Odyssean Investment Trust’s results for the year ended 31 March 2025 show a 10.7% fall in NAV and 13.5% fall in share price, and a shift from trading on a small premium to a small discount (2.5%).
The returns fall short of the return on the Deutsche Numis Smaller Companies ex Investment Companies plus AIM Index of -0.4%.
11.6m shares were issued at a premium to NAV (avoiding dilution for existing shareholders), including 6.5m through a placing last July. An additional 0.7m shares have been issued since the period end.
Extracts from the manager’s report
It was a year of two halves, with the portfolio rising by almost 10% to the end of September, after which it experienced progressive declines in the last calendar quarter of 2024 and the first calendar quarter of 2025. At the end of the period under review, the portfolio comprised 16 companies.
The top three positive contributors to performance were Ascential, NCC, and Blackline Safety.
As detailed in the Interim Results, Ascential was taken over by Informa in the first half of the period.
Despite share price volatility over the period, NCC’s shares returned more than 15% including dividends. The multi‑year performance improvement plan initiated more than two years ago seems to continue to be making good progress. The lower growth Escode division continues to deliver positive organic growth. Within the remaining cyber services businesses, the higher margin and higher visibility Managed Services activities continue to show strong double digit growth. However this performance continues to be masked by challenging trading conditions in the lower visibility Technical Assurance Services activities. During the period, NCC disposed of its non-core cryptographic division for mid-teens EV/EBITDA multiple, which has strengthened the balance sheet significantly to a point where it is in a slightly net cash position.
The position in Blackline Safety was initiated in June 2024, when we invested via a placing at C$4.05 per share. Blackline provides connected safety devices, both worn by individuals as well as larger, portable units. The company operates in an attractive global market which we believes grows above GDP. The company has developed industry leading technology in its hardware devices and associated software based monitoring platform, and is rapidly setting new industry standards. As a result the business is taking considerable market share and growing at around 30% per annum. More than 50% of revenues are derived from recurring software and monitoring services which have very high renewal rates. We invested at a forward EV/Sales of 2x which we believe was compelling given the growth rates and the quality and differentiation of the business. From purchase to the end of the period, the shares delivered a positive return of >60% in local currency.
The top three negative contributors to performance were XP Power, Stabilus and Essentra.
XP Power has suffered from a simultaneous de-rating as well as sales and earnings downgrades. The de-stocking of industrial and healthcare customers continued for at least six months longer than expected during the year. In addition, although the widely anticipated growth in orders from semiconductor equipment manufacturers from a very low ebb began in Q4 calendar 2024, the start and pace of recovery has been slower than hoped for. Although the end demand has not been what we had hoped it would be, we believe that the management has managed well what is within its control, achieving significantly ahead of what it had promised in late 2023 on operating cost savings and releasing cash from working capital. In early March 2025 the company chose to raise a modest amount of further equity to further strengthen the balance sheet given the uncertain market outlook. Whilst this was not anticipated, in retrospect this has probably proven to be a prudent decision. We continue to believe that the shares are pricing in an extraordinarily pessimistic view of its long term earnings potential and strategic value, as demonstrated by the hostile bid approach from its US peer Advanced Energy in May 2024 at a significant premium to the current share price.
Stabilus is the only portfolio company with significant exposure to the global automotive industry, providing gas springs and power mechatronic systems for opening tailgates/boots, bonnets and now doors, where it is the clear global market leader. The power mechatronic systems are growing significantly above overall vehicle production as they increase penetration across platforms. Around 50% of sales are to non-automotive markets, where automation of manufacturing is a key growth driver. Group sales are well balanced across geographies and the company is well invested. The company’s shares de-rated significantly over the period due to concerns over end demand. The rating again implies an extremely pessimistic view of its future earnings potential.
Essentra is a mid-sized position in the portfolio, the company is a leading manufacturer and supplier of plastic and metal components for industrial end uses. The company is typically a very early cycle business – i.e. it tends to perform extremely well in the very early stages of volume recovery in general manufacturing. Although there remains a significant self-help opportunity to improve gross margins and structurally reduce costs, weaker than anticipated volumes and a lack of recovery in manufacturing activity in its key geographies led to a decent sized downgrade in early 2025. We continue to believe it is a high quality business model and should perform extremely well as and when the end market cycle turns. The company’s valuation again assumes extreme pessimism about any eventual recovery.
OIT : Odyssean expands despite difficult year
