European markets experienced considerable volatility in August, driven by global economic challenges and interest rate expectations. At the start of the month, a sharp sell-off was triggered by disappointing U.S. employment data and an unexpected rate hike from the Bank of Japan. These factors led to a significant drop in global equities, including in Europe, before markets recovered later in the month, finishing in positive territory, as investors started pricing in potential rate cuts by central banks. Real estate (+4.2%), healthcare (+4.1%) and communication services (+3.4%) were among the strongest performing sectors in the wider MSCI Europe index, while energy (-3.1%) and information technology (-1.4%) were the only two sectors to post a negative return over the month.
The Fund’s top performer in August was Danish jewellery manufacturer and retailer Pandora (+9.3%) after posting strong organic growth in Q2, while also lifting its revenue guidance for the full-year. The company reported consensus-topping Q2 revenues of DKK 6.77 billion, with organic revenue growth of 15% slightly surpassing expectations. Following a solid quarter, Pandora upgraded its FY24 revenue guidance to 9-12% organic growth from the previous 8-10%, reflecting strong momentum.
Next (+12%) raised its guidance for the year after the British fashion and homewares company said shoppers ordered more of its products from abroad. The retailer said full-year pretax profit is now expected to reach £980 million ($1.3 billion), up from previous guidance of £960 million.
Dutch payment company Adyen (+18%) strengthened as net revenue for the first half beat estimates due to gains from both new and existing customers. Adyen, which handles e-commerce payments for large enterprises and through point-of-sale terminals in physical stores, reported that net revenue increased 24% from a year earlier to €913.4 million for the six months through June, driven by gains in market share, strategic international expansion, and cost management.
Danish shipping company AP Moller Maersk (-12%) reported a 45% drop in profit for the second quarter of 2024, falling to $833 million from $1.487 billion during the same period last year. The company attributed this decline to ongoing disruptions in global supply chains due to the Red Sea crisis. Despite this, the company raised its financial guidance for a third time in three months as higher freight rates continue to boost its profits.
Kingspan (-8.9%) reported first-half profit that came in below consensus expectations, with a year-on-year decline of 3%, following a slow start to the first quarter. The company's announced an optimistic outlook for the second half of the year, with management anticipating a "better performance" and trading profit growth for the full year, which analysts currently estimates at approximately +6% YoY.
Shares in Tenaris (-14%), the manufacturer and supplier of steel pipes for the energy industry, fell after margins for the second quarter were affected by an ongoing decline in OCTG (durable and robust steel) prices in the Americas, while net income was negatively impacted by a $171 million extraordinary provision.
Positive contributors to performance included:
Adyen (+18%), Next (+12%), Pandora (+9.3%),
Negative contributors to performance included:
AP Moller-Maersk (-12%), Tenaris (-14%), Kingspan (-8.9%)
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.
Overseas investments may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of the Fund. This Fund may have a concentrated portfolio, i.e. hold a limited number of investments (35 or fewer) or have significant sector or factor exposures. If one of these investments or sectors / factors fall in value this can have a greater impact on The Fund's value than if it held a larger number of investments across a more diversified portfolio. The fund’s investment objective is to target capital growth for investors. Growth stocks tend to pay out lower levels of dividend resulting in lower income yields and may produce more volatile returns than the market as a whole. Outside of normal conditions, the Fund may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash. 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.
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