TIDMTERN
RNS Number : 0884B
Tern PLC
31 May 2023
31 May 2023
Tern Plc
("Tern" or the "Company")
Results for the year ended 31 December 2022
Tern Plc (AIM: TERN), the company focused on value creation from
Internet of Things ("IoT") technology businesses, announces its
audited results for the year ended 31 December 2022.
Highlights
-- Net assets of the Company at 31 December 2022 of GBP24.9m (31
December 2021: GBP32.4m). The net asset value per ordinary share as
at 31 December 2022 decreased to 6.4p (31 December 2021: 9.2p)
-- The reduction in net assets of the Company as at 31 December
2022 principally due to movements in investments held at fair value
through the profit or loss and a reduction in the cash balance
-- The unaudited aggregated annual recurring revenue ("ARR") of
our portfolio (1) increased by 97% from 2021 to 2022 and the
year-on- year growth in aggregated revenue grew by 5%. A key focus
for our portfolio is on recurring revenue as it is a primary driver
of valuation growth
-- The aggregated employee numbers of our portfolio increased by
66% from 2021 to 2022 (35% from 2020 to 2021), and this increase
was balanced by an associated increase in ARR such that ARR per
employee increased by 19% from 2021 to 2022
1. Our 'portfolio companies and holdings' being portfolio
companies: Device Authority Limited, InVMA Limited (trading as
Konektio), FVRVS Limited (Trading as FundamentalVR) and Talking
Medicines Limited, and holdings: Wyld Networks AB, or collectively
'our portfolio': as further described in the section headed
'Portfolio Companies and Holdings below and as detailed in note
3.
Commenting on the results, Tern's CEO, Al Sisto said:
" Whilst it is disappointing to report a reduction in the
unrealised fair value of a number of our companies, a large part of
the fair value decrease at the year end, is a reflection of the
dramatic decrease in valuation metrics and models in the technology
sector rather than the underlying prospects of our companies.
Despite short-term challenges posed by macroeconomic factors and
geopolitical conflicts, we remain confident in the long-term
potential of our portfolio and the IoT markets in which we
operate.
"As hands-on managers, we are committed to continuing to work
closely with our companies, providing them with the benefit of our
expertise and resources to help them navigate the road ahead. The
IoT technology markets, which remain a core focus for us, continue
to offer long-term growth potential and we are excited to see what
the future holds.
"At the heart of our investment strategy is a focus on ARR
growth, which we believe is the key driver of valuations for
start-ups. However, we understand the importance of our portfolio
balancing their growth with achieving profitability to drive
efficient growth, and we are dedicated to supporting our portfolio
as they chart their path to success.
"We believe that our portfolio remain well positioned for
successful exits at the right time. While uncertainty may persist
in the shorter term, we are heartened by the indicators we are
seeing in the market that point to a return to improvements in
valuations."
Notice of AGM
The annual report for the year ended 31 December 2022, which
contains a notice of the Annual General Meeting ("AGM"), will
shortly be available from the Company's website
https://www.ternplc.com/investors and will shortly be posted to
shareholders.
The Company's AGM will be held at 9.00am on Thursday 29 June
2023 at the offices of Reed Smith, The Broadgate Tower, 20 Primrose
Street, London, EC2A 2RS.
Investor Presentation and Q&A Session
The Company's Chairman, Ian Ritchie, and CEO, Al Sisto, will
conduct a live question and answer session for investors on 12 June
2023 at 5:30 pm BST. The session is open to all existing and
potential shareholders.
Those who wish to attend should register via the following link
where they will be provided with access details:
https://us02web.zoom.us/webinar/register/WN_YYea-W2XQgeqJ7WUDPHnuQ
Participants will have the opportunity to submit questions
during the session, but questions are welcomed in advance and may
be submitted to: tern@investor-focus.co.uk .
Enquiries
Tern Plc via IFC Advisory
Al Sisto (CEO)
Sarah Payne (CFO)
Allenby Capital Limited Tel: 0203 328 5656
(Nominated Adviser and Broker)
Alex Brearley / Dan Dearden-Williams
(Corporate Finance)
Matt Butlin / Kelly Gardiner (Sales
and Corporate Broking)
IFC Advisory Tel: 0203 934 6630
(Financial PR and IR) tern@investor-focus.co.uk
Tim Metcalfe
Graham Herring
Florence Chandler
Chairman's Statement
I am pleased to report another year of progress for the Company
in what has been a difficult climate. All of our portfolio have
increased bookings and won new customers during the year; the
aggregate year-on-year growth of annual recurring revenue ("ARR")
of our portfolio, a key indicator of progress, has increased by
97%, and our portfolio increased employee numbers by 66% and ARR
per employee of 19%.
Our portfolio companies are all early-stage businesses with
exciting breakthrough technologies and should be recognised for
their growth, performance and potential for exit at an excellent
return at the appropriate time. It is always difficult to determine
the real underlying value of a portfolio, but we follow the
established investment practice of taking the last valuation of a
round of investment, tempered by any adjustments based on current
market performance and the value of comparable businesses, as the
value of our holdings. Of course, we all expect such businesses to
be worth far more when we finally realise their return at an exit,
but in the meantime we must take a very prudent approach to their
valuation.
