TIDMSBO
Schroder British Opportunities Tst.
06 December 2023
Schroder British Opportunities (SBO)
06/12/2023
Results analysis from Kepler Trust Intelligence
Schroder British Opportunities (SBO) has released its interim
management report for the six months to 30/09/2023. Over the
period, the trust saw a NAV decrease of 2.5% on a total return
basis.
The trust has a combination of unquoted and publicly listed
companies. At the end of the period, the portfolio consisted of
nine private companies, totalling 65% of NAV and 23 public
companies making up 27% of NAV.
The private investments rose by an aggregate 2.9%, having
delivered a positive return in every quarter since inception.
Public equities fell by 4.9% due in part to a bias to small and
medium-sized companies. The discount narrow from 36% to 30% in the
period. In the post statement period SBO's NAV rose 4.7% driven
mostly by the public equity holdings including some M&A
activity.
Cash levels rose to 10.5% following corporate activity. This is
reserved to take advantage of a pipeline of opportunities. There is
no gearing.
When discussing the private equities, Chairman Neil England
said: "the companies we have invested in have generally shown
robust revenue growth and continue to increase market share" and
struck an optimistic outlook, noting: "the patient shareholder will
benefit when market sentiment changes and the value and quality of
the underlying portfolio becomes appreciated".
Kepler View
Schroder British Opportunities (SBO) owns a blend of small and
medium-sized private and public equities. We believe this affords
the four-strong management the flexibility to identify and access
the best growth potential, whether a company be quoted or
unquoted.
In the report period, the private holdings led performance, with
four of the top five positive contributors unquoted. The managers'
focus on the growth capital and buyout spaces of the sector has
contributed to this. Valuations have been driven by strong trading,
transactional activity and both organic and inorganic growth. These
were partially offset by multiple contraction to the portfolio
which we understand reflects the lower valuations seen in public
markets.
The public equity holdings have been a headwind due to the
portfolio's smaller company bias though since the period ended,
SBO's holdings have bounced back strongly, including through
M&A. We believe the macro headwinds have arguably eased
recently and as such, the outlook is looking brighter.
Portfolio activity has been limited. Keywords Studios was sold
due to concerns over the impact of artificial intelligence and City
Pub Group (CPC) was trimmed following a strong period. Post period
end, CPC was subsequently bid for, leading to an exiting of the
position.
Positive share price returns have led to a narrowing of SBO's
discount. However, we believe there is plenty of potential at the
current level. Furthermore, the NAV reflects weakness in the public
equities, implying the private equities are being discounted even
further. The managers highlight robust underlying performance, as
well as an improvement in markets post-statement as reasons to be
optimistic. If the broader outlook continues to improve, we believe
the current discount may prove an attractive entry point for
long-term investors.
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December 06, 2023 06:51 ET (11:51 GMT)
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