Investing in Fintech.
Annual Report
For the year ended 31st March 2024
About Augmentum Fintech plc
Augmentum Fintech plc (the “Company”) is the UK’s only publicly
listed investment company focusing on the fintech sector, having
launched on the main market of the London Stock Exchange in
2018, giving businesses access to patient funding and support,
unrestricted by conventional fund timelines.
We invest in early and later stage fast growing fintech businesses that are
disrupting the banking, insurance, asset management and wider financial services
sectors.
We have invested in many great businesses and have secured six exits since IPO,
the most significant of which, Dext, interactive investor, Cushon and Onfido, were
strongly accretive.
Portfolio management is undertaken by Augmentum Fintech Management Limited
(“AFML”). AFML is a wholly owned subsidiary of the Company, together referred to
as the “Group”.
1
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
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
19
Strategic Report
Corporate Governance
32
Board of Directors
33
Management Team
34
Directors’ Report
38
Corporate Governance Report
44
Directors’ Remuneration Report
47
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
77
Information for Shareholders
78
Glossary and Alternative Performance Measures
80
Contact Details
Contents
Chairman’s Statement
2
AUGMENTUM FINTECH PLC
I am pleased to present our sixth annual report since the launch of the
Company in March 2018. This report covers the year ended 31 March
2024.
Investment Policy
Your Company predominantly invests in early stage European fintech
businesses which have technologies with the potential to transform 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 focused portfolio of private fintech companies during
what is often their period of rapid value accretion.
Performance
Your Company’s NAV per share after performance fee at 31 March 2024
was 167.4p, up 5.4% from 31 March 2023, continuing our history of
increases for every reporting period since the Company’s IPO in 2018.
However, the price at which the shares traded continued to fail to
represent the NAV throughout the period, ending at 100.5p per share, up
3.5p from the price at 31 March 2023 but still representing a discount to
the NAV per share after performance fee of 40.0%.
The UK equity market, and investment companies in particular, has been
largely out of favour and investment company discounts are running at
historic highs in many cases. The initial negative reaction to increased
interest rates has sustained but most commentators predict a rate
reduction at some point; the question remains as to when. UK inflation
numbers are improving which removes one of the barriers to lower rates.
History suggests that growth companies such as Augmentum will be
early beneficiaries of any rally inspired by declining rates.
Our underlying portfolio is performing well and the current discount is
illogical. As at 31 March 2024, like at the half year, the valuation of our top
three positions in Tide, Zopa Bank and Grover, plus cash, was almost
equivalent to our £170 million market capitalisation, attributing virtually no
value to our £119 million of other investments.
Portfolio
In the first half of the year, the Company benefitted from its fifth portfolio
realisation since IPO. We received proceeds of £22.8 million from the
completion of NatWest Group’s acquisition of Cushon, appreciably
ahead of its prior valuation and representing a 2.1x multiple on invested
capital, and an IRR of 62%. Shortly after the year end, in April, we had
our sixth exit. One of the leading global providers of online identity
verification, Entrust, acquired Onfido, delivering an IRR of 5.8% and a
multiple on capital invested of 1.3x, with the realised value representing
a c.5% uplift on the holding value we reported in the Company’s half
year results. To date, all of the Company’s investment exits have been at
or above the last reported holding value, which 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 one new investment, £4.0 million in
London-based insurtech Artificial, and a further £12.0 million of
follow-on funding to support existing portfolio companies. These
included Volt (£5.3 million), Tide (£4.2 million) and, Grover (£1.4 million).
There is a full review of the portfolio and investment transactions during
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
our Portfolio Manager works 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 analysis, due diligence and operating
practices as we believe that these are key in mitigating risk and creating
good investments.
* These are considered to be Alternative Performance Measures. Please see the Glossary and Alternative Per
formance Measures on page 78.
1 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 deducted as a consequence of our Portfolio Manager being
within our Group structure and the fees therefore being eliminated on consolidation.
To read about our KPIs see page 23.
Performance Highlights
31 March 31 March
2024 2023
NAV per Share after performance fee1* 167.4p 158.9p
NAV per Share after performance fee Total Return* 5.4% 2.4%
Share price 100.5p 97.0p
Total Shareholder Return* 3.6% (27.1%)
Discount to NAV per Share after performance fee* (40.0%) (39.0%)
Ongoing Charges Ratio* 2.0% 1.9%
Chairman’s Statement continued
Valuations
Your Board considers its governance role in the valuations process to
be of utmost importance. We operate with a Valuations Committee in
addition to an Audit Committee, both playing a key role in assessing
portfolio valuation. Your Board understands that shareholders are often
sceptical of private equity valuations as they cannot be readily verified
in the way that public equities can. We have always maintained a
consistent, rigorous and disciplined approach to valuations and the
results we are reporting reflect an in-depth process, supported by our
advisers. We maintained our multiples in the bull market for fintech
when listed fintech multiples became elevated and so we have not
needed to make subsequent corrections, unlike some others. The six
disposals made to date provide some retrospective validation of this
process.
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 sense
checked our conclusions. We also benefit from the majority of our
investments occupying a senior position in the capital structures of the
investee companies, offering an element of protection 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 continued its programme of highly accretive buybacks,
albeit more modestly in the second half, seeking to convey to the
market our confidence in the value of the portfolio, while also balancing
this with the need for capital to be available for new and follow-on
investments. All the shares repurchased by the Company are being held
in treasury to potentially reissue when the share price returns to
a premium.
4,687,567 shares were bought back into treasury during the year to
31 March 2024 (2023: 5,806,934 shares), at an average price of 97.7p
per share, representing an average discount to the prevailing NAV per
share after performance fee of 38.6% and adding 1.7p/1.1% to the NAV
per share. A further 99,118 shares have been bought back since March,
up to 24 June 2024, at an average price of 98.7p 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 25 of this annual report, the Company may, at the
discretion of the Directors, return up to 50% of the gains realised during a
year from the disposal of investments. Factors influencing decisions in
this regard include the quantum of sale proceeds, the opportunities
offered by the investment pipeline and the working capital requirements
of the Company. To date the Board has applied a proportion of such gains
to share buybacks, as this has been highly accretive to the Company’s
NAV per share. This notwithstanding, the Directors intend to consult with
shareholders to determine whether other means of cash distribution
would be preferred.
Dividend
No dividend has been declared or recommended for the year. Your
Company is focused on providing capital growth and has a policy only to
pay dividends to the extent that it is necessary to maintain the Company’s
investment trust status.
Board
There have been no changes to the Board during the year but the three
Directors at IPO in 2018 are all scheduled to retire from the Board at the
same time, so it seems logical to stage these departures and commence
Board refreshment now. After six years in the Chair, I have decided to
retire first and will not be offering myself for re-election at the forthcoming
AGM. We have an excellent mix of skills and experience on the Board
already but intend to supplement our team with a new Director. We have
engaged an independent search firm for this purpose.
It has been my pleasure to chair Augmentum Fintech PLC from its
successful IPO in 2018 and to see it grow into a leading and highly
respected player in European fintech. My grateful thanks to our
shareholders for their support, to my Board colleagues for their diligence
and hard work, and to Tim, Richard and the team at Augmentum Fintech
Management Limited who have together built a much-admired
Portfolio Manager.
AGM
Our AGM will be held on Thursday 19 September 2024 at 11.00 a.m. at the
Augmentum Fintech Management Limited office at 4 Chiswell Street,
London EC1Y 4UP. Your Board strongly encourages shareholders to
register their votes in advance using the proxy form provided or by voting
online, or if they are not held directly, by instructing the nominee company
through which the shares are held. Registering votes in advance does not
preclude shareholders from attending the meeting.
Details of all of the resolutions can be found in the Notice of AGM, which
is published separately from this annual report and will be sent to
shareholders when the annual report is published. Both documents will
also be available to view on or download from the Company’s website at
www.augmentum.vc.
Your Directors consider that all the resolutions listed are 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
Interest rates remain stubbornly high for now, but UK and global inflation
numbers are improving which suggests a more positive medium-term
outlook for growth companies. As I write, early-stage growth portfolios
remain out of favour, but our Portfolio Manager has proved its model,
well-illustrated by the returns produced by our six realisations to date.
Additionally, our largest investments are performing very well.
The underlying need to digitalise and transform financial services
remains. The opportunity is undiminished as the traditional operators
continue to dominate, despite inroads made by some stellar fintech
businesses with less costly, and in many cases more secure, business
models. Penetration is still only c.5% across the industry although
adoption of consumer focused fintech by younger demographics is
markedly higher.
3
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
We maintained our investment discipline over the last year and, with our
strong cash reserves (£44.8 million at 31 May 2024), we are well placed
both to take advantage of new opportunities and to reinforce our appeal
as a supportive investor. We have a healthy pipeline of opportunities
under consideration.
Your Board believes that the Company will see a closing of the discount
at which its shares trade in due course and, with the underlying growth of
the portfolio generally being very strong, expects that our patient
shareholders will be well rewarded in time.
Neil England
Chairman
24 June 2024
4
AUGMENTUM FINTECH PLC
Chairman’s Statement continued
5
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
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 objective, 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 way 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 restriction.
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
investee companies.
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 investment 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.
* Please refer to the Glossary on page 78.
In addition, the Company will itself not invest more than 15 per cent. of its
gross assets in other investment companies or investment 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-related instruments as
described above, the Company 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 15 per cent. 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.
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
2023 (realisations) changes return 2024 performance
£’000 £’000 £’000 £’000 £’000 fee
Tide 35,692 4,176 – 11,425 51,293 18.0%
Zopa Bank^ 30,093 – – 9,198 39,291 13.8%
Grover 43,150 1,368 (1,103) (7,522) 35,893 12.6%
Volt 14,216 5,300 – 5,942 25,458 9.0%
BullionVault^ 11,564 (799) – 2,354 13,119 4.6%
Gemini 8,306 – (308) 2,926 10,924 3.9%
Onfido 10,242 – (51) (43) 10,148 3.6%
Intellis 8,412 – (79) 1,741 10,074 3.5%
AnyFin 9,304 – (817) 928 9,415 3.3%
Iwoca 7,882 – – 44 7,926 2.8%
Top 10 Investments 178,861 10,045 (2,358) 26,993 213,541 75.1%
Other Investments* 52,644 5,931 (564) (6,469) 51,542 18.1%
Cushon 22,790 (22,790) – – – 0.0%
Total Investments 254,295 (6,814) (2,922) 20,524 265,083 93.2%
Cash & cash equivalents 40,015 38,505 13.5%
Net other current liabilities (186) (271) -0.1%
Net Assets 294,124 303,317 106.7%
Performance Fee accrual (16,819) (18,980) -6.7%
Net Assets after performance fee 277,305 284,337 100.0%
^ Held via Augmentum I LP
* There are fourteen other investments (31 March 2023: fifteen). See page 13 for further details.
7
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
Key Investments
36%
12%
11%
10%
8%
7%
2%
2%
Infrastructure
The Augmentum portfolio is well diversified across the fintech ecosystem
NAV1 by sub-sector, %
Insurtech
Circular Economy
Wealth & Asset Management
Digital Banking & Lending
Payments
Proptech
Acquired post-year end
1. NAV before performance fee, as at 31 March 2024, NAV after performance fee is £284.3m
2. £38.5m cash as at 31 March 2024
-
Digital Asset Infrastructure
NAV1
£303.3m
Cash and
other net
assets2
3%
13%
15%
Other
Total
£35.7m
£4.2m
£11.4m
£51.3m
£30.1m
£0.0m
£9.3m
£39.3m
£43.2m
£1.4m
-£8.6m
£35.9m
£14.2m
£5.3m
£5.9m
£25.5m
£11.6m
-£0.8m
£2.4m
Mar-23 Investment Realisation1
Uplift Reduction Cash available & other2
Sep-23
Gross
Portfolio
Value
NAV3
£13.1m
£8.3m
£2.6m
£10.9m
£10.2m
-£0.1m
£10.1m
£8.4m
£1.7m
£10.1m
£9.3m
£0.1m
£9.4m
£7.9m
£0.0m
£7.9m
£75.4m
£5.0m
-£22.8m
-£5.8m
£51.5m
£265.1m
£38.2m
£303.3m
Acquired post-year end
1.
Cushon exited in June 2023
2.
Consolidated cash position of £38.5m less net liabilities
3.
NAV is shown before performance fee, NAV after performance fee is £284.3m
4.
Onfido exited post period end
Portfolio valuation changes
Year ended 31 March 2024
8
AUGMENTUM FINTECH PLC
Having been founded in 2005 as the world’s first peer-to peer (“P2P”)
lending company, Zopa (www.zopa.com) launched Zopa Bank following
a funding round in 2020. It was granted a full UK banking licence,
allowing it to offer a wider product range to its customers. After 17 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 Bank is regulated by both the PRA and the FCA.
Zopa Bank is a multiple awards winner. In 2024, Zopa won three more
awards from MoneyNet; Best Savings App, Best Fixed Rate Cash ISA
Provider and Personal Savings Provider of the Year. These follow a string
of previous awards, including being named the British Bank Awards’ Best
Personal Loan Provider for the sixth year in a row in 2023. 2023 marked
a key milestone, with Zopa achieving its first full year of profitability.
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 equity funding round
alongside other existing investors. In September 2023 Zopa Bank raised
£75 million in Tier 2 Capital to support further scaling.
Source: Zopa Bank 31 March 31 March
2024 2023
£’000 £’000
Cost 33,670 33,670
Value 39,291 30,093
Valuation Methodology^ Rev. Multiple Rev. Multiple
As per last filed audited accounts of the investee company for the year
to 31 December 2023:
2023 2022
£’000 £’000
Operating income 223,544 153,737
Pre tax profit/loss 10,828 (23,783)
Net assets 413,174 299,674
Key Investments continued
Tide’s (www.tide.co) mission is to help small and mid-sized businesses
(“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 to credit, card control, instant card freezing and quick,
mobile invoicing. Tide acquired Funding Options in 2022, giving Tide’s
customers access to a wider range of credit options and creating one of
the UK’s biggest digital marketplaces for SME credit. Tide continues to
expand its product offering and launched Tide Accounting and Tide
Acquiring in 2023, and recently joined the Current Account Switch Service.
Tide is also expanding geographically. Tide launched in India in 2022 and it
has recently announced plans to launch in Germany during 2024. Tide has
10% market share of small business accounts in the UK, with more than
575,000 customers, and more than 225,000 members in India.
Augmentum led Tide’s £44.1 million first round of Series B funding in
September 2019, alongside Japanese investment firm The SBI Group.
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. In October 2023
Augmentum invested a further £4.2 million through a combination of
primary and secondary transactions.
Source: Tide 31 March 31 March
2024 2023
£’000 £’000
Cost 17,376 13,200
Value 51,293 35,692
Valuation Methodology^ Rev. Multiple Rev. Multiple
As per last filed audited accounts of the investee company for the year
to 31 December 2022:
2022 2021
£’000 £’000
Turnover 59,176 33,541
Pre tax loss (40,781) (32,719)
Net assets 34,990 66,297
^ See note 13(iii) on pages 62 to 64.
9
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
!
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 – delivering benefits to both consumers
and merchants. This helps merchants shorten their cash cycle, increase
conversion and lower their costs. Volt offers coverage in 25 markets
and counting, including UK, Europe, Brazil and Australia. In June 2023
Volt announced their partnership with Worldpay, the world’s number
one global non-bank merchant acquirer by volume processed, giving
Worldpay’s more than 1 million merchant customers across 146 markets
access to Volt’s open payment infrastructure. Volt also announced
integration with leading global commerce company Shopify in 2023, to
power a ‘pay-by-bank’ option at checkout for merchants who use the
Shopify platform. In February 2024, Volt were granted a UK EMI licence
by the FCA, enabling Volt to evolve its cash management product
‘Connect’ for virtual accounts.
Augmentum invested £0.5 million in Volt in December 2020, £4 million
in its June 2021 US$23.5 million Series A funding round and £5.3 million
in its US$60 million Series B funding round in June 2023.
Source: Volt 31 March 31 March
2024 2023
£’000 £’000
Cost 9,800 4,500
Value 25,459 14,216
Valuation Methodology Rev. Multiple CPORT
Volt is not required to publicly file audited accounts.
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 8,000 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 and Spain. 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 1.2 million
devices. Total funding has been around €1.4 billion to date and it has
over 400 employees.
In September 2019 Augmentum led a €11 million funding round with a
€6 million convertible loan note (“CLN”) investment. This coincided with
Grover signing a €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 equity and debt funding round, with
Augmentum participating and converting its CLN, and Grover’s
Series C funding round in April 2022 raised US$330 million in equity
and debt funding. In September 2023, Augmentum invested £1.4 million
as part of a €23 million transaction that will help support the company
to profitability.
Source: Grover 31 March 31 March
2024 2023
£’000 £’000
Cost 9,295 7,927
Value 35,893 43,150
Valuation Methodology Rev. Multiple Rev.Multiple
As an unquoted German company, Grover is not required to publicly file
audited accounts.
10
AUGMENTUM FINTECH PLC
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, becoming one of only ten companies to have achieved FCA
Cryptoasset Firm Registration at that time.
Gemini announced acquisitions of portfolio management services
company BITRIA and trading platform Omniex in January 2022. During
2023 Gemini expanded into the UAE and Asia.
Augmentum participated in Gemini’s first ever funding round in November
2021 with an investment of £10.2 million.
Source: Gemini 31 March 31 March
2024 2023
£’000 £’000
Cost 10,150 10,150
Value 10,924 8,306
Valuation Methodology Rev. Multiple Rev. Multiple
Gemini is not required to publicly file audited accounts.
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 competitive 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 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 monthly profits from trading, commission and
interest. It is cash generative, dividend paying, and well-placed for any
cracks in the wider financial markets.
Source: BullionVault 31 March 31 March
2024 2023
£’000 £’000
Cost 8,424 8,424
Value 13,119 11,565
Valuation Methodology EBITDA Multiple EBITDA Multiple
Dividends paid 799 564
As per last filed audited accounts of the investee company for the year
to 31 October 2023:
2023 2022
£’000 £’000
Gross profit 13,311 13,071
Pre tax profit 13,023 8,364
Net assets 46,323 41,294
11
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
Key Investments continued
Onfido 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. In May 2023 Onfido announced the acquisition of
Airside Mobile Inc, the leader in private, digital identity sharing
technology whose customers include the world’s largest airlines.
Augmentum invested £4 million in 2018 as part of a US$50 million
funding round and an additional £3.7 million in a convertible loan note in
December 2019 as part of a £4.7 million round. The latter converted into
equity when Onfido raised an additional £64.7 million in April 2020.
Augmentum exited its position in April 2024 when Entrust, a global
leader in identity, payments, and data security solutions, acquired
Onfido. Proceeds of £10.1 million have been received.
Source: Onfido 31 March 31 March
2024 2023
£’000 £’000
Cost 7,750 7,750
Value 10,148 10,242
Valuation Methodology Transaction Price Rev. Multiple
As per last filed audited accounts of the investee company for the year
to 31 January 2023:
2023 2022
£’000 £’000
Turnover 102,099 94,513
Pre tax loss (70,190) (45,159)
Net (liabilities)/assets (9,372) 40,165
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 FX
markets, 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 structure that enables seamless
onboarding of new Liquidity Partners.
Following an initial investment of €1 million In 2019, 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
2024 2023
£’000 £’000
Cost 2,696 2,696
Value 10,074 8,412
Valuation Methodology P/E Multiple P/E Multiple
As an unquoted Swiss company, Intellis is not required to publicly file
audited accounts.
12
AUGMENTUM FINTECH PLC
Key Investments continued
Founded in 2011, iwoca (www.iwoca.co.uk) uses award-winning
technology to disrupt small business lending across Europe. They offer
short-term ‘flexi-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 en-
ables the company to make a fair assessment of any business and
approve a credit facility within hours. In addition to its flexi-loans, 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 and also launched a
revenue-based loan with eBay in 2022 where repayments are a
percentage of a business’s monthly sales. The company has lent over
£3 billion in the UK and Germany since its launch across more than
130,000 business loans.
Augmentum originally invested £7.5 million in Iwoca in 2018 and has
since added £0.35 million. Iwoca has raised over £1 billion in debt
funding from partners including Barclays, Pollen Street Capital, Värde,
Citibank and Insight Investment.
Source: Iwoca
31 March 31 March
2024 2023
£’000 £’000
Cost 7,852 7,852
Value 7,926 7,882
Valuation Methodology Rev. Multiple Rev. Multiple
As per last filed audited accounts of the investee company for the year
to 31 December 2022:
2022 2021
£’000 £’000
Turnover 78,260 68,468
Pre tax loss (10,980) (4,119)
Net assets 32,956 40,579
Anyfin (www.anyfin.com) was founded in 2017 by former executives of
Klarna, Spotify and iZettle, and leverages technology to allow
creditworthy 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, and over 500,000 people have downloaded
the app.
Augmentum invested £7.2 million in Anyfin in September 2021 as part of
a US$52 million funding round and a further £2.7 million as part of a
US$30 million funding round in November 2022.
Source: AnyFin 31 March 31 March
2024 2023
£’000 £’000
Cost 9,924 9,924
Value 9,416 9,305
Valuation Methodology Rev. Multiple Rev. Multiple
As an unquoted Swedish company, Anyfin is not required to publicly file
audited accounts.
13
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
Other Investments
Monese (www.monese.com) offers consumers the ability to open a UK or European
current account with a fully digital process. Launched in 2015 Monese has more than
2 million registered users. 70% of incoming funds are from salary payments, with
customers using Monese as their primary account. In May 2023, building on strong
platform infrastructure, Monese launched XYB, a banking-as-a-service (“BaaS”)
platform. XYB enables financial institutions to build digital products using Monese’s
technology. Monese counts HSBC and Investec amongst its XYB client base. The
BaaS market shows strong growth as established banks and fintech companies
continue to bring innovative digital products to market. In May 2024 Monese
announced that it was splitting into two standalone entities: its B2C retail bank Monese,
and its B2B business XYB.
Augmentum is invested alongside Kinnevik, PayPal, International Airlines Group,
Investec and HSBC Ventures.
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,
augmented with funeral plans in 2024. 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 115,000 reviews. It is now the largest will writer in the UK.
Since its launch in 2015 Farewill’s customers have pledged over £970 million to
charities through 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 focused on structured 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 March 2023 it 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 electronic trading in the interdealer IRS market. In August
2023 Wematch passed a milestone of US$200 billion in ongoing notional value of
trades on their platform and also reached an average daily matched volume (ADMV) of
US$11 billion in Europe, the Middle East, and Africa.
Augmentum invested £3.7 million in September 2021.
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. 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.
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.
The first fund has now closed having helped over 650 people buy a new home.
Wayhome are currently working on their second fund.