In this context, it is important to regard Tern shares as a
long-term investment. The real value of the Company will not emerge
in the short-term, it will only be fully realised when we can, in
the medium to long-term, obtain good exits for our various
investments. Meanwhile the Tern team will continue to work
tirelessly to ensure that our various companies are maximising
their opportunities to grow and become a source of disruption in
their respective markets in such a way that they can become
extraordinarily valuable to a potential acquiring business.
Our portfolio has been working well, evidenced by the ability of
every one of them to either achieve a listing on a stock market
(Wyld Networks on NASDAQ First North Growth Market), or to raise
later stage investment from new third-party investors (Device
Authority, FundamentalVR, Talking Medicines and Konektio). These
all indicate that our confidence in the excellent potential of our
companies is shared by other sources of risk capital.
Of course, it is not possible for our companies to avoid the
impact of recent global economic events; interest rates have
increased sharply, and technology businesses have had to quickly
adapt to a new world of ensuring that customer acquisition and
revenue generation is paramount. The extensive experience of our
directors over many decades of past technology cycles has enabled
us to help our companies effectively to manage their way through
such turbulence.
The downturn in the global technology sector and in particular
the collapse of Silicon Valley Bank has affected the technology
business climate, but previous downturns have demonstrated that
such market conditions can have a relatively short-term effect on
early-stage innovative companies with breakthrough technologies.
Their potential remains to be realised.
Our particular positioning and skillset remains very strong,
especially our valuable intimate links with the US technology
marketplace, and our ability to introduce highly effective
management, marketing and technology skills and our extensive
experience over many years of ensuring effective operations in
growth businesses.
Our specialisation in IoT technology, along with the novel
application of innovative artificial intelligence ("AI"), and the
effective analysis of very large data sources, are the fields most
prized in today's technology markets. We have also identified a
particular focus on life sciences and medical applications which
are among today's key growth areas.
We have also been making excellent progress in the development
of ESG (environmental, social and governance) policies throughout
our portfolio.
I would like to take the opportunity to recognise the
outstanding performance during this year of Al Sisto, our CEO, and
our executive directors Bruce Leith, Sarah Payne and Matthew
Scherba, in carefully monitoring and adding value to the various
companies under their charge. We are very much a 'hands-on' team
who actively participate in the strategy and development of our
various portfolio companies.
I would also like to thank my fellow non-executive director,
Alan Howarth, for his excellent judgment and advice based on his
extensive financial and business experience.
What we do well is provide an ability for our shareholders to
participate in the development of a portfolio of attractive
high-potential businesses, not otherwise available to private
investors, whose growth, with our guidance, will undoubtedly
provide long-term capital gains.
I look forward, in the coming months and years, to the further
development of our excellent portfolio of exciting high-growth
companies, and to achieving an excellent return for you, our
shareholders.
Ian Ritchie CBE, FREng, FRSE
Chairman
CEO's Statement
Overview
I am pleased to report that our portfolio has shown remarkable
resilience and growth during 2022. With our dedicated support and
guidance, they have executed skilfully, resulting in continued
progress and contribution to our key performance indicators
("KPIs"). Even in the face of unprecedented market challenges, our
investee companies have shown impressive strength and further
development, a true testament to their leadership and our support.
Despite the intense downward pressure on valuations that we
witnessed in 2022, our companies have demonstrated admirable
determination and grit, and we couldn't be prouder of their
accomplishments.
In last year's annual report, I described 2021 as a remarkable
year for Tern and UK technology companies. However, 2022 has
presented unprecedented challenges, unlike any we have seen in
recent history. The year can be divided into two distinct halves,
with the first continuing the positive momentum from the previous
year as technology companies, investors, and customers maintained
their course post-pandemic. However, the emergence of inflationary
concerns and the subsequent interest rate hikes created a
significant shift in the traditional investing metrics for the
technology industry. This has led to challenges for technology
companies globally and here in the UK, both in public and private
markets. The downward pressure on public technology company shares
eventually trickled down to the private technology sector in the
second half of 2022, resulting in declining valuations that have
persisted into 2023. Despite our best efforts, Tern has not been
immune to these dynamics and I am disappointed to report an GBP8.4m
reduction in the unrealised fair value of our portfolio during the
year.
The objective of venture-backed businesses has always been to
pursue rapid, high-growth opportunities, and this remains true
today. As investors, we at Tern are dedicated to supporting
talented entrepreneurs by providing the necessary capital and
support to build innovative, category-creating businesses, which we
believe we have successfully done. However, as the cost of capital
increases and market conditions change, we are encouraging our
portfolio to focus on a different narrative. This involves
prioritising a compelling and sustainable opportunity for potential
investors, rather than relying solely on seeking market dominance.
