TIDMJPB
RNS Number : 5505W
JPMorgan Brazil Investment Trust
11 December 2019
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN BRAZIL INVESTMENT TRUST PLC
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHSED
31ST OCTOBER 2019
Legal Entity Identifier: 5493002T5BE3YCTKTE20
Information disclosed in accordance with DTR 4.2.2
CHAIRMAN'S STATEMENT
Introduction and Performance
While the global economic climate deteriorated further during
the first six months of this financial year amid ongoing
geopolitical and macro economic concerns, returns from global
equity markets, and in particular Brazilian equities were strong.
The Company recorded a total return on net assets for the reporting
period of +12.0%, compared with the benchmark, the MSCI 10/40 Index
(in sterling terms) which recorded a return of +11.8% for the same
period. The share price return to Ordinary shareholders was +11.3%,
reflecting the slight widening of the share price discount to net
asset value. At 31st October 2019, the share price was trading at a
discount of 18.3%, compared to 17.7% as at 30th April 2019.
The outperformance was mainly attributable to asset allocation,
most significantly in the financials and healthcare sectors.
The Investment Managers' Report gives a more detailed commentary
about the markets and conditions experienced during this period and
the outlook for the remainder of the financial year.
Share repurchases
During the six months to 31st October 2019, the Company did not
repurchase any shares. The Board will continue to monitor the
absolute level of discount at which the share price trades relative
to NAV and the volatility of the discount. Since 1st May 2019, the
share price discount to NAV to date has ranged between 12.0% and
24.8%, averaging 18.4%.
Continuation vote
As reported in my statement in the last Annual Report and
following the successful passing of the continuation resolution at
the Annual General Meeting ('AGM') in September this year, the
Board will voluntarily propose another continuation vote to
shareholders no later than the next AGM in September 2020, at which
point shareholders will have the opportunity to consider the future
of the Company in the light of circumstances at that time.
Outlook
Following the successful votes in Congress in relation to
pension reform, there are signs that the momentum exists to move on
to other aspects of the reforms that are necessary if Brazil is to
return to a healthier rate of economic growth. There remain
significant risks - political, with President Bolsonaro's decision
to set up a new political party and the influence that former
President Lula may have following his release from prison pending
his appeal against conviction on corruption charges; and economic,
with the threat of trade wars, the weakness of the Brazilian
currency and the threat to ratification of the EU-Mercosul
agreement as a result of climate change issues. But the outlook for
corporate earnings is good and the investment managers will
continue to seek high quality, reasonably priced companies with
good growth prospects for investment in the Company's
portfolio.
Howard Myles
Chairman 11th December 2019
INVESTMENT MANAGERS' REPORT
Market background
Despite the negative news during the period, including on
tariffs, global stock market returns exceeded expectations, with
Brazilian equities outshining most other markets. A policy
about-turn by central banks lies behind markets' progress. The US
Federal Reserve and the world's other central banks had been
expected to raise interest rates this year, thereby tightening
liquidity and normalising monetary policy. However, taking note of
the perilous global economic outlook, the Fed held fire and went on
to cut rates three times in 2019, with other global policy makers
following suit. In Brazil, the Banco Central's rate-setting
committee reduced rates to an all-time low of 5%, with expectations
that they could fall further to 4.5%. This, coupled with low
inflation and a more stable political backdrop, set a cautiously
optimistic tone for Latin America's largest economy.
Domestically, public support of the Brazilian government boosted
markets. We are now nearly one year into the Jair Bolsonaro
presidential era, following the Social Liberal Party's victory in
the elections of October 2018. The emphatic election result set an
optimistic tone that a Bolsonaro government would be able to
deliver on its commitment towards fiscal and structural reform, so
pivotal to Brazil's future economic growth trajectory. Although an
initial market rally was short-lived, Brazilian markets have
maintained their upward momentum during the Company's review
period. Brazil's economic situation remains tepid, but market
sentiment has been boosted by the passing of long-awaited pension
reforms that had undergone a torturous journey of political
deadlock and delay going back many years, together with signs of
progress being made on social security and taxation reforms.
Portfolio review and spotlight on stocks
Despite the testing global and domestic economic backdrop, this
has been a period of strong performance for the Company with its
net asset value rising by 12.0% over the six months to 31st October
2019, ahead of the benchmark index, the MSCI Brazil 10/40 which
rose by 11.8%. Our portfolio exposure remains tilted in favour of
domestic themes and those stocks poised to benefit from strong
domestic growth as and when this potential is realised. Even though
we look beyond short-term results and our strategy is very much
based on a long-term view, we are pleased that performance appears
to have 'turned a corner' over the review period, delivering both
absolute and relative returns.
