Schroders PLC · LSE:SDR
Schroders — Schroder UK Mid Cap Fund — Investor Presentation (January 2024)
39 slides from Schroders's investor presentation, January 2024
Slide 1: Schroder UK Mid Cap Fund plc
Schroder UK Mid Cap Fund plc Jean Roche, CFA Fund Manager Marketing material
Slide 2: 2023 performance
2023 performance +4.0% vs index and record dividend Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. ¹Source: Schroders, Morningsta
Slide 3: Dividend growth: SCP dividend 2004 to 2023
Schroder UK Mid Cap Fund plc SCP Dividend 2004 to 2023 CAGR* 13.0% Times bigger (x) 10.3x Inflation-beating dividend growth continues Pint of beer price 3.9% 2.1x Pint of milk price 3.4% 1.9x House Prices 3.4% 1.9x Past performance is not a guide to future performance and may not be repeated. Annual
Slide 4: Performance attribution – months to September 2023
Schroder UK Mid Cap Fund plc Performance attribution – 12 months to 30 September 2023 Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally inves
Slide 5: UK Mid-caps and 'Domestics' led the rally in Q4
UK Mid-caps, and ‘Domestics’ led the rally in Q4 …beating the returns of the MSCI World index Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originall
Slide 6: Valuation ranges – UK mid caps available at a discount
Valuation ranges – UK mid caps available at a discount Despite small rally, we see current valuation as attractive vs the global set 22 20 vs. Schroder UK Mid Cap plc holdings’ 2024E median p/e*: 12.0x 18 18.1 16 15.9 15.3 14 14.2 14.0 13.3 12.5 12.5 12 10 8 USA Small Mid World Small AC World Small
Slide 7: Fund summary
Fund summary Schroder UK Mid Cap Fund plc Key numbers¹: Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the Net Assets: £225.3m amount originally invested. Discou
Slide 8: Appendix
SCHRODER UK MID CAP FUND PLC – AGM 2024 Appendix
Slide 9: Introduction to Schroders' UK Small and Mid Cap Team
Introduction to Schroders’ UK Small and Mid Cap Team Bringing different skills to the party Jean Roche Andy Brough James Goodman Fund Manager Fund Manager Fund Manager 25 years’ experience in UK Managed UK Small & CFA Charterholder with 9 Small and Mid Caps. Jean Mid cap Funds for over years’ experi
Slide 10: 2023 – UK Buybacks continue to keep step with US
2023 – UK Buybacks continue to keep step with US And well ahead of large companies in other regions Proportion of large companies which reduced their number of shares by at least 1% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% MSCI USA MSCI UK MSCI Japan MSCI France MSCI Germany MSCI EM 2017−2019 avera
Slide 11: Step change in UK Mid Cap companies buying back shares
Step change in UK Mid Cap companies buying back shares Many cash rich UK Mid Cap companies funding growth and returns Proportion of UK companies which reduced their number of shares by at least 1%, 2010-2023 35% 30% 25% 20% 15% 10% 5% 0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 20
Slide 12: Why invest in Mid 250? SMIDs more likely to be acquired
Why invest in Mid 250? SMIDs are more likely to be acquired than large caps Value of completed acquisitions as percentage of index starting market capitalisation 16% 14% 12% 10% 8% 6% 4% 2% 0% '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 FTSE 100 FTSE 250 Small Cap Sou
Slide 13: UK Mid Cap Equities: categorising our investment universe
UK Mid Cap Equities Categorising our investment universe How we characterise stocks… …resulting in a portfolio of Characteristics of Characteristics of Characteristics of Unique stocks Flex stocks Stocks to avoid – Industry undergoing – Market position/pricing – Industry overcapacity change, for exa
Slide 14: Example of a Unique stock
Example of a Unique stock Games Workshop Characteristics we look for Games Workshop ticking the boxes Share price (indexed to 100) Strong market position/pricing power Warhammer = “Heroin for middle class nerds”1 450 400 Very strong business franchise Rich intellectual property – over 350 Warhammer
Slide 15: Example of a Flex stock
Example of a Flex stock Grafton Characteristics we look for Grafton ticking the boxes Share price (indexed to 100) 170 Industry undergoing change Top 3 UK merchants have flat to declining asset growth and asset sales 160 150 Company undergoing change International diversification – 50% of operating
Slide 16: Investment process
Investment process The selling part Promotion to the FTSE 100 Increases Frequent or in industry expensive capacity acquisitions 100 Deterioration in Investment Sell ESG behaviours/ thesis questions around played out sustainability discipline Company Quality of acquired accounting Valuation – Failing
Slide 17: Purchases and sales
Schroder UK Mid Cap Fund plc Purchases and sales New holdings The opportunity Complete sales Rationale Britvic Strong brands driving pricing power 888 Holdings Badly timed William Hill deal Harbour Energy Transformational deal to deliver geographic diversity Ascential Thesis played out Exposure to e
Slide 18: Industry positions
Schroder UK Mid Cap Fund plc Industry positions As at 30 December 2023 Portfolio (%) Benchmark1 (%) Underweight Overweight Industrials 33.9 21.8 12.1% Telecommunications 4.6 1.1 3.5% Basic Materials 6.4 4.0 2.4% Health Care 4.1 1.8 2.4% Consumer Staples 6.9 5.5 1.3% Consumer Discretionary 22.6 21.8
Slide 19: Long-term trend of outperformance
Schroder UK Mid Cap Fund plc Long-term trend of outperformance Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Cumulative perform
Slide 20: Performance attribution – months to December 2023
Schroder UK Mid Cap Fund plc Performance attribution – 12 months to 31 December 2023 Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invest
Slide 21: Calendar year performance
