Bath/Head Office & Unquoted Equity Team:
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MI Chelverton UK Equity Growth Fund – Monthly Manager Commentary – July 2017

The Fund’s strong relative performance last month was helped by positive trading news from companies across a broad spread of sectors so, whilst the background economic commentary has become increasingly negative post BREXIT and management commentary is appropriately cautious, bottom-up numbers have for the most part been quite supportive of market valuations. In particular, the Fund enjoyed strong performance from Bodycote on the back of good half year numbers and IQE after a positive trading update. Following shortly on from its June upgrade, Games Workshop issued yet another positive trading update in July. Two IPOs we participated in, Quiz, a fast growing multi-channel ladies fashion retailer, and Tatton Asset Management, both got off to strong starts. Our strongest performer though was Revolution Bars which, having sold off sharply earlier in the year after warning of higher than expected business rates and wage costs, received a bid approach. On the negative tack, Brooks MacDonald weakened after its new CEO warned of the need to raise administration costs to catch up with the high level of growth seen in recent years and also to make a provision against legacy issues at an earlier Channel Island acquisition.

During the month, we started a new holding in Dialight, a leading international manufacturer of LED lighting products for use at industrial locations. New management, whilst addressing the manufacturing cost base, are investing in both marketing and an upgraded product offering to take advantage of the sizeable market opportunity converting traditional lighting to low energy and minimal maintenance LED alternatives. Other new investments during the month were the Quiz IPO and Gordon Dadds, a legal business, which raised new money to consolidate firms of solicitors. We also built up the holding in Spectris to a more meaningful position, as management noted a modest improvement in end markets which, coupled with its ongoing cost saving programme, made the valuation look more compelling in our view. On the sell side, we reduced our positions in some of our more expensive holdings like IQE and Ascential, on the back of strong share performances. We exited Mortgage Advice Bureau on valuation grounds, it having performed exceptionally well since its IPO shortly after the Fund’s launch.