TIDMTERN

RNS Number : 0606F

Tern PLC

17 March 2022

17 March 2022

Tern Plc (the "Company")

Results for the year ended 31 December 2021

Tern Plc (AIM: TERN), the company focused on value creation from Internet of Things ("IoT") technology businesses, is pleased to announce its audited results for the year ended 31 December 2021.

Highlights

   --    A successful year with improved results delivered across all financial indicators 

-- Net asset growth of 35% to GBP32.4m (2020: GBP24.0m) and a 26% increase in net assets per share to 9.2p (2020: 7.3p)

-- Basic earnings per share (EPS) increased by 350% in 2021 to 1.35p (2020: 0.3p) and the Company reported positive retained reserves for the first time

-- Our network of companies(1) delivered aggregate year-over-year revenue growth of 47% (2020: 18%)

-- Our network of companies increased employee numbers in aggregate by 35% to 132 (31 December 2020: 106) and revenue per employee increased by 25% (2020: 31% and 24% increases respectively)

-- Additional capital raised during the year of GBP4m (before expenses) with GBP2.5m of this injected in 2021 into our network of companies to support their value enhancing fundraises

-- Wyld Networks value more than doubled from GBP4.0m at 31 December 2020 to GBP8.7m at 31 December 2021 following a successful IPO on the Nasdaq First North Growth Market in Stockholm

-- Further validation of business model through a net GBP6.2m fair value uplift across four companies, GBP4.7m achieved for Wyld Networks, and the remainder from Device Authority, Konektio and Talking Medicines

1. Our 'network of companies' or 'our companies': Device Authority Limited, Wyld Networks AB, InVMA Limited (trading as Konektio), FVRVS Limited (Trading as FundamentalVR) and Talking Medicines Limited, which are companies that Tern has interests in, as further described in the section headed 'Network of Companies' below and as detailed in note 2.

Commenting on the results, Tern's CEO, Al Sisto said:

"2021 was an excellent year for Tern in terms of growth in our financial indicators, but I believe it was even more significant than that. The majority of our network of companies attracted additional support and investment from independent third parties during the year, after they all conducted thorough due diligence, demonstrating confidence in their business models and future prospects. These actions resulted in uplifts to their value and helped accelerate their monthly recurring revenues, which we view as being a key metric in establishing their market value in a prospective trade sale or IPO. I am proud of the progress that all of our companies have made during 2021. Most are now well-funded and in the best commercial shape since Tern's inception.

"At Tern we have sought, and continue to seek out, companies at crucial stages of their development, often early in their first rapid expansion phase, bringing our wealth of market knowledge and business building expertise to the table during this critical time to maximise the impact on the business and set the stage for rapid growth. Based on identifying a clear path to market, coupled with a clearly identified customer value programme, Tern acts as an active strategic advisor, bringing a 'hands-on' approach, combined with board level experience to strategically guide our entrepreneurs through the minefield of bringing innovation to the market at speed and scale, successfully. The critical benefit Tern offers is the synergies within the core technologies of our companies to create a 'network effect' for collaboration. Our partnership businesses do not exist in silos, they are part of a thriving collaborative network of like-minded companies, that proactively share experiences, insights and information for the benefit of all stakeholders.

"Helping our network of companies build this sustainable and realisable value is a journey that sometimes demands courage to take difficult and complicated actions to put them on a proper growth trajectory that is the critical component in delivering value for Tern shareholders. Whilst we continually focus on this growth-led value creation, we are also constantly evaluating the appropriateness of IPOs as well as trade sales for all of the companies in our network on a case-by-case basis, although recognising that getting the timing right is key to maximising shareholder value.

"As the world emerges from the challenges of the pandemic, Tern will continue to help build the next generation of IoT solutions that will accelerate transformation, security, and sustainability. I fundamentally believe that our network of companies have very exciting futures ahead of them, and 2022 will be a year of further significant progress ."

Notice of AGM

The annual report for the year ended 31 December 2021, which contains a notice of the Annual General Meeting ("AGM"), will shortly be available from the Company's website (https://www.ternplc.com/investors) and will shortly be posted to shareholders.

The Company's AGM will be held at 9.30am on Wednesday 27 April 2022 at the offices of Reed Smith, The Broadgate Tower, 20 Primrose Street, London, EC2A 2RS. Further details concerning the AGM are set out at the end of this announcement.

Online Investor Presentation and Q&A Session

Tern's management and management from certain of Tern's network of companies will be hosting an online presentation and Q&A session at 5p.m. BST on Wednesday 27 April 2022 after the AGM earlier in the day. This session is open to all existing and prospective shareholders.

Those who wish to attend should register via the following link where they will be provided with access details:

https://us02web.zoom.us/webinar/register/WN_WBJhT6wfSOiSPkwu1NTkaA

Participants will have the opportunity to submit questions during the session, but questions are welcomed in advance and may be submitted to: tern@investor-focus.co.uk.

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 
 

Chairman's Statement

I believe 2021 was your Company's most successful year to date. Each one of the companies in our network has made substantial and demonstrable progress during the year, despite the continuing challenges of the global COVID-19 pandemic, both in terms of revenue growth and in value.

