REG - Adams PLC - Half-year Report
Adams plc
("Adams" or the "Company")
Interim Results for the Six Months ended 30 September 2020
Results
Adams Plc ("Adams" or the "Company") reported a profit after tax of £1,091,000 for the six months to 30 September 2020 compared to a loss of £46,000 in the six months ended 30 September 2019. The improvement in profitability is principally due to higher investment returns of £1,162,000 compared to £23,000 in the previous September 2019 half year.
During the six months ended 30 September 2020, the Company spent £451,000 on equity investments, of which one was a new investment and one was a follow-on investment, and generated cash proceeds of £602,000 from the partial realisation of two of its investments. Adams held seven investments as at 30 September 2020, of which five were listed and two were un-listed, and for which the total investment carrying value was £2.19 million (31 March 2020: £1.18 million, represented by five listed holdings and one un-listed holding).
The Company held cash balances of £972,000 as at 30 September 2020, compared to cash balances of £904,000 at the previous 31 March 2020 year end.
Net assets increased to £3.15 million (equivalent to 3.82p per share) at the 30 September 2020 balance sheet date, compared with £2.06 million (equivalent to 2.50p per share) at 31 March 2020. The £1.09 million increase in net assets reflects the profit reported for the period.
Business model and investing policy
Adams is an investing company with an investing policy under which the Board is seeking to acquire interests in special situation investment opportunities that have an element of distress, dislocation, dysfunction or other special situation attributes and that the Board perceives to be undervalued. The principal focus is in the small to middle-market capitalisation sectors in the UK or Europe, but the Directors will also consider possible special situation opportunities anywhere in the world if they believe there is an opportunity to generate added value for shareholders.
Investment Portfolio
The listed investments held by the Company at 30 September 2020 comprised Circassia Group plc ("Circassia"), Diurnal Group Plc ("Diurnal"), 4D Pharma Plc ("4D Pharma"), TalkTalk Telecom Group Plc ("Talk Talk"), and Griffin Mining Limited ("Griffin"). In addition, the Company held shares in unquoted Oxehealth Limited ("Oxehealth") and shares and loan notes in unquoted Sherwood Holdings Limited ("Sherwood") which has Source Bioscience Limited as its principal subsidiary company asset. Subsequent to 30 September 2020, the loan notes in Sherwood were redeemed by conversion into Sherwood shares and Sherwood's name was changed to Source Bio International Plc ("Source Bio") and its shares were admitted to AIM on 29 October 2020.
Circassia is an AIM listed diagnostics and monitoring company focused on respiratory disease. Its market leading NIOX® products are used by physicians around the world to help improve asthma diagnosis and management. In April 2020, the company announced a transaction to terminate the development and commercialisation agreement between the company and AstraZeneca UK Limited for the U.S. commercial rights to Tudorza® and Duaklir® in order to transform Circassia into a debt-free business with a strong Niox® based revenue-generating business and the potential to expand into new territories. AstraZeneca has retained its 18.9 per cent shareholding in the company. Revenues for the 6 months to 30 June 2020 amounted to £11.4 million which coupled with continued investment in development and marketing, resulted in a continuing operations loss after tax of £9.4 million for that half year. Circassia had net cash of £9.6 million as of 30 June 2020.The shareholding of Adams at 30 September 2020 was, and continues to be, 0.77 per cent of the Circassia shares in issue.
Diurnal is an AIM listed specialty pharmaceutical company dedicated to developing high-quality hormone therapeutics to aid lifelong treatment for rare and chronic endocrine conditions, initially by developing and marketing products for the rare orphan diseases congenital adrenal hyperplasia and adrenal insufficiency, including its Alkindi® and Chronocort® products. Initial revenues grew to £6.3 million for the year to 30 June 2020, which coupled with lower operating costs, resulted in a much reduced loss after tax of £4.1 million for that year. Cash balances at 30 June 2020 amounted to £15.4 million inclusive of £11.2 million raised under a share placing in March 2020. Diurnal subsequently raised a further £9.8 million of cash under a share placing in October 2020.The shareholding of Adams at 30 September 2020 was 0.39 per cent of the Diurnal shares in issue but this has reduced to 0.34 per cent consequent to the recent share placing in October.
