TIDMMTE
RNS Number : 3828W
Montanaro European Smaller C.TstPLC
12 December 2023
Montanaro European Smaller Companies Trust plc
LEI: 213800CWSC5B8BG3RS21
Unaudited Half-Yearly Report for the Six Months Ended 30 September
2023
The Board of Montanaro European Smaller Companies Trust plc (the
"Company") announces the unaudited half-yearly results of the
Company for the six months ended 30 September 2023.
Highlights
Performance
6 month 1 year 3 year 5 year 10 year MAM*
=========================== ========= ========== ========== ========== ========= ========
Capital Returns%(2)
=========================== ========= ========== ========== ========== ========= ========
Share price (13.2) 11.2 (14.9) 23.7 143.2 270.8
=========================== ========= ========== ========== ========== ========= ========
Net Asset Value ('NAV')
per Ordinary share** (12.5) 11.6 (4.3) 30.7 148.5 300.2
=========================== ========= ========== ========== ========== ========= ========
Benchmark (Composite)
(1)** (7.5) 10.4 4.3 7.2 93.3 157.2
=========================== ========= ========== ========== ========== ========= ========
Total Returns%(2)
=========================== ========= ========== ========== ========== ========= ========
Share price (12.7) 12.0 (13.3) 28.1 168.1 353.9
=========================== ========= ========== ========== ========== ========= ========
NAV per Ordinary share** (12.1) 12.1 (2.6) 35.0 171.5 380.0
=========================== ========= ========== ========== ========== ========= ========
Benchmark (Composite)(1)** (5.7) 13.1 11.0 18.0 132.1 256.9
=========================== ========= ========== ========== ========== ========= ========
Sources: Morningstar Direct, Association of Investment Companies
('AIC'), Montanaro Asset Management Limited.
As at 30 As at 30 12 month As at 31 6 month
September September March 2023
2023 2022 % change (Audited) % change
========================= ============== ============== ============= ============ ===========
Ordinary share price* 119.4p 107.4p 11.2% 137.6p (13.2%)
========================= ============== ============== ============= ============ ===========
NAV per Ordinary share** 138.5p 124.1p 11.6% 158.4p (12.5%)
========================= ============== ============== ============= ============ ===========
(Discount)/Premium
to NAV(2) (13.8%) (13.5%) (13.1%)
========================= ============== ============== ============= ============ ===========
Net assets** (GBP'000s) 262,360 235,173 11.6% 299,975 (12.5%)
========================= ============== ============== ============= ============ ===========
Market capitalisation**
(GBP'000s) 226,177 203,445 11.2% 260,652 (13.2%)
========================= ============== ============== ============= ============ ===========
Net gearing employed(2) 2.2% 5.3% 3.3%
========================= ============== ============== ============= ============ ===========
6 months 6 months 12 month 12 months 6 month
ended ended % change ended 31 % change
March
30 30 2023
September September (Audited)
2023 2022
================================ =========== ========== =========== ============== =========
Revenue return per
Ordinary share 1.37p 1.02p 34.3% 1.10p 24.6%
================================ =========== ========== =========== ============== =========
Dividend per Ordinary
share 0.225p 0.200p 0.970p
================================ =========== ========== =========== ============== =========
Ongoing charges (annualised)(2) 1.1% 1.0% - 1.0%
================================ =========== ========== =========== ============== =========
Portfolio turnover
(annualised)** 12% 19% 14%
================================ =========== ========== =========== ============== =========
*From 5 September 2006, when Montanaro Asset Management Limited
('MAM') was appointed as Investment Manager.
**Details provided in the Glossary below.
(1) From 5 September 2006, the benchmark was the MSCI Europe SmallCap
Index. The benchmark was changed on 1 June 2009 to the MSCI Europe
SmallCap (ex UK) Index (in sterling terms).
(2) Refer to Alternative Performance Measures below.
Chairman's Statement
Performance
The first six months of the financial year saw a weak period of
absolute and relative performance for your Company. The Net Asset
Value fell by 12.5% to 138.5p per share, underperforming the
Benchmark (MSCI Europe ex-UK SmallCap index), which fell by
7.5%.
At the end of the period, the discount was 13.8% versus 13.1% at
the start. As a result, the share price fell by 13.2% during the
period, providing a total return of -12.7%. The Board recognises
that while it is not out of line with the peer group, the level of
discount is high. The Board will continue to monitor the discount
closely and stands ready to act should it deemed to be in the
interest of shareholders.
This is a disappointing performance but one which is not
unexpected given the environment: "growth" companies have
underperformed "value" and high quality companies have
underperformed low quality. Montanaro seeks to invest exclusively
in high quality, growing companies and so these style shifts acted
as a significant headwind during the period.
Montanaro take a long-term approach to investing and despite
this difficult period, over 5 and 10 years your Company has
delivered NAV per share total returns of 35.0% and 171.5%
respectively, outperforming the benchmark by 17.0% and 39.4%. Since
Montanaro were appointed in September 2006, the NAV total return
has been 380.0%, 123.1% ahead of the benchmark.
