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RNS Number : 4973Q
Frontier IP Group plc
28 October 2021
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations
2019/310 ("MAR"). With the publication of this announcement via a
Regulatory Information Service, this inside information is now
considered to be in the public domain.
28 October 2021
Frontier IP Group Plc
("Frontier IP" or the "Group")
Final results for the year ended 30 June 2021
Financial highlights
-- Fair value of our equity portfolio increased by 64% to GBP31,982,000 (2020: GBP19,444,000)
-- Profit before tax increased by 145% to GBP10,242,000 (2020: GBP4,184,000)
-- Total revenue and other operating income increased by 99% to
GBP12,668,000 (2020: GBP6,377,000) -reflecting the net unrealised
profit on the revaluation of investments of GBP12,306,000 (2020:
GBP5,973,000)
-- Revenue from services decreased by 10% to GBP362,000 (2020: GBP404,000)
-- Basic earnings per share increased to 17.47p (2020: 8.76p)
-- Cash balances at 30 June 2021 of GBP1,992,000 (2020: GBP2,968,000)
-- Net assets per share as at 30 June 2021 of 69.8p (2020: 51.0p)
Corporate highlights
-- Raised GBP2.3 million via an oversubscribed placing and
retail offer to support additional investment in the Group and to
enable increased capacity for bridge financing and investment in
portfolio companies
-- The fundraising was firmly supported by existing shareholders
and a significant number of new investors
-- Team strengthened with three key appointments
-- Post period end, first portfolio company IPO - Exscientia
listed on Nasdaq Global Select Market raising gross proceeds of
approximately $304.7 million through a public offer and a further
$160 million through private placements with SoftBank and the Bill
& Melinda Gates Foundation, with a value of $2.9 billion
-- Post period end, Professor Dame Julia King, Baroness Brown of
Cambridge DBE FREng FRS, joined the Board of Directors as an
independent Non-Executive Director
Portfolio highlights
-- Robust commercial and technical progress, including industry
engagement and increased pace of fundraisings across the portfolio,
reflected by the increase in fair value
-- Growing maturity of the portfolio with a number of companies
reaching inflection points, reflected by increased pace of funding
rounds, strengthening of management teams, and industry engagement.
Fundraisings and grant awards included:
o Exscientia closing a Series C funding round at $100 million
and raising a further $225 million in a Series D round, led by new
investor SoftBank. Post period end, the company raised total gross
proceeds of $464.7 million through listing on the Nasdaq Global
Select Market with a value of $2.9 billion
o Cambridge Raman Imaging raised GBP250,000 through an equity
funding round and involvement in EUR5 million pan-European project
to develop new medical imaging technologies
o Pulsiv completed GBP1.5 million equity funding round. In
addition, the company converted GBP500,000 of debt plus accrued
interest into equity, including a GBP250,000 loan from the UK
government's Future Fund scheme
o AquaInSilico was selected to receive $250,000 after being
named as an Ocean Innovator by the United Nations Development
Programme's Ocean Innovation Challenge. The company also received a
EUR60,000 EIT RawMaterials grant
o Fieldwork Robotics raised GBP675,000 through an equity funding
round and received GBP229,000 in grants from schemes managed by
Innovate UK
o Elute Intelligence raised GBP250,000 in its first equity
funding round
o Nandi Proteins raised GBP720,000 through a convertible loan,
including GBP360,000 from the UK government's Future Fund, matched
by Frontier IP and Shackleton Finance
o Alusid raised GBP250,000 in a convertible loan, including
GBP125,000 from the UK government's Future Fund, matched by
Frontier IP and a private investor
o InSignals Neurotech gained EUR100,000 investment from Portugal
Ventures
o Post period end, CamGraPhIC raised GBP1.6 million
-- Strong commercial and technical progress made by a number of
portfolio companies, including developing new and existing industry
partnerships:
o Exscientia expanded its collaboration with Bristol Myers
Squibb. Agreement includes upfront and commercial milestone
payments potentially worth more than $1.2 billion. Post period end,
Exscientia entered a $70 million collaboration with the Bill &
Melinda Gates Foundation
o The Vaccine Group entered into first commercial agreement,
with The Pirbright Institute and ECO Animal Health, and made good
progress on developing its novel vaccine platform
o Fieldwork Robotics secured collaboration agreements with Bosch
and Bonduelle, one of the world's leading vegetable producers
o Cambridge Raman Imaging signed a licence with Motic, a leading
manufacturer of medical imaging devices
o Elute Intelligence launched its Patent Reader product
following successful pilot with dedicated user group comprising
multinationals, high-tech SMEs and professional intellectual
property service providers
-- Steps taken to strengthen leadership and teams across
portfolio to oversee scale up of companies:
o Pulsiv appointed former Aixtron and Arm executive Darrel
Kingham as Chief Executive Officer, Dr Zaki Ahmed as Chief Strategy
Officer, and announced appointment of Adam Westcott as Chief
Financial Officer
o The Vaccine Group appointed GALVmed Chief Scientific Officer
Jeremy Salt as Chief Executive Officer. He is a former senior
director for the world's biggest animal health group Zoetis
o Nandi Proteins appointed David Flower, a former senior
director with Boon Rawd Brewing Company and Kerry Foods, as Chief
Executive Officer
o Alusid appointed David Taylor, founding chief executive for
both English Partnerships and Amec Developments, property
entrepreneur and Pro-Chancellor of the University of Central
Lancashire to its board of directors as the University's
representative
ENQUIRIES
Frontier IP Group Plc T: 020 3968 7815
Neil Crabb, Chief Executive neil@frontierip.co.uk
Andrew Johnson, Communications & Investor andrew.johnson@fronterip.co.uk
Relations M: 07464 546 025
Company website: www.frontierip.co.uk
Allenby Capital Limited (Nominated Adviser) T: 0203 328 5656
Nick Athanas / George Payne
Singer Capital Markets (Broker) T: 0207 496 3000
Sandy Fraser / Harry Gooden / George Tzimas
Chairman's Statement
Performance
Frontier IP and its portfolio companies made excellent progress
during the year to June 2021. The results are exceptional.
Exscientia was a major part of the uplift in the fair value of the
portfolio and the significant increase in the profit before tax.
The results to 30 June 2021 however do not take account of
Exscientia's successful IPO following the period end. Achievements
and developments elsewhere in the portfolio also contributed to our
results. It is enough to say here that I am delighted the portfolio
made progress across a broad front.
This is particularly so in the context of COVID-19. The response
from the Frontier IP team and our portfolio companies continued to
be exemplary. I would like once again to thank them for their
continued efforts and the way they reacted to the opportunities and
challenges arising from the pandemic.
Impacts from the virus on the Group and its portfolio have been
broadly as expected, as Neil, our Chief Executive, outlined in our
Annual Report last year. The pandemic highlighted the danger of
zoonotic diseases and the need for effective vaccines and
therapeutics, providing direct opportunities for companies such as
The Vaccine Group (TVG), Exscientia and Amprologix. Other companies
are well placed to seize the opportunities provided by new ways of
working or tackling other issues brought into focus by the
pandemic, such as CamGraPhIC and Fieldwork Robotics.
In most other cases, impact was neutral. The main negative
impacts were delays, either because decision making from industrial
partners was affected, or labs and other facilities remained
closed. The few companies which have suffered, we believe, are
still fundamentally good and we remain confident about their
futures. Several took advantage of the UK government's furlough
scheme and the Future Fund, raising money through convertible
loans, and we are grateful for the support.
We continued to strengthen our team with the appointments of
Mark Rosten as Software Commercialisation Director, Darren Winter
as Director of Corporate Relationships and Harry Ayton as Chemical
Process Engineer. They all provide good examples of how we provide
hands-on support for our portfolio companies beyond the financial.
Mark has o ver 30 years of experience in product development with
15 years leading and managing software development teams in health,
fintech and transport, while Harry has a PhD in Chemical
Engineering from the University of Cambridge.
We also raised a further GBP2.3 million to give us the firepower
and flexibility to take advantage of opportunities as they arise.
The value of this approach was demonstrated when we were able to
provide a loan to CamGraPhIC, a company whose graphene-based
photonics have significant potential in telecoms. We were also able
to match funding provided by the UK government through its Future
Fund scheme to support innovative companies through the
pandemic.
Industry partnerships and collaboration are a vital part of what
we do. They help us to validate technology and understand potential
applications, market needs and demands. So it was pleasing to see
Fieldwork Robotics enter relationships with two major
multinationals, Bosch and Bonduelle, and Cambridge Raman Imaging
with Motic. The Vaccine Group also signed its first commercial
agreement with ECO Animal Health Group and The Pirbright Institute
- strong backing for its novel vaccine platform technology.
It's also worth mentioning a couple of projects we are involved
with outside the portfolio. DNA Origami is a collaboration with Dr
Ioanna Mela of the University of Cambridge, exploring the possible
application of origami-like DNA nanostructures and their use as
drug delivery vehicles . Early work to date is promising.
Frontier IP is also a partner in Emporia4KT, a pan-European
project bringing together government, academia and business to
support innovation and economic growth across Atlantic coastal
economies. Our role is to help identify technology which can be
commercialised. Teams from five countries are now developing 13
early-stage technologies.
There were no additions to our portfolio this year, as we
focused on supporting the commercial development and scale up of
existing companies in the portfolio as they approached inflection
points. However, our pipeline of intellectual property
opportunities looks good, and we would expect to incorporate new
companies in the coming year.
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 have adopted 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
this report and our website:
https://www.frontierip.co.uk/about/governance/
Board Changes
I am pleased to report that in line with our commitment to
maintaining a dynamic management framework we are making some
changes to the makeup of our Board. We have appointed Professor
Dame Julia King, Baroness Brown of Cambridge DBE FREng FRS, as an
independent Non-Executive Director effective from 28 October
2021.
Baroness Brown is an engineer with immense experience across
industry and government. Following an academic career at Cambridge
University, Julia held senior engineering and business roles at
Rolls-Royce between 1994 and 2002, before returning to academia as
Principal of Engineering at Imperial College and then as Vice
Chancellor and Chief Executive of Aston University from 2006-2016.
She is currently Chair of The Carbon Trust, a non-executive
director of Ørsted, Chair of the Adaptation Committee of the
Climate Change Committee, a member of the BEIS Hydrogen Advisory
Council and a Non-Executive Director of AIM quoted Ceres Power
Holdings plc.
