TIDMFIPP
RNS Number : 3159E
Frontier IP Group plc
05 November 2020
5 November 2020
Frontier IP Group plc
("Frontier IP", the "Group" or "the Company")
Audited final results for the year ended 30 June 2020
Frontier IP is focused on the commercialisation of intellectual
property
Financial highlights
-- Fair value of our portfolio increased by 47% to GBP19,444,000 (2019: GBP13,252,000)
-- Profit before tax increased by 78% to GBP4,184,000 (2019: GBP2,350,000)
-- Total revenue and other operating income increased by 49% to
GBP6,377,000 (2019: GBP4,268,000) - reflecting a net unrealised
profit on the revaluation of investments of GBP5,973,000 (2019:
GBP3,850,000)
-- Revenue from services decreased by 3% to GBP404,000 (2019: GBP418,000)
-- Basic earnings per share increased to 8.76p (2019: 5.77p)
-- Cash balances at 30 June 2020 of GBP2,968,000 (2019: GBP1,466,000)
-- Net assets per share as at 30 June 2020 of 51.0p (2019: 41.4p)
Corporate highlights
-- Strong response to opportunities and challenges presented by
COVID-19 includes portfolio companies taking advantage of
additional UK government support and adapting portfolio company
technology to meet challenges posed by the crisis
-- Post period end, raised GBP2.3 million via an oversubscribed
placing and PrimaryBid retail offer to provide firepower and
nimbleness through additional investment in the Group and enable
increased capacity for bridge financing and direct investment in
portfolio companies
-- The post period end fundraising attracting strong support
from existing and a significant number of new investors
-- Two new portfolio companies incorporated - Elute Intelligence
Holdings Limited and AquaInSilico Lda
-- Increased stake in portfolio company Celerum from 10 per cent
to 33.8 per cent to support development of its nature-inspired
artificial intelligence tools to improve the efficiency of
logistics
-- Appointed Nplus1 Singer Advisory LLP ("N+1 Singer") as the
Group's sole broker. Allenby Capital remains the Group Nominated
Adviser
-- Team strengthened with the appointment of two specialist
advisers focused on defence, and food and agritech. We also
appointed a Technology Commercialisation Director and, post period
end, a Software Commercialisation Director. Both posts are
non-board roles
-- Collaborative project with University of Cambridge to tackle
gum disease awarded grant by the National Biofilms Innovation
Centre
Portfolio highlights
-- Strong commercial and technical progress, including industry
engagement, within the portfolio overall, reflected in the increase
in fair value
-- Growing maturity of portfolio with a number of companies
approaching inflection points reflected in faster flow of equity
fund raisings:
o Exscientia secured $60 million in Series C funding, led by new
investor Novo Holdings
o The Vaccine Group raised GBP680,000 and Fieldwork Robotics
raised GBP316,000 through their first equity fund raisings
o Molendotech raised a further equity investment of
GBP425,000
o Post period end, Cambridge Raman Imaging Limited attracted
GBP250,000 equity investment in addition to winning EUR140,000 EU
Graphene Flagship grant during the year
o Post period end Pulsiv Solar raised GBP500,000 via a
convertible loan, including a GBP250,000 investment by the UK
government's Future Fund matched by the University of Plymouth
Enterprise Limited and Frontier IP
o Post-period end Elute Intelligence commercially launched
Patent Reader Product following successful trials with a group of
high-end users
o Post period end, Nandi Proteins raised GBP720,000 via a
convertible loan, including a GBP360,000 investment from the UK
government's Future Fund, matched by Frontier IP and Shackleton
Finance Limited
-- Portfolio companies also made strong commercial and technical
progress, including developing new and existing industry
partnerships:
o The Vaccine Group is developing vaccines for COVID-19, Ebola,
Lassa fever, African Swine Fever bovine Tuberculosis and bovine
mastitis, generating new commercialisable IP
o Exscientia entered collaborative agreements with Rallybio,
Bayer AG and SRI International. Behind first AI-designed drug to
enter human clinical trials in partnership with Sumitomo Dainippon
Pharma. Entered COVID-19 joint initiative with Diamond Light Source
and Calibr to progress compounds with potential to be viable drugs
to combat the disease
o Elute Intelligence used novel technology to develop COVID-19
document reader and Patent Reader product, launched commercially
post period end
o Post period end Pulsiv Solar announced it had started work
funded by major multinational to incorporate technology into new
product line, was engaged with other major companies and
strengthened IP position
o Other post period end developments included Fieldwork Robotics
entering into a collaboration with Bosch, Celerum supporting
PlanSea Solutions and AquaInSilico working with a leading European
environmental, water and waste management group
ENQUIRIES
Frontier IP Group Plc T: 020 7332 2338
Neil Crabb, Chief Executive neil@frontierip.co.uk
Andrew Johnson, Communications M: 07464 546 025
& Investor Relations
Company website: www.frontierip.co.uk
Allenby Capital Limited (Nominated T: 0203 328 5656
Adviser)
Nick Athanas / James Hornigold
N+1 Singer (Broker) T: 0207 496 3000
Harry Gooden / George Tzimas
ABOUT FRONTIER IP
Frontier IP unites science and commerce by identifying strong
intellectual property and accelerating its development through a
range of commercialisation services. A critical part of the Group's
work is involving relevant industry partners at an early stage of
development to ensure technology meets real world demands and
needs.
The Group looks to build and grow a portfolio of equity stakes
and licence income by taking an active involvement in spin-out
companies, including support for fund raising and collaboration
with relevant industry partners at an early stage of
development.
Chairman's Statement
Performance
The year to 30 June 2020 saw Frontier IP and its portfolio
companies make strong progress despite the considerable
uncertainties resulting from the COVID-19 outbreak. Chief Executive
Officer Neil Crabb deals with the impact and our response in his
statement, so I will limit my comments to saying that I am
delighted with the responses from the Frontier IP team and our
portfolio companies.
I would like to thank them for the splendid way they have
reacted to the challenges and opportunities arising from the
crisis.
Outside of coronavirus, highlights of the year saw the growing
maturity of the portfolio reflected in an increased flow of
fundraising and new industrial partnerships. A number of companies
are now at important inflection points in their development. They
have completed much hard toil in developing and validating their
technologies and are now poised to see commercialisation materially
accelerate.
Among them, of course, is Exscientia, whose artificial
intelligence underpinned the first AI-designed drug to enter human
clinical trials in partnership with Sumitomo Dainippon Pharma. The
Company also raised $60 million through a successful Series C
equity funding round during the year and signed further
collaboration and commercial agreements, including with Bayer AG.
Total milestone and other payments potentially due to Exscientia
now come to more than GBP500 million.
Other successes include the significant progress made by Pulsiv
Solar which is now being paid by a major multinational to
incorporate its technology to improve the energy efficiency of
power converters into a new product line. The company was already
collaborating with Bosch.
Building on our relationship, Bosch also entered into a
collaboration with Fieldwork Robotics to support development of its
agricultural robots. The Company also completed its first ever
equity fund raising and entered into a new industry collaboration
after the period end; it is now working with Bonduelle, a leading
European produce company, to develop a cauliflower harvesting
iteration of its advanced agricultural robot technology.
I was also delighted with the rapid rate of progress at our two
new portfolio companies. Elute Intelligence, the first in our
portfolio to be formed from an existing company rather than a
university spin out, commercially launched its Patent Reader post
period end, as well as providing free-to-use tools for researchers
investigating COVID-19. In addition, AquaInSilico won a European
Union grant to commercialise its wastewater management software
tools for improving the removal of phosphorus from wastewater.
Neil talks about the work The Vaccine Group is doing to create a
family of vaccines, initially for use in animals, to combat
COVID-19. The company is also making significant progress in its
other work developing vaccines for Ebola, Lassa fever, African
Swine Fever, bovine tuberculosis and Streptococcus suis. The
company and its partners have already received substantial backing
from the state sector. Strong endorsement from the private sector
came post period when it announced a collaboration with The
Pirbright Institute and ECO Animal Health Group.
We believe our portfolio as a whole is strongly placed despite
the uncertainties resulting from the virus - and as we explain in
our governance statements, our companies are playing their part in
tackling some of the most pressing issues of the day.
Our governance
Good governance is vital for long-term sustainable growth, and
we strive to achieve the highest standards for a company our size.
