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TR European Growth (TRG)

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Wednesday 28 September, 2011

TR European Growth

Final Results

RNS Number : 1365P
TR European Growth Trust PLC
28 September 2011
 



 Page 1

28 September 2011

 

This announcement contains regulated information

 

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

KEY POINTS

•           Net asset value total return per ordinary share of 36.8%

•           Share price total return of 24.6%

•           Proposed final and special dividends of 3.60p and 0.65p per ordinary share, respectively

 

 

MANAGEMENT REPORT

 

CHAIRMAN'S STATEMENT

 

Over the year to 30 June 2011, our net asset value total return per share was 36.8% and our share price total return was 24.6% as the discount widened. This compared to a total return of 34.4% for our benchmark.

 

Revenue and dividends

Net earnings per share were 3.79p, a fall of 12.1%. This decrease was mainly due to a lower level of investment income.

 

We are proposing, subject to shareholder approval at our Annual General Meeting on 7 November 2011, a final dividend per ordinary share of 3.60p, an increase of 5.9% over last year's final dividend of 3.40p. We are also proposing a special dividend of 0.65p per ordinary share, making a total dividend of 4.25p per ordinary share.

 

Share buy-backs

During the year, we bought back 993,060 shares for cancellation at a cost of £3.8m. The shares were all bought back at a discount to the prevailing NAV per share, thereby enhancing the NAV per ordinary share for the remaining shareholders.

 

Change of fund manager

After over 20 years as the Manager of TREG, Stephen Peak has decided to step down in order to focus on his other, recently increased responsibilities as head of Henderson's Pan-European Equities Investment Team. The Board would like to thank Stephen for his contribution to the Company's success since its launch in September 1990.

 

Ollie Beckett has been appointed as the new Manager. Ollie has 15 years of investment experience in Continental European equity markets and has been a specialist in European smaller companies for over five years. He has been a member of the TREG team since 2010. The Board has been impressed with Ollie's performance track record as the manager of the Henderson Horizon Pan-European Smaller Companies Fund and with the contribution that he has already made in relation to the management of the TREG portfolio.

 

 

 

 

 

 

 

Page 2

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

CHAIRMAN'S STATEMENT (continued)

 

The Board

We would like to welcome Alexander Mettenheimer to the Board. Alexander joined the Board on 1 July 2011. He brings with him a wealth of experience from the German banking sector and will surely provide some useful insight into developments on the ground.

 

Bernard Clark, who joined the Board in 2003, will be retiring at the conclusion of the Annual General Meeting in November 2011.  The Board would like to thank Bernard for his enthusiastic contribution over the last eight years and wish him well in the future.

 

Outlook

Markets have recently been registering substantial declines as confidence in a sustained economic recovery from western economies has ebbed away. The combination of both individuals and governments struggling with too high a debt burden and a banking system still unwilling to confront the ultimate fragility of its financial health have made investors increasingly risk averse and prone to sell any assets perceived to have an element of risk.

 

It is important to note the difference between now and 2008. In general, the corporate sector is in much better health, with robust balance sheets and satisfactory levels of cash generation. This should be a relatively benign environment for a number of European smaller companies, as long as they are in the right niches and in a healthy financial state as interest rates are likely to remain very low for an extended period of time.

 

Markets are likely to remain volatile for the foreseeable future and subject to sudden changes in sentiment but it is this sort of environment that should present our Manager with opportunities to add some new holdings to the portfolio at attractive prices and I look forward to reporting on our progress in our interim report.

 

Audley Twiston-Davies

Chairman



Page 3

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

MANAGER'S REPORT

 

European stock market performance

The first half of the year saw healthy returns from equity markets. There was a belief that the economies were continuing to improve, even if it was at a fairly muted rate. The improvement was largely being driven by emerging market growth.

 

However, by our year end, equity markets had refocused their attentions on the fact that there was little growth in the western world. There was also greater attention that Europe had solved none of the fundamental issues of the sovereign debt crisis and nor did they have a coherent plan to solve it.

 

Also, the economic stimulus that China had provided earlier in the year started to dissipate as the authorities introduced tightening measures to stop their economy overheating.

 

The worst performers continued to be those countries burdened by huge government debt problems.

 

The best performers were essentially those countries benefitting from the emerging market growth. Most prominently, this was Germany as the developing countries moved towards increased automation and the desire of the emerging consumers to fulfil their aspirations for conspicuous consumption.  Norway was another stellar performer as the oil price stayed above $85 and its currency provided a relative safe haven.

 

The same themes that drove country performance were witnessed in the sector performance. The export driven industrial goods and basic materials were the stand out performers.  Financials remained the laggard as European banks remained burdened by European sovereign debt and a lack of clarity from a regulatory perspective.

