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Portfolio companies

AdEPT Technology Group (ADT)

Market cap: £82.01 million​

Size of holding in DSM portfolio: 8.6%

Percentage of equity held by Downing managed funds: 12.37%




AdEPT is one of the UK’s leading independent providers of managed services for IT, unified communications, connectivity and voice solutions. It is a business that Judith MacKenzie has known for over a decade and our long-standing relationship with the company has given us a high level of confidence in the ability and integrity of the management team.


Investment case

  • Higher quality earnings: AdEPT has migrated from being a provider of just fixed line solutions to a provider of higher-margin managed service solutions across converged telecom and IT activities. This has the advantage of introducing higher quality revenue streams to the group at a better margin. AdEPT has an EBITDA margin of around 21% and low capital expenditure requirements, making the operating structure highly cash generative.
  • Mergers and Acquisitions (M&A): management has made several acquisitions since IPO. We have been impressed with its ability to acquire companies at attractive prices, and how management of these businesses are incorporated into the culture of AdEPT.
  • Engagement: CEO Ian Fishwick, and Financial Director, John Swaite, are well known to Judith MacKenzie and her team. She first met Ian in 2006 at the IPO of the business and they have since developed a strong relationship and level of understanding. Our relationship with the business is highlighted by an invitation to the Annual Group Sales Conference.


All figures correct as at 31 December 2018.


Braemar Shipping Services plc (BMS)


Market cap: £63.66 million

Size of holding in DSM portfolio: 4.80%

Percentage of equity held by Downing managed funds: 6.59%




Braemar is a leading international provider of broking, financial, consultancy, technical and other services to shipping and marine related industries. We know the business and management team well and have been an investor for over six years.

Investment case

  • Improving margins: we expect global GDP growth to be positive year on year, which we believe should drive a steadily increasing demand for shipping and freight volume over the long term. We also expect shipping rates to improve further, aided by a shortage of shipping supply.
  • Restructuring: operationally, we believe that a restructuring could help to improve Braemar’s margins through cost savings. At the time of investment, we expected the Marine Services restructure to result in £6 million p.a. cost savings from 2018.
  • Mergers and Acquisitions (M&A): we believe that Braemar could dispose of lower margin businesses and build or acquire higher margin businesses which will be accretive to group margins. This could be supported by a move to AIM which would materially lower transaction costs.
All figures correct as at 31 December 2018.

Gama Aviation (GMAA)


Market cap: £76.36 million

Size of holding in DSM portfolio: 6.04%

Percentage of equity held by Downing managed funds: 6.71%




Gama is a global business aviation service provider, headquartered at Farnborough airport. It focuses on air operations (business aircraft management, special missions and charter of business aircraft) and ground operations (engineering, design, software, maintenance, repair and operations, passenger handling and consultancy).


Investment case

  • Organic growth: natural growth, aided by the increasing cost of compliance which naturally favours players with scale, crowds out the smaller, localised operators that characterise the business aviation market. We expect margin growth through improved operational efficiencies and new higher margin activities.
  • Consolidation: Gama is one of the top three global players in the sector. We believe that the Company has the potential to be the consolidator of the market. This is due to the fragmented market, Gama’s public listing, and the crowding-out mentioned above.
  • Re-rating: underlying the operational and market opportunity, we believe the business is misunderstood and undervalued by the market. Gama’s ability to closely control working capital and consistently generate free cash flow will be key to a re-rating. We believe these factors are improving with every successive reporting period.


All figures correct as at 31 December 2018.

Hargreaves (HSP)

Market cap: £90.58 million

Size of holding in DSM portfolio: 6.57%

Percentage of equity held by Downing managed funds: 6.87%



Hargreaves (HSP) is a Scottish based conglomerate of infrastructure and commodities businesses which has historically been held in the Downing UK Micro-Cap Growth Fund. Hargreaves is a pure (but not straightforward!) NAV play. As with most conglomerates, there is an inefficiency discount applied and part of our thesis is based around closing this gap by carving out more efficient operating segments and/ or asset disposals and returning the cash to shareholders. Our investment case is predicated on the following:

  • Value creation: we believe that there is between £35 million to £50 million of value creation potential over and above the current book value of HSP in the next five years – the first plot sale at Blindwells should act as validation of this. The spin-off of the wind energy assets into Brockwell Energy could also generate material upwards revaluation as they are developed. We sense checked the energy valuation with Downing’s own renewables team who have been investing in similar assets since 2010.
  • Value realisation: we are currently engaging with management and believe that they are aligned with our views on cash and returns to shareholders. The business targets a 40% pay-out ratio but in a capital asset intensive business, returns to shareholders have been reduced through high recurring capex. In 2017, cash realisations were £25.5 million from legacy assets, but post reinvestment this sum is materially reduced. We expect that the winding down of the legacy capital intensive activities will increase distributable cash.
  • Reducing risk: the winding down of the legacy coal business and associated reduction in inventory reduces the risk to our NAV play and frees up additional cash for developing NAV accretive projects with higher returns, or distribution to shareholders.


