Pantheon benefits from substantial discount narrowing – for the year ended 31 May 2021, Pantheon International posted an NAV return of 19.6% but shareholders got a return of 31.7% as its discount narrowed considerably. The share price returns were ahead of the UK market but about 5.9% behind those of the MSCI World Index (which is arguably a better comparison). The NAV returns were quite a long way (18 percentage points) behind the MSCI World Index. However, to a large extent, that reflects the fact that Pantheon’s portfolio of unlisted investments held up better than the listed equity market in the pandemic panic of March 2020 and so did not have as far to bounce.
The NAV returns were held back by the strength of the pound, in local currencies the average valuation uplift was 36%.
The chairman says that the valuation gains have included some very impressive results from specific company investments such as JFrog, an end-to-end software solutions provider, and Allegro, Poland’s largest online marketplace, both of which had very successful IPO’s during the period. As at 31 May 2021, both JFrog, which listed on the NASDAQ in September 2020, and Allegro, which was the largest European e-commerce IPO in history when it listed on the Warsaw Stock Exchange in November 2020, were held at significant multiples of their respective cost.
Despite the discount shift, Pantheon still trades on a discount of about 24% today. [The board thinks that this is unjustified given the company’s good long-term track record and we agree.]
Balance sheet
£319.0m came in by way of distributions from investments and calls from existing commitments to private equity funds during the period amounted to £119.9m. Net then, the trust generated net cash flow of £199.1m before taking into account the funding of new investments.
The £200m Asset Linked Note, which was issued some years ago and is being paid off as cash distributions are received from a reference portfolio of older investment assets, has a remaining value of £47m.
Pantheon’s multi-currency revolving credit facility, which was due to expire in June 2022, has been extended to May 2024 and now comes with an option to extend it from £300m to £350m if required. There were no borrowings on the facility at the year end. Including its cash balance of £198m and the credit facility, Pantheon had available liquid resources of £475m at the period end. By contrast its undrawn commitments were £528m as at 31 May 2021. [This is normal – it is important to keep as much cash as possible working, the undrawn commitments will be drawn down over a number of years and Pantheon will receive further distributions in the meantime. It may never use the borrowing facility but it is handy just in case. If anything, the commitments may be a bit low. The rationale for this is explained below.]
“The board and our manager, Pantheon, remain cautious in an environment of high valuations and potential interest rate rises, but see opportunities to increase PIP’s investment pacing to secure exciting opportunities in particular growth sectors. The board intends that PIP’s portfolio should continue to reflect a mix of investment types, geographies and industries which appropriately mitigate risk through diversification while, at the same time, increasing concentration in individual assets to provide a potential boost to NAV growth. The board is seeking to achieve this by increasing allocations to co-investment and single-asset secondaries opportunities.”
Share split
Pantheon’s share price is £26.20. The directors recognise that the high share price might be a barrier to investment for certain investors including regular savers who may wish to invest smaller amounts and buy smaller quantities of shares. Accordingly, to make Pantheon’s shares more accessible to a range of investors and with a view to improving the marketability of its shares, the board proposes to split each share into 10. This will happen early in November provided the share split is approved by investors at the AGM.
PIN : Pantheon benefits from substantial discount narrowing