REG - Seed Innovations Ltd - Interim Results
22/11/2023 14:30
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231122:nRSV3630Ua&default-theme=true
RNS Number : 3630U Seed Innovations Limited 22 November 2023
Seed Innovations Ltd / AIM: SEED / Sector: Closed End Investments
22 November 2023
SEED Innovations Limited ("SEED" or the "Company")
Interim Results
SEED Innovations Ltd, the AIM quoted company providing shareholders with
exposure to early-stage health, wellness, and medical cannabis companies to
which, in normal circumstances, they have limited access to, is pleased to
announce its interim results for the six months ended 30 September 2023.
A copy of this announcement and the Interim Results will be available on the
Company's website: www.seedinnovations.co (http://www.seedinnovations.co) .
HIGHLIGHTS
· Divestment of holding in Leap Gaming for €5.8 million payable in
two tranches. The first tranche of €3 million (£2.7 million) was received
on completion of the deal with the balance due in April 2024.
· Partial sale in Avextra AG ("Avextra"), a German based, European
vertically integrated medical cannabis company, generated gross proceeds of
£2.45 million (€2.9 million), a 62% (1.6x) return on SEED's original
investment in 2021 and 2023.
· SEED remains a supportive shareholder in Avextra with 2,242 units
representing approximately 3% of Avextra on a fully diluted basis.
· The net asset value of the Company at 30 September 2023 was
£14,611,908 equal to net assets of 6.87 pence per Ordinary Share -
approximately 2.75 times the current share price.
· On 19 September 2023, the Company announced its intention to buy back
a maximum of 21,500,000 of its own shares in a bid to increase net asset value
and liquidity in its shares.
· Strong cash and cash receivables of £7.1 million as at 30 September
2023- making it well position to capitalise on investment opportunities.
The Company remains well positioned to benefit from the long-term potential of
the medical cannabis industry, and other emerging growth markets, despite
recent worldwide geopolitical and economic events.
Commenting on the interim results, CEO, Ed McDermott said:
"The Company's share price has faced a challenging period amid persistent
unfavourable macro conditions. Despite this, operationally, we have continued
to demonstrate our ability to identify, invest and generate liquidity events.
A testament to this was our recent partial exit from Avextra at a 1.6x return
on SEED's original investment. The Leap sale, and partial sale of Avextra have
contributed to our strong cash position of £7.1 million, which remains higher
than our market capitalisation. Our invested NAV also in isolation is higher
than our market capitalisation.
"We believe we are significantly undervalued and that the Company's shares,
currently trading at approximately a 64% discount to net asset value,
represent an attractive investment opportunity. To this end, and to increase
liquidity and return value to shareholders, we have, as announced and
underway, decided to buy-back up to 21,500,000 of our own shares. Alongside,
we have also committed to increasing our visibility and accessibility to
investors, via several interactive investor events, which we hope will
increase the understanding of SEED and highlight its potential to increase
shareholder value."
For further information on the Company please
visit: www.seedinnovations.com (http://www.seedinnovations.com/) or
contact:
Ed McDermott SEED Innovations Ltd E: info@seedinnovations.co (mailto:info@seedinnovations.co)
Lance de Jersey
James Biddle Beaumont Cornish Limited, T: (0)20 7628 3396
Roland Cornish Nomad
Isabella Pierre Shard Capital Partners LLP T: (0)20 7186 9927
Damon Heath Broker
Ana Ribeiro St Brides Partners Ltd, E: seed@stbridespartners.co.uk
Isabelle Morris Financial PR
CHAIRMAN'S STATEMENT
FOR THE PERIOD ENDED 30 SEPTEMBER 2023
There have been several positive developments for SEED Innovations during this
reporting period. Perhaps the most significant is the Company's divestment of
holdings in two investee companies at premiums to our original investment,
resulting in a strong current cash balance of £2.19 million at 30 September
2023 and over £4.3 million at the time of publishing these interim reports.
This puts the Company in the enviable position of having significant levels of
cash to deploy in investments that the board feel have the potential of
increasing shareholder value. That said, the macro-economic instability
continues to play a major role in stock market volatility and whilst we are
seeing some signs of a more positive sentiment, we have some way to go before
we see stable investor activity, particularly in small caps.
In April we received the first tranche of the Leap Gaming sale proceeds, with
the balance due in April 2024. In September, we went on to sell just over half
of our holding in Avextra AG at a premium of 62% (1.6x) return on SEED's
original investment in 2021 and 2022, which yielded €2.9 million (£2.45
million). With cash and receivables at period end of £7.1 million, we are in
investment mode and have strong potential deal flow. While there are many
challenges in early stage investing in depressed markets such as these, there
are also opportunities. I remain convinced that our board's extensive
experience and access to these opportunities have the potential to create
further value.
Despite a recent, and frustrating, contraction in our share price, I was
encouraged to see the price rise to around 4.15p in late September on the back
of positive news. Investors can see the Company is undervalued, with its
market capitalisation below the combined total of cash and future contracted
receivables, let alone Net Asset Value ("NAV"). While the stock price remains
volatile, I am hopeful that this will stabilise, along with the markets, and
consistently improve. This should be helped with the continuation of a share
buy-back programme launched on 2 October, the aim of which is to provide
liquidity for those investors wishing to exit their investment, as well as
reducing the number of shares in issue and so increasing the NAV per share for
those shareholders who remain with us.
