25 June 2024
Augmentum
Fintech plc
Annual
Financial Report for the year ended 31 March
2024
Augmentum
Fintech plc (LSE: AUGM) (the "Company" or "Augmentum"),
Europe's leading publicly listed
fintech fund, announces its audited Annual Results for the year
ended 31 March
2024.
Financial highlights
-
NAV before
performance fee increased by 3.1% to £303.3
million1
(31
March 2023: £294.1 million1)
of which the value of the investment portfolio was £265.1 million
(31 March 2023: £254.3
million).
-
NAV per
share after performance fee increased by 5.4% to
167.4p2 (31
March 2023: 158.9p). The increase in NAV per share after
performance fee was driven by net investment return for the year
+6.8p and impact of share buybacks +1.7p.
-
Cash
reserves of £38.5 million as at 31 March
2024 and £44.8 million as at 31 May
2024 (31 March 2023: £40.0
million).
Portfolio highlights
-
The
valuation of the top three positions (Tide, Zopa Bank and Grover)
plus a strong cash position, was just below Augmentum’s £170
million market capitalisation at year end. These three companies
have grown revenues by an average of over 1,300% since initial
investment and are either profitable or expected to reach
profitability without further funding.
-
Top 10
holdings, which represent 81% of portfolio value (31 March 2023: 78%) grew revenue at an average of
65% year-on-year (31 March 2023:
117%) and are cash generative (five positions) or have an average
of 203
months
cash runway.
-
Cushon’s
majority shareholding acquisition by NatWest Group completed during
the period, and returned £22.8 million to the Company, delivering a
return of 2.1x multiple on invested capital and an IRR of
62%.
-
Post year
end: exit from Onfido through the acquisition by Entrust,
delivering a return of 1.3x on invested capital and an IRR of
5.8%.
-
There have
now been six exits from the portfolio since inception all at or
above their last reported value, which have realised a cumulative
£89.6 million in proceeds – £55.9 million over their original cost
(c2.7x invested capital).
-
IRR of
16%4 on
invested capital since inception (31 March
2023: 18.5%).
Investment
activity
-
Continued
to maintain valuation and investment discipline across the
portfolio and new investment opportunities. Over the year, £15.8
million was invested across one new company (Artificial Labs, a
leading London-based Insurtech)
and six existing portfolio companies (31
March 2023: £19.9 million invested in two new companies and
eight existing portfolio companies).
-
Post year
end: Investment of £2.6 million in a new portfolio company
LoopFX.
Portfolio
updates
-
Tide
(18.0% of NAV) grew its UK SME banking market share to 10% and is
now structurally profitable at a group level. In October 2023 Augmentum invested a further £4.2
million through a combination of primary and secondary
transactions. International expansion continues with Germany, following the successful launch in
India.
-
Zopa Bank
(13.8% of NAV) raised £75 million in Tier 2 capital in October 2023 to support continued growth. It now
has more than 1 million customers and reached full-year
profitability for the first time in 2023.
-
Volt (9.0%
of NAV) completed a Series B funding round of $60m led by US investor IVP, with Augmentum
investing a further £5.3 million. In June
2023, Worldpay and Shopify selected Volt as their global A2A
partner.
Neil England, Chairman of Augmentum Fintech plc
commented:
“The
Company’s NAV
per share after performance fee at 31 March
2024 was 167.4p, up 5.4% from 31
March 2023. This continued our history of increases for
every reporting period since the Company’s IPO in 2018.”
“The UK
equity market has been largely out of favour and investment company
discounts are running at historic highs in many cases. However, UK
inflation numbers are improving, and history
suggests that
growth companies such as Augmentum will be early beneficiaries of
any rally inspired by declining rates.”
“We
maintained our investment discipline over the last year and, with
our strong cash reserves (£44.8 million as at 31 May 2024), we are well placed
both to take advantage of new opportunities and to reinforce our
appeal as a supportive investor. We have a healthy pipeline of
opportunities under consideration.”
Tim Levene, CEO of Augmentum Fintech Management Limited
commented:
“Several
portfolio companies have posted meaningful profits this year and
have attracted substantial growth capital of over £150 million
during the period. The operational performance
of the vast majority of the companies in the portfolio has
continued to be strong, with an average revenue growth of 65%
across the top 10 holdings in the last 12 months. There have been
some standout results, in some cases ahead of expectations, and the
majority of our companies have
over two years of cash runway.”
"Fintech’s
market share of global financial services revenue remains below 5%
but is set to more than double during the next decade as fintech
companies both disrupt
incumbent firms and become their partners for delivering digital
transformation and harnessing the potential of new technologies.
Hundreds of valuable companies will be built in Europe to support this
change. In
our view, the European early stage fintech ecosystem has reached an
exciting point of maturity.”
“This year,
we have crossed several important milestones; six years since IPO,
six exits delivered to the Company and the first portfolio position
rising above a
fair value of £50 million.”
Notes
1. NAV
before performance fee.
2. The
Board considers the NAV per share after any performance fees
payable to be the most accurate way to reflect the underlying value
of each share.
3.
Average months of cash runway based on current burn rate for
non-cash generative companies in Top 10, using latest available
data as of June 2024, excludes Onfido
exited post year end.
4.
Annualised IRR on invested capital and realisations since inception
using valuations at the last reporting date. This measure does not
include the impact of net expenses and the performance fee
provision.
Enquiries
|
Augmentum
Fintech
Tim Levene
(Portfolio Manager)
Martha
Horrox (Marketing and IR)
|
+44 (0)20
3961 5420
martha@augmentum.vc
|
|
Quill
PR
Nick
Croysdill, Sarah Gibbons-Cook
(Press and
Media)
|
+44 (0)20
7466 5050
augmentum@quillpr.com
|
|
Peel
Hunt LLP
Liz Yong,
Huw Jeremy
(Investment
Banking)
|
+44 (0)20
7418 8900
|
|
Singer
Capital Markets
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
Annual
Report and Financial Statements
for
the year ended 31st March
2024
.
CHAIRMAN’S
STATEMENT
Performance
Highlights
|
|
31
March 2024
|
31
March 2023
|
|
NAV per
Share after performance fee1*
|
167.4p
|
158.9p
|
|
NAV per
Share after performance fee Total Return*
|
5.4%
|
2.4%
|
|
|
100.5p
|
97.0p
|
|
Total
Shareholder Return*
|
3.6%
|
(27.1%)
|
|
Discount to
NAV per Share after performance fee*
|
(40.0%)
|
(39.0%)
|
|
Ongoing
Charges Ratio*
|
2.0%
|
1.9%
|
*
These
are considered to be Alternative Performance Measures. Please see
the Glossary and Alternative Performance Measures on page
78.
1
The
Board considers the NAV per share after any performance fees
provision to be the most accurate way to reflect the underlying
value of each share, whereas accounting standards require the
Group’s consolidated NAV per share to be presented before such fees
are deducted as a consequence of our Portfolio Manager being within
our Group structure and the fees therefore being eliminated on
consolidation.
To read
about our KPIs see page 23.
.
I am
pleased to present our sixth annual report since the launch of the
Company in March 2018. This report
covers the year ended 31 March
2024.
Investment
Policy
Your
Company predominantly invests in early stage European fintech
businesses which have technologies with the potential to transform
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 focused portfolio of private fintech
companies during what is often their period of rapid value
accretion.
Performance
Your
Company’s NAV per share after performance fee at 31 March 2024 was 167.4p, up 5.4% from
31 March 2023, continuing our history
of increases for every reporting period since the Company’s IPO in
2018.
However,
the price at which the shares traded continued to fail to represent
the NAV throughout the period, ending at 100.5p per share, up 3.5p
from the price at 31 March 2023 but
still representing a discount to the NAV per share after
performance fee of 40.0%.
The UK
equity market, and investment companies in particular, has been
largely out of favour and investment company discounts are running
at historic highs in many cases. The initial negative reaction to
increased interest rates has sustained but most commentators
predict a rate reduction at some point; the question remains as to
when. UK inflation numbers are improving which removes one of the
barriers to lower rates. History suggests that growth companies
such as Augmentum will be early beneficiaries of any rally inspired
by declining rates. Our underlying portfolio is performing well and
the current discount is illogical. As at 31
March 2024, like at the half year, the valuation of our top
three positions in Tide,
Zopa
Bank and
Grover,
plus cash, was almost equivalent to our £170 million market
capitalisation, attributing virtually no value to our £119 million
of other investments.
Portfolio
In the
first half of the year, the Company benefitted from its fifth
portfolio realisation since IPO. We received proceeds of £22.8
million from the completion of NatWest Group’s acquisition
of Cushon,
appreciably ahead of its prior valuation and representing a 2.1x
multiple on invested capital, and an IRR of 62%. Shortly after the
year end, in April, we had our sixth exit. One of the leading
global providers of online identity verification, Entrust,
acquired Onfido,
delivering an IRR of 5.8% and a multiple on capital invested of
1.3x, with the realised value representing a c.5% uplift on the
holding value we reported in the Company’s half year results. To
date, all of the Company’s investment exits have been at or above
the last reported holding value, which should provide investors
with comfort that our valuations process is rigorous and
corroborates the discipline our Portfolio Manager has exercised
when evaluating new investments and their reporting on the
portfolio.
Deployments
in the year included one new investment, £4.0 million in
London-based insurtech
Artificial,
and a further £12.0 million of follow-on funding to support
existing portfolio companies. These included Volt
(£5.3
million), Tide
(£4.2
million) and, Grover
(£1.4
million).
There is a
full review of the portfolio and investment transactions during the
year in the Portfolio Manager’s Review beginning on page
15.
Portfolio
Management
Our
investment team continues to evaluate a wide range of
opportunities, reviewing financial and commercial metrics in order
to identify those most likely to be successful. We are active
investors and our Portfolio Manager works closely with the
companies we invest in, often taking either a board or an observer
seat, and working closely with management to guide strategy
consistent with long-term value creation. Our portfolio is already
diversified across different fintech sectors and maturity stages
and we are keen to expand it further. We are committed to
responsible investing. We integrate Environmental, Social and
Governance (“ESG”) factors in our analysis, due diligence and
operating practices as we believe that these are key in mitigating
risk and creating good investments.
Valuations
Your Board
considers its governance role in the valuations process to be of
utmost importance. We operate with a Valuations Committee in
addition to an Audit Committee, both playing a key role in
assessing portfolio valuation. Your Board understands that
shareholders are often sceptical of private equity valuations as
they cannot be readily verified in the way that public equities
can. We have always maintained a consistent, rigorous and
disciplined approach to valuations and the results we are reporting
reflect an in-depth process, supported by our advisers. We
maintained our multiples in the bull market for fintech when listed
fintech multiples became elevated and so we have not needed to make
subsequent corrections, unlike some others. The six disposals made
to date provide some retrospective validation of this
process.
We have
carefully reviewed both the status and the forecasts of all of the
portfolio companies, used appropriate and consistent methodologies
to determine the value of each investment and sense checked our
conclusions. We also benefit from the majority of our investments
occupying a senior position in the capital structures of the
investee companies, offering an element of protection against
downside risk.
Discount
Control
The
Company’s shares traded at a discount to NAV for the whole of the
year under review and up to the date of this report,
notwithstanding the underlying value and strong prospects of the
portfolio.
The Board
has continued its programme of highly accretive buybacks, albeit
more modestly in the second half, seeking to convey to the market
our confidence in the value of the portfolio, while also balancing
this with the need for capital to be available for new and
follow-on investments. All the shares repurchased by the Company
are being held in treasury to potentially reissue when the share
price returns to a premium.
4,687,567
shares were bought back into treasury during the year to
31 March 2024 (2023: 5,806,934
shares), at an average price of 97.7p per share, representing an
average discount to the prevailing NAV per share after performance
fee of 38.6% and adding 1.7p/1.1% to the NAV per share. A further
99,118 shares have been bought back since March, up to 24 June 2024, at an average price of 98.7p per
share.
We will
seek to renew shareholders’ authorities to issue and buy back
shares at the forthcoming AGM.
Potential
Returns of Capital
As set out
on page 25 of this annual report, the Company may, at the
discretion of the Directors, return up to 50% of the gains realised
during a year from the disposal of investments. Factors influencing
decisions in this regard include the quantum of sale proceeds, the
opportunities offered by the investment pipeline and the working
capital requirements of the Company. To date the Board has applied
a proportion of such gains to share buybacks, as this has been
highly accretive to the Company’s NAV per share. This
notwithstanding, the Directors intend to consult with shareholders
to determine whether other means of cash distribution would be
preferred.
Dividend
No dividend
has been declared or recommended for the year. Your Company is
focused on providing capital growth and has a policy only to pay
dividends to the extent that it is necessary to maintain the
Company’s investment trust status.
Board
There have
been no changes to the Board during the year but the three
Directors at IPO in 2018 are all scheduled to retire from the Board
at the same time, so it seems logical to stage these departures and
commence Board refreshment now. After six years in the Chair, I
have decided to retire first and will not be offering myself for
re-election at the forthcoming AGM. We have an excellent mix of
skills and experience on the Board already but intend to supplement
our team with a new Director. We have engaged an independent search
firm for this purpose.
It has been
my pleasure to chair Augmentum Fintech PLC from its successful IPO
in 2018 and to see it grow into a leading and highly respected
player in European fintech. My grateful thanks to our shareholders
for their support, to my Board colleagues for their diligence and
hard work, and to Tim, Richard and the team at Augmentum Fintech
Management Limited who have together built a much-admired Portfolio
Manager.
AGM
Our AGM
will be held on Thursday 19 September
2024 at 11.00 a.m. at the
Augmentum Fintech Management Limited office at 4 Chiswell Street,
London EC1Y 4UP. Your Board
strongly encourages shareholders to register their votes in advance
using the proxy form provided or by voting online, or if they are
not held directly, by instructing the nominee company through which
the shares are held. Registering votes in advance does not preclude
shareholders from attending the meeting.
Details of
all of the resolutions can be found in the Notice of AGM, which is
published separately from this annual report and will be sent to
shareholders when the annual report is published. Both documents
will also be available to view on or download from the Company’s
website at www.augmentum.vc.
Your
Directors consider that all the resolutions listed are in the best
interests of the Company and its shareholders and recommend voting
in favour of them, as your Directors intend to do in respect of
their own holdings.
Outlook
Interest
rates remain stubbornly high for now, but UK and global inflation
numbers are improving which suggests a more positive medium-term
outlook for growth companies. As I write, early-stage growth
portfolios remain out of favour, but our Portfolio Manager has
proved its model, well-illustrated by the returns produced by our
six realisations to date. Additionally, our largest investments are
performing very well.
The
underlying need to digitalise and transform financial services
remains. The opportunity is undiminished as the traditional
operators continue to dominate, despite inroads made by some
stellar fintech businesses with less costly, and in many cases more
secure, business models. Penetration is still only c.5% across the
industry although adoption of consumer focused fintech by younger
demographics is markedly higher.
We
maintained our investment discipline over the last year and, with
our strong cash reserves (£44.8 million at 31 May 2024), we are well placed both to take
advantage of new opportunities and to reinforce our appeal as a
supportive investor. We have a healthy pipeline of opportunities
under consideration.
Your Board
believes that the Company will see a closing of the discount at
which its shares trade in due course and, with the underlying
growth of the portfolio generally being very strong, expects that
our patient shareholders will be well rewarded in time.
Neil England
Chairman
24 June 2024
.
PORTFOLIO
MANAGER’S REVIEW
Overview
When I
wrote to you in November it was against the backdrop of a welcome
change in sentiment. Equity markets had responded positively to
central bank decisions to hold interest rates steady, ending the
tightening cycle of 2022 and 2023. Since November, the anticipation
of future rate cuts has further boosted confidence, with global
equity indices reaching record highs in early 2024.
Whilst we
are as optimistic as we were in November, we temper this with a
dose of realism; rates remain elevated and whilst the first-rate
cuts are now trickling through, they will likely remain high well
into 2025. The market continues to set a high bar for growth
stocks, seeking capital efficiency and profitability, as well as
strong growth. While the listed fintech sector is yet to enjoy as
broad a recovery as other areas of the market, robust investor
demand has emerged for top quality companies delivering disruptive
and differentiated propositions.
A flight to
quality is also present in private markets, where investment
activity has normalised to the medium-term trend. This environment
benefits the Company as a preferred investor for quality fintechs.
Several portfolio companies have posted meaningful profits this
year and have attracted growth capital of over £150 million during
the period.
The
operational performance of the vast majority of the companies in
the portfolio has continued to be robust, with average revenue
growth of 65% 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, if they are not
already profitable.
Longer
term, the increasing dominance of US capital markets is a challenge
that UK and European policy makers must work to address, with real
implications for the future economic trajectory of the region. UK
savings are under-allocated to domestic markets, hindering growth.
Whilst we support initiatives such as the Mansion House Reforms,
their implementation and capital deployment into private markets
needs to accelerate. In the absence of meaningful change, as
evidenced by diverging regional trajectories in this recent
recovery period, the UK and European markets continue to lose
ground to the US.
Fintech’s
market share of global financial services revenue remains below 5%
but is set to more than double during the next decade as fintech
companies both disrupt incumbent firms and become their partners
for harnessing the potential of new technologies1.
Hundreds of valuable companies will be built in Europe to support sector wide digital
transformation.
Companies
in the fintech sector are addressing significant opportunities; in
2023, over 50% of fintechs in the F-Prime index of emerging,
publicly traded, financial technology companies, posted revenues
above US$1 billion, growing three
times faster than incumbents (F-Prime Capital2).
The European ecosystem is producing high quality companies that
with the right support have the potential to operate and thrive at
global scale. This includes a cohort of near-term IPO candidates,
including several from the Company’s portfolio.
Whilst IPOs
have been almost entirely absent from the market in 2024, we hope
to see their return in 2025. With IPOs absent, M&A activity,
driven mainly by incumbent firms acquiring digital capabilities,
has meanwhile continued at pace. The resilience and depth of the
exit market for fintechs is one of its key strengths from an
investment perspective. Fintech exits in Q1 2024 totalled 247
transactions and US$77 billion in
realisations globally 99% of which was M&A3.
Without access to private markets, investors will continue to miss
these compelling opportunities.
In our
view, the European early stage fintech ecosystem has reached an
exciting point of maturity. Exit activity has supported multiple
cycles of capital and talent recycling, including the 10 repeat
founders in the Company’s portfolio. This includes the Company’s
6th realisation through M&A with the sale of
Onfido to Entrust,
a leading US listed provider of digital identity
solutions.
The
flywheel of talent, funding and regulation is supporting quality
companies through growth stages. As we move towards a period of
greater market stability, we find ourselves operating from a
position of strength. Our diversified portfolio is resilient and
performing well. The Company’s cash position has been strengthened
by recent exits, and we are addressing one of the most compelling
sector-wide growth opportunities available to investors
today.
In
financial services, leveraging artificial intelligence (“AI”) is a
top priority due to significant breakthroughs in generative AI over
the past 24 months. Our engagement with AI spans three key areas;
portfolio companies, such as Zopa
Bank in credit
underwriting and Intellis
in trading
decisions, are leading in AI applications; we are exploring
innovative AI led investment opportunities; and our team uses AI
tools and proprietary data to enhance efficiency and coverage on a
day-to-day basis. Staying ahead in applying new technologies
provides a competitive advantage for the portfolio and pipeline
companies, as well as a forward-thinking venture capital investment
team.
Our
strategy remains consistent; investment discipline rooted in
experience and fintech sector specialism, applied to proprietary
pan-European deal flow with a distinct, value-add approach that
resonates with exceptional founders. The Company remains a unique
offer to public market investors, not just in terms of its
structure but also in terms of the quality and diversification of
the fintech exposure it offers.
Portfolio
Overview
As I write
the Company’s portfolio stands at 25 fintech companies, the same
level as at 31 March 2023. This
follows the exit of workplace pension provider Cushon
during the
reporting period and our post-period exit from Onfido,
a global leader in digital identity verification. This was the
sixth exit since IPO, which have delivered over £90 million in
realisations to date. We have added one new investment to the
portfolio in Artificial,
an innovative algorithmic underwriting platform serving the
speciality insurance industry. The other addition to the portfolio
comes from the post-period split of existing portfolio
company, Monese,
into its retail bank Monese and its
banking as a service business, XYB.
The
portfolio’s top 10 companies employ over 4,500 people and generate
over £1 billion in annual revenues, with year-on-year growth
continuing at an average of 65%. Five of this group are profitable
and the remaining five have an average cash runway of over 20
months.
As
reflected in these recent transactions and true to our commitment
six years ago at IPO, the portfolio has diversified across the
breadth of verticals that make up the broader fintech opportunity,
as well as by stages of maturity and European markets. The
resilience and strong performance of the portfolio through more
challenging macroeconomic times, and our growing record of
realisations, continue to deepen our confidence in this
approach.
At the end
of March, the sum of our top three positions, Tide,
Zopa Bank,
and Grover,
plus cash, is just below the Company’s market capitalisation. We
believe this represents a compelling value opportunity with
unpriced option value in the remaining 22 positions in the
portfolio, which carry strong future growth potential
themselves.
These top
three holdings are growing revenue at an average of 70%
year-on-year, with all three continuing to challenge their
respective market incumbents in industries ripe for disruption, a
key investment thesis across many of the portfolio
companies. Tide,
our largest holding, becomes the first portfolio position to
surpass £50 million in fair value having further solidified their
position as the market leader for SME banking in the UK and has
successfully launched in Germany
and India in recent
months.
We continue
to support portfolio companies from their early stages through both
capital and strategic support. Our typical first investment is made
at the Series A stage and benefits from protective structures and
board representation, which we currently hold at 17 of the 25
portfolio companies, including all of those that are early stage
(pre-series B). In addition to close monitoring of progress and
strategic input, ongoing engagement enables us to identify and
action compelling follow-on investment opportunities as companies
mature.
We have
demonstrated consistency in valuation approach against the backdrop
of volatility in public and private markets over the last two
years. All the Company’s material exits have now been delivered at
or above the last reported fair value of the holding. Its permanent
capital model enables us to reinvest exit proceeds into the next
generation of high-potential European fintech firms.
Following
the exit of Onfido
the Group’s
cash position as at 31 May 2024 was
£44.8 million and, with greater confidence in early-stage
valuations following the normalisation of market conditions, we are
in an advantageous position to deploy capital into high-quality and
appropriately priced investment opportunities in the period
ahead.
Onfido
and
interactive
investor are two of
the largest fintech transactions in the UK in the last three years.
We believe that from within the existing and future portfolio, the
Company is positioned to be part of more exit transactions of this
scale.
Investment
Activity
In my
recent reports, I have described our decision to slow deployment
into new opportunities in response to market conditions. The
distortionary impact of heightened valuations since late 2020
continued to play out during the period and our extremely
disciplined approach to valuation remained a key reason for
rejecting investment prospects at the investment committee stage.
Our total investment of £16 million across both new and follow-on
investments compares to £19.9 million in the prior year. We
maintain that reduced deployment has been the correct course in a
market absent of the right investments at the right
price.
When we see
the right opportunity, our ability to deploy capital remains
intact. In January 2024, we led a
highly competitive £8 million Series A round with a £4 million
investment in Artificial,
an emerging leader in the Insurtech space. With the digitalisation
of the London insurance market at
the forefront of change in the industry, we believe
Artificial
are well
positioned as one of the leading platforms for algorithmic
underwriting. Artificial
characterises
our early-stage strategy, bringing new technology that has the
capability to disrupt and drive significant change in an industry
that has been limited by legacy systems.
Within the
existing portfolio, we invested a further £5.3 million into
Volt
as part of
a US$60 million Series B round
completed by the company in June
2023. This takes the total invested in the company to £9.8
million. The fair value of the holding at £25.5 million reflects
this additional investment as well as a £5.9 million valuation
uplift versus March 2023. During this
period the company has grown revenue threefold, as the leading
provider of real-time payment connectivity to global merchants and
service providers. Volt’s
increasingly
diversified customer base spans a growing number of industries and
markets as the adoption of real-time account-to-account payments
continues around the world.
We made a
£4.2 million additional investment in Tide
in an
oversubscribed primary and secondary transaction in October 2023, helping to bolster the company and
increase our stake in one of the portfolio’s highest performing
assets. As the leading digital banking platform for small
businesses in the UK, Tide
has now
achieved 11% share of the UK market with more than 600,000 members
and is both profitable in the UK and at a Group level. To further
diversify from a predominantly UK revenue focus as the company
moves into a new phase of maturity, Tide
launched in
India at the end of 2022, and in
the first 18 months attracted more than 250,000 new members.
Following the successful launch of their Indian operations,
Tide
launched in
Germany in May 2024, further expanding their global
offering.
In the
reporting period, we also took up the Company’s shareholder rights
to invest a total of £1.8 million in small additional rounds
at Grover,
Wayhome
and
Habito.
Other
Top 10
During the
last three years we have frequently talked about the resilience of
the portfolio. This resilience is rooted in the strong fundamentals
of the companies that we back and the ability of their management
teams to weather challenges of all descriptions and return their
companies to growth trajectories. The path to scale is never a
straight line which is why a long-term view and ongoing support are
essential when investing in private markets.
A patient
approach is sometimes required to unlock long-term value. This has
been demonstrated by the portfolio’s second largest holding,
Zopa
Bank, which has
transformed since the write-down event in 2019. Their world class
team, coupled with exceptional underwriting technology, which
applies advanced AI, continues to drive Zopa’s
position as a standout performer. During the period
Zopa
Bank passed 1
million customers, achieved full-year profitability, and further
strengthened their balance sheet through a Tier 2 regulatory
capital raise of £75 million. The upward movement in the valuation
of the portfolio’s holding of £9.3 million follows year-on-year
revenue growth of 74% and returns the fair value of the holding
above the cost of investment.
Grover
is focused
on profitability, with their flexible subscription model now
operating at significant scale with run-rate revenue now in excess
of €250 million. The company achieved positive EBIT for the first
three months of 2024 and plans to be cash-flow positive within the
next 12 months. The last year has presented challenges for
Grover
but
progress is underway to ensure performance is not stifled and the
company can return to the growth it has long enjoyed. We have been
prudent in its valuation to reflect the challenges the company has
recently faced, and thus reduced the valuation by £8.6 million to
£35.9 million.
At the
beginning of this calendar year, we received a dividend of £0.8
million from BullionVault
following a
strong year of trading and record profits. BullionVault’s
performance has been supported by a combination of investor demand
for gold and other precious metals as an inflationary hedge, and
net interest income earned on fiat balances held by users on the
exchange. This has driven an uplift in the fair value of the
portfolio’s holding of £2.4 million. BullionVault
is a mature
position in the portfolio and serves a hedging function during
times of heightened market uncertainty.
Gemini
represents
another story of resilience and recovery as the company returns to
the portfolio’s Top 10. As a regulated multi-asset exchange and
custodian serving both institutional and retail investors, Gemini
has been a beneficiary of the positive price action in digital
asset markets that has followed from increased regulatory clarity
in the US and the approval of crypto ETF products. In addition,
acting on behalf of Gemini
users, the
company has secured a full recovery of assets loaned by users to a
crypto-lending company called Genesis. The uplift in the holding’s
fair value of £2.6 million is reflective of Gemini’s
improved trajectory but remains prudent and supported by the
downside protective structures held on this position.
We believe
that the Company’s current exposure to the digital assets vertical,
at 6.5% of net assets, is set at an appropriate level based on the
maturity of the market. While we do not anticipate making further
investments in this vertical in the near term, we continue to track
institutional themes involving blockchain technologies that hold
significant potential in the mid to long term. These include the
tokenisation of real-world assets and trade settlement
infrastructure.
One of the
more unique propositions in the portfolio, Intellis,
has continued to flourish in the last 12 months with an evolving
strategy resulting in accelerated growth. The company deploys
advanced proprietary AI trading strategies in foreign exchange
markets and has the potential to scale significantly, both in
current focus markets and potentially other asset classes.
Intellis’s
lean cost base has led to a sustained period of profitability. The
£1.7 million uplift in the holding reflects their encouraging
progress.
The
acquisition of Onfido,
one of the global leaders in digital identity verification, by
Entrust was announced in February
2024. Following regulatory approval, the acquisition
completed post-period end on 9 April
2024, with £10.1 million in proceeds received by the
Company. This delivered an IRR of 5.8% and a multiple on capital
invested of 1.3x. The realised value represented a c.5% uplift on
the holding value reported in the Company’s half year results. The
resulting IRR is well below our long-term target and the product of
investment terms that were introduced to the capital structure of
the company during a funding round that completed during the height
of the Covid pandemic. This outcome highlights the importance of
maintaining engagement and influence at board level, and of having
the ability to defend positions through follow-on funding. As this
transaction was completed after year end, Onfido
remains in
the top 10 at the completed transaction price.
Anyfin’s
core
product offering of credit refinancing combined with additional
budgeting and savings tools has continued to support financial
wellbeing for consumers across the Nordic region and Germany. Revenue growth in 2023 remained
strong at 63%, although the company has faced higher costs of
capital with an impact on margin. The experienced management team
has demonstrated strong capability while adjusting credit
underwriting to the more challenging macro environment. The company
is prioritising an adjusted capital structure and additional
licences which have the potential to significantly reduce the costs
of capital over the longer term, following a trajectory similar to
that taken by Zopa
Bank.
iwoca
provides
another example of exceptional resilience in the portfolio,
returning to performance and profitability following the end of
Covid funding support schemes and the retreat of high-street
lenders from small business funding. iwoca
has
demonstrated strong revenue growth with annualised revenue up 77%
year-on-year and consistent profitability, with positive EBIT
building month-on-month since January
2023. The company continues to prove the profit potential of
lending businesses that harness digital technologies to drive
significant operating leverage at scale.
Exits
In the
half-year report I commented on the completion of a fifth portfolio
exit in June, with the sale of Cushon
to NatWest
Group. Augmentum received proceeds of £22.8 million from the sale,
delivering an IRR of 62% and a multiple on capital invested of
2.1x. Realised value represented a 47% uplift on the previously
reported fair value of Augmentum’s position.
With
Onfido,
discussed above, these two additional exits bring total
realisations since IPO to £92 million. Each of the material exits
have been realised at or above the previously reported holding
value, providing further evidence to support our
valuations.
Performance
For the
year to 31 March 2024, we are
reporting a NAV per share after performance fee of 167.4p
(31 March 2023: 158.9p). Since IPO
the capital the Company has deployed has generated an IRR of 16%.
This is below our long-term internal expectations of
20%.
The
consistent approach to valuations that we have shown through the
cycle is supported by a growing track record of realisations. We
hope that this will continue to support investor confidence in the
fair values we report for the portfolio’s positions. Each position
is valued using the most appropriate methodology with most
positions using public market comparables either as a primary
valuation technique or as a secondary cross-check.
Along with
another strong year of growth across the portfolio, valuation
recovery in public markets has led to an increase in the public
market multiples used in our valuation approach. However, we
remained prudent, with our average forward sales multiple remaining
at 4.8x, consistent with the previous reporting period. Wider
governance is a key element of the process with each valuation
audited and signed off by the Board and Valuations
Committee.
As we have
detailed in previous reports, we continue to structure our typical
venture investments with downside protections such as liquidation
preference and anti-dilution provisions. 21 out of the 25 portfolio
positions carry these protections. Unlike ordinary share structures
typically seen in the public markets, these structures protect the
value of the Company’s position in the event of a reduction in the
equity value of an investee company from the price paid.
Outlook
Each set of
annual results provides an opportune moment to first reflect and
then to chart the course ahead. We have crossed several important
milestones; six years since IPO, six exits delivered to the Company
and the first portfolio position rising above a fair value of £50
million. With this growing track record, we are optimistic about
the future, operating with greater clarity and cohesion in a market
primed for exceptional investments.
Cross-party
political support for fintech in the UK positions the sector well.
Policy makers recognise it as a key growth sector, and a source of
international competitiveness. Investors can take further
confidence in the future environment for fintech innovation from
this backdrop, which we expect to continue.
In many
respects the UK has led the way in fintech, building on strong
financial services heritage, deep pools of talent and an attractive
investment landscape. It remains the key market for fintech
investment, capturing 57% of total European investment in
20234.
However, increasingly there are lessons to be learnt from different
approaches. In 2023, France (13%)
overtook Germany (12%) to secure
second place share of fintech investment, with activity supported
by a collection of start-up friendly policies and the ‘Tibi’
pension fund investment scheme. It is important that the UK
implements the Mansion House Reforms and other measures, and
continues to invest in financial services regulation and emerging
technologies such as AI to maintain its position.
Healthy
competition among nations to support fintech startups drives
progress in the European fintech ecosystem. Amongst the key
benefits of this are value and job creation, and financial
inclusion for previously underserved groups such as SMEs. Across
Europe the value of the fintech
sector is an estimated €340 billion and 134,000 jobs have been
newly created, over 5,000 of which are from companies in the
portfolio5.
We see
excellent prospects in our pipeline and expect our deployment rate
to return to our long-term average. Pre-seed and seed stage
activity has been resilient, creating a strong pipeline of
companies. Our proprietary origination engine, ADA, (named after
the mathematician and computing pioneer, Ada Lovelace), reflects our extensive experience
and assessment of over 5,000 fintech prospects. ADA enables us to
operate at scale with a highly specialised team, maintaining a high
investment standard with a lead-to-investment conversion rate of
just 0.6%.
In the past
year, our team has adjusted focus from portfolio management to deal
sourcing and deployment, assessing numerous companies and actively
engaging across Europe. Our latest
investment in Artificial
exemplifies
our thesis-led approach, targeting the right opportunities in
Insurtech. We are exploring themes including B2B payments, AI
applications, compliance technologies, and fintech solutions for
the green energy transition.
Our
investment strategy remains consistent, while the macroeconomic and
policy environments become more favourable. We will continue to
invest in exceptional teams at the early stages and support them to
scale their companies and ultimately secure meaningful
exits.
Tim Levene
CEO
Augmentum
Fintech Management Ltd
24 June 2024
1 BCG,
2023
2 https://fprimecapital.com/blog/the-2024-state-of-fintech-report
3 FT
Partners
4
Innovate Finance
5 McKinsey
.
