CT UK Capital And Income Investment Trust Plc (CTUK) Earnings Call Transcript & Summary

Good afternoon, and welcome to the CT UK Capital and Income Investment Trust PLC Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Dominic Younger, Fund Manager. Good afternoon, sir.

Good afternoon, and good afternoon, everyone, and thank you for joining this update session on the Investor Meet Company platform for the CT UK Capital and Income Investment Trust. We'll be looking a little bit closer to what's going on in markets and why we think there's a unique opportunity in our market at the moment and how we aim to unlock it for our shareholders. The CT UK Capital and Income Investment Trust of the company, which has combined capital growth and dividend growth every year since starting out in 1992, and I'm pleased to report we're in good shape to keep that income growth coming, helping you bust inflation a year where it's once again reared its head. Just to -- just to talk a little bit through about what we'll be talking about, we'll be recapping a little bit about the team here at CTI, some of the deep resource we have at our disposal. We'll then touch on how we hunt for new ideas and why we think we can offer you something different, both when it comes to capital and income. And we'll look at how that investment approach feeds into portfolio positioning, and I'll shine a light on some recent activity that has seen us continue to develop the portfolio. And then I'll give an idea of why I think despite the market delivering strong returns last year. There's plenty left on the table. And at the end, I'll be delighted to take any questions, which I think you can submit in the portal. But first things first, a reminder of who I am. My name is Dominic Younger. I have the privilege of being portfolio manager of the CT UK Capital and Income Investment Trust. And although I'm excited to have taken on the trust relatively recently, I spent a decade on the desk here at CTI and also manage other pooled institutional income portfolios. What do we hope to deliver to you? It's my hope that our shareholders will continue to regard this trust as a go-to place to park savings and see that capital increase over time while also receiving a sustainable income stream that grows year-on-year-on-year and whether that you take that income or harness the full power of by compounding your reinvested dividends. We hope it's a productive place for you. So to kick it off, I thought I'd do a bit of a straw poll for you to just have a ponder about at home. And I'm asking the question, who on the line thinks that we will own -- that they will own more U.K. equities over the next 12 months. Berenberg did a survey of professional investors in February. And this was the result, which I think is quite interesting. Nearly 40% of investors were minded to up their exposure to the U.K. with half looking to keep their exposure flat, perhaps content to remain stable after good gains last year. And interestingly, splitting this out to consider only those who invest across Europe or around the world, over 3/4 plan to hike their U.K. exposure, which is interesting, isn't it? Overseas exposures, overseas investors overwhelmingly looking to move more money into U.K. equities over the next 12 months. Now the eagle eye of you all spotted that this survey did take place before the war in the Persian Gulf took hold. And certainly, pre Iran, it felt like that the U.K. was -- had reached a point where money was starting to flow back in. It started at the top of the index last year was beginning to broaden out and filter through the FTSE 100 and into the FTSE 250. When something gets so cheap, money does eventually wake up. And when markets settle down post the current turbulence, we would expect this trend to broadly continue. So -- turning to our approach. There's not much has changed about that. We're -- it's been decades in the making on the U.K. income desk here at Threadneedle. We're investing based on fundamentals with a value contrarian lens. And as a reminder, we're a very deeply resourced team where we've got 200 research analysts over GBP 500 billion of AUM and on the U.K. desk specifically, one of the best resource you'll find in the city. And the heritage of that team is very long-standing as bottom-up contrarian investors -- how are we looking to do this? Well, it's about the portfolio construction as a whole remains balanced between those early-stage turnaround businesses and ideas which are a bit further along their recoveries, maturity curve. So closer to becoming those steady compounders in what I like to think of as our capital growth engine room. But the new positions, we're very much looking for names that are out of favor of the market and have typically underperformed materially, which can be for a range of reasons, often amounting to what we call a change situation where unlike when a business is just churning out 10% year-on-year-on-year, the market can really struggle to price those future cash flows effectively. And that's where self-help is king, interrogating the financial statements through cycles is really critical and just really getting yourself immersed in the web of personalities involved is essential. And often, it can mean finding middling businesses priced as poor ones as well as great businesses valued as mediocre ones. And there's a few of those around at the moment. Just turning to the next slide. And a philosophy that really underpins everything we do here at CTI is a belief in the power of income. And I think this chart