Legal Entity Identifier:  213800N1B1HCQG2W4V90

THE EUROPEAN SMALLER COMPANIES TRUST PLC

Unaudited results for the half-year ended 31 December 2024

INVESTMENT OBJECTIVE

The Company seeks capital growth by investing in smaller and medium sized companies which are quoted, domiciled, listed or have operations in Europe (ex UK).

PERFORMANCE

Fund Manager's Report

The initial six months of the financial year concluding on 31 December 2024 have not been a period of exceptional performance for the Company, which underperformed its benchmark by 3.7%. This shortfall can be attributed to several factors, including suboptimal stock selection, a disproportionate focus on companies at the lower end of the market capitalisation spectrum, and an excessive allocation towards economically-sensitive firms, notably within the industrial sector. Initially, the European economy seemed poised for a resurgence. However, political uncertainties in France, a lack of decisive action in Germany, a subdued recovery in China, and a halt in corporate decision-making in anticipation of the US Presidential election collectively contributed to a deteriorating global economic landscape.

Performance was negatively impacted by several holdings. DFDS, a Danish ferry operator, experienced performance setbacks due to escalating competition in the Mediterranean. TKH, a Dutch conglomerate specialising in industrial automation, vision technology, and cable manufacturing, reported lacklustre results, particularly with the delayed operational ramp-up of its new subsea cable facility. Mersen, a French electrical technology company, encountered uninspiring results from its solar power and silicon semiconductor divisions. Additionally, our technology sector exposure was detrimental during this period, with German semiconductor equipment manufacturer SUESS MicroTec and Swiss positioning technology firm u-blox facing challenges, including customer destocking.

Conversely, positive performance contributions emerged from select investments. IG Group, a UK online trading platform, demonstrated exceptional value, prompting a rare investment by the Company in UK-listed stocks, largely due to its significant capital return to shareholders. R&S, a Swiss manufacturer of transformers, benefited from the critical need for electrical grid investments across the developed world. Other notable contributions included Dutch wealth manager Van Lanschot, Spanish online travel company eDreams ODIGEO, and Renewi, a UK-listed waste management firm with Dutch operations, which attracted a private equity bid.

Strategic portfolio adjustments were made during this period. New investments included Cenergy, a Greek cable and steel pipe manufacturer expanding into the US market, and Mycronic, a Swedish electronic production equipment manufacturer, following strong demand for its semiconductor equipment. Additionally, investments in Bankinter, a Spanish bank, and Aixtron, a German semiconductor equipment manufacturer, were made based on their growth potential and strategic positioning.

Conversely, positions in Theon, Cadeler, Xior Student Housing, and Alimak were divested due to various strategic considerations, including sector exposure optimisation and valuation concerns.

Despite the current economic and political uncertainties, the outlook remains cautiously optimistic. The recent German election has infused optimism across Europe, with the new CDU Chancellor's aggressive agenda potentially rejuvenating German equities-a market where we are significantly overweight. Additionally, potential geopolitical developments, stimulus effects in China, and attractive valuations in the European small-cap space present compelling investment opportunities. Our portfolio is strategically positioned with companies trading at significant discounts to their intrinsic value, underscoring our commitment to maximising capital growth through judicious investment selection.

Ollie Beckett, Rory Stokes and Julia Scheufler

19 March 2025

Principal Risks and Uncertainties

The principal risks facing the Company are:

Investment strategy and objective

The investment objective or policy is not appropriate in the prevailing market or sought by investors, leading to a wide discount and hostile shareholders.

Operational

Failure of, disruption to or inadequate service levels provided by principal third-party service providers leading to a loss of shareholder value or reputational damage. This includes cyber security risks which may compromise the integrity of data and the effective operation of third-party service providers.

Legal and regulatory

Loss of investment trust status, breach of the Companies Act 2006, Listing Rules, Prospectus and/or Disclosure Guidance and Transparency Rules or the Alternative Fund Managers Directive and/or legal action brought against the Company and/or directors and/or the investment manager leading to a decrease in shareholder value and reputational damage.

Financial

Market, liquidity and/or credit risk, inappropriate valuation of assets or poor capital management leading to a loss of shareholder value.