Wayhome opens up owner-occupied residential property as an asset class for pension
funds, who will 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.
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 incentivise
issuing banks to approve more transactions. In 2022 Kipp won the Mastercard Fintech
Engage Jury award and in 2023 was awarded first place at the Mastercard Fintech
Forum CE event. It was also the ‘Leading Financial Services or Payments Start-Up’
winner at the 2023 PAY360 Awards.
Augmentum invested £4 million in May 2022.
Artificial (www.artificial.io) is an established underwriting technology provider for the
London Insurance Market. This London-based insurtech partners with global insurers
and brokers to facilitate algorithmic placement of commercial and specialty risk,
backed by their powerful contract builder and underwriting platform.
Augmentum led Artificial’s £8 million Series A+ round in January 2024 with a £4 million
investment, alongside existing investors MS&AD Ventures and FOMCAP IV. The round
was aimed at allowing Artificial to accelerate their growth, to continue to build out its
product range and further consolidate its position as a leader in algorithmic
underwriting software as the insurance market migrates towards digital solutions.
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.
In August 2023 FullCircl announced the acquisition of W2 Global Data Solutions,
a provider of real-time digital solutions for global regulatory compliance. The acquisition
strengthens FullCircl’s compliance suite and accelerates the company’s ambition to
become the market leader in smart customer onboarding solutions for regulated
businesses. In February 2024 FullCircl announced the launch of its first white label
orchestration platform through W2 by FullCircl to help regulated businesses onboard
more customers and meet regulatory requirements.
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.
Augmentum invested £2.2 million in Epsor in June 2021.
Sfermion (www.sfermion.io) 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.
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.
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 1,000 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 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 2023 financial year end the company's
clients held 10.9 million LPA (Litres of Pure Alcohol) of spirit. Augmentum’s holding
derives from WhiskyInvestDirect being spun out of BullionVault in 2020.
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 has an express
authorisation from the FIN-FSA to deploy client assets into decentralized finance or
“DeFi”.
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 trading, 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.
Previse (www.previse.co) 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.
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.
15
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
Portfolio Manager’s Review
Overview
When I wrote to you in November it was against the backdrop of a
welcome change in sentiment. Equity markets had responded positively
to central bank decisions to hold interest rates steady, ending the
tightening cycle of 2022 and 2023. Since November, the anticipation of
future rate cuts has further boosted confidence, with global equity
indices reaching record highs in early 2024.
Whilst we are as optimistic as we were in November, we temper this
with a dose of realism; rates remain elevated and whilst the first-rate
cuts are now trickling through, they will likely remain high well into 2025.
The market continues to set a high bar for growth stocks, seeking
capital efficiency and profitability, as well as strong growth. While the
listed fintech sector is yet to enjoy as broad a recovery as other areas of
the market, robust investor demand has emerged for top quality
companies delivering disruptive and differentiated propositions.
A flight to quality is also present in private markets, where investment
activity has normalised to the medium-term trend. This environment
benefits the Company as a preferred investor for quality fintechs.
Several portfolio companies have posted meaningful profits this year
and have attracted growth capital of over £150 million during the period.
The operational performance of the vast majority of the companies in
the portfolio has continued to be robust, with average revenue growth
of 65% across the top 10 in the last 12 months. There have been some
standout results, in some cases ahead of expectations, and the majority
have over 2 years of cash runway, if they are not already profitable.
Longer term, the increasing dominance of US capital markets is a
challenge that UK and European policy makers must work to address,
with real implications for the future economic trajectory of the region.
UK savings are under-allocated to domestic markets, hindering growth.
Whilst we support initiatives such as the Mansion House Reforms, their
implementation and capital deployment into private markets needs to
accelerate. In the absence of meaningful change, as evidenced by
diverging regional trajectories in this recent recovery period, the UK and
European markets continue to lose ground to the US.
Fintech’s market share of global financial services revenue remains
below 5% but is set to more than double during the next decade as
fintech companies both disrupt incumbent firms and become their
partners for harnessing the potential of new technologies1. Hundreds of
valuable companies will be built in Europe to support sector wide digital
transformation.
Companies in the fintech sector are addressing significant
opportunities; in 2023, over 50% of fintechs in the F-Prime index of
emerging, publicly traded, financial technology companies, posted
revenues above US$1 billion, growing three times faster than
incumbents (F-Prime Capital2). The European ecosystem is producing
high quality companies that with the right support have the potential to
operate and thrive at global scale. This includes a cohort of near-term
IPO candidates, including several from the Company’s portfolio.
Whilst IPOs have been almost entirely absent from the market in 2024,
we hope to see their return in 2025. With IPOs absent, M&A activity,
driven mainly by incumbent firms acquiring digital capabilities, has
meanwhile continued at pace. The resilience and depth of the exit
market for fintechs is one of its key strengths from an investment
perspective. Fintech exits in Q1 2024 totalled 247 transactions and
US$77 billion in realisations globally 99% of which was M&A3. Without
access to private markets, investors will continue to miss these
compelling opportunities.
In our view, the European early stage fintech ecosystem has reached an
exciting point of maturity. Exit activity has supported multiple cycles of
capital and talent recycling, including the 10 repeat founders in the
Company’s portfolio. This includes the Company’s 6th realisation
through M&A with the sale of Onfido to Entrust, a leading US listed
provider of digital identity solutions.
The flywheel of talent, funding and regulation is supporting quality
companies through growth stages. As we move towards a period of
greater market stability, we find ourselves operating from a position of
strength. Our diversified portfolio is resilient and performing well.
The Company’s cash position has been strengthened by recent exits,
and we are addressing one of the most compelling sector-wide growth
opportunities available to investors today.
In financial services, leveraging artificial intelligence (“AI”) is a top
priority due to significant breakthroughs in generative AI over the past
24 months. Our engagement with AI spans three key areas; portfolio
companies, such as Zopa Bank in credit underwriting and Intellis in
trading decisions, are leading in AI applications; we are exploring
innovative AI led investment opportunities; and our team uses AI tools
and proprietary data to enhance efficiency and coverage on a day-to-
day basis. Staying ahead in applying new technologies provides a
competitive advantage for the portfolio and pipeline companies, as well
as a forward-thinking venture capital investment team.
Our strategy remains consistent; investment discipline rooted in
experience and fintech sector specialism, applied to proprietary
pan-European deal flow with a distinct, value-add approach that
resonates with exceptional founders. The Company remains a unique
offer to public market investors, not just in terms of its structure but also
in terms of the quality and diversification of the fintech exposure it offers.
16
AUGMENTUM FINTECH PLC
Portfolio Manager’s Review continued
Portfolio Overview
As I write the Company’s portfolio stands at 25 fintech companies, the
same level as at 31 March 2023. This follows the exit of workplace
pension provider Cushon during the reporting period and our post-
period exit from Onfido, a global leader in digital identity verification.
This was the sixth exit since IPO, which have delivered over £90 million
in realisations to date. We have added one new investment to the
portfolio in Artificial, an innovative algorithmic underwriting platform
serving the speciality insurance industry. The other addition to the
portfolio comes from the post-period split of existing portfolio company,
Monese, into its retail bank Monese and its banking as a service
business, XYB.
The portfolio’s top 10 companies employ over 4,500 people and
generate over £1 billion in annual revenues, with year-on-year growth
continuing at an average of 65%. Five of this group are profitable and
the remaining five have an average cash runway of over 20 months.
As reflected in these recent transactions and true to our commitment
six years ago at IPO, the portfolio has diversified across the breadth of
verticals that make up the broader fintech opportunity, as well as by
stages of maturity and European markets. The resilience and strong
performance of the portfolio through more challenging macroeconomic
times, and our growing record of realisations, continue to deepen our
confidence in this approach.
At the end of March, the sum of our top three positions, Tide, Zopa
Bank, and Grover, plus cash, is just below the Company’s market
capitalisation. We believe this represents a compelling value
opportunity with unpriced option value in the remaining 22 positions in
the portfolio, which carry strong future growth potential themselves.
These top three holdings are growing revenue at an average of 70%
year-on-year, with all three continuing to challenge their respective
market incumbents in industries ripe for disruption, a key investment
thesis across many of the portfolio companies. Tide, our largest
holding, becomes the first portfolio position to surpass £50 million in fair
value having further solidified their position as the market leader for
SME banking in the UK and has successfully launched in Germany and
India in recent months.
We continue to support portfolio companies from their early stages
through both capital and strategic support. Our typical first investment
is made at the Series A stage and benefits from protective structures
and board representation, which we currently hold at 17 of the 25
portfolio companies, including all of those that are early stage
(pre-series B). In addition to close monitoring of progress and strategic
input, ongoing engagement enables us to identify and action
compelling follow-on investment opportunities as companies mature.
We have demonstrated consistency in valuation approach against the
backdrop of volatility in public and private markets over the last two
years. All the Company’s material exits have now been delivered at or
above the last reported fair value of the holding. Its permanent capital
model enables us to reinvest exit proceeds into the next generation of
high-potential European fintech firms.
Following the exit of Onfido the Group’s cash position as at 31 May
2024 was £44.8 million and, with greater confidence in early-stage
valuations following the normalisation of market conditions, we are in an
advantageous position to deploy capital into high-quality and
appropriately priced investment opportunities in the period ahead.
Onfido and interactive investor are two of the largest fintech
transactions in the UK in the last three years. We believe that from within
the existing and future portfolio, the Company is positioned to be part of
more exit transactions of this scale.
Investment Activity
In my recent reports, I have described our decision to slow deployment
into new opportunities in response to market conditions.
The distortionary impact of heightened valuations since late 2020
continued to play out during the period and our extremely disciplined
approach to valuation remained a key reason for rejecting investment
prospects at the investment committee stage. Our total investment of
£16.0 million across both new and follow-on investments compares to
£19.9 million in the prior year. We maintain that reduced deployment has
been the correct course in a market absent of the right investments at
the right price.
When we see the right opportunity, our ability to deploy capital remains
intact. In January 2024, we led a highly competitive £8 million Series A
round with a £4 million investment in Artificial, an emerging leader in
the Insurtech space. With the digitalisation of the London insurance
market at the forefront of change in the industry, we believe Artificial
are well positioned as one of the leading platforms for algorithmic
underwriting. Artificial characterises our early-stage strategy, bringing
new technology that has the capability to disrupt and drive significant
change in an industry that has been limited by legacy systems.
Within the existing portfolio, we invested a further £5.3 million into Volt
as part of a US$60 million Series B round completed by the company in
June 2023. This takes the total invested in the company to £9.8 million.
The fair value of the holding at £25.5 million reflects this additional
investment as well as a £5.9 million valuation uplift versus March 2023.
During this period the company has grown revenue threefold, as the
leading provider of real-time payment connectivity to global merchants
and service providers. Volt’s increasingly diversified customer base
spans a growing number of industries and markets as the adoption of
real-time account-to-account payments continues around the world.
We made a £4.2 million additional investment in Tide in an
oversubscribed primary and secondary transaction in October 2023,
helping to bolster the company and increase our stake in one of the
portfolio’s highest performing assets. As the leading digital banking
platform for small businesses in the UK, Tide has now achieved 11%
share of the UK market with more than 600,000 members and is both
profitable in the UK and at a Group level. To further diversify from a
predominantly UK revenue focus as the company moves into a new
phase of maturity, Tide launched in India at the end of 2022, and in the
first 18 months attracted more than 250,000 new members. Following
the successful launch of their Indian operations, Tide launched in
Germany in May 2024, further expanding their global offering.
In the reporting period, we also took up the Company’s shareholder
rights to invest a total of £1.8 million in small additional rounds at Grover,
Wayhome and Habito.
17
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
Other Top 10
During the last three years we have frequently talked about the
resilience of the portfolio. This resilience is rooted in the strong
fundamentals of the companies that we back and the ability of their
management teams to weather challenges of all descriptions and
return their companies to growth trajectories. The path to scale is never
a straight line which is why a long-term view and ongoing support are
essential when investing in private markets.
A patient approach is sometimes required to unlock long-term value.
This has been demonstrated by the portfolio’s second largest holding,
Zopa Bank, which has transformed since the write-down event in 2019.
Their world class team, coupled with exceptional underwriting
technology, which applies advanced AI, continues to drive Zopa’s
position as a standout performer. During the period Zopa Bank passed
1 million customers, achieved full-year profitability, and further
strengthened their balance sheet through a Tier 2 regulatory capital
raise of £75 million. The upward movement in the valuation of the
portfolio’s holding of £9.3 million follows year-on-year revenue growth
of 74% and returns the fair value of the holding above the cost of
investment.
Grover is focused on profitability, with their flexible subscription model
now operating at significant scale with run-rate revenue now in excess
of €250 million. The company achieved positive EBIT for the first three
months of 2024 and plans to be cash-flow positive within the next
12 months. The last year has presented challenges for Grover but
progress is underway to ensure performance is not stifled and the
company can return to the growth it has long enjoyed. We have been
prudent in its valuation to reflect the challenges the company has
recently faced, and thus reduced the valuation by £8.6 million to £35.9
million.
At the beginning of this calendar year, we received a dividend of
£0.8 million from BullionVault following a strong year of trading and
record profits. BullionVault’s performance has been supported by a
combination of investor demand for gold and other precious metals as
an inflationary hedge, and net interest income earned on fiat balances
held by users on the exchange. This has driven an uplift in the fair value
of the portfolio’s holding of £2.4 million. BullionVault is a mature
position in the portfolio and serves a hedging function during times of
heightened market uncertainty.
Gemini represents another story of resilience and recovery as the
company returns to the portfolio’s Top 10. As a regulated multi-asset
exchange and custodian serving both institutional and retail investors,
Gemini has been a beneficiary of the positive price action in digital
asset markets that has followed from increased regulatory clarity in the
US and the approval of crypto ETF products. In addition, acting on
behalf of Gemini users, the company has secured a full recovery of
assets loaned by users to a crypto-lending company called Genesis.
The uplift in the holding’s fair value of £2.6 million is reflective of
Gemini’s improved trajectory but remains prudent and supported by
the downside protective structures held on this position.
We believe that the Company’s current exposure to the digital assets
vertical, at 6.5% of net assets, is set at an appropriate level based on the
maturity of the market. While we do not anticipate making further
investments in this vertical in the near term, we continue to track
institutional themes involving blockchain technologies that hold
significant potential in the mid to long term. These include the
tokenisation of real-world assets and trade settlement infrastructure.
One of the more unique propositions in the portfolio, Intellis, has
continued to flourish in the last 12 months with an evolving strategy
resulting in accelerated growth. The company deploys advanced
proprietary AI trading strategies in foreign exchange markets and has
the potential to scale significantly, both in current focus markets and
potentially other asset classes. Intellis’s lean cost base has led to a
sustained period of profitability. The £1.7 million uplift in the holding
reflects their encouraging progress.
The acquisition of Onfido, one of the global leaders in digital identity
verification, by Entrust was announced in February 2024. Following
regulatory approval, the acquisition completed post-period end on
9 April 2024, with £10.1 million in proceeds received by the Company.
This delivered an IRR of 5.8% and a multiple on capital invested of 1.3x.
The realised value represented a c.5% uplift on the holding value
reported in the Company’s half year results. The resulting IRR is well
below our long-term target and the product of investment terms that
were introduced to the capital structure of the company during a
funding round that completed during the height of the Covid pandemic.
This outcome highlights the importance of maintaining engagement
and influence at board level, and of having the ability to defend positions
through follow-on funding. As this transaction was completed after year
end, Onfido remains in the top 10 at the completed transaction price.
Anyfin’s core product offering of credit refinancing combined with
additional budgeting and savings tools has continued to support
financial wellbeing for consumers across the Nordic region and
Germany. Revenue growth in 2023 remained strong at 63%, although
the company has faced higher costs of capital with an impact on
margin. The experienced management team has demonstrated strong
capability while adjusting credit underwriting to the more challenging
macro environment. The company is prioritising an adjusted capital
structure and additional licences which have the potential to
significantly reduce the costs of capital over the longer term, following a
trajectory similar to that taken by Zopa Bank.
iwoca provides another example of exceptional resilience in the
portfolio, returning to performance and profitability following the end of
Covid funding support schemes and the retreat of high-street lenders
from small business funding. iwoca has demonstrated strong revenue
growth with annualised revenue up 77% year-on-year and consistent
profitability, with positive EBIT building month-on-month since January
2023. The company continues to prove the profit potential of lending
businesses that harness digital technologies to drive significant
operating leverage at scale.
Exits
In the half-year report I commented on the completion of a fifth portfolio
exit in June, with the sale of Cushon to NatWest Group. Augmentum
received proceeds of £22.8 million from the sale, delivering an IRR of
62% and a multiple on capital invested of 2.1x. Realised value
represented a 47% uplift on the previously reported fair value of
Augmentum’s position.
Portfolio Manager’s Review continued
18
AUGMENTUM FINTECH PLC
With Onfido, discussed above, these two additional exits bring total
realisations since IPO to £92 million. Each of the material exits have
been realised at or above the previously reported holding value,
providing further evidence to support our valuations.
Performance
For the year to 31 March 2024, we are reporting a NAV per share after
performance fee of 167.4p (31 March 2023: 158.9p). Since IPO the
capital the Company has deployed has generated an IRR of 16%. This is
below our long-term internal expectations of 20%.
The consistent approach to valuations that we have shown through the
cycle is supported by a growing track record of realisations. We hope
that this will continue to support investor confidence in the fair values
we report for the portfolio’s positions. Each position is valued using the
most appropriate methodology with most positions using public market
comparables either as a primary valuation technique or as a secondary
cross-check.
Along with another strong year of growth across the portfolio, valuation
recovery in public markets has led to an increase in the public market
multiples used in our valuation approach. However, we remained
prudent, with our average forward sales multiple remaining at 4.8x,
consistent with the previous reporting period. Wider governance is a
key element of the process with each valuation audited and signed off
by the Board and Valuations Committee.
As we have detailed in previous reports, we continue to structure our
typical venture investments with downside protections such as
liquidation preference and anti-dilution provisions. 21 out of the 25
portfolio positions carry these protections. Unlike ordinary share
structures typically seen in the public markets, these structures protect
the value of the Company’s position in the event of a reduction in the
equity value of an investee company from the price paid.
Outlook
Each set of annual results provides an opportune moment to first reflect and
then to chart the course ahead. We have crossed several important
milestones; six years since IPO, six exits delivered to the Company and the
first portfolio position rising above a fair value of £50 million. With this
growing track record, we are optimistic about the future, operating with
greater clarity and cohesion in a market primed for exceptional investments.
Cross-party political support for fintech in the UK positions the sector
well. Policy makers recognise it as a key growth sector, and a source of
international competitiveness. Investors can take further confidence in
the future environment for fintech innovation from this backdrop, which
we expect to continue.
In many respects the UK has led the way in fintech, building on strong
financial services heritage, deep pools of talent and an attractive
investment landscape. It remains the key market for fintech investment,
capturing 57% of total European investment in 20234. However,
increasingly there are lessons to be learnt from different approaches. In
2023, France (13%) overtook Germany (12%) to secure second place
share of fintech investment, with activity supported by a collection of
start-up friendly policies and the ‘Tibi’ pension fund investment scheme.
It is important that the UK implements the Mansion House Reforms and
other measures, and continues to invest in financial services regulation
and emerging technologies such as AI to maintain its position.
Healthy competition among nations to support fintech startups drives
progress in the European fintech ecosystem. Amongst the key benefits
of this are value and job creation, and financial inclusion for previously
underserved groups such as SMEs. Across Europe the value of the
fintech sector is an estimated €340 billion and 134,000 jobs have been
newly created, over 5,000 of which are from companies in the
portfolio5.
We see excellent prospects in our pipeline and expect our deployment
rate to return to our long-term average. Pre-seed and seed stage
activity has been resilient, creating a strong pipeline of companies. Our
proprietary origination engine, ADA, (named after the mathematician
and computing pioneer, Ada Lovelace), reflects our extensive
experience and assessment of over 5,000 fintech prospects. ADA
enables us to operate at scale with a highly specialised team,
maintaining a high investment standard with a lead-to-investment
conversion rate of just 0.6%.
In the past year, our team has adjusted focus from portfolio
management to deal sourcing and deployment, assessing numerous
companies and actively engaging across Europe. Our latest investment
in Artificial exemplifies our thesis-led approach, targeting the right
opportunities in Insurtech. We are exploring themes including B2B
payments, AI applications, compliance technologies, and fintech
solutions for the green energy transition.
Our investment strategy remains consistent, while the macroeconomic
and policy environments become more favourable. We will continue to
invest in exceptional teams at the early stages and support them to
scale their companies and ultimately secure meaningful exits.
Tim Levene
CEO
Augmentum Fintech Management Ltd
24 June 2024
1 BCG, 2023
2 https://fprimecapital.com/blog/the-2024-state-of-fintech-report
3 FT Partners
4 Innovate Finance
5 McKinsey
Portfolio Manager’s Review continued
19
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
Investment Risks
The Company 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 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; and
(vi) 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 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 degree of downside protection
through mechanisms such as a liquidation preference and/or anti-
dilution provisions.
The Portfolio Manager provides a detailed update at each Board
meeting, including, inter alia, investee company developments and
funding requirements.
Strategic Report
Business Review
The Strategic Report, set out on pages 19 to 31, provides a review of the
Company’s business, performance during the year and its strategy
going forward. It also considers the principal risks and uncertainties
facing the Company and 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 27 and 28.
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
In accordance with its investment objective and policy, the Company
continued throughout the year under review to pursue the generation of
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 approved investment trust company and an
alternative investment fund (“AIF”) under the Alternative Investment
Fund Managers Regulations (“UK AIFMD”). It has appointed Frostrow
Capital LLP as its alternative investment fund manager (“AIFM”) and
Augmentum Fintech Management Limited as its Portfolio Manager.
Principal Risks and Risk Management
The Board is responsible for the ongoing identification, evaluation and
management of the 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's policy on risk
management has not materially changed during the course of the
reporting period and up to the date of this report.
The Company maintains a framework of identified 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.
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 considers that the risks set out below are the principal risks
currently facing the Company.
Principal Risks and Uncertainties
Mitigation
20
AUGMENTUM FINTECH PLC
Cash Risk
Returns to the Company through holding cash and cash equivalents
are relatively 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
adequately 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 Objective and Investment Policy.
There is also geographic diversification with 63% of the portfolio
being based in the UK and 37% 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
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 inflation, recession
fears and the conflicts in Ukraine and the Middle East.
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 the Portfolio Manager seeks to structure
investments to provide 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.
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 persistent discount could reflect a lack of demand for the
Company's shares and prevents fund raising through share issues.
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 and the Portfolio Manager endeavour to keep the
market informed of portfolio developments.
21
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
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
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 19.12.
