Final Results

European Smaller Companies Tst PLC

10 October 2024

 

Legal Entity Identifier: 213800N1B1HCQG2W4V90 This announcement contains regulated information THE EUROPEAN SMALLER COMPANIES TRUST PLC Financial results for the year ended 30 June 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).

Total return performance to 30 June 2024 (including dividends reinvested and excluding transaction costs)
	1 year %	3 years %	5 years %	10 years %
NAV1,5	12.0	2.9	73.3	200.4
Benchmark2	10.1	0.2	37.2	128.0
Average sector NAV3	7.9	-7.5	40.3	155.8
Share price4,5	19.5	4.5	82.8	211.7
Average sector share price3,4,5	11.1	-8.7	40.1	153.7

Financial highlights	at 30 June 2024	at 30 June 2023
Shareholders' funds
Net assets (£'000)	798,594	738,642
NAV per ordinary share	201.01p	184.26p
Share price	178.40p	154.00p
Year ended 30 June 2024			Year ended 30 June 2023
Profit for year
Net revenue profit (£'000)	21,662	20,927
Net capital profit/(loss) profit (£'000)	63,236	83,454
	------------	------------
Profit/(loss) for the year	84,898	104,381
	=======	=======
Total return per ordinary share
Revenue	5.41p	5.22p
Capital	15.81p	20.82p
	-------------	-------------
Total return per ordinary share	21.22p	26.04p
	=======	=======
Ongoing charge excluding performance fee5,6	0.67%	0.65%
Ongoing charge including performance fee5,6	0.75%	1.67%
1.     Net asset value (NAV) total return per ordinary share 2.     Euromoney Smaller European Companies (ex UK) Index up to 30 June 2022, thereafter MSCI Europe ex UK Small Cap Index 3.     The sector is the AIC European Smaller Companies sector 4.     Share price total return including dividends reinvested and using closing price 5.     NAV per share, NAV total return, share price total return and ongoing charge are regarded as Alternative Performance Measures.  More information on these can be found in the Annual Report 2024 6.     Calculated using the methodology prescribed by the Association of Investment Companies Sources: Morningstar Direct, Janus Henderson Investors

Chairman's Statement It has been encouraging to see interest in the European smaller company arena return over the course of the year and the Company to have participated profitably from this trend. Inflation has been tamed though interest rates have yet to meaningfully decline. Tragically the conflict in Ukraine festers on, although the energy shock has largely been contained. A global recession has not manifested and a 'soft landing' looks increasingly plausible. The Purchasing Managers' Index has yet to see a rebound, but there is growing optimism that the market suffering is close to being over. Smaller companies are well positioned to benefit from things getting better and the fund management team is well placed to take advantage of the situation. Performance The Company's portfolio produced a solid return over the year ended 30 June 2024, with an NAV total return of 12.0%, ahead of the benchmark by 1.9%. The share price total return was even more impressive at 19.5%, reflecting the growing interest in Europe and its smaller companies. This continues the Company's long term NAV and share price total return track record, as the chart on page 1 clearly demonstrates. Over a five-year period, the NAV total return has been 73.3% versus the benchmark of 37.2%, with the share price total return being 82.8% compared to the AIC European Smaller Companies sector of 40.1%. Discount management The average discount for the period has been 13.5%. Over the course of the financial year and up to the date of this report, we repurchased a total of 6.4m shares in the market at an average price of 167.68p. Doing so has been accretive to the NAV and was one of several factors contributing to the narrowing of the discount. The Board continually monitors the discount to NAV at which the Company's shares trade and utilises its ability to repurchase its own shares in the market with a view to reducing volatility and maintaining liquidity. We review the discount taking account of the position of our immediate competitors in the AIC European Smaller Companies sector, the investment trust sector as a whole and conditions in the wider market, particularly those in Europe, which are likely to have an impact on how the Company is perceived. Dividend The Board is recommending a final dividend of 3.35p per ordinary share to shareholders for approval at the forthcoming annual general meeting. If approved, the dividend will be paid to shareholders on the register on 1 November 2024. Along with an interim dividend of 1.45p which was paid on 3 May 2024, this brings the total dividend to 4.80p, an increase of 2.1% on the total dividend paid last year. The Company has benefitted from a handful of stocks that have had very high income distributing capacity in recent years, but as the fund management team begins to anticipate an economic expansion, there may be more of a pursuit of capital growth from among the many exciting investment opportunities in our market. Succession planning The forthcoming annual general meeting will be my last as Chairman. We were pleased to announce the appointment of James Williams as the chairman designate in October last year. He brings with him over 30 years' international business experience, including 20 years in the investment banking industry, and a strong suite of leadership skills. I believe I will be leaving the Company in good hands. We have further agreed a timeline for the retirement of Simona Heidempergher and have engaged recruitment consultants to help in the search for a suitable replacement. Your new Chairman will keep you updated in this respect. Annual General Meeting The 34th Annual General Meeting will be held at 11.00 am on 25 November 2024 at 201 Bishopsgate, London, EC2M 3AE. The event provides the opportunity for shareholders to meet with, and hold to account, the directors and fund management team. The Fund Manager will give his usual presentation on the year under review and the outlook for the year ahead. We therefore encourage all shareholders to attend if they can and to vote their shares, either at the meeting or via proxy beforehand. If you are unable to attend in person, you will be able to watch the meeting live via the internet by visiting www.janushenderson.com/esct-agm. Outlook I stated last year that I considered inflation to be close to settling near target. This has proved to be true and we have begun to see interest rates reduce to more appropriate levels across the globe, but most importantly in the United States.  This combined with reserve rate cuts and financial stimulus in China, is a welcome relief for the global economy and for European smaller companies.  It is a shame that political uncertainty has poked its head up in Europe again with the French election being unhelpful for growth and elections in the US have scope to create further doubt for our markets. Notwithstanding this, the very low valuations in Europe, the falling cost of capital and the improving economic optimism should outweigh the noise of politics. Europe is fortunate to be the provider of the 'picks and shovels' of the big structural growth trends such as Artificial Intelligence, the 'Green Transition' and industrial automation. It is an exciting time for the European smaller company space. Christopher Casey Chairman 9 October 2024

