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To view the report online visit: www.augmentum.vc
Investing in Fintech.
Augmentum Fintech plc
Annual Report
For the year ended 31st March 2023
Annual Report
For the year ended 31st March 2023
About Augmentum Fintech plc
1ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
Strategic Report and Business Review
2 Chairman’s Statement
5 Investment Objective and Policy
6 Portfolio Review
7 Key Investments
13 Other Investments
15 Portfolio Manager’s Review
18 Strategic Report
22 Viability Statement
Corporate Governance
31 Board of Directors
32 Management Team
33 Directors’ Report
37 Corporate Governance Report
43 Directors’ Remuneration Report
46 Directors’ Remuneration Policy
48 Report of the Audit Committee
51 Statement of Directors’ Responsibilities
Financial Statements
52 Consolidated Income Statement
53 Consolidated and Company Statements of
Changes in Equity
54 Consolidated Balance Sheet
55 Company Balance Sheet
56 Consolidated Cash Flow Statement
57 Company Cash Flow Statement
58 Notes to the Financial Statements
69 Independent Auditor’s Report to the Members of
Augmentum Fintech plc
Further Information
78 Information for Shareholders
79 Glossary and Alternative Performance Measures
81 Contact Details
Contents
Chairman’s Statement
2 AUGMENTUM FINTECH PLC
I am pleased to present our fifth annual report since the launch of the
Company in March 2018. This report covers the year ended 31 March
2023.
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 by
offering them exposure to a diversified portfolio of private fintech
companies during what is often their period of rapid value accretion.
Performance
Shareholders will be fully aware of the significant market volatility
throughout the year under review. The war in Europe, inflation, rising
interest rates after a prolonged period of close to free money, highly
priced US technology stocks falling in value and the contagion from that
have all been factors. Fast growing companies that need cash to fuel
that growth have generally been out of favour.
Despite difficult markets, the bulk of your Company’s investments
performed very well and I am pleased to report that they made a
positive contribution to the Company’s net asset value (“NAV”) per
share after performance fee
1
*, which increased by 3.7p to 158.9p.
The operational performance of portfolio companies was generally
strong, with some stand out results, and the majority have cash runways
that will fund their businesses through to profitability. In normal markets
these performances would be expected to produce a strong NAV
improvement, but valuations were negatively affected in some cases by
declines in public market comparators.
The modest increase in the Company’s NAV per share after
performance fee is nonetheless encouraging in a market where many
others have suffered significant valuation write downs and illustrates
that the diversified portfolio of investments we hold is important when
individual sectors become stressed.
It is disappointing that the NAV growth we have enjoyed over the past
five years is not reflected in our share price. For a long period, your
Company enjoyed the highest premiums of any investment company
listed in London. This reflected the opportunity for a public market
investor to gain exposure to fast growing private fintech companies,
which was otherwise not available to them. That opportunity in a vast
addressable market is undimmed, yet the price at which the Company’s
shares traded fell again across the period. The
share price touched a
low of 86.8p during the year and ended the period at 97.0p, representing
a 27.1% reduction from the price at 31 March 2022. The share price
falling to a discount to NAV from the beginning of 2022 correlates with
market sentiment turning against growth stocks and private equity
generally, but is frustrating because it does not reflect the underlying
performance or the potential of the Company’s portfolio and seemingly
gives little credit to the rigour of our valuations process. The proceeds
from our recent portfolio disposals provide an illustration of the latter.
Portfolio
The most significant portfolio transaction in the year was the receipt of
proceeds of £42.8 million early in the period from the completion of
abrdn’s acquisition of interactive investor (“ii”), which was the
Company’s largest investment. The transaction delivered an 84.8% IRR
and 11.1 times multiple on invested capital.
Post year end, another significant disposal was made when the
Company sold its holding in Cushon to NatWest Group. The £22.8
million proceeds of this sale, which is fully reflected in the year end
valuation, represents a multiple of 2.1 times invested capital and an IRR of
61.6%.
Your Company has now made five successful portfolio investment exits,
all of which have been at or above the last reported holding value. This
should provide investors with comfort that our valuations process is
rigorous and corroborates the discipline our Portfolio Manager has
exercised when evaluating new investments and their reporting on the
portfolio.
Deployments in the year included new investments of £4.0 million in
Israeli payments monitoring and acceptance fintech Kipp and €3 million
* These are considered to be Alternative Performance Measures. Please see the Glossary and Alternative
Performance Measures on page79.
To read about our KPIs see page 22.
Performance Highlights
31 March 31 March
2023 2022
NAV per Share after performance fee
1
* 158.9p 155.2p
NAV per Share after performance fee Total Return* 2.4% 19.0%
Total Shareholder Return* (27.1%) (16.4%)
Discount to NAV per Share after performance fee* (39.0%) (14.3%)
Ongoing Charges Ratio* 1.9% 1.7%
1
Note: The Board considers the NAV per share after any performance fees provision to be the most accurate way to reflect the underlying value of
each share, whereas accounting standards require the Group’s consolidated NAV per share to be presented before such fees are deduct
ed as a
consequence of our Portfolio Manager being within our Group structure and the fees therefore being eliminated on consolidation.
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
One of our resolutions will be to seek shareholder authority to issue
shares by reference to the NAV per share after performance fee as we
believe this to be the best reflection of value, as explained in the note at
the foot of page 2.
Further details of this and other resolutions will be found in the Notice of
AGM, which will be published and sent to shareholders shortly after the
publication of this annual report. Both documents will also be available
to view on or download from the Company’s website at
www.augmentum.vc.
Your Directors consider all the resolutions that will be listed in the
Notice of AGM to be in the best interests of the Company and its
shareholders and recommend voting in favour of them, as your
Directors intend to do in respect of their own holdings.
Outlook
Inflation remains high, along with interest rates as the authorities strive
to bring it back to target levels. Early stage growth portfolios may
currently be out of favour, but Augmentum has proved its model, well-
illustrated by our realisations all producing returns in excess of their
previous carrying value. Our largest 5 investments, in particular, are
performing well.
The underlying need to digitalise and transform last century’s
infrastructure remains, as nearly all financial services sectors continue
to be dominated by traditional operators whose operations cannot
ignore the rapid development of less costly, and in many cases more
secure, business models. We maintained our investment discipline over
the last year and, with our strong cash reserves (£38.5 million at
31March 2023, £50.0 million at 30 June 2023), we are well placed both
to take advantage of new opportunities and to reinforce our appeal as a
supportive investor.
Your Board believes that the Company will see a closing of the discount
at which its shares trade over time and, with the underlying growth of
the portfolio generally being very strong, expects that patient
shareholders will be well rewarded.
Neil England
Chairman
3
July 2023
4 AUGMENTUM FINTECH PLC
Chairman’s Statement continued
5ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
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 objectiv
e
, 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 w
a
y 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
r
estriction.
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
investeecompanies.
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 in
v
estment restrictions:
l 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;
l the aggregate value of seed stage investments will represent no
more than 1 per cent. of Net Asset Value; and
l 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 15percent. of its
gross assets in other investment companies or
in
vestment 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
-r
elated instruments as
described above, the Compan
y will not employ derivatives of any kind
for investment purposes, but 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 15percent. of
its Gross Assets in cash or cash equivalent investments, for the purpose
of making follow-on investments in accordance with the Company’s
investment policy and to manage the working capital requirements of
the Company.
Changes to the investment policy
No material change will be made to the investment policy without the
approval of Shareholders by ordinary resolution. Non-material changes
to the investment policy may be approved by the Board. In the event of
a breach of the investment policy set out above or the investment and
gearing restrictions set out therein, the Management Team shall inform
the AIFM and the Board upon becoming aware of the same and if the
AIFM and/or the Board considers the breach to be material, notification
will be made to a Regulatory Information Service.
* Please refer to the Glossary on page 79.
