TIDMCPE
RNS Number : 7020J
Charter European Trust plc
04 July 2011
For Immediate Release 4th July 2011
CHARTER EUROPEAN TRUST plc
HALF-YEARLY FINANCIAL REPORT
For the six months ended 31st May 2011
Interim Management Report
Chairman's Statement
Net Asset Value
The net asset value per Ordinary Share at 31st May 2011 was
275.8p, an increase of 12.4% for the six months since 30th November
2010 compared with an increase of 13.9% on the Company's benchmark,
the FTSE World Europe (ex UK) Index (GBP). Following a strong
December, equity markets were essentially flat across the world
during the Trust's first half reporting period. Further background
on the Company's relative performance is set out in the Manager's
Review.
Interim Dividend
The Board recommends an unchanged interim dividend of 1.40p per
Ordinary Share (2010: 1.40p per Ordinary Share), payable on 25th
August 2011 to shareholders on the Register at 22nd July 2011.
Gearing
As at 31st May 2011 the Company had drawn down GBP4.4 million
(EUR5 million) of its EUR10 million facility with Scotiabank, which
represented 7.1% of Shareholders' funds.
Share Buy Backs and Treasury Share Transactions
During the period under review the Company purchased 479,000
Ordinary Shares for cancellation at an average discount of 12.6%
and a further 100,000 Ordinary Shares previously held in treasury
were cancelled. In the period from 31st May 2011 to 30th June 2011,
a further 41,400 Ordinary Shares have been purchased for
cancellation.
Outlook
As at this time last year, the markets have returned to being
preoccupied with Greece, its insurmountable debt position and its
political instability which has ramifications for EU bonds and
Government solvency as well as the health of the EU and possibly
the global banking system. Politics, both national and regional,
ensures that this crisis will remain hard to anticipate, let alone
solve, and investor sentiment will remain volatile.
Elsewhere, we have seen strong economic growth in emerging
markets, albeit tempered by rising inflation and rising interest
rates, which has offset the generally dull economic recovery in
OECD economies, where the recent Japanese earthquake has also
affected prospects. Within the Eurozone German economic activity
has so far remained relatively robust. The Euro itself has also
been a relatively stable currency. As we anticipate central banks
will be less active in purchasing bonds to stimulate activity and
we foresee less fiscal stimulus from Governments, which are now
starting to adopt austerity measures, the growth environment will
slow and high quality businesses, such as the ones we favour,
should start to outperform.
Within the portfolio, we have therefore continued to focus on
strong and high quality franchises, which also offer exposure to
growth in emerging economies. Our Managers construct the portfolio
primarily on a bottom up, stock specific basis and portfolio
construction has been shaped by a number of long term themes, which
are outlined in the Manager's Review.
C G H Weaver
Chairman
Manager's Review
Background
Economic momentum in the USA and emerging markets peaked in Q4
last year and this was reflected in the strong corporate earnings
reported and earnings forecasts entering into 2011. Even though
markets have prospered since early 2009, earnings have outpaced the
market appreciation so that European companies are now cheaper
relative to their earnings than when the recovery started and also
demonstrate healthy levels of gearing and strong dividend
growth.
The EU sovereign debt crisis has, however, not been far away
from investors' minds. As each iteration of 2010 played out, be it
Greece, Ireland or Portugal, other Governments learnt from their
mistakes. Spain, as an example, started to address in an open and
constructive manner the property and banking issues within its
economy. This led to a significant rally in EU financials as Spain
and Italy decoupled from the weaker peripheral economies. As the
portfolio holds very few financials, this sharp rally was painful
for performance. The current crisis is largely caused by the
growing signs of inability in Greece to implement reforms capable
of bringing their debt burden under control.
Over the year, the Euro has regained all of the downside
suffered during the first Greek crisis and we conclude that this
says more about the credibility of the USA and its politicians than
of the EU. Whilst a strong relative Euro makes the challenge of
austerity and restructuring harder, it does offer the benefit of
improving returns to investors by being a sound currency as well as
containing inflation in the EU. The key EU economies have not
suffered from the strength of the Euro, and indeed Germany has
continued to benefit from its strong auto and machinery
exports.
