Oakley Capital Investments Limited

Good morning everyone and welcome to Oakley Capital Investments 2022 interim results webcast. My name is Andrew Honour, Managing Partner at Greenbrook and I'll be hosting today's session. Should you have any questions during the presentation, they can be submitted in writing throughout the session via the Q&A button.

at the top of the web page there'll be time at the end of the presentation uh to answer the questions so i'll now hand over to stephen treget oakley part capital partner to present the results stephen thank you andrew and a warm welcome to those joining us for a review of the oci interim results a six-month period of continued strong performance from oci and the underlying oakley funds We wanted to kick things off with this photo, not so that I can break the news of some unexpected investments in driveshafts, but because it touches on four key factors that have helped deliver growth for Oakley-backed companies to date and will continue to drive it going forward. The photo that you can hopefully see on your screen is of a testing and inspection engineer, one of the services provided by the newly signed investment in Fenner Group. a leading platform in testing, inspection, certification and compliance, the tick sector. Fenner was one of seven investments made so far this year, four of which were in new platform deals, backing proven business founders, demonstrating Oakley's ability to source attractive new entrepreneur-led opportunities, despite the wider fall-off in deal activity. Secondly, Fenner like the portfolio companies it joins, is a high growth profitable company. The average EBITDA growth of the portfolio to June was just under 20%. And encouraging the average growth of the new platform deals is more than twice that. Thirdly, one of Fenner's key features is that its growth and resilience is driven by regulatory trends. Customer demand, which is typically non-discretionary due to mandatory testing requirements. is another example of the mega trends that oakley invest behind like the continuing and enduring shift of consumers and businesses to online solutions and fourthly the equity value we expect to generate in this investment isn't predicated on a strong market backdrop fenner is to be the acquirer of choice for the best of breed specialist tech companies in what is a highly fragmented market. And so that ends a week after announcing Fenner, we have already signed a bolt on of CTS Group, a leading UK provider of testing and inspection services. Buy and build strategies like this are just one example of Oakley's value creation tools, which gives us the ability to impact outcomes. So turning to the headline numbers of a strong market-leading six-month performance. Based on the portfolio being fully revalued at the half year, the NAV per share has risen from 538 pence in December to 630 pence at the end of June. A total NAV return in the period of 17%, which continues OCI's long-term growth track record, with its five-year average annual return now standing at 23%. This sustained NAV growth is delivering scale for OCI with net assets now over the £1 billion mark. It's not for me to comment on the appropriateness of the current OCI valuation, but it currently trades on a 37% discount to this NAV. As the NAV per share bar chart shows here, performance momentum is building thanks to an established portfolio and a focused investment strategy. A performance we believe is repeatable in the years ahead. Now we take a look at what drove this recent NAV growth. In short, portfolio company financial performance was the key driver in the peer with 72% of portfolio company growth being driven by the increase in EBITDA over the year. The Oakley portfolio companies grew their EBITDA organically at an average 18%. This double digit growth comes after a very strong in part COVID boosted performance in the prior and comparable period, and is being delivered against the backdrop this year of economic disruption. Central to this growth is three irreversible long-term trends. One, business migration to the cloud. Two, the consumer shift to online. And three, the growing global demand for quality and accessible education. The largest contributor to OCI's NAV, which was based predominantly on their financial performance was IU Group, which added 38 pence to the NAV per share in the period. Germany's largest and fastest growing university offers accessible and affordable higher education to students around the world. Its scalable online platform is now delivering over 550 different learning offerings and saw enrollments increase 40% in the year so far, such that today, the university has around 100,000 students. In Grupo Puravera, we saw the addition of eight pence to NAV in the period as it fulfilled its mission to become the number one independent business software platform in the Iberian market. And in its leading market position, it's benefiting from the increased adoption of SaaS solutions among SMEs that are less digitized than their European peers. We recently announced the exciting strategic combination of the business with Sajid, one of the leading global providers of cloud-based management solutions. Whilst 28% of the portfolio value was due to multiple expansion, the vast majority of this, over 90%, was as a result of uplifts based on agreed exits. So in other words, not speculative increases in EV EBITDA multiples, but based on the price of agreed transactions, which included Factula, CTAG, and Contabo. The latter's performance added 26 pence to the NAV per share in H1, a combination of the company continuing to see the data super cycle drive demand for its high-quality web hosting services and the multiple uplift based on the agreed sale of a stake to KKR. The average EV EBITDA of the portfolio companies now stands at 13.7 times, which remains conservative when compared to the average earnings growth of the portfolio, and especially when compared to the listed growth tech companies. We've spoken in the past some of the factors which could give investors confidence in net asset values. These include independent valuations conducted on behalf of OCI, that the manager isn't incentivized to aggressively value the portfolio as it has no bearing on its management or performance fees. These performance fees are based on realizations and nothing else. And the current applied multiples more typically reflect the below market valuation paid at entry rather than, for example, a volatile public market peer group multiple should listed peers exist. Of course, The biggest