Julia is passionate about education and engineering and
contributed to the Browne report on university funding and to Lord
Stern's review on the research excellence framework. She Chairs
STEM Learning Limited and is the Chair of the Governing Board at
the Henry Royce Institute for Advanced Materials.
Julia is a Fellow of the Royal Academy of Engineering, a Fellow
of the Royal Society and was awarded a DBE for services to higher
education and technology. In 2015 she was elevated to her Peerage
as the Baroness Brown of Cambridge and sits as a Crossbench Peer in
the House of Lords where she is a member of the Science and
Technology Select Committee.
In addition, Michael Bourne, currently an independent
Non-Executive Director, has notified the Company that, having
served on the Board for more than seven years, he has decided to
step down from his non-executive role at Frontier IP. Michael will
remain on the board until the Company's forthcoming annual general
meeting to be held on 9 December 2021 where he will not seek
re-election as a director. I would like to take this first
opportunity to thank Mike for his service on the Board and his
valued contribution during his time in office.
Results
I am delighted with how the Group performed in the year. An
increase of 145% in pre-tax profits and an increase in the fair
value of our portfolio to GBP31,982,000 vindicate the strength of
our business model.
For the year to 30 June 2021, total revenue and other operating
income increased by 99% to GBP12,668,000 (2020: GBP6,377,000) as a
result of a net unrealised profit on the revaluation of investments
of GBP12,306,000 (2020: GBP5,973,000), principally due to the
increase in fair value of Exscientia. Revenue from services,
principally board retainers and licence income decreased by 10% to
GBP362,000 (2020: GBP404,000) as some services were assigned to
companies' own management.
Outlook
The results and the pipeline of companies now scaling up and
starting to achieve their commercial potential shows our innovative
business model is delivering. We are confident Exscientia's
successful IPO is a foretaste of future success. We have a built a
strong platform for growth, and so we are confident about our
prospects for the coming year and beyond.
Andrew Richmond
Chairman
27 October 2021
Chief Executive Officer's Statement
Frontier IP enjoyed a highly successful year to 30 June 2021.
The fair value of our equity portfolio rose 64% to GBP31,982,000,
with profit before tax increasing by 145% to GBP10,242,000. Profit
after tax increased by 129% to GBP9,566,000.
These pleasing numbers are significantly ahead of our
expectations. They reflect the excellent commercial and technical
progress made across the portfolio despite the difficulties posed
by the ongoing COVID-19 pandemic.
Exscientia made the most significant contribution. The company
enjoyed a stellar year and is now firmly established as one of the
world's leading companies using artificial intelligence (AI) to
drive discovery of new drugs. Three of its AI-designed candidates
have now entered human clinical trials - the first in the world to
do so - with the technology knocking years off the time taken to
discover new drug candidates by traditional methods.
This has been accompanied by burgeoning interest and commitment
from industry collaborators and investors. One of the world's
biggest pharmaceutical companies Bristol Myers Squibb expanded its
collaboration agreement, adding further upfront payments and
milestones potentially worth more than $1.2 billion. And the
company successfully closed a Series C funding round at $100
million after investment from funds managed by BlackRock, followed
by a SoftBank-led Series D round raising $225 million and an option
to draw a further $300 million if needed.
Its progress over the last year was cemented by a successful
$2.9 billion IPO on the Nasdaq Global Select Market, raising gross
proceeds of $304.7 million through a public offer and a further
$160 million in private placements at the top end of the price
range. The private placements with SoftBank and the Bill &
Melinda Gates Foundation, which is supporting the company's work on
discovering new therapeutics for COVID-19 and other viruses with
pandemic potential, provide further validation for the company's
technology.
Exscientia is the first company in our portfolio to IPO. We are
confident it will continue to grow and prosper. But we are equally
excited by the prospects for our other portfolio companies. Our
pipeline is strong, developing in depth and maturity. Significant
potential is now emerging.
A number of our companies made impressive progress. They have
reached, or are approaching, inflection points, which mark
important and favourable changes in their technical, industrial or
financial progress. In response, it is vital that we at Frontier IP
ensure they are in the best possible position to take advantage of
these opportunities. Part of this is to ensure they are properly
funded. We were pleased the pace of fundraisings increased across
the portfolio over the year.
Further testament to the quality and technological potential of
the portfolio companies are the individuals they attract. During
the year, we strengthened the management teams across the
portfolio, putting in place the right leaders to push companies
towards commercial success. We are very happy with the high calibre
of the individuals we have been able to recruit.
I would first draw attention to Pulsiv. We believe the company
will become a major green technology business. Its unique
technology improves the efficiency of electricity conversion
meaning devices waste much less energy than conventional
techniques. If widely adopted, it means electricity grids can
generate less electricity to meet the demand from devices and
appliances. It can be used in virtually all mains-powered devices
and has a host of other applications. The technology can be fitted
into smaller form factors and can manage energy consumption more
intelligently, cutting costs for manufacturers and bills for
consumers. The company raised GBP1.5 million during the year.
To ensure it can achieve its full potential, the company
appointed Darrel Kingham, formerly of Aixtron and Arm, as Chief
Executive Officer. Since joining Pulsiv, Darrel has transformed the
company's approach to scaling up its technology and is now in
advanced discussions with a number of major companies about
integrating it into their devices.
The Vaccine Group (TVG) and Nandi Proteins also appointed new
Chief Executive Officers. Jeremy Salt joined TVG from GALVmed,
where he was Chief Scientific Officer. Before GALVmed, he was a
senior director for the world's largest animal health group Zoetis.
His extensive experience at senior levels means he is the right
person to oversee the next phase of TVG's development after a year
when it continued to progress well, including its first commercial
agreement with ECO Animal Health Group and The Pirbright
Institute.
David Flower joined Nandi Proteins from the Boon Rawd Brewing
Company, maker of Singha beer. He has also been Managing Director
Home Baking for Kerry Foods. Nandi is well placed to exploit
opportunities across the food sector, including in the fast-growing
alternative meat markets, as well as in processed foods and
baking.
I am also excited about the prospects for CamGraPhIC , which is
developing high-speed, low-energy, graphene-based photonics for the
telecoms industry. In laboratory tests, the technology has
performed at about twice the speed of equivalent technologies while
consuming much less energy. There is considerable interest from
leading multinationals in the industry. And telecoms are only one
set of potential applications for the company. It is already
exploring possibilities in quantum computing.
These are only four of the companies in our portfolio with the
potential to become sizeable businesses. Others are also developing
well. Topps Tiles has already announced its intention to launch a
range of Alusid-made tiles; Fieldwork's robot soft-fruit and
harvesting technology has been improved significantly in
collaboration with Bosch; AquaInSilico is now part of a prestigious
United Nations Development Programme project to help protect and
conserve one of the world's most diverse marine environments.
Sustainability is attracting heightened interest. It is a
natural consequence of what we do and how we work. Science and
technology are vital to ensuring we can tackle the social and
environmental challenges we all face, from improving health to
cutting carbon emissions. There is a strong commercial incentive
for identifying IP which helps to solve these problems - and these
are opportunities our industry collaborators are keen to
explore.
As a result, over the years, we have developed expertise which
lies across four clusters - AI and robotics, food and agritech,
engineered particles and materials, and pathogens and cell imaging
- all of which offer clear benefits to society and the
environment.
There has been some debate around sustainability metrics and
their value to investors and other stakeholders. Much of the talk
concerns the costs and the effect on returns as companies seek to
mitigate negative impacts - for example by offsetting carbon
emissions or managing water waste. Mitigation is necessary but will
only take us so far. It is a reactive approach which, we believe,
does not give enough weight to the role of new technologies in
solving the problems we face. All companies in our portfolio have
the potential to make positive societal and environmental impacts -
and some, such as Pulsiv, could be transformative.
This year we are introducing a more formal framework for
evaluating sustainability by aligning ourselves to the United
Nations Sustainable Development Goals. They provide a framework and
a set of targets for 2030 which suit the forward-looking nature of
our business. You can learn more in the Portfolio Review section of
this report.
Finally, I would very much like to thank you, our shareholders,
and other stakeholders, for your continued support. We remain
confident about our future prospects.
Neil Crabb, Chief Executive Officer
27 October 2021
Key Performance Indicators
The Key Performance Indicators for the Group are:
KPI Description 2021 Performance
Fair value of the Value of equity in GBP31,982,000
portfolio the portfolio
(2020: GBP19,444,000)
------------------------------------------------- ----------------------------------------------
Total revenue and Growth in the aggregate GBP12,668,000
other operating income of revenue from services
and change in fair
value of the portfolio
(2020: GBP6,377,000)
------------------------------------------------- ----------------------------------------------
Profit Profit before tax GBP10,242,000
for the year
(2020: GBP4,184,000)
------------------------------------------------- ----------------------------------------------
Net assets per share Value of the Group's 69.8p (2020: 51.0p)
assets less the value
of its liabilities
per share outstanding
------------------------------------------------- ----------------------------------------------
Aggregate percentage
Total initial equity equity earned from
in new portfolio new portfolio companies
companies during the year 0% (2020: 72%)
------------------------------------------------- ----------------------------------------------
We are pleased to report that the Group achieved significant
increases in four of its five Key Performance Indicators, despite
the issues raised by the COVID-19 pandemic. Since the COVID-19
outbreak, we have focused more on the existing portfolio and did
not take on any new portfolio companies during the year.
The value of the Group's equity investments increased to
GBP31,982,000 (2020: GBP19,444,000) with net assets increasing to
GBP38,421,000 (2020: GBP25,866,000). Profit after tax for the Group
for the year to 30 June 2021 was GBP9,566,000 (2020: GBP4,184,000)
after a deferred tax charge of GBP676,000 (2020: nil). This result
includes a net unrealised profit on the revaluation of investments
of GBP12,306,000 (2020: GBP5,973,000) and reflects a decrease in
services revenue to GBP362,000 (2020: GBP404,000), greater
administrative expenses of GBP2,171,000 (2020: GBP2,011,000)
primarily due to an increase in personnel and an increase in
share-based payments to GBP368,000 (2020: GBP230,000).
Operational Review
Corporate
Frontier IP made robust progress during the year, despite the
impact of COVID-19. A number of portfolio companies are now moving
rapidly towards achieving their potential. They have made
significant technical and commercial advances during the year, and
the Group has moved to strengthen them further by supporting fund
raisings and appointing senior leadership to their teams.
