Schroders Cap Glbl - Half-year Report
30/09/2024 07:00
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RNS Number : 0933G Schroders Capital Global Innovation 30 September 2024
Schroders Capital Global Innovation Trust plc
Half Year Report
Schroders Capital Global Innovation Trust plc (the "Company") hereby submits
its Half Year Report for the six months ended 30 June 2024 as required by the
Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.2.
Key highlights
· The Company reported a NAV of 20.99p per share as of 30 June
2024, a decrease of 17.1% relative to the NAV per share as of 31 December 2023
(25.32p) and 8.1.% relative to the NAV per share as of 31 March 2024 (22.82p).
· The Investment Manager has continued to reposition the portfolio
to align with the long-term investment strategy focused on private equity and
has executed the Company's capital discipline approach.
· Two new investments were completed in the life sciences and
growth segments of the portfolio: Neurona Therapeutics, a clinical-stage
biopharmaceutical company focusing on therapies for chronic neurological
disorders, and "AI Company II" (actual name not disclosed), a privately held
company that provides high-quality data curation services for generative AI
models and application developers.
· As of 30 June 2024, the Company had £4.8 million in cash, £25.2
million in money market funds and a further £14.8 million invested in public
equity investments, which will be utilised to meet the funding requirements of
the existing portfolio, execute the buyback programme, and selectively target
new investments in innovative venture, growth and life sciences companies.
Investor Presentation
Please join us online at 09:00 am on Tuesday 1 October as Portfolio Managers
Tim Creed and Harry Raikes present the Company's interim results for the six
months ended 30 June 2024. Investors can register for the event
at: https://www.schroders.events/event/INOVHY24/websitePage:69ec5b2b-a3b7-41f8-ba96-10260c129ec7
Tim Edwards, Chair, Schroders Capital Global Innovation Trust plc:
"Despite the performance during the first half of the year, the Investment
Manager continues to remain focused on executing the Company's key priorities,
which include rebalancing the portfolio and maximising sales proceeds from
positions being exited, in order to create for shareholders a portfolio of
attractive global companies with reasonable prospects of sustained growth over
the long-term."
The Half Year Report is also being published in hard copy format and an
electronic copy of that document will shortly be available to download from
the Company's web pages: www.schroders.com/inov
(http://www.schroders.com/inov)
The Company has submitted a copy of its Half Year Report to the National
Storage Mechanism and it will shortly be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
Enquiries:
Schroder Investment Management Limited
Andy Pearce (Press) 020 7658 2000
Katherine Fyfe (Company Secretarial) 020 7658 6000
HALF YEAR REPORT AND FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2024
Legal Entity Identifier: 2138008X94M7OVE73l77
Information disclosed in accordance with DTR 4.2.2
PERFORMANCE SUMMARY
Net asset value ("NAV") per share total return*
-17.1%
(Year ended 31 December 2023: -11.2%)
Share price total return*
-18.8%
(Year ended 31 December 2023: -5.3%)
NAV per share
20.99p
(Year ended 31 December 2023: 25.32p)
Some of the financial measures are classified as Alternative Performance
Measures, as defined by the European Securities and Markets Authority and are
indicated with an asterisk (*). Definitions of these performance measures, and
other terms used in this report, are given on pages 30 and 31 together with
supporting calculations and sources where appropriate.
Investment objective
The investment objective of Schroders Capital Global Innovation Trust plc (the
"Company") is to achieve long-term capital growth through investing in a
diversified global portfolio of private and public equity companies.
Investment Policy
The portfolio manager employs a collaborative, team-based approach combining
skills, experience and research resources across its public and private equity
teams. It aims to identify private equity investments which demonstrate an
optimal combination of fast-growing, high-quality companies with strong
management teams and co-investors, and public companies with innovative
business models, a focus on organic growth and high-quality management.
The portfolio composition at any one time will reflect the opportunities
available to the portfolio manager, the performance of the underlying investee
companies and the maturity of the portfolio. The Company's portfolio will
typically consist of 30-80 holdings. The Company may become a significant
shareholder in any of the underlying investee companies. While the intention
is for each underlying investee company to represent not less than 20 per cent
of the Company over the longterm, the actual exposure may vary from time to
time reflecting the maturity of the portfolio and market environment at that
time.
The Company's portfolio is constructed on the basis of an assessment of the
fundamental value of individual securities and is not structured on the basis
of country or sector weightings. The Company's portfolio will be diversified
across a number of sectors and, while there are no specific limits placed on
exposure to any one country or sector, the Company will at all times invest
and manage the portfolio in a manner consistent with spreading investment
risk.
Scan this QR code on your smartphone camera to sign-up to receive regular
updates on Schroders Capital Global Innovation Trust plc
Ongoing charges ratio*
1.09%
(Year ended 31 December 2023: 1.08%)
Share price discount to NAV per share*
43.3%
(Year ended 31 December 2023: 42.1%)
Share price
11.90p
(Year ended 31 December 2023: 14.65p)
Revenue return per share
-0.12p
(31 December 2023: -0.20p)
This is not a sustainable product for the purposes of the Financial Conduct
Authority ("FCA") rules.
References to the consideration of sustainability factors and ESG integration
should not be construed as a representation that the Company seeks to achieve
any particular sustainability outcome.
CHAIR'S STATEMENT
"The recent performance has made it important for the Board and the Manager to
work closely and constructively to ensure that the Company has the platform
and the foundations to meet the expectations of our shareholders."
Performance and valuation
During the six-month period to 30 June 2024, the NAV per share decreased by
17.1% from 25.32p per share to 20.99p per share; the share price decreased by
18.8% from 14.65p to 11.90p; and the share price discount to NAV per share
widened from 42.1% to 43.3%.
Whilst this performance is clearly disappointing, the Investment Manager has
continued to execute the Company's strategy as agreed with the Board and we
have continued to implement our capital discipline policy. Your Board is
conscious of the Company's continuation vote in 2025 and is continuing to work
with the Manager on the Company's long-term strategy so it will have long-term
appeal to our shareholders. The Company's strategy remains as follows:
- Stay close to the portfolio and work with portfolio management teams,
co-investors, and other stakeholders to support business growth and a path to
profitability
- Rebalance the portfolio ensuring the appropriate liquidity (cash and
liquid public equities) to execute efficiently the buyback programme and
support the portfolio
- Maximise the sale proceeds from holdings, both public and private, as
part of the rebalancing exercise
- Complete new investments that align with our strategy
The Company's portfolio has had another challenging period. During the period,
the Investment Manager has continued to monitor progress across the various
investments, and has actively engaged with their management teams. Good
progress has been made by a number of the companies including Atom Bank,
Revolut, Nexeon and Carmot Therapeutics. However, this progress has not been
universal across the portfolio and other portfolio companies faced challenges
over the period, which has led to the Company's negative performance overall.
The main detractors to performance over the first half of the year included
the public equity holdings in the DNA sequencing company Oxford Nanopore
Technologies and, despite significant financial and product developments,
Autolus Therapeutics. In the Company's private equity holdings, Ocuterra and
Reaction Engines both contributed negatively to the performance over the
period.
The Investment Manager has continued to reposition the portfolio to align with
the long-term investment strategy focused on private equity, has executed the
Company's capital discipline approach, and has made two new investments into
companies in the life sciences and growth segments of the portfolio (further
details in the Investment Manager's Review).
The recent performance has made it important for the Board and the Manager to
work closely and constructively to ensure that the Company has the platform
and the foundations to meet the expectations of our shareholders. More details
on performance, valuation and portfolio activity can be found in the
Investment Manager's Review.
Capital discipline and share repurchases
As noted in the annual report and financial statements for the year ended 31
December 2023, the Board has restated its intention to repurchase shares equal
to at least 5% of the Company's issued share capital in each of the calendar
years 2023 and 2024, and in addition such number of shares in order to ensure
that over the period to the 2025 Annual General Meeting ("AGM"), the Company
has undertaken share repurchases in an amount equating to 25% of all net cash
realisations from the portfolio inherited from the previous portfolio manager.
As of 26 September 2024, the Company had repurchased 35,000,000 shares for
cancellation. No shares are held in treasury. Accordingly, the total number of
voting rights in the Company as of 26 September 2024 was 822,360,026.
Continuation vote
In accordance with the Company's Articles of Association, shareholders will
have the opportunity to vote on the continuation of the Company at its AGM in
2025 and every five years thereafter.
Board succession
Scott Brown retired from the Board at the AGM in May 2024 having served on the
Board since 2015. Following his departure, the Board continues to review its
composition and as stated in the Annual Report, have agreed to continue with
the composition of four Directors for the time being.
