Liontrust Special Situations Fund

The Liontrust Special Situations Fund returned -2.5%* in December. The FTSE All-Share Index comparator benchmark returned -1.4% and the average return in the IA UK All Companies sector, also a comparator benchmark, was -1.2%.

The FTSE All-Share Index’s December decline took it close to a flat return for 2022 as a whole, registering a small 0.3% total return. In capital terms, stripping out the benefit of dividend income, the index fell 3.2%. As we observed a few times during the year, there was a large divergence in returns to different size segments of the market: the FTSE 100 total return for 2022 was 4.7%, but the mid-cap FTSE 250 lost 17.4% and the Small Cap index dropped 13.6%. 

A slowing in the pace of US consumer price inflation in November to 7.1% – the lowest level in a year and below the 7.3% forecast – raised hopes of a US Federal Reserve pivot to less hawkish policy in 2023. However, as it lifted interest rates by 50 basis points to 4.25% - 4.5%, the US central bank issued forecasts of rates peaking at 5.1%, with no cuts projected until 2024. 

Unfortunately, the Fund’s biggest share price move in December was a negative one, as Moonpig (-31%) concluded a tough year with a heavy fall. The cost-of-living crisis has weighed on its shares for much of 2022 as investors fret over its exposure to weakening consumption. Interim results will have heightened these concerns after the online cards and gifts platform reported that new customer acquisition has decreased while customers have also traded down to cheaper gifts. In the six months to 31 October, Moonpig’s revenue was flat at £143m, while adjusted profit before tax dropped 22% to £18.9m. Due to a deterioration in trading conditions in October and November, the company also downgraded its 2023 revenue guidance from £350m to £320m, although it maintains its EBITDA target as it plans cutbacks to marketing spending.

Elsewhere within the portfolio, company newsflow was more constructive. Intellectual property services group RWS Holdings (+14%) moved higher on the back of full-year results that were slightly ahead of expectations and included robust 2023 outlook comments. In the year to 30 September the company recorded 17% growth in adjusted profit before tax to £136m. While it is mindful of a challenging global economic backdrop, it expects to meet next year’s consensus expectations for revenues of around £782m and adjusted operating profit of about £134m. 

Integrafin (+5.6%) also made ground as it issued a solid set of results. In the year to 30 September the investment platform provider saw revenues rise 8% to £134m, with underlying profit before tax rising 1% to £65.8m. 

The position in EMIS Group was sold ahead of completion of its £1.2bn takeover by US-based healthcare and insurance provider UnitedHealth Group. The stock became the fourth holding to exit the Fund in 2022 due to a takeover, following Clipper Logistics, Ideagen and CareTech.

Positive contributors included: 
Haleon (+15%), RWS Holdings (+14%), Integrafin (+5.6%), TI Fluid Systems (+5.2%) and John Wood Group (+3.6%)

Negative contributors included:
Moonpig (-31%), Alpha Group International (-20%), Craneware (-16%), Savills (-12%) and Learning Technologies (-12%).

Discrete years’ performance** (%), to previous quarter-end:

Past performance does not predict future returns

KEY RISKS

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

The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

A proportion of the portfolio is invested in smaller companies and companies traded on the Alternative Investment Market. These stocks may be less liquid and the price swings greater than those in, for example, larger companies. 

DISCLAIMER

This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.

This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.