REG-Augmentum Fintech Plc: Half-year Report
28/11/2023 07:15
28 November 2023
Augmentum Fintech plc
Interim Results for the six months ended 30 September 2023
Augmentum Fintech plc (LSE: AUGM) (“Augmentum” or the “Company”),
Europe’s leading publicly listed fintech fund, announces its unaudited
interim results for the six months ended 30 September 2023.
Financial highlights
• NAV per share after performance fee1 increased by 0.8% to 160.2p (31
March 2023: 158.9p).
• IRR of 16.6%2 on invested capital since inception (31 March 2023: 18.5%)
• Available cash at period end of £51.8 million (free cash of £48.0
million) with no debt (31 March 2023: £38.5 million).
• Repurchased 3,918,878 shares over the period, at an average price of
99.2p per share.
Portfolio and investment highlights
• The top 10 holdings, which represent 82% of portfolio value, grew
revenue at an average of 74%3 YoY and have an average of 29 months cash
runway. 4 of the top 10 positions are cash generative.
• The sum value of the top three holdings in Tide, Grover, and Zopa, plus
current cash, is above the Company’s market capitalisation. These positions
continue to demonstrate their credentials as fintech market leaders, growing
revenues by an average of over 1,200% since the Company’s investment and are
either profitable or capitalised until projected profitability.
• Cushon, the workplace pensions and savings provider, completed their
majority shareholding acquisition by NatWest Group in June 2023, which
delivered a return of 2.1x multiple on invested capital with proceeds of
£22.8 million and a 62% IRR.
• Tide, the SME business bank, now services 1 in 10 UK small and mid-sized
businesses, representing 550,000 UK businesses. Since expanding into India in
December 2022, Tide now has more than 150,000 members in the country.
• Zopa Bank, the digital-first consumer bank and lender, announced in
September 2023 that it had successfully raised £75 million in Tier 2 capital
to fuel its continuous growth and rapid expansion. This financing follows £75
million of equity funding raised earlier this year, in which Augmentum
participated. Zopa Bank now serves 1 million customers and expects to hit
full-year profitability for the first time this year.
• Monese, the mobile-only current accounts and banking as a service (BaaS)
provider, announced the launch of XYB, an end-to-end ‘coreless’ banking
platform provider, in May 2023.
• Wematch.live, the capital markets trading platform, surpassed $200
billion in ongoing notional volume of Total Return Swaps on equities in August
2023. Wematch.live also reached an average daily matched volume (ADMV) of $11
billion in EMEA in July 2023.
• A number of acquisitions were made across the portfolio, including by
Onfido, the global leader in automated identity verification, who acquired
Airside, the US-headquartered shareable digital identity technology company
and FullCircl, the company intelligence and risk solution provider for
frontline teams, who acquired RegTech provider W2 Global Data Solutions.
• The Company remains a highly selective investor. Since the start of 2022
it has consciously slowed deployment as the valuation environment has
continued to re-rate. During the period, the Company made three follow-on
investments, totaling £6.9 million, including £5.3 million into Volt, the
account-to-account payment provider, as part of a $60 million Series B round.
The Company also took up their pro rata shareholder rights to invest a total
of £1.6 million in Grover, the consumer tech subscription platform, and
Habito, the digital mortgage broker and direct lender.
Notes:
1 The Board considers NAV per share after performance fee to be the most
appropriate measure of NAV per share attributable to shareholders.
2 Annualised IRR on invested capital and realisations since inception using
valuations at the last reporting date before performance fee.
3 Revenue growth taken as the LTM to September 2023 vs the LTM to September
2022. Any outliers (>250%) have been capped to 250% to improve comparability.
Neil England, Chairman of Augmentum Fintech plc, commented:
“The Company’s NAV per share after performance fee was 160.2p, a gain of
0.8% over the reporting period. This continues the Company’s unbroken NAV
per share increase over every one of the eleven reporting periods since our
IPO in 2018, notwithstanding the recent ongoing challenging market conditions.
“Whilst the Company’s shares have continued to trade at a discount to NAV,
in order to convey to the market the Board’s confidence in the value of the
portfolio, and to take advantage of the accretion to shareholders offered by
the wide discount, we continued to buy-back shares over the period under
review. These shares are held in treasury and may be reissued when the share
price returns to a premium.
“Our Manager has retained their investment discipline over the last six
months and at the end of the reporting period the Company held net free cash
of £48 million. The Augmentum model has been proven through five successful
realisations to date, and the Company’s track record coupled with the
expected reduction in interest rates in 2024 may be the trigger for the
re-rating that the Board believes is deserved.”
Tim Levene, CEO of Augmentum Fintech Management Limited, commented:
“Despite a strong pipeline of opportunities, our bar for investment has
remained high and we have retained our uncompromising standards for new
investments. We made no additions to our portfolio during the period under
review although have invested £6.9 million in three of our existing portfolio
companies. Our three largest holdings, Tide, Grover and Zopa, are category
defining digital leaders in large and growing markets. They are currently
growing at an average of 79% year on year and are either profitable or funded
to profitability.”
“We continue to apply a rigorous approach to valuations. This can be seen in
our five exits to-date, where proceeds have been realised above or on-par with
previously reported valuations. In this reporting period Cushon’s
acquisition by NatWest Group brought in proceeds of £22.8 million,
representing a 2.1 multiple on invested capital and an uplift of 47% on the
previous valuation. Our approach to valuation, we believe, sets us apart from
many other funds.”
“Markets are exhibiting the early signs of a shift in sentiment with
interest rates being held steady first in the UK and then in the US. This
signals a cautious yet hopeful economic outlook. This, combined with the
continual move towards the digitisation of financial services and
Augmentum’s disciplined approach to both investment and valuation will, we
believe, offer exceptional opportunities for us to deliver a stand-out vintage
in 2024 and 2025.”
Enquiries
Augmentum Fintech Tim Levene (Portfolio Manager) Georgie Hazell Kivell (Marketing and IR) +44 (0)20 3961 5420 georgie@augmentum.vc
Quill PR Nick Croysdill, Sarah Gibbons-Cook (Press and Media) +44 (0)20 7466 5050 press@augmentum.vc
Peel Hunt LLP Liz Yong, Luke Simpson, Huw Jeremy (Investment Banking) +44 (0)20 7418 8900
Singer Capital Markets Harry Gooden, Robert Peel, James Fischer (Investment Banking) +44 (0)20 7496 3000
Frostrow Capital LLP Paul Griggs (Company Secretary) +44 (0)20 3709 8733
About Augmentum Fintech
Augmentum invests in fast growing fintech businesses that are disrupting the
financial services sector. Augmentum is the UK’s only publicly listed
investment company focusing on the fintech sector in the UK and wider Europe,
having launched on the main market of the London Stock Exchange in 2018,
giving businesses access to patient capital and support, unrestricted by
conventional fund timelines and giving public markets investors access to a
largely privately held investment sector during its main period of growth.
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Augmentum Fintech plc
Half Year Report for the six months ended
30 September 2023
.
Chairman’s Statement
Introduction
This report covers your Company’s progress in the six months to 30 September
2023 and its financial position at that date.
Investment Strategy
Your Company invests in early stage European fintech businesses which have
technologies that are disruptive to the traditional financial services sectors
and/or support the trend to digitalisation and market efficiency. A typical
investment will offer the prospect of high growth and the potential to scale.
Our objective is to provide long-term capital growth to shareholders by
offering them exposure to a diversified portfolio of private fintech companies
during their period of rapid growth and value accretion.
Performance
Your Company’s NAV per share after performance fee at 30 September 2023 was
160.2p, a 0.8% gain across the period under review (158.9p as at 31 March
2023). NAV per share has increased in every one of the eleven half year
reporting periods since the Company’s IPO in 2018, albeit at a much reduced
level during the past year. This lower increase is largely due to valuations
being affected by lower sales or earnings multiples in the public market
comparators that we use in our valuations, together with some sensible
provisions that we have made against those businesses that have faced
challenges.
The operational performance of the vast majority of our portfolio companies
has continued to be strong, with average revenue growth of 74% across the top
10 in the last 12 months. There have been some standout results, in some cases
ahead of expectations, and the majority have over 2 years of cash runway.
Crucially, our top 5 investments; Tide, Grover, Zopa Bank, Volt and
BullionVault, are all growing strongly.
Shareholders will note that we have not experienced the NAV write-downs that
have been a feature from several other investment companies that focus on
venture and early stage private equity. This is testament to our rigorous and
disciplined approach to investment selection and valuations. As I have
reported previously, as a result of this discipline, we did not write up the
value of our investments to the levels that others did when we were in a bull
market for fintech. It follows that we have not needed to make major
corrections now. This approach is best illustrated by our five realisations,
all of which have been at or above their pre-disposal valuation.
The world is an uncertain place as I write, and there have been capital flows
away from equities into safer havens such as cash and gold. It is expected
that equity markets will remain tough in the coming months. High interest
rates and uncertainty over future rates have continued to be a major negative
factor affecting investment companies that focus on growth. The assumption is
that these companies will need cash to fund that growth and that will be
expensive and/or difficult to get. Unfortunately, the market is not
differentiating between those companies with genuine issues in this regard and
those that have no such needs, as is the case with the bulk of our portfolio.
The result is that the price at which the shares traded continued to
significantly under-represent the NAV throughout the period, ending at 94.0p
per share, down 3.0p from the price at 31 March 2023 and representing a
discount to the NAV per share after performance fee of 41.3%. When stripping
out our cash from the balance sheet, the implied discount on our investment
portfolio is around 51%. As at 30 September 2023, the valuation of our top
three positions in Tide, Grover, and Zopa Bank, plus cash, was above our
market capitalisation, attributing no value to our £125 million of other
investments.
Portfolio and Transactions
Our portfolio stands at 24 companies, diversified across the main fintech
verticals, European markets, and at the various stages that we told our IPO
investors that we would build to. Our Top 10 investments represent 82.3% of
the portfolio value.
