13th Dec 2019 11:44
(Alliance News) - Miton UK MicroCap Trust PLC on Friday said its net asset value per share declined in the first half of its year, attributed to the particular strain of Brexit on smaller stocks, with Nanoco Group PLC its worst performer.
Shares in Miton UK MicroCap were up 5.3% at 51.17 pence in London in late morning trading.
The venture capital trust's NAV per share as at October 31 was 48.92p per share, down 13% from 56.13p at the end of April.
Miton UK MicroCap invests in firms with a typical market capitalisation of less than GBP150 million at time of investment, a group that has suffered particularly in the face of Brexit due to limited market liquidity.
Gervais Williams and Martin Turner, Miton UK MicroCap's investment managers, said: "Brexit anxiety subdued smallcap buyers, and hence the FTSE Smallcap Index excluding investment companies fell 5.9% and the AIM All-Share Index fell 8.2%. Generally, microcap share prices fell somewhat further, in part because their market liquidity is more limited as a result, the NAV of the trust fell 13% over the six months to October."
In terms of individual holdings, its weakest performance was from Nanoco, which manufactures cadmium-free quantum dots. This weakness was due to the fact that Nanoco's largest prospective customer will not be using its new factory, despite having paid for all the new machinery. Given the unlikelihood of Nanoco generating significant cash in the next few years, Miton UK MicroCap sold its stake.
Chair Andy Pomfret said: "As global growth falls back to pre-globalisation norms, we believe that a quoted microcap approach is advantageous. When economic conditions are challenging, the management agility that many microcaps demonstrate is important. Importantly, since acquisitions or mergers can turn out to be transformational, microcaps have a history of delivering much greater returns than those of the mainstream indices.
"In summary, the growth prospects for the UK economy may be no better than others. Importantly and uniquely, the UK stock market contrasts with others in that it has retained a vibrant universe of quoted microcaps over the period of globalisation. In a slow-growth world, the trust's microcap strategy is particularly well-placed to deliver premium returns. Furthermore, since we believe that UK microcaps themselves are overdue a period of major performance catch-up, we consider that the Trust has the potential for strong prospects over both the short and the longer term."
By Anna Farley; [email protected]
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