North Atlantic Smaller Companies reports NAV growth in tough environment – North Atlantic Smaller Companies (NAS) has reported preliminary results for the year-ended 31 January 2019 with the diluted NAV per share increasing 6.8% year-on-year to 3,708p, compared to an increase of 3.7% during the year in the Standard & Poor’s 500 Composite Index (Sterling adjusted). NAS navigated the generally turbulent environment for smaller companies well, particularly given the trust’s exposure to UK small-cap.
Manager’s take
NAS’ manager, Christopher Mills, provided the following commentary around the portfolio.
Quoted portfolio:
United Kingdom:
“The market for smaller companies was weak throughout most of 2018. Profit warnings combined with limited liquidity created a difficult environment with most relevant indices falling by more than 10%. It is therefore pleasing to report that our portfolio performed well.
The major standout success stories were Bioquell with the value of our holding rising by £14 million, EKF/Renalytix which contributed £11 million and the recently purchased Augean adding almost £6 million. Oryx significantly outperformed its benchmarks while the other major holdings (Ten Entertainment, MJ Gleeson and Polar Capital) taken as a whole and adjusted for dividends made a positive contribution to the net asset value. Two smaller holdings have proved disappointing with both Sportech and Goals Soccer falling after worse than expected results.
United States:
The equity portfolio made some good profits for the company but as the total value is less than £16 million, the overall impact was limited. However, very substantial holdings were held in short-dated US Treasury Bills which provided a considerable uplift as Sterling weakened from $1.422 to $1.315 over the 12-month period.
Unquoted portfolio:
United Kingdom:
Most of the unquoted portfolio is now concentrated in the two private equity funds, Trident Private Equity III LP (“TPE3”) and Harwood Private Equity IV (“HPE IV”). Both funds performed well during the year. TPE3 is currently in liquidation with only one remaining investment which is expected to be sold in early 2020. HPE IV is almost fully invested with further realisations expected in the current year.
One major new investment made in the year, Pelsis/Hamsard, has performed in line with expectations. It is anticipated that remainder of the company’s property investments will be sold in the current year.
United States:
Both Performance Chemicals and Jaguar performed well during the past year and their prospects look good. Unfortunately the arbitration decision on GAJV was unfavourable resulting in a write-down on the investment.
Liquidity:
Liquidity, that is, cash and short-term government securities, at the end the period was £116 million up from £100 million last year. This provides the company with the resources for the trust to benefit from the favourable opportunities that are now occurring to acquire good businesses at a discount to private market value.”
NAS: North Atlantic Smaller Companies reports NAV growth in tough environment