28 November 2023
Augmentum
Fintech plc
Interim
Results for the six months ended 30
September 2023
Augmentum
Fintech plc (LSE: AUGM) (“Augmentum” or the “Company”), Europe’s
leading publicly listed fintech fund, announces its unaudited
interim results for the six months ended 30
September 2023.
Financial
highlights
•
NAV per
share after performance fee1
increased
by 0.8% to 160.2p (31 March 2023:
158.9p).
•
IRR of
16.6%2
on invested
capital since inception (31 March
2023: 18.5%)
•
Available
cash at period end of £51.8 million (free cash of £48.0 million)
with no debt (31 March 2023: £38.5
million).
•
Repurchased
3,918,878 shares over the period, at an average price of 99.2p per
share.
Portfolio
and investment highlights
•
The top 10
holdings, which represent 82% of portfolio value, grew revenue at
an average of 74%3
YoY and
have an average of 29 months cash runway. 4 of the top 10 positions
are cash generative.
•
The sum
value of the top three holdings in Tide, Grover, and Zopa, plus
current cash, is above the Company’s market capitalisation. These
positions continue to demonstrate their credentials as fintech
market leaders, growing revenues by an average of over 1,200% since
the Company’s investment and are either profitable or capitalised
until projected profitability.
•
Cushon, the
workplace pensions and savings provider, completed their majority
shareholding acquisition by NatWest Group in June 2023, which delivered a return of 2.1x
multiple on invested capital with proceeds of £22.8 million and a
62% IRR.
•
Tide, the
SME business bank, now services 1 in 10 UK small and mid-sized
businesses, representing 550,000 UK businesses. Since expanding
into India in December 2022, Tide now has more than 150,000
members in the country.
•
Zopa Bank,
the digital-first consumer bank and lender, announced in
September 2023 that it had
successfully raised £75 million in Tier 2 capital to fuel its
continuous growth and rapid expansion. This financing follows £75
million of equity funding raised earlier this year, in which
Augmentum participated. Zopa Bank now serves 1 million customers
and expects to hit full-year profitability for the first time this
year.
•
Monese, the
mobile-only current accounts and banking as a service (BaaS)
provider, announced the launch of XYB, an end-to-end ‘coreless’
banking platform provider, in May
2023.
•
Wematch.live,
the capital markets trading platform, surpassed $200 billion in ongoing notional volume of Total
Return Swaps on equities in August
2023. Wematch.live also reached an average daily matched
volume (ADMV) of $11 billion in EMEA
in July 2023.
•
A number of
acquisitions were made across the portfolio, including by Onfido,
the global leader in automated identity verification, who acquired
Airside, the US-headquartered shareable digital identity technology
company and FullCircl, the company intelligence and risk solution
provider for frontline teams, who acquired RegTech provider W2
Global Data Solutions.
•
The Company
remains a highly selective investor. Since the start of 2022 it has
consciously slowed deployment as the valuation environment has
continued to re-rate. During the period, the Company made three
follow-on investments, totaling £6.9 million, including £5.3
million into Volt, the account-to-account payment provider, as part
of a $60 million Series B round. The
Company also took up their pro rata shareholder rights to invest a
total of £1.6 million in Grover, the consumer tech subscription
platform, and Habito, the digital mortgage broker and direct
lender.
Notes:
1 The
Board considers NAV per share after performance fee to be the most
appropriate measure of NAV per share attributable to
shareholders.
2
Annualised IRR on invested capital and realisations since inception
using valuations at the last reporting date before performance
fee.
3
Revenue growth taken as the LTM to September
2023 vs the LTM to September
2022. Any outliers (>250%) have been capped to 250% to
improve comparability.
Neil England, Chairman of Augmentum Fintech plc,
commented:
“The
Company’s NAV per share after performance fee was 160.2p, a gain of
0.8% over the reporting period. This continues the Company’s
unbroken NAV per share increase over every one of the eleven
reporting periods since our IPO in 2018, notwithstanding the recent
ongoing challenging market conditions.
“Whilst the
Company’s shares have continued to trade at a discount to NAV, in
order to convey to the market the Board’s confidence in the value
of the portfolio, and to take advantage of the accretion to
shareholders offered by the wide discount, we continued to buy-back
shares over the period under review. These shares are held in
treasury and may be reissued when the share price returns to a
premium.
“Our
Manager has retained their investment discipline over the last six
months and at the end of the reporting period the Company held net
free cash of £48 million. The Augmentum model has been proven
through five successful realisations to date, and the Company’s
track record coupled with the expected reduction in interest rates
in 2024 may be the trigger for the re-rating that the Board
believes is deserved.”
Tim Levene, CEO of Augmentum Fintech Management Limited,
commented:
“Despite a
strong pipeline of opportunities, our bar for investment has
remained high and we have retained our uncompromising standards for
new investments. We made no additions to our portfolio during the
period under review although have invested £6.9 million in three of
our existing portfolio companies. Our three largest holdings, Tide,
Grover and Zopa, are category defining digital leaders in large and
growing markets. They are currently growing at an average of 79%
year on year and are either profitable or funded to
profitability.”
“We
continue to apply a rigorous approach to valuations. This can be
seen in our five exits to-date, where proceeds have been realised
above or on-par with previously reported valuations. In this
reporting period Cushon’s acquisition by NatWest Group brought in
proceeds of £22.8 million, representing a 2.1 multiple on invested
capital and an uplift of 47% on the previous valuation. Our
approach to valuation, we believe, sets us apart from many other
funds.”
“Markets are
exhibiting the early signs of a shift in sentiment with interest
rates being held steady first in the UK and then in the US. This
signals a cautious yet hopeful economic outlook. This, combined
with the continual move towards the digitisation of financial
services and Augmentum’s disciplined approach to both investment
and valuation will, we believe, offer exceptional opportunities for
us to deliver a stand-out vintage in 2024 and 2025.”
Enquiries
Augmentum
Fintech
Tim Levene
(Portfolio Manager)
Georgie
Hazell Kivell (Marketing and IR)
|
+44 (0)20
3961 5420
georgie@augmentum.vc
|
Quill
PR
Nick
Croysdill, Sarah Gibbons-Cook
(Press and
Media)
|
+44 (0)20
7466 5050
press@augmentum.vc
|
Peel
Hunt LLP
Liz Yong,
Luke Simpson, Huw Jeremy
(Investment
Banking)
|
+44 (0)20
7418 8900
|
Singer
Capital Markets
Harry
Gooden, Robert Peel, James Fischer
(Investment
Banking)
|
+44 (0)20
7496 3000
|
Frostrow
Capital LLP
Paul Griggs
(Company Secretary)
|
+44 (0)20
3709 8733
|
About Augmentum Fintech
Augmentum
invests in fast growing fintech businesses that are disrupting the
financial services sector. Augmentum is the UK’s only publicly
listed investment company focusing on the fintech sector in the UK
and wider Europe, having launched
on the main market of the London Stock Exchange in 2018, giving
businesses access to patient capital and support, unrestricted by
conventional fund timelines and giving public markets investors
access to a largely privately held investment sector during its
main period of growth.
.
----------------------------------------------------------------------------------------------------------------------------------------------------
Augmentum
Fintech plc
Half
Year Report for the six months ended
30 September 2023
.
Chairman’s
Statement
Introduction
This report
covers your Company’s progress in the six months to 30 September 2023 and its financial position at
that date.
Investment
Strategy
Your
Company invests in early stage European fintech businesses which
have technologies that are disruptive to the traditional financial
services sectors and/or support the trend to digitalisation and
market efficiency. A typical investment will offer the prospect of
high growth and the potential to scale. Our objective is to provide
long-term capital growth to shareholders by offering them exposure
to a diversified portfolio of private fintech companies during
their period of rapid growth and value accretion.
Performance
Your
Company’s NAV per share after performance fee at 30 September 2023 was 160.2p, a 0.8% gain across
the period under review (158.9p as at 31
March 2023). NAV per share has increased in every one of the
eleven half year reporting periods since the Company’s IPO in 2018,
albeit at a much reduced level during the past year. This lower
increase is largely due to valuations being affected by lower sales
or earnings multiples in the public market comparators that we use
in our valuations, together with some sensible provisions that we
have made against those businesses that have faced
challenges.
The
operational performance of the vast majority of our portfolio
companies has continued to be strong, with average revenue growth
of 74% across the top 10 in the last 12 months. There have been
some standout results, in some cases ahead of expectations, and the
majority have over 2 years of cash runway. Crucially, our top 5
investments; Tide,
Grover,
Zopa
Bank,
Volt
and
BullionVault,
are all growing strongly.
Shareholders
will note that we have not experienced the NAV write-downs that
have been a feature from several other investment companies that
focus on venture and early stage private equity. This is testament
to our rigorous and disciplined approach to investment selection
and valuations. As I have reported previously, as a result of this
discipline, we did not write up the value of our investments to the
levels that others did when we were in a bull market for fintech.
It follows that we have not needed to make major corrections now.
This approach is best illustrated by our five realisations, all of
which have been at or above their pre-disposal
valuation.
The world
is an uncertain place as I write, and there have been capital flows
away from equities into safer havens such as cash and gold. It is
expected that equity markets will remain tough in the coming
months. High interest rates and uncertainty over future rates have
continued to be a major negative factor affecting investment
companies that focus on growth. The assumption is that these
companies will need cash to fund that growth and that will be
expensive and/or difficult to get. Unfortunately, the market is not
differentiating between those companies with genuine issues in this
regard and those that have no such needs, as is the case with the
bulk of our portfolio. The result is that the price at which the
shares traded continued to significantly under-represent the NAV
throughout the period, ending at 94.0p per share, down 3.0p from
the price at 31 March 2023 and
representing a discount to the NAV per share after performance fee
of 41.3%. When stripping out our cash from the balance sheet, the
implied discount on our investment portfolio is around 51%. As at
30 September 2023, the valuation of
our top three positions in Tide,
Grover,
and Zopa
Bank, plus
cash, was above our market capitalisation, attributing no value to
our £125 million of other investments.
Portfolio
and Transactions
Our
portfolio stands at 24 companies, diversified across the main
fintech verticals, European markets, and at the various stages that
we told our IPO investors that we would build to. Our Top 10
investments represent 82.3% of the portfolio value.
In the
period, the Company received proceeds of £22.8 million from the
completion of NatWest Group’s acquisition of Cushon, significantly
ahead of its prior valuation and representing a 2.1x multiple on
invested capital.
The Company
made follow-on investments to support Volt
(£5.3
million) and Grover
(£1.4
million). No new investments were established during the period,
despite the team reviewing many opportunities, illustrating the
discipline of our investment model. At the period end, the Company
had net free cash of £48 million.
The
Portfolio Manager’s report, beginning on page 8, includes a
detailed review of the portfolio, individual company performance
and investment transactions in the period.
