JPMorgan European Growth & Income (JEGI) has released its annual report for the year ended 31 March 2023. The total return on net assets for the company’s ordinary shares was +9.9% (debt at par value) and +12.5% (debt at fair value). Both of these returns compare well with its benchmark, MSCI Europe ex UK, which generated a total return of +8.6% in sterling. The total return to shareholders for the company’s ordinary shares was +16.0%. JEGI currently trades on a 9.1% discount, slightly wider than the peer group average.
JEGI’s dividend policy is to pay 4% of its NAV as a dividend, based on the preceding year’s end NAV, and paid a total dividend of 4p per share for the year ending 31 March 2023. On 23rd May 2023, the board declared a first interim dividend of 1.05 pence per share in respect of the financial year ending 31st March 2024 (which indicates a possible full year dividend of 4.2p per share).
2022 was also the last financial year for JEGI’s previous char, Josephine Dixon, with the current chair, Rita Dhut, taking over in September 2022.
Discussing the portfolio performance and positioning, the investment manager commented:
“As equity markets derated in the early part of the year, the earnings recovery gave us conviction in re-building positions in some of the more cyclical parts of the market. This included stocks within the capital goods and automobile sectors, while we remained overweight in semiconductor stocks. A common theme around many of the companies in these sectors was their ability to demonstrate pricing power. We also reduced our underweight to retail by starting a position in Inditex, the fashion retailer which owns brands such as Zara and Massimo Dutti. We funded some of these positions from areas of the market where we had lower conviction. This included some stocks within materials, where higher input costs became more of an issue, as well as pharmaceuticals, where despite valuation support some of the stocks lacked positive catalysts.”
Regarding the outlook, chair Rita Dhut added:
“During the Company’s financial year the general market continued to be buffeted by significant challenges, although at the start of the current calendar year global markets were performing well following China’s emergence from its zero-Covid policy and the prospect of peaking inflation and interest rates. However, in recent months this enthusiasm has been swiftly dampened by the challenges to the financial system caused by the failure of a number of regional banks in the US and also of Credit Suisse in Switzerland. The duration of inflationary pressures is uncertain despite the reduction in energy prices in recent months. The extent of interest rate rises by the European Central Bank, along with counterparts elsewhere in the world leaves commentators unclear as to the impact on consumer confidence and the potential severity of a possible global recession. We hope to see an easing in the tragic events taking place in Ukraine, but it seems likely that the future will offer much uncertainty and continued volatility in asset markets, with tensions with China adding to the concerns around geopolitical risks.
“Despite these challenges the Board has confidence that the Company’s Investment Managers have the requisite experience to navigate such a tricky environment by continuing to adhere to a proven investment process. In addition, the Board shares the Investment Managers’ optimism for European equities in the long term. The Board believes the new structure and objective of the Company provides shareholders with the potential for both strong capital returns and enhanced income through a well constructed portfolio of European equities.”
JEGI : Growth rebound drives premium for JPMorgan European Growth & Income