TIDMTERN
RNS Number : 6379L
Tern PLC
14 September 2021
14 September 2021
Tern Plc
("Tern" or the "Company")
Unaudited Interim Results for the six months to 30 June 2021
Tern Plc (AIM: TERN), the AIM quoted investment company
specialising in the Internet of Things ("IoT") market, is pleased
to announce its unaudited interim results for the six months to 30
June 2021.
Highlights
-- Significant progress from all of the Company's principal portfolio companies(1) in the period
o The period-on-period increase in turnover of the principal
portfolio companies(1) in the six months to 30 June 2021 was an
encouraging 75% (six months to 30 June 2020: 62%).
o The period-on-period increase in the number of employees
within the principal portfolio companies(1) , a key growth
measurement, was 14% in the six month period to 30 June 2021 (six
months ended 30 June 2020: 7%). This was supported by an increase
in revenue per employee of 53%, highlighting that employee growth
was matched by a higher growth in revenue.
-- GBP0.7 million was invested in existing portfolio companies
during the period, supporting their growth and development. As at
30 June 2021, Tern had GBP0.4 million in cash which was increased
by a post period end fundraise of GBP4 million (gross) in July
2021.
-- IPO of Wyld Networks on NASDAQ First North completed just
after the period end on 2 July 2021, following a syndicated funding
in January 2021.
-- Device Authority continued to accelerate its annual recurring
revenue growth through its subscription base and its modularised
licence platform, KeyScaler, which launched for Azure Sphere in the
Microsoft Azure Marketplace during the period, aided by the
increasing focus on IoT security, the launch of product
enhancements, the securing of further distribution partnerships and
the recruitment of a number of key senior staff.
-- Talking Medicines launched its artificial intelligence and
natural language processing powered patient intelligence platform,
PatientMetRx, to provide a systematic way of measuring the patient
experience of medicines for the pharmaceutical industry.
-- Significant further contract wins for FundamentalVR and a
further investment in FundamentalVR from Tern post period end.
-- InVMA continued to enjoy growing sales and a strong sales
pipeline, with a focus on the global deployment of
AssetMinder(R).
Al Sisto, CEO of Tern Plc, said:
"I am delighted by the progress and pace of development that our
portfolio companies achieved in these continuing unprecedented
times, increasing their relevance in the markets they serve,
accelerating their customers' digital transformation goals and
creating new opportunities. The increase in aggregate turnover and
portfolio headcount growth reflects our portfolio companies
customers' belief in and adoption of their products and services. I
am also pleased how the team at Tern has been able to help guide
our investee companies through this period of market expansion and
growth. The 'New Normal' presents many unique challenges, but with
the traction achieved by our portfolio's emphasis on customer
driven Product-Led Growth ("PLG"), which gained real traction in
the second half of 2020 and has continued into 2021, our companies
are now experiencing significant repeat business from existing
customers through internal referrals. This approach has also helped
to lower our aggregate portfolio sales cycles and development
costs, improving revenue per employee, for example. All of which
adds to the underlying prospects and value of the portfolio.
"We were pleased to see one example of the execution of our
funding model with the syndication of the Wyld Networks funding
early in the year followed by its IPO on Nasdaq First North post
period end in July, with Tern retaining a majority interest in the
business.
"The opportunities for IoT company investments continues to be
remarkably robust as a result of the pandemic requiring companies
and governments to adopt digital solutions. We also believe that
the increasing ESG focus, particularly around sustainability, will
rely on the importance of technology in many aspects of our
future.
"Our portfolio companies made significant strides towards
cementing their targeted market leadership positions during the
first six months of the year, and we believe our objectives for
Tern are being met as our portfolio expands in size and value. With
our focus on the high growth IoT market, our years of operating
expertise, the synergistic benefits of our portfolio composition
and our sustainable investment model I believe Tern is very well
positioned for the future. In addition, we will continue to
aggressively seek the very best IoT technology companies which can
provide disruptive solutions to the healthcare and industrial
sectors and that add to the synergies between our existing
holdings, providing additional value growth for the long term."
Note 1: Principal portfolio company growth excludes Push
Technology, in which Tern has a <1% holding and minimal
influence.
Enquiries:
Tern Plc via IFC Advisory
Al Sisto (CEO)
Sarah Payne (CFO)
Allenby Capital Limited Tel: 0203 328 5656
(Nominated Adviser and Broker)
David Worlidge / Alex Brearley (Corporate
Finance)
Matt Butlin / Kelly Gardiner (Sales
and Corporate Broking)
IFC Advisory Tel: 0203 934 6630
(Financial PR and IR) tern@investor-focus.co.uk
Tim Metcalfe
Graham Herring
Florence Chandler
Chief Executive's Statement
The first half of 2021 followed an unprecedented year where the
global economy learned to operate during a worldwide pandemic,
whilst governments struggle to manage the ever-changing discoveries
of science and reality in this hyper digitally connected age.
The impact and constant change resulting from the Covid-19
pandemic on humanity is now being better understood, but the impact
to the world economy and businesses is still a work in progress. I
believe no one could have predicted the far-reaching impact of the
pandemic, but it has presented opportunities for Tern and its
portfolio companies.
With the onset of the pandemic last year, the Tern team, in
conjunction with our portfolio companies, implemented a bi-weekly
programme to monitor the state of the portfolio companies' employee
bases, programmes to safeguard them, discussions on go-to-market
strategies and customer acquisition success stories, in order to
leverage the wide range of experiences from these team meetings and
maximise the available opportunities, whilst minimizing any
disruption. We believe that the portfolio companies' performance in
the first half of 2021 was aided by our investment in maintaining a
critical dialogue amongst the portfolio company leadership and
Tern.
This programme's critical objective was to leverage Tern's
management's years of operating expertise and to assist in
harnessing the value of the underlying synergies and customer
relationships between the portfolio companies. These sessions
established a forum to help capture customer opportunities and to
develop strategies to successfully participate in their customers
and prospects pandemic-accelerated transition to digital working
practices.
