Statement re Quarterly NAV

Schroder British Opportunities Tst.

25 March 2024

 

Schroder British Opportunities Trust plc 

Net Asset Value as at 31 December 2023

Schroder British Opportunities Trust plc (the "Company") announces its unaudited net asset value ("NAV") as at 31 December 2023 was £82.9 million or 112.23p per share (30 September 2023: £77.3 million or 104.66p per share), following the quarterly valuation of the Company's private equity holdings. This represents an increase of 2.21p per share (+2.0%) compared with the NAV reported at the quarter end, and a +7.2% uplift for the quarter, of which +5.8% is attributable to the Company's public equity sleeve. The private equity sleeve also performed well with a £1.2 million fair value uplift, the 12th 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 company 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 as of 22 March 2024, which will be published later today.

Portfolio

As at 31 December 2023, the Company had 30 portfolio company positions comprising 9 private and 21 public companies.

Financial performance for the three months ended 31 December 2023 (unaudited)

Attribution analysis (£m)	Public equity	Private equity	Money market funds	Net (debt)/ cash	Other	NAV
Value as at 30.09.2023	21.0	50.4	7.3	0.8	(2.2)	77.3
+ Investments	-	0.3	3.9	-4.2	-	-
- Realisations	(4.5)	-	-	4.5	-	-
+/- Fair value gains / (losses)	4.5	1.2	0.2	-	-	5.9
+/- Costs and other movements	-	-	-	-	(0.3)	(0.3)
Value as at 31.12.2023	21.0	51.9	11.4	1.1	(2.5)	82.9

The Company's private equity holdings saw an aggregate fair value gain of £1.2 million over the quarter ended 31 December 2023; the private equity allocation of the portfolio has increased in value every quarter since the Company's inception. The main contributors over this quarter were the investments in technology-enabled home care company, Cera Care, and the global leading price reporting agency for non-exchange traded commodities, Mintec. Cera Care announced the successful delivery of 7.5 million home care visits over the winter period, saving the NHS an estimated £100 million. This is 2.5 million more than the initial 5 million visits planned last October, and was delivered through Cera Care's AI-powered care model. At the same time the company continued its buy and build strategy with an acquisition in November 2023. Mintec achieved EBITDA growth during the quarter whilst making good progress integrating AgriBriefing.

The Company's public equity holdings performed particularly well, with performance equivalent to the top quartile of the IA UK Smaller Companies peer group for both the quarter and the 12 months to 31 December 2023[1]. The public equities sleeve saw an aggregate fair value gain of £4.5 million over the quarter ended 31 December 2023. The main contributor was pub operator City Pub Group, which received a take-over bid from Young & Co's Brewery. Our holding in Ascential also did well following the announced sales of its Digital Commerce division and its WGSN marketing business. Detractors to performance included online womenswear brand, Sosandar, following its announcement that its revenues would be lower than expected due to its new focus on reducing the level of discounting. Whilst the share price reaction was disappointing, we support the move to a multi-channel concept focussed on higher margin customers. Another detractor was our holding in mortgage provider, LendInvest, which reported pressure on its revenues resulting from sustained higher interest rates. Whilst market conditions were challenging in 2023, the firm de-risked its balance sheet, cut costs, and built further relationships with financial partners - the benefits of which we believe should be seen going forward once interest rates begin to fall.  

Investment activity

During the period the Company realised £4.5 million of investments. The Company exited City Pub Group following a take-over bid by Young & Co's Brewery and its small holding in Velocys due to concerns over the latter's balance sheet. Small follow-on investments were made in Learning Curve and Cera Care, amounting to £0.3 million in total.

Top 10 holdings

Holding	Quoted/unquoted	30 September 2023		31 December 2023
		Fair value (£'000)	% of total investments	Fair value (£'000)	% of total investments
Mintec	Unquoted	8,865	12.4	9,263	12.7
Cera	Unquoted	7,316	10.2	8,047	11.0
Rapyd	Unquoted	7,721	10.8	7,392	10.1
Pirum	Unquoted	7,166	10.0	7,193	9.9
EasyPark	Unquoted	6,245	8.7	6,238	8.6
Culligan	Unquoted	4,909	6.9	5,005	6.9
CFC	Unquoted	4,416	6.2	4,675	6.4
Learning Curve	Unquoted	1,918	2.7	2,099	2.9
Graphcore	Unquoted	1,801	2.5	1,986	2.7
Watches of Switzerland	Quoted	1,400	2.0	1,857	2.5

Note: money market funds excluded from calculation of % of total investments

Outlook

Fundraising activity in the small-mid cap buyout segment of the private equity market, one of the key focus areas of our strategy, is at a 5-year low, creating opportunities for attractive entry valuations in our deal pipeline. Despite high interest rates, small-mid cap buyout exits have been relatively stable when compared to 2019 levels and we expect the easing of interest rates, forecast for later this year, to provide a favourable backdrop for future exits. We continue to believe that small and medium sized companies provide good investment opportunities as they find it easier to achieve growth through expansion of product lines or their geographic footprint and to improve profit margins than larger companies, which have often been through several rounds of private equity or institutional ownership. 

Interest rate cuts widely forecast for later in 2024 are expected to benefit both the public and private sleeves of the portfolio. As the public equity portion of the portfolio is weighted towards the consumer discretionary sector, which is sensitive not only to consumer confidence, but also to interest rate sentiment, this is expected to be particularly beneficial. Furthermore, when clearer signs of a sustained economic recovery materialise and market sentiment improves, we believe that both small and mid-caps and the consumer sector should be amongst the first to re-rate. Our analysis shows that such market underperformance in the past by UK small and mid-cap companies has usually been followed by outperformance over three to five-year periods relative to companies in the FTSE 100.

The Company's differentiated public-private equity strategy enables us to invest without boundaries, providing access to a broad investable universe. British companies are trading on higher free cash flow yields than those available in many other developed markets, making investing in the UK a compelling investment opportunity. The Board is confident that the Schroder British Opportunities Trust investor will be well rewarded. 

[1] Source: Schroders, Morningstar, Aladdin. Rankings are based on the performance of the public equity portion of the Company (excluding cash). The IA UK Smaller Companies peer group median average ongoing charge (0.90%) was applied to the Company's public equity gross performance and compared against the IA UK Smaller Companies peer group (net of fees).

Enquiries:

Schroder Investment Management Limited Katherine Fyfe (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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