Oakley Capital Investments Limited

Good morning. My name is Stephen Tredgett. I'm a partner at Oakley Capital, and it's my pleasure to welcome you to the Oakley Capital Investments 2024 four-year results webcast. Before we start the presentation, can I remind you that questions can be submitted in writing during the webcast by following the questions tab at the top of this broadcast video, and we'll tackle as many of these as possible at the end of the session. You can download the presentation to view at your leisure by clicking on the Downloads button at the top of your screen. In today's presentation, we'll examine the current asset breakdown, the drivers of performance despite some challenging conditions, and the elements which have hindered NAV growth in the year. We'll speak to the prevailing favourable market for making investments, and Oakley's record level of deployment, completing eight new deals in 2024. And with five of the eight deals being in the technology sector, We'll be joined by Oakley Managing Director, Lovis Wanandrian, to discuss the investment strategy for this sector, the traits they have been targeting, and then introduce us to some of the newest additions to the portfolio, Assure Data Protection. As we turn our attention to cash and commitments, we'll reflect on realisations made in the year, despite the slow environment for X6. And finally, we'll look to the year ahead and the factors that we think will deliver stronger NAV growth in 2025 and beyond. Before we look to the future, let's take stock of where we are today and to how the portfolio has been performing. The net asset value at the end of December reached £1.2 billion or 695 pence a share. That's an increase of 15 pence over the year, which when we include dividends represents a total NAV return of 2% or 6% before the impact of FX. It's a modest NAV growth by OCI standards, but a positive outcome all the same. Given the macro headwinds, portfolio value increase was driven circa 75 by EBITDA growth, reflecting a retained cautious approach to valuation multiples. In a couple of slides, we'll also talk to the factors which muted growth in 2024, which we expect to reverse in the year ahead. A review of the historic NAV growth emphasises the muted performance of the last two years, reflecting most the mixed macro backdrop. and the more conservative exit environment. However, as I'll make the case today, we expect 2025 to see a return to a more historic NAV CAGR of 15 to 20%. Let's take a look at the asset value and how it breaks down. At a high level, we have cash, north sales preference shares, and just under one billion of equity investments. It's worth noting that of these assets, the 154 million pounds of preference shares were zero coupon. and weren't growing in value in 2024. And alongside them, just over 450 million investments that were made in the last 24 months, which made a limited contribution to NAV growth, as expected for this stage in their ownership. We'll talk to this point in more detail shortly. But needless to say, whilst nearly 50% of the asset value was going to the no or muted growth in the bright period, the prospects are different this year. With 93 million of the north press converted to equity, whose value is anticipated to appreciate given trade and the impact of recent acquisitions, whilst a maturing portfolio will increase the contributors to OCI's performance as valuation uplift typically accelerates through the duration of an Oakley investment, as we'll come on to discuss. Let's break down the equity investment first by sector and then geography. We'll see, as it has been in the recent years, that the portfolio companies are reasonably evenly spread across our four focus sectors. All four sectors have grown in value since December 23, with the largest organic growth being from the technology sector. Most notably, the exposure to business services increased 78%, reflecting the addition of automotive repair group Steer, life science compliance services provider Product Life Group, and the strong organic and acquired growth of Fenner. the UK's largest testing and inspection group. Breaking the portfolio down by geography exposure, the pie tells us a story where Oakley has its longest standing track records, expertise and founder networks. After many years of investment inactivity in our geography of origin, the UK actually represents one of the largest proportions of the asset value with nine companies headquarters here, reflecting the emergence of attractive deal flow and our building reputation amongst founders and advisors within region and the large opportunity set in the UK within business services. Germany in a very close second with 10 of the portfolios domiciled here. Spain and Southern Europe remain a fast-growing region for Oakley, reflecting a large pool of opportunities, less PE penetration and the opening of the Madrid office. One of the regions we have started to be more active in is France, falling to recent investments which has been enabled by the appointment of an in-country senior advisor. Based on the currency investments, the offsetting underlying debt in the portfolio comes in cash. The NAV currency exposure splits down 21% pounds, 52% euros and 27% dollars. Very conscious that this is becoming even harder to read every year, and you can examine the slide at your