TIDMIVO
RNS Number : 0855L
Touchstone Innovations PLC
14 July 2017
14 July 2017
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH
JURISDICTION
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014
Touchstone Innovations plc
Trading update - NAV increased to GBP502 million
Touchstone Innovations plc (AIM: IVO, "the Group", "Touchstone")
is today publishing a trading update in order to provide
shareholders with an updated net asset value as at 30 June
2017.
As at 30 June 2017, the Group's Net Assets were GBP502.2 million
or GBP3.12 per share, up 10.2% (GBP46.3 million) since the start of
the financial year (2016: GBP455.9 million and GBP2.83p
respectively), primarily as a result of fair value gains in the
unquoted portfolio. The Group's balance sheet remains strong with
GBP142.9 million available for investment (2016: GBP198.3m).
The Group's portfolio now consists of holdings in 113 companies
and as at 30 June the value of the Group's quoted and unquoted
portfolios (the "Net Portfolio Value") was approximately GBP440.3
million (2016: GBP335.1 million). The Group's unquoted portfolio
was valued at GBP399.1 million (2016: GBP292.2 million). The
Group's net cash was GBP67.2 million.
In addition, there are negotiations or other circumstances
straddling Touchstone's year-end on 31 July 2017 in relation to
five of the Group's portfolio companies that may lead to
transactions resulting in fair value gains. These potential
transactions include an externally validated funding round, two
collaborative partnerships with large pharmaceutical companies and
two potential trade sales. Whilst there is no certainty that any of
these transactions will proceed to completion, the board believes
that a number may do so, leading to further revaluations of the
Group's investments in the relevant holdings in accordance with its
valuation policies. Whilst these revaluations are unlikely to be
significant in the context of the Group's portfolio as a whole, the
board believes that they would further demonstrate the Group's
business model achieving its aim.
During the 11-month period from 1 August 2016 to 30 June 2017,
the Group invested GBP57.3 million across 33 portfolio companies,
including the addition of six new companies to the Group's
accelerated growth portfolio, which now comprises 48 companies.
Divestment proceeds were GBP15.6 million, so the net investment
during the period was GBP41.7 million.
The Directors do not believe a potential tax charge would arise
on the realisation of the fair value gains set out in this
statement.
The Directors have prepared the unaudited numbers contained in
this statement on a basis consistent with the Company's accounting
policies. Those accounting policies applied in determining the Net
Portfolio Value are set out in Appendix A, and, in the case of
unquoted investments, in accordance with the guidelines set out by
the International Private Equity and Venture Capital Valuation
Board.
As required by the Takeover Code (the "Code"), the unaudited
reported values of the Net Portfolio Value are supported by an
opinion of Deloitte LLP as independent valuer in accordance with
Rule 29 of the Code. A copy of this valuation report of Deloitte
LLP is included within this announcement in Appendix B.
For further information contact:
020 3053
Touchstone Innovations plc 8834
Russ Cummings, Chief Executive Officer
Jon Davies, Director of Communications
020 7457
Instinctif Partners 2020
Adrian Duffield/Melanie Toyne-Sewell/Chantal
Woolcock
J.P. Morgan Cazenove (Nominated 020 7742
Adviser) 4000
Michael Wentworth-Stanley/James
Robinson/Alec Pratt
020 7653
RBC Capital Markets 4000
Darrell Uden/Marcus Jackson/Laura
White
About Touchstone Innovations - www.touchstoneinnovations.com
Touchstone Innovations plc (formerly Imperial Innovations Group
plc or just "Innovations") creates, builds and invests in
pioneering technology companies and licensing opportunities
developed from outstanding scientific research from the 'Golden
Triangle', the geographical region broadly bounded by London,
Cambridge and Oxford.
This area has an unrivalled cluster of outstanding academic
research and technology businesses, and is home to four of the
world's top 10 universities, as well as leading research
institutions, the cream of the UK's science and technology
businesses and many of its leading investors.