Investment Objective and Policy
6 AUGMENTUM FINTECH PLC
Portfolio Review
Fair value of Impact Fair value of
holding at Net of foreign holding at % of Net
31 March investments/ currency rate Investment 31 March assets after
2022 (realisations) changes return 2023 performance
£’000 £’000 £’000 £’000 £’000 fee
Grover 42,415 – 1,833 (1,098) 43,150 15.5%
Tide 28,221 – – 7,471 35,692 12.9%
Zopa ^ 25,577 4,000 – 516 30,093 10.8%
Cushon 13,584 750 – 8,456 22,790 8.2%
Volt 5,608 – – 8,608 14,216 5.1%
Monese 13,225 – – (1,542) 11,683 4.2%
BullionVault ^ 10,023 (564) – 2,106 11,565 4.2%
Onfido 15,393 – 1,198 (6,349) 10,242 3.7%
AnyFin 9,870 2,709 57 (3,331) 9,305 3.4%
Intellis 4,003 – 232 4,177 8,412 3.0%
Top 10 Investments 167,919 6,895 3,320 19,014 197,148 71.0%
interactive investor ^ 42,797 (42,797) – – – 0.0%
Other Investments * 58,091 11,532 2,325 (14,801)** 57,147 20.6%
Total Investments 268,807 (24,370) 5,645 4,213 254,295 91.6%
Cash & cash equivalents 31,326 40,015 14.4%
Net other current liabilities (4,929) (186) -0.1%
Net Assets 295,204 294,124 105.9%
Performance Fee provision (15,265) (16,819) -5.9%
Net Assets after performance fee 279,939 277,305 100.0%
^ Held via Augmentum I LP
* There are fifteen other investments (31 March 2022: fourteen). See pages 13 and 14 for further details.
** The Other Investments investment loss is primarily from write-downs in the
v
aluations of Gemini and Tesseract, as detailed on page 17.
7ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
Key Investments
£42.4m
£28.2m
£25.6m
£13.6m
£5.6m
£13.2m
£10.0m
£15.4m
£9.9m
£4.0m
£100.9m
£254.3m
£294.1m
£4.0m
£0.8m
£2.7m
£11.5m
£38.5m
(£0.6m)
(£42.8m)
£0.8m
£7.5m
£0.5m
£8.4m
£8.6m
(£1.5m)
£2.2m
(£5.2m)
(£3.3m)
£4.4m
(£12.5m)
£1.3m
£43.2m
£35.7m
£30.1m
£22.8m
£14.2m
£11.7m
£11.6m
£10.2m
£9.3m
£8.4m
£57.1m
Other
Portfolio valuation changes
Year ended 31 March 2023
March-22 Investment Realisation
1
Uplift Reduction Cash Other
2
March-23
Total
Gross
Portfolio
Value
NAV
4
Exit Post
Period End
3
1. Bullionvault dividend received in January 2023, interactive investor exited in May 2022
2. Other is made up of AFML cash less net liabilities
3. Cushon exited post period end
4. NAV is shown before performance fee , NAV after performance fee is £277.3m
32%
19%
15%
10%
7%
2%
1%
14%
The Augmentum portfolio is well diversified across the fintech ecosystem
NAV
1
by sub-sector, %
Proptech
NAV
1
£294.1m
Circular Economy
Infrastructure
Digital Banking & Lending
Wealth & Asset Management
Cash and
other net
assets
2
Payments
Insurtech
8%
1. NAV before performance fee, as at 31 March 2023, NAV after performance fee is £277.3m
2. £38.5m available cash and £2.3m of other net assets as at 31 March 2023
Exit post period end
8 AUGMENTUM FINTECH PLC
Tide’s (www.tide.co) mission is to help SMEs save time and money in
the running of their businesses. Customers can be set up with an
account number and sort code in less than 10 minutes, and the
company is building a comprehensive suite of digital banking services
for businesses, including automated accounting, instant access t
o
credit, card control and quick, mobile invoicing. Tide has almost 10%
market share of small business accounts in the UK.
In November 2022, Tide acquired Funding Options, a leading UK
marketplace for SMEs seeking business finance, subject to FCA
approval. The merged credit business will give Tide’s 500,000
customers access to a wider range of credit options and creates one of
the UK’s biggest digital marketplaces for SME credit. In December
2022, Tide launched in India with two business banking solutions – the
Tide Business Account and its RuPay-powered Tide Expense Card.
Augmentum led Tide’s £44.1 million first round of Series B funding in
September 2019, alongside Japanese investment firm The SBIGroup.
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
2023 2022
£’000 £’000
Cost: 13,200 13,200
Value: 35,692 28,221
Valuation Methodology^ Rev.Multiple Rev.Multiple
% ownership (fully diluted): 5.1% 5.4%
As per last filed audited accounts of the investee company for the year
to 31 December 2021:
2021 2020
£’000 £’000
Turnover 33,541 14,442
Pre tax loss (32,719) (25,825)
Net assets 66,297 17,761
Key Investments continued
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 5,000 products including smartphones, laptops, virtual reality
technology, wearables and smart home appliances. The Grover service
allows users to keep, switch, buy, or return products depending on their
individual needs. Rentals are available in Germany, Austria, the
Netherlands, Spain and the US. Grover is at the forefront of the circular
economy, with products being returned, refurbished and recirculated
until the end of their usable life. Grover has circulated over 1 million
devices. With a total financing volume of around €1.4 billion to date and
over 400 employees, Grover is one of the fastest-growing scale-ups in
Europe.
In September 2019 Augmentum led a €11 million funding round with a
€6million 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 €15million 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 US$1 billion.
Source: Grover 31 March 31 March
2023 2022
£’000 £’000
Cost: 7,927 7,927
Value: 43,150 42,415
Valuation Methodology^ Rev.Multiple CPORT
% ownership (fully diluted): 6.3% 6.4%
As an unquoted German company, Grover is not required to publicly file audited
accounts.
^ See note 13 on pages 62 and 63.
9ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
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 won Best Short Term Fixed Rate Bond
Provider, Best Fixed Rate Bond Provider and Best New Savings
Provider in the Savings Champion Awards and was awarded Banking
Brand of the Year 2022 in the MoneyNet Awards.
Augmentum participated in a £20 million funding round led by
Silverstripe in March 2021, in October 2021 participated with a further
£10 million investment in a £220 million round led by SoftBank and in
February 2023 invested a further £4 million as part of a £75 million
funding round alongside other existing investors.
Source: Zopa 31 March 31 March
2023 2022
£’000 £’000
Cost: 33,670 29,670
Value: 30,093 25,577
Valuation Methodology Rev.Multiple CPORT
% ownership (fully diluted): 3.4% 3.3%
As per last filed audited accounts of the investee company for the year
to 31 December 2021:
2021 2020
£’000 £’000
Operating income 60,501 21,171
Pre tax loss (41,599) (41,479)
Net assets 270,512 134,074
Key Investments continued
Cushon (www.cushon.co.uk) provides workplace pensions and payroll-
linked ISAs across the UK 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.
NatWest Group, the FTSE 100 banking and financial services group,
announced in February 2023 that it had agreed to acquire a majority
shareholding in Cushon. The acquisition was completed on 1 June 2023.
Augmentum invested £5 million in Cushon in June 2021 and followed up
with a further £5 million in March 2022 and £750,000 in December
2022.
Source: Cushon 31 March 31 March
2023 2022
£’000 £’000
Cost: 10,750 10,000
Value 22,790 13,584
Valuation Methodology Sale Proceeds CPORT
% ownership (fully diluted): 13.9% 13.9%
As per last filed audited accounts of the investee company for the year
to 31 March 2022:
2022 2021
£’000 £’000
Turnover 5,501 1,632
Pre tax loss (8,548) (3,742)
Net assets 7,394 5,407
10 AUGMENTUM FINTECH PLC
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 15 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,
has been adopted by Investec for its private client transactional banking
service. 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, International
Airlines Group, Investec and HSBC Ventures.
Source: Monese 31 March 31 March
2023 2022
£’000 £’000
Cost: 11,467 11,467
Value: 11,683 13,225
Valuation Methodology CPORT CPORT
% ownership (fully diluted)*: 6.0% 7.5%
* 2022: £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 2021:
2021 2020
£’000 £’000
Turnover 17,573 16,285
Pre tax loss (17,529) (28,461)
Net liabilities (2,972) (15,410)
Key Investments continued
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 2021 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 2021 to integrate
Brazil’s domestic instant payments ne
tw
ork, Pix, and established its
physical presence in São Paolo.
Augmentum invested £0.5 million in Volt in December 2020 and a
further £4 million in June 2021.
Source: Volt 31 March 31 March
2023 2022
£’000 £’000
Cost: 4,500 4,500
Value: 14,216 5,608
Valuation Methodology CPORT CPORT
% ownership (fully diluted): 8.3% 8.3%
Volt is not required to publicly file audited accounts.
!
11ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
Key Investments continued
BullionVault (www.bullionvault.co.uk) is a physical gold and silver market
for private investors online. It enables people across 175 countries to
buy and sell professional-grade bullion at the very best prices online,
with US$3.7 billion of assets under administration, over US$100 million
worth of gold and silver traded monthly, and over 100,000 clients.
Each user’s property is stored at an unbeaten low cost in secure,
specialist vaults in London, New York, Toronto, Singapore and Zurich.
BullionVault’s unique Daily Audit then proves the full allocation of client
property every day.
The company generates solid monthly profits from trading, commission
and interest. It is cash generative, dividend paying, and well-placed for
any downturns in the wider financial markets.
