The portfolio marched steadily onwards through GBP strength, softening inflation data and hesitant Bank commentary; showing that the underlying businesses are getting on with it. However, it wasn’t all plain sailing for UK PLC. 

In January, Diageo, the Johnnie Walker and Guinness maker reported an 11% drop in operating profits in the six months to December 2023. Net sales also fell, defying analysts’ expectations they would remain flat.  We took this opportunity to add to the holding which had been disproportionately hit in our view. Their peer, Remy Cointreau, pointed to improving momentum in the sector and many executives had called the bottom of the recent downturn in the alcoholic spirits market. We were equally encouraged over the fact that more than 225,000 pints of Guinness were drunk over the Cheltenham festival week! JD Sports Fashion also received a kicking in early January, after warning that mild weather and heavy discounting had hit pre-Christmas trade. The stock fell by 20% and we took the opportunity to add, having faith in the resilience of the company, it’s management and loyal customer base. The company came to market at the end of the quarter with a positive statement, reiterating guidance and a busy sporting Summer ahead with the Euros in Germany and Paris Olympics.  

We funded these top-ups with the proceeds from Dechra Pharmaceuticals who finally got taken over. We also top-sliced our holdings in Microsoft and InterContinental Hotel Group who have both performed strongly over the past six months or so. 

Stalwarts of the fund Halma and Diploma both announced impressive results and exciting new acquisitions. Halma released a strong trading statement and announced a €85m acquisition of Rovers Medical Devices. Rovers designs and manufactures sample collection devices used in the prevention and diagnostics of cervical cancer and achieves a margin over 40%. Halma shares remain well below their historic high and look good value to us at these levels.  Diploma surged 15% at the end of the quarter on the back of their purchase of Peerless Aerospace Fastener, a market -leading distributor of bolts, washers and rivets for the airline industry. The acquisition will give Diploma more capability in airframe construction and work in tandem with their strong aircraft cabin business. 

Fred, Rose and I continued to meet with management teams from our fund, watchlist and the UK market in general. Forty different companies in total in our offices and on-site visits. In particular, we had good meetings with the management teams of Land Securities, Experian, Trainline and RELX. Our meeting with RELX was especially noteworthy, as their Exhibitions business revenues had finally surpassed pre-pandemic numbers and the implementation of Artificial Intelligence in their data and analytics businesses is starting to become game-changing in the interpretation and extrapolation of their billions of documents of data in the medical and legal space. Our first real world example of the outstanding benefits of AI in the non-tech space.      
 

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.