TIDMIPO
RNS Number : 6568V
IP Group PLC
25 July 2018
FOR RELEASE ON 25 July 2018
("IP Group" or "the Group" or "the Company")
Half-yearly results
IP Group plc (LSE: IPO), the developer of intellectual
property-based businesses, today announces its half-yearly results
for the six months ended 30 June 2018.
HALF-YEAR HIGHLIGHTS
Portfolio highlights
- Net portfolio gains GBP0.7m (HY17: GBP28.7m; FY17:
GBP94.2m)
- Fair value of portfolio: GBP1,163.7m (HY17: GBP663.0m; FY17:
GBP1,130.6m)
- Capital provided to portfolio companies and projects: GBP46.9m
(HY17: GBP20.1m; FY17: GBP71.2m)
- Significant funding rounds completed by Oxford Nanopore
Technologies (GBP100.0m), Crescendo Biologics ($70.0m), Carisma
Therapeutics ($53.0m) and Enterprise Therapeutics (GBP29.0m)
- Microbiotica entered into multi-year strategic collaboration
with Genentech, a member of the Roche Group, in a deal worth up to
$534.0m
-Ceres Power signed strategic collaboration with China's Weichai
Power comprising both product development and launch, and an equity
investment; subsequently announces oversubscribed ÂGBP20.0m
fundraising in July
Financial and operational update
- Net assets of GBP1,489.8m (HY17: GBP966.4m; FY17:
GBP1,508.5m)
- Hard NAV(1) of GBP1,298.5m (HY17: GBP898.0 m; FY17:
GBP1,326.2m)
- Return on Hard NAV(2) of negative GBP13.1m (HY17: GBP21.3m
positive; FY17: GBP64.1m positive)
- Gross cash and deposits at 30 June 2018: GBP258.5m (HY17:
GBP263.1m; FY17: GBP326.3m)
Commenting on the Group's half-yearly results, Alan Aubrey,
Chief Executive Officer of IP Group, said:
"The underlying performance of the Group's portfolio has been
robust in the first half with a number of our companies completing
both major fundraisings and collaborations. Our portfolio is well
diversified, both by sector and stage of development, with multiple
opportunities to crystallise value and there are a number of
inflection points for several of our companies over the next six to
twelve months. IP Group remains financially sound with a strong
balance sheet, net assets of GBP1.5bn and exposure to the UK, US,
Australasia and, increasingly, Asia. The Group remains excited by
the opportunities within the portfolio and we look to the second
half of the year and beyond with confidence."
For more information, please contact:
IP Group plc www.ipgroupplc.com
Alan Aubrey, Chief Executive
Officer
Greg Smith, Chief Financial
Officer
Liz Vaughan-Adams, Communications +44 (0) 20 7444 0050
Charlotte Street Partners
Andrew Wilson +44 (0) 7810 636995
Martha Walsh +44 (0) 7876 245962
Further information on IP Group is available on our website:
www.ipgroupplc.com
This half-yearly results release may contain forward-looking
statements. These statements reflect the Board's current view, are
subject to a number of material risks and uncertainties and could
change in the future. Factors that could cause or contribute to
such changes include, but are not limited to, the general economic
climate and market conditions, as well as specific factors relating
to the financial or commercial prospects or performance of
individual portfolio companies within the Group's portfolio of
investments. Throughout this half-yearly results release the
Group's holdings in portfolio companies reflect the undiluted
beneficial equity interest excluding debt, unless otherwise
explicitly stated.
(1) Hard NAV is defined as Total Equity, excluding Goodwill and
Other Intangible Assets (see page 11).
(2) Return on Hard NAV is defined as the (loss)/profit for the
period, excluding amortisation of intangible assets, share-based
payment charge and IFRS3 charge in respect of acquisition of
subsidiary (see page 10)
Interim management report
Summary
The first half of 2018 has been characterised by significant
progress across the Group's portfolio with a number of our
companies completing both major fundraisings and collaborations. It
was also encouraging to see so many of our portfolio companies
attract Chinese investors to their share registers including Oxford
Nanopore Technologies Limited and Ceres Power Holdings plc, with
many also signing significant collaborations in the region.
Financial performance was, however, impacted by a net fair value
reduction of GBP23.1m in the quoted portfolio, resulting in net
portfolio gains of GBP0.7m (HY17: GBP28.7m; FY17: GBP94.2m) and an
overall return on Hard NAV for the period of negative GBP13.1m
(HY17: GBP21.3m positive; FY17: GBP64.1m positive).
Operationally, as described in the 2017 Annual Report, the
integration of the Touchstone Innovations business in the UK has
continued to progress in line with expectations. We have simplified
and streamlined our organisational structure by moving to a
two-sector model of Life Sciences and Technology and now operate
both divisions substantially from one London head office location.
Both the Imperial College Technology Transfer Office and Parkwalk,
the UK's leading EIS investor in university spin-outs that joined
the Group in 2017, continue to be run as separate entities. Our US
business and its portfolio companies continue to mature, and we are
building out the initial team for our newly-formed Australasian
operation and intend to form our first spin-outs this year.
Portfolio performance
At 30 June 2018, the fair value of the Group's portfolio was
GBP1,163.7m (HY17: GBP663.0m; FY17: GBP1,130.6m). This represents
net portfolio gains of GBP0.7m (HY17: GBP28.7m; FY17: GBP94.2m)
during the period with net fair value increases from our Life
Sciences sector and our US business offsetting a net fair value
reduction from our Technology sector.
The single largest portfolio company fair value increase during
the period was Diurnal Group plc in the Life Sciences sector.
Diurnal hit a major milestone this year, moving it from a pure
development company to marketing and sales, after Infacort was
approved for marketing by the European Commission (EC). In May,
Diurnal announced market launch in Germany under the brand name
Alkindi. An increase in the share price of Diurnal resulted in a
fair value increase of GBP10.2m to the Group. Other key positive
contributions to the increase in fair value were Uniformity Labs,
Inc. (GBP7.8m increase(3) ), Ceres Power Holdings plc (GBP7.2m
increase), Genomics plc (GBP4.7m increase), Microbiotica Ltd
(GBP2.8m increase), Tissue Regenix Group plc (GBP2.3m increase) and
Ditto AI Ltd (GBP2.0m increase).
The largest unrealised fair value decreases were primarily as a
result of reductions in the share prices of AIM-quoted companies
including Xeros Technology Group plc (GBP17.7m decrease), Abzena
plc (GBP7.5m decrease), Mirriad Advertising plc (GBP7.1m decrease),
Avacta Group plc (GBP5.5m decrease) and Circassia Pharmaceuticals
plc (GBP3.9m decrease). Further information on the performance of
the Group's portfolio businesses is provided in the portfolio
review below.
In the first six months of the year, the Group provided
incubation, seed and further capital totalling GBP46.9m to its
portfolio companies (HY17: GBP20.1m; FY17: GBP71.2m). The Group's
portfolio now comprises holdings in 155 companies as well as
strategic stakes in three multi-sector platform businesses, 38 de
minimis holdings and 40 organic holdings (portfolio investments in
which the Group has acquired equity, but not invested funds) (HY17:
96, 3, 18, 0; FY17: 155, 3, 42, 39).
(3) The fair value of Uniformity Labs, Inc. increased by
GBP7.8m, with a further increase of GBP0.8m due to foreign exchange
movements.
North America
Our North American business has continued its momentum into the
first six months of the year. The US team identified a number of
exciting opportunities from a variety of US-based collaboration
partners, three of which have completed 'series A' financing rounds
with participation from a strong mix of strategic and institutional
investors. In addition, they funded their first company in
partnership with Johns Hopkins University; Lorem Therapeutics will
be focused on developing early-stage therapeutics for cancer
indications. Our North American business also added Yale University
to the list of exceptional university and federal lab collaboration
partners in the US, bringing the total to nine.
Australasia
In Australasia, the Group has been focused on the implementation
of the landmark agreements with Australasia's leading research
universities that were announced in 2017. These agreements will see
at least A$200m invested in finding and developing companies
involved in disruptive innovation. The Group has established a
strong pipeline of technologies in Australasia across a wide range
of markets, hired its first team members and anticipates making its
first investments before the end of 2018.
Greater China / Singapore
Many of our portfolio companies have secured investment and
business partnerships in Greater China and Singapore, including
Oxford Nanopore, Ceres Power, Mirriad Advertising and Creavo
Medical Technologies. The Group considers this geographic area to
be strategically important and will continue to facilitate market
entry, business partnership and investment discussions between our
portfolio companies and relevant Chinese and Singaporean partners.
The Group will be hosting its second annual "Global Deep Tech"
event in Greater China in September.
Outlook
IP Group's portfolio remains well-diversified both by sector and
stage of development with multiple opportunities to crystallise
value. The progress of many of the Group's largest portfolio
companies is positive and there are a number of significant
inflection points anticipated for several of our companies over the
next six to twelve months. IP Group has a growing business in the
US and has established operations in Australasia. While it remains
important to consider IP Group as a long-term business where
financial results can fluctuate from six-month period to six-month
period, the fundamentals of our business remain strong and the
Group is financially sound with GBP258.5m of gross cash and
deposits. IP Group remains excited by the opportunities within the
portfolio and we look to the second half of the year and beyond
with confidence.
Portfolio review: Overview
During the six months ended 30 June 2018, the value of the
Group's portfolio increased to GBP1,163.7m (HY17: GBP663.0m; FY17:
GBP1,130.6m), reflecting net portfolio gains of GBP0.7m (HY17:
GBP28.7m; FY17: GBP94.2m ) excluding the investments and
realisations set out below. The portfolio consists of interests in
155 companies, strategic stakes in 3 multi-sector platform
businesses as well as a further 38 de minimis holdings and 40
organic holdings (HY17: 96, 3, 18, 0; FY17: 155, 3, 42, 39). During
the period, the Group provided capital to portfolio companies
totalling GBP46.9m (HY17: GBP20.1m; FY17: GBP71.2m) and received
cash proceeds of GBP2.5m (HY17: GBP0.3m; FY17: GBP6.6m), largely in
relation to the Group's realisation of its full holding in Ilika
plc among others.
A summary of the gains and losses across the portfolio is as
follows:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------ ---------- ---------- ------------
Unrealised increases in fair value of
equity and debt investments 46.0 55.6 99.3
Unrealised decreases in fair value of
equity and debt investments (47.5) (26.5) (49.2)
Effects of movement in exchange rates 1.6 (0.6) (1.1)
Change in fair value of equity and debt
investments 0.1 28.5 49.0
Profit on disposals of equity investments 0.6 0.2 0.1
Gain on deconsolidation of subsidiary - - 45.1
Net portfolio gains 0.7 28.7 94.2
------------------------------------------ ---------- ---------- ------------
Unrealised increases in the fair value of equity and debt
investments primarily arose from increases in the share prices of
AIM-quoted Diurnal Group plc (GBP10.2m), Ceres Power Holdings plc
(GBP7.2m) and Tissue Regenix Group plc (GBP2.3m). Recent funding
rounds gave rise to gains in Uniformity Labs, Inc. (GBP7.8m(4) )
and Genomics plc (GBP4.7m), and recent progress made by
Microbiotica Limited resulted in an upward revision in value of
GBP2.8m. These unrealised gains were principally offset by
decreases in the share prices of Xeros Technology Group plc
(GBP17.7m), Abzena plc (GBP7.5m), Mirriad Advertising plc
(GBP7.1m), Avacta Group plc (GBP5.5m) and Circassia Pharmaceuticals
plc (GBP3.9m).
