REG - Tern PLC - Interim results for the six months to 30 June 2023
16/08/2023 07:00
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RNS Number : 4225J Tern PLC 16 August 2023
16 August 2023
Tern Plc
("Tern" or the "Company")
Unaudited interim results for the six months to 30 June 2023
Tern Plc (AIM: TERN), the company focused on value creation from Internet of
Things ("IoT") technology businesses, announces its unaudited interim results
for the six months to 30 June 2023 (the "Period").
Highlights
· Net asset value ("NAV") of £22.2 million as at 30 June 2023 (30 June
2022: £30.0 million, 31 December 2022: £24.9 million). This resulted in a
reduction in net asset value per share from 6.4p as at 31 December 2022 to
5.7p as at 30 June 2023.
· Portfolio valuation of £21.8 million as at 30 June 2023 (31 December
2022: £23.9 million).
· £1.1 million was invested by Tern in its existing portfolio
companies during the Period (six months to 30 June 2022: £0.8 million),
supporting the portfolio companies' growth and development, together with
maintaining Tern's position in certain portfolio companies.
· £1.2 million was realised for Tern from sale of shares in Wyld
Networks AB ("Wyld Networks") during the Period.
· £2.1 million reduction in the value of the portfolio during the
Period was primarily due to the £1.2 million value of Wyld Networks shares
sold plus a fair value reduction of £2.0 million, offset by a £1.1 million
investment in the portfolio. Of the £2.0 million fair value reduction:
o £0.3 million was attributed to the valuation of Device Authority,
principally due to the retranslation of the US Dollar investment due to a
strengthening of Sterling;
o £1.5 million was due to a combination of the reduction in the value of
Wyld Networks as a result of a retranslation of the investment against a
strengthening Sterling and a reduction in the market price of Wyld Networks
shares as at 30 June 2023; and
o £0.1 million related to a reduction in the valuation of InVMA (trading as
"Konektio") following the pricing of its recent fundraise.
· Warrants issued over 5,524,007 ordinary shares in the Company
exercisable at 6.78855 pence per ordinary share, a 50% premium to the share
price on date of issue, which if exercised, would raise £0.4 million (net)
for the Company.
· £0.5 million initial drawdown on an up to £3m loan facility
obtained to provide the Company with a stronger negotiating position and
access to funding for follow-on investment opportunities in the existing
portfolio, together with allowing the Company the potential to gain from any
future valuation increase from a proportion of its holding in Wyld Networks.
Portfolio highlights
· Progress across the portfolio* in the Period:
o the year-on-year increase in unaudited aggregated Annual Recurring Revenue
("ARR") of the portfolio* was 43% (six months ended 30 June 2022: 112%, year
ended 31 December 2022: 97%); and
o the year-on-year increase in the number of employees within the
portfolio*, a key growth measurement, was 23% (six months ended 30 June 2022:
52%, year ended 31 December 2022: 66%). This was supported by a year-on-year
increase in ARR per employee of 16% (six months ended 30 June 2022: 40%, year
ended 31 December 2022: 19%).
· Device Authority was awarded Microsoft's Rising Azure Technology 2023
Microsoft Partner of the Year Award, providing global recognition of its
KSaaS® solution, built on Microsoft's Azure Cloud, and available in the Azure
Marketplace to provide additional customer choice in procurement and
consumption.
· In the first half of 2023, Wyld Networks continued to see significant
growth in securing new customers and approximately doubled its order book to
around SEK 92 million (approximately £6.7 million). Post Period end on 4
August 2023 Wyld Networks announced the signing of an agreement with Space X
to explore potential areas of collaboration to collect data from IoT sensors
in remote locations. This announcement led to a notable increase in the
market price of Wyld Networks shares above that used for the valuation at 30
June 2023.
· FundamentalVR continued to build its ARR during the Period with
important wins from both existing and new customers across a variety of
procedural areas including ophthalmology, endovascular and urology.
· During the first half of 2023, Konektio raised a total of £1.5
million in a Series A fund raising from existing investors, including Tern,
with all outstanding convertible loan notes being converted (in addition to
the £1.5 million raised).
· Talking Medicines continued to make significant progress as an
advanced artificial intelligence (AI) company and launched its Drug-GPT™
offering following the public launch of Chat GPT by Open AI.
· Following their first two investments, Sure Valley Ventures UK
Software Technology Fund ("SVV2") has progressed its origination and their
potential deal flow is distributed across their focused industry sectors, with
almost 50% of the deals evaluated having a primary AI/machine learning (ML)
focus.
* In this context Tern's portfolio is: Device Authority Limited, InVMA Limited
(trading as Konektio), FVRVS Limited (trading as FundamentalVR) and Talking
Medicines Limited, which are portfolio companies Tern has interests in as well
as Wyld Networks AB, a Tern holding and excludes DiffusionData Limited, in
which Tern has a <1% holding and minimal influence and SVV2.
