Final Results
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Molten Ventures Plc (GROW; GRW)
Molten Ventures Plc ("Molten Ventures", “Molten”, “the Group” or the "Company")
FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2023 Molten Ventures (LSE: GROW, Euronext Dublin: GRW), a leading venture capital firm investing in and developing disruptive, high-growth technology companies, today announces its final results for the year ended 31 March 2023.
Financial highlights
The above figures contain alternative performance measures (“APMs”) - see Note 33 for reconciliation of APMs to IFRS measures.
Highlights
ESG highlights
Post period-end highlights
Martin Davis, Chief Executive Officer of Molten Ventures, commented:
“After a difficult twelve months for the technology industry, we are cautiously optimistic for the year ahead as markets stabilise and, in places, recover. In the year, we’ve continued to make strategic progress by increasing our funding flexibility and leveraging third party assets so we are well positioned to continue to invest in high-growth, disruptive technology companies. While market turbulence may persist, we believe that our seasoned team, active approach to portfolio management and long term, thesis-led approach to investing will be able to deliver for both shareholders and for the European entrepreneurs inventing our future”.
A live webcast presentation including Q&A will be held today at 9.00am for analysts and will be available on https://brrmedia.news/GROW_FY23. Conference call details for the Q&A are available upon request. A further presentation will be held at 10.30am tomorrow, 16 June 2023, via Investor Meet Company at https://www.investormeetcompany.com which is open to all existing and potential shareholders. Questions can be submitted on the platform.
Enquiries:
About Molten Ventures Molten Ventures is a leading venture capital firm in Europe, developing and investing in disruptive, high growth technology companies. We inject visionary companies with energy to help them to transform and grow. This energy comes in many forms - capital, of course, but also knowledge, experience, and relationships. We believe it is our role to support the entrepreneurs who will invent the future, and that future is being built, today, in Europe. As at 31 March 2023, Molten Ventures had a diverse portfolio with shareholdings in 70 companies, 17 of which represent our Core holdings and account for 62% of the Gross Portfolio Value. Our Core companies include Thought Machine, Coachhub, Graphcore, Aiven, Ledger and Aircall. We invest across four sectors: Enterprise Technology, Hardware and Deeptech, Consumer Technology, and Digital Health and Wellness, with highly experienced partners constantly looking for new opportunities in each. We look for high-growth companies operating in new markets, with high potential for global expansion, strong IP, powerful technology, and strong management teams to deliver success. We also look for businesses with the potential to generate strong margins to ensure rapid, sustainable growth in substantial addressable markets. Molten Ventures provides a unique opportunity for public market investors to access these fast-growing tech businesses, without having to commit to long term investments with limited liquidity. Since our IPO in June 2016, we have deployed over £1bn capital into fast growing tech companies and have realised over £480m to 31 March 2023. For more information, go to https://www.moltenventures.com/ Chair’s introduction The year under review has been the most volatile period for the technology industry since the Global Financial Crisis, if not the dot com crash more than two decades ago. While this environment will not be without precedent for the most experienced in our Investment Team, its impact has led to the first decline in Gross Portfolio Value since our IPO seven years ago. Nonetheless, it is a matter of consensus that technological innovation is continuing to transform our lives. The underlying performance of technology businesses continues to be very strong, and the response to the fall of Silicon Valley Bank (SVB) in the US and UK is an encouraging sign that tech is a genuine government policy priority globally. In the UK, the Chancellor’s announcement in the Spring Budget that the government will look to unlock defined contribution pension fund investment into the nation’s most innovative firms is further evidence of this. This ambition is not confined to the UK. The European Union’s recent Climate Bill emphasises the role of new technologies in achieving its net zero ambitions for the continent, while President Macron has set France the goal of a hundred unicorns by 2030 in recognition of the contribution of the technology sector to economic growth, and societal progress more widely. We are glad to see this increased belief in our industry, which reinforces Molten’s long-held view that the UK and Europe continues to be a phenomenal place to build and grow technology businesses. It is also in part recognition that technological innovation continues despite the macroeconomic environment, and that many of the most generation‑defining companies, from Ford to Google, were developed in a downturn. Listing what was then Draper Esprit was a radical and unconventional step for a venture capital business. Despite the challenging market conditions, we continue to believe that publicly listed venture capital is a powerful force for both supporting entrepreneurs in achieving their extraordinary potential, and in providing a wide range of individuals and institutions who seek to invest for the long term with access to high‑growth, privately owned technology companies. In January 2023, we announced that Karen Slatford had stepped down as Chair of the Board. Karen played a critical role in developing the business and since her appointment as Chair of the Board in June 2016 made an immeasurable contribution to the strategic direction of our business, including our move to the London Stock Exchange’s Main Market in 2021 and subsequent rebrand to Molten Ventures. Karen personified Molten’s purpose in bringing brainpower, passion, and energy to solving problems and transforming the way the world works. I’d like to thank Karen again for her years of service to our business and wish her the very best. Karen will be a hard act to follow, and the Board has commenced a rigorous process to identify the next Chair of Molten. Richard Pelly, another Board member who has served since before the IPO, intends to retire from the Board in accordance with our agreed succession plan, following the upcoming Annual General Meeting on 26 July 2023. We are grateful for Richard’s service as a Non-Executive Director, and more recently his work as the designated Director for engagement with the workforce. A summary of the process for succession and activities completed in our succession planning thus far is included in the Nomination Committee report and we anticipate announcing the appointment of new Directors and any changes to roles and responsibilities no later than the release of our interim results. As we have set out previously, Molten is proud to be playing a part in society’s increasingly important mission to achieve a sustainable future. This push from Molten is two-fold, both through our consideration of ESG in investment decision-making and our excitement about Climate Tech investment opportunities. We also continue to develop our reporting and remuneration structure in line with ESG initiatives. Since last year’s AGM, we have written to Shareholders to outline our proposed revised approach to Executive remuneration. In light of the feedback received and, to align with best practice guidance, we are proposing to make changes to how our Directors’ Remuneration Policy is implemented for FY24 as detailed in the Remuneration Report. The Board would like to thank Shareholders who took part in this process.
Grahame Cook Interim Chair
CEO’s statement Overview While economic uncertainties persist, we are beginning to see signs of stabilisation. Molten Ventures is well positioned to manage through the downturn and to respond to any recovery, while capitalising on opportunities in the market that enable us to deliver value for Shareholders. The past year has delivered a significant shift in the investment environment, particularly in the high-growth technology markets, as interest rates were increased to combat global inflationary pressures. This challenging market backdrop has led to a reduction in the value of our portfolio, and our focus for this year has been centred on the active management of our investments while adapting our business to respond positively in the face of market pressures. We reacted quickly to reflect the valuation movements in the first half of the year (as published in our interim results in November 2022) and were encouraged by these second half results which demonstrate greater stability. We are beginning to see initial signs that the turbulence is levelling out and are pleased with the resilience shown by Molten throughout the period, which can be attributed to our consistent approach to valuations and the diversity of our portfolio. It has been a productive year for Molten, and the underlying business performance and revenue growth of our portfolio companies has remained strong despite macroeconomic headwinds and volatility. We have continued to move the business forward with progress on third-party asset strategies and have worked with our portfolio companies to add value through the expertise and experience of our people. This approach is in line with our ambition of making Molten the investor of choice for UK and European founders who are looking for ways to invent the future. Our active management approach has seen us work closely with our portfolio companies during the period with a particular focus on maximising cash runways, controlling costs and retaining talent. We have maintained discipline around our own investment process, reducing the amount invested in the year and focusing on our own capital resources. We have continued to build third-party assets and grow fee income (£23 million during the year) which will further offset our cost base, benefiting our Shareholders by reducing the cost of the investment return we make. I expect this to become an increasing proportion of our overall deployment, enabling us to provide access to high growth private assets for a range of co-investors. We already manage c. £400 million of assets via our EIS and VCT strategies which we anticipate will continue to grow, while at the same time continuing to syndicate our Fund of Funds programme, which provides strong returns, deal flow and insights; delivering access to the next generation of disruptive technology companies from across the UK and Europe. The steps we have taken to grow and mature our platform and model in FY23 have left us in a strong position, as we move forward to identify and capture investment opportunities to transition into the next stage of the cycle. As ever, we expect the approach of Molten’s experienced Investment Team will continue to be an attractive proposition to founders. Disciplined capital deployment With equity markets depressed and rising debt costs, IPO and M&A volumes were significantly lower during FY23, delaying exits across the whole VC industry. We have reduced our highly liquid listed holdings which, alongside the emphasis on cash preservation in the second half, acted to strengthen our balance sheet position. I am pleased that we have been able to generate more capital from realisations than we have deployed in the second half of the year. Capital deployed during the year was £138 million (compared to £311 million in FY22). This was heavily weighted towards the first half of the year when £112 million was deployed, reflecting several commitments and follow-ons from deals from the prior year reaching completion as well as drawdowns from our Fund of Funds programme. The significant reduction in deployment (when compared to FY22) reflects a focus on cash preservation and balance sheet management. Quality of investment opportunities remained a consistent focal point and we continued to invest capital wisely while remaining disciplined around the quality and number of deals. Our portfolio remains focused across technology and within that, we are particularly excited by emerging subsectors such as Climate Tech and Artificial Intelligence (AI). In the year, we participated in new deals and follow-on rounds in sub sectors which we feel are poised for strong growth; including Vaultree and Worldr (cyber), Aktiia and Clue (digital health), and BeZero and Altruisitiq (climate). Realisations & exits Realisations for the period were £48 million (compared to £126 million in FY22), against a backdrop of continued weak trade sales, a slowdown in M&A, and the IPO market being effectively closed for business. Historically, most of our realisations have been through trade sales, with £487 million delivered back to the balance sheet since our 2016 IPO. The cash realisations in the year were driven by the partial sell-down of our holding in Trustpilot and a full sell-down of our holdings in UiPath and Minit (both via Earlybird), and the sale of portfolio company Roomex to Fleetcor Technologies. Realisations are an important part of our business, and the recycling of capital allows us to reinvest further in the portfolio as part of our evergreen strategy. We are proud of our record of exiting many assets at or above carrying value on our balance sheet and whilst we believe that there will be greater opportunities for realisations once market conditions recover, we continue to actively evaluate potential secondary opportunities. Broader market environment While macroeconomic headwinds continue to drive uncertainty in the European venture capital industry, we note that public markets are beginning to show initial signs of stabilisation (from the selloffs in 2022) and believe that private sector valuations are likely to follow. However, as I said at our Investor Day in February, the macroeconomic environment as characterised by a decade of low interest rates is unlikely to return soon. In today’s world, investors typically show more caution; focusing on how companies manage costs, lengthen cash runways, or offer routes to profitability in a tough financing market. Importantly, what remains is the underlying commercial traction of our portfolio companies and their ability to navigate a shifting market environment. Technological innovation underpins growth and efficiency in so many industries, and in some instances, innovation will completely transform them. In the face of this progress, we believe that Europe has an ever-increasing role to play in the responsible advancement of AI – a fact that is apparent when you look at the developments that are occurring within our own portfolio companies. And finally, we were pleased to see the continued support for growing technology companies in Europe, following the collapse of Silicon Valley Bank (SVB) at the end of the financial year, an event which caused us some disruption due to SVB’s prominence in the venture capital community and its sizeable presence in Europe. Its fall was primarily due to risk management issues within its banking operations, rather than bearing any reflection on the bank’s technology clients or credit. We were impressed to see such expedient action taken by the global banking community and governments as they addressed the fallout; with HSBC acquiring SVB’s UK operation and First Citizens’ acquisition of its US business. These quick and focused actions were a barometer of the importance now placed on high-growth technology in a drive for innovation and productivity across our respective economies. Purpose Our purpose, to advance society through technological innovation, was developed during the financial year in an exercise that involved all employees. We bring capital, brainpower, passion, and energy to solve problems, and we identify and equip the best innovators with the tools they need to transform the way the world works. We strongly believe that the best way to gain exposure to the significant returns available from venture capital as an asset class is by investing in a diversified portfolio that triages risk across the various stages and technology sub-sectors, supported by an astute Investment Team who possess experience across the whole cycle. Molten Ventures provides this access from a competitive cost base, combined with liquidity arising from its dual listing. Sustainability Our focus on ESG within the business through both our ESG-focused investment criteria and our push into Climate Tech remains as important as ever. Climate Tech continues to excite us, and we expect to be active investors in this fast-growing category. To date, we have invested in Altruistiq, BeZero and Satellite Vu, with more deals in the pipeline. We have further developed reporting in line with the Task Force on Climate-Related Financial Disclosures (“TCFD”) recommendations on a voluntary basis, which is designed to help companies provide better information to support informed capital allocation. We also made our first Climate Disclosure Project (“CDP”) submissions, and distributed tools and resources to assist portfolio companies in developing their own ESG strategies. People Our people remain the most important part of our business and we have continued to build our expertise in the areas where we see the greatest potential for the Group. For example, our offering in Central and Eastern Europe has been strengthened significantly this year by the recruitment of two new investors, one of which formerly headed up the EBRD Venture Capital Investment Programme. We continue to grow our Investment Team in the belief that experienced investors, with diverse perspectives and views, will bolster our ability to identify and support the businesses that will invent the future. Outlook We are cautiously optimistic for the year ahead as the technology markets continue to stabilise and recover in places. Even as economic headwinds persist, we will continue to deliver through our scalable and adaptable model, active approach to portfolio management and thesis-led investment approach. Further progress in building third-party assets and income is expected and this includes investments via our EIS and VCT, our Fund of Funds programme and other third‑party strategies. Further opportunities to leverage our model and grow third party assets are also anticipated given the increased political focus on attracting long-term capital into the venture ecosystem. In the medium term, we continue to see Climate Tech, AI and the emerging tech ecosystems in Central and Eastern Europe, as areas with great potential for the Group. The Board will continue to prioritise the preservation of plc capital and to work closely with our portfolio to understand their growth prospects and future liquidity requirements. We believe the cash requirement of the portfolio over the next reporting period will be in the region of £20 million and are continually monitoring how to best fund future investments, including by issuing further debt or similar securities. We are also still seeing interesting opportunities in the market and with continued effort in generating realisations we believe we will be able to generate sufficient proceeds for deployment which, with the support of third-party funds, will enable us to take advantage of these opportunities. Post period end, we agreed a secondary sale for 10% of our Earlybird Fund VI investment, realising €14 million (£13 million). The last word, as always, must go to the phenomenally gifted founders and entrepreneurs whose intelligence and foresight, aligned with cutting-edge technology, continue to disrupt markets, and create new ones. Our job in the next reporting period will be to continue to find and support these enterprises as they continue to re-invent the future.