During the first half of 2018, the Group deployed GBP46.9m of
capital into 41 portfolio companies and projects (HY17: GBP20.1m,
25; FY17: GBP71.2m, 79). The Group provided initial seed or
incubation capital to two opportunities (HY17: six; FY17: 21), both
of which were UK-based. The Group exited its interest in one
company (HY17: one; FY17: two) and realised total cash proceeds
during the period of GBP2.5m (HY17: GBP0.3m; FY17: GBP6.6m).
An analysis of the portfolio by sector is as follows:
As at 30 June 2018 As at 31 December 2017
-----------------------
Fair value Number Fair Value Number
Fair value analysis
by sector GBPm % % GBPm % %
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Life Sciences 720.3 68% 74 48% 704.4 68% 73 47%
Technology 343.8 32% 81 52% 334.0 32% 82 53%
Total 1,064.1 100% 155 100% 1,038.4 100% 155 100%
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Multi-sector platforms 62.8 - 3 - 62.9 - 3 -
De minimis holdings 1.3 - 38 - 1.3 - 42 -
Organic 7.0 40 5.7 - 39 -
----------------------- ------- ---- --- ---- ---------
Total Portfolio 1,135.2 - 236 - 1,108.3 - 239 -
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Attributable to
third parties(I) 28.5 22.3
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Gross Portfolio 1,163.7 1,130.6
----------------------- ------- ---- --- ---- --------- ----- ---- ----
(I) The amount attributable to third parties consists of
GBP17.6m attributable to minority interests represented by third
party limited partners in the consolidated fund, IPVFII, GBP7.8m
attributable to Imperial College London and GBP3.1m attributable to
other third parties (FY 2017: GBP16.3m, GBP5.7m and GBP0.3m).
(4) The fair value of Uniformity Labs, Inc. increased by
GBP7.8m, with a further increase of GBP0.8m due to foreign exchange
movements.
The following table lists the value movements attributable to
the largest twenty portfolio investments by value, which represent
66.2% of the total portfolio value (HY17: 84.6%, FY17: 65.0%).
Additional detail on the performance of these companies is included
in the Life Sciences and Technology portfolio reviews.
Sector, Group Fair Acquisitions Net Fair Fair
Quoted stake value of  value value
(Q)/ at of Touchstone investment/ movement of Group
Unquoted 30 Group Innovations (divestment) and fees holding
(U) Jun holding plc(III) settled at
2018(I) at in 30 Jun
31 Dec equity 2018
2017
Company Description % GBPm GBPm GBPm GBPm GBPm
name
----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Enabling
the analysis
of any living
Oxford thing, by
Nanopore any person, Life
Technologies in any Sciences
Limited environment (U) 18.3% 274.1 - - - 274.1
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
University
of Oxford
preferred
Oxford IP partner
Sciences under 15-year Multi-sector
Innovation framework platforms
plc agreement (U) 7.6% 55.5 - - - 55.5
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Reprogramming
metabolism
to treat Life
Istesso autoimmune Sciences
Limited disease (U) 61.1% 51.1 - - - 51.1
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Novel treatments Life
Diurnal of hormone Sciences
Group plc deficiency (Q) 43.6% 38.7 - - 10.2 48.9
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Oncolytic
PsiOxus viral Life
Therapeutics therapeutics Sciences
Limited for cancer (U) 26.3% 44.5 - - - 44.5
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
World leading
developer
of next
Ceres Power generation
Holdings fuel cell Technology
plc technology (Q) 25.3% 31.5 - - 7.2 38.7
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Optimising
the human
Actual experience
Experience of networked Technology
plc applications (Q) 22.1% 28.4 - - (1.5) 26.9
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
T cell Life
Cell Medica therapeutics Sciences
Limited for oncology (U) 24.6% 26.3 - - - 26.3
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Developing
high value,
novel medicines Life
Autifony to treat Sciences
Limited CNS diseases (U) 26.4% 23.9 - - 0.8 24.7
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Developing
Circassia a range of Life
Pharmaceuticals novel Sciences
plc immunotherapies (Q) 7.9% 26.7 - - (3.9) 22.8
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Contactless
haptic
technology
Ultrahaptics "feeling
Holdings without Technology
Limited touching" (U) 37.9% 21.8 - - - 21.8
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Net methodology
for achieving
First Light extreme
Fusion intensity Technology
Limited cavity collapse (U) 36.4% 13.9 - 3.8 - 17.7
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Regenerative
Tissue dCELLÂ(R) Life
Regenix soft tissue Sciences
Group plc body parts (Q) 13.1% 13.8 - - 2.3 16.1
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Leading
predictive
Featurespace analytics Technology
Limited company (U) 27.9% 15.6 - - - 15.6
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Clinical
cancer genomics
company
utilising
circulating
DNA analysis
to improve
testing and Life
Inivata treatment Sciences
Limited in oncology (U) 31.1% 12.8 - 2.6 - 15.4
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Live, online
Ieso Digital cognitive Life
Health behavioural Sciences
Limited therapy (U) 45.6% 14.7 - - - 14.7
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Creavo
Medical Quantum cardiac Life
Technologies imaging Sciences
Limited technology (U) 48.3% 14.4 - - - 14.4
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Equipment,
materials
Uniformity and software Technology
Labs, Inc for 3D printing (U) 25.8% 4.7 - 1.1 8.6 14.4
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Mobile payments
YoYo Wallet with integrated Technology
Limited loyalty schemes (U) 40.1% 13.1 0.2 0.3 - 13.6
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Novel catalyst
technologies
to build
carbon dioxide
into
Econic polyurethanes
Technologies and other Technology
Limited polymers (U) 50.1% 10.2 0.4 3.0 - 13.6
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Other companies (138
companies) 371.6 (16.4) 33.0 (24.7) 363.3
------------------------------------ -------------- -------- -------- ------------- ------------- --------- ---------
De minimis investments 1.0 - - - 1.0
------------------------------------ -------------- -------- -------- ------------- ------------- --------- ---------
Value not attributable
to equity holders 22.3 - 0.3 1.1 28.6(II)
-------------- -------- -------- ------------- ------------- --------- ---------
1,163.7
Total 1,130.6 (15.8) 44.1 0.1 (II)
==================================== ============== ======== ======== ============= ============= ========= =========
I.Represents the Group's undiluted beneficial economic equity
interest (excluding debt) including the portion of IPVFII's stake
attributable to the Group. Voting interest is below 50%.
II.Includes GBP4.7m increase in revenue share to Imperial
College London, with a corresponding increase in revenue share
liability resulting in no net fair value movement.
III.On 17 October 2017 the Group acquired control of Touchstone
Innovations plc. Certain assets, primarily holdings in unlisted
portfolio companies that have been accounted for using valuation
techniques, were provisionally determined and for a 12-month period
post-acquisition, adjustments are made to these assets to the
extent that new information is obtained about facts and
circumstances that were in existence at the acquisition date. See
financial and operational review on page 10 for further
details.
Portfolio review: Life Sciences
IP Group-s Life Sciences portfolio comprises holdings in 74
companies valued at GBP720.3m as at 30 June 2018.
Oxford Nanopore
The Group's largest holding, Oxford Nanopore Technologies Ltd,
continues to make excellent progress with tangible signs of it
disrupting the $3bn DNA sequencing market. The company, which
provides novel DNA/RNA sequencing technology, successfully
completed a GBP100.0m fundraising in March, primarily from Asian
investors, to support commercial expansion and continued investment
in R&D. The company disclosed tripling in orders between 2016
and 2017 and that it is anticipating a similar increase between
2017 and 2018. CEO Gordon Sanghera has been reported talking about
the increasing potential impact of China to the company, and the
attractiveness of capital markets in both London and Hong Kong.
Currently, North America makes up around 40% of its sales, followed
by 30 per cent from Europe and 10% to 15% from China. Wang Depeng,
founder and CEO of Wuhan-based NextOmics Biosciences and
Beijing-based Grandomics Biosciences, has been cited as saying that
"his firms are the first service providers in China to use
Nanopore's devices for DNA sequencing" and that they plan to spend
over US$10m to buy up to 20 high-capacity sequencing (PromethION)
kits from Nanopore, subject to satisfaction with samples".
Now in its third commercial year, Oxford Nanopore has a customer
base of thousands of MinION users while its larger GridION format
was launched last year. Its largest device, PromethION, was
commercially launched in May 2018 and is already capable of
delivering sub $1,000 nanopore-only human genomes. In May the first
human genome dataset using PromethION was released, and in June,
the first >100Gb PromethION flow cell result was shown by a
customer (PromethION is designed to operate up to 48 flow cells, so
the overall yields are competitive with the highest output
sequencing instruments on the market).
Oxford Nanopore's small, single-test format Flongle, which
provides rapid, smaller tests at accessible prices, is expected in
early access in 2018. Oxford Nanopore has the only sequencing
technology that can be miniaturised to tiny formats and operate in
real time. The Company believes this has the potential to open up
new decentralised applied markets such as infectious
disease/cancer/other diagnostics, food and water safety,
field-based analyses for environmental or agricultural purposes, or
education.
VolTRAX, an automated device for preparation aimed at those who
do not have lab equipment, lab skills, or simply prefer the
reliable results of automated processes, has shown positive results
in early access, and 'V2' is now being introduced with a much
greater suite of functionality for different preparation
techniques. At its 'London Calling' conference in May, Oxford
Nanopore also performed a live demo of 'Ubik', a prototype rugged
device made from low cost materials, designed to take a user from
sample to answer with little effort.
Other significant portfolio company updates
The largest gain in the half-year and, arguably, the most
significant developments for the overall portfolio, came from
Diurnal Group plc, one of the Group's most advanced biotech assets.
Diurnal has two late-stage products for the treatment of the
childhood and adult forms of adrenal insufficiency - Infacort and
Chronocort, respectively. In February, Diurnal announced that
Infacort had been approved for marketing by the European Commission
(EC) and, in May, announced market launch in Germany under the
brand name Alkindi. This represents a major milestone for the
company, transitioning from pure development to marketing and
sales, but also for the British biotechnology sector as a whole,
where very few companies have ever brought a drug to market. In the
half-year, Diurnal's share price appreciated by 26%, providing the
Group with a GBP10.2m unrealised fair value increase.
