REG - Tern PLC - Portfolio Update and Investor Presentation

TernAnnouncement

18/04/2023 07:00

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RNS Number : 5027W  Tern PLC  18 April 2023

18 April 2023

 

Tern Plc

("Tern" or the "Company")

 

Portfolio Update and Investor Presentation

 

Tern Plc (AIM:TERN), the company focused on value creation from Internet of
Things ("IoT") technology businesses, is pleased to provide an update on the
Company and its portfolio companies.

 

Highlights

 

·    Further significant progress across Tern's portfolio companies during
2022

·    97% year-on-year growth in the aggregate value of portfolio
companies' annual recurring revenue (ARR) contracts

·    Tern's portfolio companies increased employee numbers in aggregate by
66% to 219 (31 December 2021: 132) and annual recurring revenue per employee
increased by 19%

 

In 2022 and into the current year Tern's portfolio companies have shown
resilient performance, with revenues growing, increases in headcounts and all
winning important new customers.  Tern's portfolio companies delivered
year-on-year growth in both revenue of 5% and 97% in ARR.  As discussed in
our interim report, the key focus for our network of companies is  on
recuring revenue as it is the primary indicator of valuation growth. As a
result of the successful transition, we will only continue to report on
aggregated recurring revenue growth in future.

 

Particular highlights have included Device Authority's growth in multi-year
bookings and recurring revenues from its software security platform,
KeyScaler®; Wyld Networks launching its pioneering satellite IoT network
service providing 100% global connectivity for the IoT; FundamentalVR being
the first of Tern's investee companies to achieve a Series B growth equity
financing round; Konektio adding scale to its business and driving sales of
its AssetMinder® platform; and a number of global advertising agencies and
networks engaging Talking Medicines for proof of concept and paid
subscriptions.

 

However, the landscape for technology companies has changed dramatically in
the last year.  Low, or near zero interest rates had created cheap capital
that drove asset values to record highs.  This was particularly true of
technology companies.  With rising interest rates and the end to inexpensive
and readily available capital, technology companies, and those investing in
them, have now had to adapt their approach.  The recent collapse of Silicon
Valley Bank has also sent further shockwaves through the technology sector,
compounding the issues faced both in the UK, the US and elsewhere.

 

Cognisant of this environment, Tern is driving and assisting its portfolio
companies with their efforts to achieve breakeven as soon as possible, in lieu
of seeking growth at any cost.  In a period of lower valuations and capital
availability achieving break-even and having the ability to standalone,
without needing the support of investors to survive, is believed to be
particularly important.  It is also important to note that none of Tern's
companies are at the breakeven point yet and will need the continued support
of Tern and its other co-investors to achieve their full potential and arrive
at break-even.

 

In line with many companies Tern's audit timetable has been extended this year
and the Company currently expects to release its results for the year ended 31
December 2022 in late May 2023, with the Company's Annual General Meeting
taking place in June 2023.

 

Commenting Al Sisto, CEO of Tern, said:

 

"It is encouraging to see such a resilient performance from our portfolio
companies, with revenues growing, increases in headcounts and all winning
important new customers during a time when technology company valuations are
under pressure across the global market.  However, despite these headwinds,
in tougher times there is often a flight to quality and we believe that Tern
and its portfolio of companies is well placed to weather the storm.

 

"At Tern it is also our goal to be ultimately self-financing. The 2021 IPO of
Wyld Networks on NASDAQ First North in Stockholm was a successful transaction
for Tern.  Today, Wyld Networks is a standalone company and is being
successful in its targeted markets.  Going forward, we intend to take
advantage of this at the appropriate times and in stages, in order to provide
capital for investment elsewhere, to date Tern has realised approximately
£370k by orderly sales into the market.  At the current market valuation of
Wyld Network's, Tern's holding is valued at approximately 2.5 times the
capital we have invested.  We are firm believers in the future potential of
Wyld Networks to deliver substantial shareholder returns, but with Wyld
Networks being a publicly quoted company Tern's investors now have the
opportunity to directly participate in its equity themselves rather than
needing an investment company such as Tern to access it.

 

"Tern's long-term goal continues to be to provide our shareholders with access
to returns as we achieve liquidity events with our portfolio companies at the
point they reach sufficient maturity and when the market dynamics are
appropriate.  We are confident of their unique market positions and the
robustness of our portfolio companies' business models.  We believe that they
are the sorts of companies that will emerge stronger from these difficult and
uncertain economic times.  Downturns occur and have to be carefully navigated
through, with practicality and patience shown.  It is not our intention to
hold our portfolio companies forever, but to fully or partially exit them when
the appropriate opportunities are available.

 

"I look forward to updating further at the time of the release of our 2022
results in late May."

 

Note: 'Tern's portfolio companies' or 'its companies' or 'our portfolio
companies' or 'our companies' are: Device Authority Limited, Wyld Networks AB,
InVMA Limited (trading as Konektio), FVRVS Limited (trading as FundamentalVR)
and Talking Medicines Limited, which are companies Tern has interests in and
excludes SVV in which Tern has a 5% holding and Push Technology Limited, in
which Tern has a <1% holding and minimal influence.

 

OTC

 

On 17 June 2021 the Company announced its intention to file an application
with the OTC Markets Group for the Company's Ordinary Shares to be publicly
cross-traded on the OTCQB Market based in the United States.  It was further
stated in the 2022 AGM Statement on 27 April 2022 that, inter alia, "whilst
the process is ongoing, progress has been frustratingly slow whilst it is
ascertained whether or not Tern's specific structure and classification under
the AIM Rules enables the Company to be eligible to be publicly cross-traded
in the United States under applicable US securities laws.  We continue to
take advice in this regard and look forward to a final determination being
made."

 

Further advice was sought, including engaging specialist legal teams focused
on SEC laws and regulations, and detailed discussions held with the OTC
Markets Group.  Following this process, it has been concluded that because of
Tern's status as an Investment Company, relative to the US 1940 Investment
Company Act, it is unlikely that Tern's Ordinary Shares will be able to
qualify to be publicly cross-traded on the OTCQB Market.  The Company has
therefore ceased any further investment of time and resources in this process.

 

Online Investor Presentation and Q&A Session

Tern's management and management from certain of Tern's portfolio companies
will be hosting an online presentation and Q&A session at 5 p.m. BST on 27
April 2023. This session is open to all existing and prospective shareholders.

 

Those who wish to attend should register via the following link where they
will be provided with access details:

 

https://us02web.zoom.us/webinar/register/WN_84NY9ZQZSqqMARJLMPWLIg
(https://us02web.zoom.us/webinar/register/WN_84NY9ZQZSqqMARJLMPWLIg)

 

Participants will have the opportunity to submit questions during the session,
but questions are welcomed in advance and may be submitted to:
tern@investor-focus.co.uk (mailto:tern@investor-focus.co.uk) .

 

Enquiries

 

 Tern Plc                                                                    via IFC Advisory

 Al Sisto (CEO)

 Sarah Payne (CFO)

 Allenby Capital Limited                                                     Tel: 0203 328 5656

 (Nominated Adviser and Broker)

 David Worlidge / Alex Brearley / Dan Dearden-Williams (Corporate Finance)

 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

 

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