Tern PLC (TERN)
Tern PLC: (AIM: TERN) Unaudited Interim Results for the six months to 30
June 2020
21-Sep-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
21 September 2020
Tern Plc
(AIM: TERN)
Unaudited Interim Results for the six months to 30 June 2020
Tern Plc ("Tern" or the "Company"), the AIM quoted investment company
specialising in the Internet of Things ("IoT") market, is pleased to
announce its interim results for the six months to 30 June 2020.
Key Highlights
6 months to 6 12
months months
to to
30 June 2020
30 June 31
2019 Decembe
GBP r 2019
GBP
GBP
Net assets 19,900,647 17,478, 18,913,
283 077
Current assets 961,566 2,153,0 1,182,4
71 51
Total assets 20,089,782 17,946, 19,065,
668 111
Profit/(Loss) for the period 142,474 (623,34 (780,64
0) 3)
Net asset value per share 7.0p 6.9p 7.0p
· The period-on-period increase in turnover of principal portfolio
companies1 in six months to 30 June 2020 was 62% (year-on-year increase in
the 2019 full year: 27%), a particularly pleasing result given the impact
COVID-19 had on the economy during this time.
· An exchange rate gain on the revaluation of the investment in Device
Authority led to a GBP0.7m increase in fair value, delivering a profit for
the period. In the six months to 30 June 2019, there was no material
exchange rate impact.
· The period-on-period increase in the number of employees within the
principal portfolio companies1, a key growth measurement, increased by 7%
in the six month period to 30 June 2020 (six months ended 30 June 2019:
9%).
· Net asset value per share at 30 June 2020 of 7.0p was unchanged during
the period.
· A sale of Seal Software was achieved, one of Tern's early minority
investments with a holding of less than 1%. Tern invested GBP50,000 in Seal
Software and achieved an exit of 99% return on invested capital.
· GBP0.8 million raised during the period, strengthening the balance sheet
and improving Tern's investment options. Of this, GBP0.5 million was
re-invested in existing portfolio companies. As at 30 June 2020, Tern had
GBP0.8 million cash on the balance sheet. This was further increased by a
post balance sheet fundraise of GBP1.5 million in July 2020.
· Cost management continued to be a central focus with operating costs for
the period similar to the comparable period in 2019.
Al Sisto, CEO of Tern Plc, said:
"We recognise the challenges created by the pandemic, but we also see the
opportunities. Early in the year, we acted quickly to minimise the potential
disruption presented by the COVID-19 virus. First, we acted to protect our
employee base, whose safety and wellbeing are critical to our portfolio's
success and second, we ensured we and our companies created plans to
safeguard and preserve the capital needed to maintain momentum. Despite the
restrictions established to contain the spread of the virus, our portfolio
has remained operational and given its IoT focus, is well positioned to
participate in the acceleration towards a contactless digital work and
business environment. Looking forward we are confident in making at least
one new investment during the second half of 2020 and are focused on
achieving at least one further syndicated investment event by the end of Q1
2021.
Our portfolio companies have solidified their leadership positions during
the first six months of the year and we at Tern are aggressively seeking the
very best IoT technology companies which can provide compelling solutions to
the healthcare and industrial sectors in order to grow our NAV per share."
Note 1: Principal portfolio company growth excludes Push Technology, in
which Tern has a <1% holding and minimal influence.
Enquiries:
Tern Plc via Newgate
Albert Sisto/Sarah Payne
Allenby Capital Limited Tel: 020 3328
5656
(Nomad and broker)
David Worlidge/Alex Brearley (Corporate
Finance)
Guy McDougall (Equity Sales)
Newgate Communications Tel: 020 7382
4730
Elisabeth Cowell/Megan Kovach
Chief Executive's Statement
Building on the momentum created in 2019, Tern has experienced a strong
start to the year, despite the current unprecedented times. In 2019 we added
to our investment team which has given us more capacity to simultaneously
increase our focus on the existing portfolio and expand the quality and
depth of our pipeline.
Our progress for the first half of the year shows that our portfolio is
comprised of some of what we believe to be the most exciting private
technology companies in the UK and, while the COVID-19 pandemic has clearly
affected many companies around the world, we firmly expect that novel and
disruptive technology will play an important role in the global recovery.
Right from the start of the pandemic, Tern formed a crisis management team
comprised of the CEOs of our portfolio companies and the Tern Board, with an
objective of sharing ideas and experiences to assist in navigating through
the crisis. Weekly meetings were held to bring forward the lessons learned
as the pandemic unfolded and to adopt strategies on employee wellbeing,
business agility and to leverage the synergies within the portfolio
companies' businesses themselves. These meetings enabled the portfolio
companies to quickly adapt to the new challenges and, most importantly,
opportunities presented by the COVID-19 crisis.