To flex our business model and ensure we were in a good position
to take advantage of the opportunities we saw arising, we raised a
further GBP2.3 million (before expenses) through an oversubscribed
placing and PrimaryBid offer. This was in addition to the GBP3.8
million (net of expenses) we raised in November 2019. The money
allowed us to provide more direct financing to portfolio companies,
in particular by helping us to match convertible loans from the UK
government's Future Fund.
People are vital to our success. Our different business model,
which is based on providing direct, hands-on support for technology
from a very early stage of development means we look to recruit
those with relevant commercial and technical experience, as well as
financial.
During the year, we appointed Mark Rosten as Software
Commercialisation Director, a non-board role. Mark has more than 30
years' experience leading software teams across the health, fintech
and transport sectors. Before Frontier IP, he was Senior Vice
President Product Development at mobile payments group Bango plc.
Harry Ayton joined as a Chemical Process Engineer. He has a
doctorate in Chemical Engineering from the University of Cambridge.
Finally, Darren Winter, who has held a number of senior sales
positions in the City of London, was appointed Director of
Commercial Relationships.
Portfolio Review
Frontier IP strives to develop and maximise value from its
portfolio. We do so by taking founding stakes in companies at
incorporation and then working in long-term partnerships with
shareholders, academic and industry partners.
As part of our sustainability agenda, we have mapped our
portfolio companies to relevant United Nations Sustainability
Development Goals (UN SDGs). All equity holdings are as at 30 June
2021.
Core portfolio
Alusid: Frontier IP stake: 35.6 per cent
Alusid's innovative formulations and processes create beautiful,
premium-quality tiles, tabletops 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 and water
than conventional tile manufacturing.
The company continued work to scale up its technology for mass
production on industry-standard manufacturing equipment following a
successful pilot the previous year. This culminated in a statement
from Topps Tiles that it intended to launch the Alusid-made
Principle range. It will be the world's first tile range mass
manufactured from recycled materials. During the year, Alusid also
raised GBP250,000 through a convertible loan, including a
GBP125,000 investment from the UK government's Future Fund.
In March, David Taylor CBE, founding chief executive of both
English Partnerships and Amec Developments and Pro Chancellor and
chair of the University Board, joined Alusid's board of directors
as representative of the University of Central Lancashire.
Alusid's sustainable process technology uses up to 29 per cent
less energy than conventional tile manufacture while still running
on the same equipment, reducing CO2 emissions. Its product is made
from recycled waste, much of which would otherwise end in
high-impact landfill.
UN Sustainable Development Goal mapping: SDG 9, industry,
innovation and infrastructure; SDG 12, responsible consumption and
production.
Amprologix: Frontier IP stake: 10.0 per cent
Amprologix was created to commercialise the work of Mathew
Upton, Professor of Medical Microbiology at Plymouth's Institute of
Translational and Stratified Medicine.
The company continued to make progress with development of its
new family of antibiotics based epidermicin, which is derived from
bacteria found on human skin, to tackle antimicrobial-resistant
MRSA and other superbugs. Ingenza, a leader in industrial
biotechnology and synthetic biology, is also a shareholder and is
working with Amprologix to develop and scale up the technology.
COVID-19 has heightened interest in other threats to human
health globally. Among these is the danger from antimicrobial
resistance, named as a top 10 threat to global health by the World
Health Organisation.
UN SDG mapping: SDG 3, good health and well-being
AquaInSilico: Frontier IP stake: 29.0 per cent
AquaInSilico, the Group's fourth spin out in Portugal, is
developing sophisticated software tools able to understand and
predict how biological and chemical processes unfold in different
operating conditions.
These can be used to optimise wastewater treatment across many
industries, including municipal wastewater treatment plants, oil
groups, brewers, pulp, paper and steel makers, food processing and
waste recovery businesses.
Highlights of the company's year included the award of a
EUR60,000 EIT RawMaterials grant from the European Union's European
Institute of Innovation and Technology to commercialise tools to
remove phosphorus from wastewater in a more environmentally
friendly and effective way than existing technologies.
AquaInSilico was also selected to receive $250,000 as an Ocean
Innovator through the United Nations Development Programme's Ocean
Innovation Challenge. The company is now involved in a two-year
project to help protect and conserve one of the world's most
diverse marine environments around the Cape Verde archipelago in
the Atlantic Ocean. Its tools will be used to reduce the amount of
nutrients entering the sea and to improve water quality for the
local population.
UN SDG mapping: SDG 6, clean water and sanitation, SDG 12,
responsible consumption and production, SDG 14, life below
water
Cambridge Raman Imaging: Frontier IP stake: 25.8 per cent
Cambridge Raman Imaging, the Group's first graphene spin out, is
developing Raman imaging technology based on graphene-based
ultra-fast lasers, to detect and monitor tumours. The company was
formed as a result of a partnership between the University of
Cambridge and the Politecnico di Milano in Italy.
The key application employs Artificial Intelligence (AI) based
analysis of chemical signatures, for accurately differentiating
between healthy tissue and diseased tissue in patient samples,
augmenting or replacing subjective diagnosis of samples by
histopathologists. This will be without chemical staining -
eliminating a major contributor to sample variation seen between
one lab and the next.
During the year, the company raised GBP250,000 in its first
equity funding round, appointed a Chief Technology Officer, and
entered into a collaboration with Chinese manufacturer Motic. The
company also announced its involvement in a EUR5 million project,
Crimson, to develop new imaging technologies to enable researchers
to investigate diseases unfolding in cells in near real time. This
will promote greater understanding of disease, opening the way for
the development of new treatments.
UN SDG mapping: SDG 3 good health and well-being
CamGraPhIC : Frontier IP stake: 26.7 per cent
A second graphene spin out, this time from the University of
Cambridge and Italian research institute CNIT, CamGraPhIC develops
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.
Initial applications are high-speed optical transceivers. In
laboratory conditions these have worked at 100Gb per second, around
twice the speed of equivalent technologies, and consume at least 75
per cent less energy. The area is attracting increased interest,
with COVID-19 and the subsequent rise in remote working underlining
the need for very high broadband speeds.
UN SDG mapping: SDG 9, industry, innovation and infrastructure,
SDG 11, sustainable cities and infrastructure
Celerum: Frontier IP stake: 33.8 per cent
Celerum is developing novel artificial intelligence to improve
the operational efficiency of logistics and supply chains. The
technology also has the potential to address a host of other
complex scientific, engineering and industrial challenges.
Celerum develops technology based on nature-inspired computing,
which develops software and algorithms based on natural processes
and behaviours, such as those exhibited by ant colonies and fish
schools. This novel artificial intelligence can be used to improve
the operational efficiency of logistics and supply chains and has
the potential to address a host of other complex scientific,
engineering and industrial challenges. During the year, the company
announced it had been sub-contracted to support software
development for Aberdeen-based company PlanSea Solutions.
Although the technology is at an early stage of development, a
project conducted on behalf of Highlands and Islands Enterprise
across food and drink supply chains in northern Scotland, showed it
has the potential to cut carbon emissions by up to 40 per cent if
suppliers and logistics firms are willing to work together to share
loads.
UN SDG mapping: SDG 9, industry, innovation and
infrastructure
Des Solutio: Frontier IP stake: 25.0 per cent
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.
It does this by creating new methods to use Natural Deep
Eutectic Solvents, found in a huge array of plants, to replace
toxic organic solvents, such as ethanol, employed currently. This
means it is contributing to the environmentally sound management of
chemicals, and reducing their release to air, water and soil. The
company is still at an early stage but is already generating
industry interest.
UN SDG mapping: SDG 9 industry, innovation and infrastructure;
SDG 12, responsible consumption and production
Elute Intelligence: Frontier IP stake: 41.2 per cent
Elute's software tools are designed to help users intelligently
search, compare and analyse complex documents by mimicking the way
people read. There are a huge range of potential applications, from
searching patents and contracts, to detecting evidence of
plagiarism, collusion and copyright infringement.
During the year, the company raised GBP250,000 through its first
equity funding round and launched its innovative Patent Reader
product commercially following a successful pilot with a dedicated
user group. The Patent Reader allows users to identify relevant
patents and understand why they are relevant within minutes. It is
also developing an enterprise search tool and continued to provide
its COVID-19 document reader free to researchers. The company's
tools help to enhance research, support improved technological
capabilities and innovation.
UN SDG mapping: SDG 9, industry, innovation and
infrastructure
Exscientia: Frontier IP stake: 1.7 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. It is the company behind the first three AI-created
drugs to enter human clinical trials, taking years off traditional
drug discovery processes.
Post period end, the company became the first in our portfolio
to IPO, raising total gross proceeds of $464.7 million through a
public offer and private placements with SoftBank and the Bill
& Melinda Gates Foundation. The IPO, priced at the top end of
the estimated range, valued the company at $2.9 billion.
It cemented a growing reputation globally, which had already
been recognised by investors and the pharmaceutical industry. In
March 2021, Exscientia completed a Series C funding round at $100
million with an investment from funds managed by BlackRock; in
April a Series D funding round led by SoftBank raised $225 million
with an option to raise a further $300 million. The following
month, Exscientia announced a collaboration with one of the world's
biggest pharmaceutical companies Bristol Myers Squibb with upfront
and potential milestones of more than $1.2 billion.
The company also entered a strategic research and development
agreement with EQRx, a company committed to developing and
providing medicines at lower prices.
Although the company is primarily focused on non-communicable
diseases, such as cancer, OCD, Alzheimer's and rare diseases, it
announced the discovery of two potential therapeutics for COVID-19
earlier this year.
UN SDG mapping: SDG 3, good health and well-being
Fieldwork Robotics: Frontier IP stake: 22.2 per cent
Fieldwork Robotics made good progress in developing its robot
soft fruit picking and vegetable harvesting technology, despite
COVID-19 affecting necessary field trials.
During the year, the company entered into a collaboration with
Bosch, which optimises the robot arm technology and software to
increase speed and reduce costs. This has resulted in a number of
improvements to the technology. It also started working with
Bonduelle, a leading vegetable producer, on a three-year project to
develop a cauliflower harvesting robot.
The company raised GBP675,000 through an equity funding round
and received grants totalling GBP229,000 from schemes managed by
Innovate UK.
Robotic fruit and vegetable harvesting technology has the
potential to improve agricultural productivity, reduce food waste
by more accurate picking and minimising human contact, and result
in better quality jobs, with harvesting labour replaced by skilled
robot operators. There is also potential for cutting carbon
emissions through reduced need for migrant labour.
