Montanaro UK Smaller Companies Investment Trust PLC (MTU) has published its half-yearly report for the six months to 30 September 2026, revealing a net asset value total return of 22.6%, ahead of its benchmark, the NSCI, which returned 19.3%. The trust's share price total return reached 23.9% over the period, while the discount to NAV narrowed from 6.2% to 5.5%. Gross assets rose to £141.8 million from £124.6 million at the prior year end, as stock selection across a 56-company portfolio of quoted UK smaller companies drove the outperformance.

Key Points

  • Montanaro UK Smaller Companies Investment Trust PLC (MTU)
  • NAV total return of 22.6% for the six months to 30 September 2026 outpaced the NSCI benchmark return of 19.3%
  • NAV per share rose to 119.06p from 99.90p; gross assets increased to £141.8m; discount narrowed to 5.5%; ongoing charges held at 1.0%
  • Investors may be watching whether the discount remains within single digits and how gilt yield movements affect quality-growth valuations in the second half

NAV Climbs to 119.06p as Stock Selection Drives Outperformance Against the NSCI

The trust's NAV per ordinary share rose to 119.06p at 30 September 2026 from 99.90p at 31 March 2026, a 19.2% increase on a capital basis. Net assets reached £131.8 million, up from £114.6 million, while market capitalisation advanced to £124.5 million from £107.4 million. The managers noted that roughly two-thirds of portfolio risk is stock-specific, consistent with the trust's bottom-up approach. Net gearing fell to 1.7% from 3.3%, and ongoing charges remained flat at 1.0%. Portfolio turnover declined sharply to 30.0% from 60.2% at the prior year end, reflecting reduced trading activity during the period.

XP Power Recovery and Beauty Tech Group More Than Doubling Lead Individual Stock Contributors

The managers highlighted XP Power as a key contributor following a sharp rise in order intake, while The Beauty Tech Group, which invests in professional-grade home beauty devices, more than doubled from its IPO price since the trust invested last October. Kainos upgraded profit expectations on a record order backlog. Conversely, Cerillion detracted after concerns over AI disruption to software and an order booking delay, though the managers describe this as a timing issue. Six new holdings were added during the period, including Gooch & Housego, Avon Technologies, Bioventix, Sabre Insurance, Anpario, and Fonix, a capital-light mobile payments business.

Takeover Bids for Animal Care, Gooch & Housego and Gamma Communications Highlight SmallCap Valuation Gap

Takeover activity during the period illustrated what the managers describe as a disconnect between public market valuations and private or trade buyer assessments. Animal Care received a bid at a 36% premium, Gooch & Housego was acquired within a quarter of the trust purchasing it, and Gamma Communications agreed a recommended cash offer from Epiris valuing the business at approximately £1 billion. Ashtead Technology has also been approached. The announcement states that trade and private equity buyers are paying for earnings power that the public market has yet to fully recognise, a theme the managers view as central to the SmallCap opportunity.

Board Buybacks Narrow Discount as Gilt Yields and Domestic Politics Remain Key Risks

The board repurchased 4,043,365 ordinary shares during the half year, representing 3.5% of the issued share capital at the period start, at an average discount of 5.4%, an improvement on the 8.4% average recorded for the prior full year. A further 528,486 shares were repurchased after the period end. The managers identify elevated gilt yields — which the announcement notes reached their highest level since 2007 — and domestic political uncertainty as the principal near-term risks. However, the announcement states that almost half of portfolio companies hold net cash, providing a degree of resilience against tighter financing conditions.