Portfolio Review
Central and Eastern Europe has particularly attracted us this
year with a specific emphasis on Poland, as it is a more developed
market within this region. GDP growth there has been strong and we
have been encouraged by our meetings with companies which have
operations in the area. We initiated a position in PKO Bank, as it
is strong in both the commercial and retail banking arenas, along
with a solid balance sheet which will allow it to grow with the
country. On a more defensive tilt, we also bought shares in
Telekomunikacja Polska, a large telecoms company offering a secure
and very attractive dividend yield coupled with exposure to growth
in mobile usage and broadband penetration.
Natural resource scarcity is a theme that is unlikely to go away
in the foreseeable future and this will be reflected in higher
commodity prices. Increasing demand in both emerging and developed
economies cannot be matched by declining supply from existing
deposits or easy to access reserves. We have been attracted to the
large discoveries in Brazil of pre-salt oil reserves and while we
have sold our BG position, Galp Energia remains a core holding with
more leveraged exposure. We hold some smaller E & P names in
the portfolio as these tend to offer higher leverage to the
underlying commodity and can have a very attractive risk/reward
profile. Borders & Southern Petroleum is planning its first
drilling campaign for hydrocarbons in the South Falkland Basin at
the end of the year. This is high risk, but the potential reward
makes it an attractive investment. Another is Petroceltic
International, which is focused on North Africa and the
Mediterranean. We believe that a large gas discovery in Algeria
will become very valuable and this has been endorsed by the recent
farm-out agreement with Enel.
On a related theme, rising food prices also seem to be here to
stay, given protein demands in emerging markets as well as growing
worldwide populations. At present, due to a rare coincidence of bad
weather globally, food prices are very elevated, but in the longer
term there have also been declines in surplus food stocks and a
gradual decline in agricultural yields. Yara International is a
producer of nitrogen based fertilisers and, while crop prices are
high and agricultural economics relatively healthy, fertiliser
producers should make good returns.
Marine Harvest is a Norwegian salmon producer which is exposed
to the global trend towards higher protein consumption and healthy
eating. Their largest market is still Europe, but developing market
demand is growing faster. Bayer falls partly into the above theme
with a crop science division, but at the moment the main driver is
the pharmaceutical business. Xarelto has the potential to be a
blockbuster drug and despite the markets' caution, results to date
have exceeded or at least met expectations.
Healthcare will be a strong sector going forward driven by
increased health awareness in developing countries and ageing
demographics in developed regions. We have core holdings in Roche
and Sanofi Aventis. Roche has suffered from negative sentiment due
to setbacks for a major new cancer treatment drug called Avastin.
Sanofi Aventis is under new management and the market has punished
it for acquisitions to fill pipeline shortcomings. We view the
pharmaceutical industry as having many parallels with oil and gas,
and often it is cheaper and more effective in the long run to
outsource finding and development of new product.
Outlook
Whilst the foundations for global growth remain in place, the
markets and politicians may well have to re-appraise the medium
term prospects for their economies as the recovery from the
financial crisis will take longer than expected. As such, many over
leveraged consumers and companies (especially banks) will offer
scant opportunities for many years to come, as debts are repaid and
living standards diminished. Governments for their part will have
to maintain an acceptable level of prosperity in constrained
circumstances, which will be most effectively achieved by allowing
a higher than recent level of inflation so that the level of debt
is eroded in real terms over time. In this environment, owning a
portfolio of high quality European equities accessing global growth
markets and economies should provide attractive real returns in the
medium term.
N P S Dwane
Portfolio Manager
4th July 2011
Principal Risks and Uncertainties
The principal risks facing the Company were outlined in the
Directors' Report on pages 16 and 17 of the Annual Financial Report
of the Company for the year ended 30th November 2010. These risks
fall broadly under the following categories: Investment and
Strategy, Market, Accounting, Legal and Regulatory, Corporate
Governance and Shareholder Relations, and Operational and
Financial. In the opinion of the Board these principal risks have
not changed.
Material Events and Transactions
In the six month period ended 31st May 2011 the following
material events and transactions have taken place.