leisure in the deck, but we now break the asset value down further by the 33 underlying portfolio companies. That, with the exception of Time Out, sit within the Oakley funds. The five largest of the investments with the near-term potential for the biggest impact on NAV are Sajid, North Sales, Fenner, IU Group, and Steer Automotive. Three of these were the top five drivers of growth in 2024, and we expect all five to be significant contributors to NAV growth in the current year. Within venture, the black line at the bottom, Oakley ProFounders and the Oakley Touring Fund made a further nine investments, five from ProFounders and four from Touring, taking them to a combined 17 investing companies. Whilst they are, as can be seen, comparatively small collectively, they are nonetheless an exciting possible driver of growth for OCI in the future, and give OCI exposure to a highly attractive subset of generative AI-powered software companies. The Oakley Touring Fund even delivered its first realization after only 12 months, the partial sale of Safebase, delivering a gross 50% IRR. Performance across the portfolio is robust, with circa 80% of the companies owned for more than six months increasing in value. Looking now at the lead contributors to OCI's NAV growth through the period, Firstly, we have IU Group, which added eight pence to the Napa share. IU continued to deliver double-digit growth thanks to DeMille for its online degree courses. Student figures have now reached over under 50,000 with growth in both the B2C and on-campus segments. IU Group continues to make progress with its acquired international units as well in the UK and Canada, achieving a combined revenue growth of 35% in 2024 versus the prior year. Dexters, a business, particularly of those of you living in the south of London, will be familiar with. It's London's leading independent charter surveyor and estate agent, which added seven pence to the NAV per share in the period. Dexter grew revenues in the EBITDA 19% and 22% respectively. Despite the hesitant consumer sentiment across the UK, the companies continue to achieve healthy sales income. The buying and selling of properties in the year, whilst the letting revenue, which accounts for over 60% of the opening revenue, continued to grow in the year, increasing by 23%. And finally, Fenner, the second largest investment in OCI's underlying portfolio, with a look-through value of just over £100 million, added seven pence to the NAB per share. Fenner continues to perform well and is seeing meaningful end-market diversification, with a newly created food pharmaceutical division now representing 20% of revenues. The business has also been focused on international expansion during the year, with roughly 75% of acquisitions made in 24 located outside of the UK. Fenner continued executing on its accretive bolt-on pipeline, with eight acquisitions completed at an average of under six and a half times EV of its own multiple. To the negative drivers of performance, We have Weitz Golf, which decreased now per share by three pence, reflecting a soft performance driven by its main DTC channel, which suffered delays in product launches and the shop system migration to Shopify and a somewhat optimal marketing performance. By the final quarter of the year, however, Weitz Golf caught up on its product launches, including new golf ball models and its first generation of golf clubs, completed the Shopify migration, which together has led to a sustained uptick in performance and marketing efficiency. This allowed Vice Golf to significantly narrow, but not fully close the gap that opens up during the high season. With a fully invested technology infrastructure and a significantly strengthened management, the team is driving improvements in operational excellence throughout the organization to carry the recovery into that high season this year. Tech insights declined two pence, reflecting the challenging year experienced by the semiconductor industry, with semiconductor volumes still down 14% versus the market peak in June 2022. The market has, however, started showing signs of recovery, with semiconductor volumes up 3% versus the prior year, as at December 24. Despite the difficult market conditions, Tech Insights delivered positive revenue growth in the last 12 months, driven by growth in its subscription business and supported by healthy renewal rates from existing customers, Recurring revenues now make up to 84% of total revenues. Finally, private schools group, Thomas's. Though the impact was small, it had a one pence negative impact on the NAV per share. This reflects the focus and cost in the year of delivering two large CapEx projects. And as part of the group's professionalisation, Oakley made some adjustments to the EBITDA reporting in the group. In the meantime, the level of enrolment activity for the new Thomas's College in Richmond has been very encouraging. Looking to the average KPIs of the portfolio, earnings grew at an average organic 15% over the last 12 months, thanks to robust trading across the portfolio. This is up from 14% at the half year and reflects improving prospects across much of the portfolio heading into 2025. This figure doesn't account for growth via M&A, which in companies like Fenner, Steer, Liberty Dental, Affinitas, for example, played a large role in the value creation