14 Oct 2008 07:00
14 OCTOBER 2008 Imperial Innovations Group plc ("Imperial Innovations" or "the Group" or "the Company") Results for the year ended 31 July 2008
Imperial Innovations Group plc (AIM: IVO), a leading technology transfer, commercialisation and investment company, today announces its results for the year ended 31 July 2008.
FINANCIAL HIGHLIGHTS
* Gross fair value of investments in portfolio: ‚£51.2m (2007: ‚£55.8m) * Cash balance at 31 July 2008: ‚£43.1m (2007: ‚£19.5m) * Revenue at 31 July 2008: ‚£5.3m (2007: ‚£5.1m) * Technology businesses added to the portfolio: 15 (2007: 13) * New inventions: 354 (2007:366)
OPERATIONAL HIGHLIGHTS
* Raised ‚£29.3 million net of expenses from the issue of equity in November 2007. * Formed wholly owned subsidiary, Imperial Innovations Investment Management Limited ("IIIM"), authorised by the FSA and enabling the company to lead investments and capture additional value from corporate finance deals. * Quality of portfolio companies reinforced with several fundraisings completed: two large funding rounds for therapeutic companies raising a total of ‚£11 million for Circassia and ‚£13 million for RespiVert. * Strengthened the board and management of the company by appointing: * + Dr David Allen as non-executive director. David has nearly 30 years experience at BP plc in various roles including being a main board director for 5 years. + Simon Kerr as Director of Bioscience Ventures. Simon was most recently Commercial Director of CeNeS Pharmaceuticals plc until its acquisition by Paion AG in June 2008. * Founded and raised capital for i2india, a portfolio business in India formed to commercialise intellectual property arising from Indian research organisations and to facilitate introduction of the Group's technology to customers in India. * Expanded commercialisation relationships to include the National Physical Laboratory.
PORTFOLIO COMPANY HIGHLIGHTS
* AIM-listed fuel cell company, Ceres Power signed a new agreement with British Gas in January 2008. British Gas will fund a ‚£5m development and trials programme for Ceres Power's Combined Heat and Power units and will purchase at least 37,500 units. In January 2008, Centrica plc bought 9.999% of the issued capital of Ceres Power at 300p per share - equivalent to a cash investment of about ‚£20m. * Circassia Ltd, a specialty biopharmaceutical company focused on controlling immune system responses, initiated a Phase II Clinical Study with its anti-allergy technology, ToleroMune. Patients experienced substantially reduced reactions to cat allergens after a single administration of ToleroMune. * Thiakis Ltd, a biopharmaceutical company focused on the development of peptide hormones for the treatment of obesity, has commenced Phase I clinical trials of TKS1225, the company's novel oxyntomodulin analogue. * Cell Medica has commenced the treatment of the first human patients in its late-stage randomised confirmatory trial aimed at demonstrating the clinical effectiveness of virus-specific cell therapy to treat Cytomegalovirus (CMV) infections in cancer patients following bone marrow transplants. CMV is a major cause of infections in these patients. * Three companies - BioCeramic Therapeutics Ltd, Novacem Ltd, and PolyTherics Ltd, received investments from the Technology Strategy Board towards innovative new collaborative research and development projects
Martin Knight, Chairman of Imperial Innovations Group plc, said: "The recent upheavals in the global investment arena have not deterred us from taking the long term view when considering our business and where to deploy our capital. In that context, I am pleased to report that Imperial Innovations has made significant progress in the last twelve months and has been successful in raising funds to drive several of its high quality portfolio companies forward. This reflects well both on the calibre of these businesses and their management, and on Imperial Innovations' ability to find funding and direct it to where it will have most impact. I remain confident that we have in place the executive team and strategy to deliver real value for our shareholders in the years to come."
The full Annual Report is available at http://www.imperialinnovations.co.uk/?q= node/337
For further information please contact:
Imperial Innovations Martin Knight, Chairman +44 20 7594 1403 Susan Searle, Chief Executive Officer +44 20 7594 6591 Julian Smith, Chief Financial & Operations +44 20 7594 6505 Officer M:Communications Ben Simons / Harriet Totty +44 20 7153 1540 JPMorgan Cazenove (NOMAD to Imperial Innovations) Steve Baldwin +44 20 7588 2828 Notes to EditorsAbout Imperial Innovations
Imperial Innovations is one of the UK's leading technology transfer and commercialisation companies. The company was founded in 1986 and its ordinary shares admitted to trading on the AIM Market of London Stock Exchange plc in July 2006, raising ‚£25 million at an offer price of 365p and ‚£1 million by means of a public offer. In November 2007, the company raised a further ‚£30 million by means of a placing of new ordinary shares with investors.