4D Pharma is an AIM listed pioneer in harnessing bacteria of the gut microbiome as a novel and revolutionary class of medicines, known as live biotherapeutics, which could be used as potential new therapies for a large number of diseases including cancer, gastrointestinal disease, respiratory disease and central nervous system disease. The company has initiated multiple live biotherapeutic programmes across a broad range of therapeutic areas and has also entered a clinical collaboration with Merck & Co. to evaluate a lead immuno-oncology candidate. 4D Pharma incurred a loss after tax for the 6 months to 30 June 2020 of £13.6 million on revenues of £0.3 million. Cash and short-term deposits at 30 June 2020 amounted to £10.0 million and 4D Pharma subsequently raised gross proceeds of £7.7 million through a share placing in July 2020. In October 2020, 4D Pharma announced its intention to merge with Longevity Acquisition Corporation, a special purpose acquisition company, and to seek a NASDAQ listing. The merger and NASDAQ listing is currently expected to become effective in early 2021, subject to shareholder approvals. The shareholding of Adams at 30 September 2020 was, and continues to be, 0.15 per cent of the 4D Pharma shares in issue.
Talk Talk is a Main Market listed connectivity provider of landline, broadband, TV and mobile services to consumer and business customers. It offers both consumer and business customers access to fibre broadband connectivity and also offers data solutions to business customers at great value through its high margin ethernet-based services. Talk Talk has a compelling TV proposition that allows customers to access up to 80 Freeview channels, as well as flexible access to an extensive range of premium content from Sky, BT Sport and Netflix. Its mobile services provide unique offers in partnership with O2 that are only available to TalkTalk customers. For the year ended 31 March 2020, the company reported a profit before tax of £131 million on revenues of £1,569 million. In October 2020, Talk Talk announced that it had received a preliminary and non-binding proposal from Toscafund Asset Management LLP ("TAM") regarding a possible cash offer for the company, together with a full unlisted share alternative offer, and which its board has agreed to consider and progress. The shareholding of Adams at 30 September 2020 was, and continues to be, 0.02 per cent of the TalkTalk shares in issue.
Griffin is an AIM listed mining and investment company that has been the leader in foreign investment in mining in China having been engaged in developing the Caijiaying zinc and gold project since 1997. For the 6 months to 30 June 2020, Griffin reported a loss of US$3.8 million after tax on reduced revenues of US$21.3 million, as impacted by the suspension of operations early in the year as a result of the COVID-19 outbreak, together with falling zinc metal prices which were 18% lower than for the first half of 2019. The shareholding of Adams in Griffin as at 30 September 2020 was, and continues to be, 0.13 per cent of the Griffin shares in issue.
Source Bio is an international provider of state-of-the art laboratory services and products and has an expertise in clinical diagnostics, genomics, proteomics, drug discovery & development research and analytical testing services. For the 6 months to 30 June 2020, Source Bio generated earnings of £1.7 million before interest, depreciation and amortisation, on revenues of £10.2 million. Source Bio subsequently redeemed all of its loan notes and converted these to shares ahead of listing its shares on AIM on 29 October 2020 in conjunction with a share placing at that time to raise gross proceeds of £35.0 million. Following these events, the current shareholding of Adams in Source Bio is 0.12 per cent of the Source Bio shares in issue and Adams no longer holds any loan notes in the company.
Oxehealth is a private company that is involved in vision-based patient monitoring and management, using proprietary signal processing and computer vision to process normal digital video camera data to measure the vital signs and activity of patients in a number of different markets, primarily in Mental Health, Acute Hospital settings, Primary Care settings, Care Home, and Custodial facilities in both the UK and also in Sweden. This is achieved through the deployment of their Digital Care Assistant (DCA) platform which enables clinicians to take non-contact cardiorespiratory measurements of patients' pulse and breathing rate, generates alerts to potentially risky activity and reports on patients' vital signs and behaviour, all without the clinician entering the patient's room. As at 30 September 2020, Adams had invested £0.34 million under a subscription agreement with Oxehealth and was committed under that agreement to invest a further £0.23 million which is scheduled to be completed on 27 November 2020. Following this second share subscription, the investment holding by Adams will represent 2.4 per cent of Oxehealth's issued share capital.
