The Week’s Investment Trust Results
In this week’s results round-up, one Chairman appears to have caught a bout of football fever (who can blame him ?), while one of London’s newest funds bags an award after an impressive first year.

By
Frank Buhagiar
12 Jul, 2024

Schroder British Opportunities (SBO) believes in patience
SBO reported a +2.5% increase in NAV per share for the latest full year. That compares to the previous year’s +3.1% gain. Chairman, Neil England, points out that ‘the current portfolio of innovative, predominantly UK companies are growing strongly, the majority in line or ahead of expectations.’ Because of this, ‘the patient investor that can look beyond the recent market environment should be well rewarded.’ The reason why patience is needed is because at present ‘The market appears not to discriminate effectively between companies that need cash and those that don’t.’ Helpfully, ‘The majority of the companies in your Company’s private portfolio are already profitable with positive operating cash flows or are funded through to that point.’

And while the patient investor waits for their reward, the company is looking to grow in other ways. As England points out, the fund first came to market in 2020. No mean feat for the IPO market was very challenging which did impact the amount of funds raised. Four years on and the Board is looking to do something about the trust’s size and is considering several options to increase the size of the Company, to increase its appeal to wealth managers and to improve its liquidity.

Winterflood: ‘NAV growth driven by fair value gains in PE portfolio (+3.8% NAV contribution), while listed holdings detracted (-0.8% NAV contribution). Share price TR +16.1%, as discount narrowed to 27.8% from 36.2%. Board continues to actively consider buybacks.’

TwentyFour Income Fund (TFIF), working the ABS
TFIF chalked up an +18.1% NAV total return per share for the year, quite some turnaround from the previous year’s -3.74%. Stripping out the record dividend payment of 9.96p per share, which was above the 8p per annum target, NAV per share increased +7.7% to 108.97p. Chair, Bronwyn Curtis OBE, puts the strong outcome down to the strategy of investing in higher yielding floating rate ABS (asset-backed securities) in a higher interest rate environment which has enabled the Company to produce a record dividend for the year for investors, equivalent to a 10% yield on the share price, alongside a strong return on the portfolio.

As for the outlook, sounds like the portfolio managers are preparing to take advantage of any market volatility ‘the Board is supportive of the Portfolio Manager’s focus on Western European secured assets with short maturities, keeping one eye on market volatility whilst also offering the potential to benefit from potential market dislocations.’

Numis: ‘TFIF has exceeded its dividend target in every year since launch and has increased the target from 6p to 8p in recent years. We believe it is well-placed to beat it again given a purchase yield of 11.5% on the portfolio and the continued high-rate environment.’

Winterflood: ‘Managers expect fundamental performance to deteriorate (given increasing consumer arrears and corporate defaults in the market) and therefore continue to prefer instruments with short spread duration, sufficient liquidity and low gearing, and particularly with secured collateral such as mortgages, senior secured corporate loans and auto loans.’

Onward Opportunities (ONWD) crowns first year with award
ONWD posted a +9.2% increase in NAV per share total return for the six-month period to 30 June 2024. That brings the 12-month NAV return to 30 June 2024 up to +20.6%. By contrast, the AIM All share could only muster a pedestrian-looking +3.1%. Thanks to numbers like that, ONWD finds itself in the top quartile in terms of performance amongst its peers over 12-months – the fund, which only came to market in 2023, ranks fourth out of 26 in the AIC UK Smaller Companies sector. No surprise then that ONWD was named ‘IPO of the Year’ at the Small Cap Awards.

Fund Manager, Laurence Hulse, points out that since the fund’s IPO 15 months ago, NAV is now up +21.6%. A tick in the box for the strategy centred around ‘truly active management’.

Winterflood: ‘Performance contributions from both core and nursery holdings; top contributors included MPAC Group, Vianet Group, Team17, Northcoders and Transense Technologies. Income stream expected to offset majority of total expense ratio in forthcoming year.’

Miton UK Microcap’s (MINI) year of two halves
MINI Chairman, Ashe Windham, has caught the football bug, if his full-year statement is anything to go by ‘The report covers the full year to 30 April 2024, a period which was, in football parlance, a game of two halves.’ Easy to see why. NAV fell -15.5% in the first half before a tentative recovery took hold in the second half that saw NAV increase by +3.1%. Overall, full-year NAV was down -12.9% compared to a +7.2% rise in the Deutsche Numis Smaller Companies 1000 Index. On performance, Windham highlights how, because of the the dearth of buying interest in UK microcaps over the last three years, marginal sellers have dominated the direction of share prices.

As for why the lack of buyers, ‘Every excuse in the book has been rolled out for why institutions and individuals should not buy UK equities’. Windham cites the Scottish referendum, Brexit, high turnover of Prime Ministers, the UK’s lack of technology stocks, stamp duty on the purchase of equities, tax on North Sea oil producers and geopolitical conflict.’ To add insult to injury, the investment trust sector has been discriminated against by the iniquitous double counting of fees such that wealth managers find real difficulties explaining why they should be buying closed end vehicles for their clients. The last three years have been incredibly frustrating. Whilst this is disappointing, the Trust was set up because quoted microcaps possess extraordinary upside potential. When microcaps succeed, sometimes their share prices can appreciate very dramatically.’

Winterflood: ‘Share price -15.1% as discount widened from 7.3% to 9.5%. The yearly share redemption to be offered to shareholders again this year with 1 October 2024 the latest date for redemption requests and redemption point on 5 November 2024.’