JPMORGAN EUROPEAN GROWTH & INCOME PLC
FINAL RESULTS FOR THE YEAR ENDED
31ST MARCH 2024
The Directors of JPMorgan European Growth & Income plc announce the Company’s results
for the year ended 31st March 2024
HIGHLIGHTS
– Total return to shareholders 15.6% (Benchmark 12.7%)
– Return on net assets 16.8% (Benchmark 12.7%)
– Dividends per share 4.2p (2023:4.0p)
Legal Entity Identifier: 549300D8SPJFHBDGXS57
Information disclosed in accordance with DTR 4.1
CHAIR’S STATEMENT
Introduction
In this 12-month reporting period to 31st March 2024, I am delighted to report the Company continued to outperform its benchmark. In what remains a tricky backdrop of evolving inflation expectations and geopolitical difficulties, the Board believes the proposition of the Company is robust and effectively implemented, allowing the Investment Managers the freedom to navigate European markets, whilst delivering to our shareholders the best of capital growth combined with a consistent income.
During the reporting period the devastating conflicts in Ukraine and Gaza raged on engaging hearts and minds across the globe, either without an obvious long term solution on the horizon. Although neither war seems likely to engulf other nations, it is not impossible to create a scenario where both escalate quickly.
In Europe, muted economic growth has been the backdrop of this reporting period, which is unsurprising given the sharp increases in the level of interest rates in 2022 and 2023. But this has had the desired effect on inflation, with rapid declines observed during the last 12 months. The worries early in the reporting period regarding a wider fallout from the failure of Credit Suisse and of a ‘hard landing’ for global economies seem to have eased. However, Germany, Europe’s largest economy, has been particularly affected by the economic slow down of China and continuing trade tensions with China, which is an important market for many European companies, lurks in the background. Despite this melting pot of machinations, European stock markets have shrugged off these issues producing healthy returns over the period.
Performance
Return on net assets (NAV) and return to shareholders
For the Company’s financial year ended 31st March 2024 the total return on net assets was +16.8% (debt at fair value). This was an outperformance of 4.1% over its benchmark, which returned +12.7%. Strong relative stock selection was the main reason for this. In their Report on page 12 of the Company’s annual report and financial statements, the Investment Managers review in more detail some of the factors underlying the performance of the Company as well as commenting on the economic and market background over the period in question.
The total return to shareholders, which takes into account the movement of the share price, over the 12 months delivered a return of +15.6%, which was also an outperformance of the benchmark although by a smaller margin than the net assets performance.
For an explanation of the calculation of the Company’s total return on net assets and the total return to shareholders, please see the Glossary of Terms and Alternative Performance Measures on page 99 of the Company’s annual report and financial statements.
The Company’s restructuring in February 2022 has resulted in some of the performance and dividend data for periods prior to this reporting period being calculated on a transitional basis as detailed in various footnotes throughout this report.
Revenue and Dividends
During the 12 months to 31st March 2024, the Company’s net revenue attributable to shareholders (net return after taxation) was 10.8% higher at £13,683,000 (2023: £12,354,000) following the trajectory of the Company’s performance.
As detailed in the Company’s previous annual report, an aim of the Company’s restructuring was to provide shareholders with a predictable dividend income at a level that is consistent and frequent, based on 4% of the preceding year end net asset value per share. The Company pays quarterly dividends in July, October, January and March. In line with the above aim, in respect of the year ending 31st March 2024, the Company’s dividend was 4.2 pence per share, amounting to £18.1 million. This represents an increase from the £17.4 million paid in 2023, as illustrated in note 10(b) on page 75 of the Company’s annual report and financial statements.
For the Company’s financial year ending 31st March 2025 the Board is expecting to adopt the same approach with 4% of the net asset value per share as at 31st March 2024 being paid as dividend for the year ending 31st March 2025.
On 21st May 2024, the Board declared a first interim dividend of 1.2 pence per share in respect of the financial year ending 31st March 2025, payable on 5th July 2024. As was the case for the Company’s dividends in respect of the year ended 31st March 2024, to the extent that brought forward revenue reserves are not sufficient, dividends will be paid from distributable capital reserves for the financial year ending 31st March 2025, as permitted by the Company’s Articles.
Gearing
There has been no change in the Investment Manager’s permitted gearing range, as previously set by the Board, of between 10% net cash to 20% geared. At 31st March 2024 the Company was 4.5% geared (31st March 2023: 3.1%).
Discounts, Share Issuance and Repurchase
During the period under review, the average discount across the Investment Trust sector has remained at gaping levels. Although the initial widening was indiscriminate, particular signs of stress is evident in those Trusts with significant alternative investments with worries over liquidity, realisation and valuation of the underlying positions. The Board remain confident in the liquidity and transparency of the markets in which your Company invests, however we remain alive to dislocations beyond our comfort levels, addressing imbalances in the supply of and demand for the Company’s shares through a buy-back of shares. The Board does not wish to see the discount widen beyond 10% under normal market conditions (using the cum-income NAV with debt at fair) on an ongoing basis. The precise level and timing of repurchases is dependent on a range of factors including prevailing market conditions. In the period under review, 5,268,397 Ordinary shares were bought into Treasury. From 1st April 2024 to 29th May 2024, 200,000 Ordinary shares were bought into Treasury. No Ordinary shares were issued.
