Interim Results

RNS Number : 2001J

JPMorgan Eur Fldglng Inv Trust PLC

28 November 2008

 



STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN EUROPEAN FLEDGELING INVESTMENT TRUST PLC

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 

30TH SEPTEMBER 2008

Chairman's Statement

Performance

Against a background of acute economic uncertainty, global equity markets were extremely volatile in the first six months of the Company's financial year and the environment has not improved post the period end. 

For the six months to 30th September 2008, the Company produced a return on net assets of -20.8%. This compares with the return of -23.7% from the benchmark index, the HSBC Smaller European ompanies (ex UK) Index. Whilst it is disappointing to report such a fall in net asset value, it is a small comfort that the Investment Managers have again outperformed the benchmark index over the first half of the financial year. The return to shareholders over the period was -25.5% as the discount on the Company's shares widened in these difficult markets from 15.8% as at 31st March 2008 to 20.7% as at 30th September 2008, its highest level in several years.

Revenue and Dividend

Revenue return after tax for the six months to 30th September 2008 was £4,439 million, significantly higher than the revenue generated in the corresponding period in 2007 (£450,000). This primarily reflected the higher dividend levels on the more defensive stocks held during this period together with the income on the increased level of cash and liquid assets being held. As at 30th September 2008, approximately 18% of the Company's assets were held in cash.

The Company has a deficit on the revenue reserve, £3.341 million at the end of the period, reflecting the Company's objective to achieve long term capital growth, rather than producing revenue. Accordingly, as in previous periods, no dividend will be payable.

Share Capital

In the six months to 30th September 2008 the Company has continued to use the authority given by shareholders to buy and sell its shares through Treasury. During the period 727,000 shares were repurchased into Treasury at a total cost of £4.9million. A total of 57,000 shares were repurchased and cancelled over the period at a cost of £399,000. Since the end of September, the Company has repurchased a further 407,000 shares into Treasury at a total cost of £1.9million.

VAT

We have reached agreement in principle with our Managers JPMAM (who have been negotiating recovery from HMRC) on the basis of recovery of past VAT and are in the process of documenting this. Our total recovery is expected to be of the order of £2.8 million plus interest.

Outlook

We expect that the exceptionally volatile market conditions of the past year will continue. We therefore anticipate that in the short term our Investment Managers will maintain their cautious stance and not employ gearing. Whilst it is very difficult to put a timeframe on a return to more stable market conditions, we are mindful that the negative economic outlook will become fully reflected in market pricing and that this point may not be far off.

Elisabeth Airey

Chairman    

27 November 2008

Interim Management Report 

The Company is required to make the following disclosures in its half year report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall into five broad categories: investment and strategy; accounting, legal and regulatory; corporate governance and shareholder relations; operational and financial. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 31st March 2008.

Related Parties 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 the performance of the Company during the period.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)    the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half-Yearly Financial Reports'; and

(ii)    the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

Elisabeth Airey

Chairman    

27 November 2008

Investment Managers' Report

Review

While the banking crisis continued in the new financial year, following the successful takeover of Bear Stearns by JPMorgan, there were tentative signs that the markets had started to believe in the 'too big to fail' mantra, where, in the worst case scenario bank equity holders would lose their equity but bond investors and the system at large would be protected. However, the protracted difficulties in the credit markets had an increasingly negative impact on the economy. From the middle of July, the themes which had dominated the last few years, of strong emerging economies buying infrastructure equipment, capital goods and services from the western economies, went into sharp reversal. There was a flight to safety which resulted in strengthening of the usual safe havens such as the US dollar, Swiss Franc and gold, while prices of other commodities fell sharply, easing the central banks' mounting inflationary concerns.

With Lehman Brothers failing in September, confidence in the banking system evaporated. The inter-bank market, along with bank bond issuance which had increasingly been suffering, came to a virtual standstill and depositors began withdrawing their cash from banks perceived to be inadequately financed. 1929 analogies looked frighteningly realistic. Fear of systemic failure was not stemmed until after the period ended, when the G7 countries agreed on a global banking bail out plan which essentially amounted to nationalisation of many banks and the guarantee of virtually all deposits. The negative economic impact resulting from the consumer confidence collapse at the end of the period is something we shall probably live with for some time.

With a flight to safety, in the first six months of the financial year, the blue-chip MSCI Europe (ex UK) Index fell by 15.9 per cent, continuing to outperform the HSBC Smaller European Companies (ex UK) Index which fell by 23.7 per cent. The portfolio net asset value outperformed the small cap index, with a fall of 20.8 per cent.

The sharp change in the global macroeconomic environment from strong growth to sharp deceleration meant that sectors such as construction and capital goods producers, i.e. 'value' stocks, performed very badly whilst companies less dependent on the general economic environment, 'growth' stocks, performed better.

