TIDMFIPP
RNS Number : 3948S
Frontier IP Group plc
06 November 2019
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.
6 November 2019
Frontier IP Group plc
("Frontier IP", the "Group" or "the Company")
Audited final results for the year ended 30 June 2019
Frontier IP Group Plc is focused on the commercialisation of
intellectual property
Financial highlights
-- Fair value of our portfolio increased by 47% to GBP13,252,000 (2018: GBP9,041,000)
-- Total revenue increased by 81% to GBP4,268,000 (2018:
GBP2,363,000) - reflecting an unrealised profit on the revaluation
of investments of GBP3,850,000 (2018: GBP2,064,000)
-- Revenue from services increased by 40% to GBP418,000 (2018: GBP299,000)
-- Profit before tax increased by 160% to GBP2,350,000 (2018: GBP902,000)
-- Basic earnings per share increased to 5.77p (2018: 2.36p)
-- Cash balances at 30 June 2019 of GBP1,466,000 (2018: GBP1,111,000)
-- Net assets per share as at 30 June 2019 of 41.4p (2018: 33.2p)
Corporate highlights
-- Team strengthened with the appointment of Matthew White,
former Head of Innovation at AB Sugar, as Chief Commercialisation
Officer with a seat on the board, and Alex Pugh as analyst. Post
period end, Lucy Rowbotham, former Director of the Medical
Technology Division at Cambridge Consultants, joined as Technology
Commercialisation Director. Expanded funded intern programme
-- John Price, who has had a long and distinguished career at
Mars, Incorporated and Air Vice-Marshal Gary Waterfall CBE
appointed post year end as specialist advisers. Their roles are to
deepen and expand industrial partnerships for the Group and its
portfolio companies. They will focus respectively on food and
agritech, and defence
-- Strategic partnership agreed with UK Department for
International Trade to support growth in Portugal: Frontier IP
selected as partner in Emporia4KT, major project to maximise value
of academic research to Europe's marine and coastal economies
-- Collaboration agreement signed with Royal Academy of
Engineering, resulting in successful joint event at the Academy's
headquarters in April 2019
-- Post year end, we announced N+1 Singer as the Group's sole
broker. Allenby Capital remains our Nominated Adviser
-- Launch of an accelerated bookbuild shortly to raise in
aggregate gross proceeds of GBP3.5 million with the ability to
upscale to GBP4.0 million subject to demand, by way of a
placing
Portfolio highlights
-- Good commercial progress and strong industry engagement
within the portfolio overall, reflected in the increase in fair
value
-- Exscientia secured US$26 million in Series B funding,
announced drug-discovery collaboration agreements with Roche,
Celgene and GT Apeiron; achieved first milestone for GSK and, post
period end, first for Sanofi
-- The Vaccine Group and its partners party to more than US$9
million grant funding from the US, UK and Chinese governments
-- Alusid raised GBP1.34 million; Parkside Architectural Tiles,
the commercial arm of Topps Tiles, launched Alusid-made Sequel
range
-- Pulsiv Solar won Innovate UK grant and entered into an
agreement with Bosch UK to optimise the design of its
solar-microinverter
-- Amprologix announced strategic relationship with Ingenza and
won GBP1.2 million Department of Health and Social Care funding to
accelerate development of new antibiotic
-- Fieldwork Robotics signed collaboration agreement with Hall
Hunter Partnership, won Innovate UK grant to accelerate development
of raspberry harvester; prototype completed initial field
trials
-- Nandi Proteins-led project won Coeliac UK and Innovate UK
grant to improve taste and texture of gluten-free bread; partners
include AB Mauri and Agrii, part of Origin Enterprises
-- Tarsis Technology entered collaboration agreement with a
world-leading crop protection company
-- Core portfolio additions in the year include first three from
Portugal: NTPE, Des Solutio and Insignals Neurotech. In the UK, we
announced the addition of Amprologix and incorporated
CamGraPhIC
-- Post year end announced a new portfolio company- Elute
Intelligence Holdings- which has been formed from CFL Software, an
existing UK software business
Neil Crabb, Chief Executive Officer of Frontier IP, said: "The
year to June 2019 represented further strong progress for the
Group. Our innovative business model and committed approach to
executing our strategy means we believe we are well placed to
weather any market and political headwinds and in a good position
to deliver another positive performance over the year to come."
