Net Asset Value as at 30 June 2023

Schroder British Opportunities Tst.

03 October 2023

 

Schroder British Opportunities Trust plc

(the "Company" or "SBO")

Net Asset Value as at 30 June 2023

Schroder British Opportunities Trust plc today announces its unaudited net asset value ("NAV") as £78.9 million or 106.71 pence per share as at 30 June 2023 (31 March 2023: £79.3 million or 107.32 pence per share), following the quarterly valuation of the Company's private equity holdings. The private equity allocation of the Company's portfolio continues to perform well with the latest private equity valuation resulting in a £1.7 million fair value uplift. The Company's investments in Pirum and Cera Care were the main contributors to this increase. This represents the tenth consecutive quarter that the Company's private equity allocation has seen an increase in value (net of investments and distributions).

The Company's daily NAV calculation re-values the public asset holdings on a daily basis, and the private equity holdings quarterly post period end. This latest quarterly valuation of the private equity holdings will be reflected in the daily unaudited NAV per share announcement as of 2 October 2023, which will be published on 3 October 2023.

Portfolio

As at 30 June 2023, the Company had 33 holdings comprising 9 private and 24 public companies. During the quarter ended 30 June 2023, the Company exited its position in Keywords Studios, which is discussed below.

Financial performance (unaudited)

Attribution Analysis (£m)	Public	Private	Net (debt)/cash	Other	NAV
Value as at 31.03.2023	26.2	47.9	7.8	(2.6)	79.3
Investments	0.6	0.2	(0.8)	-	-
Realisations for cash	(1.7)	-	1.7	-	-
Fair value gains / (losses)	(1.8)	1.7	-	-	(0.1)
Costs and other movements	-	-	(0.8)	0.5	(0.3)
Value as at 30.06.2023	23.3	49.8	7.9	(2.1)	78.9

The above increase in fair value was not sufficient to offset the fall in value during the quarter of the public equity investments.  The 0.5% decrease in NAV, from £79.3 million at 31 March 2023 to £78.9 million at 30 June 2023, comprised:

§ Public holdings: (2.27%)

§ Private holdings: +2.14%

§ Costs and other movements: (0.38%)

The Company's public equity holdings saw an aggregate decrease in fair value of £1.8 million over the quarter ended 30 June 2023. The main detractor to performance was our holding in Watches of Switzerland, which was driven by an earnings downgrade partly due to higher costs incurred from its interest free credit service. Other detractors included our position in Learning Technologies Group, which experienced a tougher than expected macro environment that also led to its earnings being downgraded. Meanwhile, positive contributors included Bytes Technology and City Pub Group, which both announced a strong set of financial results.

The Company's private equity holdings saw an aggregate fair value increase of £1.7 million over the quarter ended 30 June 2023. The private equity allocation of the portfolio has increased in value every quarter since the Company's inception. The main contributors to the increase this quarter were the investments in Pirum, a leading provider of post-trade automation and collateral management technology for the global securities industry, and Cera Care, a technology-enabled home care provider. Despite tough market conditions, Pirum performed well, displaying strong year-on-year growth in sales and EBITDA. Meanwhile, Cera Care benefited from both organic and in-organic growth. In terms of detractors, the valuation in Rapyd fell marginally over the quarter, despite its run rate sales increasing, owing to a small contraction in its valuation multiple, which reflected the movement in that of comparable public companies.

Investment activity

During the period, the Company exited its position in video games outsourcer, Keywords Studios, following concerns over the visibility of its strategy in light of the potential disruption from artificial intelligence. Meanwhile, periods of share price weakness were used to increase the Company's positions in Watches of Switzerland and GB Group.

Top 10 holdings

Holding	Quoted / unquoted	Fair value as at 31 March 2023 (£'000)	% of total investments	Fair value as at 30 June 2023 (£'000)	% of total investments
Mintec	Unquoted	8,614	11.6	8,879	12.1
Rapyd	Unquoted	8,399	11.3	8,161	11.2
Cera	Unquoted	6,986	9.5	7,320	10.0
Pirum	Unquoted	6,087	8.2	7,092	9.7
Culligan	Unquoted	5,053	6.9	5,159	7.1
EasyPark	Unquoted	4,492	6.1	4,653	6.4
CFC	Unquoted	4,098	5.5	4,411	6.0
Learning Curve	Unquoted	2,455	3.3	2,401	3.3
City Pub	Quoted	1,644	2.2	1,822	2.5
Volution	Quoted	2,012	2.7	1,767	2.4

Outlook

Our Portfolio Managers believe that when clearer signs of a sustained economic recovery materialise and market sentiment substantially improves, small and mid-caps should be the first to re-rate in response. Their analysis shows that such market underperformance in the past by UK small and mid-caps has usually been followed by outperformance over three- to five-year periods relative to large cap companies in the FTSE 100. Aside from the relative valuation opportunity with UK equities remaining unloved relative to world markets in an historical context, in aggregate, they are also attractive as a result of their strong balance sheets. The valuation opportunity can also be looked at through the lens of free cash flow yields, with the UK having a higher yield than many other developed markets, making investing in the UK a compelling opportunity.

In private equity markets, with financial engineering unlikely to propel returns in the near term due to increased rates, inflation and macroeconomic uncertainty, the Portfolio Manager believes strategies focused on identifying companies that exhibit strong underlying financial performance are poised to do well. This may be achieved by the expansion of product lines, geographic footprint, and professionalising companies to improve profit margins, for example. This is all easier to do in small and medium-sized companies, and typically harder to achieve at larger companies, which have often been through several rounds of private equity or institutional ownership. Furthermore, despite the economic backdrop, the Portfolio Manager is seeing significant deal flow across a breadth of opportunities. The Portfolio Manager's private equity team has an established and formidable network in the UK (as well as globally) with hard-to-access investment partners, and the Board believes the Portfolio Managers are well positioned to seek out the best opportunities for the Company going forward.

The Company's differentiated public-private equity strategy enables us to continue to invest without boundaries, providing access to a broader investable universe. We believe this differentiates Schroder British Opportunities Trust plc from other investment trusts.

Enquiries:

Schroder Investment Management Limited   Paula Lockwood (Company Secretarial) Augustine Chipungu (PR)	020 7658 6000
Peel Hunt  Liz Yong, Luke Simpson, Huw Jeremy (Investment Banking)  Alex Howe, Chris Bunstead, Ed Welsby, Richard Harris (Sales)	020 7418 8900

 

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