TIDMONWD
RNS Number : 1978L
Onward Opportunities Limited
04 September 2023
4 September 2023
Onward Opportunities Limited
("Onward Opportunities", "ONWD" or the "Company")
Interim Results
Onward Opportunities Limited, the UK smaller company focused
Guernsey non-cellular (closed-ended) investing company, is pleased
to announce its unaudited interim results for the five-month period
from the Company's incorporation and ended 30 June 2023 (the
"Period") .
FINANCIAL HIGHLIGHTS
-- Net Asset Value (NAV) performance over the period from IPO to
30 June 2023 of +0.8% and ONWD share price performance of +5.5%,
both materially outperforming the UK AIM All-Share (-6.5%) and MSCI
UK Small Cap (-1.3%) indices.
-- Gross portfolio IRR (annualised return) of 11%, aggregating
UK Government Debt and equity holdings, gross IRR (annualised
return) of 139% from pure equity portfolio.
-- Onward Opportunities was the first investment company to
launch on AIM since November 2021 and at launch the largest IPO
year to date.
-- Eight new initial investments including one core position
(Angling Direct plc), c.19% NAV deployed into UK smaller
companies.
-- 71% of NAV held in UK Government Debt at period end, a further 10% held in cash at bank.
POST PERIOD-
-- Encouraging market leading start to investment performance
(NAV growth) since inception placed 3(rd) /26 versus peers in the
AIC UK smaller companies sector; NAV +3.6% to 99.2p, outperforming
UK AIM All-Share index by 11.5%, which fell 7.9%.
-- Gross portfolio IRR (annualised return) of 20.7% across Gilts
and equity holdings, gross IRR (annualised return) of 65.8% from
pure equity portfolio.
-- Three further core positions developed; React Specialist
Cleaning plc, Comptoir Libanais plc and Transense Technologies
plc
-- Around 50% of NAV deployed into UK smaller companies, other
c.50% NAV held in UK Government Debt and held in cash at bank.
-- Three nursery investments realized for an aggregated IRR
(annualised return) materially ahead of target returns,
particularly strong supernormal returns captured from very recent
investment into Restore plc.
-- Nominated for the 'Best Use of AIM' and 'Best Newcomer'
awards at the upcoming 2023 AIM Awards.
Andrew Henton, Chairman, commented :
"Blessed with hindsight, it is hard to envision a less
propitious timing for the launch of a specialist fund targeting
smaller listed UK companies than the first quarter of 2023. A core
thesis underlying the launch of the Company is that the London
stock market presents value investors with a rich seam of
opportunity, and the ability to buy companies whose earnings
streams are materially undervalued by reference both to their
larger quoted market comparators, and to unlisted companies backed
by private equity. Great care is being taken to deploy capital in a
measured and considered manner, harnessing the investment committee
process and to build core positions only when the full investment
analysis process has been completed. The Board is fully supportive
of this approach and the performance potential is already very
evident."
Laurence Hulse, portfolio manager, commented:
"It was encouraging to see Onward Opportunities' portfolio get
off to a market leading start both in absolute terms and relative
to the peer group. We have a high-touch investment strategy that is
well disposed to capitalise on the current conditions in the UK. We
operate using an independent mindset that is underscored with
proprietary due diligence and a collaborative team approach drawing
on depth of experience. Our pipeline and portfolio have been
focused on tangible investment theses; cash profits, margins of
safety and idiosyncratic catalysts. These factors have all combined
to create conviction and sector leading investment performance in a
cautious market.
"Our first equity investments entered the portfolio this year,
with deployment into equities increasing to around 50% NAV across
nascent ideas in the "nursery" and four core positions."
The full version of the Onward Opportunities Limited interim
report will be available on its website shortly at
https://onwardopportunities.co.uk/wp-content/uploads/2023/09/Onward-Opportunities-Limited-June-2023.pdf
-S-
FOR FURTHER ENQUIRIES:
Onward Opportunities Limited Tel: +44 (0) 203 5303
Andrew Henton, Chairman 150
ool@maitlandgroup.com
Dowgate Wealth Limited (Portfolio Manager)
Laurence Hulse, Investment Director Tel: +44 (0) 203 5303
150
ool@maitlandgroup.com
Maitland Administration (Guernsey) Limited Tel: +44 (0) 203 5303
(Company Secretary) 150
Martin Baxter / Harry Rouillard ool@maitlandgroup.com
Cenkos Securities plc (Nominated Adviser Tel: +44 (0)20 7397
and Joint Broker) 8900
Ben Jeynes/Camilla Hume
Dowgate Capital Limited (Joint Broker) Tel: +44 (0)12 9351
Russell Cooke / Nicholas Chambers 7744
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
Certain of the information contained in this announcement
regarding the Company's investments has been provided by the
relevant underlying portfolio company and has not been
independently verified by the Company. The information contained
herein is unaudited.
This announcement is for information purposes only and is not an
offer to invest. All investments are subject to risk. Past
performance is no guarantee of future returns. Prospective
investors are advised to seek expert legal, financial, tax and
other professional advice before making any investment decision.
The value of investments may fluctuate. Results achieved in the
past are no guarantee of future results. Neither the content of the
Company's website, nor the content on any website accessible from
hyperlinks on its website for any other website, is incorporated
into, or forms part of, this announcement nor, unless previously
published by means of a recognised information service, should any
such content be relied upon in reaching a decision as to whether or
not to acquire, continue to hold, or dispose of, securities in the
Company.
Highlights
Highlights in the reporting period to 30 June 2023 include:
-- NAV performance over the period from IPO to 30 June 2023 of
+0.8% and ONWD share price performance of +5.5%, both materially
outperforming the UK AIM All-Share (-6.5%) and MSCI UK Small Cap
(-1.3%) indices.
-- Gross portfolio IRR (annualised return) of 11%, aggregating
UK Government Debt and equity holdings, gross IRR (annualised
return) of 139% from pure equity portfolio.
-- Onward Opportunities was the first investment company to
launch on AIM since November 2021 and at launch the largest IPO
year to date.