These returns have been delivered through consistent application
of Montanaro's investment process, even in times when their quality
growth style has been out of favour. The Board believes this
approach provides the best possible foundation for your Company to
deliver superior long-term returns in the future, as it has in the
past. Montanaro have been able to successfully weather multiple
economic cycles and take advantage of periods of high market
volatility over the past 30 years. We believe this time will be no
different.
Earnings and Dividends
Revenue earnings per share rose to 1.37p in the period (2022:
1.02p). The Board has declared an interim dividend of 0.225p per
Ordinary Share (2022: 0.2p per share) payable on 26 January 2024 to
shareholders on the register on 22 December 2023. This increase is
being proposed both to reflect the timing of when revenues are
received and to provide a better balance between the interim and
final dividends.
Borrowings
At the end of the period, the Company had gearing, net of cash,
of 2.2% compared to 3.3% at 31 March 2023. During the period, the
Company's borrowings in the form of a EUR10 million fixed rate loan
and a EUR15 million revolving credit facility matured. The Board
has replaced these facilities with a new EUR10 million fixed rate
loan and a new EUR15 million revolving credit facility, both of
which are due to mature on 13 September 2026.
Outlook
Smaller companies have had a torrid time in recent years. In
Continental Europe, they have underperformed their larger
counterparts by more than 17% over both three- and five-year
periods. Despite this, they have outperformed significantly over
longer time periods.
The chart below shows the P/E ratio of small companies versus
the P/E of the wider market in Continental Europe over the last two
decades. For most of this period, small companies have traded at a
higher P/E than the wider market, but they have recently moved to a
discount. At the end of October 2023 they were trading at levels
previously only seen in times of extreme stress. This suggests that
small companies look cheap when compared to their larger
counterparts.
MSCI Europe ex-UK Small Cap v. MSCI Europe ex-UK - 12 month
forward P/E
Source: Montanaro Asset Management, MSCI, FactSet.
Note: Thick red line = average +2 standard deviations (dashed
red line = average + 1 standard deviation). Thick green line =
average -2 standard deviations (dashed green line = average -1
standard deviation). Black line = average.
Small companies also look cheap relative to their own history:
at the end of October 2023, the MSCI
Europe ex-UK SmallCap Index was almost two standard deviations
below its long-term average P/E.
MSCI Europe ex-UK Small Cap - 12 month forward P/E
Source: Montanaro Asset Management, MSCI, FactSet.
Note: Thick red line = average +2 standard deviations (dashed
red line = average + 1 standard deviation). Thick green line =
average -2 standard deviations (dashed green line = average -1
standard deviation). Black line = average.
It is historically unusual for quality growth companies to
underperform during bear markets. Usually as recessionary fears
rise and markets fall, investors seek the sanctuary of companies
with high recurring revenues, defensive end markets and strong
balance sheets. This time has been different because the drawdown
in stock prices has been predominantly driven by a rapid rise in
inflation and interest rates.
It remains to be seen what the future trajectory of interest
rates will be but it is clear from listening to companies on the
ground that the effects are now being felt in the "real" economy.
Companies with stretched balance sheets are finding it increasingly
difficult to roll over their debts, which heightens the risk of
corporate defaults. However, we believe that your companies are
well insulated from the risk of balance sheet stress, as nearly
half of the portfolio has net cash on the balance sheet and the
average Net Debt / EBITDA ratio for 2023 is a mere 0.3x.
As the high quality, structurally growing companies in which
your Company invests are well suited to more difficult economic
environments, we would expect investors to start re-appraising the
relative attractiveness of the Company's portfolio. This, coupled
with highly attractive valuations for the asset class, means that
we can look forward to the future with confidence.
Portfolio Summary
Twenty Largest Holdings
As at 30 September 2023
Holding Country Value % of investment % of net
GBP'000 portfolio assets
------------------------ ------------- ---------------- ---------------- --------
VZ Holding Switzerland 12,810 4.77 4.88
Kitron Norway 12,226 4.55 4.66
NCAB Sweden 11,206 4.17 4.27
Fortnox Sweden 10,965 4.08 4.17
MTU Aero Engines Germany 10,423 3.88 3.97
Atoss Software Germany 10,268 3.82 3.92
Melexis Belgium 9,208 3.43 3.51
IMCD Netherlands 8,843 3.29 3.37
Brembo Italy 8,666 3.23 3.31
CTS Eventim Germany 8,661 3.23 3.30
Brunello Cucinelli Italy 7,808 2.91 2.98
Amadeus FiRe Germany 7,698 2.87 2.93
Tecan Switzerland 7,620 2.84 2.91
Belimo Switzerland 7,222 2.69 2.75
Esker France 7,044 2.62 2.69
Sartorius Stedim France 6,851 2.55 2.61
Bachem Switzerland 6,698 2.49 2.55
Christian Hansen Denmark 6,558 2.44 2.50
Thule Sweden 6,464 2.41 2.46
Viscofan Spain 6,264 2.33 2.39
------------------------ ------------- ---------------- ---------------- --------
Twenty Largest Holdings 173,503 64.60 66.13
Geographical Analysis
As at 30 September 2023
Source: Montanaro Asset Management Limited
Sector Analysis
As at 30 September 2023
Source: Montanaro Asset Management Limited
Interim Management Report
The important events that have occurred during the period under
review and the key factors influencing the financial statements are
set out in the Chairman's Statement above.
