Interim / Quarterly Report • Sep 25, 2019
Interim / Quarterly Report
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Dissemination of a RegulatoryAnnouncement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
25 September 2019
Tern Plc ("Tern" or the "Company"), the AIM quoted investment company specialising in the Internet of Things ("IoT") market, is pleased to announce its interim results for the six months to 30 June 2019.
| 30 June 2019 | 30 June 2018 | 31 December 2018 | |
|---|---|---|---|
| £ | £ | £ | |
| Netassets | 17,478,283 | 13,942,757 | 16,751,773 |
| Currentassets | 2,153,071 | 2,671,784 | 2,152,981 |
| Total assets | 17,946,668 | 14,221,704 | 17,009,220 |
| Loss for the period | (623,340) | (221,252) | (312,564) |
| Netassetvalue per share |
6.9p | 6.2p | 7.1p |
"Duringthe first half of 2019,Tern hasac7vely focused on developing opportuni7es to expand its por>olio and to increase the fairvalua7on of its exis7ng por>olio companies. We have also built our por>olio value through some follow-on investment ac7vi7es, all the while maintaining our focus on addingvalue to our investment companies through advice, introduc7onsand capital.
"Our involvement has enabled the technology entrepreneurs in our por>olio to grow their businesses and has provided our investors with a por>olio of exci7ng early and growth-stage technology companies. Posi7ve progress was also achieved on ourmarke7ng objec7ve to posi7on Tern asaleadinginvestor in UK IoTtechnology companiesand we will be doing more to progress this in the next 12months.
We are commiDed to supporting our por>olio and investing in the very best IoTtechnology companies in the UK in order to grow our NAV per share. We are grateful for the ongoing support of our shareholders and look forward to providing updates to the market as we deliver on our strategy."
Note 1: Principal por>olio companygrowth excludes Seal and Push, in which Tern has a <1% holdingand minimal influence.
| Tern Plc AlbertSisto/Sarah Payne |
via Newgate |
|---|---|
| Allenby Capital Limited (Nomad and joint broker) David Worlidge/Alex Brearley |
Tel: 020 3 328 5656 |
| Whitman Howard (Joint broker) Nick Lovering/ChristopherFurness |
Tel: 020 7659 1234 |
| Newgate Communica2ons Elisabeth Cowell/Fiona Norman |
Tel: 020 7382 4730 |
Tern is focused on delivering NAV growth per share by providing its shareholders with investments into an exci7ng array of early-stage IoT companies, which provide best-in-class solu7ons for the healthcare and industrial IoT markets. These markets present sizable opportuni7es for genera7ng returns, as they have a large underlying popula7on of IoT devices and use cases in existence today. For example, the "all in" IoT healthcare market size is projected to reach US\$534.3 billion by 2025 expandingata CAGR of 20% between 2019 and 2025,accordingto areport by Grand View Research, Inc. (March 2019).The global Industrial Internet of Things (IIoT) market is expected to reach avalue of US\$922.62 billion by 2025,accordingto aMillion Insights report (March 2019).
Ou r financial priori7es con7nue to be accelera7ng the progress of our por>olio companies' commercial success; value crea7on; robust realisa7onsand the addi7on of new investments by:
During the six months to 30 June 2019, the fair value per share of our por>olio remained broadly stable at 6.2p (FY18: 6.3p; HY18: 5.1p) which included a 6% increase in the absolute por>olio value. Our opera7ng costs during the period increased compared to the six months to 30 June 2018 by £0.1 million to £0.7 million (HY18 costs: £0.6 million; FY18 costs: £1.3 million). The majority of this increase was due to a n increase in Directors' feesand professional fees,alongside one off legal and professional advisory fees.The one-off costs were incurred due to the Company exploringan opportunity to rapidly expand its por>olio through a strategic ini7a7ve. This transac7on would have added a significant number of companies to the Company's por>olio, increased our NAV and broadened our resources to support and manage the larger por>olio. However, aQercareful due diligence and with the support of ouradvisers the Board decided not to pursue the opportunityany further.
