REG - Frontier IP Group - Final results for the year ended 30 June 2024
22/11/2024 07:00
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RNS Number : 2599N Frontier IP Group plc 22 November 2024
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22 November 2024
Frontier IP Group plc
("Frontier IP", the "Company" or the "Group")
Final results for the year ended 30 June 2024
Financial highlights
· Fair value of our equity portfolio broadly in line with prior year at
£33,203,000 (2023: £32,964,000) following the unrealised gain on investment
of £2,468,000 (2023: loss £1,780,000), additions of £68,000 (2023:
£745,000) offset by disposals of £2,297,000 (2023 : 5,713,000)
· Disposals in our equity portfolio related to the remaining holding in
Exscientia which generated cash of £2,547,000 (2023: £4,926,000) realising a
gain of £249,000 in the period under review (2023: loss of £786,000)
· Unrealised gain on the revaluation of investments of £1,282,000
(2023: unrealised loss of £966,000) comprising unrealised gains on equity
investments of £2,468,000 (2023: unrealised loss of £1,780,000) and
unrealised losses on debt investments of £1,187,000 (2023: unrealised gains
of £814,000)
· Cash balances at 30 June 2024 of £2,298,000 (2023: £4,603,000)
· Net assets per share as at 30 June 2024 reduced by 2.6% to 79.7p (30
June 2023: 81.8p)
· Loss before tax of £1,337,000 significantly improved on prior year
(2023: loss before tax £4,370,000)
· Basic loss per share of 2.01p (2023: basic loss per share 5.85p)
Corporate highlights
· Completed the exit of Exscientia, generating cash proceeds of £2.55 million from the sale of the outstanding equity stake. In total, the Group sold a total of 1,564,000 Exscientia American Depositary Shares between 10 January 2022 and 29 February 2024 for net proceeds of approximately £14 million. The original cost of these shares was less than £2,000
· Appointed new Chief Financial Officer, Jo Stent, replacing Jim Fish
who stood down from the Board of Directors as Chief Financial Officer to take
up a new position as Portfolio Finance Director. Jo is a chartered accountant
with nearly 30 years' experience in senior roles across a broad range of
sectors and geographies. She was most recently CFO at Aim-quoted Argentex
Group Plc. Her previous roles include CFO of the European Tour and Ryder Cup
Europe, CFO of Vodafone Americas and senior positions at Telus Communications
and Deloitte
· Professor Dame Julia King, Baroness Brown of Cambridge, who joined
the Frontier IP Board of Directors in October 2021, assumed the role of Chair
replacing Andrew Richmond. She was previously the Senior Independent Director
on the Board.
· The Group took an equity stake in early-stage business Deakin
Bio-Hybrid Materials, which is initially developing sustainable alternatives
to ceramic tiles.
· The Group announced it holds a 4.26 per cent stake in DiaGen, a
Canadian company focused on AI-driven protein and peptide design for medical
applications
Portfolio highlights
· The Group's portfolio has a mix of companies at different stages of
maturity and it is now considering the potential for realising value from
several companies. There was also strong technical progress across the
portfolio. Despite the difficult funding environment, four companies raised
money during the period and post the year end. We continued to strengthen
management teams.
Highlights included:
o Alusid announced it is exploring options for a potential initial public
offering after raising £1.13 million in a funding round including a £500,000
investment from Octopus AIM VCT plc and Octopus AIM VCT 2 plc funds. The
company successfully scaled up manufacture of its floor tiles
o CamGraPhIC secured a loan facility for £1.5 million and made good
progress in development and scale up of its advanced graphene photonics
technology. The company is working with a number of potential customers,
including multinationals in the semiconductor and telecommunications sector.
It is attracting interest from potential government and financial backers
o Pulsiv strengthened its board with the appointment of serial entrepreneur
Dr Mark Gerhard as Chair and Dr Tim Moore as Chief Product Officer. After the
year end, the company launched the world's most energy efficient 65W USB-C
fast charger reference design, which is now garnering interest from potential
customers
o Nandi Proteins won its first licensing agreement with a global food
ingredients business for its meat / fat replacer. Post period end, the company
announced it had secured investment from Nesta and Scottish Enterprise
o The Vaccine Group appointed an advisory board and entered into a
collaboration with The Pirbright Institute to develop vaccines to combat
African swine fever. Post period end, Defra granted more than £1 million to a
project led by the company to develop a vaccine against Streptococcus suis
o Cambridge Raman Imaging commercially launched its ultra-fast lasers for
use in Raman imaging technology. Revenues exceeded expectations. Frontier IP
put in place a loan facility to support growth
o Fieldwork Robotics raised more than £2 million through an investment
round led by Elbow Beach Capital and appointed David Fulton as Chief Executive
Officer.
· Post period end developments included:
o GraphEnergyTech raised £1 million through an investment round led by
Aramco Ventures, the corporate venturing arm of Aramco
o Deakin Bio-Hybrid Materials raised £693,000 through an oversubscribed
funding round led by Green Angel Ventures
Key extracts from the Annual Report can also be viewed below which include the
basis for a qualified audit opinion and material uncertainty relating to going
concern.
The financial information in this announcement has been extracted from the
Group's Annual Report and Statement of Accounts for the year to 30 June 2024
and is prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and in accordance
with UK adopted international accounting standards. Whilst the financial
information included in this preliminary announcement has been computed in
accordance with International Financial Reporting Standards (IFRS), this
announcement does not itself contain sufficient information to comply with
IFRS and the financial information set out does not constitute the Company or
Group's statutory accounts for the years to 30 June 2024 or 30 June 2023.
ENQUIRIES
Frontier IP Group Plc T: 020 3968 7815 neil@frontierip.co.uk (mailto:neil@frontierip.co.uk)
Neil Crabb, Chief Executive
M: 07464 546 025
Andrew Johnson, Communications & Investor Relations andrew.johnson@frontierip.co.uk (mailto:andrew.johnson@frontierip.co.uk)
Company website: www.frontierip.co.uk (http://www.frontierip.co.uk/)
Allenby Capital Limited (Nominated Adviser) T: 0203 328 5656
Nick Athanas / George Payne
Singer Capital Markets (Broker) T: 0207 496 3000
Charles Leigh-Pemberton / James Fischer
ABOUT FRONTIER IP
Frontier IP unites science and commerce by identifying strong intellectual
property and accelerating its development through a range of commercialisation
services. A critical part of the Group's work is involving relevant industry
partners at an early stage of development to ensure technology meets real
world demands and needs.
The Group looks to build and grow a portfolio of equity stakes and licence
income by taking an active involvement in spin-out companies, including
support for fund raising and collaboration with relevant industry partners at
an early stage of development.
Chair's Statement
Performance
The year to June 2024 saw companies across the portfolio make tangible
commercial and technical progress. Although a pre-tax loss is always a
disappointment, the figure has significantly narrowed from last year and
represents a resilient performance in what were exceptionally difficult
conditions in the private markets. This was further reflected in the rise in
the fair value of our equity portfolio and an unrealised gain on the
revaluation of investments.
Our Chief Executive, Neil Crabb, addresses the key issues in his statement,
and highlights some of the successes that we have seen across the portfolio
during the year and which have continued after the year end. These include
successful funding rounds for Fieldwork Robotics, Alusid, GraphEnergyTech, and
Nandi Proteins; a commercial breakthrough for Nandi, which signed its first
licensing agreement with a major global food ingredients group; and Cambridge
Raman Imaging launching its ultra-fast fibre lasers into the market resulting
in the delivery of stronger than expected sales. CamGraPhIC and Pulsiv also
delivered strong progress. Deakin Bio-Hybrid Materials became the latest
addition to our portfolio.
This progress is bringing the day when we will be able to exit some of our
portfolio companies ever closer. The market conditions mean timings are
difficult to predict: as Neil explains, there have been sharp falls in IPOs
and M&A activity over the last 18 months to two years.
Our portfolio companies are attracting interest from a wide range of very
different organisations, from the corporate venturing arm of Aramco, to the
investment division of UK social innovation agency Nesta, from major
multinationals to specialist investors, such as Green Angel Ventures. This
broad appeal indicates to me that the portfolio is offering solutions to
deep-seated problems and is meeting fundamental needs.
This is my first statement as your Chair. I'd like to thank my predecessor
Andrew Richmond for his eleven years of service as an independent
Non-Executive Director, for nine of which he was Chairman. He played an
invaluable role in helping Frontier IP grow and develop to the stage it is at
today.
I'd also like to touch on some of the factors that attracted me to Frontier
IP, to join the board initially as an independent Non-Executive Director,
Senior Independent Director and then Chair.
One of the main things was the business model. I have held senior roles in
both academia and in industry. The model solves a lot of the problems I
experienced from both sides.
To start with, Frontier IP does not have this huge funnel that looks at
hundreds of companies and only a very small number go on to be successful. The
Group is extremely selective: we work with inventors, founders and academics
from a very early stage, and we help them to understand where what they are
doing might be applicable.
Academics do not necessarily have the breadth of experience to understand
customers. When I was at Rolls-Royce, some would approach us with really
clever ideas and technologies they had developed. But because they didn't
understand the constraints of our environment and processes, there were many
occasions where either we couldn't use them or where they could have been
valuable if they had engaged with us at a much earlier stage in the
development.
You need people to work with the academics and inventors to show them how
their technology can be used. They are the people with experience of
technologies and industry who can understand the potential applications within
any given market. A key part of the Frontier model is forming the link between
the good ideas and how they might be commercialised, who is going to use them,
and how potential customers might need to put constraints on how the idea
might be developed. A really important part of how the Frontier model works is
the high ratio of employees to portfolio companies - very broadly, the ratio
is about one to one, and ensures a tight focus on each company.
Commercialising ideas in this way is not easy, developing the kind of deep
technologies Frontier focuses on can take time. There are often tricky
problems to overcome, but these mean the barriers to entry for those seeking
to follow are much higher.
In terms of personnel, I would very much like to take this opportunity to
welcome Jo Stent to the Board of Directors as Chief Financial Officer. She has
very wide experience across a range of sectors and geographies. Most recently,
she was CFO of Aim quoted Argentex Group plc. Previously she was CFO of the
European Tour and Ryder Cup Europe, a former CFO of Vodafone Americas, and
previously held senior positions at Telus Communications and Deloitte. She
replaced Jim Fish, who stood down from the Board of Directors to take up a new
role as Portfolio Finance Director. Her experience is already proving
invaluable as the Group moves on to the next stage of its growth.
Our governance
Good governance is vital for long-term sustainable growth, and we strive to
achieve the highest standards for a business our size. We currently comply
with the Quoted Companies Alliance Corporate Governance Code, introduced in
April 2018.
The QCA has introduced a new code, the QCA Code (2023) and we are planning to
apply the new code for the next financial year to June 2025.
Results
The results represented a resilient performance in what continue to be
challenging markets for technology companies and their investors. The rise in
fair value of our equity portfolio to £33,203,000 reflected disposals of
£2,297,000 and additions of £68,000. We made an unrealised gain on the
revaluation of investments of £1,282,000 against an unrealised loss for the
year to June 2023 of £966,000 million.
The disposal of our remaining equity holding in Exscientia, generated more
than £2.5 million of cash during the year. Our cash balances at 30 June 2024
were £2,298,000.
Outlook
The markets and economic outlook remain difficult to predict given the high
levels of global uncertainty. The Group is undertaking a placing and a retail
offer through Primary Bid to ensure the balance sheet is in a strong position
to support future growth. I am confident about the prospects for both the
group and the portfolio, which is addressing important market needs and
demands.
Professor Dame Julia King, Baroness Brown of Cambridge, DBE FREng FRS FMedSci
Chair
21 November 2024
Chief Executive Officer's Statement
This has been a tough year. Higher interest rates and the subsequent
tightening of credit conditions has ended an era of cheap money flooding into
early-stage companies. Other headwinds include a fraught geopolitical
situation globally with knock-on impacts on trade and supply chains. Returns
have been subdued and exits harder to complete. The number of deals and the
amount of equity funding have fallen sharply. Investors are attending more
closely to the fundamentals of profits and cash. Some of the high and
optimistic valuations we have seen over the past few years, driven by
optimistic expectations of revenue growth, now look unsustainable. The Age of
the Unicorn is coming to an end.
Frontier IP and our portfolio companies have not been immune from these
pressures. It has taken longer than expected to get funding rounds away.
Progress towards exits has been slower than I would have liked. The fact we
made a narrow pre-tax loss is clearly a disappointment. But setting aside the
market issues, across the portfolio there have been pleasing financial,
technical and commercial developments.
When times are hard, the principles on which we base our differentiated and
innovative business model come to the fore. We do not focus on volume and high
deal flow, burning through cash in the hope one or two companies become big.
Instead, our approach is capital efficient and focused on quality, framed by
key ideas that help us to identify promising technology. Among these would be
their potential to reduce costs and improve efficiency. A byproduct is they
tend to be sustainable technologies. Efficiency and sustainability march
onwards hand-in-hand. For example, an efficient technology might use less
energy: therefore, it would cheaper to run and have a lower carbon footprint.
As a result, several of our companies generated a high level of interest and
backing from industrial, government and institutions as well as financial
backers. Some have won commercial contracts and are now generating revenues. I
am confident that we will be able to conclude successful exits in the coming
year or two, market conditions notwithstanding.
In our view, Alusid remains the likeliest candidate to be our next exit. It
has already announced an intention to IPO and has appointed a broker to
explore options. The company's patented processes and know-how are addressing
significant needs in an industry grappling with waste and high-energy,
carbon-intensive manufacturing. By making tiles almost entirely from recycled
materials and removing a firing stage, and so using less energy, Alusid's
tiles are the sustainable choice for customers. And because the tiles can be
made on existing industrial-scale manufacturing equipment, there is no need
for the company to invest huge sums in its own plant. Sub-contracting is much
more capital efficient.
In January, the company raised £1.13 million through an investment round led
by the Octopus Aim VCT and Octopus Aim VCT 2 funds. Since then, Alusid has
made good technical progress, successfully scaling up its floor tiles to
industrial production. These have now been launched by Parkside and are
expected to become Alusid's second range sold through Topps Tiles. There is
clearly global potential, and I am hopeful there will be some further news on
European distribution in the next few months.
