Liontrust UK Growth Fund

•  UK equities posted mixed returns in August, with large caps leading gains while mid- and small-caps lagged. A 25bps rate cut by the Bank of England to 4%, passed by a narrow 5–4 vote, underscored the challenging 
  policy backdrop.
• Spirax, BP, Bunzl and Diageo all advanced on solid earnings updates and supportive shareholder returns.
• WH Smith slumped after uncovering an accounting overstatement in its US unit, while Auction Technology Group and Domino’s weakened on profit warnings. 

The Liontrust UK Growth Fund returned -1.3%* in August. The FTSE All-Share Index comparator benchmark returned 0.9% and the average return in the IA UK All Companies sector, also a comparator benchmark, was -0.3%. 

UK equities advanced through much of August, with index performance once again driven by large cap stocks outperforming at the expense of mid and small caps. The FTSE 100 (+1.2%) led the UK market in August, while the mid-cap FTSE 250 (-1.2%) and the FTSE Small Cap ex-Investment Companies (-1.6%) both posted losses. The FTSE AIM All-Share (+0.4%) delivered a small positive return, though this was driven heavily by natural resources stocks (Basic Materials contributing +1.8% to AIM index return and Energy +0.4%), while most other sectors delivered negative contributions.  

The Bank of England reduced interest rates by 25 basis points to 4%, in line with market expectations. Notably, the decision was narrowly split, with the MPC voting 5–4, underlining the complexity of the current economic backdrop and hinting at a more cautious approach to further easing. 

Spirax Group (+15%) reported a 7% organic rise in adjusted operating profit to £159 million, delivering an operating margin of 19.3%, surpassing market forecasts. Reflecting confidence in its financial position, the company also raised its interim dividend by 3% to 48.9 pence.

Despite ongoing headwinds, Spirax reaffirmed its full-year guidance, projecting continued organic revenue growth ahead of global industrial production. Management also expects margin expansion in the second half, supported by operational efficiencies and a recovery across key markets.

BP (+8.3%) reported an underlying replacement cost profit of $2.35 billion for the three months to June, comfortably ahead of analyst expectations. The company announced a dividend increase to 8.32 cents from 8 cents and confirmed it will maintain its $750 million share buyback programme for the second quarter. The shares were further supported by news of BP’s largest oil and gas column discovery in 25 years.

Despite announcing a profit warning in April, Bunzl (+11%), the multinational distribution and outsourcing company, offered some relief by resuming its £200 million buyback programme and reaffirming guidance for a stronger second half of 2025. Adjusted operating profit had fallen 7.6% to £405 million in the first half of the year, due to volume pressures, deflation, and subdued demand.

Diageo (+11%) delivered 1.7% organic net sales growth for the year ending 30 June, despite a softer fourth quarter and a challenging market backdrop. After adjusting for its Cîroc transaction in North America, growth stood at 1.5%, in line with company guidance.

US spirits net sales rose 1.6%, underpinned by a 16.9% surge in Tequila sales, led by Don Julio’s 41.9% growth. The brand’s strong cultural resonance and successful activations drove this performance, while its Crown Royal brand also contributed positively to the results.

WH Smith (-33%) fell sharply following the retailer’s announcement of a significant downgrade to its full-year profit outlook. The move came after the company uncovered an overstatement in profits at its US division, prompting the appointment of an independent auditor to investigate.

As a result, WHSmith revised its full-year headline profit before tax and exceptional items to approximately £110 million, well below analysts’ previous forecasts of around £140 million.

Shares of Auction Technology Group (-31%) also fell following a profit warning and the announcement of its acquisition of Chairish, a US-based marketplace specialising in vintage furniture and art.

The company now anticipates its adjusted EBITDA margin for the fiscal year of between 42-43%, down from its previous forecast of 45-46%. Although third-quarter revenue showed slight improvement over the first half, profitability has been squeezed – largely due to a shift in revenue mix and increased shipping volumes that yielded lower margins.

