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On balance, I'm pleased to say because it's been quite a tough period. On balance, the last couple of months have been more favourable to our strategy than for a while. Let's hope that's just a beginning. And I think there's a couple of broad based things that we might observe over the summer uh that are definitely relevant to the portfolio.
First, and I think this is secondary but still significant. First, there has been a somewhat better performance from the shares of the consumer branded goods companies that were invested in. Unilever for instance which is a big holding in Finsbury over the summer to September was up something like 14%.
So quite a nice quite a nice move. And I think what's going on with Unilever but also other consumer companies that we own is is two things. The the first is there's no question global investors are beginning to ask themselves what would happen if the current bubble let's say or big big bull market in AI what happens if that runs its course or even worse bursts by the way that's not our prediction we don't know but we just observe clearly investors are feeling nervous about whether that bull market is going to sustain.
And you can see people saying to themselves, well, if that data centre thing came to an end, lots of things would be hurt by that. But what would it mean for Unilever? What would it mean for Diageo? um arguably not very much you know because they they haven't been implicated in that big um tech driven bull market.
If on the other hand, let's just say Unilever. If Unilever can continue growing steadily as it is during a period of tech disruption, maybe Unilever is a safe place to park some capital if you're feeling a bit nervous at the moment. And maybe maybe it might even be quite an interesting investment. Um we like by the way the transaction that Unilever announced earlier this summer to split itself effectively in in two.
Um and there's no doubt that core Unilever what we are going to retain um is is exposed to some quite nice growth drivers. Um you listen to Fernando Fernandez and he will say the biggest single opportunity in Unilever is the fact that washing machine penetration in India is only 15% of households. Yeah.
In Vietnam it's 35. In Mexico it's 70. other emerging markets when people get a bit wealthier they buy a washing machine that's much much earlier in India but India is a huge market for Unilever it's the kind of story that people were very excited by let's say back in 2010 or 2011 but it's kind of been forgotten about but maybe people will remember that sort of bull market.
Now I said there were two factors in the performance somewhat better performance of Finsbury over the summer. So the first was the consumer staples. The second and it's more important for Finsbury because overall we have a much more substantial exposure to this theme is that again it comes back to AI in a way.
A number of industries and companies are perceived as clear long-term losers from AI. Um, and amongst those sadly are some big investments that we have in Finsbury in data companies, uh, platform companies and software businesses. What happened over the summer was that for a variety of reasons, I'll give you some examples, but for a variety of reasons, that pessimism about the impact of AI on these companies moderated somewhat and that's led to a bounce.
So I think just to bring it back to an individual company and this is important because today this company partly because it's had a better summer it's the biggest holding in Finsbury's portfolio today that's Sage London listed software company global business United States is its biggest market global software company Sage um Sage's shares maybe over the last couple of years have gone from a high of 15 pounds uh to a low of maybe about eight.
So a serious draw down in Sage's share price and that's because people are fitting that it is a loser from AI. Now, I don't think anybody, and certainly not me, can disprove absolutely without a shadow of doubt whether or not Sage is or isn't a loser from AI. But what we can note is the way the company is trading as a business and what it's saying about itself in this changing technology environment.
And during the course of the summer, Sage reported its interim results, uh, which showed that the company's growth rate is accelerating. Um, in the United States, I said it's its biggest market growth accelerated to 14%. Um, the group growth rate is 11%. And there is no question the reason that Sage's revenue growth is accelerating is because it's inhouse developed own proprietary AI tools that are owned by Sage not anybody else.
Sage's AI tools are being successful in terms of reaching Sage's customers and delivering efficiencies for Sage's customers. I thought just one stat here. Um, Sage has roughly got 2 million small or medium-size business customers around the world. um as at the start of July, 600,000 out of that roughly two million were in some way, shape or form using Sage's AI tools.
Now, that 600,000 had increased by 20% or 120,000 in the six weeks prior to the start of July. So in other words, there's a clear very very marked acceleration of Sage's customers experimenting with Sage's AI tools and saying, "Hey, this is useful. This is saving me time. This is saving me money." And as I say, it's there is no definitive proof today.
But if this evidence is valid that Sage is actually an AI winner, not a loser, as its current business per performance suggests, then the share price is totally wrong. Much much much too low. So it's kind of really interesting. Yes, I have been satisfied with business performance um with maybe one caveat which which I will come to but again I just it's so important I must just be absolutely clear about a central driver for the future success of Finsbury.
A lot hangs on what I'm about to say. It's our thesis that the advent and advanced development of AI tools is going to accelerate the growth rates of the data software and platform businesses that we've deliberately chosen to tilt Finsbury's portfolio towards. So you better believe that we watch their results very very closely for evidence that that expected acceleration of their business is actually happening.