Source: BullionVault 31 March 31 March
2023 2022
£’000 £’000
Cost: 8,424 8,424
Value: 11,565 10,023
Valuation Methodology EBITDA Multiple EBITDA Multiple
% ownership (fully diluted): 11.1% 11.1%
Dividends paid: 564 520
As per last filed audited accounts of the investee company for the year
to 31 October 2022:
2022 2021
£’000 £’000
Gross profit 13,071 12,086
Pre tax profit 8,364 7,74 1
Net assets 41,294 39,148
Onfido (www.onfido.com) is building the new identity standard for the
internet. Its AI-based technology assesses whether a user’s
government-issued ID is genuine or fraudulent, and then compares it
against their facial biometrics. Using computer vision and a number of
other AI technologies, Onfido can verify against 4,500 different types of
identity documents across 195 countries, using techniques like “facial
liveness’’ to see patterns invisible to the human eye.
Onfido was founded in 2012. It has offices in London, San Francisco,
New York, Lisbon, Paris, Amsterdam, New Delhi and Singapore and
helps over 900 companies, including industry leaders such as Revolut,
bung and Bitstamp. These customers are choosing Onfido over others
because of its ability to scale, speed in on-boarding new customers
(15seconds for flash verification), preventing fraud, and its advanced
biometric technology.
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 £64.7million in April 2020.
Source: Onfido 31 March 31 March
2023 2022
£’000 £’000
Cost: 7,75 0 7,7 50
Value: 10,242 15,393
Valuation Methodology Rev.Multiple Rev.Multiple
% ownership (fully diluted): 2.1% 2.3%
As per last filed audited accounts of the investee company for the
13months to 31 January 2022 (previous period 12 months to
31December 2020):
2022 2020
£’000 £’000
Turnover 94,513 45,408
Pre tax loss (44,980) (34,712)
Net assets 39,221 68,508
12 AUGMENTUM FINTECH PLC
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, Norway and Germany, with
plans to expand across Europe as well as strengthen its product suite in
existing markets.
Augmentum invested £7.2 million in Anyfin in September 2021 as part of
a $52 million funding round and a further £2.7 million in November
2022.
Source: Anyfin 31 March 31 March
2023 2022
£’000 £’000
Cost: 9,924 7,248
Value: 9,305 9,870
Valuation Methodology Rev. Multiple CPORT
% ownership (fully diluted): 3.2% 2.7%
As an unquoted Swedish company, Anyfin is not required to publicly file
audited accounts.
Key Investments continued
Intellis, based in Switzerland, is an algorithmic powered quantitative
hedge fund operating in the FX space. Intellis’ proprietary approach
takes a conviction based assessment towards trading in the
FXmarkets, a position which is uncorrelated to traditional news driven
trading firms. They operate across a range of trading venues with a
regulated Investment Trust fund structur
e tha
t enables seamless
onboarding of new Liquidity Partners.
Augmentum exercised its option to invest a further €1 million in March
2020 and a further €1 million in March 2021.
Source: Intellis
31 March 31 March
2023 2022
£’000 £’000
Cost 2,696 2,696
Value 8,412 4,003
Valuation Methodology P/E Multiple CPORT
% ownership (fully diluted) 23.8% 23.8%
As an unquoted Swiss company, Intellis is not required to publicly file
audited accounts.
13ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
Other Investments
Gemini (www.gemini.com) enables individuals and institutions to safely and securely
buy, sell and store cryptocurrencies. Gemini was founded in 2014 by Cameron and
Tyler Winklevoss and has been built with a security and regulation first approach.
Gemini operates as a New York trust company regulated by the New York State
Department of Financial Services (NYSDFS) and was the first cryptocurrency
exchange and custodian to secure SOC 1 Type 2 and SOC 2 Type 2 certification.
Gemini entered the UK market in 2020 with an FCA Electronic Money Institution
licence. 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.
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 £500,000
to SMEs across the UK and Germany. iwoca leverages online integrations with high-
street banks, payment processors and sector-specific providers to look at thousands
of data points for each business. These feed into a risk engine that enables the
company to make a fair assessment of any business – from a retailer to a restaurant, a
factory to a farm – and approve a credit facility within hours. The company has offered
more than £3 billion of finance to over 70,000 SMEs in total and successfully lent £370
million 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.
In the next 10 years, £1 trillion of inheritance will pass between generations in the UK.
Farewill (www.farewill.com) is a digital, all-in-one financial and legal services platform for
dealing with death and after-death services, including wills, probate and cremation. In
2022 Farewill won National Will Writing Firm of the Year for the fourth year in a row and
in 2021 was Probate Provider of the Year for the second consecutive year at the British
Wills and Probate Awards. Farewill also won Best Funeral Information Provider and
Low-cost Funeral Provider of the Year at the Good Funeral Awards 2021. The
organisation has also been voted the UK’s best-rated death experts on Trustpilot,
scoring an average customer approval rating of 4.9/5 from over 13,000 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.
Augmentum led Farewill’s £7.5 million Series A fundraise in January 2019, with a £4
million investment
, participated in its £20 million Series B, led by Highland Europe in
July 2020 , with £2.6 million, and in its further £4.8 million fundraise in March 2023, with
£0.8 million.
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 f
ocused on structur
ed products such as securities
financing, OTC equity derivatives and OTC cleared interest rates derivatives.
Created in 2017, Wematch is headquartered in Tel Aviv and has offices in London and
Paris. In February 2023 it passed a milestone of $150 billion notional in ongoing open
trades on their platform and in March announced a collaboration with MTS Markets,
owned by Euronext, creating MTS Swaps by Wematch.live, which aims to bridge the
gap between legacy voice trading and pure electr
onic tr
ading in the interdealer IRS
market.
Augmentum invested £3.7 million in September 2021.
Kipp (www.letskipp.com) is an Israeli fintech that has developed an AI platform that
transforms the traditional payment model to increase credit card transaction approvals,
revenue, and customer satisfaction. Its core solution relies heavily on data enrichment
and risk management to help merchants and banks split the cost of risk to incentivize
issuing banks to approve more transactions.
Augmentum invested £4 million in May 2022.
Wayhome (www.wayhome.co.uk) offers a unique part-own part-rent model of home
ownership, requiring as little as 5% deposit with customers paying a market rent on the
portion of the home that Wayhome owns, with the ability to increase the equity in the
property as their financial circumstances allow. It launched to the public in September
2021, following closure of the initial phase of a £500 million pension fund investment
and has crossed the milestone of completing the purchase of its first 100 homes.
Wayhome opens up owner-occupied residential property as an asset class for pension
funds, who earn inflation-linked rent on the portion not owned by the occupier.
Augmentum invested £2.5 million in 2019, £1 million in 2021 and a further £0.9 million in
the Company's financial year to 31 March 2023.
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. In January 2022 Mastercard unveiled that its next-generation virtual card
solution for instant B2B payments would use Previse’s machine learning capabilities.
The solution combines Previse’s machine learning, with Mastercard’s core commercial
solutions and global payment network, to transform how businesses send and receive
payments.
Augmentum invested £250,000 in a convertible loan note in August 2019. This
converted into equity as part of the company’s US$11 million funding round in March
2020, alongside Reefknot Investments and Mastercard, as well as existing investors
Bessemer Venture Partners and Hambro Perks. Previse was awarded a £2.5 million
Banking Competition Remedies’ Capability and Innovation Fund grant in August 2020
In May 2022 Previse closed the first phase of its series B financing round, which was
led by Tencent, with US$18 million raised, including £2 million from Augmentum.
14 AUGMENTUM FINTECH PLC
Other Investments continued
FullCircl (www.fullcircl.com) was formed from the combination of Artesian and Duedil.
Artesian was founded with a goal to change the way B2B sellers communicate with
their customers. They built a powerful sales intelligence service using the latest in
Artificial Intelligence and Natural Language Processing to automate many of the time
consuming, repetitive tasks that cause the most pain for commercial people.
Augmentum originally invested in DueDil, which merged with Artesian in July 2021.
Combining DueDil’s Business Information Graph (B.I.G.)™ and Premium APIs, and
Artesian’s powerful web application and advanced rules engine delivers an easy to
deploy solution for banks, insurers and FinTechs to engage, onboard and grow the right
business customers.
Berlin based Baobab (www.baobab.io) is a pioneer in the provision of European cyber
insurance for SMEs. With capacity provision from Zurich, Baobab uses a novel
approach to underwriting, pricing and risk mitigation, and works with leading SME
cyber security providers to prevent breaches for its insured customers.
Augmentum invested £2.6 million in January 2023.