The Company’s Ordinary share discount as at 31st March 2024 was 12.1% to NAV with debt at fair value. The average discount of a peer group of six companies as at the same date was 10.0%. On 29th May, 2024, the Company’s Ordinary share discount was 10.3%, which compares to an average discount of the same peer group of 8.7% as at the same date, though this hides variation in strategy and performance across the sector. It also masks the corporate activity that has occurred in the sector this past year which your Board is conscious of monitoring thoughtfully for any implications for the Company.
Marketing and Shareholder Interaction
The Company continues to raise its profile with shareholders and potential investors. It is the Board’s view that enhancing the Company’s profile will benefit all shareholders, by creating sustained demand for its shares, thereby improving liquidity and scale. Our range of activity is broad seeking to showcase the Company to as wide a relevant audience as possible. The Manager follows an established marketing and investor relations programme targeting institutions, private client stockbrokers and platforms via video conferences, podcasts and in-person meetings. Additionally, we have on-going interaction with national and investment industry journalists demonstrating the knowledge and insight of our managers.
We are careful to undertake this promotional activity in the most effective and controlled manner.
The Board and the Investment Managers maintain a dialogue with the Company’s shareholders via regular email updates, which deliver news and views, and discuss the latest performance. If you have not already signed up to receive these communications and you wish to do so, you can opt in via https://tinyurl.com/JEGI-Sign-Up or by scanning the QR code in the margin.
It is the Board’s hope that these initiatives will give many more of the Company’s investors and potential shareholders the opportunity to interact with the Board and Investment Managers.
As referred to in my report included in the Company’s half year report released in November 2023, I am delighted that the Company was voted the best investment company in the European sector at the annual AIC Investment Week Award ceremony held during the year. The judges commended the Company’s performance and the benefits provided by its simplified and shareholder focused structure.
Board of Directors
The Board are delighted that, as previously announced, Andrew Robson was appointed as an independent Non-executive Director of the Company on 6th February 2024. The intention is that Andrew will be appointed as the Company’s Audit Committee Chair when Jutta af Rosenborg, the current incumbent, retires at the Company’s next Annual General Meeting, scheduled for 3rd July 2024.
During the year, the Board evaluation process reviewed Directors, the Chair, the Committees and the working of the Board as a whole. It was concluded that all aspects of the Board and its procedures were operating effectively. In accordance with corporate governance best practice, all of the Directors retire by rotation at this year’s AGM and will offer themselves for re-election/election.
Environmental, Social and Governance
The Board shares the Investment Managers’ view of the importance of taking into account the financial impact of ESG considerations in their investment process and of the necessity of continued engagement with investee companies throughout the duration of the investment.
Investment Managers
The performance of the Investment Managers is formally evaluated by the Board annually. The evaluation of the Manager was undertaken in January 2024 and based on the data available at that time; the Board concluded that the performance of the Manager was of a high standard and that their services in the new restructured format should be retained.
Annual General Meeting
The Company’s ninety fifth Annual General Meeting (AGM) will be held at 60 Victoria Embankment, London EC4Y 0JP at 2.30 p.m. on Wednesday, 3rd July 2024. We are pleased to invite shareholders to join us in-person for the Company’s AGM, hear from the Investment Managers and ask questions. Shareholders wishing to follow the AGM proceedings but choosing not to attend in person will be able to view proceedings live and ask questions (but not vote) through conferencing software. Details on how to register, together with access details, will be available shortly on the Company’s website at www.jpmeuropeangrowthandincome.com or by contacting the Company Secretary at invtrusts.cosec@jpmorgan.com
If you hold your shares via an online platform, for further details of how to vote your shares and/or attend the Company’s AGM, please see the ‘Investing in JPMorgan European Growth & Income plc’ on page 103 of the Company’s annual report and financial statements.
My fellow Board members, representatives of JPMorgan and I look forward to the opportunity to meet and speak with shareholders after the formalities of the meeting have been concluded. Shareholders who are unable to attend the AGM are strongly encouraged to submit their proxy votes in advance of the meeting, so that they are registered and recorded at the AGM. Proxy votes can be lodged in advance of the AGM either by post or electronically: detailed instructions are included in the Notes to the Notice of Annual General Meeting on pages 95 to 98 of the Company’s annual report and financial statements.
If there are any changes to these arrangements for the AGM, the Company will update shareholders via the Company’s website and an announcement on the London Stock Exchange.
Outlook
Despite the backdrop of geopolitical conflicts and uncertainty over the trajectory of inflation, the Euro zone has remained relatively resilient. For the first quarter of 2024 economic growth in the Euro zone was higher than expected helped by an improved performance from the economies of Germany and some of the zone’s southern European countries. Inflation has fallen rapidly, though the rate of decline has eased somewhat with a resilient labour market and rising consumer sentiment, suggesting interest rate reductions by the ECB are likely to be later than expected. With an unprecedented number of elections around the world this year, the near term could hold significant regime change. Throw in the emergence of generative AI impacting corporate business models and there is a lot to be mindful of.
It is your Board’s belief the merits of investing in European stock markets are yet to be fully realised. Europe has truly world class companies attractively valued particularly in relation to the US equity market. This continues to present an exciting opportunity on which our Investment managers remain focussed. As always dedication to delivering good returns through careful stock selection and a diversified portfolio remain core to the approach. The Board remain confident in the abilities of the Investment Managers to do so.
For and on behalf of the Board
Rita Dhut
Chair
31st May 2024