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Oryx International Growth reports on a disappointing year

Oryx International Growth (OIG) has announced its annual results for the year ended 31 March 2022, during which its NAV fell by 4.57% in what its investment adviser, Harwood Capital, describes as a disappointing year. The adviser says that the portfolio was hampered by a reversal in bond market sentiment towards the biotech and healthcare sectors, which had driven much of the outperformance in 2021. It also comments that, while it is unfortunate to announce a loss of value for shareholders, it is also important to note the relative positive result against the comparable indexes which fell well over 10%.

Adviser’s comments on the quoted equities portfolio

“The leading performers during the year were Avingtrans Plc, Hargreaves Services Plc, Circassia Plc and Centaur Media Plc. Most of this strong performance was achieved through improved operations within each business that boosted profitability through sales growth and cost minimization. Hargreaves Services is perhaps the outlier, with skyrocketing raw materials prices driving ‘super profits’ in its German joint venture, though the other divisions have also performed extremely well. Centaur and Avingtrans continue to generate substantial cash flow and have generated significant value for their shareholders, with the latter company now the largest investment in the Company. Circassia has continued to beat market expectations and is now profitable for the first time in its history in the wake of expert management from the executive team.

“The primary underperformers of our significant holdings were EKF Diagnostics, Renalytix AI, MJ Gleeson, Redcentric and Tribal Group. EKF Diagnostics has suffered from the market not appreciating the strength of the core business. The outperformance in 2021 was driven by investor sentiment around its Covid-19 related products, but the soaring share price has now been brought back down to earth as the pandemic eases. The core business continues to deliver, with £16 million of Earnings Before Interest, Taxes, Depreciation and Amortisation (“EBITDA”) anticipated this year, growing to £25 million by the end of 2024. The current valuation is low for a high-quality diagnostics business and with time, we hope the market will recognize this. Renalytix AI, the worst performing company in the portfolio, has suffered alongside the broader biotech sell off in the markets. The underlying business is well capitalized and has continued to deliver a pipeline of contracts with major institutions. Additional contracts as well as the still-awaited grant of Medicaid/Medicare should allow this company to stand head and shoulders above its peers, but patience from investors will be needed. Tribal Group has faced Covid-19 headwinds and broader market pressure on its share price, but the business is in good shape and remains well funded.

“Over the course of the year, several new positions were built in the portfolio. Kitwave Group Plc, a United Kingdom (“UK”) wholesale distribution business, generates significant cash that it uses for bolt-on Mergers and Acquisitions (“M&A”) and an ample dividend. Importantly, its energy costs are fixed at a much lower rate than current prices until 2025, limiting cost inflation. Northbridge Industrial Plc is another new investment. The company has recently divested its non-core assets and is now focussed on the load bank business, where it is a market leader, selling into multiple areas including data centres. We believe the new, streamlined business that operates in attractive growth markets will be an attractive asset to a potential buyer. AssetCo has been created out of a cash shell and developed into an asset management business headed by Martin Gilbert, formerly of Aberdeen Asset Management. The company recently announced its intentions to acquire River & Mercantile and we await the conclusion of those negotiations. The share price appreciation of +432% over the course of the year reflects investor enthusiasm towards this scalable model and talented management team.”

Adviser’s comments on the unquoted equities portfolio

“It was a successful year in the unquoted portfolio. Viking was exited in January and a takeover of Antler Holdco was agreed, and subsequently completed post the financial year-end, both at good premiums to the March 2021 valuation. Moxico performed well as a result of an oversubscribed placing and is expected to go public this year at a further uplift. Tradewise had to be written off following further disappointing trading although the loss attributed to fiscal 2022 was modest.”

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