 

Geographical and sector distribution

As ever, the portfolio is constructed through a process of stock selection, i.e. investing in specific companies. This can result in country and sector weightings that differ widely from the benchmark.

 

However, despite it being a stock selection approach, with the current sovereign debt issues casting a shadow over Europe, we have to be aware of how the fund is positioned for country specific risk.

 

The fund is heavily overweight Germany. We continue to find a number of attractive stocks in the country and a number of new German holdings have been added in the past year. These have included amongst others Sky Deutschland, the pay-TV platform which is gaining increasing traction, and Carl Zeiss Meditec, the global leader in ophthalmology equipment.  The fund remains underweight peripheral Europe but we continue to look for appealing stock specific ideas in all these markets.

 

The most significant sector allocation changes have brought a reduction in our overweight position in Basic Materials and an increase in our position in Retail Providers. The former was achieved through our selling out of our position in KazMunaiGas, the Kazak oil and gas producer. The latter has partly been achieved through a new holding in Salvatore Ferragamo, the Italian luxury brand specialising in handbags and shoes. We believe Ferragamo to be an attractively positioned brand particularly for Asian markets. It is also a company where we still believe there to be a lot of potential margin improvement.



Page 4

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

MANAGER'S REPORT (continued)

 

Geographic Breakdown  (% of portfolio)


30 June 2011

30 June 2010

Benchmark 30 June 2011

Austria

5.7

4.7

3.0

Belgium

3.2

1.4

4.0

Bulgaria

-

0.1

-

Denmark

-

-

3.3

Finland

1.8

0.8

6.3

France

15.0

19.6

12.1

Germany

27.0

25.5

14.7

Greece

-

0.7

3.2

Ireland

-

1.3

1.8

Italy

5.6

4.1

11.0

Kazakhstan

-

2.5

-

Luxembourg

1.3

2.1

-

Netherlands

3.9

6.2

4.4

Norway

9.1

4.6

6.8

Portugal

-

-

1.2

Romania

-

0.8

-

Russia

-

0.1

-

Spain

7.3

6.9

7.9

Sweden

2.7

0.9

8.6

Switzerland

14.8

11.1

11.7

Turkey

1.5

4.0

-

Ukraine

0.7

0.8

-

Other

0.4

1.8

-

 

Sector Breakdown (% of portfolio)


30 June 2011

30 June 2010

Benchmark 30 June 2011

Basic Materials

18.3

23.1

12.1

Business Providers

13.2

12.8

19.4

Consumer Goods

11.5

13.2

15.8

Financials

9.4

13.8

21.4

Industrial Goods

13.6

12.2

13.0

Natural Resources

8.3

7.7

3.8

Retail Providers

10.0

4.3

6.9

Technology

15.7

12.9

7.6

 

Investment activity

A lot of the activity in the last year reflects the strategy of taking the fund back to its smaller company roots. This has occurred after the removal of the hard discount protection mechanism, which had been partly responsible for the fund holding a number of companies with a larger market capitalisation, as the liquidity was required to fulfil the buy-backs.

 

The last year has seen a slight reduction in the number of Initial Public Offerings. Investment banks have struggled to get a number of issues away as they and their clients have often been seeking unrealistic prices in an uncertain environment. That said, we did participate in some new offerings which we believed to offer interesting potential for the medium term.

 

Page 5

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

MANAGER'S REPORT (continued)

 

The repositioning of the fund has also seen a slight increase in the number of holdings from 77 to 86.

 

Our transactions (purchases plus sales) totalled over £259m. For the first time in some while, our purchases were of greater value than our sales as we were released from the burden of having to fund a heavy share buy-back programme.

 

Purchases

Amongst the IPOs in which we participated were Norma, a German automotive supplier, and Powerland, the handbag manufacturer. Norma's focus is on clamps and connectors for the automotive OEMs. These are relatively low cost items but due to their significant importance to the car and the OEM's reputational risk, Norma are able to earn very high margins because of their quality and reliability. If over time the company is able to prove their profit margins are sustainable then the company should achieve a significant re-rating.

 

Powerland is a Chinese company listed in Germany. They provide affordable luxury in handbags for the Chinese consumer. We believe the company is significantly undervalued.

 

Other new German holdings included United Internet, SAF-Holland and the previously-mentioned Carl Zeiss Meditec and Sky Deutschland. The former is an entrepreneur led company which is investing in a number of potential growth drivers such as broadband, internet mail, web hosting, software as a service and Do-It-Yourself web home pages. We believe it to be a good long term holding. SAF-Holland is the global leader in components for truck trailers. Having previously been overleveraged by its former private equity owners, the company has now recapitalised its balance sheet. There are a number of structural reasons why the truck and trailer market should see growth even in a sluggish economic environment.

