REG - Onward Opportunities - Annual Results
18/03/2025 07:00
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RNS Number : 9816A Onward Opportunities Limited 18 March 2025
Announcement of ONWD
The information contained in this announcement is restricted and is not for
publication, release or distribution in the United States of America, any
member state of the European Economic Area (other than to professional
investors in Belgium, Denmark, the Republic of Ireland, Luxembourg, the
Netherlands, Norway and Sweden), Canada, Australia, Japan or the Republic of
South Africa.
18 March 2025
Onward Opportunities Limited
("ONWD" or the "Company")
Annual Results
Highlights for the reporting period to 31 December 2024 include:
· The Company's 12-month Total Shareholder Return ("TSR") of +34.1% and
Net Asset Value ("NAV") return of +21.5% saw the Company as one of the top
performing (2(nd) and 3(rd) ranking performance respectively) amongst the
Association of Investment Companies ("AIC") UK Smaller Companies peer group.
· Audited NAV was 129.37 pence per share at 31 December 2024, +21.5%
over 12 months, delivering another encouraging period of NAV outperformance.
§ Significantly outperformed the UK AIM All Share Total Return index by
+25.4% (UK AIM All Share: -3.9%);
§ NAV outperformance amongst peers in the AIC UK Smaller Companies sector
(3rd in UK Smaller Companies sector);
§ Materially outperformed all 44 small cap funds (Unit Trusts & OEICs) in
the Investment Association ("IA") UK Smaller Companies table; and
§ Significantly outperformed the Company's stated target returns of 15% per
annum.
· Top decile NAV performance of +35.2% since launch 21 months ago (2(nd)
in Sector), further establishing the Company's track record of outperformance
versus its target returns and comparator indices.
· Completed five accretive capital raises during FY24, each at a
premium to prevailing NAV per share at the time to raise an aggregate
additional £9.3 million during the year. As a result, the Company was amongst
the top ten largest capital raisers on the London Stock Exchange amongst
investment trusts in FY24.
Portfolio Update
§ Top five contributors to returns in the period, in absolute terms,
were Windward (+£2.13m), MPAC Group (+£1.72m), Synectics (+£1.0m),
Transense Technologies (+£786k), and Alumasc (+£495k).
§ Upon completion of the cash offer for Windward the estimated realised
return on investment is expected to be 134.5% IRR, and a, 2.5x Multiple of
Invested Capital ("MOIC"), underscoring the potential of the Company's stated
investment strategy.
§ Additional noteworthy profitable exits were from Team17 (+£509k),
EKF Diagnostics (+£144J)) and Speedy Hire (+£152k), all sold intentionally
around the general election on AIM inheritance tax relief policy concerns.
§ Only three noteworthy detractors from returns with investment losses
at Ebiquity (-£428k), RBG Holdings
(-£900k), where the two investments have been fully exited; and Comptoir
(-£336k), where the Portfolio Manager continues to proactively work for
profitable outcomes.
§ Significant strategic progress at core holdings supported
proactively by the Portfolio Manager, particularly at Angling Direct, MPAC
Group, The Mission Group and Likewise, further details of which are set out in
the Portfolio Managers' Report.
Post year end Highlights (1 January 2025 - 18 March 2025)
· Significant strategic progress with a further £2.1m capital raise
in March 2025, growing the Company's capacity for further investments by 6.9%,
further demonstrating the Company's ability to continue to scale.
· Soft NAV performance post year-end in line with the wider equity
market volatility of Q125. Areas of relative strength came from Audioboom in
the nursery and Alumasc in the core portfolio.
· Further strategic progress supported proactively by the Portfolio
Manager, particularly at Springfield Properties, The Mission Group and Angling
Direct.
· A number of nursery holdings and core investment opportunities
identified for use of Windward proceeds and capital raised.
· Lead manager Laurence Hulse nominated for 'Fund Manager of the
Year 2024' at the PLC Awards and 'Investor of the Year' at the 2025 CityAM
Awards.
Andrew Henton, Chair, commented:
"During its short period of existence to date, ONWD to some may seem perverse.
Not only does the Company invest in an unloved sector of the market, but it
successfully floated - and has continued to raise new money - at a time when
new issuances on UK equity capital markets have sunk to historic lows. And
notwithstanding such deviancy, it closed the calendar year as one of the top
performing funds in the UK.
Your Board does not think the Company is perverse. Rather we think ONWD's
success to date reflects the combination of cool-headed financial analysis on
the one hand, and warmly supportive, proactive engagement with investee
companies on the other. Whilst we are not complacent about the ongoing effort
required to sustain and maintain investment performance, we are confident that
the strategy, now proven, is capable of long-term application. We therefore
believe the Company is deserving of further capital allocation by new
investors.
On behalf of the Board, I thank all our investors for their support over the
past year, and we look forward to welcoming many more new investors over the
years and months to come."
Laurence Hulse, Lead Fund Manager, said:
"There has been so much to be concerned about as an investor in UK equities,
but as is often the case this has created rich pickings for single minded
investors. Onward Opportunities has successfully navigated a tough backdrop,
outperforming an illustrious peer group through a focus on bottom lines in
spite of the headlines. We are delighted to have delivered a NAV return of
+21.5% for 2024 and these results add to the emerging record of significant
market outperformance since launch. There have been some fantastic
achievements by the management teams we have backed, and our thanks must also
go to them. The takeover approach for Windward at a material premium is a
great example of hidden gems in the UK public markets which we work hard to
identify.
Looking forwards, an eclectic portfolio of opportunities has been built by the
team to deliver returns in what is expected to be a tough 2025 domestically.
Competition for investment is fiercer than ever, and UK shares will have to
command capital on a case-by-case basis; reliance on earnings growth, business
as usual or just being cheap is scant. The portfolio has been designed with a
particular focus on what we see as two key themes for outperformance; global
earnings purchasable at a London valuation or an underscored focus on domestic
catalysts that are largely idiosyncratic to conditions in the UK.
Ever Onwards."
-ENDS-
For further information, please contact
Onward Opportunities Limited Tel: +44 (0)20 3416 9143
Andrew Henton, Chairman hello@dowgate.co.uk
Dowgate Wealth Limited (Portfolio Manager) Tel: +44 (0)20 3416 9143
Laurence Hulse, Investment Director hello@dowgate.co.uk
SEC Newgate (Financial Communications) Tel: +44 (0) 203 757 6880
Bob Huxford / Molly Gretton onward@secnewgate.co.uk
Apex Fund and Corporate Services (Guernsey) Limited (Company Secretary) Tel: +44 (0) 203 5303 600
James Taylor / Tanya Kinnear ool@apexgroup.com
Cavendish Capital Markets Limited (Nominated Adviser and Joint Broker) Tel: +44 (0)20 7200 0500
Ben Jeynes / Camilla Hume
Dowgate Capital Limited (Joint Broker) Tel: +44 (0)20 3903 7715
Nicholas Chambers / Russell Cook
Extracts from the Financial Statements
Highlights for the financial year ended 31 December 2024 include:
31 December 2024 31 December 2023 % change
NAV per share 129.4p 106.5p +21.5%
Share price 137.5p 102.5p +34.1%
Total Net Assets £31.0m £17.1m +81.3%
· The Company's 12-month Total Shareholder Return ("TSR") of +34.1% and
Net Asset Value ("NAV") return of +21.5% saw the Company as one of the top
performing (2(nd) and 3(rd) ranking performance respectively) amongst the
Association of Investment Companies ("AIC") UK Smaller Companies peer group.
· Audited NAV was 129.37 pence per share at 31 December 2024, +21.5%
over 12 months, delivering another encouraging period of NAV outperformance.
§ Significantly outperformed the UK AIM All Share Total Return index by
+25.4% (UK AIM All Share: -3.9%);
§ NAV outperformance amongst peers in the AIC UK Smaller Companies sector
(3rd in UK Smaller Companies sector);
§ Materially outperformed all 44 small cap funds (Unit Trusts & OEICs) in
the Investment Association ("IA") UK Smaller Companies table; and
§ Significantly outperformed the Company's stated target returns of 15% per
annum.
· Top decile NAV performance of +35.2% since launch 21 months ago (2(nd)
in Sector), further establishing the Company's track record of outperformance
versus its target returns and comparator indices.
· Completed five accretive capital raises during FY24, each at a
premium to prevailing NAV per share at the time to raise an aggregate
additional £9.3 million during the year. As a result, the Company was amongst
the top ten largest capital raisers on the London Stock Exchange amongst
investment trusts in FY24.
Portfolio Update
§ Top five contributors to returns in the period, in absolute terms,
were Windward (+£2.13m), MPAC Group (+£1.72m), Synectics (+£1.0m),
Transense Technologies (+£786k), and Alumasc (+£495k).
§ Upon completion of the cash offer for Windward the estimated realised
return on investment is expected to be 134.5% IRR, and a, 2.5x Multiple of
Invested Capital ("MOIC"), underscoring the potential of the Company's stated
investment strategy.
§ Additional noteworthy profitable exits were from Team17 (+£509k),
EKF Diagnostics (+£144k) and Speedy Hire (+£152k), all sold intentionally
around the general election on AIM inheritance tax relief policy concerns.
§ Only three noteworthy detractors from returns with investment losses
at Ebiquity (-£428k), RBG Holdings
(-£900k), where the two investments have been fully exited; and Comptoir
(-£336k), where the Portfolio Manager continues to proactively work for
profitable outcomes.
§ Significant strategic progress at core holdings supported
proactively by the Portfolio Manager, particularly at Angling Direct, MPAC
Group, The Mission Group and Likewise, further details of which are set out in
the Portfolio Managers' Report.
Post year end Highlights (1 January 2025 - 18 March 2025)
· Significant strategic progress with a further £2.1m capital raise in
March 2025, growing the Company's capacity for further investments by 6.9%,
further demonstrating the Company's ability to continue to scale.
· Soft NAV performance post year-end in line with the wider equity
market volatility of Q125. Areas of relative strength came from Audioboom in
the nursery and Alumasc in the core portfolio.
· Further strategic progress supported proactively by the Portfolio
Manager, particularly at Springfield Properties, The Mission Group and Angling
Direct.
· A number of nursery holdings and core investment opportunities
identified for use of Windward proceeds and capital raised.
· Lead manager Laurence Hulse nominated for 'Fund Manager of the Year
2024' at the PLC Awards and 'Investor of the Year' at the 2025 CityAM Awards.
Andrew Henton, Chair, commented:
"During its short period of existence to date, ONWD to some may seem perverse.
Not only does the Company invest in an unloved sector of the market, but it
successfully floated - and has continued to raise new money - at a time when
new issuances on UK equity capital markets have sunk to historic lows. And
notwithstanding such deviancy, it closed the calendar year as one of the top
performing funds in the UK.
Your Board does not think the Company is perverse. Rather we think ONWD's
success to date reflects the combination of cool-headed financial analysis on
the one hand, and warmly supportive, proactive engagement with investee
companies on the other. Whilst we are not complacent about the ongoing effort
required to sustain and maintain investment performance, we are confident that
the strategy, now proven, is capable of long-term application. We therefore
believe the Company is deserving of further capital allocation by new
investors.
On behalf of the Board, I thank all our investors for their support over the
past year, and we look forward to welcoming many more new investors over the
years and months to come."
Laurence Hulse, Lead Fund Manager, said:
"There has been so much to be concerned about as an investor in UK equities,
but as is often the case this has created rich pickings for single minded
investors. Onward Opportunities has successfully navigated a tough backdrop,
outperforming an illustrious peer group through a focus on bottom lines in
spite of the headlines. We are delighted to have delivered a NAV return of
+21.5% for 2024 and these results add to the emerging record of significant
market outperformance since launch. There have been some fantastic
achievements by the management teams we have backed, and our thanks must also
go to them. The takeover approach for Windward at a material premium is a
great example of hidden gems in the UK public markets which we work hard to
identify.
Looking forwards, an eclectic portfolio of opportunities has been built by the
team to deliver returns in what is expected to be a tough 2025 domestically.
Competition for investment is fiercer than ever, and UK shares will have to
command capital on a case-by-case basis; reliance on earnings growth, business
as usual or just being cheap is scant. The portfolio has been designed with a
particular focus on what we see as two key themes for outperformance; global
earnings purchasable at a London valuation or an underscored focus on domestic
catalysts that are largely idiosyncratic to conditions in the UK.
Ever Onwards."
Chair's Statement
Onward Opportunities Limited ("ONWD" or "the Company") was incorporated on 31
January 2023, and the shares issued at its Initial Public Offering ("IPO")
were admitted for trading on the Alternative Investment Market ("AIM") of the
London Stock Exchange ("LSE") on 30 March 2023. These accounts have been
prepared for the 12-month accounting period covering 1 January 2024 to 31
December 2024.
As at 28 February 2025 (the latest practicable date prior to the publication
of this report) the net asset value ("NAV") per share was 122.8p and the share
price 135.5p, representing a premium to NAV of 10.3% and a NAV performance of
28.4% since inception.
Portfolio performance
During the year under review ONWD delivered a NAV return of 21.5%,
outperforming the UK AIM All-Share index by over 25%. This performance
reflects not only the assiduity of the Portfolio Manager, but also showcases
how theory has in a number of instances been put into practice. I draw your
particular attention to the following exemplars:
· Windward, a position first purchased at 45p per share and identified
as a business whose value to private equity or strategic trade investors was
materially in excess of its then market capitalisation. Sure enough, the
company was subjected to a bid during Q4 2024 and ONWD expects to exit its
position at a price of 215p per share. Whilst it is a shame that the LSE will
lose a high growth company, the takeout price reflects the undervaluation of
the business as a listed company.
· MPAC, a business identified as being on the cusp of delivering turn
around performance and where the Portfolio Manager has been able to support a
rejuvenated management team through proactive engagement. These turnaround
efforts have already delivered investment returns akin to the takeout of
Windward described above, with shares first purchased below 200p per share
versus the recent highs of over 500p per share.
Whilst no portfolio will ever comprise solely winners, and ONWD has also had
its share of detractors, those latter positions have been quickly sold down
when new evidence has emerged which undermined the original investment thesis.
To the extent the portfolio does carry positions trading below an entry price,
the Portfolio Manager remains confident this is reflective of the very market
inefficiency which the strategy seeks to exploit, and that identified value
catalysts exist in every case.
Hubris has no place in the lexicon of a successful fund manager, and whilst
the Board is very pleased with delivered performance during 2024, attention is
rightly now focused on from where the returns in 2025 will be derived. We
expect the Portfolio Manager to remain single minded in the continued
application of the processes and disciplines that have underpinned returns
over the past 24 months.
Portfolio positioning at the start of 2025
As the 2024 calendar year ended, the continued existence of a historically
wide gap between US and UK market valuations did beg the question of what
further risks might exist that have not already been priced into UK markets. A
limited rally at the start of 2025, perhaps triggered by belief in interest
rates cuts as growth in the UK economy falters, might be supportive of a view
that downside risk is perhaps now being eclipsed by upside opportunity.
The Portfolio Manager, rightly, remains less sanguine and we are certainly a
long way away from any heady days of "irrational exuberance" in the UK.
Careful stock picking remains at the core of the ONWD strategy, and one
noticeable feature of current portfolio construction is the weight of non-UK
earnings (and particularly export earnings generated from sales to the US)
across the totality of portfolio companies. This acts as a useful hedge
against macroeconomic UK risk. One particular and noteworthy feature of
successful smaller companies in the past has been their flexibility, and their
ability to react more quickly than larger competitors to changing market
forces. This ability and willingness to change is one of the features that the
Portfolio Manager actively seeks out in prospective investee companies, and is
a further hedge against disruptive events such as tariff imposition.
Trying to time the market and predict exactly when sentiment will turn in
favour of small cap stocks is a fool's errand, but the fact that private
equity and strategic investors continue to buy AIM listed companies at
significant premiums to their listed share price evidences the existence of
value. Surely more mainstream market participants and asset allocators will
follow. In the meantime, the ONWD portfolio is composed of names that the
Portfolio Manager believes enjoy distinctive and idiosyncratic features that
have the potential to catalyse value on a non-correlated basis.
Fund raising
The Company successfully concluded five separate fund raisings during the
year. Whilst individually small, such new issuances reflect the pragmatism of
the Board in tapping sources of liquidity when they are identified and are
also reflective of the momentum building within the Company. New money has
been deployed effectively and in a timely manner, and the strategy is capable
of deploying significantly greater volumes of capital before reaching
capacity. The Board fully understands that, in the context of ONWD, many
professional investors are inhibited by a combination of (i) minimum size of
investment into any particular fund; (ii) maximum size of position in any
particular fund; and (iii) prohibition on investing into funds with a short
period of track record. As ONWD enters its third year and moves through a
market capitalisation of £30m (more than double that at IPO), the Board
anticipates that these inhibitors will start to lessen and the Portfolio
Manager will be able to take forward nascent conversations already taking
place with curious institutional investors.
Service providers
In anticipation of the second anniversary of ONWD, the Board has taken the
opportunity to review the range of services being received by the Company.
Notwithstanding its relatively small market capitalisation, the differentiated
nature of the investment strategy - and impressive NAV growth performance -
have started to attract the attention both of institutional investors and
market commentators. Both are trends that the Board wants to encourage
further, and with that end in mind we have recently engaged SEC Newgate to
support the development of the Company's media profile and online presence. We
will also be moving to a new administrator and AIFM in the second quarter of
2025. Both developments are positive and made in anticipation of sustained
growth in the size of the Company over the coming years.
Conclusion
During its short period of existence to date, ONWD to some may seem perverse.
Not only does the Company invest in an unloved sector of the market, but it
successfully floated - and has continued to raise new money - at a time when
new issuances on UK equity capital markets have sunk to historic lows. And
notwithstanding such deviancy, it closed the calendar year as one of the top
performing funds in the UK.
The Board does not think the Company is perverse. Rather we think ONWD's
success to date reflects the combination of cool-headed financial analysis on
the one hand, and warmly supportive, proactive engagement with investee
companies on the other. Whilst we are not complacent about the ongoing effort
required to sustain and maintain investment performance, we are confident that
the strategy, now proven, is capable of long-term application. We therefore
believe the Company is deserving of further capital allocation by new and
existing investors.
On behalf of the Board, I thank all of our investors for their support over
the past year, and we look forward to welcoming many more new investors over
the years and months to come.
Andrew Henton
Chairman
17 March 2025
Portfolio Manager's Report
It is a privilege to present Onward Opportunities Limited's (the "Company" or
"ONWD") second annual set of audited financial statements. The success of the
Company's launch in 2023 has been substantially built upon, as the Company
again materially exceeded its 15% per annum return targets and garnered new
shareholders, raising just under £10m from capital markets during the year.
It has been a tenacious and determined effort by the team on both fronts.
These achievements, which were delivered amidst adverse market conditions, are
a testament to the Company's potential and its ability to independently create
shareholder value - truly active management delivering alpha. Two achievements
to highlight were:
1) The Company being one of the ten largest issuers of equity across all
investment companies on the London Stock Exchange. There is growing confidence
from a widening shareholder base, of institutions, family offices, and
professional investors, in our ability to deliver strong returns through our
active and differentiated investment approach, in spite of prevailing market
conditions and sentiment.
2) The bid at a material premium for top-5 holding, Windward, vindicated
both the market opportunity we have been so vocal about and our ability to
pick out high quality opportunities in depressed wider markets.
We continue to demonstrate an ability to raise capital repeatedly despite
market conditions, deploy that capital using a high-touch investment style,
and invest profitably delivering strong absolute returns. With examples such
as Windward we are now adding the next ingredient for the tonic, highly
profitable realisations.
