During August, the fund was behind the FTSE All-Share index and competitor funds. Positive contributors to performance included WH Smith, Dunelm, Paragon and Signature Aviation. Dunelm has continued to trade strongly in recent months against a background of resilient demand for homewares and the company growing its market share. Detractors included Hargreaves Lansdown and Brewin Dolphin. We thought the trading update from Hargreaves Lansdown earlier in the month was encouraging, with the company continuing to gain market share. We sold out of the fund’s holding in Cineworld during the month. The COVID-driven shutdown of its business worldwide has seriously weakened its balance sheet and any potential equity raise is complicated by the family shareholder structure. Social distancing, face masks and studios delaying new film releases are all unhelpful. The shares are now stub equity and could recover, but dividend payments currently look a distant prospect. We added to the fund’s positions in British American Tobacco and WH Smith, taking advantage of share price weakness. WH Smith is managing its cash burn well, cutting costs and will be a survivor. It may well also benefit longer term from a number of competitors falling by the wayside.

This is not a recommendation or solicitation to buy or sell any particular security. The views and opinions expressed herein are those of the manager at the time and are subject to change without notice.