We adhere to the Quoted Companies Alliance Corporate Governance
Code, introduced in April 2018. To see more details about how we
apply the principles of the Code, see the Our Governance section of
this report and our website:
https://www.frontierip.co.uk/about/governance/
Results
I am delighted with how the Group has performed in the year. An
increase of 78% in pre-tax profits and an increase in the fair
value of our portfolio to GBP19,444,000 vindicate the strength of
our business model.
For the year to 30 June 2020, total revenue and other operating
income increased by 49% to GBP6,377,000 (2019: GBP4,268,000) as a
result of a net unrealised profit on the revaluation of investments
of GBP5,973,000 (2019: GBP3,850,000), principally due to the
increase in fair value of Pulsiv Solar and The Vaccine Group.
Revenue from services, principally board retainers and licence
income decreased slightly by 3% to GBP404,000 (2019: GBP418,000) as
some services were assigned to companies' own management.
Outlook
"Our team at Frontier IP is strong, and we strengthened it
further with several key appointments during the year. I would like
to thank our team for an excellent performance in very difficult
circumstances. It has also been a particularly tough environment
for our partners and I would like to express my gratitude to our
key stakeholders for their resilience and for their support in
growing our portfolio, which I am sure will continue to develop and
thrive in the years ahead."
Andrew Richmond
Chairman
Chief Executive Officer's Statement
Frontier IP saw another strong year for the period to 30 June
2020. The fair value of our portfolio rose 47% to GBP19,444,000. We
continued to adhere to our capital efficient business model with
profit before tax increasing by 78% to GBP4,184,000. These numbers
were significantly ahead of initial management expectations.
More detail on the reasons for our strong progress can be found
in the corporate and portfolio reviews elsewhere in these
statements. The growing maturity of our portfolio and the number of
companies now reaching important inflection points provide further
evidence that the very different approach our business model takes
to commercialising intellectual property is working.
The business model is also proving its resilience. The progress
of the past year has clearly been overshadowed by the events of the
final quarter as a result of COVID-19 and the unprecedented steps
taken to stop the spread of the virus. At the time of our half year
results in March, I said we always sought to be candid about the
risks we face, and that remains true now we have a much clearer
understanding of challenges and opportunities presented by the
pandemic. While I would not want to underplay the negative impact
on some portfolio companies, I believe for the portfolio as a
whole, there is much more potential on the upside.
Broadly, the impacts on our portfolio companies fall into one of
four areas - those where there are direct opportunities, others
where opportunities arise from pandemic-induced changes to
infrastructure, where the impact is neutral, and finally where the
pandemic has caused delays to technical and commercial
development.
Direct opportunities: most obviously The Vaccine Group, which
has made rapid progress in developing a family of COVID-19
vaccines, initially for use in animals, to tackle the disease.
Exscientia has been applying its artificial intelligence to
identify potential treatments for COVID-19, while Elute has
developed dedicated free-to-use document searching software to aid
academics researching the virus. The pandemic has also highlighted
other threats to global health, including the danger from
antimicrobial resistance, Amprologix's area of expertise.
Infrastructure opportunities: areas where the pandemic has led
to new ways of doing things, accelerated change or resulted in new
government policy. For example, it has heightened the problems
fruit and vegetable growers have in recruiting seasonal labour, the
issue Fieldwork Robotics is seeking to address through its
innovative agricultural robot technology. Other companies in this
bracket would include Celerum, whose software improves the
operational efficiency of complex logistics. CamGraPhIC , a company
developing graphene and other 2D materials-based photonics able to
transmit data significantly quicker over mobile and broadband
networks, has the opportunity to benefit from the rise of remote
working and the even greater need for high-speed transmission.
Neutral, where the impact is neither good or bad and the
companies have been able to continue business on a reasonably
normal basis. These include AquaInSilico, Des Solutio, NTPE,
Insignals Neurotech, Cambridge Simulation Solutions, Cambridge
Raman Imaging and Pulsiv Solar - although the latter, post period
end, has benefited from the Future Fund scheme established to
support innovative companies through the COVID-19 outbreak.
Finally, there are those companies facing delays to their
technical or commercial development as a result of the outbreak.
These are companies, for example, where decision making in
industrial partners has been affected, or laboratories closed for
the duration. However, the outbreak has not affected the
fundamental worth of what they are doing, and we remain confident
about their longer-term prospects. Although we did not furlough
people directly employed by Frontier IP, some of our portfolio
companies did so in line with their individual circumstances.
It is not only business opportunities that have arisen as a
result of the crisis. There are also number of new funding
opportunities, ranging from the Future Fund scheme from which
Pulsiv and Nandi have benefitted, to the continuity grants to
support companies through the pandemic offered by Innovate UK, the
UK's innovation agency and which benefitted Fieldwork Robotics.
More broadly, grants are an important part of the funding mix:
they are non-dilutive and, as applications are vetted by experts,
provide important validation to the technology. Other grant winners
during the period and after the period end included Cambridge Raman
Imaging and AquaInSilico.
Different circumstances require different approaches. As part of
our response to the crisis we have decided to tweak our business
model to ensure we have the nimbleness and flexibility to seize
opportunities as they arise. To this end, we plan to make more
direct investment into our portfolio companies, either through
equity investment, or bridge financing. To support this ambition,
we were delighted to successfully complete an oversubscribed
placing via our broker, N+1 Singer and a PrimaryBid retail offer
raising GBP2.3 million after the period end. I was delighted to see
so many retail investors take advantage of the offer. I would like
to welcome them to Frontier IP and thank them for their
support.
Alongside an equally successful and oversubscribed placing
raising GBP3.8 million net of expenses in November 2019, it means
we are in a strong financial position to take advantage of
opportunities in an environment which is ever shifting. We remain
confident about the long-term prospects for the Group.
Within the Group, we continue to build a platform for future
growth, key to which is finding the right people. We were very
pleased to announce in October 2019 the appointments of John Price,
who has had a long and distinguished career at Mars, Incorporated
and Air Vice-Marshal Gary Waterfall CBE as specialist advisers to
deepen and expand industrial partnerships for the Group and its
portfolio companies. They will focus respectively on food and
agritech, and defence.
I was also delighted to strengthen our core team. Lucy
Rowbotham, former Director Medical Technology Division, at
Cambridge Consultants, joined us as Technology Commercialisation
Director in a non-board role. Post period end, we also welcomed
Mark Rosten as Software Commercialisation Director, also a
non-board role, who joined us from mobile payments group Bango plc
where he was Senior Vice President Product Development. One of the
objectives when we completed our latest funding round was to use
certain of the proceeds to hire high-quality talent, and we are
delighted to have delivered on this so quickly and attracted such
strong talent.
Another vital aspect of our business model is the strength of
the industrial partnerships we forge. They are crucial for helping
us understand the potential markets for our portfolio companies and
to validate the technology. Therefore, I am very pleased to see our
relationship with Bosch developing so strongly, with a new
collaboration agreed to support Fieldwork Robotics in addition to
the work they are already undertaking for Pulsiv.
I would also very much like to thank our investors and other
stakeholders for their continued support in difficult times. We are
well positioned despite the possible virus-related market and
political headwinds and are confident that the year to come will
build on the success we have enjoyed over the previous years of
consistent growth and, despite these challenges, will be as
successful as the year just passed.
Neil Crabb
Chief Executive Officer
Key Performance Indicators
The Key Performance Indicators for the Group are:
KPI Description 2020 Performance
Fair value of Value of GBP19,444,000
the equity in (2019:
portfolio the portfolio GBP13,252,000)
------------------------------------- ----------------------------------------
Total revenue Growth in the GBP6,377,000
and aggregate (2019:
other of revenue GBP4,268,000)
operating from services
income and change in
fair
value of the
portfolio
------------------------------------- ----------------------------------------
Profit Profit before GBP4,184,000
tax (2019:
for the year GBP2,350,000)
------------------------------------- ----------------------------------------
Net assets Value of the 51.0p (2019:
per share Group's 41.4p)
assets less
the value
of its
liabilities
per share
outstanding
------------------------------------- ----------------------------------------
Aggregate
percentage
equity
earned from
Total initial new
equity portfolio
in new companies
portfolio during the
companies year 72% (2019: 123%)
------------------------------------- ----------------------------------------
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 been more cautious in taking on new portfolio
companies and have focused more on the existing portfolio with the
result that the initial equity in new portfolio companies for the
year is less than in 2019.
