A DECREASE in the valuation of Zopa has led to lower than expected growth for investment trust Augmentum Fintech.
In its delayed half-year financial report, Augmentum confirmed that its upward valuations of £14.9m were offset by a £10.3m reduction in the valuation of Zopa.
This left the trust with an overall gain on investments of £4.6m as at 30 September 2019.
Net asset value (NAV) per share increased to 112.2p, up from 109.6p during the previous six-month period – a 2.4 per cent boost. Since the Augmentum IPO last year, NAV has increased by 13.3 per cent.
However, the fintech backer noted that these growth figures would have been higher if it wasn’t for Zopa’s reduced valuation. This was due to the Zopa Group’s ongoing efforts to launch its own bank.
Yesterday (3 December), Zopa announced a £140m investment from IAG Silverstripe, which allows the company to meet the capital requirements necessary to gain full authorisation as a bank.
“The uplift in valuation driven principally by four of our existing investments; Monese, interactive investor, Bullion Vault and Tide totalling £14.9m has been offset by the reduction in the valuation of Zopa of £10.3m to reflect the pricing of their regulatory investment round to support their application for a banking licence,” explained Neil England, chairman of Augmentum Fintech.
“We delayed the publication of these results pending confirmation of the Zopa investment which was announced yesterday.”
According to its latest financial statement, Augmentum owns a 6.2 per cent share of Zopa, worth £11.7m.
The report went on to say that it remains confident in the long-term success of Zopa, which “has a materially different business model to several other large peer-to-peer lenders.”
However, the report added: “This regulatory capital raise has been challenging due to the nature of the investor pool the company was targeting.
“Against a backdrop of Brexit, UK political instability and a poor performing listed peer in Funding Circle (which has seen a 79 per cent fall in its share price since IPO) we have not seen the valuation appreciation that was anticipated at the start of the process.
“There has been significant investor interest in Zopa, many of whom asked for the opportunity to conduct due diligence once there was more economic and political stability in the UK. However, the Prudential Regulation Authority (PRA) operates to stringent timelines and it has not been possible to achieve an extension to the fundraising process beyond the original December deadline.
“Our view of the company’s prospects has not changed and although this has an impact on the valuation of our holding in Zopa, we believe it will still deliver a compelling return over time.”
According to Augmentum’s portfolio summary as at 30 September 2019, 11.5 per cent was invested in Zopa, making it the third largest holding in the trust.
The trust is currently trading at a discount to NAV of 4.6 per cent.