Stock Split on the cards at European Assets Trust – 2017 was a good year for European smaller companies and for European Assets Trust (EAT). In its final report for the year ended 31 December 2017, the company recorded a share price return of +35.8% and a NAV total return of 22.6%. This compares to the total return of its benchmark the EMIX Smaller European Companies (ex UK) Index which rose by 23.3% during the same period.
In response to feedback and to improve marketability, the company will seek approval from shareholder at the next AGM to arrange a stock split. If they agree, with effect from 3 May 2018 each shareholder will receive ten shares for every one share held. The quarterly dividends payable on 31 July and 31 October 2018 would be adjusted commensurately from €0.22 to €0.022 per share.
Each share will have a nominal value of €0.10 in comparison to the current nominal value of €0.46 with the resulting obligation to increase share capital by €0.54 for every ten shares met by an accounting adjustment to the share premium reserve of the company.
The company will also seek further shareholder approval to increase, with effect from 3 May 2018 the authorised share capital of the company from 50,000,000 shares at €0.46 per share to 600,000,000 shares at €0.10 per share. This is proposed in the anticipation of continued share issuance by the company through the provisions of the liquidity enhancement agreement.
Market leadership, particularly during the second half of the year, transitioned towards more value and cyclical sectors. The fund managers pointed out that these areas are not where their investment approach is naturally predisposed. This change goes some way to explain how the portfolio performed through the year, with a better relative return in the first half and not so strong in the second..
The best performing sector was also the largest sector, industrials, where the total return of the company’s holdings comfortably outperformed the benchmark. Financials was the other sector, which performed particularly well. As with industrials, the company has a substantial weight in this sector and its holdings comfortably outperformed the benchmark. The managers have believed for some time that this sector has been unfairly maligned. This has given the opportunity to invest in some quality businesses with valuations significantly below their intrinsic value. Negative contributions to performance in an otherwise successful year came principally from specific stocks.
EAT : Stock Split on the cards at European Assets Trust