FUND MANAGER'S REPORT Introduction The year to 30 June 2024 was a decent year for the Company, with an NAV total return of 12.0% outperforming the benchmark which delivered a return of 10.1%. Despite the lacklustre economy, investors put fresh eyes on the European smaller companies universe which helped the start of the recovery in valuation multiples for the space. The year was characterised by soft markets in a tepid European economy. However, hopes of an economic pick-up began to manifest towards the end of 2023. We encountered a 'growth scare' towards the end of the financial year as fears that the European Central Bank and the Federal Reserve had been too slow to cut interest rates were exacerbated by snap elections called in France and the UK, which temporarily disrupted economic activity. A recession has been long awaited following the energy and supply chain shocks that hit the global economy in 2022. We have, however, been of the view that the global economy would have a soft landing, but that inflation and consequently interest rates would remain higher than prior to the pandemic. So far that has broadly come to pass, but we do think monetary policy is too tight in the West and that central banks need to loosen policy now that inflation has been largely tamed. Another phenomena of the markets has been an extreme concentration in a few very large companies. In the US this was a group of companies referred to as 'The Magnificent Seven' (Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta Platforms and Tesla). In Europe no exciting collective noun was settled on, but names such as semiconductor equipment titan ASML, GLP-1 producer Novo Nordisk and luxury good behemoth LVMH have dominated stock market performance in recent years. However, we began to see the broadening of the market take place over the year and smaller companies began to outperform larger companies for the first time since 2021. This was helpful for your Company that has a focus on investing in genuinely smaller companies. Perception and reality do not always align. Much of what we do as a team is to look for companies that have a fundamental reality that is better than its perception in the stock market and to consider ways that this can change. In some respects, this is true of the European smaller company market in general. One country that firmly has a perception problem is Germany. An economic model dependent upon cheap Russian energy and Chinese demand meeting the impending demise of the internal combustion engine automobile appears to have some substantial problems. So it is gratifying to have found so many German businesses that have been able to prove the naysayers wrong and show the reality that there is some incredible innovation and great businesses in the country. The outperformance over the twelve months to 30 June 2024 was primarily driven by stock selection, with a handful of winners driving performance, many of them being German. German listed semiconductor equipment manufacturer SUESS Microtec was a substantial contributor in the period, as demand for their Temporary Bonder machines, used in the manufacturing of Artificial Intelligence ('AI') chips, increased dramatically. German listed specialty chemical producer Alzchem also performed well as a result of the growth in their creatine and nitroguanidine businesses. Creatine is a chemical that supplies energy to muscles and has long been favoured by bodybuilders, but is increasingly being used to fend off conditions such as sarcopenia. Nitroguanidine is a propellant that goes in car air bags, but is also a key ingredient in NATO ammunition. Another German driver of performance was web hosting and cloud services solutions provider IONOS as a combination of a cheap valuation and strong earnings momentum drove the pricing of the shares. The portfolio We remain consistent in our strategy of investing across the corporate lifecycle with a balance of early-stage growth stocks, high return on capital growth compounders at sensible prices, undervalued cash generative mature companies and self-help turnaround stocks. The price we pay for shares in a company is a critical component of what we do and must be justified by the cash generation potential of a business. We are not a 'value fund' but we are intensely valuation aware. Our intention is that the performance of the portfolio is driven by stock selection rather than macro-economic factors and one of our key contentions is that company management matters. It is always gratifying to see underperforming companies get their act together and one such name for us this year has been Fugro, a Dutch listed collector and interpreter of geological data. The company has evolved from servicing the oil and gas industry to being a key part of the green energy transition, helping developers understand where best to locate offshore wind turbines. The company had been a stock market darling in the 2000s, but with the collapse in oil and gas capital expenditure from 2014 onwards had been struggling, earning a paltry return on capital employed. We invested in the company during the pandemic when the company was loss making and needed to raise capital. Since then, management has done a terrific job of improving returns by focusing the business on renewables and driving better margins and asset efficiency. We think the return on capital has a way to go yet, but the shares have begun to catch the markets' attention again and the holding was a strong contributor to performance this year. Performance attribution The Company benefitted from our investment in Dutch listed wealth manager Van Lanschot Kempen, which continued to attract strong fund inflows in the low countries. Swedish listed digital investment platform Nordnet saw an increase in business momentum as animal spirits revived in their market. One of the joys of managing a European smaller companies portfolio is that the investable universe is so fabulously heterogeneous that we are able to find companies that are benefitting from almost any exciting trend in the world. One such trend that has obsessed the stock market this year has been AI and the growth in data centres. Swedish listed Munters, whose products help manage the climate inside data centres, has seen a terrific boost to its business as a result of this and it has been a worthwhile investment for your Company. Another area of exciting growth is in the world of podcasts, a media broadcast over the internet and which is used for exploring any topic that interests a listener. Swedish listed Acast is the European leader in hosting, distributing and monetizing podcasts. The stock has performed very well this year as the company approached profitability and continued to grow strongly in a weak advertising market. Corporate activity returned to the European smaller companies space with bid approaches for Swedish online gambling company, Kindred and Swedish legal services expert Karnov. Whilst we didn't think we captured all the value possible from Kindred, the offer was reasonable and we decided to take some profit. However, we, and many other public market investors, deemed the bid for Karnov to be too far from its fundamental valuation and rejected it. We are