TIDMTERN
RNS Number : 4225J
Tern PLC
16 August 2023
16 August 2023
Tern Plc
("Tern" or the "Company")
Unaudited interim results for the six months to 30 June 2023
Tern Plc (AIM: TERN), the company focused on value creation from
Internet of Things ("IoT") technology businesses, announces its
unaudited interim results for the six months to 30 June 2023 (the
"Period").
Highlights
-- Net asset value ("NAV") of GBP22.2 million as at 30 June 2023
(30 June 2022: GBP30.0 million, 31 December 2022: GBP24.9 million).
This resulted in a reduction in net asset value per share from 6.4p
as at 31 December 2022 to 5.7p as at 30 June 2023.
-- Portfolio valuation of GBP21.8 million as at 30 June 2023 (31
December 2022: GBP23.9 million).
-- GBP1.1 million was invested by Tern in its existing portfolio
companies during the Period (six months to 30 June 2022: GBP0.8
million), supporting the portfolio companies' growth and
development, together with maintaining Tern's position in certain
portfolio companies.
-- GBP1.2 million was realised for Tern from sale of shares in
Wyld Networks AB ("Wyld Networks") during the Period.
-- GBP2.1 million reduction in the value of the portfolio during
the Period was primarily due to the GBP1.2 million value of Wyld
Networks shares sold plus a fair value reduction of GBP2.0 million,
offset by a GBP1.1 million investment in the portfolio. Of the
GBP2.0 million fair value reduction:
o GBP0.3 million was attributed to the valuation of Device
Authority, principally due to the retranslation of the US Dollar
investment due to a strengthening of Sterling;
o GBP1.5 million was due to a combination of the reduction in
the value of Wyld Networks as a result of a retranslation of the
investment against a strengthening Sterling and a reduction in the
market price of Wyld Networks shares as at 30 June 2023; and
o GBP0.1 million related to a reduction in the valuation of
InVMA (trading as "Konektio") following the pricing of its recent
fundraise.
-- Warrants issued over 5,524,007 ordinary shares in the Company
exercisable at 6.78855 pence per ordinary share, a 50% premium to
the share price on date of issue, which if exercised, would raise
GBP0.4 million (net) for the Company.
-- GBP0.5 million initial drawdown on an up to GBP3m loan
facility obtained to provide the Company with a stronger
negotiating position and access to funding for follow-on investment
opportunities in the existing portfolio, together with allowing the
Company the potential to gain from any future valuation increase
from a proportion of its holding in Wyld Networks.
Portfolio highlights
-- Progress across the portfolio* in the Period:
o the year-on-year increase in unaudited aggregated Annual
Recurring Revenue ("ARR") of the portfolio* was 43% (six months
ended 30 June 2022: 112%, year ended 31 December 2022: 97%);
and
o the year-on-year increase in the number of employees within
the portfolio*, a key growth measurement, was 23% (six months ended
30 June 2022: 52%, year ended 31 December 2022: 66%). This was
supported by a year-on-year increase in ARR per employee of 16%
(six months ended 30 June 2022: 40%, year ended 31 December 2022:
19%).
-- Device Authority was awarded Microsoft's Rising Azure
Technology 2023 Microsoft Partner of the Year Award, providing
global recognition of its KSaaS(R) solution, built on Microsoft's
Azure Cloud, and available in the Azure Marketplace to provide
additional customer choice in procurement and consumption.
-- In the first half of 2023, Wyld Networks continued to see
significant growth in securing new customers and approximately
doubled its order book to around SEK 92 million (approximately
GBP6.7 million). Post Period end on 4 August 2023 Wyld Networks
announced the signing of an agreement with Space X to explore
potential areas of collaboration to collect data from IoT sensors
in remote locations. This announcement led to a notable increase in
the market price of Wyld Networks shares above that used for the
valuation at 30 June 2023.
-- FundamentalVR continued to build its ARR during the Period
with important wins from both existing and new customers across a
variety of procedural areas including ophthalmology, endovascular
and urology.
-- During the first half of 2023, Konektio raised a total of
GBP1.5 million in a Series A fund raising from existing investors,
including Tern, with all outstanding convertible loan notes being
converted (in addition to the GBP1.5 million raised).
-- Talking Medicines continued to make significant progress as
an advanced artificial intelligence (AI) company and launched its
Drug-GPT(TM) offering following the public launch of Chat GPT by
Open AI.
-- Following their first two investments, Sure Valley Ventures
UK Software Technology Fund ("SVV2") has progressed its origination
and their potential deal flow is distributed across their focused
industry sectors, with almost 50% of the deals evaluated having a
primary AI/machine learning (ML) focus.
* In this context Tern's portfolio is: Device Authority Limited,
InVMA Limited (trading as Konektio), FVRVS Limited (trading as
FundamentalVR) and Talking Medicines Limited, which are portfolio
companies Tern has interests in as well as Wyld Networks AB, a Tern
holding and excludes DiffusionData Limited, in which Tern has a
<1% holding and minimal influence and SVV2.