At the Annual General Meeting of the Company held on 16th March
2011, all the resolutions put to shareholders were passed.
The final dividend of 2.65p per share was paid on 4th April 2011
to shareholders on the register on 25th February 2011. The total
dividend payment for the year ended 30th November 2010 was 4.05p
per share.
During the period there were no related party transactions,
which have materially affected the financial position or
performance of the Company.
Responsibility Statement
The Directors confirm to the best of their knowledge that:
-- the condensed set of financial statements contained within
the half-yearly financial report has been prepared in accordance
with the Accounting Standards Board's Statement 'Half-Yearly
Financial Reports'; and
-- the interim management report includes a fair review of the
information required by Disclosure and Transparency Rule 4.2.7R, of
important events that have occurred during the first six months of
the financial year, and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- the interim management report includes a fair review of the
information concerning related parties transactions as required by
Disclosure and Transparency Rule 4.2.8R.
The half-yearly financial report was approved by the Board on
4th July 2011 and the above responsibility statement was signed on
its behalf by the Chairman.
C G H Weaver
Chairman
155 Bishopsgate
London EC2M 3AD
4th July 2011
CHARTER EUROPEAN TRUST plc
TWENTY LARGEST EQUITY HOLDINGS AS AT 31st MAY 2011
Valuation % of
31st May 2011 Total
GBP'000s Assets* Principal Activities
Pharmaceuticals and
Roche Holdings 3,028 4.94 Biotechnology
Bayer 2,816 4.59 Chemicals
Pharmaceuticals and
Sanofi-Aventis 2,739 4.47 Biotechnology
Compagnie Financiere
Richemont 2,654 4.33 Personal Goods
Technology Hardware and
Aixtron 2,590 4.23 Equipment
Yara International 2,493 4.07 Chemicals
Credit Suisse Group 2,437 3.98 Banks
Continental 2,424 3.95 Automobiles & Parts
Technology Hardware and
ASM International 2,416 3.94 Equipment
Healthcare Equipment and
Fresenius SE & Co. 2,307 3.76 Services
Ryanair 2,300 3.75 Travel and Leisure
Enel 2,219 3.62 Electricity
Powszechna Kasa 2,181 3.56 Banks
Mobile
Inmarsat 2,171 3.54 Telecommunications
Siemens 2,163 3.53 General Industrials
Total 2,143 3.50 Oil and Gas Producers
D'Ieteren Trading 2,130 3.48 General Retailers
Koninklijke DSM 2,126 3.47 Chemicals
Galp Energia 2,098 3.42 Oil and Gas Producers
Electronic & Electrical
Barco 2,016 3.29 Equipment
47,451 77.42
============== ========
* Total assets are stated net of current liabilities
PORTFOLIO ANALYSIS AS AT 31st MAY 2011
Benchmark
Valuation %
31(st) May (FTSE World
2011 % of Europe (ex
GBP'000s Total Assets* UK)
------------------------- ------------ --------------- -------------
Basic Materials 8,993 14.67 8.09
------------------------- ------------ --------------- -------------
Consumer Goods 7,667 12.51 16.74
------------------------- ------------ --------------- -------------
Consumer Services 10,000 16.32 4.93
------------------------- ------------ --------------- -------------
Financials 4,618 7.53 22.79
------------------------- ------------ --------------- -------------
Health Care 8,074 13.17 10.09
------------------------- ------------ --------------- -------------
Industrials 4,179 6.82 14.99
------------------------- ------------ --------------- -------------
Oil and Gas 8,595 14.02 6.96
------------------------- ------------ --------------- -------------
Technology 5,006 8.17 3.51
------------------------- ------------ --------------- -------------
Telecommunications 3,568 5.82 5.82
------------------------- ------------ --------------- -------------
Utilities 3,332 5.44 6.08
------------------------- ------------ --------------- -------------
Net Current Liabilities (2,740) (4.47) -
------------------------- ------------ --------------- -------------
61,292 100.00 100.00
------------------------- ============ =============== =============
* Total assets are stated net of current liabilities
SUMMARY OF UNAUDITED RESULTS
