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Tern PLC - Portfolio Update

RNS Number : 3186L
Tern PLC
12 January 2021
 

 

12 January 2021

 

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

 

·    Strong business momentum seen in Q4 2020 across all of Tern's principal portfolio companies and continuing into 2021.

 

·    Device Authority finished 2020 strongly, closing five key orders in their primary sectors and recording its strongest ever trading quarter in Q4 2020.

 

·    The shareholders of Wyld Networks and Wyld Technologies have reached agreement on a consolidation of the business into Wyld Networks to create a more traditionally investable structure. 

o As a result, Wyld Technologies will now be owned 100% by Wyld Networks. 

o The positive momentum has continued for Wyld, with highlights including the signing of Alliance Corporation to market Wyld Connect in North America, in addition to the agreement with Ascom to market the Wyld portfolio.

 

·    Fundamental VR announced three significant contract wins in late November and early December 2020, for a combined value of £1.7 million, including two significant follow-on orders from existing customers.

 

·    InVMA finished the year strongly with significant contract wins with both existing and new customers in Q4 2020.

 

·    Since the investment by Tern in November 2020, Talking Medicines has doubled the size of its team and is focussed on the launch of its new SAAS data platform to pharma companies in Q1 2021.

 

Commenting Al Sisto, CEO of Tern, said:

 

"As I commented in our last portfolio update, issued last November, 2020 was both a year of challenges, particularly in light of COVID-19, but also one of significant opportunities. All of Tern's principal portfolio companies enjoyed strong positive momentum during 2020, which accelerated during Q4 and we anticipate will continue through 2021.  They have been engaging with globally recognised customers, world class channel partners, and winning repeat business, demonstrating real progress towards our goal of generating significant value for Tern's shareholders.  The Tern board see this progress not just in terms of the current trading performance of the portfolio companies, but also the increasing number of critical proof points of their business models and processes, elements that are particularly important if value is to be unlocked, as is our goal, through third party investment, especially from US venture capital firms.

 

"Tern now has a diversified portfolio of IoT focussed businesses, at various stages of maturity, that are benefiting from the synergies of being part of the Tern ecosystem and I believe now provide our shareholders with an appropriate balance of risk and reward.  The fundamental value and attractiveness of our portfolio has increased significantly through the performance and relevance achieved during 2020 and we believe will continue to do so during 2021. We also believe this underlying value will be recognised during this year as our portfolio companies secure third-party expansion capital through syndicated funding rounds.

 

"We look forward to providing further regular updates on the Company and its portfolio during 2021."

 

Detailed Portfolio Update

 

Device Authority Limited ("DA" or "Device Authority")

 

Sector: IoT Security

 

Holding: Tern has a 56.8% holding in DA (A shares) and as at 30 June 2020 this had a book valuation of £13.8 million. The current convertible loan balance is US$4 million and Tern also holds 12,406 B shares in DA. 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.

 

Despite the disruption caused by the COVID-19 pandemic, DA finished 2020 strongly, closing five key orders in its primary sectors in Q4 2020. These orders were:

 

·    The conversion of two existing pilot customers, one in the EU/US and one in the UK, to production licenses in the connected vehicle/automotive sectors;

·    An initial engagement for a new marquee EU-headquartered Fast Moving Consumer Goods ("FMCG") customer working with Wipro;

·    The renewal by an existing medical company customer as it advances from pilot to production, with the addition of new devices; and

·    A new pilot with an EU/US medical device company, who is launching its products in 2021.

 

Three of these orders resulted from the Microsoft and Wipro partner channels, as the relationships with partners continues to develop as planned. This includes engagement with the Microsoft Azure IoT, Sphere and Edge teams, as the requirement to simplify, and automate, the provisioning and security of IoT devices, networks and data at scale continues to be a market challenge. Although the partner channel has taken time and investment to develop, indications are that this strategy is starting to deliver the intended customer outcomes. As a result, Device Authority expects this channel momentum for KeyScaler to continue in 2021, as the requirement for automating IoT life cycle management continues to develop as a 'must have' in its focus sectors of automotive, IIoT (industrial) and IoMT (healthcare).

