30 Apr 2008 07:00
30 April 2008 Imperial Innovations Group plc Interim results for the six months ended 31 January 2008
HIGHLIGHTS
- Successfully raised a further ‚£29.3 million net of expenses from
the issue of equity in November 2007 to fully capitalise the group.
- Completed 2 large funding rounds for therapeutic companies raising
a total of ‚£11 million for Circassia and ‚£13 million for Respivert. The
total investment by the Group in the half year was ‚£3.1million with ‚£3.6
million in realisations.
- Founded and raised capital for i2india, an associate 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.
- Implemented new recruitment initiatives to accelerate growth in
portfolio companies, signing up recruitment consultants, Lancor Group Ltd
and Ruston Poole International Ltd to work alongside the portfolio
companies and introduce management as required.
- Significant progress has been made in the portfolio.
- Circassia Ltd, a specialty biopharmaceutical company focused on controlling
immune system responses, has initiated a Phase II Clinical Study with its
anti-allergy technology, ToleroMune.
- Thiakis Ltd, a biopharmaceutical company focused on the development of
peptide hormones for the treatment of obesity, has successfully commenced a
clinical trial of TKS1225, the company's novel oxyntomodulin analogue, for
obesity treatment.
- PolyTherics Ltd, an innovative biopharmaceutical company has signed a
collaboration agreement with Celtic Pharma, a global private equity investment
fund focused on the Biopharma industry, to enhance certain of their pharmaceutical products in development. - Ixico Ltd has made significant commercial progress, with its imaging capability currently being used by a global pharmaceutical company in a clinical study, and having been selected to supply another leading international pharmaceutical company. - Cell Medica Ltd has received ethics approval for the launch of a multi-centre, randomised confirmatory study aimed at demonstrating the
clinical benefit of virus-specific cell therapy to treat CMV infections in
cancer patients following bone marrow transplants. CMV is a major cause of
infections in these patients.
- Heliswirl Ltd has recently appointed Marco Fabbri as a non executive
director and Chairman. Marco was CEO of Kvaerner Oilfield Products (KOP) until
2000 and has more recently acted as an advisor to a number of major companies
with oil industry activities. - Quantasol Ltd has recently been commissioned by a major manufacturer of concentrator PV systems to develop a bespoke cell for their own highly
innovative concentrator system. The initial contract will create trial systems
with an expectation that this will lead to large scale orders for solar cells
in 2009.
- Total equity up from ‚£53.6 million at 31 July 2007 to ‚£82.9
million at 31 January 2008 with cash reserves up from ‚£19.5 million to
‚£46.9 million.
- Awarded contract by National Physical Laboratory (NPL) to provide
commercialisation services for the extensive research activities
undertaken at NPL. NPL is the UK's National Measurement Institute and a
world-leading centre for the development and application of the most
accurate measurement standards in science and technology. The signing of
the contract follows a successful three month trial during which Imperial
Innovations reviewed a large number of NPL's projects.
Martin Knight, Chairman, said:
"The Group is pleased to have raised ‚£30 million in the market in the firsthalf of the year. The Group continues to be focussed on getting technology tomarket and is excited about the opportunities within both its own productportfolio and its portfolio of technology businesses."
For further information please contact:
Imperial InnovationsMartin 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 Russ Cummings, Chief Investment Officer +44 20 7594 1331
M:Communications
Patrick d'Ancona / Eleanor Williamson +44 20 7153 1539
JPMorgan Cazenove (NOMAD to ImperialInnovations)Steve Baldwin +44(0)20 7588 2828CHAIRMAN'S STATEMENT
Imperial Innovations continues to make progress through the exploitation of intellectual property emanating principally from Imperial College.
Three features stand out in a review of the half year ended 31 January 2008:
- The company completed a fund raising of ‚£29.3 million net of costs on 22
November 2007. The business now has sufficient capital resources to drive the
successful implementation of its business model. In today's environment,
having ‚£47 million of cash in the bank places the Group in a strong position.
- A number of companies in the portfolio emerged as substantial early stage
businesses with exciting, tangible prospects; in particular Circassia, Thiakis
and Respivert raised substantial funding commitments (‚£11 million, ‚£5 million
and ‚£13 million respectively) as they progressed their activities. In total,
‚£35 million was raised by portfolio companies, of which the Group invested
‚£3.1 million. The movement in the value of the group's shareholding in Ceres
Power Holdings plc, quoted on the Alternative Investment Market of the London
Stock Exchange, had a material impact on the Group's net asset value,
notwithstanding the sale by the Group of a significant portion of its holding
in September 2007. Ceres Power has made exciting progress, through its deal
with Centrica plc, in bringing its fuel cell technology to market.
- The flow of intellectual property into the Group continued powerfully: 150
new inventions were disclosed in Imperial College, with 24 new patents filed.