At the moment, the next in line are CamGraPhIC and Pulsiv. CamGraPhIC is
currently undertaking a Series A funding round, which is expected to receive
support from major financial, industrial and government backers. Prototypes of
the company's graphene transceivers have shown their speeds to be much faster
than equivalent technologies, consume 70 per cent less energy and can operate
at a much wider range of temperatures. As silicon semiconductors approach the
very limits of what they can theoretically achieve, CamGraPhIC's graphene
photonics are emerging as a key to enabling the next generations of data
centres, AI, 5G and 6G telecommunications and many other applications.
Graphene device production can be incorporated simply into existing
fabrication plants. The very strong interest we are seeing from various
sectors provides an indication of the company's exit potential.
Pulsiv is also completing a funding round to scale up its ground-breaking
power conversion technology. Over the last 18 months, the company has
established a global distribution network, It has also launched a 65W USB C
charger reference design, which operates at a game-changing 90 per cent
efficiency, compared to about 50 per cent for existing technologies. We are
hoping to announce initial customers for the product by the end of the year.
Further product launches up to a 240W USB C reference design are in the
pipeline. Talks are ongoing with industry partners about other applications,
and technology to improve the energy output of solar cells is under
development. There is huge market potential: the technology uses fewer
components, is therefore cheaper to make, much more efficient, cheaper to run,
and can be used wherever power is converted. Exit options are under active
consideration.
The potential exits of three other companies are also emerging into view.
Nandi Proteins achieved a commercial breakthrough during the year, signing an
agreement with a global food ingredients group to make its meat and fat
replacers. Technical progress was also made on the firm's egg white and
methylcellulose replacement products. The products under development are all
high-volume applications, global in scope, and mean the company could become a
major business.
The Vaccine Group is also eyeing large market opportunities: for animal
vaccines, the global market is estimated at c$13 billion worldwide, while the
therapeutics market is worth a further $2.6 billion. During the year, the
company entered into collaboration with The Pirbright Institute for an African
Swine Fever vaccine.
It has also been an outstanding year for Cambridge Raman Imaging. The company
started selling its innovative ultra-fast fibre lasers for high-speed coherent
Raman spectroscopy at the beginning of 2024. Success, with revenues running
ahead of expectations, meant we had to put in place a loan facility for the
company to ensure it could meet demand. The ability of the technology to
create digital images of cancerous cells and tissue in near real time for fast
and accurate AI assisted tumour diagnosis promises to revolutionise
histopathology. CRI is also exploring other options for the technology.
Although our focus is on maximising exit opportunities at the moment, we're
also on the lookout for new companies. It's important to maintain a balanced
mix of maturities across the portfolio to provide the base for future exits.
During the year, we took a 32.8 per cent equity stake in Deakin Bio-Hybrid
Materials. The company has developed technology to produce advanced materials
from organic waste such as chickpea broth, and inorganic powders, like crushed
limestone. Initial applications are as sustainable alternatives to ceramic
tiles. Because DeakinBio's materials do not need firing or glazing at hot
temperatures, they can produce tiles with a carbon footprint 90 per cent less
than traditional tiles. And because they are using less energy, they will be
cheaper to manufacture.
Although the private markets have been particularly challenging this year,
several of our companies, in addition to Alusid, raised money. I was
especially pleased with the mix of investors attracted. They spanned industry
and government, as well as more traditional funds and individuals. This
strongly validates our differentiated business model, and its focus on the
patient development of deep technologies with industry-changing potential.
Aramco Ventures, the corporate venturing arm of energy giant Aramco, led an
investment round into GraphEnergyTech. Nesta Impact Investments, the
investment arm of UK social innovation agency Nesta, backed a Nandi funding
round with Scottish Enterprise after the end of the year. Also post period
end, Defra backed a TVG-led project to develop a vaccine against an emerging
zoonotic disease, Streptococcus suis. Other companies raising money included
Fieldwork Robotics, which raised £1.5 million from a fundraising led by Elbow
Beach, and DeakinBio in a round led by Green Angel Ventures.
A year of change in politics saw a new government take power after our year
end. It is still too early to say how it will affect us and our portfolio
companies. However, I was encouraged by the decision to extend the Seed
Enterprise Investment Scheme and Enterprise Investment Scheme. We use both
schemes widely for providing finance to early-stage businesses within our
portfolio.
I am also pleased Labour have promised to press ahead with the Mansion House
reforms initiated by the previous government. In last year's Annual Report, I
wrote that our globally important financial sector and world-leading
universities and researchers were failing to connect properly. The links
between finance and the sources of innovation are, if not completely broken,
severely frayed. These reforms will hopefully start to bring the pots of
capital and the pots of ideas together again.
There were also changes to the Frontier IP board during the year. I am sorry
to say that our Finance Director Jim Fish decided to take a step back from the
hurly burly of executive directorship but delighted that he has decided to
stay with the Group as Group Portfolio Finance Director, supporting our
portfolio companies. I am also delighted that Jo Stent has joined us as Chief
Finance Officer. In another move, Professor Dame Julia King, Baroness Brown of
Cambridge, became Group Chair following a stint as Senior Independent
Director.
For all the travails we have seen in the markets this year, I am optimistic
about the future for Frontier IP and our portfolio companies. They are taking
on some of the most fundamental challenges we face today: around climate,
energy, food, water and health. Technology has a vital role in helping us to
meet those challenges. And in doing so, we are developing technologies that
are more efficient and therefore cost effective. All this means our companies
are attracting strong industry interest. With a fair wind, the coming year
should see a number of exciting developments. I remain confident about our
prospects.
Neil Crabb, Chief Executive Officer
21 November 2024
Matters referring to the Financial Statements
Basis for qualified audit opinion
As noted in the external auditor's report, during the prior year ended 30 June
2023, the Directors were unable to provide the external auditor with
sufficient support to reliably perform the year end valuations for certain
investments, specifically being those investments described as 'Stage 2' by
management in Note 13, which were valued at £1.2 million as at 30 June 2023
(included in the total Equity investments of £32.9 million in the Group's
Consolidated Statement of Financial Position and £28.3 million in the Company
Statement of Financial Position). As a result, the external auditor was unable
to obtain sufficient appropriate audit evidence in respect of the valuation of
these investments as at 30 June 2023 and issued a modified audit opinion for
the financial statements to 30 June 2023 as a result. Consequently, the
external auditor was unable to determine whether any adjustment was necessary
to these amounts as at 30 June 2023 or whether there was any consequential
effect on the Group and Parent Company's other comprehensive income for the
year ended 30 June 2024, therefore issued a modified audit opinion on the
current period's financial statements purely as a result of this prior year
matter.
Material uncertainty related to going concern
We draw attention to the accounting policies in the financial statements,
which indicates that the Group is reliant on additional funding through the
issue of ordinary shares which is not guaranteed. After making appropriate
enquiries, the Directors consider that it remains appropriate to adopt the
going concern basis in preparing the financial statements. In assessing the
going concern, the Directors considered the Group's cash requirements over the
three years to 30 June 2027. The forecast included operating activities and
known near term purchase of investments. It did not include cash from the
purchase of unplanned investments. The analysis showed that as at 30 June 2024
the Group had insufficient cash to cover its operating expenditure for the 12
months from the date of signing of these financial statements. However, the
Directors intend to realise further cash from the issue of ordinary shares
which they reasonably expect will provide the Group with sufficient cash to
cover its operating expenditure for this period. The Directors also expect
that this share issue will, where appropriate, assist the Group in supporting
portfolio companies during this period. The Group and Company are reliant on
additional funding through the issue of ordinary shares, which the timing and
amount are not guaranteed however the Directors have a reasonable expectation
that the funding will be forthcoming. The amount of shares to be issued will
be subject to shareholder approval at the AGM set for 19 December 2024 with
funds available shortly thereafter. The financial statements do not include
the adjustments that would be required should the going concern basis of
preparation no longer be appropriate.
Key Performance Indicators and Alternative Performance Measures
The Key Performance Indicators and Alternative Performance Measures for the
Group are:
KPI / APM Description 2024 Performance
Basic earnings per share (KPI) Profit attributable to shareholders divided by the weighted average number of Loss of 2.01p (2023: loss of 5.8p)
shares in issue during the year.
Net assets per share (KPI) Value of the Group's assets less the value of its liabilities per share 79.7p (2023: 81.8p)
outstanding
Total revenue and other operating income (KPI) Growth in the aggregate of revenue from services, change in fair value of Positive income of £1,889,000 (2023: negative income of £1,380,000)
investments and realised profit on disposal of investments
Profit (KPI) Profit before tax for the year Loss of £1,337,000 (2023: loss of £4,370,000)
Total initial equity in new portfolio companies (APM) Note 1 Aggregate percentage equity earned from new portfolio companies during the 32.8% (2023:108%)
year
Note 1 - The total initial equity in portfolio companies is not an IFRS
measure. It is used by Directors to measure the total percentage equity stakes
received in all new spin-out companies during the year. It does not reflect
holdings in individual spin-outs and does not include equity received through
post spin-out investment. For 2024 it is the aggregate percentage holding from
one new spin-out company during the year.
The Group did not meet any of the Key Performance Indicators or Alternative
Performance Measure during the year, reflective of the prevailing market
conditions.
Net assets per share decreased by 3% to 79.7p (2023: 81.8p) reflecting a loss
after tax of £1,126,000. The value of the Group's investments increased by 1%
to £33,203,000 (2023: £32,964,000) reflecting the net increase to equity
investments of £239,000 and net increase in debt investments of
£970,000. The net increase in equity investments of £239,000 reflects an
unrealised profit on equity investments of £2,469,000, the opening value of
the remaining Exscientia shares sold of £2,297,000 and additions of
£68,000. The Exscientia shares sold generated proceeds of £2,545,000,
representing a profit of £249,000 in the period. The net increase in debt
investments of £970,000 reflects additions of £2,157,000 and an unrealised
loss on debt investments of £1,187,000. Loss after tax for the Group for
the year to 30 June 2024 was £1,126,000 (2023: loss of £3,244,000) after a
deferred tax credit of £211,000 (2023: credit of £1,126,000). This result
includes a realised gain on disposal of investments of £249,000 (2023: loss
of £786,000), an unrealised gain on the revaluation of investments of
£1,282,000 (2023: loss of £966,000) and reflects a decrease in services
revenue to £358,000(2023: £372,000). Administrative expenses of
£3,508,000 (2023: £3,130,000) increased by 12% primarily driven by people
costs as a result of the partial implementation of a previously communicated
remuneration review for directors applied in the year as well as regular
inflation from 1 July 2023.
Operational Review
During the year, we made two changes to our Board of Directors. Professor Dame
Julia King, Baroness Brown of Cambridge, DBE, FREng, FRS, FMedSci, became
Chair have previously been Senior Independent Director. She replaced Andrew
Richmond who stood down at the annual general meeting held in December 2023.
Jim Fish stepped down as Chief Financial Officer from the Board of Directors
to take up a new role as Portfolio Finance Director. He has been replaced by
Jo Stent, who joined the Group as Chief Financial Officer in April 2024.
Companies across the portfolio made good technical and commercial progress.
Several achieved important commercial traction and either started to generate
or starting to generate revenues for the first time as longer-term industry
engagement started to translate into contracts and sales. We continued to
strengthen management teams across the portfolio. Fieldwork Robotics appointed
a new chief executive and Pulsiv gained a Chair and a Chief Product Officer.
Successful fundraisings across the portfolio included those by Alusid and
Fieldwork Robotics during the year, and after the year end, by
GraphEnergyTech, Nandi Proteins and Deakin Bio-Hybrid Materials. DeakinBio was
the one addition to the portfolio during the year after the Group took an
equity stake in the business.
The Group also put in place loan facilities for CamGraphIC and Cambridge Raman
Imaging. Frontier IP also completed the exit of Exscientia and disclosed a
small equity holding in DiaGen AI, which is developing AI for protein and
peptide design for medical applications.
Portfolio Review
Frontier IP strives to develop and maximise value from its portfolio. We do so
by taking founding stakes in companies at incorporation and then working in
long-term partnerships with shareholders, academic and industry partners.
As part of our sustainability agenda, we have mapped our portfolio companies
to relevant United Nations Sustainability Development Goals (UN SDGs).
(https://sdgs.un.org/goals) All equity holdings are as at 30 June 2024.
Core portfolio
Alusid: Frontier IP stake: 35.4 per cent
Alusid recycles industrial waste to create beautiful, premium-quality tiles,
tabletops and other surfaces.
During the year, the company successfully developed and scaled up for mass
manufacture a range of floor tiles. This was an important development because
floor tiles comprise about 60 per cent of the total UK market. Called Mas, the
range is made from between 95 per cent and 98.5 per cent recycled content, and
has one of the lowest carbon footprints of tiles in the market.
The range was launched by Parkside Architectural Tiles, the commercial arm of
Topps Tiles plc. The range is expected to be sold in Topp's retail chain in
due course, where it will join Alusid's Principle wall tile range.
The company also raised £1.13 million during the year through a funding round
backed by Octopus Investments through its Octopus AIM VCT plc and Octopus AIM
VCT 2 plc funds. Following the investment, Alusid announced it was exploring
options for an initial public offering.
UN Sustainable Development Goal mapping: SDG 9, industry, innovation and
infrastructure; SDG 12, responsible consumption and production.
Amprologix: Frontier IP stake: 9.7 per cent
Amprologix was created to commercialise the work of Mathew Upton, Professor of
Medical Microbiology at Plymouth's Institute of Translational and Stratified
Medicine.
The company continued to make progress with development of its new family of
antibiotics based epidermicin, which is derived from bacteria found on human
skin, to tackle antimicrobial-resistant MRSA and other superbugs. Ingenza, a
leader in industrial biotechnology and synthetic biology, is also a
shareholder and is working with Amprologix to develop and scale up the
technology.
COVID-19 heightened interest in other threats to human health globally.
