Half-Year Results for the 6 Months to 31 Dec 2016

Released : 30 Mar 2017 07:00

RNS Number : 9081A
Frontier IP Group plc
30 March 2017
 

RNS

AIM: FIPP

30 March 2017

 

FRONTIER IP GROUP PLC
("Frontier IP" "the Group")

HALF-YEAR RESULTS FOR THE 6 MONTHS TO 31 DEC 2016

 

KEY POINTS

·     Fair value of the portfolio up 15% to £5,396,000 at 31 December 2016 (30 June 2016: £4,673,000), an increase of 44% year on year (31 December 2015: £3,745,000)

 

·     Revenue from services increased 21% to £132,000 (2015: £109,000)

 

·     Total revenue of £843,000 (2015: £992,000) - the decrease reflecting a lower gain on the revaluation of investments of £711,000 (2015: £883,000)

 

·     Profit before tax of £314,000 (2015: £549,000) - the decrease reflecting both the lower gain on revaluation of investments and the increase in administrative costs to £529,000 (2015: £443,000)

 

·     Basic earnings per share of 1.02p (2015: 2.07p)

 

·     Net assets per share increased to 26.0p as at 31 December 2016 (30 June 2016: 24.9p; 31 December 2015: 23.0p)

 

·     Further progress within the portfolio including third spin-out from the Department of Chemical Engineering and Biotechnology at the University of Cambridge, Tarsis Technology Limited

 

·     Further expansion into Portugal with the signing of a second partnership in the region with the Faculty of Science and Technology within the Universidade NOVA de Lisboa

 

·     Cambridge office opened

 

·     Cash balances as at 31 December 2016 of £186,000 (30 June 2016: £771,000; 31 December 2015: £264,000)

 

·     Post period-end, the Group successfully concluded a fundraising of £3 million, which was oversubscribed

 

Andrew Richmond, Chairman, commented,

"We are pleased to report another successful half-year performance for the Group, which has seen a 44% rise in the value of our portfolio year on year.  We continue to grow the core portfolio, with the addition of Tarsis and having secured our second partnership in Portugal. Following our successful group funding round, we look forward to the delivery of our differentiated approach to building and developing our strong portfolio."

 

Enquiries

 

 

 

Notes to Editor:

 

About Frontier IP Group plc

www.frontierip.co.uk.

Frontier IP specialises in assisting institutions and companies in the commercialisation and exploitation of their intellectual property.  It establishes formal and informal relationships with sources of exploitable IP, principally universities.  Its core business is building and growing a portfolio of equity stakes in spin-out companies by taking an active involvement in the commercialisation and funding of these businesses.

 

 

Interim Management Statement

Summary

Frontier IP's aim is to pursue growth and value for shareholders by:

·     Generating value from its relationships through new spin-outs, significant equity holdings, licensing income and realisations from existing spin-outs

·     Building a portfolio capable of commercial success

·     Reviewing and extending its portfolio pipeline for sources of high-quality IP

·     Using its expertise to assist portfolio companies to grow and achieve realisations

I am pleased to report that we made good progress in laying the foundations for growth in the first half of the financial year.  We continued to actively pursue the growth of our portfolio and this was reflected in a 15% increase in the fair value of our portfolio compared to 30 June 2016 and a 44% increase compared to 31 December 2015.

In line with extending our sources of high-quality IP, we were pleased to announce in September 2016 that we had signed an agreement with the Faculty of Science and Technology within the Universidade NOVA de Lisboa, Portugal ("FCT NOVA").  This partnership was formed to assist FCT Nova with its spin-off and licensing activities emerging from its research programmes and is our second in Portugal, reflecting the Group's view that there is significant opportunity in the region.

We have seen good progress in building the portfolio including adding new portfolio company Tarsis Technology Limited ("Tarsis"), in which we received a 20 per cent. stake. Tarsis is the Group's third spin-out from the Department of Chemical Engineering and Biotechnology at the University of Cambridge.

Nandi Proteins Limited ("Nandi") received recognition of the benefits of its technology with its participation in a £1 million UK Innovate funding award for a fat reduction technology research project.  Nandi is currently in the late stages of concluding a further fundraising, which will enable Nandi to accelerate commercial progress.

Post period-end, the Group was particularly pleased to conclude its own successful fundraising, in an oversubscribed round raising £3 million gross.

We believe the Group is now well positioned for growth and, looking ahead, we expect to see further development in our portfolio over the remainder of the financial year and beyond.

