13 Oct 2016 07:00
13 October 2016
Imperial Innovations Group plc
Year-end results
Imperial Innovations Group plc (AIM: IVO, "Innovations" or "the Group"), a leading technology commercialisation and investment group, has published its results for the year ended 31 July 2016.
Strategic developments
· UCL Technology Fund: committed £24.8 million to this fund alongside the European Investment Fund (EIF)
· Apollo Therapeutics: committed £3.3 million to the £40 million Joint Venture between Innovations, Cambridge Enterprise, UCL Business and AstraZeneca, GlaxoSmithKline and Johnson & Johnson
· Placing raised £100.0 million to strengthen the balance sheet
Highlights
· £69.9 million invested across 33 portfolio companies (2015: £60.8 million across 30)
o Rate of investment up 15% over previous year and more than double two years ago
o Reflects ambition and increasing maturity of portfolio companies
o 79% invested into existing portfolio companies
o Seven accelerated growth companies added to investment portfolio
· £206.4 million raised by portfolio companies in the year (2015: £479.9 million)
· Net portfolio value up to £335.1 million (2015: £327.2 million)
· Net assets £455.9 million (2015: £420.1 million)
· Pre-tax loss £63.1 million (2015 profit £15.1 million), includes £56.2 million net fair value loss:
o Quoted net fair value loss of £66.9 million (largely as a result of decline in Circassia share price)
o Unquoted net fair value gain of £10.7 million
· £198.3 million available to invest, including undrawn £50 million second loan facility from European Investment Bank (EIB) (2015: £178.1 million)
Post year-end
· Sale of Permasense to Emerson Electric for a total of £30.6 million plus up to a further £10.0 million depending on performance (Innovations share of Permasense on disposal was 22.7%)
· Two new companies added to the accelerated growth portfolio: Artios Pharma and ThisWay Global
· Crescendo Biologics signed multi-target collaboration and licence agreement with Takeda Pharmaceutical worth up to US $790 million subject to successful completion of milestones (Innovations share of Crescendo is 22.7%)
· New five year contract to run the incubator at the I-HUB, a new building at Imperial College London's White City Campus
Russ Cummings, Chief Executive of Imperial Innovations, said:
"Last year was one of further progress, the highlights of which can be summed up as comprising four major developments and one setback.
"We significantly increased our visibility of new investment opportunities and strengthened our position in our ecosystem with the elite universities within the 'Golden Triangle', with the completion of two new initiatives.
"The first was our £24.8 million participation in the new UCL Technology Fund. The second was our £3.3 million commitment to Apollo Therapeutics - a new £40 million Joint Venture between Cambridge Enterprise, UCLB, three of the world's leading pharma companies and us.
"Thirdly, we raised a further £100 million to strengthen our balance sheet which enables us to put more money to work in our unquoted portfolio.
"Our fourth key development was that many of our portfolio companies made significant technical, clinical or commercial progress and we once again increased our level of investment, including leading six major funding rounds.
"The outcome from Circassia's Phase III trial of its cat allergy product was disappointing, and this is the principal reason why our net assets only increased by £36 million to £456 million.
"We are continuing to see a healthy stream of new investment opportunities coming from the academic, research and entrepreneurial community within the 'Golden Triangle', as clearly demonstrated by the two new additions to our portfolio at the start of this new financial year."
Enquiries:
Imperial Innovations Group Plc | 020 3053 8834 |
Russell Cummings, Chief Executive Officer |
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Jon Davies, Director of Communications |
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Instinctif Partners | 020 7457 2020 |
Adrian Duffield/Melanie Toyne Sewell/Chantal Woolcock |
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J.P. Morgan Cazenove (Nominated Adviser) | 020 7742 4000 |
Michael Wentworth Stanley/Alec Pratt |
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Cenkos Securities | 020 7397 8900 |
Elizabeth Bowman/Steve Cox |
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About Imperial Innovations - www.imperialinnovations.co.uk
Imperial Innovations Group plc ("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 the licensing of intellectual property, 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 £440 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 agreed £80.0 million in loan facilities from the European Investment Bank (EIB).
Between Innovations' admission to AIM (August 2006) and 31 July 2016, Innovations has invested a total of £306.7 million across its portfolio companies, which have raised collectively investment of £1.5 billion.
Overview
The fundamentals of the Group's business remain very strong with many of Innovations' portfolio companies making significant technical, clinical and commercial progress during the year. There is also growing evidence of strong partnership interest in the portfolio, both from corporate venture investors (e.g. Johnson and Johnson Innovations, SR One, Roche Venture Fund and Robert Bosch) and industry (e.g. Bristol-Myers Squibb, Consort Medical, TSYS Inc and Sumitomo Chemical Co Limited) with the recently announced collaboration and licence agreement between Crescendo Biologics and Takeda Pharmaceuticals being a prime example.
Notable achievements included signing two new strategic partnerships to increase the Group's visibility of new investment opportunities and strengthening the balance sheet with a £100 million Placing. Innovations increased the level of investment in its portfolio once again, investing £69.9 million during the year, including leading six major funding rounds.
The result of Circassia's Phase III cat allergy trial in June 2016 was a setback, coming after the Phase II clinical data indicated a successful outcome. This led to a £54.8 million non-cash reduction in carrying value of Circassia and was the principal reason why the Group is reporting a post-tax loss of £63.1 million (2015 profit £15.1 million). However, the Group's strategy is to hold and develop an increasingly diversified portfolio of strong well-funded and well-managed portfolio companies, which reduces the impact of setbacks by individual companies.
Visibility of new investment opportunities from the academic, research and entrepreneurial community within the 'Golden Triangle' remains very high. The quality and experience of the team means its ability to identify potential stars is continually improving. Innovations has accelerated the development of some of its more recently formed companies; the £31.5 million Series A round for Inivata and the £19 million Series A round in Kesios being good examples.
The Group added seven new companies to its accelerated growth portfolio, once again taking a measured approach to growing the portfolio with a resolute focus on quality over quantity. Already the pipeline for FY17 is looking strong with two new companies (Artios Pharma and ThisWay Global) added to the accelerated growth portfolio in the first quarter of the new financial year.
As of 31 July 2016, the Group had total cash and short-term liquidity investments of £148.3 million (2015: £128.1 million) plus the second £50.0 million EIB loan facility that was undrawn at the year-end.
This balance sheet combined with the Group's policy of building strong investor syndicates, means it is in a strong position to create value for shareholders.
Broadening the Group's access to new IP
In January 2016, the Group completed two new initiatives aimed at expanding its licence portfolio and broadening its visibility of, and access to, intellectual property from the elite universities within the 'Golden Triangle'.
The first of these was the participation in the new UCL Technology Fund LP, the first investment fund that University College London has created to commercialise its multidisciplinary research.
Over the next five years this fund is expected to invest £50 million to support ideas from academics in life sciences and physical sciences, and will be used for early-stage proof of concept funding, licensing opportunities and the formation of new spin-out companies.
