Global markets were relatively becalmed in August. After a short interlude during the spring sell-off, leadership remained narrow, with AI-exposed US technology shares and financial shares the key drivers of stock market returns. Evenlode Income fell -1.0% compared to a fall of -0.3% for the IA UK All Companies sector and a rise of +0.9% for the FTSE All-Share.

Smith and Nephew, Diageo and Unilever were the most significant positive contributors, with all three companies releasing reassuring results. Unilever’s growth accelerated in the second quarter and guidance of 3-5% organic sales growth was confirmed for the full year. Diageo’s full year results were better than expected, whilst management’s forward guidance on free cash flow and profit growth led to small upgrades. RELX, Sage and Wolters Kluwer were the most negative contributors. All three companies released strong results at the end of July, but shares weakened in August as investors considered potential competition from generative AI companies. We think the growth prospects for these companies remain strong, and that their specialist domain expertise, deeply embedded products, and large proprietary data sets and content – supported by continued strong investment in new technologies, including AI - will make it difficult for new entrants to gain meaningful market share.

The main portfolio change during the month was the exit from Spectris, which is subject to a takeover, with proceeds used to initiate a new position in Weir Group. Weir is the global leader in pump technologies for minerals processing. Its resilient aftermarket business supports consistent mid-to-high single-digit organic revenue growth, strong profitability and cash generation. Weir is well set to benefit from structurally growing demand for critical metals such as copper, nickel, lithium and cobalt. Shares trade on an attractive free cash flow yield of over 5%.

Recent results have been impressive in aggregate, particularly given that they are reporting on a period that featured a very high level of geopolitical and tariff turmoil. Over 80% of the portfolio has updated the market since the start of July, with reporting holdings posting aggregate growth of +5% for organic revenue, +7% for organic profit, and +10% for earnings per share (EPS) growth over their most recent period^.Valuations look good too - the portfolio’s current free cash flow yield is 5.2% and forecast to be 5.7% next year, and the current dividend yield is 2.8%.

On 1 September, the fund went ex-dividend, declaring a second quarter rate of 1.78p per share (B Income shares), representing a rise of +2.9% year-on-year.