 

In Switzerland new holdings have included gategroup, the airline caterer, and Schmolz + Bickenbach, the specialist steel provider. We believe that gategroup has a resilient business model in a volatile industry. The stability comes from their long term agreements with the airlines which cover their fixed costs. There is also significant acquisition potential in the industry. Schmolz + Bickenbach is a niche steel producer supplying the automotive and energy markets. We think the company is capable of obtaining greater profitability than the market is giving it credit for and its previous balance sheet concerns have been alleviated by the capital raise at the end of 2010.

 

Nyrstar is a new holding in Basic Materials. Traditionally the company was a zinc processor but on the back of a number of well timed acquisitions in 2009/10, more than half of the company's profits are generated from mining assets. We believe the company to be significantly undervalued, particularly if there is an improvement in the supply/demand balance in 2012, as seems likely.

 

Disposals

The majority of the disposals have been of stocks of larger market capitalisation, in line with the fund's renewed strategy. These disposals have included Volkswagen, Fresenius (dialysis products), HeidelbergCement and Vallourec (steel tubing).

 

 

 

Page 6

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

MANAGER'S REPORT (continued)

 

We sold out of our position in Temenos, the Swiss financial software provider, on valuation grounds. The company had been a strong performer since 2009 and the risk/reward no longer appeared attractive, especially as their competition finally had a sound alternative product.

 

Binckbank, the Dutch online trading platform was sold from the portfolio due to our concern about increasing competition driving down prices aggressively in their core markets.

 

Gearing

We have maintained very low levels of gearing throughout the year. Our approach to borrowing remains that we favour the use of short term gearing, when appropriate, rather than any structural element. Our use of gearing is to ensure flexibility of action, allowing us to respond to opportunities immediately rather than having to first raise money by selling part of the portfolio.

 

Market capitalisation range

We have continued to refocus the portfolio towards the smaller and medium sized companies. This is highlighted by the fact that as at 30 June 2011, we had no companies with a market capitalisation of above £4bn.

 

The weighted average market capitalisation as at 30 June 2011 was £1,102m, as compared to £1,859m at 31 December 2010 and £2,248m at 30 June 2010.

 

The largest company in the portfolio (by market capitalisation) was Eiffage, the French construction and concessions group, with a market capitalisation of £3,706m and the smallest was Dietswell, the French drilling services company, with a market capitalisation of £17m.

 

Fund distribution by market capitalisation

 

Market cap

% of portfolio

at 30 June 2011

% of portfolio

at 30 June 2010

Less than £100m

8.2

16.1

£101m - £200m

8.4

11.1

£201m - £400m

13.7

11.5

£401m - £600m

16.3

12.3

£601m - £800m

6.1

5.6

£801m - £1bn

9.4

4.1

£1.001bn - £1.5bn

5.0

8.5

£1.501bn - £2bn

10.8

12.0

£2.001bn - £2.5bn

11.1

2.5

£2.501bn - £3bn

4.6

1.3

£3.001bn - £4bn

6.4

3.4

More than £4bn

0.0

11.6

 

 

 

 

 

 

 

 

Page 7

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

MANAGER'S REPORT (continued)

 

Unquoted investments

All of our private equity funds are in their realisation phases and so are in the process of returning cash to us as they sell their underlying holdings. This means that this part of our portfolio should continue to decrease over time. During the year, Doughty Hanson Fund II was liquidated and so we are now down to only three funds.  Our only significant non-fund unquoted holding is Brainlab. This German medical technology company is involved in image guided surgery and radiotherapy.

 

Performance

A number of our larger holdings proved to be strong positive contributors to performance over the year. The largest contribution came from OHL, the Spanish construction and concessions group. The company derives the majority of its profits from outside of Spain, mainly in Latin America. The listing of its Mexican concessions business on the Mexican stock exchange served to demonstrate to investors the value that the company has been creating in recent years.

 

Another strong contributor was Wirecard. This German company provides electronic transaction systems which enable websites to accept online payments. As more and more shopping moves online, the company has managed to grow its profits at a rapid pace. The trend of using the internet for shopping has also been positive for our holding in Yoox. This Italian company sells designer fashion via its website, yoox.com. It also operates the webshops and infrastructure for many of its famous customers, such as Dolce & Gabbana and Armani.

 

Other strong contributors included Andritz, the Austrian specialist engineering group which continued to build its long track record of profitable growth, and Rhodia, the French speciality chemicals company, which has transformed its profitability in recent years by refocusing its product portfolio and has subsequently been acquired by Solvay at a premium.