Statement of Principal Risks and Uncertainties:
Most of the principal risks that could threaten the Company's
objective, strategy, future returns and solvency are market related
and comparable to those of other investment trusts investing
primarily in quoted securities. The principal risks faced by the
Company are investment and strategic, gearing, financial, discount
volatility, regulatory, operational, cyber security, ESG and
manager risks. These risks and the way in which they are mitigated
are described in more detail under the heading 'Principal and
Emerging Risks and Uncertainties and Risk Mitigation' within the
Business Model and Strategy section on pages 14 to 17 of the
Company's Annual Report for the year ended 31 March 2023. The
Company's principal risks and uncertainties have not changed
materially since the date of that report and are not expected to
change materially for the remaining six months of the Company's
financial year.
Related Party Transactions:
Related party transactions are disclosed in note 13 below. There
have been no material changes to the related party transactions
described in the last Annual Report.
Going Concern:
The Directors are satisfied that the Company has sufficient
resources to continue in operation for the foreseeable future and
for a period of at least 12 months from the date of this report.
Accordingly, they continue to adopt the going concern basis in
preparing the condensed financial statements.
Directors' Responsibility Statement in respect of the
Half-Yearly Report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements have been prepared
in accordance with IAS 34 'Interim Financial Reporting' and give a
true and fair view of the assets, liabilities, financial position
and profit or loss of the Company;
-- the Interim Management Report includes a fair review of the
information required by the Disclosure Guidance and Transparency
Rule ('DTR') 4.2.7R, being an indication of important events that
have occurred during the first six months of the financial year and
their impact on the financial statements;
-- the Statement of Principal Risks and Uncertainties shown
above is a fair review of the information required by DTR 4.2.7R;
and
-- the Chairman's Statement, together with the condensed set of
financial statements, include a fair review of the information
required by DTR 4.2.8R, being related party transactions that have
taken place in the first six months of the financial year and that
have materially affected the financial position or performance of
the Company during the period, and any changes in the related party
transactions described in the last Annual Report that could do
so.
The Half-Yearly Report and Accounts were approved by the Board
and the above responsibility statement was signed on its behalf
by:
R M CURLING
Chairman
11 December 2023
Condensed Income Statement (unaudited)
for the six months to 30 September 2023
Six months to Six months to Year to
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 (audited)
GBP'000
Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Losses on
investments at
fair value
through profit
or loss - (37,997) (37,997) - (88,982) (88,982) - (23,070) (23,070)
Exchange
gains/(losses) 115 115 - (500) (500) - (542) (542)
------- ---------- ---------- ------- ---------- ---------- ------- ------------- ----------
Revenue
Investment
income 3 3,745 - 3,745 2,981 - 2,981 4,130 - 4,130
------- ---------- ---------- ------- ---------- ---------- ------- ------------- ----------
Total income 3,745 (37,882) (34,137) 2,981 (89,482) (86,501) 4,130 (23,612) (19,482)
------- ---------- ---------- ------- ---------- ---------- ------- ------------- ----------
Expenditure
Management
expenses 4 (413) (766) (1,179) (396) (736) (1,132) (804) (1,494) (2,298)
Other expenses (362) - (362) (293) - (293) (620) - (620)
------- ---------- ---------- ------- ---------- ---------- ------- ------------- ----------
Total
expenditure (775) (766) (1,541) (689) (736) (1,425) (1,424) (1,494) (2,918)
------- ---------- ---------- ------- ---------- ---------- ------- ------------- ----------
Return before
finance
costs and
taxation 2,970 (38,648) (35,678) 2,292 (90,218) (87,926) 2,706 (25,106) (22,400)
Finance costs (41) (97) (138) (39) (73) (112) (84) (156) (240)
------- ---------- ---------- ------- ---------- ---------- ------- ------------- ----------
Return before
tax 2,929 (38,745) (35,816) 2,253 (90,291) (88,038) 2,622 (25,262) (22,640)
Tax (340) - (340) (321) - (321) (538) - (538)
------- ---------- ---------- ------- ---------- ---------- ------- ------------- ----------
Return after
taxation 2,589 (38,745) (36,156) 1,932 (90,291) (88,359) 2,084 (25,262) (23,178)
------- ---------- ---------- ------- ---------- ---------- ------- ------------- ----------
Return per
share: 5 1.37p (20.45p) (19.08p) 1.02p (47.67p) (46.65p) 1.10p (13.34p) (12.24p)
------- ---------- ---------- ------- ---------- ---------- ------- ------------- ----------
The total column of this statement represents the Company's
Income Statement and Statement of Comprehensive Income, prepared in
accordance with International Financial Reporting Standards.
The supplementary revenue return and capital return columns are
both prepared under guidance published by the AIC.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the period.
