Interim Management Statement

RNS Number : 6693M

Aurora Investment Trust PLC

17 July 2014

 



AURORA INVESTMENT TRUST plc

INTERIM MANAGEMENT STATEMENT 30 June 2014

Directors:

Lord Flight (chairman)

James Barstow FCA

Richard Martin

Hon James Nelson

Fund Manager

James Barstow of Mars Asset Management Ltd

Year End: 28 February 2014

Dividend: Final only. Latest dividend 3.80p to be paid 29 July 2014

Investment Objective

Capital appreciation through investments mainly listed on the London Stock Exchange

Investment Policy

To invest primarily in equities but with some exposure also to Fixed Interest. The portfolio comprises a mix of large, mid and smaller capitalised stocks.  A distinctive  feature is an emphasis on investments in companies with exposure to economies growing at a faster rate than the UK.

Statistics
Net Asset Value (excl. income)		188.2p
Share price		161.5p
Discount		14.2%

Performance

		Aurora		FTSE All-Share
		%		%
Since 1/3/14		0.0		-1.8
1 year		+4.7		+9.4
5 years		+39.8		+65.7
Since launch		+92.4		+67.0

Top Ten Holdings

Stock	Description	£'000	Portfolio %
BTG	Pharmaceuticals & Biotech	2,593	10.6
Persimmon	Housebuilding	1,781	7.3
Royal Dutch	Oil	1,780	7.3
Gresham Computing	Software	1.444	5.9
Aberdeen Asset Management	Investment	1,361	5.5
Ashtead	Plant Hire	1,312	5.4
Emblaze	Information technology	1,078	4.4
IGas Energy	Oil & Shale gas	939	3.8
Rio Tinto	Mining	932	3.8
BG	Gas	926	3.8
			57.8

Sector Breakdown

As at 30 June 2014

		Aurora
		%
Oil & Gas		16.2
Industrials		13.1
Consumer Goods		16.1
Health Care		10.6
Consumer Services		0.8
Telecom & IT		10.4
Financials		14.8
Resources (mining)		12.2
Fixed Interest		5.8
		100.0

Review of the four months commencing 1 March   2014

During the period the benchmark index declined by 1.8%, whereas the net asset value (excluding income) ended the period with a nil gain to produce out-performance of 1.8%.  Meanwhile the share price declined by 3.0%; in consequence, the discount widened from 11.8% to 14.2%.

The dividend announced by the Board will be 3.8p (3.75p) payable on 29 July, if confirmed by the AGM on 18 July 2014.

Shareholders will be pleased to learn that Mars Asset Management Ltd has recently gained approval from the FSA as an AIFM.

A muted economic recovery continues amongst Developed Markets at a sub-trend rate of growth. The US economy appears to have slowed somewhat in recent months on account of an unusually harsh winter, which severely affected industry in the Northern states, as well as the reduction in the rate of Quantitative Easing.  Employment continues to increase, but corporations still appear extremely reluctant to engage in new capital investment programmes, despite having huge cash piles in many cases.

By contrast, led by the housing industry, which has been greatly aided by government subsidies, the UK economy continues to recover at a surprisingly rapid pace, albeit rather unevenly between sectors and regions.  The latest forecast by the Bank of England is for GDP growth of 2.9% for 2014; if achieved, this will inevitably bring forward the date of the first interest rate rise.  The economy has finally managed to regain its 2008 level.

Europe, meanwhile, continues to fare less well and has suffered a downturn in manufacturing output in recent months, especially in France.  Asia continues to grow apace led by China, which has confounded its critics with a 7.5% rate of growth in Q2.

There were few really noteworthy movements in the portfolio during the period.  Amongst them BTG, by far the portfolio's largest holding, gained a further 5% in anticipation of the US launch of Varithena its recently FDA approved revolutionary painless treatment for varicose veins.

BG rose 13.5%, being viewed as a potential candidate for takeover resulting from the resignation of the CEO.  Royal Dutch appreciated by 9.2%, being favoured as a defensive holding which had finally  brought its capital expenditure programme back under control. Aberdeen Asset Management rose by 16% as sentiment towards stocks with Emerging Market exposure regained favour, partly resulting from Mr Modi's victory in the recent Indian elections.

Amongst the stocks which fell: Persimmon -12%, but much of that was due to the payment of a large special dividend, and Rio Tinto -9.5%, in view of a pessimistic outlook for commodity prices, especially iron ore.

OUTLOOK

Insufficient change has taken place in the four month period to encourage any significant alterations to the portfolio.  The rate of recovery has slowed in the US, but accelerated in the UK and virtually stalled in Europe. There the fragility of the banking sector is being exposed once more, as is the growing threat of deflation amongst the peripheral nations. M. Draghi is aware of these problems and is making statements to suggest that the ECB will take further action to counter them. Should this occur, the outcome is likely to prove positive for equity markets, whereas some sovereign bonds appear wildly overpriced relative to their US Treasury peers.

There is little alternative for many investors seeking income other than equities while bond yields and interest rates remain at current prevailing low levels.  The manager is hopeful that unless the political problems in the Ukraine and Iraq/Syria come to a head investors will gradually gain in confidence to give greater emphasis than in recent months to the regions such as Asia which enjoy relatively stronger growth prospects than Europe over time as well as to growth oriented companies in general.  Any such re-rating would provide a substantial boost to the portfolio.

 

END

 

 

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