Enquiries:
Tern Plc via IFC Advisory
Ian Ritchie (Chairman)
Sarah Payne (CFO)
Allenby Capital Limited Tel: 0203 328 5656
(Nominated Adviser and Broker)
Nick Naylor / Alex Brearley / Dan Dearden-Williams (Corporate Finance)
Matt Butlin / Kelly Gardiner (Sales and Corporate Broking)
IFC Advisory Tel: 0203 934 6630
(Financial PR and IR) tern@investor-focus.co.uk (mailto:tern@investor-focus.co.uk)
Tim Metcalfe
Graham Herring
Florence Chandler
Chairman's statement
The first six months of 2023 remained a challenging environment for
early-stage technology businesses. However, whilst it is always
disappointing to report a decrease in the unrealised fair value of our
investments, our portfolio companies continue to make significant progress,
assisted by the Tern team, with growth in annual and monthly recurring
revenues, which we consider to be a key indicator of progress and ultimately
value that can be realised. This was evidenced in recent weeks with Wyld
Networks' post Period announcement regarding the signing of an agreement with
Space X to explore potential areas of collaboration to enable additional
connectivity to collect data from IoT sensors in remote locations.
Post Period end, on 10 August 2023, we announced a number of changes to the
Board of the Company and the Company's management structure. This Board and
management restructuring is intended to provide an appropriate governance and
management structure for the Company, at materially reduced cost, as we
continue to focus on realising value from Tern's portfolio of IoT technology
businesses, whilst maintaining Tern's hands on approach to guiding and
assisting them.
In addition, the Company is implementing other cost saving measures, including
moving to a lower cost office. Overall, the measures being implemented,
whilst having to continue to incur significant professional fees associated
with the portfolio companies and being an AIM quoted company, are expected to
save approximately 40% of the Company's overall central costs in 2024, when
compared to the level for 2022.
It is the Board's intention that the Company will not invest in any companies
or entities not already part of Tern's existing portfolio at least until such
time as the Company has realised material value from its current portfolio.
We remain focused on maximizing this value to ultimately achieve good exits
from our various investments, at the appropriate time, in order to deliver
returns for our shareholders.
Ian Ritchie CBE, FREng, FRSE
Chairman
Financial review
Highlights
6 months to 6 months to 12 months to
30 June 2023 30 June 2022 31 December 2022
£000 £000 £000
Investments 21,825 30,204 23,882
Net assets 22,209 30,042 24,852
(Loss)/Profit for the period (2,840) (2,414) (10,447)
Net asset value per share 5.7p 8.5p 6.4p
During the first half of 2023, the Company focused on supporting the growth
and development of its existing portfolio, funded by cash realisations of its
existing holding in Wyld Networks and a £0.5 million loan.
The reduction in net asset value during the Period to £22.2 million (31
December 2022: £24.9 million) was driven largely by a £2.1 million reduction
in the valuation of the portfolio. The valuation of the portfolio as at 30
June 2023 reflected a £1.1 million investment into existing portfolio
companies, offset by £1.2 million of disposals and a £2 million fair value
loss. The net asset value per share was 5.7p as at 30 June 2023 (31 December
2022: 6.4p).
The £1.2 million of disposals related to cash realisations on the sale of
shares in Wyld Networks, of which £1.1 million was re-invested in the
portfolio, primarily into Device Authority (£0.3 million), Konektio (£0.5
million), Talking Medicines (£0.2 million) and SVV2 (£0.1 million).
The remainder of the reduction in portfolio valuation was driven by the fair
value decrease in the portfolio. Device Authority's overall fair value
decreased by £0.3 million, reflecting a £0.3 million increase in fair value
being offset by a £0.6 million reduction due to the foreign exchange impact
of retranslating the US Dollar investment in Device Authority due to a
strengthening Sterling position.
Wyld Networks' fair value reduced by £1.5 million, of which £0.3 million was
due to exchange rate differences on retranslation of the Swedish Krona
investment into a strengthening Sterling position, and the remainder due to a
reduction in the market value of the Wyld Networks' shares. Wyld Networks is
traded on an active financial market and its fair value is determined by the
market price on 30 June 2023. This market price has subsequently increased
post Period end.
Konektio's fair value decreased by £0.1 million in the most recent fundraise.
The remainder of the reduction in net assets was due to a £0.2 million
reduction in cash balance and a £0.5 million increase in liabilities due to
the loan facility draw down.