The uncommercialised patent portfolio now stands at 205, an indication of the
stock of commercialisation opportunities still not touched.
Your Board put in place a carried interest plan for all staff. Ensuring the alignment of shareholder interest and staff incentives has been an important step for the business.
At the February 2008 Board meeting, Dr Tidu Maini, as a result of hisresignation as Pro-Rector for Development and Corporate Affairs for ImperialCollege, resigned as a Director of the Group. He has played a crucial role inthe transformation of the business from an Imperial College department into afully commercially focused corporate entity. We are grateful to him.
The progress that has been made to date to position the Company for the future has been down to the staff's efforts and your Board is grateful for the continued drive and determination exhibited across all of the Company's activities.
Dr Martin KnightChairmanCHIEF EXECUTIVE'S REPORTOVERVIEWDuring this period, we raised ‚£29.3 million net of expenses from existingshareholders and new shareholders. Our focus for this half year has beendeveloping technology opportunities and building and progressing businesses.Our portfolio of companies is becoming more mature and we continue to look forways to improve what we do - notably we added an innovative relationship withtwo recruitment companies to enable faster attraction of even better talentinto our portfolio of companies.We continue to work with Imperial College efficiently and effectively and havebeen pro-actively visiting many academic inventors at Imperial College. Weadded the National Physical Laboratories as a technology source and our otherpartnerships continue to complement the core activity of commercialising ideasfrom Imperial College's growing research base.The Group's trading activities for the period used cash of ‚£0.4 million(including interest received but excluding portfolio investment activities andafter adjusting for working capital timing differences). This includedon-going investment in intellectual property of ‚£0.6 million through patentexpenditure. Additionally, the Group invested a total of ‚£3.1 million in thefirst six months of the year in its portfolio companies with realisations of‚£3.6 million.THE TECHNOLOGY PIPELINEA steady flow of new ideas came from Imperial College (150 new inventions and24 new patents filed). 6 projects were approved for proof of concept funding.The un-commercialised patent portfolio size is 205 - this provides anindication of the ideas in stock possibly capable of being commercialised. Wealso commercialise technologies that are not protected by patents, but rathercomprise confidential know-how, copyright or design rights.
We secured $1m of new proof of concept funding from Shapoorji Pallonji & company, a diversified conglomerate including one of the foremost construction and real estate companies based in India. This funding will help to advance very early stage ideas pre investment and will encourage links to India, complementing the establishment of i2india.
IP AGREEMENTS
We have completed 18 new agreements (options, licences or assignments) andgenerated ‚£1.4 million of revenue (H1 2007: ‚£1.1 million, FY2007 ‚£2.1 million)from these agreements and through royalties and milestones from the existingportfolio of commercial agreements. A number of potentially royalty bearingagreements were concluded covering a range of technologies from early stagetherapeutics to medical devices to oil well monitoring software. Agreementssigned included:
- Novartis Institute and Alcon - Two licences to research tools;
- Invitrogen - Licence to eotaxin and corresponding antibodies;
- Emiliem - Option to an inhibitor of protein kinase B, a validated cancer
target;
- Edinburgh Petroleum (subsidiary of Weatherford) - Licence to de-convolution
software for analysis and appraisal of oil wells;
- Medtronic - algorithm for optimising pace maker performance.
NEW TECHNOLOGY BUSINESSES AND INCUBATION ACTIVITY
At the end of the last financial year our New Ventures team completed the incubation of a number of companies including BioCeramic Therapeutics, Evoelectric and Quantasol which concluded first round financing in excess of ‚£3.7 million (jumping the seed stage). In this half year, the team has therefore been busy developing a new cohort of company propositions across areas such as clean power generation from coal, bioinspired imaging, and orthopaedic appliances.
Novacem is developing a range of cement binders based on magnesium oxide whichare net absorbers of carbon dioxide. We have been working on the strategy forthis business and the technology is attracting much attention from a varietyof industry players. We formed four new companies: A-sep (infection control),Duvas (air pollution monitoring), Validas (tools for respiratory diseasetrials) and i2india.We believe that experienced and high quality Boards are a key to success. Wesigned an innovative new arrangement with two executive search consultants,Chris Reichhelm of Lancor and David Collingham of Ruston Poole Internationalwho provide access to people with specific industry experience and work withus to attract the best talent to our companies. In addition we recruitedEntrepreneur in Residence, John Beadle, following our previous successes withDaniel Green and Peter Beynon. John was part of the Powderject team thatco-founded PowderMed.
