Liontrust Economic AdvantageAnthony Cross and Julian Fosh
Professional Investors and Advisers only
Performance in 2011
Liontrust Special Situations
Ranked 1st/297
Liontrust UK Growth
Ranked 3rd/297
Liontrust UK Smaller Companies
Ranked 3rd/58
7.54%5%
10%
1.49%
0%
5%
10%
4.99%5%
10%
Ranked 1 /297in IMA UK All Companies sector
Ranked 3 /297in IMA UK All Companies sector
Ranked 3 /58 in IMA UK Smaller Companies sector
-3.46%
-7.04%
-15%
-10%
-5%
0%
-15.16%
-9.04%
-15%
-10%
-5%
0%
-3.46%
-7.04%
-15%
-10%
-5%
0%
Source: Financial Express 31/12/10 to 31/12/11, total return, bid-to-bid. Past performance is not a guide to future performance.
-20%
Liontrust Special
Situations Fund
FTSE All Share Index
IMA UK All Companies
-20%
Liontrust UK Smaller
Companies Fund
FTSE Small Cap ex ITs
IMA UK Smaller Companies
-20%
Liontrust UK Growth Fund
FTSE All Share IMA UK All Companies
1
Opportunities in UK equities
Attractive short term valuations
Long term growth opportunities
2
Company strengths that competitors struggle to reproduce
A process for exploiting opportunities in UK equities
Intellectual property
Distribution channels
Repeat business
The hardest to replicate:
Other intangible strengths:
Franchises & licences
Customer databases & relationships
Procedures & formats Culture Brand& licences relationships & formats
3
UK Equity Market: cash flow returns on capital
Measuring returns in competitive companies
15
7
9
11
13
15
-1
1
3
5
Source: Collins Stewart Quest ™ 29th November 2011. Cash flow returns on capital: post-tax, real economic return on total invested capital. Cost of capital: real weighted average cost of capital. UK equity market as defined by Collins Stewart’s Quest database, which currently covers 530 UK companies ex financials, with a current combined market cap of £2,025bn. * Estimated values. Estimates are not a reliable indicator of actual performance.
Cash Flow Returns on Capital Cost of capital
4
GlaxoSmithKline International Consolidated Airlines Group SA
Financial advantage - Value Creators & Destroyers
15
20
25
0
2
4
6
8
0
5
10
10
-8
-6
-4
-2
Source: Collins Stewart Quest ™ as at December 2010. * Estimated forecast values. Estimates are not a reliable indicator of actual performance. Cash flow returns on capital: post-tax, real economic return on total invested capital. Cost of capital: real weighted average cost of capital.
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
*
-10
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
*
2012
*
Cash flow returns on capital Cost of capital
5
Valuation - Buying at the right price
1. Price to earnings ratios
2. Sales & margins (EV/sales)
3. Yield and cash flow
4. Liontrust screens
Earnings surprises
Cyclical PE ratios
RoCE vs earnings yield
6
Employee motivation - The “owner-manager” culture
Why motivate? Academic and statistical evidence
Less financial gearing and fewer acquisitions
Smaller companies – directors’ ownership of at least 3%
Monitoring equity ownership – signals and relevance to all companies
7
Financial risk (gearing, cash generation, dangling liabilities, accounting, loss-making)
Scoring for risk
Product dependency
Customer dependency
Pricing risk
Regulatory change
Licence dependency
Acquisition risk
V l tiValuation
8
Stock example: Rotork PLC
A company with significant Intellectual Property and Distribution Strengths
20
25
30
0
5
10
15
Source: Collins Stewart Quest ™ as at December 2011. * Estimated forecast values. Estimates are not a reliable indicator of actual performance. Cash flow returns on capital: post-tax, real economic return on total invested capital. Cost of capital: real weighted average cost of capital.
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
*
Cash Flow Returns on Capital Cost of Capital
9
Stock example: RWS Holdings PLC
A company with significant Intellectual Property and Distribution Strengths
25
30
35
40
0
5
10
15
20
Source: Collins Stewart Quest ™ as at December 2011. * Estimated forecast values. Estimates are not a reliable indicator of actual performance. Cash flow returns on capital: post-tax, real economic return on total invested capital. Cost of capital: real weighted average cost of capital.
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012*
Cash Flow Returns on Capital Cost of Capital
10
Stock example: Tullett Prebon PLC
A company with significant Distribution Strengths
10
12
14
16
0
2
4
6
8
Source: Collins Stewart Quest ™ as at December 2011. * Estimated forecast values. Estimates are not a reliable indicator of actual performance. Cash flow returns on capital: post-tax, real economic return on total invested capital. Cost of capital: real weighted average cost of capital.
2005 2006 2007 2008 2009 2010 2011 2012*
Cash Flow Returns on Capital Cost of Capital
11
Long term
Current position of funds
IP rich Manufacturing and Pharmaceuticals
Information Technology / Software
Fee based fund management
Global Consumer Goods
Global Services
No: Banks, Miners, underweight Domestic Consumer and Property
12
Liontrust UK Smaller Companies Fund (UK small cap. portfolio)
350%
Fund+282.4%
Sector+178.5%
150%
200%
250%
300%
Index+37.6%
0%
50%
100%
Percentage returns from launch (08.01.98), versus FTSE Small Cap Index (ex IT) and the IMA UK Smaller Companies sector.Source: Financial Express, bid to bid basis, total return, to 31.12.11. Past performance is not a guide to future performance.
