REG - Odyssean Inv. Trust - Annual Financial Report
29/05/2025 07:00
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RNS Number : 4781K Odyssean Investment Trust PLC 29 May 2025
LEI: 213800RWVAQJKXYHSZ74
ODYSSEAN INVESTMENT TRUST PLC (the "Company")
Annual Financial Report
For the year ended 31 March 2025
Odyssean Investment Trust plc (the "Company") hereby submits its Annual Report
and Financial Statements for the year ended 31 March 2025 as required by the
Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.1.
The Company's Annual Report and Financial Statements for the year ended 31
March 2025, including the Notice of Annual General Meeting, is being published
in hard copy format and an electronic copy will shortly be available to
download from the Company's web page on the Manager's website at
www.oitplc.com (http://www.oitplc.com) . It will also be made available to the
public at the Company's registered office, 46-48 James Street, London W1U 1EZ.
The Company's Annual Report and Financial Statements will be uploaded to the
Financial Conduct Authority's National Storage Mechanism and will shortly be
available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
Enquiries:
NSM Funds (UK) Limited
OIT@nsm.group (mailto:OIT@nsm.group)
Unlocking Hidden Value Through Strategic Investment and Constructive
Engagement
Financial Summary
31 March 2025 31 March 2024 Change
Shareholders' funds £183.5m £187.6m (2.2)%
NAV per share 137.9p 154.4p (10.7)%
Share price per share 134.5p 155.5p (13.5)%
Share price (discount)/premium to NAV per share (2.5)% 0.7%
Past performance is not a guide to future performance
Highlights
* Over the period, the NAV per share declined by 10.7% amid market volatility,
with strong early gains reversing into weaker performance in the latter half
* While broad investor sentiment towards UK equities, particularly smaller
quoted companies, remains subdued and liquidity challenges have impacted asset
values, the Company is well-positioned to navigate these conditions
* The Company issued 11.6 million shares at a premium to NAV during the period
avoiding dilution for existing shareholders, including 6.5 million through a
July placing prompted by a large new buy order, with an additional 0.7 million
shares issued since the period end
* Despite a recent dip in NAV below £200m due to market turmoil, the Board and
Portfolio Manager remain confident in the portfolio's underlying value and are
focused on driving long-term NAV per share growth, anticipating a comfortable
recovery and potential medium-term gains without additional share issuance
Linda Wilding
Chairman of Odyssean Investment Trust (OIT)
"Although the uncertainties driven by the tariff announcements have created
market volatility, at the time of writing, it feels like markets are past the
point of peak panic. After the initial "sell everything" knee jerk reaction,
the market is beginning to realise that the impact on tariffs, particularly
given the rollbacks announced, may not be as negative as originally
anticipated.
Notwithstanding these dynamics, sentiment towards UK equities appears to be
improving. The performance of the FTSE 100 has been strong despite outflows
from UK-focused open-ended funds, implying buying has been driven by
international investors and global funds. The Board is supportive of the
portfolio managers, Stuart Widdowson and Ed Wielechowski using the investment
company structure to take less liquid, but strategically valuable stakes in
portfolio companies and being able to take a long-term, engaged investment
approach which managers of open-ended funds are not able to do."
Stuart Widdowson
Fund Manager of Odyssean Investment Trust (OIT)
"The portfolio's focus on trend-exposed companies significantly impacted NAV
per share, as many shares lacked fundamental support and traded at or below
book value. In uncertain conditions, investor risk appetite declined, causing
volatile share price movements driven more by short-term speculation than
long-term outlooks.
Industrials remain the portfolio's largest sector exposure, particularly in
B2B electronics. While delayed industrial market recovery has impacted
performance, the portfolio holds strong, hard-to-replicate positions acquired
below fair value, with potential for significant gains as markets recover.
In the environment we have endured through the past year, where small caps in
particular have seen limited investor interest, we have been actively engaged
with the portfolio to encourage companies to be as proactive as possible in
driving their own destiny, through delivering on self-help and where
appropriate crystallising value. The disposal of Elementis' Talc division
announced post the period end is a good example of such a management-driven
catalyst. It transforms the group's financial profile and, together with the
announced buyback, has been welcomed by the investment community."
Press Enquiries
Stuart Widdowson, Odyssean Capital 07710 031620
Neil Langford, Winterflood Securities (Corporate Broker) 020 3100 0160
Sarah Gibbons-Cook/McKinley (Mac) Sadler, Quill PR (Media Agency) 07702 412680/
07507 790156
OIT@quillpr.com (mailto:OIT@quillpr.com)
About Odyssean Investment Trust PLC
Odyssean Investment Trust PLC (https://www.oitplc.com/) '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 Registered UK AIFM, with
NSM Funds (UK) Ltd. providing risk management support to the Board.
OIT 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.
Financial Summary
Results for the period As at 31 March 2025 As at 31 March 2024 Change
Shareholders' funds £183.5m £187.6m (2.2)%
NAV per share 137.9p 154.4p (10.7)%
Share price per share 134.5p 155.5p (13.5)%
Share price (discount)/premium to NAV per share(#) (2.5)% 0.7%
Year ended Year ended
31 March 2025 31 March 2024
Income per ordinary share revenue (loss)* (0.4)p (0.4)p
Capital return per ordinary share* (17.8)p (5.3)p
Total return per ordinary share* (18.2)p (5.7)p
NAV total return per ordinary share(#) (10.7)% (3.7)%
DNSC ex IT plus AIM Total Return Index(#)* (0.4)% 3.0%
Year ended Year ended
Cost of running the Company 31 March 2025 31 March 2024
Annualised ongoing charges(#) 1.47% 1.48%
# Alternative Performance Measures.
* Used by the Company as comparator, not a Benchmark. Source:
Bloomberg.
Past performance is not a guide to future performance.
Chairman's Statement
Introduction
I am pleased to present the Annual Report and Financial Statements for
Odyssean Investment Trust PLC ("OIT" or the "Company") covering the period
from 1 April 2024 to 31 March 2025.
Performance
Over the period, the net asset value per share ('NAV per share') of your
company fell by 10.7 % in another volatile period, whereas the broader market
delivered a slightly negative return. It was very much a period of two
distinct halves, with a strong performance to September transforming to a more
difficult performance in the six months to March.
Despite the clear absolute and relative value of UK equities, particularly
smaller quoted companies, broad investor sentiment in the asset class in which
the Company invests remains subdued. Liquidity has been poor which has often
exacerbated share price movements as well as hampered efficient price
discovery. These market conditions are having a negative impact on general
asset values, including those held by the Company. However, the closed ended
nature of the Company is the ideal vehicle to help navigate these uncertain
times and cope with the decline in liquidity and increased volatility of
portfolio company shares.
The long term investment horizon of the strategy means that the portfolio is
not driven by short term changes in the macro economic environment. Moreover,
the low liquidity of portfolio companies means that changes in the portfolio
positioning are made over many months rather than a few weeks or days. As a
result of this, alongside the strategy being high conviction and concentrated,
it's not unusual for the short term performance to vary materially from the
broader market.
In the period under review, the concentration of the portfolio and the
allocation towards more cyclical industrial companies has worked against short
term performance. This has been irrespective of the fundamental and long term
value offered by these investments. Uncertainties from the imposition of
tariffs, with the direct and indirect impact on companies, aligned with a
longer than expected destocking has weighed on some company valuations. Where
good progress has been made in multi-year performance improvement plans, this
has often not been rewarded by the market.
The Portfolio Manager stepped up its corporate engagement with portfolio
companies as the year progressed. Although the impact of this engagement has
yet to be reflected in share prices, the Board is hopeful that the efforts
will bear fruit in the coming months.
Notwithstanding the difficult market conditions and shorter term performance,
it is encouraging to see continued support for the Company and its
differentiated investment strategy.
Discount and premium management
The share price has continued to broadly track in line with the NAV per share
over the period, albeit with a little volatility. The Company's shares ended
the period trading at 2.5% discount to the NAV.
The Company issued a total of 11.6m shares at a premium to NAV over the
period, which meant that there was no dilution to existing shareholders. 6.5m
of these were issued via a small placing in July, which was catalysed by a
large buy order from a new shareholder. Since the period end and up to the
date of this report, a further 0.7m shares have been issued at a premium to
NAV.
Dividend
The Directors expect that returns for shareholders will be driven primarily by
capital growth of the shares rather than dividend income.
Growth of the company
Given the recent market turmoil, the Company's NAV has dipped below £200m.
However, the Board and the Portfolio Manager believe that there is substantial
pent-up value in the portfolio which should lead to the Company's NAV growing
back to the £200m mark comfortably, and potentially some way beyond in the
medium term even without any further share issuance. The Board and the
Portfolio Manager's primary objective remains growing the NAV per share over
the long term.
They are both aware that there are benefits of the Company continuing to grow
its absolute size through periodic and measured issuance of new shares, where
this issuance is not dilutive to existing shareholders. The benefits of
continuing to grow include but are not limited to a) having a broader base to
spread fixed costs over and b) greater scale and a more diversified register
probably driving improved daily liquidity in the secondary market, which helps
reduce both the absolute discount over time but also its volatility.
The Board and the Portfolio Manager agree that the investment strategy is not
infinitely scalable. However, both parties agree that there appears to be
considerable room for the Company to grow before returns from the investment
strategy risk being diminished, both through further investments into existing
holdings as well as initiating a small handful of additional investments.
Outlook
Although the uncertainties driven by the tariff announcements have created
market volatility, at the time of writing, it feels like markets are past the
point of peak panic. It is particularly pleasing that the Company's discount
has remained extremely narrow on all but the most volatile of days in early
April 2025. This is testament to the work the Portfolio Manager and Cadarn
Capital has done to diversify the shareholder base and communicate effectively
with existing and potential shareholders.
Whilst the first part of the new financial year has been challenging, many of
the share price moves of portfolio companies appear to have been driven on
very low volumes, with the extent of price moves being amplified by low
liquidity. After the initial "sell everything" knee jerk reaction, the market
is beginning to realise that the impact on tariffs, particularly given the
roll-backs announced, may not be as negative as originally anticipated. That
said, uncertainty remains and until there is clarity on the direct and
indirect impacts on companies, share prices of companies with international
exposure are likely to remain depressed.
Notwithstanding these dynamics, sentiment towards UK equities appears to be
improving. The strong performance of the FTSE 100 has been delivered despite
outflows from UK-focused open ended funds, implying buying has been driven by
international investors and global funds. It is unusual for UK large caps to
outperform small and mid caps, and it bodes well for future absolute and
relative performance of UK smaller companies, whose performance quite often
lags rallies in their larger peers. Among the Company's portfolio, there
remains a lot of value creation potential from strategic and operational
initiatives. The Portfolio Manager has been working with portfolio company
stakeholders intensively over the past few months to support initiatives to
crystalise or highlight some of the potential upside of these initiatives.
Elementis' disposal of its challenged Talc division, alongside an announced
buyback, has been well received by the investment community and is a positive
catalyst for value creation. The Board shares the view of the Portfolio
Manager that these initiatives will augment any recovery in the NAV driven by
improved market sentiment towards smaller companies in general.
Whilst some of the previous periods have seen considerable share price
volatility amongst portfolio companies, the Board is supportive of the
Portfolio Manager using the investment company structure to take less liquid,
but strategically valuable stakes in portfolio companies - being able to take
a long term investment approach which managers of open ended funds are not
able to do. Over the next months and years the value of these stakes is likely
to become more apparent and has the potential to grow the NAV per share
meaningfully.
We continue to be grateful to the ongoing support and patience of shareholders
during what has been a difficult period and look forward to what will
hopefully be more fruitful and calmer periods in the next year or two.
Linda Wilding
Chairman
28 May 2025
Portfolio Manager's Report
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, 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 behind 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 the
portfolio 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 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.
This is in line with the pragmatic approach to E&S 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
Whilst the events post the period end make the year to March 2025 seem a long
time ago, it is worth reflecting on the year past. Global equities rose by
c.5% in the year to March 2025. Despite the continued shunning of UK equities,
and continued outflows from active UK equity funds, the UK All Cap returned
more than double the return of global equities, with the largest 100 UK quoted
companies returning almost 12%.
Further down the market cap spectrum, there was considerable divergence
between index returns. UK mid caps were very slightly positive, AIM returns
were around -6.5%, full list small caps returned more than 7%. The DNSC ex IC
plus AIM Total Return Index (which we used as a comparator and not a
benchmark) was marginally negative. The outperformance of the very largest UK
quoted companies compared with the smallest is against the long term trend,
whereby mid and small sized quoted UK companies have materially outperformed
larger companies.
The Company's NAV per share fell by 10.7% over the period, with the
significant variance to the market reflective of the underlying stock
performances in the highly concentrated portfolio. It was a year of two
halves, with the portfolio rising by almost 10% to the end of September, after
which it experienced progressive declines in the last calendar quarter of 2024
and the first calendar quarter of 2025.
Liquidity was generally poor and risk appetite low for smaller companies. As a
result, any news flow which was not positive was often punished by sharp share
price moves. Entering into the autumn, there was a hope and expectation that
industrial companies, of which the portfolio has considerable exposure, would
begin to see underlying trading conditions become more favourable after a
difficult year or two. However, as 2024 progressed, whilst there was the
beginning of a pick-up in the long-awaited semiconductor equipment cycle,
other industrial markets failed to see an improvement in demand and destocking
continued for longer than had been expected.
Coming into calendar 2025, general economic sentiment did not improve as
hoped. Moreover, despite his confidence, the incoming US president was unable
to find a resolution to the Ukraine war within a few days of his inauguration.
As a result, the hoped for rebound in earnings of cyclical companies in 2025
appears to have been pushed back yet again, other than where these companies
have significant defence-related revenue streams. Moreover as calendar Q1
progressed in advance of "Liberation Day", companies began to guide more
cautiously in anticipation of any tariff announcements and the potential
second derivation impact on demand.