Tern also adopted customer/market driven and product-led growth
strategies that helped our portfolio companies to establish a pool
of customer advocates, reduce customer churn and accelerate
deployments. Product-Led Growth is defined as a go-to-market
strategy that relies on using a company's product as the main
vehicle to acquire, activate, and retain customers. Metrics which
we believe are central to establishing M&A valuation models.
This PLG approach, coupled with our 'hands on' investment
management, is at various stages of adoption by our companies and
has also resulted in creating new investment opportunities for
Tern.
We have recently increased our funding capacity with our GBP4
million (gross) fundraise in July 2021 which will enable us to
support of our portfolio companies as they continue to scale. This
funding was also to provide us with negotiating strength as we look
to syndicate the next growth rounds for our existing portfolio
companies as well as potentially add to our portfolio.
We entered 2021 with renewed optimism and now hope that an end
to worst of the pandemic is in sight, but we do not believe the
'New Normal', following the disruptions from Covid-19, will alter
the basic dynamics of our portfolio companies' growth. As a result
of our investment strategy, our portfolio companies are growing in
scale and are being recognised as leaders in their targeted
markets. They are benefiting from the accelerated adoption of IoT
products and services that assist in the transition to digital and
we anticipate that this momentum will continue as global economies
transition into a post-Covid-19 contactless environment.
New portfolio company investments
Tern continues to focus on expanding our portfolio to provide a
continuum of value creations for our shareholders. We are
continuously looking for businesses which have customer or
technology synergies with our portfolio companies, seeking to
create force multipliers for the group. Our specific technology
focus continues with Artificial Intelligence ("AI"), Machine
Learning ("ML"), Virtual/Augmented Reality ("VR/AR") and Data
Sciences being leading investment themes, which are accelerating in
importance to the IoT and whose resources will add value to our
existing investments. We are also seeking to leverage our
collective expertise and the aggregate customer base of the
portfolio companies in healthcare and the industrial IoT markets
with the addition of disruptive IoT companies with strong
management teams that can enhance value creation and reduce
investment risk for our shareholders.
Our deal flow, or exposure to new investment opportunities, was
at record levels during the first half of 2021. We believe our
branding efforts and our portfolio companies' market recognition
are establishing Tern as the go-to IoT investor. We are also
experiencing more opportunities to undertake syndicated funding
efforts with other investors that provide us with a broader access
to follow-on capital for our companies from the venture capital and
private equity communities in the UK, Europe and the US.
Follow-on portfolio investments and support
We were pleased to announce in the first six months of 2021,
both the syndicated financing and the IPO of Wyld Networks on the
NASDAQ First North Growth Market . In January we announced the
follow-on investment in Wyld Networks, resulting in a step up in
our book value from GBP1.2 million to GBP4.1 million which
represented approximately 2.7 times the capital invested by Tern at
that time. Of equal importance, a s part of this funding the
corporate structure of Wyld was also simplified. As a result,
within six months of restructure, we announced the IPO of Wyld
Networks on the Nasdaq First North Growth Market. Following the
offering in conjunction with the IPO, Tern's holding in Wyld
Networks was 60.7% on the commencement of trading at a market value
of approximately GBP4.7 million, based on the offering price. We
believe that this is an important milestone for Tern, as it is a
clear demonstration of using our expertise to help create value for
the long-term benefit of our shareholders.
Another key to value creation for our shareholders is the growth
in portfolio company monthly recurring revenues/annual recurring
revenue (MRR/ARR). As highlighted above, Tern's directors are
continuing to work with our companies, individually and as a group
to stimulate MRR/ARR growth, a key metric in valuing software as a
service (SaaS) businesses. For example, Device Authority continued
its fourth quarter 2020 focus on health care and
industrial/automotive markets to add new customers and to
accelerate their existing customers' rollouts of devices and
systems. Device Authority, as part of its strategy, continued to
add to its ecosystem of partners, for example with Ericsson and
developed specific features in support of its partners, for example
support for Microsoft Azure Key Vault. Device Authority also
continued to gain industry recognition from ABI Research as a
leader in its SPARK Matrix(TM) for IoT Identity and Access
Management (IoT IAM).
In support of the progress being made at FundamentalVR, in July
2021 Tern invested a further GBP530,000 via a convertible loan note
issue totalling GBP1,160,000 along with the other existing
institutional shareholders who participated in the last
FundamentalVR syndicated funding round in October 2019. The
proceeds will be used by FundamentalVR for a number of key
initiatives to expand their platform with advanced simulated soft
tissue capabilities with kinesthetic haptics.
Tern also provided InVMA further support in July 2021 with an
additional GBP100,000 convertible loan note to support its market
and product development of AssetMinder(R). The company is
benefiting from the need by industry to make the digital transition
to contactless monitoring of machines and processes. The company
has recently expanded its operations into the US to meet the
growing interest there.
Environmental, Social and Governance ("ESG")
The Tern Board is committed to conducting its investment and
business activities in line with best practice ESG principles. We
are currently enhancing our investment strategy to include ESG
criteria and portfolio company scorecards and are reviewing our
internal policies to ensure they are inclusive and comprehensive.
We conducted our annual 360 Board Performance Review in August
2021, which included external input, and with a positive overall
assessment, readily accept the challenges of further
improvement.
