07:00 Wed 06 Nov 2019
Frontier IP Group - Final Results
Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement, this information is now considered to be in the public domain.
("
Audited final results for the year ended 30 June 2019
Financial highlights
· Fair value of our portfolio increased by 47% to
· Total revenue increased by 81% to
· Revenue from services increased by 40% to
· Profit before tax increased by 160% to
· Basic earnings per share increased to 5.77p (2018: 2.36p)
· Cash balances at
· Net assets per share as at
Corporate highlights
· Team strengthened with the appointment of
·
· Strategic partnership agreed with
· Collaboration agreement signed with
· Post year end, we announced N+1 Singer as the Group's sole broker.
· Launch of an accelerated bookbuild shortly to raise in aggregate gross proceeds of
Portfolio highlights
· Good commercial progress and strong industry engagement within the portfolio overall, reflected in the increase in fair value
· Exscientia secured
·
· Alusid raised
· Pulsiv Solar won Innovate
· Amprologix announced strategic relationship with Ingenza and won
· Fieldwork Robotics signed collaboration agreement with
· Nandi Proteins-led project won Coeliac
· Tarsis Technology entered collaboration agreement with a world-leading crop protection company
· Core portfolio additions in the year include first three from
· Post year end announced a new portfolio company-
Enquiries
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0207 332 2338 |
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07464 546 025 |
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0203 328 5656 |
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N+1 Singer (Broker) |
0207 496 3000 |
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About
The Group looks to build and grow a portfolio of equity stakes and licence income by taking an active involvement in spin-out companies, including support for fund raising and collaboration with relevant industry partners at an early stage of development.
Chairman's Statement
Performance
The year to June 2019 saw Frontier IP and its portfolio companies make strong progress despite the uncertain political, economic and market environments in which we operate. We materially increased the value of our portfolio, announced four new spin outs, including the first three from our partnerships in Portugal , and further strengthened our relationships with industry, universities and academics.
Importantly, the increase in our portfolio valuations has been underpinned by the achievement of commercial milestones and grant funding. Valuations are a topic our Chief Executive Neil Crabb takes up in his Chief Executive Officer's Statement.
On the portfolio side, Exscientia continues to perform strongly. It is establishing itself as one of the world's leading artificial intelligence-driven drug discovery companies. It raised $26 million through a Series B funding round, signed new drug discovery collaboration agreements with Roche, Celgene and, after the year end, with an exciting early-stage biopharmaceutical company Rallybio. Along with existing collaborations with GSK, Sanofi and Evotec, the company now has upfront and potential milestone payments of significantly more than £300 million .
Among the other highlights for the year, we were delighted to become one of the 14 partners in Emporia4KT, a pan-European project to ensure academic research is put to better use in boosting Europe's Atlantic marine economy. We were also named as a strategic partner of the UK Department for International Trade in Portugal and entered into a collaboration agreement with the Royal Academy of Engineering . The latter resulted in a highly-successful joint event, attended by more than 100 people, at their headquarters in central London in April 2019 .
New technologies can help us address some of the toughest issues we are facing today from tackling disease to meeting the challenges posed by environmental changes. Our portfolio companies have the potential to make important contributions.
The Vaccine Group's novel technology, for example, could prevent devastating diseases jump from animals to animals and then to humans. Amprologix is developing new antibiotics to overcome the threat from antimicrobial-resistant superbugs, while Nandi Proteins helps to address consumer desires for fewer E-number additives, less fat and less animal protein in foods.
Des Solutio is working on green chemistry to replace the use of toxic solvents in manufacturing a host of everyday pharmaceuticals, household goods and beauty products; Alusid recycles industrial waste, most of which ends in landfill, to create top-quality tiles and other surfaces. Finally, Pulsiv Solar's technology promises to make significant improvements to the energy efficiency of photovoltaic cells and power converters.
The number of our portfolio companies at the heart of these major trends is reflected in the support of our shareholders. During the year, we were delighted to raise £2.49 million in November 2018 through an oversubscribed placing with new and existing shareholders. We remain optimistic about prospects of generating further value over the coming year and beyond.