The company's integrated approach encompasses the identification of ideas, protection of intellectual property, development and licensing of technology and formation, incubation and investment in technology businesses. A wide range of technologies are commercialised within the areas of healthcare, energy, environment and emerging technology trends.
Based at Imperial College London, the company has established equity holdings in 89 technology businesses and is managing 156 commercial agreements as of 31 July 2008. Imperial Innovations also commercialises technologies originating from outside Imperial College.
www.imperialinnovations.co.uk
Chairman's statement
The year ended 31 July 2008 was one of consolidation for the Group, during which a number of important steps were taken to put the Group in a firm position to achieve its business objectives.
A major step was the completion of a third fundraising for the Group, through which ‚£29.3 million net was raised in November 2007. The business had ‚£43.1 million in the bank at 31 July 2008 - an enviable position in the light of the global credit environment - and is now funded to a level which is expected to enable it to reach the point where realisations more than cover investment requirements.
The flow of quality IP remains strong. Imperial College London, whose high status as an eminent research body in Science, Technology and Medicine was reconfirmed by the Times Higher Education Supplement ranking as the fifth best University in the world, remains the core source of IP to be exploited by Innovations: 354 inventions were disclosed; 55 patents were filed; the un-commercialised patent portfolio stands at 213; and 11 technology businesses were formed, making a total of 89. The Group does not lack for high quality IP to exploit.
Important steps were taken to improve the pool of management brought into these technology businesses. This has been a major driver in the Group: to seek out Board members and executives to take forward exploitable IP into the market to generate sustainable, profitable businesses.
The Group has established an FSA regulated subsidiary to carry out FSA regulated activities, such as leading investment rounds and providing corporate finance advice to portfolio companies, which will enhance the Group's ability to provide expert assistance to its portfolio of investee companies.
The Group is still in the investment phase of its development. Its operating income - including licensing, royalty and fee income - does not match its administrative costs, nor will it for the foreseeable future. Additionally, the portfolio of companies is still dominated by early stage investments, when disappointments are at their most numerous.
Major gains, which will produce profit and net asset value increase, will only come when this phase has in part passed and exits are being achieved. That said, a material part of the Group's holding in Ceres Power has been sold during the period and a number of the portfolio companies are making progress towards becoming mature businesses in their own right, with traction in the market place. In our Annual Review, details are given of a number of the most promising companies in the portfolio.
During the year, Dr Tidu Maini left the Board. As the nominated Imperial College Director, his role was invaluable in smoothing the path for the Group to move from being a College department to a fully fledged commercial enterprise. This transition was completed when, in April 2008, the interim arrangements between Imperial College London and the Group came to an end. The Board was delighted to welcome Dr David Allen as a Director from 1 August 2008. Dr Allen's experience as a Director of BP plc, and as Chief of Staff, with responsibilities including technology development, will be of great assistance to his fellow Directors and to the Group as a whole.
Finally during the year a carried interest plan was put in place for all staff. Motivating them to act in a way which will deliver shareholder value is a key to satisfying shareholders' aspirations and to producing a commercially successful business. It is all the more important to focus executive effort on the work which will deliver such value and such commercial success at a time when the global economic background is so uncertain.
Dr Martin KnightChairmanChief Executive's report
This year our focus has been on two areas; adding value to the technology products we will license and progressing our technology businesses (spin-outs). I am particularly pleased with the number and calibre of board members and executives recruited into our companies and expect to see their combined experience translated into success within our company portfolio.
We have continued to be highly active in sourcing technologies from Imperial College London's academic inventors, whilst complementing this by obtaining ideas from non-Imperial research organisations through incubation and commercialisation contracts.
In November 2007, we raised ‚£29.3 million net of expenses from new and existing investors. We ended the financial year with net cash and short term liquid investments of ‚£43.1 million and are now funded to a level expected to enable the Group to reach the point where realisations will more than cover investment requirements and to deliver on our core objectives.