Results

Financial assets at fair value through profit and loss at 31 December 2016 increased to £5,396,000 (30 June 2016: £4,673,000; 31 December 2015: £3,745,000).  Revenue from services over the first half increased by 21% to £132,000 (2015: £109,000) while the 15% decrease in total revenue to £843,000 (2015: £992,000) reflected the lower investment revaluations (unrealised) of £711,000 (2015: £883,000). The profit before tax was £314,000 (2015: £549,000).  Administrative expenses increased by 19% to £529,000 (2015: £443,000) primarily reflecting increased staff and associated costs, the opening of the Cambridge office and development of a new website.  Basic earnings per share was 1.02p (2015: 2.07p).

Cash balances stood at £186,000 as at 31 December 2016 (30 June 2016: £771,000; 31 December 2015: £264,000).  Net assets per share as at 31 December 2016 were 26.0p (30 June 2016: 24.9p; 31 December 2015: 23.0p).

Operational Review

Core Portfolio Highlights

We are pleased to report good progress in our core portfolio during the period and certain key developments are set out below.

In December 2016 we added new portfolio company Tarsis Technology Limited ("Tarsis"), in which we received a 20 per cent. stake. Tarsis is the Group's third spin-out from the Department of Chemical Engineering and Biotechnology at the University of Cambridge. Tarsis was established to develop and commercialise technology created by Dr. David Fairen-Jimenez, a Royal Society University Research Fellow at the Department of Chemical Engineering and Biotechnology at the University of Cambridge, and his research team. The technology allows slower and more controlled delivery of drugs using metalorganic frameworks (MOFs). The pharmaceutical industry has shown early interest in the technology.

In September 2016, Nandi and Heriot-Watt University Edinburgh were awarded a £1 million grant from Innovate UK, enabling the development of new processes and products that lead to the availability of healthier food choices for consumers. Nandi is a protein technology company, specialising in developing a platform technology which improves the functional properties of proteins in food manufacturing, creating a product which can reduce sugars, fats and additives in end-product.  Food manufacturers are under increasing pressure to respond to rising global obesity rates and the associated cost, both human and economic, of diet-related ill-health - this current project is supported by industry partners Devro plc and Kerry Group plc. Nandi is currently in the late stages of concluding a further fundraising, to enable Nandi to accelerate commercial progress, extend its product range and prepare for scaleup.

Alusid Limited ("Alusid") showed good progress during the period. ALUSID manufactures SilicaStone® an ecoarchitectural material made from 100% recycled glass and vitrified ceramic that would otherwise end up in landfill. In particular, we were pleased to note the on-going protection of Alusid's IP with the grant of the core patent in the US in September 2016. Further recognition of Alusid's progress came when it won this year's IChemE Global Award 2016 for Best Business Start-Up against a shortlist of international nominees. It also received its first commercial order, post period-end, and is currently seeking to raise further funds to enable it to meet projected demand.

IP Sources

In order to maintain the growth in our portfolio we continue to work with new and existing partners to source and identify new opportunities and are working on a range of pipeline projects.

In line with extending our sources of high-quality IP, in September 2016 we signed an agreement with the Faculty of Science and Technology within the Universidade NOVA de Lisboa, Portugal ("FCT NOVA") to assist with its spin-off and licensing activities emerging from its research programmes. This partnership is our second in Portugal and reflects the Group's view that there is significant opportunity in the region. The Universidade NOVA de Lisboa is a research-intensive university (QS Top Universities 2016) and FCT NOVA, its engineering school, has particular research strengths in Materials, Environment, Energy, Biotechnology, Conservation and Restoration. Frontier IP and FCT NOVA will work together to maximise the commercial value of intellectual property developed within or owned by FCT NOVA. Frontier IP will receive a share of equity in each spin-off company created by FCT NOVA, as well as a share in the licensing revenue it receives. Our partnership aims to accelerate value creation from the research generated within FCT NOVA and the Group is already seeing potential opportunity in its pipeline.

Our strategy is to seek to maximise both the size of equity stakes we receive from our sources of IP and extend our portfolio pipeline for sources of high-quality IP. We continue to review our partnerships, both formal and informal, for quality of dealflow and economic viability, focusing our resources where we believe there is significant potential value.

Corporate

In recognition of our developing a deeper relationship with the University of Cambridge, and the region more-widely, in November 2016 we were pleased to open a Group office in Cambridge. We also expanded the team in Cambridge with a new commercialisation professional, who will be primarily focused on our activity in Cambridge.

Post period-end, the Group successfully completed a placing to raise gross proceeds of £3 million (the "Placing") through the issue of 7,500,000 ordinary shares at 40 pence per share. The net proceeds of the Placing will be utilised in accelerating the Company's growth and developing and expanding its resourcing in areas of key activity, both in the UK and overseas.  This fundraising will enable the Group to continue to develop and grow its portfolio, key relationships and allied advisory roles.