Our portfolio companies are leaders in their targeted markets. They are
capable of being on the frontline, leading the recovery, given their
expertise in the secure and remote management of devices and services, and
the delivery of innovative virtual-environment training. These are all areas
which are in increasing demand because of the changes made to enterprise,
public sector and government work environments around the world.
Our "hands-on" approach to working with entrepreneurs as they set out to
drive growth in their businesses is focused on providing our shareholders
with long-term NAV growth per share.
By backing companies from their post product development lifecycle phase,
from their seed funding to Series A rounds, we gain affordable access to
high growth companies targeting large markets but with reduced product risk.
By way of example, the step up in FundamentalVR's valuation at the end of
2019 highlighted how we are well positioned to scale up the value of our
investment capital.
New portfolio company investments
Tern is focused on carefully growing its portfolio to continue providing our
shareholders with exposure to bold and disruptive early-stage IoT companies.
We target businesses which have synergies with our existing base of
best-in-class investee companies, both in terms of their target markets
(healthcare and industrial) and technology type. This creates a highly
productive ecosystem for growth.
With the additional Director added in 2019 we have increased both the
quality and size of our pipeline. We are seeking IoT companies with
technologies centered on Artificial Intelligence ("AI"), Machine Learning
("ML") and Data Sciences, which we believe will add strength and resources
to our existing investments and lead to an acceleration of NAV growth for
our shareholders. Each of these markets are rapidly increasing in size and
importance in the deployment of IoT solutions.
Follow on portfolio investments and support
During the first six months of the year, we were pleased to announce a
realisation from our investment into Seal Software, with its sale to
DocuSign. Seal was a minority investment made by the Company at its
formation. The exit achieved a 99% return on invested capital and a cash
contribution to the Company of GBP0.1 million.
Having raised GBP0.8 million in March 2020, we were well positioned to support
and enable the continued growth of our portfolio companies during a
challenging period. We delivered follow on investments amounting to GBP0.5
million, by participating in funding rounds directly or with other
shareholders and provided hands-on support to help our portfolio companies
scale in their respective markets and secure new partnerships.
For example, the Company provided Wyld Networks with an additional
convertible loan of GBP0.3 million which enabled it to continue its commercial
progress and helped secure additional external investment of GBP0.4 million.
Tern, along with Alsop Louie Partners and the Samenuk Family Trust, also
continued with our convertible loan note support of Device Authority during
the period, with the Company providing an additional GBP0.2 million in capital
during the period. This enabled Device Authority to continue its partner and
customer development activities, which now includes an expanded list of new
customers, as it pursues a strategic partner to help leverage its market
successes.
Tern later raised an additional GBP1.5 million in new capital (before
expenses) post period end, with the target of prudently putting a proportion
of this additional capital to work in at least one new investment by the
year end.
Environmental, Social and Governance ("ESG")
The Tern Board is committed to conducting its investment and business
activities in line with best practice ESG principles. We are enhancing our
investment strategy to include ESG criteria and portfolio company
scorecards. We are also reviewing our internal policies to ensure they are
inclusive and comprehensive, for example, this included an annual Board
Performance Review which was completed in August 2020.
Financial Priorities
Our financial priorities remain to accelerate the progress of our portfolio
companies' commercial success; value creation; create robust realisations
and the addition of new investments by:
· Investing in and creating businesses which have market validation and
disruptive market opportunities;
· Providing hands-on support to achieve sustainable value creation;
· Making introductions which help our companies achieve global scale and a
presence particularly in the USA;
· Syndication of post-seed round investments in our companies, focusing on
relevant strategic and financial investors, to provide validation, and
additional growth capital that de-risks the path to commercial success and
monetisation;
· Strengthening management and boards where appropriate; and
· Continuing to explore innovative ways to expand the synergistic benefits
of our portfolio.
Outlook
We believe that the current world situation is accelerating the adoption of
technology across our portfolio's key markets. This belief is underpinned by
the range of new partnerships and contracts delivered by our portfolio
companies during this time. Of course, we must remain cognisant of the wider
uncertainty and regulatory changes being implemented on the back of the
pandemic, but the agility of our portfolio companies is a clear strength
when it comes to managing this.
We have already announced our intention to make at least one new investment
during the second half of 2020 and we feel confident in achieving at least
one further syndicated investment event by the end of Q1 2021. We have a
strong pipeline of new opportunities and are experiencing third party
interests in our existing portfolio.
For the remainder of the year, we will continue to support our investee
companies as they pursue new opportunities and adapt to the challenges
presented by the pandemic. We will continue to work actively to help our
investee businesses grow in order to mitigate risk and increase NAV per
share for our stakeholders.
