27 Apr 2010 07:00
27 April 2010
Imperial Innovations Group plc
Momentum maintained with portfolio maturing
Imperial Innovations Group plc (AIM: IVO, "Imperial Innovations", "the Group"), a leading technology commercialisation and investment group, has published its results for the six months ended 31 January 2010.
Business highlights
• Led £15.3 million funding round in Circassia, investing £3.75 million with Invesco Perpetual and Lansdowne
• Led £1.2 million round in RepRegen, investing £0.3 million alongside LongBow and ComVest
• Invested £0.9 million in Quantasol with Low Carbon Accelerator and £0.4 million in Plaxica with Nesta, Carbon Trust and Invesco Perpetual as part of a £1.3 million investment round.
• Post period end investments:
• £1.5 million in Myotec (part of a £2.8 million commitment) alongside £2.8 million from co-investor Invesco Perpetual
• £0.4 million in Veryan Medical (part of a £1.1m commitment) alongside £2.5 million from new co-investors Seroba Kernel Lifesciences
• £0.3 million in Polytherics (part of a £2.0 million commitment) alongside £1.0 million from co-investors
• Post period end: realised £0.8 million in cash (representing a 16 x return on original investment) from €4.5million sale of Membrane Extraction Technology (MET)
• Continued flow of intellectual property with 178 invention disclosures (H1 2009: 161) and 24 patents filed (H1 2009: 23)
Financial highlights
• Pre-tax profit £0.1 million (H1 2009: £1.3 million)
• Cash invested in portfolio companies £6.2 million (H1 2009: £2.8 million)
• Cash and short term liquidity investments at 31 January 2010 £24.4 million (H1 2009: £41.9 million)
• Net assets £85.8 million (H1 2009: £81.5 million)
• Since 31 January 2010, invested further £3.4 million in six companies and committed further £3.6 million
Martin Knight, Chairman of Imperial Innovations, said:
"We continue to focus successfully on our strategy - identifying pioneering research that addresses global problems, backing its creators and developers with substantial funding over an extended period, and teaming them with outstanding entrepreneurs to lead the technology towards profitable commercialisation.
"Despite the economic crisis, the momentum we have generated continues to build amongst our portfolio companies with a further £6.2 million invested during the first half. Over the last five years we have invested more than £45 million directly in our portfolio companies, who in total have raised over £220 million. We remain on course to realise good gains from disposals, as well as realising the value from the wide pool of IP across the Group."
Enquiries:
| Imperial Innovations | 020 7594 6589 |
| Martin Knight, Chairman |
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| Susan Searle, Chief Executive Officer |
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| Julian Smith, Finance Director |
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| College Hill | 020 7457 2020 |
| Adrian Duffield/Carl Franklin |
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| J.P. Morgan Cazenove | 020 7588 2828 |
| Steve Baldwin |
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A pdf copy of the results is available at http://www.imperialinnovations.co.uk/interim2010.pdf
Imperial Innovations - www.imperialinnovations.co.uk
Innovations creates, builds and invests in pioneering technologies addressing global problems in healthcare, energy and engineering. It combines deep understanding of science and technology with commercial acumen and strong investment expertise.
Innovations supports scientist-entrepreneurs in the commercialisation of their ideas by:
·; leading the formation of new companies and providing facilities in the early stages
·; providing significant investment and encouraging co-investment to accelerate the transition from R&D to products
·; providing operational expertise
·; helping to recruit high-calibre industry figures and experienced entrepreneurs as executive management and Board members.
Innovations has exclusive access to scientific and technological developments coming out of Imperial College London, one of the world's leading research institutions. It has already achieved significant success with its early investments; for example its £1.5m investment in obesity drug developer Thiakis could return up to £22m, following its sale to Wyeth for £100m in 2008.
In the year to July 2009, Innovations invested £14.4m in 20 ventures, helping to launch six new companies. With a technology portfolio of more than 80 companies, Innovations' most advanced assets, in addition to Thiakis, include:
·; Ceres Power (now listed on AIM): Micro combined heat and power generators for domestic use
·; Circassia: Innovative vaccines for the treatment of a wide range of allergies
·; Nexeon: Advanced materials that extend the cycle life and significantly increase capacity of rechargeable batteries
·; Respivert: Discovering new treatments for respiratory diseases, including asthma
·; VeryanMed: Stents inspired by the human vascular system
Chairman's statement
We continue to focus on creating, building and investing in pioneering technologies developed from intellectual property emanating from Imperial College that address global problems in healthcare, energy and engineering. In the six months to 31 January, the Group reinforced its position as a leading exploiter of UK innovation by providing significant funding and operational support for companies in its portfolio, as well as for scientist-entrepreneurs commercialising their ideas. The Group reported a profit of £0.1 million (H1 2009:£1.3 million) and had cash and short term liquidity investments at 31 January 2010 of £24.4 million (31 July 2009:£30.7 million).
We are reporting these interim results against the backdrop of one of the most keenly fought general election in decades. Whatever the political outcome, one thing is agreed: Britain's future prosperity depends on its ability to innovate and turn bright ideas into profitable businesses, with international application.
As a nation, we are not short of bright ideas. Our leading universities produce science and technology of such quality that Britain's research base is the envy of the world. However, there is a growing concern that the excellence of this research is being squandered - that we, as a nation, are failing those whose talent and hard work should be driving the British economy forward.