Portfolio

The key active sector exposures within the Company's portfolio were stable over the six months, with software and IT services and support services remaining the largest overweight positions. At the time of writing, we still feel comfortable with our IT weighting as companies in the sector continue to display good operational momentum, while we are disposing of more economically sensitive companies in support services.

In the period we cut the industrial and oil and gas weightings as forward macro economic indicators, such as the price of commodities and freight rates, increasingly pointed to sharp global deceleration. Likewise, prices of agricultural soft commodities fell, resulting in the sale of Vilmorin, the European leader in seeds. During the six months we increased our exposure to defensive stocks in the pharmaceutical sector.

Best performing stocks in the period were French smart card producer Gemalto, Italian rail equipment producer Ansaldo STS and Grifols, a Spanish producer of plasma derivatives. Worst performing stocks included Spanish pharmaceutical producer Laboratorios Almirall, on failure of a phase three drug trial, Dutch oil service company SBM Offshore on cost over-runs, and German capital goods manufacturer GEA as markets feared a slowdown. Net cash at the end of the quarter was 17% of the portfolio.

Jim Campbell

Fancesco Conte 

Investment Managers

27 November 2008

For further information, please contact:

Jonathan Latter

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 6000

Please note that up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can be found at www.jpmeuropeanfledgeling.co.uk.

JPMorgan European Fledgeling Investment Trust plc

Unaudited figures for the six months ended 30th September 2008

Income Statement

	(Unaudited) Six months ended 30th September 2008			(Unaudited) Six months ended 30th September 2007			(Audited) Year ended 31st March 2008
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Losses from investments held at fair value through profit or loss
	—	(86,266)	(86,266)	—	(4,680)	(4,680)	—	(39,175)	(39,175)
Net foreign currency (losses)/gains	—	(377)	(377)	—	376	376	—	2,107	2,107
Income from investments	7,511	—	7,511	4,326	—	4,326	5,890	—	5,890
Other interest receivable and  similar income	256	—	256	118	—	118	259	—	259
Gross revenue and capital losses	7,767	(86,643)	(78,876)	4,444	(4,304)	140	6,149	(37,068)	(30,919)
Management fee	(2,104)	—	(2,104)	(2,795)	—	(2,795)	(4,992)	—	(4,992)
Other administrative expenses
	(297)	—	(297)	(327)	—	(327)	(617)	—	(617)
Net return/(loss) before finance costs and taxation
	5,366	(86,643)	(81,277)	1,322	(4,304)	(2,982)	540	(37,068)	(36,528)
Finance costs	(25)	—	(25)	(374)	—	(374)	(394)	—	(394)
Net return/(loss) before taxation	5,341	(86,643)	(81,302)	948	(4,304)	(3,356)	146	(37,068)	(36,922)
Taxation	(902)	—	(902)	(498)	—	(498)	(522)	—	(522)
Net return/(loss) after taxation	4,439	(86,643)	(82,204)	450	(4,304)	(3,854)	(376)	(37,068)	(37,444)
Return/(loss) per share (note 3)
	9.20p	(179.55)p	(170.35)p	0.88p	(8.42)p	(7.54)p	(0.75)p	(73.57)p	(74.32)p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies. The 'Total' column represents all the information that is required to be disclosed in a 'Statement of Total Recognised Gains and Losses' ('STRGL'). For this reason a STRGL has not been presented.

   JPMorgan European Fledgeling Investment Trust plc

Unaudited figures for the six months ended 30th September 2008

Reconciliation of Movement in Shareholders' Funds

Six months ended 30th September 2008 (unaudited)

	Called up		Capital
	share	Share	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserve	reserve	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
At 31st March 2008	12,837	1,312	2,799	415	384,374	(7,780)	393,957
Repurchase and cancellation of shares	(14)	—	14	—	(399)	—	(399)
Repurchase of shares into Treasury	—	—	—	(4,931)	—	—	(4,931)
Net (loss)/return from ordinary activities	—	—	—	—	(86,643)	4,439	(82,204)
At 30th September 2008	12,823	1,312	2,813	(4,516)	297,332	(3,341)	306,423
Six months ended 30th September 2007 (unaudited)
	Called up		Capital
	share	Share	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserve	reserve	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
At 31st March 2007	13,195	1,312	2,441	19,258	421,442	(7,404)	450,244
Repurchase of shares in Treasury	—	—	—	(3,937)	—	—	(3,937)
Net (loss)/ return from ordinary activities	—	—	—	—	(4,304)	450	(3,854)
At 30th September 2007	13,195	1,312	2,441	15,321	417,138	(6,954)	442,453
Year ended 31st March 2008 (audited)
	Called up		Capital
	share	Share	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserve	reserve	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
At 31st March 2007	13,195	1,312	2,441	19,258	421,442	(7,404)	450,244
Repurchase of shares in Treasury	—	—	—	(18,843)	—	—	(18,843)
Cancellation of shares held in Treasury	(358)	—	358	—	—	—	—
Net loss from ordinary activities	—	—	—	—	(37,068)	(376)	(37,444)
At 31st March 2008	12,837	1,312	2,799	415	384,374	(7,780)	393,957