Financial Priorities
We have used the first half of 2021 to further help our
companies accelerate the metrics of their businesses that we
believe drive investment valuation models for their next funding
rounds or exits. We have also helped our investee companies expand
and improve their infrastructure, teams, and processes. We believe
these activities position us well for creating value enhancing
opportunities across the portfolio and in expanding it. These
include:
-- Opportunities for larger syndicated Series A and Series B
rounds for our portfolio companies as measured by post-money
valuation and investment amounts as they and IoT technology
companies as a whole continue to grow in importance and
relevance
-- The ability to secure additional strategic investors from the
UK, Europe and the US which we can lead thanks to our portfolio
companies' market traction, global market ambitions and specific
North America focus
-- An expansion of our shareholder base with our application to
cross trade on the OTC market to improve our profile and
liquidity
Outlook
We are optimistic about the second half of 2021, while being
aware of the continuing uncertainty due to the ongoing Covid-19
pandemic and its effect on the business environment. The market for
IoT technology products and services is now a critical mandate for
companies and governments around the globe. Our investee companies
have proven to be resilient in managing the change and in scaling
their businesses.
We look forward to operating with continued enthusiasm for the
rest of the year and beyond. We will continue to build on our
model, specifically using third-party funding, working to enhancing
our deal flow activities and continuing to strengthen our team.
I would like to extend our deep appreciation to the management
of our portfolio companies and their teams for their pragmatism and
creativity. Our results and future opportunities are a result of
their dedication to the health of their businesses and to the
health and wellbeing of their fellow employees during these
difficult and uncertain times.
Al Sisto
Chief Executive Officer
Financial
Highlights
6 months to 6 months to 12 months to
30 June 2021 30 June 2020 31 December 2020
GBP GBP GBP
Net assets 23,295,920 19,900,647 24,000,657
Current assets 868,571 961,566 2,391,467
Total assets 23,547,031 20,089,782 24,296,258
(Loss)/Profit for
the period (718,465) 142,474 803,891
Net asset value per
share 7.1p 7.0p 7.3p
2021 has started strongly with a renewed focus on the value
enabled by IoT companies in accelerating digital transformation.
This was a positive outcome after the uncertainty of the previous
year, which required careful monitoring of the pandemic's impact on
portfolio company liquidity and performance. The portfolio
companies are further building on the performance achieved in the
fourth quarter of 2020 and a key focus was continuing to monitor
costs closely to ensure overheads were sufficient to match revenues
being generated.
Tern had an unaudited cash balance of GBP0.4 million as at 30
June 2021, which has been strengthened by the net proceeds from the
GBP4 million equity fundraise completed in July 2021. The
period-on-period increase in turnover of the principal portfolio
companies(1) for the first six months of 2021 showed a very
encouraging 75% growth (six months ended 30 June 2020: 62%).
The period-on-period increase in employees within the principal
portfolio companies(1) , a key growth measurement, was 14% in the
six months to June 2021 (six months ended 30 June 2020: 7%). This
drove a period-on-period increase in revenue per employee of 53%,
highlighting that employee growth was matched by a higher growth in
revenue.
During the six months ended 30 June 2021, Tern continued to
provide ongoing support to its underlying portfolio base, investing
GBP0.7 million via equity and loan note facilities to provide
capital for its entrepreneurial portfolio companies to enable them
to continue to grow and develop within their focused markets, this
included supporting Wyld Networks in its IPO on the Nasdaq First
North Growth Market.
For the six months to 30 June 2021, Tern recorded a loss of
GBP0.7 million, compared to a profit of GBP0.1 million in the six
months to 30 June 2020. The fair value of the portfolio remained
comparable to the year-end position, which included the GBP0.3
million increase in the fair value of Wyld Networks almost entirely
offset by a foreign exchange loss following a strengthening of the
pound against the dollar which led to a decrease in the Sterling
value of Device Authority which is valued in US Dollars. We remain
conservative in our approach to the carrying value of our portfolio
companies, with the fair value incorporating valuations validated
by third party investments.
Cost management continues to be a focus for the Company.
Operating costs rose by GBP0.2 million compared to the same period
in 2020, largely due to the Covid-19 related reduction in costs in
2020. A large part of the increase was due to Director fees
increasing by GBP0.15 million in the period, in part due to the 20%
reduction in salaries taken during 2020. Other operating costs were
broadly stable with increases in professional and accounting fees
partially offset by a decrease in other areas impacted by Covid-19,
including travel and meeting costs.
The net asset value per share of 7.1p as at 30 June 2021 was
relatively stable compared to 7.0p at 30 June 2020, although this
does not reflect the increase achieved with the post period end
fundraise priced at 18.8p per share.
Sarah Payne
Chief Financial Officer
Note 1: Principal portfolio company growth excludes Push
Technology, in which Tern has a <1% holding and minimal
influence.
Portfolio Review
Device Authority Limited ("Device Authority")
Valuation of holding: GBP12.9 million
Holding: 56.8%
Sector: Security
Invested Since: September 2014
Device Authority is a global leader in Identity and Access
Management ("IAM") cybersecurity, providing edge to enterprise
lifecycle automation and management for IoT devices, data and
applications at scale, for both retrofit and secure-by-design
applications. Their KeyScaler(TM) platform provides trust across
the IoT ecosystem, is cloud agnostic, but Microsoft centric, and
includes extensive integration into third party hardware security
modules (HSM) and Certificate Authorities (CA) that addresses the
complex challenges of securing the IoT.
With the increased frequency and sophistication of malicious
cyber-attacks on both public and private sector organisations,
there has been a marked increase in new EU and US regulation that
takes IoT cybersecurity ever more seriously, mandating new
minimum-security standards for IoT devices and data. Evolving
regulation includes:
-- WP.29 - the UN Regulation on uniform provisions for
cybersecurity and cybersecurity management systems for the
automotive sector;
-- The US IoT Cybersecurity Act, which was passed into law in December 2020; and
-- President Biden's June 2021 Executive Order for critical
infrastructure, which was expedited as a result of the ransomware
attacks on Colonial Pipeline, JBS, Washington DC Metropolitan
Police and other on major organisations.
Device Authority remains well-positioned to help meet the
dynamically evolving cybersecurity challenges that these new
regulatory frameworks demand, with a requirement for increasingly
higher IoT cybersecurity standards.