In a recent report for the Department of Business Innovation and Skills, the eminent venture capitalist Dr. Hermann Hauser highlighted the gap between research findings and their subsequent development into "commercial propositions that can attract venture capital investment or be licensed". Blaming this in part on the lack of expertise in making new technologies "investment ready", Dr. Hauser called for "a business-focused capacity and capability that bridges research and technology commercialisation".
This is precisely the funding capacity and investment capability that we are successfully providing. We identify pioneering research that addresses global problems, back its creators and developers with substantial funding over a number of years and team them with outstanding entrepreneurs with proven track records capable of creating world-class businesses.
The Rt. Hon Lord Drayson, Minister for Science and Innovation, has frequently cited Imperial Innovations as the exemplar in this endeavour. This is gratifying; and it is also pleasing that the progress being made in our investee companies gives us considerable confidence that we are on course to deliver good returns to our shareholders.
A number of exits have been achieved. During the first six months of the year three companies were formed and one seed round was completed. The second half of this financial year has already seen a number of successful fund raisings for portfolio companies. We expect further progress amongst our maturing companies, including Circassia, Nexeon, Polytherics, Respivert and Veryan Medical, delivering technical milestones, commercial deals and adding further to the experienced management teams running these businesses.
Even where Innovations has no established portfolio company, we enable commercialisation of intellectual property through technology licensing agreements. In January, we granted Novartis an exclusive worldwide license to the IP for a vaccine candidate against Meningitis B, in return for a significant up-front payment and royalties payable on the achievement of commercialisation milestones.
In short, we are providing the much sought after business-focussed and investment capability that bridges research and technology commercialisation.
Dr Martin Knight
Chairman
Financial and Operating review
Overview
Innovations creates, builds and invests in pioneering technologies that address global problems in healthcare, energy and engineering.
In the six months to 31 January 2010, the Group reinforced its position as a leading enabler of UK innovation by providing significant funding and operational support for companies in its portfolio, as well as scientist-entrepreneurs commercialising their ideas.
The Group's financial performance continued to be in line with expectations with Innovations benefitting from the cost savings programme implemented during the last financial year.
The Group generated a profit of £0.1 million in the first half of the year (H1 2009: Profit £1.3 million, FY 2009: Profit £5.3 million) after charging the unrealised loss of £1.6 million attributable to the reduction in value of its holding in Ceres Power. The Group has benefited, in particular, from a net fair value increase on investments of £0.9m.
At 31 January 2010, the Group's cash and short term liquidity investment position was £24.4 million (H1 2009: £41.9 million, FY 2009: £30.7 million), after making £6.2 million of investments in 11 companies in the half year.
The balance sheet has remained sound, ending the half year with net assets at £85.8 million, up £0.2m, on the start of the period.
Investments made in portfolio companies were £6.2 million (H1 2009: £2.8 million, FY 2009: £14.4 million), although since the end of January further investments have been made, bringing the total invested this financial year to £9.5 million (invested in 14 companies).
Operational review
Realisations
During the half year the Group received £0.5 million in retentions from the sales of Inforsense and Thiakis which had occurred in the prior year. The majority of the Thiakis deferred income remains outstanding and the Group remains confident that this is progressing well at Pfizer and continue to expect the milestones to be achieved.
The Group also sold Membrane Extraction Technologies (MET) in March 2010. The business was sold for €4.5 million to Evonik realising £0.8 million before any revenue sharing obligations have been accounted for (£0.6 million after revenue share). Innovations' original investment was £50,000, which represents a 16 times gross return on investment (12 times return on investment after accounting for revenue sharing obligations). MET is a good example of a trade sale of a business that had been built with a modest amount of investment. The Group's financial model looks to achieve a number of small exits each year, together with a large one every 12-18 months.
Licensing
In January 2010, Innovations granted Novartis an exclusive worldwide licence to the intellectual property for a novel vaccine candidate against Meningitis B. Innovations received an upfront payment and is entitled to ongoing IP licence fees, success based milestones and royalties on product sales. Innovations also licensed a T-cell therapy process to CellMedica for the treatment of infection in cancer patients.
Investments
Innovations led or participated in a number of funding rounds across its portfolio, highlighted below.
In December 2009, Innovations led a £15.3 million funding round in Circassia, the allergy T-cell vaccine developer, with a £3.8 million investment alongside co-investors Invesco Perpetual and Lansdowne Partners. The Group now owns 14.2% of Circassia, having invested a total of £7.5 million.
In October 2009, Innovations, together with Longbow Capital, led a funding round for RepRegen Limited, a bioactive materials developer for soft tissue, orthopaedic and dental applications, of £1.2 million (formerly named BCT). Innovations invested £0.3 million and Longbow Capital, a new investor, £0.4 million. Innovations has invested a total of £0.8 million in RepRegen and has an equity holding of 35.8%.
In the same month, Innovations increased its investment in Plaxica, leading a £1.3 million funding round supported by Carbon Trust Investments, the National Endowment for Science, Technology and the Arts (NESTA) and Invesco Perpetual. The investment has helped Plaxica's continued development of a new and low cost route to manufacture high-quality biodegradable plastics from renewable sources with a wide variety of applications.
Other investments included £0.9 million in Quantasol, a developer of high efficiency photovoltaic cells. Innovations' investment was matched by the specialist investor, Low Carbon Accelerator. Innovations' equity holding is now over 38%.