-- Eight new initial investments including one core position
(Angling Direct plc), c.19% NAV deployed into UK smaller
companies.
-- 71% of NAV held in UK Government Debt at period end, a further 10% held in cash at bank.
Post period end Highlights (1 July 2023 - 31 August 2023)
-- Encouraging market leading start to investment performance
(NAV growth) since inception placed 3(rd) /26 versus peers in the
AIC UK smaller companies sector; NAV +3.6% to 99.2p, outperforming
UK AIM All-Share index by 11.5%, which fell 7.9%.
-- Gross portfolio IRR (annualised return) of 20.7% across Gilts
and equity holdings, gross IRR (annualised return) of 65.8% from
pure equity portfolio.
-- Three further core positions developed; React Specialist
Cleaning plc, Comptoir Libanais plc and Transense Technologies
plc
-- Around 50% of NAV deployed into UK smaller companies, other
c.50% NAV held in UK Government Debt and held in cash at bank.
-- Three nursery investments realized for an aggregated IRR
(annualised return) materially ahead of target returns,
particularly strong supernormal returns captured from very recent
investment into Restore plc.
-- Nominated for the 'Best Use of AIM' and 'Best Newcomer'
awards at the upcoming 2023 AIM Awards.
Chairman's Statement
Onward Opportunities Limited ("ONWD" or "the Company") was
successfully admitted to AIM on 30 March 2023. As at 31 August 2023
(the latest practicable date prior to the publication of this
report) the net asset value ("NAV") per share was 99.2 p and the
share price 104 p, representing a premium to NAV of 4.9% and a NAV
performance of +3.6% since inception.
Launch of the Fund
Blessed with hindsight, it is hard to envision less propitious
timing for the launch of a specialist fund targeting smaller listed
UK companies than the first quarter of 2023.
Whilst 2021 closed buoyed with optimism following the successful
distribution of COVID-19 vaccines, the announcement of myriad
governmental stimulus measures and loosening travel restrictions,
the speed and vigour of the "recovery" brought with it rapidly
growing fears about resurgent inflation. Bullish first quarter
equity performance in the US thus flattered to deceive, with
indices distorted by the surging prices of a small number of
technology "giants". Any hopes that the Federal Funds Rate might
plateau at around 4% were swiftly scotched, and investor attention
was soon more focused on the threat posed to both corporate
earnings and consumer spending by higher than expected global
interest rates.
A core thesis underlying the launch of the Company is that AIM
presents value investors with a rich seam of opportunity, and the
ability to buy companies whose earnings streams are materially
undervalued by reference both to their larger quoted market
comparators, and to unlisted companies backed by private equity.
Lack of liquidity in AIM stocks is considered to be a major
contributory factor, so it is perhaps appropriate that the Manager
should have found itself seeking to close a fund raising when
liquidity, such as it was, further receded from the market; if
nothing else, the experience means that the Company's investment
team can empathise with the valuation challenges facing its
investee companies!
That the Portfolio Manager was successful in raising capital and
closing the fund raise amidst the collapse of international banking
giants and the challenging market environment, is testament both to
the team's tenacity and commitment (features which all of us as
shareholders should celebrate) and to the fundamentals which
underpin the investment strategy.
Portfolio development
As at 31 August 2023, the Fund was around fifty percent invested
into equities, and the NAV was up by 3.6% compared to the AIM
market performance of -7.9 %. As explained further in the Portfolio
Manager's report below, great care is being taken to deploy capital
in a measured and considered manner, and to build core positions
only when the full investment analysis process has been completed.
The Board is fully supportive of this approach and the performance
potential is already very evident with top decile NAV performance
within the AIC UK smaller companies sector.
To date, the Fund has four fully invested positions. These are
supported by smaller nursery positions in companies which are
undergoing final due diligence. Trading into (and out of) positions
over time in this way is itself a differentiating competence, and
an important one in the context of tightly held blocks of shares
where daily trading volumes are low. It has been encouraging for
the Board to observe the investment and share dealing processes and
disciplines described in the Admission Document being put into
daily practice.
Equally worthy of note is the deployment of uninvested cash into
UK Government Debt (Gilts). The Portfolio Manager has taken this
approach both to maximise yield, and to mitigate counterparty
exposures to banks. All instruments have a maturity duration of
less than six months, and the income being generated is sufficient
to substantially cover the projected operating costs of the Company
while the manager continues to deploy capital in accordance with
the stated strategy.
Market environment
The Company's investment strategy is based on deep, analytical
research of investee company earnings, valuation and market
positioning. Opportunities arise where those earnings are not
reflected in the prevailing share price. Deliberate and active
engagement with the management teams of investee companies is
intended to catalyse the hidden value identified. Prevailing market
conditions are thus favourable for the building of the Company's
initial portfolio and shareholders have been seeing some early
evidence of the team's approach at Angling Direct plc (ANG LN)
("Angling Direct").
Going forward, the Board is supportive of, and encouraged by the
recent Mansion House Compact. This is intended to encourage
investment from institutional investors (particularly the managers
of defined contribution ("DC") pension schemes) into unlisted
securities. Shares in AIM quoted companies are considered to be
"unlisted" for these purposes. Several of the larger UK pension
fund managers have committed to allocate at least 5% of their DC
assets under management into "unlisted" shares by 2030. Not only
does this initiative annualise the potential for higher returns
available from investment in UK smaller companies, but the impact
of a potential incremental GBP50 billion of new money into the
asset class would have a material positive impact on liquidity and
thus valuations.
Corporate actions
Such are the investment opportunities available at both an
underlying company level and on a wider UK small cap / micro cap
relative value basis, that it is the Board's intention to raise new
money and grow the share capital of the Company over time. In the
short to medium term this is likely to take the form of one or more
"tap issues", offering new securities to existing and new
investors. Given the largely fixed cost base of the Company, the
issuance of new shares would reduce the Total Expense Ratio ("TER")
per share as well as increasing the investee company opportunity
set.