Enquiries:
Tern Plc via IFC Advisory
Ian Ritchie (Chairman)
Sarah Payne (CFO)
Allenby Capital Limited Tel: 0203 328 5656
(Nominated Adviser and Broker)
Nick Naylor / 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
The first six months of 2023 remained a challenging environment
for early-stage technology businesses. However, whilst it is always
disappointing to report a decrease in the unrealised fair value of
our investments, our portfolio companies continue to make
significant progress, assisted by the Tern team, with growth in
annual and monthly recurring revenues, which we consider to be a
key indicator of progress and ultimately value that can be
realised. This was evidenced in recent weeks with Wyld Networks'
post Period announcement regarding the signing of an agreement with
Space X to explore potential areas of collaboration to enable
additional connectivity to collect data from IoT sensors in remote
locations.
Post Period end, on 10 August 2023, we announced a number of
changes to the Board of the Company and the Company's management
structure. This Board and management restructuring is intended to
provide an appropriate governance and management structure for the
Company, at materially reduced cost, as we continue to focus on
realising value from Tern's portfolio of IoT technology businesses,
whilst maintaining Tern's hands on approach to guiding and
assisting them.
In addition, the Company is implementing other cost saving
measures, including moving to a lower cost office. Overall, the
measures being implemented, whilst having to continue to incur
significant professional fees associated with the portfolio
companies and being an AIM quoted company, are expected to save
approximately 40% of the Company's overall central costs in 2024,
when compared to the level for 2022.
It is the Board's intention that the Company will not invest in
any companies or entities not already part of Tern's existing
portfolio at least until such time as the Company has realised
material value from its current portfolio. We remain focused on
maximizing this value to ultimately achieve good exits from our
various investments, at the appropriate time, in order to deliver
returns for our shareholders.
Ian Ritchie CBE, FREng, FRSE
Chairman
Financial review
Highlights
6 months to 6 months to 12 months to
30 June 2023 30 June 2022 31 December
GBP000 GBP000 2022
GBP000
Investments 21,825 30,204 23,882
Net assets 22,209 30,042 24,852
(Loss)/Profit for
the period (2,840) (2,414) (10,447)
Net asset value per
share 5.7p 8.5p 6.4p
During the first half of 2023, the Company focused on supporting
the growth and development of its existing portfolio, funded by
cash realisations of its existing holding in Wyld Networks and a
GBP0.5 million loan.
The reduction in net asset value during the Period to GBP22.2
million (31 December 2022: GBP24.9 million) was driven largely by a
GBP2.1 million reduction in the valuation of the portfolio. The
valuation of the portfolio as at 30 June 2023 reflected a GBP1.1
million investment into existing portfolio companies, offset by
GBP1.2 million of disposals and a GBP2 million fair value loss. The
net asset value per share was 5.7p as at 30 June 2023 (31 December
2022: 6.4p).
The GBP1.2 million of disposals related to cash realisations on
the sale of shares in Wyld Networks, of which GBP1.1 million was
re-invested in the portfolio, primarily into Device Authority
(GBP0.3 million), Konektio (GBP0.5 million), Talking Medicines
(GBP0.2 million) and SVV2 (GBP0.1 million).
The remainder of the reduction in portfolio valuation was driven
by the fair value decrease in the portfolio. Device Authority's
overall fair value decreased by GBP0.3 million, reflecting a GBP0.3
million increase in fair value being offset by a GBP0.6 million
reduction due to the foreign exchange impact of retranslating the
US Dollar investment in Device Authority due to a strengthening
Sterling position.
Wyld Networks' fair value reduced by GBP1.5 million, of which
GBP0.3 million was due to exchange rate differences on
retranslation of the Swedish Krona investment into a strengthening
Sterling position, and the remainder due to a reduction in the
market value of the Wyld Networks' shares. Wyld Networks is traded
on an active financial market and its fair value is determined by
the market price on 30 June 2023. This market price has
subsequently increased post Period end.
Konektio's fair value decreased by GBP0.1 million in the most
recent fundraise. The remainder of the reduction in net assets was
due to a GBP0.2 million reduction in cash balance and a GBP0.5
million increase in liabilities due to the loan facility draw
down.
The Company had an unaudited cash balance of GBP0.7 million as
at 30 June 2023, which included the receipt of a GBP0.5 million
initial drawdown on the up to GBP3 million loan facility announced
on 12 June 2023. The loan facility was entered into t o provide
Tern with a stronger negotiating position and access to funding for
follow-on investment opportunities in future syndicated fundraises
undertaken by Tern's existing portfolio companies and is repayable
with accrued interest, in equal monthly instalments, commencing 180
days from the date of each drawdown (the initial drawdown was 11
June 2023), until the end of the 18-month term of each drawdown.
