TIDMOIT
RNS Number : 4943T
Odyssean Investment Trust PLC
24 November 2021
ODYSSEAN INVESTMENT TRUST PLC
(the "Company", the "Trust" or "OIT")
INTERIM Report for the six months ended 30 september 2021
Odyssean Investment Trust PLC (the "Company") has today released
its half-yearly report for the six months ended 30 September
2021.
The half-yearly report and other information will be available
via www.oitplc.com
A copy of the half-yearly report will also be submitted to the
National Storage Mechanism and will shortly be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
FINANCIAL SUMMARY
As at As at
30 September 31 March
Company performance 2021 2021 Change
Shareholders' funds GBP147.6m GBP122.6m 20.4%
NAV per ordinary share 158.1p 139.3p 13.5%
Share price per ordinary share 163.0p 129.0p 26.4%
Share price premium/(discount) to
NAV per ordinary share# 3.1% (7.4)%
NAV total return per ordinary share# 13.5% 53.4%
NSCI ex IT plus AIM Index Total Return#** 9.1% 71.3%
Annualised ongoing charges# 1.4% 1.4%
* Based on the weighted average number of shares in issue during the period.
** Source: Bloomberg.
# Alternative Performance Measure ("APM"). See glossary.
Past performance is not a guide to future performance.
Jane Tufnell, Chairman of OIT, said: "I am pleased to present
the Interim Report and Financial Statements for Odyssean Investment
Trust PLC ("OIT" or the "Company") covering the period from 1 April
2021 to 30 September 2021. In a period marked by mounting concerns
over the prospect of rising inflation and increasing global supply
chain disruption, the net assets of the Company increased by
GBP25.0m to GBP147.6m, representing an increase in net asset value
per share ("NAV") of 13.5%. Over the same period, the NSCI ex IT
plus AIM Total Return Index (the "comparator index") rose by 9.1%.
More impressively, this performance has been delivered with an
average net cash position in the portfolio of 22%, demonstrating
the underlying strength of the performance of the portfolio
companies"
"A common misconception is that investing in UK smaller
companies is investing in the UK economy. However, there are many
UK quoted smaller companies which have significant international
operations and sales. The Portfolio Manager is particularly keen to
seek out these niche global players as they provide a geographic
balance to revenues and profits, and if mispriced by UK investors,
tend to become more attractive to overseas investors and
potentially acquirers. At the end of the period, the underlying
revenues of the portfolio were split fairly equally between the UK,
USA, Europe and the rest of the world. In comparison, the average
FTSE Small Cap company derives c.60% of its revenues from the UK.
This broad, geographic exposure, is an output of the Portfolio
Manager's investment approach, and one factor supporting
differentiated performance."
"In uncertain markets a clear investment philosophy and a
consistent, proven process come into their own. The Portfolio
Manager's investment approach has been honed from decades of team
experience in both public and private equity investing, identifying
undervalued market leaders with self-help opportunities, and has
demonstrated its worth across a number of cycles. This gives the
Board confidence that the Company is well-placed, with its closed
ended structure, to exploit opportunities the market presents to
generate long term capital growth."
"We are very grateful for the support shown by the shareholders
during the period."
-S-
For further information, please contact:
Stuart Widdowson, Odyssean Capital 07710 031620
Neil Langford, Winterflood Securities (Corporate
Broker) 020 3100 0160
Nick Croysdill/ Sarah Gibbons-Cook, Quill PR 07815 823412
(Media Agency) 07769 648806
OIT@quillpr.com
About Odyssean Investment Trust PLC
Odyssean Investment Trust PLC 'OIT' is a closed-ended investment
trust that seeks to deliver attractive returns to its clients by
investing in quality businesses and supporting them to deliver
superior returns. To achieve this the Board has appointed Odyssean
Capital LLP to manage the portfolio. OIT will remain a small scope
AIF, with Frostrow providing risk management support to the
Board.
Odyssean Capital invests in a concentrated portfolio of
well-researched smaller companies, typically too small for
inclusion in the FTSE 250. Constructive corporate engagement is a
key part of the Portfolio Manager's approach, drawing on the
investment team's lengthy and successful track record in this area.
OIT has recently introduced formal ethical and sustainable
investment restrictions, which augment our approach to
engagement.
INVESTMENT OBJECTIVE
The investment objective of the Company is to achieve attractive
total returns per share principally through capital growth over a
long-term period.
INVESTMENT POLICY
The Company primarily invests in smaller company equities quoted
on markets operated by the London Stock Exchange, where the
Portfolio Manager believes the securities are trading below
intrinsic value and where this value can be increased through
strategic, operational, management and/or financial initiatives.
Where the Company owns an influencing stake, it will engage with
other stakeholders to help improve value. The Company may, at
times, invest in securities quoted on other recognised exchanges
and/or unquoted securities.
It is expected that the majority of the Portfolio by value will
be invested in companies too small to be considered for inclusion
in the FTSE 250 Index, although there are no specific restrictions
on the market capitalisation of issuers into which the Company may
invest.
The portfolio will typically consist of up to 25 holdings, with
the top 10 holdings accounting for the majority of the Company's
aggregate Net Asset Value ("NAV") across a range of industries. The
Company will adhere to an exclusion-based investment approach to
avoid investment in companies involved in activities the Company
deems unethical and/or unsustainable.
The Company may hold cash in the Portfolio from time to time to
maintain investment flexibility. There is no limit on the amount of
cash which may be held by the Company from time to time.
Investment restrictions
- No exposure to any investee company will exceed 15 per cent.
of Net Asset Value at the time of investment.
- The Company may invest up to 20 per cent. of Gross Assets at
the time of investment in unquoted securities where the issuer has
its principal place of business in the UK.
- The Company may invest up to 20 per cent. of Gross Assets at
the time of investment in quoted securities not traded on the
London Stock Exchange.
- The Company will not invest more than 10 per cent., in
aggregate, of Gross Assets at the time of investment in other
listed closed-end investment funds.
Ethical and sustainability investment restrictions
The Company will not invest(1) in companies which derive any
revenue from, or are engaged in:
- the production or direct distribution of pornography;
- the manufacture, production or retail of controversial
weapons(2) (e.g. chemical, biological or nuclear weapons, cluster
munitions, landmines), civilian firearms and ammunition;
- the manufacture of alcohol and tobacco products;
- the ownership or operation of gambling facilities;
- sub-prime and/or predatory lending;
- oil and gas production (both conventional and unconventional,
including shale oil and gas, coal seam gas, coal bed methane,
thermal coal, tar sands, Arctic onshore/ offshore deepwater,
shallow water and other onshore/ offshore) and includes extraction
and refining;
- animal experimentation or animal testing, (a) where there is a
proven alternative and/or where testing is not mandated by
regulation; or (b) where there is no proven alternative and/ or the
experimentation or testing is mandated by regulation, but where the
investee company is not adhering to the "three Rs" ethics of
Replacement, Reduction and Refinement.
The Company will not invest more than 10 per cent., in
aggregate, of Gross Assets at the time of investment in companies
involved in distributing, licensing, retailing or supplying tobacco
and/or alcohol beverage products.
1 'The Company will base its analysis of an investee company's
revenues and activities on publicly available information, and will
exclude revenues and activities that are considered to be
de-minimis, being those that represent less than 1% of the investee
company's revenue.
2 Controversial weapons are those that have an indiscriminate
and disproportional humanitarian impact on civilian populations,
the effects of which can be felt long after military conflicts have
ended.
Borrowings
The Company does not intend to incur borrowings for investment
purposes, although the Company may, from time to time, utilise
borrowings over the short term for working capital purposes up to
10 per cent. of Net Asset Value at the time of borrowing.
Derivatives and Hedging
The Company will not use derivatives for investment purposes. It
is expected that the Company's assets will be predominantly
denominated in Sterling and, as such, the Company does not intend
to engage in hedging arrangements, however, the Company may do so
if the Board deems it appropriate for efficient portfolio
management purposes.
General
The Company will not be required to dispose of any asset or to
rebalance the Portfolio as a result of a change in the respective
valuations of its assets.
The Company intends to conduct its affairs so as to qualify as
an investment trust for the purposes of section 1158 of the CTA
2010.
Any material change to the Company's investment policy set out
above will require the approval of Shareholders by way of an
ordinary resolution at a general meeting and the approval of the
Financial Conduct Authority. Non-material changes to the investment
policy may be approved by the Board.
FINANCIAL SUMMARY
As at As at
30 September 31 March
Company performance 2021 2021 Change
Shareholders' funds GBP147.6m GBP122.6m 20.4%
NAV per ordinary share 158.1p 139.3p 13.5%
Share price per ordinary share 163.0p 129.0p 26.4%
Share price premium/(discount) to NAV per
ordinary share# 3.1% (7.4)%
Six months
to
30 September Year to
2021 31 March 2021
Revenue income/(loss)per ordinary share* 0.8p (0.7)p
Capital return per ordinary share* 17.6p 49.2p
Total return per ordinary share* 18.4p 48.5p
Six months
to
30 September Year to
Performance 2021 31 March 2021
NAV total return per ordinary share# 13.5% 53.4%
NSCI ex IT plus AIM Index Total Return#** 9.1% 71.3%
Six months
to
30 September Year to
Cost of running the Company 2021 31 March 2021
Annualised ongoing charges# 1.4% 1.4%
* Based on the weighted average number of shares in issue during the period.
