Molten Ventures Plc (GROW) Earnings Call Transcript & Summary

Good morning, and welcome to the Molten Ventures Plc Annual Results Presentation. [Operator Instructions] I'd now like to hand you over to Martin Davis, CEO. Good morning, sir.

Good morning, Paul, and good morning, everybody, and welcome to our annual results for financial year 2024. As you may be able to tell, I'm on the move today, I'm in Edinburgh on our roadshow, Ben was in Dublin yesterday. And the reason this is important is that part of the reason that we have listed as a business and one of our objectives is to open up this really attractive asset class to a broader set of investors. And as a result of that, it's very important that we are as transparent as possible and share the level of information that we do with institutional investors, with our retail shareholders as well. We very much believe that all shareholders are equal. And so therefore, using this platform really for the last 18 months, increasingly, you've been dialing in to hear about a range of aspects of whether the results or indeed elements of our investment thesis. And we think that this is something that's very important to us as a business. And we're very pleased that we'll be able to do this road show and present to our retail investors at this particular time as we're in the middle of our institutional investors roadshow. So you'll get the same information as everybody else and we will give you the opportunity to ask questions afterwards. Myself and Ben will probably talk for about half an hour, maybe a little bit more. There's quite a bit to cover. And then obviously, we'll open up to questions, and we're very happy to engage as much as we possibly can. So looking at the results for this year, it's really been a year of 2 halves. And we've continued over the last 12 months to develop the platform and to continue to build out and support the portfolio. It's very important for us as a business to be able to provide that support to the portfolio. And we're very pleased that we've been able to see some degree of stabilization in the numbers. Ben will take us through the detail of those numbers in a few minutes. But at a high level, broadly what we've seen is stabilization in the second half as a result of a slight recovery, which balances out the slight numbers that we produced at the half year point, which was really a continuation from the continual reduction in valuations that we've seen in our space over the last couple of years. But over the last half, seeing that stabilization of valuations gives us a degree of cautious optimism that we are seeing a degree of leveling out across the whole sector and that we may be preparing to go into the next stage of the cycle. As we move into the next stage of the cycle, it's very important for us to be prepared. And we've done a lot of work over the last year to ensure that we are ready for when that cycle changes. And that's a combination of clearly managing our portfolio and we've continued to support our portfolio company -- portfolios in very good shape. We're very pleased with the progress that we've made over the last 12 months or so. We've continued to see revenues growing, as we've shown in the results, over 50% growth in the core, which does show the strength of the demand of the services that our portfolio companies are providing. But also in these difficult times, it's important that we keep an eye on margins. And we're very pleased to see a very small uptick in margins up to average 67% operating margins across the core portfolio over the last 12 months. Likewise, whilst there is this liquidity -- whilst there remain liquidity constraints across our sector, it's important that our portfolio of companies preserve their cash. And we're very pleased that 85% of the portfolio has -- is reporting -- over the core portfolio is reporting over 18 months cash runway, which gives us then time and us time to be able to go back into growth as we continue through the current stage of the cycle. Now I wanted to talk a little bit about our model. I'm conscious that we'll have a mix of people on this call, some know us very well, some know us less well, but I do want to spend a few minutes on our model for those that are less familiar with us. What we're trying to build is a multi-stage platform for a pan-European venture. That's what we want to do. We invest in tech, we invest only in Europe and we invest across the various stages. As we have gone through the various cycles, as we move into the next stage of the cycle, access to seed capital and seed invested businesses is very important. Our Fund of Funds gives us that access. Where we are predominantly investing is at that growth stage in the middle of this chart. And that's when our companies have gone through their early stages, they're really into growth mode. And it's about the execution risk of that rapid growth is where we traditionally have invested. And that's where we have our -- the core of our investments; really A+B into that real growth stage. But it's important that we also do play and have access to other stages across the cycle. And the reason for that is that we need access through our Fund of Funds so that we can get early access to early seed invested businesses. And through the Fund of Funds we have access to -- we've invested in over 80 seed funds, nearly 2,000 seed invested businesses. It's a different level of risk. We're not seed investors, but it gives us that access to deal flow and the visibility of what's happening in our sector, which is really, really important for us to be able to follow on in the early stages, and I'll talk a little bit about that's really where Forward Partner sits, the Forward Partners team, and I'll talk about that later. But that's for us to be able to invest in that early stage, but really for the PLC is that really growth stage of investing. And then as businesses grow and as they become more mature, pre-IPO, the check size gets bigger and that's where our third-party strategy is important because it gives us additional capital to continue to invest in those companies. So spotting them early, investing in the core states that we invest and being able to continue to follow those companies right up to IPO, an IPO or exit is why we're trying to build this multi-stage platform. But we're also conscious that we have to deliver results. And actually, we believe that by focusing on the core areas that we focus on, by being able to have access in the early stage to the best deals and spot them early and to be able to follow them right the way through, that's how we deliver our really strong results. And so this is our whole model. This is a new chart to some. We're very happy to share it with you and we're very happy to take questions on it. But in broad terms, we feel that it reflects nicely the different stages that we invest. The fact that it's important for us to invest and to deliver returns, but also the cyclical nature of our market where we invest in companies, we grow them, we exit them, we generate cash, we reinvest and that circular model is something that's very important for us. So that's our model. That's where we are. That's the very brief highlights. Probably, what I'd ask now for Ben to talk about the specific financial highlights and also what the progression we've seen in the portfolio.