The Company is currently unable to make further drawdowns under the
loan facility until such time as it is able to issue the required
warrants as a transaction cost associated with further drawdowns,
pursuant to the terms of the loan facility. The issue of any
further warrants will require shareholder approval to provide the
Directors with authority to allot ordinary shares.
During the Period, the Company recorded a loss of GBP2.8
million, compared to a loss of GBP2.4 million in the six months to
30 June 2022. The loss included the fair value reduction of GBP2.0
million (six months to 30 June 2022: reduction of GBP1.2
million).
Overall operating costs reduced to GBP1.1 million compared to
GBP1.2 million for the same period in 2022 and they were offset in
part by additional revenue received in the period from the
secondment of a Tern director to Konektio. Increases in audit fees
and fees associated with the loan facility, offset some of the
reductions in one-off fees incurred in 2022. All other expenses
remained comparable. For the remainder of the year it is
anticipated that costs will fall significantly, particularly
following the post Period end Board and management restructuring
announced on 10 August 2023.
Portfolio review
A 43% year-on-year growth in ARR was achieved for the portfolio*
(six months ended 30 June 2022: 112%).
The year-on-year increase in employees within our portfolio*, a
key growth measurement, was 23% in the Period (six months ended 30
June 2022: 52%) as the portfolio* focused on controlling burn rate
and accelerating the route to break even whilst supporting ARR
growth. This drove a 16% year-on-year increase in ARR per employee.
Again, this indicates that the increase in employee growth was
matched by a higher growth in ARR.
Device Authority Limited ("Device Authority")
Valuation of holding: GBP11.9 million
Holding: 53.8%
Convertible loan notes of GBP0.7 million and short term loan of
GBP0.1 million
Sector: Security
Invested Since: September 2014
Device Authority, a global leader in identity and access
management ("IAM") for the IoT, has continued its positive business
momentum for the first half of the year.
The company's KeyScaler(R), and KeyScaler Edge(R) solution
enables full end-to-end security life cycle management from Edge to
Enterprise into leading IoT cloud applications such as Microsoft
Azure, Avnet IoTConnect, AWS, PTC ThingWorx and Google, providing
IoT deployments with robust device security combined with
scalability to meet the needs of new and legacy device
deployments.
Not only has the KeyScaler(R) platform been selected by several
major enterprises, including several leading medical device
manufacturers and a major global engine manufacturer, but the
company has also focused on recurring revenue growth via its
cloud-first Keyscaler-as-a-Service(R) ("KsaaS") offering and
expanding and cementing its strategic partner base. KsaaS provides
a scalable and infrastructure-free alternative to on-premise
installations, enabling businesses to achieve total device, data
and operational trust without the burden of costly infrastructure
or dedicated resources and with quicker time to production. KsaaS
enables customers in all sectors, including automotive, medical
device, government, and industrial manufacturing, to more rapidly
onboard KeyScaler(R) and scale its usage in a secure, hosted cloud
environment. The company is adopting a KsaaS first approach to help
customers deploy faster and shorten sales cycles.
Device Authority's partnership with a leading automotive Tier 1
company continues to progress and the company also continues to see
growing demand resulting from White House Executive Order 14028 in
May 2021 that tasked US Government organisations with defining the
minimum elements of a Software Bill of Materials ("SBOM"),
considered critical to improving transparency and security in the
software supply chain for national critical infrastructure. The
recent subsequent release of the five pillars of the White House
Cybersecurity Implementation Plan added further detail to the
roadmap for SBOM as well as the creation of other international
standards and this continues to provide commercial
opportunities.
Device Authority was awarded Microsoft's Rising Azure Technology
2023 Microsoft Partner of the Year Award, providing global
recognition of its KsaaS(R) solution, built on Microsoft's Azure
Cloud, and available in the Azure Marketplace to provide additional
customer choice in procurement and consumption. This follows Device
Authority's recognition as a Microsoft IP Co Sell Partner, further
advancing Microsoft as a channel for DA solutions.
In 2022, ABI Research released its annual 'Top Technology
Companies' Whitepaper which highlights the market leaders across
the enterprise sectors of augmented reality, 5G telco cloud-native
platforms, supply chain management and logistics and IoT, among
others. As an independent report, not paid for by the featured
companies, it aims to provide an independent view on the
market-leaders, combined with the top innovators and implementers
in each of the categories. Device Authority has been named as the
'Overall Leader' in IoT Device Identity Lifecycle Management, in
addition to 'Top Innovator and Implementer' in this category,
moving ahead of their significantly larger competitors from last
year's report. The ABI Research report can be downloaded at:
https://www.deviceauthority.com/wp-content/uploads/2022/08/37-Technology-Companies-Leading-the-Way-in-2022.pdf
.