Since the half year ended, the Group has led a number of further investments:
§ £3.0 million round, investing £2.0 million (including commitments) in Polytherics. Polytherics is pioneering work in the precision engineering of proteins to improve their half-life and bioactivity properties for therapeutic use.
§ £5.6 million round, investing £2.8 million (including commitments) in Myotec. Myotec is developing a pipeline of small molecule therapeutics for the treatment of wasting diseases, Cachexia and Sarcopenia.
§ £3.6 million round, investing £1.1 million (including commitments) in Veryan Medical. Veryan is developing a full range of 3D stents which have potential for use in all vascular applications. These stents are more flexible, kink and fracture resistant than traditional stents.
Portfolio operational update
Several portfolio companies, closely supported by Innovations, made significant operational progress. These are now well funded with high-quality management teams recruited with Innovations' help.
In November 2009, Circassia announced successful results from its Phase II clinical study in which its ToleroMune® T-cell vaccine for cat allergy dramatically reduced allergy symptom levels. In February 2010, Circassia also announced positive Phase II clinical results with its vaccine for Ragweed allergy. The company has three additional Phase II trials underway targeting house dust mite and cat allergies and plans to initiate further studies in the coming months extending the portfolio into the field of grass allergy.
In December 2009, Nexeon published its plans to commercialise its lithium-ion technology, a development which will lead to batteries with significantly higher energy density and longer lifetime between charges. In January 2010, a UK consortium, including Nexeon, was awarded approximately £1m in funding by the Technology Strategy Board (TSB). The aims of the project are to develop new battery chemistry that will deliver high energy densities and to produce a prototype cell for use in PHEVs (plug-in electric vehicles).
Post half year, in March, Nexeon achieved an important milestone in its technical development. Cells containing its silicon anode material successfully completed 500 full charge/discharge cycles without significant fade being observed. The 500 cycles performance level is regarded by the battery industry as an important performance measure and is considerably higher than the 300 or so full cycles typically considered necessary for consumer applications such as mobile phones and laptop computers.
Respivert has made strong progress in developing a new generation of inhaled treatments for serious lung diseases. The product profile is expected to be a once daily inhaled administration used alone or in a combination, targeting a first-line anti-inflammatory therapy for all patients with Chronic Obstructive Pulmonary Disease. In the coming months, Respivert will commence Phase I single ascending and repeat dose studies using both inhaled and intranasal delivery. The company has filed a number of patents on its treatments covering chemical composition and biological mode of action.
Innovations has continued to strengthen the management teams of its portfolio companies, focussing in particular on those companies ready to scale up. These include the appointments of Ian Brown as Chief Executive and Dr Stephan Rietiker as Chairman of RepRegen, Chris Shannon as Chief Executive and Gianluca Bacchin as VP Engineering at Quantasol and Howard Simons, VP Engineering at Novacem.
Incubation
Innovations continued its support for new ventures. These included: Mycologix, an early-stage business focused on the development of a low-cost, highly efficient biological pre-treatment process for 2nd generation biofuels led by Entrepreneur in Residence Nick Brooks (previously head of biofuels at Shell); Ervitech which is developing a proprietary technology for measuring respiratory rate based on intellectual property from Imperial College London and University College London; and Joint Analysis which is developing a web-based service to provide objective information to healthcare patients with joint problems.
Pipeline development
The pipeline of new ideas is healthy. 178 new invention disclosures were received and 24 new patents filed. A number of grant applications by Imperial College were supported during the period for large scale translational funding which is important because this helps to advance the earlier pipeline. These included a €120 million funding from the European Institute of Innovation and Technology to combat climate change through the creation of the Climate Knowledge and Innovation Centre (KIC) focusing on the creation of new technologies to reduce Europe's carbon emissions. The Group expects that this will contribute to the acceleration of commercialisation of ideas emanating from Imperial's research under the KIC.
Financial review
Revenue, cost of sales and operating costs
Trading revenue for the six months ended 31 January 2010 of £2.6 million (H1 2009: £2.4 million, FY 2009: £4.3 million) is higher than that for the six months ended 31 January 2009 despite the difficult trading conditions. The improvement reflects increased licence income, stable royalty income and increased corporate finance fees and other activities.
Royalty revenue from intellectual property licences was £0.8 million (H1 2009: £0.9 million, FY 2009: £1.2 million). Income from initial licence payments was a healthy £0.8 million (H1 2009: £0.4 million, FY 2009: £0.8 million).
Corporate finance fees rose to £0.4 million (H1 2009: £0.1 million, FY 2009: £0.5 million). Total other income (including corporate finance fees) was £1.0 million (H1 2009: £1.0 million, FY 2009: £2.3 million).
Cost of sales, largely arising from the revenue sharing arrangements with Imperial College, at £0.9 million (H1 2009: £0.8 million, FY 2009: £1.1 million) reflects the increased licence and royalty activity. Other administrative expenses of £2.8 million (H1 2009: £3.5 million, FY 2009: £6.8 million) are £0.7 million lower than that for the six months ended 31 January 2009. This decrease reflects the benefit of the cost reduction exercise completed early in 2009.
Administrative expenses include costs of £0.4 million (H1 2009: £0.6 million, FY 2009: £1.3 million) for expenditure incurred filing patents and protecting the as yet unexploited, intellectual property.
