REG - Tern PLC - Portfolio Update

TernAnnouncement

11/02/2022 07:00

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RNS Number : 3690B  Tern PLC  11 February 2022

11 February 2022

 

Tern Plc

("Tern" or the "Company")

 

Portfolio Update

 

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
recent activities of the Company and its portfolio companies.

 

Highlights

 

·    Further significant progress across Tern's portfolio companies, with
growth in recurring revenues and new contract wins, together with unaudited
valuation uplifts over the December 2021 to February 2022 period for Device
Authority, Konektio, Talking Medicines and Wyld Networks.

 

·    Device Authority, has continued its positive business momentum
following the strategic investment from Venafi, announced on 2 December 2021,
with the business being particularly focussed on growing its monthly recurring
revenues through its subscription base and its modularised licence platform,
KeyScaler®.

 

·    In January 2022, Device Authority entered into a partnership with
Trusted Objects, a leading player in cybersecurity technologies for embedded
systems and cloud device management platforms, to integrate Trusted Object's
'TO-protect' software root-of-trust and Device Authority's KeyScaler®.

 

·    FundamentalVR has continued to enter into further significant
contracts in recent months including: a £0.6 million contract in the area of
interventional medicine; a £1 million contract in the Robotics Assisted
Surgical Systems sector; and a £0.3 million contract from a new client to
create a virtual education facility.

 

·    Wyld Networks has continued to perform strongly, with further
commercial traction, including entering into a connectivity partnership with
Eutelsat Communications, Senet Inc and TrakAssure to form the Multimodal IoT
Infrastructure Consortium™ ("MMIIC").

 

·    Wyld Networks joined the LoRa Alliance®, the global association of
companies backing the open LoRaWAN® standard* for the IoT in November 2021.
In December 2021, LoRaWAN® was officially approved as a standard by the
International Telecommunication Union.

 

·    InVMA is now trading as Konektio and following the £2.125 million
equity fund raise, announced on 20 December 2021, the business has continued
to see strong demand for AssetMinder®.  Konektio has also recently appointed
Dr Ron Black, the former CEO of Imagination Technologies, as its new
Non-Executive Chairman.

 

·    Following the £1.59 million Talking Medicines syndicated fund raise
announced on 1 February 2022, Talking Medicines is focussing on expanding the
subscription base for PatientMetRx®, including in the US via its recently
established office in New Jersey.

 

Commenting Al Sisto, CEO of Tern, said:

 

"Since our last portfolio update at the end of October 2021, our portfolio
companies have all made substantial progress, which I believe significantly
increases the  value that will ultimately be delivered for Tern shareholders
in the form of exit proceeds.  We consider that, this value is being built
via increases in monthly recurring revenues and the significant market
traction which, as can be seen in this update, our companies are enjoying.

 

"However, I recognise that the value that is being created is more visible
with some of our companies than others.  Wyld Networks, now being a publicly
quoted company has a value that can be constantly seen, and we are delighted
that the value of Tern's holding has more than doubled in the past six
months.  We expect more to come from Wyld, and we expect that the public
listing will provide an exit route over time, when the time is right to
maximise value for Tern.

 

"With our other companies, we are also constantly evaluating the
appropriateness of IPOs as well as trade sales on a case-by-case basis,
recognising that getting the timing right is key to delivering shareholder
value.  Importantly, whilst building our companies to the stage where these
events will deliver appropriate value, we are always seeking to have increases
in value validated by third parties investing alongside Tern, with some
significant step ups in value being sought along the journey.

 

"The recent fund raises by Konektio and Talking Medicines are two such events,
demonstrating how value can be significantly increased in a short time
period.  The valuation of Tern's holding in Konektio implied by its December
2021 fund raise price represents an approximate 44% uplift to the amount
invested by Tern to date. With Talking Medicines, the valuation implied by its
January 2022 fund raise is a 62% uplift to the amount originally invested by
Tern.  Both of these companies are also now fully funded for their current
growth plans.

 

"With Device Authority, some have expressed disappointment with the valuation
achieved in December 2021 for the Venafi strategic investment, with it
representing only a modest uplift to the previous book value of Tern's
holding.  However, it must be recognised that this was a complicated
transaction that was designed to achieve specific goals and was fundamentally
different to an exit valuation.  It enabled a very important partner to take
a strategic stake in Device Authority, Tern to maintain a majority ownership
position and provided Device Authority with sufficient capital for 2022, given
its growth plans, removing the dependence on Tern.  Building a company of
sustainable value is a journey that demands courage to make difficult and
sometimes unpopular decisions.  I do not believe that we should shy away from
taking these steps to enhance the underlying value of our portfolio companies
if we are to remain true to the goal of maximising the value that we strongly
believe can be delivered for Tern's shareholders.

