Seraphim Space (SSIT ), the growth capital fund that launched near the top of the market last summer, has reassured investors about the health of its unquoted companies, saying they are performing well and that it has the cash to support them during the recession.
In a trading update last week that followed the sector-cheering news of a merger between satellite operators OneWeb and Eutelsat, the one-year-old investment trust said it had £57.7m of cash at the end of June equivalent to 23% of its £250m portfolio at 31 March.
It said its top 10 companies, which accounted for 91% of its assets at the end of March, had grown revenues by 34% in the first half of the year, lifting their 12-month total by 58%. Bookings leapt 144% in the first half and were up 77% over one year.
‘We are particularly pleased with the solid growth rates of bookings (contracted future revenues) which reflect the strong underlying performance of the businesses as they develop their commercial operations,’ it said.
In the second quarter, Seraphim made three new unlisted investments totalling £5.3m and two follow-on investments in existing unquoted portfolio companies worth an additional £2.4m.
Despite the challenging macro-economic backdrop, it reported overall investment activity in the commercial space sector was ‘strong’. A total of $12.2bn of private capital was invested globally, it said, in line with the same period a year ago, as global security, food security, humanitarian support in the wake of the war in Ukraine and climate change underlined the need to exploit the opportunities of space.
Seraphim said it would use two-thirds of the cash pile to participate in further follow-up funding rounds of its early-stage companies which will need the capital to scale up their businesses and fulfil their ambitious growth targets.
It said the unquoted companies were ‘well capitalised’ and most had sufficient cash to ‘deliver against their growth strategies for at least the 12-month period to June 2023, without further capital’.
Three unlisted companies in the portfolio will require funding before June 2023, but two have additional forms of financing available.
The remaining company, Altitude Angel – which specialises in drone safety and makes up 1.5% of the fund – will need to raise capital having ‘recently announced a major commercial milestone in relation to an initial 265km drone superhighway in the UK, in partnership with BT’.
The investment company has two listed investments on its books: Nasdaq-listed Arqit Quantum (ARQQ.O), which provides quantum encryption coding, and New York-listed analytics company Spire Global (SPIR.N), which uses satellite technology to map weather, and maritime and aviation patterns.
Shares in both companies tumbled in the second quarter of this year, with Arqit down 59% and Spire down 66%, in common with other early-stage growth companies, wiping out more half of the value of Serpahim’s listed holdings.
However, Seraphim remained confident on the prospects for the companies, stating that Arqit has ‘commenced commercialisation and begun generating revenue in the first half of its financial year’. Spire reported 86% year-on-year revenue growth to $18.1m in the first quarter of its financial year.
Fund manager Mark Boggett said while the space sector wasn’t immune to the slowing economy, the outbreak of war in Europe had lifted interest in the sector.
‘The last six months have demonstrated the crucial role space plays in global defence, food security, and humanitarian support, as well as addressing longer-term climate and sustainability solutions,’ he said.
‘Portfolio commercial performance has been robust, the underlying companies are well capitalised, and Seraphim retains cash reserves to continue to support the portfolio growth ambitions during the year ahead.’
Seraphim did not provide a fresh valuation for the portfolio which had a net asset value (NAV) per share of 104p at 31 March. It will publish a 30 June NAV with its annual results in October.
Seraphim shares slumped 60% from the New Year up to the middle of last month but have rallied from a low of 48.5p to 73.7p since then. They remain 41% down on the year to date and at 73.9p last night stood on a 24% discount below Numis Securities’ estimated NAV per share of 96.6p.
Investment company news brought to you by Citywire Financial Publishers Limited.