UN SDG mapping: SDG 2, zero hunger; SDG 12 responsible
consumption and production
Insignals Neurotech: Frontier IP stake: 33.0 per cent
Insignals Neurotech, a spin out from 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, is developing wireless wearable
devices to precisely measure wrist rigidity to help surgeons place
brain implants more accurately. The first product is aimed at
Parkinson's disease and has already undergone three clinical
studies. During the year, the company received a EUR100,000
investment from leading Portuguese venture capital firm Portugal
Ventures.
InSignals is also working on other applications in
neurology.
Parkinson's is the fastest growing neurodegenerative disease
worldwide - by 2040, 13 million people are expected to become
sufferers.
UN SDG mapping: SDG 3 good health and well-being
Molendotech: Frontier IP stake: 12.6 per cent
Molendotech continued work on its innovative rapid pathogen
detection technology. Siren(BW) , a kit to test bathing water for
faecal matter based on Molendotech's proprietary bacterial
detection technology, is now commercially available. 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, enabling environmental agencies and other authorities
to assess water quality swiftly.
The company has also developed a novel method to detect specific
pathogenic bacteria, and the investment will enable further
development of this technology for new markets, including the food
industry, where it has the potential to extend shelf life and
reduce food waste. This work is being undertaken in collaboration
with industry partners.
UN SDG mapping: SDG 6, clean water and sanitation; SDG 12
responsible consumption and production
Nandi Proteins: Frontier IP stake: 20.1 per cent
Nandi Proteins is now scaling up commercial products based on
its technology to create a wide range of customised ingredients
based on vegetable and animal proteins. These functional proteins
can be used to replace undesirable ingredients, such as fat,
gluten, E-number additives in processed foods, or those that people
do not want to consume - for example, by replacing animal proteins
with vegetable proteins.
The company has gained significant industrial traction and is
now collaborating with major companies on several applications.
These include projects to improve the taste and texture of
gluten-free products, using vegetable proteins to replace egg
whites in meat alternatives to turn a vegetarian product vegan, and
proteins to replace chemical binders and emulsifiers in plant-based
alternative meats and baked goods. The company is also developing
animal proteins to replace fat.
To oversee scale up and further development of the technology,
Nandi appointed David Flower, former managing director Europe for
Singha beer maker the Boon Rawd Brewing Company as chief executive.
He was previously managing director, home baking, for Kerry Foods.
The company also raised GBP720,000 through a convertible loan
backed by GBP360,000 from the UK government's future fund.
Nandi's technology has the potential to contribute to more
sustainable agriculture and food production by supporting the
plant-based alternative meat industry and by reducing chemical
ingredients in processed food. Cutting fat in affordable processed
foods will help to make them less harmful.
UN SDG mapping: SDG 2, end hunger; SDG 12, responsible
consumption and production
NTPE: Frontier IP stake: 31.6 per cent
NTPE is developing cellulose-based eco-friendly, low-cost,
low-power paper-based electronics to replace silicon in some
electronic applications. Called Paper-E, the novel technology means
electronic circuits, sensors and semiconductors can be printed onto
any cellulose-based paper. Paper-based energy harvesters, such as
solar cells, can be included in the circuits.
The company is focusing on a range of potential applications,
including a book-E concept to produce cheap and accessible
educational tools to teach children about electronics. Longer-term
health applications include diagnostic sensors for use in health
and food, smart packaging and paper-based sensors for use in very
remote environments.
Cellulose is natural, sustainable and recyclable material. Its
use can help reduce the severe negative impact of silicon mining,
use and disposal. The technology is still at an early stage of
development.
UN SDG mapping: SDG 12, responsible consumption and
production
PoreXpert: Frontier IP stake: 15.0 per cent
PoreXpert, a software and consultancy firm, has developed novel
software and methods to model the voids within porous materials and
how gases, liquids and colloidal suspensions behave within
them.
Applications include helping companies understand and exploit
the nature of oil and gas reserves to improve the efficiency of
exploration and extraction, supporting industry efforts to reduce
their impact on the environment. It is also being used to help
maximise the lifespan of the UK's Advanced Gas Cooled nuclear
reactors, which generate 20 per cent of the national energy
requirement, without greenhouse gas emissions.
UN SDG mapping: SDG 7, affordable and clean energy; SDG 12,
responsible consumption and production
Pulsiv: Frontier IP stake: 18.3 per cent
About half the electricity used by devices is wasted because of
inefficient power conversion - that's why converters heat up in
operation. Pulsiv's novel technology converts electricity much more
efficiently - in tests it wastes only about 10 per cent of the
energy. Furthermore, its fundamentally new power conversion
techniques can be incorporated in smaller, lighter and more
cost-effective designs. So the technology has the potential to
reduce strains on power grids and cut costs for manufacturers and
bills for consumers.
The technology can be used in nearly all mains-powered products,
battery chargers, lighting applications, electric vehicles,
portable power tools and DC motors. Not only does it convert
electricity from mains to device more efficiently, it also works
from device to mains, significantly improving the efficiency of
renewable sources. The company is working on a solar microinverter
to maximise the output from photovoltaic solar cells.
During the year, the company completed a GBP1.5 million equity
funding round and significantly strengthened its management team.
Darrel Kingham, formerly of Aixtron and Arm, joined as chief
executive officer. Dr Zaki Ahmed, the man behind the technology,
left his post at the University of Plymouth to join full time as
chief strategy officer, and Tim Moore, executive vice president of
Shark Robotics, Shark Ninja, became a non-executive director. Adam
Westcott has been appointed as chief financial officer. These
appointments reflect the fact the company is now pushing ahead with
full commercial scale up of the technology.
UN SDG mapping: SDG 7, affordable and clean energy; SDG 13,
climate action
The Vaccine Group: Frontier IP stake: 17.0 per cent
The Vaccine Group is creating a wide range of vaccines based on
a novel herpesvirus-based platform. Its core focus is on preventing
the spread of zoonotic and economically damaging diseases. Vaccines
under development include those for COVID-19, African swine fever,
bovine tuberculosis, bovine mastitis, streptococcus suis, Ebola and
Lassa fever. To date, the company and its international partners
have been awarded more than GBP9 million in grant funding from the
UK, US and Chinese governments.
Key events of the year include the company signing its first
commercial collaboration agreement with ECO Animal Health Group and
The Pirbright Institute to develop vaccines for porcine respiratory
and reproductive syndrome.
To reflect the progress made by the company, Jeremy Salt was
appointed chief executive officer to oversee the vaccine platform's
continued development and commercialisation of the technology.
Jeremy joined from GALVmed, where he was chief scientific officer.
He has previously director of Biologicals Research &
Development for Europe, Africa and Middle East of the world's
biggest animal health group Zoetis.
UN SDG mapping: SDG 2, end hunger; SDG 3 good health and
well-being
Core Portfolio Summary at 30 June 2021
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
--------------- ---------------------------- ------------------------
AquaInSilico Lda 29.0% Digital tools to FCT Nova
optimise wastewater
treatment
--------------- ---------------------------- ------------------------
Cambridge Raman 25.8% Medical imaging using University of
Imaging Limited ultra-fast lasers Cambridge and
Politecnico di
Milano
--------------- ---------------------------- ------------------------
CamGraPhIC Limited 26.7% Graphene-based photonics University of
Cambridge and
CNIT
--------------- ---------------------------- ------------------------
Celerum Limited 33.8% Near real-time automated Robert Gordon
fleet scheduling University
--------------- ---------------------------- ------------------------
Des Solutio Lda 25.0% Green alternatives FCT Nova
to industrial toxic
solvents
--------------- ---------------------------- ------------------------
Elute Intelligence 41.2% Software tools able Existing business
Holdings Limited to intelligently
search, compare and
analyse unstructured
data
--------------- ---------------------------- ------------------------
Exscientia Limited 1.7% Novel informatics University of
and experimental Dundee
methods for drug
discovery
--------------- ---------------------------- ------------------------
Fieldwork Robotics 22.2% 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 12.6% 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 Limited 18.3% High efficiency power University of
conversion and solar Plymouth
power generation
--------------- ---------------------------- ------------------------
The Vaccine Group 17.0% Herpesvirus-based University of
Limited vaccines for the Plymouth
control of bacterial
and viral diseases
--------------- ---------------------------- ------------------------
The Group holds equity stakes in 8 further portfolio companies.
The combined value of these holdings was GBP28,000, equivalent to
0.1% of the fair value of the Group's portfolio at 30 June
2021.
Financial Review
Key Highlights
The value of the Group's equity investments increased to
GBP31,982,000 (2020: GBP19,444,000) with net assets increasing to
GBP38,421,000 (2020: GBP25,866,000).
Profit after tax for the Group for the year to 30 June 2021 was
GBP9,566,000 (2020: GBP4,184,000) after a deferred tax charge of
GBP676,000 (2020: nil). This result includes a net unrealised
profit on the revaluation of investments of GBP12,306,000 (2020:
GBP5,973,000) and reflects a decrease in services revenue to
GBP362,000 (2020: GBP404,000), greater administrative expenses of
GBP2,171,000 (2020: GBP2,011,000) primarily due to an increase in
personnel and an increase in share-based payments to GBP368,000
(2020: GBP230,000).
On 21 July 2020, the Company conducted a placing of 4,243,140
new ordinary shares of 10p for cash at a price of 55p per share
raising GBP2,334,000 before expenses of GBP152,000.
Revenue
Total revenue and other operating income for the year to 30 June
2021, which is the aggregate of services revenue and unrealised
gain on the revaluation of investments, increased 99% to
GBP12,668,000 (2020: GBP6,377,000). Revenue from services decreased
10% to GBP362,000 (2020: GBP404,000). The Group's net unrealised
profit on the revaluation of investments increased 106% to
GBP12,306,000 (2020: GBP5,973,000). Unrealised gains on revaluation
of equity investments of GBP12,603,000 (2020: GBP7,064,000) were
offset by fair value decreases of GBP412,000 (2020: GBP1,051,000).
GBP8,803,000 of the equity investment gain relates to Exscientia
Limited which raised capital in April 2021 at an increased price
and GBP1,494,000 to The Vaccine Group Limited. Unrealised gains
included net unrealised profit on the revaluation of debt
investments of GBP115,000 (2020: unrealised loss of GBP40,000).
Administrative Expenses
Administrative expenses increased 8% to GBP2,171,000 (2020:
GBP2,011,000). The increase is primarily due to increased employee
and consultant costs.
Share Based Payments
Share based payments increased 60% to GBP368,000 (2020:
GBP230,000) reflecting the charge for options granted in November
2020 and a full year's charge for options granted in December
2019.