In June, Microbiotica, a leading player in microbiome-based
therapeutics spun out of the Wellcome Sanger Institute 18 months
ago, signed a $534.0m collaboration with Genentech under which the
two companies will utilise Micriobiotica's unique human microbiome
platform to identify biomarkers, therapeutic targets and medicines
for the treatment of inflammatory bowel disease (IBD). The news
resulted in an increased valuation of the company, which equated to
a ÂGBP2.8m gain for the Group. Another notable success in the
portfolio was Cambridge company Crescendo Biologics Ltd, which
closed a $70.0m financing round and signed a partnership with
Chinese pharmaceutical company Zai Lab for the development of
monoclonal antibodies for the treatment of inflammatory conditions.
In the quoted portfolio, shares in hVIVO plc bucked an eight-month
run of underperformance, returning to levels last seen in October
2017 when it announced positive data for its universal flu vaccine,
FLU-v.
Overall, positive fair value movements from Diurnal, Genomics,
Microbiotica, and Tissue Regenix were offset by poorer share price
performance of a number of quoted portfolio companies, particularly
Abzena plc, Circassia Pharmaceuticals plc and Avacta Group plc,
resulting in a net fair value gain of ÂGBP6.3m for the period.
Portfolio review: Technology
IP Group's Technology portfolio comprises holdings in 81
companies valued at GBP343.8m as at 30 June 2018.
Technology
The IP Group Technology partnership is proud of the role it
plays in supporting cutting-edge British innovation and we were
pleased to see this recognised during the first half of 2018 as two
of our most valuable portfolio assets, mid-air haptics pioneer
Ultrahaptics Ltd and fraud-prevention specialist Featurespace Ltd,
received a Queen's Award for Enterprise in the Innovation category.
Featurespace also appeared at number 566 in the Financial Times
list of Europe's 1,000 fastest growing companies, alongside
off-grid solar company Azuri Technologies Ltd, a Cleantech asset,
which featured at number 230.
Next generation communications is a key thematic area for the
partnership and in this field we were delighted to see digital
supply chain management provider Actual Experience plc make a
series of exciting commercial announcements during the first half
of 2018. In April, the company achieved the first full-scale
deployment of its analytic software within a large enterprise
customer of one of its channel partners, which is expected to
generate revenue in excess of GBP1m per year for Actual Experience.
This is a very significant milestone for the company, proving their
capability to make a large sale through a channel partner, deploy
at scale, and verifying the economic opportunity within large
customers. Soon after that, the company announced a second
large-scale customer deployment through a different channel
partner, predicted to generate revenues of approximately GBP240,000
per annum on a multi-year basis.
Another key thematic focus for the partnership is the evolving
human-machine interface and we are excited by the prospects of one
particular emerging portfolio asset in this area, WaveOptics Ltd,
which we believe has the potential to fundamentally disrupt the
growing Augmented and Mixed Reality markets with its
ground-breaking optical waveguide technology.
Turning to the US, we are pleased to report that the Technology
sector's biggest fair value gain in the first half came from
Uniformity Labs Inc in the US. Uniformity has made substantial
progress establishing relationships with new customers, including
multiple successful validation projects and the close of initial
sales. Uniformity has also identified and completed initial
validation studies with clients in key adjacent printing markets,
including high volume, low cost binder jetting. The company has
doubled its full-time staff to 14 and expanded into new
facilities.
Finally, we are disappointed by the share price performance of
Mirriad Advertising plc since its flotation in December 2017, which
we consider to be somewhat surprising in the context of renewed
contracts with several key partners, added to the endorsement and
strategic value brought by the recent investment from China's Puhua
Investment Fund.
Cleantech
Cleantech is an area of specialisation within the Technology
division at IP Group where we focus on building outstanding,
science-based businesses that mitigate the impacts of climate
change and other environmental challenges. The key investment
themes within Cleantech are distributed energy, energy demand
management, resource efficiency and mobility. The first half of the
year has seen great progress for distributed energy and mobility
asset Ceres Power, where strong share price performance has
delivered a GBP7.2m fair value gain for the Group and our holding
is now valued at GBP38.8m. This has been driven by continued
commercial progress, including the announcement of a strategic
partnership with Weichai Power, one of the leading automobile and
equipment manufacturing companies in China. The partnership with
Weichai envisions investment of up to GBP40.0m in Ceres as well as
a potential licensing agreement and the establishment of a joint
venture. Since the period end, Ceres Power announced it had raised
GBP20.0m (before expenses). The fundraising was significantly over
subscribed with several material new investors and is in addition
to the Weichai investment. In less good news, a fall in the share
price of Xeros Technology Group plc, a listed company with
proprietary water-saving polymer technology in the resource
efficiency space, has resulted in a GBP17.7m unrealised fair value
loss for the Group.
Since the period end, Xeros announced a licensing contract with
Jiangsu Sea-Lion Technology Development Co., Ltd, a wholly owned
subsidiary of the market-leading Chinese commercial washing machine
manufacturer Jiangsu Sea-Lion Machinery Co., Ltd at the annual
China International Laundry Industry Exhibition. Sea-Lion will
integrate Xeros' proprietary technologies into its own commercial
washing machines and sell them through its extensive distribution
network in China, on an exclusive basis. The first sales are
expected in 2019. Sea-Lion will be the first partner to incorporate
Xeros' new XDrum(TM) technology. XDrum(TM) is a simple, low cost
solution for OEMs to easily incorporate Xeros' patented water
saving XOrb(TM) polymer technology into their machine designs.
Portfolio review: Multi-sector platforms
The Group has maintained its strategic stakes in its three
multi-sector platform companies, Oxford Sciences Innovation plc
(OSI), Cambridge Innovation Capital plc (CIC) and Frontier IP Group
plc. OSI has continued to develop its portfolio with 10 new seed
investments added in the 6 months to 30 June 2018 with an
additional GBP18.2m invested in 12 later funding rounds during the
period. The three most significant Series A financings completed in
the period have been Oxford Flow, Ultromics and Oxford Nanoimaging,
the latter raising over GBP13m at a post money valuation of $100m.
OSI continues to attract quality later stage co-investors to its
portfolio, including companies such as Sequoia China and GV. As at
the end of June the portfolio valuation stood at GBP168.4m compared
to GBP126.0m at December 2017.
In their results for the year ended 31 March 2018, CIC reported
that their net assets grew by 14% to GBP144.0m, largely as a result
of a net fair value increase of GBP19.8m in the year. Their
portfolio now consists of 22 companies including IP Group portfolio
companies Inivata, Microbiotica and Storm Therapeutics.
Portfolio review: analysis by company stage
At 30 June 2018, the Group's portfolio fair value of GBP1,163.7m
comprises holdings in businesses that are distributed across stages
of maturity as follows:
As at 30 June 2018 As at 31 December 2017
-----------------------
Fair value Number Fair Value Number
Fair value analysis
by company stage GBPm % % GBPm % %
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Focus 715.3 67% 19 12% 709.6 68% 19 12%
Development 317.0 30% 83 54% 307.2 30% 84 54%
Early-stage 31.8 3% 53 34% 21.6 2% 52 34%
Total 1,064.1 100% 155 100% 1,038.4 100% 155 100%
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Multi-sector platforms 62.8 - 3 - 62.9 - 3 -
De minimis holdings 1.3 - 38 - 1.3 - 42 -
Organic 7.0 40 5.7 - 39 -
----------------------- ------- ---- --- ---- ---------
Total Portfolio 1,135.2 - 236 - 1,108.3 - 239 -
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Attributable to
third parties(I) 28.5 22.3
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Gross Portfolio 1,163.7 1,130.6
----------------------- ------- ---- --- ---- --------- ----- ---- ----
(I) The amount attributable to third parties consists of
GBP17.6m attributable to minority interests represented by third
party limited partners in the consolidated fund, IPVFII, GBP7.8m
attributable to Imperial College London and GBP3.1m attributable to
other third parties (FY 2017: GBP16.3m, GBP5.7m and GBP0.3m).
Portfolio companies which are classed as being in the Focus
stage are those portfolio companies which comprise the Group's
largest 20 investments by fair value, one of which, OSI, is
included within 'multi-sector platforms' above.
The Development stage group includes other businesses to which
the Group has provided in excess of GBP1.0m of funding. Although
each business can vary significantly in its rate and manner of
development, such additional funding is generally used to progress
towards key milestones and commercial validation, to build senior
level capability in the business and to attract experienced
non-executive directors to their boards.
Early-stage companies include both incubation and seed
opportunities. Incubation opportunities comprise businesses or
pre-incorporation projects that are generally at a very early stage
of development, at most within three years since the Group's first
financing, and have received at least one stage of funding.
Opportunities at this stage usually involve capital of less than
GBP0.2m from IP Group, predominantly allowing for proof of concept
work to be carried out. Seed businesses are those that have
typically received financing of up to GBP1.0m in total, primarily
from the Group, in order to continue to progress towards agreed
commercial and technology milestones and to enable the recruitment
of management teams and early commercial engagement.
Those companies which either do not progress beyond the
incubation stage within three years of the Group's initial funding
and/or whose value has subsequently fallen to below GBP0.1m, but
remain as an operating business, are classed as de minimis
holdings. Organic holdings are investments in which the Group has
acquired a shareholding upon creating the company via our
technology transfer relationship with Imperial College London, but
in which we have not actively invested.
An analysis of investments and realisations by company stage is
as follows:
Six months Six months Year ended
ended ended 31 December
Cash investment analysis by company 30 June 2018 30 June 2017 2017
stage GBPm GBPm GBPm
------------------------------------ ------------- ------------- --------------
Focus 10.7 12.5 33.7
Development 26.5 4.5 29.1
Early Stage 9.7 3.1 8.4
Total 46.9 20.1 71.2
------------------------------------ ------------- ------------- --------------
Multi-sector platforms - - -
------------------------------------ ------------- ------------- --------------
Total purchase of equity and debt
investments 46.9 20.1 71.2
------------------------------------ ------------- ------------- --------------
Cash proceeds from sales of equity
investments 2.5 0.3 6.6
------------------------------------ ------------- ------------- --------------
Net investment 44.4 19.8 64.6
------------------------------------ ------------- ------------- --------------
Financial and operational review
The Group recorded a loss for the period of GBP21.6m (HY17:
GBP18.4m profit; FY17: GBP53.4m profit) and a negative Return on
Hard NAV, i.e. on the Group's net assets excluding goodwill and
intangible assets, of GBP13.1m (HY17: GBP21.3m positive; FY17:
GBP64.1m positive). Net assets at 30 June 2018 were GBP1,489.8m
(HY17: GBP966.4m; FY17: GBP1,508.5m) and Hard NAV totalled
GBP1,298.5m at 30 June 2018 (HY17: GBP898.0m; FY17: GBP1,326.2m),
representing 122.6p per share (HY17: 128.9p; FY17: 125.4p).