illustrates that point very well. And when you're -- what you're looking at is an index of the U.K. market going back 100 years. And that third line from the top, the second darkest blue line, if you like, shows the 5.3% average annual return you would have gotten if you had invested your capital and simply clipped those nice dividends being thrown off each year by the underlying businesses, not bad at all. But what I want to draw your attention to is the gray line at the top of that chart, showing what would have happened if you had reinvested all those dividends back into the market -- and what you get is a 10% on average total return per year, which is really quite good, in fact, and illustrates the increasingly unappreciated virtues of dividend generation in the U.K. market, in particular, even if total return is your investment goal. And even for those who seek to harness the dividend-producing power of the equity market for pure income generation, the next chart is, of course, a reminder of what the trust has delivered. And here in the dark blue bars, we show the steady accumulation of payouts for our hypothetical shareholder who invested their capital on launch, but did not reinvest their dividends. They'll be looking at records of dividend growth every year since 1992, achieving sizable 280% growth from the starting level. And we've been pleased to increase that again to say not today the most recent dividend up 5% year-on-year. So that record of dividend growth is continuing. Those light blue bars on that chart show what the same investor would have got if they had just invested in a pure market, U.K. market funds and the orange line shows where standard savings account would have got you. So in hard numbers, if you invested GBP 1,000 of capital on launch of the trust, so far, you've been paid out over GBP 2,600 versus just over GBP 1,000 for investing in the market. And of course, totally separate to that, your capital remains invested gradually compounding in line with the underlying portfolio. So what does all this look like in total return terms if you reinvested all those dividends? Well, over the long term, looking back 25 years here for the trust, you can see that picture of steady value creation. The share price has stretched -- has increased over 500%, which runs ahead of the benchmark on 430. And later on, I hope to give you a sense of why we are cautiously optimistic about the new tailwinds emerging and the broader opportunity set going forward. And while also delivering consistently higher yield than the market. And that yield is a result of the dividend stream that feeds through from the portfolio, which is not just an afterthought, but to us, but a vital part of our proposition for you. And the chart on this slide is one that unapologetically show again, I think it's one that is a really good depiction of those -- how those cash flow streams that underlie your dividend really fit together. And what I want you to take away is the resilient nature of many of these businesses. To pick a few, you've got Aviva, an insurance company, very diversified, big motor and pension franchises. Beauty of these businesses, they sell products you simply have to have. Likewise, Chesnara, a closed book pension consolidator. They have very high visibility on the flows that are coming into the business stretching out several years. And that gives great confidence in just steady dividend appreciation. Then you've got GlaxoSmithKline developing and selling life-saving and extending drugs following totally separate cycle to the standard economic peaks and troughs. And Rentokil as well, not sure how many people discover a rat in their kitchen and then wait till the end of the month to see how much money they've got left over before calling a rat catcher, just a very resilient business model. And these are the exact types of businesses we want funding your dividend. And in quite stark contrast to the market, which is very heavily dominated by the much more cyclically economically sensitive cash flows of banks, oils and mining companies. And on the portfolio positioning, last time, we touched on the key thrust of how we -- the portfolio has been evolving under my leadership. And while there is a degree of continuity, I've been tilting existing holdings and adding new ones to bolster that dividend generation power, stock that capital growth engine with lots of fuel for the years ahead, whether that's halving the size of the erstwhile top active in one savings bank providing us with valuable capital for reshaping the portfolio or funding conviction in other names or building up existing holdings and names which perhaps fallen on harder times, but where we as a team have retested the thesis and built conviction that these are names that could become key contrarian opportunities. So media company, WPP and the pest control company, Rentokil bring to mind in that sense. And of course, starting new conviction positions like a specialty chemicals company, Croda or Standard Chartered the Asian Bank, both of which have made promising early starts for the portfolio. Portfolio turnover has been more modest in recent months, and we'll touch on -- there has been activity. We will touch on that, although it must be said that events in the Middle East have provided a pretty pronounced relative performance tailwind, especially in the month of March where the oil price shot up despite having Shell as our second largest absolute holding, although we've been pleased to outperform the market in the last -- each of the last couple of months. So