TIDMSUPP
RNS Number : 2760J
Schroder UK Public Private Tst plc
12 December 2022
Schroder UK Public Private Trust plc
Announcement of Net Asset Value as of 30 September 2022
Schroder UK Public Private Trust plc (the "Company") today
announces its net asset value ("NAV") as of 30 September 2022.
Summary
-- NAV of 30.88p per share as of 30 September 2022, a decrease
of 5.9% relative to the NAV per share as of 30 June 2022
(32.80p).
-- The largest detractor from performance was BenevolentAI, the
listed AI drug discovery and development company, which saw a share
price decline of 54% on thin trading volumes.
-- During the quarter, the Company completed two new private
life sciences investments - antibody-drug conjugates development
company, Araris Biotech AG ("Araris"), and clinical stage oncology
company, iOnctura SA ("iOnctura").
-- After the period end, the Company completed another new
private life sciences investment in the T-cell development company,
A2 Biotherapeutics ("A2 Bio"). All these new investments were made
in line with the private equity sub-strategy for backing innovative
life sciences businesses at the clinical or near-clinical stage,
with high quality science and a strong financing position,
alongside high-quality co-investors.
-- As of 30 September 2022, the Company is well placed to
benefit from the depressed valuation environment when making new
investments - with more than GBP5.4m in cash, an unutilised loan
facility, GBP107.9m in public equity investments and a healthy
pipeline of global venture/growth stage companies.
-- From 1 October 2022, Schroder Unit Trusts Limited replaced
Link Fund Solutions Limited as Company's Alternative Investment
Fund Manager ("AIFM") and HSBC Bank plc replaced Northern Trust(1)
as the Company's Administrator, Custodian and Depositary.
(1) Northern Trust Global Services SE, The Northern Trust
Company and Northern Trust Investor Services Limited.
Introduction
Economic backdrop
After a rally in July, major public equity markets turned lower
and registered negative returns for Q3. Looking at key equity
indices on a constant currency (USD) basis, the MSCI World fell
6.2%, the S&P500 fell 4.9% and the FTSE All-Share fell 11.3%
(total returns (net) in USD). Hopes of a peak in interest rates
were dashed as central banks reaffirmed their commitment to
fighting inflation. The Federal Reserve, European Central Bank and
Bank of England all raised interest rates in the quarter.
In private equity markets, market volatility and expectations of
a global recession have meant that deal activity has slowed. Gone
are the days of free capital and growth at all costs. Later stage
(series B+) companies are being advised to focus on capital
efficiency, profitability and extend their cash runway, in some
cases completing funding rounds with existing investors only to
ensure sufficient additional time for growth into earlier, inflated
valuations. Meanwhile, the early stage (Seed and Series A) funding
market has been relatively less impacted with deal activity
continuing. For those companies that have been required to raise
external capital, the fall in public equity markets has started to
flow through into valuations, however at times there remains a
large gap between the valuations that investors are willing to pay,
and that entrepreneurs are willing to accept.
There has been a significant reduction in the number of mega
funding rounds (greater than $100m) due to the retreat of cash
rich, non-specialist, private equity investors - hedge funds and
other non-traditional investors that had rushed into VC over the
past few years - in light of heightened stock market volatility,
rising interest rates and faltering IPO markets.
The Company's Portfolio Manager, Schroders, remains focused on
backing the highest quality companies but with strong pricing
discipline underpinned by their 25 years' experience investing in
private equity. Indeed, the investment team has considered several
investments in private companies over the last 12 months which have
ultimately been declined due to unreasonable valuations.
Portfolio composition and valuation reviews
As of 30 June 2022, the Company had 34 portfolio holdings(1)
including 11 public equity holdings and 23 private equity holdings.
During the period, the number and composition of holdings was
impacted by the following events:
-- New investment in Araris.
-- New investment in iOnctura.
-- Mafic was revalued to zero.
-- RM2 International S.A. completed its business combination
with ARC Group Worldwide Inc., a U.S. OTC-listed company.
-- Sale of Plenti Group.
As of 30 September 2022, the Company ended the period with 34
holdings(1) including 11 public equity holdings and 23 private
equity holdings. All the Company's quoted holdings were valued
using unadjusted quoted prices. For the unquoted holdings, the
Alternative Investment Fund Manager (Schroder Unit Trusts Limited)
considered any material 'triggering' events since the last
valuation assessment as of 30 June 2022.
(1. Excluding holdings with no value.)
Recent developments
There have been no material developments since the quarter end.
Further details regarding the new investment completed in A2 Bio
can be found in the Investment Activity section of this
announcement.