proof point of the robustness of an NAV is how the portfolio company valuations compare to the price an acquirer is ultimately willing to pay for them. Since inception, Oakley has continued to demonstrate not only the appeal of the portfolio companies to larger PE sponsors, and these include in the recent last couple of years, the likes of EQT, CVC, KKR, Silver Lake and others. But on average, it has realized holdings at a 52% premium to the valuation on the book at the time. Despite the market backdrop, this trend has continued in 2022. Deals completed or signed year to date being an average 68% premium to book. One of the single biggest appeals of the portfolio are its business models being based on digital disruption. Whilst the investments sit within one of our three focus sectors, technology, consumer and education, the most common theme amongst them is that nearly three quarters deliver their products or services digitally. And of the remainder that sit outside of the technology subset, we are exploring the adoption of digital solutions as part of the investment thesis. We often highlight this, but it's all the more important on certain times that 75% of the portfolio or 20 of the now 26 companies enjoy an increasing level of subscription-based or recurring revenue. With this visibility attracting increasing valuations as Tech Insight demonstrated at the turn of the year. Here we break down the 1.1 billion of asset value into the exposure to the underlying portfolio companies. For those counting, there are 24 companies on this slide with Velex and Fenner yet to arrive in the portfolio at the 30th of June. As you can see, the asset value is fairly evenly split between the three focus sectors. It also is also reasonably evenly split by underlying companies. IU Group, which we spoke to earlier, is by far the largest equity look through holding with a nearly £200 million exposure to the online university. This is encouraging, given it's currently one of the top three fastest growing companies within the portfolio. OCI retains two direct holdings, one in the equity of Time Out and the other in the debt of NorthSouth, both the Sailing Manufacturing Division and the Apparel Division. It is pleasing to report improving and profitable growth in both companies after both suffered significantly at the hands of the pandemic and required additional support from OCI as a result. As this map shows, there has not been a sudden foray outside of our region of expertise with the portfolio largely residing in Western and Southern Europe. Based on our expertise and network, this will remain the fund's geographic footprint. I should note, however, that we are less geography-led in our origination, but primarily opportunity and sector-led. We're not oblivious to the rising threats to economic and geopolitical stability in Europe and globally. And in fact, we anticipate a very challenging global operating environment lies ahead. We certainly aren't impervious to this threat either, although we are in a far more resilient position than most. As we did at the fall year, we continue to gauge the impact of the prevailing macro issues. We have no investments in Russia, Belarus or Ukraine, so no or very little direct impact is possible as a result of the war in the region. As you may imagine, there is a largely digitally-led portfolio that supply chain disruption will modestly impact OCI. We have anticipated rising Asia-related input costs like shipping and raw materials for the consumer businesses like NorthSouth, Alessi and Globetrotter. As for interest rates, with an average net debt EBITDA across the portfolio of 3.9 times, the portfolio companies are conservatively levered, especially given their growth and when compared to the wider PE market. Rising rates are expected to have a near-term impact on demand for mortgages and loans, and this will in turn impact price comparison platforms, at home and factually, and online property portal, Idealista. Countering this, however, is the structural shift in demand for these platforms due to the relatively low internet and economic e-commerce penetration in Southern Europe. And finally, rising inflation. Wage inflation, rising corporate energy bills and other cost inflation and the likely drop in consumer demand due to the steep increase in the rising cost of living will stand to impact some 40% of the portfolio companies. In our favor, however, is that one, many of the companies provide lower cost business or consumer solutions like, for example, 7NXT's fitness app, Jamondo. Two, in a rising cost environment, price comparison websites actually prosper. Three, many of the companies have been or can pass on price rises given the relatively low cost of a mission-critical service like, for example, that provided by web hosting software provider, web pros. And four, technologies tend to carry smaller asset bases and less input costs as a result. Whilst we are alive to these impacts and have forecasted accordingly, the most critical counter to these threats is our ability to impact outcomes. One of the key pillars of performance for Oakley since inception is value creation. We can impact value creation because in many cases we have a majority shareholding, we have seats on the board, and we have a very active and productive relationship with the founding partners and the managers of those businesses. We've outlined four of the strategies within value creation that we are most prolific at, all enable us to drive value regardless of the economic cycle or operating environment. In the interest of time, I'll touch on two of these. the improvement of quality of earnings. This is best illustrated through the work done with Tech Insights, the technical content platform for silicon microchips. The quality of the company's earnings was transformed from a 20% subscription revenue on acquisition in 2017, growing to over 65% today. This is one of the key drivers for the equity valuation increasing almost 18 times over this period. And secondly, digitization, taking offline companies or those with an early-stage digital solution and driving the growth of that channel. Alessi was a great example of this. It was loss-making in 2019, had very modest online sales, less than 5%. Thanks in part to a, although present, a dysfunctional third-party-provided website. Two years later, and despite of COVID, and with an entirely new management, sales are up 50%. And just as importantly, after a full revamp of its digital channels and marketing, 30% sales are e-commerce. And the EBITDA on the current year is growing