Valuations
Your Board
considers its governance role in the valuations process to be of
utmost importance. Together with our advisers we consider and
challenge all of the investment valuations used for the full and
half year financial statements. We have carefully reviewed both the
status and the forecasts of all of the portfolio companies. The
valuations have been arrived at using appropriate and consistent
methodologies, and we sense check and debate our conclusions on the
assets themselves and their market context. Also, we benefit from
some of our investments occupying a senior position in the capital
structures of these companies, providing some protection against
downside risk.
Portfolio
Management
We are
active investors with a team that works closely with the companies
we invest in, typically taking either a board or an observer seat
and working with management to guide strategy consistent with
long-term value creation. We have built a balanced portfolio across
different fintech sectors and maturity stages and are committed to
a responsible and sustainable investment approach, believing that
the integration of environmental, social and governance factors
helps to mitigate risk.
Discount
Control
As reported
above, the Company’s shares continued to trade at a discount to NAV
during the period under review and up to the date of this report.
Buybacks are one of several mechanisms your board actively consider
to reduce this discount.
To convey
to the market our confidence in the value of the portfolio and take
advantage of the accretion to shareholders offered by the wide
discount we continued to buy back shares in the period under
review. All shares purchased by the Company are being held in
treasury and will potentially be reissued when the share
price
returns to
a premium.
3,918,878
shares were bought back into treasury during the six months to
30 September 2023, at an average
price of 99.2p per share, representing an average discount to the
31 March 2023 NAV after performance
fee of 37.9% and accreting 1.4p per share. A further 366,308 shares
have been bought back since September, at an average price of 86.3p
per share, representing an average discount to the updated NAV
after performance fee as at 30 September
2023 of 46.2%.
The use of
our cash reserves is a matter of regular Board review. We aim to
balance the benefits of highly accretive buybacks when discounts
are high against ensuring that we hold appropriate reserves to fund
follow on investments and capture the best of the new investment
opportunities that we continue to see.
Outlook
Inflation
and interest rates remain elevated and early stage growth
portfolios continue to be out of favour. However, the need to
digitalise and transform last century’s infrastructure remains, as
nearly all financial services sectors continue to be dominated by
traditional businesses whose operations cannot ignore the rapid
development of less costly, and in many cases more secure, business
models.
Augmentum
has proved its model through the successful realisations to date
and we are confident in the promise that our current investments
offer.
Several
commentators have highlighted the potential value in the Augmentum
portfolio, but as yet, this has not produced the re-rating that
your Board believe is deserved. A reduction in interest rates could
be the trigger for this. UK inflation appears to have peaked and
this may produce a base rate reduction as early as Q2
2024.
The current
share price does not reflect the tangible value creation we have
seen across our top 10 investments and their potential for further
growth. This leads your Board to continue to expect that the
patient shareholder will be well rewarded.
Neil England
Chairman
27 November 2023
.
Investment
Objective and Policy
Investment
objective
The
Company’s investment objective is to generate capital growth over
the long term through investment in a focused portfolio of fast
growing and/or high potential private financial services technology
(“fintech”) businesses based predominantly in the UK and wider
Europe.
Investment
policy
In order to
achieve its investment objective, the Company invests in early or
later stage investments in unquoted fintech businesses. The Company
intends to realise value through exiting these investments over
time.
The Company
seeks exposure to early stage businesses which are high growth,
with scalable opportunities, and have disruptive technologies in
the banking, insurance and wealth and asset management sectors as
well as those that provide services to underpin the financial
sector and other cross-industry propositions.
Investments
are expected to be mainly in the form of equity and equity-related
instruments issued by portfolio companies, although investments may
be made by way of convertible debt instruments. The Company intends
to invest in unquoted companies and will ensure that the Company
has suitable investor protection rights where appropriate. The
Company may also invest in partnerships, limited liability
partnerships and other legal forms of entity. The Company will not
invest in publicly traded companies. However, portfolio companies
may seek initial public offerings from time to time, in which case
the Company may continue to hold such investments without
restriction.
The Company
may acquire investments directly or by way of holdings in special
purpose vehicles or intermediate holding entities (such as the
Partnership*).
The
Management Team has historically taken a board or board observer
position on investee companies and, where in the best interests of
the Company, will do so in relation to future investee
companies.
The
Company’s portfolio is expected to be diversified across a number
of geographical areas predominantly within the UK and wider
Europe, and the Company will at
all times invest and manage the portfolio in a manner consistent
with spreading investment risk.
The
Management Team will actively manage the portfolio to maximise
returns, including helping to scale the team, refining and driving
key performance indicators, stimulating growth, and positively
influencing future financing and exits.
Investment
restrictions
The Company
will invest and manage its assets with the object of spreading risk
through the following investment restrictions:
• the
value of no single investment (including related investments in
group entities or related parties) will represent more than 15% of
NAV, save that one investment in the portfolio may represent up to
20% of NAV;
• the
aggregate value of seed stage investments will represent no more
than 1% of NAV; and
• at
least 80% of NAV will be invested in businesses which are
headquartered in or have their main centre of business in the UK or
wider Europe.
In
addition, the Company will itself not invest more than 15% of its
gross assets in other investment companies or investment trusts
which are listed on the Official List of the FCA.
Each of the
restrictions above will be calculated at the time of investment and
disregard the effect of the receipt of rights, bonuses, benefits in
the nature of capital or by reason of any other action affecting
every holder of that investment. The Company will not be required
to dispose of any investment or to rebalance the portfolio as a
result of a change in the respective valuations of its
assets.
Hedging
and derivatives
Save for
investments made using equity-related instruments as described
above, the Company will not employ derivatives of any kind for
investment purposes. Derivatives may be used for currency hedging
purposes.
Borrowing
policy
The Company
may, from time to time, use borrowings to manage its working
capital requirements but shall not borrow for investment purposes.
Borrowings will not exceed 10 per cent. of the Company’s Net Asset
Value, calculated at the time of borrowing.
Cash
management
The Company
may hold cash on deposit and may invest in cash equivalent
investments, which may include short-term investments in money
market type funds and tradeable debt securities.
There is no
restriction on the amount of cash or cash equivalent investments
that the Company may hold or where it is held. The Board has agreed
prudent cash management guidelines with the AIFM and the Portfolio
Manager to ensure an appropriate risk/return profile is maintained.
Cash and cash equivalents are held with approved
counterparties.
It is
expected that the Company will hold between 5% and 15% of its Gross
Assets in cash or cash equivalent investments, for the purpose of
making follow-on investments in accordance with the Company’s
investment policy and to manage the working capital requirements of
the Company.
Changes
to the investment policy
No material
change will be made to the investment policy without the approval
of Shareholders by ordinary resolution. Non-material changes to the
investment policy may be approved by the Board. In the event of a
breach of the investment policy set out above or the investment and
gearing restrictions set out therein, the Management Team shall
inform the AIFM and the Board upon becoming aware of the same and
if the AIFM and/or the Board considers the breach to be material,
notification will be made to a Regulatory Information
Service.
* Please
refer to the Glossary on page 43.
.
Portfolio
as
at 30 September
2023
|
Fair
value of
holding
at
31
March
2023
£’000
|
Net
investments/
(realisations)
£’000
|
Impact
of FX rate changes
£’000
|
Investment
return
£’000
|
Fair
value of
holding
at
30
September
2023
£’000
|
%
of
portfolio
|
Tide
|
35,692
|
-
|
-
|
5,767
|
41,459
|
15.2%
|
Grover
|
43,150
|
1,368
|
(579)
|
(2,655)
|
41,284
|
15.1%
|
Zopa
Bank^
|
30,093
|
-
|
-
|
3,810
|
33,903
|
12.4%
|
Volt
|
14,216
|
5,300
|
-
|
4,223
|
23,739
|
8.7%
|
BullionVault^
|
11,565
|
-
|
-
|
404
|
11,969
|
4.3%
|
Monese
|
11,683
|
-
|
-
|
(1,588)
|
10,095
|
3.7%
|
AnyFin
|
9,304
|
-
|
(369)
|
770
|
9,705
|
3.6%
|
Onfido
|
10,242
|
-
|
(51)
|
(486)
|
9,705
|
3.6%
|
Intellis
|
8,412
|
-
|
113
|
352
|
8,877
|
3.2%
|
Iwoca
|
7,882
|
-
|
-
|
3
|
7,885
|
2.9%
|
Top
10 Investments
|
182,239
|
6,668
|
(886)
|
10,600
|
198,621
|
72.7%
|
Other
Investments*
|
49,266
|
211
|
131
|
(6,893)
|
42,715
|
15.6%
|
Cushon
|
22,790
|
(22,790)
|
-
|
-
|
-
|
0.0%
|
Total
Investments
|
254,295
|
(15,911)
|
(755)
|
3,707
|
241,336
|
88.3%
|
Cash &
cash equivalents
|
40,015
|
|
|
|
51,772
|
18.9%
|
Net other
current liabilities
|
(186)
|
|
|
|
(1,979)
|
(0.7)%
|
Net
Assets
|
294,124
|
|
|
|
291,129
|
106.5%
|
Performance
Fee accrual
|
(16,819)
|
|
|
|
(17,756)
|
(6.5)%
|
Net
Assets after performance fee
|
277,305
|
|
|
|
273,373
|
100.0%
|
^ Held
via Augmentum I LP
* There
are fourteen other investments (31 March
2023: fifteen) held in the portfolio. See page 14 for
further details.
.
Portfolio
Manager’s Review
Overview
As I write,
markets are exhibiting the early signs of a shift in sentiment. The
Bank of England's decision to hold rates steady since September,
followed by the Federal Reserve's similar stance in early November,
signals a cautious yet hopeful economic outlook. While the months
ahead present likely challenges with persistently high rates, the
encouraging performance of growth stocks in response to these
developments suggests a return to more positive equity market
performance. Patience is required, as confidence and capital
gradually reinvigorate the markets. However, reaching the apex of
this rate tightening cycle marks a significant turning point,
steering us towards a more optimistic future.
Despite
these positive shifts, the UK equity market continues to grapple
with deep-rooted demand issues, even amidst numerous strategic
efforts to enhance its competitiveness. The overwhelming preference
for passive investment strategies, coupled with the US market's
dominance, remains a formidable challenge for trading volumes. This
trend has led to reduced liquidity in domestic European exchanges,
with our pension funds and wealth managers disproportionately
investing in US markets.
My
responsibility extends beyond reporting our progress; it’s about
charting our future course. Investing in Augmentum today means
accessing a portfolio and a pan-European investment platform that
has evolved significantly since the Company’s IPO. The portfolio's
robustness positions us favourably for the promising investment
landscape in European fintech.
Each new
advance in technology, such as those seen this year with AI, adds
momentum to the structural trends driving digitalisation across the
economy. Momentum meets opportunity in financial services,
penetration of fintech market share remains well below 2% and
global fintech revenue is forecast to reach US$1.5 trillion in 2030 (BCG, 2023). The
companies that make up our portfolio and current pipeline are at
the forefront of this huge opportunity and Augmentum remains a
unique way for investors to share in it too.
Combined
with clear strategy and a disciplined approach, market conditions
are such that returns from 2024-25 private investment vintages have
the potential to be exceptional.
