In August, the NAV was +4.5% on a total return basis and the share price was +4.0% on a total return basis, while the index was +0.7%. We have been set a reinvestment challenge, as a result of the two bids for major portfolio holdings, Intertek and Schroders, which are moving toward completion in Q3 or Q4 2026. We have decided to deploy the capital released from these two takeover situations into two new holdings and to build up another relatively new holding, where recent share price weakness has offered an opportunity to resume accumulation. In all three cases, we have stuck to our stock selection criteria – of investing in world class London-listed companies, preferably with global reach and scale. In addition, we look for businesses with unique intellectual property (IP), in terms of brand, data or franchise. The existing holding we have been adding to is Games Workshop (GAW). Here, shares have fallen more than 15% from recent highs and we are keen to take advantage. The weakness appears to be little more than profit-taking, admittedly after a strong run. Recent results confirm, though, that GAW's extraordinary IP – Warhammer and associated universes – continues to hold the attention of its growing legions of fans. There are not many pure global entertainment IP franchises listed around the world and certainly very few of the calibre of GAW. We think of the growth and investment returns delivered over time by two of our long-standing holdings in the Lindsell Train Global Equity Strategy, Nintendo and TKO (owner of WWE and UFC). GAW has a similar opportunity to demonstrate longevity and increasing returns from global scale in our view; the US is already its biggest market and far from mature. Back at launch in 1996, people might have thought Pokémon, partially owned by Nintendo, was just a fad. It has turned out to be one of the most valuable pieces of entertainment property on the planet. Warhammer too is anything but a flash in the pan, first released in 1987 and more popular today in more parts of the world than ever before. We are replacing Intertek with another IP-rich UK industrial company, Spirax Group, which we have followed for 25 years or more. Spirax operates across three divisions within thermal and fluid energy solutions, holding patents on: steam management systems (50% of revenues); electrical thermal solutions (26% of revenues); and peristaltic pumps (24% of revenues). These products are mission-critical to their customers. Crucially, the average cost of a Spirax product is between £1,500 and £50,000, which means the business benefits from multiple repeat orders and is much less reliant on any global or national capital expenditure cycle. The business has fragmented end markets, good sized TAMs (total addressable markets) with respectable market shares. Across all three divisions, Spirax's share varies between 9% and 17%, with no single customer accounting for more than 1% of revenues. Looking forward, the green transition is likely to be helpful for Spirax – its steam products help to improve clients' system efficiencies to reduce energy and water consumption. The opportunity looks even bigger within the electrical division: 95% of industrial heat is generated from fossil fuels currently, which shows up in Scope 1 – but can be eliminated if the customer switches to an electric solution. Improving customer efficiency has been a key area of expertise and differentiation through Spirax's history. In many ways the company can be best understood as a deeply qualified energy-efficiency consultant, rather than an industrial component manufacturer. The high net margins of over 20%, consistently enjoyed by Spirax, confirm the high levels of IP in its services. In 2021, Spirax's share price reached the heady heights of £160 – a P/E of nearly 54x and an EV/sales of c.9x – off the back of euphoria about the growth rate of its Watson-Marlow peristaltic pumps business, which primarily serves biopharma customers, who were placing enormous orders to keep up with vaccine production demand. The share price then fell over 50% as this extraordinary demand washed through post-Covid. The share price has subsequently traded sideways, not helped by a global slowdown in capital investment, particularly in China, which still represents c.8% of sales. Now seems an attractive juncture to begin a holding. Many of these headwinds are now reversing in our view and there are attractive growth prospects for Spirax in the booming semiconductor space, as well as nuclear and production of biologic drugs. Finally, there is a nascent data angle. Spirax is looking to turn its huge installed base of industrial equipment into a source of continuous customer data, and then use that data to make its engineering expertise more valuable, more frequent and scalable. Spirax argues that the unique combination of this growing data set with in-house sales engineers, who understand each specific customer and system, not only provides a competitive barrier for the business, but also gives it more of an opportunity to upgrade their systems and sell connected products. The company has a stated ambition to install 100,000 smart products; it is currently 20% there and the numbers are growing quickly. To be clear, Spirax shares do not trade like those of a pure data company – such as Experian, for example – and short-term price moves will likely continue to be driven by investor confidence in global industrial production. Nonetheless, the company has the data sources and credibility to exploit developments in digital technology, to make its products and services even more valuable to its customers. As such, it fits our intention to identify and invest in more London-listed companies with underappreciated or underexploited data assets. One example of such a data-rich portfolio company is Clarkson, the world's biggest shipping broker, which we initiated a position in 18 months ago and which has made steady share price gains subsequently. Encouraged by the experience of investing in a world-leading brokerage business, where the leadership position generates proprietary data that further consolidates the leadership position, we have also begun a holding in TP ICAP.
