Disciplined approach to value creation
​FastForward Innovations (FFWD) is a hi-tech investment incubator, run by some of the smartest minds in the industry. The Board’s objective is to generate substantial value for shareholders, by purchasing both minority and controlling stakes in rapidly expanding, private entities, that each have the potential to realise gains of 8-10x over a 3 year period.
It is often said that 60% of all acquisitions lose money - a phenomenon known as “buyer’s curseâ€, whereby over-zealous bidders overpay for strategic assets. Not so FastForward, where we were again encouraged to hear at Tuesday’s interims that all 9 of its investee companies have either maintained or increased their worth. Granted it is still early days, albeit we think this enviable ‘hit rate’ is a credit to the management team, who together possess vast M&A experience and have remained steadfast to the core principles of: 1) only buying stakes in high growth stocks within FFWD’s target verticals (ie technology & life sciences), and 2) “walking away†from deals which are unlikely to generate superior returns commensurate to the risks.
With regards to the financials, net assets rose 3.3% from £10,270k to £10,614k (7.92p/share) in the 6 months to 30th September, vs 10.6% and 15.0% gains respectively on the FTSE All Share and AIM indices. That said, stripping out plc fees, salaries, due diligence and other corporate overheads (total £671k) – FFWD’s NAV would have actually climbed 9.9% thanks to favourable investment gains and forex (£ devaluation). A decent result, given that the portfolio consists entirely of unquoted startups, most of which under IAS rules, have to be stated at original cost.
CEO Lorne Abony travelled extensively in H1 - evaluating potential new targets and providing support to investee companies – along with building a focused high-performance management team to enhance deal flow, improve due diligence and ensure that (if required) the Board can complete transactions expeditiously. In terms of portfolio specifics, FFWD made two new investments in the period - $3.5m in Leap Gaming (virtual/3D sports) and $500k in Moon Active (casual social games) – as well as adding to its existing stake in Schoold ($700k, student software) and enjoying a nice uplift on Factom (block-chain technology to combat cyber-crime).
In the Interim statement CEO Lorne Abony concluded:†Our focus will continue to be identifying the best management teams operating high-growth businesses in industries that hold great promise. We will continue to work closely with our investee companies to assist them in leveraging opportunities to build their businesses and, where appropriate, seek exits for our investments when circumstances dictateâ€.
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