TIDMSUPP
RNS Number : 9491Z
Schroder UK Public Private Tst plc
27 May 2021
Schroder UK Public Private Trust plc
Announcement of Net Asset Value as of 31 March 2021
Schroder UK Public Private Trust plc (the "Company") today
announces its net asset value ("NAV") as of 31 March 2021.
Summary
-- NAV of 40.00p per share as of 31 March 2021, an increase of
14.3% relative to the NAV as of 31 December 2020 (35.00p per
share).
-- As disclosed in earlier announcements, there have been
several positive developments within the portfolio including Oxford
Nanopore's funding round at an uplifted valuation, Immunocore's
initial public offering ("IPO"), the sale of Kuur Therapeutics and
prospective sale of Inivata. These previously announced
developments comprise the majority of the change in NAV stated
above.
-- Completion of the sale of a basket of assets to Rosetta
Capital generating initial proceeds of GBP52.9 million and allowing
a meaningful portion of the Company's outstanding debt to be paid
down.
-- Since the period end, the Company has fully repaid its debt
facility with the $87.4 million (GBP63.6 million) proceeds from the
Kymab exit resulting in a cash position of GBP9.9 million as of 14
May 2021. The cash balance may be further bolstered by $38.6
million expected from the sale of Inivata which remains subject to
regulatory approvals.
-- The Company is now in a strong financial position to execute
its strategy and enable new and follow-on investments. On 25 May
2021, the Company announced its first new investment into UK
cybersecurity company, Tessian, as part of its Series C funding
round.
Introduction
Economic backdrop
Investors' hopes for a global economic recovery continued to
grow over the first quarter against the backdrop of a rollout of
COVID-19 vaccines. Equities globally gained ground while bond
yields and inflation expectations rose, led by the US where
President Joe Biden confirmed a fiscal stimulus package of $1.9
trillion. This was followed up with an additional promise of $2
trillion in infrastructure spending.
Lowly-valued and economically sensitive equities extended the
recovery they enjoyed at the end of 2020, with energy and financial
stocks leading many markets higher. UK equities kept pace with the
recovery, while some domestically focused areas responded
particularly well to good progress with the country's vaccination
programme and an improving economic outlook. This progress was
reflected in the strength of sterling, which also gained against a
strong US dollar.
Objectives and progress
Within the Company's portfolio, the first quarter was a period
during which much of the hard work undertaken by the Portfolio
Manager during 2020 has started to bear fruit more visibly with
positive developments including:
-- Agreement to extend the term of the credit facility for 24 months to 30 January 2023.
-- Immunocore completed its IPO on Nasdaq.
-- The Company completed the sale of a basket of assets to
Rosetta Capital allowing a meaningful portion of the outstanding
debt to be repaid.
-- Oxford Nanopore announced its intention to IPO on the London
Stock Exchange in the second half of 2021.
A trend which continued after the period end with further
announcements including:
-- Sanofi completed the acquisition of Kymab.
-- The Company fully repaid its outstanding debt.
-- The announcement of the acquisition of Inivata by NeoGenomics.
-- The announcement of the acquisition of Kuur Therapeutics by Athenex.
-- Oxford Nanopore completed a fundraise resulting in a material revaluation.
Overall, these events represent a considerable leap forward in
the repositioning of the portfolio. The Company has significantly
bolstered its financial position, fully repaying the outstanding
debt which stood at GBP113 million as of 31 December 2019 and is
now able to make its first new investments since the appointment of
Schroders as Portfolio Manager.
Portfolio composition and valuation reviews
The Company entered the first quarter with 38 portfolio
holdings(1) including 8 quoted holdings and 30 unquoted
holdings.
During the period, the number and composition of holdings was
impacted by the following events:
-- Immunocore completed an IPO and transitioned to being a quoted holding.
-- The sale of a basket of assets to Rosetta Capital resulted in
the realisation of the entire holdings in four companies and
partial holdings in three companies.
-- Lignia Wood entered administration resulting in its fair value being reduced to zero.
As of 31 March 2021, all the Company's quoted holdings were
valued using unadjusted quoted prices except Rutherford Health
which continues to be fair value priced by Link Fund Solutions
Limited ("LFS"), the Company's AIFM. For the unquoted holdings, the
AIFM considered any material 'triggering' events since the last
valuation assessment as of 31 December 2020 and as such conducted
nine valuation reviews to determine the fair value of the portfolio
as of 31 March 2021.