over 30% this year and is expected to exceed 6 million euros. Changing tack to look at OCI's resources and outstanding commitments, the company The company has outstanding Oakley Fund commitments of $993 million as at the 30th of June. The majority of this is its commitments to the recently launched Fund 5. The second bar in the chart in gray breaks this down into the expected timing of the drawdowns, i.e., when will the Oakley Fund need cash committed to them? There is $160 million expected to be called in the next six months, 500 in the next 12 months, 575 million set to be called after 12 months and over a five-year period. And finally, 275 million is not expected to be called as a result of the use of fund facilities or the fact that funds are never or rarely 100% drawn, but closer to 80%. Set against these commitments are 307 million of liquid resources, which is 97 million of cash at 30th of June, 100 million unused credit facility and 110 million of proceeds expected from signed but not yet completed transactions. This provides a healthy level of cover should the Oakley funds not have any further exits or refinancings in the next couple of years. In reality though, distributions from the funds as a result of realizations, the orange bar on this chart, have consistently raw or broadly matched or exceeded the capital calls required to fund investments the purple bars 2022 will prove no different the 30th of june there has been 43 million of capital calls and 33 million of distributions and and significantly the level of activity that has been announced is and and anticipated going forward this year is expected to be on a similarly balanced basis Supporting this is the 470 million of value in the portfolio at the half year residing in investments that have been held for over three years. Given the average holding period of an investment is three and a half years, we can reasonably expect to see more realizations in the 12 months ahead. Before touching on some of the recent activity in the portfolio, we thought it was worth summarizing the status of the broader PE markets. Falling high levels of recent fundraising coupled with outperformance of PE has reduced the available allocation to the asset class in tandem with market uncertainty leading to significantly lower levels of fundraising activity in Europe in funds raised and fund count. The events in wider Europe have also prompted some caution in places from US and Asian investors. And from our experience, institutions have been less likely to automatically back managers whose funds have invested historically, a break from what has been quite a long-term trend. In contrast to this fundraising trend so far this year, and on the strength of Oakley's track record, Fund 5 has exceeded its 2.5 billion euro target in a very short timeframe. Despite this decline in funds raised, dry powder, i.e., the undeployed capital that sits within PE funds sits at record highs with circa 2 trillion in PE buyout funds. This dry powder predominantly sits in the large global PE funds and encouragingly for the Oakley funds and OCI, these are the sponsors that continue to pursue investments in the Oakley portfolio companies. In times of rising uncertainty, it becomes harder to forecast performance and price risk. The disparity between buyers and sellers and their target pricing kind of widens. Again, record levels of activity. And sorry, this is reflected in the drop in the levels of activity, significant drop that we have seen in the year so far. However, again, looking at Oakley, Record levels of activity demonstrates the quality and visibility of the investments realized and the desire for business founders to continue to partner with us. With the set-off in consumer cyclicals and technology growth stocks, The average EV of it does in which European P firms are acquiring businesses in the year so far has significantly dropped, dropped down to 11 times. It reflects that smaller pool of target companies. It reflects the fact that there are less deals happening in some of the higher rated businesses because of that disparity between what buyers and sellers want to achieve for their companies. But against this backdrop, Oakley has continued to realise companies and realise companies at an average realisation about 18 times, demonstrating the strength and appeal once again of the Oakley portfolio companies. On this subject of deal activity, I'll close by talking to Oakley's origination and the new investment sourced in the year to date. Those that know OCI and Oakley well will know that central to our success is origination of off-market opportunities through our business founder network. As a result, we are in 90% of cases the first institutional investor in these businesses in a process which is in 80% of cases uncontested. Given their ownership and being the first PE investors into these businesses, there tends to be some mess to navigate. If you can deal with this complexity, this risk, then you can unearth some attractive entry multiples as a result. The knowledge gained from these deals leads to deepening industry insights and the identification of further adjacent opportunities. That sector mapping and that knowledge of the industry and the wider industry that we've been developing through our work in business services led us to identify the opportunity of Fenner recently. Oakley's origination has on earth four attractive new platform investments in the year so far. They include Vice, the digital first golf brand, selling its premium golf balls direct to consumers at 40% below competing brands. Velex, Spain's fastest growing cloud-based legal information platform. Affinitas, a roll-up in the fragmented premium private schools group, a sector we know incredibly well with historic and successful roll-ups in private schools and also ongoing roll-ups in other areas of education currently. And finally, Fenner, back where we started at the beginning of this presentation, one of the fastest growing tech groups globally with a revenue growth of circa 100% CAGR over the last three years, providing specialist testing and inspection services across infrastructure, the built environment, needs, industrial, pharmaceutical and certification and compliance division. The business operates across 12 countries in four continents. These are not only high growth, profitable companies that can sit within our focus sectors, but as importantly, they are typically deals by virtue of them being both disruptive business models and being led by impressive founders. Ingo, Rainer and Gail, Victor and