The majority of the companies in our network attracted additional support and investment from independent third parties this year after they conducted thorough reviews, demonstrating ongoing confidence in their business models and future prospects. Third parties, in addition to Tern, provided additional resources to accelerate the development of new products and expand the base of satisfied users which led to increased Monthly Recurring Revenue (MRR).

I would like to take this opportunity to thank Al Sisto and the Tern executives for their hard work over the year. It is through their extraordinary efforts that we have achieved such excellent results. I would also like to note my appreciation for the support of our other non-executive director, Alan Howarth, who always adds sound advice based on his considerable business and financial experience.

Our philosophy is to add expertise and value to exceptional early-stage technology businesses in the key growth areas of Internet of Things (IoT), Artificial Intelligence (AI) and Data Science but in doing so we have always made sure that we add much more than just money. One of our team serves as a director on the board of each of our companies and we strive collectively to actively help each company with their strategic challenges, whether it is sourcing key management skills, identification of target markets, or establishing new key sales offices.

During the COVID-19 pandemic, each of our companies have been required to substantially change the way they operate. In many cases this has involved staff working remotely and they have been forced to make, not only creative use of videoconferencing, but also good use of other technology tools to ensure that their teamwork remains effective.

In these circumstances extra efforts have been required to ensure that 'esprit de corps' attitudes are maintained among teams. Fortunately, much technology development can be achieved effectively through remote working and productivity has generally been maintained.

Tern has also gathered the CEOs of all of the companies in our network in regular themed joint videoconferencing calls to report successes and challenges. As a result, one of our companies frequently offers help and support to another, and key lessons are learned and shared creating a force multiplier effect.

We have also established a separate ESG (Environmental, Social, and Governance) committee among the companies in our network, in which each of these businesses can share their plans and collective conscientiousness for social and environmental factors. We aim to build metrics by which in future our ESG 'score' can be measured.

During 2021 we raised GBP4m in fresh funding which we have predominantly utilised to ensure that we continue to support our network of companies as they grow.

In one particular case, one of our companies, Wyld Networks, which listed on NASDAQ First North Growth Market in July 2021, achieved a market value of over GBP8m and has become a category leader. In another, our most recent addition to our network, Talking Medicines, has successfully raised external investment, from a leading life science investor to continue its value creation path and begin its expansion into the US.

As someone who has been involved with early-stage technology businesses for over 25 years, I feel that Tern, as a public company, takes a very honest and straightforward approach to its operations and our shareholders are free to buy and sell their shares at any time. But I must point out that as the companies in Tern's network are all early-stage, and although we work hard in conjunction with these companies and their leadership teams to create substantial value, we are regulated by market dynamics and have relatively little control over when such value will be realised.

In short, a stake in Tern should be seen as an ability to participate in the development of attractive businesses, generally not available to private investors, whose growth, with our guidance, will provide long-term capital gains.

It is our job to ensure that we work to achieve the strongest return for your investment, and we assure you that we will continue to make that our principal goal.

Ian Ritchie CBE, FREng, FRSE

Chairman

CEO's Statement

I am pleased to report a record year for Tern, delivering growth in all key performance areas during a year of significant disruption to society, industry and particularly the technology sector. In a year when the world continued to stay at home the companies in Tern's network adapted to meet their customers' requirements and delivered more products and services than ever before. Performance by our network of companies resulted in an increase in our net assets of 35%, an increase in net assets per share of 26% and an increase in basic earnings per share of 350%.

As we adjusted to this 'new normal', no one predicted the pandemic's far-reaching economic impact, nor how industry would rapidly adopt technology and digital transformation. A vast proportion of these transformations were and are being led by the IoT, which has become a critical strategic component in developing new innovative digitally based solutions and new business opportunities.

We leveraged these wholesale changes of how businesses now need to operate and actively supported directly, and with our network of partners, to strengthen our businesses, resulting in uplifts to their value and in accelerating their Monthly Recurring Revenue ("MRR"), which we consider to be a key metric in establishing their market value in a trade sale or Initial Public Offering ("IPO").

Our record performance and growth in 2021 is a testament to our strategy, built on our operational expertise, network of industry experts here and in the US, and hands on approach. A strategy that has helped our management teams adapt to the changing requirements of customers and markets, grow their businesses, secure additional third-party support and to make Tern the 'go to IoT company' for UK start-ups in healthcare and deep tech industrial IoT that are seeking to become industry leaders on the global stage.

Strategy Update

Tech M&A surged to a staggering US$1.1 trillion during 2021, an increase of 71% compared to 2020 and accounted for 20% of the US$5.9 trillion in the year's global M&A deal value and where software deals dominated the 2021 tech M&A landscape (Refinitiv Reports 2021 Q4 - Global M&A Financial Advisors).

We expect the robust pace of deal making to continue in 2022 and beyond. We expect the tech M&A market to stay competitive in 2022, as strategic buyers continue to accelerate expansion through transformative M&A and as private equity firms head into the year with ample dry powder and hundreds of Special Purpose Acquisition Companies (SPACs) seek possible business combination targets.

