Seraphim Space Investment Trust H2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 15, 2024

Key Takeaways

  • Positive Sentiment: NAV and portfolio value increased during the year, with NAV per share rising 3.5% to 96.18 pence and portfolio fair value up 7.5% to £201.5 million. The share price rose 102% from a very depressed starting point, although the trust still trades at a 43% discount to NAV.
  • Positive Sentiment: Portfolio companies reported strong operating momentum, including 71% average year-on-year revenue growth among the top 10 holdings. Management said approximately 77% of portfolio value has at least 12 months of cash runway, while six companies are projected to reach EBITDA profitability during 2025.
  • Positive Sentiment: Defense and climate-related demand continue to support the space sector, with major portfolio companies raising substantial capital and securing contracts. ICEYE exceeded $100 million in revenue and reached EBITDA profitability, D-Orbit raised €150 million and won a €109 million European Space Agency contract, and AST SpaceMobile benefited from strategic investments and commercial agreements with major telecom operators.
  • Positive Sentiment: The trust highlighted several potential growth catalysts, including investments in Skylo, Xona and ALL.SPACE. Skylo secured partnerships with Google and Verizon for satellite connectivity, while additional ALL.SPACE funding is intended to expand production and fulfill a significant defense and commercial order backlog.
  • Negative Sentiment: Risks remain from the concentrated private portfolio, limited cash reserves and several companies with less than 12 months of funded runway. Spire Global delayed its quarterly filing amid an accounting review, Arqit continued to decline in value, and management has not committed to further share buybacks despite the persistent discount to NAV.
AI Generated. May Contain Errors.
Earnings Conference Call
Seraphim Space Investment Trust H2 2024
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good morning, everyone, and welcome to the Seraphim Space Investment Trust full year results webinar. I will shortly hand over to the Chief Executive, Mark Boggett, Chief Investment Officer, James Bruegger, Chairman, Will Whitehorn, and Chief Operating Officer, Sarah Shackleton, to run through the results presentation. Once the presentation has concluded, we will begin the Q&A. If you have a question, please use the raise your hand function and we will take you off mute. I will now pass you on to the team to begin the presentation.

Speaker 1

Good morning, everybody. This is Will Whitehorn, the Chair of Seraphim Space Investment Trust, and this marks the third annual report of Seraphim. In that time, we have to face that the world has been through unprecedented upheaval. Global inflation, higher interest rates, the geopolitical tensions, and war have created a challenging environment for all businesses. Investment trusts have felt those headwinds too. As we are all too aware, discounts are still at unprecedented level in the investment trust sector. Despite these external pressures, the Seraphim team has remained successful, consistent and persistent in our messaging and strategy. We have continued to execute the vision and adapted to the realities of this volatile landscape, managed cash levels astutely, and actively supported the portfolio with their time, and where possible, their money as well.

Speaker 1

Over the past year, our portfolio's net asset value has grown by 7.5%, and this is a solid indicator of resilience, and we believe the most promising indicators lie in the key performance metrics of the actual portfolio itself. Revenue growth is strong across this portfolio, and a growing number of companies are nearing EBITDA positive status, and one or two are now EBITDA positive. Nearly $1 billion in equity has been invested in our portfolio companies over the last year. Why is the space market bucking the trends of somber performance in other tech-led growth sectors? The broader backdrop continues to provide tailwinds for our sector, and of course, that is due to the very issues of defense and climate change, which industry as a whole is facing. Both of these are key drivers for the space sector.

Speaker 1

Defense budgets are now increasingly being directed to commercial space assets, including some of our own, as new constellations of satellites, such as those within SSIT's portfolios, are offering new forms of connectivity and intelligence gathering. Furthermore, advancements we are witnessing in space technology accelerating at an astonishing pace. For example, SpaceX's Starship that you saw this weekend, which will be capable of taking 100 tons and 100 crew into orbit, heralds a new area of space commercialization and full-scale industrialization. This will undoubtedly unlock new avenues for growth opportunities for Seraphim's portfolio, along with broader commercialization of space. That is not to mention the commercial astronauts walking in space a few weeks ago, and that itself allows us to begin building infrastructure in space on a much vaster scale. In short, while the challenges of the past years have tested us, we remain optimistic.

