REG - IP Group PLC - Final Results <Origin Href="QuoteRef">IPO.L</Origin> - Part 3

IPAnnouncement

10/03/2015 07:14

- Part 3: For the preceding part double click  ID:nRSJ9713Gb 

                   
 Trade and other receivables                            16  4.8    0.8    
 Deposits                                                   30.0   5.0    
 Cash and cash equivalents                                  67.3   19.1   
 Total current assets                                       102.1  24.9   
 Total assets                                               533.1  339.4  
 EQUITY AND LIABILITIES                                                   
 Equity attributable to owners of the parent                              
 Share capital                                          19  9.6    7.5    
 Share premium account                                      327.6  150.4  
 Merger reserve                                             12.8   12.8   
 Retained earnings                                          176.2  166.3  
 Total equity attributable to equity holders                526.2  337.0  
 Non-controlling interest                                   -      (0.4)  
 Total equity                                               526.2  336.6  
 Current liabilities                                                      
 Trade and other payables                               18  2.1    1.5    
 Non-current liabilities                                                  
 Loans from limited partners of consolidated funds          4.5    1.3    
 Contingent loans from university partners                  0.3    -      
 Total equity and liabilities                               533.1  339.4  
 
 
Total equity and liabilities 
 
533.1 
 
339.4 
 
Registered number: 4204490 
 
Approved by the Board of Directors and authorised for issue on 9 March 2015 and were signed on its behalf by: 
 
Greg Smith 
 
Chief Financial Officer 
 
Alan Aubrey 
 
Chief Executive Officer 
 
CONSOLIDATED STATEMENT OF CASH FLOWS 
 
For the year ended 31 December 2014 
 
 Operating activities                                                                         
 Profit before taxation                                                       9.5     72.6    
 Adjusted for:                                                                                
 Finance income - interest receivable                                         (0.6)   (0.4)   
 Change in fair value of equity and debt investments                          (20.7)  (82.4)  
 Change in fair value of limited and limited liability partnership interests  (0.5)   (0.8)   
 (Profit)/loss on disposal of equity investments                              (1.6)   0.2     
 Depreciation of property, plant and equipment                                0.1     0.1     
 Amortisation of intangible non-current assets                                4.9     -       
 Change in fair value of Oxford equity rights asset                           1.8     5.0     
 Share-based payment charge                                                   0.9     0.9     
 Other portfolio income classified as investing activities cash flows         (0.2)   (0.3)   
 Changes in working capital                                                                   
 (Increase)/decrease in trade and other receivables                           (3.2)   0.1     
 (Increase)/decrease in trade and other payables                              (0.5)   1.1     
 Increase in non-current liabilities                                          3.2     1.3     
 Net cash flow (to)/from deposits                                             (25.0)  27.5    
 Other operating cash flows                                                                   
 Interest received                                                            0.5     0.7     
 Net cash (outflow) / inflow from operating activities                        (31.4)  25.6    
 Investing activities                                                                         
 Purchase of property, plant and equipment                                    (0.1)   -       
 Purchase of equity and debt investments                                      (46.8)  (27.5)  
 Investment in limited and limited liability partnerships                     (0.3)   (0.2)   
 Proceeds from sale of equity investments                                     9.7     5.5     
 Distributions from limited and limited liability partnerships                1.1     0.2     
 Proceeds from other financial asset                                          0.8     -       
 Other portfolio income received                                              0.2     0.1     
 Net cash outflow from investing activities                                   (35.4)  (21.9)  
 Financing activities                                                                         
 Proceeds from the issue of share capital                                     97.4    -       
 Proceeds from acquisition of subsidiary                                      17.6    -       
 Net cash inflow from financing activities                                    115.0   -       
 Net increase in cash and cash equivalents                                    48.2    3.7     
 Cash and cash equivalents at the beginning of the year                       19.1    15.4    
 Cash and cash equivalents at the end of the year                             67.3    19.1    
 
 
Cash and cash equivalents at the end of the year 
 
67.3 
 
19.1 
 
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 
 
For the year ended 31 December 2014 
 
 At 1 January 2013                        7.3  150.4  12.8  92.6   263.1  -      263.1  
 Comprehensive income                     -    -      -     73.0   73.0   (0.4)  72.6   
 Issue of equity                          0.2  -      -     (0.2)  -      -      -      
 Equity settled share based payments      -    -      -     0.9    0.9    -      0.9    
 At 1 January 2014                        7.5  150.4  12.8  166.3  337.0  (0.4)  336.6  
 Comprehensive income                     -    -      -     9.1    9.1    0.4    9.5    
 Issue of equity                          2.0  177.2  -     -      179.2  -      179.2  
 Issue of shares in connection with LTIP  0.1  -      -     (0.1)  -      -      -      
 Equity settled share based payments      -    -      -     0.9    0.9    -      0.9    
 At 31 December 2014                      9.6  327.6  12.8  176.2  526.2  -      526.2  
 
 
0.9 
 
- 
 
0.9 
 
At 31 December 2014 
 
9.6 
 
327.6 
 
12.8 
 
176.2 
 
526.2 
 
- 
 
526.2 
 
i)    Share premium - Amount subscribed for share capital in excess of nominal value, net of directly attributable issue
costs. 
 
ii)   Merger reserve - Amount subscribed for share capital in excess of nominal value in relation to the qualifying
acquisition of subsidiary undertakings. 
 
iii)  Retained earnings - Cumulative net gains and losses recognised in the consolidated statement of comprehensive income
net of associated share-based payments credits. 
 
iv)  Non-controlling interest - Share of losses attributable to the Limited Partners of IP Venture Fund II L.P. - a
consolidated fund which was created in May 2013. 
 
