Liontrust GF Special Situations Fund

May 2018 review

The Liontrust GF Special Situations Fund returned 3.9%* in May, compared with the 2.8% return from the FTSE All-Share Index.


The Bank of England chose not to raise rates in May, a decision the market had moved to price in over the last few weeks. UK rate tightening later this year may still be possible with Mark Carney appearing to attribute weak Q1 economic data to the unusually cold weather – a factor that the ONS thinks was less significant.


Trade war worries were largely on the back burner for May, but on the last day of the month Trump announced that tariff exemptions previously granted to the EU, Canada and Mexico would now be removed, raising the prospect of retaliatory measures.


Oil climbed a further 3.2% to US$77.6 a barrel (Brent crude) at the end of May, having hit US$80 during the month. Donald Trump pulled out of the nuclear deal with Iran, re-imposing sanctions on the country, which is a large oil producer. Economic turmoil in Venezuela also led the International Energy Agency to warn of a potential “double supply shortfall”.


In Europe, a deterioration of Italy’s political crisis saw financial stocks weaken as investors fretted over the risks to the Eurozone. Attempts to form a coalition government of populist parties were thrown off course as Italy’s president blocked the alliance’s Eurosceptic nomination for finance minister. This prompted a sharp sell off in Italian bonds and hit shares in European banks. However, as the month drew to a close, it seemed that another deal to form a government was looking likely.


Most sectors of the UK market finished May in positive territory, but there were a couple of notable exceptions in the form of telecoms and financials, which together represented a 50bps drag on FTSE All-Share performance. This was a headwind the Fund largely side-stepped due to its avoidance of banks and large-cap telecoms (the Fund’s only sector holding is Gamma Communications which edged 1.6% higher during the month).


The Fund’s largest riser in the month was Wood Group (+17.9%). It was awarded a “$US multi-million contract” by TEVA Biotech for a range of engineering and construction services on a new biotech facility in Germany. The deal, while significant in its own right, also furthers Wood Group’s ambitions to diversify away from its historic dependence on the upstream oil & gas sector. The company, which acquired Amec Foster Wheeler in 2017, aims to offer engineering services to a wide range of energy and industrial markets.


Paypoint (+15.7%) represented another bright spot in the portfolio. The company provides electronic point of sale (EPoS) systems to convenience stores as well as using these stores to offer services including bill payments, ATMs and Collect+ parcel pick up & drop off. Its network covers over 40% of the UK convenience store market. Paypoint’s statutory 2017 results – net revenue down 3.5%, profit before tax falling 23.4% – were skewed by the refocus of its business last year through the sale of its PayByPhone and Drop and Collect businesses. When adjusted for its continuing operations, financial performance was slightly ahead of consensus expectations.


dotDigital (-18.6%) featured on the downside, albeit due to investor speculation rather than concrete newsflow. The EU’s GDPR standards were implemented in May. While these should support demand for dotDigital’s omnichannel marketing software tools in the long term, the company has previously commented that clients are initially reacting by lengthening purchasing cycles. In addition, e-commerce platform Magento – one of dotDigitals’ most important channel partners – was acquired by Adobe in May, creating some uncertainty over which direction Adobe will take the relationship.


Metrology group Renishaw (+13.9%) grew revenues by 12% in the nine months to 31 March 2018, a top-line uplift which dropped through to an almost 40% expansion in adjusted profit before tax. The strength of trading led it to upgrade its full-year financial forecasts. Revenue guidance has been increased from £575m - £605m to £585m - £605m while the profit before tax range has been raised from £127m - £147m to £135m - £150m.


Intertek (+12.6%), the quality assurance provider, issued a trading update covering the first four months of 2018. On a constant currency basis revenue rose 4.4%, the majority of which was organic growth. The company stated that it is on track to deliver good constant currency organic review growth, moderate margin expansion and strong cash conversion in the year to 30 June 2018.


TP ICAP (-11.1%) slid after stating that weaker trading in power and credit had offset a pick-up in equity volatility and better conditions in rates products Revenue in the first four months of 2018 was 3% higher year-on-year. Shares in CareTech Holdings (-8.1%) also lost ground despite an interim trading update stating that results for the six months to 31 March would be in line with market expectations. The specialist social care services provider increased net residential and supported living capacity by 28 to 2,572 places. Occupancy levels in its mature estate were unchanged at 93%.


Market research and data analytics group YouGov (+18.8%) has expanded its presence in the sports data market through the acquisition of SMG Insight Limited. YouGov bought 20% of SMG in 2010 and is now purchasing the remaining 80% from the firm’s founder Frank Saez. A cash consideration of £1m is payable at completion, a further £1m is due after 12 months and deferred consideration of 4.25x EBITDA over the next three years will be paid under an earn-out which keeps Saez at the head of the SMG business. The total consideration is capped at £21m, which would be about 17.5x this year’s profit before tax.

Positive contributors included:

Wood Group (+17.9%), Paypoint (+15.7%), Renishaw (+13.9%), Intertek Group (+12.6%) and BP (+8.5%).


Negative contributors included:

dotDigital (-18.6%), TP ICAP (-11.1%), Caretech Holdings (-8.1%), AA (-7.9%) and Clipper Logistics (-4.2%).

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








Liontrust GF Special Situations C3 Inst Acc GBP






FTSE All Share Index







*Source: Financial Express, as at 31.05.2018, total return (net of fees and income reinvested), sterling terms, C3 institutional class.


**Source: Financial Express, as at 31.03.2018, 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.The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

A proportion of the portfolio is invested 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.


This content 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. Examples of stocks are provided for general information only to demonstrate our investment philosophy.  It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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.

Friday, June 15, 2018, 10:17 AM