Consolidated statement of comprehensive income
A summary analysis of the Group's performance is provided
below:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
GBPm GBPm GBPm
--------------------------------------------- ----------- ----------- -------------
Net portfolio gains (1) 0.7 28.7 94.2
Change in fair value of limited
and limited liability partnership
interests (0.8) 0.2 (0.2)
Other income 4.6 2.6 6.1
Administrative expenses - all other
expenses (14.3) (8.1) (21.2)
Administrative expenses - performance-based
staff incentives and share-based
payments charge (1.2) (0.7) (4.9)
Carried interest plan charge (0.7) (2.7) (1.3)
Licensing income - Istesso group - 3.0 3.4
Administrative expenses - Istesso
group - (1.1) (3.5)
Administrative expenses - other
consolidated portfolio companies (1.3) (0.5) (2.1)
Amortisation of intangible assets (5.9) (2.2) (3.9)
Acquisition and restructuring costs - (1.0) (9.1)
IFRS3 charge in respect of acquisition
of subsidiary (1.4) (1.7) (4.4)
Net finance (expense) / income (1.3) 0.2 0.3
--------------------------------------------- ----------- ----------- -------------
(Loss)/profit for the period (21.6) 16.7 53.4
Exclude:
Amortisation of intangibles assets 5.9 2.2 3.9
Share based payment charge 1.2 0.7 2.4
IFRS3 charge in respect of acquisition
of subsidiary 1.4 1.7 4.4
--------------------------------------------- ----------- ----------- -------------
Return on Hard NAV (13.1) 21.3 64.1
--------------------------------------------- ----------- ----------- -------------
Exclude:
Acquisition and restructuring costs - 1.0 9.1
--------------------------------------------- ----------- ----------- -------------
Return on Hard NAV excluding acquisition
and restructuring costs (13.1) 22.3 73.2
--------------------------------------------- ----------- ----------- -------------
1. Defined in the Portfolio review section.
Net portfolio gains consist primarily of realised and unrealised
fair value gains and losses from the Group's equity and debt
holdings in spin-out businesses, which are analysed in detail in
the portfolio analysis above.
Other income totalled GBP4.6m; an increase on the previous half
year (HY17: GBP2.6m; FY17: GBP6.1m) due to continued growth in
Parkwalk Advisors Limited, which was acquired on 31 January 2017,
as well as due to the acquisition of Touchstone Innovations in
October 2017 which saw its revenues being consolidated into the
Group's results for the first time. Other income comprises fund
management fees, licensing and patent income from Imperial
Innovations, corporate finance fees as well as consulting and
similar fees, typically chargeable to portfolio companies for
services including executive search and selection as well as legal
and administrative support.
Other central administrative expenses, excluding
performance-based staff incentives and share-based payments
charges, have increased to GBP14.3m during the period (HY17:
GBP8.1m; FY17: GBP21.2m), primarily as a result of the acquisition
of Touchstone Innovations plc, as well as the growth in IP Group's
international operations.
Administrative expenses resulting from performance-based staff
incentives and share-based payment charges increased to GBP1.2m
during the period (HY17: GBP0.7m; FY17 GBP4.9m). The Group-s return
on Hard NAV is below the minimum threshold for any payments to be
made (or accrued) under the Group-s Annual Incentive Scheme, and
the full current period cost therefore relates to the IFRS 2
share-based payments charge attributable to the Group-s Deferred
Bonus Share Plan and Long-Term Incentive Plan. This non-cash charge
(HY18: GBP1.2m; HY17: GBP0.7m; FY17: GBP2.4m) reflects the fair
value of services received from employees, measured by reference to
the fair value of the share-based payments at the date of award,
but has no net impact on the Group's total equity or net assets.
The increase in this charge versus the previous period reflects
growth in the business including as a result of the acquisition of
Touchstone Innovations plc.
The carried interest plan charge relates to the Group's
Long-Term Incentive Carry Scheme ("LTICS") which was implemented in
late 2016. This accrual reflects the impact of net fair value gains
in the scheme assets in excess of the hurdle. There is no cash
payment due to members of the scheme until sufficient asset
realisations have occurred.
In 2017 the Group's drug development subsidiary, Istesso
Limited, was deconsolidated from the Group after a share and board
reorganisation which resulted in the Group no longer holding a
controlling interest in the company. The licensing income and
operating costs of this business are hence no longer consolidated
into the Group's operating results. Included within the Group's
administrative expenses are costs in respect of a small number of
other portfolio companies. Typically, the Group owns a
non-controlling interest in its portfolio companies; however in
certain circumstances the Group will take a controlling stake and
hence consolidate the results of a portfolio company into the
Group's financial statements. The administrative expenses included
in the Group's results for such companies primarily comprise staff
costs, R&D and other operating expenses.
Costs of GBP1.4m (HY17: GBP1.7m, FY17: GBP4.4m) were incurred in
relation to deferred and contingent consideration payable to the
sellers of Parkwalk Advisors Ltd deemed under IFRS3 to be a payment
for post-acquisition services.
Amortisation costs relate to intangible assets recognised on the
acquisition of Touchstone Innovations plc, Parkwalk Advisors
Limited and Fusion IP plc, which are amortised over the period to
which the contractual commitments relate.
Consolidated statement of financial position
A summary analysis of the Group's assets and liabilities is
provided below:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
GBPm GBPm GBPm
-------------------------------------- ----------- ----------- -------------
Goodwill and other intangible assets 191.3 68.4 182.3
Portfolio 1,163.7 663.0 1,130.6
Other non-current assets 14.9 6.0 13.0
Cash and deposits 258.5 263.1 326.3
EIB debt facility (102.5) (14.9) (104.0)
Other net current liabilities (2.6) (3.8) (11.4)
Other non-current liabilities (33.5) (15.4) (28.3)
Total Equity or Net Assets 1,489.8 966.4 1,508.5
Exclude:
Goodwill (187.0) (63.4) (172.1)
Other intangible assets (4.3) (5.0) (10.2)
Hard NAV 1,298.5 898.0 1,326.2
-------------------------------------- ----------- ----------- -------------
Hard NAV per share 122.6p 128.9p 125.4p
-------------------------------------- ----------- ----------- -------------
The Group's statement of financial position includes goodwill
and acquired intangible assets of GBP191.3m (HY17: ÂGBP68.4m, FY17:
182.3). The most significant of these relates to the acquisition of
Touchstone Innovations plc (HY18: 126.3, HY17:0, FY17: GBP115.4)
and the Group's acquisition of Fusion IP plc in 2014 (HY18:
GBP39.2m, HY17: GBP40.7m, FY17: GBP39.8m); the remaining amounts
relating to the acquisitions of Techtran Limited (HY18: GBP16.3m,
HY17: GBP16.3m, FY17: GBP16.3m), Parkwalk Advisors Ltd (HY18:
GBP6.8m, HY17: GBP8.0m, FY17: GBP8.0m) Top Technology Ventures
Limited (HY18: GBP2.1m, HY17: GBP2.1m, FY17: GBP2.1m) and on the
purchase of a 3(rd) party's minority holding in subsidiary MobilION
Inc. (HY18: GBP0.6m, HY17: GBP0.6m, FY17: GBP0.6m).
Both IP Group and Touchstone Innovation plc arranged debt
facilities with the European Investment Bank ("the EIB"), total
borrowings under which totalled GBP102.5m at the period end (HY17:
GBP15m, FY17: GBP104m). Of these facilities, GBP12.4m is due to be
repaid within twelve months of the period end (HY17: nil, FY18:
GBP6.3m). The facility provides IP Group with an additional source
of long-term capital and represents an evolution in the Group's
capital structure to support its future growth and development.
All-share acquisition of Touchstone Innovations plc
On 17 October 2017 the Group acquired control of 100% of the
ordinary shares in Touchstone Innovations plc. The Group has
recognised the assets and liabilities acquired in accordance with
IFRS 3 "Business Combinations". Certain assets, primarily holdings
in unlisted portfolio companies that have been accounted for using
valuation techniques, were provisionally determined and for a
12-month period post-acquisition, adjustments are made to these
assets to the extent that new information is obtained about facts
and circumstances that were in existence at the acquisition date.
As at the reporting date, an adjustment of GBP14.9m (which
comprises GBP15.8m portfolio valuation decrease and GBP0.9m
decrease in liabilities) has been made to net assets acquired with
a corresponding increase in goodwill.
Cash, cash equivalents and short-term deposits ("Cash")
The principal constituents of the movement in Cash during the
period are as follows:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
GBPm GBPm GBPm
---------------------------------------- ----------- ----------- -------------
Net Cash used in operating activities (19.1) (2.9) (22.4)
Net Cash (used in) / generated
by investing activities (excluding
cash flows from deposits) (47.1) (21.4) (67.6)
Cash flow on acquisition of subsidiary
undertakings (net of cash acquired) - (5.2) 107.8
Issue of share capital - 180.3 181.0
Repayment/Drawdown of debt facility (1.6) - 15.0
Effect of foreign exchange rate
changes - - 0.2
---------------------------------------- ----------- ----------- -------------
Movement during period (67.8) 150.8 214.0
---------------------------------------- ----------- ----------- -------------
At 30 June 2018, the Group's Cash totalled GBP258.5m, a decrease
of GBP67.8m from a total of GBP326.3m at 31 December 2017,
predominantly due to investing activities of GBP47.1m and GBP19.1m
of cash outflow from operations. Cash outflow from operations
includes a net working capital outflow of GBP7.8m (HY17: GBP4.2m
inflow; FY17: GBP1.6m inflow).
Taxation
The Group's business model seeks to deliver long-term value to
its stakeholders through the commercialisation of fundamental
research carried out at its partner universities. To date, this has
been largely achieved through the formation of, and provision of
services and development capital to, spin-out companies formed
around the output of such research. The Group primarily seeks to
generate capital gains from its holdings in spin-out companies over
the longer term but has historically made annual net operating
losses from its operations from a UK tax perspective. Capital gains
achieved by the Group would ordinarily be taxed upon realisation of
such holdings; however since the Group typically holds in excess of
10% in its portfolio companies and those companies are themselves
trading, the Directors continue to believe that the majority of its
holdings will qualify for the Substantial Shareholdings Exemption
("SSE"). This exemption provides that gains arising on the disposal
of qualifying holdings are not chargeable to UK corporation tax
and, as such, the Group has continued not to recognise a provision
for deferred taxation in respect of uplifts in value on those
equity holdings that meet the qualifying criteria. Gains arising on
sales of non-qualifying holdings would ordinarily give rise to
taxable profits for the Group, to the extent that these exceed the
Group's operating losses from time to time.