firmly of the belief that as interest rates begin to fall the very cheap valuations on display in the European smaller companies market will see a notable increase in this type of activity. Detractors from performance have been largely driven by our misjudging where several companies were in their economic cycle, but also (unusually) by a handful of stocks that we missed the opportunity to invest in. The sins of omission mainly comprised our failure to spot Danish listed GLP-1 anti-obesity drug develop Zealand Pharma and Spanish bank Banco de Sabadell, which weighed on the Company's relative performance. In contrast, our investment in Dutch listed specialty metal producer AMG Critical Materials, which has suffered due to the abject collapse in the lithium price over the course of the year, detracted from performance. Lithium prices have been poor for a combination of reasons, but the principal one has been the weakness in the automotive market for electric vehicles (EVs) due to regulatory uncertainty on the green transition as well as interest rates. We have had too much exposure to the automotive market and a number of burdens for the Company such as German listed producer of electric boot openers Stabilus, Italian listed producer of stators and rotors for EVs Eurogroup Laminations and French listed producer of Silicon Carbide used in the rapid charging of EVs Mersen have not helped performance. It has been a frustration to relearn some fundamental investment lessons through the medium of making mistakes, but disappointingly we have been through that process this year. One such lesson is not to bet on a binary technology outcome and German listed Manz whose battery technology had looked so promising for the EV transition has failed to turn the science into cash flow. This lesson was rammed home by our investment in Swiss listed AMS-Osram whose exciting microLED technology was abandoned by their large American tech company customer, who has historic form in rough treatment of its supply chain. We intend to do a better job of applying such lessons in the future without the impact on our investors' capital. Geographical and sector distribution Stock selection rather than geographical and sector exposure is the fundamental core of our investment process, though we are careful to monitor how we are positioned as part of our risk management approach. We have never viewed the benchmark as an input to our process and we are content to diverge widely from it. Our valuation discipline typically leads us away from the more expensive markets and sectors in Europe and as a result we find ourselves underweight to Switzerland and Sweden. Conversely, we are overweight to Germany and the Netherlands where multiples are lower. Similarly, we are underweight to the sectors where we struggle to find value such as health care, utilities and real estate. We are overweight to the industrials sector, as valuations are very cheap and have scope for strong performance as the economy begins to grow again, as well as being overweight to technology where we continue to see strong structural growth trends. Other purchases Your Company typically invests in Europe outside of the UK, however, we have a degree of flexibility around this and with the Board's approval we took a position in UK listed online trading provider IG Group as we saw such potential in the company's cheap valuation and phenomenal cash generation capacity coupled with a strong capital return discipline. Whilst the shares have been very strong, you shouldn't expect us to invest beyond the broad remit with any great frequency. We have added a handful of defence exposed names to the portfolio over the course of the year. German listed producer of gearboxes and transmissions for military vehicles Renk, Dutch listed producer of night vision goggles Theon International and French listed Exosens, the producer of the tubes that go into those goggles, all made it into the portfolio, benefitting from the need for European rearmament. All three investments came from new listings on the stock market known as Initial Public Offerings ('IPOs'). The IPO market has been very quiet since the end of 2021 due to a combination of weak markets and the bad taste left in the mouth from the terrible vintage of IPOs that came through in that year. It is pleasing to report that all three investments listed above plus our investment in Greek bank Optima, have contributed positively to performance. Another feature of the hot markets of 2020 and 2021 was the creation of a number of Special Purpose Acquisition Companies ('SPACs'). A SPAC is a company that is listed on the stock market with the sole purpose of reversing a real company into a listing. You will never encounter us investing directly in a SPAC and it will not be often that you catch us investing in, the inelegantly titled, de-SPACed companies that have had a business reversed into them, so it is notable that we have taken a position in Swiss listed R&S Group which manufactures transformers, the equipment that alters alternating current and direct current. A significant investment in the electricity grid of Europe is required and R&S Group has an exciting position in this development. Other disposals We exited our position in Italian listed SAES Getters having profited handsomely from the disposal of its medical devices business. We also took profits by selling our shares in Italian listed producer of commercial vehicles Iveco. We saw an increase in mergers and acquisitions activity and the Company benefitted from bids for French listed financial adviser Rothschild & Co. and Swedish listed online gambling company Kindred. As interest rates reduce and financial conditions normalise, we would not be surprised to see more frequent mergers and acquisitions activity, an arena that usually benefits smaller companies. Currency The Company is denominated in sterling, while investing in largely euro-denominated assets. We do not hedge this currency exposure. Outlook We stated last year that we feared central banks had raised interest rates too high and we were anxious that, having been too slow to raise them, they would be too slow to cut them. Although, the European smaller company universe has seen an improvement in interest and performance, and remains very attractively valued, it typically doesn't fare well in a recessionary environment. Monetary policy becoming less restrictive in recent weeks, albeit not yet supportive, is a respectable positive indicator for the global economy. We continue to believe that with sensibly applied monetary policy, the economy can experience a 'soft landing' and thereafter grow. European smaller companies due to its gearing to global growth will be a profitable place to invest in such a scenario. Beyond the attraction of valuation, our investment universe is rich with opportunity. There are plentiful companies with exciting technologies, structural growth drivers and strong market positions. By applying our balanced investment strategy and remaining disciplined on our 'valuation aware' approach, we are confident that we can continue to find strong investment returns for our shareholders. Ollie Beckett, Rory Stokes and Julia Scheufler 9 October 2024

