Companies: CSLT    CVSG    DTY   

Since Marina Bond took the helm from Carl Stick in 2005, the Rathbone Smaller Companies Fund has made steady progress and is currently valued at £41.5 million. According to Bond, the fund’s objective is to achieve growth in total returns from a portfolio of companies that when acquired will normally, but not necessarily, be capitalised at less than £500 million.

‘The fund predominantly invests in companies with a full listing on the London Stock Exchange or AIM,’ outlines Bond. ‘This is a total return stockpicking fund, exploiting opportunities at the smaller end of the market.

‘We have used market volatility to increase our exposure to those well-run companies with reliable earnings growth, while maintaining a healthy cash position for further opportunities.’

The qualities that Bond looks out for in prospective companies are a first-class management team, strategic market positions that give a business pricing power, and a presence in a growing market. She explains, ‘I don’t chase the latest investment fashion or market momentum. Valuation and cash-backed earnings are the key considerations. My aim is long-term, consistent performance, and I believe this is best achieved by focusing on quality.’

Acquisition trail
One such company would be consolidation play CVS Group, which acquires veterinary surgeries around the country and takes over the administrative operations of their business.

The surgery essentially stays the same, which reduces any potential conflict that could occur from process changes and means that clients keep the veterinary surgeons and nurses that they know.

CVS Group is the first business of its kind to be listed in London – its IPO on AIM valued the company at £105.7 million. Over the past eight years, the company has acquired 45 practices, consisting of 128 surgeries, and currently has a market cap of £123.75 million.

Consolidation opportunity
Bond explains, ‘A lot of the owner-operators in this market are reaching retirement age and finding that their children do not want to take their businesses on. CVS is using this as an opportunity to consolidate the veterinary market.’

Another of Bond’s favourites is £87 million Cosalt, an industrial stock on the Full List that has recently been restructured to concentrate on the international marine safety market. ‘Growth in this market is being fuelled by more stringent regulatory requirements, increased international trade and a buoyant offshore oil and gas industry,’ enthuses Bond. ‘The plan is to develop a global service business for the marine and offshore industry, with service centres at each of the major shipping and offshore hubs around the world.’

She adds, ‘Cosalt has a 60 per cent market share in the UK, and is number one in the EU. Its focus is now on Asia and the Far East - China is the fast-growing cargo ship builder and Cosalt has been operating there since the 1980s.’

In the retail sector, Bond outlines FTSE 250 constituent Dignity, one of the UK’s leading providers of funerals, cremations and pre-arranged funeral plans, as a stock with promising growth. ‘The company has good pricing power because no-one quibbles about the cost of a funeral,’ she explains.