Results webinar
Please join the Investment Manager for a webinar in which they will report on
the half year ended 30 June 2024 and outline their thoughts on the future
direction of the portfolio. The presentation will be followed by a live
Q&A session. The webinar will take place on Tuesday 1 October 2024 at
9.00a.m. Register for the event at https://www.schroders.events/INOVHY24 or
via the QR code below:
Outlook
As of 30 June 2024, the Company had £4.8 million in cash, £25.2 million in
money market funds and a further £14.8 million invested in public equity
investments, which will be utilised to meet the funding requirements of the
existing portfolio, execute the buyback programme, and selectively target new
investments in innovative venture, growth and life sciences companies.
Despite the difficult performance during the first half of the year, the
Investment Manager continues to remain focused on executing the Company's key
priorities, which include rebalancing the portfolio and maximising sales
proceeds from positions being exited, in order to create for shareholders
a portfolio of attractive global companies with reasonable prospects of
sustained growth over the long-term.
Tim Edwards
Chair
27 September 2024
INVESTMENT MANAGER'S REVIEW
"Despite several headwinds, we have continued to make progress in delivering
the share buyback, shifting the portfolio to focus on private equity, and
investing in exciting new opportunities across venture, growth and life
sciences."
Summary
- The Company reported a NAV of 20.99p per share as of 30 June 2024, a
decrease of 17.1% relative to the NAV per share as of 31 December 2023
(25.32p) and 8.1% relative to the NAV per share as of 31 March 2024 (22.82p).1
- Performance over the first quarter was impacted by news, which was
previously disclosed in the Company's annual report and financial statements
for the year ended 31 December 2023, that OcuTerra's phase II diabetic
retinopathy trial failed to meet its endpoints. This subsequently resulted in
the position being valued to zero.
- Performance in the second quarter was further impacted by a
downwards revaluation to Reaction Engines, an Oxfordshire-based firm
developing innovative thermal management solutions for aerospace and other
industries, following news of slower than anticipated revenue growth which
would require further financing and time to become cash positive.
- Meanwhile, the share price of listed DNA sequencing company Oxford
Nanopore Technologies declined 54.9% during the period following weaker
performance than previously guided by management.
- The Company made total realisations of £25.6 million, including the
sale of Carmot Therapeutics to Roche, the full exit of Immunocore, further
sales of Oxford Nanopore Technologies, and the first milestone payment
following the sale of Kymab to Sanofi.
- Two new investments were completed: Neurona Therapeutics, a
clinical-stage biopharmaceutical company focusing on therapies for chronic
neurological disorders, and "AI Company II" (actual name not disclosed), a
privately held company that provides high-quality data curation services for
generative AI models and application developers.
- As of 30 June 2024, the Company had £4.8 million in cash, £25.2
million in money market funds(2) and £14.8 million in public equity
investments(3) to meet the funding requirements of the existing portfolio,
execute the buy-back programme(4), and selectively target new investments in
innovative venture, growth and life sciences companies.
(1) Source: Schroders
(2)A money market fund is a type of mutual fund that invests in short-term,
high-quality debt instruments, offering high liquidity, making it suitable for
preserving capital and accessing cash easily.
(3) Excluding BenevolentAI, which is fair value, priced by the AIFM.
(4) A buy-back is a company's purchase of its outstanding stock shares. It
increases the proportion of earnings that each share is worth. This stock
price will rise if the same price to earnings (P/E) ratio is maintained.
Past Performance is not a guide to future performance and may not be repeated.
The value of investments and the income from them may go down as well as up
and investors may not get back the amount originally invested. Exchange rate
changes may cause the value of investments to fall as well as rise.
This document may contain "forward-looking" information, such as forecasts or
projections. Please note that any such information is not a guarantee of any
future performance and there is no assurance that any forecast or projection
will be realised.
For help in understanding any terms used, please visit address
https://www.schroders.com/en-gb/uk/individual/glossary/
Introduction:
Progress made in the first half of 2024
In the annual report, we discussed our four key strategic areas as Investment
Manager. Here we discuss the progress made in the first half of the year
towards our long-term investment strategy of pursuing opportunities in
innovative, private companies globally across three key strategies: venture,
growth and life sciences.
1. Stay close to the portfolio and work with portfolio management teams,
co-investors, and other stakeholders to support business growth and a path to
profitability
32.2%
average sales growth for growth portfolio companies(5)
As Investment Manager, we monitor progress across the portfolio, and where our
relationship allows, engage with the management teams to help support
strategic planning, with specific examples provided regularly in our annual
report. During the first half of 2024, despite the challenges faced by
individual companies, several portfolio companies made good progress on
various fronts:
- Atom Bank published its full year 2024 annual report for the year
ending 31 March 2024 detailing 32% growth in net interest income (from £76
million to £100 million) and 575% growth in operating profit (from £4
million to £27 million).
- Bluewater Bio, the largest holding in the HP Environmental
technologies Fund, announced a significant new upgrade project of the North
Sitra wastewater treatment works in the Kingdom of Bahrain valued at £33
million.
- Revolut released its annual report for the year ending 31 December
2023 detailing 46% customer growth (from 26 million to 38 million), 95% group
revenue growth (from £0.9 billion to £1.8 billion) and a profit before tax
of £438 million.
- Nexeon announced the start of construction for its first
commercial-scale plant to deliver silicon anode material starting in 2025,
fulfilling the previously announced binding supply agreement with Panasonic.
- Genomics announced: (1) A new £35 million funding round led by
existing investors F-Prime Capital and Foresite Capital, including new
investors Infinity Investment Partners and US life insurer MassMutual, and (2)
A precision medicine collaboration with GSK to assess polygenic risk scores in
clinical trial design.
- Carmot Therapeutics announced its acquisition by Roche at a purchase
price of $2.7 billion.
Several portfolio companies that faced challenges include:
- Oxford Nanopore Technologies saw its share price fall by -54.9%
following revenue growth and profitability below management guidance and the
renegotiation of a key customer contract.
- Despite steps to commercialise its technology, revenue growth at
Reaction Engines has been slower than management anticipated, with the company
requiring further investment and time to become cash positive.
- OcuTerra Therapeutics' phase II diabetic retinopathy trial
failed to meet its endpoints.
- Despite significant financial and product developments at
Autolus Therapeutics, the company's share price decreased by 49.1% over the
period.
Meanwhile, as outlined for the first time in the annual report, we have
provided below our assessment of the overall portfolio funding risk. The table
breaks down equity investments over the relevant period by which portfolio
companies are required to raise further capital or risk failure.
As of 30 June 2024, 67% of equity investments (by value) were either
profitable, fully funded, with no need to raise further capital, or funded
beyond 2025. This also indicates that 8% of equity investments (by value) will
need to raise additional capital during 2024 and 25% during 2025.
Assessment of portfolio funding risk
% of equities
Year company is required to raise further funding 31 December 2023 30 June 2024
2024 12.0% 8.1%
2025 21.5% 24.9%
2026+ 31.7% 17.8%
Unprofitable (fully funded) 5.9% 8.0%
Profitable (incl. milestones) 28.9% 41.2%
Total equities 100.0% 100.0%
Source: Schroders, 2024. These figures represent forecasts and may not be
realised.
Information herein is believed to be reliable, but Schroders does not warrant
its completeness or accuracy.
2. Rebalance the portfolio ensuring the appropriate liquidity (cash and
liquid public equities) to execute efficiently the buyback programme and
support the portfolio
£30 million in cash and money market funds as of 30 June 2024
We continued altering the liquidity mix to ensure the Company is appropriately
positioned to execute efficiently the buyback programme and support the
portfolio. The Company continued its buyback programme buying back £3.6
million worth of shares.
As of 30 June 2024, the Company had £4.8 million in cash (December 2023:
£2.9 million), £25.2 million in money market funds and £14.8 million in
liquid public equity investments, which we believe to be sufficient to
continue successfully the buyback programme in 2024, meet the funding
requirements of the existing portfolio and selectively target new investments.
(5)As at 30 June 2024, the weighted average sales growth over the last 12
months or most recently available data for all growth investments valued using
a market-based approach, and excluded HP Environmental Technologies Fund as
well as Federated Wireless. Growth companies are companies that are younger in
their lifecycle.
3. Maximise the sale proceeds from holdings, both
public and private, as part of the rebalancing exercise
£25.6
million in distributions received over the six months to 30 June 2024
During 2024, we have continued to explore sales options for several holdings
in the portfolio. We reduced the exposure to certain public holdings with the
goal to position the portfolio to align better with the focus on private
equity. To this end, the Company realised £25.6 million over the six months
to 30 June 2024, exiting public equity holdings in Immunocore and
significantly reducing the holding in Oxford Nanopore Technologies.