The Company had an unaudited cash balance of £0.7 million as at 30 June 2023,
which included the receipt of a £0.5 million initial drawdown on the up to
£3 million loan facility announced on 12 June 2023. The loan facility was
entered into to provide Tern with a stronger negotiating position and access
to funding for follow-on investment opportunities in future syndicated
fundraises undertaken by Tern's existing portfolio companies and is repayable
with accrued interest, in equal monthly instalments, commencing 180 days from
the date of each drawdown (the initial drawdown was 11 June 2023), until the
end of the 18-month term of each drawdown. The Company is currently unable
to make further drawdowns under the loan facility until such time as it is
able to issue the required warrants as a transaction cost associated with
further drawdowns, pursuant to the terms of the loan facility. The issue of
any further warrants will require shareholder approval to provide the
Directors with authority to allot ordinary shares.
During the Period, the Company recorded a loss of £2.8 million, compared to a
loss of £2.4 million in the six months to 30 June 2022. The loss included the
fair value reduction of £2.0 million (six months to 30 June 2022: reduction
of £1.2 million).
Overall operating costs reduced to £1.1 million compared to £1.2 million for
the same period in 2022 and they were offset in part by additional revenue
received in the period from the secondment of a Tern director to Konektio.
Increases in audit fees and fees associated with the loan facility, offset
some of the reductions in one-off fees incurred in 2022. All other expenses
remained comparable. For the remainder of the year it is anticipated that
costs will fall significantly, particularly following the post Period end
Board and management restructuring announced on 10 August 2023.
Portfolio review
A 43% year-on-year growth in ARR was achieved for the portfolio* (six months
ended 30 June 2022: 112%).
The year-on-year increase in employees within our portfolio*, a key growth
measurement, was 23% in the Period (six months ended 30 June 2022: 52%) as the
portfolio* focused on controlling burn rate and accelerating the route to
break even whilst supporting ARR growth. This drove a 16% year-on-year
increase in ARR per employee. Again, this indicates that the increase in
employee growth was matched by a higher growth in ARR.
Device Authority Limited ("Device Authority")
Valuation of holding: £11.9 million
Holding: 53.8%
Convertible loan notes of £0.7 million and short term loan of £0.1 million
Sector: Security
Invested Since: September 2014
Device Authority, a global leader in identity and access management ("IAM")
for the IoT, has continued its positive business momentum for the first half
of the year.
The company's KeyScaler®, and KeyScaler Edge® solution enables full
end-to-end security life cycle management from Edge to Enterprise into leading
IoT cloud applications such as Microsoft Azure, Avnet IoTConnect, AWS, PTC
ThingWorx and Google, providing IoT deployments with robust device security
combined with scalability to meet the needs of new and legacy device
deployments.
Not only has the KeyScaler® platform been selected by several major
enterprises, including several leading medical device manufacturers and a
major global engine manufacturer, but the company has also focused on
recurring revenue growth via its cloud-first Keyscaler-as-a-Service®
("KsaaS") offering and expanding and cementing its strategic partner base.
KsaaS provides a scalable and infrastructure-free alternative to on-premise
installations, enabling businesses to achieve total device, data and
operational trust without the burden of costly infrastructure or dedicated
resources and with quicker time to production. KsaaS enables customers in all
sectors, including automotive, medical device, government, and industrial
manufacturing, to more rapidly onboard KeyScaler® and scale its usage in a
secure, hosted cloud environment. The company is adopting a KsaaS first
approach to help customers deploy faster and shorten sales cycles.
Device Authority's partnership with a leading automotive Tier 1 company
continues to progress and the company also continues to see growing demand
resulting from White House Executive Order 14028 in May 2021 that tasked US
Government organisations with defining the minimum elements of a Software Bill
of Materials ("SBOM"), considered critical to improving transparency and
security in the software supply chain for national critical infrastructure.
The recent subsequent release of the five pillars of the White House
Cybersecurity Implementation Plan added further detail to the roadmap for SBOM
as well as the creation of other international standards and this continues to
provide commercial opportunities.
Device Authority was awarded Microsoft's Rising Azure Technology 2023
Microsoft Partner of the Year Award, providing global recognition of its
KsaaS® solution, built on Microsoft's Azure Cloud, and available in the Azure
Marketplace to provide additional customer choice in procurement and
consumption. This follows Device Authority's recognition as a Microsoft IP Co
Sell Partner, further advancing Microsoft as a channel for DA solutions.