Paul are all founders of their businesses who have chosen Oakley to partner with on the next stage of their growth. We highlight here the three companies we have reinvested in, selling out of one fund and reinvesting into another. In these three examples, we are reinvesting for a number of reasons, not only because we think there is a good runway, existing runway of growth, and we have the information advantage gained from the kind of intellectual capital, the monetary capital that we've invested in these businesses going forward, but also we see new opportunities as a result of the incoming large global PE sponsors that we've brought on site. And a number of these opportunities There are also the opportunity for consolidation with significant large players to create not only a very dominant position throughout a much larger footprint in Europe, but also create some significant synergies and for some growth for the growth potential as products are shared across a kind of wider footprint. Finally, closing the discounts. you pour i'm just going to pause for a second um as i can no longer see um the presentation on the screen um the as as you know we we there's an element of control we can never close the discount but much is at the whim of the market um we've always also maintained that share price performance in listed P and investment trusts is much closer tracks NAV growth, which is something we can have some control over. However, we have always stated and the board has maintained that we will do anything that's possible to continue to help the closing of this discount. We've separated this into four categories. The first being the broader listed P point of kind of creating further confidence in valuations, further confidence in NAV. How do we do this? I think from an Oakley perspective and from an OCI perspective, we continue this by proving that we have a fair market methodologies, that we follow very strict guidelines and that we have what can be considered to be pretty conservative valuations applied to our underlying portfolio companies. And those that know us well know we track more the entry valuation of a business rather than kind of live market potential pricing of a business. The integrity of those valuations will continue to be borne out by the price in which we sell assets at, and particularly achieving those premiums despite the public market sell-off. This year, I think, is incredibly important, not just for OCI, but for listed P in general. If we can outperform public markets, can prove that we can continue to perform in spite of the market backdrop, and continue to be active and sell assets at or above NAV, then I think we should see a re-rating of, if not at the least, OCI, the kind of broader sector, over the coming year. Now turning to slightly more OCI-specific points, one of the key things for people to have faith in an NAV and therefore for shares to close to trade closer to it is reporting quality the availability of information and the frequency of which that available that information is available in the last two years OCI's reporting and reporting accounts and fact sheets have improved enormously in quality, and this has been endorsed by industry awards, naming OCI's reports as being best in class throughout the investment trust, alternative investment trust universe. We will continue to strive to be exactly that, best in class. We've also adopted quarterly NAVs, the first of which we implemented at the end of Q1, and that will continue going forward. that impact should be felt immediately, but the more consistent that we do it, the more likely it's going to have an impact. Performance and scale, frankly, I think performance over the last kind of five years in a relatively strong bull market has been taken for granted. It's been offset against the fact that a lot of asset classes have performed well, and there's been a rising tide, particularly within private equity. If we can continue in a disruptive market to perform in line with our five-year NAV return CAGR, that 23%. The more consistently we deliver that despite disruption, then the more confidence there will be in our NAV and our share price should reflect that. SCAD also helps. Some of the highest rated listed PE opportunities are the likes of A3i, HG. They happen to be some of the largest. The fact that our NASA asset value is now over a billion and continuing to grow, I think will be helpful to the business and the liquidity of the shares and therefore the rating. I think we've got to consistently deliver this over the next year or two to really see that kind of play out potentially in the impact to the NAV. Great if it happens sooner, but it may not. Finally, there's the direct impacts and cash returns. The board authorized a 20 million share buyback at the start of the year, and we have continued to progressively deploy that buyback over the first half. We'll continue to do that. It signals a number of things. One, when we have available cash, we'll be efficient with it and we'll return it. Two, it endorses the confidence that the OCI board has in the NAV And then when it's trading at a discount, that's one of the best uses of its cash, essentially a 35, 40% return if you're buying shares at this particular level. We know the direct investments cause rise for concerns around conflict of interest. We, the board, have confirmed that there is an intention no longer to make direct investments of that kind. And whilst we can't be specific, as those investments performance kind of continues, we'll anticipate realizing them over the short to medium term. Again, consistent delivery in those areas over the next year to three should see a closing of that discount. So let's close with a comment on the outlook. We are not complacent as we look ahead to the rest of 2022 and beyond. much in the world is uncertain however three factors continue to underpin the resilience of the oakley funds and oci's performance one is the focus on those counter-cyclical megatrends such as the rising global demand for higher education two is our ability to impact outcomes regardless of the wider economy thanks to that value creation toolkit that we referred to earlier And lastly, the fact that institutional investors want to buy our businesses. So far this year, we've sold three companies at significant premiums to book value and more are expected. We believe that these factors in combination with Oakley's unique deal origination will continue to deliver our performance for OCI investors in 2022 and beyond. At this point, I'll hand back to Andrew.