In addition, previously announced private exits, including Carmot (acquired by
Roche), as well as Kymab (acquired by Sanofi) have further strengthened the
liquidity position of the Company.
% of total investments by strategy: inner ring = 31 December 2023, outer ring
= 30 June 2024
Any reference to regions/ countries/ sectors/ stocks/ securities is for
illustrative purposes only and not a recommendation to buy or sell any
financial instruments or adopt a specific investment strategy.
Source: Schroders, 2024.
4. Complete new investments that align with our new
strategy
2
ew investments completed over the six months to 30 June 2024
While ensuring the Company was in a position to execute successfully the
buyback programme, we simultaneously made good progress with new investments
that align to our long-term investment strategy, making two new investments,
Neurona Therapeutics, which fully aligns with our life sciences strategy, and
"AI Company II", a privately held company that provides high-quality data
curation services for generative Artificial Intelligence ("AI") models and
application developers, which aligns to our growth strategy. The name of the
company has not been disclosed due to confidentiality restrictions.
Economic and market backdrop
The macroeconomic backdrop has been mixed, driven by continued high interest
rates, despite falling inflation. However, generally the economic environment
continued to be resilient resulting in a mostly friendly economic environment.
In Europe, the macroeconomic environment improved overall with economic growth
and a relatively tight labor market, even though the picture was more mixed
for individual countries. China continues to have a challenging time with
lower than expected growth, driven mainly by the deteriorating property market
and resulting fall in consumer confidence. The US continued to defy
expectations of a recession, even at higher interest rates, however the
economy started to lose steam in the first half of the year. Globally, key
concerns continued to be the lowering of interest rates by central banks as
well as geopolitical tensions which includes both larger nations like the US
and China, as well as the potential for a regional conflict in the Middle
East.
Global equity markets enjoyed a generally positive environment in the first
half of 2024, which followed the pattern of the market recovery that started
in late 2023. Overall, it was largely technology stocks that benefitted the
most from anticipated gains derived from the development of their AI
capabilities.
Global venture capital activity continued to fall in the first half of 2024
with the number of deals declining by 24%, meaning that deal activity has
dropped below levels seen prior to the COVID-19 pandemic. Deal making has
shifted towards larger transactions with the average deal size being up 17%
year to date ("YTD"). A key focus of all venture activity has been investments
in AI which accounted for 28% of all capital raised. Key drivers of this were
raises into companies like xAI, CoreWeave and Scale. In terms of geography,
funding for new start-ups fell particularly in China, whilst other countries
in Asia saw boosts to funding. In terms of exits, these have seen a slight
decline versus the first half of 2024, with the US share of exits increasing
to be on par with Europe.
Source for venture data: CB Insights, State of Venture Q2 2024 Report.
Financial performance
YTD 2024 performance
The Company's portfolio had a challenging half year period impacted by the
performance of public equity holdings, Oxford Nanopore Technologies and
Autolus Therapeutics, venture holding, Reaction Engines, and life science
holding, OcuTerra Therapeutics.
The NAV as of 30 June 2024 was £174.2 million, a decrease of 19.8% compared
with the NAV (£217.1 million) as of 31 December 2023. The NAV per share as of
30 June 2024 was 20.99p per share, a decrease of 17.1% compared with the NAV
per share (25.32p) as of 31 December 2023.
The 19.8% decrease in NAV comprised:
- Public equity: -11.8%
- Private equity growth: +0.6%
- Private equity venture: -4.2%
- Private equity life sciences: -2.5%
- Money market funds: +0.3%
- Repurchase and cancellation of the Company's own shares: -1.7%
- Costs and other movements: -0.5%
Private equity Money Cash and cash
Life sciences Venture Growth Public equity market funds equivalents Other NAV
Value as at
31 December 2023 31.0 39.3 73.3 56.8 9.7 2.9 4.1 217.1
+ Investments 4.9 5.7 - - 25.3 (35.9) - -
- Realisations at value (10.5) - - (15.1) (10.5) 36.1 - -
+/- Fair value gains/(losses) (5.4) (9.1) 1.2 (25.7) 0.7 - - (38.3)
+/- Reclassified holdings - - - - - - - -
- Repurchase and cancellation of
the Company's own shares - - - - - (3.6) - (3.6)
+/- Costs and other movements - - - - - 5.3 (6.3) (1.0)
Value as at
30 June 2024 20.0 35.9 74.5 16.01 25.2 4.8 (2.2) 174.2
(1)Including BenevolentAI.
Source: Schroders 2024
Exchange rate changes may cause the value of investments to fall as well as
rise
Public equity holdings
The Company's public equity holdings saw a fair value loss of -45.2% of the
opening fair value, contributing -11.8% to the overall -19.8% decrease in NAV
over the six-month period.
A significant driver was the performance of Oxford Nanopore Technologies that
fell by -54.9% over the reporting period. The company released a trading
update in January preceding its annual results in March. The company grew Life
Science Research Tools ("LSRT") revenue by 15% (from £147 million to £169
million), underlying LSRT revenue by 39% (from £108 million to £150
million), while extending its adjusted Earnings Before Interest, Taxes,
Depreciation and Amortisation ("EBITDA") losses (from £79 million to £105
million). These results fell short of analyst consensus estimates with
management citing difficulties in the final quarter associated with U.S.
semiconductor regulation in Asia and one-off customer delays. The company also
announced changes to its commercial agreement with G42 Laboratories, a key
customer delivering the Emirati Genome Programme, and reduced its medium-term
growth and profitability guidance.
Despite significant financial and product developments at Autolus
Therapeutics, the company's share price decreased by 49.1% over the period. In
January the US Food and Drug Administration ("FDA") accepted the company's
biologics license application for Obe-cel as a treatment for
relapsed/refractory adult B-Cell acute lymphoblastic leukemia. Additionally
in April, the European Medicines Agency announced the acceptance of a
marketing authorization application for the same indication. In June, Autolus
presented longer-term follow-up and additional data analysis of the FELIX
study at the American Society of Clinical Oncology, where they highlighted
that most patients who responded to Obe-cel showed durable responses, with a
potential for long-term survival outcomes. Notably, 40% of patients remained
in ongoing remission without undergoing subsequent stem cell transplantation
or other intervention. The study also found that ongoing CAR T persistence was
associated with improved event-free survival.
For help in understanding any terms used, please visit address
https://www.schroders.com/en-gb/uk/individual/glossary/
In February, Autolus reached an agreement with BioNTech to invest $50 million
under a license and option agreement. As part of this agreement, BioNTech will
receive a mid-single digit royalty on net sales of Obe-cel and will have the
option to access Autolus' infrastructure to accelerate the development of
BNT211 in additional tumor types. BioNTech can also co-commercialise certain
candidates in specific territories. Furthermore, BioNTech has been granted an
exclusive license to use Autolus' proprietary binders and technology, which
includes potential milestone payments and royalties on net sales if options
are exercised. Another major development for Autolus occurred in February when
the company raised $350 million in a public offering, and BioNTech also
agreed to invest an additional $200 million in Autolus through a private
placement resulting in $550 million in total proceeds.
Growth holdings
The Company's growth holdings saw a fair value gain of 1.6% of the opening
fair value, reducing the overall decrease in NAV by 0.6%.
Important contributors to this positive performance included Ada Health,
Revolut and Agrostar. Revolut demonstrated strong continued growth, doubling
revenues for 2023 and was able to translate successfully that into a £483
million pre-tax profit, up from a loss in the prior year. Agrostar, the tech
enabled agriculture commerce platform that helps farmers with high quality
agriculture inputs and sells produce to global markets, is on track to achieve
EBITDA breakeven driven by the strong growth and profitability of its branded
products as per discussions with the company.(2)
(2)Please note that the value of investments and the income from them can go
down as well as up and investors may not get back the amounts originally
invested. This is not a recommendation and you should speak to your adviser
before making any investment decision
Venture holdings
The Company's venture holdings saw a fair value loss of 23.2% of the opening
fair value, contributing 4.2% to the overall decrease in NAV.
This was mainly due to the fall in valuation of Reaction Engines which
decreased by 87% of the opening fair value. The main driver for this was
slower than anticipated revenue growth and that the company will require
further investment and time to become cash positive.
Life sciences holdings
The Company's private equity life sciences holdings saw a fair value loss of
17.4% of the opening fair value, contributing 2.5% to the overall decrease in
NAV.
The notable detractor from performance was the portfolio's holding in
OcuTerra, which was revalued at zero (from a fair value of £4.8 million as of
31 December 2023). This decision was made after the company announced that its
phase II DR:EAM clinical trial of the selective RGD integrin inhibitor,
nesvategrast (OTT166) eye drops, for patients with diabetic retinopathy, did
not meet its endpoints. Although the data confirmed the safety of OTT166, the
experimental medication did not show a statistically significant improvement
in the diabetic retinopathy severity scale scores compared to the placebo
group.