Schroder UK Mid Cap Fund plc Calendar year performance Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Performance % 2023 2022 20
Slide 22: Where did the returns come from? 2023 vs 2022
Where did the returns come from? 2023 vs 2022 De-rating of 2022 partially caught up, but further to go Return decomposition, 31/12/2021 to 30/09/2022 Return decomposition, 30/09/2022 to 30/09/2023 % ,GBP % ,GBP 20% 20% 17.5% 10% 7.9% 6.2% 15% 13.6% 0.1% 1.6% 1.9% 12.2% 11.3% 0% -0.2% 10% -10% 5% 3.7
Slide 23: No respite for allocations to UK equities, generally
No respite for allocations to UK equities, generally No one likes us (we don't care) Net % of FMS investors overweight UK equities Absolute net % overweight (by asset class) FMS allocation to UK equities was down 7ppt Month on month to net 29% underweight. This chart shows FMS absolute investor posi
Slide 24: Macro reasons to be cheerful
Macro reasons to be cheerful UK Mid-Caps are inflation sensitive Consumer price inflation UK interest rates Median forecaster expects a 100bp cut in 2024, followed by another 100bp in 2025 Past performance is not a guide to future performance and may not be repeated. Source: Refinitiv Workspace, Oct
Slide 25: UK consumer strength
UK consumer strength It DOES makes sense m/m 0.8% 0.6% The ingredients of the UK’s recent (November) GDP “beat” – services (c.80% of UK economy) 0.4% 0.2% 0.0% -0.2% -0.4% -0.6% Apr 23 May 23 Jun 23 Jul 23 Aug 23 Sep 23 Oct 23 Nov 23 Agriculture Production Construction Services GDP Source: Resolutio
Slide 26: Why invest in Mid 250? Heineken Index
Why invest in Mid 250? We know it as the Heineken Index Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested. Constantly refreshed by A
Slide 27: FTSE 250 vs FTSE 100 relative dividend yield
FTSE 250 vs FTSE 100 relative dividend yield Creating significant income opportunities in attractively valued mid cap companies 1.4 1.3 Global Financial Crisis 1.2 1.1 1 Brexit 0.9 Dot com bubble 0.8 0.7 0.6 0.5 0.4 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Slide 28: Long term Mid 250 outperformance
Long term Mid 250 outperformance …of most developed market indices over the last 25 years FTSE 250 ex Investment Trusts vs Large developed markets, Total Return¹, % 1000 900 800 700 600 500 400 300 200 100 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20
Slide 29: Hunting for '30 baggers' – how the UK beat the US
Hunting for ‘30 baggers’ – how the UK beat the US Some of these 30-baggers help to explain the Mid 250’s strong track record UK USA Total stocks 1,095 vs. Total stocks 5,654 No. of stocks No. of stocks 59 236 with 30x return with 30x return Used Bloomberg to screen for companies that – Returned 30x
Slide 30: UK 30 Baggers Class of 2022: Who are they?
UK 30 Baggers Class of 2022: Who are they? A selection of the UK’s 65 ‘30 baggers’ in the 30 years to 28 November 2022 (>12% CAGR), all past or present holdings in Schroder UK Mid Cap Plc For illustrative purposes only and should not be viewed as a recommendation to buy or sell. Schroders has expres
Slide 31: Portfolio positioning
Schroder UK Mid Cap Fund plc Portfolio positioning Top 20 overweight holdings Weight difference % Its business Stock concentration % Dunelm 3.4 Homewares retailer Top 10 holdings 36.5 Computacenter 3.1 IT infrastructure services Top 20 holdings 63.4 Telecom Plus 3.0 Multiline utilities Inchcape 2.9
Slide 32: Gearing
Schroder UK Mid Cap Fund plc Gearing, % 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 (2.0) (4.0) (6.0) (8.0) Source: Schroders, 30 September 2009 to 31 December 2023. Gearing is the ratio of a company's debt-to-equity. Gearing shows the ext
Slide 33: Discount appears to be sentiment rather than performance driven
Schroder UK Mid Cap Fund plc Discount appears to be sentiment rather than performance driven Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originall
Slide 34: We are active: some of our 1-1 company engagements in 2023
We are active: some of our 1-1 company engagements in 2023 As a matter of process, we engage fully on sustainability matters with UK companies For illustrative purposes only and should not be viewed as a recommendation to buy or sell. Climate Governance & Oversight Environment Human Capital Manageme
Slide 35: Generative AI at Schroders: Introduction
Generative AI at Schroders Introduction Use case examples (indicative only) Internal search Repurposing Automating Image e.g. policies content compliance generation checks Querying legal Translation documents Reviewing Drafting Drafting emails contracts / marketing Improving clauses content reportin
Slide 36: Generative AI at Schroders: Genie
Generative AI at Schroders Genie Started Alpha Pilot Global Ongoing Genie is Schroders’ AI assistant, enabling our employees to use AI in building (10 users) 300 users launch development their day-to-day roles. Feb 2023 March 2023 April 2023 May 2023 H2 2023 It can support a variety of natural langu
Slide 37: Important information
Important information Marketing material. This document does not constitute an offer to anyone, or a solicitation by anyone, to subscribe for shares of Schroder International Selection Fund (the “Company”). Nothing in this document should be construed as advice and is therefore not a recommendation
Slide 38: Important information
Important information Schroder UK Mid Cap Fund plc risk considerations: The trust Invests in smaller companies that may be less liquid than larger companies and price swings may therefore be greater than investment trusts that invest in larger companies. The trust will invest solely in the companies
Slide 39: Thank you
SCHRODER UK MID CAP FUND PLC THANK YOU
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