
2001	83,600	89.29	-5.7	-8.0
2002	91,028	91.12	+2.0	-10.7
2003	84,592	83.82	-8.0	-19.0
2004	97,915	109.25	+30.3	+15.7
2005 (restated)***	117,679	133.54	+22.2	+19.3
2006	154,927	167.47	+25.4	+26.2
2007	182,278	224.58	+34.1	+30.0
2008	188,519	230.56	+2.7	-0.1
2009	131,457	162.35	-29.6	-25.3
2010	185,504	232.40	+43.1	+14.4
2011	252,813	316.73	+36.3	+24.2
2012	231,584	291.05	-8.1	-24.2
2013	340,801	403.58	+38.7	+43.3
2014	409,191	451.26	+11.8	+13.4
2015	558,389	546.27	+21.1	+4.7
30 November 2015	612,301	563.03	+3.1	-4.7

***Prior to 2005, financial information was prepared under UK GAAP. From 2006 all information is prepared under IFRS.

Chairman's Statement

Over the six months to 30 November 2015 the net asset value per share of your Company rose by 3.1 per cent. from 546.27p to 563.03p. With dividends added back, the total return was 3.8 per cent. This performance was usefully ahead of its benchmark, the FTSE Europe ex-UK Total Return Index, which actually declined by 4.7 per cent. over the same period. Meanwhile the market price of your Company's shares on the London Stock Exchange rose by 6.2 per cent. over the same period.

The background to your Company's continued outperformance is considered by our portfolio manager, Alexander Darwall, in his Investment Adviser's report overleaf and I will not seek to cover the same ground here. Nevertheless, it is pertinent to note that, whilst trading conditions over the six months to 30 November 2015 were somewhat less favourable for investors in European equities than in the same period in the previous year, your Company achieved a positive return, both in absolute terms and against its benchmark.

Growing Your Company

It is encouraging that there is continued buying interest in the Company's shares on the London Stock Exchange. Over the six months under review a total of 6,532,650 new shares were issued at a premium to their Net Asset Value under our existing block-listing authority, raising a total of £34,894,740 for your Company and achieving an uplift in net assets of £558,339 for existing Shareholders through the premium price at which they were issued. The premium to NAV at which new shares were issued varied from 0.5 per cent. to 5.5 per cent.

Gearing

One of the great advantages of our investment trust structure is that we can take advantage of lower share prices by gearing the Company's investment portfolio with relatively low cost bank debt. At the end of the period the gearing level on the Company's investment portfolio remained low at 9.0 per cent. The portfolio manager has historically tended to increase gearing at times of perceived low valuations, whilst decreasing gearing in stronger markets. This approach has added sustained value over the course of your Company's history and we continue to encourage the portfolio manager to consider the use of gearing as a tactical tool to improve returns.

Board Composition

Alexander Darwall, who has served as a non-executive director of your Company since launch in November 2000, retired from the board on 4 February 2016. Alexander will nevertheless continue to serve as your Company's portfolio manager on behalf of Jupiter Asset Management Limited for the foreseeable future. I would like to thank Alexander for his contribution to the board over the past fifteen years and I look forward to our continued working relationship with him in his capacity as your Company's portfolio manager.

Outlook

Markets have fallen sharply in the opening weeks of 2016. Nevertheless, patient investors have hitherto been rewarded for backing your Company's investment strategy in both bull and bear markets. The portfolio manager's investment style remains unchanged and he will continue to seek businesses with unique products or services and a proven record of profitability for the Company's investment portfolio irrespective of the wider market environment.

I would like to take this opportunity to congratulate Alexander Darwall on his consistent ability to achieve above average returns for your Company in difficult equity markets

Hugh Priestley

Chairman

4 February 2016

Investment Adviser's Review

The total return on the Net Asset Value of the Company's Ordinary shares (with dividends added back) was 3.8 per cent. over the six months to 30 November 2015. This compares with a 4.7 per cent. decline, Sterling adjusted, of the FTSE World Europe ex UK Total Return Index, your Company's benchmark. The Company's total borrowings rose slightly during the period under review to £59.6m at 30 November, representing gearing of 9.0 per cent.