Innovations is a Limited Partner (LP) in the fund and has committed £24.8 million, matched by a commitment of the same amount from the European Investment Fund (EIF). Participation in the fund provides Innovations with visibility of potential intellectual property from across UCL's research base.
The fund's general partner, Albion Ventures, has obligations to offer co-investment opportunities to the LPs, to alert them to any projects that the fund chooses not to invest in, and to negotiate the right for LPs to take up pre-emption rights that the fund does not take up.
In addition to its £24.8 million commitment, Innovations expects to have opportunities to make direct investments into selected UCL Business plc (UCLB) spinouts to support its long term growth and value creation.
Participation significantly increases Innovations' access to deal-flow from one of the world's leading universities, and also provides a template for a new, collaborative model which could be replicated at other universities. The fund has started to make its first investments including providing Proof of Concept funding to a spin-out from the Department of Computer Science and backing for two early-stage therapeutics companies.
On 25 January 2016, Innovations committed £3.3 million to Apollo Therapeutics, a new £40 million joint venture between Innovations, Cambridge Enterprise (the Technology Transfer Office ('TTO') of the University of Cambridge), UCLB (the technology commercialisation company of UCL) and three of the world's leading pharma companies, AstraZeneca, GlaxoSmithKline and Johnson & Johnson.
This new venture is supporting the translation of outstanding academic therapeutic science into innovative new medicines by combining the skills of the university academics with industry expertise at an early stage. The ultimate aim is to speed up the development of new medicines, as well as reducing the cost and improving the attrition rate of potential opportunities, whilst sharing the risk of early development.
Over the initial six-year life of the Apollo venture, the three technology transfer offices will each contribute £3.3 million, while the three pharmaceutical companies will each contribute £10 million, as well as providing research and development expertise and resources to assist with the development of projects. In May 2016, Dr Richard Butt joined as CEO, bringing valuable experience in drug discovery and development following 20 years' experience with Pfizer.
Putting Innovations capital to work
Innovations continued to deploy its substantial capital resources into its investment portfolio, investing £69.9 million across 33 portfolio (2015: £60.8 million across 30 portfolio companies) up 15% on the prior year. This is more than double the level of just two years ago and reflects the ambition and increasing maturity of the Group's portfolio companies.
Of this, 79% (£55 million) was invested into existing portfolio companies, with the balance being invested in new companies added to the portfolio. The Group's portfolio companies raised a total of £206.4 million (2015: £479.9 million).
The Group added seven new unquoted accelerated growth companies. The Group is continuing to develop its investment portfolio by scaling its activities in non-therapeutics sectors.
Five of these seven new portfolio companies are in the ICT & Digital sector (Garrison Technology, Import.io, Telectic, WaveOptics and SAM Labs), one in the Group's Engineering & Materials sector (Silicon Microgravity) and one in Therapeutics (Precision Ocular).
The Group's accelerated growth portfolio now comprises 45 companies (2015: 39 companies) which collectively account for 99% of the portfolio by value.
Major funding rounds completed during the year
Portfolio Company | Funding round | Co-investors |
Kesios Therapeutics Limited | £19.0 million series A | SV Life Sciences, Abingworth
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Inivata Limited | £31.5 million Series A | Cambridge Innovation Capital, Johnson & Johnson Innovation, Woodford Patient Capital Trust |
MISSION Therapeutics | £60.0 million funding round | Woodford Patient Capital Trust plc, Sofinnova Partners, SR One, Roche Venture Fund and Pfizer Venture Investments |
Nexeon Limited | £30.0 million equity funding round | Invesco Asset Management, Woodford Investment Management LLP |
Precision Ocular Ltd | £15.5 million investment | Consort Medical plc, NeoMed, Hovione Scientia Limited |
Storm Therapeutics | £12.0 million Series A | Cambridge Innovation Capital, Merck Ventures BV and Pfizer Venture Investments |
Six portfolio companies completed major funding rounds. Collectively these companies: MISSION Therapeutics, Nexeon, Inivata, Kesios Therapeutics, Precision Ocular and Storm Therapeutics raised £168 million in total with Innovations investing £42.2 million.
The ability of these private companies to raise such substantial funding is a result of Innovations' proactive policy of building strong investor syndicates. This shows that the Group is not dependent upon the public markets to ensure that its portfolio companies grow with pace and ambition.
The calibre and breadth of co-investors is notable and includes strategic investors, specialist funds and financial investors. In addition to these major rounds, the Group completed investments into 20 other portfolio companies, including leading funding rounds in Featurespace (£6.2 million), Econic (£5 million), Abingdon Health (£3 million), Aqdot (£5 million) and Inflowmatix (£3 million).
In April 2016, the Group crystallised a net fair value gain of circa £1.4 million from the sale of its 16.4% interest in Stanmore Implants Worldwide. This was followed by the sale of two organic portfolio companies, Alkion Biopharma and Hark Health Solutions. Both of these companies were spin-outs from Imperial College London in which Innovations held equity as a result of the TTO providing early commercial support to the founders, as well as from licensing the founding IP.
The number of opportunities flowing through the pipeline from Imperial College London remains healthy. The Group reviewed 425 invention disclosures (2015: 386) and seven new Imperial spin-out companies were formed (2015: seven) joining the Group's organic growth portfolio. 39 licensing deals were signed (2015: 39) and 74 patents filed during the period.
Continuing momentum in the portfolio
Whilst the result of Circassia's cat allergy trial was a disappointment during the year, the Group is very encouraged by the performance of the portfolio, notable highlights include:
o Nexeon: the company is continuing to optimise its silicon materials for the blended carbon/silicon anode applications currently being demanded by the battery industry. Material development has advanced to the point that the company can now offer a product that outperforms SiOx, the only silicon-based material being used in commercial quantities today. Product sampling is underway with several potential customers in both the consumer electronics and automotive sectors. On 11 October 2016 Nexeon opened a new office and development laboratory in Yokohama, closer to many of the company's development partners and prospective customers in the electronics and automotive sectors.
o PsiOxus Therapeutics: announced an exclusive clinical collaboration agreement to evaluate the safety, tolerability, and preliminary efficacy of Enadenotucirev in combination with Bristol-Myers Squibb's PD-1 immune checkpoint inhibitor Opdivo® (nivolumab) in order to treat a range of tumour types in late-stage cancer patients. The company also announced a combination study with Paclitaxel in ovarian cancer.
o Cell Medica: significantly broadened its product pipeline with the announcement of an exclusive licensing agreement and a co-development partnership with the Baylor College of Medicine to develop next-generation cellular immunotherapies. This new partnership is expected to generate a significant number of new products for the company's cellular immunotherapy pipeline. It was followed by the acquisition of Delenex Therapeutics AG, a Swiss biopharmaceutical company whose proprietary PENTRA®Body technology provides a key enabling technology for Cell Medica to develop a pipeline of next generation CAR-modified immunotherapies. In August 2016, Cell Medica announced a research collaboration with UCL to generate leading edge modified T Cell receptor ('TCR') products for the treatment of cancer.