Antimicrobial Resistance is deemed one of the major risks to global health by
the World Health Organisation. After the year end, a political declaration at
the United Nations General Assembly set a series of targets to reduce deaths
from resistant bacteria.
UN SDG mapping: SDG 3, good health and well-being
AquaInSilico: Frontier IP stake: 29.0 per cent
AquaInSilico is developing sophisticated software tools able to understand and
predict how biological and chemical processes unfold in different operating
conditions.
These can be used to optimise wastewater treatment across many industries,
including municipal wastewater treatment plants, oil groups, brewers, pulp,
paper and steel makers, food processing and waste recovery businesses.
The company's digital tools have been implemented by a client in Cape Verde as
part of the Phos-Value project to recycle environmentally harmful nutrients as
biofertilisers and improve water quality. The project was supported by the
United Nations Development Program. AquaInSilico was also selected to take
part in a European PathFinder project to develop sustainable products and made
good progress in gaining municipal and industrial interest in its UPWATER®
technology.
UN SDG mapping: SDG 6, clean water and sanitation, SDG 12, responsible
consumption and production, SDG 14, life below water
Cambridge Raman Imaging: Frontier IP stake: 26.8 per cent
Cambridge Raman Imaging (CRI), our first graphene spin out, made significant
commercial progress during the year. The company is developing Raman imaging
technology based on ultra-fast fibre lasers to create high-quality digital
images in near real time.
Initial applications are for use in medicine to detect and monitor cancerous
tumours in human tissues and cells. The images can be analysed by artificial
intelligence to make diagnosis even faster and more accurate.
During the year, the company launched its ultra-fast fibre lasers for
high-speed Raman spectroscopy into the market. They were a success. Revenues
trended ahead of expectations, requiring Frontier IP to put in place a working
capital facility to support the company's growth. The markets being addressed
by CRI are fast growing and high margin.
The company was formed as a result of a partnership between the University of
Cambridge and the Politecnico di Milano in Italy.
UN SDG mapping: SDG 3 good health and well-being
CamGraPhIC: Frontier IP stake: 18.71 per cent
CamGraPhIC, a spin out from the University of Cambridge and Italian institute
CNIT, develops graphene-based photonics for ultra-high bandwidth, high
efficiency transmission of digital data.
The initial focus is on high-performance computing and artificial
intelligence, and smart antennas for 5G and 6G telecommunications. These are
very significant markets whose future needs cannot be met by current silicon
semiconductor technology. Further possible applications are in the defence,
automotive, space and avionics sectors.
Prototype graphene transceivers have demonstrated that speeds are much faster
than equivalent technologies and use 70 per cent less energy.
Partners include leading multinationals from the telecoms and semiconductor
sectors. During the year, CamGraphIC put in place a loan facility worth £1.5
million.
The strong trade interest provides an indication of exit potential.
UN SDG mapping: SDG 9, industry, innovation and infrastructure, SDG 11,
sustainable cities and infrastructure
Celerum: Frontier IP stake: 33.8 per cent
Celerum is developing novel artificial intelligence to improve the operational
efficiency of logistics and supply chains.
The company's technology uses specialist algorithms based on nature-inspired
computing, software and algorithms based on natural processes and behaviours.
During the year, the company announced it had won its first international
customer, Grampian Continental, and was developing more sophisticated versions
of the software to meet the needs of further customers.
UN SDG mapping: SDG 9, industry, innovation and infrastructure
Deakin Bio-Hybrid Materials: Frontier IP stake: 33.3 per cent
A new addition to the portfolio during the year, Deakin Bio-Hybrid Materials
is developing low-energy processes to produce advanced bio-based composites as
sustainable alternatives to ceramics.
The company's materials are produced from organic waste such as chickpea broth
with widely available waste minerals, such as crushed limestone. Traditional
tile manufacturing has a high carbon footprint because of the need to fire and
glaze products at a very hot temperature. This means the industry has
significant challenges with high energy prices and tighter emission
regulations.
DeakinBio's materials do not need to be fired and glazed. They have a carbon
footprint 94 per cent lower than conventional tiles and products made from
them contain more than 95 per cent recycled content.
After the year end, the company raised £693,000 through an equity funding
round led by Green Angel Ventures.
UN Sustainable Development Goal mapping: SDG 9, industry, innovation and
infrastructure; SDG 12, responsible consumption and production.
Des Solutio: Frontier IP stake: 25.0 per cent
Des Solutio is developing safer and greener alternatives to the toxic solvents
currently used to extract active ingredients by the pharmaceutical, personal
care, household goods and food industries.
It does this through the use of Natural Deep Eutectic Solvents. These are
combinations of naturally occurring (often plant based) sugars, acids,
alcohols and amino acids that can be used as safe solvents. These new green
solvents can be used to replace toxic organic solvents used in conventional
processing , such as ethanol, employed currently. This means it is
contributing to the environmentally sound management of chemicals, and
reducing their release to air, water and soil.
The company is developing food preservatives to extend the shelf life of fresh
cut products and natural juices, as well as working with industry partners to
replace toxic solvents with safer green alternatives.
UN SDG mapping: SDG 9 industry, innovation and infrastructure; SDG 12,
responsible consumption and production.
DiaGen AI: Frontier IP stake: 4.15 per cent
Frontier IP announced during the year that it holds an equity stake in DiaGen
AI, a Canadian company focused on AI-driven protein and peptide design for
medical applications. The Group earned the state in DiaGen, formerly known
Proteic Bioscience, in return for advisory services.
DiaGen was founded in 2021 to develop an AI-engine for protein design, drug
discovery and diagnostics for health, wellness, longevity and precision
medicine. The company entered into a collaboration with fellow portfolio
company The Vaccine Group during the year to developing novel and better
vaccines for use in animals.
UN SDG mapping: SDG 3 good health and well-being
Elute Intelligence: Frontier IP stake: 40.7 per cent
Elute's software tools are designed to help users intelligently search,
compare and analyse complex documents by mimicking the way people read. There
are a huge range of potential applications, from searching patents and
contracts, to detecting evidence of plagiarism, collusion and copyright
infringement. The company's tools help to enhance research, support improved
technological capabilities and innovation. Existing customers for the
company's CopyCatch plagiarism detection software include UCAS, The Open
University, and Slicethepie, the largest paid review site on the internet.
The company is developing an IP analyst tool for investment firms.
UN SDG mapping: SDG 9, industry, innovation and infrastructure
Fieldwork Robotics: Frontier IP stake: 18.2 per cent
Fieldwork Robotics is developing agricultural robots for fruit and vegetable
harvesting, with an initial focus on raspberry picking.
During the year, the company raised £1.5 million in seed funding through an
investment round led by Elbow Beach Capital. David Fulton joined as Chief
Executive Officer, and Christopher Levine as Chief Financial Officer in March.
David has more than 30 years' business experience, most recently as co-founder
and director of LAB+BONE, a service to protect dogs' identity by using DNA. He
previously held executive positions with Expedia, Adform and Microsoft.
After the year end, the company launched Fieldworker 1, an updated harvesting
robot, and entered into a collaboration with Costa Group, Australia's leading
producer of fresh fruit and vegetables. Fieldwork is seeing strong traction
with a growing customer pipeline in Australia, USA and Portugal.
UN SDG mapping: SDG 2, zero hunger; SDG 12 responsible consumption and
production
GraphEnergyTech: Frontier IP stake 30.4 per cent
GraphEnergyTech is developing advanced graphene technology for lower-cost and
more environmentally-friendly solar cells - and could help save global silver
reserves from exhaustion by 2050.
The company is developing high-conductivity graphene inks. Initial
applications are for graphene electrodes to replace expensive silver
electrodes in solar cells. Silver is the most commonly used material for solar
cell electrodes, and the solar industry is currently using 100 million troy
ounces a year at a cost of at least $2 billion. Research by the University of
New South Wales, Australia, states more than 85 per cent of current silver
reserves could be consumed by solar by 2050, with the upper end of its
estimates as high as 113 per cent.
GraphEnergyTech's electrodes are 22 per cent cheaper than silver at pilot
stage with further reductions expected as the technology is scaled up. Other
applications for the technology include batteries, super capacitors, LED
lighting and displays.
After the year end, the company raised £1 million through an investment round
led by Aramco Ventures, the corporate venturing arm of Aramco, a leading
global integrated energy and chemicals company.
Using graphene inks will also reduce the environmentally damaging extraction
of metals, including the use of mercury and cyanide.
UN SDG mapping: UN SDG 7 affordable and clean energy, UN SDG 9, industry,
innovation and infrastructure,
InSignals Neurotech: Frontier IP stake: 32.9 per cent
InSignals Neurotech continues to make progress with its novel technology to
analyse the motor symptoms of Parkinson's disease and other neurological
disorders.
The company is developing wireless devices to measure motor symptoms, such
as wrist rigidity, in real time to help surgeons and neurologists assess the
extent of the disease. Initial prototypes were designed to help identify the
best locations to place implants in the brain. However, an improved version
can now be used to monitor symptoms more broadly for disease tracking and to
understand better how patients are responding to treatment.
A collaboration with the University of Santiago de Compostela in Spain
confirmed how object measurements could produce deeper insights into disease
progression. A mobile application of the technology is now under development.
The spin out from the Portuguese Institute for Systems and Computer
Engineering, Technology and Science ("INESC TEC"), with the support of São
João University Hospital, part of the University of Porto.
UN SDG mapping: SDG 3 good health and well-being
Molendotech: Frontier IP stake: 9.5 per cent
Molendotech has developed Bacterisk+, a proprietary screening test for faecal
contamination in water. The tests, which can be used on site, cuts testing
times from up to two days to under 30 minutes because samples do not need to
be sent to a laboratory, enabling environmental agencies and other authorities
to assess water quality swiftly. It has been used to screen marine bathing
waters, inland recreational waters, irrigation water and food process water.
The company has also developed a test to detect specific bacterial strains,
including pathogens, for use in the food industry, animal feeds, veterinary
practices and ballast waters.
UN SDG mapping: SDG 6, clean water and sanitation; SDG 12 responsible
consumption and production
Nandi Proteins: Frontier IP stake: 19.8 per cent
Nandi Proteins achieved a commercial breakthrough for its innovative food
ingredient technology during the year, signing an agreement with a global food
ingredients group to make Nandi's meat and fat replacement products.
The meat / fat replacer is one of several high volume applications to reduce
fat, additives and gluten in processed foods. Nandi is also developing an egg
white replacer for use in alternative meat products, baked goods and meringues
and methylcellulose replacer. Both are making good progress.
After the year end, the company secured investment from Nesta Impact
Investments, the investment arm of UK social innovation agency Nesta, and
Scottish Enterprise, as part of a £500,000 investment made via a convertible
loan. The move is part of a wider funding round aimed at raising a total of
£1.5 million. Nesta has committed to backing the equity funding round.
UN SDG mapping: SDG 2, end hunger; SDG 12, responsible consumption and
production
Plastometrex: Frontier IP stake: 0.4 per cent
The Group holds a small equity stake in Plastometrex, a University of
Cambridge spin out focused on developing mechanical testing systems for metal
materials. The company has wide range of industry partners, including Airbus,
Babcock and Nasa.
SDG 9: build resilient infrastructure, promote sustainable industrialisation
and foster innovation
Pulsiv: Frontier IP stake: 17.9 per cent
Pulsiv has developed and patented innovative technology to intelligently
manage electrical power wherever it is converted, either from grid to devices,
or devices to grid. The company has built out a global distribution network
and is now in advanced discussions with potential customers.
During the year, the company strengthened its board the appointments of
serial entrepreneur and technology pioneer Dr Mark Gerhard as Chairman and
Dr Tim Moore, who was already a non-executive director of Pulsiv, as full-time
Chief Product Officer.
Post period end, the company launched a 65 Watt USB-C fast charger reference
design. The charger operates at 96 per cent efficiency, believed to be a world
best, which means only 4 per cent is lost through heat. The company is
targeting applications where space and heat sensitivity are an issue, with
initial markets being in-wall plug sockets that incorporate USB-C charging.
Exit options are under active consideration.
UN SDG mapping: SDG 7, affordable and clean energy; SDG 13, climate action
The Vaccine Group: Frontier IP stake: 16.7 per cent
The Vaccine Group enjoyed a year of sustained progress, both technically and
in developing relationships and collaborating with leaders in their field. The
company is establishing a strong pipeline of innovative vaccines, based on its
novel herpesvirus-based platform, for use in livestock, pets and wildlife.
There are currently 17 in development. Its vaccines aim to tackle both viral
and bacterial pathogens. The total size of the markets addressed by TVG is
estimated at more than $15bn.
During the year, the company appointed an advisory board to support scale up
and forge deeper industry relationships.
TVG also entered into a Technology Evaluation Agreement with fellow Frontier
IP portfolio company DiaGen and entered into a collaboration with The
Pirbright Institute. The collaboration aims to develop vaccines to combat
African swine fever, a high contagious disease which is deadly to pigs.
Post the year end, a project led by TVG, the University of Plymouth and the
University of Cambridge was awarded more than £1 million by the UK Department
for Environment, Food & Rural Affairs. The project aims to develop a
vaccine against Streptococcus suis, a widespread, harmful and zoonotic pig
disease.
UN SDG mapping: SDG 2, end hunger; SDG 3 good health and well-being.
