Liontrust UK Growth Fund

July 2021 review

The Liontrust UK Growth Fund returned 2.3%* 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 defence and aerospace company BAE Systems (+10%). Revenue increased 6% year-on-year, underlying earnings before interest and taxes (EBIT) rose 27% and earnings per share (EPS) rose 25%. The strong first half performance underpinned the company’s full year forecast of 6%-8% underlying EBIT growth and 3%-5% EPS growth.

 

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%.

 

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 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.

 

Information and analytics company RELX (+10%) said that it has returned to the growth trajectory it was on before the pandemic as it delivered growth across almost all of its market segments in the first half of 2021. Group revenue increased 4% and adjusted operating profit grew 11%, helped by an improvement in operating margin to 30.1%.

 

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. ­

 

Away from earnings, Ultra Electronics’ (+38%) share price shot higher after it confirmed the receipt of an improved £35 per share takeover offer from Cobham . The initial offer made in June was worth £28 per share. Ultra Electronics’ board recommended the new offer to shareholders.

 

Positive contributors included:

Ultra Electronics (+38%), BAE Systems (+10%), Spirax-Sarco Engineering (+10%), Spectris (+10%) and RELX (+10%).

 

Negative contributors included:

Reckitt Benckiser (-14%), BP (-8.2%), Intertek Group (-6.8%), Weir Group (-6.7%) and Petrofac (-6.3%).

 

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

 

Jun-21

Jun-20

Jun-19

Jun-18

Jun-17

Liontrust UK Growth I Inc

18.0%

-10.2%

2.9%

11.4%

20.1%

FTSE All Share

21.5%

-13.0%

0.6%

9.0%

18.1%

IA UK All Companies

27.7%

-11.0%

-2.2%

9.1%

22.5%

Quartile

4

2

1

1

3

 

*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.


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.

Friday, August 13, 2021, 10:02 AM