Private equity company, Oakley Capital Investments (OCI), provided the following update:
“OCI has increasingly focused on investing in companies that provide software solutions and digital infrastructure services and that utilise online delivery platforms. These types of business models are potentially less susceptible to disruptions caused by the pandemic compared with the broader economy. Nonetheless, the probability that we enter a global recession has increased considerably which brings with it significant challenges. OCI and Oakley Capital are taking a proactive approach to the situation and remain confident in the continued long-term performance of the Oakley Funds.”
OCI balance sheet
- “Net cash – the Company has no leverage and a strong balance sheet, with £152 million of net cash as at 25 March 2020. This represents 78p per share and 22% of NAV as at 31 December 2019. The board continues to be comfortable with the cash position, which remains conservative, and is in continual dialogue with the Investment Adviser.
- Commitments – OCI has outstanding commitments to the Oakley Funds of £429 million at year end. £313 million of this is committed to the recently launched Fund IV, which will be deployed in new investments over a five-year period.”
Portfolio companies & NAV impact
- “NAV – while it is too early to fully evaluate, it is anticipated there will be an adverse effect on OCI’s NAV as a result of COVID-19. The scale of the impact is dependent on many factors including the duration and severity of the virus, as well as the response from governments and consumers. The recent significant fall in the OCI share price presented an attractive opportunity to continue the NAV per share-enhancing buy-back programme, with the purchase and cancellation of 3 million shares. This approach to capital management will continue, with further share buy-backs anticipated.
- Valuations – the fall in equity markets as a result of COVID-19 will put downward pressure on portfolio companies’ valuations, where there are comparable publicly listed peers. Trading performance – over 70% of the portfolio companies operate a subscription-based or recurring revenue business model and are therefore less vulnerable to temporary declines in customer demand. In addition, 65% of the portfolio either deliver products or services digitally or have the ability to shift to digital delivery in a short time frame. While there will be an impact on trading, Oakley’s sector focus has the potential to provide some resilience during this period of disruption.”
Response from Oakley Capital
- “Safety – the welfare of colleagues, investors, portfolio company employees and business partners is Oakley Capital’s highest priority. Steps have been taken both to protect individuals and to provide support to our portfolio companies and management teams.
- Business continuity – the Oakley Capital team is well prepared with secure remote access and has continued to communicate and work without interruption.
- Response – risk assessments have been carried out on each of the portfolio companies and the team has confidence in the response plans that management teams are executing.
As a highly engaged investor, Oakley has strong lines of communications with all portfolio companies and is monitoring all businesses. This is especially important at times like these and as such the Oakley team is in constant dialogue with all portfolio companies to understand the impact and to support bespoke contingency planning, with a particular focus on liquidity and cash preservation in the short term. Oakley is also enabling the sharing of information, analysis and insights across all businesses.
Investment – Fund III is currently 78% invested and as such has capital available to support and grow the current portfolio. With Fund IV currently 27% invested, it is also well positioned to partner with new investee companies as opportunities arise.”
OCI: Oakley Capital Update