We are striving for our portfolio to strike a balance between
growth and seeking profitability, in order to responsibly reduce
burn rates and drive efficient value-creating growth. As our
reported KPIs demonstrate, our portfolio is still experiencing
strong growth, high levels of customer satisfaction, and our exit
goals remain grounded, despite being impacted by the recent
turbulence in valuation metrics.
Strategy and Market Focus
In 2022, UK M&A activity took a hit and dropped from the
record-setting levels seen in 2021 to pre-pandemic levels. The
year-on-year decline of 16% was, we believe, a result of economic
headwinds affecting the volume of deals completed.
At Tern, we recognise the importance of being agile and having
multiple exit strategies in place to navigate the current market
conditions and we firmly believe that more favourable market
conditions are on the horizon in the second half of 2023.
We remain committed to creating lasting value for our
shareholders through our focus on IoT technology companies that
deploy artificial intelligence ("AI"), machine learning ("ML"),
augmented reality/virtual reality ("AR/VR"), natural language
processing ("NLP"), security and communications products and
services. Despite these unexpected events, our portfolio has
demonstrated impressive resilience, which is reflected in their
growth in ARR. We have been encouraging our companies to embrace
Software as a service ("SaaS") revenue models, and it has had a
positive impact.
At Tern, our objective is to sell our interests in our portfolio
companies when shareholder value is maximised. We will not sell
when valuations are low or hold indefinitely. We continuously
evaluate the optimal timing for liquidity events, recognising that
external events significantly influence market sentiment. And while
we may hold some companies longer to maximise value for Tern
shareholders, a "defined time horizon" would be inappropriate in
rapidly evolving markets. It could be seriously value destructive
if potential buyers knew Tern was obligated to sell by a certain
date.
We are confident in the long-term potential of our investment
thesis and our targeting of the double-digit compound annual growth
rate ("CAGR") in healthcare/life sciences and industrial segments.
Our approach varies for each company, but we remain committed to
creating value for our shareholders while reducing dependence on
Tern for future funding. Talking Medicines is a prime example of
the success of our investment strategy, and we were proud to report
in 2021 that the valuation of our holding in their equity had
increased by 62% on the November 2020 valuation. Liquidity events
are a top priority and we believe that Tern is in a favourable
position to sell when the right time arises.
Financial Performance, Investments and Realisations
Tern's portfolio's fair value as of December 31, 2022, was
GBP23.9m, reflecting a decline of GBP6.7m or 22% from the previous
year. This decline was primarily due to a fair value reduction of
GBP8.4m, offset by additional investment of GBP1.7m. Additionally,
GBP3.1m (gross) was raised through three equity raises in August,
October and December 2022 and GBP42,300 realised from sales of
Tern's holding in Wyld Networks.
As previously referenced, a large part of the fair value
decrease at the year end is a reflection of the dramatic decrease
in valuation metrics and models in the technology sector rather
than the underlying prospects of our companies. For example,
FundamentalVR in May 2022 announced a Series B fund raising round,
securing GBP7m in new equity investment from existing investors and
a new institutional investor, at a valuation uplift of 77% from the
previous book valuation of Tern's holding. The recent follow-on
investment from the last round's investors in April 2023, which was
priced at a discount to the previous round and resulted in a
reversal of the previous uplift, in part reflecting the change in
sentiment regarding valuation metrics. This downwards adjustment to
the valuation metrics also impacted the rest of the portfolio
including reductions for Device Authority (GBP3.2m), Konektio
(GBP1.9m) and Wyld Networks (GBP3.2m).
Despite short-term challenges, we remain confident in the
long-term potential of our portfolio and the IoT markets in which
we operate. We have maintained ongoing engagement with and have a
clear understanding of our portfolio companies' cash needs. Our
cash and available liquid assets form part of the important reserve
that exists, that can be deployed as appropriate, but we remain
mindful of the importance of preserving capital.
As a quoted company, we are constantly reviewing our expenses to
ensure we operate with maximum efficiency.
ESG
We at Tern are not just another investment firm ticking off
boxes on an ESG checklist. Rather we believe that investing with
purpose is our duty, and that our ultimate goal is to create better
outcomes for society, the environment, and the people that we call
our portfolio family.
Our commitment to ESG is the guiding principle that runs through
everything we do, from our investment decisions to our day-to-day
operations. To ensure that we stay true to our values, we have
created a portfolio-wide committee dedicated to providing guidance
and support on ESG matters.
Through regular meetings and the sharing of tools and resources
amongst our companies, our ESG committee has helped the entire
portfolio develop their own ESG strategies tailored to their
respective markets. As employee, customer, and investor
expectations continue to rise, we understand that ESG is no longer
an option, but a must-have for any successful and responsible
business.
As part of our commitment to environmental transparency, we have
taken the additional step of disclosing Tern's carbon usage with
the help of a leading environmental disclosure platform. We truly
believe that accountability is key to driving change, and that
transparency is the first step towards creating a more sustainable
future for all.