Condensed Balance Sheet (unaudited) as at 30 September 2023
Note As at 30 September As at 30 September As at 31
2023 2022 March 2023
GBP'000 GBP'000 (audited)
GBP'000
========================== ==== ======================= ======================= =============
Non-current assets
Investments held
at fair value through
profit and loss 7 268,485 247,129 310,308
========================== ==== ======================= ======================= =============
Current assets
Trade and other
receivables 748 886 880
Cash and cash equivalents 2,808 771 3,225
========================== ==== ======================= ======================= =============
3,556 1,657 4,105
========================== ==== ======================= ======================= =============
Total assets 272,041 248,786 314,413
========================== ==== ======================= ======================= =============
Current liabilities
Trade and other
payables (1,099) (472) (1,260)
Revolving credit
facility 8 - (4,384) (4,391)
Interest-bearing
bank loans 8 - (8,757) (8,787)
========================== ==== ======================= ======================= =============
(1,099) (13,613) (14,438)
========================== ==== ======================= ======================= =============
Non-current liabilities
========================== ==== ======================= ======================= =============
Interest-bearing
bank loans 8 (8,582) - -
========================== ==== ======================= ======================= =============
Total liabilities (9,681) (13,613) (14,438)
========================== ==== ======================= ======================= =============
Net assets 262,360 235,173 299,975
========================== ==== ======================= ======================= =============
Capital and reserves
Called-up share
capital 9,471 9,471 9,471
Share premium account 44,057 44,057 44,057
Capital redemption
reserve 2,212 2,212 2,212
Capital reserve 201,836 175,552 240,581
Revenue reserve 4,784 3,881 3,654
========================== ==== ======================= ======================= =============
Shareholders'
funds 262,360 235,173 299,975
========================== ==== ======================= ======================= =============
NAV per share 10 138.5p 124.1p 158.4p
========================== ==== ======================= ======================= =============
Condensed Statement of Changes in Equity
for the six months ended 30 September 2023 (unaudited)
Share Share premium Capital Capital Revenue Total
capital account redemption reserve reserve GBP'000
GBP'000 GBP'000 reserve GBP'000 GBP'000
GBP'000
========================= ========== =============== ============ ========= ========= ==========
As at 1 April 2023 9,471 44,057 2,212 240,581 3,654 299,975
Return after taxation - - - (38,745) 2,589 (36,156)
Dividends paid - - - - (1,459) (1,459)
========================= ========== =============== ============ ========= ========= ==========
Balance at 30 September
2023 9,471 44,057 2,212 201,836 4,784 262,360
========================= ========== =============== ============ ========= ========= ==========
for the six months ended 30 September 2022 (unaudited)
Share capital Share premium Capital Capital Revenue Total
GBP'000 account redemption reserve reserve GBP'000
GBP'000 reserve GBP'000 GBP'000
GBP'000
======================== =============== =============== ============= ========== ========== ==========
As at 1 April 2022 9,471 44,057 2,212 265,843 3,322 324,905
Return after taxation - - - (90,291) 1,932 (88,359)
Dividends paid - - - - (1,373) (1,373)
======================== =============== =============== ============= ========== ========== ==========
Balance at 30 September
2022 9,471 44,057 2,212 175,552 3,881 235,173
======================== =============== =============== ============= ========== ========== ==========
for the year ended 31 March 2023 (audited)
Share capital Share premium Capital redemption Capital Revenue Total
GBP'000 account reserve Reserve reserve GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
====================== =============== =============== ======================= ========== ========= ==========
As at 1 April 2022 9,471 44,057 2,212 265,843 3,322 324,905
Return after taxation - - - (25,262) 2,084 (23,178)
Dividends paid - - - - (1,752) (1,752)
====================== =============== =============== ======================= ========== ========= ==========
Balance at 31 March
2023 9,471 44,057 2,212 240,581 3,654 299,975
====================== =============== =============== ======================= ========== ========= ==========
Condensed Statement of Cash Flows (unaudited) for the six months
ended 30 September 2023
Six months Six months Year to
to to 30 September
30 September 2022 31 March
2023 GBP'000 2023
GBP'000 (audited)
GBP'000
======================================== ============== ====================== ==========
Net cash inflow from operating
activities 5,376 4,717 7,701
Net cash outflow from financing
activities (5,968) (5,813) (6,316)
======================================== ============== ====================== ==========
(592) (1,096) 1,385
Exchange gains 64 46 19
======================================== ============== ====================== ==========
(Decrease)/increase in cash and
cash equivalents (528) (1,050) 1,404
======================================== ============== ====================== ==========
Reconciliation of profit before
finance costs and tax to net
cash inflow from operating activities
Return before taxation (35,678) (88,038) (22,640)
Losses on investments held at
fair value 37,997 88,982 23,070
Exchange gains/(losses) (115) 500 542
Finance costs 226 112 240
Withholding tax (340) (373) (450)
Purchases of investments (14,403) (22,614) (31,524)
Sales of investments 17,805 26,243 38,643
Changes in working capital and
other non-cash items (116) (95) (180)
---------------------------------------- -------------- ---------------------- ----------
Net cash inflow from operating
activities 5,376 4,717 7,701
---------------------------------------- -------------- ---------------------- ----------
Notes to the Accounts (unaudited )
1. The condensed unaudited financial statements have been
prepared in accordance with International Financial Reporting
Standard ('IFRS') IAS 34 'Interim Financial Reporting' and the
accounting policies set out in the statutory accounts of the
Company for the year ended 31 March 2023. The condensed financial
statements do not include all of the information required for a
complete set of IFRS financial statements and should be read in
conjunction with the financial statements of the Company for the
year ended 31 March 2023, which were prepared under full IFRS
requirements.
