Liontrust Sustainable Future Defensive Managed Fund on Advanced Drainage Systems
Thesis
Liontrust held Advanced Drainage Systems, a manufacturer of stormwater and wastewater-management products, whose quarterly results showed resilience in the face of construction-sector concerns. First-quarter revenue increased 21% and adjusted EBITDA grew 29%. However, management left full-year guidance unchanged because of weaker residential demand and higher input and distribution costs. The stock’s underperformance reflected concern that construction-market weakness could prevent those strong reported operating results from translating into a stronger outlook.
“However, management left full-year guidance unchanged, highlighting weaker residential demand, rising material costs and elevated transportation expenses”
Key risks
- Weakening demand from residential construction.
- Rising materials costs.
- Elevated transportation expenses.
- Deteriorating sentiment toward the construction sector.