Molten Ventures Plc

Good morning and welcome to the Malton Ventures PLC full year 23 interim results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged. You can be submitted at any time by the Q&A tab situated in the right-hand corner of your screen. Just click Q&A, scroll to the bottom, type your question and press send. The company may not be in a position to answer every question received during the meeting itself. Have the company review all questions submitted today. Publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Martin Davis, CEO and Ben Wilkinson, CFO. Good morning.

Good morning, Paul, and good morning, everybody. We really appreciate your time. I think this is a really important opportunity for us to engage with our retail shareholders. We think it's very important to be able to communicate with all of our shareholders what's going on in the business, and we see this vehicle as an opportunity for us to get the message out to a broader group. So we really do welcome it, and we very much appreciate your feedback as to what you find valuable and whether you'd like us to communicate in this form more frequently. we are um just on uh voice today but for those of you who want to know what we look like um it's myself and ben wilkinson and myself the ceo and ben uh the cfo and uh we will be giving about a 30-minute presentation uh give or take and then we will open up to questions we're very happy to take whatever questions you may have So these are obviously the interim results halfway through our financial year. And I think the key message here is that the numbers that we announced yesterday very much follow the trading statement issued six weeks ago, as far as the performance, ever so slightly better as far as the numbers go. But we do try to get out the trading numbers as quickly as possible at the end of the period to give investors and shareholders an indication where we are. and then we follow it up with more detailed numbers, the final numbers once they've been audited, and also an opportunity for us to go into a little bit more detail about what we saw in the first half. And so as far as the numbers go, Ben will talk in more detail about that in a few minutes. But as far as the numbers go, the gross fair value reduction of 17% remains, as we said before. It's a net downward movement of 12%, taking into consideration currency headwinds that we explained in our trading statements. Valuations really have come down very much as a result of us calibrating to public market peers. Public markets have been down over the last period, and we have, particularly with our later stage companies, we felt that it's appropriate for us to mark ours down, not quite in line with public market peers, but to reflect the downward movement of public markets. Despite removing 35% from the EV of the core, the fair value reductions for us are obviously much smaller than that and that is really because of the downside protection that we have in our preference share structure and ben will talk a little bit about that uh in a few minutes but i think it is an important part of our model and it's it's important to understand that despite um the risk inherent in these early stage companies that we invest in the reality is we do have the opportunity to go in at a preference high up on the preference stack which does give us down downside of protection The portfolio remains well-funded, 75% of the core with 18 months plus of cash runway. We're working very closely with the portfolio, with portfolio companies to extend that as far as possible, because we do understand the importance of preserving cash in this current environment. Revenues in the core, though, and this is, I think, one of the things that we do get a great deal of comfort from, continue to grow at an impressive rate. And across the core, average for 22, we're nearly at the end of that year, they are growing in excess of 60% and they are forecasting to grow in excess of 70% next year. We're also continuing to build third party assets under management, which is an important part of our strategy, particularly with EIS and VCT strategies, which continue to grow very well. As far as our liquidity and available cash goes, we have a reasonably strong cash position of 28 million. We have, as you know, we completed the debt facility earlier on in the first half, and we have 60 million of that drawn. But we also have over 20 million of listed stock, and that's on the 30th of September market price. There's been a small improvement on those across the board. As far as deployment goes, we have deployed 112 million in the first half, which is all of our investments, and we're still very much targeting for the 150 million at the end of the year. So we do expect a slowdown, and we've seen a slowdown in the second half already, and we do expect that to continue. But the resilience of our numbers today that are smaller than their public market comparators is really because of the resilience that we have in our model. We have a very consistent way of valuing. We haven't changed that. We take a conservative approach to valuations. We have a very broad model. set of companies, over 70 companies across a number of sectors and at different stages of development. And it's that portfolio approach enables us to manage the downside, but also the risk profile. And finally, and very importantly, and we'll talk about this later, I suspect, is we continue to build our ESG, continue our ESG journey. And that is both about us as a business, but also about us helping our portfolio companies to run in more sustainable and high levels of governance model than possibly you would expect from a startup. I'm not going to spend much time on this slide, but I'm conscious that not everybody will be as familiar as others with our model. I think really I'd probably just say a couple of things. The first thing on the top right hand side is that we do have the ability to invest across different stages. We don't do seed. We do that through our funder funds program and we don't do pre IPO. That's really where we can add value by helping our shareholders to get access to pre IPO markets. But where we really operate is in the series A, B and C. And as you can see in the bottom right hand chart, this is where there is substantial growth over a relatively short period of time. and this is where um originally draper spree now molten ventures has been investing for over 20 years and we understand this space very well it has very specific characteristics there are very specific criteria that you need to see in order to win and that's where we've operated and i think the last point i'd say on this is that within that growth stage, when companies are growing that rapidly, when they have the gross margins that we expect to see, our average is over 65% gross margin, the companies very rarely go to zero. They do, because that's life, but the hit rate and the success rate at that stage is much, much better, particularly considering the growth potential within that sector. I think now I will hand over to Ben to talk through the results and maybe talk a little bit about the attribution, about where we've got our results and where the numbers are.