I would like to extend our thanks to the management teams of our portfolio
companies whose dedication to business health and employee wellbeing has
provided continuity and strategic leadership in this time.
Al Sisto
Chief Executive Officer
Financial
During these unprecedented times, the Company has monitored costs closely
with continued Director salary reductions and mitigation activities in the
principal portfolio companies, primarily salary reductions and some limited
use of furlough schemes, where relevant. It has also supported its portfolio
companies in applying for Innovate UK grants, where applicable, to support
their ongoing innovative projects. Wyld Networks has successfully secured
such a grant and InVMA has secured funding from the Future Fund post period
end.
Tern had an unaudited cash balance of GBP0.8 million on 30 June 2020, which
has been strengthened by the net proceeds of the GBP1.5 million subscription
announced in July 2020. The period-on-period increase in turnover of the
principal portfolio companies1 for the first six months of 2020 was 62%
(year-on-year increase in the 2019 full year: 27%). The Directors view this
as a positive result given the slow down across the economy during this
period.
We expect for the aggregate turnover of the principal portfolio companies1
to increase year-on-year for the full 2020 financial year compared to 2019,
however with the uncertainties created by COVID-19 and the fluidity of
COVID-19 government requirements it is currently not possible to issue a
sufficiently reliable and specific new forecast for the 2020 increase.
The period-on-period increase in employees within the principal portfolio
companies1, a key growth measurement, increased by 7% in the six months to
June 2020 (six months ended 30 June 2019: 9%). This measure has been
impacted in the latter half of the period by a slowdown in recruitment to
ensure prudent management through the COVID-19 period.
During the six months ended 30 June 2020, Tern raised GBP0.8 million in March
2020 and provided ongoing support to its underlying portfolio base,
investing GBP0.5 million via loan note facilities to provide capital for these
entrepreneurial companies to enable them to continue to grow and develop
within their focused markets. The fair value of the portfolio increased by
GBP0.7 million following a weakening of the pound against the dollar which led
to an increase in the Sterling value of Device Authority which is valued in
US Dollars. Cost management continues to be a focus for the Company.
Operating costs were broadly stable during the six months compared to the
six months to 30 June 2019. A reduction in one-off non-recurring legal and
professional costs was offset by an increase in share based payment costs
and in Directors' fees, which was in part due to the appointment of a new
Executive Director. This increase was mitigated by a 20% salary reduction
taken by all Directors from April 2020 because of the uncertainty caused by
COVID-19.
In March 2020 the Company announced the sale of Seal Software, one of its
early minority investments with a holding of less than 1%. Tern invested
GBP50,000 in Seal Software and following completion, achieved an exit of 99%
return on invested capital.
The net asset value per share of 7.0p as at 30 June 2020 was relatively
stable compared to 6.9p at 30 June 2019 and 7.0p at 31 December 2019.
Sarah Payne
Chief Financial Officer
Note 1: Principal portfolio company growth excludes Push Technology, in
which Tern has a <1% holding and minimal influence.
Portfolio Review
Device Authority Limited ("Device Authority")
Valuation of holding: GBP13.8 million
Holding: 56.8%
Sector: Security
Invested Since: September 2014
Device Authority is a global leader in Identity and Access Management
("IAM") for the IoT, focused on medical / healthcare, industrial, automotive
and smart connected devices. Their KeyScaler(TM) platform provides trust for
IoT devices and the IoT ecosystem, to address the challenges of securing the
Internet of Things.
The recent demand for remote working and technologies has reinforced the
importance of having robust and secure devices, for example telemedicine and
remote monitoring devices in the healthcare industry. Device Authority's
KeyScaler(TM) platform can provide security and privacy solutions for these
remote IoT devices.
In early 2020, Device Authority developed its hardware security module (HSM)
Access Controller to help Enterprises protect their critical HSM
infrastructure. This offers organisations an out-of-the-box solution which
requires minimal integration effort from their internal teams. Device
Authority also announced its secure code signing and update delivery service
with Venafi.
In late March, Device Authority announced the launch of KeyScaler(TM) as a
Service ("KSaaS") hosted in Microsoft Azure Cloud and four essential
connectors to Microsoft Azure's IoT Edge, IoT Central, Azure Key Vault and
Active Directory Certificate Services ("ADCS") products. These new Azure
connectors are in addition to Azure IoT Hub, Device Provisioning Service
("DPS") and Event Hub connectors that are already part of the KeyScaler(TM)
platform. Soon afterwards, Device Authority was recognised as an Early-Stage
Medical Device Security Vendor in Forrester's report on medical device
security: New Tech: Medical Device Security Q1 2020.
