Evenlode Income fell -3.5% compared to -1.9% for the FTSE All-Share Index and -1.8% for the IA UK All Companies sector. After a very healthy interim results season for the portfolio in July and August, the fundamental news-flow was much lighter in September and as a result market moves were mostly driven by thematics, with the oil price, rising bond yields and AI dominating the narrative.
The most positive contributors were Smiths Group, Greggs and Victrex.
Smiths Group’s full year results were ahead of market expectations with earnings growth of +12.5%. Greggs, a new position in August, announced better than expected third quarter trading and upgraded full year profit guidance. The company is very well invested and is now entering a highly cash generative phase. Victrex reported strong trading in the third quarter and increased full year profit guidance. New management held an investor day highlighting Victrex’s strong competitive position and growth prospects, including new financial targets.
The most negative contributors were Experian, Sage and LSEG, with sentiment towards these digital-orientated holdings impacted by AI nervousness. Whilst not complacent, we continue to think the competitive advantages of these companies remain strong in the generative AI era, and that they are on the front-foot in terms of harnessing AI to enhance products and improve efficiency. All three are growing earnings at a double-digit rate and trading on very attractive free cash flow valuations.
In terms of portfolio changes, we continued to deploy the capital from the full exits of Intertek and Rotork, following their recommended takeover offers. We added to new positions in Avon Technologies, DiscoverIE and Greggs. We also initiated a new position in XPS Pensions Group, a leading consulting and administration business focused on UK pension schemes and insurers.
More generally, we are seeing a wealth of opportunities across our multi-cap universe of UK quality companies and have broadened out the portfolio further with two new positions since the month-end. The free cash flow valuation of the portfolio remains highly appealing, and forecasts for aggregate growth remain good. As some early signs of distress start to emerge in global credit markets, it is also worth reiterating the self-funding nature, the repeat-purchase cash flows, and the strong/clean balance sheets that portfolio holdings possess. These are all characteristics that the market has cared little for over the last two years, but that become increasingly valued when bad debts start to rise and credit supply starts to dry up.
Evenlode Income fell -3.5% compared to -1.9% for the FTSE All-Share Index and -1.8% for the IA UK All Companies sector. After a very healthy interim results season for the portfolio in July and August, the fundamental news-flow was much lighter in September and as a result market moves were mostly driven by thematics, with the oil price, rising bond yields and AI dominating the narrative.
The most positive contributors were Smiths Group, Greggs and Victrex.
Smiths Group’s full year results were ahead of market expectations with earnings growth of +12.5%. Greggs, a new position in August, announced better than expected third quarter trading and upgraded full year profit guidance. The company is very well invested and is now entering a highly cash generative phase. Victrex reported strong trading in the third quarter and increased full year profit guidance. New management held an investor day highlighting Victrex’s strong competitive position and growth prospects, including new financial targets.
The most negative contributors were Experian, Sage and LSEG, with sentiment towards these digital-orientated holdings impacted by AI nervousness. Whilst not complacent, we continue to think the competitive advantages of these companies remain strong in the generative AI era, and that they are on the front-foot in terms of harnessing AI to enhance products and improve efficiency. All three are growing earnings at a double-digit rate and trading on very attractive free cash flow valuations.
In terms of portfolio changes, we continued to deploy the capital from the full exits of Intertek and Rotork, following their recommended takeover offers. We added to new positions in Avon Technologies, DiscoverIE and Greggs. We also initiated a new position in XPS Pensions Group, a leading consulting and administration business focused on UK pension schemes and insurers.
More generally, we are seeing a wealth of opportunities across our multi-cap universe of UK quality companies and have broadened out the portfolio further with two new positions since the month-end. The free cash flow valuation of the portfolio remains highly appealing, and forecasts for aggregate growth remain good. As some early signs of distress start to emerge in global credit markets, it is also worth reiterating the self-funding nature, the repeat-purchase cash flows, and the strong/clean balance sheets that portfolio holdings possess. These are all characteristics that the market has cared little for over the last two years, but that become increasingly valued when bad debts start to rise and credit supply starts to dry up.