As a result, the strategy of developing early-stage technology companies has changed to reflect the key market drivers of the acquirers. Today, all of the companies in our network are on a strong path, creating product lines that are unique in their solutions and are consistently developing an accelerated repetitive revenue model, or MRR, to drive their market leadership and value. We believe the following to represent the key drivers of value that we work to achieve with our network of companies:

   --    True SaaS (Software as a service), or SaaS, subscription-based revenues; 
   --    Demonstrated brand recognition and revenue retention; 

-- Historical and forward growth that achieves the 'Rule of 40' trade-off between profitability and growth;

   --    IoT solutions that drive critical business insights and action; 
   --    In-house engineering team with strong employee retention; and 
   --    IoT solutions that become an integral part of managing customers' businesses. 

Hence our focus on obtaining year over year increases in MRR, as well as broader support from additional independent new third parties to help support them alongside Tern.

Additionally, we believe the process to create these great businesses requires focus and attention. We expect to continue to build a network of companies centred around the key components of the IoT ecosystem that are critical to usage in Healthcare (IMoT) and Industrial (IIoT) such as:

   --   Connectivity Services 

o LoRA, Satellite, Connectivity Management

   --   End to End Security (Security by Design) 

o Device Management, Connectivity Management, Two Way Control

   --   Data Analytics and Visualization 

o Virtual Reality/Augmented Reality, Digital Twins

   --   Application Enablement 

o Data Curation, Artificial Intelligence, Machine Learning Leading to Insights

With Tern's collective expertise and our hands on approach this enables us to deliver, where helpful, the advice and support our companies' need to assist them to achieve their strategic and operational goals, whilst not diluting our efforts across an overly broad set of generalist businesses. We work to provide founders with the tools we wished we had when we were in their shoes.

As a group of former founders and operators we focus our help across our companies specifically in four key areas:

   --    use of capital; 
   --    revenue and go-to market; 
   --    product; and 
   --    talent. 

As mentors and advisors, we relentlessly hustle to deliver value in these four areas. We give our time liberally, listen intently, and take action immediately.

We have travelled this road many times and have a deep understanding of the challenges facing founders. Winning is a mindset.

We are as ambitious as our founders and know that winning requires passion, grit, and both dynamic and orthogonal thinking that we can deliver from our diverse expertise, broad networks and experience.

Our common thread is supporting disruptive companies and teams with strong products in large markets where we can help accelerate their brand recognition and MRR growth and path to success quickly.

Our Values and Culture

We strongly believe that values and culture are just as important as strategy. We seek to partner with ambitious entrepreneurs who want to tackle big, hard problems in ways most think not possible to create a better future. In this regard, we believe that integrity, transparency, humility, and a commitment to excellence are paramount to our mutual success. Those values underpin a culture that is team-first, non-hierarchical and meritocratic.

Operations and Financial Performance

Tern's collective operating experience in SaaS Software, Deep Tech, and Healthcare IoT technologies has helped each of the companies in our network to make substantial progress during 2021, which I believe has significantly increased the value that will ultimately be delivered for Tern shareholders. Value that can be measured in accelerated commercial progress, a continued increase in year-over-year MRR and the willingness of third-party partners to join us on the journey.

We achieved this key operating improvement by working side by side with the companies in our network through the global economic paralysis in the early days of the COVID-19 pandemic to adjust to the new normal, resulting in renewed and enhanced commercial traction and growth.

Keeping a careful eye on our companies' liquidity and their access to additional resources when needed, were and are, we believe, the imperative to preserving shareholder value during economic shocks, such as our most recent experience caused by the global pandemic. We are vigilant and continue to be relentless with our support and are continuously working to create pathways towards sustainable multi-year growth that is several multiples over what has already been achieved. I am pleased to say that with the support of our shareholders, Tern was able to support our companies with additional resources, as required, during these times. In addition, to leverage the synergies of our network of IoT focused companies, we continued our series of fortnightly CEO round tables discussing the topics relevant to growing disruptive businesses and how to maximise value creation in the businesses, for example, by sharing go-to-market strategies and technologic advancements.

Three successful 2021 examples of the value created for our shareholders resulting from our vigilance and hands-on approach are Wyld Networks, InVMA (trading as Konektio) and Device Authority.

Today, Wyld Networks is a virtual satellite network operator that develops and delivers innovative wireless technology solutions that enable affordable connectivity for IoT devices and sensors anywhere in the world, especially for the 85% of the world's surface where there are no traditional cellular networks. Starting from humble beginnings in Brighton and Cambridge, we saw in the two founders' ideas and passion the ability to disrupt access to the Internet. Securing new commercial partners and helping to form the creation of a global IoT consortium, they have engaged customers to create a new market segment with launch partner agreements with end-users in energy and agriculture with customers such as Chevron and Bayer. Their relevance is also validated by their consortium partners which include some of the world's largest terrestrial LoRaWAN(R) IoT operators such as American Tower and Senet, with an objective to offer their existing and new customers the Wyld Connect satellite IoT solution to provision for 100% global coverage. Strong performance by the company has validated our approach and has created value for our shareholders.

Similarly at Konektio we, in collaboration with the founders, saw the opportunity to synthesise years of experience in designing and creating control systems as an engineering services business into a remote sensor/device monitoring SaaS based application which is now in the market as AssetMinder Ò . It is a product that connects legacy and existing systems and IoT based sensors to provide contactless data driven insight into their performance and state of operation.