The Company ended the period with 33 holdings(2) including 8
quoted holdings and 25 unquoted holdings.
(1) Excluding 7 holdings with no value. (2) Excluding 8 holdings
with no value.
Financial Performance
Attribution Analysis Quoted* Unquoted Net Debt Other NAV
(GBP'm)
Value at 31.12.20 66.6 354.6 (100.7) (2.4) 318.1
-------- --------- --------- ------ ------
+ Investments - 3.5 (3.5) - -
-------- --------- --------- ------ ------
- Realisations (7.7) (45.2) 52.9 - -
-------- --------- --------- ------ ------
+/- Fair value gains/(losses) (3.3) 51.1 - - 47.8
-------- --------- --------- ------ ------
+/- FX gains/(losses) (0.2) (2.3) - - (2.5)
-------- --------- --------- ------ ------
+/- Reclassified holdings 25.5 (25.5) - - -
-------- --------- --------- ------ ------
+/- Costs and other
movements - - (1.1) 1.2 0.1
-------- --------- --------- ------ ------
Value at 31.03.21 80.9 336.2 (52.4) (1.2) 363.5
-------- --------- --------- ------ ------
Source: AIFM, Link Fund Solutions Limited, as of 31 March 2021.
* Rutherford Health is reported as a quoted holding despite being
fair value priced by the AIFM.
The NAV as of 31 March 2021 was GBP363.5 million or 40.00p per
share reflecting an increase of 14.3% compared with the NAV as of
31 December 2020.
The quarterly NAV return of 14.3% comprised:
-- Quoted holdings: -1.0%
-- Unquoted holdings: +16.1%
-- Foreign exchange: -0.8%
-- Costs and other movements: 0.0%
Portfolio
The Company's quoted holdings saw a decline in value of 5.0%
contributing -1.0% to the quarterly change in NAV. The largest
single negative contributors to performance were Autolus
Therapeutics ("Autolus") and Idex Biometrics ASA ("Idex") which
declined 35% and 13% respectively. In February 2021, Autolus
undertook a capital raise of $115m (gross), which was larger than
expected, but secures the balance sheet for the coming years. The
raise had a temporary negative impact on the stock price, which in
the absence of new data from clinical trials continued into the
quarter end. Idex also raised equity in the quarter and has
continued to make progress with key partners with the planned roll
out of payment cards featuring its biometric sensors.
It should be noted that the quoted performance excludes
Immunocore which, despite completing an IPO, started the period as
an unquoted company. Within the unquoted holdings, Immunocore was
the third largest contributor with an increase in fair value of
GBP12.8m or 98% relative to the 31 December 2020 holding value
after adjusting for the partial sale to Rosetta Capital. Following
the listing of Immunocore's shares on Nasdaq in February 2021 at a
price of $26 per share, the shares subsequently increased 62% to
$42 per share as of 31 March 2021.
The Company's unquoted holdings saw an increase in value of
14.4% contributing 16.1% to the quarterly change in NAV. In Q1
2021, the largest positive contributor to performance was Oxford
Nanopore. The holding's fair value was uplifted by GBP22.0 million
or 32.1% to reflect the pricing of the external funding round
completed in May 2021 (see further details in the Company Updates
section of this report). As of 31 March 2021, Oxford Nanopore was
the largest holding within the portfolio representing 21.8% of
total investments and has further increased to more than 25%
post-period end following the sale of Kymab.
The second largest positive contributor to performance was
Inivata. The fair value of the holding was increased by GBP15.5
million or 121%, after adjusting for the partial sale to Rosetta
Capital, to reflect the terms of the prospective acquisition by
NeoGenomics, Inc. ("NeoGenomics") with the Company expecting to
receive total proceeds of $38.6m on completion of the
transaction.
Finally, the fourth largest positive contributor was Kuur
Therapeutics ("Kuur"). The holding's fair value was increased
GBP4.3m to reflect the terms of the sale to Athenex, Inc
("Athenex"), a U.S. incorporated company listed on Nasdaq. As
announced on 5 May 2021, the Company has received total proceeds of
$8.3 million in Athenex common stock on completion of the sale.