 

Additionally, the COVID-19 pandemic has triggered a new wave of cybercriminal opportunists at an unprecedented speed and scale, and the adoption of security technology continues to rise steadily to meet this demand. In particular, the past year has seen increased usage of telemedicine and the deployment of medical and healthcare devices.  As IoT device adoption increases, protecting the full lifecycle management of devices and data, both on and off network, becomes more challenging, and creates demand for solutions such as Device Authority's KeyScaler, which become integral components of successful cybersecurity strategies. 

 

Device Authority is taking a leadership position in addressing this expanded threat and will conduct a virtual IoT Security Summit in February 2021. This two-day event will include industry experts speaking across the healthcare, IoMT / medical devices, IIoT and automotive sectors, from leading global security and consultancy companies, including: Venafi, Wipro, Imagination Technology, Entrust, EPS Global and Intrinsic ID.  Device Authority's expertise and market leadership, coupled with these key opinion leaders, should make this a compelling event for anyone deploying foundational IoT cybersecurity strategies.

 

FVRVS Limited ("FundamentalVR" or "FVR")

 

Sector: Healthcare IoT

 

Holding: Tern has a 26.9% holding in FVR and as at 30 June 2020 this holding had a book valuation of £3.0 million

 

In late November and early December 2020, FundamentalVR announced three important enterprise contract wins with a combined value of £1.7 million.  Two of these were follow-on orders from existing clients, with the third being a three year contract with a new medical industry client.  All three contracts utilised the FundamentalVR's platform with its unique HapticVR TM technology.

 

FundamentalVR is also working with other leading pharma companies to implement its immersive, data driven, simulation platform for use in gene and cell therapies used in Regenerative Medicine applications, expanding its market reach beyond its historic orthopaedic and ophthalmology market focus.

 

COVID-19 has had a considerable impact on the healthcare industry, particularly regarding how new products and procedures are brought to market.  The Tern Board is pleased with the technological advances made by FundamentalVR during 2020 that are helping companies train their sales teams, doctors and hospital staff on these new capabilities as the pandemic has created the requirement for contactless solutions.  The Tern Board believes that FundamentalVR's 2021 sales pipeline and its repeat business from its existing customers reflects the importance of these market drivers and will help establish the company as a leader in its field.

 

InVMA Limited ("InVMA")

 

Sector: IoT enablement

 

Holding: Tern has a 50% holding in InVMA and as at 30 June 2020 this holding had a book valuation of £1 million. Tern also has a convertible loan balance which currently stands at £175,000.

 

Despite a challenging 2020 with the impact of COVID-19 felt throughout the industrial IoT sector, InVMA finished the year strongly with Q4 2020 including significant contract wins with both existing and new customers. This momentum is forecast to be carried into Q1 2021 and is complimented by a growing pipeline of diverse customers for both AssetMinder® and professional services, new channel partner opportunities and environmental services bids.

 

InVMA has worked hard to hone its go-to-market strategy, develop traction in the US and grow its customer base throughout the UK and into Europe across a broad range of sectors, including: aerospace, automotive, fast moving consumer goods ("FMCG") and national infrastructure.  AssetMinder® SaaS sales continue to increase as a percentage of total revenues, with both monthly recurring revenue and Q1 2021 pipeline opportunities building.  There are currently 14 AssetMinder® quotations to UK customers alone in InVMA's pipeline, and when combined with a focus on European partner development, the Tern board considers this to be a positive indicative start to 2021.  InVMA are further developing the AssetMinder® offering in 2021, including new modules and incorporating additional condition monitoring and predictive Artificial Intelligence ("AI") capability. 