 

We also had a strong performance from Grifols, the Spanish producer of human plasma products which finally had its company transforming acquisition of its US competitor, Talecris, approved by the regulatory authorities.

 

Our worst performer was Bank of Ireland. The perennial problem of being prepared to take a contrarian view is the risk of being too early. Our reasoning was that after the restructuring of the entire Irish banking sector, the competitive position and hence the ability to make profits of Bank of Ireland would be considerably strengthened. However, we were too optimistic in our view that the true scale of the problems associated with overleveraged Irish property investments was already properly understood.

 

We also had a negative contribution from A-Tec Industries, the Austrian engineering group, which suffered ultimately from too high a debt burden. The group has had to undergo a severe restructuring process of selling off assets, under the control of its lenders.

 

Another negative contributor was STS Group, the French security and authentication software company, which reported an accounting loss after the first time consolidation of a recent acquisition.

 



Page 8

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

MANAGER'S REPORT (continued)

 

Other disappointments included Lifewatch, the Swiss provider of medical remote monitoring systems which had serious problems with obtaining reimbursement from the insurers, and Safwood, the Italian lumber company which was embroiled in allegations of a serious tax investigation.

 

Inertia analysis

This analysis freezes the portfolio as at 30 June 2010 and calculates what it would have been worth a year later, i.e. assuming that we made no changes to the portfolio at all during the year. The result shows that our actions contributed positively to the performance of the portfolio by just under 5%.

 

Outlook

At the time of writing, stock markets have just seen dramatic declines on concerns about the lack of global economic growth. In July and August we have seen deteriorating economic indicators. In many ways, very little has changed in that we have to accept that the western world is in for a prolonged period of muted economic growth as personal and sovereign balance sheets are repaired. However, we still believe this is unlikely to lead to a global depression.

 

The situation has been compounded by political impotence in the United States and national self interest in Europe. In the US we have seen a lot of political point scoring but ultimately we remain confident that the willpower exists to put the country back on a growth path. There is likely to be further quantitative easing.

 

In Europe, as is ever the case, it is more complicated. The only way out of the sovereign debt crisis is growth. This requires peripheral Europe to become more competitive. The euro means that this is not possible through devaluation and the alternative, the effective "Germanification" of large parts of Europe is both difficult and culturally unpopular. Either way there is unlikely to be a quick fix.

 

Whilst most of Europe has suffered under the weight of its debt, Switzerland and its exporting companies have suffered from the country's "safe haven" status. This had led to the strong appreciation of the franc versus the euro and the dollar and a huge negative effect on a number of Swiss companies. However, unlike the Eurozone, Switzerland has acted decisively and announced a target versus the euro of 1.20 that they will aim to maintain with "unlimited" support. This has led to a fall in the Swiss franc, which should be helpful to a number of our Swiss holdings. Before the Swiss National Bank's announcement, we had taken the unusual step of entering into a three-month forward Swiss franc/sterling FX contract, with the aim of hedging £10m worth of the currency exposure of our Swiss holdings.

 

Despite the current dark shadow over the western economies, we believe that equity markets, including European smaller companies, are attractive, particularly versus other asset classes. This is not a re-run of 2008 and the market's reaction has been simplistic and knee jerk. There a number of differences: the corporates have very strong balance sheets, there is little or no inventory in the supply chain and even the banks are in better shape and less dependent on wholesale money markets. In 2011 we have not come off a number of years of excess. Valuations, particularly at the lower end of the market capitalisation range, look very attractive. Another key driver in the year ahead will continue to be M&A and it is the smaller company space where most of the transactions will occur. We are confident that the fund will be a beneficiary.



 

Page 9

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

MANAGER'S REPORT (continued)

 

We also believe that it is unlikely that China's economy will implode in the short term. In the medium term, issues are likely to emerge as with any command economy it is difficult to attain an optimal allocation of resources and at some point inflation is likely to take hold. However, for the foreseeable future, we believe that the desire for a German car or a luxury handbag is unlikely to disappear.

 

Going forward, with the change of lead manager of the fund, there will not be any revolutionary changes to the portfolio style but some slight change of emphasis. The fund will only invest in smaller companies and will predominantly focus on the mature markets of Europe. We aim to build a core portfolio of stocks which generate high returns on investment that can deliver throughout the economic cycle.

 

We believe that European smaller companies are currently offering exceptional value on any reasonable time horizon. This is at a time when returns on other asset classes are far from exciting. Our universe and our portfolio are trading at substantial discounts to their historical averages on all valuation metrics.

 

We are confident that the existing portfolio can deliver good returns for our investors in the year ahead, despite an economic backdrop of sluggish growth and we will also look to add new companies at attractive entry points.