Providing a greater opportunity to create and return value to our shareholders is our primary objec7ve and we remain commiDed to expanding our por>olio to at least twelve companies, leveraging our unique posi7oning in the IoT space. The 7meline for sourcing, structuring and execu7ng new investments in market leading UK IoTcompanies that fit within Tern's investment strategy will some7mes be beyond Tern's direct control. As a result, the Board does not now expect to have at least twelve companies within the por>olio by 31 December 2019. However, our deal flow remains strongand this cri7cal goal will be our focus for the remainder of 2019 and beyond to fuel the growth of our NAV per share.
During the first six months of 2019 we raised £1.5 million to strengthen our financial posi7on for upcoming investment opportuni7es and to provide addi7onal financing support to our exis7ng por>olio companies to enable their con7nued growth. During the period we delivered follow-on investment and support amoun7ng to £1.4 million. In par7cular, Wyld Networks, which holds a 90% interest in Wyld Technologies, acquired the assets of Amiho Technology Ltd. Asaresult of this transac7on, we added assets cos7ng only £42,910 to the exis7ng business of Wyld Networksand supported the business with addi7onal opera7ngcapital of £373,292, viaashort-term loan. Thisac7vity resulted in a new direc7on for Wyld Networks, which started as flexiOPS, a grant-based business. Wyld Technologies is now focused on the rapidly growing low power IoT mesh connec7vity space.
We, along with Alsop Louie Partners and the Samenuk Family Trust, con7nued with our conver7ble loan note support of Device Authority. During the period Tern provided loan note support to Device Authorityamoun7ng to £622,634 which included a small bridge loan, repaid on receipt of the R&D tax credit. This capital enabled Device Authority to con7nue its partner and customer development ac7vi7es, which now includes an expanded list of new customers,as it pursuesastrategic partner to help leverage its market successes.
Lastly, the Company provided InVMA with a small conver7ble loan of £50,000 and FundamentalVR with a bridge loan advance to a next round of investment of £325,000.This bridge loan wasat favourable terms, with Tern receivinga 20% discount upon equity conversion of the bridge at the next round of investment capital into FundamentalVR.
Year-over-yeargrowth in the aggregate revenue of our principal por>olio companies 1 , akey performance indicator, is forecast to increase by 50% from calendar year 2018 to calendar year 2019 (2017/2018 increase: 58%). In addi7on, year-over-year employee headcount growth, another important indicator of the growth and success of our principal por>olio companies 1 , increased by 9% in the six months to June 2019 (six months to June 2018 increase: 12%), highligh7ngacon7nuinggrowth in the por>olio overall.
Note 1: Principal por>olio companygrowth excludes Seal and Push, in which Tern has a <1% holdingand minimal influence
Device AuthorityLimited ("Device Authority"): £12.3million valuaon
Holding: 56.8% Sector: Security Invested Since: September 2014
Device Authority is a global leader in Iden7ty and Access Management (IAM) for the IoT, focused on medical / healthcare, industrial and smart connected devices. Its KeyScaler(TM) pla>orm provides trust for IoT devices and the IoT ecosystem, to address the challenges of securing the Internet ofThings.
Since Tern's ini7al investment, Device Authority has expanded its product por>olio, world class team and ecosystem of well-established business partners. The team atTern has supported this, providingadvice and contacts which have enabled Device Authority to establish aSilicon Valley presence, create connec7ons with certain strategic partners and customers and introducing new experience to the Board and adviser network.
During 2019 to date, Device Authority has con7nued to focus on the industrial, medical and automo7ve IoT sectors, which are forecast to grow substan7ally over the next five years. Achievements include growing its partnership base through the forma7on of alliances with nCipher Security, IdenTrust and Wipro and developing the Keyscaler pla>orm alongside PTC Thingworx and MicrosoQ Azure. Device Authority also
strengthened its Board through the appointment of Dr Nicko van Someren, founder of nCipher, and Ramesh Kesanupalli, founder of the FIDO Alliance and Nok Nok labs. Both are recognised leaders in their fields in the USA.