just a glance at what the shape of the trust looks like in its refresh form. OSB off the top of the active piles there as we've reduced the position. Since then, sentiment has become more muted on the U.K. domestic housing market, which is a driver of a decent portion of their book of business. But there have been many familiar names on that to long-term holders and some newer ones. So to pick out a few new ones, there's Tobacco player, Imperial Brands, Insurance consolidator, Chesnara, which I mentioned earlier. the specialist engineering company IMI, which has been a long-term high conviction pick on our broader strategy and then Standard Chartered as well. And the shape of the portfolio in terms of sector exposures versus the FTSE All-Share continues to reflect our bottom-up conviction that it's an output rather than a sector level allocation. And then just to touch on some of the key portfolio characteristics. the number of holdings has ticked down from 50 to 48 since we last spoke at our last update in February and still comfortably inside that 45 to 55 range, which allows us to back our conviction in size while leaving enough oxygen at the smaller end of the weighting range for newer or higher risk investments to move the dial. Market cap is, of course, another important factor, and we take into account on position sizing and the range of investments across that spectrum. It's fairly evenly spread if you took a weighted average of the market cap across the portfolio, you get GBP 43 billion, which puts you neatly inside the kind of the top 20 of the FTSE 100. Dividend yield on the portfolio is running about 4% on a backward-looking basis. So nicely ahead of the market, which sits on 3.3%. And we've done a little bit of our activity has actually been involved in just bolstering that income where we can, working around the ex-dividend dates, looking at shifting some capital around some of our insurance exposures in particular, which tend to be large dividend payers. And looking through the portfolio holdings to the geographic sales exposure where they're actually earning their revenues. The obvious but important point to always make here is, and you can see it in the light blue bars is that the U.K. market, the U.K. equity market is far from a mirror image of the U.K. economy. In fact, drives the vast majority of its earnings from outside the U.K. The bottom line is we're a global market still underpinned by world-class institutions and professional services, unalienable property rights and rule of law, and those things matter more than ever now. So we're still, I think, a very dynamic and exciting place to invest. That said, we do -- the trust does have slightly higher domestic exposure than the market. This isn't because we've gone out to over-index to the U.K. economy, but it is somewhere where there's an abundance of stocks, which fit our process, proper dislocations in pricing. And we tend to alight on the genuine market leaders in what they do, whether that's Marks & Spencer and Sainsbury's in retail, Morgan Sindall and Travis Perkins in Construction, ITV in media, Land Securities and LondonMetric in real estate. These are businesses able to dominate the categories in which they compete, expand them, drive their own momentum. And really all of them, we feel are pretty well placed as things stand, which brings us to how we've looked to bolster the portfolio in recent weeks and months. Now first of all, we continue to build up our exposure in some key contrarian picks in Croda specialty chemicals firm and WPP, the media company, Croda, I've discussed before. But WPP, I think, is a very interesting juncture. It's been on the end of several years of declining sales on the back of some self-inflicted difficulties and some market difficulties. They've got a new CEO in place. She's very resolute about fixing a lot of the structural problems that WP has. It's been a business which has been very fragmented, dominated by fiefs. -- almost barely unbelievably, there's -- I think the management told us there was 100 CEOs in the business. So there's been a big piece of work consolidating that, making sure in this modern world where it's very data-led, very capability-led, they're going to their clients and they're presenting one business and not, for instance, pitching against each other, which they used to do, again, fairly believably. So the encouraging thing there is that in both in Q4 and Q1, having been at the bottom of the league tables for winning new business across the whole industry for several quarters. They went -- they surged to the top in Q4. They were top again in Q1. And we should expect some of that momentum, that validation of the much improved proposition to start feeding through to the financials towards the end of this year. So we feel like that's a business where there's a good degree of self-help going on and improving market backdrop should also help to drive home the recovery trajectory there. As I mentioned, we also undertook a bit of activity around the enhancing income, mainly focused around the insurance sector. Then in March, we exited the trust position in litigation finance, Burford Capital. It's a very unique business, helps fund corporate litigation lawsuits in return for an economic share of any settlement or victory. And there is much that is interesting and differentiated about what they do. But in March, they received an adverse outcome on a very prominent legal case that saw some severe underperformance in the shares, which was deeply disappointing. And certainly, it