Thank you, Martin. Good morning, everybody. On this slide here, we have the highlights for the year. We've just put out these results, but we had pre-released the majority of the numbers in our trading update in April. There were some small adjustments to those, but broadly in line with what we released the numbers here are slightly ahead of those that we put to the market in April. So if we look at the gross portfolio value that we come out of the year with, we have GBP 1.379 billion, which is up March to March from GBP 1.371 billion. This is a function of the invested capital, which was GBP 65 million in the period. And the proceeds and realizations of the investments and realizations are the 2 cash movements, which impact on the size of the portfolio. And then the other impact is the fair value movements. And for the year, this was down 1%. But as Martin already outlined, that's a story of 2 halves, and we'll come into that into -- in more detail in a moment. Looking at how that translates into the balance sheet, the outturn for net assets is GBP 1.25 billion. That's up from GBP 1.19 million as of a year ago. The adjustments from the gross portfolio value to what we call the net portfolio value that sits on the balance sheet, taking into account any accrued carry performance fees. And then we add on the cash at the period end, which is GBP 57 million at March. And that includes the equity raise that we undertook last November, December time, which was GBP 55 million net of fees. And when you take into account the drawn debt, which is broadly GBP 90 million, you come to this net asset value. And what we have to do there is take the issued share capital, so dividing by the net assets of GBP 1.25 billion. We then divide that by 189 million shares, and that brings us to the NAV per share of GBP 6.62. Just looking across the income statement for the period, we are reflecting a loss. But as we'll touch on in a few moments, seen more stabilization across the portfolio, certainly in terms of valuations in the second half of last year. Loss for the year in aggregate is GBP 41 million. And then one of our KPIs that we're spending a lot of time and focus on is on the operating costs net of fee income as a proportion of net asset value. And this is really reflecting the fact that in the private market structures, which will be more typical for the types of investment vehicle in the asset class that we focus on, you will normally see fee structures around 2%. And what we're trying to do here with income from third-party assets is to offset any costs that we have on our balance sheet, on our income statement rather and that net of income and cost for this period was 0.1%, which is substantially below our target of 1%. When we think about that income, where does that come from? It comes from assets that are held and managed by us, multi-ventures, but not on the balance sheet. And if you look at the AUM for the period, that's up and growing in the year as we put more focus into those third-party assets. We have about GBP 400 million in our EIS and VCT portfolio that sits alongside the net assets on the balance sheet. And we've increased the amount of third-party income that we're taking with other funds, such as our Irish Co-Investment Fund and syndications of the Fund of funds. So the AUM number for the end of the period is GBP 1.8 billion. So moving on to the -- a bit more detail on the year and how it came together. This chart is marking the opening gross portfolio value. In the midpoint, you've got the September interim numbers that we released back in October, November time. And then on the right-hand side, the position of the closing of the year. We show in the bars through investments, the cash that has gone into the portfolio. The cash was broadly in line with the realizations. This was very much a year of managing the balance sheet and managing our capital preservation. The additional investment above the GBP 39 million that we realized in the period related to a share-for-share acquisition of Forward Partners. So there was an extra GBP 25 million on that invested capital, giving a total for the year of GBP 65 million. So GBP 65 million invested against GBP 39 million of realizations. And then we get into the ups and the downs of the portfolio movements. The first half of the year in total was a negative GBP 50 million reduction as we reflected through the reduction that we've seen over really the last 18 months in the technology market, in the public market for technology stocks. And these are the multiples that we look across to as we value our portfolio and measuring that against the commercial traction of the businesses. In the second half of the year, we've seen a lot more stability. So the existing portfolio before the 2 acquisitions that we undertook; firstly, Forward Partners; and secondly, Seedcamp. The existing portfolio was very much stable in the year or the second half, so flat. And what we've seen is uplifts, and you can see in this box of GBP 87 million. We have a GBP 39 million uplift related to the Forward Partners transaction. And then we have additional uplifts relating to the Seedcamp transaction within that number. And offsetting that is the reduction that we see in some components of the portfolio, obviously, across over 100 companies. There were ups and downs. So what we're reflecting here is the aggregate of those ups and downs. When you then take into account the foreign exchange movements that led us to a minus 1% reduction for the whole year. So certainly, seeing much more stability in the second half that we're now carrying into this FY '25 period.