Device Authority continues to further develop its products and
recently launched a new major release of the KeyScaler(R) platform,
including advanced edge orchestration capabilities in KeyScaler
Edge, in addition to other platform integration and breakthrough
product enhancements.
As at 30 June 2023, the fair value of Tern's shareholding in
Device Authority remained at GBP11.9 million (31 December 2022:
GBP11.9 million), with the additional convertible loan note
investment offset by a net GBP0.3 million decrease in fair value.
This was due to a GBP0.6 million decrease due to the foreign
exchange movement on the sterling value of Device Authority which
is valued in US Dollars, offset by a GBP0.3 million increase in
fair value.
In 2023 to date, Tern has provided a total of approximately
GBP0.4 million of convertible loan note investment to Device
Authority.
FVRVS Limited ("FundamentalVR")
Valuation of holding: GBP3.6 million
Holding: 13.0% (reducing to 12.1% post-Period)
Sector: Healthcare IoT
Invested Since: May 2018
FundamentalVR is a leading virtual reality and data analysis
technology platform led by surgical training experts and leading
technologists with a mission to revolutionise surgical training by
bringing surgical simulation into the hands of medical
professionals around the world, using low cost and easily
accessible technology.
FundamentalVR's software platform takes advantage of readily
available virtual reality devices, such as the Meta owned Oculus
Quest and combines it with cutting edge haptics (being technology
based on the sense of touch) to create a simulation system that can
be used on any modern computer set up. Using machine learning, the
software platform works together with haptic hardware devices to
simulate the physical sensation of operating on human tissue. It
also has the capability to provide AI driven real-time feedback,
procedure correction data and best practice insight. The result is
a simulation system that provides surgeons with a more hands-on
experience and aims to better prepare them for real life
situations, resulting in better patient outcomes.
FundamentalVR continues to build its ARR during the first half
of 2023. With important wins from both existing and new customers
across a variety of procedural areas including ophthalmology,
endovascular and urology.
FundamentalVR continues to build awareness in the medical device
marketplace and receive recognition for their leading platform. It
is building a healthy pipeline of customer and new customer
opportunities for the second half of the year.
As at 30 June 2023, the fair value of Tern's shareholding in
FundamentalVR remained steady at GBP3.6 million (31 December 2022:
GBP3.6 million), the final tranche of third-party funding received
by FundamentalVR post Period end reduced Tern's equity ownership
further, although the pricing of that tranche did not impact on
valuation.
Wyld Networks AB ("Wyld Networks" or "Wyld")
Valuation of holding: GBP3.2 million
Holding: 27.0%
Sector: IoT enablement
Invested Since: June 2016
Wyld Networks, quoted on the NASDAQ First North Growth Market in
Stockholm, enables affordable connectivity across the globe in
areas where wireless coverage is unavailable or congested. The
company specialises in providing wireless connectivity between IoT
sensors and low Earth orbit ("LEO") satellites with its Wyld
Connect solution (a satellite IoT terminal and module) .
In the first half of 2023, Wyld Networks continued to see
significant growth in securing new customers and approximately
doubling its order book to around SEK 92 million (approximately
GBP6.7 million) as well as continuing to focus on enhancing the
development of Wyld Connect and Wyld Fusion (a provisioning and
payment platform).
In addition, the company announced plans to extend their product
offering to support 5G-NB-IoT (5G narrowband Internet of Things
technology) in addition to LoRaWAN (Long Range Wide Area
Networking), increasing Wyld's addressable market.
The company has focused its geographical commercial coverage
predominately in South America, North America, Africa and the
Middle East and recently announced plans to engage in Asia
Pacific.
Post the Period end, on 4 August 2023, Wyld Networks announced
the signing of an agreement with Space X to explore potential areas
of collaboration to collect data from IoT sensors in remote
locations. This had a notable positive impact on Wyld's quoted
market price.
During the Period Wyld Networks received approximately SEK 16.1
million (approximately GBP1.2 million) from the exercise of
warrants, which had the effect of diluting Tern's holding in Wyld
Networks.
As at 30 June 2023, the fair value of Tern's shareholding in
Wyld Networks decreased to GBP3.2 million (31 December 2022: GBP6.0
million) primarily due to the disposal of shares in Wyld Networks
(GBP1.2 million) as well as a fair value decrease (GBP1.5 million),
which included a GBP0.3 million foreign exchange movement on the
Sterling value of Wyld Networks which is valued in Swedish Krona.
Wyld Networks' shares are traded on an active financial market and
the fair value is therefore determined by reference to the quoted
market price at the reporting date.
InVMA Limited (trading as "Konektio")
Valuation of holding: GBP0.9 million
Holding: 28.3%
Sector: IoT enablement
Invested Since: September 2017
Konektio develops and provides Industrial IoT ("IIoT") software
via a Software as a Service ("SaaS") model to the industrial and
manufacturing sectors. Their AssetMinder(TM) software enables
remote asset connectivity, monitoring and management delivering
condition based monitoring, predictive maintenance and energy
monitoring and optimisation that provides insights to drive
productivity improvements and cost savings. AssetMinder(TM), is
machine agnostic and allows manufacturers to diagnose issues and
proactively plan maintenance that reduces downtime and improves
both operational efficiency and operating margins.
