Gresham House Strategic has announced results for the year ended 31 March 2016. Since the new managers were appointed the NAV has returned 1.0% against a return of -2.8% for the FTSE Small cap. and -5.4% for the FTSE All-Share Index.
Although they committed to distribute 50% of capital realisation gains through dividend, the board decided that for the small gain of GBP0.26m they made on one investment, Castle Street Investments, the costs of paying a dividend out of this would be prohibitive.
Gresham House Strategic plc, previously SPARK Ventures plc, is an AIM quoted investment company that invests primarily in UK and European smaller public companies. On 10 August 2015 GHAM was formally awarded the management contract for the company. They say they have completed the realisation of asset sales from the historic SPARK Ventures portfolio, adopted the new investment strategy, raised GBP14.3m from a placing and open offer plus GBP3.8 million from an asset swap. The shares have also been consolidated on a 1 for 200 basis
The portfolio valuation at 31 March 2016 (including cash and other net assets) was GBP36.8 million, the NAV discount reduced from 34% at the start of the financial year to 20% at year-end. At present they hold six companies in the portfolio with a medium term target which would see between ten and fifteen stocks representing more than 80% of the portfolio. They say the current portfolio of companies is attractively valued, with strong cash generation characteristics. Taking into account cash in the portfolio and the current share price discount to NAV per share, the portfolio is trading on an implied EV/EBITDA multiple below 5x (excluding cash and Be Heard Group for which there are no current broker forecasts), which is approximately half the market rating, and offers EBITDA growth prospects in excess of 10%, also twice the market average. They believe they have an exciting pipeline including private opportunities which may potentially be pre-IPO, and look forward to updating shareholders in due course.
Quarto Group announced results ahead of market expectations with good earnings growth and strong cash generation as a result of organic growth and the highly successful acquisition of Ivy Press.
Miton Group highlighted strong inflows and top quartile fund performance in Q1 2016 resulting in a moderate upgrade to broker forecasts and the shares performed well, rising 27%. However, the share price performance reversed following the announcement of the departure of two key fund managers in April. They continue to believe the company is attractively valued and are encouraged by the appointment of Andrew Jackson to manage the Value Opportunities fund. The management team’s focus now should now be on defending assets and returning the group to industry average operating margins.
The only faller in the period, SpaceandPeople plc, announced final results in March for the year ended 31 December 2015 which were in line with expectations.
IMImobile, a significant holding within the portfolio, released a positive pre-close trading update on 30 March 2016 highlighting a strong pipeline and positive outlook. Preliminary results for the year ended 31 March 2016 are due for release in July and they continue to see opportunity to the upside as the valuation anomaly compared to comparable transitions closes through identified action points taken by the management.
The fund exited its position in Castle Street Investments on 1 March 2016 generating a gross IRR of 43%.
GHS : Gresham House Strategic outperforms in initial period