REG - Onward Opportunities - Half-year Report
06/09/2024 07:00
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RNS Number : 1306D Onward Opportunities Limited 06 September 2024
The information contained within this announcement is deemed by the Company to
constitute inside information pursuant to Article 7 of EU Regulation 596/2014
as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 as amended. Upon the publication of this announcement
via a Regulatory Information Service, this inside information is now
considered to be in the public domain.
6 September 2024
Onward Opportunities Limited
("Onward Opportunities" or the "Company")
Interim Results
Onward Opportunities Limited (AIM: ONWD), the investment company targeting
opportunities in smaller companies within the UK, today reports its unaudited
interim results for the six-month period ended 30 June 2024 ("HY24").
Financial Summary
30 June 2024 31 December 2023 % change
NAV per share 116.32p 106.50p +9.2%
Share price 124.00p 102.50p +20.9%
Total Net Assets £20 million £17 million +17.7%
Financial Highlights
· 30 June 2024 Net Asset Value ("NAV") per share of 116.32 pence,
equating to a total return of +9.2% over the six-month period from 31 December
2023, representing another encouraging period of NAV outperformance.
· 12-month NAV return to 30 June 2024 of +20.6%:
o Outperformed the UK AIM All Share index Total Return by +17.5% (UK AIM All
Share: +3.1%);
o Top quartile performance amongst peers in the sector over 12-months with
Onward Opportunities ranked 4th/26 peers in the AIC UK Smaller Companies
sector; and
o Delivering the Company's stated target returns of >15% IRR during the
period.
· In June 2024, the Company was pleased to have been awarded the
'IPO of the Year' award at the Small Cap Awards.
· The Company initiated two additional capital raises during the
period, totaling £4.7m, increasing Onward Opportunities' capital base by 25%
and welcoming a number of new shareholders to the Company's share register.
Post period-end highlights
· 30 August 2024 net asset value ("NAV") per share of 122.51 pence,
generating an additional 5.3% total return over the two-month window post
period end from 30 June 2024, with strong contributions from core holdings
Transense Technologies and Windward.
· 12-month NAV return to 30 August 2024 of +23.6%, materially
outperforming UK AIM All-Share, the majority of Onward Opportunities' peer
group and the Company's target returns of >15% per annum.
· As at 30 August 2024, total NAV return since inception of +28.0%,
outperforming the UK AIM All-Share by 29.4% which fell 1.43% over the same
period.
Andrew Henton, Chairman, commented:
"The Board is pleased with performance over the first half of the current year
but is very cogniscent of the need to continue to grow the size of the
Company. I look forward to updating you further in that regard when I write
again to report on the full year ending 31 December 2024."
Laurence Hulse, Lead Portfolio Manager, commented:
"In its first 18 months, the Company has made a pleasing start on its three
core KPIs: demonstrated an ability to raise capital repeatedly, deploying
that capital using a high-touch investment style, and invest profitably to
deliver strong absolute and relative returns for shareholders. The team is now
focused on consistently meeting these targets on an ongoing basis. Whilst
markets have remained challenging, we have demonstrated that we can perform
under such circumstances and the team has channelled its energy into
continuing to identify pockets of value amongst them."
-ENDS-
For further information, please contact
Onward Opportunities Limited Tel: +44 (0) 203 5303 150
Andrew Henton, Chairman ool@apexgroup.com
Dowgate Wealth Limited (Portfolio Manager) Tel: +44 (0) 203 5303 150
Laurence Hulse, Investment Director ool@apexgroup.com
Apex Administration (Guernsey) Limited (Company Secretary) Tel: +44 (0) 203 5303 150
Tanya Kinnear / Harry Rouillard ool@apexgroup.com
Cavendish Capital Markets Limited (Nominated Adviser and Joint Broker) Tel: +44 (0)20 7220 0500
Ben Jeynes/Camilla Hume - Corporate Finance
Michael Johnson / Chris West / Charlie Combe - Sales and ECM
Dowgate Capital Limited (Joint Broker) Tel: +44 (0)12 9351 7744
Russell Cooke / Nicholas Chambers
To find out more, please visit: www.onwardopportunities.co.uk
(http://www.onwardopportunities.co.uk)
Highlights
Highlights in the reporting period to 30 June 2024 include:
Company Update
· 30 June 2024 net asset value ("NAV") per share of 116.32 pence,
equating to a total return of +9.2% over the six-month period from 31 December
2023, creating another encouraging period of NAV outperformance.
· 12-month NAV return to 30 June 2024 of +20.6%:
o Outperformed the UK AIM All Share index Total Return by +17.5% (UK AIM All
Share: +3.1%);
o Top quartile performance amongst peers in the sector over 12-months with
Onward Opportunities ranked 4th/26 peers in the AIC UK Smaller Companies
sector; and
o Delivering the Company's stated target returns of >15% IRR during the
period.
· In June 2024, the Company was pleased to have been awarded the
'IPO of the Year' award at the Small Cap Awards.
· The Company initiated two additional capital raises during the
period, totaling £4.7m, increasing Onward Opportunities' capital base by 25%
and welcoming a number of new shareholders to the Company's share register.
Portfolio Update
· Significant contributions from both core positions and nursery
holdings; the top five contributors to unrealised return in the period were
MPAC Group, Vianet Group, Team 17, Northcoders, and Transense Technologies.
· The Manager has identified further upside opportunities within
the existing portfolio and has an attractive pipeline of additional
prospective investments.
· The Portfolio has captured an income stream, that at current
dividend levels, is expected to offset the majority of the total expense ratio
of the Company in the forthcoming year.
