Standard Life UK Smaller posts “remarkable” performance

Standard Life UK Smaller Companies’ diluted net asset value total return was 15.2% for the six months ended 31 December 2015. This compares with a total return of -1.0% for the Company’s benchmark, the Numis Smaller Companies Index (excluding Investment Companies). The Board say the outperformance is remarkable given stock markets have proved challenging over the period. The Board is proposing an unchanged interim dividend of 1.40p per share.

The manager’s report says the key drivers were the Trust’s lack of exposure to Oil & Gas, Mining and Engineering stocks. Helpfully the Trust was heavily exposed to the UK consumer, through Retailers, Leisure and Media, also growth sectors like Software and Healthcare and UK orientated sectors in general such as Real Estate and Financials.

Bid activity played a part. A substantial holding in Quintain Estates and Development was acquired by Lone Star of Texas. Furthermore, the PaddyPower/Betfair combination was seen as a very powerful player in the on-line sports betting market going forward, the PaddyPower share price was up 66%.

Moneysupermarket, EMIS, Rightmove, CVS Group, GB Group, Domino’s Pizza and JD Sports all rose by between 23% and 35%, all driven by trading that was ahead of expectations. he says special mention must be made for FeverTree Drinks the premium mixer drinks company where the share price rose by an amazing 110%.

The five leading performers in the period were:

Fevertee Drinks managed to come out twice with “profit warnings” where they stated that earnings would be significantly ahead of expectations as they continue to gain share as a result of the premium gin revolution around the world. Consumers have been impressed by the quality and provenance of Fevertree in comparison with erstwhile market leaders.

PaddyPower has rocketed following the merger announcement with Betfair. Paddy’s superlative marketing prowess combined with Betfair’s unique betting exchange capabilities opens up intriguing product promotion and margin enhancement possibilities. This share has returned in excess of 1100% since it was first bought in December 2004.

Moneysupermarket is continuing to gain ground on other more one dimensional price comparison sites.

Rightmove continues to be a very “giving” share. Their market leading credentials meant that the company showed its true class up against Zoopla and Agents Mutual.

Abcam, an old favourite which has been in the Trust since 2007, recovered after showing signs that it was regaining its old growth form.

The losers were comparatively thin on the ground, the most notable being Paragon Group, the challenger bank which specialises in buy to let lending. The Chancellor has moved aggressively to discourage buy to let lending by disallowing setting mortgage interest against profits and by adding 3% on to stamp duty for landlords. AG Barr lost ground, not helped by poor summer trading and a whispering campaign targeted at the issue of obesity caused by excessive sugar consumption. Clarkson and James Fisher suffered because of partial exposure to oil and gas markets. Diploma was impacted by continued weak trading in its industrial end markets.

SLS : Standard Life UK Smaller posts “remarkable” performance