Assets held in Luxembourg, which were predominantly acquired via
the combination with Touchstone in the prior year, are also subject
to capital gains and ordinarily the Group would be taxed on their
realisation. A participation exemption, similar to the UK SSE
scheme described above, is available for certain share disposals
under Luxembourg tax law. Dividends and gains arising to Imperial
Innovations SÃ!rl through its interest in Touchstone Innovations
Businesses LLP should be exempt from tax under Luxembourg law
provided the conditions for the participation exemption are met for
each investment and, while tax residence of Imperial Innovations
SÃ!rl is maintained in Luxembourg, no UK tax should arise on
applicable gains.
Alternative Performance Measures ("APMs")
The Group discloses alternative performance measures, such as
Hard NAV and Return on Hard NAV, in this half-yearly report. The
Directors believe that these APMs assist in providing additional
useful information on the underlying trends, performance and
position of the Group. Further information on APMs utilised in the
Group, is set out in note 28 of the Group's 2017 Annual Report and
Accounts.
Principal risks and uncertainties
A detailed explanation of the principal risks and uncertainties
faced by the Group, and the steps taken to manage them, is set out
in the Corporate Governance section of the Group's 2017 Annual
Report and Accounts. The principal risks and uncertainties are
summarised as follows:
- it may be difficult for the Group and its early-stage
companies to attract capital;
- the returns and cash proceeds from the Group's early-stage
companies can be very uncertain;
- universities or other research-intensive institutions may
terminate their partnerships or other collaborative relationships
with the
Group;
- the Group may lose key personnel or fail to attract and
integrate new personnel;
- macroeconomic conditions may negatively impact the Group's
ability to achieve its strategic objectives; and
- there may be changes to, impacts from, or failure to comply
with, legislation, government policy and regulation.
The Group is not aware of any significant changes in the nature
of these risks that would affect the next six months of the
financial year, and thus the Group believe the risks noted above
remain applicable to the forthcoming six months.
Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2018
Unaudited Audited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017(1) 2017
Note GBPm GBPm GBPm
-------------------------------------------- ---- ----------- ----------- ------------
Portfolio return and revenue
Change in fair value of equity and debt
investments 0.1 28.5 49.0
Gain on disposal of equity investments 0.6 0.2 0.1
Gain on deconsolidation of subsidiary - - 45.1
Change in fair value of limited and limited
liability partnership interests (0.8) 0.2 (0.2)
Licensing income 0.8 3.0 3.4
Revenue from services and other income 3.8 2.6 6.1
-------------------------------------------- ---- ----------- ----------- ------------
4.5 34.5 103.5
-------------------------------------------- ---- ----------- ----------- ------------
Administrative expenses
Research and development - (0.9) (2.9)
Carried interest plan charge (0.7) (2.7) (1.3)
Share-based payment charge (1.2) (0.7) (2.4)
Amortisation of intangible assets 6 (5.9) (2.2) (3.9)
Acquisition and restructuring costs - (1.0) (9.1)
Other administrative expenses (17.0) (10.5) (30.8)
-------------------------------------------- ---- ----------- ----------- ------------
(24.8) (18.0) (50.4)
-------------------------------------------- ---- ----------- ----------- ------------
Operating (loss)/profit (20.3) 16.5 53.1
Finance income - interest receivable 0.6 0.4 1.0
Finance income - interest payable (1.9) (0.2) (0.7)
-------------------------------------------- ---- ----------- ----------- ------------
(Loss)/profit before taxation (21.6) 16.7 53.4
Taxation - - -
-------------------------------------------- ---- ----------- ----------- ------------
(Loss)/profit for the period (21.6) 16.7 53.4
-------------------------------------------- ---- ----------- ----------- ------------
Other comprehensive income
Exchange differences on translating foreign - - -
operations
-------------------------------------------- ---- ----------- ----------- ------------
Total comprehensive (loss)/income for
the period (21.6) 16.7 53.4
-------------------------------------------- ---- ----------- ----------- ------------
Attributable to:
Equity holders of the parent (22.1) 13.2 49.7
Non-controlling interest 0.5 3.5 3.7
-------------------------------------------- ---- ----------- ----------- ------------
(21.6) 16.7 53.4
-------------------------------------------- ---- ----------- ----------- ------------
Earnings per share
Basic (p) 2 (2.09) 2.27 7.05
Diluted (p) 2 (2.09) 2.27 7.04
-------------------------------------------- ---- ----------- ----------- ------------
1 Re-presented for change in accounting treatment of Parkwalk
acquisition (see note 9).
Condensed consolidated statement of financial position
As at 30 June 2018
Unaudited Audited Audited
30 June 30 June 31 December
2018 2017(1) 2017
Note GBPm GBPm GBPm
-------------------------------------------- ---- --------- -------- ------------
ASSETS
Non-current assets
Intangible assets:
Goodwill 7 187.0 63.4 172.1
Acquired intangible asset 6 4.3 5.0 10.2
Property, plant and equipment 2.0 1.6 2.0
Portfolio:
Equity investments 3 1,132.0 649.9 1,085.4
Debt investments 3 31.7 13.1 45.2
Limited and limited liability partnership
interests 12.9 4.4 11.0
Total non-current assets 1,369.9 737.4 1,325.9
-------------------------------------------- ---- --------- -------- ------------
Current assets
Trade and other receivables 8.4 5.4 8.3
Deposits 80.0 85.0 95.0
Cash and cash equivalents 178.5 178.1 231.3
-------------------------------------------- ---- --------- -------- ------------
Total current assets 266.9 268.5 334.6
-------------------------------------------- ---- --------- -------- ------------
Total assets 1,636.8 1,005.9 1,660.5
-------------------------------------------- ---- --------- -------- ------------
EQUITY AND LIABILITIES
Equity attributable to owners of the
parent
Called up share capital 21.1 13.9 21.1
Share premium account 683.1 682.4 683.1
Merger reserve 510.3 12.8 508.6
Retained earnings 270.8 253.5 291.7
-------------------------------------------- ---- --------- -------- ------------
Total equity attributable to equity
holders 1,485.3 962.6 1,504.5
-------------------------------------------- ---- --------- -------- ------------
Non-controlling interest 4.5 3.8 4.0
-------------------------------------------- ---- --------- -------- ------------
Total equity 1,489.8 966.4 1,508.5
-------------------------------------------- ---- --------- -------- ------------
Current liabilities
Trade and other payables 11.0 9.2 19.7
EIB debt facility 12.4 - 6.3
-------------------------------------------- ---- --------- -------- ------------
Non-current liabilities
EIB debt facility 90.1 14.9 97.7
Carried interest plan liability 8.6 2.7 8.8
Loans from limited partners of consolidated
funds 13.1 12.7 13.1
Provisions for liabilities and charges 11.8 - 6.4
-------------------------------------------- ---- --------- -------- ------------
Total equity and liabilities 1,636.8 1,005.9 1,660.5
-------------------------------------------- ---- --------- -------- ------------
1 Re-presented for change in accounting treatment of Parkwalk
acquisition (see note 9).
Condensed consolidated statement of cash flows
For the six months ended 30 June 2018
Unaudited Audited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017(1) 2017
GBPm GBPm GBPm
---------------------------------------------------- ----------- ----------- ------------
Operating activities
Operating (loss)/profit (20.3) 16.5 53.1
Adjusted for:
Change in fair value of equity and debt investments (0.1) (28.5) (49.0)
Change in fair value of limited and limited
liability partnership interests 0.8 (0.2) 0.2
Gain on disposal of equity investments (0.6) (0.2) (0.1)
Gain on deconsolidation of subsidiary - - (45.1)
Depreciation of property, plant and equipment 0.5 0.1 0.9
Long term incentive carry scheme plan charge 0.7 2.7 1.3
IFRS3 charge in respect of acquisition of
subsidiary - equity-settled 1.7 - -
Amortisation of intangible non-current assets 5.9 2.2 3.9
Fees settled in the form of equity - (0.4) (0.5)
Share-based payment charge 1.2 0.7 2.4
Changes in working capital:
(Increase)/decrease in trade and other receivables (0.4) (2.6) (6.1)
(Decrease)/increase in trade and other payables (7.4) 6.8 7.7
Increase in non-current liabilities - - 8.6
Other operating cash flows:
Net interest (paid)/ received (1.1) - 0.3
---------------------------------------------------- ----------- ----------- ------------
Net cash outflow from operating activities (19.1) (2.9) (22.4)
---------------------------------------------------- ----------- ----------- ------------
Investing activities
Purchase of property, plant and equipment - (1.6) (1.6)
Purchase of equity and debt investments (46.9) (20.1) (71.2)
Net cash flow from/(to) deposits 15.0 (85.0) (95.0)
Acquisition of subsidiary undertaking - (5.2) 107.8
Investment in limited and limited liability
partnerships (2.9) - (1.4)
Distributions from limited partnership funds 0.2 - -
Proceeds from sale of equity investments 2.5 0.3 6.6
Net cash outflow from investing activities (32.1) (111.6) (54.8)
---------------------------------------------------- ----------- ----------- ------------
Financing activities
Proceeds from the issue of share capital - 180.3 184.7
Transaction costs related to issue of share
capital - - (3.7)
(Repayment of)/proceeds from drawdown of
EIB facility (1.6) - 15.0
Net cash (outflow)/inflow from financing
activities (1.6) 180.3 196.0
---------------------------------------------------- ----------- ----------- ------------
Net (decrease)/increase in cash and cash
equivalents (52.8) 65.8 118.8
Cash and cash equivalents at the beginning
of the period 231.3 112.3 112.3
Effect of foreign exchange rate changes - - 0.2
Cash and cash equivalents at the end of the
period 178.5 178.1 231.3
---------------------------------------------------- ----------- ----------- ------------
1 Re-presented for change in accounting treatment of Parkwalk
acquisition (see note 9).
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2018
Attributable to equity holders of
the parent
Share Share Merger Retained Non-controlling Total
capital premium reserve earnings Total interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- -------- -------- --------- ------- --------------- -------
At 31 December 2016
(audited) 11.3 504.7 12.8 239.6 768.4 0.3 768.7
Issue of equity 2.6 177.7 - - 180.3 - 180.3
Comprehensive income - - - 13.2 13.2 3.5 16.7
Equity-settled share-based
payments - - - 0.7 0.7 - 0.7
At 30 June 2017 (audited) 13.9 682.4 12.8 253.5 962.6 3.8 966.4
Issue of equity 7.2 0.7 495.8 - 503.7 - 503.7
Comprehensive income - - - 36.5 36.5 0.2 36.7
Equity-settled share-based
payments - - - 1.7 1.7 - 1.7
At 31 December 2017
(audited) 21.1 683.1 508.6 291.7 1,504.5 4.0 1,508.5
Issue of equity - - 1.7 - 1.7 - 1.7
Comprehensive income - - - (22.1) (22.1) 0.5 (21.6)
Equity-settled share-based
payments - - - 1.2 1.2 - 1.2
At 30 June 2018 (unaudited) 21.1 683.1 510.3 270.8 1,485.3 4.5 1,489.8
---------------------------- -------- -------- -------- --------- ------- --------------- -------
Notes to the half-yearly condensed set of financial
statements
1. Operating segments
For each of the periods referenced below, the Group-s revenue
and profit/loss before taxation were derived almost entirely from
its principal activities within the UK. Though the Group has
initiated operations in the US and Australia, the associated
revenues and costs are currently immaterial and accordingly, no
additional geographical disclosures are given. For management
reporting purposes, the Group is currently organised into two
operating segments: (i) the commercialisation of intellectual
property via the formation of long-term partner relationships with
universities; (ii) the management of EIS and venture funds focusing
on early-stage UK technology companies. The Group operated a third
segment, the in-licensing of drugable intellectual property from
research intensive institutions, until the deconsolidation of
Istesso Limited, its drug development subsidiary, at the end of
2017.