Enquiries
Frontier IP Group plc 0207 332 2338
Neil Crabb, Chief Executive
Andrew Johnson, Communications & Investor
Relations 07464 546 025
www.frontierip.co.uk
Allenby Capital Limited (Nominated Adviser) 0203 328 5656
Nick Athanas / Nicholas Chambers
N+1 Singer (Broker) 0207 496 3000
Harry Gooden / George Tzimas
About Frontier IP
Frontier IP unites science and commerce by identifying strong
intellectual property and accelerating its development through a
range of commercialisation services. A critical part of the Group's
work is involving relevant industry partners at an early stage of
development to ensure technology meets real world demands and
needs.
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 GBP300 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 GBP2.49 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
GBP13,252,000.
For the year to 30 June 2019, total revenue increased by 81% to
GBP4,268,000 (2018: GBP2,363,000) as a result of an unrealised
profit on the revaluation of investments of GBP3,850,000 (2018:
GBP2,064,000), 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 GBP418,000 (2018:
GBP299,000).
Outlook
We have an excellent team in Frontier IP, and I would very much
like to thank our people for their hard work this year. It is
thanks to their efforts and those of our university, academic and
other partners that the Group is well placed to benefit from a
portfolio increasing in maturity and breadth. We are confident our
portfolio will continue to grow in value.
Andrew Richmond
Chairman
Chief Executive Officer's Statement
Frontier IP Group saw another strong year for the period to June
2019. The fair value of our portfolio rose 47% to GBP13,252,000. We
continued to adhere to our capital efficient business model with
profit before tax increasing by 160% to GBP2,350,000. These numbers
were significantly ahead of management expectations.
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); AB Foods and Agrii, part
of Origin Enterprises (Nandi); Bosch UK (Pulsiv Solar); Parkside
Architectural Tiles, the commercial arm of Topps Tiles, (Alusid);
Hall Hunter Partnership (Fieldwork Robotics); G's Group
(Molendotech); and Ingenza (Amprologix).
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 UK government backing for Fieldwork, Pulsiv, Amprologix
and Nandi, while The Vaccine Group and its partners are party to
more than $9 million in grants from the US, UK and Chinese
governments.
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 $1 billion or more. But there's a
reason why unicorns are creatures of myth - they do not exist in
the real world.
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 GBP50,000 and GBP1 million, depending on
whether IP has been transferred or not, additionally taking into
account the level of any grant funding that might have been
received. At the next stage, valuations are then set through
third-party funding rounds or the trading progress of the business
following the industry-standard IPEV guidelines. As the business
matures a combination of valuation techniques may be applied
including discounted cash flow, industry specific valuation models
and comparable company valuation multiples.
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 GBP5.5 billion
so far this year into UK technology companies, according to recent
government figures.
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 Matthew White, a former head
of innovation at AB Sugar who is now our Chief Commercialisation
Officer and a director of the Group, and analyst Alex Pugh during
the year. Post period end, Lucy Rowbotham, former Director, Medical
Technology Division, at Cambridge Consultants, joined us as
Technology Commercialisation Director in a non-board role. We've
also expanded our funded intern programme.
We were also very pleased post the year end to announce the
appointments of John Price, who has had a long and distinguished
career at Mars, Incorporated and Air Vice-Marshal Gary Waterfall
CBE as specialist advisers to deepen and expand industrial
partnerships for the Group and its portfolio companies. They will
focus respectively on food and agritech, and defence.
There was one departure. Portfolio Director David Cairns decided
to leave the company after more than a decade. I would like to
thank David for the important contribution he has made over the
years to our growth and success, and to wish him all the very best
for the future.
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.