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 19.12. 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.
22
AUGMENTUM FINTECH PLC
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 and Middle East
The Board does not expect the conflicts in Ukraine and the Middle East
to have a material impact on the Company, but notes that two of the
Company’s investments, Wematch and Kipp, are based in Israel. The
Board continues to monitor events in both theatres. The Company has
not identified any sanctioned shareholders on its share register and 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 (see page 29). However, the
Company does not have explicit sustainability investment objectives or
policies and will not seek to apply a sustainability label under the FCA’s
UK Sustainability Disclosure Requirements and investment labels
regime (“SDR”).
Principal Risks and Uncertainties
Mitigation
Strategic Report continued
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 compliance reports from the AIFM and the Portfolio
Manager, which include, 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.
23
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
Performance and Prospects
Performance
The Board assesses the Company’s performance relative to its
investment objective using 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 NAV per share after performance fee
total return as being the critical measure of value delivered by the
Company 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 78 and in note 16
on page 65. Essentially, it adds 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 5.4% (2023: 2.4%). 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 +3.6% (2023: negative
27.1%). Whilst this is broadly consistent with the NAV per share total
return for the year, the share price remains under pressure
following the swing in market sentiment in 2022.
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 reviews the costs incurred in operating the Company at
each Board meeting and seeks 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 24 and 25. 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 2.0% (2023: 1.9%).
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 Company has the same
Portfolio Manager, management fee arrangements and cost base that it
had in 2021 when the shares traded at a premium to NAV and 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. The year under review saw
little improvement.
The Board has sought to communicate its faith in the underlying value
of the portfolio and simultaneously to take advantage of the discount by
continuing to undertake a limited programme of accretive share
buybacks, to the benefit of remaining shareholders, whilst balancing the
need to retain cash for new and follow-on investments. It is thought that
helping to create some 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.
Performance, Prospects and Future Developments
The Company’s current position and prospects are described in the
Chairman’s Statement and Portfolio Manager’s Review sections of this
annual report.
The Board’s primary focus is on the Portfolio Manager’s investment
approach and performance, which are thoroughly discussed at every
Board meeting. In addition, the AIFM, the Portfolio Manager and the
Company’s Brokers update the Board on company communications,
promotion, investor feedback and market background.
Outlines of performance, investment activity and strategy, market
background during the year and outlook are provided in the Chairman’s
Statement on pages 2 to 4 and the Portfolio Manager’s Review on
pages 15 to 18.
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 modelling the impact of a 50% fall in the value of the investment
portfolio, the impact of this on the Company’s ongoing charges and
reviewing the ability of the Company to meet its liabilities as they fall due
and support investee companies with future funding requirements in such
a scenario.
* See Glossary on page 78
Strategic Report continued
24
AUGMENTUM FINTECH PLC
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.
In considering the Company's longer-term viability, as well as
considering the principal risks on pages 19 to 22 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 inflation, concerns about a recession and the
Ukraine and Middle East conflicts, 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 66, 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 Fintech 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 £500 million:
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.
Strategic Report continued
25
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
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 £250 million.
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
24 month period and related follow-on investments made for a further
36 month 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 2024 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 2024 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
six months.
Registrar
The Company’s registrar is Computershare Investor Services PLC.
Contact details are set out on page 80.
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. The Board has affirmed, that the Company will continue
to retain the bulk of the proceeds of the investment realisations to date
for reinvestment to support its capital growth objective and utilise the
balance to support accretive share buybacks.
Strategic Report continued
26
AUGMENTUM FINTECH PLC
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. Additionally, the Company has engaged Quill PR to assist in
promoting the Company.
Further, 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 an investor database, produces key corporate
documents and 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 practice 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
pages 41 and 42. The Board also encourages diversity within AFML,
where the team of 12 people represents four different nationalities and is
42% female. The Board is also keen to promote the benefits of diversity
in the companies we invest in.
Strategic Report continued
27
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
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 of engagement with our stake
holders
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 and factsheets;
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
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.
28
AUGMENTUM FINTECH PLC
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 and Middle East conflicts upon their
business and the portfolio.
l Compensation arrangements within AFML.
l The structure of management arrangements.
l The discount at which the Company’s shares have been trading
and thoughts on possible mitigations.
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.
l
The prospects for the portfolio and the pipeline of potential
investment opportunities are of particular interest to the Board
and discussions during the year resulted in the Board being
provided with additional reports to aid visibility.
l The Ukraine and Middle East conflicts were discussed and it was
concluded that they have no direct impact on the Company. Two
portfolio companies are based in Israel and have been able to
continue operations.
l The portfolio manager reports regularly any ESG issues in the
portfolio companies to the Board. Please see pages 29 to 31 for
further details of AFML’s ESG policies.
l The structure of management arrangements has been an area of
focus during the year and discussions about this are ongoing.
l Discussions informed Board decisions in relation to continuation
of the current share buyback programme and balancing this with
available investment capital.
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 29 to 31 for further detail
on AFML’s ESG approach to investing.
Who?
Stakeholder group
Why?
The benefits of engagement with our stake
holders
How?
How the Board the AIFM and the Portfolio
Manager has engaged with our stakeholders
Strategic Report continued
29
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
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
important for mitigating risk and making 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 follow-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 investment, 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'
and ‘City Giving Day’ initiatives.
ESG Focus Areas
AFML has identified eight key areas for consideration, across the three
ESG categories, which best align with its values and 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 they may 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
30
AUGMENTUM FINTECH PLC
ESG in Action
Company Initiatives
Investing in Women Code (ESG Focus Area – Social: Diversity)
Augmentum is a signatory 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
‘City Giving Day’, entering a cycling challenge raising money for the
various charitable causes supported by The Lord Mayor’s Appeal.
The Augmentum team participates in The Lord Mayor’s Appeal ‘We Can
Be’ initiative, 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 Hours (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. Augmentum also participates in Playfair’s ‘Female Office Hours’,
the largest diversity and inclusion initiative in venture to bring founders
and investors together for one-to-one mentoring and pitch meetings.
Portfolio Business Models
Anyfin: Consumer 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 9 times
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
31
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
STRATEGIC AND BUSINESS REVIEW
Portfolio Initiatives
Farewill: Charity Pledge (Social)
Farewill partners with charities to enable them to offer free will writing
services through their website. In May 2024, Farewill announced they
had hit £1 billion in legacy pledges for charity.
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 Bank: 2025 Fintech Pledge (Social: Consumer protection and
financial inclusion)
Led by Zopa Bank, 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
24 June 2024
Strategic Report continued
Board of Directors
32
AUGMENTUM FINTECH PLC
Neil England
(Chairman of the Board and Nominations Committee)
Neil has been the Chairman of the Company since its IPO in 2018. He has extensive international business expertise in a career
spanning public and private companies varying in size from start-ups to global corporations.
He has held leadership roles in various sectors including food, FMCG, distribution, media, sport and technology.
Neil was a Vice President of Mars Incorporated; Group Chief Executive at The Albert Fisher Group plc and Group Commercial
Director at Gallaher Group plc. Additionally he started two technology businesses and has advised on others. He is a past
Chairman of a number of other companies, most recently ITE Group plc and Blackrock Emerging Europe plc.
Neil is currently Chairman of Schroder British Opportunities Trust plc and a non-executive director of two private companies.
He is a Fellow of The Chartered Institute of Marketing.
Neil holds 300,000 shares in the Company.
Karen Brade
(Chair of the Audit Committee)
Karen has been a member of the Company's Board since its IPO in 2018. She has extensive experience of project finance,
private equity and asset management. She started her career at Citibank working on various multi-national project finance
transactions.
Karen worked at CDC (now known as British International Investment), the UK Government’s development finance institution,
where she held a variety of positions in equity and debt investing, portfolio management, fund raising and investor development.
She currently serves as Chair of Keystone Positive Change Investment Trust plc; Non-Executive Director of HeiQ plc and is an
external panel member of the Albion Capital VCT investment committee.
Karen holds 39,019 shares in the Company.
David Haysey
(Chairman of the Management & Remuneration Committee and Valuations Committee, and Senior Independent Director)
David has been a member of the Company's Board since its IPO in 2018. He has extensive experience in the investment
business, working on both public and private equities, and asset allocation.
He started his career as a stockbroker, and has held a number of senior positions, including head of European equities for
SG Warburg plc and Deutsche Bank AG and CIO and co-CEO of Deutsche Asset Management’s European Absolute Return
business.
David previously worked for RIT Capital Partners plc, where he was a board member and head of public equities. He joined the
multi-strategy firm Marylebone Partners from its launch as head of liquid strategies. He is now a non-executive partner and
member of the firm’s investment committee.
David holds 94,230 shares in the Company.
Conny Dorrestijn
Conny joined the Board on 1 November 2021. She has been an active part of European fintech for many years and has worked
with a number of early stage fintech businesses. She is a founding partner of BankiFi, a developer of technology ‘putting banks
at the heart of business’, where she currently fulfils a non-executive role, Chair of the Advisory Board of Amsterdam Fintech
Week, an Associate of the European Women in Payments Network (EWPN) and a Global Innovation Awards Judge at BAI (US).
Previous roles include Chair of the supervisory board of Cobase bv, Chair of the supervisory board of pan-European fintech
provider Blanco Services, and VP Global Payments Marketing at FIS, following its acquisition of Clear2Pay, where she was
Global Head of Corporate Marketing & Analyst Relations.
Sir William Russell
Sir William joined the Board on 1 April 2022. He was the Lord Mayor of the City of London from November 2019 until November
2021 and is an Alderman of The City of London. He is a past board member of Innovate Finance, the industry body for the UK
Fintech community, and has more than 30 years’ experience in financial services including senior positions in domestic and
international banking with Merrill Lynch.
Sir William holds 240,000 shares in the Company.
Management Team
CORPORATE GOVERNANCE
33
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Tim Levene
CEO and Partner
Tim began his career at Bain & Co before leaving to co-found Crussh, the chain of juice bars. In 1999, Tim became a founding
employee at Flutter.com and after it merged with Betfair in 2001 he led the commercial side, including launching its international
business. In 2010 Tim co-founded Augmentum with the backing of RIT Capital. Tim has been a Young Global Leader at the World
Economic Forum since 2012 and was also elected as an Alderman (Independent) for the Ward of Bridge in the City of London in
2022.
Richard Matthews
COO and Partner
Richard qualified as a chartered accountant with Coopers & Lybrand/PricewaterhouseCoopers LLP before joining Tim as chief
financial officer of Flutter.com in 1999. In 2001, upon the merger with Betfair, he left to become chief financial officer of Benchmark
Europe. In 2005 Richard became a partner at Manzanita Capital, a large US family office, and in 2010 he co-founded Augmentum.
Perry Blacher
Partner
Perry started his career at McKinsey & Co in 1996, moving to Microsoft in 1998 and he has spent the last decade as an angel
investor in, and adviser to, fintech businesses. Perry is a FinTech specialist, holding advisory or non-executive roles at Fairpoint plc,
Barclays UK, Google, Onfido, Prodigy Finance, TransferGo and other FinTech businesses. He was a founding principal at Chase
Episode 1 Partners when they invested in Flutter.com and is a venture partner at Amadeus Capital. He was the founder and chief
executive officer of two businesses, both sold to public companies (Serum in 2002 and Covestor in 2007).
Ellen Logan
Principal
Ellen previously worked at OC&C Strategy Consultants, conducting commercial due diligence and strategy projects for private
equity and multinational corporate clients across TMT, B2B services, FMCG and retail sectors. Ellen also worked at HR analytics
startup Bunch, after studying Economics at the University of Edinburgh. Ellen has a particular interest in emerging technologies
such as the digital asset economy and alternative payment methods.
Réginald de Wasseige
Principal
Réginald (Reggie) started his career at Cobepa in Belgium (his home country), and then founded a software company focused on
document security for large organisations. Off the back of both experiences, VC was a natural evolution and Reggie joined ABN
AMRO Ventures, the venture capital arm of the Dutch bank, and relocated to Amsterdam. This position introduced him to the world
of fintech.
Georgie Hazell Kivell
Director of Marketing and Operations
Georgie started her career working in startups across marketing, people and strategy positions. Following time at a startup studio,
investment platform Crowdcube and gaining an MBA, she joined Augmentum in 2018. Georgie is head of marketing and
communications, company ESG champion and supports portfolio companies post-investment. She co-chairs the UK Women in
VC community and is a trained coach, working primarily with women in tech.
The Portfolio Manager is a specialist fund management and advisory business whose experienced and entrepreneurial Management Team has a
strong track record in fintech venture capital. They are London based and are authorised and regulated in the UK by the FCA. All of the team
members featured below are investors in the Company. In aggregate employees of AFML hold 3,616,902 (2.1%) of the Company's shares..
Directors’ Report
34
AUGMENTUM FINTECH PLC
Directors’ Report
The Directors present the audited Financial Statements of the Group
and the Company for the year ended 31 March 2024 and their Report
on its affairs.
In accordance with the requirement for the Directors to prepare a
Strategic Report for the year ended 31 March 2024, the following
information is set out in the Strategic Report on pages 19 to 31: a review of
the business of the Company including details about its objective, strategy
and business model, future developments, details of the principal risks and
uncertainties associated with the Company’s activities (including the
Company’s financial risk management objectives and policies), information
on stakeholder engagement, information on the Company’s contractual
arrangements with key service providers and information regarding
community, social, employee, human rights and environmental issues.
Information about Directors’ interests in the Company’s ordinary shares is
included within the Directors’ Remuneration Report on page 46.
The Corporate Governance Statement starting on page 38 forms part
of this Directors’ Report.
Business and Status of the Company
The Company is registered as a public limited company in England and
Wales (registered number 11118262) and is an investment company
within the terms of Section 833 of the Companies Act 2006 (the “Act”).
Its shares are traded on the main market of the London Stock
Exchange, which is a regulated market as defined in Section 1173 of
the Act.
The Company has received approval from HM Revenue & Customs as an
investment trust under Sections 1158 and 1159 of the Corporation Tax Act
2010. In the opinion of the Directors, the Company continues to direct its
affairs so as to qualify for such approval.
Investment Policy
The Company’s investment policy is set out on page 5.
Subsidiary Companies
The Company has two corporate subsidiaries, both of which are wholly
owned by the Company and are incorporated in England and Wales as
private limited companies:
(i)
the General Partner (Augmentum Fintech GP Limited), the principal
activity of which is to act as the general partner of the Partnership;
and
(ii)
the Portfolio Manager (Augmentum Fintech Management Limited),
the principal activity of which is to act as the portfolio manager of the
Company.
The Partnership, Augmentum I LP, is a limited partnership registered in
Jersey and is wholly owned by the Company.
Results and Dividend
The results attributable to shareholders for the year are shown on the
Income Statement.
The Directors are not recommending the payment of a dividend for the
year.
Directors
The Directors of the Company, who all served throughout the year to
31 March 2024, are listed on page 32.
All Directors expecting to continue in office seek re-election by
shareholders at each Annual General Meeting.
The Board has reviewed the performance and commitment of the
Directors standing for re-election and considers that each should
continue to serve on the Board as they bring wide, current and relevant
experience that allows them to contribute effectively to the leadership
of the Company. More details are contained within the Notice of Annual
General Meeting circular.
Directors’ Conflicts of Interest
Directors report on actual or potential conflicts of interest at each Board
meeting. Any Director or Directors with a potential conflict would be
excluded from any related discussion.
Directors’ & Officers’ Liability Insurance Cover
Directors’ and officers’ liability insurance cover has been maintained by
the Company since its incorporation. It is intended that cover will
continue for the year ending 31 March 2025 and subsequent years.
Directors’ Indemnity
The Company provides, subject to the provisions of applicable UK
legislation, an indemnity for Directors in respect of costs incurred in the
defence of any proceedings brought against them and also liabilities
owed to third parties, in either case arising out of their positions as
Directors. This was in place throughout the financial year under review,
up to and including the date of the Financial Statements.
A copy of each deed of indemnity is available for inspection at the
Company’s offices during normal business hours and will be available at
the Annual General Meeting.
Directors’ Fees
The Directors’ Remuneration Report and the Directors’ Remuneration
Policy are set out on pages 44 to 47.
Directors’ Responsibilities
The Statement of Directors Responsibilities is to be found on page 51
and is included in this Directors' Report by reference.
Portfolio Manager
It is the opinion of the Directors that the continuing appointment of the
Portfolio Manager (details on pages 24 and 25) is in the interests of the
Company’s shareholders as a whole and that the terms of engagement
negotiated with them are competitive and appropriate to the investment
mandate. The Board and the Company’s AIFM review the appointment
of the Portfolio Manager on a regular basis and make changes as
appropriate.
Directors’ Report continued
CORPORATE GOVERNANCE
35
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Capital Structure
At 31 March 2024 there were 181,013,697 ordinary shares of 1p each in
issue (31 March 2023: 181,013,697), of which 11,182,412 were held in
treasury (31 March 2023: 6,494,845).
The Company bought back 4,687,567 shares into treasury during the
year at an average price of 97.74 pence per share.
The shares, other than those held in treasury, entitle the holders to one
vote per share on a poll. Total voting rights at 31 March 2024 was
169,831,285.
At the end of the year under review, the Directors had shareholder
authorities to issue a further 34,119,994 shares without relying on a
prospectus and to buy back a further 24,804,247 shares. These
authorities will expire, and renewals will be sought, at the forthcoming
Annual General Meeting.
Since the year end, to 24 June 2024, the Company has bought back a
further 99,118 shares at an average price of 98.7 pence per share.
These shares are held in treasury.
The Company’s capital structure is summarised in note 15 on page 65.
Substantial Interests
The Company was aware of the following interests in voting rights of
3% or more of the Company as at 31 March 2024 and 31 May 2024.
31 May 2024 31 March 2024
Number Number
of % of of % of
Ordinary Voting Ordinary Voting
Shareholder Shares Rights Shares Rights
Hawksmoor Investment
Management 12,103,546 7.1 12,135,046 7.1
Canaccord Genuity Wealth
Management - Institutional 12,122,651 7.1 12,398,267 7.3
Hargreaves Lansdown 11,617,860 6.8 11,422,647 6.7
Interactive Investor 11,546,048 6.8 11,350,217 6.7
Rathbones 8,286,276 4.9 8,366,617 4.9
Tikehau Investment Management 7,112,917 4.2 7,112,917 4.2
South Yorkshire Pension Authority 7,013,157 4.1 7,013,157 4.1
Close Brothers Asset Management 6,974,598 4.1 6,973,594 4.1
Charles Stanley 6,550,579 3.9 6,607,206 3.9
EFG Harris Allday, stockbrokers 6,130,960 3.6 6,520,670 3.8
AJ Bell 4,919,180 2.9 5,056,347 3.0
Percentages shown are the percentage of the ordinary shares in issue less shares held
in treasury at the respective date.
No changes of interest in voting rights have been notified to the Company in
accordance with the FCA Disclosure Guidance and Transparency Rules since 31 May
2024.
Interests in the Company’s shares and percentage of voting rights of key
management personnel of its subsidiary at 31 March 2024 are shown below:
Tim Levene 2,774,203 1.6%
Richard Matthews 575,000 0.3%
Beneficial Owners of Shares – Information Rights
Beneficial owners of shares who have been nominated by the
registered holder of those shares to receive information rights under
section 146 of the Companies Act 2006 are required to direct all
communications to the registered holder of their shares rather than to
the Company’s registrar or to the Company directly.
Global Greenhouse Gas Emissions for the year ended
31 March 2024
At the date of this report, the Group has a staff of 12 individuals,
operating from small office premises in the UK. Accordingly, it does not
have any significant greenhouse gas emissions to report from the
operations of the Group, nor does it have responsibility for any other
emissions producing sources under the Companies Act 2006
(Strategic Report and Directors’ Reports) Regulations 2013, including
those within its underlying investment portfolio. The Group consumed
less than 40,000 kWh of energy during the year in respect of which the
Directors’ Report is prepared and therefore is exempt from the
disclosures required under the Streamlined Energy and Carbon
Reporting criteria.
Modern Slavery Act 2015
As an investment vehicle, the Company does not provide goods or
services in the normal course of business and does not have
customers. Also, the Company's portfolio management subsidiary,
which does provide services to the Company, is not in scope on
grounds of scale. Accordingly, the Directors consider that the Group
and Company are not required to make any anti-slavery or human
trafficking statement under the Modern Slavery Act 2015.
Political Donations
The Company has not in the past and does not intend in the future to
make political donations.
Common Reporting Standard (‘CRS’)
CRS is a global standard for the automatic exchange of information
commissioned by the Organisation for Economic Cooperation and
Development and incorporated into UK law by the International Tax
Compliance Regulations 2015. CRS requires the Company to provide
certain additional details to HMRC in relation to certain shareholders.
The reporting obligation began in 2016 and is now an annual
requirement. The Registrars, Computershare Investor Services PLC,
have been engaged to collate such information and file the reports with
HMRC on behalf of the Company.
Directors’ Report continued
36
AUGMENTUM FINTECH PLC
Listing Rule 9.8.4
Listing Rule 9.8.4 requires the Company to include certain information
in a single identifiable section of the annual report or a cross-reference
table indicating where the information is set out. The Directors confirm
that there are no disclosures to be made in this regard.
UK Securities Financial Transactions Regulation Disclosure
(unaudited)
The Company does not engage in Securities Financing Transactions
including repurchase transactions, securities or commodities lending
and securities or commodities borrowing, buy-sell back transactions or
sell-buy back transactions and margin lending transactions) or total
return swaps.
Alternative Performance Measures
The Financial Statements (on pages 52 to 68) set out the required
statutory reporting measures of the Company’s financial performance.
In addition, the Board assesses the Company’s performance against
criteria that are viewed as particularly relevant for investment trusts,
which are summarised on page 2 and explained in greater detail in the
Strategic Report, under the heading “Performance” on page 23.
Definitions of the terms used and the basis of calculation adopted are
set out in the Glossary and Alternative Performance Measures on
page 78.
Statement of Disclosure of Information to the Auditor
As at the date of this report each of the Directors confirms that so far as
they are aware, there is no relevant audit information of which the
Company’s auditor is unaware and they have taken all steps they ought
to have taken to make themselves aware of any relevant audit
information and to establish that the Company’s auditor is aware of that
information.
This confirmation is given and should be interpreted in accordance with
the provisions of Section 418 of the Companies Act 2006.
Independent Auditor
Resolutions to reappoint BDO LLP as the Company's auditor and to
authorise the Audit Committee to determine their remuneration will be
proposed at the forthcoming Annual General Meeting. Further details
are included in the Report of the Audit Committee on pages 48 to 50.
Risk Management and Internal Controls
Details of the Company’s risk management and internal control
arrangements, including the Board’s annual review of the effectiveness
of the Company’s risk management and internal control arrangements,
are contained in the Corporate Governance Statement.