Broader fundraising challenges and limited liquidity across the UK market have
exerted significant pressure on our own stock price but by extension, have
cast a shadow over the endeavours of a few of our portfolio companies, most
recently Northern Leaf and OTO. These tough circumstances have, regrettably,
negatively impacted the carrying value of these investments, leading to
necessary write-downs. We remain vigilant in navigating these complexities,
and while these adjustments are reflective of the current broader economic
climate, we are committed to steering our investments toward sustainable
growth and resilience in the face of such market turbulence.
I'd like to thank our shareholders, many of whom, like me, have been on this
journey for many years. It is gratifying that we have been able to report new
significant entrants to our share register as well as others who have
increased their holdings. We continue to work to improve communication with
our shareholders and potential investors through broadening the use of social
media as well as streaming our shareholder meetings, and I look forward to
welcoming shareholders to our first London investor event later this month.
With ever increasing access to potentially interesting investments, we are
confident that the coming months will present SEED with multiple
opportunities, offering avenues for growth and attractive investment
prospects. The evolving landscape holds the promise of cultivating long-term
value, and we are committed to capitalising on these opportunities to ensure
our continued success.
Ian Burns
Chairman
22 November 2023
REPORT OF THE CHIEF EXECUTIVE OFFICER
FOR THE PERIOD ENDED 30 SEPTEMBER 2023
The interim period under review continued to be one with a number of headwinds
including much stock market volatility, and macro- economic factors remain a
significant challenge for SEED. We are not isolated in this with the small cap
sector in general coming under immense pressure. That said, the last six
months has seen a number of developments for us, with SEED's financial
position strengthen significantly following the sale of Leap Gaming to IMG
Arena US, LLC, and the realisation of a little over half of our investment in
Avextra.
In April, SEED received the first tranche of sale proceeds from the sale of
Leap, being €3 million (£2.7 million), the balance being due in April 2024.
Pleasingly we then realised half of our investment in Avextra at a premium of
62% (1.6x) return on SEED's original investment, yielding €2.9 million
(£2.45 million), repaying the majority of our initial investment and leaving
most of the balance of our holding as potential pure upside.
In other portfolio developments, I was delighted to see Clean Food Group raise
c.£2.3 million in August, in which we invested £216,000. Their raise was
supported by industrial food specialists Doehler Group and Alianza Team along
with AIM listed Agronomics Limited.
As a result of an increased level of cash available, and a strong potential
deal flow, SEED remains confident that the current environment will offer
opportunities to invest and in turn, create long-lasting value for investors.
We are talking, and listening, to our shareholders about how best to utilise
the cash on hand generated by the recent exits and options considered include
the buyback of shares, a special dividend, and the reinvestment into new
investments.
The strength of our balance sheet and the knowledge that we are actively
looking for investments has attracted a lot of investment opportunities,
through our own network and pleasingly beyond it. However, quality is key and
it is critical that, in a market where valuations continue to fall, we ensure
the deployment of funds at the optimum time for our shareholders. I am
confident that the right investment(s) will present themselves and we are able
to move quickly on any favourably priced opportunities with the potential for
excellent long-term value. For that reason, the board have concluded, at this
time, to focus on new investment opportunities and using a portion of the
monies received so far to undertake a share buy-back programme, the aim of
which is to provide liquidity for those investors wishing to exit their
investment, as well as reducing the number of shares in issue increasing the
NAV per share in the future. Whilst we haven't elected to pay a 'special
dividend' at this point, it is something that will remain under consideration
and may be an option when future cash receipts occur, particularly after
significant realisations of investments.
I am frustrated by our stock price which has been variable during the period
under review. Positive news flow has resulted in buying of our shares at a
price, that at points (for example in late September), has been at a stark
contrast to the general, muted, market sentiment. That said, positive news is
not always translating into a strengthening share price so in the coming
months we will be looking at additional approaches to shareholder engagement
with the aim to enlarging our shareholder base and increasing liquidity, as
well as keeping SEED in the forefront of the minds of investors trading
stocks. Sadly, we cannot manufacture news when there is none and are sometimes
constrained by restrictions imposed by our investee companies in terms of the
timing of announcements (particularly when we are "inside" in relation to
their own news and developments). At our Annual General Meeting in September
2023, we spoke of our intention of holding an in-person investor event over
Winter 2023/24 and this is scheduled for 29 November 2023. It will be an
excellent opportunity for shareholders to meet the board and some of our
existing investee companies.
I remain confident of SEED's future and with cash and cash receivables at
period end of £7.1 million, we are well placed to deploy realised funds into
new investments over the next year as well as continuing with the recently
commenced share buy-back programme. We are seeking to increase shareholder
engagement and more general market engagement via new initiatives and look
forward to meeting more of our investors in person in due course.
Ed McDermott CEO
22 November 2023
INVESTMENT REPORT
The following brings a summary of the portfolio of investments held by the
Company, together with select updates on the underlying investee companies,
into a single report for ease of reference of shareholders rather than
spreading over the Chairman's and CEO Reports as previously.
The net asset value of the Company at 30 September 2023 was £14,611,908. (31
March 2023: £16,032,000), equal to net assets of 6.87p per Ordinary Share (31
March 2023: 7.54p per Ordinary Share).
The table below lists the Company's holdings at 30 September 2023, with
comparatives as at 31 March 2023.
Prior results as at 31 March 2023 Interim results as at 30 September 2023
Holding Category
Holding Valuation (£000's) Holding Valuation (£000's) % of Nav
Juvenescence Biotech 128,205 shares 2,556 128,205 2,595 17.8%
Limited shares
Avextra AG Biotech/ 5,142 shares 4,436 2,242 shares 1,940 13.3%
Cannabis
Biotech 5,850,000 shares 965 7,161,336 1,182 8.1%
Clean Food Group Ltd ("CFG") shares
Biotech/ 7,324,796 shares 715 7,324,796 636 4.4%
Little Green Pharma ("LGP") Cannabis shares
Inveniam Capital Partners, Fintech 86,810 shares 596 86,810 605 4.1%
shares
Inc.