Great, Stephen. Thank you very much. Now we've got some time for Q&A. Obviously, as before, if you want to ask a question, please type it out in the Q&A box at the top of the web page. You spoke a lot, Stephen, about discount to NAV. We've had a few questions on that, which I'll sort of group together. I mean, along the lines of, do you think the share price will completely close discount to NAV? And is that expectation unreasonable over, say, a five-year view?

I don't think it's unreasonable. I think there's plenty of examples of, particularly within the listed peer universe, where scale and consistent performance has ultimately led to where the share price should be trading, which is at a premium to NAV, given the NAV growth. I think there's I think there's natural inefficiency and uncertainty. There's a historical track record for listed PE to overcome as a result of the GFC, the global financial crisis, which is why I've got this belief that the next 12 months is so important for this sector. So can it close? Yes. And should it close over the next five years? Certainly.

And another question linked to that is the more that can be done from your perspective to close that aside from what you detailed in the presentation.

I mean, we try to be as transparent as possible about all the levers that we have to pull. There are other elements that we do now that OCI specific. I mean, there's a lot of attention now we put in terms of communication and reaching a wider audience. we believe fervently in the democratization of PE as an asset class. I mean, it not only serves us because obviously it attracts more people to PE, it actually serves the industry. The more people that own private equity, the more people that understand it, the better the asset class is perceived. It's such an important contributor to, you know, companies which form such a large amount of GDP. They're one of the biggest employers within the UK, and people should importantly have access to those investments. The public market cohort is shrinking in number and more and more companies are choosing to remain private because of the access, not only to capital, but in a kind of lower cost, lower reporting environment where you get kind of a single partner with significant expertise to help you grow. So on that basis, I think we've got momentum. And I think OCI's job, our job, is to go out and reach that audience. Now, thanks to COVID, more of the audience are managing their own funds. webinars, podcasts, digital media are all helping to kind of spread the message and we're engaging as much as those. We're doing a lot in our own media channels and embracing social media. These are all professionals. Hard to tell you how tangible these factors are, but they sit on top of the four pillars that I referred to earlier in the presentation.

Great. And then we've got a lot of questions to come in, actually. Another one, what percentage of Fund 5 is OCI committed to?

OCI translates to about 30% of commitments to Fund 5. And that's typical. OCI looks to try and preserve the opportunity to be about 30%. of the funds. And clearly as historic funds have outperformed, so the OCI assets have outperformed, so the next fund is larger and OCI's assets have grown in proportion with the fund growth. So there happens to be a happy alignment. And that's kind of the number you should anticipate OCR would endeavor to invest kind of going forward in a fund.

Then we've got some portfolio specific questions. Time scale for IU to expand its qualifications from German and English to other languages? And are you prioritizing in particular areas?

There is, we're unlikely to expand the number of languages, largely because the degrees are taught in, largely because One, those two languages alone underpin our growth forecast for that group, particularly because we anticipate the largest growth areas will be international and they will be in developing countries like India and Africa, where the demand is largely for English speaking degrees. Where we will hopefully expand kind of over the coming years is the jurisdictions in which we can issue degrees. So currently, we're only licensed to issue a German degree. It may be in German or English, but a German degree. And in time, that will expand over the next year or two.

Okay. Now we've got some more broader points, then we'll go back to some portfolios. On any exit sales, there's a possibility of a special dividend. Would you prefer to do, say, buyback, something like that?

Well, I guess there's a number of points there. If we have excess cash at any point, then the general preference of both seemingly the feedback of all the shareholders, particularly institutional shareholders we speak to, that the most efficient use of that cash is buybacks. OCI would never be seen as a bona fide income stock and will never really be rated accordingly If we increase the dividend or we release special dividends, generally speaking, it's viewed that dividends are a less efficient way of returning cash rather than capital growth. And we subscribe to that view. The other point, when we try also to manage the cash as efficient as we can, we're never going to get it right. We're always going to come out on the side of conservatism. But it should be noted, if we were to have a large realization and cash peaks at a particularly high level. It's been anticipated and commitments have been matched with that anticipated cash inflow. You can't match the two exactly. You're going to get lumps in cash inflows coming into the group as we've seen a couple of years back when I think Web Pros and Inspired were sold in the same year and a slide I showed earlier. And then, of course, you're going to see the steady deployment of the funds over time matching up with that cash. So we'll continue when cash, the share price and planned activity align, we'll continue to return. But you shouldn't have the expectation that suddenly a large inflow of cash automatically equals the possibility of a lot of cash to return.

Okay. We've got further questions about the dividend, actually. One question has come in. Would you consider a progressive dividend? You know, there's a lot of, you know, a few questions, people who like dividends, who see important income sources and dividends. Would you think about going down that route in terms of a more progressive dividend? Or is that just not the kind of stock you are?