Financial results
Total revenue was ‚£5.3 million (2007: ‚£5.1 million) with ‚£0.5 million (2007: ‚£ 0.8 million) of cash (after interest) being used to run the business. Licence and royalty income increased by 29% to ‚£2.7 million (2007: ‚£2.1 million) whilst other revenue declined by 13% to ‚£2.6 million (2007: ‚£3.0 million) primarily due to declining fees as responsibility for various service activities were handed back to Imperial College allowing the Company to focus on value creating activity.
Reported loss (before share based payments) was ‚£2.7 million (2007 profit: ‚£5.3 million), the largest component of which comprises ‚£6.6 million fair value losses in our holding in Ceres Power. The actual loss for the period was ‚£5.9 million (2007 profit: ‚£0.9 million).
We realised ‚£3.5 million at 308 pence per share from the sale of part of our shareholding in Ceres Power Holdings plc leaving us with a 6.3% interest. The original cost of this investment was zero.
The Group invested ‚£6.4 million (2007: ‚£13.1 million) in its portfolio of companies. Additional commitments amounted to ‚£3.2 million with the portfolio raising in total over ‚£55 million. Net assets at the close of the year were ‚£ 80.3 million (2007: ‚£53.6 million).
The Technology Pipeline
Technology opportunities continue to flow into the business with
354 invention disclosures received, of which 73% originated from
Imperial College, and 55 new patents were filed.
We continue to secure essential `proof of concept' funding from external parties to support the demonstration of ideas. We are grateful for the support from the Higher Education Innovation Fund, Johnson and Johnson, Kuwait Petroleum Ltd, London Development Agency and Shapoorji Pallonji & Company.
We have sourced inventions and spin-out opportunities from a range of universities, research organisations and corporates including Cranfield University, Edinburgh University, the National Physical Laboratory, BAE Systems and GlaxoSmithKline. Four companies were admitted to the Recycling Commercialisation Centre funded by WRAP and three new companies signed up to the Low Carbon Incubator programme managed in partnership with the Carbon Trust.
Licensing activity
Our licensing activity is beginning to bear fruit. This year we signed 40 licenses and now have a total of 156 intellectual property agreements (licences, options and evaluation agreements) under management. Our two technology teams cover the fields of Healthcare (biopharma and medtech), Engineering, Energy and Environment, and Software and IT. Licences signed included:
* Novartis Institutes for Biomedical Research Inc and Alcon Inc - licences to bioscience research tools; * Emiliem Inc - option to an inhibitor of protein kinase B, a validated cancer target; * Medtronic - algorithm for optimising pacemaker performance; * Altana Nycomed and Invitrogen Corporation - non exclusive licences to eotaxin and antibodies; * Eurodiagnostica - option to a test for rheumatoid arthritis; * Medical Models Ltd - licence to anatomically accurate bone model designs; * Syrinix Ltd - licence for a water sensor technology.
This year our licence fees totalled ‚£1.8 million (2007: ‚£1.4 million) and royalties totalled ‚£0.9 million (2007: ‚£0.7 million).
New Technology Businesses and incubation
We formed 11 new companies:
* A-Sep Healthcare Ltd (infection control); * Cortexica Vision Systems Ltd (bioinspired imaging); * Duvas Technologies Ltd (air pollution monitoring); * i2india Holdings Ltd (commercialising technology in India); * Navion Pharma Ltd (cancer diagnosis and treatment - ion channels); * Octam Ltd (cancer therapeutic developing improved versions of existing therapy); * My Action Ltd (physical therapy and dietary advice to reduce heart disease); * Plaxica Ltd (development of novel bioplastics); * Permasonic Ltd (pipe monitoring); * Validas Ltd (tools for respiratory disease clinical trials); * Eostre Energy Systems Ltd (energy generation);
We have 18 companies currently in incubation. To highlight two of these; Novacem Ltd and Navion Pharma Ltd:
* Novacem is developing a range of cement binders based on magnesium oxide which are net absorbers of carbon dioxide. This `green cement' has attracted much attention from a variety of industry players. The company has received funding from the Technology Strategy Board (TSB) to lead a ‚£ 1.47 million project to critically assess the technical and commercial viability of the technology in collaboration with partners: Laing O'Rourke, Rio Tinto Minerals and WSP Group and Imperial College London. Stuart Evans (ex CEO of Plastic Logic) has agreed to chair the company. * Navion is developing cancer therapeutics based on recent research demonstrating the role of sodium ion channels in cancer. Professor Chris Wood (previously founding CEO and Chair of Bioenvision, a US$400 million NASDAQ listed company) has agreed to chair the company.