Our commitment to supporting Konektio's transformation from a services business to a SaaS software company using AssetMinder Ò as the catalyst is another proof point in how our network of resources help founders create new and exciting business models that solve critical problems in large global markets. Business models that accelerate value creation through an MRR based metric and that attract additional partners to help us continue the journey in making AssetMinder Ò an industry leading product.

Lastly, and of significant importance was Device Authority's strategic partnership transaction with Venafi, a US$1.15 billion market cap industry leader , announced on 2 December 2021. This was the fulfilment of a commitment we made previously. We believe obtaining an active strategic partner with solid cybersecurity credentials and a large presence in the United States will help catapult Device Authority into North America. Venafi, with its major investor Thoma Bravo, fulfils this goal. However, in crafting this strategic transaction we did not lose sight of our ultimate objective to continue to create and return value to our shareholders.

Helping to build a company creating sustainable value is a journey that demands courage to take difficult and sometimes complicated actions to help put our companies on a proper trajectory for growth that is the critical component to drive value creation for our shareholders. Our network of companies are now well-funded and in the best commercial shape since our inception. The Tern team is fully focused on delivering another year of successful progress. We are constantly focused on building our companies to their next stage to maximise the opportunities available in the IoT market.

I fundamentally believe that our network of companies have very exciting futures ahead of them and 2022 will be a further year of further significant progress.

Sustainability and Governance

The excellent performance and results by the Company in 2021 are testament to the collective efforts of not just the Board, but of every employee at Tern and at our network of companies.

Since our humble beginnings in 2013, Tern has worked from a foundation built upon a strong corporate ethic in all its dealings and always strives to act in the best interests of its stakeholders. Proactive engagement with all stakeholder groups remains fundamentally important to our Board. We are members of the Quoted Companies Alliance (QCA) and have adopted their code of conduct and recommendations for industry best practices as part of our operating culture. For example, whilst the COVID-19 lockdowns and remote working imperatives curtailed face-to-face engagement during the past two years, Tern has been proactive using digital technologies to communicate such as podcasts, blogs and online Capital Markets Day events.

During the year we established an Environmental, Social and Governance (ESG) committee comprised of highly motivated employees from the companies in our network as many of these companies are developing technologies which help society, improve the quality of life, and ultimately help reduce carbon emissions. To ensure a unified mission, the ESG Committee is led by Alan Howarth and supported by Sarah Payne, our CFO. Leveraging Sarah's passion for ESG, and the committee's broad levels of expertise from the participants, we are now identifying key metrics to allow our network of companies to contribute positively to society's needs, minimising their carbon footprint, driven by good business sense and strong governance. The committee is also chartered to provide Tern with an ESG checklist for consideration in all new company building activity.

We look forward to reporting further on the committee's activities during the year and its work towards making Tern and its companies' leaders in ESG practices for the mutual benefit of all stakeholders and the planet as we strive to become carbon neutral in 2022.

Outlook and Summary

Our record financial results succinctly reflect the quality of the business which we have transformed by using the expertise of our team and network of resources. We greatly appreciate the continuing inspiration and support of our shareholders and advisers and are pleased to be delivering on our Key Performance Indicators (KPIs) and independent third-party validation of value creation throughout our companies.

Digital Transformation is leading the way in the markets we target and helping to create a new economic normality. We believe this heightened interest in using IoT devices, both new and installed, will accelerate during 2022. Acceleration that will bolster aggregate MRR growth across our companies now and for the foreseeable future. 2021 was a very good year with new independent third-party partners brought into our companies and we expect the continued MRR growth to drive additional strategic interest this year to help solidify their market segment leadership.

Having received new capital to fund their disruptive ambitions, we believe we will see significant further growth in employment across the companies in our network to aid in the execution of our plans to expand.

As we are continually evaluating the possibilities for our network of companies, we are also continuously evaluating additions and or replacements to support the growth of Tern and to stimulate additional value creation for our shareholders. We expect the Tern team to review additional opportunities to expand our network of companies during this year with an objective of securing an interest in at least one new exciting company to be added to the network that will add new capabilities, talent and the opportunity to support our growth objectives and improve our results.

Tern has grown significantly since its modest inception in 2013 via a combination of organic initiatives and shareholder support. We anticipate that this combined approach will continue during the next three years along with non-organic initiatives to continue increasing the total value of our business and the holdings of our shareholders. The successful execution of Tern's strategy by our team, despite the uncertainties created by the pandemic and government responses, has materially grown shareholder value and is a proof point that the Tern hands-on model works.

As CEO, I am extremely proud to be part of Team Tern and its culture, which is comprised of outstanding people who care about each other, our companies, our stakeholders and, importantly, who care about our planet.

I look forward to updating you, our shareholders throughout the year to report on our execution, growing confidence, expanding ambition, and value creation.

Albert Sisto

CEO

Financial Review

2021 was a successful year of growth, measured by an improvement across all Tern's KPIs. Following 2020, when attention was rightly focused on ensuring all of our network of companies protected their position at a time of extreme uncertainty, 2021 marked a period of growth and progress for these companies. As a Company we continued to focus on providing shareholders with access to some of the best private Internet of Things (IoT) technology focused companies in the UK. During the year one of these companies successfully listed on the Nasdaq First North Growth Market, while another two successfully completed value enhancing fundraises with well-respected partners.

