Full year trading update and notice of results

Molten Ventures plc

27 April 2023

Molten Ventures plc

("Molten Ventures", "Molten", or the "Company")

Full year trading update and notice of results

Signs of stabilisation in second half

Molten Ventures (LSE: GROW, Euronext Dublin: GRW), a leading venture capital firm investing in and developing high-growth digital technology businesses, today announces an update on its portfolio and NAV (unaudited) ahead of its Final Results for the year ended 31 March 2023, due to be announced on 15 June 2023.

Highlights:

• Gross Portfolio Value (“GPV”) (unaudited) is expected to be circa £1,370 million (31 March 2022: £1,532 million).

• Underlying Gross Portfolio decrease in fair value (unaudited) is approximately 19% at constant currency, reflecting stabilisation in markets during the second half (first half: 17% decrease at constant currency, second half: 2% decrease at constant currency). Currency movements from the weaker US$ partially reversed the FX gains of the first half.

• Core portfolio remains well funded, focused on capital efficiency and continues to trade strongly, with very limited exceptions: in the calendar year to 31 December 2022, value-weighted revenue growth in our Core portfolio was 40%.

• £138 million (year to 31 March 2022: £311 million) invested from Molten’s balance sheet for the year ended 31 March 2023, with a further £41 million from EIS and VCT co-investment.

• Realisations generated cash proceeds for Molten in the year of £48 million (year to 31 March 2022: £126 million), with realisations exceeding new investments in the second half of the year.

• NAV per share (unaudited) is expected to be approximately 775p (31 March 2022: 929p).

Note: Core represents ~62% of total portfolio value. Emerging includes three publicly listed investment held at 31 March 2023 market prices. The Emerging portfolio also includes holdings through the Molten fund of funds programme.

Fair value movements and portfolio performance:

• Gross fair value reduction in the six-month period to 31 March 2023 of £23 million excluding FX. Fair value movement reflects the net of £81 million increases offset by reductions of £104 million. The reductions comprise of £63 million to the value of the Core, the majority across two assets, and £41 million to the value of the Emerging portfolio.

• Portfolio companies continue to maintain strong revenue growth momentum, demonstrating the underlying resilience of these businesses and the structural demand they are seeing for their products across their respective end markets. Some specific provisions have been reflected in two Core company valuations in the six-month period to 31 March 2023, but overall valuations are broadly unchanged from 30 September 2022, when more significant market adjustments were made to reflect public market peer movements over the prior six months.

• The valuation approach continues to reflect the public market peer movements. On average Enterprise Values have reduced 37% in the Core over the 12-month period, leading to a fair value reduction of 19%, before currency movements. The lower fair value reduction relative to the Enterprise Value movements reflects the preference share protection limiting the downside.

• Company valuations continue to be supported by evidence from external capital raises with a total of £1.0 billion raised by companies across 28 rounds in the portfolio during FY2023, of which over 90% have been at higher or equivalent valuations.

• Portfolio companies have adapted to the current environment and undertaken cost-cutting measures as well as prudently managing their own balance sheets. The portfolio remains well funded with over 80% of the Core having more than 18 months of cash runway (including those that are profitable or funded to profitability and based on existing budgets and growth plans).

• Revenues of the Core have grown at an average of 40% calendar year 2021-22 with forecast growth of over 65% for 2022-23.

• Downside protection in 97% of investments with preferred share classes which provide first call on invested capital at realisation.

Cash resources and investment cadence:

• Molten balance sheet cash as at 31 March 2023 of £23 million, and a further £58 million available for investment in the EIS/VCT funds. Undrawn RCF of up to £60 million provides further funding flexibility subject to certain drawing conditions.

• Operating costs (net of fee income) expected to be well below the targeted 1% of period-end NAV at ~0.1%.

• The Company anticipates the continued preservation of capital in FY24 and based on current projections anticipates the funding requirement within the portfolio will be in the region of £20 million.

Strategic and operational review

FY23 (year ending 31 March 2023) (unaudited)

Our focus for the year has been on adaptation and stabilisation for our business and active management of the portfolio as we rapidly adjusted to a new normal. The current landscape is one where investors are more cautious and focused on how companies will manage costs, lengthen runways, and offer a route to profitability.

As we’ve said throughout the year, Molten has not been immune from the market pressures, driven by rising inflation, rising interest rates, and poor macroeconomic conditions, which have impacted private and public technology companies.

However, we have responded quickly to the new environment and our model, which is built on a consistent approach to valuations and a diverse portfolio, has enabled Molten to demonstrate relative resilience throughout the period. Our belief in the continuing attractive opportunities represented by European technology companies has been vindicated by the strong underlying business performance and revenue growth of our portfolio companies taken as a whole. Our active management approach has meant we’ve worked closely with management teams to ensure they have the right people in place and are focused on capital efficiency. We have also continued to adapt to a market where the volume of trade sales and IPOs remains low, and reduced our exposure to listed holdings through the sale of our shares.

We continuously monitor and assess the portfolio against our target returns criteria and the opportunity cost of invested capital versus alternative uses of that capital for new investments or further investment into existing portfolio companies. Discipline around our investment process remains a focus, with capital deployment for the year from the plc balance sheet at £138 million, reflecting a significant reduction in the second half of the financial year to £26 million, with realisations of £35 million exceeding the amount deployed over that period.

In September, we announced our new debt facility, a Revolving Credit Facility of up to £60 million and a £90 million Term Loan, providing additional funding flexibility.

In FY23 we also continued to deliver on our strategy of growing our third-party assets and income through our EIS and VCT strategies and our Fund of Funds programme, enabling us to provide access to high growth private assets for a range of co-investors. This co-investment capital has ensured we remain active in the market to invest in exciting new technology companies. This is an increasingly important part of our business, and we expect this to become a significant proportion of our overall deployment.

Focus for FY24 (year to 31 March 2024)

In the coming year, we expect to continue to build on our progress in growing third party assets and income. This includes our investments via our EIS and VCT strategies and our Fund of Funds programme. We continue to believe that the best way to gain exposure to the significant returns available to venture capital as an asset class is through investment in a diversified portfolio with risk triaged across different stages and technology sub-sectors and astute investment teams with experience across the cycle.

While significant macroeconomic headwinds and uncertainty remains for technology businesses, we are increasingly optimistic that markets have now begun to stabilise and that the relatively low levels of fundraising and dealmaking experienced in FY23 will not persist for the entirety of the next 12 months. 

Our strategy, based on the deep levels of experience and expertise in our investment team, our scalable and adaptable model, and thesis-led investment approach, means we are well-positioned as we transition into the next stage of the cycle.

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

“Our focus for the year has been on adaptation for our business and active management of the portfolio. The strength of our model and expertise of Molten’s people has enabled us to do this, providing relative resilience throughout a period of challenging macroeconomic conditions.

“While economic uncertainties persist, we are beginning to see signs of stabilisation. Molten is well positioned to manage through a recovery and capitalise on any opportunities presented and in doing so deliver for shareholders.”

Notice of Full Year Results:

Molten Ventures announces that the Company’s Final Results are scheduled for release on 15 June 2023. Presentation and conference call details will be confirmed in due course.

-ENDS –

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 30 September 2022, Molten Ventures had a diverse portfolio with shareholdings in 78 companies, 21 of which represent our Core holdings and account for 64% of the Gross Portfolio Value. Our Core companies include Thought Machine, Coachhub, Graphcore, Aiven and Ledger. 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 £970m capital into fast growing tech companies and have realised over £450m to 30 September 2022.