Final Results
10/10/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20241010:nRSJ6154Ha&default-theme=true
RNS Number : 6154H European Smaller Companies Tst PLC 10 October 2024
Legal Entity Identifier: 213800N1B1HCQG2W4V90
This announcement contains regulated information
THE EUROPEAN SMALLER COMPANIES TRUST PLC
Financial results for the year ended 30 June 2024
Investment Objective
The Company seeks capital growth by investing in smaller and medium sized
companies which are quoted, domiciled, listed or have operations in Europe (ex
UK).
Total return performance to 30 June 2024
(including dividends reinvested and excluding transaction costs)
1 year 3 years 5 years 10 years
% % % %
NAV(1,5) 12.0 2.9 73.3 200.4
Benchmark(2) 10.1 0.2 37.2 128.0
Average sector NAV(3) 7.9 -7.5 40.3 155.8
Share price(4,5) 19.5 4.5 82.8 211.7
Average sector share price(3,4,5) 11.1 -8.7 40.1 153.7
Financial highlights at 30 June 2024 at 30 June 2023
Shareholders' funds
Net assets (£'000) 798,594 738,642
NAV per ordinary share 201.01p 184.26p
Share price 178.40p 154.00p
Year ended Year ended
30 June 2024 30 June 2023
Profit for year
Net revenue profit (£'000) 21,662 20,927
Net capital profit/(loss) profit (£'000) 63,236 83,454
------------ ------------
Profit/(loss) for the year 84,898 104,381
======= =======
Total return per ordinary share
Revenue 5.41p 5.22p
Capital 15.81p 20.82p
------------- -------------
Total return per ordinary share 21.22p 26.04p
======= =======
Ongoing charge excluding performance fee(5,)(6) 0.67% 0.65%
Ongoing charge including performance fee(5,6) 0.75% 1.67%
1. Net asset value (NAV) total return per ordinary share
2. Euromoney Smaller European Companies (ex UK) Index up to 30 June
2022, thereafter MSCI Europe ex UK Small Cap Index
3. The sector is the AIC European Smaller Companies sector
4. Share price total return including dividends reinvested and using
closing price
5. NAV per share, NAV total return, share price total return and
ongoing charge are regarded as Alternative Performance Measures. More
information on these can be found in the Annual Report 2024
6. Calculated using the methodology prescribed by the Association of
Investment Companies
Sources: Morningstar Direct, Janus Henderson Investors
Chairman's Statement
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. Tragically the conflict in Ukraine festers
on, although the energy shock has largely been contained. A global recession
has not manifested and a 'soft landing' looks increasingly plausible. The
Purchasing Managers' Index has yet to see a rebound, but there is growing
optimism that the market suffering is close to being over. Smaller companies
are well positioned to benefit from things getting better and the fund
management team is well placed to take advantage of the situation.
Performance
The Company's portfolio produced a solid return over the year ended 30 June
2024, with an NAV total return of 12.0%, ahead of the benchmark by 1.9%. The
share price total return was even more impressive at 19.5%, reflecting the
growing interest in Europe and its smaller companies. This continues the
Company's long term NAV and share price total return track record, as the
chart on page 1 clearly demonstrates. Over a five-year period, the NAV total
return has been 73.3% versus the benchmark of 37.2%, with the share price
total return being 82.8% compared to the AIC European Smaller Companies sector
of 40.1%.
Discount management
The average discount for the period has been 13.5%. Over the course of the
financial year and up to the date of this report, we repurchased a total of
6.4m shares in the market at an average price of 167.68p. Doing so has been
accretive to the NAV and was one of several factors contributing to the
narrowing of the discount.
The Board continually monitors the discount to NAV at which the Company's
shares trade and utilises its ability to repurchase its own shares in the
market with a view to reducing volatility and maintaining liquidity. We review
the discount taking account of the position of our immediate competitors in
the AIC European Smaller Companies sector, the investment trust sector as a
whole and conditions in the wider market, particularly those in Europe, which
are likely to have an impact on how the Company is perceived.
Dividend
The Board is recommending a final dividend of 3.35p per ordinary share to
shareholders for approval at the forthcoming annual general meeting. If
approved, the dividend will be paid to shareholders on the register on 1
November 2024.
Along with an interim dividend of 1.45p which was paid on 3 May 2024, this
brings the total dividend to 4.80p, an increase of 2.1% on the total dividend
paid last year.
The Company has benefitted from a handful of stocks that have had very high
income distributing capacity in recent years, but as the fund management team
begins to anticipate an economic expansion, there may be more of a pursuit of
capital growth from among the many exciting investment opportunities in our
market.
Succession planning
The forthcoming annual general meeting will be my last as Chairman. We were
pleased to announce the appointment of James Williams as the chairman
designate in October last year. He brings with him over 30 years'
international business experience, including 20 years in the investment
banking industry, and a strong suite of leadership skills. I believe I will be
leaving the Company in good hands.
We have further agreed a timeline for the retirement of Simona Heidempergher
and have engaged recruitment consultants to help in the search for a suitable
replacement. Your new Chairman will keep you updated in this respect.
Annual General Meeting
The 34th Annual General Meeting will be held at 11.00 am on 25 November 2024
at 201 Bishopsgate, London, EC2M 3AE.
The event provides the opportunity for shareholders to meet with, and hold to
account, the directors and fund management team. The Fund Manager will give
his usual presentation on the year under review and the outlook for the year
ahead. We therefore encourage all shareholders to attend if they can and to
vote their shares, either at the meeting or via proxy beforehand.
If you are unable to attend in person, you will be able to watch the meeting
live via the internet by visiting
www.janushenderson.com/esct-agm.
Outlook
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.
It is a shame that political uncertainty has poked its head up in Europe again
with the French election being unhelpful for growth and elections in the US
have scope to create further doubt for our markets. Notwithstanding this, the
very low valuations in Europe, the falling cost of capital and the improving
economic optimism should outweigh the noise of politics. Europe is fortunate
to be the provider of the 'picks and shovels' of the big structural growth
trends such as Artificial Intelligence, the 'Green Transition' and industrial
automation. It is an exciting time for the European smaller company space.