Thanks, Ben. Maybe I'll talk a little bit about deployment. And I think this is a chart that those who have followed us for a while will be familiar with. It's one that we show every year. I think it's important to show where we're deploying capital. The obvious spike here in this chart is in financial year 2022. And really, the big driver there was the follow-ons, GBP 130 million of follow-ons over that year. And again, the reason that's important was that that enabled us to put the cash into our companies so that they have a sufficient cash to be able to ride through the cycle. [Technical Difficulty] And as a result, it was -- we deployed much less last year. And indeed, the majority of what we did deploy, GBP 30 million of the GBP 65 million, was related to the acquisition of Forward Partners and the Seedcamp deal. So we did deploy less last year. Looking ahead, I expect us to get much closer to what you might call the more traditional investment cadence. So in the region of GBP 100 million. GBP 100 million to GBP 150 million in total. And I think that's where we would expect to get to. So when you look at our cadence over the last couple of years, a lot in '22 to give up our company's cash flow season through the downturn, short last year in order to preserve capital whilst we're at the bottom of the downturn and moving back into what I would assume in this next year, expect to be back into a much more normal investment cadence. When you look at what we've actually invested in, I think it is -- again, for the fourth quarter, the green boxes are the second deals we did Forward Partners and Seedcamp, again, you would expect that. But we have not been quiet over the whole year. And we have continued to invest in companies, tomorrow's winners and the likes of Oliva, IMU, Morressier and Binalyze and Anima, good company, very typical companies that we invest in. But as well, over the period, as you would expect, we've continued to put money into our existing portfolio of companies. And obviously, we have seen in the red boxes some realizations. And we'll talk a little bit about realizations later on. But overall, it was still quite a busy year, but inevitably focused at the back end of the year on the principal secondary deals that we did within -- with Seedcamp and then also with the Forward Partners deal. So I think what I'd like to do next is move through very, very briefly. Again, this chart will be familiar to people. I don't want to take you through a lot of the detail. I think the key points here, which tracks -- this tracks our NAV growth and our cash realization. And we have targeted, as those again that are familiar with us, we targeted 20% return on NAV growth. We have delivered through the cycle since listing average return of 31% and generating cash, which is also very important. We are targeting 10% return from the opening growth portfolio. And we have delivered so far 16% per year. Now I do say this is through the cycle. These numbers don't follow the -- our financial exits, don't follow our financial dates for our financial years, obviously. But when you aggregate it through the cycle over that period, then we continue to deliver above 20% NAV growth per year and above 10% cash realization, which I think is something very important to show that we do deliver financial performance despite investing in these super exciting companies. Maybe now I think, again, this chart will be familiar, maybe hand over back to Ben to talk specifically about our returns analysis. Ben, do you want to pick that up?

Yes, sure. Thank you. So this chart is really outlining, as Martin described, the returns that we've had since the original 2016 IPO. We've brought over GBP 500 million of capital back to the balance sheet through these realizations. The realizations are a very important part of the model. It allows us to recycle the capital. But it's also important to understand that this is very much a portfolio approach to investment. And as you can see from the chart on the right-hand side, in the bracket of 3x plus multiples on invested capital, these are the returns generated in what we consider to be the winners, if you like. And these are the largest portion of the returns when you look at the returns on proceeds. The majority of them will sit here. And so venture, as you can see from this chart, is very much skewed to the winners in the portfolio. And the evergreen model allows us to double down on our winners and then hold those companies until the right time to exit and realize that full valuation of those businesses. What is also important is how we manage the rest of the portfolio. We do have losses. On the left-hand side, you can see there are no returns on just under 20% of our invested capital. The middle cohort that you can see, there's sort of less than 1 and 1 to 3. That's where a lot of the management time will go to manage these portfolio companies to generate good outcomes, but also recognizing at the right time that these companies are still valuable to somebody else even if they're not generating the types of returns we would all want to see on the right-hand side of this chart. And I think when you consider that in the context of how we invest in companies and what we look for, the inherent underlying IP of these businesses, which is reflecting in higher gross margins is then an important factor to ensure these companies remain valuable to somebody and we can turn those companies to cash and proceeds that come back to the balance sheet. So very much a portfolio approach to managing risk. Risk is triaged by stage, but also you can see here in the return. So while we'll get a lot of focus on companies in the core that are the majority of the value of our portfolio, it's important to recognize that it's the whole of the portfolio that we as the team will focus on to drive the returns that we are able to deliver to the shareholders. Just moving on to the next slide, I'll go into a little bit more detail on the income and the costs that I touched on in the highlights. On the chart on the left-hand side, we show the income and the costs and we show the net of those with the yellow lines, you can see down at the bottom and the black line, which is income and cost net as a percentage of NAV and then as a percentage of assets under management. And as I mentioned, the private standard is 2% and we're pushing our income up over periods of time, but also recognizing as we scale, our cost base has increased as well. But the measure of those 2 components is where we're really trying to make sure that as we drive more income, we get the scalable factors of the model, which ensure that we'll have more efficiency in that cost base and we should be able to drive that debt down even further over time. But even as we said now, it's substantially less than our 1% target. And so that is a focus for us. On the chart on the right-hand side, this is showing the NAV progression over time in the financial year '22. That was the high watermark, really reflecting the higher asset values that we were seeing in that market environment. Since then, we've seen interest rates increasing. And that's impacted on all asset values, but particularly looking at our portfolio, that's impacted on the multiples that our companies will be valued against. And so over the last couple of years, we've seen continued growth in the portfolio in terms of their commercial traction and net revenue, we have seen reductions in the values. And we feel like with the message of stability, we're starting to see those multiples probably have started over the past 6 months to increase. So hopefully, we're seeing a trajectory where we'll see them coming back to more normal 10-year averages, and they really have a little way to go yet before we see that in its entirety. But obviously, from the perspective of valuing our portfolio at the interim period to September and also to the period to March, we're reflecting the current values as reflected in the public markets into our assets, and that's how our net asset value is derived. Maybe just moving on, Martin, I'll let you touch on the broader portfolio.