ParaFi Capital (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), Synthetix (synthetic asset trading) and MakerDAO (stablecoins).
ParaFi also supports its protocols as a liquidity provider and governance participant.
Augmentum invested £2.8 million in ParaFi in January 2021. Co-investors include Bain
Capital Ventures and Galaxy Digital.
Epsor (www.epsor.fr) is a Paris based provider of employee and retirement savings
plans delivered through an open ecosystem, giving access to a broad range of asset
management products accessible through its intuitive digital platform. Epsor serves
more than 700 companies in France.
Augmentum invested £2.2 million in Epsor in June 2021.
Founded in 2015, WhiskyInvestDirect (www.whiskyinvestdirect.com) was a subsidiary of
BullionVault and is the online market for buying and selling Scotch whisky as it matures
in barrel. This is an asset class that has a long track record of growth, yet has previously
been opaque and inaccessible.
The business seeks to change the way some of the three billion litres of maturing
Scottish whisky is owned, stored and financed, giving self-directed investors an
opportunity to profit from whisky ownership, with the ability to trade 24/7. At its October
2022 financial year end the company's clients held 12 million LPA (Litres of Pure
Alcohol) of spirit.
Augmentum's holding derives from WhiskeyInvestDirect being spun out of BullionVault
in 2020.
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.
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 tr
ading,
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.
Habito (www.habito.com) is transforming the United Kingdom’s £1.3 trillion mortgage
market by taking the stress, arduous paperwork, hidden costs and confusing process
out of financing a home.
Since launching in April 2016, Habito had brokered £7 billion of mortgages by July 2021.
Habito launched its own buy-to-let mortgages in July 2019 and in March 2021 launched
a 40-year fixed-rate mortgage ‘Habito One’, the UK’s longest-ever fixed rate mortgage.
In August 2019, Augmentum led Habito’s £35 million Series C funding round with a £5
million investment and added £1.3 million in the Company's financial year ended 31
March 2023.
15ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
Portfolio Manager’s Review
Overview
I write to you after another 12 months of uncertainty following the
economy-wide adjustment to a higher interest rate environment. Having
flown the furthest under the market conditions of 2020-21, it is the listed
technology sector that has faced the most significant correction to
valuations in response to rising rates. Despite a bounce, in particular by
the FAANG stocks, listed tech stocks continue to trade well below their
10-year average. The increased cost of capital has reordered priorities
from growth to profitability, and returned focus to core business lines
and expense control. The market has become more discerning of
companies with strong fundamentals and those without, and the
significant rotation of capital into low-risk assets means that valuation
multiples for listed growth stocks, and fintechs within this, remain
compressed.
The stability of Augmentum’s NAV per share over the past twelve months
therefore belies the real story of continued progress and maturity in the
portfolio. Our 10 highest value holdings have seen revenue growth at an
impressive average of 117% year-on-year and raised over US$300 million
in equity capital despite a more challenging macroeconomic and
fundraising environment. Yet this strong performance has largely been
offset by multiple compression in comparable public markets. The growth
in our portfolio through the cycle reflects the quality of many of our
companies and the unabated advance of digital transformation in the
financial services sector.
The digital-asset sector suffered from a series of high-profile collapses
and subsequent contagion during 2022. These events highlighted
critical gaps in regulation and naivety in the nascent market structure.
The response from regulators has been an acceleration in policy
development and enforcement action. Europe has positioned itself as a
leader through the Markets in Crypto Asset (MiCA) regulation that will
apply from 2024 and brings welcome clarity to digital asset firms who
are committed to building compliant, legitimate businesses. This clarity
is lacking in the US market where enforcement action against high
profile firms has increased and we expect to see the biggest players in
the market move their domicile from the US to Europe, the Middle East
or Asia unless this changes in the coming year.
Recent advances in generative AI have instigated a wave of interest in
the technology and its future application in financial services. We
believe that generative AI will significantly increase the efficiency of
generalisable content-related tasks across industries such as coding
and marketing. For more complex financial services use cases, where
accuracy and compliance are imperative, it is still early from both a
technology and regulatory perspective. For now we remain in discovery
mode but it is our job as thesis driven investors to be ahead of the curve
on the investment opportunities that these innovative technologies
create.
From our perspective, it has taken the full year of 2022 and the first half
of 2023 for the valuation expectations of founding teams and investors
to reconverge. Our level of new investment activity, lower than previous
periods, has reflected this. We expect the second half of 2023 to be
more active than the first half as a result of a larger number of better
quality fintechs coming to the market for more capital. Following the
reset to private market valuations, this will be an exciting time to deploy
early-stage capital.
We are a specialist investor in high potential businesses that are
disrupting one of the largest and most profitable sectors of the
economy. Our fintech specialism and strong balance sheet position
leave us well positioned to take advantage of normalised investment
conditions. We remain committed to a diversified, private-market
strategy to deliver long-term returns.
Investment Activity
Investment activity during the year totalled £19.9 million. This is lower
than the Company’s annual average since IPO of £36.4 million but has
been appropriate during the period of adjustment tha
t the investment
environment has moved through.
New investment activity followed from high conviction thesis
development in the areas of digital payments and cyber-insurance, and
has been the product of our pan-European strategy, with both new
investments located outside the UK.
In my half-year report I introduced our investment in Kipp, an Israeli
innovator in online payment acceptance. In the period since, we have
welcomed German cyber-insurance provider Baobab to the portfolio.
Both companies characterise our early-stage strategy with teams who
bring deep domain-expertise, technology that drives differentiation and
a competitive advantage, and large, growing market opportunities.
These new investments, totalling £6.6 million, were secured off-market,
outside of competitive investment processes, on the basis of strong
relationships with the founding teams and their confidence in
Augmentum as the right investment partner
. Our thesis driven approach
is particularly important when identifying early-stage opportunities
ahead of our competition.
We continue to take advantage of our ability to support the strong
performers in the portfolio with further capital and completed eight
follow-on investments totalling £13.1 million.
With proceeds, now received, from our fifth portfolio exit, of Cushon to
NatWest Group, the Company ends the period with a strong balance
sheet.
New Investments
Falling within our thesis of optimisation in the digital payment
technology stack, Augmentum invested £4.0 million in Kipp in May
2022. The acceptance of card payments in ecommerce transactions
remains a critical issue for merchants and issuing banks, particularly in
cross-border payment contexts. Kipp’s platform enables these parties
to engage in real time information sharing to reduce rates of false-
positive payment decline. Kipp is delivering significant additional
conversion of transactions that would otherwise be lost across their
initial cohort of international merchant customers.
16 AUGMENTUM FINTECH PLC
Portfolio Manager’s Review continued
Cyber-attacks represent a growing risk to businesses of all sizes and the
insurance market is undergoing a rapid expansion, with the value of
premiums expected to scale to US$22 billion by 2025
1
. An integrated,
data-driven approach is critical to understanding risk at an individual
business level and to price policies accordingly. Incumbent insurers are
not effectively set up to carry out data collection and assessment at scale
and herein lies the opportunity for fintechs. In January 2023 Augmentum
invested £2.6 million in Baobab, who provide coverage to SMEs in
Germany and Austria with capacity provided by Zurich Insurance.
Portfolio
As I wrote to you in my half-year report, our team’s experience as
operators and active engagement through board positions has played a
significant role in helping our companies to navigate the change in
market conditions. Throughout 2022 and 2023 cost control and
sustainable growth have been core areas of focus.
Follow-on funding is also another avenue of portfolio support and we
completed eight investments into the existing portfolio during the
period. The funding rounds we participated in either supported
companies with runway to breakeven or provided additional time ahead
of their next funding round. For the companies that will fundraise in the
year ahead we expect conditions to be more favourable, assuming they
have used this period of market resettlement to realign strategy and
costs to current conditions.
Follow-on Investments and Other Top 10
Early in the period, in July 2022, we invested £2.0 million in Previse’s
£14.5 million Series B funding round led by Tencent. Previse provides
embedded lending and payment technology within B2B supply chains.
They are the technology provider behind Mastercard’s virtual card
solution for businesses available in more than 100 markets. During
2023 Previse has taken steps to rationalise its product suite and there
has been compression in the valuation multiples of listed peers. The fair
value of our holding has accordingly reduced £1.9 million in the year.
In November 2022 we invested a further £2.7 million into Anyfin, the
leading consumer credit refinancing player in the Nordics and Germany.
Augmentum’s investment formed part of a €30 million Series C round
which will take the company to breakeven in 2024. The round was led
by existing investors along with a strategic investment from the venture
investment arm of Citibank. Anyfin has seen strong counter cyclical
demand for its product but has maintained discipline in underwriting
approach given market conditions. The revaluation of our holding, down
£3.3 million, reflects compression in market multiples in the listed
lending vertical.
