Last checked at 2 Sep 2022 14:50
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Seed Innovations Ltd / AIM: SEED / Sector: Closed End Investments
2 September 2022
SEED Innovations Ltd ("SEED" or, the "Company")
Portfolio Valuation Update & Investor Presentation
SEED Innovations Ltd, the AIM quoted company focusing on making investments in fast growing and industry leading businesses with a focus on the medical cannabis, health and wellness space, today provides an update on its portfolio valuation as at 31 August 2022.
Portfolio Valuation Update
Following a review of the Company's current portfolio, the Board of SEED has updated the net asset value of the Company to an unaudited amount of £17,841,000 as at 31 August 2022 (31 March 2022: £ 20,461,000).
This reduction in net asset value is, in the most part, attributable to deteriorations in the values of investments Fralis LLC (trading as Leap Gaming, 'Leap') and Little Green Pharma Limited. On the positive, Eurox has maintained its increased valuation (up 62% on original investment cost) and been able to raise further funding at this price and the Clean Food Group, recently closed its "Friends & Family" round at 10 times the price of the "seed" round in which the Company first invested.
The Company has a fully diluted shareholding of 43.49% in Leap (assuming conversion of the convertible loan note in which SEED is also invested), as well as a €250,000 term loan, and valued Leap as a whole at an enterprise value of €22.3 million at 31 March 2022 based upon a third party valuation report. In the intervening period, it has become clear that this valuation is unlikely to be achieved in the foreseeable future via normal M&A activity in the current market. At the same time, despite best efforts to pursue a capital markets liquidity event, it is apparent that this is a poor time to pursue a public listing given the current economic outlook. Taking these factors into account and the feedback received from those parties who have expressed an interest in the purchase of Leap via an M&A transaction, the Board of SEED have re-assessed the likely realisable value of Leap as being in the region of €16 million, inferring the Company's investment in Leap at 31 August 2022 to be worth £6,069,000 at the current time (valuation as at 31 March 2022: £8,270,000).
Whilst the Board remains confident that there is value to be created via selective investing in the cannabis sector with the opportunities for growth it believes the sector provides, a number of the Company's portfolio companies have been impacted by the current sentiment towards the sector. In particular ASX listed Little Green Pharma Limited (ASX: LGP) has seen a 37% decline in market price (from AUS$0.485 per share at 31 March 2022 to AUD$0.305 at 31 August 2022), further impacting SEEDs NAV by approximately £715,000. Yooma has seen greater percentage declines over the same period, however from a lower base, reducing the NAV effect at this time. This said, SEED management remain positive on the business fundamentals and hence outlook of both companies, both of whom are developing strong businesses in what is a challenging market currently.
Portfolio
The table below lists the Company's holdings and valuations as at 31 August 2022.
Investment name | HQ / Main Operations | Portfolio %age | Current Holding | Valuation at 31 March 2022 | Valuation at 31 August 2022 |
| |
Leap Gaming (Fralis LLC) | Israel / Europe | 34.02% | Equity, CLN & Term Loan | £ 8,270,000 | £ 6,069,000 | ||
Eurox AG | Germany / Europe | 24.43% | 5,142 shares | £ 4,281,000 | £ 4,359,000 | ||
Juvenescence | Isle of Mann / US & Europe | 15.28% | 128,205 shares | £ 2,410,000 | £ 2,726,000 | ||
Little Green Pharma (LGP) | Australia / Australia & Europe | 7.36% | 7,324,796 shares | £ 2,028,000 | £ 1,313,000 | ||
Northern Leaf | Jersey / Europe | 3.84% | Convertible Loan (CLN) | £ 660,000 | £ 686,000 | ||
Inveniam | USA | 3.56% | 8,681 shares | £ 562,000 | £ 636,000 | ||
Clean Food Group | UK | 3.28% | 5,850,000 shares | £ 46,000 | £ 585,000 | ||
South West Brands | UK / UK & USA | 3.03% | Convertible Loans (CLNs) | £ 476,000 | £ 540,000 | ||
Portage BioTech (PRTG) | USA | 1.40% | 37,623 shares (March: 50,123) | £ 251,000 | £ 250,000 | ||
Yooma Wellness (YOOM) | Canada / USA, Europe & Japan | 0.73% | 4,427,609 shares | £ 351,000 | £ 130,000 | ||
CiiTech | UK / Israel | 0.62% | Convertible Loan (CLN) | £ 188,000 | £ 110,000 | ||
Vemo Education | USA | 0.00% | Equity | £ - | £ - | ||
Total Investment Value: | 97.54% | £ 19,524,000 | £ 17,403,000 | ||||
Cash & receivables, net of payables and accruals: | 2.46% | £ 937,000 | £ 438,000 | ||||
Net Asset Value | £ 20,461,000 | £ 17,841,000 | |||||
Lance de Jersey, Finance Director and COO of SEED, commented: "Whilst we have been pursuing a stock market listing for Leap of late, the market conditions and in particular the depression of earnings multiples in technology and gaming, have not been favourable. At the same time, discussions with potential "trade" buyers have clearly conveyed that our opinion of value may not be achievable in the current market and that the current value of Leap is better reflected around the €16 million mark. Whilst this is lower than previously hoped the board continues to believe that pursuing a liquidity event (through a sale or otherwise) for the investment is the right strategy for the Company.
"The wider macroeconomic factors globally have meant all businesses have had to assess immediate future plans, particularly those that are on the path to a public listing where the general appetite of public market investor activity, across all sectors, is largely on hold. This includes a number of our portfolio companies which, despite some very positive operational developments, have chosen to delay their public listing strategies until markets open up again; something we are fully in agreement with.
"We continue to support and advise our companies, remain confident in the investee companies chosen and will continue to follow our investment approach."
Investor Presentation
As a reminder, Ed McDermott, CEO, Lance de Jersey, Finance Director, and Alfredo Pascual VP of Investment Analysis, will provide a live presentation at the AGM via the Investor Meet Company platform on 7 September 2022 at 2 p.m. (BST).
The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet SEED Innovations Limited via: https://www.investormeetcompany.com/seed-innovations-limited/register-investor
ENDS
For further information on the Company please visit www.seedinnovations.co or contact:
Ed McDermott / Lance de Jersey | SEED Innovations Ltd | E: info@seedinnovations.co
|
James Biddle / Roland Cornish | Beaumont Cornish Limited, Nomad
| T: +44 (0) 207 628 3396 |
Isabella Pierre / Damon Heath | Shard Capital Partners LLP
| T: +44 (0)20 7186 9927 |
Catherine Leftley /Isabelle Morris/ Max Bennett | St Brides Partners Ltd, Financial PR
| E: info@stbridespartners.co.uk |
Notes
SEED Innovations is an AIM quoted investment company focused primarily on disruptive high growth life sciences and technology businesses particularly within the medical cannabis arena. The Company's strategy is to identify early-stage opportunities that have an upcoming investment catalyst and grow its portfolio in terms of value whilst limiting the number of investee companies to a level where relevant time can be devoted to each.