In conclusion, I and my fellow Directors remain confident about
the Company's long term strategy and we are pleased with the
nascent track record. I look forward to writing to you again in our
first set of full Financial Statements for the period ending 31
December 2023.
Andrew Henton
Chairman
1 September 2023
Portfolio Manager's Report
It is a privilege to present Onward Opportunities Limited's
maiden set of unaudited condensed interim financial statements as a
public company. The success of the Company's 2023 AIM Initial
Public Offering ("IPO") in the current market environment is
testament to the hard work of my colleagues at Dowgate. At the time
of launch the Company was the largest AIM IPO in 2023 and I am
delighted to share that as a result, the Company has been nominated
for both the Best Use of AIM Award and Best Newcomer Award at the
2023 AIM awards.
Some early highlights in the reporting period to 30 June 2023
include:
-- NAV performance over the period from IPO to 30(th) June 2023
of +0.8% and ONWD share price performance of +5.5%, both materially
outperforming the UK AIM All-Share (-6.5%) and MSCI UK Small Cap
(-1.3%) indices.
-- Encouraging market leading start to investment performance
(NAV growth) versus peers in the AIC UK smaller companies sector;
3(rd) /26 since inception to 31 August 2023.
-- Gross portfolio IRR ( annualised return) of 11% aggregating
UK Government Debt and equity holdings, gross IRR (annualised
return) of 139% from pure equity portfolio.
-- Eight new initial investments including one core position
(Angling Direct plc), c.19% NAV deployed into UK smaller
companies.
-- 71% of NAV held in UK Government Debt at period end, earning
a blended running yield in excess of 4% and a further 10% held in
cash at bank.
Market Commentary
To June 2023, investor sentiment has been mixed although markets
have shown some evidence of risk appetite returning. Whilst
consumers and policymakers remain understandably worried about
inflation, markets are more concerned with the implications of
elevated interest rates on financial stability and corporate
solvency. The widely anticipated recession is proving elusive as
most output and employment measures are far more resilient than
expected. However, rapid interest rate rises do increase the risk
of excessive policy tightening, and the fear of recession
lurks.
After the dramas of bank runs at Silicon Valley Bank and First
Republic which occurred in the Company's launch month, immediate
concerns over global financial stability have subsided, reflected
in the 10% fall in the dollar price of gold. However, worries
closer to home about the viability of highly indebted Thames Water
remind us that the uncertain trajectory of interest rates requires
vigilance regarding indebtedness. We must not forget that the
consequences of monetary tightening can be slow to play out and
multi-faceted.
We believe the market's implied base case global outlook is for
an economic slowdown. Negative forward indicators include inverted
yield curves, declining energy and industrial material prices,
falling producer prices and a faltering Chinese recovery. As a
result, most large investors remain cautiously positioned with
lower-than-normal risk asset exposure and higher-than-normal cash
holdings, meaning illiquid risk assets such as UK small-caps remain
attractively valued.
It was disappointing but perhaps unsurprising that investors did
not view UK equities as a safe haven in this period. Although
various bodies including the OECD, IMF and OBR have upgraded
assessments of the UK's economy, the UK market has remained
sluggish with all indices falling.
One feature of these market conditions has been the impact of
private equity backed bids for UK listed companies, as the first
quarter flurry of bids faded. EQT's substantial offer for Dechra
Pharmaceuticals and offers for Medica and Alfa Financial Software
highlighted how other investors will recognise value if public
markets don't.
With Japan at long last re-rating, the UK does look increasingly
isolated as the final value play among developed equity
markets.
Many less liquid smaller UK companies now resemble the "cigar
butts" of Warren Buffet's much quoted quip - "like picking up a
discarded cigar butt" astute value investors should look for
companies that have been overlooked but still have value in them.
The AIM segment is our preferred investment hunting ground, and we
look forward to today's value becoming tomorrow's accepted recovery
and momentum plays. We are very conscious that the timing of
sentiment transition is always unknowable, but believe that the end
of rate increases will be a positive catalyst.
Fund Manager's Report
It was encouraging to see the Onward shares perform strongly
post launch both in absolute terms and relative to the market,
ending the half-year at 105.5p, +5.5% and outperforming the
majority of its peer group (AIC UK Smaller Companies). Investment
performance (NAV) also got off to a positive start ending +0.8% for
Q2 at 96.42p (IPO NAV: 95.70 p), and this accelerated post period
end in July and August as discussed later in this report. The
portfolio of equities and UK Government Debt as a whole has
delivered an 11% gross IRR (annualised return) since IPO and within
that, our small equity portfolio (c.19 % NAV) has delivered a gross
IRR (annualised return) of 139%. Whilst early days it has been
pleasing to see the first investments set off in the right
direction. These figures compare favorably to UK indices, which had
a weak quarter; the UK AIM All-Share was down 6.5%.
Performance IPO to 30 Jun IPO to 31 Aug 2023
23
Onward Opportunities NAV Total
Return +0.8% +3.6%
-------------- -------------------
Onward Opportunities Total
Shareholder Return +5.5% +4.0%
-------------- -------------------
UK AIM All-Share Index -6.5% -7.9%
-------------- -------------------
MSCI UK Small Cap Index -1.3% +0.7%
-------------- -------------------
Given we have just the three months of trading to discuss within
the reporting period in this first set of unaudited, condensed
interim financial statements, our commentary is briefer than
shareholders can expect in future reports. It has been a productive
period for the team, albeit one tempered by deliberate caution.
April was our first month of full operations and we unwittingly
launched in the midst of a banking crisis which cast a gloomy pall
over the financial markets. Shareholders who would like to hear
more about the launch process can do so here in this podcast with
Edison Group: https://www.youtube.com/watch?v=a8onhzrtIEo .
