21/22 Annual Report

I am pleased to present my Chief Executive report for the year ended 30 June 2022.

This financial year has seen unprecedented challenges for the global economy, creating shockwaves across all sectors and particularly demanding market conditions for commodity derivatives as an asset class. I am immensely proud of the team to be able to operate so effectively during this time, and for finishing the year having made such significant strides forward across the Group.

Business Overview

The financial year under review was focused on the diversification and scale of our core trading business alongside driving revenue growth in our early stage businesses. The business performance was exceptional, achieving revenue of £160m (2021: £85m) and operating profits of £62m (2021: £26m), which sees the return of year on year and overall growth. Revenue was up 88% year on year, and 33% higher than 2020, whilst operating profits were up 134% year on year and 20% higher than 2020.

This was primarily achieved through continued, outstanding performance of our trading team, which generated increased profits from growth within current and newly formed desks. The total number of trading desks has now increased from 7 to 9, led by newly acquired senior talent and traders through our 'Elite' graduate trading programme. Our market share across products traded remains comfortably the largest of market makers globally, with the newly added Dubai crude desk already achieving number 1 volume by a large margin. We have also had a significant increase in market share in gas markets through our LNG desk, and noticeable gains in the Fuel oil derivative market. The trading business is continuing to demonstrate it can expand through a proprietary trading method, trained systematically to standout graduate candidates that are sourced through a rigorous search and testing criteria. Additionally, we are able to offer a world-class trading floor and working dynamic to the best senior talent out there, that has proved effective at attracting staff within our niche market. There is now also tangible evidence that this approach can be applied, and scaled, to commodities outside of oil, and we fully expect this to be sustainable source of profit growth for the future.

Outside of trading, the financial year in review saw further growth and development in our other businesses. I am delighted that our brokerage business is now cash flow positive, after increasing customer acquisitions and market share led to a surge in revenue in the second half of the financial year. This is a laudable milestone for the team competing in a highly competitive market and further evidence of value we can bring as service providers.

It was also a strong year for our data offerings, with two successful releases to market. Firstly, our Onyx Fair Value product can now be delivered via API and via Flux on mobile. The service provides minute by minute values across oil swaps, leveraging our world leading market presence and in-house capabilities to create a much superior offering to market than currently exists. Our trading team is expertly trained in marking curves through our training programme, whilst the team sees more trades and quotations than any other business in oil swaps as the world's largest market maker. These capabilities were also the back bone for our second new release this year, the Onyx Commitment of Traders data delivered via API, which reveals the market's positioning on a daily basis.

The data that underpins our products is entirely proprietary and collected from the trading business Onyx Commodities. It is then processed, packaged and sold via the service businesses.

These new iterations on our existing products have bridged the gap for the prospective customer, and led to an immediate increase in sales in the first half of the calendar year. The improvement of data delivered systematically has assisted with the sales process for our research offering Onyx Insight, with customers increasingly taking to the product now the underlying source of analysis can be evidenced. The feedback from market has reaffirmed our confidence that there is no competitive data availablethat can match both the quality and accuracy of our fair value and positioning data. Onyx's data is wholly proprietary, with a very high barrier to entry to replicate, needing an entire market making trading floor that has competing market share to provide anywhere near the same value.

In general, it has been highly encouraging to see the various arms of the Group coming together to create value to the oil (and now gas) derivative markets. In these tough times, liquidity has become a central issue, making the market making function Onyx provide incredibly important to the industry this last financial year and beyond. Demand for data as a macro theme is still growing at an incredible rate, and having the evidence that the Group structure can deliver at scale on that demand is exactly what I wanted to see at this stage in our long-term mission, and the business is well set up for a very exciting future.

Outlook

I am thrilled to announce that early into the new financial year, the parent company has undertaken a management buyout and company share buyback of early-stage investors, who remain in the business with a minority share. The business is now almost entirely owned by founders and current employees, which put us in good stead to retain key staff and build on a cohesive working culture as we execute our long term mission. The post buyout board will look to deliver on our long-term goals with increased vigour and flexibility.

The new financial year has started well across the board, with further strong performance in trading and revenue growth in our services. Immediate focus has been on consolidation after the capital event and a focus on driving current businesses will take us into the balance of the calendar year. Into the second half, we will look again towards a push into trading volumes through our E-brokerage Flux, and an expectation of more data offerings to market. The trading business should continue to organically grow, with a strong pipeline of staff steadily coming through the programme and onto new and growing desks.

We will also be forming a new office in Singapore by the end of the calendar year, increasing our presence globally to expand our service operation and improve our recruitment options within trading. The office will be led by an early employee and now equity partner in the business and has already attracted talent from the South-East region.

Vision and Alignment

Unifying cultural identity across the Group operations has been one of the greatest challenges for management. Taking a niche trading business into a full scale, global operation has been arduous work, but made more complicated by our pivot of the overall business into a service operation with novel product offerings. Technology, data, research, sales and operations teams have all had to be recruited and integrated into a working culture that initially was immersed in a trading mentality. The collective employee mindset has needed to adapt to a highly agile work philosophy, that varies from start-up, entrepreneurial thinking to procedural mindsets, all the while maintaining a collective motivation for a mission that is bigger than all of us. This highly ambitious way of working is not for everyone, but I am genuinely impressed with how many different personalities with diverse working experiences have come together to create the team we have today. We can now truly start to be define the Onyx way of doing things, that will shape our identity for many years to come.

The time spent on the employee build out in the last 3 years has now concluded with a management buyout, leaving the business more aligned than it has ever been. We now need to be ruthless and obsessive over the next few years to take the group beyond its transition and into a fully-fledged, scaled global trading and service business.

Our vision remains focussed on bringing real transparency to the market that the world has shown it craves, and to do this in the digital age. The oil derivative industry has a huge amount of growth ahead of it, for which Onyx can and will be front and centre.

Conclusion

Overall it has been an hugely rewarding year. There has been serious growth in our core business and service capabilities, whilst the business finds itself in an improved, aligned form post management and share buy-back, ready to take on the next stage of growth in line with the group’s mission.

Greg Newman - CEO - Onyx Capital Group

View our full results at Companies House

View our 2020/21 Annual Report