with their share of over 50 acquisitions during the year. Weighted average EBITDA growth after M&A is 21%. At 4.1 times, the average net debt EBITDA remains modest compared to the wider PE market, which averages between five to six times, with no debt maturities in the next two and a half years. typically asset light and strong cash generators in the portfolio are reflected in averaging interest cost cover of three times. Although the pace of central bank interest rate cuts is expected to slow, we are helping portfolio companies to lock in lower borrowing costs now and have secured £130 million of annualised interest savings in the year. Finally, the average valuation multiple stands at 16.4 times EV EBITDA, unchanged since last year, with recent realisations of book value underlying the robustness of the valuation process, even in a softer exit environment. Returning to our previous theme, the chart here shows investments made over the last seven years, with the colours denoting which fund vintage they were made The orange shaded area covers the deals completed in the last two years, illustrating the high level of investment activity, making the portfolio the youngest it has been in the last 10 years. This is predominantly thanks to the relatively fast deployment of Flagship Fund 5, represented here by the dark purple bars. Why might this have impeded NAV performance? And the graph here is an illustrative funnel that shows the money multiple return over the life of the investment for these deals we have realised. So it's unrealised money multiple return through until the end where you see some examples of the realised outcome. It demonstrates how the return builds over the life of a typical Oakley investment. We've included on the graph five examples of deals with a variety of outcomes, but whether a two times money multiple realised outcome or a 13 times money multiple, the value accrues in a similar fashion. In the first year, modest or no growth in value is recorded, reflecting the proximity of the purchase and the obvious valuation proof points at that point in time. The following years see some growth, almost entirely based on earnings growth. And then years three and four onwards, we see the combination of the impact of value creation, organization maturity, and then the multiple expansion as the investment moves closer to an exit or more closer to reflecting the market comps. To illustrate the value potential within the current portfolio, we have plotted the anticipated growth of Fund 5 through to 2027 based on the base case investment returns for the 10 underlying companies. To remind you, Fund 5 is a 2022 vintage fund to which OCI has a look-through exposure to the day of about £400 million. On the basis of the expected outcomes, Fund 5 alone will be anticipated to contribute between 150 and 200 pence to OCI's NAV per share in the next three years. This will be driven by an anticipated annual average EBITDA growth of 28% from the fund's underlying companies. While steelmaking in Europe remains below the multi-year average, the opportunity set has never been greater. 96% of European companies with revenue in excess of 100 million euros are private, and in the majority of cases, founder-led. Oakley backed a record number of these businesses during the year. The eight deals all share many of the characteristics typical of an Oakley investment. They are all within our target sectors, are founder-led companies with asset-like business models, with each exploiting the long-term megatrends we often talk about. including businesses shift to the cloud and the consumer shift to online solutions. Cyber security is one sector that Oakley has long sought to invest in, as working from home and the proliferation of connected devices widens the network perimeter companies need to secure from cyber threats. In the UK alone, cyber attacks have tripled in the last three years and are expected to grow in frequency and severity, as criminals leverage AI as well now to enhance their lines of attack. Eye tracing helps protect some of Europe's most successful businesses in the enterprise and mid-market sectors. Meanwhile, assured data protection is disrupting the managed backup and disaster recovery solution markets, and we'll hear more on them shortly. To emphasise some of the deal characteristics they share, seven of the eight of these newly acquired businesses are led by their founders, who wish to remain invested in the business and are choosing a partner to help grow and professionalize the companies they created alongside them. Which explains why more than half were uncontested deals. These were deals that were the result of a bilateral discussion between ourselves and the founder outside of an auction process. Three of the deals had some kind of deal complexity to navigate. They were carve outs or some messy ownership structures to get through, factors which would deter most other investors and can contribute to contribute to the more favorable pricing that Oakley frequently enjoys. Given the high level of recent investment activity and technology led by led its technology led businesses and its consistent outperformance, we thought we'd invite Lovis, a senior member of the investment team to share Oakley's investment thesis for this sector and tell us more about the most recent addition to the fold.