It was this backdrop that has informed our early pipeline and
investment activity. On the Company's first day of trading, we
deployed 98% of NAV into a blend of UK Government Debt with a
six-month maturity ladder; these offered higher reward (interest
rate) and lower risk (government backed) than was available from
our banking counterparties. We expect to maintain this mix of
high-quality liquid assets, drawing capital down into equity
investments as and when they are identified. We have been earning a
yield-to-maturity in excess of 4%, thereby generating a healthy
contribution to overheads and helped to recover launch costs. At
the end of the quarter, we held c.71% of NAV in UK Government Debt,
with a further 10% in cash at hand, ready for deployment into new
core positions. The remaining c.19% was invested in equities as
described below.
Top 10 Holdings Table as at 30 June 2023
Holding GBP value % weighting Unrealised Total Unrealised IRR
portfolio Profit on Unrealised (annualised return)
investment Return %
GBP
Cash at bank GBP1.3m N.A N.A N.A N.A
------------------------------------------------------------------- ------------ ----------- ----------- --------------------
UK Govt 0%
T-Bills
31/07/23 GBP1.2m 10.8% +GBP12k +1% +4.0%
------------------------------------------------------------------- ------------ ----------- ----------- --------------------
UK Govt
2.25% SNR
07/09/23 GBP1.2m 10.8% +GBP2k +0.2% +0.9%
------------------------------------------------------------------- ------------ ----------- ----------- --------------------
UK Govt 0%
T-Bills
29/08/23 GBP1.2m 10.7% +GBP10k +0.9% +3.6%
------------------------------------------------------------------- ------------ ----------- ----------- --------------------
UK Govt 0%
T-Bills
11/09/23 GBP1.2m 10.7% +GBP10k +0.9% +3.5%
------------------------------------------------------------------- ------------ ----------- ----------- --------------------
UK Govt 0%
T-Bills
25/09/23 GBP1.2m 10.7% +GBP10k +0.8% +3.5%
------------------------------------------------------------------- ------------ ----------- ----------- --------------------
UK Govt
0.75% SNR
22/07/23 GBP1.0m 9.5% +GBP8k +1.2% +3.1%
------------------------------------------------------------------- ------------ ----------- ----------- --------------------
UK Govt 0%
T-Bills
17/07/23 GBP998k 9.0% +GBP8k +0.8% +4.3%
------------------------------------------------------------------- ------------ ----------- ----------- --------------------
Angling
Direct plc GBP894k 8.1% +GBP125k +16.3% +525.4%
------------------------------------------------------------------- ------------ ----------- ----------- --------------------
UK Govt 0%
T-Bills
20/11/2023 GBP749k 6.8% GBP0k 0% +0.7%
------------------------------------------------------------------- ------------ ----------- ----------- --------------------
Aggregated
other
investments GBP1.4m 13% +GBP34k +2.4% +34.4%
------------------------------------------------------------------- ------------ ----------- ----------- --------------------
May saw our first equity investments enter the portfolio,
comprising positions taken in a handful of pre-identified pipeline
opportunities. This work continued throughout June, with deployment
into equities increasing to c.19% NAV across six ideas into the
"nursery" and our first full allocation to a core position, Angling
Direct. The nursery comprises positions of 1-2% NAV in businesses
which we are actively working on, where that initial work has
revealed a returns opportunity that we want to start capturing as
due diligence continues. This phased approach to building positions
is deliberate and gives our investment strategy more agility. We
look forward to updating shareholders in due course on nursery
positions as they develop, including in this case via the post
period end highlights section of this report.
Initial positions typically involve businesses with robust
balance sheets or margins of safety and discounted earnings
multiples; we are not trying to time the market and seek
investments that are self-sustaining through any economic
volatility. All have identifiable catalysts that are often
idiosyncratic in nature. It was a combination of strong returns in
some of these initial investments and the larger position in
Angling Direct, that drove our alpha generation in the first
quarter of operations.
The Company deployed c.6% NAV into Angling Direct, 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 upside with the
Company's investment into Angling Direct, which creates an
attractive asymmetric risk profile for our 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 United Kingdom ("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 benefit from a UK consumer recovery.
More recently, the business has been attempting to enter the
much larger European market to provide additional earnings growth,
a strategy launched by the previous management team. 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 wound down to remove the opportunity cost
to management and losses from group profits. In the latter case, we
would be left with a valuable investment in a leading UK retailer,
purchased on c.2x EV/EBITDA. We estimate a 6-12 month payback on
the closure of the European strategy. AO World plc made a similar
decision 12 months ago following a strategic review and that
business' share price has doubled since the decision was taken
recovering material shareholder value.
Our analysis suggests either of these outcomes would add more
than 50% to Angling Direct's current profits. Our entry valuation
on Angling Direct was at c.GBP20 million, a market capitalisation
underpinned by balance sheet assets c.GBP14 million net cash and
c.GBP16 million of inventory. We have an active and engaged
approach to investee companies, and shareholders can expect us to
be working hard to drive one of these two profitable outcomes on
our investment. We have in this context noted with interest, the
consolidation of angling retailers in the USA and Nordic countries
in recent years. As shown by the Unrealised annualised return
column in the holdings table, our investment has set off in an
encouraging direction and we look forward to updating shareholders
in due course. Post period end we were encouraged to see the
company release its first 'in-line' trading update for some time
and the UK business' resilient trading covered in both The Times
and The Mail.
Outlook
Post Period end Highlights (1 July 2023 - 31 August 2023)
-- NAV performance since inception to 31 August 2023 of +3.6%,
ONWD share price performance of +4%, both materially outperforming
the UK AIM All-Share which fell -7.9% and the MSCI UK Small Cap
Index (+0.71%).
-- Sector leading top-decile investment performance (NAV
growth), 3(rd) /26 since inception versus UK AIC Smaller Companies
peer group.
-- Gross portfolio IRR (annualised return) of 20.7% across UK
Government Debt and equity holdings, gross IRR (annualised return)
of 65.8% from pure equity portfolio.
-- Three further core positions developed; React Specialist
Cleaning plc, Comptoir Libanais plc and Transense Technologies
plc.
-- c.50% NAV deployed into UK smaller companies, 47% NAV held in
UK Government Debt (Gilts) at period end, further 5.6% held in cash
at bank.