Venture
University capital
partnership fund In-licensing
business management activity Consolidated
Six months ended 30 June 2018 (unaudited) GBPm GBPm GBPm GBPm
------------------------------------------- ------------ ----------- ------------ ------------
STATEMENT OF COMPREHENSIVE INCOME
Portfolio return and revenue
Change in fair value of equity and
debt investments 0.1 - - 0.1
Gain on disposal of equity investments 0.6 - - 0.6
Change in fair value of limited and
limited liability partnership investments (0.8) - - (0.8)
Licensing income 0.8 - - 0.8
Revenue from services and other income 0.5 3.3 - 3.8
Amortisation of intangible assets (5.9) - - (5.9)
Carried interest plan charge (0.7) - - (0.7)
Share-based payment charge (1.2) - - (1.2)
Administrative expenses (15.2) (1.8) - (17.0)
------------------------------------------- ------------ ----------- ------------ ------------
Operating loss (21.8) 1.5 - (20.3)
Net finance cost (1.3) - - (1.3)
------------------------------------------- ------------ ----------- ------------ ------------
Profit before taxation (23.1) 1.5 - (21.6)
Taxation - - - -
------------------------------------------- ------------ ----------- ------------ ------------
(Loss)/profit for the period (23.1) 1.5 - (21.6)
------------------------------------------- ------------ ----------- ------------ ------------
STATEMENT OF FINANCIAL POSITION
Assets 1,618.6 18.2 - 1,636.8
Liabilities (139.8) (7.2) - (147.0)
------------------------------------------- ------------ ----------- ------------ ------------
Net assets 1,478.8 11.0 - 1,489.8
------------------------------------------- ------------ ----------- ------------ ------------
Other segment items
Capital expenditure - - - -
Depreciation (0.5) - - (0.5)
------------------------------------------- ------------ ----------- ------------ ------------
Venture
University capital
partnership fund In-licensing
business management activity Consolidated
Six months ended 30 June 2017 (audited) GBPm GBPm GBPm GBPm
------------------------------------------- ------------ ----------- ------------ ------------
STATEMENT OF COMPREHENSIVE INCOME
Portfolio return and revenue
Change in fair value of equity and
debt investments 28.5 - - 28.5
Gain on disposal of equity investments 0.2 - - 0.2
Change in fair value of limited and
limited liability partnership investments 0.2 - - 0.2
Licensing income - - 3.0 3.0
Revenue from services and other income 0.1 - - 0.1
Revenue from fund management services - 2.5 - 2.5
Amortisation of intangible assets (2.2) - - (2.2)
Carried interest plan charge (2.7) - - (2.7)
Acquisition costs (1.0) - - (1.0)
Administrative expenses (10.2) (1.0) (0.9) (12.1)
------------------------------------------- ------------ ----------- ------------ ------------
Operating profit 12.9 1.5 2.1 16.5
Net finance income 0.2 - - 0.2
------------------------------------------- ------------ ----------- ------------ ------------
Profit before taxation 13.1 1.5 2.1 16.7
Taxation - - - -
------------------------------------------- ------------ ----------- ------------ ------------
Profit for the period 13.1 1.5 2.1 16.7
------------------------------------------- ------------ ----------- ------------ ------------
STATEMENT OF FINANCIAL POSITION
Assets 981.5 15.6 8.8 1,005.9
Liabilities (29.8) (0.4) (9.3) (39.5)
------------------------------------------- ------------ ----------- ------------ ------------
Net assets 951.7 15.2 (0.5) 966.4
------------------------------------------- ------------ ----------- ------------ ------------
Other segment items
Capital expenditure (1.6) - - (1.6)
Depreciation (0.1) - - (0.1)
------------------------------------------- ------------ ----------- ------------ ------------
Venture
University capital
partnership fund In-licensing
business management activity Consolidated
Year ended 31 December 2017 (audited) GBPm GBPm GBPm GBPm
----------------------------------------- ------------ ----------- ------------ ------------
STATEMENT OF COMPREHENSIVE INCOME
Portfolio return and revenue
Change in fair value of equity and
debt investments 49.0 - - 49.0
Gain on disposal of equity investments 0.1 - - 0.1
Gain on deconsolidation of subsidiary - - 45.1 45.1
Change in fair value of limited and
limited liability partnership interests (0.2) - - (0.2)
Licensing income - - 3.4 3.4
Revenue from services and other income 1.1 0.9 - 2.0
Revenue from fund management services - 4.1 - 4.1
Carried interest plan charge (1.3) - - (1.3)
Amortisation of intangible assets (3.9) - - (3.9)
IFRS3 charge in respect of acquisition
of subsidiary (4.4) - - (4.4)
Acquisition and restructuring costs (9.1) - - (9.1)
Administrative expenses (25.9) (2.3) (3.5) (31.7)
----------------------------------------- ------------ ----------- ------------ ------------
Operating profit 5.4 2.7 45.0 53.1
Finance income 1.0 - - 1.0
Finance costs (0.7) - - (0.7)
Profit before taxation 5.7 2.7 45.0 53.4
Taxation - - -
----------------------------------------- ------------ ----------- ------------ ------------
Loss for the year 5.7 2.7 45.0 53.4
----------------------------------------- ------------ ----------- ------------ ------------
STATEMENT OF FINANCIAL POSITION
Assets 1,643.4 17.1 - 1,660.5
Liabilities (147.8) (4.2) - (152.0)
----------------------------------------- ------------ ----------- ------------ ------------
Net assets 1,495.6 12.9 - 1,508.5
----------------------------------------- ------------ ----------- ------------ ------------
Other segment items
Capital expenditure 1.6 - - 1.6
Depreciation (0.9) - - (0.9)
----------------------------------------- ------------ ----------- ------------ ------------
2. Earnings per share
Unaudited Audited year
six months Audited six ended
ended months ended 31 December
30 June 2018 30 June 2017 2017
Earnings GBPm GBPm GBPm
----------------------------------- ------------- ------------- ------------
Earnings for the purposes of basic
and dilutive earnings per share (22.1) 13.2 49.7
----------------------------------- ------------- ------------- ------------
Unaudited Audited year
six months ended
ended Audited six 31 December
30 June 2018 months ended 2017
Number of 30 June 2017 Number of
Number of shares shares Number of shares shares
-------------------------------------- --------------- ----------------- -------------
Weighted average number of ordinary
shares for
the purposes of basic earnings
per share 1,058,205,661 581,197,034 704,227,751
Effect of dilutive potential ordinary
shares:
Options or contingently issuable
shares - 1,022,809 657,673
-------------------------------------- --------------- ----------------- -------------
Weighted average number of ordinary
shares for
the purposes of diluted earnings
per share 1,058,205,661 582,219,843 704,885,424
-------------------------------------- --------------- ----------------- -------------
Potentially dilutive ordinary shares include contingently
issuable shares arising under the Group's LTIP arrangements, and
options issued as part of the Deferred Bonus Share Plan (for annual
bonuses deferred under the terms of the Group's annual incentive
scheme).
3. Investment portfolio
The accounting policies in regard to valuations in these
half-yearly results are the same as those applied by the Group in
its audited consolidated financial statements for the year ended 31
December 2017 and which will form the basis of the 2018 Annual
Report and Accounts. Investments are designated as fair value
through profit or loss and are initially recognised at fair value
and any gains or losses arising from subsequent changes in fair
value are presented in profit or loss in the statement of
comprehensive income in the period in which they arise.
The Group classifies financial assets using a fair value
hierarchy that reflects the significance of the inputs used in
making the related fair value measurements. The level in the fair
value hierarchy within which a financial asset is classified is
determined on the basis of the lowest level input that is
significant to that asset's fair value measurement. The fair value
hierarchy has the following levels:
Level Quoted prices in active markets.
1 -
Level Inputs other than quoted prices that are observable, such
2 - as prices from market transactions.
Level One or more inputs that are not based on observable market
3 - data.
Level 1 Level 3
------------------ ------------------------------------- ------------
Level 3a Level 3b
-------------------------------
Equity
Equity investments Equity investments Unquoted investments
in quoted in unquoted debt investments in unquoted
spin-out spin-out in spin-out spin-out
companies companies companies companies Total
GBPm GBPm GBPm GBPm GBPm
------------------------------------ ------------------ ------------------ ----------------- ------------ -------
At 31 December 2016
(audited) 161.1 368.0 19.1 65.8 614.0
Investments during
the period 1.5 15.2 2.9 0.5 20.1
Transaction-based reclassifications
during the period - 4.1 (8.6) 4.5 -
Other transfers between
hierarchy levels during
the period - 2.6 - (2.6) -
Disposals during the -
period - - - -
Fees settled via equity - 0.4 - - 0.4
Change in fair value
in the period 10.3 23.9 (0.3) (4.8) 29.1
Exchange differences
on translating foreign
currency investments - (0.6) - - (0.6)
------------------------------------ ------------------ ------------------ ----------------- ------------ -------
At 30 June 2017 (audited) 172.9 413.6 13.1 63.4 663.0
Investments during
the period 13.7 21.1 8.6 7.7 51.1
Acquired with Touchstone
Innovations plc 35.3 131.6 19.9 165.4 352.2
Transaction-based reclassifications
during the period - 1.5 (3.9) 2.4 -
Other transfers between
hierarchy levels during
the period 13.4 (269.3) - 255.9 -
Disposals during the
period 1.2 - (0.8) (7.8) (7.4)
Adjustments for deconsolidation
of subsidiaries - - 8.4 42.7 51.1
Fees settled via equity - 0.1 - - 0.1
Change in fair value
in the period (11.4) 3.0 (0.1) 28.4 19.9
Exchange differences
on translating foreign
currency investments - 0.6 - - 0.6
------------------------------------ ------------------ ------------------ ----------------- ------------ -------
At 31 December 2017
(audited) 225.1 302.2 45.2 558.1 1,130.6
Investments during
the period 0.5 32.8 8.2 5.4 46.9
Adjustments to acquisition
with Touchstone Innovations
plc (0.2) (7.3) (6.9) (1.4) (15.8)
Transaction-based reclassifications
during
the period 4.7 9.2 (14.8) 0.9 -
Other transfers between
hierarchy levels during
the period - 281.1 - (281.1) -
Disposals during the
period (2.1) - - (0.7) (2.8)
Fees settled via equity - - - - -
Change in revenue share 0.2 - - 4.5 4.7
Change in fair value
in the period (23.1) 16.9 - 4.7 (1.5)
Exchange differences
on translating foreign
currency investments - 1.1 - 0.5 1.6
At 30 June 2018 (unaudited) 205.1 636.0 31.7 290.9 1,163.7
------------------------------------ ------------------ ------------------ ----------------- ------------ -------
Fair values of unquoted spin-out companies classified as Level
3b in the fair value hierarchy have been determined in part or in
full by valuation techniques that are not supported by observable
market prices or rates. Investments in 166 companies have been
classified as Level 3b and the individual valuations for each of
these have been arrived at using the following valuation
method:
Where fair values are based upon the most recent market
transaction, but that transaction occurred more than twelve months
prior to the balance sheet date, the investments are classified as
Level 3b in the fair value hierarchy. The fair values of
investments categorised as Level 3b are analysed on a quarterly
basis to consider indicators which may make the most recent
investment no longer a representation of fair value. Due to the
nature of the investments, observable market inputs are not
commonly available, therefore consideration of indicators of a
change in fair value focus on the companies' performance and
achievement of technical and commercial milestones.