I am pleased to report that Device Authority con7nued to gain industry recogni7on, being ranked as one of the top 20 healthcare technology providers by MyTechMag, a US technology magazine. It was also recognised by Quadrant Knowledge Solu7ons as a technology leader in the SPARK matrix analysis of the IoTIAMmarket.
Device Authority's shareholders con7nue to support the ongoing progress of the company, having provided a total of US\$3.8 million in the form of conver7ble loan notes since November 2017, with US\$2.4 million of this being provided by Tern (US\$0.7 million in the six months to 30 June 2019).
As at 30 June 2019, the value of Tern's shareholding in Device Authority has increased to £12.3 million (31 December 2018: £11.7 million) as a result of the addi7onal cash invested viaconver7ble loan notes.
The annual report and accounts for Device Authority for the year ended 31 December 2018 are expected to be submiDed to Companies House shortly.
FVRVS Limited ('Fundamental VR'): £2.2million valuaon
Holding: 34.7% Sector: HealthcareIoT Invested Since: May 2018
FundamentalVR is a dynamic technology and data insight business specialising in the intersec7on between immersive experiences and hap7cs, to enhance medical trainingand outcomes. It fits with Tern's strategy to invest in companies targe7ngthe healthcare IoTmarket.
Our investment in FundamentalVR provides us with exposure to arapidly growing healthcare market. A June 2019 report by MarketsandMarkets highlighted that the medical simula7ons market is expected to reach US\$5.16 billion by 2027 from an es7mated US\$1.70million in 2019, ata CAGR of 14.9%.
FundamentalVR's SaaS(soQware as a service) pla>orm, Fundamental Surgery, features VR Hap7cs technology that takes advantage of readily available virtual reality hardware to create asimula7on system that can be easily used on any modern VR-enabled PC/laptop.
In line with our proac7ve investment strategy,Tern has worked closely with FundamentalVR duringthe period to supportgrowth in the business. Since our ini7al investment in May 2018, we have helped the Board to refine itsgo-to-market strategy, provided them with access to poten7al new industry customers, elevated their profile within the VC marketand established new poten7al routes to market.
FundamentalVR has gone from strength to strength since Tern's ini7al investment, having secured partnerships, significant new contracts, and industry-wide awards and accredita7ons. It has increased its penetra7on within the medical industry, with its Total Hip Replacement (Posterior Approach) simula7on gaining Con7nuing Professional Developmentaccredita7on from the Royal College of Surgeons and inclusion on the orthopaedicregistrar training programme atSt George's Hospital.
FundamentalVR also won the SXSW 2019 Interac7ve Innova7on Award, 2019 Red Herring 100 Europe Awards, and was chosen as one of the top 40 healthcare transformers in MM&M's 2019 class.
The technology has con7nued to evolve in 2019, including integra7on with a hap7c glove and the inclusion of eye-tracking capability within the simula7on programme. FundamentalVR also announced a significant commercial contract (worth approximately £0.5 million) with a leading pharmaceu7cal company to create an addi7onal virtual reality simula7on,addingto the Company's con7nued technological improvements.
The annual report and accounts forFundamental VR for the year ended 31 December 2018 are expected to be submiDed to Companies House shortly.
Wyld Networks Limited ("Wyld Networks"): £78,000 valuaon, plus £0.5million short term loan
Holding: 100% Sector: IoT enablement Invested Since: June 2016
During the period, this company rebranded from flexiOPS, following the acquisi7on of the AMIHO product por>olio, from fellow Tern por>olio company InVMA Limited.
By combining Wyld Network's product por>olio,a compelling proposi7on in the IoT embedded communica7ons industry, which currently operates in over 250,000 smart meters, with Wyld Technologies' Mesh solu7ons (90% owned); we have now established a unique and value enhanced product suite deliveringsecure intelligent mesh solu7ons empoweringresilient IoTand 5G networks to create value for people, places and things.
Networks have tradi7onally been centralised. This means that everything connects to a central point, such as a base sta7on or router which has to handle all the network's traffic. However, decentralised networks, where devices are linked to each other, are also possible. Decentralised networks create an interlaced 'mesh' and can communicate through direct device to device connec7ons using mul7ple wireless technologies such as Bluetooth, Wi-Fi Direct/P2P Wi-Fi and 5G.