 

Ollie Beckett and Simon Savill

 

 



Page 10

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

The Board has drawn up a matrix of risks facing the Company and has put in place a schedule of investment limits and restrictions, appropriate to the Company's investment objective and policy, in order to mitigate these risks as far as practicable. The principal risks which have been identified and the steps taken by the Board to mitigate these are as follows:

 

● Investment activity and performance risks

An inappropriate investment strategy (for example, in terms of asset allocation or the level of gearing) may result in underperformance against the Company's benchmark index and the companies in its peer group. The Board monitors investment performance at each Board meeting and regularly reviews the extent of its borrowings.

 

Portfolio and market price risks

Although the Company invests almost entirely in securities that are quoted on recognised markets, share prices may move rapidly. The companies in which investments are made may operate unsuccessfully, or fail entirely. A fall in the market value of the Company's portfolio would have an adverse effect on shareholders' funds. The Board reviews the portfolio each month and mitigates this risk through diversification of investments in the portfolio.

 

 Tax and regulatory risks

A breach of Section 1158 of the Corporation Tax Act 2010 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation tax. A breach of the UKLA Listing Rules could result in suspension of the Company's shares, while a breach of the Companies Act 2006 could lead to criminal proceedings, or financial or reputational damage.

 

The Manager has contracted to provide investment, company secretarial, administration and accounting services through qualified professionals. The Board receives internal control reports produced by the Manager on a quarterly basis, which confirm regulatory compliance.

 

● Operational risks

Disruption to, or failure of, the Manager's accounting, dealing or payment systems or the custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. The Company is also exposed to the operational risk that one or more of its suppliers may not provide the required level of service.  Details of how the Board monitors the services provided by the Manager and its other suppliers, and the key elements designed to provide effective internal control, are explained further in the internal controls section of the corporate governance statement in the annual report.

 

Further details of the Company's exposure to market risk (including market price risk, currency risk and interest rate risk), liquidity risk and credit risk and how they are managed are contained in the notes to the financial statements in the annual report.

 

 



Page 11

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

RELATED PARTY TRANSACTIONS

 

Investment management, accounting, company secretarial and administration services are provided to the Company by wholly-owned subsidiary companies of Henderson Global Investors Limited ("Henderson" or "Manager").  This is the only related party arrangement currently in place.

 

At the AGM on 8 November 2010, shareholders approved a change in the Company's benchmark which is used by the Company to measure its performance (and against which any performance fee is calculated).  The benchmark was formerly a blend of 50% of the return of the HSBC Smaller Europe (ex UK) Index and 50% of the return of the S&P/Citigroup EMI Europe (ex UK) Index (both expressed in sterling).  The new benchmark, which is the total return of the HSBC Smaller Europe (ex UK) Index (in sterling terms), has been used to measure the performance of the Manager over the year under review.  The annual upper limit for all fees, including any performance fee, payable to the Manager remains at 2.4% of the income-inclusive net asset value at the last day of the calculation period.  This change in the benchmark has been reflected in the investment management agreement between the Company and the Manager and in the investment policy.  Under the Listing Rules of the UK Listing Authority this change was deemed to constitute a small related party transaction. 

 

With the exception of the change to the benchmark, and other than fees payable by the Company in the ordinary course of business, there have been no other material transactions with the related party affecting the financial position or performance of the Company during the year under review.

 

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES UNDER DTR 4.1.12

Each of the directors confirms that, to the best of his knowledge:

 

●          the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

 

●          the Report of the Directors in the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

 

 

For and on behalf of the Board

Audley Twiston-Davies

Chairman

 

 

 



Page 12

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

Audited Consolidated Statement of Comprehensive Income

for the year ended 30 June 2011

 

 


Year ended 30 June 2011

Year ended 30 June 2010


Revenue return £'000

Capital return  £'000

Total

£'000

Revenue return £'000

Capital return  £'000

Total

£'000

Investment income

2,979

-

2,979

3,489

-

3,489

Other income

68

-

68

287

-

287

Gains on investments held at fair value through profit or loss

-

70,112

70,112

-

34,905

34,905


---------

----------

-----------

---------

----------

-----------

Total income

3,047

70,112

73,159

3,776

34,905

38,681








Expenses







Management fees

(254)

(1,016)

(1,270)

(242)

(968)

(1,210)

Other operating expenses

(551)

-

(551)

(547)

-

(547)


---------

----------

----------

---------

----------

----------

Profit before finance costs and taxation

2,242

69,096

71,338

2,987

33,937

36,924








Finance costs

(27)

(108)

(135)

(2)

(8)

(10)


---------

--------

---------

---------

--------

---------

Profit before taxation

2,215

68,988

71,203

2,985

33,929

36,914

Taxation

(286)

-

(286)

(459)

-

(459)


---------

---------

----------

---------

---------

----------

Profit for the year and total comprehensive income

1,929

68,988

70,917

2,526

33,929

36,455


=====

======

======

=====

======

======








Earnings per ordinary share - basic and diluted (Note 2)

3.79p

135.36p

139.15p

4.31p

57.95p

62.26p


======

======

======

======

======

======








 

The total column of this statement represents the Consolidated Statement of Comprehensive Income, prepared in accordance with IFRS, as adopted by the European Union. 

