Liontrust UK Micro Cap Fund

October 2019 review

The Liontrust UK Micro Cap Fund returned 2.4%* in October. For comparison, the FTSE Small Cap (excluding investment trusts) Index returned 0.5%, the FTSE AIM All-Share Index returned 2.1% and the average return of funds in the IA UK Smaller Companies sector was 1.3%.


Although the FTSE All-Share lost 1.4%, this was primarily the result of weakness in the large stocks which dominate the capitalisation-weighted index; the FTSE 100 dropped 1.9%. The environment at the smaller end of the market was more benign: the FTSE 250, FTSE Small Cap and FTSE AIM All-Share rose 0.6%, 0.1% and 2.1% respectively.


There were signs of some rare Brexit progress as Boris Johnson secured parliament’s approval for his latest deal. But he failed in attempts to have it implemented by 31 October – instead being forced to request a three month extension from the EU. In response, he called a general election for 12 December.


Sterling rallied 3.4% (trade-weighted basis). This presented a translation headwind for companies with international footprints but is also indicative of optimism regarding the domestic economy which is likely to have helped lift shares in smaller companies.


The Fund also benefitted from further corporate activity in October. Following takeover offers for StatPro Group and Synnovia last month, Murgitroyd Group (+18.3%) recommended a cash acquisition at 675p a share. This brings the tally of Fund holdings to be subject to takeover approaches this year to six. The Economic Advantage process targets intangible assets that provide barriers to entry because they are so difficult to replicate. It is precisely this property that so often appeals to corporate acquirers, who find it easier to pay up for these attractive intangibles than to develop them organically.


Totally (+30.2%), the Fund’s largest riser in October, had a busy month. It launched a new business, Totally Healthcare, and announced new contracts and extensions worth around £25m. Totally provides ‘out-of-hospital’ healthcare services such as NHS 111 and recently completed the acquisition of Greenbrook Healthcare, one of the largest private operators of Urgent Treatment Centres in London. The new Totally Healthcare business will target insourcing opportunities, using hospitals’ premises and equipment for service delivery during times of spare capacity such as weekends and bank holiday. Totally estimates this market to be worth £125m-£150m a year. A new contract worth £8.3m was secured by Greenbrook for the provision of urgent treatment centre services in Watford General Hospital. Extensions of £16.6m were awarded on a South West London 111 & GP Out of Hours contract and a Scarborough integrated urgent care contract.


At the opposite end of the portfolio breakdown for October was K3 Business Technology (-18.7%), which dropped heavily following a profit warning. Results for the financial year to 30 November are forecast to be significantly below the market’s expectations. Trading in the second half of the year was thrown off course, partly as a result of individual setbacks: a large customer has entered into administration while a major new contract that was in the final stages of discussion has now been put on hold.


Crimson Tide (+15.6%) announced a three year deal worth a minimum of £1.14m for its mpro5 platform to be used by a retailer with nearly 4,000 locations. Mpro5 is designed to help clients manage their store cleanliness and safety systems.


Vianet Group (+14.9%) commented that trading in the first half of its financial year has been strong, with revenue and profits on course to hit market expectations. The company provides data analysis for devices connected to its ‘internet of things’ platform. In the year so far, it has seen a number of contract wins for coffee vending telemetry and payment solutions.


Bioventix (-8.4%) shares slipped despite reporting solid results for the year to 30 June. The company creates ‘high-affinity monoclonal’ antibodies for use in blood-testing machines. The majority of sales currently relate to an antibody which is used by diagnostics companies for vitamin D deficiency tests. Excluding a one-off back-royalty that boosted last year’s numbers, the company grew revenue by 16% to £9.3m and profit before tax rose 14% to £7.0m.


A new Fund holding was initiated in Keystone Law Group. The company describes itself as a “platform law firm”, using an innovative structure in which it provides central infrastructure services (such as IT, compliance, finance and marketing) to its contracted base of self-employed lawyers. The Fund owns the company on the basis of its strength in distribution, as the largest established ‘network’ law firm in the UK.


Positive contributors included:

Totally (+30.2%), Murgitroyd Group (+18.3%), Crimson Tide (+15.6%), Vianet (+14.9%) and SimplyBiz (+14.9%).


Negative contributors included:

K3 Business Technology (-18.7%), Quartix Holdings (-9.6%), Imimobile (-9.4%), Netcall (-8.8%) and Bioventix (-8.4%).


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






Liontrust UK Micro Cap I Acc




FTSE AIM All Share




FTSE Small Cap (ex IT)




IA UK Smaller Companies









*Source: Financial Express, as at 31.10.2019, 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 30.09.2019, 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 


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.


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, November 18, 2019, 10:53 AM