Earnings Per Share
Basic earnings per share were 17.47p (2020: 8.76p). Diluted
earnings per share were 16.62p (2020: 8.41p).
Statement of Financial Position
The principal items in the statement of financial position at 30
June 2021 are financial assets at fair value through profit and
loss GBP34,302,000 (2020: GBP20,307,000) and goodwill GBP1,966,000
(2020: GBP1,966,000). Financial assets at fair value through profit
and loss comprise equity holdings of GBP31,982,000 (2020:
GBP19,444,000) and debt investments of GBP2,320,000 (2020:
GBP863,000) 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 matters taken into
account when assessing the fair value of the portfolio companies
are detailed in the accounting policy on investments. The
considerations taken into account by the Directors when reviewing
the carrying value of goodwill are detailed in Note 9 to the
financial statements.
The Group had net current assets at 30 June 2021 of GBP2,379,000
(2020: GBP3,588,000). The current assets at 30 June 2021 include
trade receivables of GBP172,000 which are more than 90 days overdue
from portfolio companies Alusid, Elute Intelligence and Fieldwork
Robotics. Other debtors also include an unsecured interest free
loan to Alusid of GBP31,000. The directors are confident that
Alusid, Elute Intelligence and Fieldwork Robotics will be able to
raise sufficient funds to finance their business plans and pay the
amounts due to the Group.
Net assets of the Group increased to GBP38,421,000 at 30 June
2021 (30 June 2020: GBP25,866,000) resulting in net assets per
share of 69.8p (2020: 51.0p).
Cash
The Group's cash balances decreased during the year by
GBP976,000 to GBP1,992,000 at 30 June 2021. Operating activities
consumed GBP1,466,000 (2020: GBP1,758,000) and investing activities
consumed GBP1,692,000 (2020: GBP600,000) reflecting the purchase of
debt investments of GBP1,618,000 (2020: GBP588,000) which included
a loan of GBP933,000 to CamGraPhIC Limited and GBP320,000 to Nandi
Proteins Limited. The Group raised cash of GBP2,182,000 net of
costs through a placing in July 2020.
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 note 1 to the
financial statements. The key broader risks - financial,
operational, cash flow and personnel - are considered below.
The key financial risk in our business model is the inability to
realise sufficient income through the sale of our holdings in
portfolio companies to cover operating costs and investment
capital. This risk has been mitigated through the post-year end
initial public offering of Exscientia, our most valuable holding at
30 June 2021, creating a significant, readily realisable asset to
cover our cash requirements for the foreseeable future. The other
principal financial risk of the business is a fall in the value of
the Group's portfolio. 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
number of companies in the portfolio increases. T he Group
continues to pursue its aim of actively seeking realisation
opportunities within its portfolio to reduce the requirement for
additional capital raising.
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 advisory work. The Group seeks to
mitigate these risks by maintaining relationships with
co-investors, industry partners and financial institutions, as well
as controlling the cash burn rate in portfolio companies.
The remaining risks to the Group attributable to the COVID-19
pandemic on the Group are: Operational - Frontier and portfolio
company employees may contract the virus and be unavailable for
work for extended periods of time; Valuation - the economic impact
could delay the commercial progress and fundraisings of some
portfolio companies; and general economic deterioration could
impede the company's ability to raise funds when required. The
Group seeks to mitigate these risks by maintaining a safe working
environment, e nsuring portfolio companies have considered and
addressed risks and strengthening the Group's balance sheet.
Changes to the basis on which IP is licensed in the Higher
Education sector might lead to reduced opportunity or a need to
vary the business model. 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.
The impact of Brexit is still to become fully apparent but could
have a broad disruptive impact on the Group: reduced research
funding impacting access to quality IP in the higher education
sector; reduced grant funding for portfolio companies; disruption
to the business of portfolio companies who trade with the EU or who
are unable to recruit skilled labour. We believe the direct impact
of Brexit on the Group's operations to be limited but will be kept
under review. However, we will continue to work closely with our
portfolio companies to mitigate the impact of any issues
arising.
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.
By order of the Board
Neil Crabb
Director
27 October 2021
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2021
2021 2020
Notes GBP'000 GBP'000
Revenue
Revenue from services 362 404
Other operating income
Unrealised profit on the revaluation of investments 11,12 12,306 5,973
12,668 6,377
Administrative expenses 4 (2,171) (2,011)
Share based payments (368) (230)
Other income 104 27
Profit from operations 10,233 4,163
Interest income on short term deposits 9 21
Profit from operations and before tax 10,242 4,184
Taxation 6 (676) -
Profit and total comprehensive income attributable
to
-------- --------
the equity holders of the Company 9,566 4,184
======== ========
Profit per share attributable to the equity
holders of the Company:
Basic earnings per share 7 17.47p 8.76p
Diluted earnings per share 7 16.62p 8.41p
All of the Group's activities are classed as continuing.
There is no other comprehensive income in the year (2020:
nil).
Consolidated Statement of Financial Position
At 30 June 2021
2021 2020
Notes GBP'000 GBP'000
Assets
Non-current assets
Tangible fixed assets 8 11 5
Goodwill 9 1,966 1,966
Equity investments 11 31,982 19,444
Debt investments 12 2,320 863
36,279 22,278
--------- ---------
Current assets
Trade receivables and other current assets 13 595 830
Cash and cash equivalents 1,992 2,968
--------- ---------
2,587 3,798
--------- ---------
Total assets 38,866 26,076
--------- ---------
Liabilities
Non-current liabilities
Deferred taxation 6 (237) -
--------- ---------
(237) -
--------- ---------
Current liabilities
Trade and other payables 14 (208) (210)
---------
(208) (210)
--------- ---------
Total liabilities (445) (210)
--------- ---------
Net assets 38,421 25,866
========= =========
Equity
Called up share capital 15 5,501 5,076
Share premium account 15 14,576 12,819
Reverse acquisition reserve 16 (1,667) (1,667)
Share based payment reserve 16 1,276 477
Retained earnings 16 18,735 9,161
--------- ---------
Total equity 38,421 25,866
========= =========
Consolidated Statement of Changes in Equity
For the year ended 30 June 2021
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 2019 4,243 9,791 (1,667) 293 4,931 17,591
Issue of shares 833 3,028 - (46) 46 3,861
Share-based payments - - - 230 - 230
Profit/total comprehensive
income for the year - - - - 4,184 4,184
At 30 June 2020 5,076 12,819 (1,667) 477 9,161 25,866
---------- ---------- -------------- --------- ----------- ----------------
Issue of shares 425 1,757 - - - 2,182
Share-based payments - - - 799 8 807
Profit/total comprehensive
income for the year - - - - 9,566 9,566
At 30 June 2021 5,501 14,576 (1,667) 1,276 18,735 38,421
========== ========== ============== ========= =========== ================
Consolidated Statement of Cash Flows
For the year ended 30 June 2021
Group Group
2021 2020
Notes GBP'000 GBP'000
Cash flows from operating activities 19 (1,466) (1,758)
Cash flows from investing activities
Purchase of tangible fixed assets 8 (12) (3)
Purchase of equity investments 11 (71) (97)
Purchase of debt investments 12 (1,618) (588)
Disposal of debt investments 12 - 40
Amounts receivable from group undertakings - -
Interest income 9 21
Other income - 27
---------- --------
Net cash used in investing activities (1,692) (600)
---------- --------
Cash flows from financing activities
Proceeds from issue of equity shares 2,334 4,175
Costs of share issue (152) (315)
Net cash generated from financing activities 2,182 3,860
---------- --------
Net increase in cash and cash equivalents (976) 1,502
Cash and cash equivalents at beginning of year 2,968 1,466
Cash and cash equivalents at end of year 1,992 2,968
========== ========
Notes to the Financial Statements
1. Financial risk management
Financial risk factors
Going concern
As described in the Directors' Report, the Group's strategy is
to develop a growing portfolio of spin out companies that will
provide cash inflows through realisation of investments. In
assessing going concern, the Directors considered the Group's cash
requirements over the three years to 30 June 2024. The forecast
included operating activities and known near term purchase of
investments. It did not include cash from the disposal of
investments or for the purchase of unplanned investments. The
analysis showed that at 30 June 2021 the Group had insufficient
cash to cover its expenditure for the next 12 months. On 1 October
2021 one of the Group's portfolio companies Exscientia completed an
initial public offering with the initial public offering price
valuing the Group's holding at $34.4 million - approximately
GBP25.5 million. The Directors plan to realise sufficient cash from
the Exscientia holding in 2021 to cover expenditure for at least
the next 12 months. For further operating and investment cash
requirements over the three-year assessment period, the Directors
intend to realise further cash from either the Exscientia holding
or from other portfolio company exits. Consequently, the Directors
continue to adopt the going concern basis in preparing the Group's
financial statements.
(a) Market risk
Interest rate risk
As the Group has no borrowings it only has limited interest rate
risk. The impact is on income and operating cash flow and arises
from changes in market interest rates. Cash resources are held in
floating rate accounts.
Price risk
The Group is exposed to equity securities price risk because of
equity investments classified on the consolidated statement of
financial position as financial assets at fair value through profit
and loss. The maximum exposure is the fair value of these assets
which is GBP31,982,000 (2020: GBP19,444,000).
(b) Credit risk
The Group's credit risk is primarily attributable to its debt
investments, trade receivables, other debtors and cash equivalents.
The Group's current cash and cash equivalents are held with two UK
financial institutions, the Bank of Scotland plc and Barclays Bank
plc, both of which have a credit rating of "P1" from credit agency
Moody's, indicating that Moody's consider that these banks have a
"superior" ability to repay short-term debt obligations. The
concentration of credit risk from trade receivables and other
debtors varies throughout the year depending on the timing of
transactions and invoicing of fees. Details of major customers to
the Group are set out in Note 3. Details of trade receivables and
other current assets are set out in note 14. The Group's debt
investments are loans to its portfolio companies and its customers
are its portfolio companies. These are primarily early stage and
start-up companies and Group management determine impairment and
assess expected credit loss through taking into account both
trading and fundraising prospects in addition to the financial
position and other factors. Management's assessment is aided
through representation on the Board and/or through providing
advisory services to the companies.
The maximum exposure to credit risk for debt investments, trade
receivables, other current asset and cash equivalents is
represented by their carrying amount.
(c) Capital risk management
The Group is funded by equity finance only. Total capital is
calculated as 'total equity' as shown in the consolidated statement
of financial position. The Group's objectives for managing capital
are to safeguard the Group's ability to continue as a going concern
in order to provide returns for shareholders and benefits for other
stakeholders and to manage the cost of capital. In order to
maintain the capital structure, the Group may issue new shares as
required. The Group currently has no debt. There were no changes in
the Group's approach to capital management during the year.
