Chairman’s Statement continued
(£2.6 million) in Berlin-based cyber insurance platform Baobab. A further
£13.1 million of follow-on funding was made to support existing portfolio
companies. Theseincluded Zopa (£4.0 million), Anyfin(£2.7 million),
Previse (£2.0 million), Habito (£1.3 million), Wayhome(£0.9 million) and
Cushon (£0.8 million).
Since the year end we have also participated in the Series B fundraising
of Volt, investing a further £5.3 million.
There is a full review of the portfolio and investment transactions in the
year in the Portfolio Manager’s Review beginning on page 15.
Portfolio Management
Our investment team continues to evaluate a wide range of
opportunities, reviewing financial and commercial metrics in order to
identify those most likely to be successful. We are active investors and
work closely with the companies we invest in, often taking either a
board or an observer seat, and working closely with management to
guide strategy consistent with long-term value creation. Our portfolio is
already diversified across different fintech sectors and maturity stages
and we are keen to expand it further. We are committed to responsible
investing. We integrate Environmental, Social and Governance (“ESG”)
factors in our investment analysis, due diligence and operating
practices as we believe that these are key in mitigating risk and creating
sustainable, profitable investments.
Valuations
Your Board considers its governance role in the valuations process to
be of utmost importance. Shareholders in investment companies with a
private portfolio are understandably sceptical of valuations when they
don’t see them change as much or as rapidly as they do in many public
companies. The results we are reporting reflect an in-depth and
challenging process, supported by our advisers.
We have always maintained a consistent, rigorous and disciplined
approach to valuations. We did not write up the value of your
Company’s investments to the levels attributed to many fintech
companies when the market was very bullish. It follows that the level of
any adjustments we have needed to make this year is relatively small in
comparison to some other funds, quite apart from strong growth
offsetting reductions in comparative multiples.
We have carefully reviewed both the status and the forecasts of all of
the portfolio companies, used appropriate and consistent
methodologies to determine the value of each investment and to sense
check our conclusions. 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
The Company’s shares traded at a discount to NAV for the whole of the
year under review and up to the date of this report, notwithstanding the
underlying value and strong prospects of the portfolio.
The Board has instigated a programme of highly accretive buybacks,
seeking to convey to the market our confidence in the value of the
portfolio. Directors and others associated with the Company have also
purchased shares. We continued with these accretive buybacks
through the year under review, with all the shares purchased by the
Company being held in treasury to potentially reissue when the share
price returns to a premium.
5,806,934 shares were bought back into treasury during the year to
31March 2023, at an average price of 102.9p per share, representing
an average discount to the prevailing NAV per share after performance
fee of 34.1% and adding 1.8p/1.1% to the NAV per share. A further
3,918,878 shares have been bought back since March, up to 30 June
2023, at an average price of 98.6p per share.
We will seek to renew shareholders’ authorities to issue and buy back
shares at the forthcoming AGM.
Potential Returns of Capital
As set out on page 24 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 investment pipeline and the working capital requirements of the
Company. I explained in last year’s report that following the sale of ii we
considered whether some of the proceeds should be returned to
shareholders or retained to facilitate future investment opportunities. The
Company has not reached the scale to which we aspire and the current
share price discount and unfavourable market conditions are frustrating
our ability to raise new capital for investment. After consultation with major
shareholders last year we decided to retain a good proportion of these
proceeds for reinvestment to support our capital growth objective and
utilise the balance to support an accretive share buyback programme
when the discount is high. The Board reconsidered this decision during
the year and decided to commit further to the buyback programme whilst
retaining funds to take advantage of new investment opportunities and to
provide follow-on support to existing investments, which are often
available on favourable terms.
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.
Registrar
Shareholders should note that, as part of our regular review of service
providers, we have decided to change the Company's registrar from
Link Group to Computershare Investor Services PLC. This change will
take place on 18 December 2023.
AGM
Our AGM will be held on Tuesday 19 September 2023 at 11.00 a.m. at
the Augmentum Fintech Management Limited office at 4 Chiswell
Street EC1Y 4UP. The Notice of AGM will be published shortly after the
publication of this annual report. Your 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 will not preclude shareholders from
attending the meeting.
3ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW