18th May 2020 11:56
(Alliance News) - Baillie Gifford European Growth Trust PLC on Monday reported a drop in net assets over the first half but is confident in its new investment manager's ability to perform amid the coronavirus pandemic.
At March 31, Baillie Gifford European's NAV per share stood at 817.7 pence, down 12% compared to 929.0p at September 30.
Over the six months, the trust's net assets dropped 21% to GBP296.2 million from GBP373.9 million. The trust ended the first half with 36.2 million shares in issue from 40.2 million at the start of the period.
Baillie Gifford European does not pay interim dividends.
In the first half, the trust's NAV total return was negative 10% but was able to outperform its benchmark - the FTSE Europe ex UK, in sterling, index - which lost 17% in the same period.
The trust noted it changed investment manager in the period, moving to Baillie Gifford 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 [Holdings PLC], being retained and 40 new ones bought. This was necessary to reposition the portfolio to growth equities," Chair Michael MacPhee said.
New manager Baillie Gifford said: "Holdings in the portfolio that performed well over the period included online food delivery service company Delivery Hero [SE], which made an attractive acquisition in South Korea; lab equipment provider Sartorius Stedim; and IT provider Bechtle. These companies have held up well during the crisis but, more importantly, benefit from structural growth that should endure long after the crisis has abated.
"Low-cost airline Ryanair, rubber compounder Hexpol, and oil and gas pipe manufacturer Tenaris [SA] were noticeably weak although this was unsurprising given the impact of Covid-19 on their respective industries and also the consequent oil price shock, particularly for Tenaris. Importantly though, each of these companies is well capitalised and stands to benefit from consolidation and market share gains from weaker competitors."
Baillie Gifford noted, however, it was a "very short period" to judge its performance.
"We do not know how or when the current crisis is going to end. What we do know is that, if we continue to find exceptional businesses run by people whom we trust, the impact from this most unfortunate crisis will be relatively insignificant in the context of longer-term returns," the manager added.
Shares in Baillie Gifford European Growth Trust were 1.8% higher in London on Monday at 875.50 pence each.
By Paul McGowan; [email protected]
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