The FTSE World Index (Total Return) was down by 3.2 per cent., sterling adjusted, a better performance than Europe largely because America's S&P 500 Index was up 1.4 per cent. Other markets fared less well. The MSCI Latin America Index was 21.0 per cent. lower; the MSCI AC Asia ex-Japan Index was down by 15.2 per cent.; and the Japanese Nikkei-225 retreated by 0.9 per cent.

Salient features of the market backdrop included the sharply lower oil price (Brent crude was 29.8 per cent. lower in sterling at the period end compared with six months earlier); a lower growth rate in China; continuing 'cheap money' (Quantitative Easing (QE)) in Europe; and recessions in Brazil and Russia. The favourable factors (lower energy costs should be taken as positive) failed to translate into macro progress. The European Central Bank's (ECB) main refinancing rate remained at the extraordinarily low figure of 0.05 per cent. Nevertheless, corporate lending growth remained subdued. Growth in Europe remains disappointing, even if corporate earnings advanced. The IMF's latest forecasts (October 2015) are for 1.9 per cent. growth in the EU in both 2015 and 2016; they forecast 3.1 per cent. and 3.6 per cent. world growth in 2015 and 2016 respectively. Europe's poor performance comes despite the tremendous boost from lower oil prices (though this is distorted by Europe's high cost energy policy), and QE. Maybe the politicians will recognise that Europe suffers from supply side constraints, including rigid, high price labour markets. Fixing these problems requires political will: QE is much easier to implement.

The modest outperformance of your Company's assets is partly due to the sector exposures: underweight in the financial and oil and gas sectors, which underperformed; overweight in consumer sectors which outperformed. The macro data show stronger growth in consumer spending (for example airline travel) whereas capital expenditure in Europe remains lacklustre. The two biggest contributors to positive performance were Provident Financial and Grenkeleasing. Both are financial companies; both have produced excellent results just as the mainstream banks have disappointed. Royal Caribbean and Marine Harvest shares performed well. The former is benefitting from good demand for cruising which has led to better prices. The new and important factor is the new demand for cruising emanating in China. Marine Harvest, the world's largest salmon farmer, has enjoyed significantly higher prices as demand for salmon continues to increase. Of the other holdings we note the continuing good performance of Ryanair. Like all the airlines, Ryanair has benefitted from lower oil prices. Newer, more efficient aeroplanes and lower fuel prices have stimulated considerable new demand for air travel. The biggest single negative contributor was Syngenta following the rejection of a takeover approach from their rival, Monsanto; the CEO has since resigned; demand for their key products in crop protection is 'soft'; and the strategy is being reviewed. Yet we retain this holding as the company should be able to monetise its good quality assets in due course. Amadeus was another significant under-performer. Although results have been satisfactory there is a potential threat to their business from customers trying to reduce fees. We will retain this holding until and unless these threats materialise. Other poor performers include Leonteq and DNB. These two companies, like the best two performers, are financials companies. The differing outcomes within the same sector illustrates the point that specific company fundamentals are more important than general or thematic investment. Leonteq is a young company providing structured products to banks and insurance companies. The share price has wobbled as the growth rate has moderated. However, we believe that the company has strong attributes and we retain this holding. DNB, the leading Norwegian bank, is affected to a certain extent by the lower price of oil and by changes in regulations. These developments have highlighted the shortcomings in the investment case.

There were few new positions and none of any great weight. The largest new investment was that of WorldPay constituting 1.3 per cent. of the portfolio at the period end. WorldPay is a leader in online and offline payments processing. We followed its progress for a time before its listing in October 2015. Elsewhere we have added to many existing holdings. Of particular note was the substantial addition to the holding in Grifols, the Spanish leader in the fractionation of blood plasma. A favourable industry structure combined with new product developments make this an attractive investment. There were two other smaller new investments worthy of mention, ARM and Carnival. The former is a leading global company in the design of microchips. It is well placed to strengthen its position as the number of 'connected' devices increases. Carnival is the world's biggest cruise company and, like Royal Caribbean, likely to benefit from the growing demand for cruising not on the part of Chinese holidaymakers.

Outlook

There are few companies that are not assailed by the challenges posed by changes in technology, regulations and consumer behaviour. Whilst many companies will struggle to meet these challenges, some will adapt successfully and be strengthened in their responses: for the winners the opportunities are greater than ever. We seek to identify patterns of success which can be found in many different businesses. Thus we seek to identify and invest in a wide range of businesses which enjoy pricing power and growth drivers; produce strong products and services; and where the competitive landscape is favourable. For these winning business models the outlook is fair.