In the period, the Company received proceeds of £22.8 million from the
completion of NatWest Group’s acquisition of Cushon, significantly ahead of
its prior valuation and representing a 2.1x multiple on invested capital.
The Company made follow-on investments to support Volt (£5.3 million) and
Grover (£1.4 million). No new investments were established during the period,
despite the team reviewing many opportunities, illustrating the discipline of
our investment model. At the period end, the Company had net free cash of £48
million.
The Portfolio Manager’s report, beginning on page 8, includes a detailed
review of the portfolio, individual company performance and investment
transactions in the period.
Valuations
Your Board considers its governance role in the valuations process to be of
utmost importance. Together with our advisers we consider and challenge all of
the investment valuations used for the full and half year financial
statements. We have carefully reviewed both the status and the forecasts of
all of the portfolio companies. The valuations have been arrived at using
appropriate and consistent methodologies, and we sense check and debate our
conclusions on the assets themselves and their market context. Also, we
benefit from some of our investments occupying a senior position in the
capital structures of these companies, providing some protection against
downside risk.
Portfolio Management
We are active investors with a team that works closely with the companies we
invest in, typically taking either a board or an observer seat and working
with management to guide strategy consistent with long-term value creation. We
have built a balanced portfolio across different fintech sectors and maturity
stages and are committed to a responsible and sustainable investment approach,
believing that the integration of environmental, social and governance factors
helps to mitigate risk.
Discount Control
As reported above, the Company’s shares continued to trade at a discount to
NAV during the period under review and up to the date of this report. Buybacks
are one of several mechanisms your board actively consider to reduce this
discount.
To convey to the market our confidence in the value of the portfolio and take
advantage of the accretion to shareholders offered by the wide discount we
continued to buy back shares in the period under review. All shares purchased
by the Company are being held in treasury and will potentially be reissued
when the share price
returns to a premium.
3,918,878 shares were bought back into treasury during the six months to 30
September 2023, at an average price of 99.2p per share, representing an
average discount to the 31 March 2023 NAV after performance fee of 37.9% and
accreting 1.4p per share. A further 366,308 shares have been bought back since
September, at an average price of 86.3p per share, representing an average
discount to the updated NAV after performance fee as at 30 September 2023 of
46.2%.
The use of our cash reserves is a matter of regular Board review. We aim to
balance the benefits of highly accretive buybacks when discounts are high
against ensuring that we hold appropriate reserves to fund follow on
investments and capture the best of the new investment opportunities that we
continue to see.
Outlook
Inflation and interest rates remain elevated and early stage growth portfolios
continue to be out of favour. However, the need to digitalise and transform
last century’s infrastructure remains, as nearly all financial services
sectors continue to be dominated by traditional businesses whose operations
cannot ignore the rapid development of less costly, and in many cases more
secure, business models.
Augmentum has proved its model through the successful realisations to date and
we are confident in the promise that our current investments offer.
Several commentators have highlighted the potential value in the Augmentum
portfolio, but as yet, this has not produced the re-rating that your Board
believe is deserved. A reduction in interest rates could be the trigger for
this. UK inflation appears to have peaked and this may produce a base rate
reduction as early as Q2 2024.
The current share price does not reflect the tangible value creation we have
seen across our top 10 investments and their potential for further growth.
This leads your Board to continue to expect that the patient shareholder will
be well rewarded.
Neil England
Chairman
27 November 2023
.
Investment Objective and Policy
Investment objective
The Company’s investment objective is to generate capital growth over the
long term through investment in a focused portfolio of fast growing and/or
high potential private financial services technology (“fintech”)
businesses based predominantly in the UK and wider Europe.
Investment policy
In order to achieve its investment objective, the Company invests in early or
later stage investments in unquoted fintech businesses. The Company intends to
realise value through exiting these investments over time.
The Company seeks exposure to early stage businesses which are high growth,
with scalable opportunities, and have disruptive technologies in the banking,
insurance and wealth and asset management sectors as well as those that
provide services to underpin the financial sector and other cross-industry
propositions.
Investments are expected to be mainly in the form of equity and equity-related
instruments issued by portfolio companies, although investments may be made by
way of convertible debt instruments. The Company intends to invest in unquoted
companies and will ensure that the Company has suitable investor protection
rights where appropriate. The Company may also invest in partnerships, limited
liability partnerships and other legal forms of entity. The Company will not
invest in publicly traded companies. However, portfolio companies may seek
initial public offerings from time to time, in which case the Company may
continue to hold such investments without restriction.
The Company may acquire investments directly or by way of holdings in special
purpose vehicles or intermediate holding entities (such as the Partnership*).
The Management Team has historically taken a board or board observer position
on investee companies and, where in the best interests of the Company, will do
so in relation to future investee companies.
The Company’s portfolio is expected to be diversified across a number of
geographical areas predominantly within the UK and wider Europe, and the
Company will at all times invest and manage the portfolio in a manner
consistent with spreading investment risk.
The Management Team will actively manage the portfolio to maximise returns,
including helping to scale the team, refining and driving key performance
indicators, stimulating growth, and positively influencing future financing
and exits.
Investment restrictions
The Company will invest and manage its assets with the object of spreading
risk through the following investment restrictions:
• the value of no single investment (including related investments in group
entities or related parties) will represent more than 15% of NAV, save that
one investment in the portfolio may represent up to 20% of NAV;
• the aggregate value of seed stage investments will represent no more than
1% of NAV; and
• at least 80% of NAV will be invested in businesses which are
headquartered in or have their main centre of business in the UK or wider
Europe.
In addition, the Company will itself not invest more than 15% of its gross
assets in other investment companies or investment trusts which are listed on
the Official List of the FCA.
Each of the restrictions above will be calculated at the time of investment
and disregard the effect of the receipt of rights, bonuses, benefits in the
nature of capital or by reason of any other action affecting every holder of
that investment. The Company will not be required to dispose of any investment
or to rebalance the portfolio as a result of a change in the respective
valuations of its assets.
Hedging and derivatives
Save for investments made using equity-related instruments as described above,
the Company will not employ derivatives of any kind for investment purposes.
Derivatives may be used for currency hedging purposes.
Borrowing policy
The Company may, from time to time, use borrowings to manage its working
capital requirements but shall not borrow for investment purposes. Borrowings
will not exceed 10 per cent. of the Company’s Net Asset Value, calculated at
the time of borrowing.
Cash management
The Company may hold cash on deposit and may invest in cash equivalent
investments, which may include short-term investments in money market type
funds and tradeable debt securities.
There is no restriction on the amount of cash or cash equivalent investments
that the Company may hold or where it is held. The Board has agreed prudent
cash management guidelines with the AIFM and the Portfolio Manager to ensure
an appropriate risk/return profile is maintained. Cash and cash equivalents
are held with approved counterparties.
It is expected that the Company will hold between 5% and 15% of its Gross
Assets in cash or cash equivalent investments, for the purpose of making
follow-on investments in accordance with the Company’s investment policy and
to manage the working capital requirements of the Company.
Changes to the investment policy
No material change will be made to the investment policy without the approval
of Shareholders by ordinary resolution. Non-material changes to the investment
policy may be approved by the Board. In the event of a breach of the
investment policy set out above or the investment and gearing restrictions set
out therein, the Management Team shall inform the AIFM and the Board upon
becoming aware of the same and if the AIFM and/or the Board considers the
breach to be material, notification will be made to a Regulatory Information
Service.
* Please refer to the Glossary on page 43.
.
Portfolio
as at 30 September 2023
Fair value of Net Impact of FX rate changes Investment Fair value of % of
holding at investments/ £’000 return holding at portfolio
31 March (realisations) £’000 30 September
2023 £’000 2023
£’000 £’000
Tide 35,692 - - 5,767 41,459 15.2%
Grover 43,150 1,368 (579) (2,655) 41,284 15.1%
Zopa Bank^ 30,093 - - 3,810 33,903 12.4%
Volt 14,216 5,300 - 4,223 23,739 8.7%
BullionVault^ 11,565 - - 404 11,969 4.3%
Monese 11,683 - - (1,588) 10,095 3.7%
AnyFin 9,304 - (369) 770 9,705 3.6%
Onfido 10,242 - (51) (486) 9,705 3.6%
Intellis 8,412 - 113 352 8,877 3.2%
Iwoca 7,882 - - 3 7,885 2.9%
Top 10 Investments 182,239 6,668 (886) 10,600 198,621 72.7%
Other Investments* 49,266 211 131 (6,893) 42,715 15.6%
Cushon 22,790 (22,790) - - - 0.0%
Total Investments 254,295 (15,911) (755) 3,707 241,336 88.3%
Cash & cash equivalents 40,015 51,772 18.9%
Net other current liabilities (186) (1,979) (0.7)%
Net Assets 294,124 291,129 106.5%
Performance Fee accrual (16,819) (17,756) (6.5)%
Net Assets after performance fee 277,305 273,373 100.0%
^ Held via Augmentum I LP
* There are fourteen other investments (31 March 2023: fifteen) held in the
portfolio. See page 14 for further details.
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Portfolio Manager’s Review
Overview
As I write, markets are exhibiting the early signs of a shift in sentiment.
The Bank of England's decision to hold rates steady since September, followed
by the Federal Reserve's similar stance in early November, signals a cautious
yet hopeful economic outlook. While the months ahead present likely challenges
with persistently high rates, the encouraging performance of growth stocks in
response to these developments suggests a return to more positive equity
market performance. Patience is required, as confidence and capital gradually
reinvigorate the markets. However, reaching the apex of this rate tightening
cycle marks a significant turning point, steering us towards a more optimistic
future.
Despite these positive shifts, the UK equity market continues to grapple with
deep-rooted demand issues, even amidst numerous strategic efforts to enhance
its competitiveness. The overwhelming preference for passive investment
strategies, coupled with the US market's dominance, remains a formidable
challenge for trading volumes. This trend has led to reduced liquidity in
domestic European exchanges, with our pension funds and wealth managers
disproportionately investing in US markets.