Portfolio
Overview
The
Company’s portfolio stands at 24 fintech companies, with
diversification across fintech verticals, European markets, and
maturity stages, as we told investors we would build during the
Company’s IPO. Since listing, we have delivered £84 million in
realisations, across five exits and from dividends, despite the
macroeconomic backdrop. The portfolio’s top 10 companies employ
over 4,000 people and generate close to £1 billion in annual
revenues, with year-on-year growth continuing at an average of 74%.
Four of this group are profitable and the remaining six have an
average cash runway to their next funding round of 29
months.
The three
largest holdings, Tide,
Grover
and
Zopa
Bank are
category defining digital leaders in large and growing markets.
They are growing revenue at an average of 79% year-on-year and are
profitable or expected to reach profitability without further
funding. Each has built an exceptional team and technology
platform. True to our model, we have supported these companies from
their early stages with capital and strategic support. Revenue
growth since our initial investment has been over 2,000% on
average. We will continue to work to optimise the exits of the
Company’s positions in the years ahead.
The
resilience of our portfolio is notable against the macro backdrop
of the last 18 months. Whilst in the broader venture and tech
landscape, stress is starting to show through in rates of company
failure as cash runways come to an end. Meanwhile, the companies in
the portfolio continue to attract investment, raising over £200
million in equity funding in the last 12 months. With insight on
performance and strategic direction, we have continued to build the
positions in the portfolio’s top performers through follow-on
investments.
Following a
period of depressed investment activity in the sector over the
course of 2022 and early 2023, we have seen the beginning of a
meaningful return in activity and importantly quality in the last
quarter. This has been accompanied by the start of a reset in
valuations to longer-term accepted stage-appropriate levels.
Bolstered by our fifth portfolio exit of Cushon to NatWest Group,
the Company’s balance sheet position is strong with £48 million of
free cash and no debt. We believe that the period ahead will be an
opportune time to invest.
Investment
Activity
Our
deployment into new companies slowed while markets were correcting
in 2022 and the first half of 2023. We have continued to assess
opportunities, but prospects and deal dynamics, in particular
valuations, have not met our bar for investment. We remain
committed to a long-term, sector-focussed approach that is built
not just on quality companies, but quality investments. Reduced
deployment has been the right course in a market absent of the
right investment at the right price.
During the
period we invested £5.3 million into existing portfolio
company Volt
as part of
the company’s US$60 million Series B
round. Volt
is
addressing a huge opportunity in real-time payments that sits at
the intersection of trends in ecommerce, payment behaviours, and
increasing focus on payment costs and security. Since Augmentum’s
first investment in December
2020, Volt
has
consistently delivered double-digit month-on-month revenue growth
as a leading provider of real-time payment connectivity to global
merchants and payment service providers. The series B round was led
by US investor IVP who will support the company’s expansion into
North American markets, building on their existing presence in the
UK, Europe, Brazil and Australia.
We also
took up our pro rata shareholder rights to invest a total of £1.6
million in small additional rounds at Grover
and
Habito.
Post-period
end, we invested £4.2 million in an oversubscribed primary and
secondary transaction at Tide,
which is now our largest holding. As the leading digital banking
platform for small businesses in the UK, Tide
has now
achieved 10% share of the UK market with more than 550,000
members. Tide
is
profitable in the UK and moving into a new phase of maturity,
delivering strong revenue diversification through product
cross-sell across a large and stable base of business customers. To
further diversify from a predominantly UK revenue focus, Tide has
launched in India, and in less
than 12 months has attracted more than 150,000 new
members.
The
portfolio’s second largest holding, Grover,
continues to define a new category at the intersection of fintech
and ecommerce, fundamentally changing how retail and business
customers consume technology products. Part payment-method,
part-financing, Grover’s
technology subscriptions offer the flexibility and choice that
underpin the secular trend towards an access-rather than
ownership-economy. During the period annual recurring revenue
reached €266 million (September 2022:
€202 million), with 320,000 active customers across 5 core markets.
In the last 18 months Grover
adjusted
marketing spend to move towards profitability in 2024. Following
the recent €23 million transaction that Augmentum participated
in, Grover
is funded
to reach this milestone. The revaluation of our holding by £3.2
million reflects currency impact and the terms of the transaction.
The company continues to track its profitability-focused
year-on-year revenue growth target of 30% with EBIT and net income
margin performing ahead of expectations due to a close focus on
costs.
Zopa
Bank’s
performance demonstrates the powerful combination of exceptional
technology, a world class team, and a strong balance sheet. The
company is profitable, and performing ahead of budget year-to-date
and further strengthened its balance sheet raising £75 million in
Tier 2 regulatory capital. The upward movement in the valuation of
the Company’s holding by £3.8 million follows year-on-year revenue
growth of 92% and returns the full position above cost of
investment for the first time since the write down event that
coincided with their securing a banking licence in 2019. The
transformation of the business since, and a 17 year lending track
record, have seen Zopa
Bank continue
along an ambitious growth trajectory.
BullionVault
has enjoyed
a strong year of trading and is on track to deliver record profits.
Performance follows from investor demand for gold and other
precious metals as an inflationary hedge, and net interest income
earned on fiat balances held by users on exchange.
BullionVault
is a mature
position in the portfolio and serves a hedging function within the
Augmentum portfolio during times of heightened market uncertainty.
The moderate uplift of the Company’s position by £0.4 million
reflects this performance, but also the degree of cyclicality we
believe is exhibited in these elevated levels of
earnings.
Investor
interest in the banking-as-a-service market remains high and
Monese’s
business-to-business coreless banking platform ‘XYB’ has proven
competitive amongst a strong peer set. The opportunity is clear;
having tried and failed to launch internally-built digital
propositions, incumbent financial services firms are seeking
partnership with fintech players. Monese’s
client list, including HSBC and Investec, is reflective of the high
quality of the technology platform, originally built and proven out
through the consumer business. As Monese’s
revenue mix is increasingly built on long-term licensing revenues
from XYB, the valuation comparables of the company will adjust. Our
downward adjustment to the fair value of our holding by £1.6
million reflects the basket of public market comparators we have
used.
Founded in
Sweden, Anyfin
supports
financial wellbeing for consumers. The core product of credit
refinancing is combined with saving accounts, budgeting tools and
subscription management services driving high retention across
their prime-credit user base. Year-on-year revenue growth has
remained strong, although higher costs of capital have impacted at
the gross margin level. The experienced management team has
demonstrated strong capability while navigating a more challenging
macro environment.
Onfido
provides
identity verification services to enterprise clients in financial
services. These clients have proven to be a resilient base,
although rates of customer onboarding have reduced since peaks seen
in 2021, with some verticals hit harder than others.
Onfido
has a
leading position in the US and Europe through diversification across the
financial services sector, and entry into new areas including
healthcare. The downward adjustment to the fair value of our
holding by £0.5 million is reflective of the contraction in
valuation multiples amongst Onfido’s
listed peers. The business is a highly strategic asset which will
have strong exit opportunities as the macroeconomic environment
improves.
The £0.4
million uplift of the Company’s holding in Intellis
follows a
period of profitability for the business, despite falling market
volatility. Intellis
remains a
unique proposition in the market and in the portfolio, deploying
advanced proprietary AI trading strategies in foreign exchange
markets with highly automated execution and a very lean cost base.
Operating under a fully licensed fund structure, the road is set to
enable the business to scale, both in current focus markets, and
potentially in other adjacent asset classes.
iwoca’s
return to performance, and to the Company’s top 10, exemplifies the
resilience and capability of the teams that make up our portfolio.
In 2020, Covid funding support schemes dislocated
iwoca’s
market overnight. As these schemes have ended, and high-street
lenders have once again retreated from small business
funding, iwoca’s
trading performance has progressed from strength-to-strength.
Revenue run rate is now above £140 million with year-on-year growth
at 141%. Achieving profitability in January
2023 and building this consistently month on month,
iwoca
is another
example of the profit potential of lending businesses that harness
digital technologies to drive significant operating leverage at
scale.
We retain a
cautious approach to the digital asset sector, although
crypto-asset pricing has seen recovery following positive
regulatory news on ETF products approvals in the US. Our combined
holdings in this area equate to 4.7% of the portfolio, which we
believe to be an appropriate level of exposure to a market
opportunity that has the potential to deliver upside value if
demand continues to return.
Outside the
top 10 there were two notable
fair value movements,
with
both Gemini
and
Previse
adjusted
downwards during the period in light of trading performance at both
companies. In the US, Gemini
continue to
act as an agent in the recovery of customer assets lent through a
third-party program known as ‘Earn’. This case has attracted legal
action towards the third-party operator of the program and
Gemini,
and we continue to monitor the situation as it evolves.
Exits
In June,
our fifth portfolio exit completed with the sale of Cushon to
NatWest Group. Augmentum received £22.8 million, delivering an IRR
of 62% and a multiple on capital invested of 2.1 times,
representing a 47% uplift on the previously reported fair value of
Augmentum’s position.
We have
delivered five exits to date, all at or above the previously
reported holding value. Combined with dividends from elsewhere in
the portfolio these have delivered £84 million of cash.
Performance
As at
30 September 2023, we are reporting a
NAV per share after performance fee of 160.2p (31 March 2023: 158.9p). Since IPO the Company has
generated a Gross IRR (before expenses) on Capital Deployed* of
16.6%.
Each
position is valued objectively using the most appropriate
methodology. 92% of the portfolio is valued using public market
comparables. Wider governance is a key element of the process with
each valuation signed off by the Board and Valuations Committee.
Over time we have demonstrated consistency and prudence in our
approach, protecting the valuations from some of the outsized
market swings that were seen in 2021 and 2022.
As
mentioned in previous reports, downside protections, such as
liquidation preference and anti-dilution provisions, are integral
to the way we structure our typical venture investments.. These
structures are atypical of ordinary share structures typically seen
in the public or private markets as they protect the value of
Augmentum’s position in the event of a reduction in the equity
value of a company.
Outlook
Many
commentators expect rates to remain elevated for a sustained
period. Our base position is that 2024 is likely to be a year of
economic challenge, but we expect that confidence is likely to
rebound in 2025.
Acquisitions
have traditionally been the primary exit strategy for fintechs, a
trend we see persisting into 2024 and beyond. This trajectory is
bolstered by growing bank balance sheets in the current fiscal
landscape and an increasing synergy between fintechs and incumbent
firms. The urgency for digital transformation – to manage
operational pressures and stay competitive against fintech
challengers – remains paramount. In the banking sector, global
leaders like JPMorgan Chase, which faced scrutiny for its projected
US$15.3 billion technology spend
across acquisitions and partnerships in 2023, are now reaping
rewards for their strategic investments through outperformance.
This has not gone unnoticed by their smaller counterparts or
shareholders.
Our focus
aligns with the growing trend towards business-to-business
investments, but we also see untapped potential in
business-to-consumer fintech ventures. Harnessing cutting-edge
technologies like AI, these ventures are poised to offer consumer
products far surpassing those of incumbent firms.
