The European Smaller Companies trust increased its net asset value by 12% and share price by 19.5% in the financial year to 30 June 2024, outperforming the sector.
Despite the company’s leap in share price, the trust continues to trade at a 10.8% discount, according to the Association of Investment Companies. Yet the European Smaller Companies trust has outperformed its sector and benchmark on a one, three, five, and 10-year basis.
In the past year, the benchmark returned a NAV of 10.1%, while the sector returned 7.9%, both behind the European Smaller Companies trust’s 12%. The trust also beat out the sector for share price, which averaged 11.1% to the trust’s 19.5%.
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Aiding in the narrowing of the trust’s discount was the repurchase of 6.4m shares over the course of the financial year, at an average price of 167.68p. Share price currently sits at 178.4p, up from 154p last year. The board has recommended a final dividend 3.35p per share, for a total dividend of 4.8p, up 2.1% from last year.
Christopher Casey, chairman of the European Smaller Companies trust, said: “It has been encouraging to see interest in the European smaller company arena return over the course of the year and the Company to have participated profitably from this trend. Inflation has been tamed though interest rates have yet to meaningfully decline.
“I stated last year that I considered inflation to be close to settling near target. This has proved to be true and we have begun to see interest rates reduce to more appropriate levels across the globe, but most importantly in the United States. This combined with reserve rate cuts and financial stimulus in China, is a welcome relief for the global economy and for European smaller companies.”
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The upcoming AGM will be Casey’s last as chair, as announced last October. He will be succeeded by James Williams, bringing over 30 years of experience. Simona Heidempergher will also be retiring from the board, with a search ongoing for a replacement.
Currently, the trust has its biggest holdings geographically in Germany (20.2%), France (12.7%), and the Netherlands (11.9%).
Fund managers Ollie Beckett, Rory Stokes and Julia Scheufler said: “Perception and reality do not always align. Much of what we do as a team is to look for companies that have a fundamental reality that is better than its perception in the stock market and to consider ways that this can change. In some respects, this is true of the European smaller company market in general. One country that firmly has a perception problem is Germany.
“An economic model dependent upon cheap Russian energy and Chinese demand meeting the impending demise of the internal combustion engine automobile appears to have some substantial problems. So it is gratifying to have found so many German businesses that have been able to prove the naysayers wrong and show the reality that there is some incredible innovation and great businesses in the country.”