The Company's progress has built on our encouraging first year; delivering a
total NAV return of +35.2% since inception (30/03/2023) and outperforming the
UK AIM All-Share's total return by 43% (which like the wider UK equity market
has been poor since we launched).
An eclectic portfolio of situations and opportunities has been built by the
team to deliver returns and this process is described below. The investment
portfolio has been designed to take us into a likely challenging 2025 and we
have developed a particular focus on what we see as two key themes for
outperformance in the medium term:
1) Global earnings purchasable at a London valuation; and
2) An underscored focus on catalysts that are largely idiosyncratic to
market and macro conditions in the UK. Reliance on earnings growth, business
as usual or just being cheap is scant.
Competition for capital is fiercer than ever and therefore multiple discounts
or low single digit earnings growth will not be enough. UK shares will have to
command capital on a case-by-case basis.
Top Holdings Table as at 31 December 2024
Holding £ Value Portfolio Weighting % Thesis Summary Catalysts Total Return % IRR %
MPAC Group plc (MPAC LN) £4.0m 12.6% Margin recovery, horizontal expansion New CEO & sales team, pension buy-out, supply 95.1% 175.5%
chain normalisation, Board evolution
Windward AI (WNWD LN) £3.9m 12.2% Organic growth, profitability Contract wins, breakeven, private sector product roll outs 145.2% 185.9%
Synectics plc £3.2m 10.3% Organic growth, end market cyclical capex recovery, disposal Revised capital allocation, margin accretion, contract wins, Board changes 46.6% 311.5%*
(SNX LN)
Transense Technologies plc (TRT LN) £2.2m 6.9% Organic growth via groundbreaking technology Sales pipeline execution, senior leadership hires, 68.3% 59.4%
Board evolution
Alumasc plc £2.1m 6.6% Discount to intrinsic value of building product brands Construction sector recovery, margin recovery, 33.8% 69.8%
(ALU LN) market share gains
Angling Direct plc (ANG LN) £2.0m 6.5% Margin recovery, strategic refocus Strategy review, end market recovery, uses of cash, Board evolution 29.3% 23.4%
Springfield Properties plc (SPR LN) £1.8m 5.8% De-leveraging, cycle recovery Land disposals, social housing market share growth 17.4% 22.4%
React Group plc (REAT LN) £1.8m 5.7% Organic growth, bolt-on M&A Bolt-on M&A, IR initiatives, uses of cash 17.5% 15.4%
The Mission Group (TMG LN) £1.7m 5.5% Disposals to deleverage, SOTP value Return of Chair/major shareholder, disposals at premium to group multiple, 19.5% 53.9%*
buybacks
Vianet Group (VNET LN) £1.5m 4.7% Geographic expansion & 5-G roll out drive US Contract wins, growth in recurring revenues 9.5% 18.4%
organic growth, discounted to peers
Eleven Nursery Holdings 22.5%
Cash at Bank <1%
Portfolio Performance (displayed to 31 December 2024 and rolled on to the last
practicable date post period end; 28 February 2025)
The Company had a strong year, delivering a NAV return of +21.5%. This was the
3rd best performance in the sector, outperforming the UK AIM All-Share's total
return by 25.4%, which fell during the same period. Perhaps most encouraging
was the ongoing investment performance of the fund relative to its peers since
inception - 2nd with a +35.2% return over 21 months and this outperformance
has maintained through the volatility of the first few months of 2025.
Performance was consistently positive throughout the year and accelerated at
year end as post budget volatility subsided and there was an announced
takeover approach for Windward.
Total Returns to 31 December 2024 FY24 - 12 months to 31 December 2024 Since inception - 21 months to 31 December 2024
ONWD NAV Total Return 21.50% 35.20%
ONWD Total Shareholder Return 'TSR' 34.20% 37.50%
ONWD NAV Relative performance to UK AIM All-Share Total Return Index 25.20% 42.70%
ONWD TSR Relative performance to UK AIM All-Share Total Return Index 37.90% 45.00%
AIC UK Smaller Companies Ranking for NAV Return 3rd/25 2nd/25
AIC UK Smaller Companies Ranking for TSR 2nd/25 3rd/25
The top five contributors to returns for the year, at 31 December 2024, were
Windward (+£2.13m), MPAC Group (+£1.72m), Synectics (+£1.0m), Transense
Technologies (+£786k), and Alumasc (+£495k). There were only three
noteworthy detractors from returns in the year, with investment losses at RBG
Holdings (-£900k), Ebiquity (-£428k) (where both the investments were fully
exited) and Comptoir (-£336k).
Total Returns to 28 February 2025 (the last practicable date) 1YR Since inception - 23 months to 28 February 2025
ONWD NAV Total Return +13.9% +28.4%
ONWD Total Shareholder Return 'TSR' +20.4% +35.5%
ONWD NAV Relative performance to UK AIM All-Share Total Return Index +16.5% +37.7%
ONWD TSR Relative performance to UK AIM All-Share Total Return Index +23.0% +44.8%
AIC UK Smaller Companies Ranking for NAV Return 4/23 4/23
AIC UK Smaller Companies Ranking for TSR 5/23 5/23
Market Commentary
If we were to build on the, topical at-the-time, football analogy used in our
half-year report, then H2 '24 was most certainly not 'Fergie time' for the UK.
Supposedly fresh legs came on to the pitch only to deliver missed sitters and
own goals with more lettuce served in the stands to early murmurings of
'Starmer out'. We will try to end the analogy there and focus on our
observations of the UK Small Cap market to avoid the need for sticking on some
shin pads.
Markets and politics are both confidence games, much more than we might all
like to pretend at times. The recent disparity between the US and Europe and
more recent narrative shifts are giving us all a live spectacle of how
powerful this '12th man' can be (or not). A year ago, investors began to
believe they had missed a US recession. The soft or hard landing debate ebbed
away amidst an economy that, despite slowing in Q1, followed through with +3%
growth in Q2 and Q3. More recently inflation and recessionary risks, seemingly
slain, have shown signs of renewed life.
Although the Fed's inflation credentials no longer look immaculate, they for
now cling to a no-landing base case helped by a MAGA-inspired belief in
American exceptionalism that is increasingly being questioned under the change
of administration. Observers will argue this could prove complacent as Trump
2.0 looms over markets given recent volatility of consumer and small business
confidence as well as harder data in the engine of the global economy. For the
short to medium term at least the lofty earnings multiples that those US
equities currently command must quickly be justified.
2024 was a year of elections outside of the US too, and predictably the UK got
a new government. Less predictable was that it quickly trashed its economic
competency rating, albeit blaming an inherited (and imagined) fiscal black
hole. The thing with black holes is that nothing escapes them, so why anyone
would invite one round for tea at number 10 is beyond belief. Either way, UK
growth gravitated down to zero over the first three quarters and inflation
rose from September's below-target print of 1.7% to 2.6% by November. As the
year closed, Europe, including the UK, seemed increasingly haunted by the
ghost of stagflation past.
The most significant bond market trend has been the steepening of yield
curves. As central banks globally have lowered policy rates, longer-term bond
yields have typically risen. Since September, the Fed Funds rate has been cut
by 100 bps and the US 30-year benchmark yield (upon which mortgage rates
depend) has increased by over 100 bps to levels not seen before the GFC. The
picture is similar in other Western markets, including the UK.
The strength of monetary metals prices (gold +30% and silver +27%) and other
tradeable assets is worth noting. Such moves indicate ongoing investor debate
about "traditional" monetary debasement as the likely means to settle the
sovereign debt dilemma. As we enter 2025, these debasement trades remain
underpinned by rising sovereign debt levels and stubbornly high refinancing
yields. Until the US DOGE initiative works, or Argentina exports the Milei
fiscal consolidation playbook, hard assets will remain better risk
counterweights for equity portfolios than bonds.
Much like 2023, 2024 saw the UK deliver one of the weaker performances of
developed world equity markets. The S&P was up 26%, NASDAQ 31%, its Mag
Seven up 33%, and the small cap Russell 2000 up 15%. Most UK equity indices
were up a more modest 6% (FTSE 100, 250 and small cap measures alike).
However, the UK Budget impacted heavily on the AIM market, where Onward
traditionally sources its investments, which ended down 5%. 2023's top
performer, Japan, managed another +21% (albeit with increased volatility), and
even China, widely now considered 'uninvestable', recorded a 14% gain.
The Onward share price and NAV performance compare well to these figures and
demonstrate that there is value on offer, albeit there is a need for selective
stock picking; identifying the gems in what remain unloved markets. Perhaps
the most entertaining example from our portfolio is that Smiths News, a
supposedly 'dying business' (as it delivers newspapers to newsagents amongst
other things), generated a total shareholder return of +37.6%, outperforming
all of the above markets.
While the UK equity market is unlikely to dominate the world's capital markets
again, its recent extended relative decline looks overdone, and some adaptive
revaluation is overdue. How quickly this happens remains unclear, but its
current path to extinction will surely be interrupted at some point. For what
it is worth, it is the Manager's view that the industry needs to reestablish
its relevance to the national consciousness - 'the City' has been trivialised,
marginalised and even at times demonised, despite being one of the country's
trophy assets and financial services being something at which this nation
remains world-beating.
There are two ways for individuals to grow wealth according to an adage from
Warren Buffet; "set up a great business, or own shares in lots of them". The
London Stock Exchange has been a fantastic, and at times only way for ordinary
folk in the UK and around the world to invest directly into great companies
via ISAs, SIPPs, brokerage accounts etc. The demise of such a market in the UK
would reduce ordinary folk's ability to save, invest, retire, grow wealth, and
only further the wealth inequality that has ballooned since 2008. We believe
public markets are a public good and that this is the message that needs to be
better communicated to governments, especially those whose understanding of
capital markets and the circular flow of money is slightly one dimensional.
Indeed, stranded by the challenging trends of UK-listed equities lurk good but
forgotten value opportunities - where both time and a functioning price
mechanism have obscured the fact that they are available to all. Having had a
decent year, Onward's 4th largest holding, AI data company Windward (an 8%
position), received an agreed cash offer at a significant premium on Christmas
Eve, delivering Onward and its investors an early Christmas present. Our
strategy epitomises Charlie Munger's first rule of fishing: fish where the
fish are, but not where everyone else is fishing. As the price mechanism for
smaller listed companies fails, the strategic value of the better-quality
survivors becomes more attractive.
Portfolio Commentary
This year's investment activity eased on the hyperactivity of cash deployment
in 2023, intentionally building up cash balances between the election and the
budget to 20%, before deploying into a new core holding (Synectics) and some
dynamic opportunities in the nursery (Audioboom, Likewise). This meant that on
31 December 2024, the Company was again 'fully invested' into 10 core
investments and 11 nursery holdings which represented 95% of the portfolio. A
detailed description of the core investments in the top ten is provided
overleaf. The Portfolio Manager exited Team17 (+£509k), EKF Diagnostics
(+£144k) and Speedy Hire (+£152k) early, but profitably, over the summer as
analysis of the new UK government's likely impact on the AIM market, yields
and economic activity, threatened our thesis and returns on these investments.
All three share prices remain materially below exit levels and this was a good
example of the Investment Committee ("IC") process adding value, with sell
decisions emerging from a post-election quarterly portfolio review. However,
there were two further noteworthy exits that crystallised investment losses;
RBG Holdings (-£900k) and Ebiquity (-£428k).
Both were thesis breaches that led the Portfolio Manager to withdraw capital
from these companies in the interest of protecting the remaining value.
Lessons have been learned by the IC with each and factored into processes
going forward. Efforts combined to generate investment gains of £5.7m through
the year and an invested portfolio that is tracking a 54.3% gross IRR.
We have an active and engaged approach to investee companies, and shareholders
can expect us to be working hard to support profitable outcomes on our
investments. Some of these workstreams are shared below. Pleasingly some of
the 2023 vintage investments such as Angling Direct are starting to show real
impact from our high-touch style that is directly creating value for all
shareholders including Onward. The portfolio enters 2025 with an intentional
skew to international earnings (Transense, Windward, Synectics, MPAC,
Audioboom); global earnings exposure with a London multiple makes for
compelling price-to-earnings-growth opportunities we believe. Domestic
earnings exposure has been reserved for resilient names with strong market
positions (Angling Direct, Michelmersh, Likewise, Smiths News, Alumasc) or
where such headwinds are more than compensated for by the valuation (The
Mission Group, React Specialist Cleaning, Springfield Properties).
MPAC Group plc (MPAC LN) - Date of first investment September 2023
MPAC Group plc ("MPAC") is a designer and assembler of automated robotic
packaging lines with a strong foothold in defensive sectors globally, and a
first-mover advantage in clean energy assemblies (EV batteries), due to its
historic specialism in 'side-loading'. After a difficult 2022/23 that was
worsened by global supply chain disruption, the business is on a strong
footing under new management with a clear plan for earnings growth that we had
been able to purchase initially on an EV/EBITDA of c.2.5x, and subsequently
(with higher conviction added to) at multiples closer to 5x and 6x in 2024 -
all at a discount to the 10x (or higher) multiples where private equity
transactions take place. New CEO Adam Holland (referenced extensively at JCB
& Rolls Royce) identified levers to recover margins to 10%+ (which is now
complete) and grow earnings with an expanding sales team and abated supply
chain headwinds of 2022/3.
At the point of first investment, we had modelled 12.5% EBIT margins by 2028
but now think this can be beaten materially at much nearer 15%. This first
stage has more than doubled the value of MPAC as we anticipated it would in
our 2023 report. We are pleased to report a very strong IRR of 176% over the
15-months since we invested. MPAC has been a great example of our screening
process identifying emerging change in a company. There remains a longer-term
opportunity in battery casing that if delivered could add significantly to
returns beyond our base case, but we only ascribe hope value at this stage.
We are actively engaging with the company on a number of key initiatives
including a pension 'buy-out' (as it is now in surplus) incentive arrangements
for the new senior leadership team, board composition, M&A strategies and
investor communications. We were delighted to see the company follow up with a
strong trading update in January 2025 and are excited for what the integration
of recent international expansion offers this year and beyond. This and
further catalyst execution combined with sales and margin growth offer further
material upside potential in line with private equity backed peers which we
monitor.
Windward AI Limited (WNWD LN) - Date of first investment August 2023
We said over a year ago in our reports that Windward was "perhaps the most
exciting business model in the portfolio and has the potential to be one of
the most value-creative investment theses too," that "the recent FY23 and HY24
results … I would encourage shareholders to read; they are some of the best
trading figures I have read on AIM in some time" and "if this level of
execution were to be achieved the business would trade in line with similar
businesses around 5x sales." So, it has proven, and it seems others were
reading too with the 215p/share all-cash offer for the company from STV
Capital on Christmas Eve 2024.
Our due diligence had revealed how Windward harnesses marine traffic data to
provide analytical insights to a growing list of household names and global
operators in two key maritime markets; supply chain logistics and
regulatory/legal compliance. Both these segments and the wider maritime
industry are going through massive upheaval, and we believed Windward was
extremely well placed to capitalise on this. Windward delivers these insights
through an attractive subscription model via its Maritime AI TM platform that
we believed had material intrinsic value. Customers include Interpol, the US
military, Glencore, BP, Maersk, BMW and Transworld. This model and market
backdrop have allowed the business to produce some very compelling operational
metrics in the context of our sub-1.5x EV/Sales initial entry point (further
purchases made higher on growing conviction). The business has been growing at
35% per annum, and this is a 99% contracted revenue base the company is
building or 'adding to' each year.
The team wistfully supported the 215p/share all cash offer in December, which
represented c.8% of the portfolio. The LSE will be a lesser place without the
company, which was the fastest growing software stock on AIM this year because
it is a world-beater led by Ami Daniel, their maverick CEO, who we had found
so backable. However, the offer represented a 6.5x current price-to-sales
multiple (right in the midst of our target 5 to 10x range) and a material
premium to the 45p-120p spread which we had been paying for shares over the
past 18-months.
A highly satisfactory early realised return for our strategy and shareholders.
There is a lot of talk about the state of the LSE. Ways of incentivising more
companies like Windward to float has got to be part of the answer. We extend a
huge thanks to Windward its management team and board. A completed takeover at
215p/share at the end of Q125 would deliver a realised 134% IRR and 2.45x
Money Multiple return for Onward Opportunities in c.18months.
Synectics plc (SNX LN) - Date of first investment September 2024
Synectics (SNX LN) is a leader in Advanced Security and Surveillance Systems.
Its expertise is in providing solutions for specific markets where security
and surveillance are critical to operations. Synectics' core IP comprises an
open-architecture, proprietary 'Synergy' software and specialist 'COEX'
cameras delivering highly technical, tailored solutions to a high-profile and
blue-chip global customer base in markets including gambling, Oil & Gas,
Infrastructure and Transport. It holds best-in-class and market leading
positions in some of these sectors which, we believe, makes it a strategic
asset at some stage.
The business used the pandemic to transform its strategy and focus of
operations and this is now starting to bear fruit in the form of contract
wins. It was this earnings transformation that some of our screening systems
were flagging.
Anecdotally, the business has transformed over the past 15 years from one with
seven employees in hardware and one software developer, to 50 in software, two
in hardware and much higher margins. Over the last 10 years, the Synergy
command and control technology platform has become a key driver to Synectics
both winning and retaining customers as well as improving margins, primarily
in Systems but also indirectly in Security. Synergy is (according to customers
and former employees we have spoken to) a user-friendly command and control
platform with good flexibility, expandability, and resilience that is 'world
leading'. Contract wins such as Marina Bay Sands speak to this.
The mission critical nature of Synectics products makes this an interesting
business to consider for investment now that the turnaround is completed. Two
crucial aspects of the Synergy platform are that it increases customer
retention stickiness by integrating into their operations but also generates a
higher blended margin than a typical hardware only surveillance and security
company.
We have been able to acquire this world leading, sticky, high-margin product
on a sub 10x price/earnings multiple through the second half of 2024, another
great example of 'gems amongst the rubble'. The business is now throwing off
large amounts of excess cash and there is optionality around the hardware
division that offers the potential for material capital returns to
shareholders to supplement capital growth in the value of the company. We now
look to new Chair Bob Holt and incoming CEO Amanda Larnder to maximise
exaction of the material earning opportunities facing the business,
particularly in data centres in the UK and new caisson openings around the
world, particularly the UAE and far east.
Transense Technologies plc (TRT LN) - Date of first investment June 2023
Transense Technologies is a very different business, but we believe is another
example of a small UK company quietly working up great prospects for growth.
It is fair to say the business has had a checkered history of 'jam tomorrow'
as a listed business, with a series of false dawns leading to cash
consumption, funding requirements and shareholder value destruction. However,
our screens and subsequent due diligence uncovered that over the past few
years, prospects and crucially profits have tangibly changed, and that this
success is partly obscured by perceptions from the past. The business has
three core market leading technologies at various stages of execution and a
valuation of £13m at the point of investment. In 2019 the first of these,
iTrack, became profitable through a 10-year royalty deal with Bridgestone that
is 100% profit margin, and we believe will peak at around £3m per annum
versus £2m currently.
The future cashflows of this deal underpin the current value of the business.
This deal, led by the now Executive Chairman Nigel Rogers, has been crucial
as it has provided the group with visible long-term profits that have allowed
development of its other two exciting technologies - Translogik and Surface
Acoustic Wave ("SAW") sensors.
Translogik provides tyre wear monitoring equipment to fleet managers and
revenues have more than doubled since 2020 when the new team started to deploy
time and effort into the opportunity using iTrack profits. The technology
generates a gross margin in excess of 50% for the group and we expect that
under the recently appointed Managing Director, Ryan Maughan, revenues can at
least double again in the next few years, if not more.