Our governance
Good governance is vital for long-term sustainable growth, and we strive to achieve the highest standards for a company our size. We adhere to the Quoted Companies Alliance Corporate Governance Code, introduced in April 2018 . To see more details about how we apply the principles of the Code, see the Our Governance section of our website: www.frontierip.co.uk/investors/corporate-governance.
Results
I was very pleased with the Group's strong performance for the year, which was ahead of management expectations. Pre-tax profits increased by 160% and the fair value of our portfolio rose to £13,252,000 .
For the year to 30 June 2019 , total revenue increased by 81% to £4,268,000 (2018: £2,363,000 ) as a result of an unrealised profit on the revaluation of investments of £3,850,000 (2018: £2,064,000 ), principally due to the movement in fair value of Exscientia and The Vaccine Group . Revenue from services, principally board retainers, technical development services and licence income, increased by 40% to £418,000 (2018: £299,000 ).
Outlook
We have an excellent team in
Chairman
Chief Executive Officer's Statement
The reasons for our encouraging progress are explained in more detail in the operational and portfolio reviews elsewhere. However, if I were to highlight one factor it would be the increasing rate at which we and our portfolio companies engage with industry. Industry engagement is a central part of what we do. It helps us validate the technology, understand how it can be scaled up and address real-world market needs and demands. Growing portfolio value is driven by external markers such as third-party investment and commercial milestones which also shows we are consistently and successfully identifying strong, commercialisable intellectual property.
During the year, our portfolio companies entered into partnerships with a host of blue chip or market-leading companies including: Roche and Celgene (Exscientia);
We strongly believe public grants play an important role in the funding mix for our portfolio companies. Data shows grants are a strong indicator of improved business performance in time and greater likelihood of a successful future exit. It also provides further validation for the technology being developed and, from a shareholder's perspective, there is the added advantage that such funding is non-dilutive.
Our portfolio companies enjoyed considerable success in winning grant funding to support commercialisation over the year. This included
Valuations in the wider marketplace have become a source of increasing concern and potential risk, so it is worth reiterating our approach. There are two aspects to the issue. First is the global market perspective, where we are seeing companies yet to justify their business model valued at extraordinary sums, in markets stoked by cheap money and the hunt for returns. There are bubbles in certain areas; the only questions are when and whether they will burst dramatically or deflate slowly.
The second aspect is the question about how to value smaller, illiquid companies still at a relatively early development stage. In too many instances, investors have been prepared to put their money in before the technology is fully proven, encouraging businesses to ramp up cash burn as they strive to justify their new-found valuation. Particularly invidious is the hype around unicorns and the way it skews investor behaviour through the desire to create companies valued at a
Many valuations reflect the sums a company is able to raise, rather than bearing any relation to technology or business fundamentals.
Our approach is different and is designed to ensure valuations are based on reality. It also reflects our view that the best way to develop spin outs is by working in partnership with universities, academics and industry, and managing for the long term. These businesses do not always need significant sums to prosper. What they do need is time to overcome the inevitable scientific, technological and commercial obstacles that arise.
Our valuation policy is explained under the heading "Equity Investments" within the annual report and accounts but to summarise; when we first incorporate a spin out, the whole company is valued at between
It is important to remember that we do not typically invest directly ourselves. Price is determined by external investors and achieving commercial milestones, so we are not under pressure to "follow our money". In this way, we hope to mitigate the risks of overvaluation.
The outcome of Brexit is unknown and therefore a potential risk to the Group. The impact on us is softened to an extent by the fact the exposure of the Group and its portfolio companies to physical cross-border trading with the EU is low, and the government has stated it will support existing grant programmes. Ideas remain free to travel unhindered; they know no borders.
Where it might have a more disruptive effect is if it leads to significant cuts to research funding. This may in time reduce the flow of quality IP available for commercialisation. Our portfolio companies may also be affected if there are cuts to grant funding.