The portfolio's higher weighting towards companies exposed to these trends led
to a disproportionate impact on the Company's NAV per share. There appeared to
be little fundamental underpin to share prices, with a number trading at or
below book value at the end of the period. As is so often the case in
conditions of great uncertainty, investor risk appetite evaporates and share
price movements can swing wildly on little news flow, being impacted by views
of what may or may not occur in the next few weeks, rather than taking a
longer term view.
The top three positive contributors to performance were Ascential, NCC, and
Blackline Safety.
As detailed in the Interim Results, Ascential was taken over by Informa in the
first half of the period.
Despite share price volatility over the period, NCC's shares returned more
than 15% including dividends. The multi‑year performance improvement plan
initiated more than two years ago seems to continue to be making good
progress. The lower growth Escode division continues to deliver positive
organic growth. Within the remaining cyber services businesses, the higher
margin and higher visibility Managed Services activities continue to show
strong double digit growth. However this performance continues to be masked by
challenging trading conditions in the lower visibility Technical Assurance
Services activities. During the period, NCC disposed of its non-core
cryptographic division for mid-teens EV/EBITDA multiple, which has
strengthened the balance sheet significantly to a point where it is in a
slightly net cash position.
The position in Blackline Safety was initiated in June 2024, when we invested
via a placing at C$4.05 per share. Blackline provides connected safety
devices, both worn by individuals as well as larger, portable units. The
company operates in an attractive global market which we believes grows above
GDP. The company has developed industry leading technology in its hardware
devices and associated software based monitoring platform, and is rapidly
setting new industry standards. As a result the business is taking
considerable market share and growing at around 30% per annum. More than 50%
of revenues are derived from recurring software and monitoring services which
have very high renewal rates. We invested at a forward EV/Sales of 2x which we
believe was compelling given the growth rates and the quality and
differentiation of the business. From purchase to the end of the period, the
shares delivered a positive return of >60% in local currency.
The top three negative contributors to performance were XP Power, Stabilus and
Essentra.
XP Power has suffered from a simultaneous de-rating as well as sales and
earnings downgrades. The de-stocking of industrial and healthcare customers
continued for at least six months longer than expected during the year.
In addition, although the widely anticipated growth in orders from
semiconductor equipment manufacturers from a very low ebb began in Q4 calendar
2024, the start and pace of recovery has been slower than hoped for. Although
the end demand has not been what we had hoped it would be, we believe that the
management has managed well what is within its control, achieving
significantly ahead of what it had promised in late 2023 on operating cost
savings and releasing cash from working capital. In early March 2025 the
company chose to raise a modest amount of further equity to further strengthen
the balance sheet given the uncertain market outlook. Whilst this was not
anticipated, in retrospect this has probably proven to be a prudent decision.
We continue to believe that the shares are pricing in an extraordinarily
pessimistic view of its long term earnings potential and strategic value, as
demonstrated by the hostile bid approach from its US peer Advanced Energy in
May 2024 at a significant premium to the current share price.
Stabilus is the only portfolio company with significant exposure to the global
automotive industry, providing gas springs and power mechatronic systems for
opening tailgates/boots, bonnets and now doors, where it is the clear global
market leader. The power mechatronic systems are growing significantly above
overall vehicle production as they increase penetration across platforms.
Around 50% of sales are to non-automotive markets, where automation of
manufacturing is a key growth driver. Group sales are well balanced across
geographies and the company is well invested. The company's shares de-rated
significantly over the period due to concerns over end demand. The rating
again implies an extremely pessimistic view of its future earnings potential.
Essentra is a mid-sized position in the portfolio, the company is a leading
manufacturer and supplier of plastic and metal components for industrial end
uses. The company is typically a very early cycle business - i.e. it tends to
perform extremely well in the very early stages of volume recovery in general
manufacturing. Although there remains a significant self-help opportunity to
improve gross margins and structurally reduce costs, weaker than anticipated
volumes and a lack of recovery in manufacturing activity in its key
geographies led to a decent sized downgrade in early 2025. We continue to
believe it is a high quality business model and should perform extremely well
as and when the end market cycle turns. The company's valuation again assumes
extreme pessimism about any eventual recovery.
Portfolio development
During the period £68m was invested into stock purchases. This level of
investment was predominantly funded through realisations and investment income
of £49m as well as cash inflows of £19m following the issuance of new
shares. Overall net cash weighting decreased from 2.8% to 0.3% over the year
and averaged 2% across the year.
Three new investments totalling £25m were made across the period. The largest
of these investments was into Genus, a leading provider of genetics to the
porcine and bovine markets. Secondly, a smaller weight position was initiated
in the Canadian listed, but globally active B2B technology player Blackline
Safety (as described above). When we invest in a business listed outside the
UK we are highly selective, looking for extra comfort through backing a
business model, or management team we know well. In the case of Blackline the
group CEO has been known to us since 2005 and a business model combing B2B
electronics hardware and recurring SaaS software is one we have seen many
times before. The final new position is currently a smaller weight, but we see
scope to scale it materially as we continue our diligence and if market prices
remain attractive.
In total c.£43m was invested into existing positions. The most material of
these was a further c.£12m investment into XP Power in part to support an
equity fundraising (as described above). Significant further investments were
also made into Essentra and Auction Technology Group as we scaled these
relatively newer positions to their full target weightings. More broadly,
further investments were also made into a number of positions on share price
weakness where our due diligence suggested market reactions were overly severe
and represented an attractive risk/reward opportunities.
Through the period we realised £49m from disposals and dividends. Three
positions were fully exited raising c.£27m. The significant majority of
proceeds from full realisations came from Ascential, where the group
management team successfully delivered on a break-up of the group, selling two
divisions, making a significant return to shareholders before the remaining
business was itself acquired by Informa PLC. This drove a significant uplift
in shareholder value with our investment in the group returning c.36% IRR
across our c.2 year investment period.
Chemring was a smaller position in the portfolio which was also fully exited
in the period. We first invested in Chemring in 2018 (shortly after the IPO of
OIT) and actively rebalanced the position weighting on news flow and share
price moves. With shares having performed particularly strongly through 2024,
and seeing more attractive opportunities elsewhere, we fully exited after a
c.6 year investment. Across this period our holding in delivered a c.20% IRR
against a flat market.
A more disappointing outcome came from our holding in Videndum which was also
fully exited in the period. The group was significantly challenged by the
Hollywood writer's strike of 2023 as well as post covid de-stocking in its
core end markets. With these headwinds being more severe and more prolonged
than we anticipated, we became increasingly concerned about the strength of
the balance sheet exiting the position at a loss, recycling capital into other
names.
Throughout the period we continued to take profits from investments which
performed well, recycling capital into new ideas or other existing positions
which offered a more attractive balance of risk/reward. Material realisations
were taken from Elementis, ATG, Genus and NCC all of which enjoyed periods of
robust share price performance at times during the period.
Following this investment activity, industrials remains the largest sector
exposure of the portfolio, with a significant portion of this exposure in the
B2B electronics sector. Whilst this has potentially been a headwind to
performance as the hoped for upturn in industrial markets has been delayed, we
continue to believe we have built hard-to-replicate positions in a number of
companies at prices significantly below fair value and where market recovery
and self-help offer optionality for that value to scale materially in the
medium term. As demonstrated by the reaction post Xaar's final results in
March 2025, improving investor sentiment can drive a significant positive
share price reaction when all sellers have been exhausted.
In the environment we have endured through the past year, where Small Caps in
particular have seen limited investor interest, we have been actively engaged
with the portfolio to encourage companies to be as proactive as possible in
driving their own destiny, through delivering on self-help and where
appropriate crystallising value.
Alongside this we have continued to engage actively on the more 'day to day'
areas of corporate governance, investor relations and ESG disclosure. We
continue to engage an external consultant to conduct a review of each of our
investments against a proprietary ESG scoring system.
We use this to measure progress of the portfolio against ESG disclosure over
time as well as an entry point for discussions with boards on these issues
where appropriate. It remains pleasing to see ongoing improvements in these
scores overtime.
Portfolio detail
At the end of the period under review, the portfolio comprised 16 companies.
Key updates through the period for each of our top 10 positions are detailed
below:
NCC Group - Leading independent provider of software escrow services and cyber
security consulting services
14% NAV
Sector: TMT
Performance in period
Through the year NCC continued to make progress on its transformation against
a mixed market backdrop. Trading updates were broadly solid with the Cyber
Security division demonstrating good gross margin progression on the back of
improved utilisation, and a return to revenue growth with strong delivery in
higher quality, recurring Managed Services revenue (up 40%+) offsetting
ongoing softer markets for more transactional Technical Assurance Services.
The group's Escode division which provides software escrow services continued
its recent track record of steady single digit growth. An update from the
company late in 2024 flagged that macro-economic uncertainty was driving a
lengthening of sales cycles in cyber services. Whilst new business quotations
remained strong (near record levels), growth outlook for 2025 was reduced due
to customer decision making being delayed.
Outlook
Despite weakness in demand in some of its end markets, we believe NCC is
making good progress on its transformation and remains significantly
undervalued. The new management team have demonstrated their ability to
transform the operations of the cyber consulting division. Consultant numbers
have been right-sized driving improved utilisation, an offshore delivery
centre has been set up supporting lower cost delivery and revenue mix is being
shifted to higher quality areas. Management's ambitions to return this
division to mid-teens margin and growth is credible in improved end markets.
The group continues to trade at a very significant discount to our view of its
sum-of-the-parts value and with each division of the group likely highly
attractive to a range of buyers we do not see this situation as sustainable.
Elementis - Leading producer of specialty chemicals focused on personal care,
talc and coatings markets.
12% NAV
Sector: Industrials
Performance in period
Elementis delivered a solid trading performance through the year, upgrades at
the H1 results were followed by a slight beat at full year. Key trends through
the year were revenue growth led by strong performance in Personal Care and
Coatings divisions (new product sales and pricing power) offset by weakness in
the more troubled Talc division (challenged end markets). Margins improved,
supported by delivery of self-help cost actions of $18m in 2024 and a further
$12m expected in 2025. In August the group announced a strategic review of its
Talc business with disposal a likely outcome. In addition, significant
shareholder engagement (which we supported) resulted in two new directors
joining the board including Christopher Mills of our business partner Harwood
Capital with a clear mandate to improve shareholder value.
Outlook
Elementis has traded solidly through the year but we still see significant
value from here. In our view its shares undervalue the profitability potential
the group has from its unique owned mineral resources (notably hectorite) and
discount any potential recovery in volumes. The disposal of the lower quality
Talc business announced post the period end, and the associated buyback is a
material positive catalyst for value creation. We believe that the remaining
Elementis businesses have much superior financial characteristics worthy of a
significant re-rating. If the shares do not re-rate to fair value, with the
perceived "poison pill" of the Talc division removed, the business looks
extremely vulnerable to approaches from trade acquirers.
XP Power - Leading manufacturer of power supplies and power converters
11% NAV
Sector: Industrials
Performance in period
XP trading results in the year were broadly in-line with expectations in tough
markets. Through FY24 revenues fell c.20% driven by de-stocking in industrial
and medical end markets and the semiconductor market working through the
bottom of the cycle. Against this backdrop the company managed costs well,
maintaining gross margin and saw strong working capital management to reduce
net debt. The end of the year saw some improving signs, with orders improving
led by the semiconductor market but significant uncertainty on outlook for
2025 remained. This combined with a negative outcome to a US litigation along
with US restrictions on semiconductor exports to China led the group to
complete a £40m equity raise in March. We saw this as prudent and supported
the raise.
Outlook
XPP shares have suffered through the period with the soft end markets
persisting longer than expected and the decision to raise equity again to
strengthen the balance sheet. We believe the recent equity raise now seems
prudent with hindsight as it has de-risked the balance sheet leaving the group
well positioned to benefit when end markets recover. Fundamentally, XP is a
leader in markets that grow across the cycle, and they will recover from their
current low point. We understand that new platform wins have been strong and
should begin to impact sales during 2026/7, hopefully amplifying any cyclical
recovery. XP shares currently trade on roughly half their average long term
EV/Sales rating and have historically shown sharp re-ratings on a market
recovery suggesting significant value potential. The fundamental value of XP
was further demonstrated by the bid approach from US peer Advanced Energy in
May 24 at a level equivalent to over twice the current share price.
Xaar - Leading independent designer and manufacturer of industrial inkjet
printheads
9% NAV
Sector: Industrials
Performance in period
Xaar full year results confirmed a tough year for the business, but saw
positive underlying trends and strong progress on significant mid-term
opportunities. Revenues fell through the year largely driven by ongoing
declines in legacy ceramic printing markets where the ongoing weakness in
China remains a headwind. Looking through this however, growth in newer
markets was strong (up 23%) with these now accounting for the majority of
group revenue. More excitingly, the group continues to make progress on
significant mid-term opportunities notably in inkjet printing for
EV batteries, automotive paint shops and 3D printing. In each of these, OEM
(Original Equipment Manufacturers) relationships have been agreed and working
machines are in the market. We see the scope for each of these to potentially
be transformative for the company's financials in the coming years.
Outlook
We remain excited by the medium term prospects for Xaar with our conviction in
the opportunity growing through the year. As flagged above, the company has
made significant progress on developing potentially material new product areas
which have the opportunity to scale significantly. While the exact ramp up of
these areas remains uncertain, they are increasingly tangible and close and we
believe are materially undervalued at the current share price. The company
has considerable IP for which there appear to be multiple exciting new
potential commercial applications.
Genus - Leading global provider of genetics and related services to global
porcine and bovine sectors
9% NAV
Sector: Healthcare
Performance in period
Genus saw improving trading through the period, upgrading expectations early
in 2025. The group saw improving volumes in its porcine business (up 9% in H1
FY25) and improving margins in the bovine business supported by delivery of
material cost out plans. Looking forward, the group noted good sign up of new
porcine customers in China, flagged further cost improvement to come in its
bovine business and noted ongoing progress on regulatory approval of a new
disease resistant pig genetic line ('PRP') which has the potential to
materially grow group revenues.