Speaker 1

The fundamentals of our portfolio are strong, and we believe we are well-positioned to seize the opportunities that lie ahead. Seraphim is strategically positioned, backing companies that use space to drive capability on Earth, and many portfolio companies have leveraged AI to make their insights attractive to many different sectors in the insurance, real estate, oil and gas, and logistics sectors. I will now hand over to Mark Boggett and the team to draw out those insights for the annual results. Thank you.

Speaker 2

Thank you, Will. Good morning, everyone. I am Mark Boggett, CEO at the fund. We have James Bruegger, CIO, and Sarah Shackleton, our COO, on the call. Before I go into the detail of the report, I just wanted to take a step back and remind folks about the big picture for Seraphim. Seraphim is the most prolific investor in the space market globally. We have a portfolio of over 130 space tech companies across our public and private portfolios. Seraphim was the first VC to launch on this strategy in 2016, and SSIT represents the first and only listed investment fund focused on space globally. Our partners and backers include some of the world's biggest space corporates, and we continue to receive a massive global deal flow, seeing virtually all deals at all stages, which provides us with an incredible information advantage and information asymmetry that we leverage.

Speaker 2

We triage deal flow between early- and late-stage opportunities. Earlier stage going to our affiliated accelerator program and venture fund, and the later stage B Series plus going to SSIT. We are a value-add investor. We are a hands-on investor. We join the boards of most of the portfolio companies, and this allows us to build conviction. Information asymmetry and conviction is the bedrock of our past and future success. Now let us turn to SSIT and these annual results. Starting with these headlines. Share price is up by 102%, albeit from incredible lows of 27 pence to the 54.6 pence per share as at the 30th of March. NAV growth per share increased by 3.5% to 96.18 pence, and market capitalization doubled over the period now at $129.5 million.

Speaker 2

In relation to net assets, despite strong performance, our net assets have risen only 2.6% to $228.1 million, leaving a discount of 43% compared to an average of 34% in our AIC peer group. Cash reserves were at 27 million, which is down from 35 million a year ago. But as you will see from my presentation, the portfolio is very well-funded for the upcoming year, having raised $900 million during the past 12 months. Portfolio valuation increased by 7.5% to 201.5 million, and shares in issue were reduced by 0.9% to 237 million after a small buyback at the start of the year. Below, you can see the indices and peer group comparison. Our share price performance and discount to NAV typically aligns with our AIC peer group.

Speaker 2

But as can be seen in the chart, we have experienced periods of relative outperformance in share price since the start of the year. This is notable amongst trusts like Chrysalis and Schroders. So during this presentation, I am clearly looking to demonstrate how SSIT is positioned to close this discount gap, especially as sentiment shifts back towards technology, growth, and private companies. We have several distinct drivers that sets us apart from more generalistic nature of our AIC peers. I am going to highlight some of these today. So taking us straight into the detail, let's start with the attribution analysis table. The portfolio's value grew by 7.5%, rising from GBP 187.4 million to GBP 201.5 million during the period. And this was driven by a combination of new investment, follow-ons, and value appreciation. The portfolio fair value now stands at 104.7% versus cost.

Speaker 2

In relation to new investments and follow-on, GBP 6.3 million in new investments, GBP 4.7 million in follow-on investments. Together, these more than offset the GBP 7.3 million in proceeds from disposals made during the year. There was an unrealized fair value increase of GBP 11.8 million, with minimal FX gain, and this was offset a GBP 1.4 million realized value loss during the year. Next, to turn to the balance sheet as at the 30th of June. This table sets out the NAV bridge. The NAV increased by 2.6% over the year to GBP 228.1 million. That is up from GBP 222 million in June 2023. The portfolio fair value, including FX movements, increased by GBP 14.1 million over the year. 2.2 million shares were bought back during the year at an aggregate cost of GBP 1 million. And the NAV per share increased from GBP 92.9 to GBP 96.18 over the year. Cash stood at GBP 27 million liquid resources.