Post period end Highlights (1 July 2024 - 30 August 2024)
· 30 August 2024 net asset value ("NAV") per share of 122.51 pence,
generating an additional 5.3% total return over the two-month window post
period end from 30 June 2024, with strong contributions from core holdings
Transense Technologies and Windward.
· 12-month NAV return to 30 August 2024 of +23.6%, materially
outperforming UK AIM All-Share, the majority of the peer group and our target
returns of >15% per annum.
· As at 30 August 2024, total NAV return since inception of +28.0%,
outperforming the UK AIM All-Share by 29.4% which fell 1.4% over the same
period.
Chair's Statement
Onwards Opportunities Limited ("ONWD" or "the Company") was admitted to
trading on the AIM market of the London Stock Exchange plc on 30 March 2023.
As at 30 August 2024 (the latest practicable date prior to the publication of
this report) the net asset value ("NAV") per share was 122.51p representing a
NAV performance of +28.0% since inception.
Portfolio development
As at 30 August 2024, the Company was 90% invested into equities, and the NAV
was up by a further 5.3% since 30 June 2024, compared to the AIM market
performance of +1.3% on a total return basis over the same period. Capital
raised by the Company from new investors in July was swiftly deployed into a
number of pre identified opportunities, which ensured those funds were put to
work quickly. The speed of deployment of these additional funds was testament
to an investment process which is now well established and is serving the
Company admirably. The nature of the AIM market, and its relative illiquidity,
is such that it can take a while for "the market" to recognise value that the
Portfolio Manager has identified. Market inefficiency in this context is one
of the attractions of the investment strategy, and as a Board we are willing
to be patient and to accept that value will often accrete over time. This
notwithstanding, it has been very pleasing to see a number of the positions
identified by the Portfolio Manager and now within the Company's portfolio
revalue quite quickly and thereby contribute to the strong NAV growth. The
Portfolio Manager in this context draws particular reference to MPAC Group and
Transense Technologies in its report below.
An important element of the portfolio management process is the distinction
between core positions, and what we describe as "nursery positions". The
latter get their name from the fact that, as due diligence is being undertaken
and refined on a prospective core position, an initial stake can be taken in
the name and built out over time. This is very deliberate and part of a
trading strategy that is tailored to the nature of the market in which the
Company operates, and typically nursery positions will account for up to 25%
of the portfolio. The nursery does also get used to take advantage of other
identified opportunities however. These might include positions that will
never qualify as a core holding (perhaps due to unavailability of stock) or
event driven opportunities that are shorter term in nature. Nursery positions
of this sort have been a notable source of NAV accretion during the first half
of the year, and the Portfolio Manager refers to Northcoders and Vianet Group
in its report. Typically shorter holding periods within the "nursery" also
represent an important source of ongoing portfolio liquidity, allowing the
Portfolio Manager to trade in and out of positions without the necessity of
having to sell core positions. The nursery is therefore an important and
valuable component of the overall investment strategy.
Whilst ONWD is a relatively new fund with a short trading and performance
history, it is very pleasing to be able to report that the Company sits in the
top quartile of its peer group as measured by NAV performance over the past 12
months. There are a number of elements to the investment strategy that make it
distinctive and it is pleasing to observe those differences translating into
relative outperformance.
Market environment
ONWD was launched at a point in the economic cycle when the Board identified
more upside opportunity for small cap stocks than downside valuation risk. The
results of recent elections in France and the UK surely portend change in both
countries, and the possible prospect of a second Trump Presidency in the US
makes the risk of a trade war with China, via the imposition of tariffs, more
possible.
It is a truism that financial markets can find it difficult to price in
(geo)political risk, but equity markets in the US and UK have remained
essentially buoyant. Of interest is the growing divergence between forward
looking earnings growth expectations for larger and smaller companies and
associated valuation multiples (indicating lower valuations for the smaller
company sector).
The optimist will hope this divergence is a lead indicator of a catalysing
"catch up" for smaller company valuations and will be a source of greater
asset weightings towards smaller UK company stocks. Whether or not this proves
to be the case, the important point to observe over the 18 month trading
period since inception of ONWD is the strong, positive NAV growth within the
portfolio - and this notwithstanding the vagaries of macro events. It remains
the view of the Board that there is more upside opportunity in smaller company
valuations than downside risk, and any market rerating which does take place
will represent a fillip.
Corporate actions
The small size of the Company in absolute terms remains a key area of focus
for the Board. Performance to date vindicates the investment thesis upon which
the Company was founded, and the effectiveness of the investment processes
being followed by the Portfolio Manager. Those features should continue to
make the Company worthy of growth via the attraction of new money.
Since its IPO, ONWD has successfully closed three further rounds of capital
raising. A combination of good performance, a falling TER and an increase in
absolute size will allow the Company to be marketed to a wider range of
prospective institutional investors, many of whom are presently excluded from
buying shares due to a combination of technical thresholds including minimum
ticket sizes and maximum ownership stake. Marketing the Company to new
investors, with the support of the Portfolio Manager and our appointed
Brokers, will be a priority action over the course of the next 12 months.
In summary, the Board is pleased with performance over the first half of the
current year but is very cogniscent of the need to continue to grow the size
of the Company. I look forward to updating you further in that regard when I
write again to report on the full year ending 31 December 2024.
