REG - IP Group PLC - IP Group plc Annual Results Release <Origin Href="QuoteRef">IPO.L</Origin> - Part 6
07/03/2017 07:07
- Part 6: For the preceding part double click ID:nRSG6795Ye
Comparative TSR(ii) FTSE 250+29% IP Group+22%
i. Hard NAV target increased by Committee to reflect £21.7m Fusion IP net
assets acquired in 2014 and £276.1m net proceeds of the Group's placings in
2014 and 2015.
ii. TSR performance shown reflects the Group's one-month average share
price to 26 February 2016. Actual performance period is the one-month average
to 31 March 2016.
The performance measures were achieved in full however the underpin was only
partially achieved, as a result 57.6% of the 2013 LTIP awards vested on 31
March 2015.
The movement in the number of shares conditionally awarded under the LTIP is
set out below:
2016 2015
At 1 January 3,378,595 3,650,493
Forfeited during the year (493,959) (39,876)
Vested during the year (457,877) (1,552,144)
Notionally awarded during the year 3,188,078 1,320,122
At 31 December 5,614,837 3,378,595
The fair value of LTIP shares notionally awarded during 2016 was calculated
using Monte Carlo pricing models with the following key assumptions:
2016 2015
Share price at date of award £1.558 £2.188
Exercise price £nil £nil
Fair value at grant date £0.41 £0.78
Expected volatility (median of historical 50-day moving average) 31% 32%
Expected life (years) 2.83 2.83
Expected dividend yield 0% 0%
Risk-free interest rate 1.0% 1.0%
Former Fusion IP LTIP
In 2014, three former employees of Fusion IP plc were each conditionally
awarded 1,000,000 shares in Fusion IP plc under the Fusion IP LTIP. As part of
the arrangements for the acquisition of Fusion IP plc, the Fusion IP LTIP
awards were converted into awards over IP Group shares at the same conversion
price per share as the scheme of arrangement was undertaken (0.446 IP Group
plc shares for every Fusion IP plc share). The awards will vest on 31 December
2017 provided certain performance conditions are met which relate to, inter
alia, the growth in value of Fusion IP plc's net asset value ("Fusion NAV")
from the date of acquisition and the continued employment of the individual by
the Group. In summary, if Fusion NAV growth of 10% per annum is achieved then
30% of an award shall vest. Maximum vesting will occur if Fusion NAV growth of
20% per annum is achieved with straight-line vesting between 30% and 100% if
Fusion NAV growth of 10%-20% per annum is achieved. No vesting shall occur if
Fusion NAV growth of less than 10% is achieved.
The movement in the number of shares conditionally awarded under the Former
Fusion IP LTIP is set out below:
2016 2015
At 1 January 1,338,000 1,338,000
At 31 December 1,338,000 1,338,000
Fair value charge
The fair value charge recognised in the statement of comprehensive income
during the year in respect of all share-based payments, including the DBSP,
LTIP and Former Fusion IP LTIP, was £1.5m (2015: £1.5m).
22. Limited and Limited Liability Partnership Interests
£m
At 1 January 2015 4.6
Additions during the year -
Realisations in the year (0.6)
Change in fair value during the year 0.4
At 1 January 2016 4.4
Additions during the year 0.1
Realisations in the year -
Change in fair value during the year (0.3)
At 31 December 2016 4.2
The Group considers interests in Limited and Limited Liability Partnerships to
be Level 3 in the fair value hierarchy throughout the current and previous
financial years. If the assumptions used in the valuation techniques for the
Group's holding in each company are varied by using a range of possible
alternatives, there is no material difference to the carrying value of the
respective spin-out company. The effect on the consolidated statement of
comprehensive income for the period is also not expected to be material.
23. Related Party Transactions
The Group has various related parties arising from its key management,
subsidiaries, equity stakes in portfolio companies and management of certain
Limited Partnership funds.
