Baillie Gifford European Growth (BGEU) has posted interim results to 31 March 2020. Over the six month period, the company’s NAV total return was (10.0)% compared to a total return of (17.0)% for the FTSE Europe ex UK index, in sterling terms. The share price total return for the same period was (0.9)%.
Over the four months to end March, being the period under the management of Baillie Gifford, the company’s NAV total return was minus 10.7% compared to a total return of minus 17.0% for the FTSE Europe ex UK index, in sterling terms. The share price total return for the same period was (7.3%). Baillie Gifford took over management of the trust last November, from Edinburgh Partners.
Following the move to Baillie Gifford, the portfolio was reorganised extensively in the first half of December, with only one holding, Ryanair, being retained and 40 new ones bought. This was necessary to reposition the portfolio to growth equities; Baillie Gifford having built its reputation as a growth investor. BGEU notes that the cost of the portfolio restructuring was a little over 1% of the company’s net asset value.
Dividend and Expense Allocation Policy – focus is now on capital growth
Michael MacPhee, chairman of BGEU, noted: “The final dividend of 21.5p was paid on 31 January 2020 to all shareholders on the register at the close of business on 3 January 2020. As flagged in the Annual Report, following the move to Baillie Gifford, the company’s dividend policy has been changed such that no interim dividend will be paid, and any annual dividend will be paid only to the extent needed for the company to maintain its investment trust status.
In March, the company announced a change to its expense allocation policy as the revised investment objective explicitly seeks to achieve capital growth. Effective 1 April 2020, the allocation policy has been amended to 80% to capital and 20% to revenue to replace the prior policy of two-thirds to capital and one-third to revenue. This change is in line with the board’s continued aim of matching expenses against the estimated division of the company’s long-term returns.”
Michael went on to note: “Europe is home to some of the world’s most impressive, investor-friendly and well-aligned growth companies. Despite the uncertain backdrop, the portfolio managers remain focused on finding the companies that will progress through current events and emerge with an even more dominant position and strong prospects. In some ways, and for some businesses, this crisis could be described as accelerating our path towards a likely future. Stock market volatility is providing investment opportunities at attractive valuations and the portfolio now has invested gearing of around 4%.”
BGEU: Baillie Gifford European Growth reports first results since change of management