Alexander Darwall

Fund Manager

Jupiter Asset Management Limited

Investment Adviser

4 February 2016

Investment Portfolio as at 30 November 2015

		30 November 2015		31 May 2015
		Market	Percentage	Market	Percentage
		value	of	value	of
Company	Country of Listing	£'000	portfolio	£'000	portfolio
Provident Financial	UK	58,277	8.6	47,839	8.0
Novo Nordisk	Denmark	48,247	7.1	47,334	7.9
Wirecard	Germany	47,933	7.1	40,075	6.7
Reed Elsevier	Netherlands	46,289	6.8	35,104	5.8
Inmarsat	UK	45,030	6.7	33,140	5.5
Syngenta	Switzerland	43,485	6.4	42,387	7.1
Novozymes	Denmark	42,516	6.3	31,463	5.2
Fresenius	Germany	33,786	5.0	28,830	4.8
Grenkeleasing	Germany	29,452	4.3	17,476	2.9
Experian	UK	28,610	4.2	28,524	4.7
Amadeus	Spain	26,206	3.9	24,787	4.1
Deutsche Börse	Germany	23,905	3.5	14,144	2.4
Leonteq	Switzerland	23,829	3.5	27,974	4.7
Ingenico	France	21,632	3.2	20,842	3.5
Coloplast	Denmark	19,704	2.9	16,272	2.7
Grifols	Spain	16,861	2.5	4,601	0.8
Ryanair	Ireland	15,526	2.3	10,807	1.8
Luxottica Group	Italy	14,158	2.1	11,841	2.0
Royal Caribbean Cruises	Liberia	12,268	1.8	2,489	0.4
Marine Harvest	Norway	11,023	1.6	5,725	0.9
DnB NOR	Norway	10,040	1.5	13,163	2.2
Worldpay Group	UK	8,707	1.3	-	-
Saga	UK	8,643	1.3	6,806	1.1
Dassault Systemes	France	8,188	1.2	4,090	0.7
Intrum Justitia	Sweden	5,123	0.8	4,492	0.7
Elementis	UK	4,826	0.7	3,667	0.6
ARM	UK	4,492	0.7	-	-
Carnival	UK	4,328	0.6	-	-
UPM-Kymmene	Finland	4,125	0.6	4,983	0.8
KWS Saat	Germany	3,390	0.5	2,889	0.5
Bayer	Germany	2,663	0.4	1,856	0.3
Gemalto	Netherlands	1,466	0.2	-	-
Ossur	Denmark	1,431	0.2	1,614	0.3
Hexagon	Sweden	969	0.1	7,560	1.3
Autoliv	Sweden	417	0.1	-	-
Total		677,545	100.0

Cross Holdings in other Investment Companies

As at 30 November 2015 and 31 May 2015, none of the Company's assets were invested in the securities of other listed closed-ended investment funds. It is the Company's stated policy that it will not invest in other listed closed-ended investment funds.

Interim Management Report

Related Party Transactions

During the first six months of the current financial year no transactions with related parties have taken place which have materially affected the financial position or performance of the Company. Details of related party transactions are contained in the Annual Report and Accounts of the Company for the year ended 31 May 2015.

Principal Risks and Uncertainties

The Company is exposed to the effect of variations in the price of its investments. A fall in the value of its portfolio will have an adverse effect on Shareholders' funds. It is not the aim of the Board to eliminate entirely the risk of capital loss, rather it is its aim to seek capital growth. Other key risks faced by the Company relate to foreign currency movements, interest rates, liquidity risk, gearing risk, the discount to Net Asset Value, regulatory risk, loss of key personnel, operational and financial risks. A detailed explanation of the Risks and Uncertainties facing the Company can be found in the Annual Report and Accounts for the year ended 31 May 2015.