Device Authority also continues to gain industry cybersecurity
analyst recognition, and the recently released SPARK Matrix for IAM
further reinforces Device Authority's market leading position in
the upper right quadrant. Additionally, the May 2021 ABI Research
IoT Device Onboard and Lifecycle Management report confirmed that
Microsoft Azure and AWS continue to dominate cloud deployments and
highlighted the importance of critical partnerships with companies
including Device Authority to extend market reach through the
inclusion of intelligence and automation for a sustainable
lifecycle management to secure the entire device identity supply
chain.
The market for secure IoT management remains challenging for
customers, but as cyber-attack vectors move away from inside the
network to IoT devices, IoT onboarding and lifecycle management of
trusted device identity becomes increasing critical. Device
Authority continues to align their Keyscaler platform with market
leading standards, including the FIDO Alliance, which released
their new onboarding standard for securing the Internet of Things,
and Device Authority is part of the IoT Technical Working Group
that supports the FIDO device onboarding (FDO) standard.
In the first six months of 2021, Device Authority continued to
deliver on their strategy of expanding their customer base across
the EU and US markets through direct sales, developing a closer
partnership with Microsoft and strategic partnerships to extend
end-to-end cybersecurity. Extending capability helps solve
increasingly complex edge-to-enterprise security issues that
customers are facing for the lifecycle automation and management to
securely provision IoT devices and data at scale. Device
Authority's commercial development focus continued across the core
sectors of automotive, healthcare and industrial IoT (IIoT), and as
result of evolving regulatory environment, now includes the US
Government sector. Key strategic partnerships established in the
first six months of 2021 include:
-- Crossroads Innovation Group - which helps to expand reach
within the US public sector, including government and defence,
academic research, and smart city initiatives, leveraging the
regulatory drive to modernise IoT security standards.
-- Medigate - securing the Internet of Medical Things (IoMT) to
deliver to Healthcare Delivery Organizations (HDOs) important new
integrated capabilities that address cybersecurity challenges for
the healthcare sector.
-- FIDO Alliance - Part of the IoT Technical Working Group and
supporting the FIDO device onboarding (FDO) specification.
-- EPS Global and Intrinsic ID - EPS Global, a worldwide
provider of integrated circuit (IC) Programming and Secure
Provisioning Services, and Intrinsic-ID, the world's leading
provider of security IP for embedded systems based on physical
unclonable function (PUF technology).
Device Authority's strategic partnerships have also resulted in
a new integration to extend the trust and security from the edge to
enterprise applications. Their Enhanced Platform Interface
Connector (EPIC) enables a flexible and seamless approach to
interfacing to any IoT Application or service across their partner
ecosystem. The unique device-bound identity and data security model
helps to meet the unified security requirements for critical IoT
use cases. The executive order for software bill of materials
(SBoM), is designed to reduce federal cybersecurity risk by listing
the code used in software-containing devices so that anyone who
operates it can check for security vulnerabilities,
Device Authority's shareholders, including Tern, continue to
support the ongoing progress of the company, having provided a
total of US$5.9 million by 30 June 2021 in the form of convertible
loan notes since November 2017, with US$4.0 million of this being
provided by Tern (US$0.4 million in the six months to 30 June
2021).
As at 30 June 2021, the fair value of Tern's shareholding in
Device Authority remained stable at GBP12.9 million (31 December
2020: GBP12.8 million), with the small change reflecting a GBP0.2
million investment offset by the foreign exchange effects on the
sterling value of Device Authority which is valued in US
Dollars.
FVRVS Limited ('Fundamental VR')
Valuation of holding: GBP3 million
Holding: 26.9%
Sector: Healthcare IoT
Invested Since: May 2018
FundamentalVR is a deep IP company working at the intersection
of immersive technology, haptics and machine learning. Immersive
technology has the ability to change the human/computing interface
forever, to transcend geographies and accelerate business
deployments. FundamentalVR has created a platform Fundamental
Surgery that is the market leading VR medical education and
training platform delivering multimodal simulation and education
across tethered and all in one VR, mixed reality and mobile.
It is the only global platform of its type to have education
accreditation from leading medical institutions such as the
American Academy of Orthopaedic Surgeons (AAOS) and Royal College
of Surgeons in England.
At the core of the FundamentalVR tech stack is their 'Haptic
Intelligence Engine', HapticVR(TM), a unique, patent protected
software modelling system that delivers high fidelity physical
interaction The Haptic Intelligence Engine is a hardware agnostic
software engine that delivers full kinesthetic force feedback
haptics into a variety of handheld devices ranging from base
station held instruments through to haptic gloves.
With HapticVR(TM) FVR is able to accelerate skills acquisition,
lighten the cognitive load and deliver significantly enhanced user
experiences. Within its medical education platform, Fundamental
Surgery, this capability has been validated to increase skills
development by enabling surgeons to learn true muscle memory.
FundamentalVR's market position is being recognised and recent
awards and accreditation include being awarded number one 'Virtual
Healthcare Education Programme' by Healthcare Global Magazine and
'VR Healthcare of the Year' at the VR Awards.
Since the realisation that working practices need to change as a
result of the pandemic, FundamentalVR has seen the take-up of its
solutions accelerate, with signed committed revenues in the year
running at approximately two times last year's performance,
including significant orders from leading robotics companies and
gene therapy implantation specialists, cementing its position as
the leading specialist haptic VR company.
Wyld Networks AB ("Wyld Networks")
Valuation of holding: GBP4.7 million
Holding: 60.7%
Sector: IoT enablement
Invested Since: June 2016
Wyld Networks, quoted on the NASDAQ First North Growth Market in
Stockholm, enables affordable connectivity across the globe in
areas where wireless coverage is unavailable or congested. The
company specialises in providing wireless connectivity between IoT
sensors and low Earth orbit ("LEO") satellites with its Wyld
Connect solution, as well as connecting people to people in mobile
mesh networks for location aware social networks with it Wyld Mesh
solution even where there is no Wi-Fi or 4G / 5G.