Annual General Meeting (“AGM”)
The AGM will be held on Thursday, 19 September 2024. The formal
notice of the AGM is sent out as a separate circular and will be posted to
shareholders at the same time as this annual report.
Explanatory notes to the proposed resolutions are included in the
Notice of Meeting circular.
The Board considers the proposed resolutions to be in the best
interests of shareholders as a whole. Accordingly, the Board
unanimously recommends to shareholders that they vote in favour of
the resolutions by proxy ahead of the meeting, as the Directors intend to
do in respect of their own beneficial holdings.
Authority to Purchase Own Shares
A special resolution will be proposed at the forthcoming AGM to grant
the Company authority to purchase its own shares, so as to permit the
purchase of up to 14.99% of the number of ordinary shares in issue
excluding shares held in treasury at the date of the passing of the
resolution, subject to the constraints set out in the special resolution.
The Directors intend to use this authority to purchase shares only if this
would result in an increase in net asset value per share and if they
consider it to be in the best interests of shareholders generally. Ordinary
shares which are purchased under this authority may be held in
treasury or cancelled.
The Directors believe that granting the Board authority to purchase
shares, as detailed above, is in the best interests of shareholders as a
whole and therefore recommend that shareholders vote in favour of this
resolution.
Authorities to Issue Shares
Separate resolutions will be proposed at the forthcoming AGM to grant
the Company authority to issue ordinary shares with and without
pre-emption rights. Both resolutions seek to permit the issue of up to
20% of the share capital in issue, excluding shares held in treasury, at
the date of the passing of the resolution. The latter resolution will be
proposed as a special resolution and incorporates within that limit the
sale of shares held in treasury. This is the same as the authority sought
last year and for this purpose the Board classes the Company as a
‘capital hungry company’, it having completed fund raises in 2019
(24.5%), 2020 (20.0%) and 2021 (28.9%), with plans for further
fundraises only deferred because of the market rotation in 2022 and
the shares moving to a discount. Additionally, since the Company is an
investment vehicle rather than a commercial operating entity, it is
considered unlikely that the potential dilution of voting rights will be of
concern for existing shareholders. Shares will only be issued or sold
from treasury in accordance with this resolution at a premium to the
prevailing NAV per share after performance fee in order not to dilute the
financial interests of existing shareholders. The Board considers the
NAV per share after performance fee to be the most appropriate metric
of NAV and to best reflect the value of each share.
Directors’ Report continued
CORPORATE GOVERNANCE
37
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Voting Rights
Subject to any rights or restrictions attached to any shares, on a show
of hands, every member who is present in person has one vote and
every proxy present who has been duly appointed has one vote.
However, if the proxy has been duly appointed by more than one
member entitled to vote on the resolution, and is instructed by one or
more of those members to vote for the resolution and by one or more
others to vote against it, or is instructed by one or more of those
members to vote in one way and is given discretion as to how to vote by
one or more others (and wishes to use that discretion to vote in the
other way) that proxy has one vote for and one vote against the
resolution. Every corporate representative present who has been duly
authorised by a corporation has the same voting rights as the
corporation would be entitled to. On a poll, every member present in
person or by duly appointed proxy or corporate representative has one
vote for every share of which they are the holder or in respect of which
the appointment as proxy or corporate representative has been made.
It is anticipated that voting at the forthcoming AGM will be by poll for all
resolutions.
A member, proxy or corporate representative entitled to more than one
vote need not, if they vote, use all their votes or cast all the votes used
the same way.
In the case of joint holders, the vote of the senior who tenders a vote
shall be accepted to the exclusion of the votes of the other joint holders,
and seniority shall be determined by the order in which the names of
the holders stand in the register of members.
A member is entitled to appoint another person as their proxy to
exercise all or any of their rights to attend and to speak and vote at a
meeting of the Company. The appointment of a proxy shall be deemed
also to confer authority to demand or join in demanding a poll. Delivery
of an appointment of proxy shall not preclude a member from attending
and voting at the meeting or at any adjournment of it. A proxy need not
be a member. A member may appoint more than one proxy in relation to
a meeting, provided that each proxy is appointed to exercise the rights
attached to a different share or shares.
Other Statutory Information
The following information is disclosed in accordance with the
Companies Act 2006:
l
The rules on the appointment and replacement of Directors are set
out in the Company’s articles of association (the “Articles”). Any
change to the Articles is governed by the Companies Act 2006.
l
Subject to the provisions of the Companies Act 2006, to the
Articles, and to any directions given by special resolution, the
business of the Company shall be managed by the Directors who
may exercise all the powers of the Company. The powers shall not
be limited by any special powers given to the Directors by the
Articles and a meeting of the Directors at which a quorum is
present may exercise all the powers exercisable by the Directors.
The Directors’ powers to issue and buy back shares in force at the
end of the year are recorded in the Directors’ Report.
l
There are no agreements:
(i)
to which the Company is a party that might affect its control
following a takeover bid; and/or
(ii)
between the Company and its Directors concerning
compensation for loss of office.
By order of the Board
Frostrow Capital LLP
Company Secretary
24 June 2024
38
AUGMENTUM FINTECH PLC
Corporate Governance Report
Corporate Governance Statement
The Board has considered the principles and provisions of the AIC
Code of Corporate Governance (the “AIC Code”). The AIC Code
addresses all the principles and provisions set out in the 2018 UK
Corporate Governance Code (the “UK Code”), as well as setting out
additional principles and recommendations on issues that are of
specific relevance to investment companies.
The Board considers that reporting against the principles and
provisions of the AIC Code, which has been endorsed by the Financial
Reporting Council, provides more relevant information to shareholders.
By reporting against the AIC Code investment companies will meet
their obligations under the UK Corporate Governance Code and
associated disclosure requirements under paragraph 9.8.6 of the UK
Listing Rules. As such, the Company does not need to report further on
issues contained in the UK Code which are not relevant to it.
The AIC Code can be viewed on the AIC’s website www.theaic.co.uk
and the UK Code can be viewed on the Financial Reporting Council
website www.frc.org.uk.
Statement of Compliance
The Company has complied with the principles and provisions of the
AIC Code and the relevant provisions of the UK Code except that:
l
the Chairman of the Board is a member of the Audit Committee,
which is permitted by the AIC Code since he was independent on
appointment, and in the Board’s view he continues to be so. It is the
opinion of the Board that, given its small size, it is appropriate for
him to be a member of the Audit Committee in order for it to benefit
from his experience and knowledge.
Board Leadership and Purpose
Responsibility for effective governance and for the overall management
of the Company’s affairs lies with the Board. The governance framework
of the Company reflects the fact that it is an investment company that
outsources company secretarial, administration, marketing, portfolio
and risk management services to Frostrow. Portfolio management is
then delegated to Augmentum Fintech Management Limited (“Portfolio
Manager”) by Frostrow.
Role of the Board
The Board’s statutory duties are defined by sections 171 to 177 of the
Companies Act 2006. In particular, under section 172 the Directors have
a duty to promote the success of the Company taking into
consideration the likely consequences of any decision in the long term;
the need to foster the Company’s business relationships with its service
providers; the impact of the Company’s operations on the community
and the environment; the desire for the Company to maintain a
reputation for high standards of business conduct; and the need to act
fairly between members of the Company. The Board reports on its
engagement with stakeholders in the context of its duties under section
172 within the Strategic Report on pages 27 and 28.
The Board is responsible for all aspects of the Company’s affairs,
including setting the parameters for monitoring the investment strategy
and the review of investment performance and policy. It also has
responsibility for all strategic policy issues, including share issuance
and buy backs, share price and discount/premium monitoring,
corporate governance matters, dividends and gearing.
Company’s Purpose, Values and Strategy
The Company’s purpose is to generate value for shareholders over the
long term in accordance with its investment objective, and the Board
assesses the basis on which this is achieved. The Strategic Report
describes how opportunities and risks to the future success of the
business have been considered and addressed, the sustainability of the
Company’s business model and how its governance contributes to the
delivery of its strategy. The Company’s investment objective and
investment policy are set out on page 5.
The Board’s key responsibilities are to set the strategy, values and
standards; to provide leadership within a controls framework which
enables risks to be assessed and managed; to challenge constructively
and scrutinise the performance of all outsourced activities; and to
review regularly the contracts, performance and remuneration of the
Company’s principal service providers and Portfolio Manager.
Culture
The Board seeks to establish and maintain a corporate culture
characterised by fairness in its treatment of the Group’s employees and
service providers, whose efforts are collectively directed towards
delivering returns to shareholders in line with the Company’s purpose
and objectives. It is the Board’s belief that this contributes to the
success of the Company, as well as being an appropriate way to
conduct relations between parties engaged in a common purpose.
Board Committees
The Board has delegated specific responsibilities to the Audit
Committee, the Management Engagement & Remuneration Committee,
the Nominations Committee and the Valuations Committee, details of
which are set out below.
Every year the Board reviews its composition and the composition of its
Committees. The Board and the Nominations Committee oversee this
process. Further details are given on page 42 under Board Evaluation.
Audit Committee
As expanded in the Report of the Audit Committee starting on page 48,
the Audit Committee’s key responsibilities are to monitor the integrity of
the annual report and financial statements; to oversee the risk and
control environment and financial reporting; and to review the
performance of the Company’s external auditor.
Valuations Committee
The Valuations Committee adds a further level of oversight to the
valuation process carried out by Frostrow and AFML under their
contractual arrangements with the Company. The Committee meets at
least twice a year to review the valuation of investments.
Management Engagement & Remuneration Committee
The Management Engagement & Remuneration (“ME&R”) Committee
reviews annually the performance of the AIFM and the Portfolio
Manager. The Committee considers the quality, cost and remuneration
method of the service provided by the AIFM and the Portfolio Manager
against their contractual obligations. The Committee is also responsible
for the regular review of the terms of the AIFM Agreement and the
Portfolio Management Agreement. The Committee last reviewed these
in March 2024, at which time it was agreed that no amendments to the
agreements were required.
Corporate Governance Report continued
CORPORATE GOVERNANCE
39
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
The Committee’s duties also include determining and agreeing with the
Board the policy for remuneration of the Directors and monitoring the
Portfolio Manager’s remuneration arrangements. Where appropriate,
the Committee will consider both the need to judge the position of the
Company relative to other companies on the remuneration of Directors
and whether to appoint external remuneration consultants. The
Committee met once in the year to consider remuneration matters.
A report on its activities in relation to remuneration is contained in the
Directors’ Remuneration Report.
Nominations Committee
The Nominations Committee considers annually the skills possessed
by the Board and identifies any skill shortages to be addressed. When
considering new appointments, the Board reviews the skills of the
Directors and seeks to add persons with complementary skills or who
possess the skills and experience which fill any gaps in the Board’s
knowledge or experience and who can devote sufficient time to the
Company to carry out their duties effectively.
In view of the size of the Board and the nature of the Company, all
independent non-executive Directors are members of each Committee.
Copies of the full terms of reference, which clearly define the
responsibilities of each Committee, can be obtained from the Company
Secretary and they are available for inspection on the Company’s
website www.augmentum.vc.
Board Meetings
Representatives of the Portfolio Manager, AIFM and Company
Secretary are expected to be present at all meetings. The primary focus
at Board meetings is a review of investment performance and
associated matters. The Chairman seeks to encourage open debate
within the Board and a supportive and co-operative relationship with
the Company’s Portfolio Manager, advisers and other service providers.
The table that follows sets out the number of formal Board and
Committee meetings held during the year ended 31 March 2024 and
the number of meetings attended by each Director.
Four Board meetings are scheduled each year. In addition to the
scheduled Board and Committee meetings, Directors attended ad hoc
Committee meetings sign-off on the annual and interim reports.
Meeting Attendance
Neil Karen David Conny William
England Brade Haysey Dorrestijn Russell
Scheduled Board meetings 4 4 4 3 4
Ad Hoc meetings – 2 1 1 1
Audit Committee 4 4 4 3 4
ME&R Committee 1 1 1 1 1
Valuations Committee 2 2 2 2 2
Nominations Committee 2 2 2 1 2
All the Directors attended the Annual General Meeting in September 2023.
Shareholder Engagement
The Chairman is responsible for ensuring that there is effective
communication with the Company’s shareholders. He works closely
with the Portfolio Manager and there is regular liaison with the
Company’s stockbrokers and the AIFM. There is a process in place for
analysing and monitoring the shareholder register and a programme for
meeting or speaking with the institutional investors and with private
client stockbrokers and advisers. In addition to the Portfolio Manager
and AIFM the Chairman endeavours to make himself available to meet
with shareholders wishing to engage.
The Board encourages shareholders to attend the Company’s Annual
General Meeting, which provides an opportunity for engagement. The
Notice of the Annual General Meeting and related papers are sent to
shareholders at least 20 working days before the meeting. The
Chairman, Directors and the Portfolio Manager all expect to be in
attendance at the Annual General Meeting and encourage
shareholders to submit questions ahead of the Meeting. Details of the
proxy votes received in respect of each resolution will be announced
after the Meeting. In the event of a significant (defined as 20% or more)
vote against any resolution proposed at the Annual General Meeting,
the Board will consult with shareholders in order to understand the
reasons for this and consider appropriate action to be taken, reporting
to shareholders within six months.
The Directors may be contacted through the Company Secretary at the
address shown on page 80.
While the Portfolio Manager and AIFM expect to lead on preparing and
effecting communications with investors, all major corporate issues are
put to the Board or, if time is of the essence, to a Committee thereof.
The Board places importance on effective communication with
investors and approves a marketing programme each year to enable
this to be achieved. Copies of the annual report and the half year report
are made available to shareholders and, where possible, to investors
through other providers’ products and nominee companies. All this
information is readily accessible on the Company’s website
www.augmentum.vc. A Key Information Document is also published on
the Company’s website. The Company is a member of the Association
of Investment Companies which publishes information to increase
investors’ understanding of the sector.
Stakeholders
Section 172 of the Companies Act 2006 requires that the Directors
have regard to the Company’s stakeholders, amongst other
considerations, within their duty to promote the success of the
Company. The Board’s report on its compliance with Section 172 of the
Companies Act 2006 is contained within the Strategic Report on
pages 27 and 28.
40
AUGMENTUM FINTECH PLC
Corporate Governance Report continued
Subsidiary Employees
The Board seeks to ensure that workforce policies and practices are in
line with the Company’s purpose and values and support its culture.
The Management Engagement & Remuneration Committee advises
the Board in respect of policies on remuneration-related matters.
Since the subsidiary company has only 12 employees, including its two
executive directors, the Board considers that the directors of AFML are
best-placed to engage with the workforce. In accordance with the
Company’s whistleblowing policy, members of staff who wish to discuss
any matter with someone other than the subsidiary directors are able to
contact the Senior Independent Director or, in his absence, another
member of the Board.
Relationship with other service providers
The Board has delegated a wide range of activities to external agents,
in addition to the Portfolio Manager.
These services include investment administration, management and
financial accounting, company secretarial and certain other
administrative and registration services. The contracts for each of these
were entered into after full and proper consideration by the Board of the
quality and cost of the services offered, including the control systems in
operation in so far as they relate to the affairs of the Company.
Further information on the service providers is contained within the
Strategic Report on pages 24 and 25.
The Board receives and considers reports and information from these
contractors as required. The Board and AIFM are responsible for
monitoring and evaluating the performance of the Company’s service
providers.
Viability Statement and Going Concern
The Board’s assessment of the Company’s longer-term viability and that
it is appropriate for the financial statements to be prepared on a going
concern basis are set out in the Strategic Report on pages 23 and 24.
Significant Holdings and Voting Rights
Details of the substantial interests in the Company’s Shares, the voting
rights of the shares and the Directors’ authorities to issue and
repurchase the Company’s shares, are set out in the Directors’ Report.
Nominee Share Code
Where shares in the Company are held via a nominee company,
the Company undertakes:
l
to provide the nominee company with multiple copies of
shareholder communications, so long as an indication of quantities
has been provided in advance; and
l
to allow investors holding shares through a nominee company to
attend general meetings, provided the correct authority from the
nominee company is available.
Nominee companies are encouraged to provide the necessary
authority to underlying shareholders to attend the Company’s Annual
General Meeting.
Stewardship and the Exercise of Voting Powers
It is the Board’s view that, in order to achieve long-term success,
companies need to maintain high standards of corporate governance
and corporate responsibility. Therefore the Company expects the
companies in which it is invested to comply with best practice in
corporate governance matters, or to provide adequate explanation of
any areas in which they fail to comply, whilst recognising that a different
approach may be justified in special circumstances. In respect of UK
companies, current best practice in corporate governance matters is
set out in the UK Corporate Governance Code.
The Board has delegated authority to the Portfolio Manager to vote the
shares owned by the Company. The Board has instructed that the
Portfolio Manager submit votes on behalf of the Company wherever
possible, in the best long-term interest of shareholders in accordance
with their own investment philosophy and knowledge of the relevant
circumstances, although the Portfolio Manager may refer to the Board
on matters of a contentious nature.
The Board also monitors the ESG policies of the Portfolio Manager,
given the likely influence of such factors on the long-term growth
prospects of the companies in the portfolio.
Division of Responsibilities
Responsibilities of the Chairman
The Chairman’s primary role is to provide leadership to the Board,
assuming responsibility for its overall effectiveness in directing the
company. The Chairman is responsible for:
l
ensuring that the Board is effective in its task of setting and
implementing the Company’s direction and strategy taking the
chair at general meetings and Board meetings, conducting
meetings effectively and ensuring all Directors are involved in
discussions and decision-making;
l
setting the agenda for Board meetings and ensuring the Directors
receive accurate, timely and clear information for decision-making;
l
taking a leading role in determining the Board’s composition and
structure, overseeing the induction of new Directors and the
development of the Board as a whole, leading the annual board
evaluation process and assessing the contribution of individual
Directors;
l
supporting and also challenging the AIFM and the Portfolio
Manager (and other suppliers where necessary) ensuring effective
communications with shareholders and, where appropriate, other
stakeholders; and
l
engaging with shareholders to ensure that the Board has a clear
understanding of shareholder views.
The Board appointed David Haysey as Senior Independent Director
during the year. David can be contacted via the Company Secretary.
CORPORATE GOVERNANCE
41
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Corporate Governance Report continued
Directors’ Interests
The beneficial interests of the Directors in the Company are set out on
page 46 of this annual report.
Directors’ Independence
The Board consists of five non-executive Directors, each of whom is
independent of Frostrow and AFML. No member of the Board has been
an employee of the Company, Frostrow, AFML or any of its service
providers. Accordingly, the Board considers that all the Directors are
independent and there are no relationships or circumstances which are
likely to affect or could appear to affect their judgement.
Directors’ Other Commitments
Each of the Directors has assessed the overall time commitment of their
external appointments and it was concluded that they have sufficient
time to discharge their duties.
Matters Reserved for Decision by the Board
The Board has adopted a schedule of matters reserved for its decision.
This includes, inter alia, the following:
l
Requirements under the Companies Act 2006, including approval
of the half yearly and annual financial statements, recommendation
of any final dividend, the appointment or removal of the Company
Secretary, and determining the policy on share issuance and
buybacks.
l
Matters relating to certain Stock Exchange requirements and
announcements, the Company’s internal controls, and the
Company’s corporate governance structure, policy and procedures.
l
Decisions relating to the strategic objectives and overall
management of the Company, including the appointment or
removal of the AIFM and other service providers, and review of the
Investment Policy.
l
Matters relating to the Board and Board committees, including the
terms of reference and membership of the committees, the
appointment of Directors (including the Chairman) and the
determination of Directors’ remuneration.
Some of these are delegated to committees of the Board. Day-to-day
operational and portfolio management is delegated to Frostrow and
AFML, respectively.
The Board takes responsibility for the content of communications
regarding major corporate issues, although Frostrow or AFML may act
as spokesmen. The Board is kept informed of relevant promotional
material that is issued by Frostrow.
Tenure, Composition, Succession and Evaluation
Policy on the Tenure of the Chairman and other Non-Executive
Directors
The tenure of each independent, non-executive director, including the
Chairman, is not ordinarily expected to exceed nine years.
Succession Planning
The Board regularly considers its structure and recognises the need for
progressive refreshment. The Board has an approved succession
planning policy to ensure that (i) there is a formal, rigorous and
transparent procedure for the appointment of new directors; and (ii) the
Board is comprised of members who collectively display the necessary
balance of professional skills, experience, length of service and
industry/Company knowledge.
The Board considers that five Directors is the appropriate number for
the Company given the workload, particularly around valuations and
audit, in addition to its general governance activities. The Board intends
to comply with accepted best practice and will replace Directors at or
around nine years of tenure. The three Directors at the time of the
Company’s IPO are all scheduled to rotate off the Board in 2027. They
hold key positions as Chair of the Company, Valuations Committee and
Audit Committee respectively.
To allow orderly succession, it is intended to spread the replacement of
these Directors over three years and for their replacements to join
approximately six months prior to their departure. The Chairman plans
to retire at the conclusion of the Annual General Meeting in
September 2024.
Appointments to the Board
The rules governing the appointment and replacement of Directors are
set out in the Company’s Articles of Association. Where the Board
appoints a new Director during the year, that Director will stand for
election by shareholders at the next Annual General Meeting. Subject to
there being no conflict of interest, all Directors are entitled to vote on
new Director candidates. When considering new appointments, the
Board endeavours to ensure that its members collectively have the
capabilities necessary for it to be effective and oversee the Company’s
strategic priorities. This will include an appropriate range, balance and
diversity of skills, experience and knowledge. The Company is
committed to ensuring that any vacancies arising are filled by the most
qualified candidates. The Nominations Committee may engage an
independent search agency to assist in any recruitment process.
Diversity Policy
The Board supports the principle of boardroom diversity, of which
gender and ethnicity are important aspects. The Company’s policy is
that the Board should be comprised of Directors who collectively
display the necessary balance of professional skills, experience, length
of service and industry knowledge and that appointments to the Board
should be made on merit, against objective criteria, including diversity in
its broadest sense.
The objective of the policy is to have a broad range of approaches,
backgrounds, skills, knowledge and experience represented on the
Board. The Board believes that this will make the Board more effective
at promoting the long-term sustainable success of the Company and
generating value for all shareholders by ensuring there is a breadth of
perspectives among the Directors and the challenge needed to
support good decision-making. To this end achieving a diversity of
perspectives and backgrounds on the Board is a key consideration in
any Director search process. The Board currently comprises Directors
of different nationalities, educational backgrounds and gender.
The gender balance for Board members of three men and two women
meets the FCA rules on gender diversity for premium listed investment
companies. No current members of the Board are from a non-white
ethnic minority, but the Board supports the representation of ethnic
minorities on boards and this will be a material factor for the Board
when undertaking its next search process.