The value of the Group's equity investments increased to
GBP19,444,000 (2019: GBP13,252,000) with net assets increasing to
GBP25,866,000 (2019: GBP17,591,000). Profit after tax for the Group
for the year to 30 June 2020 was GBP4,184,000 (2019: GBP2,350,000).
This result includes a net unrealised profit on the revaluation of
investments of GBP5,973,000 (2019: GBP3,850,000) and reflects a
decrease in services revenue to GBP404,000 (2019: GBP418,000) and
greater administrative expenses of GBP2,241,000 (2019:
GBP1,932,000) as the Group invested in people. The additional
administrative expenses were offset by growth in unrealised profit
on revaluation of investments.
Operational Review
Corporate
Frontier IP made strong progress during the year, despite the
impact of COVID-19 in the final quarter. A number of portfolio
companies are now at inflection points as demonstrated by the
significant technical and commercial advances made by a number of
portfolio companies outlined in the Portfolio Review.
In anticipation of this and to ensure we had the financial
wherewithal to make the most of opportunities, we raised GBP3.8
million (net of expenses) through an oversubscribed placing in
November 2019. COVID-19 has given rise to further opportunities
across a number of portfolio companies; to enable us to pursue
these opportunities we raised a further GBP2.3 million (before
expenses) through an oversubscribed placing and Primary Bid retail
offer. The funding will be used to invest in the Group to ensure
there is the capacity to step up technology commercialisation. We
are also flexing our business model to provide more direct
financing to our portfolio companies via bridge funding and direct
investments in portfolio companies.
People resource is a potential constraint on our ability to grow
our business. During the year, Lucy Rowbotham joined as Technology
Commercialisation Director in a non-board role. She is a former
Director, Medical Technology Division, at Cambridge Consultants,
and has extensive experience of technology commercialisation. Post
period end, Mark Rosten joined as Software Commercialisation
Director, also in a non-board role, from mobile payments group
Bango plc where he was Senior Vice President Product
Development.
We were also very pleased to announce the appointments of John
Price and Air Vice-Marshal Gary Waterfall CBE as specialist
advisers on food and agritech, and defence respectively.
Collaborations and partnerships are an important part of what we
do whether with industry, academia or government. We were delighted
post year end to extend our relationship with Bosch, already
collaborating with Pulsiv Solar, to supporting Fieldwork Robotics
with the commercial development of its agricultural robot
technology.
We are also delighted to be collaborating with the University of
Cambridge on a project to tackle gum disease which has been awarded
a grant by the National Biofilms Innovation Centre. Other
developments included increasing our stake in Celerum from 10 per
cent to 33.8 per cent, reflecting the increased industry interest
we are seeing in the company's novel artificial intelligence
technology based on natural behaviour.
In September 2019, we announced N+1 Singer as the Group's sole
broker alongside Allenby Capital Limited as the Group's Nominated
Adviser.
Portfolio Review
Core portfolio
Frontier IP strives to develop and maximise value from its core
portfolio, which numbered 19 at the year end. We do so by taking
founding stakes in companies at incorporation and then working in
long-term partnerships with shareholders, academic and industry
partners. Core portfolio companies must meet two out of three
criteria:
-- The Group holds at least 10 per cent of the company's equity
-- Our shareholding is worth at least GBP500,000
-- We see substantial opportunity for a favourable exit, either through trade sale or IPO.
The core portfolio made strong progress across a number of
fronts during the year, rising to meet the challenges and
opportunities presented by COVID-19 during the final quarter. The
growing maturity of the portfolio, with a number of companies
approaching inflection points, was reflected in an increased flow
of equity fund raisings, including the first equity funding rounds
for The Vaccine Group and Fieldwork Robotics. We incorporated two
new portfolio companies, including Elute Intelligence, the first
from a non-university source. The other was AquaInSilico, our
fourth spin out in Portugal. Industry engagement with our portfolio
companies remained strong, with highlights including a slew of
collaboration agreements for Exscientia, a major multinational
funded development work for Pulsiv Solar and, post period end,
Fieldwork Robotics entering into a collaboration with Bosch.
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 made significant technical progress during the year,
successfully scaling up its technology for mass production on
industry-standard manufacturing equipment. A successful pilot
resulted in more than 1,000m(2) of tiles being made in 24 hours -
previously the company was limited to making 4,000m(2) a year hand
making tiles via a batch process at its Preston plant.
Alusid is in advanced discussions to widen the distribution of
its products.
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 is initially developing a new family of antibiotics,
helping to tackle antimicrobial-resistant MRSA and other superbugs,
based on epidermicin, which is derived from bacteria found on human
skin. Progress to date has been rapid and industry involvement is
already secured. Ingenza, a leader in industrial biotechnology and
synthetic biology, is also a shareholder and is working with
Amprologix on scale up.
COVID-19 has generated heightened interest in other threats to
human health globally. Among these, and one consistently
highlighted the World Health Organisation, is the danger of
antimicrobial resistance. Amprologix is well placed to take
advantage.
AquaInSilico: Frontier IP stake 29.0 per cent
AquaInSilico, the Group's fourth spin out in Portugal, is
developing software tools to optimise wastewater treatment across
many different industries, including municipal wastewater treatment
plants, oil groups, brewers, pulp, paper and steel makers, food
processing and waste recovery businesses.
The Company, a spin out from NOVA University, NOVA School of
Science and Technology, has developed sophisticated algorithms able
to understand and predict how biological and chemical processes
unfold in different operating conditions.
After the period end, the Company announced it had won EUR60,000
EIT RawMaterials grant from the European Union's European Institute
of Innovation and Technology to build on an existing collaboration
with a leading environmental, water and waste management group to
commercialise tools to remove phosphorus from wastewater in a more
environmentally friendly and effective way than existing
technologies.
Cambridge Raman Imaging: Frontier IP stake: 30.9 per cent
Cambridge Raman Imaging was the Group's first graphene spin out,
the result of a partnership between the University of Cambridge and
the Politecnico di Milano, in Italy. It has been incorporated to
commercialise research undertaken into ultra-fast lasers based on
graphene or other 2D materials, initially for use in Raman-imaging
microscopes to diagnose and monitor tumours. During the year, the
Company won a EUR140,000 grant from the EU Graphene Flagship
programme.
Post period end, it announced that it had successfully raised
GBP250,000 in equity funding from external investors, been
recognised as an official spin out by the Politecnico di Milano,
opening up further funding avenues and access to facilities, and
appointed a Chief Technology Officer.
CamGraPhIC: Frontier IP stake: 33.3 per cent
A second graphene spin out, this time from the University of
Cambridge and Italian research institute CNIT, CamGraPhIC was
incorporated to develop graphene-based photonics for high-speed
data and telecommunications. Graphene photonics are seen as a key
enabler for 5G technologies by the company's industrial partners.
The area is attracting increased interest, with COVID-19 and the
subsequent rise in remote working underlining the need for very
high broadband speeds.
Cambridge Simulation Solutions: Frontier IP stake: 40.0 per
cent
Cambridge Simulation Solutions is developing advanced software
to simulate and control complex, discontinuous processes, such as
the way neural transmitters work in the brain. There are a number
of potential industrial and medical applications for the spin out
to explore.
Celerum Limited: Frontier IP stake: 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.
The Company, a spin out from the Robert Gordon University in
Aberdeen, is developing 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.
During the year, Frontier IP increased its stake in the Company
from 10 per cent to 33.8 per cent in response to increased industry
interest. Post period end, the Company announced it had been
sub-contracted to support software development for Aberdeen-based
PlanSea Solutions.
Des Solutio: Frontier IP stake: 25.0 per cent
Des Solutio, incorporated as the Group's second Portuguese spin
out in October 2018, is developing safer and greener alternatives
to the toxic solvents currently used to extract active ingredients
by the pharmaceutical, personal care, household goods and food
industries. The company is developing strong relationships with
potential industry partners.
Des Solutio was established to commercialise the research of
Associate Professor Ana Rita Duarte and Dr Alexandre Pavia of the
NOVA University Lisbon, NOVA School of Science and Technology.
Elute Intelligence: Frontier IP stake 43.5 per cent
Elute Intelligence, whose incorporation was announced during the
period, is the first portfolio company not to originate from a
university, instead being formed from an existing business, CFL
Software Limited and including additional IP developed by Frontier
IP.