a) Limited Partnerships
The Group manages a number of investment funds structured as Limited
Partnerships. Group entities have a Limited Partnership interest (see note 1)
and act as the general partners of these Limited Partnerships. The Group
therefore has power to exert significant influence over these Limited
Partnerships. The following amounts have been included in respect of these
Limited Partnerships:
Statement of comprehensive income 2016 £m 2015 £m
Revenue from services 0.9 1.3
Statement of financial position 2016 £m 2015 £m
Investment in limited partnerships 2.8 3.1
Amounts due from related parties 0.2 -
b) Key management personnel
i) Key management personnel transactions
Key management had investments in the following spin-out companies as at 31
December 2016:
Alan Aubrey Accelercomm Limited - 333 333 0.3%
Alesi Surgical Limited 18 - 18 0.2%
Amaethon Limited - A Shares 104 - 104 3.1%
Amaethon Limited - B Shares 11,966 - 11,966 1.0%
Amaethon Limited - Ordinary shares 21 - 21 0.3%
Avacta Group plc(v) 202,761 - 202,761 0.3%
Boxarr Limited 1,732 - 1,732 0.3%
Capsant Neurotechnologies Limited 11,631 - 11,631 0.8%
Cloud Sustainability Limited 26 - 26 0.4%
Crysalin Limited 1,447 - 1,447 0.1%
Diurnal Group plc 15,000 - 15,000 <0.1%
EmDot Limited 15 - 15 0.9%
Empiricom Technologies Limited - 119,965,724 119,965,724 17.3%
Getech Group plc 15,000 - 15,000 <0.1%
Gunsynd plc 767,310 - 767,310 <0.1%
hVivo plc 37,160 - 37,160 <0.1%
Ilika plc 69,290 - 69,290 <0.1%
Karus Therapeutics Limited 223 - 223 <0.1%
Microbiotica Limited - 3,750 3,750 <0.1%
Mirriad Advertising Limited 33,333 - 33,333 <0.1%
MDL 2016 Limited - Ordinary shares 3,226 - 3,226 0.4%
MDL 2016 Limited - A shares 229 - 229 0.5%
Modern Biosciences plc 1,185,150 - 1,185,150 1.7%
Modern Water plc 519,269 - 519,269 0.7%
Cronin Group plc 2,172,809 - 2,172,809 0.4%
Oxford Nanopore Technologies Limited 101,208 - 101,208 0.4%
Oxtox Limited 25,363 (25,363) - 0.0%
Perachem Holdings plc 108,350 - 108,350 0.8%
Revolymer plc 88,890 - 88,890 0.1%
Salunda Limited 53,639 - 53,639 <0.1%
Structure Vision Limited 212 - 212 1.0%
Surrey Nanosystems Limited 453 - 453 0.3%
Tissue Regenix Group plc 2,389,259 - 2,389,259 0.3%
Xeros Technology Group plc 40,166 - 40,166 <0.1%
Zeetta Networks Limited 212 212 424 <0.1%
Mike Townend Amaethon Limited - A Shares 104 - 104 3.1%
Amaethon Limited - B Shares 11,966 - 11,966 1.0%
Amaethon Limited - Ordinary shares 21 - 21 0.3%
Applied Graphene Materials plc - 7,619 7,619 <0.1%
Avacta Group plc(v) 9,314 10,687 20,001 <0.1%
Capsant Neurotechnologies Limited 11,282 - 11,282 0.8%
Cloud Sustainability Limited 25 - 25 0.4%
Creavo Technologies Limited(i) 117 - 117 <0.1%
Crysalin Limited 1,286 - 1,286 0.1%
Diurnal Group plc 15,000 - 15,000 <0.1%
EmDot Limited 14 - 14 0.8%
Getech Group plc 20,000 - 20,000 <0.1%
hVivo plc 37,160 - 37,160 <0.1%
Ilika plc 10,000 - 10,000 <0.1%
Mirriad Advertising Limited 25,000 - 25,000 <0.1%
Mode Diagnostics Limited 1,756 - 1,756 0.1%
Modern Biosciences plc 1,185,150 - 1,185,150 1.7%
Modern Water plc 575,000 - 575,000 0.7%
Cronin Group plc 932,944 - 932,944 0.2%
Oxford Advanced Surfaces Limited 5,000 - 5,000 0.2%
Oxford Nanopore Technologies Limited 30,967 - 30,967 0.1%
Oxtox Limited 25,363 (25,363) - 0.0%
Perachem Holdings plc 113,222 - 113,222 0.8%
Revolymer plc 35,940 29,000 64,940 <0.1%
Structure Vision Limited 212 - 212 1.0%