Andrew Henton
Chair
5 September 2024
Portfolio Manager's Report
The Portfolio Manager is pleased to present its report in respect of Onward
Opportunities Limited's (the "Company" or "ONWD") interim financial statements
for the six months ended 30 June 2024. During the period the Company built on
the success of the 2023 AIM IPO with a further two fundraises this calendar
year, making for four fundraises, including the IPO, since the Company was
established last year. In July 2024 we crossed the £25m net asset value
threshold for the first time and growth remains a key KPI for the team to
increase ONWD's firepower for capitalising on the attractive market
opportunity ahead of us.
There were two key areas of highlight in the period:
1. Firstly, the ongoing NAV performance with a rolling 12-months
+23.6% return to the end of August, which compares very favourably amongst
peers and ahead of both our target returns and the indices. This performance
and the various fundraises were delivered against a backdrop of political,
economic and market uncertainty and augur well for when animal spirits and a
more benign operating environment eventually return, but demonstrate we are
not reliant on such conditions either.
2. Secondly, the award of IPO of the Year at the Small Cap Awards;
an unusual accolade for an investment company but gladly received nonetheless
in recognition of the hard work of Dowgate colleagues and our advisors
including Cavendish, and of course the support and conviction of our
investors. Subsequently we have also been nominated for the 'best use of AIM'
and 'best newcomer' awards at the 2024 AIM awards, which will be held later in
the year.
An eclectic portfolio of opportunities has been built by the team and this
process is described further below. The investment portfolio has been designed
to take us through to 2025 and beyond. Resultantly the third quarter of FY24
started encouragingly for our shareholders, the NAV has grown a further 5.3%
to 122.5p/share in the two-months to the end of August.
Market Commentary
Following the UK economy over the last couple of years to June has been like
following the England football team's journey to the knockout stages of Euro
'24. Having played a safety-first, sluggish game since 2022, outperforming
sceptical expert expectations, the UK economy remains in the game and can
still reach the top. Although such an unexpected outcome would require more
recently successful competitors to fall by the wayside, it is said that
defence wins tournaments.
It is halftime in the year of elections, and the UK's position is not
deteriorating. Since the painful days under previous management, the UK's
defensive style has been uninspiring but effective. The UK's new management
might only involve a change of strip and a new team talk, while the rest of
the world has started looking increasingly uncertain and rudderless. It is all
still to play for. UK Macroeconomic data has rallied up the league tables and
in some areas now leads the G7 economies.
Looking ahead to the 'second half', the world economy has continued to grow,
led by a fiscally supercharged US that has overcome sluggishness in China, the
Eurozone, and the UK, but its growth rate is now clearly slowing. The UK's
position appears better when looking at economic momentum or the rate of
change in GDP growth. The UK's Q1 measure was revised up (again) to 0.7%,
compared with 0.3% in the Eurozone and 1.3% in the US. US GDP growth has
slowed rapidly from 4.9% to 3.6% in Q3 and Q4 last year. Even China only
managed 1.6% in Q1 despite massive stimulus packages designed to lessen the
impact of a troubled real estate sector. The UK could yet outperform a slowing
world economy.
Inflation continues to fall everywhere, and although there are warning signs
of a second wave, it is when and not if targets are hit. The UK was the first
to achieve the 2% target in this cycle. However, the UK and the Eurozone have
suffered larger aggregate inflation than the US, primarily reflecting
differing energy policies. Energy prices remain critical.
The global rate-cutting cycle arrived later than the Federal Reserve led
markets to hope a year ago. It is now underway, with Canada and the ECB in the
vanguard. The UK joined the party in August and the Fed will now surely also
cut in September, to the delight of the Democratic party following the
replacement of Joe Biden as Presidential candidate by Kamala Harris.
Along the curve, 10-year bond yields rose in all major markets, with recent
idiosyncratic spikes in Japan and France causing concerns in the Euro and Yen
markets but, so far, with limited broader impacts. Meanwhile, the UK's Truss
Sterling/Gilt blow-up two years ago is fading from view. The UK's net debt to
GDP ratio is well positioned among G7 countries all facing the same basic
fiscal problem. However, as Simon French of Panmure Liberum points out, with
25% of its debt issued as index-linkers, the incoming UK government has more
room to manoeuvre than most others.
The Pound (GBP) has been the most stable major currency relative to a
strengthening US dollar (USD) YTD to June. With a very weak Yen cancelling out
dollar-based Japanese stock market gains, the UK looks well placed as the
lowest-value risk-adjusted developed-world stock market.
Despite still trailing behind the US market, UK indices all posted mid- to
high-single-digit gains. The AIM All Share index, the 700-strong index of
small and mid-cap companies on London's junior market where Onward identifies
the majority of its investment opportunities, was broadly flat over H1, having
been +6% by the end of May. This index has now flatlined for the last 12
months, falling a cumulative 35% over the two years up to June last year. It
is hardly a bull market, but a base has been formed upon which progress can be
made.
Allenby Capital's analysis for the year to the end of May shows that while the
number of AIM companies continues to decline, nearly half of those leaving
were acquired at an average bid premium of 48% to the prior close. Meanwhile,
AIM liquidity has continued to improve, with May seeing the highest percentage
of market value traded since June 2021. The number of new company joiners and
the amount of capital raised are moving up, too, albeit from very subdued
levels.
Bids and share buybacks have offset net investor outflows, resulting in a
flatlining market. However, anecdotal evidence suggests UK retail outflows
from UK smaller company funds have slowed, or even turned to a trickle, while
new mandates from global family offices and overseas investors are appearing
for the first time in years. Whisper it, but there are even inflows occurring
at select UK investment managers and mainstream commentators are starting to
observe the improving attractiveness of UK assets. 'Plague Island' no more.
