4 July
2022
Augmentum Fintech
plc
Annual Financial
Report for the year ended 31 March
2022
Augmentum Fintech plc (LSE: AUGM) (the “Company” or
“Augmentum”), the UK’s only publicly listed investment company
solely focused on the fintech sector, announces its audited Annual
Results for the year ended 31 March
2022.
Financial highlights
• NAV per share after
performance fee increased by 19.0% to
155.2p1 (31 March
2021: 130.4p).
• IRR of 22.6% on
invested capital since inception (31 March
2021: 19%).
• Available cash at
year end of £31.3 million, which has increased to £60.6 million as
of today following the exit from interactive investor.
• Raised net proceeds
of £53.6 million through an oversubscribed fundraising in
July 2021.
• Unrealised gains of
£56.7 million (2021: £26.7 million) across the portfolio.
Portfolio highlights
• £60.8
million2 invested in 7 new companies and 7 existing
portfolio companies (2021: £15.4 million2 invested
in 2 new companies and 11 existing portfolio companies).
• Total of £1.3
billion equity raised by portfolio companies in the year
(2021: £185 million).
• interactive investor
acquired by abrdn for £1.5 billion which completed post year end,
and returned £42.8 million to the Company, representing an 11 times
return on money invested.
• Grover completed a
€113.0 million Series C funding round.
• Tide has grown
market share of UK SME banking to 7%.
• Onfido grew revenue
90% in 2021 to over $100.0 million
and reported 134% year-on-year growth in the US.
• Top 10 holdings
growing at an average of 96% YoY and have an average of 17 months
cash runway or are profitable.
Neil England, Chairman of
Augmentum Fintech plc commented:
“I am pleased to present our fourth set of positive annual
results since the launch of Augmentum Fintech plc in 2018.
The Company’s portfolio of investments has again performed very
well with an increase in Net Asset Value (NAV) per share after
performance fee of 19.0%. However, the share price and total
shareholder return do not reflect the strong performance of the
portfolio and have been influenced by the global mark down of
listed technology stocks and associated market sentiment.
In July 2021 we raised gross
proceeds of £55.0 million through a significantly oversubscribed
fundraising. This provided the resources for our Portfolio Manager
to continue to add new exciting fintech companies to the portfolio
and to make further investments in existing portfolio companies.
However, the second half of the year has seen a slower rate of
deployment from the Company reflecting the disciplined approach to
investment decisions which has often seen our Portfolio Manager
decline to participate in investments at prices that others have
been prepared to pay.
Following the exit from Dext early in the first half of the year
we made three further exits from SRL Global, Seedrs and interactive
investor. The latter has been acquired by abrdn for £1.5 billion
which completed after the year end giving the Company an 11 times
return on money invested.
The portfolio companies continue to benefit from the active
engagement of the Portfolio Manager, and most of these have cash
runways that exceed 12 months of current requirements, with our top
five investments all in that position.
Over the reporting period we have welcomed Conny Dorrestijn and
Sir William Russell to the Board. We
now consider the Board to be the right size for the Company’s
market capitalisation and stage of development, with an appropriate
and diverse balance of skills, knowledge and experience.
The investment pipeline remains strong and the Portfolio Manager
continues to have visibility over the bulk of the opportunities in
European fintech. The Board believe that, despite market headwinds
affecting the current share price, the Company will generate
rewarding returns to shareholders.”
Tim Levene, CEO of Augmentum
Fintech Management Limited commented:
“We began the year coming out of Covid and ended it with further
economic uncertainty caused by higher inflation and the prospect of
increasing interest rates which post year end we now are
experiencing, all compounded by a rapidly changing geopolitical
situation in Europe.
But, uncertain times drive innovation and activity in fintech
continues to grow and so do the opportunities. Over the last 12
months our challenge has been finding opportunities where the entry
price ultimately rewards us in time for the risk we are willing to
take. There has been a slew of new investors in the fintech space,
many of whom were prepared to pay any price to build exposure. We
are starting to see some of this money leave the sector which will
continue to lead to a healthy correction in entry prices later this
year and beyond. We must remain disciplined on price while
continuing to deliver advantaged deal access for our shareholders.
Our dictum holds that not every good business is a good
investment.
Therefore, our pace of investment slowed over the course of the
year. In the second half of the year we invested £16.4 million,
compared to £44.4 million in the first six months.
The quality of opportunities in our pipeline remains high with
more and more talent drawn to the sector. Our belief in the
potential of the sector remains as strong as ever, yet our
investment bar must remain high. Our central thesis of investing
only in areas of high conviction and/or secular trends in consumer
behaviour will continue to dominate our decision making.
We are experienced managers who have worked through similar
challenging economic cycles and continue to be hands on managers
actively engaged in our portfolio companies. Our core holdings in
the portfolio are well-placed, well-funded and with sufficient
liquidity to benefit from continuing market opportunities as they
evolve.”
Notes
1 This is considered to be an Alternative
Performance Measure. The financial statements in the Annual Report
set out the required statutory reporting measures of the Company’s
financial performance. In addition, the Board assesses the
Company’s performance against a range of criteria which are viewed
as particularly relevant for investment trusts, which are
summarised in the key performance indicators in the Annual Report.
Definitions of the terms used are set out in the Annual Report.
2 Net investments of £48.0 million (2021: £14.3
million).
Enquiries:
Augmentum Fintech
Tim Levene, Portfolio Manager
Nigel Szembel, Investor Relations |
+44 (0)20 3961 5420
+44 (0)7802 362088
nigel@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, Alaina Wong
(Investment Banking) |
+44 (0)20 7496
3000 |
Frostrow Capital LLP
Paul Griggs, Company Secretary |
+44 (0)20
3709 8733 |
About Augmentum Fintech
Augmentum invests in fast growing fintech businesses that are
disrupting the financial services sector. Augmentum is the UK’s
only publicly listed investment company focusing on the fintech
sector in the UK and wider Europe,
having launched on the main market of the London Stock Exchange in
2018, giving businesses access to patient capital and support,
unrestricted by conventional fund timelines and giving public
markets investors access to a largely privately held investment
sector during its main period of growth.
.
Augmentum Fintech plc
Annual Report and Financial
Statements
for the year ended 31st March
2022
.
CHAIRMAN’S STATEMENT
Financial Highlights
|
31
March 2022 |
31
March 2021 |
NAV per Share after
performance fee* |
155.2p |
130.4p |
NAV per Share after
performance fee Total Return* |
19.0% |
12.3% |
Total Shareholder
Return* |
(16.4%) |
128.8% |
(Discount)/Premium
to NAV per Share after performance fee* |
(14.3%) |
21.9% |
Ongoing Charges
Ratio* |
1.7% |
1.9% |
* These
are considered to be Alternative Performance Measures. Please see
the Glossary and Alternative Performance Measures on page 78.
.
I am pleased to present our fourth annual report since the
launch of the Company in March 2018.
This report covers the year ended 31 March
2022.
Investment Policy
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.
Performance
Your Company’s portfolio of investments has yet again performed
very well with an increase in the Company’s Net Asset Value (NAV)
per share (after performance fee) of 19.0%. Performance remains
ahead of our stated target returns. As you will read in the
Portfolio Manager’s Review on page 15 a number of milestones have
been achieved within the portfolio which give us confidence in its
current value and future prospects.
However, the share price, and hence the total shareholder
return, has not kept pace. The global mark down of listed
technology stocks and the group-think of market sentiment has had
its effect, even though the Company has had a period of strong
performance. The disconnect between sentiment and fact is extremely
frustrating.
Portfolio
Most portfolio changes in the year took place in the first half
of the period under review, leading up to the July fundraise, and
were summarised in the half year report. The latter half of the
year was characterised by a lot of new capital chasing fintech
assets, valuations reflecting that and a slower rate of deployment
from the Company consistent with its measured approach. Fundraise
valuations have had large multiples paid in some cases, with 20
times revenue a regular occurrence. By contrast, the average
forward revenue multiple of the Company’s top ten investments at
31 March 2022 was approximately 5.3
times.
It follows that, although we have continued to see lots of
interesting opportunities, we have declined to participate on terms
that others have been prepared to pay. We have a disciplined
approach to our investment decisions and a proven investment model.
Good companies do not make good investments if pricing does not
appropriately reflect the risk. We do not expect these high
investment multiples to sustain and, indeed, market corrections
since the year end have already brought multiples to more sensible
levels.
As you will read in the Portfolio Manager’s Review, we made
follow on investments in Zopa and Cushon to support their growth
plans.
Shareholders will be aware that one of our largest, later stage
investments, interactive investor, has been sold to abrdn in a £1.5
billion deal, which completed after the year end. The Company
received proceeds of £42.8 million, representing an 11 times return
on money invested.
In current markets, one of the concerns that investors may have
is around the ability of the portfolio companies to raise new
capital to fund their growth. I am pleased to report that the bulk
of our investments have cash runways that exceed 12 months current
requirements and all of our top 5 investments are in this position.
Additionally, your Company has cash reserves available to support
any new funding rounds if required to do so.
There is a full review of the portfolio and investment
transactions in the year in the Portfolio Manager’s Review
beginning on page 15.
Valuations
Together with our advisers, we have carefully reviewed both the
status and the forecasts of all of the portfolio companies. We have
used appropriate methodologies to determine the value of each
investment and to sense check our conclusions. The outcome of this
is reflected in the valuations in this report. We also benefit from
some of our investments occupying a senior position in the capital
structures of the investee companies, protecting against downside
risk.
Discount Control
After a prolonged period of trading at a premium to NAV,
reflecting the opportunity of exposure to private fintech
businesses via Europe’s only specialist publicly listed vehicle,
the shares have traded at a discount for much of 2022. We therefore
undertook a modest programme of accretive buybacks to the benefit
of shareholders during the year and have continued to do so after
the year end. 687,911 shares were bought back into treasury during
the Company’s financial year, at an average price of 131.1p per
share, representing an average discount to the 31 March 2022 NAV after performance fee of 15.5%.
Subsequent to the year end a further 1,104,361 shares have been
bought back, at an average price of 121.1p per share, representing
an average discount to the 31 March
2022 NAV after performance fee of 22.0%.
The Board has sought to convey to the market our confidence in
the value of the underlying portfolio.
All shares purchased are being held in treasury and will
potentially be reissued when the share price returns to a premium
to NAV per share after performance fee.
We will seek to renew shareholders’ authorities to issue and buy
back shares at the forthcoming AGM. As we have highlighted
previously, the Board considers the NAV per share after performance
fee to be the most appropriate metric of NAV and to best reflect
the value of each share. Accordingly, the Company is seeking
shareholder authority to issue shares by reference to the NAV per
share after performance fee. Further details can be found in the
Notice of the AGM.
Dividend
No dividend has been declared or recommended for the year. Your
Company is focused on providing capital growth and has a policy to
only pay dividends to the extent that it is necessary to maintain
the Company’s investment trust status.
2021 Fundraise
As set out in my half year statement, the Company’s fundraise in
July 2021 raised gross proceeds of
£55 million and was significantly oversubscribed. 40,590,406 new
ordinary shares were issued at 135.5p per share by way of the
initial placing, open offer, offer for subscription and
intermediaries offer. The issue price represented a premium of 3.9%
to the NAV per ordinary share as at 31 March
2021 and a discount of 6.1% to the closing price per
ordinary share on 11 June 2021 (this
being the last business day prior to the announcement of the issue
price). Notwithstanding an attractive pipeline of prospective new
investments that offer the potential to grow the fund further,
plans for further fundraises are on hold given market
conditions.
Potential Returns of Capital
As set out on page 23 of this annual report, the Company may, at
the discretion of the Directors, return a proportion of the gains
realised during a year from the disposal of investments. Factors
influencing this will include the quantum of any sale proceeds, the
opportunities offered by the current investment pipeline and the
working capital requirements of the Company. Following the sale of
interactive investor we have considered whether some of the
proceeds should be returned to shareholders or retained to
facilitate future investment opportunities.
The Company is growing in value but has not reached the scale we
aspire to and the current share price discount will probably
frustrate our ability to raise new capital for the foreseeable
future, given macro-economic events. Our pipeline suggests a number
of compelling propositions will become available. After
consultation with major shareholders, we have therefore decided to
retain the bulk of these proceeds for reinvestment to support our
capital growth objective and utilise the balance to support a
limited accretive share buyback programme. In the event that our
pipeline does not deliver the investment opportunities we expect in
the coming year then the Board will reconsider this decision.
Portfolio Management
Our investment team continues to work hard evaluating a wide
range of investment opportunities, reviewing and challenging
financial and commercial metrics in order to identify those most
likely to be successful. 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 focused on managing these investments and
carefully growing the portfolio further. The investment team is
also committed to a responsible investment approach through the
lifecycle of the investments, from pre-screening to exit, believing
that the integration of Environmental, Social and Governance
(“ESG”) factors within the investment analysis, diligence and
operating practices is pivotal in mitigating risk and creating
sustainable, profitable investments.
I would like to take this opportunity to thank the team for
maintaining their energy and diligence during some long hours.
Board
I am delighted to welcome two new non-executive colleagues to
our Board. Conny Dorrestijn joined on 1
November 2021 and Sir William
Russell on 1 April 2022. Conny
has been an active and high profile part of the European fintech
scene for many years and she has worked with a number of early
stage fintech businesses. We hope her network will help us improve
our reach on the continent. William brings extensive fintech and
financial services experience, most recently as Lord Mayor of
London, and has an understanding
of our own investor base. They have both joined the Audit,
Valuations, Nominations and Management Engagement &
Remuneration committees. Conny and William will offer themselves
for election by shareholders at the forthcoming AGM.
We now consider the Board to be the right size for the Company’s
market capitalisation and stage of development, with an appropriate
balance of skills, knowledge and experience.
AGM
The fourth AGM of the Company will be held on Wednesday,
14 September 2022 at 11.00 a.m. at the offices of Augmentum Fintech
Management Limited, 5th floor, 4 Chiswell Street EC1Y
4UP. We fully expect the AGM to be held in normal physical format
again this year. Nonetheless, the Board strongly encourages
shareholders to register their votes in advance by voting online
using the Registrar’s portal, www.signalshares.com or, if they are
not held directly, by instructing the nominee company through which
the shares are held. Registering votes online does not preclude
shareholders from physically attending the meeting.
The Notice of the AGM will be sent to shareholders when the
annual report is published. Both documents will also be available
to view on or download from the Company’s website at
www.augmentum.vc.
The Directors consider that all the resolutions listed are in
the best interests of the Company and its shareholders and
recommend voting in favour them, as the Directors intend to do in
respect of their own holdings.
Outlook
High inflation and rising interest rates, and the debate about
their effect on companies and the people they serve, will dominate
sentiment for the coming months. Experience tells us that growth
companies will be out of favour, often with no correlation to their
own underlying performance. Your Company has little influence on
this.
We continue to be pleased with the performance of our portfolio
and in particular its five largest investments, all of which are
growing strongly and have dynamic growth plans, good funding
runways and a clear path to profitability if they are not already
there. We maintained our investment discipline and we expect our
shareholders to reap the benefits of this in the future. The
underlying need to digitise and transform last century’s
infrastructure remains, as does our appeal as a supportive
investor. Our pipeline remains strong and we continue to have
visibility over the bulk of the opportunities in European
fintech.
All this leads your Board to believe that, despite market
headwinds affecting our current share price, the Company will
generate rewarding returns to the patient
shareholder.
Neil England
Chairman
1 July 2022
.
PORTFOLIO MANAGER’S REVIEW
Overview
Despite a backdrop of continued economic uncertainty fuelled by
the current geopolitical and macroeconomic challenges, the
financial services industry continues to go through a major digital
transformation. The industry has seen record levels of investment
over the past 12 months, and it is important to distinguish between
the opportunity that is still ahead of us alongside the ongoing and
much welcomed moderation in fintech valuation multiples both in the
private and public markets.
Markets are understandably volatile, and the tech sector has
perhaps been the hardest hit. Many high profile public fintech
businesses have been hit hard. Market volatility has foiled many
IPO plans and many of the SPACs (special purpose acquisition
companies) that were crowding the headlines in 2021. We have also
seen a contraction in the digital asset (crypto) sector. This
shake-out has shone a light on some of the obstacles and shortfalls
the sector still needs to overcome as it becomes more mainstream,
but this doesn’t diminish the fundamental disruptive potential of
blockchain technologies.
