Liontrust UK Micro Cap Fund August 2021 review | Insights

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

The Liontrust UK Micro Cap Fund returned 4.6%* in August. The FTSE Small Cap (excluding investment trusts) Index and the FTSE AIM All-Share Index comparator benchmarks returned 4.2% and 3.4% respectively. The average return of funds in the IA UK Smaller Companies sector, also a comparator benchmark, was 4.6%.

The macroeconomic backdrop for markets was little changed during August. The highlight was perhaps Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole summit in which he indicated that the US central bank could start tapering its asset purchasing programme.

Within the portfolio, Microlise Group (+31%) made a strong start to life as a listed company following its IPO in July. The provider of transport management software announced a five-year contract renewal with J.C. Bamford Excavators for software licences and hardware sales, further bolstering its recurring revenue base.

Cloud computing, connectivity and analytics provider Beeks Financial Cloud Group (+27%) said it has seen good levels of trading activity in the second half of the year and expects to deliver growth in both revenue and underlying EBITDA (earnings before interest, taxes, depreciation and amortisation) for the full year. It also launched a new Proximity Cloud which offers a high performance financial trading environment.

Yourgene Health’s (+22%) new financial year started solidly, with revenue up 80% in the three months to end-June 2021, driven by the molecular diagnostics group’s Covid-related services and product sales. The company accelerated investment in its product capability and strengthened its position in North America during its previous financial year. Management believe that this investment is already paying off and are forecasting the resumption of profitable growth. Asset management consultancy MJ Hudson (+15%) was another holding to report on a positive start to its financial year. Having seen a 25% increase in revenue for the year to end-June 2021, the group said it had seen momentum continue, fuelled by recent acquisitions and new client wins.

CML Microsystems’ (-4.3%) shares slipped despite an upbeat trading update. The semiconductor maker stated that the beginning of its new financial year has started positively with order intake reflecting a recovery in end-markets, new customer traction and concerns about semiconductor availability. Its board foresees a continued recovery in end markets to more normal level.

Nucleus Financial Group exited the portfolio after its takeover offer by James Hay became unconditional.

Cake Box was added to the portfolio. It is a franchise business selling eggless fresh-cream celebration cakes from over 165 locations across the UK. The Fund bought the stock on the basis of the company’s strength in distribution, as its geographic store density, supply depots and growth in outlets lead to increasing economies of scale in ingredient purchasing and distribution. Operating a relatively capital-light franchise model, Cake Box generates very high cash flow returns on capital. It also benefits from the entrepreneurial tenacity and commitment of its franchisees in building the resilience of the business and driving future growth. Founders Sukh Chamdal and Pardip Dass (CEO and CFO) still hold over 40% of the equity between them.

Positive contributors included:

Microlise Group (+31%), Beeks Financial Cloud Group (+27%), Fonix Mobile (+25%), Yourgene Health (+22%) and Solid State (+16%).

Negative contributors included:

Medica Group (-6.7%), Cohort (-5.0%), FRP Advisory Group (-4.8%), CML Microsystems (-4.3%) and Intercede Group (-3.6%).

Discrete years' performance** (%), to previous quarter-end:

	Jun-21	Jun-20	Jun-19	Jun-18	Jun-17
Liontrust UK Micro Cap I Acc	59.5%	4.6%	3.1%	21.4%	33.7%
FTSE Small Cap ex ITs	65.2%	-12.3%	-8.6%	6.4%	28.4%
FTSE AIM All Share	42.5%	-2.8%	-13.9%	13.5%	38.5%
IA UK Smaller Companies	53.1%	-6.5%	-6.2%	17.2%	36.3%
Quartile	2	1	1	1	3

*Source: Financial Express, as at 31.08.21, total return (net of fees and income reinvested), bid-to-bid, institutional class. Non fund-related return data sourced from Bloomberg.

**Source: Financial Express, as at 30.06.21, total return (net of fees and income reinvested), bid-to-bid, institutional class.

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Key Risks

Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Some of the Funds managed by the Economic Advantage team invest primarily in smaller companies and companies traded on the Alternative Investment Market. These stocks may be less liquid and the price swings greater than those in, for example, larger companies.

Disclaimer

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.

This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. Always research your own investments and if you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.