o TopiVert Pharma: completed a Phase I trial of its lead product TOP1288 in ulcerative colitis. A Phase IIa proof of concept study started in October 2016. TopiVert also expects to start the clinical development of TOP1630, candidate for dry eye disease in early 2017.
o Circassia Pharmaceuticals plc: the Phase III cat allergy trial was disappointing and resulted in a reduction in the net fair value of Innovations' holding. However, the company made progress in its respiratory products portfolio with the announcement that its lead asthma product has been approved in the UK. Circassia expects two further filings for regulatory approval by the end of 2017.
o Abzena plc: raised £20 million and completed two US acquisitions. The company also announced a licensing agreement with a large, publicly listed US biotech for the development of Antibody Drug Conjugates (ADCs) with the potential to receive licence fees and milestone payments of up to $150 million, and a manufacturing agreement with Faron Pharmaceuticals (AIM: FARN) to manufacture Clevegen®, a novel therapeutic antibody being developed to reduce immune suppression in cancer.
o Autifony Therapeutics: announced the successful completion of a Phase I study of AUT00206, its first-in class Kv3 modulator for schizophrenia. This partly offset the failure of the company's Phase II study in age-related hearing loss involving a second molecule AUT00063. The Quick+fire study in adult cochlear implant users, which started in July 2015 and will test AUT00063 in a population of patients with different hearing difficulties, is continuing.
o Featurespace: announced a number of significant new customer wins in the UK and growing traction in the US. These include a five-year agreement with Zapp, the UK mobile payment innovator; a new project with Camelot, the UK National Lottery operator; and a new partnership with US company TSYS Inc, one of the world's largest payment solutions and services companies.
o Cortexica Vision Systems: announced the successful completion of a six month consumer trial of its findSimilar™ product discovery tool on the John Lewis iPad app. As a result, John Lewis has permanently added this function to its Men's and Women's fashion product list pages.
o Abingdon Health: signed a multi-year, exclusive, global distribution agreement with Sebia, the world leader in medical diagnostics by electrophoresis, for its Seralite® - FLC serum product. The Company also achieved a CE Mark for its related product Seralite® - FLC urine. In April 2016, the company announced a collaboration agreement with Sumitomo Chemical Co Limited to develop a next-generation multiplexed point of care biosensor device.
o Oxford Immunotec: acquired Imugen, Inc., a Massachusetts-based clinical laboratory that specialises in testing for tick-borne diseases. This transaction has expanded the company's addressable market, whilst leveraging its existing commercial infrastructure.
Outlook
The long-term prospects for the Group remain very promising. Innovations is a diversified business, with a strong financial position and a dynamic portfolio with potential for near-term exits and partnering transactions.
Innovation's portfolio now includes 45 accelerated growth companies comprising four quoted and 41 private companies with the vast majority (85%) valued at cost or last funding round. The Group now has 10 companies with net carrying values between £10 million to £50 million spread across three sectors (see Table A below).
Of these 10 companies, eight are private companies with an average age of 8.6 years. These are well-managed and well-capitalised businesses which have raised an average of £38.9 million each.
In addition, the Group has considerable strength in depth from other investments in the portfolio which show potential, and has the capital to support their growth.
In the current financial year, the Group will continue to deploy the bulk of its investment capital into existing portfolio companies. It expects to maintain its current rate of investment in order to accelerate the growth of leading assets and maintain significant stakes in its high potential companies.
Creating strong syndicates with like-minded co-investors will remain an important part of the approach, allowing Innovations to build substantial, well-managed and well-funded businesses whilst leveraging the complementary expertise of our co-investors.
Whilst the majority of the investment capital will be deployed in companies that Innovations has co-founded and knows intimately, the Group will maintain its new business creation activity at the current rate by selectively adding 5-8 new companies per annum.
Innovations plans to continue to balance its portfolio by proactively growing its investment in non-therapeutics businesses whilst building further capacity in its tech ventures team.
The quality of new opportunities that the Group is seeing from the academic, research and entrepreneurial community within the 'Golden Triangle' remains very high, with a healthy stream of new investment opportunities.
Imperial College is a key component of this cluster and remains a highly productive source of new opportunities. Since 2011, Innovations has broadened its reach across the 'Golden Triangle' but still around one third of all of the Group's new companies have come from this strategically important relationship.
Innovations remains in a very strong financial position with nearly £200 million available to invest. This gives the Group ample capital to scale up its investment in the significant opportunities within the maturing portfolio, whilst maximising the new opportunities expected from the new alliances with UCL Technology Fund and Apollo.
The current financial year has started very well. In the first quarter, portfolio company Permasense has been sold to Emerson Electric (Innovations share of Permasense on disposal was 22.7%) and the Group has secured a new five-year contract to run the incubator at the I-HUB, a new building at Imperial College London's new White City Campus. In the last few days portfolio company Crescendo Biologics has signed a global, strategic, multi-target collaboration and licence agreement with Takeda Pharmaceutical which has a potential value of $790 million subject to successful completion of milestones. Innovations holding in the company is 22.7%.
The Group has also added two new companies to its investment portfolio: ThisWay Global, a Cambridge-based technology company that is developing a software platform powered by machine learning for the recruitment industry; and Artios Pharma, a new Cambridge-based private biotech company, focused on the development of novel DNA Damage Response (DDR) cancer therapies.
The UK voted to leave the EU during the year and consequently there could be potential risks to UK funding. However we believe that the UK government recognises these challenges and will address them. Our own relationship with the European Investment Bank and European Fund remains strong.
The Board remains confident that Innovations' business model and key principles of attracting world class management, building stakes in selected portfolio companies alongside appropriate co-investors, and having the patience and capital resources to hold for the long-term, will generate attractive returns.
Financial Review
The Group's rate of investment in its portfolio companies increased to £69.9 million across 33 companies (2015: £60.8 million across 30 companies). This takes the total invested since the IPO in July 2006 to £306.7 million and the total raised by the Group's portfolio companies to £1.5 billion (of which £1.0 billion has been raised by the Group's private portfolio companies).
Net assets at the year-end of £455.9 million (2015: £420.1 million) increased by £35.8 million from 31 July 2015. The increase reflects the net proceeds from the Placing, which raised gross £100 million, less the fair value loss and operating costs for the year.
Cash and short-term liquidity investments increased to £148.3 million (2015: £128.1 million) primarily following the Placing, offset by the increase of the investment rate to £69.9 million (2015: £60.8 million). The Group also still has an undrawn £50 million facility with the EIB.
Summarised statement of comprehensive income
Summary of financial performance: | 2016 £m | 2015 £m |
Revenue | 4.3 | 5.1 |
Cost of sales | (1.4) | (1.8) |
Net change in fair value of investments | (56.2) | 21.3 |
Admin expenses: |
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Carried Interest Plan release | 3.0 | 1.2 |
Other | (12.6) | (11.5) |
Finance costs | (1.2) | (0.6) |
Finance income | 1.0 | 1.4 |
(Loss)/profit and total comprehensive income for the year | (63.1) | 15.1 |
Basic (loss)/earnings per Ordinary Share (pence) | (43.2) | 11.1 |
Revenue
Total revenue was £4.3 million (2015: £5.1 million). The main reason for the decrease is a decline in royalty income of £0.5 million, a £0.1 million decrease in licence income and £0.3 million decrease in services and recoveries. The fall in royalty income reflects lower receipts on the Volcano licence.