In early 2023, Konektio released their energy monitoring and
carbon tracking platform, AssetMinder(TM) Impact, that delivers
real-time insights and improved energy management and optimisation
that leads to savings across the most energy consuming
manufacturing processes using water, air, gas, electricity, and
steam (WAGES). Konektio believes the new release could save energy
intensive manufacturers and industrial customers 12% or more per
year on their energy costs through rapid turnkey deployment,
providing a deeper understanding of customer's energy consumption
efficiencies and producing comparative analytics to identify
efficiencies across their factory equipment and field assets. The
data and insights also provide the detailed information companies
require to meet increasing carbon and ESG reporting obligations,
helping them to accelerate their drive to net zero.
Following this new product release, Konektio announced a boost
to their senior team with the appointment of a new Chief Technology
Officer in the period, Gareth McLaughlin, with over 20 years of
experience and a proven track record within the Industrial IoT,
telematics and technology sectors.
During the first half of 2023, Konektio raised a total of GBP1.5
million in Series A fund raisings from existing investors, with all
outstanding convertible loan notes being converted. Tern invested a
total of GBP0.2m in these Konektio fundraisings and converted
GBP0.5m of convertible loan notes. As announced on 26 May 2023, a s
econd tranche of GBP1.3 million is due for completion in Q4 2023,
within which Tern has committed to invest a minimum of GBP0.28
million, with an option, at Tern's sole discretion, to increase its
investment amount up to GBP0.4 million. Should Tern not fulfil its
commitment to invest a minimum of GBP0.28 million at this time, 75%
of Tern's holding in Konektio will be transferred to a valueless
class of Konektio's deferred shares.
As at 30 June 2023, the fair value of Tern's shareholding in
Konektio was GBP0.9 million (31 December 2022: GBP0.5 million).
Talking Medicines Limited ("Talking Medicines")
Valuation of holding: GBP2.0 million
Holding: 23.8%
Convertible loan notes of GBP0.2 million
Sector: Data intelligence
Invested Since: November 2020
Talking Medicines uses Advanced Data Science and next generation
Artificial Intelligence to transform socially sourced feedback from
patients into data intelligence about their lived experience
regarding medicine use through structuring and evaluating emotions,
opinions, and attitudes at scale.
Talking Medicines entered 2023 as an advanced AI company ready
to take advantage of the huge attention given to Large Language
Models ("LLMs") through the public launch of Chat GPT by Open AI.
Talking Medicines has launched Drug-GPT(TM) which stands apart as a
specialised "Curated Large Language Model". This means that it
offers natural language questioning of proprietary, curated social
data resulting in acutely high-quality output. This trusted
intelligence on 'patient voice' is a ready solution for the highly
regulated health sector and marketing agencies, who can then make
data-driven decisions based on curated truths, as opposed to the
raw open web.
The capabilities for Drug-GPT(TM) have now been integrated into
all Talking Medicines offerings. Further strength has been added to
the capabilities by extending source data to include clients own
unstructured data and building AI classification and curation to
include Health Care Professionals, Digital Opinion Leaders, and Key
Opinion Leaders to find a single source of truth enabling metrics
that support measurement and tracking across broader healthcare
voices.
The Talking Medicines solutions include its SaaS dashboard
PatientMetRx(R), alongside Data as a Service ("DaaS") for larger
clients. This provides Talking Medicines' customers and their
clients access to a level of scale and depth of insights through
automation that was previously not possible from manual extraction.
From trials, it has been found that Talking Medicines solutions
provide 80% time saving for customers through automation and this
is building robust efficiency and effectiveness for customers. This
enables their pharma advertising and marketing consulting customers
to make higher returns through data-driven decisions in creative
and strategic processes.
The company continues to build its US operation in the New
Jersey/New York metro area with significant marketing agency groups
amongst new clients. Looking ahead the focus is on building the US
market further to capitalise on the new service offerings and
leading as an Advanced Data Science and next generation Artificial
Intelligence company.
As at 30 June 2023, the fair value of Tern's shareholding in
Talking Medicines increased to GBP2.0 million (31 December 2022:
GBP1.8 million) due to additional investments from Tern of
approximately GBP0.2 million via convertible loan notes during the
Period.
Sure Valley Ventures UK Software Technology Fund ("SVV2")
Valuation of holding: GBP0.1 million
Holding: 5.9%
Sector: IoT deep tech
Invested since: March 2022
SVV2 is a venture capital fund investing in a range of private
UK software companies with a focus on companies in the immersive
technology and metaverse sectors, including augmented and virtual
reality, artificial intelligence, and security.
