Odyssean Investment Trust PLC · LSE:OIT
Odyssean Investment Trust — Q3 2022 Earnings Presentation
38 slides from Odyssean Investment Trust's earnings presentation, October 2022
Slide 1: Odyssean Investment Trust PLC Q3 2022 Update
Odyssean Investment Trust PLC Q3 2022 Update
Slide 2: Important Information
Important Information • The information contained in this presentation is for the use of Professional and Institutional Investors only. • Past performance is not a reliable indicator of future performance and Investors may not get back the value of their original investment • The value of Odyssean I
Slide 3: Executive Summary – Q3 2022
Executive Summary – Q3 2022 NAV decline c.4.3% over the period during a further challenging time for markets • NAV per share fell 4.3%1,2 in the period. NSCI +AIM ex IC index (“Comparator”) fell 7.1% 2,3 • NAV per share fell in the trailing twelve months by 5.3%. Net cash balance averaged 6%. • Comp
Slide 4: Performance update
Performance update NAV down c.4.3% in Q3 in a difficult market. Comparator now negative since IPO Performance % Annualised Inception Since Q3-22 YTD-22 LTM CY21 CY20 CY19 since to Dec-18 inception inception NAV Total Return Per Share1 -4.3% -8.3% -5.3% +25.0% +13.1% +22.0% -3.7% +52.3% +10.0% Share
Slide 5: Our investment strategy has delivered strong long term returns
Our investment strategy has delivered strong long term returns Attractive absolute and relative performance, without any gearing Strategy NAV per share performance since inception1,2,3 30 June 2009 – 30 September 2022 CAGR CAGR 900 Over 13.25 years Whilst invested 800 16.3% 18.1% 700 Strategy 600 ou
Slide 6: Recap on OIT’s investment approach and team
Recap on OIT’s investment approach and team Our approach Our team • Significant performance differential compared with • Experienced investment team & committee, in aggregate growth/momentum and value broader peer group having worked through • Thatcher years • Long only with no derivatives • Black M
Slide 7: Performance drivers in Q3 2022
Performance drivers in Q3 2022 Key stock contributors Largest positive contributors Largest negative contributors • Strong revenue progression in H1 with lighting sales • FY22 results showed strong growth in cyber up 33%, signs of recovery of share in MRO and consulting Assurance division and stabil
Slide 8: The investment cycle
The investment cycle Factors suggest “Bear Market” which will inevitably transition to “Bottom” Market phase Bear Market Bottom Early Stage Mid-Stage Bull Peak of Bull Market Recovery Market General vertical direction (but not horizonal direction) of asset price movements Investment style Balance sh
Slide 9: Quest analysis suggests UK equities are cheap in absolute terms
Quest® analysis suggests UK equities are cheap in absolute terms Within UK equities, most potential upside from UK Small valuations Aggregate Market Value (Discount)/Premium to Default Quest ® fair value 37% 40% 30% 25% 21% 20% 10% 5% 0% -10% -20% -30% -40% -30% -32% -33% -37% -50% UK Large UK Mid 1
Slide 10: Our take on markets…
Our take on markets… ..which drive our views on the near term Market conditions Our views • Equity ratings are undemanding • Markets driven by short term fear not fundamentals • UK SMID equities particularly out of favour and • Clear value in UK SMIDs. Late 2022/early 2023 likely to inexpensive be a
Slide 11: Our tactics – continue existing focus on fundamentals
Our tactics – continue existing focus on fundamentals We seek to avoid cheap “lobster pots” with neither catalysts nor M&A angles Focus Rationale • Niche market leaders with higher quality business models • Market leaders with strong business models and adept management teams will survive and potent
Slide 12: Portfolio
Portfolio High conviction portfolio Top portfolio holdings¹ Elementis • Top 10 holdings account for 72% of NAV NCC • Profits taken from Euromoney following bid with Curtis Banks position fully exited – proceeds re-invested 6.5% 11.6% Xaar • Further investments made into positions oversold 9.6% Flowt
Slide 13: Portfolio
Portfolio Focused on our core sectors and core market cap range Holding by sector 1 Holding by market cap 1 3.5% 6.5% 6.5% 11.6% Industrials 7.0% Sub £100m 8.9% TMT 32.4% £100m-£500m Healthcare £500m-£1bn 11.2% Business Services Over £1bn Financial Services Net cash 39.5% Other Equity 35.5% 12.0% Ca