Northern Leaf Ltd Biotech/ 1,236,331 shares 960 1,236,331 444 3.0%
Cannabis shares
Portage Biotech Inc. Biotech 37,623 shares 94 37,623 65 0.4%
shares
OTO International Ltd CBD SWB shares 423 71,502 38 0.3%
Wellness (excl loan) shares
(South West Brands)
Leap Gaming Gaming Shares & Loan 5,106 Sold - 0.0%
Total Investment Value 15,851 7,505 51.4%
Cash and receivables, net of payables and accruals 181 7,107 48.6%
Net Asset Value 16,032 14,612
The movement in the portfolio value of negative £1.4 million is attributable
to the negative revaluations of Northern Leaf and OTO (due to raising funds at
discounted prices) and the further decline in the market price of listed
investments Little Green Pharma and Portage. Gains have been seen in the
valuation of Avextra and due to favorable FX movements.
This report is separated by liquidity profile of the underlying investments,
from those liquid investments which could more easily be realised to cash by
virtue of their own public markets listings, toward those longer term
investments which are less liquid and so likely to take a longer time and more
planning and work to get to a position for sale via a liquidity event or
M&A activity.
LIQUID INVESTMENTS
Portage Biotech, Inc ('Portage')
NASDAQ listed Portage (Ticker: PRTG) is an emerging biotechnology company
developing an immunotherapy-focused pipeline to treat a broad range of
cancers. Its focus is to combine its own technology with already proven
immune-boosting PD1 agents and to this end, Portage has a pipeline of products
targeted for clinical testing and a growing roster of notable partnerships.
Portage is valued at its trading price on the NASDAQ exchange. Despite
positive analysts targets, market price has continued to remain depressed well
below these levels and is unlikely to be helped by additional fundraising by
Portage at these prices. SEED's holding is however, a residual balance left
after prior profitable sales of this stock. The holding is in no way material
to SEEDs position and will likely be exited in the future, albeit we are
loathe to realise a loss unnecessarily at this point.
Portage's activity within the period was steady, this included;
· The Portage team participated in a panel discussion at both the
Cantor Global Healthcare Conference, the BIO International Conference, and the
at the American Society of Clinical Oncology (ASCO) Annual Meeting;
· Portage entered into a clinical trial collaboration agreement
with Merck (known as MSD outside the US and Canada) to evaluate Portage's
next-generation adenosine antagonists in combination with KEYTRUDA®
(pembrolizumab), Merck's anti- PD-1 (programmed death receptor-1) therapy, for
patients with solid tumours;
· In late June Portage announced that it had dosed the first
patient in its Phase 1a trial, ADPORT-601 (NCT04969315). The trial is
evaluating Portage's adenosine 2A receptor (A2AR) antagonist candidate,
PORT-6, in patients with solid tumours including prostate cancer, and renal
and non-small cell lung cancer;
· It has updated interim data from the Phase 1 portion of the trial
evaluating its lead invariant natural killer T cell (iNKT) engager, PORT-2
(IMM60), alone and in combination with KEYTRUDA® (pembrolizumab) in patients
with advanced melanoma and metastatic non-small cell lung cancer (NSCLC)
presented in a poster presentation at the 2023 ASCO Annual Meeting.
PRE-LIQUIDITY INVESTMENTS
Being investee companies with a communicated intent to pursue a liquidity
event such as a market listing, or M&A transaction, in the near to medium
term.
Juvenescence Ltd ('Juvenescence')
Juvenescence is a life sciences company developing therapies and consumer
products to modify and support heathy aging focused on improving and extending
human lifespans. By utilising a coalition of best scientists, physicians, and
investors across its four divisions, it aims to create cutting-edge therapies
and products that disrupt the thinking and behaviour around ageing.
Juvenescence has a broad portfolio of products in development and is driving
innovation amongst two divisions: JuvTherapeutics - Focused on traditional
prescription medicines to modify aging and prevent diseases, and JuvLife-
Consumer products that manage aging and help increase health span.
Juvenescence has announced a move to a more conventional "pharma" like
development structure which it believes will position it for a liquidity event
in the future as development of its JuvRX portfolio of pharma solutions
progresses. It seems unlikely however that such a liquidity event will be seen
before 2025 at the earliest.
Despite the sector-wide valuation challenges faced by many life sciences
companies Juvenescence has seen progress its JuvRx Core Programs, including;
Oral PAI-1 Inhibitor (MDI), GDF-15 and follow on mAbs (BYOMass), Oral CD38
inhibitor (Napa), Oral Therapeutic, Ketone Ester (Selah), Oral Plasmalogens
(Pelagic) that all programs that continue to progress and hit key milestones
enroute to the clinic.
Northern Leaf Ltd ('Northern Leaf')
Northern Leaf is focused on becoming a key player in the European medical
cannabis supply chain, having already built a secure operational facility in
Jersey. Northern Leaf is leading the development of a new industry for the
British Isles, using state-of-the-art tracking systems and robust policies and
procedures to ensure the highest levels of quality from seed to sale.
Significant milestones were reached by Northern Leaf despite challenging
market conditions, including several major accreditations including the Good
Manufacturing Practice (GMP) accreditation by the UK's Medicines and
Healthcare Products Regulatory Agency for its flower product as an active
pharmaceutical ingredient as well as being accredited with the Good
Agricultural and Collecting Practice by Control Union Medical Cannabis
Standard (IMC- G.A.P) for its cultivation facility in Jersey.
