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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Augmentum Fintech Plc | LSE:AUGM | London | Ordinary Share | GB00BG12XV81 | ORD GBP0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 103.00 | 96.60 | 102.50 | 76,942 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | 10.27M | 4.89M | 0.0287 | 35.89 | 175.34M |
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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 +44 (0)20 3961 5420
Nigel Szembel, Investor Relations +44 (0)7802 362088
nigel@augmentum.vc
Peel Hunt LLP +44 (0)20 7418 8900
Liz Yong, Luke Simpson, Huw Jeremy
(Investment Banking)
Singer Capital Markets +44 (0)20 7496 3000
Harry Gooden, Robert Peel, Alaina Wong
(Investment Banking)
Frostrow Capital LLP +44 (0)20 3709 8733
Paul Griggs, Company Secretary
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 (14.3%) 21.9%
performance fee*
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 Fair value
of Net of
holding at investments/ Investment holding at
31 March (realisations) return 31 March % of
2021 £'000 £'000 2022 portfolio
£'000 £'000
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 31 March
2022 2021
£'000 £'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 2019
£'000 £'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 31 March
2022 2021
£'000 £'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 31 March
2022 2021
£'000 £'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 2019
£'000 £'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 31 March
2022 2021
£'000 £'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 2019
£'000 £'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 31 March
2022 2021
£'000 £'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 2019
£'000 £'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 31 March
2022 2021
£'000 £'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 2020
£'000 £'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 31 March
2022 2021
£'000 £'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 2019
£'000 £'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 31 March
2022 2021
£'000 £'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 31 March
2022 2021
£'000 £'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 2020
£'000 £'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 31 March
2022 2021
£'000 £'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.)T 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 Within the constraints dictated by its
portfolio is materially influenced by objective, the Company's portfolio is
economic conditions. These may affect diversified across a range of sectors, has
demand for services supplied by investee no leverage, a net cash balance and as set
companies, foreign exchange rates, input out below the Portfolio Manager structures
costs, interest rates, debt and equity investments to provide downside protection,
capital markets and the number of active where possible.
trade and financial buyers. The Board, AIFM and Portfolio Manager
All of these factors could have an impact monitor the macroeconomic environment and
on the Group's ability to realise a return this is discussed at each Board meeting,
from its investments and cannot be along with the potential impact. The
directly controlled by the Group. Portfolio Manager also provides a detailed
Particular current factors include update on the investments at each meeting,
increasing inflation and sanctions related including, inter alia, developments in
to the situation in Ukraine. relation to the macro environment and
trends.
Strategy Implementation Risks A robust and sustainable corporate
The Group is subject to the risk that its governance structure has been implemented
long-term strategy and its level of with the Board responsible for continuing
performance fail to meet the expectations to act in the best interests of
of its shareholders. shareholders.
An experienced fintech Portfolio Manager
has been retained in order to deliver the
strategy.
Investment Risks The Portfolio Manager has put in place a
The performance of the Group's portfolio rigorous investment process which ensures
is influenced by a number of factors. disciplined investment selection and
These include, but are not limited to: portfolio management. This includes
(i) the quality of the initial detailed due diligence, regular portfolio
investment decision; reviews and in many cases active engagement
(ii) reliance on co-investment with portfolio companies by way of board
parties; representation or observer status.
(iii) the quality of the management Investing in young businesses that may be
team of each underlying portfolio company cash consuming for a number of years is
and the ability of that team to inherently risky. In order to reduce the
successfully implement its business risks of permanent capital loss the
strategy; Portfolio Manager will, where possible,
(iv) the success of the Portfolio structure investments to afford a degree of
Manager in building an effective working downside protection through mechanisms such
relationship with each team in order to as a liquidation preference and/or
agree and implement value-creation anti-dilution provisions.
strategies; As noted above the Portfolio Manager
(v) changes in the market or provides a detailed update at each Board
competitive environment in which each meeting, including, inter alia, investee
portfolio company operates; company developments, funding requirements
(vi) the macroeconomic risks described and the pipeline of potential new
above; and investments.
(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.
Portfolio Diversification Risk The Group attempts to mitigate this risk by
The Group is subject to the risk that its making investments across a range of
portfolio may not be diversified, being companies in a range of fintech company
heavily concentrated in the fintech sector subsectors and in companies at different
and the portfolio value may be dominated stages of their lifecycle in accordance
by a single or limited number of with the Investment Objective and
companies. 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 To mitigate this risk the Board has agreed
cash and cash equivalents are currently prudent cash management guidelines with the
low. The Company may hold significant cash AIFM and Portfolio Manager.
balances, particularly when a fundraising The Group maintains sufficient cash
has taken place, and this may have a drag resources to manage its ongoing operational
on the Company's performance. and investment commitments. Regular
The Company may require cash to fund discussions are held to consider the future
potential follow-on investments in cash requirements of the Company and its
existing investee companies. If the investments to ensure that sufficient cash
Company does not hold sufficient cash to is maintained.
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.