However, we see potential opportunities arising from Brexit should it crystallise existing pressures on universities to make more of their research as they tackle problems caused by uncertainty over funding and a downturn in student numbers. Sterling weakness might also create opportunities. British science and technology has long been a magnet for foreign investors and the fall in the pound has enticed them to put a record
Within the Group, we continue to build a platform for future growth, key to which is finding the right people. To this end, I am very pleased with the appointments of
We were also very pleased post the year end to announce the appointments of
There was one departure. Portfolio Director
I would also very much like to thank our investors and other stakeholders for their continued support. We are well positioned despite the possible market and political headwinds and are confident that the year to come will be as successful as the one that has passed.
Chief Executive Officer
Key Performance Indicators
The Key Performance Indicators for the Group are:
KPI |
Description |
2019 Performance |
Fair value of the portfolio |
Movement in the value of equity in the portfolio |
|
Total revenue |
Growth in the aggregate of revenue from services and change in fair value of the portfolio |
|
Profit |
Profit before tax for the year |
|
Net assets per share |
Value of the Group's assets less the value of its liabilities per share outstanding |
41.4p (2018: 33.2p) |
Total initial equity in new portfolio companies |
Aggregate percentage equity earned from new portfolio companies during the year |
123% (2018: 67%) |
We are pleased to report that the Group achieved significant increases in all of its five Key Performance Indicators.
The value of the Group's equity investments increased to
Operational Review
Corporate
People are the biggest constraint on our ability to scale the business. It is also vital we hire the right people, with the skills to take a proactive approach to identifying IP and making our portfolio companies successful. During the year we were delighted to appoint
Post year end,
We were also very pleased to announce the appointments post year end of
The Group extended its existing networks of industry, academic and financial relationships through three important partnerships. In
In
We also announced our involvement as a partner in Emporia4KT, a major project to maximise the value of academic research to
In
Sources of IP
In line with our business model, our strategy is to identify strong, commercialisable IP and earn sizeable equity stakes in spin out companies through the support we provide to validate technology, drive industrial engagement and scaling up.
As part of this, we seek to forge long-term partnerships with sources of IP, both formal and informal, although we keep them under continual review for quality of deal flow and economic viability. This approach ensures that effort is focused where it is most effective and there is most potential value.
We continue to see good flow of intellectual property with strong commercial potential from the
Our partnerships in
Portfolio Review
Core portfolio
· The Group holds at least 10 per cent of the company's equity
· Our shareholding is worth at least
· We see substantial opportunity for a favourable exit, either through trade sale or IPO
The core portfolio made strong progress across a number of fronts during the year. Between them, our spin outs announced 11 agreements with commercial partners. Many of those are leaders in their sectors, a clear indication of our success in driving industry engagement. We incorporated four new spin outs including the first three from our operations in
Alusid:
Alusid's innovative formulations and processes create beautiful, premium-quality tiles, table tops and other surfaces by recycling industrial waste ceramics and glass, most of which would otherwise be sent to landfill. Its processes also use less energy than conventional tile manufacturing.
Alusid took significant strides during the year to
Amprologix:
Amprologix is the latest spin out stemming from our formal partnership with the
The company is initially developing a new family of antibiotics, helping to tackle antimicrobial-resistant MRSA and other superbugs, a major threat to human health globally, based on epidermicin, which is derived from bacteria found on human skin. Progress to date has been rapid and industry involvement is already secured. Ingenza, a leader in industrial biotechnology and synthetic biology, is also a shareholder and is working with Amprologix on scale up.
In February, Amprologix won a
Cambridge Raman Imaging:
Cambridge Raman Imaging was the Group's first graphene spin out, the result of a partnership between the
CamGraPhIC:
A second graphene spin out, this time from the
Cambridge Simulation Solutions:
Cambridge Simulation Solutions is developing advanced software to simulate and control complex, discontinuous processes, such as the way neural transmitters work in the brain. There are a number of potential industrial and medical applications for the spin out to explore.
Celerum was formed to commercialise research know-how and IP arising from the work of the Computational Intelligence research group at
Des Solutio:
The Group announced its second spin out from
Des Solutio was established to commercialise the research of Associate Professor
Exscientia:
Exscientia, a spin out from the
New partners included Roche, Celgene Corporation and, post-period end, Rallybio, an early-stage company seeking to combat rare diseases. During the year, Exscientia also signed a partnership agreement with GT Apeiron Therapeutics, a
In other developments, the company achieved its first milestone payment resulting from its collaboration with GSK, and completed a
Fieldwork Robotics:
A prototype of Fieldwork Robotics raspberry-harvesting robot technology successfully completed initial field trials in
The trials were held at a farm owned and operated by
The academic behind the technology, Dr Martin Stoelen, has also trialled technology to harvest cauliflowers and tomatoes.
Insignals Neurotech:
Insignals Neurotech, incorporated as the Group's third Portuguese spin out in
Molendotech:
Nandi Proteins:
Nandi Proteins develops processes and process control technology to create new ingredients from whey, collagen and vegetable proteins to replace chemical E-number additives, fat and gluten in processed food. The technology is now in the process of being scaled up following successful small-scale trials in collaboration with industry partners, which include
With its expertise in vegetable proteins and a growing consumer demand for more meat-free products, Nandi is attracting strong interest from major companies in the food industry.
NTPE LDA:
NTPE was our first spin out in
The company was spun out of the NOVA University
PoreXpert:
PoreXpert's software and consultancy services provide highly accurate information about the void spaces in porous materials and how gases and liquids behave within them. Customers include a major player in the nuclear industry and there is interest from companies in the oil and gas sector.
Pulsiv Solar:
Pulsiv Solar's technology improves the energy efficiency of photovoltaic cells and the power converters used by a host of everyday devices, such as laptops, televisions and mobile phones. The company enjoyed a year of solid progress, winning a
Tarsis Technology:
A spin out from the
Core Portfolio at 30 June 2019
|
% Issued Share Capital |
About |
Source |
|
35.6% |
Recycled materials |
|
|
10.0% |
Novel antibiotics to tackle antimicrobial resistance |
Universities of |
|
33.3% |
Medical imaging using ultra-fast lasers |
|
|
40.0% |
Methods to simulate and control complex chemical processes |
|
|
33.3% |
|
|
|
10.0% |
Near real-time automated fleet scheduling |
|
Des Solutio LDA |
25.0% |
Green alternatives to industrial toxic solvents |
FCT Nova |
|
3.3% |
Novel informatics and experimental methods for drug discovery |
|
|
27.5% |
Robotic harvesting technology for challenging horticultural applications |
|
Insignals Neurotech Lda |
33.0% |
Wearable medical devices supporting deep brain surgery |
INESC TEC |
|
14.1% |
Rapid detection of water borne bacteria |
|
|
20.1% |
Food protein technology |
|
NTPE LDA |
31.6% |
Novel technology to print electronic circuits, sensors and semiconductors onto paper |
FCT Nova |
|
15.0% |
Analysis and modelling of porous materials |
|
|
18.9% |
High efficiency power conversion and solar power generation |
|
|
18.0% |
Controlled delivery of agrochemicals using metal-organic frameworks |
|
|
19.2% |
Herpesvirus-based vaccines for the control of bacterial and viral diseases |
|
The Group holds equity stakes in a further six portfolio companies which do not meet the test for inclusion in its core portfolio. At
After the year end, in
Limited Partnership Funds
The ten-year term of the
In accordance with
Financial Review
Key Highlights
The value of the Group's equity investments increased to
Profit after tax for the Group for the year to
Revenue
Total revenue for the year to
Administrative Expenses
Administrative expenses increased by 32% to
Earnings Per Share
Basic earnings per share were 5.77p (2018: 2.36p). Diluted earnings per share were 5.51p (2018: 2.25p).
Statement of Financial Position
The principal items in the statement of financial position at
The Group had net current assets at
Net assets of the Group increased to
Cash
The Group's cash balances increased during the year by
Key Risks and Challenges affecting the Group
The specific financial risks of price risk, interest rate risk, credit risk and liquidity risk are discussed in the notes to the financial statements. The key broader risks - financial, operational, cash flow and personnel - are considered below.
The principal financial risks of the business are a fall in the value of the Group's portfolio, the impairment of the value of goodwill and recovery of overdue debt from portfolio companies. With regards to the value of the portfolio itself, the fair value of each portfolio company represents the best estimate at a point in time and may be impaired if the business does not perform as well as expected, directly impacting the Group's value and profitability. This risk is mitigated as the size of the portfolio increases. The value of goodwill is linked to the progress of the existing portfolio and to continued identification and acquisition of equity stakes in new portfolio companies.
There is a risk of certain portfolio companies being unable to repay outstanding loans or trade debt owed to the Group. The Group aims to mitigate this risk by helping ensure that these portfolio companies meet planned milestones and are in a position to finance their business plans, typically through fundraising, and repay the debt when due. The directors are confident that Nandi, Alusid and Fieldwork Robotics will be able to raise sufficient funds to finance their business plans and commence payment of the debt.
The principal operational risk of the business is management's ability to continue to identify spin out companies from its formal and informal university relationships, to increase the revenue streams that will generate cash in the short term and achieve realisations from the portfolio.
Early-stage spin out companies are particularly sensitive to downturns in the economic environment. Any downturn would mean considerable uncertainty in the capital markets, resulting in a lower level of funding activity for such companies and a less favourable exit environment. The impact of this may be to constrain the growth and value of the Group's portfolio and to reduce the potential for revenue from funding advisory work. The Group seeks to mitigate these risks by maintaining relationships with co-investors, industry partners and financial institutions.
A reduction in public funding to the Higher Education sector may result in: reduced research funding; universities changing their approach to research, which generates intellectual property, and subsequent commercialisation; or consolidation among Higher Education Institutions. Any uncertainty in the sector may have an impact on the operation of the Group's commercialisation partnerships in terms of lower levels of intellectual property generation and therefore commercialisation activity. The Group seeks to mitigate these risks by continuing to seek new sources of IP from a wide range of institutions both within and outside of the
Brexit presents potential risks for the business: the unknown impact on funding for research and development in both the higher education sector as discussed above and for our portfolio companies; the uncertain economic conditions could impact the ability of our portfolio companies to grow, in particular potentially increased difficulty recruiting and retaining appropriately skilled staff. There may also be risks to certain portfolio companies of potential tariffs, shipping delays and large foreign currency fluctuations. The continuing uncertainty surrounding Brexit makes it difficult to take any mitigating steps currently, but the Group will work closely with our portfolio companies to mitigate the impact of issues arising from Brexit when these are known.
Until the Group generates cash through an investment realisation it will rely on raising additional capital to fund the Group's operations. The uncertainty centres on the ability of management to identify and effect realisations from the portfolio and generate service revenue streams to reduce the Group's reliance on raising money from capital markets. In order to manage this risk, the Group continues to pursue its aim of actively seeking realisation opportunities within its portfolio and growing service revenue to reduce the requirement for additional capital raising.
The Group is dependent on its executive team for its success and there can be no assurance that it will be able to retain the services of key personnel. This risk is mitigated by the Group through recruiting additional skilled personnel and ensuring that the Group's reward and incentive framework aids our ability to recruit and retain key personnel. The Executive Directors are encouraged to hold direct interests in shares in the Company.
Consolidated Statement of Comprehensive Income
For the year ended
|
|
2019 |
|
2018 |
|
Notes |
£'000 |
|
£'000 |
Revenue |
|
|
|
|
Revenue from services
Other operating income Unrealised profit on the revaluation of investments |
5 |
418
3,850 |
|
299
2,064 |
|
|
|
|
|
|
|
4,268 |
|
2,363 |
|
|
|
|
|
Administrative expenses Dividend income on financial assets at fair value through profit or loss |
|
(1,932) 2 |
|
(1,465) - |
|
|
|
|
|
Profit from operations |
|
2,338 |
|
898 |
|
|
|
|
|
Interest income on short term deposits |
|
12 |
|
4 |
|
|
|
|
|
Profit from operations and before tax |
|
2,350 |
|
902 |
|
|
|
|
|
Taxation |
3 |
- |
|
- |
|
|
|
|
|
Profit and total comprehensive income attributable to |
|
|
|
|
the equity holders of the Company |
|
2,350 |
|
902 |
|
|
|
|
|
Profit per share attributable to the equity holders of the Company: |
|
|
|
|
Basic earnings per share |
4 |
5.77p |
|
2.36p |
Diluted earnings per share |
4 |
5.51p |
|
2.25p |
All of the Group's activities are classed as continuing.