(d) Liquidity risk
The Group seeks to manage liquidity risk to ensure sufficient
liquidity is available to meet the requirements of the business and
to invest cash assets safely and profitably. The Group's business
model is to realise cash through the sale of investments in
portfolio companies and in the absence of such realisations the
Group would plan to raise additional capital. The Board reviews
available cash to ensure there are sufficient resources for working
capital requirements and investments. At 30 June 2021 and 30 June
2020 all amounts shown in the consolidated statement of financial
position under current assets and current liabilities mature for
payment within one year.
2. Critical accounting estimates and assumptions
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates and
judgements.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are addressed below:
(i) Valuation of investments
In applying valuation techniques to determine the fair value of
unquoted equity investments the Group makes estimates and
assumptions regarding the future potential of the investments. As
the Group's investments are in seed, start-up and early-stage
businesses it can be difficult to assess the outcome of their
activities and to make reliable forecasts. Given the difficulty of
producing reliable cash flow projections for use in discounted cash
flow valuations, this technique is applied with caution.
Adjustments made to fair value are, by their very nature,
subjective and determining the fair value is a critical accounting
estimate. Reasonable possible shifts, which themselves are
estimates, are included in Note 12 and show a reasonable possible
shift for the total unquoted equity investments of 29% being
GBP9,249,000 from a total value of GBP31,982,000. In applying
valuation techniques to determine the fair value of debt
investments the Group makes estimates and assumptions regarding the
time to repayment or conversion, discount rate and credit risk.
Where warrants are attached to a debt instrument, the fair value is
determined using the Black-Scholes-Merton valuation model. The
significant inputs to the model are provided in note 13. The price
at which debt investments were made is 95% of the fair value of
debt investments at 30 June 2021.
(ii) Impairment of goodwill
The Group tests annually whether goodwill has suffered any
impairment, in accordance with the stated accounting policy. The
recoverable amount is determined using a value in use model which
requires a number of estimations and assumptions about the timing
and amount of future cash flows. As future cash inflows relate
primarily to capital gains on the sale of unquoted equity
investments, these estimates and assumptions are subject to a high
degree of uncertainty. Note 9 describes the key assumptions and
sensitivity applied.
(iii) Consideration of credit losses
The matters taken into account in the recognition of credit
losses include historic current and forward-looking information.
The Group applies the IFRS 9 simplified approach to measuring
expected loss, details of which are provided in note 14.
Critical accounting judgements
The Group believes that the most significant judgement areas in
the application of its accounting policies are establishing the
fair value of its unquoted equity investments and the consideration
of any impairment to goodwill. The matters taken into account by
the Directors when assessing the fair value of the unquoted equity
investments are detailed in the accounting policy on
investments.
The considerations taken into account by the Directors when
reviewing goodwill are detailed in Note 9. In addition, the
Directors judge that the Group is exempt from applying the equity
method of accounting for associates in which it has interests of
over 20% as they consider the Group to be similar to a venture
capital organisation and elects to hold such investments at fair
value in the statement of financial position.
IAS28 Investments in Associates and Joint Ventures permits
investments held by entities which are similar to venture capital
organisations to be excluded from its scope where those investments
are designated, upon initial recognition, as at fair value through
profit and loss.
3. Major customers
During the year the Group had five major customers that
accounted for 76% of its revenue from services (2020: five
customers accounted for 75%). The revenues generated from each
customer were as follows:
2021 2020
GBP'000 GBP'000
Customer 1 78 90
Customer 2 72 72
Customer 3 48 53
Customer 4 48 48
Customer 5 29 39
275 302
======== ========
4. Administration expenses
Expenses included in administrative expenses are analysed
below.
2021 2020
GBP'000 GBP'000
Employee costs 1,534 1,446
Consultant 66 43
Travel and subsistence 1 22
Depreciation 6 6
Bad and doubtful debts - (1)
Audit services:
- audit of the Company and consolidated accounts 54 65
- audit of the Company's subsidiaries pursuant
to legislation 5 2
Non-audit services :
- tax services 10 8
- consultancy services 3 9
Legal, professional and financial costs 290 217
Premises lease 133 142
Administration costs 69 52
2,171 2,011
======== ========
5. Directors and employees
The average number of people employed by the Group during the
year was:
2021 2020
Number Number
Business and corporate development 15 15
======= =======
2021 2020
GBP'000 GBP'000
Wages and salaries 1,125 1,081
Social security 146 146
Pension costs - defined contribution plans 98 73
Non-executive directors' fees 95 95
Other benefits 70 51
-------- --------
Employee administration expenses 1,534 1,446
Share option expense 368 230
-------- --------
1,902 1,676
======== ========
All employees with the exception of Jacqueline McKay are
employed by Frontier IP Group plc. Jacqueline McKay is employed by
the subsidiary Frontier IP Limited and her costs are shown in the
table of directors' remuneration below.
The key management of the Group and the Company comprise the
Frontier IP Group Plc Board of Directors. The remuneration of the
individual Board members is shown below.
Remuneration comprises basic salary, pension contributions and
benefits in kind, being private health insurance and life
assurance. The type of remuneration is constant from year to year.
Ad hoc bonuses may be paid to reward exceptional performance. Such
bonuses are decided by the Remuneration Committee on the
recommendation of the Chief Executive Officer. Share options are
also awarded to employees from time to time. The granting of share
options to individual employees is determined taking into account
seniority, commitment to the business and recent performance.
The total remuneration for each director is shown below.
Salary Other benefits Pension Share option Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 '000
Executive
N Crabb 138 138 4 3 12 15 72 21 226 177
J McKay 84 103 5 4 32 11 66 11 187 129
J Fish 108 108 3 3 11 11 66 20 188 142
M White 130 130 3 3 13 13 64 20 210 166
Non-executive
A Richmond 43 43 - - - - - - 43 43
M Bourne 26 26 - - - - - - 26 26
C Wilson 26 26 - - - - - - 26 26
-------- -------- --------
555 574 15 13 68 50 268 72 906 709
======== ======== ======== ======== ======== ======== ======== ======== ======== =====
6. Taxation
2021 2020
GBP'000 GBP'000
Current tax - -
Deferred tax 676 -
Tax charge for the year 676 -
======== ========
A reconciliation from the reported profit before tax to the
total tax charge is shown below:
2021 2020
GBP'000 GBP'000
Profit before tax 10,242 4,184
======== ========
-
Profit before tax at the effective rate of
corporation tax in the UK of 19% (2020: 19%) 1,946 795
Effects of:
Fair value movement in investments not recognised
in deferred tax 159 (1,086)
Expenses not deductible for tax purposes 70 48
Movement in deferred tax asset of losses not
recognised (1,610) 295
Other adjustments 111 (52)
Tax charge for the year 676 -
======== ==========
The UK corporation tax rate was previously enacted to reduce to
17% from 1 April 2020. However, the Finance Act 2020, which was
substantively enacted on 11 March 2020, repealed this rate
reduction and the corporation tax rate has remained at 19% from 1
April 2020 . The Finance Act 2021 received Royal Assent on 10 June
2021 which has enacted an increase in the UK corporation tax rate
to 25% from 1 April 2023. The closing deferred tax assets and
liabilities have been calculated at a blended rate of 21.75%, on
the basis that this is the rate at which those assets and
liabilities are expected to unwind.
Deferred Tax
Group
Deferred tax liabilities at 30 June 2021
Unrealised gains investments (2,795)
-------------------
(2,795)
-------------------
Deferred tax assets at 30 June 2021
Tax losses 1,891
Short-term timing differences - pension 2
Short-term timing differences - outstanding share options 665
-------------------
2,558
-------------------
Net deferred tax (liability) / asset (237)
-------------------
Group
Deferred tax movement
At 1 July 2020 -
Debited / (credited) to profit and loss account 676
Credited to equity (439)
-----------------
At 30 June 2021 237
-----------------
7. 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 2021 9,566 54,761,420 17.47
-------------------- ----------- -----------
Year ended 30 June 2020 4,184 47,753,569 8.76
-------------------- ----------- -----------
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 2021 9,566 57,548,082 16.62
-------------------- ----------------- -----------
Year ended 30 June 2020 4,184 49,775,053 8.41
-------------------- ----------------- -----------
8. Tangible fixed assets
Fixtures
and equipment
GBP'000
Cost
At 1 July 2019 23
Additions 3
Disposals -
---------------
At 30 June 2020 26
---------------
Additions 12
Disposals (2)
At 30 June 2021 36
Depreciation
Accumulated depreciation at 1 July 2019 16
Charge for the year to 30 June 2020 5
Disposals -
Accumulated depreciation at 30 June 2020 21
Charge for the year to 30 June 2021 6
Disposals (2)
---------------
Accumulated depreciation at 30 June 2021 25
---------------
Net book value
At 30 June 2020 5
===============
At 30 June 2021 11
===============
9. Goodwill
Group
GBP'000
Cost
At 1 July 2019, 30 June 2020 and at 30 June 2021 1,966
Impairment
At 1 July 2019, 30 June 2020 and at 30 June 2021 -
--------
Carrying value
At 30 June 2021 1,966
========
At 30 June 2020 1,966
========
The Group conducts an annual impairment test on the carrying
value of goodwill based on the recoverable amount of the Group as
one cash generating operating unit. The net present value of
projected cash flows is compared with the carrying value of the
Group's investments and goodwill. In arriving at a net present
value of projected cash flows, an individual company dilution
value-in-use model was used within which assumptions were used for
future spin outs and for the existing portfolio.
The assumptions used in the model are set out below:
2021 2020
Future Spin Existing Future Existing
Outs Portfolio Spin Outs Portfolio
------------------------- ------------ ----------- ---------------
Initial spin out
equity, being the
product of the
number of spin
outs and initial
equity acquired. 75% - 150% - 75% - 150% -
------------ ---------------- ----------- ---------------
Equity in existing - 1.65%-41.2%* - 2.4% - 43.5%
portfolio
------------ ---------------- ----------- ---------------
Average of Average
Dilution 35% 28% 35% of 31%
------------ ---------------- ----------- ---------------
Years to exit 7 7 ** 7 7
------------ ---------------- ----------- ---------------
Rate of return 27% 27% 27% 27%
------------ ---------------- ----------- ---------------
Discount rate (pre-tax) 12% 12% 12% 12%
------------ ---------------- ----------- ---------------
Value at first/next GBP1.5m GBP1.5m - GBP1.5m GBP1.5m
funding round carrying - carrying
values of values of
individual individual
companies companies
at 30 June at 30 June
2021. Average 2020. Average
of GBP49.4m*** of GBP13.5m
------------ ---------------- ----------- ---------------
* Actual range of equity at 30 June 2021 excluding immaterial
holdings.
