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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ip Group Plc | LSE:IPO | London | Ordinary Share | GB00B128J450 | ORD 2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.60 | 3.49% | 47.50 | 47.40 | 47.75 | 48.05 | 46.25 | 48.00 | 1,479,662 | 16:35:11 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | -299.8M | -344.5M | -0.3322 | -1.43 | 493.05M |
From Apr 2019 to Apr 2024
TIDMIPO
RNS Number : 6568V
IP Group PLC
25 July 2018
FOR RELEASE ON 25 July 2018
("IP Group" or "the Group" or "the Company")
Half-yearly results
IP Group plc (LSE: IPO), the developer of intellectual property-based businesses, today announces its half-yearly results for the six months ended 30 June 2018.
HALF-YEAR HIGHLIGHTS
Portfolio highlights
- Net portfolio gains GBP0.7m (HY17: GBP28.7m; FY17: GBP94.2m)
- Fair value of portfolio: GBP1,163.7m (HY17: GBP663.0m; FY17: GBP1,130.6m)
- Capital provided to portfolio companies and projects: GBP46.9m (HY17: GBP20.1m; FY17: GBP71.2m)
- Significant funding rounds completed by Oxford Nanopore Technologies (GBP100.0m), Crescendo Biologics ($70.0m), Carisma Therapeutics ($53.0m) and Enterprise Therapeutics (GBP29.0m)
- Microbiotica entered into multi-year strategic collaboration with Genentech, a member of the Roche Group, in a deal worth up to $534.0m
-Ceres Power signed strategic collaboration with China's Weichai Power comprising both product development and launch, and an equity investment; subsequently announces oversubscribed ÂGBP20.0m fundraising in July
Financial and operational update
- Net assets of GBP1,489.8m (HY17: GBP966.4m; FY17: GBP1,508.5m)
- Hard NAV(1) of GBP1,298.5m (HY17: GBP898.0 m; FY17: GBP1,326.2m)
- Return on Hard NAV(2) of negative GBP13.1m (HY17: GBP21.3m positive; FY17: GBP64.1m positive)
- Gross cash and deposits at 30 June 2018: GBP258.5m (HY17: GBP263.1m; FY17: GBP326.3m)
Commenting on the Group's half-yearly results, Alan Aubrey, Chief Executive Officer of IP Group, said:
"The underlying performance of the Group's portfolio has been robust in the first half with a number of our companies completing both major fundraisings and collaborations. Our portfolio is well diversified, both by sector and stage of development, with multiple opportunities to crystallise value and there are a number of inflection points for several of our companies over the next six to twelve months. IP Group remains financially sound with a strong balance sheet, net assets of GBP1.5bn and exposure to the UK, US, Australasia and, increasingly, Asia. The Group remains excited by the opportunities within the portfolio and we look to the second half of the year and beyond with confidence."
For more information, please contact:
IP Group plc www.ipgroupplc.com Alan Aubrey, Chief Executive Officer Greg Smith, Chief Financial Officer Liz Vaughan-Adams, Communications +44 (0) 20 7444 0050 Charlotte Street Partners Andrew Wilson +44 (0) 7810 636995 Martha Walsh +44 (0) 7876 245962
Further information on IP Group is available on our website: www.ipgroupplc.com
This half-yearly results release may contain forward-looking statements. These statements reflect the Board's current view, are subject to a number of material risks and uncertainties and could change in the future. Factors that could cause or contribute to such changes include, but are not limited to, the general economic climate and market conditions, as well as specific factors relating to the financial or commercial prospects or performance of individual portfolio companies within the Group's portfolio of investments. Throughout this half-yearly results release the Group's holdings in portfolio companies reflect the undiluted beneficial equity interest excluding debt, unless otherwise explicitly stated.
(1) Hard NAV is defined as Total Equity, excluding Goodwill and Other Intangible Assets (see page 11).
(2) Return on Hard NAV is defined as the (loss)/profit for the period, excluding amortisation of intangible assets, share-based payment charge and IFRS3 charge in respect of acquisition of subsidiary (see page 10)
Interim management report
Summary
The first half of 2018 has been characterised by significant progress across the Group's portfolio with a number of our companies completing both major fundraisings and collaborations. It was also encouraging to see so many of our portfolio companies attract Chinese investors to their share registers including Oxford Nanopore Technologies Limited and Ceres Power Holdings plc, with many also signing significant collaborations in the region. Financial performance was, however, impacted by a net fair value reduction of GBP23.1m in the quoted portfolio, resulting in net portfolio gains of GBP0.7m (HY17: GBP28.7m; FY17: GBP94.2m) and an overall return on Hard NAV for the period of negative GBP13.1m (HY17: GBP21.3m positive; FY17: GBP64.1m positive).
Operationally, as described in the 2017 Annual Report, the integration of the Touchstone Innovations business in the UK has continued to progress in line with expectations. We have simplified and streamlined our organisational structure by moving to a two-sector model of Life Sciences and Technology and now operate both divisions substantially from one London head office location. Both the Imperial College Technology Transfer Office and Parkwalk, the UK's leading EIS investor in university spin-outs that joined the Group in 2017, continue to be run as separate entities. Our US business and its portfolio companies continue to mature, and we are building out the initial team for our newly-formed Australasian operation and intend to form our first spin-outs this year.
Portfolio performance
At 30 June 2018, the fair value of the Group's portfolio was GBP1,163.7m (HY17: GBP663.0m; FY17: GBP1,130.6m). This represents net portfolio gains of GBP0.7m (HY17: GBP28.7m; FY17: GBP94.2m) during the period with net fair value increases from our Life Sciences sector and our US business offsetting a net fair value reduction from our Technology sector.
The single largest portfolio company fair value increase during the period was Diurnal Group plc in the Life Sciences sector. Diurnal hit a major milestone this year, moving it from a pure development company to marketing and sales, after Infacort was approved for marketing by the European Commission (EC). In May, Diurnal announced market launch in Germany under the brand name Alkindi. An increase in the share price of Diurnal resulted in a fair value increase of GBP10.2m to the Group. Other key positive contributions to the increase in fair value were Uniformity Labs, Inc. (GBP7.8m increase(3) ), Ceres Power Holdings plc (GBP7.2m increase), Genomics plc (GBP4.7m increase), Microbiotica Ltd (GBP2.8m increase), Tissue Regenix Group plc (GBP2.3m increase) and Ditto AI Ltd (GBP2.0m increase).
The largest unrealised fair value decreases were primarily as a result of reductions in the share prices of AIM-quoted companies including Xeros Technology Group plc (GBP17.7m decrease), Abzena plc (GBP7.5m decrease), Mirriad Advertising plc (GBP7.1m decrease), Avacta Group plc (GBP5.5m decrease) and Circassia Pharmaceuticals plc (GBP3.9m decrease). Further information on the performance of the Group's portfolio businesses is provided in the portfolio review below.
In the first six months of the year, the Group provided incubation, seed and further capital totalling GBP46.9m to its portfolio companies (HY17: GBP20.1m; FY17: GBP71.2m). The Group's portfolio now comprises holdings in 155 companies as well as strategic stakes in three multi-sector platform businesses, 38 de minimis holdings and 40 organic holdings (portfolio investments in which the Group has acquired equity, but not invested funds) (HY17: 96, 3, 18, 0; FY17: 155, 3, 42, 39).
(3) The fair value of Uniformity Labs, Inc. increased by GBP7.8m, with a further increase of GBP0.8m due to foreign exchange movements.
North America
Our North American business has continued its momentum into the first six months of the year. The US team identified a number of exciting opportunities from a variety of US-based collaboration partners, three of which have completed 'series A' financing rounds with participation from a strong mix of strategic and institutional investors. In addition, they funded their first company in partnership with Johns Hopkins University; Lorem Therapeutics will be focused on developing early-stage therapeutics for cancer indications. Our North American business also added Yale University to the list of exceptional university and federal lab collaboration partners in the US, bringing the total to nine.
Australasia
In Australasia, the Group has been focused on the implementation of the landmark agreements with Australasia's leading research universities that were announced in 2017. These agreements will see at least A$200m invested in finding and developing companies involved in disruptive innovation. The Group has established a strong pipeline of technologies in Australasia across a wide range of markets, hired its first team members and anticipates making its first investments before the end of 2018.
Greater China / Singapore
Many of our portfolio companies have secured investment and business partnerships in Greater China and Singapore, including Oxford Nanopore, Ceres Power, Mirriad Advertising and Creavo Medical Technologies. The Group considers this geographic area to be strategically important and will continue to facilitate market entry, business partnership and investment discussions between our portfolio companies and relevant Chinese and Singaporean partners. The Group will be hosting its second annual "Global Deep Tech" event in Greater China in September.
Outlook
IP Group's portfolio remains well-diversified both by sector and stage of development with multiple opportunities to crystallise value. The progress of many of the Group's largest portfolio companies is positive and there are a number of significant inflection points anticipated for several of our companies over the next six to twelve months. IP Group has a growing business in the US and has established operations in Australasia. While it remains important to consider IP Group as a long-term business where financial results can fluctuate from six-month period to six-month period, the fundamentals of our business remain strong and the Group is financially sound with GBP258.5m of gross cash and deposits. IP Group remains excited by the opportunities within the portfolio and we look to the second half of the year and beyond with confidence.
Portfolio review: Overview
During the six months ended 30 June 2018, the value of the Group's portfolio increased to GBP1,163.7m (HY17: GBP663.0m; FY17: GBP1,130.6m), reflecting net portfolio gains of GBP0.7m (HY17: GBP28.7m; FY17: GBP94.2m ) excluding the investments and realisations set out below. The portfolio consists of interests in 155 companies, strategic stakes in 3 multi-sector platform businesses as well as a further 38 de minimis holdings and 40 organic holdings (HY17: 96, 3, 18, 0; FY17: 155, 3, 42, 39). During the period, the Group provided capital to portfolio companies totalling GBP46.9m (HY17: GBP20.1m; FY17: GBP71.2m) and received cash proceeds of GBP2.5m (HY17: GBP0.3m; FY17: GBP6.6m), largely in relation to the Group's realisation of its full holding in Ilika plc among others.
