In April Lowland’s net asset value rose 5.4% relative to a 2.7% rise in the FTSE All-Share. Following the extension of the ‘Brexit’ deadline to the end of October this removed an imminent source of uncertainty for domestic stocks. As a result small and medium sized companies outperformed the FTSE 100 and this positively contributed to Lowland’s performance. While there has been a short term move upwards, UK equities, and particularly domestically focussed companies, remain out of favour and this remains evident in UK equity flows and fund manager surveys. We continue to see value in UK equities and intend to continue to be net investors in the upcoming months.
The largest contributor to performance during the month was Anexo, which provides hire vehicles following an accident to people who would otherwise struggle to get access to a hire car (or bike). This reported an encouraging set of results in which they are successfully managing to grow sales and earnings. Following an encouraging meeting with the management team we intend to keep the current holding.
The largest (actively held) detractor from performance was K3 Capital, a UK corporate broker. A subset of their business is larger corporate finance deals for which they are appointed to find a buyer. They are currently struggling to get larger deals completed due (partly) to uncertainty surrounding Brexit, which is putting off potential private equity purchasers. Following the share price fall we added to the holding as this setback in larger deals completing should be temporary, while the remainder of the business dealing in smaller businesses continues to grow well.
The largest purchase during the month was a new position in Vitec Group, which makes equipment for the broadcasting industry such as autocues, audio equipment, lighting, tripods etc with leading market shares globally across the majority of their products. There is potential to materially grow sales and margins over time and in our view this is not factored into the current share price. Elsewhere we added to existing holdings including RBS, GlaxoSmithKline and Mondi, all of which look attractively valued with a good dividend yield.
Dividend yield: The dividend yield is the ratio of a company's annual dividend compared to its share price. The dividend yield is represented as a percentage.