The Company is developing software tools to 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.
To support researchers investigating COVID-19, the Company
launched a dedicated, free-to-use only document reader. Post period
end, it also commercially launched a Patent Reader following a
successful pilot trial with a user group comprising users from
multinationals, high-tech SMEs and professional IP services
providers.
Exscientia: Frontier IP stake: 2.4 per cent
Exscientia, a spin out from the University of Dundee, now based
in Oxford, justified its reputation as a world leader in artificial
intelligence-driven drug discovery by announcing its involvement in
the world's first AI-designed drug to enter human clinical trials
in partnership with Sumitomo Dainippon Pharma.
The announcement was part of another successful year. Exscientia
signed further collaboration agreements with a host of leading
pharmaceutical companies, including Rallybio, an early-stage
company seeking to combat rare diseases, and giant Bayer AG to
bring the total amount of upfront and potential milestone payments
and royalties to more than GBP500 million.
During the period, the company successfully raised $60 million
through a Series C funding round led by a new investor Novo
Holdings. In March, Exscientia announced a joint initiative to
identify COVID-19 drugs with Diamond Light Source, the UK's
national synchrotron facility funded by the government, the
University of Oxford, and Calibr, a division of Scripps Research
(USA).
Fieldwork Robotics: Frontier IP stake: 26.7 per cent
Fieldwork Robotics successfully raised GBP316,000 through its
first equity funding round after completing two sets of field
trials for its novel raspberry-harvesting robot technology during
the course of 2019. The company is now seeking to accelerate
development of both the soft fruit picking and vegetable iterations
of the technology.
To this end, it has entered into two further industry
collaborations in addition to the work it is doing with Hall Hunter
Partnership, a leading soft fruit grower, on the raspberry
harvester. Post period end, it entered into a collaboration with
Bosch, which will be optimising the robot arm technology and
software to increase speed and reduce cost. It also started working
with Bonduelle, a leading vegetable producer, on a three-year
project to develop a cauliflower harvesting robot.
Although the COVID-19 outbreak has impacted subsequent field
trials, it has also exacerbated the problems facing many growers in
recruiting labour to work their farms and emphasised the potential
for robots in agriculture.
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 two clinical
studies.
Molendotech: Frontier IP stake: 12.6 per cent
Molendotech raised GBP425,000 in equity investment in May 2020
to accelerate development of its innovative rapid pathogen
detection technology. The funding round valued the company at
GBP3.9 million, up from its previous valuation, reflecting the
success already achieved in commercialising its patented
technology.
Siren(BW) , a kit to test bathing water for faecal matter based
on Molendotech's proprietary bacterial detection technology, was
launched through Palintest, a subsidiary of FTSE 100 group Halma
plc. 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. 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. The company is already in
collaboration with G's Group to develop tests detecting the
different levels of bacteria in produce, food contact areas, and
irrigation and washing water.
Molendotech has also received strong interest internationally
from potential customers concerned about the risk of secondary
infections result from the COVID-19 outbreak.
Nandi Proteins: Frontier IP stake: 20.1 per cent
Nandi Proteins develops processes and process control technology
to create new ingredients from whey, collagen and vegetable
proteins to replace chemical E-number additives, fat and gluten in
processed food. The technology is now in the process of being
scaled up following successful small-scale trials in collaboration
with industry partners, which include Devro and Kerry Foods
Group.
With its expertise in vegetable proteins and a growing consumer
demand for more meat-free products, Nandi is attracting strong
interest from major companies in the food industry.
The Company continued to make good technical progress during the
year. Although commercial progress has been delayed by the COVID-19
outbreak, the disease and its greater impact on the obese has
resulted in the UK government stepping up efforts to encourage
people to eat more healthily. The Company also raised GBP720,000
through a convertible loan from the UK government's Future Fund,
Frontier IP and Shackleton Finance Limited.
NTPE LDA: Frontier IP stake: 31.6 per cent
NTPE was our first spin out in Portugal. The company is
developing Paper-E, a novel technology to print electronic
circuits, sensors and semiconductors onto any cellulose-based
paper. It does so by replacing the silicon used in electronics with
eco-friendly metal oxides and cellulose. Applications include
paper-based diagnostic kits, smart packaging, logistics, and for
use with banknotes and passports.
The company was spun out of the NOVA University Lisbon, NOVA
School of Science and Technology to commercialise the work of
professors Elvira Fortunato and Rodrigo Martins, who lead a team of
more than 65 researchers.
PoreXpert: Frontier IP stake: 15.0 per cent
PoreXpert's software and consultancy services provide highly
accurate information about the void spaces in porous materials and
how gases and liquids behave within them. Customers include major
players in the nuclear industry and the oil and gas sector.
Pulsiv Solar: Frontier IP stake: 18.9 per cent
Pulsiv Solar's technology improves the energy efficiency of
photovoltaic cells and the power converters used by a host of
everyday devices, such as laptops, televisions and mobile
phones.
The company enjoyed a year of strong progress, where it
successfully proved the technology had very broad application
across wide range of industries and product areas. Post period end,
Pulsiv announced it had started design work funded by a major
multinational to incorporate the technology into a new product line
and engaged with a number of other large multinationals about
further applications. The company has also strengthened its IP
position.
The step change in industrial engagement follows the successful
development of a series of demonstration products. Pulsiv was
already working with Bosch to optimise the design, cost and
manufacturability of the product; the company will be able to
market the devices as "Engineered by Bosch" when it moves into
commercial production. There is strong industry and government
interest in the technology.
Also post period end, Pulsiv announced it had raised a
convertible loan of GBP500,000, with GBP250,000 from the UK
government's Future Fund to support innovative companies through
the COVID-19 outbreak being matched by University of Plymouth
Enterprise Limited and Frontier IP.
Tarsis Technology: Frontier IP stake: 18.0 per cent
A spin out from the University of Cambridge, Tarsis Technology
entered into a collaboration agreement with a world-leading
manufacturer of crop protection products in July 2018. The
collaboration is researching the use of the company's technology to
deliver chemical pesticides and fungicides in a more precise and
controlled way using metal-organic framework particles.
The Vaccine Group: Frontier IP stake: 17.0 per cent
The Vaccine Group develops novel vaccine technologies to combat
zoonotic diseases, which jump from species to species, including
humans, and other diseases.
The period represented a stand-out year for the company. In
addition to raising GBP680,000 through its first equity fund
raising, the Company proved the flexibility of its novel vaccine
platform technology by making strong progress in developing a range
of COVID-19 vaccines, initially for use in animals. The University
of Plymouth spin out took significant step forwards with other
applications of the technology. Rabbit trials of a bovine mastitis
vaccine revealed the potential for new IP, while vaccines to combat
bovine tuberculosis and African Swine Fever are ready for animal
trials. Work on Ebola and Lassa fever vaccines funded by the US
government are also progressing well.
The Company and its partners have already won major backing for
their work, winning grants from the US, UK and Chinese governments
totalling more than GBP9 million. Post period end, these strong
endorsements from the public sector were enhanced by its first
industrial validation, when it entered into a three-way
collaboration with The Pirbright Institute and ECO Animal Health
Group.
As well as the project to tackle Ebola and Lassa fever,
grant-funding also backs work underway to tackle Streptococcus
suis, an emerging antibiotic-resistant disease that can leap from
pigs to humans.
Core Portfolio at 30 June 2020
Portfolio Company % Issued About Source
Share Capital
AquaInSilico 29.0% Digital tools to FCT Nova
optimise wastewater
treatment
--------------- ---------------------------- ------------------------
Alusid Limited 35.6% Recycled materials University of
Central Lancashire
--------------- ---------------------------- ------------------------
Amprologix Limited 10.0% Novel antibiotics Universities
to tackle antimicrobial of Plymouth and
resistance Manchester
--------------- ---------------------------- ------------------------
Cambridge Raman 30.9% Medical imaging using University of
Imaging Limited ultra-fast lasers Cambridge and
Politecnico di
Milano
--------------- ---------------------------- ------------------------
Cambridge Simulation 40.0% Methods to simulate University of
Solutions Limited and control complex Cambridge
chemical processes
--------------- ---------------------------- ------------------------
CamGraPhIC Limited 33.3% Graphene-based photonics University of
Cambridge and
CNIT
--------------- ---------------------------- ------------------------
Celerum Limited 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 Holdings 43.5% Software tools able Existing business
Limited to intelligently
search, compare and
analyse unstructured
data
--------------- ---------------------------- ------------------------
Exscientia Limited 2.4% Novel informatics University of
and experimental Dundee
methods for drug
discovery
--------------- ---------------------------- ------------------------
Fieldwork Robotics 26.7% 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 Solar Limited 18.9% High efficiency power University of
conversion and solar Plymouth
power generation
--------------- ---------------------------- ------------------------
Tarsis Technology 18.0% Controlled delivery University of
Limited of agrochemicals Cambridge
using metal-organic
frameworks
--------------- ---------------------------- ------------------------
The Vaccine Group 17.0% Herpesvirus-based University of
Limited vaccines for the Plymouth
control of bacterial
and viral diseases
--------------- ---------------------------- ------------------------
The Group holds equity stakes in four further portfolio
companies which do not meet the test for inclusion in its core
portfolio. At 30 June 2020, the value of these holdings was
GBP33,624, equivalent to 0.2% of the fair value of the Group's
portfolio at 30 June 2020.