PROGRESS IN THE EXISTING PORTFOLIO OF COMPANIES
At the end of the period there were 77 businesses in the portfolio (H1 2007:70, FY2007 74). The portfolio comprised 4 quoted holdings and 73 unquotedholdings. The unquoted portfolio increased in value from ‚£26.5 million to‚£31.9 million after revenue sharing obligations, comprising ‚£3.1millioninvestments and ‚£2.3 million fair value gains. The net quoted portfoliodecreased from ‚£12.1 million to ‚£5.9 million (reflecting movements in thevalue of stock as well as disposals). Ceres Power Holdings plc, our largestquoted holding represents 21% of the total gross portfolio and closed the halfyear at ‚£10.7 million. Ceres Power Holdings plc signed an agreement withCentrica for a funded trialling programme and a forward order of 37,500 unitsfor residential combined heat and power products. Centrica also subscribed fora 10% stake in the company at 300 pence per share investing a total of around‚£20 million.
The portfolio of companies raised circa ‚£35 million during the half year. Companies that completed fund raisings and milestone based draw downs included Ceres Power Holdings plc, Circassia, Respivert, Deltadot, Heliswirl, Quantasol, Ionscope, and we made a seed investment in I2India.
We continue to attract good people into our technology businesses. Paul May,formerly technical director of Cambridge Display Technology joined Midaz asCEO, Nigel Burns, formerly Senior Vice President at Cambridge AntibodyTechnologies joined CellMedica as chairman and Jackie Walker, formerly VP &General Manager of the professional services division of DentSplyInternational, joined Osspray. Stephen Allott, formerly chairman of Micromuse,took over as Chairman of Inforsense.Our technology businesses continued to make commercial progress. Polythericssigned a collaboration with Celtic Pharma and Ixico has made significantcommercial progress, with its imaging capability currently being used by aglobal pharmaceutical company in a clinical study, and having been selected tosupply another leading international pharmaceutical company.The therapeutics businesses have made good technical progress. Thiakisannounced its clinical trials in man for its Oxyntomodulin analogue which willtreat obesity. Circassia announced that it had initiated its phase II clinicalstudy of its novel anti-allergy technology and Cellmedica has achieved a majormilestone, receiving ethics and regulatory approval to commence its pivotalPhase III clinical trial for the use of CMVT cells to treat CMV infection inbone marrow transplant patients. CMV causes over 70% of all bone marrowtransplant failures.Heliswirl has recently appointed Marco Fabri as a non executive director andChairman. Marco was CEO of Kvaerner Oilfield Products (KOP) until 2000 and hasmore recently acted as an advisor to a number of major companies with oilindustry activities.
The Engineer awards in September recognised Ionscope with the University spin out award and Professor Colin Caro of Imperial College Department of Bioengineering, for outstanding achievement in technology innovation. His technology forms the basis of both Veryan Medical and Heliswirl.
INVESTMENT ACTIVITY
We completed two large investments. We committed ‚£1.7 million to Respivert, which is developing therapeutics to combat respiratory disease as part of a ‚£13 million round alongside Advent Venture Partners, SV Life Sciences and Fidelity. Circassia, developing medicines designed to control immune system responses, closed an ‚£11 million round which included ‚£1.75 million from Innovations alongside new investors Goldman Sachs and Invesco Perpetual together with existing investor Lansdowne.
We invested ‚£3.1 million in this first half of the year. Since the period end the Group has invested a further ‚£1.4 million.
DIVESTMENT ACTIVITY
We realised ‚£3.5 million at 308 pence per share from our shareholding in CeresPower Holdings plc leaving us with a 6.3% shareholding, an illustration of howwe complete the process from founding equity to exit. The original cost ofinvestment of this equity was zero.
PARTNERS
We continue to work through a variety of arrangements with complementary sources of intellectual property, industry partners and government bodies who provide us with market knowledge and access:
- BAE Systems - we are currently negotiating licences for an engineering
software system and are working on the commercialisation of a number of other
technologies.
- National Physical Laboratories, a research organisation based in Teddington
- we signed an exclusive agreement to commercialise their technology.
- Johnson and Johnson - committed further proof of concept funding for medical
devices and diagnostics.
- The Recycling Commercialisation Centre, sponsored by WRAP - 3 new companies
have been signed in this half year including Rubber Regen, a company
developing a process for conversion of rubber waste to products, FineAg, an
aggregate recycling technology and Natural Resources, a company developing
moulded paper products using recycled paper.
- Carbon Trust - we signed 2 new companies, Novacem and Evoelectric to the
incubator program.
INTERNATIONAL ACTIVITY - I2INDIA HOLDINGS LTD
We founded i2india, an associate business in India and raised ‚£1.5 millionseed finance. Innovations owns 34% before the impact on dilution arising frommanagement options with the balance owned by a range of Indian businessinvestors and TATA group. The chairman, Chris Mathias is an experiencedentrepreneur and has established an experienced advisory board. The advisoryboard includes Dr Tidu Maini (Chairman), Dr R.A. Mashelkar, D. S. Brar, D.Peck and G. Wrigley. The company intends to work with Indian researchorganisations to commercialise ideas following the Innovations Group model. Itwill also act as a vehicle through which Innovations Group technologies can beintroduced to partners and customers in India.
