July update. Markets slip as the economic impact of the Coronavirus hits home

13th August 2020

The UK market saw its first monthly reverse following the record falls in March as Europe locked down.  Whilst economic data is recovering, the signs are that it will be a slower recovery than many expected as confidence takes time to rebuild. The various job retention schemes will also end in the coming months, leading to an inevitable rise in unemployment.

Whilst current conditions are unquestionably difficult, they do produce opportunities to add high quality companies trading at multi year lows to the portfolio. We anticipate these companies not only surviving but able to thrive in years to come as the recovery takes hold, though we accept that this may take longer than we first envisaged. The disruption caused will mean some industries and working methods change for good – to the benefit of some companies and the detriment of others. Well capitalised, nimble and forward-looking companies should be able to start to thrive and build larger businesses over the coming years.

We have continued to see an active fund raising market this month as companies continue to tap the equity market to repair their balance sheets and provide capital to take advantage of the growth opportunities the pandemic has thrown up. By purchasing shares at the time they are raising fresh capital, we are typically buying in at a discount to the prevailing market price, free of stamp duty and broker commission, coupled with now owning a company that is inherently in a stronger position than it was before the fundraise.

This month Inspiration Healthcare, Primary Health Properties, Infrastrata, Sumo Group and Countryside Properties were added to the portfolio as part of fund raisings. We also added to our holding in Network International, whilst purchasing Elixirr International at IPO. The IPO market has understandably been quiet during the market crash as investors awaited greater certainty. We are starting to see early signs of this changing and anticpate more IPO’s later in the year.

In July, the MFM UK Primary Opportunities fund returned -2.0% compared with -3.6% for the FTSE All Share and -2.2% for the IA UK All Companies sector.

Please be advised that 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



Inspiration Healthcare

Inspiration is a medical technology company whose strategy is to become the leader in neonatal care equipment. The Company has received £5m of adult ventilator orders from the NHS as a result of the Covid-19 pandemic. We acquired the shares as part of a placing to fund the acquisition of a company which designs and manufacturers ventilators for neonantal intensive care. Whilst it is one of the smallest companies by market capitalisation in the portfolio, it is profitable and we believe well placed for future growth.

Primary Health Properties

PHP is an investment property company specialising in the rental of GP surgeries, pharmacies and dentists. We sold our holding at the end of February, citing its substantial premium to NAV in a market that was commencing its record fall as a result of the pandemic. With a share placing at more than 10% below the level we sold, we re-instated the stock in the portfolio. The shares offer stability and a secure dividend in an economically uncertain time.


Infrastrata is a developer of gas storage projects and recently acquired Harland & Wolff, a shipyard in Belfast, and most famous for building the Titanic. We acquired the shares as part of a fund raise to strengthen the company’s balance sheet and allow it greater scope to pitch for ship refurbishment projects. We acknowledge that Infrastrata has had a chequered investment history but believe the new management, along with this fundraise, put the company on a far stronger footing and we believe we are getting a lot of assets for our money due to the company’s lowly valuation.

Sumo Group

Sumo is a video game developer working with some of the largest players in the industry. Having first purchased the stock at IPO in 2017, we re-acquired the shares as part of a fund raising for acquisition purposes. We consider this an attractive re-entry point in a rapidly growing industry. We continue to hold Team17 in the sector as well.

Countryside Properties

Countryside is a UK housebuilder. One part of the business is focused on house building in London and the South East, whilst the partnership side of the business focuses on building affordable homes by working with local authorities and housing associations, helping to regenerate areas nationwide. We acquired the shares as part of a £250m raise to reduce debt levels and allow further development of the partnership’s business.

Network International

Network International is a fast growing payment processing services company in the Middle East and Africa. It services vendors by facilitating them to accept payment from customers and also provides debit, credit and prepaid cards to customers. We added to our holding as part of a £200m fund raise to acquire an African payments’ solution provider, acquiring the shares at a 9% discount to the previous night’s closing price.

Elixirr International

Elixirr is a management consultancy business. Founded during the financial crisis in 2009, it it a challenger to the larger consultancy businesses. Now operating in 25 countries and with over 100 employees, the capital raised at IPO will allow it to grow its presence further by adding teams and acquiring complementary businesses.




We trimmed our holding in this software provider following a strong set of results and a double digit rise in the shares.

MJ Hudson

We trimmed our holding in this provider of legal services and fund administration, whose focus is on the alternatives sector. The shares rallied on a trading statement.

Renalytix AI

We reduced the holding in this artificial intelligence kidney disease testing company. The shares have performed very strongly of late on the back of obtaining a secondary listing on NASQAQ and raising a further $70m for development. It remains one of our most exciting holdings.

AJ Bell

We reduced the holding in this investor platform business following a strong set of results. We have a relatively high exposure to this area with holdings in Hargreaves Lansdown and Integrafin as well.


The holding in this brick and other building supplies merchant was trimmed on strength. With the recent purchases of housebuilders Taylor Wimpey and Countryside Properties, we were content to reduce exposure to this small cap.



Cumulative Performance (Total Return %)– July 2020

Fund/Benchmark Name 3M to 31/07/2020
6M to 31/07/2020
Year to 31/07/2020
3 years to 31/07/2020
5 years to 31/07/2020
Since Inception (28/05/1997)
MFM UK Primary Opportunities P Acc 2.3 -15.7 -12.5 -4.9 26.7 348.89
Quartile Ranking – IA UK All Cos 2 2 2 2 1 1
IA UK All Companies 1.2 -17.6 -14.5 -8.3 7.8 213.9
FTSE All Share 1.3 -17.8 -17.8 -9.1 8.5 217.8

Source: FE 31/07/2020


Discrete Annual Performance (Total Return %)– July 2020

Fund/Benchmark Name Year to 31/07/2020 Year to 31/07/2019 Year to 31/07/2018 Year to 31/07/2017 Year to 31/07/2016
MFM UK Primary Opportunities P Acc -12.5 0.6 8.1 27.4 4.5
Quartile Ranking – IA UK All Cos 2 2 3 1 1
IA UK All Companies -14.5 -1.2 8.5 16.6 0.9
FTSE All Share -17.8 1.3 9.2 14.9 3.8

Source: FE 31/07/2020


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 Financial Conduct Authority. Marlborough Fund Manager 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