Christopher Casey
Chairman
9 October 2024
FUND MANAGER'S REPORT
Introduction
The year to 30 June 2024 was a decent year for the Company, with an NAV total
return of 12.0% outperforming the benchmark which delivered a return of 10.1%.
Despite the lacklustre economy, investors put fresh eyes on the European
smaller companies universe which helped the start of the recovery in valuation
multiples for the space.
The year was characterised by soft markets in a tepid European economy.
However, hopes of an economic pick-up began to manifest towards the end of
2023. We encountered a 'growth scare' towards the end of the financial year as
fears that the European Central Bank and the Federal Reserve had been too slow
to cut interest rates were exacerbated by snap elections called in France and
the UK, which temporarily disrupted economic activity. A recession has been
long awaited following the energy and supply chain shocks that hit the global
economy in 2022. We have, however, been of the view that the global economy
would have a soft landing, but that inflation and consequently interest rates
would remain higher than prior to the pandemic. So far that has broadly come
to pass, but we do think monetary policy is too tight in the West and that
central banks need to loosen policy now that inflation has been largely tamed.
Another phenomena of the markets has been an extreme concentration in a few
very large companies. In the US this was a group of companies referred to as
'The Magnificent Seven' (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta
Platforms and Tesla). In Europe no exciting collective noun was settled on,
but names such as semiconductor equipment titan ASML, GLP-1 producer Novo
Nordisk and luxury good behemoth LVMH have dominated stock market performance
in recent years. However, we began to see the broadening of the market take
place over the year and smaller companies began to outperform larger companies
for the first time since 2021. This was helpful for your Company that has a
focus on investing in genuinely smaller companies.
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.
The outperformance over the twelve months to 30 June 2024 was primarily driven
by stock selection, with a handful of winners driving performance, many of
them being German. German listed semiconductor equipment manufacturer SUESS
Microtec was a substantial contributor in the period, as demand for their
Temporary Bonder machines, used in the manufacturing of Artificial
Intelligence ('AI') chips, increased dramatically. German listed specialty
chemical producer Alzchem also performed well as a result of the growth in
their creatine and nitroguanidine businesses. Creatine is a chemical that
supplies energy to muscles and has long been favoured by bodybuilders, but is
increasingly being used to fend off conditions such as sarcopenia.
Nitroguanidine is a propellant that goes in car air bags, but is also a key
ingredient in NATO ammunition. Another German driver of performance was web
hosting and cloud services solutions provider IONOS as a combination of a
cheap valuation and strong earnings momentum drove the pricing of the shares.
The portfolio
We remain consistent in our strategy of investing across the corporate
lifecycle with a balance of early-stage growth stocks, high return on capital
growth compounders at sensible prices, undervalued cash generative mature
companies and self-help turnaround stocks. The price we pay for shares in a
company is a critical component of what we do and must be justified by the
cash generation potential of a business. We are not a 'value fund' but we are
intensely valuation aware. Our intention is that the performance of the
portfolio is driven by stock selection rather than macro-economic factors and
one of our key contentions is that company management matters. It is always
gratifying to see underperforming companies get their act together and one
such name for us this year has been Fugro, a Dutch listed collector and
interpreter of geological data. The company has evolved from servicing the oil
and gas industry to being a key part of the green energy transition, helping
developers understand where best to locate offshore wind turbines. The company
had been a stock market darling in the 2000s, but with the collapse in oil and
gas capital expenditure from 2014 onwards had been struggling, earning a
paltry return on capital employed. We invested in the company during the
pandemic when the company was loss making and needed to raise capital. Since
then, management has done a terrific job of improving returns by focusing the
business on renewables and driving better margins and asset efficiency. We
think the return on capital has a way to go yet, but the shares have begun to
catch the markets' attention again and the holding was a strong contributor to
performance this year.
Performance attribution
The Company benefitted from our investment in Dutch listed wealth manager Van
Lanschot Kempen, which continued to attract strong fund inflows in the low
countries. Swedish listed digital investment platform Nordnet saw an increase
in business momentum as animal spirits revived in their market.
One of the joys of managing a European smaller companies portfolio is that the
investable universe is so fabulously heterogeneous that we are able to find
companies that are benefitting from almost any exciting trend in the world.
One such trend that has obsessed the stock market this year has been AI and
the growth in data centres. Swedish listed Munters, whose products help manage
the climate inside data centres, has seen a terrific boost to its business as
a result of this and it has been a worthwhile investment for your Company.
Another area of exciting growth is in the world of podcasts, a media
broadcast over the internet and which is used for exploring any topic that
interests a listener. Swedish listed Acast is the European leader in hosting,
distributing and monetizing podcasts. The stock has performed very well this
year as the company approached profitability and continued to grow strongly in
a weak advertising market.
Corporate activity returned to the European smaller companies space with bid
approaches for Swedish online gambling company, Kindred and Swedish legal
services expert Karnov. Whilst we didn't think we captured all the value
possible from Kindred, the offer was reasonable and we decided to take some
profit. However, we, and many other public market investors, deemed the bid
for Karnov to be too far from its fundamental valuation and rejected it. We
are firmly of the belief that as interest rates begin to fall the very cheap
valuations on display in the European smaller companies market will see a
notable increase in this type of activity.
Detractors from performance have been largely driven by our misjudging where
several companies were in their economic cycle, but also (unusually) by a
handful of stocks that we missed the opportunity to invest in. The sins of
omission mainly comprised our failure to spot Danish listed GLP-1 anti-obesity
drug develop Zealand Pharma and Spanish bank Banco de Sabadell, which weighed
on the Company's relative performance. In contrast, our investment in Dutch
listed specialty metal producer AMG Critical Materials, which has suffered due
to the abject collapse in the lithium price over the course of the year,
detracted from performance. Lithium prices have been poor for a combination of
reasons, but the principal one has been the weakness in the automotive market
for electric vehicles (EVs) due to regulatory uncertainty on the green
transition as well as interest rates. We have had too much exposure to the
automotive market and a number of burdens for the Company such as German
listed producer of electric boot openers Stabilus, Italian listed producer of
stators and rotors for EVs Eurogroup Laminations and French listed producer of
Silicon Carbide used in the rapid charging of EVs Mersen have not helped
performance.