Thank you, Stephen. Before I dive into how Oakley tackled tech, let us recap why we invest in technology businesses in the first place. And put simply, technology businesses on average are simply better businesses than businesses in other sectors. Why do we think so? The revenues that they generate are highly predictable and recurring. The services that they provide are mission critical and non-cyclical, meaning that in a downturn, it is really the last thing that you turn off. The business model is capital light and highly scalable with a high degree of operating leverage. So simply, you build it once, you sell it many times. And finally, and perhaps most underappreciated, is there is a huge amount of white space particularly in SMEs. And we hear a lot about the impact of AI, but the reality is in most businesses operating in the SME space, Excel is by far the most common solution rather than dedicated software products. And extraordinarily, 2023 was really the first year that cloud spend outstripped on-prem spend amongst all businesses. And so the wide space in these sectors is still huge. And so you have highly stable businesses with really favorable macro tailwinds across the whole sector. And the quality of these businesses, of course, means that they also command valuation premium. And so the critical challenge for Oakley is to think, how do we gain exposure to these businesses without overpaying for them? And so on the next couple of slides, I'll talk about how we do that. And there's really two key tenants to giving us an edge in this sector. The first is really narrow and deep subsector specialization. We know that there are a lot of attractive sectors, and we've mapped out around 100 subsectors across tech. And we know that we can't cover all of them. And so what we do is we focus on a very narrow subset, You can see 12, 12 or 13 on this page. And we focus very deeply on those. We spend a lot of time building deep sector expertise, building deep networks, allowing us to then really be a value add partner in those sectors, allowing us to uncover proprietary of market opportunities. And when those opportunities come around, we are ideally placed to move quickly. Now I personally focus on this autumn road, this middleware sector. All of my time is dedicated on hosting, CTO suite and DevOps. It's all the software and services that typically you don't see. These are the things that the IT manager buys. And the work in this sector is also what uncovered Assured Data Protection, which I will speak to in a little while. The second tenet of of our right to win in the technology sector, if we could go to the next slide, is our track record of partnering with entrepreneurs and being a value-add partner in a very specific way. And you can see here that the businesses that we typically focus on exhibit two key characteristics. The first is a high degree of organic growth. These businesses are already growing quickly. And that's because typically they've developed strong products and have developed a very clear product market fit. However, what they also exhibit is a very high degree of organizational immaturity. These are not well-developed businesses. These are well-developed products, but not well-developed businesses. And what we do is we partner with the entrepreneurs. We provide them with the resources. the skills, the experience to help them scale their businesses, which allows them to continue that organic growth. Now, in many instances, the growth, this simply enables them to continue to grow at the rates that they have done and building the framework structure processes around that growth to turn it from a young, strong product into a really valuable business and the kind of valuable business that, for example, large cap private equity and strategics really want to buy. How does that look in action? On the next slide, let's talk about Assure Data Protection and practically how that works. As Steve mentioned, Assure Data Protection is the leading managed service provider in a very narrow niche, backup, disaster recovery, and cyber resilience. And this deal really came out of the past 10 plus years of our expertise in hosting and cybersecurity. Now, in hosting, we've, of course, been incredibly active. In cybersecurity, we have been much less active until recently. But nonetheless, we've really laid the groundwork over the past seven years to be able to make these kind of investments. And so it really all starts with that sector expertise. Now, secondly, it's about the founder. Assured is a founder-owned business and it's really about partnering with the founder, building that relationship and us investing over six plus months into building that relationship and that trust so that we were the preferred party. And the services that Assured provides have been growing incredibly quickly because they're in a market that has really attractive characteristics. it's a billion we expect it to be a billion size market by 2030 a market that's growing five times over and so while the market is relatively small today assured is really the leading player in this market and has a strong right to win to at a minimum grow at the rate of the market now they have been growing faster than the rate of the market almost 50 percent over the past three years. And frankly, we expect that growth rate to accelerate. With the resources we're providing them and the favorable market tailwinds, they have every chance to continue to grow at that rate and perhaps even accelerate. And as I mentioned earlier, the business has a wonderful product, but a high degree of organizational immaturity. There is no finance function. There is no HR function. There is no strategic approach to pricing. And many of the other business processes and the things that we apply in our playbook to businesses, they don't exist in this business, giving us a huge amount of opportunity to help them create value. Now, while it's a very attractive market and a well-placed business that's growing quickly, that degree of organizational immaturity carries risk with it. Because inherently, this is a younger, more immature business. And so a huge amount of effort goes into thinking about how we can de-risk these opportunities while still having the opportunity to generate disproportionate outsized returns. And so there's really two things that we did on Assure Data Protection to ensure we can de-risk the business. The first is alignment. You can see here that the founders rolled over 80% of their investment into the business. So they continue to be heavily aligned and heavily incentivized. And secondly, the structure that we implemented really protects us on the downside. We have a liquidation preference, which means that in a downside scenario, our money would come out first. And so really this gives us the certainty that if things don't go to plan, our capital is protected while being exposed to a really attractive high growth business with a huge amount of potential where we can really generate disproportionate returns. And so we made this investment late last year and it's early days, but we are incredibly bullish that this can generate really outsized returns. I'll hand over back to Stephen to continue on North Seltz.