Development of life science investments
Source: Schroders Capital, 2024. Companies shown are for illustrative purposes
only and should not be viewed as a recommendation to buy or sell.
Foreign exchange
Over the period, the fair value of investments denominated in Swiss Franc and
Euro were negatively impacted by appreciation in the value of the British
Pound Sterling. Meanwhile, the fair value of investments denominated in United
States Dollar were positively impacted by depreciation in the value of the
British Pound Sterling.
Investment activity
Realisations
During the six months to 30 June 2024, the Company made realisations totalling
£25.6 million. This included £4.5 million from the sale from Kymab, £4.5
million from the sale of Carmot Therapeutics, £4.6 million from the full exit
of Immunocore and £10.5 million from reducing the holding in Oxford Nanopore
Technologies. The proceeds of these sales continue to be used for the buyback
programme, follow-on investments and selective new investments.
Investments
During the six months to 30 June 2024, the Company invested into Neurona
Therapeutics, "AI Company II" and made two follow-on investments into iOnctura
and Memo Therapeutics.
Life sciences
Neurona Therapeutics
The Company invested $1.6 million as part of the Neurona Therapeutics Series E
financing round, which raised $120 million for the company. The proceeds from
the financing will be used to advance the company's pipeline of wholly owned,
off-the-shelf cell therapies for multiple indications, including its lead
investigational candidate, NRTX-1001. The round was co-led by Viking Global
Investors and Cormorant Asset Management with capital raised from several new
and existing investors, including the Company.
Neurona Therapeutics is a privately held, clinical-stage biotherapeutics
company focused on developing therapies to treat chronic diseases of the
nervous system. It was founded at the University of California, San Francisco
and is building on two decades of research. The company has built a robust
regenerative medicine discovery platform and developed proprietary methods to
manufacture specific types of cell therapy candidates for targeted delivery
into the damaged nervous system.
Growth
"AI Company II" (actual name not disclosed) is a privately held company that
provides high-quality data curation services for generative AI models and
application developers. It also offers a full-stack generative AI platform for
enterprises to onboard their data, curate it and use it to train AI models in
one place. These services are used by customers across various industries.
This investment completed in two tranches during the second and third
quarters.
Outlook
The core tenets of the strategy pursued in 2023 remain unchanged in 2024. We
continue to stay close to the portfolio, work with portfolio company
management teams, and when possible, seek to maximise potential exit outcomes.
Below we look at the latest outlook across the four different strategies:
Growth
Atom Bank is now substantially the largest holding in the portfolio
representing 13.5% of total investments. As described above, the company made
good progress in full year 2023, however with inflation over the past two
years placing UK households under pressure, and with interest rates at or
close to peak, the less benign interest rate outlook we believe is expected to
squeeze margins in the banking sector. This is being monitored closely, and in
the months ahead, Atom Bank will need to balance carefully growth with
profitability to maintain its momentum.
In addition, we would draw attention to the post balance sheet events section
of this report which details expected valuation adjustments during Q3.
Revolut announced two important updates to its business outlook. Firstly, the
company received its UK banking licence with restrictions from the Prudential
Regulation Authority, the regulator responsible for overseeing the UK banking
sector, to complete the build out of their UK banking operations.
Subsequently, the company announced a secondary share sale providing liquidity
for employees at a $45 billion valuation. With these developments, the company
is well set to continue its impressive growth journey as what we believe to be
Europe's most valuable private technology company. Revolut is expected to be
positively revalued during Q3.
We expect negative valuation adjustments to Ada Health and Bizongo. Despite
positive momentum in the first half year, resulting in an upwards revaluation
in Q2 2024, the near-term business expectations for Ada Health have been
reassessed. In addition, Bizongo has been revised down to reflect the latest
developments within the company.
Venture
The venture segment of the portfolio by design is where we expect to see the
highest level of risk and therefore widest dispersion of returns (excluding
life sciences) and 2024 is likely to be no different. These holdings are the
hardest to value, often requiring a milestone-based approach which, at times,
can result in large swings in valuation.
Following the disappointing news regarding Reaction Engines, key factors for
success in 2024 are focused on Nexeon making progress with building its first
commercial scale production plant, Federated Wireless driving further
commercial and federal traction and Genomics signing new partnerships to
demonstrate the value of its polygenic risk scores. Meanwhile, the
venture-stage software holdings, Securiti, Attest and MMC SPV 3, will continue
to be focused on scaling customers, revenue and targeting timely sustained
profitability.
Life sciences
The primary drivers of expected value in the therapeutics portfolio are the
readouts from ongoing clinical trials. iOnctura will continue conducting phase
II clinical trials of their lead therapeutic, roginolisib, specifically
focusing on Uveal melanoma. Additionally, they have recently started a new
phase II clinical trial for roginolisib in combination with the PD-1 targeting
antibody dostarlimab in collaboration with GSK, aimed at treating non-small
cell lung cancer.
Anthos, after demonstrating its potential in best-in-class thrombosis
prevention last year, will persist in the development of Abelacimab, a Factor
XI inhibitor. This will be carried out through pivotal clinical trials, with
the goal of preventing thrombosis in patients with atrial fibrillation and
those at risk of cancer-associated thrombosis.
Epsilogen has successfully obtained approval from the UK Medicines and
Healthcare Products Regulatory Agency for the phase Ib trial of MOv18 IgE.
This trial is anticipated to commence later in 2024 and will assess the
effectiveness of MOv18 IgE in patients with platinum-resistant ovarian cancer.
Public equities
We expect the public equity portfolio, principally Oxford Nanopore
Technologies and Autolus Therapeutics, to remain volatile as the valuation
environment for loss-making listed companies remains unforgiving. After the
period end, Oxford Nanopore Technologies published its half year trading
update detailing underlying year-on-year LSRT revenue growth of 12.4%, lower
than the annual target of 20-30%, although in-line with the company's expected
phasing, with 2024 and longer-term guidance unchanged. In August, the company
also announced the completion of an £80 million equity issue led by strategic
investor, Novo Holdings A/S, the investment company responsible for managing
the assets and the wealth of the Novo Nordisk Foundation. No specific use of
proceeds was disclosed, only to strengthen the company's financial position
and provide further headroom to implement the business plan through adjusted
EBITDA breakeven in 2027 and cashflow breakeven in 2028.
Autolus is currently waiting for regulatory approval to market Obe-cel, a
treatment for relapsed/refractory Acute Lymphocytic Leukemia. In the US, the
anticipated response date, also known as the Prescription Drug User Fee Act
date, from the US FDA is November 16, 2024. Regulators have also accepted the
filings for regulatory approval of Obe-cel in the European Union. Furthermore,
there are plans to submit the regulatory filing for Obe-cel in the United
Kingdom in the second half of 2024. Additional clinical trial results for two
other programs are also expected by the end of 2024. First, the results of the
phase 1 clinical trial (ALLCAR19) for Obe-cel in B-cell Non-Hodgkin Lymphoma
and Chronic Lymphocytic Leukemia will be available. Second, the results of the
phase 1 dose confirmation study (CARLYSLE) in refractory systemic lupus
erythematosus patients are also expected to be released.
Artificial Intelligence
Schroders Capital has been investing in venture capital for over 25 years.
Over that time, our team has seen various waves of technological innovation
and witnessed first-hand the ripple effect through different sectors and
regions. Our belief is that AI, most recently focused on the field of
generative AI that has been enabled by the advent of large language models,
has the potential for innovation and disruption on a scale comparable to the
introduction of email, the internet and smartphones.
Schroders Capital has been investing in AI for over 10 years with exposure
today, both directly and indirectly, to 52 of the top 100 AI companies, and 8
of the 10 most highly valued generative AI startups1. Our venture capital fund
managers are amongst leading investors in the theme.
This is a theme that we, as Investment Manager, are particularly excited about
and expect to become an increasingly prominent focus in our portfolios,
including this Company's portfolio. Our venture capital investment team are
committing significant resources to this area, working closely with our data
insights and internal technology teams, researching the sector and uncovering
new opportunities.
To date, the Company has completed three AI investments;
- Securiti - the pioneer of a centralised platform that enables the
safe use of data with generative AI covering security, privacy, governance and
compliance.
- "AI Company I" (MMC SPV3) - an early leader in an emerging segment
of AI software.
- "AI Company II" - a privately held company that provides
high-quality data curation services for generative AI models and application
developers.
We expect to make further investments in this sector going forward.