During the first half of 2021 Wyld Networks completed
preparations for its admission to trading on the NASDAQ First North
Growth Market in Stockholm, which occurred post period end on 2
July 2021, together with conducting an oversubscribed fund raising
(the "Offering"). Wyld Networks received SEK 25 million
(approximately GBP2.1 million) from the Offering, before issue
costs and the proceeds from any future exercise of warrants issued
as part of the Offering. This included approximately GBP300,000
from Tern which was paid in June 2021 and further amounts from
certain of Tern's Directors (amounting to approximately GBP55,000)
and Wyld Networks' management. A maximum of a further approximately
SEK 69 million (approximately GBP5.8 million) could potentially be
raised by Wyld Networks if all of the warrants granted pursuant to
the Offering (as described in Tern's announcement of 9 June 2021)
were to be exercised. Following the Offering, Tern's holding in
Wyld Networks reduced from 78.7% to 60.7% on the commencement of
trading on NASDAQ First North, which was valued at approximately
GBP4.7 million on the basis of the Offering price.
The Offering followed a GBP750,000 syndicated equity fundraise
for Wyld Networks announced by Tern on 28 January 2021, including
GBP150,000 from Tern and GBP600,000 from the same third-party
institutional investor who previously subscribed for GBP400,000 of
convertible loan notes in Wyld Networks, as announced on 7 May
2020, at a significant valuation uplift from the previous book
valuation of Tern's holding.
Post period end on 25 August 2021, in light of Wyld Networks'
strong recent performance, including winning new contracts with
significant customers, it put in place an accelerated operating
plan and entered into a loan agreement for SEK 12 million
(approximately GBP1 million) with Formue Nord Fokus A/S (the
"Lender"). This financing was secured to bring forward the
recruitment of additional sales and development resources to assist
with accelerating the commercialisation of Wyld Networks' solutions
in global markets. Alongside the loan, Wyld Networks issued
warrants to the Lender and free of charge to existing Wyld Networks
shareholders, including Tern.
Wyld Connect solution - Terrestrial networks only cover 20%(1)
of the Earth's surface and this lack of global connectivity in the
other 80%(1) of the world's surface is holding back the growth of
IoT networks from contributing towards adding an estimated US$ 2 to
US$ 3 trillion to global GDP over the next decade(2) . Wyld Connect
is a hybrid satellite and terrestrial solution connecting IoT
devices and sensors to terrestrial networks if available, and to
LEO satellites where there is no terrestrial network, aimed at
providing 100% global coverage. Wyld Connect is suitable for
applications in agriculture, maritime, the environment,
transportation and oil and gas, amongst others.
Wyld Mesh solution - Congested internet connectivity impacts
global GDP, most notably in e-commerce. Wyld Mesh is a software
solution to allow businesses to build wireless networks to deliver
relevant and location aware content to end users, as well as
ensuring that content is effectively delivered by adding an
additional layer of wireless connectivity by connecting smartphones
directly to smartphones and IoT devices in a mesh network where
there is no or poor 4G/5G or WiFi networks. The solution has
applications in retail, events, transportations hubs and stadiums,
to enhance the customer experience and increase revenues.
In the first six months of 2021 Wyld Networks has in part
focused deploying its Wyld Mesh solution in the healthcare market
and on signing agreements and partnerships with the following
companies in advance of the planned commercial launch of Wyld
Connect its satellite IoT solution:
-- Chevron - one of the world's largest energy companies with
revenues of approximately US$98bn in 2020
-- Rijk Zwann - a Dutch vegetable breeding and seed production
company with a market share of 9% making it the number four
vegetable breeding company worldwide
-- Eastwest Seeds - an Asian seed supplier in the agricultural sector
-- Fujitsu - a global IT organisation headquartered in Japan
employing over 126,000 people with annual revenues in excess of
US$33 billion
-- CFG - An association of fruit producers in South America that
focuses on leveraging technology to improve production yield in
crops
-- Agrisound - a UK based IoT company, that combines acoustic
technology with environmental sensors, to help maintain an optimal
pollination environment to increase the yield from crops
-- Agrocognitive - a South American company that provides data
analytics for the agricultural sector
-- KWS - a company based in Germany that focuses on plant
breeding with activities in about 70 countries. KWS is the fourth
largest seed producer worldwide based on sales for agricultural
crops
-- Wezen Group - a leading provider of infrastructure,
networking and operations services in South America with a focus on
agriculture
Additionally, in June 2021 Wyld delivered the first five test
terminals to Eutelsat, its satellite partner, as part of the
internal test phase of the satellite IoT solution currently in
development.
1.
https://www.abiresearch.com/press/new-satellite-networks-will-enable-24-million-iot-connections-and-provide-seamless-global-connectivity-2024/
2.
https://www.mckinsey.com/industries/agriculture/our-insights/agricultures-connected-future-how-technology-can-yield-new-growth
InVMA Limited ("InVMA")
Valuation of holding: GBP1.2 million
Holding: 50%
Sector: IoT enablement
Invested Since: September 2017
InVMA is an Industrial Internet of Things ("IIoT") software
solutions company, helping industrial and manufacturing companies
prosper by converging their physical assets with new
transformational digital insights. InVMA's AssetMinder(R) is a
modular, industry 4.0, IoT SaaS platform, using a wide range of
analytical tools and AI and machine learning algorithms to connect
up whole factory floors and processes as well as managing resources
into and out of the factory.
AssetMinder(R) is a unique customisable platform enabling
customers to remotely collect, aggregate and monitor real-time data
across both factory and remote assets, devices and equipment;
providing analytics and predictive insights that drive
intelligence-based decisions for individual machines, entire
manufacturing lines, and across a portfolio of facilities.