Financial Review
Key Highlights
The value of the Group's equity investments increased to
GBP19,444,000 (2019: GBP13,252,000) with net assets increasing to
GBP25,866,000 (2019: GBP17,591,000).
Profit after tax for the Group for the year to 30 June 2020 was
GBP4,184,000 (2019: GBP2,350,000). This result includes a net
unrealised profit on the revaluation of investments of GBP5,973,000
(2019: GBP3,850,000) and reflects a decrease in services revenue to
GBP404,000 (2019: GBP418,000) and greater administrative expenses
of GBP2,241,000 (2019: GBP1,932,000) as the Group invested in
people. The additional administrative expenses were offset by
growth in unrealised profit on revaluation of investments.
Revenue
Total revenue and other operating income for the year to 30 June
2020, which is the aggregate of services revenue and unrealised
gain on the revaluation of investments, increased 49% to
GBP6,377,000 (2019: GBP4,268,000). Revenue from services decreased
3% to GBP404,000 (2019: GBP418,000). The Group's net unrealised
profit on the revaluation of investments increased 55% to
GBP5,973,000 (2019: GBP3,850,000). Unrealised gains on revaluation
of investments of GBP7,064,000 (2019: GBP3,885,000) were offset by
fair value decreases of GBP1,091,000 (2019: GBP35,000).
GBP2,646,000 of the gain relates to Pulsiv Solar Limited and
GBP1,428,000 to The Vaccine Group Limited while GBP760,000 of the
impairments relates to Exscientia Limited which raised capital
around 30 June 2020 at a price lower that the carrying value.
Administrative Expenses
Administrative expenses increased by 16% to GBP2,241,000 (2019:
GBP1,932,000). The increase is primarily due to increased staff,
salaries and associated costs of GBP188,000 and share based
payments of GBP103,000 while travel and subsistence costs decreased
by GBP33,000 due to Covid-19 restrictions during the second half of
the year.
Earnings Per Share
Basic earnings per share were 8.76p (2019: 5.77p). Diluted
earnings per share were 8.41p (2019: 5.51p)
Statement of Financial Position
The principal items in the statement of financial position at 30
June 2020 are goodwill GBP1,966,000 (2019: GBP1,966,000) and
financial assets at fair value through profit and loss, principally
equity holdings of GBP19,444,000 (2019: GBP13,252,000) and debt
investments GBP863,000 (2019: GBP437,000) 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 considerations taken into account by the Directors
when reviewing the carrying value of goodwill are detailed in Note
9. The matters taken into account when assessing the fair value of
the portfolio companies are detailed in the accounting policy on
investments.
The Group had net current assets at 30 June 2020 of GBP3,588,000
(2019: GBP2,212,000). The current assets at 30 June 2020 include
trade receivables of GBP474,000 which are more than 90 days overdue
of which GBP337,000 has been collected since the year end leaving
GBP137,000 to collect from certain portfolio companies, being
Alusid and Fieldwork Robotics. Other debtors also includes an
unsecured interest free loan to Alusid of GBP31,000. The directors
are confident that both Alusid 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 GBP25,866,000 at 30 June
2020 (30 June 2019: GBP17,591,000) resulting in net assets per
share of 51.0p (2019: 41.4p).
Cash
The Group's cash balances increased during the year by
GBP1,502,000 to GBP2,968,000 at 30 June 2020. Operating activities
consumed GBP1,758,000 (2019: GBP1,270,000) and investing activities
consumed GBP600,000 (2019: GBP772,000) reflecting the purchase of
financial assets at fair value of GBP685,000 (2019: GBP779,000).
The group raised cash of GBP3,814,000 net of costs through a
placing in November 2019 and subsequent to the year-end raised cash
of GBP2,178,000 net of costs through a capital raising 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 principal financial risks of the business are a fall in the
value of the Group's portfolio, the impairment of the value of
goodwill and recovery of overdue debt from portfolio companies.
With regards to the value of the portfolio itself, the fair value
of each portfolio company represents the best estimate at a point
in time and may be impaired if the business does not perform as
well as expected, directly impacting the Group's value and
profitability. This risk is mitigated as the number of companies in
the portfolio increases. The value of goodwill is linked to the
progress of the existing portfolio and to continued identification
and acquisition of equity stakes in new portfolio companies.
There is a risk of certain portfolio companies being unable to
repay outstanding loans or trade debt owed to the Group. The Group
aims to mitigate this risk by helping ensure that these portfolio
companies meet planned milestones and are in a position to finance
their business plans, typically through fundraising, and repay the
debt when due. Since the year end, 69% of overdue trade receivables
at 30 June 2020 have been collected.
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.
The Group reviewed its risk policy including considering the
impact of the COVID-19 pandemic on the Group; the principal risks
to the Group are set out below.
Capital risk
The impact of COVID-19 may have resulted in a reduced ability
for the Group to source further equity funding. Post-period end,
the Group completed an equity fundraising to strengthen its balance
sheet and to enable bridge funding and direct investment in its
portfolio companies. In addition, where appropriate, we have
supported our portfolio companies in raising equity funding,
accessing public funding and reducing cost.
Operational risk
We have sought to minimise disruption to the Group's operations
by ensuring that the team continues to work effectively remotely
and good communication is maintained. We have supported our
portfolio companies in doing the same.
Valuation risk
The impact of COVID-19 on our portfolio companies' progress has
varied across the portfolio. However, we continue to work closely
with our portfolio companies to ensure that our portfolio is
supported to meet, or benefit, from the challenges that COVID-19
brings.
A reduction in public funding to the Higher Education sector may
result in reduced research funding; universities changing their
approach to research, which generates intellectual property, and
subsequent commercialisation; or consolidation among Higher
Education Institutions. Any uncertainty in the sector may have an
impact on the operation of the Group's commercialisation
partnerships in terms of lower levels of intellectual property
generation and therefore commercialisation activity. The Group
seeks to mitigate these risks by continuing to seek new sources of
IP from a wide range of institutions both within and outside of the
UK.
Brexit presents potential risks for the business: the unknown
impact on funding for research and development in both the higher
education sector as discussed above and for our portfolio
companies; the uncertain economic conditions could impact the
ability of our portfolio companies to grow, in particular
potentially increased difficulty recruiting and retaining
appropriately skilled staff. There may also be risks to certain
portfolio companies of potential tariffs, shipping delays and large
foreign currency fluctuations. We believe the direct impact of
Brexit on the Group's operations is likely to be limited but will
be kept under review. The Group will work closely with its
portfolio companies to mitigate the impact of any issues
arising.
Until the Group generates cash through an investment realisation
it will rely on raising additional capital to fund the Group's
operations. The uncertainty centres on the ability of management to
identify and effect realisations from the portfolio and generate
service revenue streams to reduce the Group's reliance on raising
money from capital markets. In order to manage this risk, t he
Group continues to pursue its aim of actively seeking realisation
opportunities within its portfolio and growing service revenue to
reduce the requirement for additional capital raising.
The Group is dependent on its executive team for its success and
there can be no assurance that it will be able to retain the
services of key personnel. This risk is mitigated by the Group
through recruiting additional skilled personnel and ensuring that
the Group's reward and incentive framework aids our ability to
recruit and retain key personnel. The Executive Directors are
encouraged to hold direct interests in shares in the Company.