Outlook and Summary
Despite the challenges posed by macroeconomic factors and
geopolitical conflicts, our portfolio operates in thriving IoT
markets and remain well positioned for successful exits at the
right time. While uncertainty may persist in the short term, we are
heartened by the indicators we are seeing in the market that point
to a return to improvements in valuations.
As hands-on managers, we are committed to continuing to work
closely with our portfolio companies, providing them with the
benefit of our expertise and resources to help them navigate the
road ahead. The IoT technology markets, which remain a core focus
for us, continue to offer long-term growth potential and we are
excited to see what the future holds.
At the heart of our investment strategy is a focus on ARR
growth, which we believe is the key driver of valuations for
start-ups. We understand the importance of balancing growth and
achieving profitability to drive efficient growth, and we are
dedicated to supporting our portfolio as they chart their path to
success.
We are confident that our portfolio will continue to make
important technological advancements that will solve critical
business and social problems, shaping the future of work and the
world we live in.
In closing, we want to express our gratitude to the Tern team,
our portfolio CEOs and employees, and our shareholders for their
commitment and patience during what has been a challenging period.
Thank you for your trust in our vision and for joining us on this
exciting journey.
Albert Sisto
CEO
Financial Review
All sectors, excluding energy, saw a decline in venture
investing and valuations during 2022 from higher valuations and
catch-up investing post Covid in 2021. This valuation adjustment
flowed through to some of our portfolio companies and holdings.
However, our portfolio continued to focus on their fundamentals,
showing growth through the period with a focus on maximising growth
of annual recurring revenue.
Statement of Financial Position
Net assets at 31 December 2022 were GBP24.9m, a reduction of
GBP7.5m from the net assets of GBP32.4m at 31 December 2021. This
is principally due to movements in investments held at fair value
through the profit or loss ("FVTPL") and a reduction in the
Company's cash balance. Investments made in our portfolio, and the
net positive impact of foreign exchange movements at Device
Authority and Wyld Networks have been offset by decreases in the
fair value of the portfolio leading to an overall decrease in our
investments of GBP6.7m. Our cash balance is GBP1.0m lower at 31
December 2022 compared to 31 December 2021. There is no debt on the
Statement of Financial Position.
Investments held at FVTPL of GBP23.9m relate to our portfolio of
high-growth technology companies. During the year, the fair value
of this portfolio decreased by GBP6.7m, resulting from investments
made of GBP1.7m and a negative movement in the fair value of
investments held at FVTPL of GBP8.4m.
Income Statement and Statement of Comprehensive Income
The total comprehensive loss for the year was GBP10.4m (2021:
profit of GBP4.6m), primarily due to a net negative movement in the
fair value of investments held at FVTPL of GBP8.4m: a negative fair
value movement of GBP9.5m offset by a positive foreign exchange
movement of GBP1.1m.
The Company does not charge high board fees to ensure capital is
not deducted at source and is instead reinvested in the portfolio
to drive value creation.
Administration costs increased to GBP1.8m in 2022 (2021:
GBP1.6m). This consisted of a GBP0.1m decrease in directors' fees
compared to 2021 and small increases elsewhere, including travel,
professional fees and interest. Other expenses of GBP0.4m (2021:
GBP0.1m) include costs relating to the proposed acquisition of
Pires Investments Plc, which ultimately did not complete
(GBP0.3m).
Statement of Cashflows
During the year, GBP2.0m was used in the Company's operations,
GBP1.8m deployed within our existing portfolio, via equity and
debt; GBP1.7m into investments and GBP0.1m as repayable debt. A net
GBP2.8m was raised through three equity raises in August 2022,
October 2022 and December 2022. A GBP0.4m short term loan was
provided to the Company during the year and repaid from the
December 2022 fund raise proceeds. The loan included an option over
Wyld Networks shares which has now been cancelled.
Events after the end of the reporting period impacting 2022
results
InVMA Limited, which trades as Konektio, completed a GBP0.3m
equity fundraise in April 2023. Tern invested GBP0.1m, with the
remainder provided by Konektio's other institutional investors
Mercia and Foresight. Tern and other investors also converted
GBP0.5m of convertible loan notes in Konektio.
Key performance indicators
The Company's financial Key Performance Indicators (KPIs) are
focused on increasing net asset value, increasing net asset value
per share and delivering consistent turnover growth from our
portfolio. The Company also monitors non-financial KPIs, the
primary focus being on the increase in employee numbers and
turnover per employee in our portfolio which is an indicator of
growth to support commercial success. These indicators are
monitored closely by the Board and the details of performance
against these are given below.