Yes. Thanks, Ben. And maybe I'll just give them -- again for those of you that are familiar with us, you'll know that we give more detail on what we call our core, which is in this instance, it's always between about 15% and 20% -- 15 to 20 assets that always represent somewhere around 60% of the NAV. This time around, we've got 20 assets that are just over 60% of the NAV. And we -- I'd like to give a little bit more detail on those so that we could give more clarity to shareholders around the broader portfolio. When we look at this at a high level -- and I'll ask Ben maybe to talk a little bit about how we've come to some of the numbers and our methodology in a minute. But when we look at this at a high level, we've seen stability over the year. But when you look at certainly some of the reductions that are being shown here over the full year, I think it's important to bear in mind that if you look at certainly thought machine, Aiven, Ledger, Graphcore, all of those reductions were taken in the first half. So those were all announced in November. And so therefore, actually, there is no change over the last 6 months or very small change. What we have seen is a small uptick in some of those companies that are delivering, to Ben's point earlier on, really good solid commercial traction, and those are the likes of Revolut. You can see here Form3. And indeed, ICEYE has just done a recent large fundraising. And so that is reflected. But in broad terms, most of the changes, certainly the downturns, were taken at the interims and are not news for the last 6 months, they're broadly flat. I think the only other thing I would say when we look at the overall portfolio is that we remain to be pleased that it is diversified. We have no asset, single asset that's over 10% of the NAV. And we think that this diversified approach gives us a much better ability to deliver smooth returns over time. So I think highly diversified and nicely smoothed and stable portfolio is what I would say is the kind of the high level. What might be helpful, Ben, is if you could just take them through a little bit more about [Technical Difficulty] valuations?

Yes, absolutely. So I'd mentioned on a previous slide where we're reflecting public market multiples for technology businesses. We follow international private equity venture capital guidelines in value in our companies. And what you look forward the best source of evidence when following those guidelines is when the companies have raised capital through a market pricing process with third-party capital being invested into the business. And that will therefore be your best source of evidence. So if a company has raised a round of capital, we can use that as a starting point and then look to what's changed in the market since they raised that capital, be that up or down. And similarly, how the company has performed against its own projections, which it was forecasting at the time of the round. So that allows us to do a calibrated price of last round approach. But again, that is very much focusing in that calibration process around the company's delivery against its targets as well as the broader market backdrop. In a similar way, we will look at the public market multiples for a peer group of each individual company and apply the multiples that the public market is inferring against the commercial traction of the underlying company. And the commercial traction is driven by the revenue growth. A lot of our businesses are not profitable. And as they grow and gain market share, that is the original initial focus. And what you can see here, therefore, on the chart on the left-hand side is that the drivers of that portfolio grows and really the revenue growth in their businesses. And that forecast for this coming year '24 is over 52% -- is over 50% in the core companies and that's remained at a strong level. There's variations within some of the businesses where they have more maturity, and therefore, they'll be growing maybe more like 20% to 30% and then other businesses which will be growing over 100%. So this is an average that's weighted to our holding values. That growth is slightly down on prior year as companies continue to focus on capital-efficient growth. And I think, if anything, this is a level of growth that we think is sustainable, but also reflective of better cost controls as we've seen across the environment in its entirety given the higher cost of capital driven by interest rates. The middle chart shows us the gross margins of our businesses as an average again. This is now coming out at 67%. And for us, the gross margins are an inherent marker of the companies being an underlying technology-driven business. And also that the companies can at some stage turn on that EBITDA profitability at the levels we would anticipate in the sort of region of say, 20% of profitability at the right time on the company's journey. So investing in high gross margin businesses is clearly an underlying fundamental part of our investment thesis. And then finally, we look at the cash runway and resilience of those companies. Clearly, when we're evaluating the businesses, we're looking at how much cash runway they've got in the first instance before we move to any other parts of the methodology. And it's pleasing to see that the blue lines have moved to the right-hand side here. And we made a statement that over 85% of core has more than 18 months of cash runway. It's worth bearing in mind as well that we manage that cash control with our businesses very closely and very tightly in terms of when the run rate takes them to, how much time they will need to raise additional capital, what the syndicated investors around the table can put to work in terms of capital for the business if it needs more equity for growth. And so that's a fairly normal part of the model where businesses have raised for, say, 12 to 18 months in proving out additional milestones. And that's something that we've been able to demonstrate over the past year where there have been less active fundraising environment. The companies have managed those cash flows very well and that we've had to put less than GBP 10 million into our entire portfolio to support those businesses to bridge to the next milestones. Passing back...

