TIDMINOV
RNS Number : 4684V
Schroders Capital Global Innovation
04 December 2023
Schroders Capital Global Innovation Trust plc
Q3 2023 Quarterly Net Asset Value - 30 September 2023
Schroders Capital Global Innovation Trust plc (the "Company")
today announces its net asset value ("NAV") as of 30 September
2023.
Summary
-- NAV of 23.46p per share as of 30 September 2023, a decrease
of 5.1% relative to the NAV per share as of 30 June 2023
(24.73p).
-- Performance over the quarter was impacted by decreases in the
valuations of the holdings in Atom Bank, Genomics and Federated
Wireless.
-- Innovative email cybersecurity company, Tessian, announced
that it had entered into a definitive agreement to be acquired by
Proofpoint.
-- During the quarter, the Company made three new investments:-
data privacy and management platform Securiti, B2B platform for
made-to-order goods Bizongo and an investment into an AI software
company. After the quarter end the Company also made an investment
into Memo Therapeutics, a clinical-stage biopharmaceutical
company.
-- As of 30 September 2023, the Company had GBP19.9 million in
cash and GBP47.9 million in public equity investments(1) to meet
the funding requirements of the existing portfolio, execute the
buyback program and target new investments in innovative venture,
growth and life science businesses.
-- In accordance with its capital discipline policy, the Company
commenced a share repurchase programme in September 2023. In line
with the Company's stated intention to repurchase at least 5 per
cent. of its issued share capital during 2023, the Company has
repurchased 35 million shares for cancellation as at 30 November
2023, returning over GBP5m to investors, and remains on track to
meet its 2023 target.
1. Excluding BenevolentAI which is fair value priced by the
AIFM.
Introduction
Economic backdrop
Global equity markets fell in the third quarter as concerns
about the impact of higher interest rates and weaker Chinese
economic growth affected investor sentiment. Central banks around
the world continued to raise interest rates to combat inflation,
which has been sticky in both the service sectors and in wages
given the tightness in most western labour markets. Bond and equity
markets have been looking for signs that inflation is under
sufficient control for central banks to signal the monetary
tightening is done. Government bond yields increased across most
major markets in the quarter.
Global venture capital deal activity presented a mixed picture
in Q3 2023, however there were some reasons for optimism. During
the quarter, funding increasing 11% by value (from $58.2 billion in
Q2 2022 to $64.6 billion in Q3 2023) and deal volumes decreased 11%
(from 6,888 deals in Q2 2023 to 6,111 deals in Q3 2023), the
seventh straight quarterly decline, indicating that any improvement
in the market was not broad based. In particular, the number of
mega-rounds (funding rounds of more than $100 million), which
declined sharply in 2022, continued to see quarter-on-quarter
volatility, rebounding 47% by value (from $20.2 billion in Q2 2022
to $29.6 billion in Q3 2023) and 13% by volume (from 103 deals in
Q2 2023 to 116 deals in Q3 2023). However, the growth in larger
rounds did not seemingly filter through into valuations with only
12 unicorns created in Q3 2023, the lowest quarterly level since
2016. The environment for exits also presented a mixed picture. The
number of M&A transactions, the predominant exit route for
venture backed businesses, declined 8% quarter-on-quarter (from
2,061 in Q2 2023 to 1,887 in Q3 2023), while the number of initial
public offerings ("IPOs") increased 24% (from 102 in Q2 2023 to 126
in Q3 2023). Overall, the current market continues to be
characterised by weak exit activity counterbalanced by a favourable
environment for new investments.
Source for data: CB Insights Q3 2023 State of Venture
Report.