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 for the foreseeable future. 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. Thus the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Directors' Responsibility Statement

We, the Directors of Jupiter 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 of the Company for the period ended 30 November 2015;

(b) The Chairman's Statement, the Investment Adviser's Review and the Interim Management Report include a fair review of the information required by Disclosure and Transparency Rule 4.2.7R; and

(c) The Interim Management Report includes a fair review of the information required by Disclosure 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

H M Priestley

Chairman

4 February 2016

Statement of Comprehensive Income

For the six months to 30 November 2015 (unaudited)

	30 November 2015			30 November 2014
Revenue		Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gain on investments at fair
value through profit or loss	-	30,701	30,701	-	20,696	20,696
Foreign exchange gain on loan	-	1,218	1,218	-	902	902
Currency exchange (loss)/gain	-	(108)	(108)	-	4	4
Investment income	3,161	-	3,161	2,171	-	2,171
Total income	3,161	31,811	34,972	2,171	21,602	23,773
Investment management fee	(2,455)	-	(2,455)	(1,939)	-	(1,939)
Performance fee	-	(8,806)	(8,806)	-	(3,303)	(3,303)
Other expenses	(327)	-	(327)	(303)	-	(303)
Total expenses	(2,782)	(8,806)	(11,588)	(2,242)	(3,303)	(5,545)
Return before finance costs
and tax	(379)	23,005	23,384	(71)	18,299	18,228
Finance costs	(286)	-	(286)	(262)	-	(262)
Return before taxation	93	23,005	23,098	(333)	18,299	17,966
Taxation	(198)	-	(198)	(125)	-	(125)
Return after taxation	(291)	23,005	23,296	(458)	18,299	17,841
Return per Ordinary share	0.27p	21.57p	21.84p	(0.50)p	20.07p	19.57p

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.

The financial information does not constitute 'accounts' as defined in section 434 of the Companies Act 2006.

Statement of Financial Position

As at 30 November 2015

	30 November	31 May
	2015	2015
	(unaudited)	(audited)
	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	677,545	600,852
Current assets
Receivables	1,606	3,103
Cash at bank	7,736	5,669
	9,342	8,772
Total assets	686,887	609,624
Current liabilities	(74,586)	(51,235)
Total net assets less current liabilities	612,301	558,389
Capital and reserves
Called up share capital	1,088	1,022
Share premium	177,671	142,988
Special reserve	33,687	33,687
Capital redemption reserve	45	45
Retained earnings	399,810	380,647
Total equity	612,301	558,389
Net Asset Value per Ordinary share	563.03p	546.27p

Statement of Changes in Equity

For the six months to 30 November 2015

				Capital
	Share	Share	Special	Redemption	Retained
For the six months to	Capital	Premium	Reserve	Reserve	Earnings	Total
30 November 2015	£'000	£'000	£'000	£'000	£'000	£'000
1 June 2015	1,022	142,988	33,687	45	380,647	558,389
Net gain for the period	-	-	-	-	23,296	23,296
Ordinary shares issue	66	34,683	-	-	-	34,749
Dividends declared and paid *	-	-	-	-	(4,133)	(4,133)
Balance at 30 November 2015	1,088	177,671	33,687	45	399,810	612,301
				Capital
	Share	Share	Special	Redemption	Retained
For the six months to	Capital	Premium	Reserve	Reserve	Earnings	Total
30 November 2014	£'000	£'000	£'000	£'000	£'000	£'000
1 June 2014	907	85,486	33,687	45	289,066	409,191
Net gain for the period	-	-	-	-	17,841	17,841
Ordinary shares issue	24	10,199	-	-	-	10,223
Dividends declared and paid *	-	-	-	-	(3,175)	(3,175)
Balance at 30 November 2014	931	95,685	33,687	45	303,732	434,080

* Dividends paid during the period were paid out of revenue reserves.

Cash Flow Statement

For the six months to 30 November 2015 (unaudited)

	2015	2014
	£'000	£'000
Cash flows from operating activities
Purchases of investments	(98,961)	(50,062)
Sales of investments	51,126	35,411
Realised (losses)/gains on foreign currency	(108)	4
Performance fee paid	(12,609)	-
Investment income received	4,633	3,597
Interest paid	-	(16)
Investment management fee paid	(2,317)	(1,877)
Other cash expenses	(307)	(369)
Dividend paid	-	(3,175)
Cash outflow from operating activities
before finance costs and taxation	(57,543)	(16,487)
Finance costs paid	(218)	(258)
Taxation paid	232	(41)
Net cash outflow from operating activities	(57,529)	(16,786)
Financing activities
Ordinary shares issued	34,749	11,141
Short-term loans received	38,347	12,000
Short-term loans paid	(13,500)	(6,273)
Increase in cash	2,067	(82)
Cash and cash equivalents at start of period	5,669	5,056
Cash and cash equivalents at end of period	7,736	5,138

Notes to the Financial Statements

1.   Accounting Policies

The accounts comprise the unaudited financial results of the Company for the six month period from 1 June 2015 to 30 November 2015. The accounts are presented in pounds sterling, as this is the functional currency of the Company.