Wyld's technology is unique in that it creates a wireless network which connects people to people directly from smartphone to smartphone or device to device, as well as device to people. It establishes a resilient and low-latency mesh network without the need to route all the traffic through the tradi7onal hierarchical mobile infrastructure. This creates mul7ple revenue genera7ng and cost reducing use cases in areas of high popula7on densityand also where there is no mobile coverage.
In 2018, Wyld Networks signed smart-device delivery contracts and license agreements for its wireless sensor technology in the smart energy (Cadis, RCD, Develco) and smartagritech (Delta-T) sectors.
Wyld Networks was also awarded a £121,000 grant by Innovate UK to collaborate on a new mass produc7on technology, SmartDrop, for Archipelago Technology Group Ltd.
Wyld Technologies launched its Intelligent Device Mesh Agent soQware development kit (SDK) aQer comple7ng technical trials with a large
underground metro system, and i n 2019 par7cipated in a large rail operatoraccelerator, which launched Wyld Fusion, an Intelligent Content ManagementSystem and Integra7on Pla>orm.
The annual report and accounts for Wyld Networks for the year ended 31 December 2018 are expected to be submiDed to Companies House shortly.
InVMA Limited ("InVMA"): £1 million valuaon Holding: 50% Sector: IoT enablement Invested Since: September 2017
InVMA is an end-to-end IoTand 'Industry 4.0' solu7on provider of IoT products. It combines world-class management consul7ng exper7se along with hardware, soQware, IT and opera7onal technology (OT) capabili7es. Thisallows it to build bespoke solu7ons that enable customers to disrupt their market, create new revenue streams and reduce their opera7ng costs quickly with low risk. Tern has supported InVMA's management through this process in line with our investmentapproach.
Its innova7ve product 'AssetMinder', which also integrates with Device Authority's KeyScaler, enables management of all of an IoTclient'sassets through one applica7on,and has been the focus of growth during 2019. It facilitates real-7me monitoring, which is cri7cal to fuelling IoTgrowth, par7cularly in the Industrial IoTmarket, which isakeyarea of focus forall our por>olio companies.
Duringthe first half of 2019, InVMA increased its strategic partner base by securingagreements with XL Group, Solid State Supplies, Robustel and ECA Services.
InVMA has collaborated on 'Industry 4.0' contracts with ECA Services for several of the UK's largest manufacturers. InVMA also secured an ini7al £0.25m contract with aleadingaerospace and defence organisa7on, to enable an innova7ve SmartFactory implementa7on.
The annual reportand accounts for InVMA for the year ended 31 December 2018 show netassets of £0.2million and aloss of £0.5million.
Seal Soware Group Limited ("SealSo7ware"): £115,145 valuaon
Holding: <1% Sector: Database Analycs Invested since: July 2014
During the first half of 2019 Seal SoQware, a leader in contract discovery and analy7cs, in which Tern holds less than 1%, has con7nued to grow and develop its business with numerous new contractsand strategic partnershipsannounced.Specifically:
Push TechnologyLimited ("Push Technology"): £61,161 valuaon
Holding: <1% Sector: Data distribuon Invested since: July 2014
We have been informed by management that Push Technology, acompany in which Tern holds less than 1%, has expanded both its interna7onal footprintand the breadth of industries served by the company's 'Diffusion(R)' Real-Time API Management pla>orm duringthe first half of 2019.
For organisa7ons worldwide, Diffusion powers the real-7me applica7ons and systems cri7cal to their business expansion, revenue growth, and op7mal ongoing business opera7ons, by solvingtheir real-7me data managementand distribu7on challenges.
During the six months ended 30 June 2019, Tern provided ongoing support to its underlying por>olio base, inves7ng £1.4 million via loan note facili7es to provide capital for these entrepreneurial companies to enable them to con7nue to grow and develop within their focused markets. The fair value of the por>olio remained stable across the period with no movement due to exchange rate fluctua7ons, which had impacted the previous comparable periods. Cost management con7nues to be a focus for the Company. The increase in administra7on costs during the six months compared t o the six months to 20 June 2018, was principally due to addi7onal advisory costs in the UK and the USA, along with an increase in Directors' salaries to begin to bring them closer to more conven7onal market levels. Other expenses in the period included costs associated with Tern exploringan expansion to its por>olio through astrategicini7a7ve with synergis7cvalue.
