Liontrust Special Situations Fund

July 2021 review

The Liontrust Special Situations Fund returned 2.9%* in July. The FTSE All-Share Index comparator benchmark returned 0.5% and the average return in the IA UK All Companies sector, also a comparator benchmark, was 1.3%.


The FTSE All-Share recovered from a mid-month dip to record a sixth consecutive month of gains. The initial decline was caused by growing concerns that the spread of the Delta variant of coronavirus would weigh on economic growth. These concerns come against a backdrop of rising inflation as data for June showed UK consumer price inflation of 2.5%.


The Fund performed strongly during July, showing resilience during the mid-month decline and then participating in the bounce back. Many of its largest movers issued interim updates, including Learning Technologies Group (+14%), which indicated that it expects to report a 29% year-on-year increase in revenue for the first half of the year. The performance was a mixture of organic growth – the Content & Services division being a highlight – and boosts from recent acquisitions such as Bridge and Reflektive. Adjusted earnings before interest and taxes are set to be 20% ahead of the previous year. LTG also undertook a share placing raising £82m to help fund its acquisition of GP Strategies, a leading provider of learning services and workforce transformation.


Reckitt Benckiser’s (-14%) share price performance reflected poorly received half-year results. The personal goods giant saw revenue fall by 4.5% in the first half of the year, feeding through to a 16% decline in adjusted operating profit. This was in part due to significant cost increases in the second quarter, which the company said would take time to offset as productivity and price changes are implemented in the latter part of the year. Reckitt anticipates a slower third quarter due to strong comparables, but is more optimistic about the fourth quarter as seasonal cold and flu trends are likely to drive demands for its products. It continues to forecast full year like-for-like net revenue growth of 0%-2%.


Quality assurance company Intertek Group (-6.8%) also slumped on the release of interim results. The company suffered from strong currency headwinds, meaning that a 1.1% like-for-like revenue increase in constant currency terms translated to a 5.4% decline in actual terms. Adjusted operating profit remained flat however, thanks to a 40 basis point improvement in margins. Intertek’s commodity cargo inspection division Caleb Brett was the main drag on revenue as global mobility is forecast to remain below pre-Covid levels for some time, while poor weather in Texas adversely affected North American operations.


Recruiter PageGroup (+10%) upgraded its guidance as its second quarter gross profit came in ahead of pre-Covid levels. The company said the strong momentum that it reported on in the first quarter continued in April and May, with gross profit in both months only 3% lower than its 2019 comparable. However, in June this stepped up significantly, with gross profit 11% higher than 2019. For the quarter overall, this meant gross profit was 2% ahead of the 2019 level and 94% ahead of the 2020 figure. 2021’s operating profit is now forecast to be £125m-£135m, up from the £90m-£100m forecast in Q1 results.


Spectris (+10%) swung to a £187m pre-tax profit in the first six months of 2021, having reported a £66m loss in the same period last year. The precision instrumentation and controls supplier said it has benefited from the faster than expected economic recovery and the simplification of its business over the last two years. The company anticipates the recovery to continue for the remainder of the year and forecasts full-year like-for-like growth of 10%-12%.


Despite issuing interims that came in ahead of market expectations and resuming its dividend payment, Weir Group (-6.7%) ended amongst the month’s heaviest fallers. The engineer reported a 6% increase in adjusted pre-tax profit to £121m, ahead of the consensus estimate of £116m, as its customers sought to increase production amid record high commodity prices. This allowed the company to declare an interim dividend of 11.5p per share. ­


During the month, the Fund exited two positions: Accesso Technology Group and IG Design. Accesso was sold after its senior management equity ownership level fell below the 3% threshold required of all smaller companies held under the Economic Advantage process. IG Designs was sold after significant disposals of stock by the senior management team.


It also participated in the IPO of Big Technologies on AIM. Big Technologies is a provider of integrated hardware/software solutions for the electronic monitoring of criminal offenders. The business has strong intellectual property, some of it patented, and a key selling point to customers is its superior product design compared to competitors. It also boasts high levels of revenue visibility, as contracts with its government customers are very long term in nature (averaging 3-5 years, but in some cases up to 12 years in duration).


Big Technologies has multiple avenues of growth ahead of it, including continuing to take market share and expand internationally in its core Criminal Justice market, as well as expanding into adjacent large markets such as health and care, where its products also have a number of existing and potential future applications. CEO and founder Sara Murray is a serial entrepreneur, having previously founded and sold, and retains 25% of the equity following the IPO.


Positive contributors included:

Big Technologies (+78%), Keywords Studios (+18%), Kainos Group (+17%), Learning Technologies Group (+14%) and Spirax-Sarco Engineering (+10%).


Negative contributors included:

Reckitt Benckiser Group (-14%), BP (-8.2%), Intertek Group (-6.8%), Weir Group (-6.7%) and Next Fifteen Communications (-5.9%).


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








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FTSE All Share







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*Source: Financial Express, as at 31.07.21, total return (net of fees and income reinvested), bid-to-bid, institutional class. Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 30.06.21, total return (net of fees and income reinvested), bid-to-bid, primary class.


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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.


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.

Friday, August 13, 2021, 10:02 AM