The Imperial Incubator, the physical incubation facility we have managed for two years, remains close to full occupancy and represents a thriving business environment for our early stage companies. Four companies have `graduated' from the Incubator and 18 companies are currently tenants.
International activity - i2india
We founded i2india to replicate Imperial Innovations' business model in India and to commercialise ideas from Indian research organisations. The company has raised ‚£1.5 million seed finance from a group of Indian business investors, the TATA group, and from Imperial Innovations, whose shareholding is 32.8%.
i2india will also act as a vehicle through which our portfolio of technologies can be introduced to partners and customers in India.
Progress in the existing company portfolio
At the end of the year there were 47 companies in the portfolio in which we actively manage our interest. Eighteen are managed by New Ventures currently in incubation, and 29 are under active management by the Investment Team. In addition we have smaller equity holdings in a further 42 companies for which we take a more passive management role.
Ceres Power Holdings plc, our largest quoted holding, represents 6.3% of the gross portfolio and closed the year at a gross value of ‚£8.9 million. In January 2008, British Gas agreed to fund a ‚£5 million development and trials programme for Combined Heat and Power units and to purchase at least 37,500 CHP units over a four-year period. Centrica plc (owner of British Gas) subscribed for 9.999% of the issued share capital of Ceres Power at 300p per share - equivalent to a cash investment of about ‚£20 million.
We were successful in securing funds from the Technology Strategy Board for a number of companies: BioCeramic Therapeutics (with partners Plasticell and Finsbury Orthopaedics) received ‚£375,000 to lead a ‚£1.3 million project, PolyTherics (with partners Glycoform and Aston University) secured ‚£685,000 and (with Avecia) ‚£350,000, and Southside Thermal Sciences (with partners RWE, NPower and Land Instruments) secured ‚£374,000. The Technology Strategy Board promotes innovation by bringing together partners and providing funds to aid development.
Investment activity in our Technology Businesses
We completed three large investments. We committed ‚£2 million to RespiVert, which is developing a new generation of inhaled medicines designed to transform the management of severe chronic respiratory diseases, as part of a ‚£13 million funding round alongside Advent Venture Partners, SV Life Sciences and Fidelity. Circassia, which is developing medicines designed to control immune system responses closed an ‚£11 million round which included ‚£1.75 million from the Group alongside new investors Goldman Sachs and Invesco and existing investor Lansdowne.
We committed ‚£2 million to OSspray as part of a ‚£3 million funding round, alongside investors NESTA and the Capital Fund. OSspray is developing bioactive glass material for dental applications.
We invested ‚£6.4 million in the companies in our portfolio during the year.
Other companies which completed fund raisings and milestone-based drawdowns included Deltadot, Duvas, Equinox, Evince, Heliswirl, Midaz, Myotec, Molecular Vision, Nanobiodesign,
Quantasol, Smart Surgical Systems, Spiral Gateway, Southside Thermal Sciences and Thiakis.
We have created Imperial Innovations Investment Management Ltd, a wholly owned subsidiary within the Group, to carry out FSA regulated activities such as leading investment rounds and providing corporate finance advice to portfolio companies.
An important factor in the success of early-stage businesses is the quality of the people that are put in place to run them, particularly the Chairman, as they work with the New Ventures team to build the commercial team and the rest of the board. As a result, we have significantly driven the recruitment of highly experienced individuals into our technology businesses and have recruited 14 chairmen and 11 CEOs and Non-Executive Directors into our technology businesses
New staff at Imperial Innovations
We have seen an increasing number of healthcare opportunities from Imperial College, mirroring the College's growth in activity in this area. Accordingly, to strengthen the New Ventures team, we have appointed Mark Wyatt as Bioscience Ventures Manager and Simon Kerr as Director of Biosciences Ventures, both of whom have highly technical and commercial bioscience experience.
Over the last four years Mark Wyatt has worked at the Rising Stars Growth Fund, latterly as an Investment Director, investing in seed and early stage technology companies, and prior to that he worked for six years at Merlin Biosciences shaping new life science propositions and undertaking due diligence on existing ones.