INCOME STATEMENT
for the six months ended 31st May 2011
Revenue Capital Total Return
GBP'000s GBP'000s GBP'000s
(Note 2)
Net gains on investments at fair
value - 6,560 6,560
Net gains on foreign currencies - 6 6
Income 1,376 - 1,376
Investment management fee (65) (282) (347)
Administration expenses (171) (6) (177)
--------- --------- -------------
Net return before finance costs
and taxation 1,140 6,278 7,418
Finance costs: interest payable
and similar charges (5) (15) (20)
--------- --------- -------------
Net return on ordinary activities
before taxation 1,135 6,263 7,398
Taxation (71) - (71)
Net return attributable to Ordinary
Shareholders 1,064 6,263 7,327
========= ========= =============
Net return per Ordinary Share 4.75p 27.99p 32.74p
(Note 1)
BALANCE SHEET
as at 31st May 2011
GBP'000s
Investments held at fair value through profit or loss 64,032
Net Current Liabilities (2,740)
---------
Total Net Assets 61,292
---------
Called up Share Capital 246
Capital Redemption Reserve 290
Special Reserve 31,530
Capital Reserve 26,806
Revenue Reserve 2,420
Shareholders' Funds 61,292
---------
Net Asset Value per Ordinary Share 275.8p
The net asset value is based on 22,219,917 Ordinary
Shares in issue
As at 31st May 2011 there were an additional 2,380,000
Ordinary Shares held in treasury
SUMMARY OF UNAUDITED RESULTS
INCOME STATEMENT
for the six months ended 31st May 2010
Revenue Capital Total Return
GBP'000s GBP'000s GBP'000s
(Note 2)
Net losses on investments at fair
value - (1,620) (1,620)
Net gains on foreign currency
loan - 198 198
Income 1,186 - 1,186
Investment management fee (64) (313) (377)
Administration expenses (143) (5) (148)
--------- --------- -------------
Net return before finance costs
and taxation 979 (1,740) (761)
Finance costs: interest payable
and similar charges (3) (9) (12)
--------- --------- -------------
Net return on ordinary activities
before taxation 976 (1,749) (773)
Taxation (149) - (149)
Net return attributable to Ordinary
Shareholders 827 (1,749) (922)
========= ========= =============
Net return per Ordinary Share
(Note 1) 3.51p (7.43)p (3.92)p
BALANCE SHEET
as at 31st May 2010
GBP'000s
Investments held at fair value through profit or loss 56,417
Net Current Liabilities (1,273)
---------
Total Net Assets 55,144
---------
Called up Share Capital 256
Capital Redemption Reserve 280
Special Reserve 33,420
Capital Reserve 19,104
Revenue Reserve 2,084
Shareholders' Funds 55,144
---------
Net Asset Value per Ordinary Share 239.0p
The net asset value is based on 23,072,917 Ordinary
Shares in issue
As at 31st May 2010 there were an additional 2,480,000
Ordinary Shares held in treasury
SUMMARY OF UNAUDITED RESULTS
INCOME STATEMENT
for the year ended 30thNovember 2010
Revenue Capital Total Return
GBP'000s GBP'000s GBP'000s
(Note 2)
Net gains on investments at fair
value - 161 161
Gains on foreign currencies - 220 220
Income 1,699 - 1,699
Investment management fee (124) (669) (793)
Administration expenses (371) (8) (379)
--------- --------- -------------
Net return before finance costs
and taxation 1,204 (296) 908
Finance costs: interest payable
and similar charges (5) (14) (19)
--------- --------- -------------
Net return on ordinary activities
before taxation 1,199 (310) 889
Taxation (186) - (186)
Net return attributable to Ordinary
Shareholders 1,013 (310) 703
========= ========= =============
Net return per Ordinary Share 4.37p (1.34)p 3.03p
(Note 1)
BALANCE SHEET
as at 30th November 2010
GBP'000s
Investments held at fair value through profit or loss 53,708
Net Current Assets 1,726
---------
Total Net Assets 55,434
---------
Called up Share Capital 251
Capital Redemption Reserve 285
Special Reserve 32,406
Capital Reserve 20,543
Revenue Reserve 1,949
Shareholders' Funds 55,434
---------
Net Asset Value per Ordinary Share 245.3p
The net asset value is based on 22,598,917 Ordinary
Shares in issue
As at 30th November 2010 there were an additional
2,480,000 Ordinary Shares held in treasury
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the six months ended 31st May 2011 and comparative
