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Four cornerstones of investing

 

Understanding what a successful and profitable business looks like is in our DNA. We operate a highly selective investment process that focuses on bottom-up fundamentals analysis.

Our ‘four cornerstones of investing’ approach helps us build a deep understanding of each company and conviction in the growth potential it may offer.

We analyse a company’s financial performance; ensure that the right people are in place; that the business platform is prepared for growth and we work to ensure that the strategic position of each business is optimised in its marketplace.

+ We focus on forming and maintaining a close relationship with the management of our portfolio companies, where possible, in order to build conviction in management capabilities and their suitability to execute their business strategy. Shareholder engagement in our public company investments is a high priority and we seek wherever possible to comply with the Stewardship Code.
+ The Livingbridge platform and the wider team’s exposure to a large number of company management teams provides a very broad capability to benchmark the quality of management in both public and private company arenas.
+ We have a well-developed process to reference the quality and track-record of management teams, often leveraging specialist external resources as well as the deep and granular knowledge of our investment and research team.
+ We believe this approach and expertise provides us with the tools to help build conviction around high performing and high potential managers and teams and also a greater ability to spot potential derailers and therefore avoid or mitigate risks to investment performance.

People

We place a significant focus on entrepreneurial and high-quality management teams as a key driver of business growth and shareholder value creation. This has led to an active approach to evaluating management teams, optimising organisational structures and seeking to back effective teams.

 

+ Evaluate best practices in financial discipline and board governance;
+ Establish the platform has scalable infrastructure (in functions such as IT, supply chain, marketing, pricing and purchasing); and
+ Consider whether internal processes have the capacity to handle greater volumes of business/trade in order to be scalable.
We have developed a framework to evaluate operational scalability and to identify areas of potential risk. Where relevant and appropriate we seek to introduce resource from the wider Livingbridge platform and network to assist its portfolio companies to benchmark themselves against best practice and implement improvements for the benefit of all stakeholders.

Platform

To look to ensure its portfolio companies have a sufficiently robust and stable operating platform to provide a springboard for growth, Livingbridge seeks to:

When considering investment opportunities and our existing portfolio companies, we seek to assess the market position of the company including its strategic positioning and if management can clearly define and articulate their genuine addressable market.
We also look to understand each company’s potential for international expansion and ability to make acquisitions and how management assess the possibilities of these opportunities, and how they enhance strategic value.

Position

 

We mainly focus on a fundamental earnings-based approach to valuation analysis. Specific metrics and ratios are selected depending on the individual characteristics of the company. Each investment is assessed based on absolute and relative valuation metrics. Valuations are benchmarked against:
+ Selected listed peers;
+ Long term average sector multiples;
+ Appropriate situational comparators; and
+ Public and private company M&A multiples.
Our process helps identify profitable, cash generative companies with the potential to deliver earnings growth, valuation multiple expansion, and dividend payments and dividend growth over time.

Performance


The final cornerstone of our investment evaluation focuses on operational and financial performance, considering the profit and cash flow growth potential over the anticipated life of the investment. We consider the key sensitivities to growth both on the upside and downside. We also consider visibility of revenues and earnings, concentration risks, vulnerability to external shocks outside the control of management as well as the key value drivers of the business.

 

Added conviction

 

With our private equity heritage, we are bottom-up stock pickers first and foremost. We build conviction in the growth potential of our investments in a number of ways.

Every stock is thoroughly interrogated utilising proprietary research to evaluate the case for investment. Our multi-faceted, holistic risk assessment approach assesses market, capitalisation, portfolio, and asset risk for every potential holding. Once complete, we award a ‘conviction score’ to determine the size of the holding within the portfolio.

The combination of focusing on four key sectors:

+ Consumer

+ Business services

+ Technology, media & telecommunications

+ Healthcare & education

and filtering possible opportunities by underlying profitability, helps us mitigate some of the inherent risks of investing in smaller companies.

Our investment process seeks to screen out a substantial proportion of the investment universe that carry binary investment risk. Through this approach we have an objective of reducing risk and volatility and enhancing risk-adjusted returns over the longer term. Above everything we have an unwavering focus on absolute risk, and the preservation of investors’ capital is built in to every investment decision that we take.

Our funds

Our people

We strive to get the best results for our clients by challenging accepted wisdom, sharing information and creating a naturally collaborative environment. 

Our equity investment team incorporates the added expertise of over 50 investment and research professionals from the wider Livingbridge business into their investment analysis. This powerful platform of research includes a wide network of relationships built with entrepreneurs, business leaders and influential thinkers – providing insight beyond the traditional methods of company evaluation. 

 

Meet the whole Livingbridge team

Heather Duncan

Client relations and distribution

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Brendan Gulston

Investment team

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Adam Hughes

Client relations and distribution

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David Leahy

Investment team

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Mark Turner

Value strategy team

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Ken Wotton

Investment team

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