Unlike the England football team, the UK economy and its stock market are not
in knockout competitions. But they have been seeded below their long-term
potential for too long. The UK's continued steady performances deserve
reappraisal among the seasoned and sceptical match-day commentators,
suggesting a multiyear opportunity for the UK to outperform an insecure and
chaotic world.
It is all still to play for. A flurry of warning signs about the health of the
US economy recently has rattled financial markets. The final straw was
unemployment data, which triggered the Sahm Rule in August, the most
significant macro policy indicator no one had previously heard of. Amidst all
this over the last few weeks, the Pound and the UK stock market have remained
relatively stable. It would be naive to think the UK will remain immune from
financial market contagion; however, it is demonstrating its safe-haven
credentials for now. Both UK 'Smaller Cap' and 'Value' strategies had some of
their vintage years in the fall out of dot-com tech bubble unwinding,
delivering stellar absolute and relative returns 2001-2007. This time round a
similar situation may be overlayed with the UK being one of the most
under-owned areas of equity allocation yet currently delivering the strongest
macroeconomic data of the G7.
Performance Summary
Within this fickle market backdrop, the portfolio has performed admirably
(+28.0% since inception to 30 August 2024), as it is designed to do being a
value orientated, catalyst driven set of investments. The NAV chart and table
below highlight the performance over a number of time frames since launch and
it is pleasing to have demonstrated NAV growth in both falling and rising
markets, contributing to a significant outperformance of the UK AIM All-Share
of 29.4% since inception, and positioning ONWD in the top quartile amongst its
peers according to the AIC UK Smaller Companies sector.
As at 30/08/2024 Inception 1yr 6 months 3 months 1month
ONWD 24.5% 19.7% 10.7% 2.0% 1.6%
ONWD NAV 28.0% 23.6% 13.6% 2.0% -0.3%
UK AIM All-Share TR -1.4% 6.1% 5.8% -3.7% -1.7%
The top five contributors to return in the period were MPAC Group, Vianet
Group, Windward AI, Northcoders, and Transense Technologies.
Top 10 Holdings as at 30 August 2024 (the last practicable date)
Holding Name % of Portfolio Book Cost Valuation Value Valuation Unrealised Gain/Loss % Unrealised Gain/Loss Unrealised IRR
Windward Plc 10.2% £1,548,353 £2,506,597 £958,244 61.9% 151.0%
Transense Technologies Plc 6.9% £1,061,375 £1,707,603 £646,228 60.9% 65.8%
Angling Direct Plc 6.7% £1,371,547 £1,641,113 £269,565 19.7% 20.0%
Springfield Properties Plc 6.5% £1,136,253 £1,563,450 £427,196 37.6% 56.7%
MPAC Group Plc 6.1% £698,382 £1,512,576 £1,195,780 171.2% 196.7%*
The Mission Group Plc 5.9% £1,166,606 £1,449,315 £282,708 24.2% 359.7%*
React Group Plc 5.8% £1,306,705 £1,424,549 £117,843 9.0% 9.7%
EKF Diagnostics Holdings Plc 4.7% £1,107,980 £1,159,226 £51,245 4.6% 11.1%
Alumasc Group Plc 4.4% £1,041,443 £1,090,250 £48,806 4.7% 36.4%*
Vianet Group Plc 3.8% £631,637 £934,375 £302,737 47.9% 96.7%
Cash 9.7% £2,666,960 £2,666,960 N/A N/A N/A
*holding period of less than 12-months
Portfolio Commentary
A summary of the core investments in the top 10 as at the last practicable
date before publication is provided in detail below. 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 and some of
these workstreams are shared below.
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, and a first-mover
advantage in electric vehicle battery casing, due to its historic specialism
in 'side-loading'. After a difficult 18-months that was worsened by global
supply chain disruption, it is now a business with a clear plan for earnings
growth that we have been able to purchase on an EV/EBITDA of 2.5x. New CEO
Adam Holland (referenced extensively at JCB & Rolls Royce), has identified
levers to recover margins to 10%+, and grow earnings with an expanding sales
team and abating supply chain headwinds from 2022/3. This first stage, we
believe, can more than double the value of the company and we are pleased to
report a very early +125%+ gain on our investment; a great example of our
screening process identifying emerging change in a company. There is a
longer-term opportunity in battery casing that if delivered could add
significantly to returns beyond our base case. 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 early strategic initiatives with a very
strong set of FY23 results in March.
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 early
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,
invested 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 expected to improve under new management, and 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 approximately double 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 scepticism about the
European opportunity to be proved wrong during the remainder of the calendar
year. Our analysis suggests either of these outcomes would c.50% to Angling
Direct's current profits. The recent trading update reiterated the strength of
the UK division and demonstrated again that Europe is proving a drag to
profits and management resource.
Fishing is a sport of probability maximisation, and in that sense shares many
similarities with investment management. 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. Our entry valuation on Angling Direct was at
c.£20m, a market capitalisation more-than underpinned by balance sheet assets
- c.£14m net cash and c.£16m of inventory. We have in this context noted
with interest, the consolidation of angling retailers in the USA and Nordic
countries in recent years at multiples significantly higher than that which
ANG trades on.
EKF Diagnostics Holding plc (EKF LN) - Date of first investment May 2023
EKF shares had languished due to downgraded earnings, a misjudged acquisition
(now disposed of), and delays in completing a new enzyme production facility.
The departure of the previous CEO and CFO further exacerbated uncertainties.