Information on these risks and how they are managed is given in the Annual Report 2023. In the view of the Board, these principal risks and the uncertainties facing the Company remained largely unchanged over the six months under review.  The Board anticipates that these principal risks will remain applicable to the remaining six months of the financial year.

Statement of Directors' Responsibilities

Each director (as set out in note 15) confirms, to the best of their knowledge, that:

·      the condensed set of financial statements has been prepared in accordance with UK adopted International Accounting Standards and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by Disclosure and Transparency Rule ('DTR') 4.2.4 R;

·    the interim management report includes a fair review of the information required:

-    by DTR 4.2.7 R (indication of important events during the first six months and a description of principal risks and uncertainties for the remaining six months of the year); and

-    by DTR 4.2.8 R (disclosure of related party transactions and changes therein).

On behalf of the Board

James Williams

Chairman

19 March 2025

Notes to the condensed financial statements

1.    Accounting policies

a)  Basis of preparation

The condensed financial statements comprise the unaudited results of the Company for the half-year ended 31 December 2024. They have been prepared on a going concern basis and in accordance with UK adopted International Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('SORP'), issued in July 2022 where the SORP is consistent with the requirements of UK adopted International Accounting Standards.

For the period under review, the Company's accounting policies have not varied from those described in the annual report for the year ended 30 June 2024.  These financial statements have not been audited or reviewed by the Company's auditors.

2.    Return per ordinary share

The return per ordinary share is based on the loss for the half-year of £59,894,000 (half-year ended 31 December 2023: profit of £32,902,000; year ended 30 June 2024: profit of £84,898,000) and on 395,136,083 ordinary shares (half-year ended 31 December 2023: 400,667,457 and year ended 30 June 2024: 400,039,178), being the weighted average number of ordinary shares in issue during the period.

The return per ordinary share detailed above can be further analysed between revenue and capital, as below.

9.    Going concern

Having reassessed the principal risks and uncertainties facing the Company, the directors consider that it is appropriate to continue to adopt the going concern basis of preparation and confirm that there are no material uncertainties of which they are aware. The assets of the Company consist mainly of securities, most of which are realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for at least twelve months from the date of approval of the financial statements.

10.  Related party transactions

The Company's transactions with related parties in the period were with the directors and the investment manager. There were no material transactions between the Company and its directors during the period and the only amounts paid to the directors were in respect of expenses and remuneration for which there were no outstanding amounts payable at the period end.  In relation to the provision of services by the investment manager, other than fees payable by the Company in the ordinary course of business and the facilitation of marketing activities with third parties, there were no material transactions with the investment manager affecting the financial position of the Company during the period under review.

11.  Comparative information

The financial information contained in this half-year report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The financial information for the half-years ended 31 December 2024 and 31 December 2023 has not been audited or reviewed by the Company's auditors. The figures and financial information for the year ended 30 June 2024 are an extract based on the latest published accounts and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and include the Independent Auditor's Report which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

12.  Website

Details of the Company's share price and net asset value, together with general information about the Company, monthly factsheets and data, announcements, reports and details of general meetings can be found at www.europeansmallercompaniestrust.com

13.  Half-year report

The Company's half-year report and a summary extract is available on the Company's website. The summary extract will be posted to shareholders in March 2025.

14.  Company status

The European Smaller Companies Trust PLC is registered in England and Wales, No. 2520734, has its registered office at 201 Bishopsgate, London EC2M 3AE and is listed on the London Stock Exchange. 

SEDOL/ISIN:  BMCF868/GB00BMCF8689

London Stock Exchange (TIDM) code:  ESCT

Global Intermediary Identification Number (GIIN):  JX9KYH.99999.SL.826

Legal Entity Identifier (LEI):  213800N1B1HCQG2W4V90

15.  Directors and Secretary

At the date of this report, the directors of the Company are James Williams (Chairman), Daniel Burgess (Chairman of the Audit Committee), Ann Grevelius and Simona Heidempergher (Senior Independent Director). The Corporate Secretary is Janus Henderson Secretarial Services UK Limited.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) are incorporated into, or form part of, this announcement.