Bellevue Entrepreneur Europe Small

European SMID caps, as measured by the MSCI Europe ex UK Small Cap Index, declined 0.2% in August, underperforming European large caps (Stoxx Europe 600 Index; +0.9%) after five consecutive months of outperformance. The August 15 meeting between Trump and Putin, followed by a Washington summit with Zelensky and European leaders, raised expectations of renewed dialogue on a Russia-Ukraine ceasefire. In France, Prime Minister Bayrou scheduled a confidence vote on September 8 linked to the EUR 44 bn budget plan, though parliamentary approval appears unlikely, heightening political risk. In the US, Fed Chair Powell’s remarks at the Jackson Hole Symposium suggested a potential September rate cut amid early signs of a softening labor market. The eurozone’s Composite PMI remained robust at 51.1, supported by a third consecutive expansion in services (50.7) and a rebound in manufacturing (50.7). In terms of sectors, utilities (+2.8%), consumer discretionary (+2.2%), and energy (+2.1%) performed best, while information technology (–4.4%), healthcare (–1.1%), and industrials (–1.0%) lagged the most.

Against this backdrop, the fund was unchanged, outperforming its benchmark by 17 bps. The fund is up 20.5% ytd, outperforming the benchmark by 622 bps.

The top detractors for the month were Sopra Steria (–16.3%), Montana Aerospace (–11.5%), and Ipsos (–10.1%). Sopra Steria suffered from exposure to France and the fear of potential delays in IT investment decisions, notably in the public sector, due to the unstable political situation. The company has not experienced any meaningful impact to date, with July in line with expectations. Montana Aerospace suffered some profit-taking despite solid Q2 figures. Revenues for aerostructures were a little shy of consensus, but EBIT rose 24% yoy, with margins up 140 bps, reflecting disciplined efficiency management. Cash flow exceeded expectations, and the company reiterated its guidance for 2025 and 2026. The Ipsos Board unexpectedly announced the appointment of Jean-Laurent Poitou as new CEO, replacing Ben Page, who had been in charge since 2021. While management changes always generate anxiety, we like the tech profile of the new CEO and understand the timing of the decision ahead of the company’s upcoming November Capital Markets Day and its new five-year plan. Ipsos is currently trading on a free cash flow yield of 10%, a historic trough. The top performers for the month were u-blox (+32.6%), Do & Co (+14.5%), and Rovi (+7.0%). u-blox was subject to a takeover offer from the US private equity fund Advent at CHF 135 per share, a premium of 32% compared to the 60-day average share price and slightly below the five-year peak reached in 2022. While we note that the acceptance threshold is 66.7%, u-blox has a highly fragmented shareholder structure, and Advent has so far only secured the commitment of u-blox’s largest individual shareholder, SEO Master Fund LP. Ahead of the formal offer period, which will run until October 9, u-blox’s share price is trading slightly ahead of the offer price. Do & Co, the Austrian premium caterer, delivered strong EBIT growth of 44%, driven by sustained double-digit top-line growth, fueled by new contract wins and the resilience of premium travel. While part of the 200 bp EBIT margin increase came from an expected profitability catch-up in the US, Do & Co is also keeping a remarkably tight rein on operating costs while leveraging past investments. Rovi reported solid Q2 results, with low-molecular-weight heparin (LMWH) and Okedi partially offsetting the expected slowdown in its contract development and manufacturing organization (CDMO) business. Gross margin expanded by 440 bps on the back of an improved product mix and lower raw material costs, driving EBITDA above expectations. Management reaffirmed the company’s full-year guidance and expects new CDMO contracts to support future growth.

In the European industrial sector, short-term trends are (finally) displaying signs of a revival. The eurozone’s Manufacturing PMI rose by 0.9 to 50.7 in August, the first expansion reading since June 2022, driven by an improvement in domestic demand. We recently trimmed our heavy investments in the industrial space slightly, taking profits to reinvest in the battered healthcare sector. Our industrial stock selection has been outstanding over the last 12 to 36 months, generating a strong performance contribution for the Bellevue Entrepreneur Europe Small (LUX) Fund, with names like Nordex, Wärtsilä, Montana Aerospace, and CAF gaining between 45% and 87% ytd. As we approach year-end, we expect Germany’s economic stimulus package to support Europe further.