Outlook
We see many drivers to equity value growth at Genus. We believe the Porcine
business should grow volume outside of China at mid-to-high single digits
across the cycle and we think recent results show that the end markets are
coming off cyclical lows. The bovine business has significant potential for
further margin improvement as further cost out is delivered. There are further
break out growth opportunities through success in gaining material share in
Porcine in China or successful delivery of the new disease resistant pig.
Shares today in our view reflect little of this potential, trade materially
below our view of sum-of-the-parts value based on recent comparable
transactions and we note significant private equity activity in the sector. We
do not see a high quality market leader in this attractive niche trading at
such a discount to fair value as a sustainable situation.
Gooch & Housego - Manufacturer of photonics solutions for a variety of
industrial end markets
8% NAV
Sector: Industrials
Performance in period
Gooch's trading updates through the period showed markets remained subdued but
with an improving outlook. Following downgrades in mid-year on supply
chain/third-party delays, Gooch subsequently delivered in-line updates showing
flat revenues - with growth in life sciences and A&D end markets
offsetting ongoing de-stocking in industrials. Looking forward, the group
noted a strong orderbook giving good visibility into 2025 as well as material
opportunities to improve margin as management deliver on their self-help
improvement plan. The group also continued to be reshaped through the disposal
of non-core operations and accretive bolt-on M&A.
Outlook
Gooch appears to be progressing well. The group's end markets appear near a
bottom, or in the case of defence have turned, offering an improving backdrop,
and a manufacturing footprint spread across the UK and US means it is well
insulated from possible tariff disruption. The management team are making
progress on the key levers of their improvement plan notably driving
efficiency through manufacturing operations and reshaping of the group though
M&A. We see good prospects that the group delivers strong organic growth
over the medium term and delivers on its ambition to drive a 700-800bps
improvement in margins. The group today trades significantly below long run
ratings and at half the level at which a key UK peer was recently acquired by
a large US trade player. Any normalisation of these discounts suggests
significant potential upside to shares.
James Fisher and Sons plc - Leading global provider of a range of niche marine
services to renewable, energy and defence sectors
6% NAV
Sector: Services
Performance in period
James Fisher has seen a further year of delivery and transformation. Trading
updates were delivered broadly in-line with expectations, but more important
was the progress on the group's turnaround journey. Firstly, the group has
seen a de-risking of its balance sheet with non-core disposals allowing
significant pay down of debt and subsequent re‑financing. Leverage is now at
management target levels of below 1.5x. Alongside this, the group has
refreshed its senior team and begun the self-help program of cost savings
through better integrating a distributed group of businesses and implementing
best practices across supply chain and procurement. The group gave a positive
outlook for FY25 with end markets remaining supportive and notably seeing
progress in a number of key new product areas in its defence division.
Outlook
James Fisher has completed the first stage of its transformation. With the
balance sheet fixed and the team now in place, attention shifts to the next
phase where focus is on driving margins from current levels of c.5% to
management targets of 10% and beyond. The team have set out a clear plan to
deliver this, and we look forward to seeing progress in the coming year.
Alongside the margin progression we see the group's end markets as remaining
supportive and we are particularly excited by emerging new product wins in the
defence division which we believe have the potential to transform this
historically more challenged part of the business. The shares today trade
below book value. For a growing business with ambitions to generate 15% ROCE
we view this as a material mis-valuation with significant upside.
Spire Healthcare - Leading provider of private hospital and primary care
services in the UK
5% NAV
Sector: Healthcare
Performance in period
Spire delivered solid performance through 2024, delivering 6% revenue growth
driven by PMI and NHS patients offsetting weaker performance in self-pay.
Margins expanded in the hospital business as the group outperformed on its
targeted self-help cost savings, delivering £20m vs. an original £15m target
for 2024. Looking forward, the group flagged that National Insurance / Minimum
wage rises alongside mix and energy costs would drive a c£20m impact on FY25
performance. Management flagged that they had identified additional cost
savings that would offset these by 2027. Despite this share fell sharply on
the news.
Outlook
The impact of government changes to NI and minimum wage is a disappointing
short term headwind for Spire, but looking through this, we continue to see a
team driving significant progress in a market with attractive dynamics. High
NHS waiting lists continue to support strong demand for private healthcare
(and strong demand from the NHS for access to private providers to reduce
these waiting lists), with its revenue spread between patient types Spire is
well placed to benefit as this situation evolves. Despite the near term cost
increases, the Spire team have shown themselves capable of delivering material
efficiencies across the group and have rapidly identified savings to offset
the unexpected regulatory changes. As these are delivered we see a strong
earnings growth story going forward, which we expect to be complimented by
continued M&A as Spire builds out its small but rapidly growing primary
care offer. Shares today trade c.25% below the level of the failed bid from
peer Ramsay Hospitals in 2021, despite Spire having doubled EBIT in the
intervening years. We view the group as vulnerable at current levels.
Dialight - Global leader in LED lighting for hazardous and industrial
environments
5% NAV
Sector: Industrials
Performance in period
Dialight's trading performance through the year has been strong as management
begin to deliver on the group's transformation plan. FY25 results are expected
to be ahead of market expectations with improvements in profitability as the
group began to benefit from improved cost and pricing discipline. Alongside
this management re-confirmed their belief that once the transformation is
complete the group should generate c.15% margins vs. c.2% today. The other
key news through the year was that following the initial announcement of an
unfavourable outcome to a long running US litigation, Dialight managed to
agree acceptable settlement terms with its counterparty with a payment of the
liability spread over the next 3 years allowing them to be covered from group
cash flow.
Outlook
We believe Dialight is making good progress on its turnaround. The new team
are progressing on rebuilding the groups production, commercial and central
functions which will enable delivery on 15% margin ambitions supported by some
revenue recovery. Whilst current tariff uncertainty may impact end market
demand in the short term, we view Dialight as likely suffering limited direct
impact with its operations in Mexico tariff free for shipping into the US
under current proposals. We believe that once the transformation is complete
the group will be highly attractive to a range of trade acquirors - the
current valuation of sub 0.5x EV/sales does not reflect this potential.
ATG - Leading provider of online marketplaces for Arts & Antiques and
Industrial & Commercial products
5% NAV
Sector: TMT
Performance in period
Following a downgrade in outlook early in the period, ATG's results through
the rest of the year were solid showing improving performance into the second
half of their FY24. The group's end markets showed stabilisation through the
year and ATG continued to deliver good progress on driving value added
services (marketing, payments and shipping) which increase the take rate on
every transaction ATG facilitates. The group continued to demonstrate its
highly profitable and cash generative business model with EBITDA margins of
46% in FY24 and 80%+ cash conversion.
Outlook
While end markets for Arts & Antiques and second hand Industrial &
Commercial equipment have transitioned through the post covid normalisation,
ATG has delivered well on the factors within its control. The group has seen
success of the initial roll out of its value added services which can scale
revenue materially at high profit drop through, and we continue to see
significant further scope for these to scale. While end markets have been
tough, we see recent stabilisation through 2024 and the start of 2025 as
providing a more supportive environment for the group to see an acceleration
in revenue growth going forward. With leading positions in large markets and a
highly scalable business model we see ATG as a valuable platform with an
exciting equity story going forward.
The remaining 6 investments represent between c.1% and c.4% of NAV each. These
are spread across our core focus sectors and all offer scope to scale, subject
to further due diligence and pricing remaining attractive.
Outlook
Reverberations across financial markets still continue after the tariffs
announced by the USA in early April 2025. We quickly analysed the impacts
across our portfolio companies and concluded that the direct risk of the
proposed tariffs was low. In the vast majority of cases, portfolio companies
which could have been caught up by tariffs are either insulated, due to "local
for local" manufacturing, or they manufacture in areas where there are
exemptions. Moreover, we assessed that portfolio companies are not at a
competitive disadvantage on balance to their competitors.
The indirect impacts are less clear. Trading updates from our portfolio
companies and their peers do not indicate any change in customer behaviour
yet. However, portfolio companies are mindful that this may change as the
potential impacts of supply chain dislocations feed through during the second
calendar quarter.
In our view it is likely that the momentum of the US making deals with
partners will continue, with deals having been consummated with many countries
by the autumn. Equally, we believe that peak pessimism was reached in the week
after tariffs were announced.
8 out of the top 10 holdings have been quoted for more than 20 years. Of these
8, Elementis is a very different business in nature compared with 20 years
ago. Excluding Elementis, the Enterprise Value to Sales ratio of the remaining
7 top 10 companies dropped to a 20 year low in early April 2025, even lower
than the trough valuation during the Global Financial Crisis. This was
indicative of extreme risk aversion - and notably there was very limited
volume traded.
Since then, markets appear to be climbing the preverbal "wall of worry". As
conditions normalise, we believe that the industrial technology portfolio
holdings will continue to regain ground. We believe that they were
inexpensively priced coming into this year, and during early April were
trading at extremely distressed pricing, very dislocated from fair value. As
sentiment improves towards these holdings, low levels of liquidity and tight
shareholder bases mean that there could be a sharp recovery in pricing.
The portfolio is little changed over the past year, and reflects our view that
we wish to be invested in companies with international exposure and typically
niche market leading positions. Whilst this has been difficult for relative
and absolute performance in the period, we continue to believe that our
strategy will generate superior long term returns than focusing on companies
with consumer and domestic cyclical exposure. The choices made by the incoming
government in our view have not been conducive to supporting growth in the
private sector. Overall UK economic growth continues to be downgraded and has
decelerated. Stripping out the growth in public sector spending overall
private sector growth is probably negative. We also suspect private sector GDP
per capita has declined even further. Absent fiscal and energy policy change,
we believe that this backdrop is not conducive to investing in domestic
cyclical companies exposed to the UK consumer.
As well as seeking out internationally exposed companies due to their revenues
and growth opportunities being more varied, we also believe that these
companies are trading at significant discounts to their international peers.
We believe that this means that prolonged undervaluation of these companies
has more chance of being remedied through M&A than pure
domestically-focused consumer companies, where the suitors tend to be more
limited and more financially rather than strategically driven.
Our hope is that many of our portfolio companies benefit from sentiment
improving towards small and mid cap quoted UK companies, and remain public
companies. It seems to us that the distressed sales by UK focused quoted fund
managers is past us.
A benefit of the market reaction to the imposition of tariffs by the USA has
been that it has led to market commentators finally considering alternatives
to investing in large US tech stocks, which have driven much of US and global
equity returns over the past few years. Although European equities have seemed
to be the first beneficiary of this, there is evidence that UK equities are
attracting more interest from international equity investors.
Whilst international capital appears to have been flowing into UK large caps
so far (with UK large caps unusually outperforming small and mid caps), it has
seemingly yet to percolate down into UK small and mid cap stocks. If history
is any guide to the future, this will happen and could catalyse some quite
material moves in share prices.
We are acutely aware that the last year has seen the NAV not make the progress
that we strive for over the long term. However, we are confident that better
times lie ahead due to a combination of the following reasons:
- Valuations at almost crisis levels;
- Investor re-assessment of UK equities;
- Interest rates being cut;
- Investor sentiment shifting back in favour of sectors we have exposure
to;
- Catalysts starting to be delivered at portfolio companies, such as the
recently announced disposal of Elementis' Talc division.
In addition to strategic and operational catalysts starting to bear fruit at
portfolio companies, a combination of lower interest rates and tariff
certainty has the potential to rekindle M&A activity.
We thank shareholders for their patience and are confident that the
considerable value we see in the portfolio will start to be recognised by
either the stock market or alternatively strategic acquirers.
Stuart Widdowson & Ed Wielechowski
Odyssean Capital LLP
28 May 2025
Portfolio of Investments
as at 31 March 2025
Country of Cost Valuation % of
Company Sector Listing £'000 £'000 Net Assets
NCC Group TMT UK 29,277 26,410 14.3%
Elementis Industrials UK 16,325 21,318 11.6%
XP Power Industrials UK 36,158 20,299 11.1%
Xaar Industrials UK 21,396 16,198 8.8%
Genus Healthcare UK 14,958 15,827 8.6%
Gooch and Housego Industrials UK 16,301 14,546 7.9%
James Fisher and Sons Business Services UK 10,490 11,704 6.4%
Spire Healthcare Group Healthcare UK 9,009 8,427 4.6%
Dialight Industrials UK 14,926 8,400 4.6%
Auction Technology Group TMT UK 6,909 7,989 4.4%
Top ten equity investments 175,749 151,118 82.3%
Other equity investments 49,749 31,853 17.4%
Total equity investments 225,498 182,971 99.7%
Cash and other net current assets 541 0.3%
Net assets 183,512 100.0%
* Other equity investments include six investments, each
represents between 1.1% and 3.9% 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.
Business Review
The Strategic Report contains a review of the Company's business model and
strategy, an analysis of its performance during the financial year ended 31
March 2025 and its future developments and details of the principal risks and
challenges it faces. In particular, the Chairman's Statement and the Portfolio
Manager's Report concentrate on the outlook for the current year and the
factors likely to affect the position of the business. The Strategic Report
has been prepared solely to provide information to shareholders to enable them
to assess how the Directors have performed their duty to promote the success
of the Company.
The Strategic 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.
Further information on how the Directors have discharged their duty under
Section 172 of the Companies Act 2006 can be found in the Section 172
Statement.
Business model
Status of the Company
The Company was incorporated on 21 December 2017 and the IPO took place on 1
May 2018. It is registered in England and Wales as a public limited company
and is an investment company within the terms of section 833 of the Companies
Act 2006. The principal activity of the Company is to carry on business as an
investment trust. The Company has been approved by HM Revenue & Customs as
an authorised investment trust under sections 1158 and 1159 of the Corporation
Tax Act 2010, subject to there being no subsequent serious breaches of
regulations. In the opinion of the Directors, the Company is directing its
affairs so as to enable it to continue to qualify for such approval.
The Company's shares have a listing in the closed-ended investment funds
segment of the Official List of the FCA and trade on the London Stock
Exchange's main market for listed securities.