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 at 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 per
cent. of Net Asset Value;
• the
aggregate value of seed stage investments will represent no more
than 1 per cent. of Net Asset Value; and
• at
least 80 per cent. of Net Asset Value 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 per cent.
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, but 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 per cent. 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 78.
.
PORTFOLIO
REVIEW
|
|
Fair
value of
holding
at
31
March
2023
£’000
|
Net
investments/
(realisations
£’000
|
Impact
of foreign currency rate changes £’000
|
Investment
return
£’000
|
Fair
value of
holding
at
31
March
2024
£’000
|
%
of Net assets after performance fee
|
|
Tide
|
35,692
|
4,176
|
–
|
11,425
|
51,293
|
18.0%
|
|
Zopa
Bank^
|
30,093
|
–
|
–
|
9,198
|
39,291
|
13.8%
|
|
Grover
|
43,150
|
1,368
|
(1,103)
|
(7,522)
|
35,893
|
12.6%
|
|
Volt
|
14,216
|
5,300
|
–
|
5,942
|
25,458
|
9.0%
|
|
BullionVault^
|
11,564
|
(799)
|
–
|
2,354
|
13,119
|
4.6%
|
|
Gemini
|
8,306
|
–
|
(308)
|
2,926
|
10,924
|
3.9%
|
|
Onfido
|
10,242
|
–
|
(51)
|
(43)
|
10,148
|
3.6%
|
|
Intellis
|
8,412
|
–
|
(79)
|
1,741
|
10,074
|
3.5%
|
|
AnyFin
|
9,304
|
–
|
(817)
|
928
|
9,415
|
3.3%
|
|
Iwoca
|
7,882
|
–
|
–
|
44
|
7,926
|
2.8%
|
|
Top
10 Investments
|
178,861
|
10,045
|
(2,358)
|
26,993
|
213,541
|
75.1%
|
|
Other
Investments*
|
52,644
|
5,931
|
(564)
|
(6,469)
|
51,542
|
18.1%
|
|
Cushon
|
22,790
|
(22,790)
|
–
|
–
|
–
|
0.0%
|
|
Total
Investments
|
254,295
|
(6,814)
|
(2,922)
|
20,524
|
265,083
|
93.2%
|
|
Cash &
cash equivalents
|
40,015
|
|
|
|
38,505
|
13.5%
|
|
Net other
current liabilities
|
(186)
|
|
|
|
(271)
|
-0.1%
|
|
Net
Assets
|
294,124
|
|
|
|
303,317
|
106.7%
|
|
Performance
Fee accrual
|
(16,819)
|
|
|
|
(18,980)
|
-6.7%
|
|
Net
Assets after performance fee
|
277,305
|
|
|
|
284,337
|
100.0%
|
^ Held
via Augmentum I LP
* There
are fourteen other investments (31 March
2023: fifteen). See page 13 for further details.
.
KEY
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,
instant card freezing and quick, mobile invoicing. Tide acquired
Funding Options in 2022, 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. Tide continues to expand its
product offering and launched Tide Accounting and Tide Acquiring in
2023, and recently joined the Current Account Switch Service. Tide
is also expanding geographically. Tide launched in India in 2022 and it has recently announced
plans to launch in Germany during
2024. Tide has 10% market share of small business accounts in the
UK, with more than 575,000 customers, and more than 225,000 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
|
31
March
2024
£’000
|
31
March
2023
£’000
|
|
Cost:
|
17,376
|
13,200
|
|
Value:
|
51,293
|
35,692
|
|
Valuation
Methodology^
|
Rev.Multiple
|
Rev.Multiple
|
As per last
filed audited accounts of the investee company for the year to
31 December 2022:
|
|
2022
£’000
|
2021
£’000
|
|
Turnover
|
59,176
|
33,541
|
|
Pre tax
loss
|
(40,781)
|
(32,719)
|
|
Net
assets
|
34,990
|
66,297
|
^
See note
13(iii) on pages 62 to 64.
.
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. In 2024, Zopa won three more awards
from MoneyNet; Best Savings App, Best Fixed Rate Cash ISA Provider
and Personal Savings Provider of the Year. These follow a string of
previous awards, including being named the British Bank Awards’
Best Personal Loan Provider for the sixth year in a row in 2023.
2023 marked a key milestone, with Zopa achieving its first full
year of profitability.
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
|
31
March
2024
£’000
|
31
March
2023
£’000
|
|
Cost:
|
33,670
|
33,670
|
|
Value:
|
39,291
|
30,093
|
|
Valuation
Methodology^
|
Rev.Multiple
|
Rev.Multiple
|
As per last
filed audited accounts of the investee company for the year to
31 December 2021:
|
|
2023
£’000
|
2022
£’000
|
|
Operating
income
|
223,544
|
153,737
|
|
Pre tax
profit/loss
|
10,828
|
(23,783)
|
|
Net
assets
|
413,174
|
299,674
|
.
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 and Spain.
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. Total
funding has been around €1.4 billion to date and it has over 400
employees.
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 help support the company to
profitability.
|
Source:
Grover
|
31
March
2024
£’000
|
31
March
2023
£’000
|
|
Cost:
|
9,295
|
7,927
|
|
Value:
|
35,893
|
43,150
|
|
Valuation
Methodology
|
Rev.Multiple
|
Rev.Multiple
|
As an
unquoted German company, Grover is not required to publicly file
audited accounts.
.
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, giving Worldpay’s more than 1 million merchant customers
across 146 markets access to Volt’s open payment infrastructure.
Volt also announced integration with leading global commerce
company Shopify in 2023, to power a ‘pay-by-bank’ option at
checkout for merchants who use the Shopify platform. In
February 2024, Volt were granted a UK
EMI licence by the FCA, enabling Volt to evolve its cash management
product ‘Connect’ for virtual accounts.
Augmentum
invested £0.5 million in Volt in December
2020, £4 million in its 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
|
31
March
2024
£’000
|
31
March
2023
£’000
|
|
Cost:
|
9,800
|
4,500
|
|
Value:
|
25,459
|
14,216
|
|
Valuation
Methodology
|
Rev.Multiple
|
CPORT
|
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 competitive 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 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 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
|
31
March
2024
£’000
|
31
March
2023
£’000
|
|
Cost:
|
8,424
|
8,424
|
|
Value:
|
13,119
|
11,565
|
|
Valuation
Methodology
|
EBITDA
Multiple
|
EBITDA
Multiple
|
|
Dividends
paid:
|
799
|
564
|
As per last
filed audited accounts of the investee company for the year to
31 October 2023:
|
|
2023
£’000
|
2022
£’000
|
|
Gross
profit
|
13,311
|
13,071
|
|
Pre tax
profit
|
13,023
|
8,364
|
|
Net
assets
|
46,323
|
41,294
|
.
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, becoming one of only ten companies to have
achieved FCA Cryptoasset Firm Registration at that time.
Gemini
announced acquisitions of portfolio management services company
BITRIA and trading platform Omniex in January 2022. During 2023 Gemini expanded into
the UAE and Asia.
Augmentum
participated in Gemini’s first ever funding round in November 2021 with an investment of £10.2
million.
|
Source:
Gemini
|
31
March
2024
£’000
|
31
March
2023
£’000
|
|
Cost:
|
10,150
|
10,150
|
|
Value:
|
10,924
|
8,306
|
|
Valuation
Methodology
|
Rev.Multiple
|
Rev.Multiple
|
Gemini is
not required to publicly file audited accounts.
.
Onfido
Onfido 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. 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.
Augmentum exited its position in April
2024 when Entrust, a global leader in identity, payments,
and data security solutions, acquired Onfido. Proceeds of £10.1
million have been received.
|
Source:
Onfido
|
31
March
2024
£’000
|
31
March
2023
£’000
|
|
Cost:
|
7,750
|
7,750
|
|
Value:
|
10,148
|
10,242
|
|
Valuation
Methodology
|
Transaction
Price
|
Rev.Multiple
|
As per last
filed audited accounts of the investee company for the 13 months to
31 January 2022 (previous period
12 months
to 31 December 2020):
|
|
2023
£’000
|
2022
£’000
|
|
Turnover
|
102,099
|
94,513
|
|
Pre tax
loss
|
(70,190)
|
(45,159)
|
|
Net
(liability)/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
|
31
March
2024
£’000
|
31
March
2023
£’000
|
|
Cost
|
2,696
|
2,696
|
|
Value
|
10,074
|
8,412
|
|
Valuation
Methodology
|
P/E
Multiple
|
P/E
Multiple
|
As an
unquoted Swiss company, Intellis is not required to publicly file
audited accounts.
.
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, and over 500,000 people have
downloaded the app.
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
|
31
March
2024
£’000
|
31
March
2023
£’000
|
|
Cost:
|
9,924
|
9,924
|
|
Value:
|
9,416
|
9,305
|
|
Valuation
Methodology
|
Rev.
Multiple
|
Rev.
Multiple
|
As an
unquoted Swedish company, Anyfin 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 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 and 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 £3 billion in the UK and Germany since its launch across more than
130,000 business loans.
Augmentum
originally invested £7.5 million in Iwoca in 2018 and has since
added £0.35 million. Iwoca has raised over £1 billion in debt
funding from partners including Barclays, Pollen Street Capital,
Värde, Citibank and Insight Investment.
|
Source:
Monese
|
31
March
2024
£’000
|
31
March
2023
£’000
|
|
Cost:
|
7,852
|
7,852
|
|
Value:
|
7,926
|
7,882
|
|
Valuation
Methodology
|
Rev.
Multiple
|
Rev.
Multiple
|
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
|
.
OTHER
INVESTMENTS
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. In May 2024 Monese announced
that it was splitting into two standalone entities: its B2C retail
bank Monese, and its B2B business XYB.
Augmentum
is invested alongside Kinnevik, PayPal, International Airlines
Group, Investec and HSBC Ventures.
.
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,
augmented with funeral plans in 2024. 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 115,000
reviews. It is now the largest will writer in the UK.
Since its
launch in 2015 Farewill’s customers have pledged over £970 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.
.
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.
.
Parafi
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.
.
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. The
first fund has now closed having helped over 650 people buy a new
home. Wayhome are currently working on their second
fund.
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.
.
Kipp
Kipp (www.letskipp.com) is an Israeli fintech that has
developed an AI 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. In 2022 Kipp won the Mastercard Fintech Engage Jury
award and in 2023 was awarded first place at the Mastercard Fintech
Forum CE event. It was also the ‘Leading Financial Services or
Payments Start-Up’ winner at the 2023 PAY360 Awards.
Augmentum
invested £4 million in May
2022.
.
Artificial
Artificial
(www.artificial.io) is an established underwriting technology
provider for the London Insurance Market. This London-based insurtech partners with global
insurers and brokers to facilitate algorithmic placement of
commercial and specialty risk, backed by their powerful contract
builder and underwriting platform.
Augmentum
led Artificial’s £8 million Series A+ round in January 2024 with a £4 million investment,
alongside existing investors MS&AD Ventures and FOMCAP IV. The
round was aimed at allowing Artificial to accelerate their growth,
to continue to build out its product range and further consolidate
its position as a leader in algorithmic underwriting software as
the insurance market migrates towards digital solutions.
.
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. In February 2024 FullCircl announced the launch of
its first white label orchestration platform through W2 by
FullCircl to help regulated businesses onboard more customers and
meet regulatory requirements.
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.
.
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.
.
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.
.
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 1,000 companies in France.
Augmentum
invested £2.2 million in Epsor in June
2021.
.
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 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 2023 financial year end
the company's clients held 10.9 million LPA (Litres of Pure
Alcohol) of spirit. Augmentum’s holding derives from
WhiskyInvestDirect being spun out of BullionVault in
2020.
.
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 has 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 underleveraged relative to
traditional capital markets.
Augmentum
led Tesseract’s Series A funding round in June 2021 with an investment of £7.3
million.
.
Previse
Previse
(www.previse.co) 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 pre-approval 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.
.
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.
.
STRATEGIC
REPORT
Business
Review
The
Strategic Report, set out on pages 19 to 31, provides a review of
the Company’s business, performance during the year and its
strategy going forward. It also considers the principal risks and
uncertainties facing the Company and includes information for
shareholders to assess how the Directors have performed their duty
to promote the success of the Company. In this respect, information
on how the Directors have discharged their duties under Section 172
of the Companies Act 2006 can be found on pages 27 and
28.
The
Strategic Report contains certain forward-looking statements. These
statements are made by the Directors in good faith based on the
information available to them up to the date of this report and
such statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward-looking information.
Strategy
and Strategic Review
In
accordance with its investment objective and policy, the Company
continued throughout the year under review to pursue the generation
of 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.
The Company
is an approved investment trust company and an alternative
investment fund (“AIF”) under the Alternative Investment Fund
Managers Regulations (“UK AIFMD”). It has appointed Frostrow
Capital LLP as its alternative investment fund manager (“AIFM”) and
Augmentum Fintech Management Limited as its Portfolio
Manager.
Principal
Risks and Risk Management
The Board
is responsible for the ongoing identification, evaluation and
management of the risks faced by the Company and has established a
process for the regular review of these risks and their mitigation.
This process accords with the UK Corporate Governance Code and the
FRC’s Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting. The Board's policy on risk
management has not materially changed during the course of the
reporting period and up to the date of this report.
The Company
maintains a framework of identified key risks, with the policies
and processes devised to monitor, manage and mitigate them where
possible. This risk map is reviewed regularly by the Audit
Committee.
Further
details of the financial risks are included in note 13 starting on
page 61.
The Board
has carried out a robust assessment of the emerging and principal
risks facing the Company, including those that would threaten its
business model, future performance, solvency and liquidity. Further
details of the risk management processes that are in place can be
found in the Corporate Governance Statement.
The Board
considers that the risks set out below are the principal risks
currently facing the Company.
|
Principal
Risks and Uncertainties
|
Mitigation
|
|
Investment
Risks
The Company
invests in early-stage companies which, by their nature, may be
smaller capitalisation companies. Such companies may not have the
financial strength, diversity and the resources of larger and more
established companies, and may find it more difficult to operate,
especially in periods of low economic growth.
The
performance of the Group’s portfolio is influenced by a number of
factors. These include, but are not limited to:
(i) the
quality of the initial investment decision;
(ii) reliance
on co-investment parties;
(iii) the
quality of the management team of each underlying portfolio company
and the ability of that team to successfully implement its business
strategy;
(iv) the
success of the Portfolio Manager in building an effective working
relationship with each team in order to agree and implement
value-creation strategies;
(v) changes
in the market or competitive environment in which each portfolio
company operates; and
(vi) environmental,
social and governance (“ESG”) factors.
Any of
these factors could have an impact on the valuation of an
investment and on the Group’s ability to realise the investment in
a profitable and timely manner.
|
The
Portfolio Manager has put in place a rigorous investment process
which ensures disciplined investment selection and portfolio
management. This includes detailed due diligence, regular portfolio
reviews and in many cases active engagement with portfolio
companies by way of board representation or observer
status.
Investing
in young businesses that may be cash consuming for a number of
years is inherently risky. In order to reduce the risks of
permanent capital loss the Portfolio Manager will, where possible,
structure investments to afford a degree of downside protection
through mechanisms such as a liquidation preference and/or
antidilution provisions.
The
Portfolio Manager provides a detailed update at each Board meeting,
including, inter
alia, investee
company developments and funding requirements.
|
|
Portfolio
Diversification Risk
The Group
is subject to the risk that its portfolio may not be adequately
diversified, being heavily concentrated in the fintech sector and
the portfolio value may be dominated by a single or limited number
of companies.
|
The Group
attempts to mitigate this risk by making investments across a range
of companies in a range of fintech company subsectors and in
companies at different stages of their lifecycle in accordance with
the Investment Objective and Investment Policy. There is also
geographic diversification with 63% of the portfolio being based in
the UK and 37% in continental Europe, Israel and the US. Given the
nature of the Company’s Investment Objective this remains a
significant risk.
|
|
Cash
Risk
Returns to
the Company through holding cash and cash equivalents are
relatively low. The Company may hold significant cash balances,
particularly when a fundraising has taken place, and this may have
a drag on the Company’s performance.
The Company
may require cash to fund potential follow-on investments in
existing investee companies. If the Company does not hold
sufficient cash to participate in subsequent funding rounds carried
out by portfolio companies, this could result in the interest the
Company holds in such businesses being diluted. This may have a
material adverse effect on the Company’s financial position and
returns for shareholders.
|
To mitigate
this risk the Board has agreed prudent cash management guidelines
with the AIFM and Portfolio Manager.
The Group
maintains sufficient cash resources to manage its ongoing
operational and investment commitments. Regular discussions are
held to consider the future cash requirements of the Company and
its investments to ensure that sufficient cash is
maintained.
|
|
Macroeconomic
Risks
The
performance of the Group’s investment portfolio is materially
influenced by economic conditions. These may affect demand for
services supplied by investee companies, foreign exchange rates,
input costs, interest rates, debt and equity capital markets and
the number of active trade and financial buyers.