We further strengthened our balance sheet by raising new equity capital of GBP4m in July 2021. This enabled the Company to continue to support our network of companies as they focus on developing and growing their Monthly Recurring Revenue (MRR).

The value of interests in our network of companies has increased by 40% from GBP21.9m as at 31 December 2020 to GBP30.6m as at 31 December 2021. The valuation includes additional funding of GBP2.5m, including alongside new syndicated partners at Device Authority and Konektio and fair value growth of GBP6.2m. This primarily comprises a GBP4.5m fair value gain for Wyld Networks and an aggregated GBP1.7m gain across Device Authority, Konektio and Talking Medicines.

Net assets increased by 35% to GBP32.4m as at 31 December 2021 (31 December 2020: GBP24.0m) and included a strong cash balance of GBP2.0m (31 December 2020: GBP2.1m). There is no debt on the balance sheet.

During the year, GBP1.5m of cash was used in company operations, GBP2.5m deployed in the existing network of companies and a net GBP3.8m raised through the July 2021 equity fundraising.

Income Statement and Statement of Comprehensive Income

The Company does not charge high board fees to ensure capital is not deducted at source and is instead reinvested in the companies in our network to drive value creation. Total investment income increased to GBP6.1m, a GBP4m increase compared to 2020. This has been driven primarily by the fair value uplift for Wyld Networks as well as fair value uplifts across three of the five other companies.

Overheads overall were fairly stable at GBP1.7m in 2021 (2020: GBP1.5m). This consisted of administration costs of GBP1.6m and other expenses of GBP0.1m. The administration costs included a GBP0.1m increase in directors' fees compared to 2020 which included small increases in salary and benefits as well as the return to full salary following the six-month reduction in fees in 2020 due to COVID-19 related management of uncertainty. Other expenses include costs relating to a share-based payment charge for options issued in 2019 and 2020 and recharged legal costs to the companies in our network.

Events after the end of the reporting period impacting 2021 results

On 1 February 2022, it was announced that Talking Medicines had completed a GBP1.59m fundraise at an increased valuation. The Company's investment in Talking Medicines is now valued at GBP1.79m, which included an additional investment of GBP0.4m by Tern in this round. This valuation was taken into account in the 31 December 2021 valuation of Talking Medicines.

Key performance indicators

The Company's financial Key Performance Indicators (KPIs) are focused on increasing net asset value, increasing net asset value per share and delivering consistent turnover growth from our network of companies. The Company also monitors non-financial KPIs, the primary focus being on the increase in employee numbers and turnover per employee at our network of companies which is an indicator of growth to support commercial success. These indicators are monitored closely by the Board and the details of performance against these are given below.

The return on investments:

Unrealised fair value:

-- Wyld Networks Limited: GBP8.7m valuation (31 December 2020: GBP4.0m): The equity valuation has increased due to additional funding provided to the company and a fair value uplift based on the market capitalisation as at 31 December 2021;

-- Device Authority: GBP14.7m valuation (31 December 2020: GBP12.8m): The valuation has increased due to additional funding provided to the company and a fair value uplift based on the recent strategic equity fundraise in December 2021;

-- Konektio: GBP2.2m valuation (31 December 2020: GBP1.2m): The equity value of Konektio increased due to additional funding provided to the company and a fair value uplift based on the recent equity fundraise in December 2021;

-- FundamentalVR: GBP3.6m valuation (31 December 2020: GBP3m): The valuation has increased due to additional funding provided to the company via a convertible loan note. The equity value remains unchanged and is held at fair value, taking into consideration the current and expected performance of the company. As part of the valuation in the current year, the directors have not considered it necessary to recognise a fair value movement (from the most recent third-party valuation performed in October 2019);

-- Talking Medicines: GBP1.4m valuation (31 December 2020: GBP0.9m): The investment is held at fair value with the most recent equity fundraise in January 2022 taken into account. The additional investment in January 2022 is not included in the 2021 results; and

-- Push Technology: GBP0.02m valuation (31 December 2020: GBP0.03m): The investment is valued at fair value with the price of the most recent valuation taken into account.

The companies in our network are early-stage businesses in evolving markets where there is a lack of comparative businesses available on which to provide a comparable valuation and therefore value has been based on an assessment of numerous factors which includes the multiples achieved in comparable markets on recent transactions, and an assessment by the Board on the strength of our companies' sales pipelines and achievability of their 2022 sales forecasts. Wyld Networks is measured as a Level 1 company under IFRS and as such the value is determined by reference to the appropriate quoted market price at the reporting date.

The net assets of the Company at 31 December 2021 showed strong growth to GBP32.4m (2020: GBP24.0m). The net asset value per ordinary share as at 31 December 2021 also increased to 9.2p (2020: 7.3p).

The year-over-year growth in the aggregate revenue of our network of companies increased by 47% from 2020 to 2021 (18% from 2020 to 2021) which provides an indication of growth in the overall portfolio.

The Company has non-financial KPIs which are also monitored regularly by the Board. The non-financial KPIs are focused around the growth in employee numbers in our network of companies. We believe these factors help serve as leading indicators of the future performance and our impact on our stakeholders:

Employees in our network of companies increased by 35% from 2020 to 2021 (0% from 2019 to 2020), and this increase was balanced by an associated increase in revenues such that revenue per employee also increased by 25% from 2020 to 2021.