It has been a frustration to relearn some fundamental investment lessons
through the medium of making mistakes, but disappointingly we have been
through that process this year. One such lesson is not to bet on a binary
technology outcome and German listed Manz whose battery technology had looked
so promising for the EV transition has failed to turn the science into cash
flow. This lesson was rammed home by our investment in Swiss listed AMS-Osram
whose exciting microLED technology was abandoned by their large American tech
company customer, who has historic form in rough treatment of its supply
chain. We intend to do a better job of applying such lessons in the future
without the impact on our investors' capital.
Geographical and sector distribution
Stock selection rather than geographical and sector exposure is the
fundamental core of our investment process, though we are careful to monitor
how we are positioned as part of our risk management approach. We have never
viewed the benchmark as an input to our process and we are content to diverge
widely from it. Our valuation discipline typically leads us away from the more
expensive markets and sectors in Europe and as a result we find ourselves
underweight to Switzerland and Sweden. Conversely, we are overweight to
Germany and the Netherlands where multiples are lower.
Similarly, we are underweight to the sectors where we struggle to find value
such as health care, utilities and real estate. We are overweight to the
industrials sector, as valuations are very cheap and have scope for strong
performance as the economy begins to grow again, as well as being overweight
to technology where we continue to see strong structural growth trends.
Other purchases
Your Company typically invests in Europe outside of the UK, however, we have a
degree of flexibility around this and with the Board's approval we took a
position in UK listed online trading provider IG Group as we saw such
potential in the company's cheap valuation and phenomenal cash generation
capacity coupled with a strong capital return discipline. Whilst the shares
have been very strong, you shouldn't expect us to invest beyond the broad
remit with any great frequency.
We have added a handful of defence exposed names to the portfolio over the
course of the year. German listed producer of gearboxes and transmissions for
military vehicles Renk, Dutch listed producer of night vision goggles Theon
International and French listed Exosens, the producer of the tubes that go
into those goggles, all made it into the portfolio, benefitting from the need
for European rearmament.
All three investments came from new listings on the stock market known as
Initial Public Offerings ('IPOs'). The IPO market has been very quiet since
the end of 2021 due to a combination of weak markets and the bad taste left in
the mouth from the terrible vintage of IPOs that came through in that year. It
is pleasing to report that all three investments listed above plus our
investment in Greek bank Optima, have contributed positively to performance.
Another feature of the hot markets of 2020 and 2021 was the creation of a
number of Special Purpose Acquisition Companies ('SPACs'). A SPAC is a company
that is listed on the stock market with the sole purpose of reversing a real
company into a listing. You will never encounter us investing directly in a
SPAC and it will not be often that you catch us investing in, the inelegantly
titled, de-SPACed companies that have had a business reversed into them, so it
is notable that we have taken a position in Swiss listed R&S Group which
manufactures transformers, the equipment that alters alternating current and
direct current. A significant investment in the electricity grid of Europe is
required and R&S Group has an exciting position in this development.
Other disposals
We exited our position in Italian listed SAES Getters having profited
handsomely from the disposal of its medical devices business. We also took
profits by selling our shares in Italian listed producer of commercial
vehicles Iveco. We saw an increase in mergers and acquisitions activity and
the Company benefitted from bids for French listed financial adviser
Rothschild & Co. and Swedish listed online gambling company Kindred. As
interest rates reduce and financial conditions normalise, we would not be
surprised to see more frequent mergers and acquisitions activity, an arena
that usually benefits smaller companies.
Currency
The Company is denominated in sterling, while investing in largely
euro-denominated assets. We do not hedge this currency exposure.
Outlook
We stated last year that we feared central banks had raised interest rates too
high and we were anxious that, having been too slow to raise them, they would
be too slow to cut them. Although, the European smaller company universe has
seen an improvement in interest and performance, and remains very attractively
valued, it typically doesn't fare well in a recessionary environment. Monetary
policy becoming less restrictive in recent weeks, albeit not yet supportive,
is a respectable positive indicator for the global economy. We continue to
believe that with sensibly applied monetary policy, the economy can experience
a 'soft landing' and thereafter grow. European smaller companies due to its
gearing to global growth will be a profitable place to invest in such a
scenario.
Beyond the attraction of valuation, our investment universe is rich with
opportunity. There are plentiful companies with exciting technologies,
structural growth drivers and strong market positions. By applying our
balanced investment strategy and remaining disciplined on our 'valuation
aware' approach, we are confident that we can continue to find strong
investment returns for our shareholders.
Ollie Beckett, Rory Stokes and Julia Scheufler
9 October 2024
Geographic exposure at 30 June 2024 (% of portfolio excluding cash)
2024 2023
% %
Germany 20.2 17.4
France 12.7 14.6
Netherlands 11.9 11.9
Sweden 10.9 10.0
Switzerland 8.2 8.1
Italy 5.3 10.3
Belgium 5.0 4.2
Spain 4.9 5.4
Denmark 4.0 2.8
Greece 3.1 3.2
Norway 2.9 2.3
Portugal 2.4 1.3
Ireland 2.2 2.5
Finland 1.7 3.0
United Kingdom 1.7 -
Austria 1.6 2.0
Cyprus 0.8 -
Faroe Islands 0.5 -
Malta - 1.0
100.0 100.0
Sector exposure at 30 June 2024 ( of portfolio excluding cash)
2024 2023
% %
Industrials 36.3 38.6
Consumer Discretionary 17.1 20.9
Financials 13.6 13.0
Technology 13.3 11.6
Basic Materials 5.0 3.2
Real Estate 3.7 2.3
Consumer Staples 3.4 2.0
Health Care 3.1 3.1
Energy 2.0 1.7
Utilities 2.0 3.1
Telecommunications 0.5 0.5
100.00 100.0
Principal and emerging risks
Investing, by its nature, carries inherent risk. The Board, with the
assistance of the investment manager, carries out a robust assessment of the
principal and emerging risks and uncertainties facing the Company which could
threaten the business model and future performance, solvency and liquidity of
the portfolio. A matrix of these risks, along with the steps taken to mitigate
them, is maintained and is kept under regular review. The mitigating measures
include a schedule of investment limits and restrictions within which the Fund
Manager must operate.