Interest income was £0.3 million (H1 2009: £1.2 million, FY 2009: £2.0 million), reflecting the scale of the Group's cash balance but down £0.9 million on the first 6 months of last year in line with the reduced interest rates available for deposits in the market as a whole.
The Group reported a profit of £0.1 million (H1 2009: £1.3 million, FY 2009: £5.3 million) with Group basic earnings per share of 0.2p (H1 2009: basic earnings per share 2.18p; FY2009: basic earnings per share 9.23p). The Board is not paying a dividend.
Cash
At 31 January 2010, the Group had cash and short term liquidity investments of £24.4 million (31 January 2009: £41.9 million, 31 July 2009: £30.7 million). This represents a decrease of £6.3 million from the opening balance at 31 July 2009. This movement in cash is summarised below:
| | Six months to 31 January 2010 | Six months to 31 January 2009 | 12 months to 31 July 2009 |
| | £m | £m | £m |
| Net cash used in operating activities | (1.6) | (2.1) | (3.7) |
| Purchase of trade investments | (5.7) | (2.8) | (14.0) |
| Net proceeds from sale of trade investments | 0.5 | 3.3 | 3.4 |
| Net cash from / (used in) other investing activities | 9.5 | (3.9) | 8.6 |
| Financing activities (issue of net equity) | 0.1 | - | - |
| Movement during year | 2.8 | (5.5) | (5.7) |
| Adjustment for short term liquidity investments | (9.1) | 4.3 | (6.7) |
| Movement in net cash reserves | (6.3) | (1.2) | (12.4) |
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. In light of the continuing uncertain macro economic climate, the Group maintains its cash reserves with a number of highly credit rated institutions to diversify counterparty risk.
Investment portfolio performance
The Group reported a net profit arising from the portfolio fair value adjustments of £0.9 million (H1 2009: profit £2.0 million, FY 2009: profit £6.7 million). An analysis of the changes in fair value is given below:
| Portfolio movements excluding cash invested and divestments; |
Note | Six months to 31 January 2010 | Six months to 31 January 2009 | 12 months to 31 July 2009 |
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| £'000 | £'000 | £'000 |
| Gains on revaluation of investments | 2 | 4.4 | 6.5 | 12.3 |
| Losses on the revaluation of investments | 2 | (3.3) | (7.7) | (9.0) |
| Fair value gains / (losses) |
| 1.1 | (1.2) | 3.3 |
| Movement in associated revenue sharing obligations | 3 | (0.2) | 3.2 | 3.6 |
| Net fair value gains | 4 | 0.9 | 2.0 | 6.9 |
The total value of the portfolio (excluding University Challenge Seed Fund investments) increased from £54.9 million to £62.2 million during the half year as a result of investments of £6.2 million and fair value gains of £1.1 million. There was a corresponding increase in the provision for liabilities and charges from £4.9 million to £5.1 million. University Challenge Seed Fund investments are subject to a threefold increase in realised value before funds can be freely utilised by the Group.
Investment and divestment
During the half year, the Group made £6.2 million investments to fund 11 technology companies in its portfolio and at the end of the half year had outstanding commitments to make further investments of £1.9 million.
Since 31 January 2010, the Group has invested a further £3.4 million in six companies which brings the total invested in this financial year to £9.5 million and has made further commitments of £3.6 million.
During the half year the Group received £0.5 million in respect of retentions held back on the disposal of Inforsense and Thiakis in prior accounting periods. Since the half year, the Group received £0.8 million arising from the sale of MET.
Portfolio company creation
At 31 January 2010, the Group held equity stakes in 86 companies (H1 2009: 90 companies, FY 2009: 80 companies). A total of 10 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 licences granted or services rendered. The movement reflects disposals, formations less dissolutions and liquidations during the year.
The Group has continued its approach of keeping company propositions as unincorporated projects until the opportunity has been developed more substantially. Three new companies were formed in the half year (H1 2009: 0 companies, FY 2009: one company). The lower number of companies formed is a reflection of the change in business practice and does not reflect a reduction of the number of propositions being developed in the Group. The number of companies seed funded with launch management teams was one (H1 2009: five companies, FY 2009: six companies).
Portfolio company overview
The table below sets out the top 10 technology companies, by value, in the portfolio to illustrate the spread of the investments held and their relative carrying value. All of the carrying values listed below 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.
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Name of company | Net Investment carrying value at 31 July 2009 | Cash invested 6 months to 31 January 2010 | Net Movement in Carrying Value 6 months to 31 January 2010 | Net Investment carrying value at 31 January 2010 | % of Issued share capital held 31 January 2010 |
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| £'000 | £'000 | £'000 | £'000 |
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| Circassia Holdings Limited | 7,267 | 3,750 | 2,405 | 13,422 | 14.2 |
| Nexeon Limited | 11,327 | - | - | 11,327 | 35.0 |
| Veryan Medical Limited | 5,717 | - | - | 5,717 | 37.6 |
| Ceres Power Holdings plc | 5,083 | - | (1,600) | 3,483 | 2.8 |
| Quantasol Limited | 1,210 | 942 | - | 2,152 | 38.1 |
| Respivert Limited | 2,043 | - | - | 2,043 | 13.4 |
| Evo Electric | 1,744 | - | - | 1,744 | 37.6 |
| I2India | 1,600 | 106 | - | 1,706 | 35.2 |
| Molecular Vision | 1,407 | - | - | 1,407 | 57.2 |
| OSspray | 1,391 | - | - | 1,391 | 40.0 |
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| Thiakis Limited | 5,996 | - | (118) | 5,878 | n/a |
See note 2 to the financial statements for further explanation (held in debtors).