In 2022, ABI Research released its annual 'Top Technology Companies'
Whitepaper which highlights the market leaders across the enterprise sectors
of augmented reality, 5G telco cloud-native platforms, supply chain management
and logistics and IoT, among others. As an independent report, not paid for by
the featured companies, it aims to provide an independent view on the
market-leaders, combined with the top innovators and implementers in each of
the categories. Device Authority has been named as the 'Overall Leader' in IoT
Device Identity Lifecycle Management, in addition to 'Top Innovator and
Implementer' in this category, moving ahead of their significantly larger
competitors from last year's report. The ABI Research report can be
downloaded at:
https://www.deviceauthority.com/wp-content/uploads/2022/08/37-Technology-Companies-Leading-the-Way-in-2022.pdf
(https://www.deviceauthority.com/wp-content/uploads/2022/08/37-Technology-Companies-Leading-the-Way-in-2022.pdf)
.
Device Authority continues to further develop its products and recently
launched a new major release of the KeyScaler® platform, including advanced
edge orchestration capabilities in KeyScaler Edge, in addition to other
platform integration and breakthrough product enhancements.
As at 30 June 2023, the fair value of Tern's shareholding in Device Authority
remained at £11.9 million (31 December 2022: £11.9 million), with the
additional convertible loan note investment offset by a net £0.3 million
decrease in fair value. This was due to a £0.6 million decrease due to the
foreign exchange movement on the sterling value of Device Authority which is
valued in US Dollars, offset by a £0.3 million increase in fair value.
In 2023 to date, Tern has provided a total of approximately £0.4 million of
convertible loan note investment to Device Authority.
FVRVS Limited ("FundamentalVR")
Valuation of holding: £3.6 million
Holding: 13.0% (reducing to 12.1% post-Period)
Sector: Healthcare IoT
Invested Since: May 2018
FundamentalVR is a leading virtual reality and data analysis technology
platform led by surgical training experts and leading technologists with a
mission to revolutionise surgical training by bringing surgical simulation
into the hands of medical professionals around the world, using low cost and
easily accessible technology.
FundamentalVR's software platform takes advantage of readily available virtual
reality devices, such as the Meta owned Oculus Quest and combines it with
cutting edge haptics (being technology based on the sense of touch) to create
a simulation system that can be used on any modern computer set up. Using
machine learning, the software platform works together with haptic hardware
devices to simulate the physical sensation of operating on human tissue. It
also has the capability to provide AI driven real-time feedback, procedure
correction data and best practice insight. The result is a simulation system
that provides surgeons with a more hands-on experience and aims to better
prepare them for real life situations, resulting in better patient outcomes.
FundamentalVR continues to build its ARR during the first half of 2023. With
important wins from both existing and new customers across a variety of
procedural areas including ophthalmology, endovascular and urology.
FundamentalVR continues to build awareness in the medical device marketplace
and receive recognition for their leading platform. It is building a healthy
pipeline of customer and new customer opportunities for the second half of the
year.
As at 30 June 2023, the fair value of Tern's shareholding in FundamentalVR
remained steady at £3.6 million (31 December 2022: £3.6 million), the final
tranche of third-party funding received by FundamentalVR post Period end
reduced Tern's equity ownership further, although the pricing of that tranche
did not impact on valuation.
Wyld Networks AB ("Wyld Networks" or "Wyld")
Valuation of holding: £3.2 million
Holding: 27.0%
Sector: IoT enablement
Invested Since: June 2016
Wyld Networks, quoted on the NASDAQ First North Growth Market in Stockholm,
enables affordable connectivity across the globe in areas where wireless
coverage is unavailable or congested. The company specialises in providing
wireless connectivity between IoT sensors and low Earth orbit ("LEO")
satellites with its Wyld Connect solution (a satellite IoT terminal and
module).
In the first half of 2023, Wyld Networks continued to see significant growth
in securing new customers and approximately doubling its order book to around
SEK 92 million (approximately £6.7 million) as well as continuing to focus on
enhancing the development of Wyld Connect and Wyld Fusion (a provisioning and
payment platform).
In addition, the company announced plans to extend their product offering to
support 5G-NB-IoT (5G narrowband Internet of Things technology) in addition to
LoRaWAN (Long Range Wide Area Networking), increasing Wyld's addressable
market.
The company has focused its geographical commercial coverage predominately in
South America, North America, Africa and the Middle East and recently
announced plans to engage in Asia Pacific.
Post the Period end, on 4 August 2023, Wyld Networks announced the signing of
an agreement with Space X to explore potential areas of collaboration to
collect data from IoT sensors in remote locations. This had a notable positive
impact on Wyld's quoted market price.
During the Period Wyld Networks received approximately SEK 16.1 million
(approximately £1.2 million) from the exercise of warrants, which had the
effect of diluting Tern's holding in Wyld Networks.
As at 30 June 2023, the fair value of Tern's shareholding in Wyld Networks
decreased to £3.2 million (31 December 2022: £6.0 million) primarily due to
the disposal of shares in Wyld Networks (£1.2 million) as well as a fair
value decrease (£1.5 million), which included a £0.3 million foreign
exchange movement on the Sterling value of Wyld Networks which is valued in
Swedish Krona. Wyld Networks' shares are traded on an active financial market
and the fair value is therefore determined by reference to the quoted market
price at the reporting date.
