Half year trading update and notice of results

RNS Number : 9921E

Molten Ventures PLC

02 November 2022

 

This announcement contains inside information as defined under the UK Market Abuse Regulation.

2 November 2022 

Molten Ventures plc

("Molten" or the "Company")

Half year trading update and notice of results

Progress made in H1 - a relatively resilient performance against challenging public market backdrop

Molten Ventures (LSE: GROW, Euronext Dublin: GRW), a leading venture capital firm investing in and developing high growth digital technology businesses, today provides an update on its portfolio and NAV (unaudited) ahead of its interim results for the period ended 30 September 2022, scheduled for release on 21 November 2022.

Highlights for the period:

· Gross Portfolio Value (unaudited) is expected to be not less than £1,450 million (30 September 2021: £1,350 million; 31 March 2022: £1,532 million)

· Underlying Gross Portfolio decrease in fair value (unaudited) of approximately 17% at constant currency. Net decline of 12% due to offsetting currency tailwinds of approximately 5%

· Valuations calibrated to reflect public market peers leading to a reduction in Enterprise Value ("EV") in the Core portfolio on average of 35%, leading to fair value reductions (before currency movements) of 17%, with preference share protection limiting the downside

· Portfolio well-funded with more than 75% of the Core with over 18 months of cash runway and revenues continue to grow at an average for the Core of over 60% with forecast growth of 70% for 2023

· NAV per share is expected to be not less than 830p (30 September 2021: 887p; 31 March 2022: 937p)

	Six months ended 30 September 2022	% Change to Opening GPV
	£'million
Opening Gross Portfolio Value	1,532
Investments	112
Realisations	(13)
Movement in Foreign Exchange (a)	79	5%
Movement in Fair Value (b)	(260)	(17%)
Total Fair Value Movements (a+b)	(181)	(12%)
Closing Gross Portfolio Value	1,450

Note: Core represents ~65% of total portfolio value, and includes 3 publicly listed investments held at 30 September market prices. Emerging includes 1 publicly listed investment held at 30 September market prices. The Emerging portfolio also includes holdings through fund of funds.

Fair value movements:

· Gross fair value movements in the period of £260m excluding FX, primarily driven by reductions of £200m to the value of the Core and £60m to the value of the Emerging portfolio

· Following the significant market adjustments the valuations are calibrated to reflect public market peer movements over the past six months. As a comparison, using the last round valuations from the previous 12 months would have led to over £260m increase in the fair value movement (excluding currency), i.e net neutral FV movement

· FX tailwinds of £79m partially offset the fair value reductions

Portfolio performance:

· Revenues have grown at an average for the Core of over 60% with forecast growth of 70% for 2023

· Portfolio remains well funded with over £2bn of capital raised in the prior year and over 75% of the Core with over 18 months of cash runway (based on existing budgets and growth plans)

· Downside protection with preferred share classes in 90% of investments which provide first call on invested capital at realisation

Realisations and new investments:

· Cash proceeds from realisations in H1 of £13 million (six months to 30 September 2021: £67 million)

· £112 million invested by the Company and its consolidated group ("the Group") balance sheet in the first half of the year, with a further £17 million invested by EIS and VCT bringing the total invested for H1 to £129 million (six months to 30 September 2021: £169 million invested by the Company, EIS and VCT, "the Molten Group")

· Investments mix includes £56 million of primary, principally closing investments agreed in the prior year, and more recently an increased focus on the existing portfolio with £31m in follow on capital

Cash resources and investment cadence:

· Operating costs (net of fee income) expected to be significantly less than the targeted 1% of period-end NAV. Prudently reserving cash, with the cost base anticipated to be 20% below budget for FY23

· Investment target for the year remains at £150 million, underpinned by Company cash resources; complemented by increased debt facility

· New debt facility of £150 million (£90 million term debt drawn and £60 million revolving credit facility undrawn) with JP Morgan Chase Bank as new lender alongside Silicon Valley Bank, realigning the capital structure towards the stated target of debt at 10% of portfolio value, providing funding flexibility subject to certain drawing conditions

· Cash on the Group balance sheet at period-end of £28 million (30 September 2021: £156 million; 31 March 2022: £78 million) and listed assets valued at £23 million (30 September market prices)

