Liontrust UK Micro Cap Fund

The Liontrust UK Micro Cap Fund returned 4.9%* in February. The FTSE Small Cap (excluding investment trusts) Index and the FTSE AIM All-Share Index comparator benchmarks returned 7.2% and 2.0% respectively. The average return of funds in the IA UK Smaller Companies sector, also a comparator benchmark, was 3.9%.

There was a firmer focus on a post-Covid world in February’s markets as the breakneck pace of the global vaccination effort saw the number of people vaccinated exceed the number of Covid cases. Specifically, investors began to price in a potential rise in inflation from pent-up demand being unleashed as lockdown restrictions ease. Further stoking inflationary concerns was the anticipation of a huge US fiscal stimulus bill, as President Biden’s US$1.9 trillion plan passed through the House of Representatives late in the month.

In the UK, where the vaccine roll-out has been particularly impressive, Prime Minister Johnson outlined the path out of lockdown and towards an economy without any Covid restrictions. Vianet Group (+21%) provides data and analysis to pubs and vending machine operators via its connected ‘internet-of-things’ (IoT) platform and its shares rose on the prospects of pubs re-opening. 

Meanwhile, essensys (+47%), which provides software-as-a-service platforms to the flexible workspace sector, updated on trading for the six months to 31 January 2021. Its US business had traded strongly, recurring revenue increasing 18% to £4.4m while the UK division remained resilient through the pandemic. Group revenue edged 5% lower as new site openings were impacted by Covid restrictions, but recurring revenue increased to £9.8m from £9.7m.

Customer engagement software group Netcall (+21%) also reported strong interim results, with revenue rising 9% in the six months to 31 December 2020, and pre-tax profit rising to £960,000 from £140,000. The performance was led by strong growth in cloud software revenues, which rose 28% as the company saw higher sales in key market segments of financial services, healthcare and government. Management stated the overall revenue growth rate achieved in the first half had continued into the second and now that there is improved visibility of forward revenue, earnings before interest, taxes, depreciation and amortisation (EBITDA) will be ahead of expectations for the full-year.

There was greater disruption to MJ Hudson Group’s (-13%) trading during the same period. The asset management consultancy said that due to the pandemic, there were fewer fund launches and less merger and acquisition activity in the second half of 2020, which weighed on its Advisory division where revenue fell against a strong 2019 comparison. However, other divisions performed better, aided by recent acquisitions, and overall revenue rose 12%.

Enterprise resource planning (ERP) software provider K3 Business Tech (+54%) announced the sale of its managed services unit Starcom Technologies for £14.7m. The sale will generate a profit of £10m, which will be booked in the company’s current financial year. The proceeds will significantly strengthen K3’s balance sheet, eliminating its net debt which stood at £2.3m on 30 November 2020.

The managers completed the sale of Marlowe after the stock exceeded the Fund’s upper market limit of £275m.

Positive contributors included:

essensys (+47%), accesso Technology Group (+31%), Surgical Innovations (+26%), Intercede Group (+25%) and Beeks Financial Cloud Group (+24%).

Negative contributors included:

MJ Hudson Group (-13%), James Cropper (-12%), Quixant (-11%), Crimson Tide (-7.4%) and Inspecs Group (-5.3%).

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

*Source: Financial Express, as at 28.02.21, 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 31.12.20, 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.

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.