July saw the "full effect of the coronavirus" make its mark on Lindsell Train Investment Trust's quoted companies following Q2 reporting season, according to the company's latest factsheet.
In a note to investors, Michael Lindsell highlighted "five good and five bad results" across the trust's holdings, eight of which are in the top ten.
Included in the good was Nintendo, which saw its profits increase fivefold due to "homebound living" pushing sales of the Nintendo Switch console and related software to a level "never previously experienced" in a typically "slow period for sales", combined with over 50% of software sales being downloaded, resulting in overall margins up to 40% - "double the long term average". The company's share price has risen 9% this year and the manager noted it will be "interesting to see whether these surprisingly good results spur on the share price".
PayPal also featured, as its share price has risen more than 80% since the beginning of the year, which the manager attributed to a "surge in e-commerce" as over double the normal number of new active users signed up, combined with a "surge in offline merchants signing up, recognising they need a valid online payment alternative in the future".
Lindsell added: "The bigger PayPal's ecosystem gets, the more difficult it is to challenge or compete with it."
The London Stock Exchange made "steady progress", owing largely to "rising clearing volumes", but also benefitted from the news it will have to sell its MTC bond trading platform and the Italian Borsa to "mollify European regulators and ensure the Refinitiv deal is approved". This will reduce the LSE's debt burden and increasing its financial flexibility, according to Lindsell, who said this "may well be a good thing in these uncertain times".
In-home consumption benefitted both Unilever and Mondelez, the latter of which saw its "best quarter for years in terms of market share gains", while the former, with a "diversified portfolio of household, personal care, food and refreshment" sold well enough to "offset the drag" from reduced out of home consumption.
Beverage sellers constituted the majority of Lindsell's "five bad results", with Diageo, Heineken and AG Barr all struggling due to their dependence on restaurants, bars, pubs and cafes. A rise in home consumption, with its lower margin, was not enough to offset the fall in demand, and Heineken, which suffered the worst fall in profits, along with AG Barr passed on their interim dividends.
Also starring in the bad results was "constant disappointer" Pearson, which suffered an "exacerbated" fall in sales and profits thanks to the closure of its Pearson Vue test and certification centres, and the cancellation or postponement of testing contracts. However, the manager noted as a "surge in demand for online learning and the technology and tools associated with it", a trend which the firm has been "anticipating and investing [in] for some time".
Although RELX is "digitally driven and thus in a good position to navigate the vicissitudes of the crisis", 15% of its business is "running exhibitions", which are unable to take place, resulting in a drop in sales of over 70% and the division making a loss.
Lindsell added: "All these companies are suffering thanks to the unpredictable effects of the crisis; but the crisis will in time abate and as it does so we expect them to first recover their sales and profitability and then grow their businesses, empowered by their well-known brands and unique market positions."
Despite the "good" and "bad" declarations, the top three contributors to the trust's performance were PayPal, Diageo and Unilever, while the top three detractors were Nintendo, RELX and LF Lindsell Train North American Equity fund.
Both the net asset value and share price have fallen since last month, the former down to £1112.04 and the latter at £1170, resulting in a drop of nearly 1% in the trust's premium to 5.21%.