The principal risks which have been identified and the steps we have taken to
mitigate these are set out below. We do not consider these risks to
have changed during the period.
Investment strategy and objective
The investment objective or policy is not appropriate in the prevailing market
or sought by investors, leading to a wide discount and hostile shareholders.
Investment mandate limits established by the Board are inappropriate leading
to out-of-scope investments which may negatively impact shareholder value.
Poor investment performance over an extended period leading to shareholders
voting to wind up the Company. This may be the result of:
· External factors such as geopolitical instability, including
financial shock, pandemic, climate change, changes in the regulatory
environment, etc.
· internal factors such as poor stock selection, poor management of
gearing, loss of key members of the fund management team, etc.
Mitigating measures: The investment manager periodically reviews the
investment objective and policy in line with best practice and taking account
of investor appetites. The Board receives regular updates on professional and
retail investor activity from the investment manager, and reports from the
corporate broker, both of whom remain in contact with professional investors
throughout the year, to inform themselves of investor sentiment and how the
Company is perceived in the market. From time to time, research may be
undertaken by a third-party consultant to specifically ascertain the views of
retail investors. The level of discount and share register are are reviewed by
the Board at each meeting.
The Board reviews compliance with the investment limits at each meeting.
The Fund Manager maintains a diverse portfolio (sector, country, business life
cycle) with buy/sell disciplines and employs suitable quantitative and
qualitative metrics, which incorporates environmental, social and governance
('ESG') considerations, for assessing stocks for inclusion or held within the
portfolio. The Board reviews the Key Performance Indicators ('KPI's),
portfolio composition and levels of gearing at each meeting. The Board
furthermore maintains an understanding of the fund management team's
investment process and considers the potential for climate change to impact
the value of the portfolio, alongside other factors which may have the same
effect.
Operational
Failure of, disruption to or inadequate service levels provided by principal
third-party service providers leading to a loss of shareholder value or
reputational damage. This includes cyber security risks which may compromise
the integrity of data and the effective operation of third-party service
providers.
Mitigating measures: The Board engages reputable third-party service providers
and formally evaluates their performance, and terms of engagement, at least
annually.
The Audit Committee assesses the effectiveness of internal controls in place
at the Company's key third-party service providers through review of their
ISAE 3402 reports, quarterly internal control reports from the investment
manager and monthly reporting on compliance with the investment limits
established by the Board.
Legal and regulatory
Loss of investment trust status, breach of the Companies Act 2006, Listing
Rules, Prospectus and/or Disclosure Guidance and Transparency Rules or the
Alternative Fund Managers Directive and/or legal action brought against the
Company and/or directors and/or the investment manager leading to a decrease
in shareholder value and reputational damage.
Mitigating measures: The Board engages reputable third-party service providers
and formally evaluates their performance, and terms of appointment, at least
annually.
The Audit Committee assesses the effectiveness of internal controls in place
at the Company's key third-party service providers through review of their
ISAE 3402 reports and, in respect of the investment manager's investment
trust operations, reporting from the investment manager's internal audit
function. The investment manager's Compliance function has reporting
obligations under AIFMD, with any non-compliance being captured in the
investment manager's quarterly internal control reporting to the Board.
Financial
Market, liquidity and/or credit risk, inappropriate valuation of assets or
poor capital management leading to a loss of shareholder value.
Mitigating measures: The Board determines the investment limits and monitors
compliance with these at each meeting. The directors review the portfolio
liquidity at each meeting and periodically consider the appropriateness of
hedging the portfolio against currency risk.
The Board reviews the portfolio valuation at each meeting and considers the
effectiveness of controls in place at its principal third-party service
providers, including the fund accountants, at least annually.
Investment transactions are carried out by a large number of approved brokers
whose credit standard is periodically reviewed and limits are set on the
amount that may be due from any one broker, cash is only held with the
custodian/depositary or reputable banks.
The Board monitors the broad structure of the Company's capital including the
need to buy back or allot ordinary shares and the extent to which revenue in
excess of that which is required to be distributed, should be retained.
Going concern and viability
In keeping with provisions of the Code of Corporate Governance issued by the
Association of Investment Companies (the 'AIC Code'), the Board has assessed
the prospects of the Company for a period of at least twelve months from the
date of this report, being 9 October 2025 period (our assessment of going
concern) and also over the longer period of three years (our assessment of
viability).
We consider the Company's viability over a three-year period as we believe
this is a reasonable timeframe reflecting the longer term investment horizon
for the portfolio, but acknowledges the inherent shorter term uncertainties
in equity markets.
As part of the assessment, we have considered the Company's financial
position, as well as its ability to liquidate the portfolio and meet expenses
as they fall due. The following aspects formed part of our assessment:
· the closed-end nature of the Company which does not need to
account for redemptions;
· an assessment of the principal and emerging risks, as well as the
uncertainties facing the Company, including the potential impact of climate
change on the value of investee companies;
· the diverse nature of the portfolio and its anticipated liquidity
in normal and stressed market conditions;
· the level of the Company's revenue reserves and the size of the
bank overdraft facility; and
· the expenses incurred by the Company, which are predictable and
modest in comparison with the assets and the fact that there are no capital
commitments currently foreseen which would alter that position.
Also of relevance in contemplating the duration of the Company, is the
three-year cycle for its continuation vote. Shareholders were last asked at
the annual general meeting in 2022 if they wished the Company to continue in
operation. The resolution was passed with the overwhelming support of 84.4%
shareholders who voted. The next continuation vote will be put to
shareholders at the annual general meeting in 2025. Based on the voting
record since 2000 for such resolutions, the Board is confident that
shareholders will continue to support the Company. In the event this is not
the case, the Company will be wound up in keeping with the provisions of the
articles.