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2020
2020 2019
Notes GBP'000 GBP'000
Revenue
Revenue from services 404 418
Other operating income
Unrealised profit on the revaluation of investments 12,13 5,973 3,850
6,377 4,268
Administrative expenses 4 (2,011) (1,805)
Share based payments (230) (127)
Dividend income on financial assets at fair
value through profit or loss - 2
Other income 27 -
Profit from operations 4,163 2,338
Interest income on short term deposits 21 12
Profit from operations and before tax 4,184 2,350
Taxation 6 - -
Profit and total comprehensive income attributable
to
-------- --------
the equity holders of the Company 4,184 2,350
======== ========
Profit per share attributable to the equity
holders of the Company:
Basic earnings per share 7 8.76p 5.77p
Diluted earnings per share 7 8.41p 5.51p
All of the Group's activities are classed as continuing.
There is no other comprehensive income in the year (2019:
nil).
Consolidated Statement of Financial Position
At 30 June 2020
2020 2019
Notes GBP'000 GBP'000
Assets
Non-current assets
Tangible fixed assets 8 5 7
Goodwill 9 1,966 1,966
Equity investments 12 19,444 13,252
Debt investments 13 863 40
Trade receivables 14 - 114
--------- ---------
22,278 15,379
--------- ---------
Current assets
Debt investments 13 - 397
Trade receivables and other current assets 14 830 488
Cash and cash equivalents 2,968 1,466
--------- ---------
3,798 2,351
--------- ---------
Total assets 26,076 17,730
--------- ---------
Liabilities
Current liabilities
Trade and other payables 15 (210) (139)
---------
(210) (139)
---------
Net assets 25,866 17,591
========= =========
Equity
Called up share capital 16 5,076 4,243
Share premium account 16 12,819 9,791
Reverse acquisition reserve 17 (1,667) (1,667)
Share based payment reserve 17 477 293
Retained earnings 17 9,161 4,931
--------- ---------
Total equity 25,866 17,591
========= =========
Consolidated Statement of Changes in Equity
For the year ended 30 June 2020
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 2018 3,828 7,789 (1,667) 186 2,581 12,717
Issue of shares 415 2,002 (20) 2,397
Share-based payments - - - 127 - 127
Profit/total comprehensive
income for the year - - - - 2,350 2,350
At 30 June 2019 4,243 9,791 (1,667) 293 4,931 17,591
---------- ---------- -------------- --------- ----------- ----------------
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
========== ========== ============== ========= =========== ================
Consolidated Statement of Cash Flows
For the year ended 30 June 2020
2020 2019
Notes GBP'000 GBP'000
Cash flows from operating activities
Cash used in operations 20 (1,758) (1,270)
Taxation paid 6 - -
----------
Net cash used in operating activities (1,758) (1,270)
---------- ----------
Cash flows from investing activities
Purchase of tangible fixed assets 8 (3) (7)
Purchase of equity investments 12 (97) (363)
Purchase of debt investments 13 (588) (416)
Disposal of debt investments 13 40 -
Amounts receivable from group - -
undertakings
Interest received 21 12
Other income 27 -
Dividend income on financial assets
at fair value through profit or
loss - 2
---------- ----------
Net cash used in investing activities (600) (772)
---------- ----------
Cash flows from financing activities
Proceeds from issue of equity
shares 4,175 2,552
Costs of share issue (315) (155)
Net cash generated from financing
activities 3,860 2,397
---------- ----------
Net increase in cash and cash
equivalents 1,502 355
Cash and cash equivalents at beginning
of year 1,466 1,111
Cash and cash equivalents at end
of year 2,968 1,466
========== ==========
Notes
1. Financial risk management
Financial risk factors
Going concern
The COVID-19 pandemic has not impacted the Group and its
portfolio companies to the same extent as many other businesses but
the uncertainty over the length of the pandemic presents a
significant risk to the Group's future operations. The Directors
have assessed the Group's going concern position as outlined in the
accounting policies and concluded that the Group has sufficient
cash to cover expenditure for a period of more than twelve
months.
The Group's business activities are set out in the Strategic
Report. These activities expose the Group to a number of financial
risks. The following describes the Group's objectives, policies and
processes for managing these risks and the methods used to measure
them. The Group operates primarily in the UK and although it has
started to develop business in Portugal, transactions in foreign
currency were minimal during the year and at the year-end. It has
therefore not been exposed to any material foreign exchange
risk.
(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 GBP19,444,000 (2019: GBP13,252,000).
(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 13. 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 2020 and 30 June
2019 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 unquoted equity 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 32% being
GBP6,315,000 from a total value of GBP19,444,000.
(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 value in use models which
require 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 75% of its revenue from services (2019: five
customers accounted for 81%). The revenues generated from each
customer were as follows:
2020 2019
GBP'000 GBP'000
Customer 1 90 102
Customer 2 72 77
Customer 3 53 65
Customer 4 48 48
Customer 5 39 48
302 340
======== ========
4. Administration expenses
Expenses included in administrative expenses are analysed
below.
2020 2019
GBP'000 GBP'000
Employee costs 1,446 1,276
Consultant 43 16
Travel and subsistence 22 56
Depreciation 6 6
Bad and doubtful debts (1) (9)
Audit services:
- audit of the Company and consolidated accounts 65 35
- audit of the Company's subsidiaries pursuant
to legislation 2 7
Non-audit services:
- tax services 8 7
- consultancy services 9 16
Legal, professional and financial costs 217 218
Premises lease 142 133
Administration costs 52 44
2,011 1,805
======== ========
5. Directors and employees
The average number of people employed by the Group during the
year was:
2020 2019
Number Number
Business and corporate development 15 14
======= =======
2020 2019
GBP'000 GBP'000
Wages and salaries 1,081 961
Social security 146 124
Pension costs - defined contribution plans 73 71
Non-executive directors' fees 95 92
Other benefits 51 28
Share option expense 230 127
-------- --------
1,676 1,403
======== ========
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
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 '000
Executive
N Crabb 138 133 3 3 15 11 21 29 177 176
J McKay 103 99 4 4 11 10 11 21 129 134
D Cairns 12 74 - - 1 7 0 8 13 89
J Fish 108 104 3 3 11 10 20 21 142 138
M White 130 99 3 2 13 10 20 14 166 125
Non-executive
A Richmond 43 42 - - - - - - 43 42
M Bourne 26 25 - - - - - - 26 25
C Wilson 26 25 - - - - - - 26 25
-------- -------- --------
586 601 13 12 51 48 72 93 722 754
======== ======== ======== ======== ======== ======== ======== ======== ======== =====
6. Taxation
A reconciliation from the reported profit before tax to the
total tax charge is shown below:
2020 2019
GBP'000 GBP'000
Profit before tax 4,184 2,350
======== ========
Profit before tax at the effective rate of
corporation tax in the UK of 19% (2019: 19%) 795 446
Effects of:
Non-taxable income (1,086) (733)
Expenses not deductible for tax purposes 48 26
Trading losses carried forward 295 269
Other adjustments (52) (8)
Tax charge for the year - -
======== ======
The tax asset relating to the Group losses is not recognised, in
accordance with Group policy. The Group has a tax asset for
cumulative unrelieved management expenses and other tax losses of
GBP1,621,000 (2019: GBP1,152,000) available for use to offset
future profits. These amounts are stated using a corporation tax
rate of 19% of total losses of GBP8,531,000 (2019: 17% of total
losses of GBP6,779,000).
There is a deferred tax liability on the difference between base
cost and fair value of certain financial assets at fair value
through profit and loss which are not exempt from tax under the
Substantial Shareholding Exemption. There are excess management
expenses and trading losses carried forward in the Group and there
is the ability to transfer gains arising which would be covered by
excess management expenses and no tax liability would be expected
to arise.