But uncertain times drive increasing innovation, and activity
continues unabated in high potential earlier stage fintech
companies. With significant volumes of “dry powder” (fund
commitments raised over the last couple of years and not yet
deployed) in the European venture market, and a finite number of
high quality companies, valuations at the early stage remain
relatively cushioned from broader public market uncertainty.
Maintaining price discipline and delivering advantaged deal access
therefore remain critical to the work that we do in securing
long-term returns for our shareholders.
Investments
Activity in the period since I last wrote to you in the half
year report has reflected our continued discipline and need for
high conviction. Despite writing several investment term sheets
over the past 12 months, we saw a significant reduction in our
conversion rate following the increasingly aggressive activity of
new investors in the fintech space - we issued 14 term sheets in
the year and six of the seven that did not progress to investment
failed on valuation grounds. The desire of these investors to build
a beta portfolio at unprecedented forward revenue multiples ran
contrary to our philosophy of finding companies with great
potential that can also deliver a great return. As such our
deployment slowed down considerably and we invested £16.4 million
over the last six months of the year compared to £44.4 million over
the first six months. The portfolio has also seen its second
significant exit with abrdn agreeing the acquisition of
interactive investor for £1.5 billion in a
transaction which returned £42.8 million to the Company post
year-end.
New Investments
Infrastructure has been a central pillar of our active
investment thesis now for some time. As fintech has entered the
mainstream, institutions have been keener to adopt technologies
that facilitate their core mission improving accuracy and/or
reducing operational overheads.
As mentioned in the half year report we invested in
Tesseract, WeMatch and Gemini, all playing
into an infrastructure thesis in both traditional and digital
sectors.
Earlier in the year, and also announced in the half year report,
we made investments in Cushon and Epsor, giving us
exposure to the workplace pension and savings markets across the UK
and France. These are markets yet
to be widely disrupted by technology and are often overlooked by
generalist venture capital funds. However, they hold great
potential as employers recognise their responsibility to ensure
their employees have a better sense and understanding of their
pension and savings pots.
Finally, again as announced in the half year report, we welcomed
Anyfin to the portfolio in June. European consumer credit
markets lag the UK and US in terms of sophistication; low risk
borrowers are overpaying for credit, including new high-interest
products such as Buy Now, Pay Later (“BNPL”). We saw the
opportunity early last year for data driven lenders to identify and
capture high value customer segments by offering improved terms
based on a more sophisticated understanding of risk. Anyfin are
becoming the leading digital refinancing player in Europe, already active across Germany, Sweden, Finland and Norway.
The Existing Portfolio
Follow on investments continue to be a focus for the portfolio
as we back our winners through their growth cycle. In the half year
since the last report, we have made three follow on investments,
with another falling just outside the reporting period. In total
these investments amount to £16.4 million of capital.
In October we took the opportunity to invest a further £10
million into our later stage portfolio company Zopa in a
£220 million round led by SoftBank Vision Fund 2 alongside existing
investors Silverstripe and Northzone. Zopa was awarded a banking
licence in 2020 allowing it to offer a wider product range
including fixed term savings backed by FSCS protection. The funding
was required to meet the capital requirements of the rapidly
growing bank, at the time already having attracted £675 million in
deposits and issuing 150,000 credit cards. The round will enable
Zopa to continue their accelerated path and further evolve the
product set. Their performance continues to impress, with record
revenues in the first quarter of 2022 and achieving profitability
in March.
We first welcomed Cushon into the portfolio in
May 2021 when their assets under
management stood at circa £375 million. In December we increased
our commitment with a further £5 million for equity in a £35
million round of financing comprising equity and debt led by
Ashgrove Capital. The new capital was required to scale operations
and to fund the acquisition of Creative, an auto-enrolment scheme.
Creative is Cushon’s third Master Trust acquisition in two years
which has helped grow assets under management to circa £1.7 billion
on behalf of 400,000 customers. The workplace pensions industry is
under pressure from the UK government to consolidate and deliver
better value. Cushon is riding these secular winds to grow at a
rapid rate.
During the period, Grover successfully completed its
Series C funding round of €113 million following the €60 million
Series B it closed in the first quarter of 2021. Grover has
delivered continuous growth since our first investment in 2019,
topping €160 million of annualised subscription value by the end of
the first quarter of 2022 and making rapid early progress with its
US entry strategy. Grover is benefiting from secular trends away
from ownership and towards utilisation, together with a circular
economy benefit that is central to its mission.
After the period end, Previse successfully completed its
Series B investment round comprising US$18
million at first close, led by the Asian headquartered
investment arm of Tencent. Previse
have continued to pursue an embedded finance approach, integrating
working capital and inventory finance into core accounting and
workflow platforms and banking entities with significant untapped
opportunities across multiple product lines.
Additionally, notable performance commentaries from our larger
existing portfolio positions include:
Tide now has over 7% UK market penetration with nearly
430,000 members and is, together with Starling, the leading SME
challenger banking platform with only the “Big 5” incumbents now
serving more SMEs in the UK. Revenue growth has been robust, driven
by continued growth in payment services and membership
subscriptions. Tide continues to deliver on an open field
opportunity to better serve smaller business customers with a cost
structure unencumbered by traditional legacy branch structures and
technology stacks.
Onfido continue to consolidate their US and global market
position with nearly 1,000 active customers. The company grew
revenue 90% in 2021 to over US$100
million and achieved 134% year on year growth in the US.
Onfido’s digital identity checks surpassed 100 million in September
last year and increased 50% in the subsequent five months to hit
150 million in the first quarter of this year. Goode Intelligence
recently predicted that identity verification checks will grow from
1.1 billion last year to 3.8 billion in 2026. Onfido is another
portfolio company that is clearly advancing within strong secular
trends.
As we have signposted in previous reviews, making early-stage
investments does not always pay off and we do not expect to get it
right all of the time. Elsewhere in the portfolio, outside the top
10 investments, we have reduced valuations by £4 million in
aggregate, driven largely by the slowdown in the mortgage market
affecting Habito and a delay experienced by Farewill
in regulatory approval from the FCA in relation to their funeral
plans launch.
Exits
interactive investor (ii) was successfully sold to abrdn
in a transaction that completed in May
2022. The Company benefited from a realisation of £42.8
million. This is the fourth exit from our portfolio and the most
significant exit in just four years since inception. The 84% IRR
(11 times gross multiple of money invested (“MoM”)) generated
validates the core Augmentum thesis of pursuing disruptive
propositions developing against secular trends in consumer and
business behaviour.
This followed exits of our holdings in Dext (30.5% IRR, 1.4
times MoM) and Seedrs (0% IRR, 1 times MoM) earlier in the
year.
Performance
For the year to 31 March 2022 we
are reporting gains on investments of £56.7 million (2021 £26.7
million). Since IPO this represents an IRR of 22.6% on the capital
that we have deployed.
It is in periods of market volatility like these that the
structure we negotiate into investments shows its value.
Liquidation preferences, a common feature of early stage investing,
provide downside protection in that the value of the investment
would have to fall below the value of the funds invested before our
capital would suffer any impairment. Anti-dilution provisions can
also provide for additional shares being awarded if the company
raises future rounds at lower valuations.
These mechanisms and other rights we build into investment
agreements shield us from much of the downside ordinary shares
suffer in publicly listed companies and are key to our style of
investing, in particular at the early stage. Within the current
portfolio, 19 of the 24 investments have the benefit of liquidation
preferences.
Outlook
We have evolved in just six short months from a risk on market
that had developed over a number of years to a risk off
environment. The shift in sentiment has not taken us by surprise
and we have built up a healthy cash buffer of, at the date of this
report, £61.0 million to ensure we can both support our existing
portfolio and also capitalise on compelling opportunities in the
fintech market over the coming 12 months and beyond.
The volume of venture capital raised over the last two years
leaves significant “dry powder” commitments across Europe, with estimates suggesting more than
two and a half years of capital in place at deployment rates
matching the last two years. Such volume of capital seeking a
finite number of quality investments is likely to serve to continue
to maintain momentum for the fintech sector. In addition there has
consistently been a trend, particularly in fintech, for companies
to stay private for longer, something that the external market
conditions is likely to reinforce.
Seeing potential squeezes at both entry and exit therefore means
that discipline is vital. The quality of opportunities in our
pipeline remains high with more and more talent drawn to the
sector. Not every good business is a good investment though and our
conversion rate of meeting companies and ultimately investing is
currently at 0.4%. The bar must remain exceptionally high, and our
central thesis of investing only in areas of high conviction and/or
secular trends in consumer behaviour, will continue to dominate our
decision making.
Our belief in the potential of the sector remains as strong as
ever. Our core holdings in the portfolio are well placed, well
funded and with sufficient liquidity to benefit from continuing
market opportunities as they evolve.
Tim Levene CEO
Augmentum Fintech Management Ltd
1 July 2022
.
INVESTMENT OBJECTIVE AND POLICY
Investment objective
The Company’s investment objective is to generate capital growth
over the long term through investment in a focused portfolio of
fast growing and/or high potential private financial services
technology (“fintech”) businesses based predominantly in the UK and
wider Europe.
Investment policy
In order to achieve its investment objective, the Company invests
in early or later stage investments in unquoted fintech businesses.
The Company intends to realise value through exiting these
investments over time.
The Company seeks exposure to early stage businesses which are
high growth, with scalable opportunities, and have disruptive
technologies in the banking, insurance and wealth and asset
management sectors as well as those that provide services to
underpin the financial sector and other cross-industry
propositions.
Investments are expected to be mainly in the form of equity and
equity-related instruments issued by portfolio companies, although
investments may be made by way of convertible debt instruments. The
Company intends to invest in unquoted companies and will ensure
that the Company has suitable investor protection rights where
appropriate. The Company may also invest in partnerships, limited
liability partnerships and other legal forms of entity. The Company
will not invest in publicly traded companies. However, portfolio
companies may seek initial public offerings from time to time, in
which case the Company may continue to hold such investments
without restriction.
The Company may acquire investments directly or by way of
holdings in special purpose vehicles or intermediate holding
entities (such as the Partnership*).
The Management Team has historically taken a board or board
observer position at investee companies and, where in the best
interests of the Company, will do so in relation to future investee
companies.
The Company’s portfolio is expected to be diversified across a
number of geographical areas predominantly within the UK and wider
Europe, and the Company will at
all times invest and manage the portfolio in a manner consistent
with spreading investment risk.
The Management Team will actively manage the portfolio to
maximise returns, including helping to scale the team, refining and
driving key performance indicators, stimulating growth, and
positively influencing future financing and exits.
Investment restrictions
The Company will invest and manage its assets with the object of
spreading risk through the following investment restrictions:
• the value of no single investment
(including related investments in group entities or related
parties) will represent more than 15 per cent. of Net Asset
Value;
• the aggregate value of seed stage
investments will represent no more than 1 per cent. of Net Asset
Value; and
• at least 80 per cent. of Net Asset
Value will be invested in businesses which are headquartered in or
have their main centre of business in the UK or wider Europe.
In addition, the Company will itself not invest more than 15 per
cent. of its gross assets in other investment companies or
investment trusts which are listed on the Official List of the
FCA.
Each of the restrictions above will be calculated at the time of
investment and disregard the effect of the receipt of rights,
bonuses, benefits in the nature of capital or by reason of any
other action affecting every holder of that investment.
The Company will not be required to dispose of any investment
or to rebalance the portfolio as a result of a change in the
respective valuations of its assets.
Hedging and derivatives
Save for investments made using equity-related instruments as
described above, the Company will not employ derivatives of any
kind for investment purposes. Derivatives may be used for currency
hedging purposes.
Borrowing policy
The Company may, from time to time, use borrowings to manage its
working capital requirements but shall not borrow for investment
purposes. Borrowings will not exceed 10 per cent. of the Company’s
Net Asset Value, calculated at the time of borrowing.
Cash management
The Company may hold cash on deposit and may invest in cash
equivalent investments, which may include short-term investments in
money market type funds and tradeable debt securities.
There is no restriction on the amount of cash or cash equivalent
investments that the Company may hold or where it is held. The
Board has agreed prudent cash management guidelines with the AIFM
and the Portfolio Manager to ensure an appropriate risk/return
profile is maintained. Cash and cash equivalents are held with
approved counterparties.
It is expected that the Company will hold between 5 and 15 per
cent. of its Gross Assets in cash or cash equivalent investments,
for the purpose of making follow-on investments in accordance with
the Company’s investment policy and to manage the working capital
requirements of the Company.
Changes to the investment policy
No material change will be made to the investment policy without
the approval of Shareholders by ordinary resolution. Non-material
changes to the investment policy may be approved by the Board. In
the event of a breach of the investment policy set out above or the
investment and gearing restrictions set out therein, the Management
Team shall inform the AIFM and the Board upon becoming aware of the
same and if the AIFM and/or the Board considers the breach to be
material, notification will be made to a Regulatory Information
Service.
.
PORTFOLIO REVIEW
|
Fair
value of
holding at
31 March
2021
£’000 |
Net
investments/
(realisations)
£’000 |
Investment
return
£’000 |
Fair
value of
holding at
31 March
2022
£’000 |
% of
portfolio |
interactive
investor^ |
32,631 |
- |
10,166 |
42,797 |
15.9% |
Grover |
12,938 |
- |
29,477 |
42,415 |
15.8% |
Tide |
18,963 |
2,200 |
7,058 |
28,221 |
10.5% |
Zopa^ |
9,501 |
10,000 |
6,076 |
25,577 |
9.5% |
Onfido |
14,850 |
- |
543 |
15,393 |
5.7% |
Cushon |
- |
10,000 |
3,584 |
13,584 |
5.1% |
Monese |
10,340 |
1,166 |
1,719 |
13,225 |
4.9% |
Gemini† |
- |
10,150 |
358 |
10,508 |
3.9% |
BullionVault^ |
11,466 |
(520) |
(923) |
10,023 |
3.7% |
AnyFin |
- |
7,248 |
2,622 |
9,870 |
3.7% |
Top 10
Investments |
110,689 |
40,244 |
60,680 |
211,613 |
78.7% |
Other Investments* |
53,438 |
7,755 |
(3,999) |
57,194 |
21.3% |
Total
Investments |
164,127 |
47,999 |
56,681 |
268,807 |
100.0% |
^ Held via Augmentum I LP
† Held through Augmentum
Gemini Ltd
* There are 14 other investments
(31 March 2021: 13). See pages 13 and
14 for further details.
.
KEY INVESTMENTS
interactive investor
interactive investor is the No.1 UK direct-to-consumer fixed fee
investment platform, with almost £55 billion of assets under
administration and over 400,000 customers across its general
trading, ISA and SIPP accounts. It accounts for a fifth of UK
retail equity trading. The company offers execution-only trading
and investing services in shares, funds, ETFs and investment
trusts, all for a market-leading monthly subscription fee.
interactive investor completed a £40 million acquisition of
Alliance Trust Savings in 2019, bringing together the two largest
UK fixed price platforms. In 2020 it completed the acquisition of
Share plc, adding a further 61,000 customers and in 2021 it
acquired the D2C investment platform EQi from Equinti, adding
another 59,000 customers.
In December 2021 abrdn, the FTSE
100 asset manager, announced that it had agreed to acquire
interactive investor, subject, inter alia, to the receipt of the
necessary shareholder and regulatory approvals. The transaction
completed in May 2022.
The Company acquired its interest in interactive investor in
March 2018 as part of the seed
portfolio at IPO, at a valuation of approximately £3.8 million; and
the realisation represents a multiple of 11 times cost and an IRR
of 84%.
Source: ii
|
31
March
2022
£’000 |
31
March
2021
£’000 |
Cost: |
3,843 |
3,843 |
Value: |
42,797 |
32,631 |
% ownership (fully
diluted) |
3.8% |
3.8% |
As per last filed audited accounts of the investee company for
the year to 31 December 2020:
|
2020
£’000 |
2019
£’000 |
Turnover |
133,153 |
90,170 |
Pre tax profit |
41,692 |
13,933 |
Net assets |
205,278 |
128,005 |
.
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 3,000 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 a pioneer in the advancement of the circular economy,
with products being returned, refurbished and recirculated until
the end of their usable life.
