Liontrust UK Micro Cap Fund

August 2021 review

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.

 

For a comprehensive list of common financial words and terms, see our glossary here.

 

Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. 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. The performance of the GF UK Growth Fund may differ from the performance of the UK Growth Fund and will be lower than its corresponding Master Fund due to additional fees and expenses.

Disclaimer

The information and opinions provided 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.  Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Monday, September 13, 2021, 3:05 PM