Simon Kerr has worked in the pharmaceutical and biotechnology sectors for over 25 years in business development, marketing and sales roles. He has extensive experience of biotechnology start-ups, and has held board-level positions in four companies: Gemini Genomics, Cambridge Genetics, Circassia Limited and TheraSci Limited. He was most recently Commercial Director of CeNeS Pharmaceuticals plc until its acquisition by Paion AG in June 2008.
We are continuing with our Entrepreneur in Residence programme and during the year appointed three people:
* John Beadle, formerly VP Global Medical Operations at GSK, then VP Medical and Product development at Powderject and CMO of PowderMed; * John Hamlin, formerly general manager at BP and corporate technology manager for BP Chemicals; * Nick Brooks, formerly general manager at Shell, recently CEO of Sun Biofuels and CEO Europe of Bioverda.
Outlook
The value of the Group continues to be demonstrated by the quality of its companies, the management teams and boards running them and the co-investors in these businesses. In addition, some of the products we are developing will be licensed and progressed to a stage where market size, and potentially substantial royalties, are more visible.
Fundamental to our success is the wide range of skills available across our team of 45 people and Imperial College; the quality of its science and the continued support of its management and inventors.
Susan SearleChief Executive OfficerFinancial report
The Group ended the year with net assets of ‚£80.3 million up by ‚£26.7 million on the prior year. Cash reserves (including short term liquidity investments) were ‚£43.1 million after a successful equity placing in November 2007 raising a total of ‚£29.3 million net. Revenue increased in the year to ‚£5.3 million (2007: ‚£5.1 million). Interest income increased to ‚£2.3 million (2007: ‚£1.4 million) and the Group moved closer towards its goal of meeting its operating expenses from its trading income and interest earned. The Group realised ‚£3.6 million (2007: ‚£0.4 million) from the partial realisation of investment assets and invested a total of ‚£6.4 million (2007: ‚£13.1 million) indicating the non-linear nature of the investment activities.
The value of the investment portfolio fell to ‚£51.2 million (2007: ‚£55.8 million) with a resulting decrease in provisions for revenue sharing obligations of ‚£4.3 million. The Group reported a loss of ‚£5.9 million (2007 profit: ‚£0.9 million) with an adjusted loss of ‚£2.7 million (2007 profit: ‚£5.3 million) excluding the non-cash share based payment charge.
Investment activities
During the year, the Group made ‚£6.4 million of investments to fund 22 technology companies in its portfolio. Additional commitments amounted to ‚£ 3.2million.
The early stage of many of the technology companies is such that investments are made on a milestone tranche-based method which matches their need for cash with delivery of milestones, whilst providing certainty of investment to ensure their security.
Additionally, some investments are made as convertible loans and at the year end there was a total of ‚£3.7 million outstanding, which are included in fixed asset investments.
During the year ‚£3.6 million was realised through the disposal of three investments and one partial disposal. This means that the total net investment in the year was ‚£2.8 million.
Portfolio performance
During the year the Group's investment portfolio fell by 8% from ‚£55.8 million spread over 74 companies to ‚£51.2 million over 89 companies. The portfolio as a whole raised in excess of ‚£55 million from all investors during the year.
Under the valuation technique based on International Private Equity and Venture Capital Valuation Guidelines (IPEVCVG), at the end of July 2008, the value of the Group's technology company holdings decreased by ‚£4.6 million to ‚£51.2 million before taking into account associated revenue sharing obligations and by ‚£3.0 million after these obligations have been taken into account.
Portfolio movements excluding cash invested 2008 2007 ‚£m ‚£m Gains on the revaluation of investments 4.0 13.3 Losses on the revaluation of investments (11.1) (3.8) Fair value (losses)/ gains (7.1) 9.5
Movement in associated revenue sharing obligations 4.1 (3.3)
Net fair value (loss)/ gain (3.0) 6.2
The most significant element of the fair value loss was the fall in value of the investment in Ceres Power Holdings plc (AIM: CWR.L).
Portfolio company creation
At 31 July 2008 the Group held equity stakes in 89 companies (2007: 74 companies). 23 companies in the portfolio achieved successful follow-on funding rounds during the year. Equity acquired relates to equity stakes acquired in companies in consideration for licence fees or services rendered.