By sector, Financials remains the Company's largest by some
distance and our overweight position relative to the benchmark
index contributed to performance overall, albeit with exceptions.
Our investments in IRB Brasil RE (Latin America's largest
reinsurance company) and in SulAmérica, (Brazil's second largest
insurance company) were particularly positive.
Our longstanding underweight exposure to Materials benefitted
relative performance whilst investments in Healthcare (primarily
Hapvida) and Information Technology (primarily PagSeguro Digital)
were helpful. In contrast, our investments in the Consumer
Discretionary and Consumer Staples sectors detracted overall.
Hapvida is one of Brazil's largest health operators. In May
2019, it announced the acquisition of Grupo Sao Francisco (SF),
marking the company's expansion into Brazil's South East and
Central West regions. Hapvida announced strong quarterly results to
the end of June, with net revenue, net income and plan participant
numbers all up sharply. PagSeguro Digital (PSD) provides payment
processing hardware, software and business services and delivered
impressive sales and earnings results. Early in 2019 the company
announced that it had secured a banking license, enabling it to
offer a range of new financial services products to previously
untapped segments of the population.
Raia Drogasil (RD) is one of the Company's long-standing
investments. It is the largest and fastest growing pharmacy
operator in Brazil, with more than 1,900 stores across 22 states.
RD's share price performed strongly, as it demonstrated a
productivity edge over its peers. B3 is one of the world's largest
financial market infrastructure companies. It is our largest
holding and one that we rate extremely highly from a strategic
perspective. Our underweight position in Vale, the world's largest
iron ore producer, was beneficial over the period. The stock was
weakened by lower iron ore prices as global demand softened, not
helped by the trade dispute between the US and China.
However, in what was a pleasing period overall for the Company,
there were some performance detractors. One of these was our
overweight position in BK Brasil, the master franchisee of Burger
King. The stock's share price fell in the face of increasing
competition from its main competitor - Arcos Dorado (and
consequently falling prices) in its market segment.
Banco Bradesco also disappointed. Although results were broadly
in-line with market expectations, the bank's costs were higher than
expected and targets were missed.
In regard to key portfolio shifts, these were largely stocks
that we chose to rotate following positive market performance or
where our expectation for future returns shifted. Banco Bradesco
fell into the latter category and we trimmed our exposure. We added
marginally to our holding in reinsurance firm IRB by participating
in its share offering, at a discount to the market price.
Moving to Consumer stocks, we added to Latin America's largest
brewing company Ambev on the back of positive trends and an
encouraging meeting with management.
We exited automobile components manufacturer Iochpe-Maxion,
reinvesting the proceeds in Randon, a trailer and auto parts
manufacturer.
We invested in Magazine Luíza, one of Brazil's largest retailers
and fast becoming one of its leading e-commerce providers.
We invested in BTG Pactual, a financial services company with a
dominant franchise across Latin America. We have also added to our
holdings in the Real Estate sector in recent months with a position
in EzTec, although our exposure remains underweight relative to the
benchmark.
Outlook: positive signs but still room for caution
Although our future expectations have improved, business
sentiment remains fragile and we think it will take some time for
the dust to settle. The most important risks in the short term
remain slowing global growth, trade tensions and a stubbornly
strong US dollar. Investors will need to remain patient until the
global economic tide turns.
For many months, all eyes had been fixed on Brazil's pension
reform bill. Its recent passing is a significant victory for the
Bolsonaro administration and testament to a government committed to
transforming the Brazilian economy through both macro and
micro-economic reforms. The social security reform was finally
approved in Congress after eight months of discussion. Now,
expectations are building on the delivery of a set of
government-led measures to contain spending as well as budget
planning, administrative reforms and privatisations. Tax reform is
also on the agenda; however, we are not too optimistic of achieving
a very comprehensive reform due to the complexity of the debate. We
are likely to see layers of tax reform achieved, but not an
overhaul of the system.
Brazil's Central Bank has forecast economic growth of just 0.9%
for 2019, adding that the outlook is subject to a 'high degree of
uncertainty'. Nevertheless, at the operational level, Earnings Per
Share (EPS) statistics have delivered growth this year and this
should continue next year in double digits. Brazil has been one of
the few emerging markets to deliver positive earnings figures and
in the current environment where earnings are challenged, we will
continue looking for stocks where we see the potential for earnings
growth recovery.