Our recovery thesis is that Julian Baines can remedy these matters, being the
company's highly experienced former CEO who has stepped back into an Executive
Chairman role and it was his confirmed return that triggered our due diligence
and investment into the company. Primarily, we believe the company can now
deliver significant earnings recovery as the new enzyme fermenters come
online, driving a re-rating in the company's shares and earnings uplift from
60-70% gross margin sales. The site recently won its first order. We also
believe the company is a covetable asset given the attractive business model
of the Point of Care business (razor/razor blade) along with the high margins
and repeatable revenues. EKF now has a very strong board, which affords us the
benefit of being able to quietly support tried and tested shareholders and
board members to recover value for all.
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
have 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 has three 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.
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 forward P/E multiples of 6.5x - 8.5x.
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 all created 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 are
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.
Windward Limited (WNWD LN) - Date of first investment August 2023
Windward is perhaps the most exciting business model in the portfolio and has
the potential to be one of the most value-creative investment theses too. The
business 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 believe Windward is extremely well placed to capitalise on this.
Windward delivers these insights through an attractive subscription model via
its Maritime AI TM platform. Customers include; Interpol, the US military,
Glencore, BP, Maersk, BMW and Transworld. The compelling investment case has
been demonstrated in the recent FY23 and HY24 results which I would encourage
shareholders to read; they are some of the best trading figures I have read on
AIM in some time.
This model and market backdrop is allowing the business to produce some very
compelling operational metrics in the context of our sub 1.5x EV/Sales entry
point. The business is growing at 35% per annum and this is a 99% contracted
revenue base it is building, or adding to each year. The gross margins
associated with this are 80% and can likely accrete further above 80% and most
crucially we expect the business to reach profitability this year, leaving its
c.$15m of cash surplus to requirements and providing optionality. The
business' list of blue-chip customers is rapidly growing, almost doubling to
200 in the past 12-months as Windward's offering becomes ever more topical for
customers making high value maritime decisions. We believe this growth can
continue and double turnover over the next five years or more and if this
level of execution were to be achieved the business would trade in line with
similar businesses around 5x sales. This has the potential to provide
extremely attractive investment returns on our 1x current sales investment
point. The investment performed very strongly over the summer as other market
investors began to recognise what our work spotted back last year.
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 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
tangible development of the group's 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 Director of Business Development,
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. We were delighted to
see Stephen Parker join the board in May given his experience in scaling
applied technologies, such as YASA, which was acquired by Mercedes, where he
now sits on a subsidiary board.
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 alongside those
developments. We were excited to see the business recently win work with
Airbus as the pipeline continues to accelerate for the group, supplemented
with further share purchases by management. The company released a bullish
trading update in July which if read carefully implies that some of tomorrow's
jam is about to be spread by the new management team.
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 a UK focused advertising agency, which for the past 8 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 overgeared, 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/share; a 45% and 75% premia respectively to our 20p entry price.
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 expand 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 have performed pleasingly
since, and the number of growth opportunities are what stood out most at the
last update.
Alumasc Group (ALU LN) - Date of first investment September 2023
Alumasc is a building products group made up of three divisions; Water
Management, Building Envelope, and Housebuilding Products (Timloc). The
business has been on a multi-year divestment strategy that has seen it shed a
number of lower quality operating segments, in the process materially
improving the earnings quality of the group. What remains includes some of the
best known and trusted brands in the water and drainage markets in the UK, if
not globally, and a housebuilding products division that is so well run it is
able to grow in a falling market and steal market share whilst delivering a
sector leading 25% EBIT margin. These qualities are what have allowed Alumasc
to deliver sector leading margins for over two years, yet the shares trade on
a low single digit multiple compared to peers such as Genuit which trade at
well over 10x. To complement these healthy margins the group has managed to
grow materially faster than end markets too. This has been achieved ahead of
an expected recovery in construction activity driven by Government policy and
falling interest rates, according to a number of sector analysts, with the
business paying a handsome dividend yield while investors wait for such
opportunities to play out.
Outlook
In its' first 18 months, the Company has made a pleasing start on its three
core KPI's:
1. Demonstrated an ability to raise capital repeatedly regardless of
market conditions,
2. Deploy that capital using a high-touch investment style, and
3. Invest profitably delivering strong absolute and relative returns
for shareholders.
The team is now focused on consistently meeting these targets on an ongoing
basis. Whilst markets have remained challenging, we have demonstrated that we
can perform under such circumstances and the team has channelled its energy
into continuing to identify pockets of value amongst them.
We look forward to updating shareholders again at the full year and via our
quarterly factsheets. I thank you for your support and investment over the
past 18-months.
Ever Onwards,
Laurence Hulse
Lead Portfolio Manager
5 September 2024
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:
The Directors of the Company who served during the period are:
· Andrew Henton (Independent Non-Executive Chair)
· Susan Norman (Independent Non-Executive Director)
· Henry Freeman (Independent Non-Executive Director, Chair of
Management Engagement Committee)
· Luke Allen (Independent Non-Executive Director, Chair of Audit
and Risk Committee)
All Directors also served during the period ended 31 December 2023, and their
brief biographies are available in the annual report as at that date.
Investment Committee
The Investment Committee of the Company who served during the period are:
· Laurence Hulse (Investment Director and Founder)
· Tom Teichman (Investment Committee Chair)
· David Poutney (Investment Committee Member)
· Jeremy McKeown (Investment Committee Member)
· Jay Patel (Investment Committee Member)
All Committee members also served during the period ended 31 December 2023,
and their brief biographies are available in the annual report as at that
date.