Post Period End
Further to the investment commentary on the reporting period to
the end of June, comments on post period end activity are also
provided. NAV Performance accelerated per the highlights covered
above. Our investment in Angling Direct progressed further with
green shoots of a recovery emerging in the company's summer trading
update and a number of new investments began to generate additional
alpha too. The team added several investments to the nursery of
nascent ideas and three new core holdings graduated from the
nursery into the top 10. These were React Specialist Cleaning plc
(REAT) ("React") , Comptoir Libanais plc (COM LN) ("Comptoir
Libanais") and Transense Technologies plc (TRT LN) ("Transense
Technologies") , all of which generated early positive returns for
the portfolio and are discussed in more detail below.
Three nursery investments were realised post period end,
generating an aggregated IRR (annualised return) significantly
ahead of our target returns. Particularly strong profits were
captured for shareholders from the purchase of Restore plc at 135p,
which got almost halfway to our target price within two weeks, so
the team opted to crystallise a healthy profit at an average of
178p, allowing for the investment to be revisited later.
Top 10 Holdings as at 31 August 2023
Holding GBP value % weighting Unrealised Total Unrealised
portfolio Profit on Unrealised IRR (annualised
investment Return return)
GBP %
UK Govt 2.25% SNR
07/09/23 GBP1.2m 9.5% +GBP8k +0.7% +1.7%
----------- ------------ ------------ ------------ -----------------
UK Govt 0% T-Bills
11/09/23 GBP1.2m 9.5% +GBP20k +1.7% +4.2%
----------- ------------ ------------ ------------ -----------------
UK Govt 0% T-Bills
25/09/23 GBP1.2m 9.4% +GBP20k +1.7% +4.1%
----------- ------------ ------------ ------------ -----------------
Angling Direct plc GBP1.1m 8.7% +GBP251k +29% +204%
----------- ------------ ------------ ------------ -----------------
React Specialist
Cleaning plc GBP800k 6.3% +GBP63k +9% +64%
----------- ------------ ------------ ------------ -----------------
UK Govt 0% T-Bills
20/11/23 GBP749k 6.0% +GBP7k +0.9% +4.6%
----------- ------------ ------------ ------------ -----------------
UK Gilt 0.125% 31
Jan 202 GBP753k 5.9% +GBP3k +0.4% +4.6%
----------- ------------ ------------ ------------ -----------------
Transense Technologies
pl GBP497k 3.9% +GBP52k +12% +103%
----------- ------------ ------------ ------------ -----------------
UK Govt 0% T-Bills
Oct 23 GBP452k 3.6% GBP0k 0% N/A
----------- ------------ ------------ ------------ -----------------
UK Govt 0% T-Bills
Jan 24 GBP446k 3.5% GBP0k 0% N/A
----------- ------------ ------------ ------------ -----------------
Aggregated other
equity investments GBP3.6m 28.1% +GBP58k +2% +15.1%
----------- ------------ ------------ ------------ -----------------
Cash at bank GBP742k 5.6% N/A N/A N/A
----------- ------------ ------------ ------------ -----------------
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 last year 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 to 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 over the past six months on forward
P/E multiple of 6.5x - 8.5x.
We have analysed React's ability to continue growing organically
and potentially through bolt-on acquisitions over the next five
years. Independent referencing with a number of larger customers
and partners have underscored React's competitive advantage and
high levels of service delivery. This work has given us confidence
to model and substantiate projections further out than most
analysts. Based on our work, we believe the business can grow sales
to c.GBP30m and generate a c.15% EBITDA margin within the next five
years. Such a growth and margin profile should command a P/E
multiple well in excess of 12x, and as a result, our investment has
the potential to outperform our target returns of 2x money
invested. At this scale, we believe the business would become a
target for larger managed services groups.
Transense Technologies is a very different business, but we
believe they are another example of a small UK company quietly
working up great prospects for growth. It is fair to say the
business has had a chequered 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 DD 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 GBP13m 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 GBP3m per
annum versus GBP2m 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 groups 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
barrier 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. It
is not impeded by magnetic interference, nor does it require
structural integrity reductions (to allow flexing) unlike rival
technologies, as SAW uses sound waves to continuously monitor
torque rather than movement or electro-magnetism. This is
especially relevant in the era of electric motors, which give off
magnetic interference and where efficiency through more precise
torque monitoring is key to the value proposition (range anxiety!).
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, revenues generate an extremely high
gross margin, north of 85% and sales have been accelerating, from
GBP90k in 2020 to c.GBP0.5m in 2023. The GE aviation deal to
retrofit SAW to over 5000 helicopter engines for the US military
has particularly caught the team's eye given the scale and
specification of the work, though admittedly deployment does not
ramp up until the late 2020's.
A blended partial success across these three technologies can
create a compelling and high quality earnings figure and quality in
the context of a current valuation for the business of GBP13m,
though we have weighted our investment accordingly given the
longer-term nature of the opportunity, investing c.3% NAV. Much
like with React, we have been able to acquire such potential and
earnings on a single digit P/E and attractive free-cash flow
yield.
Thirdly, we have invested into Comptoir Libanais a chain of
around 30 Lebanese restaurants predominantly in the UK that have
impressively traded profitably through both one of the toughest
environments for the sector in living memory and boardroom
disruption. Despite this resilience and the subsequent assembly of
an impressive new board and leadership team, the sector and
personnel headwinds saw the shares de-rate to a discount to the
material net cash balance of the group, leaving a profitable,
growing restaurant chain with a brand that references well trading
at a negative value. The group floated in 2017 at 50p with 15
restaurants, it now has around 30, which are trading profitably
with a net cash balance in excess of 6p/share but we have been able
to invest in the company for less than 5.5p/share.
Whilst restaurants do not typically lend themselves to our
investment strategy, the margin of safety provided by a net cash
balance that was larger than the market cap and the resilience of
the core business' trading created a basis for further analysis.
