Invesco Perpetual UK Smaller posts decent outperformance

Invesco Perpetual UK Smaller Companies says, for the year ended 31 January 2016 the net asset value rose by 10.9%, on a total return basis, an outperformance of 7.1% versus the benchmark index of the Company, the Numis
Smaller Companies Index (excluding Investment Companies), which returned a lesser 3.8%. When compared to the wider UK stock market, the company generated an impressive 15.5% outperformance against the FTSE All-Share Index return of -4.6% over the same period.

For the year ended 31 January 2016 three interim dividends of 3.4p each were paid to shareholders, in September and December 2015 and in March 2016. The Board is now proposing a final dividend of 4.1p per share, bringing the
total dividend for the year to 14.3p per share, an increase of 4.0% on the previous year’s total dividend. Based on the year end share price of 362p, this represents a dividend yield of 4%.

At the individual stock level, the stand-out performer was JD Sports (+68%), a leading sportswear retailer. The business is successfully growing same-store sales and rolling out its format into continental Europe. The company enjoys strong support from the major brands, enabling it to take share from its rival, Sports Direct. Staffline (+67%), a blue collar recruitment business, also had a strong year. It continues to win new customers in the logistics and food sectors and has grown its presence in the government Work Programme, where it helps re-employ the long term unemployed. CVS (+64%), a veterinary services business, had another good year. Management have continued to acquire smaller  competitors, leveraging its market-leading position to drive more business through its specialist centres and pet crematoria. Also of note is Sanne (+88%), which we acquired as an IPO in April. The business offers back office outsourcing services to the financial sector, and is well positioned to grow over the next few years.

Inevitably, there were some disappointments. Northgate (-43%), a flexible van rental business, found itself out of favour with investors. There was some minor disappointment, with a small reduction in the UK fleet due to lower demand from the solar panel installation sector, but on the whole trading was solid. There is also some pressure on the value of its used vans, but, they say, nothing that fully explains the share price decline. Ithaca Energy (-64%), is a North Sea oil producer, which has seen profits reduced by a lower oil price. Another smaller holding that proved to be particularly disappointing was Stanley Gibbons (-75%), which trades stamps, coins and other collectables. They
had hoped its new online trading platform would create a significant growth opportunity, but a combination of poor IT implementations, management in-fighting and weak trading, which resulted in an over indebted balance sheet,
has severely damaged investor sentiment. They sold the position since the year end and before the recent fall in share price.

IPU : Invesco Perpetual UK Smaller posts decent outperformance

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