Release Date: October 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Schroders Capital Global Innovation Trust PLC has made 18 new investments since taking over the trust, with several showing strong revenue and earnings growth.
- The portfolio is transitioning from legacy investments to new investments, with 67% of companies now profitable or fully funded through 2026.
- The trust has achieved a 32% average sales growth for revenue-generating companies, indicating strong future potential.
- Successful exits include Carmot Therapeutics, which was sold to Roche, yielding a 3.2 times return on investment.
- The trust is on track with its buyback program, having GBP30 million in cash and money market funds, ensuring financial stability for the rest of the year.
Negative Points
- The first six months of 2024 have been challenging, with a 20% decline in NAV and a 17% decline in NAV per share.
- Legacy investments have underperformed, contributing to a 43% discount compared to NAV.
- The trust's largest public equity holding, Oxford Nanopore, declined by 55%, impacting overall performance.
- Reaction Engines, a legacy investment, has been significantly devalued due to slower growth and capital challenges.
- Despite a large buyback program, the discount to NAV has not narrowed, causing shareholder frustration.
Q & A Highlights
Q: Can you explain the buyback program and its impact on the discount to NAV?
A: Harry Raikes, Co-Portfolio Manager, explained that the Board committed to a buyback program, repurchasing a minimum of 5% of outstanding shares for 2023 and 2024. The Board also intends to recycle 25% of proceeds from legacy investments into the buyback. Despite these efforts, the discount to NAV remains a concern, and discussions with the Board continue to address this issue.
Q: How is the cash for buybacks being sourced, and how does it affect new investments?
A: Harry Raikes clarified that cash for buybacks comes from selling liquid public holdings and gradually reducing positions in companies like Oxford Nanopore. This approach ensures the fund has the necessary resources for buybacks, operating costs, and new investments, without relying on volatile public stocks or speculative private sales.
Q: Do you personally hold shares in the company, and how does that align with shareholder interests?
A: Tim Creed, Managing Director, confirmed that he and other team members invested in the trust when they took over management, aligning their interests with shareholders. Harry Raikes also mentioned being a long-term shareholder, emphasizing their commitment to improving the trust's performance.
Q: Why can't you disclose the names of some new investments, like AI Company II?
A: Harry Raikes explained that disclosure restrictions are due to agreements with the companies and co-investors, who prefer confidentiality. This allows the trust to access high-growth opportunities that might otherwise be unavailable due to public disclosure requirements.
Q: What are the challenges in reducing the size of legacy investments, and how do you plan to address them?
A: Tim Creed highlighted that selling private companies is challenging due to limited market interest and minority positions. The team has worked to turn around some legacy investments, but market conditions and strategic directions of these companies pose ongoing challenges.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
