November saw some stabilisation in global stock markets, though volatility remained high. Worries over trade tariffs and a slowdown in the global economy continued, as did Brexit uncertainty for UK investors. More positively, investors were relieved that the US mid-term elections passed with no big surprises, expectations for US interest rates reduced somewhat, and emerging market currencies continued to recover.

Evenlode Income rose +3.1% compared to a fall of -1.6% for the IA UK All Companies Sector and -1.6% for the FTSE All-Share. The most positive drivers of performance were Compass and Smith & Nephew, helped by good trading updates. Compass continues to benefit from its strong market position in the global food catering industry, with full year organic sales growth of +5.5%, strong cash generation and a dividend increase of +12.5%. Smith & Nephew reported good operational progress and accelerating sales growth. Other good performers following results included Spectris, Sage, and Paypoint. The most negative contributors were DMGT and Victrex. DMGT shares fell after releasing full year results. However, we have been encouraged by progress made over the last year, both in terms of operational changes and portfolio rationalisation, and the company’s balance sheet is now extremely strong. Victrex shares fell on no specific news.

There were no major changes to the portfolio, though we continued to add to the fund’s small positions in Schroders, Hays and Savills, and to several other holdings where we see a good combination of a strong competitive position, financial strength and valuation appeal.

At the end of November, the fund went ex a third quarter dividend of 1.61p (B Income estimated). This was in-line with the first and second quarter dividends and +4.5% year-on-year. Looking ahead, the provision of real dividend growth remains a key aim for the fund.

Hugh Yarrow 30 Nov 2018
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