Post 30 September 2020 investment transactions.
In addition to the further investment of £0.23 million in Oxehealth referred to above, Adams committed to subscribe £700,000 for 5,000,000 units in C4X Discovery Holdings Plc ("C4XD") under a conditional placing by C4XD which completed on 11 November 2020. Each C4XD unit comprises 1 new C4XD ordinary share and 1 warrant. Following this investment, Adams holds 2.2 per cent of C4XD's issued share capital and also has warrants over a further 5,000,000 new C4DX ordinary shares. C4XD aims to create the world's most productive Drug Discovery engine by using cutting-edge technologies and expertise to efficiently deliver best-in-class small-molecule medicines to clinical partners for the benefit of patients. The C4XD business model focuses on replenishing big pharma discovery pipelines and driving returns through revenue generating pre-clinical licensing deals.
COVID-19 update
The coronavirus (Covid-19) outbreak in 2020 continues to have a negative impact on global economic activity and additional volatility in financial markets can be expected. Adams' investment portfolio has, however, not been adversely impacted subsequent to its 30 September 2020 interim period end and following the second share subscription in Oxehealth expected to be completed on 27 November 2020, the Company will have remaining cash balances of approximately £0.1 million plus investments with a carrying value of approximately £3.4 million represented by seven listed holdings and one un-listed holding.
Outlook
There is much reason for investment caution in the near term, given the severe economic threat to the global economy from the ongoing Covid-19 pandemic, as well as Brexit uncertainties and unprecedented levels of worldwide public debt. Continued volatility in financial markets can, therefore, be expected.
In view of these economic threats and uncertainties, your Board will continue to maintain a rigorous and highly selective investment approach which is committed to delivering additional value for shareholders going forward. We remain confident in the underlying fundamentals, technologies and long-term potential for growth at the companies within our investment portfolio, many of which are in sectors that are regarded as defensive stocks in the current COVID-19 environment.
Michael Bretherton
Chairman
25 November 2020
Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement. The Directors of the Company take responsibility for this announcement.
Enquiries:
Adams plc
Mike Bretherton
Tel: +44 1534 719 761
Nomad
Cairn Financial Advisers LLP
Sandy Jamieson, James Caithie
Tel: +44 207 213 0880
Broker
Peterhouse Corporate Finance Limited
Lucy Williams, Duncan Vasey
Tel: +44 207 469 0930
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'', ''could'', "should" ''envisage'', ''estimate'', ''intend'', ''may'', ''plan'', ''potentially'', "expect", ''will'' or the negative of those, variations or comparable expressions, including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors.
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTH PERIOD TO 30 SEPTEMBER 2020
6 months ended
30 Sep 2020
Year ended 31 Mar 2020
6 months ended
30 Sep 2019
Note
(Unaudited)
(Audited)
(Unaudited)
£'000
£'000
£'000
Gain/(loss) on investments
5
1,159
(245)
(31)
Dividend income
3
83
54
Investment return
1,162
(162)
23
Expenses and other income
Administrative expenses
(77)
(152)
(73)
Other income
-
1
-
Operating profit/(loss)
1,085
(313)
(50)
Interest income
6
10
4
Profit/(loss) before income tax
1,091
(303)
(46)
Income tax expense
-
-
-
Profit/(loss) and total comprehensive
income/(loss) for the period
1,091
(303)
(46)
Basic and diluted earnings/(loss) per share
10
1.32
(0.37)p
(0.06)p
STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2020
As at
30 Sep 2020
As at
31 Mar 2020
As at
30 Sep 2019
(Unaudited)
(Audited)
(Unaudited)
Note
£'000
£'000
£'000
Assets
Non-current assets
Investments
6
2,187
1,178
2,024
Current assets
Trade and other receivables
7
3
9
3
Cash and cash equivalents
972
904
309
Current assets
975
913
312
Total assets
3,162
2,091
2,336
Liabilities
Current liabilities
Trade and other payables
8
(8)
(28)
(16)
Total liabilities
(8)
(28)
(16)
Net current assets
967
885
296
Net assets
3,154
2,063
2,320
Equity
Called up share capital
9
826
826
826
Accumulated gains
2,328
1,237
1,494
Total shareholder equity
3,154
2,063