For venture
capital funds that have weathered the challenges of the past two
years, a new cycle of opportunity is unfolding. In Europe, the recalibration of early-stage
valuations coincides with a maturing technology infrastructure,
evolving start-up ecosystems, and new regulatory frameworks. These
elements, coupled with substantial room for digital disruption in
financial services, lay the groundwork for the next generation of
impactful businesses.
The
announcement of The Mansion House Compact in July 2023 marked a potential paradigm shift for
UK pension fund capital, with ten of the UK’s largest funds
committing to allocate up to 5% of assets to private markets by
2030. This signals a welcome change in allocator mindset; with
progression beyond the singular focus on cost-minimisation that has
seen UK pensions underperform against international benchmarks.
Talk, however, is cheap and the industry needs to move swiftly and
decisively to ensure the Compact delivers on its significant
potential to address the UK’s pension performance gap, and to
support the wider investment environment.
European
venture capital has demonstrated that private market strategies can
offer both value and outstanding returns. We believe that by
building diversified private market strategies, capitalising on the
UK’s venture capital expertise in various sectors and stages,
pension fund managers can access some of the highest quality
private market opportunities.
During our
Capital Markets Day in July, we underscored the importance of
sector specialisation. This focus enhances deal sourcing and
execution and elevates the support we provide to portfolio
companies. Our thesis-led approach, grounded in a deep
understanding of technological advancements and regulatory shifts,
guides our identification of emerging fintech
opportunities.
Looking
ahead, our team is cultivating a pipeline centred on expanding
retail access to private markets, regulatory and compliance
technologies, financial operations including treasury management,
and financial market infrastructure for the carbon and energy
sectors.
We maintain
an uncompromising standard for new investments. Our meticulous
approach has been instrumental in building our resilient, diverse,
and rapidly growing portfolio, which continues to scale even in
uncertain economic times. We believe that the coming years will
offer exceptional opportunities for top-tier venture investors to
deliver a standout vintage.
Tim Levene
CEO
Augmentum
Fintech Management Limited
27 November 2023
.
Investments
Tide
Tide’s
(www.tide.co) mission is to help small and mid-sized businesses
(“SMEs”) save time and money in the running of their businesses.
Customers can be set up with an account number and sort code in
less than 10 minutes, and the company is building a comprehensive
suite of digital banking services for businesses, including
automated accounting, instant access to credit, card control and
quick, mobile invoicing. In November
2022, Tide acquired Funding Options, a leading UK
marketplace for SMEs seeking business finance giving Tide’s
customers access to a wider range of credit options and creating
one of the UK’s biggest digital marketplaces for SME credit. In
December 2022, Tide launched in
India with two business banking
solutions – the Tide Business Account and its RuPay-powered Tide
Expense Card. Tide now has 10% market share of small business
accounts in the UK, with more than 500,000 customers, and more than
150,000 members in India.
Augmentum
led Tide’s £44.1 million first round of Series B funding in
September 2019, alongside Japanese
investment firm The SBI Group. In July
2021 Tide completed an £80 million Series C funding round
led by Apax Digital, in which Augmentum invested an additional £2.2
million and into which the £2.5 million loan note converted. In
October 2023 Augmentum invested a
further £4.2 million through a combination of primary and secondary
transactions.
Source:
Tide
|
30
Sept
2023
£’000
|
31
March
2023
£’000
|
Cost
|
13,200
|
13,200
|
Value
|
41,459
|
35,692
|
Valuation
Methodology^
|
Rev.
Multiple
|
Rev.
Multiple
|
% ownership
(fully diluted)
|
5.1%
|
5.1%
|
As per last
filed audited accounts of the investee company for the year to
31 December 2021 (2022 accounts are
expected to be filed shortly):
|
2021
£’000
|
2020
£’000
|
Turnover
|
33,541
|
14,442
|
Pre tax
loss
|
(32,719)
|
(25,825)
|
Net
assets
|
66,297
|
17,761
|
^see note 7
on pages 30 and 31.
Grover
Berlin-based Grover (www.grover.com) is the leading
consumer-tech subscription platform, bringing the access economy to
the consumer electronics market by offering a simple, monthly
subscription model for technology products. Private and business
customers have access to over 8,000 products including smartphones,
laptops, virtual reality technology, wearables and smart home
appliances. The Grover service allows users to keep, switch, buy,
or return products depending on their individual needs. Rentals are
available in Germany, Austria, the
Netherlands, Spain and the
US. Grover is at the forefront of the circular economy, with
products being returned, refurbished and recirculated until the end
of their usable life. Grover has circulated over 1.2 million
devices. With total funding of around €1.4 billion to date and over
400 employees, Grover is one of the fastest-growing scale-ups in
Europe.
In
September 2019 Augmentum led a €11
million funding round with a €6 million convertible loan note
(“CLN”) investment. This coincided with Grover signing a €30
million debt facility with Varengold Bank, one of Germany’s major
fintech banking partners. In March
2021 Grover completed a €60 million Series B equity and debt
funding round, with Augmentum participating and converting its CLN,
and Grover’s Series C funding round in April
2022 raised US$330 million in
equity and debt funding. In September
2023, Augmentum invested £1.4 million as part of a €23
million transaction that will support the company to
profitability.
Source:
Grover
|
30
Sept
2023
£’000
|
31
March
2023
£’000
|
Cost
|
9,295
|
7,927
|
Value
|
41,284
|
43,150
|
Valuation
Methodology^
|
Rev.
Multiple
|
Rev.
Multiple
|
% ownership
(fully diluted)
|
6.3%
|
6.3%
|
As an
unquoted German company, Grover is not required to publicly file
audited accounts.
Zopa
Having been
founded in 2005 as the world’s first peer-to peer (“P2P”) lending
company, Zopa (www.zopa.com) launched Zopa Bank following a funding
round in 2020. It was granted a full UK banking licence, allowing
it to offer a wider product range to its customers. After 17 years
of delivering positive returns for investors, Zopa closed the P2P
lending side of its business in 2021 to fully focus on Zopa
Bank.
Current
products include fixed term and smart savings, wedding and home
improvement loans, debt consolidation loans, a credit card and
motor finance. Zopa Bank is regulated by both the PRA and the
FCA.
Zopa Bank
is a multiple awards winner. It was awarded Banking Brand of the
Year in the 2022 MoneyNet Awards and won three Savings Champion
Awards: Best New Savings Provider, Best Fixed Rate Bond Provider
and Best Short Term Fixed Rate Bond Provider. These follow a string
of previous awards, including being named the British Bank Awards’
Best Personal Loan Provider for the fifth year in a row in
2021.
Augmentum
participated in a £20 million funding round led by Silverstripe in
March 2021, in October 2021 participated with a further £10
million investment in a £220 million round led by SoftBank, and in
February 2023 invested a further £4
million as part of a £75 million equity funding round alongside
other existing investors. In September
2023 Zopa Bank raised £75 million in Tier 2 Capital to
support further scaling.
Source:
Zopa Bank
|
30
Sept
2023
£’000
|
31
March
2023
£’000
|
Cost
|
33,670
|
33,670
|
Value
|
33,903
|
30,093
|
Valuation
Methodology
|
Rev.
Multiple
|
Rev.
Multiple
|
% ownership
(fully diluted)
|
3.4%
|
3.4%
|
As per last
filed audited accounts of the investee company for the year to
31 December 2022:
|
2022
£’000
|
2021
£’000
|
Operating
income
|
153,737
|
53,788
|
Pre tax
loss
|
(23,783)
|
(48,312)
|
Net
assets
|
299,674
|
264,307
|
Volt
Volt
(www.volt.io) is a provider of account-to-account payments
connectivity for international merchants and payment service
providers (PSPs). An application of Open Banking,
account-to-account payments – where funds are moved directly from
one bank account to another rather than via payment rails –
delivering benefits to both consumers and merchants. This helps
merchants shorten their cash cycle, increase conversion and lower
their costs. Volt offers coverage in 25 markets and counting,
including UK, Europe, Brazil and Australia. In June
2023 Volt announced their partnership with Worldpay, the
world’s number one global non-bank merchant acquirer by volume
processed, with more than 1 million merchant customers across 146
markets. Starting with Australia,
Worldpay merchants will gain access to Volt’s open payment
infrastructure. In the same month Volt also announced integration
with Shopify, the leading global commerce company. Volt will power
a ‘pay-by-bank’ option at checkout for merchants who use the
Shopify platform.
Augmentum
invested £0.5 million in Volt in December
2020, £4 million in Volts June
2021 US$23.5 million Series A
funding round and £5.3 million in its US$60
million Series B funding round in June 2023.
Source:
Volt
|
30
Sept
2023
£’000
|
31
March
2023
£’000
|
Cost
|
9,800
|
4,500
|
Value
|
23,739
|
14,216
|
Valuation
Methodology
|
CPORT
|
CPORT
|
% ownership
(fully diluted)
|
8.3%
|
8.3%
|
Volt is not
required to publicly file audited accounts.
BullionVault
BullionVault
(www.bullionvault.co.uk) is a physical gold and silver market for
private investors online. It enables people across 175 countries to
buy and sell professional-grade bullion at the very best prices
online, with US$3.7 billion of assets
under administration, over US$100
million worth of gold and silver traded monthly, and over
100,000 clients.
Each user’s
property is stored at an unbeaten low cost in secure, specialist
vaults in London, New York, Toronto, Singapore and Zurich. BullionVault’s unique daily audit then
proves the full allocation of client property every day.
The company
generates solid monthly profits from trading, commission and
interest. It is cash generative, dividend paying, and well-placed
for any cracks in the wider financial markets.
Source:
BullionVault
|
30
Sept
2023
£’000
|
31
March
2023
£’000
|
Cost
|
8,424
|
8,424
|
Value
|
11,969
|
11,565
|
Valuation
Methodology
|
EBITDA
Multiple
|
EBITDA
Multiple
|
% ownership
(fully diluted)
|
10.8%
|
11.1%
|
Dividends
paid
|
-
|
564
|
As per last
filed audited accounts of the investee company for the year to
31 October 2022:
|
2022
£’000
|
2021
£’000
|
Gross
profit
|
13,071
|
12,086
|
Pre tax
profit
|
8,364
|
7,741
|
Net
assets
|
41,294
|
39,148
|
Monese
Monese
(www.monese.com) offers consumers the ability to open a UK or
European current account with a fully digital process. Launched in
2015 Monese has more than 2 million registered users. 70% of
incoming funds are from salary payments, with customers using
Monese as their primary account. In May
2023, building on strong platform infrastructure, Monese
launched XYB, a banking-as-a-service (“BaaS”) platform. XYB enables
financial institutions to build digital products using Monese’s
technology. Monese counts HSBC and Investec amongst its XYB client
base. The BaaS market shows strong growth as established banks and
fintech companies continue to bring innovative digital products to
market.
Augmentum
is invested alongside Kinnevik, PayPal, International Airlines
Group, Investec and HSBC Ventures.