Deferred payment obligations
Non-current liabilities (reflecting the revenue-sharing obligations to Imperial College London and other parties arising on the investments in technology companies) remained at £5.7 million during the half year.
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 shareholding 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.
During the half year there was no charge or credit relating to taxation (H1 2009: £nil million, FY 2009: £ nil million).
Consolidated interim statement of comprehensive income
For the six month period to 31 January 2010
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| Unaudited six months to 31 January 2010 | Unaudited six months to 31 January 2009 | Audited 12 months to 31 July 2009 |
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| Note | £'000 | £'000 | £'000 |
| Continuing operations |
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| Revenue |
| 2,601 | 2,396 | 4,320 |
| Cost of sales |
| (850) | (814) | (1,139) |
| Gross profit |
| 1,751 | 1,582 | 3,181 |
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| Net change in fair value of investments held at fair value through profit and loss | 4 | 927 | 1,995 | 6,960 |
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| Administrative expenses: |
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| - Other administrative expenses |
| (2,842) | (3,550) | (6,772) |
| Operating (loss) / profit |
| (164) | 27 | 3,369 |
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| Interest receivable |
| 281 | 1,232 | 1,953 |
| Profit before taxation |
| 117 | 1,259 | 5,322 |
| Taxation |
| - | - | - |
| Profit for the financial period and total comprehensive income |
| 117 | 1,259 | 5,322 |
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| Basic earnings per ordinary share (pence) | 5 | 0.2 | 2.18 | 9.23 |
| Diluted earnings per ordinary share (pence) | 5 | 0.2 | 2.18 | 9.20 |
The accompanying notes are an integral part of these interim financial statements.
Consolidated interim balance sheet
As at 31 January 2010
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| Unaudited As at 31 January 2010 | Unaudited As at 31 January 2009 | Audited As at 31 July 2009 |
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| Note | £'000 | £'000 | £'000 |
| Assets |
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| Non-current assets |
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| Property, plant and equipment |
| 20 | 39 | 28 |
| Investments | 2 | 62,211 | 39,796 | 54,954 |
| University Challenge Seed Fund (UCSF): |
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| - Investments |
| 576 | 936 | 763 |
| - Loans |
| 42 | 31 | 42 |
| Low Carbon Seed Fund (LCSF) |
| - | 232 | - |
| Total non-current assets |
| 62,849 | 41,034 | 55,787 |
| Current assets |
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| Trade and other receivables | 6 | 7,736 | 9,506 | 7,524 |
| Short term liquidity investments |
| 20,200 | 40,300 | 29,300 |
| Cash and cash equivalents |
| 4,180 | 1,570 | 1,401 |
| Total current assets |
| 32,116 | 51,376 | 38,225 |
| Total assets |
| 94,965 | 92,410 | 94,012 |
| Equity and liabilities |
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| Equity attributable to equity holders |
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| Issued share capital | 7 | 1,812 | 1,746 | 1,746 |
| Share premium |
| 51,748 | 51,748 | 51,748 |
| Retained earnings |
| 6,020 | 1,840 | 5,903 |
| Share based payments |
| 8,114 | 8,097 | 8,097 |
| Other reserves |
| 18,096 | 18,096 | 18,096 |
| Total equity |
| 85,790 | 81,527 | 85,590 |
| Liabilities |
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| Non-current liabilities |
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| University Challenge Seed Fund (UCSF) |
| 618 | 967 | 805 |
| Provisions for liabilities and charges | 3 | 5,055 | 5,344 | 4,883 |
| Low Carbon Seed Fund (LCSF) |
| - | 232 | - |
| Total non-current liabilities |
| 5,673 | 6,543 | 5,688 |
| Current liabilities |
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| Trade and other payables |
| 3,502 | 4,340 | 2,734 |
| Total liabilities |
| 9,175 | 10,883 | 8,422 |
| Total equity and liabilities |
| 94,965 | 92,410 | 94,012 |
The accompanying notes are an integral part of these interim financial statements.
The interim financial statements were approved by the Board of Directors on 26 April 2010 and were signed on its behalf by J. Smith and S. Searle.