2. Earnings for the first six months should not be taken as a
guide to the results for the full year.
3. Income for the period is derived from:
Six months Six months Year to
to to
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 (audited)
GBP'000
Overseas dividend income 3,661 2,933 4,078
Exchange (losses)/gains (4) 35 23
Other income 88 13 29
-------------- ------------- ----------
Total 3,745 2,981 4,130
-------------- ------------- ----------
4. Management fee:
As set out in the Company's Annual Report, the management fee is
linked to the size of the Company, as follows:
-- 0.90% p.a. of the amount of the Company's market capitalisation up to GBP500 million;
-- 0.75% p.a. of the amount of the Company's market capitalisation between
GBP500 million and GBP750 million; and
-- 0.65% p.a. of the amount of the Company's market capitalisation above GBP750 million.
The management fee is payable monthly in arrears.
MAM is also paid a fee of GBP50,000 per annum for acting as the
Company's Alternative Investment Fund Manager ('AIFM').
5. Return per Share
Earnings per Ordinary Share is based on a weighted average of
189,427,600 Ordinary Shares in issue during the period (year ended
31 March 2023: 189,427,600 and six months ended 30 September 2022:
189,427,600), excluding those shares bought back and held in
treasury (nil at 30 September 2023).
6. Dividends
The interim dividend relating to the year ended 31 March 2024 of
0.225p per Ordinary Share will be paid on 26 January 2024 to
shareholders on the register on 22 December 2023. In accordance
with IFRS, this dividend has not been recognised in these financial
statements. The ex-dividend date for this payment is 21 December
2023.
A final dividend relating to the year ended 31 March 2023 of
0.77p per Ordinary Share was paid during the six months to 30
September 2023 and amounted to GBP1,459,000.
7. Investments at fair value through profit or loss
31 March
30 September 30 September 2023
2023 2022 (audited)
GBP'000 GBP'000 GBP'000
======================= ============= ============ ==========
Opening book
cost 193,796 196,337 196,337
Holding gains 116,512 143,451 143,451
======================= ============= ============ ==========
Opening fair
value 310,308 339,788 339,788
Purchases at
cost 13,991 22,427 32,076
Sales - proceeds (17,817) (26,104) (38,486)
- gains on sales 5,450 4,019 3,869
Holding (losses)/gains (43,447) (93,001) (26,939)
======================= ============= ============ ==========
Closing fair
value 268,485 247,129 310,308
======================= ============= ============ ==========
Closing book
cost 195,420 196,679 193,796
Holding gains 73,065 50,450 116,512
======================= ============= ============ ==========
Closing valuation 268,485 247,129 310,308
======================= ============= ============ ==========
8. Borrowings
Revolving credit facility
Six months Six months Year to
to to
30 September 30 September 31 March 2023
2023 2022 (audited)
GBP'000 GBP'000 GBP'000
Opening balance 4,391 - 8,450
(Repaid)/drawn down (4,327) 4,439 (4,325)
Foreign currency exchange
(gain)/loss (64) 55 266
Closing balance - 4,384 4,391
-------------- ------------- --------------
The Company's EUR15 million three year secured revolving credit
facility with ING matured on 13 September 2023. The Company entered
into a three year secured revolving credit facility which will
mature on 13 September 2026.
As at 30 September 2023, no amounts were drawn down under this
facility.
Interest bearing bank loans
Six months Six months Year to
to to
30 September 30 September 31 March 2023
2023 2022 (audited)
GBP'000 GBP'000 GBP'000
Opening balance 8,787 8,434 8,434
Loan set up costs (99) - -
Amortisation of set-up
costs 6 5 10
Non-cash foreign currency
movements (112) 318 343
-------------- ------------- --------------
Closing balance 8,582 8,757 8,787
-------------- ------------- --------------
The Company's fixed rate loan facilities totaling EUR10 million
matured on 13 September 2023. The Company refinanced EUR10 million
by entering into a three year secured loan at a fixed rate of
5.105% per annum (previously 1.33%) with ING Bank N.V. ('ING').
This loan will mature on 13 September 2026.
The carrying value of the balances above approximates to fair
value.
9. Share Capital
30 September 2023 31 March 2023
(audited)
Number of
shares GBP'000 Number of shares GBP'000
Allotted, called-up
and fully paid:
Ordinary shares of 2p
each (31 March 2023:
2p each)
Balance at beginning
of period 189,427,600 9,471 189,427,600 9,471
--------------------------- ----------------- ------- ---------------- -------
Balance at end of period 189,427,600 9,471 189,427,600 9,471
--------------------------- ----------------- ------- ---------------- -------
10. Net Assets Value per Ordinary Share
The NAV per Ordinary Share was based on 189,427,600 Ordinary
Shares in issue at the end of the period (31 March 2023:
189,427,600 and 30 September 2022: 189,427,600), excluding those
shares bought back and held in treasury. As at 30 September 2023,
there were no Ordinary Shares held in treasury (31 March 2023: nil
and 30 September 2022: nil).