Look, I think it's not the kind of stock we are. Our mission statement is to support capital growth. And consequently, that's where we've been focused. We did introduce a dividend back in 2016. We had a significant number of income funds at the time. We also recognized that when it was introduced, a number of investors would have owned shares on the basis of that. And so we are committed to maintaining that dividend. it is unlikely, I wouldn't want to set expectations in the near future that that dividend will become progressive. And look, we appreciate that there's always going to be, as we grow larger on our shareholder base, you know, widens and diversifies, particularly into kind of retail investors that, you know, for some, you know, they would also like to see an increase in dividends. But it's, but given, we don't generate income per se or consistent long-term income. We're not an obvious choice for producing or supplying a progressive dividend.

Sure. Another question. It may be easier for some to invest if you had a main market listing. What's your view on that?

Yeah, I agree with it, firstly. We're aware that we made the move from AIM to the specialist fund segment because at the time, we didn't qualify for a premium listing because the rules stated that our investments were too concentrated. Now, a lot has changed in the meantime. We've expanded, issued new funds. They don't look through to the underlying portfolio companies. They look at a fund level. So over the last kind of years, we've as each of the funds has grown and we've launched new funds and new fund strategies like the Origin Fund, hopefully that diversity is increased. Now, moving markets is expensive. It takes time. It is on our agenda. I can't be specific as to when, but I completely agree. I think a move to the main market, I think we would now I believe qualify for the FTSE 250. Our shareholder register is now diverse. The majority of it is free float. We would qualify for the indices. I think it is a move well worth making, and it will be beneficial, particularly going back to that subject of closing the discount, I suspect. So we are aligned with that thought. I just can't be specific on timing at this point. And sorry to emphasize the point that we're also aware of, look, you can freely trade on the SFS. It largely doesn't prevent people from buying the shares, particularly retail. However, we are aware that some brokers either create, there's more of a hurdle to investing in a specialist fund segment listed company. And there are a couple of examples of a couple of brokers that prohibit it because the SFS is deemed to be an expert listing or a listing for expert investors.

Sure. Another question. What's your current expectation for the timing of exits from OCI's direct investments?

Yeah, as I said at the time when I touched on that slide is that we know it's important that we ultimately realize those investments to take away the kind of confusion, the distraction that they cause by virtue of their existence. And because historically, the two companies that have been in have been underperformers. I mean, thankfully now that performance is reversing. I guess the first thing to say is that their current valuations in no way represent what those businesses are worth. And until they do, we won't be selling those assets. In the case of North, North requires a kind of restructuring, which we hope to take place over the next six to 12 months. which will then enable a refinancing of the group and ultimately then a return of the debt paid to OCI from OCI. So that's not straightforward, but there is a plan and a process in place for that kind of restructuring to take place. So I guess that's some kind of indication of a timeline of the sale down of that debt. Timeout is less straightforward as public company, And until we get close to the kind of value that we believe that business is worth, our holding is going nowhere. However, we're not going to wait in perpetuity for that to happen, and we'll do whatever is required and create the necessary catalysts to help realize that value.

Sure. Quite an interesting, fun question. With the recent sales and reinvestments, they're useful, the questioner says, in providing valuations. Are they merely an exercise in generating more performance fees for you? uh number one and then some supplementaries can can can the questioner get a better understanding of the operating performance some of the larger investments like north sales etc which largest contribute to nav and you know one of your longest held investments so you know comment on sales and reinvestments and comment on sort of the underlying performance of some of the larger investments yeah absolutely um look i think um

There's a couple of points there. There's the, are we selling businesses to book performance fee? One of the things that when we look back over history, particularly of the early funds of Oakley, and we look on kind of performance and what drove it and what performance we left on the table, one of our big conclusions was that we sold some of our assets too early. That could have been because we were a young private equity manager and we were under pressure to produce a realized performance. And we also ran our kind of the companies that were performing maybe as well, we ran them probably longer than we should have done. We have sought to really learn that lesson from kind of fund three onwards. It doesn't really benefit us kind of sell a business for the sake of generating performance fees we would be you know kind of potentially um leaving a bit of performance behind and we are held to account not just by the ocr shells which is which is one um limited partner in the funds but a lot of other significant lps and if we did wrong by any one particular fund we will be punished significantly in the next fund this isn't about the realization of near-term performance fees We have to ensure that we are delivering consistent performance over time across all our funds. Now, I have to say one of the, you know, kind of arguably the shortfalls of a private equity fund, although we talk about the long-term commitment, it is still a, you know, as typically a 10-year life. I mean, we deploy it over five years, we harvest over five years. The actual reality of that is that we deploy over three years and, you know, we... There's a realization of those assets over a further three years. There is just an end of life. We have to sell these assets and we typically sell them after holding them for three and a half to four years. We typically take in a small number of companies where we think there is a real opportunity for really significant growth in a company you know incredibly well. and there is a catalyst to that growth as a result of an incoming sponsor, then we'll look to invest again in another fund. But it is an entirely separate investment, and it has to stand alone, and it also has to meet our requirements for it to at least be a two times money multiple investment and a 25% IRR. I mean, hurdles that would be very disappointed if we didn't significantly exceed. And sorry, Andrew, and then the other point was just a bit more color around north-south. Correct, yeah. So north, as you'll be aware, is divided into two divisions, the kind of manufacturing division, which includes the kind of the premium the sale of premium racing sales. They sell across the, but that's particularly its area of niche. And then there's kind of bespoke carbon masks and rigging. So that manufacturing is a real cash cow. It was significantly hit in the last couple of years because it's a bit like Formula One race cars. They dominate the market, sorry, Formula One tires. They dominate that, their particular market, but you need races to happen. So when regattas and races stop, so the replacement cycle slowed down and so they were heavily impacted. That market this year has returned kind of significantly, so the cash cow is back in action. The growth opportunity was in lifestyle, if we can call it that, which is kite surfing, windsurfing, paraphernalia attached to that, and apparel, the opportunity to sell North Sells related apparel to those that know and love the brand. There has been a huge amount, one in the kite surfing and windsurfing, we essentially took the brand back in house and almost had a startup a couple of years ago. The growth in that division has been phenomenal. In apparel, we've completely repositioned the product. We've launched a whole new technical brand. We have completely uplifted, transformed the kind of DTC, the online distribution and digital promotion of apparel. And the great news is that business is now, that bit of business is now also profitable. In combination, we've gone from being loss-making to small EBITDA positive last year to this year, we're set to see a business that's going to create over 20 million of EBITDA.

