Dear reader
I felt so pleased to eradicate the “unknown” NAV in my last article but today my carefully constructed puzzle gets jumbled up again! ANIC release their year end accounts but change their reporting to now report percentage of NAV and not the fair value (except of course to provide the subtotalled fair value as of 31/12/23)
So I’ve introduced percentages and these largely match those of the RNS which at first led me to think the near £12m reduction from my estimate was some sort of general write down across the board, rather than any specific negative reductions from the prior estimate.
But I was wrong about that….. read on reader and I’ll explain
But first a couple of things for eagle-eyed readers.
We know the NAV is 16.9p as at 31/12/23.
True - but post period ANIC awarded Mr Mellon (Shellbay) further shares so there’s 1.6% dilution so I’ve corrected the shares in issue and NAV per share reduces to a 16.63p (estimated) today.
Many businesses offer share-based compensation to its leadership so shareholders have to accept this is Mr Mellon’s I suppose. 1.6% is not disproportionately large but it isn’t insignificant either. To be fair, accessing these sorts of investments via a Hedge Fund would cost 2 and 20 (2% and 20% of all gains) so 1.6% and 0% is less….
Upon closer inspection many of the 2023 period gains do not appear to have been recognised. The FVTPL (the gain or loss through the P&L) is £608,573. So £5.7m gain on Solar Foods and £3.75m gain on Good Dog Food, and Liberation Labs £650k gain are not recognised to the P&L. It isn’t at clear why. This is note 2 which “explains” the calculation. I am being ironic reader, and maybe a little sarcastic as there is no explanation!
The £11.9m “correcting reduction” in NAV is almost certainly simply the fact that all of the “Post Period Gains” (which were meant to be items recognised in 2H 2023) remain unrecognised as at 31/12/23 so are post period as in they will fall into the 2024 accounts.
To be fair to ANIC, there are semi-cryptic messages referring to four revaluations but that these cannot be recognised (for now):
So you have to decide whether fair NAV is 16.6p a share reader, or over 18p/share based on your view of the unrecognised events which are documented in past RNS’s and in my articles - so clearly have occurred - and would have “usually” have led to a recognition of that fair value in the next valuation event (an interim report being one such event).
Other Events Post Period
Of course I say the true fair value is “over 18p” that’s before we consider anything in 2024. So what’s happened since?
1.Legislative Approval
Positive read across from Aleph, for cellular agriculture’s regulatory approval - allowing commercialisation in Israel.
2024 will see a flurry of these and this will be a key milestone.
2. Bond Pet Foods - Colgate partnership
Celebrity-endorsed* ("Bond") has delivered two metric tons of animal protein (shaken and not stirred) to Hill's Pet Nutrition Inc ("Hill's") - a division of the Colgate-Palmolive Company.
This represents a major milestone toward Bond commercialising its fermentation technology for pet food applications. Hill's will formulate a variety of test products at its Pet Nutrition Center in Topeka, Kansas, for regulatory review and evaluation.
This will be reviewed by the U.S. FDA’s Center for Veterinary Medicine, as well as to prepare prototypes for market evaluation. The commercial agreement reinforces a strong partnership between Bond and Hill's after the companies first announced a joint venture in 2021 to develop a source of more sustainable animal protein to fulfil the dietary needs of dogs and cats. In the U.S. alone, 74 million dogs and 56 million cats in households currently consume significant amounts of animal-based protein.
Just as an aside, imagine we one day had a scandal involving Colgate? Would we have to call it Colgate-gate?
3.California Cultured Inc. (CC)
CC has reached a partnership agreement with Meiji, Japan's largest chocolate manufacturer. The partnership involves a 10-year-long arrangement for the supply and integration of California Cultured's cell-cultured flavanol cocoa powder into an array of products tailored for both the US and Japanese markets. The co-branded packaged goods, including chocolate, truffles and wellness-enhancing chocolate, will mark the first time cell-cultured cocoa will enter any market worldwide.
The global chocolate industry faces significant issues regarding ethical and secure supply chains. Cell culturing technology allows the production of cocoa to be decoupled from deforestation of tropical plantations, and addressing key issues of uncertain weather conditions and labour exploitation (assuming you don’t hire a bunch of kids to make cell-cultured cocoa, or Japanese chocolate of course). (Bad) jokes aside, the cocoa industry is a sad tale and this documentary, below, is from one year ago. Even if people buy Fair Trade, it seems things are not as “Fair” as you might like to believe - either to children or to the environment.
Cell-cultured can give a guarantee of no child labour and no rainforest deforestation while Fair Trade feels like a PR disaster in the offing (and next week’s Panorama or C4 Despatches) coming from one of these varied and far flung places of the world that grow Cocoa.
Conclusion
There are no great insights from today’s Interims other than a slightly weird 8% of NAV which hasn’t been recognised (yet), and three further developments of note post period.
I remain enthused by the potential of ANIC and believe we will see continued progress very positively. Given the progress of TEK’s SALT holding, which has doubled since its recent IPO (and has much further to run in my opinion) ANIC’s holding products play into a similar global need where food businesses realise they must consider new avenues to the environmental and ESG challenges of 2024 and beyond.
This is not advice.
Oak
Possibly the first public offering of one portfolio company within the next 12 months? If so could be the catalyst for a revaluation...Liberation labs? This would make the most sense to me..
I withdraw my comment about fairness related to the fee structure.