 

"I fundamentally believe that the companies we have within the Tern portfolio
all have very exciting futures ahead of them and 2022 will be a year of
further significant progress."

 

Portfolio Update

 

Device Authority Limited ("DA" or "Device Authority")

Holding: 53.8%

 

Device Authority, a global leader in identity and access management ("IAM")
for the IoT, has continued its positive business momentum following the
strategic investment from Venafi, announced on 2 December 2021, with the
business being particularly focussed on growing its monthly recurring revenues
through its subscription base and its modularised licence platform,
KeyScaler®.

 

Particularly strong recent demand has come from the automotive sector, with
the retail sector and the US Government, both as a customer and due the
effects of its policy, also being strong recent contributors to growth.  The
executive order from US President Biden in May 2021 that tasked the National
Telecommunications and Information Administration (NTIA) and the Commerce
Department with defining the minimum elements of a SBOM (software bill of
materials), considered critical to improving transparency and security in the
software supply chain, continues to provide sales opportunities and leads for
Device Authority.

 

With the target of growing monthly recurring revenues, Device Authority has
recently started selling KeyScaler® as a SaaS (software as a service)
product, with initial customers on this model coming from the automotive,
healthcare and retail sectors, enabling these customers to more rapidly
onboard and scale in a secure, hosted cloud environment.

 

In January 2022, Device Authority entered into a partnership with Trusted
Objects, a leading player in cybersecurity technologies for embedded systems
and cloud device management platforms, to integrate Trusted Object's
'TO-protect' software root-of-trust ("RoT") and Device Authority's
KeyScaler®.  In 2021 Trusted Objects joined the 'KeyScaler Ready' programme,
which enabled both companies to work closely together to provide a combined
solution for IoT Edge devices.  Integrating TO-protect with KeyScaler®
enables full end-to-end security life cycle management from Edge to Enterprise
into IoT cloud applications such as Microsoft Azure, Avnet IoTConnect, AWS,
Ericsson, PTC ThingWorx and Google.  Utilising a software RoT in IoT
deployments meets the needs for robust device security, at the same time as
providing scalability to meet the needs of new and legacy device deployments.
 This software model is being used by distributors such as Avnet, who can
provide device software "stock-keeping units" or "SKUs" for Original Equipment
Manufacturers and enable security lifecycle management into its platform.

 

Device Authority has also continued to further develop its products and
recently launched a new release of KeyScaler® Edge, amongst other product
enhancements.

 

Wyld Networks AB (publ) ("Wyld Networks" or "Wyld")

Holding: 58.7%

 

Wyld Networks has continued to perform strongly since the admission to trading
of Wyld's shares on the NASDAQ First North Growth Market ("NASDAQ First
North") in Stockholm on 2 July 2021.  Since 2 July 2021, the Wyld Networks
share price has risen from SEK11 to SEK 24.2 as at the close of business on 10
February 2021, valuing the Tern holding at approximately £9.3 million.  To
date Tern has invested approximately £1.75 million in Wyld Networks.

 

In recent months Wyld Networks has continued its focus on the development of
Wyld Connect (a satellite IoT terminal and module) and Wyld Fusion (a
provisioning and payment platform). In particular, Wyld has completed the
hardware development of Wyld Connect, the world's first Long Range-Frequency
Hopping Spread Spectrum (LR-FHSS) sensor-to-satellite modem, to enable
satellites to connect to devices/sectors across remote areas around the globe.
Wyld is also continuing with the development of Wyld Fusion in preparation for
the commercial launch of Wyld's end-to-end satellite IoT solution, planned for
later this year.

 

Additional personnel, both technical and commercial, have been recruited,
including a recently appointed sales manager in Brazil to support the South
American region and a global Head of Sales and Marketing to support all of
Wyld's commercial activities.

 

Wyld Networks have recently started to sign agreements with customers in new
market areas, outside of the previous focus on energy and agriculture with
customers such as Chevron and Bayer, as well as with system integrators such
as Fujitsu and Wezen.  Recently, Wyld signed has also signed agreements with
some of the world's largest terrestrial LoRaWAN® IoT operators including
American Tower and Senet.