Thanks, Ben. I'll talk a little bit about the Forward Partners and Seedcamp Fund III acquisitions that we completed last year. Purpose of this call is not to go through, as we did do a specific call on Forward Partners. So I won't rehash all of that. Suffice it to say that the strategic rationale was for us to acquire attractive assets at a decent price for us to also acquire the capabilities that enable us to provide -- to do some more slightly earlier investing, which is very much where Forward Partners have operated in the past. And it really enhances both the multi-stage platform that I talked about earlier on and also gives us some more attractive assets for us to be able to make returns on and indeed to continue to invest in some of the notable assets like Robin AI, Zopa and Gravity Sketch, well-known companies that are very typical of the types of companies we would be investing in. So the acquisition was completed in March and the integration of that has gone extremely -- almost seamlessly. The team has moved in and is very much part of the Molten team now. And the portfolio, clearly at the year-end, Ben and his team were able to carry out the valuations process, including all of those in the same way that we would do -- we would value our own businesses. So the integration really is very much being completed. There are some legal entities that still need to be cleaned up a little bit inevitably. But overall, the acquisition has been completed and we're really back into business as usual. But we have that capability to invest slightly earlier, which is a slightly different investment philosophy and enhances, as I said, of this multi-stage platform. The other piece is the Seedcamp Fund III. We have done a secondary with Seedcamp previously. And secondary is when prices -- when liquidity is low and prices are where they are, secondary market is very attractive. And we have really unique access to some really good portfolios and Seedcamp Fund III is a classic example. It's really our relationship with Seedcamp that goes back many years through our Fund of Funds program that has enabled us to get access to that and to be able to complete that transaction. There are -- it's a relatively small portfolio, but really the value is a small group of assets that we know reasonably well, and clearly, Revolut being one of them. And so I think, again, what it allows us to do and we continue to do this is to look at portfolios where there are assets that are well priced and there are funds that want a bit of liquidity and are willing to offer a decent price. And we think that that opportunity will remain over the next at least 12 months as liquidity remains as it is. And so we would look to do more of these types of transactions. But it's very nice to be able to do that, complete it fairly quickly, integrate it into our business and moved on. I want to talk very briefly because we've seen -- we've got a lot of questions coming in, some really good questions they are. The questions are all the areas that we want to cover today. So I think I'll probably move over this quite quickly so we can get into the questions. But we have also announced today our allocation policy. And I think it's really important for us to be able to do that. We have guided that we think there will be GBP 100 million of realization over this financial year. We've already announced Perkbox and Endomag. Although we need to be clear that those have not completed yet, they are subject to a number of conditions, particularly regulatory conditions. And so even though those haven't completed, obviously, we've got some -- a degree of visibility on our exits over this year. And therefore, the obvious question from shareholders comes to what are you going to do with the cash? So broadly, we've discussed it at the Board, we've agreed an allocation policy and it's relatively straightforward. As you would expect, we take the medicine that we offer to our portfolio companies, which means that we need to have 18 months visibility on our operating costs, servicing our debt, and of course, our LP commitments. And so we have an ongoing 18-month look through to make sure that we have enough capital to be able to see that through. The next priority then comes to some specific investments. We do see investment opportunities when prices are where they are. And we do expect to increase our investment cadence over the next year. So we would expect to do some more investing, both in primary, but as I mentioned earlier on, I suspect probably a little bit more into the secondary market. But also, as these realizations come in, we do think the opportunity for us to -- both from feedback from shareholders, but also to use some of that capital for share price -- to benefit the share price. So therefore, we have also agreed that we would do a minimum of 10% of our realization this year into shares, utilizing our existing authority granted by the Board at the AGM. So very much, we do think it's worth -- we do think there's an opportunity at this level of discount for us to be able to deliver a decent return and support the share prices through some buybacks. But the reality is that we are an investment company. And so even though we will be deploying some into a buyback some of our realizations, we will continue to invest. Now that's really what I wanted to cover. I think we have a lot of questions. I'll probably save any wind up comments until the very end. And I think, Paul, should I just go straight into questions?

Yes, absolutely. And just to say thanks to all those investors submitting those. Just to remind investors, if we don't get time to run through all the questions, we will be able to review those published responses where appropriate to do so on the Investor Meet Company platform. So Martin, please over to you just to read out those questions where appropriate. Thank you.

So I'll read out the question and I'll deal with them. You may have noticed our cameras have gone out. I'm sure we have most our occurs have gone up. That is the joy of being on the road. I haven't got the official bandwidth frankly in this hotel. So you have the pleasure of not having to look at Ben and I, but we are here. And obviously, that's why we put cameras off so that hopefully we can continue without interruption. So the first question is, can you advise why the NAV per share has reduced over 15%, while the performance of the portfolio has been flat? I will give my non-CFO answer in one sentence, Ben may want to give more detail. But in broad terms, obviously, we issued a lot of shares when we raised capital last year and also with the all share purchase of Forward Partners. And that has with the flat NAV led to a dilution of about 15%. Is there anything else you want to say on that, Ben or does that cover it?

No, I think that is the majority of it. And clearly, in the income statement, we are showing a loss for the year because the first half of the year was down, the second half showed more stability and we got the majority of those losses we did through the secondary transactions, but the currency did move against us in the second half. So there was the overall loss positions obviously included into that reduction.