A summary of the gains and losses across the portfolio is as follows:
Hot Features
Premium
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
------------------------------------------ ---------- ---------- ------------
Unrealised increases in fair value of
equity and debt investments 46.0 55.6 99.3
Unrealised decreases in fair value of
equity and debt investments (47.5) (26.5) (49.2)
Effects of movement in exchange rates 1.6 (0.6) (1.1)
Change in fair value of equity and debt
investments 0.1 28.5 49.0
Profit on disposals of equity investments 0.6 0.2 0.1
Gain on deconsolidation of subsidiary - - 45.1
Net portfolio gains 0.7 28.7 94.2
------------------------------------------ ---------- ---------- ------------
Unrealised increases in the fair value of equity and debt investments primarily arose from increases in the share prices of AIM-quoted Diurnal Group plc (GBP10.2m), Ceres Power Holdings plc (GBP7.2m) and Tissue Regenix Group plc (GBP2.3m). Recent funding rounds gave rise to gains in Uniformity Labs, Inc. (GBP7.8m(4) ) and Genomics plc (GBP4.7m), and recent progress made by Microbiotica Limited resulted in an upward revision in value of GBP2.8m. These unrealised gains were principally offset by decreases in the share prices of Xeros Technology Group plc (GBP17.7m), Abzena plc (GBP7.5m), Mirriad Advertising plc (GBP7.1m), Avacta Group plc (GBP5.5m) and Circassia Pharmaceuticals plc (GBP3.9m).
During the first half of 2018, the Group deployed GBP46.9m of capital into 41 portfolio companies and projects (HY17: GBP20.1m, 25; FY17: GBP71.2m, 79). The Group provided initial seed or incubation capital to two opportunities (HY17: six; FY17: 21), both of which were UK-based. The Group exited its interest in one company (HY17: one; FY17: two) and realised total cash proceeds during the period of GBP2.5m (HY17: GBP0.3m; FY17: GBP6.6m).
An analysis of the portfolio by sector is as follows:
As at 30 June 2018 As at 31 December 2017
-----------------------
Fair value Number Fair Value Number
Fair value analysis
by sector GBPm % % GBPm % %
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Life Sciences 720.3 68% 74 48% 704.4 68% 73 47%
Technology 343.8 32% 81 52% 334.0 32% 82 53%
Total 1,064.1 100% 155 100% 1,038.4 100% 155 100%
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Multi-sector platforms 62.8 - 3 - 62.9 - 3 -
De minimis holdings 1.3 - 38 - 1.3 - 42 -
Organic 7.0 40 5.7 - 39 -
----------------------- ------- ---- --- ---- ---------
Total Portfolio 1,135.2 - 236 - 1,108.3 - 239 -
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Attributable to
third parties(I) 28.5 22.3
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Gross Portfolio 1,163.7 1,130.6
----------------------- ------- ---- --- ---- --------- ----- ---- ----
(I) The amount attributable to third parties consists of GBP17.6m attributable to minority interests represented by third party limited partners in the consolidated fund, IPVFII, GBP7.8m attributable to Imperial College London and GBP3.1m attributable to other third parties (FY 2017: GBP16.3m, GBP5.7m and GBP0.3m).
(4) The fair value of Uniformity Labs, Inc. increased by GBP7.8m, with a further increase of GBP0.8m due to foreign exchange movements.
The following table lists the value movements attributable to the largest twenty portfolio investments by value, which represent 66.2% of the total portfolio value (HY17: 84.6%, FY17: 65.0%). Additional detail on the performance of these companies is included in the Life Sciences and Technology portfolio reviews.
Sector, Group Fair Acquisitions Net Fair Fair
Quoted stake value of  value value
(Q)/ at of Touchstone investment/ movement of Group
Unquoted 30 Group Innovations (divestment) and fees holding
(U) Jun holding plc(III) settled at
2018(I) at in 30 Jun
31 Dec equity 2018
2017
Company Description % GBPm GBPm GBPm GBPm GBPm
name
----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Enabling
the analysis
of any living
Oxford thing, by
Nanopore any person, Life
Technologies in any Sciences
Limited environment (U) 18.3% 274.1 - - - 274.1
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
University
of Oxford
preferred
Oxford IP partner
Sciences under 15-year Multi-sector
Innovation framework platforms
plc agreement (U) 7.6% 55.5 - - - 55.5
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Reprogramming
metabolism
to treat Life
Istesso autoimmune Sciences
Limited disease (U) 61.1% 51.1 - - - 51.1
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Novel treatments Life
Diurnal of hormone Sciences
Group plc deficiency (Q) 43.6% 38.7 - - 10.2 48.9
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Oncolytic
PsiOxus viral Life
Therapeutics therapeutics Sciences
Limited for cancer (U) 26.3% 44.5 - - - 44.5
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
World leading
developer
of next
Ceres Power generation
Holdings fuel cell Technology
plc technology (Q) 25.3% 31.5 - - 7.2 38.7
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Optimising
the human
Actual experience
Experience of networked Technology
plc applications (Q) 22.1% 28.4 - - (1.5) 26.9
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
T cell Life
Cell Medica therapeutics Sciences
Limited for oncology (U) 24.6% 26.3 - - - 26.3
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Developing
high value,
novel medicines Life
Autifony to treat Sciences
Limited CNS diseases (U) 26.4% 23.9 - - 0.8 24.7
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Developing
Circassia a range of Life
Pharmaceuticals novel Sciences
plc immunotherapies (Q) 7.9% 26.7 - - (3.9) 22.8
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Contactless
haptic
technology
Ultrahaptics "feeling
Holdings without Technology
Limited touching" (U) 37.9% 21.8 - - - 21.8
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Net methodology
for achieving
First Light extreme
Fusion intensity Technology
Limited cavity collapse (U) 36.4% 13.9 - 3.8 - 17.7
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Regenerative
Tissue dCELLÂ(R) Life
Regenix soft tissue Sciences
Group plc body parts (Q) 13.1% 13.8 - - 2.3 16.1
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Leading
predictive
Featurespace analytics Technology
Limited company (U) 27.9% 15.6 - - - 15.6
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Clinical
cancer genomics
company
utilising
circulating
DNA analysis
to improve
testing and Life
Inivata treatment Sciences
Limited in oncology (U) 31.1% 12.8 - 2.6 - 15.4
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Live, online
Ieso Digital cognitive Life
Health behavioural Sciences
Limited therapy (U) 45.6% 14.7 - - - 14.7
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Creavo
Medical Quantum cardiac Life
Technologies imaging Sciences
Limited technology (U) 48.3% 14.4 - - - 14.4
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Equipment,
materials
Uniformity and software Technology
Labs, Inc for 3D printing (U) 25.8% 4.7 - 1.1 8.6 14.4
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Mobile payments
YoYo Wallet with integrated Technology
Limited loyalty schemes (U) 40.1% 13.1 0.2 0.3 - 13.6
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Novel catalyst
technologies
to build
carbon dioxide
into
Econic polyurethanes
Technologies and other Technology
Limited polymers (U) 50.1% 10.2 0.4 3.0 - 13.6
----------------- ----------------- -------------- -------- -------- ------------- ------------- --------- ---------
Other companies (138
companies) 371.6 (16.4) 33.0 (24.7) 363.3
------------------------------------ -------------- -------- -------- ------------- ------------- --------- ---------
De minimis investments 1.0 - - - 1.0
------------------------------------ -------------- -------- -------- ------------- ------------- --------- ---------
Value not attributable
to equity holders 22.3 - 0.3 1.1 28.6(II)
-------------- -------- -------- ------------- ------------- --------- ---------
1,163.7
Total 1,130.6 (15.8) 44.1 0.1 (II)
==================================== ============== ======== ======== ============= ============= ========= =========
I.Represents the Group's undiluted beneficial economic equity interest (excluding debt) including the portion of IPVFII's stake attributable to the Group. Voting interest is below 50%.
II.Includes GBP4.7m increase in revenue share to Imperial College London, with a corresponding increase in revenue share liability resulting in no net fair value movement.
III.On 17 October 2017 the Group acquired control of Touchstone Innovations plc. Certain assets, primarily holdings in unlisted portfolio companies that have been accounted for using valuation techniques, were provisionally determined and for a 12-month period post-acquisition, adjustments are made to these assets to the extent that new information is obtained about facts and circumstances that were in existence at the acquisition date. See financial and operational review on page 10 for further details.
Portfolio review: Life Sciences
IP Group-s Life Sciences portfolio comprises holdings in 74 companies valued at GBP720.3m as at 30 June 2018.
Oxford Nanopore
The Group's largest holding, Oxford Nanopore Technologies Ltd, continues to make excellent progress with tangible signs of it disrupting the $3bn DNA sequencing market. The company, which provides novel DNA/RNA sequencing technology, successfully completed a GBP100.0m fundraising in March, primarily from Asian investors, to support commercial expansion and continued investment in R&D. The company disclosed tripling in orders between 2016 and 2017 and that it is anticipating a similar increase between 2017 and 2018. CEO Gordon Sanghera has been reported talking about the increasing potential impact of China to the company, and the attractiveness of capital markets in both London and Hong Kong. Currently, North America makes up around 40% of its sales, followed by 30 per cent from Europe and 10% to 15% from China. Wang Depeng, founder and CEO of Wuhan-based NextOmics Biosciences and Beijing-based Grandomics Biosciences, has been cited as saying that "his firms are the first service providers in China to use Nanopore's devices for DNA sequencing" and that they plan to spend over US$10m to buy up to 20 high-capacity sequencing (PromethION) kits from Nanopore, subject to satisfaction with samples".
Now in its third commercial year, Oxford Nanopore has a customer base of thousands of MinION users while its larger GridION format was launched last year. Its largest device, PromethION, was commercially launched in May 2018 and is already capable of delivering sub $1,000 nanopore-only human genomes. In May the first human genome dataset using PromethION was released, and in June, the first >100Gb PromethION flow cell result was shown by a customer (PromethION is designed to operate up to 48 flow cells, so the overall yields are competitive with the highest output sequencing instruments on the market).
Oxford Nanopore's small, single-test format Flongle, which provides rapid, smaller tests at accessible prices, is expected in early access in 2018. Oxford Nanopore has the only sequencing technology that can be miniaturised to tiny formats and operate in real time. The Company believes this has the potential to open up new decentralised applied markets such as infectious disease/cancer/other diagnostics, food and water safety, field-based analyses for environmental or agricultural purposes, or education.
VolTRAX, an automated device for preparation aimed at those who do not have lab equipment, lab skills, or simply prefer the reliable results of automated processes, has shown positive results in early access, and 'V2' is now being introduced with a much greater suite of functionality for different preparation techniques. At its 'London Calling' conference in May, Oxford Nanopore also performed a live demo of 'Ubik', a prototype rugged device made from low cost materials, designed to take a user from sample to answer with little effort.
