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Liontrust UK Micro Cap Fund

October 2022 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 1.6%* in October. The FTSE Small Cap (excluding investment trusts) Index and the FTSE AIM All-Share Index comparator benchmarks both returned 0.8% and 0.1% respectively. The average return of funds in the IA UK Smaller Companies sector, also a comparator benchmark, was 2.1%.


The UK equity market recovered from mid-month to post a solid gain in October, with the mid-cap FTSE 250 index (+4.5%) arresting its heavy year-to-date underperformance of large-caps although the FTSE Small Cap (ex Its) and FTSE AIM All-Share both lagged. The market rally was a global phenomenon, which was helped along in the UK by a conclusion to the latest episode of political turmoil with the resignation of Chancellor Kwasi Kwarteng, the reversal of his mini-budget measures by his successor Jeremy Hunt and the subsequent departure of Liz Truss as prime minister.

Billing, charging and customer relationship management company Cerillion (+17%) struck a very upbeat tone in its full-year trading update, listing several positive trends. It said it traded very well during the second half of the year, securing its largest ever contract in the final quarter. It also benefited from favourable exchange rates and higher resource utilisation, as well as lower-than-expected finance and depreciation costs. As a result, revenues are on course to be marginally higher than market expectations while profit before tax is expected to be materially ahead of forecast.

Arbuthnot Banking Group (+21%) announced that it is on track to exceed consensus expectations with full-year results after Bank of England base rate rises fed through strongly to profitability. The group has around £2.6bn of assets with variable interest linked to the base rate, so it expects to benefit from abnormally high net interest margins for around 12 months until the lagged increase in deposit rates.


Shares in Intercede (+43%) rallied strongly after it announced the acquisition of Authlogics, a provider of multi factor authentication (MFA) and password security software. This deal should allow Intercede to significantly increase its addressable market with a solution that can target smaller customers with less complex requirements. Intercede’s existing MyID digital identity management product suite is aimed at larger customers with significantly more challenging requirements, but commensurately longer sales cycles and larger, lumpier deal sizes. Intercede also issued a short interim trading statement confirming that trading has been in line with management expectations, with revenue up by 23% in constant currency terms in the six months to 30 September.

Shares in Essensys Group (-20%), the cloud services provider for flexible workspaces, tumbled earlier in the year when it warned that full-year results would fall short of market expectations due to longer sales cycles and lower-than-expected bookings. From a much lower base, the shares lost some further ground on October’s release of full-year results, although they were largely in-line with the indications given in March’s profit warning. Although revenues rose 6% to £23.3m, the company slipped to a £7m EBITDA loss. While Essensys thinks that delays in sales cycles may persist in the near-term, it believes that it will reduce cash burn and regain profitability before it exhausts its £24m cash balance.

Advanced materials and paper products manufacturer James Cropper (-15%) has this year seen strong revenue growth (+26% in the first half of its year) undermined by its exposure to huge increases in energy costs (+148%) and other raw materials (+20%). While it is focused on passing these costs on via energy surcharges and higher prices, it has only managed to do so in a lagged manner. In the first half of the year it managed to break-even and for the full year it now expects profit before tax of around £2m, down from prior forecasts of over £5m.


In October, the position in musicMagpie was sold after the fund managers reappraised the business’s possession of core Economic Advantage intangible assets (in this case, intellectual property and a strong distribution network). They found that a new market entrant’s aggressive expansion has raised question marks over the strength of its barriers to competition, a key feature expected of all Fund holdings. Additionally, the managers had concerns over the scale of investment in musicMagpie’s new rental business.


FRP Advisory also left the portfolio having exceeded the £275m market cap level at which the fund managers look to begin a managed exit.


Positive contributors included:

Intercede (+43%), Arbuthnot Banking Group (+21%), K3 Capital Group (+20%), Cerillion (+17%) and Kitwave Group (+17%).

Negative contributors included:

Yourgene Health (-21%), Essensys Group (-20%), James Cropper (-15%), Avingtrans (-15%) and Property Franchise Group (-11%).


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

Past performance does not predict future returns







Liontrust UK Micro Cap I Acc






FTSE Small Cap ex ITs






IA UK Smaller Companies












*Source: Financial Express, as at 31.10.22, total return (net of fees and income reinvested), bid-to-bid, institutional class.

**Source: Financial Express, as at 30.09.22, total return (net of fees and income reinvested), bid-to-bid, institutional class.

Understand common financial words and terms See our glossary

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 guaranteedYou 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.

Commentaries Economic Advantage

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