Annual Report and Financial Statements 31 August 2021
PERFORMANCE RECORD
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As at 31 August 2021 |
As at 31 August 2020 |
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| Net assets (£000)1 | 651,731 | 387,861 | |
| Net asset value per ordinary share (pence) | 678.49 | 459.97 | |
| Ordinary share price (mid-market) (pence) | 692.00 | 447.00 | |
| Premium/(discount) to cum income net asset value2 | 2.0% | (2.8%) | |
| FTSE World Europe ex UK Index | 1869.96 | 1467.97 | |
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For the year ended 31 August 2021 |
For the year ended 31 August 2020 |
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| Performance (with dividends reinvested) | |||
| Net asset value per share2 | 49.4% | 16.9% | |
| Ordinary share price2 | 56.8% | 18.0% | |
| FTSE World Europe ex UK Index | 27.4% | 0.7% | |
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For the year ended 31 August 2021 |
For the year ended 31 August 2020 |
Change |
| Revenue | |||
| Net profit after taxation (£000) | 3,595 | 5,776 | -37.8 |
| Revenue profit per ordinary share (pence) | 4.13 | 6.85 | -39.7 |
| Dividends (pence) | |||
| Interim dividend | 1.75 | 1.75 | – |
| Final dividend | 4.55 | 4.40 | 2.4 |
| ————– | ————– | ————– | |
| Total dividends paid/payable | 6.30 | 6.15 | 3.4 |
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Source: BlackRock.
1 The change in net assets reflects new ordinary shares issued, shares reissued from treasury, market movements and dividends paid.
2 Alternative Performance Measures, see Glossary in the Annual Report and Financial Statements.
CHAIRMAN’S STATEMENT
PERFORMANCE OVERVIEW
The past year has been a very successful one for your Company both with regard to excellent absolute returns and also relative to our reference index. This has resulted in significant demand for our shares and, since the end of January this year, we have either reissued shares from treasury or issued new shares at a premium to the net asset value (NAV) per share to the aggregate value of £89,004,000 up to 2 November 2021. This is very pleasing.
After the COVID-19 pandemic outbreak and subsequent ramifications in 2020, the restart of economic activity has gathered pace and 2021 looks set to be one of the best years for growth in decades, albeit from a low base. The success of vaccinations in Europe, together with fiscal stimulus and easy monetary support, have provided a bridge through the pandemic and allowed many economies to recover more quickly than expected.
Against this backdrop, it is very pleasing to report that over the year ended 31 August 2021 the Company’s NAV per share returned 49.4%, outperforming its reference index, the FTSE World Europe ex UK Index, which returned 27.4%. The Company’s share price returned 56.8% over the same period (all percentages calculated in sterling terms with dividends reinvested).
Since the financial year end and up to close of business on 2 November 2021, the Company’s NAV has increased by 2.3% compared with a rise in the FTSE World Europe ex UK Index of 1.3% over the same period.
REVENUE EARNINGS AND DIVIDENDS
The Company’s revenue return per share for the year ended 31 August 2021 amounted to 4.13p per share, which compares with 6.85p per share for the previous year, a decrease of 39.7%. In the previous year the revenue return had been enhanced by taxation recoveries in some of the jurisdictions in which we invest. In April the Board declared an interim dividend of 1.75p per share (2020: 1.75p) and the Board is proposing the payment of a final dividend of 4.55p per share for the year (2020: 4.40p). This, together with the interim dividend, makes a total dividend for the year of 6.30p per share (2020: 6.15p), a rise of 2.4%. The dividend will be funded primarily from dividend income received in the year, supported by a payment from revenue reserves. We are fortunate in having strong revenue reserves with which to fund this.
Subject to shareholder approval, the dividend will be paid on 17 December 2021 to shareholders on the Company’s register on 19 November 2021, the ex-dividend date being 18 November 2021.
DISCOUNT/PREMIUM
Over the year to 31 August 2021, the Company’s shares have traded at an average premium of 0.1% and within a range of a 7.4% discount to a 4.1% premium. The Company did not buy back any shares during the year but has reissued 8,432,310 ordinary shares from treasury at a premium to NAV at an average price of 595.33p per share for a net consideration of £50,200,000. In addition, the Company allotted a total of 3,300,000 new ordinary shares during the year at an average price of 674.61p per share for a net consideration of £22,262,000. Since the year end up to 2 November 2021, a further 2,400,000 ordinary shares have been allotted at an average price of 689.12p per share for a total consideration of £16,542,000. These shares have been issued at an average premium over NAV of 2.1% (excluding costs).