was attached to an outcome, which there was a very low probability, but all the same it was little comfort to us as the shares underperformed. And at that stage, we took the opportunity to retest the investment thesis. We took note of the fact that it was likely that the dividend they were paying was going to be reduced going forward, at least temporarily. And in a market where there's a lot of competition for capital, we thought that Burford would -- the capital in Burford would be put to better use elsewhere for the portfolio. One example of that is that we started a new position in a distribution business called Bunzl. This is a company which provides businesses with things that they need to run their business, but they don't sell to their customers. So we're talking paper straws for a restaurant or cleaning materials for a supermarket. -- business has a very long history of compounding profits and cash through consolidating and buying up lots of little smaller businesses, bringing them into their network, extracting cost efficiencies through sourcing, distribution and shared services. And the recent past has seen the shares go through a more difficult time. It's been a combination of executional issues in the U.S. business, a few missteps there and also a slowdown in the organic growth as the M&A activity, which tends to lead for them to organic growth also slowed down as interest rates rose. The shares have then underperformed the market by over 40% on a 3-year view. And that really brought it into our zone of thinking we -- this is a previously very well-regarded business. Returns have been consistently above cost of capital, but it's -- the market has fallen out of love with it, and we've been tracking it for some time. We've been encouraged by some of the self-help program they've undertaken to fix those operational issues. And while the deals that help fuel the organic growth have not yet picked up, I think we're seeing signs that they could start to pick up again, and that could be a lead indicator for organic growth starting to redevelop. Meanwhile, the business continues to generate a lot of cash and yields at a premium to the market. So unlike Burford there. And we're always looking to keep on building up that income generation, that yield generation across the portfolio. So we're excited for what that can offer us. And it tends to be a business which behaves quite resiliently in uncertain times. and does particularly well when there's an inflationary backdrop as well because it's able to pass the pricing on to its customers. So we're pretty happy with the addition of that to the portfolio, which takes us to what is going on in the world. As I said, it's an uncertain world at the moment. I'm not going to speculate about what's going to be coming out of Donald Trump's Twitter feed or in fact, or for that matter, what's going on about -- going on with Andy Burnham's Twitter account either. But it does seem clear that we're shifting to a new paradigm on technological and geopolitical fronts. Hard power politics is back. And then there's a separate seismic shift, which I touched on last time, but I think is worth reiterating where we've come out of that free money era where companies and individuals were able to borrow huge amounts of money at virtually no cost, pour it into assets and create all sorts of distortions in the market. And we've started to see that theme play out in the stylistic trends where both the quality and the growth investors have found life tougher after that halcyon era post-GFC. And here on the left, I've charted the growth stocks indexes performance versus a value stock index, both at a global level in the light blue chart on the left there and a European, including U.K. level in the dark blue. The lines going up when growth is outperforming. And likewise, when the line turns down, that shows value is starting to outperform. And in this part of the world, in Europe and the U.K., that shows a really stark reversal in fortunes for growth businesses over the last 3 years, coinciding with a normalization of interest rate policy as we've come out of COVID. And I mean, higher borrowing costs have all sorts of implications for businesses, markets, investment, but a really simple one is that the far out future cash flows, which drive the valuation of a lot of these growth businesses are just worth less if we have to discount them at a higher rate because central banks are offering higher risk-free rates. And I think you've seen some of that play out with some of the growth businesses. We've seen big runs from traditional value sectors like banks and miners in the -- as those growth businesses have fallen away. And in Europe as well, you've seen the chart on the right as well, those so-called quality businesses, which had it so good for a long time with good brands, very strong pricing power, which in a world of not much volume growth, low nominal growth, they're able to still grow profits and expand margins and therefore, stuck in all this investor capital and see their share prices really heavily inflate. And that started to turn over quite heavily over the last 2 or 3 years. And they took pricing too far. We all saw it like Nike trainers, which used to cost GBP 50 pre-COVID, suddenly setting you back GBP 120 or malt whiskey, which was under GBP 40 now being suddenly north of GBP 70 -- and that valuation unwind is still playing out. But given our investment approach, we expect to be on the right side of that as it continues. And against this backdrop, it may be surprising that some