As well as considering the principal risks and financial position of the
Company, along with the continuation vote, the Board has made the following
assumptions:
· investors will continue to wish to have exposure to investing in
European small cap companies;
· investors will continue to invest in closed-end funds;
· the Company's performance will continue to be satisfactory; and
· the Company will continue to have access to adequate capital when
required.
Based on the results of the assessment, we have concluded that:
· the Company has adequate resources to meet its liabilities for a
period of at least twelve months from the date of this report, being 9 October
2025, meaning it is therefore appropriate to prepare these financial
statements on a going concern basis; and
· we have a reasonable expectation that the Company will be able to
continue operations over the coming three-year period, as well as meeting its
expenses and liabilities for that period.
Related party transactions
The Company's transactions with related parties in the year were with the
directors and the investment manager.
There have been no material transactions between the Company and its directors
during the year. The only amounts paid to them were in respect of remuneration
and expenses for which there were no outstanding amounts payable at the
year-end.
In relation to the provision of services by the investment manager, other than
fees payable by the Company in the ordinary course of business and the
provision of marketing activities, there have been no material transactions
affecting the financial position of the Company during the year under review.
Directors' responsibility statements
Each of the directors in office at the date of this report confirm that, to
the best of their knowledge:
· the financial statements prepared in accordance with UK Adopted
International Accounting Standards give a true and fair view of the assets,
liabilities, financial position and profit and loss of the issuer and the
undertakings included in the financial statements as a whole; and
· the Strategic Report includes a fair review of the development
and performance of the business and the position of the Company, together with
a description of the principal risks and uncertainties that it faces.
For and on behalf of the Board
Daniel Burgess
Chairman of the Audit Committee
9 October 2024
Statement of Comprehensive Income
Year ended 30 June 2024 Year ended 30 June 2023
Revenue return £'000 Capital return £'000 Total Revenue return £'000 Capital Total
return return return
£'000 £'000 £'000
Investment income 25,453 - 25,453 25,054 - 25,054
Other income 22 - 22 9 - 9
Gains on investments held at fair value through profit or loss - 96,206 96,206
- 72,040 72,040
----------- ----------- ------------ ----------- ----------- ------------
Total income 25,475 72,040 97,515 25,063 96,206 121,269
Expenses
Management and performance fee (833) (3,902) (4,735) (776) (10,284) (11,060)
Other operating expenses (875) - (875) (760) - (760)
----------- ----------- ----------- ----------- ----------- -----------
Profit before finance costs and taxation 23,767 68,138 91,905 23,527 85,922 109,449
Finance costs (1,128) (4,512) (5,640) (595) (2,382) (2,977)
----------- ----------- ----------- ----------- ----------- -----------
Profit before taxation 22,639 63,626 86,265 22,932 83,540 106,472
Taxation (997) (390) (1,367) (2,005) (86) (2,091)
----------- ----------- ----------- ----------- ----------- -----------
Profit for the year and total comprehensive income 21,662 63,236 84,898 20,927 83,454 104,381
====== ====== ====== ====== ====== ======
Return per ordinary share - basic and diluted 5.41p 15.81p 21.22p 5.22p 20.82p 26.04p
====== ======== ======= ====== ======== =======
The total column of this statement represents the Statement of Comprehensive
Income, prepared in accordance with UK adopted International Accounting
Standards.
The revenue return and capital return columns are supplementary to this and
are prepared under guidance published by the Association of Investment
Companies.
All revenue and capital items in this statement derive from continuing
operations.
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Equity
Year ended 30 June 2024
Called up share capital Share Capital redemption Other capital reserves Revenue reserve £'000 Total
£'000 premium account reserve £'000 £'000
£'000 £'000
Total equity at 1 July 2023 6,264 120,364 13,964 564,880 33,170 738,642
Total comprehensive income:
Profit for the year - - - 63,236 21,662 84,898
Buyback of shares for cancellation (56) - 56 (6,140) - (6,140)
Ordinary dividends paid - - - - (18,806) (18,806)
----------- ----------- ----------- ----------- ----------- -----------
Total equity at 30 June 2024 6,208 120,364 14,020 621,976 36,026 798,594
====== ====== ====== ====== ====== ======
Year ended 30 June 2023
Called up share capital Share Capital redemption Other capital reserves Revenue reserve £'000 Total
£'000 premium account reserve £'000 £'000
£'000 £'000
Total equity at 1 July 2022 6,264 120,364 13,964 481,409 30,463 652,464
Total comprehensive income:
Profit for the year - - - 83,454 20,927 104,381
Costs relating to sub-division of shares - - - 17 - 17
Ordinary dividends paid - - - - (18,220) (18,220)
------------ ------------ ------------ ----------- ----------- -----------
Total equity at 30 June 2023 6,264 120,364 13,964 564,880 33,170 738,642
======= ======= ======= ====== ====== ======
Balance Sheet
At 30 June 2024 At 30 June 2023
£'000 £'000
Non current assets
Investments held at fair value through profit or loss 883,842 835,744
------------ ------------
Current assets
Receivables 7,587 7,323
Cash and cash equivalents 232 2
------------ ------------
7,819 7,325
------------ ------------
Total assets 891,661 843,069
------------- -------------
Current liabilities
Payables (2,848) (10,411)
Bank overdrafts (90,219) (94,016)
------------ ------------
(93,067) (104,427)
------------ ------------
Net assets 798,594 738,642
======= =======
Equity attributable to equity shareholders
Called up share capital 6,208 6,264
Share premium account 120,364 120,364
Capital redemption reserve 14,020 13,964
Retained earnings:
Other capital reserves 621,976 564,880
Revenue reserve 36,026 33,170
------------ ------------
Total equity 798,594 738,642
======= =======
Net asset value per ordinary share - basic and diluted 201.01p 184.26p
======= =======
Cash Flow Statement
Year ended Year ended
30 June 2024 30 June 2023
£'000 £'000
Operating activities
Profit before taxation 86,265 106,472
Add back: interest payable 5,640 2,977
Less: (Gains) on investments held at fair value through profit or loss (72,040) (96,206)
Sales of investments held at fair value through profit or loss 362,971 274,632
Purchases of investments held at fair value through profit or loss (340,283) (290,536)
Increase in prepayments and accrued income (195) (881)
Decrease in amounts due from brokers 291 1,215
Decrease in accruals and deferred income (7,622) (451)
Increase/(decrease) in amounts due to brokers 81 (636)
----------- -----------
Net cash inflow/(outflow)from operating activities before interest and 35,108 (3,414)
taxation(1)
----------- -----------
Interest paid (5,663) (2,618)
Taxation on investment income (1,726) (2,761)
----------- -----------
Net cash inflow/(outlow) from operating activities 27,719 (8,793)
----------- -----------
Financing activities
Equity dividends paid (net of refund of unclaimed dividends) (18,806) (18,220)
Buyback of shares for cancellation (6,140) -
Net (repayment)/drawdown of bank overdraft (2,543) 27,004
----------- -----------
Net cash (used in)/raised financing activities (27,489) 8,784
----------- -----------
Increase/(decrease) in cash and cash equivalents 230 (9)
Cash and cash equivalents at the start of the year 2 11
----------- -----------
Cash and cash equivalents at the end of the year 232 2
----------- -----------
Comprising:
Cash at bank 232 2
----------- -----------
232 2
====== ======
1. In accordance with IAS7.31 cash inflow from dividends was
£25,158,000 (2023: £24,157,000) and cash inflow from interest was £11,000
(2023: £3,000).