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 new €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 funding round,
with Augmentum participating and converting its CLN. The round was
made up of €45 million from equity investors and €15 million in
venture debt financing. With its Series C funding round in
April 2022 Grover raised US$330 million in equity and debt funding,
bringing the company’s valuation to over one
billion US dollars.
Source: Grover
|
31
March
2022
£’000 |
31
March
2021
£’000 |
Cost: |
7,927 |
7,927 |
Value: |
42,415 |
12,937 |
% ownership (fully
diluted): |
6.4% |
8.3% |
As an unquoted German company, Grover is not required to
publicly file audited accounts.
.
Tide
Tide’s (www.tide.co) mission is to help SMEs save time and money
in the running of their businesses. Customers are set up with an
account number and sort code in as little as 5 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. Tide
has passed 7% market share of business accounts in the UK, serving
over 400,000 SMEs.
Tide appointed Sir Donald Brydon
as its first independent Non-Executive Chair in September 2020; Sir Donald brings extensive
experience to the Board, previously chairing the London Stock
Exchange, the Royal Mail and Sage.
Augmentum led Tide’s £44.1m 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.
Source: Tide
|
31
March
2022
£’000 |
31
March
2021
£’000 |
Cost: |
13,200 |
11,000 |
Value: |
28,221 |
18,962 |
% ownership (fully
diluted)*: |
5.4% |
5.9% |
* 2021:
£2.5m in a convertible loan note.
As per last filed audited accounts of the investee company for
the year to 31 December 2020:
|
2020
£’000 |
2019
£’000 |
Turnover |
14,442 |
4,860 |
Pre tax loss |
(23,208) |
(20,821) |
Net assets |
17,761 |
26,021 |
.
Zopa
Zopa (www.zopa.com) was founded in 2005 as the world’s first
peer-to-peer (P2P) lending company, aiming to give people access to
simpler, better-value loans and investments. Following a funding
round in 2020 Zopa launched Zopa Bank and was granted a full UK
banking licence, which allowed it to offer a wider product range.
It is regulated by both the PRA and the FCA.
After 16 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 is a multiple awards winner. In 2021 Zopa was awarded Best
Personal Loan Provider and Best Credit Card Provider by the British
Bank Awards, Best Online Savings Provider by Moneynet Personal
Finance, Best use of IT in Consumer Finance in the FStech Awards
and won the Personal Credit Cards Innovation award in the Finder
Lending Innovation Awards. In 2022 it has won Best Short Term Fixed
Rate Bond Provider, Best Fixed Rate Bond Provider and Best New
Savings Provider in the Savings Champion Awards and been awarded
Banking Brand of the Year 2022 in the MoneyNet Awards 2022.
Augmentum participated in a £20 million funding round led by
Silverstripe in March 2021 and in
October 2021 participated with a
further £10 million investment in a £220 million round led by
SoftBank.
Source: Zopa
|
31
March
2022
£’000 |
31
March
2021
£’000 |
Cost: |
29,670 |
19,670 |
Value: |
25,577 |
9,501 |
% ownership (fully
diluted): |
3.3% |
3.0% |
As per last filed audited accounts of the investee company for
the year to 31 December 2020:
|
2020
£’000 |
2019
£’000 |
Operating income |
21,252 |
33,464 |
Pre tax loss |
(41,481) |
(18,136) |
Net assets |
134,072 |
36,535 |
.
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 and has offices in London, San
Francisco, New York,
Lisbon, Paris, Amsterdam, New
Delhi and Singapore and
helps over 800 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 October 2021 the company announced its
acquisition of biometric innovator, EYN, and in November 2021 its partnership with Italian bank
Banca Profilo via fintech partner Tinaba.Augmentum invested an
additional £3.7 million in a convertible loan note in December 2019 as part of a £4.7 million round.
This converted into equity when Onfido raised an additional £64.7
million in April 2020.
Source: Onfido
|
31
March
2022
£’000 |
31
March
2021
£’000 |
Cost: |
7,750 |
7,722 |
Value: |
15,393 |
14,851 |
% ownership (fully
diluted): |
2.3% |
2.6% |
As per last filed audited accounts of the investee company for
the year to 31 December 2020:
|
2020
£’000 |
2019
£’000 |
Turnover |
45,408 |
27,561 |
Pre tax loss |
(34,712) |
(26,488) |
Net
(liabilities)/assets |
68,508 |
(9,494) |
.
Cushon
Cushon (www.cushon.co.uk) provides workplace pensions and
payroll-linked ISAs to more than 200,000 members across 8,000 UK
employers. Cushon has overall assets under management of £740
million and is authorised by The Pensions Regulator to operate a
master trust pension scheme. In January
2021, Cushon became the first UK pension provider to launch
a fully carbon neutral ‘Net Zero Now’ pension product. In
April 2022 it finalised the
acquisition of Creative Benefits, manager of Creative Pension
Trust, making it the fifth largest master trust pension provider in
the UK and doubling its assets under management to £1.7
billion.
Augmentum invested £5 million in Cushon in June 2021 and followed up with a further £5
million in March 2022.
Source: Cushon
|
31
March
2022
£’000 |
31
March
2021
£’000 |
Cost: |
10,000 |
- |
Value: |
13,584 |
- |
% ownership (fully
diluted)*: |
13.9% |
- |
As per last filed audited accounts of the investee company for
the year to 31 March 2021:
|
2021
£’000 |
2020
£’000 |
Turnover |
1,632 |
2 |
Pre tax
(loss)/profit |
(3,742) |
(2,036) |
Net assets |
5,407 |
1,699 |
.
Monese
With Monese (www.monese.com) you can open a UK or European
current account in minutes from your mobile, with a photo ID and a
video selfie. Their core customers are amongst the hundreds of
millions of people who live some part of their life in another
country - whether it’s for travel, work, business, study, family,
or retirement.
With its mobile-only dual UK and Euro IBAN current account, its
portability across 31 countries, and both the app and its customer
service available in 14 languages, Monese allows people and
businesses to bank like a local across the UK and Europe. Launched in 2015 Monese now has more
than 2 million registered users. 70% of incoming funds are from
salary payments, indicating that customers are using Monese as
their primary account. In October
2020 Mastercard and Monese announced a multi-year strategic
partnership, with Monese becoming a principal Mastercard issuer.
Monese’s new Banking as a Service (“BaaS”) platform, which arrived
following deals by Monese with Mastercard and core banking provider
Thought Machine, will be used by Investec for its private client
transactional banking service and in the launch of a new business
current account offering for private companies. Over time, Investec
also expects BaaS will allow the bank to consolidate its retail
savings products. In December 2021
the company expanded its credit and lending capabilities through
the acquisition of financial services provider Trezeo.
Augmentum is invested alongside Kinnevik, PayPal and
International Airlines Group.
Source: Monese
|
31
March
2022
£’000 |
31
March
2021
£’000 |
Cost: |
11,428 |
10,261 |
Value: |
13,225 |
10,341 |
% ownership (fully
diluted)*: |
7.5% |
7.5% |
*£0.9m (2021: £0.9m) of investment in a convertible loan
note.
As per last filed audited accounts of the investee company for
the year to 31 December 2020:
|
2020
£’000 |
2019
£’000 |
Turnover |
16,282 |
10,273 |
Pre tax loss |
(31,130) |
(38,061) |
Net (liabilities) |
(18,044) |
(17,398) |
.
Gemini
Gemini 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.
Augmentum participated in Gemini’s first ever funding round in
November 2021 with an investment of
£10.2 million.
Source: Gemini
|
31
March
2022
£’000 |
31
March
2021
£’000 |
Cost: |
10,150 |
- |
Value: |
10,508 |
- |
% ownership (fully
diluted)*: |
0.2% |
- |
No audited accounts have been filed for Gemini.
.
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$3.8
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
|
31
March
2022
£’000 |
31
March
2021
£’000 |
Cost: |
8,424 |
8,400 |
Value: |
10,023 |
11,466 |
% ownership (fully
diluted): |
11.1% |
11.1% |
Dividends paid: |
520 |
622 |
As per last filed audited accounts of the investee company for
the year to 31 October 2021:
|
2021
£’000 |
2020
£’000 |
Gross profit |
12,086 |
15,707 |
Pre tax profit |
7,741 |
10,703 |
Net assets |
39,148 |
34,851 |
.
Anyfin
Anyfin (www.anyfin.com) was founded in 2017 by former executives
of Klarna, Spotify and iZettle, and leverages technology to allow
credit-worthy 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 and Germany.
Augmentum invested £7.2 million in Anyfin in September 2021 as part of a $52 million funding round.
Source: Anyfin
|
31
March
2022
£’000 |
31
March
2021
£’000 |
Cost: |
7,248 |
- |
Value: |
9,870 |
- |
% ownership (fully
diluted): |
2.7% |
- |
Audited financial statements are not available for Anyfin.
.
OTHER INVESTMENTS
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 2021 Farewill won National Will Writing Firm of the
Year for the third year in a row and 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 10,000 reviews. It is now
the largest will writer in the UK.
Since its launch in 2015 Farewill’s customers have pledged over
£450 million in legacy gifts written into their wills.
In January 2019 Augmentum led
Farewill’s £7.5 million Series A fundraise, with a £4 million
investment. Augmentum participated in Farewill’s £20 million Series
B, led by Highland Europe in July
2020.
.
iwoca
Founded in 2011, iwoca (www.iwoca.co.uk) uses award-winning
technology to disrupt small business lending across Europe. They offer short-term loans of up to
£200,000 to SMEs across the UK, Germany and Poland. 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.
The company has issued over £1 billion in funding to over
50,000 SMEs in total and has surpassed £100 million worth of
lending through the Coronavirus Business Interruption Loan Scheme
to businesses grappling with the fallout of the economic crisis
caused by the coronavirus. 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.
.
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”.
Taking no principal position, 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.
.
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 – deliver
benefits to both consumers and merchants. This helps merchants
shorten their cash cycle, increase conversion and lower their
costs. In October Volt announced their partnership with Worldline,
the European leader in payments and transactional services, giving
over 600 enterprise-level merchants globally access to Volt’s open
payments infrastructure. It also announced its expansion into
Brazil in November to integrate
Brazil’s domestic instant payments network, Pix, and established
its physical presence in São Paolo. More recently, in April 2022, it partnered with Mercuryo to help
the crypto payments company offer open banking payments to their
two million global customers. The real-time account-to-account
payments (A2A) will provide Mercuryo wallet users, alongside their
business partners, with single-click payment solutions via fiat
currency.
Augmentum invested in £0.5 million Volt in December 2020 and a further £4 million in
June 2021.
.
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. The 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), and Synthetix (synthetic
asset trading), 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.
.
Intellis
Intellis, based in Switzerland, is
an automated forex trading platform governed by AI.
Augmentum exercised its option to invest a further €1 million in
March 2020 and a further €1 million
in March 2021.
.
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
pre-approval payables at scale. The company processes over 100,000
invoices a day. 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.
.
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.
Wematch is headquartered in Tel
Aviv and has offices in London and Paris. In 2021 WeMatch managed more than
12,000 matching and lifecycle events, saving more than 500,000
trader to trader contacts, saved over 5,000 working hours for their
premium users with their workflow solutions, launched a new
securities lending platform and a new ETF synthetic portfolio
management product.
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.
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 £1 million in 2021, adding to its previous
£2.5 million investment from 2019.
.
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 has helped nearly 400,000 better understand their mortgage
needs and submitted almost £6 billion of mortgages. 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.
.
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 have 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.
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 (https://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 40,000 savers and over 400 companies in France.
Augmentum invested £2.2 million in Epsor in June 2021.
.
Sfermion:
Sfermion 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 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 Company has over 3,500 bulk-stockholding clients holding the
equivalent of 29 million bottles of whisky stored in barrels. 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.
Augmentum’s holding derives from WhiskeyInvestDirect being spun
out of BullionVault.
.
STRATEGIC REPORT
Business Review
The Strategic Report, set out on pages 17 to 28, provides a
review of the Company’s business, the performance during the year
and its strategy going forward. It also considers the principal
risks and uncertainties facing the Company.
The Strategic Report has been prepared to provide information to
shareholders to assess how the Directors have performed their duty
to promote the success of the Company. Further information on how
the Directors have discharged their duty under Section 172 of the
Companies Act 2006 can be found on pages 25 and 26.
The Strategic Report contains certain forward-looking
statements. These statements are made by the Directors in good
faith based on the information available to them up to the date of
this report and such statements should be treated with caution due
to the inherent uncertainties, including both economic and business
risk factors, underlying any such forward-looking information.
Strategy and Strategic Review
Throughout the year under review, the Company continued to
operate as an approved investment trust, following its investment
objectives and policy which 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.
The Company is an alternative investment fund (“AIF”) under the
Alternative Investment Fund Managers Regulations (“UK AIFMD”) and
has appointed Frostrow Capital LLP as its alternative investment
fund manager (“AIFM”).
During the year, the Board, Frostrow Capital LLP, as AIFM, and
the Portfolio Manager undertook all strategic and administrative
activities.
Principal Risks and Risk
Management
The Board considers that the risks detailed below are the
principal risks currently facing the Company. These are the risks
that could affect the ability of the Company to deliver its
strategy.
The Board is responsible for the ongoing identification,
evaluation and management of the principal risks faced by the
Company and has established a process for the regular review of
these risks and their mitigation. This process accords with the UK
Corporate Governance Code and the FRC’s Guidance on Risk
Management, Internal Control and Related Financial and Business
Reporting.
The Board has carried out a robust assessment of the emerging
and principal risks facing the Company, including those that would
threaten its business model, future performance, solvency and
liquidity. Further details of the risk management processes that
are in place can be found in the Corporate Governance
Statement.
The Board’s policy on risk management has not materially changed
during the course of the reporting period and up to the date of
this report.
The Company maintains a framework of the key risks, with the
policies and processes devised to monitor, manage and mitigate them
where possible. This risk map is reviewed regularly by the Audit
Committee.
Further details on the financial risks are included in Note 13
starting on page 61.
The Company’s key risks fall broadly under the following
categories:
Principal Risks and
Uncertainties |
Mitigation |
Macroeconomic
Risks
The performance of the Group’s investment portfolio is materially
influenced by economic conditions. These may affect demand for
services supplied by investee companies, foreign exchange rates,
input costs, interest rates, debt and equity capital markets and
the number of active trade and financial buyers.
All of these factors could have an impact on the Group’s ability to
realise a return from its investments and cannot be directly
controlled by the Group. Particular current factors include
increasing inflation and sanctions related to the situation in
Ukraine. |
Within the constraints dictated by its objective, the Company’s
portfolio is diversified across a range of sectors, has no
leverage, a net cash balance and as set out below the Portfolio
Manager structures investments to provide downside protection,
where possible.
The Board, AIFM and Portfolio Manager monitor the macroeconomic
environment and this is discussed at each Board meeting, along with
the potential impact. The Portfolio Manager also provides a
detailed update on the investments at each meeting, including,
inter alia, developments in relation to the macro
environment and trends. |
Strategy
Implementation Risks
The Group is subject to the risk that its long-term strategy and
its level of performance fail to meet the expectations of its
shareholders. |
A robust and
sustainable corporate governance structure has been implemented
with the Board responsible for continuing to act in the best
interests of shareholders.
An experienced fintech Portfolio Manager has been retained in order
to deliver the strategy. |
Investment
Risks
The performance of the Group’s portfolio is influenced by a number
of factors. These include, but are not limited to:
(i) the quality of the initial
investment decision;
(ii) reliance on co-investment parties;
(iii) the quality of the management team of each
underlying portfolio company and the ability of that team to
successfully implement its business strategy;
(iv) the success of the Portfolio Manager in
building an effective working relationship with each team in order
to agree and implement value-creation strategies;
(v) changes in the market or competitive
environment in which each portfolio company operates;
(vi) the macroeconomic risks described above;
and
(vii) environmental, social and governance (“ESG”)
factors.
Any of these factors could have an impact on the valuation of an
investment and on the Group’s ability to realise the investment in
a profitable and timely manner.