Neil Crabb
Chief Executive Officer
Key Performance Indicators
The Key Performance Indicators for the Group are:
KPI Description 2019 Performance
Fair value of Movement in GBP13,252,000
the the value (2018:
portfolio of equity in GBP9,041,000)
the portfolio
------------------------------------- ----------------------------------------
Total revenue Growth in the GBP4,268,000
aggregate (2018:
of revenue GBP2,363,000)
from services
and change in
fair
value of the
portfolio
------------------------------------- ----------------------------------------
Profit Profit before GBP2,350,000
tax (2018:
for the year GBP902,000)
------------------------------------- ----------------------------------------
Net assets Value of the 41.4p (2018:
per share Group's 33.2p)
assets less
the value
of its
liabilities
per share
outstanding
------------------------------------- ----------------------------------------
Aggregate
percentage
equity
earned from
Total initial new
equity portfolio
in new companies
portfolio during the
companies 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
GBP13,252,000 (2018: GBP9,060,000) with net assets increasing to
GBP17,591,000 (2018: GBP12,717,000). Profit after tax for the Group
for the year to 30 June 2019 was GBP2,350,000 (2018: GBP902,000).
This result includes a net unrealised profit on the revaluation of
investments of GBP3,850,000 (2018: GBP2,064,000) and reflects an
increase in services revenue to GBP418,000 (2018: GBP299,000) and
greater administrative expenses of GBP1,932,000 (2018:
GBP1,465,000) as the Group invested in people and premises. The
additional administrative expenses were offset by growth in
unrealised profit on revaluation of investments.
Operational Review
Corporate
Frontier IP made strong progress during the year as it continued
to pave the way for future growth and value, reflected in the
significant technological and commercial advances made by a number
of portfolio companies outlined in the portfolio review below.
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 Matthew White as Chief Commercialisation
Officer and a director of the Group. His role before joining us was
Head of Innovation for AB Sugar, one of the world's biggest sugar
producers and a wholly-owned subsidiary of FTSE 100 multinational
Associated British Foods. We were also pleased to appoint analyst
Alex Pugh, an economics graduate and qualified chartered account
with strong experience in financial markets.
Post year end, Lucy Rowbotham joined as Technology
Commercialisation Director. She is a former Director, Medical
Technology Division, at Cambridge Consultants, and has extensive
experience of technology commercialisation. We have also extended
our funded intern programme to contribute technical expertise on a
project-by-project basis.
We were also very pleased to announce the appointments post year
end of John Price and Air Vice-Marshal Gary Waterfall CBE as
specialist advisers on food and agritech, and defence
respectively.
The Group extended its existing networks of industry, academic
and financial relationships through three important partnerships.
In August 2018, we entered into a strategic partnership with the UK
Department for International Trade ("DIT") in Portugal. The move
means we will be able to build our position as a leading university
IP commercialisation partner in the country by opening access to
potential industry collaborators and key decision makers in the
Portuguese government and economy. The DIT also presented us with
the New to Market Award. During the year, we announced our first
three spin outs in the country.
In April 2019, we announced a collaboration agreement with the
Royal Academy of Engineering, based in London, reflecting our
shared aims in supporting new engineering and technology companies.
As a result, we held a successful joint event at the Academy's
headquarters. More than 100 guests were able to see demonstrations
of technology developed by our portfolio companies and from
businesses supported by the Academy's Enterprise Hub.
We also announced our involvement as a partner in Emporia4KT, a
major project to maximise the value of academic research to
Europe's marine and coastal economies on the Atlantic seaboard.
Emporia4KT brings together 14 partners from Portugal, Ireland,
France, Spain and the UK to develop ways to transfer academic
knowledge and innovation to boost activities such as fishing,
shipbuilding, tourism and ocean energy. Our role is to develop
tools to help partners assess risks, judge cost effectiveness and
understand the most appropriate routes for commercialising their
IP.
In September 2019, we announced N+1 Singer as the Group's sole
broker alongside Allenby Capital Limited as the Group's Nominated
Adviser.