Strategic and operational review

The first six months of the financial year have been against the backdrop of a challenging market environment with inflation and rising global interest rates feeding through to a decline in the value of publicly listed high growth technology companies. Nasdaq has declined 25% in the past six months while technology sub-sectors such as semi-conductors and e-commerce have declined further. In the private markets deployment of investment capital has slowed while companies, and investors, adapt to an environment with a higher cost of capital. The interim valuation of the portfolio reflects the movements in public market peer comparables with EV reductions across the Core portfolio on average of 35%, leading to a fair value reduction of 17%, before currency movements. The lower fair value reduction relative to the EV movements reflects the preference share protection limiting the downside.

While it is disappointing to report a decline in valuations, Molten's relative resilience is testament to our long-held consistent approach to valuing our portfolio companies across the cycle. While much of the movement during the period has been driven by sharp downward movements in a number of our key Core assets, our portfolio is well diversified, with over 70 companies across four sectors at different stages in their development. We believe that our thesis-led, sectoral investment approach which has stood the test of time across previous cycles, together with our robust valuation process and active management value that Molten brings to its portfolio companies, will continue to serve us well. While no VC investor is currently immune from the recent steep compression in valuations, our investment model has significant inbuilt downside protection from our consistent strategy of early-stage investing, together with holding many of our investments through preference share structures.

Exits during the period included UiPath and Minit (via Earlybird) leading to cash realisations of £13 million. Although the IPO market remains weak, historically, the majority of the Group's realisations have been through trade sales. We are mindful of the importance of preserving capital in the current environment and expect a lower deployment cadence in the second half, and to deploy of the order of £150 million in investments for the full year.

Martin Davis, Chief Executive Officer, Molten Ventures, commented:

"We have built our model to capture upside and minimise downside, and we continue to invest funds and deploy our expertise to maximise value in our portfolio. Nevertheless, recent changes in public markets and our approach to valuation in line with the relevant guidelines have led us to report a decrease in fair value.

We have maintained an ongoing engagement with our portfolio companies to build a clear understanding of their cash needs and maintain sufficient resources to support them as they navigate their way through uncertain markets, particularly given their own balance sheet strength.

The advances in technology and it's adoption by enterprises has shown no signs of abating and I am confident that high-growth tech companies that will invent tomorrow will be founded and developed here in Europe, with Molten and our investors well positioned as ever to invest in these opportunities."

Interim Results Presentations

A presentation and Q&A will be held for sell-side analysts on the morning of the results, details of which will be confirmed in due course.

There will also be a further presentation on 22 November via the Investor Meets Company platform. More details will be available, including the opportunity to submit questions in advance, in due course. No new material disclosures will be made in this second presentation in addition to the Interim Results.

-ENDS-

Enquiries:

Molten Ventures plc Martin Davis (Chief Executive Officer) Ben Wilkinson (Chief Financial Officer)	[phone]
Numis Securities Joint Financial Adviser and Corporate Broker Simon Willis Jamie Loughborough Havish Patel	[phone]
Goodbody Stockbrokers Joint Financial Adviser and Corporate Broker, Euronext Dublin Sponsor Don Harrington Charlotte Craigie Dearbhla Gallagher	[phone]
Powerscourt Public relations Elly Williamson Jane Glover	[phone] / [phone]

About Molten Ventures

Molten Ventures is one of the most active venture capital firms in Europe, developing and investing in disruptive, high growth technology companies. We believe it is our role to support the visionary entrepreneurs who will invent the future. We fuel their growth with our "energy" in the form of long-term capital, access to international networks and decades of experience building businesses.

As at 31 March 2022, Molten Ventures had a diverse portfolio with shareholdings in 69 companies, 21 of which represent our Core holdings and account for 68% of the total portfolio value. Our Core companies include Graphcore, Ledger, Revolut, Aiven, and CoachHub. We invest across four sectors: Consumer Technology, Enterprise Technology, Hardware and Deeptech, 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 £865m capital into fast growing tech companies and have realised over £439m to 31 March 2022.

For more information, go to   https://www.moltenventures.com/    

 

END

 

 

TSTKFLFBLFLLFBZ