Martin Davis Chief Executive Officer
Market overview Market environment 2022 presented new challenges to financial markets with shifting valuations, broader public market sell-offs and a global shift in monetary policy. The Venture Capital (VC) market, similar to other asset classes, has seen a significant impact as a result; however, VC has the proven outperformance over the long term and throughout the economic cycle. Over the past 12 months, central banks have focused on curbing inflation, with the Federal Open Markets Committee (FOMC) rate increasing tenfold to 5% in April 2023, and similar stances taken by the European Central Bank (ECB); and the Bank of England (BOE) with the base rate currently sitting at 4.5%. This increased cost of capital has led to a significant valuation impact on the technology sector, specifically in high-growth unprofitable businesses which have traditionally looked to the VC market for expansion capital. The rationalisation of valuations was most immediately evident in the public markets, with the NASDAQ down 33% over 2022, technology and IT-related indices such as the Thompson Reuters Venture Capital Index (TRVCI) is also down 55% in the same period. In this environment, VC managers have adopted a greater level of caution, which is more pronounced in larger financing rounds and the later stages of investment. Molten Venture’s response has been to focus on capital preservation, supporting the existing portfolio and continuing to deploy into top tier assets. Since 2022 however, tech markets have begun to recover – with the NASDAQ up 17% in the first quarter of 2023 and the TRVCI up 12%. This is largely due to the change in both inflation and interest-rate expectations, which are no longer anchored in the 2022 market. VC as an asset class is a long-term endeavour and Molten – similar to other VC managers – continues to support emerging innovation and the broader VC market. A significant moment over the past 12 months on a global scale has been the abrupt collapse of Silicon Valley Bank (SVB) and its subsequent acquisition by First Citizens in the US and HSBC in the UK. The collapse of SVB brings two interesting developments to light, which were not present at the time of the Global Financial Crisis – one negative and the other positive. Firstly, SVB experienced the fastest bank run in history, which was powered by the very technology they have been investing in and servicing for decades, leaving the financial community stunned. Secondly, on a more positive note, was the speed and efficiency with which governments, regulators and major financial institutions reacted to the situation – protecting depositors, clients and global businesses. It is important to highlight that the problems faced by SVB were not created by their products or their customer base. The acquisition of SVB by HSBC in the UK may be seen as a marker in the institutionalisation of VC as an asset class, most recently followed by Blackrock’s acquisition of Kreos Capital (Europe’s largest Venture Debt provider). In the VC market deals continue to be funded and Limited Partners continue to back VC fund managers. 2022 saw c.$110 billion invested in European VC and growth-stage companies, representing a 16% contraction from the peak market in 2021. Despite the market contraction, Europe remains the fastest growing VC region ahead of the US and Asia. Versus 2021, the 2022 VC and Growth market in the US declined by 29%, and in Asia by 41%. Similarly, the compounded annual growth rate in Europe since 2015 is 26% per year, more than 10% above its US counterpart and 16% above Asia. The first quarter in 2022 saw $38.2 billion invested, the most active quarter on record. At this point the market was fuelled by local innovation, increasing European success stories and international capital flows into Europe. Much of the activity which followed came from existing investors supporting their portfolio companies as the market began to turn and non-traditional investors, such as corporate VC and LP investors, who expanded their reach to invest in European VC deals directly, began to retract from the market. Non-traditional investors have historically favoured larger round sizes and growth-stage opportunities, meaning their impact on the VC market is becoming more profound. Participation in large funding rounds had become more common, and in the longer-term this phenomenon is likely to persist however in the shorter term– as valuations have come down – some participants have subsequently exited the market, and this departure of “tourist capital” presents opportunities for experienced and stable VC investors. When digging deeper into the deal volumes, the most affected investment stages over 2022 were the early seed rounds (less than $2 million) and later-stage expansion (>$50 million), which have both seen consistent quarterly declines in deal count across the year. The late seed, Series A and B rounds however showed similar levels of activity when compared to 2021 showing more resilience at the earlier-mid stages. At Molten, this has always been our target investment stage, as the risk profile of these companies has matured beyond the early stages, and our expertise as an active manager is well placed to support them as they transition to the growth and later stages. In addition to VC managers adjusting to the market, so too have portfolio companies. Leading from the front, some tech giants have announced large-scale employee reductions to match the current environment, and so too have VC stage companies. Across 2022 and into 2023, VC companies have adopted less aggressive growth plans and adjusted their hiring to reflect this; they have also pivoted towards pursuing more efficient revenue growth and paths to profitability. We believe this fundamental shift in approach – from both the VC manager and portfolio companies – will foster a stronger and more resilient VC market in the future. Looking ahead Looking to 2023, the deployment of capital has slowed down as investors have become more cautious. The larger financing events for the very large European private VC businesses have now become rare. The chart below shows capital deployment in European VC on a quarterly basis, which has been on a downward trajectory since early 2022 with Q1 2023 representing 33% of the peak deployment in Q1 2022. The analysis shows that smaller rounds, categorised largely by Series A and B, have been more insulated to the broader market adjustment when compared to larger rounds in excess of $250 million, which have been shrinking quarter-over-quarter. Molten invests in this stage of the market (predominantly Series A and B), and over the remainder of 2023 (and into 2024) it expects to continue deploying in a favourable valuation environment with high-quality management teams who will adopt the same approach to efficient revenue growth. 2023 VC investment volumes are expected to contract from 2022 levels however the longer-term trajectory of the market continues to increase, and the overall VC market globally has become more resilient and robust as it has matured and expanded. As some investors have retracted from a declining market across 2022, a greater opportunity has emerged for Molten as an experienced and long-term patient investor in today’s financing environment.
Our strategy
KPIs
Financial review
Valuation decreases have been reflected through the portfolio this year despite the continued revenue growth in the underlying portfolio companies. This is because the valuation multiples for technology investments reduced significantly in the first half of the year. Reductions to valuations in the portfolio that were taken in the first half of the year aligned the value of the portfolio to this revised market environment of lower valuation multiples. In the second half we have seen some improvements in comparable peer group multiples for technology businesses which has led to a more nuanced picture across the portfolio of increased valuations being offset by some specific provisions in the Core. Cash runway and liquidity remains key and we are pleased by the resilience demonstrated by the portfolio companies to raise capital at supportive valuations and to adapt their growth models to preserve capital.
As at 31 March 2023, net assets of £1,194 million were recognised, which is a decrease of £240 million on the prior year. This decrease is mainly driven by the movement of our Net Portfolio Value, which is recognised at fair value through profit or loss (“FVTPL”) in the consolidated statement of financial position.
Our portfolio has been impacted by macroeconomic factors, despite being well diversified across sectors and stages of their life cycle. The majority of reductions were taken in the first half of the year and in the second half there has been a net fair value decrease of £29 million, compared to the full year decrease of £293 million.
As we continue to build out a broader platform to incorporate third party assets alongside the balance sheet funds, we have seen the benefit of increases in income. We have generated fee income during the year of £23 million, including £22 million of management fees (a 21% increase on prior year’s fees) which serves to offset our cost base such that our costs (net of income) are close to parity, and substantially less than the stated target of less than 1% of NAV. Limited cost drag on investment returns is perhaps an under-appreciated facet of the Molten Ventures model but has continued to be an area of focus for management over several years.
Statement of financial position Portfolio The Gross Portfolio Value at 31 March 2023 is £1,371 million (£1,532 million at 31 March 2022). The Gross Portfolio Value is an APM (see Note 33) and a reconciliation from gross to net portfolio value, which is recognised on the consolidated statement of financial position, is shown below. Investments of £138 million were made during the year, cash proceeds from exits, escrows and sales of shares were received of £48 million (£46 million net of carry payments). In order to preserve our balance sheet capital, the amount of investments have been reduced and as such realisations in the second half of the year exceeded capital deployed. The gross fair value movement on the portfolio was £251 million, of which £42 million resulted from foreign exchange tailwinds and a decrease of £293 million from fair value movements. Further details on the Group’s valuation policy and valuation basis as at 31 March 2023 can be found in Notes 5, 28 and 29 to the consolidated financial statements. The fair value decrease in the year reflects the sentiment throughout the market. The decrease in the valuation of public companies has impacted our private portfolio. However, of the 19% net fair value decrease* in the year, only 2% of this decrease was in the second half of the financial year. The 2% movement in the second half of the financial year was predominantly represented by the fair value movement of two Core companies. Decreases in fair value have largely been through the recalibration of the technology sector in public markets, impacting the private portfolio holding valuations. The Gross Portfolio Value is subject to adjustments for the fair value of accrued carry liabilities and Irish deferred tax to generate the Net Portfolio Value of £1,277 million. Both carried interest liabilities and Irish deferred tax arise at the level of our investment vehicles and are taken into account when arriving at the fair value of these vehicles to be recognised in the consolidated statement of financial position. The fair value movement on investments of £240 million is reflected in the consolidated statement of comprehensive income. Carry balances of £94.0 million are accrued to previous and current employees of the Group based on the current fair value at the year-end and deducted from the Gross Portfolio Value. Carry payments totalling £2 million were made in the year following the realisations of assets in the underlying fund holdings that exceeded threshold returns. In addition, non-investment movements to entities held at FVTPL were made of £14 million, including for settlement of Priority Profit Share (“PPS”). The Gross Portfolio Value table below reconciles the Gross to Net Portfolio Values and the movements between 31 March 2022 to 31 March 2023. The percentage of Net Portfolio Value to Gross Portfolio Value is 93% (31 March 2022: 92%), which reflects the decrease in carry balances in line with the movements of the portfolio. Total liquidity Total available cash for the Group at 31 March 2023 was £83 million, including £60 million undrawn on the Company’s revolving credit facility (31 March 2022: £113 million, including £35 million undrawn on the Company’s revolving credit facility). Our EIS and VCT funds also have £48 million of cash available for investment at 31 March 2023. The consolidated cash balance at 31 March 2023 was £23 million (31 March 2022: £78 million, including £2m restricted). During the year we received cash proceeds from portfolio realisations of £48 million. This was offset by investments made during the period of £138 million, as well as carry, management fees, and operating costs. Debt facility During the year, the Group agreed a new £150 million net asset value facility with J.P. Morgan Chase Bank N.A. (“JPM”) and Silicon Valley Bank UK Limited (“SVB”) (the “Debt Facility”). The Debt Facility comprises a £90.0 million term loan and a revolving credit facility (“RCF”) of up to £60 million on three-year tenors, both with one-year extensions up to five years and is secured against various assets and LP interests in the Group. The Debt Facility interest rate is SONIA plus a margin of 5.5% per annum and is underpinned by the value of the investment portfolio. Drawdowns are subject to a maximum loan to value ratio of 10%. The value of the portfolio companies is subject to periodic independent third-party valuation. The Debt Facility is utilised for investment and corporate purposes and was used to repay in full the Company’s existing £65 million facility with SVB and Investec. We have been compliant with all relevant financial covenants (for both the previous facility with SVB and Investec and the current Debt Facility) throughout the duration of the facilities and at period-end. There has been no impact on the Debt Facility following the change of ownership of SVB to HSBC UK Bank plc on 13 March 2023. As at 31 March 2023, the £90 million term loan is fully drawn and the £60 million RCF is undrawn. The drawn amount is recognised in the consolidated interim statement of financial position at 31 March 2023, offset by capitalised fees from the setup of the Debt Facility, which are being amortised over its life. All capitalised amounts relating to the previous facility were recognised in the consolidated statement of profit or loss on extinguishment of the liability (when the previous facility was repaid). Drawdowns and paydowns on the RCF will be driven by portfolio investments and realisations. For further information, please see Note 22(i). Net assets Net assets in the consolidated statement of financial position at 31 March 2023 have decreased by £240 million from 31 March 2022 to £1,194 million, a decrease of 17%. This is mainly the result of the decrease in the investments balance discussed above, decreases in cash and deferred tax recognised in the statement of financial position, and increased loans and borrowing from the new debt facility. Statement of comprehensive income We recognised a loss in the year of £243 million, compared to a £301 million profit in FY22. Income and losses recognised during the year ending 31 March 2023 comprises investment fair value decreases of £240 million (year ending 31 March 2022: £329 million increases), as well as fee income of £23 million (year ended 31 March 2022: £22 million). Fee income is principally comprised of PPS, management fees from the EIS/VCT funds, performance fees and promoter fees. PPS is generated from management fees charged on the underlying plc funds, as invested capital, net of realisations, increases so too does the PPS income. The increase in fee income in the year is a result of an increase in the funds under management, partly attributed to the increase in the third-party funds from the syndication of our Fund of Funds programme. This has resulted in management fees increasing by over 20% in the period, offset by a reduction in performance fees. General and administration costs (“G&A”) of £19 million, compared to the £20 million recognised in the year to 31 March 2022, have decreased due to no performance fees being payable in the period and a more stable cost base being reflected against the prior year where the cost base had grown to expand the investment team and supporting infrastructure. Our operating costs (net of fee income) continue to be substantially less than our target of 1% of NAV and have narrowed as income builds. It is anticipated that further income in fees generated from management of third-party funds will provide a further positive contribution to our cost base and profitability in the future. Finance expenses have increased to £7 million from £1 million in 2022 as a consequence of the increased debt facility. Post period-end As part of our portfolio management and to generate additional liquidity, we have agreed a secondary sale for 10% of our Earlybird Fund VI investment on 28 April 2023, realising €14 million (£13 million).