Covid-19 has accelerated the demand for, and deployment of,
remote condition monitoring with remote monitoring moving to the
forefront of industrial and manufacturing agendas. AssetMinder(R)
has been well placed to extend remote capability to existing
customers, and to deploy extended capability across a range of new
clients. InVMA's customer pipeline continues to increase, across
both direct and partner channels. The partnership with PTC has
continued to develop, with several new joint customer opportunities
achieved. A focus on developing the partner channel has resulted in
commercial growth across the UK, EU and US, and several new
partnerships established. InVMA has established a wholly owned US
entity, AssetMinder Inc, registered as a Delaware B Corp, as they
look to expand into the US markets.
During the first half of 2021, InVMA announced that the
partnership agreement with Dexis Consulting Group ("Dexis"), signed
in January 2020, was expanded to offer Assetminder(R) to customers
in Belgium and France across a range of verticals, including major
utilities, industrials, quarries and energy. Since January 2020,
the number of Dexis AssetMinder(R) installations has grown, and
continues to grow, with thousands of devices now being monitored
across a large amount of critical assets.
As at 30 June 2021, Tern had an outstanding convertible loan
balance of GBP175,000 (31 December 2020: GBP175,000) with InVMA, in
addition to its equity holding. The convertible loan has been
included within the investment fair value. Post period end in July
2021, Tern advanced a further GBP100,000 of convertible loan notes
to InVMA, which carry a coupon rate of 8% per annum and are
convertible into InVMA shares at a 20% discount to any future third
party fundraising.
Talking Medicines Limited ("Talking Medicines")
Valuation of holding: GBP0.9 million
Holding: 23.4%
Sector: Data distribution software
Invested Since: November 2020
Talking Medicines is a data technology company using Artificial
Intelligence, Natural Language Processing and Machine Learning to
give patients a voice. Talking Medicines uses leading technologies
to structure and decode what patients are saying by medicine brand
for the first time as a systematic data service. The signals are
sourced from social media, health forums and groups at scale. This
addresses the blind spot that global pharmaceutical marketeers have
toward their patients despite spending approximately US$30 billion
annually on marketing. Talking Medicines has launched its
PatientMetRx(R) platform on a subscription basis for pharmaceutical
companies in H1 2021. This ground-breaking platform features access
to calculated real world 'Patient Confidence Scores' by
medicine.
PatientMetRx(R) provides actionable data that is needed to
support the new decision-making support systems being designed by
pharma companies to bring agility into brand management. To date
the sector has made decisions based on historic data,
PatientMetRx(R) offers the possibility of staying engaged with what
is happening in real time. The smart data from PatientMetRx(R) is
designed to be used by marketeers as a leading indicator to course
correct, benchmark and seek opportunities for global brand
marketing by medicine driving better patient outcomes.
The commercial strategy for Talking Medicines in H1 2021
following the launch of PatientMetRx(R) has been to seed uptake in
'top 20' pharma companies to create credible use cases and
facilitate the start of formal procurement processes. To date,
Talking Medicines has made significant progress with five top
global pharma companies to spearhead this adoption, with the first
such company contracted. In addition, Talking Medicines is working
with agency partners where there are established relationships
within the pharmaceutical sector. The agreement with Closing Delta
was the first of these partnerships.
In H1 2021 Talking Medicines has additionally grown its team to
bring in new employees at the leadership level, alongside launching
PatientMetRx(R). The senior hires include those with skills in the
areas of sales, engineering, and data. A UK patent has also been
filed to protect Talking Medicines' IP. This is anticipated to
establish further value for the models that have been built to
filter to and isolate the voice of the patient matched to regulated
medicines. We believe that the PatientMetRx(R) platform is well
placed to play a leading role in the post-pandemic digital
transformation in the pharma sector.
In H2 2021, the focus will be on commercial uptake and working
with strategic partners to accelerate the global roll out and
adoption of PatientMetRx(R).
Push Technology Limited ("Push Technology")
Valuation of holding: GBP34,205
Holding: <1%
Sector: Data distribution
Invested since: July 2014
For organisations worldwide, Push Technology's software product,
Diffusion, powers the real-time applications and systems critical
to their business expansion, revenue growth, and optimal ongoing
business operations. Diffusion simplifies and speeds development,
deployment, and scaling of customers' systems, providing peace of
mind that data is securely managed and efficiently delivered in
real-time.
