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Tern PLC - Portfolio Update

RNS Number : 7506E
Tern PLC
10 November 2020
 

10 November 2020

 

Tern Plc

("Tern" or the "Company")

 

Portfolio Update

 

Tern Plc (AIM:TERN), the investment company specialising in the Internet of Things ("IoT"), is pleased to provide an update on the recent activities of the Company and its principal portfolio companies.

 

Highlights

 

·    Recent expansion of the Tern portfolio, following a £0.86 million investment for a 23.4% equity stake in Talking Medicines Limited, in line with the Company's strategy to increase the breadth and value of its portfolio, fulfilling its commitment to secure a new investment before the end of 2020.

·    On 6 November 2020 Wyld Networks contracted with Ascom as a distributor to market the Wyld portfolio. Ascom is a global solutions provider focused on healthcare ICT and mobile workflow solutions in the retail, industry, secure facilities and hospitality sectors

·    In response to the COVID-19 pandemic, Wyld Networks has recognised an additional application of its technology to monitor, alert and measure social distancing to help reduce the spread of viruses such as COVID-19 and Influenza in multiple sectors. This technology combines Wyld Mesh and Wyld Connect. Wyld Networks has specifically developed a technology with support from NHS Highland and Highland Health Ventures for deployment into care homes. The first care home deployment is expected to commence in late November 2020.

 

·    Wyld Networks has further progressed its solution for combined terrestrial and satellite LPWAN IoT connectivity for deployment where there is no internet or the internet is congested. The company received an initial order in September 2020 to develop and deliver a number of test IoT modules ahead of a proposed launch of a low earth orbit satellite constellation in 2021.

 

·    In October 2020, the Company, alongside Alsop Louie Partners and the Estate of George Samenuk, provided an additional loan of US$0.5 million to Device Authority, of which the Company contributed US$0.4 million, to further progress the roll out of Keyscaler into the Microsoft channel programmes. As part of this investment the Company also subscribed for new B shares in Device Authority, enabling participation in any future B shares liquidity benefit.

 

Commenting Al Sisto, CEO of Tern, said:

 

"2020 is proving to be a year of uncertainty, but one of significant opportunity. Tern was quick to react to the challenges of COVID-19 by creating a round table of our portfolio CEOs and Tern's board to respond to the "new normal" by leveraging the synergies of our portfolio companies. Our investee companies created safe and productive work environments to focus on the opportunities created by the accelerated adoption of technology.

 

"Today, the continued uncertainty created by the COVID-19 crisis is only serving to fuel the transition to digital solutions which are creating new opportunities for our portfolio companies to participate in. Participating with our companies individually and at our round table has enabled Tern to continue to play an important role in helping our CEOs maintain their teams and to rapidly create new solutions for their customers to address the digital transformation and contactless requirements.

 

"The pandemic's acceleration of the shift to online activity is evident in everything from online telehealth visits, remote monitoring and tracking, online education and training to the global need to secure the new online infrastructures. It has helped produce an opportunity rich environment in the IoT sector which has resulted in a new investment for the Company as well as a healthy pipeline of future opportunities. I am excited by recent developments at our portfolio companies and we believe that Tern's portfolio is well positioned to benefit from new market requirements driven by these long-term trends. We look forward to providing further regular updates on the Company and its portfolio."

 

Detailed Portfolio Update

 

Device Authority Limited ("DA")

Tern holding: 56.8% A shares

Sector: Security

Invested Since: September 2014

 

Tern has a 56.8% holding in DA (A shares), which specialises in IoT security, and as at 30 June 2020 this holding had a book valuation of £13.8 million. The current convertible loan balance is US$4 million and Tern now also holds 12,406 B shares in DA as part of the latest loan agreement. DA's B shares are non-voting, and in conjunction with DA's C shares, participate in 25% of the net proceeds on a liquidity event.

 

DA has recently made changes to its board with Matthew Scherba, Tern's Investment Director, joining as Chairman to support Darron Antill, CEO of DA, strategically with the commercial growth of the business and the expansion into North America and Europe. Al Sisto, after six years as Chairman, has stepped down from this role at DA to focus more of his time on Talking Medicines, but he remains a DA board observer.