Yes. So the next question is, in September you're looking at a upside to GBP 7.80 as a result of the transaction since we reduced the GBP 62 million, similar sort of question. But I think the question is, what evidence can you give that investments you have made will outweigh that dilution? Now again, the dilution is a combination both of the acquisition of Forward Partners, but also the capital raise. And the capital raise has enabled us to invest, for example, in Seedcamp and we have a pipeline of a number of others. Now what evidence can we provide? Well, the reality is that in venture, it takes some time for that to come through. We applied our normal hurdle rate. And in fact, our hurdle rate for secondaries is slightly different. We expect that money to come back sooner. That returns to come sooner. And we're very confident having completed those transactions that those returns will be delivered back to the balance sheet. But the real proof of the pudding will come in time. But where we are right now, that extra liquidity we got from the capital raise and the assets that we've acquired give us really good confidence that that dilution was the right thing to do and will deliver good returns back for shareholders. Next question is, can you comment on the cash runway in the portfolio? You mentioned 18 months. Can you comment on the mix of being tight in OpEx, CapEx and better revenue performance? I mean, I think -- unless you want to give any more detail on that, Ben, I mean, the reality is all of our companies are different and they have different levels of growth. We want them -- if we don't see proof points in growth in the portfolio of companies then we want them to extend their cash runway inevitably. If they do cut costs, there will be an impact on growth. But when you look across the core at 50% growth over -- anticipated for this year, 60% over last year, that is still impressive growth. And in a tough environment, we think that's sufficient despite companies maintaining their runway. I don't know if there's anything you wanted to add to that, Ben?

No, I don't think so. I think the answer you've given covers that. And also the -- we do obviously aggregate the numbers that we're showing to people. So we're not publishing in the public markets all of the details of our underlying portfolio companies and preserving their benefits and being private. So we don't give too much more detail than the aggregate run rate.

The next question is in relation to Endomag. You'll recall we've announced the sale of Endomag to Hologic. And the question is that showcase of the CEO Day, Endomag looks like a very exciting opportunity. Hologic is expecting it to be only slightly dilutive in '23. What made this transaction appealing? And also one might expect your conservative valuation methodology lead to a bigger uplift from book value on realization. Endomag withheld that same value at financial year as well as at the interim, even then its value uplift in half 1 was very small. I think maybe I'll take the first point, and Ben, I don't know if you want to cover the second one. So look, Endomag is a very exciting company. I think what we have to do, we have to look across our whole portfolio at the right time for us to be willing to sell companies. And when you have an opportunity like that where there's clearly a strategic, it probably generates greater strategic value for Hologic than it does for us to be able to continue to run it as an independent company. We have to balance that with the ability to return capital back to the balance sheet and back to investors. And Endomag was also in our EIS and VCT investment strategies. So I think overall, we have to balance getting the cash back versus the growth versus the home. And that's why we feel that that is -- it is an exciting company, but that's the right home for it. I don't know if you want to talk about how we kind of narrow valuations, the closer it looks to coming to exit, Ben?

Yes. I think there's probably a few points to mention here. When we look at the valuation methodology, clearly, we're having to fair value our assets. Within that window of fair value, we would argue that we were always being prudent about our approach to that. And I think that's been demonstrated with our track record of selling uplifts. And I think the average uplift has been in the region of 15% when it's come to a sale over the last 3 years. In the case of Endomag here, as the transaction or rather as a company matures and gets towards -- continues to grow, but matures into maybe where we think there's an exit value coming together. And from that perspective, we'll look at the M&A market and consider for each of our assets where we think the likely sales value would be, then we won't grow the valuation above that clearly. And so it will slow over time. We haven't had that many exit transactions over the last 18 months. So you'll see with a few of the portfolio when they're closer to the potential of being realized, then we won't be increasing the fair value substantially. So I think that's a sensible approach and clearly proven and it's ensuring that we're keeping our values aligned to where the market is. And it's also demonstrating that we will get some uplift. I think the question about having a greater uplift actually is this probably not substantially positive because it would suggest that the valuation that has been carried out wouldn't be within that range of fair value. And therefore, obviously, we have a daily traded share price that is linked to our net asset value. So I think we get that balance overall pretty well delivered.

Next question. You're expecting the reach of GBP 100 million realizations. You say, around 10% of that will be directed to share buybacks. Is it, therefore, relative to expect you will deploy around GBP 90 million in direct this year or do you intend to either reduce term loan or draw some of the else here? I'll answer. I think I've covered most of this. We do expect 10% back, but the reality is that we would be expecting to see -- we would not be expecting to invest directly GBP 90 million into new investments. It would be a mix into direct investments and into secondaries. And I would expect probably more to go in the secondaries. We also will be deploying some of that into our existing portfolio companies in follow-ons. As far as the term, we haven't...

Can I just maybe touch on the debt side just to sort of people's awareness. We look at the cost of capital in the market, be that equity or be that debt. Clearly, most of our funding that we've raised has been equity and that's right. But I think having some portion of debt in the capital structure makes sense, it reduces down our cost of capital. But it also serves to give us liquidity to bridge through cycles, but also to bridge to realizations. The level of debt that we have now with GBP 90 million drawn on the term loan and then GBP 60 million undrawn revolving credit facility gives us in total GBP 150 million, which relative to our asset base is around sort of 12% of loan-to-value. I would say that other funds in the markets will take 15% to 20% loan-to-value within their structures. That probably feels too high for the asset class that we're in. But 10% to 12%, feels sensible to me and doesn't infer then on the equity story, but does give us that balance of cost of capital and that flexibility.