There is no other comprehensive income in the year (2018: nil).
Consolidated Statement of Financial Position
At
|
|
2019 |
|
2018 |
|
Notes |
£'000 |
|
£'000 |
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Tangible fixed assets |
|
7 |
|
7 |
|
|
1,966 |
|
1,966 |
Financial assets at fair value through profit and loss Equity investments Debt investments |
5 5 |
13,252 40 |
|
9,060 - |
Trade receivables |
|
114 |
|
161 |
|
|
15,379 |
|
11,194 |
Current assets |
|
|
|
|
Financial assets at fair value through profit and loss |
|
|
|
|
Debt investments |
|
397 |
|
- |
Trade receivables and other current assets |
|
488 |
|
617 |
Cash and cash equivalents |
|
1,466 |
|
1,111 |
|
|
2,351 |
|
1,728 |
Total assets |
|
17,730 |
|
12,922 |
|
|
|
|
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
(139) |
|
(205) |
|
|
(139) |
|
(205) |
|
|
|
|
|
Net assets |
|
17,591 |
|
12,717 |
|
|
|
|
|
Equity |
|
|
|
|
Called up share capital |
|
4,243 |
|
3,828 |
Share premium account |
|
9,791 |
|
7,789 |
Reverse acquisition reserve |
|
(1,667) |
|
(1,667) |
Share based payment reserve |
|
293 |
|
186 |
Retained earnings |
|
4,931 |
|
2,581 |
Total equity |
|
17,591 |
|
12,717 |
Consolidated Statement of Changes in Equity
For the year ended
|
Share capital |
Share premium account |
Reverse acquisition reserve |
Share- based payment reserve |
Retained earnings |
Total equity attributable to equity holders of the Company |
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
At |
3,828 |
7,789 |
(1,667) |
130 |
1,679 |
11,759 |
|
|
|
|
|
|
|
Share-based payments |
- |
- |
- |
56 |
- |
56 |
Profit/total comprehensive income for the year |
- |
- |
- |
- |
902 |
902 |
|
|
|
|
|
|
|
At |
3,828 |
7,789 |
(1,667) |
186 |
2,581 |
12,717 |
|
|
|
|
|
|
|
Issue of shares |
415 |
2,002 |
- |
(20) |
- |
2,397 |
Share-based payments |
- |
- |
- |
127 |
- |
127 |
Profit/total comprehensive income for the year |
- |
- |
- |
- |
2,350 |
2,350 |
|
|
|
|
|
|
|
At |
4,243 |
9,791 |
(1,667) |
293 |
4,931 |
17,591 |
Consolidated Statement of Cash Flows
For the year ended
|
|
|
|
|
|
2019 |
2018 |
|
|
£'000 |
£'000 |
|
|
|
|
Cash flows from operating activities |
|
|
|
Cash used in operations |
|
(1,270) |
(970) |
Taxation paid |
|
- |
- |
Net cash used in operating activities |
|
(1,270) |
(970) |
|
|
|
|
Cash flows from investing activities |
|
|
|
Purchase of tangible fixed assets |
|
(7) |
(7) |
Purchase of financial assets at fair value through profit and loss |
|
(779) |
(245) |
Interest received Dividend income on financial assets at fair value through profit or loss |
|
12
2 |
4
- |
Net cash used in investing activities |
|
(772) |
(248) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Proceeds from issue of equity shares |
|
2,552 |
- |
Costs of share issue |
|
(155) |
- |
|
|
|
|
Net cash generated from financing activities |
|
2,397 |
- |
|
|
|
|
Net increase / (decrease) in cash and cash equivalents |
|
355 |
(1,218) |
|
|
|
|
Cash and cash equivalents at beginning of year |
|
1,111 |
2,329 |
|
|
|
|
Cash and cash equivalents at end of year |
|
1,466 |
1,111 |
Notes
1. General Information
This preliminary announcement was approved for issue by a duly appointed and authorised committee of the Board of Directors on 5
2. Basis of preparation
The financial information set out in this announcement does not constitute statutory financial statements for the year ended
The report of the auditor on the statutory financial statements for each of the years ended
The Directors continue to adopt the going concern basis in preparing the group's financial statements.