Geographic exposure at 30 June 2024 (% of portfolio excluding cash)
	2024 %	2023 %
Germany	20.2	17.4
France	12.7	14.6
Netherlands	11.9	11.9
Sweden	10.9	10.0
Switzerland	8.2	8.1
Italy	5.3	10.3
Belgium	5.0	4.2
Spain	4.9	5.4
Denmark	4.0	2.8
Greece	3.1	3.2
Norway	2.9	2.3
Portugal	2.4	1.3
Ireland	2.2	2.5
Finland	1.7	3.0
United Kingdom	1.7	-
Austria	1.6	2.0
Cyprus	0.8	-
Faroe Islands	0.5	-
Malta	-	1.0
	100.0	100.0

Sector exposure at 30 June 2024 ( of portfolio excluding cash)
	2024 %	2023 %
Industrials	36.3	38.6
Consumer Discretionary	17.1	20.9
Financials	13.6	13.0
Technology	13.3	11.6
Basic Materials	5.0	3.2
Real Estate	3.7	2.3
Consumer Staples	3.4	2.0
Health Care	3.1	3.1
Energy	2.0	1.7
Utilities	2.0	3.1
Telecommunications	0.5	0.5
	100.00	100.0

Principal and emerging risks Investing, by its nature, carries inherent risk. The Board, with the assistance of the investment manager, carries out a robust assessment of the principal and emerging risks and uncertainties facing the Company which could threaten the business model and future performance, solvency and liquidity of the portfolio. A matrix of these risks, along with the steps taken to mitigate them, is maintained and is kept under regular review. The mitigating measures include a schedule of investment limits and restrictions within which the Fund Manager must operate. The principal risks which have been identified and the steps we have taken to mitigate these are set out below.  We do not consider these risks to have changed during the period. 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. Investment mandate limits established by the Board are inappropriate leading to out-of-scope investments which may negatively impact shareholder value. Poor investment performance over an extended period leading to shareholders voting to wind up the Company. This may be the result of: ·      External factors such as geopolitical instability, including financial shock, pandemic, climate change, changes in the regulatory environment, etc. ·      internal factors such as poor stock selection, poor management of gearing, loss of key members of the fund management team, etc. Mitigating measures: The investment manager periodically reviews the investment objective and policy in line with best practice and taking account of investor appetites. The Board receives regular updates on professional and retail investor activity from the investment manager, and reports from the corporate broker, both of whom remain in contact with professional investors throughout the year, to inform themselves of investor sentiment and how the Company is perceived in the market. From time to time, research may be undertaken by a third-party consultant to specifically ascertain the views of retail investors. The level of discount and share register are are reviewed by the Board at each meeting. The Board reviews compliance with the investment limits at each meeting. The Fund Manager maintains a diverse portfolio (sector, country, business life cycle) with buy/sell disciplines and employs suitable quantitative and qualitative metrics, which incorporates environmental, social and governance ('ESG') considerations, for assessing stocks for inclusion or held within the portfolio. The Board reviews the Key Performance Indicators ('KPI's), portfolio composition and levels of gearing at each meeting. The Board furthermore maintains an understanding of the fund management team's investment process and considers the potential for climate change to impact the value of the portfolio, alongside other factors which may have the same effect. 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. Mitigating measures: The Board engages reputable third-party service providers and formally evaluates their performance, and terms of engagement, at least annually. The Audit Committee assesses the effectiveness of internal controls in place at the Company's key third-party service providers through review of their ISAE 3402 reports, quarterly internal control reports from the investment manager and monthly reporting on compliance with the investment limits established by the Board. 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. Mitigating measures: The Board engages reputable third-party service providers and formally evaluates their performance, and terms of appointment, at least annually. The Audit Committee assesses the effectiveness of internal controls in place at the Company's key third-party service providers through review of their ISAE 3402 reports and, in respect of the investment manager's investment trust operations, reporting from the investment manager's internal audit function. The investment manager's Compliance function has reporting obligations under AIFMD, with any non-compliance being captured in the investment manager's quarterly internal control reporting to the Board. Financial Market, liquidity and/or credit risk, inappropriate valuation of assets or poor capital management leading to a loss of shareholder value. Mitigating measures: The Board determines the investment limits and monitors compliance with these at each meeting. The directors review the portfolio liquidity at each meeting and periodically consider the appropriateness of hedging the portfolio against currency risk. The Board reviews the portfolio valuation at each meeting and considers the effectiveness of controls in place at its principal third-party service providers, including the fund accountants, at least annually. Investment transactions are carried out by a large number of approved brokers whose credit standard is periodically reviewed and limits are set on the amount that may be due from any one broker, cash is only held with the custodian/depositary or reputable banks. The Board monitors the broad structure of the Company's capital including the need to buy back or allot ordinary shares and the extent to which revenue in excess of that which is required to be distributed, should be retained. Going concern and viability In keeping with provisions of the Code of Corporate Governance issued by the Association of Investment Companies (the 'AIC Code'), the Board has assessed the prospects of the Company for a period of at least twelve months from the date of this report, being 9 October 2025 period (our assessment of going concern) and also over the longer period of three years (our assessment of viability). We consider the Company's viability over a three-year period as we believe this is a reasonable timeframe reflecting the longer term investment horizon for the portfolio, but acknowledges the inherent shorter term uncertainties in equity markets. As part of the assessment, we have considered the Company's financial position, as well as its ability to liquidate the portfolio and meet expenses as they fall due. The following aspects formed part of our assessment: ·      the closed-end nature of the Company which does not need to account for redemptions; ·      an assessment of the principal and emerging risks, as well as the uncertainties facing the Company, including the potential impact of climate change on the value of investee companies; ·      the diverse nature of the portfolio and its anticipated liquidity in normal and stressed market conditions; ·      the level of the Company's revenue reserves and the size of the bank overdraft facility; and ·      the expenses incurred by the Company, which are predictable and modest in comparison with the assets and the fact that there are no capital commitments currently foreseen which would alter that position. Also of relevance in contemplating the duration of the Company, is the three-year cycle for its continuation vote. Shareholders were last asked at the annual general meeting in 2022 if they wished the Company to continue in operation.  The resolution was passed with the overwhelming support of 84.4% shareholders who voted.  The next continuation vote will be put to shareholders at the annual general meeting in 2025.  Based on the voting record since 2000 for such resolutions, the Board is confident that shareholders will continue to support the Company.  In the event this is not the case, the Company will be wound up in keeping with the provisions of the articles. As well as considering the principal risks and financial position of the Company, along with the continuation vote, the Board has made the following assumptions: ·      investors will continue to wish to have exposure to investing in European small cap companies; ·      investors will continue to invest in closed-end funds; ·      the Company's performance will continue to be satisfactory; and ·      the Company will continue to have access to adequate capital when required. Based on the results of the assessment, we have concluded that: ·      the Company has adequate resources to meet its liabilities for a period of at least twelve months from the date of this report, being 9 October 2025, meaning it is therefore appropriate to prepare these financial statements on a going concern basis; and ·      we have a reasonable expectation that the Company will be able to continue operations over the coming three-year period, as well as meeting its expenses and liabilities for that period. Related party transactions The Company's transactions with related parties in the year were with the directors and the investment manager. There have been no material transactions between the Company and its directors during the year. The only amounts paid to them were in respect of remuneration and expenses for which there were no outstanding amounts payable at the year-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 provision of marketing activities, there have been no material transactions affecting the financial position of the Company during the year under review. Directors' responsibility statements Each of the directors in office at the date of this report confirm that, to the best of their knowledge: ·      the financial statements prepared in accordance with UK Adopted International Accounting Standards give a true and fair view of the assets, liabilities, financial position and profit and loss of the issuer and the undertakings included in the financial statements as a whole; and ·      the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. For and on behalf of the Board Daniel Burgess Chairman of the Audit Committee 9 October 2024