The Company is a member of the AIC, a trade body which promotes investment
companies and also develops best practice for its members.
Strategy for the year ended 31 March 2025 and Strategic Review
Throughout the year ended 31 March 2025, the Company continued to operate as
an approved investment trust, following its investment objective and policy.
During the year, the Board made all strategic decisions for the Company.
Odyssean Capital LLP and, until 25 January 2025, Frostrow Capital LLP
undertook all strategic and administrative activities on behalf of the Board,
which retained overall responsibility. In accordance with the Fund Services
Agreement signed on 1 December 2025, and following a handover period, Frostrow
Capital LLP was replaced as Company Secretary and Administrator by NSM Funds
(UK) Limited ("NSM") and Investor Relations Adviser by Cadarn Capital Limited
("Cadarn").
Purpose
The purpose of the Company is to achieve predominantly capital growth in our
shareholders' wealth over time. It aims to achieve this by using its
closed-ended structure to invest in a concentrated number of less liquid,
higher- quality smaller quoted companies, which the Portfolio Manager believes
are undervalued and could be generating higher returns for their shareholders.
The long-term nature of the Company's capital enables the Portfolio Manager to
undertake constructive corporate engagement with the underlying portfolio
companies and their stakeholders, on financial and operating performance,
strategy and sustainability, specifically ESG practices.
Sustainable improvement in a smaller quoted company's financial and
operational performance, and ESG practices, not only benefit the shareholders
of the Company, but also the shareholders and stakeholders in the underlying
portfolio companies.
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's full investment policy is set out in the Annual Report and
Financial Statements and contains information on the policies which the
Company follows, including in relation to borrowings, derivatives, hedging as
well as ethical and sustainability investment restrictions. The Company
invests primarily 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.
Any material change to the Company's investment policy would require the
approval of shareholders by way of an ordinary resolution at a general meeting
and the approval of the FCA. Non-material changes to the investment policy may
be approved by the Board.
Portfolio analysis
A detailed review of how the Company's assets have been invested is contained
in the Chairman's Statement and the Portfolio Manager's Report on pages. A
list of the Company's investments is contained in the Portfolio of Investments
section..
Dividend Policy
It is the Company's policy to pursue attractive total returns principally
through growth over the long term. The Company will comply with the investment
trust rules regarding distributable income, which require investment trusts to
retain no more than 15% of their investment income each year. The Company will
only pay the minimum dividend required to maintain investment trust status. No
dividend will be proposed for the year ended 31 March 2025.
The Board
The Board of the Company comprises Linda Wilding (Chairman), Arabella Cecil,
Peter Hewitt, Richard King and Neil Mahapatra, all of whom are independent
non-executive Directors and served during the whole year under review and up
to the date of signing the report. All Directors, other than Arabella Cecil,
who is retiring, will stand for re‑election at the forthcoming Annual
General Meeting. Further information on the Directors can be found in the
Annual Report and Financial Statements..
Board Focus and Responsibilities
With the day to day management of the Company outsourced to service providers
the Board's primary focus at each Board meeting is reviewing the investment
performance and associated matters, such as, inter alia, future outlook and
strategy, gearing, asset allocation, investor relations, marketing, and
industry issues.
In line with its primary focus, the Board retains responsibility for all the
key elements of the Company's strategy and business model, including:
● Investment Objective and Policy, incorporating the investment
guidelines and limits, and changes to these;
● whether the Portfolio Manager should be authorised to gear the
portfolio up to a pre-determined limit;
● review of performance against the Company's key performance
indicators ("KPIs");
● review of the performance and continuing appointment of
service providers; and
● maintenance of an effective system of oversight, risk
management and corporate governance.
Details of the principal KPIs, along with details of the principal risks, and
how they are managed, are given in the Key Performance Indicators section.
Section 172 statement
Overview
The Directors' overarching duty is to act in good faith and in a way that is
the most likely to promote the success of the Company as set out in Section
172 of the Companies Act 2006. In doing so, Directors must take into
consideration the interests of the various stakeholders of the Company, the
impact the Company has on the community and the environment, take a long-term
view on consequences of the decisions they make as well as aim to maintaining
a reputation for high standards of business conduct and fair treatment between
the members of the Company.
Fulfilling this duty naturally supports the Company in achieving its
investment objective and helps to ensure that all decisions are made in a
responsible and sustainable way. In accordance with the requirements of the
Companies (Miscellaneous Reporting) Regulations 2018, the Company explains how
the Directors have discharged their duty under Section 172 below.
To ensure that the Directors are aware of, and understand, their duties they
are provided with the pertinent information when they first join the Board as
well as receiving regular and ongoing updates and training on the relevant
matters. Induction and access to training is provided for new Directors. They
also have continued access to the advice and services of the Company
Secretary, and when deemed necessary, the Directors can seek independent
professional advice. The schedule of Matters Reserved for the Board, as well
as the Terms of Reference of its committees are reviewed on an annual basis
and further describe Directors' responsibilities and obligations and include
any statutory and regulatory duties. The Audit Committee has the
responsibility for the ongoing review of the Company's risk management systems
and internal controls and, to the extent that they are applicable, risks
related to the matters set out in Section 172 are included in the Company's
risk register and are subject to periodic and regular reviews and monitoring.
Stakeholders
A company's stakeholders are normally considered to comprise its shareholders,
its employees, its customers, its suppliers as well as the wider community in
which the company operates and impacts. The Company is different in that as an
investment trust it has no employees and, significantly, its customers are
synonymous with its shareholders. In terms of suppliers, the Company receives
professional services from a number of different providers, principal among
them being the Portfolio Manager. The Board believes that the wider community
in which the Company operates encompasses its portfolio of investee companies
and the communities in which they operate.
Details of how the Board considers the needs and priorities of the Company's
stakeholders and how these are taken into account during all its discussions
and as part of its decision-making are detailed below. All discussions involve
careful considerations of the longer- term consequences of any decisions and
their implications for stakeholders.
Stakeholder Board Engagement
Shareholders
Continued shareholder support and engagement are critical to existence of the The Board is committed to maintaining open channels of communication and to
business and the delivery of the long-term strategy of the Company. engage with shareholders in a manner which they find most meaningful, in order
to gain an understanding of the views of shareholders. These include:
- Annual General Meeting - The Company welcomes and encourages
attendance, voting and participation from shareholders at the AGM, during
which the Directors and the Portfolio Manager are available to discuss issues
affecting the Company and answer any questions. The Portfolio Manager provides
a presentation at the AGM on the Company's performance and its future outlook.
The Company values any feedback and questions it may receive from shareholders
ahead of and during the AGM.
- Publications - The Annual and Half-Year Reports of the Company are made
available on its website and the Annual Report is circulated to shareholders.
These reports provide shareholders with a clear understanding of the Company's
portfolio and financial position. This information is supplemented by a
monthly fact sheet and regular presentations which are available on the
website. Feedback and/or questions the Company receives from the shareholders
help the Company evolve its reporting, aiming to render the reports and
updates transparent and understandable.
- Shareholder meetings - The Portfolio Manager and the Company's Broker
are in regular contact with major shareholders. The Chairman and the other
Directors are available to meet with shareholders to understand their views on
governance and the Company's performance where they wish to do so.
Shareholders are also able to meet with the Portfolio Manager and the Investor
Relations Team of Cadarn, either in person or via video conference. In
accordance with the Fund Services Agreement signed on 1 December 2024, Cadarn
took over from Frostrow to provide Investor Relations Services to the Company.
In advance of the successful shareholder Redemption Event, the Chairman and
the Company's Broker met with the Company's principal shareholders to hear
their views. The results from all meetings between the Portfolio Manager,
Cadarn, the Broker and shareholders, and the views of the shareholders are
reported to the Board on a regular basis.
- Shareholder concerns - In the event shareholders wish to raise issues
or concerns with the Directors, they are welcome to do so at any time by
writing to the Chairman. Other members of the Board are also available to
shareholders if they have concerns that have not been addressed through the
normal channels. Shareholders wishing to communicate directly with the Board
should contact the Company Secretary at the registered office address which
can be found in the Annual Report and Financial Statements..
- Investor relations updates - At every Board meeting, the Directors
receive updates from the Company's Broker on the share trading activity, share
price performance and any shareholders' feedback, as well as updates from the
Portfolio Manager and from Cadarn. To gain a deeper understanding of the views
of its shareholders and potential investors, the Portfolio Manager and Cadarn
also meet regularly with shareholders. Any pertinent feedback is taken into
account when Directors discuss the Company's share capital and any possible
fundraisings. The willingness of the shareholders, including the partners and
staff of the Portfolio Manager, to maintain their holdings over the long-term
period is another way for the Board to gauge how the Company is meeting its
objectives and suggests the presence of a healthy corporate culture.
The Portfolio Manager
The Portfolio Manager's performance is critical for the Company to The management of the Company's portfolio is delegated to the Portfolio
successfully deliver its investment strategy and meet its objective to provide Manager, which manages the assets in accordance with the Company's objectives
shareholders with attractive total return over a long-term period. and policies. At each Board meeting, representatives from the Portfolio
Manager are in attendance to present reports to the Directors covering the
Company's current and future activities, portfolio of assets and its
investment performance over the preceding period.
Maintaining a close and constructive working relationship with the Portfolio
Manager is crucial as the Board and Odyssean Capital both aim to continue to
achieve consistent, long-term returns in line with the Company's investment
objective. Important components in the collaboration with the Portfolio
Manager, representative of the Company's culture, are:
- Operating in a fully supportive, co-operative and open environment and
maintaining ongoing communication with the Board between formal meetings;
- Encouraging open discussion with the Portfolio Manager, allowing time
and space for original and innovative thinking;
- Recognising that the interests of shareholders and the Portfolio
Manager are for the most part well aligned, adopting a tone of constructive
challenge, balanced with robust negotiation of the Portfolio Manager's terms
of engagement if those interests should not be fully united;
- Drawing on Board members' individual experience and knowledge to
support the Portfolio Manager in its monitoring of and engagement with
portfolio companies; and
- Willingness to make the Board members' experience available to support
the Portfolio Manager in the sound long-term development of its business and
resources, recognising that the long-term health of the Portfolio Manager is
in the interests of shareholders in the Company.
The management arrangements are set out in greater detail in the Management
Arrangements - Portfolio Manager section. In addition to the management fee,
the Portfolio Manager also receives a performance fee if certain circumstances
are met. In respect of the year ended 31 March 2025, no performance fee has
been accrued (2024: £nil).
Portfolio companies
The Company invests into available opportunities, allocating capital across The relationship with the Portfolio Manager is fundamental to ensuring the
different portfolio companies to meet the Company's investment objectives Company meets its purpose. Day-to-day engagement with portfolio companies is
within the pre-defined portfolio limits and with a focus on portfolio level undertaken by the Portfolio Manager. Details of how Odyssean Capital carries
diversification. out portfolio management, as well as information on its differentiated
investment approach and the structuring of investments can be found in the
Portfolio Manager's Report. The Board receives updates at each scheduled Board
meeting from the Portfolio Manager on specific investments including regular
valuation reports and detailed portfolio and returns analyses. Odyssean
Capital's engagement with portfolio companies incorporates recurring due
diligence reviews, active voting at their annual general meetings, discussions
with their stakeholders (including but not limited to executives,
non-executives, other shareholders and corporate advisors) and on-site visits.
In particular, the Board strongly supports the Portfolio Manager in engaging
with portfolio companies on ESG issues with the aim of improving operations,
ESG standards and performance as well as company culture.
Other service providers
In order to function as an investment trust with a listing on the London Stock The Company's main functions are delegated to a number of service providers,
Exchange, the Company relies on a diverse range of reputable advisers for each engaged under separate contracts. The Board, together with NSM as Company
support in meeting all relevant obligations. Secretary, maintains regular contact with its key external providers and
receives regular reporting from them, both through the Board and committee
meetings, as well as outside of the regular meeting cycle. Their advice and
views are routinely taken into account. This regular interaction provides an
environment where issues and business developments needs can be dealt with
efficiently and collegiately.
The Audit Committee reviews and evaluates the financial reporting control
environments in place at each service provider.
Through its Management Engagement Committee, the Board formally assesses their
performance, fees and continuing appointment annually to ensure that the key
service providers continue to function at an acceptable level and are
appropriately remunerated to deliver the expected level of service.
The above mechanisms for engaging with stakeholders are kept under review by
the Directors and are discussed on a regular basis at Board meetings to ensure
that they remain effective.
Key topics of engagement with stakeholders and outcomes
Key topics of engagement with investors Actions taken and principal decisions
● Ongoing dialogue with shareholders concerning the strategy of the ● The Portfolio Manager, Frostrow and the Broker meet regularly with
Company, performance, the portfolio and ESG issues. shareholders and potential investors to discuss the Company's Strategy,
performance, the portfolio and any ESG issues which might be raised.
● The Company's shareholder Redemption Event.
● In advance of the successful shareholder Redemption Event, the
Placing and Retail Offer Chairman and the Company's Broker met with the Company's principal
shareholders to hear their views. It was pleasing to note that all tendered
● Responding to interest from investors and demand in the market for the shares, representing a small percentage of 0.6% of the Company, had been
Company's shares. resold to institutional shareholders. The Board intends to continue to offer
this facility every seventh year as set out in the original prospectus.
● Shareholders are provided with performance updates via the Company's
website as well as the usual financial reports and monthly fact sheets.
● In light of interest from investors and demand in the market, the
Board successfully completed a placing and retail offer of shares in the
Company. The fundraising raised gross proceeds of £11.4 million and a total
of 6.5 million new shares were issued in the Company.
Key topics of engagement with the Portfolio Manager on an ongoing basis Actions taken and principal decisions
● Portfolio composition, performance, outlook and business updates as ● Updates are received by the Board at every Board meeting.
well as ESG engagement with portfolio companies.