In June 2020 Device Authority announced the availability of KeyScaler(TM) in
the Microsoft Azure Marketplace [1], an online store providing applications
and services for use on Azure. The marketplace significantly expands Device
Authority's sales channel as it lets customers worldwide discover, try, and
deploy KeyScaler(TM) solutions that are certified and optimized to run on
Azure. The company has also secured contract renewals via key channel
partners and their customers during the period, including a contract to
provide security services to a leading international automotive design and
manufacturing company in conjunction with its use of the Azure platform.
In recent months, Device Authority continues to gain industry recognition,
being identified as the 2020 technology leader in the SPARK Matrix analysis
of the global IoT Identity and Access Management (IoT IAM) market by
Quadrant Knowledge Solutions. Device Authority also continues to protect its
intellectual property, securing the UK trademark for KeyScaler(TM) in August
2020.
Device Authority's shareholders continue to support the ongoing progress of
the company, having provided a total of US$5.4 million in the form of
convertible loan notes since November 2017, with US$3.6 million of this
being provided by Tern (US$0.3 million in the six months to 30 June 2020).
As at 30 June 2020, the value of Tern's shareholding in Device Authority has
increased to GBP13.8 million (31 December 2019: GBP12.7 million), primarily due
to a weakening of the pound against the dollar which led to an increase in
the Sterling value of Device Authority which is valued in US Dollars.
The annual report and accounts for Device Authority for the year ended 31
December 2019 are expected to be submitted to Companies House shortly.
FVRVS Limited ('Fundamental VR')
Valuation of holding: GBP3 million
Holding: 26.9%
Sector: Healthcare IoT
Invested Since: May 2018
FundamentalVR is a dynamic technology and data insight business specialising
in the intersection between immersive experiences and haptics, to enhance
medical training and outcomes. It fits with Tern's strategy to invest in
companies targeting the healthcare IoT market.
FundamentalVR continues to work with its customers to complete the
simulations that they need to deliver their medical device and pharma-based
products. Its virtual reality-based platform can keep the learner safe from
unnecessary potential exposure to COVID-19, provide an endless supply of
virtual patients and measure the performance of the healthcare professional
in achieving the necessary operational skill levels, helping to create a
more agile healthcare workforce.
In April 2020, FundamentalVR announced the expansion of the Fundamental
Surgery [2] platform, with the addition of a new education modality @HomeVR.
In these current times, where rapid learning and remote access has never
been more relevant, this has enabled health care professionals to prepare to
use new equipment and undertake new procedures. FundamentalVR's multiuser
support enables its enterprise customers to provide virtual master classes
to accelerate the adoption of new products and procedures. This ability to
access training remotely worldwide via the cloud enables collaboration in a
virtual operating room or clinic with no requirement for physical presence.
In the current COVID-19 environment, FundamentalVR's shared virtual setting
also improves the overall communication process among surgeons and trainees.
This was evidenced in a real world setting when the team at FundamentalVR
designed and launched an online training tool that could quickly teach
nurses and doctors how to operate ventilators. The new online tool,
developed by Imperial College London, Imperial College Healthcare NHS Trust
and FundamentalVR, allows the redeployed clinicians to gain the key
knowledge they need for ventilating patients in just 30 minutes.
In June 2020, FundamentalVR achieved another important milestone when all
the orthopaedic education simulations available on the Fundamental Surgery
platform were reviewed by the American Academy of Orthopaedic Surgeons
(AAOS) and awarded accreditation status. This recognition demonstrates the
AAOS's commitment to innovation in medical education and will allow
orthopaedic surgeons to collect continuing medical education (CME) credits
while utilising the unique cutting-edge haptic FundamentalVR platform. This
was followed in July 2020 by the company receiving centre accreditation from
the Royal College of Surgeons of England. This kite mark of quality has been
adopted by many leading organisations that develop world-class surgical
education courses, solutions and platforms.
During the first half of 2020, FundamentalVR continued to gain industry
recognition with the award of first place in Hit Consultants Top 18
Healthcare Augmented Reality and Virtual Reality companies to watch. More
recently, the @HomeVR modality was selected as a finalist in the VR Awards.
The annual report and accounts for FundamentalVR for the year ended 31
December 2019 are expected to be submitted to Companies House shortly.
Wyld Networks Limited ("Wyld Networks")
Valuation of holding: GBP1.2 million
Holding: 100%
Sector: IoT enablement
Invested Since: June 2016
Wyld Networks provides secure, intelligent and scalable mobile mesh networks
and Low Power Wide Area Network (LPWAN) software and modules connecting both
smartphones and IoT devices together without the need for WiFi or cellular
networks.
In May 2020 it secured GBP0.4 million of convertible loan note investment to
support its growing pipeline of opportunities in mobile mesh networks and
wireless IoT connectivity [3].