Statement of Comprehensive Income
	Year ended 30 June 2024			Year ended 30 June 2023
	Revenue return £'000	Capital return  £'000	Total return £'000	Revenue return £'000	Capital return  £'000	Total return £'000
Investment income	25,453	-	25,453	25,054	-	25,054
Other income	22	-	22	9	-	9
Gains on investments held at fair value through profit or loss	-	72,040	72,040	-	96,206	96,206
	-----------	-----------	------------	-----------	-----------	------------
Total income	25,475	72,040	97,515	25,063	96,206	121,269
Expenses
Management and performance fee	(833)	(3,902)	(4,735)	(776)	(10,284)	(11,060)
Other operating expenses	(875)	-	(875)	(760)	-	(760)
	-----------	-----------	-----------	-----------	-----------	-----------
Profit before finance costs and taxation	23,767	68,138	91,905	23,527	85,922	109,449
Finance costs	(1,128)	(4,512)	(5,640)	(595)	(2,382)	(2,977)
	-----------	-----------	-----------	-----------	-----------	-----------
Profit before taxation	22,639	63,626	86,265	22,932	83,540	106,472
Taxation	(997)	(390)	(1,367)	(2,005)	(86)	(2,091)
	-----------	-----------	-----------	-----------	-----------	-----------
Profit for the year and total comprehensive income	21,662	63,236	84,898	20,927	83,454	104,381
	======	======	======	======	======	======
Return per ordinary share - basic and diluted	5.41p	15.81p	21.22p	5.22p	20.82p	26.04p
	======	========	=======	======	========	=======
The total column of this statement represents the Statement of Comprehensive Income, prepared in accordance with UK adopted International Accounting Standards. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All revenue and capital items in this statement derive from continuing operations. The accompanying notes are an integral part of the financial statements.

Statement of Changes in Equity
	Year ended 30 June 2024
	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 1 July 2023	6,264	120,364	13,964	564,880	33,170	738,642
Total comprehensive income:
Profit for the year	-	-	-	63,236	21,662	84,898
Buyback of shares for cancellation	(56)	-	56	(6,140)	-	(6,140)
Ordinary dividends paid	-	-	-	-	(18,806)	(18,806)
	-----------	-----------	-----------	-----------	-----------	-----------
Total equity at 30 June 2024	6,208	120,364	14,020	621,976	36,026	798,594
	======	======	======	======	======	======

	Year ended 30 June 2023
	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
Total equity at 1 July 2022	6,264	120,364	13,964	481,409	30,463	652,464
Total comprehensive income:
Profit for the year	-	-	-	83,454	20,927	104,381
Costs relating to sub-division of shares	-	-	-	17	-	17
Ordinary dividends paid	-	-	-	-	(18,220)	(18,220)
	------------	------------	------------	-----------	-----------	-----------
Total equity at 30 June 2023	6,264	120,364	13,964	564,880	33,170	738,642
	=======	=======	=======	======	======	======

Balance Sheet
	At 30 June 2024  £'000	At 30 June 2023 £'000
Non current assets
Investments held at fair value through profit or loss	883,842	835,744
	------------	------------
Current assets
Receivables	7,587	7,323
Cash and cash equivalents	232	2
	------------	------------
	7,819	7,325
	------------	------------
Total assets	891,661	843,069
	-------------	-------------
Current liabilities
Payables	(2,848)	(10,411)
Bank overdrafts	(90,219)	(94,016)
	------------	------------
	(93,067)	(104,427)
	------------	------------
Net assets	798,594	738,642
	=======	=======
Equity attributable to equity shareholders
Called up share capital	6,208	6,264
Share premium account	120,364	120,364
Capital redemption reserve	14,020	13,964
Retained earnings:
Other capital reserves	621,976	564,880
Revenue reserve	36,026	33,170
	------------	------------
Total equity	798,594	738,642
	=======	=======
Net asset value per ordinary share - basic and diluted	201.01p	184.26p
	=======	=======