My responsibility extends beyond reporting our progress; it’s about charting
our future course. Investing in Augmentum today means accessing a portfolio
and a pan-European investment platform that has evolved significantly since
the Company’s IPO. The portfolio's robustness positions us favourably for
the promising investment landscape in European fintech.
Each new advance in technology, such as those seen this year with AI, adds
momentum to the structural trends driving digitalisation across the economy.
Momentum meets opportunity in financial services, penetration of fintech
market share remains well below 2% and global fintech revenue is forecast to
reach US$1.5 trillion in 2030 (BCG, 2023). The companies that make up our
portfolio and current pipeline are at the forefront of this huge opportunity
and Augmentum remains a unique way for investors to share in it too.
Combined with clear strategy and a disciplined approach, market conditions are
such that returns from 2024-25 private investment vintages have the potential
to be exceptional.
Portfolio Overview
The Company’s portfolio stands at 24 fintech companies, with diversification
across fintech verticals, European markets, and maturity stages, as we told
investors we would build during the Company’s IPO. Since listing, we have
delivered £84 million in realisations, across five exits and from dividends,
despite the macroeconomic backdrop. The portfolio’s top 10 companies employ
over 4,000 people and generate close to £1 billion in annual revenues, with
year-on-year growth continuing at an average of 74%. Four of this group are
profitable and the remaining six have an average cash runway to their next
funding round of 29 months.
The three largest holdings, Tide, Grover and Zopa Bank are category defining
digital leaders in large and growing markets. They are growing revenue at an
average of 79% year-on-year and are profitable or expected to reach
profitability without further funding. Each has built an exceptional team and
technology platform. True to our model, we have supported these companies from
their early stages with capital and strategic support. Revenue growth since
our initial investment has been over 2,000% on average. We will continue to
work to optimise the exits of the Company’s positions in the years ahead.
The resilience of our portfolio is notable against the macro backdrop of the
last 18 months. Whilst in the broader venture and tech landscape, stress is
starting to show through in rates of company failure as cash runways come to
an end. Meanwhile, the companies in the portfolio continue to attract
investment, raising over £200 million in equity funding in the last 12
months. With insight on performance and strategic direction, we have continued
to build the positions in the portfolio’s top performers through follow-on
investments.
Following a period of depressed investment activity in the sector over the
course of 2022 and early 2023, we have seen the beginning of a meaningful
return in activity and importantly quality in the last quarter. This has been
accompanied by the start of a reset in valuations to longer-term accepted
stage-appropriate levels. Bolstered by our fifth portfolio exit of Cushon to
NatWest Group, the Company’s balance sheet position is strong with £48
million of free cash and no debt. We believe that the period ahead will be an
opportune time to invest.
Investment Activity
Our deployment into new companies slowed while markets were correcting in 2022
and the first half of 2023. We have continued to assess opportunities, but
prospects and deal dynamics, in particular valuations, have not met our bar
for investment. We remain committed to a long-term, sector-focussed approach
that is built not just on quality companies, but quality investments. Reduced
deployment has been the right course in a market absent of the right
investment at the right price.
During the period we invested £5.3 million into existing portfolio company
Volt as part of the company’s US$60 million Series B round. Volt is
addressing a huge opportunity in real-time payments that sits at the
intersection of trends in ecommerce, payment behaviours, and increasing focus
on payment costs and security. Since Augmentum’s first investment in
December 2020, Volt has consistently delivered double-digit month-on-month
revenue growth as a leading provider of real-time payment connectivity to
global merchants and payment service providers. The series B round was led by
US investor IVP who will support the company’s expansion into North American
markets, building on their existing presence in the UK, Europe, Brazil and
Australia.
We also took up our pro rata shareholder rights to invest a total of £1.6
million in small additional rounds at Grover and Habito.
Post-period end, we invested £4.2 million in an oversubscribed primary and
secondary transaction at Tide, which is now our largest holding. As the
leading digital banking platform for small businesses in the UK, Tide has now
achieved 10% share of the UK market with more than 550,000 members. Tide is
profitable in the UK and moving into a new phase of maturity, delivering
strong revenue diversification through product cross-sell across a large and
stable base of business customers. To further diversify from a predominantly
UK revenue focus, Tide has launched in India, and in less than 12 months has
attracted more than 150,000 new members.
The portfolio’s second largest holding, Grover, continues to define a new
category at the intersection of fintech and ecommerce, fundamentally changing
how retail and business customers consume technology products. Part
payment-method, part-financing, Grover’s technology subscriptions offer the
flexibility and choice that underpin the secular trend towards an
access-rather than ownership-economy. During the period annual recurring
revenue reached €266 million (September 2022: €202 million), with 320,000
active customers across 5 core markets. In the last 18 months Grover adjusted
marketing spend to move towards profitability in 2024. Following the recent
€23 million transaction that Augmentum participated in, Grover is funded to
reach this milestone. The revaluation of our holding by £3.2 million reflects
currency impact and the terms of the transaction. The company continues to
track its profitability-focused year-on-year revenue growth target of 30% with
EBIT and net income margin performing ahead of expectations due to a close
focus on costs.
Zopa Bank’s performance demonstrates the powerful combination of exceptional
technology, a world class team, and a strong balance sheet. The company is
profitable, and performing ahead of budget year-to-date and further
strengthened its balance sheet raising £75 million in Tier 2 regulatory
capital. The upward movement in the valuation of the Company’s holding by
£3.8 million follows year-on-year revenue growth of 92% and returns the full
position above cost of investment for the first time since the write down
event that coincided with their securing a banking licence in 2019. The
transformation of the business since, and a 17 year lending track record, have
seen Zopa Bank continue along an ambitious growth trajectory.
BullionVault has enjoyed a strong year of trading and is on track to deliver
record profits. Performance follows from investor demand for gold and other
precious metals as an inflationary hedge, and net interest income earned on
fiat balances held by users on exchange. BullionVault is a mature position in
the portfolio and serves a hedging function within the Augmentum portfolio
during times of heightened market uncertainty. The moderate uplift of the
Company’s position by £0.4 million reflects this performance, but also the
degree of cyclicality we believe is exhibited in these elevated levels of
earnings.
Investor interest in the banking-as-a-service market remains high and
Monese’s business-to-business coreless banking platform ‘XYB’ has proven
competitive amongst a strong peer set. The opportunity is clear; having tried
and failed to launch internally-built digital propositions, incumbent
financial services firms are seeking partnership with fintech players.
Monese’s client list, including HSBC and Investec, is reflective of the high
quality of the technology platform, originally built and proven out through
the consumer business. As Monese’s revenue mix is increasingly built on
long-term licensing revenues from XYB, the valuation comparables of the
company will adjust. Our downward adjustment to the fair value of our holding
by £1.6 million reflects the basket of public market comparators we have
used.
Founded in Sweden, Anyfin supports financial wellbeing for consumers. The core
product of credit refinancing is combined with saving accounts, budgeting
tools and subscription management services driving high retention across their
prime-credit user base. Year-on-year revenue growth has remained strong,
although higher costs of capital have impacted at the gross margin level. The
experienced management team has demonstrated strong capability while
navigating a more challenging macro environment.
Onfido provides identity verification services to enterprise clients in
financial services. These clients have proven to be a resilient base, although
rates of customer onboarding have reduced since peaks seen in 2021, with some
verticals hit harder than others. Onfido has a leading position in the US and
Europe through diversification across the financial services sector, and entry
into new areas including healthcare. The downward adjustment to the fair value
of our holding by £0.5 million is reflective of the contraction in valuation
multiples amongst Onfido’s listed peers. The business is a highly strategic
asset which will have strong exit opportunities as the macroeconomic
environment improves.
The £0.4 million uplift of the Company’s holding in Intellis follows a
period of profitability for the business, despite falling market volatility.
Intellis remains a unique proposition in the market and in the portfolio,
deploying advanced proprietary AI trading strategies in foreign exchange
markets with highly automated execution and a very lean cost base. Operating
under a fully licensed fund structure, the road is set to enable the business
to scale, both in current focus markets, and potentially in other adjacent
asset classes.
iwoca’s return to performance, and to the Company’s top 10, exemplifies
the resilience and capability of the teams that make up our portfolio. In
2020, Covid funding support schemes dislocated iwoca’s market overnight. As
these schemes have ended, and high-street lenders have once again retreated
from small business funding, iwoca’s trading performance has progressed from
strength-to-strength. Revenue run rate is now above £140 million with
year-on-year growth at 141%. Achieving profitability in January 2023 and
building this consistently month on month, iwoca is another example of the
profit potential of lending businesses that harness digital technologies to
drive significant operating leverage at scale.
We retain a cautious approach to the digital asset sector, although
crypto-asset pricing has seen recovery following positive regulatory news on
ETF products approvals in the US. Our combined holdings in this area equate to
4.7% of the portfolio, which we believe to be an appropriate level of exposure
to a market opportunity that has the potential to deliver upside value if
demand continues to return.
Outside the top 10 there were two notable fair value movements, with both
Gemini and Previse adjusted downwards during the period in light of trading
performance at both companies. In the US, Gemini continue to act as an agent
in the recovery of customer assets lent through a third-party program known as
‘Earn’. This case has attracted legal action towards the third-party
operator of the program and Gemini, and we continue to monitor the situation
as it evolves.
Exits
In June, our fifth portfolio exit completed with the sale of Cushon to NatWest
Group. Augmentum received £22.8 million, delivering an IRR of 62% and a
multiple on capital invested of 2.1 times, representing a 47% uplift on the
previously reported fair value of Augmentum’s position.
We have delivered five exits to date, all at or above the previously reported
holding value. Combined with dividends from elsewhere in the portfolio these
have delivered £84 million of cash.
Performance
As at 30 September 2023, we are reporting a NAV per share after performance
fee of 160.2p (31 March 2023: 158.9p). Since IPO the Company has generated a
Gross IRR (before expenses) on Capital Deployed* of 16.6%.
Each position is valued objectively using the most appropriate methodology.