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 University of Plymouth,
including announcing our stake in Amprologix during the year. The
Group continues to build on its relationships with academics and
departments at the University of Cambridge. It incorporated its
second graphene spin out from Cambridge alongside Italian research
institute CNIT.
Our partnerships in Portugal with NOVA University Lisbon, NOVA
School of Science and Technology and INESC TEC also bore fruit,
with the incorporation of NTPE, Des Solutio and Insignals Neurotech
announced during the year. Portugal is a market underserved by
university IP commercialisation specialists, and, alongside our
partnership with the UK Department for International Trade in the
country, we believe we are well placed to take advantage of
opportunities as they arise.
Portfolio Review
Core portfolio
Frontier IP strives to develop and maximise value from its core
portfolio, which numbered 17 at the year end. We do so by taking
founding stakes in companies at incorporation and then working in
long-term partnerships with shareholders, academic and industry
partners. Core portfolio companies must meet two out of three
criteria:
-- The Group holds at least 10 per cent of the company's equity
-- Our shareholding is worth at least GBP500,000
-- 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 Portugal and core portfolio
companies completed two fund raisings and secured seven grant
awards.
Alusid: Frontier IP stake: 35.6 per cent
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 June 2019. In
September 2018, it raised GBP1.34 million to support development
work on scaling up. Following this, in May, Parkside Architectural
Tiles, the commercial arm of Topps Tiles, launched Sequel, an
exclusive range of tiles made by Alusid. It also successfully
completed trials for volume production using industry-standard
equipment and is now looking to move up to volume production
through Spanish subcontractors.
Amprologix: Frontier IP stake: 10 per cent
Amprologix is the latest spin out stemming from our formal
partnership with the University of Plymouth. The company was
incorporated to commercialise the work of Mathew Upton, Professor
of Medical Microbiology at Plymouth's Institute of Translational
and Stratified Medicine.
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 GBP1.2 million UK Department of
Health and Social Care contract to accelerate development and scale
up of its lead antibiotic candidate, epidermicin NI01.
Cambridge Raman Imaging: Frontier IP stake: 33.3 per cent
Cambridge Raman Imaging was the Group's first graphene spin out,
the result of a partnership between the University of Cambridge and
the Politecnico di Milano, in Italy. It has been incorporated to
commercialise research undertaken into graphene-based ultra-fast
lasers, initially for use in Raman-imaging microscopes to diagnose
and monitor tumours.
CamGraPhIC: Frontier IP stake: 33.3 per cent
A second graphene spin out, this time from the University of
Cambridge and Italian research institute CNIT, CamGraPhIC was
incorporated this year to develop graphene-based photonics for
high-speed data and telecommunications. Graphene photonics are seen
as a key enabler for 5G technologies by the company's industrial
partners.
Cambridge Simulation Solutions: Frontier IP stake: 40 per
cent
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 Limited: Frontier IP stake: 10 per cent
Celerum was formed to commercialise research know-how and IP
arising from the work of the Computational Intelligence research
group at Robert Gordon University. The company has expertise in
translating complex business logic into software models which, when
combined with data, can be used for automated fleet scheduling.
Des Solutio: Frontier IP stake: 25 per cent
The Group announced its second spin out from Portugal in October
2018. Des Solutio is developing safer and greener alternatives to
the toxic solvents currently used to extract active ingredients by
the pharmaceutical, personal care, household goods and food
industries. The company is developing strong relationships with
potential industry partners.
Des Solutio was established to commercialise the research of
Associate Professor Ana Rita Duarte and Dr Alexandre Pavia of the
NOVA University Lisbon, NOVA School of Science and Technology.
Exscientia: Frontier IP stake: 3.25 per cent
Exscientia, a spin out from the University of Dundee, now based
in Oxford, is a world leader in artificial intelligence-driven drug
discovery, a reputation reflected in the number of collaboration
agreements struck during the year, bringing upfront and potential
milestone payments totalling more than GBP300 million.
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
Shanghai-headquartered drug-discovery platform launched with
backing from specialist investor GT Healthcare Capital
Partners.