So the next question is, are your returns of Fund to Funds investments more or less successful than direct investment in companies? I think the [Technical Difficulty] is that different. We're not investing in Fund of Funds predominantly for the investment return. It does return very good returns to us, but it's not about the returns, it's about the access to the market and the ability to follow on those companies on horizon scanning in various sectors. It does deliver a good return, but that's not predominantly why we're there. And so therefore, the returns are different. The next question is, you already have GBP 50 million of realizations in the bag. I'm not quite sure what you mean by in the bag. That have been announced. But as I said earlier on, they are subject to a number of closing conditions. Is GBP 100 million guidance for financial '25 year on the conservative side? Look, it's on the realistic side for us we believe. It is still a very difficult environment. There's all talk about the cost of capital coming down, it hasn't actually yet. And so therefore, I think we're confident that that's a realistic number, but there are still many things and a great deal of uncertainty in the market. The next question is the loss in the year, circa GBP 41 million. Is that realized loss of IFRS 9 mark-to-market loss? Please help us better understand that number. It is the loss we produce. I think, Ben, I'm going to ask you to give a non -- relatively non-technical but brief answer to this. [Technical Difficulty]

So if you look at the income statement, we have non-realized movements. So this is a fair value movement on the portfolio, but it's unrealized being the majority of the movements that go through. There are 2 component parts there, a negative GBP 68 million offset with a GBP 39 million uplift, as we mentioned on the Forward transaction. So the investment movements were actually minus GBP 29 million. And then the remainder of the income statement reflects the income we get from management fees and then offsetting our cost base and that leads us to the GBP 41 million. So the GBP 41 million is a component part of several different movements. But when it relates to the investments, those are unrealized movements.

The next question is, you have acquired new assets as a result of M&A activity. I think this comes back to the previous question, yet NAV per share is down. On the face of indicators that the share issuance to acquire those assets has not been accretive to shareholders in the short-term as it has destroyed shareholder equity. Am I reading this wrong? I don't think you're reading it wrong, James, but I think it is not the full story. Firstly, we do expect, like all of our investments, the returns to come down the line. That is the nature of the investments. And also, of course, the dilution is also as a result of the cash and having cash on the balance sheet is beneficial to shareholders even if it is -- doesn't help NAV per share in the short-term. So I do understand your point. I think probably it sort of comes into the next question a little bit, which is, given that there's been a minimal amount of exits over the last 2 years, do you not feel there needs to be better balance between making your investments and using cash from exits for other things such as paying down debt or special dividend? The portfolio is already bloated, that's a statement. I'm not sure I agree with it, but there you go. So what is the point of adding to it. While exits are still going to be tough? Do you want an activist investor getting involved, but maybe you need to respect the perspective, they would bring. Okay. So quite a lot in there, James. I think the first thing is, we talked about the environment. It has been a tough environment. You have to go -- you have to kind of roll with the blows growth through the cycle in venture. And I think we're in a very strong position as we come out and we would expect to see the benefit over time. So I think that is just one of the natures of our business. I think we've discussed about how we would use some of those realizations for covering the debt and share buybacks. We want to support shareholders. I don't believe that the portfolio is bloated. We have a very diversified portfolio. And we're seeing good growth across the board. We get our realizations from all parts of the portfolio. It's not just the top end. And I think when we look at the deals that we're looking at, at the moment, most of them are in the kind of lower end of the core or the upper end of the emerging. And so I think it is important to understand that the whole portfolio does contribute to the value that we deliver to shareholders. And the question about do I want to an activist investor, I'm not even going to answer that. So I think you know the answer. Sorry, Ben, are you going to take that?

Of course, Martin, that the importance of venture is looking through cycles and the vintage creation by investing through those cycles is important as we look 3 to 5 years out and the growth that's going to come in the portfolio over that period of time. So we do need to continue investing for each year, but also in the current market environment, we see better opportunities for future vintages. So balancing that capital use with share buybacks, as we said we will do, but also the investment is crucial.

The next question is an interesting one. Most of the investments that have yielded greater than 3x return on invested capital have been fully realized. The exception is Revolut. Can you explain why you have exited others, but held on to this investment? So I think the first thing, and this refers to that slide that has the various boxes where we show our exits and the returns. And we want to get all of our exits clearly into the 3x plus box on the right-hand side. But in delivering returns, our 20% returns to shareholders, we also need a fair amount in the 1x to 3x. I'm not at least getting our money back. And I think that's something that's very important. And we will see -- with the exit we have at the moment, we'll see a number of them at different stages and in different boxes and a number of them will be in those 3x plus box. So I don't think at all that that's right to say that our 3x plus will be fully realized.

I just want to touch on one slide as well. Hopefully, people can see. But there's one slide which has a gross portfolio value table and there's a column in there showing the multiple on invested capital. You can see that actually many of the companies our holdings will be above those 3x. And as Martin said, it's about exiting those businesses at the right time. But it's not true to say that we just have one above 3x and we'll use that as a measure and then decide that's the time to realize.