SVV2 has investments in two companies so far, RETi ni ZE
Limited, a creative tech company based in Belfast, and Jaid (t/a
Opsmatix Limited), an innovative technology firm providing
AI-powered human communication solutions. Follow on investment for
Jaid, under the same terms as the initial round was taken up by
SVV2 in the Period.
The SVV2 team has made progress with origination and their
potential deal flow is distributed across their focused industry
sectors, with almost 50% of the deals evaluated having a primary
AI/ML focus alongside other deals with Immersive Tech, SaaS, Cyber
Security and IoT. The vast majority of the deals evaluated have AI
underpinning technology which is in line with the fund's main
investment strategy.
SVV2 continues to see returns from its in-person approach to
origination. During the Period, the investment team members
attended many start-up events and pitch competitions in Liverpool,
Manchester, London, Cambridge and Dublin hosted by Plexal, Innovate
UK, Google Cloud, InterTrade Ireland, Entrepreneurs Collective,
Xoogler and more.
The SVV2 team has also been involved in some fantastic
initiatives to build their brand, support the wider start-up
ecosystem and push forward the diversity and inclusion agenda and
during the Period, SVV2 became an investor member of Fund Her North
- a collective seeking to improve access to funding for female
founders across the North at every stage of their journey.
As at 30 June 2023, the fair value of Tern's shareholding in
SVV2 was GBP0.1 million (31 December 2022: GBP0.1 million). The
additional investment during the Period was in part offset by fees
charged by the fund.
DiffusionData Limited ("DiffusionData")
Valuation of holding: GBP0.02 million
Holding: <1%
Sector: Data distribution
Invested since: July 2014
DiffusionData is a pioneer in real-time data streaming and
messaging solutions. Founded to solve the real-time systems and
application connectivity and data distribution challenges
experienced by companies worldwide, the company has an
international team of business and technology experts. The
company's flagship offering-the Diffusion(R) Intelligent Data
Platform, makes it easy to consume, enrich, and deliver data
reliably.
As at 30 June 2023, the fair value of Tern's shareholding in
Diffusiondata was GBP0.02 million (31 December 2022: GBP0.02
million).
Unaudited Income Statement and Statement of Comprehensive
Income
For the six months ended 30 June 2023
6 months 6 months 12 months
to 30 June to 30 June to 31 December
Notes 2023 2022 2022
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
Fee income 156 20 66
Movement in fair value
of investments 7 (1,988) (1,233) (8,416)
Profit on disposal 9 - 11
------------ ------------ ----------------
Total investment
deficit (1,823) (1,213) (8,339)
Administration costs (1,052) (1,241) (2,159)
Operating loss (2,875) (2,454) (10,498)
Finance income 35 40 51
Loss before tax (2,840) (2,414) (10,447)
Tax - - -
------------ ------------ ----------------
Loss and total comprehensive
loss for the period (2,840) (2,414) (10,447)
------------ ------------ ----------------
Earnings per share 6
Basic and diluted loss
per share (0.73)p (0.69)p (2.92)p
Unaudited Statement of Financial Position
As at 30 June 2023
30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
Note GBP000 GBP000 GBP000
Assets
Non-current assets
Investments 7 21,825 30,204 23,882
21,825 30,204 23,882
------------ ------------ ------------
Current assets
Trade and other receivables 352 205 363
Cash and cash equivalents 741 290 932
1,093 495 1,295
Total assets 22,918 30,699 25,177
------------ ------------ ------------
Equity and liabilities
Share capital 8 1,380 1,372 1,379
Share premium 33,391 30,546 33,341
Share warrant reserve 140 - -
Retained earnings (12,702) (1,876) (9,868)
22,209 30,042 24,852
------------ ------------ ------------
Current liabilities
Trade and other payables 346 657 325
Borrowings 9 191 - -
Total current liabilities 537 657 325
Borrowings 9 172 - -
------------ ------------ ------------
Total non-current liabilities 172 - -
------------ ------------ ------------
Total liabilities 709 657 325
------------ ------------ ------------
Total equity and liabilities 22,918 30,699 25,177
------------ ------------ ------------
Unaudited Statement of Changes in Equity
For the six months ended 30 June 2023
Share Share Share warrant Retained Total
capital premium reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 31 December
2021 1,372 30,546 - 498 32,417
------------------------ -------- -------- -------------- --------- --------
Total comprehensive
income - - - (2,414) (2,414)
Transactions with
owners
Share based payment
charge - - - 40 40
------------------------ -------- -------- -------------- --------- --------
Balance at 30 June
2022 1,372 30,546 - (1,876) 30,042
------------------------ -------- -------- -------------- --------- --------
Total comprehensive
income - - - (8,032) (8,032)
Transactions with
owners
Issue of share capital 7 3,114 - - 3,121
Share issue costs - (319) - - (319)
Share based payment
charge - - - 40 40
------------------------ -------- -------- -------------- --------- --------
Balance at 31 December
2022 1,379 33,341 - (9,868) 24,852
------------------------ -------- -------- -------------- --------- --------
Total comprehensive
income - - - (2,840) (2,840)
Transactions with
owners
Issue of share capital 1 50 - - 51
Issue of warrants - - 140 - 140
Share based payment
charge - - - 6 6
------------------------ -------- -------- -------------- --------- --------