 

DA continues to build on its technology integrations and support for Microsoft and recently announced functionality to automate certificate management for Microsoft Azure Sphere devices. This provides an automatic way to certify devices that are connecting different constituents, including Microsoft and non-Microsoft assets, in operations.

 

FundamentalVR

Tern holding: 26.9%

Sector: Healthcare IoT

Invested Since: May 2018

 

Tern's shareholding in FundamentalVR is 26.9% and as at 30 June 2020 this holding had a book valuation of £3.0 million.  

 

In September 2020, FundamentalVR announced the appointment of Allan May as Chairman of the company.  Allan is a highly respected and established figure in Silicon Valley, with considerable experience in funding, leading and co-founding companies across biotech, Medtech and diagnostics.

 

In October 2020, FundamentalVR announced the expansion of its surgical specialty capabilities with the addition of new products and procedures for use in treating the eye. FundamentalVR can now create immersive, data-driven medical educational simulations for ophthalmology powered by the company's patented HapticVRTM technology, in addition to its existing applications for orthopaedic devices and pharmaceutical brands.

 

InVMA Limited ("InVMA")

Holding: 50%

Sector: IoT enablement

Invested Since: September 2017

 

Tern has a 50% holding in InVMA and as at 30 June 2020 this holding had a book valuation of £1 million. Following the recent investment made alongside the Future Fund in August 2020, Tern also has a convertible loan balance which currently stands at £175,000.

 

Since appointing its new CEO, Peter Stephens, in August 2020, InVMA has strengthened its AssetMinder product offering, including adding the artificial intelligence and machine learning expertise required to expand upon its existing capabilities. The investment of £250,000 in InVMA in August 2020 has also enabled  InVMA to add to its management team, and expand its international expertise, and reach, through both direct contacts and key partnerships. InVMA has continued to see increased demand across industrial IoT sectors, despite the impact that COVID-19 has had on many industrial businesses. Over the remainder of the year, InVMA is targeting growth through direct sales, the global channel partnership that was announced in January 2020, as well as through the addition of new strategic partners.

 

Wyld Networks Limited ("Wyld Networks")

Holding: 100%

Sector: IoT enablement

Invested Since: June 2016

 

Tern has a 100% holding in Wyld Networks and as at 30 June 2020 this holding had a book valuation of £1.2 million, which includes a convertible loan balance of £1.1 million.

 

Wyld Networks market a portfolio of solutions with broad application in multiple sectors leveraging its patent pending technology.  This portfolio includes:

 

Terrestrial and Satellite IoT - Wyld Connect

 

Wyld Connect has a solution for combined terrestrial and satellite Low Power Wide Area Network (LPWAN) IoT connectivity for deployment where there is no internet or where the internet is congested. Early this year the company signed a co-design co-development and co-marketing agreement with a global satellite operator for a satellite IoT module and received an initial order in September 2020 for a number of test IoT modules ahead of a proposed launch in 2021 of a low earth orbit satellite constellation.

 

Tern's Board believes that the low earth orbit nano satellite IoT market presents a significant opportunity for Wyld Networks and a recent report forecasts the global market for satellite IoT solutions to grow to US$5.9 billion in 2025 with 30.3 million IoT modules deployed between 2021 and 2025, representing a CAGR of just under 40%1.

 

Branded consumer wireless mesh networks - Wyld Mesh

 

Wyld Mesh connects smartphones directly to smartphones without the need for 4G or WiFi, allowing brands to build their own wireless networks with the aim of improving their customer's experience and generating new revenue streams through location-based marketing and the data generated. In the consumer sector this has applications in retail, sporting and entertainment venues.

 

The global location-based advertising market was valued at US$62.35 billion in 2019 and is forecast to register a CAGR of 17.4% from 2020 to 20272, although the impact of COVID-19 has yet to be quantified.