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 2020 4,184 47,753,569 8.76
-------------------- ----------- -----------
Year ended 30 June 2019 2,350 40,700,979 5.77
-------------------- ----------- -----------
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 2020 4,184 49,775,053 8.41
-------------------- ----------------- -----------
Year ended 30 June 2019 2,350 42,632,932 5.51
-------------------- ----------------- -----------
8. Tangible fixed assets
Fixtures
and equipment
GBP'000
Cost
At 1 July 2018 17
Additions 7
Disposals (1)
---------------
At 30 June 2019 23
---------------
Additions 3
Disposals -
At 30 June 2020 26
Depreciation
Accumulated depreciation at 1 July 2018 10
Charge for the year to 30 June 2019 6
Disposals -
Accumulated depreciation at 30 June 2019 16
Charge for the year to 30 June 2020 5
Disposals -
---------------
Accumulated depreciation at 30 June 2020 21
---------------
Net book value
At 30 June 2020 5
===============
At 30 June 2019 7
===============
9. Goodwill
Group Company
GBP'000 GBP'000
Cost
At 1 July 2018, 30 June 2019 and at 30 June 1,966 -
2020
Impairment
At 1 July 2018, 30 June 2019 and at 30 June - -
2020
-------- --------
Carrying value
At 30 June 2020 1,966 -
======== ========
At 30 June 2019 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. For the prior
year, a weighted distribution of outcomes and values model was also
used but the Directors consider that as the portfolio has matured
the individual company dilution model provides a sufficient
impairment test.
The assumptions used in the model are set out below:
2020 2019
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% - 175% -
------------ ------------------- ----------- -------------------
Equity in existing - 2.4% - 43.5%* - 3% - 40%*
portfolio
------------ ------------------- ----------- -------------------
Average Average
Dilution 35% of 31% 35% of 33%
------------ ------------------- ----------- -------------------
Years to exit 7 7 6 6
(minimum (minimum
of 2 years of 2 years
from measurement from measurement
date) date)
------------ ------------------- ----------- -------------------
Rate of return 27% 27% 23% 23%
------------ ------------------- ----------- -------------------
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
2020. Average 2019. Average
of GBP13.5m of GBP13.3m
------------ ------------------- ----------- -------------------
* Actual range of equity at 30 June 2020.
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
COVID-19 pandemic may impact a number of our assumptions, in
particular the number of spin-outs and time to exit.
The percentage change required in an assumption in order 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. -25%
----------------
Dilution +80%
----------------
Years to exit +29%
----------------
Rate of return -12%
----------------
Discount rate (pre-tax) +24%
------------------------------------------------------- ----------------
Value at first funding round -18%
----------------
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 GBP4.1m
and a 12% decrease in the rate of return from 29% to 24% 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 2019
Equity investments 13,252 - 13,252
Debt investments 382 55 437
Trade and other receivables - 602 602
Cash and cash equivalents - 1,466 1,466
--------------- ------------ ----------
Total 13,634 2,123 15,757
--------------- ------------ ----------
All financial liabilities are categorised as other financial
liabilities and recognized at amortised cost.
A reduction in the fair value of financial assets of GBP40,000
was attributable to credit risk. (2019: GBPnil)
All net fair value gains in the year are attributable to
financial assets designated at fair value through profit or loss.
(2019: all net fair value gains were attributable to financial
assets designated at fair value through profit or loss.)
11. Investment in subsidiaries
Company Company
2020 2019
GBP'000 GBP'000
At 1 July 2,383 2,383
Provision for impairment - -
-------- --------
At 30 June 2,383 2,383
======== ========
Group Investments
The Company has investments in the following subsidiary
undertakings.
Country of Proportion Proportion
incorporation of ordinary of ordinary
shares directly shares held
held by by the Group
the Company
Frontier IP Limited
- principal activity is commercialisation
of IP Scotland 100%
Frontier IP Investments Limi ted
- principal activity was investment
in the RGU Ventures Investment
Fund * Scotland 100%
Frontier IP Founder Partners Limited
- principal activity was founder
partner in the RGU Ventures Investment
Fund * Scotland 100%
Frontier IP Management Limited
- principal activity is investment
advisory and marketing services Scotland 100%
Frontier IP GP RG Limited
- principal activity was the general
partner of the RGU Ventures Investment
Fund * Scotland 100%
* RGU Ventures Investment Fund was dissolved 15 January
2020.
The registered office of all subsidiaries is c/o CMS Cameron
McKenna Nabarro Olswang LLP, Saltire Court, 20 Castle Terrace,
Edinburgh EH1 2EN.
12. 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 Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 13,252 9,041 5,777 3,441
Additions 97 359 23 360
Conversion of debt investments 82 - 48 -
Fair value increases 7,064 3,864 6,617 1,988
Fair value decreases (1,051) (12) (320) (12)
-------- -------- -------- --------
At 30 June 19,444 13,252 12,145 5,777
======== ======== ======== ========
Limited Partnership Interests Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
At 1 July - 19 - -
Additions - 4 - -
Fair value decreases - (23) - -
-------- -------- -------- --------
At 30 June - - - -
======== ======== ======== ========
The ten-year term of the RGU Ventures Investment Fund expired on
27 July 2019 and prior to 30 June 2019 the assets were distributed
to the limited partners and the limited partnership dissolved in 15
January 2020.
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 2019 78 2,537 180 5,290 5,167 13,252
Transfers between stages 274 (2,342) 1,606 5,629 (5,167) -
Fair value (decrease)
/ increase through other
operating income (277) 696 1,459 4,135 - 6,013
Additions - 23 - 156 - 179
30 June 2020 75 914 3,245 15,210 - 19,444
======== ======== ======== ======== ======== ========
The table below provides information about unquoted equity
investment fair value measurements.
(See the accounting policy on investments for a description of
the valuation matrix stages)
Valuation No of Investments Fair Unobservable inputs Reasonable possible
matrix value shift
stage
GBP'000 % +/- GBP000
Stage Initial valuation of
1 5 75 new spin outs at GBP50,000 20% 15
Management's assessment
of the value of IP transferred
and the value of grants
Stage from which economic benefit
2 3 914 is derived. 25% 228
Management's assessment
of performance against
Stage milestones and discussions
3 6 3,245 of likely imminent fundraising. 39% 1,265
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 9 15,210 methodology. 32% 4,867
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 2019 19,444 32% 6,375
======== ==============
Significant unobservable inputs:
The valuation of the Group's investment in Exscientia at 30 June
2020 was GBP4,407,000, 23% of the Group's total equity investments
and 17% of its net assets at 30 June 2020. The decrease in the
value of the Group's holding in Exscientia over the year to 30 June
2020 was GBP760,000, 13% of the Group's net unrealised profit on
the revaluation of investments and 18% of profit for the year to 30
June 2020. The significant inputs into the valuation of the Group's
holding in Exscientia included the price of investments immediately
before and after 30 June 2020 which were completed at the same
price.
The valuation of the Group's investment in Pulsiv Solar at 30
June 2020 was GBP3,591,000, 18% of the Group's total equity
investments and 14% of its net assets at 30 June 2020. The increase
in the value of the Group's holding in Pulsiv over the year to 30
June 2020 was GBP2,646,000, 44% of the Group's net unrealised
profit on the revaluation of investments and 63% of profit for the
year to 30 June 2020. The significant inputs into the valuation of
the Group's holding in Pulsiv included indication of the price of
investment at 30 June 2020 and beyond as well as progress since the
year end.
The valuation of the Group's investment in The Vaccine Group
(TVG) at 30 June 2020 was GBP3,051,000, 16% of the Group's total
equity investments and 12% of its net assets at 30 June 2020. The
increase in the value of the Group's holding in TVG over the year
to 30 June 2020 was GBP1,428,000, 24% of the Group's net unrealised
profit on the revaluation of investments and 34% of profit for the
year to 30 June 2020. 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 2020 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. In addition TVG has made
significant progress on a number of internally funded projects
including: the development of three candidate vaccines to protect
against SARS CoV-2 (responsible for COVID-19) that are being
prepared for animal trials post period end; the development of a
candidate vaccine for African Swine Fever Virus (a highly
contagious and deadly virus that affects pigs, with no effective
vaccine currently commercially available) that was ready for trials
in pigs; the development of a candidate vaccine for Bovine
tuberculosis that was ready for trials in cattle; the development
of a candidate vaccine for bovine mastitis that has been
successfully trialled in a model rabbit system and is being
prepared for trials in cattle. Post-period end TVG has announced
its first agreement with a commercial partner, developing two
vaccine candidates for Porcine Reproductive and Respiratory
Syndrome Virus in collaboration with the Pirbright Institute and
funded by ECO Animal Health Group plc. Each of these 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 is
particularly challenging at this point in time as the current
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 21% while a 25% increase in the success rate would
increase the valuation by 36%. 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 balance sheet 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 2020 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, 30.9% 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, 33.3% 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 Holdings 21 Church Road, Tadley, RG26 43.5% Ordinary
Limited 3AX
-------------------------------------- --------- ------------
Fieldwork Robotics Research And Innovation Floor 26.7% 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.