All of
these factors could have an impact on the Group’s ability to
realise a return from its investments and cannot be directly
controlled by the Group. Particular current factors include
inflation, recession fears and the conflicts in Ukraine and the
Middle East.
|
Within the
constraints dictated by its objective, the Company’s portfolio is
diversified across a range of sectors, has no leverage, a net cash
balance and the Portfolio Manager seeks to structure investments to
provide downside protection where possible.
The Board,
AIFM and Portfolio Manager monitor the macroeconomic environment
and this is discussed at each Board meeting, along with the
potential impact. The Portfolio Manager also provides a detailed
update on the investments at each meeting, including,
inter
alia,
developments in relation to the macro environment and
trends.
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Strategy
Implementation Risks
The Group
is subject to the risk that its long-term strategy and its level of
performance fail to meet the expectations of its
shareholders.
A
persistent discount could reflect a lack of demand for the
Company's shares and prevents fund raising through share
issues.
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A robust
and sustainable corporate governance structure has been implemented
with the Board responsible for continuing to act in the best
interests of shareholders.
An
experienced fintech Portfolio Manager has been retained in order to
deliver the strategy.
The Company
and the Portfolio Manager endeavour to keep the market informed of
portfolio developments.
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Valuation
Risk
The
valuation of investments in accordance with IFRS 13 and
International Private Equity and Venture Capital (IPEV) Valuation
Guidelines requires considerable judgement and is explained in note
19.12.
The
Company’s investments are illiquid and a sale may require the
consent of other interested parties. Such investments may therefore
be difficult to value and realise. Such realisations may involve
significant time and cost and/or result in realisations at levels
below the value of such investments as estimated by the
Company.
Valuations
are often based on comparator prices and market-based multiples,
which can be affected by equity market sentiment and comparators’
situations that may not reflect the individual positions of
companies invested in.
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The Company
has a rigorous valuation policy and process as set out in notes
19.4 and 19.12. This process is led by the Board and includes
benchmarking valuations against actual prices received when a sale
of shares is made, as well as taking account of liquidity issues
and/or any restrictions over investments.
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Key
person risk
There is a
risk that the individuals responsible for managing the portfolio
may leave their employment or may be prevented from undertaking
their duties.
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The Board
manages this risk by:
• receiving
reports from AFML at each Board meeting, such reports include any
significant changes in the make-up of the team supporting the
Company;
• delegating
to the Management Engagement & Remuneration Committee oversight
of the remuneration of employees of AFML;
• meeting
the wider team, outside the designated lead managers, at the
Portfolio Manager’s offices and by video conference, and
encouraging the participation of the wider AFML team in investor
updates; and
• delegating
to the Management Engagement & Remuneration Committee
responsibility to perform an annual review of the service received
from AFML, including, inter
alia, the team
supporting the lead managers and succession planning.
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Credit
Risk
As noted
the Company may hold significant cash balances. There is a risk
that the banks with which the cash is deposited fail and the
Company could be adversely affected through either delay in
accessing the cash deposits or the loss of the cash deposit. When
evaluating counterparties there can be no assurance that the review
will reveal or highlight all relevant facts and circumstances that
may be necessary or helpful in evaluating the creditworthiness of
the counterparty.
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The Board
has agreed prudent cash management guidelines with the AIFM to
ensure an appropriate risk/return profile is maintained. Cash and
cash equivalents are held with approved counterparties, who are
required to have a high credit rating and financial strength.
Compliance with these guidelines is monitored regularly and
reported to the Board on a quarterly basis.
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Operational
Risk
The Board
is reliant on the systems of the Group and Company’s service
providers and as such disruption to, or a failure of, those systems
could lead to a failure to comply with law and regulations leading
to reputational damage and/or financial loss to the Group and/or
Company.
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To manage
these risks the Board:
• receives
compliance reports from the AIFM and the Portfolio Manager, which
include, inter alia, details of compliance with applicable laws and
regulations;
• reviews
internal control reports, where available, key policies, including
measures taken to combat cybersecurity issues, and also the
disaster recovery procedures of its service providers;
• maintains
a risk matrix with details of risks to which the Group and Company
are exposed, the controls relied on to manage those risks and the
frequency of operation of the controls; and
• receives
updates on pending changes to the regulatory and legal environment
and progress towards the Group and Company’s compliance with
these.
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Emerging
Risks
The Company
has carried out a robust assessment of the Company’s emerging and
principal risks and the procedures in place to identify emerging
risks are described below. The International Risk Governance
Council definition of an ‘emerging’ risk is one that is new, or is
a familiar risk in a new or unfamiliar context or under new context
conditions (re-emerging). Failure to identify emerging risks may
cause mitigating actions to be reactive rather than being proactive
and, in the worst case, could cause the Company to become unviable
or otherwise fail or force the Company to change its structure,
objective or strategy.
The Audit
Committee reviews the risk map at least half-yearly. Emerging risks
are discussed in detail as part of this process and also throughout
the year to try to ensure that emerging (as well as known) risks
are identified and, so far as practicable, mitigated.
The
experience and knowledge of the Directors are useful in these
discussions, as are update papers and advice received from the
Board’s key service providers such as the Portfolio Manager, the
AIFM and the Company’s Brokers. In addition, the Company is a
member of the AIC, which provides regular technical updates as well
as drawing members’ attention to forthcoming industry and/or
regulatory issues and advising on compliance
obligations.
Ukraine and Middle
East
The Board
does not expect the conflicts in Ukraine and the Middle East to have a material impact on the
Company, but notes that two of the Company’s investments, Wematch
and Kipp, are based in
Israel. The Board continues to
monitor events in both theatres. The Company has not identified any
sanctioned shareholders on its share register and the portfolio
companies have no Russian operations.
ESG
As
mentioned above under Investment Risks, the Board recognises the
risks posed by environmental, social and governance (“ESG”)
factors, particularly with respect to the portfolio. Investment
companies are currently exempt from reporting under the Task Force
on Climate-Related Financial Disclosures (“TCFD”) and the Company
has not voluntarily adopted the requirements, but recognises the
potential for reputational risk should the Company not meet
investor expectations in relation to ESG. This, together with ESG
factors that might affect portfolio companies, is considered to be
an emerging risk area for the Company. ESG risk assessment is
embedded in the Portfolio Manager's due diligence and
decision-making process when investing in new companies and
monitored thereafter (see page 29). However, the Company does not
have explicit sustainability investment objectives or policies and
will not seek to apply a sustainability label under the FCA’s UK
Sustainability Disclosure Requirements and investment labels regime
(“SDR”).
Performance
and Prospects
Performance
The Board
assesses the Company’s performance relative to its investment
objective using the following Key Performance Indicators (“KPIs”).
Due to the unique nature and investment policy of the Company, with
no direct listed competitors or comparable indices, the Board
considers that there is no relevant external comparison against
which to assess the KPIs and as such performance against the KPIs
is considered on an absolute basis. Information on the Company’s
performance is provided in the Chairman’s Statement and the
Portfolio Manager’s Review. The KPIs have not changed from the
prior year:
• The
Net Asset Value (“NAV”) per share after performance fee total
return*
The
Directors regard the NAV per share after performance fee total
return as being the critical measure of value delivered by the
Company 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.
This is an
Alternative Performance Measure (“APM”) and its calculation is
explained in the Glossary on page 78 and in note 16 on page 65.
Essentially, it adds back distributions made in the period to the
change in the NAV after performance fee to arrive at a total
return.
The Group’s
NAV per share after performance fee total return for the year was
5.4% (2023: 2.4%). This result is discussed in the Chairman's
Statement on page 2.
• The
Total Shareholder Return (“TSR”)*
The
Directors also regard the Company’s TSR as a key indicator of
performance. Like the NAV per share after performance fee total
return discussed above, this is an APM and its calculation is
explained in the Glossary on page 79. The TSR is similar in nature
to the NAV per share after performance fee total return, except
that it adds back distributions made in the period to the change in
the share price, to reflect more closely the return in the hands of
shareholders. Share price performance is monitored closely by the
Board.
The
Company's TSR for the year was +3.6% (2023: negative 27.1%). Whilst
this is broadly consistent with the NAV per share total return for
the year, the share price remains under pressure following the
swing in market sentiment in 2022.
• Ongoing
Charges Ratio (“OCR”)*
Ongoing
charges represent the costs that shareholders can reasonably expect
to pay from one year to the next, under normal
circumstances.
The Board
reviews the costs incurred in operating the Company at each Board
meeting and seeks to maintain a sensible balance between strong
service and keeping costs down.
The terms
of appointment of the Company’s AIFM and the Portfolio Manager are
set out on pages 24 and 25. In reviewing their continued
appointment the Board took into account the ongoing charges ratio
of other investment companies with specialist mandates.
The Group’s
OCR for the year was 2.0% (2023: 1.9%).
*See
Glossary on page 78
Discount/Premium*
The Board
monitors the price of the Company's shares in relation to their net
asset value after performance fee and the premium/discount at which
the shares trade. Shareholder approvals are sought each year to
issue and buy back shares, which can assist in reducing share price
volatility. However, the level of discount or premium is understood
to be mostly a function of investor sentiment and demand for the
shares, over which the Board has little influence. The Company has
the same Portfolio Manager, management fee arrangements and cost
base that it had in 2021 when the shares traded at a premium to NAV
and the Board does not believe that Company specific factors have
influenced the discount. Rather, the share price falling to a
discount to NAV at the beginning of 2022 correlates with market
sentiment turning against growth stocks generally, with the
Company's shares being affected notwithstanding the portfolio’s
potential. The year under review saw little improvement.
The Board
has sought to communicate its faith in the underlying value of the
portfolio and simultaneously to take advantage of the discount by
continuing to undertake a limited programme of accretive share
buybacks, to the benefit of remaining shareholders, whilst
balancing the need to retain cash for new and follow-on
investments. It is thought that helping to create some additional
market liquidity for sellers in this way also had an effect on
stabilising the share price. All shares purchased are held in
treasury and will potentially be reissued when the share price
returns to a premium to NAV after performance fee. Shareholder
authorities to issue and buy back shares are being sought at the
forthcoming AGM.
Performance,
Prospects and Future developments
The
Company’s current position and prospects are described in the
Chairman’s Statement and Portfolio Manager’s Review sections of
this annual report.
The Board’s
primary focus is on the Portfolio Manager’s investment approach and
performance, which are thoroughly discussed at every Board meeting.
In addition, the AIFM, the Portfolio Manager and the Company’s
Brokers update the Board on company communications, promotion,
investor feedback and market background.
Outlines of
performance, investment activity and strategy, market background
during the year and outlook are provided in the Chairman’s
Statement on pages 2 to 4 and the Portfolio Manager’s Review on
pages 15 to 18.
Viability
Statement
The Board
has considered the Company’s financial position, including its
ability to liquidate portfolio assets and meet its expenses as they
fall due, and notes the following:
As part of
its review the Board considered the impact of a significant and
prolonged decline in the Company’s performance and prospects. This
included modelling the impact of a 50% fall in the value of the
investment portfolio, the impact of this on the Company’s ongoing
charges and reviewing the ability of the Company to meet its
liabilities as they fall due and support investee companies with
future funding requirements in such a scenario.
The
expenses of the Company are predictable and modest in comparison
with the assets and there are no capital commitments currently
foreseen which would alter that position.
In
considering the Company's longer-term viability, as well as
considering the principal risks on pages 19 to 22 and the financial
position of the Company, the Board considered the following factors
and assumptions:
• The
Company is and will continue to be invested primarily in long-term
illiquid investments which are not publicly traded;
• The
Board reviews the liquidity of the Company, regularly considers any
commitments it has and cash flow projections;
• The
Board, AIFM and Portfolio Manager will continue to adopt a
long-term view when making investments and anticipated holding
periods will be at least five years;
• As
detailed in the Directors’ Report, the Valuations Committee
oversees the valuation process;
• There
will continue to be demand for investment trusts;
• Regulation
will not increase to a level that makes running the Company
uneconomical; and
• The
performance of the Company will continue to be
satisfactory.
Whilst
acknowledging that market and economic uncertainty remain
heightened in view of inflation, concerns about a recession and the
Ukraine and Middle East conflicts, based on the results of
its review, and taking into account the long-term nature of the
Company, the Board has a reasonable expectation that the Company
will be able to continue its operations and meet its expenses and
liabilities as they fall due for the foreseeable future, taken to
mean at least the next five years. The Board has chosen this period
because, whilst it has no information to suggest this judgement
will need to change in the coming five years, forecasting over
longer periods is imprecise. The Board’s long-term view of
viability will, of course, be updated each year in the annual
report.
Going
Concern
In light of
the conclusions drawn in the foregoing Viability Statement and as
set out in note 19.1 to the financial statements on page 66, the
Company has adequate financial resources to continue in operational
existence for at least the next 12 months from the date of signing
of this report.
Therefore,
the Directors believe that it is appropriate to continue to adopt
the going concern basis in preparing the financial statements. In
reviewing the position as at the date of this report, the Board has
considered the guidance on this matter issued by the Financial
Reporting Council.
Management
Arrangements
Principal
Service Providers
The Company
is structured as an internally managed closed-ended investment
company. Augmentum Fintech Management Limited (“Portfolio Manager”)
is the wholly owned operating subsidiary of the Company that
manages the investment portfolio of the Company as a delegate of
the AIFM.
The other
principal service providers to the Company are Frostrow Capital LLP
(“Frostrow” or the “AIFM”) and IQ EQ Depositary Company (UK)
Limited (the “Depositary”). Details of their key responsibilities
and their contractual arrangements with the Company
follow.
Alternative
Investment Fund Manager (“AIFM”)
Frostrow,
under the terms of its AIFM agreement with the Company,
provides, inter
alia, the
following services:
• oversight
of the portfolio management function delegated to Augmentum Fintech
Management Limited;
• promotion
of the Company’s shares;
• investment
portfolio administration and valuation;
• risk
management services;
• share
price discount and premium monitoring;
• administrative
and company secretarial services;
• advice
and guidance in respect of corporate governance
requirements;
• maintenance
of the Company’s accounting records;
• review
of the Company’s website;
• preparation
and publication of annual and half year reports; and
• ensuring
compliance with applicable legal and regulatory
requirements.
AIFM
Fees
Under the
terms of the AIFM Agreement Frostrow is entitled to an annual fee
of:
• on
NAV up to £150 million: 0.225% per annum;
• on
that part of NAV in excess of £150 million and up to £500 million:
0.2% per annum; and
• on
that part of NAV in excess of £500 million: 0.175% per
annum,
calculated
on the last working day of each month and payable monthly in
arrears.
The AIFM
Agreement may be terminated by either party on giving notice of not
less than 12 months.
Portfolio
Manager
Augmentum
Fintech Management Limited, as delegate of the AIFM, is responsible
for the management of the Company’s portfolio of investments under
an agreement between it, the Company and Frostrow (the “Portfolio
Management Agreement”).
Under the
terms of its Portfolio Management Agreement, Augmentum Fintech
Management Limited provides, inter
alia, the
following services:
• seeking
out and evaluating investment opportunities;
• recommending
the manner by which monies should be invested, disinvested,
retained or realised;
• advising
on how rights conferred by the investments should be
exercised;
• analysing
the performance of investments made; and
• advising
the Company in relation to trends, market movements and other
matters which may affect the investment objective and policy of the
Company.
Portfolio
Manager Fees
Portfolio
Management Fee
Under the
terms of the Portfolio Management Agreement Augmentum Fintech
Management Limited (the “Portfolio Manager”) receives an annual fee
of 1.5% of the NAV per annum, falling to 1.0% of any NAV in excess
of £250 million.
Performance
Fee
The
Portfolio Manager is entitled to a performance fee in respect of
the performance of any investments and follow-on 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 would 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, the Portfolio Manager receives, in aggregate,
15% of the net realised cash profits from the investments and
follow-on investments made over the relevant period once the
Company has received an aggregate annualised 10% realised return on
investments (the “hurdle”) and follow-on investments made during
the relevant period. The Portfolio Manager’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 the Portfolio Manager’s entitlement to any performance
fees as calculated following the relevant period.
Based on
the investment valuations as at 31 March
2024 the hurdle has been met, on an unrealised basis, and as
such a performance fee has been provided for as set out in notes 2
and 12. This will only be payable if the hurdle is met on a
realised basis.
The
Portfolio Management Agreement may be terminated by either party
giving notice of not less than 12 months.
AIFM
and Portfolio Manager Evaluation and
Re-Appointment
The
performance of Frostrow as AIFM and Augmentum Fintech Management
Limited as Portfolio Manager is regularly monitored by the Board
with a formal evaluation being undertaken each year. As part of
this process the Board monitors the services provided by the AIFM
and the Portfolio Manager and receives regular reports and views
from them.
Following a
review at a Management Engagement & Remuneration Committee
meeting in March 2024 the Board
believes that the continuing appointment of the AIFM and the
Portfolio Manager, under the terms described within this Strategic
Report, is in the best interests of the Company’s shareholders. In
coming to this decision it took into consideration the following
additional reasons:
• the
quality and depth of experience of the management, company
secretarial, administrative and marketing team that the AIFM
brought to the management of the Company; and
• the
quality and depth of experience allocated by the Portfolio Manager
to the management of the portfolio, together with the clarity and
rigour of the investment process.