11. Fair Value Hierarchy
The Company measures fair values using the following fair value
hierarchy that reflects the significance of the inputs used in
making the measurements.
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant assets as follows:
-- Level 1 - valued using quoted prices unadjusted in active
markets for identical assets or liabilities.
-- Level 2 - valued by reference to valuation techniques using
observable inputs for the asset or liability other than quoted
prices included within Level 1.
-- Level 3 - valued by reference to valuation techniques using
inputs that are not based on observable market data for the asset
or liability.
The tables below set out fair value measurements of financial
instruments as at the period end, by the level in the fair value
hierarchy into which the fair value measurement is categorised.
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
============== ======== ======== ======== =================
30 September
2023
Investments 268,485 - - 268,485
Loan - (8,582) - (8,582)
-------------- -------- -------- -------- -----------------
30 September
2022
Investments 247,129 - - 247,129
Loan - (13,141) (13,141)
-------------- -------- -------- -------- -----------------
31 March 2023
(audited)
Investments 310,308 - - 310,308
Loan - (13,178) - (13,178)
-------------- -------- -------- -------- -----------------
There were no transfers between levels during the period ended
30 September 2023 (year ended 31 March 2023 and period ended 30
September 2022: None).
Other aspects of the Company's financial risk management
objectives and policies are consistent with those disclosed in the
financial statements, as at and for the year ended, 31 March
2023.
12. Rates of Exchange (to Sterling)
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 (audited)
GBP'000
================ ============= ============ ==========
Danish Krone 8.60 8.48 8.48
Euro 1.15 1.14 1.14
Norwegian Krone 13.03 12.17 12.95
Swedish Krona 13.32 12.40 12.82
Swiss Franc 1.12 1.10 1.13
================ ============= ============ ==========
13. Related Parties
The following are considered related parties: the Board of
Directors. The Directors of the Company received fees for their
services and dividends from their shareholdings in the Company as
outlined below.
The amount charged by the Manager during the period was
GBP1,179,000 (six months to 30 September 2022: GBP1,132,000; year
to 31 March 2023: GBP2,298,000). At 30 September 2023, the amount
due to the Manager, included in creditors, was GBP575,000. The
existence of an independent Board of Directors demonstrates that
the Company is free to pursue its own financial and operating
policies.
Directors' Emoluments
At 30 September 2023, the Board consisted of three non-executive
Directors. All Directors are considered to be independent of the
Manager. None of the Directors has a service contract with the
Company. The Chairman receives an annual fee of GBP41,000, the
Chair of the Audit Committee receives an annual fee of GBP35,500
and non-executive Directors receive GBP29,500 per annum.
At 30 September 2023, the amount outstanding in respect of
Directors' fees was GBPnil (31 March 2023: GBPnil).
At 30 September 2023, the interests of the Directors in the
Ordinary Shares of the Company were as follows:
30 September 2023 31 March 2023
No. of shares No. of shares
R M Curling 100,000 100,000
G Neilly 62,178 61,867
C A Roxbrugh 62,352 62,352
The following changes in the Directors' interests occurred
between 30 September 2023 and the date of this report:
C A Roxburgh acquired 382 shares on 12 October 2023.
14. Statutory Accounts
These are not statutory accounts in terms of Section 434 of the
Companies Act 2006 and have not been audited or reviewed by the
Company's Auditor. The information for the year ended 31 March 2023
has been extracted from the latest published financial statements
and which have been filed with the Registrar of Companies. The
Auditor's report on those accounts was not qualified, did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying the report and did
not contain statements under section 498 (2) or (3) of the
Companies Act 2006. No statutory accounts in respect of any period
after 31 March 2023 have been reported on by the Company's Auditor
or delivered to the Registrar of Companies.
Alternative Performance Measures ("APMs")
The Company uses the following APMs:
Capital Return - NAV and Share Price Returns
Capital returns measure the effect of any rise or fall in the
share price or NAV, excluding any dividends paid. As at 30
September 2023, the 6 month NAV Capital Return was (12.5%), and the
6 month Ordinary share price
Capital Return was (13.2%) , as shown in the Highlights above.
NAV Capital Return calculation as at 30 September
2023
NAV per share as at 30 September 138.50 (a)
2023
NAV per share as at 31 March 2023 158.40 (b)
---------------------------------- -------
NAV Capital Return (12.5%) ((a-b)/b)
---------------------------------- -------
Share Price Capital Return calculation as at 30
September 2023
Share Price as at 30 September 119.40 (a)
2023
Share Price as at 31 March 2023 137.60 (b)
-------------------------------- -------
Share Price Capital Return (13.2%) ((a-b)/b)
-------------------------------- -------
Total Return - NAV and Share Price Returns
Total returns measure the effect of any rise or fall in the
share price or NAV, plus dividends paid which are reinvested at the
prevailing NAV or share price on the ex- dividend date. As at 30
September 2023, the 6 month NAV Total Return was (12.1%), and the 6
month Ordinary share price Total Return was (12.7%), as shown in
the Highlights above.