Credit Risk The Board has agreed prudent cash
As noted the Company may hold significant management guidelines with the AIFM to
cash balances. There is a risk that the ensure an appropriate risk/return profile
banks with which the cash is deposited fail is maintained. Cash and cash equivalents
and the Company could be adversely affected are held with approved counterparties, who
through either delay in accessing the cash are required to have a high credit rating
deposits or the loss of the cash deposit. and financial strength. Compliance with
When evaluating counterparties there can be these guidelines is monitored regularly
no assurance that the review will reveal or and reported to the Board on a quarterly
highlight all relevant facts and basis.
circumstances that may be necessary or
helpful in evaluating the creditworthiness
of the counterparty.
Valuation Risk The Company has a rigorous valuation
The valuation of investments in accordance policy and process as set out in Notes
with IFRS 13 and International Private 19.4 and 19.17. This process is led by the
Equity and Venture Capital (IPEV) Valuation Board and includes benchmarking valuations
Guidelines requires considerable judgement against actual prices received when a sale
and is explained in Note 19.17. of shares is made, as well as taking
The Company's investments may be illiquid account of liquidity issues and/or any
and a sale may require consent of other restrictions over investments.
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.
Operational Risk To manage these risks the Board:
The Board is reliant on the systems of the . receives a quarterly compliance
Group and Company's service providers and report from the AIFM and the Portfolio
as such disruption to, or a failure of, Manager, which includes, inter alia,
those systems could lead to a failure to details of compliance with applicable laws
comply with law and regulations leading to and regulations;
reputational damage and/or financial loss . reviews internal control reports,
to the Group and/or Company. 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 The Board manages this risk by:
There is a risk that the individuals . receiving reports from AFML at each
responsible for managing the portfolio may Board meeting, such reports include any
leave their employment or may be prevented significant changes in the make-up of the
from undertaking their duties. 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? Why? How?
Stakeholder group The benefits of engagement with How the Board the AIFM and the
our stakeholders Portfolio Manager has engaged with
our stakeholders
Investors Clear communication of the Frostrow as AIFM, the Portfolio
Company's strategy and the Manager and the Company's joint
performance against its brokers on behalf of the Board
objective can help the share complete a programme of investor
price trade at a narrower relations throughout the year. In
discount or a wider premium to addition the Chairman has
its net asset value which continued to engage regularly with
benefits shareholders. the Company's larger shareholders.
New shares may be issued to Key mechanisms of engagement
meet demand without diluting included:
the NAV per share of existing . The Annual General
shareholders. Increasing the Meeting
size of the Company can benefit . The Company's website
liquidity as well as spread which hosts reports, video
costs. 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 The Board meets regularly with the
Manager is necessary to Company's Portfolio Manager
evaluate performance against throughout
the stated strategy and to the year both formally at the
understand any risks or quarterly Board meetings and more
opportunities this may present regularly on an informal basis.
to the Company. It also The Board also receives quarterly
provides clarity on the Board's performance and compliance
expectations and helps ensure reporting at each Board meeting.
that portfolio management costs The Portfolio Manager's attendance
are closely monitored and at each Board meeting provides the
remain competitive. 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 The Board and Frostrow engage
third parties for other regularly with all service
services including: depositary, providers both in one-to-one
investment accounting & meetings and via regular written
administration, company reporting. This regular
secretarial and share interaction provides an
registration. It is necessary environment where topics, issues
for the Company's success to and business development needs can
ensure the third parties to be dealt with efficiently and
whom we have outsourced collegiately.
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.
Employees of AFML In order to attract and retain In normal times all employees of
talent to ensure the Group has AFML sit in one open plan office,
the resources to successfully facilitating interaction and
implement its strategy and engagement. Notwithstanding remote
manage third-party working, interaction continued
relationships. 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 The Board encourages the Company's
ESG factors into the investment Portfolio Manager to engage with
process assists in companies and in doing so expects
understanding and mitigating ESG issues to be a key
risks of an investment and consideration. The Portfolio
potentially identifying future Manager seeks to take a board
opportunities. 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? Outcomes and actions
What were the key topics of What actions were taken, including principal
engagement? decisions?
Key topics of engagement with . The Portfolio Manager, Frostrow and the
investors joint brokers meet regularly with shareholders
Ongoing dialogue with shareholders and potential investors to discuss the Company's
concerning the strategy of the strategy, performance and portfolio. These
Company, performance and the meetings take place with and without the
portfolio. 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 . The prospects for the portfolio and the
external Portfolio Manager on an pipeline of potential investment opportunities
ongoing basis are portfolio were of particular interest to the Board in
composition, performance, outlook connection with the fundraise decision making.
and business updates. . All of the Company's service providers
Additional topics included successfully implemented remote working when it
. The impact of COVID-19 upon was necessary. Whilst this created challenges at
their business and the portfolio. times there was no adverse impact on service
. The impact of the Ukraine delivery.
conflict upon their business and the . Russian sanctions have no direct impact on
portfolio. the Company and extremely limited impact on
. The integration of portfolio companies.
