Montanaro UK Smaller Companies Investment Trust PLC · LSE:MTU

Montanaro UK Smaller Companies Investment Trust — UK Smaller Companies Investment Trust (MUSCIT) — Shareholder Meeting (July 2018)

21 slides from Montanaro UK Smaller Companies Investment Trust's shareholder meeting presentation, Jul 18, 2018

  1. Slide 1: UK Smaller Companies Investment Trust (MUSCIT) AGM Presentation

    UK Smaller Companies Investment Trust (“MUSCIT”) AGM Presentation 18 July 2018 Montanaro Asset Management Ltd 53 Threadneedle Street, London EC2R 8AR www.montanaro.co.uk enquiries@montanaro.co.uk Tel: +44 (0)20 7448 8600 Follow us on Twitter: @MontanaroAM Blog: http://www.montanaro.co.uk/blog

  2. Slide 2: What is a "Montanaro" company?

    30 June 2018 unless stated otherwise What is a “Montanaro” company? 1. Simple business we can understand 2. Niche business in a growth market 3. Market leader 4. Business with high operating margins 5. Profitable company at a sensible valuation 6. Good management we trust Source: Montanaro. 1

  3. Slide 3: Top 20 holdings

    30 June 2018 unless stated otherwise Top 20 holdings Company Country % Company Country % Hilton Food UK 3.2% Rathbone Brothers UK 2.5% Big Yellow UK 3.1% 4Imprint UK 2.5% Cranswick UK 3.0% Polypipe UK 2.5% Dechra Pharmaceuticals UK 2.9% GB UK 2.3% Entertainment One UK 2.9% FDM UK 2.3% Consort Medica

  4. Slide 4: A high quality portfolio

    30 June 2018 unless stated otherwise A high quality portfolio Portfolio Characteristics Risk Portfolio Benchmark Portfolio Benchmark # Stocks 54 344 Beta* 1.09 1.00 Weighted Market Cap £1.1b £889m Standard Deviation* 12.5% 10.4% EBIT Margin (19F) 19% 18% Tracking Error* 5.3% n/a RoE (19F) 15% 12% Ne

  5. Slide 5: Offering higher EPS growth than the market

    30 June 2018 unless stated otherwise … offering higher EPS growth than the market Growth (2019F) Valuation (2019F) Portfolio Benchmark Portfolio Benchmark Sales Growth 7.1% 4.7% P/E 18.0 12.2 EPS Growth 11.7% 9.9% P/E Premium v. Index 48% n/a DPS Growth 8.8% 8.7% Source: Montanaro, Factset, Bloomber

  6. Slide 6: MUSCIT typically delivers higher EPS growth

    30 June 2018 unless stated otherwise MUSCIT typically delivers higher EPS growth EPS Growth 20% 18% MUSCIT NSCI ex-IC index 15% 14% 13% 11% 12% 10% 9.3% 10% 9% 8% 7% 6% 6% 5% 5% 2% 1.7% 0% -1% -1% -5% -3% -3% -10% -9% -15% 2011 2012 2013 2014 2015 2016 2017 2018e 2019e CAGR Source: Montanaro, Factse

  7. Slide 7: A good start to FY19 after a strong FY18 (+5% vs index)

    30 June 2018 unless stated otherwise A good start to FY19 after a strong FY18 (+5% vs index) Annual Returns to June 2018 UK Small Cap Montanaro NAV Composite (ex Relative ICs) (£)*** 3 Months 7.8% 4.9% 2.9% 6 Months -0.4% -2.7% 2.3% 1 Year 11.0% 4.7% 6.3% 3 Years 7.2% 6.0% 1.1% 5 Years 7.8% 8.4% -0.

  8. Slide 8: Relative outperformance of 4.4% p.a. over 23 years

    30 June 2018 unless stated otherwise Relative outperformance of 4.4% p.a. over 23 years MUSCIT v. Benchmark - Relative Returns per Calendar Year (NAV) 35% Dash-for- Dash-for- 29% Dash-for- 30% Trash Trash Trash 25% 20% 17% 17% 16% 14% 15% 13% 13% 12% 12% 10% 8% 9% 7% 4% 4.4% 5% 2% 2% 0% -1% -5% -3%

  9. Slide 9: The recent underperformance appears to be coming to an end

    30 June 2018 unless stated otherwise The recent underperformance appears to be coming to an end 5-Year rolling relative performance of MUSCIT v. NSCI ex-ICs CM Handover CM Back 7% 5% 3% 1% -0.6% -1% -3% -5% 01' 02' 03' 04' 05' 06' 07' 08' 09' 10' 11' 12' 13' 14' 15' 16' 17' Source: Montanaro, Bloomb

