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Augmentum Fintech looks to grow and amend investment policy to build on strong year

Augmentum Fintech (AUGM) released its annual results to 31 March 2021, as well as announcing proposals to 1) amend its investment policy and 2) issue new ordinary shares and/or C shares in connection with a proposed share issuance programme (including an initial issue of new ordinary shares targeting at least £40m at an expected price of 135.5p).

AUGM’s results included the following summary of its financial performance and highlights from the portfolio over the year.

Financial highlights:

  • NAV per share increased by 12.3% to 130.4p (31 March 2020: 116.1p).
  • Unrealised annualised IRR of 19% on invested capital (31 March 2020: 18%).
  • Overall NAV increased 35% to £183.2m (31 March 2020: £135.8m).
  • Raised gross proceeds of £28.0m through oversubscribed placing and retail offer in October 2020 (net proceeds £27.5m).
  • Unrealised gains of £26.7m (2020: £12.m ) across the portfolio.

Portfolio highlights:

  • £15.4m total invested in two new businesses, ParaFi and Volt, and 11 existing portfolio companies (2020: £32.8m invested in three new companies and seven existing portfolio companies).
  • A further £15.5 million invested in two new companies (Cushon and Epsor) and four existing portfolio companies post year-end.
  • Total of £185.0m equity raised by portfolio companies in the year (2020: £415).
  • interactive investor completed its acquisition of Share plc in July 2020 and entered into an agreement to acquire the direct-to-consumer book of Equiniti Financial Services in March 2021.
  • Grover secured €60.0 million in Series B funding and delivered 2.5x year-on-year growth in annual subscription value during the year.
  • Tide was awarded a further £25.0 million grant under the Banking Competition Remedies (BCR) grant scheme in September 2020 and grew market share of UK SME banking to 6%.
  • Onfido completed a $100.0 million Series C fundraise in April 2020 and reported 82% year-on-year growth in annual recurring revenues 2019-2020.
  • Dext (previously Receipt Bank) acquired Xavier, and post period end, the Company’s stake in Dext was sold for £10.5 million to Hg Capital, realising a 30.5% gross internal rate of return.

Fintech has been the beneficiary of a strong trend towards a digital economy

In describing the proposed changes to the investment policy and the issuance of new shares, AUGM’s results announcement notes that  “The manager continues to see a strong pipeline of investment opportunities, and as announced on 7 June 2021, the company is considering the issue of new ordinary shares to fund additional investments with the aim of delivering further value for the company’s shareholders.

Alongside this, the board and manager are recommending that the company’s investment policy be amended to remove the restriction on the company making investments in seed-stage businesses. The aggregate value of seed-stage investments will represent no more than 1 per cent. of Net Asset Value at cost and it is the manager’s current intention that initial investments into seed-stage businesses will be relatively small in size, typically less than £100,000. Separately, to reflect the growth of the Company since IPO, the Board is proposing to reduce the amount of cash as a percentage of gross assets that the company expects to hold at any given time (primarily for making follow-on investments) from 10-20% to 5-15%.

Any such initial issue is expected to be priced at an issue price of 135.5 pence per new ordinary share and target proceeds of at least £40m. The issue price represents a premium of 3.9 per cent. to the NAV per ordinary share as at 31 March 2021 and a discount of 6.1 per cent. to the closing mid-price per ordinary share on 11 June 2021 of 144.25 pence per ordinary share (being the last business day prior to this announcement). Such a fundraise is expected to require the publication of a prospectus and further details will be announced in due course.”

Neil England, AUGM’s chairman, noted that “fintech has been the beneficiary of a strong trend towards a digital economy, a trend which accelerated during the pandemic. In October 2020 we raised net proceeds of £27.5m through an oversubscribed placing and a retail offer. This has provided the necessary resources for our manager to continue to add new exciting fintech companies to the portfolio and to make further investments in existing portfolio companies.

Our share price has continued its strong recovery and appetite for the company has been high, as demonstrated by our consistently high premium to NAV since late 2020. After the year-end we made our first investment in France with Epsor, and also made our first disposal with the sale of Dext (previously Receiptbank).”

View from AUGM’s manager

Tim Levene, CEO of Augmentum Fintech Management (AUGM’s manager) commented: “Our strategy remains to back some of Europe’s most exciting early and growth-stage fintech businesses that are disrupting the traditional financial services industry.

Our clear focus during the year was to ensure our portfolio was well funded and supported during these unprecedented times. We have worked closely with the management teams in our portfolio companies to ensure they were well-positioned to react quickly and effectively to changes in their respective markets. Our portfolio has performed well over the twelve months under review with many of our companies seeing record growth and successfully completing additional financing rounds.

Having witnessed the positive trading across the portfolio, and having completed our successful placing and retail offer in October, we returned to focus on investing in new and exciting opportunities. By the end of the reporting period, we had invested a net total of £14.3m across two new and 11 existing companies.

We continue to seek out opportunities ahead of popular adoption of new technologies to the fintech mainstream, and this positions Augmentum competitively at a time when more global institutional investors than ever before are seeking to access European fintech. This has led to valuation inflation in parts of the sector, but we continue to remain price disciplined and theses driven, even if that means being contrarian at times.

We believe that the trend to digital adoption will continue to gather pace and are excited at the varied pipeline of opportunities and relationships currently available to us.”

AUGM: Augmentum Fintech looks to grow and amend investment policy to build on strong year

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