Source:
Monese
|
30
Sept
2023
£’000
|
31
March
2023
£’000
|
Cost
|
11,467
|
11,467
|
Value
|
10,095
|
11,683
|
Valuation
Methodology
|
Rev.
Multiple
|
CPORT
|
% ownership
(fully diluted)
|
5.9%
|
6.0%
|
As per last
filed audited accounts of the investee company for the year to
31 December 2021 (2022 accounts are
expected to be filed shortly):
|
2021
£’000
|
2020
£’000
|
Turnover
|
17,573
|
16,285
|
Pre tax
loss
|
(17,529)
|
(28,461)
|
Net
liabilities
|
(2,972)
|
(15,410)
|
AnyFin
Anyfin
(www.anyfin.com) was founded in 2017 by former executives of
Klarna, Spotify and iZettle, and leverages technology to allow
creditworthy consumers the opportunity to improve their financial
wellbeing by consolidating and refinancing existing credit
agreements with improved interest rates, as well as offering smart
budgeting tools. Anyfin is currently available in Sweden, Finland, Norway and Germany, with plans to expand across
Europe as well as strengthen its
product suite in existing markets.
Augmentum
invested £7.2 million in Anyfin in September
2021 as part of a US$52
million funding round and a further £2.7 million as part of
a US$30 million funding round in
November 2022.
Source:
AnyFin
|
30
Sept
2023
£’000
|
31
March
2023
£’000
|
Cost
|
9,924
|
9,924
|
Value
|
9,705
|
9,305
|
Valuation
Methodology
|
Rev.
Multiple
|
Rev.
Multiple
|
% ownership
(fully diluted)
|
3.2%
|
3.2%
|
As an
unquoted Swedish company, Anyfin is not required to publicly file
audited accounts.
Onfido
Onfido
(www.onfido.com) is building the new identity standard for the
internet. Its AI-based technology assesses whether a user’s
government-issued ID is genuine or fraudulent, and then compares it
against their facial biometrics. Using computer vision and a number
of other AI technologies, Onfido can verify against 4,500 different
types of identity documents across 195 countries, using techniques
like “facial liveness’’ to see patterns invisible to the human
eye.
Onfido was
founded in 2012. It has offices in London, San
Francisco, New York,
Lisbon, Paris, Amsterdam, New
Delhi and Singapore and
helps over 900 companies, including industry leaders such as
Revolut, bung and Bitstamp. These customers are choosing Onfido
over others because of its ability to scale, speed in on-boarding
new customers (15 seconds for flash verification), preventing
fraud, and its advanced biometric technology. In May 2023 Onfido announced the acquisition of
Airside Mobile Inc, the leader in private, digital identity sharing
technology whose customers include the world’s largest
airlines.
Augmentum
invested £4 million in 2018 as part of a US$50 million funding round and an additional
£3.7 million in a convertible loan note in December 2019 as part of a £4.7 million round.
The latter converted into equity when Onfido raised an additional
£64.7 million in April
2020.
Source:
Onfido
|
30
Sept
2023
£’000
|
31
March
2023
£’000
|
Cost
|
7,750
|
7,750
|
Value
|
9,705
|
10,242
|
Valuation
Methodology
|
Rev.
Multiple
|
Rev.
Multiple
|
% ownership
(fully diluted)
|
2.1%
|
2.1%
|
As per last
filed audited accounts of the investee company for the year to
31 January 2023:
|
2023
£’000
|
2022
£’000
|
Turnover
|
102,099
|
94,513
|
Pre tax
loss
|
(70,190)
|
(45,159)
|
Net
(liabilities)/assets
|
(9,372)
|
40,165
|
Intellis
Intellis,
based in Switzerland, is an
algorithmic powered quantitative hedge fund operating in the FX
space. Intellis’ proprietary approach takes a conviction based
assessment towards trading in the FX markets, a position which is
uncorrelated to traditional news driven trading firms. They operate
across a range of trading venues with a regulated Investment Trust
fund structure that enables seamless onboarding of new Liquidity
Partners.
Following
an initial investment of €1 million In 2019, Augmentum exercised
its option to invest a further €1 million in March 2020 and a further €1 million in
March 2021.
Source:
Intellis
|
30
Sept
2023
£’000
|
31
March
2023
£’000
|
Cost
|
2,696
|
2,696
|
Value
|
8,877
|
8,412
|
Valuation
Methodology
|
P/E
Multiple
|
P/E
Multiple
|
% ownership
(fully diluted)
|
23.8%
|
23.8%
|
As an
unquoted Swiss company, Intellis is not required to publicly file
audited accounts.
Iwoca
Founded in
2011, iwoca (www.iwoca.co.uk) uses award-winning technology to
disrupt small business lending across Europe. They offer short-term ‘flexi-loans’ of
up to £500,000 to SMEs across the UK and Germany. iwoca leverages online integrations
with high-street banks, payment processors and sector-specific
providers to look at thousands of data points for each business.
These feed into a risk engine that enables the company to make a
fair assessment of any business – from a retailer to a restaurant,
a factory to a farm – and approve a credit facility within hours.
In addition to its flexi-loans Iwoca launched iwocaPay in
June 2020, an innovative
business-to-business (B2B) ‘buy now pay later’ product to provide
flexible payment terms to buyers while giving peace of mind to
sellers. It also launched a revenue-based loan with eBay in 2022
where repayments are a percentage of a business’s monthly sales.
The Company has lent over £2.5 billion in the UK and Germany since its launch across more than
120,000 business loans.
Augmentum
originally invested £7.5 million in Iwoca in 2018 and has since
added £0.35 million. Iwoca has raised over £850 million in debt
commitments from partners including Barclays, Pollen Street Capital
and Värde.
Source:
Iwoca
|
30
Sept
2023
£’000
|
31
March
2023
£’000
|
Cost
|
7,852
|
7,852
|
Value
|
7,885
|
7,882
|
Valuation
Methodology
|
Rev.
Multiple*
|
Rev.
Multiple
|
% ownership
(fully diluted)
|
2.4%
|
2.4%
|
As per last
filed audited accounts of the investee company for the year to
31 December 2022:
|
2022
£’000
|
2021
£’000
|
Turnover
|
78,260
|
68,468
|
Pre tax
loss
|
(10,980)
|
(4,119)
|
Net
assets
|
32,956
|
40,579
|
.
Farewill
In the next
10 years, £1 trillion of inheritance will pass between generations
in the UK. Farewill (www.farewill.com) is a digital, all-in-one
financial and legal services platform for dealing with death and
after-death services, including wills, probate and cremation. In
2022 Farewill won National Will Writing Firm of the Year for the
fourth year in a row and in 2021 was Probate Provider of the Year
for the second consecutive year at the British Wills and Probate
Awards. Farewill also won Best Funeral Information Provider and
Low-cost Funeral Provider of the Year at the Good Funeral Awards
2021. The organisation has also been voted the UK’s best-rated
death experts on Trustpilot, scoring an average customer approval
rating of 4.9/5 from over 14,000 reviews. It is now the largest
will writer in the UK.
Since its
launch in 2015 Farewill’s customers have pledged over £800 million
to charities through their wills.
Augmentum
led Farewill’s £7.5 million Series A fundraise in January 2019, with a £4 million investment,
participated in its £20 million Series B, led by Highland Europe in
July 2020, with £2.6 million, and in
its further £4.8 million fundraise in March
2023, with £0.8 million.
Gemini
Gemini
(www.gemini.com) enables individuals and institutions to safely and
securely buy, sell and store cryptocurrencies. Gemini was founded
in 2014 by Cameron and Tyler
Winklevoss and has been built with a security and regulation
first approach. Gemini operates as a New
York trust company regulated by the New York State Department of Financial
Services (NYSDFS) and was the first cryptocurrency exchange and
custodian to secure SOC 1 Type 2 and SOC 2 Type 2 certification.
Gemini entered the UK market in 2020 with an FCA Electronic Money
Institution licence and is one of only ten companies to have
achieved FCA Cryptoasset Firm Registration.
Gemini
announced acquisitions of portfolio management services company
BITRIA and trading platform Omniex in January 2022. During 2023 Gemini has been
expanding into the UAE and Asia.
Augmentum
participated in Gemini’s first ever funding round in November 2021 with an investment of £10.2
million.
Tesseract
Tesseract
(www.tesseractinvestment.com) is a forerunner in the dynamic
digital asset sector, providing digital lending solutions to market
makers and other institutional market participants via regulated
custody and exchange platforms. Tesseract was founded in 2017, is
regulated by the Finnish Financial Supervisory Authority
(“FIN-FSA”), and was one of the first companies in the EU to obtain
a 5AMLD (Fifth Anti-Money Laundering Directive) virtual asset
service provider (“VASP”) licence. It is the only VASP with an
express authorisation from the FIN-FSA to deploy client assets into
decentralized finance or “DeFi”.
Tesseract
provides an enabling crypto infrastructure to connect digital asset
lenders with digital asset borrowers. This brings enhanced capital
efficiency with commensurate cost reduction to trading, in a space
that is currently significantly under-leveraged relative to
traditional capital markets.
Augmentum
led Tesseract’s Series A funding round in June 2021 with an investment of £7.3
million.
Kipp
platform
that transforms the traditional payment model to increase credit
card transaction approvals, revenue, and customer satisfaction. Its
core solution relies heavily on data enrichment and risk management
to help merchants and banks split the cost of risk to incentivize
issuing banks to approve more transactions.
Augmentum
invested £4 million in May
2022.
baobab
Berlin based Baobab (www.baobab.io) is a pioneer in the
provision of European cyber insurance for SMEs. With capacity
provision from Zurich, Baobab uses
a novel approach to underwriting, pricing and risk mitigation, and
works with leading SME cyber security providers to prevent breaches
for its insured customers.
Augmentum
invested £2.6 million in January
2023.
ParaFi
Capital
ParaFi
Capital (www.parafi.com) is an investor in decentralised finance
protocols that address tangible use cases of the technology and
demonstrate signs of product-market fit. ParaFi investment has
drawn on their domain expertise developed in both traditional
finance and crypto to identify and invest in leading protocols such
as Compound (lending and interest accrual), Aave (asset borrowing),
Uniswap (automated liquidity provision), Synthetix (synthetic asset
trading) and MakerDAO (stablecoins). ParaFi also supports its
protocols as a liquidity provider and governance
participant.
Augmentum
invested £2.8 million in ParaFi in January
2021. Co-investors include Bain Capital Ventures and Galaxy
Digital.
WeMatch
Wematch
(www.wematch.live) is a capital markets trading platform that helps
financial institutions transition liquidity to an orderly
electronic service, improving productivity and de-risking the
process of voice broking. Their solution helps traders find
liquidity, negotiate, trade, optimise and manage the lifecycle of
their portfolios of assets and trade structures. Wematch is focused
on structured products such as securities financing, OTC equity
derivatives and OTC cleared interest rates derivatives.