Ben Wilkinson Chief Financial Officer
*The above figure is an alternative performance measure (“APM”) – see Note 33 for reconciliation of APMs to IFRS measures
Gross Portfolio Value table
* Fully diluted interest categorised as follows: Cat A: 0–5%, Cat B: 6–10%, Cat C: 11–15%, Cat D: 16–25%, Cat E: >25%
Portfolio review
Portfolio valuations The Gross Portfolio Value as at 31 March 2023 is £1,371 million, a decrease of £161 million from the 31 March 2022 value of £1,532 million. This represents a 16% decrease in gross fair value. £251 million is a net decrease, resulting from a £293 million decrease in the gross fair value, offset by £42 million FX. Valuations remain robust due to 97% of the portfolio value holding downside protection thanks to preference rights. Our portfolio valuations process continues to follow the IPEV Guidelines and aligns to the market movements in the period; we have seen significant movements in some of our key assets to reflect public market comparatives movements. We continue to see overall revenue growth in our portfolio companies with forecast weighted average revenue growth in the core of over 65% in the year, reflecting the continued innovation and digital transition continuing across sectors. The Core Portfolio is made up of 17 companies representing 62% of the Gross Portfolio Value. New entrants to the core are Fintech OS, HiveMQ and Schüttflix while Cazoo, Trustpilot, Lyst, Freetrade, Smava, and N26 are not above the threshold for the core in this period. New companies During the period, we invested £61 million into new entrants to the portfolio, including: • HiveMQ – Molten led a €40 million Series A funding round in HiveMQ, provider of the enterprise MQTT messaging platform. HiveMQ’s messaging platform allows companies to capitalise on the industry trend of connecting IoT devices to the cloud. From its roots in the automotive industry in Germany, HiveMQ has grown into other sectors and internationally. • Friday Finance – Molten led a US$20 million Series A funding round in Friday Finance, a finance management platform designed to help businesses save time and money. Friday Finance integrates into the existing systems of customers, connecting to the banks its customers already use, so they do not have to switch from their existing financial solutions. Friday Finance offers the user quick insights into their finances and allows them to consolidate multiple accounts in one place. • &Open – Molten led a US$26 million Series A funding round in &Open, a gifting platform that helps companies to send meaningful gifts at scale. &Open helps brands curate high-quality, design-led, and responsibly sourced gifts for customers around the world. As companies strive to keep employees, customers, and partners engaged amidst competing priorities, a global pandemic, and the proliferation of hybrid and remote work, &Open has experienced a period of exponential growth, increasing Annual Recurring Revenue (ARR) by over 376% and growing new clients by 270% in the last year. • SettleMint – Molten co-led a €16 million Series A funding round for SettleMint, a high-performing low-code platform for building blockchain applications. The company has established itself as the category defining platform for blockchain application development for enterprise and is trusted by leading banks, financial services providers, global retailers, manufacturers and by innovators in the public sector. • Altruistiq – Molten has led a £15 million funding round in Altruistiq, a Climate Tech company whose emissions reduction model is leading the change in corporate carbon measurement. Altruistiq’s platform enables large enterprises with complex supply chains to automate sustainability data measurement, management and exchange. Altruistiq brings unparalleled accuracy in data reporting, breadth of supply chain integration, and the ability to make lasting change that goes deeper than simply a commitment to carbon offsets. • Vaultree – Molten co-led a US$13 million Series A funding round for Vaultree, an end-to-end encryption company who makes it possible to work with fully encrypted data without the need to decrypt the information or surrender security keys. The technology enables searchable, Fully Homomorphic Encryption (FHE) at plaintext speed – a step change in the secure, scalable processing of data. Follow-on We continue to support our existing portfolios as they grow, investing £41 million into follow-ons, including: • Fintech OS – Molten invested £10 million during the period in Fintech OS, providing an open-source solution for banks and the insurance industry. For further information on this company please refer to the Portfolio update. • CoachHub – we participated with a further £4 million investment in a US$80 million Series B extension round in CoachHub. CoachHub is the leading global talent development platform and enables organisations to create a personalised, measurable, and scalable coaching program for the entire workforce, regardless of department and seniority level. CoachHub uses artificial intelligence to match individuals with more than 2,500 certified business and wellbeing coaches in 70 countries across six continents, with coaching sessions available in more than 60 languages. • Clue – we invested £4 million as part of the extension to the Series C round. Clue is a leading brand in FemTech, constantly evolving its application environment recently launching new products for pregnancy and birth control and its period tracking app is now monetised. The company’s vision is to enable women to make good decisions in line with their biology and has resonated globally and the company is considered a leading brand in the FemTech space. • Schüttflix – we participated in the company’s Series A extension with a further £7 million investment. For further information on this company please refer to the Portfolio update. • Finalcad – we invested £3 million in April 2022 in a Series C round. Finalcad is the global leader in digital transformation for construction, infrastructure and energy. Its unique combination of software, change management, and data helps construction stakeholders to change the way they build. Since 2012, Finalcad has delivered more than 20,000 projects across 35 countries, and has secured over $63 million in funding from investors including, Cathay Innovation, Salesforce Ventures, Serena, Aster, and CapHorn Invest. • FocalPoint – we participated with an investment of £3 million in a Series C funding round of £23 million by FocalPoint, following on from the Series B investment made in 2021. FocalPoint’s groundbreaking super correlation software enables a new class of satellite positioning receiver that can measure the directions of the incoming signals, allowing them to ignore reflected signals and fake “spoofed” signals, making them more accurate in cities and more resilient against spoofing attacks. • Agora – we invested £2 million in their latest fundraise. Agora’s vision is to build the largest social commerce platform for beauty in Europe. Users can watch live streams or video reviews from ambassadors testing and reviewing products. During these live shows, users can engage with the streamers via comments and emojis, as well as directly buy the product via the marketplace. • Fluidic Analytics – the Company invested £1 million in a Series C raise with a further £4 million invested via our EIS/VCT funds in the period. Fluidic brings together the best of biophysical and digital technologies to help their customers understand the machinery of life. Their products are based on a fundamentally new technology platform developed at the University of Cambridge. This platform enables the rapid characterization of proteins based on the physical properties that determine their function. And because proteins are characterized in solution and in their natural state — without the need for surfaces, matrices or ionization — this platform gives our customers access to unique quantitative insights into protein behaviour that are not accessible using other approaches. • Aktiia – we invested CHF2 million in a convertible loan note. Aktiia develops blood pressure monitoring wearables, which monitor blood pressure automatically throughout the day. • BeZero Carbon – we participated in the US$50 million Series B funding round. BeZero Carbon is a ratings agency for the voluntary carbon market. Combining expertise across climate science, finance and policy, it provides ratings, risk and data tools that improve information accessibility and decision-making. Its aim is to build markets for environmental impact. • Manna – we invested US$3 million in a convertible loan note. Manna provides drone delivery as a service stack to restaurant chains, dark kitchens, and online food delivery platforms. Manna enables, transforms and grows local businesses of all types by powering a three-minute delivery service across a 30 square mile catchment area for them. Reaching more customers - more quickly and in a more scalable way than road-based delivery. • Freetrade – we invested £1 million in a convertible bridge. Freetrade is a brokerage application that offers mobile based share dealing services. They believe investing should be accessible to everyone Fund of Funds Our seed and early-stage Fund of Funds programme continues to expand, providing access to earlier stage companies, as well as deal flow opportunities for the highest quality companies from within these portfolios. During the financial year, we committed to another 18 funds, bringing our total commitments to 75 funds. Total commitments to new and existing seed funds at 31 March 2023 are £148 million, of which £78 million has been drawn to year-end (£26 million during the year excluding external LPs). It is anticipated the remaining £70 million will be drawn over the next three to five years. Among the new funds within our portfolio are: • Sisu Ventures III (Finland – Gaming) – Sisu Game Ventures is an early-stage venture capital fund focused 100% on games. Established in 2014 to support the most promising founders in the industry. Sisu has deep roots in the Nordic region, but their network of founders is fully global. • Educapital Fund II (France – EdTech) – Educapital is a leading pan-European fund specialized in the future of education and the future of work. Educapital covers all segments of education (Early Childhood, K12, Higher Education, Corporate Training, Lifelong Learning and Future of Work) by investing in companies combining financial performance and social impact/learning outcome. • Contrarian VC Fund I (Lithuania – Climate Tech) – Contrarian Ventures is a hands-on, community-focused, and founders vetted seed-stage sustainable energy transition-focused venture capital firm investing across Europe and Israel. The firm is aiming to be the top investor choice for Climate Tech founders at the seed stage and be the first institutional capital in leading Climate Tech companies. Earlybird During this period, funds managed by Earlybird Digital East and Earlybird Digital West drew down £7 million. This allows us, via our partnership with Earlybird into their Digital East Fund I, Growth Opportunities Fund, and Earlybird West’s Fund VI and VII, to continue to access earlier stage companies in Germany and Europe with the benefit of Earlybird’s expertise.
Realisations Total cash proceeds from realisation and distribution during the year are £48 million. Of the £48 million, we have generated proceeds of £13million during the period from the sale of Trustpilot shares and proceeds of £12 million from the sale of UiPath shares.
Included within the £48 million of realisations in the year is the syndication of part of our Fund of Funds programme. On syndication with a third party, we realised £13 million from the investment vehicle.
Post period-end As part of our portfolio management and to generate additional liquidity, we have agreed a secondary sale for 10% of our Earlybird Fund VI investment on 28 April 2023, realising €14 million (£13 million).
Portfolio review: Core company updates The Molten Ventures Core Portfolio is made up of 17 companies representing 62% of the Gross Portfolio Value. New entrants to the core are Fintech OS, HiveMQ and Schüttflix. The companies not included in the Core in this period are Cazoo, Trustpilot, Freetrade, N26 and Smava. Note – narrative updates based on publicly available information from the Core portfolio companies.
Risk management Risk appetite The nature of our business fundamentally involves accepting risk if we are to achieve our strategic aim of creating and maintaining a pipeline of investment opportunities and supporting our diversified portfolio of businesses to achieve meaningful returns. However, the business will accept risk only where it can be appropriately managed and where it offers sufficient reward. The Board has determined its risk appetite for each of the principal risks described below and considered appropriate ways to monitor performance and mitigate each risk to ensure it remains acceptable. Risk governance Our approach to risk governance is a top-down approach, with a culture of compliance that runs from the Board, through its Committees, the Executive Team, the Compliance Team and to all staff, encouraging a thoughtful and transparent culture towards risk that is grounded in principles of responsible stewardship for our stakeholders. For the Group, the first line of defence comprises management controls and internal control measures administered by all managers and staff, with the second line of risk management overseen by the Compliance Team. The Compliance Team report directly into the CFO on all compliance matters and have direct access to the Chair of the Board and the Chair of the Audit, Risk and Valuations Committee. Both the Audit, Risk and Valuations Committee and the Executive Team regularly consider and review the existing and emerging risks faced by the business to ensure that any exposure and associated mitigations align with the business’s strategic objectives. All material risks associated with the Group and its activities are entered into the Company’s Corporate Risk Register which applies a scoring system to assist the Audit, Risk and Valuations Committee in its decision-making by capturing inherent risks, mitigations, and residual risks as well as any proposed actions. Risks are mapped to a heat map and monitored while controls are put in place and continually reviewed to mitigate the Group’s exposure. The Audit, Risk and Valuations Committee meets formally at least four times a year, with other informal meetings convened as necessary. The Executive Team are delegated authority to oversee the application of the risk framework across the business. The Group operates clear reporting lines throughout the business and engages external compliance specialists, IQ-EQ, to assist the Compliance Team in monitoring and advising on all regulatory compliance matters at a fund manager level within the Group structure. We identify and monitor risks closely throughout the business, with all employees involved in overseeing and mitigating risk on a day-to-day level under the ambit of the Group Compliance Manual and Group Code of Conduct. Periodic internal checks are administered by the Compliance Team; enhanced IT security measures are employed by the IT Manager supported by external IT specialists, Softwerx and SoftCat plc; weekly meetings are conducted at an Executive level where risk is a standing item; and dedicated risk-review sessions are undertaken periodically by the Executive Team structured around the Corporate Risk Register. Third-party review There is a formal compliance report issued to the Board annually based upon the Company’s Corporate Risk Register and the output of quarterly monitoring reports issued by IQ-EQ. For the report covering the year ended 31 March 2023, the only actions identified by IQ-EQ as requiring attention were classified as low-risk. Depositary services in the financial year were provided to the Company and the Fund of Funds by Langham Hall UK Depositary LLP including safekeeping of Company assets, oversight, and reporting any breaches, anomalies and discrepancies. Representatives of the Depositary attended a meeting of the Audit, Risk and Valuations Committee immediately prior to year-end to report on activity completed during the year and any associated recommendations, with no items identified as being high risk or in need of remedial action. Training Externally-led training is provided to all staff at least annually in connection with the Group’s culture of risk awareness and risk mitigation and the professional and ethical standards to which all employees must perform in the fulfilment of their roles (including where relevant under the Senior Managers and Certification Regime (“SM&CR”)). During the year, IQ-EQ delivered targeted training on the subject of SM&CR and the Group’s Client Assets Sourcebook (CASS) obligations to those members of the compliance, finance and administrative team involved in the safekeeping and reconciliation of client assets. Mandatory online training is conducted not less than annually (including associated testing) on a variety of core topics including anti-money laundering, anti-bribery and corruption, SM&CR, anti-bullying and harassment, antimodern slavery, and data protection. Targeted internal-led compliance training sessions are delivered during the onboarding process for new joiners and to different teams within the business as required, including a session on inside information and financial promotions to the Investment Team. Within the quarterly Investment Team “Hit-list Day”, market themes, opportunities and risks are assessed as part of the wider approach towards investments, and there is also a bi-annual Strategy Day attended by all of the Investment Team to review the Group’s existing portfolio and assess risks and opportunities at an asset level. Whistleblowing The Group has adopted procedures by which employees may, in confidence, raise concerns relating to possible improprieties in matters of financial reporting, financial control, adequate management of risks or any other matter. The Whistleblowing Policy applies to all employees of the Group, who are required to confirm that they have read the policy and are aware of how the procedure operates as part of the Group’s ongoing internal training programme. Principal and emerging risks We regularly consider and make a robust assessment of principal and emerging risks and opportunities, both internal and external, which may affect the Group in the near, medium, and long term. The Executive Team and Audit, Risk and Valuations Committee have risk scheduled for review at meetings periodically and, as required and during the year, performed their annual review of the Group’s principal risks, assessing the severity and mitigation strategies in place for previously identified risks, and identifying whether any new risks had materialised in the period. The heat map opposite shows what we consider to be our principal risks and uncertainties by potential impact and likelihood of occurrence. Detailed descriptions of those principal risks are set out below. A principal risk is a risk, or a combination of risks, from our corporate risk register that can seriously affect the performance or reputation of the Group. These principal risks are subject to regular reviews by the Audit, Risk and Valuations Committee or Board, with the Executive Director responsible for that risk category reporting on the nature and any developments on the risk at an appropriate frequency. Emerging risks are those risks not yet considered to be “principal” by the Audit, Risk and Valuations Committee on recommendation by the Executive Directors, but which have been identified by horizon scanning and other processes, such as scenario analysis. These are risks that are either new and therefore may, in time, pose a threat to the Company and/or its business model; or they can be a preexisting risk that has emerged in a new or unfamiliar context. The following are some of the emerging risks that have been identified and are currently being monitored: • Potential escalation of China/Taiwan tensions and conflict with the US • Banking sector volatility in the aftermath of SVB and Credit Suisse collapse and second order effects on the macroeconomic environment and the tech sector within this • Increased cost of borrowing to finance investment/deployment with further interest rate increases from central banks • Cost of living pressures effect on B2C/B2B sales Risk framework updates Updates to our risk framework for the year include: • Engaged SoftCat plc to provide a fractional CIO function to assist with the evolution of the Group’s IT and cyber-resilience infrastructure • Development of a regulatory crisis engagement strategy • Migration of Money Laundering Officer function within the Group’s regulated businesses away from CFO to the Compliance Team to minimise risk of conflicts and expand capacity associated with the role
Principal risks
Going concern The Directors confirm that they have a reasonable expectation that the Group will have adequate resources to continue in operational existence for at least the next 12 months from the date of the approval of the financial statements and accordingly they continue to adopt the going concern basis in preparing the financial statements. A viability statement, as required by the Code, can be found on page 91 of the Annual Report. Statement of directors’ responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with UK-adopted International Accounting Standards, International Financial Reporting Standards as adopted by the European Union, and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority, and the Transparency (Directive 2004/109/EC) Regulations 2007 (as amended) and the Central Bank of Ireland (Investment Market Conduct) Rules 2019. The Company financial statements are prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101). Under company law, 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 profit or loss of the Group for that period. In preparing the financial statements, the Directors are required to:
The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s 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 and the Annual Report on Remuneration comply with the Companies Act 2006. The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors are responsible for presenting and marking up the consolidated financial statements in compliance with the requirements set out in the Delegated Regulation 2019/815 on European Single Electronic Format (“ESEF Regulation”).