Speaker 2

That is 11.8% of NAV at the 30th of June, and this compares to GBP 35 million at the start of the year. Turning next to the investments. Ten transactions, GBP 11 million invested. The most significant investment during the period was a follow-on investment in ALL.SPACE, which is a U.K.-based antenna manufacturer. In July 2023, Seraphim participated in ALL.SPACE's C series round alongside AE Industrial and several other new and existing investors. The fund is supporting the completion of their first production model and the expansion of their sales efforts. And during the period, this company also secured $10 million in non-dilutive funding from a U.S. defense customer. A key point to note is leadership change. Firstly, Chris Emerson was appointed as Chairman. He is a seasoned aerospace executive, former CEO of Airbus U.S. Space and Defense.

Speaker 2

Additionally, Paul McCartner became the new COO and was later promoted to CEO outside the period in September. ALL.SPACE is a pivotal Seraphim portfolio, ranking third by NAV weighting. And this company is at a critical juncture as it begins to deliver its innovative antenna systems to its customers. Their electronic antenna, designed for moving platforms like cars and boats and planes and trains and military vehicles, is unique in that it can simultaneously connect to multiple different satellites from different providers in different orbits. The company has a sizable backlog from both government and commercial clients that it has now started to fulfill. Other key investments include Skylo, which I am going to go into some detail on my next slide. In April 2024, Seraphim invested in SatVu's A series extension round alongside existing investors.

Speaker 2

This funding followed the failure of the first proof of concept satellite after six months of operations. During this time, the company successfully generated significant interest, proved its unique imagery from a broad range of customers. This new funding round, alongside a full payment of the insurance on the first satellite, has enabled the company to place orders for two new replacement satellites, which will launch next year. In May 2024, Seraphim invested in Xona's $90 million Series A round. This will support the launch of the first production satellite and the execution of various government contracts in related to this private GPS network. Also in May, Seraphim made a small investment, a follow-on investment, in Voyager, our space station company. In relation to the early-stage investments listed there, I will return to focus on these later in my presentation.

Speaker 2

Next, I am going to profile the new investment made during the period, Skylo. Through enabling existing GEO and future LEO satellite operators to seamlessly connect with any smartphone and any IoT endpoint globally, Skylo has a cutting-edge software platform that bridges the gap between satellite communications and the terrestrial telecoms networks. This has the potential to unlock the direct-to-device connectivity from space. Seraphim invested $2 million of a $37 million round alongside lead investor Intel Capital, investing alongside Innovation Endeavors, BMW i Ventures, Samsung Catalyst, and Next47. The problem that they are addressing is the connectivity gaps in the mobile networks. Outside of terrestrial mobile networks, there are vast areas where connectivity is either unavailable or too costly to cover with cell towers. However, in today's interconnected world, consumers and business demand always-on solutions, whether or not they are in remote regions or in critical situations.

Speaker 2

This is the problem that Skylo resolves by using its virtual radio network access to integrate non-terrestrial networks directly into the terrestrial mobile ecosystem. This means any mobile or any IoT device with the latest industry standard chipsets can automatically roam onto the Skylo network when outside of terrestrial covering. This offers seamless connectivity. This company is addressing a multi-billion-dollar market, focusing initially on messages and IoT services. The potential for growth is enormous, with a future expansion into voice and data service poised to increase this market opportunity by up to tenfold. The latest developments since investment include the appointment of Tami Erwin, who is the former CEO of Verizon Business. They joined the Skylo board to bring their extensive leadership and experience in telco and enterprise services.

Speaker 2

They also entered into an exclusive partnership with Google in August 2024, where Google selected Skylo as its exclusive partner to provide satellite connectivity for its flagship Google Pixel 9, and this enables emergency SOS services through satellite. They also partnered with Verizon, which was announced in August. Verizon is the largest mobile network operator in the U.S. They have partnered with Skylo also to offer satellite-based emergency services starting this year, but also next year, moving that to satellite-powered text messaging. This is a huge opportunity, and this business has started to grow very rapidly immediately after we invested. During the year, the company also made two divestments. In April 2024, the company announced the sale of nine early-stage portfolio companies to a new venture fund that is led by Seraphim for a total consideration of £3.8 million.