Notes to the Financial Statements
1. Accounting policies
Basis of preparation
The European Smaller Companies Trust PLC is a company incorporated in England
and Wales and subject to the provisions of the Companies Act 2006. The
Company is domiciled in the United Kingdom. The financial statements for the
year ended 30 June 2024 have been prepared in accordance with UK adopted
International Accounting Standards. These comprise standards and
interpretations approved by the International Accounting Board ('IASB'),
together with interpretations of the International Accounting Standards and
Standing Interpretations Committee approved by the IFRS Interpretations
Committee ('IFRS IC') that remain in effect, to the extent that IFRSs have
been adopted by the UK Endorsement Board.
The financial statements have been prepared on a going concern basis. The
principal accounting policies adopted are set out below. Where presentational
guidance set out in the Statement of Recommended Practice ('SORP') for
investment companies issued by the Association of Investment Companies ('AIC')
in July 2022, is consistent with the requirements of UK adopted International
Accounting Standards, the directors have sought to prepare the financial
statements on a basis consistent with the recommendations of the SORP.
The financial position of the Company is described in the Annual Report 2024,
which includes the Company's policies and process for managing its capital;
its financial risk management objectives; and details of financial instruments
and exposure to credit risk and liquidity risk. In preparing these financial
statements the directors have considered the impact of climate change risk and
concluded there was no impact as the investments are valued based on market
quoted prices.
2. Going concern
The directors have determined that it is appropriate to prepare the financial
statements on a going concern basis and have concluded that the Company has
adequate resources to continue in operational existence for at least twelve
months from the date of approval of the financial statements.
In coming to this conclusion, the directors have considered the nature of the
portfolio, being that the securities held are readily realisable, the size and
covenants of the Company's bank overdraft and the strength of its
distributable reserves. As part of their usual assessment of risks facing the
Company, the directors considered the macro-economic and geopolitical
environment, as well as the possible impact of climate change risk on the
value of the portfolio. The directors have concluded that the Company is able
to meet its financial obligations, including the repayment of the bank
overdraft, as they fall due for a period of at least twelve months from the
date of this report, being 9 October 2025.
3. Management and performance fees
2024 2023
Revenue Capital Total Revenue Capital Total
return return return return return return
£'000 £'000 £'000 £'000 £'000 £'000
Management fee 833 3,333 4,166 776 3,104 3,880
Performance fee - 569 569 - 7,180 7,180
--------- --------- --------- -------- -------- --------
Total 833 3,902 4,735 776 10,284 11,060
===== ===== ===== ===== ===== =====
4. Return per ordinary share
The return per ordinary share figure is based on the net profit for the year
of £84,898,000 (2023 profit: £104,381,000) and on the weighted average
number of ordinary shares in issue during the year of 400,039,178 (2023:
400,867,176).
The return per ordinary share figure detailed above can be further analysed
between revenue and capital, as below. The Company has no securities in issue
that could dilute the return per ordinary share. Therefore the basic and
diluted return per ordinary share are the same.
2024 2023
£'000 £'000
Net revenue profit 21,662
Net capital profit 63,236 83,454
------------ ------------
Net profit 84,898 104,381
======= =======
Weighted average number of ordinary shares in issue during the year 400,039,178 400,867,175
2024 2023
Pence Pence
Revenue return per ordinary share 5.41 5.22
Capital return per ordinary share 15.81 20.82
----------- -----------
Total return per ordinary share 21.22 26.04
====== ======
5. Net asset value per ordinary share
The NAV per ordinary share is based on the net assets attributable to the
ordinary shares of £798,594,000 (2023: £738,642,000) and on the 397,287,598
ordinary shares in issue at 30 June 2024 (2023: 400,867,176).
The Company has no securities in issue that could dilute the NAV per ordinary
share (2023: same). The NAV per ordinary share at 30 June 2024 was 201.01p
(2023: 184.26p).
