In terms of activity, within the portfolio, we recycled the takeover cash from Ideagen into topping up GB Group, Strix, Breedon, Gamma, and RWS holdings. We have also taken a position in a new holding, Keystone Law in July. On a positive note, we took profits in GB Group (GBG) in September (where the position was overweight) after an informal bid from GTCR which saw their share price surge. On 4th October, GTCR withdrew the cash offer however GBG is still in our view one of the UK’s best identity software businesses around.
Our new holding, Keystone Law (KEYS) is a modern law firm with a low-risk business model and is highly cash generative. Keystone Law essentially provides a platform for self-employed lawyers where they have the flexibility to work from anywhere with KEYS handling all the administration/marketing aspects and the lawyers are not salaried (they don’t get paid until paid by the client). One of the key drivers for Keystone Law is recruitment and during the 2008 recession a lot of the traditional law firms let go of staff and it was the best year of recruitment for KEYS. With recession looming, we believe Keystone Law’s low operational gearing gives it a key advantage over traditional law firms.
Despite the difficult background we believe all the companies in our AIM portfolio retain strong market positions and are well-placed to be long-term winners in their respective markets.