Interim Management Report
For the six month period ended 30 June 2024
Principal Risks and Uncertainties
The Directors have reconsidered the principal risks and uncertainties
affecting the Company. The Directors consider that the principal risks and
uncertainties have not significantly changed since the publication of the
Audited Financial Statements for the period ended 31 December 2023. The risks
and associated risk management processes, including financial risks, can be
found in the Audited Financial Statements for the financial period ending 31
December 2023, https://onwardopportunities.co.uk/document-centre/
(https://onwardopportunities.co.uk/document-centre/) .
The risks referred to and which could have a material impact on the Company's
performance for the remainder of the current financial period relate to:
· Market risk
· Credit risk
· Liquidity risk
· Company failure
· Portfolio concentration risk
· Key person risk
· Share price risk
· Conflicts of interest
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 period, 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.
Going Concern
The Directors have adopted the going concern basis in preparing the Unaudited
Condensed Interim 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 the conflict in the Middle East,
potential increases in tariffs, inflation, interest rates and other
uncertainties impacting on the financial position and liquidity requirements
of the Company's investments.
At period end the Company had a net asset position of £20,423,000 including
cash of £443,000 and listed investments amounting to £20,201,000.
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 operating expenses relative to net assets, such expenses approximating to
3.1% of net assets as at 30 June 2024. Subsequent to the period end the £3.1m
raise that the Company completed on 3 July 2024 has further improved the total
expense ratio, reducing it to below 3%.
Important events and financial performance
Highlights as at 30 June 2024 are as follows:
Ordinary Shares
30 June 2024
Highlights
Net Asset Value per share 116.3p
Share Price 124.0p
% of capital deployed into AIM listed equities (investments) 99.4%
% of capital deployed into cash and near cash equivalents 2.2%
The table below provides bi-annual performance information:
Date NAV % change in
per share NAV
30 March 2023 95.70
30 June 2023 96.42 0.8% increase
31 December 2023 106.50 10.5% increase
30 June 2024 116.32 9.2% increase
The net profit for the period ended 30 June 2024 amounted to £1,720,000.
Further details of the Company's performance for the period are included in
the Portfolio Manager's Report on pages 4 to 12, which includes a review of
investment activity and adherence to investment restrictions.
Premium
As at 30 June 2024, the share price was trading at a premium of 6.60% to the
last published NAV per share.
Related party transactions
Details of related party transactions are given in note 15 to the Unaudited
Condensed Interim Financial Statements.
Director
5 September 2024
Unaudited Condensed Statement of Comprehensive Income
For the six month period ended 30 June 2024
Period from Period from
1 January 2024 to 31 January 2023 to
30 June 2024 30 June 2023
(unaudited) (unaudited)
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investments
Net gains on investments held at fair value through profit or loss 9 - 1,959 1,959 - 252 252
Net investment gains - 1,959 1,959 - 252 252
Interest income 2 - 2 6 - 6
Dividend income - 64 64 - - -
Total income 2 64 66 6 - 6
Portfolio management and 5 (144) - (144) (47) - (47)
performance fees
Other expenses 6 (161) - (161) (131) - (131)
Total (loss) / gain and comprehensive (loss) / income for the period (303) 2,023 1,720 (172) 252 80
(Deficit) / earnings per 7 (1.80) 12.03 10.23 (1.35) 1.98 0.63
Ordinary Share (pence)
The total column of this statement represents the Unaudited Condensed
Statement of Comprehensive Income of the Company prepared under IAS 34.
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 21 to 30 form an integral part of these Unaudited Condensed
Interim Financial Statements.
Unaudited Condensed Statement of Financial Position
As at 30 June 2024
30 June 31 December
2024 2023
£'000 £'000
Notes (unaudited) (audited)
Non-current assets
Investments held at fair value through profit or loss 9 20,201 16,695
Current assets
Cash and cash equivalents 443 407
Other receivables 66 38
Unsettled trades 10 - 157
509 602
Total assets 20,710 17,297
Current liabilities
Management fee payable 5 (25) (22)
Performance fee payable 5 - (28)
Unsettled trades 10 (222) (132)
Other payables (40) (46)
Total liabilities (287) (228)
Net assets 20,423 17,069
Equity
Share capital 11 17,170 15,536
Capital reserve 3,979 1,956
Revenue reserve (726) (423)
Total equity 20,423 17,069
Net Asset Value per Ordinary Share: basic 12 116.32 106.50
and diluted (pence)
Number of Ordinary Shares in issue 11 17,557,378 16,027,290
Approved by the Board of Directors and authorised for issue on 5 September
2024 and signed on their behalf:
_______________________
Director
The notes on pages 21 to 30 form an integral part of these Unaudited Condensed
Interim Financial Statements.
Unaudited Condensed Statement of Changes in Equity
For the six month period ended 30 June 2024
Share capital Revenue reserve Capital reserve Total
2024 2024 2024 2024
£'000 £'000 £'000 £'000
For the period 1 January 2024
to 30 June 2024 (unaudited)
At 1 January 2024 15,536 (423) 1,956 17,069
Share issue 1,684 - - 1,684
Share issue costs (50) - - (50)
Total (loss) / gain and comprehensive (loss) / income for the period - (303) 2,023 1,720
At 30 June 2024 17,170 (726) 3,979 20,423
Share capital Revenue reserve Capital reserve Total
2023 2023 2023 2023
£'000 £'000 £'000 £'000
For the period 31 January 2023
to 30 June 2023 (unaudited)
At 31 January 2023 - - - -
Share issue 12,750 - - 12,750
Share issue costs (536) - - (536)
Total (loss) / gain and comprehensive (loss) / income for the period - (172) 252 80
At 30 June 2023 12,214 (172) 252 12,294
The notes on pages 21 to 30 form an integral part of these Unaudited Condensed
Interim Financial Statements.
