TR European Growth underperformed its benchmark over the second half of 2015 – the net asset value total return (including dividends reinvested) was 6.7% compared to a total return from the benchmark index (The Euromoney Smaller Companies Index ex UK) of 8.2%. The share price total return was 7.0%. The discount increased from 7.6% to 8.0% compared with an increase in the sector discount from 4.0% to 4.7%.
The manager says the largest contributor to the Company’s performance over the review period was stock picking rather than from following any ‘macro’ theme. That said the best performing stock was Dalata Hotel, an Irish hotel company that has benefited from improving room rates in Europe’s fastest growing economy. TRG also had good returns from Finnish online retailer Verkkokauppa, a company they purchased in the first half of 2014. The company announced a strong set of results and continues to take market share from those peers with a higher cost base.
French train equipment manufacturer Faiveley Transport was bid for by US company Wabtec at a 41% premium delivering a welcome return to the portfolio.
Pump and vacuum system manufacturer Pfeiffer Vacuum Technology was another strong contributor after delivering a series of upgrades to forecasts in 2015. They sold into the strong stock price performance given our doubts about the near term resilience of the semiconductor sector.
SAP transformation software and consulting business SNP Schneider-Neureither & Partner was another strong performer as its consulting business delivered strong results and the market finally rewarded it.
The biggest negative came from Swiss industrial OC Oerlikon which suffered from declining orders in its man-made fibre business as a result of the economic slowdown in China. However, the company has a terrific industrial coatings business that is doing well and we have kept the holding because of the very cheap valuation. They also had poor returns from mining service business Outotec which has suffered from the general malaise in the commodity world. German bank Aareal Bank also delivered poor returns as the market began to worry about its capacity to maintain margins in such a low interest rate environment.
TRG : TR European Growth just fails to match benchmark