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION 
 
1. ACCOUNTING POLICIES 
 
Basis of preparation 
 
The results are based on the Group financial statements, which have been prepared in accordance with International
Financial Reporting Standards ("IFRS") and the International Financial Reporting Interpretations Committee's
interpretations as adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. This release does not include all of the information required for full annual financial statements.
Copies of the 2014 Annual Report and Accounts will be published on the Group's website and will be available upon request. 
 
The accounting policies are consistent with those applied by the Group in its 2012 annual report and accounts except as
described below. On 1 January 2013 the Group adopted the following new accounting standards and amendments to standards: 
 
Amendment to IFRS 10 - Investment Entities: The amendments define an investment entity and require a parent that is an
investment entity to measure its investments in particular subsidiaries at fair value through profit or loss, rather than
consolidating them in its consolidated financial statements. Measurement at fair value through profit or loss must also be
applied to an investment entity's separate financial statements. The amendments also introduce disclosure requirements for
investment entities into IFRS 12 Disclosure of Interests in Other Entities and amend IAS 27 Separate Financial Statements.
The Group, after examination, does not qualify for the investment entity exemption and consequently the amendment has not
resulted in changes to the preparation and presentation of the Group's subsidiaries, associates or Limited Partnerships. 
 
No other new standards, interpretations and amendments effective for the first time from 1 January 2014 have had a material
effect on the Group's financial statements. 
 
2. FINANCIAL RISK MANAGEMENT 
 
As set out in the Principal risks and uncertainties section above, the Group is exposed, through its normal operations, to
a number of financial risks, the most significant of which are market, liquidity and credit risks. 
 
In general, risk management is carried out throughout the Group under policies approved by the Board of Directors. The
following further describes the Group's objectives, policies and processes for managing those risks and the methods used to
measure them. Further quantitative information in respect of these risks is presented throughout these financial
statements. 
 
(a) Market risk
(i) Price risk
The Group is exposed to equity securities price risk as a result of the equity and debt investments, and investments in
limited partnerships held by the Group and categorised as at fair value through profit or loss. 
 
The Group mitigates this risk by having established investment appraisal processes and asset monitoring procedures which
are subject to overall review by the Board. The Group has also established corporate finance and communications teams
dedicated to supporting portfolio companies with fundraising activities and investor relations. 
 
The Group holds investments which are publicly traded on AIM (18 companies) or ISDX (1 company) and investments which are
not traded on an active market. 
 
The net increase in fair value of the Group's equity and debt investments during 2014 of £20.7m represents a 7% change
against the opening balance (2013: net increase of £82.4m, 45%) and a similar increase or decrease in the prices of quoted
and unquoted investments is considered to be reasonably possible. The table below summarises the impact of a 1%
increase/decrease in the price of both quoted and unquoted investments on the Group's post-tax profit for the year and on
equity. 
 
 Equity investments and investments in limited partnerships  1.4  2.1  3.5  1.4  1.5  2.9  
 
 
Quoted£m 
 
Unquoted£m 
 
Total£m 
 
Equity investments and investments in limited partnerships 
 
1.4 
 
2.1 
 
3.5 
 
1.4 
 
1.5 
 
2.9 
 
(ii)   Interest rate risk 
 
As the Group has no significant borrowings, it has only a limited interest rate risk. The primary impact to the Group is
the impact on income and operating cash flow as a result of the interest-bearing deposits and cash and cash equivalents
held by the Group. 
 
The Group mitigates this risk, in co-ordination with liquidity risk, by managing its proportion of fixed to floating rate
financial assets. The table below summarises the interest rate profile of the Group. 
 