Outlook

We very pleased with the momentum within our portfolio and our business more widely. We are seeing an increase in prospects from our sources of exceptional IP and within the core portfolio. We look forward to reporting on further progress over the second half of the financial year and beyond.

Our recent capital raising leaves the Group well placed to respond effectively to, and capitalise on, opportunities in the second half of the year.

 

Neil Crabb
Chief Executive Officer

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

For the six months ended 31 December 2016

 

 

 

 

 

Notes

Six months ended 31 December 2016 (unaudited)

 Six months ended 31 December 2015 (unaudited)

Year ended 30 June 2016 (audited)

 

 

£'000

£'000

£'000

Revenue

 

 

 

 

Revenue from services

 

132

109

221

Other operating income

 

 

 

 

Unrealised profit on the revaluation of

 

 

 

 

investments

7

711

883

1,809

Total revenue

 

843

992

2,030

 

 

 

 

 

Administrative expenses

 

(529)

(443)

(900)

Profit from operations

 

314

549

1,130

 

 

 

 

 

Interest income on short-term bank deposits

 

-

-

1

Profit before tax

 

314

549

1,131

 

 

 

 

 

Taxation

5

-

-

-

 

 

 

 

 

Profit and total comprehensive income attributable to the equity holders of the parent

 

 

314

 

549

    

1,131

 

 

 

 

 

 

 

 

 

 

Profit/ per share attributable to the equity

 

 

 

 

holders of the parent

 

 

 

 

Basic earnings per share

6

1.02p

2.07p

4.08p

Diluted earnings per share

6

1.00p

2.05p

4.04p

 

 

All of the Group's activities are classed as continuing and there were no comprehensive gains or losses in any period other than those included in the statement of comprehensive income.

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

At 31 December 2016

 

 

 As at 31  December

2016 (unaudited)

£'000

 As at 31 December

2015 (unaudited) 

£'000

As at

30 June

2016 (audited)

£'000

ASSETS

Notes

 

 

 

Non-current assets

 

 

 

 

Tangible fixed assets

 

5

1

2

Goodwill

 

1,966

1,966

1,966

Financial assets at fair value through profit and loss

 

7

 

5,396

 

3,745

 

4,673

Trade receivables

 

177

117

144

           

 

7,544

5,829

6,785

Current assets

Trade receivables and other current assets

Cash and cash equivalents

 

 

 

399

186

 

 

154

264

 

 

223

771

 

 

585

418

994

Total assets

 

8,129

6,247

7,779

 

 

 

 

 

LIABILITIES

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

(121)

(128)

(111)

 

 

(121)

(128)

(111)

 

Net assets

 

 

8,008

 

6,119

 

7,668

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

Called up share capital

Share premium account

Reverse acquisition reserve

Share based payment reserve

Retained earnings

 

3,078

5,729

(1,667)

104

764

2,660

5,200

(1,667)

58

(132)

3,078

5,729

(1,667)

78

450

 

Total equity

 

 

8,008

 

6,119

 

7,668

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six month period ended 31 December 2016

 

           

 

 

Share

 capital

 

Share

premium

account

 

Reverse acquisition

 reserve

Share-

based

payment

 reserve

 

Profit

and loss

account

 

 

 

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

At 1st July 2015

2,660

5,200

(1,667)

45

(681)

5,557

Share-based payments

-

-

-

13

-

13

Profit/comprehensive income for the period

-

-

-

-

549

549

At 31 December 2015

2,660

5,200

(1,667)

58

(132)

6,119

Issue of shares

418

529

-

-

-

947

Share-based payments

-

-

-

20

-

20

Profit/comprehensive income for the period

-

-

-

-

582

582

At 30 June 2016

3,078

5,729

(1,667)

78

450

7,668

Share-based payments

-

-

-

26

-

26

Profit/comprehensive income for the period

-

-

-

-

314

314

At 31 December 2016

3,078

5,729

(1,667)

104

764

8,008

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 31 December 2016

 

Six months ended 31 December

2016 (unaudited)

£'000

Six months ended 31 December

2015 (unaudited)

£'000

Year ended 30 June

2016 (audited)

£'000

Cash flows from operating activities

 

 

 

Cash used in operations

(569)

(369)

(805)

Taxation paid

-

-

-

Net cash used in operating activities

(569)

(369)

(805)

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of tangible fixed assets

(4)

-

(2)