In January 2023 we invested £4 million into Zopa which, along with a
£0.5 million uplift, takes the total value of our holding to £30.1 million.
Zopa continues to deliver exceptional performance as a fully licensed
bank with increasingly diversified lending activity and total deposits
approaching £4 billion. The company is performing ahead of budget
and on track to achieve full year profitability in 2023. The ability to
maintain low cost of capital through deposits and to draw from a 17 year
lending track record translate into a distinct competitive advantage for
Zopa that is particularly powerful in the current economic environment.
We made four small investments of under £1.5 million each as part of
funding rounds for Farewill, Wayhome and Habito, and supported
Cushon through their acquisition process with a short-term investment
that has since been returned as part of exit proceeds.
At the beginning of the calendar year we received a dividend of
£0.6million from BullionVault following strong trading performance
and profitability, driving a £2.1 million valuation increase. The company is
a leading precious metals investment mark
etplace and continues to
trade well during periods of volatility in mainstream markets.
Grover (valuation up £0.7 million in the year) has enjoyed a successful
year in its transition towards long-term profitable growth. Total
subscription value as at the reporting date was rapidly nearing €250
million representing 50% year-on-year growth in the top line despite a
near 50% year-on-year reduction in quarterly marketing spend. Average
cost of customer acquisition has fallen by 25% since Q1 2022 with net
revenue retention above 100%. Grover’s nascent B2B offering now
represents fully 15% of overall subscription revenue, with the international
business growing at nearly 20% month-on-month and growth
outstripping the retail business in the domestic market.
Our second largest holding, Tide, is well established as the leading
digital business banking platform for SMEs in the UK with half a million
customers and market share of 9%. In the last 12 months considerable
progress has been made on revenue diversification and geographical
expansion with the official launch of Tide India taking place in
December 2022. Year-on-year revenue growth of 74% has more than
offset valuation multiple compression to deliver an 18% (£7.5 million)
increase in our holding value. Tide completed their first acquisition;
absorbing SME credit marketplace Funding Options into the business
to broaden credit access for Tide customers. Tide is well positioned to
consider additional acquisitions in the current market environment in
order to further broaden product capabilities or geographical presence.
Fifty countries and counting now have an Open Banking initiative in
place and account-to-account (“A2A”) payments - where funds are
moved in real-time between transacting parties - is the fastest growing
use case. Volt are established as a leading provider of account-to-
account payment connectivity. Through a unique network aggregation
model, Volt’s coverage is expanding in line with the global roll-out of
Open Banking initiatives, delivering the consistency and quality of
service demanded by the highest-volume ecommerce merchants and
facilitators in twenty-five countries and counting. In June 2023
Worldpay, the world’s largest merchant acquirer, and ecommerce
software giant Shopify selected Volt as their global A2A partner. The
increase in the value of our holding, of £8.6 million, has been supported
by exceptional revenue growth and post-period end Volt announced a
Series B fundraising of US$60 million led by US based IVP with
Augmentum investing a further £5.3 million.
Monese continues to advance their B2B strategy while maintaining
moderated growth in their pan-European retail banking platform. In May
2023 the company announced their coreless banking platform under
the new brand XYB. The last twelve months have been a period of
adjustment for the company to the new strategy and market
environment and we take confidence from the quality of customers that
XYB has been able to secure, supported by a healthy pipeline. In
September 2022, the strategic venture arm of HSBC joined Investec
Bank with a £30 million investment driven by their interest in XYBs
technology and delivery capability. Despite this positive newsflow
Monese’s valuation fell £1.5 million.
Onfido’s product is primarily used in customer on-boarding with
volumes therefore influenced by product demand. With a mix of
financial services verticals represented in the customer base, reduced
on-boarding in areas such as digital assets has been offset by
continued expansion in verticals such as digital banking. Onfido are
another of our portfolio who have taken advantage of value-pricing in
the market to extend product capabilities through acquisition,
1
Munich Re, 2022
17ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
announcing the acquisition of Airside Mobile in May 2023 to accelerate
product development in the area of re-usable digital ID. The reduction in
the fair value of our holding, of £5.1 million, is reflective of compression in
the valuation multiples of listed peers despite a positive year-on-year
growth rate and being on a fully funded pathway to profitability.
Our investments in the digital asset sector make up 5.2% (2022: 8.6%)
of the portfolio. Our thesis has focused on backing companies that have
a long-term view and are intent on building an institutional grade
proposition underpinned by robust regulatory frameworks. Despite our
continued conviction in this approach, our investments so far have
disappointed, and we are reporting significant reductions in the fair
value of our positions in Gemini, Tesseract and Parafi, of £2.2 million,
£6.3 million and £2.0 million, respectively. In the last 12 months digital
asset markets have been undermined by actors operating without
regard for regulation and the general reduction in the demand for risk
assets in the new macroeconomic environment. The growth
trajectories of our companies have been impacted by these events and
each has taken steps to adjust costs and str
ategy to current trading
conditions.
Exits
The Company saw its second significant exit during the year, with
interactive investor, the direct-to-consumer fixed fee investment
platform, acquired by abrdn in May 2022 for £1.49 billion. This resulted in
proceeds for the Company of £42.8 million, delivering an IRR of 84.8%
and multiple on capital invested of 11.1 times. interactive investor was
an early investment in the Augmentum portfolio, quite antithetical to
most venture capital radars at the point o
f investment. Under strong
leadership and disciplined focus the company grew rapidly to over
£55billion of customer assets under administration, becoming the
second largest self-directed investment platform in the UK.
The acquisition of workplace pensions provider Cushon by NatWest
Group was announced during the period in February 2023 and,
following regulatory approval, completed post-period end on 1st June.
Augmentum received proceeds of £22.8 million from the sale, giving an
IRR of 61.6% and multiple on capital invested of 2.1 times. Realised value
represents a c40% uplift on the holding value we reported in the
Company’s half year results.This marks the fifth exit from the portfolio
and is a further example of our measured approach to valuation; each
exit to date has been realised above or on-par with the previously
reported carrying value.
Performance
For the year to 31 March 2023 we are reporting gains on investments of
£9.9 million (2022 £56.7 million). Since IPO this represents an IRR of
18.5% on the capital that we have deployed.
We continue to take a consistent and disciplined approach to arrive at
fair values for the Company’s portfolio positions. The valuation
methodology (or methodologies) applied to each company is selected
with consideration of individual stage and circumstance. Our growing
track record of exits shows realisations above or on-par with the last
reported holding value.
In recent reports we have spoken more actively to shareholders about
the downside protections that form an integral part of the structure of
our typical investments. The most common protections across the
portfolio are liquidation preferences and anti-dilution provisions with 21
out of 25 portfolio positions protected by at least one of these.
These structures differentiate our shareholdings from ordinary shares
held in public or private companies because they protect value in the
eventuality that a company’s headline valuation is reduced. Through the
market volatility of 2022 these structures provided additional support to
the holding value of some of our positions, particularly those held in
earlier stage companies.
Our diversified portfolio approach also remains important. This extends
across verticals, stages of maturity and geographies and reduces our
overall exposure to market impact on any one of these.
Outlook
In the dislocation that follows from periods of economic turbulence,
entrepreneurs are presented with new opportunities to establish
ground-breaking businesses. This principle can also apply to venture
capital firms that operate with a clear purpose and we have welcomed
the general retreat of ‘tourist capital’ and the so-called ‘mega-rounds’
that played a distortionary role in private markets during the second half
of 2020 and 2021.
Quality deal flow is visibly improving as companies funded internally
through the turbulence of 2022 are now returning to market. Amongst
them are high potential prospects in line with our mandate which are
bolstering the investment pipeline. Increasing levels of “dry powder” in
the market maintain competition for quality companies but our thesis
driven approach and unique proposition – fintech specialism, patient
capital and operating experience – continue to cut through.
Less compelling investment opportunities are also returning to market,
and we anticipate a further shakeout and consolidation of companies to
come. Several of our established portfolio companies have already
found value-opportunities to add product and personnel capabilities
through acquisition. As fast-growing market leaders in their respective
fintech verticals they are well positioned to consider further
opportunities in the period ahead. Investors should see this is another
signal of maturity in the portfolio along with progression towards
profitability and exit.
The headroom for further disruption in financial services remains
significant and recent policy dialogue provides us many reasons for
optimism around the future of the technology sector in the UK and
Europe. Strong cross-party support was in evidence at the recent
London Tech Week (June 2023) where both the Prime Minister and
Leader of the Opposition spoke in favour of further investment and
progressive regulation in the UK in order to capture the economy-wide
benefits of a generational opportunity in AI. Reforms such as the
removal of the fee cap on defined contribution pension funds and a
potential UK sovereign wealth fund will begin to address the historic
under-investment from UK institutions in the venture capital asset class.