InVMA Limited (trading as "Konektio")
Valuation of holding: £0.9 million
Holding: 28.3%
Sector: IoT enablement
Invested Since: September 2017
Konektio develops and provides Industrial IoT ("IIoT") software via a Software
as a Service ("SaaS") model to the industrial and manufacturing sectors.
Their AssetMinder(TM) software enables remote asset connectivity, monitoring
and management delivering condition based monitoring, predictive maintenance
and energy monitoring and optimisation that provides insights to drive
productivity improvements and cost savings. AssetMinder™, is machine
agnostic and allows manufacturers to diagnose issues and proactively plan
maintenance that reduces downtime and improves both operational efficiency and
operating margins.
In early 2023, Konektio released their energy monitoring and carbon tracking
platform, AssetMinder™ Impact, that delivers real-time insights and improved
energy management and optimisation that leads to savings across the most
energy consuming manufacturing processes using water, air, gas, electricity,
and steam (WAGES). Konektio believes the new release could save energy
intensive manufacturers and industrial customers 12% or more per year on their
energy costs through rapid turnkey deployment, providing a deeper
understanding of customer's energy consumption efficiencies and producing
comparative analytics to identify efficiencies across their factory equipment
and field assets. The data and insights also provide the detailed
information companies require to meet increasing carbon and ESG reporting
obligations, helping them to accelerate their drive to net zero.
Following this new product release, Konektio announced a boost to their senior
team with the appointment of a new Chief Technology Officer in the period,
Gareth McLaughlin, with over 20 years of experience and a proven track record
within the Industrial IoT, telematics and technology sectors.
During the first half of 2023, Konektio raised a total of £1.5 million in
Series A fund raisings from existing investors, with all outstanding
convertible loan notes being converted. Tern invested a total of £0.2m in
these Konektio fundraisings and converted £0.5m of convertible loan notes. As
announced on 26 May 2023, a second tranche of £1.3 million is due for
completion in Q4 2023, within which Tern has committed to invest a minimum of
£0.28 million, with an option, at Tern's sole discretion, to increase its
investment amount up to £0.4 million. Should Tern not fulfil its commitment
to invest a minimum of £0.28 million at this time, 75% of Tern's holding in
Konektio will be transferred to a valueless class of Konektio's deferred
shares.
As at 30 June 2023, the fair value of Tern's shareholding in Konektio was
£0.9 million (31 December 2022: £0.5 million).
Talking Medicines Limited ("Talking Medicines")
Valuation of holding: £2.0 million
Holding: 23.8%
Convertible loan notes of £0.2 million
Sector: Data intelligence
Invested Since: November 2020
Talking Medicines uses Advanced Data Science and next generation Artificial
Intelligence to transform socially sourced feedback from patients into data
intelligence about their lived experience regarding medicine use through
structuring and evaluating emotions, opinions, and attitudes at scale.
Talking Medicines entered 2023 as an advanced AI company ready to take
advantage of the huge attention given to Large Language Models ("LLMs")
through the public launch of Chat GPT by Open AI. Talking Medicines has
launched Drug-GPT™ which stands apart as a specialised "Curated Large
Language Model". This means that it offers natural language questioning of
proprietary, curated social data resulting in acutely high-quality output.
This trusted intelligence on 'patient voice' is a ready solution for the
highly regulated health sector and marketing agencies, who can then make
data-driven decisions based on curated truths, as opposed to the raw open web.
The capabilities for Drug-GPT™ have now been integrated into all Talking
Medicines offerings. Further strength has been added to the capabilities by
extending source data to include clients own unstructured data and building AI
classification and curation to include Health Care Professionals, Digital
Opinion Leaders, and Key Opinion Leaders to find a single source of truth
enabling metrics that support measurement and tracking across broader
healthcare voices.
The Talking Medicines solutions include its SaaS dashboard PatientMetRx®,
alongside Data as a Service ("DaaS") for larger clients. This provides Talking
Medicines' customers and their clients access to a level of scale and depth of
insights through automation that was previously not possible from manual
extraction. From trials, it has been found that Talking Medicines solutions
provide 80% time saving for customers through automation and this is building
robust efficiency and effectiveness for customers. This enables their pharma
advertising and marketing consulting customers to make higher returns through
data-driven decisions in creative and strategic processes.
The company continues to build its US operation in the New Jersey/New York
metro area with significant marketing agency groups amongst new clients.
Looking ahead the focus is on building the US market further to capitalise on
the new service offerings and leading as an Advanced Data Science and next
generation Artificial Intelligence company.