Furthermore, there is the potential for additional contingent
payments of up to $14.6 million over several years which may be
paid in either cash or additional Athenex common stock, at the sole
discretion of Athenex. The Company's AIFM had originally expected
to revalue the holding for reflection in the NAV as of 30 June
2021, however decided to revalue the holding as of 31 March 2021.
The holding was valued based on the Athenex quoted share price as
of 31 March 2021 with a 20% discount applied to reflect the
execution uncertainty between the valuation and transaction closing
dates.
Elsewhere across the portfolio, there was no unquoted holding
that detracted from performance by more than GBP2.0 million,
although there were several smaller adjustments amongst which
include:
-- CeQur was revalued to reflect the terms of a recent funding
round ( see further details in the Company Updates section
below).
-- Mafic was revalued to reflect increased funding uncertainty.
-- Seedrs was revalued due to a valuation review conducted
following termination of the merger with Crowdcube.
-- Spin Memory was revalued to reflect its deteriorating financial position.
Cash and net debt
As of 31 March 2021, the Company had a net debt balance of
GBP52.4 million, a decrease of GBP48.3 million relative to 31
December 2020. This balance is reflective of the partial debt
repayment following the sale of assets to Rosetta Capital, but
before the exit of Kymab resulting in additional proceeds of
GBP63.6m after the period end. Hence, as at 14 May 2021 the Company
had a net cash position of GBP9.9 million, which may be further
bolstered with news of the prospective sale of Inivata for $38.6
million.
Investment Activity
During Q1, the most notable investment activity impacting the
portfolio composition was the sale of a basket of assets to Rosetta
Capital. As disclosed in the Annual Report and Accounts for the
year ended 31 December 2020, on 27 January 2021, the Company agreed
the sale of a basket of seven assets (the "Sale Portfolio") to
Rosetta Capital VI, LP (the "Buyer"), an investment fund managed by
the UK-based life science venture capital firm Rosetta Capital
Limited, for a total acquisition price of GBP49.0 million. The Sale
Portfolio consisted of the entire holdings in Carrick Therapeutics,
Mission Therapeutics, PsiOxus Therapeutics and Mereo BioPharma and
partial holdings in Inivata, Immunocore and ReNeuron. The Buyer
also agreed to pay GBP2.9 million representing the value of certain
follow-on investments made by the Company with respect to holdings
contained in the Sale Portfolio during January 2021. On 15 March
2021, the transaction successfully closed with the Company
receiving initial proceeds of GBP52.9 million, out of which GBP1.0
million resulted from a positive adjustment to the acquisition
price due to changes in the values of the listed portfolio
companies Mereo BioPharma and ReNeuron on an aggregated basis.
Elsewhere in the portfolio, the Company completed two small
follow-on investments in unquoted holdings with a combined value of
just under GBP0.6 million. The first investment was in Mafic as
part of an internal funding round structured to resolve legacy
governance issues and marginally extend the cash runway, albeit
that further funding uncertainty remains. The second investment was
in CeQur, where due to the existing holding, the Company had the
opportunity to acquire additional shares at a discount to the
valuation implied by the significant $115m funding round (see
further details in the Company Updates section).
There was no investment activity within the public equity
holdings during the period.
Since the end of Q1 2021, the Company has announced three
further updates in relation to its private equity portfolio:
(1) Sanofi completed the acquisition of Kymab
On 9 April 2021, Sanofi successfully completed the acquisition
of the Company's holding in Kymab Group Ltd. ("Kymab") resulting in
the receipt of initial proceeds of $87 million (GBP63 million) with
the potential for additional contingent payments of up to $33
million subject to a deferred purchase price release and Kymab
achieving certain development and regulatory milestones.
As reported in the Annual Report and Accounts for the year ended
31 December 2020, during Q4 2020, the holding in Kymab was revalued
to GBP70 million generating a fair value gain of GBP54m to reflect
the terms of the agreed sale. This is after accounting for the
purchase of $1.3m additional shares, which generated a return of
over 700% on sale, and when compared with the holding value of
GBP14 million as of 31 December 2019. Hence, it should be noted
that the closing of the transaction has not notably impacted the
portfolio valuation during the first quarter.
(2) Inivata announced its acquisition by NeoGenomics
On 5 May 2021, Inivata announced its acquisition by NeoGenomics,
a provider of cancer-focused genetic testing services and global
oncology contract research services. An acquisition which followed
a $25 million minority equity investment by NeoGenomics in Inivata
in May 2020, at which time NeoGenomics was granted a fixed price
option to purchase the remainder of Inivata for $390 million.
