Odyssean Investment Trust PLC · LSE:OIT
Odyssean Investment Trust — Q4 2023 Earnings Presentation
43 slides from Odyssean Investment Trust's earnings presentation, January 2024
Slide 1: Odyssean Investment Trust PLC Q4 2023 Update
Odyssean Investment Trust PLC Q4 2023 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 In
Slide 3: Executive Summary – Q4 2023
Executive Summary – Q4 2023 NAV slightly down in a rising market • NAV per share fell 1.2%1,2 in the period. NSCI +AIM ex IC index (“Comparator”) rose 6.9% 2,3 • Key portfolio news: Ascential announced sale of WGSN and Digital commerce businesses and a material cash return to shareholders Elementis
Slide 4: Performance update
Performance update NAV per share fell c.1.2% in Q4 in a rising market Performance % Annualised Inception Since Q4-23 CY23 CY22 CY21 CY20 CY19 since to Dec-18 inception inception NAV Total Return Per Share1 -1.2% -10.4% +5.5% +25.0% +13.1% +22.0% -3.7% +56.9% +8.3% Share price return3 +1.1% -9.3% +5.
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 CAGR CAGR 30 June 2009 – 31 December 2023 Over 14.5 years Whilst invested 1000 900 800 Strategy 15.1% 16.6% 700 out
Slide 6: M&A activity shows value in UK stocks
M&A activity shows value in UK stocks Industrials sector has been under-represented in bids to date • The value in UK stock markets is demonstrated by the level of M&A activity in the past year. 2023 saw 40 bids for listed 2023 - Split of # bids by sector companies with equity values over £100m • c.
Slide 7: Performance drivers in Q4 2023
Performance drivers in Q4 2023 Key stock contributors Largest positive contributors Largest negative contributors • Disappointing trading update downgraded FY24 • Announced sale of Product Design and expectations on China construction market Digital Commerce divisions for combined headwinds and dela
Slide 8: Ascential
Ascential Announced disposals offer significant capital return to shareholders • On 30th October 2023 Ascential announced the sale of its Product Design division for £700m and its Digital Commerce division of c£740m. The combined valuation of c.£1.4bn is broadly in-line with the levels we included i
Slide 9: Xaar
Xaar What has happened. Why we remain positive about the investment What has happened? What are our views? • Trading update in November 2023 flagged cost actions would • Following the announcement, we had follow up calls with both the deliver FY23 ahead of expectations but several headwinds executiv
Slide 10: Xaar
Xaar Despite near term challenges, a number of data points point to long term opportunity Xaar new product launches …pipeline of machines in …EV/Sales rating undemanding vs expand addressable market 4x… development with Xaar technology history 200 growing 7.0x 11 6.0x 160 5 63 5.0x 120 61 4.0x 80 3.
Slide 11: Elementis
Elementis Capital Markets Day flagged cost savings and revenue initiatives, not reflected in market expectations What has happened? • Elementis hosted a Capital Markets Day in November setting $m out revised targets for 2026 • Operating margin 19% (assuming no market recovery) • >90% cash conversion
Slide 12: Portfolio
Portfolio High conviction portfolio Top portfolio holdings¹ Ascential • Top 10 holdings account for 86% of NAV NCC • Continuing quieter period for portfolio activity – 2.5% no new positions or exits Elementis 3.8% 8.4% 14.5% XPPower • Material further investments made into James 4.6% Fisher and Xaar
Slide 13: Portfolio
Portfolio Focused on our core sectors and core market cap range Holding by sector 1 Holding by market cap 1 2.5% 2.5% 15.9% Sub £100m 15.1% 9.9% Industrials £100m-£500m 10.5% TMT 48.1% £500m-£1bn Business Services Healthcare 22.0% Over £1bn 29.0% Cash + Other 44.5% Net cash • Industrials remains the
Slide 14: Portfolio trading significantly below long run ratings
Portfolio trading significantly below long run ratings Any return towards recent average ratings suggests significant upside in the portfolio Implied share price upside Current 10 year av. Current 10 year av. on reversion to 10 year av. Company % NAV EV/Sales EV/Sales P/Book P/Book EV/Sales P/Book A
Slide 15: UK Smaller Companies can provide global exposure
UK Smaller Companies can provide global exposure OIT’s portfolio is more international currently than the FTSE 100 Revenue exposure by geography1, 2, 3 • Portfolio revenue generation is balanced by 100% geographic area, which we believe spreads political ROW and economic risk 90% 80% • Few companies
Slide 16: 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 Portfolio of leading sector events, B2B and Digital Commerce Break up in progress platforms Global market leader with high quality industrial tal
Slide 17: Key portfolio themes by sub-sector
Key portfolio themes by sub-sector Account for c.97% of NAV • Market share recovery following improved supply chain and new product introductions • Low capital intensity and well invested -> growth not capex hungry Specialist B2B • Products enable substantial energy cost savings Electronics (28% NAV
Slide 18: Special situations across the portfolio
Special situations across the portfolio Lots of ways for companies to create/unlock value Material cost Market share Margin Undervalued/ SOTP¹ Geographic Holding synergies for a growth/ Other improvement hidden growth discount arbitrage trade buyer recovery Break up ✓ ✓✓ ✓✓ ? ✓ announced Mineral ass
Slide 19: US equities peaked at >100% premium to Quest during 2021