 Financial assets                                                                                        
 Equity rights                                        -     -     1.1    1.1    -    -     2.9    2.9    
 Equity investments                                   -     -     345.9  345.9  -    -     283.1  283.1  
 Debt investments                                     0.2   -     3.8    4.0    0.6  -     2.2    2.8    
 Limited and limited liability partnership interests  -     -     4.6    4.6    -    -     4.8    4.8    
 Contingent value rights                              -     -     1.4    1.4    -    -     1.4    1.4    
 Deposits                                             30.0  -     -      30.0   5.0  -     -      5.0    
 Cash and cash equivalents                            -     67.3  -      67.3   -    19.1  -      19.1   
 Other financial assets                               -     -     -      -      -    -     0.7    0.7    
 Trade receivables                                    -     -     4.8    4.8    -    -     0.4    0.4    
 Other receivables                                    -     -     -      -      -    -     0.4    0.4    
                                                      30.2  67.3  361.6  459.1  5.6  19.1  295.9  320.6  
 Financial liabilities                                                                                   
 Trade payables                                       -     -     (1.5)  (1.5)  -    -     (0.1)  (0.1)  
 Other accruals and deferred income                   -     -     (0.6)  (0.6)  -    -     (1.4)  (1.4)  
 Loans from limited partners of consolidated funds    -     -     -      -      -    -     (1.3)  (1.3)  
                                                      -     -     (2.1)  (2.1)  -    -     (2.8)  (2.8)  
 
 
- 
 
(1.3) 
 
(1.3) 
 
- 
 
- 
 
(2.1) 
 
(2.1) 
 
- 
 
- 
 
(2.8) 
 
(2.8) 
 
At 31 December 2014, if interest rates had been 1% higher/lower, post-tax profit for the year, and other components of
equity, would have been £0.7m (2013: £0.2m) higher/lower as a result of higher interest received on floating rate cash
deposits. 
 
(b) Liquidity risk 
 
The Group seeks to manage liquidity risk, to ensure sufficient liquidity is available to meet foreseeable needs and to
invest cash assets safely and profitably. The Group's Treasury Management Policy asserts that at any one point in time no
more than 60% of the Group's cash and cash equivalents will be placed in fixed-term deposits with a holding period greater
than three months. Accordingly, the Group only invests working capital in short-term instruments issued by reputable
counterparties. The Group continually monitors rolling cash flow forecasts to ensure sufficient cash is available for
anticipated cash requirements. 
 
(c) Credit risk 
 
The Group's credit risk is primarily attributable to its deposits, cash and cash equivalents, debt investments and trade
receivables. The Group seeks to mitigate its credit risk on cash and cash equivalents by making short-term deposits with
counterparties, or by investing in treasury funds with an "AA" credit rating or above managed by institutions. Short-term
deposit counterparties are required to have most recently reported total assets in excess of £3bn and, where applicable, a
prime short-term credit rating at the time of investment (ratings are generally determined by Moody's or Standard &
Poor's). Moody's prime credit ratings of "P1", "P2" and "P3" indicate respectively that the rating agency considers the
counterparty to have a "superior", "strong" or "acceptable" ability to repay short-term debt obligations (generally defined
as having an original maturity not exceeding 13 months). An analysis of the Group's deposits and cash and cash equivalents
balance analysed by credit rating as at the reporting date is shown in the table below. All other financial assets are
unrated. 
 
 P1                                            68.7  14.2  
 P2                                            28.6  9.9   
 AA                                            -     -     
 Total deposits and cash and cash equivalents  97.3  24.1  
 
 
Total deposits and cash and cash equivalents 
 
97.3 
 
24.1 
 
The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and
customers. The Group has detailed policies and strategies which seek to minimise these associated risks including defining
maximum counterparty exposure limits for term deposits based on their perceived financial strength at the commencement of
the deposit. The maximum single counterparty limit for deposits at 31 December 2014 was £25m (2013: £10m). 
 
The Group's exposure to credit risk on debt investments is managed in a similar way to equity price risk, as described
earlier, through the Group's investment appraisal processes and asset monitoring procedures which are subject to overall
review by the Board. 
 
The maximum exposure to credit risk for debt investments, receivables and other financial assets is represented by their
carrying amount. 
 
3. SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS 
 
The Directors make judgements and estimates concerning the future. Estimates and judgements are continually evaluated and
are based on historical experience and other factors, such as expectations of future events, and are believed to be
reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions, which
have the most significant effects on the carrying amounts of the assets and liabilities in the financial statements, are
discussed below. 
 
(i) Valuation of unquoted equity investments 
 
The judgements required, in order to determine the appropriate valuation methodology of unquoted equity investments, have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities. These judgements
include making assessments of the future earnings potential of portfolio companies, appropriate earnings multiples to
apply, and marketability and other risk discounts. 
 
(ii) Impairment of goodwill 
 
The Group is required to test, at least annually, whether goodwill has suffered any impairment. The recoverable amount is
determined using a number of value-in-use and fair-value-less-costs-to-sell calculations. The use of these methods requires
the estimation of future cash flows, and the selection of a suitable discount rate, in order to calculate the present value
of these cash flows as well as the selection of applicable and reasonable multiples. 
 
(iii) Acquired Intangible Assets 
 
At the date of its acquisition by IP Group, Fusion IP plc had contractual arrangements with four UK universities. The Group
separately recognised each of these contractual arrangements as intangible assets at the fair value of these assets at
acquisition date. As the intangible assets are not quoted on an active market, the fair value at acquisition date was
determined by averaging the inflation and venture capital industry activity adjusted true