Surrey Nanosystems Limited 404 - 404 0.2%
Tissue Regenix Group plc 1,950,862 - 1,950,862 0.3%
Tracsis plc 25,430 (25,430) - 0.0%
Ultrahaptics Holdings Limited(iv) 35 - 35 <0.1%
Xeros Technology Group plc 35,499 - 35,499 <0.1%
Greg Smith Alesi Surgical Limited 2 - 2 <0.1%
Avacta Group plc(v) 3,904 - 3,904 <0.1%
Capsant Neurotechnologies Limited 896 - 896 <0.1%
Cloud Sustainability Limited 8 - 8 0.1%
Crysalin Limited 149 - 149 <0.1%
Diurnal Group plc 15,000 - 15,000 <0.1%
EmDot Limited 4 - 4 0.2%
Encos Limited 5,671 - 5,671 0.3%
Getech Group plc 8,000 - 8,000 <0.1%
hVivo plc 61,340 - 61,340 <0.1%
Perachem Holdings plc(ii) 4,830 - 4,830 <0.1%
Mirriad Advertising Limited 16,667 - 16,667 <0.1%
MDL 2016 Limited - Ordinary shares 361 - 361 <0.1%
MDL 2016 Limited - A shares 28 - 28 <0.1%
Modern Biosciences plc 313,425 - 313,425 0.5%
Modern Water plc 7,250 - 7,250 <0.1%
Oxford Nanopore Technologies Limited 1,581 - 1,581 <0.1%
Revolymer plc 4,500 - 4,500 <0.1%
Summit Therapeutics plc 798 - 798 <0.1%
Surrey Nanosystems Limited 88 - 88 <0.1%
Tissue Regenix Group plc 50,000 - 50,000 <0.1%
Xeros Technology Group plc 1,392 - 1,392 <0.1%
David Baynes Alesi Surgical Limited 4 - 4 <0.1%
Arkivum Limited 377 - 377 <0.1%
Creavo Technologies Limited(i) 46 - 46 <0.1%
Diurnal Group plc 73,000 - 73,000 0.1%
Mirriad Advertising Limited 16,667 - 16,667 <0.1%
Oxford Nanopore Technologies Limited 155 19 174 <0.1%
Ultrahaptics Holdings Limited(iv) 26 - 26 <0.1%
Zeetta Networks Limited 212 212 424 <0.1%
Angela Leach Alesi Surgical Limited 2 - 2 <0.1%
Avacta Group plc(v) 1,897 - 1,897 <0.1%
Boxarr Limited 102 - 102 <0.1%
Capsant Neurotechnologies Limited 1,858 - 1,858 0.1%
Cloud Sustainability Limited 10 - 10 0.1%
Creavo Technologies Limited(i) 23 - 23 <0.1%
Cronin Group plc 68,101 - 68,101 <0.1%
Diurnal Group plc 11,500 - 11,500 <0.1%
Gunsynd plc(iii) 7,990 - 7,990 <0.1%
First Light Fusion Limited 17 - 17 <0.1%
Getech Group plc 2,083 - 2,083 <0.1%
hVivo plc 25,903 - 25,903 <0.1%
Mirriad Advertising Limited 16,667 - 16,667 <0.1%
MDL 2016 Limited - Ordinary Shares 606 - 606 <0.1%
MDL 2016 Limited - A Shares 102 - 102 0.2%
Modern Water plc 15,570 - 15,570 <0.1%
Modern Biosciences plc 322,923 - 322,923 0.5%
Oxford Nanopore Technologies Limited 1,721 61 1,782 <0.1%
Revolymer plc 4,500 - 4,500 <0.1%
Structure Vision Limited 21 - 21 0.1%
Surrey Nanosystems Limited 90 - 90 <0.1%
Tissue Regenix Group plc 329,172 (52,381) 276,791 <0.1%
Ultrahaptics Holdings Limited(iv) 5 - 5 <0.1%
Xeros Technology Group plc 5,666 - 5,666 <0.1%
<0.1%
Xeros Technology Group plc
5,666
-
5,666
<0.1%
i. Creavo Technologies Limited was formerly known as Quantum Imaging
Limited.
ii. Boxarr Limited was formerly known as Plexus Planning Limited
iii. Gunsynd plc was formerly known as Evocutis plc
iv. Ultrahaptics Holdings Limited was formerly known as Ultrahaptics
Limited
v. Avacta Group plc had a share consolidation during the year 100:1
ii) Key management personnel compensation
Key management personnel compensation comprised the following:
2016 £000s 2015 £000s
Short-term employee benefits1 1,489 1,890
Post-employment benefits2 71 89
Other long-term benefits - -
Termination benefits - -
Share-based payments3 623 550
Total 2,183 2,529
1 Represents key management personnel's base salaries, benefits including
cash in lieu of pension where relevant, and the cash settled element of the
Annual Incentive Scheme.
