Phenomenal year for TR European Growth shareholders – TR European Growth says that, for the year ended 30 June 2017, its net asset value total return was 54.0% compared to a total return from the benchmark index of 35.8%. The share price total return was 75.5%. They are proposing an increased final dividend of 11.5p and also a 3p special dividend. They say that it is their intention to move towards paying an interim and a final dividend.
Ollie Beckett (pictured) and Rory Stokes, the managers, say that the performance has come from a wide range of strong performing stocks offset by a relatively limited number of poorly performing ones. The largest contributor to return was outsourced research and development and drug discovery company Evotec. This company returned 290% in the year after the stock market spotted the valuation disparity with the US listed peers, became excited about the internal drug discovery pipeline and understood the value accretion of recent mergers and acquisitions. Another strong contributor was the fund’s largest position Van Lanschot, a Dutch wealth manager that is tackling an inflated cost base, freeing up capital to return to shareholders and improving return on equity. They say that, despite delivering a share price return of 50% last year, the stock remains cheap and they are hopeful of further strong returns.
There was good contribution too from: Lisi, a French manufacturer of fasteners for the automotive, aerospace and medical sector as recent years restructuring bore fruit; AMG, a Dutch listed producer of specialty metals including Lithium which is a key component for the batteries in electric vehicles; Lenzing, an Austrian listed global manufacturer of woven and non-woven viscose and specialty fibres that benefited from new managements actions to improve profitability and inflationary pricing in viscose.
The fund also benefited in the year from bids for 3D printing machine manufacturer SLM Solutions by General Electric (that subsequently fell away due to the actions of an activist hedge fund, but which highlighted the underlying and strategic value of the business); and Irish listed tropical fruit importer Fyffes by Sumitomo Corp.
Performance was weighed down by an investment in Petroleum Geo-Services, a Norwegian oilfield service company that provides images from beneath the ocean floor that oil companies rely on to find oil and gas reserves. A weaker oil price and more prolonged capex holidays by the oil majors has meant the investment has not delivered. This was also a factor that weighed on Dutch listed Fugro, which collects, processes and interprets geological data for the oil and other industries. Technicolor, a French producer of digital set top boxes for the cable industry, DVDs and digital film production services was also a detractor after a shortage of Dynamic Random Access Memory (DRAM) a key component in set top boxes which drove prices up dramatically causing profitability to suffer.
TRG : Phenomenal year for TR European Growth shareholders