Core Portfolio Summary at 30 June 2024
Portfolio Company % Issued Share Capital About Source
Alusid Limited 35.4% Recycled materials University of Central Lancashire
Amprologix Limited 10.0% Novel antibiotics to tackle antimicrobial resistance Universities of Plymouth and Manchester
AquaInSilico Lda 29.0% Digital tools to optimise wastewater treatment FCT Nova
Cambridge Raman Imaging Limited 26.8% Medical imaging using ultra-fast lasers University of Cambridge and Politecnico di Milano
CamGraPhIC Limited 18.71% Graphene-based photonics University of Cambridge and CNIT
Celerum Limited 33.8% Near real-time automated fleet scheduling Robert Gordon University
Deakin Bio-Hybrid Materials Limited 33.3% Sustainable materials made from organic waste and inorganic powders, initially Existing Business
as alternatives to ceramic tiles
Des Solutio Lda 25.0% Green alternatives to industrial toxic solvents FCT Nova
DiaGen AI Inc 4.15% AI-driven protein and peptide design for drug discovery and use in health Existing business
Elute Intelligence Holdings Limited 40.7% Software tools able to intelligently search, compare and analyse unstructured Existing business
data
Fieldwork Robotics Limited 18.2% Robotic harvesting technology for challenging horticultural applications University of Plymouth
GraphEnergyTech Limited 30.4% High conductivity graphene inks University of Cambridge / École Polytechnique Fédérale de Lausanne
Insignals Neurotech Lda 32.9% Wearable medical devices supporting deep brain surgery INESC TEC
Molendotech Limited 9.5% Rapid detection of water borne bacteria University of Plymouth
Nandi Proteins Limited 19.8% Food protein technology Heriot-Watt University, Edinburgh
Plastometrex Limited 0.4% Machines and software for high-speed testing of material yields and tensile Existing Business
strength
Pulsiv Limited 17.9% High efficiency power conversion and solar power generation University of Plymouth
The Vaccine Group Limited 16.7% Herpesvirus-based vaccines for the control of bacterial and viral diseases University of Plymouth
The Group holds equity stakes in 3 further portfolio companies with nil equity
value as at 30 June 2024. As at 30 June 2023, the Group held equity stakes in
6 further portfolio companies with a combined value of £575,000, equivalent
to 1.7% of the fair value of the Group's equity investments at 30 June 2023.
Financial Review
Key Highlights
The revaluation of investments of £1,282,000 and a realised gain on the
remaining disposal of the Group's holding in Exscientia of £249,000 coupled
with services revenue of £358,000 (2023: £372,000) did not offset overall
operating costs for the year albeit losses before tax for the year of
£1,337,000 were significantly lower versus prior year (2023 loss before tax
£4,370,000)
Net assets per share decreased by 3% to 79.7p (2023: 81.8p) reflecting a loss
after tax of £1,126,000.
Loss after tax for the Group for the year to 30 June 2024 of £1,126,000
(2023: loss of £3,244,000) was after a deferred tax credit of £211,000
(2023: credit of £1,126,000). This result includes a realised gain on
disposal of investments of £249,000 (2023: loss of £786,000), an unrealised
gain on the revaluation of investments of £1,282,000 (2023: loss of
£966,000) and reflects a decrease in services revenue to £358,000(2023:
£372,000). Administrative expenses increased by 12% to £3,508,000 (2022:
£3,130,000) primarily due to the partial implementation of an increase in
directors' remuneration subsequent to a previously communicated formal
external review, as well as regular inflationary increases applied from 1 July
2023.
Revenue and Other Operating Income
Services revenue decreased by 4% to £358,000 (2023: £372,000) while other
operating income, comprising realised and unrealised gains on investments,
reflected a gain of £1,531,000 (2023: loss of £1,752,000). The realised gain
on disposal of investments was £249,000 (2023: loss of £786,000) and the
unrealised gain on the revaluation of investments was £1,282,000 (2023: loss
of £966,000). During the year, the Group sold the final part of its holding
in Exscientia for £2,547,000 realising a gain of £249,000 on the value of
the holding at 30 June 2023, 100% of the realised gain for the year to 30 June
2024. The unrealised gain on the revaluation of investments of £1,282,000
comprises gains on equity investments of £2,468,000 and losses on debt
investments of £1,187,000.
Administrative Expenses
Administrative expenses increased by 12% to £3,508,000 (2023: £3,130,000).
The increase is primarily due to an increase in employee costs of 16% to
£2,451,000 (2023 £2,117,000) as a result of the partial implementation of an
increase in directors' remuneration subsequent to a previously communicated
formal external review, as well as regular inflationary increases applied from
1 July 2023.
Share Based Payments
Share based payments increased 45% to £225,000 (2023: £155,000) reflecting
option grants during the year.
Earnings Per Share
Basic loss per share was 2.01p (2023: loss per share of 5.85p). Diluted loss
per share was 1.96p (2023: loss per share 5.64p).
Statement of Financial Position
The principal items in the statement of financial position at 30 June 2024 are
financial assets at fair value through profit and loss comprising equity
investments of £33,203,000 (2023: £32,964,000) and debt investments of
£5,595,000 (2023: £4,625,000). The carrying value of these items is
determined by the Directors using their judgement when applying the Group's
accounting policies. The matters taken into account when assessing the fair
value of the portfolio companies are detailed in the accounting policy on
investments. The movement during the year in equity and debt investments is
detailed in notes 13 and 14 to the financial statement, respectively.
The Group had goodwill of £1,966,000 at 30 June 2024 (2022: £1,966,000). The
considerations taken into account by the Directors when reviewing the carrying
value of goodwill are detailed in Note 10 to the financial statements.
The Group had net current assets at 30 June 2024 of £3,994,000(2023:
£6,181,000) reflecting primarily the decrease in cash to £2,298,000 (2023 :
£4,603,000) The current assets at 30 June 2024 include trade receivables of
£940,000 (2023 : £604,000) which are more than 90 days overdue. The
portfolio company debtors are in the process of raising funds and the
directors are confident that the amounts due to the company will be paid.
Net assets per share
Net assets of the Group decreased to £44,773,000 at 30 June 2024 (30 June
2023: £45,538,000) resulting in net assets per share of 79.7p (30 June 2023:
81.8p).
Cash
The Group's cash balances decreased during the year by £2,305,000 to
£2,298,000 at 30 June 2024. Operating activities consumed £ 2,811,000 (2023:
£3,248,000). Investing activities generated a total of £370,000 (2023 :
£3,385,000). In the main this reflects proceeds on disposal of the
remainder of our holding in Exscientia of £2,547,000 (2023: £4,926,000) and
the purchase of equity and debt investments of £2,225,000(2023: £1,576,000).
Principal Risks and Challenges affecting the Group
The specific financial risks of price risk, interest rate risk, credit risk
and liquidity risk are discussed in note 1 to the financial statements. The
principal broader risks - financial, operational, cash flow and personnel -
are considered below.
The key financial risk in our business model is the inability to realise
sufficient income through the sale of our holdings in portfolio companies to
cover operating costs and investment capital The other principal financial
risk of the business is a fall in the value of the Group's portfolio. With
regards to the value of the portfolio itself, the fair value of each portfolio
company represents the best estimate at a point in time and may be impaired if
the business does not perform as well as expected, directly impacting the
Group's value and profitability. This risk is mitigated as the number of
companies in the portfolio increases. The Group continues to pursue its aim of
actively seeking realisation opportunities within its portfolio to reduce the
requirement for additional capital raising.
The principal operational risk of the business is management's ability to
continue to identify spin out companies from its formal and informal
university relationships, to increase the revenue streams that will generate
cash in the short term and to achieve realisations from the portfolio.
Early-stage companies are particularly sensitive to downturns in the economic
environment. There are currently several areas of concern that could affect
the UK and wider global markets and economy. Global risks include the
continuing war in Ukraine and emerging conflict and instability in the middle
east. The impact of both, particularly the dangers of escalation, on
geopolitics, economically and on markets, are uncertain and difficult to
predict. Inflation and interest rates are rising. Longer-term risks include
uncertainties in the US, where economic growth continues to be slow and around
next year's presidential elections, and in China, which is facing demographic
challenges and pressures in its property sector.
Any economic downturn would mean considerable uncertainty in capital markets,
resulting in a lower level of funding activity for such companies and a less
favourable exit environment. The impact of this may be to constrain the growth
and value of the Group's portfolio and to reduce the potential for revenue
from advisory work. The Group seeks to mitigate these risks by maintaining a
strong balance sheet, relationships with co-investors, industry partners and
financial institutions, as well as controlling the cash burn rate in portfolio
companies.
Changes to the basis on which IP is licensed in the Higher Education sector
might lead to reduced opportunity or a need to vary the business model. Any
uncertainty in the sector may have an impact on the operation of the Group's
commercialisation partnerships in terms of lower levels of intellectual
property generation and therefore commercialisation activity. The Group seeks
to mitigate these risks by continuing to seek new sources of IP from a wide
range of institutions both within and outside of the UK.
The Group is dependent on its executive team for its success and there can be
no assurance that it will be able to retain the services of key personnel.
This risk is mitigated by the Group through recruiting additional skilled
personnel and ensuring that the Group's reward and incentive framework aids
our ability to recruit and retain key personnel. We expanded our team during
the year and have partially implemented findings from an externally
commissioned review of our remuneration framework.
After making appropriate enquiries, the Directors consider that it remains
appropriate to adopt the going concern basis in preparing the financial
statements. In assessing the going concern, the Directors considered the
Group's cash requirements over the three years to 30 June 2027. The forecast
included operating activities and known near term purchase of investments. It
did not include cash from the purchase of unplanned investments. The analysis
showed that as at 30 June 2024 the Group had insufficient cash to cover its
operating expenditure for the 12 months from the date of signing of these
financial statements. However, the Directors intend to realise further cash
from the issue of ordinary shares which they reasonably expect will provide
the Group with sufficient cash to cover its operating expenditure for this
period. The Directors also expect that this share issue will, where
appropriate, assist the Group in supporting portfolio companies during this
period. The Group and Company are reliant on additional funding through the
issue of ordinary shares, which the timing and amount are not guaranteed
however the Directors have a reasonable expectation that the funding will be
forthcoming. The amount of shares to be issued will be subject to shareholder
approval at the AGM set for 19 December 2024 with funds available shortly
thereafter.
By order of the Board
Neil Crabb
Director
21 November 2024
Remuneration
Review
The Group reviewed its remuneration policy during FY 2022, to ensure that the
policy continued to reinforce long-term value creation by enhancing the
Group's ability to attract and retain the best people. The Group has
implemented most of the key findings of the review.
Salary
A salary increase of 3% was awarded to all personnel in July 2023 to ease cost
of living pressures.
In relation to Directors' pay, the 2022 Remuneration Review recommended
Executive director salaries be raised to market median over two years. The
year-two increase in Directors' full-time equivalent salaries was not
implemented during the year. The Committee is expecting to implement this
recommendation in FY25 which would be disclosed in the relevant directors'
remuneration report.
Annual Bonus
Our business model means that the availability of cash to pay bonuses will be
dependent on cash being raised through asset realisations. As the bonus
opportunity in any financial year is dependent on this activity, bonuses will
only be paid where the Group determines there is a sufficient surplus to the
medium-term operating cash requirement.
Following review, the Remuneration Committee concluded that no bonuses should
be paid, consequently no bonus payments were made during the period.
Directors' remuneration
An analysis of remuneration by director is given in Note 6 of these financial
statements.
Contracts of service
Neil Crabb's, Jacqueline McKay's, Jo Stent's and Matthew White's service
agreements are subject to a six-month notice period.
Share options
The Company currently has three share option schemes.
The Frontier IP Group plc Employee Share Option Scheme 2011, as adopted by the
Board of Directors of the Company on 30 November 2012 and amended by the Board
of Directors of the Company on 26 March 2018, was able to grant both options
which are Enterprise Management Incentive (EMI) approved. This scheme remains
in place, but no new options will be granted as the Group has ceased to be a
qualifying company for EMI purposes.
Two further schemes are in place: the Frontier IP Group PLC Company Share
Option Plan 2021 ("CSOP") and the Frontier IP Group PLC Unapproved Share
Option Plan 2021, as amended by Board of Directors Resolution on 7 March 2023
("LTIP").
During the year, a total of 666,838 grants were made under the terms of the
Company's LTIP, structured as grants of nominal cost options, at a price of 10
pence per share.
A total of 169,181 Options were granted to Group non-director employees under
the CSOP with an exercise price of 44.5 pence per share, being the closing
mid-market price of an existing ordinary share on 1 November 2023, the
business day prior to the grant date.
Details of share options held by Directors who were in office at 30 June 2024
are set out below:
The market price of the Company's shares at 30 June 2024 was 36.8p. The
range of prices during the year was 32.5p to 74.0p.
Directors' exercise of share options before expiry
Directors' interests in shares
The Directors in office at 30 June 2024 had the following interests in the
ordinary shares of 10p each in the Company at the year end.
2024 2023
Number Number
Neil Crabb 3,573,713 3,445,538
Jacqueline McKay 262,855 208,637
All the above interests are beneficial.
Professor Dame Julia King, Baroness Brown of Cambridge, DBE FREng FRS FMedSci
Chair of the Remuneration Committee
21 November 2024
Audit Committee Report
Key Responsibilities
The Audit Committee's terms of reference are available on the Group's website.
The Committee is required, amongst other things, to:
· monitor the integrity of the financial statements of the Group,
reviewing significant financial reporting issues and the judgements they
contain;
· review and challenge where necessary the accounting policies used,
the application of accounting standards and the clarity of disclosure in the
financial statements;
· keep under review the effectiveness of the Group's internal controls
and risk management systems; and
· oversee the relationship with the external auditor, reviewing their
performance and advising the Board on their appointment and remuneration.
Committee Governance
At 30 June 2024 the Audit Committee comprised the three non-executive
directors, chaired by David Holdbrook. It meets a minimum of two times per
year with the external auditors present. In addition, executive directors may
be asked to attend.
Activities of the Audit Committee during the year
The Committee met on two occasions during the year under review and up to the
date of this Annual Report with all members present and the external auditors
in attendance. The main areas covered by the Committee are outlined below:
Internal controls and risk management
The Board has overall responsibility for internal controls and risk
management. As the Board's three non-executive directors were also the
Committee members during the year, the Group's risk analysis and controls
policy was reviewed and updated by the Board. Further details of business
risks identified can be found in Key Risks and Challenges Affecting the Group.
The risk management process is continually being developed and improved.
Significant estimates and judgements
The focus at the Committee meetings was on the significant estimates,
assumptions and judgements used in the financial statements in arriving at the
value of investments, reviewing goodwill for impairment and assessing the
recoverability of amounts owed to the Group by portfolio companies. The
Committee was satisfied that such estimates, assumptions and judgements used
were reasonable and appropriate. Details of critical accounting estimates and
assumptions and of critical accounting judgements can be found in Note 2 to
the Financial Statements.