2 Represents employer contributions to defined contribution pension and
life assurance plans
3 Represents the accounting charge for share based payments, reflecting
LTIP and DBSP options currently in issue as part of these schemes. See note 21
for a detailed description of these schemes.
c) Portfolio companies
The Group earns fees from the provision of business support services and
corporate finance advisory to portfolio companies in which the Group has an
equity stake. Through the lack of control over portfolio companies these fees
are considered arms-length transactions. The following amounts have been
included in respect of these fees:
Statement of comprehensive income 2016 £m 2015 £m
Revenue from services 1.6 2.0
Statement of financial position 2016 £m 2015 £m
Trade receivables 0.7 1.5
d) Subsidiary companies
Subsidiary companies that are not 100% owned either directly or indirectly by
the parent Company have intercompany balances with other Group companies
totalling as follows:
Statement of financial position 2016 £m 2015 £m
Intercompany balances with other Group companies 10.7 10.5
These intercompany balances represent funding loans provided by Group
companies that are interest free, repayable on demand and unsecured.
24. Capital Management
The Group's key objective when managing capital is to safeguard the Group's
ability to continue as a going concern so that it can continue to provide
returns for shareholders and benefits for other stakeholders.
The Group sets the amount of capital in proportion to risk. The Group manages
the capital structure, and makes adjustments to it, in light of changes in
economic conditions and the risk characteristics of its underlying assets. In
order to maintain or adjust the capital structure, the Group may adjust the
amount of issued new shares or dispose of interests in more mature portfolio
companies.
During 2016, the Group's strategy, which was unchanged from 2015, was to
maintain healthy cash and short-term deposit balances that enable it to
provide capital to all portfolio companies, as determined by the Group's
investment committee, whilst having sufficient cash reserves to meet all
working capital requirements in the foreseeable future.
The Group has an external debt facility with associated covenants that are
described in Note 18.
25. Capital Commitments
Commitments to university partnerships
A number of the Group's partnerships with research intensive universities in
the UK include certain arrangements to provide seed capital to spin-out
companies arising from such universities. As at 31 December 2016, the balances
were as follows:
Partnership Year of commencement of partnership Original commitment £m Invested to date £m Remaining commitment £m
University of Southampton(i) 2002 5.0 3.6 1.4
King's College London(ii) 2003 5.0 1.8 3.2
University of York - CNAP(iii) 2003 0.8 0.2 0.6
University of Leeds(iv) 2005 4.2 1.1 3.1
University of Bristol(v) 2005 5.0 1.1 3.9
University of Surrey(vi) 2006 5.0 0.5 4.5
University of York(iii) 2006 5.0 0.2 4.8
Queen Mary University of London(vii) 2006 5.0 0.7 4.3
University of Bath(viii) 2006 5.0 0.2 4.8
University of Glasgow(ix) 2006 5.0 1.6 3.4
University of Manchester(x) 2013 7.5 0.2 7.3
52.5 11.2 41.3
i. Under the terms of an agreement entered into in 2002 between the
Group, the University of Southampton and certain of the University of
Southampton's subsidiaries, IP2IPO Limited agreed to make £5.0m available for
the purposes of making investments in University of Southampton spin-out
companies.
ii. Under the terms of an agreement entered into during 2003 between the
Group and King's College London ("KCL") and King's College London Business
Limited (formerly KCL Enterprises Limited), the Group agreed to make £5.0m
available for the purposes of making investments in spin-out companies. Under
the terms of this agreement, KCL was previously able to require the Company to
make a further £5.0m available for investments in spin-out companies on the
tenth anniversary of the partnership. However, the 2003 agreement was
terminated and replaced by a revised agreement between the same parties on 12
November 2010. Under the revised agreement, the Group agreed to target
investing the remaining commitment of £3.2m over a three-year period; KCL
cannot, however, require the Group to make any additional funds available.
Other changes effected by the revised agreement included the removal of the
Group's automatic entitlement to initial partner equity in every spin-out
company and/or a share of KCL's licensing fees from intellectual property
commercialisation and to the termination rights of the parties.
iii. In 2003, the Group entered into an agreement with the University of
York. The agreement relates to a specialist research centre within the
University of York, the Centre for Novel Agricultural Products ("CNAP"). The
Group has committed to invest up to a total of £0.8m in spin-out companies
based on CNAP's intellectual property. In 2006, the Group extended its
partnership with the University of York to cover the entire university. The
Group has committed to invest £5.0m in University of York spin-outs over and
beyond the £0.8m commitment as part of the Group's agreement with CNAP. The
agreement with the University of York was amended during 2013 so as to alter
the process by which the Group evaluates commercialisation opportunities and
the level of initial partner equity the Group is entitled to as a result.