Lastly, the patent protected SAW technology, which is the least progressed but
with the largest potential for earnings contribution, has started to make
headway in some of the highest barriers to entry markets - US defence and
high-performance motorsport. SAW is garnering industry and investor interest
because of its ability to provide more specific and consistent torque readings
in high-intensity and adverse operating environments. The team are targeting
opportunities in the industrial, electric drivetrain and aerospace sectors and
we are monitoring progress closely following early successes with McLaren
and GE aviation. The business won two major pieces of work that set the
scene for further progress with the technology: (i) SAW was selected as a key
partner in an ambitious £11 million electric vehicle (EV) research and
development programme, that will be part funded by the UK Government through
the Advanced Propulsion Centre UK and joined an Aerospace Technology Institute
supported project and; (ii) "LANDOne", with Airbus to provide SAWsense
technology and support the development of next generation landing-systems
technology. LANDOne is a £37.8 Million project looking into new lighter,
lower maintenance landing gear systems. Officially launched in 2022, Transense
has joined the project due to the SAWsense technology potentially allowing
critical measurements to be made that were not possible with other
technologies.
We were delighted to see Craig Wilson join the board in June, given his
experience at Williams Advanced Engineering last year, where he spent 10 years
and led the development of the business from its foundations in Formula One
racing to provide innovative technology across a range of sectors, becoming
recognised as a leader in electrification and energy storage. As an applied
technology company, revenues generate an extremely high gross margin, north of
85%, and sales have been accelerating. We have been delighted to see a number
of new hires and recent directors buying shares alongside those developments.
Angling Direct plc (ANG LN) - Date of first investment May 2023
Angling Direct is the UK's leading retailer of fishing equipment and tackle.
This position gives us an opportunity to provide investors with some insights
to our investment strategy in action. We believe we have captured dual
optionality on the upside on our investment into Angling Direct, which creates
an attractive asymmetric risk profile for shareholders' capital, initially
investing between 24 and 30 pence per share. This position represents either a
growth or value investment, depending on various strategic decisions that are
taken in the coming months.
The business has a dominant market position in the UK, where it is profitable
and cash generative from a repeat customer base of 'anglers'. These metrics
are improving materially under new management, and look to benefit from both a
UK consumer recovery and growth from additional store rollout.
More recently, the business has been attempting to enter the much larger
European market to provide additional earnings growth. Success has been
limited so far, with annual losses that are material in the context of overall
group profits, whereas the UK business generates a profit that is
significantly more than the current group number (which factors in European
losses). Our returns thesis is that either the European strategy starts to
bear fruit in the near-term and contributes profitable growth to the group, or
it can be reviewed to remove the opportunity cost to management and losses
from group profits. Either outcome would be shareholder value creative to our
investment and we would be happy for our initial skepticism about the European
opportunity to be proved wrong during the remainder of the calendar year.
Eighteen months on from first investing, it would be natural to expect this
debate is approaching conclusion following the recent capital allocation
commentary by the company. Fishing is a sport of probability maximisation, and
in that sense shares many similarities with investment management. Investors
can expect the ANG team to be on a path to reducing European losses for
shareholders one way or the other, creating material value in the process.
Anglers buy tackle to maximise their chances of catching fish predictably and
ONWD shareholders can expect a similar mindset in our strategic discussions
with the company in order to maximise shareholder returns.
The Onward approach has made a material impact this year on ANG's strategy,
increasing shareholder value. The team has been highly engaged with the
company for over 12 months on a number of strategic matters and the recently
announced capital allocation policy, including a £4m buyback, was well
received by shareholders. Behind the scenes, there has been a refinement of
operational elements within the strategy under new CEO Steve Crowe, the
benefits of which are beginning to reveal themselves in some cracking UK
divisional figures and increased growth rates. We are excited by what we
identify to be potential further 'wins' for shareholder value in 2025 as the
company seeks to capitalise on this UK success, which would not be possible
without the hard work and savvy tactics of Steve and his team. ANG delivered
some of the best UK retailer figures on the public markets this year and we
are thankful for their efforts and engagement. We have in this context noted
with interest the consolidation of angling retailers in the USA and Nordic
countries in recent years at much higher multiples than that which ANG trades
on.
React Group plc (REAT LN) - Date of first investment May 2023
With React we believe we have captured a defensive growth opportunity at a
value price and invested c.6% NAV into the company. It is a business the team
has been researching since September 2022 (pre-launch) and was an early
pipeline priority. Through a mix of specialist cleaning services for UK
corporates, the business has a highly attractive earnings profile.
The business now has four core divisions:
1. React - the heritage of the group, reactive specialist cleaning often
needed for emergencies or callouts requiring specialist cleaning techniques,
high margin but less predictable.
2. LaddersFree - large glass pane and cladding cleaning for UK corporates,
executed through a capital-light membership model.
3. Fidelis - contract cleaning focused on public services. The business
operates over 80% of its sales on contracted terms of one to five years and
has been organically growing at 17%+ per annum for the past four years under a
new management team. Sales are highly cash generative and yield a high
contribution margin, whilst CAPEX, depreciation and amortisation are all
insignificant.
4. Aquaflow - A recently acquired drainage and plumbing services company.
Crucially now, as a result of a mix of organic and acquisitive growth and the
upcoming cessation of deferred consideration payments, the business is
beginning to generate strong profits and free cash flow growth from
contribution margin as it exploits inherent operational gearing. If one were
to look away for a moment - not knowing the company cleans large glass
facades, rolling stock, and prisons - its characteristics mean it could easily
be mistaken for a small, successful software company. Yet we have been able to
acquire shares in React on very low P/E multiples. We expect the company to
now use these multiplying cash flows to acquire further earnings on a non-or
very slightly dilutive self-funding basis and compound value creation over the
medium to long term. We are engaged with the company as to how best accelerate
where possible both organic and inorganic strategies to maximise shareholder
value from what is an attractive core business model.
Springfield Properties plc (SPR LN) - Date of first investment July 2023
Springfield Properties is one of Scotland's largest housebuilders and
crucially owns the largest land bank with planning approval in the country.
Over the past 24-months the Scottish government has helpfully (for ONWD at
least!) self-inflicted a number of headwinds to the housebuilding market to
complement the well-documented impact of rising interest rates and consumer
pressures on the sector.
These include rent-controls, unrealistic terms of business for social housing
construction contracts and wider political uncertainty. These challenges
resulted in Springfield properties having to materially cut earnings guidance,
which in turn left its balance sheet looking stretched. The shares followed
and the company traded at a nearly 50% discount to NAV (of which the main
asset is the previously mentioned land bank). Whilst these were all
fascinating reasons to create a potential entry point, it is of course a
recovery that we as capital allocators are interested in. We have invested
with a line of sight on a number of catalysts for value recovery.
Firstly, the regulatory environment is improving; the Scottish government is
ending rent controls which should see the build to rent market improve for
Springfield and social housing contract terms have been adjusted to reflect
inflationary pressures. Springfield is seeing and winning work in both these
areas again. The near-term likelihood of Scottish independence has also
reduced materially which again provides more certainty for business and
investors. Most crucially however are the self-help initiatives that we are
proactively supporting. The company has removed £4m from the central cost
base - which is material in the context of a historic EBITDA of around £20m.
Secondly, and really to the core of our thesis, is the disposal of land
parcels which transfer enterprise value to equity value in the form of
monetising a portion of the balance sheet assets to pay down debt ahead of
forecasts.
The company has already announced a number of profitable disposals, and we
expect these efforts to continue to progress for the rest of the calendar
year. As these de-risking catalysts complete it is not unreasonable to expect
Springfield to re-rate from around 0.6x NAV at the point of investment to
nearer 1.2-1.3x where the sector typically trades through the cycle.
From this point the investment is likely to become a healthy compounder for
the portfolio through the next housebuilding cycle, where Scottish properties
are much more appealingly priced relative to average earnings than most parts
of the UK and SPR's locations close to the Scottish freeport, and Green Power
Line could prove lucrative.
The Mission Group (TMG LN) - Date of first investment July 2024
The Mission Group is a classic special situation which we have been able to
obtain for the portfolio; a business now trading at a material discount to its
sum of the parts valuation and a deep discount to historic and sector
multiples. TMG is an advertising agency focussed on the UK market, which for
the past eight years has been something of a disadvantage but is now
increasingly looking like a great geography in which to be 'overweight'. The
business had still been growing against this backdrop until 2022/23, when a
sector slowdown caught the business over geared, especially its property and
technology sector facing agencies. The high levels of operational gearing in
these businesses and their cyclical nature led to a material earnings
downgrade and resultant short-term impact on the share price, which our
long-term valuation approach has been able to take advantage of.
One of the founders, David Morgan MBE, has returned as Chair to help deliver
cost take-outs and a disposal strategy to recover value for shareholders, of
which he is one with a 5% equity stake. The Board now has a publicly stated
strategy of disposals to reduce debt and our analysis of the goodwill on the
balance sheet suggests that three of the 15+ agencies in the group are worth
significantly more than the current c£40m EV. We look forward to progress in
this area, which ought to drive both a transfer of EV to equity value, if
executed correctly, but also an improvement of the earnings multiple on which
the business is valued. We also estimate any earnings lost from disposals can
be almost fully recovered to profits in the form of a materially reduced
interest line as debt is paid down.
The value we have spotted has not gone unnoticed - the business has received
two approaches from a peer at 29p and 35p per share; a 45% and 75% premium
respectively to our 20p entry price. Our thesis took a big step forward just
after the period end, as TMG completed the sale of April Six Limited for a
total gross consideration of up to £17.4m. The disposal of April Six marks
the completion of the Group's Value Restoration Plan ("VRP") announced on 20th
December 2023.Through self-help actions the VRP has delivered £5 million of
annualised operational improvements in 2024 and has significantly strengthened
the company's financial position with two business disposals. Net bank debt
has thus reduced from £17.0 million to £6.5 million pre deferred payments; a
material deleveraging event delivered by a board fully aligned with
shareholder interests through their own stakes.
Vianet Group plc (VNET LN) - Date of first investment January 2024
Vianet is a recovery and growth situation into which we have invested at a
material discount (5x EBITDA) to listed peers and transaction values for high
recurring revenue businesses that are returning to growth. The investment case
is focused upon scaling its proprietary platforms in two key operating
segments; smart vending ("Smart Machines'") and hospitality ("Smart Zones").
In Smart Zones, the recent launch of SmartDraught as well as the BMI
acquisition have expanded the UK addressable market by c.4x, and accelerated
US expansion plans respectively. In Smart Machines, the evolution of SmartVend
should further differentiate the platform, and enable expansion into a
possible 15m machines worldwide. Proven hardware with longstanding customers
creates very low churn levels, and 3 to 5-year contracts deliver over 80% of
recurring revenue for Vianet.
In the medium term, we expect the scaling of SaaS solutions will drive gross
margin to over 70%, create strategically valuable data, and deliver platform
economies of scale. Delivering these levels of operating metrics left the team
concluding 5x EBITDA was a mis-pricing opportunity and if the anomaly
persists, Vianet's embedded large market share will prove hard to resist for
consolidators higher up the value-chain. The team has performed pleasingly
since, and the number of growth opportunities are what stood out most at the
last update.
Outlook
The Company has delivered a year to be proud of as investment theses at core
holdings started to play-out. Synectics, Windward, Alumasc, Angling Direct,
Audioboom and MPAC all had a particularly strong series of updates that
demonstrated the improving operational activity and strategic changes we had
identified. Hard work has been put in by the Manager to source and verify
these opportunities, and also by the management teams to execute business
plans, with our support where appropriate. Our thanks must go to the portfolio
companies for a strong year set against a sterile backdrop.
The portfolio and the Manager will both have to work even harder this year to
deliver a strong performance as several UK specific headwinds, often
self-inflicted, have developed in the second half of 2024. These have only
worsened in the early weeks of 2025. Without a major global tailwind such as a
resolution to the crisis in Ukraine or dramatically lower energy prices, it is
likely to be a tough operating environment in the UK; higher taxes than
expected, higher costs of debt than expected, lower consumer confidence than
expected and lower consumption than expected. Onward shareholders can be
comforted by our strategy's focus on catalysts for value creation rather than
circumstances and the current particular focus on global earnings exposure and
domestic defensiveness. We believe this resolve has enabled the Company to
continue to raise capital in 2025 in the thick of recent equity market
volatility.
Onwards,
Laurence Hulse
Lead Fund Manager and Founder
17 March 2025
Investment Objective and Policy
Investment objective
The Company was incorporated with limited liability in Guernsey under The
Companies (Guernsey) Law, 2008 (the "Companies Law") on 31 January 2023 as a
non-cellular (closed-ended) company limited by shares. The Company's
investment objective is to generate risk-adjusted absolute returns for
shareholders through investments in UK smaller companies. Returns are expected
to be principally derived from capital growth over a target three to five-year
holding period with an appropriate diversification of investment risk.
Investment policy
The Company will seek to achieve its investment objective by investing
primarily in equity and equity-related securities of UK smaller companies that
are predominantly listed or admitted to trading on markets operated by the
London Stock Exchange, and where it is considered that there is a material
potential valuation upside that can be delivered from catalysing strategic,
operational or management initiatives.
In order to ensure that the Company is able to maintain its approach of active
engagement with investee companies, and to encourage and support value
creation, the Company will typically target meaningful minority stakes in
investee companies of between 5% and 25% of the issued share capital.
Whilst the Company has no limitation on the size of the companies in which it
can invest, the Company typically expects to invest in companies with market
capitalisations of no more than £250 million (with particular focus on those
below £100 million) at the time of investment. The Company will therefore
focus on investments in the 'micro' smaller companies sector and on companies
admitted to trading on AIM.
Investee companies will typically have certain of the following
characteristics:
· balance sheet asset backing;
· a competitive advantage and/or strong management track record;
· attractive cash flow potential;
· visibility of earnings/future earnings improvement;
· potential for liquidity and/or exit in line with the Company's
targeted hold period;
· scope for an active shareholder to trigger value creation; and/or
· foreseeable events and catalysts to unlock intrinsic value.
Investments may be either direct investments made by the Company, or indirect
investments made by the Company through similar funds or investment vehicles.
The Company may make its investments for cash or for share consideration.
Although investments will not be restricted to specific sectors, the Company
does not expect to pursue or make investments into companies in the
biotechnology sector or in companies directly involved in extractive
industries (such as mining or oil and gas).
Whilst the Company will initially seek to take minority stakes in investee
companies of between 5% and 25% and will not typically seek to take majority
positions in investee companies, it will not be restricted from taking a
majority position if considered appropriate by the Portfolio Manager.
The Company's portfolio is expected to be relatively concentrated, with a
typical investment being between 2% and 10% of Net Asset Value at the time of
investment. This is expected over time to result in a portfolio of
approximately 10 to 15 high conviction investments and a further 5 to 10
smaller portfolio holdings, in companies operating in a number of industries
and geographic locations.
Whilst the Company will target an investment holding period of three to five
years, actual holding periods and exit strategies will depend on the
underlying investment, the availability of exit opportunities and the size of
the Company's investment. The Company may therefore dispose of investments
outside of the target timeframe should an appropriate opportunity arise.
The Company may hold cash in its portfolio from time to time to maintain
investment flexibility. There is no limit on the amount of cash which may be
held by the Company at any time.
Investment restrictions
The Company will observe the following investment restrictions:
· the maximum investment in any single investee company will be no
more than 15% of Net Asset Value at the time of investment;
· no more than 10% of Gross Asset Value at the time of investment will
be invested in securities listed or quoted on listing venues other than
markets operated by the London Stock Exchange (without the explicit written
consent of the Board);
· no more than 25% of Gross Asset Value at the time of investment(s)
will be in unquoted securities including, inter alia, in unlisted shares or
other unlisted instruments such as convertible loan notes issued by quoted
companies, rights, options, warrants, bonds and notes; and
· no more than 20% in aggregate, of the Gross Asset Value at the time
of investment will be in other listed closed-ended investment funds.
Corporate Governance Statement
The Company is listed on AIM and became a member of the Association of
Investment Companies (AIC) on 4 April 2023. The Directors recognise the
importance of sound corporate governance and the Directors intend to observe
the requirements of the AIC Code so far as is practicable.
The Guernsey Financial Services Commission's ("GFSC") Financial Sector Code of
Corporate Governance (the "Code") applies to the Company. The GFSC has stated
in the Code that companies which report against the UK Corporate Governance
Code, or the AIC Code are deemed to meet the requirements of the Code and need
take no further action. Accordingly, as the Company will report against the
AIC Code, it will be deemed to meet the requirements of the Code.
The Board has established an Audit and Risk Committee and a Management
Engagement Committee. These committees undertake specific activities through
delegated authority from the Board. Terms of reference for each committee have
been adopted and will be reviewed on a regular basis by the Board. The Board
as a whole will undertake the functions of remuneration and nomination
committees and as such no separate remuneration or nomination committee has
been established.
Key Governance Disclosures
Section 172(1) Statement
Through adopting the AIC Code, the Board acknowledges its duty to apply and
demonstrate compliance with section 172 of the UK Companies Act 2006 and to
act in a way that promotes the success of the Company for the benefit of its
Shareholders as a whole, having regard to (amongst other things):
a) consequences of any decision in the long-term;
b) the need to foster business relationships with suppliers, customers
and others;
c) impact on community and environment;
d) maintaining reputation; and
e) acting fairly as between members of the Company.
The Board considers its duties under section 172 to be integrated within the
Company's culture and values. The Company's culture is one of respect for the
opinions of stakeholders, with an aim of carrying out its operations in a fair
and sustainable manner that is both instrumental to the Company's long-term
success and upholds the Company's ethical values. The Board encourages
diversity of thought and opinion and would like to encourage stakeholders to
engage freely with the Board of Directors on matters that are of concern to
them. Stakeholders may contact the Company via the Company's dedicated e-mail
address ool@apexgroup.com (mailto:ool@apexgroup.com) or by post via the
Company Secretary on any matters that they wish to discuss with the Board of
Directors.
The Company does not have a formal diversity policy. This is a function of the
fact that the Company's remunerated officers are limited to the directors. The
composition and effectiveness of the Board is internally assessed on an annual
basis. The periodic rotation or retirement of directors is a trigger event
which initiates a formal search and selection process. This prioritises
professional experience relevant to the needs of the Company over other more
subjective factors which do not lend themselves to formal assessment and
testing. Whilst the Company does not therefore have any policy of positive
discrimination in relation to age, gender or race, the Company does recognise
the value that different perspectives and outlooks can bring to the quality of
decision making. Accordingly, whilst remaining focused on merit-based
appointments, the Board encourages and seeks to identify candidates who can
also enhance the diversity of its composition.
The Board has continued to work closely with its service providers during 2024
in order to support the maintenance of high standards of service. As part of
its annual review process, the Management Engagement Committee enquires about
any incidents, breaches or other occurrences within its service providers that
might create a reputational risk or other negative consequences for the
Company. Further details relating to the service providers can be found within
the Directors' Report.
The Board considers that there is a very low risk of modern slavery or human
trafficking associated with the Company's activities, given it has no
employees, premises, manufacturing or other physical operations. Its suppliers
are professional services providers, most of whom are regulated and none of
whom operate in jurisdictions that have a poor record on modern slavery or
human trafficking. The Company is an externally managed investment company,
has no employees, and as such is operationally quite simple.
The Board does not believe that the Company has any material stakeholders
other than those set out in the following table.
Investors Service providers Community and environment
Issues that matter to them
Performance of the shares Reputation of the Company Compliance with Law and Regulation Impact of the Company and its activities on
third parties
Growth of the Company Compliance with Law and Regulation
Liquidity of the shares Remuneration
Corporate Governance
Engagement process
Annual General Meeting The main service providers engage with the Board in formal quarterly meetings, Adherence to principles of appropriate ESG policies exists at both Company and
giving them direct input to Board discussions. investment level.