In our final results for March 2023, the Company reported the conversion of
its 2-year £600,000 Convertible Loan Note as part of an equity raise of c.£3
million, resulting in SEED holding 1,236,331 preference shares in Northern
Leaf, representing 2.2% of the enlarged equity of Northern Leaf and with a
carrying value of £960,000 based upon the price of that raise and with
Northern Leaf targeting an IPO for later this year.
Unfortunately, poor public market conditions including one of the hardest
markets in memory for initial public offerings, have worked against Northern
Leaf's ambitions thus far and whilst work on an IPO continues, if successful,
it will likely be at a lower price than that at of the last equity raise. As a
result, we have reduced our carrying valuation by a little over half to
£443,000 to reflect either the risk of an IPO at a lower price or indeed of a
listing not progressing and the resultant pressures of raising further private
funding. This said SEED is encouraged by the drive and determination of
Northern Leaf's management to be successful in this endeavour and wish them
well in their continued work to secure ongoing funding for the further
development of the business as it transitions into a revenue generating
cannabis production company.
LONGER TERM INVESTMENTS
Being typically early-stage investments and often in the value creation phase
of development, working toward initial sales and/or profitability. Some
positions may have been held for some years already, with no communicated
plans for a public market liquidity event, nor publicised plans for a sale by
M&A. Where progress in development has been achieved or further upside
within an acceptable timeframe now seems unlikely, SEED may be working with
the investee company to identify a route to a liquidity event, or may
independently find a purchaser for just its own holding in the investee
company.
Clean Food Group Limited ('CFG')
CFG was co-founded by CEO Alex Neves and Co-Chairman (and SEED CEO) Ed
McDermott in 2021, with the goal of becoming the leading independent UK
cultivated food ingredients business. CFG is a British based food Technology
Company which aims to become the leading independent UK cultivated food
business. CFG is developing a sustainable yeast technology that produces
cultivated, sustainable alternatives to palm oil and soy protein, two
ingredients in food and cosmetics with currently massive and still growing
demand and negative environmental impact. CFG has gathered a knowledgeable
board of directors and an experienced advisory team which is familiar with
biotechnology, life sciences and high-growth industries.
Since the last reporting period, SEED has invested a further £216,000 in
CFG's latest funding round. This raised monies at the same carrying price per
share as was used to value the holding in March 2023. Other investors and
industrial food specialists are supporting CFG including AIM listed
Agronomics, Doehler Group and Alianza Team. We are confident that the global
food industry will continue to look to invest in healthier and more
sustainable food choices for future generations and CFG will continue to
prosper as a result.
OTO International Limited ('OTO')
OTO is an omni-channel premium wellness brand, whose positioning as the
premium wellness brand of choice has enabled the business to build three
diversified and robust revenue streams (including retail, spa and e-commerce)
across multiple territories including the UK, USA, Japan and Europe consisting
of an exciting and uniquely positioned portfolio of brands in fast growing
consumer sectors, with products perfectly positioned to take a market share
across beauty, female wellness, personal care and spa.
SEED received a shareholding in OTO of 71,502 shares (1.4% of OTO) being
payment in kind from the sale of South West Brands ('SWB', in which SEED was
previously invested) to OTO in April 2023. Following their purchase of SWB,
OTO has sadly experienced some funding issues, resulting in a significant
write-down of carrying value to c.£38,000 now. SEED also continues to hold a
loan with SWB / OTO which is now reflected in "Receivables" in these financial
statements.
Inveniam Capital Partners ('Inveniam')
Inveniam is a private fintech company which built Inveniam.io, a powerful
technology platform that utilises big data, AI and blockchain technology to
provide surety of data and high-functioning use of that data in a distributed
data ecosystem. Inveniam has built Inveniam.io, the data operating system for
delivering access, transparency, and trust in the value and performance of
private market assets.
SEED's investment in Inveniam came about following the failure of legacy
investment Factom and is non-core in relation to the current investment
strategy. As such, it is a position that we will seek to exit when possible
and to this end look forward to a future improvement in the fortunes of US
Tech investing and positive developments at Inveniam.
Avextra AG (formally Eurox Group GmbH) ('Avextra')
Avextra is a German-based, vertically integrated medical cannabis company
focused on intensifying its investment in pharmaceutical development
internationally while maintaining the highest European pharmaceutical quality
standards to expand its Avextra-branded pharmaceutical products.
Within the reporting period Avextra successfully exported EU-GMP standardised
cannabis extracts manufactured at its German facility to its distribution
partner in Italy, increasing Avextra's European footprint and validating its
extract focused business strategy.
SEED has been able to negotiate the exit of 56% of our position in Avextra
during the period, realizing €2.9 million in cash. This represented an exit
at slightly (2%) above our March 2023 carrying value per share. Given the
total invested in Avextra historically stood at €3.17 million, SEED has
substantially recovered our cost of investment thus far, leaving the majority
of the £1.94 million carrying value as potential profit to be realized in the
future.
The Board proposes to invest in companies to which, in normal circumstances,
individual investors may have limited access.
Investments sought will be in sectors which have, or have the potential for,
significant intellectual property, principally in the wellness and life
sciences sectors (including biotech, longevity of life and pharmaceuticals)
along with aligned technology sectors (including artificial intelligence and
digital delivery). Equally the Board will consider investments in established
industries where the business is applying new technologies and/or 'know-how'
to enhance its offering or taking established business models or products to
new markets. In keeping with its desire to provide its shareholders with
access to investments they may otherwise not be able to participate in, the
Board also intends to apply a portion of the portfolio to opportunistic
investments which may, by exception, fall outside the above criteria but
represent good potential for short term returns. Such investments will be
limited at 15% of the Company's NAV and would typically be in fundraisings by
listed companies or as part of an IPO.