(5)As ranked by Pitchbook in terms of latest post-money valuation for private
companies in the Generative AI vertical. Post-money valuation is the value of
a company after it has received external funding or investment. It is
calculated by adding the pre-money valuation (the company's value before the
new investment) to the amount of new equity received from investors.
Rebalancing and diversification
With 46% of equities as of 30 June 2024 representing investments made by
Schroders, we continue to seek to maximise the sale proceeds from holdings,
both public and private, as part of the rebalancing exercise to ensure
sufficient liquidity (cash and liquid public equities) to execute efficiently
the buyback programme, support the portfolio and make new investments.
As outlined in the annual report, we expect diversification to be a key topic
for 2024. As capital availability allows, we seek to target new investments
that align with our three strategies (venture, growth and life sciences) with
the aim of building a diversified portfolio which more appropriately balances
the risk of each strategy. This goal remains a moving target with the
requirements of the buyback programme and uncertain timing of potential future
exits. In this regard, we are delighted with the two new investments completed
over the period, although given our latest view of potential liquidity events
in the portfolio, we expect that capital available for new investments will be
constrained through the second half of the year.
We understand the frustration felt by shareholders over another difficult
period, however Schroders Capital remains committed to the Company and
delivering long-term value for shareholders.
Schroders has expressed its own views and opinions in this document and these
may change.
Top 10 investments
Quoted/ 31 December % of total 30 June % of total
Portfolio company unquoted 2023 investments 2024 investments
Atom Bank(2) Unquoted 23,105 11.0 23,105 13.5
HP Environmental Technologies Fund(2) Unquoted 10,918 5.2 10,576 6.2
Ada Health Unquoted 9,638 4.6 10,486 6.1
Oxford Nanopore Technologies(2) Quoted 41,669 19.8 10,173 5.9
Revolut(3) Unquoted 7,888 3.8 8,670 5.1
Back Market(4) Unquoted 8,839 4.2 8,648 5.0
Nexeon(2) Unquoted 7,039 3.4 8,235 4.8
AgroStar(5) Unquoted 7,279 3.5 7,897 4.6
AI Company II(6) Unquoted - - 5,651 3.3
Federated Wireless(5) Unquoted 6,392 3.0 5,381 3.1
(2)Assets inherited from the previous portfolio manager
(3)Revolut is held via the Company's holding in Target Global Selected
Opportunities, LLC - Series Space, a single asset fund.
(4)Back Market is held via the Company's holding in Sprints Capital Ellison
LP, a single asset fund.
(5)AgroStar is held via the Company's holding in Schroders Capital Private
Equity Asia Mauri VIII Ltd, a single asset fund.
(6)The company's actual name is not disclosed due to confidentiality
restrictions.
Portfolio's three largest positions
Atom Bank
Leading UK app-only challenger bank
Atom Bank is the UK's first bank built exclusively for mobile. It aims to
redefine what a bank should be, making things easier, more transparent, and
better value. Atom Bank currently offers savings accounts, mortgages and
business loans.
In June 2024, Atom Bank published its annual report for the 12-month period to
31 March 2024, with key highlights including:
- Deposits grew by 14% from £5.7 billion to £6.6 billion
- Loan book grew by 39% from £3.0 billion to £4.1billion
- Net interest income grew by 32% from £76 million to £100 million
- Net interest margin remained stable at 2.8% despite pressure on
spreads within the residential mortgage market
- Operating profit grew by 575% from £4 million to £27 million,
primarily due to the loan book growth, keeping costs below plan and
maintaining customer metrics
Source: Atom Bank Annual Report
(https://www.atombank.co.uk/investor-information/)
HP Environmental Technologies Fund
A fund invested in emerging environmental technologies that was seeded through
the secondary purchase of a portfolio of seven environmental technology
companies (previously called Ombu Group).
The HP Environmental Technologies Fund specialises in high growth clean tech
firms. The largest holding within the fund is wastewater treatment company,
Bluewater Bio.
In May 2024, Bluewater Bio announced an upgrade project of the North Sitra
wastewater treatment works in the Kingdom of Bahrain valued at £33 million.
The contract was formally concluded and signed in Westminster, at the
Department for Business and Trade headquarters. Bluewater Bio will be
responsible for all aspects of engineering, acting as a contractor and
technology supplier, through the provision of their advanced treatment
technologies, HYBACS® and FilterClear®. As the result of population and
industrial expansion, additional and enhanced treatment capacity is required
to continue to produce treated water suitable for reuse.
Ada Health
A medical AI platform that simplifies healthcare journeys and helps people
take care of themselves
Ada Health has developed a clinical grade AI powered health assessment and
triaging software providing users with diagnoses and care recommendations
following a dynamic questionnaire prompted by the user's responses regarding
their symptoms. The technology platform is monetized through i) commercial
services to pharma by identifying and qualifying potential patients with
certain diseases and ii) supporting health systems payors by providing safe
and accurate care navigation and health assessment support. Ada Health offers
unmatched clinical breadth, accuracy and safety,6,000+ condition models and
10,000+ symptoms and risk factors from 14,000+ unique sources, continuously
tested to optimise condition coverage.
Ada Health recorded significant revenue growth between 2020 to 2023 and
reached EBITDA level profitability in 2023, driven by new large contract wins,
although continues to maintain a strong dependency on key contracts and
expanding its client base.
The recent business outlook has become more uncertain and this is reflected as
a post balance sheet event (please refer to Note 10 in the section on Notes to
the Financial Statements).
Information herein is believed to be reliable but Schroders does not warrant
its completeness or accuracy.
Source: Schroders. Figures have been rounded to nearest %.
*Based on country of risk.
INVESTMENT PORTFOLIO
as at 30 June 2024
The 20 largest investments account for 92.1% of total investments by value (30
June 2023: 94.8% and 31 December 2023: 91.1%).
Total
Fair value investments
Holding Quoted/unquoted Strategy Industry sector £'000 %
Equities
Atom Bank(1) Unquoted Growth Financials 23,105 13.5
HP Environmental Technologies Fund(1) Unquoted Growth Industrials 10,576 6.2
Ada Health Unquoted Growth Health Care 10,486 6.1
Oxford Nanopore Technologies(1) Quoted Public Health Care 10,173 5.9
Revolut LLP(3) Unquoted Growth Financials 8,670 5.1
Back Market(2) Unquoted Growth Consumer 8,648 5.0
Nexeon(1) Unquoted Venture Industrials 8,235 4.8
AgroStar4 Unquoted Growth Technology 7,897 4.6
AI Company II Unquoted Venture Technology 5,651 3.3
Federated Wireless(1) Unquoted Venture Technology 5,381 3.1
Genomics(1) Unquoted Venture Health Care 5,139 3.0
Bizongo(5) Unquoted Growth Technology 5,063 3.0
Autolus Therapeutics(1) Quoted Public Health Care 4,592 2.7
Cequr(1) Unquoted Life sciences Health Care 4,368 2.5
Securiti Unquoted Venture Technology 4,204 2.5
iOnctura Unquoted Life sciences Health Care 3,090 1.8
Attest Technologies Unquoted Venture Business Services 2,844 1.7
Anthos Therapeutics Unquoted Life sciences Health Care 2,461 1.4
Epsilogen Unquoted Life sciences Health Care 2,021 1.2
Kymab(1) Unquoted Life sciences Health Care 1,850 1.1
MMC SPV 3 LP(7) Unquoted Venture Technology 1,663 1.0
Araris Biotech Unquoted Life sciences Health Care 1,420 0.8
Reaction Engines(1) Unquoted Venture Industrials 1,406 0.8
AMO Pharma(1) Unquoted Life sciences Health Care 1,361 0.8
Industrial Heat(1) Unquoted Venture Industrials 1,318 0.8
Memo Therapeutics Unquoted Life sciences Health Care 1,280 0.7
Neurona Therapeutics Unquoted Life sciences Health Care 1,266 0.7
BenevolentAl(1,6) Quoted Public Health Care 1,179 0.7
A2 Biotherapeutics Unquoted Life sciences Health Care 922 0.5
Econic(1) Unquoted Venture Industrials 58 -
ARC Group(1) Quoted Public Business Services 11 -
Novabiotics(1) Unquoted Life sciences Health Care - -
OcuTerra(1) Unquoted Life sciences Health Care - -
Carmot Therapeutics Unquoted Life sciences Health Care - -
Freevolt (formerly Drayson)(1) Unquoted Venture Technology - -
Just Benchmarks(1) Unquoted Venture Financials - -
Mafic(1) Unquoted Venture Industrials - -
Metaboards(1) Unquoted Venture Technology - -
Mereo BioPharma Group(1) Quoted Life sciences Health Care - -
Evofem Biosciences(1) Unquoted Life sciences Health Care - -
Bodle Technologies(1) Unquoted Venture Technology - -
Rutherford Health(1) Unquoted Venture Health Care - -
Lignia Wood(1) Unquoted Venture Industrials - -
Oxsybio(1) Unquoted Life sciences Health Care - -
Spin Memory(1) Unquoted Venture Technology - -
Kind Consumer(1) Unquoted Venture Consumer Staples - -
Total equities 146,338 85.3
Money market funds
Schroder Special Situations - Sterling
Liquidity Plus Fund Quoted Cash Collective - SICAV 25,229 14.7
Total money market funds 25,229 14.7
Total investments(8) 171,567 100.0
(1) Assets inherited from the previous portfolio manager.