Frequent meetings with investors by brokers and the Portfolio Manager and
subsequent reports to the Board Communication between the Board and service providers also occurs informally
on an ongoing basis during the year.
Quarterly factsheets
Key Information Document
Rationale and example outcomes
The Board has engaged with shareholders in relation to the Company's business The Company relies on service providers as it has no systems or employees of The Portfolio Manager works to ensure that sustainability and ESG factors are
over the course of the year. its own. carefully considered and reflected in the Company's investment decisions.
The Board seeks to act fairly and transparently with all service providers, The Board of Directors travel as infrequently as possible and instead
and this includes such aspects as prompt payment of invoices. communicate, where they are able to, by video and conference call.
Going Concern Statement
The Going Concern Statement is made on page 29.
Long-Term Viability Statement
The Long-Term Viability Statement is made on pages 29 to 30.
Fair, Balanced and Understandable Statement
The annual report and accounts taken as a whole are considered by the Board to
be fair, balanced and understandable and provide the information necessary for
shareholders to assess the Company's performance, business model and strategy.
Further information on how this conclusion was reached can be found within the
Audit and Risk Committee Report.
Continuing Appointment of the Portfolio Manager
Further details relating to the continuing appointment of the Portfolio
Manager and how this is in the interests of shareholders as a whole can be
found within the Directors' Report on pages 33 and 34.
Assessment of Principal and Emerging Risks
The Board has undertaken a robust assessment of the Company's principal and
emerging risks, together with the procedures that are in place to identify
emerging risks. Further information on this assessment and an explanation on
how these risks are being mitigated and managed can be found on pages 31 to
33.
Review of Risk Management and Internal Control
The Audit and Risk Committee is responsible for ensuring that the financial
performance of the Company is properly reported and monitored. The Audit and
Risk Committee reviews the Company's annual and interim accounts, the
accounting policies of the Company and key areas of accounting judgment,
management information statements, financial announcements, internal control
systems, risk management and the continuing appointment of auditors. It also
monitors the whistle blowing policy and procedures over fraud and bribery of
the Administrator.
Due to its size, structure and the nature of its activities, the Company does
not have an internal audit function. The Audit and Risk Committee will
continue to keep this matter under review.
The Board is ultimately responsible for the Company's system of internal
controls and for reviewing its effectiveness. The Board has developed a
framework that is designed to manage, rather than to eliminate, the risk of
failure to achieve the Company's business objectives. The framework involves
identifying sources of risk, the potential significance (financial and
operational) of any risk impacts, and the associated controls in place to
identify, pre-empt and mitigate those potential impacts. This is documented in
a Business Risk Assessment which is considered at least annually by the Board.
The framework is discussed with the Portfolio Manager, and members of the
Management Engagement Committee conduct a detailed meeting with the Portfolio
Manager to review the effectiveness of controls and any breaches / errors that
have occurred since the last inspection visit. Any such control failures are
also recorded on an exceptions basis and reported at quarterly Board meetings
or in real time if sufficiently significant. No significant failings or
weaknesses have been identified to date. These processes ensure an at least
annual review of the Company's system of internal controls, including
financial, operational, compliance and risk management. The system can only
provide reasonable and not absolute assurance against material misstatements.
The Board has delegated the management of the Company's investment portfolio,
the provision of custody services, the administration (including the
independent calculation of the Company's NAV), share registration, corporate
secretarial functions and the production of the half-yearly and annual
independently audited financial reports. The Board retains accountability for
the functions it delegates. Formal contractual arrangements have been put in
place between the Company and the providers of these services. Compliance
reports are provided by the Company's Compliance Officer at each quarterly
Board meeting. The Board considers that its internal control processes meet
current industry best practice.
Regulatory Compliance
The Company keeps abreast of regulatory and statutory changes and responds
appropriately. The Board continues to take advice on Alternative Investment
Fund Managers Directive ("AIFMD") from external professional advisers and to
implement necessary measures to ensure compliance with relevant requirements
of the AIFMD Regulations. The AIFM is also a resource relied upon by the Board
in this regard. Although the majority of the obligations associated with AIFMD
are applicable to the AIFM, the Board is satisfied that the Company as an
Alternative Investment Fund ("AIF") complies fully with its relevant
obligations under the AIFMD and the UK's AIFMD Regulations 2013. Key
Information Documents ("KIDs") have been updated in accordance with the EU's
Packaged Retail and Insurance-based Investment Products Regulations ("PRIIPs")
and the UK's amended version thereof and are available at
https://onwardopportunities.co.uk/wp-content/uploads/2024/09/UK-KID-en-GB-GG00BMZR1514-28-Jun-2024.pdf
(https://onwardopportunities.co.uk/wp-content/uploads/2024/09/UK-KID-en-GB-GG00BMZR1514-28-Jun-2024.pdf)
Board Members
The Board is responsible for the determination of the Company's investment
objective and investing policy and has overall responsibility for the
Company's activities including the review of investment activity and
performance and the control and supervision of the AIFM, the Portfolio Manager
and the other service providers.
The Directors meet at least four times a year, and at such other times as may
be required. The Directors (including the Chair) are all independent
non-executive directors. Given the size of the Board it has not been
considered necessary to appoint a senior independent director at this stage in
the Company's lifecycle.
The Board has been assembled to ensure that the Company has the appropriate
breadth of skills and experience in order to ensure that it can be governed
effectively and comprises the following persons:
Director Biographies
Andrew Henton (Independent Non-Executive Chair)
Andrew graduated from Oxford University in 1991 and subsequently qualified as
a Chartered Accountant with PricewaterhouseCoopers in London, specialising as
a corporate tax consultant. He spent eight years working in the City as a
corporate finance advisor with HSBC Investment Bank and as a principal of the
Baring English Growth Fund, a private equity Fund focussed on mid-market
transactions sponsored by ING Barings. In 2002 Andrew was relocated to
Guernsey by Close Brothers Group plc to take responsibility for integrating
and reorganising a number of regulated banking, custody, asset management and
fiduciary administration businesses that the bank had acquired in Jersey,
Guernsey and Isle of Man.
He was Head of Offshore Businesses for Close until the division he managed was
sold in 2011. Thereafter he chose to remain in Guernsey and to work with a
portfolio of companies as a non-executive director. He has wide board
experience of both regulated and non-regulated businesses (including listed
funds and venture backed companies) in both executive and non-executive
capacities. Andrew is British and resident in Guernsey.
Susan Norman (Independent Non-Executive Director)
Susan has over 25 years of boardroom experience formerly in company
secretarial roles and most recently through non-executive director roles
across a wide range of companies in multiple jurisdictions. Susan started her
career within the private banking and fund of hedge funds sectors and now runs
her own consultancy business providing company secretarial, governance and
independent directorship services to a broad range of clients across various
jurisdictions. Susan's board experience covers public and private equity
investment companies, venture capital, real estate investment companies and
impact investment funds, amongst others.
Susan holds an LLB (Hons) degree in Scots Law from the University of
Strathclyde, is a Fellow of the Chartered Governance Institute and holds the
Institute of Directors' Diploma in Company Direction.
Henry Freeman (Independent Non-Executive Director, Chair of Management
Engagement Committee)
Henry is an investment professional with over 25 years of investment decision
making and over 10 years of Board experience. During his executive career as
an investment manager with Lloyds Private Banking/Hill Samuel and Forsyth
Partners, and then an investment banker with Liberum and Investec Securities,
Henry managed institutional and private client funds, investing across
equities, investment trusts and alternative investments; and advised
London-listed investment companies and funds on strategy, structuring, IPOs
and M&A. Henry has also built technology and investment businesses and sat
on UK parliamentary policy groups and Downing Street roundtables for fintech
and social finance. Henry was a founding member of Innovate Finance.
In addition to Onward Opportunities, Henry sits on a number of commercial fund
and investment company boards, as well as the Crown Dependency of Guernsey's
sovereign wealth and pension funds. He is proud to have established the GIFA
Schools Investment Challenge, encouraging financial literacy and investment
education among young people. Henry holds the Institute of Directors' Diploma
in Company Direction.
Luke Allen (Independent Non-Executive Director, Chair of Audit and Risk
Committee)
Luke is an independent non-executive director with over 30 years' experience
working in the financial services sector, the majority of which have been
spent in the investment funds industry. Until December 2019 he was the chief
executive and managing director of Man Group plc's Guernsey office, which
serviced an extensive range of hedge funds and funds of hedge funds. His
primary role was to lead Man Group's operations in Guernsey, chairing the
local management company boards, setting strategy and ensuring effective risk
management, outsourced service provider oversight, and compliance with laws
and regulations. He has well over a decade's experience (in both an executive
and independent non-executive capacity) of working with, and sitting on the
boards of, a wide range of fund and management company structures across
various asset classes and international jurisdictions.
He is a chartered accountant (ICAEW) and, prior to running Man Group's
Guernsey office, he headed up their fund financial reporting and liquidations
team, with responsibility for the production of fund financial statements and
for fund terminations across their entire product range. He has completed the
Institute of Directors' Diploma in Company Direction and is the holder of a
personal fiduciary licence issued by the Guernsey Financial Services
Commission.
Public Company Directorships
The following details are of all other public company directorships and
employment held by each Director and shared directorships of any commercial
company held by two or more Directors:
Andrew Henton
Pershing Square Holdings Limited
Susan Norman
None to be disclosed
Henry Freeman
None to be disclosed
Luke Allen
Global Private Equity One Limited
Director Attendance
During the year ended 31 December 2024, the Board and Committee meetings held
and attended by the Directors were as follows:
Management
Audit and Risk Committee Meeting Engagement
Quarterly Board Meeting Committee Ad-hoc Meetings
Meetings
Director Attended/ Attended/ Attended/ Attended/
Eligible Eligible Eligible Eligible
Andrew Henton 4/4 3/3 2/2 9/10
Susan Norman 4/4 3/3 2/2 10/10
Henry Freeman 4/4 3/3 2/2 10/10
Luke Allen 4/4 3/3 2/2 10/10
Division of Responsibilities
A schedule of matters reserved for the Board is maintained by the Company and
can be summarised as follows:
· Strategic Issues;
· Financial Items such as approval of the annual and half-yearly
reports and any preliminary announcement of the final results and the annual
report and accounts including the corporate governance statement;
· Legal, Administration and Other Benefits;
· Communications with Shareholders;
· Board Appointments and Arrangements;
· Miscellaneous such as to approve the appointments of professional
advisers for any Group company in addition to the Company's Auditors;
· Monetary Limits and payment approvals.
The Directors have also delegated certain functions to other parties such as
the Portfolio Manager, the Administrator, the Company Secretary, the Custodian
and the Registrar. In particular, the Portfolio Manager has been granted
discretion over the management of the investments comprising the Company's
portfolio.
The Portfolio Manager reports to the Board on a regular basis both outside of
and during quarterly board and Committee meetings, where the operating and
financial performance of the portfolio, together with valuations, are
discussed at length between the Board and the Portfolio Manager. The Directors
have responsibility for exercising supervision over the Portfolio Manager.
Board Committees
The Company has established an Audit and Risk Committee and a Management
Engagement Committee (together the "Committees"). The Terms of Reference for
each committee are available on the Company's website.
The Board believes that its established Committees are adequately composed,
and that each member has the necessary skills and experience to discharge
their duties effectively. The relevant Committee and the actions carried out
by each Committee since the previous quarterly board meeting are reported at
each meeting to the Board of Directors by the respective Committee chair. Each
Committee meeting is attended by the Company Secretary and minutes are kept,
as well as a schedule of the action points arising from each meeting.
The Audit and Risk Committee comprises all of the Directors and is chaired by
Luke Allen who is considered to have recent and relevant financial experience.
The Audit and Risk Committee meets at least twice a year. There are likely to
be a number of regular attendees at meetings of the Audit and Risk Committee,
including the Company's external auditors. A full report regarding the Audit
and Risk Committee's activities during the year can be found in the Audit and
Risk Committee Report on pages 40 - 45.
The Management Engagement Committee comprises all of the Directors and is
chaired by Henry Freeman. The Management Engagement Committee meets at least
once a year or more often, if required. Its principal duties are to consider
and review the management engagement terms on which each of the AIFM and the
Portfolio Manager is engaged. Those terms are reviewed by the Committee
annually, scrutinising and holding to account the performance of each of the
AIFM, the Portfolio Manager and other service providers prior to the annual
results announcement being released. Details of the Management Engagement
Committee's activities during the year can be found on page 36.
Investment Committee
Laurence Hulse (Investment Director and Founder)
Laurence joined Dowgate Wealth in September 2022 as an Investment Director.
Laurence started his career at Gresham House in 2015, around the time of its
inception, and worked on a number of outperforming equity products as part of
a small team during that time. At the time of his departure from Gresham
House, he had co-managed or deputised on a number of equity funds; namely
Gresham House Strategic plc (now called Rockwood Strategic plc), Strategic
Public Equity Fund LP and Gresham House Smaller Companies Fund. He was awarded
both AAA and AA-ratings by Citywire during this time and two of these
co-managed funds achieved FE '5-crown' ratings while he was part of the team
working on them. During his tenure, the company grew from a handful of
employees and less than £50m assets to over 200 employees and in excess of
£7.5 billion of assets. Gresham House was bid for by Searchlight Capital in
Q3 2023 for a value of c.£500m, generating a total return to Gresham House
Shareholders since the management buy-in in December 2014 of over 300%.
Laurence joined Dowgate to pursue a long-held ambition to build and manage an
investment vehicle tailored for HNWIs and Family Offices focused on special
situations in the UK, which perfectly aligns with the Dowgate ethos. The first
step of this ambition was achieved with the floatation of Onward Opportunities
in March 2023.
As an investor, Laurence strongly believes in creating value through change;
whether that be strategic, operational or personnel within a business -
particularly in small and micro-cap companies where the impacts of these
changes tend to be most tangible. He prides himself on working actively with
the Boards and Executive teams of investee companies to drive shareholder
value through the investment cycle. He holds a truly active approach to
investment management by applying private equity techniques to publicly listed
companies. His enthusiasm and drive have allowed him to successfully garner a
track record of outperformance and close industry network throughout his early
career in the City.
Career highlights for Laurence include when he was nominated for the rising
star of investment companies award in 2021 and the flotation of Onward
Opportunities, the investment vehicle he founded, on the London stock market
in 2023. This subsequently won the 2024 IPOI of the Year award and was
followed by a nomination for Fund Manager of the Year 2024 at the illustrious
plc awards. His biggest achievement away from work was climbing Mount
Kilimanjaro for charity at the age of 16. In addition to his duties as
Investment Director, Laurence loves cycling, driving, and vintage cars.
Tom Teichman (Investment Committee Chair)
Tom started his career at Willis Faber & Dumas and then William Brandt's
Sons & Co., becoming head of European merchant banking. Over the next 40
years he has sat on various credit and investment committees whilst working at
Bankers Trust Company, Credit Suisse, Finanz AG, Mitsubishi Finance
International, Bank of Montréal Nesbitt Thomson, NewMedia Investors, SPARK
Ventures (which he co-founded), The Garage Soho (which he co-founded) and
Gresham House Strategic, where he worked directly with Laurence Hulse. Tom was
personally, or through investment vehicles he established, a very early-stage
investor in MAID, Argonaut Games, ARC Risc Cores, lastminute.com,
mergermarket.com, System C, Notonthehighstreet.com, made.com,
moshimonsters.com, Kobalt Music Group and IMI Mobile.
He served on the boards of most of these companies, in some cases as chairman,
advising on growth, funding and exit strategy. Some of these eventually went
public or were acquired by major corporations, including The Financial Times
and Oracle, and/or achieved valuations of over £1 billion.
Tom has a B.Sc. (Econ.) Hons. from University College, London and was born in
Hungary. He has over 30 years' experience in venture capital and banking and
has chaired or been a member of several credit and investment committees
including the Gresham House Strategic Public Equity Investment Committee where
he worked directly with Laurence Hulse from its inception.
David Poutney (Investment Committee Member)
David is Chief Executive of Dowgate Capital and Chairman of, Dowgate Wealth,
and Dowgate Group. His early career was in commercial banking and asset
finance, after completing a history degree from Cardiff University in 1974. He
made the transition into stockbroking a few years ahead of the Big Bang,
becoming a number one rated financials analyst for 15 years at a number of
well-known firms including BZW, James Capel and UBS. He moved into a broader
role in corporate broking during the Dotcom boom of the 1990s and was involved
in the flotation of a number of companies which survived the crash, notably
Sports Internet Group which was taken over by Sky. After joining Numis in 2001
as head of corporate broking, he was responsible for a number of growth
companies such as Domino's Pizza, Alliance Pharma and Learning Technologies
Group. Overall, he was involved in the flotation of over 30 companies.
In addition to his positions at Dowgate Group, David is a non-executive
director of AIM-quoted Franchise Brands plc and Belluscura plc and previously
of Be Heard plc which also quoted on AIM before being sold to a private equity
firm.
Jeremy McKeown (Investment Committee Member)
After obtaining an economics degree from Georgia State University, Jeremy
began his career as a trainee investment analyst at the South Yorkshire
Pension Fund in 1982. Over the following forty years, Jeremy worked on both
the buy and sell sides of the UK stock market, including with companies such
as Abbey Life, British Gas Pension Fund, Midland Bank, Charterhouse, Merril
Lynch, Investec, Liberum and Royal Bank of Canada. Jeremy obtained an MBA from
the City University Business School during this time. Jeremy built a
reputation for independent advice to institutional small and mid-cap investors
and worked on many equity capital market transactions. He led award-winning
teams at Charterhouse, Merrill Lynch and Investec. Since 2020 Jeremy has
worked as a consultant for a number of clients, including Dowgate and
Progressive Equity Research. Jeremy is passionate about understanding the
investment landscape from the macroeconomic backdrop to the entrepreneurs
capable of delivering exceptional returns. He started writing a blog during
the pandemic and launched a podcast series covering investment issues. Jeremy
is a non-executive director at Cranfield University spinout, Loxham Precision.
Jay Patel (Investment Committee Member)
Jay is the Vice President and General Manager of Cisco's Webex CPaaS
initiative and joined Cisco when the company he ran, IMIMobile, was acquired
for US$730m in 2021. He helped start IMImobile PLC in 2003, as CEO led it to a
successful IPO in 2014 and then delivered its exit to Cisco. Today Jay is
working on combining the IMI platforms with relevant technologies from Webex
to create solutions that help clients deliver the world's best customer
experiences.
Jay is an experienced technology executive with over 25 years' commercial
experience through operational, investment and advisory roles. He has had a
successful career working with fast growth businesses and has served as both
an executive and non-executive director on the boards of both private and
public companies over the last 20 years.
Previously, Jay was a co-founder of venture capital firm Spark Ventures PLC
(an early stage venture capital firm), where he led several successful
investments, restructurings and exits in the technology sector across digital
media and publishing, B2B software and B2C eCommerce. Jay has also worked in
corporate finance roles at UBS Warburg and BSkyB and qualified as a Chartered
Accountant with KPMG. He has an MBA from INSEAD and an Economics degree from
London School of Economics.
Directors' Report
The Directors present their Report and the Audited Financial Statements of the
Company for the year ended 31 December 2024.
Principal Activities and Business Review
The investment objective of the Company is to generate long term capital
growth through investing in a portfolio consisting primarily of equity
investments in quoted companies.
The Directors do not envisage any change in these activities for the
foreseeable future. A description of the activities of the Company in the year
under review is given in the Chair's Statement and the Portfolio Manager's
Report.