2,320
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD TO 30 SEPTEMBER 2020
Share
Capital
Accumulated gains/(losses)
Total
£'000
£'000
£'000
At 31 March 2019 (audited)
826
1,540
2,366
Total comprehensive loss for period
-
(46)
(46)
At 30 September 2019 (unaudited)
826
1,494
2,320
Total comprehensive loss for period
-
(257)
(257)
At 31 March 2020 (audited)
826
1,237
2,063
Total comprehensive gain for period
-
1,091
1,091
At 30 September 2020 (unaudited)
826
2,328
3,154
STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD TO 30 SEPTEMBER 2020
6 months
ended
30 Sep 2020
Year
ended
31 Mar 2020
6 months ended
30 Sep 2019
(Unaudited)
(Audited)
(Unaudited)
£'000
£'000
£'000
Profit/(loss) for the period
1,091
(303)
(46)
Unrealised (gain)/loss on revaluation of investments
(736)
319
277
Realised gain on disposal of investments
(423)
(74)
(246)
Decrease/(Increase) in trade and other receivables
6
(7)
(1)
(Decrease)/increase in trade and other payables
(20)
2
(10)
Net cash outflows from operating activities
(82)
(63)
(26)
Cash flows from investing activities
Proceeds from sales of investments
602
2,030
579
Purchase of investments
(451)
(1,378)
(559)
Net cash generated from investing activities
151
652
20
Net increase/(decrease) in cash and cash equivalents
69
589
(6)
Cash and cash equivalents at beginning of period
903
315
315
Cash and cash equivalents at end of period
972
904
309
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD TO 30 SEPTEMBER 2020
1 General information
Adams Plc ("the Company") is a company incorporated in the Isle of Man and is listed on the AIM market of the London Stock Exchange.
2 Basis of preparation
The interim financial statements of Adams Plc are unaudited condensed financial statements for the six months ended 30 September 2020. These include unaudited comparatives for the six months ended 30 September 2019 together with audited comparatives for the year ended 31 March 2020.
These interim condensed financial statements have been prepared on the basis of the accounting policies expected to apply for the financial year to 31 March 2020 which are based on the recognition and measurement principles of International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). The financial statements have been prepared under the historical cost convention. The Company's presentation and functional currency is GBP Pounds Sterling.
The interim financial statements do not include all of the information required for full annual financial statements and do not comply with all the disclosures in IAS 34 'Interim Financial Reporting', and should be read in conjunction with the Company's annual financial statements to 31 March 2020. Accordingly, whilst the interim statements have been prepared in accordance with IFRS, they cannot be construed as being in full compliance with IFRS.
The preparation of financial statements in conformity with IFRS as adopted by the EU requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies.
3 Going concern
Information on the business environment, financial position and the factors underpinning the Company's future prospects and portfolio are included in the Chairman's Statement. The Directors have considered their obligation in relation to the assessment of the going concern of the Company and have reviewed the current cash forecasts and assumptions as well as the main risk factors facing the Company. The Directors acknowledge the ongoing Coronavirus pandemic ("Covid-19") and the adverse impact it, and the measures taken to tackle it, continue to have on the global economy. The impact of the pandemic on the Company and its investments cannot be quantified, however the Directors consider that there is no immediate expectation for the Covid-19 pandemic to affect the going concern status of the Company. The Directors will continue to closely monitor the ongoing impact of Covid-19 on the Company's operations. The Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the going concern basis has been adopted in the preparation of the financial statements.
4 Significant accounting policies
The accounting policies adopted are consistent with those followed in the preparation of the annual financial statements of Adams Plc for the year ended 31 March 2020 which received an unqualified audit opinion. A copy of these financial statements is available on the Company website at www.adamsplc.co.uk.