Created in
2017, Wematch is headquartered in Tel
Aviv and has offices in London and Paris. In March
2023 it announced a collaboration with MTS Markets, owned by
Euronext, creating MTS Swaps by Wematch.live, which aims to bridge
the gap between legacy voice trading and pure electronic trading in
the interdealer IRS market. In August
2023 Wematch passed a milestone of US$200 billion in ongoing notional value of
trades on their platform and also reached an average daily matched
volume (ADMV) of US$11 billion in
Europe, the Middle East, and Africa.
Augmentum
invested £3.7 million in September
2021.
Wayhome
Wayhome
(www.wayhome.co.uk) offers a unique part-own part-rent model of
home ownership, requiring as little as 5% deposit with customers
paying a market rent on the portion of the home that Wayhome owns,
with the ability to increase the equity in the property as their
financial circumstances allow. It launched to the public in
September 2021, following closure of
the initial phase of a £500 million pension fund investment and has
crossed the milestone of completing the purchase of its first 100
homes.
Wayhome
opens up owner-occupied residential property as an asset class for
pension funds, who will earn inflation-linked rent on the portion
not owned by the occupier.
Augmentum
invested £2.5 million in 2019, £1 million in 2021 and a further
£0.9 million in the Company's financial year to 31 March 2023.
Habito
Habito
(www.habito.com) is transforming the United Kingdom’s £1.3 trillion
mortgage market by taking the stress, arduous paperwork, hidden
costs and confusing process out of financing a home.
Since
launching in April 2016, Habito had
brokered £7 billion of mortgages by July
2021. Habito launched its own buy-to-let mortgages in
July 2019 and in March 2021 launched a 40-year fixed-rate mortgage
‘Habito One’, the UK’s longest-ever fixed rate mortgage.
In
August 2019, Augmentum led Habito’s
£35 million Series C funding round with a £5 million investment and
added £1.3 million in the Company's financial year ended
31 March 2023.
Previse
Previse
(www.previ.se) allows suppliers to be paid instantly. Previse’s
artificial intelligence (“AI”) analyses the data from the invoices
that sellers send to their large corporate customers. Predictive
analytics identify the few problematic invoices, enabling the rest
to be paid instantly. Previse charges the suppliers a small fee for
the convenience, and shares the profit with the corporate buyer and
the funder. Previse precisely quantifies dilution risk so that
funders can underwrite preapproval payables at scale. In
January 2022 Mastercard unveiled that
its next-generation virtual card solution for instant B2B payments
would use Previse’s machine learning capabilities. The solution
combines Previse’s machine learning, with Mastercard’s core
commercial solutions and global payment network, to transform how
businesses send and receive payments.
Augmentum
invested £250,000 in a convertible loan note in August 2019. This converted into equity as part
of the company’s US$11 million
funding round in March 2020,
alongside Reefknot Investments and Mastercard, as well as existing
investors Bessemer Venture Partners and Hambro Perks. Previse was
awarded a £2.5 million Banking Competition Remedies’ Capability and
Innovation Fund grant in August 2020.
In May 2022 Previse closed the first
phase of its series B financing round, which was led by
Tencent, with US$18 million raised, including £2 million from
Augmentum.
FullCircl
FullCircl
(www.fullcircl.com) was formed from the combination of Artesian and
Duedil. Artesian was founded with a goal to change the way B2B
sellers communicate with their customers. They built a powerful
sales intelligence service using the latest in Artificial
Intelligence and Natural Language Processing to automate many of
the time consuming, repetitive tasks that cause the most pain for
commercial people.
In
August 2023 FullCircl announced the
acquisition of W2 Global Data Solutions, a provider of real-time
digital solutions for global regulatory compliance. The acquisition
strengthens FullCircl’s compliance suite and accelerates the
company’s ambition to become the market leader in smart customer
onboarding solutions for regulated businesses. The combined company
now provides coverage on entities located in 160
countries.
Augmentum
originally invested in DueDil, which merged with Artesian in
July 2021. Combining DueDil’s
Business Information Graph (B.I.G.)™ and Premium APIs, and
Artesian’s powerful web application and advanced rules engine
delivers an easy to deploy solution for banks, insurers and
FinTechs to engage, onboard and grow the right business
customers.
Epsor
Epsor
(www.epsor.fr) is a Paris based
provider of employee and retirement savings plans delivered through
an open ecosystem, giving access to a broad range of asset
management products accessible through its intuitive digital
platform. Epsor serves more than 850 companies in France.
Augmentum
invested £2.2 million in Epsor in June
2021.
Sfermion
Sfermion
(www.sfermion.io) is an investment fund focused on the non-fungible
token (NFT) ecosystem. Their goal is to accelerate the emergence of
the open metaverse by investing in the founders, companies, and
entities creating the infrastructure and environments forming the
foundations of our digital future.
Augmentum
committed US$3 million in
October 2021, to be drawn down in
tranches.
WhiskyInvestDirect
Founded in
2015, WhiskyInvestDirect (www.whiskyinvestdirect.com),
was a subsidiary of BullionVault and is the online market for
buying and selling Scotch whisky as it matures in barrel. This is
an asset class that has a long track record of growth, yet has
previously been opaque and inaccessible.
The
business seeks to change the way some of the three billion litres
of maturing Scottish whisky is owned, stored and financed, giving
self-directed investors an opportunity to profit from whisky
ownership, with the ability to trade 24/7. At its October 2022 financial year end the company's
clients held 12 million LPA (Litres of Pure Alcohol) of spirit.
Augmentum’s holding derives from WhiskeyInvestDirect being spun out
of BullionVault in 2020.
.
Condensed
Consolidated Statement of Comprehensive Income
For
the six months ended 30 September
2023
|
|
Six
months ended
30
September 2023
|
Six
months ended
30
September 2022
|
|
Notes
|
Revenue
return
£’000
|
Capital
return
£’000
|
Total
£’000
|
Revenue
return£’000
|
Capital
return
£’000
|
Total
£’000
|
Gains on
investments held at fair value
|
|
-
|
2,952
|
2,952
|
-
|
1,497
|
1,497
|
Investment
income
|
|
702
|
-
|
702
|
38
|
-
|
38
|
AIFM and
Performance Fees
|
2
|
(292)
|
-
|
(292)
|
(301)
|
-
|
(301)
|
Other
expenses
|
|
(2,453)
|
(16)
|
(2,469)
|
(2,256)
|
(21)
|
(2,277)
|
(Loss)/return
before taxation
|
|
(2,043)
|
2,936
|
893
|
(2,519)
|
1,476
|
(1,043)
|
Taxation
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(Loss)/return
attributable to equity shareholders of the parent
company
|
|
(2,043)
|
2,936
|
893
|
(2,519)
|
1,476
|
(1,043)
|
(Loss)/return
per share (pence)
|
3
|
(1.2)
|
1.7
|
0.5
|
(1.4)
|
0.8
|
(0.6)
|
The total
column of this statement represents the Group’s Consolidated Income
Statement, prepared in accordance with IFRS as adopted by the
UK.
The revenue
return and capital return columns are supplementary to this and are
prepared under guidance published by the Association of Investment
Companies.
The Group
does not have any other comprehensive income and hence the total
return, as disclosed above, is the same as the Group’s total
comprehensive income.
All items
in the above statement derive from continuing
operations.
All returns
are attributable to the equity holders of Augmentum Fintech plc,
the parent company. There are no non-controlling
interests.
.
Condensed
Consolidated Statement of Changes in Equity
For
the six months ended 30 September
2023
|
|
Six
months ended 30 September 2023
|
|
Group
|
Ordinary
share
capital
£’000
|
Share
premium
account
£’000
|
Special
reserve
£’000
|
Other
capital
reserve
£’000
|
Revenue
reserve
£’000
|
Total
£’000
|
Opening
shareholders’ funds
|
1,810
|
105,383
|
85,218
|
117,740
|
(16,027)
|
294,124
|
Purchase of
own shares into treasury
|
-
|
-
|
(3,888)
|
-
|
-
|
(3,888)
|
Return/(loss)
for the period
|
-
|
-
|
-
|
2,936
|
(2,043)
|
893
|
At
30 September 2023
|
1,810
|
105,383
|
81,330
|
120,676
|
(18,070)
|
291,129
|
|
|
Six
months ended 30 September 2022
|
|
Group
|
Ordinary
share
capital
£’000
|
Share
premium
account
£’000
|
Special
reserve
£’000
|
Other
capital
reserve
£’000
|
Revenue
reserve
£’000
|
Total
£’000
|
Opening
shareholders’ funds
|
1,810
|
105,383
|
91,191
|
107,989
|
(11,169)
|
295,204
|
Purchase of
own shares into treasury
|
-
|
-
|
(2,036)
|
-
|
-
|
(2,036)
|
Return/(loss)
for the period
|
-
|
-
|
-
|
1,476
|
(2,519)
|
(1,043)
|
At
30 September 2022
|
1,810
|
105,383
|
89,155
|
109,465
|
(13,688)
|
292,125
|
.
Condensed
Consolidated and Company Statement of Financial
Position
as
at 30 September
2023
|
Note
|
30
September
2023
£’000
|
31
March
2023
£’000
|
Non
current assets
|
|
|
|
Investments
held at fair value
|
7
|
241,336
|
254,295
|
Property,
plant & equipment
|
|
262
|
297
|
Current
assets
|
|
|
|
Right of
use asset
|
|
513
|
588
|
Other
receivables
|
|
131
|
555
|
Cash and
cash equivalents
|
|
51,772
|
40,015
|
Total
assets
|
|
294,014
|
295,750
|
Current
liabilities
|
|
|
|
Other
payables
|
|
(2,307)
|
(948)
|
Lease
liability
|
|
(578)
|
(678)
|
Total
assets less current liabilities
|
|
291,129
|
294,124
|
Net
assets
|
|
291,129
|
294,124
|
Capital
and reserves
|
|
|
|
Called up
share capital
|
4
|
1,810
|
1,810
|
Share
premium account
|
4
|
105,383
|
105,383
|
Special
reserve
|
|
81,330
|
85,218
|
Retained
earnings:
|
|
|
|
Capital
reserves
|
|
120,676
|
117,740
|
Revenue
reserve
|
|
(18,070)
|
(16,027)
|
Total
equity
|
|
291,129
|
294,124
|
NAV
per share (pence)
|
5
|
170.7
|
168.5
|
NAV
per share after performance fee (pence)
|
5
|
160.2
|
158.9
|
.
Condensed
Consolidated Statement of Cash Flows
For
the six months ended 30 September
2023
|
Six
months
ended
30
September
2023
£’000
|
Six
months
ended
30
September
2022
£’000
|
Cash
flows from operating activities
|
|
|
Purchases
of investments
|
(5,511)
|
(11,994)
|
Sales of
investments
|
22,790
|
44,226
|
Acquisition
of property, plant and equipment
|
(4)
|
(355)
|
Interest
received
|
680
|
29
|
Operating
expenses paid
|
(1,769)
|
(1,846)
|
Net
cash outflow from operating activities
|
16,186
|
30,060
|
Cash
flow from financing activities
|
|
|
Purchase of
own shares into Treasury
|
(4,429)
|
(2,036)
|
Net
cash (outflow) from financing
|
(4,429)
|
(2,036)
|
Increase
in cash and cash equivalents
|
11,757
|
28,024
|
Cash
and cash equivalents at the beginning of the
period
|
40,015
|
31,326
|
Cash
and cash equivalents at the end of the period
|
51,772
|
59,350
|
.
