Strategic Equity Capital’s results for the year ended 30 June 2024 show an NAV total return of 16.6% and share price return of 19.2% (as the discount narrowed a little). The NAV returns came in just behind the 18.5% return posted by the FTSE Small Cap Index. Revenue per share rose to 4.15p and the dividend was upped to 3.5p from 2.5p.
The discount narrowing was encouraged by policies such as the plan to return up to 50% of proceeds from profitable realisations, with buybacks at a discount no wider than 5%, a standing commitment from the investment manager to reinvest 50% of its quarterly management fee in the company, and a 100% realisation opportunity in November 2025. In addition, a 10% stake in the company was placed with various UK wealth managers, increasing liquidity.
Top performance contributors during the period were:
- XPS Pensions Group, which saw successive analyst upgrades throughout the period and accounted for 22.9% of the NAV at year end;
- Fintel, a regulatory technology service provider, which completed a number of strategic acquisitions expected to significantly increase the capabilities, scale and IP of the organisation;
- The Property Franchise Group, a lettings-focused franchised estate agency business, which completed two transformational acquisitions in the period augmented by strong organic growth;
- Wilmington, a professional media provider, which demonstrated strong operating fundamentals and forecast upgrades whilst successfully refocusing the business on a digital first strategy in the governance, risk and compliance market was exited in full during the year; and
- Tribal Group, a provider of technology products and services to the education, learning and training markets, which amicably settled an ongoing contractual dispute (at a significant discount to the counterparty’s claimed damages) following strong full-year results, and the announcement (albeit the transaction eventually lapsed post-shareholder vote) of a recommended cash offer in early October at a 42% spot premium.
The company’s three-year returns have been good enough (15.6%, compared to just 0.8% for the FTSE Small Cap Index.) to trigger the payment of a performance fee to the manager. The fee was capped at £1,409,000.
SEC : Strategic Equity Capital discount control effort seems to be working