As reported in the Half Yearly Financial Report, the Directors exercised their discretion not to operate the half yearly tender offers in November 2020 and May 2021. It was also announced on 30 September 2021 that the Board had decided not to implement a semi-annual tender offer in November 2021. Over the six-month period to 31 August 2021, the average premium to NAV (cum income) was 1.9%. The Board therefore concluded that it was not in the interests of shareholders, as a whole, to implement the latest semi-annual tender offer.
The Directors recognise the importance to investors that the market price of the Company’s shares should not trade at a significant premium or discount to the underlying NAV. Accordingly, in normal market conditions, the Board may use the Company’s share buy back and share issue powers, or operate six monthly tender offers, to ensure that the share price does not go to an excessive discount or premium to the underlying NAV. Resolutions to renew the Company’s semi-annual tender offers and the authorities to issue and buy back shares will be put to shareholders at the forthcoming Annual General Meeting.
OUTLOOK
The outlook for Europe is positive as vaccination rates rise and retail sales and consumer demand point to a strengthening economic recovery. Valuations of European stocks remain attractive relative to historical earnings multiples and are also significantly lower compared with either US stocks or European bonds. Additionally, investors remain significantly underweight in Europe in their portfolios and investor inflows are only just starting to pick up. All of this leads us to a positive view of the future.
Inflation remains the greatest concern and a key factor is the response by global central banks to inflation numbers. For now, the European Central Bank has not signalled any intention to increase rates, as it continues to preserve favourable financing conditions. We see recent market strength for European equities persisting and a focus on fundamentals and active management will be critical for our Portfolio Managers to identify potential winners as the recovery strengthens.
ANNUAL GENERAL MEETING (AGM)
The AGM of the Company will be held at 12 Throgmorton Avenue, London EC2N 2DL (the venue) on Thursday, 9 December 2021 at 12 noon. In light of the ongoing COVID-19 pandemic, shareholders are strongly encouraged to submit a proxy vote in advance of the AGM, either by completing the hard copy Form of Proxy or online by following the instructions set out in the Notice of Annual General Meeting.
At present UK Government restrictions on public gatherings are no longer in force in connection with COVID-19 and the AGM can be held in the normal way with physical attendance by shareholders. However, shareholders should be aware that it is possible that such restrictions could be reimposed prior to the date of the AGM. In such event, these restrictions could mean that the AGM is required to be held as a closed meeting as happened last year with physical attendance limited to only a small number of attendees comprising the required quorum for the meeting and those persons whose attendance is necessary for the conduct of the meeting, and that any other persons will be refused entry. Accordingly, all shareholders are recommended to vote by proxy in advance of the AGM and to appoint the Chairman of the meeting as their proxy. This will ensure that shareholders’ votes will be counted even if they (or any appointed proxy) are not able to attend. All votes will be taken by poll so that all proxy votes are counted.
The Company may impose entry restrictions on persons wishing to attend the AGM (including, if required, refusing entry) in order to secure the orderly conduct of the AGM and the safety of the attendees. All shareholders intending to attend should either be fully vaccinated or obtain a negative COVID test result before entering the venue. Negative test results must be obtained no earlier than one day before entering the venue and fully vaccinated shareholders are also strongly encouraged to get tested. Attendees will also be required to wear a face covering at all times within the venue except when seated in the relevant meeting room. Shareholders are also requested not to attend the AGM if they have tested positive for COVID-19 in the 10 days prior to the AGM, are experiencing new or worsening COVID-19 related symptoms, have been in close contact with anyone who is experiencing symptoms or has contracted COVID-19 during the 14 days prior to the AGM, or are required to self isolate pursuant to UK Government guidance.
Finally, most of our Board meetings during the year were held virtually but happily, during the summer, physical meetings were able to resume. I would like to thank my colleagues and our advisers for the versatility that they have shown throughout the pandemic in adapting to the circumstances and to welcome a return to a more normal modus of operation.
ERIC SANDERSON
Chairman
4 November 2021