Financial Performance
Attribution analysis Public Private Net (debt)/cash Other NAV
(GBPm) equity equity
Fair value as of 30.06.23 55.7 137.1 31.0 (0.6) 223.2
-------- -------- ---------------- ------ -------
+ Investments - 12.5 (12.5) - -
-------- -------- ---------------- ------ -------
- Realisations at value (2.7) - 2.7 - -
-------- -------- ---------------- ------ -------
+/- Fair value gains/(losses) (2.4) (9.6) - - (12.0)
-------- -------- ---------------- ------ -------
+/- Reclassified holdings - - - - -
-------- -------- ---------------- ------ -------
+/- Costs and other
movements - - (1.3) (0.1) (1.4)
-------- -------- ---------------- ------ -------
Fair value as of 30.09.23 50.6 140.0 19.9 (0.7) 209.8
-------- -------- ---------------- ------ -------
Following the quarterly revaluation, the NAV as of 30 September
2023 was GBP209.8 million, reflecting a decrease of 6.0%(2)
compared with the NAV as of 30 June 2023 (GBP223.2 million).
The 6.0% decrease in NAV over the quarter comprised:
-- Public equity holdings: -1.1%
-- Private equity holdings: -4.3%
-- Costs and other movements: -0.6%
(2) The change in NAV differs to the change in NAV per share due
to the impact of share buybacks.
Portfolio performance
The Company's private equity holdings saw a decrease in value of
7.0% contributing -4.3% to the change in the NAV over the period.
The largest detractor to performance was Atom Bank, the UK
app-based bank. The company has raised GBP100 million in new equity
capital from existing shareholders BBVA, Toscafund and Infinity
Investment Partners, which will be used to accelerate lending and
balance sheet growth as the bank continues to scale. Following this
news, the Company's AIFM revalued the holding in Atom Bank to
GBP23.1 million, which was reflected in the daily unaudited NAV as
of 3 November 2023. The valuation implemented represents a discount
to the valuation of the fundraise. Whilst the valuation impact of
this fundraise is disappointing in the short term, this significant
investment is a good signal of confidence in Atom Bank. The company
now has the capital to scale up and demonstrate the operating
efficiency of its platform. Although much work remains, Atom Bank
is one step closer to a planned future liquidity event.
Additionally, the valuations of holdings in pioneering
healthcare company Genomics and wireless communications company
Federated Wireless were also decreased, reflecting the AIFM's
latest quarterly assessment of the Company's private equity
holdings. The AIFM's fair value assessment considers factors
specific to each holding, including changes in financial position
and forecasts, planned fundraise terms, valuations of comparable
businesses and exit expectations.
Innovative email cybersecurity company, Tessian, announced that
it had entered into a definitive agreement to be acquired by
Proofpoint, a people-centric cybersecurity and compliance company.
The agreement is expected to close in late 2023 to early 2024,
subject to customary closing conditions and required regulatory
approvals. We hope to be able to share more details with the
Company's investors when the transaction closes.
The Company's public equity holdings saw a decrease in value of
4.3% contributing -1.1% to the quarterly decrease in NAV. The share
price of Oxford Nanopore Technologies ("ONT"), the Company's
largest holding, declined 3.6% over the quarter. However, in recent
news, bioMérieux, a leading company in the field of vitro
diagnostics, made a strategic GBP70 million investment in ONT,
while expecting to make further market share purchases, up to a
further 3.5% of Oxford Nanopore's shares. Through this partnership
and this investment, the two companies intend to leverage ONT's
ground-breaking nanopore-based IVD solution and bioMérieux's IVD
expertise in R&D, Regulatory, Medical and Market Access .
Additionally, the Mayo Clinic and ONT announced a multi-year joint
development collaboration to develop new clinical tests for
diseases and improve patient care.
Foreign Exchange
During the quarter, the fair value of investments denominated in
the Euro (EUR), United States Dollar (USD), Swiss Franc (CHF) was
positively impacted by the depreciation of the British pound
sterling (GBP) relative to these currencies.
Cash, debt, and net current assets
As of 30 September 2023, the Company held GBP19.9 million in
cash.
Investment Activity
Realisations
During the quarter, the Company made realisations totalling
GBP2.7 million. This included a full exit of public equity holding
IDEX Biometrics and a reduction in the holding of Oxford
Nanopore.
New Investments
During the quarter, the Company completed new investments
totalling GBP12.5 million.
Since 30 June 2023, the Company has taken advantage of the
current environment of slower fundraising activity and lower
valuation expectations to deploy capital in each of the portfolio's
three sub-strategies (venture, growth and life sciences) across
different geographies.