The net asset value per share of 6.9p as at 30 June 2019 remained broadly comparable across the periods, compared to 7.1p at 31 December 2018 and 6.2p at 30 June 2018.
The Company remains commiDed to the areas of the IoT market outlined earlier by expanding our par7cipa7on in this start-up ecosystem in the
UK , through direct investments and innova7ve partnerships. We firmly believe that the current entrepreneurial environment is spawning opportuni7esatarapid pace thatare crea7ngsolu7ons to global problems, usingacombina7on of new and exis7ngtechnologies that can benefit from our investment thesis. We also believe that the model that we have transi7oned to lends itself to working with late seed and early stage series 'A' partners in Europe to further syndicate our investments at reasonable values, to reduce risk and accelerate por>olio company growth and value.
We are aiming to achieve US Venture Capital valua7ons for our UK investments in later series 'B' rounds and beyond, to create shareholder value and premium exit opportuni7es. We have seta target for our por>olio ac7vi7es to achieve an average of 20% year-on-year growth in por>olio value by year end 2019 and beyond. We have achieved a modest 6% growth during this repor7ng period within the por>olio and the Directors will be seekingto achieve the targetgrowth over the remainder of the financial year.
We feel confident of making further progress duringthe second half of 2019 and look forward to making more announcements about business performance, new developments and improvements for each of our por>olio companies and repor7ng exci7ng new addi7ons to the Tern por>olio. The 7meline for sourcing, structuring and execu7ng new investments in market leading UK IoT companies that fit within Tern's investment strategy will some7mes be beyond Tern's direct control and although we now do not expect to reach our objec7ve of 12 investments by 31 December 2019, this remainsakey strategy for the Companyat the earliest opportunity.
I would also like to extend our thanks to the management teams of our por>olio companies who remain central to our whole investment business model. We enter the second half of the year well posi7oned to capitalise on opportuni7es in 2019 and remain focused on execu7ng our strategy drivinglong-term, sustainable NAV growth for our shareholders.
AlSisto
Chief Execuve Officer
25 September 2019
| Notes | 6months to 30 June 2019 |
6months to 30 June 2018 |
12months to 31 December 2018 |
|
|---|---|---|---|---|
| (Unaudited) | (Unaudited) | (Audited) | ||
| £ | £ | £ | ||
| Turnover | 51,965 | 64,245 | 106,117 | |
| Movement in fairvalue of investments | 11,724 | 282,987 | 775,910 | |
| Gross Profit | 63,689 | 347,232 | 882,027 | |
| Administra7on costs | (494,028) | (393,212) | (792,534) | |
| OtherExpenses | (192,718) | (178,740) | (476,716) | |
| Opera7ngloss | (623,057) | (224,720) | (387,223) | |
| Finance income | 1,943 | 4,376 | 74,659 | |
| Finance costs | (2,226) | (908) | - | |
| Loss before tax | (623,340) | (221,252) | (312,564) | |
| Tax | - | - | - | |
| Lossand total comprehensive income for the period |
(623,340) | (221,252) | (312,564) | |
| Earnings pershare | 9 | |||
| Basic | (0.25)p | (0.1)p | (0.1)p | |
| Diluted | (0.25)p | (0.1)p | (0.1)p | |
30 June 2019 30 June 2018 31 December 2018 (Unaudited) (Unaudited) (Audited) Note £ £ £ Assets Investments 15,793,597 11,549,920 14,856,239 Non-current assets 15,793,597 11,549,920 14,856,239 Current assets Trade and other receivables 780,347 1,133,132 239,180 Cash and cash equivalents 1,372,724 1,538,652 1,913,801 2,153,071 2,671,784 2,152,981
| Total assets | 17,946,668 | 14,221,704 | 17,009,220 | |||||
|---|---|---|---|---|---|---|---|---|