Unquoted Quoted Total At 1 August 70 4 74 2007 New companies 11 - 11 formed Equity acquired 4 - 4 At 31 July 2008 85 4 89 Deferred payment obligations
Provisions for liabilities and charges decreased from ‚£15.2 million at the end of 2007 to ‚£10.9 million at the end of 2008, reflecting the decrease in the revenue share obligations to Imperial College London and other parties arising on the revaluation of the shareholding in technology companies.
Revenues, cost of sales and operating costs
Total revenues at ‚£5.3 million increased 4% from ‚£5.1 million in 2007 due to increased revenues earned from licensing, technology transfer and other activities despite the fees received from Imperial College dropping from ‚£ 725,000 to ‚£427,000 during the year.
Cost of sales, largely arising from the revenue sharing arrangement with Imperial College London, increased from ‚£1.1 million to ‚£1.5 million, a 36% increase, as a result of increased activity and higher revenue share on the development phase of a significant licence contract.
As a consequence of an increase in activity, operating costs (excluding the share based payment charge) increased by 8% from ‚£6.2 million to ‚£6.7 million. A total of ‚£1.3 million (2007: ‚£1.2 million) was charged to operating costs reflecting expenditure incurred filing patents and protecting the, as yet unexploited, intellectual property.
University Challenge Seed Fund
The University Challenge Seed Fund (UCSF) reflects an award made by the United Kingdom government and third parties and must be deployed according to the conditions of that award. The purpose of the fund covers seed investment and funds for proof of concept awards.
These terms include a restriction on distribution of monies from UCSF investments until the fund size has reached a multiple of three times the original investment of ‚£4.15 million, excluding donations from industry parties.
The corresponding creditor balance is reflected on the balance sheet under `non-current liabilities'. The decline in the value of this asset in the period arises mainly as a result of write downs in equity and loan balances in addition to the costs of running the fund.
Cash
The yearend cash balance of ‚£7.1 million, together with the short termliquidity balance, representing 3 months or longer term deposits of ‚£36million, totalling ‚£43.1 million of cash reserves, represents an increase of ‚£23.6 million from the opening balance of ‚£19.5 million. This movement islargely a result of: 2008 2007 ‚£m ‚£m Net cash used in (4.9) (2.1)operating activities Net cash outflow from (0.8) (11.1)investing activities Issue of net equity 29.3 - Financing activities - 0.2 Movement during year 23.6 (13.0)
It is the Group's current policy to place cash surplus to working capital requirements on short term deposits. The Group has no foreign currency deposits.
Share-based payments
Share-based payments made to Group Directors and staff are accounted for under International Financial Reporting Standard (IFRS) 2, `Share-based Payment' which requires that for share option awards to employees, the fair value of the employee services received should be measured by reference to the fair value of the share option at the grant date, with the charge being spread over the vesting period. This results in a charge to the Income Statement.
The assumptions used in calculating the charge are set out in detail in note 7 to the accounts. The charge is ‚£3.2 million in the year (2007: ‚£4.4 million). As this is a non cash item the total amount charged is reflected in the `share-based payment reserve' and therefore does not impact on shareholders' equity.
Fixed asset investments
All equity investments held by the Group are defined as financial assets under International Accounting Standard (IAS) 32 `Financial Statement: Disclosure and Presentation' and are classified as financial assets held at fair value under IAS 39, `Financial Instruments: Recognition and Measurement'. This includes all UCSF/LCSF equity investments.
Under IAS 39 the carrying value of all investments is measured at fair value with changes in fair value between accounting periods being charged or credited to the Income Statement.
Taxation
The Group is eligible for Substantial Shareholder Relief as it is a member of a trading group whilst it is a subsidiary of Imperial College London.
However, should the Group cease to be part of the Imperial College London group of companies (i.e. Imperial College London's holding falls below 50%), transitional rules apply, which are likely to preserve the exemption for a further two years. Therefore, unless Imperial College London reduces its holding to less than 50%, it is likely that the Group will continue to be exempt from taxation on chargeable gains from disposals of substantial shareholdings.
Deferred tax
Full provision for deferred tax under IFRS is made on all temporary differences resulting from the IFRS carrying value of fixed asset investments and its tax base.