Balance at 30 June
2023 1,380 33,391 140 (12,702) 22,209
------------------------ -------- -------- -------------- --------- --------
Unaudited Statement of Cash Flows
For the six months ended 30 June 2023
6 months 6 months 12 months
to 30 June to 30 June to 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
Note GBP000 GBP000 GBP000
OPERATING ACTIVITIES
Net cash used in operations 10 (846) (882) (2,056)
Purchase of investments (1,133) (785) (1,670)
Cash received from sale of
investments 1,238 - 42
Loan to investee companies - - (144)
Interest received - - 1
------------ ------------ ----------------
Net cash used in operating
activities (741) (1,667) (3,827)
------------ ------------ ----------------
FINANCING ACTIVITIES
Proceeds on issue of shares 50 - 3,122
Share issue expenses - - (320)
Proceeds from drawdown of loan 500 - -
Net cash from financing activities 550 - 2,802
------------ ------------ ----------------
(Decrease) in cash and cash
equivalents (191) (1,667) (1,025)
Cash and cash equivalents
at beginning of period 932 1,957 1,957
Cash and cash equivalents
at end of period 741 290 932
------------ ------------ ----------------
Notes to the Unaudited Interim Statements
For the six months ended 30 June 2023
1. General information
Tern is an investing company specialising in private software
companies, predominantly in the Internet of Things (IoT).
The Company is a public limited company, incorporated in England
and Wales, with its shares traded on AIM, a market of that name
operated by the London Stock Exchange.
The address of Tern's registered office is 27/28 Eastcastle
Street, London W1W 8DH. Items included in the financial statements
of the Company are measured in Pounds Sterling, which is the
Company's presentational and functional currency.
2. Basis of preparation
The interim financial information in this report has been
prepared 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 30 June 2023. They do not include all of the
information required for full annual financial statements and
should be read in conjunction with Tern's audited financial
statements for the year ended 31 December 2022. The financial
information for the year ended 31 December 2022 set out in this
interim report does not constitute statutory accounts as defined in
Section 434 of the Companies Act 2006. The Company's statutory
financial statements for the year ended 31 December 2022 have been
filed with the Registrar of Companies and can be found on the
Company's website: www.ternplc.com . The auditor's report on those
financial statements was unqualified and did not contain statements
under Section 498 (2) or Section 498 (3) of the Companies Act 2006.
These interim financial statements have been prepared under the
historical cost convention as adjusted for the valuation of
investments and have been approved for issue by the Board of
Directors.
3. Going concern
The financial statements have been prepared on the going concern
basis.
The Directors have a reasonable expectation that the Company has
adequate resources to continue operating for the foreseeable
future. For this reason, they continue to adopt the going concern
basis in preparing the Company's financial statements.
In the event that additional funding was required, management is
confident that they would be able to obtain additional funds from
various sources. For example, the Company can exit part of its
investment in its held level one investments with the risk that
such transactions are determined by an inherent and undetermined
market risk.
4. Investments
The investment valuation consists of equity investments.
In accordance with IFRS 10, paragraph 4B, investments are
recognised at fair value through profit and loss (FVTPL) in line
with guidance set out in IFRS 9. Changes in foreign exchange rates
impact investments valued in a foreign currency.
5. Critical accounting judgements and key sources of estimation uncertainty
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
rarely equal the related actual results. The key sources of
estimation uncertainty that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below.
ESTIMATES
Fair value of financial instruments
The Company holds unquoted investments of GBP18.6 million that
have been designated as held for trading on initial recognition.
Where practicable the Company determines the fair value of these
financial instruments that are not quoted using the most recent bid
price at which a transaction has been carried out. These techniques
are significantly affected by certain key assumptions, such as
market liquidity. Given the nature of the investments being
early-stage businesses, other valuation methods such as discounted
cash flow analysis to assess estimates of future cash flows and
derive fair value estimates cannot always be substantiated by
comparison with independent markets and, in many cases, may not be
capable of being realised immediately.
JUDGEMENTS
Investments held at FVTPL
The critical judgement is the assessment that the investments
should be consolidated. This assessment was reached following a
review of all the key conditions for an investment entity, as set
out in IFRS 10 and the Company was judged to have met those key
conditions as follows:
-- The Company obtains funds from one or more investors for the
purpose of providing those investor(s) with investment management
services;
-- The Company commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
-- The Company measures and evaluates the performance of
substantially all its investments on a fair value basis.