Wyld Networks' mesh technology was originally designed for applications such
as major sporting events, music festivals, retail centres and transport hubs
to deliver relevant, location-aware information. In March 2020 the team
focused on repurposing its technology to support the COVID-19 efforts
earlier in the year to enable it to play a vital role in protecting
residents, staff and visitors in care homes and hospitals as well as helping
business and education get back to work safely.
In May 2020, Wyld Networks announced that it had signed an agreement with
Highland Health Ventures Ltd [4] (HHVL) to test and deploy its Wyld mesh
technology into certain care homes in Scotland to help protect residents,
staff and visitors, and prevent the spread of COVID-19 or other viruses.
This was recently confirmed to be due to commence in a care home in
Inverness in October 2020. The patented solution connects smartphones
directly to smartphones, without the need for WiFi or cellular connectivity,
to create an infrastructure-lite wireless mesh communication network, as
well as provide social distance monitoring and alerting. HHVL is an
independent company with a Collaboration Agreement with NHS Highland [5] for
the purpose of developing innovations in healthcare.
Continuing its commercial traction, Wyld Networks also announced it had
signed an agreement with a global satellite operator to co-develop, test and
co-market a LoraWAN direct to satellite solution that is intended to bring
the cost of satellite IoT services in line with terrestrial based IoT
solutions, aimed at opening up a new frontier in the deployment of IoT
solutions. In September 2020 it was announced that an initial GBP0.1m purchase
order had been received for the test phase as part of this agreement to
develop and deliver a small number of proprietary-designed Low Power Wide
Area Network ("LPWAN") IoT modems to be functionally tested with a
pre-commercial low earth orbiting ("LEO") satellite. The Tern Board believes
that, following successful testing, a full deployment of this technology
with a LEO satellite constellation could follow.
Wyld Networks continues to deliver solutions against its existing contracts
with Delta-T, Develco, RCD, CADIS, Eltek and Envirosystems.
More recently, Wyld Networks announced the launch of Wyld Mesh and Fusion,
its innovative mobile mesh networking technology, data curation and content
delivery platform. Wyld Mesh and Fusion provides businesses with an
innovative way to generate new revenue streams, operate more efficiently,
get back to work safely and monitor social distancing practices. Wyld Mesh
harnesses the power of mobile devices to create wireless mesh communication
networks with applications in enterprise, healthcare, retail, education,
events and industry.
Wyld Networks also successfully filed a patent application for its
disruptive mesh (Wyld Mesh) and data curation (Wyld Fusion) technology
platform to protect its IP and further establish value.
Tern continues to support the growth of the business with an additional loan
of GBP0.3 million provided during the period, bringing the outstanding
convertible loan balance to GBP1.1 million as at 30 June 2020.
The annual report and accounts for Wyld Networks for the year ended 31
December 2019 are expected to be submitted to Companies House shortly.
InVMA Limited ("InVMA")
Valuation of holding: GBP1 million
Holding: 50%
Sector: IoT enablement
Invested Since: September 2017
InVMA is an Industrial Internet of Things (IIoT) software solutions company
enabling their customers to digitally improve performance using real-time
analytics and predictive intelligence. InVMA empowers industrial and
manufacturing companies by converging their physical assets with new
transformational digital insights, enabling customers to reduce internal
operating costs and downtime risk, while creating new revenue streams
through remote monitoring and management. InVMA has recently announced the
appointment of a new CEO, Peter Stephens, to help finalise the
transformation of the business to a SaaS based software products company,
which was coupled with a GBP0.25 million investment from Tern and the Future
Fund.
A significant milestone in InVMA's product transformation was achieved in
January 2020 when it was announced that the company had secured an initial
order commitment worth GBP817,000 over a two-year period to provide their
AssetMinder(R) SAAS IIoT solution to a global, multi-billion Euro revenue
supplier to the industrial and construction sectors. This was achieved as a
result of the re-positioning of InVMA from a consultancy services to a
Software as a Service (SaaS) product business, in which Tern has been
instrumental.
Although COVID-19 has had a material impact on the industrial sector,
interest in remote monitoring remains a key growth area for development as
manufacturers increase efficiencies using machine learning and connected
devices. InVMA has carefully managed demand for their services and products
while effectively utilising government furlough support where required. Over
this period InVMA has continued to focus on the growth of its AssetMinder(R)
SaaS product supported by a rapidly evolving market where the Directors
believe that remote monitoring has moved to the forefront of industrial and
manufacturing agendas. AssetMinder(R) is a unique customisable platform for
a wide variety of assets as it enables its customers to remotely collect,
aggregate and monitor real-time data on their specific assets, devices and
equipment; providing analytics and predictive insights that drive
intelligence-based decisions for individual machines, entire manufacturing
lines, and across a portfolio of facilities. Tern's Directors believe that
InVMA has the potential to be the go to SAAS platform for smart
manufacturing and machine condition monitoring.