In conclusion the Group remains focused on getting technology to market and is extremely excited about the opportunities within both its own product portfolio and its portfolio of technology businesses.
FINANCIAL REVIEW
SUMMARY
The Group ended the half year with net assets of ‚£82.9 million, up by ‚£29.3million on the start of the year due primarily to the issue of new equity inNovember 2007. There was a decrease of ‚£4.1 million in the value of theinvestment portfolio from ‚£55.8 million to ‚£51.7 million due to realisationsand revaluation losses in the portfolio with a resulting decrease in theprovision for revenue sharing obligations of ‚£3.3 million (‚£2.9m excludingUniversity Challenge Seed Fund movements and disposals). The Group showed anadjusted loss after excluding the non cash share based payment charge of‚£71,000 (H1 2007: ‚£24,000 profit) and a loss for the financial period of ‚£2.2million (H1 2007: ‚£2.1 million) after the non cash share based payment charge.Trading revenue was up 10% at ‚£2.8 million for the period (H1 2007: ‚£2.5million).The last half year covers a period during which there has been significantturmoil in the global financial markets triggered by a liquidity crisisbetween financial institutions and sub-prime mortgages asset write offs. Thishas triggered volatility in the world stock markets and has impacted on itsquoted holdings which have fallen significantly in line with the AIM market asa whole. The Group has raised sufficient cash through the issue of new equitythat its trading activity has so far been unaffected by this turbulence, andalthough there may be an impact on the ability of the portfolio companies toraise venture capital type investment this has yet to materialise with goodinvestment proposition continuing to attract required funding.
INVESTMENT PERFORMANCE
During the half year, the Group made ‚£3.1 million investments to fund 10technology companies in its portfolio and at the end of the half year hadoutstanding commitments to make further investments of ‚£3.6 million. The earlystage of many of the technology companies is such that investments are made ona milestone tranched basis which matches their need for cash with the deliveryof milestones whilst providing the certainty of investment to ensure theirsecurity. Some investments are made as convertible loans and at the half yearend these had a carrying value of ‚£2.5 million.
During the first six months of the year a total of ‚£3.6 million was realised from the partial disposal of 4 investments, primarily a disposal of ‚£3.5 million in Ceres Power Holdings plc at a price of 308 pence per share which takes our current holding to 6.3%.
PORTFOLIO PERFORMANCE
The Group reported a net loss in fair value of ‚£0.5 million (H1 2007: gain ‚£0.7 million, FY 2007: gain ‚£6.2 million). An analysis of the changes in fair value is given below:
Portfolio movements excluding cash Six months to Six months to 12 months toinvested; 31 January 31 January 31 July 2008 2007 2007 ‚£`000 ‚£`000 ‚£`000Gains on revaluation of investments 3,852 3,537 13,300Losses on the revaluation of (7,254) (2,760) (3,790)investmentsFair value (losses) / gains (3,402) 777 9,510Movement in associated revenue 2,880 (31)
(3,270)
sharing obligationsNet fair value (losses) / gains (522) 746
6,240
The gross gains on revaluation of investments of ‚£3.9 million (H1 2007: ‚£3.5million, FY 2007: ‚£13.3 million) were attributable to movements on the valueof existing unquoted shareholdings as a result of increased valuations in 5unquoted company funding rounds and to surpluses arising on realisations. Thelosses on the revaluation of investments of ‚£7.3 million (H1 2007: ‚£2.7million, FY 2007: ‚£3.8 million) were attributable, in part, to market losseson the Group's portfolio of AIM-listed investments of ‚£5.2 million, andunrealised losses against investments in the unquoted portfolio amounted to‚£2.1 million. The Group realised, on the partial disposal of 4 investments,the sum of ‚£3.6 million (H1 2007: ‚£0.2 million, FY 2007: ‚£0.6 million).
EQUITY STAKES
At 31 January 2008, the Group had equity stakes in 77 companies (H1 2007: 70companies, FY 2007: 74 companies). A schedule setting out the movement in thenumber of technology companies is given below:Technology Companies Unquoted Quoted spin-outs spin-outs Total (number) (number) (number)At 1 August 2007 70 4 74New technology companies 4 - 4Companies leaving the portfolio (1) (1)during the periodAt 31 January 2008 73 4 77During the period, the Group invested ‚£0.1 million (H1 2007: ‚£nil, FY 2007:‚£0.6 million) in 1 new technology company and ‚£3 million (H1 2007: ‚£5.2million, FY 2007: ‚£12.5 million) in follow-on funding and the portfolio as awhole raised about ‚£35 million (H1 2007: ‚£15.7 million, FY 2007: ‚£40 million).Since 31 January 2008 the Group has invested a further ‚£1.4 million in 7companies.
