Syncona results and Moneysupermarket.com update

Syncona Ltd (SYNC.L Market Cap. 1480m, FTSE 250 Index, 223p and 3.1% of JIC Portfolio and 0.0% of JIC Top 10)Results for the year ended 31st March 2020

Conclusion: 31st March was close to the worst point for calculating a net asset value for the business. The increase in Autolus share price (listed on NASDAQ) will alone have increased the NAV to £1341m or NAV per share to around 200p. It represents around 13.0% of total asset value which hopefully will increase in the short term as the Autolus share price recovers further. Longer-term it is hoped that it will become less important as the earlier stage companies in the portfolio bear fruit. The share price is currently at around a 10% premium to NAV. It has sustained higher premiums in the past, so I’m not too concerned about that. The bottom line is, Syncona is doing what it says on the tin and I’m happy to hold what I think will add significant value to the portfolio over the longer term. As its portfolio of investments increases, one would expect future progress to be less ‘lumpy” as it reduces its dependence on one or two successful investments. Happy Holder!

Highlights:

Net assets of £1246m, down from £1455m on 31st March 2019. NAV per share 185.6p down from 216.8p.

Uplift from the sale of Blue Earth for $476 (10.0x invested capital) outweighed by 81% decline in Autolus share price. (Autolus share price has appreciated by 131% since 31st March).

Sale of Nightstar diagnostics to Biogen for $877m.

It deployed £206.4m in significant funding for its growing life science portfolio.

It says it has seen strong clinical progress across its clinical stage companies with nine live trials.

Outlook – long-term opportunity to create significant value with key milestones in the year ahead 

“As always, data generated from our clinical pipeline will be a critical driver of value and while not without risk, we have a number of portfolio companies approaching key milestones in the coming year. In particular, we expect:

·      Freeline’s lead programme in haemophilia B to publish further data and provide a path to pivotal study; and dose its next patient in its second programme in Fabry disease

·      Autolus to progress its pivotal study in AUTO1 adult ALL and to take a decision on whether to initiate a Phase II trial in AUTO3 DLBCL in Q3 CY2020

·      Achilles will dose its first patient in its NSCLC programme and will report initial data on both this programme and its melanoma study in the first half of CY2021

·      Gyroscope will report initial data from its lead programme targeting dry AMD”

Martin Murphy, Chief Executive Officer, Syncona Investment Management Limited, said: “2020 was a year of good strategic progress for Syncona. We expanded the expertise in our team and added a new company to our portfolio, whilst the sales of Blue Earth and Nightstar, two companies we founded, delivered very attractive cash returns. The proceeds from these sales significantly strengthened our capital pool enabling us to make long-term funding commitments, deploying £206.4 million into our portfolio as our next generation of companies’ scale. 

Our portfolio made good progress over the year including the generation of positive clinical data. The decline in Autolus’ share price has clearly impacted our financial performance in the year and whilst this is disappointing, Autolus has advanced its AUTO1 programme to a pivotal study and post period end released good data from its AUTO3 DLBCL programme. We believe Autolus has the potential to deliver next generation CAR-T therapies to patients over the long-term.

The COVID-19 pandemic has been a human tragedy and has presented an unprecedented challenge to public healthcare systems. We have worked closely with our companies to support them in navigating this disruption, avoid unnecessary burdens on health services, and ensure the safety of their employees and the patients taking part in clinical studies. Whilst we have seen delays to clinical trials across the portfolio, we are confident our companies are well placed to be resilient through the current crisis. The UK life science industry has been playing an important role in developing solutions to COVID-19 and it is clear that fundamental innovation and collaboration has never been more important for societies and patients. The Syncona team has leveraged its core expertise to provide advice to both the Wellcome Trust and Government when requested during these exceptional times. 

As we look ahead, the need for medicines remains undiminished and our vision to deliver transformational treatments for patients remains as important as ever. Our strong capital pool and the deep expertise within the team means we are well positioned to support our companies in navigating continued disruption and ensure they able to progress their business plans. Whilst life science product development is never without risk, we believe our nine companies are strongly positioned to deliver value over the long-term.”

Moneysupermarket.com (MONY.L, FTSE Mid 250 Index. Market Cap £1857m, 346p, 2.1% of JIC Portfolio and 0.0% of JIC Top 10)

COVID 19 update:

Conclusion: Too early for forward guidance given continuing uncertainty about how long it will take to lift the lockdown so that life returns to more normal conditions. Clearly, overall business was impacted but May was better than April and hopefully, June will be better than May. In the meantime, Moneysupermarket is a very flexible business with a low-cost base and which generates high returns on capital and cash. It is up 56% since purchase in March. I have it as Medium Risk/Medium Reward pointing to a 2.0% position, which is where I am. It is likely to pause for breath but longer term it should be a beneficiary of “the new normal” times ahead. Happy Holder!

No forward guidance yet but it says it continues to trade effectively and that at 31st May it had net debt of £0.8m having just paid the £46m final dividend.

Car insurance is returning to normal after a poor April. It expects house insurance to improve as the housing market reopens. There has been almost no demand for travel insurance but again hopefully that will improve with time.

Money:

“We have seen a very significant reduction in the attractiveness and availability of credit and banking products as lending criteria have tightened and interest rates have fallen, and we do not expect this to change in the immediate future.”
“Within the savings part of banking, early on we saw consumers move rapidly to secure better rates. Across banking more broadly we now have a very significant reduction in the attractiveness and availability of products.”

Home Services – “attractive savings levels for consumers driving strong switching demand
· Consumers can still make large savings when switching their energy. A combination of market-leading offers and MoneySavingExpert’s editorial strength meant we saw strong growth in energy switching.
· Broadband has become even more important to consumers, and we have seen robust growth.
Mobile has remained the primary device for users. Following our successful brand re-launch last year, our plans for above-the-line marketing spend in 2020 are unchanged, however we have adjusted our marketing mix to reflect how consumers are now spending their time.”

Mark Lewis, CEO of Moneysupermarket Group, said:
“Through this difficult time for household finances, the group has continued to help our customers save money – over £800m so far this year.
“The lockdown restrictions have had a significant impact across our marketplace. As the lockdown eases, we’ve seen motor insurance start to recover. But with substantially fewer financial services products on offer from providers, our Money business is significantly suppressed.
“Our Home Services performance has remained strong, delivering growth ahead of the market as consumers take advantage of attractive energy offers and boost their broadband. We will shortly launch our energy auto-switching service on MoneySavingExpert, making it even easier for customers to save money.”

 

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