Schroder British Opportunities (SBO)
12/07/2024
Results analysis from Kepler Trust
Intelligence
Schroder British
Opportunities (SBO) has released its annual financial results for
the year ending 31/03/2024. Over the year, the trust saw its NAV
per share increase by 2.5% on a total return basis. This has
contributed to a NAV total return of 12.3% since inception in
2020.
NAV growth in the past year
has been primarily driven by performance in the private equity
portion of the portfolio. The focus on growth capital and buyout
has led to upwards fair value adjustments in valuations, leading to
a gain of 6.3% over the year.
The public equity portfolio
benefitted from the takeover of City Pub Group. Whilst beneficial,
this was not enough to offset the negative performance seen
elsewhere in the public equities.
The managers made commitments
to two unquoted holdings in the year, meaning NAV consisted of 65%
unquoted and 23.9% quoted holdings at year-end. In the period post
results, the trust announced an investment in HeadFirst, an
unquoted HR service provider for an undisclosed
amount.
Cash and cash equivalents
totalled £11.6m at year end, including uncalled capital
commitments.
The discount narrowed in the
year, from 36.2% to 27.8% as a result of share price
appreciation.
Chairman Neil England stated:
"The UK stock market represents one of the cheapest equity markets
in the world and the UK mid-cap sector looks particularly
attractive," adding, "inflation numbers are better which suggests a
more positive medium-term outlook for growth
companies."
Kepler
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Schroder British
Opportunities (SBO), managed by a four-strong team, owns a
portfolio of both public and private equities consisting
predominantly of UK companies. This portfolio will contain between
30 and 50 holdings, with a tilt towards mid-sized companies. The
ability to invest across both public and private offers flexibility
to identify the best growth opportunities regardless of
status.
SBO has delivered a year of
solid performance, having returned 2.5% in NAV terms. This has
predominantly come from the uplift in value of the private
equities, which increased by an aggregate of 6.3%. EasyPark was the
best performer partly as a result of an acquisition that will
expand the company's global reach. We believe this is a good
demonstration of the managers' expertise.
Despite some bright spot the
public equities were a drag on performance. The focus on mid-caps
and sector bias has meant their portfolio has had greater
sensitivity to macro factors. They believe that valuations are very
attractive and have the potential to recover.
The share price return was a
positive which the managers argue could be a sign that investors
are recognising the growing momentum in the portfolio. This has
contributed to the discount narrowing at year end. We believe this
discount could be attractive for long-term investors, especially in
the context of the portfolio composition, inferring an even wider
discount on the private equities.
The managers made two
additions to private holdings in the period and sold three public
equities. This has resulted in nine unquoted holdings totaling 65%
of NAV, and 21 quoted holdings totaling 24%. Since the period end,
the managers added one new unquoted holding. The managers believe
this demonstrates the opportunity set in private markets, despite
the negative sentiment.
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