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) as adopted by the
3. Taxation
There is no charge to taxation for the year ended
The Group's deferred tax assets, other than those relating to short term timing differences, are not recognised in accordance with Group policy.
4. Earnings per share
a) Basic
Basic earnings per share is calculated by dividing the profit attributable to the shareholders of
|
Profit attributable to shareholders £'000 |
Weighted average number of shares |
Basic earnings per share amount in pence |
|
|
|
|
Year ended |
2,350 |
40,700,979 |
5.77 |
|
|
|
|
Year ended |
902 |
38,278,520 |
2.36 |
b) Diluted
Diluted earnings per share is calculated by adjusting the weighted number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary shares: share options. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market value share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
|
Profit attributable to shareholders £'000 |
Weighted average number of shares adjusted for share options |
Diluted earnings per share amount in pence |
|
|
|
|
Year ended |
2,350 |
42,632,932 |
5.51 |
|
|
|
|
Year ended |
902 |
40,114,559 |
2.25 |
5. Financial assets at fair value through profit and loss
|
Group 2019 |
Group 2018 |
Company 2019 |
Company 2018 |
|
£'000 |
£'000 |
£'000 |
£'000 |
At 1 July |
9,060 |
6,751 |
3,441 |
2,347 |
Additions |
779 |
245 |
776 |
41 |
Fair value increase |
3,850 |
2,064 |
1,976 |
1,053 |
At 30 June |
13,689 |
9,060 |
6,193 |
3,441 |
The investments held are valued individually at fair value in accordance with the Group's accounting policy on investments and have been categorised as being level 3, that is, valued using unobservable inputs. All gains and losses relate to assets held at the year end, and the fair value movement has been shown in the income statement as other operating income.
Financial assets at fair value through profit and loss comprise the following:
|
Group 2019 |
Group 2018 |
Company 2019 |
Company 2018 |
|
£'000 |
£'000 |
£'000 |
£'000 |
Limited partnership interests |
- |
19 |
- |
- |
Unquoted equity investments Debt investments |
13,252 437 |
9,041 - |
5,777 416 |
3,441 - |
|
13,689 |
9,060 |
6,193 |
3,441 |
The movement during the year is set out below:
Limited Partnership Interests
|
Group 2019 |
Group 2018 |
Company 2019 |
Company 2018 |
|
£'000 |
£'000 |
£'000 |
£'000 |
At 1 July |
19 |
22 |
- |
- |
Additions during the year Disposals during the year |
4 - |
4 - |
- - |
- - |
Fair value decreases during the year |
(23) |
(7) |
- |
- |
At 30 June |
- |
19 |
- |
- |
The ten-year term of the RGU Ventures Investment Fund expired on 27 July 2019 and prior to 30 June 2019 the assets were distributed to the limited partners.
Unquoted Equity Investments
|
Group 2019 |
Group 2018 |
Company 2019 |
Company 2018 |
|
£'000 |
£'000 |
£'000 |
£'000 |
At 1 July |
9,041 |
6,729 |
3,441 |
2,347 |
Additions during the year |
359 |
241 |
360 |
41 |
Fair value increases during the year |
3,864 |
2,396 |
1,988 |
1,353 |
Fair value decreases during the year |
(12) |
(325) |
(12) |
(300) |
At 30 June |
13,252 |
9,041 |
5,777 |
3,441 |
Debt Investments
|
Group 2019 |
Group 2018 |
Company 2019 |
Company 2018 |
|
£'000 |
£'000 |
£'000 |
£'000 |
At 1 July |
- |
- |
- |
- |
Additions during the year |
416 |
- |
416 |
- |
Fair value increases during the year |
21 |
- |
- |
- |
Fair value decreases during the year |
- |
- |
- |
- |
At 30 June Less debt investment non-current |
437 (40) |
- - |
416 (40) |
- |
Current portion |
397 |
- |
376 |
- |
Debt investments are loans to portfolio companies to fund early stage costs, provide funding alongside grants and bridge to an equity fundraise. Loans made during the period were principally to Pulsiv Solar (£164,000) and to Fieldwork Robotics (£121,000).