92% of the portfolio is valued using public market comparables. Wider
governance is a key element of the process with each valuation signed off by
the Board and Valuations Committee. Over time we have demonstrated consistency
and prudence in our approach, protecting the valuations from some of the
outsized market swings that were seen in 2021 and 2022.
As mentioned in previous reports, downside protections, such as liquidation
preference and anti-dilution provisions, are integral to the way we structure
our typical venture investments.. These structures are atypical of ordinary
share structures typically seen in the public or private markets as they
protect the value of Augmentum’s position in the event of a reduction in the
equity value of a company.
Outlook
Many commentators expect rates to remain elevated for a sustained period. Our
base position is that 2024 is likely to be a year of economic challenge, but
we expect that confidence is likely to rebound in 2025.
Acquisitions have traditionally been the primary exit strategy for fintechs, a
trend we see persisting into 2024 and beyond. This trajectory is bolstered by
growing bank balance sheets in the current fiscal landscape and an increasing
synergy between fintechs and incumbent firms. The urgency for digital
transformation – to manage operational pressures and stay competitive
against fintech challengers – remains paramount. In the banking sector,
global leaders like JPMorgan Chase, which faced scrutiny for its projected
US$15.3 billion technology spend across acquisitions and partnerships in 2023,
are now reaping rewards for their strategic investments through
outperformance. This has not gone unnoticed by their smaller counterparts or
shareholders.
Our focus aligns with the growing trend towards business-to-business
investments, but we also see untapped potential in business-to-consumer
fintech ventures. Harnessing cutting-edge technologies like AI, these ventures
are poised to offer consumer products far surpassing those of incumbent firms.
For venture capital funds that have weathered the challenges of the past two
years, a new cycle of opportunity is unfolding. In Europe, the recalibration
of early-stage valuations coincides with a maturing technology infrastructure,
evolving start-up ecosystems, and new regulatory frameworks. These elements,
coupled with substantial room for digital disruption in financial services,
lay the groundwork for the next generation of impactful businesses.
The announcement of The Mansion House Compact in July 2023 marked a potential
paradigm shift for UK pension fund capital, with ten of the UK’s largest
funds committing to allocate up to 5% of assets to private markets by 2030.
This signals a welcome change in allocator mindset; with progression beyond
the singular focus on cost-minimisation that has seen UK pensions underperform
against international benchmarks. Talk, however, is cheap and the industry
needs to move swiftly and decisively to ensure the Compact delivers on its
significant potential to address the UK’s pension performance gap, and to
support the wider investment environment.
European venture capital has demonstrated that private market strategies can
offer both value and outstanding returns. We believe that by building
diversified private market strategies, capitalising on the UK’s venture
capital expertise in various sectors and stages, pension fund managers can
access some of the highest quality private market opportunities.
During our Capital Markets Day in July, we underscored the importance of
sector specialisation. This focus enhances deal sourcing and execution and
elevates the support we provide to portfolio companies. Our thesis-led
approach, grounded in a deep understanding of technological advancements and
regulatory shifts, guides our identification of emerging fintech
opportunities.
Looking ahead, our team is cultivating a pipeline centred on expanding retail
access to private markets, regulatory and compliance technologies, financial
operations including treasury management, and financial market infrastructure
for the carbon and energy sectors.
We maintain an uncompromising standard for new investments. Our meticulous
approach has been instrumental in building our resilient, diverse, and rapidly
growing portfolio, which continues to scale even in uncertain economic times.
We believe that the coming years will offer exceptional opportunities for
top-tier venture investors to deliver a standout vintage.
Tim Levene
CEO
Augmentum Fintech Management Limited
27 November 2023
.
Investments
Tide
Tide’s (www.tide.co) mission is to help small and mid-sized businesses
(“SMEs”) save time and money in the running of their businesses. Customers
can be set up with an account number and sort code in less than 10 minutes,
and the company is building a comprehensive suite of digital banking services
for businesses, including automated accounting, instant access to credit, card
control and quick, mobile invoicing. In November 2022, Tide acquired Funding
Options, a leading UK marketplace for SMEs seeking business finance giving
Tide’s customers access to a wider range of credit options and creating one
of the UK’s biggest digital marketplaces for SME credit. In December 2022,
Tide launched in India with two business banking solutions – the Tide
Business Account and its RuPay-powered Tide Expense Card. Tide now has 10%
market share of small business accounts in the UK, with more than 500,000
customers, and more than 150,000 members in India.
Augmentum led Tide’s £44.1 million first round of Series B funding in
September 2019, alongside Japanese investment firm The SBI Group. In July 2021
Tide completed an £80 million Series C funding round led by Apax Digital, in
which Augmentum invested an additional £2.2 million and into which the £2.5
million loan note converted. In October 2023 Augmentum invested a further
£4.2 million through a combination of primary and secondary transactions.
Source: Tide
30 Sept 31 March
2023 2023
£’000 £’000
Cost 13,200 13,200
Value 41,459 35,692
Valuation Methodology^ Rev. Multiple Rev. Multiple
% ownership (fully diluted) 5.1% 5.1%
As per last filed audited accounts of the investee company for the year to 31
December 2021 (2022 accounts are expected to be filed shortly):
2021 2020
£’000 £’000
Turnover 33,541 14,442
Pre tax loss (32,719) (25,825)
Net assets 66,297 17,761
^see note 7 on pages 30 and 31.
Grover
Berlin-based Grover (www.grover.com) is the leading consumer-tech subscription
platform, bringing the access economy to the consumer electronics market by
offering a simple, monthly subscription model for technology products. Private
and business customers have access to over 8,000 products including
smartphones, laptops, virtual reality technology, wearables and smart home
appliances. The Grover service allows users to keep, switch, buy, or return
products depending on their individual needs. Rentals are available in
Germany, Austria, the Netherlands, Spain and the US. Grover is at the
forefront of the circular economy, with products being returned, refurbished
and recirculated until the end of their usable life. Grover has circulated
over 1.2 million devices. With total funding of around €1.4 billion to date
and over 400 employees, Grover is one of the fastest-growing scale-ups in
Europe.
In September 2019 Augmentum led a €11 million funding round with a €6
million convertible loan note (“CLN”) investment. This coincided with
Grover signing a €30 million debt facility with Varengold Bank, one of
Germany’s major fintech banking partners. In March 2021 Grover completed a
€60 million Series B equity and debt funding round, with Augmentum
participating and converting its CLN, and Grover’s Series C funding round in
April 2022 raised US$330 million in equity and debt funding. In September
2023, Augmentum invested £1.4 million as part of a €23 million transaction
that will support the company to profitability.
Source: Grover
30 Sept 31 March
2023 2023
£’000 £’000
Cost 9,295 7,927
Value 41,284 43,150
Valuation Methodology^ Rev. Multiple Rev. Multiple
% ownership (fully diluted) 6.3% 6.3%
As an unquoted German company, Grover is not required to publicly file audited
accounts.
Zopa
Having been founded in 2005 as the world’s first peer-to peer (“P2P”)
lending company, Zopa (www.zopa.com) launched Zopa Bank following a funding
round in 2020. It was granted a full UK banking licence, allowing it to offer
a wider product range to its customers. After 17 years of delivering positive
returns for investors, Zopa closed the P2P lending side of its business in
2021 to fully focus on Zopa Bank.
Current products include fixed term and smart savings, wedding and home
improvement loans, debt consolidation loans, a credit card and motor finance.
Zopa Bank is regulated by both the PRA and the FCA.
Zopa Bank is a multiple awards winner. It was awarded Banking Brand of the
Year in the 2022 MoneyNet Awards and won three Savings Champion Awards: Best
New Savings Provider, Best Fixed Rate Bond Provider and Best Short Term Fixed
Rate Bond Provider. These follow a string of previous awards, including being
named the British Bank Awards’ Best Personal Loan Provider for the fifth
year in a row in 2021.
Augmentum participated in a £20 million funding round led by Silverstripe in
March 2021, in October 2021 participated with a further £10 million
investment in a £220 million round led by SoftBank, and in February 2023
invested a further £4 million as part of a £75 million equity funding round
alongside other existing investors. In September 2023 Zopa Bank raised £75
million in Tier 2 Capital to support further scaling.
Source: Zopa Bank
30 Sept 31 March
2023 2023
£’000 £’000
Cost 33,670 33,670
Value 33,903 30,093
Valuation Methodology Rev. Multiple Rev. Multiple
% ownership (fully diluted) 3.4% 3.4%
As per last filed audited accounts of the investee company for the year to 31
December 2022:
2022 2021
£’000 £’000
Operating income 153,737 53,788
Pre tax loss (23,783) (48,312)
Net assets 299,674 264,307
Volt
Volt (www.volt.io) is a provider of account-to-account payments connectivity
for international merchants and payment service providers (PSPs). An
application of Open Banking, account-to-account payments – where funds are
moved directly from one bank account to another rather than via payment rails
– delivering benefits to both consumers and merchants. This helps merchants
shorten their cash cycle, increase conversion and lower their costs. Volt
offers coverage in 25 markets and counting, including UK, Europe, Brazil and
Australia. In June 2023 Volt announced their partnership with Worldpay, the
world’s number one global non-bank merchant acquirer by volume processed,
with more than 1 million merchant customers across 146 markets. Starting with
Australia, Worldpay merchants will gain access to Volt’s open payment
infrastructure. In the same month Volt also announced integration with
Shopify, the leading global commerce company. Volt will power a
‘pay-by-bank’ option at checkout for merchants who use the Shopify
platform.
Augmentum invested £0.5 million in Volt in December 2020, £4 million in
Volts June 2021 US$23.5 million Series A funding round and £5.3 million in
its US$60 million Series B funding round in June 2023.
Source: Volt
30 Sept 31 March
2023 2023
£’000 £’000
Cost 9,800 4,500
Value 23,739 14,216
Valuation Methodology CPORT CPORT
% ownership (fully diluted) 8.3% 8.3%
Volt is not required to publicly file audited accounts.
