European Assets has published results for 2024. Its NAV total return was -0.8% and share price return -3.6%. These compare to a 2.4% return for its MSCI Europe excluding United Kingdom Small Mid Cap (Net Return) Index benchmark. The chairman observes that the longer-term performance of the company has been disappointing. The sterling NAV total returns for the five- and ten-year periods ended 31 December 2024 are 9.3% and 75.8% respectively. These compared to 26.3% and 137.1% for the sterling benchmark total returns for the same periods.

The board is dissatisfied with the overall investment performance, particularly the disappointing stock selection. Following Mine Tezgul succeeding Sam Cosh as the lead investment manager, it is closely monitoring the new team’s implementation of the investment process to assess the impact on performance relative to both the benchmark and the company’s peer group.

The discount widened to 12.0% from 8.8%. The dividend is based on a percentage of NAV, as the NAV falls so does the dividend, from 5.90p for 2024 to 5.52p for 2025.

[European Assets does give the impression that it is fast disappearing down a plughole as its high dividends erode its capital base. European smaller companies have perked up a bit this year but European Assets’ portfolio has not. That will worry shareholders and accounts for it trading on the widest discount of its peers. The status quo cannot continue.]

Extracts from the manager’s report

Strong performers of note included our holdings in Cairn Homes (+74.8%), Smurfit Westrock (+42.4%) Karnov (+67.0%) and CTS Eventim (+26.7%). An overview of these holdings is provided below:

Cairn Homes, Consumer Discretionary, Ireland, £1.2 billion market cap, 4.0% of net assets at year end

The shortage of housing stock in Ireland continues, and this gives Cairn Homes, as one of the largest suppliers, a source of demand stretching out for the foreseeable future. This is increasingly reflected in the company’s published guidance regarding future profitability. The change in government in Ireland did not bring any change in the key policy which is termed ‘Housing for All – a New Housing Plan for Ireland’ and which provides a supportive framework for the sector, and therefore for Cairn Homes’ business, until 2030.

Smurfit Westrock, Basic Materials, Ireland, £22.3 billion market cap, 3.6% of net assets at year end

Smurfit Westrock was a notable positive contributor over the year. Towards the end of the year the paper and packaging firm released its first quarterly results as a combined entity and expressed optimism regarding its future prospects in sustainable packaging. The company now has a large footprint in Europe and the US and stands to benefit from merger efficiencies. This is a business and a sector which was attractive even before the merger: when we bought the stock it was called Smurfit Kappa, but the combination of Smurfit Kappa with Westrock in the US gives the business a global footprint. This brings synergy benefits, and the company is also now attracting wider shareholder interest due to it is global operations and brand recognition.

Karnov, Industrials, Sweden, £646 million market cap, 1.7% of net assets at year end

Karnov is a Swedish provider of online legal information services. The company received a bid at a 28% premium to the prevailing share price from two private equity groups, although it was rejected by larger shareholders and the private equity groups retreated. The share price has held its position at the higher levels, as even though the bid failed, it did so as shareholders believed the premium was not high enough. This has led to a reappraisal of the value of the company by the market. We sold some of the Company’s position profitably at these higher levels.

CTS Eventim, Consumer Discretionary, Germany, £6.5 billion market cap, 3.0% of net assets at year end

CTS Eventim performed well for us – it is a German business providing an online platform for ticketing for concerts and events. It also manages some major venues which provides a further boost to this business. The company produced strong Q2 results, better than the market expected, following a strong first quarter. At the same time, management are merging two of their promotion businesses, Peter Rigeer Konzertagentur and Dreamhaus, which will increase efficiency and impact. They have now consolidated See Tickets, another acquisition, reaffirming their successful M&A strategy. Success at the Paris Olympics and Paralympics, where they were one of the lead ticketing providers, has been followed up by signing the Los Angeles Olympics in 2028. The recent Adele tour has also provided a useful fillip. Q3 2024 results were less strong, partly as the equivalent period last year was boosted by revenues from the Taylor Swift tour, but we expect growth to pick up later.

Some portfolio holdings turned in more disappointing performances over the year. Gerresheimer, the German manufacturer of syringes for administering prescription drugs, warned that inventory problems would depress profitability. This is likely to keep the shares under a cloud for the foreseeable future, especially as competitors are voicing concerns about the market too. The company had experienced a boom during the pandemic as a consequence of demand for injectable vaccines. This phase is now past. We carefully reassessed this holding and decided to exit the investment.

Tecan, a Swiss-based laboratory automation business, was initially affected by poor sector sentiment after a peer issued a profit warning. Later the company themselves said they had seen market weakness and order delays, and this prompted downgrades from analysts. Whilst results early in the year were behind expectations, with demand proving weaker than expected, we believe the second half is likely to have been better. The comparable period last year saw weak Chinese demand, giving the company a lower hurdle to beat. We are maintaining a holding in Tecan but have reduced its size to reflect our lower level of optimism about prospects for the company.

Stabilus, the German manufacturer of gas springs, dampers and electromechanical drives cut its financial guidance owing to weakness in the automotive and commercial vehicle markets, particularly in premium cars which are heavy users of its products. We have sold the position. Whilst the shares have been a poor performer, we fear that the election of President Trump and rising tariffs, may cast a shadow over the European automotive sector, to which Stabilus is inextricably linked, for some time. Similarly we have sold the position in Melexis, which provides integrated semiconductors for use in the automotive industry. Weak trends in that industry will affect Melexis too.

EAT : European Assets board dissatisfied with performance as it lags benchmark yet again