The fall in services and recoveries arose as prior year cost recoveries on investments completed, were higher. The split of revenue is licence and royalty income £2.2 million (2015: £2.8 million), services £1.6 million (2015: £1.9 million), corporate finance fees £0.4 million (2015: £0.4 million) and dividends received £0.1 million.
Cost of sales
Cost of sales, which mainly arises from the revenue-sharing arrangement with Imperial College London, was £1.4 million (2015: £1.8 million) primarily reflecting the decreased licence and royalty income.
Change in fair value of investments reflecting investment portfolio performance
Total net fair value losses were £56.2 million (2015: £21.3 million gains) and reflect gains in the net fair value of the portfolio of £22.1 million (2015: £29.7 million), offset by impairments and losses of net fair value of £78.3 million (2015: £8.4 million). This is summarised in the following table.
Portfolio movements excluding cash invested: | 2016 £m | 2015 £m |
Net fair value gains on the revaluation of investments | 22.1 | 29.7 |
Net fair value losses on the revaluation of investments | (78.3) | (8.4) |
Net fair value (loss)/gain | (56.2) | 21.3 |
The net fair value gains include a gain of £4.1 million on MISSION Therapeutics and £4.0 million gain on TopiVert. Additional gains of £2.3 million arose following the sales of portfolio companies.
Other significant gains include Econic Technologies of £1.5 million, Inivata of £1.3 million, Kesios Therapeutics of £0.7 million, Nexeon of £2.8 million and Process Systems Enterprise of £1.8 million. The balance of the gain reflects smaller mechanistic uplifts.
These gains were offset by net fair value impairments and losses of £78.3 million (2015: loss £8.4 million). This includes net fair value losses on quoted stock on Circassia of £54.8 million, Abzena of £9.6 million and Oxford Immunotec of £2.5 million. These losses reflect the market prices of these quoted stocks at the end of July 2016. The balance includes general impairments across the portfolio.
Carried interest plan
The Group's Carried Interest Plan, which is a long term employee incentive scheme, generated an accounting release of £3.0 million (2015: release £1.2 million). This reflects the impact of the hurdle which must be exceeded by gains in the portfolio before the performance conditions are met and an accounting charge arises. There is no cash payment due to members of the scheme until the Group has made substantial future cash realisations.
Other administrative expenses
Other administrative expenses increased, as expected, by 9.6% to £12.6 million (2015: £11.5 million). The small increase reflects the increased activity across the Group. Administrative expenses includes costs of £1.5 million (2015: £1.4 million) incurred on filing patents and protecting the 'as yet' unexploited intellectual property emanating from Imperial College London.
Finance costs
Finance costs were £1.1 million (2015: £0.6 million) and relate to the drawn down £30.0 million EIB facility.
Finance income
Finance income was £1.1 million (2015: £1.4 million) mainly attributable to the lower cash balance during the year before the receipt of the equity raise proceeds in February 2016.
Loss after tax
Overall this resulted in the Group reporting a post-tax loss for the year to 31 July 2016 was £63.1 million (2015: profit £15.1 million).
Earnings per share
Basic loss per share was 43.2 pence (2015: earnings 11.1 pence).
Investment portfolio and activity
The net value of the Group's investment portfolio rose to £335.1 million spread across 107 companies (2015: £327.2 million 98 companies). The increase represents £69.9 million (2015: £60.8 million) of investments to fund 33 (2015: 30) companies in its portfolio, net disposals of £5.8 million (2015: £6.9 million) and net fair value losses of £56.2 million (2015: net fair value gains of £21.3 million).
The Group has invested a total of £274.4 million in the portfolio of currently active technology companies; £154.8 million invested in the top 10 companies and £119.6 million in the remaining companies. In total the portfolio companies raised £206.4 million in cash (2015: £479.9 million) from all sources of investment.
The table below separates out the top 10 portfolio companies, by net fair value, to illustrate the relative carrying value in the Group's investments in such companies and the movement in value from 1 August 2015 to 31 July 2016.
Table A - Schedule of net fair value movement: Top 10 portfolio companies
Name of company | Net investment carrying value as at 1 August 2015 £000 | Cash invested year to 31 July 2016 £000 | Cash divested year to 31 July 2016 £000 | Fair value movement year to 31 July 2016 £000 | Net investment carrying value as at 31 July 2016 £000 | Cumulative cash invested as at 31 July 2016 £000 | % Issued share capital held as at 31 July 2016
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Nexeon Limited | 34,086 | 5,000 | - | 2,804 | 41,890 | 27,373 | 33.7% |
Cell Medica Limited | 21,037 | 7,500 | - | - | 28,537 | 19,810 | 25.5% |
Veryan Holdings Limited | 20,893 | 5,606 | - | - | 26,499 | 19,317 | 46.1% |
Circassia Pharmaceuticals PLC | 79,750 | - | - | (54,818) | 24,932 | 25,500 | 9.3% |
Psioxus Therapeutics Limited | 22,623 | - | - | - | 22,623 | 13,676 | 27.8% |
MISSION Therapeutics Limited | 6,012 | 3,937 | - | 4,111 | 14,060 | 9,770 | 11.6% |
TopiVert Pharma Limited | 7,543 | 1,059 | - | 4,045 | 12,647 | 8,500 | 29.5% |
Abzena plc | 17,773 | 2,500 | - | (9,607) | 10,666 | 12,975 | 19.8% |
Abingdon Health Limited | 7,717 | 2,725 | - | - | 10,442 | 11,014 | 33.7% |
Econic Technologies Limited 2 | 6,145 | 2,500 | - | 1,533 | 10,178 | 6,900 | 53.7% |
Other companies | 103,641 | 39,047 | (5,759) | (4,317) | 132,612 | 119,5961 |
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Net total | 327,220 | 69,874 | (5,759) | (56,249) | 335,086 | 274,431 |
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1 Currently active companies.
2 The Group does not control this company (control as defined by IFRS10), and therefore does not consolidate it.
All carrying values reflect the net fair value of the investment being the gross value of the holding less the attributable revenue-sharing obligations associated with each investment.
The percentage of issued share capital represents the absolute percentage of the shares held, without reflecting any revenue-sharing obligations. The percentage holdings in these companies are increasing in line with the Group's strategy to hold larger stakes in its portfolio companies.
The early-stage nature of many of the portfolio companies is such that investments are made on a milestone/tranche basis that matches the companies' needs for cash with the achievement of agreed milestones.
This provides investment security for the companies and more control over the Group's cash payments to the portfolio. Additional investment commitments undrawn at the year-end amounted to £29.0 million (2015: £22.3 million).
The Group does not have, directly or indirectly, more than half of the voting power of these entities nor does it have power over more than half of the voting rights by virtue of any agreement with any other investor.
