The UK stock market fell in November as economic and geopolitical news-flow remained choppy: Trump, North Korea, European politics, US tax cuts and Brexit all filled the newswires. Meanwhile sterling strengthened amidst some relief that London and Brussels seemed to be making progress on negotiations. 

Evenlode returned -0.4% compared to -1.0% for the IA UK All Companies sector and -1.7% for the UK market. The most negative contributors were Compass, Burberry and DMGT. Although Compass shares fell the company’s final results were reassuring in our view. The full year dividend rose +5.7% and the potential for on-going excess shareholder returns remains high as the balance sheet continues to strengthen. Burberry and DMGT both fell due to earnings downgrades following results. These were driven by increased investment plans at both companies, whilst DMGT is also facing operational headwinds in some end markets and has made some disposals to focus the portfolio. We are positive on the long-term outlook for both holdings and support current management strategies. Importantly, free cash flow generation and balance sheet strength remain healthy (Burberry has no debt and DMGT’s balance sheet is now the strongest it has been for twenty years). The most positive contributors to return were Informa, Fidessa, and Sage Group, all of which recently released reassuring updates.  Other good performers following results included some of the more recent additions to the portfolio: UBM, Cisco and Howden Joinery. 

The fund went ‘ex’ a third quarter dividend of 1.54p* on 1st December, in-line with the first two quarters and +6.2% year-on-year. Over the medium term, I continue to view moderate real dividend growth as a realistic aspiration for the asset-light businesses on which Evenlode is focused.

*B Income shares, estimated

Hugh Yarrow 30 Nov 2017
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