 

Covid-19 social distance monitoring and alerting networks - Wyld Mesh and Wyld Connect

 

In response to the COVID-19 pandemic, Wyld Networks has recognised an additional application of its technology to monitor, alert and measure social distancing to help reduce the spread of viruses such as COVID-19 and Influenza in multiple sectors.  Wyld Networks has focussed on combining Wyld Mesh and Wyld Connect to create a solution to monitor, alert and measure social distancing in multiple sectors. Wyld has specifically developed a technology with support from NHS Highland and Highland Health Ventures for deployment into care homes. The first care home deployment is expected to commence in late November 2020.

 

The technology has additional potential applications in university halls of residence, retail, health care, hospitality, and general commercial/business premises and is designed to enable people to work safely against the backdrop of COVID-19 and to assist employers in providing a duty of care to both employees and customers.

 

Tern will provide further updates on the deployment of this technology in due course.

 

On 6 November 2020 Wyld Networks contracted with Ascom as a distributor to market the Wyld portfolio. Ascom is a global solutions provider focused on healthcare ICT and mobile workflow solutions in the retail, industry, secure facilities and hospitality sectors.

 

Enterprise wireless mesh networks - Wyld Mesh and Wyld Connect

 

Wyld Networks also has a wireless mesh network solution for enterprises, which combines Wyld Mesh and Wyld Connect. This solution provides wireless networks connecting both people to people and people to IoT devices in a mesh network, with the aim of improving operational efficiency in enterprise communications.

 

Wyld Networks continues to deliver solutions against its existing contracts with Delta-T, Develco, RCD, CADIS, Eltek and Envirosystems, among others.

 

Talking Medicines Limited ("TM")

Tern holding: 23.4%

Sector: Medtech

Invested Since: November 2020

 

As announced on 4 November 2020 the Company has invested £0.86 million for a 23.4% equity stake in Talking Medicines Limited as the lead investor in a syndicated funding round of an aggregate of £1.1 million alongside the Scottish Investment Bank, Scottish Enterprise's investment arm. TM uses its natural language processing technology to convert what people are saying on social media in plain unstructured language, into structured pharma grade intelligence on patient sentiment.

 

TM harnesses the voice of the patient from the growing proportion of the world's population who are active on social media and who are using health devices. Through a combination of artificial intelligence and machine learning, coupled with natural language processing technologies, TM decodes rich patient intelligence at scale. TM's new artificial intelligence data service is designed to translate what patients are saying into actionable intelligence by providing a global patient confidence score by medicine. This addresses the need for pharmaceutical companies, insurance providers and pharmacies to understand their patients in a real world environment. By mapping the intelligence on what patients think about their medicines and how they are taken, TM's customers can drive more efficient marketing and better health outcomes.  

 

The recent investment round will enable the company to scale up its team, particularly in relation to natural language processing data science and engineering, with the aim of accelerating the product roadmap, and expanding the customer base, both within Europe, but also with a focus on the North American market. Al Sisto has now joined the TM board as the new Chairman.

 

Online Investor Presentation and Q&A Session

 

Tern's management will be hosting an online presentation and Q&A session regarding the latest developments with the Company and its portfolio at 5.30 p.m. GMT on Monday 23 November 2020. This session is open to all existing and prospective shareholders. Those who wish to attend should email tern@investor-focus.co.uk and they will be provided with access details. Participants will have the opportunity to submit questions during the session, but questions are welcomed in advance and may be submitted to: tern@investor-focus.co.uk.

 

Enquiries

 

Tern Plc

Al Sisto (CEO)

Sarah Payne (CFO)

via IFC Advisory

 

Allenby Capital Limited

(Nominated Adviser and Broker)

David Worlidge / Alex Brearley (Corporate Finance)

Guy McDougall (Equity Sales)

 

Tel: 0203 328 5656

 

IFC Advisory

(Financial PR and IR)

Tim Metcalfe

Graham Herring

Florence Chandler

 

Tel: 0203 934 6630

tern@investor-focus.co.uk

 

Sources

 

1https://rethinkresearch.biz/articles/nanosats-and-new-use-cases-will-propel-satellite-iot-to-5-9bn-by-2025/

2https://www.grandviewresearch.com/industry-analysis/location-based-advertising-market

 

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