US equities peaked at >100% premium to Quest during 2021 UK equities trade at the largest discount to Quest® fair value of major markets Aggregate Market Value (Discount)/Premium to Default Quest® fair value 75% 68% 50% 39% 41% 22% 27% 25% 19% 25% 16% 0% 3% 0% -6% -25% -22% -22% -21% -50% World USA
Slide 20: Historic UK equity returns from current valuations
Historic UK equity returns from current valuations Implies above long-term trend returns for the next 5 years for UK Small Cap Subsequent annualised returns from current starting trailing p/e valuations As at 3rd January 2024 & period since 1996 25% 24.1% 20% 18.0% 16.0% 15% 13.6% 12.3% 10.8% 10.2%
Slide 21: Outflows from UK SMID OEICs still c.£100m per month
Outflows from UK SMID OEICs still c.£100m per month Mitigated by increased M&A in Nov and Dec 2023? £bn Fund flows for UK SMID OEICs1 £bn Rolling 3 month net flows 1.5 12.5% 0.8 10.0% 0.6 1.0 7.5% 0.4 5.0% 0.5 2.5% 0.2 0.0 0.0% 0.0 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-2
Slide 22: UK All Companies OEICs have experienced high outflows YTD
UK All Companies OEICs have experienced high outflows YTD YTD outflows remain high £bn Fund flows for UK All Company OEICs1 7.5 7.5% 5.0 5.0% 2.5 2.5% 0.0 0.0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 -2.5 -2.5% -5.0 -5.0% -7.5 -7.5% -10.0 -10.0% -12.5 Net flow (£bn) % of opening
Slide 23: The investment cycle
The investment cycle Looking for signs of improving fundamentals in UK Equities? 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 sheet Value Growt
Slide 24: Supporting Portfolio & Market Data
Supporting Portfolio & Market Data
Slide 25: Outlook - update
Outlook - update We remain optimistic for the medium term Overall market conditions • Market sentiment remains poor (with the exception of the Super 7 Mega Cap US Tech companies) • Outflows continue at a lower rate in UK SMID OEICs, recently mitigated by M&A • Liquidity is poor Opportunities & reaso
Slide 26: Why bother investing in UK Smaller Companies?
Why bother investing in UK Smaller Companies? Value of £100 invested at end December 1954. Due a catch up with the All Share? CAGR £700,000 1954-2023 2019-2023 £600,000 13.2% 0.3% £500,000 £400,000 £300,000 £200,000 11.3% 3.3% £100,000 £- 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2
Slide 27: Over the long term, UK Equities' returns have exceeded CPI
Over the long term, UK Equities’ returns have exceeded CPI Higher long-term outperformance from smaller companies December 1954 to December 2023 Value CAGR Δ vs CPI 10,000 5,402 13.2% +8.6% p.a. 1,766 11.3% +6.7% p.a. 1,000 100 22 4.6% 10 1 1954 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 2009
Slide 28: Annualised performance over the decades
Annualised performance over the decades 25% 24% Up until 2020s, the DNSCI & AIM had outperformed CPI in every decade 20% 19% The average outperformance of UK Smaller DSNCI & AIM ex IC Companies vs CPI across these decades is 8.8% 15% CPI Since 2019, UK Smaller Companies have 13% 12% underperformed C
Slide 29: Significant variance of performance across Small Co sector
Significant variance of performance across Small Co sector Close ended funds seem to perform better than open ended and passives UK Smaller Companies sector annualised total returns by fund category/index % Periods to December 2023 15 13.5 11.6 10.3 10 6.7 6.5 5.3 5 4.4 4.0 3.8 3.9 3.3 n/a 0 5 year
Slide 30: Portfolio sector exposure overtime
Portfolio sector exposure overtime Industry exposure shifts driven by where we believe there are opportunities Sectoral split over time 100.0% 1.6% 3.1% 0.4% 0.0% 1.0% 0.0% 2.2% 2.5% 4.4% 3.6% 4.4% 6.5% 0.0% 0.0% 10.2% 8.6% 10.0% 9.6% 8.9% 1.9% 10.9% 11.9% 12.0% 8.5% 10.1% 14.0% 3.1% 6.3% 8.6% 11.5%
Slide 31: ESG - Portfolio company voting record over Q4 2023
ESG - Portfolio company voting record over Q4 2023 Continued to follow our consistent guidelines and raise our concerns where appropriate Number of meetings 6 Number of resolutions 55 Number voted 55 Voted with management 51 Voted against management 4 Abstained 0 Source: Odyssean Capital 31
Slide 32: 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 33: 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 34: 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 23 ye
Slide 35: 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 36: Odyssean Investment Trust - key company facts
Odyssean Investment Trust - key company facts NAV £184m1 Shares in issue 119,242,053 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 Manageme
Slide 37: Further performance data
Further performance data As at 31st December 2023 Performance % 1 year 3 year 5 year NAV Total Return Per Share1 -10.4% +18.1% +63.0% Share price return3 -9.3% +22.5% +64.6% NSCI + AIM ex IC Total Return3 +3.2% -3.3% +24.0% As at 31st December 2023. Performance measured from COB 1/5/18, share perfor
Slide 38: OIT shareholder base
OIT shareholder base As at 31st December 20231 Shareholder base by investor type Shareholders >3% Harwood Capital 1.5% 0.8% Cazenove Capital RBC Brewin Wealth Manager 9.5% 14.0% Ian Armitage Connected Parties 27.0% Close Bros Retail Investors 10.8% Investec Wealth 17.8% Raymond James 50.0% Instituti
Slide 39: 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 40: 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 41: 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 42: 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 43: Contact details
Contact details Portfolio Manager Investor Relations 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 Tel: +44 (0)7710 031620 Tel: +44 (0)20 3008 4910 Email: info@odys
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