In coming to this conclusion, the Company also judged that its
investment-related activities do not represent a separate
substantial business activity or a separate substantial source of
income to the investment entity.
6. Earnings/(Loss) per share
Earnings/(Loss) per share is calculated by reference to the
weighted average shares in issue as follows:
6 months 6 months 12 months
to to to
30 June 30 June 31 December
2023 2022 2022
GBP000
GBP000 GBP000
Loss for the purposes of
basic and fully diluted
loss per share (2,840) (2,414) (10,447)
----------------------------- ------------ ------------ ------------
Weighted average number
of ordinary shares (see
note below): Number Number Number
For calculation of basic
and fully diluted loss per
share 388,681,380 352,014,701 357,424,413
Loss per share
Basic and diluted loss per
share (0.73)p (0.69)p (2.92)p
At 30 June 2022, 31 December 2022 and 30 June 2023 the fully
diluted earnings per share is the same as the basic earnings per
share as the share options and warrants were underwater which would
have an anti-dilutive effect on earnings per share.
7. Investments
30 June 30 June 31 December
2023 2022 2022
GBP000 GBP000 GBP000
-------------------------------------- -------- -------- ------------
Fair value of investments
brought forward 23,882 30,612 30,612
-------------------------------------- -------- -------- ------------
Interest accrued on convertible
loan notes 27 40 47
Additions 1,133 785 1,670
Disposals (1,229) - (31)
-------------------------------------- -------- -------- ------------
23,813 31,437 32,298
Fair value adjustment to investments (1,988) (1,233) (8,416)
Fair value of investments
carried forward 21,825 30,204 23,882
-------------------------------------- -------- -------- ------------
On 25 April 2023, the convertible loan facility issued to InVMA
Limited was converted into equity with any movements in fair value
taken to profit or loss for the period.
8. Issued share capital
30 June 30 June 31 December
2023 2022 2022
Number Number Number
Issued and fully paid:
Ordinary shares of GBP0.0002 389,676,311 352,014,701 388,571,510
Deferred shares of GBP29.999 42,247 42,247 42,247
Deferred shares of GBP0.00099 34,545,072 34,545,072 34,545,072
GBP000 GBP000 GBP000
Issued and fully paid:
Ordinary shares of GBP0.0002 79 71 78
Deferred shares of GBP29.999 1,267 1,267 1,267
Deferred shares of GBP0.00099 34 34 34
------------
1,380 1,372 1,379
============ ============ ============
The deferred shares have no voting or dividend rights. The
deferred shares are not quoted on the AIM market of the London
Stock Exchange.
On 12 June 2023, 1,104,801 new ordinary shares were issued at a
deemed price of 4.5257 pence per share in settlement of a Facility
implementation fee of GBP50,000 .
9. Borrowings
30 June 30 June
2023 2022 31 Dec 2022
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
Gross loan 500 - -
Transaction cost (140) - -
Interest (3) - -
----------- ----------- -----------
Balance carried forward 363 - -
----------- ----------- -----------
Short term borrowings 191 - -
Long term borrowings 172 - -
363 - -
----------- ----------- -----------
The borrowing transaction cost was calculated using the Black
Scholes model. The transaction cost, from the issue of warrants,
will be taken to profit or loss over the 18 month loan repayment
period.
10. Cash flow from operations
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
GBP000 GBP000 GBP000
(Loss)/profit for the period (2,840) (2,414) (10,447)
Adjustments for items not included
in cash flow:
Movement in fair value of investments 1,988 1,233 8,416
Loss/(profit) on disposal (9) - (11)
Share-based payment charge 6 40 80
Finance expenses 3 - -
Finance income (35) (40) (51)
Operating cash flows before movements
in working capital (887) (1,181) (2,013)
Adjustments for changes in working
capital:
- (Increase)/decrease in trade and
other receivables (excluding loans
to investee companies) 20 (16) (26)
- Increase/(decrease) in trade and
other payables 21 315 (17)
----------- ----------- ----------
Cash used in operations (846) (882) (2,056)
----------- ----------- ----------
11. Events after the reporting period
On 10 August 2023, the Company announced a restructuring of the
Board such that Bruce Leith and Matthew Scherba stepped down with
immediate effect. It was announced that Sarah Payne will step down
as CFO and Company Secretary on or before 30 September 2023 but
will remain on the Board as a Non-Executive Director. Following
these changes, the Board will comprise: Ian Ritchie, Alan Howarth
and Sarah Payne. The Company also announced that it was
implementing cost savings which once fully implemented are expected
to save approximately 40% of the overall central costs in 2024 when
compared to 2022, this includes a material reduction in
remuneration for the senior management team.
12. Availability of interim results
Copies of this report will be available from the Company's
website www.ternplc.com .
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END
IR GPUAGRUPWGMA
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August 16, 2023 02:00 ET (06:00 GMT)
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