Liontrust UK Growth Fund

July 2018 review

The Liontrust UK Growth Fund returned 0.7%* in July, compared with the 1.3% return from the FTSE All-Share Index.

 

Equity markets were still captivated by trade war news. Trump acted on his promise to place tariffs on China which, as expected, announced retaliatory measures. However, relations with Europe were less strained; Trump met with Jean Claude Juncker, president of the European Commission, and agreed to not impose any further trade barriers.

 

In the UK, weak economic data – notably inflation numbers – sent trade-weighted sterling to its lowest levels of 2018 so far. UK CPI (consumer price index) grew 2.4% year-on-year in June, the same rate that was recorded in May but below analyst expectations for 2.6% growth.

 

A consequence of the weaker pound was that UK large cap stocks outperformed: the FTSE 100 Index returned 1.5% in July, compared to the FTSE 250’s return of 0.4% and the FTSE Small-Cap (ex-IT) Index’s -1.0%. This was a headwind to the Fund’s relative performance as it has a lower weighting to large caps compared to the FTSE All-Share.

 

A number of the Fund’s large cap stocks put in a strong performance, including AstraZeneca (+11.7%), British American Tobacco (+9.7%) and Reckitt Benckiser Group (+8.9%) all of which have significant overseas earnings. Pharma giant Astra’s interim results were not particularly spectacular, as total revenue slipped 1% and operating profit fell 21%. However, the group maintained its expectations for its full-year results. BAT reported a 57% year-on-year increase in revenue for the six months to end June, following a strong performance from its Reynolds American acquisition.

 

Consumer goods company Reckitt raised its net revenue expectations for 2018 to 14%-15% growth from 13%-14% following a better than expected first-half performance from its Infant Formula and Child Nutrition division. Overall, the company posted a 30% increase in interim net revenue, at constant exchange rates, and a 29% increase in operating profit.

 

There were a number of portfolio holdings to release interim results and trading updates during July. The weakest was TP ICAP (-33.6%), which warned ahead of its interim results that Brexit, regulatory, legal and IT costs will mean earnings per share for 2018 are likely to be below the bottom end of expectations. Additionally, the company has struggled to integrate the voice broking ICAP business and now expects synergies from the deal to be £75m, down from £100m. TP ICAP also announced the departures of its chief executive and its chief financial officer.

 

Indivior’s (-20.2%) woes worsened after the pharmaceutical company withdrew its guidance for financial year 2018 following the US FDA’s approval of generic versions of the company’s Suboxone film treatment for opoid addiction last month. Though Indivior was successful in obtaining a temporary restraining order on the generic version, an unknown quantity was sold in the US market prior to this and caused uncertainty about the company’s full-year performance. The company also noted a slower than expected uptake of its Sublocade treatment due to problems with its distribution and reimbursement model. Precision instruments company Spectris (-11.3%) maintained its full-year expectations in its interim results, but noted that organic sales are expected to slow in the second half of the year due to tougher comparators.

 

The Fund sold its position in NEX Group as the group nears the completion of its takeover by US-based CME Group.

 

Positive contributors included:

AstraZeneca (+11.7%), British American Tobacco (+9.7%), Reckitt Benckiser (+8.9%), RWS Holdings (+7.7%) and Rotork (+7.5%).

 

Negative contributors included:

TP ICAP (-33.6%), Indivior (-20.2%), Spectris (-11.3%), AA (-9.8%) and Domino’s Pizza Group (-9.1%).

 

Discrete years' performance** (%), to previous quarter-end:

 

 

Jun-18

Jun-17

Jun-16

Jun-15

Jun-14

Liontrust UK Growth I Inc

11.4

20.1

9.1

6.4

11.8

FTSE All Share Index

9.0

18.1

2.2

2.6

13.1

IA UK All Companies

9.1

22.5

-4.1

7.0

14.0

Quartile

1

3

1

3

3

 

*Source: Financial Express, as at 31.07.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class.

 

**Source: Financial Express, as at 30.06.2018, total return (net of fees and income reinvested), bid-to-bid, primary class.


For a comprehensive list of common financial words and terms, see our glossary here.
 

 

Key Risks 

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. 

Some of the Funds managed by the Economic Advantage team invest primarily in smaller companies and companies traded on the Alternative Investment Market.  These stocks may be less liquid and the price swings greater than those in, for example, larger companies. The performance of the  GF UK Growth Fund may differ from the performance of the  UK Growth Fund and will be lower than its corresponding Master Fund due to additional fees and expenses.

Disclaimer

The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product.  Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing. 

Tuesday, August 21, 2018, 12:03 PM