Thank you Martin. Hello everybody. I'll talk us through the headlines of the results first and then we'll go through some slides which give a little bit more detail on the breakdown of how those numbers came together. So just starting with the highlights of the period to the end of 30th of September, we have a gross portfolio value. The gross portfolio is the main measure that we use and it demonstrates the value of all of the assets we have in the portfolio. We take off from that number carry value and deferred taxes that might get paid and then it's a net number that goes on to the balance sheet. So you see and then what is reflected on the balance sheet is the net investments. And it's the net investments that make up the majority of our net assets. And to get from those net investment number to the net asset number, you add on principally the cash and the debt. Those are the main items on the balance sheet. So for this period, we've had a movement down, which we've talked about in the gross portfolio. We have reduced down the values of the companies, principally reflecting those movements that Martin highlighted in the public markets. The assets have moved down, fair value of 17%. The opening gross portfolio was 1.5 billion. And the 17% was offset with currency benefits. A lot of our companies are denominated in dollars or euros, and therefore the weakness in this period has been a benefit to our portfolio value. And that's offset by approximately 5%. And that leads us to this 12% gross portfolio value decrease that you see on the highlights here. cash being invested we have 112 million added to the portfolio value in the period from the investments that we've made and then in a similar way where we've realized investments we have 13 million of cash returning back to the balance sheet but which comes into the cash line. So those are the key movements that we've had from the portfolio perspective that nets down to 1.28 billion of net assets and it's that number that's divided by our number of issued shares which is just under 153 million that gives us then our NAV per share of eight times the And it's that NAV per share, of course, that is therefore reflected in the market and what we reflect our current share price against, which is currently trading at a discount. But that's the headline number that people will use. And that will be the reference point for roughly the next six months until we put out the next iteration of our valuations for the end of March, which captures our full year position. The other highlights that we mentioned here are in relation to our cost base. We always target to have less than 1% of operating costs on a net basis. This is income, less expenses. And for this period, we'll show some charts showing the trends, but we're about 0.1%, so well below that target. And then finally, we've talked about the expanded debt facility. This was something we put in place in the six-month period, a new facility of 150 million. This is broken down between 90 million of term debt, which we've now drawn, and 60 million of a revolving credit facility. And that means that we can repay that debt back and then redraw the debt again. So that stays available to us. And as it stands at this point in time, we haven't drawn that revolving credit facility. So that 60 million is available to us as additional liquidity on top of the 28 million of cash that we have. So just moving along to give you a little bit more detail, it's quite often easier to look at this graphically. The 1.5 billion on the left-hand side is the opening portfolio, as I highlighted. You can then see the addition of cash and the reduction of realized cash, and then the net of those fair value movements that I talked about, the downward movement of 262 million on the fair value being offset by the currency gain of 82 million which gives us that net of 180 and that leaves us with our gross portfolio value of 1.45 and then just showing on the right hand side that progression over time this really demonstrates how we've grown the asset base obviously that's reduced in this period where we've had reductions in the value of the portfolio but you can see the trend over time and how that's been reflected in the NAV per share The next slide is giving a little bit more additional color and detail. The valuations is a key part of what we do, and we're trying to ensure that you as investors and potential investors can see how these valuations are pulled together. Again, starting on the left-hand side of the chart, you have the March position, the addition of the invested cash and the reduction of the realized cash coming out. And then the next bars really break down that 180 million of net fair value movements between the component parts of how we value those businesses. The first is the foreign exchange, which I've already highlighted. movements in currency in the period principally dollars and euros against sterling which we sterling is obviously the currency that we're reporting and then you move into the different components of valuation from the technique of valuing these companies we follow the iped guidelines these are the international private equity venture capital guidelines The best source of evidence for valuing a private company is where they've raised capital with third party investment coming into that business. That will then form the strongest point of evidence for the value of that company. But crucially, what you also have to do is take that last round value and then calibrate the movements in the company from their own performance but also the movements that have been reflected in the market since the round and and you can see here 101 million of movements down is is principally where we've reflected last round values and then taken the market movements for each of those technology subsectors since There is a headline view that NASDAQ moved down roughly 25% in the period between March and the end of September. But we've had some technology subsectors which have moved greater than that. And semiconductors is a good example of that, where that's moved, in fact, in about 45% in that period. And then moving along for the different valuation techniques that we've applied, we've got loss on listed assets. daily traded price we mark those assets like Trustpilot and UiPath and Kazoo to the balance sheet dates that will be reflected with prices as at the 30th of September and then looking at the net loss fair value in assets valued at NAV This is where we have LP positions. So we've invested in a limited partnership. And that's essentially somebody else's fund, a third party manager. And that principally reflects the seed fund of funds where we don't invest directly in those companies. We go through managers that we know across Europe and we've built up a program across Europe of 67 managers now with about 72 million of throng. on a program of 130 million of committed capital. And what we're reflecting here is the movements in value in the period. And this also will capture the early bird assets where an LP in German partnership with early bird across several of their funds. And that gives us access to the German speaking parts of the market in the series A slightly earlier stage, late seed in a series A opportunities. And then just finally to finish on this slide, the last valuation technique that we have is looking at comparison. is purely taking the revenue of the underlying portfolio companies and reflecting them against a previously agreed basket of comparable companies in the public markets and therefore reflecting again a reduction in multiples that we've seen in this period. And so that gives you the summary of the key movements that bring us back to that 1.45 billion on the gross portfolio value.