Ocean Equity Monthly Manager Commentary – February 2025
Manager view
February presented global equity markets with a challenging mix of policy uncertainty, regional differences and sector shifts. Investors faced a slew of news on tariffs, geopolitics, inflation, interest rates, and economic growth. At the micro level, the FY24 results season was in full swing, though headlines were dominated by Trump, with trade tariffs and the Ukraine situation standing out as key issues for equity markets. The widely expected tariffs on China, Mexico, and Canada have coincided with a decline in leading US economic indicators and a corresponding drop in the US equity market. These trade tariffs pose a risk to both the US and global economies, heightened by their unpredictable rollout so far. Meanwhile, the US’s hesitation to offer Ukraine a security guarantee has spurred European nations to quickly plan increased spending on defence and infrastructure.
Markets currently expect two 25 bp cuts to U.S. interest rates in 2025, though this outlook remains shaky due to factors like tariff effects, fragile business and consumer confidence, and broader economic uncertainty. Inflation fell to 2.8% in February – from 3.0% in January. This is a positive sign. Meanwhile, core CPI (excluding volatile food and energy prices) eased slightly to 3.1% from 3.3% over the same period. In the UK, the Bank of England cut interest rates by 25 bps to 4.5% – its third reduction in this cycle – to address softer inflation and bolster confidence among businesses and consumers. Uncertainty remains high, and equity markets have been volatile in recent weeks. That said, recent management commentary and results have been encouraging, reflecting incremental progress across portfolio companies overall.
Discrete performance
| 2024 | 2023 | 2022 | 2021 | 2020 | 2019 | |
| Fund | 3.42% | 8.67% | -22.63% | 27.74% | -2.40% | 24.04% |
| IA Sector | 7.87% | 7.38% | -9.06% | 17.25% | -6.01% | 22.24% |
| Rank in Sector | 200/225 | 79/231 | 202/228 | 9/222 | 53/217 | 80/209 |
| Quartile | 4 | 2 | 4 | 1 | 1 | 2 |
Total return, bid to bid, tax UK net, sterling terms. Source: Waystone Fund Services UK Limited/Financial Express Analytics. Past performance is not a reliable indicator of future results. The value of your investment and the income derived from it can go down as well as up, and you may not get back the money you invested.
Company news
Keller, the global leader in geotechnical specialist contracting, released its financial results for the year ending December 31, 2024. Revenue rose 4%, profit climbed 22%, earnings per share (EPS) surged 30%, and the dividend increased by 10%. The company’s balance sheet strengthened significantly, with debt dropping 80% to £29.5 million, reducing net debt to EBITDA to just 0.1x – driven by robust profitability and cash flow. Notably, Keller’s order book hit a record £1.6 billion, up 8%, underscoring its growing reputation in this technical market and its potential to expand market share.
These 2024 results highlight a strong year of financial and operational progress. Keller has cemented its position as a global leader in geotechnical solutions, boasting a healthier balance sheet, higher profits, and a solid project pipeline. Stakeholders can see this as proof of the company’s successful long-term strategy, with potential for capital returns via dividends and share buybacks. At its current valuation, Keller looks highly attractive for a global leader delivering record results: a FY27 price-to-earnings (P/E) ratio of 5x, a FY25 dividend yield of 4.2%, a free cash flow (FCF) yield of 13%, and a return on invested capital (ROIC) of 25%. These metrics suggest a competitive edge, with pricing power to secure contracts and deliver projects on time and within budget.
Relx, a global provider of information-based analytics and decision tools, shared its preliminary FY24 results. Revenue grew 7%, profit increased 10%, EPS rose 11%, and the dividend was lifted by 7%. Return on invested capital (ROIC) – a key measure of how efficiently a company uses its capital – held steady at 22%, consistent with the past five years.
Looking ahead, Relx’s strong order book for analytic tools and ambitious capital return plans signal a solid medium-term outlook. CEO Erik Engstrom, who joined Relx in 2004 and became CEO in 2009, credited 2024’s robust performance to over a decade of leveraging AI and technology to enhance customer value – a strategy poised to fuel long-term growth. Management sees positive momentum across the business and anticipates another year of strong revenue, profit, and EPS growth in 2025, driven by ongoing product and service innovation. Relx’s financial position remains healthy, with a net debt-to-EBITDA ratio of 1.9x and strong cash flow supporting shareholder returns through dividends and buybacks. However, risks like a broader economic slowdown or regulatory changes persist, though management’s tone conveys resilience and optimism. The valuation reflects Relx’s operational and financial quality: a FY27 P/E of 26x, a FY25 FCF yield of 3%, and a dividend yield of 1.6%, underpinned by an ROIC of approximately 22%.
Michael Foster – Lead Portfolio Manager Ocean Equity
February 2025
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The Ocean Equity Fund does not have an objective linked to the oceans or marine bio-diversity but the Fund Manager may choose to invest in companies that derive their revenue from shipping and energy transition sectors.
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