NAV Total Return calculation as at 30 September
2023
NAV per share as at 30 September 138.50 (c)
2023
NAV per share as at 31 March 2023 158.40 (d)
Dividend adjustment factor 1.0053 (a)
(+1)
Pre-Dividend Reinvestment 0.8744 (b)(b=c/d)
Factor
------------------------------------- ----------- ---------------------
NAV Total Return (12.1%) ((a*b)-1)
----------------------- ------------ ----------- ---------------------
(a) Dividend Adjustment
Factor
-------------------------------------
Dividend NAV at Share price
Dividend PPS XD date Dividend Multiplier
XD date
------------ --------- ------------ ----------- ---------------------
Final
dividend 0.77 18.Aug.23 145.51 0.0053
------------ --------- ------------ ----------- ---------------------
Share price Total Return calculation as at 30 September
2023
Share Price as at 30 September 2023 119.40 (c)
Share Price as at 31 March 2023 137.60 (d)
Dividend adjustment factor 1.0061 (a)
(+1)
Pre-Dividend Reinvestment 0.8677 (b)(b=c/d)
Factor
-------------------------------------- -------------- -------------------
Share price Total Return (12.7%) ((a*b)-1)
-------------------------------------- -------------- -------------------
(a) Dividend Adjustment
Factor
Share price
Dividend PPS Dividend at Dividend Share price
XD date XD date Multiplier
------------ --------- ------------- -------------- -------------------
Final
dividend 0.77 18.Aug.23 127.00 0.0061
------------ --------- ------------- -------------- -------------------
Discount or Premium to NAV
If the share price of an Investment Trust is less than its NAV
per share, the shares are trading at a discount. If the share price
is greater than the NAV per share, the shares are trading at a
premium.
As at 30 September 2023, the NAV per share was 138.41p and the
share price was 119.40p. The discount is therefore calculated at
13.73% as shown in the highlights above.
Net gearing employed
Unlike open-ended investment companies, Investment Trusts have
the ability to borrow to invest. This term is used to describe the
level of borrowings that an Investment Trust has undertaken and is
stated as a percentage of shareholders' funds. The higher the level
of borrowings, the higher the gearing ratio.
Net gearing is calculated as total debt, net of cash and cash
equivalents, as a percentage of the total shareholders' funds.
As at 30 September 2023, interest bearing bank loans were
(GBP8,582,000), cash and cash equivalents were GBP2,808,000 and net
assets were GBP262,360,000. As at 30 September 2023, Gearing was
therefore equal to 2.20% as shown in the highlights above.
Ongoing charges (expressed as a percentage)
Ongoing charges are the Company's revenue and capital expenses
(excluding finance costs and certain non-recurring items) expressed
as a percentage of the average daily net assets of the Company
during the period.
Ongoing charges calculation
Six months to Six months to Year to
30 September 30 September 31 March
2022
2023 GBP'000 2023
GBP'000 (audited)
GBP'000
=================================================================== =============== ============
Total expenditure (a) 1,541 1,425 2,917
Average daily net
assets (b) 291,230 279,257 279,739
======================================= ========= =============== =============== ============
Ongoing charges
(c = a/b)* (c) 1.1% 1.0% 1.0%
======================================= ========= =============== =============== ============
* 30 September 2023 and 30 September 2022 figures annualised for
comparison (c = (a/b) x 2).
Glossary of terms
AIFMD
Alternative Investment Fund Managers Directive. Issued by the
European Parliament in 2012 and 2013, the Directive requires
that all investment vehicles in the European Union, including
Investment Trusts, must, with effect from 22 July 2014, appoint
a Depositary and an AIFM. The Board of Directors of an Investment
Trust, nevertheless, remains fully responsible for all aspects
of the Company's strategy, operations and compliance with regulations.
AIC
The Association of Investment Companies is the trade body for
Closed-end Investment Companies (www.theaic.co.uk).
Benchmark
This is a measure against which an Investment Trust's performance
is compared. The benchmark of the Company is the MSCI Europe
SmallCap (ex UK) Index (capital return in Sterling terms).
The index averages the performance of a defined selection of
companies listed in European smaller company stock markets
and gives an indication of how those markets have performed
in any period.
Closed-end Investment Company
A company, including an Investment Trust, with a fixed issued
ordinary share capital which is traded on an exchange at a
price not necessarily related to the NAV of the company and
where shares can only be issued or bought back by the company
in certain circumstances. This contrasts with an open-ended
investment company, which has units not traded on an exchange
but issued or bought back from investors at a price directly
related to the NAV.
Custodian
A specialised financial institution responsible for safeguarding,
worldwide, the listed securities and certain cash assets of
the Company, as well as the income arising therefrom, through
provision of custodial, settlement and associated services.
The Company's Custodian is Bank of New York Mellon SA/NV.
Depositary
Under AIFMD rules applying from 22 July 2014, the Company must
appoint a Depositary, whose duties in respect of investments,
cash and similar assets include: safekeeping; verification
of ownership and valuation; and cash monitoring. The Depositary
has strict liability for loss of any investments or other assets
where it has safekeeping duties. The Depositary's oversight
duties include, but are not limited to, oversight of share
buybacks, dividend payments and adherence to investment limits.
