April update – UK market surges to enjoy its best month for nearly 5 years

In April, IFSL RC Brown UK Primary Opportunities returned 5.47% compared with 6.43% for the FTSE All Share.

We participated in a placing in Primary Health Properties, rump placings in Galliford Try and Provident Financial and secondary sell downs in Ten Entertainment Group and Curtis Banks. We also took the opportunity to add to our holding in Glencore following what we considered an unjustified sell off. After a relatively quiet start to the year, the IPO market is picking up and we anticipate some attractive opportunities in the months ahead.

The UK market enjoyed its first positive month of the year as it shook off global political tensions between the US and China over trade and a US led military coalition that launched strikes on Syria. UK economic growth remains weak as it reported just 0.1% first quarter growth. Fortunately, global growth remains strong which saw commodity price strength with oil hitting $75 – a level not seen for more than 3 years.

Global M&A activity remained a feature with the first 4 months of the year being the highest on record. (Source: Dealogic) The UK market remains unloved offering relative value and its constituents subject to opportunistic bids from overseas buyers.

Purchases

Primary Health Properties
A company well known to us as a regular raiser of capital. We participated in a £115m fund raise to provide capital for further acquisitions of healthcare properties in the UK and Ireland. The shares were acquired at net asset value and are underpinned with a 5.4% dividend yield. The shares were promoted to the FTSE 250 for the first time during the month.

Galliford Try
A housebuilding and construction company. We purchased the shares as part of a rump placing following a rights issue to provide capital for a joint venture which they took control of following the collapse of partner Carillion.

Provident Financial
Following a torrid period which has seen the Company lose over half its value and ejection from the FTSE 100. Management have been replaced following a disastrous change to their door collecting loan business as the business attempts to go back to its core strengths. We purchased the shares as part of a rump placing following a rights issue to help repair the balance sheet.

Ten Entertainment Group
The UK’s 2nd largest ten pin bowling company and a strong performer since we first purchased at IPO last year rising over 50%. We added to our holding as part of a secondary sell down by private equity. The shares remain modestly value and offer a dividend yield of 4.5%.

Curtis Banks
One of the largest SIPP and SSAS administrators in the country with over £12bn under administration. We purchased the shares as part of a selldown by the founders which increased the free float by to over 50%. We acquired the shares at an 18% discount to the previous night’s close which was simply too hard to resist.

Glencore
We took the opportunity to add to our holding in the secondary market following a sharp sell off as a result of Russian sanctions which saw the value of its stake in Russian aluminum producer, Rusal fall sharply. We considered the fall overdone and used it as an opportunity to increase our weighting in mining which we see as a modestly valued sector offering attractive dividends.

Sales

Fulcrum Utility Services
We exited our holding following a sharp gain on retail investor buying following a share tip in a national newspaper. With the shares no longer offering compelling value we felt new primary opportunities offered better value.

Creo Medical
We reduced our holding following a stellar rise year to date. We await newsflow on potential distribution deals regarding its minimally invasive surgery products. It remains an unexciting though relatively early stage company.

Joh Laing Group
A recent purchase, nevertheless with a return of 12% in a month and trading at close to NAV, we took profits as we see further upside limited and our cash better deployed elsewhere.

Entertainment One
The shares were sold following a bounce post insipid share price performance and to raise cash for new opportunities.

Onesavings Bank
We sold our remaining modest holding following a recovery post a fall on recent results. We anticipate further primary opportunities in the sector.

Totally
A very disappointing performer that has not delivered acquisitions inline with our expectations in the healthcare market  -we took the opportunity of liquidity in the stock to exit and deploy our capital more effectively in forthcoming primary opportunities.

Global Benefits Group
We cut our losses following a profit warning and cut to dividend. We prefer to exit those companies that disappoint.

Residential Secure Income
Another underperformer, we used a share price bounce as a result of a share buyback programme to reduce our REIT exposure for deployment elsewhere.

Reckitt Benckiser
Having correctly reduced our holding last October, we sold the remainder of our holding following continued disappointing results. We prefer to sit on the sidelines awaiting further newsflow which may lead to a more attractive entry point in the future.

Cumulative Performance (Total Return %)– April 2018

Fund/Benchmark Name	Year to 30/04/2018	3 Years to 30/04/2018	5 years to 30/04/2018
IFSL RC Brown UK Primary Opportunities P Acc	8.34	34.88	60.60
IA UK All Companies	7.41	22.76	50.77
FTSE All Share	8.16	22.20	44.99

Discrete Annual Performance (Total Return %) – April 2018

Fund/Benchmark Name	30/04/2017 to 30/04/2018	30/04/2016 to 30/04/2017	30/04/2015 to 30/04/2016	30/04/2014 to 30/04/2015	30/04/2013 to 30/04/2014
IFSL RC Brown UK Primary Opportunities P Acc	8.34	25.48	-0.78	5.57	12.25
IA UK All Companies	7.41	18.85	-3.83	7.58	13.55
FTSE All Share	8.16	20.14	-5.95	7.07	10.08

Source: FE 2018

The past is not necessarily a guide to future performance. Investments and the income derived from them can fall as well as rise and the investor may not get back the amount originally invested. R.C. Brown and Marlborough are authorised and regulated by the FCA. Marlborough are the ACD. The Key Investor Information Document and the Full Prospectus can be obtained via www.marlboroughfunds.com or by request at: info@rcbpo.co.uk