The closing of the transaction is subject to the expiration or
termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and other customary closing
conditions. Based on the terms of the transaction, the Company
expects to receive total proceeds of $38.6 million on completion of
the transaction which is currently expected in June 2021.
(3) Athenex announced its acquisition of Kuur Therapeutics
On 4 May 2021, Athenex announced that it had acquired Kuur
Therapeutics for an upfront payment of $70 million, comprised of
equity in Athenex common stock listed on Nasdaq and subject to a
90-day lockup period. Additionally, Kuur shareholders are eligible
to receive up to $115 million of milestone payments over several
years, which may be paid in either cash or additional Athenex
common stock, at the sole discretion of Athenex.
Based on the terms of the transaction, the Company has received
total initial proceeds of $8.3 million in Athenex common stock.
Furthermore, the Company has the potential for additional
contingent payments of up to $14.6 million over several years which
may be paid in either cash or additional Athenex common stock, at
the sole discretion of Athenex.
Top 10
The Company's top 10 holdings as of 31 March 2021 compared with
the respective holding as of 31 December 2020.
Holding Fair value as % of total Fair value % of total
of 31 March 2021 investments as of 31 December investments
(GBP'000) 2020 (GBP'000)
Oxford Nanopore 90,745 21.8% 68,707 16.3%
----------------- ------------ ------------------ ------------
Kymab Group 68,937 16.5% 69,580 16.5%
----------------- ------------ ------------------ ------------
Atom Bank 37,760 9.1% 37,760 9.0%
----------------- ------------ ------------------ ------------
Rutherford Health 33,889 8.1% 33,889 8.0%
----------------- ------------ ------------------ ------------
Inivata 28,393 6.8% 26,137 6.2%
----------------- ------------ ------------------ ------------
Immunocore 25,451 6.1% 25,570 6.1%
----------------- ------------ ------------------ ------------
BenevolentAI 21,339 5.1% 21,339 5.1%
----------------- ------------ ------------------ ------------
Reaction Engines 12,500 3.0% 12,500 3.0%
----------------- ------------ ------------------ ------------
AMO Pharma 11,305 2.7% 11,411 2.7%
----------------- ------------ ------------------ ------------
IDEX ASA 9,864 2.4% 11,466 2.7%
----------------- ------------ ------------------ ------------
Source: AIFM, Link Fund Solutions Limited.
Company Updates
Oxford Nanopore: Started preparing for an IPO and completed a
funding round
In March 2021, Oxford Nanopore ("ONT") notified shareholders
that is has started the process of preparing for a potential IPO.
Whilst the timing of a potential IPO is dependent on market
conditions and other matters not fully within its control, Oxford
Nanopore currently expects the IPO to occur in the second half of
the year on the London Stock Exchange.
In May 2021, ONT also announced that it had raised GBP195
million in new capital including GBP125 million from new investors
Temasek, Wellington Management, M&G Investments and Nikon.
Atom Bank: Completed a funding round
In April 2021, Atom Bank ("Atom") announced that it had raised a
further GBP40 million from existing shareholders and guided towards
profitability from its mortgage and business lending within a year,
and to IPO the year after. Atom disclosed that it is on course to
achieve 100bps of Net Interest Margin by the end March 2021 with
lending to SMEs on its balance sheet having grown to over GBP700
million, a tripling of business loans in the last 12 months. This
growth has been achieved both within the Coronavirus Business
Interruption Loan Scheme and independent of government schemes.
The latest funding round took place at a price of 60p per share,
which is significantly below the 2019 funding round price. This is
due to particularly weak sentiment around this sector in the public
markets throughout 2020. This funding round price impacted the
holding fair value as of 31 December 2020 which has remained
unchanged as of 31 March 2021.
Rutherford Health: Agreed a secured infrastructure
investment
In February 2021, Rutherford Health ("Rutherford") provided an
update on its funding situation which highlighted the approaching
need for financing during the first quarter of 2021.
In March 2021, Rutherford announced that it has agreed an
infrastructure investment of GBP40 million with Equitix Investment
Management Ltd. The proceeds from the investment are being used to
repay the company's current debt of GBP18.6 million, for further
investment in its infrastructure and for mid-term working capital
purposes. The investment is backed by the freehold transfer of the
Rutherford Cancer Centre South Wales and supported by other
security to be put in place over the company's other centres. The
agreement is for 25 years, and the company will have the option to
repurchase the freehold of the South Wales centre for an agreed
nominal sum at expiry.
