Evenlode Income rose +1.8% compared to a rise of +0.7% for the FTSE All-Share and +1.1% for the IA UK All Companies sector. The strongest contributors were Sage Group, Experian and LSEG, which all benefitted from a partial reversal of investor concerns around AI that had dominated the market narrative earlier in the year. All three companies reported strong results in July. The main negative contributors to return were Smith & Nephew and Compass. Smith & Nephew reported weaker than expected sales growth in the first half of the year but maintained its full year outlook for around 8% profit growth. Compass decreased on no specific news.
Interim results season came to an end in August. Despite a complex geopolitical backdrop, aggregate full year forecasts for the portfolio are similar to where they stood at the start of the year: +5% organic revenue growth, +8% organic operating profit growth, and double-digit earnings per share growth. All holdings are expected to grow organic operating profit for the full year. Valuations remain compelling, with the fund’s next-twelve-month free cash flow yield standing at 6.7%.
In terms of portfolio changes, we fully exited Intertek and Rotork, whose share prices had rallied strongly following recommended takeover offers. We recycled this capital into a variety of existing positions, and continued to build three new positions, Avon Technologies (mission-critical protective equipment for the military and first responders), DiscoverIE (designs and manufacturers complex electronic products for the industrial and medical sectors) and Greggs (food-on-the-go retailer – and previously a fund holding in the 2010s). These companies all share several attractive characteristics: market-leading positions in their respective sectors, good growth potential over coming years, cash generative business models, and attractive free cash flow valuations. They also bring interesting diversification to the portfolio. We have added a further new position since the month end as we redeploy the Rotork and Intertek capital.
These changes are reflective of the broad range of opportunities across our universe of competitively advantaged, high return-on-capital, UK-listed companies: from UK-based global market leaders to domestic market leaders, from consumer-facing to business-to-business franchises, and across the market capitalisation spectrum.
The healthy and reliable cash generation of these companies reinforces their ability to invest for future growth, enhance shareholder returns and create long-term value. De-equitisation is also enhancing per share free cash flow, with 60% of the portfolio currently in the process of a material buy-back program.
Evenlode Income rose +1.8% compared to a rise of +0.7% for the FTSE All-Share and +1.1% for the IA UK All Companies sector. The strongest contributors were Sage Group, Experian and LSEG, which all benefitted from a partial reversal of investor concerns around AI that had dominated the market narrative earlier in the year. All three companies reported strong results in July. The main negative contributors to return were Smith & Nephew and Compass. Smith & Nephew reported weaker than expected sales growth in the first half of the year but maintained its full year outlook for around 8% profit growth. Compass decreased on no specific news.
Interim results season came to an end in August. Despite a complex geopolitical backdrop, aggregate full year forecasts for the portfolio are similar to where they stood at the start of the year: +5% organic revenue growth, +8% organic operating profit growth, and double-digit earnings per share growth. All holdings are expected to grow organic operating profit for the full year. Valuations remain compelling, with the fund’s next-twelve-month free cash flow yield standing at 6.7%.
In terms of portfolio changes, we fully exited Intertek and Rotork, whose share prices had rallied strongly following recommended takeover offers. We recycled this capital into a variety of existing positions, and continued to build three new positions, Avon Technologies (mission-critical protective equipment for the military and first responders), DiscoverIE (designs and manufacturers complex electronic products for the industrial and medical sectors) and Greggs (food-on-the-go retailer – and previously a fund holding in the 2010s). These companies all share several attractive characteristics: market-leading positions in their respective sectors, good growth potential over coming years, cash generative business models, and attractive free cash flow valuations. They also bring interesting diversification to the portfolio. We have added a further new position since the month end as we redeploy the Rotork and Intertek capital.
These changes are reflective of the broad range of opportunities across our universe of competitively advantaged, high return-on-capital, UK-listed companies: from UK-based global market leaders to domestic market leaders, from consumer-facing to business-to-business franchises, and across the market capitalisation spectrum.
The healthy and reliable cash generation of these companies reinforces their ability to invest for future growth, enhance shareholder returns and create long-term value. De-equitisation is also enhancing per share free cash flow, with 60% of the portfolio currently in the process of a material buy-back program.