Following strong gains in November and December, in January the FTSE All-Share fell modestly (-0.8%). At the sector level a rise in the oil price (following the largely unexpected decision by Saudi Arabia to curb oil production) meant that energy was the best performing sector in the UK. Strong commodity prices more broadly (such as iron ore) also meant the materials sector outperformed.

For Lowland specifically, the best performers during the month were broadly companies that reported encouraging pre-close trading updates (for example construction equipment producer Somero Enterprises, flooring distributor Headlam, and free-to-air broadcaster STV). The exception to this was Ilika, which performed well on the back of little material news (but with ongoing strong interest in the alternative energy area). We had a good meeting during the month with the Ilika management team who are making steady progress in commercialising their solid-state batteries, although it remains early stage in terms of revenue generation and therefore there are ongoing risks on the route to full commercialisation.

In terms of transactions, in the energy sector we added to companies such as Serica Energy and Jadestone Energy, which are buying cash generative assets from the oil majors as part of their ongoing disposal programmes. Both have experienced management teams and conservative balance sheets. The position in bowling alley operator Ten Entertainment was reduced, as it was reaching near historic average valuation levels on an assumption that 2022 earnings would show a strong recovery. The path to re-opening leisure assets in the UK remains uncertain and therefore in our view it was prudent to reduce the scale of the holding.


Commodity: A physical good such as oil, gold or wheat. The sale and purchase of commodities in financial markets is usually carried out through futures contracts.