Corporate Governance Report continued
42
AUGMENTUM FINTECH PLC
The Board has noted the FCA’s new Listing Rules which require
companies to report against the following diversity targets:
(a)
At least 40% of individuals on the board are women;
(b)
At least one of the senior board positions is held by a woman; and
(c)
At least one individual on the board is from a minority ethnic
background.
The following tables set out the information a listed company must now
include in its annual financial report under listing rule 9.8.6R (10).
The information below reflects the Board's position as at the
Company's year end. The Company is an investment company with a
non-executive Board and no executive employees. As such it does not
have the roles of CEO or CFO. Given the nature of the Company, the
Board considers the chairs of the Audit Committee and Valuations
Committee to be senior positions. These are not captured by the
prescribed listing rules disclosure, so an additional column has been
added to the right of the prescribed tables below to show the
Board-defined senior positions. Each Director volunteered how they
wished to be included in the tables.
(a) Table for reporting on gender identity or sex
Number
of senior
positions
on the Board-
Number Percentage board (CEO, defined
of board of the CFO, SID senior
members board and Chair) positions
Men 3 60 2 2
Women 2 40 – 1
Not specified/prefer not to say – – – –
(b) Table for reporting on ethnic background
Number
of senior
positions
on the Board-
Number Percentage board (CEO, defined
of board of the CFO, SID senior
members board and Chair) positions
White British or other White
(including minority-white
groups) 5 100 2 3
Mixed/Multiple Ethnic Groups – – – –
Asian/Asian British – – – –
Black/African/Caribbean/Black
British – – – –
Other ethnic group, including Arab – – – –
Not specified/prefer not to say – – – –
Board Evaluation
During the year the performance of the Board, its committees and
individual Directors (including each Director’s independence) was
evaluated through a formal assessment process. This year the process
was questionnaire-based, including for the Chairman's evaluation.
The latest evaluation did not identify any material deficiencies in the
Board or its Committees. However, as a matter of course, the Board
continues to monitor particular areas of relevance highlighted in the
evaluation process, including its relationship with the Portfolio Manager.
The Chairman is satisfied that the structure and operation of the Board
continues to be effective and relevant and that there is a satisfactory
mix of skills, experience, length of service and knowledge of the
Company. The Board has considered the position of all of the Directors
as part of the evaluation process, and believes that it would be in the
Company’s best interests for those seeking to continue to be re-elected
at the AGM.
Conflicts of Interest
In line with the Companies Act 2006, the Board has the power to
sanction any potential conflicts of interest that may arise and impose
such limits or conditions as it thinks fit. A register of interests and
external appointments is maintained and is reviewed at every Board
meeting to ensure all details are kept up to date. Should a conflict arise,
the Board has the authority to request that the Director concerned
abstains from any relevant discussion or vote where a perceived
conflict may arise. Appropriate authorisation is sought prior to the
appointment of any new Director or if any new conflicts or potential
conflicts arise.
Exercise of Voting Powers
Stewardship and the exercise of voting powers is summarised on
page 40.
Anti-Bribery and Corruption Policy
The Board has adopted a zero-tolerance approach to bribery and
corruption. Accordingly it expressly prohibits any Director or associated
persons when acting on behalf of the Company from accepting,
soliciting, paying, offering or promising to pay or authorise any payment,
public or private, in the United Kingdom or abroad to secure any
improper benefit.
The Board applies the same standards to its service providers in their
activities for the Company.
A copy of the Company’s Anti Bribery and Corruption Policy can be
found on its website at www.augmentum.vc. The policy is reviewed
regularly by the Audit Committee.
Prevention of the Facilitation of Tax Evasion
In response to the implementation of the Criminal Finances Act 2017, the
Board adopted a zero-tolerance approach to the criminal facilitation of tax
evasion. A copy of the Company’s policy on preventing the facilitation of
tax evasion can be found on the Company’s website www.augmentum.vc.
The policy is reviewed regularly by the Audit Committee.
Independent Professional Advice
The Board has formalised arrangements under which the Directors, in
the furtherance of their duties, may seek independent professional
advice at the Company’s expense.
Corporate Governance Report continued
CORPORATE GOVERNANCE
43
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Company Secretary
The Directors have access to the advice and services of a Company
Secretary which is responsible to the Board for ensuring, through its
appointed representative, that the Board procedures are followed and
that the Company complies with applicable rules and regulations. The
Company Secretary is also responsible for ensuring good information
flows between all parties.
Relationship with the AIFM and with the Portfolio Manager
The Company manages its own operations through the Board and
AIFM, as set out on pages 24 and 25. The Portfolio Manager manages
the investment portfolio within the terms of its portfolio management
contract.
The Board scrutinises the performance of the AIFM and Portfolio
Manager at each meeting. The Management Engagement &
Remuneration Committee reviews the contractual relationships with the
AIFM and Portfolio Manager at least annually. Further information on the
AIFM and Portfolio Manager fees are contained within the Strategic
Report on pages 24 and 25.
Audit, Risk and Internal Control
The Statement of Directors’ Responsibilities on page 51 describes the
Directors’ responsibility for preparing this report.
The Report of the Audit Committee, beginning on page 48, explains the
work undertaken to allow the Directors to make this statement and to
apply the going concern basis of accounting. It also sets out the main
roles and responsibilities and the work of the Audit Committee and
describes the Directors’ review of the Company’s risk management and
internal control systems.
A description of the principal risks facing the Company and an
explanation of how they are being managed is provided in the Strategic
Report on pages 19 to 22.
Annual General Meeting
The sixth AGM of the Company will be held on Thursday, 19 September
2024 at 11.00 a.m. at the offices of Augmentum Fintech Management
Limited, 4 Chiswell Street, London EC1Y 4UP.
The Notice for the Annual General Meeting is published as a separate
document from this annual report and financial statements. A summary
of the Annual General Meeting business is appended to that document,
in the form of explanatory notes to the resolutions.
These include specific reasons why (in the Board’s opinion) each
Director’s contribution is, and continues to be, important to the
Company’s long-term sustainable success.
In addition to the ordinary business of the meeting the following items of
special business will be proposed:
Authority to allot shares;
Authority to disapply pre-emption rights;
Authority to buy back shares;
Authority to hold General Meetings (other than the Annual General
Meeting) on at least 14 clear days’ notice.
The details of the resolutions to be proposed at the Annual General
Meeting are set out in the separate Notice of Meeting document, which
is being sent to Shareholders with this annual report and is also made
available on the Company’s website www.augmentum.vc.
By order of the Board
Frostrow Capital LLP
Company Secretary
24 June 2024
Directors’ Remuneration Report
44
AUGMENTUM FINTECH PLC
Statement by the Chairman of the Management Engagement
& Remuneration Committee
On behalf of the Board, I am pleased to present my report as Chairman
of the Management Engagement & Remuneration Committee (the
“Committee”). This report covers the remuneration-related activities of
the Committee for the year ended 31 March 2024. It sets out the
remuneration policy and remuneration details for the non-executive
Directors.
Role of the Management Engagement & Remuneration Committee
All of the members of the Board are members of the Committee, all
being independent Directors of the Company.
The Committee operates under terms of reference, which are reviewed
annually and approved by the Board. The Committee’s core
responsibilities include:
l
Determining the policy for the remuneration of the Chairman and
non-executive Directors of the Company;
l
overseeing the remuneration of employees of Augmentum Fintech
Management Limited (“AFML”), including the total remuneration
packages (including bonuses, incentive payments or other awards)
for key management personnel of AFML; and
l
Reviewing management engagement terms in place with the
Company’s AIFM and Portfolio Manager.
The Committee will meet at least once per year. The Committee met on
one occasion during the year under review.
The activity of the Committee during the year focused predominantly on
the remuneration of the non-executive Directors and matters in respect
of AFML.
The Companies Act 2006 requires the auditor to report to shareholders
on certain parts of the Directors’ Remuneration Report and to state
whether, in their opinion, those parts of the report have been properly
prepared in accordance with the Regulations. The parts of the annual
report on remuneration that are subject to audit are indicated in the report.
Consideration by Directors of Matters Relating to Directors’
Remuneration
Each of the Directors is appointed pursuant to a letter of appointment
with the Company. Subject to their re-election by shareholders,
Directors’ initial term is three years from their appointment, and their
appointments are terminable upon three months’ notice by either party.
The Committee assesses the workload and responsibilities of the
non-executive Directors and reviews, annually, the fees paid to them in
accordance with the Directors' Remuneration Policy.
The Directors’ fees are determined subject to the limit set out in the
Company’s Articles of Association.
The Directors are remunerated exclusively by fixed fees in cash and do
not receive bonus payments or pension contributions from the
Company, hold options to acquire shares in the Company, or other
benefits, nor do they participate in the AFML performance fee allocation.
The Company does not have share options or a share scheme.
Directors are entitled to be reimbursed for reasonable out of pocket
expenses incurred by them in order to perform their duties as Directors
of the Company. Under HMRC guidance, travel expenses and other out
of pocket expenses may be considered as taxable benefits for the
Directors. Where expenses reimbursed to the Directors are classed as
taxable under HMRC guidance they are shown in the taxable expenses
column of the Directors’ remuneration table along with the associated
tax liability, which is settled by the Company.
Annual Report on Remuneration
We are submitting this report in accordance with the requirements of
the Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013 (Regulations) and relevant
sections of the Listing Rules. It will be subject to an advisory vote at the
forthcoming Annual General Meeting in September 2024.
Over the year ended 31 March 2024 the Directors’ fees were as follows:
Chairman of the Board: £50,000 per annum; Directors: £30,000 per
annum; additional fee paid to Directors who chair one or more of the
Audit, Valuations and Management Engagement & Remuneration
Committees: £8,000 per annum.
At the most recent review of Directors’ fees, held in March 2024, it was
agreed that with effect from 1 April 2024 the Directors' fees would be
the following: Chairman of the Board: £52,000 per annum; Directors:
£32,000 per annum; additional fee paid to Directors who chair one or
more of the Audit, Valuations and Management Engagement &
Remuneration Committees: £8,000 per annum.
The Committee was not provided with any external advice or services
during the financial year ended 31 March 2024 in respect of the fees
payable to the non-executive Directors.
The Committee is required to submit its remuneration policy to a
shareholder vote every three years. A resolution to approve the
remuneration policy was last put to shareholders at the 2022 AGM.
Directors’ Remuneration Report continued
CORPORATE GOVERNANCE
45
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Statement of shareholder voting
The Company is committed to ongoing shareholder dialogue and takes
an active interest in voting outcomes. Where there are substantial votes
against resolutions in relation to Directors’ remuneration, the reasons for
any such vote will be sought and any actions in response will be detailed
in future Directors’ Remuneration Reports. There have been no
substantial shareholder votes against the resolutions at Annual General
Meetings since listing.
At the Annual General Meeting held on 19 September 2023 an ordinary
resolution to approve the Directors’ Remuneration Report for the year
ended 31 March 2023 was put to shareholders and passed by poll. An
ordinary resolution to approve the Directors’ Remuneration Policy was
put to shareholders, and passed, at the Annual General Meeting held on
14 September 2022. The results of the respective polls were as follows:
Votes Total Votes Votes
Resolution Votes For % Against % Cast Withheld
Approval of the Directors’ Remuneration Report
for the year ended 31 March 2023 63,598,202 99.7 210,319 0.3 63,808,521 98,466
Approval of the Directors' Remuneration Policy in 2022 76,057,949 99.7 204,640 0.3 76,262,589 50,180
Single total figure of remuneration (Audited)
The following table shows the single figure of remuneration of the non-executive Directors’ remuneration for the year:
2024 2023
Fixed Taxable Fixed Taxable
Role fees expenses1 Total fees expenses Total
Neil England Chairman of the Board and 50,000 374 50,374 45,000 – 45,000
Nominations Committee
Karen Brade Chair of the Audit Committee 38,000 – 38,000 35,000 – 35,000
David Haysey Chairman of the Management 38,000 484 38,484 35,000 – 35,000
Engagement & Remuneration
Committee and Valuations Committee
Conny Dorrestijn Director 30,000 – 30,000 27,000 – 27,000
William Russell Director 30,000 – 30,000 27,000 – 27,000
Total 186,000 858 186,858 169,000 – 169,000
1 taxable expenses primarily comprise travel and associated expenses incurred by the Directors in attending Board and Committee meetings in London. These are reimbursed by
the Company and, under HMRC Rules, are subject to tax and National Insurance and therefore are treated as a benefit in kind within this table.
Changes in Directors’ Remuneration
The following table shows the percentage changes in the levels of fixed fees paid to the Directors from year to year for each financial year since
2020:
Change Change Change Change Change
2024 to 2023 to 2022 to 2021 to 2020 to
2025 2024 2023 2022 2021
% % % % %
Chairman 4.0 11.1 – 28.6 –
Committee Chairs 5.3 8.6 – 16.7 –
Directors 6.7 11.1 – 16.7 –
Directors’ Remuneration Report continued
46
AUGMENTUM FINTECH PLC
Directors’ share interests (Audited)
The interests at 31 March 2024 of the Directors who served in the year
and who held an interest in the ordinary shares of the Company were as
follows:
Number of Number of
ordinary ordinary
shares shares
as at as at
31 March 31 March
2024 2023
Neil England 300,000 300,000
Karen Brade 39,019 39,019
David Haysey 94,230 94,230
William Russell 240,000 240,000
These include shares held by connected persons, where applicable.
The Directors are not required to own shares in the Company.
There have been no changes to Directors’ share interests from 31 March
2024 to the date of this report.
Total Shareholder Return
The graph below shows the total return for the period from 13 March
2018 to 31 March 2024 against the FTSE 250 Ex Investment Trust Index.
Augmentum Fintech Ord (Share Price Total Return)
FTSE 250 Ex Investment Trust (Total Return)
%
Mar
2018
Mar
2019
Mar
2020
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
Mar
2021
Mar
2022
Mar
2023
Mar
2024
Relative importance of spend on pay
2024 2023
Spend £’000 £’000
Fees of non-executive Directors 186 169
Remuneration paid to or 2,793 2,944
receivable by all employees of
the Group in respect of the year**
Total Expenses** 5,485 5,271
** excludes performance fee and other capital expenses.
David Haysey
Chairman of the Management Engagement & Remuneration
Committee
24 June 2024
Directors’ Remuneration Policy
47
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
CORPORATE GOVERNANCE
The Company reports on the implementation of its remuneration policy each year in accordance with the Regulations and is required to submit its
remuneration policy to a binding shareholder vote every three years. An ordinary resolution for the approval of the current policy was passed by
members at the Annual General Meeting on 14 September 2022.
The Directors’ Remuneration Policy aims to ensure that Directors fees are set at a level that is commensurate with the duties, responsibilities and
time commitment of each respective role and consistent with the need to attract and retain directors of appropriate quality and experience.
Directors’ remuneration should also be comparable to that of other investment trusts of a similar size and structure;
The views of shareholders on remuneration are extremely important to the Committee. As such, it is intended that an ongoing and open dialogue
with shareholders is maintained. It is the Committee’s policy to consult with major shareholders and investor representative bodies prior to
proposing any material changes to either this policy or any related remuneration arrangements at an Annual General Meeting. On an ongoing basis,
any feedback received from shareholders is considered as part of the Committee’s annual review of remuneration.
Directors’ Remuneration Policy
The table below sets out the Company’s policy for Directors’ fees.
Fee element Purpose and link to strategy Operation Maximum
The above policy will also apply to new Directors.
Terms of appointment
No Director has a contract of employment or service with the Company. Directors’ terms and conditions of appointment are set out in letters of
appointment, which are available for inspection from the Company Secretary at the Company’s registered office during normal business hours and
at the Annual General Meeting. In line with the recommendations of the UK Corporate Governance Code, all Directors will stand for annual
re-election by shareholders at the Annual General Meeting.
Payments for Loss of Office and Payments to Former Directors (Audited)
No payments have been made to any former directors. It is the Company’s policy not to pay compensation upon leaving office for whatever reason.
David Haysey
Chairman of the Management Engagement & Remuneration Committee
24 June 2024
The maximum aggregate fee
for Directors, including the
Chairman, is limited by the
Company’s articles of
association to £500,000 p.a.
Fee levels are set to reflect the time commitment,
responsibility of the role, and taking into account
fees paid by similarly sized companies in the market
The Chairman’s and Directors’ fees are determined
by the Management Engagement & Remuneration
Committee
Fees are reviewed annually to ensure that they
remain in line with market practice and are paid in
equal monthly instalments
To attract and retain high
calibre individuals to serve as
Directors
Chairman’s and Directors’
basic fees
See table on page 45
Directors (other than the Chairman) are paid an
additional fee if they chair one or more Board
Committees
To provide compensation
to Directors taking on
additional Committee
responsibility
Additional fees
No maximum set
The Company reimburses reasonable travel and
subsistence costs together with any tax liabilities
arising from these amounts
To facilitate the execution of
the role
Benefits
48
AUGMENTUM FINTECH PLC
Statement by the Chair of the Audit Committee
I am pleased to present my report as Chair of the Audit Committee. All of
the members of the Board are members of the Committee. The Board
has taken note of the requirement that at least one member of the Audit
Committee should have recent and relevant financial experience and is
satisfied that the Audit Committee is properly constituted in this respect.
The role of the Committee is to assist the Board in protecting
shareholders’ interests through fair, balanced and understandable
reporting, ensuring effective internal controls and maintaining an
appropriate relationship with the Group’s auditor. The Committee’s role
and responsibilities are set out in its terms of reference, which comply
with the UK Corporate Governance Code. The terms of reference are
available on request from the Company Secretary and can be seen on
the Company’s website.
Responsibilities of the Committee
The Audit Committee’s responsibilities include:
l
Monitoring and reviewing the integrity of the financial statements,
the internal financial controls and the independence, objectivity
and effectiveness of the external auditor
l
Providing advice to the Board on whether the annual financial
statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Company’s performance, business
model and strategy
l
Making recommendations to the Board in relation to the
appointment of the external auditor and approving their
remuneration and the terms of their engagement
l
Advising the Board on the Company’s overall risk appetite,
tolerance and strategy
l
Overseeing and advising the Board on the current risk exposures
of the Company and future risk strategy, including reviewing the
Company’s key risks and internal controls
l
Developing and implementing the Company’s policy on the
provision of non-audit services by the external auditor
l
Considering annually whether there is a need for the Company to
have its own internal audit function
l
Reviewing the arrangements in place whereby employees may, in
confidence, raise concerns about possible improprieties in matters
of financial reporting or other matters insofar as they may affect the
Company.
Meetings and Business
I report to the Board after each Audit Committee meeting on the main
matters discussed at the meeting.
The Audit Committee met four times during the year under review and
again in the subsequent period to the date of this report. The main
matters discussed at those meetings were:
l
Review and approval of the annual plan of the external auditor
l
Discussion and approval of the fee for the external audit
l
Review of Audit Committee terms of reference and the accounting
policies
l
Review of the Company’s key risks and internal controls
l
Review of the Annual and Interim Reports, including consideration
of the significant accounting issues relating to the financial
statements
l
Meeting with the external auditor without management present
l
Assessment of the need for an internal audit function
l
Review of whistleblowing arrangements
l
Consideration of the Valuations Committee’s assessment and
recommendation concerning the adequacy of the methodologies
applied in and results of the Group’s valuation process, and its
discussions with the AIFM, Portfolio Manager and the external
auditor.
Internal Controls and Risk Management
The Board has overall responsibility for risk management and for the
review of the internal controls of the Company, undertaken in the
context of its investment objective.
A summary of the principal risks facing the Company is provided in the
Strategic Report.
The review covers the key business, operational, compliance and
financial risks facing the Company, including emerging risks. In arriving
at its judgement of what risks the Company faces, the Board has
considered the Company’s operations in light of the following factors:
l
The nature and extent of risks which it regards as acceptable for
the Company to bear within its overall investment objective;
l
The threat of such risks becoming a reality; and
l
The Company’s ability to reduce the incidence and impact of risk
on its performance.
Against this background, a risk matrix has been developed which
covers the key risks the Company faces, the likelihood of their
occurrence and their potential impact, how these risks are monitored
and mitigating controls in place.
Report of the Audit Committee
CORPORATE GOVERNANCE
49
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
The Board has delegated to the Audit Committee responsibility for the
review and maintenance of the risk matrix and it reviews, in detail, the
risk matrix at least half-yearly, bearing in mind any changes to the
Company, its environment or service providers since the last review.
Any significant changes to the risk matrix are discussed with the whole
Board. There were no changes to the Company’s risk management
processes during the year and no significant failings or weaknesses
were identified from the Committee’s most recent risk review.
The Committee reviews internal controls reports from its principal
service providers on an annual basis. The Committee is satisfied that
appropriate systems have been in place for the year under review and
up to the date of approval of this report.
Significant Reporting Matters
The most significant risk in the Company’s financial statements is
whether its investments are fairly and consistently valued and this issue
is considered carefully when the Audit Committee reviews the
Company’s Annual and Interim Reports. We also ask the external
auditor to pay particular attention this area. We have considered the
work of the Valuations Committee and the results of their discussions
with the AIFM, Portfolio Manager and the external auditor. We consider
the work to be detailed, comprehensive and that the persons preparing
the reports have sufficient and appropriate expertise through their
experience and qualifications. Furthermore, we believe that the process
is planned and managed so as to devote adequate time and resource
to preparation and review by the AIFM, Portfolio Manager and the
Valuations Committee. This is the most significant area of judgement in
the compilation of the financial statements and we specifically note the
challenge provided by the members of the Valuations Committee in this
process.
Financial Statements
The Board has asked the Committee to confirm that in its opinion the
Board can make the required statement that the annual report taken as
a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s
position, performance, business model and strategy. The Committee
has given this confirmation on the basis of its review of the whole
document, underpinned by involvement in the planning for its
preparation and review of the processes to assure the accuracy of
factual content.
The Committee is satisfied that it is appropriate for the Board to prepare
the financial statements on the going concern basis.
The Committee considered the longer-term viability of the Company in
connection with the Board’s statement in the Strategic Report on
pages 23 and 24. The Committee reviewed the Company’s financial
position, expected future cash flows and position, together with the
principal risks and uncertainties. This included performing stress tests
which considered the impact of a fall in valuation and liquidity constraints.
The results demonstrated the impact on the Company’s NAV, its
expenses and its ability to meet its liabilities. The Committee concluded
it was reasonable for the Board to expect that the Company will be able
to continue in operation and meet its liabilities as they fall due over the
next five financial years.
External Auditor
The Committee met with BDO in March 2024 to review the audit plan
and in June to review the outcome of the year end audit, during part of
which the Committee also met separately with BDO without Frostrow or
the Portfolio Manager being present. I also engaged with BDO on their
progress ahead of the June Audit Committee meeting. In addition, BDO
attended all Valuations Committee meetings.