** Minimum of 4 years for existing portfolio companies with the
exception of Exscientia.
*** GBP5.1m excluding the value of Exscientia.
Projected cash flows are based upon management approved budgets
for service income, overheads and investments for a period of three
years and key assumptions over potential investment outcomes in the
future. When determining the key assumptions, management has used
both past experience and management judgement. In particular, the
Group has no history of exits as the Group's portfolio comprises
primarily early-stage businesses. No increase or growth has been
factored into the model with regard to the key assumptions, or for
the projected cash flows after the 3-year budgeted period.
The percentage change required in an assumption to cause the
recoverable amount to equal the carrying amount is shown below:
Assumption Change Required
Initial spin out equity, being the product of
the number of spin outs and initial equity acquired. -57%
----------------
Dilution +140%
----------------
Years to exit +43%
----------------
Rate of return -22%
----------------
Discount rate (pre-tax) +51%
----------------
Value at first funding round -50%
----------------
The Board considers that a reasonably possible change in the
rate of return would cause the carrying amount of the cash
generating unit to exceed its recoverable amount. The amount by
which the recoverable amount exceeds the carrying amount is GBP9.9m
and a 22% decrease in the rate of return from 27% to 21% would
cause the recoverable amount to equal the carrying amount.
The Board considers that the net present value of cash flow from
the Group's one cash generating unit is greater than its carrying
value.
10. Categorisation of Financial Instruments
At fair
value through Amortised
profit or cost Total
Financial assets loss GBP'000 GBP'000
GBP'000
At 30 June 2020
Equity investments 19,444 - 19,444
Debt investments 863 - 863
Trade and other receivables - 830 830
Cash and cash equivalents - 2,968 2,968
--------------- ------------ ----------
Total 20,307 3,798 24,105
--------------- ------------ ----------
At 30 June 2021
Equity investments 31,982 - 31,982
Debt investments 2,320 - 2,320
Trade and other receivables - 595 595
Cash and cash equivalents - 1,992 1,992
--------------- ------------ ----------
Total 34,302 2,587 36,889
--------------- ------------ ----------
All financial liabilities are categorised as other financial
liabilities and recognized at amortised cost.
All net fair value gains in the year are attributable to
financial assets designated at fair value through profit or loss.
(2020: all net fair value gains were attributable to financial
assets designated at fair value through profit or loss.)
11. Equity investments
Equity investments are unquoted investments 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.
Unquoted Equity Investments Group Group
2021 2020
GBP'000 GBP'000
At 1 July 19,444 13,252
Additions 71 97
Conversion of debt investments 276 82
Fair value increases 12,603 7,064
Fair value decreases (412) (1,051)
-------- --------
At 30 June 31,982 19,444
======== ========
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 2020 75 914 3,245 15,210 - 19,444
Transfers between stages (15) (720) 338 397 - -
Fair value (decrease)
/ increase through other
operating income (29) 38 1,495 10,687 - 12,191
Additions - - - 347 - 347
30 June 2021 31 232 5,078 26,641 - 31,982
======== ======== ======== ========= ======== =========
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 4 31 new spin outs at GBP50,000 20% 6
Management's assessment
of the value of IP transferred
and the value of grants
Stage from which economic benefit
2 2 232 is derived. 30% 70
Management's assessment
of performance against
Stage milestones and discussions
3 7 5,078 of likely imminent fundraising. 39% 1,980
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 10 26,641 methodology. 27% 7,193
Stage 0 - Discounted comparable - -
5 public company valuation.
Unobservable inputs into
discounted cash flow
are forecasts of future
cash flows, probabilities
of project failure and
evaluation of the time
cost of money.
-------- --------------
30 June 2021 31,982 29% 9,249
======== ==============
Significant unobservable inputs:
The valuation of the Group's investment in Exscientia at 30 June
2021 was GBP13,210,000, 41% of the Group's total equity investments
and 34% of its net assets at 30 June 2021. The increase in the
value of the Group's holding in Exscientia over the year to 30 June
2021 was GBP8,803,000, 72% of the Group's net unrealised profit on
the revaluation of investments and 86% of profit before tax for the
year to 30 June 2021. The significant inputs into the valuation of
the Group's holding in Exscientia included the price of an
investment in April 2021 as well as progress from then until 30
June 2021.
The valuation of the Group's investment in Pulsiv Solar at 30
June 2021 was GBP4,087,000, 13% of the Group's total equity
investments and 11% of its net assets at 30 June 2021. The increase
in the value of the Group's holding in Pulsiv over the year to 30
June 2021 was GBP200,000, 2% of the Group's net unrealised profit
on the revaluation of investments and 2% of profit before tax for
the year to 30 June 2021. The significant inputs into the valuation
of the Group's holding in Pulsiv included the price of an
investment in May 2021 as well as progress from then until 30 June
2021.
The valuation of the Group's investment in The Vaccine Group
(TVG) at 30 June 2021 was GBP4,546,000, 14% of the Group's total
equity investments and 12% of its net assets at 30 June 2021. The
increase in the value of the Group's holding in TVG over the year
to 30 June 2021 was GBP1,494,000, 12% of the Group's net unrealised
profit on the revaluation of investments and 15% of profit before
tax for the year to 30 June 2021. The significant inputs into the
valuation of the Group's holding in TVG included an assessment of
the progress made in the five projects in progress at 30 June 2021
since the most recent funding round in January 2020, the growth in
valuation of vaccine companies over the period and a discounted
cash flow model. The company's activities on the projects funded by
the US, UK and Chinese governments remain on track and have met the
milestones agreed with the funders. Post-period end animal trials
commenced on a transmissible Ebola vaccine, believed to be the
first of its kind in the world; this demonstrates the progress made
during the period.
TVG's projects are individually high risk but also potentially
high reward for TVG. It is therefore challenging to accurately
value TVG given the material impact of success or failure in any
one of these projects. This remains particularly challenging at
this point in time as the COVID-19 environment has seen a strong
growth in the valuations of vaccine companies, particularly those
that are specifically targeting COVID-19. The current valuation has
been corroborated by discounted cash flows which have been risk
adjusted for probability of success. A 25% reduction in the royalty
rate or cost per dose would reduce the valuation of the Group's
investment in TVG by 25% while a 25% increase in the success rate
or a 25% reduction in the discount rate would increase the
valuation by 23% and 24% respectively. The high risk/reward nature
of TVG's projects, the difficulty in estimating future cash flows
and the high level of judgement involved mean there is a risk of
material adjustment to the valuation.
Equity investments are carried in the statement of financial
position at fair value even though the Group may have significant
influence over those companies. This treatment is permitted by
IAS28, Investments in Associates. At 30 June 2021 the Group held an
economic interest of 20% or more in the following companies:
Name of Undertaking Registered Address % Issued Share Class
Share
Capital
AquaInSilico Avenida Tenente Valadim, n . 29.0% Ordinary
17, 2 F, 2560-275 Torres Vedras,
Portugal
-------------------------------------- --------- ------------
Alusid Limited Richard House, Winckley Square, 35.6% Ordinary
Preston, Lancashire, PR1 3HP
-------------------------------------- --------- ------------
Cambridge Raman Wellington House, East Road, 25.8% Ordinary
Imaging Limited Cambridge, CB1 1BH
-------------------------------------- --------- ------------
Cambridge Simulation 8 Cody Road, Waterbeach, Cambridge, 40.0% Ordinary
Solutions Limited CB25 9LS
-------------------------------------- --------- ------------
CamGraPhIC Limited Wellington House, East Road, 26.7% Ordinary
Cambridge, CB1 1BH
-------------------------------------- --------- ------------
Celerum Limited School Of Computing Science 33.8% Ordinary
& Digital Media Robert Gordon
University, Garthdee Road, Aberdeen,
AB10 7GJ
-------------------------------------- --------- ------------
Des Solutio Avenida Tenente Valadim, n . 25.0% Ordinary
LDA 17, 2 F, 2560-275 Torres Vedras,
Portugal
-------------------------------------- --------- ------------
Elute Intelligence 21 Church Road, Tadley, RG26 41.2% Ordinary
Holdings Limited 3AX
-------------------------------------- --------- ------------
Fieldwork Robotics Research And Innovation Floor 22.2% Ordinary
Limited 2 Marine Building, Plymouth
University, Plymouth, PL4 8AA
-------------------------------------- --------- ------------
Insignals Neurotech Rua Passeio Alegre, 20 Centro 33.0% Ordinary
Lda de Incubacyo e Aceleracyo Do
Porto, Porto 4150-570, Portugal
-------------------------------------- --------- ------------
Nandi Proteins 93 George Street, Edinburgh, 20.1% A Ordinary
Limited EH2 3ES
-------------------------------------- --------- ------------
NTPE LDA Avenida Tenente Valadim, n . 31.6% Ordinary
17, 2 F, 2560-275 Torres Vedras,
Portugal
-------------------------------------- --------- ------------
The nature of these companies' business is provided in the
Portfolio Review section of the Strategic Report where the holding
carries a value.
12. Debt investments
Debt investments are loans to portfolio companies to fund
early-stage costs, provide funding alongside grants and bridge to
an equity fundraise. Loans ranging from GBP50,000 (Pulsiv) to
GBP933,000 (CamGraPhIC) were made to five companies during the
period. All debt investments are categorised as fair value through
profit or loss and measured at fair value. The Group uses valuation
techniques that management consider appropriate in the
circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs The price at
which the debt investment was made may be a reliable indicator of
fair value at that date but management consider the financial
position and prospects for the portfolio company borrower when
valuing debt investments at subsequent measurement dates.