The Company's Depositary is The Bank of New York Mellon (International)
Limited.
Dividend
The income from an investment. Some Investment Trusts pay dividends
on a quarterly or monthly basis. Montanaro European Smaller
Companies Trust plc currently pays dividends twice a year.
Gearing
Gearing is calculated as total liabilities less current assets
divided by net assets.
IFRS
International Financial Reporting Standards.
Investment Manager
The Company's Investment Manager is Montanaro Asset Management
Limited.
Investment Trust
A Closed-end Investment Company which satisfies the requirements
of Section 1158 of the Corporation Tax Act 2010. Companies
which meet these criteria are exempt from having to pay tax
on the capital gains they realise from sales of the investments
within their portfolios.
Leverage
As defined under the AIFMD rules, Leverage is any method by
which the exposure of an AIF is increased through borrowing
of cash or securities or leverage embedded in derivative positions.
Leverage is broadly equivalent to Gearing, but is expressed
as a ratio between the assets (excluding borrowings) and the
net assets (after taking account of borrowings). Under the
gross method, exposure represents the sum of the Company's
positions after deduction of cash and cash equivalents, without
taking account of any hedging or netting arrangements. Under
the commitment method, exposure is calculated without the deduction
of cash and cash equivalents and after certain hedging and
netting positions are offset against each other.
Marked to Market
Accounting for the fair value of an asset or liability that
can change over time and reflects its current market value
rather than its book cost.
Market Capitalisation
The stock market value of a company as determined by multiplying
the number of shares in issue, excluding those shares held
in treasury, by the market price of the shares.
NAV per Ordinary Share
This is calculated as the net assets of an Investment Trust
divided by the number of shares in issue, excluding those shares
held in treasury.
Net Assets (or Shareholders' Funds)
This is calculated as the value of the investments and other
assets of an Investment Trust, plus cash and debtors, less
borrowings and any other creditors. It represents the underlying
value of an Investment Trust at a point in time.
Net Gearing
Net Gearing is calculated as total debt, net of cash and cash
equivalents, as a percentage of the total shareholders' funds.
Ordinary Shares
The main type of equity capital issued by conventional Investment
Trusts. Shareholders are entitled to their share of both income,
in the form of dividends paid by the Investment Trust, and
any capital growth. Montanaro European Smaller Companies Trust
plc has only Ordinary Shares in issue.
Portfolio Turnover
Calculated using total sales proceeds as a percentage of the
average monthly net assets during the period, annualised.
Related Party Transactions
Under the Listing Rules, the Manager is regarded as a related
party of the Company.
Share Price
The value of a share at a point in time as quoted on a stock
exchange. The shares of Montanaro European Smaller Companies
Trust plc are quoted on the Main Market of the London Stock
Exchange.
SORP
Statement of Recommended Practice "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" issued
by the AIC.
Total Assets
This is calculated as the value of the investments and other
assets of an Investment Trust, plus cash and debtors.
Montanaro European Smaller Companies Trust PLC
Registered in Scotland No. SC074677
An investment company as defined under section 833 of the
Companies Act 2006
Directors Registered Office
R M Curling (Chairman) 28 Walker Street
G Neilly Edinburgh EH3 7HR
C A Roxburgh
Principal Advisers
AIFM and Investment Manager Depositary
MONTANARO ASSET MANAGEMENT LIMITED THE BANK OF NEW YORK MELLON (INTERNATIONAL)
53 Threadneedle Street LIMITED
London EC2R 8AR 160 Queen Victoria Street London
Tel: 020 7448 8600 EC4V 4LA
enquiries@montanaro.co.uk www.montanaro.co.uk
Company Secretary and Administrator Custodian
JUNIPER PARTNERS LIMITED BANK OF NEW YORK MELLON SA/NV
28 Walker Street, 160 Queen Victoria Street London
Edinburgh EH3 7HR EC4V 4LA
Tel: 0131 378 0500
Contact: cosec@junipartners.com
Auditor Registrar
PRICEWATERHOUSECOOPERS LLP EQUINITI LIMITED
Atria One Aspect House,
144 Morrison Street Spencer Road, Lancing
Edinburgh EH3 8EX West Sussex BN99 6DA
Registrar's Shareholder Helpline
Tel: 0371 384 2030*
*Lines are open 8.30am to 5.30pm,
Monday to Friday, excluding UK
public holidays
Solicitor Stockbroker
DICKSON MINTO W.S. CAVENDISH
16 Charlotte Square One Bartholomew Close
Edinburgh EH2 4DF London EC1A 7BL
Sources of Further Information
Information on the Company, including this Half-Yearly Report
is available on the Company's website: https://montanaro.co.uk/trust/montanaro-
european-smaller-companies-trust/
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on this announcement
(or any other website) is incorporated into, or forms part
of, this announcement.
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END
IR FFSFIFEDSEIE
(END) Dow Jones Newswires
December 12, 2023 02:00 ET (07:00 GMT)
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