Liontrust SF UK Growth Fund

Q4 2017 review

The Fund lagged its benchmark over the quarter, registering a return of 3.5% against 4.9% from the MSCI UK Index*.

Our process targets businesses that can grow structurally, driven by the shift towards a global economy that is more efficient, provides a higher quality of life and is more resilient.

GW Pharmaceuticals was a top performer over the period, with 2017 a pivotal year for the company as it put the final building blocks in place to launch a revolutionary drug for the treatment of paediatric epilepsy. Epidiolex is initially targeted for two very rare forms of epilepsy but feedback from physicians suggests its benefits will be useful for far more people suffering from this disease.

As such, the company continues to progress further clinical trials in other forms of epilepsy and we look forward to the seeing the results of these, as well as the drug’s primary launch in the US around the middle of 2018.

Softcat, one of the leading value-added software resellers in the UK, was the main contributor to performance over the quarter after a very strong set of full-year results, delivering organic sales growth in excess of 23% year-on-year.

We suspect this company was potentially positively impacted by Brexit, as customers may have brought forward big purchases before IT vendors hiked prices to counteract the weaker sterling. The long-term thesis on Softcat remains in place, namely that that a relentless focus on both customer and employee satisfaction results in a distinctive organisational culture that will continue to drive strong sales and profitability growth.

On the negative side, the GlaxoSmithKline share price has had a tough year and so too has the company’s new CEO Emma Walmsley, the first female chief executive of a major pharmaceutical. At the half-year results, she was at pains to highlight her leadership did not herald a change of direction but simply a refocus – in particular within the pharmaceuticals business. Later in the year meanwhile, when asked about the potential for acquisitions within the consumer part of the business, some took her failure to rule this out badly and questioned the company’s ability to continue to pay such a large dividend if this were to happen.

In the long term, we believe that at its core, the company has one of the most sustainable and forward-looking approaches to the provision of healthcare: a broad and diversified portfolio focused on global patient needs rather than just selling expensive drugs within the US.

Meanwhile, vaccines are one of the most cost-effective ways to prevent poor health outcomes and a consumer business provides another stable revenue stream, playing the theme of people continuing to take more responsibility for their own health.

Another major detractor from returns was the chain of veterinary practices CVS Group. The company released a trading update covering the first four months of the 2018 financial year, highlighting strong progress on acquisitions in the UK and, more recently, the Netherlands. Of particular note was a reported slowdown in like-for-like growth.


The shares promptly sold off around 30% and we had two separate meetings with management to ascertain whether this was a structural issue for the company. Following these meetings, we remain confident the company still has a long runway for growth and so took share price weakness as an opportunity to add to the position.


Finally, we participated in a capital raising for one of our smaller holdings Xeros Technology. Xeros is a company that uses polymer beads to revolutionise water-intensive industrial and commercial laundry processes by reducing water and chemistry usage. The company is still in its early stages but we are excited about the potential impact these technologies can have on key sustainability issues.


Discrete years' performance* (%)








Liontrust Sustainable Future UK Growth 2 Acc












IA UK All Companies













*Source: Financial Express, primary share class, total return (net of fees and income reinvested), to 31.12.17


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.

Some of the Funds managed by the Sustainable Future Equities team involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates.


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.

Thursday, January 25, 2018, 5:08 PM