Key topics of engagement with other service providers Actions taken and principal decisions
● The Directors have frequent engagement with the Company's other ● During the year, Frostrow resigned as Administrator, Company
service providers through the annual cycle of reporting and due diligence Secretary and Investor Relations and Marketing Adviser and, following a
meetings and conversations with the Portfolio Manager. NSM, as Company competitive review, was replaced by NSM as Administrator and Company Secretary
Secretary, has regular conversations with all other service providers on and Cadarn as Investor Relations Adviser. No other specific action was
behalf of the Board and the Management Engagement Committee. required in respect of the other service providers, as the reviews of their
services have been positive and the Directors believe that their continued
● This engagement is completed with the aim of maintaining an effective appointment is in the best interest of the Company.
working relationship and oversight of the services provided.
Culture
The Directors agree that establishing and maintaining a healthy corporate
culture among the Board and in its interaction with the Portfolio Manager,
shareholders and other stakeholders supports the delivery of the Company's
goals. The Board seeks to promote a culture of openness, debate and integrity
through ongoing dialogue and engagement with its service providers,
principally, the Portfolio Manager.
The Board strives to ensure that its culture is in line with the Company's
purpose, values and strategy. As detailed in the Corporate Governance
Statement, the Company has a number of policies and procedures in place to
assist with maintaining a culture of good governance including those relating
to diversity, Directors' conflicts of interest and Directors' dealings in the
Company's shares. The Board assesses and monitors compliance with these
policies as well as the general culture of the Board through Board meetings
and in particular, during the annual evaluation process which is undertaken by
each Director.
The Board is cognisant of the nature of companies that the Company invests in
and notes that their performance could fluctuate while the Portfolio Manager
actively engages with them. This requires a culture of patience from the
Board, supported by an orderly, disciplined investment management process by
the Portfolio Manager. The Board pays particular attention to Odyssean
Capital's corporate engagement initiatives and proxy voting policies.
Additional information on the Board's approach to ESG matters is detailed in
the Annual Report and Financial Statements.
The Board seeks to appoint the best possible service providers and evaluates
their remit, performance and cost effectiveness on a regular basis. The Board
considers the culture of the Portfolio Manager and other service providers,
including their policies, practices and behaviour, through regular reporting
from these stakeholders and, in particular, during the annual review of the
performance and continuing appointment of all service providers through its
Management Engagement Committee.
Responsible and Sustainable Investing
It is the Board's view that, in order to achieve long-term success, companies
need to maintain high standards of corporate governance and corporate
responsibility. More information is given in the Portfolio Manager's Report.
* Alternative Performance Measures.
Climate Change
The risks associated with climate change represent an increasingly important
issue and the Board and the Portfolio Manager are aware that the transition to
a low-carbon economy will affect all businesses, irrespective of their size,
sector or geographic location. Therefore, no company's revenues are immune and
the assessment of such risks must be considered within any effective
investment approach. Further details of the risks related to climate change
are detailed in the Company's principal risks and uncertainties.
Key Performance Indicators ("KPIs")
At each Board meeting, the Directors consider several performance measures to
assess the Company's success in achieving its objective. The KPIs used to
measure the progress and performance of the Company over time are established
industry measures. These are as follows:
Net asset value total return*
The NAV per share at 31 March 2025 was 137.9 p, compared to 154.4p per share
at the end of the previous year, a decrease of 10.7% (2024: a decrease of
3.7%). The NAV total return since the launch of the Company on 1 May 2018 to
31 March 2025 was 37.9% (to 31 March 2024: 54.4%). The total return of the
DNSC ex IC plus AIM Total Return Index was -0.4% (to 31 March 2024: +3.0%) for
the same period.
A full description of the Company's performance for the year ended 31 March
2025 can be found in the Portfolio Manager's Report.
Share price total return*
The Company's share price at the previous year end was 155.5p and decreased to
134.5p as at 31 March 2025, resulting in a return of -13.5% (2024: -5.2%)
during the year.
Share price premium/discount to NAV per share*
The share price premium to NAV per share changed from 0.7% at the previous
year end to a discount of 2.45% as at 31 March 2025. During the year ended 31
March 2025, the shares traded at an average premium to NAV per share of 0.62%
(2024: 1.4%).
Revenue return per share
In the year to 31 March 2025, the Company made a revenue return of -0.4p per
share (2024: -0.4p per share).
Ongoing charges*
The Company's ongoing charges figure for the year ended 31 March 2025 was
1.47% (2024: 1.48%).
Management Arrangements - Portfolio Manager
The Company is an internally managed investment company for the purposes of
the UK's Alternative Investment Fund Managers Directive and is its own
alternative investment fund manager. The Board is therefore responsible for
the portfolio management and risk management functions of the Company.
Pursuant to the terms of the Portfolio Management Agreement, the Board has
delegated responsibility for discretionary portfolio management functions to
Odyssean Capital LLP as Portfolio Manager, subject always to the overall
supervision and control by the Board.
The Company may terminate the Portfolio Management Agreement by giving the
Portfolio Manager not less than six months' prior written notice. The
Portfolio Manager may terminate the Portfolio Management Agreement by giving
the Company not less than six months' prior written notice.
Management Fee
The Portfolio Manager is entitled to receive an annual management fee equal to
the lower of: (i) 1% of the NAV (calculated before deduction of any accrued
but unpaid management fee and any performance fee) per annum; or (ii) 1% per
annum of the Company's market capitalisation. The annual management fee is
calculated and accrues daily and is payable quarterly in arrears.
The Portfolio Manager is also entitled to reimbursement for all costs and
expenses properly incurred by it in the performance of its duties under the
Portfolio Management Agreement.
Performance Fee
In addition, the Portfolio Manager is entitled to a 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 NAV
total return per ordinary share over a Performance Period against the total
return performance of the DNSC ex IC plus AIM Total Return Index (the
"Comparator Index"). The first Performance Period ran from IPO to 31 March
2021.
A Performance Fee is payable if the NAV per ordinary share at the end of the
relevant Performance Period 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 NAV) 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 "NAV Total Return per
Share") exceeds both:
i) the NAV 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% per
annum over the relevant Performance Period (the "Target NAV per Share");
ii) the highest previously recorded NAV per share as at the end of the
relevant Performance Period in respect of which a Performance Fee was last
paid (the "High‑Water Mark"); and
iii) 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 NAV 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 NAV total return per
share to fall below both the relevant target NAV per share and the relevant
High-Water Mark 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 be satisfied 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 the performance fee
payment as a collective group rather than as individuals. The collective group
includes Ian Armitage, Harwood Capital Management Limited, Stuart Widdowson
and Ed Wielechowski.
Each such tranche of shares 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.
Based on the performance of the Company to 31 March 2025, no performance fee
has been accrued in respect of the year ended 31 March 2025 (2024: no
performance fee).
Administrator, Company Secretary, Investor Relations Adviser
During the year and following the resignation by Frostrow of its services, the
Company undertook a competitive review for its services for Administrator,
Company Secretary and Investor Relations. In accordance with the Fund Services
Agreement signed on 1 December 2024, and following a handover period, Frostrow
was replaced as Company Secretary and Administrator by NSM and Investor
Relations Adviser by Cadarn.
An annual administration and management services fee of 22.5 basis points of
the market capitalisation of the Company up to (but not including) £150
million, charged monthly in arrears, is payable. The fees will reduce from
22.5 basis points to 20 basis points on market capitalization of the Company
in excess of £150 million in size up to and including £300 million, to 17.5
basis points on market capitalisation in excess of £300 million, and to 15
basis points on market capitalisation in excess of £500 million. The
agreement may be terminated by either party on six months' written notice.
Custodian
CACEIS Bank, UK Branch ("Caceis") has been appointed as the Company's
custodian, pursuant to an original agreement between the Company and RBC
Investor Services Trust ("RBC") dated 22 March 2018. Following acquisition of
RBC by Caceis in 2023, migration of accounts from RBC to Caceis was completed
in March 2024. Caceis is responsible for, inter alia, the safekeeping and
custody of the Company's assets, investments and cash, processing transactions
and foreign exchange services, if necessary. The Company and the Custodian may
terminate the Custody Agreement with 90 days' written notice.
Portfolio Manager Evaluation and Continuing Appointment
The Board keeps the ongoing performance of the Portfolio Manager under
continual review and the Management Engagement Committee conducts an annual
appraisal of the Portfolio Manager's performance and makes a recommendation to
the Board about the continuing appointment of the Portfolio Manager.
The Management Engagement Committee has reviewed Odyssean Capital's
performance, with respect to its provision of portfolio management and other
services. Due consideration was given to the quality and continuity of its
personnel, succession planning and investment processes. Alongside the
performance review, the Committee completed an appraisal of the terms of the
Portfolio Management Agreement to ensure that the terms remained competitive
and in the interest of the Company. The Portfolio Manager has executed the
investment strategy according to the Board's expectations and it is the
opinion of the Directors that the continuing appointment of the Portfolio
Manager on the terms agreed is in the best interests of shareholders as a
whole.
Company Promotion
The Company has appointed Cadarn to promote the Company's shares to
professional investors in the UK, the Channel Islands and Ireland. As
investment company specialists, the Cadarn team provides a continuous,
pro-active distribution and investor relations service that aims to promote
the Company by encouraging demand for the shares.
Cadarn actively engages with professional investors including discretionary
wealth managers, institutions, family offices and a range of execution-only
platforms. Regular engagement helps to attract new investors and retain
existing shareholders, and over time results in a stable share register made
up of diverse, long-term holders.
Cadarn arranges and manages a continuous programme of one-to-one meetings with
professional investors around the UK. These include regular meetings with
"gate keepers", the senior points of contact responsible for their respective
organisations' research output and recommended lists. The programme of regular
meetings also includes autonomous decision makers within large multi-office
groups, as well as small independent organisations. Some of these meetings
involve Odyssean Capital LLP, but most of the meetings do not, which means the
Company is being actively represented both to existing and potential
investors, while the Portfolio Manager concentrates on the portfolio.
NSM produces many key corporate documents, monthly factsheets, annual and
half-yearly reports. All Company information and invitations to investor
events, including updates from the Portfolio Manager on portfolio and market
developments, are regularly emailed to a growing database, overseen by Cadarn,
consisting of professional investors.
Cadarn maintains close contact with all the relevant investment trust broker
analysts, particularly those from Winterflood Securities Limited, the
Company's corporate broker, but also others who publish and distribute
research on the Company to their respective professional investor clients.
The Company further benefits from regular press coverage, with articles
appearing in respected publications that are widely read by both professional
and self-directed private investors. The latter typically buy their shares via
retail platforms, which account for a significant proportion of the Company's
share register.
Employees, Human Rights, Social and Community Issues
The Board recognises the requirement under Companies Act 2006 to detail
information about human rights, employees and community issues, including
information about any policies it has in relation to these matters and the
effectiveness of these policies. These requirements do not apply to the
Company as it has no employees, all the Directors are non-executive and it has
outsourced all its functions to third party service providers. The Company has
therefore not reported further in respect of these provisions, however, it
does expect its service providers and portfolio companies to respect these
requirements.
Integrity and Business Ethics
The Company is committed to carrying out business in an honest and fair manner
with a zero-tolerance approach to bribery, tax evasion and corruption. As
such, policies and procedures are in place to prevent the above. The Board's
expectations are that its principal service providers have similar governance
policies in place. The Company Secretary, on behalf of the Board, will seek
assurances from service providers on a regular basis.
Environmental, Social and Governance ("ESG") issues
The Company has no employees, property or activities other than investments,
so its direct environmental impact is minimal. In carrying out its activities
and in its relationships with service providers, the Company aims to conduct
itself responsibly, ethically and fairly.
The Board is comprised entirely of non-executive Directors and the day-to-day
management of the Company's business is delegated to the Portfolio Manager.
The Portfolio Manager aims to be a responsible investor and believes it is
important to invest in companies that act responsibly in respect of
environmental, ethical and social issues.
The Portfolio Manager is specifically looking to invest in companies which
have average or above average ESG characteristics or practices, but where
improvement potential exists. Being mindful of the smaller company nature of
many of the portfolio companies, the Portfolio Manager has a pragmatic
engagement approach, focused on dialogue with portfolio companies around their
performance, disclosure and general practices compared with best-in-class
peers, and seeking positive changes in specific areas. The Portfolio Manager
will not invest in non-ethical or unsustainable businesses as set out on in
the Investment Objective and Investment Policy in the Annual Report and
Financial Statements.
The Directors believe that proxy voting is an important part of the corporate
governance process. It is the policy of the Company to vote at all shareholder
meetings of investee companies, and the Board has delegated voting activities
to the Portfolio Manager. The Portfolio Manager follows relevant regulatory
requirements with an aim to make voting decisions which will best support
growth in shareholder value and will commonly take into account best practices
regarding corporate governance, board composition, remuneration and ESG
issues. The Portfolio Manager also provides the Directors with a six-monthly
update regarding the voting decisions made in respect of the investee
companies.
Taskforce for Climate-Related Financial Disclosures ("TCFD")
The Company notes the TCFD recommendations on climate-related financial
disclosures. The Company is an investment trust with no employees, internal
operations or property and, as such, it is exempt from the Listing Rules
requirement to report against the TCFD framework.
Modern Slavery Act 2015
The Company falls outside the scope of the Modern Slavery Act and is therefore
not required to make a slavery and human trafficking statement. Nevertheless,
it requires all of its suppliers in the scope of the Modern Slavery Act to
confirm annual compliance.
Portfolio management of the Company has been delegated to the Portfolio
Manager, Odyssean Capital LLP. It is a boutique investment manager whose
investment strategy focuses on four key sectors: TMT, Business Services,
Healthcare and Industrials. Due to its size, it is not subject to the
requirements under section 54 (Transparency in Supply Chains) of the Modern
Slavery Act 2015 to prepare an annual slavery and human trafficking statement.
Odyssean Capital LLP has engaged a third party ESG data and research provider
whose research includes considerations of human rights and provides key ESG
performance data on investee companies. As part of its corporate engagement
activities, the Portfolio Manager would raise any significant concerns
highlighted by the ESG research provider with management of the investee
company. The Portfolio Manager believes that the companies that are invested
in the portfolio pose a low risk of violating human rights or global labour
standards.