markets do appear to be defying gravity, if that's not too strong a phrase, Take the U.S. market, which despite of all of the regime change and clear cracks emerging in the era of Pax Americana, which has prevailed for the last 30 years, there continues to be animal spirits there, not without any justification either. The earnings growth, particularly recently, has been pretty eye-popping, really supporting those valuations. The excitement around tech-led innovation is tangible. Momentum is extremely bullish. We would argue with our valuation mindset, the valuation is not so much. And examining these charts tells you something about that. On the left-hand side, that chart looks at a broad sweep of U.S. stock market history going back 145 years in some cases and asks what percent of the time have valuations been more expensive than they are today. And you can see across that's telling us that there's not been many occasions. And that answer, I think, should be food for thought when considering where our marginal pound is going. The chart on the top right is a new one. That looks beneath the surface of that really bumper earnings growth, which has come through over the last weeks and months. And the picture is not what you might think. It's a little bit unnerving. The latest reading indicates that there's actually more companies where analysts are downgrading their expectations of future earnings growth than upgrading. -- which you couldn't necessarily tell from the headline level of earnings upgrades. And the chart at the bottom right digs a little bit deeper to tell us a little bit about that mystery and really shows what it is that has been driving that earnings growth. And there's just such a large growing concentration in one particular sector that is driving these animal spirits. So our conclusion is that while the clear strength persists in the U.S. markets, there is underlying weakness in some really quite critical drivers like earnings growth, which really they don't come much more important than that in what drives markets higher. And with valuation as our North Star, we're still big believers that the key determinant of your ultimate return from any investment is the price at which you buy. So put another way, price is what you pay, value is what you get. So when it comes to red hot markets like the S&P at the moment, while it always will be a big part of investors allocations, and we would never argue any different. Our challenge to put to asset allocators is to consider whether the setup from here is there to warrant the current 73%, 74% weighting in global benchmarks or whether there's a diversification argument to be made. And naturally, as we would, we would say that the part of -- one of the answers to that diversification argument, you can make a strong argument for that being the U.K. market. And in these destabilized environments, more broadly, the U.K. market does often tend to do okay. We've got this profusion of more defensive, hard asset, old economy names, companies that are often dismissed as unexciting and lacking the sparkle of very shiny tech-driven counterparts across the Atlantic. But what they are is tried and tested businesses, which generate predictable cash flows or simply operate in sectors which deliver year after year despite not conforming with whatever the prevailing investor fashion is. The chart on the right here shows how this makeup has often seen periods of U.K. equity outperformance coincide with global shocks. We've seen that in the dot-com bubble, the GFC, the trade wars, the 2022 inflation shock and there's born contrarians where we're drawn like this to this like moths to a flame. These cash flows support some of the best dividend champions out there, providing unparalleled opportunities for income investors. The chart on the left shows why with our market's long track record of 3%, 4%, 5% dividend yield, we do remain the capital of income and all the long-term outperformance that, that has been proven to unlock over the last century for the U.K. market. So all in all, it's a really exciting place to be for those like us who really understand the power of income-generating assets. And we argue that there is a place for this sort of strategy in any portfolio really, not least in a destabilized world. And the good news, of course, is that despite the U.K. outperforming the U.S., Germany and France, since the start of 2025, you haven't missed it. We're still at deeply depressed levels across many metrics. if you like the professional investors, Berenberg surveyed at the top of my presentation, feel like you could be underweight a promising market. You are not the only ones thinking about it. And of course, here, I'm referring to the hot pace of M&A that we've had so far this year, there's 13 potential bids running year-to-date compared with -- we had 42 in the whole of last year, really picked up Intertek. We've had GBP 10 billion approach Schroders towards the end of last year, GBP 10 billion, Beazley, that was a GBP 7 billion or GBP 8 billion. Add to that easyJet, Tate & Lyle, Hiscox and [indiscernible] [Smiths Group, IMI] all implicated in M&A discussion, and that excludes a number of bids, which have come and gone. Of course, we've also had the IPO market, which has slotted back into life. several towards the end of last year, several on the slate. And then probably an underappreciated point about the U.K. You think it's too often thought of as being a bit of a backwater when it comes to the more dynamic side of capitalism. But you've got to remember, our VC