Sarah Payne

CFO

Network of Companies

Wyld Networks AB (publ) ("Wyld Networks" or "Wyld")

Holding: 58.7%

Wyld's ongoing success has meant more and more customers signing up to their low-cost, high-value data solution.

Wyld Networks mission is to develop and market innovative solutions to create global and affordable wireless connectivity for people and things, from connecting IoT devices in hard-to-reach areas with satellite IoT solutions to connecting smartphones together in mesh networks without the need for WiFi or 4G.

Wyld Networks CEO, Alastair Williamson said:

"Tern brings a wealth of real-world experience in building companies from start-up through to scale-up. The collaborative nature of the way we all work is invaluable in sharing expertise and knowledge that helps us all grow as businesses."

Device Authority Limited ("DA" or "Device Authority")

Holding: 53.8%

Device Authority is a global leader in Identity and Access Management (IAM) for the IoT; focused on the automotive, medical device (IoMT) and industrial (IIoT) sectors. Device Authority's KeyScaler(TM) platform provides zero touch provisioning and complete automated lifecycle management for securing IoT devices and data at scale, with frictionless deployment across device provisioning, authentication, credential management, policy based end-to-end data security/encryption and secure OTA (over the air) and HSM (hardware security module) updates. KeyScalerTM is system agnostic, and protects their customers' global IoT deployments at the edge, in the cloud and integrating into complex policy-driven requirements, independent of the customers' proprietary hardware and software environments. KeyScaler(TM) is deployed both direct, and through key platform and system integrator partners such as Microsoft, Wipro, EPS Global/Intrinsic ID.

Device Authority CEO, Darron Antill said:

"We've been working with Tern since we started, and they've not only helped us in advancing our technology, but also helped us gain access to the markets which are key to our continued commercial success."

InVMA Limited (trading as "Konektio")

Holding: 36.8%

Konektio is pioneering the next generation of Industrial IoT, delivering value by connecting businesses' people, process, places and things.

Konektio helps industrial and manufacturing companies prosper by converging their physical assets with new transformational digital insights. Konektio'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) assesses the effectiveness and efficiencies of entire operations, putting customers in control of their assets and therefore directly impacting productivity, efficiency and business outcomes.

Konektio CEO, Peter Stephens said:

"We're so excited about the next developments of our AssetMinder(R) tool, we can't bring them online fast enough. We think our future is bright with the support of Tern."

FVRVS Limited ("FundamentalVR")

Holding: 26.9%, plus convertible loan of GBP530,000

Providing a solution that is revolutionising Life Science companies' approach to surgery practice and education, FundamentalVR is making huge strides in its markets in Europe and the US.

FundamentalVR provides the Company with exposure to the rapidly growing medical simulation market using low cost open-system IoT devices. Their proprietary HapticVRTM platform replaces wet labs and cadaveric training with remote, collaborative training to accelerate life science product adoption.

FundamentalVR CEO, Richard Vincent said:

"Tern brought a wealth of experience in how to build a business, and for the last few years we've been doing exactly that, growing from where we were as a company of just three people, to where we are today."

Talking Medicines Limited ("Talking Medicines")

Holding: 23.4%

Talking Medicines continue on their mission to become the gold standard in patient intelligence by medicine.

Talking Medicines is a social intelligence company designed specifically for the pharmaceutical industry. By structuring and translating the patient's voice on social media into actionable intelligence, it focuses on assisting pharmaceutical companies in delivering a greater return on investment for marketing and delivering better health outcomes for patients. Its platform, PatientMetRx, is an artificial intelligence ("AI") and natural language processing ("NLP") powered social intelligence service, to provide pharmaceutical companies with insights on patient experience on a scale and depth not previously possible.

Talking Medicines CEO, Jo Halliday said:

"Tern is a very different type of partner, they are with you for the long-term and are a real team player as you build your business."

Income Statement and Statement of Comprehensive Income

For the year ended 31 December 2021

 
                                                2021         2020 
                                                 GBP          GBP 
--------------------------------------   -----------  ----------- 
Fee income                                    63,783      151,159 
Movement in fair value of investments      6,240,095    1,992,891 
Loss on disposal                           (199,115)            - 
---------------------------------------  -----------  ----------- 
Total investment income                    6,104,763    2,144,050 
Administration costs                     (1,635,058)  (1,341,802) 
Other expenses                              (75,372)    (206,845) 
---------------------------------------  -----------  ----------- 
Operating profit                           4,394,333      595,403 
Finance income                               183,988      208,488 
---------------------------------------  -----------  ----------- 
Profit before tax                          4,578,321      803,891 
Tax                                                -            - 
--------------------------------------   -----------  ----------- 
Profit and total comprehensive income 
 for the period                            4,578,321      803,891 
---------------------------------------  -----------  ----------- 
 

Since there is no other comprehensive income, the profit for the year is the same as the total comprehensive income for the year.

