Tekcapital has released final results for the year ending 31st December 2022 and provided a summary of progress for their portfolio companies during the period.

Tekcapital is an investment company holding both listed and private companies. Portfolio companies include MicroSalt, Innovative Eyewear, Belluscura, and Guident.

During the period, Tekcapital’s portfolio NAV eased to 31p compared to a current share price of 13p.

Tekcapital portfolio companies

Over the past year, Tekcapital portfolio companies recorded material commercial progress. MicroSalt is now stocked in thousands of US stores, and Innovative Eyewear launched the world’s first ChatGPT-enabled.

Guident will soon roll out its remote monitoring and control (RMCC) for the Jacksonville Transportation Authority and is undergoing testing of its regenerative shock absorbers.

MicroSalt has signed several distribution agreements with major US outlets, including Kroger and is now stocked in thousands of US stores. MicroSalt appointed Zeus Capital as an advisor for their AIM IPO at the end of 2022, and Tekcapital is unable to provide specific financials for the privately held company before the IPO. This will be included in MicroSalt’s prospectus.

“The Group has made good progress during 2022. Our portfolio companies have demonstrated solid growth and we believe they should achieve additional significant milestones by the end of 2023,’ said Dr Clifford Gross

“Of note, Lucyd’s Innovative Eyewear Inc. subsidiary completed its flotation on the NASDAQ and raised US$7.3m in gross proceeds, in spite of a choppy year in the capital markets. Guident secured its first customer, the Jacksonville Transportation Authority for its remote monitoring and control (RMCC) service and has signed a letter of intent with its second customer, the Boca Raton Innovation Campus, to provide remote monitoring for its campus shuttle.

‘Additionally, Guident has made significant progress improving and fabricating its latest regenerative shock absorbers and has begun testing them with several Tier-1 companies.

“We are also pleased to highlight MicroSalt’s strong progress ending the year by growing its revenues, signing up additional customers and launching its low sodium saltshakers to an increasing number of supermarkets and engaging its advisory team for a prospective AIM IPO during 2023.”

Dr Gross continues to explain the macroeconomic picture’s impact on their portfolio’s value. Tekcapital’s listed portfolio companies are by their nature driven by general sentiment and softer economic conditions are evident in their share prices.

“Our financial results were negatively impacted by the reduction in the observable, closing share prices of both innovative Eyewear and Belluscura at the end of the period, which we believe were in large measure the result of exogenous macro-economic and capital market factors. These were partially offset by the approximate doubling of the share value of MicroSalt,” Gross said.

“We remain steadfast and excited about the commercial progress of our portfolio companies in 2022 and for their future prospects for the remainder of 2023. As per our mission and investment objective, we believe that all of our key portfolio companies have the potential to make a positive impact on the lives of the customers they serve as well as produce meaningful returns on invested capital for our shareholders over the mid to long term.” 

Tekcapital valuation

Tekcapital’s revised NAV highlights the deep value in the current Tekcapital share price. Tekcapital’s NAV per share was adjusted to $0.38 (31p) per share as of the end of 2022.

Tekcapital’s share price was 13p on Friday.

The opportunity for a near-term re-rate of MicroSalt’s NAV after the IPO could dramatically alter the NAV to the upside and make shares look even cheaper.

The Tekcapital team is optimistic about their portfolio’s underlying growth prospects, which could also see NAV revised higher in the coming periods.

“We believe we will see significant growth of our portfolio companies in 2023,” said CEO Dr Clifford Gross.

The FTSE 100 fell on Thursday as debt ceiling fears stepped up ahead of the crunch date at the beginning of June.

The FTSE 100 was down 0.7% at the time of writing on Thursday.

“The FTSE 100 continued to lose ground on Thursday as the US debt ceiling crisis remained unresolved with the beginning of June deadline rapidly approaching,” said AJ Bell investment director Russ Mould.

“Asian markets hit two-month lows as investors looked for safe-haven assets in an attempt to build some insurance into their portfolios. This is aimed at protecting against the still unlikely risk that the US defaults on its debt.”

Washington regularly goes through political wrangling ahead of debt ceiling limits, and investors have become desensitised to the ramifications of shutting down key US government departments.

Nonetheless, traders took the opportunity to take cash off the table and await a resolution.

FTSE 100 movers

Centrica was one of few FTSE 100’s gainers after the UK government announced the energy price cap would be reduced in July. The move would make the domestic energy market more competitive and potentially help Centrica win new customers.

Coca-Cola HBC was the FTSE 100’s top faller despite raising revenue guidance and maintaining earnings forecasts. Coca-Cola HBC was down 5% at the time of writing.

BP and Shell were major drags on the index as oil prices fell on concerns about demand. Shell and BP were down 2.2% and 2.4%, respectively.

United Utilities’ key measures of revenue and operating profit fell in the 2023FY after lower consumption hit the top line and rising prices eroded operating profit.

United Utilities’ recorded an operating profit of £441m in the year to 31st March, down from £610m in the same period a year ago. The company blamed falling profits on the rising price of electricity and chemicals.

Despite the dismal performance in the full year, United Utilities shares were around 1% higher at the time of writing on Thursday. The stock has sold off into the release of the results suggesting the poor performance was expected by investors.

“United Utilities appear to have a leak in their profit pipeline as we saw operating profits take a tumble. In return for providing a reliable and affordable water supply to North West England, the regulator allows the group to earn an acceptable return. The only issue is, high levels of inflation are really taking their toll on costs. Coupled with lower revenues as customers are actively being encouraged to save water, it’s no surprise to see profits dry up,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

“But falling revenues should only be a temporary problem, since over the medium term the group’s able to increase its prices alongside inflation. And if the amount of water it bills its customers for falls below a certain threshold, the regulator will pay United Utilities the difference. But these funds are only received two years later. So in the short term, we’re seeing cash flows and earnings that are feeling the impact of rising costs and declines in water usage.”

United Utilities increased its full-year dividend 4.6% to 45.51p.