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Fevertree helps power Standard Life Smaller Companies to another year of outperformance

Fevertree helps power Standard Life Smaller Companies to another year of outperformance – Standard Life Smaller Companies says that, for the year ended 30 June 2017, its diluted net asset value total return was 35.0%, compared with a total return of 29.1% for the Numis Smaller Companies ex Investment Companies Index. The share price total return, calculated on the same basis, was 38.9%.

The Board is recommending an unchanged final dividend of 5.20p (2016: 5.20p). If approved, the final dividend, together with the interim dividend of 1.50p paid in April, will give a total dividend for the year of 6.70p and will represent an increase of 1.52% on last year.

The fund underperformed in the first half of the financial year. The manager says that the immediate impact of the unexpected US election result election was negative. Investors reverted to “global macro” type, favouring recovery and commodities and de-emphasising quality, predictability and company fundamentals.

In terms of sector exposure the main positives were being heavy in Healthcare, Retailers and Food & Beverages while not holding any Oil & Gas stocks. The only real negative sector weightings were not owning Metals & Mining stocks and being underweight in Support Services.

There was no bid activity for any of the holdings in the portfolio during the period.

Positive influences on relative performance

  • Fevertree Drinks. For the second year running Fevertree made the strongest contribution to performance as the premium gin revolution continues to be felt around the world. Consumers have been impressed by the quality and provenance of Fevertree’s products in comparison with erstwhile market leaders Schweppes and Britvic. Fevertree’s share price rose by 137% over the year.
  • NMC Healthcare. The Abu Dhabi based healthcare provider traded strongly as it continued to benefit from changes in the law in Dubai which now obliges companies to provide health cover for all their foreign workers. Some well-timed acquisitions expanded their reach by medical category and by geography within the Gulf region.
  • First Derivatives. The Newry based “big fast data” company gained significant traction in several new market verticals such as market research analytics, utilities analysis and aerospace. They are now on a solid path of earnings revisions momentum.
  • CVS Group. The company is the leading consolidator of Veterinary Surgery practices in the UK. They also own chains in the Netherlands. They are gaining economies of scale as they make earning enhancing acquisitions. The specialist surgical units and pet crematoria are also performing strongly.
  • Gamma Communications. The telecoms service provider to small & medium sized businesses continued to consistently beat expectations.
  • Other strong performers were Sanne Group, the specialist fund administrator, Medica, a new issue that provides radiologist services to the NHS, JD Sports Fashion, the branded footwear led retailer who is expanding rapidly into Continental Europe and Mattioli Woods, a wealth management and employee benefit services provider.

Negative influences on relative performance

The manager says that, again, it was Numis Index constituents that the fund didn’t own that were negative for performance. These were all Mining stocks – Vedanta Resources, the Indian copper producer, Ferrexpo, the Russian steel company, Kaz Minerals, the Kazakh copper producer and Evraz, another Russian steel producer were the biggest negatives. Domino’s Pizza (UK & Ireland) and EMIS in GP’s surgery software were weak throughout the year due to sub-par trading performances.

SLS : Fevertree helps power Standard Life Smaller Companies to another year of outperformance

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