No dividend but good performance from North Atlantic Smaller – North Atlantic Smaller Companies has announced results for the year ended 31 January 2021. The net asset value per share rose by 20.7% as compared to a rise in the sterling adjusted S&P Composite of 10.9%. The share price rose from 3400p to 3850p. The company’s revenue account showed a return after tax of £531,000, less than a tenth of last year’s £5,872,000. COVID caused a number of its major investments to cut or omit their dividends. North Atlantic Smaller also saw a reduction in loan note interest following the repayment of its loan to SourceBio. The directors are not recommending a dividend in respect of the year to end January 2021 (2020 30p).
[The chairman draws attention to the votes that the company has received in the past against the whitewash resolution (a vote put to shareholders to allow major shareholder’s share of the company to go above 29.9% without triggering a bid for the whole company – as is required under the Takeover Code). Buying back stock should help narrow the discount (which in this case is currently 27.9%) but triggering a bid might eliminate the discount entirely – so you can see the attraction for some shareholders of forcing the major shareholder’s hand.]
Extract from the manager’s report
“The year was very much a game of two halves. Substantial losses in the period to 31 July 2020, followed by a substantial recovery through to 31 January 2021. The Company was badly impacted through its exposure to leisure related stocks and in particular the fall in Ten Entertainment and Stobart Group resulted in a net loss to the Company of approximately £30 million, as key parts of their business were forced to close.
Fortunately, this was more than offset by the relatively high weighting in Life Sciences with Ergomed (prior to sale), EKF, Renalytix and Verici DX all performing notably well and collectively adding nearly £90 million to the NAV. Augean and Polar Capital rose modestly but the gain was offset by a fall in MJ Gleeson.
Smaller holdings such as AssetCo, Sureserve and Signature Aviation performed well and other holdings such as Frenkel Topping, Bigblu Broadband, Tribal and Benchmark made modest progress.
Finally, it is pleasing to note that both Oryx International (“Oryx”), our largest holding, and Odyssean Investment Trust, outperformed their benchmarks, in Oryx’s case by a significant amount.
quoted portfolio USA
The portfolio remains relatively modest and had no major impact on the net asset value of the Company.
unquoted portfolio UK
Source Bioscience (previously Sherwood Holdings) went public during the period and with accrued interest is estimated to have added in total approximately £9 million to the net asset value. Hamsard was also written up but the impact was offset by the need to write down Specialist Components due to weak orders resulting from the COVID Pandemic. Viking was also written up modestly with further gains expected in the current year as the business hopefully enters a liquidity event.
Finally, it was necessary to write down Jaguar Holdings Group an inflight catering business as demands for its services collapsed due to COVID impact on the airline industry.
unquoted portfolio USA
The standout performer of the year was the IPO of Telos in the fourth quarter. In January 2021, the ordinary shares were valued at little over £1 million. With sales following the IPO of over £20 million and with the balance of the publicly listed shares worth over £5 million the investment made an outstanding contribution to the Company’s performance in the year to 31 January 2021.
Performance Chemicals suffered due to the weak oil price but remained EBITDA profitable. Coventbridge and Utitec made modest progress again impeded by COVID issues. We do however expect liquidity events from both the investments in the current financial year which will boost both cash reserves and the net asset value.
liquidity
Cash and US treasury bills started the year at £82 million and fell initially as opportunity was taken to invest in companies where we believed there had been an overreaction in the share price compared to the intrinsic value of the business. Most recently however, the IPO of Source, the partial sale of Assetco, the partial sale of Signature following multiple ongoing bids and the sale of most of the Telos position has resulted in cash and US treasury bills at the end of January 2021 nearing £89 million. This is expected to increase still further as the balance of the Telos and Signature Aviation positions are realised.”
NAS : No dividend but good performance from North Atlantic Smaller