The return on investments
Unrealised fair value:
-- Wyld Networks: GBP6.0m valuation (31 December 2021: GBP8.7m):
The equity valuation has decreased due to a reduction in market
capitalisation of GBP3.0m (reduction in share price) plus an
exchange rate loss of GBP0.2m, offset by additional funding of
GBP0.5m provided to exercise warrants in Wyld Networks;
-- Device Authority: GBP11.9m valuation (31 December 2021:
GBP14.7m): The valuation has decreased due to a net fair value
reduction of GBP3.2m, including a foreign exchange rate gain of
GBP1.3m, which is considered to be a reflection of the dramatic
decrease in valuation metrics and models in the technology sector,
offset by additional funding provided to the company by Tern of
GBP0.4m via a CLN. GBP0.1m of short term loans are also outstanding
(and held in trade and other receivables);
-- Konektio: GBP0.5m valuation (31 December 2021: GBP2.2m): The
equity value of Konektio reduced due to a fair value reduction of
GBP1.9m with the pricing of the most recent equity fundraise in
April 2023 taken into account, including GBP0.2m of additional
funding provided via a CLN to the company;
-- FundamentalVR: GBP3.6m valuation (31 December 2021: GBP3.6m):
The valuation increased due the conversion of an outstanding CLN of
GBP0.6m and a fair value uplift based on the Series B funding in
May 2022, this fair value increase was then reversed with the most
recent equity fundraise in April 2023 (at a 25% discount) taken
into account;
-- Talking Medicines: GBP1.8m valuation (31 December 2021:
GBP1.4m): The valuation has increased due to additional funding
provided to the company of GBP0.4m. The equity value remains
unchanged taking into account the price of the equity fundraise in
January 2022;
-- Diffusiondata (previously Push Technology) : GBP0.02m
valuation (31 December 2021: GBP0.02m): The investment is valued at
fair value with the price of the most recent valuation taken into
account; and
-- SVVUK: GBP0.1m valuation: The investment is valued at fair
value at the value provided by the SVVUK fund.
The companies in our portfolio are early-stage businesses in
evolving markets where there is a lack of comparative businesses
available on which to provide a comparable valuation and therefore
value has been based on an assessment of numerous factors which
includes the multiples achieved in comparable markets on recent
transactions, and an assessment by the Board on the strength of our
companies' sales pipelines and achievability of their 2023 sales
forecast. Wyld Networks is measured as a Level 1 company under IFRS
and as such the value is determined by reference to the appropriate
quoted market price at the reporting date. The global downturn in
technology company valuations and multiples applied to early-stage
businesses was taken into consideration when assessing the fair
value of the portfolio, and this in particular is a driver of the
reduction in the fair value of our holding in Device Authority.
Further details in respect of fair value measurement can be
found in note 2 below.
The net assets of the Company at 31 December 2022 showed a
reduction to GBP24.9m (31 December 2021: GBP32.4m). The net asset
value per ordinary share as at 31 December 2021 decreased to 6.4p
(31 December 2021: 9.2p).
The year-on-year unaudited ARR of our portfolio increased by 97%
from 2021 to 2022 and the year-over-year growth in aggregated
revenue grew by 5% (47% from 2020 to 2021). The key focus for our
portfolio is on recurring revenue as it is a primary driver of
valuation growth. As a result, it will be that growth that we will
monitor and report going forward.
The Company has non-financial KPIs which are also monitored
regularly by the Board. The non-financial KPIs are focused on the
growth in employee numbers in our portfolio. We believe these
factors help serve as leading indicators of the future performance
and our impact on our stakeholders:
Employees in our portfolio increased by 66% from 2021 to 2022
(35% from 2020 to 2021), and this increase was balanced by an
associated increase in ARR such that ARR per employee also
increased by 19% from 2021 to 2022.
Sarah Payne
CFO
Portfolio Companies and Holdings as at 31 December 2022
Wyld Networks AB (publ) ("Wyld Networks" or "Wyld")
Valuation: GBP6.0m
Holding: 41.2%
Wyld Networks, quoted on the NASDAQ First North Growth Market in
Stockholm, enables affordable connectivity across the globe in
areas where wireless coverage is unavailable. The company
specialises in providing wireless connectivity between IoT sensors
and Low-Earth-Orbit ("LEO") satellites with its Wyld Connect
solution for governments and businesses.
Wyld Networks CEO, Alastair Williamson said: "As we continue to
evolve and expand, we are grateful for the insights and guidance
that Tern provides, helping us navigate the challenges and
capitalise on the opportunities that lie ahead."
Device Authority Limited ("DA" or "Device Authority")
Valuation: GBP11.9m
Equity ownership : 53.8%, plus convertible loan of GBP0.4m and
cashflow loan of GBP0.1m
Device Authority is a global leader in securing machine
identities and enabling 'zero trust' security policies for the IoT.
Zero Trust is a security framework requiring all users, whether in
or outside the organisation's network, to be authenticated,
authorised, and continuously validated for security configuration
and posture before being granted or keeping access to applications
and data. Device Authority's KeyScaler(R) software security
platform is believed to be the only platform that can automate and
manage machine identities throughout their lifecycle, delivering
automated device provisioning, authentication, credential
management, policy-based end-to-end data security/encryption and
secure updates and providing complete device, data and operational
trust.