Depositary
The Company
has appointed IQ EQ Depositary (UK) Limited as its Depositary in
accordance with the UK AIFMD on the terms and subject to the
conditions of an agreement between the Company, Frostrow and the
Depositary (the “Depositary Agreement”).
The
Depositary provides the following services, inter
alia, under its
agreement with the Company:
• verification
of non-custodial investments;
• cash
monitoring;
• processing
of transactions; and
• foreign
exchange services.
The
Depositary must take reasonable care to ensure that the Company is
managed in accordance with the Financial Conduct Authority’s
Investment Funds Sourcebook, the UK AIFMD and the Company’s
Articles of Association.
Under the
terms of the Depositary Agreement, the Depositary is entitled to
receive an annual fee of £25,000 plus certain event driven
fees.
The notice
period on the Depositary Agreement is not less than six
months.
Registrar
The
Company’s registrar is Computershare Investor Services PLC. Contact
details are set out on page 80.
Dividend
Policy
The Company
invests with the objective of achieving capital growth over the
long term and it is not expected that a revenue dividend will be
paid in the foreseeable future. The Board intends only to pay
dividends out of revenue to the extent required in order to
maintain the Company’s investment trust status.
Potential
returns of capital
It is
expected that the Company will realise investments from time to
time. The proceeds of these disposals may be re-invested,
used for working capital purposes or, at the discretion of the
Board, returned to shareholders.
The Company
has committed to return to Shareholders up to 50 per cent. of the
gains realised by the disposal of investments in each financial
year, with such returns of capital expected to be made on an annual
basis. The Company may also seek to make returns of capital to
Shareholders where available cash is not expected to be
substantially deployed within the following 12-18 months. The
options for effecting any return of capital to shareholders may
include the Company making tender offers to purchase Shares, paying
special dividends or any alternative method or a combination of
methods. Certain methods intended to effect a return of capital may
be subject to, amongst other things, shareholder approval.
Shareholders should note that the return of capital by the Company
is at the discretion of the Directors and is subject to, amongst
other things, the working capital requirements of the Company. The
Board has affirmed, that the Company will continue to retain the
bulk of the proceeds of the investment realisations to date for
reinvestment to support its capital growth objective and utilise
the balance to support accretive share buybacks.
Company
Promotion
The Company
has retained the services of Peel Hunt LLP and Singer Capital
Markets Advisory LLP as joint corporate brokers, to work alongside
one another to encourage demand for the Company’s shares.
Additionally, the Company has engaged Quill PR to assist in
promoting the Company.
Further, in
addition to AIFM services, Frostrow also provides investor
relations & marketing services.
Engaging
regularly with investors:
The
Company’s brokers and Frostrow meet with institutional investors,
discretionary wealth managers and execution-only platform providers
around the UK and hold regular seminars and other investor
events;
Making
Company information more accessible:
Frostrow
manages the investor database and produces all key corporate
documents, distributes factsheets, annual reports and updates from
the Portfolio Manager on portfolio and market developments;
and
Monitoring
market activity, acting as a link between the Company, shareholders
and other stakeholders:
The
Company’s brokers and Frostrow maintain regular contact with sector
broker analysts and other research and data providers, and provide
the Board with up-to-date information on the latest shareholder and
market developments.
Community,
Social, Employee, Human Rights, Environmental Issues, Anti-bribery
and Anti-corruption
The Company
is committed to carrying out business in an honest and fair manner
with a zero-tolerance approach to bribery, tax evasion and
corruption. As such, policies and procedures are in place to
prevent bribery and corruption. In carrying out its activities, the
Company aims to conduct itself responsibly, ethically and fairly,
including in relation to social and human rights issues.
As an
investment trust with limited internal resource, the Company has
little impact on the environment. The Company believes that high
ESG (Environmental, Social and Governance) standards within both
the Company and its portfolio companies make good business sense
and have the potential to protect and enhance investment returns.
Consequently, the Group’s investment process ensures that ESG
issues are taken into account and best practice is
encouraged.
Diversity
There are
currently three male and two female Directors (being 40% female
representation) on the Board, and these Directors have three
different nationalities and diverse educational backgrounds. The
Company aims to have a balance of relevant skills, experience and
background amongst the Directors on the Board and believes that all
Board appointments should be made on merit and with due regard to
the benefits of diversity. The Company's diversity policy is set
out on pages 41 and 42. The Board also encourages diversity within
AFML, where the team of 12 people represents four different
nationalities and is 42% female. The Board is also keen to promote
the benefits of diversity in the companies we invest in.
Engaging
with our stakeholders
The
following ‘Section 172’ disclosure describes how the Directors have
had regard to the views of the Company’s stakeholders in their
decision-making.
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Who?
STAKEHOLDER
GROUP
|
Why?
THE
BENEFITS OF ENGAGEMENT WITH OUR STAKEHOLDERS
|
How?
HOW
THE BOARD THE AIFM AND THE PORTFOLIO MANAGER HAS ENGAGED WITH OUR
STAKEHOLDERS
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Investors
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Clear
communication of the Company’s strategy and the performance against
its objective can help the share price trade at a narrower discount
or a wider premium to its net asset value which benefits
shareholders.
New shares
may be issued to meet demand without diluting the NAV per share of
existing shareholders. Increasing the size of the Company can
benefit liquidity as well as spread costs.
Understanding
investor preferences in relation to potential Board decisions, such
as in relation to possible distributions.
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Frostrow as
AIFM, the Portfolio Manager and the Company’s joint brokers on
behalf of the Board complete a programme of investor relations
throughout the year. In addition, the Chairman endeavours to make
himself available to meet with shareholders wishing to
engage.
Key
mechanisms of engagement included:
• The
Annual General Meeting;
• The
Company’s website which hosts reports, video interviews with the
managers and regular market commentary;
• Online
newsletters;
• One-on-one
investor meetings;
• Investor
meetings with the Portfolio Manager and AIFM; and
• The
Portfolio Manager hosts an annual Capital Markets Day event to
inform investors about portfolio constituents.
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Portfolio
Manager
|
Engagement
with our Portfolio Manager is necessary to evaluate performance
against the stated strategy and to understand any risks or
opportunities this may present to the Company. It also provides
clarity on the Board’s expectations and helps ensure that portfolio
management costs are closely monitored and remain
competitive.
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The Board
meets regularly with the Company’s Portfolio Manager throughout the
year both formally at the quarterly Board meetings and more
regularly on an informal basis. The Board also receives quarterly
performance and compliance reporting at each Board
meeting.
The
Portfolio Manager’s attendance at each Board meeting provides the
opportunity for the Portfolio Manager and Board to further
reinforce their mutual understanding of what is expected from all
parties.
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Service
Providers
|
The Company
contracts with third parties for other services including:
depositary, investment accounting & administration, company
secretarial and share registration. It is necessary for the
Company's success to ensure the third parties to whom we have
outsourced services complete their roles diligently and
correctly.
The Company
ensures all service providers are paid in accordance with their
terms of business.
The Board
closely monitors the Company’s Ongoing Charges Ratio.
|
The Board
and Frostrow engage regularly with all service providers both in
one-to-one meetings and via regular written reporting. This regular
interaction provides an environment where topics, issues and
business development needs can be dealt with efficiently and
collegiately.
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Employees
of AFML
|
In order to
attract and retain talent to ensure the Group has the resources to
successfully implement its strategy and manage third-party
relationships.
|
AFML has an
open plan office, facilitating ready interaction and engagement.
Senior team members report to the Board at each meeting.
Given the
small number of employees, engagement is at an individual level
rather than as a group.
|
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Portfolio
companies
|
Incorporating
consideration of ESG factors into the investment process assists in
understanding and mitigating risks of an investment and potentially
identifying future opportunities.
|
The Board
encourages the Company’s Portfolio Manager to engage with companies
and in doing so expects ESG issues to be a key consideration. The
Portfolio Manager seeks to take a board seat, or have board
observer status, on all investments. See pages 29 to 31 for further
detail on AFML’s ESG approach to investing.
|
|
What?
WHAT
WERE THE KEY TOPICS OF ENGAGEMENT?
|
Outcomes
and Actions
WHAT
ACTIONS WERE TAKEN, INCLUDING PRINCIPAL
DECISIONS?
|
|
Key
topics of engagement with investors Ongoing
dialogue with shareholders concerning the strategy of the Company,
performance and the portfolio.
|
• The
Portfolio Manager, Frostrow and the joint brokers meet regularly
with shareholders and potential investors to discuss the Company’s
strategy, performance and portfolio. These meetings take place with
and without the Portfolio Manager.
|
|
Key
topics of engagement with the Portfolio Manager
On an
ongoing basis the Board engages on portfolio composition,
performance, outlook and business updates.
Additional
topics included:
• The
impact of market conditions upon their business and the
portfolio.
• The
impact of the Ukraine and Middle East conflicts upon their business
and the portfolio.
• Compensation
arrangements within AFML.
• The
structure of management arrangements.
• The
discount at which the Company’s shares have been trading and
thoughts on possible mitigations.
|
• The
prospects for the portfolio and the pipeline of potential
investment opportunities are of particular interest to the Board
and discussions during the year resulted in the Board being
provided with additional reports to aid visibility.
• The
Ukraine and Middle East conflicts were discussed and it was
concluded that they have no direct impact on the Company. Two
portfolio companies are based in Israel and have been able to
continue operations.
• The
portfolio manager reports regularly any ESG issues in the portfolio
companies to the Board. Please see pages 29 to 31 for further
details of AFML’s ESG policies.
• The
structure of management arrangements has been an area of focus
during the year and discussions about this are ongoing.
• Discussions
informed Board decisions in relation to continuation of the current
share buyback programme and balancing this with available
investment capital.
|
Approach
to Responsible Investing
Augmentum
Fintech Management Limited (“AFML”) continues to be committed to a
responsible investment approach through the lifecycle of its
investments, from pre-screening to exit. AFML believes that the
integration of Environmental, Social and Governance (“ESG”) factors
within the investment analysis, diligence and operating practices
is important for mitigating risk and making profitable
investments.
Five-Stage
Approach to Future-Proofing the Portfolio
ESG
principles adapted from the UN PRI (Principles of Responsible
Investment) are integrated throughout business operations; in
investment decisions, at the screening stage through an exclusion
list and due diligence, ongoing monitoring and engaging with
portfolio companies post-investment and when making follow-on
investment decisions, as well as within fund operations.
1. Screening
An
Exclusion List is used to screen out companies incompatible with
AFML’s corporate values (sub-sectors and types of business). AFML
also commits to being satisfied that the investors they invest
alongside are of good standing.
2. Due
Diligence
An ESG Due
Diligence (DD) survey is completed by teams from companies in the
later stages of the investment process. An ESG scorecard is
completed for each potential investment, in which potential ESG
risks and opportunities are identified, and discussed with the
investment committee. Where necessary, an action plan is agreed
with the management team on areas for improvement and commitments
are incorporated into the Term Sheet.
3. Post-Investment
Monitoring and Engagement
An annual
survey is completed by portfolio companies and areas for
improvement are discussed with management teams, with commitments
agreed and revisited as appropriate.
4. Follow
On Investments
ESG risks
and opportunities are assessed when making follow-on investment
decisions, with an ESG scorecard completed and co-investors taken
into consideration. Follow on investments are only made into
companies that continue to meet AFML’s ESG criteria.
5. Internally
at Augmentum
AFML has
continued to identify priority areas in which to make suitable
ESG-related advancements across fund operations. Key progress areas
include:
• Tracking
the gender diversity of founders/CEOs of companies in our
dealflow;
• Continuing
to embrace diversity and inclusion through inclusive hiring and
professional development practices and Female Founder Office
Hours;
• Building
on our programme of CSR initiatives through supporting Crisis
Venture Studio and The Lord Mayor's Appeal ‘We Can Be’ and ‘City
Giving Day’ initiatives.
ESG
Focus Areas
AFML has
identified eight key areas for consideration, across the three ESG
categories, which best align with its values and are most relevant
for companies operating in the fintech industry.
The key
environmental consideration as identified by the AFML is the
potential impact of business operations on the global issue of
climate change. Social factors include the risks and opportunities
associated with data security, privacy and ethical use, consumer
protection, diversity and financial inclusion. Governance
considerations include anti-bribery and corruption, board structure
and independence and compliance.
AFML is
committed to:
• Incorporating
ESG and sustainability considerations into its investment analysis,
diligence, and operating practices.
• Providing
ESG training and support to the AFML employees involved in the
investment process, so that they may perform their work in
accordance with AFML’s policy.
• Actively
engaging with portfolio companies to encourage improvement in key
ESG areas.
• Annual
reporting on progress to stakeholders.
ESG
in Action
Company
Initiatives
Investing
in Women Code (ESG
Focus Area – Social: Diversity)
Augmentum
is a signatory of the Investing in Women Code. The Investing in
Women Code is a commitment to support the advancement of female
entrepreneurship in the United
Kingdom by improving female entrepreneurs’ access to tools,
resources and finance from the financial services
sector.
As a
signatory to the Investing in Women Code, the Company is committed
to a culture of inclusion and to advance access to capital for
female entrepreneurs. As a signatory, the Company will:
• Have
a nominated member of the senior leadership team who is responsible
for supporting equality in all its interactions with
entrepreneurs.
• Provide
HM Treasury with a commonly agreed set of data concerning:
all-female-led businesses; mixed-gender-led businesses and
all-male-led businesses. The Company agrees that HM Treasury will
collate this data and publish it on an aggregated and anonymised
basis in an annual report.
• Adopt
internal practices which aim to improve the potential for female
entrepreneurs to successfully access the tools, resources,
investment and finance they need to build and grow their
businesses, working with relevant players in the ecosystem. The
Company will review these actions annually and make this commitment
publicly available.
The
Lord Mayor’s Appeal (Environmental:
climate/carbon footprint and
Social: Diversity)
In
September the Augmentum team took part in The Lord Mayor’s Appeal’s
‘City Giving Day’, entering a cycling challenge raising money for
the various charitable causes supported by The Lord Mayor’s
Appeal.
The
Augmentum team participates in The Lord Mayor’s Appeal ‘We Can Be’
initiative, hosting a group of school girls, introducing them to a
career in the City and the inner workings of an investment
trust.
Female
Founders in Fintech Office Hours (Social:
Diversity)
Augmentum
launched Female Fintech Founders monthly Office Hours along with
other fintech investors Outward and Portage, providing an
opportunity for early stage female fintech founders to speak with
leading fintech investors and discuss fundraising and business
scaling more broadly. 25 founders were selected and hosted across
the first three sessions. Augmentum also participates in Playfair’s
‘Female Office Hours’, the largest diversity and inclusion
initiative in venture to bring founders and investors together for
one-to-one mentoring and pitch meetings.
Portfolio
Business Models
Anyfin:
Consumer Financial Education (Social:
Consumer protection)
A core
element of Anyfin’s mission is to help get people out of debt and
to date the company has helped customers save millions of Euros in
credit costs. They are proactive with consumer financial education;
earlier this year they released the third edition of the Anyfin
Report, a financial health study conducted by YouGov. The report
focused on the ways in which people are planning to deal with their
debts (and finances more broadly) in 2023. The company hosts
regular ‘Anyfin House’ sessions, open to the public, and covering
topics such as financial management, financial stress and the
economy.
Grover:
Circular Economy Model (Environmental:
Climate/carbon footprint)
Grover
provides a sophisticated solution for the increasing number of
consumers who value access over ownership via their circular
economy tech-rental model. By replacing the highly wasteful linear
product ownership approach (take -> make -> dispose),
Grover’s model extends the lifecycle of a product by re-using,
repairing and redistributing. A device rented from Grover is
circulated 2-6 times on average, and as of 2023 the company has
circulated over 1 million devices.
Wayhome:
Gradual Home Ownership Model (Social:
Financial inclusion)
Wayhome’s
‘Gradual Homeownership’ model aims to help aspiring homeowners who
are unable to obtain a traditional mortgage to buy a home get on
the housing ladder. With the average home now costing 9 times
average income and the average first time buyer only able to borrow
3.55 times income, millions of hardworking families are locked out
of homeownership. Wayhome customers own the share of the home they
paid for and rent the remainder, gradually buying more and renting
less over time.
Portfolio
Initiatives
Farewill:
Charity Pledge
(Social)
Farewill
partners with charities to enable them to offer free will writing
services through their website. In May
2024, Farewill announced they had hit £1 billion in legacy
pledges for charity..
Tide:
(Environmental:
Climate/carbon footprint)
In March,
Tide became the first fintech globally to remove 100% of its
emissions with durable carbon removals as of 2022 onwards. The
business has also committed to becoming fully NetZero by 2030 and
to support its UK members (more than 9% of UK SMEs), and growing
network of Indian SMEs on their journey to NetZero.
Tide made
three climate-focused pledges which included committing to removing
100% of their emissions with durable carbon removal from 2022
onwards and reducing 90% of their 2021 emissions per employee by
2030. These would make Tide fully Net Zero by 2030. The
organisation also committed to making Net Zero simpler for their
Members by developing the support on offer.