In other developments, the company achieved its first milestone
payment resulting from its collaboration with GSK, and completed a
$26 million Series B financing round. New investors included
Celgene Corporation and GT Healthcare Capital Partners. Existing
investor Evotec AG also participated.
Fieldwork Robotics: Frontier IP stake: 27.5 per cent
A prototype of Fieldwork Robotics raspberry-harvesting robot
technology successfully completed initial field trials in May 2019.
The data gathered was invaluable in further refining the hardware
and software as work progresses well on developing a robot capable
of harvesting more than 25,000 raspberries a day.
The trials were held at a farm owned and operated by Hall Hunter
Partnership, one of the UK's biggest soft-fruit growers, and were
the result of a collaboration agreement between the grower and
Fieldwork Robotics announced in August 2018. In April 2019, the
University of Plymouth spin out unveiled further validation for the
technology with the announcement of a GBP547,250 Innovate UK
Industrial Strategy grant to accelerate development of the
system.
The academic behind the technology, Dr Martin Stoelen, has also
trialled technology to harvest cauliflowers and tomatoes.
Insignals Neurotech: Frontier IP stake: 33 per cent
Insignals Neurotech, incorporated as the Group's third
Portuguese spin out in February 2019, is developing wearable
devices supporting deep brain surgery to alleviate the symptoms of
Parkinson's disease and other neurological disorders. The company
was spun out of the Portuguese Institute for Systems and Computer
Engineering, Technology and Science ("INESC TEC"), with the support
of São João University Hospital, part of the University of Porto.
It is commercialising the work of João Paulo Cunha, Associate
Professor with Agregoção at the University of Porto and senior
researcher at INESC TEC.
Molendotech: Frontier IP stake: 14.1 per cent
Palintest, a subsidiary of FTSE 100 group Halma plc, started
commercial roll out of Siren(BW) , a kit to test bathing water for
faecal matter based on Molendotech's proprietary bacterial
detection technology The kit, which can be used on site, cuts
testing times from up to two days to under 30 minutes because
samples do not need to be sent to a laboratory. Molendotech is now
developing water tests to specifically detect E.coli after signing
a collaboration agreement with G's Group, one of Europe's leading
fresh produce suppliers, as announced in October 2018.
Nandi Proteins: Frontier IP stake: 20.1 per cent
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 Devro and Kerry Foods Group.
Coeliac UK and Innovate UK awarded a Nandi-led project a GBP180,697
grant to improve the taste and texture of gluten-free bread. Other
partners include AB Mauri, the ingredients division of AB Foods,
and Agrii, part of agri-services group Origin Enterprises.
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: Frontier IP stake: 31.6 per cent
NTPE was our first spin out in Portugal. The company is
developing Paper-E, a novel technology to print electronic
circuits, sensors and semiconductors onto any cellulose-based
paper. It does so by replacing the silicon used in electronics with
eco-friendly metal oxides and cellulose. Applications include
paper-based diagnostic kits, smart packaging, logistics, and for
use with banknotes and passports.
The company was spun out of the NOVA University Lisbon, NOVA
School of Science and Technology to commercialise the work of
professors Elvira Fortunato and Rodrigo Martins, who lead a team of
more than 65 researchers.
PoreXpert: Frontier IP stake: 15 per cent
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: Frontier IP stake: 18.9 per cent
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 GBP129,929
Innovate UK grant in July 2018 towards a GBP288,732 project to
complete technological development of its solar micro-inverter.
Pulsiv is now working with Bosch UK to optimise the design, cost
and manufacturability of the product; the company will be able to
market the devices as "Engineered by Bosch" when it moves into
commercial production. There is strong industry and government
interest in the technology.
Tarsis Technology: Frontier IP stake: 18 per cent
A spin out from the University of Cambridge, Tarsis Technology
entered into a collaboration agreement with a world-leading
manufacturer of crop protection products in July 2018. The
collaboration is researching the use of the company's technology to
deliver chemical pesticides and fungicides in a more precise and
controlled way using metal-organic framework particles.