There are positives: data on the Brazilian economy continues to
show signs of recovery, albeit slowly. GDP growth in the third
quarter of 2019 and Industrial Production figures in November have
surpassed expectations. The economic slack in the economy and low
inflation have allowed the Banco Central to cut interest rates and
signal that more cuts will follow. Privatisations are planned for
several state-owned entities and the Bolsonaro government's more
pro-business stance should fuel growth. Unemployment has nudged
downwards in recent months, having risen in the first quarter of
2019.
Our portfolio is positioned for a recovery in the domestic
economy, with the positive momentum of the reformist agenda fueling
confidence in both consumer demand and levels of investment.
Although valuations have increased over the review period, the
lower rate environment justifies a premium valuation for stocks
that show stable growth, and we still believe that our investment
process can uncover fundamentally sound businesses with good
long-term prospects to deliver solid shareholder returns. We are
pleased that our strategy has been successful over the current
reporting period and we will continue to view sentiment shifts and
market setbacks as opportunities to buy into new stocks or to add
to existing high-conviction holdings. We will adhere to this
approach whilst maintaining a balanced risk profile.
Luis Carrillo
Sophie Bosch De Hood
Investment Managers 11th December 2019
INTERIM MANAGEMENT REPORT-
The Company is required to make the following disclosures in its
half year report:
Principal Risks and Uncertainties
The principal risks and uncertainties faced by the Company have
not changed and fall into the following broad categories:
investment and strategy; market; accounting, legal and regulatory;
corporate governance and shareholder relations; operational and
financial. Information on each of these areas is given in the
Directors' Report within the Annual Report and Accounts for the
year ended 30th April 2019.
Related Parties Transactions
During the first six months of the current financial year, no
transactions with related parties have taken place which have
materially affected the financial position or the performance of
the Company.
Going Concern
The Directors believe, having considered the Company's
investment objectives, risk management policies, capital management
policies and procedures, nature of the portfolio and expenditure
projections, that the Company has adequate resources, an
appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the
foreseeable future. More specifically, the Directors believe that
there are no material uncertainties pertaining to the Company that
would prevent its ability to continue in such operation existence
for at least twelve months from the date of the approval of this
half yearly financial report, subject to the outcome of the
continuation vote to be proposed no later than September 2020. For
these reasons, they consider there is reasonable evidence to
continue to adopt the going concern basis in preparing the
accounts.
Directors' Responsibilities
The Board of Directors confirms that, to the best of its
knowledge:
(i) the condensed set of financial statements contained within
the half yearly financial report has been prepared in accordance
with FRS 104 'Interim Financial Reporting' and gives a true and
fair view of the state of affairs of the Company and of the assets,
liabilities, financial position and net return of the Company, as
at 31st October 2019, as required by the UK Listing Authority
Disclosure and Transparency Rules 4.2.4R; and
(ii) the interim management report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the UK Listing
Authority Disclosure and Transparency Rules.
In order to provide these confirmations, and in preparing these
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business;
and the Directors confirm that they have done so.
For and on behalf of the Board
Howard Myles
Chairman 11th December 2019
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 31ST OCTOBER 2019
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st October 2019 31st October 2018 30th April 2019
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Gains/(losses) on
investments
held at fair value
through
profit or loss - 3,147 3,147 - (442) (442) - 495 495
Net foreign currency
(losses)/gains - (10) (10) - 9 9 - (40) (40)
Income from investments 327 - 327 346 - 346 883 - 883
Interest receivable
and
similar income 5 - 5 2 - 2 6 - 6
------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Gross return/(loss) 332 3,137 3,469 348 (433) (85) 889 455 1,344
Management fee (145) - (145) (86) - (86) (155) - (155)
Other administrative
expenses (139) - (139) (138) - (138) (331) - (331)
------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net return/(loss)
before taxation 48 3,137 3,185 124 (433) (309) 403 455 858
Taxation (17) - (17) (32) - (32) (70) - (70)
------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net return/(loss)
after taxation 31 3,137 3,168 92 (433) (341) 333 455 788
------------------------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Return/(loss) per
share
(note 3) 0.09p 9.36p 9.45p 0.28p (1.29)p (1.01)p 0.99p 1.36p 2.35p
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the period.