Innovations supports scientists and entrepreneurs in the
commercialisation of their ideas through protecting and licensing
out intellectual property (through its Technology Transfer
subsidiary, Imperial Innovations Limited), by leading the formation
of new companies, by recruiting high calibre management teams and
by providing investment and encouraging co-investment. Innovations
remains an active investor over the life of its portfolio
companies, with the majority of Innovations' investment going into
businesses in which it is already a shareholder.
Since becoming a public company in 2006, Innovations has raised
more than GBP440 million of equity from investors, which has
enabled it to invest in some of the most exciting spin-outs to come
out of UK academic research. In addition, the Group has drawn down
the outstanding GBP50.0 million from the European Investment Bank
(EIB) taking the total loan to GBP80.0 million.
Between Innovations' admission to AIM (August 2006) and 30 June
2017, Innovations has invested a total of GBP364.0 million across
its portfolio companies, which have collectively raised investment
of more than GBP1.5 billion.
Further Information
J.P. Morgan Limited, which conducts its UK investment banking
business as J.P. Morgan Cazenove ("J.P. Morgan Cazenove"), is
authorised and regulated in the United Kingdom by the Financial
Conduct Authority. J.P. Morgan Cazenove is acting as financial
adviser exclusively for Touchstone and no one else in connection
with the matters set out in this announcement and will not regard
any other person as its client in relation to the matters in this
announcement and will not be responsible to anyone other than
Touchstone for providing the protections afforded to clients of
J.P. Morgan Cazenove or its affiliates, or for providing advice in
relation to any matter referred to herein.
RBC Capital Markets is the business name used by RBC Europe
Limited, which is authorised in the United Kingdom by the
Prudential Regulation Authority ("PRA") and regulated by the
Financial Conduct Authority ("FCA") and the PRA and is a subsidiary
of the Royal Bank of Canada. RBC is acting as Corporate Broker to
the Company.
Forward-looking statements
This announcement (including information incorporated by
reference) may contain statements which are, or may be deemed to
be, "forward-looking statements".
All statements, other than statements of historical fact are, or
may be deemed to be, forward-looking statements. Forward-looking
statements are prospective in nature and are not based on
historical facts, but rather on current expectations and
projections of the management of Touchstone about future events,
and are therefore subject to risks and uncertainties which could
cause actual results, performance or events to differ materially
from those expressed or implied by the forward-looking statements.
The forward-looking statements contained in this announcement
include statements relating to the expected effects of the
transaction and other statements other than historical facts.
Often, but not always, forward-looking statements can be identified
by the use of forward looking words such as "plan", "expect",
"budget", "target", "aim", "scheduled", "estimate", "forecast",
"intend", "anticipate", "assume", "hope", "continue" or "believe",
or variations of such words and phrases or statements that certain
actions, events or results "may", "could", "should", "would",
"might" or "will" be taken, occur or be achieved. By their nature,
forward-looking statements involve risks (known and unknown) and
uncertainties (and other factors) that could cause actual results
to differ materially from those suggested by them. Much of the risk
and uncertainty relates to factors that are beyond the relevant
companies' or directors' ability to control or estimate precisely,
such as future market conditions and behaviours of other market
participants or changes in tax rates.
Each forward-looking statement speaks only as of the date of the
announcement. No representation, assurance or guarantee is provided
that the occurrence of the events expressed or implied in any
forward-looking statements in the information will actually occur.
All forward-looking statements contained in the information are
expressly qualified in their entirety by the cautionary statements
contained or referred to in this disclaimer. Readers are cautioned
not to place undue reliance on these forward-looking statements.
Other than in accordance with their legal or regulatory obligations
(including under the Code), Touchstone, the directors of
Touchstone, its subsidiaries and subsidiary undertakings are under
no obligation and undertake no obligation, and expressly disclaim
any intention or obligation, to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Responsibility
The directors of Touchstone accept responsibility for the
information contained in this announcement (including expressions
of belief) and, to the best of the knowledge and belief of the
Touchstone directors (having taken all reasonable care to ensure
that such is the case), the information contained in this
announcement is in accordance with the facts and does not omit
anything likely to affect the import of such information.
Consent
Deloitte LLP has given and not withdrawn its written consent to
the inclusion of its opinion on the value of the Group's quoted and
unquoted portfolio as at 30 June 2017 in this announcement.
