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Liontrust UK Micro Cap Fund

October 2021 review
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 -2.7%* in October. The FTSE Small Cap (excluding investment trusts) Index and the FTSE AIM All-Share Index comparator benchmarks returned -1.2% and -1.6% respectively. The average return of funds in the IA UK Smaller Companies sector, also a comparator benchmark, was -1.9%.


One of September’s additions to the Fund was its best performing stock in October: Calnex Solutions (+24%), a supplier of hardware solutions which enable customers in the telecommunications industry to test and validate the performance of critical network infrastructure equipment. An October trading update noted that revenues and profits for the year to 31 March 2022 are now expected to be “materially” ahead of previous forecasts. The company has seen a return to pre-pandemic customer spending patterns in all regions other than China. It also states that the global semiconductor shortage has not had a negative impact on its operations.


By contrast, Oxford Metrics (+13%) is having supply chain issues in its Vicon division due to semiconductor shortages, but it has not stopped the software provider from enjoying positive momentum overall. A trading update revealed that good trading in both its Vicon and Yotta divisions has driven better-than-expected revenues and profits for the year to 30 September.


Cake Box (+9.5%), another recent Fund addition, was also among the strongest performers. It is a franchise business selling eggless fresh-cream cakes. 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. An interim trading update revealed that 20 new franchises were opened in the six months to 30 September, taking the total to 174. Sales also rose substantially, up 50% year-on-year in the four months to 30 September and up 13% on a like-for-like basis. Cake Box has maintained its full-year financial forecasts.


D4t4 Solutions (+12%) is on course to deliver interim revenues and profits which are in line with its forecasts, while it remains confident of a “solid full year” performance for the period to 31 March 2022. The customer data management specialist noted that its prospects for the second half of the year are underpinned by several contracts that are in the final stages of negotiation.


Inspiration Healthcare (+10%) stated that operating profit for the six months to 31 July had exceeded its expectations. The specialist in medical devices for use in critical care and operating theatres said that while revenues were in-line with forecasts, tight cost control allowed it to expand gross margins from 51.4% to 52.5%.


Tristel (-19%) has previously commented on the scale of the Covid-19 headwind to its sales growth and this was apparent in its results for the year to 30 June 2021. Turnover fell 2% to £31m and adjusted pre-tax profit dropped by almost a quarter to £5.4m. However, Tristel believes sales of its medical device disinfectants should now pick up again as patient examinations return to more normal levels. In the first quarter of its new financial year, Tristel has observed increasing patient examinations in most of its markets. The company also commented that its normal pattern of business seems to have resumed for the first time in 18 months.


An upbeat trading update from Vianet (-17%) said that the easing of Covid-19 restrictions had generated strong recent momentum for its Smart Zones division. Almost all of its clients are now fully operational and it has seen continued demand for its cashless vending machines. This resulted in a 55% year-on-year increase in sales in the six months to 30 September, slightly ahead of the company’s expectations. Share price weakness suggests investors may be concerned that Vianet has left itself a lot to do in the second half of the year to meet forecasts, but the company remains confident.


Quartix (-16%) also fell despite issuing a largely positive trading update. The vehicle tracking software provider experienced 12% growth in its subscription base to over 195,000 vehicles in the first nine months of 2021. Based on this expansion, Quartix expects to deliver full-year revenue and profits which are in-line with analysts’ consensus forecasts.


The Fund bought into MusicMagpie, a “re-commerce” specialist in the areas of consumer technology, books and disc media which was founded by CEO Steve Oliver and business partner Walter Gleeson in 2007. It buys pre-owned items from consumers, refurbishing where necessary, before selling on to other consumers. We think the company has a depth of intellectual property in its software platform, a strong distribution network and a well-known brand. At initial public offering earlier this year, the stock sat slightly above the Fund’s market cap range, but the shares have slid back in recent months, providing the Fund with an opportunity to invest.


Hazardous waste management business Augean left the portfolio in October. The company was the subject of a short bidding war in 2021 between Morgan Stanley and a consortium led by Fiera Infrastructure. The latter ultimately succeeded with a bid of 372p per share which offered a very healthy upside to the price at which the Fund entered the stock in April 2020.


Curtis Banks Group was sold from the Fund as, despite recent improvements in the quality of earnings and strategic direction of the company, the fund managers had concerns around the deteriorating quality of the lending book (from which the business earns the majority of profits) and the founding management team’s decision to take a step back from day-to-day involvement. 


Positive contributors included:

Calnex Solutions (+24%), Oxford Metrics (+13%), D4t4 Solutions (+12%), Inspiration Healthcare (+10%) and Cake Box Holdings (+9.5%).


Negative contributors included:

Tristel (-19%), James Cropper (-19%), Vianet (-17%), Quartix Technologies (-16%) and Animalcare Group (-9.5%).


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







Liontrust UK Micro Cap I Acc






FTSE Small Cap ex ITs






IA UK Smaller Companies













*Source: Financial Express, as at 31.10.21, total return (net of fees and income reinvested), bid-to-bid, institutional class.


**Source: Financial Express, as at 30.09.21, total return (net of fees and income reinvested), bid-to-bid, institutional class.

Understand common financial words and terms See our glossary
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. 


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. 

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