Certain debt investments carry warrants granting the option to
purchase shares. The exercise price is generally the price of
shares issued at the first equity fundraising following the grant
and the period of exercise is generally at any time from the first
equity fundraising to an exit event. The fair value of the warrants
is determined using the Black-Scholes-Merton valuation model. The
significant inputs into the model for each warrant were the
exercise price, the current share price valuation, volatility of
70%, expected life of between four and six years and an annual
risk-free interest rate of 0.038%. The value of warrants included
in debt investments at 30 June 2021 is GBP60,000 (2020: nil)
The movement of debt investments during the year is set out
below:
Group Group 2020
2021
GBP'000 GBP'000
At 1 July 863 382
Additions 1,618 588
Disposals - (40)
Conversion to unquoted equity investments (276) (82)
Reclassification - 55
Fair value increases 272 -
Fair value decreases (157) (40)
-------- -----------
At 30 June 2,320 863
======== ===========
All debt investments are classed as non-current. Certain debt
instruments have conversion or repayment terms dependent on the
amount and timing of an equity fundraising by the portfolio company
borrower. The exercise of a conversion right would reclass the debt
investment as a non-current equity investment. The expectation is
to exercise the right to repayment, however there is uncertainty
over the timing and amount of equity fundraisings, particularly
during the existing COVID-19 pandemic. Furthermore, notwithstanding
the right to repayment being triggered, the Group may decide,
depending on the circumstance at the time, to defer repayment or
convert into equity for the benefit of the portfolio company
borrower in which the Group also holds an equity stake.
13. Trade receivables and other current assets
Group Group
2021 2020
GBP'000 GBP'000
Trade receivables 336 614
Receivables from Group undertakings - -
VAT 13 3
Prepayments and accrued income 58 48
Other debtors 109 146
Accrued interest 79 19
595 830
Less receivables from Group undertakings - non current
- -
-------- --------
Current portion 595 830
======== ========
Trade receivables
Group Group
2021 2020
GBP'000 GBP'000
Trade receivables not past due 54 62
Trade receivables past due 1-30 days 71 28
Trade receivables past due 31-60 days 25 29
Trade receivables past due 61-90 days 14 21
Trade receivables past due over 90 days 172 474
-------- --------
Gross trade receivables at 30 June 336 614
-------- --------
Expected credit loss at 1 July - -
Debts provided for in the year - -
Debts written off in the year - -
-------- --------
Expected credit loss at 30 June - -
-------- --------
Net trade receivables at 30 June 336 614
======== ========
Trade receivables are amounts due from portfolio companies for
services provided with net amounts recorded as revenue in the
consolidated statement of comprehensive income. The expected credit
losses are estimated by reference to the financial position and
specific circumstances of the portfolio companies, by reference to
past default experience and by assessment of the current and
forecast economic conditions. The nature of the services provided
to portfolio companies means the Group has in-depth knowledge of
the companies' prospects both for trading and raising capital and
the number of companies with past due receivables is small enabling
a full assessment of recoverability by company. The Group also
considers if a general provision for expected loss through applying
the historical rate of portfolio company failures is material.
GBP34,000 of trade receivables at 30 June 2021 have been recovered
post year-end. Of the remaining GBP302,000, GBP104,000 is due from
Fieldwork Robotics, GBP87,000 from Alusid and GBP76,000 from Elute
Intelligence. The directors are confident that these companies will
be able to raise sufficient funds to repay their debt and fund
their business plan. If the directors considered it necessary to
write off the equity investment in a portfolio company, they would
also provide for a specific credit loss for any amounts due from
the portfolio company, otherwise they do not consider it necessary
to provide for any expected credit loss on a specific company or
general basis.
Receivables from Group undertakings carry interest of 2.0% above
base rate (2020: 2.0%).
14. Trade and other payables
Group Group
2021 2020
GBP'000 GBP'000
Trade payables 36 36
Social security and other taxes 56 47
VAT - -
Other creditors 6 7
Accruals and deferred income 110 120
At 30 June 20 8 210
======== ========
15. Share capital and share premium
Number Ordinary
of shares shares Share
issued of 10p premium Total
and fully
paid
GBP'000 GBP'000 GBP'000
At 30 June 2020 50,762,406 5,076 12,819 17,895
Issue of shares through a placing 4,243,140 425 1,757 2,182
----------- --------- ---------- --------
At 30 June 2021 55,005,546 5,501 14,576 20,077
=========== ========= ========== ========
On 21 July 2020, the Company conducted a placing of 4,243,140
new ordinary shares of 10p for cash at a price of 55p per share
raising GBP2,334,000 before expenses of GBP152,000. The Company has
one class of ordinary shares which carry equal voting rights, equal
rights to income and distribution of assets on a winding-up. The
allotted share capital of the Company at 30 June 2020 is 55,005,546
ordinary shares of 10p each.
16. Reserves
The reverse acquisition reserve was created on the reverse
takeover of Frontier IP Group Plc. The fair value of equity-settled
share-based payments is expensed on a straight-line basis over the
vesting period and the amount expensed in each year is transferred
to the share-based payment reserve. The amount by which the
deferred tax asset arising on the intrinsic value of the
outstanding share options differs from the cumulative expense is
also transferred to the share-based payment reserve. Included in
retained earnings are unrealised profits amounting to
GBP31,068,000. The movement in reserves for the years ended 30 June
2021 and 2020 is set out in the Consolidated and Company Statement
of Changes in Equity.
17. Share options
Frontier IP has three option schemes. Under the Frontier IP
Group Plc Employee Share Option Scheme 2011 - Amended 26 March
2018, both enterprise management incentive options and unapproved
options are granted. No payment is required from option holders on
the grant of an option. The options are exercisable starting three
years from the date of the grant with no performance conditions.
The scheme runs for a period of ten years but no new options can be
granted as the Group has ceased to be a qualifying company for EMI
purposes. During the year, the Group adopted two new schemes as
outlined in the Remuneration Committee Report but no options were
granted under these schemes during the year.
Movements in the number of share options outstanding and their
related weighted average exercise prices were as follows:
2021 2021 2020 2020
Weighted average Weighted average
exercise price Options exercise price Options
Pence per Pence per
share share
At 1 July 30.48 4,335,676 27.05 3,312,000
Granted 42.21 748,858 40.74 1,663,376
Exercised - - 27.72 (331,034)
Lapsed 51.45 (54,353) 52.04 (308,666)
At 30 June 31.99 5,030,181 30.48 4,335,676
========== ==========
Of the 5,030,181 outstanding options (2020: 4,335,676) 2,134,000
had vested at 30 June 2021 (2020: 2,134,000). The vested options
have a weighted average exercise price of 25.62p.
Share options outstanding at the end of the year have the
following expiry date and exercise prices:
Exercise 2021 2020
price Number Number
Pence per
share
2023 15.00 652,607 652,607
2024 26.88 432,393 432,393
2026 26.63 650,000 900,000
2027 40.00 399,000 496,000
2028 65.00 246,000 292,000
2028 10.00 456,000 539,000
2029 66.00 707,612 740,971
2029 10.00 737,711 739,705
2030 65.00 438,542 -
2030 10.00 310,316 -
=========== ========= ========
The weighted average remaining contractual life of the
outstanding options is 6.4 years.
The weighted average fair value of options granted to executive
Directors and employees during the year determined using the
Black-Scholes-Merton valuation model was 35.73p per option. The
significant inputs into the model were the exercise price shown
above, weighted average share price of 65.0p, volatility of 42%,
dividend yield of 0%, expected life of 5 years and annual risk-free
interest rate of 0.022%. Future volatility has been estimated based
on 5 years' historical monthly data.
18. Leases
2021 2020
Land & Land &
Buildings Buildings
GBP'000 GBP'000
Commitments under non-cancellable leases expiring:
Within one year 72 90
Within two to five years - 4
After five years - -
----------- -----------
72 94
=========== ===========
The leases relate to rental of serviced offices. Under the terms
of the rental agreements, the supplier has the right to terminate
the agreement during the period of use, however at inception of the
agreement this was not considered likely to occur. For short term
leases (12 months or less) and leases of low value assets, the
Group has opted to recognise a lease expense on a straight-line
basis as permitted by IFRS 16's transitional rules. Currently the
longest lease ends in March 2022.
19. Cash used in operations
Group Group
2021 2020
GBP'000 GBP'000
Profit before tax 10,242 4,184
Adjustments for:
Share-based payments 368 230
Depreciation 6 6
Interest received (9) (21)
Other income - (27)
Fair value (gain) on financial assets through profit (12,306
and loss ) (5,973)
Changes in working capital:
Trade and other receivables 235 (228)
Trade and other payables (2) 71
----------
Cash flows from operating activities (1,466) (1,758)
========== ==========
The movements in liabilities from financing cashflows are
nil.
20. Related party transactions
Neil Crabb is a director of PoreXpert Limited, Pulsiv Limited,
Celerum Limited and Alusid Limited. Campbell Wilson is a director
of Tarsis Technology Limited and principal of Wilson Biopharma
Consulting. Matthew White is a director of The Vaccine Group
Limited, Nandi Proteins Limited and Elute Intelligence Holdings
Limited. All these companies, with the exception of Wilson
Biopharma, are portfolio companies of the Group. The Group charged
fees to these companies and was owed amounts from these companies
as follows:
Fees charged Fees charged Amounts Amounts
owed owed
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
Nandi Proteins Limited 78 90 26 324
Pulsiv Solar Limited 48 48 19 59
Alusid Limited 72 72 87 118
Tarsis Technology Limited - - - -
The Vaccine Group Limited 48 28 15 15
Celerum Limited 30 21 - 10
Elute Intelligence Holdings
Limited 30 21 85 3
By Related Parties
Wilson Biopharma Consulting 12 12 - -
On 21 July 2020, the Company conducted a capital raising through
the issue of 4,243,410 new ordinary shares of 10p for cash at a
price of 55p per share raising GBP2,334,000 before expenses of
GBP152,000. Neil Crabb, CEO and Michael Bourne, a Non-Executive
Director, subscribed for 54,545 and 55,000 Placing Shares
respectively. In addition, 602,851 Placing Shares were subscribed
for by Quilter Cheviot Investment Management ("Quilter"). Quilter
is a substantial shareholder in the Group, as defined in the AIM
Rules, and their participation in the Placing was deemed to be a
related party transaction under the AIM Rules.
21. Subsequent events
On 1 October 2021, Exscientia conducted an initial public
offering. The initial public offering price valued the Group's
holding at $34.4 million - approximately GBP25 million, an increase
of approximately GBP12 million from the value of the Group's
holding at 30 June 2021.
22. Basis of preparation
The financial information does not constitute the financial
statements.
For the period covered:
a) the statutory financial statements will be delivered to the
registrar of companies in due course;
b) the auditor has reported on the statutory financial
statements and the audit report was unqualified.
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END
FR MRBPTMTITBAB
(END) Dow Jones Newswires
October 28, 2021 02:00 ET (06:00 GMT)
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