 

The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

 

All items in the above statement derive from continuing operations.

 

All income is attributable to the equity holders of TR European Growth Trust PLC, the parent company.  There are no non-controlling interests.

 

The net profit of the Company for the year was £70,917,000 (2010: £36,455,000).

 

The Group does not have any other comprehensive income and hence the net profit for the year as disclosed above is the same as the Group's total comprehensive income.

 

 

 

 

 

 

 

 

                                                                                      

Page 13

TR EUROPEAN GROWTH TRUST PLC

 Annual Financial Report for the year ended 30 June 2011

 

Audited Consolidated and Parent Company Statements of Changes in Equity

for the year ended 30 June 2011

CONSOLIDATED

Year ended 30 June 2011

Called up share capital

£'000

Share

premium account

£'000

Capital redemption

reserve £'000

Other capital reserves

£'000

Revenue reserve £'000

Total

£'000

Total equity at 30 June 2010

6,453

115,451

13,725

47,286

16,562

199,477

Total comprehensive income:







   Profit for the year

-

-

-

68,988

1,929

70,917

Transactions with owners, recorded directly to equity:







   Ordinary dividends paid

-

-

-

-

(2,178)

(2,178)

   Buy-backs of ordinary shares

(124)

-

124

(3,802)

-

(3,802)


----------

----------

---------

----------

---------

----------

Total equity at 30 June 2011

6,329

115,451

13,849

112,472

16,313

264,414


======

======

=====

======

=====

======




CONSOLIDATED

Year ended 30 June 2010

Called up

share capital

£'000

Share

premium account

£'000

Capital redemption

reserve

£'000

Other  capital reserves

£'000

Revenue reserve £'000

Total

£'000

Total equity at 30 June 2009

8,059

115,451

12,119

62,270

17,499

215,398

Total comprehensive income:







   Profit for the year

-

-

-

33,929

2,526

36,455

Transactions with owners, recorded directly to equity:







   Ordinary dividends paid

-

-

-

-

(3,463)

(3,463)

   Buy-backs of ordinary shares

(1,606)

-

1,606

(48,913)

-

(48,913)


----------

----------

---------

----------

---------

----------

Total equity at 30 June 2010

6,453

115,451

13,725

47,286

16,562

199,477


======

======

=====

======

=====

======



COMPANY

Year ended 30 June 2011

Called up share capital

£'000

Share premium account

£'000

Capital redemption

reserve

£'000

Other capital reserves

 £'000

Revenue reserve £'000

Total

£'000

Total equity at 30 June 2010

6,453

115,451

13,725

48,843

15,005

199,477

Total comprehensive income:







   Profit for the year

-

-

-

68,487

2,430

70,917

Transactions with owners, recorded directly to equity:







   Ordinary dividends paid

-

-

-

-

(2,178)

(2,178)

   Buy-backs of ordinary shares

(124)

-

124

(3,802)

-

(3,802)


----------

-----------

----------

----------

---------

----------

Total equity at 30 June 2011

6,329

115,451

13,849

113,528

15,257

264,414


======

======

======

======

=====

======



COMPANY

Year ended 30 June 2010

Called up

share capital

£'000

Share premium account

 £'000

Capital redemption

reserve

£'000

Other  capital reserves

£'000

Revenue reserve £'000

Total

£'000

Total equity at 30 June 2009

8,059

115,451

12,119

63,828

15,941

215,398

Total comprehensive income:







   Profit for the year

-

-

-

33,928

2,527

36,455

Transactions with owners, recorded directly to equity:







   Ordinary dividends paid

-

-

-

-

(3,463)

(3,463)

   Buy-backs of ordinary shares

(1,606)

-

1,606

(48,913)

-

(48,913)


----------

-----------

----------

----------

----------

----------

Total equity at 30 June 2010

6,453

115,451

13,725

48,843

15,005

199,477


======

======

======

======

=====

======

 

 



Page 14

 

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

Audited Consolidated and Parent Company Balance Sheets

 at 30 June 2011

 