Speaker 2

This was settled through the issuance of new LP interest for the company in the venture fund. This strategic transaction had the dual benefit of enabling the company to concentrate its resources on more mature assets, whilst also building a larger pipeline for future growth investment rounds via the venture fund's wider portfolio of early-stage space tech companies. It is also important to note that this was a one-off. SSIT will make no further commitments to the venture fund. The other divestment during the period with Astroscale, one of the top 10 holdings, which went public on the Tokyo Stock Exchange on the 5th of June. The IPO was priced at a level to achieve success, albeit from a Seraphim perspective, this was 40% lower than the fair value that we held that company at.

Speaker 2

The IPO was oversubscribed at subscription price of JPY 850 per share and backed by both institutional and retail investors. I am pleased to say that the share price surged on IPO and has consistently traded above the IPO price. We determined that we would sell down part of our holding in order to recycle the liquidity. Following the IPO, within the reported period that we are talking about, SSIT sold 530,000 shares in the company, equivalent to 40% of its holding, for £3.5 million. This was equivalent to 94% of the original sterling cost if the investment that those shares were sold. Outside of the period, SSIT completed a further sell down of its holding in the company, selling 47% of its original investment for consideration of £3.5 million.

Speaker 2

This next page is a range of portfolio headlines, and there is quite a bit to unpack here. Firstly, starting with the private portfolio, which accounts for 94.4% of fair value and 83.3% of NAV. We showed a 7.5% rise in the year for fair value, now standing at 126.8% versus cost. Excluding Astroscale, which as just noted, went public during the year, the private portfolio's fair value increased by 10% over the year. Several private companies continued to meet critical milestones, driving significant growth. The top 10 holdings, representing 81.8% of the overall portfolio fair value and 72.2% of NAV, saw an average year-on-year revenue increase of 71% in sterling and 224% on a fair value weighted basis. Next, the listed portfolio, standing at just 27% of cost. This remains impacted by the public companies that went through SPAC listings.

Speaker 2

They faced steep declines in share prices in 2022 and 2023. Despite these challenges, there was propulsive momentum during the year, with the listed holdings, excluding Astroscale, reaching a £5.7 million fair value. That means that they were up by 56.3% from June the 30th. The listed portfolio, including Astroscale, which is 20% of the portfolio by the number of companies, accounted for 5% of NAV and 5.6% of portfolio fair value at the end of the year. The fair value compared to cost of AST SpaceMobile was 99%. This company has returned to the cost value. Spire Global, 25%, and Arqit down at only 3%, with further losses of £1.5 million in fair value during the year.

Speaker 2

Arqit sadly continues to face share price declines, but a new CEO was appointed after the period end that we hope is going to have a big impact on this business. In relation to cash runway, approximately 77% of the portfolio by fair value has a robust cash runway. Of this, 60% is fully funded according to the latest projections from the company's management teams. 17% of the portfolio is funded for 12 months or more from the 30th of June, and that includes raises that were completed outside of the end of the period. The management teams of six companies, five of which are in the top 10 holdings, project that they are now fully funded. However, five companies representing 16% of the portfolio fair value have less than 12 months of cash-funded runway.

Speaker 2

These companies are taking various measures, such as reducing cash burn, focusing on government development and grants, and cutting costs to extend their runways. Many of these companies are actively fundraising, and some have even closed new funding rounds after the period of end. It is worth noting, though, that it is not uncommon for venture-backed companies to have less than 12 months of cash runway, as they typically raise funds on an 18-month cycle. So far our portfolio companies have successfully raised the necessary funding to extend their runways when required. Excluding the fully funded companies, the remaining private portfolio has a fair value weighted average cash runway of 14 months from the 30th of June.