Other significant portfolio company updates
The largest gain in the half-year and, arguably, the most significant developments for the overall portfolio, came from Diurnal Group plc, one of the Group's most advanced biotech assets. Diurnal has two late-stage products for the treatment of the childhood and adult forms of adrenal insufficiency - Infacort and Chronocort, respectively. In February, Diurnal announced that Infacort had been approved for marketing by the European Commission (EC) and, in May, announced market launch in Germany under the brand name Alkindi. This represents a major milestone for the company, transitioning from pure development to marketing and sales, but also for the British biotechnology sector as a whole, where very few companies have ever brought a drug to market. In the half-year, Diurnal's share price appreciated by 26%, providing the Group with a GBP10.2m unrealised fair value increase.
In June, Microbiotica, a leading player in microbiome-based therapeutics spun out of the Wellcome Sanger Institute 18 months ago, signed a $534.0m collaboration with Genentech under which the two companies will utilise Micriobiotica's unique human microbiome platform to identify biomarkers, therapeutic targets and medicines for the treatment of inflammatory bowel disease (IBD). The news resulted in an increased valuation of the company, which equated to a ÂGBP2.8m gain for the Group. Another notable success in the portfolio was Cambridge company Crescendo Biologics Ltd, which closed a $70.0m financing round and signed a partnership with Chinese pharmaceutical company Zai Lab for the development of monoclonal antibodies for the treatment of inflammatory conditions. In the quoted portfolio, shares in hVIVO plc bucked an eight-month run of underperformance, returning to levels last seen in October 2017 when it announced positive data for its universal flu vaccine, FLU-v.
Overall, positive fair value movements from Diurnal, Genomics, Microbiotica, and Tissue Regenix were offset by poorer share price performance of a number of quoted portfolio companies, particularly Abzena plc, Circassia Pharmaceuticals plc and Avacta Group plc, resulting in a net fair value gain of ÂGBP6.3m for the period.
Portfolio review: Technology
IP Group's Technology portfolio comprises holdings in 81 companies valued at GBP343.8m as at 30 June 2018.
Technology
The IP Group Technology partnership is proud of the role it plays in supporting cutting-edge British innovation and we were pleased to see this recognised during the first half of 2018 as two of our most valuable portfolio assets, mid-air haptics pioneer Ultrahaptics Ltd and fraud-prevention specialist Featurespace Ltd, received a Queen's Award for Enterprise in the Innovation category. Featurespace also appeared at number 566 in the Financial Times list of Europe's 1,000 fastest growing companies, alongside off-grid solar company Azuri Technologies Ltd, a Cleantech asset, which featured at number 230.
Next generation communications is a key thematic area for the partnership and in this field we were delighted to see digital supply chain management provider Actual Experience plc make a series of exciting commercial announcements during the first half of 2018. In April, the company achieved the first full-scale deployment of its analytic software within a large enterprise customer of one of its channel partners, which is expected to generate revenue in excess of GBP1m per year for Actual Experience. This is a very significant milestone for the company, proving their capability to make a large sale through a channel partner, deploy at scale, and verifying the economic opportunity within large customers. Soon after that, the company announced a second large-scale customer deployment through a different channel partner, predicted to generate revenues of approximately GBP240,000 per annum on a multi-year basis.
Another key thematic focus for the partnership is the evolving human-machine interface and we are excited by the prospects of one particular emerging portfolio asset in this area, WaveOptics Ltd, which we believe has the potential to fundamentally disrupt the growing Augmented and Mixed Reality markets with its ground-breaking optical waveguide technology.
Turning to the US, we are pleased to report that the Technology sector's biggest fair value gain in the first half came from Uniformity Labs Inc in the US. Uniformity has made substantial progress establishing relationships with new customers, including multiple successful validation projects and the close of initial sales. Uniformity has also identified and completed initial validation studies with clients in key adjacent printing markets, including high volume, low cost binder jetting. The company has doubled its full-time staff to 14 and expanded into new facilities.
Finally, we are disappointed by the share price performance of Mirriad Advertising plc since its flotation in December 2017, which we consider to be somewhat surprising in the context of renewed contracts with several key partners, added to the endorsement and strategic value brought by the recent investment from China's Puhua Investment Fund.
Cleantech
Cleantech is an area of specialisation within the Technology division at IP Group where we focus on building outstanding, science-based businesses that mitigate the impacts of climate change and other environmental challenges. The key investment themes within Cleantech are distributed energy, energy demand management, resource efficiency and mobility. The first half of the year has seen great progress for distributed energy and mobility asset Ceres Power, where strong share price performance has delivered a GBP7.2m fair value gain for the Group and our holding is now valued at GBP38.8m. This has been driven by continued commercial progress, including the announcement of a strategic partnership with Weichai Power, one of the leading automobile and equipment manufacturing companies in China. The partnership with Weichai envisions investment of up to GBP40.0m in Ceres as well as a potential licensing agreement and the establishment of a joint venture. Since the period end, Ceres Power announced it had raised GBP20.0m (before expenses). The fundraising was significantly over subscribed with several material new investors and is in addition to the Weichai investment. In less good news, a fall in the share price of Xeros Technology Group plc, a listed company with proprietary water-saving polymer technology in the resource efficiency space, has resulted in a GBP17.7m unrealised fair value loss for the Group.
Since the period end, Xeros announced a licensing contract with Jiangsu Sea-Lion Technology Development Co., Ltd, a wholly owned subsidiary of the market-leading Chinese commercial washing machine manufacturer Jiangsu Sea-Lion Machinery Co., Ltd at the annual China International Laundry Industry Exhibition. Sea-Lion will integrate Xeros' proprietary technologies into its own commercial washing machines and sell them through its extensive distribution network in China, on an exclusive basis. The first sales are expected in 2019. Sea-Lion will be the first partner to incorporate Xeros' new XDrum(TM) technology. XDrum(TM) is a simple, low cost solution for OEMs to easily incorporate Xeros' patented water saving XOrb(TM) polymer technology into their machine designs.
Portfolio review: Multi-sector platforms
The Group has maintained its strategic stakes in its three multi-sector platform companies, Oxford Sciences Innovation plc (OSI), Cambridge Innovation Capital plc (CIC) and Frontier IP Group plc. OSI has continued to develop its portfolio with 10 new seed investments added in the 6 months to 30 June 2018 with an additional GBP18.2m invested in 12 later funding rounds during the period. The three most significant Series A financings completed in the period have been Oxford Flow, Ultromics and Oxford Nanoimaging, the latter raising over GBP13m at a post money valuation of $100m. OSI continues to attract quality later stage co-investors to its portfolio, including companies such as Sequoia China and GV. As at the end of June the portfolio valuation stood at GBP168.4m compared to GBP126.0m at December 2017.
In their results for the year ended 31 March 2018, CIC reported that their net assets grew by 14% to GBP144.0m, largely as a result of a net fair value increase of GBP19.8m in the year. Their portfolio now consists of 22 companies including IP Group portfolio companies Inivata, Microbiotica and Storm Therapeutics.
Portfolio review: analysis by company stage
At 30 June 2018, the Group's portfolio fair value of GBP1,163.7m comprises holdings in businesses that are distributed across stages of maturity as follows:
As at 30 June 2018 As at 31 December 2017
-----------------------
Fair value Number Fair Value Number
Fair value analysis
by company stage GBPm % % GBPm % %
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Focus 715.3 67% 19 12% 709.6 68% 19 12%
Development 317.0 30% 83 54% 307.2 30% 84 54%
Early-stage 31.8 3% 53 34% 21.6 2% 52 34%
Total 1,064.1 100% 155 100% 1,038.4 100% 155 100%
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Multi-sector platforms 62.8 - 3 - 62.9 - 3 -
De minimis holdings 1.3 - 38 - 1.3 - 42 -
Organic 7.0 40 5.7 - 39 -
----------------------- ------- ---- --- ---- ---------
Total Portfolio 1,135.2 - 236 - 1,108.3 - 239 -
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Attributable to
third parties(I) 28.5 22.3
----------------------- ------- ---- --- ---- --------- ----- ---- ----
Gross Portfolio 1,163.7 1,130.6
----------------------- ------- ---- --- ---- --------- ----- ---- ----
(I) The amount attributable to third parties consists of GBP17.6m attributable to minority interests represented by third party limited partners in the consolidated fund, IPVFII, GBP7.8m attributable to Imperial College London and GBP3.1m attributable to other third parties (FY 2017: GBP16.3m, GBP5.7m and GBP0.3m).
Portfolio companies which are classed as being in the Focus stage are those portfolio companies which comprise the Group's largest 20 investments by fair value, one of which, OSI, is included within 'multi-sector platforms' above.
The Development stage group includes other businesses to which the Group has provided in excess of GBP1.0m of funding. Although each business can vary significantly in its rate and manner of development, such additional funding is generally used to progress towards key milestones and commercial validation, to build senior level capability in the business and to attract experienced non-executive directors to their boards.
Early-stage companies include both incubation and seed opportunities. Incubation opportunities comprise businesses or pre-incorporation projects that are generally at a very early stage of development, at most within three years since the Group's first financing, and have received at least one stage of funding. Opportunities at this stage usually involve capital of less than GBP0.2m from IP Group, predominantly allowing for proof of concept work to be carried out. Seed businesses are those that have typically received financing of up to GBP1.0m in total, primarily from the Group, in order to continue to progress towards agreed commercial and technology milestones and to enable the recruitment of management teams and early commercial engagement.
Those companies which either do not progress beyond the incubation stage within three years of the Group's initial funding and/or whose value has subsequently fallen to below GBP0.1m, but remain as an operating business, are classed as de minimis holdings. Organic holdings are investments in which the Group has acquired a shareholding upon creating the company via our technology transfer relationship with Imperial College London, but in which we have not actively invested.
An analysis of investments and realisations by company stage is as follows:
Six months Six months Year ended
ended ended 31 December
Cash investment analysis by company 30 June 2018 30 June 2017 2017
stage GBPm GBPm GBPm
------------------------------------ ------------- ------------- --------------
Focus 10.7 12.5 33.7
Development 26.5 4.5 29.1
Early Stage 9.7 3.1 8.4
Total 46.9 20.1 71.2
------------------------------------ ------------- ------------- --------------
Multi-sector platforms - - -
------------------------------------ ------------- ------------- --------------
Total purchase of equity and debt
investments 46.9 20.1 71.2
------------------------------------ ------------- ------------- --------------
Cash proceeds from sales of equity
investments 2.5 0.3 6.6
------------------------------------ ------------- ------------- --------------
Net investment 44.4 19.8 64.6
------------------------------------ ------------- ------------- --------------
Financial and operational review
The Group recorded a loss for the period of GBP21.6m (HY17: GBP18.4m profit; FY17: GBP53.4m profit) and a negative Return on Hard NAV, i.e. on the Group's net assets excluding goodwill and intangible assets, of GBP13.1m (HY17: GBP21.3m positive; FY17: GBP64.1m positive). Net assets at 30 June 2018 were GBP1,489.8m (HY17: GBP966.4m; FY17: GBP1,508.5m) and Hard NAV totalled GBP1,298.5m at 30 June 2018 (HY17: GBP898.0m; FY17: GBP1,326.2m), representing 122.6p per share (HY17: 128.9p; FY17: 125.4p).