Business and Tax Status
The Company has been registered with the GFSC as a closed-ended investment
company under the Registered Collective Investment Schemes Rules and Guidance,
2021 ("the RCIS Rules) and the Protection of Investors (Bailiwick of Guernsey)
Law, 2020 ("POI") Law and was incorporated in Guernsey on 31 January 2023. The
Company operates under The Companies (Guernsey) Law, 2008 (the "Law").
The Company's shares are listed and traded on AIM.
The Company's management and administration takes place in Guernsey and the
Company has been granted exemption from income tax within Guernsey by the
Administrator of Income Tax. It is the intention of the Directors to continue
to operate the Company so that each year this tax-exempt status is maintained.
In respect of the Criminal Finances Act 2017, which has introduced a new
corporate criminal offence of 'failing to take reasonable steps to prevent the
facilitation of tax evasion', the Board confirms that they are committed to
zero tolerance towards the criminal facilitation of tax evasion.
Foreign Account Tax Compliance Act ("FATCA")
FATCA requires certain financial institutions outside the United States ("US")
to pass information about their US customers to the US tax authorities, the
Internal Revenue Service (the "IRS"). A 30% withholding tax is imposed on the
US source income and disposal of assets of any financial institution within
the scope of the legislation that fails to comply with this requirement.
The Board of the Company has taken all necessary steps to ensure that the
Company is FATCA compliant and confirms that the Company is registered and has
been issued a Global Intermediary Identification Number ("GIIN") by the IRS.
The Company will use its GIIN to identify that it is FATCA compliant to all
financial counterparties.
Common Reporting Standard
The Common Reporting Standard is a global standard for the automatic exchange
of financial account information developed by the Organisation for Economic
Co-operation and Development ("OECD"), which has been adopted in Guernsey and
which came into effect in January 2016.
The Company is subject to Guernsey regulations and guidance on the automatic
exchange of tax information and the Board will therefore take the necessary
actions to ensure that the Company is compliant in this regard.
Going Concern
The Directors have adopted the going concern basis in preparing the Audited
Financial Statements.
In assessing the going concern basis of accounting, the Directors have
assessed the guidance issued by the Financial Reporting Council and considered
the Company's own financial position, recent market volatility, the on-going
impact of the Russian war on Ukraine and conflict in the Middle East, the
prospect of tariffs and a global "trade war" and other uncertainties impacting
on the financial position and liquidity requirements of the Company's
investments.
At year end the Company had a net asset position of £31,021,000 comprising
cash of £362,000, a convertible loan note of £500,000 and listed investments
of £30,789,000.
The Company generates liquidity by raising capital and exiting investments. It
uses liquidity by making new and follow-on investments and paying company
expenses. The Directors ensure it has adequate liquidity by regularly
reviewing its financial position and forward-looking liquidity requirements.
In assessing its going concern status, the Directors have considered the level
of ongoing operating expenses relative to net assets, such expenses
approximating to 3% of net assets as at 31 December 2024.
Long-Term Viability Statement
The principal risks facing the Company are documented in the Business Risk
Assessment and are described later in this report. The business model and
investment strategy are described and evaluated in the Portfolio Manager's
report. The Board's review of the effectiveness of the Company's risk
management and internal control systems is described in the Audit Committee's
report.
Given the liquid, tradeable nature of its assets it would take a general
failure in the effective and ongoing operation of financial markets (cessation
of market liquidity) to threaten the Company's solvency. Such a market failure
could prevent investments held by the Company from being redeemed and thereby
leave it potentially unable to meet its financial obligations as they fall
due. Notwithstanding the uncertainty caused by recent market volatility, the
on-going impact of the Russian war on Ukraine and conflict in the Middle East,
the prospect of tariffs and a global "trade war" and other uncertainties
impacting on the Company's investments, the fact that the operating expenses
(excluding performance fees) of the Company approximate to 3% of its NAV on an
annual basis makes this risk remote.
The Board has conducted a robust assessment of the principal and emerging
risks and uncertainties facing the Company and has also assessed its long-term
viability. The ongoing impact of the Russian war on Ukraine, the conflict in
the Middle East and possible widespread imposition of tariffs have formed part
of this assessment. The key risk to the Company has been identified as a
failure of the investment decision making process to generate NAV accretion
that is in line with investors' expectations, and which is attractive on a
risk adjusted basis when compared with alternative managed investment
opportunities.
The Company's performance is measured on a monthly basis via both the NAV of
its underlying investments and its share price. Key data inputs used by the
Portfolio Manager when making investment decisions comprise company earnings,
macro factors and indicators of sentiment. The Company's performance is
compared primarily to peer group funds on a regular basis, and performance
fees payable to the Portfolio Manager are calculated annually.
The significant majority of investment positions taken by the Company are in
relatively liquid assets that can be converted to cash readily in the market
and a great effort is made by the Portfolio Manager to minimise drawdowns and
to maintain liquidity. Given that the Company's operating costs as a
percentage of its realisable investment portfolio are low and that it is a
closed-ended fund, the Directors consider there to be significant liquidity
headroom available in all but the most extreme market failure scenarios.
Despite the emphasis on short-term performance and resilience described above,
not all investment positions are entered into with the expectation of them
being unwound within twelve months. Moreover, the 'repeatability' of the
investment process is of fundamental importance.
The Portfolio Manager has developed analytical tools and processes that it
seeks to apply on a consistent basis over time when making investment
decisions. In this way it seeks to generate positive risk adjusted returns
using strategies that are sustainable for the medium to long term. The time
frame over which it is necessary to identify and respond to 'paradigm shifts'
in economic markets is long term in nature. Factors such as government or
central bank policies (e.g. quantitative easing) or external events (including
wars and regional instability) can cause significant changes in investor
sentiment, which can in turn alter market assessments of intrinsic value and
correlations between different asset types. For these reasons, the Board
considers a three-year time horizon to 31 March 2028 as being the appropriate
period over which to assess future prospects and viability.
On the basis of the relevant and rigorous assessment described above, the
Board believes that the Company will remain viable as a closed-ended
investment company for at least the period ending 31 March 2028.
Results and Dividends
The results attributable to shareholders for the year are shown in the
Statement of Comprehensive Income on page 50. The Directors have neither
declared nor paid a dividend for the year (2023: £nil).
Directors
The Directors of the Company who served during the year and to date are set
out on pages 22 to 23.
Directors' Interests
The Directors held the following interests in the share capital of the Company
either directly or beneficially as at
31 December 2024, and as at the date of signing these Audited Financial
Statements:
Number of % Ordinary Shares in
Ordinary Shares issue as at 31 December 2024
Andrew Henton 100,000 0.4170
Susan Norman 45,104 0.1881
Henry Freeman 15,000 0.0626
Luke Allen 25,052 0.1045
Adrian Norman (husband of Susan Norman) 4,878 0.0203
As at 31 December 2023 the following Directors had holdings in the Company:
Number of % Ordinary Shares in
Ordinary Shares issue as at 31 December 2023
Andrew Henton 100,000 0.6239
Susan Norman 20,000 0.1248
Henry Freeman 15,000 0.0936
Luke Allen - -
Adrian Norman (husband of Susan Norman) 4,878 0.0304
Under their terms of appointment, the Directors' total remuneration (including
one-off fees) are as disclosed below:
The Directors' compensation is reviewed annually and at present each Director
is paid a basic fee of £27,500 (2023: £27,500) per annum by the Company. In
addition to this, the Chair receives an extra £11,500 (2023: £11,500) per
annum and the Audit and Risk Committee Chair receives an extra £3,500 (2023:
£3,500) per annum.
Procedures for Identifying Risks
Principal Risks and Uncertainties
There are several potential risks and uncertainties which could have a
material impact on the Company's performance and could cause actual results to
differ materially from expected and historical results.
The AIFM has overall responsibility for risk management and control within the
context of achieving the Company's objectives. The Board agrees the strategy
for the Company, approves the Company's risk appetite and the AIFM monitors
the risk profile of the Company. The AIFM also maintains a risk management
process to identify, monitor and control risk concentration.
The Board's responsibility for conducting a robust assessment of the principal
and emerging risks is embedded in the Company's risk map, which helps position
the Company to ensure compliance with the Association of Investment Companies
Code of Corporate Governance (the "AIC Code").
The principal risks that the Company faces arising from its financial
instruments are:
(i) market risk, including:
- Price risk, being the risk that the value of investments will
fluctuate because of changes in market prices;
- interest rate risk, being the risk that the future cash flows of a
financial instrument will fluctuate because of changes in interest rates;
(ii) credit risk, being the risk that a counterparty to a financial instrument
will fail to discharge an obligation or commitment that it has entered with
the Company.
(iii) liquidity risk, being the risk that the Company will not be able to meet
its liabilities when they fall due. This may arise should the Company not be
able to sell its investments.
(iv) company failure, being the risk that companies invested in may fail and
result in loss of capital invested.
To manage such risks the Company complies with the investment restrictions and
diversification limits provided for in its Admission Document.
The Company invests and manages its assets with the objective of spreading
risk. Further to the investment restrictions referenced, the Company also
seeks to manage risk by:
· not incurring debt over 25% of its NAV, calculated at time of
drawdown. The Company will target repayment of such debt within twelve months
of drawdown; and
· not using derivatives for investment purposes. It is expected that
the Company's assets will be predominantly denominated in Sterling and, as
such, the Company does not intend to engage in hedging arrangements, although
the Company may do so if the Board deems it appropriate for efficient
portfolio management purposes.
Other operational related risks identified by the Board include the following:
Portfolio concentration risk
The majority of the Company's portfolio is expected to be invested in
approximately 10 to 15 companies, with a further 5 to 10 smaller portfolio
holdings existing from time to time. As a result, the portfolio carries a
higher degree of stock-specific risk than a more diversified portfolio.
This is mitigated by position sizing being relatively evenly spread across the
portfolio to ensure that there isn't a disproportionately high level of
exposure to a small number of assets within the portfolio itself. In addition,
both the AIFM and the Portfolio Manager monitor that the investment
restrictions as set out in its Admission Document are adhered to at all times.
Key person risk
At present the Company's investment selection, portfolio management and
marketing functions are heavily reliant upon a single individual employed by
the Portfolio Manager. This individual presents a key person risk as their
departure or inability to continue to provide services to the Company could be
significantly detrimental to its performance. This risk is mitigated by the
fact that the key individual is reputationally and financially linked to the
success of the Company, that there are other staff employed by the Portfolio
Manager who could provide cover in the event of any unexpected absence, that
there is a plan to procure additional staff resources as the Company grows in
size and that contractual notice periods are in place in order to enable the
Company sufficient time to find a replacement Portfolio Manager in the event
that this became necessary.
Share price risk
There is a risk that the Company's shares trade at a discount to their
prevailing Net Asset Value and that any discount may become embedded if it
persists for a significant length of time, albeit that this is a function of
supply and demand for the Company's shares in the market which cannot be
controlled by the Board. The discount risk is mitigated by the fact that the
Portfolio Manager, AIFM and Brokers review market conditions on an ongoing
basis and will report to the Board if a persistent discount appears to be
materialising. In addition, consideration has been given to discount
management options as set out in the Company's Admission Document and the
Company is committed to ensuring that secondary market liquidity is maintained
via the issuance of informative investor communications and the engagement of
active Brokers.
Conflicts of interest
The Portfolio Manager and/or companies with which it is associated may act as
advisor in relation to, or be otherwise involved with, other investment funds
or accounts which presents the risk of a conflict of interest. There is also a
risk that key individuals at the Portfolio Manager may spend time on other
structures rather than on providing services to the Company. This risk is
mitigated by the fact that the Company has put a formal Conflicts of Interest
Policy in place and that it has access to, and receives regular reporting
from, the Portfolio Manager.
Emerging Risks
Emerging risks, along with all other risks the directors have identified the
Company as being exposed to, are monitored via the Company's Business Risk
Assessment. During the year, as part of their regular review and assessment of
risk, the Directors have continued to consider the impact of the emerging
risks of climate change, the use of artificial intelligence, the impact of
rising tariffs on EU economies, and the potentially changing fiscal
environment in the UK on the Company's business model and viability, but do
not consider these to be material risks at this time.
With respect to climate change risk in particular, the Directors consider that
the pricing of the underlying portfolio of the Company's investments reflects
market participants' views of climate change risk and that there are no
further climate related influences on the NAV of the Company at this point in
time.
ESG and Climate Change Risks and Considerations
The momentum of ESG adoption in the asset management industry continued in
2024, as incoming regulations pushed asset owners to increase their demand for
transparency. As ESG processes are further embedded within the wider
investment sector the hope is that improving environmental outcomes will be
realised as compliant companies find it easier to access capital via the
public markets and to grow relative to their less or non-compliant peers.
Climate change risk has been considered within the Emerging Risks section
above.
Ongoing Charges
The ongoing charges figure for the year was 3%. The ongoing charges represent
annualised ongoing expenses of £706,348 divided by the average Net Asset
Value for the year of £22,634,774. The ongoing charges calculation has been
prepared in accordance with the recommended methodology provided by the
Association of Investment Companies where performance fees of £481,296 have
been excluded and represents the percentage reduction in shareholder returns
as a result of recurring operational expenses.
Service Providers
Portfolio Management Agreement and Fees
The Portfolio Management Agreement between the Company, the AIFM, the
Portfolio Manager and Laurence Hulse, pursuant to which the Portfolio Manager
has been appointed, with effect from Admission, to act as the portfolio
manager to the Company and the AIFM, was executed on 23 March 2023.
The initial term of the Portfolio Management Agreement is three years
commencing on Admission (the "Initial Term"). The Company may terminate the
Portfolio Management Agreement by giving the Portfolio Manager not less than
12 months' prior written notice such notice not to be served prior to the end
of the Initial Term. The Portfolio Manager may terminate the Portfolio
Management Agreement by giving the Company not less than 12 months' prior
written notice such notice not to be served prior to the end of the Initial
Term. The Portfolio Management Agreement may be terminated with immediate
effect on the occurrence of certain events, including insolvency or material
and continuing breach.
Under the terms of the Portfolio Management Agreement, the Portfolio Manager
is entitled to an annual management fee, and in certain circumstances the
payment of a Performance Fee, together with reimbursement of all reasonable
costs and expenses incurred by it in the performance of its duties.
In addition, in the event that the Key Man ceases to be involved in a material
respect with the Portfolio Manager, the Company shall be entitled to terminate
the Portfolio Management Agreement immediately without penalty by notice in
writing if the Portfolio Manager, within 90 days of being requested by the
Company to do so, is unable to present a proposal which is reasonably
acceptable to the Board to replace the departed Key Man. The 'Key Man' shall
be Laurence Hulse or any person approved as a replacement Key Man by the
Board.
The Company has given an indemnity in favour of the Portfolio Manager (subject
to customary exceptions) in respect of the Portfolio Manager's potential
losses in carrying on its responsibilities under the Portfolio Management
Agreement.
Laurence Hulse is a party to the Portfolio Management Agreement to take the
benefit of certain provisions. The Portfolio Management Agreement is governed
by the laws of England and Wales. The Board has reviewed the performance of
the Portfolio Manager since the date of its appointment and is satisfied that
the continued appointment of the Portfolio Manager on the terms agreed is in
the interests of the shareholders.
Administrator and company secretary
Apex Fund and Corporate Services (Guernsey) Limited (formerly Apex
Administration (Guernsey) Limited) (the "Administrator") will be responsible
for the day to day administration and company secretarial functions of the
Company (including but not limited to the maintenance of the Company's
accounting records, the calculation and publication of the Net Asset Value and
the production of the Company's annual and interim report). Prospective
investors should note that it is not possible for the Administrator to provide
any investment advice to investors.
The Administrator will be responsible for monitoring regulatory compliance and
providing support to the Board's corporate governance process and its
continuing obligations under UK Market Abuse Regulation (UK MAR).
The Administrator is a company incorporated in Guernsey with limited liability
on 9 January 1998, with registered number 33475, and is licensed by the GFSC
under the provisions of the POI Law to conduct certain restricted investment
and administrative activities in relation to collective investment schemes.
The Administrator, for the purposes of the POI Law and the RCIS Rules, is the
'designated administrator' of the Company. The Administrator's ultimate
holding company is Apex Group Limited.
See note 18 for details of a change in the Administrator that will take place
in the period subsequent to the Statement of Financial Position date.
Alternative Investment Fund Managers Directive
The Company has appointed FundRock Management Company (Guernsey) Limited as
the AIFM of the Company, pursuant to the AIFM Agreement. The AIFM will act at
the Company's alternative investment fund manager for the purposes of the UK
AIFM Regime.
The AIFM has formally delegated portfolio management functions to the
Portfolio Manager as portfolio manager to the Company and the AIFM. The AIFM
retains risk management functions in relation to the Company and is
responsible for oversight of the portfolio management functions delegated to
the Portfolio Manager.
The AIFM works closely with the Portfolio Manager in implementing appropriate
risk measurement and management standards and procedures. The AIFM carries out
the on-going oversight functions and supervision of the Portfolio Manager. The
AIFM is legally and operationally independent of the Company and the Portfolio
Manager.
See note 18 for details of a change in the AIFM that will take place in the
period subsequent to the Statement of Financial Position date.
Custodian
The Custodian of the Company is Butterfield Bank (Guernsey) Limited.
Registrar
Link Market Services (Guernsey) Limited was appointed as registrar to the
Company pursuant to the Registrar Agreement dated 24 March 2023. In such
capacity, the Registrar is responsible for the transfer and settlement of
shares held in certificated and uncertificated form. The Register may be
inspected at the office of the Registrar.
Corporate Governance Statement
The Corporate Governance Statement forms part of the Directors' Report.
Board Responsibilities
The Board comprises four non-executive Directors, who meet at least quarterly
to consider the affairs of the Company in a prescribed and structured manner.
All Directors are considered independent of the Portfolio Manager for the
purposes of the AIC Code. Biographies of the Directors for the year ended 31
December 2024 appear on pages 22 and 23 which demonstrate the wide range of
skills and experience they bring to the Board.
The Directors, in the furtherance of their duties, may take independent
professional advice at the Company's expense, which is in accordance with
principle 13 of the AIC Code. The Directors also have access to the advice and
services of the Company Secretary through its appointed representatives who
are responsible to the Board for ensuring that the Board's procedures are
followed, and that applicable rules and regulations are complied with.
To enable the Board to function effectively and allow the Directors to
discharge their responsibilities, full and timely access is given to all
relevant information. Whilst no limit has been imposed on the overall length
of service of the Directors, at each annual general meeting of the Company,
each director shall retire from office and each director may offer themselves
for election or re-election by the shareholders.
Conflicts of Interest
None of the Directors nor any persons connected with them had a material
interest in any of the Company's transactions, arrangements or agreements at
the date of this report and none of the Directors has or had any interest in
any transaction which is or was unusual in its nature or conditions or
significant to the business of the Company, and which was affected by the
Company during the reporting period.
At the date of this Report, there are no outstanding loans or guarantees
between the Company and any Director.
The Audit and Risk Committee
Luke Allen is the Chair of the Audit and Risk Committee. A full report
regarding the Audit and Risk Committee can be found in the Audit and Risk
Committee Report.
Management Engagement Committee
The Management Engagement Committee comprises all of the Directors and is
chaired by Henry Freeman. The Management Engagement Committee meets at least
once a year or more often, if required. Its principal duties are to consider
the terms of appointment of the AIFM and the Portfolio Manager and it reviews
these appointments and the terms of the AIFM Agreement and the Portfolio
Management Agreement annually. The Management Engagement Committee also
reviews the terms of appointment of other key service providers to the
Company. Details of the management and performance fees can be found in note
6.