The Company also invests in early-stage companies which, by their
nature, may be smaller capitalisation companies. Such companies may
not have the financial strength, diversity and the resources of
larger and more established companies, and may find it more
difficult to operate, especially in periods of low economic
growth. |
The Portfolio Manager
has put in place a rigorous investment process which ensures
disciplined investment selection and portfolio management. This
includes detailed due diligence, regular portfolio reviews and in
many cases active engagement with portfolio companies by way of
board representation or observer status.
Investing in young businesses that may be cash consuming for a
number of years is inherently risky. In order to reduce the risks
of permanent capital loss the Portfolio Manager will, where
possible, structure investments to afford a degree of downside
protection through mechanisms such as a liquidation preference
and/or anti-dilution provisions.
As noted above the Portfolio Manager provides a detailed update at
each Board meeting, including, inter alia, investee company
developments, funding requirements and the pipeline of potential
new investments. |
Portfolio
Diversification Risk
The Group is subject to the risk that its portfolio may not be
diversified, being heavily concentrated in the fintech sector and
the portfolio value may be dominated by a single or limited number
of companies. |
The Group attempts to mitigate this
risk by making investments across a range of companies in a range
of fintech company subsectors and in companies at different stages
of their lifecycle in accordance with the Investment Objective and
Investment Policy. There is also geographic diversification with
68% of the portfolio being based in the UK and 32% in continental
Europe, Israel and the US. Given the nature of the Company’s
Investment Objective this remains a significant risk. |
Cash Risk
Returns to the Company through holding cash and cash equivalents
are currently low. The Company may hold significant cash balances,
particularly when a fundraising has taken place, and this may have
a drag on the Company’s performance.
The Company may require cash to fund potential follow-on
investments in existing investee companies. If the Company does not
hold sufficient cash to participate in subsequent funding rounds
carried out by portfolio companies, this could result in the
interest the Company holds in such businesses being diluted. This
may have a material adverse effect on the Company’s financial
position and returns for shareholders. |
To mitigate this risk the Board has agreed prudent cash management
guidelines with the AIFM and Portfolio Manager.
The Group maintains sufficient cash resources to manage its ongoing
operational and investment commitments. Regular discussions are
held to consider the future cash requirements of the Company and
its investments to ensure that sufficient cash is maintained. |
Credit Risk
As noted the Company may hold significant cash balances. There is a
risk that the banks with which the cash is deposited fail and the
Company could be adversely affected through either delay in
accessing the cash deposits or the loss of the cash deposit. When
evaluating counterparties there can be no assurance that the review
will reveal or highlight all relevant facts and circumstances that
may be necessary or helpful in evaluating the creditworthiness of
the counterparty. |
The Board has agreed prudent cash
management guidelines with the AIFM to ensure an appropriate
risk/return profile is maintained. Cash and cash equivalents are
held with approved counterparties, who are required to have a high
credit rating and financial strength. Compliance with these
guidelines is monitored regularly and reported to the Board on a
quarterly basis. |
Valuation
Risk
The valuation of investments in accordance with IFRS 13 and
International Private Equity and Venture Capital (IPEV) Valuation
Guidelines requires considerable judgement and is explained in Note
19.17.
The Company’s investments may be illiquid and a sale may require
consent of other interested parties. Such investments may therefore
be difficult to value and realise. Such realisations may involve
significant time and cost and/or result in realisations at levels
below the value of such investments as estimated by the
Company. |
The Company has a rigorous valuation
policy and process as set out in Notes 19.4 and 19.17. This process
is led by the Board and includes benchmarking valuations against
actual prices received when a sale of shares is made, as well as
taking account of liquidity issues and/or any restrictions over
investments. |
Operational
Risk
The Board is reliant on the systems of the Group and Company’s
service providers and as such disruption to, or a failure of, those
systems could lead to a failure to comply with law and regulations
leading to reputational damage and/or financial loss to the Group
and/or Company. |
To manage these risks
the Board:
• receives a quarterly compliance
report from the AIFM and the Portfolio Manager, which includes,
inter alia, details of compliance with applicable laws and
regulations;
• reviews internal control reports,
where available, key policies, including measures taken to combat
cybersecurity issues, and also the disaster recovery procedures of
its service providers;
• maintains a risk matrix with
details of risks to which the Group and Company are exposed, the
controls relied on to manage those risks and the frequency of
operation of the controls; and
• receives updates on pending changes
to the regulatory and legal environment and progress towards the
Group and Company’s compliance with these. |
Key person
risk
There is a risk that the individuals responsible for managing the
portfolio may leave their employment or may be prevented from
undertaking their duties. |
The Board manages this
risk by:
• receiving reports from AFML at each
Board meeting, such reports include any significant changes in the
make-up of the team supporting the Company;
• putting in place a compensation
structure designed to retain key staff and encourage alignment with
shareholders;
• meeting the wider team, outside the
designated lead managers, at the Portfolio Manager’s offices and by
video conference, and encouraging the participation of the wider
AFML team in investor updates; and
• delegating to the Management
Engagement & Remuneration Committee responsibility to perform
an annual review of the service received from AFML, including,
inter alia, the team supporting the lead managers and
succession planning. |
Emerging Risks
The Company has carried out a robust assessment of the Company’s
emerging and principal risks and the procedures in place to
identify emerging risks are described below. The International Risk
Governance Council definition of an ‘emerging’ risk is one that is
new, or is a familiar risk in a new or unfamiliar context or under
new context conditions (re-emerging). Failure to identify emerging
risks may cause mitigating actions to be reactive rather than being
proactive and, in the worst case, could cause the Company to become
unviable or otherwise fail or force the Company to change its
structure, objective or strategy.
The Audit Committee reviews the risk map at least half-yearly.
Emerging risks are discussed in detail as part of this process and
also throughout the year to try to ensure that emerging (as well as
known) risks are identified and, so far as practicable,
mitigated.
The experience and knowledge of the Directors are useful in
these discussions, as are update papers and advice received from
the Board’s key service providers such as the Portfolio Manager,
the AIFM and the Company’s Brokers. In addition, the Company is a
member of the AIC, which provides regular technical updates as well
as drawing members’ attention to forthcoming industry and/or
regulatory issues and advising on compliance obligations.
COVID-19
The Board has continued to monitor developments with respect to
COVID-19. Restrictions imposed because of the pandemic challenged
operations, but they proved to be resilient. All of the Company’s
service providers continued to provide as-normal services
throughout, notwithstanding adopting remote working during the
lockdowns. The Company’s Portfolio Manager provided regular updates
to the Board on the financial impacts of the pandemic on portfolio
performance and investee companies as well as the effect on the
fintech sector.
Ukraine
The Board is monitoring the events in Ukraine and related sanctions. The Board is
confident that the situation should have no direct impact on the
Company and has not identified any Russian shareholders in the
Company. The portfolio companies have no Russian operations.
Performance and Prospects
Performance
The Board assesses the Company’s performance in meeting its
objective against the following Key Performance Indicators
(“KPIs”). Due to the unique nature and investment policy of the
Company, with no direct listed competitors or comparable indices,
the Board considers that there is no relevant external comparison
against which to assess the KPIs and as such performance against
the KPIs is considered on an absolute basis. Information on the
Company’s performance is provided in the Chairman’s Statement and
the Portfolio Manager’s Review. The KPIs have not changed from the
prior year:
• The Net Asset
Value (“NAV”) per share after performance fee total return*
The Directors regard the Company’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.
This is an Alternative Performance Measure (“APM”) and its
calculation is explained in the Glossary on page 78 and in Note 16
on page 64. Essentially, it adds back distributions made in the
period to the change in the NAV after performance fee to arrive at
a total return.
The Group’s NAV per share after performance fee total return for
the year was 19.0% (2021: 12.3%). This strong result is discussed
in the Chairman’s Statement on page 2.
• The Total
Shareholder Return (“TSR”)*
The Directors also regard the Company’s TSR as a key indicator of
performance. Like the NAV per share after performance fee total
return discussed above, this is an APM and its calculation is
explained in the Glossary on page 78. The TSR is similar in nature
to the NAV per share after performance fee total return, except
that it adds back distributions made in the period to the change in
the share price, to reflect more closely the return in the hands of
shareholders. Share price performance is monitored closely by the
Board.
The Company’s TSR for the year was (16.4%) (2021: 128.8%)
reflecting the swing in market sentiment against listed growth and
tech stocks at the beginning of 2022.
• Ongoing Charges
Ratio (“OCR”)*
Ongoing charges represent the costs that shareholders can
reasonably expect to pay from one year to the next, under normal
circumstances.
The Board is cognisant of costs and reviews the level of
expenses at each Board meeting. It works hard to maintain a
sensible balance between strong service and keeping costs down.
The terms of appointment of the Company’s AIFM and the Portfolio
Manager set out on pages 22 and 23. In reviewing their continued
appointment, the Board took into account the ongoing charges ratio
of other investment companies with specialist mandates.
The Group’s OCR for the year was 1.7% (2021: 1.9%). The Board
aims for this ratio to reduce over time.
Discount/Premium*
The Board monitors the price of the Company’s shares in relation
to their net asset value after performance fee and the
premium/discount at which the shares trade. Powers are taken each
year to issue and buy back shares, which can assist short term
volatility management, however the level of discount or premium is
mostly a function of investor sentiment and demand for the shares,
over which the Board has little influence.
After an extended period during which the shares traded at a
premium to NAV the share price moved to a discount in the current
financial year as market sentiment turned against growth stocks,
with the Company’s shares being affected notwithstanding the
strength of the portfolio’s fundamental disruptive potential.
The Board has taken advantage of the situation by undertaking a
modest programme of accretive buybacks to the benefit of remaining
shareholders. All shares purchased are being held in treasury and
will potentially be reissued when the share price returns to a
premium to NAV after performance fee. Shareholder authorities to
issue and buy back shares are being sought at the forthcoming
AGM.
Prospects
The Company’s current position and prospects are described in the
Chairman’s Statement and Portfolio Manager’s Review sections of
this annual report.
Performance and Future developments
The Board’s primary focus is on the Portfolio Manager’s investment
approach and performance. The subject is thoroughly discussed at
every Board meeting.
In addition, the AIFM updates the Board on company
communications, promotions and investor feedback, as well as wider
investment issues.
An outline of performance, investment activity and strategy,
market background during the year, and the outlook is provided in
the Chairman’s Statement on pages 2 to 4 and the Portfolio
Manager’s Review on pages 15 and 16.
Viability Statement
The Board has considered the Company’s financial position,
including its ability to liquidate portfolio assets and meet its
expenses as they fall due, and notes the following:
The Board has considered the viability of the Company under
various scenarios, including periods of acute stock market and
economic volatility such as that experienced in 2020.
The expenses of the Company are predictable and modest in
comparison with the assets and there are no capital commitments
currently foreseen which would alter that position.
In considering the Company’s longer-term viability, as well as
considering the principal risks on pages 17 to 20 and the financial
position of the Company, the Board considered the following factors
and assumptions:
• The Company is and
will continue to be invested primarily in long-term illiquid
investments which are not publicly traded;
• The Board reviews
the liquidity of the Company, regularly considers any commitments
it has and cash flow projections;
• The Board, AIFM and
Portfolio Manager will continue to adopt a long-term view when
making investments and anticipated holding periods will be at least
five years;
• As detailed in the
Directors’ Report, the Valuations Committee oversees the valuation
process;
• There will continue
to be demand for investment trusts;
• Regulation will not
increase to a level that makes running the Company uneconomical;
and
• The performance of
the Company will continue to be satisfactory.
Whilst acknowledging that market and economic uncertainty remain
heightened in view of rising inflation and the Ukraine conflict, based on the results of its
review, and taking into account the long-term nature of the
Company, the Board has a reasonable expectation that the Company
will be able to continue its operations and meet its expenses and
liabilities as they fall due for the foreseeable future, taken to
mean at least the next five years. The Board has chosen this period
because, whilst it has no information to suggest this judgement
will need to change in the coming five years, forecasting over
longer periods is imprecise. The Board’s long-term view of
viability will, of course, be updated each year in the annual
report.
Going Concern
In light of the conclusions drawn in the foregoing Viability
Statement and as set out in note 19.1 to the financial statements
on page 65, the Company has adequate financial resources to
continue in operational existence for at least the next
12 months.
Therefore, the directors believe that it is appropriate to
continue to adopt the going concern basis in preparing the
financial statements. In reviewing the position as at the date of
this report, the Board has considered the guidance on this matter
issued by the Financial Reporting Council.
Management Arrangements
Principal Service Providers
The Company is structured as an internally managed closed-ended
investment company. Augmentum Fintech Management Limited (“AFML” or
the “Portfolio Manager”) is the wholly owned operating subsidiary
of the Company that manages the investment portfolio of the Company
as a delegate of the AIFM.
The other principal service providers to the Company are
Frostrow Capital LLP (“Frostrow” or the “AIFM”) and IQ EQ
Depositary Company (UK) Limited (the “Depositary”). Details of
their key responsibilities and their contractual arrangements with
the Company follow.
Alternative Investment Fund Manager
(“AIFM”)
Frostrow under the terms of its AIFM agreement with the Company
provides, inter alia, the following services:
• oversight of the
portfolio management function delegated to Augmentum Fintech
Management Limited;
• promotion of the
Company’s shares;
• investment portfolio
administration and valuation;
• risk management
services;
• share price discount
and premium monitoring;
• administrative and
company secretarial services;
• advice and guidance
in respect of corporate governance requirements;
• maintenance of the
Company’s accounting records;
• review of the
Company’s website;
• preparation and
publication of annual and half year reports; and
• ensuring compliance
with applicable legal and regulatory requirements.
AIFM Fees
Under the terms of the AIFM Agreement Frostrow is entitled to an
annual fee of:
• on NAV up to £150
million: 0.225% per annum;
• on that part of NAV
in excess of £150 million and up to £500 million: 0.2% per annum;
and
• on that part of NAV
in excess of £500 million: 0.175% per annum,
calculated on the last working day of each month and payable
monthly in arrears.
The AIFM Agreement may be terminated by either party on giving
notice of not less than 12 months.
Portfolio Manager
Augmentum Fintech Management Limited, as delegate of the AIFM,
is responsible for the management of the Company’s portfolio of
investments under an agreement between it, the Company and Frostrow
(the “Portfolio Management Agreement”).
Under the terms of its Portfolio Management Agreement, Augmentum
Fintech Management Limited provides, inter alia, the
following services:
• seeking out and
evaluating investment opportunities;
• recommending the
manner by which monies should be invested, disinvested, retained or
realised;
• advising on how
rights conferred by the investments should be exercised;
• analysing the
performance of investments made; and
• advising the Company
in relation to trends, market movements and other matters which may
affect the investment objective and policy of the Company.
Portfolio Manager Fees
Portfolio Management Fee
Under the terms of the Portfolio Management Agreement Augmentum
Fintech Management Limited (the “Portfolio Manager”) receives an
annual fee of 1.5% of the NAV per annum, falling to 1.0% of any NAV
in excess of £250 million.
The Portfolio Manager is entitled to a performance fee in
respect of the performance of any investments and follow-on
investments. Each performance fee operates in respect of
investments made during a 24 month period and related follow-on
investments made for a further 36 month period, save that the first
performance fee would be in respect of investments acquired using
80% of the net proceeds of the Company’s IPO* in March 2018 (including the Initial Portfolio), and
related follow-on investments.
Performance Fee
Subject to certain exceptions, the Portfolio Manager receives,
in aggregate, 15% of the net realised cash profits from the
investments and follow-on investments made over the relevant period
once the Company has received an aggregate annualised 10% realised
return on investments (the “hurdle”) and follow-on investments made
during the relevant period. The Portfolio Manager’s return is
subject to a ‘‘catch-up’’ provision in its favour. The performance
fee is paid in cash as soon as practicable after the end of each
relevant period, save that at the discretion of the Board payments
of the performance fee may be made in circumstances where the
relevant basket of investments has been realised in part, subject
to claw-back arrangements in the event that payments have been made
in excess of the Portfolio Manager’s entitlement to any performance
fees as calculated following the relevant period.
Based on the investment valuations as at 31 March 2022 the hurdle has been met, on an
unrealised basis, and as such a performance fee has been provided
for as set out in Notes 2 and 12. This will only be payable if the
hurdle is met on a realised basis.
The Portfolio Management Agreement may be terminated by either
party giving notice of not less than 12 months.