Many thanks, Lovis. And we'll bring Lovis back for the Q&A later. We'll turn now, as Lovis mentioned, to the largest overall OCI investment and one of the two remaining direct investments. NorthSouth. As you recall, in 2023, OCI's direct debt state in NorthSouth was converted into preferred equity, giving the asset the better security and the first step in the board's move to maximise the value of the investment. Following this, and in response to positive trading momentum, OCI converted $107 million of its preferred equity position into ordinary equity in the final quarter of 2024, a move which is expected to generate increased returns for OCI given the anticipated performance. After the conversion, OCI continues to hold $77 million in preferred equity, which attracted a coupon of 5% from the 1st of January 25. The target is to liquidate the remaining breadth in the next 12 to 18 months. OCI retains a further £61 million in an indirect position in North Sails via its stake in Fund 2. The group delivered another year of positive performance with healthy order volumes, improving gross margins and significant trading momentum aided by the America's Cup. Most notably during the year, North Sails completed two strategic acquisitions, buying Quantum Sails and Dorsabs, both leading designers and manufacturers of high-performance sailing products with presence globally, much like North. The potential value creation from these acquisitions is expected to be significant. The combination of strong underlying performance and the recent deals is set to lead North to be one of the leading contributors of NAV growth in 2025. The third section of this presentation analyzes the liquidity of OCI, its outstanding commitments, the corresponding cash available to meet commitments, and the prospects for near-term proceeds. Realizations during 2024 delivered £159 million to OCI, a positive outcome given the subdued M&A market and highlights the appeal of the Oakley portfolio. The three assets shown on the slide, Idealista, Ocean Technologies and Schuler Hilfer were all realised close to the prevailing NAV, underscoring the robustness of the underlying valuations. The Oakley funds have a growing reputation for the timely realisation of assets and the subsequent return of capital to its investors. We have shown the look-through proceeds to OCI of annual realisations over the last 12 years. We anticipate this consistency to continue aided by the early signs of a strengthening exit environment, with M&A advisors reporting a rise in Q1 activity levels. We'd observe this to be driven by the improving performance of underlying company more generally, pragmatism on pricing by both buyers and sellers, and the need for large sponsors to deploy capital. Turning our attention to outstanding Oakley Fund commitments, which realisations allow us to meet, At the year end, commitments across all locally funds totalled £646 million, compared with approximately one billion of commitments at the 2023 year end. If we break this down by fund strategy and vintage, the darker section of each bar represents the look-through value invested in the funds, and the purple, the outstanding commitments, showing us that the majority of the committed funds that have yet to be drawn from OCI are the youngest vintages, And Oakley's biggest funds to date being Flagship 5, which is circa 70% invested, and Origin 2. Oakley's lower mid-market buyout strategy, which is 10% deployed. As a reminder, these are funds which can take up to five or more years to invest. To give us a better indication of when we can expect the 646 million to be called, These files break down if and when the commitments will be called. Starting at the left, there is over 200 million pounds that is not expected to be called, 300 million that is set to be called after 12 months and over a four or five year period, and circa 150 million that is expected to be called in the next 12 months. This compares to 225 million of liquidity from cash and available credit facilities. implying that OCI has current liquidity for approximately two years of deployment, which is an appropriate and target level of cover. Of course, we can expect cash inflows over the coming years, which leads us over the slide to the sources of that liquidity, which naturally include further realizations, the increase in an OCI loan or revolving credit facilities, and secondary sell downs of existing fund positions. We'd expect the first two of these to be sources of inflows in the year, with buybacks and fund commitments being the likely allocations. With some progress on the former, you can expect a more explicit update on capital allocation from OCI between now and the end of April. And the final couple of slides and prospects for asset value growth and an improved rating for the shares. Starting with that rating point, As we know, discounts proliferate across the sector and there are no silver bullets. And some of the reasons that discounts exist are structural, at least for the time being. However, the three most likely positive impacts that we as OCI can control in the near term are one, accelerating NAV growth and realisations at or above NAV to continue to build the confidence and the quality and conservatism in the NAV. Two, the board has initiated a process to transfer OCI's listing to the main market of the London Stock Exchange, a move which would expand access to a wider range of investors and should help to further boost liquidity. We hope to confirm the timing of this at the H1 NAV update. Three, it's open debate whether it closes the discount, but increased liquidity and therefore capital return should be possible this year and would I'm sure be a welcome a well-received outcome. To bring us to the end of the presentation element of this webinar, we'll leave you with four factors that will drive OCI share performance in 2025 and beyond. One is the result of the persistence of structural trends, an improved macro backdrop, or whether it's the impact of value creation measures. Although at an early stage, we are seeing an uptick in trading across the portfolio, and expect the 15% organic average weighted earnings growth to rise, drive the NAV growth as it does. Expect the large number of deals, secondly. Expect the large number of deals in the last two years to become bigger contributors to NAV growth as the positions mature. Three, continued realisations will provide further NAV confidence and liquidity. And fourthly, we remain confident in the eventual closure of OCI share price discount to NAV per share as the board takes measures to address it and investor confidence in OCI's near-term outperformance grows. And whilst I'm here, some dates for the diary. 30th of April is the Q1 NAV update. And on the 14th of May is the capital markets day. So please contact OCI investor relations team via the website should you wish to dial into this event. That brings the presentation element of the webinar to a close. Thank you for remaining with us. And at this point, I'll hand over to Rosanna to take us into the Q&A section and we'll bring Lovis back on the screen.