| J. Smith |
| S. Searle |
| Chief Financial and Operations Officer |
| Chief Executive Officer |
Consolidated interim cash flow statement
For the six month period to 31 January 2010
| Unaudited | six months to 31 January 2010 | six months to 31 January 2009 | 12 months to 31 July 2009 |
|
| £'000 | £'000 | £'000 |
| Cash flows from operating activities |
|
|
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| Operating (loss) / profit | (164) | 27 | 3,369 |
| Adjustments to reconcile operating profit / (loss) to net cash flows from operating activities |
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| Depreciation of property, plant and equipment | 8 | 11 | 21 |
| Fair value movement in investments | (927) | (1,995) | (6,960) |
| Share based payments | 17 | - | - |
| UCSF management fee | - | (32) | (32) |
| Working capital adjustments: |
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| (Increase) in trade and other receivables | (1,190) | (1,226) | (109) |
| Increase in trade and other payables | 646 | 1,075 | 11 |
| Net cash used in operating activities | (1,610) | (2,140) | (3,700) |
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| Cash flows from investing activities |
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| Purchase of trade investments | (5,703) | (2,791) | (14,000) |
| Proceeds from sale of investments | 483 | 3,299 | 3,939 |
| Revenue share paid on asset realisations in trade investments | - | - | (512) |
| Net cash flows (used in) / from investments in trade investments | (5,220) | 508 | (10,573) |
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|
|
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| Purchase of property, plant and equipment | - | (5) | (5) |
| Interest received | 443 | 430 | 1,902 |
| Short term liquidity investments | 9,100 | (4,300) | 6,700 |
| Net cash flows from / (used in) other investing activities | 9,543 | (3,875) | 8,597 |
|
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| Net cash generated from / (used in) investing activities | 4,323 | (3,367) | (1,976) |
|
|
|
|
|
| Cash flows from financing activities |
|
|
|
| Proceeds from share issues | 66 | - | - |
| Net cash generated from financing activities | 66 | - | - |
|
|
|
|
|
| Net (decrease) / increase in cash and cash equivalents | 2,779 | (5,507) | (5,676) |
| Cash and cash equivalents at beginning of the period | 1,401 | 7,077 | 7,077 |
|
|
|
|
|
| Cash and cash equivalents at end of the period 1 | 4,180 | 1,570 | 1,401 |
1 As at 31 January 2010, in addition to cash and cash equivalents, short term liquidity investments (treasury deposits) held were £20.2 million (H1 2009: £40.3 million, FY 2009: £29.3 million).
Consolidated interim statement of changes in equity
Attributable to equity holders of the group
| Unaudited | Share Capital | Share Premium | Retained Earnings | Share Based Payments | Other Reserves |
Total |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| At 31 January 2009 | 1,746 | 51,748 | 1,840 | 8,097 | 18,096 | 81,527 |
| Consolidated profit for the period to 31 July 2009 | - | - | 4,063 | - | - | 4,063 |
| At 31 July 2009 | 1,746 | 51,748 | 5,903 | 8,097 | 18,096 | 85,590 |
| Share capital issued | 66 | - | - | - | - | 66 |
| Share based payments | - | - | - | 17 | - | 17 |
| Consolidated profit for the period to 31 January 2010 | - | - | 117 | - | - | 117 |
| At 31 January 2010 | 1,812 | 51,748 | 6,020 | 8,114 | 18,096 | 85,790 |
Notes to the interim financial statements
1. Basis of preparation
These unaudited consolidated interim financial statements have been prepared in accordance with the AIM Rules and European Union endorsed International Financial Reporting Standards and International Financial Reporting Interpretation Committee Interpretations. These comprise the consolidated interim statement of comprehensive income, the consolidated interim balance sheet, the consolidated interim cash flow statement, the consolidated interim statement of changes in equity and the related notes ("the interim financial statements"). The Group has chosen not to adopt IAS 34, "Interim Financial Reporting", in the preparation 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 annual financial statements for the year ended 31 July 2009, as described in those financial statements, except for the adoption of the following accounting standards which have become effective for the year ending 31 July 2010:
·; The Group has adopted IAS 1 (revised), "Presentation of Financial Statements". This presentational standard has no impact on the reported results of the Group;
·; The Group has adopted the amendment to IFRS 7, "Financial Instruments Disclosures". This amendment will increase the disclosure required in the 2010 Annual report in order to categorise the fixed asset investments into the three-level hierarchy; and
·; The Group has adopted IFRS 8, "Operating Segments". IFRS 8 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, being Technology Transfer, Incubation and Investment. The Board of Directors assess the performance of the operating segment on financial information which is measured and presented in a manner consistent with that in the financial statements.
These interim financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 July 2009 were approved by the Board of Directors on 6 October 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.
2. Investments - Designated at fair value through profit or loss
| Unaudited for the six months to 31 January 2009 | Quoted Companies1 | Unquoted Companies | Total |
|
| £'000 | £'000 | £'000 |
| At 1 August 2008 | 9,689 | 39,680 | 49,369 |
|
|
|
|
|
| Gains on the revaluation of investments | - | 6,469 | 6,469 |
| Losses on the revaluation of investments | (4,588) | (3,112) | (7,700) |
| Fair value (losses) / gains | (4,588) | 3,357 | (1,231) |
|
|
|
|
|
| Investments during the period | - | 2,798 | 2,798 |
| Proceeds from the sale on investments | (1,846) | (9,294) | (11,140) |
| Net investment | (1,846) | (6,496) | (8,342) |
|
|
|
|
|
| At 31 January 2009 | 3,255 | 36,541 | 39,796 |
|
|
|
|
|
| For the year ended 31 July 2009 | Quoted Companies1 | Unquoted Companies | Total |
|
| £'000 | £'000 | £'000 |
| At 1 August 2008 | 9,689 | 39,680 | 49,369 |
|
|
|
|
|
| Gains on the revaluation of investments | 652 | 11,696 | 12,348 |
| Losses on the revaluation of investments | (2,531) | (6,566) | (9,097) |
| Fair value (losses) / gains | (1,879) | 5,130 | 3,251 |
|
|
|
|
|
| Investments during the period | - | 14,427 | 14,427 |
| Proceeds from the sale on investments | (1,848) | (10,245) | (12,093) |
| Net investment | (1,848) | 4,182 | 2,334 |
|
|
|
|
|
| At 31 July 2009 | 5,962 | 48,992 | 54,954 |
|
|
|
|
|
| Unaudited for the six months to 31 January 2010 | Quoted Companies | Unquoted Companies | Total |
|
| £'000 | £'000 | £'000 |
| At 1 August 2009 | 5,962 | 48,992 | 54,954 |
|
|
|
|
|
| Gains on the revaluation of investments | 54 | 4,327 | 4,381 |
| Losses on the revaluation of investments | (1,691) | (1,601) | (3,292) |
| Fair value (losses) / gains | (1,637) | 2,726 | 1,089 |
|
|
|
|
|
| Investments during the period | - | 6,168 | 6,168 |
| Net investment | - | 6,168 | 6,168 |
|
|
|
|
|
| At 31 January 2010 | 4,325 | 57,886 | 62,211 |
All quoted companies are listed on AIM.