Initially the geographical focus will be North America and Europe but
investments may also be considered in other regions to the extent that the
Board considers that valuable opportunities exist and positive returns can be
achieved.
INVESTING POLICY
In selecting investment opportunities, the Board will focus on businesses,
assets and/or projects that are available at attractive valuations and hold
opportunities to unlock embedded value. In line with the existing portfolio it
is expected that investments will be in SMEs with sub £100m valuations but
with the potential for significant growth. Where appropriate, the Board may
seek to invest in businesses where it may influence the business at a board
level, add its expertise to the management of the business, and utilise its
industry relationships and access to finance. The extent that the Company will
be a passive or active shareholder will depend on the interest held and the
maturity of the investee company.
The Company's interests in a proposed investment and/or acquisition will range
from minority positions to full ownership and will comprise multiple
investments. The proposed investments may be in either quoted or unquoted
companies; are likely to be made by direct acquisitions or investments; and
may be in companies, partnerships, earn-in joint ventures, debt or other loan
structures, joint ventures or direct or indirect interests in assets or
businesses.
The Company will pursue a balanced portfolio of an even mixture of early
stage, pre-liquidity event and liquid investments which it will aim to hold
within the portfolio for 2-4 years, 6-24 months and up to 12 months
respectively. Whilst the target is to have the portfolio split fairly evenly
between the different stages of liquidity there will be no set criteria for
which the Company will hold an investment and the proportion of the portfolio
which will be represented by each investment type.
There is no limit on the number of projects into which the Company may invest.
The Directors intend to mitigate risk by appropriate due diligence and
transaction analysis. The Board considers that as investments are made, and
new promising investment opportunities arise, further funding of the Company
may also be required.
Where the Company builds a portfolio of related assets it is possible that
there may be cross holdings between such assets. The Company does not
currently intend to fund any investments with debt or other borrowings but may
do so if appropriate. Investments are expected to be mainly in the form of
equity, with debt potentially being raised later to fund the development of
such assets. Investments in later stage assets are more likely to include an
element of debt to equity gearing. The Board may also offer new Ordinary
Shares by way of consideration as well as or in lieu of cash, thereby helping
to preserve the Company's cash for working capital and as a reserve against
unforeseen contingencies including, for example, delays in collecting accounts
receivable, unexpected changes in the economic environment and operational
problems.
The Board will conduct initial due diligence appraisals of potential
businesses or projects and, where it believes that further investigation is
warranted, it intends to appoint appropriately qualified persons to assist.
The Board believes it has a broad range of contacts through which it is likely
to identify various opportunities which may prove suitable.
The Board believes its expertise will enable it to determine quickly which
opportunities could be viable and so progress quickly to formal due diligence.
The Company will not have a separate investment manager. The Board proposes to
carry out a comprehensive and thorough project review process in which all
material aspects of a potential project or business will be subject to
rigorous due diligence, as appropriate. Due to the nature of the sectors in
which the Company is focused it is unlikely that cash returns will be made in
the short to medium term on the majority of its portfolio; rather the Company
expects a focus on capital returns over the medium to long term.
The Directors are responsible for preparing these unaudited condensed
half-yearly financial statements, which have not been reviewed or audited by
the Company's independent auditors, and are required to:
· prepare the unaudited half-yearly financial statements in
accordance with International Accounting Standard 34: Interim Financial
Reporting;
· include a fair review of important events that have occurred
during the period, and their impact on the unaudited half-yearly financial
statements, together with a description of the principal risks and
uncertainties of the Company for the remaining six months of the financial
year as detailed in the Chairman's Statement; and
· include a fair review of related party transactions that have
taken place during the six-month period which have had a material effect on
the financial position or performance of the Company, together with disclosure
of any changes in related party transactions from the last annual financial
statements which have had a material effect on the financial position of the
Company in the current period.
CONDENSED HALF-YEARLY STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 SEPTEMBER 2023
01 April 2023 to 01 April 2022 to
30 September 30 September
2023 2022
(unaudited) (unaudited)
Notes £'000 £'000
Net realised gain / (loss) on disposal of financial assets at fair value
through
profit and loss 5 1,112 4
Net unrealised (loss)/gain on revaluation of financial assets at fair value
through profit and loss 5 (2,148) (3,536)
Interest income on financial assets at fair value through profit and loss - 41
Total investment (loss)/income (1,036) (3,491)
Other income
Bank Interest income Arrangement fee 43 -
- 9
Total other income 43 9
Expenses
Directors' remuneration and expenses 12 (179) (173)
Recognition of Directors share based expense 12 - (16)
Legal and professional fees (85) (40)
Other Expenses (91) (80)
Administration fees Adviser and broker's fees (20) (24)
(35) (46)
Total expenses (410) (379)
Net (loss)/profit before losses and gains on foreign currency exchange (1,403) (3,861)
Net foreign currency exchange gains/(loss) (17) 72
Total comprehensive (loss)/gain for the period (1,420) (3,789)
(Loss)/earnings per Ordinary share - basic and diluted 7 (0.67p) (1.78p)
The Company has no recognised gains or losses other than those included in the
results above.
All the items in the above statement are derived from continuing operations.
CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2023
30 September 2023 31 March 2023
(unaudited)
Notes £'000 £'000
Non-current assets
Financial assets at fair value through profit or loss 5 7,504 16,019
7,504 16,019
Current assets
Cash and cash equivalents Other receivables 2,185 30
4,951 50
7,136 80
Total assets 14,640 16,099
Current liabilities
Payables and accruals (28) (67)
(28) (67)
Net assets 14,612 16,032
Financed by
Share capital 11 2,127 2,127
Other distributable reserve 12,485 13,905
14,612 16,032
Net assets per Ordinary share - basic and diluted 10 6.87 7.54
CONDENSED HALF-YEARLY STATEMENT OF CHANGES IN EQUITY
AS AT 30 SEPTEMBER 2023
Employee Other
Share Capital share option distributable Total
reserve reserve
£'000 £'000 £'000 £'000
Balance as at 31 March 2023 2,127 - 13,905 16,032
Total comprehensive income for the year - - (1,420) (1,420)
Balance as at 30 September 2023 2,127 - 12,485 14,612
Balance as at 31 March 2022 2,127 212 18,122 20,461
Total comprehensive loss for the year - - (3,788) (3,788)
Employee share scheme - value of employee services - 16 - 16
Balance as at 30 September 2022 2,127 228 14,334 16,689
CONDENSED HALF-YEARLY STATEMENT OF CASHFLOWS
FOR THE PERIOD ENDED 30 SEPTEMBER 2023
01 April 2023 to 01 April 2022 to
30 September 2023 30 September 2022
(unaudited) (unaudited)
£'000 £'000
Notes
Cash flows from operating activities (1,420) (3,788)
Total comprehensive (loss)/income for the year
Adjustments for:
Unrealised loss/(gain) on fair value adjustments on financial assets at 2,148 3,536
FVTPL (1,112) (4)
Realised loss/(gain) on disposal of financial assets at FVTPL
Foreign exchange movement 17 (72)
Directors' share based payment expense - 16
Finance income - (37)
Changes in working capital:
(Increase)/decrease in other receivables and prepayments (4,901) 27
Decrease in other payables and accruals (39) (23)
Net cash outflow from operating activities (5,306) (345)
Cash flows from investing activities
Acquisition of financial assets at fair value through profit or loss 5 (216) (439)
Disposal of financial assets at fair value through profit or loss 5 7,695 150
Net cash inflow/(outflow) from investing activities 7,479 (289)
(Decrease)/Increase in cash and cash equivalents 2,172 (634)
30 922
Cash and cash equivalents brought forward
(Decrease)/Increase in cash and cash equivalents 2,172 - 634
Foreign exchange movement (17) 72
Cash and cash equivalents carried forward 2,185 360
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 SEPTEMBER 2023
1. General Information
SEED Innovations Limited (the "Company") is an authorised closed-ended
investment scheme. The Company is domiciled and incorporated as a limited
liability company in Guernsey. The registered office of the Company is PO Box
343, Obsidian House, La Rue D'Aval, Vale, GY6 8LB.
The Company's objective is set out in its Investing Policy which can be found
at https://seedinnovations.co/about/investing-policy and as detailed on pages
10 to 11 of these financial statements.
The Company's Ordinary Shares are quoted on AIM, a market operated by the
London Stock Exchange and is authorised as a Closed- ended investment scheme
by the Guernsey Financial Services Commission (the "GFSC") under Section 8 of
the Protection of Investors (Bailiwick of Guernsey) Law, 2020 and the
Authorised Closed-Ended Investment Schemes Guidance and Rules 2021.
2. Statement of Compliance
These condensed half-yearly financial statements, which have not been
independently reviewed or audited by the Company auditors, have been prepared
in accordance with International Accounting Standard 34: Interim Financial
Reporting. They do not include all of the information required for full annual
financial statements and should be read in conjunction with the audited
financial statements for the year ended 31 March 2023.
The unaudited condensed half-yearly financial statements were approved by the
Board of Directors on 22 November 2023.
3. Significant Accounting Policies
These unaudited condensed half-yearly financial statements have adopted the
same accounting policies as the last audited financial statements, which were
prepared in accordance with International Financial Reporting Standards
("IFRS"), issued by the International Accounting Standards Board,
interpretations issued by the IFRS Interpretations Committee and applicable
legal and regulatory requirements of Guernsey Law and reflect the accounting
policies as disclosed in the Company's last audited financial statements,
which have been adopted and applied consistently.
The Company has adopted all revisions and amendments to IFRS issued by the
IASB, which may be relevant to and effective for the Company's financial
statements for the annual period beginning 1 April 2023. No new standards or
interpretations adopted during the period had an impact on the reported
financial position or performance of the Company.
4. Critical Accounting Estimates and Judgements
The preparation of financial statements in conformity with IFRS requires the
Board to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates.
The Board makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results.
The Directors believe that the underlying assumptions are appropriate and that
the financial statements are fairly presented. 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 outlined
below:
Judgements
Going concern
After making reasonable enquiries, and assessing all data relating to the
Company's liquidity, the directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence for the
foreseeable future and do not consider there to be any threat to the going
concern status of the Company. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
Assessment as an investment entity
In determining the Company meeting the definition of an investment entity in
accordance with IFRS 10, it has considered the following:
o the Company has raised the commitments from a number of investors in order
to raise capital to invest and to provide investor management services with
respect to these private equity investments;
o the Company intends to generate capital and income returns from its
investments which will, in turn, be distributed to the investors; and
o the Company evaluates its investment performance on a fair value basis, in
accordance with the policies set out in these financial statements.