Notes
to the Financial Statements
For
the six months ended 30 September
2023
1.a
General information
Augmentum
Fintech plc is a company limited by shares, incorporated and
domiciled in the UK. Its registered office is 25 Southampton
Buildings, London WC2A 1AL, UK and
its principal place of business is at 4 Chiswell Street,
London EC1Y 4UP. Its shares are
listed on the London Stock Exchange.
These
condensed interim financial statements were approved for issue on
27 November 2023. These condensed
interim financial statements do not comprise statutory accounts
within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31
March 2023 were approved by the board of directors on
3 July 2023
and delivered to the Registrar of Companies.
The report
of the auditors on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
The
financial statements have been reviewed, not audited.
1.b
Basis of preparation
This
condensed consolidated interim financial report for the half-year
reporting period ended 30 September
2023 has been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority
and International Accounting Standard IAS 34, ‘Interim Financial
Reporting’, as adopted in the UK.
The
accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period,
except for the adoption of new and amended standards as set out
below.
1.c
New and amended standards adopted by the Group
No new or
amended standards became applicable for the current reporting
period that have an impact on the Group or Company.
1.d
Going Concern
The
Directors believe that it is appropriate to adopt the going concern
basis in preparing these condensed consolidated financial
statements, as the Board considers the Group has sufficient
financial resources to continue in operation for at least the next
12 months from the date of signing of these financial
statements.
1.e
Segmental Analysis
The Group
operates a single business segment for reporting purposes and is
managed as a single investment company. Reporting is provided to
the Board of Directors on an aggregated basis. The investments are
all located in the UK, continental Europe, Israel and the US.
1.f
Related Party Transactions
There have
been no changes to the nature of the related party arrangements or
transactions during the period to those reported in the Annual
Report for the year ended 31 March
2023.
1.g
Events after the reporting period
There have
been no significant events since the end of the reporting period
requiring disclosure.
2
AIFM
and Performance Fees
|
Revenue
£’000
|
Capital
£’000
|
Six
months
ended
30
September
2023
£’000
|
Revenue
£’000
|
Capital
£’000
|
Six
months
ended
30
September
2022
£’000
|
AIFM
fees
|
292
|
-
|
292
|
301
|
-
|
301
|
Performance
fee
|
-
|
-
|
-
|
-
|
-
|
-
|
|
292
|
-
|
292
|
301
|
-
|
301
|
A
performance fee is payable by the Company to AFML when the Company
has realised an aggregate annualised 10% return on investments (the
‘hurdle’) in each basket of investments. Based on the investment
valuations and the hurdle level as at 30
September 2023 the hurdle has been met, on an unrealised
basis, and as such a performance fee of £17,756,000 has been
accrued by the Company as at 30 September
2023, equivalent to 10.4 pence
per share (31 March 2023:
£16,517,000; 9.1 pence per share).
This accrual is reversed on consolidation and not included in the
Group Statement of Financial Position.
The
performance fee is only payable to AFML if the hurdle is met on a
realised basis. See page 24 and Note 19.9 of the Company’s 2023
Annual Report for further details. Any allocation of the
performance fee by AFML to its employees is made on a discretionary
basis.
3
(Loss)/return per share
The
(loss)/return per share figures are based on the following
figures:
|
Six
months
ended
30
September
2023
£’000
|
Six
months
ended
30
September
2022
£’000
|
Net revenue
loss
|
(2,043)
|
(2,519)
|
Net capital
return
|
2,936
|
1,476
|
Net
total (loss)/return
|
893
|
(1,043)
|
|
|
|
Weighted
average number of ordinary shares in issue
|
171,507,993
|
179,413,420
|
|
Pence
|
Pence
|
Revenue
loss per share
|
(1.2)
|
(1.4)
|
Capital
return per share
|
1.7
|
0.8
|
Total
(loss)/return per share
|
0.5
|
(0.6)
|
4
Share
capital
As at
30 September 2023 there were
170,599,974 (31 March 2023:
174,518,852) ordinary shares in issue, excluding shares held in
treasury, and 10,413,723 (31 March
2023: 6,494,845) shares held in treasury.
During the
year to 31 March 2023 5,806,934
shares were bought back into treasury at an average price of 102.9p
per share.
From
1 April 2023 to 30 September 2023 3,918,878 of the Company’s
ordinary shares were bought back into treasury at an average price
of 99.2p per share. No shares were issued during the six
months.
5
Net
asset value
(“NAV”) per share
The NAV per
share is based on the Group net assets attributable to the equity
shareholders of £291,129,000 (31 March
2023: £294,124,000) and 170,599,974 (31 March 2023: 174,518,852) shares being the
number of shares in issue at the period end.
The NAV per
share after performance fee* is based on the Group net assets
attributable to the equity shareholders, less the performance fee
accrual made by the Company of £17,756,000 (31 March 2023: £16,819,000), and the number of
shares in issue at the period end.
*
Alternative Performance Measure
6
Subsidiary
undertakings
The Company
has an investment in the issued ordinary share capital of its
wholly owned subsidiary undertaking, Augmentum Fintech Management
Limited, which is registered in England and Wales, operates in the United Kingdom and is regulated by the
Financial Conduct Authority.
7
Financial Instruments
The
principal risks which the Company faces from its financial
instruments are:
• Market
Price Risk
• Liquidity
Risk; and
• Credit
Risk
Market
Price Risk
Market
price risk arises mainly from uncertainty about future prices of
financial instruments in the Group’s portfolio.
It represents
the potential loss the Group might suffer through holding market
positions in the face of price movements, mitigated by stock
diversification.
The Group
is exposed to the risk of the change in value of its unlisted
equity and non-equity investments. For unlisted equity and
non-equity investments the market risk is principally deemed to be
represented by the assumptions used in the valuation methodology as
set out in the accounting policy.
Liquidity
Risk
The Group’s
assets comprise unlisted equity and non-equity investments. Whilst
unlisted equity is illiquid, short-term flexibility is achieved
through cash and cash equivalents.
Credit
Risk
The Group’s
exposure to credit risk principally arises from cash and cash
equivalents. Only highly rated banks (with credit ratings above A3,
based on Moodys ratings or the equivalent from another ratings
agency) are used for cash deposits and the level of cash is
reviewed on a regular basis.
Further
details of the Company’s management of these risks can be found in
note 13 of the Company’s 2023 Annual Report.
There have
been no changes to the management of or the exposure to credit risk
since the date of the Annual Report.
Fair
Value Hierarchy
Fair value
is the amount for which an asset could be exchanged, or a liability
settled between knowledgeable willing parties in an arm’s length
transaction.
The Group
complies with IFRS 13 in respect of disclosures about the degree of
reliability of fair value measurements. This requires the Group to
classify, for disclosure purposes, fair value measurements using a
fair value hierarchy that reflects the significance of the inputs
used in making the measurements.
The levels
of fair value measurement bases are defined as follows:
Level 1:
fair values measured using quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Level 2:
fair values measured using valuation techniques for all inputs
significant to the measurement other than quoted prices included
within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from
prices).
Level 3:
fair values measured using valuation techniques for which any
significant input to the valuation is not based on observable
market data (unobservable inputs).
The
determination of what constitutes ‘observable’ requires significant
judgement by the Directors.
The Group
considers observable data to be market data that is readily
available, regularly distributed or updated, reliable and
verifiable, not proprietary and provided by independent sources
that are actively involved in the relevant market.
All
investments were classified as Level 3 investments as at, and
throughout the period to, 30 September
2023. Details of movements in, and changes in value of, the
Level 3 investments are included on the next page.
All
investments were valued in accordance with accounting policy as set
out in note 19.4 of the Company’s Annual Report for the year ended
31 March 2023.
When using
the price of a recent transaction in the valuations the Company
looks to ‘re-calibrate’ this price at each valuation point by
reviewing progress within the investment, comparing against the
initial investment thesis, assessing if there are any significant
events or milestones that would indicate the value of the
investment has changed and considering whether a market-based
methodology (ie. using multiples from comparable public companies)
or a discounted cashflow forecast would be more
appropriate.
The main
inputs into the calibration exercise, and for the valuation models
using multiples, are revenue, EBITDA and P/E multiples (based on
the most recent revenue, EBITDA or earnings achieved and equivalent
corresponding revenue, EBITDA or earnings multiples of comparable
public companies), quality of earnings assessments and
comparability difference adjustments. Revenue multiples are often
used, rather than EBITDA or earnings, due to the nature of the
Group’s investments, being in fast-growing, small financial
services companies which are not normally expected to achieve
profitability or scale for a number of years. Where an investment
has achieved scale and profitability the Group would normally then
expect to switch to using an EBITDA or earnings multiple
methodology.
In the
calibration exercise and in determining the valuation for the
Group’s equity instruments, comparable trading multiples are used.
In accordance with the Group’s policy, appropriate comparable
public companies based on industry, size, developmental stage,
revenue generation and strategy are determined and a trading
multiple for each comparable company identified is then calculated.
Due to the nature of the Group's investments there are frequently
no directly comparable public companies; in these instances baskets
of public companies will be used that share similar characteristics
to the investee company.
The
multiple is calculated by dividing the enterprise value of the
comparable company by its revenue, EBITDA or earnings. The trading
multiple is then adjusted for considerations such as illiquidity,
premium to public companies implied in an investee's previous
financing round, marketability and other differences, advantages
and disadvantages between the Group’s portfolio company and the
comparable public companies based on company specific facts and
circumstances.
The main
input into the PWERM (‘Probability Weighed Expected Return
Methodology’) was the probability of conversion. This method was
used for the convertible loan notes held by the Company.
Total gains
and losses on assets measured at Level 3 are recognised as part of
Gains on Investments in the Consolidated Income Statement, and no
other comprehensive income has been recognised on these assets. The
total unrealised return for the period was £2,952,000 (period ended
30 September 2022:
£1,497,000).
The
following table presents those investments in portfolio companies
whose fair values are recognised in whole or in part using
valuation techniques based on assumptions that are not supported by
prices or other inputs from observable current market transactions
in the same instrument and the effect of changing one or more of
those assumptions behind the valuation techniques adopted based on
reasonably possible alternative assumptions.