The Company made an investment of $8.0 million (GBP6.3 million)
in India-based vendor digitisation company, Bizongo. This
investment formed part of the $50.0 million Series E funding round
that was led by Schroders Capital with participation from other
investors including IFC, BCap, Chiratae Ventures, and British
International Investment. Bizongo, which was founded in 2015, is
transforming supply chain operations for large enterprises, as well
as for micro, small and medium enterprises (MSMEs) in India,
through its foundational vendor digitisation platform. Bizongo
enables vendors to source raw materials across a broad range of
categories, including steel, aluminium and textiles, and to
optimise their procurement processes. Customers leverage the
Bizongo vendor digitisation platform to source suppliers, optimise
for cost, seamlessly place orders, all whilst managing invoicing
and order tracking in real-time. Bizongo has a capital efficient,
inventory-free operating model, that connects vendors directly with
suppliers. The vendor digitisation platform has seen a three-fold
rise in its gross merchandise value, the total value of sales
through the platform, from $215 million in FY22 to $750 million in
FY23. With its platform, the company has also opened doors to
embedded financing through its network of more than 40 partner
banks and non-banking financial corporations (NBFCs), who can
evaluate MSMEs based on deep transactional and behavioural
insights, allowing them to take better financing calls, and
enabling MSMEs to scale their growth through efficient working
capital. The Company's investment in Bizongo is in line with the
portfolio's sub-strategy of backing innovative growth businesses
while utilising the Company's broadened global investment remit.
Schroders Capital has been an investor in Bizongo since 2019, over
which time we have seen the company grow exponentially, achieve
scale, and expand into more sectors. The company is playing a
transformational role in enabling vendors in India to digitalise
their supply chain, which has accelerated since the COVID pandemic.
We are excited that the Company is now participating in Bizongo's
future growth.
The Company also made an investment in US-based cybersecurity
company, Securiti, the pioneer of the Data Command Center, a
centralized platform that enables the safe use of data and GenAI.
Its solution unifies controls for data security, privacy,
governance and compliance in one place. This unification of data
intelligence is revolutionizing important but arduous processes,
allowing organisations to retire disparate, legacy solutions which
add cost and complexity. The Company's investment in Securiti is in
line with the portfolio's sub-strategy of backing innovative
venture-stage businesses while utilizing the Company's broadened
global investment remit. Schroders Capital has known Securiti for a
number of years, having been an investor since 2019 through our
fund investments. We believe Securiti is playing a key role in
transforming how organisations can innovate with vast quantities of
data while meeting their data obligations and we are delighted to
make this investment to accelerate the company's progress.
Furthermore, the Company made an investment of $2.0 million
(GBP1.7 million) into an early leader in an emerging segment of
artificial intelligence (AI) software. The Company invested through
its co-investment partner, MMC Ventures, via a single asset fund,
MMC SPV 3 LP. Schroders Capital has been investing in venture
capital for over 25 years. Over that time, our team has seen
various waves of technological innovation and witnessed first-hand
the ripple effect through different sectors and regions. Our belief
is that AI, most recently focused on the field of generative AI
that has been enabled by the advent of large language models, has
the potential for innovation and disruption on a scale comparable
to the introduction of email, the internet and the smartphone. We
see significant opportunity in the AI sector, justifying its
position as one of our eight key global innovation themes. This
investment, which forms part of our sub-strategy of backing
innovative venture-stage business, is in an access-restricted
software company that is an early leader in an emerging application
of AI. Currently, we are not able to name the company due to
confidentiality, however, we believe it represents a highly
complementary addition to the portfolio. Furthermore, we are
delighted to be partnering with MMC Ventures.