Although the Company met all three defining criteria, management has also
assessed the business purpose of the Company, the investment strategies for
the private equity investments, the nature of any earnings from the private
equity investments and the fair value model. Management made this assessment
in order to determine whether any additional areas of judgement exist with
respect to the typical characteristics of an investment entity versus those of
the Company. Management have therefore concluded that from the assessments
made, the Company meets the criteria of an investment entity within IFRS 10.
Part of the assessment in relation to meeting the business purpose aspects of
the IFRS 10 criteria also requires consideration of exit strategies. Given
that the Company does not intend to hold investments indefinitely, management
have determined that the Company's investment plans support its business
purpose as an investment entity.
The Board has also concluded that the Company meets the additional
characteristics of an investment entity, in that: it holds more than one
investment; the investments will predominantly be in the form of equities,
derivatives and similar securities; it has more than one investor and the
majority of its investors are not related parties.
Estimates and assumptions
Fair value of securities not quoted in an active market.
The Company may value positions by using its own models or commissioning
valuation reports from professional third-party valuers. The models used in
either case are based on valuation methods and techniques generally recognised
as standard within the industry and in accordance with International Private
Equity and Venture Capital Valuation (IPEV) Guidelines. The inputs into these
models are primarily revenue or earnings multiples and discounted cash flows.
The inputs in the revenue or earnings multiple models include observable data,
such as the earnings multiples of comparable companies to the relevant
portfolio company, and unobservable data, such as forecast earnings for the
portfolio company. In discounted cash flow models, unobservable inputs are the
projected cash flows of the relevant portfolio company and the risk premium
for liquidity and credit risk that are incorporated into the discount rate. In
some instances, the cost of an investment is the best measure of fair value in
the absence of further information. Models are calibrated by back-testing to
actual results/exit prices achieved to ensure that outputs are reliable, where
possible.
Models use observable data, to the extent practicable. However, areas such as
credit risk (both own and counterparty), volatilities and correlations require
management to make estimates. Changes in assumptions about these factors could
affect the reported fair value of financial instruments. The sensitivity to
unobservable inputs is based on management's expectation of reasonable
possible shifts in these inputs, taking into consideration historical
volatility and estimations of future market movements.
The determination of what constitutes 'observable' requires significant
judgement by the Company. The Company considers observable data to be market
data that is readily available, regularly distributed or updated, reliable and
verifiable, not proprietary, and provided by independent sources that are
actively involved in the relevant market.
4. Investments designated at fair value through profit or loss
A reconciliation of the opening and closing balances of assets designated at
fair value through profit or loss classified as Level 1 is shown below:
30 September 2023 31 March 2023
£'000 £'000
Fair value of investments brought forward 811 2,632
Purchases during the year - -
Disposals proceeds during the year - (104)
Realised gains/(losses) on disposals - 4
Net unrealised change in fair value (108) (1,721)
Fair value of investments carried forward 703 811
A reconciliation of the opening and closing balances of assets designated at
fair value through profit or loss classified as Level 3 is shown below:
30 September 2023 31 March 2023
£'000 £'000
Fair value of investments brought forward 15,208 16,892
Purchases during the period/year 216 443
Disposals proceeds during the period/year (7,695) (54)
Capitalised interest on loan - 102
Realised gains/(losses) on disposals 1,112 (840)
Net unrealised change in fair value (2,040) (1,335)
Fair value of investments carried forward 6,801 15,208
During the period there were no transfers between the levels.
The valuations used to determine fair values are validated and periodically
reviewed by experienced personnel, in most cases this validation and review is
undertaken by members of the Board, however professional third-party valuation
firms are used for some valuations and the Company also has access to a
network of industry experts by virtue of the personal networks of the
directors and substantial shareholders. The valuations prepared by the Company
or received from third parties are in accordance with the International
Private Equity and Venture Capital Valuation Guidelines. The valuations, when
relevant, are based on a mixture of:
• Market approach (utilising EBITDA or Revenue multiples, industry value
benchmarks and available market prices approaches);
• Income approach (utilising Discounted Cash Flow, Replacement Cost and Net
Asset approaches);
• Price of a recent transaction when transaction price/cost is considered
indicative of fair value; and
• Proposed sale price.
5. Segmental Information
In accordance with IFRS 8: Operating Segments, it is mandatory for the Company
to present and disclose segmental information based on the internal reports
that are regularly reviewed by the Board in order to assess each segment's
performance and to allocate resources to them.
Operating segments are reported in a manner consistent with the internal
reporting used by the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board as a
whole. The board is responsible for the Company's entire portfolio and
considers the business to have a single operating segment. Asset allocation
decisions are based on a single, integrated investment strategy, and the
Company's performance is evaluated on an overall basis.
6. (Loss)/Earnings per Ordinary Share
The loss per Ordinary Share of -0.67p (30 September 2022: -1.78p loss per
ordinary share) is based on the loss for the period of £1,420,000 (30
September 2022: loss £3,789,000) and on a weighted average number of
212,747,395 Ordinary Shares in issue during the year (30 September 2022:
212,747,395 Ordinary Shares).
7. Dividends
The Directors do not propose an interim dividend for the period ended 30
September 2023 (30 September 2022: £Nil).
8. Tax effects of other comprehensive income
The Income Tax Authority of Guernsey has granted the Company exemption from
Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey)
(Amendment) Ordinance, 2012 and the income of the Company may be distributed
or accumulated without deduction of Guernsey income tax. Exemption under the
above mentioned Ordinance entails payment by the Company of an annual fee of
£1,200 for each year in which the exemption is claimed. It should be noted,
however, that interest and dividend income accruing from the Company's
investments may be subject to withholding tax in the country of origin.
There were no tax effects arising from the other comprehensive income
disclosed in the Statement of Comprehensive Income (30 September 2022: £Nil).