In the interests of the UK building on its preeminent position in
European fintech we hope and expect that those with the power to
implement these measures proceed to do so in a full and timely fashion.
As we navigate an evolving investment and technology landscape
where change is not uniform across countries, it is ever more important
to continue to develop our brand across Europe. We are well positioned
to identify and win exceptional investment opportunities and build on
our reputation as one of Europe’s leading fintech venture investors.
Tim Levene CEO
Augmentum Fintech Management Ltd
3 July 2023
STRATEGIC AND BUSINESS REVIEW
Portfolio Manager’s Review continued
18 AUGMENTUM FINTECH PLC
Strategic Report
Business Review
The Strategic Report, set out on pages 18 to 30, 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.
It also includes information for shareholders to assess how the
Directors have performed their duty to promote the success of the
Company. In this respect, information on how the Directors have
discharged their duties under Section 172 of the Companies Act 2006
can be found on pages 26 and 27.
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, f
ollowing its investment objective and
policy, seeking 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
thisreport.
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 of the financial risks are included in note 13 starting on
page 61.
Macroeconomic Risks
The performance of the Group’s investment portfolio is materially
influenced by economic conditions. These may affect demand for
services supplied by investee companies, foreign exchange rates,
input costs, interest rates, debt and equity capital markets and the
number of active trade and financial buyers.
All of these factors could have an impact on the Group’s ability to
realise a return from its investments and cannot be directly controlled
by the Group. Particular current factors include high inflation,
recession fears and sanctions related to the situation in Ukraine.
Principal Risks and Uncertainties
Within the constraints dictated by its objective, the Company’s
portfolio is diversified across a range of sectors, has no leverage, a
net cash balance and, as set out below, the Portfolio Manager
structures investments to pro
vide downside protection, where
possible.
The Board, AIFM and Portfolio Manager monitor the macroeconomic
environment and this is discussed at each Board meeting, along with
the potential impact. The Portfolio Manager also provides a detailed
update on the investments at each meeting, including, inter alia,
developments in relation to the macro environment and trends.
Mitigation
Strategy Implementation Risks
The Group is subject to the risk that its long-term strategy and its
level of performance fail to meet the expectations of its shareholders.
A robust and sustainable corporate governance structure has been
implemented with the Board responsible for continuing to act in the
best interests of shareholders.
An experienced fintech Portfolio Manager has been retained in order
to deliver the strategy.
The Company’s key risks fall broadly under the following categories:
19ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
Cash Risk
Returns to the Company through holding cash and cash equivalents
are currently low. The Company may hold significant cash balances,
particularly when a fundraising has taken place, and this may have a
drag on the Company’s performance.
The Company may require cash to fund potential follow-on
investments in existing investee companies. If the Company does not
hold sufficient cash to participate in subsequent funding rounds
carried out by portfolio companies, this could result in the interest
the Company holds in such businesses being diluted. This may have
a material adverse effect on the Company’s financial position and
returns for shareholders.
To mitigate this risk the Board has agreed prudent cash
management guidelines with the AIFM and Portfolio Manager.
The Group maintains sufficient cash resources to manage its
ongoing operational and investment commitments. Regular
discussions are held to consider the future cash requirements of the
Company and its investments to ensure that sufficient cash is
maintained.
Strategic Report continued
Portfolio Diversification Risk
The Group is subject to the risk that its portfolio may not be
diversified, being heavily concentrated in the fintech sector and the
portfolio value may be dominated by a single or limited number of
companies.
The Group attempts to mitigate this risk by making investments
across a range of companies in a range of fintech company
subsectors and in companies at different stages of their lifecycle in
accordance with the Investment Objectiv
e and Investment Policy.
There is also geographic diversification with 66.6% of the portfolio
being based in the UK and 33.4% in continental Europe, Israel and
the US. Given the nature of the Company’s Investment Objective this
remains a significant risk.
Principal Risks and Uncertainties
Mitigation
Investment Risks
The performance of the Group’s portfolio is influenced by a number
of factors. These include, but are not limited to:
(i) the quality of the initial investment decision;
(ii) reliance on co-investment parties;
(iii) the quality of the management team of each underlying portfolio
company and the ability of that team to successfully implement
its business strategy;
(iv) the success of the Portfolio Manager in building an effective
working relationship with each team in order to agree and
implement value-creation strategies;
(v) changes in the market or competitive environment in which each
portfolio company operates;
(vi) the macroeconomic risks described above; and
(vii) environmental, social and governance (“ESG”) factors.
Any of these factors could have an impact on the valuation of an
investment and on the Group’s ability to realise the investment in a
profitable and timely manner.
The Company also invests in early-stage companies which, by their
nature, may be smaller capitalisation companies. Such companies
may not have the financial strength, diversity and the resources of
larger and more established companies, and may find it more difficult
to operate, especially in periods of low economic growth.
The Portfolio Manager has put in place a rigorous investment
process which ensures disciplined investment selection and
portfolio management. This includes detailed due diligence, regular
portfolio reviews and in many cases active engagement with
portfolio companies by way of board representation or observer
status.
Investing in young businesses that may be cash consuming for a
number of years is inherently risky. In order to reduce the risks of
permanent capital loss the Portfolio Manager will, where possible,
structure investments to afford a degr
ee of downside protection
through mechanisms such as a liquidation preference and/or anti-
dilution provisions.
As noted above the Portfolio Manager provides a detailed update at
each Board meeting, including, inter alia, investee company
developments and funding requirements.
20 AUGMENTUM FINTECH PLC
Strategic Report continued
Credit Risk
As noted the Company may hold significant cash balances. There is
a risk that the banks with which the cash is deposited fail and the
Company could be adversely affected through either delay in
accessing the cash deposits or the loss of the cash deposit. When
evaluating counterparties there can be no assurance that the review
will reveal or highlight all relevant facts and circumstances that may
be necessary or helpful in evaluating the creditworthiness of the
counterparty.
Principal Risks and Uncertainties
The Board has agreed prudent cash management guidelines with
the AIFM to ensure an appropriate risk/return profile is maintained.
Cash and cash equivalents are held with approved counterparties,
who are required to have a high credit rating and financial strength.
Compliance with these guidelines is monitored regularly and
reported to the Board on a quarterly basis.
Mitigation
Valuation Risk
The valuation of investments in accordance with IFRS 13 and
International Private Equity and Venture Capital (IPEV) Valuation
Guidelines requires considerable judgement and is explained in note
19.17.
The Company’s investments are illiquid and a sale may require
consent of other interested parties. Such investments may therefore
be difficult to value and realise. Such realisations may involve
significant time and cost and/or result in realisations at levels below
the value of such investments as estimated by the Company.
Valuations are often based on comparator prices and market-based
multiples, which can be affected by equity market sentiment and
comparators’ situations that may not reflect the individual positions of
companies invested in.
The Company has a rigorous valuation policy and process as set out
in notes 19.4 and 19.17. This process is led by the Board and includes
benchmarking valuations against actual prices received when a sale
of shares is made, as well as taking account of liquidity issues and/or
any restrictions over investments.
Operational Risk
The Board is reliant on the systems of the Group and Company’s
service providers and as such disruption to, or a failure of, those
systems could lead to a failure to comply with law and regulations
leading to reputational damage and/or financial loss to the Group
and/or Company.
To manage these risks the Board:
l receives a quarterly compliance report from the AIFM and the
Portfolio Manager, which includes, inter alia, details of
compliance with applicable laws and regulations;
l reviews internal control reports, where available, key policies,
including measures taken to combat cybersecurity issues, and
also the disaster recovery procedures of its service providers;
l 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
l receives updates on pending changes to the regulatory and
legal environment and progress towards the Group and
Company’s compliance with these.
21ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
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.
Ukraine
The Board continues to monitor events in Ukraine and related
sanctions. The Board remains 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.
ESG
As mentioned above under Investment Risks, the Board recognises the
risks posed by environmental, social and governance (“ESG”) factors,
particularly with respect to the portfolio. Investment companies are
currently exempt from reporting under the Task Force on Climate-
Related Financial Disclosures (“TCFD”) and the Company has not
voluntarily adopted the requirements, but recognises the potential for
reputational risk should the Company not meet investor expectations in
relation to ESG. This, together with ESG factors that might affect
portfolio companies, is considered to be an emerging risk area for the
Company. ESG risk assessment is embedded in the Portfolio Manager's
due diligence and decision-making process when investing in new
companies and monitored thereafter.