Cash Flow Statement
	Year ended 30 June 2024  £'000	Year ended 30 June 2023  £'000
Operating activities
Profit before taxation	86,265	106,472
Add back: interest payable	5,640	2,977
Less: (Gains) on investments held at fair value through profit or loss	(72,040)	(96,206)
Sales of investments held at fair value through profit or loss	362,971	274,632
Purchases of investments held at fair value through profit or loss	(340,283)	(290,536)
Increase in prepayments and accrued income	(195)	(881)
Decrease in amounts due from brokers	291	1,215
Decrease in accruals and deferred income	(7,622)	(451)
Increase/(decrease) in amounts due to brokers	81	(636)
	-----------	-----------
Net cash inflow/(outflow)from operating activities before interest and taxation1	35,108	(3,414)
	-----------	-----------
Interest paid	(5,663)	(2,618)
Taxation on investment income	(1,726)	(2,761)
	-----------	-----------
Net cash inflow/(outlow) from operating activities	27,719	(8,793)
	-----------	-----------
Financing activities
Equity dividends paid (net of refund of unclaimed dividends)	(18,806)	(18,220)
Buyback of shares for cancellation	(6,140)	-
Net (repayment)/drawdown of bank overdraft	(2,543)	27,004
	-----------	-----------
Net cash (used in)/raised financing activities	(27,489)	8,784
	-----------	-----------
Increase/(decrease) in cash and cash equivalents	230	(9)
Cash and cash equivalents at the start of the year	2	11
	-----------	-----------
Cash and cash equivalents at the end of the year	232	2
	-----------	-----------
Comprising:
Cash at bank	232	2
	-----------	-----------
	232	2
	======	======
1.     In accordance with IAS7.31 cash inflow from dividends was £25,158,000 (2023: £24,157,000) and cash inflow from interest was £11,000 (2023: £3,000).

Notes to the Financial Statements  1.   Accounting policies Basis of preparation The European Smaller Companies Trust PLC is a company incorporated in England and Wales and subject to the provisions of the Companies Act 2006.  The Company is domiciled in the United Kingdom. The financial statements for the year ended 30 June 2024 have been prepared in accordance with UK adopted International Accounting Standards. These comprise standards and interpretations approved by the International Accounting Board ('IASB'), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the IFRS Interpretations Committee ('IFRS IC') that remain in effect, to the extent that IFRSs have been adopted by the UK Endorsement Board. The financial statements have been prepared on a going concern basis. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice ('SORP') for investment companies issued by the Association of Investment Companies ('AIC') in July 2022, is consistent with the requirements of UK adopted International Accounting Standards, the directors have sought to prepare the financial statements on a basis consistent with the recommendations of the SORP. The financial position of the Company is described in the Annual Report 2024, which includes the Company's policies and process for managing its capital; its financial risk management objectives; and details of financial instruments and exposure to credit risk and liquidity risk. In preparing these financial statements the directors have considered the impact of climate change risk and concluded there was no impact as the investments are valued based on market quoted prices. 2.   Going concern The directors have determined that it is appropriate to prepare the financial statements on a going concern basis and have concluded that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. In coming to this conclusion, the directors have considered the nature of the portfolio, being that the securities held are readily realisable, the size and covenants of the Company's bank overdraft and the strength of its distributable reserves. As part of their usual assessment of risks facing the Company, the directors considered the macro-economic and geopolitical environment, as well as the possible impact of climate change risk on the value of the portfolio. The directors have concluded that the Company is able to meet its financial obligations, including the repayment of the bank overdraft, as they fall due for a period of at least twelve months from the date of this report, being 9 October 2025.
3.  Management and performance fees
2024 2023 Revenue  return  £'000 Capital  return  £'000 Total  return  £'000 Revenue  return  £'000 Capital  return  £'000 Total  return  £'000 Management fee 833 3,333 4,166 776 3,104 3,880 Performance fee - 569 569 - 7,180 7,180 --------- --------- --------- -------- -------- -------- Total 833 3,902 4,735 776 10,284 11,060 ===== ===== ===== ===== ===== =====
4.  Return per ordinary share The return per ordinary share figure is based on the net profit for the year of £84,898,000 (2023 profit: £104,381,000) and on the weighted average number of ordinary shares in issue during the year of 400,039,178 (2023: 400,867,176). The return per ordinary share figure detailed above can be further analysed between revenue and capital, as below. The Company has no securities in issue that could dilute the return per ordinary share. Therefore the basic and diluted return per ordinary share are the same.
	2024 £'000		2023 £'000
Net revenue profit	21,662
Net capital profit	63,236		83,454
	------------		------------
Net profit	84,898		104,381
	=======		=======
Weighted average number of ordinary shares in issue during the year	400,039,178		400,867,175
	2024 Pence		2023 Pence
Revenue return per ordinary share	5.41		5.22
Capital return per ordinary share	15.81		20.82
	-----------		-----------
Total return per ordinary share	21.22		26.04
	======		======
5.  Net asset value per ordinary share The NAV per ordinary share is based on the net assets attributable to the ordinary shares of £798,594,000 (2023: £738,642,000) and on the 397,287,598 ordinary shares in issue at 30 June 2024 (2023: 400,867,176). The Company has no securities in issue that could dilute the NAV per ordinary share (2023: same). The NAV per ordinary share at 30 June 2024 was 201.01p (2023: 184.26p).
The movements during the year in assets attributable to the ordinary shares were as follows:
	2024 £'000	2023 £'000
Net assets attributable to ordinary shares at start of year	738,642	652,464
Profit for the year	84,898	104,381
Dividends paid in the year	(18,806)	(18,220)
Buyback of shares for cancellation	(6,140)	-
Costs relating to sub-division of shares	-	17
	------------	------------
Net assets at 30 June	798,594	738,642
	=======	=======