Responsibility statement of the Directors in respect of the annual financial report Each of the Directors, whose names and functions are listed on the Board of Directors section on pages 96 and 97 of the Annual Report confirm that, to the best of their knowledge:
We consider that the 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. By order of the Board
Ben Wilkinson Chief Financial Officer 14 June 2023
Consolidated statement of comprehensive income for the year ended 31 March 2023
The consolidated financial statements should be read in conjunction with the accompanying notes.
Consolidated statement of financial position As at 31 March 2023
The consolidated financial statements should be read in conjunction with the accompanying notes. The consolidated financial statements were authorised for issue by the Board of Directors on 14 June 2023 and were signed on its behalf by: Ben Wilkinson Chief Financial Officer Molten Ventures plc registered number 09799594
Consolidated statement of cash flows for the year ended 31 March 2023
The consolidated financial statements should be read in conjunction with the accompanying notes. Consolidated statement of changes in equity for the year ended 31 March 2023 Year ended 31 March 2023
Year ended 31 March 2022
The consolidated financial statements should be read in conjunction with the accompanying notes.
Notes to the consolidated financial statements 1. General information
Molten Ventures plc (the “Company”) is a public limited company incorporated and domiciled in England and Wales. The Company is the ultimate parent company in which the results of all subsidiaries are consolidated in line with IFRS 10 (see Note 4(b) for further details). The consolidated financial statements for the year ended 31 March 2023 and for the comparative year ended 31 March 2022 comprise the consolidated financial statements of the Company and its subsidiaries (together, the “Group”). The consolidated financial statements are presented in Pounds Sterling (GBP/£), which is the currency of the primary economic environment in which the Group operates. All amounts are presented in millions, unless otherwise stated. 2. Going concern assessment and principal risks
Going concern The Group’s primary sources of liquidity are the cash flows it generates from its operations, realisations of its investments and borrowings. The primary use of this liquidity is to fund the Group’s operations (including the purchase of investments). Responsibility for liquidity risk management rests with the Board, which has established a framework for the management of the Group’s funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and with ongoing monitoring of forecast and actual cash flows. The Group has undertaken a going concern assessment and the latest assessment showed sufficient headroom for liquidity for at least the next 12 months from the date of signing of these financial statements. The assessment of going concern considered both the Group’s current performance and future outlook, including:
After making enquiries and following challenge and review, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for 12 months from the date of approval of these financial statements. For this reason, they continue to adopt the going concern basis in preparing the financial statements. For further information, please refer to the Audit, Risk and Valuations Committee Report on pages 108 to 110 and the Directors’ Report on pages 128 to 130. Principal risks The Group has reviewed its exposure to its principal risks and concluded that these did not have a significant impact on the financial performance and/or position of the Group for the year and as at 31 March 2023, respectively. For further details on the Group’s principal risks, as well as its risk management processes, please see the Risk Management and Principal Risks section in the Strategic Report to these financial statements. 3. Adoption of new and revised standards i. Adoption of new and revised standards No changes to IFRS have impacted this year’s financial statements. ii. Impact of standards issued not yet applied No upcoming changes under IFRS are likely to have a material effect on the reported results or financial position. Management will continue to monitor upcoming changes. 4. Significant accounting policies a) Basis of preparation The financial statements have been prepared in accordance with UK-adopted International Accounting Standards (“IAS”) and the requirements of the Companies Act 2006 as applicable to companies reporting under those standards and International Financial Reporting Standards (“IFRS”) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. UK-adopted International Accounting Standards differ in certain respects from International Financial Reporting Standards as adopted by the EU. The differences have no material impact on the financial statements for the periods presented, which, therefore, also comply with International Financial Reporting Standards as adopted by the EU. The consolidated financial statements have been prepared under the historical cost convention as modified for the revaluation of certain financial assets and financial liabilities held at fair value. A summary of the Group’s principal accounting policies, which have been applied consistently across the Group, is set out below. The consolidated financial statements have been approved for issue by the Board of Directors on 14 June 2023. The financial reporting framework that has been applied in the preparation of the Company’s financial statements (beginning on page 179) is Financial Reporting Standard 101, ‘Reduced Disclosure Framework’ (FRS 101). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities measured at fair value through profit or loss, and in accordance with the Companies Act 2006. The Company has taken advantage of disclosure exemptions available under FRS 101 as explained further in Note 1 of the Company’s financial statements. The financial statements are prepared on a going concern basis as disclosed in the Audit, Risk and Valuations Committee Report (pages 108 to 110), in the Directors’ Report (pages 128 to 130) and in Note 2. In preparing the financial statements we have considered the impact of climate change, particularly in the context of the disclosures included in the Strategic Report this year. There has not been a material impact on the financial reporting judgements and estimates arising from our considerations. Specifically, we note the following:
A summary of the Group’s principal accounting policies, which have been applied consistently across the Group, is set out below. b) Basis of consolidation The consolidated financial statements comprise the Company (Molten Ventures plc, 20 Garrick Street, London, England WC2E 9BT) and the results, cash flows and changes in equity of the following subsidiary undertakings as well as the Molten Ventures Employee Benefit Trust:
Registered addresses ^ 20 Garrick Street, London, England, WC2E 9BT * 50 Lothian Road, Festival Square, Edinburgh, Scotland, EH3 9WJ † c/o Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands ‡ 412F, Route d’Esch, Grand Duchy of Luxembourg, 1471, Luxembourg Subsidiaries Subsidiaries are entities controlled by the Group. Control, as defined by IFRS 10, is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are fully consolidated from the date on which the Group effectively obtains control. They are deconsolidated from the date that control ceases. Control is reassessed whenever circumstances indicate that there may be a change in any of these elements of control. All transactions and balances between Group subsidiaries are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with consolidated accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. Employee Benefit Trust On 27 November 2020, Molten Ventures Employee Benefit Trust (the “Trust”) was set up to operate as part of the Molten Ventures employee share option schemes. The substance of the relationship is considered to be one of control by the Group and, therefore, the Trust is consolidated, and all assets and liabilities are consolidated into the Group. Grow Trustees Limited was appointed trustee of the Trust and the substance of this relationship is also considered to be one of control by the Group and, as such, Grow Trustees Limited is consolidated. Investment entity In accordance with the provisions of IFRS 10, Molten Ventures plc considers itself to be an investment entity. As a result of its listed status, it obtains funds from its Shareholders to acquire equity interests in multiple high-growth technology businesses (indirectly) with the purpose of capital appreciation over the life of the investments. These investments are made on behalf of investors in Molten Ventures plc across a number of deployment strategies – see page 15. Exit strategies for the portfolio vary depending on each investment, with realisations occurring typically five to ten years after the investment is made. Exit strategies for each of the portfolio companies are documented and discussed as part of regular portfolio reviews. The Group reviews exit opportunities regularly and each member of the Deal Team is responsible for an exit thesis for the investee companies they are responsible for prior to any investment being made. An exit thesis is set out in the original investment papers and it is reiterated or amended thereafter, as appropriate, in the Group’s regular quarterly reports. Exit strategies include the sale of the investment via private placement or in a public market, IPO, trade sale of a company, and distributions to investors from funds invested into. All exits are approved by a sub-committee of the Investment Committee, following a similar approval process to any approval of a new investment, requiring a majority vote. Although Molten Ventures plc holds these investments indirectly, it has been deemed appropriate to directly consider the investment strategies for the portfolio as the intermediary investment vehicles discussed below were formed to hold investments on behalf of Molten Ventures plc. Molten Ventures plc evaluates its investments on a fair value basis and reports this financial information to its Shareholders. The Directors have also satisfied themselves that Molten Ventures plc’s wholly owned subsidiary, Molten Ventures (Ireland) Limited, as well as certain partnerships listed below, meet the characteristics of an investment entity. Although they have one or two investors, in substance these partnerships and companies are investing funds on behalf of the Shareholders of Molten Ventures plc. They have obtained funds for the purpose of acquiring equity interests in high-growth technology businesses with the purpose of capital appreciation over the life of the investments for the benefit of Shareholders of Molten Ventures plc and this has been communicated directly to the Shareholders. Exit strategies for investments (directly or indirectly) are previously discussed. The Group evaluates its portfolio on a fair value basis and this financial information is communicated directly to the Molten Ventures plc Shareholders. In line with the IFRS 10 consolidation exemption, entities meeting the definition of investment entity do not consolidate certain subsidiaries and instead measure those investments that are controlling interests in another entity (i.e., their subsidiaries) as investments held at fair value through profit or loss on the consolidated balance sheet. Loans to investment vehicles are treated as net investments at fair value through profit or loss. The below is a list of entities that are controlled and not consolidated but held as investments at fair value through profit or loss on the consolidated balance sheet.