** Source: Bloomberg.
# Alternative Performance Measure ("APM"). See glossary.
Past performance is not a guide to future performance.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Interim Report and Financial
Statements for Odyssean Investment Trust PLC ("OIT" or the
"Company") covering the period from 1 April 2021 to 30 September
2021.
Performance
In a period marked by mounting concerns over the prospect of
rising inflation and increasing global supply chain disruption, the
net assets of the Company increased by GBP25.0m to GBP147.6m,
representing an increase in net asset value per share ("NAV") of
13.5%. Over the same period, the NSCI ex IT plus AIM Total Return
Index (the "comparator index") rose by 9.1%. The period was one
where different investment styles came in and out of fashion.
Value, which had been rallying since end-2020, began to wane from
early June eclipsed by a resurgence in growth, but by early
September higher rated growth companies weakened alongside all
investment styles.
The ability to be agile in the face of the inflationary threat
has become front and centre to investors. A company's control over
raw materials and components whether in terms of price or supply is
essential in the face of the well-publicised supply chain
challenges. In hand with this is the importance of being able to
pass price rises on to the customer.
From inception on 30 April 2018 to 30 September 2021, the NAV
per share has grown by 61% - roughly double the return from the
comparator index. More impressively, this performance has been
delivered with an average net cash position in the portfolio of
22%, demonstrating the underlying strength of the performance of
the portfolio companies.
Discount and premium management
The share price has exceeded the NAV growth through the period,
due to the discount narrowing. The shares ended the period trading
at a modest premium of 3.1%, and on average traded broadly at par
over the period. In the Board's view, the narrowing of the discount
during the period was driven by a number of factors, including: the
inclusion of the Company's shares in the All-Share Index in June,
leading to passive funds buying in for the first time; ongoing
positive press for the Company notably following the successful
passing of the third-year anniversary; and active work by the
Portfolio Manager to engage with potential new shareholders.
In response to buying demand and to manage the premium to which
its shares trade, the Company issued a total of 5.3m shares at a
premium which meant that there was no dilution for existing
shareholders. Of these, 3.7m were issued to the Portfolio Manager
and connected parties in a small placing in mid-July 2021.
The Board believes that the Company's strong relative rating is
driven by a number of factors including good performance, effective
communication with existing and potential investors, a clear
discount control policy (including a periodic redemption facility)
and multiple features which align the interests of shareholders
with the Portfolio Manager.
Dividend
The Directors expect that returns for shareholders will be
primarily driven by capital growth of the shares rather than
dividend income.
Portfolio Manager
As shareholders have read in the last annual report, the
Portfolio Manager was paid a performance fee in respect of the
NAV's outperformance over the hurdle set by the Board. In the
period under review, the Portfolio Manager has fulfilled its
obligation to re-invest 50% of the proceeds from the performance
fee earned for the year ended 31 March 2021. These shares were
purchased in the market and as part of the placing in July. This
provides continued alignment of interests with the Company's
shareholders for the long term.
Growth of the Company
The majority of the growth in the Company since launch has been
organic through the strong performance delivered by the Portfolio
Manager, although as previously mentioned, the Company has taken
the opportunity to issue new shares at a premium to net asset
value.
The Board believes that growth in the Company provides a number
of benefits to shareholders including greater liquidity in the
shares and a lower ongoing charges ratio as the fixed costs of the
Company are spread over a larger asset base. The Board is also of
the view that investors typically prefer to invest in larger more
liquid trusts and hence further growth in the Company's assets can
be expected to broaden the pool of potential shareholders and
contribute to the demand for, and the rating of, OIT shares. The
Board will continue to look for opportunities to grow the Company
through issuance or other strategic initiatives where possible.
Outlook
The Board shares the Portfolio Manager's concern that inflation
will be more persistent than many expect.
This is in part likely to be driven by the severe disruption
many businesses and consumers are experiencing with the breakdown
of global supply chains, impacted as the world "turns back on
producing and buying" at normal levels after the COVID-19
lockdowns. These supply chain issues are leading to considerable
uncertainty and changing behaviours for businesses and consumers.
The Portfolio Manager has reported that investee companies are
expecting this disruption to last until at least the summer of 2022
and have planned accordingly.
Through periods of uncertainty, the Board believes that the
Portfolio Manager's team background and expertise, facilitated by
the closed ended nature of the Company, offers shareholders a
differentiated approach to investing. The disciplined approach to
valuation combined with the unconstrained investment approach, led
to the Portfolio Manager building cash through the period as it
took profits, leaving it well placed to capitalise on the
disruption in markets seen at the end of the period and just after.
The part of the market in which the Portfolio Manager invests is
often ripe with mispricing, which is one reason why it is such a
fertile area for an experienced investor.
Moreover, the Portfolio Manager's desire to seek out smaller
companies with improvement potential is another differentiator and
potentially strong contributor to returns. Smaller companies react
more quickly to a change agenda, both in terms of their behaviours
as well as their financial and share price performance.
The chairman of a company is the key change agent. The Board
notes how many of the portfolio companies have had chairmen
appointed within the last three years, where in a number of cases
the Portfolio Manager has been engaged in the process. As a result,
the Board shares the Portfolio Manager's view that, with change
effectively executed, there is attractive medium to long term
upside in several portfolio companies, which has the potential to
be delivered independent of market gyrations.
A common misconception is that investing in UK smaller companies
is investing in the UK economy. However, there are many UK quoted
smaller companies which have significant international operations
and sales. The Portfolio Manager is particularly keen to seek out
these niche global players as they provide a geographic balance to
revenues and profits, and if mispriced by UK investors, tend to
become more attractive to overseas investors and potentially
acquirers. At the end of the period, the underlying revenues of the
portfolio were split fairly equally between the UK, USA, Europe and
the rest of the world. In comparison, the average FTSE Small Cap
company derives c.60% of its revenues from the UK. This broad
geographic exposure, is an output of the Portfolio Manager's
investment approach, and one factor supporting differentiated
performance.
In uncertain markets a clear investment philosophy and a
consistent, proven process come into their own. The Portfolio
Manager's investment approach has been honed from decades of team
experience in both public and private equity investing, identifying
undervalued market leaders with self-help opportunities, and has
demonstrated its worth across a number of cycles. This gives the
Board confidence that the Company is well-placed, with its closed
ended structure, to exploit opportunities the market presents to
generate long term capital growth.
We are very grateful for the support shown by the shareholders
during the period.
Jane Tufnell
Chairman
24 November 2021
PORTFOLIO MANAGER'S REPORT
Details of the Portfolio Manager
The Company's Portfolio Manager is Odyssean Capital LLP.
The Portfolio Manager was founded in 2017 by Stuart Widdowson
and Harwood Capital Management Limited, an independently owned
investment group, and is jointly owned by both parties. The
Chairman of Odyssean Capital LLP is Ian Armitage, former CEO and
Chairman of HgCapital.
The Portfolio Manager's investment team, Stuart Widdowson and Ed
Wielechowski, identify and undertake research on potential investee
companies as well as managing the portfolio. They draw on the
experience of a three-strong Panel of Advisors, who have run and
invested in multiple quoted and unquoted smaller companies. In
addition, the investment team draws on the expertise and experience
of Mr Armitage and Mr Christopher Mills, who sits on Odyssean
Capital's Board as a Non-Executive Director. Mr Armitage and Mr
Mills have more than 85 years' combined investment experience in
quoted and unquoted smaller companies.
Stuart Widdowson, Co-fund Manager
Stuart has spent the last 21 years investing in public and
private UK small and mid-size corporates and a further two years
providing investment advisory services in the same field.
Prior to founding the Portfolio Manager, Stuart was at GVQ
Investment Management ("GVQ"), where he held the position of fund
manager and head of strategic investments for more than seven
years. During his time at GVQ, Stuart led the transformation of the
performance of Strategic Equity Capital plc ("SEC") and
significantly improved shareholder value. Stuart led SEC to win
several industry awards and was recognised as Fund Manager of the
Year at both the PLC and QCA awards in 2015.
Stuart began his career as a strategy consultant undertaking
commercial due diligence and strategy projects for private equity
and corporate clients. In 2001, he joined HgCapital and spent five
years working on small and mid-cap leveraged buyouts in the UK and
Germany. During this time, he worked on a number of public to
private transactions of UK quoted companies.
Ed Wielechowski, Co-fund Manager
Ed joined the Portfolio Manager in December 2017 as a Fund
Manager.