The 'Total' column of this statement is the profit and loss
account of the Company and the 'Revenue' and 'Capital' columns
represent supplementary information prepared under guidance issued
by the Association of Investment Companies.
The net return/(loss) on ordinary activities after taxation
represents the profit/(loss) for the period/year and also total
comprehensive income.
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 31ST OCTOBER 2019
Called Capital
up
share Share redemption Other Capital Revenue
capital premium reserve reserve reserves reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- ----------- -------- ---------- ----------- --------
Six months ended 31st
October 2019
(Unaudited)
At 30th April 2019 617 16,149 13 26,482 (18,131) 1,040 26,170
Net return - - - - 3,137 31 3,168
Dividend paid in the
period (note 4) - - - - - (268) (268)
----------------------- -------- -------- ----------- -------- ---------- ----------- --------
At 31st October 2019 617 16,149 13 26,482 (14,994) 803 29,070
----------------------- -------- -------- ----------- -------- ---------- ----------- --------
Six months ended 31st
October 2018
(Unaudited)
At 30th April 2018 617 16,149 13 26,482 (18,586) 975 25,650
Net (loss)/return - - - - (433) 92 (341)
Dividend paid in the
period (note 4) - - - - - (268) (268)
----------------------- -------- -------- ----------- -------- ---------- ----------- --------
At 31st October 2018 617 16,149 13 26,482 (19,019) 799 25,041
----------------------- -------- -------- ----------- -------- ---------- ----------- --------
Year ended 30th April
2019
(Audited)
At 30th April 2018 617 16,149 13 26,482 (18,586) 975 25,650
Net return - - - - 455 333 788
Dividend paid in the
year (note 4) - - - - - (268) (268)
----------------------- -------- -------- ----------- -------- ---------- ----------- --------
At 30th April 2019 617 16,149 13 26,482 (18,131) 1,040 26,170
----------------------- -------- -------- ----------- -------- ---------- ----------- --------
(1) This reserve forms the distributable reserve for the Company
and may be used to fund distribution of profits to investors via
dividend payments.
STATEMENT OF FINANCIAL POSITION AT 31ST OCTOBER 2019
(Unaudited) (Unaudited) (Audited)
31st October 31st October 30th April
2019 2018 2019
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------- ------------- -----------
Fixed assets
Investments held at fair value through
profit or loss 28,396 24,775 25,686
Current assets
Derivative financial assets - 1 -
Debtors 97 333 249
Cash and cash equivalents 635 5 346
---------------------------------------- ------------- ------------- -----------
732 339 595
Current liabilities
Creditors: amounts falling due within
one year (58) (73) (111)
---------------------------------------- ------------- ------------- -----------
Net current assets 674 266 484
---------------------------------------- ------------- ------------- -----------
Total assets less current liabilities 29,070 25,041 26,170
---------------------------------------- ------------- ------------- -----------
Net assets 29,070 25,041 26,170
---------------------------------------- ------------- ------------- -----------
Capital and reserves
Called up share capital 617 617 617
Share premium 16,149 16,149 16,149
Capital redemption reserve 13 13 13
Other reserve 26,482 26,482 26,482
Capital reserves (14,994) (19,019) (18,131)
Revenue reserve 803 799 1,040
---------------------------------------- ------------- ------------- -----------
Total shareholders' funds 29,070 25,041 26,170
---------------------------------------- ------------- ------------- -----------
Net asset value per share (note 5) 86.7p 74.7p 78.1p
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 31ST OCTOBER 2019
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended
31st October 31st October 30th April
2019 2018 2019
GBP'000 GBP'000 GBP'000
-------------------------------------------- ------------- ------------- -----------
Net cash outflow from operations before
dividends received and
interest (263) (250) (546)
Dividends received 383 348 749
Interest received 5 2 6
-------------------------------------------- ------------- ------------- -----------
Net cash inflow from operating activities 125 100 209
-------------------------------------------- ------------- ------------- -----------
Purchases of investments (3,983) (3,131) (10,421)
Sales of investments 4,417 2,992 10,525
Settlement of foreign currency contracts (2) (4) (15)
-------------------------------------------- ------------- ------------- -----------
Net cash inflow/(outflow) from investing
activities 432 (143) 89
-------------------------------------------- ------------- ------------- -----------
Dividends paid (268) (268) (268)
-------------------------------------------- ------------- ------------- -----------
Net cash outflow from financing activities (268) (268) (268)
-------------------------------------------- ------------- ------------- -----------
Increase/(decrease) in cash and cash
equivalents 289 (311) 30
-------------------------------------------- ------------- ------------- -----------
Cash and cash equivalents at start of
period 346 316 316
Cash and cash equivalents at end of
period 635 5 346
-------------------------------------------- ------------- ------------- -----------
Increase/(decrease) in cash and cash
equivalents 289 (311) 30
-------------------------------------------- ------------- ------------- -----------
Cash and cash equivalents consist of:
Cash and short term deposits 136 5 64
Cash held in JPMorgan US Dollar Liquidity
Fund 499 - 282
-------------------------------------------- ------------- ------------- -----------
Total 635 5 346
-------------------------------------------- ------------- ------------- -----------
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 31ST OCTOBER 2019
1. Financial statements
The information contained within the financial statements in
this half year report has not been audited or reviewed by the
Company's auditors.
