North Atlantic sitting on £73m war chest

North Atlantic Smaller Companies’ figures for the year ended 31 January 2015 show the fund generating a return on net assets of 13.5% and a return to shareholders of 15.3% (benefiting from a narrowing of the discount from 21.5% to 19.7%). These numbers are ahead of the Russell 2000 Index, which returned 12.5% and the 2.9% return on the FTSE Small Cap. index, the closest indices to the fund’s strategy, but behind the 22.2% return on the S&P 500 Index.

Within the portfolio, MJ Gleeson Group shares fell modestly in the year under review despite reporting excellent and above forecast results. The net asset value of Oryx rose by 7%, outperforming its relevant index. Mecom Group performed well following a takeover bid. Unquoted fund, Trident Private Equity II, continued to perform well and is currently in the course of liquidation whilst Forefront was sold at a good uplift to the 2014 valuation. Amongst the rest of their unquoted portfolio, SINAV was sold in early June 2014 at a Sterling profit of approximately 3.5 x cost. The Banks portfolio also performed well with Atlanta Bancorp being taken over early in the year and TrustAtlantic being taken over just prior to the year end. In the case of TrustAtlantic, they say the bid was worth nearly three times the January 2014 holding value.

The principal disappointment during the year was Coats Group (previous Guinness Peat Group) as the share price fell by approximately 30% following concerns over its pension liability. In their property portfolio, Merchant Properties and Crendon were sold and Hampton Investment Properties partly liquidated, a process which is expected to be completed in the current year. One new property investment was made, Industrial Properties, where they think early indications look favourable.

They had c£73m in cash or short-term Treasury Bills, most of which was held in US Dollars at the year end, having received the final proceeds of the sales of Orthoproducts and Bionostics. The manager thinks there is a good chance that markets will  weaken from current levels, allowing them to deploy their cash pile at more attractive valuations.

NAS : North Atlantic sitting on £73m war chest