Additional Information
In accordance with Rules 26.1 and 26.3 of the Code, a copy of
this announcement will be available at
www.touchstoneinnovations.com by no later than 12 noon (London
time) on the business day following this announcement. The content
of the website referred to in this announcement is not incorporated
into and does not form part of this announcement.
Appendix A
The accounting policies followed by the Directors in their
preparation of the Net Portfolio Value contained in this statement
are set out below.
When a price for an asset or liability is not observable, the
Group measures fair value using another valuation technique that
maximises the use of relevant observable inputs and minimises the
use of unobservable inputs.
The fair value of unlisted securities is established using
International Private Equity and Venture Capital Valuation
Guidelines (IPEVCVG). The valuation methodology used most commonly
by the Group is the 'price of recent investment' or a 'milestone
analysis' approach. Given the nature of the Group's investments in
seed, start-up and early-stage companies, where there are often no
current and no short-term future earnings or positive cash flows,
it can be difficult to gauge the probability and financial impact
of the success or failure of development or research activities and
to make reliable cash flow forecasts.
Consequently, the most appropriate approach to determine fair
value is a methodology that is based on market data, that being the
price of a recent investment. The Group considers that fair value
estimates that are based entirely on observable market data will be
of greater reliability than those based on assumptions and
accordingly where there has been any recent investment by third
parties, the price of that investment will generally provide a
basis of the valuation.
Where the Group considers that the price of recent investment,
unadjusted, is no longer relevant and there are limited or no
comparable companies or transactions from which to infer value, the
Group carries out an enhanced assessment based on milestone
analysis and/or industry and sector analysis. In applying the
milestone analysis approach to investments in companies in early or
development stages the Group seeks to determine whether there is an
indication of change in fair value based on a consideration of
performance against any milestones that were set at the time of the
original investment decision, as well as taking into consideration
the key market drivers of the investee company and the overall
economic environment.
When considered appropriate, the Group may use external valuers
to assess the reasonableness of any change in fair value estimated
by management.
The following considerations are used when calculating the fair
value:
-- where the investment being valued was itself made recently,
its cost will generally provide a good indication of fair value
unless there is objective evidence that the investment has since
been impaired, such as observable data suggesting a deterioration
of the financial, technical, or commercial performance of the
underlying business;
-- where there has been any recent investment by third parties,
the price of that investment will provide a basis of the
valuation;
-- if there is no readily ascertainable value from following the
'price of recent investment' methodology, the Group considers
alternative methodologies in the IPEVCVG guidelines, being
principally discounted cash flows and price-earnings multiples
requiring management to make assumptions over the timing and nature
of future earnings and cash flows when calculating fair value;
-- where a fair value cannot be estimated reliably, the
investment is reported at the carrying value at the previous
reporting date unless there is evidence that the investment has
since been impaired;
-- all recorded values of investments are regularly reviewed for
any indication of impairment and adjusted accordingly;
-- the length of period for which it remains appropriate to use
the price of recent investment depends on the specific
circumstances of the investment and the stability of the external
environment. During this period the Group considers whether any
changes or events subsequent to the transaction would imply a
change in the fair value of the investment may be required; where
the Group considers that there is an indication that the fair value
has changed, an estimation is made of the required amount of any
adjustment from the last price of recent investment. Wherever
possible, this adjustment is based on objective data from the
investee company and the experience and judgement of the Group.