OPERATIONAL PERFORMANCE
Excluding the share based payment charge and including interest receivable theGroup made a loss for the financial period of ‚£71,000. After accounting forthe share based payment charge the Group reported a loss for the financialperiod of ‚£2.2 million (H1 2007: loss ‚£2.1 million, FY 2007: profit ‚£0.9million).
REVENUE AND EXPENSES
Trading revenue for the six months ended 31 January 2008 of ‚£2.8 million (H12007: ‚£2.5 million, FY 2007: ‚£5.1 million) is ‚£0.3m higher than that for thesix months ended 31 January 2007 despite the fees from Imperial Collegedropping significantly as expected and as per the Technology PipelineAgreement signed in 2005. The increase in non Imperial College revenue isprimarily due to higher licence and royalty income.Cost of sales, largely arising from the revenue sharing arrangements withImperial College, increased by ‚£35,000 to ‚£0.8 million (H1 2007: ‚£0.8 million,FY 2007: ‚£1.1 million), a 4.7% increase. Other expenses (excluding the sharebased payment charge) of ‚£3.4 million (H1 2007: ‚£3.2 million, FY 2007: ‚£6.2million) are ‚£0.2 million (4.9%) higher than that for the six months ended 31January 2007.This is primarily due to increased operational activity across the business.Included within this figure is a charge of ‚£0.6 million (H1 2007: ‚£0.5million, FY 2007: ‚£1.2 million) reflecting expenditure incurred filing patentsand protecting the as yet unexploited intellectual property.
SHARE BASED PAYMENTS
The Group has incurred an IFRS 2 "Share Based Payment" charge in the period of‚£2.2 million (H1 2007: ‚£2.1 million, FY 2007: ‚£4.4 million). This chargereflects options that were granted to non-executive directors, directors andemployees in 2006 and 2007. IFRS 2 requires the Group to value the stockoptions at grant date and to charge this over the vesting period. Theseoptions become exercisable at the end of April 2008 subject, in certain cases,to share price performance, and as such the IFRS2 charge will cease in April2008.CASHAt 31 January 2008 the Group had cash of ‚£46.9 million (31 January 2007: ‚£27.0million, 31 July 2007: ‚£19.5 million). This represents an increase of ‚£27.4million from the opening balance. This movement is summarised below: Six months to Six months to 12 months to 31 January 31 January 31 July 2008 2007 2007 ‚£'000 ‚£'000 ‚£'000
Net cash used in operating activities (3,000) (1,700)
(2,200)
Net cash generated from/(used in) 1,100 (3,900)
(11,100)
investing activitiesFinancing activities - -
200
Issue of new ordinary share capital (net 29,300 -
-of expenses)Movement in period 27,400 (5,600) (13,100)Of the net cash used in operating activities, ‚£1.7 million reflected movementsin working capital arising from increased turnover at the end of the periodand settlement of liabilities brought forward at the start of the period. Itis the Group's current policy to place cash surplus to working capitalrequirements on short-term deposits. The Group has no foreign currencydeposits. In light of the current macro economic climate, the Group maintainsits cash reserves with a number of highly credit rated institutions todiversify counterparty risk.
TAXATION
The Group is eligible for Substantial Shareholder Relief as it is a member ofa trading group whilst it is a subsidiary of Imperial College. However, shouldthe Group cease to be part of the Imperial College group of companies (i.e.Imperial College's shareholding drops below 50%) transitional rules apply,which are likely to preserve the exemption for a further two years. Therefore,unless Imperial College reduces its holding to less than 50%, it is likelythat the Group will continue to be exempt from taxation on chargeable gainsfrom disposals of substantial shareholdings.During the period, ‚£0.9 million (H1 2007: ‚£nil, FY 2007: (‚£0.1 million)) wascredited to the Income Statement which arose on the reversal of the deferredtaxation provision previously accrued in the financial year ended 2007 andearlier as a result of the unrecognised gain in the material investment inCeres Power Holdings plc. The value of the Group's investment in Ceres PowerHoldings plc fell in the half year and as a result the unrealised gain wasless than the brought forward management expenses and so no provision fordeferred tax needs be held at the end of the period.
EMPLOYEE CARRIED INTEREST PLAN
During the half year the Group put into place a long term incentive plan as had been discussed in the 2007 Chairman's statement and in the 2006 AIM admission document. The scheme was defined by the Group's Remuneration Committee who took external guidance from remuneration experts MM&K. It is structured as a carried interest plan providing a bonus on realised gains achieved exceeding a 8% per annum threshold. At the half year, there was no accrued benefit to the Directors or employees.