Unaudited Condensed Statement of Cash Flows
For the six month period ended 30 June 2024
Period from Period from
1 January 2024 31 January 2023
to 30 June to 30 June
2024 2023
Notes £'000 £'000
(unaudited) (unaudited)
Cash flows from operating activities
Other expense payments 13 (300) (110)
Interest income 2 6
Purchase of UK Government Debt 9 - (13,908)
Sale of UK Government Debt 9 - 5,248
Purchase of equity instruments 9, 10 (9,344) (2,200)
Sale of equity instruments 9, 10 8,044 32
Net cash outflow from operating activities (1,598) (10,932)
Cash flows from financing activities
Issue of Ordinary Shares 11 1,684 12,750
Share issue costs 11 (50) (536)
Net cash inflow from financing activities 1,634 12,214
Net increase in cash and cash equivalents 36 1,282
Cash and cash equivalents at beginning of period 407 -
Cash and cash equivalents at end of period 443 1,282
Cash and cash equivalents comprise of the following:
Cash at bank 443 1,282
The notes on pages 21 to 30 form an integral part of these Unaudited Condensed
Interim Financial Statements.
Notes to the Unaudited Condensed Interim Financial Statements
For the six month period ended 30 June 2024
1. Reporting Entity
Onward Opportunities Limited (the "Company") is registered in Guernsey and was
formed 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's 17,557,378 shares in issue under ticker ONWD, SEDOL BMZR151 and
ISIN GG00BMZR1514 were admitted to trading on AIM, on 30 June 2024. The
Company is also a member of the AIC. The Unaudited Condensed Interim Financial
Statements of the Company are presented for the period ended 30 June 2024.
The Company and its Alternative Investment Fund Manager received discretionary
portfolio management services directly from Dowgate Wealth Limited ("DWL")
during the six month period ended 30 June 2024. The administration of the
Company is delegated to Apex Administration (Guernsey) Limited ("AAGL") (the
"Administrator").
2. Material accounting policies
(a) Basis of accounting
The Unaudited Condensed Interim Financial Statements have been prepared on a
going concern basis in accordance with IAS 34 Interim Financial Reporting as
adopted by the EU, and applicable Guernsey law. These Unaudited Condensed
Interim Financial Statements do not comprise statutory Financial Statements
within the meaning of the Companies (Guernsey) Law, 2008, they do not include
all of the information required for full annual financial statements and
should be read in conjunction with the financial statements of the Company as
at 31 December 2023, which were prepared in accordance with International
Financial Reporting Standards as adopted by the EU ("IFRS"). The accounting
policies adopted in these Unaudited Condensed Interim Financial Statements are
consistent with those of the previous financial period and the corresponding
interim reporting period, except for the adoption of new and amended standards
as set out in note 4.
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 April 2021 is consistent with the requirements of
IFRS, the Directors have sought to prepare the Unaudited Condensed Interim
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 Unaudited
Condensed Interim 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 the conflict in the Middle East,
potential increases in tariffs, inflation, interest rates and other
uncertainties impacting on the financial position and liquidity requirements
of the Company's investments.
At period end the Company had a net asset position of £20,423,000 including
cash of £443,000 and listed investments amounting to £20,201,000.
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 operating
expenses relative to net assets, such expenses approximating to 3.1% of net
assets as at 30 June 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) 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 period.
Exemption is applied for and granted annually and is subject to the payment of
a fee which was £1,600 for the period.
(e) 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 Unaudited Condensed Interim 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 Unaudited Condensed
Interim Financial Statements and the reported amounts of income and expenses
during the period. Actual results could differ from those estimates and
assumptions.
The estimates and underlying assumptions are reviewed on an ongoing basis.
There were no significant accounting estimates or significant judgements in
the current period.
4. New and revised standards
New standards and interpretations not yet adopted
New accounting standards, amendments to accounting standards and
interpretations that have been published that are not mandatory for 30 June
2024 reporting periods and have not been early adopted by the Company are as
follows:
· The Effects of Changes in Foreign Exchange Rates (Amendments to
IAS 21) that become effective for periods beginning on or after 1 January
2025.
Standards, amendments and interpretations effective during
the period
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. Portfolio management and performance fees
1 January 2024 31 January 2023
to 30 June to 30 June
2024 2023
£'000 £'000
Portfolio management fee 144 47
Total portfolio management fees 144 47
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 up to and
including £50m and 1% of the Net Asset Value that is above £50m (the
"Management Fee"). The management fee is calculated and paid monthly in
arrears.
During the period, fees in respect of management services to the Company
amounting to £144,000 (30 June 2023: £47,000) were charged by DWL of which
£25,000 (31 December 2023: £22,000) was outstanding at the period end.
Performance fee
For the year ending 31 December 2024 a performance fee may be payable to DWL,
the sum of which would be 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 30 June 2024, the Company had not reached the end of the Calculation
period so an accrual of £nil (31 December 2023: £28,000) for performance
fees payable to DWL has been reflected within these Unaudited Condensed
Interim Financial Statements.
6. Other expenses
1 January 31 January 2023 to 30 June
2024 to 30 June
2024 2023
£'000 £'000
Directors' fees 63 32
Administration fee 42 20
Auditor's remuneration for:
- audit fees 10 10
- non-audit fees (6) 13
Custodian fees 5 4
Broker fees 5 3
Registrar's fees 3 1
Listing fees 6 3
Regulatory fees 7 25
Legal and professional fees:
- ongoing operations 5 10
Directors' liability insurance 2 1
Sundry expenses 19 9
161 131
7. (Deficit) / Earnings per Ordinary Share
30 June 2024 30 June 2023
Net return Per share Net return Per share
£'000 pence £'000 pence
Revenue return (303) (1.80) (172) (1.35)
Capital return 2,023 12.03 252 1.98
At 30 June 1,720 10.23 80 0.63
Weighted average number of Ordinary Shares 16,820,358 12,750,010
The return per share is calculated using the weighted
average number of ordinary shares.