Immunocore: Completed its IPO on Nasdaq
In January 2021, Immunocore announced the completion of its $75
million Series C financing round. A precursor to its ultimate IPO
on Nasdaq in February 2021 raising gross proceeds of $312
million.
Finally, in March 2021, Immunocore provided a business update
and reported full year 2020 financial results. The announcement
highlighted the continued progression of the ImmTAC (Immune
mobilizing monoclonal T-cell receptors Against Cancer) clinical
portfolio for multiple tumour types and the grant of Breakthrough
Therapy Designation by the FDA for Tebentafusp in unresectable or
metastatic uveal melanoma, with the company anticipating completion
of the submission of a Biologics License Application in the third
quarter of 2021.
BenevolentAI: Completed first dosing for its trial in Atopic
Dermatitis
In February 2021, BenevolentAI announced dosing of the first
patient in its randomised first-in-human clinical trial for
BEN-2293, a molecule designed and developed to treat Atopic
Dermatitis. A development which sees a novel multi-target drug
developed using BenevolentAI's scientific and technical expertise
entering human clinical trials. BEN-2293 is a potent and selective
small-molecule Pan-Trk antagonist formulated for topical delivery,
with a pharmacokinetic profile designed for low systemic exposure
to deliver the optimal safety and efficacy profile in the treatment
of itch and inflammation associated with Atopic Dermatitis. In this
initial trial, BEN-2293 will be studied in adult patients with mild
to moderate disease.
In April 2021, BenevolentAI reported that AstraZeneca had
selected a novel chronic kidney disease ("CKD") target to advance
to its drug development portfolio, a major milestone since
formation of the strategic collaboration in 2019 to discover new
drugs for CKD and idiopathic pulmonary fibrosis. A collaboration
which combines AstraZeneca's scientific expertise and rich datasets
with BenevolentAI's target identification platform and biomedical
knowledge graph to understand these two complex diseases'
underlying mechanisms and identify new and more efficacious drug
targets.
Reaction Engines: Completed further validation of SABRE
technology
In February 2021, Reaction Engines announced that it had
completed the testing of two vital sub-systems of SABRE; the HX3
heat exchanger and the advanced hydrogen preburner. These
sub-systems supply heat energy and air to the air-breathing core of
the engine. These experiments have yielded high levels of insight
and are the latest in a wider series designed to validate SABRE
technology.
The objectives of both campaigns were to manufacture full size
test rigs to validate performance modelling and de-risk high
temperature operation in advance of further integration. The
preburner test campaign further aimed to show that Reaction
Engines' novel fuel injection system would function at full scale,
with the ability to control the heat output precisely and provide
even temperature to the HX3.
During testing, the HX3 achieved a top temperature 1126 , making
it the hottest test to date, even higher than the precooler's
validation at speeds representative of Mach 5 in 2019. Performance
exceeded model predictions with slightly more heat exchange and
less pressure loss than expected. Similarly, the preburner exceeded
expectations and actually provided a larger performance envelope.
The preburner campaign involved testing a lot of new technology at
the same time and significant redesigns were expected, however only
relatively minor issues ensued.
IDEX Biometrics: Completed a placing
In February 2021, Idex completed a placing of NOK 229m which is
expected to fund the business through to breakeven in H2 2022. The
company has continued to secure certifications from major
international card schemes and saw its sensors integrated into the
first biometric payment card ready for mass launch by a leading
card manufacturer. Several leading card issuers have announced
their intention to integrate biometric sensors into upcoming card
replacement cycles, and the business looks set for a production
ramp up over the coming quarters. The company also announced that
its sensors are being used in trials for digital RMB being run by
the People's Bank of China. This follows the trend of central banks
launching digital currency initiatives and represents a new
potential route to market for Idex.
Seedrs: Terminated its merger with Crowdcube
In March 2021, the Competition and Markets Authority published
its provisional findings which concluded that, in their opinion,
the merger with Crowdcube may be expected to result in a
substantial lessening of competition within the supply of equity
crowdfunding platforms to small and medium enterprises and
investors in the UK.
Hence, following further evaluation, both companies decided to
walk away from the transaction with Seedrs subsequently announcing
a new funding round.