Financial Performance
Attribution Analysis Public Private Net (debt)/cash Other NAV
(GBPm)
Fair value as of 30.06.22 127.7 164.2 6.7 (0.8) 297.8
------- -------- ---------------- ------ -------
+ Investments - 1.9 (1.9) - -
------- -------- ---------------- ------ -------
- Realisations at value (0.1) (1.6) 1.7 - -
------- -------- ---------------- ------ -------
+/- Fair value gains/(losses) (21.1) (2.1) - - (23.2)
------- -------- ---------------- ------ -------
+/- FX gains/(losses) 1.4 5.5 - - 6.9
------- -------- ---------------- ------ -------
+/- Reclassified holdings - - - - -
------- -------- ---------------- ------ -------
+/- Costs and other movements - - (1.1) (0.5) (1.6)
------- -------- ---------------- ------ -------
Fair value as of 30.09.22 107.9 167.9 5.4 (1.3) 279.9
------- -------- ---------------- ------ -------
Source: AIFM as of 30 September 2022.
The NAV as of 30 September 2022 was GBP279.9 million reflecting
a decrease of 6.0%(1) compared with the NAV as of 30 June 2022
(GBP297.8 million).
The quarterly NAV per share return of -5.9%(1) comprised:
-- Public equity holdings: -7.1%
-- Private equity holdings: -0.7%
-- Foreign exchange: + 2.3%
-- Costs and other movements: -0.4%
(1) Performance of NAV per share return differs to NAV return
due to the impact of share buybacks.
Portfolio
The Company's public equity holdings saw a decline in value of
16.5% contributing -7.1% to the quarterly change in NAV per share.
The largest detractor to performance was BenevolentAI, whose share
price declined by 54.0%. BenevolentAI listed in April via a SPAC
rather than a full price discovery process and the majority of
shareholders were locked up until mid-October. This has resulted in
thin trading volumes and price movements that are not necessarily
reflective of the operational performance of the business.
Meanwhile, holdings in Oxford Nanopore and IDEX Biometrics also
displayed share price weakness over the period declining by 3.6%
and 42.6%. Oxford Nanopore continues to deliver against commercial
milestones, however it remains some way from cash breakeven and the
stock price remains volatile. Meanwhile, shares in IDEX were weak
due to continued slow revenue generation, which meant the market
anticipated that an additional capital raise would be required to
fund the business through to breakeven. This raise was carried out
in November.
On the positive side, shares in global commercial-stage biotech
company Immunocore performed well increasing 25.7%. The company has
continue to proceed with developing its platform and raised c.$140
million in private placement in July 2022, extending its cash
runway by over a year.
The Company's private equity holdings saw a decrease in value of
1.3% contributing -0.7% to the quarterly change in NAV. No
individual holding fair value changed by more than GBP1.5m during
the period.
Foreign Exchange
During the quarter, the fair value of investments denominated in
the United States Dollar (USD), Euro (EUD) and Swiss Franc (CHF)
benefited from the depreciation in the value of the British pound
sterling (GBP). Whereas the investment in IDEX Biometrics,
denominated in Norwegian Krone (NOK), was marginally negatively
impacted by the appreciation of GBP.
Cash, debt, and net current assets
As of 30 September 2022, the Company held GBP5.4 million in cash
with no funds drawn from the loan facility.
Investment Activity
Realisations
During the quarter, the Company made one partial and one full
realisation totalling GBP1.7 million.
The Company made a partial realisation of its holding in Nexeon,
the manufacturer of silicon-based anode materials for rechargeable
lithium-ion batteries, generating proceeds of GBP1.6 million. In
January 2022, the company announced a $80m fundraising led by SKC,
one of Korea's leading advanced materials companies, with
participation from private equity firm SJL Partners. In August
2022, Nexeon completed a second close raising a further $90m from
investors including Ingevity Corporation (NYSE:NGVT), GLY Mobility
Fund and Korean private equity investors Daishin Private Equity and
Shinhan Investments. The sale was completed in conjunction with the
second close, taking advantage of the liquidity available in the
round to trim the position at an uplifted valuation.
The Company also sold its small remaining public equity position
in consumer lending company Plenti Group following the expiry of
its lock-up period.
New Investments
During the quarter, the Company made two new private equity
investments totalling GBP1.9 million. These included antibody-drug
conjugates development company, Araris, and clinical stage oncology
company, iOnctura.
After the period end, the Company also completed an investment
in T-cell development company, A2 Bio.
All three of these investments are in line with the private
equity sub-strategy for backing innovative life sciences businesses
at the clinical or near-clinical stage, with high-quality science,
a strong financing position, alongside high-quality
co-investors.
Further details on each company and transaction are outlined
below.
Araris
In October 2022, the Company announced it had made a commitment
of CHF 3.0 million (GBP2.7 million) to Araris, as part of its CHF
23.5 million (GBP21.4 million) financing round. New investors Wille
Finance (CH) and the Institute for Follicular Lymphoma Innovation
(US) as well as existing investors in the company's blue chip
syndicate, participated in this financing, including Pureos
Bioventures, 4BIO Capital, VI Partners, btov Partners and
Redalpine.