The Vaccine Group: Frontier IP stake: 19.2 per cent
The Vaccine Group develops novel vaccine technologies to combat
zoonotic diseases, which jump from species to species, including
humans, and other diseases. The University of Plymouth spin out won
major backing for its work, winning grants from the US, UK and
Chinese governments. This included its involvement as a key partner
in a $9.67 million project to protect the US military and homeland
from Ebola, Lassa fever and other zoonotic diseases. Other
grant-funded projects are underway including work to tackle
Streptococcus suis, an emerging antibiotic-resistant disease that
can leap from pigs to humans.
Core Portfolio at 30 June 2019
Portfolio Company % Issued About Source
Share Capital
Alusid Limited 35.6% Recycled materials University of
Central Lancashire
--------------- ---------------------------- ------------------------
Amprologix Limited 10.0% Novel antibiotics Universities
to tackle antimicrobial of Plymouth and
resistance Manchester
--------------- ---------------------------- ------------------------
Cambridge Raman 33.3% Medical imaging using University of
Imaging Limited ultra-fast lasers Cambridge and
Politecnico di
Milano
--------------- ---------------------------- ------------------------
Cambridge Simulation 40.0% Methods to simulate University of
Solutions Limited and control complex Cambridge
chemical processes
--------------- ---------------------------- ------------------------
CamGraPhIC Limited 33.3% Graphene-based photonics University of
Cambridge and
CNIT
--------------- ---------------------------- ------------------------
Celerum Limited 10.0% Near real-time automated Robert Gordon
fleet scheduling University
--------------- ---------------------------- ------------------------
Des Solutio LDA 25.0% Green alternatives FCT Nova
to industrial toxic
solvents
--------------- ---------------------------- ------------------------
Exscientia Limited 3.3% Novel informatics University of
and experimental Dundee
methods for drug
discovery
--------------- ---------------------------- ------------------------
Fieldwork Robotics 27.5% Robotic harvesting University of
Limited technology for challenging Plymouth
horticultural applications
--------------- ---------------------------- ------------------------
Insignals Neurotech 33.0% Wearable medical INESC TEC
Lda devices supporting
deep brain surgery
--------------- ---------------------------- ------------------------
Molendotech Limited 14.1% Rapid detection of University of
water borne bacteria Plymouth
--------------- ---------------------------- ------------------------
Nandi Proteins 20.1% Food protein technology Heriot-Watt University,
Limited Edinburgh
--------------- ---------------------------- ------------------------
NTPE LDA 31.6% Novel technology FCT Nova
to print electronic
circuits, sensors
and semiconductors
onto paper
--------------- ---------------------------- ------------------------
PoreXpert Limited 15.0% Analysis and modelling University of
of porous materials Plymouth
--------------- ---------------------------- ------------------------
PulsiV Solar Limited 18.9% High efficiency power University of
conversion and solar Plymouth
power generation
--------------- ---------------------------- ------------------------
Tarsis Technology 18.0% Controlled delivery University of
Limited of agrochemicals Cambridge
using metal-organic
frameworks
--------------- ---------------------------- ------------------------
The Vaccine Group 19.2% Herpesvirus-based University of
Limited vaccines for the Plymouth
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 30 June 2019, the aggregate value of these holdings
was GBP13,500, equivalent to 0.1% of the fair value of the Group's
portfolio at 30 June 2019.
After the year end, in October 2019, the Group announced it had
taken a 43% equity stake in Elute Intelligence Holdings Limited.
Elute develops novel software tools to intelligently search complex
documents, such as patents and contracts, and to detect evidence of
plagiarism, collusion and copyright infringement.
Limited Partnership Funds
RGU Ventures Investment Fund LP ("RGU Fund")
The ten-year term of the RGU Fund expired on 27 July 2019 and
prior to 30 June 2019 the assets were distributed to the limited
partners.
In accordance with Frontier IP's accounting policies, the
Group's 27.3% investment in the RGU Fund is included in the
financial statements at fair value. At 30 June 2019, the carrying
value was GBPNil (2018: GBP19,000), which is GBP166,000 below cost
(2018: GBP147,000 below cost).