13. 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 GBP75,000 (Cambridge Raman
Imaging) to GBP150,000 (Nandi Proteins) 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.
Debt investments comprise the following:
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Fair value through profit or
loss 863 382 713 361
Amortised cost - 55 - 55
-------- -------- -------- --------
At 30 June 863 437 713 416
======== ======== ======== ========
The movement during the year of debt investments is set out
below
Fair value through profit or Group Group Company Company
loss 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 382 - 361 -
Additions 588 361 425 361
Disposals (40) (40)
Conversion to unquoted equity
investments (82) (47)
Reclassification 55 - 55 -
Fair value increases - 21 - -
Fair value decreases (40) - (40) -
-------- -------- -------- --------
At 30 June 863 382 713 361
Less non-current (863) (40) (713) (40)
-------- -------- -------- --------
Current portion - 342 - 321
======== ======== ======== ========
Amortised cost Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 55 - 55 -
Reclassification (55) 55 (55) 55
At 30 June - 55 - 55
======== ======== ======== ========
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.
14. Trade receivables and other current assets
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 614 392 280 151
Receivables from Group undertakings - - 4,612 3,854
VAT 3 3 - -
Prepayments and accrued income 48 34 23 11
Other debtors 146 173 117 130
Accrued interest 19 - 10 -
830 602 5,042 4,146
Less trade receivables - non - (114) - -
current
Less receivables from Group
undertakings - non current - - (4,657) (3,854)
-------- -------- ---------- ----------
Current portion 830 488 385 292
======== ======== ========== ==========
Trade receivables
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables not past due 62 68 56 59
Trade receivables past due 1-30
days 28 26 21 16
Trade receivables past due 31-60
days 29 27 22 18
Trade receivables past due 61-90
days 21 13 17 4
Trade receivables past due over
90 days 474 258 164 54
-------- -------- -------- --------
Gross trade receivables at 30
June 614 392 280 151
-------- -------- -------- --------
Expected credit loss at 1 July - 9 - -
Debts provided for in the year - (9) - -
Debts written off in the year - - - -
-------- -------- -------- --------
Expected credit loss at 30 June - - - -
-------- -------- -------- --------
Net trade receivables at 30
June 614 392 280 151
======== ======== ======== ========
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.
GBP416,000 of trade receivables at 30 June 2020 have been recovered
post year end and the remaining GBP198,000 is due from four
companies including Fieldwork Robotics (GBP97,000) and Alusid
(GBP87,000). The directors are confident that these companies will
be able to raise sufficient funds to repay their debt and fund
their business plan. The directors 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 2.1%
(2019: 2.5%).
15. Trade and other payables
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 36 33 14 12
Social security and other taxes 47 41 - -
VAT - - 9 7
Other creditors 7 5
Accruals and deferred income 120 65 56 37
At 30 June 210 139 84 56
======== ======== ======== ========
16. 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 2019 42,431,372 4,243 9,791 14,034
Issue of shares on exercise
of share options 331,034 33 59 92
Issue of shares through a placing 8,000,000 800 2,969 3,769
----------- --------- ---------- --------
At 30 June 2020 50,762,406 5,076 12,819 17,895
=========== ========= ========== ========
On 6 November 2019, the Company conducted a placing of 8,000,000
new ordinary shares of 10p for cash at a price of 50p per share
raising GBP4,000,000 before expenses of GBP231,000. 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 50,762,406
ordinary shares of 10p each.
17. 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 movement in reserves for
the years ended 30 June 2020 and 2019 is set out in the
Consolidated and Company Statement of Changes in Equity on page
49.
18. Share options
Frontier IP has one option scheme, the Frontier IP Group Plc
Employee Share Option Scheme 2011 - Amended 26 March 2018. Under
the scheme, 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.
Movements in the number of share options outstanding and their
related weighted average exercise prices were as follows:
2020 2020 2019 2019
Weighted average Weighted average
exercise price Options exercise price Options
Pence per Pence per
share share
At 1 July 27.05 3,312,000 25.52 2,806,000
Granted 40.74 1,663,376 29.33 831,000
Exercised 27.72 (331,034) 19.67 (325,000)
Lapsed 52.04 (308,666) - -
At 30 June 30.48 4,335,676 27.05 3,312,000
========== ==========
Of the 4,335,676 outstanding options (2019: 3,312,000) 2,134,000
had vested at 30 June 2020 (2019: 1,985,000). The vested options
have a weighted average exercise price of 25.62p.
The weighted average share price at the date of exercise for
share options exercised during the year was 64.99p (2019:
85.50p)
Share options outstanding at the end of the year have the
following expiry date and exercise prices:
Exercise 2020 2019
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 65.00 253,000 292,000
2028 10.00 468,000 539,000
2029 66.00 740,971 -
2029 10.00 739,705 -
=========== ======== ========
The weighted average remaining contractual life of the
outstanding options is 6.9 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 36.37p per option. The
significant inputs into the model were the exercise price shown
above, weighted average share price of 66.0p, volatility of 42%,
dividend yield of 0%, expected life of 5 years and annual risk-free
interest rate of 0.56%. Future volatility has been estimated based
on 5 years' historical monthly data.
19. Leases
2020 2019
Land & Land &
Buildings Buildings
GBP'000 GBP'000
Commitments under non-cancellable leases expiring:
Within one year 90 123
Within two to five years 4 58
After five years - -
----------- -----------
94 181
=========== ===========
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. One lease has
rental commitments of 14 months with an annual rent of GBP27,000
and is not considered material.
20. Cash used in operations
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Profit before tax 4,184 2,350 4,978 967
Adjustments for:
Share-based payments 230 127 230 127
Depreciation 6 6 - -
Interest received (21) (12) (130) (108)
Dividends received - (2) - -
Other income (27) - (5) -
Fair value (gain) on financial
assets through profit and loss (5,973) (3,850) (6,257) (1,976)
Changes in working capital:
Trade and other receivables (228) 176 (92) (388)
Trade and other payables 71 (65) 28 (14)
----------
Cash flows from operating activities (1,758) (1,270) (1,248) (1,392)
========== ========== ========== ==========
The movements in liabilities from financing cashflows are
nil.
21. Related party transactions
Neil Crabb is a director of PoreXpert Limited, Pulsiv Solar
Limited, Celerum Limited and Alusid Limited. Neil Crabb was a
director of Nandi Proteins Limited during the year. 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
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:
By the Group Fees charged Fees charged Amounts Amounts
owed owed
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Nandi Proteins Limited 90 102 324 241
Pulsiv Solar Limited 48 48 59 19
Alusid Limited 72 66 118 22
Tarsis Technology Limited 0 36 0 24
The Vaccine Group Limited 28 5 15 1
Celerum Limited 21 - 10 -
Elute Intelligence Holdings
Limited 21 - 3 -
By Related Parties
Wilson Biopharma Consulting 12 11 0 0
On 6 November 2019 the Group announced a placing to raise GBP4.0
million (before expenses) through the issue of 8,000,000 new
ordinary shares at 50 pence per share. Neil Crabb, CEO and Michael
Bourne, a Non-Executive Director, each subscribed for 100,000
Placing Shares. In addition, 2,000,000 Placing Shares were
subscribed for by Canaccord Genuity Group Inc. ("Canaccord") and
873,076 Placing Shares were subscribed for by Quilter Cheviot
Limited ("Quilter"). Canaccord and Quilter are substantial
shareholders in the Group, as defined in the AIM Rules and
accordingly their participations in the Placing were deemed to be
related party transactions under the AIM Rules. In addition, as
Neil Crabb and Michael Bourne are Directors of the Group, their
participations were deemed to be related party transactions under
the AIM Rules.
22. Subsequent events
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
GBP156,000. As a consequence, the Directors believe that the Group
will have sufficient funds to fund its activities for the next 12
months. After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the annual report and financial statements.
23. 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.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR BABMTMTBMMPM
(END) Dow Jones Newswires
November 05, 2020 02:00 ET (07:00 GMT)
Frontier IP (AQSE:FIPP.GB)
Gráfico Histórico do Ativo
De Jan 2025 até Fev 2025
Frontier IP (AQSE:FIPP.GB)
Gráfico Histórico do Ativo
De Fev 2024 até Fev 2025