9. Net Assets per Ordinary Share
The net asset value per Ordinary Share is based on the net assets attributable
to equity shareholders of £14,612,000 (31 March 2023:
£16,032,000) and on 212,747,395 Ordinary Shares (31 March 2023: 212,747,395
Ordinary Shares) in issue at the end of the period.
10. Share Capital, Warrants, Options, Treasury shares and Other
distributable reserves
30 September 2023 31 March 2023
£'000 £'000
Authorized:
1,910,000,000 Ordinary Shares of 1p 19,100 19,100
(2022: 1,910,000,000 Ordinary Shares)
100,000,000 Deferred Shares of 0.9p 900 900
(2022: 100,000,000 Deferred Shares)
20,000 20,000
Allotted, called up and fully paid:
212,747,395 Ordinary Shares of 1p 2,127 2,127
(2022: 212,747,395 Ordinary Shares) (i)
Nil Deferred Shares of 0.9p (ii) - -
Treasury Shares:
2,472,446 Treasury Shares of 1p 25 25
(2022: 2,472,446) (iii)
(i) Ordinary Shares
There was no issue of shares during the period ended 30 September 2023 (31
March 2023: Nil).
(ii) Deferred Shares
There was no issue of shares during the period ended 30 September 2023 (31
March 2023: Nil).
(iii) Directors' Authority to Allot Shares
The Directors are generally and unconditionally authorised to exercise all the
powers of the Company to allot relevant securities. The Directors may
determine up to a maximum aggregate nominal amount of 100% of the issued share
capital during the period until the following Annual General Meeting. The
Guernsey Companies Law does not limit the power of Directors to issue shares
or impose any pre-emption rights on the issue of new shares.
(iv) Shares held in Treasury
There were no changes to the number of Shares held in Treasury during the
period.
11. Related Parties
Ian Burns
Mr Burns is the legal and beneficial owner of Smoke Rise Holdings Limited,
which held 1,674,024 (0.79%) Ordinary Shares (2022: 1,374,024 (0.65%)) in the
Company at 31 March 2023 and the date of signing this report.
Mr Burns is entitled to an annual remuneration of £36,000.
Ed McDermott
Mr McDermott held 4,680,000 (2.2%) Ordinary Shares (2022: Nil) in the Company
at 31 March 2023 and at the date of signing this report.
Mr McDermott is entitled to an annual remuneration of £160,000 (2022:
£160,000). Mr McDermott was paid no performance bonus in 2023 (2022: Nil)
relating to work undertaken in the year ended 31 March 2023.
Lance De Jersey
Mr De Jersey, Finance Director of the Company held 400,000 ordinary shares in
the Company as at 31 March 2023 and at the date of signing of this report.
Mr De Jersey is entitled annual remuneration of £106,000 (2022: £106,000)
and was paid no performance bonus in 2023 (2022: Nil) relating to work
undertaken in the year ended 31 March 2023.
Luke Cairns
Mr Cairns is entitled to an annual remuneration of £36,000.
Alfredo Pascual
Mr Pascual is entitled to an annual remuneration of €106,000 per annum.
30 September 2023 30 September 2022
Directors' Directors'
Remuneration Remuneration
£'000 £'000
Ian Burns 18 18
Ed McDermott 81 80
Lance De Jersey 53 57
Luke Cairns 18 18
Alfredo Pascual 9 -
179 173
12. Capital Management Policy and Procedures
The Company's capital structure is derived solely from the issue of Ordinary
Shares.
The Company does not currently intend to fund any investments through debt or
other borrowings but may do so if appropriate. Investments in early stage
assets are expected to be mainly in the form of equity, with debt potentially
being raised later to fund the development of such assets. Investments in
later stage assets are more likely to include an element of debt to equity
gearing. The Company may also offer new Ordinary Shares as consideration as
well as cash, thereby helping to preserve the Company's cash for working
capital and as a reserve against unforeseen contingencies including, for
example, delays in collecting accounts receivable, unexpected changes in the
economic environment and operational problems.
The Board monitors and reviews the structure of the Company's capital on an ad
hoc basis. This review includes:
· The need to obtain funds for new investments, as and when they
arise;
· The current and future levels of gearing;
· The need to buy back Ordinary Shares for cancellation or to be
held in treasury, which takes account of the difference between the net asset
value per Ordinary Share and the Ordinary Share price;
· The current and future dividend policy; and
· The current and future return of capital policy.
The Company is not subject to any externally imposed capital requirements.
13. Events after the Financial Reporting Date
On 29 September 2023 the Company announced the commencement of a share
repurchase programme of Ordinary Shares for up to a maximum of 21,500,000
shares and £850,000 commencing on 2 October 2023 and ending not later than 29
February 2024. Share purchases will take place in open market transactions and
may be made from time to time depending on market conditions, share price,
trading volume and other factors. The Company has appointed Shard Capital
Partners LLP to manage the programme and make market purchases of Ordinary
Shares on its behalf, independently of the Company.
As at the date of signing of the financial statements the Company had
purchased 6,485,000 total number of shares at a volume weighted average price
of £ 0.0325.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR MZMZMDZDGFZMRecent news on Seed Innovations
See all newsRCS - Seed Innovations Ltd - Investor Presentation Postponed
AnnouncementRCS - Seed Innovations Ltd - Introduction to Newly Appointed Directors
AnnouncementREG - Seed Innovations Ltd - Interim Results
AnnouncementREG - Seed Innovations Ltd - Board Appointments
AnnouncementRCS - Seed Innovations Ltd - Investee Company Update: Little Green Pharma Ltd
Announcement