Speaker 2

Whilst this is down from the 20-month average in the prior year end, it is important to highlight that only 2% of the portfolio was fully funded then, compared to 60% as at the 30th of June. Again, these are based on the company's own management projections. The next few slides are going to highlight some of these key developments that have contributed to these stats. ICEYE, our largest company, continues to thrive. This business has exceeded $100 million of revenues, reached EBITDA profitability during 2023, and as previously reported. The company continues to perform well, and they have recently secured several significant new contracts with sovereign government customers. ICEYE also completed a $93 million oversubscribed Series E round structured as an unpriced convertible, bringing the total equity raised up to $403 million.

Speaker 2

D-Orbit has had a fantastic year, closing 150 million euro round, of which 100 million EUR was within the reported period. This is worth noting that this is one of the largest European space tech company rounds ever. It was also ranked in the top 10 largest global deals of the year. This round was led by strategic investor Marubeni, and was priced at a solid premium relative to our book value. These funds are being allocated towards U.S. expansion and new capability, and notably, just announced in the last 24 hours, D-Orbit has won a landmark 119 million EUR deal with the European Space Agency for its inaugural satellite services mission. HawkEye 360, the signals intelligence company, secured an additional 68 million in equity during the year in a round that was led by BlackRock, bringing the total amount of equity raised to $412 million.

Speaker 2

The company launched Clusters 8 and 9 in April and Cluster 10 more recently in August, and each of these clusters has three satellites. This expansion has significantly enhanced service levels, has reduced latency, and expanded the company's addressable market, in particular, amongst U.S. DoD and global defense organizations. LeoLabs very much remains the market leader in the space domain awareness market, which is a rapidly growing global market. LeoLabs accounts approximately 75% of all satellites in low Earth orbit as customers. This year, the company raised $29 million, bringing the total equity funding up to $111 million, which will accelerate the deployment of its ground-based radars, improving visibility and accuracy. Additionally, during the year, a new CEO with extensive experience in securing large U.S. DoD contracts joined the team, sharpening the company's focus on opportunities in the U.S. and with foreign governments.

Speaker 2

On this slide, we've already spoken about Xona, we've spoken about Skylo and SatVu, so I'll focus on AST, which has been a huge success story during the course of the last few quarters. AST, which is listed on Nasdaq, has seen a very strong recovery in its share price over the period. Indeed, its share price increased by nearly 150% during the period, and increased by more than another 100% post the period end. Investors' confidence in the business was boosted by a slew of positive announcements, including a $200 million strategic investment by Google and AT&T, and then commercial agreements with both AT&T and Verizon to provide the company's first space-based broadband network direct to cell phones of their subscribers. More recently, the launch of the first batch of its five industrial cell towers in space.

Speaker 2

I'm going to skip over this slide in the interest of time, as we've already spoken about Astroscale in some level of detail. The other three growth portfolio companies have each announced contracts with leading customers during the year. You'll be familiar with this slide, which provides a snapshot of the portfolio and drawing out some of the insights on the donuts on the left into the ecosystem chart on the top right. More than half of the portfolio is invested in platform, which means satellite constellations. These are the businesses developing the digital platform in the sky, providing capability of data and insights from large fleets of low-cost satellites. The biggest customers today are typically defense, and they're thriving due to the challenges of geopolitical situation globally and the increase in the size of the budgets.

Speaker 2

In relation to geography, it's pretty evenly balanced between the U.S., Europe, and U.K. In relation to stage, the bottom left chart, circa 75% of the value is in companies at the later stage growth series of C series and beyond. Turning attention to the NAV chart on the right, the top 10 companies dominate NAV, accounting for 74%, with cash at 12%. ICEYE, the largest holding with a portfolio NAV of around 20%, was one portfolio company we've doubled down on based on our high levels of conviction. That conviction is continuing to pay off as this business is performing exceptionally well on all measures. This chart shows the changes in the fair value of the top holdings individually, alongside the rest of the portfolio collectively. Over the year, there were significant increases in the fair values of D-Orbit.