Risk Management
Principal Risks, Emerging Risks and Risk Management
The Board considers that the risks detailed within this report are the
principal risks currently facing the Company to deliver its strategy.
The Board is responsible for the ongoing identification, evaluation and
management of the of the principal risks faced by the Company and the Audit
Committee, on behalf of the Board, has established a process for the regular
review of these risks and their mitigation. This process accords with the UK
Governance Code and the FRC's Guidance on Risk Management, Internal Control
and Related Financial and Business Reporting.
During the year ended 31 March 2025, the Audit Committee has again carried out
a robust assessment of the emerging and principal risks facing the Company,
including those that would threaten its business model, future performance,
solvency and liquidity. The Committee also considered the controls in place to
mitigate the inherent risks and whether additional controls or actions were
required to bring the residual risk down to an acceptable level. The Committee
was satisfied with the controls that are in place.
Further details, including as a summary of the Company's approach to risk and
how principal risks and uncertainties were dealt with during the year under
review, are set out below.
Internal Control Review
The Board is also responsible for the internal controls relating to the
Company, including the reliability of the financial reporting process, and for
reviewing their effectiveness.
Key procedures established with a view to providing effective financial
control, have been in place throughout the year ended 31 March 2025 and up to
the date of this Report. The internal control systems are designed to ensure
that proper accounting records are maintained, that the financial information
on which business decisions are made and which are issued for publication is
reliable and that the assets of the Company are safeguarded.
The risk management process and systems of internal control are designed to
manage rather than eliminate the risk of failure to achieve the Company's
investment objective. It should be recognised that such systems can only
provide reasonable, not absolute, assurance against material misstatement or
loss.
The Directors have carried out a review of the effectiveness of the Company's
risk management and internal control systems as they have operated during the
year and up to the date of approval of this Report. There were no matters
arising from this review that required further investigation and no
significant failings or weaknesses were identified.
Internal Control Assessment Process
Robust risk assessments and reviews of internal controls are undertaken
regularly in the context of the Company's overall investment objective. During
the year, the Board -through the Audit Committee and together with NSM - has
confirmed its risk management controls under the key headings of: Corporate
Strategy; Accounting, Legal and Regulatory; Operational; Investment and
Business Activities. In evaluating the risks the Company faces, the Board has
considered the Company's operations in the light of the following factors:
- the nature and extent of risks which it regards as acceptable for the
Company to bear within its overall business objective;
- the threat of such risks becoming reality;
- the Company's ability to reduce the incidence and impact of risk on its
performance;
- the cost to the Company and benefits related to the review of risk and
associated controls of the Company; and
- the extent to which the third parties operate the relevant controls.
A risk matrix helps to monitor the risks which have been identified and the
controls in place to mitigate those risks. The risks are assessed on the basis
of the likelihood of them happening, the impact on the business if they were
to occur and the effectiveness of the controls in place to mitigate them. This
risk register is reviewed by the Audit Committee regularly at every meeting.
Most of the day-to-day management functions of the Company are sub-contracted,
and the Directors therefore obtain regular assurances and information from key
third party suppliers regarding the internal systems and controls operating in
their organisations. In addition, each of the third parties is requested to
provide a copy of its report on internal controls each year, which is reviewed
by the Audit Committee.
Principal risks and uncertainties Key mitigation
Investment performance is not comparable to the expectations of investors
Consistently poor performance could lead to a fall in the share price and a The Board reviews and discusses the Company's performance against its
widening of the discount. The success of the Company depends on the Portfolio investment objective and policy, and assesses performance in comparison to
Manager's ability to identify, acquire and realise investments in accordance industry peers and the broader comparative market. The Board also keeps the
with the Company's investment policy. This, in turn, depends on the ability of performance of the Portfolio Manager under continual review, along with a
the Portfolio Manager to apply its investment processes and identify suitable review of significant stock decisions and the overall rationale for holding
investments. the current portfolio. In addition, the Management Engagement Committee
conducts an annual appraisal of the Portfolio Manager.
Share price performance
The market price of the Company's shares, like shares in all investment The Board monitors the relationship between the share price and the NAV,
companies, may fluctuate independently of the NAV and therefore may not including regular review of the level of discount relative to that of
reflect the underlying NAV of the shares. The shares could trade at a discount companies in the sector. The Company has taken powers to re-purchase shares
or premium to NAV at different times, depending on factors such as market and will consider doing so to reduce the volatility of any share price
conditions, investors' perceptions of the merits of the Company's objective discount. The Company has also taken powers to issue shares (only at a premium
and investment policy, supply and demand for the shares and the extent to NAV) to provide liquidity to the market to meet investor demand by way of
investors value the activities of the Company and/or the Portfolio Manager. issue of further shares.
No share buybacks were undertaken during the year. The Company issued a total
of 5,100,000 new shares through tap issuances.
In light of interest from investors and demand in the market, the Board
successfully completed a placing and retail offer of shares in the Company in
July 2024. The fundraising raised gross proceeds of £11.4 million and a total
of 6.5 million new shares, at a price of 174 pence per share, were issued in
the Company. This represented a premium of 1.0% to the cum-income NAV per
share as at 16 July 2024, being the last published NAV per share prior to the
close of the fundraising.
The Board and the portfolio management team all own shares in the Company, by
way of aligning their own interests with those of all other shareholders. The
Directors invest their Directors' fees in shares and the Portfolio Manager
invests at least 50% of any performance fee in shares.
In addition, in the seventh year following the IPO (and every seventh year
thereafter), the Board has and will continue to provide shareholders with an
opportunity to realise their shares at the applicable NAV. During the year
under review, a tender offer was undertaken. It was pleasing to note that all
tendered shares, representing a small percentage of 0.6% of the Company, had
been resold to institutional shareholders.
Portfolio Manager - loss of personnel or reputation
The identification and selection of investment opportunities and the The Board maintains a good level of communication and has a good relationship
management of the day-to-day activities of the Company depends on the with the Portfolio Manager, and regularly reviews the Portfolio Manager's
diligence, skill, judgement and business contacts of the Portfolio Manager's performance at Board meetings. The Portfolio Manager's Compliance Officer also
investment professionals and the information and deal flow they generate reports to the Board regularly and the Portfolio Manager would report to the
during the normal course of their activities. The Company's future success Board immediately in the event of any change in key personnel.
depends on the continuing ability of these individuals to provide services and
the Portfolio Manager's ability to strategically recruit, retain and motivate Odyssean Capital LLP as Portfolio Manager has appointed an investment team
new talented personnel as required. The departure of some or all of the consisting of Stuart Widdowson and Ed Wielechowski, both of whom are very
Portfolio Manager's investment professionals could prevent the Company from experienced in managing the portfolio in accordance with the Company's
achieving its investment objective and give rise to a significant public principles and investment strategy.
perception risk regarding the potential performance of the Company.
Material changes within the Portfolio Manager's organisation
Material changes could occur within the Portfolio Manager's organisation or The Portfolio Manager has advance notice of any material changes within its
its affiliates which are to the detriment of the Company's standing in respect organisation and would report to the Board immediately in the event of any
of its competitors and its profitability. such changes, including within its organisation and affiliates or to its key
personnel.
Reliance on the performance of third party service providers
The Company has no employees and the Directors have been appointed on a The Board has appointed third party service providers with relevant
non-executive basis. The Company is reliant upon the performance of third experience. Each third party service provider is monitored by the Board and
party service providers for its executive function. Failure by any service their roles are evaluated at least annually by the Management Engagement
provider to carry out its obligations to the Company in accordance with the Committee.
terms of its appointment could have a material adverse effect on the operation
of the Company. The Board further receives a monthly report from NSM, which includes details
of compliance with applicable law and regulations; reviews internal control
This encompasses disruption or failure caused by cyber crime or a pandemic and reports and key policies of its service providers; has considered the
covers dealing, trade processing, administrative services, financial and other increased risk of cyber-attacks and has received assurances from its service
operational functions. This threat has increased with advances in technology providers regarding the controls in place. The Board will continue to monitor
that has seen a greater use of Artificial Intelligence ("AI"). developments in AI carefully in conjunction with the Portfolio Manager, to
ensure any risk is appropriately managed and mitigated. The Board maintains a
risk matrix with details of risks to which the Company is exposed, the
approach to those risks, key controls relied on and the frequency of the
controls operation.
UK Regulatory Risk
The regulatory environment in which the Company operates changes materially, The Board monitors regulatory change with the assistance of NSM and external
affecting the Company's operations. professional advisers to ensure that the Board is aware of any likely changes
in the regulatory environment and will be able to adapt as required.
UK Legal Risk
The Company and/or the Directors fail to comply with legal requirements in The Board monitors regulatory change with the assistance of its external
relation to FCA dealing rules and procedures, the UK AIFMD, the Listing Rules, professional advisers to ensure compliance with applicable laws and
the Companies Act 2006, relevant accounting standards, the Bribery Act 2010, regulations including the Companies Act 2006, the UK AIFM Rules, the
the Criminal Finances Act 2017, GDPR, tax regulations or any other applicable Corporation Tax Act 2010 ("Section 1158"), the Market Abuse Regulation
regulations. ("MAR"), the Disclosure Guidance and Transparency Rules ("DTRs") and the FCA
UK Listing Rules.
The Board reviews compliance reports and internal control reports provided by
its service providers, as well as the Company's financial statements and
revenue forecasts.
The Directors attend seminars and conferences to keep up to date on regulatory
changes and receive industry updates from the Company Secretary. The Company
Secretary also presents a quarterly report on changes in the regulatory
environment, including AIC updates, and how changes have been addressed.
Governance Risk
Poor adherence to corporate governance best practice or errors or The Board reviews all information supplied to shareholders and Cadarn's
irregularities in published information could lead to censure and/or result in Investor Relations activity at each meeting.
reputational damage to the Company.
Details of the Company's compliance with corporate governance best practice,
including information on relationships with shareholders, are set out in the
Corporate Governance Report.
ESG and Climate Change Risk
Risks related to the environment, social issues and governance such as the At every Board meeting, the Board receives ESG updates, which include
impact of climate change or bad governance of portfolio companies could have information on any climate change and governance related engagement, from the
an adverse impact on the portfolio companies' operational performance. Portfolio Manager together with monthly portfolio updates. The Board
challenges the Investment Manager on ESG matters to ensure that the portfolio
companies are acting in accordance with the Board's ESG approach.
The Portfolio Manager supports the UK Stewardship Code and actively engages
with portfolio companies on ESG matters including climate change.
Details of the Portfolio Manager's ESG approach can be found in the Portfolio
Manager's Report and on the Company's website at www.oitplc.com.
Furthermore, the Board has decided to hold some of its meetings, when
possible, not in person but via video conference, to save on travel and reduce
the Directors' carbon footprints on behalf of the Company.
Emerging Risks
The Company has carried out a detailed assessment of its emerging and
principal risks. The International Risk Governance Council's definition of an
"emerging" risk is one that is new, or is a familiar risk in a new or
unfamiliar context or under new context conditions (re-emerging). Failure to
identify emerging risks may cause reactive actions rather than being proactive
and, in a worst case scenario, could cause the Company to become unviable or
otherwise fail or force the Company to change its structure, objective or
strategy.
The Audit Committee reviews the Company's risk register at its half-yearly
meetings. Emerging risks are discussed in detail as part of this process to
try to ensure that emerging as well as well-known risks are identified and
mitigated as far as possible.
Any emerging risks and mitigations are added to the risk register, examples
being conflict in the Middle East and market volatility from trade tariffs,
which may result in supply emergencies, distribution problems and price
increases and the Board and all its advisers continue to keep developments
under close review.
The experience and knowledge of the Directors is useful in these discussions,
as are update papers and advice received from the Board's key service
providers such as the Portfolio Manager, NSM, Cadarn and the Company's
brokers. In addition, the Company is a member of the AIC, which provides
regular technical updates, draws members' attention to forthcoming industry
and regulatory issues and advises on compliance obligations.
Going Concern
The content of the Company's portfolio, trading activity, the Company's cash
balances and revenue forecasts, and the trends and factors likely to affect
the Company's performance are reviewed and discussed at each Board meeting.
The Company's financial statements for the year ended 31 March 2025 have been
prepared on a going concern basis.
In reaching this conclusion, the Board has considered a detailed assessment of
the Company's ability to meet its liabilities as they fall due, including
tests which modelled the effects of substantial falls in markets and
significant reductions in market liquidity, on the Company's NAV, its cash
flows and expenses. The assessments also factored in market volatility from
trade tariffs and ongoing and potential further risks arising from the
conflicts in Ukraine and the Middle East. Further information is also provided
in the Audit Committee Report.
Based on the information available to the Directors at the date of this
report, including the results of these stress tests, the conclusions drawn in
the Viability Statement, the Company's cash balances, and the liquidity of the
Company's listed investments, the Directors are satisfied that the Company has
adequate financial resources to continue in operation for at least the next 12
months and that, accordingly, it is appropriate to continue to adopt the going
concern basis in preparing the financial statements.
Longer-Term Viability Statement
In accordance with the AIC Code of Corporate Governance, the Directors have
carefully assessed the Company's position and prospects as well as the
principal risks and have formed a reasonable expectation that the Company will
be able to continue in operation and meet its liabilities as they fall due
over the next three financial years. The Board has chosen a three-year horizon
in view of the long-term nature and outlook adopted by the Investment Manager
when making investment decisions.
To make this assessment and in reaching this conclusion, the Audit Committee
has considered the Company's financial position and its ability to liquidate
its portfolio and meet its liabilities as they fall due:
- the portfolio is principally comprised of investments listed and traded
on stock exchanges. These are actively traded and, whilst perhaps less liquid
than larger quoted companies, the portfolio is well diversified;
- the portfolio is typically run with a net cash position and as a result
there is ample liquidity on a day-to-day basis for the Company to meet its
obligations;
- the expenses of the Company are predictable and modest in comparison
with the assets and there are no capital commitments foreseen which would
alter that position; and
- the Company has no employees, only its non-executive Directors.