Further, the Group's automatic entitlement to share in any of the University
of York's proceeds from out-licensing has been removed from the agreement.
iv. The Group extended its partnership with the University of Leeds in
July 2005 by securing the right with associated contractual commitment to
invest up to £5.0m in University of Leeds spin-out companies. This agreement
was varied in March 2011 to, amongst other things, remove the Group's
entitlement to a share of out-licensing income generated by the University of
Leeds except in certain specific circumstances where the Group is involved in
the relevant out-licensing opportunity. Under the terms of the variation
agreement, subject to quality and quantity of the investment opportunities,
the Group, IP Assist Services Limited and the University of Leeds have agreed
to target annual investments of at least £0.7m in aggregate and, subject to
earlier termination or the parties otherwise agreeing alternative target, to
review this target on 30 April 2017.
v. In December 2005, the Group entered into an agreement with the
University of Bristol. The Group has committed to invest up to a total of
£5.0m in University of Bristol spin-out companies.
vi. Under the terms of an agreement entered into in 2006 between the
Group and the University of Surrey, the Group has committed to invest up to a
total of £5.0m in spin-out companies based on the University of Surrey's
intellectual property.
vii. In July 2006, the Group entered into an agreement with Queen Mary
University of London ("QM") to invest in QM spin-out companies. The Group has
committed to invest up to a total of £5.0m in QM spin-out companies. The
agreement was amended in January 2014, primarily to remove the Group's
entitlement to licence fees save where it is involved in the development or
licensing of the relevant IP and, in most cases, to replace the Group's
automatic entitlement to a share of the initial equity in any spin-out company
with an equivalent warrant exercisable at the seed stage of the relevant
company.
viii. In September 2006, the Group entered into an agreement with the
University of Bath to invest in University of Bath spin-out companies. The
Group has committed to invest up to a total of £5.0m in University of Bath
spin-out companies. The agreement with the University of Bath was amended
during 2009 so as to remove the Group's automatic entitlement to a share of
the initial equity or licence fees (as applicable) received by the University
of Bath from the commercialisation of its intellectual property in the event
that the Group and its employees have not been actively involved in developing
the relevant opportunity.
ix. In October 2006, the Group entered into an agreement with the
University of Glasgow to invest in University of Glasgow spin-out companies.
The Group has committed to invest up to a total of £5.0m in University of
Glasgow spin-out companies.
x. In February 2013, the Group entered into a commercialisation
agreement with the University of Manchester. Initially the Group had agreed to
make available an initial facility of up to £5.0m to provide capital to new
proof of principle projects (excluding graphene projects) intended for
commercialisation through spin-out companies. During January 2014, the Group
extended its agreement to include funding for graphene projects; increased the
capital commitment by a further £2.5m, bringing the total to £7.5m; and
extended the agreement to 2019.
Commitments to limited partnerships
Pursuant to the terms of their limited partnership agreements, the Group has
committed to invest the following amounts into limited partnerships as at 31
December 2016:
Partnership Year of commencement of partnership Original commitment £m Invested to date £m Remaining commitment £m
IP Venture Fund 2006 3.1 3.0 0.1
IP Venture Fund II L.P. 2013 10.0 3.9 6.1
13.1 6.9 6.2
26. Post Balance Sheet Events
Effective 31 January 2017, the Group acquired 100% of the shares of Parkwalk
Advisors Limited, the UK's leading university spin-out focussed EIS fund
manager. This business will be consolidated in the Group's results from the
date of acquisition. The total maximum consideration payable is £20m over a
three-year period. The initial consideration comprises £5m of cash, £2.5m in
the form of newly-issued IP Group ordinary shares and a further £2.5m of cash
payable in two equal instalments over two years, subject to certain
conditions. The remaining £10m consideration is payable as £5m in cash and £5m
in IP Group ordinary shares over a three-year period, subject to the acquired
company achieving certain business performance targets. The Group is in the
process of finalising the acquisition accounting and can therefore not provide
any other reliable disclosure in line with IFRS 3 at this stage.
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