Slide 14: Portfolio
Portfolio Portfolio has higher proportion of international earnings than the FTSE Small Cap Revenue exposure of portfolio¹,² Revenue exposure of FTSE Small Cap Index3 (NAV weighted exc. cash) (% sales) 22.4% 17.1% UK UK 36.0% US US 10.6% Europe Other Europe / Other 19.3% 9.5% 62.8% RoW RoW 22.2% • P
Slide 15: Top 10 holdings summary
Top 10 holdings summary Niche market leaders, often with international operations and self-help Holding Market position Self-help/engagement opportunities Global market leader with high quality industrial talc and high quality Plant footprint optimisation; more higher value add products; invest hect
Slide 16: Key portfolio themes by sub-sector
Key portfolio themes by sub-sector Account for almost 78% of NAV • Market leading positions – significant strategic value Cyclical • Revenue enhancements (new products; digital) and efficiencies driving self help Industrials • Achieving inflation+ price rises (24% NAV) • We believe self help potenti
Slide 17: Our industrial & electronics holdings had peak earnings 2016-2018
Our industrial & electronics holdings had peak earnings 2016-2018 Little in current valuations for recovery, self-help initiatives, FX and M&A potential? EV/Sales1 EBITA Price to book1 Organic margin growth Self help 2 End markets Potential for M&A2, 3, 4 10 year 10 year Current potential 2 Current
Slide 18: Special situations across the portfolio
Special situations across the portfolio Lots of ways for companies to create/unlock value Material cost Margin Undervalued/ SOTP¹ Geographic Market share Holding synergies for a Other improvement hidden growth discount arbitrage recovery trade buyer Mineral assets ✓ ✓ ✓ ✓ Sell Chromium Scarcity valu
Slide 19: ESG - Portfolio company voting record over Q3 2022
ESG - Portfolio company voting record over Q3 2022 Continued to follow our consistent guidelines and raise our concerns where appropriate Comment Number of meetings 1 Number of resolutions 8 Number voted 8 Voted with management 8 Voted against management 0 Abstained 0 • Quiet period for meetings ove
Slide 20: ESG performance and disclosure
ESG performance and disclosure Improving trend of performance and disclosure ESG performance and disclosure (out of 100) of portfolio companies 60 50 40 30 20 10 0 A B C D E F G H I J K L M N O P Q R Company First year of analysis Latest year Source: CEN ESG Advisory; Odyssean Capital. As at 30th Se
Slide 21: Outlook & Data
Outlook & Data
Slide 22: Outlook
Outlook 2022 has been a difficult year for equity investors. We remain optimistic for the medium term Overall market conditions • Market remains volatile with nervousness across many fronts – inflation/stagflation, energy prices, supply chain disruption, interest rates, recession risk, risk of polic
Slide 23: Global equities about “fair value”. US equities below LT average
Global equities about “fair value”. US equities below LT average UK equities trade at the largest discount to Quest® fair value of major markets Aggregate Market Value (Discount)/Premium to Default Quest ® fair value 80% 60% 41% 40% 36% 27% 26% 17% 20% 2% 5% 0% -20% -13% -16% -40% -30% World USA Eur
Slide 24: UK Small at a discount to Quest FV for first year since 2002
UK Small at a discount to Quest® FV for first year since 2002 UK Small trading at a wider discount than UK Large for the first year since 2002/3 Aggregate Market Value Premium / (discount) to Default Quest ® fair value 80% 67% 60% 55% 50% 46% 46% 46% 42% 40% 33% 36% 31% 30% 27% 27% 20% 18% 18% 20% 1
Slide 25: UK equities have experienced material de-ratings since May-21
UK equities have experienced material de-ratings since May-21 FTSE 250 and NSCI Indices approaching the low of the Global Financial Crisis Forward NTM p/e multiple by FTSE Index1 FTSE AIM premium to FTSE Small Cap Index1 25x OIT IPO OIT IPO 100% 80% 20x 60% 15x 40% 10x 20% 0% 5x -20% 0x -40% May-07
Slide 26: NSCI + AIM ex IT sector ratings