Principal Risks and Uncertainties Mitigation
Key person risk
There is a risk that the individuals responsible for managing the
portfolio may leave their employment or may be prevented from
undertaking their duties.
The Board manages this risk by:
l receiving reports from AFML at each Board meeting, such
reports include any significant changes in the make-up of the
team supporting the Company;
l delegating to the Management Engagement & Remuneration
Committee oversight of the remuneration of employees of AFML;
l 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
l 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.
Strategic Report continued
* See Glossary on page 79
22 AUGMENTUM FINTECH PLC
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:
l 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 79 and in note 16
on page 64. Essentially, itadds 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 2.4% (2022: 19.0%). This result is discussed in the
Chairman's Statement on page 2.
l 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 79. 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 (27.1%) (2022: (16.4%))
reflecting the swing in market sentiment a
gainst listed growth and
tech stocks from the beginning of 2022 and the associated wide
discount to NAV at which the Company's shares have traded.
l 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 are set out on pages 23 and 24. 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 1.9% (2022: 1.7%).
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. Shareholder approvals are sought each year
to issue and buy back shares, which can assist in reducing share price
volatility. However, the level of discount or premium is understood to be
mostly a function of investor sentiment and demand for the shares, over
which the Board has little influence. The Portfolio Manager, the
management fee arrangements and the Company’s cost base
generally have not changed and the current discount follows an
extended period during which the shares traded at a premium to NAV.
The Board does not believe that Company specific factors have
influenced the discount. Rather, the share price falling to a discount to
NAV at the beginning of 2022 correlates with market sentiment turning
against growth stocks generally, with the Company's shares being
affected notwithstanding the portfolio’s potential. This situation
continued unabated through the year under review.
The Board has sought to communicate its faith in the underlying value
of the portfolio and simultaneously to take advantage of the discount by
undertaking a programme of accretive share buybacks, to the benefit of
remaining shareholders. It is thought that helping to create additional
market liquidity for sellers in this way also had an effect on stabilising the
share price. All shares purchased are 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 to 17.
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:
As part of its review the Board considered the impact of a significant
and prolonged decline in the Company’s performance and prospects.
This included a range of plausible downside scenarios such as
reviewing the effects of substantial f
alls in investment values and the
impact on the Company’s ongoing charges.
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.
* See Glossary on page 79
Strategic Report continued
23ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
In considering the Company's longer-term viability, as well as
considering the principal risks on pages 18 to 21 and the financial
position of the Company, the Board considered the following factors
and assumptions:
l The Company is and will continue to be invested primarily in long-
term illiquid investments which are not publicly traded;
l The Board reviews the liquidity of the Company, regularly
considers any commitments it has and cash flow projections;
l 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;
l As detailed in the Directors’ Report, the Valuations Committee
oversees the valuation process;
l There will continue to be demand for investment trusts;
l Regulation will not increase to a level that makes running the
Company uneconomical; and
l The performance of the Company will continue to be satisfactory.
Whilst acknowledging that market and economic uncertainty remain
heightened in view of current inflation, concerns about a recession 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 from the date of signing of this
report.
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 Fint
ech Management Limited
(“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:
l oversight of the portfolio management function delegated to
Augmentum Fintech Management Limited;
l promotion of the Company’s shares;
l investment portfolio administration and valuation;
l risk management services;
l share price discount and premium monitoring;
l administrative and company secretarial services;
l advice and guidance in respect of corporate governance
requirements;
l maintenance of the Company’s accounting records;
l review of the Company’s website;
l preparation and publication of annual and half year reports; and
l 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:
l on NAV up to £150 million: 0.225% per annum;
l on that part of NAV in excess of £150 million and up to £500million:
0.2% per annum; and
l 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:
l seeking out and evaluating investment opportunities;
l recommending the manner by which monies should be invested,
disinvested, retained or realised;
l advising on how rights conferred by the investments should be
exercised;
l analysing the performance of investments made; and
l advising the Company in relation to trends, market movements and
other matters which may affect the investment objective and policy
of the Company.
* See Glossary on page 79
Strategic Report continued
24 AUGMENTUM FINTECH PLC
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 £250million.
Performance Fee
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
24month period and related follow-on investments made for a further
36month 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.
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 2023 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 2023 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:
l 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
l 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:
l verification of non-custodial investments;
l cash monitoring;
l processing of transactions; and
l 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
sixmonths.
Registrar
The Board has decided to change the Company’s share registrar. The
Company’s current registrar is Link Group. With effect from
18December 2023 the Company’s registrar will become
Computershare Investor Services PLC. Contact details for both
registrars are set out on page 81.
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
confirmed its decision taken last year, following a consultation, that the
Company will retain the bulk of the proceeds of the investment
Strategic Report continued
25ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
realisations to date for reinvestment to support its capital growth
objective and utilise the balance to support accretive share buybacks.
Company Promotion
The Company has retained the services of 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 investor relations &
marketing 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 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 pr
actice is encouraged.
Diversity
There are currently three male and two female Directors (being 40%
female representation) on the Board, and these Directors have three
different nationalities and diverse 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
pages40 and 41. The Board also encourages diversity within
AFML,
where the team of 11 people represents four different nationalities and is
45% female. The Board is also keen to promote the benefits of diversity
in the companies we invest in.
Strategic Report continued
Investors
Who?
Stakeholder group
Portfolio Manager
Clear communication of the Company’s strategy
and the performance against its objective can
help the share price trade at a narrower discount
or a wider premium to its net asset value which
benefits shareholders.
New shares may be issued to meet demand
without diluting the NAV per share of existing
shareholders. Increasing the size of the
Company can benefit liquidity as well as spread
costs.
Understanding investor preferences in relation
to potential Board decisions, such as in relation
to possible distributions.
Why?
The benefits o
f engagement with our
stakeholders
Frostrow as AIFM, the Portfolio Manager and the
Company's joint brokers on behalf of the Board
complete a programme of investor relations
throughout the year. In addition, the Chairman
endeavours to make himself available to meet
with shareholders wishing to engage.
Key mechanisms of engagement included:
l The Annual General Meeting;
l The Company’s website which hosts reports,
video interviews with the managers and
regular market commentary;
l Online newsletters;
l One-on-one investor meetings;
l Investor meetings with the Portfolio Manager
and AIFM; and
l The Portfolio Manager hosts an annual
Capital Markets Day event to inform
investors about portfolio constituents.
How?
How the Board the AIFM and the Portfolio
Manager has engaged with our stakeholders
The Board meets regularly with the Company’s
Portfolio Manager throughout the year both
formally at the quarterly Board meetings and
more regularly on an informal basis. The Board
also receives quarterly performance and
compliance reporting at each Board meeting.
The Portfolio Manager’s attendance at each
Board meeting provides the opportunity for the
Portfolio Manager and Board to further reinforce
their mutual understanding of what is expected
from all parties.
Service Providers The Company contracts with third parties for
other services including: depositary, investment
accounting & administration, company
secretarial and share registration. It is necessary
for the Company's success to ensure the third
parties to whom we have outsourced services
complete their roles diligently and correctly.
The Company ensures all service providers are
paid in accordance with their terms of business.
The Board closely monitors the Company's
Ongoing Charges Ratio.
The Board and Frostrow engage regularly with
all service providers both in one-to-one meetings
and via regular written reporting. This regular
interaction provides an environment where
topics, issues and business development needs
can be dealt with efficiently and collegiately.
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.
Strategic Report continued
26 AUGMENTUM FINTECH PLC
Engagement with our Portfolio Manager is
necessary to evaluate performance against the
stated strategy and to understand any risks or
opportunities this may present to the Company. It
also provides clarity on the Board’s expectations
and helps ensure that portfolio management
costs are closely monitored and remain
competitive.
27ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
Key topics of engagement with investors
Ongoing dialogue with shareholders concerning the strategy of the
Company, performance and the portfolio.
Key topics of engagement with the Portfolio Manager
On an ongoing basis the Board engages on portfolio composition,
performance, outlook and business updates.
Additional topics included:
l The impact of market conditions upon their business and the
portfolio.
l The impact of the Ukraine conflict upon their business and the
portfolio.
l The integration of ESG into the Portfolio Manager’s investment
processes.
l Compensation arrangements within AFML.
l The structure of management arrangements.
What?