Thank you, Stephen, and thank you to everyone who have asked questions already on the portal. We're going to try our best to get through as many as possible. For those of you who would still like to ask questions, it is still possible that the question function is at the top of your web page. So we're going to start, Stephen, on the topic of the pipeline. Do you expect to see a similar level of new deals in 2025? And what sectors and regions are you specifically looking at?

We don't expect quite as high level of executed deals. It's not something we have perfect clarity over, as you might imagine, given the way we source. The guidance we're giving is, you know, kind of some of the reason of half of the level. So it was 300 million deployed last year and maybe something more in the region of 150 million. But this is a guide. If we look to the pipeline currently, it really mimics kind of the experience of the last year in terms of there's a slight bias towards tech and to some extent business services. And, you know, it's across the regions that we know well, with a bias more towards kind of UK and Southern Europe. I don't know, Lovis, if you want to talk to your expectations around tech.

Yeah, I mean, as you said, the pipeline is very full, but given how we source and originate deals, it's inherently lumpy and unpredictable. We're not waiting for a banker to send us an IM and a clear process, which makes it much more predictable. We're trying to uncover proprietary opportunities. And so while the pipeline is very full and there's a real chance that many of these opportunities come to fruition, there's also a realistic prospect that they don't and they take slightly longer to

Thank you both. Now on the question, the topic of cybersecurity, we've had a few questions in on this, perhaps one for both Stephen and Lovis. Why now for cybersecurity? And if it's been a target for a while, why has it taken so long to invest in it?

I'm going to hand over pretty swiftly to Lovis on this, except to say there's a lot of sub-sectors that we, that we map and have mapped for many, many years. And it kind of reflects the very specific nature of the deals we make and high conviction, you know, kind of focus bets. I mean, maybe Lovis you'll talk to, you know, why it's maybe taken seven years to find our first deal in this space.

Yeah, and it's exactly the narrative I try to outline in the tech sector. Cybersecurity is an incredibly attractive sector that's growing incredibly quickly and will continue to grow incredibly quickly. But of course, everybody knows this. And so it's a hotly contested, very expensive sector. And so for us, it's important to do the right deal, not just to do any deal that gives us exposure. And that's unpredictable and takes a long time sometimes to uncover. And so within cybersecurity, we had a very narrow focus of the type of opportunities that we thought we wanted to pay for. And those took a long time to uncover and to develop and to build that they live in that relationship and now that we have started that we're hopeful that this again deepens our network in that sector and uncovers more opportunities as has been the case for example in hosting which started in a similar way and then there's been this snowball effect of new opportunities thank you we've had a few questions picking up on the average ebitda growth

So could you give us some more granularity on that average EBITDA growth of 15% and also touching on the fact that the NAV grew pre-FX only 6%?