The accounts have been prepared in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB) and International Accounting Standards Committee (IASC), as adopted by the European Union (EU).

Where presentational guidance set out in the Statement of Recommended Practice (SORP) for investment trusts issued by the Association of Investment Companies (AIC) in January 2009 and replaced in November 2014 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.

The Company continues to adopt the going concern basis in the preparation of the financial statements.

2.  Gains on investments

	Six months to	Six months to
	30 November 2015	30 November 2014
	£'000	£'000
Net gain realised on sale of investments	19,196	13,018
Movement in investment holding gains	11,505	7,678
Gains on investments	30,701	20,696

3.   Return per Ordinary share

The earnings per Ordinary share figure is based on the net profit for the six months of £23,296,000 (six months to 30 November 2014: profit £17,841,000) and on 106,657,219 (six months to 30 November 2014: 91,183,487) Ordinary shares, being the weighted average number of Ordinary shares in issue during the period.

The return per Ordinary share figure detailed above can be further analysed between revenue and capital, as below.

	Six months to	Six months to
	30 November 2015	30 November 2014
	£'000	£'000
Net revenue (profit)/loss	291	(458)
Net capital profit	23,005	18,299
Net total profit	23,296	17,841
Weighted average number of Ordinary
shares in issue during the period	106,657,219	91,183,487
Revenue earnings per Ordinary share	0.27p	(0.50)p
Capital return per Ordinary share	21.57p	20.07p
Total return per Ordinary share	21.84p	19.57p

4.   Net Asset Value per Ordinary share

The Net Asset Value per Ordinary share is based on the net assets attributable to the Ordinary shareholders of £612,301,000 (31 May 2015: £558,389,000) and on 108,750,331 (31 May 2015: 102,217,681) Ordinary shares, being the number of Ordinary shares in issue at the period end.

5.   Related Parties

Alexander Darwall, the fund manager is an employee of the Investment Adviser, Jupiter Asset Management Limited ('JAM'), a company within the same group as the Alternative Investment Fund Manager, Jupiter Unit Trust Managers Limited ('JUTM').

Jupiter Unit Trust Managers Limited is contracted to provide investment management services to the Company (subject to termination by not less than twelve months notice by either party) for an annual fee of 0.75% of total assets less current liabilities of the Company excluding the value of any Jupiter managed investments payable quarterly in arrears.

The Management fee paid to Jupiter Unit Trust Managers Limited (JUTM) for the period 1 June 2015 to 30 November 2015 was £1,178,148. Management fee of £1,276,415 was outstanding as at 30 November 2015.

Jupiter Unit Trust Managers Limited is also entitled to an investment performance fee which is based on the out-performance of the Net Asset Value per Ordinary share over the total return on the Benchmark Index, the FTSE World Europe ex-UK total return index in an accounting period. Any performance fee payable will equal 15 per cent. of the amount by which the increase in the Net Asset Value per Ordinary share (plus any dividends per Ordinary share paid or payable and any accrual for unpaid performance fees for the period) exceeds the higher of (a) the Net Asset Value per Ordinary share on the last business day of the previous accounting period; (b) the Net Asset Value per Ordinary share on the last day of a period in respect of which a performance fee was last paid; and (c) 100p. In each case the values of (a), (b) and (c) are increased by the percentage by which the total return of the Benchmark Index increases or decreases during the calculation period. The total amount of any performance fee payable in respect of one accounting period is limited to 4.99 per cent. of the Total Assets of the Company.

A copy of the Half-Yearly Financial Report will shortly be available for download from the Company's website www.jupiteram.com/JEO

For further information, please contact:

Richard Pavry

Head of Investment Trusts

Jupiter Asset Management Limited, Company Secretary

[e-mail]

020 3817 1496

4 February 2016

 

END

 

 

IR UGUUWPUPQGPC