Domino's Pizza Group (-17%) cut its annual core profit forecast, citing rising labour costs and subdued customer demand as key pressures on performance. The company now expects underlying core profit for 2025 to range between £130 million and £140 million, a reduction from its earlier guidance of £141 million to £150 million. While the short term macro-economic backdrop is undoubtedly unhelpful, we were encouraged by the company’s focus on operational improvements, automation and digitisation, relentless pursuit of best-in-class customer service, and – most importantly – evidence of market share gains. 

RELX (-12%) and Sage (-11%) fell in the absence of concrete newsflow, both caught in the crosshairs of a broader negative sentiment shift towards shares perceived to be potentially impacted by the evolution of AI. We are of the strong view that AI is likely to be a tailwind rather than a headwind for both companies over the medium term. RELX combines ownership of extensive and long-standing data sets with a front footed approach to leveraging AI investment and partnerships to improve its customer offering, such as a recent strategic alliance signed with the high-profile legal generative AI disruptor HarveyAI.. Meanwhile, Sage has also been investing actively in AI powered solutions for several years, such as its productivity-enhancing Sage Copilot generative AI assistant, as well as internally-developed machine-learning products like its accounts payable automation tool. 

In terms of portfolio activity, Spectris exited the portfolio in August ahead of the completion of a takeover bid. With shares trading at a narrow discount to agreed terms, the decision was taken to reinvest the capital elsewhere and two new holdings were initiated for the Fund during the month. 

Cranswick is a  leading UK food producer, specialising in premium, innovative, and high-quality fresh and added-value food products, particularly in pork and poultry. A mid cap stock towards the larger end of the FTSE250, Cranswick has been a staple of the London market for decades. Its track record of compounding growth is exemplary, having delivered 35 years of unbroken dividend growth and an annualised total return of over 18% during its time on the market. Its key intangible asset strength under the investment process lies in distribution, with a very high level of vertical integration in the form of ownership of feed mills, pig and poultry farms and 23 production facilities across the country. It also boasts deep, long-term strategic customer relationships with the large supermarkets, with a partnership approach to developing resilient supply chains, dedicated facilities and innovation for category growth. Cash flow returns on capital delivered by the business are notably strong and stable (currently around 12.0%)

Foresight Group is a FTSE 250 alternative investment management business focusing on infrastructure ‘real assets’ and private equity investing. Its infrastructure division, which contributes approximately two thirds of the group’s profitability, caters to both institutional and retail clients looking for exposure to the energy transition, natural capital and core infrastructure. The high-margin private equity division has a network of offices across the UK investing in growth private equity, venture capital and private credit assets. Foresight enjoys a high level of recurring revenue, predominantly derived from management fees on long-term investment structures, which is currently running at 87% of total revenue, comfortably in excess of the 70% recurring revenue threshold required to count as a top-tier Economic Advantage asset under the investment process. The company boasts a very strong return on capital profile, with current CFROC of 33.8% (well ahead of the Fund’s average of 14.5% and wider UK universe average of 6.9%). Its medium-long term growth prospects are well underpinned by the structural growth tailwinds of the sustainable energy transition and strong flows into private market assets – prospects which are not reflected in current valuation multiples at a significant discount to both the wider market and the range of recent comparable peer transaction.

Positive contributors included:

Spirax (+15%), Bunzl (+11%), Diageo (+11%), Renishaw (+8.6%) and BP (+8.3%)

Negative contributors included:

WH Smith (-33%), Auction Technology Group (-31%), Domino’s Pizza Group (-17%), Relx (-12%) and Sage Group (-11%)

Discrete years' performance** (%) to previous quarter-end:

*Source: Financial Express, as at 30.08.25, total return (net of fees and income reinvested), bid-to-bid, institutional class. **Source: Financial Express, as at 30.06.25, total return (net of fees and income reinvested), bid-to-bid, primary class.