Consequently, it does not have redundancy or other employment related
liabilities or responsibilities.
Redemption Event
As set out in the Company's Prospectus, the Board has committed to provide
shareholders with an opportunity to elect to realise the value of their
ordinary shares at close to NAV during the seventh year following the initial
admission of the Company's shares. The first successful tender offer had taken
place on 5 June 2024. The low level of participation reflected the strong
absolute and relative performance delivered by the Portfolio Manager in a
challenging market since launch and a recognition of the Company's unique
investment approach.
The Board noted that the Company's share price has frequently traded at
premium to NAV per share, and demand for its shares remains strong. This is
demonstrated by the issuance of 5.1 million ordinary shares in the year ended
31 March 2025, and 34 million shares since the Annual General Meeting in
September 2021.
Placing and Retail Offer
In light of interest from investors and demand in the market, the Board
successfully completed a placing and retail offer of shares in the Company in
July 2024. The fundraising raised gross proceeds of £11.4 million and a total
of 6.5 million new shares, at a price of 174 pence per share, were issued in
the Company. This represented a premium of 1.0% to the cum-income NAV per
share as at 16 July 2024, being the last published NAV per share prior to the
close of the fundraising.
The Audit Committee, as well as considering the potential impact of the
Company's principal risks and various severe but plausible downside scenarios,
has also considered the following assumptions in considering the Company's
longer-term viability:
- there will continue to be demand for investment trusts;
- the Board and the Portfolio Manager will continue to adopt a long-term
view when making investments;
- the Company invests principally in the securities of UK listed
companies to which investors will wish to continue to have exposure;
- regulation will not increase to a level that makes running the Company
uneconomical; and
- the performance of the Company will continue to be satisfactory.
The ongoing and potential further risks arising from market volatility due to
trade tariffs and the conflicts in Ukraine and the Middle East were also
factored into the key assumptions made by assessing its impact on the
Company's key risks and whether they had increased in their potential to
affect the normal, favourable and stressed market conditions.
Looking to the Future
The Board concentrates its attention on the Company's investment performance
and Odyssean Capital LLP's investment approach and on factors that may have an
effect on this approach.
The Board is regularly updated by NSM on wider investment trust industry
issues and regular discussions are held concerning the Company's future
development and strategy.
A review of the Company's year ended 31 March 2025, its performance and the
outlook for the Company can be found in the Chairman's Statement and in the
Portfolio Manager's Report.
The Company's overall strategy remains unchanged.
Approval
This Strategic Report has been approved by the Board of Directors and signed
on its behalf by:
Linda Wilding
Chairman
28 May 2025
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial period. Accordingly, the Directors have prepared the Financial
Statements in accordance with IFRS as adopted by the United Kingdom. Under
company law, the Directors must not approve the Financial Statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Company and of the profit or loss of the Company for that period.
In preparing the Financial Statements, the Directors are required to:
- select suitable accounting policies in accordance with IAS 8:
"Accounting Policies, Changes in Accounting Estimates and Errors" and then
apply them consistently;
- present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
- provide additional disclosures when compliance with specific
requirements in IFRS is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Company's
financial position and financial performance;
- state whether applicable IFRS have been followed, subject to any
material departures disclosed and explained in the Financial Statements;
- make judgements and accounting estimates that are reasonable and
prudent; and
- prepare the Financial Statements on the going concern basis unless it
is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the Financial Statements comply with Companies Act
2006 and Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic Report, Directors' Report, Directors' Remuneration
Report and Corporate Governance Statement that comply with that law and those
regulations, and for ensuring that the Annual Report includes information
required by the UK Listing Rules of the FCA.
The Financial Statements are published on the Company's website,
www.oitplc.com, which is maintained on behalf of the Company by Cadarn. The
work carried out by the Auditor does not involve consideration of the
maintenance and integrity of this website and accordingly, the Auditor accepts
no responsibility for any changes that have occurred to the Financial
Statements since they were initially presented on the website.
Under the Portfolio Management Agreement, the Portfolio Manager is responsible
for the maintenance and integrity of the corporate and financial information
included on the Company's website. Visitors to the website need to be aware
that legislation in the United Kingdom covering the preparation and
dissemination of the financial statements may differ from legislation in their
jurisdiction.
We confirm that to the best of our knowledge:
- the Financial Statements, which have been prepared in accordance with
IFRS as adopted by the United Kingdom, give a true and fair view of the
assets, liabilities, financial position and loss of the Company; and
- the Annual Report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that it faces.
The Directors consider that the Annual Report and Financial Statements, taken
as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy.
On behalf of the Board
Linda Wilding
Chairman
28 May 2025
Statement of Comprehensive Income
for the year ended 31 March 2025
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Income 2 2,900 - 2,900 2,194 - 2,194
Losses on investments at fair value 7 - (22,984) (22,984) - (6,247) (6,247)
Currency exchange gains/(losses) - 4 4 - - -
Gross return 2,900 (22,980) (20,080) 2,194 (6,247) (4,053)
Portfolio management and performance fees 3 (2,059) - (2,059) (1,801) - (1,801)
Other expenses 4 (1,266) - (1,266) (854) - (854)
Total expenses (3,325) - (3,325) (2,655) - (2,655)
Net return before taxation (425) (22,980) (23,405) (461) (6,247) (6,708)
Taxation 5 (37) - (37) (11) - (11)
Net return for the period (462) (22,980) (23,442) (472) (6,247) (6,719)
Basic and diluted return per share (pence) 6 (0.4) (17.8) (18.2) (0.4) (5.3) (5.7)
The total column of this statement is the Income Statement of the Company
prepared in accordance with International Financial Reporting Standards
("IFRS"), as adopted by the United Kingdom. The supplementary revenue and
capital columns are presented in accordance with the Statement of Recommended
Practice issued by the AIC ("AIC SORP").
All revenue and capital 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 net return for the
period is also the total comprehensive income.
The accompanying notes are an integral part of these financial statements.
Statement of Changes in Equity
for the year ended 31 March 2025
Share Special
Share premium distributable Capital Revenue
capital account reserve reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Year ended 31 March 2025
Opening balance as at 1 April 2024 1,214 53,542 85,475 47,721 (395) 187,557
Net return for the year - - - (22,980) (462) (23,442)
Net proceeds from share issuance 10 116 19,281 - - - 19,397
As at 31 March 2025 1,330 72,823 85,475 24,741 (857) 183,512
Share Special
Share premium distributable Capital Revenue
capital account reserve reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Year ended 31 March 2024
Opening balance as at 1 April 2023 1,129 40,556 85,475 53,968 77 181,205
Net return for the year - - - (6,247) (472) (6,719)
Net proceeds from share issuance 10 85 12,986 - - - 13,071
As at 31 March 2024 1,214 53,542 85,475 47,721 (395) 187,557
The accompanying notes are an integral part of these financial statements.
Statement of Financial Position
as at 31 March 2025
31 March 31 March
2025 2024
Notes £'000 £'000
Non current assets
Investments at fair value through profit or loss 7 182,971 182,296
Current assets
Trade and other receivables 8 487 1,937
Cash and cash equivalents 1,436 4,935
1,923 6,872
Total assets 184,894 189,168
Current liabilities
Trade and other payables 9 (1,382) (1,611)
Total liabilities (1,382) (1,611)
Total assets less current liabilities 183,512 187,557
Net assets 183,512 187,557
Represented by:
Share capital 10 1,330 1,214
Share premium account 72,823 53,542
Special distributable reserve 10 85,475 85,475
Capital reserve 24,741 47,721
Revenue reserve (857) (395)
Total equity attributable to equity holders of the Company 183,512 187,557
Basic and diluted NAV per ordinary share (pence) 11 137.9 154.4
The accompanying notes are an integral part of these financial statements.
These statements were approved and authorised for issue by the Board on 28 May
2025 and signed on its behalf by:
Linda Wilding
Chairman
Company Registered Number: 11121934
Cash Flow Statement
for the year ended 31 March 2025
Year ended Year ended
31 March 2025 31 March 2024
£'000 £'000
Reconciliation of net return before taxation to net cash outflow from
operating activities
Net return before taxation (23,405) (6,708)
Losses on investments held at fair value through profit and loss 22,980 6,247
(Increase)/decrease in receivables (357) 267
Increase in payables 20 32
Taxation paid (37) (11)
Net cash outflow from operating activities (799) (173)
Investing activities
Purchases of investments (68,168) (49,680)
Sales of investments 46,067 40,346
Net cash outflow from investing activities (22,101) (9,334)
Financing activities
Net proceeds from share issuance 19,397 13,071
Net cash inflow from financing activities 19,397 13,071
(Decrease)/increase in cash and cash equivalents (3,503) 3,564
Reconciliation of net cash flow movements in funds
Cash at the beginning of the year 4,935 1,370
Exchange rate movements 4 1
(Decrease)/increase in cash (3,503) 3,564
Cash at end of year 1,436 4,935
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
for the year ended 31 March 2025
1. Material Accounting Policies
Odyssean Investment Trust PLC is a listed public company incorporated and
registered in England and Wales. The registered office of the Company is 46-48
James Street, London W1U 1EZ. The principal activity of the Company is that of
an investment trust company within the meaning of sections 1158/1159 of the
Corporation Tax Act 2010 and its investment approach is detailed in the
Strategic Report.
a) Basis of preparation
The financial statements of the Company have been prepared in accordance with
IFRS as adopted by the United Kingdom which comprise standards and
interpretations approved by the International Accounting Standards Board
("IASB"), and as applied in accordance with the provisions of the Companies
Act 2006. The annual financial statements have also been prepared in
accordance with the AIC 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.
In order to better reflect the activities of an investment trust company and
in accordance with guidance issued by the AIC, supplementary information which
analyses the Statement of Comprehensive Income between items of a revenue and
capital nature has been prepared alongside the Statement of Comprehensive
Income.
The functional currency of the Company is Sterling because this is the
currency of the primary economic environment in which the Company operates.
The financial statements are also presented in Sterling rounded to the nearest
thousand, except where otherwise indicated.
b) Going concern
The financial statements have been prepared on a going concern 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 the resources to
continue in business for the foreseeable future, being a period of at least 12
months from the date these financial statements were approved. In making the
assessment, the Directors have considered the likely impacts of the ongoing
and potential further risks arising from market volatility from trade tariffs
and the conflicts in Ukraine and the Middle East on the Company, operations
and the investment portfolio.
The Directors noted the net cash balance exceeds any short-term liabilities,
the Company has no debt and the Company holds a portfolio of investments
listed on the London Stock Exchange. The Company is a closed end fund, where
assets are not required to be liquidated to meet redemptions. Whilst the
economic future is uncertain, and the Directors believe it is possible the
Company could experience further reductions in income and/or market value this
should not be to a level which would threaten the Company's ability to
continue as a going concern. The Directors, the Portfolio Manager and other
service providers have put in place contingency plans to minimise disruption.
Furthermore, the Directors are not aware of any material uncertainties that
may cast 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. Therefore, the financial statements have been prepared
on a going concern basis.
c) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single
segment of the business, being investment business in accordance with its
Investment Objective and Policy.
d) Accounting developments
In the current year, the Company has applied a number of amendments to IFRS,
issued by the IASB. These include annual improvements to IFRS, changes in
standards, legislative and regulatory amendments, changes in disclosure and
presentation requirements.
The adoption of the changes has had no material impact on the current or prior
years' financial statements.
e) Critical accounting judgements and key sources of estimation
uncertainty
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and the reported amounts in the Statement of Financial
Position, the Statement of Comprehensive Income and the disclosure of
contingent assets and liabilities at the date of the financial statements. The
estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgements about
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
No critical accounting judgments or significant estimations were made by the
Company in the preparation of its financial statements for the year ended 31
March 2025.
f) Investments
The Company's business is investing in financial assets with a view to
profiting from their total return in the form of income and capital growth.
This portfolio of financial assets is managed and its performance evaluated on
a fair value basis in accordance with the documented investment strategy and
information is provided internally on that basis to the Company's Board of
Directors and other key management personnel.
All investments are designated upon initial recognition as held at fair value
through profit or loss, and are measured at subsequent reporting dates at fair
value, which is bid price for investments traded in active markets. The
Company derecognises a financial asset only when the contractual rights to the
cash flows from the asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another
entity. On derecognition of a financial asset, the difference between the
asset's carrying amount and the sum of consideration received and receivable
and the cumulative gain or loss that had been accumulated is recognised in
profit or loss.
All gains and losses are allocated to the capital return within the Statement
of Comprehensive Income. Also included within this heading are transaction
costs in relation to the purchase or sale of investments. When a sale or
purchase is made under a contract, the terms of which require delivery within
the timeframe of the relevant market, the investments concerned are recognised
or derecognised on the trade date.
All investments for which a fair value is measured or disclosed in the
financial statements are categorised within the fair value hierarchy levels
set out in note 7.
g) Income
Dividends receivable on quoted equity shares are taken to revenue on an
ex-dividend basis. Dividends receivable on equity shares where no ex-dividend
date is quoted are brought into account when the Company's right to receive
payment is established. Dividends from overseas companies are shown gross of
any withholding taxes which are disclosed separately in the Statement of
Comprehensive Income.
Special dividends are taken to the revenue or capital account depending on
their nature. In deciding whether a dividend should be regarded as capital or
revenue receipt, the Board reviews all relevant information as to the sources
of the dividend on a case-by-case basis.
When the Company has elected to receive scrip dividends in the form of
additional shares rather than in cash, the amount of the cash dividend
foregone is recognised as income. Any excess in the value of the cash dividend
is recognised in the capital column.
All other income is accounted on a time-apportioned accruals basis and is
recognised in the Statement of Comprehensive Income.
h) Expenses
All expenses are accounted on an accruals basis and are allocated wholly to
revenue with the exception of the transaction costs which are allocated wholly
to capital, as the fee payable by reference to the capital performance of the
Company.
i) Share capital and reserves
The share capital represents the nominal value of equity shares.