As I remarked, it's clear in Sage's results uh over the summer. We've had interim results as well uh from Experian, from RELX, from London Stock Exchange Group. We've had updates from Rightmove. And I think in every single case, we can see an acceleration in business growth and a clear acceleration being driven by these companies applying AI tools to their proprietary unique assets that they and nobody else own.
So I think that that is encouraging. I said there was a caveat about business performance and perhaps I perhaps I I ought to say something here about Diageo. Um Diageo had its full year results which in fact were no worse than people had feared. Um, but the fact is that Diageo's overall group revenues or sales for the last financial year were down 2%.
Now, that's not a lot, but if you'd asked me candidly two years ago, what would I have thought Diageo's revenues would be for the financial year 25/6, I would have thought, you know, plus five, plus seven. So down to yeah it it's it is disappointing. It is disappointing and it is indicative that um yeah the backdrop for consumers uh and particularly the backdrop for consumers uh wanting to enjoy themselves in bars or clubs around the world that's definitely constrained and it's it's it's crimping Diageo's ability to grow in the current environment.
So that that is somewhat of a disappointment. Uh I do have to note though um Diageo had a capital markets day um associated with the results led by the new chief executive Sir Dave Lewis, the great turnaround expert in UK plc. And um we were pleased that Diageo's share price went up somewhat after that capital markets day.
And I have to say we thought that it was rational that the shares would go up somewhat because what Lewis was able to demonstrate I think is that there is a great deal that can be done to improve the efficiency of Diageo's business. There's a great deal that still can be done to invest behind those brands that Diageo owns that are currently growing but still have a long runway of growth ahead of them like Guinness, like Johnny Walker.
And I think that what that cost cutting opportunity means for Diageo is that um earnings are protected during a period when we hope at the end of that period there will be a resumption in underlying demand for for premium spirits. So I think that for the first time for some time it's possible to express some optimism for Diageo although acknowledging that we're still not there in terms of a of a clear recovery in its in its in its end markets.
Yeah, you 2026 has been marked as as as you say by a lot of corporate activity in the UK stock market and you know however obvious or trite this observation is I I think you have to say the amount of merger and acquisition activity is suggesting that the UK stock market had become at least somewhat undervalued over this prolonged period of of underperformance.
And I think that adds a little spice to being invested in a UK portfolio right now because you never know what might happen, what might happen next. Yeah, we've had two successful bids for portfolio holdings in 2026 that combined, this is Intertek and Schroeder's combined amount to 10% of the portfolio.
Um, and that means that certainly by Q4 of this year, 10% of the portfolio is going to come back as cash. And it's a perfectly reasonable question. What what are we proposing to do about that? Um, and I mean the answer is the the straight answer is that we've begun to redeploy that capital um by selling down the positions somewhat to fund a position um that we'd already got a holding in uh but kind of felt that we'd missed the opportunity to buy as much as we wanted to.
The price has come back a bit. we've been able to buy a bit more and then there are two brand new holdings that we've um over the course of the summer actually initiated in um what I think it's important it's important for me to assert this um I is that let's call these two and a half new holdings the two and a half new holdings to my mind to Madeline's mind they are absolutely consistent with the long term investment themes that we've looked to build Finsbury's portfolio around.
So, they're new ideas, but they're new ideas fitting into long established um preferences. All three of them, we'll talk about them, I'm sure, but all three of them are global businesses listed on London, UK companies. that but they're all global businesses. They're all clearly the best or very close to the best at what they do around the world compared to to to competitors.
And I think each of them, even though it's in a different way, each of them has a franchise, a brand, or in some cases a a data asset that is unique and where we hope and believe that there's an undervaluation. you know, on the face of it, it's um it's a UK engineering company. Um it's been a very very successful business for many many decades.
And you look at it and you think, well, how can it have been so successful? because what it manufactures which are components that help um uh regulate the flow of steam in industrial processes. That's the core business. You think well that's not a very high value added piece of metal that this company manufactures.
But actually Spirax is a business whose products and services are absolutely integral to the success of their customers industrial operations. Steam and indeed Spirax has other services it offers. It is absolutely central to a myriad of industrial processes around the world. And Spirax has millions upon millions of its components installed around the world.
And that offers the opportunity for the company to advise its customers how to derive efficiencies from their processes. As a manufacturing business, you might think that Spirax might enjoy operating margins, I don't know, of 7 or 8%. Actually, Spirax has operating margins of over 20%. And that's telling you that there is a significant amount of knowhow, franchise, intellectual property in Spirax services that help it sustain such high profits.
Now, I think what's interesting about Spirax is two things. The first, and maybe this is slightly trite, but it's still maybe an opportunity. Um during COVID, um there was a boom for one part of Spirax's business and the share price kind of got out of hand with people extrapolating that boom into infinity.
Um and at the peak, Spirax's share price got to I think it was £160 a share. Today the share price is 70 a share. So it's materially halved since since COVID Regrettably we we've had a tough time um with with Finsbury's performance of late. Um, one of the relatively, sadly, relatively bright spots in Finsbury's portfolio has been another relatively recent new holding, uh, a company called Clarkson.