Speaker 2

The fair value versus cost of 285%. This was driven by a funding round which closed earlier in the year, which I have outlined earlier. ICEYE, whose fair value versus cost is 121%, were driven by higher premium being applied because of the price of the last round, and the previous year, and due to continued strong performance. These gains more than offset value reductions experienced by other private portfolio companies. Fair value reductions in the private portfolio included SatVu, where the fair value versus cost is now at 160%, and this is due to the setback of its failed satellite. Altitude Angel fair value versus cost at 98% due to commercial underperformance. This slide, which is my penultimate slide, focuses on five notable developments post the period end.

Speaker 2

In ALL.SPACE, SSIT invested a further GBP 5 million alongside other existing investors in a new funding round for the company that will now be opened up to new investors. We talked about AST SpaceMobile. This launched its five commercial cell towers in space that saw its share price increase to $24 as at the 11th of October. That is the equivalent to a further GBP 4.7 million post-period increase in fair value. D-Orbit announced that it reached second close and final close on its Series C funding, bringing the total round size to EUR 150 million. As mentioned earlier, in the last 24 hours, it has also announced a EUR 109 million contract with ESA. Astroscale, where SSIT completed a sell-down of its holding in the company outside of the period. A further 47% of the original investment was sold for GBP 3.5 million.

Speaker 2

Finally, on a negative note, Spire announced that it would delay the filings of its Q2 2024 financial report due to an ongoing review of certain elements of its accounting practices. This company has until mid-February 2025 to comply with the SEC filing requirements. This is now the final slide before we open for Q&A. In relation to the Q4 review, despite a challenged macroeconomic backdrop last year, marked by high inflation, rising interest rates that led to a risk-off approach by markets, space tech has defied this trend. Investment activity in the quarter to the 30th of September, growth and outperformance has continued. Our portfolios perform well, with the top 10 companies seeing an average revenue growth of 72%, and with the portfolio raising nearly $1 billion in equity. These companies are very well capitalized.

Speaker 2

As stewards of cash, we believe that we have balanced the needs of the portfolio against adding selective new names such as Skylo. The outlook for the year ahead is that we are optimistic about the prospects of the improving macroeconomic conditions. Inflation appears to be under control, and the interest rates seem to have peaked. This, combined with strong secular tailwinds of defense and climate, gives us confidence as we move into the new year. Our key assets are all performing well, demonstrating growth and financial strength, and the next milestones for the portfolio is achieving EBITDA profitability, which is anticipated for multiple key assets over the next 12 to 18 months. We will continue to closely support our portfolio of growth-stage companies as they approach this critical profitability milestone, and we believe that achieving consistent EBITDA profitability could be a springboard for potential IPOs or acquisitions of interest thereafter.

Speaker 2

I hope you enjoyed my presentation. I am going to now open up the floor for questions, which will be fielded by my partners, CIO James Bruegger and COO Sarah Shackleton.

Operator

Thank you, Mark. As a reminder, as we open the floor to questions, please use the raise your hand function on the webinar, and we will take you off mute so that you can ask your question. We have a first one here from Shivaa. If you could take yourself off mute, please, and we would love to hear your question.

Speaker 3

Yes. Hello, can you hear me?

Speaker 2

Yeah. Hi, Shivaa.

Speaker 3

Hi. Thanks for that. Maybe just to be clear, does anyone beyond ICEYE have positive EBITDA? If not, do you have any further granularity beyond the 12 to 18 months idea on the rest? Is there any particular one that's expected within a few months, et cetera? Because I think earlier in the year you were hoping for one or two more this year. Second, if we could get your take in a bit more depth, how serious is the Spire Global issue? Maybe as an aside, is there any further interest from your perspective in conducting buybacks as for the board perhaps? Thank you.

Speaker 4

I'll take that one if that's okay. All right. First question was around EBITDA profitability. Point one, I'm afraid we're not in a position to disclose the specifics of any of the other companies. These are privately held companies, and we need to respect their confidentiality. What we can talk about in general terms is what's the trajectory towards EBITDA profitability. There are a number of our more mature assets, which is correlated with our top 10 holdings, that are now close to the point of EBITDA profitability. We will wait to see where those companies end up at the end of 2024 as to whether they become EBITDA profitable or not.