The table below sets out the movement in the value of unquoted equity investments by valuation matrix stage during the year:
Unquoted Equity Investments |
Valuation matrix stage |
|||||
|
Stage 1 |
Stage 2 |
Stage 3 |
Stage 4 |
Stage 5 |
Total |
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
1 July 2018 |
50 |
595 |
3,467 |
4,929 |
- |
9,041 |
Transfers between stages |
(21) |
16 |
(3,312) |
- |
3,317 |
- |
Fair value increase through other operating income |
49 |
1,914 |
25 |
14 |
1,850 |
3,852 |
Additions |
- |
12 |
- |
347 |
- |
359 |
30 June 2019 |
78 |
2,537 |
180 |
5,290 |
5,167 |
13,252 |
The table below provides information about unquoted equity investment fair value measurements.
(See the accounting policy on investments for a description of the valuation matrix stages)
Valuation matrix stage |
No of Investments |
Fair value |
Unobservable inputs |
Reasonable possible shift |
|
|
|
£'000 |
|
% |
+/- £000 |
Stage 1 |
5 |
78 |
Initial valuation of new spin outs at £50,000 |
20% |
16 |
Stage 2 |
5 |
2,537 |
Management's assessment of the value of IP transferred and the value of grants from which economic benefit is derived. |
25% |
634 |
Stage 3 |
7 |
180 |
Management's assessment of performance against milestones and discussions of likely imminent fundraising. |
30% |
54 |
Stage 4 |
5 |
5,290 |
The price of latest funding round provides unobservable input into the valuation of any individual investment. However, subsequent to the funding round, management are required to re-assess the carrying value of investments at each period end which result in unobservable inputs into the valuation methodology. |
10% |
529 |
Stage 5 |
1 |
5,167 |
Discounted comparable public company valuation. Unobservable inputs into discounted cash flow are forecasts of future cash flows, probabilities of project failure and evaluation of the time cost of money. |
30% |
1,550 |
30 June 2019 |
13,252 |
|
|
2,783 |
Significant unobservable inputs:
The valuation of the Group's investment in Exscientia at 30 June 2019 was £5,167,000, 39% of the Group's total equity investments and 29% of its net assets at 30 June 2019. The increase in the value of the Group's holding in Exscientia over the year to 30 June 2019 was £1,850,000, 48% of the Group's unrealised profit on the revaluation of investments and 79% of profit for the year to 30 June 2019. The significant inputs into the valuation of the Group's holding in Exscientia included the price of the latest funding round, assessment of performance during the period from the pricing of the latest funding round to 30 June 2019 and estimated, risk adjusted forecasts of future cash flows. Management's view is that Exscientia is continuing to make significant progress, as evidenced in the strong news flow from the company, but management does not have full information on Exscientia's contracts in existence at 30 June 2019 and on its future prospects and therefore the sum of the parts that comprise the valuation include varying degrees of significant estimation and assumption. Given this, management has exercised a degree of caution. The estimated fair value of new contracts since the last funding round includes discounted estimated cash flows which have been risk adjusted for probability of success. A 20% reduction in the probabilities of success would reduce the valuation of the Group's investment in Exscientia by 22% while a 50% increase in the 12% discount rate applied by Group's management would reduce the valuation by 13%.
The value of grants from which The Vaccine Group will derive commensurate economic benefit provided significant unobservable input into the valuation of the Group's investment in The Vaccine Group at 30 June 2019 of £1,624,000.
6. Availability of statutory financial statements
Copies of the full statutory financial statements will be available from the Company's offices at 93 George Street, Edinburgh EH2 3ES no later than 7 November 2019 and will be available on its website at www.frontierip.co.uk later today.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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