JPMorgan European Fledgeling Investment Trust plc

Unaudited figures for the six months ended 30^th September 2008

 

Balance Sheet

		(Unaudited)	(Unaudited)	(Audited)
		30th September 2008	30th September 2007	31st March 2008
		£’000	£’000	£’000
Fixed assets
Investments at fair value through  profit or loss
		280,640	465,948	397,331
Current assets
Debtors		8,434	1,938	6,582
Cash and short term deposits		22,329	192	2,456
Derivative financial instrument		—	—	2
		30,763	2,130	9,040
Creditors: amounts falling due within one year
		(4,974)	(25,625)	(12,414)
Derivative financial instrument		(6)	—	—
Net current assets/(liabilities)		25,783	(23,495)	(3,374)
Total assets less current liabilities		306,423	442,453	393,957
Total net assets		306,423	442,453	393,957
Capital and reserves
Called up share capital		12,823	13,195	12,837
Share premium		1,312	1,312	1,312
Capital redemption reserve		2,813	2,441	2,799
Other reserve		(4,516)	15,321	415
Capital reserve		297,332	417,138	384,374
Revenue reserve		(3,341)	(6,954)	(7,780)
Shareholders’ funds		306,423	442,453	393,957
Net asset value per share (note 4):		638.6p	870.0p	807.8p

JPMorgan European Fledgeling Investment Trust plc

Unaudited figures for the six months ended 30th September 2008

Cash Flow Statement

	(Unaudited) Six months ended 30th September 2008 £’000	(Unaudited) Six months ended 30th September 2007 £’000	(Audited) Year ended 31st March 2008 £’000
Net cash inflow /(outflow) from operating activities	4,453	186	(1,083)
Net cash outflow from returns on investments  and servicing of finance
	(25)	(355)	(395)
Tax recovered	31	130	216
Net cash inflow/(outflow) from capital expenditure and financial investment
	21,113	(5,071)	18,952
Net cash (outflow)/inflow from financing	(5,330)	4,435	(17,544)
Increase/(decrease) in cash for the period	20,242	(675)	146
Reconciliation of net cash flow  to movement in net funds/debt Net cash movement
	20,242	(675)	146
Net loans drawn down in the period	—	(5,396)	(99)
Exchange movements	(369)	374	2,104
Movement in net funds/debt in the period	19,873	(5,697)	2,151
Net funds at the beginning of the period	2,456	305	305
Net funds/(debt) at the end of the period	22,329	(5,392)	2,456
Represented by:
Cash at bank and in hand	22,329	192	2,456
Debt falling due within one year	—	(5,584)	—
Net funds/(debt) at the end of the period	22,329	(5,392)	2,456

Notes to the Accounts

 

1.          Financial Statements

The information contained within the financial statements in this preliminary announcement has not been audited or reviewed by the Company’s auditors.

 

The figures and financial information for the year ended 31st March 2008 are extracted from the latest published accounts of the Company and do not constitute statutory accounts (as defined in section 434 (3) of the Companies Act 2006) for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or 237(3) of the Companies Act 1985 (as amended).

2.     Accounting Policies

      The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (‘UK GAAP’) and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies’ dated 31st December 2005.

      All of the Company’s operations are of a continuing nature.

      The accounting policies applied to these half year accounts are consistent with those applied in the accounts for the year ended 31st March 2008.

3.     Return/(loss) per share

	(Unaudited) 30th September 2008 £’000	(Unaudited) Six months ended 30th September 2007 £’000	(Audited) Year ended 31st March 2008 £’000
Return/(loss) per share is based on the following:
Revenue return/(loss)	4,439	450	(376)
Capital loss	(86,643)	(4,304)	(37,068)
Total loss	(82,204)	(3,854)	(37,444)
Weighted average number of shares in issue	48,256,977	51,132,996	50,380,312
Revenue return /(loss) per share	9.20p	0.88p	(0.75)p
Capital loss per share	(179.55)p	(8.42)p	(73.57)p
Total loss per share	(170.35)p	(7.54)p	(74.32)p

 

4.   Net asset value per share

   The net asset value per share is calculated by dividing shareholders' funds by the number of shares in issue at 30th September 2008 of
   51,293,198 (30th September 2007: 50,855,698 and 31st March 2008: 48,770,323) excluding shares held in Treasury.

 

 

 

 

 

END

 

 

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