Post-period
end Tide and Transcorp announced the launch of India’s-first
recycled PVC RuPay Card. Made from 99% recycled plastic, this is a
first for fintechs in India. Each
rPVC card saves 7g of carbon and 3.18g plastic that would normally
be used in production.
Zopa
Bank: 2025 Fintech Pledge (Social:
Consumer protection and financial
inclusion)
Led by Zopa
Bank, 33 fintechs and their industry partners are working together
to tackle the cost-of-living crisis. The 2025 Fintech Pledge aims
to drive 10 million consumer actions that build up the financial
resilience of UK consumers by 2025. It will
achieve this by connecting people to platforms that make savings
work harder, improve credit scores, consolidate debt, and lower
utility bills and household outgoing costs. To date, more than 2
million actions have been reported from all members
combined.
This
Strategic Report was approved by the Board of Directors and signed
on its behalf by:
Neil England
Chairman
24 June 2024
.
STATEMENT
OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT, THE
DIRECTORS’ REMUNERATION REPORT AND THE FINANCIAL
STATEMENTS
The
directors are responsible for preparing the annual report and
financial statements in accordance with United Kingdom applicable law and
regulations.
Company law
requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the
Group and Company financial statements in accordance with
UK-adopted international accounting standards. Under Company law
the directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the return or loss for the
Group and Company for that period.
In
preparing these group 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 they have been prepared in accordance with UK-adopted
international accounting standards, subject to any material
departures disclosed and explained in the financial
statements;
• Prepare
the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in
business; and
• Prepare
a directors’ report, a strategic report and directors’ remuneration
report which comply with the requirements of the Companies Act
2006.
The
directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group and Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to
ensure that the financial statements comply with the Companies Act
2006.
They are
also responsible for safeguarding the assets of the Group and the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Responsibility
Statement
The
Directors consider that this annual report and financial
statements, taken as a whole, is fair, balanced, and understandable
and provides the information necessary for shareholders to assess
the Group and Company’s position and performance, business model
and strategy.
Each of the
Directors, whose names and functions are listed under the ‘Board of
Directors’ on page 32 confirm that, to the best of their
knowledge:
• The
financial statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Group and
Company;
• The
annual report includes a fair review of the development and
performance of the business and the financial position of the Group
and Company, together with a description of the principal risks and
uncertainties that they face.
Neil England
Chairman
24 June 2024
.
CONSOLIDATED
INCOME STATEMENT
|
|
|
Year
ended 31 March 2024
|
Year
ended 31 March 2023
|
|
|
Notes
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
Gains on
Investments
|
8
|
–
|
17,602
|
17,602
|
–
|
9,858
|
9,858
|
|
Interest
Income
|
|
1,681
|
–
|
1,681
|
412
|
–
|
412
|
|
Expenses
|
2
|
(5,432)
|
(49)
|
(5,481)
|
(5,270)
|
(107)
|
(5,377)
|
|
(Loss)/Return
before Taxation
|
|
(3,751)
|
17,553
|
13,802
|
(4,858)
|
9,751
|
4,893
|
|
Taxation
|
6
|
–
|
–
|
–
|
–
|
–
|
–
|
|
(Loss)/Return
for the year
|
|
(3,751)
|
17,553
|
13,802
|
(4,858)
|
9,751
|
4,893
|
|
(Loss)/Return
per Share (pence)
|
7
|
(2.2)p
|
10.3p
|
8.1p
|
(2.7)p
|
5.4p
|
2.7p
|
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
and capital 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.
The notes
on pages 58 to 68 are integral to and form part of these Financial
Statements.
.
CONSOLIDATED
AND COMPANY STATEMENTS OF CHANGES IN EQUITY
|
|
Year
ended 31 March 2024
|
|
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
|
–
|
–
|
(4,609)
|
–
|
–
|
(4,609)
|
|
Return/(loss)
for the year
|
–
|
–
|
–
|
17,553
|
(3,751)
|
13,802
|
|
At
31 March 2024
|
1,810
|
105,383
|
80,609
|
135,293
|
(19,778)
|
303,317
|
|
|
Year
ended 31 March 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
|
91,191
|
107,989
|
(11,169)
|
295,204
|
|
Purchase of
own shares into treasury
|
–
|
–
|
(5,973)
|
–
|
–
|
(5,973)
|
|
Return/(loss)
for the year
|
–
|
–
|
–
|
9,751
|
(4,858)
|
4,893
|
|
At
31 March 2023
|
1,810
|
105,383
|
85,218
|
117,740
|
(16,027)
|
294,124
|
|
|
|
|
|
|
|
|
|
|
Year
ended 31 March 2024
|
|
Company
|
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
|
100,919
|
(17,576)
|
275,754
|
|
Purchase of
own shares into treasury
|
–
|
–
|
(4,609)
|
–
|
–
|
(4,609)
|
|
Return/(loss)
for the year
|
–
|
–
|
–
|
15,392
|
(3,805)
|
11,587
|
|
At
31 March 2024
|
1,810
|
105,383
|
80,609
|
116,311
|
(21,381)
|
282,732
|
|
|
|
|
|
|
|
|
|
|
Year
ended 31 March 2023
|
|
Company
|
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
|
92,724
|
(12,556)
|
278,552
|
|
Purchase of
own shares into treasury
|
–
|
–
|
(5,973)
|
–
|
–
|
(5,973)
|
|
Return/(loss)
for the year
|
–
|
–
|
–
|
8,195
|
(5,020)
|
3,175
|
|
At
31 March 2023
|
1,810
|
105,383
|
85,218
|
100,919
|
(17,576)
|
275,754
|
The notes
on pages 58 to 68 are integral to and form part of these Financial
Statements.
.
CONSOLIDATED
BALANCE SHEET
as
at 31 March 2024
|
|
Note
|
2024
£’000
|
2023
£’000
|
|
Non-Current
Assets
|
|
|
|
|
Investments
held at fair value
|
8
|
265,083
|
254,295
|
|
Property,
plant & equipment
|
|
219
|
297
|
|
Current
Assets
|
|
|
|
|
Right-of-use
asset
|
5
|
438
|
588
|
|
Other
receivables
|
10
|
245
|
555
|
|
Cash and
cash equivalents
|
|
38,505
|
40,015
|
|
Total
Assets
|
|
304,490
|
295,750
|
|
Current
Liabilities
|
|
|
|
|
Other
payables
|
11
|
(699)
|
(948)
|
|
Lease
liability
|
5
|
(474)
|
(678)
|
|
Total
Assets less Current Liabilities
|
|
303,317
|
294,124
|
|
Net
Assets
|
|
303,317
|
294,124
|
|
Capital
and Reserves
|
|
|
|
|
Called up
share capital
|
15
|
1,810
|
1,810
|
|
Share
premium
|
|
105,383
|
105,383
|
|
Special
reserve
|
|
80,609
|
85,218
|
|
Retained
earnings:
|
|
|
|
|
Capital
reserves
|
|
135,293
|
117,740
|
|
Revenue
reserve
|
|
(19,778)
|
(16,027)
|
|
Total
Equity
|
|
303,317
|
294,124
|
|
Net
Asset Value per share (pence)
|
16
|
178.6p
|
168.5p
|
|
Net
Asset Value per share after performance fee
(pence)*
|
16
|
167.4p
|
158.9p
|
The
Financial Statements on pages 52 to 68 were approved by the Board
of Directors on 24 June 2024 and
signed on its behalf by:
Neil England
Chairman
The notes
on pages 58 to 68 are integral to and form part of these Financial
Statements.
Augmentum
Fintech plc
Company
Registration Number: 11118262
* Considered
to be Alternative Performance Measure. Please see the Glossary and
Alternative Performance Measures on page 78.
.
COMPANY
BALANCE SHEET
as
at 31 March 2024
|
|
Note
|
2024
£’000
|
2023
£’000
|
|
Non-Current
Assets
|
|
|
|
|
Investments
held at fair value
|
8
|
265,083
|
254,295
|
|
Investment
in subsidiary undertakings
|
9
|
750
|
500
|
|
Current
Assets
|
|
|
|
|
Other
receivables
|
10
|
196
|
118
|
|
Cash and
cash equivalents
|
|
36,052
|
38,470
|
|
Total
Assets
|
|
302,081
|
293,383
|
|
Current
Liabilities
|
|
|
|
|
Other
payables
|
11
|
(369)
|
(810)
|
|
Provisions
|
12
|
(18,980)
|
(16,819)
|
|
Total
Assets less Current Liabilities
|
|
282,732
|
275,754
|
|
Net
Assets
|
|
282,732
|
275,754
|
|
Capital
and Reserves
|
|
|
|
|
Called up
share capital
|
15
|
1,810
|
1,810
|
|
Share
premium
|
|
105,383
|
105,383
|
|
Special
reserve
|
|
80,609
|
85,218
|
|
Retained
earnings:
|
|
|
|
|
Capital
reserves
|
|
116,311
|
100,919
|
|
Revenue
reserve
|
|
(21,381)
|
(17,576)
|
|
Total
Equity
|
|
282,732
|
275,754
|
The
Company’s return for the year was £11,587,000 (2023: £3,175,000).
The Directors have taken advantage of the exemption under s408 of
the Companies Act and not presented an income statement or a
statement of comprehensive income for the Company alone.
The
Financial Statements on pages 52 to 68 were approved by the Board
of Directors on 24 June 2024 and
signed on its behalf by:
Neil England
Chairman
The notes
on pages 58 to 68 are integral to and form part of these Financial
Statements.
Augmentum
Fintech plc
Company
Registration Number: 11118262
.
CONSOLIDATED
CASH FLOW STATEMENT
|
|
Year
ended
31
March
2024
£’000
|
Year
ended
31
March
2023
£’000
|
|
Operating
activities
|
|
|
|
Sales of
investments
|
22,790
|
44,226
|
|
Purchases
of investments
|
(15,976)
|
(24,855)
|
|
Acquisition
of property, plant and equipment
|
(8)
|
(365)
|
|
Interest
income received
|
1,608
|
326
|
|
Expenses
paid
|
(4,552)
|
(5,058)
|
|
Lease
payments
|
(221)
|
(153)
|
|
Net
cash inflow from operating activities
|
3,641
|
14,121
|
|
Purchase of
own shares into treasury
|
(5,151)
|
(5,432)
|
|
Net
cash used by financing activities
|
(5,151)
|
(5,432)
|
|
Net
(decrease)/increase in cash and cash
equivalents
|
(1,510)
|
8,689
|
|
Cash
and cash equivalents at start of year
|
40,015
|
31,326
|
|
Cash
and cash equivalents at end of year
|
38,505
|
40,015
|
The notes
on pages 58 to 68 are integral to and form part of these Financial
Statements.
.
COMPANY
CASH FLOW STATEMENT
|
|
Year
ended
31
March
2024
£’000
|
Year
ended
31
March
2023
£’000
|
|
Operating
activities
|
|
|
|
Sales of
investments
|
22,790
|
44,226
|
|
Purchases
of investments
|
(16,226)
|
(24,855)
|
|
Interest
income received
|
1,563
|
326
|
|
Expenses
paid
|
(5,494)
|
(5,489)
|
|
Net
cash inflow from operating activities
|
2,733
|
14,208
|
|
Purchase of
own shares into treasury
|
(5,151)
|
(5,432)
|
|
Net
cash used by financing activities
|
(5,151)
|
(5,432)
|
|
Net
(decrease)/increase in cash and cash
equivalents
|
(2,418)
|
8,776
|
|
Cash
and cash equivalents at start of year
|
38,470
|
29,694
|
|
Cash
and cash equivalents at end of year
|
36,052
|
38,470
|
The notes
on pages 58 to 68 are integral to and form part of these Financial
Statements.
.
NOTES
TO THE FINANCIAL STATEMENTS
1 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
located in the UK, continental Europe, Israel and the US.
2 Expenses
|
|
|
2024
|
|
|
2023
|
|
|
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
AIFM fees
|
582
|
–
|
582
|
593
|
–
|
593
|
|
Administrative
expenses
|
1,706
|
49
|
1,755
|
1,415
|
107
|
1,522
|
|
Directors’
fees*
|
186
|
–
|
186
|
169
|
–
|
169
|
|
Performance
fee (see note 4)^
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Staff costs
(see note 4)
|
2,793
|
–
|
2,793
|
2,944
|
–
|
2,944
|
|
Auditor’s
remuneration
|
165
|
–
|
165
|
149
|
–
|
149
|
|
Total
expenses
|
5,432
|
49
|
5,481
|
5,270
|
107
|
5,377
|
£169,000 of
interest and depreciation relating to a lease (2023: £209,000) is
included in administrative expenses. See note 5 for further
details.
* Details
of the amounts paid to Directors are included in the Directors
Remuneration Report on page 45.
^
See note 4
for further details of the performance fee arrangements.
Non-executive Directors of the Company are not eligible to
participate in any allocation of the performance fee.
Auditor’s
Remuneration
|
|
2024
|
2023
|
|
|
Group
£’000
|
Company
£’000
|
Group
£’000
|
Company
£’000
|
|
Audit of
Group accounts pursuant to legislation
|
110
|
110
|
104
|
104
|
|
Audit of
subsidiaries accounts pursuant to legislation
|
19
|
–
|
18
|
–
|
|
Audit
related assurance services
|
26
|
26
|
20
|
20
|
|
Non-audit
related assurance services
|
10
|
–
|
7
|
–
|
|
Total
auditors’ remuneration
|
165
|
136
|
149
|
124
|
Non-audit
services
It is the
Group’s practice to employ BDO LLP on assignments additional to
their statutory audit duties only when their expertise and
experience with the Group are important. Details of the Group’s
process for safeguarding and supporting the independence and
objectivity of the external auditor are given in the Report of the
Audit Committee beginning on page 48.
3 Key
Management Personnel Remuneration
The
Directors of the Company are considered to be the Key Management
Personnel along with the directors of the Company’s
subsidiary.
|
|
2024
|
2023
|
|
|
Salary
/Fees
£’000
|
Other
benefits
£’000
|
Total
£’000
|
Salary
/Fees
£’000
|
Other
benefits
£’000
|
Total
£’000
|
|
Key
management personnel remuneration
|
1,158
|
125
|
1,283
|
1,352
|
277
|
1,629
|
|
Performance
fee allocation*
|
–
|
–
|
–
|
–
|
–
|
–
|
|
|
1,158
|
125
|
1,283
|
1,352
|
2770
|
1,629
|
Other
benefits include pension and social security contributions relating
to the directors of the Company’s subsidiary.
* Allocation
of the performance fee to the directors of the Company’s
subsidiary. See note 4 for further details of the performance fee
arrangements.
4 Staff
Costs
The monthly
average number of employees for the Group during the year was
eleven (2023: eleven). All employees are within the investment and
administration function and employed by the Company's
subsidiary.
|
|
2024
£’000
|
2023
£’000
|
|
Wages and
salaries
|
2,264
|
2,437
|
|
Social
security costs
|
318
|
347
|
|
Other
pension costs
|
119
|
104
|
|
Other staff
benefits
|
92
|
56
|
|
Staff
costs
|
2,793
|
2,944
|
|
Performance
fee (charged to capital)*
|
–
|
–
|
|
Total
|
2,793
|
2,944
|
* The
performance fee arrangements were set up to provide a long-term
employee benefit plan to incentivise employees of AFML and align
them with shareholders through participation in the realised
investment profits of the Group. Any performance fee paid by the
Company to AFML is allocated to employees of AFML on a
discretionary basis and overseen by the Management Engagement &
Remuneration Committee of the Company.
The
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 31
March 2024 the hurdle has been met, on an unrealised basis,
and as such a performance fee of £18,980,000 (2023: £16,819,000)
has been provided for by the Company, equivalent to 11.2 pence per share. This provision 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 and the actual amount payable
will depend on the amount and timing of investment realisations.
See page 25 and note 19.9 for further details.
5 Leases
Leasing
activities
The Group,
through its subsidiary AFML, has leased an office in the UK from
which it operates for a fixed fee. When measuring lease liabilities
for leases that were classified as operating leases, the Group
discounts lease payments at a rate of 6.4% (2023: 6.4%).
Right-of-Use
Asset
|
|
2024
Group
Office
Premises
£’000
|
2023
Group
Office
Premises
£’000
|
|
As at 1
April
|
588
|
750
|
|
Depreciation
|
(150)
|
(162)
|
|
At
31 March
|
438
|
588
|
Lease
Liability
|
|
2024
Group
Office
Premises
£’000
|
2023
Group
Office
Premises
£’000
|
|
As at 1
April
|
678
|
783
|
|
Rent free
period reduction
|
(21)
|
–
|
|
Interest
Expense
|
38
|
48
|
|
Lease
Payments
|
(221)
|
(153)
|
|
At
31 March
|
474
|
678
|
Maturity
Analysis
|
|
Group
|
|
At
31 March 2024
|
Up
to 3 months
£’000
|
3 –
12 months
£’000
|
Between
1 –
2 years
£’000
|
Between
2 –
5 years
£’000
|
|
Lease
payments
|
60
|
121
|
181
|
181
|
6 Taxation
Expense
|
|
2024
|
2023
|
|
For
the year ended 31 March
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
Current
tax:
|
|
|
|
|
|
|
|
UK
corporate tax on profits for the year
|
–
|
–
|
–
|
–
|
–
|
–
|
The
difference between the income tax expense shown above and the
amount calculated by applying the effective rate of UK corporation
tax of 25% (2023: 19%) to the (loss)/return before tax is as
follows:
|
|
2024
|
2023
|
|
For
the year ended 31 March
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
Revenue
£’000
|
Capital
£’000
|
Total
£’000
|
|
(Loss)/return
before taxation
|
(3,751)
|
17,553
|
13,802
|
(4,858)
|
9,751
|
4,893
|
|
(Loss)/return
before tax multiplied by the effective rate of UK corporation tax
of 25% (2023: 19%)
|
(938)
|
4,388
|
3,450
|
(923)
|
1,853
|
930
|
|
Effects
of:
|
|
|
|
|
|
|
|
Non-taxable
capital returns
|
–
|
(4,400)
|
(4,400)
|
–
|
(1,873)
|
(1,873)
|
|
Unutilised
management expenses
|
938
|
12
|
950
|
923
|
20
|
943
|
|
Total
tax expense
|
–
|
–
|
–
|
–
|
–
|
–
|
No
provision for deferred taxation has been made in the current year.