External audit
The external auditor reports to the Committee on actions taken to comply with
professional and regulatory requirements and is required to rotate the lead
audit partner every five years. BDO LLP were first appointed as external
auditor in FY19 following their merger with Moore Stephens LLP who were the
external auditor in place since FY15 following their merger with Chantrey
Vellacott DFK LLP who were first appointed in FY08. Timothy West was appointed
lead partner in FY17. Chris Meyrick was appointed lead partner in FY22. The
Committee has confirmed it is satisfied with the independence, objectivity and
effectiveness of BDO LLP and has recommended to the Board that the auditors be
reappointed, and there will be a resolution to this effect at the forthcoming
Annual General Meeting. In addition to their statutory duties, BDO LLP are
also engaged to provide non-audit services where it is felt their knowledge of
the business best places them to provide those services, such as review of the
interim results, and where these non-audit services are permitted under the
Financial Reporting Council's ethical guidelines.
Basis for qualified audit opinion
As noted in the external auditor's report , during the prior year ended 30
June 2023, the Directors were unable to provide the external auditor with
sufficient support to reliably perform the year end valuations for certain
investments, specifically being those investments described as 'Stage 2' by
management in Note 13, which were valued at £1.2 million as at 30 June 2023
(included in the total Equity investments of £32.9 million in the Group's
Consolidated Statement of Financial Position and £28.3 million in the Company
Statement of Financial Position). As a result, the external auditor was unable
to obtain sufficient appropriate audit evidence in respect of the valuation of
these investments as at 30 June 2023 and issued a modified audit opinion for
the financial statements to 30 June 2023 as a result. Consequently, the
external auditor was unable to determine whether any adjustment was necessary
to these amounts as at 30 June 2023 or whether there was any consequential
effect on the Group and Parent Company's other comprehensive income for the
year ended 30 June 2024, therefore issued a modified audit opinion on the
current period's financial statements purely as a result of this prior year
matter.
David Holbrook
Chair of the Audit Committee
21 November 2024
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2024
2024 2023
Notes £'000 £'000
Revenue
Revenue from services 3 358 372
Other operating income
Unrealised (loss)/profit on the revaluation of investments 13,14 1,282 (966)
Realised (loss)/profit on disposal of investments 249 (786)
1,889 (1,380)
Administrative expenses 5 (3,508) (3,130)
Share based payments (225) (155)
Interest income on debt investments 409 232
Other income 36 13
(Loss)/profit from operations (1,399) (4,420)
Interest income on short term deposits 62 50
(Loss)/profit from operations and before tax (1,337) (4,370)
Taxation 7 211 1,126
(Loss)/profit and total comprehensive (expense)/income attributable to the
equity holders of the Company
(1,126) (3,244)
(Loss)/profit per share attributable to the equity holders of the Company:
Basic (loss) / earnings per share (2,01)p (5.85)p
Diluted (loss) / earnings per share (1.96)p (5.64)p
All of the Group's activities are classed as continuing.
There is no other comprehensive income in the year (2023:
nil).
Consolidated Statement of Financial Position
At 30 June 2024
2024 2023
Notes £'000 £'000
Assets
Non-current assets
Tangible fixed assets 9 15 13
Goodwill 10 1,966 1,966
Equity investments 13 33,203 32,964
Debt investments 14 5,595 4,625
40,779 39,568
Current assets
Trade receivables and other current assets 15 1,629 1,026
Advances 16 382 793
Cash and cash equivalents 2,298 4,603
4,309 6,422
Total assets 45,088 45,990
Liabilities
Non-current liabilities
Deferred taxation 7 - (211)
- (211)
Current liabilities
Trade and other payables 17 (315) (241)
(315) (241)
Total liabilities (315) (452)
Net assets 44,773 45,538
Equity
Called up share capital 18 5,617 5,566
Share premium account 18 14,791 14,627
Reverse acquisition reserve 19 (1,667) (1,667)
Share based payment reserve 19 1,437 1,291
Retained earnings 19 24,595 25,721
Total equity 44,773 45,538
Company Statement of Financial Position
At 30 June 2024
Notes 2024 2023
£'000 £'000
Assets
Non-current assets
Investment in subsidiaries 12 2,412 2,383
Equity investments 13 31,108 28,259
Debt investments 14 4,351 3,557
Amounts receivable from group undertakings 15 400 357
Deferred taxation 7 - 330
38,271 34,886
Current assets
Trade receivables and other current assets 15 929 582
Advances 287 785
Cash and cash equivalents 2,290 3,224
3,506 4,591
Total assets 41,777 39,477
Liabilities
Non-current liabilities
Amounts payable to group undertakings 17 (6,399) (3,366)
(6,399) (3,366)
Current liabilities
Trade and other payables 17 (161) (160)
(161) (160)
Total liabilities (6,560 ) (3,526)
Net assets 35,217 35,951
Equity attributable to equity holders of the Company
Called up share capital 18 5,617 5,566
Share premium account 18 14,791 14,627
Share-based payment reserve 19 1,437 1,291
Retained earnings 19 13,372 14,467
Total equity 35,217 35,951
The Company has elected to take the exemption under section 408 of the
Companies Act 2006 to not present the Company statement of comprehensive
income. The total loss of the Company for the year was £1,095,000 (2023: loss
of £1,537,000).
The financial statements on pages 65 to 95 were approved by the Board of
Directors and authorised for issue on 21 November 2024 and were signed on its
behalf by:
Jo Stent
Chief Financial Officer
Registered number: 06262177
Consolidated and Company Statements of Changes in Equity
For the year ended 30 June 2024
Group
Share- Total equity
Share Reverse acquisition based payment attributable to
Share capital premium reserve reserve Retained earnings equity holders
account of the Company
£'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2022 5,501 14,576 (1,667) 1,324 28,965 48,699
Issue of shares 65 51 - (18) - 98
Share-based payments - (15) (15)
Profit/total comprehensive income for the year
- - - - (3,244) (3,244)
At 30 June 2023 5,566 14,627 (1,667) 1,291 25,721 45,538
Issue of shares 51 164 - (79) - 136
Share-based payments - - - 225 - 225
(Loss)/total comprehensive expense for the year
- - - - (1,126) (1,126)
At 30 June 2024 5,617 14,791 (1,667) 1,437 24,595 44,773
Company
Share- Total equity
Share based payment attributable to
Share premium reserve Retained earnings equity holders
capital account of the Company
£'000 £'000 £'000 £'000 £'000
At 1 July 2022 5,501 14,576 1,324 16,004 37,405
Issue of shares 65 51 (18) - 98
Share-based payments - - (15) - (15)
Profit/total comprehensive expense for the year
- - - (1,537) (1,537)
At 30 June 2023 5,566 14,627 1,291 14,467 35,951
Issue of shares 51 164 (79) - 136
Share-based payments - - 225 - 225
(Loss)/total comprehensive expense for the year - - - (1,095) (1,095)
At 30 June 2024 5,617 14,791 1,437 13,372 35,217
Consolidated and Company Statements of Cash Flows
For the year ended 30 June 2024
Group Group Company Company
2024 2023 2024 2023
Notes £'000 £'000 £'000 £'000
Cash flows from operating activities 22 (2,811) (3,248) (2,058) (2,704)
Cash flows from investing activities
Purchase of tangible fixed assets 9 (14) (16) - -
Purchase of equity investments 13 (68) (691) (68) (691)
Disposal of equity investments 2,547 4,926 - -
Purchase of debt investments 14 (2,157) (884) (1,987) (575)
Net amounts receivable from group undertakings - - 2,988 3,103
Interest income 62 50 55 53
Net cash from investing activities 370 3,385 988 1,890
Cash flows from financing activities
Proceeds from issue of equity shares 136 98 136 98
Costs of share issue - - - -
Net cash generated from financing activities 136 98 136 98
Net increase/(decrease) in cash and cash equivalents (2,305) 235 (934) (716)
Cash and cash equivalents at beginning of year 4,603 4,368 3,224 3,940
Cash and cash equivalents at end of year 2,298 4,603 2,290 3,224
Accounting Policies
The principal accounting policies are summarised below. They have all been
applied consistently throughout the year and the preceding year.
Basis of accounting
The financial statements of the Group and the Company have been prepared in
accordance with UK adopted International Financial Reporting Standards (IFRS)
and in the case of the Company financial statements, as applied in accordance
with the Companies Act 2006.
The financial statements have been prepared on the historical cost basis,
except where IFRS requires an alternative treatment. The principal variations
from historical cost relate to financial instruments.
Going Concern
As described in the Directors' Report, the Group's strategy is to develop a
growing portfolio of spin out companies that will provide cash inflows through
realisation of investments. In assessing the going concern, the Directors
considered the Group's cash requirements over the three years to 30 June 2027.
The forecast included operating activities and known near term purchase of
investments. It did not include cash from the purchase of unplanned
investments. The analysis showed that as at 30 June 2024 the Group had
insufficient cash to cover its operating expenditure for the 12 months from
the date of signing of these financial statements. However, the Directors
intend to realise further cash from the issue of ordinary shares which they
reasonably expect will provide the Group with sufficient cash to cover its
operating expenditure for this period. The Directors also expect that this
share issue will, where appropriate, assist the Group in supporting portfolio
companies during this period.
As a result, the Group and Company are reliant on additional funding through
the issue of ordinary shares, which is not guaranteed.
Based on the above, this indicates the existence of a material uncertainty
which may cast significant doubt over the Group and Company's ability to
continue as a going concern and therefore, they may be unable to realise their
assets and discharge their liabilities in the ordinary course of business.
The Directors have a reasonable expectation that the funding will be
forthcoming. Consequently, the Directors continue to adopt the going concern
basis in preparing the Group and Company's financial statements.
The financial statements do not include the adjustments that would be required
should the going concern basis of preparation no longer be appropriate.
Changes in accounting policies
a) New standards, interpretations and amendments
effective 1 July 2023
There are no new standards, interpretations or amendments which have been
applied in these financial statements.
b) New standards, interpretations and amendments not yet
effective.
New standards mandatory for periods beginning 1 January 2024 or later:
1) IFRS S1 General requirements for disclosure of sustainability-related
financial information
This requires an entity to disclose information about sustainability-related
risks and opportunities which will be useful to the users of the financial
statements. We are waiting on further information of implementation of this
standard in the UK and will assess then its impact on the financial
statements.
2) IFRS S2 Climate related disclosures
This requires an entity to disclose climate-related risks and opportunities on
the entity's financial position for the reporting period, and anticipated
future risks and opportunities. As with IFRS S1, we will assess its impact on
future financial statements.
3) Amendment to IAS1: Classification of liabilities as current and non-current
A series of criteria under which liabilities should be classed as current or
non-current, in relation to payment obligations and timescales, will be
applied in the next financial period. These amendments are not expected to
have a material impact on the financial statements of the Group.
Basis of consolidation
The Group financial statements consolidate the financial statements of
Frontier IP Group Plc and its subsidiary undertakings. Subsidiary undertakings
are consolidated using acquisition accounting from the date of control. An
entity is classed as under the control of the Group when all three of the
following elements are present: power over the entity, exposure, or rights to,
variable returns from its involvement with the entity and the ability of the
Group to use its power over the entity to affect the amount of those variable
returns.
Segmental reporting
The Group operates in one market sector, the commercialisation of University
Intellectual Property, and primarily within the UK. The Group conducts
business in Portugal, but transactions during the year were immaterial.
Therefore, revenue, profit on ordinary activities before tax and net assets do
not need to be analysed by segment.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary at the date of acquisition. Goodwill is
recognised as an asset and reviewed for impairment annually. Goodwill arising
on acquisition is allocated to cash-generating units. The recoverable amount
of the cash-generating unit to which goodwill has been allocated is tested for
impairment annually, or on such other occasions that events or changes in
circumstances indicate that it might be impaired. Any impairment is recognised
immediately as an expense and is not subsequently reversed.
Property and equipment
The Group does not own any property. Equipment is stated at cost less
depreciation and any provision for impairment.
Depreciation
Depreciation is provided at rates calculated to write off the cost less
estimated residual value of each asset on a straight-line basis over its
expected useful life. The assets' residual values and useful lives are
reviewed, and adjusted if appropriate, at the end of each reporting period.
The rates of depreciation are as follows:
Fixtures and office
equipment
50% per annum
EV right of use
asset
over lease term
Financial instruments
Financial assets and financial liabilities are recognised in the Group's
statement of financial position at fair value when the Group becomes a party
to the contractual provisions of the instrument.
IFRS 9 divides all financial assets into two classifications - those measured
at amortised cost and those measured at fair value. Where assets are measured
at fair value, gains or losses are either recognised entirely in profit or
loss or in other comprehensive income. Impairments are recognised on an
expected loss basis. As such where there are expected to be credit losses
these are recognised in the profit and loss.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision
for an appropriate allowance for credit losses over the expected life of the
asset. An allowance for expected credit loss is established when there is
expectation that the Group will not be able to collect all amounts due. The
amount of the provision is the difference between the asset's carrying amount
and the present value of estimated future cash flows, discounted at the
effective interest rate. The movement in the provision is recognised in the
comprehensive income statement. The Group applies the IFRS 9 simplified
approach to measuring expected loss, details of which are provided in note 15.
Cash
Cash and cash equivalents comprise cash at bank and in hand and short-term
deposits and is measured at fair value.
Equity Investments
Equity investments are held with a view to the ultimate realisation of capital
gains and are recognised and derecognised on the trade date. They are
classified as financial assets at fair value through profit and loss and are
initially measured at fair value and the realised gain represents the
difference between the carrying amount at the beginning of the reporting
period, or the transaction price if it was purchased in the current reporting
period, and the consideration received on disposal. The unrealised gain
represents the difference between the carrying amount at the beginning of the
period, or the transaction price if it was purchased in the current reporting
period, and its carrying amount at the end of the reporting period. Gains and
losses are presented through the profit or loss in the period in which they
arise. Equity investments are classified as non-current assets.
