After a sustained period of positive post pandemic re-opening trade newsflow, the macro indicators have become more mixed, with the economic rebound causing supply chain issues and generating inflationary pressures in raw materials, freight and from labour shortages. At the corporate level newsflow has been generally supportive with companies for the most part beating conservatively set forecasts, with management teams not wanting to be held hostage to fortune until they’re confident trading conditions have normalised. July saw a raft of new issuance and fund raising activity at the Mid and Small Cap end of the market. We have also seen, countering this to some extent, a steady stream of takeover activity, particularly from Private Equity. Indeed the two highest contributors to performance last month, Ultra Electronics and Restore, were both the subject of bid approaches. Elsewhere, Future and Liontrust Asset Management performed strongly on the back of positive trading updates. On the negative tack, two of the Fund’s Healthcare holdings, Angle and Amryt Pharma, gave up ground in the absence of any newsflow.
The Fund had a particularly active month from a trading perspective, supporting a fund raising to finance Hotel Chocolat’s accelerated growth strategy. This business has performed well throughout the pandemic, successfully shifting its primary sales channel from retail to online, making its ambitious growth plans less capital intensive and therefore more attractive to the Fund. We also participated in a number of IPOs, supporting issues for Big Technologies (prisoner tagging), Revolution Beauty (a challenger cosmetics brand with a strong ecommerce presence), Seraphine (an online maternity wear business) and CMO Stores (an online builders’ merchant). A theme across most of the IPOs we have supported is the strength of their ecommerce offerings, as online buying habits by both businesses and consumers have accelerated during the pandemic. Finally, we started a holding in Purplebricks, the market leading online estate agency, where new management are in the process of changing the business model to drive market share. On the sell side, we exited from Ascential on valuation grounds and top-sliced holdings in Future, Volution, Bytes, Liontrust and Dotdigital, which had all performed strongly.