The movements during the year in assets attributable to the ordinary shares
were as follows:
2024 2023
£'000 £'000
Net assets attributable to ordinary shares at start of year 738,642 652,464
Profit for the year 84,898 104,381
Dividends paid in the year (18,806) (18,220)
Buyback of shares for cancellation (6,140) -
Costs relating to sub-division of shares - 17
------------ ------------
Net assets at 30 June 798,594 738,642
======= =======
6. Dividends
2024 2023
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Final dividend of 3.25p for the year ended 30 June 2023 (2022: 3.10p) 13,010 12,427
Interim dividend of 1.45p per ordinary share for the year ended 30 June 2024 5,796 5,812
(2023: 1.45p)
Unclaimed dividends from prior years - (19)
--------- ---------
18,806 18,220
===== =====
The final dividend of 3.25p per ordinary share in respect of the year ended 30
June 2023 was paid on 1 December 2023 to shareholders on the Register of
Members at the close of business on 2 November 2023. The total dividend paid
amounted to £13,010,000.
Subject to approval at the annual general meeting on 25 November 2024, the
proposed final dividend of 3.35p per ordinary share will be paid on 29
November 2024 to shareholders on the Register of Members at the close of
business on 1 November 2024. The shares will be quoted ex-dividend on 31
October 2024.
The proposed final dividend for the year ended 30 June 2024 has not been
included as a liability in these financial statements. Under UK adopted
International Accounting Standards, these dividends are not recognised until
approved by shareholders.
The total dividends payable in respect of the financial year which form the
basis of the test under s.1158 are set out below:
2024 2023
£'000 £'000
Revenue available for distribution by way of dividends for the year 21,662 20,927
Interim dividend of 1.45p per ordinary share for the year ended 30 June 2024 (5,796) (5,812)
(2023: 1.45p)
Proposed final dividend of 3.35p per ordinary share for the year ended 30 June (13,214) (13,028)
2024 (2023: 3.25p) (based on 394,459,292 shares in issue at 9 October 2024)
---------- ----------
Transfer to Revenue reserve 2,652 2,087
====== ======
The Company's undistributed revenue represents 10.4% (2023: 8.3) of total
income.
7. Called up share capital
Shares entitled to dividend Total shares in issue Nominal value of shares in issue
£'000
Allotted, issued and fully paid
Issued ordinary shares of 1.5625p each
At 1 July 400,867,176 400,867,176 6,264
Buyback of ordinary shares (3,579,578) (3,579,578) (56)
At 30 June ------------------ ------------------ ----------
397,287,598 397,287,598 6,208
========== ========== ======
During the year the Company repurchased 3,579,578 of its own issued ordinary
shares for cancellation (2023: nil) at a cost of £6,140,000 (2023: £nil).
Since the year end 2,282,306 shares have been bought back at a cost of
£4,998,000. A total of 173,034 shares are held in treasury.
8. 2024 Financial information
The figures and financial information for the year ended 30 June 2024 are
extracted from the Company's annual financial statements for that period and
do not constitute statutory accounts. The Company's annual financial
statements for the year to 30 June 2024 have been audited but have not yet
been delivered to the Registrar of Companies. The Independent Auditors' Report
on the 2024 annual financial statements was unqualified, did not include a
reference to any matter to which the auditors drew attention without
qualifying the report, and did not contain any statements under Sections
498(2) or 498(3) of the Companies Act 2006.
9. 2023 Financial information
The figures and financial information for the year ended 30 June 2023 are
compiled from an extract of the published financial statements for that year
and do not constitute statutory accounts. Those financial statements have been
delivered to the Registrar of Companies and included the Independent Auditor's
Report which was unqualified, did not include a reference to any matter to
which the auditors drew attention without qualifying the report, and did not
contain any statements under Sections 498(2) or 498(3) of the Companies Act
2006.
10. Annual Report
The annual report will be posted to shareholders in October 2024. A video of
the Fund Manager discussing the financial results will shortly be available on
the Company's website, www.europeansmallercompaniestrust.com
(http://www.europeansmallercompaniestrust.com) along with the annual
report.
11. Annual General Meeting
The annual general meeting will be held on Monday 25 November 2024 at 11.00 am
at 201 Bishopsgate, London, EC2M 3AE. The Notice of Meeting will be sent to
shareholders with the annual report.
12. General information
Company Status
The European Smaller Companies Trust PLC is registered in England and Wales,
no. 2520734, has its registered office at 201 Bishopsgate, London EC2M 3AE and
is listed on the London Stock Exchange.
SEDOL/ISIN: BMCF868/GB00BMCF8689
London Stock Exchange (TIDM) code: ESCT
Global Intermediary Identification Number (GIIN): JX9KYH.99999.SL.826
Legal Entity Identifier (LEI): 213800N1B1HCQG2W4V90
Directors and Secretary
The directors of the Company are Christopher Casey (Chairman), Daniel Burgess
(Chairman of the Audit Committee), Ann Grevelius, Simona Heidempergher (Senior
Independent Director and Chairman of the Nomination and Remuneration
Committee) and James Williams (Chairman designate). The Corporate Secretary is
Janus Henderson Secretarial Services UK Limited.
Website
Details of the Company's share price and net asset value, together with
general information about the Company, monthly factsheets and data, copies of
announcements, reports and details of general meetings can be found at
www.europeansmallercompaniestrust.com (http://www.treuropeangrowthtrust.com) .
4. Return per ordinary share
The return per ordinary share figure is based on the net profit for the year
of £84,898,000 (2023 profit: £104,381,000) and on the weighted average
number of ordinary shares in issue during the year of 400,039,178 (2023:
400,867,176).
The return per ordinary share figure detailed above can be further analysed
between revenue and capital, as below. The Company has no securities in issue
that could dilute the return per ordinary share. Therefore the basic and
diluted return per ordinary share are the same.
2024
£'000
2023
£'000
Net revenue profit
21,662
Net capital profit
63,236
83,454
------------
------------
Net profit
84,898
104,381
=======
=======
Weighted average number of ordinary shares in issue during the year
400,039,178
400,867,175
2024
Pence
2023
Pence
Revenue return per ordinary share
5.41
5.22
Capital return per ordinary share
15.81
20.82
-----------
-----------
Total return per ordinary share
21.22
26.04
======
======
5. Net asset value per ordinary share
The NAV per ordinary share is based on the net assets attributable to the
ordinary shares of £798,594,000 (2023: £738,642,000) and on the 397,287,598
ordinary shares in issue at 30 June 2024 (2023: 400,867,176).