Speaker 4

As we look ahead for 2025, there is a meaningful proportion as indicated, so six of the portfolio, five of the top 10, who based on the latest projections from management, are indicating that they expect to reach the point of EBITDA profitability during the course of 2025. As concluded by Mark, we see the transition of some of our key growth holdings becoming EBITDA profitable as a really important milestone that we do hope once those businesses have not just passed that milestone, but have evidenced consistent EBITDA profitability. We would hope that that is an important pillar of growth for the businesses as they move towards potential exits, either through public market offerings or M&A.

Speaker 4

In terms of the Spire issue, point number one, we're not on the board of Spire, excuse me, and therefore have no particular insights into the issue beyond those that everyone else is aware of. We believe the company is working through the issues. I guess the only observation that we can make is that the accounting practices of very complex multi-year agreements

Speaker 4

Has been an issue more broadly across the sector. We certainly hope that Spire is going to resolve these issues and continue positively. In terms of the buybacks, I guess I'll perhaps give Will the opportunity to comment on that.

Speaker 4

You're on mute, Will.

Speaker 4

Will, you're on mute.

Speaker 1

On the subject of buybacks, the board obviously reviewed the buyback that we did in the last year, and it was successful in helping the share price to improve. As far as we can see at the moment, we have not taken a decision to continue the buyback, but we have not taken a decision not to do another buyback. We are going to carry on reviewing that, and reviewing it in light of basically how the portfolio also performs over the next 18 months.

Speaker 4

Thanks, Will.

Speaker 1

Thank you.

Speaker 4

Should we move on to the next question?

Operator

Yeah. Next up, we have Charles Murphy. If you could take yourself off mute, and we'll hear your question next, please.

Speaker 5

Good morning. Sorry, I'm on the train, so we might get a bit of noise. Can you talk about the ALL.SPACE funding round? What is the use of proceeds targeting? You seem to indicate that the actual round is ongoing. Is that correct?

Speaker 4

Yeah, certainly. I will take that one. As Mark Boggett described, the company has a significant backlog of orders from both defense customers and governments and commercial satellite operators. The business is now fulfilling that backlog, so that means shipping terminals to customers. The latest round of funding that we and other investors have made is really to give the business the resources that it needs as it now looks to ramp up production in order to service the significant demand. Just to provide some more context about where that demand is coming from. The unique capability that ALL.SPACE has is this ability to simultaneously connect to multiple satellites. Why is that important? Well, it is specifically extremely important to departments of defense who increasingly now see their own space assets, so these are their own satellites they use for communication, potentially being vulnerable to interference from other state actors.

Speaker 4

Likewise, if you look at some of the things that have been happening in Ukraine, for example, the advent of electronic warfare, interfering with the ability of ground terminals to be able to connect to satellites. The only mitigant to that is to have an ability through a single antenna to connect to multiple different satellites from different operators at the same time. That is enabling what is referred to as resilience. This is an absolute key strategic priority for departments of defense around the world. ALL.SPACE's technology is unique in being able to deliver that resilience across different frequencies and combining different SATCOMs operators, both from the commercial domain with those operated by governments themselves. We believe that this business is very well-positioned and look forward to significant growth under the new leadership of Paul McCartner in the year ahead.

Speaker 5

Quick follow-up question. In terms of the funding rounds that have been happening in the last 12 months or so, are these to accelerate growth or just to allow them to complete initial business plans? Can you just add a bit of color around that? Thank you, and that is my last.

Speaker 4

Short answer, Charles, it's a mixture of both. But if you look at our more mature top 10 holdings, multiple of those companies have announced very significant rounds in the 50 million-100 million plus range. That includes the likes of D-Orbit, ICEYE, and HawkEye as three examples. And in each of those examples, these funding rounds are very much to fund growth. These are businesses that are maturing, seeing revenues grow significantly to reasonable scale, and putting those businesses in line of sight of achieving EBITDA profitability, we hope, within the relative near term. It's really more orientated towards growth, albeit for some of our earlier stage companies, such as Xona, funding rounds have been provided in order for them to go through key milestones.