Prior to joining Odyssean, Ed was a Principal in the technology
team at HgCapital. He joined HgCapital in 2006 and worked on
numerous completed deals, including multiple bolt-on transactions
made by portfolio companies. He has additional quoted market
experience, having led the successful IPO of Manx Telecom plc in
2014, as well as having evaluated and executed public to private
transactions. Ed started his career as an analyst in the UK mergers
and acquisitions department of JPMorgan in 2004.
The investment approach
Our investment approach applies the core elements of the private
equity investment philosophy - highly focused, long-term, engaged
'ownership' style investment - to public markets. We believe that
this approach creates a portfolio unlike that of many typical
public equity funds and that, when well executed, can offer
attractive, differentiated, risk-adjusted returns.
- Highly concentrated portfolio: We look to build a highly
concentrated portfolio of no more than 25 investee companies where
we carry out intensive diligence, only investing in our highest
conviction ideas.
- Narrow focus: We are focused on smaller companies typically
too small for inclusion in the FTSE 250 index. We believe this
market is less efficient, offering more opportunities to find
mis-pricings. Further, we believe the best investment decisions are
made from a base of knowledge and experience, and we will make the
majority of investments in industry sectors that we and our
advisors, know well (TMT, Services, Industrials and
Healthcare).
- Targeting long-term holding periods: We will evaluate each
investment opportunity over a 3 to 5-year investment horizon. We
have structured our business to reflect this belief and do not
intend to run any capital which is redeemable over short time
periods. To think like an 'owner' of a business we believe your
capital should behave like one too.
- Engaged investment style: We are engaged investors. We like
investing in companies which, whilst good, are underperforming
their potential and where we see the opportunity for constructive
corporate engagement to unlock improved sustainable returns for all
stakeholders.
The Company's investment objective is to deliver long term
capital growth rather than outperform a specific index. Our
differentiated investment approach, allied with our sector focus
and the recently revised investment restrictions approved in
January 2021, is likely to lead to periods of NAV per share
performance materially different to those of the broader market. We
fully anticipate this potential short-term performance variance and
will focus on comparative investment performance on a rolling
three-year basis.
The absolute return mentality of the strategy, allied with the
desire to avoid being a forced seller, may lead to net cash
balances being held over the long-term. We anticipate a core range
of 5-15% over the long term. Net cash balances will not be used as
an attempt to market time, but to enable us to invest where blocks
of stock are available rather than being required to sell a less
liquid holding on short notice.
Implementing the investment strategy
There are three key factors we look for when we analyse a
potential investment;
1) a valuation opportunity;
2) in a higher-quality company; and
3) with improvement potential.
Our view is that buying at a fair price and supporting improved
performance generates capital growth, while our quality filters
mitigate losses in the event of unexpected headwinds.
Valuation
We look for two valuation factors in every investment. Firstly,
what we refer to as "static valuation" - does the company trade at
a discount to its current value? This is not only judged by
traditional public market ratios. We also seek to model every
company through the lens of a private equity buyer (of which we
have considerable experience) as well as evaluating its
attractiveness to strategic trade buyers.
Secondly, we are looking for companies which can grow their
value over time - "dynamic valuation". We particularly look for
situations where there are multiple, independent drivers of value
creation present, and where management actions can unlock these. We
believe seeking multiple value drivers makes an investment case
more secure and less exposed to single areas of uncertainty or
misjudgement.
Quality
We assess every potential investment against qualitative and
quantitative quality criteria. The quality assessment is important
to mitigate the risk of permanent capital destruction from
investments which fail to achieve their value potential. In our
experience, higher quality companies are more likely to maintain a
minimum value through difficult times and are more able to attract
high calibre management teams to rectify underperformance.
Improvement potential and engagement
We particularly like companies that are in some way
underperforming relative to their potential, and where the current
valuation does not price in the potential for improvement. Once
invested, constructive corporate engagement can help to unlock
value. Our mantra is to buy good businesses and sell excellent
businesses. The spectrum of areas which can be improved is broad
and includes operating performance, asset utilisation, overly
complex business structures/organisation, strategic direction, poor
M&A, investor relations, and governance and pay.
ESG in our investment process
We have historically focused on evaluating and engaging on
corporate governance ("G") and financial performance as part of our
investment process.
In January 2021, shareholders approved a change in the
investment policy of the Company to implement negative screening of
certain investments, deemed unethical and or involved in activities
which were deemed unsustainable. These restrictions augment our
approach to corporate engagement and provide clarity and certainty
to investors and largely formalises the approach we have taken
since we launched.
Our partnership with the specialist ESG data provider for
smaller quoted companies, announced in December 2020, has enabled
us to analyse all our portfolio companies ESG performance. Many of
these companies are too small to have attracted ratings from the
major ESG rating agencies. As at the time of preparation, we have
shared these reports with each of our portfolio companies.
This is in line with the pragmatic approach to environmental and
social engagement given the more resource-constrained nature of
smaller quoted companies. Our focus is on how boards approach
sustainability, where the scope for improvement is, how progress is
evaluated and how it is reported to investors. Our belief is that
performing ahead of peers and market expectations on ESG should
attract new shareholders, a higher rating and a lower cost of
equity, all things which will drive enhanced returns and benefit
the Company's shareholders.
Progress and performance in the past year
The six months ending September 2021 saw markets begin in a
positive fashion, buoyed by the ongoing success of vaccine roll
outs in the developed world, alongside progressive relaxation of
many of the most stringent lockdown protocols. Through the period,
there was a notable style shift in our part of the market, with the
value rally which began in November 2020 seeming to peter out, and
growth/momentum enjoying a strong renaissance during the summer
months. Through September, concerns about inflation and stagflation
weighed on markets. There were also flashbacks to the 1970s with
many of us experiencing fuel shortages. Although the price of
petrol has remained largely in check, oil shares performed
extremely well.
The Company's net asset value (NAV) per share rose 13.5% in the
period, exceeding the 9.1% rise in the NSCI & AIM index. The
second half of the period saw an increase in absolute, as well as
relative, volatility. Lack of exposure to oil and gas shares
impacted the Company's relative NAV per share performance during
September.
Unusually, AIM stocks underperformed both full list small and
mid-cap indices, rising only 4.4% over the period. The mid-cap
indices delivered a similar return to the NSCI & AIM Index, and
the FTSE Small Cap index delivered a return similar to that of the
Company's NAV.
The top five positive contributors to performance were Vectura,
Flowtech, Elementis, Chemring and Spire. Highly unusually two of
these companies, Vectura and Spire, received bid approaches on the
same day in May 2021.
Both companies are in the healthcare sector, and we had
increased our exposure to this sector, and these companies,
materially during Q4 2020, a time when many investors were more
focused on investing on consumer cyclical recovery situations. We
thought neither bid was a knock-out but believed that there was
more chance of a counterbidder in the case of Vectura, where the
initial approach had been from a private equity house, seemingly
bringing no synergies. In July, Philip Morris counter bid for
Vectura which sparked a bidding war. Ultimately Philip Morris
prevailed and the position was exited in full at the end of
September, with the investment having generated 1.7x cash and 40%
internal rate of return (IRR) over our holding period.
We were more sceptical that a competing bidder would emerge to
counter Ramsay Health Care for Spire, and sold a third of the
holding at a premium to the bid. No competing approach arrived and
the bid was ultimately voted down by shareholders.
The bids for Vectura and Spire represent the fifth and sixth
portfolio companies to receive bids since November 2019. During the
period, Elementis also received a further takeover approach, the
third in nine months, this time from US peer Innospec. The media
reported this to be at c.160p. We believed that this substantially
undervalued the company and we were supportive of the board's
approach not to engage with the bidder.
There were three negative contributors during the period. The
only one of note was Clinigen, which suffered from an unscheduled
and highly disappointing negative trading update in June, just
before its financial year end. The mixed sentiment surrounding the
company turned extremely negative, leading to a fierce reaction in
the share price. This event has led to significant changes in the
shareholder register, with special situations investors such as
Elliot and Slater becoming the largest shareholders. Also, through
the period the longstanding Chairman left, a new Senior
Non-Executive Director joined the board, and the CFO left. This is
likely to be the start of a one to two year phase of change for the
company.
We believe there is meaningful upside in the shares through a
combination of a) improving operational efficiencies; b)
simplifying the group, including unlocking the discount to the sum
of parts to which the shares trade; c) improving the company's
perception with the investment community. Medium term, success or
otherwise of Proleukin (the immune response drug Clinigen has the
rights to) offers a material upside option.
The portfolio was on average 93% invested across the period. Net
cash began the period at 11% and ended the period at 12%. The
portfolio consisted of 17 holding as at the end of September
2021.
Portfolio development
Following a very busy period through the sharp market gyrations
at the start of the COVID-19 pandemic, portfolio activity returned
to more normalised levels during the first half of the year.