Purchase of financial assets at fair value through profit and loss

 

(12)

 

(3)

 

(5)

Interest received

-

-

-

Net cash used in investing activities

 

(16)

(3)

(7)

 

Cash flows from financing activities

Proceeds from issue of equity shares

Costs of share issue

 

 

-

-

 

 

-

-

 

 

1,003

(56)

Net cash generated from financing activities

-

-

947

 

Net (decrease)/increase in cash and cash equivalents

 

(585)

 

(372)

 

135

 

 

 

 

Cash and cash equivalents at beginning of period

771

636

636

Cash and cash equivalents at end of period

186

264

771

 

 

 

 

Cash used in operations

 

 

 

Profit before tax

314

549

1,131

Adjustments for:

 

 

 

  Share-based payments

26

13

33

  Depreciation

1

1

2

  Costs of share issue

-

-

-

  Fair value (gain) on financial assets at fair value through profit or loss

 

(711)

 

(883)

 

(1,809)

Changes in working capital:

 

 

 

   Trade and other receivables

(209)

(55)

(150)

   Trade and other payables

10

6

(12)

 

 

 

 

 

(569)

(369)

(805)

 

 

 

 

 

NOTES

1.   General information

The Company is a limited liability company incorporated in England and with its registered office at 78 Cannon Street, London EC4N 6AF.  The Company's main trading office is situated at 93 George Street, Edinburgh, EH2 3ES.

The Company is quoted on the AIM market.

This condensed consolidated interim financial information was approved and authorised for issue by a duly appointed and authorised committee of the Board of Directors on 29th March 2017.

This condensed interim financial information has not been audited or reviewed by the Company's auditor.

2.   Basis of preparation

This condensed consolidated interim financial information for the six months ended 31 December 2016 has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting".  The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 30 June 2016, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

This condensed consolidated interim financial information does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.  The comparatives for the full year ended 30 June 2016 are not the Company's full statutory accounts for that year.  A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.  The auditor's report on those accounts was unqualified and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

3.   Accounting policies

The accounting policies applied by the Group in these unaudited half year results are consistent with those applied in the annual financial statements for the year ended 30 June 2016 as described in the Group's Annual Report for that year and as available on our website www.frontierip.co.uk.  No new standards that have become effective in the period have had a material effect on the Group's financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

4.   Segmental information

The chief operating decision-maker has been identified as the Group's board of directors.  The board reviews the Group's internal reporting in order to assess performance and allocate resources. Currently the board considers that the Group has one operating activity, the commercialisation of University IP.  All of the Group's revenue arose in the UK.

5.   Taxation

The taxation expense is recognised based on management's best estimate of the weighted average annual tax rate expected for the full financial year.  Management expects that there will be no tax charge arising in the year and so there is no charge to taxation for the six months to 31 December 2016 (2015: Nil).

A deferred tax asset has not been recognised in respect of losses in view of the uncertainty as to the level of future taxable profits.

6.   Earnings per share

The calculation of the basic earnings per share for the six months ended 31 December 2016 and 31 December 2015 and for the year ended 30 June 2016 is based on the earnings attributable to the shareholders of Frontier IP Group Plc in each period divided by the weighted average number of shares in issue during the period.

Basic earnings per share

 

Earnings attributable to shareholders

Weighted average number of shares

 

Basic earnings

per share

 

£'000

Number

Pence

 

 

 

 

Six months ended 31 December 2016

314

30,778,520

1.02

 

 

 

 

Six months ended 31 December 2015

549

26,601,020

2.07

 

 

 

 

Year ended 30 June 2016

1,131

27,722,650

4.08

 

 

 

 

Diluted earnings per share

 

Earnings attributable to shareholders

Weighted average number of shares

 

Diluted earnings

per share

 

£'000

Number

Pence

 

 

 

 

Six months ended 31 December 2016

314

31,449,663

1.00

 

 

 

 

Six months ended 31 December 2015

549

26,808,407

2.05

 

 

 

 

Year ended 30 June 2016

1,131

27,998,277

4.04

 

7.   Financial Assets at Fair Value Through Profit and Loss

 

31 December

31 December December

30 June

 

2016

2015

2016

 

£'000

£'000

£'000

Opening balance

4,673

2,859

2,859

Additions

12

3

5

Fair value increase

711

883

1,809

Closing balance

5,396

3,745

4,673

 

8.   Copies of Half Yearly Report

Copies of the Half Yearly Report will be available on the Company's website, www.frontierip.co.uk, and on request from the Company's offices at 93 George Street, Edinburgh EH2 3ES no later than 3 April 2017.


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