6.  Dividends 2024 £'000 2023 £'000 Amounts recognised as distributions to equity holders in the year: Final dividend of 3.25p for the year ended 30 June 2023 (2022: 3.10p) 13,010 12,427  Interim dividend of 1.45p per ordinary share for the year ended 30 June 2024 (2023: 1.45p) 5,796 5,812  Unclaimed dividends from prior years - (19) --------- --------- 18,806 18,220 ===== ===== The final dividend of 3.25p per ordinary share in respect of the year ended 30 June 2023 was paid on 1 December 2023 to shareholders on the Register of Members at the close of business on 2 November 2023. The total dividend paid amounted to £13,010,000. Subject to approval at the annual general meeting on 25 November 2024, the proposed final dividend of 3.35p per ordinary share will be paid on 29 November 2024 to shareholders on the Register of Members at the close of business on 1 November 2024. The shares will be quoted ex-dividend on 31 October 2024. The proposed final dividend for the year ended 30 June 2024 has not been included as a liability in these financial statements. Under UK adopted International Accounting Standards, these dividends are not recognised until approved by shareholders. The total dividends payable in respect of the financial year which form the basis of the test under s.1158 are set out below:
2024 £'000 2023 £'000 Revenue available for distribution by way of dividends for the year 21,662  20,927  Interim dividend of 1.45p per ordinary share for the year ended 30 June 2024 (2023: 1.45p) (5,796) (5,812) Proposed final dividend of 3.35p per ordinary share for the year ended 30 June 2024 (2023: 3.25p) (based on 394,459,292 shares in issue at 9 October 2024) (13,214) (13,028) ---------- ---------- Transfer to Revenue reserve  2,652  2,087  ====== ======
The Company's undistributed revenue represents 10.4% (2023: 8.3) of total income.
7.  Called up share capital Shares entitled to dividend Total shares in issue Nominal value of shares in issue £'000 Allotted, issued and fully paid Issued ordinary shares of 1.5625p each At 1 July 400,867,176  400,867,176  6,264  Buyback of ordinary shares (3,579,578) (3,579,578) (56) At 30 June ------------------ ------------------ ---------- 397,287,598  397,287,598  6,208  ========== ========== ====== During the year the Company repurchased 3,579,578 of its own issued ordinary shares for cancellation (2023: nil) at a cost of £6,140,000 (2023: £nil). Since the year end 2,282,306 shares have been bought back at a cost of £4,998,000.  A total of 173,034 shares are held in treasury.
8.  2024 Financial information The figures and financial information for the year ended 30 June 2024 are extracted from the Company's annual financial statements for that period and do not constitute statutory accounts. The Company's annual financial statements for the year to 30 June 2024 have been audited but have not yet been delivered to the Registrar of Companies. The Independent Auditors' Report on the 2024 annual financial statements was unqualified, did not include a reference to any matter to which the auditors drew attention without qualifying the report, and did not contain any statements under Sections 498(2) or 498(3) of the Companies Act 2006. 9. 2023 Financial information The figures and financial information for the year ended 30 June 2023 are compiled from an extract of the published financial statements for that year and do not constitute statutory accounts. Those financial statements have been delivered to the Registrar of Companies and included the Independent Auditor's Report which was unqualified, did not include a reference to any matter to which the auditors drew attention without qualifying the report, and did not contain any statements under Sections 498(2) or 498(3) of the Companies Act 2006.
10. Annual Report The annual report will be posted to shareholders in October 2024.  A video of the Fund Manager discussing the financial results will shortly be available on the Company's website, www.europeansmallercompaniestrust.com    along with the annual report.
11. Annual General Meeting The annual general meeting will be held on Monday 25 November 2024 at 11.00 am at 201 Bishopsgate, London, EC2M 3AE. The Notice of Meeting will be sent to shareholders with the annual report.
12. General information 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 Directors and Secretary The directors of the Company are Christopher Casey (Chairman), Daniel Burgess (Chairman of the Audit Committee), Ann Grevelius, Simona Heidempergher (Senior Independent Director and Chairman of the Nomination and Remuneration Committee) and James Williams (Chairman designate). The Corporate Secretary is Janus Henderson Secretarial Services UK Limited. Website Details of the Company's share price and net asset value, together with general information about the Company, monthly factsheets and data, copies of announcements, reports and details of general meetings can be found at www.europeansmallercompaniestrust.com.

For further information please contact:
Ollie Beckett Fund Manager The European Smaller Companies Trust PLC Telephone: [phone]
Dan Howe Head of Investment Trusts Janus Henderson Investors Telephone: [phone]	Harriet Hall PR Director, Investment Trusts Janus Henderson Investors Telephone: [phone]
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) is incorporated into, or forms part of, this announcement.

 

END