In order to fulfil the Committee’s responsibility regarding the
independence of the Auditor, the Committee reviewed:
l
The senior audit personnel in the audit plan, in order to ensure that
there were sufficient, suitably experienced staff with knowledge of
the investment trust sector working on the audit;
l
The steps the Auditor takes to ensure its independence and
objectivity;
l
The statement by the Auditor that they remain independent within
the meaning of the relevant regulations and their professional
standards; and
l
The extent of non-audit services provided by the Auditor.
Following the finalisation of the 2023 annual report the Committee
conducted a formal review of the quality and effectiveness of the audit.
During this exercise we reviewed:
l
The Auditor’s execution and fulfilment of the agreed audit plan,
including their ability to communicate with and challenge
management and to resolve any issues promptly and satisfactorily,
and the audit partner’s leadership of the audit team;
l
Communications between the Auditor, the Directors and the AIFM
on the consideration of certain disclosure matters in the annual
report;
l
The quality of the Auditor’s report to the Committee
l
Feedback from Frostrow as the AIFM on the conduct of the audit
and their working relationship; and
l
We particularly noted, in relation to the significant reporting matter
last year, which was the same as that above for the current year,
that the Auditor attended each of the Valuations Committee
meetings in the year and diligently challenged valuation
methodologies and conclusions when they thought it appropriate.
The Committee is satisfied with the overall quality of the audit, the
Auditor’s independence and the effectiveness of the audit process,
together with the degree of diligence and professional scepticism
brought to bear and notes that, pending a formal review, the current
year’s audit has proceeded in a consistent manner.
As a public company listed on the London Stock Exchange, the
Company is subject to mandatory auditor rotation requirements. Based
on these requirements, another tender process will be required in 2029.
The Committee will, however, continue to consider annually the need to
go to tender for audit quality, remuneration or independence reasons.
The audit of the financial statements for the year ended 31 March 2024
is BDO LLP’s fifth audit of the Company since they were appointed.
Accordingly, Peter Smith, who was the audit partner for all of these
audits, will rotate off the assignment for future years.
Report of the Audit Committee continued
50
AUGMENTUM FINTECH PLC
Non-Audit Services
The Committee has approved a policy on non-audit services, which
requires that non-audit fees must not exceed 70% of the average of the
fees paid in the last three consecutive years for the statutory audit.
BDO was not engaged for any non-audit services during the year, other
than those disclosed in note 2 on page 58.
Internal Audit Function
The Group does not have an internal audit function. Through Frostrow,
the AIFM, most of the Company’s operations are delegated to third
parties and the portfolio management subsidiary, AFML, employs only a
small staff. AFML and certain other key service providers are subject to
external regulation and have compliance functions in place. The Audit
Committee receives an annual assurance report on the AIFM’s internal
controls, which includes a report from the AIFM’s auditor on the control
policies and procedures in operation. AFML provides half yearly
compliance reports to the Audit Committee confirming, amongst other
things, that compliance monitoring is carried out in the manner and with
the frequency specified in its compliance monitoring programme. The
appointment of separate service providers ensures a clear separation
of duties and a structure of internal controls that is balanced and robust.
For these reasons, supported by the review of the effectiveness of
internal controls referred to above, the Audit Committee considers that
an internal audit function specific to the Company is unnecessary. The
Board and the AIFM will continue to monitor the system of internal
controls in order to provide assurance that it operates as intended and
the Directors will review at least annually whether a function equivalent
to an internal audit is needed.
Evaluation
The Committee’s evaluation of its own performance was covered as
part of the process of the Board’s annual evaluation of its operations
and performance and those of its Committees, as described in the
Corporate Governance Statement.
It was concluded that the Committee was performing satisfactorily.
Karen Brade
Chair of the Audit Committee
24 June 2024
Report of the Audit Committee continued
CORPORATE GOVERNANCE
51
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
The directors are responsible for preparing the annual report and
financial statements in accordance with United Kingdom applicable law
and regulations.
Company law requires the directors to prepare financial statements for
each financial year. Under that law the directors have prepared the
Group and Company financial statements in accordance with
UK-adopted international accounting standards. Under Company law
the directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
Group and Company and of the return or loss for the Group and
Company for that period.
In preparing these group financial statements, the directors are
required to:
l
Select suitable accounting policies and then apply them
consistently;
l
Make judgements and accounting estimates that are reasonable
and prudent;
l
State whether they have been prepared in accordance with
UK-adopted international accounting standards, subject to any
material departures disclosed and explained in the financial
statements;
l
Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
l
Prepare a directors’ report, a strategic report and directors’
remuneration report which comply with the requirements of the
Companies Act 2006.
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group and Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to
ensure that the financial statements comply with the Companies Act
2006.
They are also responsible for safeguarding the assets of the Group and
the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Responsibility Statement
The Directors consider that this annual report and financial statements,
taken as a whole, is fair, balanced, and understandable and provides the
information necessary for shareholders to assess the Group and
Company’s position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed under the
‘Board of Directors’ on page 32 confirm that, to the best of their
knowledge:
l
The financial statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Group and Company;
l
The annual report includes a fair review of the development and
performance of the business and the financial position of the
Group and Company, together with a description of the principal
risks and uncertainties that they face.
Neil England
Chairman
24 June 2024
Note to those who access this document by electronic means:
The annual report for the year ended 31 March 2024 has been
approved by the Board of Augmentum Fintech plc.
Copies of the annual report and the half year report are circulated to
shareholders and, where possible, to investors through other providers’
products and nominee companies (or written notification is sent when
they are published online). It is also made available in electronic format
for the convenience of readers. Printed copies are available from the
Company’s registered office in London.
The Directors are responsible for the maintenance and integrity of the
company’s website: www.augmentum.vc. Legislation in the United
Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Statement of Directors’ Responsibilities in respect of
the Annual Report, the Directors’ Remuneration
Report and the Financial Statements
52
AUGMENTUM FINTECH PLC
Year ended 31 March 2024 Year ended 31 March 2023
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Gains on Investments 8 – 17,602 17,602 – 9,858 9,858
Interest Income 1,681 – 1,681 412 – 412
Expenses 2 (5,432) (49) (5,481) (5,270) (107) (5,377)
(Loss)/Return before Taxation (3,751) 17,553 13,802 (4,858) 9,751 4,893
Taxation 6 – – – – – –
(Loss)/Return for the year (3,751) 17,553 13,802 (4,858) 9,751 4,893
(Loss)/Return per Share (pence) 7 (2.2)p 10.3p 8.1p (2.7)p 5.4p 2.7p
The total column of this statement represents the Group’s Consolidated Income Statement, prepared in accordance with IFRS as adopted by the UK.
The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
The Group does not have any other comprehensive income and hence the total return, as disclosed above, is the same as the Group’s total comprehensive income.
All items in the above statement derive from continuing operations.
All returns are attributable to the equity holders of Augmentum Fintech plc, the parent company.
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
Consolidated Income Statement
FINANCIAL STATEMENTS
53
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Year ended 31 March 2024
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Group £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders’ funds 1,810 105,383 85,218 117,740 (16,027) 294,124
Purchase of own shares into treasury – – (4,609) – – (4,609)
Return/(loss) for the year – – – 17,553 (3,751) 13,802
At 31 March 2024 1,810 105,383 80,609 135,293 (19,778) 303,317
Year ended 31 March 2023
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Group £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders’ funds 1,810 105,383 91,191 107,989 (11,169) 295,204
Purchase of own shares into treasury – – (5,973) – – (5,973)
Return/(loss) for the year – – – 9,751 (4,858) 4,893
At 31 March 2023 1,810 105,383 85,218 117,740 (16,027) 294,124
Year ended 31 March 2024
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Company £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders’ funds 1,810 105,383 85,218 100,919 (17,576) 275,754
Purchase of own shares into treasury – – (4,609) – – (4,609)
Return/(loss) for the year – – – 15,392 (3,805) 11,587
At 31 March 2024 1,810 105,383 80,609 116,311 (21,381) 282,732
Year ended 31 March 2023
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Company £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders’ funds 1,810 105,383 91,191 92,724 (12,556) 278,552
Purchase of own shares into treasury – – (5,973) – – (5,973)
Return/(loss) for the year – – – 8,195 (5,020) 3,175
At 31 March 2023 1,810 105,383 85,218 100,919 (17,576) 275,754
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
Consolidated and Company Statements of
Changes in Equity
54
AUGMENTUM FINTECH PLC
2024 2023
Note £’000 £’000
Non-Current Assets
Investments held at fair value 8 265,083 254,295
Property, plant & equipment 219 297
Current Assets
Right-of-use asset 5 438 588
Other receivables 10 245 555
Cash and cash equivalents 38,505 40,015
Total Assets 304,490 295,750
Current Liabilities
Other payables 11 (699) (948)
Lease liability 5 (474) (678)
Total Assets less Current Liabilities 303,317 294,124
Net Assets 303,317 294,124
Capital and Reserves
Called up share capital 15 1,810 1,810
Share premium 105,383 105,383
Special reserve 80,609 85,218
Retained earnings:
Capital reserves 135,293 117,740
Revenue reserve (19,778) (16,027)
Total Equity 303,317 294,124
Net Asset Value per share (pence) 16 178.6p 168.5p
Net Asset Value per share after performance fee (pence)* 16 167.4p 158.9p
The Financial Statements on pages 52 to 68 were approved by the Board of Directors on 24 June 2024 and signed on its behalf by:
Neil England
Chairman
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
Augmentum Fintech plc
Company Registration Number: 11118262
as at 31 March 2024
* Considered to be Alternative Performance Measure. Please see the Glossary and Alternative Performance Measures on page 78.
Consolidated Balance Sheet
FINANCIAL STATEMENTS
55
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
2024 2023
Note £’000 £’000
Non-Current Assets
Investments held at fair value 8 265,083 254,295
Investment in subsidiary undertakings 9 750 500
Current Assets
Other receivables 10 196 118
Cash and cash equivalents 36,052 38,470
Total Assets 302,081 293,383
Current Liabilities
Other payables 11 (369) (810)
Provisions 12 (18,980) (16,819)
Total Assets less Current Liabilities 282,732 275,754
Net Assets 282,732 275,754
Capital and Reserves
Called up share capital 15 1,810 1,810
Share premium 105,383 105,383
Special reserve 80,609 85,218
Retained earnings:
Capital reserves 116,311 100,919
Revenue reserve (21,381) (17,576)
Total Equity 282,732 275,754
The Company’s return for the year was £11,587,000 (2023: £3,175,000). The Directors have taken advantage of the exemption under s408 of the
Companies Act and not presented an income statement or a statement of comprehensive income for the Company alone.
The Financial Statements on pages 52 to 68 were approved by the Board of Directors on 24 June 2024 and signed on its behalf by:
Neil England
Chairman
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
Augmentum Fintech plc
Company Registration Number: 11118262
as at 31 March 2024
Company Balance Sheet
56
AUGMENTUM FINTECH PLC
Year Year
ended ended
31 March 31 March
2024 2023
£’000 £’000
Operating activities
Sales of investments 22,790 44,226
Purchases of investments (15,976) (24,855)
Acquisition of property, plant and equipment (8) (365)
Interest income received 1,608 326
Expenses paid (4,552) (5,058)
Lease payments (221) (153)
Net cash inflow from operating activities 3,641 14,121
Purchase of own shares into treasury (5,151) (5,432)
Net cash used by financing activities (5,151) (5,432)
Net (decrease)/increase in cash and cash equivalents (1,510) 8,689
Cash and cash equivalents at start of year 40,015 31,326
Cash and cash equivalents at end of year 38,505 40,015
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
Consolidated Cash Flow Statement
FINANCIAL STATEMENTS
57
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Year Year
ended ended
31 March 31 March
2024 2023
£’000 £’000
Operating activities
Sales of investments 22,790 44,226
Purchases of investments (16,226) (24,855)
Interest income received 1,563 326
Expenses paid (5,394) (5,489)
Net cash inflow from operating activities 2,733 14,208
Purchase of own shares into treasury (5,151) (5,432)
Net cash used by financing activities (5,151) (5,432)
Net (decrease)/increase in cash and cash equivalents (2,418) 8,776
Cash and cash equivalents at start of year 38,470 29,694
Cash and cash equivalents at end of year 36,052 38,470
The notes on pages 58 to 68 are integral to and form part of these Financial Statements.
Company Cash Flow Statement
58
AUGMENTUM FINTECH PLC
1
Segmental Analysis
The Group operates a single business segment for reporting purposes and is managed as a single investment company. Reporting is provided to
the Board of Directors on an aggregated basis. The investments are located in the UK, continental Europe, Israel and the US.
2
Expenses
2024 2023
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
AIFM fees 582 – 582 593 – 593
Administrative expenses 1,706 49 1,755 1,415 107 1,522
Directors’ fees* 186 – 186 169 – 169
Performance fee (see note 4)^ – – – – – –
Staff costs (see note 4) 2,793 – 2,793 2,944 – 2,944
Auditor’s remuneration 165 – 165 149 – 149
Total expenses 5,432 49 5,481 5,270 107 5,377
£169,000 of interest and depreciation relating to a lease (2023: £209,000) is included in administrative expenses. See note 5 for further details.
* Details of the amounts paid to Directors are included in the Directors Remuneration Report on page 45.
^ See note 4 for further details of the performance fee arrangements. Non-executive Directors of the Company are not eligible to participate in any allocation of the performance fee.
Auditor’s Remuneration
2024 2023
Group Company Group Company
£’000 £’000 £’000 £’000
Audit of Group accounts pursuant to legislation 110 110 104 104
Audit of subsidiaries accounts pursuant to legislation 19 – 18 –
Audit related assurance services 26 26 20 20
Non-audit related assurance services 10 – 7 –
Total auditors’ remuneration 165 136 149 124
Non-audit services
It is the Group’s practice to employ BDO LLP on assignments additional to their statutory audit duties only when their expertise and experience with
the Group are important. Details of the Group’s process for safeguarding and supporting the independence and objectivity of the external auditor
are given in the Report of the Audit Committee beginning on page 48.
3
Key Management Personnel Remuneration
The Directors of the Company are considered to be the Key Management Personnel along with the directors of the Company’s subsidiary.
2024 2023
Other Other
Salary/Fees benefits Total Salary/Fees benefits Total
£’000 £’000 £’000 £’000 £’000 £’000
Key management personnel remuneration 1,158 125 1,283 1,352 277 1,629
Performance fee allocation* – – – – – –
1,158 125 1,283 1,352 277 1,629
Other benefits include pension and social security contributions relating to the directors of the Company’s subsidiary.
* Allocation of the performance fee to the directors of the Company’s subsidiary. See note 4 for further details of the performance fee arrangements.
Notes to the Financial Statements
FINANCIAL STATEMENTS
59
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
4
Staff Costs
The monthly average number of employees for the Group during the year was eleven (2023: eleven). All employees are within the investment and
administration function and employed by the Company's subsidiary.
2024 2023
£’000 £’000
Wages and salaries 2,264 2,437
Social security costs 318 347
Other pension costs 119 104
Other staff benefits 92 56
Staff costs 2,793 2,944
Performance fee (charged to capital)* – –
Total 2,793 2,944
* The performance fee arrangements were set up to provide a long-term employee benefit plan to incentivise employees of AFML and align them with shareholders through
participation in the realised investment profits of the Group. Any performance fee paid by the Company to AFML is allocated to employees of AFML on a discretionary basis and
overseen by the Management Engagement & Remuneration Committee of the Company.
The performance fee is payable by the Company to AFML when the Company has realised an aggregate annualised 10% return on investments (the ‘hurdle’) in each basket of
investments. Based on the investment valuations and the hurdle level as at 31 March 2024 the hurdle has been met, on an unrealised basis, and as such a performance fee of
£18,980,000 (2023: £16,819,000) has been provided for by the Company, equivalent to 11.2 pence per share. This provision is reversed on consolidation and not included in the
Group Statement of Financial Position. The performance fee is only payable to AFML if the hurdle is met on a realised basis and the actual amount payable will depend on the
amount and timing of investment realisations. See page 25 and note 19.9 for further details.
5
Leases
Leasing activities
The Group, through its subsidiary AFML, has leased an office in the UK from which it operates for a fixed fee. When measuring lease liabilities for
leases that were classified as operating leases, the Group discounts lease payments at a rate of 6.4% (2023: 6.4%).
Right-of-use Asset
2024 2023
Group Group
Office Premises Office Premises
£’000 £’000
As at 1 April 588 750
Depreciation (150) (162)
At 31 March 438 588
Lease Liability
2024 2023
Group Group
Office Premises Office Premises
£’000 £’000
As at 1 April 678 783
Rent free period reduction (21) –
Interest Expense 38 48
Lease Payments (221) (153)
At 31 March 474 678
Maturity Analysis
Group
Between Between
At 31 March 2024 Up to 3 months 3 – 12 months 1 – 2 years 2 – 5 years
£’000 £’000 £’000 £’000
Lease payments 60 121 181 181
60
AUGMENTUM FINTECH PLC
6
Taxation Expense
2024 2023
Revenue Capital Total Revenue Capital Total
For the year ended 31 March £’000 £’000 £’000 £’000 £’000 £’000
Current tax:
UK corporate tax on profits for the year – – – – – –
The difference between the income tax expense shown above and the amount calculated by applying the effective rate of UK corporation tax of
25% (2023: 19%) to the (loss)/return before tax is as follows:
2024 2023
Revenue Capital Total Revenue Capital Total
For the year ended 31 March £’000 £’000 £’000 £’000 £’000 £’000
(Loss)/return before taxation (3,751) 17,553 13,802 (4,858) 9,751 4,893
(Loss)/return before tax multiplied by the effective rate of
UK corporation tax of 25% (2023: 19%) (938) 4,388 3,450 (923) 1,853 930
Effects of:
Non-taxable capital returns – (4,400) (4,400) – (1,873) (1,873)
Unutilised management expenses 938 12 950 923 20 943
Total tax expense – – – – – –
No provision for deferred taxation has been made in the current year. The Group has not provided for deferred tax on capital profits arising on the
revaluation of investments, as it is exempt from tax on these items because of its status as an investment trust company.
The Company has not recognised a deferred tax asset on the excess management expenses of £36,704,000 (2023: £32,904,000). It is not
anticipated that these excess expenses will be utilised in the foreseeable future.
7
(Loss)/Return per Share
The (loss)/return per share figures are based on the following figures:
2024 2023
£’000 £’000
Net revenue loss (3,751) (4,858)
Net capital return 17,553 9,751
Net total return 13,802 4,893
Weighted average number of ordinary shares in issue 170,877,294 178,651,736
Pence Pence
Revenue loss per share (2.2) (2.7)
Capital return per share 10.3 5.4
Total return per share 8.1 2.7
8
Investments Held at Fair Value
Non-current Investments Held at Fair Value
2024 2023
Group and Group and
Company Company
As at 31 March £’000 £’000
Unlisted at fair value 265,083 254,295
FINANCIAL STATEMENTS
61
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
8
Investments Held at Fair Value (continued)
Reconciliation of movements on investments held at fair value are as follows:
2024 2023
Group and Group and
Company Company
£’000 £’000
As at 1 April 254,295 268,807
Purchases at cost 15,976 19,854
Realisation proceeds (22,790) (44,224)
Gains on investments 17,602 9,858
As at 31 March 265,083 254,295
The Group and Company received £22,790,000 (2023: £44,224,000) from investments sold in the year. The book cost of these investments when
they were purchased was £10,750,000 (2023: £6,348,000). These investments have been revalued over time and until they were sold any
unrealised gains/losses were included in the fair value of the investments.
9
Subsidiary undertakings
The Company has an investment of £750,000 (2023: £500,000) in the issued ordinary share capital of its wholly owned subsidiary undertaking,
Augmentum Fintech Management Limited (“AFML”), which is registered in England and Wales, operates in the United Kingdom and is regulated by
the Financial Conduct Authority. AFML’s principal activity is the provision of portfolio management services to the Company. AFML’s registered office
is 4 Chiswell Street, London EC1Y 4UP.
10
Other Receivables
2024 2024 2023 2023
Group Company Group Company
As at 31 March £’000 £’000 £’000 £’000
Other receivables 245 196 555 118
11
Other Payables
2024 2024 2023 2023
Group Company Group Company
As at 31 March £’000 £’000 £’000 £’000
Other payables 699 369 948 810
12
Provisions
2024 2023
Company Company
As at 31 March £’000 £’000
Performance fee provision* 18,980 16,819
* See page 25 and notes 4 and 19.9 for further details.
13
Financial Instruments
(i)
Management of Risk
As an investment trust, the Group’s investment objective is to seek capital growth from a portfolio of securities. The holding of these financial
instruments to meet this objective results in certain risks.
The Group’s financial instruments comprise securities in unlisted companies, partnership interests, trade receivables, trade payables, and cash and
cash equivalents.
The main risks arising from the Group’s financial instruments are fluctuations in market price, and credit and liquidity risk. The policies for managing
each of these risks are summarised below. These policies have remained constant throughout the year under review. The financial risks of the
Company are aligned to the Group’s financial risks.
Market Price Risk
Market price risk arises mainly from uncertainty about future prices of financial instruments in the Group’s portfolio. It represents the potential loss
the Group might suffer through holding market positions in the face of price movements, mitigated by stock diversification.
The Group is exposed to the risk of the change in value of its unlisted equity and non-equity investments. For unlisted equity and non-equity
investments the market risk is principally deemed to be the assumptions used in the valuation methodology as set out in the accounting policies.
Liquidity Risk
The Group’s assets comprise unlisted equity and non-equity investments. Whilst unlisted equity is illiquid, short-term flexibility is achieved through
cash and cash equivalents.
62
AUGMENTUM FINTECH PLC
13
Financial Instruments (continued)
Credit Risk
The Group’s exposure to credit risk principally arises from cash and cash equivalents. Only highly rated banks or liquidity funds (with credit ratings
above A3, based on S&P’s ratings or the equivalent from another ratings agency) are used for cash deposits and the level of cash is reviewed on a
regular basis. The components of cash and cash equivalents are shown in the table below.
(ii)
Financial Assets and Liabilities
Group Company Group Company
Fair value Fair value Fair value Fair value
2024 2024 2023 2023
As at 31 March £’000 £’000 £’000 £’000
Financial Assets
Unlisted equity shares 259,015 259,015 249,529 249,529
Unlisted convertible loan notes 6,068 6,068 4,766 4,766
Cash at bank 2,460 1,052 14,715 13,470
Cash Equivalents – Liquidity Funds 36,045 35,000 25,300 25,000
Other assets 683 196 1,143 118
Financial Liabilities
Other payables and lease liabilities (1,173) (369) (1,626) (810)
Cash and other receivables and payables are measured at amortised cost and the rest of the financial assets in the table above are held at
approximate to fair value. The carrying values of the financial assets and liabilities measured at amortised cost are equal to the fair value.