The Management Engagement Committee met twice during the year ended 31
December 2024 to review all service providers. In addition, members of the
Management Engagement Committee carried out three separate on-site and in
person meetings with service providers, including the Manager, the
Administrator and the AIFM.
In anticipation of the Company's second anniversary, the Board, through the
Management Engagement Committee, took the opportunity to review the range of
services being received by the Company. Consequently in Q4 2024, competitive
tender processes for Administrator, AIFM and Public Relations / Communications
services were initiated. Following these processes the Company has engaged SEC
Newgate to support the development of the Company's media profile and online
presence. The Company will also be moving to a new administrator and AIFM in
the second quarter of 2025. Both developments are positive and made in
anticipation of sustained growth in the size of the Company over coming years.
Substantial Shareholdings
On 17 March 2025, the latest practicable date for disclosure in this Report,
the Company's only shareholders with a holding greater than 5% were Dowgate
Capital Limited (11.92%) and Dowgate Wealth Limited (26.79%).
Shareholder Communication
The Company's main method of communication with Shareholders is through its
published Half Yearly and Annual Reports which aim to provide Shareholders
with a fair, balanced and understandable view of the Company's results and
objectives. This is supplemented by the publication of the Company's monthly
net asset values on its ordinary shares on AIM and quarterly factsheets.
In line with principle 16 of the AIC Code, the Portfolio Manager communicates
with both the Chair and shareholders and is available to communicate and meet
with major shareholders. The Company has also appointed Cavendish Capital
Markets Limited to liaise with all major shareholders together with the
Portfolio Manager, all of whom report back to the Board at quarterly board
meetings ensuring that the Board is fully aware of shareholder sentiment,
expectations and analyst views. The Company's website, which is maintained by
the Portfolio Manager, is regularly updated with news and announcements.
Information published online is accessible in many countries each with
differing legal requirements relating to the preparation and dissemination of
financial information.
Users of the Company's website are responsible for informing themselves of how
the requirements in their own countries may differ from those of Guernsey.
Relations with Shareholders
All holders of Ordinary Shares in the Company have the right to receive notice
of, attend and vote at the general meetings of the Company.
At each general meeting of the Company, the Board and the Portfolio Manager
will be available to discuss issues affecting the Company.
Shareholders are additionally able to contact the Board, Portfolio Manager and
the Chair directly outside of meetings via the Company's dedicated e-mail
address (ool@apexgroup.com) or by post via the Company Secretary. The Company
has adopted a zero-tolerance policy towards bribery and is committed to
carrying out business fairly, honestly and openly.
Voting and Stewardship code
The Portfolio Manager is committed to the principles of the Financial
Reporting Council's UK Stewardship Code and this also constitutes the
disclosure of that commitment required under the rules of the FCA (Conduct of
Business Rule 2.2.3).
Signed on behalf of the Board by:
( )
Andrew Henton
Chair
17 March 2025
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Report and Audited Financial
Statements in accordance with applicable law and regulations.
Guernsey Companies Law requires the Directors to prepare Audited Financial
Statements for each financial year. Under that law they are required to
prepare the Audited Financial Statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the EU and applicable law.
Under company law the Directors must not approve the Audited Financial
Statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and of its profit or loss for that year.
In preparing these Audited Financial Statements, the Directors are required
to:
· select suitable accounting policies and then apply them
consistently;
· make judgements and estimates that are reasonable, relevant and
reliable;
· state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the Audited
Financial Statements;
· assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
· use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations or have no realistic
alternative but to do so.
The Directors are responsible for keeping proper 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 its Audited Financial Statements comply with the
Companies (Guernsey) Law, 2008. They are responsible for such internal control
as they determine is necessary to enable the preparation of Financial
Statements that are free from material misstatement, whether due to fraud or
error, and have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Company and to prevent and detect
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in Guernsey governing the preparation and dissemination of
Financial Statements may differ from legislation in other jurisdictions.
Disclosure of information to auditors
The Directors who held office at the date of approval of this Directors'
Report confirm that, so far as they are aware, there is no relevant audit
information of which the Company's Auditor is unaware; and that each Director
has taken all the steps that they ought to have taken as a director to make
themselves aware of any relevant audit information and to establish that the
Company's Auditor is aware of that information.
Responsibility statement of the Directors in respect of the Report
We confirm that to the best of our knowledge:
· the Financial Statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company; and
· the management report (comprising the Chair's Statement, the
Portfolio Manager's Report, and Directors' 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.
We consider the Report and Audited Financial Statements, taken as a whole, are
fair, balanced and understandable and provide the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
Signed on behalf of the Board by:
Andrew Henton
Chair
17 March 2025
Audit and Risk Committee Report
Role and Responsibility of the Committee
This is the report of the Audit and Risk Committee (herein the "Committee")
which has been prepared with reference to the AIC Code and describes the work
of the Committee in discharging its responsibilities.
The Committee meets formally at least twice each year and on an ad hoc basis
when required and reports to the Board. It has formally delegated duties and
responsibilities with written terms of reference which are reviewed and
reapproved at least annually. Those terms of reference are published on the
Company's website at
https://onwardopportunities.co.uk/wp-content/uploads/2024/10/3.1-Audit-and-Risk-Committee-Terms-of-Reference-revised-5-Sep-2024-1.pdf
The Committee is mandated by the Board to investigate any activity within its
terms of reference and to consult externally with legal or other independent
professional advisors, as required, to ensure that the Committee adequately
discharges its duties and responsibilities, which include:
a) considering the appointment of the external auditor, its letter of
engagement and the terms thereof, the audit fee, and any questions of
resignation or dismissal of the external auditor;
b) reviewing from time to time the effectiveness of the audit and the
independence and objectivity of the external auditor;
c) developing and implementing policy on the engagement of the external
auditor to supply non-audit services where necessary, taking into account
relevant ethical guidance regarding the provision of non-audit services by the
external audit firm; and report to the Board, identifying any matters in
respect of which it considers that action or improvement is needed and making
recommendations as to the steps to be taken;
d) reviewing the Company's half-yearly and annual financial reports, not
excepting the full Board's responsibility over the reports, focusing
particularly on:
· Any changes in accounting policies and practice;
· Major judgmental areas;
· Significant adjustments arising from the audit;
· The going concern assumption;
· Compliance with accounting standards (and in particular
accounting standards adopted in the financial year for the first time);
· Compliance with applicable legal and regulatory requirements;
· A risk management review; and
· Assessing the effectiveness of internal controls.
e) discussing any problems and reservations arising from the final audit,
and any other matters which the auditor may wish to discuss (in the absence of
the Company's agents where necessary);
f) reviewing the external auditor's Report to the Committee and
determining whether any changes have to be implemented as a result;
g) reviewing, on behalf of the Board, the Company's systems of internal
controls (including financial, operational, compliance and risk management)
and making recommendations to the Board;
h) considering the major findings of internal investigations and
management's response;
i) reviewing the Company's operating, financial and accounting
policies and practices;
j) considering any other matters specifically delegated to the
Committee by the Board from time to time;
k) reporting to the Board on how it performs its duties; and
l) confirming to the Board as to whether the annual report and audited
Financial Statements taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess the
Company's performance, business model and strategy.
The Committee may review any matter that it considers appropriate not
withstanding that it is not specifically mentioned in the above list of
duties.
Composition
The Committee is comprised of all of the Directors with Luke Allen acting as
permanent Chair. The membership of the Committee and its terms of reference
are kept under review. All members of the Committee have relevant competence
in the sector in which the Company operates in addition to relevant financial
experience as required by the Code.
Only independent non-executive Directors serve on the Committee and the
members do not have any links with the Company's external auditor. They are
also independent of the management teams of the Portfolio Manager,
administrator and all other service providers. Notwithstanding that Andrew
Henton is Chair of the Board, he was independent upon appointment, so is a
member of, but may not chair, the Committee.
The Committee meets the external auditor at least twice a year.
Oversight of Controls and Risk Management Systems
The Board, via its Management Engagement Committee, conducts an annual
Business Risk Assessment in conjunction with the Portfolio Manager and the
AIFM. The intention of this exercise is to identify and articulate the
material risks that might affect the Company and its trading prospects, the
likelihood of them occurring and their assessed impact. As part of this
process the explicit controls intended to mitigate either or both of the risk
of occurrence, or the impact of an occurrence, are also articulated. In this
way a residual net impact assessment is derived.
The Management Engagement Committee will hold meetings with the Portfolio
Manager, the AIFM and the Administrator on a regular basis, to review and
inspect operations. The Management Engagement Committee will review senior
staff members responsible for the internal control and oversight functions,
and who report as to the proper conduct of the business in accordance with the
regulatory environment in which both the Company and the Portfolio Manager
operate.
The oversight programme will follow a preplanned agenda involving reviews of,
inter alia (i) changes that have taken place within operations; (ii) IT
systems and controls, including cyber security arrangements; (iii) regulatory
compliance; (iv) investor relations; (v) the valuation of any unquoted
investments; (vi) the risk register, complaints, errors and breaches logs and
business continuity arrangements; (vii) ESG and responsible investment
policies; and (vii) the impact of external factors such as the Russia /
Ukraine conflict and the conflict in the Middle East. The results of the
oversight visits and questionnaires will be documented and discussed at a
meeting of the Management Engagement Committee.
As part of the oversight programme, the Portfolio Manager, the AIFM and the
Administrator report formally to the Committee at least annually on their
systems of internal controls. In accordance with the provisions of the Code,
the Committee has conducted a review of those systems of internal controls and
is satisfied that they are sufficient to withstand the risks to which the
Company is subject.
As the Company is a closed-ended investment company, all of whose Directors
are non-executive, and as all executive functions have been delegated to
professional third party advisors, the Committee does not consider it
necessary for the Company to have its own internal audit function. Whilst no
reliance can be placed on them, reviews conducted on the Portfolio Manager's
operations by independent custodians, and on-site due diligence visits by
prospective investors and their professional advisers provide a degree of
additional third party comfort.
Whilst the Company does not have any staff, the Committee considers that the
arrangements by which staff of the Portfolio Manager, the AIFM and the
Administrator may, in confidence, raise concerns about possible improprieties
in matters of financial reporting or other matters are of great importance.
The Committee reviews such arrangements annually and, as required by the Code,
is satisfied that arrangements are in place for the proportionate and
independent investigation of such matters and for appropriate follow-up
action.
Significant Risks in Relation to the Report and Audited Financial Statements
In discharging its responsibilities, the Committee has specifically considered
the following significant issues relating to the Financial Statements:
Valuation of Investments
The Board reviews portfolio valuations on a regular basis throughout the year,
and at quarterly meetings with the Portfolio Manager seeks assurance that the
pricing basis is appropriate and in line with relevant accounting standards.
The Company's net asset value is calculated on a monthly basis by the
Administrator.
The impact of the Russia / Ukraine conflict and the conflict in the Middle
East on financial markets has been significant, reflecting disruption to
international supply chains, the interruption of production generally, higher
short and long-term interest rates, inflationary pressures, delays in
corporate activity and investment, uncertainty about the availability of
financing and increased volatility in the value of financial instruments. The
Committee has considered the particular circumstances of the Company in light
of these issues, in particular the associated risk exposures and implications
for financial reporting.
As an investment company, the Company does not have employees, customers or
suppliers in a conventional sense as a trading/operating company does.
Reliance is, however, placed on service providers, principally the Portfolio
Manager, the AIFM and the Administrator. The Committee has been kept appraised
of business continuity measures enacted by these key service providers and is
receiving updates in relation to any emergent risks, vulnerabilities and the
continued effectiveness of internal controls. Information flows between the
Portfolio Manager and other advisers have been effective and a key component
of oversight in prevailing conditions. Both the Board and the Portfolio
Manager are maintaining dialogue with shareholders in order to provide
transparency.
Completeness and accuracy of the disclosures in the Financial Statements
The Committee concluded that all appropriate and required disclosures have
been incorporated in the Financial Statements and drew comfort from the fact
that multiple layers of oversight exist to achieve this objective.
Specifically, the administrator, Portfolio Manager and external auditor have
all performed their own checks for completeness.
The Committee continues to give particular attention to the extent of
disclosures about the Company's underlying portfolio. Risk measures,
sensitivities and performance are driven by the make-up of the portfolio and
hence detailed disclosures about it are appropriate to permit a full
understanding of the accounts.
Presentation of Financial Statements
The Committee considered the complexity of the Financial Statements in their
entirety, and the descriptive narrative supporting the financial disclosures.
It was recognised that the sophistication of the investment strategy pursued
by the Company does not lend itself to description in 'plain English' and that
the use of technical terminology was not always consistent with the goals of
ensuring transparency and maximising ease of understanding.
On balance the Committee concluded that the benefits of accurate - but
detailed - descriptive narrative outweighed the possible benefit of simplified
summaries. The nature of the shareholder base (predominantly sophisticated
professional investors) was an important factor in reaching this conclusion.
Performance fee payable to the Portfolio Manager
The Portfolio Manager will be entitled to a performance fee (the "Performance
Fee") in certain circumstances.
The Company's performance fee is measured over the 12 month period ending on
31 December in each year (or in respect of a Performance Period in which the
Portfolio Management Agreement is terminated, the effective date of such
termination) (each a "Performance Period").
A Performance Fee is payable if the Net Asset Value per Ordinary Share on the
relevant calculation date on 31 December in each year (or in respect of the
Performance Period in which this Agreement is terminated, the effective date
of such termination) ("Calculation Date"); as adjusted to: (i) adding back the
aggregate value of any dividends per Ordinary Share paid (or accounted as paid
for the purposes of calculating the Net Asset Value) to Shareholders since
Admission; (ii) removing any enhancement to Net Asset Value per Ordinary Share
resulting from the issue or buy back of Ordinary Shares; and, (iii) excluding
any accrual for unpaid Performance Fee accrued in relation to the relevant
Performance Period) (the "Net Asset Value Total Return per Share") exceeds the
higher of:
(a) on any Calculation Date, 100p as increased by a non-compounding rate
of 6 per cent. per annum, calculated from Admission, and as adjusted from time
to time to take into account: (i) any change in the accounting reference date
of the Company from 31 December, (ii) any consolidation or sub-division of the
Ordinary Shares and/or any C Shares, or (iii) any material change in the
Company's normal accounting policies, each of paragraphs (i), (ii), or (iii)
being a "Triggering Adjustment Event"), or (iv) any other event agreed between
the Company and the Portfolio Manager as constituting a Triggering Adjustment
Event (the "Performance Hurdle Price"); and
(b) the highest previously recorded Net Asset Value per Ordinary Share as at
a Calculation Date in respect of which a Performance Fee was last paid (or the
Net Asset Value per Ordinary Share as at Admission, if no Performance Fee has
been paid) (the "High Watermark"),
with any resulting excess amount being known as the "Excess Return" and the
Excess Return multiplied by the time weighted average number of Ordinary
Shares in issue during the relevant Performance Period to which the
Calculation Date relates will be known as the "Excess Return Amount."
The Audit Committee annually reviews the calculation of the performance fee.
Going concern
The Committee reviewed the assumptions upon which it is assumed that the
Company can continue to operate on a going concern basis as set out in the
Directors' Report. In so doing, it assessed outstanding financial obligations
and calls on the Company's resources, investment performance and the meeting
of shareholders' expectations.
Assessment of the External Audit Process
The Company's auditor was appointed immediately prior to the launch of the
Company in March 2023. The Committee, in conjunction with the Board, is
committed to reviewing this appointment on a regular basis to ensure that the
Company is receiving an optimal level of service. The appointment of the
auditor is reviewed on an annual basis. There are no contractual obligations
which restrict the Company's choice of auditor and the Board is satisfied that
the auditor remains independent.
The Committee does not award any non-audit work and the full Board would have
to approve any other non-audit work. Where non-audit services are provided by
the auditor, these engagements are pre-approved by the Committee to ensure
that the auditor's independence and objectivity is not breached, and a
recommendation is made to the Board
The Committee considered the experience and tenure of the audit partner and
staff and the nature and level of services provided. The Committee received
confirmation from the auditor that it had complied with the relevant Guernsey
professional and regulatory requirements on independence.
The Committee considers the nature, scope and results of the auditor's work
and monitors the independence of the external auditor. Formal reports are
received from the auditor on an annual basis relating to the extent of their
work. The work of the auditor in respect of any significant audit issues and
consideration of the adequacy of that work is discussed.
The Chair of the Committee liaises with the Portfolio Manager and the
Administrator to discuss the extent of audit work completed to ensure all
matters of risk are covered, while the Committee assesses the quality of the
draft Financial Statements prepared by the Administrator.
The Committee has an active involvement in and oversight of the preparation of
both half yearly and annual Financial Statements. Ultimate responsibility for
reviewing and approving the Report and Audited Financial Statements remains
with the Board.
The table below summarises the remuneration for services provided to the
Company by Grant Thornton Limited Channel Islands for audit and non-audit
services during the year ended 31 December 2024.
31 December 31 December
2024 2023
£ £
Annual audit fee 21,430 20,000
Interim review - 16,000
21,430 36,000
Conclusion in respect of the Report and Audited Financial Statements
The production of the Company's Report and Audited Financial Statements is a
comprehensive process requiring input from a number of different parties. One
of the key governance requirements is that the Company's Report and Audited
Financial Statements be fair, balanced and understandable. The Board has
requested that the Committee advise on whether it considers that the Report
and Audited Financial Statements fulfils these requirements.
As a result of the work performed, the Committee recommended that the Board
should conclude that the Report and Audited Financial Statements for the Year,
taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's performance,
business model and strategy and has reported on these findings to the Board.
The Board's conclusions in this respect are set out in the Directors' Report
above.
Luke Allen
Chair of Audit & Risk Committee
17 March 2025
Independent Auditor's Report to the Shareholders of Onward Opportunities
Limited
Opinion
We have audited the financial statements of Onward Opportunities Limited (the
"Company") for the year ended 31 December 2024, which comprise the Statement
of Comprehensive Income, the Statement of Financial Position, the Statement of
Changes in Equity, and the Statement of Cash Flows, and notes to the financial
statements for the year then ended, including material accounting policy
information. The financial statements framework that has been applied in their
preparation is applicable law and IFRS Accounting Standards as adopted by the
European Union (EU).
In our opinion, the financial statements:
· give a true and fair view of the financial position of the Company
as at 31 December 2024, and of its financial performance and its cashflows for
the year then ended;
· are in accordance with IFRS Accounting Standards as adopted by
the EU; and
· comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(ISAs) and applicable law. Our responsibilities under those standards are
further described in the 'Auditor's responsibilities for the audit of the
financial statements' section of our report. We are independent of the Company
in accordance with the International Ethics Standards Board for Accountants'
International Code of Ethics for Professional Accountants (including
International Independence Standards) (IESBA Code), together with the ethical
requirements that are relevant to our audit of the financial statements in
Guernsey, and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the IESBA Code. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
year. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
The key audit matter How the matter was addressed in our audit
Existence and Valuation of Quoted Investments - Equity Instruments In responding to the key audit matter, we performed the following audit
£30,789,000 procedures:
Due to the use of a custodian, accounting records may not match the · We obtained confirmation, from the Custodian, of securities held at
custodian's records with respect to securities held; and the reporting date that are owned by the Company.
