Augmentum Fintech (AUGM) announced its audited annual results for the year ended 31 March 2023. NAV per share increased by 2.4%, however shares fell 27.1% with the company’s discount widening to 37%.
Chairman Neil England commented on the performance, noting:
“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 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 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.”
Regarding the outlook, he continued:
“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 five 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 31 March 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.”
AGUM : NAV resilient but shares fall for Augmentum Fintech