In total c.GBP30.9m was invested across the period. Two new
positions were started for a total investment of c.GBP8.9m, of
which Dialight is a top 10 position. The other new position is
outside the top 10 but has scope to scale further. The remaining
GBP22.0m investment went into existing positions with notable
further investments into Xaar, Elementis and Spire growing these
relatively newer positions as our diligence progressed. We also
made further investment into Clinigen, where we felt that the sharp
fall in shares on the disappointing trading update offered an
attractive risk/reward balance.
Through the period we realised GBP29.6m, with two positions
fully exited raising GBP16.1m. The largest single position exited
was Vectura as a result of a successful bid from Phillip Morris
(detailed previously). We also fully exited our position in
Volution selling down into the market.
Volution has been an extremely successful investment with the
business delivering on our targets for margin improvement, cash
generation and revenue growth. With the shares performing well and
reaching a level above our view of a fair value (and above the
level of recent trade deals in the sector) we saw more attractive,
balanced returns elsewhere in the portfolio and in new
opportunities. Over our investment period our holding in Volution
returned c.1.9x our money and a 37% IRR. Of the other stock sales,
we have taken profits on names which have performed well and where
valuations have exceeded our view of current fair value. We have
also recycled capital from our position in RWS inherited from the
takeover of SDL.
As a result of investment activity in the period, industrials
has become the largest sector exposure of the portfolio. This
positioning does not represent a cyclical call, but rather the
specific, special situations we have found in the sector. We
believe that each of our industrial investments has significant
self-help potential which if delivered can both drive growth above
market levels in the coming years, and drive a material step up in
margins to levels above pre-COVID-19 peaks. This exciting
combination is currently not reflected in valuations, with our
industrial investments trading below long run average multiple of
revenues. These holdings have the potential to offer attractive
upside.
We have continued to actively engage with the portfolio where
appropriate in order to drive value and are pleased to see progress
being made.
Portfolio detail
At the end of the period under review, the portfolio comprised
17 companies. During the period two new positions were initiated
and two positions fully exited as detailed above.
Key updates through the period for the largest ten positions
(accounting for 68% of net asset value) are detailed below:
ELEMENTIS
% NAV: 12%
Sector: Industrials
Leading producer of specialty chemicals focused on personal
care, talc and coatings markets.
The key news for Elementis during the period was a further
unsolicited bid approach in April from Innospec Inc at a valuation
of 160p per share. We viewed this offer as undervaluing the
potential of the company and were supportive of the board not
engaging with the bidder. Interim results in July were in-line with
expectations with the recovery from COVID-19 progressing. We
continue to see the group as well positioned to return revenues to
levels above their prior peak as the recovery continues, on margins
enhanced by already delivered cost actions - an outcome which has
seemingly not been priced in by the investment community.
FLOWTECH FLUIDPOWER
% NAV: 9%
Sector: Services
Leading UK distributor of hydraulic and pneumatic
components.
Flowtech delivered an in-line set of interim results in
September. These showed a return to growth and a positive outlook
for the remainder of the year. More pleasing was the notable
progress on key self-help initiatives, with cost savings from
integration of legacy M&A delivered and the potential from
building out the group's e-commerce capabilities coming more
clearly into focus. Despite potential near term challenges from
supply chain pressures, we see these operational improvements
positioning the group to emerge stronger from COVID-19 with
significant further mid-term growth potential.
CLINIGEN GROUP PLC
% NAV: 9%
Sector: Healthcare
Provides a range of services and products to the pharmaceutical
market, focused on ensuring that hard to access medicines reach the
right patients at the right time.
Trading updates from Clinigen through the period were
disappointing with downgrades driven by COVID-19 slowing demand for
key, high margin immune response treatment Proleukin. The shares
fell sharply on this news. On the back of this obviously
disappointing news, we have actively engaged with the company and
other shareholders around the opportunity to strengthen the company
board and the need to set out a clear strategy to maximise value
from the group. We have been pleased to see the announcement of a
rapid change in Chairman and appointment of a new senior
non-executive director. We believe this marks the start of a needed
professionalisation of the company's activities, further
strengthening of the board and a review of the strategic direction
of the business.
Chemring Group
% NAV: 8%
Sector: Industrials
Producer of countermeasures, sophisticated sensor products, and
energetic devices primarily for the defence sector.
Interim results and subsequent trading updates from Chemring
have continued to show the group delivering in-line with
expectations as the company continues to grow its impressive track
record of delivery. Shares have performed well through the period
and we continue to be positive on the outlook for the company. End
markets for the group's countermeasure products are supported by
the ongoing F-35 platform roll out, demand for the group's Roke
cyber security services is strong and the company is well placed on
forthcoming large US DoD contracts.
New Top 10 Position
XAAR
% NAV: 6%
Sector: Industrials
Leading independent designer and manufacturer of industrial
inkjet print heads.
Xaar is a new disclosable top ten position in the period. The
group is a leading designer and manufacturer of inkjet print heads
for industrial use. Originally formed around technology spun out
from the University of Cambridge, Xaar benefits from intellectual
property (IP) and a printhead architecture fundamentally different
to others on the market with advantages in printing high viscosity,
highly pigmented ink. The strength of Xaar's IP however was
overshadowed in recent years by a period under previous management
of over investment in facilities and R&D, combined with a
number of commercial miss-steps.
We see Xaar as an exciting investment with a new management team
driving clear self-help actions to right past mistakes, and
commercialise years of R&D investment to increase the
addressable market for the group's products. With this done, we
believe that Xaar retains a strong IP advantage in growth markets
where a rehabilitation of its reputation with customers can drive a
return to revenue growth. Historic investment in capacity has left
the group with scope to double revenues with minimal investment,
driving the potential for rapid profit recovery. Finally, a net
cash balance sheet de-risks any near term uncertainty in this
turnaround story.
Benchmark Holdings
% NAV: 6%
Sector: Healthcare
Leading supplier to the global aquaculture market offering
genetics, early-stage nutrition and health products.
Interim and Q3 trading updates from Benchmark were broadly
in-line with demand for its salmon genetics products strong and a
recovery being seen in demand for its nutrition products. The key
operational news flow from the group was the receipt of Norwegian
marketing authority for its new salmon sea lice treatment
BMK08/Ectosan along with its unique Cleantreat delivery system.
This approval marks the first new sea lice treatment brought to
market in over a decade and the high efficacy of the product,
combined with the environmentally friendly Cleantreat system (which
releases no chemicals into the wider ecosystem), has been well
received with initial demand expected to be strong. Roll out of
this solution, will be a key driver of growth for the group in the
coming years. This key announcement is further evidence of the
transformation of Benchmark into a more professional business
supporting ongoing value growth.
Euromoney Institutional Investor PLC
% NAV: 5%
Sector: TMT
Global B2B information business providing data, pricing
information and insight to the asset management, commodities and a
range of financial services markets.
Euromoney's interim results came in ahead of expectations driven
by strong subscription sales and tight cost control. Pleasingly,
the group also flagged that the turnaround of its more troubled
Asset Management division was being delivered ahead of plan. We
continue to see Euromoney as a somewhat overlooked COVID-19
recovery story. The group has a well invested, high quality core
business and a strong balance sheet. The coronavirus impact on
in--person events has been a headwind, but market peers are
demonstrating that vaccine roll out in developed countries is being
followed by growing demand for a return of in person (or blended
digital) events. The continuation of this trend bodes well for
continuing strong performance at Euromoney which we see as yet to
be priced in to shares.
New Top 10 Position
Dialight
% NAV: 5%
Sector: Industrials
Designer and manufacturer of LED lighting solutions primarily
sold into hazardous industrial environments.
Dialight is a new disclosable top ten position in the period.
The group is a leader in the market for LED lights, primarily for
use in hazardous and high reliability industrial applications. This
niche market is growing well driven by replacement of traditional
lighting solutions by more economic and more ESG friendly LED based
solutions. The business itself has had a tumultuous recent history
with previous management failing to outsource production of a
complex product range to an ill prepared partner, causing
production issues and material loss of share.
Under a new management team, we see these historic issues as now
being resolved with production brought back in house. This has left
the business well placed to see revenues rebound strongly as
capital investment budgets restart with COVID-19 unlocking. The
business should see significant operational leverage come through
from its now well invested manufacturing footprint. The current
share price fails to capture this potential, and we note Dialight's
IP and strong US sales force would be highly attractive to larger
industrial companies in the sector.
Wilmington plc
% NAV: 5%
Sector: TMT
B2B information, training and media provider focused on the
compliance, healthcare and professional business markets.
Wilmington delivered full year results to June which were ahead
of expectations. The group has navigated the pandemic well, the
core of recurring revenue from data/information products has proved
resilient and the group has readily pivoted to digital delivery of
many of its training courses and in person events. We remain
positive on the team at Wilmington and their efforts to restructure
the operating model of the group, to construct a more coherent,
integrated whole from the legacy disparate group of businesses. We
see further upside in the shares as the transformation continues
and in person events recover.
DEVRO
% NAV: 4%
Sector: Consumer
Leading provider of edible, collagen-based sausage casings.