Unaudited Income Statement and Statement of Comprehensive
Income
For the six months ended 30 June 2021
6 months 6 months 12 months
to 30 June to 30 June to 31 December
Notes 2021 2020 2020
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
Fee income 41,950 42,076 151,159
Movement in fair value
of investments 9 25,688 736,470 1,992,891
------------ ------------ ----------------
Total investment
income 67,638 778,546 2,144,050
Administration costs (832,991) (632,644) (1,341,802)
Other Expenses (21,328) (95,857) (206,845)
Operating (loss)/profit (786,681) 50,045 595,403
Finance income 68,216 92,429 208,488
(Loss)/profit before
tax (718,465) 142,474 803,891
Tax - - -
------------ ------------ ----------------
(Loss)/profit and total
comprehensive (loss)/income
for the period (718,465) 142,474 803,891
------------ ------------ ----------------
Earnings per share 8
Basic and diluted (loss)/earnings
per share (0.2)p 0.1p 0.3p
Unaudited Statement of Financial Position
As at 30 June 2021
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
Note GBP GBP GBP
Assets
Non-current assets
Investments 9 22,678,460 19,128,216 21,904,791
22,678,460 19,128,216 21,904,791
------------ ------------ ------------
Current assets
Trade and other receivables 420,785 172,024 261,301
Cash and cash equivalents 447,786 789,542 2,130,166
868,571 961,566 2,391,467
Total assets 23,547,031 20,089,782 24,296,258
------------ ------------ ------------
Equity and liabilities
Share capital 10 1,367,635 1,358,238 1,367,635
Share premium 26,740,789 23,335,580 26,740,789
Retained earnings (4,812,504) (4,793,171) (4,107,767)
23,295,920 19,900,647 24,000,657
------------ ------------ ------------
Current liabilities
Trade and other payables 251,111 189,135 295,601
------------
Total liabilities 251,111 189,135 295,601
Total equity and liabilities 23,547,031 20,089,782 24,296,258
------------ ------------ ------------
Unaudited Statement of Changes in Equity
For the six months ended 30 June 2021
Share Share Retained Total
capital premium earnings equity
GBP GBP GBP GBP
Balance at 31 December
2019 1,355,571 22,578,619 (5,021,113) 18,913,077
------------------------ ---------- ----------- ------------ -----------
Total comprehensive
income - - 142,474 142,474
Transactions with
owners
Issue of share capital 2,667 797,333 - 800,000
Share issue costs - (40,372) - (40,372)
Share based payment
charge - - 85,468 85,468
------------------------ ---------- ----------- ------------ -----------
Balance at 30 June
2020 1,358,238 23,335,580 (4,793,171) 19,900,647
------------------------ ---------- ----------- ------------ -----------
Total comprehensive
income - - 661,417 661,417
Transactions with
owners
Issue of share capital 9,397 3,691,003 - 3,700,400
Share issue costs - (285,794) - (285,794)
Share based payment
charge - - 23,987 23,987
------------------------ ---------- ----------- ------------ -----------
Balance at 31 December
2020 1,367,635 26,740,789 (4,107,767) 24,000,657
------------------------ ---------- ----------- ------------ -----------
Total comprehensive
income - - (718,465) (718,465)
Transactions with
owners
Share based payment
charge - - 13,728 13,728
------------------------ ---------- ----------- ------------ -----------
Balance at 30 June
2021 1,367,635 26,740,789 (4,812,504) 23,295,920
------------------------ ---------- ----------- ------------ -----------
Unaudited Statement of Cash Flows
For the six months ended 30 June 2021
6 months 6 months 12 months
to 30 June to 30 June to 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
Note GBP GBP GBP
OPERATING ACTIVITIES
Net cash used in operations 11 (898,409) (554,777) (1,189,481)
Purchase of investments (684,971) (517,221) (1,957,248)
Cash received from sale of
investments - 92,864 93,421
Loan to investee companies (99,000) - -
Interest received - 1,083 1,275
------------ ------------ ----------------
Net cash used in operating
activities (1,682,380) (978,051) (3,052,033)
------------ ------------ ----------------
FINANCING ACTIVITIES
Proceeds on issue of shares - 800,000 4,500,400
Share issue expenses - (40,372) (326,166)
Net cash from financing activities - 759,628 4,174,234
------------ ------------ ----------------
(Decrease)/increase in cash
and cash equivalents (1,682,380) (218,423) 1,122,201
Cash and cash equivalents at
beginning of period 2,130,166 1,007,965 1,007,965
Cash and cash equivalents at
end of period 447,786 789,542 2,130,166
------------ ------------ ----------------
Notes to the Unaudited Interim Statements
For the six months ended 30 June 2021
1. General information
Tern is an investing company specialising in private software
companies, predominantly in the Internet of Things.
The Company is a public limited company, incorporated in England
and Wales, with its shares traded on AIM, a market of that name
operated by the London Stock Exchange.
The address of Tern's registered office is 27/28 Eastcastle
Street, London W1W 8DH. Items included in the financial statements
of the Company are measured in Pounds Sterling, which is the
Company's presentational and functional currency.
2. Basis of preparation
The interim financial information in this report has been
prepared using accounting policies consistent with IFRS as adopted
by the United Kingdom. They do not include all of the information
required for full annual financial statements and should be read in
conjunction with Tern's audited financial statements for the year
ended 31 December 2020. The financial information for the year
ended 31 December 2020 set out in this interim report does not
constitute statutory accounts as defined in Section 434 of the
Companies Act 2006. The Company's statutory financial statements
for the year ended 31 December 2020 have been filed with the
Registrar of Companies and can be found on the Company's website:
www.ternplc.com . The auditor's report on those financial
statements was unqualified and did not contain statements under
Section 498 (2) or Section 498 (3) of the Companies Act 2006. These
interim financial statements have been prepared under the
historical cost convention as adjusted for the valuation of
investments and have been approved for issue by the Board of
Directors.
3. Going concern
The financial statements have been prepared on the going concern
basis.
The Directors have a reasonable expectation that the Company has
adequate resources to continue operating for the foreseeable
future. For this reason, they continue to adopt the going concern
basis in preparing the Company's financial statements. The post
period end fundraise and the impact of Covid-19 has been considered
as part of the Directors' assessment.
4. Investments
The investment valuation consists of equity investments and
convertible loan notes and loans issued to a portfolio company.
In accordance with IFRS 10, paragraph 4, investments are
recognised at fair value through profit and loss (FVTPL) in line
with guidance set out in IFRS 9. Changes in foreign exchange rates
impact investments valued in a foreign currency.
5. Convertible Loans
Financial assets
Convertible loans provided to investee companies are evaluated
with reference to IFRS 9. The convertible loan facility issued to
Device Authority is a financial asset with multiple embedded
derivatives and a warrant instrument. The convertible loan
facilities issued to InVMA and Wyld Networks are financial assets
with multiple embedded derivatives. IFRS 9 permits the entire
contract for all loans to be designated at FVTPL.
6. Critical accounting judgements and key sources of estimation uncertainty
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
rarely equal the related actual results. The key sources of
estimation uncertainty that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below.
ESTIMATES
Fair value of financial instruments
The Company holds investments of GBP22.7 million that have been
designated as held for trading on initial recognition. Where
practicable the Company determines the fair value of these
financial instruments that are not quoted using the most recent bid
price at which a transaction has been carried out. These techniques
are significantly affected by certain key assumptions, such as
market liquidity. Given the nature of the investments being
early-stage businesses, other valuation methods such as discounted
cash flow analysis to assess estimates of future cash flows to
derive fair value estimates cannot always be substantiated by
comparison with independent markets and, in many cases, may not be
capable of being realised immediately.