On 18 December 2008, the Group divested its holding in Thiakis Limited. Under the sales agreement, Imperial Innovations could receive cash payments, net of transaction costs, of £22.2 million which, after accounting for revenue sharing obligations to Imperial College, London and other research sponsors of £6.1 million, would leave a net receipt of £16.1 million.
As at 31 January 2009, the first payment of £3.3 million had been received which, after revenue sharing obligations, resulted in a net receipt of £2.9 million. The payment received resulted in a fair value uplift to the income statement in the 12 months ended 31 July 2009 of £0.2 million. The estimated fair value uplift of the contingent deferred consideration, after risk adjusting using industry standard criteria and discounting for time at 12% per annum, resulted in a fair value uplift to the income statement in the 12 months ended 31 July 2009 from the contingent deferred consideration of £6.0 million.
At each accounting reference date the fair value of the contingent deferred consideration is adjusted to reflect the probability of completion of the milestones and any cash receipts. At 31 January 2010, after allowing for further receipts of £0.2 million, the probability of milestone receipts was maintained which resulted in no impact on the carrying value of the deferred consideration and no impact to the income statement.
As the future payments are a contractual entitlement, rather than an equity investment, they are reflected in the balance sheet under trade and other receivables (Note 6).
3. Provisions for liabilities and charges
| Unaudited for the six months to 31 January 2009 | Quoted Companies | Unquoted Companies | Total |
|
| £'000 | £'000 | £'000 |
| At 1 August 2008 | 4,842 | 6,021 | 10,863 |
|
|
|
|
|
| Decrease of liability arising from gains on the revaluation/disposal of investments | - | (185) | (185) |
| Decrease of liability arising from losses on the revaluation of investments | (2,433) | (541) | (2,974) |
| Changes in fair value during the period | (2,433) | (726) | (3,159) |
|
|
|
|
|
| Provisions utilised in the period | (69) | - | (69) |
| Realisations during the period | (1,846) | (445) | (2,291) |
| At 31 January 2009 | 494 | 4,850 | 5,344 |
|
|
|
|
|
| For the year ended 31 July 2009 | Quoted Companies | Unquoted Companies | Total |
|
| £'000 | £'000 | £'000 |
| At 1 August 2008 | 4,842 | 6,021 | 10,863 |
|
|
|
|
|
| Increase of liability arising from gains on the revaluation of investments | 93 | 275 | 368 |
| Decrease of liability arising from losses on the revaluation of investments | (2,447) | (1,543) | (3,990) |
| Changes in fair value during the period | (2,354) | (1,268) | (3,622) |
|
|
|
|
|
| Provisions utilised in the period | (69) | - | (69) |
| Realisations during the period | (1,848) | (441) | (2,289) |
| At 31 July 2009 | 571 | 4,312 | 4,883 |
|
|
|
|
|
| Unaudited for the six months to 31 January 2010 | Quoted Companies | Unquoted Companies | Total |
|
| £'000 | £'000 | £'000 |
| At 1 August 2009 | 571 | 4,312 | 4,883 |
|
|
|
|
|
| Increase of liability arising from gains on the revaluation/disposal of investments | 26 | 661 | 687 |
| Decrease of liability arising from losses on the revaluation of investments | (86) | (429) | (515) |
| Changes in fair value during the period | (60) | 232 | 172 |
|
|
|
|
|
| Provisions utilised in the period | - | - | - |
| Realisations during the period | - | - | - |
| At 31 January 2010 | 511 | 4,544 | 5,055 |
Provisions for liabilities and charges is made up of the revenue sharing provision which represents a fair value estimate of monies due to Imperial College 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.