Consolidated statement of comprehensive income
A summary analysis of the Group's performance is provided below:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
GBPm GBPm GBPm
--------------------------------------------- ----------- ----------- -------------
Net portfolio gains (1) 0.7 28.7 94.2
Change in fair value of limited
and limited liability partnership
interests (0.8) 0.2 (0.2)
Other income 4.6 2.6 6.1
Administrative expenses - all other
expenses (14.3) (8.1) (21.2)
Administrative expenses - performance-based
staff incentives and share-based
payments charge (1.2) (0.7) (4.9)
Carried interest plan charge (0.7) (2.7) (1.3)
Licensing income - Istesso group - 3.0 3.4
Administrative expenses - Istesso
group - (1.1) (3.5)
Administrative expenses - other
consolidated portfolio companies (1.3) (0.5) (2.1)
Amortisation of intangible assets (5.9) (2.2) (3.9)
Acquisition and restructuring costs - (1.0) (9.1)
IFRS3 charge in respect of acquisition
of subsidiary (1.4) (1.7) (4.4)
Net finance (expense) / income (1.3) 0.2 0.3
--------------------------------------------- ----------- ----------- -------------
(Loss)/profit for the period (21.6) 16.7 53.4
Exclude:
Amortisation of intangibles assets 5.9 2.2 3.9
Share based payment charge 1.2 0.7 2.4
IFRS3 charge in respect of acquisition
of subsidiary 1.4 1.7 4.4
--------------------------------------------- ----------- ----------- -------------
Return on Hard NAV (13.1) 21.3 64.1
--------------------------------------------- ----------- ----------- -------------
Exclude:
Acquisition and restructuring costs - 1.0 9.1
--------------------------------------------- ----------- ----------- -------------
Return on Hard NAV excluding acquisition
and restructuring costs (13.1) 22.3 73.2
--------------------------------------------- ----------- ----------- -------------
1. Defined in the Portfolio review section.
Net portfolio gains consist primarily of realised and unrealised fair value gains and losses from the Group's equity and debt holdings in spin-out businesses, which are analysed in detail in the portfolio analysis above.
Other income totalled GBP4.6m; an increase on the previous half year (HY17: GBP2.6m; FY17: GBP6.1m) due to continued growth in Parkwalk Advisors Limited, which was acquired on 31 January 2017, as well as due to the acquisition of Touchstone Innovations in October 2017 which saw its revenues being consolidated into the Group's results for the first time. Other income comprises fund management fees, licensing and patent income from Imperial Innovations, corporate finance fees as well as consulting and similar fees, typically chargeable to portfolio companies for services including executive search and selection as well as legal and administrative support.
Other central administrative expenses, excluding performance-based staff incentives and share-based payments charges, have increased to GBP14.3m during the period (HY17: GBP8.1m; FY17: GBP21.2m), primarily as a result of the acquisition of Touchstone Innovations plc, as well as the growth in IP Group's international operations.
Administrative expenses resulting from performance-based staff incentives and share-based payment charges increased to GBP1.2m during the period (HY17: GBP0.7m; FY17 GBP4.9m). The Group-s return on Hard NAV is below the minimum threshold for any payments to be made (or accrued) under the Group-s Annual Incentive Scheme, and the full current period cost therefore relates to the IFRS 2 share-based payments charge attributable to the Group-s Deferred Bonus Share Plan and Long-Term Incentive Plan. This non-cash charge (HY18: GBP1.2m; HY17: GBP0.7m; FY17: GBP2.4m) reflects the fair value of services received from employees, measured by reference to the fair value of the share-based payments at the date of award, but has no net impact on the Group's total equity or net assets. The increase in this charge versus the previous period reflects growth in the business including as a result of the acquisition of Touchstone Innovations plc.
The carried interest plan charge relates to the Group's Long-Term Incentive Carry Scheme ("LTICS") which was implemented in late 2016. This accrual reflects the impact of net fair value gains in the scheme assets in excess of the hurdle. There is no cash payment due to members of the scheme until sufficient asset realisations have occurred.
In 2017 the Group's drug development subsidiary, Istesso Limited, was deconsolidated from the Group after a share and board reorganisation which resulted in the Group no longer holding a controlling interest in the company. The licensing income and operating costs of this business are hence no longer consolidated into the Group's operating results. Included within the Group's administrative expenses are costs in respect of a small number of other portfolio companies. Typically, the Group owns a non-controlling interest in its portfolio companies; however in certain circumstances the Group will take a controlling stake and hence consolidate the results of a portfolio company into the Group's financial statements. The administrative expenses included in the Group's results for such companies primarily comprise staff costs, R&D and other operating expenses.
Costs of GBP1.4m (HY17: GBP1.7m, FY17: GBP4.4m) were incurred in relation to deferred and contingent consideration payable to the sellers of Parkwalk Advisors Ltd deemed under IFRS3 to be a payment for post-acquisition services.
Amortisation costs relate to intangible assets recognised on the acquisition of Touchstone Innovations plc, Parkwalk Advisors Limited and Fusion IP plc, which are amortised over the period to which the contractual commitments relate.
Consolidated statement of financial position
A summary analysis of the Group's assets and liabilities is provided below:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
GBPm GBPm GBPm
-------------------------------------- ----------- ----------- -------------
Goodwill and other intangible assets 191.3 68.4 182.3
Portfolio 1,163.7 663.0 1,130.6
Other non-current assets 14.9 6.0 13.0
Cash and deposits 258.5 263.1 326.3
EIB debt facility (102.5) (14.9) (104.0)
Other net current liabilities (2.6) (3.8) (11.4)
Other non-current liabilities (33.5) (15.4) (28.3)
Total Equity or Net Assets 1,489.8 966.4 1,508.5
Exclude:
Goodwill (187.0) (63.4) (172.1)
Other intangible assets (4.3) (5.0) (10.2)
Hard NAV 1,298.5 898.0 1,326.2
-------------------------------------- ----------- ----------- -------------
Hard NAV per share 122.6p 128.9p 125.4p
-------------------------------------- ----------- ----------- -------------
The Group's statement of financial position includes goodwill and acquired intangible assets of GBP191.3m (HY17: ÂGBP68.4m, FY17: 182.3). The most significant of these relates to the acquisition of Touchstone Innovations plc (HY18: 126.3, HY17:0, FY17: GBP115.4) and the Group's acquisition of Fusion IP plc in 2014 (HY18: GBP39.2m, HY17: GBP40.7m, FY17: GBP39.8m); the remaining amounts relating to the acquisitions of Techtran Limited (HY18: GBP16.3m, HY17: GBP16.3m, FY17: GBP16.3m), Parkwalk Advisors Ltd (HY18: GBP6.8m, HY17: GBP8.0m, FY17: GBP8.0m) Top Technology Ventures Limited (HY18: GBP2.1m, HY17: GBP2.1m, FY17: GBP2.1m) and on the purchase of a 3(rd) party's minority holding in subsidiary MobilION Inc. (HY18: GBP0.6m, HY17: GBP0.6m, FY17: GBP0.6m).
Both IP Group and Touchstone Innovation plc arranged debt facilities with the European Investment Bank ("the EIB"), total borrowings under which totalled GBP102.5m at the period end (HY17: GBP15m, FY17: GBP104m). Of these facilities, GBP12.4m is due to be repaid within twelve months of the period end (HY17: nil, FY18: GBP6.3m). The facility provides IP Group with an additional source of long-term capital and represents an evolution in the Group's capital structure to support its future growth and development.
All-share acquisition of Touchstone Innovations plc
On 17 October 2017 the Group acquired control of 100% of the ordinary shares in Touchstone Innovations plc. The Group has recognised the assets and liabilities acquired in accordance with IFRS 3 "Business Combinations". Certain assets, primarily holdings in unlisted portfolio companies that have been accounted for using valuation techniques, were provisionally determined and for a 12-month period post-acquisition, adjustments are made to these assets to the extent that new information is obtained about facts and circumstances that were in existence at the acquisition date. As at the reporting date, an adjustment of GBP14.9m (which comprises GBP15.8m portfolio valuation decrease and GBP0.9m decrease in liabilities) has been made to net assets acquired with a corresponding increase in goodwill.
Cash, cash equivalents and short-term deposits ("Cash")
The principal constituents of the movement in Cash during the period are as follows:
Six months Six months Year ended
ended 30 ended 30 31 December
June 2018 June 2017 2017
GBPm GBPm GBPm
---------------------------------------- ----------- ----------- -------------
Net Cash used in operating activities (19.1) (2.9) (22.4)
Net Cash (used in) / generated
by investing activities (excluding
cash flows from deposits) (47.1) (21.4) (67.6)
Cash flow on acquisition of subsidiary
undertakings (net of cash acquired) - (5.2) 107.8
Issue of share capital - 180.3 181.0
Repayment/Drawdown of debt facility (1.6) - 15.0
Effect of foreign exchange rate
changes - - 0.2
---------------------------------------- ----------- ----------- -------------
Movement during period (67.8) 150.8 214.0
---------------------------------------- ----------- ----------- -------------
At 30 June 2018, the Group's Cash totalled GBP258.5m, a decrease of GBP67.8m from a total of GBP326.3m at 31 December 2017, predominantly due to investing activities of GBP47.1m and GBP19.1m of cash outflow from operations. Cash outflow from operations includes a net working capital outflow of GBP7.8m (HY17: GBP4.2m inflow; FY17: GBP1.6m inflow).
Taxation
The Group's business model seeks to deliver long-term value to its stakeholders through the commercialisation of fundamental research carried out at its partner universities. To date, this has been largely achieved through the formation of, and provision of services and development capital to, spin-out companies formed around the output of such research. The Group primarily seeks to generate capital gains from its holdings in spin-out companies over the longer term but has historically made annual net operating losses from its operations from a UK tax perspective. Capital gains achieved by the Group would ordinarily be taxed upon realisation of such holdings; however since the Group typically holds in excess of 10% in its portfolio companies and those companies are themselves trading, the Directors continue to believe that the majority of its holdings will qualify for the Substantial Shareholdings Exemption ("SSE"). This exemption provides that gains arising on the disposal of qualifying holdings are not chargeable to UK corporation tax and, as such, the Group has continued not to recognise a provision for deferred taxation in respect of uplifts in value on those equity holdings that meet the qualifying criteria. Gains arising on sales of non-qualifying holdings would ordinarily give rise to taxable profits for the Group, to the extent that these exceed the Group's operating losses from time to time.