In June 2020, InVMA announced that it had signed a partnership agreement
with Senseye [6] Limited, the Industry 4.0 software company using
machine-learning algorithms for predictive maintenance. This partnership
enables customers to more easily, and cost-effectively, capture and share
their shop-floor and machine performance data, driving better predictive
maintenance insights on assets using proprietary machine-learning algorithms
that automatically forecast machine failure and remaining useful life. This
seamless capability means that companies at any stage of IoT maturity can
leverage advanced machine learning intelligence to improve shop floor
productivity, product quality and to proactively reduce manufacturing
downtime.
Tern had an outstanding convertible loan balance of GBP50,000 with InVMA as at
30 June 2020, this increased by a further GBP125,000 post period end, with
Tern's investment being accompanied by GBP125,000 of convertible loan
investment from the Future Fund.
The annual report and accounts for InVMA for the year ended 31 December 2019
are expected to be submitted to Companies House shortly.
Push Technology Limited ("Push Technology")
Valuation of holding: GBP34,205
Holding: <1%
Sector: Data distribution
Invested since: July 2014
Push Technology, a company in which Tern holds less than 1%, secured GBP10m of
Series A funding in April 2020, led by Maven Capital Partners. It was
reported that the company has begun the year strongly, benefitting from
market momentum building as the use of web and mobile devices to access
global busines systems grows.
For organisations worldwide, Push Technology's software product, Diffusion,
powers the real-time applications and systems critical to their business
expansion, revenue growth, and optimal ongoing business operations.
Diffusion simplifies and speeds development, deployment, and scaling of
customers' systems, providing peace of mind that data is securely managed
and efficiently delivered in real-time.
Unaudited Income Statement and Statement of Comprehensive Income
For the six months ended 30 June 2020
Notes 6 months to 6 months to 12 months
30 June 30 June to 31
2020 2019 December
2019
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
Fee income 42,076 51,965 124,766
Movement in fair 9 736,470 11,724 293,756
value of
investments
Total investment 778,546 63,689 418,522
income
Administration (632,644) (494,028) (1,028,60
costs 5)
(95,857) (192,718)
Other Expenses (245,414)
Operating 50,045 (623,057) (855,497)
profit/(loss
)
Finance 92,429 1,943 74,854
income
Finance - (2,226) -
costs
Profit/(loss) 142,474 (623,340) (780,643)
before tax
Tax - - -
Profit/(Loss) and 142,474 (623,340) (780,643)
total comprehensive
income/(loss) for
the period
Earnings per share 8
Basic and diluted 0.1p (0.3)p (0.3)p
earnings/(loss) per
share
Unaudited Statement of Financial Position
As at 30 June 2020
30 June 30 June 31
December
2019
2020 2019
(Unaudited) (Unaudited) (Audited)
Note GBP GBP GBP
Assets
Non-current
assets
Investments 9 19,128,216 15,793,597 17,882,66
0
19,128,216 15,793,597 17,882,66
0
Current
assets
Trade and 172,024 780,347 174,486
other
receivables
Cash and 789,542 1,372,724 1,007,965
cash
equivalents
961,566 2,153,071 1,182,451
Total assets 20,089,782 17,946,668 19,065,11
1
Equity and
liabilities
Share 10 1,358,238 1,352,433 1,355,571
capital
Share 23,335,580 21,006,754 22,578,61
premium 9
Retained (4,793,171) (4,880,904) (5,021,11
earnings 3)
19,900,647 17,478,283 18,913,07
7
Current
liabilities
Trade and 189,135 468,385 152,034
other
payables
Total 189,135 468,385 152,034
liabilities
Total equity 20,089,782 17,946,668 19,065,11
and 1
liabilities
Unaudited Statement of Changes in Equity
For the six months ended 30 June 2020
Share Share Retained Total
capital premium earnings equity
GBP GBP GBP GBP
Balance at 31 1,348,903 19,660,434 (4,257,564) 16,751,773
December 2018
Total comprehensive - - (623,340) (623,340)
income
Transactions with
owners
Issue of share 3,530 1,496,470 - 1,500,000
capital
Share issue costs - (150,150) - (150,150)
Balance at 30 June 1,352,433 21,006,754 (4,880,904) 17,478,283
2019
Total comprehensive - - (157,303) (157,303)
income
Transactions with
owners
Issue of share 3,138 1,746,865 - 1,750,003
capital
Share issue costs - (175,000) - (175,000)
Share based payment - - 17,094 17,094
charge
Balance at 31 1,355,571 22,578,619 (5,021,113) 18,913,077
December 2019
Total comprehensive - - 142,474 142,474
income
Transactions with
owners
Issue of share 2,667 797,333 - 800,000
capital
Share issue costs - (40,372) - (40,372)
Share based payment - - 85,468 85,468
charge
Balance at 30 June 1,358,238 23,335,580 (4,793,171) 19,900,647
2020
Unaudited Statement of Cash Flows
For the six months ended 30 June 2020
6 months to 30 6 months to 30 12 months to
June 2020 June 2019 31 December
2019
(Unaudited) (Unaudited) (Audited)
Note GBP GBP GBP
OPERATING
ACTIVITIES
Net cash 11 (554,777) (521,944) (1,337,878)
used in
operations