| Equity a <ributable company's="" equity="" holders<="" th="" the="" to=""> | ||||||||
| Share capital | 10 | 1,352,433 | 1,346,665 | 1,348,903 | ||||
| Share premium | 21,006,754 | 16,833,172 | 19,660,434 | |||||
| Loan note equity reserve | - | - | - | |||||
| Share op7on and warrant reserve | - | - | - | |||||
| Retained earnings | (4,880,904) | (4,237,080) | (4,257,564) | |||||
| 17,478,283 | 13,942,757 | 16,751,773 | ||||||
| Current liabili2es | ||||||||
| Trade payables | 405,760 | 34,024 | 64,370 | |||||
| Accrualsand other payables | 62,625 | 244,923 | 193,077 | |||||
| 468,385 | 278,947 | 257,447 | ||||||
| Non-current liabili2es | ||||||||
| Borrowings | - | - | - | |||||
| Total liabili2es | 468,385 | 278,947 | 257,447 | |||||
| Total equity and liabili2es | 17,946,668 | 14,221,704 | 17,009,220 |
| Loan note | ||||||
|---|---|---|---|---|---|---|
| Share | Share | equity | Op7on and warrant | Retained | Total | |
| capital | premium | reserve | reserve | earnings | equity | |
| £ | £ | £ | £ | £ | £ | |
| Balance at 1 January 2018 | 1,330,225 13,237,362 | 123,482 | 175,982 (4,286,249) | 10,580,802 | ||
| Total comprehensive income | - | - | - | - | (221,252) | (221,252) |
| Issue of share capital | 16,440 | 3,953,310 | - | - | - | 3,969,750 |
| Share and loan issue costs | - | (357,500) | (357,500) | |||
| Conversion of conver7ble loan notes | - | - | (123,482) | - | - | (123,482) |
| Transfer of lapsed warrants | - | - | - | (175,982) | 175,982 | - |
| Share based payment charge | - | - | - | - | 94,439 | 94,439 |
| Balance at 30 June 2018 | 1,346,665 16,833,172 | - | - | (4,237,080) | 13,942,757 | |
| Total comprehensive income | - | - | - | - | (91,312) | (91,312) |
| Issue of share capital | 2,238 | 2,907,762 | - | - | - | 2,910,000 |
| Share and loan issue costs | - | (245,500) | - | - | - | (245,500) |
| Transfer on conversion of conver7ble loan notes | - | 165,000 | - | - | - | 165,000 |
| Share based payment charge | - | - | - | - | 70,828 | 70,828 |
| Balance at 31 December 2018 | 1,348,903 19,660,434 | - | - | (4,257,564) | 16,751,773 | |
| Total comprehensive income | - | - | - | - | (623,340) | (623,340) |
| Issue of share capital | 3,530 | 1,496,470 | - | - | - | 1,500,000 |
| Share and loan issue costs | - | (150,150) | - | - | - | (150,150) |
| Balance at 30 June 2019 | 1,352,433 21,006,754 | - | - | (4,880,904) | 17,478,283 |
| 6months to 30 June 2019 |
6months to 30 June 2018 |
12months to 31 December 2018 |
||
|---|---|---|---|---|
| (Unaudited) | (Unaudited) | (Audited) | ||
| Note | £ | £ | £ | |
| OPERATING ACTIVITIES | ||||
| Net cash used in opera7ons | 11 | (521,944) | (503,436) | (752,350) |
| Investment in por>olio companies | (1,370,926) | (1,513,549) | (3,556,625) | |
| Netcash used in opera2ng ac2vi2es | (1,892,870) | (2,016,985) | (4,308,975) | |
| FINANCING ACTIVITIES | ||||
| Proceeds on issue of shares | 1,500,000 | 3,100,000 | 6,010,000 | |
| Share issue expenses | (150,150) | (357,500) | (603,000) |
| Proceeds from exercise of op7ons | - | 8,500 | 8,500 |
|---|---|---|---|
| Proceeds on issue of loan note | - | 550,000 | 550,000 |
| Repayment of loan stock | - | (20,000) | (20,000) |
| Interest received | 1,943 | 811 | 3,450 |
| Netcash from financing ac2vi2es | 1,351,793 | 3,281,811 | 5,948,950 |
| (Decrease)/Increase in cash and cash equivalents |
(541,077) | 1,264,826 | 1,639,975 |
| Cash and cash equivalents at beginning of period |
1,913,801 | 273,826 | 273,826 |
| Cash and cash equivalents at end of period | 1,372,724 | 1,538,652 | 1,913,801 |
Notes to the unaudited interim statement for the six months ended 30 June 2019
Tern plcisan inves7ngcompany specialisingin private soQware companies, predominantly in the Internet ofThings sector.