Further due diligence revealed the upside potential of a
quick-service-retail franchise roll out via the international Shawa
brand. This potential is to be explored under new CEO Nick Ayerst,
who joined from a background at LEON and The Restaurant Group and
Chair Beatrice Lafon who has an impressive private equity
background, both of whom reference strongly. We have noted with
interest the near doubling of the Net Promoter Score of the chain
from the mid-40s to 80+ under the new team and, having visited a
number of sites ourselves, there is noticeable improvement in the
menus and their contents.
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 will 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.
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 Chairman)
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 20 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 is currently a non-executive director of a
number of Terra Firma Capital Partners Limited's Guernsey-based
private equity vehicles. 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, 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)
Henry is an investment professional with over 25 years of
investment decision making and over 10 years of Board experience.
In addition to Onward Opportunities, he 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
a member of the Guernsey Investment & Funds Association (GIFA)
Executive Committee and 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.
During his executive career in fund management, investment
banking and fintech, Henry managed institutional and private client
funds, investing across equities and alternative investments;
advised London-listed companies and funds on strategy, structuring,
IPOs and M&A; built technology and investment businesses and
advised UK government on fintech and social finance, sitting on
parliamentary policy groups and Downing Street roundtables. Henry
was a founding member of Innovate Finance.
Luke Allen (Independent Non-Executive Director)
Luke is an independent non-executive director with over 30
years' experience working in the financial services sector, the
last 18 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 over 13
years' 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.
Investment Committee
Laurence Hulse (Investment Director & 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 GBP50m
assets to over 200 employees and in excess of GBP7.5 billion of
assets. Gresham House was bid for by Searchlight Capital in Q3 2023
for a value of c.GBP500m, 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. 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 almost all 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 GBP1 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.
Interim Management Report
For the 5 month period ended 30 June 2023
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 main 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, all of which will be more fulsomely described in the
Company's first full set of audited financial statements for the
period ending 31 December 2023:
-- Cybersecurity
-- Portfolio concentration
-- Service providers
-- Key person risk
-- ONWD shares trading discount to NAV
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, energy shortages, inflation, increases in
interest rates, recent bank failures and other uncertainties
impacting on the Company's investments, their financial position
and liquidity requirements.
At period end the Company had a net asset position of
GBP12,294,000 comprising cash of GBP1,282,000, listed investments
amounting to GBP2,331,000 and UK Government Debt of
GBP8,749,000.
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.
Important events and financial performance
Highlights from financial year to date are as follows:
Ordinary Shares
30 June 2023
Highlights
Net Asset Value per share 96.42p
Share Price 105.50p
% of capital deployed into AIM listed equities (investments) 19%
% of capital deployed into cash and near cash equivalents 81%
The table below provides performance information:
Date NAV % change in
per share NAV
30 March 2023 95.70
30 June 2023 96.42 1.12% increase
The net profit for the five month period ended 30 June 2023
amounted to GBP79,661. Further details of the Company's performance
for the period are included in the Portfolio Manager's Report,
which includes a review of investment activity and adherence to
investment restrictions.
Premium
As at 30 June 2023, the share price was trading at a premium of
9.42% to the last published NAV per share.
Related party transactions
Details of related party transactions are given in note 14 to
the Unaudited Condensed Interim Financial Statements.
Director
1 September 2023
Independent Review Report to Onward Opportunities Limited
Introduction
We have reviewed the accompanying unaudited condensed statement
financial position of Onward Opportunities Limited as of June 30,
2023, and the related unaudited condensed statements of
comprehensive income, unaudited changes in equity and unaudited
condensed statement of cash flows for the five-month period then
ended. Management is responsible for the preparation and
presentation of this unaudited condensed interim financial
information in accordance with the International Financial
Reporting Standards (IFRSs) as issued by the International
Accounting Standards Board (IASB). Our responsibility is to express
a conclusion on this unaudited condensed interim financial
information based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements 2410, Review of Interim Financial
Information Performed by the Independent Auditor of the Entity. A
review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions
Based on our review, nothing has come to our attention that
causes us to believe that the accompanying interim financial
information is not prepared, in all material respects, in
accordance with IFRSs as issued by the IASB.
Use of our report
This report is made solely to the Company's directors as a body,
in accordance with the terms of our engagement letter dated 06 July
2023. Our review work has been undertaken so that we might state to
the Company's directors those matters we have agreed to state to
them in a reviewer'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
directors as a body, for our review work, for this report, or for
the conclusions we have formed.
Grant Thornton Limited
St Peter Port
Guernsey
Date: 1 September 2023
Unaudited Condensed Statement of Comprehensive Income
For the 5 month period ended 30 June 2023
Period from
31 January 2023
to
30 June 2023
(unaudited)
Notes Revenue Capital Total
GBP'000 GBP'000 GBP'000
Investments
Net gains on investments
held at fair value through
profit or loss 9 - 252 252
Net investment gains - 252 252
======== ======== ========
Interest income 6 - 6
Total income 6 - 6
======== ======== ========
Investment management
and
performance fees 5 (47) - (47)
Other expenses 6 (131) - (131)
-------- -------- --------
(Loss) / Gain before
taxation (172) 252 80
Tax expense - - -
Total (loss) / gain and
comprehensive (loss) /
income for the period (172) 252 80
======== ======== ========
(Loss) / Gain per
Ordinary Share (pence) 7 (1.35) 1.98 0.63
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 form an integral part of these Unaudited Condensed
Interim Financial Statements.
Unaudited Condensed Statement of Financial Position
As at 30 June 2023
30 June
2023
GBP'000
Notes (unaudited)
Non-current assets
Investments held at fair value through
profit or loss 9 2,331
Current assets
UK Government Debt 9 8,749
Cash and cash equivalents 1,282
Other receivables 27
10,058
Total assets 12,389
------------
Current liabilities
Management fee payable 5 (15)
Other payables (80)
Total liabilities (95)
Net assets 12,294
============
Equity
Share Capital 10 12,214
Capital reserve 252
Revenue reserve (172)
Total equity 12,294
============
Net Asset Value per Ordinary Share
(pence) 11 96.42
Number of Ordinary Shares in issue 10 12,750,010
Approved by the Board of Directors and authorised for issue on 1
September 2023 and signed on their behalf:
_______________________
Director
The notes form an integral part of these Unaudited Condensed
Interim Financial Statements.
