Oakley Capital Investments confident in pandemic portfolio plans
Oakley Capital Investments (OCI) updated the market in light of the Covid-19 coronavirus pandemic on Wednesday, saying that itself and its investment adviser Oakley Capital were placing the safety and welfare of colleagues, investors and all other stakeholders as its highest priority.
The London-listed specialist fund said it was taking “all necessary steps” to protect individuals, ensure business continuity and provide support to its portfolio companies.
It said Oakley Capital had increasingly focused on investing in companies that provided software solutions and digital infrastructure services, and that utilised online delivery platforms.
Those types of business models were “potentially less susceptible” to disruptions caused by the pandemic, it asserted, compared with the broader economy.
“Nonetheless, the probability that we enter a global recession has increased considerably which brings with it significant challenges,” the board said in its statement.
“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.”
The company said it had no leverage and a strong balance sheet, with £152m of net cash as at 25 March.
That represented 78p per share, and 22% of its net asset value as at 31 December.
“The board continues to be comfortable with the cash position, which remains conservative, and is in continual dialogue with the investment adviser.”
OCI said it had outstanding commitments to the Oakley Funds of £429m at year end, of which £313m was committed to the recently-launched Fund IV, which would be deployed in new investments over a five-year period.
It said that, while it was too early to fully evaluate, it expected there would be an adverse effect on its net asset value as a result of the pandemic.
The scale of the impact remained dependent on a number of 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 net asset value per share-enhancing buyback programme, with the purchase and cancellation of three million shares,” the board said.
“This approach to capital management will continue, with further share buy-backs anticipated.”
The fall in equity markets as a result of Covid-19 would also put downward pressure on portfolio company valuations where there were comparable publicly listed peers, the directors said.
It added that over 70% of the portfolio companies operated a subscription-based or recurring revenue business model, and were thus less vulnerable to temporary declines in customer demand.
In addition, 65% of the portfolio either delivered products or services digitally, or had 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.”
Looking at the response from Oakley Capital, the company said its team was “well prepared” with secure remote access, and had continued to communicate and work without interruption.
It added that risk assessments had been carried out on each of the portfolio companies, with the investment adviser reportedly “confident” in the response plans that management teams were 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.”
Finally, on the investment front, OCI said Fund III was currently 78% invested and as such had capital available to support and grow the current portfolio.
With Fund IV currently 27% invested, it was also well positioned to partner with new investee companies as opportunities arose.
At 1505 GMT, shares in Oakley Capital Investments were up 5.52% at 172p.