Half-year Report
26/11/2020 07:00
RNS Number : 5378G
Adams PLC
26 November 2020
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 |
| 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 |
| 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 | ||
| 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 |
| 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 |
| 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) |
| 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 |
| 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 |
| 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 |
| 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 |
| 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 |