Financial Review
Key Highlights
The value of the Group's equity investments increased to
GBP13,252,000 (2018: GBP9,060,000) with net assets increasing to
GBP17,591,000 (2018: GBP12,717,000).
Profit after tax for the Group for the year to 30 June 2019 was
GBP2,350,000 (2018: GBP902,000). This result includes a net
unrealised profit on the revaluation of investments of GBP3,850,000
(2018: GBP2,064,000) and reflects an increase in services revenue
to GBP418,000 (2018: GBP299,000) and greater administrative
expenses of GBP1,932,000 (2018: GBP1,465,000) as the Group invested
in people and premises. The additional administrative expenses was
offset by growth in unrealised profit on revaluation of
investments.
Revenue
Total revenue for the year to 30 June 2019, which is the
aggregate of services revenue and unrealized gain on the
revaluation of investments, increased 81% to GBP4,268,000 (2018:
GBP2,363,000). Revenue from services increased 40% to GBP418,000
(2018: GBP299,000). The Group's net unrealised profit on the
revaluation of investments increased 86% to GBP3,850,000 (2018:
GBP2,064,000). Unrealised gains on revaluation of investments of
GBP3,885,000 (2018: GBP2,396,000) were marginally offset by
impairments of GBP35,000 (2018: GBP332,000). GBP1,850,000 of the
gain relates to Exscientia Limited and GBP1,613,000 to The Vaccine
Group Limited.
Administrative Expenses
Administrative expenses increased by 32% to GBP1,932,000 (2018:
GBP1,465,000). The increase is primarily due to increased staff,
salaries and associated costs.
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 30
June 2019 are goodwill GBP1,966,000 (2018: GBP1,966,000) and
financial assets at fair value through profit and loss, principally
equity holdings of GBP13,252,000 (2018: GBP9,060,000) and debt
investments GBP437,000 (2018: GBP0) in portfolio companies. The
carrying value of these items is determined by the Directors using
their judgement when applying the Group's accounting policies. The
considerations taken into account by the Directors when reviewing
the carrying value of goodwill are detailed in Note 9. The matters
taken into account when assessing the fair value of the portfolio
companies are detailed in the accounting policy on investments.
The Group had net current assets at 30 June 2019 of GBP2,212,000
(2018: GBP1,523,000). The current assets at 30 June 2019 include
trade receivables of GBP258,000 which are more than 90 days
overdue, of which GBP204,000 is due from Nandi and GBP43,000 is due
from Fieldwork Robotics. The non-current trade receivables of
GBP114,000 are due from Nandi. Other debtors include unsecured
interest free loans to Nandi and Alusid of GBP80,000 and GBP31,000
respectively. The directors are confident that Nandi, Alusid and
Fieldwork Robotics will be able to raise sufficient funds to
finance their respective business plans and commence payment of the
trade debt and unsecured loans.
Net assets of the Group increased to GBP17,591,000 at 30 June
2019 (30 June 2018: GBP12,717,000) resulting in net assets per
share of 41.4p (2018: 33.2p).
Cash
The Group's cash balances increased during the year by
GBP355,000 to GBP1,466,000 at 30 June 2019. Operating activities
consumed GBP1,270,000 (2018: GBP970,000) and financial assets at
fair value were purchased at GBP779,000 (2018: GBP245,000). The
group raised cash of GBP2,333,000 net of costs through a placing in
November 2018.
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
UK.