The fair value measurements at the reporting date may be inaccurate due to the · We reviewed information about the trading history of the investee
use incorrect inputs. companies to determine whether the shares are traded in an active market to
verify the accuracy of an external Custodian and valued the classification as
The portfolio of investments is mostly comprised of quoted investments which level 1 instruments.
are held by using publicly available quoted market prices, in accordance with
IFRS 9 Financial Instruments and IFRS 13 Fair Value Measurement. Whilst the · We obtained the quoted prices as at the reporting date from
valuation of these investments is not considered complex, nor does it involve independent publicly available sources and compared them to the share prices
significant judgements and estimates to be made by management, the market used by management.
value of investments is material to the Company, as it represents 99% of the
net asset value as at 31 December 2024 and represents a balance considerably · We recalculated the valuation per the accounting records using the
larger than any other reported balance within the Company's financial quoted share prices obtained from the relevant stock exchanges and the
statements. confirmed number of shares.
In addition, due to the regular/frequent trading of investment positions held Our result
by the Company, there is a risk that the reported investment portfolio at the
year end, may be misstated. Due to the financial significance of the We did not note any material issues from our procedures
investments held at the year-end, an error or misstatement regarding the
recognition/ inclusion of a single investment could lead to a material
misstatement.
Other information in the Annual Report
The directors are responsible for the other information. The other information
comprises the information included in the Annual Report and Audited financial
statements but does not include the financial statements and our auditor's
report thereon.
Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors' Responsibilities set
out on page 38, the Directors are responsible for the preparation of the
financial statements which give a true and fair view in accordance with IFRS
Accounting Standards as adopted by the EU, and for such internal control as
the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the Directors are responsible for
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment
and maintain professional scepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
· Obtain an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control.
· Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
Directors.
· Conclude on the appropriateness of the Directors' use of the going
concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on Company's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention
in our auditor's report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor's
report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
· Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that
achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with
relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, actions taken to eliminate
threats or safeguards applied.
From the matters communicated with the directors, we determine those matters
that were of most significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We describe these
matters in our auditor's report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's
report is Cyril Swale.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has
been undertaken so that we might state to the Company's members those matters
we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to
which the Companies (Guernsey) Law, 2008 requires us to report to you if, in
our opinion:
· proper accounting records have not been kept by the Company; or
· the Company's financial statements are not in agreement with the
accounting records; or
· we have not obtained all the information and explanations, which
to the best of our knowledge and belief, are necessary for the purposes of our
audit.
Grant Thornton Limited
Chartered Accountants
St Peter Port
Guernsey
Date:
Statement of Comprehensive Income
For the year ended 31 December 2024
Year ended Period from 31 January 2023 to 31 December 2023
31 December 2024
Notes Revenue£'000 Capital £'000 Total £'000 Revenue£'000 Capital £'000 Total £'000
Net gains on investments held at fair value through profit or loss 10 - 5,745 5,745 - 1,843 1,843
Net investment gains - 5,745 5,745 - 1,843 1,843
Interest income 5, 11 7 19 26 8 14 22
Dividend income - 233 233 - 127 127
Total income 7 252 259 8 141 149
Portfolio management and 6 (344) (481) (825) (156) (28) (184)
performance fees
Other expenses 7 (352) - (352) (275) - (275)
Total (loss) / gain and comprehensive (loss) / income for the year / period (689) 5,516 4,827 (423) 1,956 1,533
(Deficit) / earnings per 8 (3.60) 28.87 25.27 (3.81) 17.56 13.75
Ordinary Share (pence)
The total column of this statement represents the Statement of Comprehensive
Income of the Company prepared in accordance with International Financial
Reporting Standards as adopted by the European Union ("IFRS").
The supplementary revenue and capital return columns are prepared under
guidance published by the Association of Investment Companies ("AIC").
All items in the above statement derive from continuing operations.
The notes on pages 54 to 72 form an integral part of these Audited Financial
Statements.
Statement of Financial Position
As at 31 December 2024
31 December 31 December
2024 2023
£'000 £'000
Notes
Non-current assets
Investments held at fair value through profit or loss 10 30,789 16,695
Convertible loan note 11 500 -
Current assets
Interest receivable on convertible loan note 11 10 -
Cash and cash equivalents 362 407
Other receivables 25 38
Unsettled trades 12 - 157
397 602
Total assets 31,686 17,297
Current liabilities
Management fee payable 6 (40) (22)
Performance fee payable 6 (481) (28)
Unsettled trades 12 (95) (132)
Other payables (49) (46)
Total liabilities (665) (228)
Net assets 31,021 17,069
Equity
Share capital 13 24,661 15,536
Capital reserve 7,472 1,956
Revenue reserve (1,112) (423)
Total equity 31,021 17,069
Net Asset Value per Ordinary Share: basic and diluted (pence) 14 129.37 106.50
Number of Ordinary Shares in issue 13 23,979,754 16,027,290
Approved by the Board of Directors and authorised for issue on 17 March 2025
and signed on their behalf:
_______________________
Director
The notes on pages 54 to 72 form an integral part of these Audited Financial
Statements.
Statement of Changes in Equity
For the year ended 31 December 2024
Share capital Revenue reserve Capital reserve Total
£'000 £'000 £'000 £'000
For the year ended
31 December 2024
At 1 January 2024 15,536 (423) 1,956 17,069
Share issue (note 13) 9,450 - - 9,450
Share issue costs (note 13) (325) - - (325)
Total (loss) / gain and comprehensive (loss) / income for the year - (689) 5,516 4,827
At 31 December 2024 24,661 (1,112) 7,472 31,021
Share capital Revenue reserve Capital reserve Total
£'000 £'000 £'000 £'000
For the period 31 January 2023
to 31 December 2023
At 31 January 2023 - - - -
Share issue (note 13) 16,109 - - 16,109
Share issue costs (note 13) (573) - - (573)
Total (loss) / gain and comprehensive (loss) / income for the period - (423) 1,956 1,533
At 31 December 2023 15,536 (423) 1,956 17,069
The notes on pages 54 to 72 form an integral part of these Audited Financial
Statements.
Statement of Cash Flows
For the year ended 31 December 2024
Period from
Year ended 31 January 2023
31 December to 31 December
2024 2023
Notes £'000 £'000
Cash flows from operating activities
Other expense payments 15 (678) (274)
Dividend income 221 -
Interest income 16 22
Purchase of UK Government Debt 10 - (15,556)
Sale of UK Government Debt 10 - 15,736
Purchase of investments 10, 12 (27,373) (17,543)
Sale of investments 10, 12 19,144 2,486
Purchase of convertible loan note 11 (500) -
Net cash outflow from operating activities (9,170) (15,129)
Cash flows from financing activities
Issue of Ordinary Shares 13 9,450 16,109
Share issue costs 13 (325) (573)
Net cash inflow from financing activities 9,125 15,536
Net (decrease) / increase in cash and cash equivalents (45) 407
Cash and cash equivalents at beginning of year / period 407 -
Cash and cash equivalents at end of year / 362 407
period
Cash and cash equivalents comprise of the following:
Cash at bank 362 407
362 407
The notes on pages 54 to 72 form an integral part of these Audited Financial
Statements.
Notes to the Audited Financial Statements
For the year ended 31 December 2024
1. Reporting Entity
Onward Opportunities Limited (the "Company") is registered in Guernsey and was
incorporated on 31 January 2023, with registered number 71526. The Company's
registered office is 1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey, GY1
2HL.
The Company is a Registered Closed-ended Collective Investment Scheme
regulated by the Guernsey Financial Services Commission ("GFSC"), with
reference number 2804577, pursuant to the Protection of Investors (Bailiwick
of Guernsey) Law 2020, as amended and the Registered Collective Investment
Scheme Rules and Guidance, 2021. The Company is also a member of the AIC.
The Company's had 16,027,290 shares in issue under ticker ONWD, SEDOL BMZR151
and ISIN GG00BMZR1514 on 31 December 2023. During the current year, the
Company admitted a further 7,935,616 shares through 5 separate fundraises for
a gross consideration of £9,431,237. An addition 16,848 shares were admitted
in respect of the Portfolio Manager's performance fee for the year ended 31
December 2024. The Audited Financial Statements of the Company are presented
for the year ended 31 December 2024.
The Company and its Alternative Investment Fund Manager received discretionary
portfolio management services directly from Dowgate Wealth Limited ("DWL")
during the year ended 31 December 2024. The administration of the Company is
delegated to Apex Fund and Corporate Services (Guernsey) Limited (formerly
Apex Administration (Guernsey) Limited) (the "Administrator"). See note 18 for
details of a change in the AIFM and the Administrator that will take place
subsequent to the Statement of Financial Position date.
2. Material accounting policies
(a) Basis of accounting
The Audited Financial Statements have been prepared in compliance with
International Financial Reporting Standards as adopted by the European Union
("IFRS"). The Audited Financial Statements give a true and fair view and
comply with the Companies (Guernsey) Law, 2008.
Where presentational guidance set out in the Statement of Recommended Practice
("SORP") for investment companies issued by the Association of Investment
Companies ("AIC") updated in July 2022 is consistent with the requirements of
IFRS, the Directors have sought to prepare the Audited Financial Statements on
a basis compliant with the recommendations of the SORP.
(b) Going concern
The Directors have adopted the going concern basis in preparing the Audited
Financial Statements.
In assessing the going concern basis of accounting, the Directors have
assessed the guidance issued by the Financial Reporting Council and considered
the Company's own financial position, recent market volatility, the on-going
impact of the Russian war on Ukraine and conflict in the Middle East, the
prospect of tariffs and a global "trade war" and other uncertainties impacting
on the financial position and liquidity requirements of the Company's
investments.
At year end the Company had a net asset position of £31,021,000 comprising
cash of £362,000, a convertible loan note of £500,000 and listed investments
of £30,789,000.
The Company generates liquidity by raising capital and exiting investments. It
uses liquidity by making new and follow-on investments and paying company
expenses. The Directors ensure it has adequate liquidity by regularly
reviewing its financial position and forward-looking liquidity requirements.
In assessing its going concern status, the Directors have considered the level
of ongoing operating expenses relative to net assets, such expenses
approximating to 3% of net assets as at 31 December 2024.
(c) Segmental reporting
The chief operating decision maker is the Board of Directors. The Directors
are of the opinion that the Company is engaged in a single segment of business
with the primary objective of investing in securities to generate capital
growth for shareholders. Consequently, no business segmental analysis is
provided.
The key measure of performance used by the Board is the Net Asset Value of the
Company (which is calculated under IFRS). Therefore, no reconciliation is
required between the measure of profit or loss used by the Board and that
contained in these Audited Financial Statements.
(d) Functional and presentational currency
The Audited Financial Statements of the Company are presented in the currency
of the primary economic environment in which it operates (its functional
currency). For the purpose of the Audited Financial Statements, the results
and financial position of the Company are expressed in pound sterling ("£").
All amounts have been rounded to the nearest thousand, unless otherwise
indicated.
(e) Income
Interest income is accounted for on an accruals basis and recognised in profit
or loss in the Audited Statement of Comprehensive Income. Interest income
includes interest earned on convertible loan and senior notes (UK treasury
debts), cash held at bank on call, on deposit and cash held as cash
equivalents.
(f) Expenses
Expenses are accounted for on an accruals basis. The Company's portfolio
management and administration fees, finance costs and all other expenses are
charged through the Audited Statement of Comprehensive Income and are charged
to revenue. Performance fee is charged to the capital column in the Audited
Statement of Comprehensive Income.
(g) Dividends to shareholders
Dividends are recognised in the year in which they are paid.
(h) Taxation
The Company has been granted exemption from liability to income tax in
Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989
amended by the Director of Income Tax in Guernsey for the current year.
Exemption is applied and granted annually and is subject to the payment of a
fee which was £1,600 for the year.
(i) Financial instruments
Recognition and derecognition of financial assets
The Company recognises a financial asset at its fair value, plus, in the case
of a financial asset not at fair value through profit or loss, transaction
costs that are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at fair value through
profit or loss which are directly attributable to the acquisition are
capitalised.
A financial asset (in whole or in part) is derecognised either (i) when the
Company has transferred substantially all the risks and rewards of ownership;
or (ii) when it has neither transferred nor retained substantially all the
risks and rewards and when it no longer has control over the assets or a
portion of the asset; or (iii) when the contractual right to receive cash flow
has expired. The derecognised investments are measured at the weighted average
method. Any gain or loss on derecognition is recognised in the Net gains on
investments held at fair value through profit or loss in the Audited Statement
of Comprehensive Income.
Classification
The Company's financial assets are classified in the following measurement
categories:
· those to be measured at fair value through profit or loss; and
· those to be measured at amortised cost.
The classification depends on the entity's business model for managing the
financial assets and the contractual terms of the cash flows.
At initial recognition, the Company measures a financial asset at its fair
value, plus, in the case of a financial asset not at fair value through profit
or loss, transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets carried at fair
value through profit or loss are expensed in profit or loss.
Subsequent measurement of financial assets
Financial assets held at amortised cost
Assets that are held in order to collect contractual cash flows give rise to
cash flows that are solely payments of principal and interest are measured at
amortised cost. These assets are subsequently measured at amortised cost using
the effective interest method.
The Company has elected to apply the simplified approach permitted by IFRS 9
in respect of trade and other receivables. This approach requires expected
lifetime losses to be recognised from initial recognition of the receivables.
The Company's financial assets held at amortised cost include trade and other
receivables and cash and cash equivalents.
Financial assets at fair value through profit or loss
For investments actively traded in organised financial markets, fair value
will generally be determined by reference to Stock Exchange quoted market bid
prices at the close of business on the valuation date, without adjustment for
transaction costs necessary to realise the asset.
The Company has adopted a valuation policy for unquoted securities to provide
an objective, consistent and transparent basis for estimating the fair value
of unquoted equity securities in accordance with IFRS as well as IPEVC.
The Company considers it impractical to perform an in-depth valuation analysis
for every unquoted investment on a daily basis (whether internally or with the
assistance of an independent third party). Therefore, it is expected that an
in-depth valuation of each investment will be performed: (i) on an annual
basis; and (ii) where DWL determines that a Triggering Event has occurred.
A "Triggering Event" may include any of the following:
· a subsequent round of financing (whether pro rata or otherwise)
by the relevant investee company;
· a significant or material milestone achieved by the relevant
investee company;
· a secondary transaction involving the relevant investee company
on which sufficient information is available;
· a change in the makeup of the management of the relevant
investee company;
A "Triggering Event" may include any of the following:
· a material change in the recent financial performance or expected
future financial performance of the relevant investee company;
· a material change in the market environment in which the
relevant investee company operates; or
· a material movement in market indices or economic indicators.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date.
The change in fair value is recognised in profit or loss and is presented
within the "net gains on investments held at fair value through profit or
loss" in the Audited Statement of Comprehensive Income.
IFRS requires the Company to measure fair value using the following fair value
hierarchy that reflects the significance of the inputs used in making the
measurements. IFRS establishes a fair value hierarchy that prioritises the
inputs to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the lowest priority
to unobservable inputs (Level 3 measurements).
The three levels of fair value hierarchy under IFRS are as follows:
· Level 1 reflects financial instruments quoted in an active
market.
· Level 2 reflects financial instruments whose fair value is
evidenced by comparison with other observable current market transactions in
the same instrument or based on a valuation technique whose variables include
only data from observable markets.
· Level 3 reflects financial instruments whose fair value is
determined in whole or in part using a valuation technique based on
assumptions that are not supported by prices from observable market
transactions in the same instrument and not based on available observable
market data. For investments that are recognised in the Audited Financial
Statements on a recurring basis, the Company determines whether transfers have
occurred between levels in the hierarchy by re-assessing the categorisation
(based on the lowest material input) at the date of the event that caused the
transfer.
Impairment of financial assets
The Company recognises lifetime expected credit losses (ECL) for other
receivables and related party receivables, as the receivables are from loans
with non-contractual payment terms. The expected credit losses on these
financial assets are estimated using a provision matrix based on the Company's
historical credit loss experience, adjusted for factors that are specific to
the debtors, general economic conditions and an assessment of both the current
as well as the forecast direction of conditions at the reporting date,
including time value of money where appropriate.
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Company are recognised at the proceeds received, net of direct
issue costs.
Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangement.
Financial liabilities, including borrowings, are initially measured at fair
value, net of transaction costs.
Financial liabilities are subsequently measured at amortised cost using the
effective interest method, with interest expense recognised on an effective
yield basis.
Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the
Company's obligations are discharged, cancelled or they expire.
(j) Cash and cash equivalents
Cash comprises cash and demand deposits. Cash equivalents, are short-term,
highly liquid investments that are readily convertible to known amounts of
cash, are subject to insignificant risks of changes in value, and are held for
the purpose of meeting short-term cash commitments rather than for investment
or other purposes. Included in cash and cash equivalents at the year end was
cash at bank of £362,000 (2023: £407,000).
(k) Other receivables
Other receivables do not carry interest and are short-term in nature and are
accordingly recognised at amortised cost.
(l) Foreign currency
Transactions and balances
At each Statement of Financial Position date, monetary assets and liabilities
that are denominated in foreign currencies are translated at the rates
prevailing at that date.
Non-monetary items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date fair value is
measured. Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated. Exchange differences are recognised
in profit or loss in the year in which they arise. Transactions denominated in
foreign currencies are translated into pound sterling (£) at the rate of
exchange ruling at the date of the transaction.
Foreign exchange gains and losses arising from translation are included in the
Audited Statement of Comprehensive Income.
Where foreign currency items are held at fair value, the foreign currency
movements are presented as part of the fair value change.
(m) Capital reserve
Profits achieved by selling investments and changes in fair value arising upon
the revaluation of investments that remain in the portfolio are all charged to
profit or loss in the capital column of the Audited Statement of Comprehensive
Income and allocated to the capital reserve. The capital reserve is also used
to fund dividend distributions.
(n) Revenue reserve
The balance of all items allocated to the revenue column of the Audited
Statement of Comprehensive Income for the year is transferred to the Company's
revenue reserve.
(o) Investment entities
In accordance with IFRS 10 an investment entity is an entity that:
· obtains funds from one or more investors for the purpose of
providing those investor(s) with investment management services;
· commits to its investor(s) that its business purpose is to
invest funds solely for returns from capital application, investment income,
or both; and
· measures and evaluates the performance of substantially all
of its investments on a fair value basis.
The Directors are satisfied that the Company meets each of these criteria and
hence is an investment entity in accordance with IFRS 10.
3. Use of estimates and critical judgements
The preparation of Audited Financial Statements in accordance with IFRS
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the Audited Financial Statements and the reported
amounts of income and expenses during the year. Actual results could differ
from those estimates and assumptions.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Climate Change
In preparing the Company's Financial Statements the Directors have considered
the impact of climate change risk as a principal risk as set out in the
Principal and Emerging Risks and Uncertainties section of the Directors'
Report and have concluded that it does not have a material impact on the value
of the Company's investments. In line with IFRS, investments are valued at
fair value as disclosed in Note 10. The Directors consider that the pricing of
the underlying portfolio of the Company's investments reflects market
participants' views of climate change risk and that there are no further
climate related influences on the NAV of the companies in which the Company
invests.
There are no estimates or critical accounting judgements to note in the
current year.
4. New and revised standards
New standards and interpretations not yet adopted
Certain new accounting standards, amendments to accounting standards and
interpretations have been published that are not mandatory for 31 December
2024 reporting periods and have not been early adopted by the Company.
· The Effects of Changes in Foreign Exchange Rates (Amendments to IAS
21) that become effective for periods beginning on or after 1 January 2025;
· Annual improvement to IFRS Accounting Standards - Volume 11 - Gain
or loss on derecognition that become effective for the period beginning on or
after 1 January 2026;
· Amendments to the Classification and Measurement of Financial
Instruments - Amendments to IFRS 9 and IRFS 7 that become effective for the
period beginning on or after 1 January 2026;
· Annual improvements to the IFRS Accounting Standards - Volume 11
Cost method that become effective for the period beginning on or after 1
January 2026; and
· IFRS 18 introduces three sets of new requirements to improve
companies' reporting of financial performance and give investors a better
basis for analysing and comparing companies that become effective for the
period beginning on or after 1 January 2027.