Device Authority has maintained its US dollar valuation compared
to 2020 without a bid price comparison in the period. It is an
early-stage business in an emerging market where there is a lack of
comparative businesses available on which to provide a comparable
valuation and therefore valuation was based on a combination of
factors including the independent valuation of Device Authority's
patent portfolio, an independent comparison to transaction
multiples in comparable market sectors and an evaluation of sales
pipeline and 2021 trading forecast. This supported a valuation in
line with 2020, although an exchange rate loss was recognised on
translation at the balance sheet date.
The Company holds financial assets that have been held at FVTPL.
The value of the convertible loan note has been estimated by
assessing the probability of each possible redemption or conversion
scenario and accounting for this within the overall fair value
assessment.
JUDGEMENTS
Investments held at FVTPL
The critical judgement is the assessment whether the investments
should be consolidated. This assessment was reached following a
review of all the key conditions for an investment entity, as set
out in IFRS 10 and the Company was judged to have met those key
conditions as follows:
-- The Company obtains funds from one or more investors for the
purpose of providing those investor(s) with investment management
services;
-- The Company commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
-- The Company measures and evaluates the performance of
substantially all its investments on a fair value basis.
In coming to this conclusion, the Company also judged that its
investment-related activities do not represent a separate
substantial business activity or a separate substantial source of
income to the investment entity.
7. Segmental reporting
The accounting policy for identifying segments is based on
internal management reporting information that is regularly
reviewed by the chief operating decision maker, which is identified
as the Board of Directors.
In identifying its operating segments, management generally
follows the Company's service lines which represent the main
products and services provided by the Company. The Directors
believe that the Company's continuing investment operations
comprise one segment and therefore the figures presented on the
face of the Income Statement and Statement of Comprehensive Income
represent the segmental information.
8. Earnings/(Loss) per share
Earnings/(Loss) per share is calculated by reference to the
weighted average shares in issue as follows:
6 months 6 months 12 months
to to to
30 June 30 June 31 December
2021 2020 2020
GBP GBP GBP
(Loss)/profit for the purposes
of basic and fully diluted
loss per share (718,465) 142,474 803,891
----------------------------------- ------------ ------------ ------------
Weighted average number
of ordinary shares (see
note below): Number Number Number
For calculation of basic
earnings/(loss) per share 330,338,101 277,271,791 290,768,708
For calculation of fully
diluted earnings/(loss)
per share 330,338,101 278,608,041 290,768,708
(Loss)/Earnings per share
Basic and diluted (loss)/earnings
per share (0.2)p 0.1p 0.3p
9. Investments
30 June 30 June 31 December
2021 2020 2020
GBP GBP GBP
-------------------------------------- ----------- ----------- ------------
Fair value of investments
brought forward 21,904,791 17,882,660 17,882,660
-------------------------------------- ----------- ----------- ------------
Interest accrued on convertible
loan note 63,010 91,346 171,473
Additions 684,971 517,221 1,957,248
Disposals - (99,481) (99,481)
-------------------------------------- ----------- ----------- ------------
Cost of investments carried
forward 22,652,772 18,391,746 19,911,900
Fair value adjustment to investments 25,688 736,470 1,992,891
-------------------------------------- ----------- ----------- ------------
Fair value of investments
carried forward 22,678,460 19,128,216 21,904,791
-------------------------------------- ----------- ----------- ------------
The convertible loan facility issued to Device Authority is a
financial asset with multiple derivatives and the entire contract
has been designated at FVTPL, with any movement in fair value taken
to profit or loss for the period. As at 30 June 2021 the value of
the convertible loan outstanding was GBP3,117,136 (31 December
2020: GBP2,925,900). The convertible loan note has been secured
with a charge over Device Authority's intellectual property.
The convertible loan facility issued to InVMA is a financial
asset with multiple derivatives and the entire contract has been
designated at FVTPL, with any movement in fair value taken to
profit or loss for the period. As at 30 June 2021 the value of the
convertible loan outstanding was GBP175,000 (30 December 2020:
GBP175,000).
The convertible loan facility issued to Wyld Networks was
converted into equity with any movements in fair value taken to
profit or loss for the period.
10. Issued share capital
There have been no share issues in the period.
11. Cash flow from operations
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
(Loss)/profit for the period (718,465) 142,474 803,891
Adjustments for items not included
in cash flow:
Movement in fair value of investments (25,688) (736,470) (1,992,891)
Share-based payment charge 13,728 85,468 109,455
Deferred cash on sale of investment - 6,617 6,060
Finance income (68,216) (92,429) (208,488)
Operating cash flows before movements
in working capital (798,641) (594,340) (1,281,973)
Adjustments for changes in working
capital:
- (Increase)/decrease in trade and
other receivables (excluding loan
to investee companies) (55,278) 2,462 (51,075)
- (Decrease)/increase in trade and
other payables (44,490) 37,101 143,567
----------- ----------- -----------
Cash used in operations (898,409) (554,777) (1,189,481)
=========== =========== ===========
12. Events after the reporting period
On 2 July 2021, it was announced that the admission of trading
on the NASDAQ First North Growth Market of the newly incorporated
holding company of Wyld Networks Limited, Wyld Networks AB was
approved and commenced trading. Tern currently holds 60.7% of Wyld
Networks issued share capital.
On 13 July 2021, it was announced that the Company had raised
approximately GBP4 million before expenses through a subscription
of 21,276,600 new ordinary shares of 0.02p each at a price of 18.8
pence per new ordinary share.
On 16 August 2021, it was announced that FVRVS Limited had
completed a GBP1,160,000 fundraise in the form of convertible loan
notes. The Company has subscribed for GBP530,000.
13. Availability of interim results
Copies of this report will be available from the Company's
website www.ternplc.com .
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END
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