EARNINGS PER SHARE:

 
 Basic earnings per share     1.35 pence   0.30 pence 
 Diluted earnings per share   1.33 pence   0.30 pence 
 

Statement of Financial Position

As at 31 December 2021

 
ASSETS                                 2021         2020 
 NON--CURRENT ASSETS                    GBP          GBP 
 Investments                     30,612,047   21,904,791 
-----------------------------   -----------  ----------- 
                                 30,612,047   21,904,791 
 -----------------------------  -----------  ----------- 
CURRENT ASSETS 
Trade and other receivables         189,354      261,301 
Cash and cash equivalents         1,957,203    2,130,166 
------------------------------  -----------  ----------- 
                                  2,146,557    2,391,467 
 -----------------------------  -----------  ----------- 
TOTAL ASSETS                     32,758,604   24,296,258 
------------------------------  -----------  ----------- 
EQUITY AND LIABILITIES 
Share capital                     1,371,970    1,367,635 
Share premium                    30,546,569   26,740,789 
Retained earnings                   498,010  (4,107,767) 
------------------------------  -----------  ----------- 
                                 32,416,549   24,000,657 
 -----------------------------  -----------  ----------- 
CURRENT LIABILITIES 
Trade and other payables            342,055      295,601 
------------------------------  -----------  ----------- 
TOTAL CURRENT LIABILITIES           324,055      295,601 
------------------------------  -----------  ----------- 
TOTAL LIABILITIES                   342,055      295,601 
------------------------------  -----------  ----------- 
TOTAL EQUITY AND LIABILITIES     32,758,604   24,296,258 
------------------------------  -----------  ----------- 
 

Statement of Changes in Equity

For the year ended 31 December 2021

 
                                  Share capital      Share premium      Retained earnings         Total 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                    -                  -                803,891              803,891 
----------------------------  -----------------  -----------------  ---------------------  ------------------- 
Transactions with owners 
Issue of share capital                   12,064          4,488,336                      -            4,500,400 
Share issue costs                             -          (326,166)                      -            (326,166) 
Share based payment charge                    -                  -                109,455              109,455 
Balance at 31 December 2020           1,367,635         26,740,789            (4,107,767)           24,000,657 
----------------------------  -----------------  -----------------  ---------------------  ------------------- 
Total comprehensive income                    -                  -              4,578,321            4,578,321 
----------------------------  -----------------  -----------------  ---------------------  ------------------- 
Transactions with owners 
Issue of share capital                    4,335          4,031,665                      -            4,036,000 
Share issue costs                             -          (225,885)                      -            (225,885) 
Share based payment charge                    -                  -                 27,456               27,456 
----------------------------  -----------------  -----------------  ---------------------  ------------------- 
Balance at 31 December 2021           1,371,970         30,546,569                498,010           32,416,549 
----------------------------  -----------------  -----------------  ---------------------  ------------------- 
 
 

Statement of Cash Flows

For the year ended 31 December 2021

 
                                                  2021         2020 
                                                   GBP          GBP 
----------------------------------------   -----------  ----------- 
 OPERATING ACTIVITIES 
 Net cash used in operations               (1,535,722)  (1,189,481) 
 Purchase of investments                   (2,504,185)  (1,957,248) 
 Cash received from sale of investments              -       93,421 
 Interest received                              56,829        1,275 
-----------------------------------------  -----------  ----------- 
 Net cash used in operating activities     (3,983,078)  (3,052,033) 
-----------------------------------------  -----------  ----------- 
 FINANCING ACTIVITIES 
 Proceeds on issues of shares                4,000,000    4,500,400 
 Share issue expenses                        (225,885)    (326,166) 
 Proceeds from exercise of options              36,000            - 
 Net cash from financing activities          3,810,115    4,174,234 
-----------------------------------------  -----------  ----------- 
 (Decrease)/increase in cash and 
  cash equivalents                           (172,963)    1,122,201 
-----------------------------------------  -----------  ----------- 
 Cash and cash equivalents at beginning 
  of year                                   2,130,166     1,007,965 
-----------------------------------------  -----------  ----------- 
 Cash and cash equivalents at end 
  of year                                    1,957,203    2,130,166 
-----------------------------------------  -----------  ----------- 
 

Notes

1. BASIS OF PREPARATION

The financial information set out in the announcement does not constitute the Company's statutory accounts for the years ended 31 December 2021 or 2020. The financial information for the year ended 31 December 2020 is derived from the statutory accounts for that year, which were prepared under IFRSs in conformity with the requirements of the Companies Act 2006 , and which have been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006. For the year ended 31 December 2020 it did include an emphasis of matter paragraph in relation to the impact of COVID-19 on the Company.

The financial information for the year ended 31 December 2021 is derived from the audited statutory accounts for the year ended 31 December 2021 on which the auditors have given an unqualified report, that did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditors drew attention by way of emphasis. The statutory accounts will be delivered to the Registrar of Companies following the Company's annual general meeting.

The financial statements of the Company have been prepared in accordance with UK-adopted international accounting standards . The financial statements have been prepared on the basis of the recognition and measurement principles of the IFRS that were applicable at 31 December 2021. The accounting policies are consistent with those applied in the preparation of the interim results for the period ended 30 June 2021. The accounting policies are also consistent with the statutory accounts for the year ended 31 December 2020.

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may ultimately differ from those estimates.

In accordance with IFRS 10, para 4 the Directors consider the Company to be an investment company and has taken the exemption not to present consolidated financial statements or apply IFRS3 when it obtains control of another entity as it is an investing company that measures all of its investments at fair value through the income statement in accordance with IFRS 9.