However any adjustment is, by its very nature, subjective. Where
deterioration in value has occurred, the Group reduces the carrying
value of the investment to reflect the estimated decrease. If there
is evidence of value creation, the Group may consider increasing
the carrying value of the investment. However, in the absence of
additional financing rounds or profit generation it can be
difficult to determine the value that a purchaser may place on
positive developments given the potential outcome and the costs and
risks to achieving that outcome. This is a critical accounting
judgement as set out in note 20;
-- factors which the Group considers include, inter alia,
technical measures such as product development phases and patent
approvals, financial measures such as cash burn rate and
profitability expectations, and market and sales measures such as
testing phases, product launches and market introduction; and
-- where the equity structure of a portfolio company involves
different class rights in a sale or liquidity event, the Group
takes these different rights into account when forming a view of
the value of its investment
Appendix B
The Directors
Touchstone Innovations plc
7 Air St,
Soho,
London
W1B 5AD
J.P. Morgan Limited
25 Bank Street
London
E14 5JP
14 July 2017
Dear Sirs
We report on the net portfolio value at 30 June 2017 (the "Net
Portfolio Value") as set out in the trading statement (the "Trading
Statement") issued by the directors of Touchstone Innovations plc
("the Company") dated 14 July 2017. The report is required by Rule
29.1 of The City Code on Takeovers and Mergers (the "City Code")
and is given for the purpose of complying with that requirement and
for no other purpose.
Save for any responsibility that we may have to those persons to
whom this report is addressed, to the fullest extent permitted by
law we do not assume any responsibility and will not accept any
liability to any other person for any loss suffered by any such
person as a result of, arising out of, or in connection with, this
report or our statement, required by and given solely for the
purposes of complying with Rule 23.2 of the City Code, consenting
to its inclusion in the Trading Statement.
Accordingly, we assume no responsibility in respect of this
report to IP Group plc (the "Offeror") or any person connected to,
or acting in concert with, the Offeror or to any other person who
is seeking or may in future seek to acquire control of the Company
or to any other person connected to, or acting in concert with,
such a person.
Responsibilities
The directors of the Company have prepared the Net Portfolio
Value in accordance with International Private Equity and Venture
Capital Valuation Guidelines and are solely responsible for the
estimate.
It is our responsibility to form an opinion as required by the
City Code to support the Net Portfolio Value prepared by the
directors of the Company.
Basis of opinion
We conducted our work in accordance with Standards for
Investment Reporting 1000 issued by the Auditing Practices Board in
the United Kingdom. Our work included an assessment of evidence
relevant to the amounts and disclosures in the Net Portfolio Value.
It also included an assessment of whether the accounting policies
are consistently applied and adequately disclosed.
We planned and performed our work so as to obtain all the
information and explanations which we considered necessary in order
to provide our opinion.
Our work has not been carried out in accordance with auditing or
other standards and accordingly should not be relied upon as if it
had been carried out in accordance with those standards and
practices.
In carrying out our work we have:
-- reviewed the work papers prepared by the Company;
-- considered the basis of value and assumptions used;
-- made enquiries of the Company;
-- where necessary, considered supporting evidence obtained by
the Company or from public sources; and,
-- assessed whether the accounting policies adopted by the
Company, as set out in the Trading Statement, have been
applied.
The review was limited to the information provided by the
Company.
We note the Directors' statement regarding the tax impact of the
Net Portfolio Value.
Opinion
In our opinion, the Net Portfolio Value as at 30 June 2017:
-- has been properly compiled and fairly presented on a basis
consistent with the accounting policies adopted by the Company and,
in the case of unquoted investments, in accordance with the
guidelines set out by the International Private Equity and Venture
Capital Valuation Board; and
-- has been prepared after due care and consideration.
On the basis of our review, we are not aware of any material
modifications that should be made to the Net Portfolio Value as
presented for the Company as at 30 June 2017.
Limitations
Our review was substantially less in scope than an audit
performed in accordance with International Financial Reporting
Standards and therefore provides a lower level of assurance than an
audit. Accordingly we do not express an audit opinion on the Net
Portfolio Value.
Consent
Deloitte LLP has given and not withdrawn its consent for the
inclusion of this letter in the Trading Statement.
Yours faithfully,
Deloitte LLP
Deloitte LLP is a limited liability partnership registered in
England and Wales with registered number OC303675 and
its registered office at 2 New Street Square, London EC4A 3BZ,
United Kingdom.
Deloitte LLP is the United Kingdom member firm of Deloitte
Touche Tohmatsu Limited ("DTTL"), a UK private
company limited by guarantee, whose member firms are legally
separate and independent entities. Please see
www.deloitte.co.uk/about for a detailed description of the legal
structure of DTTL and its member firms.
Member of Deloitte Touche Tohmatsu Limited
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