And we had a little supplementary in ourselves, actually. It's quite a complex structure. Just to update on simplifying, unraveling all of that, how's that going?

So, yeah, I touched on the fact that that's one of the key catalysts to us being able to refinance the business and then ultimately to... to OCI seeing its debt repaid. One of the key challenges is that the apparel business, where broadly half of the loan is based, has received over time, by virtue of it being an Italian business, or at least it's Italian incorporated, And therefore to retain that status, it's had to remain separate from the broader group. It retains that status because it attracts Italian government lending. And so the minute that you bring the business together, you potentially lose that backing. So therefore you have to do that at a point in time, basically one of our targets, we have to do it in points in time when you know that you can successfully refinance the business. And it's one of those kind of the minute you restructure, you potentially lose the, um, lose, lose the funding. So you need to be able to, the group needs better support itself where you initially lose a bunch of debt supports, and then you need to be able to restructure. So in short, the company needs to be in its strongest financial state. So you need to have shown you can deliver as a group performance across at least a 12 month period. That will hopefully be, um, the year that we're currently in thereafter. in Q1 next year onwards, we can start the process of executing that restructuring and thereby leading us on to refinance. Look, there's always a danger of setting time tables for these. It isn't a straightforward process. We're working across multiple jurisdictions. If it was easy, we would have done it already. So there is a number of things that the need to happen for this to take place. But we are getting closer to that moment.

Good. Okay. Another portfolio company question about Fenner. What should we expect with Fenner? Fragmented market. We're looking for lots of bolt-ons. And can you give us a bit more detail about Fenner, about its prospects and what it's doing?

Yeah, certainly. I think, look, I think Fenner alone, I mean, if we look at organic growth, and I should have, I didn't. specify this early on. I mean, when we talk about the growth of the portfolio companies, that is its organic growth number. And Fenner alone, thanks to its kind of the diversity of the sectors it touches, the kind of that increasing regulatory trend that I spoke about upfront is growing strongly organically on the base that we've acquired. The great opportunity comes is that although they'll be relatively high quality in some cases, there are plenty of single products, maybe slightly subscale, other strong testing companies throughout Europe, which we can buy on relatively modest multiples, one. Two, in bringing in conjunction with the group and the expertise of of the founders of Fenner can really help transform some of those businesses. There is not a case of just, let's buy a bunch of disparate businesses, keep them disparate, and then hope someone pays a lot of money for the combined group. There is a lot of, whilst we allow the founders of those businesses to continue to run them, and their brands can continue if that's important to the delivery of the products, What we absolutely need to do is to give them the systems of a much larger and developed business, give them the business support, M&A support, and growth support that they need, and that they will prosper in a far greater way within the Fenner universe. And CTS is a great first step. The opportunity there from acquiring a business that potentially isn't as well run as a Fenner, the fact that it presents significant kind of cost synergies as well in some of the cases where there's some overlap with Fenner and is already bringing significant scale to a platform that we have only just signed.

Okay. Okay, final couple of questions. One about the institutional shareholder base. Can you detail that a bit? Who are the big institutions? And has there been much change over the last 12 months?