Purchase of (517,221) (925,634) (1,808,034)
investments
Loan to - (445,292) (688,332)
investee
companies
Cash 92,864 - -
received
from sale of
investments
Interest 1,083 1,943 3,555
received
Net cash (978,051) (1,890,927) (3,830,689)
used in
operating
activities
FINANCING
ACTIVITIES
Proceeds on 800,000 1,500,000 3,250,003
issue of
shares
Share issue (40,372) (150,150) (325,150)
expenses
Net cash 759,628 1,349,850 2,924,853
from
financing
activities
Decrease in (218,423) (541,077) (905,836)
cash and
cash
equivalents
Cash and
cash
equivalents
at beginning
of period 1,007,965 1,913,801 1,913,801
Cash and 789,542 1,372,724 1,007,965
cash
equivalents
at end of
period
Notes to the Unaudited Interim Statements
For the six months ended 30 June 2020
1) General information
Tern plc is an investing company specialising in private software companies,
predominantly in the Internet of Things sector.
The Company is a public limited company, incorporated in England and Wales,
with its ordinary shares traded on AIM, a market of that name operated by
the London 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 statements of Tern Plc have been prepared in
accordance with IAS 34, Interim Financial Reporting, as adopted by the
European Union (EU). They do not include all of the information required for
full annual financial statements and should be read in conjunction with Tern
plc's audited financial statements for the year ended 31 December 2019. The
financial information for the year ended 31 December 2019 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 2019 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 and drew attention by way of emphasis to the impact of COVID-19 on
the Company. 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. The post period end fundraise and the impact of
COVID-19 has been considered as part of the Directors' assessment.
4) Investments
The investment valuation consists of equity investments and convertible loan
notes.
In accordance with IFRS 10, para 4, investments are recognised at FVTPL in
line with guidance set out in IFRS 9. Changes in foreign exchange rates
impact investments valued in a foreign currency.
5) Convertible Loans
Financial assets
Convertible loans provided to investment companies are evaluated with
reference to IFRS 9. The convertible loan facility issued to Device
Authority is a financial asset with multiple embedded derivatives and a
warrant instrument. The convertible loan facilities issued to InVMA and Wyld
Networks are financial assets with multiple embedded derivatives. IFRS 9
permits the entire contract for both loans to be designated at FVTPL.
6) Critical accounting judgements
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 estimates and assumptions 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 investments of GBP19.1 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
business, other valuation methods such as discounted cash flow analysis
assess estimates of future cash flows to 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.
The Company holds financial assets that have been held at FVTPL. The value
of the convertible loan note has been estimated by assessing the probability
of each possible redemption or conversion scenario and accounting for this
within the overall fair value assessment.
JUDGEMENTS
Investments held at FVTPL
The critical judgement that has a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year is the assessment that 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.
7) Segmental reporting
The accounting policy for identifying segments is based on internal
management reporting information that is regularly reviewed by the chief
operating decision maker, which is identified as the Board of Directors.
In identifying its operating segments, management generally follows the
Company's service lines which represent the main products and services
provided by the Company. The Directors believe that the Company's continuing
investment operations comprise one segment and therefore the figures
presented on the face of the income statement and statement of financial
position represent the segmental information.
8) Earnings/Loss per share
Earnings/(Loss) per share is calculated by reference to the weighted average
shares in issue as follows:
6 months to 6 months to 12 months to
30 June 2020 30 June 2019 31 December
2019
GBP
GBP GBP
Profit/(Loss) for the 142,474 (623,340)
purposes of basic and
fully diluted loss
per share
(780,643)
Weighted average Number Number Number
number of ordinary
shares (see note
below):
For calculation of 277,271,791 245,256,672 251,945,498
basic earnings/(loss)
per share
For calculation of 278,608,041 245,256,672 251,945,498
fully diluted
earnings/(loss) per
share
Earnings/(Loss) per
share
Basic and diluted 0.1p (0.3)p (0.3)p
earnings/(loss) per
share
The fully diluted loss per share for 2019 is the same as the basic loss per
share as the loss for the period has an anti-dilutive effect on earnings per
share.