The Company has no securities in issue that could dilute the NAV per ordinary
share (2023: same). The NAV per ordinary share at 30 June 2024 was 201.01p
(2023: 184.26p).
The movements during the year in assets attributable to the ordinary shares
were as follows:
2024
£'000
2023
£'000
Net assets attributable to ordinary shares at start of year
738,642
652,464
Profit for the year
84,898
104,381
Dividends paid in the year
(18,806)
(18,220)
Buyback of shares for cancellation
(6,140)
-
Costs relating to sub-division of shares
-
17
------------
------------
Net assets at 30 June
798,594
738,642
=======
=======
6. Dividends
2024 2023
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Final dividend of 3.25p for the year ended 30 June 2023 (2022: 3.10p) 13,010 12,427
Interim dividend of 1.45p per ordinary share for the year ended 30 June 2024 5,796 5,812
(2023: 1.45p)
Unclaimed dividends from prior years - (19)
--------- ---------
18,806 18,220
===== =====
The final dividend of 3.25p per ordinary share in respect of the year ended 30
June 2023 was paid on 1 December 2023 to shareholders on the Register of
Members at the close of business on 2 November 2023. The total dividend paid
amounted to £13,010,000.
Subject to approval at the annual general meeting on 25 November 2024, the
proposed final dividend of 3.35p per ordinary share will be paid on 29
November 2024 to shareholders on the Register of Members at the close of
business on 1 November 2024. The shares will be quoted ex-dividend on 31
October 2024.
The proposed final dividend for the year ended 30 June 2024 has not been
included as a liability in these financial statements. Under UK adopted
International Accounting Standards, these dividends are not recognised until
approved by shareholders.
The total dividends payable in respect of the financial year which form the
basis of the test under s.1158 are set out below:
2024 2023
£'000 £'000
Revenue available for distribution by way of dividends for the year 21,662 20,927
Interim dividend of 1.45p per ordinary share for the year ended 30 June 2024 (5,796) (5,812)
(2023: 1.45p)
Proposed final dividend of 3.35p per ordinary share for the year ended 30 June (13,214) (13,028)
2024 (2023: 3.25p) (based on 394,459,292 shares in issue at 9 October 2024)
---------- ----------
Transfer to Revenue reserve 2,652 2,087
====== ======
The Company's undistributed revenue represents 10.4% (2023: 8.3) of total
income.
7. Called up share capital
Shares entitled to dividend Total shares in issue Nominal value of shares in issue
£'000
Allotted, issued and fully paid
Issued ordinary shares of 1.5625p each
At 1 July 400,867,176 400,867,176 6,264
Buyback of ordinary shares (3,579,578) (3,579,578) (56)
At 30 June ------------------ ------------------ ----------
397,287,598 397,287,598 6,208
========== ========== ======
During the year the Company repurchased 3,579,578 of its own issued ordinary
shares for cancellation (2023: nil) at a cost of £6,140,000 (2023: £nil).
Since the year end 2,282,306 shares have been bought back at a cost of
£4,998,000. A total of 173,034 shares are held in treasury.
8. 2024 Financial information
The figures and financial information for the year ended 30 June 2024 are
extracted from the Company's annual financial statements for that period and
do not constitute statutory accounts. The Company's annual financial
statements for the year to 30 June 2024 have been audited but have not yet
been delivered to the Registrar of Companies. The Independent Auditors' Report
on the 2024 annual financial statements was unqualified, did not include a
reference to any matter to which the auditors drew attention without
qualifying the report, and did not contain any statements under Sections
498(2) or 498(3) of the Companies Act 2006.
9. 2023 Financial information
The figures and financial information for the year ended 30 June 2023 are
compiled from an extract of the published financial statements for that year
and do not constitute statutory accounts. Those financial statements have been
delivered to the Registrar of Companies and included the Independent Auditor's
Report which was unqualified, did not include a reference to any matter to
which the auditors drew attention without qualifying the report, and did not
contain any statements under Sections 498(2) or 498(3) of the Companies Act
2006.
10. Annual Report
The annual report will be posted to shareholders in October 2024. A video of
the Fund Manager discussing the financial results will shortly be available on
the Company's website, www.europeansmallercompaniestrust.com
(http://www.europeansmallercompaniestrust.com) along with the annual
report.
11. Annual General Meeting
The annual general meeting will be held on Monday 25 November 2024 at 11.00 am
at 201 Bishopsgate, London, EC2M 3AE. The Notice of Meeting will be sent to
shareholders with the annual report.
12. General information
Company Status
The European Smaller Companies Trust PLC is registered in England and Wales,
no. 2520734, has its registered office at 201 Bishopsgate, London EC2M 3AE and
is listed on the London Stock Exchange.
SEDOL/ISIN: BMCF868/GB00BMCF8689
London Stock Exchange (TIDM) code: ESCT
Global Intermediary Identification Number (GIIN): JX9KYH.99999.SL.826
Legal Entity Identifier (LEI): 213800N1B1HCQG2W4V90
Directors and Secretary
The directors of the Company are Christopher Casey (Chairman), Daniel Burgess
(Chairman of the Audit Committee), Ann Grevelius, Simona Heidempergher (Senior
Independent Director and Chairman of the Nomination and Remuneration
Committee) and James Williams (Chairman designate). The Corporate Secretary is
Janus Henderson Secretarial Services UK Limited.
Website
Details of the Company's share price and net asset value, together with
general information about the Company, monthly factsheets and data, copies of
announcements, reports and details of general meetings can be found at
www.europeansmallercompaniestrust.com (http://www.treuropeangrowthtrust.com) .
For further information please contact:
Ollie Beckett
Fund Manager
The European Smaller Companies Trust PLC Telephone: 020 7818 4331/3997
Dan Howe Harriet Hall
Head of Investment Trusts PR Director, Investment Trusts
Janus Henderson Investors Janus Henderson Investors
Telephone: 020 7818 4458 Telephone: 020 7818 2919
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FSWFWUELSEIS