No respite for Jupiter Green investors – Jupiter Green’s results, covering the year ended 31 March 2019, offer little joy for its shareholders. the trust has underperformed its benchmark by 7.4% (returning -1.4% against 6.0% for the FTSE ET100 Total Return Index). The shares fell by 4.6% over the period, failing to react positively to a doubling of the dividend (achieved by paying out capital as well as income).
Shrinking assets
Shareholders were given the opportunity to subscribe for new ordinary shares on 1 April 2019 on the basis of one new ordinary share for every ten held. The subscription price was 191.31p. Subscriptions were received from shareholders resulting in the issue of 4,043 ordinary shares from treasury on this occasion. During the 12 months to 31 March 2019, the company issued 130,998 new ordinary shares and repurchased a total of 2,073,824 shares.
Extract from the manager’s report
“The key impediment to relative performance was the company’s positioning in the US, with both the portfolio’s underweight holding and stock selection detracting from relative returns. The portfolio has a natural underweight exposure in the US since the investment universe of environmental and sustainable solutions companies is relatively less prevalent there than other regions.
Within its US holdings, the company suffered some stock-specific disappointments, in particular United Natural Foods (UNFI) which lost value following news that it had bid for mainstream grocery distributor Supervalu. The company’s holding was sold given the strategic change and the pressure it placed on the company balance sheet. Elsewhere, key detractors included waste management company Renewi which disappointed after a weaker-than-expected performance update. Additionally, problems at a hazardous-waste treatment plant forced the business to lower both its profit guidance and proposed dividend. We engaged with management several times and believe the company is well placed to overcome its current issues. Horiba, a Japanese manufacturer of precision instruments for measurement and analysis, and Prysmian, an Italian manufacturer of electric power transmission and telecommunications cables and systems, also detracted from relative performance. A lack of exposure to index-heavyweight Tesla also impacted relative returns as the stock advanced over the 12-month period overall. It is worth noting, however, that the stock was volatile during the year, with strong performance periods often countered by weakness on concerns about the company’s business model, such as that seen towards the end of the period.
In contrast, making good returns for the company was recycling technology leader Tomra. The Norwegian company is one of a limited number of businesses actively providing solutions for the circular economy and the reduction of plastic waste. A new position in IPG Photonics, established during the market weakness in the final quarter of 2018, was beneficial. The company sells fibre lasers that are used in manufacturing and industrial processes and whose application significantly reduces energy consumption and waste material. Its core technologies are allowing for an increasing diversity of applications and underpin its strong prospects for long-term structural growth. IPG is one of several recent additions to the portfolio which added value during the period (SalMar, mentioned below, is another). Not holding Austrian sensor maker ams AG also had a positive impact on the company’s relative performance as shares fell sharply amid concerns over lower demand from a key customer.
In terms of transactions, we took profits and disposed of the company’s holding in Norwegian salmon business SalMar. SalMar benefitted from better pricing environment in 2018 which saw the investment increase some 83% within the year (Source: Jupiter). Although we think the long-term credentials in this sector are robust, we have exited our position reflecting our concerns that valuations in the sector, and in particular Salmar, have become too stretched in the medium term. We also took steps to consolidate certain industry exposures, for example, selling out of NSK in favour of the company’s holding in SKF, and disposing of Suez while retaining Veolia.
Against the wider global stock market, the company’s relative performance was impeded by having no exposure to large US technology companies which fall outside the company’s environmental and sustainable solutions remit. ”
[One effect of a shrinking fund has been an increase in the trust’s ongoing charges ratio. this hit 1.5%, up from 1.46%, for the accounting year ended 31 March 2019. The trust’s benchmark has changed over the years but, since 2009, the trust has underperformed in 2010, 2014, 2015, 2017 and 2019 and is 20% behind its benchmark over five years.]
JGC : No respite for Jupiter Green investors