4. Net change in fair value of investments held at fair value through profit or loss
| Unaudited for the six months to 31 January 2009 | Quoted Companies | Unquoted Companies | Total |
|
| £'000 | £'000 | £'000 |
| At 1 August 2008 | 4,847 | 33,659 | 38,506 |
|
|
|
|
|
| Gains on the revaluation/disposal of investments | - | 6,654 | 6,654 |
| Losses on the revaluation of investments | (2,155) | (2,571) | (4,726) |
| Fair value (losses) / gains | (2,155) | 4,083 | 1,928 |
|
|
|
|
|
| Investments during the period | - | 2,798 | 2,798 |
| Provisions utilised in the period | 69 | - | 69 |
| Proceeds from the sale on investments | - | (8,849) | (8,849) |
| Net investment | 69 | (6,051) | (5,982) |
|
|
|
|
|
| At 31 January 2009 | 2,761 | 31,691 | 34,452 |
|
|
|
|
|
| For the year ended 31 July 2009 | Quoted Companies | Unquoted Companies | Total |
|
| £'000 | £'000 | £'000 |
| At 1 August 2008 | 4,847 | 33,659 | 38,506 |
|
|
|
|
|
| Gains on the revaluation of investments | 559 | 11,421 | 11,980 |
| Losses on the revaluation of investments | (84) | (5,023) | (5,107) |
| Fair value gains | 475 | 6,398 | 6,873 |
|
|
|
|
|
| Investments during the period | - | 14,427 | 14,427 |
| Provisions utilised in the period | 69 | - | 69 |
| Proceeds from the sale of investments | - | (9,804) | (9,804) |
| Net investment | 69 | 4,623 | 4,692 |
|
|
|
|
|
| At 31 July 2009 | 5,391 | 44,680 | 50,071 |
|
|
|
|
|
| Unaudited for the six months to 31 January 2010 | Quoted Companies | Unquoted Companies | Total |
|
| £'000 | £'000 | £'000 |
| At 1 August 2009 | 5,391 | 44,680 | 50,071 |
|
|
|
|
|
| Gains on the revaluation/disposal of investments | 28 | 3,666 | 3,694 |
| Losses on the revaluation of investments | (1,605) | (1,172) | (2,777) |
| Fair value (losses) / gains | (1,577) | 2,494 | 917 |
|
|
|
|
|
| Investments during the period | - | 6,168 | 6,168 |
| Provisions utilised in the period | - | - | - |
| Proceeds from the sale on investments | - | - | - |
| Net investment | - | 6,168 | 6,168 |
|
|
|
|
|
| At 31 January 2010 | 3,814 | 53,342 | 57,156 |
Net change in fair value for the period represents the change in fair value (disclosed in note 2) less the revenue share charge on these fair value movements (disclosed in note 3). Net change in fair value of investments of £0.9 million as set out on the face of the Income Statement represents the change in net fair value of £0.9 million (above table) plus £10,000 to reflect final adjustments on realisations before revenue share with third parties as summarised below.
| Unaudited | Six months to 31 January 2010 | Six months to 31 January 2009 | 12 months to 31 July 2009 |
|
| £'000 | £'000 | £'000 |
| Net fair value gain on portfolio | 917 | 1,928 | 6,873 |
| Changes in fair value realised during the period | 10 | 67 | 87 |
| Net fair value movement recognised in consolidated income statement | 927 | 1,995 | 6,960 |
5. Earnings per share
Basic earnings per share is calculated by dividing the profit for the financial period by the weighted average number of Ordinary Shares in issue during the period.
The profits and weighted average number of shares used in the calculations are set out below:
| Unaudited | Six months to 31 January 2010 | Six months to 31 January 2009 | 12 months to 31 July 2009 |
| Earnings per Ordinary Share |
|
|
|
| Profit for the financial period (£'000) | 117 | 1,259 | 5,322 |
| Weighted average number of Ordinary Shares (basic) (thousands) | 57,738 | 57,630 | 57,630 |
| Effect of dilutive potential Ordinary Shares | 78 | 166 | 205 |
| Weighted average number of Ordinary Shares for the purposes of diluted earnings per share (thousands) | 57,816 | 57,796 | 57,835 |
| Earnings per ordinary share basic (pence) | 0.2 | 2.18 | 9.23 |
| Earnings per ordinary share diluted (pence) | 0.2 | 2.18 | 9.20 |
During January 2010 a total of 2,357,761 options were exercised or cancelled resulting in 523,677 remaining exercisable options at the end of the half year.
6. Trade and other receivables
The balance includes the contingent deferred consideration on the sale of Thiakis of £5.9 million (H1 2009: £6.0 million, FY 2009: £6.0 million).
7. Share capital
During the financial period the Company issued 2,160,308 ordinary shares of 3 1/33 pence each on the exercise of options for a cash consideration of £66,000.
8. Post balance sheet events
Since the period end of 31 January 2010, until and as at 22 April 2010, the last practical date prior to the approval of the interim financial statements, the value of the Group's largest publicly quoted investment, Ceres Power Holdings plc, had decreased by £0.5 million a fall of 14% of its value at 31 January 2010. This has had the effect of decreasing investments by £0.5 million and of decreasing the provision for liabilities and charges by £25,000 since the half year end.
Since 31 January 2010, the Group has invested a further £3.4 million in six companies which brings the total cash invested in this financial year to £9.5 million. The Group has also made further investment commitments of £3.6 million.
Independent review report to Imperial Innovations Group plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2010, which comprises the consolidated interim statement of comprehensive income, consolidated interim balance sheet, consolidated interim cash flow statement, consolidated interim statement of changes in equity and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
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.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the basis of preparation set out in note 1.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of 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 to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 January 2010 is not prepared, in all material respects, in accordance with the basis of preparation set out in note 1 and the AIM Rules for Companies.
PricewaterhouseCoopers LLP
Chartered Accountants
26 April 2010
London
Notes:
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.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.