AIFM and Portfolio Manager Evaluation and
Re-Appointment
The performance of Frostrow as AIFM and Augmentum Fintech
Management Limited as Portfolio Manager is regularly monitored by
the Board with a formal evaluation being undertaken each year. As
part of this process the Board monitors the services provided by
the AIFM and the Portfolio Manager and receives regular reports and
views from them.
Following a review at a Management Engagement & Remuneration
Committee meeting in March 2022 the
Board believes that the continuing appointment of the AIFM and the
Portfolio Manager, under the terms described within this Strategic
Report, is in the best interests of the Company’s shareholders. In
coming to this decision it took into consideration the following
additional reasons:
• the quality and
depth of experience of the management, company secretarial,
administrative and marketing team that the AIFM brought to the
management of the Company; and
• the quality and
depth of experience allocated by the Portfolio Manager to the
management of the portfolio, together with the clarity and rigour
of the investment process.
Depositary
The Company has appointed IQ EQ Depositary (UK) Limited as its
Depositary in accordance with the UK AIFMD on the terms and subject
to the conditions of an agreement between the Company, Frostrow and
the Depositary (the “Depositary Agreement”).
The Depositary provides the following services, inter
alia, under its agreement with the Company:
• verification of
non-custodial investments;
• cash monitoring;
• processing of
transactions; and
• foreign exchange
services.
The Depositary must take reasonable care to ensure that the
Company is managed in accordance with the Financial Conduct
Authority’s Investment Funds Sourcebook, the UK AIFMD and the
Company’s Articles of Association.
Under the terms of the Depositary Agreement, the Depositary is
entitled to receive an annual fee of £25,000 plus certain event
driven fees.
The notice period on the Depositary Agreement is not less than
six months.
Dividend Policy
The Company invests with the objective of achieving capital growth
over the long term and it is not expected that a revenue dividend
will be paid in the foreseeable future. The Board intends only to
pay dividends out of revenue to the extent required in order to
maintain the Company’s investment trust status.
Potential returns of capital
It is expected that the Company will realise investments from time
to time. The proceeds of these disposals may be re-invested, used
for working capital purposes or, at the discretion of the Board,
returned to shareholders.
The Company has committed to return to Shareholders up to 50 per
cent. of the gains realised by the disposal of investments in each
financial year, with such returns of capital expected to be made on
an annual basis. The Company may also seek to make returns of
capital to Shareholders where available cash is not expected to be
substantially deployed within the following 12-18 months. The
options for effecting any return of capital to shareholders may
include the Company making tender offers to purchase Shares, paying
special dividends or any alternative method or a combination of
methods. Certain methods intended to effect a return of capital may
be subject to, amongst other things, shareholder approval.
Shareholders should note that the return of capital by the Company
is at the discretion of the Directors and is subject to, amongst
other things, the working capital requirements of the Company. As
described in the Chairman’s Statement the Board has decided,
following a consultation, that the Company will retain the bulk of
the proceeds of the investment realisations to date for
reinvestment to support its capital growth objective and utilise
the balance to support a limited accretive share buyback
programme.
Company Promotion
The Company has appointed Peel Hunt LLP and Singer Capital
Markets Advisory LLP as joint corporate brokers, to work alongside
one another to encourage demand for the Company’s shares.
In addition to AIFM services, Frostrow also provides marketing
and distribution services.
Engaging regularly with investors:
The Company’s brokers and Frostrow meet with institutional
investors, discretionary wealth managers and execution-only
platform providers around the UK and hold regular seminars and
other investor events;
Making Company information more accessible:
Frostrow manages the investor database and produces all key
corporate documents, distributes monthly factsheets, annual reports
and updates from the Portfolio Manager on portfolio and market
developments; and
Monitoring market activity, acting as a link between the
Company, shareholders and other stakeholders:
The Company’s brokers and Frostrow maintain regular contact with
sector broker analysts and other research and data providers, and
provide the Board with up-to-date information on the latest
shareholder and market developments.
Community, Social, Employee, Human Rights, Environmental
Issues, Anti-bribery and Anti-corruption
The Company is committed to carrying out business in an honest and
fair manner with a zero-tolerance approach to bribery, tax evasion
and corruption. As such, policies and procedures are in place to
prevent bribery and corruption. In carrying out its activities, the
Company aims to conduct itself responsibly, ethically and fairly,
including in relation to social and human rights issues.
As an investment trust with limited internal resource, the
Company has little impact on the environment. The Company believes
that high ESG (Environmental, Social and Governance) standards
within both the Company and its portfolio companies make good
business sense and have the potential to protect and enhance
investment returns. Consequently, the Group’s investment process
ensures that ESG issues are taken into account and best practice is
encouraged.
Diversity
There are currently three male and two female Directors (being 40%
female representation) on the Board, and these Directors come from
a number of nationalities and educational backgrounds. The Company
aims to have a balance of relevant skills, experience and
background amongst the Directors on the Board and believes that all
Board appointments should be made on merit and with due regard to
the benefits of diversity. The Company’s diversity policy is set
out on pages 40 and 41. The Board also encourages diversity in the
management team at AFML and the promotion of the benefits of
diversity in portfolio companies.
Engaging with our stakeholders
The following ‘Section 172’ disclosure describes how the Directors
have had regard to the views of the Company’s stakeholders in their
decision-making.
Who?
Stakeholder group |
Why?
The benefits of engagement with our stakeholders |
How?
How the Board the AIFM and the Portfolio Manager has engaged with
our stakeholders |
Investors |
Clear communication of
the Company’s strategy and the performance against its objective
can help the share price trade at a narrower discount or a wider
premium to its net asset value which benefits shareholders.
New shares may be issued to meet demand without diluting the NAV
per share of existing shareholders. Increasing the size of the
Company can benefit liquidity as well as spread costs. |
Frostrow as AIFM, the
Portfolio Manager and the Company's joint brokers on behalf of the
Board complete a programme of investor relations throughout the
year. In addition the Chairman has continued to engage regularly
with the Company’s larger shareholders.
Key mechanisms of engagement included:
• The Annual
General Meeting
• The
Company’s website which hosts reports, video interviews with the
managers and regular market commentary
• Online
newsletters
• One-on-one
investor meetings
• Investor
meetings with the Portfolio Manager and AIFM. |
Portfolio Manager |
Engagement with our Portfolio
Manager is necessary to evaluate performance against the stated
strategy and to understand any risks or opportunities this may
present to the Company. It also provides clarity on the Board’s
expectations and helps ensure that portfolio management costs are
closely monitored and remain competitive. |
The Board meets
regularly with the Company’s Portfolio Manager throughout
the year both formally at the quarterly Board meetings and more
regularly on an informal basis. The Board also receives quarterly
performance and compliance reporting at each Board meeting.
The Portfolio Manager’s attendance at each Board meeting provides
the opportunity for the Portfolio Manager and Board to further
reinforce their mutual understanding of what is expected from all
parties. |
Service Providers |
The Company contracts
with third parties for other services including: depositary,
investment accounting & administration, company secretarial and
share registration. It is necessary for the Company’s success to
ensure the third parties to whom we have outsourced services
complete their roles diligently and correctly.
The Company ensures all service providers are paid in accordance
with their terms of business.
The Board closely monitors the Company’s Ongoing Charges
Ratio. |
The Board and Frostrow engage
regularly with all service providers both in one-to-one meetings
and via regular written reporting. This regular interaction
provides an environment where topics, issues and business
development needs can be dealt with efficiently and
collegiately. |
Employees of
AFML |
In order to attract and retain
talent to ensure the Group has the resources to successfully
implement its strategy and manage third-party relationships. |
In normal times all
employees of AFML sit in one open plan office, facilitating
interaction and engagement. Notwithstanding remote working,
interaction continued during lockdown conditions. Senior team
members report to the Board at each meeting.
Given the small number of employees, engagement is at an individual
level rather than as a group. |
Portfolio companies |
Incorporating consideration of ESG
factors into the investment process assists in understanding and
mitigating risks of an investment and potentially identifying
future opportunities. |
The Board encourages the Company’s
Portfolio Manager to engage with companies and in doing so expects
ESG issues to be a key consideration. The Portfolio Manager seeks
to take a board seat, or have board observer status, on all
investments. See pages 27 and 28 for further detail on AFML’s ESG
approach to investing. |
What?
What were the key topics of engagement? |
Outcomes and
actions
What actions were taken, including principal decisions? |
Key topics of
engagement with investors
Ongoing dialogue with shareholders concerning the strategy of
the Company, performance and the portfolio. |
• The
Portfolio Manager, Frostrow and the joint brokers meet regularly
with shareholders and potential investors to discuss the Company’s
strategy, performance and portfolio. These meetings take place with
and without the Portfolio Manager. This interaction informed the
Board's deliberations on various matters, including in relation to
the distribution of investment realisation proceeds where it
contributed to the Board’s decision to restrict distributions to a
limited share buyback programme, it being considered that
shareholders were better served by realisation proceeds principally
being used for further investment. |
Key topics of
engagement with the external Portfolio Manager on an ongoing basis
are portfolio composition, performance, outlook and business
updates.
Additional topics included
• The impact of COVID-19
upon their business and the portfolio.
• The impact of the
Ukraine conflict upon their business and the portfolio.
• The integration of
environmental, social and governance (‘ESG’) into the Portfolio
Manager’s investment processes.
• Performance and
compensation of Group employees is decided by the Management
Engagement & Remuneration Committee with the Directors of
AFML. |
• The prospects for the portfolio and the
pipeline of potential investment opportunities were of particular
interest to the Board in connection with the fundraise decision
making.
• All of the Company's service providers
successfully implemented remote working when it was necessary.
Whilst this created challenges at times there was no adverse impact
on service delivery.
• Russian sanctions have no direct impact
on the Company and extremely limited impact on portfolio
companies.
• The portfolio manager reports regularly
any ESG issues in the portfolio companies to the Board. Please see
pages 27 and 28 for further details of AFML’s ESG policies.
• The Management Engagement &
Remuneration Committee engaged with respect to AFML’s long-term
incentive arrangements and the revision of the Directors’
Remuneration policy, which is set out on pages 46 and 47. |
Approach to Responsible Investing
Augmentum Fintech Management Limited (“AFML”) continues to be
committed to a responsible investment approach through the
lifecycle of its investments, from pre-screening to exit. AFML
believes that the integration of Environmental, Social and
Governance (“ESG”) factors within the investment analysis,
diligence and operating practices is pivotal in mitigating risk and
creating sustainable, profitable investments.
Five-Stage Approach to Future-Proofing
the Portfolio
ESG principles adapted from the UN PRI (Principles of
Responsible Investment) are integrated throughout business
operations; in investment decisions, at the screening stage through
an exclusion list and due diligence, ongoing monitoring and
engaging with portfolio companies post-investment and when making
follow-on investment decisions, as well as within fund
operations.
1. Screening
An Exclusion List is used to screen out companies incompatible
with AFML’s corporate values (sub-sectors and types of business).
AFML also commits to being satisfied that the investors they invest
alongside are of good standing.
2. Due Diligence
An ESG Due Diligence (DD) survey is completed on behalf of all
companies in the later stages of the investment process. An ESG
scorecard is completed for each potential investment, in which
potential ESG risks and opportunities are identified, and discussed
with the investment committee. Where necessary, an action plan is
agreed with the management team on areas for improvement and
commitments are incorporated into the Term Sheet.
3. Post-Investment
Monitoring and Engagement
An annual survey is completed by portfolio companies and areas
for improvement are discussed with management teams, with
commitments agreed and revisited as appropriate.
4. Follow On
Investments
ESG risks and opportunities are assessed when making follow-on
investment decisions, with an ESG scorecard completed and
co-investors taken into consideration. Follow on investments are
only made into companies that continue to meet AFML’s ESG
criteria.
5. Internally at
Augmentum
AFML have continued to identify priority areas in which to make
suitable ESG-related advancements across fund operations. Key
progress areas include:
• AFML went fully
carbon neutral in 2021. Working in partnership with Minimum, they
are now monitoring their Scope 1, 2 and 3 emissions and will
continue to track and reduce emissions towards Net Zero. AFML has
opted to neutralise unavoidable emissions through a robust
portfolio of carbon removal and prevention projects;
• Incorporating
environmental considerations into operating decisions, from
partnering with Cushon for Net Zero pensions to design and
materials in the new office and encouraging recycling in the office
to a Bike2Work scheme for staff and using a sustainable clothing
company for branded merchandise;
• Continuing to
maintain the highest levels of governance and ethical integrity in
accordance with the regulatory standards to which we are subject,
including the Financial Conduct Authority and the London Stock
Exchange; and
• Continuing to
embrace diversity and inclusion through inclusive hiring and
professional development practices, an events programme including
Female Founder Office Hours, as well as charity partnerships
including with Crisis Venture Studio..
ESG Focus Areas
AFML have identified eight key areas for consideration, across
the three ESG categories, which best align with their values and
are most relevant for companies operating in the fintech
industry.
The key environmental consideration as identified by AFML is the
potential impact of business operations on the global issue of
climate change. Social factors include the risks and opportunities
associated with data security, privacy and ethical use, consumer
protection, diversity and financial inclusion. Governance
considerations include anti-bribery and corruption, board structure
and independence and compliance.
AFML is committed to:
• Incorporating ESG
and sustainability considerations into its investment analysis,
diligence, and operating practices.
• Providing ESG
training and support to the AFML employees involved in the
investment process, so that they may perform their work in
accordance with AFML’s policy.
• Actively engaging
with portfolio companies to encourage improvement in key ESG
areas.
• Annual reporting on
progress to stakeholders.
ESG in Action
Advancements continue to be seen in ESG practices across the
portfolio, both in business models and operating procedures.
However, it should be noted that the portfolio comprises early
stage companies and quantitative data may not be available. Below
we highlight some examples, as stated by the companies
referenced.
Anyfin
Stockholm-headquartered
consumer credit refinancing company Anyfin believes that everyone
should have healthy personal finances and are developing services
that make managing personal finances fun and easy. The company
leverages open banking capabilities to help users improve their
overall financial wellbeing. They also launched a budgeting tool to
give users a complete overview of their finances by displaying all
their bank accounts in one place.
Cushon
In June 2021, Augmentum invested
in Cushon, creator of the world’s first Net Zero pension product.
Net Zero is achieved through a unique mix of fund allocation and
carbon offsetting through projects around the world, achieving
positive impact without compromising returns. In another industry
first, Cushon have also launched in-app ESG voting features which
allow savers to vote on governance issues from companies within
their savings portfolios.
Onfido
In June 2021 identity verification
company Onfido joined the Tech Zero taskforce, a cohort including
other leading tech companies led by industry body Tech Nation,
London & Partners and Level39.
The taskforce exists to accelerate progress to net zero, support
tech companies in making a climate action plan and use technology
to help the 100 million customers they serve to live more
sustainably.
Grover
With over 50 million tons of e-waste piling up from unused
personal electronics globally each year, circular economy tech
rental company Grover’s mission is to sustainably improve access to
technology. Renting can save up to 80% of C02 emissions compared to
buying new products and also ensures devices stay out of landfills
and in circulation longer. The company also partnered with edtech
StartSteps to provide students with laptops to begin their careers
in tech and participated in several hiring events for refugees in
Berlin.
Encouraging a Diverse Fintech
Industry: Progress highlights
AFML has continued to show its support for a diverse, inclusive
fintech industry through involvement in various diversity-focused
initiatives and events, and has been recognised for its
industry-leading approach. Learn more below.
Diverse Dealflow and Events Programme
AFML has hosted numerous diversity-focused events over the last
twelve months, most notably its Female Fintech Founder pitch
events, in collaboration with Outward VC, where they brought
together several dozen female founders across a number of events,
provided pitch coaching and assembled engaged audiences of venture
capital and angel investors. They have also supported initiatives
including The 200Bn Club, a new 12 week programme designed to
accelerate financing directed to female founders and connect them
with the skills, mentorship, and network they need to raise a seed
or Series A investment.
Crisis Venture Studio Partnership
AFML has partnered with the recently launched venture studio from
homeless charity Crisis. The team supported the charity through
advice, pitch feedback and mentoring sessions with fintech founders
as well as charitable donations.
Community Development
Head of Engagement Georgie Hazell joined the Women in VC community
leadership team as UK Co-Lead. They recently launched a mentoring
and monthly events programme focused on boosting diversity and
inclusion within decision-making roles in venture capital and
entrepreneurship, and increasing access to high quality
dealflow.