The unlisted financial assets held at fair value are valued in accordance with the IPEV Guidelines as detailed within note 19.4.
(iii)
Fair Value Hierarchy
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length
transaction.
The Group complies with IFRS 13 in respect of disclosures about the degree of reliability of fair value measurements. This requires the Group to
classify, for disclosure purposes, fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the
measurements.
The levels of fair value measurement bases are defined as follows:
Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within Level
1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: fair values measured using valuation techniques for which any significant input to the valuation is not based on observable market data
(unobservable inputs).
All investments were classified as Level 3 investments as at, and throughout the year to, 31 March 2024. Note 8 on page 61 presents the movements
on investments measured at fair value. Total gains and losses on assets measured at Level 3 are recognised as part of Gains on Investments in the
Consolidated Income Statement, and no other comprehensive income has been recognised on these assets.
When using the price of a recent transaction in the valuations, the Company looks to ‘re-calibrate’ this price at each valuation point by reviewing
progress within the investment, comparing against the initial investment thesis, assessing if there are any significant events or milestones that would
indicate the value of the investment has changed and considering whether a market-based methodology (ie. using multiples from comparable public
companies) or a discounted cashflow forecast would be more appropriate.
The main inputs into the calibration exercise, and for the valuation models using multiples, are revenue, EBITDA, AuM, and P/E multiples (based on
the most recent revenue, EBITDA, AuM, or earnings achieved and equivalent corresponding revenue, EBITDA, AuM, or earnings multiples of
comparable public companies), quality of earnings assessments and comparability difference adjustments. Revenue multiples are often used, rather
than EBITDA or earnings, due to the nature of the Group’s investments, being in fast-growing, small financial services companies which are not
normally expected to achieve profitability or scale for a number of years. Where an investment has achieved scale and profitability the Group would
normally then expect to switch to using an EBITDA or earnings multiple methodology.
The main input into the PWERM (‘Probability Weighed Expected Return Methodology’) is the probability of conversion. This method is used for the
convertible loan notes held by the Company.
FINANCIAL STATEMENTS
63
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
13
Financial Instruments (continued)
The fair valuation of private company investments is influenced by the estimates, assumptions and judgements made in the fair valuation process (see
note 19.12 on page 68). A sensitivity analysis is provided below which recognises that the valuation methodologies employed involve subjectivity in their
significant unobservable inputs and illustrates the sensitivity of the valuations to these inputs. The inputs have been flexed with the exception of the
Sales Price valuation approach as it does not involve significant subjectivity. The table also provides the range of values for the key unobservable inputs.
As at 31 March 2024
Weighted
Fair value of Key Other Applied average Sensitivity Change in
investments unobservable Unobservable Multiple multiple +/- Valuation
Valuation approach £’000 inputs inputs Range applied# % +/- £’000
Market approach using Revenue Multiple‡ a, b, c, g 2.3x – 28.0x 6.0x 10% 17,564/(17,554)
comparable traded multiples Earnings Multiple a, b, c, g 6.3x-18.6x 11.0x 10% 3,146/(2,423)
AUM Multiple a, b, c, g 0.1x 0.1x 10% 264/-
217,054 Illiquidity discount d,g 0% - 50% 32.3% 30% 12,558/(10,920)
Transaction implied e, g 0% - 630% 109.3% 30% 17,063/(18,023)
premiums and
discounts
Net Asset Value** 8,264 Discount to NAV a n/a n/a 10% (826)
PWERM* 6,068 Probability of a n/a n/a 25% 248/(248)
conversion
Expected transaction price 7,135 Execution a, f n/a n/a 10% 713/(713)
risk discount
CPORT^ 16,414 Transaction Price a,e,g n/a n/a 10% 1,641/(1,641)
Sales Price 10,148 n/a n/a n/a n/a n/a n/a
# Weighted average is calculated by reference to the fair value of holdings as at the respective year-end. This therefore gives a clearer indication of the typical multiple or adjustment
being applied across the portfolio.
**LP (‘Limited Partnership’) investments are held at net asset values provided by the relevant LP fund administrators. These are adjusted by benchmark movements as appropriate.
^ Whilst a recent or expected transaction price may be the most appropriate basis for a valuation, it will be corroborated by other techniques which factor in the unobservable inputs
noted below.
As at 31 March 2023
Weighted
Fair value of Key Other Applied average Sensitivity Change in
investments unobservable Unobservable Multiple multiple +/- Valuation
Valuation approach £’000 inputs inputs Range applied# % +/- £’000
Market approach using Revenue Multiple‡ a, b, c, g 2.7x – 11.1x 4.8x 10% 17,563/(17,563)
comparable traded multiples Earnings Multiple a, b, c, g 8.3x-11.8x 10.9x 10% 3,146/(2,423)
AUM Multiple a, b, c, g 0.1x 0.1x 10% 264/-
197,876 Illiquidity discount d,g 0% - 44% 19.3% 30% 4,117/(4,044)
Transaction implied e, g 0% - 310% 105.0% 30% 17,824/(17,300)
premiums and
discounts
Net Asset Value** 5,805 Discount to NAV a n/a n/a 10% (581)
PWERM* 4,766 Probability of a n/a n/a 25% 248/(248)
conversion
Expected transaction price 14,216 Execution a, f n/a n/a 10% 142/(142)
risk discount
CPORT^ 8,842 Transaction Price a,e,g n/a n/a 10% 884/(884)
Sales Price 22,790 n/a n/a n/a n/a n/a n/a
*Significant unobservable inputs
The variable inputs applicable to each broad category of valuation basis will vary dependent on the particular circumstances of each private
company valuation. An explanation of each of the key variable inputs is provided below. The assumptions and decisions process in relation to the
inputs is described in note 19.12 on page 68.
(a)
Application of valuation basis
Each investment is assessed independently, and the valuation basis applied will vary depending on the circumstances of each investment.
When an investment is pre-revenue, the focus of the valuation will be on assessing the recent transaction and the achievement of key
milestones since investment. Adjustments may also be made depending on the performance of comparable benchmarks and companies. For
those investments where a trading multiples approach can be taken, the methodology will factor in revenue, earnings or assets under
management as appropriate for the investment.
64
AUGMENTUM FINTECH PLC
13
Financial Instruments (continued)
(b)
Selection of comparable companies
The selection of comparable companies is assessed individually for each investment and the relevance of the comparable companies is
continually evaluated at each valuation date. Key criteria used in selecting appropriate comparable companies are the industry sector in which
they operate, the geography of the company’s operations, the respective revenue and earnings growth rates, operating margins, company size
and development stage. Typically, between 4 and 10 comparable companies will be selected for each investment, but this can vary depending
on how many relevant comparable companies are identified. The resultant revenue or earnings multiples or share price movements derived will
vary depending on the companies selected and the industries they operate in. Given the nature of the investments the Company makes there
are not always directly comparable listed companies, in such cases comparables will be selected whose businesses bear similarity to the
relevant investment, in such cases the need for an additional discount / premium to the comparables will be assessed at each valuation date.
(c)
Estimated sustainable revenue or earnings
The selection of sustainable revenue or earnings will depend on whether the company is sustainably profitable or not, and where it is not then
revenues will be used in the valuation. The valuation approach will typically assess companies based on the last twelve months of revenue or
earnings, as they are the most recent available and therefore viewed as the most reliable. Where a business has volatile earnings on a
year-on-year basis, revenue or earnings may be assessed over a longer period. Where a company has reliably forecasted earnings previously
or there is a change in circumstance at the business which will impact earnings going forward, then forward estimated revenue or earnings may
be used instead.
(d)
Application of illiquidity discount
An illiquidity discount may be applied either through the calibration of a valuation against the most recent transaction, or by application of a
specific discount. The discount applied where a calibration (see (e) below) is not appropriate is dependent on factors specific to each
investment, such as quality of earnings or revenues and potential exit scenarios.
(e)
Transaction implied premium and discount
Where there is an implied company valuation available as a result of an external arm's length transaction, the ongoing valuation will be calibrated
to this by deriving a company valuation with reference to the average multiple from a set of comparable companies and comparing this to a
transaction implied valuation. This can result in an implied premium or discount compared to comparable companies at the point of transaction.
This discount or premium will be considered in future valuations and may be reduced due to factors such as the time since the transaction and
company performance. Where a calibrated approach is not appropriate, a discount for illiquidity may be applied as noted in (d) above.
(f)
Execution risk
An execution risk discount is applied to all investments where an arm’s-length transaction is due to take place but hasn’t closed prior to the
reporting period end. The discount applied is dependent on the progress of the negotiations and outstanding matters that may impact on the
expected price. When valuing in line with an expected transaction the arm’s-length nature of the deal will be assessed, and term sheets will
have been received.
(g)
Liquidity preference
The company’s investments are typically venture investments with downside protections such as liquidation preference and anti-dilution
provisions. Unlike ordinary share structures typically seen in the public or private markets, these structures protect the value of the Company’s
position in the event of a reduction in the enterprise value of an investee company from the price paid. Where a valuation indicates the
enterprise value of an investment has fallen the enterprise value will be fed into the investee companies’ ‘waterfall’ (which ranks shares by
seniority/preference in the event of a liquidation event) to calculate the value of the Company’s position.
14
Substantial holdings in Investments
The table below shows substantial holdings in investments where the Company owns more than 3% of the fully diluted capital of the investee
company and the investment value is more than 5% of the Company’s non-current investments.
2024 2023
% ownership % of % ownership % of
(fully diluted) portfolio (fully diluted) portfolio
Zopa Bank* 3.5 14.8 3.4 11.8
Augmentum I LP ** 100 20.7 100 17.5
Tide 5.6 19.3 5.1 14.0
Grover 6.3 13.5 6.3 17.0
Cushon – – 13.9 9.0
Volt 8.3 9.6 8.3 5.6
* indirect ownership via Augmentum I LP.
** Augmentum I LP’s registered office is IFC 5, St Helier, Jersey JE1 1ST and it is registered in Jersey.
FINANCIAL STATEMENTS
65
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
15
Called up Share Capital
2024 2023
Ordinary Shares Ordinary Shares
No. £’000 No. £’000
Opening issued and fully paid ordinary shares of 1p each 174,518,852 1,810 180,325,786 1,810
Ordinary shares purchased into treasury (4,687,567) – (5,806,934) –
Closing issued and fully paid ordinary shares of 1p each 169,831,285 1,810 174,518,852 1,810
No shares were issued during the years ended 31 March 2023 and 31 March 2024.
4,687,567 shares were bought back into treasury during the year at an average price, including ancillary costs, of 98.3 p per share. In the year ended
31 March 2023 5,806,934 shares were bought back into treasury at an average price of 102.9p per share.
At 31 March 2024 there were 11,182,412 shares held in treasury (2023: 6,494,845).
16
Net Asset Value per Share
The net asset value per share is based on the Group net assets attributable to the equity shareholders of £303,317,000 (2023: 294,124,000) and
169,831,285 (2023: 174,518,852) shares in issue at the year end excluding shares held in treasury.
The net asset value per share after performance fee* is based on the Group net assets attributable to the equity shareholders of £303,317,000
(2023: £294,124,000), less the performance fee provision made by the Company of £18,980,000 (2023: £16,819,000), and 169,831,285 (2023:
174,518,852) shares in issue at the year end excluding shares held in treasury.
* Alternative Performance Measure
17
Related Party Transactions and transactions with AIFM
Balances and transactions between the Company and its subsidiaries are eliminated on consolidation. Details of transactions between the Group
and Company and other related parties are disclosed below.
The following are considered to be related parties:
•
Frostrow Capital LLP (under the Listing Rules only)
•
The Directors of the Company and the Company’s subsidiary, Augmentum Fintech Management Limited
•
Augmentum Fintech Management Limited
Details of the relationship between the Company and Frostrow Capital LLP, the Company’s AIFM, are disclosed on page 24. Details of fees paid to
Frostrow by the Company and Group can be found in note 2 on page 58.
Details of the remuneration of all Directors can be found on page 45. Details of the Directors’ interests in the capital of the Company can be found on
page 46.
Augmentum Fintech Management Limited is appointed as the Company’s delegated Portfolio Manager. The Portfolio Manager earns a portfolio
management fee of 1.5% of NAV up to £250 million and 1.0% of NAV for any excess over £250 million and is entitled to a performance fee of 15% of
net realised cash profits once the Company has received an annual compounded 10% realised return on its investments. Further details of this
arrangement are set out on page 25 in the Strategic Report. During the year the Portfolio Manager received a portfolio management fee of
£3,972,000 (2023: £4,026,000), which has been eliminated on consolidation and therefore does not appear in these accounts. A performance fee
provision of £18,980,000 (2023: £16,819,000) has been accrued in the Company's accounts, which is eliminated on consolidation in the Group
accounts. No performance fee is payable or has been paid during the year. There were no outstanding balances due to the Portfolio Manager at the
year end (2023: nil).
18
Capital Risk Management
Group Group
2024 2023
£’000 £’000
Equity
Equity share capital 1,810 1,810
Retained earnings and other reserves 301,507 292,314
Total capital and reserves 303,317 294,124
The Group’s objective in the management of capital risk is to safeguard its liquidity in order to provide returns for shareholders and to maintain an
optimal capital structure. In doing so the Group may adjust the amount of dividends paid to shareholders or issue new shares or debt.
The Group manages the levels of cash deposits held whilst maintaining sufficient liquidity for investments and operating expenses.
There are no externally imposed restrictions on the Company’s capital.
66
AUGMENTUM FINTECH PLC
19
Basis of Accounting and Material Accounting Policies
19.1
Basis of preparation
The Group and Company Financial Statements for the year ended 31 March 2024 have been prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those
standards.
The Financial Statements have been prepared on a going concern basis and under the historical cost basis of accounting, modified to include the
revaluation of certain assets at fair value, as disclosed in note 19.4. The Board has considered a detailed assessment of the Group and Company’s
ability to meet their liabilities as they fall due, including stress tests which modelled the effects of a fall in portfolio valuations and liquidity constraints
on the Group and Company’s financial position and cash flows. The results of the tests showed that the Group and Company would have sufficient
cash to meet their liabilities as they fall due. Based on the information available to the Directors at the time of this report, including the results of the
stress tests, and the Group and Company’s cash balances, the Directors are satisfied that the Group and Company have adequate financial
resources to continue in operation for at least the next 12 months from the date of signing of these financial statements and that, accordingly, it is
appropriate to adopt the going concern basis in preparing these financial statements.
In order to reflect the activities of an investment trust company, supplementary information which analyses the Consolidated Income Statement
between items of a revenue and capital nature has been presented alongside the Consolidated Income Statement. In analysing total income
between capital and revenue returns, the Directors have followed the guidance contained in the Statement of Recommended Practice for
investment companies issued by the Association of Investment Companies issued in July 2022 (the “SORP”).
The recommendations of the SORP which have been followed include:
l
Realised and unrealised profits or losses arising on the revaluation or disposal of investments classified as held at fair value through profit or
loss should be shown in the capital column of the Consolidated Income Statement. Realised gains are taken to the realised reserves in equity
and unrealised gains are transferred to the unrealised reserves in equity.
l
Other returns on any investment (whether in respect of dividends, interest or otherwise) should be shown in the revenue column of the
Consolidated Income Statement. The total of the revenue column of the Consolidated Income Statement is taken to the revenue reserve
in equity.
l
The Board should determine whether the indirect costs of generating capital returns should be allocated to capital as well as the direct costs
incurred in generating capital profits. In this regard the Board has decided to follow a non-allocation approach to indirect costs, which will
therefore be charged in full to the revenue column of the Consolidated Income Statement.
19.2
Basis of Consolidation
The Consolidated Financial Statements include the Company and certain subsidiary undertakings.
IFRS 10 and IFRS 12 define an investment entity and include an exemption from the consolidation requirements for investment entities.
The Company has been deemed to meet the definition of an investment entity per IFRS 10 as the following conditions exist:
l
The Company has multiple unrelated investors which are not related parties, and holds multiple investments
l
Ownership interests in the Company are exposed to variable returns from changes in the fair value of the Company’s net assets
l
The Company has obtained funds for the purpose of providing investors with investment management services
l
The Company’s business purpose is investing solely for returns from capital appreciation and investment income
l
The performance of investments is measured and evaluated on a fair value basis.
The Company will not consolidate the portfolio companies or other investment entities it controls. The principal subsidiary Augmentum Fintech
Management Limited as set out in note 9 is wholly owned. It provides investment related services through the provision of investment management.
As the primary purpose of this subsidiary is to provide investment related services that relate to the Company’s investment activities it is not held for
investment purposes. This subsidiary has been consolidated.
The Company also owns 100% of the interests in Augmentum I LP (the ‘LP’). As this LP is itself an investment entity and is held as part of the
Company’s investment portfolio it has not been consolidated.
19.3
Application of New Standards
(i) New standards, interpretations and amendments effective from 1 April 2023
There were no new standards or interpretations effective for the first time for periods beginning on or after 1 April 2023 that had a significant effect
on the Group’s financial statements.
(ii) New standards, interpretations and amendments not yet effective
There are a number of standards and interpretations which have been issued by the International Accounting Standards Board (‘IASB’) that are
effective in future accounting periods. The Group does not expect any of the standards issued by the IASB, but not yet effective, to have a material
impact on the Group or Company.
19.4
Investments
All investments are defined by IFRS as fair value through profit or loss (described in the Financial Statements as Investments held at fair value) and
are subsequently measured at reporting dates at fair value. The fair value of direct unquoted investments is calculated in accordance with the
Principles of Valuation of Investments below. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale
becomes unconditional.
Increases or decreases in valuation are recognised as part of gains on investments at fair value in the Consolidated Income Statement.
FINANCIAL STATEMENTS
67
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
19
Basis of Accounting and Material Accounting Policies (continued)
Principles of Valuation of Investments
(i) General
The Group estimates the fair value of each investment at the reporting date in accordance with IFRS 13 and the International Private Equity and
Venture Capital Valuation (“IPEV”) Guidelines.
Fair value is the price for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. In estimating fair
value, the AIFM and Board apply valuation techniques which are appropriate in light of the nature, facts and circumstances of the investment and
use reasonable current market data and inputs combined with judgement and assumptions. Valuation techniques are applied consistently from one
reporting date to another except where a change in technique results in a better estimate of fair value.
In general, the enterprise value of the investee company in question will be determined using one of a range of valuation techniques. The enterprise
value is adjusted for factors such as surplus assets, excess liabilities or other contingencies or relevant factors; the resulting amount is apportioned
between the investee company’s relevant financial instruments according to their ranking and the effect of any instrument that may dilute economic
entitlements.
(ii) Unlisted Equity Investments
In respect of each unlisted investment one or more of the following valuation techniques is used:
l
A market approach, based on the price of the recent investment, market multiples or industry valuation benchmarks.
l
A probability-weighted expected returns methodology. Under the PWERM fair value is based on consideration of values for the investment
under different scenarios. This will primarily be used where there is a convertible element to the investment.
l
A net assets based approach based on the value of the underlying assets of the investment.
In assessing whether a methodology is appropriate techniques that use observable market data are preferred.
Price of Recent Investment/Transaction
Where the investment being valued was itself made recently, or there has been a third party transaction in the investment, the price of the
transaction may provide a good indication of fair value. Using the Price of Recent Investment technique is not a default and at each reporting date
the fair value of investments is estimated to assess whether changes or events subsequent to the relevant transaction would imply a material
change in the investment’s fair value.
Multiple
Under the multiple methodology a revenue, EBITDA, AuM or earnings multiple technique is used. This involves the application of an appropriate and
reasonable multiple to the maintainable earnings or revenue of an investee company.
Further details on the multiple based methodology are provided in note 13 (iii).
PWERM (‘Probability-Weighted Expected Returns Methodology’)
Under the PWERM potential scenarios are identified. Under each scenario the value of the investment is estimated and a probability for each
scenario is selected. The fair value is then calculated as the sum of the value under each scenario multiplied by its probability.
Net Assets
For the net asset approach the fair value estimate is based on the attributable proportion of the reported net asset value of the investment derived
from the fair value of underlying assets / investments. Valuation reports provided by the manager or general partner of the investments are used to
calculate fair value where there is evidence that the valuation is derived using fair value principles that are consistent with the Company’s accounting
policies and valuation methods. Such valuation reports may be adjusted to take account of changes or events to the reporting date, or other facts
and circumstances which might impact the underlying value.
19.5
Cash and Cash Equivalents
Cash comprises cash at bank and short-term deposits with an original maturity of less than 3 months and subject to minimal risk of changes in value.
19.6
Presentation and Functional Currency
The Group’s and Company’s presentation and functional currency is Pounds Sterling (“Sterling”), since that is the currency of the primary economic
environment in which the Group operates.
19.7
Other income
Interest income received from cash equivalents is accounted for on an accruals basis.
19.8
Expenses
Expenses are accounted for on an accruals basis, and are charged through the revenue column of the Consolidated Income Statement except for
transaction costs and the performance fee as noted below.
Transaction costs are legal and professional fees incurred when undertaking due diligence on investment transactions. Transaction costs, when
incurred, are recognised in the Income Statement. If a transaction successfully completes, as a direct cost of an investment, the related transaction
cost is charged to the capital column of the Income Statement. If the transaction does not complete the related cost is charged to the revenue
column of the Income Statement.
68
AUGMENTUM FINTECH PLC
19
Basis of Accounting and Material Accounting Policies (continued)
19.9
Performance Fee
As set out in prior annual reports the performance fee arrangements were set up to provide a long-term employee benefit plan to incentivise
employees of AFML and align them with shareholders through participation in the realised investment profits of the Group. AFML is entitled to a
performance fee, and any performance fee paid by the Company to AFML is allocated to employees of AFML on a discretionary basis by the
Management Engagement & Remuneration Committee of the Company. Non-executive Directors of the Company are not eligible to participate in
any allocation of the performance fee.
The Company provides for the performance fee in full. A performance fee is provided for if its performance conditions would be achieved if the
remaining assets in that basket were realised at fair value, at the Statement of Financial Position date. The performance fee is equal to the share of
profits in excess of the performance conditions in the basket. On consolidation the performance fee is eliminated since it is payable to the
Company’s subsidiary, AFML.
Performance fees are charged to the capital column of the Income Statement and taken to the Capital Reserve.
19.10
Share Premium and Special Reserve
The share premium account arose following the Company’s admission to listing in 2018 and represented the difference between the proceeds
raised and the par value of the shares issued. Costs of the share issuance were offset against the proceeds of the relevant share issue and also
taken to the share premium account.