The Group has interests of over 20% but these are not accounted for as
associates as the Group elects to hold such investments at fair value in the
statement of financial position. IAS 28 Investments in Associates and Joint
Ventures does not require investments held by entities which are similar to
venture capital organisations to be accounted for under the equity method
where those investments are designated, upon initial recognition, as at fair
value through profit and loss.
The fair value of equity investments is established in accordance with
International and Private Equity and Venture Capital Valuation Guidelines
("IPEV Guidelines"). The Group uses valuation techniques that management
consider appropriate in the circumstances and for which sufficient data are
available to measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs taking into account any
discounts required for non-marketability and other risks inherent in
early-stage businesses. The fair value of quoted investments is based on the
bid price in an active market on the measurement date. The Group's investments
are primarily in seed, start-up and early-stage companies often with no
short-term earnings, revenue or positive cash flow making it difficult to
assess the value of its activities and to reliably forecast cash flows. The
Group normally receives its initial equity prior to any third-party funding
and some companies progress without third party funding. In selecting the most
appropriate valuation technique in estimating fair value the Group uses a
standard valuation matrix to categorise companies. The valuation matrix is as
follows:
1. Initial Equity
When the Group has received its initial equity prior to transfer of IP to the
portfolio company, the company is valued based on the cost of the initial
equity. If advisory services are provided by the Group prior to spin out in
return for its equity stake, the cost is the value of services invoiced. If no
advisory services have been invoiced prior to spin out, the cost is the
nominal value of the shares received.
2. IP Transferred
Once the IP is transferred to the company, but prior to the company raising
investment funds, the valuation is based primarily on the value attributed to
the IP. The method of valuation will involve evaluating the portfolio
company's progress against technical measures, including product development
phases and patents. In addition, where grant funding is awarded in relation to
its product development costs the value of the grant may be included in the
company valuation to the extent that management is satisfied that the company
will derive commensurate economic benefit. The assessment of inputs used in
valuing companies in advance of a funding round are highly subjective and
accordingly caution is applied.
3. Trading Prior to Investment
When the portfolio company commences trading, the Group considers if this
indicates a change in fair value. If there is evidence of value creation the
Group may consider increasing the value and would seek comparable company
valuations to estimate fair value.
4. Price of Recent Investment
If the company receives third party funding, the price of that investment will
provide the starting point for the valuation. The Group considers whether any
changes or events subsequent to the investment would indicate a change in fair
value using a milestone based approach. The milestone based approach involves
performing an assessment on the success of relevant milestones that were
agreed at the time of investment, including inputs such as revenues, IP
assessment, patents, cash burn rates, product testing phases and market
traction. Any adjustment made is, whenever possible, based on objective data
from the company in addition to management's judgement.
5. Other Valuation Techniques
As the company develops and generates predictable cash flows a combination of
valuation techniques are applied as appropriate, such as discounted cash flow,
industry specific valuation models and comparable company valuation multiples.
6. Quoted companies.
The fair value of quoted companies is based on the bid price in an active
market on the measurement date.
Investment in subsidiary companies is stated at cost, which is the fair value
of consideration paid, less provision for any impairment in value. If the
recoverable amount of an investment in a subsidiary is estimated to be less
than its carrying amount, the carrying amount is reduced to its recoverable
amount. Impairment losses are recognised as an expense immediately through
profit or loss. Where an impairment loss subsequently reverses, the carrying
amount of the investment in subsidiary is increased to the revised estimate of
its recoverable amount, but so that the increased carrying amount does not
exceed the carrying amount that would have been determined had no impairment
loss been recognised in prior years.
Debt investments
Debt investments are unquoted debt instruments, are loans to portfolio
companies and are valued at fair value. None of the instruments are held with
a view to selling the instrument to realise a profit or loss. Instruments
which are convertible to equity at a future point in time or which carry
warrants to purchase equity at a future point in time are considered to be
hybrid instruments containing a fixed rate debt host contract with an embedded
equity derivative. The Group does not separate the embedded derivative from
the host contract and the entire instrument is measured at fair value through
profit or loss. The fair value of debt investments is derived by applying
probability weightings to the conversion and repayment values of the debt
investment plus the value of warrants. Inputs to the conversion value are the
nominal value of the loan, interest to conversion, conversion discount and
time to conversion. Inputs to the repayment value are the nominal value,
interest to repayment and time to repayment. Both values are discounted at a
rate appropriate to the portfolio company's stage of development. Where
warrants are attached to a debt instrument, the fair value is determined using
the Black-Scholes-Merton valuation model. Any indications of changes in the
credit risk of the portfolio company borrower are considered when valuing debt
investments at subsequent measurement dates.
Financial liabilities and equity
Financial liabilities and equity are classified according to the substance of
the financial instrument's contractual obligations rather than the financial
instrument's legal form. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of its
liabilities.
Trade payables
Trade payables are not interest bearing and are stated at their amortised
cost.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs.
Current and deferred tax
The charge for current tax is based on the results for the year as adjusted
for items which are non-assessable or disallowed. It is calculated using rates
that have been enacted or substantively enacted by the statement of financial
position date.
Deferred tax is accounted for using the statement of financial position
liability method in respect of temporary differences arising from differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax basis used in the computation of taxable
profit. Deferred tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible
temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from the
initial recognition (other than in a business combination) of other assets and
liabilities in a transaction which affects neither the tax profit nor the
accounting profit.
Share options
The Group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of shares or options that will
eventually vest. The corresponding credit is recognized in retained earnings
within total equity. Fair value is measured using the Black-Scholes-Merton
pricing model. The expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability, exercise
restrictions, and behavioural considerations.
Revenue recognition
The Group's revenue streams are recognised in accordance with IFRS 15. The
Group applies IFRS 15 to each of its revenue streams analysing its nature, the
timing of satisfaction of performance obligations and any significant payments
terms.
Fees for services provided by the Group are measured at the fair value of the
consideration received or receivable, net of value added tax. The Group's
revenue is derived from the following streams:
Business support services are governed by engagement agreements which
typically provide for a fixed monthly fee for services to be performed on an
on-going monthly basis. The services are invoiced at the end of each month and
the revenue recognised for that month.
Fees for corporate finance work are governed by separate engagement agreements
where the fee is typically based on a percentage of funds raised and/or a
fixed fee. Revenue is recognised when the service is provided and the
respective transaction has completed.
Interest income on debt investments in portfolio companies is recognised when
it is probable that the economic benefits will flow to the Group and the
amount can be reliably measured. Interest income on cash deposits is accrued
on a time basis by reference to the principal outstanding and the applicable
interest rate.
Where the consideration for spin out services is equity in companies spun out
by a university, the revenue recognized is the Group's percentage of equity
received applied to the value attributed to the portfolio company on initial
spin out. The percentage of equity received is governed by an agreement with
the university and revenue is recognized upon spin out. When the consideration
for services is a share in licencing income the revenue is recognised on an
accruals basis in accordance with the terms of the licensing agreements.
Leases
As a lessee, the Group rents office premises. Under the terms of the rental
agreements, the supplier has the right to terminate the agreement during the
period of use, however at inception of the agreement this is not considered
likely to occur. At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments to be made
over the lease term if the present value is materially different from the
lease payments to be made. In calculating the present value of lease payments,
the Group uses the incremental borrowing rate at the lease commencement date.
After the commencement date, the amount of lease liabilities is increased to
reflect the accretion of interest and reduced for the lease payments made. In
addition, the carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, or a change in the in-substance
fixed lease payments. For short term leases and leases of low value assets,
the Group recognises the expense on a straight-line basis as permitted by IFRS
16.
Retirement benefit costs
The Group operates a defined contribution retirement benefit scheme. The
amount charged to the income statement in respect of retirement benefit costs
are the contributions payable in the year. Differences between contributions
payable in the year and contributions actually paid are shown as either
prepayments or accruals in the statement of financial position.
Notes to the Financial Statements
1. Financial risk management
Financial risk factors
(a) Market risk
Interest rate risk
As the Group has no borrowings it only has limited interest rate risk. The
impact is on income, debt investments and operating cash flow and arises from
changes in market interest rates. Cash resources are held in floating rate
accounts.
Price risk
The Group is exposed to equity securities price risk because of equity
investments classified on the consolidated statement of financial position as
financial assets at fair value through profit and loss. The maximum exposure
is the fair value of these assets which is £33,557,000 (2023: £32,964,000).
Equity investments are valued in accordance with the Group's accounting policy
on equity investments. Management's monitoring of and contact with portfolio
companies provides sufficient information to value the unquoted companies and
the Board regularly reviews their progress, prospects and valuation.
Information on reasonable possible shifts in the valuation of equity
investments is provided in note 13 to the financial statements.
(b) Credit risk
The Group's credit risk is primarily attributable to its debt investments,
trade receivables, other debtors and cash equivalents. The Group's current
cash and cash equivalents are held with two UK financial institutions, the
Bank of Scotland plc and Barclays Bank plc, both of which have a credit rating
of "P1" from credit agency Moody's, indicating that Moody's consider that
these banks have a "superior" ability to repay short-term debt obligations.
The concentration of credit risk from trade receivables and other debtors
varies throughout the year depending on the timing of transactions and
invoicing of fees. Details of major customers to the Group are set out in
Note 4. Details of trade receivables and other current assets are set out in
note 15. Details of significant debt investments are set out in Note 14.
Management's assessment is aided through representation on the Board and/or
through providing advisory services to the companies.
The maximum exposure to credit risk for debt investments, trade receivables,
other current asset and cash equivalents is represented by their carrying
amount.
(c) Capital risk management
The Group is funded by equity finance only. Total capital is calculated as
'total equity' as shown in the consolidated statement of financial position.
The Group's objectives for managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to manage the cost of
capital. In order to maintain the capital structure, the Group may issue new
shares as required. The Group currently has no debt. There were no changes in
the Group's approach to capital management during the year.
(d) Liquidity risk
The Group seeks to manage liquidity risk to ensure sufficient liquidity is
available to meet the requirements of the business and to invest cash assets
safely and profitably. The Group's business model is to realise cash through
the sale of investments in portfolio companies and in the absence of such
realisations the Group would plan to raise additional capital. The Board
reviews available cash to ensure there are sufficient resources for working
capital requirements and investments. At 30 June 2024 and 30 June 2023 all
amounts shown in the consolidated statement of financial position under
current assets and current liabilities mature for payment within one year.
2. Critical accounting estimates and assumptions
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates and judgements.
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below:
(i) Valuation of investments
In applying valuation techniques to determine the fair value of unquoted
equity investments the Group makes estimates and assumptions regarding the
future potential of the investments. As the Group's unquoted investments are
in seed, start-up and early-stage businesses it can be difficult to assess the
outcome of their activities and to make reliable forecasts. Given the
difficulty of producing reliable cash flow projections for use in discounted
cash flow valuations, this technique is applied with caution. Adjustments made
to fair value are, by their very nature, subjective and determining the fair
value is a critical accounting estimate. The valuation of equity investments
is explained at note 14 below.
In applying valuation techniques to determine the fair value of debt
investments the Group makes estimates and assumptions regarding the time to
repayment or conversion, discount rate and credit risk. A 25% increase in the
time to repayment or conversion reduces the value of debt investments from
£5,595,000 to £5,554,000 and a 25% increase in the discount rate reduces the
value of the debt investments from £5,595,000 to £5,510,000. Where
warrants are attached to a debt instrument, the fair value is determined using
the Black-Scholes-Merton valuation model. The significant inputs to the model
are provided in note 14. The price at which debt investments were made is 92%
of the fair value of debt investments at 30 June 2024 (2023: 65%).
(ii) Impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in
accordance with the stated accounting policy. The recoverable amount is
determined using a value in use value model which requires a number of
estimations and assumptions about the timing and amount of future cash flows.
As future cash flows relate primarily to proceeds from sale of investments,
these estimates and assumptions are subject to a high degree of uncertainty.
Note 10 describes the key assumptions and sensitivity applied.
(iii) Consideration of credit losses
The matters taken into account in the recognition of credit losses include
historic current and forward-looking information The matters taken into
account in the recognition of credit losses include historic current and
forward-looking information. The Group's exposure to credit losses is with
companies from its own portfolio whose ability to settle their debts is
primarily dependant on their ability to raise capital rather than their
current trading. The age of debt is not considered in assessing credit loss
as the outcome is expected to be binary. The debt is also concentrated in a
small number of companies; six companies account for 99% of trade receivables
and three account for 80% of debt investments at 30 June 2024. Management has
in-depth knowledge of these companies and is providing the fundraising service
for all four of them. The Group's history of credit loss is not significant
and therefore management focus on the factors which impact the ability of
these companies to successfully raise capital and a probability of default as
a result of the failure to raise capital is applied to determine the expected
credit loss. Details of the expected credit loss are provided in note 15.
The Group believes that the most significant judgement areas in the
application of its accounting policies are establishing the fair value of its
unquoted equity investments and the consideration of any impairment to
goodwill. The matters taken into account by the Directors when assessing the
fair value of the unquoted equity investments are detailed in the accounting
policy on investments.
The considerations taken into account by the Directors when reviewing goodwill
are detailed in Note 10. In addition, the Directors judge that the Group is
exempt from applying the equity method of accounting for associates in which
it has interests of over 20% as they consider the Group to be similar to a
venture capital organisation and elects to hold such investments at fair value
in the statement of financial position.
IAS28 Investments in Associates and Joint Ventures permits investments held by
entities which are similar to venture capital organisations to be excluded
from its scope where those investments are designated, upon initial
recognition, as at fair value through profit and loss.
3. Revenue from services
During the year the Group earned revenue from the provision of services to
portfolio companies and university partners as follows:
2024 2023
£'000 £'000
Retainers with portfolio companies 315 336
Corporate finance fees from portfolio company fundraisings 43 30
Advisory fees from universities on initial spin-outs - 3
License income from universities - 3
358 372
4. Major customers
During the year the Group had five major customers that accounted for 78% of
its revenue from services (2023: five customers accounted for 86%). The same
five customers were also in the top five in 2023. The revenues generated from
each customer were as follows:
2024 2023
£'000 £'000
Customer 1 80 78
Customer 2 66 70
Customer 3 50 52
Customer 4 48 48
Customer 5 40 40
284 288
5. Administration expenses
Expenses included in administrative expenses are analysed below.