As at 30 June 2023, the fair value of Tern's shareholding in Talking Medicines
increased to £2.0 million (31 December 2022: £1.8 million) due to additional
investments from Tern of approximately £0.2 million via convertible loan
notes during the Period.
Sure Valley Ventures UK Software Technology Fund ("SVV2")
Valuation of holding: £0.1 million
Holding: 5.9%
Sector: IoT deep tech
Invested since: March 2022
SVV2 is a venture capital fund investing in a range of private UK software
companies with a focus on companies in the immersive technology and metaverse
sectors, including augmented and virtual reality, artificial intelligence, and
security.
SVV2 has investments in two companies so far, RETìníZE Limited, a creative
tech company based in Belfast, and Jaid (t/a Opsmatix Limited), an innovative
technology firm providing AI-powered human communication solutions. Follow on
investment for Jaid, under the same terms as the initial round was taken up by
SVV2 in the Period.
The SVV2 team has made progress with origination and their potential deal flow
is distributed across their focused industry sectors, with almost 50% of the
deals evaluated having a primary AI/ML focus alongside other deals with
Immersive Tech, SaaS, Cyber Security and IoT. The vast majority of the deals
evaluated have AI underpinning technology which is in line with the fund's
main investment strategy.
SVV2 continues to see returns from its in-person approach to origination.
During the Period, the investment team members attended many start-up events
and pitch competitions in Liverpool, Manchester, London, Cambridge and Dublin
hosted by Plexal, Innovate UK, Google Cloud, InterTrade Ireland, Entrepreneurs
Collective, Xoogler and more.
The SVV2 team has also been involved in some fantastic initiatives to build
their brand, support the wider start-up ecosystem and push forward the
diversity and inclusion agenda and during the Period, SVV2 became an investor
member of Fund Her North - a collective seeking to improve access to funding
for female founders across the North at every stage of their journey.
As at 30 June 2023, the fair value of Tern's shareholding in SVV2 was £0.1
million (31 December 2022: £0.1 million). The additional investment during
the Period was in part offset by fees charged by the fund.
DiffusionData Limited ("DiffusionData")
Valuation of holding: £0.02 million
Holding: <1%
Sector: Data distribution
Invested since: July 2014
DiffusionData is a pioneer in real-time data streaming and messaging
solutions. Founded to solve the real-time systems and application connectivity
and data distribution challenges experienced by companies worldwide, the
company has an international team of business and technology experts. The
company's flagship offering-the Diffusion® Intelligent Data Platform, makes
it easy to consume, enrich, and deliver data reliably.
As at 30 June 2023, the fair value of Tern's shareholding in Diffusiondata was
£0.02 million (31 December 2022: £0.02 million).
Unaudited Income Statement and Statement of Comprehensive Income
For the six months ended 30 June 2023
Notes 6 months to 30 June 2023 6 months to 30 June 2022 12 months to 31 December 2022
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Fee income 156 20 66
Movement in fair value of investments 7 (1,988) (1,233) (8,416)
Profit on disposal 9 - 11
Total investment deficit (1,823) (1,213) (8,339)
Administration costs (1,052) (1,241) (2,159)
Operating loss (2,875) (2,454) (10,498)
Finance income 35 40 51
Loss before tax (2,840) (2,414) (10,447)
Tax - - -
Loss and total comprehensive loss for the period (2,840) (2,414) (10,447)
Earnings per share 6
Basic and diluted loss per share (0.73)p (0.69)p (2.92)p
Unaudited Statement of Financial Position
As at 30 June 2023
30 June 30 June 31 December 2022
2023 2022
(Unaudited) (Unaudited) (Audited)
Note £000 £000 £000
Assets
Non-current assets
Investments 7 21,825 30,204 23,882
21,825 30,204 23,882
Current assets
Trade and other receivables 352 205 363
Cash and cash equivalents 741 290 932
1,093 495 1,295
Total assets 22,918 30,699 25,177
Equity and liabilities
Share capital 8 1,380 1,372 1,379
Share premium 33,391 30,546 33,341
Share warrant reserve 140 - -
Retained earnings (12,702) (1,876) (9,868)
22,209 30,042 24,852
Current liabilities
Trade and other payables 346 657 325
Borrowings 9 191 - -
Total current liabilities 537 657 325
Borrowings 9 172 - -
Total non-current liabilities 172 - -
Total liabilities 709 657 325
Total equity and liabilities 22,918 30,699 25,177
Unaudited Statement of Changes in Equity
For the six months ended 30 June 2023
Share Share Share warrant Retained Total
capital premium reserve earnings equity
£000 £000 £000 £000 £000
Balance at 31 December 2021 1,372 30,546 - 498 32,417
Total comprehensive income - - - (2,414) (2,414)
Transactions with owners
Share based payment charge - - - 40 40
Balance at 30 June 2022 1,372 30,546 - (1,876) 30,042
Total comprehensive income - - - (8,032) (8,032)
Transactions with owners
Issue of share capital 7 3,114 - - 3,121
Share issue costs - (319) - - (319)