Um, Clarkson is the world's number one ship broker. Um, it's a UK listed company. It's the best in the world at what it does. It's got a dominant position in a very very important global marketplace, the global maritime marketplace. And amongst a number of factors, one reason why Clarkson has been successful as a business and why it share price has done really quite well over the last 12 months is because its position of dominance as the biggest broker enables Clarkson to generate more data about the industry that it operates in, more insights into the industry that it operates in than its smaller rivals.
So again, Clarkson is a business with a valuable and growing source of data that the company is using to enhance its competitive position and to accelerate its growth rate. Now encouraged by the success of our investment in Clarkson, we've been looking for other similar quoted companies in the London market that where there might be an analogy or or or a useful comparison and actually maybe obviously enough TPA is is a similar proposition.
Um it's the biggest um OTC over-the-counter uh uh broker uh in the world. It's got a 40% share of all OTC business done in the world. That's it's a clear number one. And that's kind of a really interesting market. the the the OTC market, the value of assets traded are something like 20 times bigger than global equity markets and yet there's no central exchange.
It it's it's all between banks with brokers sitting uh in the middle. uh TPI cap has a 45% share of the broking volumes in that market and that is a highly lucrative position for the company but it's also of strategic significance you know it's part of the plumbing of global markets that ICAP sees some part of two out of every three trades that takes place uh uh uh uh in in in in that uh environment.
And just as is the case with Clarkson, it's ubiquity in all of those trades means that it sees data, receives data that just isn't accessible to its smaller peers. And that data not only allows TP ICAP to compete more effectively with more valuable insights than its rivals. Actually the data is turning into a new revenue source for ICAP.
Just like Clarkson, ICAP has created a new standalone data division which is growing quickly for both companies and generating more and more value. It just comes back to this idea that where you can find a company that's generating in the course of their business like Spirax as well generating data in the course of their business that's not available to anybody else.
There are new ways to exploit and derive value from that data. It makes ICAP in my mind and this is not a coincidence what I'm about to say. It makes it similar to the investment that we have in London stock exchange group. Um again LSEG is an important part of the plumbing of global financial markets.
institutions use its services every second pretty much of pretty much every second of every day and in the process LSEG like ICAP like Clarkson is generating more and more data and finding more and more ways to exploit that data. I think one of the clearest trends in the world throughout my career, God knows how long that is now, but one of the clearest trends has been more assets traded more frequently um in more jurisdictions than ever before.
Just trading of financial assets has been in a long-term upward trajectory. And there seems to be no reason to believe that that is going to come to an end. And what that means is that those companies that do have these defensible positions involved in the plumbing of all those transactions, they're durable and they give you participation in that long-term growth.
And to us, TP ICAP is absolutely there. were very attracted to owning entertainment assets. Um when you own something that entertains millions, maybe even preferably billions of people and you are the only source of that entertainment, then then you own something of unique and extraordinary and enduring value.
Um there are sadly very few such listed owners of entertainment content in in the UK stock market. Um of which Games Workshop is definitely definitely one. Um, we we do have a holding as you know in um in Manchester United and you know we're not talking about Manchester United here. Although I think that we're in a very very interesting juncture for the value of football franchises that seem to that value seems to be going up worldwide.
I I think it makes sense to look at Manchester United as a sort of entertainment content company. Every time it plays a game that creates new entertainment. Um it sort of seems to me that Games Workshop almost offers a for its fans almost a comparable affection or loyalty as Manchester United. The only difference is that Games Workshop doesn't have to pay Space Commandos £350,000 a week.
Do you know Do you know what I mean? You know, they don't have to pay those metal figurines. And yet, you know, that's at the heart of the at the heart of the franchise. Um I I said we we started a position in Games Workshop I don't know maybe a year best part of a year ago and we bought a bit and the share price ran away and rightly or wrongly we said look look we're not going to chase it.
Um let's just wait and see what happens. Actually the price has come back somewhat. is now I don't know over 20% below the peak that it reached earlier this year and we've just started we've just started accumulating uh uh again I I think that you know if you had to condense the idea about games workshop into one stat one statistic I would say that I don't know whether people know this but but um Already the US is Games Workshop's biggest geography.
All right. So it's a UK company. It's it's UK business is the core and where the company developed from from its Nottingham roots. But already the US is bigger than the UK. And yet in terms of its maturity, in terms of the future potential to reach more, let's be blunt about this, adolescent males in the United States, there's just such a huge runway left to go.
It depends how you measure it measure it, but you you could easily argue that the US has only reached about a quarter of the um sales penetration that that the that the that Games Workshop has in its home market of the UK. So, a long long runway of growth to come and it's also growing in Europe. It's also growing in Asia.
It's an incredible franchise. So we're just happy to have a investment in something as unique as this
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