And then on specifically, because the question is the exception is Revolut, can you explain why we exited others, but held on to this investment. The reality is, we exit at the right time for that company. And the exit time and the valuation is absolutely critical. And so therefore -- and indeed the buyer. And so therefore, we exit at the right time for the right company. And when we believe it's right time and the environment is right for Revolut, then we would look to do that. But there are lots of moving parts and we do not always, and in many cases, don't at all have control over exactly when we accept individual assets. Next question is a political one. How will [ Labour ] government policies impact your business? This is I think making the assumption that there will be a next Labour government. I'm not going to go there. However, what I would say is that in broad terms, when we look at the manifestos from all the principal parties, there is a lot of support for driving innovation, research, the U.K. Startup Ecosystem. And I think we've signed up to the Mansion House Compact, which is supported by both principal parties. We don't think there will be any change to that. So I think there is a legislative wind in our sales as far as political support for Startup Ecosystem in the U.K. and in research and development and innovation and science. And all of that is going to be good for our portfolio companies, which is good for us. So at this stage, I can't see a change of government other than disruption in the market for a period of time. I can't see it negatively impacting our business at this stage. Next one is the same thing. Can you speak the risk posed by Labour wanting to give carried interest to different tax treatment? I think that, again, I think it's quite clear what they're trying to achieve. I don't think that's a significant risk. I think it's not a good thing for the sector. I don't think it's a good thing for the industry. It may move some probably PE offshore or out of the U.K., remains to be seen whether that happens. For us, I don't think it's a big issue. It's disappointing, but that's -- we've got a role with these things and that's the way it is. It is what it is. We don't -- we can't get too excited or indeed change tax legislation. Next question is, do you track the growth of companies that you exit perhaps post-IPO in order to ascertain whether exiting at the point that public money is being raised for future growth is indeed the best time to exit? What lessons have been learned? Interesting question. And funnily enough, I think you might have seen. I was actually just looking at 3 of our listed companies that we exited I think reasonably well and where they have gone. If you look at [ Kazu ], it's gone to 0. Wise has obviously just had some significant reduction in the share price. And ironically, Trustpilot has actually been quite strong, but it's still trading below where we exited. So I think it's very difficult for us. Look, at the end of the day, we exit when we exit. We can't control once we're out. I think in general terms, when businesses -- we're not a public market investor. And so therefore, when companies list, we would look to exit them and that's what we've done. Their performance post us exiting is a point of interest, but it is academic because we're not public market investors. I saw UiPath has been lost nearly 50% of its value relatively recently again and way below the level where we actually sold out some time ago. So I think we're not trying to be clever with public markets, but we don't play the public markets, we exit at when it lists or in an orderly manner. And what happens post that, happens post that and that's where we are. So those are actually -- we've actually managed to come to the end of the questions, which I'm very pleased about, because obviously, the purpose of this is to give you the level of information and the opportunity to question us in the same way that we would offer that to institutional investors. And that's why these webcasts are so important to us because we do believe that it's important that retail investors are treated equally as institutional investors and we do want to provide the same level of transparency that we do to institutional investors. So I am actually going to say thank you very much, but I'm probably going to hand over to Paul first, who will...

Honestly, I was going to say he did very well. Thank you, both, yourself and Ben, for getting through every single question. Of course, if any further questions come through, the team will be able to review those. Before redirecting investors to provide you their feedback, I know it's particularly important to you and the team, as you said, Martin, if we could just have a few closing comments and then we'll get you some feedback.

Thanks very much, Paul. So look, it's been a very -- it's been a pleasing year for us during a very difficult environment. Obviously, coming off 2022 at that stage of the cycle, it's been a very difficult environment for venture and for private markets across the board. However, we're very pleased with where -- how we've managed over the last 12 months. We've continued to build out the portfolio. We continue to prepare ourselves and build the foundations, for example, in third-party assets so that when we do see the turn, we will be in a very strong position to be able to benefit from that turn. The portfolio has performed well and continues to be resilient despite a very tough economic environment. And one would hope that if the economic environment improves, our portfolio will continue to improve and we as a platform will continue to benefit from that improved environment. Now having said that, we do remain cautiously optimistic, because there are -- there's a lot of political events, and of course, there's a lot that could -- a lot of macro events that could change the macro picture. However, leaving last year, we've done -- we're very pleased -- I'm very pleased with the team and I'm hugely appreciative and have a great deal of admiration for the hard work the team has put in over the last 12 months because it has been a difficult environment. But we exited I think with a strong portfolio, stabilized valuation, good cash position and in a better position to build out this multi-stage platform for pan-European technology. So we're very excited about what tech can do across Europe moving forward. We're very excited about our portfolio companies and the stage we are in the cycle. And we very much look forward to being able to offer continued support to shareholders and to continue to drive value and to support our founders as we move into the next stage of the cycle. So from Ben and I, thank you very much for your time today. And finally, probably hand back to you, Paul.

Fantastic. Martin, Ben, indeed, thank you for updating investors today. Can I please ask investors not to close the session, you should be automatically redirected to provide your feedback in order the management to better understand your views and expectations. Just going to take a few moments to complete. I'm sure it will be greatly valued by the company. On behalf of the management team at Molten Ventures Plc, I would like to thank you for attending today's presentation. That concludes today's session. And good afternoon to you all.