Cash and short-term liquid investments
The Group ended the financial year with total cash and short-term liquidity investments of £148.3 million (2015: £128.1 million), comprising £133.3 million of cash (2015: £108.1 million) and £15 million (2015: £20 million) of short-term liquidity investments.
Cash and short-term liquidity investments increased from the prior year primarily because of the proceeds from the placement, reduced by the increased rate of investment.
The movement in the cash and short-term liquidity investments balance is shown below:
| 2016 £m | 2015 £m |
Net cash used in operating activities | (10.8) | (9.3) |
Purchase of trade investments | (69.9) | (60.0) |
Investments in funds | (1.2) | - |
Net proceeds from sale of trade investments | 5.0 | 6.2 |
Net cash from other investing activities | 1.1 | 1.4 |
Financing activities | 96.01 | 13.3 |
Movement in net cash reserves | 20.2 | (48.4) |
1 Primarily reflects the proceeds of the £98.6 million equity raised (net of expenses)
The Group invests cash surplus to working capital requirements in short-term deposits, classified as short-term liquidity investments, across a number of banks with a focus on capital preservation rather than interest earned. The Group has no foreign currency deposits.
Key Performance Indicators
The key performance indicators (KPIs) below measure the Group's results of operations.
1. Growth in value of the Group's interest in its portfolio of companies
This KPI monitors the strategic objective of maximising value through measuring progress in the value of the portfolio companies.
How measured: Measured in terms of the net value and net gain or loss arising in the value of the portfolio using established valuation methodologies based on International Private Equity and Venture Capital Guidelines (IPEVCVG). The value is net of revenue sharing obligations.
Progress: The value of the Group's portfolio fell reflecting the decline in the quoted portfolio. However the unquoted portfolio continued to show growth through fair value gains and investment activity.
2. Investments made in portfolio companies
This KPI monitors the strategic objective of providing continuity of funding through measuring investment made by the Group as well as total investment from external sources.
How measured: Measured in terms of total cash raised by the portfolio, together with the investments made by the Group, giving an indication of the appetite for funding within the portfolio.
Progress: The Group has increased the rate of investment and the rate of investment from external sources has fallen.
3. New companies added to the Group's portfolio
This KPI monitors the strategic objective of leveraging outstanding research.
How measured: Measured in terms of all new companies added to the Group's portfolio. New companies can be added through investments arising from relationships with, among others, Cambridge Enterprise Limited, Oxford Spin-out Equity Management and UCL Business plc, or technology transfer activities with Imperial College London.
Progress: The Group has continued to select a range of technology opportunities from the UK's four leading research-intensive universities as well as other research institutions and entrepreneurs.
Number of new companies added to the Group's portfolio
14 new companies during the year, comprising 7 accelerated growth and 7 lighter touch.
4. Potential value available from the existing portfolio
This KPI monitors value creation, which will then flow through to realisations and provide funds for future investments.
How measured: A measure of the net increase in value in the accelerated growth portfolio calculated by the movement in the portfolio value during the year, less investments made.
Progress: The potential value available from the accelerated-growth portfolio has continued to increase.
Net increase in accelerated growth portfolio value £11.0m
5. Exits achieved
This KPI monitors the Group's strategy to grow its most valuable companies in order to optimise value.
How measured: Measured in terms of cash returned to sustain future investments.
Progress: Net realisations of £5.8 million were in line with prior year.
6. Health and quality of intellectual property pipeline from Imperial College London
This KPI monitors the success of the Group's commercialisation of intellectual property.
How measured: Measured by the number of opportunities flowing through the pipeline from Imperial College London, demonstrated by the number of inventions disclosed, patents filed, and new licences.
Progress: The flow of opportunities has remained healthy. Of the 425 invention disclosures in the year ended 31 July 2016, 310 came from Imperial College London and the remainder came from other sources. The Group entered into 39 new IP agreements and generated £2.2 million in revenue from its portfolio of 2202 licensing and royalty agreements.
Consolidated statement of comprehensive income
for the year ended 31 July 2016
| Note | 2016 £000 | 2015 £000 |
Revenue | 2 | 4,257 | 5,099 |
Cost of sales |
| (1,395) | (1,769) |
Gross profit |
| 2,862 | 3,330 |
Fair value losses and gains on investments | 3 | (56,249) | 21,324 |
Administrative expenses: |
|
|
|
- Carried Interest Plan release | 4a | 2,972 | 1,161 |
- Other administrative expenses | 4b | (12,634) | (11,567) |
Total administrative expenses |
| (9,662) | (10,406) |
Operating (loss)/profit |
| (63,049) | 14,248 |
Finance costs |
| (1,141) | (555) |
Finance income |
| 1,077 | 1,372 |
(Loss)/profit before taxation |
| (63,113) | 15,065 |
Taxation |
| - | - |
(Loss)/profit and total comprehensive income for the financial year |
| (63,113) | 15,065 |
Basic (loss)/earnings per Ordinary Share (pence) | 5 | (43.2) | 11.1 |
Diluted (loss)/earnings per Ordinary Share (pence) | 5 | (43.2) | 11.0 |
Consolidated balance sheet
as at 31 July 2016
| Note | 2016 £000 | 2015 £000 |
Assets |
|
|
|
Non-current assets |
|
|
|
Property, plant and equipment |
| 18 | 29 |
Trade investments | 3 | 343,973 | 333,268 |
Higher Education Innovation Fund (HEIF) and University Challenge Seed Fund (UCSF) investments |
| 163 460 | 460 460 |
Higher Education Innovation Fund (HEIF) loans |
| 288 | 179 |
Apollo Therapeutics and UCL Technology Fund |
| 1,173 | - |
Total non-current assets |
| 345,615 | 333,936 |
|
|
|
|
Current assets |
|
|
|
Trade and other receivables |
| 4,486 | 2,409 |
Short-term liquidity investments | 6 | 15,000 | 20,000 |
Cash and cash equivalents | 6 | 133,306 | 108,097 |
Total current assets |
| 152,792 | 130,506 |
Total assets |
| 498,407 | 464,442 |
|
|
|
|
Equity and liabilities |
|
|
|
Equity attributable to equity holders |
|
|
|
Issued share capital | 8 | 4,885 | 132,500 |
Share premium |
| 304,938 | 207,068 |
Capital redemption reserve |
| 128,344 | - |
Retained (loss)/earnings |
| (9,234) | 53,879 |
Share-based payments reserve |
| 8,861 | 8,528 |
Other reserves |
| 18,096 | 18,096 |
Total equity |
| 455,890 | 420,071 |
|
|
|
|
Liabilities |
|
|
|
Non-current liabilities |
|
|
|
Borrowings | 7 | 24,089 | 27,222 |
Higher Education Innovation Fund and University Challenge Seed Fund |
| 477 | 666 666 |
Provisions for liabilities and charges | 3 | 8,887 | 6,048 |
Carried Interest Plan liability | 4a | 1,731 | 4,703 |
Total non-current liabilities |
| 35,184 | 38,639 |
|
|
|
|
Current liabilities |
|
|
|