Assets held in Luxembourg, which were predominantly acquired via the combination with Touchstone in the prior year, are also subject to capital gains and ordinarily the Group would be taxed on their realisation. A participation exemption, similar to the UK SSE scheme described above, is available for certain share disposals under Luxembourg tax law. Dividends and gains arising to Imperial Innovations SÃ!rl through its interest in Touchstone Innovations Businesses LLP should be exempt from tax under Luxembourg law provided the conditions for the participation exemption are met for each investment and, while tax residence of Imperial Innovations SÃ!rl is maintained in Luxembourg, no UK tax should arise on applicable gains.
Alternative Performance Measures ("APMs")
The Group discloses alternative performance measures, such as Hard NAV and Return on Hard NAV, in this half-yearly report. The Directors believe that these APMs assist in providing additional useful information on the underlying trends, performance and position of the Group. Further information on APMs utilised in the Group, is set out in note 28 of the Group's 2017 Annual Report and Accounts.
Principal risks and uncertainties
A detailed explanation of the principal risks and uncertainties faced by the Group, and the steps taken to manage them, is set out in the Corporate Governance section of the Group's 2017 Annual Report and Accounts. The principal risks and uncertainties are summarised as follows:
- it may be difficult for the Group and its early-stage companies to attract capital;
- the returns and cash proceeds from the Group's early-stage companies can be very uncertain;
- universities or other research-intensive institutions may terminate their partnerships or other collaborative relationships with the
Group;
- the Group may lose key personnel or fail to attract and integrate new personnel;
- macroeconomic conditions may negatively impact the Group's ability to achieve its strategic objectives; and
- there may be changes to, impacts from, or failure to comply with, legislation, government policy and regulation.
The Group is not aware of any significant changes in the nature of these risks that would affect the next six months of the financial year, and thus the Group believe the risks noted above remain applicable to the forthcoming six months.
Condensed consolidated statement of comprehensive income
For the six months ended 30 June 2018
Unaudited Audited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017(1) 2017
Note GBPm GBPm GBPm
-------------------------------------------- ---- ----------- ----------- ------------
Portfolio return and revenue
Change in fair value of equity and debt
investments 0.1 28.5 49.0
Gain on disposal of equity investments 0.6 0.2 0.1
Gain on deconsolidation of subsidiary - - 45.1
Change in fair value of limited and limited
liability partnership interests (0.8) 0.2 (0.2)
Licensing income 0.8 3.0 3.4
Revenue from services and other income 3.8 2.6 6.1
-------------------------------------------- ---- ----------- ----------- ------------
4.5 34.5 103.5
-------------------------------------------- ---- ----------- ----------- ------------
Administrative expenses
Research and development - (0.9) (2.9)
Carried interest plan charge (0.7) (2.7) (1.3)
Share-based payment charge (1.2) (0.7) (2.4)
Amortisation of intangible assets 6 (5.9) (2.2) (3.9)
Acquisition and restructuring costs - (1.0) (9.1)
Other administrative expenses (17.0) (10.5) (30.8)
-------------------------------------------- ---- ----------- ----------- ------------
(24.8) (18.0) (50.4)
-------------------------------------------- ---- ----------- ----------- ------------
Operating (loss)/profit (20.3) 16.5 53.1
Finance income - interest receivable 0.6 0.4 1.0
Finance income - interest payable (1.9) (0.2) (0.7)
-------------------------------------------- ---- ----------- ----------- ------------
(Loss)/profit before taxation (21.6) 16.7 53.4
Taxation - - -
-------------------------------------------- ---- ----------- ----------- ------------
(Loss)/profit for the period (21.6) 16.7 53.4
-------------------------------------------- ---- ----------- ----------- ------------
Other comprehensive income
Exchange differences on translating foreign - - -
operations
-------------------------------------------- ---- ----------- ----------- ------------
Total comprehensive (loss)/income for
the period (21.6) 16.7 53.4
-------------------------------------------- ---- ----------- ----------- ------------
Attributable to:
Equity holders of the parent (22.1) 13.2 49.7
Non-controlling interest 0.5 3.5 3.7
-------------------------------------------- ---- ----------- ----------- ------------
(21.6) 16.7 53.4
-------------------------------------------- ---- ----------- ----------- ------------
Earnings per share
Basic (p) 2 (2.09) 2.27 7.05
Diluted (p) 2 (2.09) 2.27 7.04
-------------------------------------------- ---- ----------- ----------- ------------
1 Re-presented for change in accounting treatment of Parkwalk acquisition (see note 9).
Condensed consolidated statement of financial position
As at 30 June 2018
Unaudited Audited Audited
30 June 30 June 31 December
2018 2017(1) 2017
Note GBPm GBPm GBPm
-------------------------------------------- ---- --------- -------- ------------
ASSETS
Non-current assets
Intangible assets:
Goodwill 7 187.0 63.4 172.1
Acquired intangible asset 6 4.3 5.0 10.2
Property, plant and equipment 2.0 1.6 2.0
Portfolio:
Equity investments 3 1,132.0 649.9 1,085.4
Debt investments 3 31.7 13.1 45.2
Limited and limited liability partnership
interests 12.9 4.4 11.0
Total non-current assets 1,369.9 737.4 1,325.9
-------------------------------------------- ---- --------- -------- ------------
Current assets
Trade and other receivables 8.4 5.4 8.3
Deposits 80.0 85.0 95.0
Cash and cash equivalents 178.5 178.1 231.3 -------------------------------------------- ---- --------- -------- ------------ Total current assets 266.9 268.5 334.6 -------------------------------------------- ---- --------- -------- ------------ Total assets 1,636.8 1,005.9 1,660.5 -------------------------------------------- ---- --------- -------- ------------ EQUITY AND LIABILITIES Equity attributable to owners of the parent Called up share capital 21.1 13.9 21.1 Share premium account 683.1 682.4 683.1 Merger reserve 510.3 12.8 508.6 Retained earnings 270.8 253.5 291.7 -------------------------------------------- ---- --------- -------- ------------ Total equity attributable to equity holders 1,485.3 962.6 1,504.5 -------------------------------------------- ---- --------- -------- ------------ Non-controlling interest 4.5 3.8 4.0 -------------------------------------------- ---- --------- -------- ------------ Total equity 1,489.8 966.4 1,508.5 -------------------------------------------- ---- --------- -------- ------------ Current liabilities Trade and other payables 11.0 9.2 19.7 EIB debt facility 12.4 - 6.3 -------------------------------------------- ---- --------- -------- ------------ Non-current liabilities EIB debt facility 90.1 14.9 97.7 Carried interest plan liability 8.6 2.7 8.8 Loans from limited partners of consolidated funds 13.1 12.7 13.1 Provisions for liabilities and charges 11.8 - 6.4 -------------------------------------------- ---- --------- -------- ------------ Total equity and liabilities 1,636.8 1,005.9 1,660.5 -------------------------------------------- ---- --------- -------- ------------
1 Re-presented for change in accounting treatment of Parkwalk acquisition (see note 9).
Condensed consolidated statement of cash flows
For the six months ended 30 June 2018
Unaudited Audited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017(1) 2017
GBPm GBPm GBPm
---------------------------------------------------- ----------- ----------- ------------
Operating activities
Operating (loss)/profit (20.3) 16.5 53.1
Adjusted for:
Change in fair value of equity and debt investments (0.1) (28.5) (49.0)
Change in fair value of limited and limited
liability partnership interests 0.8 (0.2) 0.2
Gain on disposal of equity investments (0.6) (0.2) (0.1)
Gain on deconsolidation of subsidiary - - (45.1)
Depreciation of property, plant and equipment 0.5 0.1 0.9
Long term incentive carry scheme plan charge 0.7 2.7 1.3
IFRS3 charge in respect of acquisition of
subsidiary - equity-settled 1.7 - -
Amortisation of intangible non-current assets 5.9 2.2 3.9
Fees settled in the form of equity - (0.4) (0.5)
Share-based payment charge 1.2 0.7 2.4
Changes in working capital:
(Increase)/decrease in trade and other receivables (0.4) (2.6) (6.1)
(Decrease)/increase in trade and other payables (7.4) 6.8 7.7
Increase in non-current liabilities - - 8.6
Other operating cash flows:
Net interest (paid)/ received (1.1) - 0.3
---------------------------------------------------- ----------- ----------- ------------
Net cash outflow from operating activities (19.1) (2.9) (22.4)
---------------------------------------------------- ----------- ----------- ------------
Investing activities
Purchase of property, plant and equipment - (1.6) (1.6)
Purchase of equity and debt investments (46.9) (20.1) (71.2)
Net cash flow from/(to) deposits 15.0 (85.0) (95.0)
Acquisition of subsidiary undertaking - (5.2) 107.8
Investment in limited and limited liability
partnerships (2.9) - (1.4)
Distributions from limited partnership funds 0.2 - -
Proceeds from sale of equity investments 2.5 0.3 6.6
Net cash outflow from investing activities (32.1) (111.6) (54.8)
---------------------------------------------------- ----------- ----------- ------------
Financing activities
Proceeds from the issue of share capital - 180.3 184.7
Transaction costs related to issue of share
capital - - (3.7)
(Repayment of)/proceeds from drawdown of
EIB facility (1.6) - 15.0
Net cash (outflow)/inflow from financing
activities (1.6) 180.3 196.0
---------------------------------------------------- ----------- ----------- ------------
Net (decrease)/increase in cash and cash
equivalents (52.8) 65.8 118.8
Cash and cash equivalents at the beginning
of the period 231.3 112.3 112.3
Effect of foreign exchange rate changes - - 0.2
Cash and cash equivalents at the end of the
period 178.5 178.1 231.3
---------------------------------------------------- ----------- ----------- ------------
1 Re-presented for change in accounting treatment of Parkwalk acquisition (see note 9).
Condensed consolidated statement of changes in equity
For the six months ended 30 June 2018
Attributable to equity holders of
the parent
Share Share Merger Retained Non-controlling Total
capital premium reserve earnings Total interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- -------- -------- -------- --------- ------- --------------- -------
At 31 December 2016
(audited) 11.3 504.7 12.8 239.6 768.4 0.3 768.7
Issue of equity 2.6 177.7 - - 180.3 - 180.3
Comprehensive income - - - 13.2 13.2 3.5 16.7
Equity-settled share-based
payments - - - 0.7 0.7 - 0.7
At 30 June 2017 (audited) 13.9 682.4 12.8 253.5 962.6 3.8 966.4
Issue of equity 7.2 0.7 495.8 - 503.7 - 503.7
Comprehensive income - - - 36.5 36.5 0.2 36.7
Equity-settled share-based
payments - - - 1.7 1.7 - 1.7
At 31 December 2017
(audited) 21.1 683.1 508.6 291.7 1,504.5 4.0 1,508.5
Issue of equity - - 1.7 - 1.7 - 1.7
Comprehensive income - - - (22.1) (22.1) 0.5 (21.6)
Equity-settled share-based
payments - - - 1.2 1.2 - 1.2
At 30 June 2018 (unaudited) 21.1 683.1 510.3 270.8 1,485.3 4.5 1,489.8
---------------------------- -------- -------- -------- --------- ------- --------------- -------
Notes to the half-yearly condensed set of financial statements
1. Operating segments
For each of the periods referenced below, the Group-s revenue and profit/loss before taxation were derived almost entirely from its principal activities within the UK. Though the Group has initiated operations in the US and Australia, the associated revenues and costs are currently immaterial and accordingly, no additional geographical disclosures are given. For management reporting purposes, the Group is currently organised into two operating segments: (i) the commercialisation of intellectual property via the formation of long-term partner relationships with universities; (ii) the management of EIS and venture funds focusing on early-stage UK technology companies. The Group operated a third segment, the in-licensing of drugable intellectual property from research intensive institutions, until the deconsolidation of Istesso Limited, its drug development subsidiary, at the end of 2017.
