June Commentary: Lowland Investment Company



​June was a weak month for the Trust in absolute terms; the net asset value on a total return basis fell 1.9% relative to a 2.5% fall in the wider market.

The UK consumer is being squeezed. Inflation is running at a higher rate than nominal wage growth and this is impacting consumer confidence and spending. We are beginning to see this affecting some of our companies. DFS, for example, has seen a deterioration in sofa sales and as a result has lowered earnings expectations. We have maintained the (small) position as DFS is a market leader in its category and continues to be highly cash generative. However, it is a reminder that no matter how optically cheap a company looks on earnings multiples, in the event of a steep downgrade to earnings expectations shares are likely to fall materially (a steep downgrade is rarely ‘priced in’). We are currently wary of adding to UK domestic exposure for this reason.
Among the best performers during the month was Carclo, which makes LED lighting for ‘supercars’ as well as technical plastics. Carclo are winning good levels of work in their lighting business and are expanding their capabilities beyond ‘supercars’ to mass market models that should lead to good earnings growth in the future.

The largest individual detractor from performance was Cape, which provides services such as coatings and insulation primarily to the energy industry. The poor performance is we think a result of the recent fall in the oil price as well as poor results from peers.
We were a net seller during the month and gearing was brought down to 11%. Positions we reduced included Conviviality Retail, Headlam and Hill & Smith, all of which we like fundamentally but on valuation grounds thought it was prudent to reduce. Where we added to holdings it tended to be where we saw good income opportunities, adding to existing positions in Randall & Quilter and Redde.
Debt at fair value - a sale price agreed to by a willing buyer and seller, assuming both parties enter the transaction freely.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

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Lowland Investment Company plc

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

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Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Specific risks

  • Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
  • This trust is suitable to be used as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this trust.
  • The trust could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the trust.
  • If a trust's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio diversified across more countries.
  • The return on your investment is directly related to the prevailing market price of the trust’s shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the trust. As a result losses (or gains) may be higher or lower than those of the trust’s assets.
  • Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • The trust may use gearing as part of its investment strategy. If the trust utilises its ability to gear, the profits and losses incured by the trust can be greater than those of a trust that does not use gearing.
  • Some of the investments in this portfolio are in smaller companies shares. They may be more difficult to buy and sell and their share price may fluctuate more than that of larger companies.

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