market is really kind of a leading nation, particularly in Europe, where it's bigger than the German, the French, the Swiss markets combined. So it's a really important touch point for us and our economy as well as further up in the quoted markets. And just to shine a light on one sector where we do see a lot of value, U.K. real estate is a fascinating juncture before the Middle East crisis, things had started to recover in terms of the share prices from very deeply depressed base as the path to lower bond yields look to be well in train the underlying rental market was robust, had been improving despite the tepid sentiment and economic backdrop. And that backdrop hasn't changed materially. We've still seen lots of good upward rental growth. We're still seeing sizable increase in rent driven by higher cost of construction and broader cost inflation as well as the underlying tenants generally being in a more profitable place. They've all got very robust balance sheets of their own. But since the outbreak of the Iran war, we've seen obviously bond yields back up again. We're back at a point where it feels like the sector is pricing in a large amount of pain. And I mean, we haven't been adding, but we have a very healthy weight here in the trust, and we're very happy with that and excited for the scope for that to drive performance in time to come. We have LondonMetrics, Sirius Real Estate, which is more European-based and have held firm there. But the valuation opportunity means we wouldn't be surprised to see the deal makers alighting on that sector as well. So to conclude, we believe there is much to be constructed about in our approach and the longer-term fundamentals for our market. The case for U.K. equities is not about aggressive growth either domestically or more broadly across the piece. We see it as being about value and income value inherent in the fundamentals. The rating is still modest even after outperforming peers since the start of last year. And then, of course, income from the leading income market in the world, which when reinvested has driven half those double-digit long-term total returns over the last century. -- and supported the last 32 years of uninterrupted dividend growth for the CT UK Capital and Income Trust. And my contention would be that this does count for something in an increasingly uncertain world and represents useful diversification for investors and savers who might like many others, have sizable exposures to the more crowded and more richly priced regions of global markets. And despite the disruption of the year-to-date brought by the Iran conflict, the rate cycle should begin to deliver increasing support for long underappreciated segments of the market. All building blocks for our confidence that the trust is in good shape and should provide a productive place to park your hard-earned savings, and we do feel constructive about what the future brings. So I will stop talking there. I hope that's been useful. Thank you very much for listening, and I'm very happy to take any questions that you have.

Thank you, Dominic. My name is Peter Brown. I'm part of the team here at Columbia Threadneedle in the Investment Trust team. Thank you for that very insightful. We do have a couple of questions to ask you. We'll start. You mentioned it quite significantly, but we'll mention again the IPO market. Do you see any potential for a reversal in the de-equitization of the U.K. market? Why does the U.K. IPO market remain so weak relative to history?

I think that is a really interesting question. And it's one that I do ponder. And I think it plays actually into the seismic shift that I alluded to when at the top of my outlook section, where we've gone from this free money era to back to when suddenly money costs money again, companies have to evidence returns. And the PE, the private equity complex, which over the last 10 years, to your point, Peter, has been de-equitizing, if you like, the quoted markets by buying up all of our companies because they've been at deeply attractive prices, then they lever them up and then try and sell them back to us. But the fact is that a lot of their investments have been struck at times at valuations, which reflect the old era, the free money era. And therefore, there's a lot of assets in that world where their natural home might be on quoted markets, but the private equity companies have managed to kind of keep dancing, if you like, keep the music playing for the last couple of years in order to try and allow markets to start to price them more in accordance with what they would like them to be worth. But the reality is that these -- the private equity companies need to start returning cash to their limited partners. And they've got a lot of these businesses on their books. So it wouldn't surprise me at all, and this is a kind of a major theme and will take years to play out. If the de-equitization that we've seen over recent years does start to reverse as a lot of those companies which have gone into private ownership start to come into public ownership. And I'll try and stop myself from really getting on my soapbox, but the virtues, the accountability, the liquidity and the rigor that comes with being a quoted company, I think, would be of a much broader benefit to markets generally. So it wouldn't surprise me to see the pipeline of IPO is steadily picking up. And from an absolute standing start, we started to see that coming in the U.K., and we all know that it's occurring in the U.S., but that's from a slightly separate starting point, I'd argue.