(2) Back Market is held via the Company's holding in Sprints Capital Ellison
LP, a single asset fund.
(3) Revolut is held via the Company's holding in Target Global Selected
Opportunities, LLC - Series Space, a single asset fund.
(4) AgroStar is held via the Company's holding in Schroders Capital Private
Equity Asia Mauri VIII Ltd, a single asset fund.
(5) Bizongo is held via the Company's holding in Schroders Capital Private
Equity Asia Maurit V Ltd, a single asset fund.
(6) BenevolentAI is quoted, but the market is inactive. Thus its valuation has
been determined in accordance with the process followed for unquoted assets.
(7) MMC SPV 3 LP is a single asset fund that holds an AI software company.
(8) Total investments comprise:
£'000 %
Unquoted 130,383 76.0
Listed on the London Stock Exchange 10,572 6.1
Listed on a recognised stock exchange overseas 5,383 3.2
Collective investment scheme - money market instruments 25,229 14.7
Total 171,567 100.0
DIRECTORS' REPORT
Principal risks and uncertainties
The Board has determined that the key risks for the Company are strategy risk,
economic and market risk, investment performance and portfolio concentration
risk, liquidity risk, operational risk, information technology and information
security risk, key person dependency risk and ESG risk. These risks are set
out on pages 38 to 41 of the annual report and financial statements for the
year ended 31 December 2023.
The Board regularly monitors the Company's liquid assets since the
recommencement of share repurchases. There is continued geopolitical and
economic uncertainty. The Company's principal risks and uncertainties, and
their mitigation, have not materially changed during the six months to 30
June 2024 or since the annual report was published on 28 March 2024.
Going concern
The Board has considered the Company's principal risks and uncertainties
(including whether there are any emerging risks); has scrutinised the detailed
cash flow forecast prepared by the Manager; and considered their assessment of
the likelihood and quantum of funds which could be raised from sales of
investments. As a result, the Board is comfortable that the Company will have
sufficient liquid funds to pay operating expenses and capital commitments.
On this basis, the Board considers it appropriate to adopt the going concern
basis of accounting in preparing the Company's accounts.
Related party transactions
There have been no transactions with related parties that have materially
affected the financial position or the performance of the Company during the
six months ended 30 June 2024.
Directors' responsibility statement
In respect of the half year report for the six months ended 30 June 2024, the
Directors confirm that, to the best of their knowledge:
- the condensed set of Financial Statements contained within have been
prepared in accordance with the United Kingdom Generally Accepted Accounting
Practice in particular with Financial Reporting Standard 104 "Interim
Financial Reporting" and with the statement of Recommended Practice,
"Financial Statements of Investment Companies and Venture Capital Trusts"
issued in July 2022 and give a true and fair view of the assets, liabilities,
financial position and profit and loss of the Company as at 30 June 2024, as
required by the Disclosure Guidance and Transparency Rule 4.2.4R; and
- the half year report includes a fair review of the information as
required by the Disclosure Guidance and Transparency Rules 4.2.7R and 4.2.8R.
The half year report has not been audited nor reviewed by the Company's
auditor.
Tim Edwards
Chair
For and on behalf of the Board
27 September 2024
STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2024 (unaudited)
(Unaudited) (Unaudited) (Audited)
For the six months For the six months For the year
ended 30 June 2024 ended 30 June 2023 ended 31 December 2023
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Losses on investments held at fair
value through profit or loss - (38,307) (38,307) - (33,566) (33,566) - (32,015) (32,015)
Net foreign currency gains/(losses) - 45 45 - (39) (39) - 42 42
Income from investments 106 - 106 501 - 501 784 - 784
Gross return/(loss) 106 (38,262) (38,156) 501 (33,605) (33,104) 784 (31,973) (31,189)
Management fee (457) - (457) (621) - (621) (1,252) - (1,252)
Administrative expenses (652) - (652) (772) - (772) (1,341) - (1,341)
Net loss before finance
costs and taxation (1,003) (38,262) (39,265) (892) (33,605) (34,497) (1,809) (31,973) (33,782)
Finance costs - - - (16) - (16) (16) - (16)
Net loss before taxation (1,003) (38,262) (39,265) (908) (33,605) (34,513) (1,825) (31,973) (33,798)
Taxation - - - - - - - - -
Net loss after taxation (1,003) (38,262) (39,265) (908) (33,605) (34,513) (1,825) (31,973) (33,798)
Loss per share (pence) 4 (0.12) (4.55) (4.67) (0.10) (3.72) (3.82) (0.20) (3.57) (3.77)
The "Total" column of this statement is the profit and loss account of the
Company. The "Revenue" and "Capital" columns represent supplementary
information prepared under guidance issued by The Association of Investment
Companies. The Company has no other items of other comprehensive income, and
therefore the net loss on ordinary activities after taxation is also the total
comprehensive loss for the period, therefore no separate Statement of
Comprehensive Income has been prepared.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2024 (unaudited)
Capital
Called-up Redemption Special Capital Revenue
share capital reserve reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2023 8,573 513 883,145 (646,164) (29,003) 217,064
Repurchase and cancellation of the Company's own shares (275) 275 (3,638) - - (3,638)
Net loss after taxation - - - (38,262) (1,003) (39,265)
At 30 June 2024 8,298 788 879,507 (684,426) (30,006) 174,161
for the six months ended 30 June 2023 (unaudited)
Capital
Called-up share Share Redemption Special Capital Revenue
capital premium reserve reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2022 9,042 891,017 44 - (615,003) (27,178) 257,922
Repurchase and cancellation of the Company's
own shares (17) - 17 - (256) - (256)
Net loss after taxation - - - - (33,605) (908) (34,513)
At 30 June 2023 9,025 891,017 61 - (648,864) (28,086) 223,153
for the year ended 31 December 2023 (audited)
Capital
Called-up share Share Redemption Special Capital Revenue
capital premium reserve reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 December 2022 9,042 891,017 44 - (615,003) (27,178) 257,922
Cancellation of share premium - (891,017) - 891,017 - - -
Repurchase and cancellation of the Company's
own shares (469) - 469 (7,872) 812 - (7,060)
Net loss after taxation - - - (31,973) (1,825) (33,798)
At 31 December 2023 8,573 - 513 883,145 (646,164) (29,003) 217,064
STATEMENT OF FINANCIAL POSITION
as at 30 June 2024 (unaudited)
(Unaudited) (Unaudited) (Audited)
30 June 30 June 31 December
2024 2023 2023
Note £'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 5 171,567 192,828 210,093
Current assets
Debtors 1,117 307 5,511
Cash and cash equivalents 4,841 30,954 2,913
5,958 31,261 8,424
Current liabilities
Creditors: amounts falling due within one year 6 (3,364) (936) (1,453)
Net current assets 2,594 30,325 6,971
Total assets less current liabilities 174,161 223,153 217,064
Net assets 174,161 223,153 217,064
Capital and reserves
Called-up share capital 7 8,298 9,025 8,573
Share premium - 891,017 -
Capital redemption reserves 788 61 513
Special reserve 879,507 - 883,145
Capital reserves (684,426) (648,864) (646,164)
Revenue reserve (30,006) (28,086) (29,003)
Total equity shareholders' funds 174,161 223,153 217,064
Net asset value per share (pence) 8 20.99 24.73 25.32
Registered in England and Wales as a public company limited by shares
Company registration number: 09405653
CASH FLOW STATEMENT
for the six months ended 30 June 2023 (unaudited)
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months ended months ended year ended
30 June 30 June 31 December
2024 2023 2023
£'000 £'000 £'000
Operating activities
Net loss before finance costs and taxation (39,265) (34,497) (33,782)
Adjustments for:
Capital loss before taxation 38,262 33,605 31,973
Decrease/(increase) in debtors 9 (120) (134)
(Decrease)/increase in creditors (455) 114 514
Net cash outflow from operating activities (1,449) (898) (1,429)
Investing activities
Purchases of investments (33,452) (8,420) (35,999)
Sales of investments 40,469 24,503 31,178
Net cash inflow/(outflow) from investment activities 7,017 16,083 (4,821)
Financing activities
Repurchase and cancellation of the Company's own shares (3,685) (256) (6,985)
Finance costs - (58) (16)
Net cash outflow from financing activities (3,685) (314) (7,001)
Change in cash and cash equivalents 1,883 14,832 (13,251)
Cash and cash equivalents at the beginning of the period 2,913 16,122 16,122
Exchange movements 45 (39) 42
Cash and cash equivalents at the end of the period 4,841 30,954 2,913
NOTES TO THE FINANCIAL STATEMENTS
1. Financial Statements
The information contained within the financial statements in this half year
report has not been audited or reviewed by the Company's independent auditor.