Device Authority CEO, Darron Antill said: "Team Tern continues
to support the company in many ways, developing fundraising plans,
leveraging its network and contacts, and actively supporting
customer, channel and partner-based activities."
InVMA Limited (trading as "Konektio")
Valuation: GBP0.5m
Equity ownership: 36.8%, plus convertible loan of GBP0.2m
Konektio helps industrial and manufacturing companies prosper by
converging their physical assets with new transformational digital
insights. Konektio's AssetMinder(R) is a modular, industry 4.0, IoT
SaaS platform, using a wide range of analytical tools, AI and
machine learning algorithms to connect whole factory floors and
processes as well as managing resources into and out of the
factory. AssetMinder(R) assesses the effectiveness and efficiencies
of entire operations, putting customers in control of their assets
and therefore directly impacting productivity, efficiency and
business outcomes.
Konektio CEO, Peter Stephens said: "We're in an exciting growth
phase where we are experiencing acceleration in customer demand for
AssetMinder solutions at greater scale. We are seeing this from
both existing customers taking more of our portfolio solutions and
new customers working with us for the first time in existing and
expansion markets. We are very excited to have the support of Tern
as we go into this accelerated growth stage."
FVRVS Limited ("FundamentalVR")
Valuation: GBP3.6m
Equity ownership: 16.6%
FundamentalVR delivers virtual reality haptic 'flight
simulators' for surgery creating a safe, measurable and repeatable
space to refine skills. FundamentalVR's goal is to transform the
way surgeons prepare, practice and refine their skills. It has
built an immersive, surgical simulation application platform,
Fundamental Surgery, to provide medical professionals with the
opportunity to rehearse, practise, and test themselves within a
safe, controllable space that is as close to real-life as
possible.
FundamentalVR CEO, Richard Vincent said: "Throughout our
journey, Tern has been an invaluable partner, offering unwavering
support and expertise. As we strive to achieve new heights and
increase our commercial traction, their wealth of experience and
guidance have proven to be invaluable."
Talking Medicines Limited ("Talking Medicines")
Valuation: GBP1.8m
Equity ownership: 23.8%
Talking Medicines is revolutionising the pharmaceutical industry
with its cutting-edge social intelligence platform, PatientMetRx.
By harnessing the power of artificial intelligence (AI) and natural
language processing (NLP), the platform provides pharmaceutical
companies with unparalleled insights into patient and healthcare
providers (HCPs) experience and preferences using social data. This
allows companies to deliver a greater return on investment for
marketing and ultimately improve health outcomes for patients. With
PatientMetRx, pharmaceutical companies have access to a level of
scale and depth of patient insights that was previously impossible,
enabling them to make data-driven decisions that drive success.
Talking Medicines CEO, Jo Halliday said: "Tern are a committed
investor who add significant value to scaling our operation through
their strategic involvement particularly around expansion to US and
product led growth."
Diffusiondata (previously Push Technology)
Valuation: GBP0.02m
Equity ownership: <1%
Diffusiondata significantly enhances the ability of
organisations to communicate in real-time. This includes direct
communication as well as indirect, for example, by refreshing data
displayed information in real-time rather than when a user
explicitly asks for an update. Interactive applications are
infinitely more engaging, updating in real-time as new data becomes
available.
Sure Valley Ventures UK Software Technology Fund ("SVVUK")
Valuation: GBP0.1m
Equity ownership: 5.9%
SVVUK is a new UK venture capital fund, investing in
cutting-edge software companies that are at the forefront of
immersive technology and metaverse innovation. With a focus on
augmented and virtual reality, artificial intelligence, the IoT and
security, SVVUK's portfolio companies are poised to transform the
digital landscape.
Income Statement and Statement of Comprehensive Income
For the year ended 31 December 2022
2022 2021
GBP GBP
-------------------------------------- ------------ -----------
Fee income 66,013 63,783
Movement in fair value of investments (8,415,781) 6,240,095
Profit/(Loss) on disposal 11,208 (199,115)
--------------------------------------- ------------ -----------
Total investment income (8,338,560) 6,104,763
Administration costs (1,792,523) (1,635,058)
Other expenses (366,596) (75,372)
--------------------------------------- ------------ -----------
Operating (loss)/profit (10,497,679) 4,394,333
Finance income 50,915 183,988
--------------------------------------- ------------ -----------
(Loss)/Profit before tax (10,446,764) 4,578,321
Tax - -
-------------------------------------- ------------ -----------
(Loss)/Profit and total comprehensive
income for the period (10,446,764) 4,578,321
--------------------------------------- ------------ -----------
Since there is no other comprehensive income, the profit for the
year is the same as the total comprehensive income for the
year.
