July Commentary: Lowland Investment Company

31/07/2017

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​July was a good month for the Trust; the net asset value rose 1.5% on a total return basis (with debt at fair value) relative to a 1.2% rise in the FTSE All-Share.

We have seen a resumption in M&A activity within the Fund and this month two of our holdings received cash bid approaches – Cape, which is a services provider primarily to the energy industry, and Novae, which is a non-life insurer. These two were both among the largest contributors to performance. Also among the best performers was Conviviality Retail, one of the largest alcohol distributors in the UK. This had encouraging results in which the management team have managed to successfully integrate two sizeable acquisitions in a short amount of time and return the business to organic growth.
 
The largest individual detractor from performance was contractor and supports services provider Carillion. Within their contracting division they have found a number of problematic contracts for which they have had to take a sizeable provision. Having met with Keith Cochrane (who was a Non-Executive Director but is currently interim CEO) we have decided to maintain the position. While the scale of the provision is extremely disappointing, we are awaiting the outcome of a review into the business that Keith is conducting, the results of which will likely be announced in September.
 
During the month we continued to be a modest net seller and the gearing on the Trust has come down to 10%. We reduced both Cape and Novae following the bid approaches. The biggest purchases included Strix, which is an IPO of a company that makes safety controls for kettles that should pay an approximately 7% dividend yield, and AstraZeneca, which we added to following the disappointing trial results for one of its key cancer products.

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.


Important information

Please read the following important information regarding funds related to this article.

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.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

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), Henderson Investment Management Limited (reg. no. 1795354), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), Gartmore Investment Limited (reg. no. 1508030), (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. Telephone calls may be recorded and monitored.

Specific risks

  • 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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