2024 2023
£'000 £'000
Employee costs 2,451 2,117
Consultant 142 133
Travel and subsistence 36 21
Depreciation 9 9
Bad and doubtful debts 245 169
Fees payable to auditor:
- audit fee 137 92
- non-audit services - 3
Legal, professional and financial costs 257 378
Premises lease 157 140
Administration costs 74 68
3,508 3,130
6. Directors and employees
The average number of people employed by the Group during the year was:
2024 2023
Number Number
Business and corporate development 21 20
2024 2023
£'000 £'000
Wages and salaries 1,774 1,518
Social security 247 197
Pension costs - defined contribution plans 234 186
Non-executive directors' fees 137 126
Other benefits 59 52
Recruitment - 38
Total employee administration expenses 2,451 2,117
At 30(th) June 2024, all employees were employed by Frontier IP Group plc.
The key management of the Group and the Company comprise the Frontier IP Group
Plc Board of Directors. The remuneration of the individual Board members is
shown below.
Remuneration comprises basic salary, pension contributions and benefits in
kind, being private health insurance and life assurance. The type of
remuneration is constant from year to year. Ad hoc bonuses may be paid to
reward exceptional performance, as decided by the Remuneration Committee, with
none awarded in the period. Share options are also awarded to employees from
time to time. The granting of share options to individual employees is
determined taking into account seniority, commitment to the business and
recent performance.
The total remuneration for each director is shown below.
Amounts in £'000
Salary Other benefits Pension Share option exercise Share Based Payment Total
2024 2023 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023
Executive
N Crabb 206 177 6 5 21 17 19 276 49 43 301 518
J McKay 112 74 6 5 61 76 8 118 36 36 222 309
J Fish* 87 125 5 4 66 31 34 - 34 37 226 197
M White 163 152 5 5 16 15 37 34 222 204
J Stent 39 - - 4 - - - 43 -
Non-executive
A Richmond* 28 48 - - - - - - - - 28 48
J King 41 34 - - - - - - - - 41 34
N Grierson 34 10 - - - - - - - - 34 10
D Holbrook 34 10 - - - - - - - - 34 10
744 653 22 17 168 139 61 394 156 150 1,151 1,330
* Former
Director
7. Taxation
2024 2023
£'000 £'000
Current tax - -
Deferred tax (211) (1,126)
Tax (credit)/charge for the year (211) (1,126)
A reconciliation from the reported (loss)/profit before tax to the total tax
(credit)/charge is shown below:
2024 2023
£'000 £'000
(Loss)/profit before tax (1,337) (4,370)
-
(Loss)/profit before tax at the effective rate of corporation tax in the UK of
25% (2023: 20.5%)
(334) (895)
Effects of:
Fair value movement in investments not recognised in deferred tax (617) (69)
Expenses not deductible for tax purposes 71 31
Movement in deferred tax asset of losses not recognised 688 -
Adjustments arising from difference between average and deferred tax rates - (169)
Deferred tax recognised in equity - (171)
Other adjustments (19) 147
Tax (credit)/charge for the year (211) (1,126)
Deferred Tax
Group Group
Deferred tax liabilities at 30 June 2024 2023
Unrealised gains investments (43) (689)
Short-term timing differences - fixed assets (3) (1)
(46) (690)
Deferred tax assets at 30 June
Tax losses 601 277
Short-term timing differences - pension 10 6
Short-term timing differences - outstanding share options 134 196
745 479
Impairment (699) -
Net deferred tax (liability) / asset - (211)
Company Company
Deferred tax liabilities at 30 June 2024 2023
Unrealised gains investments (67) (138)
Short-term timing differences - fixed assets - -
(67) (138)
Deferred tax assets at 30 June
Tax losses 590 272
Short-term timing differences - pension - -
Short-term timing differences - outstanding share options 134 196
724 468
Impairment (657) -
Net deferred tax (liability) / asset - 330
Group Company
Deferred tax movement
(Liability)/asset at 1 July 2022 (1,167) 1,164
Credited 1,126 (664)
Debited to equity (170) (170)
At 30 June 2023 (211) 330
Group Company
Deferred tax movement
(Liability)/asset at 1 July 2023 (211) 330
Credited 211 (330)
Debited to equity - -
At 30 June 2024 - -
No deferred tax liability has been recognised on the difference between base cost and fair value of certain financial assets at fair value through profit and loss which qualify as equity investments and which are expected to be exempt from tax under the substantial Shareholding Exemption on their subsequent disposal.
The Group has a potential deferred tax asset at year end of £657,000 (Period
ended 30 June 2023: unrecognised net deferred tax asset of £420,000)
calculated at 25% in respect of Group tax losses in the year to June 2024.
This has been fully impaired, due to uncertainty in respect of future probable
trading profits in the Group against which these losses can be utilised (2023:
trading losses pre-2017 not recognised due to uncertainty regarding future
probable trading profits in Frontier IP Limited).
8. Earnings per share
a) Basic
Basic earnings per share is calculated by dividing the profit attributable to
the shareholders of Frontier IP Group Plc by the weighted average number of
shares in issue during the year.
(Loss) / profit attributable to shareholders Weighted average number of shares Basic (loss) / earnings per share amount in pence
£'000
Year ended 30 June 2024 (1,126) 55,986,153 (2.01)
Year ended 30 June 2023 (3,244) 55,409,626 (5.85)
b) Diluted
Diluted earnings per share is calculated by adjusting the weighted number of
ordinary shares outstanding to assume conversion of all dilutive potential
ordinary shares. The Company has only one category of dilutive potential
ordinary shares: share options. A calculation is done to determine the number
of shares that could have been acquired at fair value (determined as the
average annual market value share price of the Company's shares) based on the
monetary value of the subscription rights attached to outstanding share
options. The number of shares calculated as above is compared with the number
of shares that would have been issued assuming the exercise of the share
options.
(Loss) / profit attributable to shareholders Weighted average number of shares adjusted for share options Diluted (loss) / earnings per share amount in pence
£'000
Year ended 30 June 2024 (1,126) 57,673,312 (1.96)
Year ended 30 June 2023 (3,244) 57,542,781 (5.64)
9. Tangible fixed assets
Fixtures and equipment Electric Vehicle
£'000 £'000
Cost
At 1 July 2022 39 -
Additions 16 -
Disposals (12) -
At 30 June 2023 43 -
Additions 4 10
Disposals - -
At 30 June 2024 47 10
Depreciation
Accumulated depreciation at 1 July 2022 33 -
Charge for the year to 30 June 2022 9 -
Disposals (12) -
Accumulated depreciation at 30 June 2023 30 -
Charge for the year to 30 June 2023 9 3
Disposals
Accumulated depreciation at 30 June 2023 39 3
Net book value
At 30 June 2023 13 -
At 30 June 2024 8 7
10 Goodwill
Group Company
£'000 £'000
Cost
At 1 July 2022, 30 June 2023 and at 30 June 2024 1,966 -
Impairment
At 1 July 2022, 30 June 2023 and at 30 June 2024 - -
Carrying value
At 30 June 2023 1,966 -
At 30 June 2024 1,966 -
The Group conducts an annual impairment test on the carrying value of goodwill
based on the recoverable amount of the Group as one cash generating operating
unit. The recoverable amount is determined using a value in use model. The net
present value of projected cash flows is compared with the carrying value of
the Group's investments and goodwill. Projected cash flows are based on
management approved budgets for a period of three years and key assumptions
over a further seven years. When determining the key assumptions, management
has used both past experience and management judgement, but as future cash
inflows are derived primarily from the realisation of investments, these
assumptions are subject to a high degree of uncertainty. The key assumptions
used in the model were rate of return 29% (2023: 29%); average yearly
realisations 7% (2023: 6.7%); annual growth in trading income 6% (2023:7.2%);
annual growth in the cost base 6% (2023: 7.8%); discount 15 % (2023: 14%). The
Board considers that a reasonable possible change in the rate of return or in
the discount rate would cause the carrying amount of the cash generating unit
to exceed its recoverable amount. A decrease in the rate of return from 29% to
17% or an increase in the discount rate from 15% to 21% would cause the
recoverable amount to equal the carrying amount. The Board considers that the
recoverable amount of the Group as one cash generating operating unit is
greater than its carrying value.
11. Categorisation of Financial Instruments
At fair value through profit or loss
£'000 Amortised cost
£'000 Total
Financial assets £'000
At 30 June 2023
Equity investments 32,964 - 32,964
Debt investments 4,625 - 4,625
Trade and other receivables - 1,026 1,026
Advances - 793 793
Cash and cash equivalents - 4,603 4,603
37,589 6,422 44,011
At 30 June 2024
Equity investments 33,203 - 33,203
Debt investments 5,595 - 5,595
Trade and other receivables - 1,629 1,629
Advances - 382 382
Cash and cash equivalents - 2,298 2,298
Total 38,798 4,309 43,107
All financial liabilities are categorised as other financial liabilities and
recognized at amortised cost.
All net fair value losses in the year are attributable to financial assets
designated at fair value through profit or loss. (2023: all net fair value
gains were attributable to financial assets designated at fair value through
profit or loss.)
12. Investment in subsidiaries
Company Company 2023
2024
£'000 £'000
At 1 July 2,383 2,383
Addition - conversion of FIP Unipessoal Lda loan 29
Provision for impairment - -
At 30 June 2,412 2,383
Group Investments
The Company has investments in the following subsidiary undertakings.
Country of Proportion of ordinary
incorporation shares directly held by the Company
Frontier IP Limited Scotland 100%
- principal activity is commercialisation of IP
Frontier IP Management Limited Scotland 100%
- principal activity is investment advisory and marketing services
FIP Portugal, Unipessoal Lda. Portugal 100%
- principal activity is commercialisation of IP
The registered office of all subsidiaries registered in Scotland is c/o CMS
Cameron McKenna Nabarro Olswang LLP, Saltire Court, 20 Castle Terrace,
Edinburgh EH1 2EN.
The registered office of FIP Portugal, Unipessoal, Lda is Rua João Frederico
Ludovice 22ª, Loja
1500-357, Benfica, Lisbon, Portugal.
13. Equity investments
Equity investments are valued individually at fair value in accordance with
the Group's accounting policy on investments. There are no remaining quoted
equity investments (2023: £2,297k). All of the Group's equity investments
are unquoted and these have been categorised as being level 3, that is, valued
using unobservable inputs. All gains and losses relate to assets held at the
year end, and the fair value movement has been shown in the income statement
as other operating income.
Equity Investments Group Group Company Company 2023
2024 2023 2024
£'000 £'000 £'000 £'000
At 1 July 32,964 39,712 28,259 26,963
Additions 68 691 68 691
Conversion of debt investments - 54 - 54
Disposals (2,297) (5,713) - -
Unrealised (loss)/profit on revaluation 2,468 (1,780) 2,781 551
At 30 June 33,203 32,964 31,108 28,259
The table below sets out the movement during the year in the value of unquoted
equity investments by the valuation matrix stages described in the accounting
policy on equity investments:
Equity Investments
Stage Stage 2 Stage Stage 4 Stage Stage 6 Total
1 3 5
Fair value category 3 3 3 3 3 1
£'000 £'000 £'000 £'000 £'000 £'000 £'000
1 July 2022 31 798 6,086 22,665 - 10,132 39,712
Transfers between stages - 44 2,234 (2,278) - - -
Fair value change through other operating income (31) 351 (2,447) 2,469 - (2,122) (1,780)
Additions - - - 745 - - 745
Disposals - - - - (5,713) (5,713)
30 June 2023 - 1,193 5,873 23,601 - 2,297 32,964
Transfers between stages - (613) (1,900) 2,513 - - -
Fair value increase through other operating income - (244) 2,712 - 2,468
Additions - - 68 - - 68
Disposals - - - - - (2,297) (2,297)
30 June 2024 - 580 3,729 28,894 - - 33,203
The table below provides information about equity investment fair value
measurements. (See the accounting policy on investments for a description of
the valuation matrix stages)
Valuation matrix stage No of Investments Fair value Inputs Reasonable possible shift
£'000 % +/- £000
At 30 June 2023
Stage 1 4 - The company is valued at fair value 20% -
Stage 2 4 1,192 Management's assessment of the value of IP transferred and valuation of grants 31% 370
from which economic benefit is derived
Stage 3 6 5,873 Management's assessment of performance against milestones and discussions of 40% 2,349
likely imminent fundraising
Stage 4 9 23,601 The price of last funding round provides unobservable input into the valuation 28% 6,608
of any individual investment. However, subsequent to the funding round,
management are required to re-assess the carrying value of investments at
each year-end which result in unobservable inputs into the valuation
methodology.
Stage 5 - - Discounted comparable public company valuation. Unobservable inputs into - -
discounted cash-flow are forecasts of future cash-flows, probabilities of
project failure, and evaluation of the time value of money.
Stage 6 1 2,298 Based on bid price at balance sheet date. - -
30 June 2023 32,964 23% 7,582
At 30 June 2024
Stage 1 3 - The company is valued at fair value which is the cost of the initial equity. - -
If advisory services are provided by the Group prior to spin out in return for
its equity stake, the cost is the value of services invoiced. If no advisory
services have been invoiced prior to spin out, the cost is the nominal value
of the shares received.
Stage 2 2 580 Management's assessment of the value of IP transferred and the value of grants 36% 209
from which economic benefit is derived.
Stage 3 5 3,729 Management's assessment of performance against milestones and discussions of 42% 1,566
likely imminent fundraising.
Stage 4 14 28,894 The price of latest funding round provides unobservable input into the 31% 8,957
valuation of any individual investment. However, subsequent to the funding
round, management are required to re-assess the carrying value of investments
at each year end which result in unobservable inputs into the valuation
methodology.