Venture
University capital
partnership fund In-licensing
business management activity Consolidated
Six months ended 30 June 2018 (unaudited) GBPm GBPm GBPm GBPm
------------------------------------------- ------------ ----------- ------------ ------------
STATEMENT OF COMPREHENSIVE INCOME
Portfolio return and revenue
Change in fair value of equity and
debt investments 0.1 - - 0.1
Gain on disposal of equity investments 0.6 - - 0.6
Change in fair value of limited and
limited liability partnership investments (0.8) - - (0.8)
Licensing income 0.8 - - 0.8
Revenue from services and other income 0.5 3.3 - 3.8
Amortisation of intangible assets (5.9) - - (5.9)
Carried interest plan charge (0.7) - - (0.7)
Share-based payment charge (1.2) - - (1.2)
Administrative expenses (15.2) (1.8) - (17.0)
------------------------------------------- ------------ ----------- ------------ ------------
Operating loss (21.8) 1.5 - (20.3)
Net finance cost (1.3) - - (1.3)
------------------------------------------- ------------ ----------- ------------ ------------
Profit before taxation (23.1) 1.5 - (21.6)
Taxation - - - -
------------------------------------------- ------------ ----------- ------------ ------------
(Loss)/profit for the period (23.1) 1.5 - (21.6)
------------------------------------------- ------------ ----------- ------------ ------------
STATEMENT OF FINANCIAL POSITION
Assets 1,618.6 18.2 - 1,636.8
Liabilities (139.8) (7.2) - (147.0)
------------------------------------------- ------------ ----------- ------------ ------------
Net assets 1,478.8 11.0 - 1,489.8
------------------------------------------- ------------ ----------- ------------ ------------
Other segment items
Capital expenditure - - - -
Depreciation (0.5) - - (0.5)
------------------------------------------- ------------ ----------- ------------ ------------
Venture
University capital
partnership fund In-licensing
business management activity Consolidated
Six months ended 30 June 2017 (audited) GBPm GBPm GBPm GBPm
------------------------------------------- ------------ ----------- ------------ ------------
STATEMENT OF COMPREHENSIVE INCOME
Portfolio return and revenue
Change in fair value of equity and
debt investments 28.5 - - 28.5
Gain on disposal of equity investments 0.2 - - 0.2
Change in fair value of limited and
limited liability partnership investments 0.2 - - 0.2
Licensing income - - 3.0 3.0
Revenue from services and other income 0.1 - - 0.1
Revenue from fund management services - 2.5 - 2.5
Amortisation of intangible assets (2.2) - - (2.2)
Carried interest plan charge (2.7) - - (2.7)
Acquisition costs (1.0) - - (1.0)
Administrative expenses (10.2) (1.0) (0.9) (12.1)
------------------------------------------- ------------ ----------- ------------ ------------
Operating profit 12.9 1.5 2.1 16.5
Net finance income 0.2 - - 0.2
------------------------------------------- ------------ ----------- ------------ ------------
Profit before taxation 13.1 1.5 2.1 16.7
Taxation - - - -
------------------------------------------- ------------ ----------- ------------ ------------
Profit for the period 13.1 1.5 2.1 16.7
------------------------------------------- ------------ ----------- ------------ ------------
STATEMENT OF FINANCIAL POSITION
Assets 981.5 15.6 8.8 1,005.9
Liabilities (29.8) (0.4) (9.3) (39.5)
------------------------------------------- ------------ ----------- ------------ ------------
Net assets 951.7 15.2 (0.5) 966.4
------------------------------------------- ------------ ----------- ------------ ------------
Other segment items
Capital expenditure (1.6) - - (1.6)
Depreciation (0.1) - - (0.1)
------------------------------------------- ------------ ----------- ------------ ------------
Venture
University capital
partnership fund In-licensing
business management activity Consolidated
Year ended 31 December 2017 (audited) GBPm GBPm GBPm GBPm
----------------------------------------- ------------ ----------- ------------ ------------
STATEMENT OF COMPREHENSIVE INCOME
Portfolio return and revenue
Change in fair value of equity and
debt investments 49.0 - - 49.0
Gain on disposal of equity investments 0.1 - - 0.1
Gain on deconsolidation of subsidiary - - 45.1 45.1
Change in fair value of limited and
limited liability partnership interests (0.2) - - (0.2)
Licensing income - - 3.4 3.4
Revenue from services and other income 1.1 0.9 - 2.0
Revenue from fund management services - 4.1 - 4.1
Carried interest plan charge (1.3) - - (1.3)
Amortisation of intangible assets (3.9) - - (3.9)
IFRS3 charge in respect of acquisition
of subsidiary (4.4) - - (4.4)
Acquisition and restructuring costs (9.1) - - (9.1)
Administrative expenses (25.9) (2.3) (3.5) (31.7)
----------------------------------------- ------------ ----------- ------------ ------------
Operating profit 5.4 2.7 45.0 53.1
Finance income 1.0 - - 1.0
Finance costs (0.7) - - (0.7)
Profit before taxation 5.7 2.7 45.0 53.4
Taxation - - -
----------------------------------------- ------------ ----------- ------------ ------------ Loss for the year 5.7 2.7 45.0 53.4 ----------------------------------------- ------------ ----------- ------------ ------------ STATEMENT OF FINANCIAL POSITION Assets 1,643.4 17.1 - 1,660.5 Liabilities (147.8) (4.2) - (152.0) ----------------------------------------- ------------ ----------- ------------ ------------ Net assets 1,495.6 12.9 - 1,508.5 ----------------------------------------- ------------ ----------- ------------ ------------ Other segment items Capital expenditure 1.6 - - 1.6 Depreciation (0.9) - - (0.9) ----------------------------------------- ------------ ----------- ------------ ------------
2. Earnings per share
Unaudited Audited year
six months Audited six ended
ended months ended 31 December
30 June 2018 30 June 2017 2017
Earnings GBPm GBPm GBPm
----------------------------------- ------------- ------------- ------------
Earnings for the purposes of basic
and dilutive earnings per share (22.1) 13.2 49.7
----------------------------------- ------------- ------------- ------------
Unaudited Audited year
six months ended
ended Audited six 31 December
30 June 2018 months ended 2017
Number of 30 June 2017 Number of
Number of shares shares Number of shares shares
-------------------------------------- --------------- ----------------- -------------
Weighted average number of ordinary
shares for
the purposes of basic earnings
per share 1,058,205,661 581,197,034 704,227,751
Effect of dilutive potential ordinary
shares:
Options or contingently issuable
shares - 1,022,809 657,673
-------------------------------------- --------------- ----------------- -------------
Weighted average number of ordinary
shares for
the purposes of diluted earnings
per share 1,058,205,661 582,219,843 704,885,424
-------------------------------------- --------------- ----------------- -------------
Potentially dilutive ordinary shares include contingently issuable shares arising under the Group's LTIP arrangements, and options issued as part of the Deferred Bonus Share Plan (for annual bonuses deferred under the terms of the Group's annual incentive scheme).
3. Investment portfolio
The accounting policies in regard to valuations in these half-yearly results are the same as those applied by the Group in its audited consolidated financial statements for the year ended 31 December 2017 and which will form the basis of the 2018 Annual Report and Accounts. Investments are designated as fair value through profit or loss and are initially recognised at fair value and any gains or losses arising from subsequent changes in fair value are presented in profit or loss in the statement of comprehensive income in the period in which they arise.
The Group classifies financial assets using a fair value hierarchy that reflects the significance of the inputs used in making the related fair value measurements. The level in the fair value hierarchy within which a financial asset is classified is determined on the basis of the lowest level input that is significant to that asset's fair value measurement. The fair value hierarchy has the following levels:
Level Quoted prices in active markets.
1 -
Level Inputs other than quoted prices that are observable, such
2 - as prices from market transactions.
Level One or more inputs that are not based on observable market
3 - data.