(LOSS)/EARNINGS PER SHARE:
Basic (loss)/earnings per share (2.92) pence 1.35 pence
Diluted (loss)/earnings per share (2.92) pence 1.33 pence
Statement of Financial Position
As at 31 December 2022
ASSETS 2022 2021
NON--CURRENT ASSETS GBP GBP
Investments 23,881,769 30,612,047
----------------------------- ----------- -----------
23,881,769 30,612,047
----------------------------- ----------- -----------
CURRENT ASSETS
Trade and other receivables 363,765 189,354
Cash and cash equivalents 931,765 1,957,203
------------------------------ ----------- -----------
1,295,530 2,146,557
----------------------------- ----------- -----------
TOTAL ASSETS 25,177,299 32,758,604
------------------------------ ----------- -----------
EQUITY AND LIABILITIES
Share capital 1,379,282 1,371,970
Share premium 33,341,218 30,546,569
Retained earnings (9,868,199) 498,010
------------------------------ ----------- -----------
24,852,301 32,416,549
----------------------------- ----------- -----------
CURRENT LIABILITIES
Trade and other payables 342,998 342,055
------------------------------ ----------- -----------
TOTAL CURRENT LIABILITIES 342,998 324,055
------------------------------ ----------- -----------
TOTAL LIABILITIES 342,998 342,055
------------------------------ ----------- -----------
TOTAL EQUITY AND LIABILITIES 25,177,299 32,758,604
------------------------------ ----------- -----------
Statement of Changes in Equity
For the year ended 31 December 2022
Share capital Share premium Retained earnings Total equity
GBP GBP GBP GBP
---------------------------- ----------------- ----------------- --------------------- -------------------
Balance at 31 December
2020 1,367,635 26,740,789 (4,107,767) 24,000,657
---------------------------- ----------------- ----------------- --------------------- -------------------
Total comprehensive income - - 4,578,321 4,578,321
---------------------------- ----------------- ----------------- --------------------- -------------------
Transactions with owners
Issue of share capital 4,335 4,031,665 - 4,036,000
Share issue costs - (225,885) - (225,885)
Share based payment charge - - 27,456 27,456
Balance at 31 December 2021 1,371,970 30,546,569 498,010 32,416,549
---------------------------- ----------------- ----------------- --------------------- -------------------
Total comprehensive income - - (10,446,764) (10,446,764)
---------------------------- ----------------- ----------------- --------------------- -------------------
Transactions with owners
Issue of share capital 7,312 3,114,249 - 3,121,561
Share issue cost - (319,600) - (319,600)
Share based payment charge - - 80,555 80,555
---------------------------- ----------------- ----------------- --------------------- -------------------
Balance at 31 December 2022 1,379,282 33,341,218 (9,868,199) 25,852,301
---------------------------- ----------------- ----------------- --------------------- -------------------
Statement of Cash Flows
For the year ended 31 December 2022
2022 2021
GBP GBP
----------------------------------------- ----------- -----------
OPERATING ACTIVITIES
Net cash used in operations (2,055,814) (1,535,722)
Purchase of investments (1,670,194) (2,504,185)
Cash received from sale of investments 42,346 -
Loans to portfolio companies (144,757) -
Interest received 1,020 56,829
------------------------------------------ ----------- -----------
Net cash used in operating activities (3,827,399) (3,983,078)
------------------------------------------ ----------- -----------
FINANCING ACTIVITIES
Proceeds on issues of shares 3,121,561 4,000,000
Share issue expenses (319,600) (225,885)
Proceeds from exercise of options - 36,000
Net cash from financing activities 2,801,961 3,810,115
------------------------------------------ ----------- -----------
(Decrease) in cash and cash equivalents (1,025,438) (172,963)
------------------------------------------ ----------- -----------
Cash and cash equivalents at beginning
of year 1,957,203 2,130,166
------------------------------------------ ----------- -----------
Cash and cash equivalents at end
of year 931,765 1,957,203
------------------------------------------ ----------- -----------
Notes
1. BASIS OF PREPARATION
The financial information set out in the announcement does not
constitute the Company's statutory accounts for the years ended 31
December 2022 or 2021. The financial information for the year ended
31 December 2021 is derived from the statutory accounts for that
year, which were prepared under IFRSs in conformity with the
requirements of the Companies Act 2006 , and which have been
delivered to the Registrar of Companies. The auditor's report on
those accounts was unqualified, did not contain a statement under
either Section 498(2) or Section 498(3) of the Companies Act
2006.
The financial information for the year ended 31 December 2022 is
derived from the audited statutory accounts for the year ended 31
December 2022 on which the auditors have given an unqualified
report, that did not contain a statement under section 498(2) or
498(3) of the Companies Act 2006 and did not include references to
any matters to which the auditors drew attention by way of
emphasis. The statutory accounts will be delivered to the Registrar
of Companies following the Company's annual general meeting.
The financial statements of the Company have been prepared in
accordance with UK-adopted international accounting standards . The
financial statements have been prepared on the basis of the
recognition and measurement principles of the IFRS that were
applicable at 31 December 2022. The accounting policies are
consistent with those applied in the preparation of the interim
results for the period ended 30 June 2022. The accounting policies
are also consistent with the statutory accounts for the year ended
31 December 2021.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results may
ultimately differ from those estimates.