The figures and financial information for the year ended 30th
April 2019 are extracted from the latest published financial
statements of the Company and do not constitute statutory accounts
for that year. Those financial statements have been delivered to
the Registrar of Companies and including the report of the auditors
which was unqualified and did not contain a statement under either
section 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
The financial statements have been prepared in accordance with
the Companies Act 2006, FRS 102 'The Financial Reporting Standard
applicable in the UK and Republic of Ireland' of the United Kingdom
Generally Accepted Accounting Practice ('UK GAAP') and with the
Statement of Recommended Practice 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts' (the revised
'SORP') issued by the Association of Investment Companies in
November 2014 and updated in October 2019.
FRS 104, 'Interim Financial Reporting', issued by the Financial
Reporting Council ('FRC') in March 2015 has been applied in
preparing this condensed set of financial statements for the six
months ended 31st October 2019.
All of the Company's operations are of a continuing nature.
The accounting policies applied to this condensed set of
financial statements are consistent with those applied in the
financial statements for the year ended 30th April 2019.
3. Return/(loss) per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st October 2019 31st October 30th April
2018 2019
GBP'000 GBP'000 GBP'000
----------------------------- ------------------ ----------------- -----------
Return/(loss) per share
is based on the following:
Revenue return 31 92 333
Capital return/(loss) 3,137 (433) 455
----------------------------- ------------------ ----------------- -----------
Total return/(loss) per
share 3,168 (341) 788
----------------------------- ------------------ ----------------- -----------
Weighted average number
of shares in issue during
the period 33,524,854 33,524,854 33,524,854
Revenue return per share 0.09p 0.28p 0.99p
Capital return/(loss) per
share 9.36p (1.29)p 1.36p
----------------------------- ------------------ ----------------- -----------
Total return/(loss) per
share 9.45p (1.01)p 2.35p
----------------------------- ------------------ ----------------- -----------
4. Dividends paid
(Unaudited) (Unaudited) (Audited)
Six months Six months ended Year ended
ended
31st October 31st October 30th April
2019 2018 2019
GBP'000 GBP'000 GBP'000
-------------------------------- ------------- ----------------- -----------
Final dividend in respect of
the year ended
30th April 2019 of 0.8p (2018:
0.8p) 268 268 268
-------------------------------- ------------- ----------------- -----------
All dividends paid in the period/year have been funded from the
Revenue Reserve
5. Net asset value per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st October 31st October 30th April
2019 2018 2019
--------------------------- ----------------- ----------------- -----------
Net assets (GBP'000) 29,070 25,041 26,170
Number of shares in issue 33,524,854 33,524,854 33,524,854
--------------------------- ----------------- ----------------- -----------
Net asset value per share 86.7p 74.7p 78.1p
--------------------------- ----------------- ----------------- -----------
JPMORGAN FUNDS LIMITED
11th December 2019
For further information, please contact:
Divya Amin
For and on behalf of
JPMorgan Funds Limited, Secretary
020 7742 4000
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.
JPMORGAN FUNDS (UK) LIMITED
ENDS
A copy of the half year will be submitted to the National
Storage Mechanism and will shortly be available for inspection at
www.morningstar.co.uk/uk/NSM
The half year will also shortly be available on the Company's
website at www.jpmbrazil.co.uk where up to date information on the
Company, including daily NAV and share prices, factsheets and
portfolio information can also be found.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BDBDDLXBBGCB
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December 11, 2019 08:00 ET (13:00 GMT)
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