CONSOLIDATED INTERIM INCOME STATEMENTFOR THE SIX MONTH PERIOD TO 31 JANUARY 2008 Unaudited Unaudited Audited six months to six months to 12 months to 31 January 31 January 31 July 2008 2007 2007 Note ‚£'000 ‚£'000 ‚£'000Continuing operationsRevenue 2,781 2,525 5,110Cost of sales (786) (751) (1,130)Gross profit 1,995 1,774 3,980 Investments
Change in fair value of investments 2 (522) 746
6,240
Administrative expenses:- Other administrative expenses (3,366) (3,207)
(6,174)- Share based payments (2,167) (2,133) (4,399)Operating (loss) (4,060) (2,820) (353) Interest receivable 962 711 1,392Interest payable (3) - (16)
(Loss) / profit before taxation (3,101) (2,109)
1,023
Taxation 863 -
(141)
(Loss) / profit for the financial (2,238) (2,109)
882period Basic (loss) / earnings per 4 (4.3) (4.3) 1.78ordinary share (pence)Diluted (loss) / earnings per 4 (4.3) (4.3) 1.72ordinary share (pence)CONSOLIDATED INTERIM BALANCE SHEETAS AT 31 JANUARY 2008 Unaudited Unaudited Audited As at As at As at 31 January 31 January 31 July 2008 2007 2007 Note ‚£'000 ‚£'000 ‚£'000AssetsNon-current assets
Property, plant and equipment 49 45
54
Investments 2 49,852 37,319
53,726
University Challenge Seed Fund(UCSF):- Investments 851 881 1,061- Loans 758 1,039 758Low Carbon Seed Fund (LCSF) 237 - 227Total non-current assets 51,747 39,284 55,826Current assetsTrade and other receivables 2,159 1,559 1,343Cash and cash equivalents 46,867 26,954 19,469Total current assets 49,026 28,513 20,812Total assets 100,773 67,797 76,638Equity and liabilitiesEquity attributable to equityholdersIssued share capital 1,746 1,501 1,501Share premium 51,798 22,713 22,713Retained earnings 4,204 3,451 6,442Share based payments 7,062 2,629 4,895Other reserves 18,096 18,096 18,096Total equity 82,906 48,390 53,647LiabilitiesNon-current liabilities
University Challenge Seed Fund 1,670 1,910
1,905
(UCSF)
Provisions for liabilities and 3 12,104 12,041
15,182chargesDeferred taxation - 722 863Low Carbon Seed Fund (LCSF) 237 - 227
Total non-current liabilities 14,011 14,673
18,177Current liabilitiesTrade and other payables 3,856 4,734 4,814Total liabilities 17,867 19,407 22,991
Total equity and liabilities 100,773 67,797
76,638
CONSOLIDATED INTERIM CASH FLOW STATEMENTFOR THE SIX MONTH PERIOD TO 31 JANUARY 2008 Unaudited Unaudited Audited six months to six months to 12 months to 31 January 31 January 31 July 2008 2007 2007 ‚£'000 ‚£'000 ‚£'000Cash flows from operating activitiesOperating (loss) (4,060) (2,820)
(353)
Adjustments to reconcile operating (loss)to netcash flows from operating activitiesDepreciation of property, plant and 11 9
16
equipment
Fair value movement in investments 522 (746)
(6,240)Share based payments 2,167 2,133 4,399UCSF management fee (30) - (70)Working capital adjustments
(Increase) in trade and other receivables (802) (383)
(498)
(Decrease) / increase in trade and other (876) 95
555
payables
Net cash used in operating activities (3,068) (1,712) (2,191)
Cash flows from investing activitiesPurchase of property, plant and equipment (6) (29)
(46)
Purchase of investments (2,929) (4,739)
(12,744)
Proceeds from sale of investments 3,596 270
426
Revenue share paid on asset realisations (295) -
-Purchase of UCSF investments - (19) (19)Interest received 764 632 1,326Net cash generated from / (used in) 1,130 (3,885)
(11,057)
investing
activities
Cash flows from financing activitiesProceeds from share issues 30,000 -
-
Transaction cost of issue of shares (670) -
-
Income from UCSF fund 6 4
170
Net cash generated from financing 29,336 4
170
activities
Net increase / (decrease) in cash and 27,398 (5,593)
(13,078)
cash
equivalents
Cash and cash equivalents at beginning of 19,469 32,547 32,547 the period
Cash and cash equivalents at end of the 46,867 26,954 19,469periodCONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITYAttributable to equity holders of the Group Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited Share Share Retained Share Other Capital Premium Earnings Based Reserves Total Payments ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000At 31 January 2007 1,501 22,713 3,451 2,629 18,096 48,390Consolidated profit for the periodto 31 July 2007 - - 2,991 - - 2,991Share based payments - - - 2,266 - 2,266At 31 July 2007 1,501 22,713 6,442 4,895 18,096 53,647Consolidated loss for the period to31 January 2008 - - (2,238) - - (2,238)Share based payments - - - 2,167 - 2,167Issue of share capital 245 29,085 - - - 29,330At 31 January 2008 1,746 51,798 4,204 7,062 18,096 82,906
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
These unaudited consolidated interim financial statements have been preparedin accordance with the AIM Rules. These comprise the consolidated interimincome statement, the consolidated interim balance sheet, the consolidatedinterim cash flow statement, the consolidated interim statement of changes inequity and the related notes ("the interim financial statements"). The Grouphas chosen not to adopt IAS 34, "Interim Financial Reporting", in thepreparation of these interim financial statements.
