Interim Management Statement

RNS Number : 8479X

Aurora Investment Trust PLC

16 January 2014

 



AURORA INVESTMENT TRUST plc

INTERIM MANAGEMENT STATEMENT 31 December 2013

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 3.75p, paid 26 July 2013

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)		188.20p
Share Price		167.25p
Discount		11.1%

Performance

		Aurora		FTSE All-Share
		%		%
Since 1/9/13		+6.1		+5.8
Since 1/3/13		+3.1		+7.7
1 year		+6.0		+16.7
5 years		+55.8		+63.3
Since launch		+92.4		+67.4

Top Ten Holdings as at 31 December 2013 (consolidated portfolio)

Stock	Description	£'000	% portfolio
BTG	Pharmaceuticals & Biotechnology	2.924	12.1
Royal Dutch	Oil	1,595	6.6
Gresham Computing	Software	1,353	5.6
Aberdeen Asset Management	Investment	1,237	5.1
Emblaze	Information technology	1,176	4.9
Asian Citrus	Food	1,040	4.3
Rio Tinto	Mining	1,022	4.2
West China Cement	Construction	1,021	4.2
Persimmon	Housebuilding	991	4.1
BG	Gas	973	4.0
Total Top Ten		13,332	55.1

Sector Breakdown

As at 31 December 2013

Sector		AURORA
		%
Financials		16.1
Oil & Gas		15.2
Industrials		14.1
Consumer Goods		12.8
Health Care		12.8
Resources (mining)		12.8
Consumer Services, Telecoms, Information Tech.		10.5
Fixed Interest		5.7
Total		100.0

Review of the four months beginning 1 September 2013

During the period the benchmark index rose by 5.8%, the net asset value (excluding income) by 6.1% and the share price gained 19.4%. In consequence, the discount from the NAV excluding income narrowed from 21.1% to 11.1%.

Economic statistics emanating from the US continued to show evidence of the recovery gaining pace, albeit rather uneven.  Employment growth was slower than anticipated on account of the reluctance by corporations to incur new capital expenditure. Against this background, Wall Street rose but worries over the inevitable need for tapering of Quantitative Easing remained to the fore. In Europe, Germany made further progress whereas Italy and France continued to remain weak.  The recovery in the UK economy gathered pace, raising investor confidence.

The outstanding performance in the portfolio was from BTG, the largest holding; it rose by no less than 49% after gaining approval from the FDA for its revolutionary new and painless treatment for varicose veins, which will be launched in the US in Q1 2014.  Pure Circle showed a gain of 67% on rising hopes of a major deal with Coca Cola for its products (natural sweetener with zero calories). Other strong performers were Gresham Computing +14%, and Rio Tinto +17 %.

Notable weak performances were made by the large holding in Asian Citrus -34% and West China Cement -11% as worries over a slowdown in China and a possible shadow banking crisis prevailed.

Outlook

The authorities in the US are confident that the economy is sufficiently robust to allow tapering of their stimulus to become reality.  Indicators for housing, employment and general consumer confidence continue to suggest that GDP growth will strengthen in 2014 despite this withdrawal of liquidity.

Tentative signs of growth in the Eurozone towards the end of 2013 may be no more than a temporary blip as the main economies become more stable. A return to anything approaching normal conditions still appears to be a long way off with unemployment attaining record levels; meanwhile the German authorities continue to advocate austerity measures to cure historic imbalances.

In the UK, momentum is building with business investment picking up.  Recent statistics on inflation and unemployment should result in monetary conditions remaining loose until greater evidence appears that GDP growth is more sustainable.

The manager is confident that performance has turned, with an improved outcome in the second half of 2013 likely to continue this year as risk aversion by investors diminishes.

Within the portfolio there are many reasons for optimism.  BTG has already undergone a rerating but this share looks as if it has further to rise.  Emblaze has come back from suspension with an instant uplift in share price but which is still a sizeable discount to cash per share; it has additional huge upside potential if the company were to be successful in its forthcoming court case against Apple for unpaid royalties.  Persimmon remains a strong beneficiary of the buoyant UK housing market and Ashtead is experiencing very good demand in the US.  More recently IGas is being rerated as Total has made an important move into the UK shale gas industry. Lastly, in China, notwithstanding fears over the shadow banking system, valuations of Asian Citrus and West China Cement look increasingly attractive to corporate activity.

 

END

 

 

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