Standards, amendments and interpretations effective during the year
There are no standards, amendments to standards or interpretations that are
effective for annual
periods beginning on 1 January 2024 that have a material effect on the
financial statements of the
Company.
5. Interest income
Interest is accounted for using the effective interest method. Interest income
(net of withholdings tax) totalling £18,849 (2023: £nil) was earned from the
OTAQ Convertible Loan, £7,595 (2023: £7,531) was earned from Butterfield
bank accounts.
6. Portfolio management and performance fees
Year ended 31 January 2023
31 December 2024 to 31 December 2023
£'000 £'000
Portfolio management fees 344 156
Portfolio performance fees 481 28
Total portfolio management and performance fees 825 184
The Company procures portfolio management services directly from DWL, under
the Portfolio Management Agreement.
Management fee
The monthly management fee is equal to 1.5% of the Net Asset Value is up to
and including £50m and 1% of the Net Asset Value that is above £50 million
(the "Management Fee"). The management fee is calculated and paid monthly in
arrears.
As at 31 December 2024, an amount of £40,194 (2023: £21,818) was outstanding
in respect of management fees.
Performance fee
For the year ended 31 December 2024, a performance fee may be payable, the sum
of which is equal to 12.5% of the amount by which the Adjusted Net Asset Value
at the end of a Calculation Period exceeds the higher of: (i) the Performance
Hurdle; and (ii) the High Water Mark (the "Performance Fee"). The calculation
period for the current year will be the period commencing on 1 January 2024
and ending on 31 December 2024 (the "Calculation Period").
As at 31 December 2024, the Company had exceeded the High Water Mark and
Performance Hurdle therefore an accrual of £481,296 (2023: £28,350) for
performance fees has been reflected within these Audited Financial Statements.
7. Other expenses
Year ended 31 December 31 January 2023 to 31 December
2024 2023
£'000 £'000
Directors' fees 125 95
Administration fee 86 61
Auditor's remuneration for:
- audit fees 21 20
- non-audit fees (4) 16
Custodian fees 11 10
Broker fees 10 8
Registrars' fees 9 4
Listing fees 16 9
Regulatory fees 17 28
Legal and professional fees:
- ongoing operations 30 12
Directors' liability insurance 4 3
Depositary Fee 2 -
Sundry expenses 25 9
Total other expenses 352 275
8. (Deficit) / Earnings per Ordinary Share
31 December 2024 31 December 2023
Net return Per share Net return Per share
£'000 pence £'000 pence
Revenue return (689) (3.60) (423) (3.81)
Capital return 5,516 28.87 1,956 17.56
At 31 December 4,827 25.27 1,533 13.75
Weighted average number of Ordinary Shares 19,109,864 11,144,294
The return per share is calculated using the weighted
average number of Ordinary Shares.
9. Dividends
The Board has not declared or paid any dividends during the
year (2023: nil).
10. Investments held at fair value through profit or loss
Equity instruments UK Government Debt Equity instruments
31 December 31 December 31 December
2024 2023 2023
£'000 £'000 £'000
Opening book cost 15,032 - -
Opening investment holding unrealised gains 1,663 - -
Opening valuation 16,695 - -
Movements in the year / period
Purchases at cost 27,336 15,556 17,675
Sales - proceeds (18,987) (15,736) (2,643)
Net gains on investments held at fair value
through profit or loss 5,745 180 1,663
Closing valuation 30,789 - 16,695
Closing book cost 23,381 - 15,032
Closing investment holding unrealised gains 7,408 - 1,663
Closing valuation 30,789 - 16,695
Movement in unrealised gains during the year / period 16,298 - 3,259
Movement in unrealised losses during the year / period (10,100) - (1,873)
Realised (loss) / gain on sale of investments (453) 180 277
Net gain on investments held at fair value through profit or loss 5,745 180 1,663
Total net gain on investments held at fair value through profit or loss 5,745 - 1,843
11. Convertible loan note
Year ended 31 December 31 January 2023
to 31 December
2024 2023
£'000 £'000
Convertible loan note - Principal amount 500 -
Convertible loan note interest receivable
Interest earned 19 -
Interest received (9) -
Total interest receivable 10 -
On 12 July 2024, the Company purchased a convertible loan note in OTAQ plc for
a consideration of £500,000. The loan note earns interest at 10% per annum
for the first three years and 12.5% for the next two years if the loan has not
yet converted. Interest is receivable quarterly in arrears based on calendar
quarters. The conversion price on the loan note is £0.03 per share with an
option to receive the principal loan amount if the conversion rate is
unfavourable. The convertible loan is secured against OTAQ's inventory at a
rate of 2.2x. The fair value of the convertible loan note approximates to its
carrying amount as presented above.
12. Unsettled trades
At year end, the net amount in relation to trades that were settled post year
end is £94,700 (2023: £24,900). The table below summarises these trades.
31 December Settlement date
2024
£'000
Payable
Mpac Group plc (24) 3 January 2025
Springfield Properties plc (5) 2 January 2025
Synectics plc (30) 3 January 2025
Likewise Group plc (36) 2 January 2025
Total unsettled trades payable (95)
31 December Settlement date
2023
£'000
Payable
Mpac Group plc (31) 3 January 2024
Springfield Properties plc (57) 3 January 2024
Transense Technologies plc (10) 3 January 2024
Windward plc (34) 2 January 2024
Total unsettled trades payable (132)
Receivable
Pinewood Technologies plc 157 2 January 2024
Total unsettled trades receivable 157
Net unsettled trades 25
13. Share capital
No of
shares £'000
Ordinary Shares at no par value
Opening balance as at 31 January 2023 - -
Issue of shares 16,027,290 16,109
Issue costs - (573)
At 31 December 2023 16,027,290 15,536
Issue of shares 7,952,464 9,450
Issue costs - (325)
At 31 December 2024 23,979,754 24,661
The holders of Ordinary Shares have the right to receive notice of and attend,
speak and vote in general meetings of the Company. They are also entitled to
participate in any dividends and other distributions of the Company.
14. Net Asset Value per Ordinary Share
The Net Asset Value per Ordinary Share and the Net Asset Value at the year end
calculated in accordance with the Articles of Incorporation were as follows:
31 December 2024 31 December 2023
NAV NAV attributable NAV NAV attributable
per share per share
pence £'000 pence £'000
Ordinary Shares: basic and diluted 129.37 31,021 106.50 17,069
The Net Asset Value per Ordinary Share is based on 31,021,477 (2023:
16,027,290) Ordinary Shares, being the number of Ordinary Shares in issue at
the year end.
The NAV per Ordinary Share as shown above differs from the unaudited NAV per
Ordinary Share as published by the Company by way of RNS on 2 January 2025
(131.37 pence) following the audit of the crystallised performance fee payable
by the Company as at 31 December 2024.
15. Other expense payments
31 December 31 December
2024 2023
£'000 £'000
Total gains for the year / period 4,827 1,533
Net gains on investments held at fair value
through profit or loss (5,745) (1,843)
Dividend income (233) -
Interest income (26) (22)
Movement in working capital
Decrease / (increase) in other receivables 25 (38)
Increase in payables 474 96
Total other expense payments (678) (274)
16. Financial instruments and capital disclosures
The Company's activities expose it to a variety of financial risks; market
risk (including other price risk, foreign currency risk and interest rate
risk), credit risk and liquidity risk.
Certain financial assets and financial liabilities of the Company are carried
in the Audited Statement of Financial Position at their fair value. The fair
value is the amount at which the asset could be sold, or the liability
transferred in a current transaction between market participants, other than a
forced or liquidation sale. For investments actively traded in organised
financial markets, fair value is generally determined by reference to Stock
Exchange quoted market mid prices and Stock Exchange Electronic Trading
Services ("SETS") at last trade price at the year end date, without adjustment
for transaction costs necessary to realise the asset. Other financial
instruments not carried at fair value are typically short-term in nature and
reprice to the current market rates frequently. Accordingly, their carrying
amount is a reasonable approximation of fair value. This includes cash and
cash equivalents, other receivables and other payables.
The Company measures fair values using the following hierarchy that reflects
the significance of the inputs used in making the measurements.
The Company measures fair values using the following hierarchy that reflects
the significance of the inputs used in making the measurements. Categorisation
within the hierarchy has been determined on the basis of the lowest level
input that is significant to the fair value measurement of the relevant assets
as follows:
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
arm's-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 2 inputs include the following:
· quoted prices for similar (i.e., not identical) assets in active
markets;
· quoted prices for identical or similar assets or liabilities in
markets that are not active. Characteristics of an inactive market include a
significant decline in the volume and level of trading activity, the available
prices vary significantly over time or among market participants or the prices
are not current;
Level 2 inputs include the following:
· inputs other than quoted prices that are observable for the asset (for
example, interest rates and yield curves observable at commonly quoted
intervals); and
· inputs that are derived principally from, or corroborated by,
observable market data by correlation or other means (market-corroborated
inputs).
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. 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.
At 31 December 2024 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity instruments 30,789 - - 30,789
Convertible loan note - - 500 500
30,789 - 500 31,289
At 31 December 2023 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity instruments 16,695 - - 16,695
16,695 - - 16,695
The Company has exposure to both level 1 and level 3 instruments in the
current year.
The following table shows a reconciliation of the opening balance to the
closing balance for fair values:
December December December
2024 2024 2023
£'000 £'000 £'000
Level 1 Level 3 Level 1
Opening balance 16,695 - -
Purchases at cost 27,336 500 33,231
Sales at cost (18,987) - (18,379)
Total gains included in net gains on investments in the Audited Statement of
Comprehensive Income
- on assets sold (453) - 457
- on assets held at year end 6,198 - 1,386
30,789 500 16,695
Investments are transferred between levels at the point of the trigger event.
The main risks that the Company faces arising from its financial instruments
are:
(i) market risk, including:
- other price risk, being the risk that the value of investments will
fluctuate as a result of changes in market prices;
- interest rate risk, being the risk that the future cash flows of a
financial instrument will fluctuate because of changes in interest rates;
(ii) credit risk, being the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that it has
entered into with the Company; and
(iii) liquidity risk, being the risk that the Company will not be able to
meet its liabilities when they fall due. This may arise should the Company not
be able to liquidate its investments.
Market and other price risk
The management of price risk is part of the portfolio management process and
is characteristic of investing in equity securities. The investment portfolio
is managed with an awareness of the effects of adverse price movements through
detailed and continuing analysis with an objective of maximising overall
returns to shareholders. Although it is the Company's current policy not to
use derivatives, they may be used from time to time for the purpose of
efficient portfolio management and managing any exposure to assets denominated
in currencies other than pound sterling.
If the investment portfolio valuation rose or fell by 10% at 31 December 2024,
the impact on the net asset value would have been £3,128,900/-£3,128,900
(2023: £1,669,500/-£1,669,500). The calculations are based on the investment
portfolio valuation as at the Audited Statement of Financial Position date and
are not necessarily representative of the year as a whole.
Interest rate risk
The financial assets and financial liabilities exposed to interest rate risk
are as shown below:
In one year Greater than
or less one year Total
2024 £'000 £'000 £'000
Convertible loan note - 500 500
Cash at bank 362 - 362
Total 362 500 862
2023
Cash at bank 407 - 407
Total 407 - 407
Interest risk table
The following tables detail the Company's remaining contractual maturity for
its current financial assets and liabilities.
2024 Interest Year 1 Year 1 - 2 Over 2 years £'000 Total £'000
rate % £'000 £'000
Assets
Convertible loan note 10% 10 - 500 510
Cash at bank Daily bank rate 362 - - 362
Other receivables Interest free 25 - - 25
Total 397 - 500 897
2024 Interest Year 1 Year 1 - 2 Over 2 years £'000 Total £'000
rate % £'000 £'000
Liabilities
Other current liabilities Interest free 665 - - 665
Total 665 - - 665
2023 Interest Year 1 Year 1 - 2 Over 2 years £'000 Total £'000
rate % £'000 £'000
Assets
Cash at bank Daily bank rate 407 - - 407
Unsettled trades Interest free 157 - - 157
Other receivables Interest free 38 - - 38
Total 602 - - 602
Liabilities
Other current liabilities Interest free 228 - - 228
Total 228 - - 228
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into with
the Company. The Audit and Risk Committee has in place a monitoring procedure
in respect of counterparty risk which is reviewed on an ongoing basis.
The carrying amounts of financial assets best represent the maximum credit
risk exposure at the Audited Statement of Financial Position date, and the
main exposure to credit risk is via the Company's Custodian who is responsible
for the safeguarding of the Company's cash balances.
At the reporting date, the Company's financial assets exposed to credit risk
amounted to the following:
2024 2023
Total Total
£'000 £'000
Convertible loan note (fair value) 500 -
Convertible loan note interest receivable 10 -
Cash at bank 362 407
Unsettled trades - 157
Other receivables 25 38
Total 897 602
All the assets of the Company which are traded on a recognised exchange are
held on its behalf by Butterfield Bank (Guernsey) Limited, the Company's
Custodian. Bankruptcy or insolvency of the Custodian may cause the Company's
rights with respect to securities held by the Custodian to be delayed or
limited.
The credit risk on cash is controlled through the use of counterparties or
banks with high credit ratings, rated B or higher, assigned by international
credit rating agencies. Bankruptcy or insolvency of such financial
institutions may cause the Company's ability to access cash placed on deposit
to be delayed, limited or lost.
Cash of £362,000 (2023: £407,000) was held with Butterfield Bank (Guernsey)
Limited and Alpha FX Group plc at year end.
The credit rating of Butterfield Bank (Guernsey) Limited was A2 and Alpha FX
Group plc was B at the year end.
The convertible loan note is secured against inventory at a 2.2x level at year
end therefore mitigating the credit risk.
Liquidity risk
Liquidity risk is defined as the risk that the Company does not have
sufficient liquid resources to meet its obligations as they fall due. In
managing the Company's assets, the Company will seek to ensure that it holds
at all times a portfolio of assets (including cash) to enable the Company to
discharge its payment obligations as they fall due. The Company may also
maintain a short-term overdraft facility that it may utilise from time to time
to manage short-term liquidity.
The Company's liquidity risk is maintained by the Board in accordance with
established policies, procedures and governance structures in place. Cash flow
forecasting is reviewed by the Board to ensure that it has sufficient cash to
meet obligations as they fall due.
The maturity profile of the Company's current assets and liabilities is
presented in the following table.
Up to Between Between Total
3 months 3 and 12 1 and 5
months years
2024 £ £ £ £
Assets
Cash at bank 362 - - 362
Other receivables 25 - - 25
Convertible loan note 10 - 500 510
Liabilities
Current liabilities (665) - - (665)
Total (268) - 500 232
2023
Assets
Cash at bank 407 - - 407
Unsettled trades 157 - - 157
Other receivables 38 - - 38
Liabilities
Current liabilities (228) - - (228)
Total 374 - - 374
The Board, ensure that a robust assessment of the principal risks facing the
Company has been undertaken (including those risks that would threaten its
business model, future performance, solvency or liquidity) and provide advice
on the management and mitigation of those risks.
Capital management objectives, policies and procedures
The structure of the Company's capital is described in note 13 and details of
the Company's reserves are shown in the Audited Statement of Changes in Equity
on page 52.
The Company's capital management objectives are:
· to ensure that it is able to continue as a going concern; and
· to generate long-term capital growth through investing in a
portfolio consisting primarily of equity or equity related securities of UK
smaller companies that are predominantly listed or admitted to trading on
markets operated by the London Stock Exchange.
The Board, with the assistance of the Portfolio Manager, regularly monitors
and reviews the broad structure of the Company's capital. These reviews
include:
· the extent to which revenue reserves should be retained or
utilised; and
· ensuring the Company's ability to continue as a going concern.
17. Related parties
DWL provides portfolio management services to the Company.
Year ended 31 January 2023 to
31 December 31 December
2024 2023
£'000 £'000
Fees charged / (recharged) by DWL:
Management fees
Total management fee charged 344 156
Management fee outstanding 40 22
AIFM recharge
Total AIFM fee recharged (55) (38)
AIFM fee recharge outstanding (5) (4)
Performance fees
Total Performance fees charged 481 28
Performance fees outstanding 481 28
AIFM fee charged by FundRock:
Total AIFM fee charged 55 38
AIFM fee outstanding 5 4
Directors' fees:
Total Directors' fees charged 125 95
Directors' fees outstanding - -
As at 31 December 2024 the following Directors had holdings in the Company:
Number of Ordinary Shares % Ordinary Shares in issue as at 31 December 2024
Andrew Henton 100,000 0.4170
Susan Norman 45,104 0.1881
Henry Freeman 15,000 0.0626
Luke Allen 25,052 0.1045
Adrian Norman (husband of Susan Norman) 4,878 0.0203
As at 31 December 2023 the following Directors had holdings in the Company:
Number of Ordinary Shares % Ordinary Shares in issue as at 31 December
2023
Andrew Henton 100,000 0.6239
Susan Norman 20,000 0.1248
Henry Freeman 15,000 0.0936
Luke Allen - -
Adrian Norman (husband of Susan Norman) 4,878 0.0304
18. Post Statement of Financial Position events
On 31 January 2025 the Administrator of the Company changed from Apex
Administration (Guernsey) Limited to Apex Fund and Corporate Services
(Guernsey) Limited following the amalgamation of corporate bodies of these two
entities. All pre-existing contractual arrangements in place between the
Company and the Administrator currently remain in force.
Also on 31 January 2025 the Board of the Company resolved to serve 3 months'
notice of termination of services to the Administrator and the AIFM with the
intention of replacing them, effective 2 May 2025, with NSM Funds Limited and
Global Fund Management Services Limited respectively. This decision was taken
following a comprehensive review of all service providers to the Company and
is considered to be in the best interests of all of the Company's
stakeholders.
There has been no other matter or circumstance occurring subsequent to the end
of the financial year that has significantly affected, or may significantly
affect, the operations of the Company, the results of those operations, or the
state of affairs of the Company in the future financial year.
Corporate Information
Directors
Andrew Henton, Chair
Henry Freeman
Luke Allen
Susan Norman
Registered office
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Portfolio Manager
Dowgate Wealth Limited ("DWL")
15 Fetter Lane
London
EC4A 1BW
AIFM
FundRock Management Company (Guernsey) Limited
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Nominated Advisor and Joint Broker
Cavendish Capital Markets Limited
6-8 Tokenhouse Yard
London
EC2R 7AS
Joint Broker
Dowgate Capital Limited
15 Fetter Lane
London
EC4A 1BW
Administrator and Company Secretary
Apex Fund and Corporate Services (Guernsey) Limited
(formerly Apex Administration (Guernsey) Limited)
1 Royal Plaza
Royal Avenue
St Peter Port
Guernsey, GY1 2HL
Registrar
Link Market Services (Guernsey) Limited
Mont Crevelt House
Bulwer Avenue
St Sampson
GY2 4LH
Guernsey
Custodian
Butterfield Bank (Guernsey) Limited
P.O. Box 25
Regency Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 3AP
English Legal Adviser to the Company
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
Guernsey Legal Adviser to the Company
Collas Crill LLP
Glategny Court
PO Box 140
St Peter Port
Guernsey
GY1 4EW
Independent Auditor
Grant Thornton Limited
St James Place
St James Street
St Peter Port
Guernsey
GY1 2NZ
PR Agency
SEC Newgate UK Limited
14 Greville Street
London
EC1N 8SB
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