Share based payment charge - - - 40 40
Balance at 31 December 2022 1,379 33,341 - (9,868) 24,852
Total comprehensive income - - - (2,840) (2,840)
Transactions with owners
Issue of share capital 1 50 - - 51
Issue of warrants - - 140 - 140
Share based payment charge - - - 6 6
Balance at 30 June 2023 1,380 33,391 140 (12,702) 22,209
Unaudited Statement of Cash Flows
For the six months ended 30 June 2023
6 months to 30 June 2023 6 months to 30 June 2022 12 months to 31 December 2022
(Unaudited) (Unaudited) (Audited)
Note £000 £000 £000
OPERATING ACTIVITIES
Net cash used in operations 10 (846) (882) (2,056)
Purchase of investments (1,133) (785) (1,670)
Cash received from sale of investments 1,238 - 42
Loan to investee companies - - (144)
Interest received - - 1
Net cash used in operating activities (741) (1,667) (3,827)
FINANCING ACTIVITIES
Proceeds on issue of shares 50 - 3,122
Share issue expenses - - (320)
Proceeds from drawdown of loan 500 - -
Net cash from financing activities 550 - 2,802
(Decrease) in cash and cash equivalents (191) (1,667) (1,025)
Cash and cash equivalents at beginning of period 932 1,957
1,957
Cash and cash equivalents at end of period 741 290 932
Notes to the Unaudited Interim Statements
For the six months ended 30 June 2023
1. General information
Tern is an investing company specialising in private software companies,
predominantly in the Internet of Things (IoT).
The Company is a public limited company, incorporated in England and Wales,
with its shares traded on AIM, a market of that name operated by the London
Stock Exchange.
The address of Tern's registered office is 27/28 Eastcastle Street, London W1W
8DH. Items included in the financial statements of the Company are measured in
Pounds Sterling, which is the Company's presentational and functional
currency.
2. Basis of preparation
The interim financial information in this report has been prepared in
accordance with UK-adopted international accounting standards. The financial
statements have been prepared on the basis of the recognition and measurement
principles of the IFRS that were applicable at 30 June 2023. They do not
include all of the information required for full annual financial statements
and should be read in conjunction with Tern's audited financial statements for
the year ended 31 December 2022. The financial information for the year
ended 31 December 2022 set out in this interim report does not constitute
statutory accounts as defined in Section 434 of the Companies Act 2006. The
Company's statutory financial statements for the year ended 31 December 2022
have been filed with the Registrar of Companies and can be found on the
Company's website: www.ternplc.com (http://www.ternplc.com) . The auditor's
report on those financial statements was unqualified and did not contain
statements under Section 498 (2) or Section 498 (3) of the Companies Act
2006. These interim financial statements have been prepared under the
historical cost convention as adjusted for the valuation of investments and
have been approved for issue by the Board of Directors.
3. Going concern
The financial statements have been prepared on the going concern basis.
The Directors have a reasonable expectation that the Company has adequate
resources to continue operating for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the Company's
financial statements.
In the event that additional funding was required, management is confident
that they would be able to obtain additional funds from various sources. For
example, the Company can exit part of its investment in its held level one
investments with the risk that such transactions are determined by an inherent
and undetermined market risk.
4. Investments
The investment valuation consists of equity investments.
In accordance with IFRS 10, paragraph 4B, investments are recognised at fair
value through profit and loss (FVTPL) in line with guidance set out in IFRS
9. Changes in foreign exchange rates impact investments valued in a foreign
currency.
5. Critical accounting judgements and key sources of
estimation uncertainty
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, rarely equal the related
actual results. The key sources of estimation uncertainty 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.
ESTIMATES
Fair value of financial instruments
The Company holds unquoted investments of £18.6 million that have been
designated as held for trading on initial recognition. Where practicable the
Company determines the fair value of these financial instruments that are not
quoted using the most recent bid price at which a transaction has been carried
out. These techniques are significantly affected by certain key assumptions,
such as market liquidity. Given the nature of the investments being
early-stage businesses, other valuation methods such as discounted cash flow
analysis to assess estimates of future cash flows and derive fair value
estimates cannot always be substantiated by comparison with independent
markets and, in many cases, may not be capable of being realised immediately.