Deferred tax is determined using tax rates (and laws) that have been enacted by the Balance Sheet date and are expected to apply when the related deferred tax asset is realised or deferred tax liability is settled. However, deferred tax assets and liabilities are only recognised to the extent that it is probable that the deferred tax liability will be payable or the deferred tax asset will be utilised in the future.
Any deferred tax charge or credit is applied through the Income Statement. During the year a total of ‚£0.9 million was credited to the Income Statement which arose on the reversal of the deferred tax provision previously accrued in the year ended 31 July 2007 and earlier as a result of unrecognised gains.
Julian Smith
Chief Financial and Operations Officer
Consolidated Income Statement
For the year ended 31 July 2008
2008 2007 ‚£000 ‚£000 Continuing operations Revenue 5,336 5,110 Cost of sales (1,453) (1,130) Gross profit 3,883 3,980 Net change in fair value of investments held (2,989) 6,240at fair value through profit and loss Administrative expenses: * Other administrative expenses (6,698) (6,174) * Share-based payments (3,202) (4,399) Operating loss (9,006) (353) Interest receivable 2,293 1,392 Interest payable (11) (16) (Loss)/profit before taxation (6,724) 1,023 Taxation 863 (141) (Loss)/profit for the financial year (5,861) 882 Basic (losses)/earnings per Ordinary Share (10.63) 1.78(pence) Diluted (losses)/earnings per Ordinary (10.63) 1.72Share (pence) Consolidated Balance SheetAs at 31 July 2008 2008 2007 ‚£000 ‚£000 Assets Non-current assets Property, plant and equipment 44 54 Investments 49,369 53,726 University Challenge Seed Fund (UCSF): * Investments 800 1,061 * Loans 758 758 Low Carbon Seed Fund (LCSF) 234 227 Total non-current assets 51,205 55,826 Current assets Trade and other receivables 1,488 1,343 Short term liquidity investments 36,000 - Cash and cash equivalents 7,077 19,469 Total current assets 44,565 20,812 Total assets 95,770 76,638 Equity and liabilities Equity attributable to equity holders Issued share capital 1,746 1,501 Share premium 51,748 22,713 Retained earnings 581 6,442 Share-based payments 8,097 4,895 Other reserves 18,096 18,096 Total equity 80,268 53,647 Liabilities Non-current liabilities University Challenge Seed Fund (UCSF) 1,590 1,905 Provisions for liabilities and charges 10,863 15,182 Deferred taxation - 863 Low Carbon Seed Fund (LCSF) 234 227 Total non-current liabilities 12,687 18,177 Current liabilities Trade and other payables 2,815 4,814 Total liabilities 15,502 22,991 Total equity and liabilities 95,770 76,638
Consolidated Cash Flow Statement
For the year ended 31 July 2008
2008 2007 ‚£000 ‚£000 Cash outflows from operating activities Operating loss (9,006) (353) Adjustments to reconcile operating loss to net cash flows from operating activities Depreciation of property, plant 21 16 and equipment Fair value movement in investments 2,989 (6,240) Share based payments 3,202 4,399 UCSF management fee (60) (70) Working capital adjustments: Increase in trade and other (139) (498) receivables (Decrease)/increase in trade and (1,847) 555 other payables Net cash used in operating (4,840) (2,191) activities Cash flows from investing activities Purchase of property, plant and (11) (46) equipment Purchase of investments (6,149) (12,744) Proceeds from sale of investments 3,600 426 Revenue share paid on asset (332) - realisations Purchase of UCSF investments - (19) Interest paid (25) - Interest received 2,079 1,326 Short term liquidity investments (36,000) - Net cash used in investing (36,838) (11,057) activities Cash flows from financing activities Proceeds from share issues 30,000 - Transaction cost of issue of (720) - shares Income from UCSF fund 6 170 Net cash generated from financing 29,286 170 activities Net decrease in cash and cash (12,392) (13,078) equivalents Cash and cash equivalents at 19,469 32,547 beginning of the year Cash and cash equivalents at end 7,077 19,469 of the year
Consolidated Statement of Changes in Equity
Attributable to equity holders of the group
Share Share Retained Share-based Other Total Payments Capital Premium Earnings Reserves ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 At 1 August 2006 1,501 22,713 5,560 496 18,096 48,366 Consolidated profit for the - - 882 - - 882 year to 31 July 2007 Share-based payments - - - 4,399 - 4,399 At 31 July 2007 1,501 22,713 6,442 4,895 18,096 53,647 Consolidated loss for the - - (5,861) - - (5,861)year to 31 July 2008 Issue of share capital 245 29,035 - - - 29,280 Share-based payments - - - 3,202 - 3,202 At 31 July 2008 1,746 51,748 581 8,097 18,096 80,268 Basis of preparation
The preliminary announcement for the year ended 31 July 2008 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as at 31 July 2008. The financial information contained in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The financial information has been extracted from the financial statements for the year ended 31 July 2008, which have been approved by the Board of Directors and on which the auditors have reported without qualification. 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 2007, upon which the auditors reported without qualification, have been delivered to the Registrar of Companies.
