Over the 12 months ended 31 March 2026, Montanaro European generated a NAV return of 1.8% and a share price return of 1.5%, both lagging the 17.5% return on the MSCI Europe ex-UK SmallCap Index by some distance.
The chairman observes that the manager’s stock selection decisions have added value over three, five, and ten years “indicating that the investment process continues to add value.”
He says: “The recent period of underperformance has been driven primarily by pronounced and persistent style headwinds, with sectors such as banks, energy and mining outperforming at the expense of those companies that demonstrate consistent attributes of quality and growth companies.”
In a vote of confidence, the manager and the directors bought over £450k worth of shares in March this year. The chairman concludes by saying: “while recent performance has been challenging, the underlying drivers of long-term value creation remain firmly in place. The portfolio is characterised by high-quality, structurally growing companies with strong balance sheets and improving earnings momentum, yet it is valued at approximately 20x forward earnings, towards the lower end of its historical range.”
The manager highlights the big positive and negative contributors to returns over the year. The largest positive contributors over the period were:
- Kitron – a Norwegian electronics manufacturing services company. The company reported robust results, supported by contract wins in Aerospace and Defence and a growing order backlog, providing good visibility on future growth.
- Technoprobe – an Italian manufacturer of probe cards used in semiconductor testing. The company benefited from improving semiconductor demand and strong momentum in AI-related applications, supported by its leading market position.
- Plejd – a Swedish developer of smart lighting and electrical products, sold primarily to professional electricians. The company delivered very strong results, with revenue growth driving margin expansion, supported by robust demand and continued traction in newer markets such as the Netherlands.
The largest detractors were:
- ATOSS Software – a German developer of workforce management software. The shares declined as the stock was caught up in the broader sell-off in SaaS companies linked to fears around AI disruption.
- CTS Eventim – a German operator of ticketing platforms and live entertainment services across Europe. The share price fell despite strong operational performance and record ticket volumes, as the outlook was dampened by a one-off income headwind from a contract change.
- Reply – an Italian IT consulting and digital services provider. Similar to ATOSS, the shares declined amid the broad sell-off in Software and IT services companies.