Devro delivered solid trading updates through the period. The
group continued its strong track record of delivering cost savings,
but also pleasingly delivered volume growth supported by
particularly strong performance across emerging markets. We believe
that Devro remains an attractive investment opportunity; a capable
management team is beginning to see a return on investment in
standardising operations, but now also from the strengthening of
the businesses commercial function. Delivery of revenue growth,
continuing strong margins and cash flow should support continuing
value creation.
The remaining seven investments represent up to 4% of NAV each.
They are weighted towards our core focus sectors and include
positions with the potential to scale as liquidity and due
diligence allows.
Outlook
At the time of preparation, the key drivers of uncertainty in
markets are supply chain issues, and inflation.
On the former, we have engaged with our portfolio companies to
understand what direct and indirect supply chain issues they face.
The direct impacts (specifically availability of raw
materials/components) have been managed well, with companies having
either increased raw material inventories and/or secured supply.
The indirect impacts are more difficult to predict and plan for:
e.g., if you supply a component to a customer, which has shortages
in other components from other suppliers, the customer could cut
future orders from you until it can secure future supply of other
components.
In April, we assessed our portfolio companies against the risks
of increasing inflation. Our conclusions were that given many had
market leadership, could pass on price increases relatively
quickly, and had limited customer or supplier concentration, they
are well positioned to perform resiliently. There are few companies
where labour and/or energy are very significant proportions of
costs. Some might have a small lag before being able to full pass
on temporary costs such as freight surcharges, but certain
portfolio companies could thrive in periods of inflation.
Despite short-term uncertainty, we have become increasingly
confident of the medium to long term value uplift potential of many
of our portfolio companies. We like companies with the potential to
drive improvements in their value through "self-help" - strategic,
operational, capital allocation improvements, as well as enhancing
their communications with investors. Such change requires a
catalyst and often change of mindset and culture. This change
typically starts from the top.
The role of a chairman is often under appreciated. An engaged
and high calibre chairman can make a material positive impact on a
smaller company. Unless it is a "deep rescue" situation, the
appointment of a good new chairman typically leads to a
three-to-six month review, followed by six to twelve months of
implementation, and then an improvement journey visible to the
investment community. From that point, we often observe multiple
periods of strong share price performance, and sometimes takeovers
from high quality trade bidders. We believe that high quality trade
bidders prefer to pay a premium to a high price for a "clean/fixed"
company, rather than a bargain for an underperforming company with
potential. Other stock market investors are also more attracted to
"clean/fixed" businesses.
It is notable that a high proportion of our portfolio companies
have had a new chairman join since the beginning of 2020. We
believe this augurs well for medium term relative and absolute
performance.
This is particularly the case with our industrial cyclical
investments (Dialight, Elementis, Flowtech and Xaar), all of which
we believe have recovery and self-help potential, and have had new
chairmen since April 2020. Unlike many companies in the industrial
sector, we do not believe that these companies' shares are pricing
in recovery, with their valuations trading on discounts to average
long-term Enterprise Value to Sales (despite their business models
being robust), when their forecast sales remain notably below
previous peak nominal sales. All have been raising prices of late
too. The balance sheets of these companies appear robust. We see
the prospect of attractive returns over the next three years for
these companies. These investments accounted for c.30% of NAV at
the end of the period.
Two other significant areas of potential NAV growth over the
next two to three years are a) the healthcare & life sciences
special situations, Benchmark and Clinigen; and b) the B2B media
companies.
We believe Benchmark and Clinigen trade at significant discounts
to their sum of parts valuations. The executive team change was
completed at Benchmark more than a year ago and we believe that
restructuring and change is well embedded. In comparison, the
change process at Clinigen is in its infancy.
The B2B media investments in Euromoney and Wilmington may not
offer as much upside as some other recovery plays in the portfolio
but both have the potential to deliver attractive returns over the
next two to three years in excess of our investment hurdles. Unlike
other recovery plays, their asset light nature means their progress
is not encumbered by supply chain issues. B2B media companies tend
to operate on negative working capital so, their cash generation
during recovery phases should exceed profits. Both companies enjoy
strong balance sheets which will give them the potential to execute
value-enhancing acquisitions.
We continue to look for situations where there are multiple
drivers of capital increase leading to a balanced return, not just
sales-driven earnings growth. Likewise, we are not interested in
"cheap" stocks with problems, instead looking to pay below our view
of the intrinsic value for higher quality companies.
Increased volatility in both directions means we usually reduce
and exit positions in portfolio companies when the market value
exceeds the intrinsic value and the likely value as a takeover
target to a trade buyer. This discipline of pegging intrinsic value
to a takeover valuation and selling as our opinion of fair value
has been reached, has helped us raise capital during the summer,
which we have redeployed during the recent market weakness.
We are fortunate to manage an unconstrained mandate without a
benchmark, allowing us to wait for compelling investments, and not
be drawn into short term fads. We can thus maintain a net cash
balance sheet and only invest when we see compelling investment
opportunities.
A closed-ended structure allows investment in a highly
concentrated portfolio of less liquid companies, enabling us to
select a small number of investments each year which we believe
offer an attractive risk/reward balance. Unlike open ended funds,
which are subject to daily fund inflows and outflows, we have
certainty of the capital base we are investing, so we can make long
term investment decisions.
We are confident the existing portfolio has the potential to
generate attractive returns over the next three to five years and
our patience should be rewarded as market conditions present new
attractive opportunities.
Stuart Widdowson | Ed Wielechowski
Portfolio Managers
Odyssean Capital LLP
24 November 2021
PORTFOLIO OF INVESTMENTS
as at 30 September 2021
Cost Valuation % of
Company Sector Country of Listing GBP'000 GBP'000 Net Assets
--------------------------------- ------------------ ------------------- ------- --------- ----------
Elementis Industrials United Kingdom 9,034 17,880 12.2%
Flowtech Fluidpower Business Services United Kingdom 10,305 13,550 9.2%
Clinigen Group Healthcare United Kingdom 12,621 12,700 8.6%
Chemring Group Industrials United Kingdom 8,213 11,803 8.0%
XAAR Industrials United Kingdom 6,417 8,673 5.9%
Benchmark Holdings Healthcare United Kingdom 7,033 8,622 5.8%
Euromoney Institutional Investor TMT United Kingdom 6,269 7,112 4.8%
Dialight Industrials United Kingdom 6,240 7,110 4.8%
Wilmington TMT United Kingdom 4,762 7,057 4.8%
Devro Consumer United Kingdom 5,695 6,405 4.3%
--------------------------------- ------------------ ------------------- ------- --------- ----------
Total top 10 equity investments 76,589 100,912 68.4%
Other equity investments* 22,459 29,098 19.7%
-------------------------------------------------------------------------- ------- --------- ----------
Total equity investments 99,048 130,010 88.1%
-------------------------------------------------------------------------- ------- --------- ----------
Cash and other net current
assets 17,543 11.9%
-------------------------------------------------------------------------- ------- --------- ----------
Net assets 147,553 100.0%
-------------------------------------------------------------------------- ------- --------- ----------
* Other equity investments include seven investments, each
representing between c.1% and 4% of NAV. These are spread across
our core focus sectors and all offer scope to scale, subject to
further due diligence and pricing remaining attractive.
DISTRIBUTION OF INVESTMENTS
as at 30 September 2021
Elementis 12.2%
Flowtech 9.2%
------
Clinigen 8.6%
------
Chemring 8.0%
------
Xaar 5.9%
------
Benchmark 5.8%
------
Euromoney 4.8%
------
Dialight 4.8%
------
Wilmington 4.8%
------
Devro 4.3%
------
Other equity 19.7%
------
Cash and other net current
assets 11.9%
------
Sector exposure
(% of net assets)
Industrials 30.8%
Healthcare 18.7%
------
TMT 16.9%
------
Business Services 10.7%
------
Financial Services 4.0%
------
Other equity 7.0%
------
Cash and other net current
assets 11.9%
------
Geographical revenue exposure
(% of invested capital)
UK 30.0%
US 23.0%
------
Europe Other 21.0%
------
Rest of the World 26.0%
------
Market capitalisation
(% of invested capital)
Below GBP150m 22.6%
GBP150m - GBP750m 24.6%
------
Over GBP750m 52.8%
------
INTERIM MANAGEMENT REPORT AND STATEMENT OF DIRECTORS'
RESPONSIBILITIES
Interim management report
The important events that have occurred during the period under
review, the key factors influencing the financial statements and
the principal factors that could impact the remaining six months of
the financial year are set out in the Chairman's statement and the
Portfolio Manager's report.
Principal Risks and Uncertainties
The principal risks and uncertainties associated with the
Company are set out on pages 35 to 41 of the Annual Report and
Accounts for the year ended 31 March 2021, which is published on
the Company's website. Such risks and uncertainties are as
applicable for the remaining six months of the Company's financial
year as they have been for the period under review. The risks can
be summarised under the following headings: investment performance
not being comparable to the expectations of investors, share price
performance, loss of personnel or reputation of the Portfolio
Manager, material changes within the Portfolio Manager's
organisation, valuation of unquoted investments, reliance on the
performance of third-party service providers, market risks
(including market price risk, currency risk and interest rate
risk), liquidity risk and credit risk.