On that theme, how is the U.K. or the London Stock Exchange going to attract listings on there rather than lose them to the U.S., which is arguably a bigger draw because stocks trade on higher valuations or maybe European. What's the U.K. going to do to be able to attract listings into London Stock Exchange?

I think there's a couple of important points there. I'd say the first point is that the evidence points to the companies from the U.K. and Europe that have gone over to the U.S. and listed. I think about 50% of them are currently trading below 50% of the price at which they listed. 90% of them are trading below the price they listed. And then a number of them are trading at literal single pennies on the pound. So it's far from clear that it's a panacea for European and U.K. companies or companies which would naturally list over here to go over there and get the listing that they dream about. So I'd be cautious of -- I'd caution businesses who thought that, that was an answer. And then secondly, I'd say, as I alluded to in the piece, the U.K. market has world-class services institutions. We've got -- we've got the language of business. We've got -- we're in a location where we can -- where Asian markets -- as Asian markets are going to bed, we are waking up and then we can hand over the baton to the U.S. market. So by virtue of geography, we're kind of right in the middle. There's lots of virtues for the U.K. market. What we'd like to see more of is policy support to recognize that having that healthy IPO pipeline is important for the broader U.K. economy. But strong market performance and a succession of credible successful IPOs will lay the groundwork that should bring more successful listings.

Good to hear. Next question, stock specific, if you don't mind. Could you say a bit about Unilever, please, and the drop in its share price and the sell in its food products business?

Yes. Unilever, it's a large holding in the portfolio. We think it's a great business. The Chairman has come in, Ian Meakins, who's got a very strong track record, and we've invested with them previously. And the CEO, Fernando has taken up the mantle after the previous CEO wasn't pushing change fast enough. And there is a lot of change going on in this organization. They recognize exactly where their best markets are, where they make the most money and also where perhaps there's better owners for parts of the business. They've moved forward with a split of the -- a way of their fee business via a slightly complex structure with the American here McCormick. And I think it's that -- the slight complexity of that structure and the indigestion, which the market fears over the next 12 months or so that has just caused some trepidation amidst a sector, which more broadly is not deeply in favor. I think we point to the fact that they not too long ago, managed to lift their ice cream business, and they've taken a lot of learnings from that. We know that the Chairman and the CEO are both extremely driven and in their words, bloody unreasonable people. So we'll really kind of keep the keep the focus on executing on that transaction. And then looking through that to what Unilever will be once they've separated out the food business, you've got an incredibly strong health and wellness focused EM heavy business with plenty of natural growth in it, very strong pricing power and an overall business which should command a much higher multiple. So we're excited for the long term, but acknowledge that there is indigestion, which the market is seeing playing out through some recent underperformance. But our overall conviction is steady.

Excellent. Okay. Well, we're just approaching the 45 minutes' time. So we'll leave it there. If I can just ask you for some final thoughts and comments, and then we'll pass back to the moderator.

Well, I mean, I'd just like to say thanks, everyone, for listening. We -- as you said -- as I've said, we're not suggesting that the U.K. market is about to go to like one of Elon Musk's rockets, but we think it's a really interesting point. It's about value, it's about income. And we think that this strategy and this is the perfect way to play that, and we look forward to building on some strong returns for our shareholders.

That's great. Thank you for updating investors today. I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This going to take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.