8. Dividends
The Board has not declared an interim dividend (2023: £nil).
9. Investments held at fair value through profit or loss
Equity instruments UK Government Debt Equity instruments
30 June 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 period
Purchases at cost 9,434 15,556 17,675
Sales - proceeds (7,887) (15,736) (2,643)
Net gains on investments held at fair value
through profit or loss 1,959 180 1,663
Closing valuation 20,201 - 16,695
Closing book cost 16,579 - 15,032
Closing investment holding unrealised gains 3,622 - 1,663
Closing valuation 20,201 - 16,695
Movement in unrealised gains during the period 5,613 - 3,259
Movement in unrealised losses during the period (4,200) - (1,873)
Realised gain on sale of investments 546 180 277
Net gain on investments held at fair value through profit or loss 1,959 180 1,663
Total net gain on investments held at fair value through profit or loss 1,959 1,843
10. Unsettled trades
At period end, the net amount in relation to trades that were settled post
period end is £222,000 (2023: £25,000). The table below summarises these
trades as at 30 June 2024.
30 June 2024
£'000 Settlement date
Payable
Windward plc 141 1 July 2024
EKF Diagnostics Holdings plc 81 2 July 2024
Total unsettled trades payable 222
31 December 2023
£'000 Settlement date
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
11. 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
Opening balance as at 1 January 2024 16,027,290 15,536
Issue of shares 1,530,088 1,684
Issue costs - (50)
At 30 June 2024 17,557,378 17,170
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.
12. Net Asset Value per Ordinary Share
The Net Asset Value per Ordinary Share and the Net Asset Value at the period
end calculated in accordance with the Articles of Incorporation were as
follows:
30 June 2024 31 December 2023
NAV NAV NAV NAV
per share attributable per share attributable
pence £'000 pence £'000
Ordinary Shares: basic and diluted 116.32 20,423 106.50 17,069
The Net Asset Value per Ordinary Share is based on 17,557,378 Ordinary Shares,
being the number of Ordinary Shares in issue at the period end.
13. Cash used in operating activities
30 June 30 June
2024 2023
£'000 £'000
Total gains for the period 1,720 80
Net gains on investments held at fair value
through profit or loss (1,959) (252)
Interest income (2) (6)
Movement in working capital
Increase in other receivables (28) (27)
(Decrease) / Increase in payables (31) 95
Total other expense payments (300) (110)
14. Financial instruments and capital disclosures
The Company's activities expose it to a variety of financial risks; market
risk (which includes price risk, foreign currency risk and interest rate
risk), credit risk and liquidity risk. The Unaudited Condensed Interim
Financial Statements do not include all financial risk management information
and disclosures required in the annual financial statements; they should be
read in conjunction with the Company's Audited Financial Statements as at 31
December 2023.
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;
· 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 30 June 2024 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity instruments 20,201 - - 20,201
20,201 - - 20,201
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 only had exposure to level 1 instruments in the current period.
The following table shows a reconciliation of the opening balance to the
closing balance for Level 1 fair values:
June December
2024 2023
£'000 £'000
Level 1 Level 1
Opening balance 16,695 -
Purchases at cost 9,434 33,231
Sales at cost (7,887) (18,379)
Total gains included in net gains on investments in the Unaudited Condensed
Statement of Comprehensive Income
- on assets sold 546 457
- on assets held at period end 1,413 1,386
20,201 16,695
There have been no significant changes in the management of risk or in any
risk management policies since the last Statement of Financial Position date.
15. Related parties
DWL provides portfolio management services to the Company.
1 January 31 January 31 January 2023 to
2024 to 2023 to
30 June 31 December 30 June
2024 2024 2023
£'000 £'000 £'000
Fees charged / (recharged) by DWL:
Management fees
Total management fee charged 144 156 47
Management fee outstanding 25 22 15
AIFM recharge
Total AIFM fee recharged (26) (38) (13)
AIFM fee recharge outstanding (9) (4) (8)
Performance fees
Total Performance fees charged - 28 -
Performance fees outstanding - 28 -
AIFM fee charged by FundRock:
Total AIFM fee charged 26 38 13
AIFM fee outstanding 5 4 8
Directors' fees
Total Directors' fees charged 63 95 32
Directors' fees outstanding - - 17
As at 30 June 2024 the Directors had holdings in the Company as follows:
Number of % Ordinary Shares in
Ordinary Shares issue as at 30 June 2024
Andrew Henton 100,000 0.5696
Susan Norman 20,000 0.1139
Henry Freeman 15,000 0.0854
Luke Allen - -
Adrian Norman (husband of Susan Norman) 4,878 0.0278
16. Post balance sheet events
The Company raised gross proceeds of approximately £3.1m by way of a direct
subscription, by new and existing investors, for 2,606,733 new ordinary shares
at a price of 119.5 pence per new ordinary share during July 2024. This
included the acquisition by Susan and Adrian Norman collectively of a further
25,104 ordinary shares.
There has not been any other matter or circumstance occurring subsequent to
the end of the interim financial period 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 future financial
periods.
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 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 Channel Islands
St James Place
St James Street
St Peter Port
Guernsey
GY1 2NZ
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