Liontrust UK Micro Cap Fund

February 2018 review

The Liontrust UK Micro Cap Fund returned -1.1%* in February. The Fund does not have a formal benchmark, but for reference, the FTSE Small Cap (excluding investment trusts) Index returned -3.9%, the FTSE AIM All-Share Index returned -2.8% and the average return of funds in the IA UK Smaller Companies sector was -2.1%.

 

The Fund’s monthly return reflected an environment of soft investor sentiment towards equities as January’s concerns over the impact of tighter monetary policy spilled over into February.

 

The broad-based weakness in UK equities was partially reflected in the Fund, however, a number of positive company updates meant that losses were not as heavy as the rest of the market.

 

Croma Security Solutions Group (+21.3%) was one of the best performers for the Fund. It pleased the market after revealing that pre-tax profit in the six months to end December rose almost fivefold, driven by increased security demand from both the private and public sector. The company indicated that the strong first half of its financial year meant it was on track to deliver a record performance over the full year. Property franchise Belvoir Lettings (+8.8%) stated in a pre-close update that it performed well in 2017 and expects to post a 13% year-on-year rise in group revenue. It added that the pipeline of portfolio acquisition opportunities in 2018 is strong.

 

Procurement software provider Proactis (+4.9%) updated on trading in the six months to 31 January 2018. It experienced a 123% increase in revenues to over £26m and a 183% rise in earnings before interest, taxes, depreciation and amortisation (EBITDA) to £8.5m. The majority of the growth can be attributed to the inclusion of Perfect Commerce, which was acquired in August 2017. The business’s integration is progressing well, with £3.3m in annualised cost synergies achieved so far out of the £5m targeted by the end of the financial year in July 2018. New customer wins and cross-selling activity are also described as strong.

 

One of the biggest individual stock detractors this month was IDE Group (-17.5%). The company stated that Coreix raised its trademark infringement claim against IDE to £500,000. Separately, the managed IT services provider reported a 50% increase in revenue for the year to end December, adding that the business was performing in line with expectations

 

D4t4 Solutions (+14.0%) and Surgical Innovations (+12.5%) both saw rises in their respective share prices following contract news. D4t4 revealed new contract wins for its Data Management business from a US headquartered financial institution and its Data Collection business from a major Asian bank. Surgical Innovations announced that its subsidiary Elemental Healthcare signed a three year contract renewal with US surgical instruments manufacturer Microline Surgical worth around £7m in revenue over the period.                   

 

Crimson Tide (-10.9%) and Inspiration Healthcare (-10.7%) both fell after releasing trading updates. Mobile business solution company Crimson Tide indicated that revenue for 2017 is expected to grow by 23% but higher sales and marketing costs meant that profit before tax in 2017 is expected to be similar to that of 2016. The company’s continued growth plans mean that 2018 profit is also anticipated to be at the current level. Inspiration Healthcare’s share price weakness came in spite of a statement outlining a strong performance in the second half of its financial year, with full-year pre-tax profit to be in line with market expectations for the year ended 31 January. The full results are due in April.

 

Positive contributors included:

Croma Security Solutions (+21.3%), D4t4 Solutions (+14.0%), Surgical Innovations (+12.5%), Belvoir Lettings (+8.8%) and AB Dynamics (+8.5%)

 

Negative contributors included:

IDE Group (-17.5%), Empresaria Group (-15.3%), Marlowe (-12.0%), Crimson Tide (-10.9%) and Inspiration Healthcare (-10.7%).

 

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

 

 

Dec-17

Liontrust UK Micro Cap I Acc

22.1

FTSE Small Cap ex ITs

15.6

IA UK Smaller Companies

27.2

Quartile

4


*Source: Financial Express, as at 28.02.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class.
Discrete data is not available for five full 12 month periods due to the launch date of the portfolio. Investment decisions should not be based on short-term performance.

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. 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. 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

This content 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.  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, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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, March 19, 2018, 11:47 AM