NSCI + AIM ex IT sector ratings Wholesale de-ratings of our target sectors Forward next 12 months PE ratio ex-loss makers1 30x 28.5 27.8 25x 23.4 21.7 20.5 20x 17.9 16.9 17.6 17.8 16.7 16.9 17.1 16.3 16.6 15.5 14.9 14.7 15x 14.3 14.4 14.0 13.5 10.8 10.3 10.3 9.9 10x 8.8 8.7 5x 0x 21/09/2020 06/09/20
Slide 27: Portfolio sector exposure overtime
Portfolio sector exposure overtime Industry exposure shifts driven by where we believe there are opportunities Sectoral split over time 100% 4% 4% 2% 4% 10% 9% 10% 10% 9% 2% 11% 6% 14% 3% 6% 12% 12% 8% 21% 4% 2% 2% 2% 9% 9% 4% 5% 4% 4% 10% 2% 4% 4% 5% 3% 7% 9% 4% 3% 35% 9% 80% 13% 10% 10% 4% 4% 9% 5
Slide 28: Investment strategy recap – neither growth nor value
Investment strategy recap – neither growth nor value Based on 3 pillars: Valuation, Quality and Engagement, with Sector focus Target Zone Valuation • Invest at a significant discount to owner’s valuation • Look for businesses with multiple drivers of equity value growth (sales; margin; rating; free
Slide 29: Sectors we focus on
Sectors we focus on We focus on four key sectors we know well • We believe the best investment decisions are made from a Odyssean: view of main sectors base of knowledge and experience High Low Sector B2B focus ROCE/cash • We focus on sectors where the team has expertise and where cyclicality expert
Slide 30: Corporate engagement
Corporate engagement Goal to augment returns from stock selection • We use engagement to create, defend or recover value • Operational efficiency • Fixed assets and to deliver differentiated returns • R&D allocation • • IP maximisation Capex allocation Asset • The investment team has more than 19 ye
Slide 31: Portfolio construction
Portfolio construction Our strategy is more similar to Private Equity than other Public Equity funds Typical Long Only Odyssean Strategy Typical Private Equity Number of positions 50-100 Up to 25 10-15 Typical position size 1% 3-8% at cost, max 20% 10% Typical holding period Variable 3-5 years 3-5 y
Slide 32: Odyssean Investment Trust - key company facts
Odyssean Investment Trust - key company facts NAV £156m1 Shares in issue 104,045,0531 Domicile UK Full listing, London Stock Exchange Board Fully independent. Owns c.1% of issued share capital. Will use all fees, post tax, to buy shares Internally managed, small registered UK AIFM. Portfolio Managem
Slide 33: OIT shareholder base
OIT shareholder base As at 30th September 20221 Shareholder base by investor type Shareholders >3% Harwood Capital 2.4% 0.9% Cazenove Capital Wealth Manager RBC Brewin 9.2% 16.3% Connected Parties Ian Armitage 29.8% 12.1% Investec Wealth Retail Investors 14.1% Raymond James 52.3% Institutions JM Fin
Slide 34: Disclaimer
Disclaimer The sole purpose of this document is to provide information on Odyssean Investment Trust Plc (“OIT”) and its underlying investment strategy. The information contained in this document is strictly confidential and is intended for the named recipient only. The unauthorised use, disclosure,
Slide 35: Disclaimer
Disclaimer No representation or warranty, either expressed or implied, is or will be made or given and no responsibility or liability is or will be accepted by Odyssean Capital LLP or by any of their respective directors, officers, employees, members, agents or advisers in relation to the accuracy o
Slide 36: Quest Disclaimer
Quest Disclaimer Appendix: Important Disclosures Quest® is at this stage registered in the UK and in the USA, and common law trademark rights are asserted in other jurisdictions. For the purposes of UK regulation Canaccord Genuity Limited (“CGL”) produces non-independent research which is a marketin
Slide 37: Quest Disclaimer
Quest Disclaimer objectives, and investors should make their own independent decisions regarding any securities or strategies discussed herein. Please contact your salesperson for more information regarding Canaccord Genuity’s research. General Disclaimers See “Required Company-Specific Disclosures”
Slide 38: Contact details
Contact details Portfolio Manager Distribution Partner Odyssean Capital LLP Frostrow Capital LLP 6 Stratton Street 25 Southampton Buildings London London W1J 8LD WC2A 1AL www.odysseancapital.com www.frostrow.com Stuart Widdowson David Harris Tel: 07710 031620 Tel: 020 3008 4910 Email: info@odysseanc
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