BullionVault
BullionVault (www.bullionvault.co.uk) is a physical gold and silver market for
private investors online. It enables people across 175 countries to buy and
sell professional-grade bullion at the very best prices online, with US$3.7
billion of assets under administration, over US$100 million worth of gold and
silver traded monthly, and over 100,000 clients.
Each user’s property is stored at an unbeaten low cost in secure, specialist
vaults in London, New York, Toronto, Singapore and Zurich. BullionVault’s
unique daily audit then proves the full allocation of client property every
day.
The company generates solid monthly profits from trading, commission and
interest. It is cash generative, dividend paying, and well-placed for any
cracks in the wider financial markets.
Source: BullionVault
30 Sept 31 March
2023 2023
£’000 £’000
Cost 8,424 8,424
Value 11,969 11,565
Valuation Methodology EBITDA Multiple EBITDA Multiple
% ownership (fully diluted) 10.8% 11.1%
Dividends paid - 564
As per last filed audited accounts of the investee company for the year to 31
October 2022:
2022 2021
£’000 £’000
Gross profit 13,071 12,086
Pre tax profit 8,364 7,741
Net assets 41,294 39,148
Monese
Monese (www.monese.com) offers consumers the ability to open a UK or European
current account with a fully digital process. Launched in 2015 Monese has more
than 2 million registered users. 70% of incoming funds are from salary
payments, with customers using Monese as their primary account. In May 2023,
building on strong platform infrastructure, Monese launched XYB, a
banking-as-a-service (“BaaS”) platform. XYB enables financial institutions
to build digital products using Monese’s technology. Monese counts HSBC and
Investec amongst its XYB client base. The BaaS market shows strong growth as
established banks and fintech companies continue to bring innovative digital
products to market.
Augmentum is invested alongside Kinnevik, PayPal, International Airlines
Group, Investec and HSBC Ventures.
Source: Monese
30 Sept 31 March
2023 2023
£’000 £’000
Cost 11,467 11,467
Value 10,095 11,683
Valuation Methodology Rev. Multiple CPORT
% ownership (fully diluted) 5.9% 6.0%
As per last filed audited accounts of the investee company for the year to 31
December 2021 (2022 accounts are expected to be filed shortly):
2021 2020
£’000 £’000
Turnover 17,573 16,285
Pre tax loss (17,529) (28,461)
Net liabilities (2,972) (15,410)
AnyFin
Anyfin (www.anyfin.com) was founded in 2017 by former executives of Klarna,
Spotify and iZettle, and leverages technology to allow creditworthy consumers
the opportunity to improve their financial wellbeing by consolidating and
refinancing existing credit agreements with improved interest rates, as well
as offering smart budgeting tools. Anyfin is currently available in Sweden,
Finland, Norway and Germany, with plans to expand across Europe as well as
strengthen its product suite in existing markets.
Augmentum invested £7.2 million in Anyfin in September 2021 as part of a
US$52 million funding round and a further £2.7 million as part of a US$30
million funding round in November 2022.
Source: AnyFin
30 Sept 31 March
2023 2023
£’000 £’000
Cost 9,924 9,924
Value 9,705 9,305
Valuation Methodology Rev. Multiple Rev. Multiple
% ownership (fully diluted) 3.2% 3.2%
As an unquoted Swedish company, Anyfin is not required to publicly file
audited accounts.
Onfido
Onfido (www.onfido.com) is building the new identity standard for the
internet. Its AI-based technology assesses whether a user’s
government-issued ID is genuine or fraudulent, and then compares it against
their facial biometrics. Using computer vision and a number of other AI
technologies, Onfido can verify against 4,500 different types of identity
documents across 195 countries, using techniques like “facial liveness’’
to see patterns invisible to the human eye.
Onfido was founded in 2012. It has offices in London, San Francisco, New York,
Lisbon, Paris, Amsterdam, New Delhi and Singapore and helps over 900
companies, including industry leaders such as Revolut, bung and Bitstamp.
These customers are choosing Onfido over others because of its ability to
scale, speed in on-boarding new customers (15 seconds for flash verification),
preventing fraud, and its advanced biometric technology. In May 2023 Onfido
announced the acquisition of Airside Mobile Inc, the leader in private,
digital identity sharing technology whose customers include the world’s
largest airlines.
Augmentum invested £4 million in 2018 as part of a US$50 million funding
round and an additional £3.7 million in a convertible loan note in December
2019 as part of a £4.7 million round. The latter converted into equity when
Onfido raised an additional £64.7 million in April 2020.
Source: Onfido
30 Sept 31 March
2023 2023
£’000 £’000
Cost 7,750 7,750
Value 9,705 10,242
Valuation Methodology Rev. Multiple Rev. Multiple
% ownership (fully diluted) 2.1% 2.1%
As per last filed audited accounts of the investee company for the year to 31
January 2023:
2023 2022
£’000 £’000
Turnover 102,099 94,513
Pre tax loss (70,190) (45,159)
Net (liabilities)/assets (9,372) 40,165
Intellis
Intellis, based in Switzerland, is an algorithmic powered quantitative hedge
fund operating in the FX space. Intellis’ proprietary approach takes a
conviction based assessment towards trading in the FX markets, a position
which is uncorrelated to traditional news driven trading firms. They operate
across a range of trading venues with a regulated Investment Trust fund
structure that enables seamless onboarding of new Liquidity Partners.
Following an initial investment of €1 million In 2019, Augmentum exercised
its option to invest a further €1 million in March 2020 and a further €1
million in March 2021.
Source: Intellis
30 Sept 31 March
2023 2023
£’000 £’000
Cost 2,696 2,696
Value 8,877 8,412
Valuation Methodology P/E Multiple P/E Multiple
% ownership (fully diluted) 23.8% 23.8%
As an unquoted Swiss company, Intellis is not required to publicly file
audited accounts.
Iwoca
Founded in 2011, iwoca (www.iwoca.co.uk) uses award-winning technology to
disrupt small business lending across Europe. They offer short-term
‘flexi-loans’ of up to £500,000 to SMEs across the UK and Germany. iwoca
leverages online integrations with high-street banks, payment processors and
sector-specific providers to look at thousands of data points for each
business. These feed into a risk engine that enables the company to make a
fair assessment of any business – from a retailer to a restaurant, a factory
to a farm – and approve a credit facility within hours. In addition to its
flexi-loans Iwoca launched iwocaPay in June 2020, an innovative
business-to-business (B2B) ‘buy now pay later’ product to provide flexible
payment terms to buyers while giving peace of mind to sellers. It also
launched a revenue-based loan with eBay in 2022 where repayments are a
percentage of a business’s monthly sales. The Company has lent over £2.5
billion in the UK and Germany since its launch across more than 120,000
business loans.
Augmentum originally invested £7.5 million in Iwoca in 2018 and has since
added £0.35 million. Iwoca has raised over £850 million in debt commitments
from partners including Barclays, Pollen Street Capital and Värde.
Source: Iwoca
30 Sept 31 March
2023 2023
£’000 £’000
Cost 7,852 7,852
Value 7,885 7,882
Valuation Methodology Rev. Multiple* Rev. Multiple
% ownership (fully diluted) 2.4% 2.4%
As per last filed audited accounts of the investee company for the year to 31
December 2022:
2022 2021
£’000 £’000
Turnover 78,260 68,468
Pre tax loss (10,980) (4,119)
Net assets 32,956 40,579
.
Farewill
In the next 10 years, £1 trillion of inheritance will pass between
generations in the UK. Farewill (www.farewill.com) is a digital, all-in-one
financial and legal services platform for dealing with death and after-death
services, including wills, probate and cremation. In 2022 Farewill won
National Will Writing Firm of the Year for the fourth year in a row and in
2021 was Probate Provider of the Year for the second consecutive year at the
British Wills and Probate Awards. Farewill also won Best Funeral Information
Provider and Low-cost Funeral Provider of the Year at the Good Funeral Awards
2021. The organisation has also been voted the UK’s best-rated death experts
on Trustpilot, scoring an average customer approval rating of 4.9/5 from over
14,000 reviews. It is now the largest will writer in the UK.
Since its launch in 2015 Farewill’s customers have pledged over £800
million to charities through their wills.
Augmentum led Farewill’s £7.5 million Series A fundraise in January 2019,
with a £4 million investment, participated in its £20 million Series B, led
by Highland Europe in July 2020, with £2.6 million, and in its further £4.8
million fundraise in March 2023, with £0.8 million.
Gemini
Gemini (www.gemini.com) enables individuals and institutions to safely and
securely buy, sell and store cryptocurrencies. Gemini was founded in 2014 by
Cameron and Tyler Winklevoss and has been built with a security and regulation
first approach. Gemini operates as a New York trust company regulated by the
New York State Department of Financial Services (NYSDFS) and was the first
cryptocurrency exchange and custodian to secure SOC 1 Type 2 and SOC 2 Type 2
certification. Gemini entered the UK market in 2020 with an FCA Electronic
Money Institution licence and is one of only ten companies to have achieved
FCA Cryptoasset Firm Registration.
Gemini announced acquisitions of portfolio management services company BITRIA
and trading platform Omniex in January 2022. During 2023 Gemini has been
expanding into the UAE and Asia.
Augmentum participated in Gemini’s first ever funding round in November 2021
with an investment of £10.2 million.
Tesseract
Tesseract (www.tesseractinvestment.com) is a forerunner in the dynamic digital
asset sector, providing digital lending solutions to market makers and other
institutional market participants via regulated custody and exchange
platforms. Tesseract was founded in 2017, is regulated by the Finnish
Financial Supervisory Authority (“FIN-FSA”), and was one of the first
companies in the EU to obtain a 5AMLD (Fifth Anti-Money Laundering Directive)
virtual asset service provider (“VASP”) licence. It is the only VASP with
an express authorisation from the FIN-FSA to deploy client assets into
decentralized finance or “DeFi”.
Tesseract provides an enabling crypto infrastructure to connect digital asset
lenders with digital asset borrowers. This brings enhanced capital efficiency
with commensurate cost reduction to trading, in a space that is currently
significantly under-leveraged relative to traditional capital markets.