Unaudited Condensed Statement of Changes in Equity
For the 5 month period ended 30 June 2023
Share Revenue Capital
capital reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'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 form an integral part of these Unaudited Condensed
Interim Financial Statements.
Unaudited Condensed Statement of Cash Flows
For the 5 month period ended 30 June 2023
Period from
31 January
2023
to 30 June
2023
Notes GBP'000
(unaudited)
Cash flows from operating activities
Other expense payments 12 (110)
Interest income 6
Purchase of UK Government Debt 9 (13,908)
Sale of UK Government Debt 9 5,248
Net cash outflow from operating
activities (8,764)
------------
Cash flows from investing activities
Purchase of equity instruments 9 (2,200)
Sale of equity instruments 9 32
Net cash outflow from investing
activities (2,168)
------------
Cash flows from financing activities
Issue of Ordinary Shares 10 12,750
Share issue costs 10 (536)
Net cash inflow from financing activities 12,214
------------
Net increase in cash and cash equivalents 1,282
Cash and cash equivalents at beginning
of period -
Cash and cash equivalents at end
of period 1,282
============
Cash and cash equivalents comprise
of the following:
Cash at bank 1,282
1,282
============
The notes form an integral part of these Unaudited Condensed
Interim Financial Statements.
Notes to the Unaudited Condensed Interim Financial
Statements
For the 5 month period ended 30 June 2023
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 Board of Directors comprises Andrew Henton, Susan
Norman, Henry Freeman and Luke Allen, all of whom are non-executive
and considered to be independent.
The Company's 12,750,010 shares in issue under ticker ONWD,
SEDOL BMZR151 and ISIN GG00BMZR1514 were admitted to trading on
AIM, on 30 March 2023. The Company is also a member of the AIC. The
Unaudited Condensed Interim Financial Statements of the Company are
presented for the five month period ended 30 June 2023.
The Company and its Alternative Investment Fund Manager received
discretionary portfolio management services directly from Dowgate
Wealth Limited ("DWL") during the five month period ended 30 June
2023. The administration of the Company is delegated to Maitland
Administration (Guernsey) Limited ("MAGL") (the "Administrator"),
an Apex Group company.
2. Significant 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.
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, energy shortages, inflation, increases in
interest rates, recent bank failures and other uncertainties
impacting on the Company's investments, their financial position
and liquidity requirements.
At period end the Company had a net asset position of
GBP12,294,000 comprising cash of GBP1,282,000, listed investments
amounting to GBP2,331,000 and UK Government Debt of
GBP8,749,000.
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 sources and uses of liquidity.
(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
Unaudited Condensed Interim Financial Statements.
(d) Functional and presentational currency
The Unaudited Condensed Interim 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 Unaudited Condensed Interim Financial Statements,
the results and financial position of the Company are expressed in
pound sterling ("GBP"). 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 Unaudited Condensed Statement
of Comprehensive Income. Interest income includes interest earned
on 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 Unaudited Condensed
Statement of Comprehensive Income and are charged to revenue.
Performance fee is charged to the capital column in the Unaudited
Condensed 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 period. Exemption is applied and granted annually
and subject to the payment of a fee, currently GBP1,200.
(i) Financial instruments
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.
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.
In respect of unquoted instruments, including associates, or
where the market for a financial instrument is not active, fair
value is established by using recognised valuation methodologies,
in accordance with International Private Equity and Venture Capital
Valuation Guidelines ("IPEVC").
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 unquoted securities valuation policy and the associated
valuation procedures are subject to review on a regular basis, and
updated as appropriate, in line with industry best practice. In
addition, the Company works with independent third-party valuation
firms, to obtain assistance, advice, assurance, and documentation
in relation to the ongoing valuation process.
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 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 significant 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 Unaudited Condensed 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
significant input) at the date of the event that caused the
transfer.
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 Unaudited Condensed Statement of Comprehensive Income.
Equity instruments
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 period end
was cash at bank of GBP1,282,000.
(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 (GBP) at the
rate of exchange ruling at the date of the transaction.
Foreign exchange gains and losses arising from translation are
included in the Unaudited Condensed 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 Unaudited Condensed 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
Unaudited Condensed 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 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
There are no accounting standards and their amendments that were
in issue at the period end but will not be in effect until after
this financial period end.
5. Investment management and performance fees
31 January
2023
to 30 June
2023
GBP'000
Investment management fees 47
Total investment management fees 47
===========
The Company procures portfolio management services directly from
DWL, under the Portfolio Management Agreement.
Management fee
The monthly management fee is equal to of 1.5% of the Net Asset
Value is up to and including GBP50m and 1% of the Net Asset Value
that is above GBP50m (the "Management Fee"). The management fee is
calculated and paid monthly in arrears.
As at 30 June 2023, an amount of GBP15,183 was outstanding in
respect of management fees.
Performance fee
For the period ended 31 December 2023, 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 period will be the period commencing on 30 March 2023
and ending on 31 December 2023 (the "Calculation Period").
As at 30 June 2023, the Company had not exceeded the High Water
Mark and Performance Hurdle therefore an accrual of GBPnil for
performance fees has been reflected within these Unaudited
Condensed Interim Financial Statements.
6. Other expenses
31 January
2023 to 30
June
2023
GBP'000
Directors' fees 32
Administration fee 20
Auditor's remuneration for:
- audit fees 10
- non-audit fees 13
Custodian fees 4
Broker fees 3
Registrars' fees 1
Listing fees 3
Regulatory fees 25
Legal fee and professional fees:
- ongoing operations 10
Directors' liability insurance 1
Sundry expenses 9
Total other expenses 131
============
7. (Loss) / Gain per Ordinary Share
30 June 2023
Net return Per share
GBP'000 pence
Revenue return (172) (1.35)
Capital return 252 1.98
At 30 June 80 0.63
=========== ===========
Weighted average number of Ordinary
Shares 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.