Well, let's just initially define that growth. There is a range. So first of all, that is a weighted organic figure. it doesn't reflect as i kind of mentioned earlier kind of m a and you know whilst all the businesses are um growing you know there are single-digit growers in there i mean as a good example fener or steer one of the largest contributors to nav well actually their organic growth is single-digit you know we expect it to be in the region of you know kind of over its life, 5% to 10%. It reflects that it's growing faster than the market. The real investment thesis here is that we can grow a business of size, make it international, expand not just the geographies, but the solution it provides with it, and also get the great multiple arbitrage of buying businesses sub six, seven times for a platform that we think if sold could be worth anywhere between 18 to 21 times. But from an average EBITDA growth perspective, you know, it would only be contributing, you know, 4% over the period. So it gives you some sense. And the highest growers, you know, we've got some, although small, doubling their EBITDA, you know, kind of year on year. So it's a reasonably kind of blunt measure that is hiding a kind of big range of outcomes. The very interesting and valid question is, how does 15% EBITDA growth not map to something similar in a way of NAV growth? And there's kind of a couple of points here. Let's go to my original point, which is, well, actually it points down to 50% of the NAV didn't show much growth. for all the reasons we discussed earlier, cash, a pref, young companies where we typically, but not exclusively, where we typically hold them at least in the first year of ownership or first six months of ownership close to their NAV value. So there's your kind of first point, which might go some way to comparing 6% NAV pre-FX to 15%. The other thing is the 15% EBITDA growth is a historic number. It is the average growth over the last 12 months. And the NAV is typically based on a forecast of the budgeted growth over the next 12 months. So to illustrate to you, if that forecast for last year was based on an average 20% EBITDA growth, but you only delivered 15% then your NAV wouldn't grow as much as you might anticipate by the time you get to the end of the year, given the difference in the outcome and the budgeting. And that kind of reflects the last couple of years, you know, the companies have performed, you know, I think at the interim, I talked about a third have performed above budget, a third on, a third below. The difference we're noticing this year is not just that kind of maturity of the businesses, but we're seeing, although it's early in the year, anecdotally, a kind of a greater tailwind to the performance of those businesses, which hopefully should be more in line with budgets. And therefore, we should hopefully see that EBITDA growth that we report this year being a kind of a more of a key driver to NAV growth.

Thank you for that answer. And picking up there on performance going forward, which companies do you expect to lead performance this year, so 2025?

I mentioned this earlier. I mean, the biggest investments are naturally going to have the biggest impact. Sorry, the biggest look through investments are clearly going to have some of the biggest impact on NAV growth. And to kind of repeat those in order, it's like, you know, NorthSouth, Fener, Sajid, IU Group, Steer. And so I'll be very surprised if they weren't up there in the kind of the big drivers this year. Now, although there's smaller companies in the portfolio, there's some really fast growers in the portfolio. And of course, we don't know the outcome of the year, but I suspect we'll start to see some of those earlier investments come through. I don't know if you want to comment and any particular in the tech sector, Lovis?

Yeah, I think in tech overall, we're bullish on the portfolio for different reasons, frankly. There are some like eye tracing and assured that have strong tailwinds that are growing very quickly organically, which of course drives performance. There are some which are really driven by M&A that are growing much slower, but you have a multiple accretive M&A like World Host Group, for example, in a low growth sector, but you continue to buy very accretive businesses. And then finally, much more mature businesses like web pros, which aren't growing nearly as quickly. They're growing high single digits, low double digits. But they continue to be, to continue to grow. They are very large and they are highly cash generated. So, you know, as I said, we're bullish across the portfolio, but for very different reasons.

Thank you for that. Switching tact slightly to exits. Can you comment on the fact that recent exits have been realised close to NAV or value versus a premium on previous exits historically?

yeah yeah absolutely so so the average um even after the recent exits is the average premium since inception is kind of 25 30 premium exit and naturally enough scholar focus on that because um it's an obvious driver to nav the positive surprise at exit and if we look back over prior years you know we were getting a lot of um unsolicited approaches for our businesses and they were offering us a value, you know, maybe we've held the business for three or four years and they're offering us the value as if we'd held it for five. And so you were getting that, you know, that, that quite big pot at exit and auctions as well were highly contested. And although, and 2020, end of 2022 was the kind of last year when that was the case, we should know IU group, was sold at NAV, but we increased the NAV 83% or the value of 83% in the prior 12 years, because we knew the book value was going to be the focus for the realization. So to the question, what are we seeing in M&A now, is the recent deals that have been done at or closer to NAV a reflection of what we anticipate going forward? I think, and I'll get Lois to comment on this as well, I think that 2024 and 23 was an improving environment. We certainly saw more approaches, but I'd say there was still a low number of participants within auctions. And as a result, there wasn't maybe the pricing tension and initial approach, which may have been above NAV. Actually, the outcome was slightly below NAV. And, you know, pricing expectations were relatively tight. Now, the fact that we managed to sell three businesses in that environment, sell them around book value and record, you know, an average close to two and a half times money multiple on those three businesses. And we should also say they weren't necessarily, you know, the three or far from the three best performing assets in the portfolio, which I think is encouraging that you can still sell those businesses at that level. Now, the hope is that as we see with better performance in companies, more participants returning to the M&A markets this year, there is early optimism in the amount of deals. And clearly, some hope that that's going to be reflected in takeout values. I don't know if you'd add to that, Lovis.

