Montanaro European Smaller Companies Trust PLC

Legal Entity Identifier: 213800CWSC5B8BG3RS21

Company update and Director dealings

The Board of Montanaro European Smaller Companies Trust plc (the "Company" or "MESCT") is pleased to provide an update on recent portfolio developments, corporate activity and the current investment opportunity.

Accelerating earnings growth

The ongoing reporting season has provided encouraging confirmation of the strength and resilience of the portfolio. Despite a challenging backdrop of rising energy prices, higher bond yields and increased geopolitical uncertainty, a number of portfolio companies have delivered results well ahead of expectations and upgraded their outlook. 

Examples include:

·    Kitron, a Norwegian electronics manufacturing services provider, reported record results driven by strong demand in defence and aerospace, alongside a record order backlog providing good visibility for future progress;

·  Bachem, a Swiss manufacturer of peptides used in innovative medicines, continues to benefit from robust demand for peptide-based therapies, delivering strong growth and profitability; and

·  Sectra, a Swedish provider of medical imaging and cybersecurity software to healthcare systems, reported earnings well ahead of expectations, supported by strong recurring revenue growth and continued margin expansion.

The Board and Montanaro Asset Management (the "Manager") believe these developments are typical examples of the high quality of the businesses within the portfolio.

Consensus forecasts are for c.26% overall earnings growth in 2026 and a further c.18% in 2027.

Well positioned for an uncertain environment

The portfolio remains focused on companies with strong balance sheets, pricing power and resilient and high recurring revenues. Half the companies in the portfolio hold net cash which increases resilience in a challenging macroeconomic environment.

Compelling valuation opportunity

After a prolonged period of underperformance by high-quality growth companies, MESCT's underlying portfolio has seen a significant de-rating.  Valuations are now at a significant discount both to long-term averages and relative to larger companies. 

The Board and Manager believe that this presents a compelling opportunity to invest in a portfolio of high-quality businesses with strong long-term growth prospects at historically attractive valuations.

Investment by both the Directors and Manager

The Directors and a number of senior members of the Manager, have recently purchased a total of £456,000 in 310,848 ordinary shares in the Company:

Directors

Gordon Neilly, Chairman: 67,500 shares

Caroline Roxburgh, Non-Executive Director: 3,397 shares

Hillary Williams, Non-Executive Director: 6,801 shares

Manager

George Cooke: 16,650 shares

Cedric Durant des Aulnois: 16,500 shares

Charles Montanaro: 200,000 shares

These purchases demonstrate strong alignment between the Board, the Manager and shareholders.

Long-term track record

MESCT's investment approach remains unchanged: a disciplined, bottom-up focus on high-quality, growing European Smaller Companies.  We do not invest in good businesses; we invest in great businesses.

This philosophy has delivered strong long-term performance.  Since the Manager's appointment in 2006, the Company has delivered an NAV return of 10.1% p.a. compared with 8.8% p.a. for the benchmark.  Over the past 10 years, the portfolio has delivered a NAV return of 12.2% p.a..

Importantly, the Manager has demonstrated an ability to consistently add value through sound stock selection over the past five and ten years despite significant factor headwinds particularly over the last five years in favour of Value.

Outlook

The combination of strong underlying company fundamentals, accelerating earnings growth and attractive valuations means that MESCT will benefit from any normalisation in market conditions.

Gordon Neilly, Chairman of MESCT, commented:

"The recent results season has reinforced our confidence in the quality and resilience of the companies in the portfolio.  Combined with historically attractive valuations, we believe this presents a compelling opportunity for long-term investors.

The recent share purchases by the Board and the Manager reflect our strong conviction in the Company's strategy and prospects."

Contacts:

Montanaro Asset Management

Investment Manager

020 7448 8600

Juniper Partners Limited

Company Secretary

0131 378 0500

Cavendish Capital Markets, Corporate Broker

Andrew Worne/Robert Peel

+44 (0)20 7908 6000

Camarco, PR Advisers

Ben Woodford/Elfie Kent/Annabel Reed

[email protected]

020 3757 4980

Notes to Editors

Montanaro European Smaller Companies Trust (LSE: MTE) is a London-listed investment trust aiming for long-term capital growth by investing in high-quality, SmallCap companies listed in Europe, particularly within the EU, Norway, and Switzerland.  Managed by Montanaro Asset Management, MESCT aims to achieve capital growth by investing in small European quoted companies.  It seeks to achieve capital growth in excess of its benchmark, the MSCI Europe SmallCap (ex-UK) Index.

In February 2026, the Association of Investment Companies (AIC) listed MESCT among 68 investment trusts that would have made investors more than £1 million if they had invested the full annual ISA allowance in the same trust each year.  This is a reflection of the proven and consistent long-term performance and track record of The Montanaro European Smaller Companies Trust.