This strategic report was approved by the Board of Directors and
signed on its behalf by:
Neil
England
Chairman
1 July 2022
.
STATEMENT OF DIRECTORS’
RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT, THE DIRECTORS’
REMUNERATION REPORT AND THE FINANCIAL STATEMENTS
The directors are responsible for preparing the annual report
and financial statements in accordance with UK-adopted
international accounting standards.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the Group and Company financial statements in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006. Under Company law
the directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the return or loss for the
Group and Company for that period.
In preparing these group financial statements, the directors are
required to:
• Select suitable
accounting policies and then apply them consistently;
• Make judgements and
accounting estimates that are reasonable and prudent;
• State whether they
have been prepared in accordance with UK-adopted international
accounting standards, subject to any material departures disclosed
and explained in the financial statements;
• Prepare the
financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in
business; and
• Prepare a directors’
report, a strategic report and directors’ remuneration report which
comply with the requirements of the Companies Act 2006.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Company and enable
them to ensure that the financial statements comply with the
Companies Act 2006 and, as regards the Group financial statements,
Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the
Group and the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Responsibility Statement
The Directors consider that this annual report and financial
statements, taken as a whole, is fair, balanced, and understandable
and provides the information necessary for shareholders to assess
the Group and Company’s position and performance, business model
and strategy.
Each of the Directors, whose names and functions are listed
under the ‘Board of Directors’ on pages 29 and 30 confirm that, to
the best of their knowledge:
• The financial
statements, prepared in accordance with applicable accounting
standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Group and Company;
• The annual report
includes a fair review of the development and performance of the
business and the financial position of the Group and Company,
together with a description of the principal risks and
uncertainties that they face.
Neil
England
Chairman
1 July 2022
.
CONSOLIDATED INCOME STATEMENT
|
|
Year ended 31 March 2022 |
Year ended 31 March 2021 |
|
Notes |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Gains on
Investments |
8 |
- |
56,681 |
56,681 |
– |
26,727 |
26,727 |
Interest Income |
|
3 |
- |
3 |
7 |
– |
7 |
Expenses |
2 |
(3,801) |
6,432 |
(2,631) |
(2,879) |
(4,179) |
(7,058) |
(Loss)/Return before
Taxation |
|
(3,798) |
63,113 |
59,315 |
(2,872) |
22,548 |
19,676 |
Taxation |
6 |
- |
- |
- |
– |
– |
– |
(Loss)/Return for
the year |
|
(3,798) |
63,113 |
59,315 |
(2,872) |
22,548 |
19,676 |
(Loss)/Return per
Share (pence) |
7 |
(2.2)p |
37.1p |
34.9p |
(2.3)p |
18.2p |
15.9p |
The total column of this statement represents the Group’s
Consolidated Income Statement, prepared in accordance with IFRS as
adopted by the UK.
The revenue and capital columns are supplementary to this and
are prepared under guidance published by the Association of
Investment Companies.
The Group does not have any other comprehensive income and hence
the total return, as disclosed above, is the same as the Group’s
total comprehensive income.
All items in the above statement derive from continuing
operations.
All returns are attributable to the equity holders of Augmentum
Fintech plc, the parent company.
The notes on pages 58 to 68 are integral to and form part of
these Financial Statements.
.
CONSOLIDATED AND COMPANY STATEMENTS OF
CHANGES IN EQUITY
|
|
|
Year
ended 31 March 2022 |
|
Group |
Ordinary
share
capital
£’000 |
Share
premium
account
£’000 |
Special
reserve
£’000 |
Other
capital
reserve
£’000 |
Revenue
reserve
£’000 |
Total
£’000 |
Opening
Shareholders’ funds |
1,405 |
52,151 |
92,101 |
44,876 |
(7,371) |
183,162 |
Issue of shares
following placing and offer for subscription |
405 |
54,595 |
- |
- |
- |
55,000 |
Costs of placing and
offer for subscription |
- |
(1,363) |
- |
- |
- |
(1,363) |
Purchase of own shares
into treasury |
- |
- |
(910) |
- |
- |
(910) |
Return/(loss) for the
year |
- |
- |
- |
63,113 |
(3,798) |
59,315 |
At 31 March
2022 |
1,810 |
105,383 |
91,191 |
107,989 |
(11,169) |
295,204 |
|
|
|
Year ended 31 March 2021 |
|
Group |
Ordinary
share
capital
£’000 |
Share
premium
account
£’000 |
Special
reserve
£’000 |
Other
capital
reserve
£’000 |
Revenue
reserve
£’000 |
Total
£’000 |
Opening
Shareholders’ funds |
1,171 |
24,760 |
92,033 |
22,328 |
(4,499) |
135,793 |
Issue of shares
following placing and offer for subscription |
234 |
27,812 |
– |
– |
– |
28,046 |
Costs of placing and
offer for subscription |
– |
(546) |
– |
– |
– |
(546) |
Issue of shares from
treasury |
– |
125 |
119 |
– |
– |
244 |
Purchase of own shares
into treasury |
– |
– |
(51) |
– |
– |
(51) |
Return/(loss) for the
year |
– |
– |
– |
22,548 |
(2,872) |
19,676 |
At 31 March
2021 |
1,405 |
52,151 |
92,101 |
44,876 |
(7,371) |
183,162 |
|
|
|
Year ended 31 March 2022 |
|
Company |
Ordinary
share
capital
£’000 |
Share
premium
account
£’000 |
Special
reserve
£’000 |
Other
capital
reserve
£’000 |
Revenue
reserve
£’000 |
Total
£’000 |
Opening
Shareholders’ funds |
1,405 |
52,151 |
92,101 |
44,876 |
(7,774) |
183,759 |
Issue of shares
following placing and offer for subscription |
405 |
54,595 |
- |
- |
- |
55,000 |
Costs of placing and
offer for subscription |
- |
(1,363) |
- |
- |
- |
(1,363) |
Purchase of own shares
into treasury |
- |
- |
(910) |
- |
- |
(910) |
Return/(loss) for the
year |
- |
- |
- |
47,848 |
(4,782) |
43,066 |
At 31 March
2022 |
1,810 |
105,383 |
91,191 |
92,724 |
(12,556) |
278,552 |
|
|
|
Year ended 31 March 2021 |
|
Company |
Ordinary
share
capital
£’000 |
Share
premium
account
£’000 |
Special
reserve
£’000 |
Other
capital
reserve
£’000 |
Revenue
reserve
£’000 |
Total
£’000 |
Opening
Shareholders’ funds |
1,171 |
24,760 |
92,033 |
22,328 |
(4,690) |
135,602 |
Issue of shares
following placing and offer for subscription |
234 |
27,812 |
– |
– |
– |
28,046 |
Costs of placing and
offer for subscription |
– |
(546) |
– |
– |
– |
(546) |
Issue of shares from
treasury |
– |
125 |
119 |
– |
– |
244 |
Purchase of own shares
into treasury |
– |
– |
(51) |
– |
– |
(51) |
Return/(loss) for the
year |
– |
– |
– |
22,548 |
(3,084) |
19,464 |
At 31 March
2021 |
1,405 |
52,151 |
92,101 |
44,876 |
(7,774) |
182,759 |
|
|
|
|
|
|
|
|
The notes on pages 58 to 68 are integral to and form part of
these Financial Statements.
.
CONSOLIDATED BALANCE SHEET
as at 31 March
2022
|
Note |
2022
£’000 |
2021
£’000 |
Non-Current
Assets |
|
|
|
Investments held at
fair value |
8 |
268,807 |
164,127 |
Property, plant &
equipment |
|
9 |
6 |
Current
Assets |
|
|
|
Right of use asset |
5 |
750 |
145 |
Other receivables |
10 |
391 |
47 |
Cash and cash
equivalents |
|
31,326 |
27,433 |
Total
Assets |
|
301,283 |
191,758 |
Current
Liabilities |
|
|
|
Other payables |
11 |
(5,296) |
(1,940) |
Lease liability |
5 |
(783) |
(148) |
Provisions |
12 |
- |
(6,508) |
Total Assets less
Current Liabilities |
|
295,204 |
183,162 |
Net Assets |
|
295,204 |
183,162 |
Capital and
Reserves |
|
|
|
Called up share
capital |
15 |
1,810 |
1,405 |
Share premium |
|
105,383 |
52,151 |
Special reserve |
|
91,191 |
92,101 |
Retained earnings: |
|
|
|
Capital reserves |
|
107,989 |
44,876 |
Revenue reserve |
|
(11,169) |
(7,371) |
Total
Equity |
|
295,204 |
183,162 |
Net Asset Value per
share (pence) |
16 |
163.7p |
130.4p |
Net Asset Value per
share after performance fee (pence) |
16 |
155.2p |
130.4p |
The Financial Statements on pages 52 to 68 were approved by the
Board of Directors on 1 July 2022 and
signed on its behalf by:
Neil
England
Chairman
The notes on pages 58 to 68 are integral to and form part of
these Financial Statements.
Augmentum Fintech plc
Company Registration Number: 11118262
.
COMPANY BALANCE SHEET
as at 31 March
2022
|
Note |
2022
£’000 |
2021
£’000 |
Non-Current
Assets |
|
|
|
Investments held at
fair value |
8 |
268,807 |
164,127 |
Investment in
subsidiary undertakings |
9 |
500 |
500 |
Current
Assets |
|
|
|
Other receivables |
10 |
39 |
17 |
Cash and cash
equivalents |
|
29,694 |
26,533 |
Total
Assets |
|
299,040 |
191,177 |
Current
Liabilities |
|
|
|
Other payables |
11 |
(5,223) |
(1,910) |
Provisions |
12 |
(15,265) |
(6,508) |
Total Assets less
Current Liabilities |
|
278,552 |
182,759 |
Net Assets |
|
278,552 |
182,759 |
Capital and
Reserves |
|
|
|
Called up share
capital |
15 |
1,810 |
1,405 |
Share premium |
|
105,383 |
52,151 |
Special reserve |
|
91,191 |
92,101 |
Retained earnings: |
|
|
|
Capital reserves |
|
92,724 |
44,876 |
Revenue reserve |
|
(12,556) |
(7,774) |
Total
Equity |
|
278,552 |
182,759 |
The accompanying notes are an integral part of these Financial
Statements.
The Company return for the year was £43,066,000 (2021:
£19,464,000). The Directors have taken advantage of the exemption
under s408 of the Companies Act and not presented an income
statement or a statement of comprehensive income for the Company
alone.
The Financial Statements on pages 52 to 68 were approved by the
Board of Directors on 1 July 2022 and
signed on its behalf by:
Neil
England
Chairman
The notes on pages 58 to 68 are integral to and form part of
these Financial Statements.
Augmentum Fintech plc
Company Registration Number: 11118262
.
CONSOLIDATED CASH FLOW STATEMENT
|
Year
ended
31 March
2022
£’000 |
Year
ended
31 March
2021
£’000 |
Operating
activities |
|
|
Sales of
investments |
11,263 |
- |
Purchases of
investments |
(55,992) |
(12,538) |
Acquisition of
property, plant and equipment |
(9) |
(2) |
Interest income
received |
1 |
68 |
Expenses paid |
(3,958) |
(2,758) |
Lease payments |
(139) |
(141) |
Net cash outflow
from operating activities |
(48,834) |
(15,371) |
Issue of shares
following placing and offer for subscription |
55,000 |
28,046 |
Costs of placing and
offer for subscription |
(1,363) |
(546) |
Purchase of own shares
into treasury |
(910) |
(51) |
Issue of shares from
treasury |
- |
244 |
Net cash generated
from financing activities |
52,727 |
27,693 |
Net increase in cash
and cash equivalents |
3,893 |
12,322 |
Cash and cash
equivalents at start of year |
27,433 |
15,111 |
Cash and cash
equivalents at end of year |
31,326 |
27,433 |
The notes on pages 58 to 68 are integral to and form part of
these Financial Statements.
.
COMPANY CASH FLOW STATEMENT
|
Year
ended
31 March
2022
£’000 |
Year
ended
31 March
2021
£’000 |
Operating
activities |
|
|
Sales of
investments |
11,263 |
- |
Purchases of
investments |
(55,992) |
(12,538) |
Interest income
received |
- |
66 |
Expenses paid |
(4,837) |
(3,075) |
Net cash outflow
from operating activities |
(49,566) |
(15,547) |
Issue of shares
following placing and offer for subscription |
55,000 |
28,046 |
Costs of placing and
offer for subscription |
(1,363) |
(546) |
Purchase of own shares
into treasury |
(910) |
(51) |
Issue of shares from
treasury |
- |
244 |
Net cash generated
from financing activities |
52,727 |
27,693 |
Net increase in cash
and cash equivalents |
3,161 |
12,146 |
Cash and cash
equivalents at start of year |
26,533 |
14,387 |
Cash and cash
equivalents at end of year |
29,694 |
26,533 |
The notes on pages 58 to 68 are integral to and form part of
these Financial Statements.
.
NOTES TO THE FINANCIAL STATEMENTS
1
Segmental Analysis
The Group operates a single business segment for reporting
purposes and is managed as a single investment company. Reporting
is provided to the Board of Directors on an aggregated basis. The
investments are located in the UK, continental Europe, Israel and the US.
2
Expenses
|
2022 |
2021 |
|
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
AIFM fees |
507 |
- |
507 |
334 |
– |
334 |
Administrative
expenses |
1,141 |
76 |
1,217 |
817 |
39 |
856 |
Directors fees* |
126 |
- |
126 |
95 |
– |
95 |
Performance fee (see
Note 4)^ |
- |
(6508) |
(6,508) |
– |
4,140 |
4,140 |
Staff costs (see Note
4) |
1,877 |
- |
1,877 |
1,535 |
– |
1,535 |
Auditors’
remuneration |
150 |
- |
150 |
98 |
– |
98 |
Total
expenses |
3,801 |
(6,432) |
(2,631) |
2,879 |
4,179 |
7,058 |
£153,000 of interest and depreciation relating to a lease (2021:
£197,000) were included in administrative expenses. See Note 5
for further details.
* Details
of the amounts paid to Directors are included in the Directors
Remuneration Report on page 44.
^
See Note 4 for further details of the performance fee arrangements.
Non-executive Directors of the Company are not eligible to
participate in any allocation of the performance fee.
Auditors’ Remuneration
|
2022 |
2021 |
|
Group
£’000 |
Company
£’000 |
Group
£’000 |
Company
£’000 |
Audit of Group accounts
pursuant to legislation* |
83 |
83 |
66 |
66 |
Audit of subsidiaries
accounts pursuant to legislation* |
14 |
- |
14 |
– |
Audit related assurance
services* |
18 |
15 |
18 |
15 |
Reporting accountant
services |
35 |
35 |
- |
- |
Total auditors’
remuneration |
150 |
133 |
98 |
81 |
Non-audit services
It is the Group’s practice to employ BDO LLP on assignments
additional to their statutory audit duties only when their
expertise and experience with the Group are important. Details of
the Group’s process for safeguarding and supporting the
independence and objectivity of the external auditors are given in
the Report of the Audit Committee beginning on page 48. In addition
to the above BDO LLP was also paid £50,000 (2021: £nil) for
reporting accountant services, which is included within the costs
of placing and offer for subscription in the Statement of Changes
in Equity.
3
Key Management Personnel Remuneration
The Directors of the Company are considered to be the Key
Management Personnel (KMP) along with the directors of the
Company’s subsidiary.
|
2022 |
2021 |
|
Salary
/Fees
£’000 |
Other
benefits
£’000 |
Total
£’000 |
Salary
/Fees
£’000 |
Other
benefits
£’000 |
Total
£’000 |
Key management
personnel remuneration |
799 |
79 |
878 |
755 |
78 |
833 |
Performance fee
allocation* |
(4,296) |
- |
(4,296) |
2,640 |
– |
2,640 |
|
(3,497) |
79 |
(3,418) |
3,395 |
78 |
3,473 |
Other benefits include pension contributions relating to the
directors of the Company’s subsidiary.
*
Allocation of the performance fee to the directors of the Company’s
subsidiary. See Note 4 for further details of the performance fee
arrangements.