periods
Called Capital
up Share Redemption Special Capital Revenue
Capital Reserve Reserve Reserve Reserve Total
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
Six months
ended 31(st)
May 2011
Net Assets
at 30th
November
2010 251 285 32,406 20,543 1,949 55,434
Revenue
Return - - - - 1,064 1,064
Shares
repurchased
during the
period (5) 5 (876) - - (876)
Dividends on
Ordinary
Shares - - - - (593) (593)
Capital
Return - - - 6,263 - 6,263
Net Assets
at 31st May
2011 246 290 31,530 26,806 2,420 61,292
--------- ----------- --------- --------- --------- ---------
Six months
ended 31st
May 2010
Net Assets
at 30th
November
2009 258 278 34,821 20,853 1,883 58,093
Revenue
Return - - - - 827 827
Shares
repurchased
during the
period (2) 2 (1,401) - - (1,401)
Dividends on
Ordinary
Shares - - - - (626) (626)
Capital
Return - - - (1,749) - (1,749)
Net Assets
at 31st May
2010 256 280 33,420 19,104 2,084 55,144
--------- ----------- --------- --------- --------- ---------
Year ended
30th
November
2010
Net Assets
at 30th
November
2009 258 278 34,821 20,853 1,883 58,093
Revenue
Return - - - - 1,013 1,013
Shares
repurchased
during the
year (7) 7 (2,415) - - (2,415)
Dividends on
Ordinary
Shares - - - - (947) (947)
Capital
Return - - - (310) - (310)
Net Assets
at 30th
November
2010 251 285 32,406 20,543 1,949 55,434
--------- ----------- --------- --------- --------- ---------
SUMMARY OF UNAUDITED RESULTS
CASH FLOW STATEMENT
For the six months ended 31st May 2011 and comparative
periods
Six months Six months Year
ended ended ended
31st May 31st May 30th November
2011 2010 2010
GBP'000s GBP'000s GBP'000s
Net cash inflow from operating
activities 253 107 476
Return on investment and servicing
of finance
Interest paid (20) (12) (21)
Capital expenditure and financial
investment
----------- ----------- ---------------
Purchases of fixed asset
investments (26,087) (29,709) (66,724)
Sales of fixed asset investments 22,887 32,097 73,602
----------- ----------- ---------------
Net cash (outflow) inflow from
capital expenditure and financial
investment (3,200) 2,388 6,878
Equity dividends paid (593) (626) (947)
----------- ----------- ---------------
Net cash(outflow) inflow before
financing (3,560) 1,857 6,386
Financing
----------- ----------- ---------------
Purchase of Ordinary Shares for
cancellation and held in treasury (878) (1,399) (2,414)
Drawdown of loan 4,343 - -
Repayment of loan - - (2,785)
----------- ----------- ---------------
Net cash inflow (outflow) from
financing 3,465 (1,399) (5,199)
----------- ----------- ---------------
(Decrease) Increase in cash (95) 458 1,187
----------- ----------- ---------------
Reconciliation of Return on
Ordinary Activities before
Taxation to Net Cash Flow from
Operating Activities
Total Return before taxation 7,398 (773) 889
Add: Finance costs: interest
payable and similar charges 20 12 19
Less: Net (gains) losses on
investments at fair value (6,560) 1,620 (161)
Less: Net (gains) losses on
foreign currencies (30) 37 53
Less: Net losses (gains) on
foreign currency loan 24 (235) (273)
Less: Overseas tax suffered (71) (149) (186)
----------- ----------- ---------------
781 512 341
(Increase) Decrease in debtors (208) (195) 59
(Decrease) Increase in creditors (320) (210) 76
----------- ----------- ---------------
Net cash inflow from operating
activities 253 107 476
----------- ----------- ---------------
Reconciliation of net cash flow
to movement in net debt
Net cash (outflow) inflow (95) 458 1,187
Drawdown of Euro loan (4,343) - -
Repayment of Euro loan - - 2,785
Foreign currency movements 6 198 220
----------- ----------- ---------------
Movement in net (debt) funds (4,432) 656 4,192
Net funds (debt) brought forward 2,308 (1,884) (1,884)
----------- ----------- ---------------
Net (debt) funds carried forward (2,124) (1,228) 2,308
----------- ----------- ---------------
Notes
Note 1
The return per Ordinary Share is based on a weighted average
number of shares in issue of 22,378,998 (31st May 2010: 23,537,659;
30th November 2010: 23,191,456).