Genomics: Completed a $30m funding round
In March 2021, Genomics plc ("Genomics") announced that it had
successfully completed a $30m funding round with participation from
new investors including Foresite Capital and F-Prime Capital, plus
existing shareholders Oxford Sciences Innovation and Lansdowne
Partners. Genomics intends to use the funding to expand its work,
building a patient-centric, population health platform that unlocks
a more proactive, precise, and personalised form of healthcare.
Genomics is a leader in the new area of genomic prevention: a
paradigm-changing approach to sustainable healthcare. For the first
time, it allows reliable and personalised estimates of risk for
common diseases, well ahead of disease manifestation. This allows
targeted interventions and tailored screening to either prevent
disease entirely, or to catch it early when outcomes remain
favourable. Genomics' population health management services and
clinical decision support tools are designed to bring greater,
earlier, and more accurate understanding about an individual's risk
for all the common chronic diseases and cancers to doctors and
their patients. The company also uses insights from genomic
variation to accelerate the discovery and development of new
medicines.
Federated Wireless : Began deployment of a private 5G wireless
network for the U.S. Department of Defense
In February 2021, Federated Wireless announced that it had begun
deployment of a Citizens Broadband Radio Service ("CBRS")-enabled
private 5G wireless network for the U.S. Department of Defense,
along with a team of partners including AWS, Cisco, JMA, Vectrus,
Perspecta Labs and Capstone Partners. The trial is designed to
modernize the Marine Corps Logistics Command warehouse operations
in Albany, Georgia. The new private enterprise 5G network supports
a broad set of smart warehouse use cases, including warehouse
robotics, barcode scanning and holographic, augmented and virtual
reality applications.
The multi-year initiative will create a 5G Smart Warehouse
reference design to increase the efficiency and dependability of
Marine Corps Logistics Command warehouse operations, including
improvements to receipt, storage, issuance, inventory control and
auditability of material and supplies that directly support Marine
Corps global operations.
CeQur: Completed a $115m funding round
In April 2021, CeQur announced the close of a $115 million
equity financing to advance commercial plans for CeQur
Simplicity(TM), including market development activities, a phased
commercial launch strategy that includes a limited market release
in 2021, and the scale-up of high-volume manufacturing. Credit
Suisse Entrepreneur Capital Ltd. and Endeavour Vision led the
financing with participation from new investors, including Tandem
Diabetes Care, Inc. (NASDAQ: TNDM), Ypsomed Group (SWX: YPSN),
Federated Hermes Kaufmann Funds, Kingdon Capital, and GMS Capital,
as well as existing investors.
CeQur Simplicity is a simple, three-day, wearable insulin device
for discreet, convenient, and injection-free bolus dosing. One
Simplicity patch holds up to 200 units of rapid-acting insulin
administered in two-unit increments and replaces, on average, nine
mealtime injections over three days. Clinical research has shown
that nearly 90% of patients using CeQur Simplicity reported
following their insulin regimen better as compared to MDI. The
device is clinically proven to improve glycaemic control, with
patients achieving significantly improved HbA1C and time-in-range
("TIR") goals. CeQur Simplicity is both FDA cleared and
CE-marked.
Source: Portfolio companies, including information disclosed
publicly on their websites.
Outlook
As recently highlighted in the Annual Report and Accounts, 2020
was a year of transition for the Company. The Portfolio Manager
focused on building relationships with the portfolio companies,
contributing to strategic thinking, honouring the Company's
existing financial commitments, selectively investing in new
follow-on opportunities within the financial constraints and
working to pay down the outstanding debt to enable longer-term
repositioning.
At the timing of writing, the Company now sits in a net cash
position having fully repaid the debt that stood at GBP113m as of
31 December 2019. This represents a tremendous leap forward in the
repositioning of the Company and now enables the Portfolio Manager
to not only support the strongest companies in the existing
portfolio but also to invest into new high quality, high conviction
opportunities, both public and private.
Strategy
It is the Board and Portfolio Manager's combined intention that
the Company's strategy will remain true to its origins, whilst
leveraging the Portfolio Manager's extensive sourcing capabilities
in the public and private markets, complemented by strict
governance and control processes. In summary, the core tenets of
the Company's strategy will continue to be:
(1) Focused on high quality UK innovation. The Company will look
to invest in world class innovative businesses founded in the UK or
with a strong innovation presence in the UK. These will be
companies with disruptive innovations, significant growth
potential, high quality management teams and supported by highly
credible co-investors.