The share premium account represents the accumulated premium paid for shares
issued above their nominal value less issue expenses. This reserve is not
distributable.
The special distributable reserve was created on 8 August 2018 following
approval of the Court to cancel the Company's share premium account,
accumulated through initial placing and subsequent issuance of the Company's
ordinary shares over the period between 1 May 2018 and 27 June 2018. This
reserve may be used for the costs of share buybacks, the cancellation of
shares, and distribution by way of dividends.
The capital reserve represents realised and unrealised capital and exchange
gains and losses on the disposal and revaluation of investments and of foreign
currency items. In addition, performance fee costs are allocated to the
capital reserve. The amount within the capital reserve less unrealised gains
is available for distribution. The realised gains within the capital reserve
amounted to £67,268,000 as at 31 March 2025 (2024: £57,437,000). The Company
does not intend to make distributions out of its capital reserve.
The revenue reserve represents the surplus of accumulated revenue profits
being the excess of income derived from holding investments less the costs
associated with running the Company. This reserve may be distributed by way of
dividends, to the extent realised.
2. Income
Year ended 31 March 2025 Year ended 31 March 2024
Income Capital Total Income Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income from investments*
UK dividends 2,500 - 2,500 1,825 - 1,825
Overseas dividends 245 - 245 200 - 200
2,745 - 2,745 2,025 - 2,025
Other income
Bank interest 159 - 159 169 - 169
Exchange losses (4) - (4) - - -
Total income 2,900 - 2,900 2,194 - 2,194
* Income from investments is classified by country of incorporation and
taxation of the dividend paying investment company.
3. Portfolio management fee
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Portfolio management fee 2,059 - 2,059 1,801 - 1,801
Performance fee - - - - - -
2,059 - 2,059 1,801 - 1,801
The Company may be liable to pay a performance fee depending on the
performance of the Company over a rolling three-year period. Based on the
performance of the Company to 31 March 2025, no performance fee has been
accrued (2024: £nil).
A performance fee is recognised when the performance criteria is met. Further
details of the Company's management fee and performance fee arrangements can
be found in Business Review section.
4. Other expenses
Year to Year to
31 March 2025 31 March 2024
£'000 £'000
Administration fees - Frostrow Capital 376 404
Administration fees - NSM 54 -
Administration fees - Cadam 84 -
Directors' fees* 128 135
Broker fees 62 60
Auditor fees** 67 63
Custody fees 28 29
Registrar fees 29 19
Other expenses*** 438 144
1,266 854
* Peter Hewitt does not receive a Director fee in respect of his
services to the Company, owing to his employment as a Director of Global
Equities at Columbia Threadneedle. The decrease in total Directors' fees from
2024 is mainly due to the reduction of one Director from the Board during the
current year and the new Chair receiving the full year salary. Further details
can be found in the Directors' Remuneration Report.
** Exclusive of VAT. The Company's auditor provided no non-audit
services (2024: none) during the year.
*** Other expenses includes £300,000 of fees relating to the tender
offer undertaken during the year to 31 March 2025.
5. Taxation
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Analysis of charge in year
Current tax:
Overseas withholding tax suffered 37 - 37 11 - 11
37 - 37 11 - 11
The current taxation charge for the year is the standard rate of Corporation
Tax in the UK of 25% (2024: 25%). The differences are explained below:
Year ended 31 March 2025 Year ended 31 March 2024
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net return before taxation (425) (22,980) (23,405) (461) (6,247) (6,708)
Theoretical tax at UK corporation tax rate of 25% (2024: 25%) (106) (5,745) (5,851) (115) (1,562) (1,677)
Effects of:
UK dividends that are not taxable (625) - (625) (456) - (456)
Overseas dividends that are not taxable (61) - (61) (50) - (50)
Non-taxable investment losses - 5,745 5,745 - 1,562 1,562
Irrecoverable overseas withholding tax 37 - 37 11 - 11
Unrelieved excess management expenses 792 - 792 621 - 621
37 - 37 11 - 11
Factors that may affect future tax charges
At 31 March 2025, the Company had no unprovided deferred tax liabilities
(2024: £nil). At that date, based on current estimates and including the
accumulation of net allowable losses, the Company had unrelieved losses of
£18,410,000 (2024: £15,244,000) that are available to offset future taxable
revenue. A deferred tax asset of £4,603,000 (2024: 3,811,000) has not been
recognised because the Company is not expected to generate sufficient taxable
income in future periods in excess of the available deductible expenses and
accordingly, the Company is unlikely to be able to reduce future tax
liabilities through the use of existing surplus losses.
Deferred tax is not provided on capital gains and losses arising on the
revaluation or disposal of investments because the Company meets (and intends
to continue for the foreseeable future to meet) the conditions for approval as
an Investment Trust company.
6. Return per ordinary share
The capital, revenue and total return per ordinary share are based on the net
return for the period shown in the Statement of Comprehensive Income and the
weighted average number of ordinary shares during the period of 128,803,537
(2024: 116,957,728).
There are no dilutive instruments issued by the Company.
7. Investments held at fair value through profit or loss
As at As at
31 March 31 March
2025 2024
£'000 £'000
Opening book cost 192,012 182,942
Opening unrealised investment holding losses (9,716) (2,548)
Opening fair value 182,296 180,394
Analysis of transactions made during the year
Purchases at cost 67,919 49,550
Sales proceeds received (44,260) (41,404)
Gains on sales of investments 9,827 924
Unrealised losses on investment holding (32,811) (7,168)
Closing fair value 182,971 182,296
Closing book cost 225,498 192,012
Closing unrealised investment holding losses (42,527) (9,716)
Closing fair value 182,971 182,296
Transaction costs 318 246
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.
An active market is a market in which transactions for the asset or liability
occur with sufficient frequency and volume on an ongoing basis such that
quoted prices reflect prices at which an orderly transaction would take place
between market participants at the measurement date. Quoted prices provided by
external pricing services, brokers and vendors are included in Level 1, if
they reflect actual and regularly occurring market transactions on an arms
length basis.
- 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.
As at 31 March 2025 As at 31 March 2024
Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Quoted at fair value 182,971 182,971 - - 182,296 182,296 - -
Total 182,971 182,971 - - 182,296 182,296 - -
There were no transfers between levels during the year.
During the year ended 31 March 2024, £8,685,000 of level 2 investments were
transferred to level 1 as the volume and frequency of trading in these assets
had increased sufficiently so that the assets were classified as being valued
with quoted prices in an active market.
The Company held interests of 3% or more of any share class in seven investee
companies (2024: eight investee companies).
Valuation % of
£'000 voting rights
Xaar 26,410 19.6
Dialight 8,400 17.5
Flowtech Fluidpower 5,985 16.6
Gooch and Housego 14,546 12.8
XP Power 20,299 9.5
James Fisher and Sons 11,704 7.5
NCC Group 26,410 6.0
8. Trade and other receivables
As at As at
31 March 31 March
2025 2024
£'000 £'000
Due from brokers - 1,807
Dividend income receivable 378 62
Other receivables 109 68
487 1,937
9. Trade and other payables
As at As at
31 March 31 March
2025 2024
£'000 £'000
Due to brokers 726 975
Portfolio management fees 478 463
Other payables 178 173
1,382 1,611
10. Share capital
Year ended 31 March 2025 Year ended 31 March 2024
Number of £'000 Number of £'000
Shares Shares
Issued and fully paid:
Ordinary shares of 1p:
Balance at beginning of the year 121,452,053 1,214 112,945,053 1,129
Shares issued during the year 11,642,159 116 8,507,000 85
Balance at end of the year 133,094,212 1,330 121,452,053 1,214
The Company currently has no shares in treasury. During the year, the Company
issued 11,642,159 new ordinary shares (2024: 8,507,000).
11. Net asset value per ordinary share
The basic net asset value per ordinary share is based on net assets of
£183,512,000 (2024: £187,557,000) and the number of ordinary shares in issue
of 133,094,212 (2024: 121,452,053).
There are no dilutive instruments issued by the Company.
12. Financial instruments
The Company's financial instruments include its investment portfolios, cash
balances, trade receivables and trade payables that arise directly from its
operations. Adherence to the Company's investment policy is key to mitigating
risk.
Risks
The Portfolio Manager monitors the financial risks affecting the Company on an
ongoing basis and the Board regularly receives financial information, which is
used to identify and monitor risk. All risks are actively reviewed and managed
by the Board.
The risks identified arising from the Company's financial instruments are:
(i) market risk, including market price risk, interest rate risk and
currency risk;
(ii) liquidity risk;
(iii) credit and counterparty risk
(i) Market risk
Market risk is the risk of loss arising from movements in observable market
variables. The fair value of future cash flows of a financial instrument held
by the Company may fluctuate because of changes in market prices. The
Portfolio Manager assesses the exposure to market risk when making each
investment decision and these risks are monitored by the Portfolio Manager on
a regular basis and the Board at meetings with the Portfolio Manager.
Market price risk
The Company is exposed to market price risk (i.e. changes in market prices
other than those arising from currency or interest rate risk) which may affect
the value of investments whose future prices are uncertain. The Company's
exposure to market price risk comprises movements in the value of the
Company's investments. If the fair value of the Company's investments at the
year-end increased or decreased by 10%, then it would have had an impact on
the Company's capital return and equity of £18,297,000 (2024: £18,230,000).
The Portfolio Manager manages this risk by following the investment objective
and policy as set out in the prospectus. The Portfolio Manager assesses the
exposure to market price risk when making each investment decision and
monitors the overall level of market price risk on the whole investment
portfolio on an ongoing basis. The Portfolio Manager maintains a net cash
position and intends to maintain this for the foreseeable future.
Currency risk
Currency risk is the risk that fair values of future cash flows of a financial
instrument fluctuate because of changes in foreign exchange rates. The Company
held three investments in foreign currencies as at 31 March 2025 (2024: one).
Whilst the Company's other investments are denominated in sterling, the
Company may have currency exposure through the trading activities of its
investee companies.
The Portfolio Manager does not hedge underlying portfolio companies.
Foreign currency exposures
Fair values of the Company's investments denominated in foreign currencies are
shown below. The Company has no other foreign currency denominated assets or
liabilities.
As at As at
31 March 31 March
2025 2024
£'000 £'000
Euro 7,146 7,609
CAD 7,092 -
14,238 7,609
Foreign currency sensitivity
The table below shows the impact on the Company's net loss after taxation for
the year ended and net assets, if sterling had strengthened/weakened by 10%
against the Euro and Canadian Dollar.
As at As at As at As at
31 March 31 March 31 March 31 March
2025 2024 2025 2024
Strengthened Weakened Strengthened Weakened
£'000 £'000 £'000 £'000
Euro (649) 794 (692) 845
CAD (645) 788 - -
(1,294) 1,582 (692) 845
Interest rate risk
Interest rate risk is the risk that fair value of future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates. Interest rate movements may potentially affect future cash flows from
the level of income receivable on cash deposits.
The Company's bank balances are subject to a variable rate of interest, it
does not generate significant income from interest and the Portfolio Manager
does not hedge against this. The Company has no gearing and therefore there is
limited downside risk from increasing interest costs on borrowings.
Based on the Company's cash balance as at 31 March 2025 of £1,436,000 (2024:
£4,935,000), a 1% increase in interest rates would increase the revenue
return and net assets by £14,000 (2024: £49,000) and a fall of 1% in
interest rates would have the opposite effect on the Company's revenue return
and net assets.
The Portfolio Manager actively manages the cash positions of the Company.
(ii) Liquidity risk
The Company's assets mainly comprise readily realisable securities which can
be easily sold to meet funding commitments and obligations. Liquidity risk is
mitigated by the fact that the Company has £1,436,000 (2024: £4,935,000)
cash at bank and the assets are readily realisable. The Company is a
closed-end fund and assets do not need to be liquidated to meet redemptions.
The Portfolio Manager maintains a net cash position and intends to maintain
this for the foreseeable future. The Portfolio Manager will manage the
portfolio to maintain sufficient cash balances to meet its obligations or
liabilities as they fall due.
(iii) Credit risk
This is the risk a counterparty of the Company will not meet their obligations
to the Company.
The Company does not have any significant exposure to credit risk arising from
one individual party. Credit risk is spread across a number of counterparties,
each having an immaterial effect on the Company's cash flows, should a default
happen. The credit standing of all counterparties is reviewed periodically and
assesses the debtors to ensure they are neither past due or impaired.
All the investments of the Company which are traded on a recognised exchange
are held by the Company's custodian, CACEIS Bank, UK Branch. All the Company's
cash is also held by CACEIS. The Portfolio Manager and the Board actively
monitor the relationship with CACEIS and review its internal control report.
13. Related party transactions
The amount incurred in respect of Portfolio Management fees during the period
to 31 March 2025 was £2,059,000 (2024: £1,801,000), of which £478,000
(2024: £463,000) was outstanding at 31 March 2025.
Fees paid to the Company's Directors and Directors' shareholdings, are
disclosed in the Directors' Remuneration Report. At the year end, £7,000 of
outstanding fees was payable to Directors (2024: £nil).
14. Subsequent events
Since the year end, the Company has issued 700,000 Ordinary Shares for net
proceeds of £896,000, after purchase costs of £5,000.
FINANCIAL INFORMATION
This announcement does not constitute the Company's statutory accounts. The
financial information is derived from the statutory accounts, which will be
delivered to the registrar of companies and will be put forward for approval
at the Company's Annual General Meeting. The auditors have reported on the
accounts for the year ended 31 March 2024 and the year ended 31 March 2025,
their reports were unqualified and did not include a statement under Section
498(2) or (3) of the Companies Act 2006.
The Annual Report for the year ended 31 March 2025 was approved on 28 May
2025.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held on 4 September 2025 at 12 noon at the
offices of Odyssean Capital LLP, 6 Stratton Street, Mayfair, London W1J 8LD.
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website) is incorporated into, or forms part of, this announcement.
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