Stage 5 - - Discounted comparable public company valuation. - -
Unobservable inputs into discounted cash flow are forecasts of future cash
flows, probabilities of project failure and evaluation of the time cost of
money.
Stage 6 - - Based on bid price at balance sheet date. - -
30 June 2024 33,203 31% 10,293
The percentage reasonable possible shift for each stage is the blended
percentage reasonable possible shift of each company at that stage which are
based on the Directors' assessment of the level of uncertainty attached to the
valuation inputs.
Equity investments are carried in the statement of financial position at fair
value even though the Group may have significant influence over those
companies. This treatment is permitted by IAS28, Investments in Associates. At
30 June 2024 the Group held an economic interest of 20% or more in the
following companies:
Name of Undertaking Registered Address % Issued Share Capital Share Class
2024
2023
AquaInSilico Avenida Tenente Valadim, nº. 17, 2º F, 2560-275 Torres Vedras, Portugal 29.0% Ordinary
29.0%
Alusid Limited Richard House, Winckley Square, Preston, Lancashire, PR1 3HP 35.4% Ordinary
37.4%
Cambridge Raman Imaging Limited Botanic House,100 Hills Road, Cambridge, CB2 1PH 26.8% Ordinary
26.8%
Celerum Limited 30 East Park Road, Kintore, Inverurie, AB51 0FE 33.8% Ordinary
33.8%
Des Solutio LDA Madan Parque, Rua dos Inventores, 2825-182 Caparica, Portugal 25.0% Ordinary
25.0%
Elute Intelligence Holdings Limited 21 Church Road, Tadley, RG26 3AX 40.71% Ordinary
42.2%
Enfold Health Limited The Officers' Mess, Royston Road, Duxford, Cambridgeshire, United Kingdom, 75.8% Ordinary
CB22 4QH
75.8%
GraphEnergyTech Limited The Officers' Mess, Royston Road, Duxford, Cambridgeshire, United Kingdom, 30.4% Ordinary
CB22 4QH
32.1%
Insignals Neurotech Lda Rua Passeio Alegre, 20 Centro de Incubacyo e Aceleracyo Do Porto, Porto 32.9% Ordinary
4150-570, Portugal
32.9%
NTPE LDA Avenida Tenente Valadim, nº. 17, 2º F, 2560-275 TorresVedras, Portugal 47.9% Ordinary
47.9%
Deakin Bio-hybrid Materials 73 Temperance Street, Ardwick, Manchester, England,M12 6HU 33.3% 0% Ordinary
The nature of these companies' business is provided in the Portfolio Review
section of the Strategic Report where the holding carries a value.
14. Debt investments
Debt investments are loans to portfolio companies to fund early-stage costs,
provide funding alongside grants and bridge to an equity fundraise. Loans
ranging from £40,000 to £1,457,000 were made to five companies during the
period. All debt investments are categorised as fair value through profit or
loss and measured at fair value. These have been categorised as being level 3,
that is, valued using unobservable inputs. The Group uses valuation techniques
that management consider appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximising the use of
relevant observable inputs and minimising the use of unobservable inputs The
price at which the debt investment was made may be a reliable indicator of
fair value at that date but management consider the financial position and
prospects for the portfolio company borrower when valuing debt investments at
subsequent measurement dates.
Certain debt investments carry warrants granting the option to purchase
shares. The exercise price is generally the price of shares issued at the
first equity fundraising following the grant and the period of exercise is
generally at any time from the first equity fundraising to an exit event. The
fair value of the warrants is determined using the Black-Scholes-Merton
valuation model. The significant inputs into the model for each warrant were
the exercise price, the current share price valuation, volatility of 70%
(2023: 70%), expected life of between three months and six years and annual
risk-free interest rates to end of term of between 3.95% and 4.64% (2023:
4.45% and 5.30%). The value of warrants included in debt investments at 30
June 2024 is £440,000(2023: £1,881,000).
The movement of debt investments during the year is set out below:
Group Group 2023 Company Company 2023
2024 2024
£'000 £'000 £'000 £'000
At 1 July 4,625 2,981 3,557 2,297
Additions 2,157 884 1,987 575
Conversion to unquoted equity investments - (54) - (54)
Unrealised profit / (loss) on revaluation (1,187) 814 (1,193) 739
At 30 June 5,595 4,625 4,351 3,557
Debt investments with three portfolio companies accounted for 80% of the value
of debt investments at 30 June 2024: CamGraPhIC (£2,629,000), Nandi Proteins
(£953,000) and Elute Intelligence (£892,000).
Conversions of debt investments are non-cash transactions, so not reflected in
the statement of cashflows. All debt investments are classed as non-current.
Certain debt instruments have conversion or repayment terms dependent on the
amount and timing of an equity fundraising by the portfolio company borrower.
The exercise of a conversion right would reclass the debt investment as a
non-current equity investment. The expectation is to exercise the right to
repayment, however there is uncertainty over the timing and amount of equity
fundraisings. Furthermore, notwithstanding the right to repayment being
triggered, the Group may decide, depending on the circumstance at the time, to
defer repayment or convert into equity for the benefit of the portfolio
company borrower in which the Group also holds an equity stake.
15. Trade receivables and other current assets
Group Group Company Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Trade receivables 804 529 474 338
Receivables from Group undertakings - - 400 357
VAT 17 7 7 -
Prepayments and accrued income 104 71 29 30
Other debtors (excluding advances) 79 74 4 17
Accrued interest 906 448 645 286
1,910 1,129 1,559 1,028
Expected credit loss at 1 July 103 43 89 27
Other current assets provided for in the year 178 60 141 62
Other current assets written off in the year - - - -
Expected credit loss at 30 June 281 103 230 89
Less receivables from Group undertakings - non current
- - 400 357
Current portion 1,629 1,026 929 582
Trade receivables
Group Group Company Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Trade receivables not past due 27 32 17 18
Trade receivables past due 1-30 days 32 35 23 23
Trade receivables past due 31-60 days 21 33 12 18
Trade receivables past due 61-90 days 21 32 11 21
Trade receivables past due over 90 days 940 604 568 383
Gross trade receivables at 30 June 1,041 736 631 463
Expected credit loss at 1 July 207 98 125 78
Debts provided for in the year 30 109 32 47
Debts written off in the year - - - -
Expected credit loss at 30 June 237 207 157 125
Net trade receivables at 30 June 804 529 474 338
Trade receivables are amounts due from portfolio companies for services
provided with net amounts recorded as revenue in the consolidated statement of
comprehensive income. The expected credit losses are estimated by reference to
the financial position and specific circumstances of the portfolio companies,
by reference to past default experience and by assessment of the current and
forecast economic conditions. The nature of the services provided to portfolio
companies means the Group has in-depth knowledge of the companies' prospects
both for trading and raising capital and the number of companies with past due
receivables is small enabling a full assessment of recoverability by company.
The Group also considers if a general provision for expected loss through
applying the historical rate of portfolio company failures is material. The
Group's history of credit loss is not sufficiently material to inform future
expectations and therefore management focus on the factors which impact the
ability of its debtor companies to successfully raise capital and a
probability of default as a result of the failure to raise capital is applied
to determine the expected credit loss.
Receivables from Group undertakings carry interest of 2.0% above Bank of
England base rate (2023: 2.0%).
16. Advances
Group 2024 Group 2023 Company 2024 Company 2023
£'000 £'000 £'000 £'000
Advances 382 793 287 785
In the period to 30 June 2024 the Group advanced money to five portfolio
companies on a short-term basis. The largest of these advances was £175,000
to Camgraphic Ltd.
17. Trade and other payables
Group Group Company Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Trade payables 49 23 71 42
Payables to group undertakings - - 6,399 3,366
Social security and other taxes 92 68 - -
VAT 0 9 - 9
Other creditors 16 14 - -
Accruals and deferred income 158 127 90 109
At 30 June 315 241 6,560 3,526
Less payables to Group undertakings - non current
- - (6,399) (3,366)
Current portion 315 241 161 160
18. Share capital and share premium
Number of shares issued and fully paid Ordinary shares of 10p
Share premium
Total
£'000 £'000 £'000
At 30 June 2023 55,658,155 5,566 14,627 20,193
Exercise of options 508,793 51 164 216
At 30 June 2024 56,166,948 5,617 14,791 20,409
19. Reserves
The reverse acquisition reserve was created on the reverse takeover of
Frontier IP Group Plc. The fair value of equity-settled share-based payments
is expensed on a straight-line basis over the vesting period and the amount
expensed in each year is transferred to the share-based payment reserve, which
in 2023-24 was £225,000 (2023: £155,000). The amount by which the deferred
tax asset arising on the intrinsic value of the outstanding share options
differs from the cumulative expense is also transferred to the share-based
payment reserve. This amount was zero in the year ended June 2024 (2023:
£171,000). Included in retained earnings are unrealised profits amounting
to £29,096,000 (2023: £25,721,000). Consequently, there were no
distributable reserves at 30 June 2024 or 30 June 2023. The movement in
reserves for the years ended 30 June 2024 and 2023 is set out in the
Consolidated and Company Statement of Changes in Equity.
20. Share options
Frontier IP has three option schemes:
Under the Frontier IP Group Plc Employee Share Option Scheme 2011 - Amended 26
March 2018, both enterprise management incentive options and unapproved
options are granted. No payment is required from option holders on the grant
of an option. The options are exercisable starting three years from the date
of the grant with no performance conditions. The scheme runs for a period of
ten years but no new options can be granted as the Group has ceased to be a
qualifying company for EMI purposes No options were granted during the year
under this scheme.
Under the Frontier IP Group plc Company Share Option Plan 2021 ("CSOP"), no
payment is required from option holders on grant of an option. The options are
exercisable starting three years from the date of the grant with no
performance conditions. The scheme runs for a period of ten years. 169,181
share options were granted during the year under the CSOP.
Under the Frontier IP Group plc Unapproved Share Option Plan 2021 ("LTIP"), no
payment is required from option holders on grant of an option. The options are
exercisable starting three years from the date of grant provided certain
performance conditions have been met. The scheme runs for a period of ten
years. 666,838share options were granted during the year under the LTIP.
Movements in the number of share options outstanding and their related
weighted average exercise prices were as follows:
2024 2024 2023 2023
Weighted average exercise price Weighted average exercise price
Options Options
Pence per share Pence per share
At 1 July 32.22 5,099,064 31.71 4,986,726
Granted 16.98 836,019 24.43 834,872
Exercised 27.12 (508,793) 15.00 (652,607)
Lapsed 99.32 (132,541) 63.76 (69,927)
At 30 June 29.47 5,293,749 32.22 5,099,064
Of the 5,293,749 outstanding options (2023: 5,099,064) , 3,622,858 had vested
at 30 June 2024 (2023: 3,570,616). The vested options have a weighted average
exercise price of 33.51p.
Share options outstanding at the end of the year have the following expiry
date and exercise prices:
Exercise price 2024 2023
Pence per share Number Number
2024 26.88 - 432,393
2026 26.63 650,000 650,000
2027 40.00 352,000 399,000
2028 65.00 233,000 246,000
2028 10.00 432,000 456,000
2029 66.00 562,612 694,050
2029 10.00 729,211 734,611
2030 65.00 353,719 383,260
2030 10.00 310,316 310,316
2032 85.00 74,646 74,676
2033 66.00 116,850 116,850
2033 10.00 643,376 643,376
2033 44.50 169,181 -
2033 10.00 666,838 -
The weighted average remaining contractual life of the outstanding options is
5.6 years.
The weighted average fair value of options granted to executive Directors and
employees during the year determined using the Black-Scholes-Merton valuation
model was 30.13p per option. The significant inputs into the model were the
exercise prices shown above, weighted average share price of 44.5p, volatility
of 9.9%, dividend yield of 0%, expected life of 5 years and annual risk-free
interest rate of 4.36%. Future volatility has been estimated based on 5 years'
historical daily data.
21. Leases
2024 2023
Land & Buildings Land & Buildings
£'000 £'000
Commitments under non-cancellable leases expiring:
Within one year 105 91
Within two to five years - -
After five years - -
105 91
Property leases relate to rental of serviced offices. Under the terms of the
rental agreements, the supplier has the right to terminate the agreement
during the period of use, however at inception of the agreement this was not
considered likely to occur. For short term leases (12 months or less) and
leases of low value assets, the Group has opted to recognise a lease expense
on a straight-line basis as permitted by IFRS 16's transitional rules.
Currently the longest lease ends in March 2025.
22. Cash used in operations
Group Group Company Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Profit/(loss) before tax (1,337) (4,370) (765) (873)
Adjustments for:
Share-based payments 225 155 225 155
Depreciation 9 9 - -
Interest received (62) (50) (81) (52)
Unrealised loss/(profit) on the revaluation of investments
(1,282) 966 (1588) (1,290)
Realised loss/(profit) on disposal of investments (249) 786 - -
Changes in working capital:
Trade and other receivables* (602) 26 (348) 122
Advances 413 (793) 498 (785)
Trade and other payables 74 23 1 19
Cash flows from operating (2,811) (3,248) (2,058) (2,704)
activities
*Movement in trade and other receivables includes non-cash accrued interest on
debt investments with portfolio companies
The movements in liabilities from financing cashflows are nil.
23. Related party transactions
Neil Crabb is a director of Graphenergytech Ltd, PoreXpert Limited, Pulsiv
Limited, CamGraPhIC Ltd, Cambridge Raman Imaging Ltd and Alusid Limited.
Matthew White is a director of The Vaccine Group Limited, Nandi Proteins
Limited,and Deakin Bio-Hybrid Materials Ltd. All of these companies are
portfolio companies of the Group. The Group charged fees to these companies
and was owed amounts from these companies as follows:
By the Group Fees charged Fees charged Amounts owed Amounts owed
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Nandi Proteins Limited 66 78 292 213
Pulsiv Limited 24 24 5 5
Alusid Limited 80 70 155 127
The Vaccine Group Limited 48 48 135 77
CamGraPhIC Ltd 40 40 167 112
Cambridge Raman Imaging Ltd - 24 - -
Deakin Bio-Hybrid Materials Ltd 25 - - -
24. Subsequent events
There were no subsequent events to report.
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