Level 1 Level 3
------------------ ------------------------------------- ------------
Level 3a Level 3b
-------------------------------
Equity
Equity investments Equity investments Unquoted investments
in quoted in unquoted debt investments in unquoted
spin-out spin-out in spin-out spin-out
companies companies companies companies Total
GBPm GBPm GBPm GBPm GBPm
------------------------------------ ------------------ ------------------ ----------------- ------------ -------
At 31 December 2016
(audited) 161.1 368.0 19.1 65.8 614.0
Investments during
the period 1.5 15.2 2.9 0.5 20.1
Transaction-based reclassifications
during the period - 4.1 (8.6) 4.5 -
Other transfers between
hierarchy levels during
the period - 2.6 - (2.6) -
Disposals during the -
period - - - -
Fees settled via equity - 0.4 - - 0.4
Change in fair value
in the period 10.3 23.9 (0.3) (4.8) 29.1
Exchange differences
on translating foreign
currency investments - (0.6) - - (0.6)
------------------------------------ ------------------ ------------------ ----------------- ------------ -------
At 30 June 2017 (audited) 172.9 413.6 13.1 63.4 663.0
Investments during
the period 13.7 21.1 8.6 7.7 51.1
Acquired with Touchstone
Innovations plc 35.3 131.6 19.9 165.4 352.2
Transaction-based reclassifications
during the period - 1.5 (3.9) 2.4 -
Other transfers between
hierarchy levels during
the period 13.4 (269.3) - 255.9 -
Disposals during the
period 1.2 - (0.8) (7.8) (7.4)
Adjustments for deconsolidation
of subsidiaries - - 8.4 42.7 51.1
Fees settled via equity - 0.1 - - 0.1
Change in fair value
in the period (11.4) 3.0 (0.1) 28.4 19.9
Exchange differences
on translating foreign
currency investments - 0.6 - - 0.6
------------------------------------ ------------------ ------------------ ----------------- ------------ -------
At 31 December 2017
(audited) 225.1 302.2 45.2 558.1 1,130.6
Investments during
the period 0.5 32.8 8.2 5.4 46.9
Adjustments to acquisition
with Touchstone Innovations
plc (0.2) (7.3) (6.9) (1.4) (15.8)
Transaction-based reclassifications
during
the period 4.7 9.2 (14.8) 0.9 -
Other transfers between
hierarchy levels during
the period - 281.1 - (281.1) -
Disposals during the
period (2.1) - - (0.7) (2.8)
Fees settled via equity - - - - -
Change in revenue share 0.2 - - 4.5 4.7
Change in fair value
in the period (23.1) 16.9 - 4.7 (1.5)
Exchange differences on translating foreign currency investments - 1.1 - 0.5 1.6 At 30 June 2018 (unaudited) 205.1 636.0 31.7 290.9 1,163.7 ------------------------------------ ------------------ ------------------ ----------------- ------------ -------
Fair values of unquoted spin-out companies classified as Level 3b in the fair value hierarchy have been determined in part or in full by valuation techniques that are not supported by observable market prices or rates. Investments in 166 companies have been classified as Level 3b and the individual valuations for each of these have been arrived at using the following valuation method:
Where fair values are based upon the most recent market transaction, but that transaction occurred more than twelve months prior to the balance sheet date, the investments are classified as Level 3b in the fair value hierarchy. The fair values of investments categorised as Level 3b are analysed on a quarterly basis to consider indicators which may make the most recent investment no longer a representation of fair value. Due to the nature of the investments, observable market inputs are not commonly available, therefore consideration of indicators of a change in fair value focus on the companies' performance and achievement of technical and commercial milestones.
Where indicators of a change in fair value against the most recent market transaction are identified, any adjustment to arrive at fair value is based on objective data from the company and the experience and judgement of the Group.
If the fair value of all Level 3b equity investments were to decrease by 10%, the net assets figure would decrease by GBP29.1m, with a corresponding increase if the unobservable inputs were to increase by 10%.
For assets and liabilities that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. Transfers between tiers are then made as if the transfer took place on the first day of the period in question.
If the assumptions used in the valuation techniques for the Group's holding in each company are varied by using a range of possible alternatives, there is no material difference to the carrying value of the respective spin-out company. The effect on the consolidated statement of comprehensive income for the period is also not expected to be material.
Transfers between Level 3a and 1 occur when a previously unquoted investment undertakes an initial public offering, resulting in its equity becoming quoted on an active market. In the current period, there were no transfers of this nature.
Transfers between Level 1 and Level 3a would occur when a quoted investment's market becomes inactive. There have been no such instances in the current period.
Transfers between Level 3b and Level 3a occur when an investment, for which the penultimate funding round occurred more than twelve months before the prior period end, undertakes an investment round during the period that results in an observable market price. In the current period, transfers of this nature amounted to GBP366.1m.
Transfers between Level 3a and Level 3b occur when the balance sheet date becomes more than twelve months after an investment's most recent funding round, at which point the price is deemed to be unobservable. In the current period, transfers of this nature amounted to GBP85.0m.
The fair value changes in Level 3b investments have amounted to a gain of GBP5.2m in the period, recognised as change in fair value of equity and debt investments in the condensed consolidated statement of comprehensive income.
4. Share capital
Audited
Unaudited Audited 31 December
30 June 2018 30 June 2017 2017
GBPm GBPm GBPm
-------------------------------- ------------- ------------- ------------
Issued and fully paid:
1,059,144,595 ordinary shares
of 2p each (HY17: 696,727,321;
FY17: 1,057,383,601) 21.1 13.9 21.1
-------------------------------- ------------- ------------- ------------
In April 2018, the Group issued 1,519,849 new ordinary shares to satisfy a proportion of the deferred consideration, which has become due in respect of the acquisition of Parkwalk Advisors Limited during the previous year.
Also during April 2018, the Group issued 241,145 new ordinary shares following the exercise of nil-cost options awarded under the Group's Deferred Bonus Share Plan by certain of the Group's employees.
The Company has one class of ordinary shares, each with a par value of 2p and carrying equal voting rights, equal rights to income and distributions of assets on liquidation, or otherwise, and no right to fixed income.
5. Acquisition of subsidiaries
On 17 October 2017 the Group acquired control of 100% of the ordinary shares in Touchstone Innovations plc. The Group has recognised the assets and liabilities acquired in accordance with IFRS 3 'Business Combinations'. Certain assets, primarily holdings in unlisted portfolio companies that have been accounted for using valuation techniques, were provisionally determined and for a 12-month period post-acquisition, adjustments are made to these assets to the extent that new information is obtained about facts and circumstances that were in existence at the acquisition date. As at the reporting date, an adjustment of GBP14.9m (which comprises GBP15.8m portfolio valuation decrease and ÂGBP0.9m decrease in liabilities) has been made to net assets acquired.
6. Intangible assets
Total
GBPm
--------------------------------------------------------- -------
Cost
At 1 January 2017 (audited) 21.6
Additions: acquisition of Parkwalk Advisors (see note 5) 2.1
--------------------------------------------------------- -----
At 30 June 2017 (audited) 23.7
Additions 6.9
--------------------------------------------------------- -----
At 31 December 2017 (audited) 30.6
Additions -
At 30 June 2018 (unaudited) 30.6
--------------------------------------------------------- -------
Accumulated amortisation
At 1 January 2017 (audited) 16.5
Charge for the period 2.2
------------------------------ ----
At 30 June 2017 (audited) 18.7
Charge for the period 1.7
------------------------------ ----
At 31 December 2017 (audited) 20.4
Charge for the period 5.9
------------------------------ ----
At 30 June 2018 (audited) 26.3
------------------------------ ----
Net book value
------------------------------ ----
At 30 June 2017 (audited) 5.0
------------------------------ ----
At 31 December 2017 (audited) 10.2
------------------------------ ----
At 30 June 2018 (unaudited) 4.3
------------------------------ ----
The intangible assets represent contracts with customers and other contractual arrangements with UK universities acquired through acquisition of subsidiaries. The contractual arrangements have fixed terms and, consequently, the intangible assets have a finite life which align with the remaining terms which, at the end of the period, range from two months to 29 months. The individual contractual arrangements are amortised in a straight line over the remainder of their terms with the expense being presented directly on the primary statements.
7. Goodwill
ÂGBPm
--------------------------------------------------------- ----------
At 31 December 2016 (audited) 57.1
Recognised on acquisition of subsidiary undertaking (see
note 5) 5.7
Other additions 0.6
--------------------------------------------------------- ----------
At 30 June 2017 (audited) 63.4
Recognised on acquisition of subsidiary undertaking (see
note 5) 108.7
31 December 2017 (audited) 172.1
Recognised on acquisition of subsidiary undertaking (see
note 5) 14.9
At 30 June 2018 (unaudited) 187.0
--------------------------------------------------------- ----------
Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets of acquired subsidiaries at the date of acquisition. Included in the balance sheet of the Group, at 30 June 2018, is goodwill of GBP187.0m. This arose from the Group's acquisition of Top Technology Ventures Limited in June 2004 (GBP2.1m), Techtran Group Limited in January 2005 (GBP16.3m), Fusion IP plc in March 2014 (GBP38.7m) and MobilION Inc. (GBP0.6m), and more recently, the acquisitions of Parkwalk Advisors in January 2017 (GBP5.9m) and Touchstone Innovations in October 2017 (GBP123.4m). Goodwill is allocated from the acquisition date to each of the Group's cash-generating units ("CGUs") that are expected to benefit from the business combination. Goodwill may be allocated to CGUs in both the acquired business and in the existing business.
The Group conducts annual impairment tests on the carrying value of goodwill, based on the recoverable amount of the CGUs to which the goodwill has been allocated. The goodwill allocated to each CGU is summarised in the table below. A number of both value-in-use and fair-value-less-costs-to-sale calculations are used to assess the recoverable values of the CGUs, details of which are specified in the audited consolidated financial statements for the year ended 31 December 2017.
Unaudited Audited Audited
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
--------------------------- --------- -------- ------------
University partnership CGU 184.5 61.1 169.6
Fund management CGU 2.1 2.1 2.1
Parkwalk Advisors CGU 0.4 0.2 0.4
--------------------------- --------- -------- ------------
187.0 63.4 172.1
--------------------------- --------- -------- ------------
During the period to 30 June 2018, no factors indicating potential impairment of goodwill were noted and, as a result, no impairment review was deemed necessary.
8. Related party transactions
The Group has various related parties arising from its key management, subsidiaries, equity stakes in portfolio companies and management of certain Limited Partnership funds.