Consolidated 2011

£'000

Consolidated 2010

£'000

Company 2011

£'000

Company 2010

£'000

Non current assets





Investments held at fair value through profit or loss

270,800

192,719

271,787

194,207


-----------

-----------

-----------

-----------






Current assets





Other receivables

2,528

10,481

2,528

10,481

Cash and cash equivalents

403

1,130

400

1,127


----------

----------

----------

----------


2,931

11,611

2,928

11,608


----------

----------

---------

---------

Total assets

273,731

204,330

274,715

205,815


----------

----------

----------

----------






Current liabilities





Other payables

(557)

(971)

(1,541)

(2,456)

Bank loans and overdrafts

(8,760)

(3,882)

(8,760)

(3,882)


----------

----------

----------

----------


(9,317)

(4,853)

(10,301)

(6,338)


----------

----------

----------

----------

Net assets

264,414

199,477

264,414

199,477

 

======

======

======

======

 





Equity attributable to equity shareholders





Called up share capital

6,329

6,453

6,329

6,453

Share premium account

115,451

115,451

115,451

115,451

Capital redemption reserve

13,849

13,725

13,849

13,725

Retained earnings:





   Other capital reserves

112,472

47,286

113,528

48,843

   Revenue reserve

16,313

16,562

15,257

15,005


----------

----------

-----------

-----------

Total equity

264,414

199,477

264,414

199,477


======

======

======

======






Net asset value per ordinary share - basic and diluted (Note 4)     

522.20p

386.38p

522.20p

386.38p


======

======

======

======

 

 

 

 

 



Page 15

 

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

Audited Consolidated and Parent Company Cash Flow Statements

for the year ended 30 June 2011

 

 


Year ended 30 June 2011

Year ended 30 June 2010


Consolidated £'000

Company £'000

Consolidated £'000

Company £'000

Operating activities





Profit before taxation

71,203

71,203

36,914

36,914

Add back: interest payable

135

135

10

10

Less gains on investments held at fair value through profit or loss

(70,112)

(69,611)

(34,905)

(34,904)

Sales of investments held at fair value through profit or loss

125,548

125,548

131,479

131,479

Purchases of  investments held at fair value through profit or loss

(133,619)

(133,619)

(101,915)

(101,915)

Withholding tax on dividends deducted at source

(502)

(502)

(656)

(656)

Decrease in prepayments and accrued income

43

43

287

287

Decrease/(increase) in amounts due from brokers

7,942

7,942

(9,750)

(9,750)

Increase/(decrease) in accruals and deferred income

106

106

(19)

(20)

Decrease in VAT recoverable

-

-

323

323

Decrease in amounts due to brokers

(28)

(28)

(2,181)

(2,181)

Decrease in amounts due to subsidiary undertaking

-

(501)

-

-


----------

----------

-----------

----------

Net cash inflow from operating activities before

   interest and taxation

716

716

19,587

19,587






Interest paid

(135)

(135)

(5)

(5)

Taxation recovered

184

184

144

144


----------

----------

-----------

----------

Net cash inflow from operating activities

765

765

19,726

19,726


----------

----------

-----------

----------

Financing activities





Equity dividends paid (net of refund of unclaimed dividends)

(2,178)

(2,178)

(3,463)

(3,463)

Buy-backs of ordinary shares

(4,294)

(4,294)

(49,834)

(49,834)


----------

----------

-----------

----------

Net cash used in financing

(6,472)

(6,472)

(53,297)

(53,297)


----------

----------

-----------

-----------






Decrease in cash and cash equivalents

(5,707)

(5,707)

(33,571)

(33,571)

Cash and cash equivalents at the start of year

(2,752)

(2,755)

30,709

30,706

Exchange movements

102

102

110

110


----------

----------

----------

---------

Cash and cash equivalents at the end of year

(8,357)

(8,360)

(2,752)

(2,755)


======

======

======

=====

Comprising:





Cash at bank

403

400

1,130

1,127

Bank overdrafts

(8,760)

(8,760)

(3,882)

(3,882)


----------

----------

----------

---------


(8,357)

(8,360)

(2,752)

(2,755)


======

======

======

=====

 



Page 16

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

Notes to the Financial Statements

 

1.

Accounting policies

The consolidated and parent company financial statements for the year ended 30 June 2011 have been prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRSs.  IFRSs comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ("IASC") that remain in effect, to the extent that IFRSs have been adopted by the European Union.

 

The financial statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of certain financial instruments.  The principal accounting policies adopted are set out in full in the Annual Report.  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 is consistent with the requirements of IFRSs, the directors have sought to prepare the financial statements on a basis consistent with the recommendations of the SORP.

 

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



 

2.

Earnings per ordinary share

The earnings per ordinary share figure is based on the net profit for the year of £70,917,000 (2010:  £36,455,000) and on the weighted average number of ordinary shares in issue during the year of 50,965,518 (2010: 58,554,559).