  10. Slide 10: Absolute returns since launch more than double the All-Share

    30 June 2018 unless stated otherwise Absolute returns since launch more than double the All-Share MUSCIT - Absolute NAV Returns per Calendar Year 80% 66% 60% 43% 43% MUSCIT 40% 32% 28% 28% 24% 23% 21% 25% FTSE All- 14% 14% Share 20% 14% 8% 8% 8.9% 4.4% 0% 0% -5% -6% -3% -7% -7% -20% -19% -40% -32% -

  11. Slide 11: Over almost all 5-year periods MUSCIT produced positive returns

    30 June 2018 unless stated otherwise Over almost all 5-year periods MUSCIT produced positive returns MUSCIT - 5-year rolling NAV return (annualised) 30% 25% 20% 15% 10% 7.8% 5% 0% -5% -10% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: Montanaro, Bloomberg. 10

  12. Slide 12: MUSCIT has performed well since launch

    30 June 2018 unless stated otherwise MUSCIT has performed well since launch Cumulative Returns since MUSCIT launch (31 Mar 1995 - 30 Jun 2018) 800 8.9% p.a. 700 MUSCIT Benchmark 600 FTSE All-Share 500 400 300 4.5% p.a. 4.4% p.a. 200 100 0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 1

  13. Slide 13: The last 18 months have been busy

    30 June 2018 unless stated otherwise The last 18 months have been busy 1. April 2017 - we cut our Management Fee from 0.85% p.a. to 0.50% p.a.: - in addition to other cost savings (gearing, new Company Secretary, new Broker) - Ongoing Charge has fallen to 0.8% from 1.2% (down one third) 2. July 2017

  14. Slide 14: Outlook: Global economic growth continues to gain momentum

    30 June 2018 unless stated otherwise Outlook: Global economic growth continues to gain momentum WORLD Real GDP Growth Consensus Forecast (2018e) 3.9% 3.8% 3.8% 3.7% 3.6% 3.5% 3.4% 3.3% 3.2% 3.1% 3.0% Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Ju

  15. Slide 15: US & Europe are firing on all cylinders (UK is lagging)

    30 June 2018 unless stated otherwise … as the US & Europe are firing on all cylinders (UK is lagging) Rea l GDP Growth Consensus Forecast (2018e) 3.0% June 2016: UK 2.9% Brexit 2.8% Euro Area 2.6% US 2.4% 2.4% 2.2% 2.0% 1.8% 1.6% 1.4% 1.3% 1.2% 1.0% Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 A

  16. Slide 16: SmallCap is trading in line with its long-term average P/E

    30 June 2018 unless stated otherwise SmallCap is trading in line with its long-term average P/E UK SmallCap - NSCI ex-ITs - 12-month trailing P/E 20 19 18 17 16 15 14 Median = 13.5x 13.9x 13 12 11 10 9 8 7 6 5 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

  17. Slide 17: Plenty of profit warnings nowadays – it pays to stick to Quality

    30 June 2018 unless stated otherwise Plenty of profit warnings nowadays – it pays to stick to Quality Source: Montanaro, EY. 16

  18. Slide 18: Gearing - just over 4%

    30 June 2018 unless stated otherwise Gearing - just over 4% MUSCIT Gearing 14% 2016 = 10.1% 12% 10% 2014 = 7.6% 8% 2015 = 6.6% 2012 = 4.8% 6% 4% 4.1% 2013 = 2.3% 2% 2017 = 3.6% 0% 11 12 13 14 15 16 17 Source: Montanaro. 17

  19. Slide 19: The discount is above its long-term average – good entry point

    30 June 2018 unless stated otherwise The discount is above its long-term average  good entry point -5% -10% Average = -16% -15% -20% -22% -25% Buybacks Buybacks (May – Jul 04) (Sep 01) Buybacks Buybacks (Aug 03) (Dec 07 – Jul 08) -30% 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Sour

  20. Slide 20: Summary

    30 June 2018 unless stated otherwise Summary 1. Back in the saddle after a disappointing period - outperformed by 5% last year 2. The portfolio has been refreshed (more AIM) 3. Fees / costs have been cut 4. Good long-term track record: - 4.4% p.a. outperformance over 23 years - the sixth most consis

  21. Slide 21: Disclaimer

    30 June 2018 unless stated otherwise Disclaimer Important Notice This document is issued by Montanaro Asset Management Limited (“MAM”) for distribution only to persons of the kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995, or of

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