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(Alliance News) - Montanaro UK Smaller Cos Investment Trust PLC on Friday said net asset value edged upwards in the first half of its financial year, as it revealed that tax hikes announced in the recent UK government budget were "less severe than feared".
The London-based trust, which is managed by Montanaro Asset Management Ltd, invests in profitable companies with smaller market capitalisations on the London Stock Exchange and AIM.
In the six months ended September 30, the investment trust got a 4.2% increase in NAV, whilst its benchmark the NSCI returned 11% over the same period.
NAV per share also underperformed the benchmark, growing by 2.6% to 121.6 pence at September 30 from 118.0p at March 31. The share price return in the six months was slightly better at 7.3%.
Montanaro UK Smaller Cos shares were up 0.7% at 104.77p on Friday morning in London.
Starting in 2025, the company will pay a regular quarterly dividend equivalent to 1.5% of its NAV, up from the 1% implemented in 2018 as it said that "the interest rate environment has changed considerably".
The firm cited the continuance in underperformance of AIM as a partial determinant of its performance, with the junior market lagging London Main Market small caps by 8% during the recent half year.
Montanaro UK Smaller Cos also said the six months posed challenges for growth managers, as small cap growth stocks underperformed small cap value stocks by more than 7%.
Montanaro Asset Management Chair & Founder Charles Montanaro said: "While some assume that the summer months are a quieter time for stock markets, with fund managers escaping to sunnier destinations, this is not the case for us. After reducing our AIM exposure through the sale of YouGov [PLC] and Judges Scientific [PLC], we have been actively seeking new investment opportunities.
"As we write these lines, the much-anticipated Budget announcement has come and gone. Despite a range of tax increases - including those on capital gains, National Insurance and Inheritance Tax on AIM - the changes were less severe than feared, and we believe smaller companies will adapt.
"It feels as though the headwinds of the past three years are finally easing. Disinflation is taking hold, political uncertainties have subsided and M&A activity is picking up. Small cap as a whole has outperformed large cap over the past six and twelve months, suggesting that the worst may indeed be behind us."
By Christopher Ward, Alliance News reporter
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