1 32 Molesworth Street, Dublin 2, Ireland D02 Y512. 2 20 Garrick Street, London, England WC2E 9BT. 3 c/o Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1–1104, Cayman Islands. 4 16 Great Queen Street, London, England WC2B 5AH. 5 35 New Bridge Street, London, England EC4V 6BW. 6 412F, Route d’Esch, Grand Duchy of Luxembourg, 1471, Luxembourg. 7 22% is held by Molten Ventures FoF I LP of which Molten and a third party are both 50% LPs
Limited partnerships (co-invest and carried interest) Carried interest vehicles/co-investment limited partnerships (“CIPs”) – the Group’s general partners are members of these limited partnerships. These vehicles are set up with two purposes: 1) to facilitate payments of carried interest from the fund to carried interest participants; and 2) in certain circumstances to facilitate co-investment into the funds. Carried interest and co-investment partnerships are investment entities and are measured at FVTPL with reference to the performance conditions described in Note 4(u) and held at FVTPL, which equates to the net asset value attributable to the Group, in the statement of financial position in line with our application of IFRS 10 for investment entities. The vehicles in question are as follows:
^ c/o Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1–1104, Cayman Islands. * 50 Lothian Road, Festival Square, Edinburgh, Scotland EH3 9WJ. † 20 Garrick Street, London WC2E 9BT. Each carry vehicle indirectly holds interests in a vintage of investments within our portfolio with the purpose of producing profits for distribution among the carried interest partners. The Group evaluates its interest in carried interest at fair value as part of the valuations cycle. Indirectly, the carry partnerships have exit strategies for each investment within which they have an interest as the manager of both the carry partner and the investment vehicles regularly considers exit strategies as discussed above. Limited partnerships (managed by Group entities) A number of limited partnerships are managed by entities within the Group but are not considered to be controlled and, therefore, they are not consolidated in these financial statements. Legacy funds The Group continues to manage three legacy funds, Esprit Fund 1, Esprit Fund 2, Esprit Fund 3(i), and their general partners are consolidated within the Group. These funds are in run-off. Historically, the Group has not had any direct beneficial interests in the assets owned by these funds and the Group was not exposed to variable returns from these funds. Within the current financial year, the Group has acquired assets within Esprit Fund 2 with a fair value of £1.9 million as of 31 March 2023. Other than Esprit Fund 2, which is held at fair value through profit and loss, as an investment, management considers the legacy funds are held under an agency relationship with the funds where the Group acts as an agent which is primarily engaged to act on behalf, and for the benefit, of the fund investors rather than for its own benefit. Although the manager (Esprit Capital Partners LLP, subsidiary to Molten Ventures plc) has the power to influence the returns generated by the fund, the Group does not have an interest in their returns. As a result, the Group is not deemed to control these managed funds and they are not consolidated. The legacy funds have the following details: Esprit Fund 1 : Esprit Capital I Fund No.1 Limited Partnership and Esprit Capital I Fund No.2 Limited Partnership – c/o Molten Ventures plc, 20 Garrick Street, London WC2E 9BT. Esprit Fund 2 : Esprit Capital II L.P. – c/o Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, Esprit Capital 3(i) : Esprit Capital Fund III(i) LP and Esprit Capital Fund III(i) A LP – c/o Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1–1104, Cayman Islands. EIS/VCT funds Enterprise Investment Scheme funds and Molten Ventures VCT plc are managed by the Group. The Group has no direct beneficial interest in the assets being managed and its sole exposure to variable returns are to performance fees payable on exits above a specified hurdle and management fees based on subscriptions (and Promoter’s fees in certain cases), which is a small proportion of the total capital within each fund. The Board believes that this results in an agency relationship with the funds where the Group acts as an agent, which is primarily engaged to act on behalf, and for the benefit, of the fund investors rather than for its own benefit. Although the managers (Encore Ventures LLP – EIS funds, Elderstreet Investments Limited – VCT fund and Molten SP I LLP) have the power to influence the returns generated by the fund, the Group only has an insignificant interest in their returns. As a result, the Group is not deemed to control these managed funds and they are not consolidated. The EIS/VCT funds have the following details: EIS funds : DFJ Esprit Angels’ EIS Co-Investment Fund, DFJ Esprit Angels’ EIS Co-Investment II, DFJ Esprit EIS III, DFJ Esprit EIS IV, Draper Esprit EIS 5, and Molten Ventures EIS. VCT funds : Molten Ventures VCT plc – 6th Floor St Magnus House, 3 Lower Thames Street, London, England EC3R 6HD. Audit exemption for members of the Group The following entities are included in the parent’s consolidated accounts. As a result of section 479A of the Companies Act 2006, these subsidiaries are exempt from the requirements of the Companies Act 2006 relating to the audit of accounts under section 475 of the Companies Act 2006. Esprit Capital Holdings Limited, Esprit Capital I (CIP) Limited, Molten Ventures (Nominee) Limited, Esprit Nominees Limited, Grow Trustees Limited, Esprit Capital III MLP LLP, Esprit Capital III GP Limited, Esprit Capital I (GP) Limited, Esprit Capital III Founder GP Limited, Elderstreet Holdings Limited, Encore I GP Limited, Encore I Founder GP Limited, Esprit Capital I General Partner, Esprit Capital III GP LP, Molten Ventures Growth Fund I GP S.a.r.l, Molten Ventures Growth SP GP LLP, Molten Ventures FoF I GP LLP and Molten Ventures Investments GP LLP. Esprit Foundation Molten Ventures plc is the sole member of the Foundation. However, this is not controlled by Molten Ventures plc or the Group, as the Esprit Foundation has a separate Board of Trustees with a separate governance and decision-making process. A donation was received during the year ended 31 March 2023, there has not yet been any grant-making activity. No activity took place in the year ended 31 March 2022. Charitable Incorporated Organisation status was entered onto the Register of Charities with the Registered Charity Number 1198436 on 30 March 2022. Stuart Chapman is one of the three Trustees of the Esprit Foundation and is also an Executive Director on the Board of Molten Ventures plc. c) Operating segment IFRS 8, ‘Operating Segments’, defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resources. The Board of Directors have identified Molten’s Chief Operating Decision Maker to be the Chief Executive Officer (“CEO”). The Group’s investment portfolio engages in business activities from which it earns revenues and incurs expenses, has operating results, which are regularly reviewed by the CEO to make decisions about resources and assess performance, and the portfolio has discrete financial information available. The Group’s investment portfolio has similar economic characteristics, and investments are similar in nature. Dealflow for the investment portfolio is now consistent across all funds (except for the Legacy funds – see below) and the Group’s Investment Committee reviews and approves (where appropriate) investments for all of the investment portfolio in line with the strategy set by the Molten Ventures plc Board of Directors (approvals from the Molten Ventures plc Board of Directors is required for higher value investments where the proposed value of the investment to be made by plc is above £1.0 million). Although the managers of our EIS funds, VCT funds and plc funds have a management committee, the majority of those sitting on the committees are consistent across all. Taking into account the above points, and in line with IFRS 8, the investment portfolio (across all funds) has been aggregated into one single operating segment. Legacy funds – the legacy funds (Esprit Capital I Fund No 1 LP, Esprit Capital Fund No 2 LP, Esprit Capital II LP, Esprit Capital Fund III (i) LP and Esprit Capital Fund III (i) A LP) continue to be managed by the Group (Esprit Capital Partners LLP). These funds are in run-off. Although the investments held within these funds are not consistent with the rest of the investment portfolio (although there has been some cross-over in the past), they are similar in nature and the Group does not earn material revenue (neither is material expenditure incurred) from the management of these funds that would meet the quantitative thresholds set out in IFRS 8. Management does not believe that separate disclosure of information relating to the legacy funds would be useful to users of the financial statements. The majority of the Group’s revenues are not from interest, and the Chief Operating Decision Maker does not primarily rely on net interest revenue to assess the performance of the Group and make decisions about resource allocation. Therefore, the Group reports interest revenue separately from interest expense. The Group’s management considers the Group’s investment portfolio represents a coherent and diversified portfolio with similar economic characteristics and as a result these individual investments have been aggregated into a single operating segment. In the view of the Directors, there is accordingly one reportable segment under the provisions of IFRS 8. d) Revenue recognition Revenue is comprised of management fees from EIS/VCT funds and Molten SP I LLP, as well as performance fees and promoter fees. Priority Profit Share is incorporated within management fees, presented as management fees charged on the underlying investment vehicles. Revenue is also generated from Directors’ fees from a small number of portfolio companies where members of the Investment Team act as Directors for portfolio companies. Revenue is recognised when the timing can be measured and amount reliably determined, measured at the fair value of the consideration received or receivable. This represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales-related taxes. All revenue from services is generated within the UK and is stated exclusive of value added tax. Revenue presented as fee income are services comprised of: i. Management fees (Priority Profit Share) Management fees are earned by General Partners of Limited Partnerships, through a Priority Profit Share arrangement. The basis of calculation of fund management fees differs depending on the fund and its stage. Fund management fees are either earned at a fixed annual rate or are set at a fixed percentage of funds under management, measured by commitments or invested cost, depending on the stage of the fund being managed. Revenues are recognised as the related services are provided. ii. Management fees earned by Encore Ventures LLP. Fund Close April 2019 and prior. Management fees are charged on the Net Subscription per annum for the first four years of the life of the portfolio. Management fees are charged annually in advance. Cash received from the investor’s Net Subscription is received and will be recognised as revenue in the period they become due, across the first four years in line with the investment and follow-on period for investing activities. In this case, the transaction price is fixed for the life of the contract and, if management fees are recognised in the period for which they are receivable. Fund Close July 2019 onwards. Management fees are charged on Net Subscription per annum for the first five years of the life of the portfolio, payable annually in advance. Cash received from the investor’s Net Subscription is received and will be recognised as revenue in the period they become due, across the first five years in line with the investment and follow-on period for investing activities. Management fees are charged annually in advance. Cash received from the investor’s Net Subscription to cover the payment of management fees relating to the first 2.75 years of the life of the portfolio. Thereafter, fees will be accrued and deducted from cash proceeds from exits at the time of becoming highly probable. If no proceeds are received, these fees will not be charged to investors. iii. Performance fees Performance fees are earned on a percentage of returns over a hurdle rate. These are recognised in the statement of comprehensive income on realisation of underlying investment. Amounts are recognised as revenue when it can be reliably measured and is highly probable funds will flow to the Group, which is generally at the point of invoicing or shortly before due to the unpredictability associated with realisations but is assessed on a case-by-case basis. iv. Promoter’s fees Promoter’s fees are earned by Elderstreet Investments Limited, as manager of the VCT funds, based on amounts subscribed during each offer. Fees are agreed on an offer-by-offer basis and are receivable when the shares are allotted. Elderstreet Investments Limited may also be entitled to promoter’s fees when it promotes offers for new subscriptions into the funds it manages. Promoter’s fees are earned at a percentage of subscriptions received. Revenue is recognised in full at the time valid subscriptions are received. v. Directors’ fees Portfolio Directors’ fees are annual fees charged to an investee company. Directors’ fees are only charged on a limited number of the investee companies. Revenues are recognised as services are provided. e) Deferred income The Group’s management fees are typically billed quarterly or half-yearly in advance. Where fees have been billed for an advance period, the amounts are credited to deferred income, and then subsequently released through the statement of comprehensive income during the period to which the fees relate. Certain performance fees and portfolio Directors’ fees are also billed in advance and these amounts are credited to deferred income, and then subsequently released through the statement of comprehensive income accounting during the period to which the fees relate. f) Business combinations The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred, and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. The Group recognises identifiable assets acquired and liabilities assumed in a business combination, regardless of whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of: a) fair value of consideration transferred; b) the recognised amount of any non-controlling interest in the acquiree; and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in the statement of comprehensive income immediately. g) Goodwill and other intangible assets Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceed the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain. When the consideration transferred by the Group in a business combination includes an asset or liability resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the “measurement period” (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. Other intangible assets Certain previously unrecognised assets acquired in a business combination that qualify for separate recognition are recognised as intangible assets at their fair values, e.g. brand names, customer contracts and lists. All finite-lived intangible assets are accounted for using the cost model whereby capitalised costs are amortised on a straight-line basis over their estimated useful lives. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing as described below. Customer contracts are amortised on a straight-line basis over their useful economic lives, typically the duration of the underlying contracts. The following useful economic lives for customer contracts were applied on the date of acquisition: i. Encore Ventures LLP: eight years; and ii. Elderstreet Investments Limited: three years. h) Impairment For the purposes of assessing impairment, assets are grouped at the lowest level for which there are largely independent cash inflows (“cash generating units” or “CGU”). As a result, some assets are tested individually for impairment, and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the consolidated statement of total comprehensive income for the amount by which the assets or cash-generating units carrying amount exceeds its recoverable amount that is the higher of fair value less costs to sell and value-in-use. To determine value-in-use, management estimates expected future cash flows over five years from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. Discount factors are determined individually for each cash-generating unit and reflect their respective risk profile as assessed by management. Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro-rata to the other assets in the cash-generating unit with the exception of goodwill, and all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-generating unit’s recoverable amount exceeds its carrying amount where there has been a change in estimates used for the calculation of the recoverable amount. i) Foreign currency Transactions entered into by Group entities in a currency other than the functional currency in which they operate are recorded at the rates prevailing when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates prevailing at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the statement of comprehensive income. The individual financial statements of the Group’s subsidiary undertakings are presented in their functional currency. For the purpose of these consolidated financial statements, the results and financial position of each subsidiary undertaking are expressed in Pounds Sterling, which is the presentation currency for these consolidated financial statements. The assets and liabilities of the Group’s undertakings, whose functional currency is not Pounds Sterling, are translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period. j) Financial assets All financial assets are recognised when economic benefit is expected to be transferred to the Group. On recognition, a financial asset is initially measured at fair value, plus transaction costs, except for those financial assets classified at “fair value through profit or loss” (“FVTPL”), which are initially measured at fair value. Financial assets are classified by the Group into the following specified categories:
The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets through profit or loss A financial asset may be designated as at FVTPL upon initial recognition if: a. such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or b. the financial asset forms part of a group of financial assets or financial liabilities, or both, which is managed, and its performance is evaluated on a fair value basis, in accordance with the Molten Venture Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or c. it forms part of a contract containing one or more embedded derivatives, and IFRS 9 ‘Financial Instruments’ permits the entire combined contract (asset or liability) to be designated as at FVTPL. The Group considers its investment interests referred to in Note 4(b) are appropriately designated as at FVTPL as they meet criteria (b) above. Further details of the accounting policy can be found in Note 28, Fair value measurements. Financial assets through profit or loss are accounted for at settlement date. Amortised cost A financial asset is held at amortised cost under IFRS 9 where it is held for the collection of cash flows representing solely payments of principal and interest. These assets are measured at amortised cost using the effective interest method, less any expected losses. The Group’s financial assets held at amortised cost comprise trade and other receivables, and cash and cash equivalents in the consolidated statement of financial position. Financial assets held at amortised cost are accounted for at trade date. k) Financial liabilities The Group’s financial liabilities include trade and other payables, and borrowings. Trade and other payables Trade and other payables are recognised when the Group enters into contractual arrangements with an expectation that economic benefits will flow from the Group. The carrying amounts of trade and other payables are considered to be the same as their amortised cost, due to their short-term nature. Loans and borrowings Borrowings are initially recognised at fair value that is deemed to be the carrying value at inception. Fees related to the debt facility are amortised over the term of the loan, see Note 22(i) for further detail regarding the debt facility entered into during the year. The carrying amount of borrowings is deemed to be presented at amortised cost as the fair value of future cash flows have not been incorporated. All interest-related charges are reported in profit or loss and are included within finance costs. l) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the outflow of resources embodying the economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. m) Share capital Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Group’s shares are classified as equity instruments. Equity instruments are recorded at the proceeds received, net of direct issue costs. Shares held by Molten Ventures Employee Benefit Trust are held at cost and disclosed as own shares and deducted from other equity. n) Defined contribution scheme Contributions to the defined contribution pension scheme are charged to the consolidated statement of comprehensive income in the years to which they relate. o) Share-based payments When equity-settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period on a straight-line basis. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting period. Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received. The employee share option plans are administered by the Molten Ventures Employee Benefit Trust, which is consolidated in accordance with the principles in Note 4. p) Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. q) Deferred tax Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available, against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits, against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also dealt with in other comprehensive income. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities, and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. r) Property, plant and equipment Fixtures and equipment are stated at cost less accumulated depreciation and any recognised impairment loss. Depreciation is recognised to write off the cost or valuation of assets less their residual values over their useful lives, using the straight-line method, on the following basis:
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. s) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and deposits held at call with financial institutions. t) Interest income Interest income earned on cash and deposits and short-term liquidity investments is recognised when it is probable that the economic benefits will flow to the Group and the amount of income recognised can be measured reliably. Interest income is accrued on a time basis, with reference to the principal outstanding and at the effective interest rate applicable. u) Carried interest The Company has established carried interest plans for the Executive Directors (see the following associated note), other members of the Investment Team and certain other employees (together the “Plan Participants”) in respect of any investments and follow-on investments made from IPO. To 31 March 2020 each carried interest plan operated in respect of investments made during the Subject to certain exceptions, Plan Participants will receive, 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 and follow-on investments made during the relevant period. The carried interest plan from 1 April 2020 has an aggregate annualised 8% realised return on investments and follow-on investments made during the relevant period, to bring the plans more in line with market. The Plan Participants’ return is subject to a “catch-up” in their favour. Plan Participants’ carried interests vest over five years for each carried interest plan and are subject to good and bad leaver provisions. Any unvested carried interest resulting from a Plan Participant becoming a leaver can be reallocated by an adjudication committee formed by Esprit Capital Partners LLP as manager of the carried interest plan at their discretion, including to the Group, and, therefore, an assumption is made in the financial statements that any unvested carried interest as at the reporting date would be reallocated to the Group. See Note 30 for further information on amounts that have been attributed to the Group. Carried interest is measured at FVTPL with reference to the performance conditions described above. This is deducted from the gross value of our portfolio as an input to determine the fair value of our investment vehicles, which are held at FVTPL in the statement of financial position in line with our application of IFRS 10 for investment entities. The external carry is deducted as it will be paid to members external to the Group from proceeds of investments on realisation. Where the Group has a holding in the carried interest, this is recognised at FVTPL. v) Fair value movement Management uses valuation techniques to determine the fair value of financial assets. This involves developing estimates and assumptions consistent with how market participants would price the assets. Management bases its assumptions on observable data as far as possible, but this is not always available, in that case, management uses the best information available. Estimated fair values may vary from the amount which may be received as consideration for investments in normal market conditions, between two willing parties, at the reporting date (See Note 5(a)). 5. Critical accounting estimates and judgements The Directors have made the following judgements and estimates that have had the most significant effect on the carrying amounts of the assets and liabilities in the consolidated financial statements. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Actual results may differ from estimates. The key estimate, (5)(a), and judgement, (5)(b), are discussed below. There have been no new critical accounting estimates and judgements in the financial year ended 31 March 2023. Estimates: a. Valuation of unquoted equity investments at fair value through profit or loss The Group invests into Limited Companies and Limited Partnerships, which are considered to be investment companies that invest for the benefit of the Group. These investment companies are measured at fair value through profit or loss based on their net asset value (“NAV”) at the year-end. The Group controls these entities and is responsible for preparing their NAV, which is mostly based on the valuation of their unquoted investments. The Group’s valuation of investments measured at fair value through profit or loss is, therefore, dependent upon estimations of the valuation of the underlying portfolio companies. The Group, through its controlled investment companies also invests in investment funds, which primarily focus on German or seed investments. These investments are considered to be “Fund of Fund investments” for the Group and are recognised at their NAV at the year-end date. These Fund of Fund investments are not controlled by the Group and some do not have coterminous year-ends with the Group. To value these investments, management obtains the latest audited financial statements or partner reports of the investments and discusses further movements with the management of the funds following consideration of whether the funds follow the International Private Equity and Venture Capital Guidelines (“IPEV Guidelines”). Where the Fund of Funds hold investments that are individually material to the Group, management perform further procedures to determine that the valuation of these investments has been prepared in accordance with the Group’s valuation policies for portfolio companies, as outlined below, and these valuations will be adjusted by the Group where necessary based on the Group valuation policy for portfolio companies. The estimates required to determine the appropriate valuation methodology of investments means there is a risk of material adjustment to the carrying amounts of assets and liabilities. These estimates include whether to increase or decrease investment valuations and require the use of assumptions about the carrying amounts of assets and liabilities that are not readily available or observable. The fair value of investments is established with reference to the International Private Equity and Venture Capital Valuation Guidelines. An assessment will be made at each measurement date as to the most appropriate valuation methodology. The Group invests in early-stage and growth technology companies, through predominantly unlisted securities. Given the nature of these investments, there are often no current or short-term future earnings or positive cash flows. Consequently, although not considered to be the default valuation technique, the appropriate approach to determine fair value may be based on a methodology with reference to observable market data, being the price of the most recent transaction. Fair value estimates that are based on observable market data will be of greater reliability than those based on estimates and assumptions and, accordingly, where there have been recent investments by third parties, the price of that investment will generally provide a basis of the valuation. If this methodology is used, its initial use and the length of period for which it remains appropriate to use the calibration of last round price depends on the specific circumstances of the investment, and the Group will consider whether this basis remains appropriate each time valuations are reviewed. In addition, the inputs to the valuation model (e.g. revenue, comparable peer group, product roadmap, and other milestones) will be recalibrated to assess the appropriateness of the methodology used in relation to the market performance and technical/product milestones since the round and the Company’s trading performance relative to the expectations of the round. The Group considers alternative methodologies in the IPEV Guidelines, being principally price-revenue or price-earnings multiples, depending upon the stage of the asset, requiring management to make assumptions over the timing and nature of future revenues and earnings when calculating fair value. When using multiples, we consider public traded multiples as at measurement date (31 March 2023 and 31 March 2022 for this report) in similar lines of business, which are adjusted based on the relative growth potential and risk profile of the subject company versus the market and to reflect the degree of control and lack of marketability as well as considering company performance against milestones (e.g. financial/technical/product milestones). The equity values of our portfolio companies are generally assessed via the methodologies described above. For direct investments, the equity values are run through their relevant waterfalls to assess the fair value of the investment to Molten Ventures under the current value methodology. Other methodologies would be considered if appropriate. In all cases, valuations are based on the judgement of the Directors after consideration of the above and upon available information believed to be reliable, which may be affected by conditions in the financial markets. Due to the inherent uncertainty of the investment valuations, the estimated values may differ significantly from the values that would have been used, had a ready market for the investments existed, and the differences could be material. Due to this uncertainty, the Group may not be able to sell its investments at the carrying value in these financial statements when it desires to do so or to realise what it perceives to be fair value in the event of a sale. See Note 28 for information on unobservable inputs used and sensitivity analysis on investments held at fair value through profit or loss. Judgement: b. The Company and certain subsidiaries as an investment entity The Group has a number of entities within its corporate structure and a judgement has been made regarding which should be consolidated in accordance with IFRS 10, and which should not. The Group consolidates all entities where it has control, as defined by IFRS 10, over the following:
The Company does not consolidate qualifying investment entities it controls in accordance with IFRS 10 and instead recognises them as investments held at fair value through profit or loss. An investment entity, as defined by IFRS 10, is an entity that:
When judging whether an entity within the Group is an investment entity, the Group structure as a whole is considered. As a Group, the investment entities listed in Note 4(b) have the characteristics of an investment entity. This is because the Group has:
See Note 4(b) for further details on the consolidation status of entities. 6. Changes in (losses)/gains on investments held at fair value through profit or loss
7. Fee income Revenue is derived solely within the UK, from continuing operations for all years. An analysis of the Group’s revenue is as follows:
8. General administrative expenses Administrative expenses comprise:
9. Employee and employee-related expenses Employee benefit expenses (including Directors) comprise:
The monthly average number of persons (including Executive and Non-Executive Directors) employed by the Group during the year was:
At 31 March 2023, there were four Non-Executive Directors (31 March 2022: five). See Nomination Committee report for further details of changes in the year. Infrastructure comprises finance, marketing, human resources, legal, IT, and administration. 10. Auditor’s remuneration The profit for the year has been arrived at after charging:
Audit-related assurance services paid to the Company’s Auditors in the year were £25k related to CASS reporting to the FCA in respect of certain subsidiaries (for the year ended 31 March 2022: £18k), £61k in respect of the review of the Group’s interim financial statements (for the year ended 31 March 2022: £46k). Non-audit services paid to the Company’s Auditors in the year were £Nil in respect of reporting accountant services (for the year ended 31 March 2022: £305k). 11. Net finance expense
12. Income taxes The charge to tax, which arises in the Group and the corporate subsidiaries included within these financial statements, is:
The UK standard rate of corporation tax is 19% as at year-end (for the year ended 31 March 2022: 19%). The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to (loss)/profit for the year before tax are as follows:
The standard rate of corporation tax will increase to 25% from 1 April 2023.
13. (Loss)/earnings per share and net asset value The calculation of basic earnings per weighted average shares is based on the profit attributable to Shareholders and the weighted average number of shares. When calculating the diluted earnings per share, the weighted average number of shares in issue is adjusted for the effect of all dilutive share options and awards. Basic (loss)/earnings per ordinary share
Diluted (loss)/earnings per ordinary share
Net asset value per share is based on the net asset attributable to Shareholders and the number of shares at the relevant reporting date. When calculating the diluted earnings per share, the number of shares in issue at balance sheet date is adjusted for the effect of all dilutive share options and awards. Net asset value per ordinary share
Diluted net asset value per ordinary share
14. Share-based payments
* This is a vesting period of three years and a further two-year holding period.
Set out below are summaries of options granted under the plan.
Both the CSOP and LTIP are, as of 31 March 2023, partly administered by the Molten Ventures Employee Benefit Trust (“Trust”). The Trust is consolidated in these consolidated financial statements. The Trust may purchase shares from the market and, from time to time, when the options are exercised, the Trust transfers the appropriate number of shares to the employee or sells these as agent for the employee. The proceeds received, net of any directly attributable transaction costs, are credited directly to equity. Shares held by the Trust at the end of the reporting period are shown as own shares in the consolidated financial statements (see Note 25(i)). Of the 16,906 options exercised during the year, none were satisfied with new ordinary shares issued by Molten Ventures plc (FY22: 0.9 million options exercised with no new ordinary shares issued) (see Note 24). All outstanding options have been assessed to be reportable as equity-settled. For share options granted under the CSOP, the Black-Scholes Option Pricing Model has been used for valuation purposes. All options are settled in shares. Volatility is expected to be in the range of 20–30% based on an analysis of the Company’s and peer group’s share price. The risk-free rates used were taken from zero coupon United Kingdom government bonds on a term consistent with the vesting period. There are no non-market performance conditions attached to the share options granted under the CSOP. Share options granted during the period under the LTIP vest over the prescribed performance period to the extent that performance conditions are met. The performance conditions relate to realisations, assets under management (calculated in line with the relevant deed of grant), and Total Shareholder Return. These options are granted under the plan for no consideration and are granted at a nominal value of one pence per share option. The fair value of the LTIP shares is valued using the Black–Scholes model, which includes a Monte Carlo simulation model. A six-monthly review takes place of non-market performance conditions and, as at 31 March 2023, the best estimate for expected vesting of unvested share options is 81%. In the year ended 31 March 2023, it was agreed that 0% (31 March 2022: 50%) of the Executive Team’s bonus for that financial year would be deferred in shares of Molten Ventures plc. FY23 bonus amounts were paid in cash for an amount up to 100% (FY22: 100%) of each Director’s salary, with the balance being paid in the form of a deferred share award over a number of shares calculated based on the Volume Weighted Average Price per share for the five trading days immediately prior to the date of grant. The deferral period under the bonus scheme is two years from the date of the award. Vesting is not subject to any further performance conditions (other than continued employment at the date of vesting). The Black–Scholes Option Pricing Model has been used for valuation purposes. The share-based payment charge for the year is £4.4 million (year ended 31 March 2022: £3.7 million).
15. Intangible assets
The amortisation charge for the year is shown in the “depreciation and amortisation” line of the consolidated statement of comprehensive income. 16. Financial assets held at fair value through profit or loss The Group holds investments through investment vehicles it manages. The investments are carried at fair value through profit or loss. The Group’s valuation policies are set out in Note 5(a) and Note 28. The table below sets out the movement in the balance sheet value of investments from the start to the end of the year, showing investments made, cash receipts and fair value movements.
17. Related undertakings For further details of other related undertakings within the Group, see Note 4(b). Please see below details of investments held by the Group’s investment companies, where the ownership percentage or partnership interest exceeds 20%. These are held at fair value through the profit or loss in the statement of financial position.
* Fully diluted interest categorised as follows: Cat A: 0–5%, Cat B: 6–10%, Cat C: 11–15%, Cat D: 16–25%, Cat E: >25%. Details of the fair value of the Core companies are detailed as part of the Gross Portfolio Value table on page 46. 18. Property, plant and equipment
The depreciation charge for the year is shown in the “depreciation and amortisation” line of the consolidated statement of comprehensive income. 19. Operating segments The Group follows the accounting policy on operating segments laid out in Note 4(c). 20. Trade and other receivables
Expected credit losses for these receivables are expected to be immaterial. The ageing of trade receivables at reporting date is as follows:
Trade receivables are held at amortised cost. The maximum exposure to credit risk of the receivables at the reporting date is the fair value of each class of receivable mentioned above, which is as shown above due to the short-term nature of the trade receivables. The Group does not hold any collateral as security. 21. Trade and other payables
All trade and other payables are short term. 22. Financial liabilities
The below table shows the changes in liabilities from financing activities.