Speaker 4

In the case of Xona, that milestone is launching their first commercial-grade GPS satellite, which will be the first private company to develop this capability, which is an area that we think offers very exciting growth potential in the years ahead.

Speaker 5

Apologies. Just a quick follow-up on ALL.SPACE. Was this funding round complete, or has the company continued to speak to investors?

Speaker 4

Sorry, which funding round?

Speaker 5

The ALL.SPACE one, the August 24 one.

Speaker 4

The most recent round of funding from insiders has been completed. But the business continues to receive interest from new investors, given the prospects that I have outlined.

Speaker 5

Thank you.

Operator

Thank you, Charles. We now have a question from Will. If you could take yourself off mute, and we will hear your question next, please.

Speaker 6

Morning, guys. Thanks for the prez. I have two questions, please. The first is what was behind the valuation of Xona Space Systems falling about 25% over the last quarter? I think it was written up over 100% the quarter before that. The second question, it is just one, I am a bit surprised to see that most of the Astroscale holding has already been sold at below cost too. Given, I think you said at the time of the IPO, the issue price was aggressive and you expected the price to rise. Even though it has risen, it still remained at a level which implies a valuation below where you last held it at.

Speaker 4

Yeah. First one, in terms of the changes in fair value over the course of the year of Xona. We announced earlier in the year, this is going back to second half of 2023, that we had made a partial provision against our investment in Xona at that time, as the company had limited cash runway, and was still working on the fundraise, which clearly ultimately it was successful in raising. On the back of successfully raising the funds, that provision was unwound, and then during the last quarter, the full effect of the new funding round has been represented in the enterprise value of the business, and then applied to the waterfall. I appreciate there has been various changes, but the fair value is now fully reflective of the rounds that has recently closed.

Speaker 4

In terms of Astroscale, we have elected to take the opportunity to recycle some cash from that investment in order to boost the cash reserves of the funds. We have done that on the basis of, as we do with any potential opportunity of liquidity, weighing up what we believe the future potential return on the capital is from where the money is currently invested, in this case, Astroscale, versus other potential new opportunities that we might look to invest into. We have acknowledged that the IPO pricing of Astroscale was aggressive, but has improved significantly. As we have reported, the sell-down that we made during the period was very close to the original cost of the investment. So a sell-down at 94% on a sterling basis relative to cost. I hope that answers the question.

Speaker 6

Yeah, that is good on the Astroscale. Thanks. Just to follow up onto the Xona one. Am I right in saying it has, despite it being written back up, the valuation has fallen about 25% between March and June? Which is the reason behind that subsequent fall after being written up.

Speaker 4

The round has now been fully reflected. There was the unwinding of the provision and then reflective of the pricing of the rounds. There were two separate rounds.

Speaker 6

Oh, the rounds. Okay. It was essentially a down round, I guess.

Speaker 4

The round was done at a premium relative to the provision, but at a lower valuation relative to the last price round.

Speaker 6

Okay, brilliant. Thank you very much.

Operator

Thank you, Will. That now marks the end of the questions. I am now going to pass back to Mark and the team for any final closing remarks.

Speaker 2

Well, thank you to everyone for tuning in today to listen to the year-end results. I think we have made it clear that our portfolio companies are now firmly on the pathway to becoming EBITDA positive. Six companies that we anticipate are going to achieve that within the funding that they have already raised based on management's own projections, five of those in the top 10. Hopefully there is a recognition here that our portfolio is maturing, and we believe that as the economic environment improves, that this portfolio is going to be well-geared to both the recovery and sentiment and a more general recovery in the market opportunity. Thank you for listening today, and we always stand by to answer any further questions if you wanted to contact us directly.

Speaker 1

Thank you very much, Mark. That concludes the presentation. Just to say that I have joined you for the first time from Starlink, having finally got rid of my BT in Sussex. It works extremely well. Thank you very much.

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