Semi-annual report 30 June 2022
28 July 2022
Quest for Growth closed the first quarter of its financial year with a loss of €14,579,003. The return on equity, taking into account the dividend of €1.02 gross paid out on 21 April 2022, was -8.6%. Quest for Growth was therefore not immune to the global stock market downturn. The decline was limited, however, by a number of successful exits in our portfolio. In the venture and growth capital segment, Quest for Growth sold its stake in the German biotech company c-Lecta to the Irish company Kerry. In the listed equities portfolio, we focused on the bid by KKR for Dutch bicycle manufacturer Accell.
Quest for Growth’s share price declined by 12.8% over the first half year to a closing price of €6.12 on 30 June 2022. This includes the dividend payment mentioned above. The discount of the share price in relation to the net asset value increased slightly to 27.9%, compared to 25.5% at the end of 2021.
Shareholders were entitled to have their dividends paid in newly issued shares. This involved 45% of the dividend rights being paid out in the form of new shares. As a result of this capital increase, Quest for Growth's share capital increased to over €147 million, compared to over €138 million at the end of 2021.
Following an excellent year on the stock exchange in 2021, 2022 is proving extremely difficult. The European stock market index STOXX Europe 600 Net Return fell by 15%. It is not unusual for the share prices of smaller companies to fall more sharply than their larger counterparts during a stock market correction. The same applies now, and the small cap index (STOXX Europe Small 200 Net Return) posted a bigger drop of 25%. The US stock exchanges are also following this downward trend. The S&P 500 in EUR fell 13%: if the impact of the more expensive dollar is excluded, the S&P 500 even fell 20%. The main cause of the turbulence on the world’s stock exchanges is the historically high inflation that is forcing central banks worldwide to accelerate their expansionary monetary policies. Increasing geopolitical tensions due to the war in Ukraine have exacerbated the situation.
Investments in quoted equities
The estimated performance of the listed shares stands at about -18%, and so they have held up well compared to the STOXX Europe Small 200 NR index. Dutch bicycle manufacturer Accell made the strongest contribution to the listed portfolio in the first half of the year. In the course of June, we sold our Accell shares in the context of the offer made by the American private equity player KKR. EVS (+10% including dividend) from Liège published good first-quarter figures and was able to present a growing order book. EVS also announced its intention to continue paying a high dividend in the coming years. Jensen enjoyed a further recovery in the demand for industrial laundry systems. Their shares rose by 5%, mainly after publishing their better-than-expected annual figures.
Among those suffering the most dramatic falls were Steico (-39%), PSI Software (-37%) and Stratec (-36%), three German companies that saw their share prices and valuations rise sharply in 2021.
During the first quarter, Quest for Growth bought one new position in EVS, and also withdrew from the three companies Fresenius, Technotrans and Accell. Belgian company EVS combines a low valuation with good prospects for dividends and cash flows. The new management, under the leadership of CEO Serge Van Herck, also dares to use the extremely conservative balance sheet for acquisitions that may generate growth again in the long run. Fresenius, a German company, has seen its growth rate slow down in recent years, while its gearing ratio has remained high. We sold the stock after a strategic management exercise produced inconclusive results. We saw insufficient growth potential at Technotrans, and we were not convinced by the management's new strategy.