 

 


The earnings per ordinary share figure detailed above can be further analysed between revenue and capital, as below.  The Company has no securities in issue that could dilute the return per ordinary share.  Therefore the basic and diluted earnings per ordinary share are the same.

 





 



2011

£'000

2010

£'000

 


Net revenue profit

1,929

2,526

 


Net capital profit

68,988

33,929

 



----------

-----------

 


Net profit

70,917

36,455

 



======

======

 


Weighted average number of ordinary shares in issue during

   the year

50,965,518

58,554,559

 





 



Pence

Pence

 


Revenue earnings per ordinary share

3.79

4.31

 


Capital earnings per ordinary share

135.36

57.95

 



----------

-----------

 


Total earnings per ordinary share

139.15

62.26

 



======

======

 





 

 

 

 

 

 

 

Page 17

 

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

Notes to the Financial Statements (continued)

 

3.

Share capital

At 30 June 2011 there were 50,634,229 ordinary shares in issue (2010: 51,627,289). During the year ended 30 June 2011 the Company bought back 993,060 (2010: 12,848,566) of its own issued ordinary shares in the market for cancellation at a cost of £3,802,000 (2010: £48,913,000). There has been no change to the share capital since the year end. 



4.

Net asset value per ordinary share

The net asset value per ordinary share is based on the net assets attributable to the ordinary shares of £264,414,000 (2010: £199,477,000) and on the 50,634,229 ordinary shares in issue at 30 June 2011 (2010: 51,627,289).  The Company has no securities in issue that could dilute the net asset value per ordinary share.

 

 


The movements during the year in assets attributable to the ordinary shares were as follows:



£'000


Net assets attributable to ordinary shares at 1 July 2010

199,477


Buy-backs of ordinary shares

(3,802)


Profit for the year

70,917


Dividends paid in the year

(2,178)



----------


Total net assets at 30 June 2011

264,414



======



5.

Dividends

Subject to approval at the AGM in November 2011, the proposed final dividend of 3.60p and a special dividend of 0.65p per ordinary share will be paid on 11 November 2011 to shareholders on the register of members at the close of business on 14 October 2011.  The shares will be quoted ex-dividend on 12 October 2011.







Group

Company



2011

2011



£'000

£'000


Revenue available for distribution by way of dividends for the year

1,929

2,430


Proposed total dividend for the year ended 30 June 2011 - 4.25p

(comprising a final dividend of 3.60p and a special dividend of 0.65p)

(based on 50,634,229 shares in issue at 29 September 2011)

(2,152)

(2,152)



--------

--------


Revenue (deficit)/surplus

(223)

278



=====

=====


For Section 1158 purposes, the Company's undistributed revenue represents 8.0% of the income from investments of £3,479,000 (includes intra-group dividends paid during the year).



6.

Going concern statement


As the assets of the Company consist mainly of a portfolio of diversified securities that are readily realisable, the Company has adequate financial resources to meet its liabilities and continue in operational existence for the foreseeable future.  For these reasons, the directors believe that it is appropriate to  continue to adopt the going concern basis in preparing the financial statements. In reviewing the position as at the date of this report, the Board has considered the "Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009" published by the Financial Reporting Council in October 2009.

 

 



Page 18

 

TR EUROPEAN GROWTH TRUST PLC

Annual Financial Report for the year ended 30 June 2011

 

 

7.   2011 financial information

The figures and financial information for 2011 are extracted from the Annual Report and Financial Statements for the year ended 30 June 2011 and do not constitute the statutory accounts for the year.  The Annual Report and Financial Statements includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.  The Annual Report and Financial Statements has not yet been delivered to the Register of Companies.

 

8.   2010 financial information

The figures and financial information for 2010 are extracted from the published Annual Report and Financial Statements for the year ended 30 June 2010 and do not constitute the statutory accounts for that year.  The Annual Report and Financial Statements has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 489(2) or section 498(3) of the Companies Act 2006.

 

 

 

Annual Report and Financial Statements

The Annual Report and Financial Statements will be posted to shareholders on 7 October 2011 and will be available on the Company's website (www.treuropeangrowth.com) or in hard copy format from the Company's Registered Office, 201 Bishopsgate, London EC2M 3AE thereafter.

 

The Annual General Meeting will be held on Monday 7 November 2011 at 12.30pm at the Registered Office address.

 

For further information please contact:

 

Ollie Beckett

Fund Manager

TR European Growth Trust PLC

Telephone: 020 7818 4331

 

Sarah Gibbons-Cook

Investor Relations and PR Manager

Henderson Global Investors

Telephone: 020 7818 3198

 

 

- ENDS -

 

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR UWRNRARAKUAR