Through May, the UK Economy continued to track ahead of estimates, similar to the broader Global picture. UK business confidence is strong and there are already signs of labour shortages in some areas, such as hospitality. Just how this flows through to inflation, which seems to be the primary concern of the equity market, will remain unclear until government support measures fully roll off and we have a better view as to how the pandemic and Brexit have changed the labour market. Against this backdrop, it was a relatively quiet month for reporting, with further Q1 and AGM updates which were generally positive driving upgrades. After a very strong couple of months of fundraising (both IPOs and from existing listed companies), there were signs that this is starting to slow down as we move into the traditionally quieter summer months. However, the attractiveness of valuations in the UK market continues to be highlighted by bid activity from Private Equity.
This bid activity could be seen in our portfolio through 2 of our top 6 performers in the month. Sanne, the provider of outsourced services to the alternative asset management market, was subject to an approach from private equity and Augean, the specialist waste and resource management group, was subject to press speculation regarding a potential bid. Also strong in the month was Future, our largest holding, as they announced good half-year results with 30% organic growth in their media division, and Tyman, who announced a positive start to the year, leading to them to upgrade profit expectations. From a negative perspective, Best of the Best drifted off after announcing in-line results, as did Amryt Pharma, as the market responded poorly to the proposed acquisition of Chiasma, a US listed commercial stage biopharma, with an on-market product which adds to Amryt’s existing portfolio of Orphan drugs.
On the trading front, as mentioned above, we supported a number of fundraises for new and existing holdings. We added Dianomi, a digital advertising platform focused on premium content in the business and finance vertical, at IPO and supported NCC, a provider of software escrow and cybersecurity services, as they raised funds to acquire the leading US escrow business from Iron Mountain. We also started a holding in Saga, the insurance and travel provider to over 50s, as we felt the market price undervalued the potential profitability of the business once travel returns. On the sell side, we continued to trim our Future, DotDigital and Volution holdings on price strength.