 

InVMA's growth coincides with a time when the industrial physical and digital worlds continue to show convergence.  PWC reported that 90% of industrial companies are investing in digital factories, and McKinsey suggests that 70% of companies are considering digital manufacturing at the top of their operations-strategy agendas. AssetMinder's® return on investment potential can be realised by preventing one unplanned event, and is achieved by helping customers remotely monitor assets, reducing their operating costs through condition and predictive monitoring and developing new digitally-enabled revenue streams.

 

Wyld Networks Limited ("Wyld" or "Wyld Networks")

 

Sector: IoT enablement

 

Holding: Tern holds 96.74% of Wyld Networks Limited 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.

 

Tern, the sole shareholder of Wyld Networks and the minority shareholders of Wyld Technologies, have reached agreement on a consolidation of the two businesses into Wyld Networks, which is now underway.  The directors of Wyld, supported by Tern, believe that this will result in a more traditionally investable structure.  As a result, Wyld Technologies will now be owned 100% by Wyld Networks and Wyld Networks will be held 96.74% by Tern, with the remainder held by management and other shareholders.

 

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

 

Wyld Connect - Terrestrial and Satellite IoT

 

Wyld continues to supply both development services and products for its existing terrestrial Low Power Wide Area Network ("LPWAN") modules into the IoT connectivity market. As reported in November 2020, Wyld reached an agreement with a global satellite operator to co-design, co-develop and co-market a combined terrestrial and satellite LPWAN IoT module to address a forecast market1 of 30.3 million units of satellite IoT modules to be deployed by 2025, commencing in 2021.

 

In advance of Wyld's partner's proposed commencement of a deployment of a low earth orbiting satellite constellation in 2021 to provide global coverage, Wyld is in discussions with distribution and cooperation partners for the solution and is pleased to announce the signing of a contract with Alliance Corporation covering the North American region. Alliance Corporation will also market the Wyld Connect terrestrial products as part of their distribution portfolio.

 

Wyld Mesh and Connect - Wireless mesh networks and COVID-19 social distance monitoring and alerting networks

 

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 customers' 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.

 

In response to the COVID-19 pandemic, 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 including healthcare, education and business in general.

 

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. On 3 December 2020 Ascom launched the solution into the healthcare market with a focus on care homes and hospitals. Ascom plan to launch Wyld Mesh and Wyld Connect into the enterprise market, consisting of retail, hospitality and other venues, by the end of January 2021.

 

In the care home environment, the roll out of the COVID-19 social distance monitoring and alerting network solution in Scotland continues on plan with the support of NHS Highland and Highland Health Ventures. In addition, Ascom is in advanced discussions regarding reselling the Wyld Covid-19 solution to several other care home providers.

 

In December 2020, Wyld Networks, together with Edinburgh University, was awarded a ESRC IAA Impact Grant for a project entitled "Designing for scale: technology's impact on compassion within care homes". Wyld Networks will provide infrastructure for research to be conducted by Edinburgh University on the impact of the technology in delivering compassion within care homes and Edinburgh University will provide input to Wyld Networks for further potential enhancements of the technology.

 

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

 

Talking Medicines Limited ("Talking Medicines")

 

Sector: Medtech

 

Holding: As announced on 4 November 2020, Tern invested £0.86 million for a 23.4% equity stake in Talking Medicines

 

Talking Medicines captures the voice of the patient experience by medicine, focussing on the opportunity to address the blind spot for pharma companies in understanding patients in the real world.

 

Since the investment by Tern and the Scottish Investment Bank in November 2020, Talking Medicines has doubled the size of its team through senior tech hires.  This has enabled it to accelerate its proprietary AI machines to filter the voice of the patient through understanding sentiment in the context of specific medicines.  As a result, Talking Medicines will be launching its new SAAS data platform to pharma companies in Q1 2021. Talking Medicines believes this will bring social intelligence on patient confidence by medicine to the market for the first time and the initial focus will be to generate commercial interest in the North American market during Q1 2021.

 

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 and Corporate Broking)

 

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/

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