Schroder British Opportunities (SBO)
09/12/2024
Results analysis from Kepler Trust
Intelligence
· Schroder British Opportunities (SBO)
released its interim results for the six months ending 30/09/2024
where the trust saw NAV per share decrease by 2.4% on a total
return basis.
· The management team can invest in both
private (unquoted) and public (quoted) equities. The unquoted
holdings make up the majority and are long-term investments. Over
the period, underlying performance was encouraging, leading to net
positives from company performance and valuations, although this
was offset by factors such as FX and transactional activity,
meaning the unquoted portfolio as a whole detracted 2.7% from NAV.
The portfolio is valued at 1.5x cost, despite the conservative
valuation approach.
·
There have been two new
private companies: Headfirst and Acturis, which was added post
results. Despite being relatively new, Headfirst has already
contributed positively to NAV.
· The Graphcore sale was completed in the
period at above the carrying value, arguably reflecting the
conservative valuation approach. At period end, the portfolio
consisted of nine private companies totalling 64% of NAV, with cash
of 9% of NAV.
· The public equity (quoted) portfolio was
broadly flat with some positive recoveries, somewhat offset by
weaker performers. There were two new quoted additions and one
disposal following an M&A approach. The quoted portfolio
consisted of 22 holdings totalling 27% of NAV.
·
The discount remained at
27.8% though the board has decided against share
buybacks.
·
It was announced that one of
the four strong management team is to retire in early
2025.
·
New Chairman Justin Ward
commentated on the operational performance of the portfolio, saying
"The current portfolio of innovative growth businesses is
performing well and the pipeline for attractive investment
opportunities remains strong".
Kepler
View
Schroder British
Opportunities (SBO) has released its half year results to the end
of September 2024. The period saw a significant change in
conditions, with falling inflation and lower interest rates which
has arguably improved the outlook for small and medium-sized
companies, potentially setting up the trust well for the second
half of its year.
Operating performance of the
private (unquoted) equities was encouraging, and helped drive an
uplift in NAV. A disposal at above carrying value could be seen as
an indication of the portfolio's potential in our opinion. These
were offset by transactional activity and FX to deliver an
aggregate -2.7% from NAV, however, we note this is short-term, and
likely reflective of a conservative valuation approach. The
managers remain positive on the outlook, and highlight the
aggregate unquoted portfolio at 1.5x cost price, which make up
nearly two-thirds of the portfolio and a key driver going
forward.
In the unquoted portfolio,
there was a new position in Headfirst, a HR tech service provider
which has already contributed positively to NAV. The quoted
equities saw new additions in Warpaint London and Forterra and one
disposal, and now total 22 holdings at a weight of 27% of
NAV.
The trust offers an
attractive, unique portfolio of predominately private growth
companies, with quoted holdings providing considerable flexibility.
We believe the current discount arguably hasn't adjusted for the
improving outlook for the asset class.
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