Where indicators of a change in fair value against the most
recent market transaction are identified, any adjustment to arrive
at fair value is based on objective data from the company and the
experience and judgement of the Group.
If the fair value of all Level 3b equity investments were to
decrease by 10%, the net assets figure would decrease by GBP29.1m,
with a corresponding increase if the unobservable inputs were to
increase by 10%.
For assets and liabilities that are recognised at fair value on
a recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by reassessing
categorisation (based on the lowest level input that is significant
to the fair value measurement as a whole) at the end of each
reporting period. Transfers between tiers are then made as if the
transfer took place on the first day of the period in question.
If the assumptions used in the valuation techniques for the
Group's holding in each company are varied by using a range of
possible alternatives, there is no material difference to the
carrying value of the respective spin-out company. The effect on
the consolidated statement of comprehensive income for the period
is also not expected to be material.
Transfers between Level 3a and 1 occur when a previously
unquoted investment undertakes an initial public offering,
resulting in its equity becoming quoted on an active market. In the
current period, there were no transfers of this nature.
Transfers between Level 1 and Level 3a would occur when a quoted
investment's market becomes inactive. There have been no such
instances in the current period.
Transfers between Level 3b and Level 3a occur when an
investment, for which the penultimate funding round occurred more
than twelve months before the prior period end, undertakes an
investment round during the period that results in an observable
market price. In the current period, transfers of this nature
amounted to GBP366.1m.
Transfers between Level 3a and Level 3b occur when the balance
sheet date becomes more than twelve months after an investment's
most recent funding round, at which point the price is deemed to be
unobservable. In the current period, transfers of this nature
amounted to GBP85.0m.
The fair value changes in Level 3b investments have amounted to
a gain of GBP5.2m in the period, recognised as change in fair value
of equity and debt investments in the condensed consolidated
statement of comprehensive income.
4. Share capital
Audited
Unaudited Audited 31 December
30 June 2018 30 June 2017 2017
GBPm GBPm GBPm
-------------------------------- ------------- ------------- ------------
Issued and fully paid:
1,059,144,595 ordinary shares
of 2p each (HY17: 696,727,321;
FY17: 1,057,383,601) 21.1 13.9 21.1
-------------------------------- ------------- ------------- ------------
In April 2018, the Group issued 1,519,849 new ordinary shares to
satisfy a proportion of the deferred consideration, which has
become due in respect of the acquisition of Parkwalk Advisors
Limited during the previous year.
Also during April 2018, the Group issued 241,145 new ordinary
shares following the exercise of nil-cost options awarded under the
Group's Deferred Bonus Share Plan by certain of the Group's
employees.
The Company has one class of ordinary shares, each with a par
value of 2p and carrying equal voting rights, equal rights to
income and distributions of assets on liquidation, or otherwise,
and no right to fixed income.
5. Acquisition of subsidiaries
On 17 October 2017 the Group acquired control of 100% of the
ordinary shares in Touchstone Innovations plc. The Group has
recognised the assets and liabilities acquired in accordance with
IFRS 3 'Business Combinations'. Certain assets, primarily holdings
in unlisted portfolio companies that have been accounted for using
valuation techniques, were provisionally determined and for a
12-month period post-acquisition, adjustments are made to these
assets to the extent that new information is obtained about facts
and circumstances that were in existence at the acquisition date.
As at the reporting date, an adjustment of GBP14.9m (which
comprises GBP15.8m portfolio valuation decrease and ÂGBP0.9m
decrease in liabilities) has been made to net assets acquired.
6. Intangible assets
Total
GBPm
--------------------------------------------------------- -------
Cost
At 1 January 2017 (audited) 21.6
Additions: acquisition of Parkwalk Advisors (see note 5) 2.1
--------------------------------------------------------- -----
At 30 June 2017 (audited) 23.7
Additions 6.9
--------------------------------------------------------- -----
At 31 December 2017 (audited) 30.6
Additions -
At 30 June 2018 (unaudited) 30.6
--------------------------------------------------------- -------
Accumulated amortisation
At 1 January 2017 (audited) 16.5
Charge for the period 2.2
------------------------------ ----
At 30 June 2017 (audited) 18.7
Charge for the period 1.7
------------------------------ ----
At 31 December 2017 (audited) 20.4
Charge for the period 5.9
------------------------------ ----
At 30 June 2018 (audited) 26.3
------------------------------ ----
Net book value
------------------------------ ----
At 30 June 2017 (audited) 5.0
------------------------------ ----
At 31 December 2017 (audited) 10.2
------------------------------ ----
At 30 June 2018 (unaudited) 4.3
------------------------------ ----
The intangible assets represent contracts with customers and
other contractual arrangements with UK universities acquired
through acquisition of subsidiaries. The contractual arrangements
have fixed terms and, consequently, the intangible assets have a
finite life which align with the remaining terms which, at the end
of the period, range from two months to 29 months. The individual
contractual arrangements are amortised in a straight line over the
remainder of their terms with the expense being presented directly
on the primary statements.
7. Goodwill
ÂGBPm
--------------------------------------------------------- ----------
At 31 December 2016 (audited) 57.1
Recognised on acquisition of subsidiary undertaking (see
note 5) 5.7
Other additions 0.6
--------------------------------------------------------- ----------
At 30 June 2017 (audited) 63.4
Recognised on acquisition of subsidiary undertaking (see
note 5) 108.7
31 December 2017 (audited) 172.1
Recognised on acquisition of subsidiary undertaking (see
note 5) 14.9
At 30 June 2018 (unaudited) 187.0
--------------------------------------------------------- ----------
Goodwill represents the excess of the cost of an acquisition
over the fair value of the net identifiable assets of acquired
subsidiaries at the date of acquisition. Included in the balance
sheet of the Group, at 30 June 2018, is goodwill of GBP187.0m. This
arose from the Group's acquisition of Top Technology Ventures
Limited in June 2004 (GBP2.1m), Techtran Group Limited in January
2005 (GBP16.3m), Fusion IP plc in March 2014 (GBP38.7m) and
MobilION Inc. (GBP0.6m), and more recently, the acquisitions of
Parkwalk Advisors in January 2017 (GBP5.9m) and Touchstone
Innovations in October 2017 (GBP123.4m). Goodwill is allocated from
the acquisition date to each of the Group's cash-generating units
("CGUs") that are expected to benefit from the business
combination. Goodwill may be allocated to CGUs in both the acquired
business and in the existing business.
The Group conducts annual impairment tests on the carrying value
of goodwill, based on the recoverable amount of the CGUs to which
the goodwill has been allocated. The goodwill allocated to each CGU
is summarised in the table below. A number of both value-in-use and
fair-value-less-costs-to-sale calculations are used to assess the
recoverable values of the CGUs, details of which are specified in
the audited consolidated financial statements for the year ended 31
December 2017.
Unaudited Audited Audited
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
--------------------------- --------- -------- ------------
University partnership CGU 184.5 61.1 169.6
Fund management CGU 2.1 2.1 2.1
Parkwalk Advisors CGU 0.4 0.2 0.4
--------------------------- --------- -------- ------------
187.0 63.4 172.1
--------------------------- --------- -------- ------------
During the period to 30 June 2018, no factors indicating
potential impairment of goodwill were noted and, as a result, no
impairment review was deemed necessary.
8. Related party transactions
The Group has various related parties arising from its key
management, subsidiaries, equity stakes in portfolio companies and
management of certain Limited Partnership funds.