Borrowings | 7 | 3,167 | 1,500 |
Trade and other payables |
| 4,166 | 4,232 |
Total liabilities |
| 42,517 | 44,371 |
Total equity and liabilities |
| 498,407 | 464,442 |
Consolidated cash flow statement
for the year ended 31 July 2016
| Note | 2016 £000 | 2015 £000 |
Cash flows from operating activities: |
|
|
|
Operating (loss)/profit |
| (63,049) | 14,248 |
|
|
|
|
Adjustments to reconcile operating profit to net |
|
|
|
cash flows used in operating activities: |
|
|
|
Depreciation of property, plant and equipment |
| 11 | 14 |
Fair value movement in investments |
| 56,249 | (21,324) |
Share-based payment charge |
| 333 | 224 |
Carried Interest Plan release |
| (2,972) | (1,161) |
|
|
|
|
Working capital adjustments: |
|
|
|
Increase in trade and other receivables |
| (273) | (679) |
Decrease in trade and other payables |
| (1,098) | (653) |
Net cash used in operating activities |
| (10,799) | (9,331) |
|
|
|
|
Cash flows from investing activities: |
|
|
|
Purchase of trade investments | 6 | (69,873) | (59,957) |
Investments in funds |
| (1,173) | - |
Proceeds from sale of trade investments | 6 | 4,979 | 7,179 |
Revenue-share paid on realisations of trade investments | 6 | - | (989) |
Net cash flows used in investments |
| (66,067) | (53,767) |
|
|
|
|
Purchase of property, plant and equipment |
| - | (17) |
Interest received |
| 1,079 | 1,410 |
Decrease in short-term liquidity investments |
| 5,000 | 50,000 |
Net cash flows generated from other investing activities |
| 6,079 51,393 | 51,393 51,393 |
Net cash used in investing activities |
| (59,988) | (2,374) |
|
|
|
|
Cash flows from financing activities: |
|
|
|
Proceeds from issuance of Ordinary Shares1 |
| 101,636 | - |
Transaction costs relating to issuance of Ordinary Shares2 |
| (3,037) | - |
Proceeds from EIB loan |
| - | 15,000 |
Costs incurred for EIB loan |
| - | (181) |
Repayment of EIB loan |
| (1,500) | (944) |
Interest paid |
| (1,103) | (535) |
Net cash generated from financing activities |
| 95,996 | 13,340 |
Net increase in cash and cash equivalents |
| 25,209 | 1,635 |
Cash and cash equivalents at beginning of the year |
| 108,097 | 106,462 |
Cash and cash equivalents at end of the year | 6 | 133,306 | 108,097 |
1 Issue of 523,677 ordinary shares on exercise of share options by two former Directors during August 2015 and a further issue of 23,529,412 ordinary shares as part of the placing during February 2016 (see note 8).
2 These transaction costs were deducted from share premium.
Consolidated statement of changes in equity
attributable to equity holders of the Group
| Issued share capital £000 | Share premium £000 | Capital redemption reserve £000 | Retained earnings £000 | Share-based payments reserve £000 | Other reserves £000 | Total equity £000 |
At 31 July 2014 | 132,500 | 207,068 | - | 38,814 | 8,304 | 18,096 | 404,782 |
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
Profit for the financial year | - | - | - | 15,065 | - | - | 15,065 |
Total comprehensive income | - | - | - | 15,065 | - | - | 15,065 |
Transactions with owners recognised directly in equity |
|
|
|
|
|
|
|
Value of employee services | - | - | - | - | 224 | - | 224 |
Transactions with owners | - | - | - | - | 224 | - | 224 |
At 31 July 2015 | 132,500 | 207,068 | - | 53,879 | 8,528 | 18,096 | 420,071 |
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
Loss for the financial year | - | - | - | (63,113) | - | - | (63,113) |
Total comprehensive income | - | - | - | (63,113) | - | - | (63,113) |
Transactions with owners recognised directly in equity |
|
|
|
|
|
|
|
Value of employee services | - | - | - | - | 333 | - | 333 |
Share capital issued | 729 | 100,907 | - | - | - | - | 101,636 |
Costs of share capital issued | - | (3,037) | - | - | - | - | (3,037) |
Cancellation of deferred shares | (128,344) | - | 128,344 | - | - | - | - |
Transactions with owners | (127,615) | 98,870 | 128,344 | - | 333 | - | 98,932 |
At 31 July 2016 | 4,885 | 304,938 | 128,344 | (9,234) | 8,861 | 18,096 | 455,890 |
Treasury shares with a cost of £2,564,009 (2015: £2,564,009) have been netted against retained earnings representing shares held by the Employee Benefit Trust.
Notes
1. Basis of preparation
The preliminary announcement for the year ended 31 July 2016 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as at 31 July 2016 and with the accounting policies disclosed in the Company's annual report for the year ended 31 July 2015. The financial information contained in this preliminary announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information has been extracted from the financial statements for the year ended 31 July 2016, which have been approved by the Board of Directors. The report of the auditors on the financial statements for the year ended 31 July 2016 was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The financial statements will be delivered to the Registrar of Companies after the Annual General Meeting. The financial statements for the year ended 31 July 2015, upon which the auditors reported without qualification, have been delivered to the Registrar of Companies.
2. Segmental reporting
For the year ended 31 July 2016 and the year ended 31 July 2015, the Group's revenue and (loss)/profit was derived from its principal activity within the United Kingdom.
IFRS 8, 'Operating Segments' defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resources. The Chief Operating Decision Maker has been identified as the Board of Directors. The Directors are of the opinion that under IFRS 8 the Group has only one operating segment, which commercialises academic research and uses it to build businesses.
The Group has two customers contributing revenues of £914,000 and £601,000 respectively that account or £1,515,000 (36%) of the Group's revenue (2015: two customers that account for £2,175,000 (43%)).
Breakdown of the revenue from all sources is as follows:
Analysis of revenue by category: |
| 2016 £000 | 2015 £000 |
Licence and royalty revenue |
| 2,186 | 2,834 |
Revenue from services |
|
1,606 | 1,822 |
Corporate finance fees |
| 400 | 429 |
Dividends received |
| 65 | 14 |
Total revenue |
| 4,257 | 5,099 |
3. Investments
Net change in fair value of trade investments held at fair value through profit or loss
Net change in fair value of investments for the year of £56,249,000 loss (2015: £21,324,000 gain) represents the change in fair value taking into account the movement in the revenue-share provision on these fair value movements.
Included within the net fair value movement recognised in the consolidated statement of comprehensive income are provisions for liabilities and charges. These are made up of the revenue sharing provision which represents an estimate of the fair value of monies due to Imperial College London and other third parties such as co-funders of research work and the Appointee Directors' pool. The provision will be payable upon the eventual realisation of investments held by the Group under the revenue sharing arrangements of the Technology Pipeline Agreement (TPA) and in recognition of Imperial College London's right to call for a transfer of its share of the Group's holding in investments. The timing and amount of the realisation of the provision is dependent on the timing of the disposal of investments, which is uncertain as this is determined by the investment strategy.