a) Limited partnerships
The Group manages a number of investment funds structured as Limited Partnerships. Group entities have a Limited Partnership interest (see note 1) and act as the general partners of these Limited Partnerships. The Group therefore has power to exert significant influence over these Limited Partnerships. The following amounts have been included in respect of these Limited Partnerships:
Audited
Unaudited six months Audited
six months ended year ended
ended 30 June 31 December
30 June 2017 2017
Income statement 2018 GBPm GBPm GBPm
---------------------- ----------- ----------- ------------
Revenue from services 0.3 0.5 0.7
---------------------- ----------- ----------- ------------
Unaudited Audited Audited
30 June 30 June 31 December
2018 2017 2017
Statement of financial position GBPm GBPm GBPm
----------------------------------- --------- -------- ------------
Investment in limited partnerships 2.9 3.0 2.6
----------------------------------- --------- -------- ------------
Amounts due from related parties 0.8 0.5 0.7
----------------------------------- --------- -------- ------------
b) Key management transactions
The following key management held shares in the following spin-out companies as at 30 June 2018:
Number of Number of
shares held shares acquired/ Number of
Director/ at (disposed shares held
Company 1 January of) in the at
Secretary Company name 2018 period 30 June 2018 %
------------- ----------------------------- ------------ ----------------- ------------- -----
Alan Aubrey Accelercomm Limited 333 305 638 0.4%
Alesi Surgical Limited 18 - 18 0.2%
Amaethon Limited -
A Shares 104 - 104 3.1%
Amaethon Limited -
B Shares 11,966 - 11,966 1.0%
Amaethon Limited -
Ordinary shares 21 - 21 0.3%
Avacta Group plc 202,761 - 202,761 0.3%
Boxarr Limited 1,732 - 1,732 0.3%
Capsant Neurotechnologies
Limited 11,631 - 11,631 0.8%
Crysalin Limited 1,447 - 1,447 0.1%
Ditto AI Limited 120,434,525 - 120,434,525 9.0%
Diurnal Group plc 15,000 - 15,000 <0.1%
EmDot Limited 15 - 15 0.9%
Getech Group plc 15,000 - 15,000 <0.1%
Alan Aubrey Gunsynd plc 767,310 - 767,310 <0.1%
(cont.) hVivo plc 37,160 - 37,160 <0.1%
Ilika plc 69,290 - 69,290 <0.1%
Istesso Limited 1,185,150 - 1,185,150 1.7%
Itaconix plc 88,890 - 88,890 0.1%
Karus Therapeutics
Limited 223 - 223 <0.1%
Microbiotica Limited 10,000 - 10,000 <0.1%
Mirriad Advertising
plc 33,333 - 33,333 <0.1%
MDL 2016 Limited -
Ordinary shares 3,226 - 3,226 0.4%
MDL 2016 Limited -
A shares 229 - 229 0.5%
Modern Water plc 519,269 - 519,269 0.7%
Cronin Group plc 2,172,809 - 2,172,809 0.4%
Oxford Nanopore Technologies
Limited 101,208 - 101,208 0.4%
Perachem Holdings plc 108,350 - 108,350 0.8%
Salunda Limited 53,639 - 53,639 <0.1%
Structure Vision Limited 212 - 212 1.0%
Surrey Nanosystems
Limited 453 - 453 0.3%
Tissue Regenix Group
plc 2,389,259 - 2,389,259 0.3%
Xeros Technology Group
plc 40,166 - 40,166 <0.1%
Zeetta Networks Limited 424 - 424 <0.1%
Amaethon Limited -
Mike Townend A Shares 104 - 104 3.1%
Amaethon Limited -
B Shares 11,966 - 11,966 1.0%
Amaethon Limited -
Ordinary shares 21 - 21 0.3%
Applied Graphene Materials
plc 22,619 - 22,619 <0.1%
Avacta Group plc 20,001 - 20,001 <0.1%
Capsant Neurotechnologies
Limited 11,282 - 11,282 0.8%
Creavo Technologies
Limited 117 - 117 <0.1%
Crysalin Limited 1,286 - 1,286 0.1%
Ditto AI Limited 613,048 - 613,048 <0.1%
Diurnal Group plc 15,000 - 15,000 <0.1%
EmDot Limited 14 - 14 0.8%
Getech Group plc 20,000 - 20,000 <0.1%
Istesso Limited 1,185,150 - 1,185,150 1.7%
Ilika plc 10,000 - 10,000 <0.1%
Itaconix plc 64,940 - 64,940 <0.1%
Mirriad Advertising
plc 25,000 - 25,000 <0.1%
Mode Diagnostics Limited 1,756 - 1,756 0.1%
Modern Water plc 575,000 - 575,000 0.7%
Cronin Group plc 932,944 - 932,944 0.2%
Oxford Advanced Surfaces
Limited 5,000 - 5,000 0.2%
Oxford Nanopore Technologies
Limited 30,967 - 30,967 0.1%
Perachem Holdings plc 113,222 - 113,222 0.8%
Structure Vision Limited 212 - 212 1.0%
Surrey Nanosystems
Limited 404 - 404 0.2%
Tissue Regenix Group
plc 1,950,862 - 1,950,862 0.3%
Ultrahaptics Holdings
Limited 1,224 - 1,224 <0.1%
Xeros Technology Group
plc 35,499 - 35,499 <0.1%
Greg Smith Alesi Surgical Limited 2 - 2 <0.1%
Avacta Group plc 3,904 - 3,904 <0.1%
Capsant Neurotechnologies
Limited 896 - 896 <0.1%
Crysalin Limited 149 - 149 <0.1%
Ditto AI Limited 144,248 - 144,248 <0.1%
Diurnal Group plc 15,000 - 15,000 <0.1%
EmDot Limited 4 - 4 0.2%
Encos Limited 5,671 - 5,671 0.3%
Getech Group plc 8,000 - 8,000 <0.1%
hVivo plc 61,340 - 61,340 <0.1%
Istesso Limited 313,425 - 313,425 0.5%
Itaconix plc 4,500 - 4,500 <0.1%
Perachem Holdings plc 4,830 - 4,830 <0.1%
Mirriad Advertising
plc 16,667 - 16,667 <0.1%
MDL 2016 Limited -
Ordinary shares 361 - 361 <0.1%
MDL 2016 Limited -
A shares 28 - 28 <0.1%
Modern Water plc 7,250 - 7,250 <0.1%
Oxford Nanopore Technologies
Limited 1,581 - 1,581 <0.1%
Summit Therapeutics
plc 798 - 798 <0.1%
Surrey Nanosystems
Limited 88 - 88 <0.1%
Tissue Regenix Group
plc 50,000 - 50,000 <0.1%
Xeros Technology Group
plc 1,392 - 1,392 <0.1%
David Baynes Alesi Surgical Limited 4 - 4 <0.1%
Arkivum Limited 377 - 377 <0.1%
Creavo Technologies
Limited 46 - 46 <0.1%
Diurnal Group plc 73,000 - 73,000 0.1%
Mirriad Advertising
David Baynes plc 16,667 - 16,667 <0.1%
Oxford Nanopore Technologies
(cont.) Limited 174 - 174 <0.1%
Ultrahaptics Holdings
Limited 26 - 26 <0.1%
Zeetta Networks Limited 424 - 424 <0.1%
------------------------------------------- ------------ ----------------- ------------- -----
Mark Reilly Actual Experience plc 65,500 - 65,500 <0.1%
Diurnal Group plc 7,500 - 7,500 <0.1%
Ultrahaptics Holdings
Limited 1,700 - 1,700 <0.1%
Mirriad Advertising
plc 33,333 - 33,333 <0.1%
------------------------------------------- ------------ ----------------- ------------- -----
Sam Williams Accelercomm Limited 66 61 127 0.1%
Alesi Surgical Limited 1 - 1 <0.1%
Creavo Medical Technologies
Limited 23 - 23 <0.1%
Diurnal Group plc 46,748 5,500 52,248 0.1%
Istesso Limited 7,048,368 - 7,048,368 10.0%
Microbiotica Limited 7,000 - 7,000 <0.1%
Mirriad Advertising
plc 3,333 - 3,333 <0.1%
Oxford Nanopore Technologies
Limited 340 - 340 <0.1%
Ultrahaptics Holdings
Limited 558 - 558 <0.1%
------------------------------------------- ------------ ----------------- ------------- -----
c) Portfolio companies
The Group earns fees from the provision of business support services and corporate finance advisory to portfolio companies in which the Group has an equity stake. Through the lack of control over portfolio companies these fees are considered arm's length transactions. The following amounts have been included in respect of these fees:
Unaudited Audited
six months six months Audited
ended ended Year ended
30 June 30 June 31 December
2018 2017 2017
Statement of comprehensive income GBPm GBPm GBPm
---------------------------------- ----------- ----------- --------------
Revenue from services 1.1 1.0 1.9
---------------------------------- ----------- ----------- --------------
Unaudited Audited Audited
30 June 30 June 31 December
2018 2017 2017
Statement of financial position GBPm GBPm GBPm
---------------------------------- ----------- ----------- ------------
Trade receivables 0.3 0.5 0.5
---------------------------------- ----------- ----------- ------------
d) Subsidiary companies
Subsidiary companies that are not 100% owned either directly or indirectly by the parent company have intercompany balances with other Group companies totalling as follows:
Unaudited Audited Audited
30 June 30 June 31 December
2018 2017 2017
GBPm GBPm GBPm
--------------------------------------- --------- -------- ------------
Intercompany balances with other Group
companies 3.4 10.7 3.2
--------------------------------------- --------- -------- ------------
These intercompany balances represent funding loans provided by Group companies that are interest free, repayable on demand and unsecured.
9. Re-presented comparative figures
The June 2017 comparative figures were re-presented to recognise amounts paid in relation to the deferred and contingent consideration payable to the Parkwalk sellers in the period and deemed, under IFRS3, to represent a payment for post-acquisition services.
General information
The comparative financial information presented herein for the year ended 31 December 2017 does not constitute full statutory accounts within the meaning of the Companies Act 2006. The Group's Annual Report and Accounts for the year ended 31 December 2017 have been delivered to the Registrar of Companies. The Group's independent auditor's report on those accounts was unqualified, did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying their report and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006.
Accounting policies
Basis of preparation
The financial information presented in these half-yearly results constitutes the condensed consolidated financial statements of IP Group plc, a company incorporated in Great Britain and registered in England and Wales, and its subsidiaries (together, the "Group") for the six months ended 30 June 2018.
The condensed consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2017, which have been prepared in accordance with International Financial Reporting Standards as adopted for use in the EU ("IFRS"). The financial information in these half-yearly results, which were approved by the Board and authorised for issue on 25 July 2018, is unaudited but has been subject to a review by the Group's independent auditor.
Accounting estimates and judgements
The preparation of the half-yearly results requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on historical experience and other factors, such as expectations of future events, and are believed to be reasonable under the circumstances. Actual results may differ from these estimates. In preparing these half-yearly results, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the audited consolidated financial statements for the year ended 31 December 2017.
Going concern
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of these consolidated half-year financial statements. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated half-year financial statements.
Accounting policies
The accounting policies applied by the Group in these half-yearly results are the same as those applied by the Group in its audited consolidated financial statements for the year ended 31 December 2017 and which will form the basis of the 2018 Annual Report and Accounts. None of the new standards that have become effective in the period are expected to have a material effect on the Group's future financial statements.
Statement of Directors' responsibilities
The Directors confirm to the best of their knowledge that:
a. the half-yearly results have been prepared in accordance with IAS 34 as adopted by the European Union; and
b. the interim management report includes a fair review of the information required by the FCA's Disclosure and Transparency Rules (4.2.7 R and 4.2.8 R).
The Directors of IP Group plc and their functions are listed below.
By order of the Board
Mike Humphrey Alan Aubrey Chairman Chief Executive Officer
24 July 2018
INDEPENDENT REVIEW REPORT TO IP GROUP PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises the condensed consolidated statement of comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of cash flows, condensed consolidated statement of changes in equity and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.
As disclosed in the accounting policies note, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.
Jonathan Mills
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
24 July 2018
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR USUORWVABUUR
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July 25, 2018 02:01 ET (06:01 GMT)
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