1.1 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. This has been assessed using detailed cash flow analysis so that the Board can conclude that the Company has sufficient working capital resources to continue for at least 12 months from the approval of the financial statements without any additional financing requirement. The impact of COVID-19 has been considered as part of this assessment. In the event that opportunities are presented such that additional funding was required, management are confident that they would be able to obtain additional funds from various sources. For example, the Company can exit part of its investment in listed equity securities with the risk that such transactions are determined by an inherent and undetermined market risk.

2. NON-CURRENT ASSETS

INVESTMENTS

 
                                               2021         2020 
                                                GBP          GBP 
--------------------------------------  -----------  ----------- 
 Fair value of investments brought 
  forward                                21,904,791   17,882,660 
 Interest accrued on convertible 
  loan note                                 162,091      171,473 
 Additions                                2,504,185    1,957,248 
 Disposals                                (199,115)     (99,481) 
--------------------------------------  -----------  ----------- 
 Fair value of investments carried 
  forward                                24,371,952   19,911,900 
 Fair value adjustment to investments     6,240,095    1,992,891 
--------------------------------------  -----------  ----------- 
 Fair value of investments carried 
  forward                                30,612,047   21,904,791 
--------------------------------------  -----------  ----------- 
 
 
                              Cost   Valuation   Equity ownership 
                            GBP000      GBP000                  % 
-------------------------  -------  ----------  ----------------- 
 Wyld Networks AB            1,788       8,746               58.7 
 Device Authority            8,565      14,686               53.8 
 InVMA Limited               1,525       2,189               36.8 
 FVRVS Limited               2,928       3,576               26.9 
 Talking Medicines 
  Limited                      860       1,392               23.4 
 Push Technology Limited       120          23                 <1 
-------------------------  -------  ----------  ----------------- 
                            15,786      30,612 
-------------------------  -------  ----------  ----------------- 
 

The convertible loan facility issued to FVRVS is a financial asset with multiple derivatives and the entire contract has been designated at FVTPL (fair value through profit and loss), with any movement in fair value taken to profit and loss for the year. In 2021 the value of the convertible loan outstanding was GBP530,000 (2020: nil)

The convertible loan facilities issued to Device Authority, InVMA and Wyld Networks were converted into equity with any movements in fair value taken to profit and loss for the year.

3. EARNINGS PER SHARE

 
                                                                       2020         2019 
                                                                        GBP          GBP 
-------------------------------------------------------------  ------------  ----------- 
          Profit for the purposes of basic and fully diluted   GBP4,578,321   GBP803,891 
           profit per share 
-------------------------------------------------------------  ------------  ----------- 
                                                                       2021         2020 
                                                                     Number       Number 
-------------------------------------------------------------  ------------  ----------- 
          Weighted average number of ordinary shares: 
          For calculation of basic earnings per share           339,559,205  290,768,708 
                                                                342,975,205 
          For calculation of fully diluted earnings per 
           share                                                       ,205  290,768,708 
-------------------------------------------------------------  ------------  ----------- 
                                                                       2021         2020 
-------------------------------------------------------------  ------------  ----------- 
          Earnings per share: 
          Basic earnings per share                               1.35 pence   0.30 pence 
          Diluted earnings per share                             1.33 pence   0.30 pence 
-------------------------------------------------------------  ------------  ----------- 
 

4. POSTING OF ANNUAL REPORT AND ANNUAL GENERAL MEETING

The annual report for the year ended 31 December 2021 will shortly be available from the Company's website ( https://www.ternplc.com/investors) and will be posted to shareholders. The annual report contains a notice of the AGM which will be held at 9.30am on Wednesday 27 April 2022 at the offices of Reed Smith, The Broadgate Tower, 20 Primrose Street, London, EC2A 2RS.

While it is currently anticipated that there will be no restrictions on social contact or meeting format at the time of the AGM, shareholders should carefully consider whether or not it is appropriate to attend the AGM. The Board remains keen to ensure the wellbeing of all employees and shareholders is protected and to minimise any public health risks from public gatherings. Shareholders are strongly encouraged to exercise their voting rights by completing and submitting a Form of Proxy in advance of the meeting, appointing the Chairman of the Annual General Meeting as proxy rather than a named person. Shareholders are asked not to attend the AGM if they are displaying any symptoms of COVID-19, or have recently been in contact with anyone who has tested positive. To minimise transmission we encourage shareholders to take a rapid lateral flow test before attending the meeting, and subject to conditions on the day of the meeting, shareholders may be required to wear face masks.

The Company will continue to closely monitor the developing impact of COVID-19, including the latest UK Government guidance. If a change to Government guidelines is announced after the date of this Notice is published and such guidelines limit gatherings and shareholder attendance at the AGM, any changes to the AGM arrangements will be notified to shareholders through the Company's website www.ternplc.com and, where appropriate, by announcement made by the Company to a Regulatory Information Service.

Any shareholders who have specific questions on any of the resolutions should address these to the Chairman of the Company via info@ternplc.com by 5.30pm on Wednesday 20 April 2022 and answers to these questions will be published, as appropriate, on the Company's website in advance of the AGM.

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END

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March 17, 2022 03:00 ET (07:00 GMT)

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