Investments - Designated at fair value through profit or loss
Quoted Unquoted Total Companies1 Companies ‚£000 ‚£000 ‚£000 At 1 August 2006 16,906 14,592 31,498 Investments during the - 13,144 13,144period Reclassification during the 250 (250) -period Changes in fair value during 3,405 6,105 9,510the period Realisations during the (53) (373) (426)period At 31 July 2007 20,508 33,218 53,726 Quoted Unquoted Total Companies1 Companies ‚£000 ‚£000 ‚£000 At 1 August 2007 20,508 33,218 53,726 Investments during the - 6,357 6,357period Changes in fair value during (7,262) 148 (7,114)the period Realisations during the (3,557) (43) (3,600)period At 31 July 2008 9,689 39,680 49,369
1 All quoted companies are listed on AIM.
Provisions for liabilities and charges
Quoted Unquoted Total Companies Companies ‚£000 ‚£000 ‚£000 At 1 August 2007 8,425 6,757 15,182 Changes in fair value during (3,389) (736) (4,125)the period Realisations during the (196) - (196)period At 31 July 2008 4,840 6,021 10,861Analysed by obligation: Revenue Revenue Deferred Total Sharing Imperial Sharing Consideration College Other ‚£000 ‚£000 ‚£000 ‚£000 At 1 August 2007 13,058 1,242 882 15,182 Settlements (37) (159) - (196) Changes in fair value (3,545) (175) (405) (4,125)attributable to revenue share At 31 July 2008 9,476 908 477 10,861
The revenue sharing provision 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 and 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 other revenue share represents monies due to other third parties in the Appointee Directors' Pool in respect of the Imperial Innovations LLP assets acquired as part of the stepped acquisition in 2005. The timing and amount of the realisation of the provision is dependent on the timing of the disposal of investments, which is uncertain.
Deferred consideration represents monies due to Imperial College upon the eventual realisation of the Imperial Innovations LLP assets acquired from Imperial College as part of the private share placement in 2005. The deferred consideration at the date of acquisition (April 2005) was ‚£554,000. At each Balance Sheet date a fair value adjustment is made until the eventual realisation of the assets. The timing of the realisation of the provision is dependent on the realisation of the Imperial Innovations LLP assets acquired from Imperial College, which is uncertain.
Net change in fair value of investments held at fair value through profit orloss Quoted Unquoted Total Companies Companies ‚£000 ‚£000 ‚£000 At 1 August 2007 12,083 26,461 38,544 Investments during the period - 6,357 6,357 Changes in fair value during (3,873) 884 (2,989)the period Realisations during the (3,361) (43) (3,404)period At 31 July 2008 4,849 33,659 38,508
Net change in fair value for the period represents the changes in fair value less the revenue share charge on these fair value movements.
(Losses)/Earnings per share
Basic (losses)/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 period.
The (losses)/profits and weighted average number of shares used in the calculations are set out below:
2008 2007 (Losses)/earnings per Ordinary Share (Loss)/profit for the financial year (‚£000) (5,861) 882
Weighted average number of Ordinary Shares (basic) 55,130 49,522 (thousands)
Effect of dilutive potential Ordinary Shares 1 - 1,724
Weighted average number of Ordinary Shares for the - 51,246 purposes of diluted (losses)/earnings per share
(thousands)
(Losses)/earnings per Ordinary Share basic (pence) (10.63) 1.78
(Losses)/earnings per Ordinary Share diluted (pence) 1 (10.63) 1.72
1 Diluted EPS is the same as EPS as the Group was loss making for the period.
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