The Group has not provided for deferred tax on capital profits
arising on the revaluation of investments, as it is exempt from tax
on these items because of its status as an investment trust
company.
The Company
has not recognised a deferred tax asset on the excess management
expenses of £36,704,000 (2023: £32,904,000). It is not anticipated
that these excess expenses will be utilised in the foreseeable
future.
7 (Loss)/Return
per Share
The
(loss)/return per share figures are based on the following
figures:
|
|
2024
£’000
|
2023
£’000
|
|
Net revenue
loss
|
(3,751)
|
(4,858)
|
|
Net capital
return
|
17,553
|
9,751
|
|
Net
total return
|
13,802
|
4,893
|
|
Weighted
average number of ordinary shares in issue
|
170,877,294
|
178,651,736
|
|
|
|
|
|
|
Pence
|
Pence
|
|
Revenue
loss per share
|
(2.2)
|
(2.7)
|
|
Capital
return per share
|
10.3
|
5.4
|
|
Total
return per share
|
8.1
|
2.7
|
8 Investments
Held at Fair Value
Non-current
Investments Held at Fair Value
|
As
at 31 March
|
2024
Group
and
Company
£’000
|
2023
Group
and
Company
£’000
|
|
Unlisted at
fair value
|
265,083
|
254,295
|
Reconciliation
of movements on investments held at fair value are as
follows:
|
|
2024
Group
and
Company
£’000
|
2023
Group
and
Company
£’000
|
|
As at 1
April
|
254,295
|
268,807
|
|
Purchases
at cost
|
15,976
|
19,854
|
|
Realisation
proceeds
|
(22,790)
|
(44,224)
|
|
Gains on
investments
|
17,602
|
9,858
|
|
As
at 31 March
|
265,083
|
254,295
|
The Group
and Company received £22,790,000 (2023: £44,224,000) from
investments sold in the year. The book cost of these investments
when they were purchased was £10,750,000 (2023: £6,348,000). These
investments have been revalued over time and until they were sold
any unrealised gains/losses were included in the fair value of the
investments.
9 Subsidiary
undertakings
The Company
has an investment of £750,000 (2023: £500,000) in the issued
ordinary share capital of its wholly owned subsidiary undertaking,
Augmentum Fintech Management Limited (“AFML”), which is registered
in England and Wales, operates in the United Kingdom and is regulated by the
Financial Conduct Authority. AFML’s principal activity is the
provision of portfolio management services to the Company. AFML’s
registered office is 4 Chiswell Street, London EC1Y 4UP.
10
Other
Receivables
|
As
at 31 March
|
2024
Group
£’000
|
2024
Company
£’000
|
2023
Group
£’000
|
2023
Company
£’000
|
|
Other
receivables
|
245
|
196
|
555
|
118
|
11 Other
Payables
|
As
at 31 March
|
2024
Group
£’000
|
2024
Company
£’000
|
2023
Group
£’000
|
2023
Company
£’000
|
|
Other
payables
|
699
|
369
|
948
|
810
|
|
|
699
|
369
|
948
|
810
|
12 Provisions
|
As
at 31 March
|
2024
Company
£’000
|
2023
Company
£’000
|
|
Performance
fee provision*
|
18,980
|
16,819
|
* See
page 25 and notes 4 and 19.9 for further details.
13
Financial
Instruments
(i) Management
of Risk
As an
investment trust, the Group’s investment objective is to seek
capital growth from a portfolio of securities. The holding of these
financial instruments to meet this objective results in certain
risks.
The Group’s
financial instruments comprise securities in unlisted companies,
partnership interests, trade receivables, trade payables, and cash
and cash equivalents.
The main
risks arising from the Group’s financial instruments are
fluctuations in market price, and credit and liquidity risk. The
policies for managing each of these risks are summarised below.
These policies have remained constant throughout the year under
review. The financial risks of the Company are aligned to the
Group’s financial risks.
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
the assumptions used in the valuation methodology as set out in the
accounting policies.
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 or liquidity funds (with
credit ratings above A3, based on S&P’s ratings or the
equivalent from another ratings agency) are used for cash deposits
and the level of cash is reviewed on a regular basis. The
components of cash and cash equivalents are shown in the table
below.
(ii) Financial
Assets and Liabilities
|
|
Group
Fair
value
2024
£’000
|
Company
Fair
value
2024
£’000
|
Group
Fair
value
2023
£’000
|
Company
Fair
value
2023
£’000
|
|
Financial
Assets
|
|
|
|
|
|
Unlisted
equity shares
|
259,015
|
259,015
|
249,529
|
249,529
|
|
Unlisted
convertible loan notes
|
6,068
|
6,068
|
4,766
|
4,766
|
|
Cash at
bank
|
2,460
|
1,052
|
14,715
|
13,470
|
|
Cash
Equivalents – Liquidity Funds
|
36,045
|
35,000
|
25,300
|
25,000
|
|
Other
assets
|
683
|
196
|
1,143
|
118
|
|
Financial
Liabilities
|
|
|
|
|
|
Other
payables and lease liabilities
|
(1,173)
|
(369)
|
(1,626)
|
(810)
|
Cash and
other receivables and payables are measured at amortised cost and
the rest of the financial assets in the table above are held at
approximate to fair value. The carrying values of the financial
assets and liabilities measured at amortised cost are equal to the
fair value.
The
unlisted financial assets held at fair value are valued in
accordance with the IPEV Guidelines as detailed within note
19.4.
(iii) 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).
All
investments were classified as Level 3 investments as at, and
throughout the year to, 31 March
2024. Note 8 on page 61 presents the movements on
investments measured at fair value.
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.
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, AuM, and P/E multiples (based
on the most recent revenue, EBITDA, AuM, or earnings achieved and
equivalent corresponding revenue, EBITDA, AuM, 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.
The main
input into the PWERM (‘Probability Weighed Expected Return
Methodology’) is the probability of conversion. This method is used
for the convertible loan notes held by the Company.
The
fair
valuation
of
private
company investments is influenced by the estimates, assumptions and
judgements made in the fair valuation process (see Note 19.12 on
page 68). A sensitivity analysis is provided below which recognises
that the valuation methodologies employed involve subjectivity in
their significant unobservable inputs and illustrates the
sensitivity of the valuations to these
inputs.
The
inputs
have
been
flexed
with the
exception
of
the
Sales
Price
valuation
approach as
it does not involve significant subjectivity. The table also
provides the range of values for the key unobservable
inputs.
|
As
at
31
March
2024
|
|
Valuation
approach
|
Fair
value
of
investments
£’000
|
Key
unobservable
inputs
|
Other
Unobservable
inputs
|
Applied
Multiple
Range
|
Weighted
average
multiple
applied#
|
Sensitivity
+/-
%
|
Change in
Valuation
+/-
£’000
|
|
Market
approach
using
comparable traded
multiples
|
217,054
|
Revenue
Multiple‡
|
a, b, c,
g
|
2.3x –
28.0x
|
6.0x
|
10%
|
17,564 /
(17,554)
|
|
Earnings
Multiple
|
a, b, c,
g
|
6.3x-18.6x
|
11.0x
|
10%
|
3,146 /
(2,423)
|
|
AUM Multiple
|
a, b, c,
g
|
0.1x
|
0.1x
|
10%
|
264 /
-
|
|
Illiquidity discount
|
d,
g
|
0% -
50%
|
32.3%
|
30%
|
12,558 /
(10,920)
|
|
Transaction
implied premiums and discounts
|
e,
g
|
0% -
630%
|
109.3%
|
30%
|
17,063 /
(18,023)
|
|
Net Asset
Value**
|
8,264
|
Discount to
NAV
|
a
|
n/a
|
n/a
|
10%
|
(826)
|
|
PWERM*
|
6,068
|
Probability
of conversion
|
a
|
n/a
|
n/a
|
25%
|
248/(248)
|
|
Expected
transaction price
|
7,135
|
Execution
risk
discount
|
a,
f
|
n/a
|
n/a
|
10%
|
713 /
(713)
|
|
CPORT^
|
16,414
|
Transaction
Price
|
a, e,
g
|
n/a
|
n/a
|
10%
|
1,641 /
(1,641)
|
|
Sales
Price
|
10,148
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
# Weighted
average is calculated by reference to the fair value of holdings as
at the respective year-end. This therefore gives
a
clearer
indication
of
the
typical
multiple
or
adjustment
being
applied
across
the
portfolio.
**LP
(‘Limited
Partnership’)
investments
are
held
at
net
asset
values
provided
by
the
relevant
LP
fund
administrators.
These are adjusted by benchmark movements as
appropriate.
^ Whilst
a
recent
or expected transaction
price
may
be
the
most
appropriate
basis
for
a
valuation,
it
will
be
corroborated
by
other
techniques which
factor
in
the
unobservable inputs
noted
below.
|
As
at
31
March
2023
|
|
Valuation
approach
|
Fair
value
of
investments
£’000
|
Key
unobservable
inputs
|
Other
Unobservable
inputs
|
Applied
Multiple
Range
|
Weighted
average
multiple
applied#
|
Sensitivity
+/-
%
|
Change in
Valuation
+/-
£’000
|
|
Market
approach
using
comparable traded
multiples
|
197,876
|
Revenue
Multiple‡
|
a, b, c,
g
|
2.7x –
11.1x
|
4.8x
|
10%
|
17,563 /
(17,563)
|
|
Earnings
Multiple
|
a, b, c,
g
|
8.3x-11.8x
|
10.9x
|
10%
|
3,146 /
(2,423)
|
|
AUM Multiple
|
a, b, c,
g
|
0.1x
|
0.1x
|
10%
|
264 /
-
|
|
Illiquidity discount
|
d,
g
|
0% -
44%
|
19.3%
|
30%
|
4,117 /
(4,044)
|
|
Transaction
implied premiums and discounts
|
e,
g
|
0% -
310%
|
105.0%
|
30%
|
17,824 /
(17,300))
|
|
Net Asset
Value**
|
5,805
|
Discount to
NAV
|
a
|
n/a
|
n/a
|
10%
|
(581)
|
|
PWERM*
|
4,766
|
Probability
of conversion
|
a
|
n/a
|
n/a
|
25%
|
248/(248)
|
|
Expected
transaction price
|
14,216
|
Execution
risk
discount
|
a,
f
|
n/a
|
n/a
|
10%
|
142 /
(142)
|
|
CPORT^
|
8,842
|
Transaction
Price
|
a, e,
g
|
n/a
|
n/a
|
10%
|
884 /
(884)
|
|
Sales
Price
|
22,790
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
n/a
|
The
variable
inputs
applicable
to
each
broad
category
of
valuation
basis
will
vary
dependent
on
the
particular
circumstances
of
each
private
company
valuation.
An
explanation
of
each
of
the
key
variable
inputs
is
provided
below. The
assumptions and decisions process in relation to the inputs is
described in note 19.12 on page 68.
(a) Application
of
valuation
basis
Each
investment
is
assessed
independently,
and
the
valuation
basis
applied
will
vary
depending
on
the
circumstances
of
each
investment.
When
an
investment
is
pre-revenue,
the
focus
of
the
valuation
will
be
on
assessing
the
recent transaction
and
the
achievement
of
key
milestones
since
investment.
Adjustments
may
also
be
made
depending
on
the
performance of
comparable
benchmarks
and
companies.
For
those
investments
where
a
trading
multiples
approach
can be
taken, the methodology will factor in revenue, earnings or assets
under management as appropriate for the investment.
(b) Selection
of
comparable
companies
The
selection
of
comparable
companies
is
assessed
individually
for
each
investment
and the
relevance of the comparable companies is continually evaluated at
each valuation date. Key criteria used in selecting
appropriate
comparable companies are the industry sector in which they operate,
the geography of the company’s operations,
the
respective
revenue
and
earnings
growth
rates,
operating
margins,
company size and development stage.
Typically,
between
4
and
10
comparable companies will be selected for each investment, but this
can vary depending on how many relevant comparable companies
are
identified.
The
resultant
revenue
or
earnings
multiples
or
share
price
movements
derived
will
vary
depending
on the companies selected and the industries they operate in. Given
the nature of the investments the Company makes there are not
always directly comparable listed companies, in such cases
comparables will be selected whose businesses bear similarity to
the relevant investment, in such cases the need for an additional
discount / premium to the comparables will be assessed at each
valuation date.
(c) Estimated
sustainable
revenue or
earnings
The
selection of sustainable revenue or earnings will depend on whether
the company is sustainably profitable or not, and where
it is not then revenues will be used in the valuation. The
valuation approach will typically assess companies based
on
the
last
twelve
months
of
revenue
or
earnings,
as
they
are
the
most
recent
available
and
therefore
viewed
as
the most
reliable. Where a business has volatile earnings on a year-on-year
basis, revenue or earnings may be assessed over a longer period.
Where a company has reliably forecasted earnings previously or
there is a change in circumstance at the business which will impact
earnings going forward, then forward estimated revenue or earnings
may be used instead.
(d) Application
of
illiquidity
discount
An
illiquidity discount may be applied either through the calibration
of a valuation against the most recent transaction,
or
by
application
of
a
specific
discount.
The
discount
applied
where
a
calibration
(see
(e)
below)
is
not
appropriate is dependent on factors specific to each investment,
such as quality of earnings or revenues and potential exit
scenarios.
(e) Transaction
implied
premium
and
discount
Where
there
is
an
implied
company
valuation
available
as
a
result
of
an
external
arm's
length
transaction,
the
ongoing
valuation will
be
calibrated
to
this
by
deriving
a
company
valuation
with
reference
to
the
average
multiple
from
a
set
of
comparable companies
and
comparing
this
to
a
transaction
implied
valuation.
This can result in
an
implied
premium
or discount
compared
to
comparable
companies
at
the
point
of
transaction.
This
discount
or
premium
will
be
considered
in future valuations and may be reduced due to factors such as the
time since the transaction and company performance.
Where
a
calibrated
approach
is
not
appropriate,
a
discount
for
illiquidity
may
be
applied
as
noted
in
(d)
above.
(f) Execution
risk
An
execution risk discount is applied to all investments where an
arm’s-length transaction is due to take place but hasn’t
closed
prior
to
the
reporting
period
end.
The
discount
applied
is
dependent
on the progress of the negotiations and outstanding matters
that
may impact
on the
expected
price.
When
valuing in
line
with
an
expected
transaction the arm’s-length nature of the deal will be assessed,
and term sheets will have been received.
(g) Liquidity
preference
The
company’s investments are typically venture investments with
downside protections such as liquidation preference and
anti-dilution provisions. Unlike ordinary share structures
typically seen in the public or private markets, these structures
protect the value of the Company’s position in the event of a
reduction in the enterprise value of an investee company from the
price paid. Where a valuation indicates the enterprise value of an
investment has fallen the enterprise value will be fed into the
investee companies’ ‘waterfall’ (which ranks shares by
seniority/preference in the event of a liquidation event) to
calculate the value of the Company’s position.
14 Substantial
holdings in Investments
The table
below shows substantial holdings in investments where the Company
owns more than 3% of the fully diluted capital of the investee
company and the investment value is more than 5% of the Company’s
non-current investments.
|
|
2024
|
2023
|
|
|
%
ownership
(fully
diluted)
|
%
of
portfolio
|
%
ownership
(fully
diluted)
|
%
of
portfolio
f
|
|
Zopa
Bank*
|
3.5
|
14.8
|
3.4
|
11.8
|
|
Augmentum
I LP**
|
100
|
20.7
|
100
|
17.5
|
|
Tide
|
5.6
|
19.3
|
5.1
|
14.0
|
|
Grover
|
6.3
|
13.5
|
6.3
|
17.0
|
|
Cushon
|
–
|
–
|
13.9
|
9.0
|
|
Volt
|
8.3
|
9.6
|
8.3
|
5.6
|
*
indirect
ownership via Augmentum I LP.
**
Augmentum I
LP’s registered office is IFC 5, St Helier, Jersey JE1 1ST and it
is registered in Jersey.
