The Great Reopening continued...

Garraway Global Equity Fund - An Update from Malcolm Schembri

The other day, we noted that the strong earnings season has propelled Garraway Global Equity Fund (the Fund) ahead of the market and peers for the year to the end of July and that, overall, the companies held had reported strong results with the majority having raised guidance figures and won further market share.

With a number of our holdings rebounding strongly as “the great reopening” gets firmly underway, here’s a further update on a some of the companies held by the Fund.

Powered by what the management dubbed as the “the great human reconnection” Starbucks reported record third quarter results with comparable sales up 73% globally and 83% in the US with 10% two-year growth figures. Active Starbucks rewards membership in the United States up 48% year on year to 24.2 million.

Starbucks continues to win significant market share. As at end of 2020, the company had nearly 9% of the café and bar market worldwide. Furthermore, in the Americas market, annual price increases of 5.2% and unit openings of 4.1% outpace the industry’s 0% and 0.01% respective growth rates. Full year guidance figures have been raised.

L’Oréal enjoyed exceptional growth of 33.5% in the second quarter particularly driven by a strong acceleration in North America, up 44.7%. Despite the reopening, e-commerce posted strong 29.2% growth. Operating margins expanded 170 basis points to 19.7%.

The cosmetics giant spent nearly 5 billion euro in marketing during the first 6 months of the year. This translated to a whopping 32.6% of revenue and has helped the company win massive market share across the board.

MSCI reported better than expected results. Revenue grew 21.6% year on year whilst diluted earnings per share grew 46.3%. The company also upgraded year-end figures. FCF growth is expected to be north of 30% for the full year.

Investments into ESG are paying off as the pandemic has accelerated the trend towards a more sustainable form of investing. MSCI broke out ESG into its own segment called ESG and climate. Having achieved a 44% year on year growth rate, this is the fastest growth segment within the company.

Diageo posted solid net sales growth of 16%, North America organic growth of 20.2% Africa/Latin America up 20% and 30% respectively. Asia Pacific region grew 14% growth whilst Europe was the weakest with growth of just 4%. Free cash flow grew 35%.

Results reflected the increasing shift to spirits from total beverage alcohol. Diageo held or gained market share in over 85% of their underlying businesses.

Assa Abloy, the global leader in access solutions having the world’s largest installed base of locks, delivered robust second quarter results with 23% organic top line growth and a further 5% growth from net acquisitions. Recovery in margins led to earnings before interest and tax to improve 71%. Whilst the subdued travel market impacted global tech and Asian Pacific regions, digital locks and smart locks are increasingly gaining adoption due to building access tracking and hygienic benefits.

Visa reported strong third fiscal quarter results with net revenue up 27% year-on-year. The firm’s total processed transactions are now up 21% from pre-pandemic levels with data from the first three weeks of July demonstrating further improvement. The company’s whopping 66.3% operating margins are in line with pre-pandemic levels. Yet clearly with cross border transactions (which have a much higher margin) still being down 21% from pre-pandemic levels, further margin expansion is clearly achievable.

Mastercard’s results have been similarly strong.

In June, we wrote a series of updates highlighting some huge developments around a number of healthcare firms held by the Fund. We’ll provide an update on these firms, including their results, shortly.