4 Staff Costs
The monthly average number of employees for the Group during the
year was ten (2021: eight). All employees are within the investment
and administration function and employed by the Company’s
subsidiary.
|
2022
£’000 |
2021
£’000 |
Wages and
salaries |
1,551 |
1,254 |
Social security
costs |
211 |
179 |
Other pension
costs |
84 |
78 |
Other staff
benefits |
31 |
24 |
Staff
costs |
1,877 |
1,535 |
Performance fee
(charged to capital)* |
(6,508) |
4,140 |
Total |
(4,631) |
5,675 |
* The performance fee arrangements were
set up to provide a long-term employee benefit plan to incentivise
employees of AFML and align them with shareholders through
participation in the realised investment profits of the Group.
During the year to 31 March 2022 the
existing plan for AFML staff was terminated and the performance fee
liability to AFML employees accrued as at 31
March 2021 of £6,508,000 was reversed. AFML continues to be
entitled to a performance fee as before, but any performance fee
paid by the Company to AFML will now be allocated to employees of
AFML on a discretionary basis by the Management Engagement &
Remuneration Committee of the Company.
The performance fee is payable by the Company to AFML when the
Company has realised an aggregate annualised 10% return on
investments (the ‘hurdle’) in each basket of investments. Based on
the investment valuations and the hurdle level as at 31 March 2022 the hurdle has been met, on an
unrealised basis, and as such a performance fee of £15,265,000 has
been provided for by the Company, equivalent to 8.5 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 and the actual amount payable will
depend on the amount and timing of investment realisations. See
page 23 and Note 19.9 for further details.
5 Leases
Leasing activities
The Group, through its subsidiary AFML, has leased an office in
the UK from which it operates for a fixed fee. When measuring lease
liabilities for leases that were classified as operating leases,
the Group discounts lease payments at a rate of 5.9% (2021:
5.0%).
Right of Use Asset
|
2022
Group
Office Premises
£’000 |
2021
Group
Office Premises
£’000 |
As at 1 April |
145 |
333 |
Addition |
752 |
– |
Depreciation |
(147) |
(188) |
At 31
March |
750 |
145 |
Lease Liability
|
2022
Group
Office Premises
£’000 |
2021
Group
Office Premises
£’000 |
As at 1 April |
148 |
333 |
Addition |
769 |
– |
Interest Expense |
6 |
9 |
Lease Payments |
(140) |
(194) |
At 31
March |
783 |
148 |
Maturity Analysis
|
Group |
At 31 March 2022 |
Up to 3 months
£’000 |
3 – 12 months
£’000 |
Between
1 – 2 years
£’000 |
Between
2 – 5 years
£’000 |
Lease payments |
12 |
120 |
241 |
543 |
6 Taxation
Expense
|
2022 |
2021 |
For the year ended 31 March |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Current
tax: |
|
|
|
|
|
|
UK corporate tax on
profits for the year |
– |
– |
– |
– |
– |
– |
The difference between the income tax expense shown above and
the amount calculated by applying the effective rate of UK
corporation tax of 19% (2021: 19%) to the (loss)/return before tax
is as follows:
|
|
2022 |
|
|
2021 |
|
For the year ended 31 March |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
Capital
£’000 |
Total
£’000 |
(Loss)/return before
taxation |
(3,798 |
63,113 |
59,315 |
(2,872) |
22,548 |
19,676 |
(Loss)/return before
tax multiplied by the effective rate of |
|
|
|
|
|
|
UK corporation tax of
19% (2021: 19%) |
(722) |
11,991 |
11,269 |
(546) |
4,284 |
3,738 |
Effects of: |
|
|
|
|
|
|
Non-taxable capital
returns |
- |
(10,770) |
(10,770) |
– |
(5,078) |
(5,078) |
Excess management
expenses |
722 |
(1,221) |
(499) |
546 |
794 |
1,340 |
Total tax
expense |
- |
- |
- |
– |
– |
– |
No provision for deferred taxation has been made in the current
year. The Group has not provided for deferred tax on capital
profits arising on the revaluation of investments, as it is exempt
from tax on these items because of its status as an investment
trust company.
The Company has not recognised a deferred tax asset on the
excess management expenses of £13,878,000 (2021: £9,998,000). It is
not anticipated that these excess expenses will be utilised in the
foreseeable future.
7 (Loss)/Return per
Share
The (loss)/return per share figures are based on the following
figures:
|
2022
£’000 |
2021
£’000 |
Net revenue loss |
(3,798) |
(2,872) |
Net capital return |
63,113 |
22,548 |
Net total
return |
59,315 |
19,676 |
Weighted average number
of ordinary shares in issue |
169,923,583 |
123,553,057 |
|
|
|
|
Pence |
Pence |
Revenue loss per
share |
(2.2) |
(2.3) |
Capital return per
share |
37.1 |
18.2 |
Total return per
share |
34.9 |
15.9 |
8 Investments Held
at Fair Value
Non-current Investments Held at Fair
Value
As at 31 March |
2022
Group and
Company
£’000 |
2021
Group and
Company
£’000 |
Unlisted at fair
value |
268,807 |
164,127 |
Reconciliation of movements on investments held at fair value
are as follows:
|
Group
and
Company
£’000 |
Group
and
Company
£’000 |
As at 1 April |
164,127 |
123,132 |
Purchases at cost |
59,262 |
14,268 |
Realisation
proceeds |
(11,263) |
- |
Gains on
investments |
56,681 |
26,727 |
As at 31
March |
268,807 |
164,127 |
The Group and Company received £11,263,000 (2021: nil) from
investments sold in the year. The book cost of these investments
when they were purchased was £8,227,000 (2021: nil). These
investments have been revalued over time and until they were sold
any unrealised gains/losses were included in the fair value of the
investments. In addition, Augmentum I LP, the Company's
unconsolidated subsidiary (See Note19.2), received proceeds of
£2,673,000 from investments sold during the year, which had a book
cost of £3,173,000.
9 Subsidiary
undertakings
The Company has an investment of £500,000 (2021: £500,000) in
the issued ordinary share capital of its wholly owned subsidiary
undertaking, Augmentum Fintech Management Limited (“AFML”), which
is registered in England and
Wales, operates in the
United Kingdom and is regulated by
the Financial Conduct Authority. AFML’s principal activity is the
provision of portfolio management services to the Company. AFML’s
registered office is 4 Chiswell Street, London EC1Y 4UP.
10
Other Receivables
As at 31 March |
2022
Group
£’000 |
2022
Company
£’000 |
2021
Group
£’000 |
2021
Company
£’000 |
Other receivables* |
391 |
39 |
47 |
17 |
*Includes £73,000 due back from the portfolio managers due to an
inadvertent overpayment that was repaid after the year end.
11
Other Payables
As at 31 March |
2022
Group
£’000 |
2022
Company
£’000 |
2021
Group
£’000 |
2021
Company
£’000 |
Purchases payable |
5,000 |
5,000 |
1,730 |
1,730 |
Other payables |
296 |
223 |
210 |
180 |
|
5,296 |
5,223 |
1,940 |
1,910 |
12
Provisions
As at 31
March |
2022
Group and
Company
£’000 |
2021
Group and
Company
£’000 |
Performance fee
provision* |
15,265 |
6,508 |
*See page 23 and Notes 4 and 19.9 for further details.
13
Financial Instruments
(i) Management of
Risk
As an investment trust, the Group’s investment objective is to
seek capital growth from a portfolio of securities. The holding of
these financial instruments to meet this objective results in
certain risks.
The Group’s financial instruments comprise securities in
unlisted companies, partnership interests, trade receivables, trade
payables, and cash and cash equivalents.
The main risks arising from the Group’s financial instruments
are fluctuations in market price, and credit and liquidity risk.
The policies for managing each of these risks are summarised below.
These policies have remained constant throughout the year under
review. The financial risks of the Company are aligned to the
Group’s financial risks.
Market Price Risk
Market price risk arises mainly from uncertainty about future
prices of financial instruments in the Group’s portfolio. It
represents the potential loss the Group might suffer through
holding market positions in the face of price movements, mitigated
by stock diversification.
The Group is exposed to the risk of the change in value of its
unlisted equity and non-equity investments. For unlisted equity and
non-equity investments the market risk is principally deemed to be
the assumptions used in the valuation methodology as set out in the
accounting policies.
Liquidity Risk
The Group’s assets comprise unlisted equity and non-equity
investments. Whilst unlisted equity is illiquid, short-term
flexibility is achieved through cash and cash equivalents.
Credit Risk
The Group’s exposure to credit risk principally arises from cash
and cash equivalents. Only highly rated banks or liquidity funds
(with credit ratings above A3, based on S&P’s ratings or the
equivalent from another ratings agency) are used for cash deposits
and the level of cash is reviewed on a regular basis. The Company
held cash or cash equivalents with the following bank and liquidity
fund.
Bank Credit Ratings at 31 March 2022 |
2022
£’000 |
2021
£’000 |
Moody’s |
Barclays Bank plc |
24,326 |
27,433 |
A+ |
JPM GBP Liquidity
LVNAV |
7,000 |
– |
AAAm |
|
31,326 |
27,433 |
|
(ii) Financial Assets and
Liabilities
As at 31 March |
Group
Fair value
2022
£’000 |
Company
Fair value
2022
£’000 |
Group
Fair value
2021
£’000 |
Company
Fair value
2021
£’000 |
Financial
Assets |
|
|
|
|
Unlisted equity
shares |
266,720 |
266,720 |
157,719 |
157,719 |
Unlisted convertible
loan notes |
2,087 |
2,087 |
6,408 |
6,408 |
Cash and cash
equivalents |
31,326 |
29,694 |
27,433 |
26,533 |
Other assets |
1,141 |
39 |
47 |
17 |
Financial
Liabilities |
|
|
|
|
Other payables |
6,079 |
5,223 |
(1,940) |
(1,910) |
Cash and other receivables and payables are measured at
amortised cost and the rest of the financial assets in the table
above are held at approximate to fair value. The carrying values of
the financial assets and liabilities measured at amortised cost are
equal to the fair value.
The unlisted financial assets held at fair value are valued in
accordance with the IPEV Guidelines as detailed within
Note 19.4.
(iii)
Fair Value Hierarchy
Fair value is the amount for which an asset could be exchanged, or
a liability settled between knowledgeable willing parties in an
arm’s length transaction.
The Group complies with IFRS 13 in respect of disclosures about
the degree of reliability of fair value measurements.
This requires the Group to classify, for disclosure purposes,
fair value measurements using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements.
The levels of fair value measurement bases are defined as
follows:
Level 1: fair values measured using quoted prices (unadjusted)
in active markets for identical assets or liabilities.
Level 2: fair values measured using valuation techniques for all
inputs significant to the measurement other than quoted prices
included within Level 1 that are observable for the asset or
liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
Level 3: fair values measured using valuation techniques for
which any significant input to the valuation is not based on
observable market data (unobservable inputs).
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 year to, 31 March
2022. Note 8 on page 61 presents the movements on
investments measured at fair value.
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.
The multiple is calculated by dividing the enterprise value of the
comparable group by its revenue, EBITDA or earnings. The trading
multiple is then adjusted for considerations such as illiquidity,
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
year was £53,645,000 (2021: £26,727,000).
The table below 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 reasonable possible alternative assumptions.
Valuation Technique |
Fair
Value
2022
£’000 |
Fair
Value
2021
£’000 |
Unobservable Inputs |
Reasonably possible shift
in input +/- |
Change
in
valuation
+/(-) £’000 |
Multiple
methodology |
35,888 |
75,461 |
Multiple
Illiquidity adjustment |
10%
30% |
6,543
(6,452) / 1,587 |
CPORT* |
180,359 |
69,536 |
Transaction price |
10% |
19,111 /
(19,111) |
PWERM** |
1,752 |
4,503 |
Probability of
conversion |
25% |
127 /
(127) |
NAV |
7,677 |
4,091 |
Discount to NAV |
30% |
(2,303) |
Sales Price |
42,796 |
10,536 |
N/A |
|
|
*
Calibrated price of recent transaction.
** Probability
weighted expected return methodology.
14
Substantial holdings in Investments
The table below shows substantial holdings in investments where
the Company owns more than 3% of the fully diluted capital of the
investee company, and the investment value is more than 5% of the
Company’s non-current investments.
|
2022 |
2021 |
|
%
ownership
(fully diluted) |
%
of
portfolio |
%
ownership
(fully diluted) |
%
of
portfolio f |
interactive
investor* |
3.6 |
15.9 |
3.8 |
19.9 |
Zopa* |
3.3 |
9.5 |
3.0 |
5.8 |
Augmentum I LP
** |
100.0 |
30.3 |
100.0 |
34.8 |
Tide |
5.4 |
10.5 |
5.9 |
11.6 |
Grover |
6.4 |
15.8 |
8.3 |
7.9 |
Cushon |
13.9 |
5.1 |
- |
- |
* indirect
ownership via Augmentum I LP.
** Augmentum I LP’s
registered office is IFC 5, St Helier, Jersey JE1 1ST and it is
registered in Jersey.
15
Called up Share Capital
|
2022 |
2021 |
|
Ordinary Shares |
Ordinary Shares |
|
No. |
£’000 |
No. |
£’000 |
Opening issued and
fully paid ordinary shares of 1p each |
140,423,291 |
1,405 |
116,931,911 |
1,171 |
Issue of shares |
40,590,406 |
405 |
23,371,380 |
234 |
Ordinary shares
purchased into treasury |
(687,911) |
- |
(75,000) |
– |
Shares sold from
treasury |
- |
- |
195,000 |
– |
Closing issued and
fully paid ordinary shares of 1p each |
180,325,786 |
1,810 |
140,423,291 |
1,405 |
On 8 July 2021 40,590,406 ordinary
shares were issued. The nominal value of the shares issued was
£405,000 and the total gross cash consideration received was
£55,000,000. This consideration has been offset against costs of
issue, which totalled £1,362,000.
On 1 November 2020 23,371,380
ordinary shares were issued. The nominal value of the shares issued
was £234,000 and the total gross cash consideration received was
£28,046,000. This consideration has been offset against costs of
issue, which totalled £546,000.
687,911 shares were bought back into treasury during the year at
an average price of 131.1p per share. At 31
March 2022 there were 687,911 shares held in treasury (2021:
nil).
16
Net Asset Value per Share
The net asset value per share is based on the Group net assets
attributable to the equity shareholders of £295,204,000 and
180,325,786 shares being the number of shares in issue at the year
end.
The net asset value per share after performance fee* is based on
the Group net assets attributable to the equity shareholders of
£295,204,000, less the performance fee accrual made by the Company
of £15,265,000, and 180,325,786 shares being the number of shares
in issue at the year end.
* Alternative Performance Measure.
17
Related Party Transactions
Balances and transactions between the Company and its
subsidiaries are eliminated on consolidation. Details of
transactions between the Group and Company and other related
parties are disclosed below.
The following are considered to be related parties:
- Frostrow Capital LLP (under the Listing Rules only)
- The Directors of the Company and the Company’s subsidiary,
Augmentum Fintech Management Limited
- Augmentum Fintech Management Limited
Details of the relationship between the Company and Frostrow
Capital LLP, the Company’s AIFM, are disclosed on page 22.
Details of fees paid to Frostrow by the Company and Group can be
found in Note 2 on page 58.
Details of the remuneration of all Directors can be found on
page 44. Details of the Directors’ interests in the capital of the
Company can be found on page 45.
Augmentum Fintech Management Limited is appointed as the
Company’s delegated Portfolio Manager. The Portfolio Manager earns
a portfolio management fee of 1.5% of NAV up to £250 million and
1.0% of NAV for any excess over £250 million and is entitled
to a performance fee of 15% of net realised cash profits once the
Company has received an annual compounded 10% realised return on
its investments. Further details of this arrangement are set out on
page 23 in the Strategic Report. During the year the Portfolio
Manager received a portfolio management fee of £3,510,000
(2021: £2,235,000), which has been eliminated on consolidation
and therefore does not appear in these accounts. A performance fee
provision of £15,265,000 (2021: £6,508,000) has been accrued in the
Company’s accounts, which is eliminated on consolidation in the
Group accounts. No performance fee is payable or has been paid
during the year. There were no outstanding balances due to the
Portfolio Manager at the year end (2021: nil).