All figures correct as at 31 December 2018.

Ramsdens (RFX)


Market cap: £52.27 million

Size of holding in DSM portfolio: 6.03%

Percentage of equity held by Downing managed funds: 16.30%



Ramsdens is a growing and diversified financial services provider and retailer. It operates in four core business segments: foreign currency exchange (FX), pawnbroking loans, buying and selling precious metals and retailing previously owned and new jewellery. The group operates from over 120 stores in the UK. We believe that market forecasts are too light, and the business can grow earnings and dividends around 10-15% per annum.


Investment case

  • Organic growth: the FX, jewellery retailing and pawnbroking loans divisions have grown at annualised rates of 37%, 25% and 7% respectively. We have made prudent assumptions around these growth rates but still arrive at numbers materially ahead of the market.
  • Estate growth: management has grown the estate by approximately 10 stores per annum since 2009. Despite this, the market has assumed only 12 new stores in total will be opened before the business moves to a steady state. We believe management is targeting growth more in line with historic levels, rather than the much lower growth rate assumed in the market forecasts.
  • Operating model: we believe Ramsdens has a strong operating model. It has high levels of cash generation, a net cash balance sheet, barriers to entry provided by the regulatory environment, and a proven management team.


All figures correct as at 31 December 2018.

Real Good Food Ltd (RGD)


Market cap: £6.16 million

Size of holding in DSM portfolio: 17.18%**

Percentage of equity held by Downing managed funds: 7.96%



Real Good Food consists of three divisions: cake decoration, premium bakery and food ingredients. The cake decoration business manufactures sugar pastes and decorations. Premium bakery, which operates under the brand name Hayden’s, is a manufacturer and distributor of premium bakery products. Clients include Waitrose and Marks & Spencer. 

Investment case

  • Growth: our investment was to provide a large amount of capex which we believe can generate enhanced returns and ultimately improved earnings in the long term.
  • Governance: we believe the business needed appropriate financial controls, accountability and corporate governance. These are now largely on their way to being implemented.
  • Valuation: we believe there is a material disconnect between intrinsic value and enterprise value. We expect that reaching the growth and governance targets (as mentioned above) will reduce this valuation spread.

The strength of the newly established management team and the underlying quality of the divisional businesses continues to provide us with confidence that the company is now travelling in the right direction. We believe the structure of the investment and the investor rights inferred have allowed us to help establish the necessary changes to drive value.


All figures correct as at 31 December 2018.

Redhall Group (RHL)


Market cap: £13.15 million

Size of holding in DSM portfolio: 3.6%

Percentage of equity held by Downing managed funds: 23.91%



Redhall is an engineering business offering design, manufacture, installation, maintenance and decommissioning services to a variety of sectors. The initial attraction of the business was based on increasing UK infrastructure projects and the company’s strength in these particular niche markets.

Investment case

  • Order book: we believe Redhall’s expanding order book is undervalued in terms of its growth potential, the visibility provided, and the quality of the underlying projects.
  • Critical infrastructure: The group brings material exposure to high value UK public sector contracts, specifically nuclear projects. These are typically long duration – for example, Hinkley Point which is expected to be constructed over eight to ten years.
  • Improving margin: operational gearing and continuous process improvements are expected to lift margins as the business continues to deliver on new contracts. This follows the completion of the Strategic Turnaround Plan which was executed by outgoing CEO Phil Brierley, and was focused on exiting capital intensive, low margin contracting activities.


All figures correct as at 31 December 2018.

Science in Sport (SiS)


Market cap: £65.86 million

Size of holding in DSM portfolio: 2.59%

Percentage of equity held by Downing managed funds: 12.79%



SiS is a leading sports nutrition company that develops, manufactures and markets sports nutrition products for professional athletes and sports enthusiasts. Downing funds initially invested in the company in 2013, impressed by the strength of the brand and management team. 

Investment case

  • Gross margin: the business has sector-leading gross margins and we believe that this will continue. We believe revenue growth should improve operational efficiency at the current facility, with the company’s growing e-commerce business providing additional margin support.
  • Growth: in November 2017, SiS raised capital to fund further expansion in the US and Italy, as well as a new target market – football.
  • Return on capital: the Manager’s valuation approach in this case is centred around incremental return on invested capital on our monies. It assumes an exit at a multiple at least as great as the sector average, which we believe to be around 2.5x enterprise value (EV)/sales. On this basis, we believe that the company can deliver more than a 15% IRR over the investment horizon.


All figures correct as at 31 December 2018.

FireAngel Safety Technology (FA)

Market cap: £18.82 million

Size of holding in DSM portfolio: 1.53%

Percentage of equity held by Downing managed funds: 10.78%




FireAngel is a major designer and distributor of smoke and carbon monoxide detectors, and other safety-related devices, in Europe. Those incorporating FireAngel’s own technology/ IP are sold under its brands FireAngel (the UK’s number one retail brand of detectors), FireAngel PRO, AngelEye, Pace Sensors, and SONA. The business has filed over 100 patents to protect its smoke and CO sensing technology, as well as the IP around its next generation Internet of Things products.