-50%
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
13
F d
Liontrust Special Situations Fund (UK “all cap.” best ideas portfolio)
100%
120%
Fund+101.8%
Index+28.9%
40%
60%
80%
Sector+21.5%
40%
-20%
0%
20%
Percentage returns from launch (10.11.05), versus FTSE All-Share Index and the IMA UK all Companies sector.Source: Financial Express, bid to bid basis, total return, to 31.12.11. Past performance is not a guide to future performance.
-40%
Nov
'05
May
'06
Nov
'06
May
'07
Nov
'07
May
'08
Nov
'08
May
'09
Nov
'09
May
'10
Nov
'10
May
'11
Nov
'11
14
Fund+78.9%
Liontrust UK Growth Fund (UK large and mid cap. portfolio)
80%
90%
Index+59.2%Sector+54.4%
40%
50%
60%
70%
0%
10%
20%
30%
*Percentage returns since manager inception (25.03.09) versus FTSE All-Share Index and the IMA UK All Companies sector. Source: Financial Express, bid to bid basis, total return as at 31.12.11. Past performance is not a guide to future performance.
-10%
Mar
'09
Jun
'09
Sep
'09
Dec
'09
Mar
'10
Jun
'10
Sep
'10
Dec
'10
Mar
'11
Jun
'11
Sep
'11
Dec
'11
15
Strictly private and confidential information
Liontrust UK Growth Fund, Liontrust UK Smaller Companies Fund, Liontrust Special Situations Fund
Important noticeThis presentation is the property of Liontrust Investment Partners LLP (“LIP”), authorised and regulated by the Financial Services Authority, and is strictly confidential. It contains information intended only for the person to whom it is addressed or presented, and is intended for evaluation purposes only, with no licence to use the content or materials within. In receiving this presentation, the recipient acknowledges and agrees that: i) in the event the recipient does not wish to pursue this matter, this presentation will be returned as soon as possible; ii) the recipient will not copy, fax, reproduce, divulge or distribute this confidential presentation, in whole or in part, without the express written consent of LIP; iii) all of the information herein will be treated as confidential material with no less care than that afforded to the addressee’s own confidential material of the most sensitive nature; iv) information herein may constitute material non-public information disclosure of which may be prohibited byof the most sensitive nature; iv) information herein may constitute material non public information, disclosure of which may be prohibited by law, and the legal responsibility for its use is borne solely by the recipient. This presentation in no way constitutes an offer to sell, nor a solicitation to purchase securities in any company or investment product.
The value of units in a unit trust and the income generated from them can fall as well as rise and are not guaranteed; investors may not get back the amount originally subscribed. Past performance is not a guide to future performance. Some smaller companies may be less liquid than larger companies and the price swings in smaller company funds may therefore be greater than in larger company funds. The issue of units may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Equity investment should always be considered as long term.
The Prospectus or Simplified Prospectus for Liontrust’s unit trusts are available direct from Liontrust or from our website, www.liontrust.co.uk.
16
Style factors, measuring the portfolio on a weighted average basis, relative to the market, on a scale of +5 to -5.
UK Growth Fund style factors, relative to the market
Style factors, relative to the market
Quality: measured on 5 year average cash flow return on capital, 3 year average real capital growth and equilibrium growth, fixed cover charge and changes in cash flow return on capital.
Momentum: measured on a 9 month moving average relative price change, a comparison of the 100 and 200 day moving average, and of the 30 and 90 day moving average, a 12 month relative trading range, and 3 month EPS momentum.
Value: measured on the Collins Stewart Quest ™ measures ofLiontrust UK Growth Fund
+2.0
+0.1
-1.4Quality Momentum Value
Value: measured on the Collins Stewart Quest measures of valuation and market to book, on earnings value to sales, dividend yield and PE ratios.
Financial strength: Collins Stewart Quest's ™ Q score, a proprietary measure of financial strength/risk, scored on a composite of fixed cover charge, current ratio, cash flow return on operating assets (CFROA) and CFROA stability. Measured on a scale of 0 to 10, 10 being the safest, 0 the riskiest.
C h fl t it l t t l i t
UK stock market*
6.0
4.7
10.3%
5.9%
1.7
1.3
Cash flow return on capital: post tax, real economic return on total invested capital, as a percentage (5 year average).
Stability is the variance in operating returns (i.e. CFROA, the economic return on operating assets) over 5 years, including the most recent forecast year, minimum 0, maximum 2.5.
Source: Collins Stewart Quest ™ December 2010* As defined by Collins Stewart’s Quest database, which currently covers 530 UK companies ex financials, with a current combined market cap of £2,025bn.
Financial strength Cash flow return on capital Stability
17
Awards and Ratings
Liontrust UK Growth Fund 5 Crown Rated, Financial Express
Liontrust UK Smaller Companies Fund 5 Crown Rated, Financial Express
A Rated, OBSR
Liontrust Special Situations FundInvestment Week Fund Manager of the Year Awards 2011, UK Growth sector
5 Crown Rated, Financial Express
A Rated, OBSR
Anthony Cross & Julian FoshA rated by Citywire for their risk-adjusted performance from 30.11.08 to 30.11.11.
Julian Fosh FE Alpha Manager 2011Julian Fosh FE Alpha Manager 2011
Anthony CrossCitywire Top100 UK All Companies Manager of the Year 2009
LiontrustProfessional Adviser Best Smaller Companies Group 2009
18
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