Note 2
The total return column of this statement is the profit and loss
account of the Company.
All revenue and capital items derive from continuing operations.
No operations were acquired or discontinued in the period.
A Statement of Total Recognised Gains and Losses is not required
as all gains and losses of the Company have been reflected in the
Income Statement.
Note 3
Investments are designated as held at fair value through profit
or loss in accordance with FRS 26 'Financial Instruments:
Recognition and Measurement'. Listed investments are valued at bid
market prices.
Note 4
In accordance with FRS 21 'Events after the Balance Sheet Date',
the final dividend payable on Ordinary Shares is recognised as a
liability when approved by shareholders. Interim dividends are
recognised only when paid.
Dividends paid on Ordinary Shares in respect of earnings for
each period are as follows:
Six months to Six months to Year to
31st May 31st May 30(th) November
2011 2010 2010
GBP'000s GBP'000s GBP'000s
============================== ============= ============= ================
Interim dividend 1.40p paid
25th August 2010 - - 320
============================== ============= ============= ================
Final dividend 2.65p paid 4th
April 2011 (2010- 2.65p) 593 626 626
============================== ============= ============= ================
593 626 946
============================== ------------- ------------- ----------------
The above dividends are after adjusting for dividends proposed
but not paid, due to share buy backs.
Dividends payable at the period end are not recognised as a
liability under FRS 21 'Events after the Balance Sheet Date'.
Details of these dividends are set out below.
Six months Six months
to to Year to
31st May 31st May 30th November
2011 2010 2010
GBP'000s GBP'000s GBP'000s
Interim dividend 1.40p payable
25th August 2011 (2010: 1.40p) 311 323 -
Final dividend 2.65p - - 599
311 323 599
----------- ----------- --------------
The interim and final dividends above are based on the number of
shares in issue at the period end. However, the dividends payable
will be based on the number of shares in issue on the record date
and will reflect any purchases and cancellations of shares by the
Company settled subsequent to the period end.
Note 5
The Directors believe it is appropriate to continue to adopt the
going concern basis in preparing the financial statements, as the
assets of the Company consist mainly of securities which are
readily realisable and accordingly believe that the Company has
adequate financial resources to continue in operational existence
for the foreseeable future.
Note 6
The half-yearly financial report has neither been audited nor
reviewed by the Company's auditors. The financial information for
the year ended 30th November 2010 has been extracted from the
statutory financial statements for that year which have been
delivered to the Registrar of Companies. The accounting policies
and presentation are consistent with those applied in the latest
published financial statements. The auditors' report on those
financial statements was unqualified, did not contain an emphasis
of matter paragraph and did not contain a statement under Section
498 (2) or (3) of the Companies Act 2006.
In accordance the UK's disclosure requirements for listed
companies, the Company is required to make limited additional and
updated disclosures, mainly relating to the first and third
quarters of the financial year. These Interim Management Statements
are released via the Regulatory News Service and posted on the
Company's website www.chartereuropean.co.uk on or shortly before
19th April and 19th October each year.
The half-yearly financial report will be sent to shareholders in
mid July 2011 and will be available to members of the public from
the Company's registered office at 155 Bishopsgate, London EC2M
3AD.
For further information, please contact:-
Peter Ingram
Company Secretary
Tel: 020 7065 1467
This information is provided by RNS
The company news service from the London Stock Exchange
END
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