a) Limited partnerships
The Group manages a number of investment funds structured as
Limited Partnerships. Group entities have a Limited Partnership
interest (see note 1) and act as the general partners of these
Limited Partnerships. The Group therefore has power to exert
significant influence over these Limited Partnerships. The
following amounts have been included in respect of these Limited
Partnerships:
Audited
Unaudited six months Audited
six months ended year ended
ended 30 June 31 December
30 June 2017 2017
Income statement 2018 GBPm GBPm GBPm
---------------------- ----------- ----------- ------------
Revenue from services 0.3 0.5 0.7
---------------------- ----------- ----------- ------------
Unaudited Audited Audited
30 June 30 June 31 December
2018 2017 2017
Statement of financial position GBPm GBPm GBPm
----------------------------------- --------- -------- ------------
Investment in limited partnerships 2.9 3.0 2.6
----------------------------------- --------- -------- ------------
Amounts due from related parties 0.8 0.5 0.7
----------------------------------- --------- -------- ------------
b) Key management transactions
The following key management held shares in the following
spin-out companies as at 30 June 2018:
Number of Number of
shares held shares acquired/ Number of
Director/ at (disposed shares held
Company 1 January of) in the at
Secretary Company name 2018 period 30 June 2018 %
------------- ----------------------------- ------------ ----------------- ------------- -----
Alan Aubrey Accelercomm Limited 333 305 638 0.4%
Alesi Surgical Limited 18 - 18 0.2%
Amaethon Limited -
A Shares 104 - 104 3.1%
Amaethon Limited -
B Shares 11,966 - 11,966 1.0%
Amaethon Limited -
Ordinary shares 21 - 21 0.3%
Avacta Group plc 202,761 - 202,761 0.3%
Boxarr Limited 1,732 - 1,732 0.3%
Capsant Neurotechnologies
Limited 11,631 - 11,631 0.8%
Crysalin Limited 1,447 - 1,447 0.1%
Ditto AI Limited 120,434,525 - 120,434,525 9.0%
Diurnal Group plc 15,000 - 15,000 <0.1%
EmDot Limited 15 - 15 0.9%
Getech Group plc 15,000 - 15,000 <0.1%
Alan Aubrey Gunsynd plc 767,310 - 767,310 <0.1%
(cont.) hVivo plc 37,160 - 37,160 <0.1%
Ilika plc 69,290 - 69,290 <0.1%
Istesso Limited 1,185,150 - 1,185,150 1.7%
Itaconix plc 88,890 - 88,890 0.1%
Karus Therapeutics
Limited 223 - 223 <0.1%
Microbiotica Limited 10,000 - 10,000 <0.1%
Mirriad Advertising
plc 33,333 - 33,333 <0.1%
MDL 2016 Limited -
Ordinary shares 3,226 - 3,226 0.4%
MDL 2016 Limited -
A shares 229 - 229 0.5%
Modern Water plc 519,269 - 519,269 0.7%
Cronin Group plc 2,172,809 - 2,172,809 0.4%
Oxford Nanopore Technologies
Limited 101,208 - 101,208 0.4%
Perachem Holdings plc 108,350 - 108,350 0.8%
Salunda Limited 53,639 - 53,639 <0.1%
Structure Vision Limited 212 - 212 1.0%
Surrey Nanosystems
Limited 453 - 453 0.3%
Tissue Regenix Group
plc 2,389,259 - 2,389,259 0.3%
Xeros Technology Group
plc 40,166 - 40,166 <0.1%
Zeetta Networks Limited 424 - 424 <0.1%
Amaethon Limited -
Mike Townend A Shares 104 - 104 3.1%
Amaethon Limited -
B Shares 11,966 - 11,966 1.0%
Amaethon Limited -
Ordinary shares 21 - 21 0.3%
Applied Graphene Materials
plc 22,619 - 22,619 <0.1%
Avacta Group plc 20,001 - 20,001 <0.1%
Capsant Neurotechnologies
Limited 11,282 - 11,282 0.8%
Creavo Technologies
Limited 117 - 117 <0.1%
Crysalin Limited 1,286 - 1,286 0.1%
Ditto AI Limited 613,048 - 613,048 <0.1%
Diurnal Group plc 15,000 - 15,000 <0.1%
EmDot Limited 14 - 14 0.8%
Getech Group plc 20,000 - 20,000 <0.1%
Istesso Limited 1,185,150 - 1,185,150 1.7%
Ilika plc 10,000 - 10,000 <0.1%
Itaconix plc 64,940 - 64,940 <0.1%
Mirriad Advertising
plc 25,000 - 25,000 <0.1%
Mode Diagnostics Limited 1,756 - 1,756 0.1%
Modern Water plc 575,000 - 575,000 0.7%
Cronin Group plc 932,944 - 932,944 0.2%
Oxford Advanced Surfaces
Limited 5,000 - 5,000 0.2%
Oxford Nanopore Technologies
Limited 30,967 - 30,967 0.1%
Perachem Holdings plc 113,222 - 113,222 0.8%
Structure Vision Limited 212 - 212 1.0%
Surrey Nanosystems
Limited 404 - 404 0.2%
Tissue Regenix Group
plc 1,950,862 - 1,950,862 0.3%
Ultrahaptics Holdings
Limited 1,224 - 1,224 <0.1%
Xeros Technology Group
plc 35,499 - 35,499 <0.1%
Greg Smith Alesi Surgical Limited 2 - 2 <0.1%
Avacta Group plc 3,904 - 3,904 <0.1%
Capsant Neurotechnologies
Limited 896 - 896 <0.1%
Crysalin Limited 149 - 149 <0.1%
Ditto AI Limited 144,248 - 144,248 <0.1%
Diurnal Group plc 15,000 - 15,000 <0.1%
EmDot Limited 4 - 4 0.2%
Encos Limited 5,671 - 5,671 0.3%
Getech Group plc 8,000 - 8,000 <0.1%
hVivo plc 61,340 - 61,340 <0.1%
Istesso Limited 313,425 - 313,425 0.5%
Itaconix plc 4,500 - 4,500 <0.1%
Perachem Holdings plc 4,830 - 4,830 <0.1%
Mirriad Advertising
plc 16,667 - 16,667 <0.1%
MDL 2016 Limited -
Ordinary shares 361 - 361 <0.1%
MDL 2016 Limited -
A shares 28 - 28 <0.1%
Modern Water plc 7,250 - 7,250 <0.1%
Oxford Nanopore Technologies
Limited 1,581 - 1,581 <0.1%
Summit Therapeutics
plc 798 - 798 <0.1%
Surrey Nanosystems
Limited 88 - 88 <0.1%
Tissue Regenix Group
plc 50,000 - 50,000 <0.1%
Xeros Technology Group
plc 1,392 - 1,392 <0.1%
David Baynes Alesi Surgical Limited 4 - 4 <0.1%
Arkivum Limited 377 - 377 <0.1%
Creavo Technologies
Limited 46 - 46 <0.1%
Diurnal Group plc 73,000 - 73,000 0.1%
Mirriad Advertising
David Baynes plc 16,667 - 16,667 <0.1%
Oxford Nanopore Technologies
(cont.) Limited 174 - 174 <0.1%
Ultrahaptics Holdings
Limited 26 - 26 <0.1%
Zeetta Networks Limited 424 - 424 <0.1%
------------------------------------------- ------------ ----------------- ------------- -----
Mark Reilly Actual Experience plc 65,500 - 65,500 <0.1%
Diurnal Group plc 7,500 - 7,500 <0.1%
Ultrahaptics Holdings
Limited 1,700 - 1,700 <0.1%
Mirriad Advertising
plc 33,333 - 33,333 <0.1%
------------------------------------------- ------------ ----------------- ------------- -----
Sam Williams Accelercomm Limited 66 61 127 0.1%
Alesi Surgical Limited 1 - 1 <0.1%
Creavo Medical Technologies
Limited 23 - 23 <0.1%
Diurnal Group plc 46,748 5,500 52,248 0.1%
Istesso Limited 7,048,368 - 7,048,368 10.0%
Microbiotica Limited 7,000 - 7,000 <0.1%
Mirriad Advertising
plc 3,333 - 3,333 <0.1%
Oxford Nanopore Technologies
Limited 340 - 340 <0.1%
Ultrahaptics Holdings
Limited 558 - 558 <0.1%
------------------------------------------- ------------ ----------------- ------------- -----
c) Portfolio companies
The Group earns fees from the provision of business support
services and corporate finance advisory to portfolio companies in
which the Group has an equity stake. Through the lack of control
over portfolio companies these fees are considered arm's length
transactions. The following amounts have been included in respect
of these fees:
Unaudited Audited
six months six months Audited
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
Statement of comprehensive income GBPm GBPm GBPm
---------------------------------- ----------- ----------- --------------
Revenue from services 1.1 1.0 1.9
---------------------------------- ----------- ----------- --------------
Unaudited Audited Audited
30 June 30 June 31 December
2018 2017 2017
Statement of financial position GBPm GBPm GBPm
---------------------------------- ----------- ----------- ------------
Trade receivables 0.3 0.5 0.5
---------------------------------- ----------- ----------- ------------
d) Subsidiary companies
Subsidiary companies that are not 100% owned either directly or
indirectly by the parent company have intercompany balances with
other Group companies totalling as follows:
Unaudited Audited Audited
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
--------------------------------------- --------- -------- ------------
Intercompany balances with other Group
companies 3.4 10.7 3.2
--------------------------------------- --------- -------- ------------
These intercompany balances represent funding loans provided by
Group companies that are interest free, repayable on demand and
unsecured.
9. Re-presented comparative figures
The June 2017 comparative figures were re-presented to recognise
amounts paid in relation to the deferred and contingent
consideration payable to the Parkwalk sellers in the period and
deemed, under IFRS3, to represent a payment for post-acquisition
services.
General information
The comparative financial information presented herein for the
year ended 31 December 2017 does not constitute full statutory
accounts within the meaning of the Companies Act 2006. The Group's
Annual Report and Accounts for the year ended 31 December 2017 have
been delivered to the Registrar of Companies. The Group's
independent auditor's report on those accounts was unqualified, did
not include references to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
did not contain a statement under Section 498(2) or 498(3) of the
Companies Act 2006.
Accounting policies
Basis of preparation
The financial information presented in these half-yearly results
constitutes the condensed consolidated financial statements of IP
Group plc, a company incorporated in Great Britain and registered
in England and Wales, and its subsidiaries (together, the "Group")
for the six months ended 30 June 2018.
The condensed consolidated financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting and
should be read in conjunction with the Annual Report and Accounts
for the year ended 31 December 2017, which have been prepared in
accordance with International Financial Reporting Standards as
adopted for use in the EU ("IFRS"). The financial information in
these half-yearly results, which were approved by the Board and
authorised for issue on 25 July 2018, is unaudited but has been
subject to a review by the Group's independent auditor.
Accounting estimates and judgements
The preparation of the half-yearly results requires management
to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets and liabilities, income and expenses. Estimates and
judgements are continually evaluated and are based on historical
experience and other factors, such as expectations of future
events, and are believed to be reasonable under the circumstances.
Actual results may differ from these estimates. In preparing these
half-yearly results, the significant judgements made by management
in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those applied to the
audited consolidated financial statements for the year ended 31
December 2017.
Going concern
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for a period of at least 12 months from the
date of approval of these consolidated half-year financial
statements. Accordingly, they continue to adopt the going concern
basis in preparing the condensed consolidated half-year financial
statements.
Accounting policies
The accounting policies applied by the Group in these
half-yearly results are the same as those applied by the Group in
its audited consolidated financial statements for the year ended 31
December 2017 and which will form the basis of the 2018 Annual
Report and Accounts. None of the new standards that have become
effective in the period are expected to have a material effect on
the Group's future financial statements.
Statement of Directors' responsibilities
The Directors confirm to the best of their knowledge that:
a. the half-yearly results have been prepared in accordance with
IAS 34 as adopted by the European Union; and
b. the interim management report includes a fair review of the
information required by the FCA's Disclosure and Transparency Rules
(4.2.7 R and 4.2.8 R).
The Directors of IP Group plc and their functions are listed
below.
By order of the Board
Mike Humphrey Alan Aubrey
Chairman Chief Executive Officer
24 July 2018
INDEPENDENT REVIEW REPORT TO IP GROUP PLC
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2018 which comprises the condensed
consolidated statement of comprehensive income, condensed
consolidated statement of financial position, condensed
consolidated statement of cash flows, condensed consolidated
statement of changes in equity and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2018 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU and
the Disclosure Guidance and Transparency Rules ("the DTR") of the
UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in the accounting policies note, the annual
financial statements of the Group are prepared in accordance with
International Financial Reporting Standards as adopted by the EU.
The directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Jonathan Mills
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
24 July 2018
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR USUORWVABUUR
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