Interim Management Statement
April 27 2010 - 11:37AM
UK Regulatory
TIDMGGOR
GARTMORE GROWTH OPPORTUNITIES plc
Interim Management Statement (unaudited)
In the quarter to 31 March 2010 the Company's Net Asset Value per Ordinary
share increased by 2.2% to 522.10 pence per share, outperforming the benchmark
FTSE SmallCap (ex investment companies) Index which increased 1.1%.
Market Environment
The first weeks of 2010 brought the welcome news that the UK economy had
finally emerged from recession in the final quarter of 2009. Although the
lacklustre 0.1% increase initially disappointed the market, there have since
been two upwards revisions that put it in line with the market's original
forecast of 0.4%. Further afield, concerns surrounding the weight of debt
carried on national balance sheets, (particularly Greece) raised market risk
premia, and this persisted into February. However, volatility has dropped again
subsequently and during March the VIX volatility index reached its lowest
levels since May 2008.
The 1.1% increase in the FTSE Smaller Companies (excluding Investment
Companies) Index over the first quarter was not enough to reverse the decline
over the final months of 2009 and other capitalisation ranges generally fared
better over the period. The FTSE AIM All-Share Index gained 7.5% and both
lagged mid caps.
Investment Strategy
The Company's outperformance of its benchmark in the quarter was in part due to
its exposure to AIM-listed micro-cap companies. Amongst our overweight
positions in benchmark constituents, the strongest result came from Nestor
Healthcare, which delivered strong gains after receiving broker upgrades. The
provider of staffing solutions to the health and social care market reported a
drop in full-year profit, but a positive outlook for 2010 boosted the share
price and significant director acquisitions lent additional support. However,
relative to the index, the greatest contribution to outperformance was provided
by poorly performing index constituents that were not represented in the
portfolio. For example, Antisoma, a pharmaceutical company, fell by more than
75% over the quarter after reporting that one of its biggest hopes for
commercial development, a lung cancer drug, had failed to perform in late-stage
clinical trials. Other poor performers in the index, but not held, included
Spice, Mouchel Group, and Vectura Group. Similarly, we had a lower weighting
than the index in Intec Telecom, which declined sharply at the end of March
upon delivering a negative trading update and warning of lower profits.
The largest detractor from performance was our overweight holding in BATM
Advanced Communications, which fell in February after reporting a 22% drop in
full-year pretax profit (which was expected), accompanied by small downgrades
as the pace of growth in the emerging medical division dilutes the group margin
in the short term.
As one of our largest positions, the set-top box maker Pace also detracted with
a fall in its share price in January in the absence of an earnings upgrade. We
believe the investment case remains strong - Pace is still an attractive
company with a compelling valuation.
Investment Outlook
The increased appetite for risk assets over the first quarter is a positive
step towards market recognition of the attractions of the small-cap asset
class. The small-cap space has been neglected by institutional investors for
some time now, in favour of larger companies that had benefited from the easy
supply of credit that has now been withdrawn. We also expect attention to be
refocused on small- and micro-caps if the trend for initiating, reinstating and
growing dividends gathers momentum. With investors short of opportunities to
maintain income streams, smaller companies that can produce good and growing
dividends should receive greater attention from those seeking yield but also
seeking diversification. As more institutional investors take notice of
small-caps, we expect to see the "small-cap effect" gain further recognition
and the gap between market perceptions and business realities narrow, to the
advantage of stock-focused investors such as ourselves.
The weakness in sterling also raises the prospect of foreign investors taking a
greater interest in takeovers of UK enterprises and indeed through the first
quarter there has been an increase in corporate activity. Should this trend
persist then it can be expected to benefit the small-cap asset class and we
will be on the lookout for opportunities to profit from this.
10 Largest Investments at 31 March 2010:
% of
Company Market Value Portfolio
GBP'000 Value
Pace 2,213 3.6
Penna Consulting 2,025 3.3
BATM Advanced Communications 1,958 3.2
Juridica Investments 1,167 1.9
Nestor Healthcare 1,142 1.9
Innovation Group 1,049 1.7
Management Consulting Group 966 1.6
Lavendon Group 901 1.5
Collins Stewart 890 1.4
Marylebone Warwick 9.75% 30/06/2012 888 1.4
.
Sector Breakdown at 31 March 2010:
% of
Portfolio
Value
Industrials 29.2
Technology 19.7
Financials 16.1
Consumer Services 9.7
Health Care 7.6
Basic Materials 5.3
Oil & Gas 4.8
Consumer Goods 4.1
Utilities 0.9
Telecommunications 0.3
Fixed Interest 2.3
.
Financial Position: As at As at
31.03.10 31.12.09
(Unaudited) (Unaudited)
GBPm GBPm
Company's portfolio of Investments 59.0 62.5
Subsidiary's investments held for 2.6 1.7
trading
Net current assets/(liabilities) - -
(excluding short-term gearing)
----- -----
61.6 64.2
Management Shares - -
Bank loan (0.6) (4.4)
----- -----
Net Assets attributable to Ordinary 61.0 59.8
shares
===== =====
616,976 Ordinary shares were redeemed in April 2010 leaving 11,073,864 shares
in issue.
.
Performance:*
At 3 months 1 year 3 years 5 years 10 years
31.03.10
Net Asset Value per 522.1p +2.2% +75.0% +24.6% +53.8% +74.2%
Ordinary share
FTSE SmallCap (ex +1.1% +63.1% -40.1% -18.6% -28.8%
investment companies) Index
Share Price - Ordinary 501.5p +3.8% +93.3% +23.1% +58.5% +119.0%
Shares
Discount 4%
*Source: Thomson Reuters Datastream/Gartmore.
.
Price and Performance Information:
The Company's Ordinary shares are listed on the London Stock Exchange and the
prices are published in the Financial Times under `Investment Companies'.
Real-time share price information is available on 09058 171 690. BT land line
calls are charged at 75p per minute at all times.
The Company's Net Asset Value is calculated daily and can be viewed on the
London Stock Exchange website at http://www.londonstockexchange.com and via a
link from the Gartmore web site at http://www.gartmore.co.uk .
Information on the Company is available on the Gartmore internet site, http://
www.gartmore.co.uk. The Company's discrete area on the site can be accessed via
the "Fund range" menu or directly using http://www.gartmoregrowthopps.co.uk or
http://www.gartmoregrowthopps.com. This information includes the latest annual
and interim reports, fact sheets and corporate governance documents such as
committee terms of reference that can be downloaded, together with access to
the latest regulatory news announcements and net asset values.
Further information can be obtained from Gartmore as follows:
Free investor helpline: 0800-289 336
Internet address: http://www.gartmore.co.uk
email address: helpline@gartmore.com
.
Gartmore Investment Limited
Secretary
27 April 2010
END
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