Results analysis from Kepler Trust Intelligence

RNS Number : 9877H

JPMorgan European Grwth & Inc PLC

29 November 2022

 

JPMorgan European Growth & Income (JEGI)

29/11/2022

Results analysis from Kepler Trust Intelligence

For the six months to 30/09/2022 JPMorgan European Growth & Income produced a NAV total return of -9.4% (debt at par value) and -7.7% (debt at fair value). The share price total return was -9.7%. This is in comparison to the benchmark, which produced a total return of -10.5%. The Morningstar Europe investment trust peer group recorded share price and NAV total returns of -16.3% and -7.9% respectively, with debt at fair value. This is the first six-month reporting period under JEGI's new simplified structure, where there is a single share class invested into one equity portfolio and with one dividend policy.

The newly simplified structure was designed to provide shareholders with a dividend based on 4% of the preceding year NAV payable in July, October, January and March. The company has paid the first interim dividend of 1 pence per share and declared the second interim dividend of 1 pence per share. Between the end of this six-month reporting period and the release of this report, the board declared a third interim dividend of 1 pence per share. The board is expecting to declare the fourth interim dividend in February 2023.

Chair Rita Dhut said: "your Board has confidence that our fund managers have the requisite experience to navigate such a tricky environment by continuing to stick to a proven investment process. The new structure and objective of the Company is now clear and provides a good basis for shareholders to maintain a core long-term holding in European equities whilst providing an enhanced income. Together that provides some assurance to shareholders in these uncertain times."

Kepler View

It is obviously only early days for JPMorgan European Growth & Income (JEGI's) new simplified structure, and no one would have wished for the backdrop that accompanied this first reporting period. Nevertheless, it is encouraging that stock selection has added value against the benchmark even in the midst of a very difficult equity market. The new structure frees the management team to concentrate on stock selection without having to worry about the timing of underlying dividends, and this has paid off in the first six months.

The new dividend policy mirrors one adopted by several other investment trusts including some of the JPMorgan Asset Management range. Since the dividend is set as 4% of the preceding financial year end's NAV per share, it is very easy for investors to see what the quarterly dividends for the following year will be. It is worth just noting though that although the current year dividend total of 4 pence per share would imply, based on the current share price, a yield of 4.6%, the dividend level will be reset once again to 4% of NAV measured at 31/03/2023 and so investors should be aware that the dividend rises and falls with the NAV.

JEGI's current discount is slightly wider than the average for the peer group and in our view could improve as more investors become aware of its robust performance and newly-simplified structure and dividend policy. After a very difficult year for equities generally, we would expect the market to favour low valuations and more robust growth companies. JEGI's defensive positioning means it is very well set to benefit from such a scenario.

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