In March Lowland’s net asset value rose 5.4%, outperforming its FTSE All-Share benchmark which rose 4.0%, and the UK Equity Income peer group which rose 4.9%. In a reversal of the pattern seen in recent months, defensive sectors such as consumer staples and utilities outperformed, while (broadly) more cyclical industries including energy and materials lagged. In this context we were pleased to see the Trust outperform, driven by encouraging results from companies including Halfords (which reported strong sales growth leading to earnings upgrades) and M&G (good capital generation leading to increased confidence that the current ~9% dividend yield is sustainable). There was also good progress made by Aviva in further asset disposals at above expected valuations.

We have met a large number of company management teams over the last month as full year results were reported. There were a few key takeaways. Firstly, many businesses have used the pandemic to look hard at their cost base and many have found efficiency measures that will remain in place following the pandemic. This could include closing manufacturing facilities or reducing their use of office space. Secondly, many businesses outside of the worst hit sectors (such as physical retail, civil aerospace) are seeing trading conditions return to roughly where they were at the end of 2019, which we find encouraging. Finally, we are seeing an increasing number of companies aligning themselves with the UN Paris Agreement. This is extending beyond large companies and is increasingly being adopted by medium and smaller companies as well. We find this encouraging for both standalone environmental reasons and because being aligned with the Paris Agreement is increasingly a ‘must have’ for companies rather than a ‘nice to have’. This is because supplier emissions are being captured within Scope 3 emissions, and therefore we are hearing that if companies do not align, they are risking being removed by their end customers from approved supplier lists. It is therefore important for the sustainability of earnings that companies align themselves with the Paris Agreement, and we are encouraged to see this happening.



Net asset value (NAV) - The total value of a fund's assets less its liabilities.

Cyclical stocks - Companies that sell discretionary consumer items, such as cars, or industries highly sensitive to changes in the economy, such as miners. The prices of equities and bonds issued by cyclical companies tend to be strongly affected by ups and downs in the overall economy, when compared to non-cyclical companies.

Yield - The level of income on a security, typically expressed as a percentage rate. For equities, a common measure is the dividend yield, which divides recent dividend payments for each share by the share price. For a bond, this is calculated as the coupon payment divided by the current bond price.



References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security. Janus Henderson Investors, one of its affiliated advisors, or its employees, may have a position mentioned in the securities mentioned in the report.