JPMorgan European Discovery has published results for the 12 months ended 31 March 2025. The trust beat its MSCI Europe ex UK Small cap benchmark, returning 2.9% to the index’s 1.3%. A narrowing of the discount from 10.6% to 7.3% meant that shareholders got a return of 7.0%.
During the year, the company repurchased 14,660,188 shares at an average discount of 9.8%. A further 16,347,505 shares have been re-purchased since the period end.
Revenue per share rose by 2.7% to 12.36p. The dividend was 13.0p, up from 10.5p. The revenue reserve at 31 March 2025 was £21.806m (about 22.8p per share).
A reduced fee structure is now in operation – 0.70% on the first £300m of net assets and 0.65% of the balance. That compares to the previous flat fee of 0.75%.
Extracts from the manager’s report
Positive Contributors to Performance – sectors
At the sector level, over the period the Company’s overweight positioning in the Consumer Discretionary sector made the most significant positive contribution to performance. Within this sector, investments in Irish housebuilder, Cairn Homes and Swedish school operator, AcadeMedia, were notable positive contributors. Cairn Home’s performance was driven by persistently high demand for housing in Ireland, supported by a strong economy, falling interest rates and a structural housing shortage. AcadeMedia is the largest private education provider in Northern Europe. We added this company to the portfolio in December 2024 due to its attractive valuation and promising return profile, which is independent of short-term macroeconomic fluctuations thanks to the multi-year nature of its services. Over the period, AcadeMedia benefited from a strong start to the school year, driven by sustained demand across all levels of education. Alongside this, the company also announced an increase to the reimbursement rates that local governments pay for each child for the next academic year. This increase was the result of a catch-up for inflation effects.
Other strongly performing sectors were Consumer Staples and Communication Services sectors. The Consumer Staples sector saw strong returns on the back of the Company’s position in AAK, a Swedish manufacturer of speciality vegetable oils and fats. This business has benefited over the last 12 months from soaring cocoa prices, which have encouraged users to switch to AAK’s cocoa butter alternatives. The Communication Services sector also did well on the back of a good performance by CTS Eventim, a German online ticketing platform that has delivered consistently strong results over the past year. CTS is benefiting from the ongoing growth in the live music industry, as major artists look to diversify their revenue streams away from declining traditional sales channels. Returns within this sector were also enhanced by an overweight in Scout 24, a digital classifieds platform operator focused on German and Austrian real estate, which consistently outperformed over the period given continued strong operational momentum.
Detractors from Performance – sectors
The Company’s largest detractors from a sectorial standpoint were Industrials, Materials and Real Estate. The underperformance of the Industrial sector was largely driven by the poor performance of holdings with exposure to Electrification or Green environmental characteristics. These stocks came under pressure following the US election, due to President Trump’s very vocal support for fossil fuels and his efforts towards subverting net zero carbon emissions targets. Names which came under pressure included France’s Nexans, a global leader in the high voltage cables needed to modernise electricity grids and connect to renewable energy sources, and Arcadis, a Dutch environmental consultancy which is also a leader in its field. Both stocks underperformed on concerns that the US administration’s anti-environmental stance will cause Green energy projects to be delayed or cancelled.
Our underweight position to both the Real Estate and Materials sectors also detracted, primarily due to stock selection decisions. In real estate, the Company’s investments in the German residential sub-sector (TAG and LEG Immobilien) underperformed on concerns that increased German government spending would fuel inflation, limiting scope for lower interest rates which would support the sector. Within the Materials sector, Hexpol was the main detractor. Hexpol is a Swedish company which is a leading producer of synthetic polymers and rubbers. It has been hurt by continued weakness in the automotive sector. There is little prospect of any near-term recovery in the sector as car makers are among the businesses most exposed to US tariff increases.
Positive Contributors to Performance – stocks
At the stock level, our most significant contributors to performance during the year were: Bilfinger, a German industrial services provider which produced strongly improving results, thereby confirming our expectation that a successful operational turnaround of the business would drive margin improvement and earnings growth. This success can be attributed to the company’s new management team, which has been implementing better risk controls and pricing mechanisms. Resultant strong cash generation provided scope for Bilfinger to initiate a share buyback programme. Alongside this, the German government’s announcement of fiscal stimulus measures provided a further boost to the stock, as the company is likely to be a direct beneficiary of the increase in public investment spending. The second, Unipol, an Italian general insurance provider (which was also one of the top contributors to performance during the 2023-24 financial year), continued its run of stellar performance. Its investments in the banking sector continued to perform, and overall insurance results were positive. Lottomatica, an Italian gaming company, was the third top contributor. This company has grown strongly on the back of its increasing online market penetration and by taking market share from its smaller, less efficient regional rivals.
Detractors from Performance – stocks
The biggest detractors from performance were: Ipsos, the world’s third-largest market research company. This French business is currently suffering from the weak performance of its US operations, which have been adversely impacted by a change of local management, and a lack of spending by the public sector and healthcare companies. The second was Fugro, a Dutch geological data specialist, is facing uncertainty due to the new US administration’s stance on offshore energy. This uncertainty has delayed investment decisions and projects across Fugro’s end markets. By the end of the financial year, we had exited our position in this stock on the view that the lack of policy clarity is likely to persist for the foreseeable future. The third, BFF Bank, an Italian bank focused on factoring, a process whereby a business sells its accounts receivable (outstanding invoices) to a third-party financial institution (a ‘factor’) at a discount, to receive immediate cash. BFF underperformed after the Bank of Italy required BFF to pause its dividend payments while they examined how they were classifying their overdue invoices. We have also now exited our position in BFF.
JEDT : Decent year for JPMorgan European Discovery
