Liontrust Special Situations Fund

June 2018 review

The Liontrust Special Situations Fund returned 0.4%* in June, compared with the -0.2% return from the FTSE All-Share Index.


Equity market volatility has gradually eased since February’s spike on inflation concerns, but in June we saw it pick up again. The FTSE All-Share’s almost flat monthly return belies an eventful period from a macroeconomic perspective. Investor sentiment ebbed and flowed with the twists and turns in the ‘Trade War’ narrative. As the month ended, the US had confirmed tariffs on US$50bn of Chinese goods to be implemented in early July; a move which was met with a retaliatory commitment from the Chinese, which itself then saw the US threatening a further US$200bn in tariffs – a pattern which threatens to develop into the type of damaging protectionism which investors have feared.


Another key feature in June was further normalisation of monetary policy following decisions from the US Federal Reserve and the European Central Bank. The Fed raised rates by 25bp to a range of 1.75% - 2.0%,, the second increase in 2018 so far, and guided towards two further hikes this year – one more than it had previously indicated. The ECB gave long-awaited details of the termination of its quantitative easing programme, which will finish in December 2018 after another taper in September from €30bn of monthly bond purchases down to €15bn.


Newsflow on the UK equity market was reasonably light, as companies with an end-December financial year will most likely update on interim trading in July. Sector trends were relatively muted, although strength in utilities (+1.7%) and telecoms (+3.1%), both traditionally defensive sectors, hinted at some risk aversion.


News was similarly thin on the Fund’s portfolio of holdings. One of the few significant updates came from RWS Holdings (+19.9%). Having sold off in April on a trading statement, RWS staged a strong recovery after the June release of interim results. It had previously warned on lower-than-expected initial activity from certain Moravia clients, so investors were encouraged that the recently acquired business has seen an “excellent start” to the second half of its financial year. Headline numbers were as pre-announced: revenue up more than 80% to £140m in the six months to 31 March and adjusted operating profit expanding by 60% to £30.5m. Underlying growth on a constant currency basis was a modest 5%, but outlook comments suggest an acceleration is expected in the second half. With respect to Moravia, RWS has observed an “accelerating revenue performance” since the trading update as well as improved synergies.


Cloud computing company Iomart (-5.7%) also released results, covering the year to 31 March 2018. As flagged in its March trading update, Iomart generated 9% revenue growth to £97.7m, while adjusted earnings before interest, tax, depreciation and amortisation was £39.8m – also 9% higher year-on-year. The top-line growth reflects a combination of organic growth and the impact of three acquisitions: Dediserve, Simple Servers and Sonassi. Trading in its new financial year is described as progressing in a “similarly positive vein”.


In an interim trading update, Wood Group (-6.4%) commented that it continues to see “early signs of recovery” in the oil & gas market, which is a key customer for Wood Group’s engineering and project management services. The statement outlined an expectation of US$5.1bn – US$5.2bn in revenue for the interim period, with operating profit of US$250m – US$260m. Wood Group typically has a bias towards higher levels of activity in the second half of the year, and it is confident of delivering full-year results in line with current market expectations.


Positive contributors included:

RWS Holdings (+19.9%), Craneware (+13.1%), Reckitt Benckiser (+8.3%), Rightmove (+8.1%) and Pagegroup (+6.3%).


Negative contributors included:

Savills (-9.8%), Weir Group (-8.7%), Domino’s Pizza Group (-8.7%), Spectris (-6.5%) and Wood Group (-6.4%).

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







Liontrust Special Situations I Inc






FTSE All Share Index






IA UK All Companies













*Source: Financial Express, as at 30.06.2018, 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.


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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.
 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.

Monday, July 16, 2018, 10:25 AM