Molten Ventures still hamstrung by dismal trading backdrop

The last 15 months or so have posed challenges for companies looking to profit from the wider tech sector. That certainly applies to Molten Ventures (GROW) as the tech-focussed venture capital firm had to contend with a marked fall-away in M&A volumes and initial public offerings. To make matters worse, it also had to endure weakening trade sales, the key cash component of its realisations – down by 62 per cent to £48mn.

The trading figures precipitated another share price decline, down by over a third over the past year, although as much attention was given over to news that the tech investor had written down its stake in the London-headquartered challenger bank, Revolut, by 40 per cent year-on-year.

Molten Ventures saw an 11 per cent contraction in its gross asset base to £1.37bn, with an accompanying 16 per cent negative fair value movement. The unfavourable conditions faced by the group are most brutally illustrated by the net loss of £243mn, against a profit of £301mn in FY 2022.  

The trading backdrop hasn’t improved since the March year-end, but management has been proactively tailoring the investment portfolio, so the group was able to generate more capital from realisations than it deployed in the second half of the year.

Group chief executive, Martin Davis, confirmed that “cash preservation and balance sheet management” are the main priorities while markets remain subdued, although perhaps the main long-term challenge facing management is the general reduction in market liquidity. Losses for the period exceeded FactSet consensus estimates, but brokers are guiding for adjusted EPS of 39.5p in the current year, giving a modest, though wholly justified, forward rating of 7 times forecast earnings. Hold.

Last IC view: Hold, 915p, 29 Nov 2021