I honestly don't have much more to say other than to agree that it's been as tough an environment to exit businesses as it's probably ever been, also in part driven by the high cost of debt, of course. And so, as Stephen said, the competitive dynamics in the processes has been different to what it was in prior years. If we think back to the Wipro's exit or the Contabo exit, it was just a very different environment that made it a much more challenging time to exit businesses. And nonetheless, as Stephen said, the fact that we have managed to exit these businesses at a premium is something we're pretty proud of.

Thanks both. Finally, well actually we'll maybe get through two more questions. Whilst the discount remains persistent, what criteria is needed for OCI to initiate buybacks?

It needs the available liquidity. I think there has been, as the OCI board has demonstrated over the last years, it had a kind of a active buyback program long before any of its peers, you know, it's bought back, you know, somewhere between 100 to 200 million pounds worth of stock over a kind of last three, four year period. However, particularly based on the realization environment that we've just been discussing in combination with the fast deployment of the funds, we haven't had that kind of excess level of cash in order to make buybacks. So I guess in short, with with liquidity will come the opportunity for us to take advantage of that assisted discount. And as I highlighted towards the end of the presentation, we hope we'll have some more visibility around that liquidity and the company would take the opportunity to kind of update on its capital allocation sometime between now and the Q1 NAV updates at the end of April.

Thanks very much, Stephen. And final question now, I think that's all we've got time for, is a question on the macro. So there's been a few things on this, but to wrap them into one, how do you think about a trade war and how would you think that a US recession could impact the portfolio?

I'm always hesitant to kind of give views on direction of macro geopolitical situations, et cetera, simply because when we make an investment, we do so assuming that we're going to be in a recessionary environment. There's going to be high interest rates. There's going to be, you know, there's little where macro tailwinds. And we have to demonstrate that each investment can make a gross two times money multiple in that environment. And that's around value creation and hopefully businesses that can continue to grow regardless of the market backdrop. And that's what, although this is a muted NAV growth period for the reasons we've discussed, actually, you can tell from businesses growing on average at 15%, these are businesses that are doing just that. There's obviously a lot of focus on the US and its economic prospects and the trade wars. I think I think the two things to point out that in terms of revenue exposure to the US. It's about 40% of total revenues, so so we have some. Determine whether that's that's going to be a positive or negative driving. Europe is really the kind of jurisdiction that we are, you know, most dialed into. And if I think about the kind of businesses that would be impacted, know it's a small it's a small percentage of total revenues it's one two percent of revenues are goods sold into the us as you can imagine it's time and it's and so if you're going to be subject to tariffs your vice north globetrotter um alessi so i i don't necessarily see that as a as a threat um I mean, it's a very service-heavy portfolio, so I don't expect us to see much friction in this area. I don't know if you want to comment. Yeah, I mean, as Stephen said,

very difficult, not even impossible to predict what might be going on. But as Stephen said, our direct exposure to tariffs, for example, is minimal. We do have revenues in the US and internationally, of course. And what we're very acutely aware of is trying to naturally hedge those revenues. And so in most instances where we do have international revenues, we try to match those with international costs in that basis to cancel out any adverse effects. And while there's certainly some risk around the US in particular, there's also a huge amount of opportunity. And so as we think our investments, as I mentioned, we try to de-risk these both structurally in the sort of capital structure that we use to protect us, but also frankly, going back to the sort of macro tailwinds. And if we think about cybersecurity, for example, in disaster recovery, This is such an underpenetrated market that even in a downturn, we expect the penetration of this market to continue. Now, of course, it may hamper growth and it may slow growth. That's, of course, a likely prospect. But fundamentally, we think there remains a business need in most of our sectors that should somewhat protect it in the downside.

Thank you, Stephen and Lovis. I think that's all we've got time for in terms of questions. For those of you who've submitted questions or we've not quite got to them, we will catch up with you separately to address those. Thank you very much. Back to you, Steve.

Thank you, Rosanna, and thank you once again for those that have joined us today. As Rosanna said, we will get in contact with those whose questions we didn't reach. Hopefully, it's a presentation that has helped better understand the performance of 2024, but also outline our kind of increasing optimism for shareholder performance in 2025. Many thanks for joining us today and goodbye.