9) Investments
30 June 30 June 31 December
2020 2019 2019
GBP GBP GBP
Fair value of 17,882,660 14,856,239 14,856,239
investments brought
forward
Reclassification of cash - - 165,000
flow loans from other
debtors
Interest accrued on 91,346 - 71,299
convertible loan note
Additions 517,221 925,634 2,496,366
Disposals (99,481) - -
Cost of investments 18,391,746 15,781,873 17,588,904
carried forward
Fair value adjustment to 736,470 11,724 293,756
investments
Fair value of 19,128,216 15,793,597 17,882,660
investments carried
forward
Fair value of equity 10,808,679 8,034,875 10,196,240
investments
Fair value of 8,319,537 7,758,722 6,833,088
convertible loans
Fair value of cash flow - - 853,332
loans
Fair value of 19,128,216 15,793,597 17,882,660
investments
The convertible loan facility issued to Device Authority is a financial
liability 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. For the six months to 30 June 2020 the fair value increase was
GBP0.7 million (30 June 2019: GBPnil). The convertible loan note has been
secured with a charge over Device Authority's intellectual property.
The cash flow loan issued to Wyld Networks was converted into a secured
convertible loan note in May 2020. It is a financial liability and the
entire contract has been designated at FVTPL, with any movement in fair
value taken to profit or loss for the year. The convertible loan note has
been secured with a charge over Wyld Network's intellectual property.
10) Issued share capital
30 June 2020 30 June 2019 31 December 2019
Number Number Number
Issued and fully
paid:
Ordinary shares 283,352,376 254,323,945 270,019,045
of GBP0.0002
Deferred shares 42,247 42,247 42,247
of GBP29.999
Deferred shares 34,545,072 34,545,072 34,545,072
of GBP0.00099
GBP GBP GBP
Issued and fully
paid:
Ordinary shares 56,670 50,865 54,003
of GBP0.0002
Deferred shares 1,267,368 1,267,368 1,267,368
of GBP29.999
Deferred shares 34,200 34,200 34,200
of GBP0.00099
1,358,238 1,352,433 1,355,571
The deferred shares have no voting or dividend rights. The deferred shares
are not quoted on the AIM market of the London Stock Exchange.
During the period, Wyld Networks issued a GBP400,000 convertible loan note
("CLN") to an external party (the "CLN Holder") which includes a put option
on Tern shares. Under the terms of the convertible loan note, and following
a conversion event, any amount of the convertible loan note not converted
into Wyld shares will automatically be converted into fully paid ordinary
shares of 0.02 p each in the capital of Tern ("Tern Shares") at a 15%
discount to the market price of Tern Shares on AIM at market close on the
date of the conversion event. If a conversion event has not occurred by 6
May 2021 (the "Maturity Date"), then the CLN Holder has the option to elect
to convert all of the CLN into Tern Shares at a 15% discount to the five-day
average closing price of Tern Shares on AIM immediately prior to the
Maturity Date, or, failing such election, the maturity date of the CLN is to
be extended for one further year ("the Second Maturity Date"). If a
Conversion Event has not taken place by the Second Maturity Date, the CLN
will automatically convert into fully paid Tern Shares at a 15% discount to
the five-day average closing price of Tern Shares on AIM immediately prior
to the Second Maturity Date.
11) Cash flow from operations
6 months to 30 6 months to 30 12 months to
June 2020 June 2019 31 Dec 2019
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
Profit/(Loss) for 142,474 (623,340) (780,643)
the period
Adjustments for
items not
included in cash
flow:
Movement in fair (736,470) (11,724) (293,756)
value of
investments
Share-based 85,468 - 17,094
payment charge
Deferred cash on 6,617 - -
sale of
investment
Interest income (91,346) - (71,299)
accrued
Finance income (1,083) (1,943) (3,555)
Operating cash (594,340) (637,007) (1,132,159)
flows before
movements in
working capital
Adjustments for
changes in
working capital:
- 2,462 (95,875) (100,306)
Decrease/(increas
e) in trade and
other receivables
(excluding loan
to investee
companies)
- 37,101 210,938 (105,413)
Increase/(decreas
e) in trade and
other payables
Cash used in (554,777) (521,944) (1,337,878)
operations
12) Availability of interim results
Copies of this report will be available from the Company's website
www.ternplc.com [7].
ISIN: GB00BFPMV798
Category Code: IR
TIDM: TERN
LEI Code: 2138005F87SODHL9CQ36
Sequence No.: 84485
EQS News ID: 1133909
End of Announcement EQS News Service
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