Subsequent to admission and following the approval of the Court, the initial share premium account was cancelled and the balance of the account
was transferred to the Special Reserve. The purpose of this was to enable the Company to increase the distributable reserves available to facilitate
the payment of future dividends or with which to make share repurchases.
19.11
Revenue and Capital Reserves
Net capital return is added to the Capital Reserve in the Consolidated Statement of Financial Position, while the net revenue return is added to the
Revenue Reserve. When positive, the revenue reserve is distributable by way of dividend, as is any realised portion of the capital reserve.
The realised portion of the capital reserve is £52,491,000 (2023: 40,519,000) representing realised capital profits less costs charged to capital.
19.12
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
Critical accounting judgements and key sources of estimation uncertainty used in preparing the financial information are continually evaluated and
are based on historical experience and other factors, including expectations of future events that are believed to be reasonable. The resulting
judgements and estimates will, by definition, seldom equal the related actual results.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty in the reporting year, that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Fair value measurements and valuation processes
Unquoted assets are measured at fair value in accordance with IFRS 13 and the IPEV Valuation Guidelines. Decisions are required in order to
determine the appropriate valuation methodology and subsequently in determining the inputs into the valuation model used. These decisions
include selecting appropriate quoted company comparables, appropriate multiples to apply, adjustments to comparable multiples and estimating
future cash flows of investee companies. In estimating the fair value of an asset, market-observable data is used, to the extent it is available.
The Valuations Committee, which is chaired by a Director, determines the appropriate valuation techniques and inputs for the model. The Audit
Committee considers the work of the Valuations Committee and the results of their discussion with the AIFM, Portfolio Manager and the external
auditor and works closely with the AIFM and Portfolio Manager to review the appropriate valuation techniques and inputs to the model. The Chair of
the Audit Committee reports its findings to the Board of Directors of the Group every six months to explain the cause of fluctuations in the fair value
of the investments.
Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in notes 19.4
and 13(iii).
As set out in note 19.9 a performance fee is calculated which is based on the valuation of the investments and as such is considered a significant
accounting estimate.
20 Post Balance Sheet Events
No post balance sheet events have occurred since 31 March 2024.
21
Financial Commitment
The Company made commitments to invest up to $3,000,000 into the Snowcrash Offshore Feeder LP. Of this commitment $nil (2023: $750,000)
remains outstanding.
FINANCIAL STATEMENTS
69
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Independent Auditor’s Report to the Members of
Augmentum Fintech plc
Opinion on the financial statements
In our opinion:
l
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2024 and of the
Group’s profit for the year then ended;
l
the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
l
the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards and
as applied in accordance with the provisions of the Companies Act 2006; and
l
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Augmentum Fintech plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
31 March 2024 which comprise the Consolidated Income Statement, the Consolidated and Company Statement of Changes in Equity, the
Consolidated Balance Sheet, the Company Balance Sheet, the Consolidated Cash Flow Statement, the Company Cash Flow Statement and notes
to the financial statements, including a summary of material accounting policy information. The financial reporting framework that has been applied
in their preparation is applicable law and UK adopted international accounting standards and as regards the Parent Company financial statements,
as applied in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional
report to the Audit Committee.
Independence
Following the recommendation of the audit committee, we were appointed by the Directors in February 2020 to audit the financial statements for
the year ended 31 March 2020 and subsequent financial periods. The period of total uninterrupted engagement including retenders and
reappointments is 5 years, covering the years ended 31 March 2020 to 31 March 2024. We remain independent of the Group and the Parent
Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
The non-audit services prohibited by that standard were not provided to the Group or the Parent Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt
the going concern basis of accounting included:
l
agreeing the inputs and assumptions (ie. forecasted income, expenditure and Investment Portfolio Value) within the board’s assessment of the
going concern status of the Group and Parent Company to supporting documentation and our own understanding of the Group; and,
l
assessing the appropriateness of assumptions made by the Directors in their stress tests and considering the likelihood of the extreme
downside scenarios occurring and the resulting effects on the liquidity of the Group.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In relation to the Parent Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
70
AUGMENTUM FINTECH PLC
Independent Auditor’s Report to the Members of
Augmentum Fintech plc continued
Overview
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and
assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls,
including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
The Group audit team performed a full scope audit of the Group, Parent Company and sole subsidiary using materiality levels set out in the
materiality section of our report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Coverage 100% (2023: 100%) of Group profit before tax
100% (2023: 100%) of Group revenue
100% (2023: 100%) of Group total assets
Key audit matter 2024 2023
Valuation of unquoted Investments
(Group and Parent Company) Yes Yes
Materiality Group financial statements as a whole
£6.04m (2023: £5.77m) based on 2% of net assets (2023: 2% of
net assets)
FINANCIAL STATEMENTS
71
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Independent Auditor’s Report to the Members of
Augmentum Fintech plc continued
Our testing of unquoted investments was 100% of the portfolio.
For all investments we tested:
•
we assessed whether the assumptions and underlying evidence
supporting the year end valuations are in line with the
requirements of the applicable accounting standards and whether
the valuation methodology is the most appropriate in the
circumstances under the International Private Equity and Venture
Capital Valuation (“IPEV”) Guidelines;
•
we attended the Valuations Committee meeting on 6 June 2024
where we discussed the valuations with management and the
Board and challenged significant judgements made;
•
we recalculated the attributable value based on the rights of the
relevant instruments, which were agreed to investment
agreements; and
•
we received direct confirmation of the capital structure from all of
the investee companies.
For CPORT (Calibrated Price of Recent Transaction) valuations:
•
we agreed the price of the recent investment to supporting
documentation and management information. We considered
whether or not the performance of the portfolio company has
significantly varied from expectations at the transaction date by
obtaining management’s evaluation of post transaction
performance against relevant milestones to determine the
appropriateness of the level of adjustment, if any, made to the
recent transaction price; and
•
we assessed whether the investment was an arm’s length
transaction through reviewing the parties involved in the
transaction and checking whether or not they were already
investors of the investee company or otherwise connected.
For earnings and revenue multiple valuations, as well as valuations that
have been restricted to the value of the liquidation preference:
•
we held discussions with management and reviewed
management accounts/board packs to understand the
performance of the portfolio company, including its cash runway,
and challenged estimates used in the valuations of the
investments;
•
we assessed the reasonableness of the budgeted revenue figures
used considering historical performance and information available
in board packs;
•
we recalculated discounts and premiums and assessed these
against those of comparable companies; and
•
we performed an assessment of the appropriateness of the
basket of comparable companies through consideration of those
companies’ operations and business sectors.
Key observations:
Based on the procedures performed we consider the unquoted
investment valuations to be appropriate, and the estimates made by
management in valuing the unquoted investments to be reasonable.
Valuation of unquoted investments (Group and Parent Company)
The Group’s accounting policy for assessing the fair value of
investments is disclosed on page 66 in note 19.4 and disclosures
regarding the fair value estimates are given on page 68 in note 19.12.
We consider the valuation of unquoted investments to be the most
significant audit area as there is a high level of estimation uncertainty
involved in determining the unquoted investment valuations.
The share price valuation of the Group is informed by the value of the
investments recognised in the Statement of Financial Position. As the
Portfolio Manager is responsible for valuing investments in the financial
statements, and there is a high level of estimation uncertainty in
determining the valuation of unquoted investments due to the lack of
readily available prices, there is a potential risk of overstatement of the
valuation of the unquoted investments.
Key audit matter How the scope of our audit addressed the key audit matter
72
AUGMENTUM FINTECH PLC
Independent Auditor’s Report to the Members of
Augmentum Fintech plc continued
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality
to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the
basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated
as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Group financial statements Parent company financial statements
2024 2023 2024
2023
£m £m £m
£m
Materiality 6.04 5.77 5.63
5.42
Basis for determining materiality 2024: 2% of net assets (2023: 2% of net assets)
Rationale for the benchmark applied
Performance materiality 4.53 4.03 4.22
3.79
Basis for determining 70% of materiality 70% of materiality 70% of materiality
70% of materiality
performance materiality
Rationale for the percentage applied for
performance materiality
Component materiality
For the purposes of our Group audit opinion, we set materiality for each significant component of the Group, based on our assessment of the risk of
material misstatement of that component. The materiality for the sole subsidiary was set at £79k (2023: £80k) and was based on 2% (2023: 2%) of
its Revenue. We further applied a performance materiality level of 70% (2023: 70%) of the component materiality to our testing to ensure that the risk
of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £241k (2023: £230k). We also agreed
to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
In determining the appropriate benchmark, consideration was given to:
• the nature of the investment portfolio and the level of judgement inherent in the valuation; and
• the range of reasonable alternative valuations.
In determining the appropriate benchmark, consideration was given to:
• our risk assessment;
• consideration of the control environment; and
• the level of historical misstatements identified.
FINANCIAL STATEMENTS
73
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report other than
the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate
Governance Statement relating to the parent company’s compliance with the provisions of the UK Corporate Governance Code specified for
our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement
is materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern and longer-term viability • The Directors’ statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material
uncertainties identified set out on page 24; and
• the Directors’ explanation as to their assessment of the Group’s
prospects, the period this assessment covers and why the period is
appropriate set out on page 23.
Other Code provisions • Directors’ statement on fair, balanced and understandable set out on
page 51;
• Board’s confirmation that it has carried out a robust assessment of
the emerging and principal risks set out on page 19;
• the section of the annual report that describes the review of
effectiveness of risk management and internal control systems set
out on pages 48 and 49; and
• the section describing the work of the audit committee set out on
page 48.
Independent Auditor’s Report to the Members of
Augmentum Fintech plc continued
74
AUGMENTUM FINTECH PLC
Independent Auditor’s Report to the Members of
Augmentum Fintech plc continued
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006
and ISAs (UK) to report on certain opinions and matters as described below.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report
for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
• the Strategic report and the Directors’ report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and
Parent Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic
report or the Directors’ report.
Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be
audited has been properly prepared in accordance with the Companies
Act 2006.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation
to which the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the Parent Company financial statements and the part of the
Directors’ remuneration report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are
not made; or
• we have not received all the information and explanations we require
for our audit.
FINANCIAL STATEMENTS
75
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
Based on:
l
our understanding of the Group and the industry in which it operates;
l
discussion with management and those charged with governance;
l
obtaining and understanding of the Group’s policies and procedures regarding compliance with laws and regulations; and
l
we considered the significant laws and regulations to be Companies Act 2006, AIC Code of Governance, Section 1158 of Corporation Tax Act
2010, UK-adopted international accounting standards, London Stock Exchange and Financial Conduct Authority Listing requirements and the
Alternative Investment Fund Managers Directive.
The Group is also subject to laws and regulations where the consequence of non-compliance could have a material effect on the amount or
disclosures in the financial statements, for example through the imposition of fines or litigations. We identified such laws and regulations to be the
Anti - Money Laundering Act 2018, Data Protection Act 1988 and Bribery Act 2010.
Our procedures in respect of the above included:
l
review of minutes of meetings of those charged with governance for any instances of non-compliance with laws and regulations;
l
review of correspondence with regulatory and tax authorities for any instances of non-compliance with laws and regulations;
l
review of financial statement disclosures and agreeing to supporting documentation;
l
enquiries of management, the Directors, and the Audit Committee, as to whether they were aware of any non-compliance with laws and
regulations;
l
obtaining an understanding of the control environment in monitoring compliance with laws and regulations; and
l
review of the complaints and breaches register for any instances of non-compliance with laws and regulations.
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk assessment procedures included:
l
enquiry with management and those charged with governance including the Directors, and the Audit Committee regarding any known or
suspected instances of fraud;
l
obtaining an understanding of the Group’s policies and procedures relating to:
l
detecting and responding to the risks of fraud; and
l
internal controls established to mitigate risks related to fraud.
l
review of minutes of meetings of those charged with governance for any known or suspected instances of fraud;
l
discussion amongst the engagement team as to how and where fraud might occur in the financial statements; and
l
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due
to fraud.
Based on our risk assessment, we considered the areas most susceptible to fraud to be management override of controls and valuation of
unquoted investments.
Independent Auditor’s Report to the Members of
Augmentum Fintech plc continued
76
AUGMENTUM FINTECH PLC
Independent Auditor’s Report to the Members of
Augmentum Fintech plc continued
Our procedures in respect of the above included:
l
assessing post year end journals that were passed to prepare the financial statements to consider their appropriateness for the Company and
the significant component where applicable;
l
performing test of journals to evaluate unusual or inappropriate journals outside of our expectations that were set using various criteria where
relevant;
l
assessing significant transactions outside the normal course of business (if any);
l
evaluation of the consolidation, with focus on manual or late journals posted at consolidated level; and
l
the procedures set out in the Key Audit Matter section of this report.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to
have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and
the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Peter Smith (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
24 June 2024
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
FURTHER INFORMATION
77
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Information for Shareholders
How to Invest
Retail Investors Advised by IFAs
The Company currently conducts its affairs so that its shares can be
recommended by Independent Financial Advisers (IFAs) in the UK to
ordinary retail investors in accordance with the Financial Conduct
Authority (FCA) rules in relation to non-mainstream investment products
and intends to continue to do so. The shares are excluded from the
FCA’s restrictions which apply to non-mainstream investment products
because they are shares in an investment trust.
Investment Platforms
The Company’s shares are traded openly on the London Stock
Exchange and can be purchased through a stock broker or other
financial intermediary. The shares are available through savings plans
(including Investment Dealing Accounts, ISAs, Junior ISAs and SIPPs)
which facilitate both regular monthly investments and lump sum
investments in the Company’s shares. There are a number of
investment platforms that offer these facilities. A list of some of them,
that is not comprehensive and does not constitute any form of
recommendation, can be found below:
AJ Bell Youinvest www.youinvest.co.uk
Charles Stanley Direct www.charles-stanley-direct.co.uk
EQi www.eqi.co.uk
Halifax Investing www.halifax.co.uk/investing
Hargreaves Lansdown www.hl.co.uk
iDealing www.idealing.com
interactive investor www.ii.co.uk
Redmayne Bentley www.redmayne.co.uk
Share Deal Active www.sharedealactive.co.uk
Shareview www.shareview.co.uk
X-O www.x-o.co.uk
Financial Calendar
Date Event
31 March Financial Year End
June/July Financial Results Announced
September Annual General Meeting
30 September Half Year End
November/December Half Year Results Announced
Website
For further information on share prices, regulatory news and other
information, please visit www.augmentum.vc.
Shareholder Enquiries
In the event of queries regarding your shareholding, please contact the
Company’s registrar, Computershare Investor Services PLC, who will be
able to assist you with:
l
Registered holdings
l
Balance queries
l
Lost certificates
l
Change of address notifications
Computershare’s contact details are provided on page 80.
Risk Warnings
l
Past performance is no guarantee of future performance.
l
The value of your investment and any income from it may go down
as well as up and you may not get back the amount invested. This
is because the share price is determined, in part, by the changing
conditions in the relevant stock markets in which the Company
invests and by the supply and demand for the Company’s shares.
l
As the shares in an investment trust are traded on a stock market,
the share price will fluctuate in accordance with supply and
demand and may not reflect the underlying net asset value of the
shares; where the share price is less than the underlying value of
the assets, the difference is known as the ‘discount’. For these
reasons, investors may not get back the original amount invested.
l
Although the Company’s financial statements are denominated in
sterling, some of the holdings in the portfolio are currently
denominated in currencies other than sterling and therefore they
may be affected by movements in exchange rates. As a result, the
value of your investment may rise or fall with movements in
exchange rates.
l
Investors should note that tax rates and reliefs may change at any
time in the future.
78
AUGMENTUM FINTECH PLC
Glossary and Alternative Performance Measures
Within the Strategic Report and Business Review, certain financial
measures common to investment trusts are shown. Where relevant,
these are prepared in accordance with guidance from the AIC, and this
glossary provides additional information in relation to them.
Alternative Investment Fund Managers Regulations ("UK AIFMD")
Agreed by the European Parliament and the Council of the EU and
transposed into UK legislation, the UK AIFMD classifies certain
investment vehicles, including investment companies, as Alternative
Investment Funds (“AIFs”) and requires them to appoint an Alternative
Investment Fund Manager (“AIFM”) and depositary to manage and
oversee the operations of the investment vehicle. The Board of the
Company retains responsibility for strategy, operations and compliance
and the Directors retain a fiduciary duty to shareholders.
Average net assets
The average net assets figure is the average of the net assets of the
Group after performance fee calculated on a time weighted basis and
adjusted for share buybacks and issuance.
Downside Protection
Downside protection is an investment technique that is employed to
mitigate against or prevent a decrease in the value of an investment. In
relation to venture capital investing the key methods of achieving this are
through liquidation preferences over other investors, and/or anti-dilution
provisions, which allow an investor to maintain their ownership
percentage in the event that new shares are issued.
Discount or Premium
A description of the difference between the share price and the net asset
value per share. The size of the discount or premium is calculated by
subtracting the share price from the net asset value per share and is
usually expressed as a percentage (%) of the net asset value per share. If
the share price is higher than the net asset value per share the result is a
premium. If the share price is lower than the net asset value per share, the
shares are trading at a discount.
Initial Public Offering (“IPO”)
An IPO is a type of public offering in which shares of a company are
sold to institutional investors and usually also retail (individual) investors.
Through this process, colloquially known as floating, or going public, a
privately held company is transformed into a public company.
Internal Rate of Return (“IRR”)
IRR is the annualised return on an investment calculated from the cash
flows arising from that investment taking account of the timing of each
cash flow. It is derived by computing the discount rate at which the
present value of all subsequent cash flows arising from an investment
are equal to the original amount invested.
Leverage
For the purposes of the UK AIFMD, leverage is any method which
increases the Company’s exposure, including the borrowing of cash
and the use of derivatives. It is expressed as a ratio between the
Company’s exposure and its net asset value and can be calculated
using gross and a commitment methods.
Under the gross method, exposure represents the sum of the
Company’s positions after the deduction of sterling cash balances,
without taking into account any hedging and netting arrangements.
Under the commitment method, exposure is calculated without the
deduction of sterling cash balances and after certain hedging and
netting positions (as detailed in the UK AIFMD) are offset against
each other.
Net Asset Value (“NAV”)
The value of the Company’s assets, principally investments made in
other companies and cash being held, minus any liabilities. The NAV is
also described as ‘shareholders’ funds’. The NAV is often expressed in
pence per share after being divided by the number of shares in issue,
excluding treasury shares. The NAV per share is unlikely to be the same
as the share price, which is the price at which the Company’s shares
can be bought or sold by an investor. The share price is determined by
the relationship between the demand and supply of the shares.
Net Asset Value ("NAV") per share after performance fee*
The NAV of the Group as calculated above less the performance fee
provision made by the Company divided by the number of shares in
issued (excluding treasury shares).
NAV per share Total Return after performance fee*
The theoretical total return on the NAV per share after performance fee,
reflecting the change in NAV after performance fee during the period
assuming that any dividends paid to shareholders were reinvested at
NAV after performance fee at the time the shares were quoted ex-
dividend. This is a way of measuring investment management
performance of investment trusts which is not affected by movements
in the share price discount/premium.
2024 2023
pence pence
per share per share
Opening NAV after performance fee 158.9 155.2
Earnings per share 8.1 2.7
Performance fee impact (1.3) (0.8)
Impact of buybacks and issuance 1.7 1.8
Closing NAV after performance fee 167.4 158.9
NAV after performance fee Total Return 5.4% 2.4%
Ongoing Charges Ratio (“OCR”)*
As an investment trust with an operating subsidiary, the calculation of
the Company’s OCR requires adjustments to the total operating
expenses.
Year ended Year ended
31 March 31 March
2024 2023
£’000 £’000
Operating expenses 5,481 5,377
Less: capital costs (49) (107)
Recurring operating expenses 5,432 5,270
Average net assets 272,143 275,575
Ongoing charges ratio 2.0% 1.9%
* Alternative Performance Measure.
FURTHER INFORMATION
79
ANNUAL REPORT AND FINANCIAL STATEMENTS 2024
Partnership
Augmentum I LP, a limited partnership registered in Jersey and a
wholly-owned subsidiary of the Company.
Regtech
Computer programs and other technology used to help banking and
financial companies comply with their regulatory obligations.
Total Shareholder Return*
The theoretical total return per share reflecting the change in share
price during the period and assuming that any dividends paid were
reinvested at the share price at the time the shares were quoted
ex-dividend. Augmentum Fintech plc has not paid any dividends so the
Total Shareholder Return equates to the change in the share price.
Unquoted investment
Investments in unquoted securities such as shares and debentures
which are not quoted or traded on a stock market.
Glossary and Alternative Performance Measures continued
80
AUGMENTUM FINTECH PLC
Contact Details
Directors
Neil England (Chairman of the Board and Nominations Committee)
Karen Brade (Chair of the Audit Committee)
David Haysey (Chairman of the Management & Remuneration
Committee and Valuations Committee)
Conny Dorrestijn
Sir William Russell
Registered Office
Augmentum Fintech plc
25 Southampton Buildings
London WC2A 1AL
United Kingdom
Incorporated in England and Wales with company no. 11118262 and
registered as an investment company under Section 833 of the
Companies Act 2006
AIFM, Company Secretary and Administrator
Frostrow Capital LLP
25 Southampton Buildings
London WC2A 1AL
United Kingdom
Telephone: 0203 008 4910
Email: info@frostrow.com
Portfolio Manager
Augmentum Fintech Management Limited
4 Chiswell Street
London EC1Y 4UP
United Kingdom
Joint Corporate Brokers
Peel Hunt LLP
100 Liverpool Street
London EC2M 2AT
United K ingdom
Singer Capital Markets Advisory LLP
1 Bartholomew Lane
London EC2N 2AX
United Kingdom
Depositary
IQ EQ Depositary Company (UK) Limited
4th Floor
3 More London Riverside
London SE1 2AQ
United Kingdom
Legal Adviser to the Company
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
United Kingdom
Independent Auditor
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
Registrars
Computershare Investor Services PLC, the Pavilions, Bridgwater Road,
Bristol BS99 6ZZ, United Kingdom.
Email: WebCorres@computershare.co.uk
Telephone: +44 (0)370 707 1469
Website: www.investorcentre.co.uk
Identification codes
SEDOL: BG12XV8
ISIN: GB00BG12XV81
BLOOMBERG: AUGM LN
EPIC: AUGM
Legal Entity Identifier:
213800OTQ44T555I8S71
Foreign Account Tax Compliance Act (“FATCA”)
IRS Registration Number (GIIN): 755CKI.99999.SL.826
A member of the Association of
Investment Companies
This report is printed on Revive 100% White Silk, a totally recycled paper
produced using 100% recycled waste at a mill that has been awarded the
ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
This report has been produced using vegetable based inks.
To view the report online visit: www.augmentum.vc