Araris is pioneering the development of a novel antibody-drug
conjugate (ADC)-linker technology to enable efficient and precise
production of ADCs. Its linker platform enables the attachment of
any drug payload to 'off the shelf' antibodies, without the need
for prior antibody engineering. The resulting ADCs have shown very
high activity at low doses and an improved therapeutic index
compared to FDA-approved ADCs. Araris is a spin-off company from
the Paul Scherrer Institute (PSI) and ETH Zurich.
On completion of the transaction, the Company invested c.GBP1.3
million of its total commitment with the balance expected to be
invested at the milestone closing at some point in the second
quarter of 2023.
iOnctura
In November 2022, the Company announced it had made a EUR1.3
million (GBP1.1 million) investment in iOnctura, as part of a
convertible loan. All the existing blue chip investor syndicate,
including M Ventures, INKEF Capital, VI Partners, and 3B Future
Health, participated in this financing.
iOnctura is a clinical-stage biotech with a portfolio of
programs that each target multiple core mechanisms involved in
cancer resistance and survival. iOnctura's pioneering programs
target core mechanisms of resistance and relapse which could lead
to significant clinical benefits. iOnctura has progressed two
therapeutic candidates into mid-stage clinical development:
IOA-244, a highly selective allosteric inhibitor of PI3K to treat
Treg-driven tumours; and IOA-289, a highly selective,
non-competitive autotaxin (ATX) inhibitor to treat cancer
associated fibroblast (CAF) driven tumours.
On completion of the transaction, the Company invested c.GBP0.7
million of its total commitment with the balance expected to be
invested in the first quarter of 2023.
A2 Bio
In November 2022, the Company completed an investment of $1.17
million (GBP0.99 million) to A2 Bio, as part of its $50 million
(GBP42 million) financing round. The total amount was invested
upfront. A2 Bio is backed by investors that include The Column
Group, Vida Ventures, Samsara BioCapital, Nextech Invest, Casdin
Capital, Euclidean Capital, UC Investments (Office of the Chief
Investment Officer of the Regents), Hartford HealthCare Endowment,
StepStone Group, Section 32 and Merck.
A2 Bio is using its next-generation cell therapy Tmod platform
to engineer T-cells that target the loss of genetic material in
tumours, enabling the selective killing of tumour cells while
leaving normal cells unharmed.
Top 10
The Company's top 10 holdings as of 30 September 2022 compared
with the respective holding as of 30 June 2022.
Holding Fair value % of total Fair value % of total
as of 30 investments as of 30 investments
June 2022 September
(GBP'000) 2022 (GBP'000)
Oxford Nanopore 62,069 21.3 59,853 21.7
----------- ------------- ---------------- -------------
Atom Bank 38,090 13.1 38,090 13.8
----------- ------------- ---------------- -------------
AMO Pharma 16,151 5.5 17,620 6.4
----------- ------------- ---------------- -------------
BenevolentAI 32,734 11.2 15,351 5.6
----------- ------------- ---------------- -------------
Federated Wireless 12,481 4.3 13,616 4.9
----------- ------------- ---------------- -------------
Reaction Engines 12,500 4.3 12,500 4.5
----------- ------------- ---------------- -------------
Immunocore 8,564 2.9 11,746 4.3
----------- ------------- ---------------- -------------
Ada Health 10,155 3.5 10,353 3.8
----------- ------------- ---------------- -------------
HP Environmental Technologies 10,006 3.4 10,297 3.7
----------- ------------- ---------------- -------------
Back Market 8,098 2.8 8,255 3.0
----------- ------------- ---------------- -------------
Source: AIFM as of 30 September 2022.
Outlook
Operationally, the transfers of the Company's AIFM to Schroder
Unit Trusts Limited, and the Company's Administrator, Custodian and
Depositary to HSBC Bank plc are now complete. Despite the
challenging backdrop of rising interest rates, inflation, expected
recessions and volatile markets, we believe the Company continues
to be well placed to capitalise on new investments in the private
markets with its new global strategy. Indeed, the extended
geographical focus allows us to leverage our network and invest in
the best opportunities, when viewed on a risk return basis, no
matter where they are in the world.
Several stock specific situations remain from the inherited
portfolio and we continue to focus on maximising return potential
from these for shareholders. We have capital available to continue
to make investments as we continue to rebalance the portfolio, and
have a healthy pipeline of global venture/growth stage companies
from which to consider potential investment.
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
Shilla Pindoria (Company Secretary) 0207 658 7267
Augustine Chipungu (Press) 0207 658 2106
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END
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December 12, 2022 02:00 ET (07:00 GMT)
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