5 Segment reporting
Operating segments for Adams Plc are reported based on the financial information provided to the Board, which is used to make strategic decisions. The Directors are of the opinion that under IFRS 8 'Operating segments' the Company has only one reportable segment, being Investment Return. The Board assesses the performance of the operating segment based on financial information which is measured and presented in a manner consistent with that in the financial statements.
The principal sources of revenue for the Company in the period to 30 September 2020 were as follows:
6 months ended 30 Sep 2020
Year ended
31 Mar 2020
6 months ended 30 Sep 2019
£'000
£'000
£'000
Unrealised gain/(loss) on investments
736
(319)
(277)
Realised gains on investments
423
74
246
Total gain/(loss) on investments
1,159
(245)
(31)
6 Investments
An analysis of movements in the value of the Company's investments is as follows:
Quoted Equity Shares
Unquoted Equity Shares
Unquoted Loan Notes
Total
£'000
£'000
£'000
£'000
Fair value at 31 March 2019
1,956
5
114
2,075
Additions at cost
555
-
4
559
Unrealised revaluation losses
(333)
-
-
(333)
Disposals
(277)
-
-
(277)
Fair value at 30 September 2019
1,901
5
118
2,024
Additions at cost
813
-
6
819
Disposals
(1,623)
-
-
(1,623)
Unrealised revaluation losses
(42)
-
-
(42)
Fair value at 31 March 2020
1,049
5
124
1,178
Additions at cost
445
-
6
451
Disposals
(178)
-
-
(178)
Unrealised revaluation gains
736
-
-
736
Fair value at 30 September 2020
2,052
5
130
2,187
7 Trade and other receivables
As at
30 Sep 2020
As at
31 Mar 2020
As at
30 Sep 2019
£'000
£'000
£'000
Prepayments
3
9
3
3
9
3
The carrying amount of prepayment is approximate to their fair value.
8 Trade and other payables
As at
30 Sep 2020
As at
31 Mar 2020
As at
30 Sep 2019
£'000
£'000
£'000
Trade payables
1
14
11
Accruals and other creditors
7
14
5
8
28
16
The carrying amount of trade and other payables approximates to their fair value.
9 Share capital
Ordinary shares
Number of shares issued and fully paid up
Share capital
£'000
At 30 September 2019
82,553,232
826
Issue of shares
-
-
At 31 March 2020
82,553,232
826
Issue of shares
-
-
At 30 September 2020
82,553,232
826
The authorised Ordinary share capital of the Company at 30 September 2020, 31 March 2020 and 30 September 2019 was 350,000,000 Ordinary Shares with a nominal value of £0.01 per share.
10 Earnings/(loss) per share
The basic earnings or loss per share is calculated by dividing the profit or loss after tax attributable to equity shareholders by the weighted average number of Ordinary Shares in issue during the period:
6 months
ended
30 Sep 2020
Year
ended
31 Mar 2020
6 months
ended
30 Sep 2019
Profit/(loss) after tax attributable to equity holders of the Company (£'000)
1,091
(303)
(46)
Weighted average number of Ordinary Shares
82,553,232
82,553,232
82,553,232
Basic and diluted earnings/(loss) per share
1.32
(0.37)p
(0.06)p
There were no potentially dilutive shares in issue as at 30 September 2020, 31 March 2020 or 30 September 2019.
11 Events after the reporting date
On 9 June 2020 the Company announced its commitment to subscribe for 21,630 new £0.001 Ordinary Shares in Oxehealth Limited at a price of £26.19 per share. Settlement of the total cash consideration of £566,490 was by way of two subscriptions, the first of which was for £339,894 and completed on 11 June 2020 and the second is for £226,596 and is scheduled to complete on 27 November 2020.
On 21 October 2020 the Company entered into an agreement to subscribe £700,000 for 5,000,000 new units of C4X Discover Holdings Plc ("C4XD") at a price of £0.14 each. Each unit comprises of 1 new ordinary share and 1 warrant in C4XD with a 5-year expiration date. The placing was conditional upon the approval of C4XD's shareholders at a general meeting on 9 November 2020 and the £700,000 investment by Adams completed on 11 November 2020.
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