The Company is a public limited company, incorporated in England and Wales, with its ordinary shares traded on AIM, a market of that name operated by the London StockExchange.
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 PoundsSterling, which is the Company's presenta7onal and func7onal currency.
The interim financial statements of Tern Plc have been prepared in accordance with IAS 34, Interim Financial Repor7ng, as adopted by the European Union (EU). They do not include all of the informa7on required for full annual financial statementsand should be read in conjunc7on with Tern plc's audited financial statements for the year ended 31 December 2018. The financial informa7on for the year ended 31 December 2018 set out in this interim report does not cons7tute statutory accounts as defined in Sec7on 434 of the Companies Act 2006. The Company's statutory financial statements for the year ended 31 December 2018 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 Sec7on 498 (2) or Sec7on 498 (3) of the Companies Act 2006. These interim financial statements have been prepared under the historical cost conven7on asadjusted for the valua7on of investmentsand have been approved for issue by the Board of Directors.
The financial statements have been prepared on the goingconcern basis.
The Directors have areasonable expecta7on that the Company has adequate resources to con7nue opera7ngfor the foreseeable future. For this reason, they con7nue to adopt the goingconcern basis in preparingthe Company's financial statements.
There has been no material effect from the adop7on of IFRS 16.
The investmentvalua7on consists of equity investmentsand conver7ble loans.
In accordance with IFRS 10, para 31, investments are recognised at FVTPL in line with guidance set out in IFRS 9. Changes in foreign exchange rates impact investmentsvalued in aforeign currency.
Conver7ble loans provided to investment companies are evaluated with reference to IFRS 9. The conver7ble loan facility issued to Device Authority isa financial asset with mul7ple embedded deriva7vesand a warrant instrument. IFRS 9 permits the en7re contract to be designated at FVTPL.The conver7ble loan facilities issued to FundamentalVR and InVMA are financial assets with mul7ple embedded deriva7ves. IFRS 9 permits the en7re contract to be designated atFVTPL.The loan facility provided to Wyld Networks isa financial asset designated at FVTPL. Assets are measured at fairvalue at each repor7ng date, with any movement in fairvalue taken to profit or loss for the year.
Es7matesand judgementsare con7nually evaluated and are based on historical experience and other factors, including expecta7ons of future events thatare believed to be reasonable under the circumstances.
The Company makes es7mates and assump7ons concerning the future. The resul7ng accoun7ng es7mates will, by defini7on, rarely equal the related actual results. The es7mates and assump7ons that have a significant risk of causing a material adjustment to the carrying amounts of assetsand liabili7es within the next financial yearare outlined below.
The Company holds investments that have been designated as held for trading on ini7al recogni7on. Where prac7cable the Company determines the fair value of these financial instruments that are not quoted using the most recent bid price at which a transac7on has been carried out. These techniques are significantly affected by certain key assump7ons, such as market liquidity. Given the nature of the investments being early stage business, othervalua7on methods such as discounted cash flow analysis assess es7mates of future cash flows to derive fairvalue es7mates cannotalways be substan7ated by comparison with independent marketsand, in many cases, may not be capable of beingrealised immediately.
The Company holds financial assets that have been held at FVTPL. The value of the conver7ble loan note has been es7mated by assessing the probability of each possible redemp7on orconversion scenario and accoun7ngfor this within the overall fairvalue assessment.
