Nimmo said that the fashion company had produced ‘spectacular’ returns after a rapid phase of expansion in the past few years but that he now felt it needed a period of time to consolidate the business.
‘Mulberry is experiencing growing pains and has to let infrastructure and management catch up,’ he said.
Faith in online retail
Retail remains a prominent investment theme in the £1.5 billion Standard Life UK Smaller Companies fund with long term favourites such as ASOS, Ted Baker and Supergroup featuring heavily. Nimmo has assigned around 15% of the portfolio to this sector.
Nimmo has continued to like the theme as retail brands expand their offer into overseas markets, which has been made easier by the expansion of online services.
He told Citywire Selection: ‘Retailing used to be very much about home markets. It was very difficult to translate the format and brand overseas and with the internet we’ve seen changes in that, he said.
‘ASOS’ expansion plans into the Chinese market pleased investors and is a clear example of the global reach of online retail.’
In a similar vein, he has increased exposure to online companies Perform, Rightmove and Blinkx to make the most of their early moves into the online space.
‘It is not a cottage industry anymore. With the disruptive advent of online, it’s becoming clear who the winners and the losers are,’ he said.
Nimmo has been topping up on online insurer Esure after being hit by a large drop in its share price following a disappointing dividend payout and is prepared to back the company for the longer term.
‘It hasn’t been a rip-roaring success [since its IPO] but we like entrepreneurs building and running businesses with large stakes.’
The company was was founded by Direct Line founder Peter Wood and has suffered a 23% drop since its issue in March.
Dividend yields play a key role in Harry Nimmo’s UK Smaller Companies fund. Cash generative top holdings Hargreaves Lansdown, Paypoint and Aveva have recently all paid special dividends.
‘Dividends yields are low [in smaller companies funds] but growing rapidly and we have recently introduced an income share class to the UK Smaller Companies fund.’
With the exception of ASOS and Supergroup which do not pay dividends, all of the fund’s top ten holdings have recently increased their dividend yield between 14% and 28%.
Over 5 years to the end of August 2013, the SLI UK Smaller Companies fund has returned 105.4% compared with the Numis Smaller Companies (ex IT) benchmark return of 103.4%.
Citywire Selection Verdict: Harry Nimmo’s policy of running his winners has led him to follow many a smaller company up the food chain and he now has close to two thirds of the fund in medium-sized UK firms. This is balanced with a substantial component invested in the Alternative Investment Market, and large positions in consumer services and industrials together make up more than 40% of the portfolio. The fund has recently righted itself after a brief lapse in performance and we remain confident this manager can deliver going forward. Access to his strategy through the investment trust allows for gearing, pushing performance higher still.