What were the key topics of engagement?
l The Portfolio Manager, Frostrow and the joint brokers meet
regularly with shareholders and potential investors to discuss the
Company’s strategy, performance and portfolio. These meetings
take place with and without the Portfolio Manager. The Chairman
and Mr Haysey also engaged with certain of the Company's
larger shareholders.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 an
accretive share buyback programme, with it being considered
that shareholders were better served by realisation proceeds
mainly being used for further investment.
l The prospects for the portfolio and the pipeline of potential
investment opportunities were of particular interest to the Board.
l Russian sanctions have no direct impact on the Company and
extremely limited impact on portfolio companies.
l The portfolio manager reports regularly any ESG issues in the
portfolio companies to the Board. Please see pages 28 to 30 for
further details of AFML’s ESG policies.
l As a result of discussions about the compensation
arrangements within AFML the remuneration policy put to
shareholders at the last AGM no longer covers key personnel of
AFML and the terms of reference of the Management
Engagement & Remuneration Committee were also revised.
l The structure of management arrangements is the subject of
continuing dialogue.
Outcomes and actions
What actions were taken, including principal decisions?
Employees of AFML
In order to attract and retain talent to ensure the
Group has the resources to successfully
implement its strategy and manage third-party
relationships.
AFML has an open plan office, facilitating ready
interaction and engagement. Senior team
members report to the Board at each meeting.
Given the small number of employees,
engagement is at an individual level rather than
as a group.
Portfolio companies Incorporating consideration of ESG factors into
the investment process assists in understanding
and mitigating risks of an investment and
potentially identifying future opportunities.
The Board encourages the Company’s Portfolio
Manager to engage with companies and in doing
so expects ESG issues to be a key consideration.
The Portfolio Manager seeks to take a board
seat, or have board observer status, on all
investments. See pages 28 to 30 for further
detail on AFML’s ESG approach to investing.
Who?
Stakeholder group
Why?
The benefits o
f engagement with our
stakeholders
How?
How the Board the AIFM and the Portfolio
Manager has engaged with our stakeholders
Strategic Report continued
28 AUGMENTUM FINTECH PLC
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 f
ollow-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 by teams from
companies in the later stages of the investment process. An ESG
scorecard is completed for each potential in
vestment, 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 has continued to identify priority areas in which to make suitable
ESG-related advancements across fund operations. Key progress
areas include:
l Tracking the gender diversity of founders/CEOs of companies in
our dealflow;
l Continuing to embrace diversity and inclusion through inclusive
hiring and professional development practices and Female
Founder Office Hours;
l Building on our programme of CSR initiatives through supporting
Crisis Venture Studio and The Lord Mayor's Appeal `We Can Be'
initiative.
ESG Focus Areas
AFML has identified eight key areas for consideration, across the three
ESG categories, which best align with its valuesand are most relevant
for companies operating in the fintech industry.
The key environmental consideration as identified by the 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:
l Incorporating ESG and sustainability considerations into its
investment analysis, diligence, and operating practices.
l Providing ESG training and support to the AFML employees
involved in the investment process, so that theymay perform their
work in accordance with AFML’s policy.
l Actively engaging with portfolio companies to encourage
improvement in key ESG areas.
l Annual reporting on progress to stakeholders.
Strategic Report continued
29ANNUAL REPORT AND FINANCIAL STATEMENTS 2023
STRATEGIC AND BUSINESS REVIEW
ESG in Action
Company Initiatives
Investing in Women Code (ESG Focus Area – Social: Diversity)
This year Augmentum became signatories of the Investing in Women
Code. The Investing in Women Code is a commitment to support the
advancement of female entrepreneurship in the United Kingdom by
improving female entrepreneurs’ access to tools, resources and finance
from the financial services sector.
As a signatory to the Investing in Women Code, the Company is
committed to a culture of inclusion and to advance access to capital for
female entrepreneurs. As a signatory, the Company will:
l Have a nominated member of the senior leadership team who is
responsible for supporting equality in all its interactions with
entrepreneurs.
l Provide HM Treasury with a commonly agreed set of data
concerning: all-female-led businesses; mixed-gender-led
businesses and all-male-led businesses. The Company agrees
that HM Treasury will collate this data and publish it on an
aggregated and anonymised basis in an annual report.
l Adopt internal practices which aim to improve the potential for
female entrepreneurs to successfully access the tools, resources,
investment and finance they need to build and grow their
businesses, working with relevant players in the ecosystem. The
Company will review these actions annually and make this
commitment publicly available.
The Lord Mayor’s Appeal (Environmental: climate/carbon footprint
and Social: Diversity)
In September the Augmentum team took part in The Lord Mayor’s
Appeal’s ‘City Giving Day’, entering a cycling challenge raising money
for the various charitable causes supported by The Lord Mayor’s
Appeal.
The Company participated in The Lord Mayor’s Appeal’s ‘We Can Be’
initiative for the first time, hosting a group of school girls, introducing
them to a career in the City and the inner workings of an investment
trust.
Female Founders in Fintech Office H
ours (Social: Diversity)
Augmentum launched Female Fintech Founders monthly Office Hours
along with other fintech investors Outward and Portage, providing an
opportunity for early stage female fintech founders to speak with
leading fintech investors and discuss fundraising and business scaling
more broadly. 25 founders were selected and hosted across the first
three sessions.
Portfolio Business Models
Anyfin: C
onsumer Financial Education (Social: Consumer protection)
A core element of Anyfin’s mission is to help get people out of debt and
to date the company has helped customers save millions of Euros in
credit costs. They are proactive with consumer financial education;
earlier this year they released the third edition of the Anyfin Report, a
financial health study conducted by YouGov. The report focused on the
ways in which people are planning to deal with their debts (and finances
more broadly) in 2023. The company hosts regular ‘Anyfin House’
sessions, open to the public, and covering topics such as financial
management, financial stress and the economy.
Grover: Circular Economy Model (Environmental: Climate/carbon
footprint)
Grover provides a sophisticated solution for the increasing number of
consumers who value access over ownership via their circular economy
tech-rental model. By replacing the highly wasteful linear product
ownership approach (take -> make -> dispose), Grover’s model extends
the lifecycle of a product by re-using, repairing and redistributing. A
device rented from Grover is circulated 2-6 times on average, and as of
2023 the company has circulated over 1 million devices.
Wayhome: Gradual Home Ownership Model
(Social: Financial inclusion)
Wayhome’s ‘Gradual Homeownership’ model aims to help aspiring
homeowners who are unable to obtain a traditional mortgage to buy a
home get on the housing ladder. With the average home now costing
9times average income and the average first time buyer only able to
borrow 3.55 times income, millions of hardworking families are locked
out of homeownership. Wayhome customers own the share of the
home they paid for and rent the remainder, gradually buying more and
renting less over time.
Strategic Report continued
Pertinent Sustainable Development Goals
30 AUGMENTUM FINTECH PLC
Portfolio Initiatives
Onfido: The T
rust Framework Certification (Social: Data security and
consumer protection)
In January 2023 Onfido announced it had achieved certification for
high confidence profile H1A under the UK Digital Identity and Attributes
Trust Framework (the trust framework). The certification serves use
cases where a higher confidence level in digital identity verification is
required. The trust framework is part of the UK government’s wider plan
to make it easier and more secure for people to prove their identity
online. It provides a set of rules for organisations to adhere to in order to
provide secure and trustworthy digital identity. The Home Office now
recommends companies use identity service providers (IDSPs) that
meet the trust framework standards for Right to Work, Right to Rent and
Disclosure and Barring Service’s (DBS) screening checks.
Tide: (Environmental: Climate/carbon footprint)
In March, Tide became the first fintech globally to remove 100% of its
emissions with durable carbon removals as of 2022 onwards. The
business has also committed to becoming fully NetZero by 2030 and to
support its UK members (more than 9% of UK SMEs), and growing
network of Indian SMEs on their journey to NetZero.
Tide made three climate-focused pledges which included committing
to removing 100% of their emissions with durable carbon removal from
2022 onwards and reducing 90% of their 2021 emissions per employee
by 2030. These would make Tide fully Net Zero by 2030. The
organisation also committed to making Net Zero simpler for their
Members by developing the support on offer.
Post-period end Tide and Transcorp announced the launch of India’s-
first recycled PVC RuPay Card. Made from 99% recycled plastic, this is
a first for fintechs in India. Each rPVC card saves 7g of carbon and 3.18g
plastic that would normally be used in production.
Zopa: 2025 Fintech Pledge (Social: Consumer protection and
financial inclusion)
Led by Zopa, 33 fintechs and their industry partners are working
together to tackle the cost-of-living crisis. The 2025 Fintech Pledge
aims to drive 10 million consumer actions that build up the financial
resilience of UK consumers by 2025. It will achieve this by connecting
people to platforms that make savings work harder, improve credit
scores, consolidate debt, and lower utility bills and household outgoing
costs. To date, more than 2 million actions have been reported from all
members combined.
This Strategic Report was approved by the Board of Directors and
signed on its behalf by:
Neil England
Chairman
3 July 2023
Strategic Report continued