Augmentum led Tesseract’s Series A funding round in June 2021 with an
investment of £7.3 million.
Kipp
platform that transforms the traditional payment model to increase credit card
transaction approvals, revenue, and customer satisfaction. Its core solution
relies heavily on data enrichment and risk management to help merchants and
banks split the cost of risk to incentivize issuing banks to approve more
transactions.
Augmentum invested £4 million in May 2022.
baobab
Berlin based Baobab (www.baobab.io) is a pioneer in the provision of European
cyber insurance for SMEs. With capacity provision from Zurich, Baobab uses a
novel approach to underwriting, pricing and risk mitigation, and works with
leading SME cyber security providers to prevent breaches for its insured
customers.
Augmentum invested £2.6 million in January 2023.
ParaFi Capital
ParaFi Capital (www.parafi.com) is an investor in decentralised finance
protocols that address tangible use cases of the technology and demonstrate
signs of product-market fit. ParaFi investment has drawn on their domain
expertise developed in both traditional finance and crypto to identify and
invest in leading protocols such as Compound (lending and interest accrual),
Aave (asset borrowing), Uniswap (automated liquidity provision), Synthetix
(synthetic asset trading) and MakerDAO (stablecoins). ParaFi also supports its
protocols as a liquidity provider and governance participant.
Augmentum invested £2.8 million in ParaFi in January 2021. Co-investors
include Bain Capital Ventures and Galaxy Digital.
WeMatch
Wematch (www.wematch.live) is a capital markets trading platform that helps
financial institutions transition liquidity to an orderly electronic service,
improving productivity and de-risking the process of voice broking. Their
solution helps traders find liquidity, negotiate, trade, optimise and manage
the lifecycle of their portfolios of assets and trade structures. Wematch is
focused on structured products such as securities financing, OTC equity
derivatives and OTC cleared interest rates derivatives.
Created in 2017, Wematch is headquartered in Tel Aviv and has offices in
London and Paris. In March 2023 it announced a collaboration with MTS Markets,
owned by Euronext, creating MTS Swaps by Wematch.live, which aims to bridge
the gap between legacy voice trading and pure electronic trading in the
interdealer IRS market. In August 2023 Wematch passed a milestone of US$200
billion in ongoing notional value of trades on their platform and also reached
an average daily matched volume (ADMV) of US$11 billion in Europe, the Middle
East, and Africa.
Augmentum invested £3.7 million in September 2021.
Wayhome
Wayhome (www.wayhome.co.uk) offers a unique part-own part-rent model of home
ownership, requiring as little as 5% deposit with customers paying a market
rent on the portion of the home that Wayhome owns, with the ability to
increase the equity in the property as their financial circumstances allow. It
launched to the public in September 2021, following closure of the initial
phase of a £500 million pension fund investment and has crossed the milestone
of completing the purchase of its first 100 homes.
Wayhome opens up owner-occupied residential property as an asset class for
pension funds, who will earn inflation-linked rent on the portion not owned by
the occupier.
Augmentum invested £2.5 million in 2019, £1 million in 2021 and a further
£0.9 million in the Company's financial year to 31 March 2023.
Habito
Habito (www.habito.com) is transforming the United Kingdom’s £1.3 trillion
mortgage market by taking the stress, arduous paperwork, hidden costs and
confusing process out of financing a home.
Since launching in April 2016, Habito had brokered £7 billion of mortgages by
July 2021. Habito launched its own buy-to-let mortgages in July 2019 and in
March 2021 launched a 40-year fixed-rate mortgage ‘Habito One’, the UK’s
longest-ever fixed rate mortgage.
In August 2019, Augmentum led Habito’s £35 million Series C funding round
with a £5 million investment and added £1.3 million in the Company's
financial year ended 31 March 2023.
Previse
Previse (www.previ.se) allows suppliers to be paid instantly. Previse’s
artificial intelligence (“AI”) analyses the data from the invoices that
sellers send to their large corporate customers. Predictive analytics identify
the few problematic invoices, enabling the rest to be paid instantly. Previse
charges the suppliers a small fee for the convenience, and shares the profit
with the corporate buyer and the funder. Previse precisely quantifies dilution
risk so that funders can underwrite preapproval payables at scale. In January
2022 Mastercard unveiled that its next-generation virtual card solution for
instant B2B payments would use Previse’s machine learning capabilities. The
solution combines Previse’s machine learning, with Mastercard’s core
commercial solutions and global payment network, to transform how businesses
send and receive payments.
Augmentum invested £250,000 in a convertible loan note in August 2019. This
converted into equity as part of the company’s US$11 million funding round
in March 2020, alongside Reefknot Investments and Mastercard, as well as
existing investors Bessemer Venture Partners and Hambro Perks. Previse was
awarded a £2.5 million Banking Competition Remedies’ Capability and
Innovation Fund grant in August 2020. In May 2022 Previse closed the first
phase of its series B financing round, which was led by Tencent, with US$18
million raised, including £2 million from Augmentum.
FullCircl
FullCircl (www.fullcircl.com) was formed from the combination of Artesian and
Duedil. Artesian was founded with a goal to change the way B2B sellers
communicate with their customers. They built a powerful sales intelligence
service using the latest in Artificial Intelligence and Natural Language
Processing to automate many of the time consuming, repetitive tasks that cause
the most pain for commercial people.
In August 2023 FullCircl announced the acquisition of W2 Global Data
Solutions, a provider of real-time digital solutions for global regulatory
compliance. The acquisition strengthens FullCircl’s compliance suite and
accelerates the company’s ambition to become the market leader in smart
customer onboarding solutions for regulated businesses. The combined company
now provides coverage on entities located in 160 countries.
Augmentum originally invested in DueDil, which merged with Artesian in July
2021. Combining DueDil’s Business Information Graph (B.I.G.)™ and Premium
APIs, and Artesian’s powerful web application and advanced rules engine
delivers an easy to deploy solution for banks, insurers and FinTechs to
engage, onboard and grow the right business customers.
Epsor
Epsor (www.epsor.fr) is a Paris based provider of employee and retirement
savings plans delivered through an open ecosystem, giving access to a broad
range of asset management products accessible through its intuitive digital
platform. Epsor serves more than 850 companies in France.
Augmentum invested £2.2 million in Epsor in June 2021.
Sfermion
Sfermion (www.sfermion.io) is an investment fund focused on the non-fungible
token (NFT) ecosystem. Their goal is to accelerate the emergence of the open
metaverse by investing in the founders, companies, and entities creating the
infrastructure and environments forming the foundations of our digital future.
Augmentum committed US$3 million in October 2021, to be drawn down in
tranches.
WhiskyInvestDirect
Founded in 2015, WhiskyInvestDirect (www.whiskyinvestdirect.com), was a
subsidiary of BullionVault and is the online market for buying and selling
Scotch whisky as it matures in barrel. This is an asset class that has a long
track record of growth, yet has previously been opaque and inaccessible.
The business seeks to change the way some of the three billion litres of
maturing Scottish whisky is owned, stored and financed, giving self-directed
investors an opportunity to profit from whisky ownership, with the ability to
trade 24/7. At its October 2022 financial year end the company's clients held
12 million LPA (Litres of Pure Alcohol) of spirit. Augmentum’s holding
derives from WhiskeyInvestDirect being spun out of BullionVault in 2020.
.
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 September 2023
Six months ended Six months ended
30 September 2023 30 September 2022
Notes Revenue Capital Total Revenue Capital Total
return return £’000 return£’000 return £’000
£’000 £’000 £’000
Gains on investments held at fair value - 2,952 2,952 - 1,497 1,497
Investment income 702 - 702 38 - 38
AIFM and Performance Fees 2 (292) - (292) (301) - (301)
Other expenses (2,453) (16) (2,469) (2,256) (21) (2,277)
(Loss)/return before taxation (2,043) 2,936 893 (2,519) 1,476 (1,043)
Taxation - - - - - -
(Loss)/return attributable to equity shareholders of the parent company (2,043) 2,936 893 (2,519) 1,476 (1,043)
(Loss)/return per share (pence) 3 (1.2) 1.7 0.5 (1.4) 0.8 (0.6)
The total column of this statement represents the Group’s Consolidated
Income Statement, prepared in accordance with IFRS as adopted by the UK.
The revenue return and capital return columns are supplementary to this and
are prepared under guidance published by the Association of Investment
Companies.
The Group does not have any other comprehensive income and hence the total
return, as disclosed above, is the same as the Group’s total comprehensive
income.
All items in the above statement derive from continuing operations.
All returns are attributable to the equity holders of Augmentum Fintech plc,
the parent company. There are no non-controlling interests.
.
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 September 2023
Six months ended 30 September 2023
Group Ordinary Share Special Other Revenue Total
share premium reserve capital reserve £’000
capital account £’000 reserve £’000
£’000 £’000 £’000
Opening shareholders’ funds 1,810 105,383 85,218 117,740 (16,027) 294,124
Purchase of own shares into treasury - - (3,888) - - (3,888)
Return/(loss) for the period - - - 2,936 (2,043) 893
At 30 September 2023 1,810 105,383 81,330 120,676 (18,070) 291,129
Six months ended 30 September 2022
Group Ordinary Share Special Other Revenue Total
share premium reserve capital reserve £’000
capital account £’000 reserve £’000
£’000 £’000 £’000
Opening shareholders’ funds 1,810 105,383 91,191 107,989 (11,169) 295,204
Purchase of own shares into treasury - - (2,036) - - (2,036)
Return/(loss) for the period - - - 1,476 (2,519) (1,043)
At 30 September 2022 1,810 105,383 89,155 109,465 (13,688) 292,125
.