JUDGEMENTS
Investments held at FVTPL
The critical judgement is the assessment that the investments should be
consolidated. This assessment was reached following a review of all the key
conditions for an investment entity, as set out in IFRS 10 and the Company was
judged to have met those key conditions as follows:
· The Company obtains funds from one or more investors for the purpose
of providing those investor(s) with investment management services;
· The Company commits to its investors that its business purpose is to
invest funds solely for returns from capital appreciation, investment income,
or both; and
· The Company measures and evaluates the performance of substantially
all its investments on a fair value basis.
In coming to this conclusion, the Company also judged that its
investment-related activities do not represent a separate substantial business
activity or a separate substantial source of income to the investment entity.
6. Earnings/(Loss) per share
Earnings/(Loss) per share is calculated by reference to the weighted average
shares in issue as follows:
6 months to 6 months to 12 months to
30 June 2023 30 June 2022 31 December 2022
£000
£000 £000
Loss for the purposes of basic and fully diluted loss per share (2,840) (2,414) (10,447)
Weighted average number of ordinary shares (see note below): Number Number Number
For calculation of basic and fully diluted loss per share 388,681,380 352,014,701 357,424,413
Loss per share
Basic and diluted loss per share (0.73)p (0.69)p (2.92)p
At 30 June 2022, 31 December 2022 and 30 June 2023 the fully diluted earnings
per share is the same as the basic earnings per share as the share options and
warrants were underwater which would have an anti-dilutive effect on earnings
per share.
7. Investments
30 June 2023 30 June 2022 31 December 2022
£000 £000 £000
Fair value of investments brought forward 23,882 30,612 30,612
Interest accrued on convertible loan notes 27 40 47
Additions 1,133 785 1,670
Disposals (1,229) - (31)
23,813 31,437 32,298
Fair value adjustment to investments (1,988) (1,233) (8,416)
Fair value of investments carried forward 21,825 30,204 23,882
On 25 April 2023, the convertible loan facility issued to InVMA Limited was
converted into equity with any movements in fair value taken to profit or loss
for the period.
8. Issued share capital
30 June 2023 30 June 2022 31 December 2022
Number Number Number
Issued and fully paid:
Ordinary shares of £0.0002 389,676,311 352,014,701 388,571,510
Deferred shares of £29.999 42,247 42,247 42,247
Deferred shares of £0.00099 34,545,072 34,545,072 34,545,072
£000 £000 £000
Issued and fully paid:
Ordinary shares of £0.0002 79 71 78
Deferred shares of £29.999 1,267 1,267 1,267
Deferred shares of £0.00099 34 34 34
1,380 1,372 1,379
The deferred shares have no voting or dividend rights. The deferred shares are
not quoted on the AIM market of the London Stock Exchange.
On 12 June 2023, 1,104,801 new ordinary shares were issued at a deemed price
of 4.5257 pence per share in settlement of a Facility implementation fee
of £50,000.
9. Borrowings
30 June 2023 30 June 2022 31 Dec 2022
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
Gross loan 500 - -
Transaction cost (140) - -
Interest (3) - -
Balance carried forward 363 - -
Short term borrowings 191 - -
Long term borrowings 172 - -
363 - -
The borrowing transaction cost was calculated using the Black Scholes model.
The transaction cost, from the issue of warrants, will be taken to profit or
loss over the 18 month loan repayment period.
10. Cash flow from operations
6 months to 30 June 2023 6 months to 30 June 2022 12 months to 31 Dec 2022
(Unaudited) (Unaudited) (Audited)
£000 £000 £000
(Loss)/profit for the period (2,840) (2,414) (10,447)
Adjustments for items not included in cash flow:
Movement in fair value of investments 1,988 1,233 8,416
Loss/(profit) on disposal (9) - (11)
Share-based payment charge 6 40 80
Finance expenses 3 - -
Finance income (35) (40) (51)
Operating cash flows before movements in working capital (887) (1,181) (2,013)
Adjustments for changes in working capital:
- (Increase)/decrease in trade and other receivables (excluding loans to 20 (16) (26)
investee companies)
- Increase/(decrease) in trade and other payables 21 315 (17)
Cash used in operations (846) (882) (2,056)
11. Events after the reporting period
On 10 August 2023, the Company announced a restructuring of the Board such
that Bruce Leith and Matthew Scherba stepped down with immediate effect. It
was announced that Sarah Payne will step down as CFO and Company Secretary on
or before 30 September 2023 but will remain on the Board as a Non-Executive
Director. Following these changes, the Board will comprise: Ian Ritchie,
Alan Howarth and Sarah Payne. The Company also announced that it was
implementing cost savings which once fully implemented are expected to save
approximately 40% of the overall central costs in 2024 when compared to 2022,
this includes a material reduction in remuneration for the senior management
team.
12. Availability of interim results
Copies of this report will be available from the Company's website
www.ternplc.com (http://www.ternplc.com) .
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