These interim financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of certain financial assets at fair value, as required by IAS 39, "Financial instruments: Recognition and Measurement".
The accounting policies adopted are consistent with those of the annualfinancial statements for the year ended 31 July 2007, as described in thosefinancial statements. The following new standards, amendments to standards orinterpretations are mandatory for the first time for the year ending 31 July2008:
- IFRIC 10, `Interim financial reporting and impairment', is effective for
annual periods beginning on or after 1 November 2006. This interpretation has
not had any impact on the timing or recognition of impairment losses as the
Group already accounted for such amounts using principles consistent with
IFRIC 10.
- IFRIC 11, `IFRS 2 - Group and treasury share transactions', is effective for
annual periods beginning on or after 1 March 2007. Management do not expect
this interpretation to have any effect on the Group as it already accounts for
group share transactions using principles consistent with IFRIC 11.
- IFRS 7, `Financial instruments: Disclosures', is effective for annual
periods beginning on or after 1 January 2007. As this interim report contains
only condensed financial statements, the full IFRS 7 disclosures are not
required at this stage. The full IFRS 7 disclosures will be given in the
annual financial statements.
These interim financial statements do not comprise statutory accounts withinthe meaning of Section 240 of the Companies Act 1985. Statutory accounts forthe year ended 31 July 2007 were approved by the Board of Directors on 26September 2007 and delivered to the Registrar of Companies. The report of theauditors on those accounts was unqualified, did not contain an emphasis ofmatter paragraph and did not contain any statement under Section 237 of theCompanies Act 1985.
2. INVESTMENTS - DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
Unaudited Unaudited Unaudited Quoted Unquoted Total companies companies ‚£'000 ‚£'000 ‚£'000At 1 August 2007 20,508 33,218 53,726Investments during the period - 3,129 3,129Changes in fair value during (5,199) 1,797 (3,402)the period (i)Proceeds from sale of (3,566) (35) (3,601)investmentsAt 31 January 2008 11,743 38,109 49,852
Net change in fair value for the period after revenue share (note 3) is a fall of ‚£0.5m (H1 2007: ‚£0.7 million gain, FY 2007: ‚£6.24 million gain).
3. PROVISIONS FOR LIABILITIES AND CHARGES - REVENUE SHARE
Unaudited Unaudited Unaudited Unaudited Revenue Revenue Deferred Total sharing sharing consideration Imperial other College ‚£000 ‚£000 ‚£000 ‚£000At 1 August 2007 13,058 1,242 882 15,182Settlements (39) (159) - (198)Changes in fair value (2,472) (106) (302) (2,880)attributable torevenue shareAt 31 January 2008 10,547 977 580 12,104The revenue sharing provision represents monies due to Imperial College uponthe eventual realisation of investments held by the Group under the revenuesharing arrangements of the Technology Pipeline Agreement with ImperialCollege ("TPA"); including recognition of Imperial College's right under theTPA to call for a sale (and distribution of proceeds) of the appropriaterelevant proportion of the Group's holding in quoted investments. The timingand amount of the realisation of the provision is dependent on the timing ofthe disposal of investments, which is uncertain as this is determined by theinvestment strategy.During the half year the Group disposed of Ceres Power Holdings plc shares at308 pence per share realising an amount of ‚£3.5 million. These shares were notsubject to payment of revenue share to Imperial College pursuant to the TPAbut are subject to an agreement whereby the Group adjusted the revenue sharingpercentage in respect of Ceres Power Holdings plc only. Accordingly at the endof the period the Group held an interest worth ‚£10.7 million in Ceres PowerGroup plc (H1 2007: ‚£12.5 million, FY 2007: ‚£19.0 million) and a net valueafter all associated revenue sharing obligations have been accounted for of‚£5.4 million (H1 2007: ‚£7.5 million, FY 2007: ‚£11.3 million).The other revenue share represents monies due to other third parties includingamounts due to third parties in the Appointee Directors Pool (in respect ofthe Imperial Innovations LLP assets acquired as part of the steppedacquisition in 2005). The timing and amount of the realisation of theprovision is dependent on the timing of the disposal of investments, which isuncertain.Deferred consideration represents monies due to Imperial College upon theeventual realisation of the Imperial Innovations LLP assets acquired fromImperial College as part of the private share placement in 2005. The deferredconsideration at the date of acquisition (April 2005) was ‚£554,000. At eachbalance sheet date, a fair value adjustment is made until the eventualrealisation of the assets. The timing of the realisation of the provision isdependent on the realisation of the Imperial Innovations LLP assets acquiredfrom Imperial College, which is uncertain.