  • Legislative drivers: the company benefits from country legislation which is driving the adoption of fire protection products. This was evidenced in France in 2015 and is now underway in Germany. Guidance is for the purchase of smoke alarms with a 10 year lifespan. Therefore, in more mature markets where there is high penetration, we are already beginning to see a replacement cycle on the installed base.
  • Improving margins: gross margins on FireAngel’s products differ to those of typical white goods – earning around 30% and over 45% on IP enabled products. When these are combined with an improved operational structure, we expect conversion to profits and cash flow to improve. After a temporary fall in earnings in 2016 (due to a product recall) the company has reorganised its internal systems and process testing. Additionally, the move to Flex in Poland for manufacturing and supply of smoke detectors is progressing to plan and we believe this will enable the company to control production costs more closely. Finally, the termination of a distribution agreement with BRK Brands will save £2.9 million in annual distribution fees.
  • Market growth: FireAngel has robust technology and IP around device interactivity, owing to its long tenure in the sector. While there are new upstarts in the Internet of Things (IoT) sector, who are investing heavily to gain market share, we believe that FireAngel’s technology is superior. It has historically not exploited this IoT market potential and we believe that doing so could offer material upside.


All figures correct as at 31 December 2018.

Synectics (SNX)


Market cap: £35.14 million

Size of holding in DSM portfolio: 8.11%

Percentage of equity held by Downing managed funds: 12.86%



Synectics is a leader in the design, integration, control and management of advanced surveillance technology and networked security systems. It operates mainly in heavily regulated industries, including gaming, transport and critical infrastructure, high security and public space applications and oil and gas.

Investment case

  • Order book: our investment case is based on the strong and growing forward order book, which increased by 28% in the first half of its 2017 financial year. We see great potential in the gaming market where Synectics has an existing client base of global casino owners and operators.
  • Improving quality earnings: following a recent restructure, we believe the business is more operationally geared and could double its return on capital employed in the mid-term. We value Synectics’ focus on managed services, which contribute around 25% of higher quality recurring revenues.
  • Strategic opportunity: we believe Synectics has two main growth opportunities. Firstly, an improvement in operating performance, secondly, consolidation potential in a fragmented sector with exposure to highly regulated markets.


All figures correct as at 31 December 2018.

Volex (VLX)


Market cap: £129.39 million

Size of holding in DSM portfolio: 12.52%

Percentage of equity held by Downing managed funds: 7.46%



Volex is a heritage British manufacturer operating across two segments: power cords and cable assemblies. We have followed the business closely for over a year and believe that our entry point comes ahead of a transformational change in the strategy. Downing client funds participated alongside the Trust’s commitment and now own 7.5% of the equity.

Investment case

  • Growth: we believe that the rebased business is now in a position to grow profitably over the long-term. Revenue growth should be leveraged at a higher rate through the improved operating structure which is more efficient than it has been historically.
  • Margin Recovery: we expect margin recovery at a group level from the cost efficiencies undertaken.
  • Strategy: we believe the decision to exit the PC business in the medium term is the correct one since it should be worth disproportionately more to a vertically integrated player with automation. This would leave a cable assemblies business and cash to pursue a roll-up in this industry. We think that focusing on cable assemblies, the more profitable division, plays better to the competitive strengths of the mod


All figures correct as at 31 December 2018.

Duke Royalty (DUKE)


Market cap: £87.34 million

Size of holding in DSM portfolio: 4.63%

Percentage of equity held by Downing managed funds: 6.37%



Duke Royalty is an alternative lender to SMEs through its unique royalty finance offering. It provides investors with exposure to established, growing and cash generative private businesses, solely across Europe and North America. Duke aims to share the stable returns from these activities with shareholders through a market leading dividend yield.


Investment case


  • First mover in European royalty financing: Duke is the first listed, non-resource, royalty finance offering in the uncontested European market. It is rolling out a product that has been hugely successful in North America since its inception in the 1980’s - that market is now worth over £50 billion.
  • Banks vacating the SME space: Duke’s offering comes at a time when mainstream banks, constrained by capital adequacy rules, have focused lending to the most prime customers, leaving a significant number of SMEs unbanked and requiring expansionary capital. This has led to a growing alternative finance market in Europe, but one without a royalty finance offering other than Duke’s.
  • High yield, long-term finance: Duke’s royalty finance product involves the investment of £5-20m in a European SME in return for a regular annual royalty set at an initial 12-15% yield. Royalties are typically paid over a 25-40 year period but can be structured perpetually as permanent capital. Under these terms, Duke’s investment is typically returned by years 6-7, leaving a minimum of 18 years of royalty payments to come.


All figures correct as at 31 December 2018.