at last valuation point in May 2020 unless otherwise stated
May 2020 saw equity markets continue their recovery boosted by the co-ordinated monetary and fiscal stimulus measures deployed by central banks in order to keep economies and confidence alive. In addition, with Covid-19 seeming to be coming under some semblance of control in Europe, there has been a general easing of the lockdown measures and the partial reopening of economies. Portfolio companies are taking measures to future proof their operations. Further issues are likely to arise in winter when colder weather could cause another increase in Covid-19 infection rates, subsequently forcing the authorities to implement further lockdown measures. Similarly, the US Presidential election in November and the increasingly hostile dialogue between the US and China over issues such
as Hong Kong and trade tariffs will only act as a drag on markets.
We have now been managing Ocean UK Equity for two years – launched on the 14th of May 2018 – and this is the third challenging economic period we have faced. The first was the sharp sell-off in Q4 2018. The second was the final third of 2019 when domestic and value stocks rebounded and international stocks came under intense pressure as sterling strengthened.
Now we are all facing the impacts of Covid-19 not only on domestic and commercial life but also particularly on the economy. During each of these three different situations we have stayed calm and rational. We have been reassured by the fact that we own a selection of quality companies that have strong competitive positons and that are managed by teams who appear to navigate difficult environments effectively and efficiently. The unit price is marginally back over £1 and we are focused on trying to move it higher over the longer-term. We are pleased with our relative performance, and thank all our coinvestors for their patience and continued support.
Intertek, the testing and quality assurance provider for items such as cargos as they cross borders and checking the skills of workers who handle food, has released a trading update. Revenues fell 4.6% across the group in the context of the market anticipating a 10% decline. The final dividend is being paid, demonstrating the cash generative nature of the business. The balance sheet is strong with net debt of circa £629m, which is roughly matched by its annual earnings before tax. During the crisis it has developed a programme, Protek, which provides tailored health and hygiene testing for companies and government agencies, including hotel and restaurant operators who are keen to provide reassurance to much needed returning customers. The crisis should only accelerate the increasing trends towards greater quality control which provides interesting structural growth opportunities for Intertek and could increase its competitive position within the $250 billion global quality assurance market.
Experian, the global information services company, released prelims for the year ending 31st March 2020. Organic revenues were up +8% and, EPS up +3% whilst the dividend was held at the same level as 2019 and the balance sheet remains robust. Since the year end, Covid-19 has had an impact across the business with trading in April down -5% and FY21 guidance has been withdrawn. Experian have implemented a range of short-term costs mitigation actions such as directors taking a 25% pay cut for six months. It has also helped small businesses in the US and the UK by providing free Experian credit reports. Operationally, the focus has been on maintaining appropriate levels of organisational capacity in order to serve customers and communities when conditions improve. Covid-19 has highlighted the fundamental importance of data and its value to society. Experian is in a strong position, and as the crisis abates, they should continue to deliver long-term revenue and profit growth.
The Fund aims to achieve capital and income growth, and to provide a return (after fees, charges and other expenses payable out of the Fund) in excess of that of the CBOE UK All Companies Total Return Index over the long-term.