The figures and financial information for the year ended 31 December 2023 are
extracted from the latest published financial statements of the Company and do
not constitute statutory financial statements for that year. Those financial
statements have been delivered to the Registrar of Companies and included the
report of the auditor which was unqualified and did not contain a statement
under either section 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
Basis of accounting
The financial statements have been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, in particular with Financial Reporting
Standard 104 "Interim Financial Reporting" and with the Statement of Recommend
Practice "Financial Statements of Investment Trust Companies and Venture
Capital Trusts" issued by the Association of Investment Companies in July
2022.
All of the Company's operations are of a continuing nature.
The accounting policies applied to these financial statements are consistent
with those applied in the financial statements for the year ended 31 December
2023. In particular, the policy on valuation of investments is consistent with
that detailed in note 1(b) to the financial statements for the year ended 31
December 2023, presented on page 69 of the annual report.
3. Taxation
The Company's effective corporation tax rate is nil, as deductible expenses
exceed taxable income. The Company intends to continue meeting the conditions
required to maintain its status as an Investment Trust Company, and therefore
no provision has been made for deferred tax on any capital gains or losses
arising on the revaluation or disposal of investments.
4. Loss per share
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months ended months ended year ended
30 June 30 June 31 December
2024 2023 2023
£'000 £'000 £'000
Revenue loss (1,003) (908) (1,825)
Capital loss (38,262) (33,605) (31,973)
Total loss (39,265) (34,513) (33,798)
Weighted average number of shares in issue during the period 841,102,572 902,740,094 895,075,078
Revenue loss per share (pence) (0.12) (0.10) (0.20)
Capital loss per share (pence) (4.55) (3.72) (3.57)
Total loss per share (pence) (4.67) (3.82) (3.77)
The basic and diluted loss per share is the same because there are no dilutive
instruments in issue.
5 Investments held at fair value through profit or loss
(a) Movement in investments
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months ended months ended year ended
30 June 30 June 31 December
2024 2023 2023
£'000 £'000 £'000
Opening book cost 553,693 581,253 581,253
Opening investment holding losses (343,600) (338,749) (338,749)
Opening fair value 210,093 242,504 242,504
Purchases at cost 35,865 8,420 35,999
Sales proceeds (36,084) (24,530) (36,395)
Losses on investments held at fair value through profit or loss (38,307) (33,566) (32,015)
Closing fair value 171,567 192,828 210,093
Closing book cost 550,101 547,562 553,693
Closing investment holding losses (378,534) (354,734) (343,600)
Closing fair value 171,567 192,828 210,093
The Company received £36,084,000 (period ended 30 June 2023: £24,530,000 and
year ended 31 December 2023: £36,395,000) from investments sold in the
period. The book cost of the investments when they were purchased was
£39,457,000 (period ended 30 June 2023: £42,111,000 and year ended 31
December 2023: £63,560,000). These investments have been revalued overtime
and, until they were sold, any unrealised gains/losses were included in the
fair value of the investments.
(b) Unquoted investments, including investments quoted in
inactive markets
Material revaluations of unquoted investments during the period (unaudited)
Opening Closing
valuation at valuation at
31 December Valuation Purchases/ 30 June
20231 adjustment (disposals) 2024
£'000 £'000 £'000 £'000
Reaction Engines 10,625 (9,219) - 1,406
OcuTerra 4,804 (4,804) - -
1 Based on the closing holding at opening prices.
Material disposals of unquoted investments during the period (unaudited)
Profit based
on carrying
Carrying value at value at
31 December 30 June
Book cost 2023 Sales Proceeds 2024
£'000 £'000 £'000 £'000
Kymab - 4,520 4,539 19
Carmot Therapeutics 1,379 4,262 4,506 244
6. Creditors: amounts falling due within one year
(Unaudited) (Unaudited) (Audited)
30 June 30 June 31 December
2024 2023 2023
£'000 £'000 £'000
Repurchase and cancellation of the Company's own shares awaiting settlement 28 - 75
Securities purchased awaiting settlement 2,460 314 -
Management fee payable 253 - 633
Other creditors and accruals 623 622 745
3,364 936 1,453
The Directors consider that the carrying amount of creditors falling due
within one year approximates to their fair value.
7. Called-up share capital
(Unaudited) (Unaudited) (Audited)
For the six For the six For the
months ended months ended year ended
30 June 30 June 31 December
2024 2023 2023
£'000 £'000 £'000
Ordinary shares of 1p each, allotted, called up and fully paid:
Opening balance of 857,360,026 (31 December 2022: 904,219,238) shares 8,573 9,042 9,042
Repurchase and cancellation of 27,560,000 (period ended 30 June 2023:
1,735,000
and year ended 31 December 2023: 46,859,212) shares (275) (17) (469)
Closing balance of 829,800,026 (30 June 2023: 902,484,238 and 31 December 8,298 9,025 8,573
2023: 857,360,026) shares
8. Net asset value per share
(Unaudited) (Unaudited) (Audited)
30 June 30 June 31 December
2024 2023 2023
£'000 £'000 £'000
Net assets (£'000) 174,161 223,153 217,064
Shares in issue at the period end 829,800,026 902,484,238 857,360,026
Net asset value per share (pence) 20.99 24.73 25.32
9. Disclosures regarding financial instruments measured at
fair value
The Company's financial instruments within the scope of FRS 102 that are held
at fair value comprise its investment portfolio.
FRS 102 requires that financial instruments held at fair value are categorised
into a hierarchy consisting of the three levels below. A fair value
measurement is categorised in its entirety on the basis of the lowest level
input that is significant to the fair value measurement.
Level 1 - valued using unadjusted quoted prices in active markets for
identical assets.
Level 2 - valued using observable inputs other than quoted prices included
within Level 1.
Level 3 - valued using inputs that are unobservable.
At 30 June, the Company's investment portfolio and any derivative financial
instruments were categorised as follows:
30 June 2024 (unaudited)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities - quoted 14,776 25,229 1,179 41,184
Investments in equities - unquoted - - 130,383 130,383
Total 14,776 25,229 131,562 171,567
The Level 2 asset relates to the holding in Schroders Special Situations -
Sterling Liquidity Plus Fund. BenevolentAI is quoted, but the market is
inactive. Thus its valuation has been determined in accordance with the
process followed for unquoted assets and included in Level 3 above.
30 June 2023 (unaudited)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities - quoted 52,089 - 3,627 55,716
Investments in equities - unquoted - - 137,112 137,112
Total 52,089 - 140,739 192,828
There have been no transfers between levels during the period ended 30 June
2023.
30 December 2023 (audited)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Investments in equities - quoted 54,603 9,733 2,176 66,512
Investments in equities - unquoted - - 143,581 143,581
Total 54,603 9,733 145,757 210,093
The Level 2 asset relates to the holding in Schroders Special Situations -
Sterling Liquidity Plus Fund. BenevolentAI is quoted, but the market is
inactive. Thus its valuation has been determined in accordance with the
process followed for unquoted assets and included in Level 3 above.
10. Events after the interim date that have not been reflected in
the financial statements for the interim period
On 16 August 2024, Revolut Ltd, one of the Company's growth investments,
announced a secondary share sale to provide employees with a liquidity
opportunity. The Company, while not participating in this secondary share
sale, considered the relevant information implied from this transaction as
part of its own valuation assessment and currently estimates a positive
valuation adjustment of £1.8 million to the 30 June 2024 net asset value.
The Company has assessed the valuation of its other unquoted holdings based on
information received until the date of this interim report, including recent
business updates, changes to business projections, and the Company's own
estimates of current valuation levels. The Company estimates negative
valuation adjustments to the 30 June 2024 net asset value of £3.8m in Bizongo
because of developments within the company and £2.9m in Ada Health due to
changes in business expectations.
In total, the assessed valuation changes amount to a net decrease of £4.9
million, which corresponds to an approximate 2.8% decline to the 30 June 2024
net asset value. The Company has evaluated these developments and determined
that they qualify as non-adjusting events for these interim financial
statements. All unquoted holdings, including the investments mentioned above,
will undergo further evaluation and final determination in line with the
Company's valuation policy as part of the 30 September 2024 quarterly net
asset value publication.
