Despite the effects of COVID-19, our portfolio companies’ revenues have largely recovered, or improved. Some, like Quantifi Photonics, saw demand shift to the future, while others saw an immediate drop and then a return.
Overall, COVID-19 accelerated the shift to digital services, benefiting all companies in our portfolio.
In the past week we’ve hit the road with our Retail Offer, launching in Auckland and then zooming around to see investors in Hamilton, Tauranga, Wellington and today in Christchurch. We’ve enjoyed meeting so many of you and presenting the 2020 retail offer, so we thought we’d share some photos – as well as links to the PDS and investment details.
The 2020 Retail Offer is open, and investments are coming in! You can subscribe at any time, so long as payment and application are both in before the Offer closes at 11:59pm on the 17th of December.
We are happy to report that we have exited our equity investment in EverEdgeIP Global Limited (Everedge).
The $1.45 million deal has two parts – the sale of our shares in Everedge to a new investor for $550,000, and a related medium and long term debt agreement with Everedge. This has no material impact on the value we hold for Everedge in our portfolio.
1: Annual Report
I am very happy to present the 2020 Annual Report for Punakaiki Fund Limited, compete with the full set of audited IFRS Tier 1 financial accounts.
1: Interim Accounts
We have just published our September 2019 Interim Accounts. These are the results for the half-year to the end of September 2019. They are prepared with accounting policies consistent with our annual accounts, which were prepared in accordance with NZ IFRS (Tier 1). The Interim Accounts comply with the New Zealand’s equivalent to the International Accounting Standard 34 (NZ IAS 34) Interim Financial Reporting, but unlike the year-end accounts they are not audited.
As well as long term performance of the portfolio, I always say to judge us on our efficiency through the ratio of our net operating costs to our assets. In this 6-month period we had net cash used in operating activities of $750,000 and assets at the quarter-end of $49.3 million, giving a ratio of 1.52%. This was up from $349,000 in net cash used in operating activities in the same period last year, and, with $42.2 million in assets reported, a ratio of 0.8%.
The net operating costs to assets ratio of 1.52% for the 6-month period would annualise to 3.04%, which is the highest result we have experienced. This was due to higher than expected net cash used in operating activities, which increased due to three factors.
The New Zealand Government has previously announced its intent to create a $300 million venture capital fund of funds – dubbed the Venture Capital Fund (VCF).
Over the last few weeks and months Treasury, NZ Super Fund, Ministry for Business, Innovation and Employment (MBIE), NZ Venture Investment Fund (NZVIF) and the government have been working on three key pieces of work:
The first piece of work is the legislation – the Venture Capital Bill. This allocates $300 million to the Guardians of the NZ Super Fund (the Guardians), who will manage and administer the VCF, and also requires the Guardians to contract with NZVIF to run the VCF.
The bill is at the Select Committee stage, and LWCM completed our own Venture Capital Bill Submission last week, and I (Lance) appeared in front of the Committee yesterday (Tuesday 1 October).
Note that submission and my appearance were on behalf of LWCM, not Punakaiki Fund. We did not consult the Punakaiki Fund Board for our submission.
The second is the Policy Statement on the Venture Capital Fund Act 2019. A draft of this Policy was shared with industry, and submissions were made to that draft by last Friday. LWCM’s submission for the draft Policy document is attached to our submission to the Venture Capital Bill. Chris and I also attended a workshop in Auckland facilitated by the players above.
The third piece of work has not been made public, and that’s the draft Contract between the Guardians and NZVIF to manage the investment of the VCF’s capital. We would like to see the contract made public for comment, and certainly once it is in effect. Our understanding is that the Guardians, Treasury, MBIE and NZVIF have been allocating substantial resources to negotiating this document.
As part of the third piece of work the Guardians will review the suitability of NZVIF to run the VCF, and perhaps NZVIF will make internal changes to be ready to run the new fund.
This matters to Punakaiki Fund as some of the VCF funds could potentially be placed with Punakaiki Fund, and VCF funds will obviously be placed with venture capital funds that both compete and collaborate with us.
We have now released our March 31, 2019 annual report.
Top financial highlights are:
– Asset value was $47.3 million, with revaluation gains of $7.1 million
– Just $0.8 million net cash used in operating activities
– 23.3% IRR annualised increase in the value of our investment portfolio
At our launch 5 years ago Punakaiki Fund had a broad mandate, able to invest in any New Zealand company that was “high growth”, as well as turn-around opportunities. We also stated that we would focus on Internet, technology and design-led companies.
Over the following years we added and amended our Statement of Investment Policies and Objectives, and then added a Socially Responsible Investment Policy addressing environmental, social and governance (ESG) issues.
Mobi2Go Accepts Investment
We are pleased to announce that Punakaiki Fund portfolio company Mobi2Go has closed a $5 million investment round with Movac, a fellow (and larger) New Zealand venture capital fund.
We have generally kept Punakaiki Fund company news for investors only, but will now be publishing more information. The first release is our latest Quarterly Report. Note that there is a webinar this afternoon (Tuesday) at 5pm, which all are welcome to join.
We have also released all of our historical Quarterly Reports. The earlier Quarterly Reports are redacted to preserve confidential information, while more recent reports are written for a public audience.