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 30 June 2019
2019 2018
Notes GBP'000 GBP'000
Revenue
Revenue from services 418 299
Other operating income
Unrealised profit on the revaluation of investments 5 3,850 2,064
4,268 2,363
Administrative expenses (1,932) (1,465)
Dividend income on financial assets at fair
value through profit or loss 2 -
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 30 June 2019
2019 2018
Notes GBP'000 GBP'000
Assets
Non-current assets
Tangible fixed assets 7 7
Goodwill 1,966 1,966
Financial assets at fair value through profit
and loss
Equity investments 5 13,252 9,060
Debt investments 5 40 -
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 30 June 2019
Share- Total equity
Share Reverse based attributable
Share premium acquisition payment Retained to
capital account reserve reserve earnings equity holders
of the Company
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2017 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 30 June 2018 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 30 June 2019 4,243 9,791 (1,667) 293 4,931 17,591
========== ========== ============== ========= =========== ================
Consolidated Statement of Cash Flows
For the year ended 30 June 2019
2019 2018
GBP'000 GBP'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 12 4
at fair value through profit or
loss 2 -
----------
Net cash used in investing activities (772) (248)
---------- ----------
Cash flows from financing activities
Proceeds from issue of equity 2,552 -
shares
Costs of share issue (155) -
Net cash generated from financing 2,397 -
activities
---------- ----------
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
November 2019.
2. Basis of preparation
The financial information set out in this announcement does not
constitute statutory financial statements for the year ended 30
June 2019 or 30 June 2018.
The report of the auditor on the statutory financial statements
for each of the years ended 30 June 2019 and 30 June 2018 did not
contain statements under section 498(2) or (3) of the Companies Act
2006. The statutory financial statements for the year ended 30 June
2018 have been delivered to the Registrar of Companies. The
financial statements for the year ended 30 June 2019 will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting.
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 European Union, this
announcement does not itself contain sufficient information to
comply with IFRS.
3. Taxation
There is no charge to taxation for the year ended 30 June 2019
(2018: Nil) due to the Group making a taxable loss.
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 Frontier IP Group Plc by the
weighted average number of shares in issue during the year.
Profit attributable Weighted Basic
to shareholders average earnings
GBP'000 number of per share
shares amount
in pence
Year ended 30 June 2019 2,350 40,700,979 5.77
-------------------- ----------- -----------
Year ended 30 June 2018 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 Weighted Diluted
to shareholders average earnings
GBP'000 number of per share
shares adjusted amount
for share in pence
options
Year ended 30 June 2019 2,350 42,632,932 5.51
-------------------- ----------------- -----------
Year ended 30 June 2018 902 40,114,559 2.25
-------------------- ----------------- -----------
5. Financial assets at fair value through profit and loss
Group Group Company Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'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 Group Company Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Limited partnership interests - 19 - -
Unquoted equity investments 13,252 9,041 5,777 3,441
Debt investments 437 - 416 -
-------- -------- -------- --------
13,689 9,060 6,193 3,441
======== ======== ======== ========
The movement during the year is set out below:
Limited Partnership Interests Group Group Company Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 19 22 - -
Additions during the year 4 4 - -
Disposals during the year - - - -
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 Group Company Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'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 Group Company Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
At 1 July - - - -
Additions during the year 416 - 416 -
Fair value increases during 21 - - -
the year
Fair value decreases during - - - -
the year
-------- -------- -------- --------
At 30 June 437 - 416 -
Less debt investment non-current (40) - (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 (GBP164,000) and to Fieldwork Robotics
(GBP121,000).
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 Stage Stage Stage Stage Total
1 2 3 4 5
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 No of Investments Fair Unobservable inputs Reasonable possible
matrix value shift
stage
GBP'000 % +/- GBP000
Stage Initial valuation of
1 5 78 new spin outs at GBP50,000 20% 16
Management's assessment
of the value of IP transferred
and the value of grants
Stage from which economic benefit
2 5 2,537 is derived. 25% 634
Management's assessment
of performance against
Stage milestones and discussions
3 7 180 of likely imminent fundraising. 30% 54
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
Stage inputs into the valuation
4 5 5,290 methodology. 10% 529
Discounted comparable
public company valuation.
Unobservable inputs into
discounted cash flow
are forecasts of future
cash flows, probabilities
of project failure and
Stage evaluation of the time
5 1 5,167 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 GBP5,167,000, 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 GBP1,850,000, 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 GBP1,624,000.
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.
END
FR BABJTMBJMTJL
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