(2) Mindful of diversification by stage and sector. The Company
will look to build out a balanced portfolio of venture, growth, and
public companies across the Portfolio Manager's core sectors. New
private investments will typically be targeted at the 'growth'
stage where the companies are already generating revenue with
proven unit economics and scaling towards profitability.
(3) Prudent debt utilisation. The Company will use its debt
facility prudently to improve operational efficiency and minimise
return dilution. The facility will only be used on a short-term
basis to fund expenses and investments, but only when there is
visibility of paying down the incremental amount within twelve
months from future realisations. The intention being to keep the
loan balance below 10% of gross asset value.
In addition, the Board and Portfolio Manager intend to consider
in greater detail the specific investment opportunity at the
pre-IPO, or cross-over stage between public and private markets,
where the Company is uniquely positioned given its hybrid
investment strategy. Furthermore, the Company intends to actively
implement sustainability as a tool to enhance value creation and
will consider alignment with the UN SDGs as an important part of
the investment process.
New Investments
So, as the Company looks towards its first new investments in
over 18 months, the Portfolio Manager has stated its intention to
invest in two new private companies and two new public companies
during 2021.
As such, the Company has just announced its first new investment
since the appointment of Schroder Investment Management Ltd as
Portfolio Manager on 13 December 2019. In May 2021, the Company
made a $6.75m investment into cybersecurity company, Tessian
Limited, as part of its $65m Series C funding round. The round was
led by March Capital, a U.S.-based venture growth firm, with
participation from existing shareholders including Sequoia Capital,
Accel, Balderton Capital and Latitude. The deal values Tessian at
$500m.
Tessian is pioneering a new approach to cybersecurity and is
defining a new category of security software called Human Layer
Security. To overcome the so-called "people problem" in security,
Tessian uses machine learning to stop security threats and data
breaches caused by people, without disrupting their workflow. It
builds Behavioral Intelligence Models, tailored to every employee,
by understanding each individual's communication patterns and
behaviours online. Tessian uses the models to automatically detect
security threats and prevent them from turning into breaches by
notifying the employee in-the-moment. Over time, these alerts help
employees improve their security behaviours. Today, Tessian secures
people on email and automatically prevents threats such as
phishing, business email compromise, data exfiltration and
accidental data loss.
In the last year, Tessian has tripled its Fortune 500-level
customer base and now has 350 customers around the world across the
legal, financial services, healthcare and technology sectors
including Affirm, Investec and Schroders.
With the new funding, Tessian will continue to expand its
platform's capabilities and plans to secure other interfaces like
messaging, web and collaboration platforms. Tessian will also use
the funding to triple its rapidly growing employee base, with a
particular focus on growing its sales team.
As highlighted above, this investment is in line with the
Company's focus on backing innovative businesses founded in the UK
with disruptive innovations, significant global growth potential,
high quality management teams and supported by credible
co-investors. The Company is committed to improving its
sustainability profile hence, as communicated in the Annual Report
and Accounts for the year ended 31 December 2020, the Portfolio
Manager intends to disclose where appropriate the United Nations'
Sustainable Development Goals ("SDGs") associated with new
investments. The investment in Tessian is in line with SDG 16
"Peace, Justice and Strong Institutions" and Target 16.4 "By 2030,
significantly reduce illicit financial and arms flows, strengthen
the recovery and return of stolen assets and combat all forms of
organized crime".
Conclusion
In summary, the Board and Portfolio Manager are greatly
encouraged with the progress seen in Q1 and since the period end.
The Company is now on the front foot and in a strong position to be
able to support the portfolio's most attractive companies and make
new investments. With capital available to deploy, and further
positive developments expected through 2021, we are optimistic
about the portfolio's prospects and remain hopeful of rewarding the
patience of shareholders.
Past performance is not a guide to future performance and may
not be repeated. The value of investments and the income from them
may go down as well as up and investors may not get back the
amounts originally invested. The securities shown above are for
illustrative purposes only and are not to be considered a
recommendation to buy or sell.
Enquiries:
Schroder Investment Management Limited
Gareth Faith (Company Secretary) 0207 658 5264
Estelle Bibby (Press) 0207 658 3431
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