In accordance with IFRS 10, para 4 the Directors consider the
Company to be an investment company and has taken the exemption not
to present consolidated financial statements or apply IFRS3 when it
obtains control of another entity as it is an investing company
that measures all of its investments at fair value through the
income statement in accordance with IFRS 9.
1.1 GOING CONCERN
The financial statements have been prepared on the going concern
basis.
The directors have a reasonable expectation that the Company has
adequate resources to continue operating for the foreseeable
future. For this reason, they continue to adopt the going concern
basis in preparing the Company's financial statements. This has
been assessed using detailed cash flow analysis so that the Board
can conclude that the Company has sufficient working capital
resources to continue for at least 12 months from the approval of
the financial statements without any additional financing
requirement. In the event that opportunities are presented such
that additional funding was required, management are confident that
they would be able to obtain additional funds from various sources.
For example, the Company can exit part of its investment in listed
equity securities with the risk that such transactions are
determined by an inherent and undetermined market risk.
2. FAIR VALUE MEASUREMENT
For Level 3 investments, private company portfolio companies,
the fair value assessment was made by the directors using the price
of the shares in the most recent fundraise, where this was
available, as well as an assessment of market valuations placed on
comparable businesses, a review of the underlying asset values and
a review of the sales pipeline and forecast to support any
valuation applied. Convertible loans provided to portfolio
companies are evaluated with reference to IFRS 9.
3. NON-CURRENT ASSETS
INVESTMENTS
2022 2021
GBP GBP
-------------------------------------- ------------ -----------
Fair value of investments brought
forward 30,612,047 21,904,791
Interest accrued on convertible
loan note 46,447 162,091
Additions 1,670,194 2,504,185
Disposals (31,138) (199,115)
-------------------------------------- ------------ -----------
Fair value of investments carried
forward 32,297,550 24,371,952
Fair value adjustment to investments (8,415,781) 6,240,095
-------------------------------------- ------------ -----------
Fair value of investments carried
forward 23,881,769 30,612,047
-------------------------------------- ------------ -----------
Cost Valuation Equity ownership
GBP000 GBP000 %
------------------------------- ------- ---------- -----------------
Wyld Networks AB 2,299 5,985 41.2
Device Authority Limited 8,932 11,861 53.8
InVMA Limited (Konektio) 1,695 469 36.8
FVRVS Limited (FundamentalVR) 2,928 3,630 16.6
Talking Medicines Limited 1,260 1,792 23.8
Diffusiondata Limited 120 23 <1
Sure Valley Ventures
UK Software Technology
Fund 222 122 5.9
------------------------------- ------- ---------- -----------------
17,456 23,882
------------------------------- ------- ---------- -----------------
The convertible loan facility issued to Device Authority is a
financial asset with multiple derivatives and the entire contract
has been designated at FVTPL, with any movement in fair value taken
to profit or loss for the year. As at 31 December 2022, the
principal of the convertible loan outstanding was GBP354,547
($427,520) (2021: Nil). The unsecured cashflow loan issued to
Device authority carries interest. The balance outstanding of the
cashflow loan as at 31 December 2022 was GBP144,757 ($174,551)
(2021: Nil).
The convertible loan facility issued to InVMA is a financial
asset with multiple derivatives and the entire contract has been
designated at FVTPL, with any movement in fair value taken to
profit or loss for the year. As at 31 December 2022, the principal
of the convertible loan outstanding was GBP170,000 (2021: Nil).
The convertible loan facility issued to FVRVS was converted into
equity during the year with any movements in fair value taken to
profit or loss for the year.
4. (LOSS)/EARNINGS PER SHARE
2020 2019
GBP GBP
2022 2021
------------------------------------------------------ --------------- ------------
(Loss)/Profit for the purposes of basic and GBP(10,446,764) GBP4,578,321
fully diluted profit per share
------------------------------------------------------ --------------- ------------
2022 2021
Number Number
------------------------------------------------------ --------------- ------------
Weighted average number of ordinary shares:
For calculation of basic earnings per share 357,424,413 339,559,205
For calculation of fully diluted earnings
per share 357,424,413 342,975,205
2022 2021
------------------------------------------------------ --------------- ------------
(Loss)/Earnings per share:
Basic (loss)/earnings per share (2.92) pence 1.35 pence
Diluted (loss)/earnings per share (2.92) pence 1.33 pence
------------------------------------------------------ --------------- ------------
In 2022 the fully diluted loss per share is the same as the
basic loss per share as the share options were underwater which
would have an anti-dilutive effect on loss per share.
5. POSTING OF ANNUAL REPORT AND ANNUAL GENERAL MEETING
The annual report for the year ended 31 December 2022 will
shortly be available from the Company's website (
https://www.ternplc.com/investors) and will be posted to
shareholders. The annual report contains a notice of the AGM which
will be held at 9am on Thursday 29 June 2023 at the offices of Reed
Smith, The Broadgate Tower, 20 Primrose Street, London, EC2A
2RS.
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