Condensed Consolidated and Company Statement of Financial Position
as at 30 September 2023
Note 30 September 31 March
2023 2023
£’000 £’000
Non current assets
Investments held at fair value 7 241,336 254,295
Property, plant & equipment 262 297
Current assets
Right of use asset 513 588
Other receivables 131 555
Cash and cash equivalents 51,772 40,015
Total assets 294,014 295,750
Current liabilities
Other payables (2,307) (948)
Lease liability (578) (678)
Total assets less current liabilities 291,129 294,124
Net assets 291,129 294,124
Capital and reserves
Called up share capital 4 1,810 1,810
Share premium account 4 105,383 105,383
Special reserve 81,330 85,218
Retained earnings:
Capital reserves 120,676 117,740
Revenue reserve (18,070) (16,027)
Total equity 291,129 294,124
NAV per share (pence) 5 170.7 168.5
NAV per share after performance fee (pence) 5 160.2 158.9
.
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 September 2023
Six months Six months
ended ended
30 September 30 September
2023 2022
£’000 £’000
Cash flows from operating activities
Purchases of investments (5,511) (11,994)
Sales of investments 22,790 44,226
Acquisition of property, plant and equipment (4) (355)
Interest received 680 29
Operating expenses paid (1,769) (1,846)
Net cash outflow from operating activities 16,186 30,060
Cash flow from financing activities
Purchase of own shares into Treasury (4,429) (2,036)
Net cash (outflow) from financing (4,429) (2,036)
Increase in cash and cash equivalents 11,757 28,024
Cash and cash equivalents at the beginning of the period 40,015 31,326
Cash and cash equivalents at the end of the period 51,772 59,350
.
Notes to the Financial Statements
For the six months ended 30 September 2023
1.a General information
Augmentum Fintech plc is a company limited by shares, incorporated and
domiciled in the UK. Its registered office is 25 Southampton Buildings, London
WC2A 1AL, UK and its principal place of business is at 4 Chiswell Street,
London EC1Y 4UP. Its shares are listed on the London Stock Exchange.
These condensed interim financial statements were approved for issue on 27
November 2023. These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 March 2023 were approved by the
board of directors on 3 July 2023 and delivered to the Registrar of
Companies.
The report of the auditors on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain any statement under
section 498 of the Companies Act 2006.
The financial statements have been reviewed, not audited.
1.b Basis of preparation
This condensed consolidated interim financial report for the half-year
reporting period ended 30 September 2023 has been prepared in accordance with
the Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority and International Accounting Standard IAS 34, ‘Interim Financial
Reporting’, as adopted in the UK.
The accounting policies adopted are consistent with those of the previous
financial year and corresponding interim reporting period, except for the
adoption of new and amended standards as set out below.
1.c New and amended standards adopted by the Group
No new or amended standards became applicable for the current reporting period
that have an impact on the Group or Company.
1.d Going Concern
The Directors believe that it is appropriate to adopt the going concern basis
in preparing these condensed consolidated financial statements, as the Board
considers the Group has sufficient financial resources to continue in
operation for at least the next 12 months from the date of signing of these
financial statements.
1.e Segmental Analysis
The Group operates a single business segment for reporting purposes and is
managed as a single investment company. Reporting is provided to the Board of
Directors on an aggregated basis. The investments are all located in the UK,
continental Europe, Israel and the US.
1.f Related Party Transactions
There have been no changes to the nature of the related party arrangements or
transactions during the period to those reported in the Annual Report for the
year ended 31 March 2023.
1.g Events after the reporting period
There have been no significant events since the end of the reporting period
requiring disclosure.
2 AIFM and Performance Fees
Revenue Capital Six months Revenue Capital Six months
£’000 £’000 ended £’000 £’000 ended
30 September 30 September
2023 2022
£’000 £’000
AIFM fees 292 - 292 301 - 301
Performance fee - - - - - -
292 - 292 301 - 301
A performance fee is payable by the Company to AFML when the Company has
realised an aggregate annualised 10% return on investments (the ‘hurdle’)
in each basket of investments. Based on the investment valuations and the
hurdle level as at 30 September 2023 the hurdle has been met, on an unrealised
basis, and as such a performance fee of £17,756,000 has been accrued by the
Company as at 30 September 2023, equivalent to 10.4 pence per share (31 March
2023: £16,517,000; 9.1 pence per share). This accrual is reversed on
consolidation and not included in the Group Statement of Financial Position.
The performance fee is only payable to AFML if the hurdle is met on a realised
basis. See page 24 and Note 19.9 of the Company’s 2023 Annual Report for
further details. Any allocation of the performance fee by AFML to its
employees is made on a discretionary basis.
3 (Loss)/return per share
The (loss)/return per share figures are based on the following figures:
Six months Six months
ended ended
30 September 30 September
2023 2022
£’000 £’000
Net revenue loss (2,043) (2,519)
Net capital return 2,936 1,476
Net total (loss)/return 893 (1,043)
Weighted average number of ordinary shares in issue 171,507,993 179,413,420
Pence Pence
Revenue loss per share (1.2) (1.4)
Capital return per share 1.7 0.8
Total (loss)/return per share 0.5 (0.6)
4 Share capital
As at 30 September 2023 there were 170,599,974 (31 March 2023: 174,518,852)
ordinary shares in issue, excluding shares held in treasury, and 10,413,723
(31 March 2023: 6,494,845) shares held in treasury.
During the year to 31 March 2023 5,806,934 shares were bought back into
treasury at an average price of 102.9p per share.
From 1 April 2023 to 30 September 2023 3,918,878 of the Company’s ordinary
shares were bought back into treasury at an average price of 99.2p per share.
No shares were issued during the six months.
5 Net asset value (“NAV”) per share
The NAV per share is based on the Group net assets attributable to the equity
shareholders of £291,129,000 (31 March 2023: £294,124,000) and 170,599,974
(31 March 2023: 174,518,852) shares being the number of shares in issue at the
period end.
The NAV per share after performance fee* is based on the Group net assets
attributable to the equity shareholders, less the performance fee accrual made
by the Company of £17,756,000 (31 March 2023: £16,819,000), and the number
of shares in issue at the period end.
* Alternative Performance Measure
6 Subsidiary undertakings
The Company has an investment in the issued ordinary share capital of its
wholly owned subsidiary undertaking, Augmentum Fintech Management Limited,
which is registered in England and Wales, operates in the United Kingdom and
is regulated by the Financial Conduct Authority.
7 Financial Instruments
The principal risks which the Company faces from its financial instruments
are:
• Market Price Risk
• Liquidity Risk; and
• Credit Risk
Market Price Risk
Market price risk arises mainly from uncertainty about future prices of
financial instruments in the Group’s portfolio. It represents the potential
loss the Group might suffer through holding market positions in the face of
price movements, mitigated by stock diversification.
The Group is exposed to the risk of the change in value of its unlisted equity
and non-equity investments. For unlisted equity and non-equity investments the
market risk is principally deemed to be represented by the assumptions used in
the valuation methodology as set out in the accounting policy.
Liquidity Risk
The Group’s assets comprise unlisted equity and non-equity investments.
Whilst unlisted equity is illiquid, short-term flexibility is achieved through
cash and cash equivalents.
Credit Risk
The Group’s exposure to credit risk principally arises from cash and cash
equivalents. Only highly rated banks (with credit ratings above A3, based on
Moodys ratings or the equivalent from another ratings agency) are used for
cash deposits and the level of cash is reviewed on a regular basis.
Further details of the Company’s management of these risks can be found in
note 13 of the Company’s 2023 Annual Report.
There have been no changes to the management of or the exposure to credit risk
since the date of the Annual Report.
Fair Value Hierarchy
Fair value is the amount for which an asset could be exchanged, or a liability
settled between knowledgeable willing parties in an arm’s length
transaction.
The Group complies with IFRS 13 in respect of disclosures about the degree of
reliability of fair value measurements. This requires the Group to classify,
for disclosure purposes, fair value measurements using a fair value hierarchy
that reflects the significance of the inputs used in making the measurements.
The levels of fair value measurement bases are defined as follows:
Level 1: fair values measured using quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Level 2: fair values measured using valuation techniques for all inputs
significant to the measurement other than quoted prices included within Level
1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
Level 3: fair values measured using valuation techniques for which any
significant input to the valuation is not based on observable market data
(unobservable inputs).
The determination of what constitutes ‘observable’ requires significant
judgement by the Directors.
The Group considers observable data to be market data that is readily
available, regularly distributed or updated, reliable and verifiable, not
proprietary and provided by independent sources that are actively involved in
the relevant market.
All investments were classified as Level 3 investments as at, and throughout
the period to, 30 September 2023. Details of movements in, and changes in
value of, the Level 3 investments are included on the next page.
All investments were valued in accordance with accounting policy as set out in
note 19.4 of the Company’s Annual Report for the year ended 31 March 2023.
When using the price of a recent transaction in the valuations the Company
looks to ‘re-calibrate’ this price at each valuation point by reviewing
progress within the investment, comparing against the initial investment
thesis, assessing if there are any significant events or milestones that would
indicate the value of the investment has changed and considering whether a
market-based methodology (ie. using multiples from comparable public
companies) or a discounted cashflow forecast would be more appropriate.
The main inputs into the calibration exercise, and for the valuation models
using multiples, are revenue, EBITDA and P/E multiples (based on the most
recent revenue, EBITDA or earnings achieved and equivalent corresponding
revenue, EBITDA or earnings multiples of comparable public companies), quality
of earnings assessments and comparability difference adjustments. Revenue
multiples are often used, rather than EBITDA or earnings, due to the nature of
the Group’s investments, being in fast-growing, small financial services
companies which are not normally expected to achieve profitability or scale
for a number of years. Where an investment has achieved scale and
profitability the Group would normally then expect to switch to using an
EBITDA or earnings multiple methodology.
In the calibration exercise and in determining the valuation for the Group’s
equity instruments, comparable trading multiples are used. In accordance with
the Group’s policy, appropriate comparable public companies based on
industry, size, developmental stage, revenue generation and strategy are
determined and a trading multiple for each comparable company identified is
then calculated. Due to the nature of the Group's investments there are
frequently no directly comparable public companies; in these instances baskets
of public companies will be used that share similar characteristics to the
investee company.