15 Called
up Share Capital
|
|
2024
Ordinary
Shares
|
2023
Ordinary
Shares
|
|
|
No.
|
£’000
|
No.
|
£’000
|
|
Opening
issued and fully paid ordinary shares of 1p each
|
174,518,852
|
1,810
|
180,325,786
|
1,810
|
|
Ordinary
shares purchased into treasury
|
(4,687,567)
|
–
|
(5,806,934)
|
–
|
|
Closing
issued and fully paid ordinary shares of 1p
each
|
169,831,285
|
1,810
|
174,518,852
|
1,810
|
No shares
were issued during the years ended 31 March 2023 and 31 March
2024.
4,687,567
shares were bought back into treasury during the year at an average
price, including ancillary costs, of 98.3p per share. In the year
ended 31 March 2023 5,806,934 shares were bought back into treasury
at an average price of 102.9p per share.
At 31 March
2024 there were 11,182,412 shares held in treasury (2023:
6,494,845).
16
Net
Asset Value per Share
The net
asset value per share is based on the Group net assets attributable
to the equity shareholders of £303,317,000 (2023: £294,124,000) and
169,831,285 (2023: 174,518,852) shares in issue at the year end
excluding shares held in treasury.
The net
asset value per share after performance fee* is based on the Group
net assets attributable to the equity shareholders of £303,317,000
(2023: £294,124,000), less the performance fee provision made by
the Company of £18,980,000 (2023: £16,819,000), and 169,831,285
(2023: 174,518,852) shares in issue at the year end excluding
shares held in treasury.
*
Alternative
Performance Measure
17
Related
Party Transactions
Balances
and transactions between the Company and its subsidiaries are
eliminated on consolidation. Details of transactions between the
Group and Company and other related parties are disclosed
below.
The
following are considered to be related parties:
• Frostrow
Capital LLP (under the Listing Rules only)
• The
Directors of the Company and the Company’s subsidiary, Augmentum
Fintech Management Limited
• Augmentum
Fintech Management Limited
Details of
the relationship between the Company and Frostrow Capital LLP, the
Company’s AIFM, are disclosed on page 24. Details of fees paid to
Frostrow by the Company and Group can be found in note 2 on page
58.
Details of
the remuneration of all Directors can be found on page 45. Details
of the Directors’ interests in the capital of the Company can be
found on page 46.
Augmentum
Fintech Management Limited is appointed as the Company’s delegated
Portfolio Manager. The Portfolio Manager earns a portfolio
management fee of 1.5% of NAV up to £250 million and 1.0% of NAV
for any excess over £250 million and is entitled to a performance
fee of 15% of net realised cash profits once the Company has
received an annual compounded 10% realised return on its
investments. Further details of this arrangement are set out on
page 25 in the Strategic Report. During the year the Portfolio
Manager received a portfolio management fee of £3,972,000 (2023:
£4,026,000), which has been eliminated on consolidation and
therefore does not appear in these accounts. A performance fee
provision of £18,980,000 (2023: £16,819,000) has been accrued in
the Company's accounts, which is eliminated on consolidation in the
Group accounts. No performance fee is payable or has been paid
during the year. There were no outstanding balances due to the
Portfolio Manager at the year end (2023: nil).
18
Capital
Risk Management
|
|
Group
2024
£’000
|
Group
2023
£’000
|
|
Equity
|
|
|
|
Equity
share capital
|
1,810
|
1,810
|
|
Retained
earnings and other reserves
|
301,507
|
292,314
|
|
Total
capital and reserves
|
303,317
|
294,124
|
The Group’s
objective in the management of capital risk is to safeguard its
liquidity in order to provide returns for shareholders and to
maintain an optimal capital structure. In doing so the Group may
adjust the amount of dividends paid to shareholders or issue new
shares or debt.
The Group
manages the levels of cash deposits held whilst maintaining
sufficient liquidity for investments and operating
expenses.
There are
no externally imposed restrictions on the Company’s
capital.
19
Basis
of Accounting and Significant Accounting
Policies
19.1 Basis
of preparation
The Group
and Company Financial Statements for the year ended 31 March 2024
have been prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act
2006 as applicable to companies reporting under those
standards.
The
Financial Statements have been prepared on a going concern basis
and under the historical cost basis of accounting, modified to
include the revaluation of certain assets at fair value, as
disclosed in note 19.4. The Board has considered a detailed
assessment of the Group and Company’s ability to meet their
liabilities as they fall due, including stress tests which modelled
the effects of a fall in portfolio valuations and liquidity
constraints on the Group and Company’s financial position and cash
flows. The results of the tests showed that the Group and Company
would have sufficient cash to meet their liabilities as they fall
due. Based on the information available to the Directors at the
time of this report, including the results of the stress tests, and
the Group and Company’s cash balances, the Directors are satisfied
that the Group and Company have adequate financial resources to
continue in operation for at least the next 12 months from the date
of signing of these financial statements and that, accordingly, it
is appropriate to adopt the going concern basis in preparing these
financial statements.
In order to
reflect the activities of an investment trust company,
supplementary information which analyses the Consolidated Income
Statement between items of a revenue and capital nature has been
presented alongside the Consolidated Income Statement. In analysing
total income between capital and revenue returns, the Directors
have followed the guidance contained in the Statement of
Recommended Practice for investment companies issued by the
Association of Investment Companies issued in July 2022 (the
“SORP”).
The
recommendations of the SORP which have been followed
include:
• Realised
and unrealised profits or losses arising on the revaluation or
disposal of investments classified as held at fair value through
profit orloss should be shown in the capital column of the
Consolidated Income Statement. Realised gains are taken to the
realised reserves in equity and unrealised gains are transferred to
the unrealised reserves in equity.
• Other
returns on any investment (whether in respect of dividends,
interest or otherwise) should be shown in the revenue column of the
Consolidated Income Statement. The total of the revenue column of
the Consolidated Income Statement is taken to the revenue reserve
in equity.
• The
Board should determine whether the indirect costs of generating
capital returns should be allocated to capital as well as the
direct costs incurred in generating capital profits. In this regard
the Board has decided to follow a non-allocation approach to
indirect costs, which will therefore be charged in full to the
revenue column of the Consolidated Income Statement.
19.2 Basis
of Consolidation
The
Consolidated Financial Statements include the Company and certain
subsidiary undertakings.
IFRS 10 and
IFRS 12 define an investment entity and include an exemption from
the consolidation requirements for investment entities.
The Company
has been deemed to meet the definition of an investment entity per
IFRS 10 as the following conditions exist:
• The
Company has multiple unrelated investors which are not related
parties, and holds multiple investments
• Ownership
interests in the Company are exposed to variable returns from
changes in the fair value of the Company’s net assets
• The
Company has obtained funds for the purpose of providing investors
with investment management services
• The
Company’s business purpose is investing solely for returns from
capital appreciation and investment income
• The
performance of investments is measured and evaluated on a fair
value basis.
The Company
will not consolidate the portfolio companies or other investment
entities it controls. The principal subsidiary Augmentum Fintech
Management Limited as set out in note 9 is wholly owned. It
provides investment related services through the provision of
investment management. As the primary purpose of this subsidiary is
to provide investment related services that relate to the Company’s
investment activities it is not held for investment purposes. This
subsidiary has been consolidated.
The Company
also owns 100% of the interests in Augmentum I LP (the ‘LP’). As
this LP is itself an investment entity and is held as part of the
Company’s investment portfolio it has not been
consolidated.
19.3 Application
of New Standards
(i)
New
standards, interpretations and amendments effective from 1 April
2023
There were
no new standards or interpretations effective for the first time
for periods beginning on or after 1 April 2023 that had a
significant effect on the Group’s financial statements.
(ii)
New
standards, interpretations and amendments not yet
effective
There are a
number of standards and interpretations which have been issued by
the International Accounting Standards Board (‘IASB’) that are
effective in future accounting periods. The Group does not expect
any of the standards issued by the IASB, but not yet effective, to
have a material impact on the Group or Company.
19.4 Investments
All
investments are defined by IFRS as fair value through profit or
loss (described in the Financial Statements as Investments held at
fair value) and are subsequently measured at reporting dates at
fair value. The fair value of direct unquoted investments is
calculated in accordance with the Principles of Valuation of
Investments below. Purchases and sales of unlisted investments are
recognised when the contract for acquisition or sale becomes
unconditional.
Increases
or decreases in valuation are recognised as part of gains on
investments at fair value in the Consolidated Income
Statement.
Principles
of Valuation of Investments
(i)
General
The Group
estimates the fair value of each investment at the reporting date
in accordance with IFRS 13 and the International Private Equity and
Venture Capital Valuation (“IPEV”) Guidelines.
Fair value
is the price for which an asset could be exchanged between
knowledgeable, willing parties in an arm’s length transaction. In
estimating fair value, the AIFM and Board apply valuation
techniques which are appropriate in light of the nature, facts and
circumstances of the investment and use reasonable current market
data and inputs combined with judgement and assumptions. Valuation
techniques are applied consistently from one reporting date to
another except where a change in technique results in a better
estimate of fair value.
In general,
the enterprise value of the investee company in question will be
determined using one of a range of valuation techniques. The
enterprise value is adjusted for factors such as surplus assets,
excess liabilities or other contingencies or relevant factors; the
resulting amount is apportioned between the investee company’s
relevant financial instruments according to their ranking and the
effect of any instrument that may dilute economic
entitlements.
(ii)
Unlisted
Equity Investments
In respect
of each unlisted investment one or more of the following valuation
techniques is used:
• A
market approach, based on the price of the recent investment,
market multiples or industry valuation benchmarks.
• A
probability-weighted expected returns methodology. Under the PWERM
fair value is based on consideration of values for the investment
under different scenarios. This will primarily be used where there
is a convertible element to the investment.
• A
net assets based approach based on the value of the underlying
assets of the investment.
In
assessing whether a methodology is appropriate techniques that use
observable market data are preferred.
Price
of Recent Investment/Transaction
Where the
investment being valued was itself made recently, or there has been
a third party transaction in the investment, the price of the
transaction may provide a good indication of fair value. Using the
Price of Recent Investment technique is not a default and at each
reporting date the fair value of investments is estimated to assess
whether changes or events subsequent to the relevant transaction
would imply a material change in the investment’s fair
value.
Multiple
Under the
multiple methodology a revenue, EBITDA, AuM or earnings multiple
technique is used. This involves the application of an appropriate
and reasonable multiple to the maintainable earnings or revenue of
an investee company.
Further
details on the multiple based methodology are provided in note 13
(iii).
PWERM
(‘Probability-Weighted Expected Returns
Methodology’)
Under the
PWERM potential scenarios are identified. Under each scenario the
value of the investment is estimated and a probability for each
scenario is selected. The fair value is then calculated as the sum
of the value under each scenario multiplied by its
probability.
Net
Assets
For the net
asset approach the fair value estimate is based on the attributable
proportion of the reported net asset value of the investment
derived from the fair value of underlying assets / investments.
Valuation reports provided by the manager or general partner of the
investments are used to calculate fair value where there is
evidence that the valuation is derived using fair value principles
that are consistent with the Company’s accounting policies and
valuation methods. Such valuation reports may be adjusted to take
account of changes or events to the reporting date, or other facts
and circumstances which might impact the underlying
value.
19.5 Cash
and Cash Equivalents
Cash
comprises cash at bank and short-term deposits with an original
maturity of less than 3 months and subject to minimal risk of
changes in value.
19.6 Presentation
and Functional Currency
The Group’s
and Company’s presentation and functional currency is Pounds
Sterling (“Sterling”), since that is the currency of the primary
economic environment in which the Group operates.
19.7 Other
income
Interest
income received from cash equivalents is accounted for on an
accruals basis.
19.8 Expenses
Expenses
are accounted for on an accruals basis, and are charged through the
revenue column of the Consolidated Income Statement except for
transaction costs and the performance fee as noted
below.
Transaction
costs are legal and professional fees incurred when undertaking due
diligence on investment transactions. Transaction costs, when
incurred, are recognised in the Income Statement. If a transaction
successfully completes, as a direct cost of an investment, the
related transaction cost is charged to the capital column of the
Income Statement. If the transaction does not complete the related
cost is charged to the revenue column of the Income
Statement.
19.9 Performance
Fee
As set out
in prior annual reports the performance fee arrangements were set
up to provide a long-term employee benefit plan to incentivise
employees of AFML and align them with shareholders through
participation in the realised investment profits of the Group. AFML
is entitled to a performance fee, and any performance fee paid by
the Company to AFML is allocated to employees of AFML on a
discretionary basis by the Management Engagement & Remuneration
Committee of the Company. Non-executive Directors of the Company
are not eligible to participate in any allocation of the
performance fee.
The Company
provides for the performance fee in full. A performance fee is
provided for if its performance conditions would be achieved if the
remaining assets in that basket were realised at fair value, at the
Statement of Financial Position date. The performance fee is equal
to the share of profits in excess of the performance conditions in
the basket. On consolidation the performance fee is eliminated
since it is payable to the Company’s subsidiary, AFML.
Performance
fees are charged to the capital column of the Income Statement and
taken to the Capital Reserve.
19.10 Share
Premium and Special Reserve
The share
premium account arose following the Company’s admission to listing
in 2018 and represented the difference between the proceeds raised
and the par value of the shares issued. Costs of the share issuance
were offset against the proceeds of the relevant share issue and
also taken to the share premium account.
Subsequent
to admission and following the approval of the Court, the initial
share premium account was cancelled and the balance of the account
was transferred to the Special Reserve. The purpose of this was to
enable the Company to increase the distributable reserves available
to facilitate the payment of future dividends or with which to make
share repurchases.
19.11 Revenue
and Capital Reserves
Net capital
return is added to the Capital Reserve in the Consolidated
Statement of Financial Position, while the net revenue return is
added to the Revenue Reserve. When positive, the revenue reserve is
distributable by way of dividend, as is any realised portion of the
capital reserve. The realised portion of the capital reserve is
£52,491,000 (2023: £40,519,000) representing realised capital
profits less costs charged to capital.
19.12 Critical
Accounting Judgements and Key Sources of Estimation
Uncertainty
Critical
accounting judgements and key sources of estimation uncertainty
used in preparing the financial information are continually
evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable. The resulting judgements and estimates will, by
definition, seldom equal the related actual results.
Key
sources of estimation uncertainty
The key
assumptions concerning the future, and other key sources of
estimation uncertainty in the reporting year, that may have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below.
Fair
value measurements and valuation processes
Unquoted
assets are measured at fair value in accordance with IFRS 13 and
the IPEV Valuation Guidelines. Decisions are required in order to
determine the appropriate valuation methodology and subsequently in
determining the inputs into the valuation model used. These
decisions include selecting appropriate quoted company comparables,
appropriate multiples to apply, adjustments to comparable multiples
and estimating future cash flows of investee companies. In
estimating the fair value of an asset, market-observable data is
used, to the extent it is available.
The
Valuations Committee, which is chaired by a Director, determines
the appropriate valuation techniques and inputs for the model. The
Audit Committee considers the work of the Valuations Committee and
the results of their discussion with the AIFM, Portfolio Manager
and the external auditor and works closely with the AIFM and
Portfolio Manager to review the appropriate valuation techniques
and inputs to the model. The Chair of the Audit Committee reports
its findings to the Board of Directors of the Group every six
months to explain the cause of fluctuations in the fair value of
the investments.
Information
about the valuation techniques and inputs used in determining the
fair value of various assets and liabilities are disclosed in notes
19.4 and 13(iii).
As set out
in note 19.9 a performance fee is calculated which is based on the
valuation of the investments and as such is considered a
significant accounting estimate.
20
Post
Balance Sheet Events
No post
balance sheet events have occurred since 31 March 2024.
21
Financial Commitment
The Company
made commitments to invest up to $3,000,000 into the Snowcrash
Offshore Feeder LP. Of this commitment $nil (2023: $750,000)
remains outstanding.
.
2024
Accounts
The figures
and financial information for 2024 are extracted from the annual
report and financial statements for the year ended 31 March 2024
and do not constitute the statutory accounts for the year. The
annual report and financial statements include the Report of the
Independent Auditor which is unqualified and does not contain a
statement under either section 498(2) or section 498(3) of the
Companies Act 2006. The annual report and financial statements have
not yet been delivered to the Registrar of Companies.
2023
Accounts
The figures
and financial information for 2023 are extracted from the published
annual report and financial statements for the year ended 31 March
2023 and do not constitute the statutory accounts for that year.
The annual report and financial statements have been delivered to
the Registrar of Companies and included the Report of the
Independent Auditor which was unqualified and did not contain a
statement under either section 498(2) or section 498(3) of the
Companies Act 2006.
Annual
report and financial statements
Copies of
the annual report and financial statements will be posted to
shareholders shortly and will be available on the Company’s website
(www.augmentum.vc)
or in hard copy format from the Company Secretary.
The
Company's annual report
for the year ended 31 March 2024 will shortly be available for
inspection on the National Storage Mechanism (NSM) via
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The Annual
General Meeting will be held on Thursday, 19 September 2024 at
11.00 a.m. The Notice of the Annual General Meeting will be posted
to shareholders with the annual report and will be available on the
Company’s website and the NSM as per the above with respect to the
annual report.
Neither the
contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other
website) is incorporated into, or forms part of, this
announcement.