THE WS EPWORTH MULTI ASSET FUND (MAF)

Hoya is a Japanese optics technology business focused on health applications, that is held as a conviction stock in the WS Epworth Global Equity Fund. A key part of the business is glasses and contact lenses, but the business also develops endoscopes, metallic orthopaedic implants, intraocular lenses, and other medical accessories.

A combination of ageing populations, a growing middle-class in developing economies and improved access to health care are driving significant demand for these products, in addition to the ongoing need for research and development to improve existing healthcare provision, as well as provide new solutions to improve wellbeing. There is also a growing focus on preventative medicine to cut health spending burdens caused by subsequent illnesses, which Hoya’s endoscopes help to address.

International Public Partnerships (INPP) is a listed infrastructure vehicle held directly by the WS Epworth Multi Asset Fund. It invests in a range of social and public infrastructure projects that offer attractive financial returns, but also significant societal and environmental benefits.

One of the projects INPP has invested in is the Thames Tideway Tunnel, a new investment in the London sewer network, which will carry sewage and storm water discharges from the existing sewerage network. London currently relies on a 150-year-old sewer system built for a population less than half its current size. The project will deliver improvements that will significantly reduce polluting discharges in a typical year by about 37 million cubic meters, resulting in a healthier river for London’s citizens and wildlife. INPP owns 16% of the project, which is constructing a 25km long, 7.2m diameter tunnel running up to 65 meters below the river Thames, replacing the Thames as a “sewer of last resort”. Construction is expected to complete in 2024.

INPP also finances the design, construction, and provision of facilities management services for several multi-use primary care health centers. These are mostly situated in the UK, but also in Australia and Italy.

Fairer Finance
An example of Epworth’s shareholder activism is reflected in some of its holdings in the UK financial services sector. Epworth’s parent organization, the Central Finance Board of the Methodist Church, is a Living Wage Accredited Employer, and Epworth regular engages with businesses, both directly and through collaborations, to encourage them to seek independent verification that they pay their staff a fair wage.

Epworth has two conviction holdings in the UK financial sector, wealth manager Brooks Macdonald and investment platform provider IntegraFin. Epworth selected these business because although they are far from the biggest operators in their respective markets, their efficient operating models and targeted approach results in industry leading profit margins, good customer service and strong organic growth. Both benefit from structural growth trends and trade on reasonable valuations whilst offering compelling returns on capital, which are the key criteria Epworth’s investment team seek in an investment.

Epworth has met regularly with the management of both companies since its shareholdings were established, pushing for both to improve their approach and disclosure around social responsibility and sustainability. One of the areas of success from these engagements is that Epworth has successfully persuaded both businesses to become Living Wage accredited employers.

Whilst pay in the finance sector is traditionally above the national average, this accreditation requires that contracted catering, cleaning and security staff are included. Epworth feel that the need for fair pay has taken on even greater significance in the cost of living crisis, and well run businesses can help tackle this issue at minimal additional cost to their own shareholders. It is fantastic that both businesses have responded positively to these engagements, and Epworth will continue to push for further positive changes from these and its other investments.

Ten Entertainment – “Up Epworth’s alley”

Ten Entertainment Group is the second-largest ten-pin bowling company in the UK, operating over 50 centres under the Tenpin brand. It also offers further entertainment such as laser arenas, a range of escape rooms, karaoke, arcades and tables sports, as well as offering food and drink.
Ten Entertainment was added as a conviction stock in 2017 due to its attractive growth characteristics and opportunity to leverage digitalisation. This allowed Ten Entertainment to better reach target customers, improve customer experience and generate an online presence. There was also a strong belief that, due to the fragmented nature of the bowling industry in the UK, Ten Entertainment could acquire run-down sites and upgrade them to generate exciting growth opportunities. Furthermore, the business is family-friendly, offering relatively cheap entertainment whilst generating employment for local younger people. As well as this, the valuation of the stock was considered cheap despite a strong management team track record of success and expertise.

Since 2017, the business has performed well and delivered strong growth, leading to a takeover bid for the business in December 2023. This saw Epworth exit its holding in the stock for a total return of around 160%.

Whilst a shareholder, Epworth enjoyed a positive engagement relationship with Ten Entertainment, regularly meeting with senior management to discuss important ethical issues. These included food waste, recycling, employee relations and carbon emissions, with considerable progress made by the company as a result of these engagements. Notably, Ten Entertainment has changed its energy supplier to ensure 100% renewable energy used across its sites, and the company has also massively improved its rates of recycling waste from its centres. The company is also targeting net zero carbon emissions for its operations and suppliers by 2030, which will involve installing solar arrays across its sites.