FY26 Q1 Reporting Season Update

Fairlight portfolio companies began reporting earnings results for the first quarter of 2026 in April.  Below we highlight some of these quarterly results and discuss how recent earnings performance measures against our expectations and those of the market. Overall, results have been strong and forward annual guidance has been maintained, reinforcing our confidence in our 2026 earnings forecasts for the portfolio and belief that the Fund remains well positioned to achieve our long-term return objectives.

MSCI

MSCI delivered an excellent quarter, with revenues and EPS growing 14% year-on-year comfortably ahead of expectations. Two engines are firing strongly. First, the Index business, which powers trillions of dollars of ETFs and investment funds benchmarked to MSCI's indices, saw subscription growth return to double digits at 11%, alongside a record asset-based fee run rate which grew 25%. As global investors increasingly rotate into international and emerging market exposures.

Second, MSCI’s newer growth businesses are performing well. Private Capital Solutions delivered net new sales growth of 44%, as demand for private market data and benchmarking tools continues to build rapidly. Asia Pacific was a particular highlight, posting recurring sales growth of 46%.

Perhaps most encouragingly, this was MSCI's best quarter for net new subscription sales since 2022, with clients signing up for new products at an accelerating pace. The retention rate of 95% across all product lines indicates that clients view these products as critical to their business operations.

Scout24

Scout24 owns the leading real estate portal in Germany which connects property buyers, sellers, renters and landlords across the country. The company generates most of its revenues from subscription fees paid by real estate agents, with additional revenues from private consumer listings and display advertising.

During Scout’s analyst call, management provided evidence that the portal is retaining relevance versus new AI tools, for example, usage by property seekers of Scout24’s AI-powered search within its platform is 9x larger than the usage of external AI-tools. This reinforces our view that the combination of high direct engagement from property seekers and extensive and accurate proprietary datasets will make the incumbent portals the natural providers of AI-driven tools to improve the search experience.

Scout delivered a strong start to 2026 with first-quarter revenue growth of 14%, driven by its core professional segment where subscription revenue grew 15% and the average number of agent subscribers increased 4%. The operating margin expanded slightly despite growing investment in AI capabilities. Operating profits grew 15%, and EPS grew 20%, further benefiting from recent share buyback programs.

Lennox

Lennox is one of the leading manufacturers of premium air conditioners for residential and commercial buildings in the US. Circa 80% of the company’s sales are predictable as they relate to the replacement and service of existing equipment. The remaining sales are linked to new construction activity, which can be more volatile.

The installed base of air conditioners in the US grows modestly but steadily as new homes are built and population growth continues to skew more towards warmer states like Texas, Florida, Arizona and the Carolinas, where air conditioning is not a luxury but a necessity for much of the year. The price point for new units also increases over time as less noisy and more energy-efficient units are introduced.

Lennox has historically outperformed the industry growth rate, mainly due to market share gains, a result of stronger demand for premium products and an effective distribution model where Lennox mostly sells products directly to installers, via its wide network of stores which act as mini distribution and service centres.

The investment thesis for Lennox centres on the company's ability to deliver consistent EPS growth of at least 10% on the back of continued outperformance and steady margin expansion as fixed costs are leveraged further.

Lennox delivered a solid Q1 after a few quarters of weaker performance due to subdued new construction in the US and consumers opting to repair rather than replace their units. Q1 showed improving momentum in the business, and Lennox is on track to grow EPS by 5% in 2026 and return to faster growth over the coming years.

IMCD

IMCD is a leading global distributor and formulator of speciality chemicals and ingredients. The company serves a broad range of end markets including pharmaceuticals, personal care, food and nutrition, coatings and construction, and industrial applications. IMCD's business model is built on deep technical expertise and long-standing relationships with both global chemical producers, who rely on the company to distribute their products to smaller clients and manufacturers, who value IMCD's formulation knowledge and supply chain capabilities.

Demand for speciality chemicals grows faster and is less cyclical than that of bulk chemicals and we believe that the speciality distribution market will continue to consolidate around a small number of scale players. Thanks to these favourable industry dynamics and a disciplined programme of bolt-on acquisitions in fragmented regional markets, IMCD should compound EPS at a rate of at least 10% over the long term.

Over the past 12 months, IMCD’s organic growth has stalled as clients have been decreasing the size of their orders while they try to make sense of the constant changes in tariff regimes and generally cope with a more volatile end-market demand. The recent spike in global energy prices, however, should put an end to ‘destocking’ dynamics as manufacturers try to stock up before the prices of most chemicals start to rise again.

Removing the adverse impact of currency movements, IMCD reported sales growth of 6% and better-than-expected operating margins in Q1. Following a strong share price reaction, we sold shares in IMCD to fund the purchase of a new investment.

The Fairlight View

Most of the Fund’s investment companies are scheduled to report their quarterly earnings results in May. The companies that have already reported have posted strong results, which supports the 13% EPS growth estimate for the portfolio in 2026. We are looking forward to sharing further feedback on earnings season next month.

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