The cri7cal judgement which has the most significant effect on the financial statements is the assessment that the Company is an Investment en7tyand therefore should not consolidate investments but should carry them at fairvalue through profit or loss. Thisassessment was reached following a review of all the key condi7ons for an investment en7ty, as set out in IFRS 10 and the Company was judged to have met those key condi7onsas follows:
In coming to this conclusion, the Company also judged that its investment-related ac7vi7es do not represent a separate substan7al business ac7vity oraseparate substan7al source of income to the investment en7ty.
The accoun7ng policy for iden7fying segments is based on internal management repor7ng informa7on that is regularly reviewed by the chief opera7ng decision maker, which is iden7fied as the Board of Directors.
In iden7fying its opera7ng 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 con7nuinginvestment opera7ons comprise one segment.
Earnings (loss) per share is calculated by reference to the weighted average shares in issue as follows:
| 6months to | 6months to | 12months to 31 December 2018 |
||
|---|---|---|---|---|
| 30 June 2019 | 30 June 2018 | |||
| Weighted average number of ordinaryshares (see note below): | ||||
| Forcalcula7on of basic earnings (loss) per share | 245,256,672 | 199,609,225 | 217,221,165 | |
| Forcalcula7on of fully diluted earnings (loss) per share | 245,256,672 | 199,609,225 | 217,221,165 |
The same number of shares is used for the calcula7on of the diluted loss per share as for the basic loss per share for the six months to 30 June 2019 as the losses in these periods have an an7-dilu7ve effect.
| 30 June 2019 | 30 June 2018 | 31 December 2018 | |
|---|---|---|---|
| Number | Number | Number | |
| Issued and fully paid: | |||
| Ordinary shares of £0.0002 | 254,323,945 | 225,484,580 | 236,676,887 |
| Deferred shares of £29.999 | 42,247 | 42,247 | 42,247 |
| Deferred shares of £0.00099 | 34,545,072 | 34,545,072 | 34,545,072 |
| £ | £ | £ | |
| Issued and fully paid: | |||
| Ordinary shares of £0.0002 | 50,865 | 45,097 | 47,335 |
| Deferred shares of £29.999 | 1,267,368 | 1,267,368 | 1,267,368 |
| Deferred shares of £0.00099 | 34,200 | 34,200 | 34,200 |
| 1,352,433 | 1,346,665 | 1,348,903 |
The deferred shares have negligible value, beingsubject to restric7onsas to vo7ng, par7cipa7on and redemp7on accordingto the new Ar7cles of Associa7on then adopted.The deferred sharesare not quoted on the AIMmarket of the London StockExchange.
| 6months to 30 June 2019 (Unaudited) |
6months to 30 June 2018 (Unaudited) |
12months to 31 Dec 2018 (Audited) |
|
|---|---|---|---|
| £ | £ | £ | |
| Loss for the period | (623,340) | (221,252) | (312,564) |
| Adjustments for items not included in cash flow: | |||
| Movement in fairvalue of investments | (11,724) | (282,987) | (775,910) |
| Share based payment charge | - | 94,439 | 165,267 |
| Transac7on costsassociated with conver7ble loan note | - | - | 55,000 |
| Discount on issue of conver7ble loan note | - | - | 110,000 |
| Interest income accrued | - | - | (71,209) |
| Finance income | (1,943) | (4,376) | (3,450) |
| Opera7ngcash flows before movements in workingcapital | (637,007) | (414,176) | (832,866) |
|---|---|---|---|
| Adjustments forchanges in workingcapital: | |||
| - (Increase)/decrease in trade and other receivables (excludingloan to | |||
| investee companies) | (95,875) | (91,043) | 100,233 |
| - Increase/(decrease) in trade and other payables | 210,938 | 1,783 | (19,717) |
| Cash used in opera7ons | (521,944) | (503,436) | (752,350) |
Copies of this report will be available from the Company's website www.ternplc.com.
ISIN: GB00BFPMV798 Category Code:IR TIDM: TERN LEICode: 2138005F87SODHL9CQ36 Sequence No.: 21176 EQS News ID: 879229
End ofAnnouncementEQS News Service
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