Liontrust UK Smaller Companies Fund

August 2018 review

The Liontrust UK Smaller Companies Fund returned 2.7%* in August, compared with the -0.9% return from the FTSE Small Cap (excluding investment trusts) Index.

 

Of the Fund’s 10 largest contributors to performance over the month, only the top two - one riser, one faller issued newsflow of note. The small cap end of the UK market proved more resilient that large-caps (the FTSE 100 Index returned -3.3%) and the portfolio outperformed within this.

 

Shares in Bioquell (+36.9%) rallied throughout August as investors digested interim results released on 24 July. An operational restructuring is feeding through to an improvement in profitability which led management to predict full year profits will exceed consensus market expectations. In the first six months of the year the provider of bio decontamination solutions grew revenues 13% in constant currency terms to £15.7m while profit before tax jumped to £2.0m from £1.4m last year. The resulting upgrade to broker forecasts was the fourth double-digit increase in the last year, which goes a long way towards explaining Bioquell’s share price momentum. In May, the company had announced the sale of its MDH Defence business for an initial consideration of £0.4m, with a further £0.6m in potential contingent payments. This disposal follows on from the 2017 sale of its Airflow division. Bioquell is now focused purely on bio decontamination for the pharmaceutical, life sciences & healthcare industries.

 

On first glance, Statpro’s (-22.0%) release seemed to contain little cause for share price weakness. Revenue rose 22% to £27.2m in the first half of 2018 while adjusted EBITDA increased 23% to £4.3m. This growth primarily reflected the impact of the Delta acquisition, which has integrated well so far. Furthermore, the company stated that it is on course to meet analysts’ full year expectations. The sell-off appeared to have been sparked by concerns over a 2% drop in annualised recurring revenues.

 

A position in Nasstar was added to the Fund. Nasstar is a hosted desktop and cloud computing business, whose services enable customers to access their corporate desktop, applications and data in the cloud. Nasstar targets SME customers in application-rich, heavily regulated verticals such as legal, finance and recruitment, where complexity of delivery and a requirement for high customer service levels provide significant barriers to entry. With over 12,000 hosted desktop users relying on the company to deliver business-critical IT resource, Nasstar has a strong embedded distribution network. In addition, the business enjoys very strong recurring revenues (almost 90%) thanks to its subscription-based charging model.

 

Positive contributors included:

Bioquell (+36.9%), Tatton Asset Management (+15.8%), Learning Technologies (+15.3%), Ideagen (+14.6%) and IMImobile (+13.3%).

 

Negative contributors included:

StatPro Group (-22.0%), Team17 Group (-11.3%), Trifast (-9.1%), Quartix Holdings (-6.5%) and Bango (-6.4%).

 

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

 

 

Jun-18

Jun-17

Jun-16

Jun-15

Jun-14

Liontrust UK Smaller Companies I Inc

18.7

39.9

5.4

7.3

29.6

FTSE Small Cap ex ITs

6.4

28.4

-3.7

8.4

25.3

IA UK Smaller Companies

17.2

36.3

-6.1

9.8

22.3

Quartile

2

2

1

4

1

 

*Source: Financial Express, as at 31.08.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class.

 

**Source: Financial Express, as at 30.06.2018, total return (net of fees and income reinvested), bid-to-bid, primary 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 17, 2018, 2:48 PM