4. (LOSS) / EARNINGS PER SHARE
Basic (loss) / earnings per share is calculated by dividing the (loss) / profit for the period 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:
Unaudited Unaudited Audited Six months to Six months to 12 months to 31 January 2008 31 January 31 July 2007 2007(Losses) / Earnings per Ordinary Share(Loss) / profit for the financial year (2,238) (2,109)
882
(‚£000)
Weighted average number of Ordinary 52,630 49,522
49,522
Shares
(basic) (thousands)Effect of dilutive potential Ordinary - -
1,724
Shares (1)Weighted average number of Ordinary 52,630 49,522
51,246
Shares
for the purposes of diluted earnings pershare(thousands)Earnings per Ordinary Share basic (4.3) (4.3)
1.78
(pence)
Earnings per Ordinary Share diluted (4.3) (4.3)
1.72
(pence)
(1) Share options are non-dilutive for the six months to 31 January 2008 and 31 January 2007 because of the loss.
5. SHARE CAPITAL
On 22 November 2007 the Company issued 8,108,108 ordinary shares of 3 1/33 pence each for placing on the Alternative Investment Market of the London Stock Exchange for a cash consideration of ‚£30,000,000 (before issue expenses of ‚£669,000). The placing represented approximately 16.4 per cent of the Company's then existing share capital and following the issue represents approximately 14.1 per cent of the Company's enlarged issued share capital.
6. POST BALANCE SHEET EVENTS
Since the period end of 31 January 2008, until and as at 22 April 2008, thelast practical date prior to the approval of the interim financial statements,the value of the Group's largest publicly quoted investment, Ceres PowerHoldings plc, had decreased by 34% from 255 pence per share to 168 pence pershare and the effect of this is to decrease the value of the Ceres investmentby ‚£3.7 million to ‚£7 million and to decrease provisions for liabilities andcharges by ‚£1.8 million to ‚£3.5 million.
Independent review report to Imperial Innovations Group plc
Introduction
We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 31January 2008, which comprises the consolidated interim income statement,consolidated interim balance sheet, consolidated interim cash flow statement,consolidated interim statement of changes in equity and related notes. We haveread the other information contained in the half-yearly financial report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financialstatements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.
This interim report has been prepared in accordance with the basis set out inNote 1. As disclosed in note 1, the annual financial statements of the companyare prepared in accordance with IFRSs as adopted by the European Union. Theaccounting policies are consistent with those that the directors intend to usein the next annual financial statements.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. This report, including the conclusion, has been prepared for and onlyfor the company for the purpose of the AIM Rules for Companies and for noother purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom thisreport is shown or into whose hands it may come save where expressly agreed byour prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, `Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly,we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us tobelieve that the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 31 January 2008 is not prepared, inall material respects, in accordance with the basis set out in Note 1 and theAIM Rules for Companies.PricewaterhouseCoopers LLPChartered Accountants[Date]CambridgeNotes:
(a) The maintenance and integrity of the Imperial Innovations Group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Company InformationDirectorsM Knight (Chairman)S Searle (Chief Executive Officer)J Smith (Chief Financial & Operations Officer)R Cummings (Chief Investment Officer)T Maini (Non-Executive Director) resigned 21 February 2008P Atherton (Non-Executive Director)M Rowan (Non-Executive Director)Company SecretaryJ BowenRegistered OfficeLevel 12, Electrical and Electronic Engineering BuildingImperial CollegeLondon SW7 2AZAuditorsPricewaterhouseCoopers LLPAbacus HouseCastle ParkCambridge CB3 0ANPrincipal BankersNational Westminster Bank plcP O Box No 59218 Cromwell PlaceLondon SW7 2LBSolicitorsMayer Brown International LLP11 Pilgrim StreetLondon EC4V 6RWFinancial Advisers and NomadJPMorgan Cazenove Limited20 MoorgateLondon EC2R 6DAShare RegistrarsEquiniti LimitedAspect HouseSpencer RoadLancingWorthingWest Sussex BN99 6DA
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