The table below sets out the movement in the balance sheet value of the investments from the start to the end of the year, setting out the fair value gains and losses together with any investments and disposals.
Gross investments - designated at fair value through profit or loss For the year ended 31 July 2016 | Quoted1 companies Total £000 | Unquoted companies Total £000 | Total £000 |
At 1 August 2015 | 107,113 | 226,155 | 333,268 |
|
|
|
|
Gains on the revaluation of investments | - | 26,404 | 26,404 |
Losses on the revaluation of investments | (67,060) | (11,727) | (78,787) |
Net fair value gains | (67,060) | 14,677 | (52,383) |
|
|
|
|
Investments during the year | 3,081 | 66,793 | 69,874 |
Disposal of investments | - | (6,786) | (6,786) |
Net investment | 3,081 | 60,007 | 63,088 |
At 31 July 2016 | 43,134 | 300,839 | 343,973 |
1 Quoted companies are registered on AIM, NASDAQ and the Main Market of the London Stock Exchange.
The table below sets out the movement in the balance sheet value of the provision for liabilities and charges arising on revenue sharing obligations from the start to the end of the year, setting out any fair value gains and losses together with the impact arising as a result of disposals.
Provisions for liabilities and charges2 For the year ended 31 July 2016 | Quoted1 companies Total £000 | Unquoted companies Total £000 |
Total £000 |
At 1 August 2015 | 345 | 5,703 | 6,048 |
|
|
|
|
Increase in liability arising from changes in fair value of investments | - | 4,321 | 4,321 |
Decrease in liability arising from changes in fair value of investments | (134) | (321) | (455) |
Net (reduction)/increase in fair value of liability during the year | (134) | 4,000 | 3,866 |
|
|
|
|
Disposals during the year | - | (1,027) | (1,027) |
At 31 July 2016 | 211 | 8,676 | 8,887 |
2 The provision for liabilities and charges represents monies due to Imperial College London upon the eventual realisation of investments held by the Group under the revenue sharing arrangements of the Technology Pipeline Agreement (TPA) and in recognition of Imperial College London's right to call for a transfer of its share of the Group's holding in these particular investments. Deferred consideration represents monies due to Imperial College London upon the eventual realisation of the Imperial Innovations LLP assets acquired from Imperial College London as part of the private share placement in 2005.
The table below sets out the movement in the net carrying value of investments from the start to the end of the year, setting out the net fair value gains and losses together with any investments and disposals.
Investments - designated at fair value through profit or loss (net of revenue-share) For the year ended 31 July 2016 | Quoted1 companies Total £000 | Unquoted companies Total £000 | Total £000 |
At 1 August 2015 | 106,768 | 220,452 | 327,220 |
|
|
|
|
Gains on the revaluation of investments | - | 22,083 | 22,083 |
Losses on the revaluation of investments | (66,926) | (11,406) | (78,332) |
Net fair value gains | (66,926) | 10,677 | (56,249) |
|
|
|
|
Investments during the year | 3,081 | 66,793 | 69,874 |
Disposal of investments | - | (5,759) | (5,759) |
Net investments | 3,081 | 61,034 | 64,115 |
At 31 July 2016 | 42,923 | 292,163 | 335,086 |
1 Quoted companies are registered on AIM, NASDAQ and the Main Market of the London Stock Exchange.
Additionally, monies are due to parties in the Appointee Directors' Pool in respect of the Imperial Innovations LLP assets acquired as part of the stepped acquisition in 2005 and to other third parties. These are included in 'Revenue Sharing Other' in the table below. The timing and amount of the realisation of the provision is dependent on the timing of the disposal of investments, which is uncertain as this is determined by the investment strategy.
The following table analyses the provision by obligation:
| Revenue Sharing Imperial College London £000 | Revenue Sharing Other £000 | Total £000 |
At 1 August 2015 | 5,748 | 300 | 6,048 |
Settlements and provisions utilised | (843) | (184) | (1,027) |
Charged to the consolidated statement of comprehensive income | 3,532 | 334 | 3,866 |
At 31 July 2016 | 8,437 | 450 | 8,887 |
4a. Carried Interest Plan release
| 2016 £000 | 2015 £000 |
Carried Interest Plan release | (2,972) | (1,161) |
The Group's Carried Interest Plan generated an accounting release of £3.0 million (2015: release of £1.2 million) for the year ended 31 July 2016, with a corresponding liability of £1.7 million (2015: £4.7 million). An accounting liability is reflected as the fair value of the portfolio of companies has exceeded the investments made by the Group plus 8% interest compounded. Once future disposals are made they are distributed in the following order: retention by the Group of the original amount invested, retention by the Group of an 8% hurdle, then a catch up until the desired investor: executive ratio for the portfolio in question (which will be in the range from 85 : 15 to 89.5 : 10.5) has been achieved and then retention of any excess by the Group and distribution to the executives in that same ratio. Accordingly, there is no cash payment due to the members of the scheme until the Group has ceased investment in the companies in the relevant portfolio and has made future realisations.
4b. Other administrative expenses
| 2016 £000 | 2015 £000 |
Staff related | 7,345 | 6,596 |
Share-based payments | 333 | 224 |
Patent costs | 1,539 | 1,405
|
Other | 3,417 | 3,342 |
| 12,634 | 11,567 |
5. (Loss)/earnings per share
Basic earnings per share is calculated by dividing the (loss)/profit for the financial year by the weighted average number of Ordinary Shares in issue during the year. Diluted earnings per share is computed by dividing the (loss)/profit for the financial year, by the weighted-average number of Ordinary Shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including share options (and in the prior year the impact of the partly paid New Convertible B shares) on an as-if-converted basis. The potential dilutive shares are included in diluted earnings per share computations on a weighted average basis for the year. The profits and weighted average number of shares used in the calculations are set out below:
| 2016 | 2015 |
(Loss)/earnings per Ordinary Share |
|
|
(Loss)/profit for the financial year (£000) | (63,113)
| 15,065 |
Weighted average number of Ordinary Shares (basic) (thousands) | 146,063 | 136,180 |
Effect of dilutive potential Ordinary Shares | - | 480 |
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share (thousands) |
146,063 |
136,660 |
(Loss)/earnings per Ordinary Share basic (pence) | (43.2) | 11.1 |
(Loss)/earnings per Ordinary Share diluted (pence) | (43.2) | 11.0 |
6. Short-term liquidity investments and cash and cash equivalents
| 2016 £000 | 2015 £000 |
Cash at bank and in hand | 133,306 | 108,097 |
Total cash and cash equivalents | 133,306 | 108,097 |
Total short-term liquidity investments (3 to 12 months) | 15,000 | 20,000 |
Total cash and cash equivalents include restricted balances of £2.1 million (2015: £0.6 million). Pursuant to the amended and restated EIB facility agreement (see note 7) the Group is required to maintain a debt service reserve account pledged in favour of the lender. The account is available solely to pay any outstanding interest and principal payments owed under the EIB agreement for the following six months.