 

Wyld Networks, together with Eutelsat Communications, Senet Inc and
TrakAssure, is a founder member of the Multimodal IoT Infrastructure
Consortium™ ("MMIIC").  The consortium was set up to bring integrated and
interoperable terrestrial and satellite LoRaWAN® IoT connectivity to
customers across the globe, as announced by Wyld Networks and Tern on 11
January 2022.  Additional partnerships recently signed ahead of the
commercial launch include agreements with the Navigator Group in Russia,
AgriSound in the UK and Treevia in Brazil.

 

Additionally, Wyld Networks joined the LoRa Alliance®, the global association
of companies backing the open LoRaWAN® standard* for the IoT in November
2021. In December 2021, LoRaWAN® was officially approved as a standard by the
International Telecommunication Union, the United Nations specialised agency
for information and communication technologies. The LoRa Alliance® also
provides a platform for Wyld to showcase its technology to over 500 member
companies.

 

*The LoRaWAN® specification, developed and maintained by the LoRa Alliance®,
is a Low Power, Wide Area networking protocol designed to wirelessly connect
battery operated 'things' to the internet in regional, national or global
networks, and targets key IoT requirements such as bi-directional
communication, end-to-end security, mobility and localisation services.

 

FVRVS Limited ("FundamentalVR")

Holding: 26.9%, plus convertible loan of £530,000

 

FundamentalVR delivers virtual reality ("VR") haptic 'flight simulators' for
surgery creating a safe, measurable and repeatable space to refine skills.
FundamentalVR's goal is to transform the way surgeons prepare, practice, and
refine their skills.  It has built an immersive, surgical simulation
application platform, Fundamental Surgery, to provide medical professionals
with the opportunity to rehearse, practice, and test themselves within a safe,
controllable space that is as close to real-life as possible.

 

FundamentalVR has continued to enter into further significant contracts in
recent months including:

 

·      A contract in the area of interventional medicine, a
strategically important area for FundamentalVR, where they have secured an
important contract from a new client to create a simulation platform in an
area that can directly benefit from the fidelity and realism of the
FundamentalVR platform. The contract is valued at £0.6 million over four
years.

 

·      A new contract in another strategically important area with a new
client within the fast-moving Robotics Assisted Surgical Systems ("RASS")
sector. This long-term contract to create a simulated 'digital twin' is valued
at £1 million over four years.

 

·      A contract from a new client to create a virtual education
facility.  The client is a major US medical institution with a globally
renowned virtual hospital and hands-on clinical training facility. The initial
contract is valued at approximately £0.3 million.

 

InVMA Limited (trading as "Konektio")

Holding: 36.8%

 

Following the £2.125 million equity fund raise by Konektio, announced on 20
December 2021, the business has continued to see strong demand for its
Industrial IoT connected asset software as a service (SaaS) product,
AssetMinder®.  In particular, this has been from customers who are looking
to connect their assets to AssetMinder® as Covid-19 has accelerated the need
and demand for contactless monitoring of factory and remote assets.  Konektio
has a strong sales pipeline and is continuing to build its recurring revenue
base, particularly via its expansion into Europe and North America.

 

Konektio has recently appointed Dr Ron Black as its Non-Executive Chairman,
succeeding Sarah Payne, Chief Financial Officer of Tern, who remains a
Non-Executive Director of Konektio (InVMA Limited).  Dr Black, who has
recently taken on the role of CEO at Codasip, a leading supplier of processing
solutions for integrated circuit designers, brings with him a wealth of
technology, innovation, and global business scale-up experience, through his
previous roles which have included CEO of Imagination Technologies and CEO of
Rambus.

 

Talking Medicines Limited ("Talking Medicines")

Holding: 23.8%

 

Talking Medicines is a data technology company using Artificial Intelligence,
Natural Language Processing and Machine Learning as social listening
technologies to give patients a voice.  Following the £1.59 million Talking
Medicines syndicated fund raise announced on 1 February 2022, Talking
Medicines is focussing on expanding the subscription base and resulting
recurring revenue stream from major pharmaceutical brand teams and pharma
marketing agencies for its next generation data platform, PatientMetRx®.
Its near-term expansion plans, utilising part of the proceeds from the recent
fund raise, include recruiting a US-based sales team to be run from Talking
Medicines' recently established office in New Jersey.

 

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 (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

 

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