The Board notes that equity markets experienced substantial
volatility during the period due to uncertainties linked to the
Covid-19 pandemic. The Directors have considered the impact of the
continued uncertainty on the Company's financial position and,
based on the information available to them at the date of this
report, have concluded that no adjustments are required to the
accounts as at 30 September 2021. The Board is also aware that the
UK's exit from the European Union has introduced elements of
political and economic uncertainty. Developments continue to be
closely monitored by the Board.
Related Party Transactions
During the first six months of the current financial year no
material transactions with related parties other than those set out
in the notes to the financial statements have taken place which
have affected the financial position of the performance of the
Company.
Going concern
The Directors believe, having considered the Company's
investment objectives, risk management policies, capital management
policies and procedures, nature of the portfolio and expenditure
projections, that the Company has adequate resources, an
appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the
foreseeable future and, more specifically, that there are no
material uncertainties relating to the Company that would prevent
its ability to continue in such operational existence for at least
twelve months from the date of the approval of this Interim Report.
For these reasons, they consider there is reasonable evidence to
continue to adopt the going concern basis in preparing the
accounts.
Responsibility statement
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements contained within the
Half Year Report has been prepared in accordance with International
Accounting Standard ("IAS") 34, 'Interim Financial Reporting';
- the Half Year Report and condensed financial statements give a
true and fair view of the assets, liabilities, financial position
and return of the Company; and
- the Interim Management Report includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the Company
during that period; and any changes in the related party
transactions that could do so.
The Half Year Report has not been reviewed or audited by the
Company's Auditors.
This Half Year Report contains certain forward-looking
statements. These statements are made by the Directors in good
faith based on the information available to them up to the date of
this report and such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
For and on behalf of the Board
Jane Tufnell
Chairman
24 November 2021
CONDENSED INCOME STATEMENT
for the six months ended 30 September 2021
Six months ended Six months ended
30 September 2021 30 September 2020
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ----- ------- ------- ------- ------- ------- -------
Income 3 1,718 - 1,718 194 - 194
Net gains on investments at
fair value 9 - 17,621 17,621 - 15,144 15,144
-------------------------------- ----- ------- ------- ------- ------- ------- -------
Total income 1,718 17,621 19,339 194 15,144 15,338
Expenses
Portfolio management fee 4 (702) (1,713) (2,415) (411) (807) (1,218)
Other expenses 5 (329) - (329) (207) - (207)
-------------------------------- ----- ------- ------- ------- ------- ------- -------
Total expenses (1,031) (1,713) (2,744) (618) (807) (1,425)
-------------------------------- ----- ------- ------- ------- ------- ------- -------
Return/(loss) before taxation 687 15,908 16.595 (424) 14,337 13,913
Taxation 6 - - - - - -
Return/(loss) for the period 687 15,908 16,595 (424) 14,337 13,913
Basic and diluted return/(loss)
per ordinary share (pence) 7 0.8 17.6 18.4 (0.5) 16.3 15.8
-------------------------------- ----- ------- ------- ------- ------- ------- -------
The total column of the statement is the Income Statement of the
Company prepared in accordance with International Financial
Reporting Standards ("IFRS") as endorsed by the European Union
("EU"). The supplementary revenue and capital columns are presented
for information purposes as recommended by the Statement of
Recommended Practice ("SORP") issued by the AIC.
All items in the above Statement derive from continuing
operations. No operations were acquired or discontinued during the
period.
There is no other comprehensive income, and therefore the profit
for the period after tax is also the total comprehensive income for
the period.
The notes form part of these financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2021
Special
Share Share distributable Capital Revenue
capital premium reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------- ------- ------------- ------- ------- -------
Six months ended 30 September
2021
(unaudited)
Opening balance as at 1
April 2021 883 449 85,245 36,562 (579) 122,560
Share released from treasury - 212 230 - - 442
Net proceeds from share
issuance 50 7,906 - - - 7,956
Total comprehensive income
for
the period - - - 15,908 687 16,595
---------------------------------- ------- ------- ------------- ------- ------- -------
As at 30 September 2021 933 8,567 85,475 52,470 108 147,553
---------------------------------- ------- ------- ------------- ------- ------- -------
Special
Share Share distributable Capital Revenue
capital premium reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------- ------- ------------- ------- ------- -------
Six months ended 30 September
2020
(unaudited)
Opening balance as at 1
April 2020 883 449 85,475 (6,726) 14 80,095
Share repurchases into treasury - - (230) - - (230)
Total comprehensive income/(loss)
for
the period - - - 14,337 (424) 13,913
---------------------------------- ------- ------- ------------- ------- ------- -------
As at 30 September 2020 883 449 85,245 7,611 (410) 93,778
---------------------------------- ------- ------- ------------- ------- ------- -------
The notes form part of these financial statements.
CONDENSED BALANCE SHEET
as at 30 September 2021
As at As at
30 September 31 March
2021 2021
GBP'000 GBP'000
Notes (unaudited) (audited)
----------------------------------------------- ----- ------------- ----------
Non-current assets
Investments at fair value through profit or
loss 9 130,010 109,259
----------------------------------------------- ----- ------------- ----------
Current assets
Trade and other receivables 81 143
Cash and cash equivalents 19,652 15,689
----------------------------------------------- ----- ------------- ----------
19,733 15,832
----------------------------------------------- ----- ------------- ----------
Total assets 149,743 125,091
----------------------------------------------- ----- ------------- ----------
Current liabilities
Trade and other payables 4 (2,190) (2,531)
----------------------------------------------- ----- ------------- ----------
Total liabilities (2,190) (2,531)
----------------------------------------------- ----- ------------- ----------
Total assets less current liabilities 147,553 122,560
----------------------------------------------- ----- ------------- ----------
Net assets 147,553 122,560
----------------------------------------------- ----- ------------- ----------
Represented by:
Share capital 10 933 883
Share premium 8,567 449
Special distributable reserve 10 85,475 85,245
Capital reserve 52,470 36,562
Revenue reserve 108 (579)
----------------------------------------------- ----- ------------- ----------
Total equity attributable to equity holders
of the Company 147,553 122,560
----------------------------------------------- ----- ------------- ----------
Basic and diluted net asset value per ordinary
share (pence) 8 158.1 139.3
----------------------------------------------- ----- ------------- ----------
The notes form part of these financial statements.
CONDENSED CASH FLOW STATEMENT
for the six months ended 30 September 2021
Six months Six months
ended ended
30 September 30 September
2021 2020
GBP'000 GBP'000
(unaudited) (unaudited)
------------------------------------------------------- ------------ ------------
Reconciliation of profit before taxation to net cash
outflows from operating activities
Profit before tax 16,595 13,913
Gains on investments held at fair value through profit
and loss (17,621) (15,144)
Decrease in receivables 62 14
(Decrease)/increase in payables (41) 759
Taxation paid - -
------------------------------------------------------- ------------ ------------
Net cash outflow from operating activities (1,005) (458)
------------------------------------------------------- ------------ ------------
Investing activities
Purchases of investments (31,308) (19,737)
Sales of investments 27,878 19,902
------------------------------------------------------- ------------ ------------
Net cash (outflow)/inflow from investing activities (3,430) 165
------------------------------------------------------- ------------ ------------
Financing activities
Net proceeds from share issuance 7,956 -
Shares released from/(repurchased into) treasury 442 (230)
------------------------------------------------------- ------------ ------------
Net cash inflow/(outflow) from investing activities 8,398 (230)
------------------------------------------------------- ------------ ------------
Increase/(decrease) in cash and cash equivalents 3,963 (523)
------------------------------------------------------- ------------ ------------
Reconciliation of net cash flow movements in funds
Cash and cash equivalents at the beginning of period 15,689 9,800
------------------------------------------------------- ------------ ------------
Increase/(decrease) in cash and cash equivalents 3,963 (523)
------------------------------------------------------- ------------ ------------
Cash and cash equivalents at end of period 19,652 9,277
------------------------------------------------------- ------------ ------------
The notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 30 September 2021 (unaudited)
1. General information
Odyssean Investment Trust PLC is a listed public limited company
incorporated in England and Wales. The registered office of the
Company is 25 Southampton Buildings, London WC2A 1AL.
2. Accounting policies
a) Basis of preparation/statement of compliance
The interim financial information covers the period from 1 April
2021 to 30 September 2021 and has been prepared in accordance with
IAS 34, 'Interim Financial Reporting'.
The Company's annual financial statements for the year ended 31
March 2021 were prepared in conformity with IFRS as adopted by the
EU, which comprise standards and interpretations approved by the
International Accounting Standards Board ("IASB"), and as applied
in accordance with the SORP for the financial statements of
investment trust companies and venture capital trusts, except to
any extent where it is not consistent with the requirements of
IFRS.