Yeah, look, we provide a list of our top shareholders on the website. So in some case, we can reveal some of them, but they include the likes of Fidelity, Saracen, Asset Value Investors, City of London Asset Management. They also include a couple of the retail platforms that are in the top 10, Hargrave Lansdowne and Interactive Investors. Some of the big private wealth managers now are in there, the likes of Hawksmoor, Charles Stanley, and Smith & Willis and Evelyn.

and um aberdeen to give a um a selection of those names that kind of appear in our top top 10 15. apologies to any institution listening that didn't get in trouble okay it's coming up to 10 so we've probably got time for just one more question uh which is a lovely one why do you think oci is going to be a better investment than hg and 3i over the next five years is it just closing the NAVGAAP or is it about the fundamentals of your portfolio? Why is this going to be a better investment?

Well, I don't necessarily hold. I see no benefit in holding out and telling you that we're going to be better than 3i and HG. Frankly, I hope that we all continue to perform. This is a small sector and I really hope that our peers, which I believe are high quality, will continue to perform. We've all got slightly different approaches. And so, you know, you choose your manager based on that performance. So maybe the easiest thing to do is identify why we're different to them. You can decide whether or not you think that's going to drive up performance. I'm going to put the closing of discount behind. I've got less control over that. But yes, if it closes, it's going to be one of the greater drivers of shareholder return versus a 3IMHG. we have in common with a 3i hg trust um or an apax global is a relatively small number of direct listed pe i.e the funds back one particular manager one one particular strategy and that makes the visibility of of what we're doing a lot easier to kind of get your head around and maybe you can provide a lot more visibility which i think helps um and it can be a lot clearer as to how you're going to create return rather than investing across know kind of multiple funds across multiple strategies now there there is a there is a positive to that raw portfolio effect in the fund of funds and that is a reduction in risk so what oci offers you is quite focused it's 20 it's 26 companies we've talked about you know each one of those companies we show you you know that you're exposed to each of those companies you know the themes that they're best behind now there's a risk of being focused clearly If we've got it wrong, and we haven't yet, but that's ultimately what keeps us awake at night, our ability to continue to find these great businesses and for these businesses to continue to perform. We don't take that for granted. If we've got that right, when you see big outperformance, it has a real and direct impact on the NAV. IU Group is a great example of that. We've created a kind of multi-billion opportunity there And, you know, OCI is a big direct beneficiary of that. It's driven the NAV significantly over the last year or so. Its performance isn't diluted by a thousand other holdings. And also, I guess we'd like to maintain that those, you know, those underlying companies are held at valuations, which are not priced to perfection. We're not holding, you know, IU Group, you know, one of the fastest growing education businesses in the world. We're not holding it at, you know, kind of tech growth multiples. You know, we're holding it, let's say between 10 to 20 times, which, you know, kind of is, you know, there's plenty of upside from where it currently stands. And we think that's important to maintain a consistent and conservative valuation for these businesses. So I think hopefully that also draws confidence. You're developing, you know, You're growing as fast as any of those peers. It's a focus group, so any performance really does drive directly into OCI shares. That happens to be a mispricing, but I think that's generally a secondary reason. You own OCI or any listed P firm because you believe the NAV will grow. That's what will reliably drive shareholder returns. And in time, the discount may be kind of icing on the cherry on the cake. But not the kind of, should never be the kind of key reason. It's baked in, it's there. Wonderful. If it closes, that's fantastic. What is absolutely important is that NAV growth and the fact that it continues to grow regardless of that economic backdrop.

Sure. Great. I think that brings our Q&A session to an end. We've just run a little bit over 10. Thank you, everyone who submitted questions. Thank you, Stephen, for answering all the questions. So I'm just going to hand back to you, Stephen, for any closing remarks before we end the session.

Thanks, Andrew. Well, I guess I've had the opportunity to really hopefully press home the position that OCI finds itself in positive position it finds itself in, despite the wider macro. We are not complacent, I repeat, about that backdrop. It will, as a previous slide outlined, have some impacts on the portfolio. But if you look to those key trends we're investing behind, move on in regards to the actual backdrop. The fact, so importantly, unlike an investor in a public vehicle, we have control over outcomes. We're majority investors. We have significant teams working daily with management teams. We can, with our value creation toolkit, create growth regardless of the backdrop. Lastly, we anticipate further activity. Our businesses are incredibly popular. but they've grown now to the size in many cases, particularly those mature businesses, such that they are now of the scale and appeal to those larger PE firms. We're very lucky to have not only that portfolio, the founders we back, but also the relationships we have with those larger PE firms who have still significant levels of dry powder. I think whilst we may not keep the kind of incredibly high levels of activity level going. I mean, Fund 5 is already kind of 20% deployed, and we've only just in the midst of the fundraising at the fund itself. So I don't think we kind of maintain these levels, but hopefully the fact that we are both buying and selling assets despite this environment and maybe where we others aren't, kind of also tells you that our resignation strategy is still not only unique, but is still effectively working. And we think all these things combined, you know, give us a pretty strong and resilient kind of outlook for OCI in the rest of this year and beyond. Thank you, Andrew, I should say. Very kind of you to moderate today. And thank you for those that joined us. That brings the webcast to a close.