Dramatic recovery for TR European Growth
Over the year ended 30 June 2021, the NAV total return per share for TR European Growth was 63.5%, an outperformance against the benchmark of 27.0%. The share price total return per share was even better at 79.5%. Despite COVID, the revenue generated by the portfolio rose from £9.1m for the year ended 30 June 2020 to £13.5m and, given this, the board is proposing a total dividend for the year of 25p, an increase of 13.6% on the previous year.
Strategic review
The board has carried out a strategic review of the investment objective, operations and positioning in the market. Without any doubt, the review concluded that the investment objective and policy continued to meet investors’ demands and the fund manager’s approach to investing was well suited to the objective and the long-term nature of the company.
However, the review did highlight that more could be done to improve the company’s positioning in relation to the retail investor market. To that end, the Board has decided to make a number of changes which it thinks will help with the marketing of the trust.
- Change of name: the board plans to rename the company as The European Smaller Companies Trust Plc.
- Share split: there will be an 8:1 share split to improve the liquidity of the company’s shares and enhance the ability of investors to make more efficient regular monthly investments on share dealing platforms.
- Management fee: Reduce the management fee from 0.6% of net assets up to £500m and 0.5% thereafter, to 0.55% of net assets up to £800m and 0.45% thereafter.
- Benchmark: the board will also replace the benchmark, currently the Euromoney Smaller European Companies (ex UK) Index with the MSCI Europe ex UK Small Cap Index. This change will only become effective from 1 July 2022 and will not be retrospectively applied to any fee calculations.
Extract from the manager’s report
“There were dramatic price moves in some stocks over the course of the financial year ending June 2021, and the Company benefited from owning a handful of stocks that exhibited substantial price increases in that time. German online retailer of furniture and decorative items, Westwing, increased by 535.7% over the course of the year, contributing a helpful sum to performance. Similarly, French commerce and marketing technology company Criteo increased 297.5% over the course of the year as the extremely cheap valuation unwound with the advent of a new CEO and the urgent need for businesses to get online during the pandemic. Dutch bank and wealth manager Van Lanschot increased 66.0% in the period.
Detractors from performance included German pharmaceutical distributor, Medios, which struggled to obtain sufficient drug supply due to the pandemic. We felt that valuation was stretched and decided to exit the position. Norwegian electricity distributor, Fjordkraft, suffered as rising spot electricity prices squeezed the profitability of their semi-fixed price electricity contracts. Finally, Norwegian harvester and producer of krill oil, Aker Biomarine, delivered lacklustre performance due to a poor krill harvest and weak sales of oil in South Korea.”
TRG : Dramatic recovery for TR European Growth