The accounting policies used by the Company followed in these
half-year financial statements are consistent with the most recent
Annual Report for the year ended 31 March 2021.
The interim financial information is being sent to shareholders
and copies will be made available to the public at the registered
office of the Company and on the Company's website:
www.oitplc.com.
b) Functional and presentation currency
The condensed financial statements are presented in GBP
Sterling, which is the Company's functional currency. All amounts
have been rounded to the nearest thousand, unless otherwise
indicated.
c) Comparative information
The financial information contained in this Interim Report does
not constitute statutory accounts as defined in the Companies Act
2006. The financial information contained within this report
relates to the following periods: 1 April 2021 to 30 September 2021
and 1 April 2020 to 30 September 2020 (unaudited and unreviewed by
the Company's Auditor); and as at 31 March 2021 (audited) for the
Balance Sheet. The comparative figures for the period 30 September
2020 are not the Company's statutory accounts for that financial
year. The Company's statutory accounts are for the year ended 31
March 2021 and were reported on by the Company's Auditor and
delivered to the Registrar of Companies. The report of the Auditor
was (i) unqualified, (ii) did not include a reference to any
matters to which the Auditor drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
d) Going concern
The financial statements have been prepared on a going concern
basis and on the basis that approval as an investment trust company
will continue to be met.
The Directors have made an assessment of the Company's ability
to continue as a going concern and are satisfied that the Company
has adequate resources to continue in operational existence for the
foreseeable future (being a period of at least 12 months from the
date on which these financial statements were approved).
Furthermore, the Directors are not aware of any material
uncertainties that may cast significant doubt upon the Company's
ability to continue as a going concern, having taken into account
the liquidity of the Company's investment portfolio and the
Company's financial position in respect of its cash flows, debt and
investment commitments.
3. Income
Six months ended
30 September 2021
Six months
ended
30 September
2020
Income Capital Total Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------ -------- -------- -------- -------------
Income from investments
Dividend income 1,718 - 1,718 194
------------------------ -------- -------- -------- -------------
Total income 1,718 - 1,718 194
------------------------ -------- -------- -------- -------------
4. Portfolio management fee
Six months ended Six months ended
30 September 2021 30 September 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ------- ------- ------- ------- ------- -------
Portfolio management fee 702 - 702 411 - 411
Performance fee - 1,713 1,713 - 807 807
------------------------- ------- ------- ------- ------- ------- -------
702 1,713 2,415 411 807 1,218
------------------------- ------- ------- ------- ------- ------- -------
The Company is liable to pay a performance fee depending on the
performance of the Company over a three-year period and thereafter
a rolling three-year period as set out in the Company's prospectus
dated 26 March 2018. Based on the performance of the Company to 30
September 2021, GBP1,713,000 (2020: GBP807,000) of performance fee
has been accrued in the NAV and included in Trade and Other
Payables in the Balance Sheet.
Pursuant to the terms of the Portfolio Management Agreement, the
Portfolio Manager is entitled, with effect from Initial Admission,
to receive an annual management fee equal to the lower of: (i) 1.0%
of the net asset value (calculated before deduction of any accrued
but unpaid management fee and any performance fee) per annum; or
(ii) 1.0% per annum of the Company's market capitalisation. The
annual management fee is calculated and accrues daily and is
payable quarterly in arrears.
In addition, the Portfolio Manager will be entitled to a
performance fee (the "Performance Fee") in certain
circumstances.
The Company's performance is measured over rolling three-year
periods ending on 31 March each year (each a "Performance Period"),
by comparing the net asset value total return per ordinary share
over a Performance Period against the total return performance of
the NSCI ex IT plus AIM Index (the "Comparator Index"). The first
Performance Period ran from Initial Admission to 31 March 2021 and
GBP1,824,000 was paid to the Investment Manager.
A Performance Fee is payable if the net asset value per ordinary
share at the end of the relevant Performance Period (as adjusted
to: (i) add back the aggregate value of any dividends per ordinary
share paid (or accounted as paid for the purposes of calculating
the net asset value) to shareholders during the relevant
Performance Period; and (ii) exclude any accrual for unpaid
Performance Fee accrued in relation to the relevant Performance
Period) (the "Net Asset Value Total Return per Share") exceeds
both:
(i) (a) the net asset value per ordinary share at Initial
Admission, in relation to the first Performance Period; and (b)
thereafter the net asset value per ordinary share on the first
business day of a Performance Period; in each case as adjusted by
the aggregate amount: of (i) the total return on the Comparator
Index (expressed as a percentage); and (ii) 1.0% per annum over the
relevant Performance Period (the "Target Net Asset Value per
Share"); and
(ii) the highest previously recorded net asset value per
ordinary share as at the end of the relevant Performance Period in
respect of which a Performance Fee was last paid (or the net asset
value per ordinary share as at Initial Admission, if no Performance
Fee has been paid) (the "High Watermark"),
with any resulting excess amount being known as the "Excess
Amount".
The Portfolio Manager will be entitled to 10% of the Excess
Amount multiplied by the time weighted average number of ordinary
shares in issue during the relevant Performance Period to which the
calculation date relates. The Performance Fee will accrue
daily.
Payment of a Performance Fee that has been earned will be
deferred to the extent that the amount payable exceeds 1.75% per
annum of the net asset value at the end of the relevant Performance
Period (amounts deferred will be payable when, and to the extent
that, following any later Performance Period(s) with respect to
which a Performance Fee is payable, it is possible to pay the
deferred amounts without causing that cap to be exceeded or the
relevant net asset value total return per share to fall below both
the relevant target net asset value per share and the relevant High
Watermark for such Performance Period, with any amount not paid
being retained and carried forward).
Subject at all times to compliance with relevant regulatory and
tax requirements, any Performance Fee paid or payable shall:
- where as at the relevant calculation date, the ordinary shares
are trading at, or at a premium to, the latest published net asset
value per ordinary share; be satisfied as to 50% of its value by
the issuance of new ordinary shares by the Company to the Portfolio
Manager (rounded down to the nearest whole number of ordinary
shares) (including the reissue of treasury shares) issued at the
latest published net asset value per ordinary share applicable at
the date of issuance;
- where as at the relevant calculation date, the ordinary shares
are trading at a discount to the latest published net asset value
per ordinary share; be satisfied as to 100% of its value in cash
and the Portfolio Manager shall, as soon as reasonably practicable
following receipt of such payment, use 50% of such Performance Fee
payment to make market purchases of ordinary shares (rounded down
to the nearest whole number of ordinary shares) within four months
of the date of receipt of such Performance Fee payment,
(in each case "Restricted Shares").
Each such tranche of Restricted Shares issued to, or acquired
by, the Portfolio Manager will be subject to a lock- up undertaking
for a period of three years post issuance or acquisition (subject
to customary exceptions).
At no time shall the Portfolio Manager (and/or any persons
deemed to be acting in concert with it for the purposes of the
Takeover Code) be obliged, in the absence of a relevant whitewash
resolution having been passed in accordance with the Takeover Code,
to receive, or acquire, further ordinary shares where to do so
would trigger a requirement to make a mandatory offer pursuant to
Rule 9 of the Takeover Code. Where any restriction exists on the
issuance of further ordinary shares to the Portfolio Manager, the
relevant amount of the Performance Fee may be paid in cash.
In addition, the Portfolio Manager is entitled to reimbursement
for all costs and expenses properly incurred by it in the
performance of its duties under the Portfolio Management
Agreement.
The initial term of the Portfolio Management Agreement is three
years commencing on the date of Initial Admission (the "Initial
Term"). The Company may terminate the Portfolio Management
Agreement by giving the Portfolio Manager not less than six months'
prior written notice, such notice not to be served prior to the end
of the Initial Term. The Portfolio Manager may terminate the
Portfolio Management Agreement by giving the Company not less than
six months' prior written notice, such notice not to be served
prior to the end of the Initial Term.
5. Other expenses
Six months Six months
ended ended
30 September 30 September
2021 2020
GBP'000 GBP'000
---------------------------------------------------- ------------ ------------
Directors' fees* 44 43
Company Secretarial and Administration fee - Link** - 43
Frostrow Capital LLP*** 162 44
Audit fee 19 14
Other expenses 104 63
---------------------------------------------------- ------------ ------------
329 207
---------------------------------------------------- ------------ ------------
* Peter Hewitt is not receiving a Director fee in respect of his
services to the Company. Each of the Directors has agreed to use
their applicable Directors' fees (net of applicable taxes) to
acquire ordinary shares in the secondary market, subject to
regulatory requirements. In relation to any dealings, the Directors
will comply with the share dealing code adopted by the Company in
accordance with the Market Abuse Regulation. The Board will be re
sponsible for taking all proper and reasonable steps to ensure
compliance with the share dealing code by the Directors.
** Link Company Matters Ltd was appointed as Company Secretary
and Administrator up until 12 July 2020.