18
Capital Risk Management
|
Group
2022
£’000 |
Group
2021
£’000 |
Equity |
|
|
Equity share
capital |
1,810 |
1,405 |
Retained earnings and
other reserves |
293,394 |
181,757 |
Total capital and
reserves |
295,204 |
183,162 |
The Group’s objective in the management of capital risk is to
safeguard its liquidity in order to provide returns for
shareholders and to maintain an optimal capital structure. In doing
so the Group may adjust the amount of dividends paid to
shareholders or issue new shares or debt.
The Group manages the levels of cash deposits held whilst
maintaining sufficient liquidity for investments and operating
expenses.
There are no externally imposed restrictions on the Company’s
capital.
19 Basis of
Accounting and Significant Accounting Policies
19.1 Basis of preparation
The Group and Company Financial Statements for the year ended
31 March 2022 have been prepared in
accordance with UK-adopted International Accounting Standards and
with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards.
The Financial Statements have been prepared on a going concern
basis and under the historical cost basis of accounting, modified
to include the revaluation of certain assets at fair value, as
disclosed in Note 19.4. The Board has considered a detailed
assessment of the Group and Company’s ability to meet their
liabilities as they fall due, including stress tests which modelled
the effects of a fall in portfolio valuations and liquidity
constraints on the Group and Company’s financial position and cash
flows. Further information on the stress tests are provided in the
Report of the Audit Committee on page 49. The results of the tests
showed that the Group and Company would have sufficient cash to
meet their liabilities as they fall due. Based on the information
available to the Directors at the time of this report, including
the results of the stress tests, and the Group and Company’s cash
balances, the Directors are satisfied that the Group and Company
have adequate financial resources to continue in operation for at
least the next 12 months and that, accordingly, it is appropriate
to adopt the going concern basis in preparing these financial
statements.
In order to reflect the activities of an investment trust
company, supplementary information which analyses the Consolidated
Income Statement between items of a revenue and capital nature has
been presented alongside the Consolidated Income Statement. In
analysing total income between capital and revenue returns, the
Directors have followed the guidance contained in the Statement of
Recommended Practice for investment companies issued by the
Association of Investment Companies issued in February 2021 (the “SORP”).
The recommendations of the SORP which have been followed
include:
- Realised and unrealised profits or losses arising on the
revaluation or disposal of investments classified as held at fair
value through profit or loss should be shown in the capital column
of the Consolidated Income Statement. Realised gains are taken to
the realised reserves in equity and unrealised gains are
transferred to the unrealised reserves in equity.
- Other returns on any investment (whether in respect of
dividends, interest or otherwise) should be shown in the revenue
column of the Consolidated Income Statement. The total of the
revenue column of the Consolidated Income Statement is taken to the
revenue reserve in equity.
- The Board should determine whether the indirect costs of
generating capital returns should be allocated to capital as well
as the direct costs incurred in generating capital profits. In this
regard the Board has decided to follow a non-allocation approach to
indirect costs, which will therefore be charged in full to the
revenue column of the Consolidated Income Statement.
19.2 Basis of
Consolidation
The Consolidated Financial Statements include the Company and
certain subsidiary undertakings.
IFRS 10 and IFRS 12 define an investment entity and include an
exemption from the consolidation requirements for investment
entities. The Company has been deemed to meet the definition of an
investment entity per IFRS 10 as the following conditions
exist:
- The Company has multiple unrelated investors which are not
related parties, and holds multiple investments
- Ownership interests in the Company are exposed to variable
returns from changes in the fair value of the Company’s net
assets
- The Company has obtained funds for the purpose of providing
investors with investment management services
- The Company’s business purpose is investing solely for returns
from capital appreciation and investment income
- The performance of investments is measured and evaluated on a
fair value basis.
The Company will not consolidate the portfolio companies or
other investment entities it controls. The principal subsidiary
Augmentum Fintech Management Limited as set out in Note 9 is wholly
owned. It provides investment related services through the
provision of investment management. As the primary purpose of this
subsidiary is to provide investment related services that relate to
the Company’s investment activities it is not held for investment
purposes. This subsidiary has been consolidated.
The Company also owns 100% of the interests in Augmentum I LP
(the ‘LP’). As this LP is itself an investment entity and is held
as part of the Company’s investment portfolio it has not been
consolidated.
19.3 Application of New Standards
(i) New standards,
interpretations and amendments effective from 1 April 2021
There were no new standards or interpretations effective for the
first time for periods beginning on or after 1 April 2021 that had a significant effect on the
Group’s financial statements.
(ii) New standards, interpretations
and amendments not yet effective
There are a number of standards and interpretations which have been
issued by the International Accounting Standards Board (‘IASB’)
that are effective in future accounting periods. The Group does not
expect any of the standards issued by the IASB, but not yet
effective, to have a material impact on the Group or Company.
19.4 Investments
All investments are defined by IFRS as fair value through profit
or loss (described in the Financial Statements as Investments held
at fair value) and are subsequently measured at reporting dates at
fair value. The fair value of direct unquoted investments is
calculated in accordance with the Principles of Valuation of
Investments below. Purchases and sales of unlisted investments are
recognised when the contract for acquisition or sale becomes
unconditional.
Increases or decreases in valuation are recognised as part of
gains on investments at fair value in the Consolidated Income
Statement.
Principles of Valuation of Investments
(i)
General
The Group estimates the fair value of each investment at the
reporting date in accordance with IFRS 13 and the International
Private Equity and Venture Capital Valuation (“IPEV”)
Guidelines.
Fair value is the price for which an asset could be exchanged
between knowledgeable, willing parties in an arm’s length
transaction. In estimating fair value, the AIFM and Board apply
valuation techniques which are appropriate in light of the nature,
facts and circumstances of the investment and use reasonable
current market data and inputs combined with judgement and
assumptions. Valuation techniques are applied consistently from one
reporting date to another except where a change in technique
results in a better estimate of fair value.
In general, the enterprise value of the investee company in
question will be determined using one of a range of valuation
techniques. The enterprise value is adjusted for factors such as
surplus assets, excess liabilities or other contingencies or
relevant factors; the resulting amount is apportioned between the
investee company’s relevant financial instruments according to
their ranking and the effect of any instrument that may dilute
economic entitlements.
(ii)
Unlisted Equity Investments
In respect of each unlisted investment one or more of the following
valuation techniques is used:
- A market approach, based on the price of the recent investment,
market multiples or industry valuation benchmarks.
- A probability-weighted expected returns methodology. Under the
PWERM fair value is based on consideration of values for the
investment under different scenarios. This will primarily be used
where there is a convertible element to the investment
- A net assets based approach based on the value of the
underlying assets of the investment.
In assessing whether a methodology is appropriate techniques
that use observable market data are preferred.
Price of Recent Investment/Transaction
Where the investment being valued was itself made recently, or
there has been a third party transaction in the investment, the
price of the transaction may provide a good indication of fair
value. Using the Price of Recent Investment technique is not a
default and at each reporting date the fair value of investments is
estimated to assess whether changes or events subsequent to the
relevant transaction would imply a material change in the
investment’s fair value.
Multiple
Under the multiple methodology an earnings or revenue multiple
technique is used. This involves the application of an appropriate
and reasonable multiple to the maintainable earnings or revenue of
an investee company.
Multiples used are usually taken from current market-based
multiples, reflected in the market valuations of quoted comparable
companies or the price at which comparable companies have changed
ownership. Differences between these market-based multiples and the
investee company being valued are reflected by adjusting the
multiple for points of difference which might affect the risk and
growth prospects which underpin the multiple. Such points of
difference might include the relative size and diversity of the
entities, rate of revenue/earnings growth, reliance on a small
number of key employees, diversity of product ranges, diversity and
quality of customer base, level of borrowing, and any other reason
the quality of revenue or earnings may differ.
In respect of maintainable revenue/earnings, the most recent 12
month period, adjusted if necessary to represent a reasonable
estimate of the maintainable amount, is used. Such adjustments
might include exceptional or non-recurring items, the impact of
discontinued activities and acquisitions, or forecast material
changes.
PWERM ('Probability-Weighted Expected Returns
Methodology')
Under the PWERM potential scenarios are identified. Under each
scenario the value of the investment is estimated and a probability
for each scenario was selected. The fair value is then calculated
as the sum of the value under each scenario multiplied by its
probability.
Net Assets
For the net asset approach the fair value estimate is based on the
attributable proportion of the reported net asset value of the
investment derived from the fair value of underlying assets /
investments. Valuation reports provided by the manager or general
partner of the investments are used to calculate fair value where
there is evidence that the valuation is derived using fair value
principles that are consistent with the Company’s accounting
policies and valuation methods. Such valuation reports may be
adjusted to take account of changes or events to the reporting
date, or other facts and circumstances which might impact the
underlying value.
19.5 Cash and Cash
Equivalents
Cash comprises cash at bank and short-term deposits with an
original maturity of less than 3 months and subject to minimal risk
of changes in value.
19.6 Presentation
and Functional Currency
The Group’s and Company’s presentation and functional currency is
Pounds Sterling (“Sterling”), since that is the currency of the
primary economic environment in which the Group operates.
19.7 Other
income
Interest income received from cash equivalents is accounted for on
an accruals basis.
19.8
Expenses
Expenses are accounted for on an accruals basis, and are charged
through the revenue column of the Consolidated Income Statement
except for transaction costs and the carried interest fee as noted
below.
Transaction costs are legal and professional fees incurred when
undertaking due diligence on investment transactions. Transaction
costs, when incurred, are recognised in the Income Statement. If a
transaction successfully completes, as a direct cost of an
investment, the related transaction cost is charged to the capital
column of the Income Statement. If the transaction does not
complete the related cost is charged to the revenue column of the
Income Statement.
19.9 Performance
Fee
As set out in prior annual reports the performance fee arrangements
were set up to provide a long-term employee benefit plan to
incentivise employees of AFML and align them with shareholders
through participation in the realised investment profits of the
Group. During the year to 31 March
2022 the existing plan for AFML staff was terminated and the
performance fee liability to AFML employees accrued as at
31 March 2021 of £6,805,000 was
reversed. AFML continues to be entitled to a performance fee as
before, but any performance fee paid by the Company to AFML will
now be allocated to employees of AFML on a discretionary basis by
the Management Engagement & Remuneration Committee of the
Company. Non-executive Directors of the Company are not eligible to
participate in any allocation of the performance fee.
The Company provides for the performance fee in full. A
performance fee is provided for if its performance conditions would
be achieved if the remaining assets in that basket were realised at
fair value, at the Statement of Financial Position date. The
performance fee is equal to the share of profits in excess of the
performance conditions in the basket. On consolidation the
performance fee is eliminated since it is payable to the Company’s
subsidiary, AFML.
Performance fees will be charged to the capital column of the
Income Statement and taken to the Capital Reserve.
19.10 Leases
All leases are accounted for by recognising a right-of-use asset
and a lease liability.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the Group's
incremental borrowing rate. Right-of-use assets are measured at the
amount of the lease liability less provisions for dilapidations,
where applicable.
Subsequent to initial measurement, lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease.
19.11 Taxation
The tax effect of different items of income/gain and expense/loss
is allocated between capital and revenue on the same basis as the
particular item to which it relates.
19.12 Deferred Tax
Deferred taxation is provided on all timing differences other than
those differences regarded as permanent. Deferred tax assets are
only recognised to the extent that it is probable that taxable
profits will be available from which the reversal of timing
differences can be utilised. Deferred tax is not recognised if the
temporary difference arises from the initial recognition of assets
and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax is provided at the tax rates that are expected to
apply in the year when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted or
substantively enacted at the Statement of Financial Position
date.
19.13 Receivables and
Payables
Receivables and payables are typically settled in a short time
frame and are carried at amortised cost. As a result, the fair
value of these balances is considered to be materially equal to the
carrying value, after taking into account potential impairment
losses.
19.14 Share Capital
Ordinary shares issued by the Group are recognised at the proceeds
or fair value received with the excess of the amount received over
nominal value being credited to the share premium account. Direct
issue costs are deducted from equity.
19.15 Share Premium and Special
Reserve
The share premium account arose following the Company’s admission
to listing and represented the difference between the proceeds
raised and the par value of the shares issued. Costs of the share
issuance were offset against the proceeds of the relevant share
issue and also taken to the share premium account.
Subsequent to admission and following the approval of the Court,
the initial share premium account was cancelled and the balance of
the account was transferred to the Special Reserve. The purpose of
this was to enable the Company to increase the distributable
reserves available to facilitate the payment of future dividends or
with which to make share repurchases.
19.16 Revenue and Capital Reserves
Net capital return is added to the Capital Reserve in the
Consolidated Statement of Financial Position, while the net revenue
return is added to the Revenue Reserve. When positive, the revenue
reserve is distributable by way of dividend, as is any realised
portion of the capital reserve. The realised portion of the capital
reserve is £2,750,000 (2021: £(208,000)) representing realised
capital profits less costs charged to capital.
19.17 Critical Accounting Judgements and Key Sources of
Estimation Uncertainty
Critical accounting judgements and key sources of estimation
uncertainty used in preparing the financial information are
continually evaluated and are based on historical experience and
other factors, including expectations of future events that are
believed to be reasonable. The resulting judgements and estimates
will, by definition, seldom equal the related actual results.
There is one significant judgement included in the presentation
of the Consolidated Financial Statements, that the Company has
determined it is an investment company as set out in Note 19.2.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of
estimation uncertainty in the reporting year, that may have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below.
Fair value measurements and valuation processes
Unquoted assets are measured at fair value in accordance with IFRS
13 and the IPEV Valuation Guidelines. Decisions are required in
order to determine the appropriate valuation methodology and
subsequently in determining the inputs into the valuation model
used. These decisions include selecting appropriate quoted company
comparables, appropriate multiples to apply, adjustments to
comparable multiples and estimating future cash flows of investee
companies. In estimating the fair value of an asset,
market-observable data is used, to the extent it is available.
The Valuations Committee, which is chaired by a Director,
determines the appropriate valuation techniques and inputs for the
model. The Audit Committee considers the work of the Valuations
Committee and the results of their discussion with the AIFM,
Portfolio Manager and the external auditor and works closely with
the AIFM and Portfolio Manager to review the appropriate valuation
techniques and inputs to the model. The Chairman of the Audit
Committee reports its findings to the Board of Directors of the
Group every six months to explain the cause of fluctuations in the
fair value of the investments.
Information about the valuation techniques and inputs used in
determining the fair value of various assets and liabilities are
disclosed in Note 19.4. As set out in Note 19.9 carried interest is
calculated based on the valuation of the investments and as such is
considered a significant accounting estimate.
20 Post Balance Sheet Events
At the year end regulatory approval remained outstanding for a deal
announced in December 2021 in which
the Company’s holding in interactive investor would be realised as
part of its acquisition by abrdn. This transaction completed in
May 2022, with the Company receiving
proceeds of £42.8 million. There are no other significant events
after the end of the reporting period requiring disclosure.
.
2022 Accounts
The figures and financial information for 2022 are extracted
from the annual report and financial statements for the year ended
31 March 2022 and do not constitute
the statutory accounts for the year. The annual report and
financial statements include the Report of the Independent Auditor
which is unqualified and does not contain a statement under either
section 498(2) or section 498(3) of the Companies Act 2006. The
annual report and financial statements have not yet been delivered
to the Registrar of Companies.
2021 Accounts
The figures and financial information for 2021 are extracted
from the published annual report and financial statements for the
year ended 31 March 2021 and do not
constitute the statutory accounts for that year. The annual report
and financial statements have been delivered to the Registrar of
Companies and included the Report of the Independent Auditor which
was unqualified and did not contain a statement under either
section 498(2) or section 498(3) of the Companies Act 2006.
Annual report and financial
statements
Copies of the annual report and financial statements will be
posted to shareholders shortly and will be available on the
Company’s website (www.augmentum.vc) or in hard copy format from
the Company Secretary.
The Company's annual report for the year ended 31 March 2022 will shortly be available for
inspection on the National Storage Mechanism (NSM) via
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The Annual General Meeting will be held on Wednesday,
14 September 2022 at 11.00 a.m. The Notice of the Annual General
Meeting will be posted to shareholders with the annual report and
will be available on the Company’s website and NSM as per the above
with respect to the annual report.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.