22 (i). Loans and borrowings On 6 September 2022, the Company entered into a facility agreement relating to a new debt facility (the “Debt Facility”) with J.P. Morgan Chase Bank N.A., London Branch (“JPM”) and SVB UK Limited (“SVB”), with a JPM affiliate acting as the appointed agent. The Debt Facility comprises a £90.0 million term loan (“Term Loan”) and a revolving credit facility (“RCF”) of up to £60.0 million on three and two-year availability periods respectively. Repayment dates for both may be extended by two 12-month periods subject to the lenders’ willingness to extend and satisfaction of various conditions. The headline interest rate applied on both the Term Loan and RCF includes a “margin” of 5.50% per annum plus SONIA. The Debt Facility is secured against various Group assets, including bank accounts; listed shares; and LP interests, with a number of entities within the Group acceding as guarantors. The Company’s ability to borrow under the Debt Facility and satisfy its financial and non-financial covenants is dependent on the value of the investment portfolio (excluding third-party funds under management), with draw downs being subject to a maximum loan to value ratio of 10% (1.10:1.00). The lenders may commission quarterly independent valuations of the investment portfolio. The Debt Facility replaced the Company’s previous revolving credit facility with SVB and Investec Bank plc of £65.0 million, which was repaid in full. In addition to repaying the previous facility, the Debt Facility may be used for general working capital purposes and to finance the purchase of portfolio companies, but cannot be used to fund share buybacks. The Group incurred transaction fees of £1.0 million, which are presented within loans and borrowings on the statement of financial position and are amortised over the life of the facility, and to date professional fees of £0.4 million have been accrued arising from the negotiation of the Debt Facility Agreement, which have been presented in general administrative expenses. Interest-related charges are reported in the consolidated statement of comprehensive income as finance costs (see Note 11). On execution of the Debt Facility Agreement, the Group drew down £90.0 million of the Term Loan, with the RCF (£60.0 million, currently undrawn) being available for two years to September 2024 subject to any extension. After expiry of the availability period, a cash sweep on realisations will apply. Both the RCF and Term Loan must be fully repaid by the third anniversary of the date of the Debt Facility Agreement, subject to any extension. The Debt Facility contains financial and non-financial covenants, which the Company and certain members of the Group must comply with throughout the term of the Debt Facility: • Maintain a value to cost ratio of investments of at least 10% (1.10:1.00). • Total financial indebtedness not to exceed 20% (10% on each utilisation) of the value of investments in the portfolio with adjustments for concentration limits (see below) together with the value of all amounts held in specified bank accounts subject to the security package. • Total aggregate financial indebtedness of the Company and certain members of the Group is not to exceed 35% (25% on each utilisation) of the value of secured investments in the portfolio with adjustments for concentration limits calculated by reference to specified assets and bank accounts subject to the security package. • The Company, and certain members of its Group, must maintain a minimum number of investments subject to concentration limits connected to sector, geography, joint or collective value, and/or listed status. Failure to satisfy financial covenants may limit the Company’s ability to borrow and/or also trigger events of default, which in some instances could trigger a cash sweep on realisations and/or require the Company to cure those breaches by repaying the Debt Facility (either partially or in full).
The Company was amortising costs relating to the inception, increase and extension over the life of the previous facility. On extinguishment of this liability, the costs were recognised in full in the condensed consolidated interim statement of comprehensive income. The interest reserve account previously held with SVB no longer forms part of the security package (balance on consolidated statement of financial position as at 31 March 2022: £2.3 million). 23. Deferred tax Deferred tax is calculated in full on temporary differences under the balance sheet liability method using the tax rate expected to apply when the temporary differences reverse. See breakdown below:
24. Share capital and share premium Ordinary share capital
1 In June 2021, the Company raised gross proceeds of £111.2 million at a placing price of 800 pence per share by way of a placing of 13,902,778 new ordinary shares. Share premium
25. Own shares and other reserves i. Own shares reserve Own shares are shares held in Molten Ventures plc that are held by Molten Ventures Employee Benefit Trust (“Trust”) for the purpose of issuing shares under the Molten Ventures plc 2016 Company Share Options Plan and Long-Term Incentive Plan. Shares issued to employees are recognised on a weighted average cost basis. The Trust holds 0.72% of the issued share capital at 31 March 2023.
* Disposals or transfers of shares by the Trust also include shares transferred to employees net of exercise price with no resulting cash movements. Cash receipts in respect of sale of shares in the year ended 31 March 2023 were £Nil (year ended 31 March 2022: £Nil). ii. Other reserves The following table shows a breakdown of the “other reserves” line in the consolidated interim statement of financial position and the movements in those reserves during the period. A description of the nature and purpose of each reserve is provided below the table.
Merger relief reserve In accordance with the Companies Act 2006, a Merger Relief Reserve of £13.1 million (net of the cost of share capital issued of £80k) was created on the issue of 4,392,332 ordinary shares for 300 pence each in Molten Ventures plc as consideration for the acquisition of 100% of the capital interests in Esprit Capital Partners LLP on 15 June 2016. Share-based payment reserve Where the Group engages in equity-settled share-based payment transactions, the fair value at the date of grant is recognised as an expense over the vesting period of the options. The corresponding credit is recognised in the share-based payment reserve. Please see Note 14 for further details on how the fair value at the date of grant is recognised. 26. Adjustments to reconcile operating (loss)/profit to net cash outflow in operating activities
Please see Note 22 for the changes in liabilities from financing activities. 27. Retirement benefits The Molten Ventures Group makes contributions to personal pension schemes set up to benefit its employees. The Group has no interest in the assets of these schemes and there are no liabilities arising from them beyond the agreed monthly contribution for each employee or member that is included in employment costs in the profit and loss account as appropriate. 28. Fair value measurements
i. Fair value hierarchy This section explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value in the financial statements. This section should be read with reference to Note 5 and Note 16. As explained in Note 5(a), valuation of unquoted equity investments at fair value through profit or loss is a critical accounting estimate and actuals may differ from estimates. The Group has considered the impact of ESG and climate-related risks on its portfolio, and consider these to be currently immaterial to the value of our portfolio for FY23, owing to the nature of the underlying investments (FY22: immaterial) and taking into consideration the climate risk impact channels and their financial impact across the portfolio companies, however this will be monitored each year to assess any changes. The Group recognised a number of climate-related opportunities within the portfolio via our Climate Tech thesis. The inputs to our valuations are described in the sensitivities analysis table below, and because these are more short-term in nature (e.g. forecast revenue for the current year applied to current market multiples, and recent transactions), we do not currently see any material impacts on these inputs from the longer term risks described in our TCFD report and, therefore, values as at 31 March 2023. We also recognise that, although the risks are not currently material, they could become material in the medium to long-term without mitigating actions, which are described within the TCFD section of the Strategic Report. For further discussion of our climate-related risks and opportunities, please see our TCFD and Principal Risks section of the Strategic Report. The Group classifies financial instruments measured at fair value through profit or loss (“FVTPL”) according to the following fair value hierarchy prescribed under the accounting standards: • Level 1: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date (31 March 2023; and 31 March 2022 for comparatives); • Level 2: inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and • Level 3: inputs are unobservable inputs for the asset or liability. All financial instruments measured at FVTPL in FY22 and FY23 are financial assets relating to holdings in investment entities that hold high-growth technology companies either directly or through Fund of Funds. The Group invests in special purpose vehicles and limited partnerships, which are considered to be investment companies that invest mostly in equities for the benefit of the Group. As set out in Note 4(b), these are held at their respective net asset values and, as such, are noted to be all Level 3 for FY22 and FY23. For details of the reconciliation of those amounts please refer to Note 16. The additional disclosures below are made on a look-through basis and are based on the Gross Portfolio Value (“GPV”). In order to arrive at the Net Portfolio Value (“NPV”), which is the value recognised as investments held at FVTPL in the statement of financial position, the GPV is subject to deductions for the fair value of carry liabilities and adjustments for Irish deferred tax. UK deferred tax is recognised in the consolidated statement of financial position as a liability to align the recognition of deferred tax to the location in which it will likely become payable on realisation of the assets. For details of the GPV and its reconciliation to the investment balance in the financial statements, please refer to the extract of the Gross Portfolio Value table below:
Carry external – this relates to accrued carry that is due to former and current employees or managers external to the Group. These values are calculated based on the reported fair value, applying the provisions of the limited partnership agreements to determine the value that would be payable by the Group’s investment entities to the carried interest partnerships. Portfolio deferred tax – this relates to tax accrued against gains in the portfolio to reflect those portfolio companies where tax is expected to be payable on exits. This relates to Irish deferred tax only. UK deferred tax is recognised in the consolidated statement of financial position as a liability to align the recognition of deferred tax to the location in which it will likely become payable on realisation of the assets. These values are calculated based on unrealised fair value of investments at reporting date at the applicable tax rate. Trading carry and co-invest – this relates to accrued carry that is due to the Group. Non-investment cash movements – this relates to cash movements relating to management fees and other non-investment cash movements to the subsidiaries held at FVTPL. During the year ending 31 March 2023, there were no transfers between levels (year to 31 March 2022: transfers out of Level 3 and into Level 1 following the listing of two investments, one is held directly and one of which is held via our partnership with Earlybird) – see below for the breakdown of investments by fair value hierarchy and (iii) on the following page for movements. The Group’s policy is to recognise transfers into and out of fair value hierarchy levels as at the end of the reporting period.
* ”other” includes Fund of Funds investments and Earlybird investments where we do not perform a look-through valuation. This differs from the analysis in the Strategic Report in order to align to valuation methodologies. Within the Strategic Report, additional Earlybird companies are included within the sector analysis. ii. Valuation techniques used to determine fair values The fair value of unlisted securities is established with reference to the IPEV Guidelines. In line with the IPEV Guidelines, the Group may base valuations on earnings or revenues where applicable, market comparables, calibrated price of recent investment in the investee companies, or on net asset values of underlying funds (“NAV of underlying funds”). An assessment will be made at each measurement date as to the most appropriate valuation methodology, including that for investee companies owned by third-party funds that Molten Ventures plc invests in and which are valued on a look-through basis. Financial instruments, measured at fair value, categorised as Level 3 can be split into three main valuation techniques: • Calibrated price of recent investment; • Revenue-multiple; and • NAV of underlying fund. Each portfolio company will be subject to individual assessment. For a valuation based on calibrated price of recent investment, the recent round enterprise value is calibrated against the equivalent value at year-end using a revenue-multiple valuation methodology as well as in relation to technical/product milestones since the round and the Company’s trading performance is relative to the expectations of the round. For a valuation based on a revenue-multiple, the main assumption is the multiple. The multiple is derived from comparable listed companies or relevant market transaction multiples. Companies in the same industry, geography, and, where possible, with a similar business model and profile are selected and then adjusted for factors including liquidity risk, growth potential and relative performance. They are also adjusted to represent our longer-term view of performance through the cycle of our existing assumption. Where the Group invests in Fund of Fund investments, the value of the portfolio will be reported by the fund to the Group. The Group will ensure that the valuations comply with the Group policy and that they are adjusted with any cash and known valuation movements where reporting periods do not align. See also Note 5(a) where valuation policies are discussed in more detail. iii. Fair value measurements using significant unobservable inputs (Level 3) The table below presents the changes in Level 3 items for the years ending 31 March 2022 and 31 March 2023.
iv. Valuation inputs and relationships for fair value The following table summarises the quantitative information about the significant unobservable inputs used in Level 3 fair value measurements:
*There were no significant inter-relationships between unobservable inputs that materially affect fair values.
v. Valuations processes The Audit, Risk and Valuations Committee is responsible for ensuring that the financial performance of the Group is properly reported on and monitored. In addition to continuous portfolio monitoring through the Board positions held in portfolio companies and the Investment Committee, a bi-annual strategy day is held every six months to discuss the investment performance and valuations of the portfolio companies. The Investment Team leads discussions focused on business performances and key developments, exit strategy and time lines, revenue and EBITDA progression, funding rounds and latest capitalisation table, and valuation metrics of listed peers. Valuations are prepared every six months by the Finance Team during each reporting period, with direct involvement and oversight from the CFO. Challenge and approvals of valuations are led by the Audit, Risk and Valuations Committee every six months, in line with the Group’s half-yearly reporting periods. 29. Financial instruments risk
Financial risk management Financial risks are usually grouped by risk type: market, liquidity and credit risk. These risks are discussed in turn below. Market risk – Foreign currency A significant portion of the Group’s investments and cash deposits are denominated in a currency other than Sterling. The principal currency exposure risk is to changes in the exchange rate between GBP and USD/EUR. Presented below is an analysis of the theoretical impact of 10% volatility in the exchange rate on Shareholder equity. Theoretical impact of a change in the exchange rate of +/-10% between GBP and USD/EUR would be as follows:
Certain cash deposits held by the Group are denominated in Euros and US Dollars. The theoretical impact of a change in the exchange rate of +/-10% between GBP and USD/EUR would be as follows:
The combined theoretical impact on Shareholders’ equity of the changes to revenues, investments and cash and cash equivalents of a change in the exchange rate of +/- 10% between GBP and USD/EUR would be as follows:
Market risk – Price risk Market price risk arises from the uncertainty about the future prices of financial instruments held in accordance with the Group’s investment objectives. It represents the potential loss that the Group might suffer through holding market positions in the face of market movements. As stated in Note 5 and Note 28, valuation of unquoted equity investments at fair value through profit or loss is a critical accounting estimate and actuals may differ from estimates. The Group is exposed to equity price risk in respect of equity rights and investments held by the Group and classified on the balance sheet as financial assets at fair value through profit or loss (Note 28). These equity rights are held mostly in unquoted high-growth technology companies and are valued by reference to revenue or earnings multiples of quoted comparable companies (taken as at the year-end date), last round price (calibrated against market comparables), or NAV of underlying fund, and also in certain quoted high-growth technology companies – as discussed more fully in Note 5(a). These valuations are subject to market movements. The Group seeks to manage this risk by routinely monitoring the performance of these investments, employing stringent investment appraisal processes. Theoretical impact of a fluctuation in equity prices of +/-10% would be as follows:
Given the impact on both private and public markets from current market volatility, which could impact the valuation of our unquoted and quoted equity investments, we further flexed by 20% in order to analyse the impact on our portfolio of larger market movements. Theoretical impact of a fluctuation of +/- 20% would have the following impact:
Liquidity risk Cash and cash equivalents comprise of cash and short-term bank deposits with an original maturity of three months or less held in readily accessible bank accounts. There is no restricted cash as at 31 March 2023 (restricted cash as at 31 March 2022 included £2.3 million of collateral for interest payments on the revolving credit facility (see Note 22 (i)). The carrying amount of these assets is approximately equal to their fair value. Responsibility for liquidity risk management rests with the Board of Molten Ventures plc, which has established a framework for the management of the Group’s funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves and by continuously monitoring forecast and actual cash flows. The utilisation of the debt facility and requirement for utilisation requests is monitored as part of this process, the debt facility is not linked to the liquidity of the Group and further drawdowns on the debt facility have been considered within the Going Concern assessment. For the contractual maturities of the Group’s liabilities see tables below.
