Liontrust UK Micro Cap Fund

• Global equity markets rebounded amid signs of easing US-China trade tensions, including significant tariff cuts and a new US/UK trade agreement.
• James Cropper rallies strongly on a reassuring full-year trading update under its recently appointed CEO.
• Keystone Law Group moves higher on strong 2024 results release.

The Liontrust UK Micro Cap Fund returned 6.7%* in May. The FTSE Small Cap (excluding investment trusts) Index and the FTSE AIM All-Share Index comparator benchmarks returned 7.7% and 8.4% respectively. The average return of funds in the IA UK Smaller Companies sector, also a comparator benchmark, was 7.3%.

Global equity markets continued their recovery from April’s sell-off on more signs of a de-escalation of the US trade war. Developments in May included the US and China slashing their reciprocal tariffs – from 145% to 30% on Chinese goods and from 125% to 10% on US goods – and the agreement of a US/UK trade deal.

In this more risk-on environment, the Fund benefited from a strong rebound in its AIM-listed holdings, with a number of these positions reporting double digit share price gains during the month. While these moves so far represent but a fractional reversal of the extreme de-rating across the portfolio over the past few years, it is nevertheless cheering to see significant signs of life emerging.

James Cropper (+111%) has faced some cyclical headwinds to demand for its high quality paper and advanced materials products, which, combined with higher energy costs, has reduced profitability. Turnover of senior executives within the business has also been unhelpful, although we are encouraged by the quality of the recent CEO and CFO hires.

In light of these challenges, a full-year trading update offered investors a good degree of reassurance. Under new CEO David Stirling, the company commented that results for the year to 29 March 2025 were in-line with expectations, with revenues marginally lower than last year but profit before tax slightly higher. Next year, Cropper expects paper and packaging revenue to be stable and substantial cost savings achieved, while it forecasts single-digit growth at the advanced materials division.

Having upgraded financial guidance in February, platform law firm Keystone Law Group (+19%) followed up with full-year results showing 11% revenue growth to £97.7 million in the year to 31 January, with pre-tax profits rising 13% to £12.7 million. The group also commented on a positive start to the new financial year, with good recruitment activity keeping it on track to meet expectations.

Shares in Bigblu Broadband (-18%) rose in December last year on news of the sale of its Australian business Skymesh for consideration of up to £25 million, including £15 million in cash. The company had previously committed to returning this capital to investors by way of a tender offer for around 26% of its issued shares at a significant premium of 40p a share. The shares drifted lower during the period.

Positive contributors included:

James Cropper (+111%), Virgin Wines (+21%), Quartix (+19%), Keystone Law Group (+19%) and Animalcare (+19%). 

Negative contributors included:

Bigblu Broadband (-18%), Eagle Eye Solutions (-12%), Solid State (-12%), Fonix (-8.6%) and Netcall (-7.6%).

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

*Source: Financial Express, as at 30.05.25, total return (net of fees and income reinvested), bid-to-bid, institutional class.

**Source: Financial Express, as at 31.03.25, total return (net of fees and income reinvested), bid-to-bid, institutional class. 

KEY RISKS

Past performance does not predict future returns. You may get back less than you originally invested.

We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.

The Funds managed by the Economic Advantage team:

• May invest in smaller companies and may invest a small proportion (less than 10%) in unlisted securities. There may be liquidity constraints in these securities from time to time, i.e. in certain circumstances, a fund may not be able to sell a position for full value or at all in the short term. This may affect performance and could cause a fund to defer or suspend redemptions of its shares. May invest in companies listed on the Alternative Investment Market (AIM) which is primarily for emerging or smaller companies. The rules are less demanding than those of the official List of the London Stock Exchange and therefore companies listed on AIM may carry a greater risk than a company with a full listing.
• May encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings.
• May invest in companies predominantly in a single country which maybe subject to greater political, social and economic risks which could result in greater volatility than investments in more broadly diversified funds.
• Outside of normal conditions, may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash.

The risks detailed above are reflective of the full range of Funds managed by the Economic Advantage team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.

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.

DISCLAIMER

This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.

It 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.

This information and analysis 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, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com or direct from Liontrust. 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.