The multiple is calculated by dividing the enterprise value of the comparable
company by its revenue, EBITDA or earnings. The trading multiple is then
adjusted for considerations such as illiquidity, premium to public companies
implied in an investee's previous financing round, marketability and other
differences, advantages and disadvantages between the Group’s portfolio
company and the comparable public companies based on company specific facts
and circumstances.
The main input into the PWERM (‘Probability Weighed Expected Return
Methodology’) was the probability of conversion. This method was used for
the convertible loan notes held by the Company.
Total gains and losses on assets measured at Level 3 are recognised as part of
Gains on Investments in the Consolidated Income Statement, and no other
comprehensive income has been recognised on these assets. The total unrealised
return for the period was £2,952,000 (period ended 30 September 2022:
£1,497,000).
The following table presents those investments in portfolio companies whose
fair values are recognised in whole or in part using valuation techniques
based on assumptions that are not supported by prices or other inputs from
observable current market transactions in the same instrument and the effect
of changing one or more of those assumptions behind the valuation techniques
adopted based on reasonably possible alternative assumptions.
Valuation Technique Fair Value Fair Value Unobservable Inputs Reasonably possible shift Change in
30 September 31 March in input +/- valuation
2023 2023 +/(-) £’000
£’000 £’000
Multiple methodology 221,422 197,876 Multiple 10% 18,437/(19,050)
Illiquidity adjustment increase / Premium decrease 30% (26,347)
Illiquidity adjustment decrease / Premium increase 30% 23,880
CPORT* 7,343 21,568 Transaction price 10% 3,069/(3,069)
PWERM** 6,183 4,766 Probability of conversion 25% 252/(252)
NAV 6,388 7,295 Discount to NAV 30% 489/(489)
Sales Price - 22,790 N/a
* Calibrated price of recent transaction.
** Probability weighted expected return methodology.
The following table presents the movement of investments measured at fair
value, based on fair value measurement levels.
Level 3
Six months to Year to
30 September 31 March
2023 2023
£’000 £’000
Opening balance 254,295 268,807
Purchases at cost 6,879 19,854
Realisation proceeds (22,790) (44,224)
Gains on investments held at fair value 2,952 9,858
Closing balance as at 30 September 241,336 254,295
.
Independent Review Report to Augmentum Fintech plc
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2023 is not prepared,
in all material respects, in accordance with UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom’s Financial Conduct Authority.
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2023 which comprises the Condensed Consolidated Income Statement,
Consolidated Statement of changes in Equity, Condensed Consolidated Statement
of Financial Position, Condensed Consolidated Statement of Cash Flows and the
related notes.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, “Review of Interim Financial Information Performed by
the Independent Auditor of the Entity” (“ISRE (UK) 2410”). A review of
interim financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in
scope than an audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, “Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the group to
cease to continue as a going concern.
Responsibilities of Directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom’s Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom’s Financial Conduct Authority and
for no other purpose. No person is entitled to rely on this report unless such
a person is a person entitled to rely upon this report by virtue of and for
the purpose of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other purpose
and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
27 November 2023
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
.
Interim Management Report
Principal Risks and Uncertainties
A review of the half year and the outlook for the Company can be found in the
Chairman’s Statement and in the Portfolio Manager’s Review. The principal
risks and uncertainties faced by the Company fall into the following broad
categories: investment risks; portfolio diversification risk; cash
risk; credit risk; valuation risk; operational risk; and
key person risk. Information on these risks is given in the Annual Report for
the year ended 31 March 2023.
The Board believes that the Company’s principal risks and uncertainties have
not changed materially since the date of that report and are not expected to
change materially for the remaining six months of the Company’s financial
year.
Related Party Transactions
During the first six months of the current financial year, no transactions
with related parties have taken place which have materially affected the
financial position or the performance of the Group.
Going Concern
The Directors believe, having considered the Company’s investment objective,
risk management policies, capital management policies and procedures, and the
nature of the portfolio and the expenditure projections, that the Group has
adequate resources, an appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the foreseeable
future.
Directors’ Responsibilities
The Board of Directors confirms that, to the best of its knowledge:
(i) the condensed set of financial statements contained within this Half Year
Report has been prepared in accordance with Accounting Standard IAS 34,
‘Interim Financial Reporting’, as adopted in the UK;
(ii) the condensed set of financial statements give a true and fair view of
the assets, liabilities, financial position and return of the issuer and the
undertakings included in the consolidation; and
(iii) the Half Year Report includes a fair review of the information required
by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure Guidance and
Transparency Rules.
In order to provide these confirmations, and in preparing these financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable IFRS have been followed, subject to any material
departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business;
and the Directors confirm that they have done so.
On behalf of the Board of Directors
Neil England
Chairman
27 November 2023
.
Glossary and Alternative Performance Measures
Alternative Investment Fund Managers Directive (“AIFMD”)
Agreed by the European Parliament and the Council of the European Union and
transposed into UK legislation, the AIFMD classifies certain investment
vehicles, including investment companies, as Alternative Investment Funds
(“AIFs”) and requires them to appoint an Alternative Investment Fund
Manager (“AIFM”) and depositary to manage and oversee the operations of
the investment vehicle. The Board of the Company retains responsibility for
strategy, operations and compliance and the Directors retain a fiduciary duty
to shareholders.
Alternative Performance Measures (“APMs”)
The measures the Board of Directors uses to assess the Company’s performance
that are not defined under the International Financial Reporting Standards but
which are viewed as particularly relevant for investment trusts. Definitions
of the terms used and the basis of calculation are set out in this Glossary
and the APMs are indicated with an asterisk (*).
Convertible Loan Note
A convertible loan note is a loan which bears interest and is repayable but
may convert into shares under certain circumstances.
Discount or Premium
A description of the difference between the share price and the net asset
value per share. The size of the discount or premium is calculated by
subtracting the share price from the net asset value per share and is usually
expressed as a percentage (%) of the net asset value per share. If the share
price is higher than the net asset value per share the result is a premium. If
the share price is lower than the net asset value per share, the shares are
trading at a discount.
Gross IRR on Capital Deployed
Is the annualised return arising on investment related cash flows taking
account of the timing of each cash flow, and assuming all investments are
realised at their carrying value at the period end. It does not take account
of the Group's expenses or transactions with shareholders. It is derived by
computing the discount rate at which the present value of all investment
related cash flows are equal to the original amounts invested.
Initial Public Offering (“IPO”)
An IPO is a type of public offering in which shares of a company are sold to
institutional investors and usually also retail (individual) investors.
Through this process, colloquially known as floating, or going public, a
privately held company is transformed into a public company.
Internal Rate of Return (“IRR”)
Is the annualised return on an investment calculated from the cash flows
arising from that investment taking account of the timing of each cash flow.
It is derived by computing the discount rate at which the present value of all
subsequent cash flows arising from an investment are equal to the original
amount invested.
Performance fee – Company
AFML is entitled to a performance fee (previously referred to as carried
interest) in respect of the performance of the Company's investments. Each
performance fee operates in respect of investments made during a 24 month
period and related follow-on investments made for a further 36 month period,
save that the first performance fee shall be in respect of investments
acquired using 80% of the net proceeds of the Company’s IPO in March 2018
(including the Initial Portfolio), and related follow-on investments.
Subject to certain exceptions, AFML will receive, in aggregate, 15% of the net
realised cash profits from the sale of investments made over the relevant
period once the Company has received an aggregate annualised 10% realised
return on investments (the ‘hurdle’) made during the relevant period.
AFML's return is subject to a ‘’catch-up’’ provision in its favour.
The performance fee is paid in cash as soon as practicable after the end of
each relevant period, save that at the discretion of the Board payments of the
performance fee may be made in circumstances where the relevant basket of
investments has been realised in part, subject to claw-back arrangements in
the event that payments have been made in excess of AFML’s entitlement to
any performance fees as calculated following the relevant period.
The performance fee payable by the Company to AFML is accrued in the Company's
financial statements and eliminated on consolidation in the Group financial
statements.
Performance Fee – AFML
The performance fee arrangements within AFML were set up with the aim of
incentivising employees of AFML and aligning them with shareholders through
participation in the realised investment profits of the Group.
Any performance fee received by AFML will be allocated to its employees on a
discretionary basis by the Management Engagement & Remuneration Committee of
the Company.
NAV per share Total Return*
The theoretical total return on the NAV per share, reflecting the change in
NAV during the period assuming that any dividends paid to shareholders were
reinvested at NAV at the time the shares were quoted ex-dividend. This is a
way of measuring investment management performance of investment trusts which
is not affected by movements in the share price discount/premium.
Net Asset Value (“NAV”)
The value of the Group’s assets, principally investments made in other
companies and cash being held, minus any liabilities. The NAV per share is
also described as ‘shareholders’ funds’ per share. The NAV is often
expressed in pence per share after being divided by the number of shares in
issue. The NAV per share is unlikely to be the same as the share price, which
is the price at which the Company’s shares can be bought or sold by an
investor. The share price is determined by the relationship between the demand
and supply of the shares.
Net Asset Value (“NAV”) per share after performance fee*
The NAV of the Group as calculated above less the performance fee accrual made
by the Company divided by the number of issued shares.
Net Asset Value (“NAV”) per share after performance fee total return*
The Directors regard the Group’s NAV per share after performance fee total
return as being the critical measure of value delivered to shareholders over
the long term. The Board considers that the NAV per share after performance
fee better reflects the current value of each share than the consolidated NAV
per share figure, the calculation of which eliminates the performance fee.
Partnership
Augmentum I LP, a limited partnership registered in Jersey and a wholly-owned
subsidiary of the Company.
Total Shareholder Return*
The theoretical total return per share reflecting the change in share price
during the period and assuming that any dividends paid were reinvested at the
share price at the time the shares were quoted ex-dividend.
Unquoted investment
Investments in unquoted securities such as shares and debentures which are not
quoted or traded on a stock market.
.
The half year report will shortly be available for inspection on the Company's
website (https://augmentum.vc) and the National Storage Mechanism website
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism).
- END -
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