DEFINITIONS OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES
The terms and performance measures below are those commonly used by investment
companies to assess values, investment performance and operating costs.
Numerical calculations are given where relevant. Some of the financial
measures below are classified as Alternative Performance Measures ("APMs") as
defined by the European Securities and Markets Authority. Under this
definition, APMs include a financial measure of historical financial
performance or financial position, other than a financial measure defined or
specified in the applicable financial reporting framework. APMs have been
marked with an asterisk.
Net asset value ("NAV") per share
The NAV per share of 20.99p (31 December 2023: 25.32p) represents the net
assets attributable to equity shareholders of £174,161,000 (31 December
2023: £217,064,000) divided by the number of shares in issue of 829,800,026
(31 December 2023: 857,360,026).
The change in the NAV amounted to -17.1% (year ended 31 December 2023:
-11.2%) over the period.
Total return*
The combined effect of any dividends paid, together with the rise or fall in
the share price or NAV per share. Total return statistics enable the investor
to make performance comparisons between investment companies with different
dividend policies. Any dividends received by a shareholder are assumed to have
been reinvested in either the assets of the Company at its NAV per share at
the time the shares were quoted ex-dividend (to calculate the NAV per share
total return) or in additional shares of the Company (to calculate the share
price total return). The Company has not declared a dividend in either 2023 or
2024.
The NAV total return for the period ended 30 June 2024 is calculated as
follows:
Opening NAV at 31/12/23 25.32p
Closing NAV at 30/06/24 20.99p
NAV total return, being the closing NAV, expressed
as a percentage change in the opening NAV: -17.1%
The NAV total return for the year ended 31 December 2023 is calculated as
follows:
Opening NAV at 31/12/22 28.52p
Closing NAV at 31/12/23 25.32p
NAV total return, being the closing NAV, expressed
as a percentage change in the opening NAV: -11.2%
The share price total return for the period ended 30 June 2024 is calculated
as follows:
Opening Share price at 31/12/23 14.65p
Closing Share price at 30/06/24 11.90p
Share price total return, being the closing share
price, expressed as a percentage change in the
opening share price: -18.8%
The share price total return for the year ended 31 December is calculated as
follows:
Opening Share price at 31/12/22 15.47p
Closing Share price at 31/12/23 14.65p
Share price total return, being the closing share
price, expressed as a percentage change in the
opening share price: -5.3%
Discount/premium*
The amount by which the share price of an investment trust is lower (discount)
or higher (premium) than the NAV per share. If shares are trading at a
discount, investors would be paying less than the value attributable to the
shares by reference to the the underlying assets. A premium or discount is
generally the consequence of supply and demand for the shares on the stock
market. The discount or premium is expressed as a percentage of the NAV per
share. The discount at the period end amounted to 43.3% (31 December 2023:
42.1%), as the closing share price at 11.90p (31 December 2023: 14.65p) was
18.8% (31 December 2023: 5.3%) lower than the closing NAV of 20.99p (31
December 2023: 25.32p).
(Net cash)/gearing*
The gearing percentage reflects the amount of borrowings (i.e. bank loans or
overdrafts) which the Company has drawn down and invested in the market. This
figure is indicative of the extra amount by which shareholders' funds would
move if the Company's investments were to rise or fall. This represents
borrowings used for investment purposes, less cash, expressed as a percentage
of net assets. If the figure so calculated is negative, this is shown as a
"Net cash" position. The gearing figure at the relevant period/year end is
calculated as follows:
2024 2023
£'000 £'000
Borrowings used for investment
purposes, less cash (4,841) (2,913)
Net assets 174,161 217,064
(Net cash)/gearing (%) (2.8) (1.3)
Leverage*
For the purpose of the Alternative Investment Fund Managers (AIFM) Directive,
leverage is any method which increases the Company's exposure, including the
borrowing of cash and the use of derivatives. It is expressed as the ratio
of the Company's exposure to its net asset value and is required to be
calculated both on a "Gross" and a "Commitment" method. Under the Gross
method, exposure represents the sum of the absolute values of all positions,
so as to give an indication of overall exposure. Under the Commitment method,
exposure is calculated in a similar way, but after netting off hedges which
satisfy certain strict criteria.
The Company's leverage policy and details of its leverage ratio calculation
and exposure limits as required by the AIFMD are published on the Company's
webpages and within this report. The Company is also required to periodically
publish its actual leverage exposures. As at 30 June 2024 these were:
% of net asset value
Maximum Actual
Gross method 310 99.01
Commitment method 120 100
Ongoing Charges*
Ongoing charges are calculated in accordance with the Association of
Investment Companies recommended methodology. When the financial reporting
period is not a full year, the ongoing charges are annualised to obtain a
12-month ongoing charges figure. This figure includes management fee and all
other operating expenses, excluding finance costs and transaction costs. For
the current period, the ongoing charges amount to £2,151,000 (31 December
2023: £2,593,000), expressed as a percentage of the average daily net asset
values during the period of £197,803,000 (31 December 2023: £239,109,000).
30 June 31 December
2024 2023
£'000 £'000
Management fee and all other operating
expenses excluding finance costs, transaction
costs and any performance fee payable 2,151 2,593
Average daily net asset values during the
period/year 197,803 239,109
Ongoing charges ratio 1.09 1.08
SHAREHOLDER INFORMATION
Warning to shareholders
Companies are aware that their shareholders have received unsolicited
telephone calls or correspondence concerning investment matters. These are
typically from overseas-based 'brokers' who target UK shareholders, offering
to sell them what often turn out to be worthless or high risk shares or
investments. These operations are commonly known as 'boiler rooms'. These
'brokers' can be very persistent and extremely persuasive. Shareholders are
advised to be wary of any unsolicited advice, offers to buy shares at a
discount or offers of free company reports. If you receive any unsolicited
investment advice:
• Make sure you get the correct name of the
person and organisation
• Check that they are properly authorised by the
FCA before getting involved by visiting https://register.fca.org.uk
• Report the matter to the FCA by calling 0800
111 6768 or visiting
https://fca.org.uk/consumers/report-scam-unauthorised-firm
• Do not deal with any firm that you are unsure
about
If you deal with an unauthorised firm, you will not be eligible to receive
payment under the Financial Services Compensation Scheme. The FCA provides a
list of unauthorised firms of which it is aware, which can be accessed at
https://www.fca.org.uk/consumers/unauthorised-firmsindividuals#list.
More detailed information on this or similar activity can be found on the FCA
website at https://www.fca.org.uk/consumers/protectyourself-scams
INFORMATION ABOUT THE COMPANY
www.schroders.com/inov
Directors
Tim Edwards (Chair)
Lamia Baker
Stephen Cohen
Jane Tufnell
Registered office
1 London Wall Place
London EC2Y 5AU
Tel: +44 (0) 20 7658 6000
Advisers
Alternative Investment Fund Manager (the "AIFM" or "Manager")
Schroder Unit Trusts Limited
1 London Wall Place
London EC2Y 5AU
Investment Manager
Schroder Investment Management Limited
1 London Wall Place
London EC2Y 5AU
Schroders Capital Management (Switzerland) AG
Affolternstrausse 56, CH-8050
Zurich, Switzerland
Company Secretary
Schroder Investment Management Limited
1 London Wall Place
London EC2Y 5AU
Email: amcompanysecretary@schroders.com
(mailto:amcompanysecretary@schroders.com)
Depositary and custodian
HSBC Bank plc
8 Canada Square
London E14 5HQ
Corporate broker
Winterflood Securities Limited
Riverbank House
2 Swan Lane
London EC4R 3GA
Legal adviser
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
Independent Auditor
Ernst & Young LLP
25 Churchill Place
London E14 5EY
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Shareholder Helpline:
0800 032 0641(1)
Website: www.shareview.co.uk (http://www.shareview.co.uk)
(1)Calls to this number are free of charge from UK landlines.
Communications with shareholders are mailed to the address held on the
register. Any notifications and enquiries relating to shareholdings, including
a change of address or other amendment should be directed to Equiniti Limited
at the address above.
Other information
Company number
09405653
Shareholder enquiries
General enquiries about the Company should be addressed to the Company
Secretary at the Company's Registered Office.
Dealing codes
SEDOL: BVG1CF2
ISIN: GB00BVG1CF25
Ticker: INOV
Global Intermediary Identification Number (GIIN)
U73RHA.99999.SL.826
Legal Entity Identifier (LEI)
2138008X94M7OVE73l77
Privacy notice
The Company's privacy notice is available on its web pages.
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. END IR FLFSEAAIDFIS