Reconciliation of amounts invested to trade investments:
| 2016 £000 | 2015 £000 |
Invested in trade investments in the year | 69,874 | 60,817 |
Investments unpaid at year end
| (1) | - |
Exchange of holding for shares in another spin-out | - | (860) |
Net cash invested in trade investments in the year | 69,873 | 59,957 |
Reconciliation of cash flows arising from sale of trade investments:
| 2016 £000 | 2015 £000 |
Disposals of trade investments | 6,786 | 7,885 |
Disposal of investment in exchange for shares in portfolio company | - | (860) |
Deferred consideration received | 430 | 584 |
Deferred consideration accrued | (2,237) | (430) |
Cash flow arising on the proceeds from sale of investment in trade investments | 4,979 | 7,179 |
Reconciliation of cash flows arising on revenue-share paid on asset realisations of trade investments:
| 2016 £000 | 2015 £000 |
Movement in revenue sharing liability arising from disposal of trade investments | 1,027 | 989 |
Revenue-share outstanding (included within accruals) | (1,027) | - |
Cash flow arising on the settlement of revenue sharing liabilities on sale of trade investments |
- |
989 |
7. Borrowings
This note provides information about the contractual terms of the Group's interest-bearing borrowings, which are measured at amortised cost.
| 2016 £000 | 2015 £000 |
EIB Loan - non current | 24,089 | 27,222 |
EIB Loan - current | 3,167 | 1,500 |
| 27,256 | 28,722 |
On 1 July 2013 the Group entered into a £30.0 million loan agreement with the European Investment Bank (EIB) available to draw down in two tranches of £15.0 million. The purpose of the loan is to provide funding towards Biotech and Therapeutics investments.
The first tranche of £15.0 million was drawn down on 30 July 2013. Transaction costs in the year ended 31 July 2013 of £186,000 were incurred to obtain the loan and were set against the loan amount. These costs are subsequently amortised over the life of the loan. During the year ended 31 July 2016, £15,000 (2015: £16,000) was charged to the statement of comprehensive income. The loan is based on a floating interest rate related to LIBOR and is repayable in 10 equal annual instalments over a twelve year period with the first payment paid on 25 July 2016. There was an uncapped cash sweep of 25% of all investment realisations used to prepay the loan. During the current year £1,500,000 (2015: £944,000) was repaid. This cash sweep was removed with the signing of the new loan during the current year.
The second tranche of £15.0 million was drawn down on 30 June 2015. Transaction costs of £181,000 were incurred to obtain the loan and were set against the loan amount. These costs are subsequently amortised over the life of the loan. During the year ended 31 July 2016, £18,000 (2015: £2,000) was charged to the statement of comprehensive income. The loan is based on a fixed interest rate of 4.199% and is repayable in nine equal annual instalments over a ten year period with the first payment due on 25 July 2017.
On 13 July 2015 the Group entered into a second loan agreement of £50.0 million with the European Investment Bank (EIB) available to draw down in up to four tranches with a minimum tranche value of £10.0 million. The purpose of the loan is to provide funding towards Biotech and Therapeutics investments. This loan has not been drawn down. There is a non-utilisation fee calculated on the daily undrawn, uncancelled balance of the loan from the date falling six months after the date of the agreement at a rate of 0.10% per annum.
The loans contain a debt covenant requiring that the ratio of the total fair value of investments plus cash and qualifying liquidity to debt should at no time fall below 4:1. The loan also stipulates that on any date, the aggregate of all amounts scheduled for payment to the EIB in the following six months should be kept in a separate bank account.
The Group closely monitors that the covenants are adhered to on an ongoing basis and has complied with these covenants throughout the year. The Company will continue to monitor the covenants position against forecasts and budgets to ensure that it operates within the prescribed limits.
The maturity profile of the borrowings was as follows: | 2016 £000 | 2015 £000 |
Due under 6 months | 1,583 | - |
Due 6 to 12 months | 1,584 | 1,500 |
Due 1 to 5 years | 15,833 | 15,833 |
Due after 5 years | 8,556 | 11,722 |
Total¹ | 27,556 | 29,055 |
1 These are gross amounts repayable and exclude costs of £300,000 (2015: £333,000) incurred on obtaining the loans and amortised over the life of the loans.
8. Issued share capital
Ordinary Shares | 2016 £000 | 2015 £000 |
Allotted and fully paid: Balance at beginning of year (137,151,035 Ordinary Shares of £0.0303 each) (2015: 137,151,035 Ordinary Shares of £0.0303 each) Issue of share capital during the year |
4,156 729 |
4,156 - |
Balance as at end of year (161,204,124 Ordinary Shares of £0.0303 each) (2015: 137,151,035 Ordinary Shares of £0.0303 each) |
4,885 |
4,156 |
Deferred shares |
|
|
Allotted and fully paid: |
|
|
Balance as at beginning of year (36,990,086 Deferred shares of £3.4697 each) | 128,344 | 128,344 |
Cancellation of shares and transfer to capital redemption reserve | (128,344) | - |
Balance as at end of year of nil (2015: 36,990,086 Deferred shares of £3.4697 each) | - | 128,344 |
|
|
|
Total balance as at end of year | 4,885 | 132,500 |
Share capital
Deferred shares are not transferable and do not entitle the holder to the payment of any dividend or otherwise participate in the profits of the Company or to receive notice of or attend or vote at any general meeting of the Company and on any reduction of capital in accordance with the Companies Act 2006, may be cancelled without payment of consideration. The Deferred Shares are not listed on any stock exchange. The Company may purchase the Deferred Shares for not more than the sum of £0.01 in aggregate for all the Deferred Shares and cancel the Deferred Shares so purchased, without any requirement to obtain the consent or sanction of the holders of the Deferred Shares. Pursuant to this right, on 24 September 2015 the Company purchased all the Deferred Shares for the total sum of £0.01 in aggregate and the shares were then cancelled.
On 17 August 2015, the Company's total issued voting capital increased through the issue of 523,677 Ordinary Shares of 3 and 1/33 pence each (total nominal value of £16,000) at an average price of approximately 312 pence per Ordinary Share pursuant to the exercise of share options held by two former Directors.
On 4 February 2016 the Company announced a placing to raise £100,000,000 before issue costs, through the issue of 23,529,412 Ordinary Shares of 3 and 1/33 pence each (total nominal value of £713,000) at 425 pence each.
The total issued voting share capital as at 31 July 2016 was 161,204,124 voting shares (2015: 137,151,035 voting shares).
Employee Benefit Trust
As at 31 July 2016, the Employee Benefit Trust (EBT) held 971,080 (2015: 971,080) of the Group's Ordinary Shares, which have a cost of £2,564,009 (2015: £2,564,009), which was offset against the retained earnings in prior years. During the year the Employee Benefit Trust did not increase its holding (2015: no increase). As set out in the Directors' Remuneration Report for the year ended 31 July 2016, these represent unallocated shares which are considered to be under the de-facto control of the Group and have therefore been consolidated in the financial statements.
It is the intention of the Group to use these shares to settle the option liabilities at the point of exercise and they represent a partial hedge on the cost of the exercise. No shares have been issued from the EBT during the year (2015: nil).