*** Frostrow Capital LLP was appointed with effect from 13 July 2020.
6. Taxation
The Company has an effective tax rate of 0%. The estimated
effective tax rate is 0% as investment gains are exempt from tax
owing to the Company's status as an investment trust and there is
expected to be an excess of management expenses over taxable income
and thus there is no charge for corporation tax.
7. Return/(loss) per ordinary share
The capital, revenue and total return/(loss) per ordinary share
are based on the net return/(loss) shown in the Condensed Income
Statement and the weighted average number of ordinary shares during
the period of 90,438,153 (2020: 88,058,850).
There are no dilutive instruments in issue and therefore no
difference between the basic and diluted return/(loss) per ordinary
share.
8. Net asset value per ordinary share
The basic net asset value per ordinary share is based on net
assets of GBP147,553,000 (2020: GBP93,778,000) and on 93,299,553
(2020: 87,982,211) ordinary shares, being the number of ordinary
shares in issue at the period end.
There are no dilutive instruments in issue and therefore no
difference between the basic and diluted total net asset per
ordinary share.
9. Investments at fair value through profit or loss
The Company is required to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
consists of the following three levels:
- Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2 - Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from
prices).
- Level 3 - Inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data from investments actively traded in organised
financial markets, fair value is generally determined by reference
to Stock Exchange quoted market bid or closing prices at the close
of business on the Condensed Balance Sheet date, without adjustment
for transaction costs necessary to realise the asset.
As at 30 September 2021 As at 31 March 2021
Level Level Level Level Level Level
Total 1 2 3 Total 1 2 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
Quoted at fair value 130,010 130,010 - - 109,259 109,259 - -
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
Total 130,010 130,010 - - 109,259 109,259 - -
--------------------- ------- ------- ------- ------- ------- ------- ------- -------
There were no transfers between levels during the period.
10. Share capital and reserves
Six months ended Year ended
30 September 2021 31 March 2021
Number Number
of of
Shares GBP'000 Shares GBP'000
--------------------------------------- ----------- ------- ---------- -------
Issued and fully paid:
Ordinary shares of 1p:
Balance at the beginning of the period 88,257,211 883 88,257,211 883
New shares issued during the period 5,042,342 50 - -
--------------------------------------- ----------- ------- ---------- -------
Balance at the end of the period 93,299,553 933 88,257,211 883
--------------------------------------- ----------- ------- ---------- -------
Special distributable reserve
Upon initial placing and subsequent issuance of the Company's
ordinary shares on 1 May 2018 and 27 June 2018 respectively, the
Company accumulated a premium account of GBP85,495,000. Following
approval of the Court, effective on 8 August 2018, the share
premium account was cancelled and the balance after cancellation
cost of GBP20,000 was transferred to the special distributable
reserve.
On 22 May 2020, the Company purchased 275,000 of its own
ordinary shares at a total cost of GBP230,000 and these shares were
placed into treasury, but subsequently released through share
issuance during the six months ended 30 September 2021.
11. Related party transactions
The amount incurred, in respect of portfolio management fees,
during the period to 30 September 2021 was GBP702,000 (30 September
2020: GBP411,000), of which GBP377,000 was outstanding at 30
September 2021 (30 September 2020: GBP224,000).
The amount incurred in respect of Directors' fees during the
period to 30 September 2021 was GBP44,000 (2020: GBP43,000) of
which GBPnil was outstanding at period end (2020: GBPnil).
GLOSSARY
AIC
Association of Investment Companies.
CTA
Corporation Tax Act 2010.
Premium/discount (APM)
A description of the difference between the share price and the
net asset value per share. The size of the discount is calculated
by subtracting the share price from the NAV per share and is
usually expressed as a percentage of the NAV per share. If the
share price is higher than the net asset value per share the result
is a premium. If the share price is lower than the net asset value
per share, the shares are trading at a discount.
30 September 31 March
Premium/(discount) calculation 2021 2021
------------------------------- ------------ --------
Closing NAV per share (p) 158.1 139.3
Closing share price (p) 163.0 129.0
------------------------------- ------------ --------
Premium/(discount) (%) 3.1 (7.4)
------------------------------- ------------ --------
FCA
Financial Conduct Authority.
IPO
Initial public offering.
LSE
London Stock Exchange.
M&A
Mergers and acquisitions.
NAV
NAV stands for net asset value and represents shareholders'
funds. Shareholders' funds are the total value of a company's
assets at current market value less its liabilities.
NAV total return per ordinary share (APM)
NAV total return is the closing NAV per share including any
cumulative dividends paid as a percentage over the opening NAV.
Six months
ended Year ended
30 September 31 March
2021 2021
----------------------------------------------------- ------------- ----------
Opening NAV per ordinary share (p) 139.1 90.8
Dividend paid per ordinary share (p) - -
----------------------------------------------------- ------------- ----------
Dividend adjusted opening NAV per ordinary share (p) 139.1 90.8
Closing NAV per ordinary share (p) 158.1 139.3
NAV total return per ordinary share (%) 13.5 53.4
----------------------------------------------------- ------------- ----------
NSCI ex IT plus AIM Index
Numis Smaller Companies ex Investment Trusts plus AIM Index.
Ongoing charges ratio (APM)
Based on total expenses, excluding finance costs and certain
non-recurring items for the period or year, and average daily net
asset value.
Six months
ended Year ended
30 September 31 March
2021 2021
----------------------------------------------- ------------- ----------
Total expenses per note 4 and note 5 (GBP'000) 1,031 1,442
Annualised total expenses (GBP'000) 2,062 1,442
Average net asset value (GBP'000) 143,025 101,160
----------------------------------------------- ------------- ----------
Ongoing charges (%) 1.44 1.43
----------------------------------------------- ------------- ----------
TMT
Technology, media and telecom.
Total assets
Total assets are the sum of both fixed and current assets with
no deductions.
SHAREHOLDER INFORMATION
Investing in the Company
The Company's shares are traded on the LSE and can be bought or
sold through a stock broker or other financial intermediary.
Shares in the Company are available through savings plans,
including Investment Dealing Accounts, ISAs, Junior ISAs and SIPPs,
which facilitate both regular monthly investments and lump sum
investments in the Company's shares. The Company's shares are also
available on various investment platforms.
Share register enquiries
The register for the ordinary shares is maintained by Equiniti
Limited. In the event of queries regarding your holding, please
contact the Registrar on 0371 384 2030. Changes of name and/or
address must be notified in writing to the Registrar at the address
shown under Corporate Information below. You can check your
shareholding and find practical help on transferring shares or
updating your details at www.shareview.co.uk.
Share capital and NAV information
Ordinary 1p shares 93,299,553 as at 30 September 2021
Held in Treasury Nil
Shares with voting rights 93,299,553 as at 30 September 2021
SEDOL number BFFK7H5
ISIN GB00BFFK7H57
Ticker OIT
LEI 213800RWVAQJKXYHSZ74
The Company's NAV is released daily to the LSE and published on
the Company's website.
Sources of further information
Copies of the Company's Annual and Interim Reports, Stock
Exchange announcements and further information on the Company can
be obtained from its website: www.oitplc.com, or from the Company
Secretary at info@frostrow.com.
Key dates
Company's half-year 30 September
end
Interim results announced November/ December
Company's year end 31 March
Annual results announced June/July
Annual General Meeting September
Association of Investment Companies
The Company is a member of the AIC, which publishes monthly
statistical information in respect of member companies. The AIC can
be contacted on 020 7282 5555, enquiries@theaic.co.uk or visit the
website: www.theaic.co.uk.
CORPORATE INFORMATION
Directors Portfolio Manager
Jane Tufnell (Chairman) Odyssean Capital LLP
Arabella Cecil (Senior Independent 6 Stratton Street
Director) Mayfair
Peter Hewitt (Chairman of the Management London W1J 8LD
Engagement Committee) Tel: 020 7640 3282
Richard King (Chairman of the Audit Email: info@odysseancapital.com
Committee)
Company Secretary and Registered Broker
Office Winterflood Securities Limited
Frostrow Capital LLP Cannon Bridge House
25 Southampton Buildings 25 Dowgate Hill
London WC2A 1AL London EC4R 2GA
Tel: 0203 008 4910
Email: info@frostrow.com
Website: www.frostrow.com
Independent Auditor Solicitor
KPMG LLP Gowling WLG (UK) LLP
15 Canada Square 4 More London Riverside
Canary Wharf London SE1 2AU
London E14 5GL
Registrar Custodian
Equiniti Limited RBC Investor Services Trust (UK Branch)
Aspect House 100 Bishopsgate
Spencer Road London EC2N 4AA
Lancing BN99 6DA
Tel: 0371 384 2030; +44 (0) 121 415
7047
www.shareview.co.uk
Corporate website
www.oitplc.com
Company registration number
11121934 (registered in England
and Wales)
ENDS
Frostrow Capital LLP
Company Secretary
020 3709 8732
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END
IR ZZLFLFFLXFBD
(END) Dow Jones Newswires
November 24, 2021 09:41 ET (14:41 GMT)
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