Valuation
Technique
|
Fair
Value
30
September
2023
£’000
|
Fair
Value
31
March
2023
£’000
|
|
Unobservable
Inputs
|
Reasonably
possible shift
in
input +/-
|
Change
in
valuation
+/(-)
£’000
|
Multiple
methodology
|
221,422
|
197,876
|
|
Multiple
|
10%
|
18,437/(19,050)
|
|
|
|
|
Illiquidity
adjustment increase / Premium decrease
|
30%
|
(26,347)
|
|
|
|
|
Illiquidity
adjustment decrease / Premium increase
|
30%
|
23,880
|
CPORT*
|
7,343
|
21,568
|
|
Transaction
price
|
10%
|
3,069/(3,069)
|
PWERM**
|
6,183
|
4,766
|
|
Probability
of conversion
|
25%
|
252/(252)
|
NAV
|
6,388
|
7,295
|
|
Discount to
NAV
|
30%
|
489/(489)
|
Sales
Price
|
-
|
22,790
|
|
N/a
|
|
|
* Calibrated
price of recent transaction.
** Probability
weighted expected return methodology.
The
following table presents the movement of investments measured at
fair value, based on fair value measurement levels.
|
|
Level
3
|
|
Six
months to
30
September
2023
£’000
|
Year
to
31
March
2023
£’000
|
Opening
balance
|
254,295
|
268,807
|
Purchases
at cost
|
6,879
|
19,854
|
Realisation
proceeds
|
(22,790)
|
(44,224)
|
Gains on
investments held at fair value
|
2,952
|
9,858
|
Closing
balance as at 30 September
|
241,336
|
254,295
|
.
Independent
Review Report to Augmentum Fintech plc
Conclusion
Based on
our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 September 2023 is not prepared, in all
material respects, in accordance with UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency
Rules of the United Kingdom’s Financial Conduct
Authority.
We have
been engaged by the Company to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 30 September 2023
which comprises the Condensed Consolidated Income Statement,
Consolidated Statement of changes in Equity, Condensed Consolidated
Statement of Financial Position, Condensed Consolidated Statement
of Cash Flows and the related notes.
Basis
for conclusion
We
conducted our review in accordance with International Standard on
Review Engagements (UK) 2410, “Review of Interim Financial
Information Performed by the Independent Auditor of the Entity”
(“ISRE (UK) 2410”). A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
As
disclosed in note 1, the annual financial statements of the group
are prepared in accordance with UK adopted international accounting
standards. The condensed set of financial statements included in
this half-yearly financial report has been prepared in accordance
with UK adopted International Accounting Standard 34, “Interim
Financial Reporting.
Conclusions
relating to going concern
Based on
our review procedures, which are less extensive than those
performed in an audit as described in the Basis for conclusion
section of this report, nothing has come to our attention to
suggest that the directors have inappropriately adopted the going
concern basis of accounting or that the directors have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This
conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the group to cease to continue as a going
concern.
Responsibilities
of Directors
The
directors are responsible for preparing the half-yearly financial
report in accordance with the Disclosure Guidance and Transparency
Rules of the United Kingdom’s Financial Conduct
Authority.
In
preparing the half-yearly financial report, the directors are
responsible for assessing the company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do
so.
Auditor’s
responsibilities for the review of the financial
information
In
reviewing the half-yearly report, we are responsible for expressing
to the Company a conclusion on the condensed set of financial
statements in the half-yearly
financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for
Conclusion paragraph of this report.
Use
of our report
Our report
has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure
Guidance and Transparency Rules of the United Kingdom’s Financial
Conduct Authority and for no other purpose. No person is entitled
to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms
of engagement or has been expressly authorised to do so by our
prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
BDO
LLP
Chartered
Accountants
London, UK
27 November 2023
BDO LLP is
a limited liability partnership registered in England and Wales (with registered number
OC305127).
.
Interim
Management Report
Principal
Risks and Uncertainties
A review of
the half year and the outlook for the Company can be found in the
Chairman’s Statement and in the Portfolio Manager’s Review. The
principal risks and uncertainties faced by the Company fall into
the following broad categories: investment risks; portfolio
diversification risk; cash
risk;
credit risk; valuation risk; operational risk; and
key person
risk. Information on these risks is given in the Annual Report for
the year ended 31 March
2023.
The Board
believes that the Company’s principal risks and uncertainties have
not changed materially since the date of that report and are not
expected to change materially for the remaining six months of the
Company’s financial year.
Related
Party Transactions
During the
first six months of the current financial year, no transactions
with related parties have taken place which have materially
affected the financial position or the performance of the
Group.
Going
Concern
The
Directors believe, having considered the Company’s investment
objective, risk management policies, capital management policies
and procedures, and the nature of the portfolio and the expenditure
projections, that the Group has adequate resources, an appropriate
financial structure and suitable management arrangements in place
to continue in operational existence for the foreseeable
future.
Directors’
Responsibilities
The Board
of Directors confirms that, to the best of its
knowledge:
(i) the
condensed set of financial statements contained within this Half
Year Report has been prepared in accordance with Accounting
Standard IAS 34, ‘Interim Financial Reporting’, as adopted in the
UK;
(ii) the
condensed set of financial statements give a true and fair view of
the assets, liabilities, financial position and return of the
issuer and the undertakings included in the consolidation;
and
(iii) the
Half Year Report includes a fair review of the information required
by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure
Guidance and Transparency Rules.
In order to
provide these confirmations, and in preparing these financial
statements, the Directors are required to:
• select
suitable accounting policies and then apply them
consistently;
• make
judgements and accounting estimates that are reasonable and
prudent;
• state
whether applicable IFRS have been followed, subject to any material
departures disclosed and explained in the financial statements;
and
• prepare
the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in
business;
and the
Directors confirm that they have done so.
On behalf
of the Board of Directors
Neil England
Chairman
27 November 2023
.
Glossary
and Alternative Performance Measures
Alternative
Investment Fund Managers Directive (“AIFMD”)
Agreed by
the European Parliament and the Council of the European Union and
transposed into UK legislation, the AIFMD classifies certain
investment vehicles, including investment companies, as Alternative
Investment Funds (“AIFs”) and requires them to appoint an
Alternative Investment Fund Manager (“AIFM”) and depositary to
manage and oversee the operations of the investment vehicle. The
Board of the Company retains responsibility for strategy,
operations and compliance and the Directors retain a fiduciary duty
to shareholders.
Alternative
Performance Measures (“APMs”)
The
measures the Board of Directors uses to assess the Company’s
performance that are not defined under the International Financial
Reporting Standards but which are viewed as particularly relevant
for investment trusts. Definitions of the terms used and the basis
of calculation are set out in this Glossary and the APMs are
indicated with an asterisk (*).
Convertible
Loan Note
A
convertible loan note is a loan which bears interest and is
repayable but may convert into shares under certain
circumstances.
Discount
or Premium
A
description of the difference between the share price and the net
asset value per share. The size of the discount or premium is
calculated by subtracting the share price from the net asset value
per share and is usually expressed as a percentage (%) of the net
asset value per share. If the share price is higher than the net
asset value per share the result is a premium. If the share price
is lower than the net asset value per share, the shares are trading
at a discount.
Gross
IRR on Capital Deployed
Is the
annualised return arising on investment related cash flows taking
account of the timing of each cash flow, and assuming all
investments are realised at their carrying value at the period end.
It does not take account of the Group's expenses or transactions
with shareholders. It is derived by computing the discount rate at
which the present value of all investment related cash flows are
equal to the original amounts invested.
Initial
Public Offering (“IPO”)
An IPO is a
type of public offering in which shares of a company are sold to
institutional investors and usually also retail (individual)
investors. Through this process, colloquially known as floating, or
going public, a privately held company is transformed into a public
company.
Internal
Rate of Return (“IRR”)
Is the
annualised return on an investment calculated from the cash flows
arising from that investment taking account of the timing of each
cash flow. It is derived by computing the discount rate at which
the present value of all subsequent cash flows arising from an
investment are equal to the original amount invested.
Performance
fee – Company
AFML is
entitled to a performance fee (previously referred to as carried
interest) in respect of the performance of the Company's
investments. Each performance fee operates in respect of
investments made during a 24 month period and related follow-on
investments made for a further 36 month period, save that the first
performance fee shall be in respect of investments acquired using
80% of the net proceeds of the Company’s IPO in March 2018 (including the Initial Portfolio), and
related follow-on investments.
Subject to
certain exceptions, AFML will receive, in aggregate, 15% of the net
realised cash profits from the sale of investments made over the
relevant period once the Company has received an aggregate
annualised 10% realised return on investments (the ‘hurdle’) made
during the relevant period. AFML's return is subject to a
‘’catch-up’’ provision in its favour.
The
performance fee is paid in cash as soon as practicable after the
end of each relevant period, save that at the discretion of the
Board payments of the performance fee may be made in circumstances
where the relevant basket of investments has been realised in part,
subject to claw-back arrangements in the event that payments have
been made in excess of AFML’s entitlement to any performance fees
as calculated following the relevant period.
The
performance fee payable by the Company to AFML is accrued in the
Company's financial statements and eliminated on consolidation in
the Group financial statements.
Performance
Fee – AFML
The
performance fee arrangements within AFML were set up with the aim
of incentivising employees of AFML and aligning them with
shareholders through participation in the realised investment
profits of the Group.
Any
performance fee received by AFML will be allocated to its employees
on a discretionary basis by the Management Engagement &
Remuneration Committee of the Company.
NAV
per share Total Return*
The
theoretical total return on the NAV per share, reflecting the
change in NAV during the period assuming that any dividends paid to
shareholders were reinvested at NAV at the time the shares were
quoted ex-dividend. This is a way of measuring investment
management performance of investment trusts which is not affected
by movements in the share price discount/premium.
Net
Asset Value (“NAV”)
The value
of the Group’s assets, principally investments made in other
companies and cash being held, minus any liabilities. The NAV per
share is also described as ‘shareholders’ funds’ per share. The NAV
is often expressed in pence per share after being divided by the
number of shares in issue. The NAV per share is unlikely to be the
same as the share price, which is the price at which the Company’s
shares can be bought or sold by an investor. The share price is
determined by the relationship between the demand and supply of the
shares.
Net
Asset Value (“NAV”) per share after performance
fee*
The NAV of
the Group as calculated above less the performance fee accrual made
by the Company divided by the number of issued shares.
Net
Asset Value (“NAV”) per share after performance fee total
return*
The
Directors regard the Group’s NAV per share after performance fee
total return as being the critical measure of value delivered to
shareholders over the long term. The Board considers that the NAV
per share after performance fee better reflects the current value
of each share than the consolidated NAV per share figure, the
calculation of which eliminates the performance fee.
Partnership
Augmentum I
LP, a limited partnership registered in Jersey and a wholly-owned
subsidiary of the Company.
Total
Shareholder Return*
The
theoretical total return per share reflecting the change in share
price during the period and assuming that any dividends paid were
reinvested at the share price at the time the shares were quoted
ex-dividend.
Unquoted
investment
Investments
in unquoted securities such as shares and debentures which are not
quoted or traded on a stock market.
.
The half
year report will shortly be available for inspection on the
Company's website (https://augmentum.vc) and the National Storage
Mechanism website (https://data.fca.org.uk/#/nsm/nationalstoragemechanism).
- END
-