Liontrust UK Smaller Companies Fund

August 2019 review

The Liontrust UK Smaller Companies Fund returned -2.7%* in August. For comparison the FTSE Small Cap (excluding investment trusts) Index returned -2.2%.


Investor sentiment soured in August as trade hostilities between the US and China escalated once again. Donald Trump stated, in a series of tweets, that tariffs would be placed on an additional US$300bn worth of Chinese imports from 1 September. He later announced that this tariff rate would be raised to 15% from 10%, but carved out a list of goods for which implementation would be delayed until December. 


On the UK political scene, the prospect of a ‘no deal’ Brexit cast a shadow over the country’s outlook. The rhetoric from Prime Minister Johnson had many adopting ‘no deal’ as the base case scenario and the pound took a knock as a result, touching its lowest level since late 2016 in trade weighted terms.


The negative developments in the political world soured investor sentiment and resulted in a number of holdings seeing share price declines without releasing any significant newsflow. Share price moves may also have been accentuated by the low trading volumes typical of the London market during the summer months.


Clipper Logistics (-18.3%) was one of the fallers which issued newsflow. The e-retail and returns management logistics company stated that due to the timing of contract wins, earnings before interest and taxes (EBIT) would be modestly behind expectations for the year ended 30 April 2019, with a corresponding jump to financial year 2020. It issued its full-year results at the end of the month and reported a slight decline in EBIT to £20.2m from £20.9m last year, in what has been a difficult end market.


Pennant International Group’s (-28.3%) shares de-rated after it warned that results for 2019 as a whole are expected to be materially lower than current market expectations. This was mainly due to slower than expected progress in its contract to supply electro-mechanical trainers for the Ajax armoured fighting vehicle, as the customer has made some adjustments and extensions to the functional design. The net result of these changes is that revenue is now not expected to ramp up until FY2020. Additionally an extension to the timetable for growing the recently acquired Aviation Skills Partnership was reported; the latter was affected by Brexit uncertainty which caused delays in the allocation of public funding.


On a more positive note, research and analytics group YouGov (+2.5%) said that trading for the year to 31 July 2019 is estimated to be comfortably ahead of market forecasts. Similarly, mobile payments processor Bango (+4.0%) continued to benefit from its July-released interim results in which it recorded a doubling in end-user spend.


The Fund participated in the initial public offering (IPO) of brick and tiles speciality distributor Brickability Group. The company’s Economic Advantage rests in the strength of its distribution network, manifesting itself in a 40% market share of the UK brick factoring market and genuine national coverage. As an example the company has 130 sales people in the UK, whereas the brick manufacturing businesses combined only have 90 – providing an advantage in a market which has also seen procurement departments at the housebuilders shrinking to a fraction of their former size. Additionally, it enjoys sole supplier status into the UK for several kilns located in mainland Europe.


Brickability also benefits from ‘second tier’ Economic Advantage intangible assets in the form of long-standing customer relationships (e.g. a 20-year relationship with Bellway, its largest customer) and a strong owner manager culture as CEO Alan Simpson remains the largest shareholder.


Positive contributors included:

Learning Technologies Group (+9.0%), AB Dynamics (+7.4%), Team17 Group (+7.3%), Trifast (+5.4%) and Brickability Group (+5.0%).


Negative contributors included:

Clipper Logistics (-18.3%), dotdigital Group (-13.1%), Kainos Group (-11.4%), Medica Group (-11.0%) and Craneware (-9.5%).


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








Liontrust UK Smaller Companies I Inc






FTSE Small Cap ex ITs






IA UK Smaller Companies













*Source: Financial Express, as at 31.08.2019, 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 30.06.2019, total return (net of fees and income reinvested), bid-to-bid, primary class.

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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.

Tuesday, September 17, 2019, 4:02 PM