9. Investments held at fair value through profit or loss
UK Government Equity
Debt instruments
30 June 30 June
2023 2023
GBP'000 GBP'000
Opening book cost - -
Opening investment holding unrealised - -
gains
Opening valuation - -
Movements in the period
Purchases at cost 13,908 2,200
Sales - proceeds (5,248) (32)
Net gains on investments held at fair
value
through profit or loss 89 163
Closing valuation 8,749 2,331
============== =============
Closing book cost 8,660 2,168
Closing investment holding unrealised
gains 89 163
Closing valuation 8,749 2,331
============== =============
UK Government Equity
Debt instruments
30 June 30 June
2023 2023
GBP'000 GBP'000
Movement in unrealised gains
during the period 79 230
Movement in unrealised losses
during the period (19) (71)
Realised gain on sale of investments 29 4
Net gain on investments held
at fair value through profit
or loss 89 163
============== =============
10. Share capital
No of
shares GBP'000
Ordinary Shares at no par value
Opening balance as at 31 January 2023 - -
Issue of shares 12,750,010 12,750
Issue costs - (536)
At 30 June 2023 12,750,010 12,214
=========== ========
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.
11. 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 2023
NAV NAV
per share attributable
pence GBP'000
Ordinary Shares: basic
and diluted 96.42 12,294
The Net Asset Value per Ordinary Share is based on 12,750,010
Ordinary Shares, being the number of Ordinary Shares in issue at
the period end.
12. Other expense payments
30 June
2023
GBP'000
Total gains for the period 80
Net gains on investments held at fair value
through profit or loss (252)
Interest income (6)
Movement in working capital
(Increase) in other receivables (27)
Increase in payables 95
Total other expense payments (110 )
========
13. 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 Unaudited Condensed 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 period 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;
-- 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 2023 Level Level Level Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Equity instruments 2,331 - - 2,331
UK Government Debt 8,749 - - 8,749
11,080 - - 11,080
========= ======== ======== ========
The Company only has 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
2023
GBP'000
Level
1
Opening balance -
Purchases at cost 16,108
Sales at cost (5,280)
Total gains included in net gains
on investments in the Unaudited
Condensed Statement of Comprehensive
Income
- on assets sold 33
- on assets held at period
end 219
11,080
========
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.
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 30
June 2023, the impact on the net asset value would have been
GBP1,108,031/-GBP1,108,031. The calculations are based on the
investment portfolio valuation as at the Unaudited Condensed
Statement of Financial Position date and are not necessarily
representative of the year as a whole.
Interest rate risk
As at 30 June 2023 the financial assets and financial
liabilities exposed to interest rate risk are as shown below:
In one Greater
year than 2023
or less one year Total
GBP'000 GBP'000 GBP'000
Cash at bank 1,282 - 1,282
UK Government Debt 8,749 - 8,749
Total 10,031 - 10,031
======== ========= ========
Liquidity and interest risk tables
The following tables detail the Company's remaining contractual
maturity for its current financial assets and liabilities.
Over
Interest Year Year 2 years Total
1 1 - 2
2023 rate % GBP'000 GBP'000 GBP'000 GBP'000
Assets
Daily bank
Cash at bank rate 1,282 - - 1,282
0% fixed
UK Treasury bills rate 6,508 - - 6,508
Variable
UK Gilts coupon rate 2,241 - - 2,241
Interest
Other receivables free 27 - - 27
Total 10,058 - - 10,058
======== ======== ======== ========
Over
Interest Year Year 2 years Total
1 1 - 2
2023 rate % GBP'000 GBP'000 GBP'000 GBP'000
Liabilities
Interest
Other current liabilities free 95 - - 95
Total 95 - - 95
======== ======== ======== ========
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 Unaudited Condensed 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:
2023
Total
GBP'000
Cash at bank 1,282
UK Government Debt 8,749
Other receivables 27
Total 10,058
========
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 AA 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 GBP1,282,000 was held with Butterfield Bank (Guernsey)
Limited and Alpha FX Group plc at period end.
The credit rating of Butterfield Bank (Guernsey) Limited was A2
and Alpha FX Group plc was B at the period end.
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.
Between Between
3 and 1 and
Up to 12 5 Total
3 months months years Total
2023 GBP GBP GBP GBP
Assets
1,282 - - 1,282
Cash at bank 313333 313333
UK Government Debt 8,749 - - 8,749
Other receivables 27 - - 27
Liabilities
Current liabilities (95) - - (95)
Total 9,963 - - 9,963
========= ======== ======== ========
Capital management objectives, policies and procedures
The structure of the Company's capital is described in note 10
and details of the Company's reserves are shown in the Unaudited
Condensed Statement of Changes in Equity.
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
investments in unquoted companies.
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.
14. Related parties
DWL provides portfolio management services to the Company.
31 January
2023 to
30 June
2023
GBP'000
Management fee charged
by DWL:
Total management fee charged 47
Management fee outstanding 15
Total AIFM fee recharged (13)
AIFM fee recharge outstanding (8)
AIFM fee charged by FundRock:
Total AIFM fee charged 13
AIFM fee outstanding 8
Directors' fees
Total Directors ' fees
charged 32
Directors' fees outstanding 17
As at 30 June 2023 the following Directors have holdings in the
Company:
Number of % Ordinary Shares in
Director Ordinary Shares issue as at 30 June 2023
Andrew Henton 100,000 0.0078
Susan Norman 20,000 0.0016
15. Post statement of financial position events
There has not been any 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 period.
Corporate Information
Directors
Andrew Henton, Chairman
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
Cenkos Securities plc
6-8 Tokenhouse Yard
London
EC2R 7AS
Joint Broker
Dowgate Capital Limited
15 Fetter Lane
London
EC4A 1BW
Administrator and Company Secretary
Maitland Administration (Guernsey) Limited, an Apex group
company
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
Channel Islands
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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END
IR BXGDCUDGDGXX
(END) Dow Jones Newswires
September 04, 2023 02:00 ET (06:00 GMT)
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