Lease liabilities fall due over the term of the lease. The debt facility has a term of three years – for further details, see Note 22(i). All other Group payable balances at balance sheet date and prior periods fall due for payment within one year. As part of our Fund of Funds strategy, we make commitments to funds to be drawn down over the life of the fund. Projected drawdowns due by the Company are monitored as part of the monitoring process above. For further details, see Note 31. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss. The Group is exposed to this risk for various financial instruments, for example by granting receivables to customers and placing deposits. As part of the Group’s investments, the Group invests in debt instruments such as bridging loans and convertible loan notes (included within the investments held at FVTPL). This is not included below as the risk is considered as part of the fair value measurement. The Group’s trade receivables are amounts due from the investment funds under management, or underlying portfolio companies. The Group’s maximum exposure to credit risk is limited to the carrying amount of trade receivables, cash and cash equivalents, and restricted cash at each period-end is summarised below:
The Directors consider that expected credit losses relating to the above financial assets are immaterial for each of the reporting dates under review as they are of good credit quality. In respect of trade and other receivables, the Group is not exposed to significant risk as the principal customers are the investment funds managed by the Group, and in these the Group has control of the banking as part of its management responsibilities. Investments in unlisted securities are held within limited partnerships for which Esprit Capital Partners LLP acts as manager, and, consequently, the Group has responsibility itself for collecting and distributing cash associated with these investments. The credit risk of amounts held on deposit is limited by the use of reputable banks with high-quality external credit ratings and, as such, is considered negligible. The Group has an agreed list of authorised counterparties. Authorised counterparties and counterparty credit limits are established within the parameters of the Group Treasury Policy to ensure that the Group deals with creditworthy counterparties and that counterparty concentration risk is addressed. Any changes to the list of authorised counterparties are proposed by the CFO after carrying out appropriate credit worthiness checks and any other appropriate information, and the changes require approval from the Board. Cash at 31 March 2023 is held with the following institutions (and their respective Moody’s credit rating): (1) Barclays Bank plc (Baa2); (2) SVB UK Limited (Ba1); (3) Investec Bank plc (Baa1); and at 31 March 2022, also EFG Private Bank Limited. Capital management The Group’s objectives when managing capital are to: • safeguard their ability to continue as a going concern, so that they can continue to provide returns for Shareholders and benefits for other stakeholders; and • maintain an optimal capital structure. The Group is funded through equity and debt at the balance sheet date. During the period, the Group has repaid a revolving credit facility and replaced with a term loan (as well as an undrawn revolving credit facility). During the year, the previous credit facility of £65.0 million was repaid with a term loan of £90.0 million. Please refer to Note 22(i) for further details regarding the loan. In order to maintain or adjust the capital structure, the Group may make distributions to Shareholders, return capital to Shareholders, issue new shares or sell assets between related parties or otherwise to manage cash. Interest rate risk The Group’s interest rate risk arises from borrowings on the £90.0 million loan facility with JPM and SVB, which was entered into in September 2022 and the fully repaid £65.0 million loan facility with SVB and Investec (31 March 2022: £30.0 million drawn). The Group’s borrowings are denominated in GBP and are carried at amortised cost. The fair value of the debt is deemed to be the same as the carrying amount. Drawdowns of £90.0 million were made during the year to 31 March 2023 at an interest rate of SONIA (prior debt facility LIBOR) plus 5.50% on the loan facility with JPM and SVB. This balance remains outstanding at the period end. There was an additional drawdown from the previous debt facility with SVB and Investec of £35.0 million in the period (total borrowings post drawdown of £65.0 million) at an interest rate of LIBOR plus 6.25%. The £65.0 million debt facility was fully repaid in the year ended 31 March 2023. (31 March 2022: £30.0 million had been drawn down from the previous facility, which has now been repaid). The Debt Facility agreement has an interest rate calculated with reference to the SONIA with a margin of 5.50%. The interest charged on future drawdowns will fluctuate with the movements on SONIA. If the base rate (SONIA or LIBOR) rate had been 2.5% higher during the year to 31 March 2023, the difference to the consolidated statement of comprehensive income would have been an increase in finance costs of £1.5 million.
30. Related party transactions The Group has various related parties stemming from relationships with Limited Partnerships managed by the Group, its investment portfolio, its advisory arrangements/Directors’ fees (Board seats) and its key management personnel.
Key management personnel compensation Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, and are considered to be the Directors of the Company listed on pages 96 and 97 of the annual report.
The details of individual Directors’ remuneration and pension benefits, as set out in the tables contained in the Directors’ Remuneration Report on page 117, form part of these consolidated financial statements. During the year, employees of Molten Ventures plc, including key management personnel were granted and exercised share options – see Note 14 for further details. Transactions with other related parties In addition to key management personnel, the Company has related parties in respect of its subsidiaries and other related entities. On 30 March 2022, Molten Ventures plc entered into an agreement with Softcat plc to provide Molten Ventures plc with fractional CIO services. Karen Slatford was both the Chair of Softcat plc’s Board and was Chair of Molten Ventures plc’s Board at the time of entering the agreement until 17 January 2023. During the year, fees of £0.1 million have been recognised in relation to the services and £Nil remains outstanding at 31 March 2023 (31 March 2022: £Nil). Management fees Fees are received by the Group in respect of the EIS and VCT funds as well as unconsolidated structured entities managed by Esprit Capital Partners LLP, which is consolidated into the Group. The EIS funds are managed by Encore Ventures LLP under an Investment Management Agreement; Encore Ventures LLP is a consolidated subsidiary of the Group. Molten Ventures VCT plc is managed under an Investment Management Agreement by Elderstreet Investments Limited, which is a consolidated subsidiary of the Group. Management fees are received by the Group in respect of these contracts. See Note 4(b) for further information on consolidation.
Directors’ fees Administration fees for the provision of Director services are received where this has been agreed with the portfolio companies. These amounts are immaterial. At times, expenses incurred relating to Director services can be recharged to portfolio companies – these are also immaterial. Molten Ventures does not exercise control or management through any of these Non-Executive positions. Carry payments Carry was paid to 15 beneficiaries in the year, of which the below was to related parties. Carry payments have been made in respect of Esprit Capital III LP and Esprit Capital IV LP to key management personnel in FY22 and FY23. Please see the Directors’ Remuneration Report for further details.
Performance fees Performance fees have not been paid during the year by the EIS and VCT funds to Encore Ventures LLP. At 31 March 2023, £Nil was unpaid (31 March 2022: £0.8 million).
Unconsolidated structured entities The Group has exposure to a number of unconsolidated structured entities as a result of its venture capital investment activities. The Group ultimately invests all funds via a number of limited partnerships and some via Molten Ventures plc’s wholly owned subsidiary, Molten Ventures (Ireland) Limited. These are controlled by the Group and not consolidated, but they are held as investments at fair value through profit or loss on the consolidated statement of financial position in line with IFRS 10 (see Note 4(b) for further details and for the list of these investment companies and limited partnerships). The material assets and liabilities within these investment companies are the investments, which are held at FVTPL in the consolidated accounts. Please see further details in the table below. Within the current financial year, the Group has acquired assets within Esprit Fund 2 at a fair value of £1.9 million as at 31 March 2023. The Group has a beneficial interest to these assets since the acquisition and as such holds them as investments at fair value through profit and loss.
Molten Ventures (Ireland) Limited invests via the following limited partnerships: Esprit Investments (1) LP, Esprit Investments (2) LP, Esprit Capital IV LP (which also holds investments via DFJ Europe X LP) and Esprit Capital III LP. Molten Ventures Holdings Limited invests via the following limited partnerships: Molten Ventures Investments LP, Molten Ventures FoF I LP, and Esprit Investments (2)(B)(ii) LP. The investments balance in the consolidated statement of financial position also includes investments held by consolidated entities. The Group also co-invests or historically co-invested with a number of limited partnerships (see Note 4(b) for further details). The exposure to these entities is immaterial. Vested but unrealised carried interest of £0.6 million is recognised by the Group via Encore I Founder LP (14.5% aggregate carry LP interest) and Esprit Capital III Carried Interest LP (2.2% aggregate carry LP interest). 31. Capital commitments The Group makes commitments to seed funds (including funds invested in as part of our partnership with Earlybird) as part of its investment activity, which will be drawn down as required by the funds over their investment period. Contractual commitments for the following amounts have been made as at 31 March 2023 but are not recognised as a liability on the consolidated statement of financial position:
Total fair value to the Group of these seed funds (including Earlybird) is £349.8 million of total investments (31 March 2022: £399.5 million). 32. Ultimate controlling party The Directors of Molten Ventures plc do not consider there to be a single ultimate controlling party of the Group. 33. Alternative Performance Measures (“APM”) The Group has included the APMs listed below in this report as they highlight key value drivers for the Group and, as such, have been deemed by the Group’s management to provide useful additional information to readers of this report. These measures are not defined by IFRS and should be considered in addition to IFRS measures. Gross Portfolio Value (“GPV”) The GPV is the gross fair value of the Group’s investment holdings before deductions for the fair value of carry liabilities and any deferred tax. The GPV is subject to deductions for the fair value of carry liabilities and deferred tax to generate the net investment value, which is reflected on the consolidated statement of financial position as financial assets held at FVTPL. Please see Note 28 for a reconciliation to the net investment balance. This table also shows the Gross to Net movement, which is 93% in the current year calculated as the net investment value (£1,277.0 million) divided by the GPV (£1,370.7 million). The table reflects a Gross fair value movement of (£250.9 million), on an opening balance of £1,531.5 million, which is a (16)% percentage change on the 31 March 2022 GPV. This is described in the report as the Gross fair value decrease/increase. Net Portfolio Value (“NPV”) The NPV is the net fair value of the Group’s investment holdings after deductions for the fair value of carry liabilities and any deferred tax from the GPV. The NPV is the value of the Group’s financial assets classified at “fair value through profit or loss” on the statement of financial position. NAV per share The NAV per share is the Group’s net assets attributable to Shareholders divided by the number of shares at the relevant reporting date. See the calculation in Note 13. Please see further details relating to the calculation of the Net Portfolio Value in Note 28. Net fair value movement This is the fair value movement as calculated by dividing the fair value movement, excluding foreign exchange movements, by the opening Gross Portfolio Value at the relevant period. Gross fair value movement This is the fair value movement as calculated by dividing the fair value movement, including foreign exchange movements, by the opening Gross Portfolio Value at the relevant period. 34. Exceptional items Exceptional costs related to the Company’s Main Market move were £Nil for the year ended 31 March 2023 (year ended 31 March 2022: £2.4 million). The majority of these costs related to brokers fees, legal advisory, listing, reporting accountant, NED recruitment, remuneration advisory, IT consultancy, and PR services. 35. Subsequent events As part of our portfolio management and to generate additional liquidity, we have agreed a secondary sale for 10% of our Earlybird Fund VI investment on 28 April 2023, realising €14 million (£13 million). There are no further post balance sheet events requiring comment.
Annual Report and Accounts The Company’s Annual Report and Accounts for the year ended 31 March 2023, in both PDF and structured electronic formats, will also be available to download from the Company’s website at https://investors.moltenventures.com/investor-relations/plc/reports The Company has also submitted its Annual Report and Accounts to the UK National Storage Mechanism (available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism) and Euronext Dublin (available for inspection at https://direct.euronext.com/#/oamfiling). This announcement constitutes the material required by DTR 6.3.5 to be communicated in unedited full text through a Regulatory Information Service.
Status of announcement 2022 Financial Information: The figures and financial information for 2022 are extracted from the published Annual Report and Accounts for the year ended 31 March 2022 and do not constitute the statutory accounts for that year. The 2022 Annual Report and Accounts have been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. 2023 Financial Information: The figures and financial information for 2023 are extracted from the Annual Report and Accounts for the year ended 31 March 2023 and do not constitute the statutory accounts for the year. The 2023 Annual Report and Accounts include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The 2023 Annual Report and Accounts will be delivered to the Registrar of Companies in due course. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement. Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. |
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| ISIN: | GB00BY7QYJ50 |
| Category Code: | FR |
| TIDM: | GROW; GRW |
| LEI Code: | 213800IPCR3SAYJWSW10 |
| OAM Categories: | 1.1. Annual financial and audit reports |
| Sequence No.: | 250972 |
| EQS News ID: | 1657455 |
| End of Announcement | EQS News Service |
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