Post period end, the Company made a commitment of CHF 0.9
million (GBP0.8 million) to Memo Therapeutics AG ("Memo"), a
Switzerland-based clinical-stage biopharmaceutical company. The
Company participated in Memo's Series C financing round, which
raised CHF 25 million and was led by Pureos Bioventures. Existing
investors Swisscanto, Vesalius Biocapital, Adjuvant Capital, Verve
Ventures, GF Group, Fresenius Medical Care Ventures, and Red Alpine
also joined the round. Memo develops novel therapeutic antibodies
for patients with viral infections and cancer. Memo's unique
antibody discovery and functional screening platform enables the
identification, isolation, and selection of antibodies from patient
samples or vaccinated animals. This technology helps Memo to
discover antibodies with the potential to treat diseases using rare
antibodies that other methods might miss. The Series C funding will
support Memo in completing the U.S. Phase II clinical development
of their leading antibody, AntiBKV. This antibody is designed to
neutralize BK virus (BKV) infection in kidney transplant
recipients. BKV infection can have serious adverse effects on graft
function and patient survival following a transplantation
procedure. Currently there are no regulatory approved therapeutics
to treat BVK infection in kidney transplant recipients. With Phase
II clinical data expected in 2024, the funding will also enable
Memo to prepare for large-scale manufacturing of AntiBKV for a
Phase III study and potential market entry. Additionally, the
investment will help Memo advance its pipeline of other
experimental antibody therapeutics. This is the seventh new
investment in our portfolio sub-strategy of backing innovative life
science companies at the near-clinical or clinical stage of
development. We believe Memo is a highly complementary addition to
the company's portfolio. AntiBKV has solid pre-clinical efficacy
and clinical safety data with near term Phase II clinical efficacy
data expected in 2024. A positive phase II readout has the
potential to drive a significant value inflection for Memo and may
enable a material improvement in the quality of life for kidney
transplant recipients with BKV infection.
Top 10
The Company's top 10 holdings as of 30 September 2023 compared
with the respective holding as of 30 June 2023.
Holding
Oxford Nanopore 44.0 22.8% 41.1 21.6%
----- ------ ----- ------
Atom Bank 31.7 16.4% 23.1 12.1%
----- ------ ----- ------
Reaction Engines 12.5 6.5% 12.5 6.6%
----- ------ ----- ------
HP Environmental Technologies
Fund 11.1 5.8% 11.2 5.9%
----- ------ ----- ------
Back Market 8.0 4.1% 8.1 4.2%
----- ------ ----- ------
Ada Health 7.2 3.7% 7.2 3.8%
----- ------ ----- ------
AgroStar 6.3 3.3% 6.6 3.4%
----- ------ ----- ------
Bizongo - - 6.6 3.4%
----- ------ ----- ------
Federated Wireless 8.6 4.5% 6.5 3.4%
----- ------ ----- ------
Revolut 6.1 3.2% 6.4 3.4%
----- ------ ----- ------
Outlook
In the interim report and accounts, we commented on our
frustration at the lack of selling opportunities in the current
market. While the exit environment remains challenging and we
continue to work hard to create opportunities when underlying
company progress allows, we are encouraged by the recent news
announced by Tessian that it is entering into a definitive
agreement to be acquired by Proofpoint. Meanwhile, clinical-stage
biopharmaceutical company, Carmot Therapeutics, recently filed for
an initial public offering, and a Nasdaq listing.
We continue to focus on rebalancing the portfolio to ensure the
appropriate liquidity mix to efficiently execute the buyback
programme and support the portfolio. In this context, we are
closely monitoring the capital available for new investments, which
remains dependent on the execution of the Board's buyback strategy,
which is the priority. However, we have made considerable progress
recently with new investments, making additions to each of our
three sub-strategies (venture, growth and life sciences) across
different geographies, taking advantage of the current environment
of slower fundraising activity and lower valuation expectations to
deploy capital.
Past performance is not a guide to future performance and may
not be repeated. The value of investments and the income from them
may go down as well as up and investors may not get back the
amounts originally invested. The securities shown above are for
illustrative purposes only and are not to be considered a
recommendation to buy or sell.
Enquiries:
Schroder Investment Management Limited
Shilla Pindoria (Company Secretary) 0207 658 7267
Augustine Chipungu (Press) 0207 658 2106
John Spedding (Head of Investment
Trusts) 0207 658 3206
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END
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