environmental, social and governance . The portfolio manager reports regularly any
('ESG') into the Portfolio Manager's ESG issues in the portfolio companies to the
investment processes. Board. Please see pages 27 and 28 for further
. Performance and details of AFML's ESG policies.
compensation of Group employees is . The Management Engagement & Remuneration
decided by the Management Engagement Committee engaged with respect to AFML's
& Remuneration Committee with the long-term incentive arrangements and the revision
Directors of AFML. 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 Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'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 (3,798) 63,113 59,315 (2,872) 22,548 19,676
Taxation
Taxation 6 - - - - - -
(Loss)/Return for the (3,798) 63,113 59,315 (2,872) 22,548 19,676
year
(Loss)/Return per Share 7 (2.2)p 37.1p 34.9p (2.3)p 18.2p 15.9p
(pence)
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
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Opening Shareholders' funds 1,405 52,151 92,101 44,876 (7,371) 183,162
Issue of shares following placing 405 54,595 - - - 55,000
and offer for subscription
Costs of placing and offer for - (1,363) - - - (1,363)
subscription
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
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Group £'000 £'000 £'000 £'000 £'000 £'000
Opening Shareholders' funds 1,171 24,760 92,033 22,328 (4,499) 135,793
Issue of shares following placing 234 27,812 - - - 28,046
and offer for subscription
Costs of placing and offer for - (546) - - - (546)
subscription
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
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Opening Shareholders' funds 1,405 52,151 92,101 44,876 (7,774) 183,759
Issue of shares following placing 405 54,595 - - - 55,000
and offer for subscription
Costs of placing and offer for - (1,363) - - - (1,363)
subscription
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
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Company £'000 £'000 £'000 £'000 £'000 £'000
Opening Shareholders' funds 1,171 24,760 92,033 22,328 (4,690) 135,602
Issue of shares following placing 234 27,812 - - - 28,046
and offer for subscription
Costs of placing and offer for - (546) - - - (546)
subscription
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
2022 2021
Note £'000 £'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
2022 2021
Note £'000 £'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 Year
ended ended
31 March 31 March
2022 2021
£'000 £'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 Year
ended ended
31 March 31 March
2022 2021
£'000 £'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 Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'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 Company Group Company
£'000 £'000 £'000 £'000
Audit of Group accounts pursuant to legislation* 83 83 66 66
Audit of subsidiaries accounts pursuant to 14 - 14 -
legislation*
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 Other Total Salary Other Total
/Fees benefits £'000 /Fees benefits £'000
£'000 £'000 £'000 £'000
Key management personnel 799 79 878 755 78 833
remuneration
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 2021
£'000 £'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 2021
Group Group
Office Office
Premises Premises
£'000 £'000
As at 1 April 145 333
Addition 752 -
Depreciation (147) (188)
At 31 March 750 145
Lease Liability
2022 2021
Group Group
Office Office
Premises Premises
£'000 £'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
Between Between
Up to 3 3 - 12 months 1 - 2 years 2 - 5
At 31 March 2022 months £'000 £'000 years
£'000 £'000
Lease payments 12 120 241 543
6 Taxation Expense
2022 2021
Revenue Capital Total Revenue Capital Total
For the year ended 31 March £'000 £'000 £'000 £'000 £'000 £'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
Revenue Capital Total Revenue Capital Total
For the year ended 31 March £'000 £'000 £'000 £'000 £'000 £'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: (722) 11,991 11,269 (546) 4,284 3,738
19%)
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 2021
£'000 £'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
2022 2021
Group and Group and
Company Company
As at 31 March £'000 £'000
Unlisted at fair value 268,807 164,127
Reconciliation of movements on investments held at fair value are as follows:
Group and Group and
Company Company
£'000 £'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
2022 2022 2021 2021
Group Company Group Company
As at 31 March £'000 £'000 £'000 £'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
2022 2022 2021 2021
Group Company Group Company
As at 31 March £'000 £'000 £'000 £'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 2021
Group and Group and
Company Company
£'000 £'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.
2022 2021
Bank Credit Ratings at 31 March 2022 £'000 £'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
Group Company Group Company
Fair value Fair value Fair value Fair
2022 2022 2021 value
As at 31 March £'000 £'000 £'000 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.
Fair Fair Reasonably Change in
Value Value possible valuation
Valuation 2022 2021 Unobservable Inputs shift +/(-) £'000
Technique £'000 £'000 in input +/-
Multiple 35,888 75,461 Multiple 10% 6,543
methodology Illiquidity adjustment 30% (6,452) /
1,587
CPORT* 180,359 69,536 Transaction price 10% 19,111 /
(19,111)
PWERM** 1,752 4,503 Probability of 25% 127 / (127)
conversion
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 % of % ownership % of
(fully portfolio (fully portfolio f
diluted) diluted)
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 140,423,291 1,405 116,931,911 1,171
shares of 1p each
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 180,325,786 1,810 140,423,291 1,405
shares of 1p each
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 Group
2022 2021
£'000 £'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. END
(END) Dow Jones Newswires
July 04, 2022 02:00 ET (06:00 GMT)
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