REG - Tern PLC - Results for the year ended 31 December 2022
31/05/2023 07:00
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RNS Number : 0884B Tern PLC 31 May 2023
31 May 2023
Tern Plc
("Tern" or the "Company")
Results for the year ended 31 December 2022
Tern Plc (AIM: TERN), the company focused on value creation from Internet of
Things ("IoT") technology businesses, announces its audited results for the
year ended 31 December 2022.
Highlights
· Net assets of the Company at 31 December 2022 of £24.9m (31 December
2021: £32.4m). The net asset value per ordinary share as at 31 December 2022
decreased to 6.4p (31 December 2021: 9.2p)
· The reduction in net assets of the Company as at 31 December 2022
principally due to movements in investments held at fair value through the
profit or loss and a reduction in the cash balance
· The unaudited aggregated annual recurring revenue ("ARR") of our
portfolio(1) increased by 97% from 2021 to 2022 and the year-on- year growth
in aggregated revenue grew by 5%. A key focus for our portfolio is on
recurring revenue as it is a primary driver of valuation growth
· The aggregated employee numbers of our portfolio increased by 66%
from 2021 to 2022 (35% from 2020 to 2021), and this increase was balanced by
an associated increase in ARR such that ARR per employee increased by 19% from
2021 to 2022
1. Our 'portfolio companies and holdings' being portfolio companies:
Device Authority Limited, InVMA Limited (trading as Konektio), FVRVS Limited
(Trading as FundamentalVR) and Talking Medicines Limited, and holdings: Wyld
Networks AB, or collectively 'our portfolio': as further described in the
section headed 'Portfolio Companies and Holdings below and as detailed in note
3.
Commenting on the results, Tern's CEO, Al Sisto said:
"Whilst it is disappointing to report a reduction in the unrealised fair value
of a number of our companies, a large part of the fair value decrease at the
year end, is a reflection of the dramatic decrease in valuation metrics and
models in the technology sector rather than the underlying prospects of our
companies. Despite short-term challenges posed by macroeconomic factors and
geopolitical conflicts, we remain confident in the long-term potential of our
portfolio and the IoT markets in which we operate.
"As hands-on managers, we are committed to continuing to work closely with our
companies, providing them with the benefit of our expertise and resources to
help them navigate the road ahead. The IoT technology markets, which remain a
core focus for us, continue to offer long-term growth potential and we are
excited to see what the future holds.
"At the heart of our investment strategy is a focus on ARR growth, which we
believe is the key driver of valuations for start-ups. However, we understand
the importance of our portfolio balancing their growth with achieving
profitability to drive efficient growth, and we are dedicated to supporting
our portfolio as they chart their path to success.
"We believe that our portfolio remain well positioned for successful exits at
the right time. While uncertainty may persist in the shorter term, we are
heartened by the indicators we are seeing in the market that point to a return
to improvements in valuations."
Notice of AGM
The annual report for the year ended 31 December 2022, which contains a notice
of the Annual General Meeting ("AGM"), will shortly be available from the
Company's website https://www.ternplc.com/investors
(https://www.ternplc.com/investors) and will shortly be posted to
shareholders.
The Company's AGM will be held at 9.00am on Thursday 29 June 2023 at the
offices of Reed Smith, The Broadgate Tower, 20 Primrose Street, London, EC2A
2RS.
Investor Presentation and Q&A Session
The Company's Chairman, Ian Ritchie, and CEO, Al Sisto, will conduct a live
question and answer session for investors on 12 June 2023 at 5:30 pm BST.
The session is open to all existing and potential 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_YYea-W2XQgeqJ7WUDPHnuQ
(https://us02web.zoom.us/webinar/register/WN_YYea-W2XQgeqJ7WUDPHnuQ)
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.
Enquiries
Tern Plc via IFC Advisory
Al Sisto (CEO)
Sarah Payne (CFO)
Allenby Capital Limited Tel: 0203 328 5656
(Nominated Adviser and Broker)
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
Tim Metcalfe
Graham Herring
Florence Chandler
Chairman's Statement
I am pleased to report another year of progress for the Company in what has
been a difficult climate. All of our portfolio have increased bookings and won
new customers during the year; the aggregate year-on-year growth of annual
recurring revenue ("ARR") of our portfolio, a key indicator of progress, has
increased by 97%, and our portfolio increased employee numbers by 66% and ARR
per employee of 19%.
Our portfolio companies are all early-stage businesses with exciting
breakthrough technologies and should be recognised for their growth,
performance and potential for exit at an excellent return at the appropriate
time. It is always difficult to determine the real underlying value of a
portfolio, but we follow the established investment practice of taking the
last valuation of a round of investment, tempered by any adjustments based on
current market performance and the value of comparable businesses, as the
value of our holdings. Of course, we all expect such businesses to be worth
far more when we finally realise their return at an exit, but in the meantime
we must take a very prudent approach to their valuation.
In this context, it is important to regard Tern shares as a long-term
investment. The real value of the Company will not emerge in the short-term,
it will only be fully realised when we can, in the medium to long-term, obtain
good exits for our various investments. Meanwhile the Tern team will continue
to work tirelessly to ensure that our various companies are maximising their
opportunities to grow and become a source of disruption in their respective
markets in such a way that they can become extraordinarily valuable to a
potential acquiring business.
Our portfolio has been working well, evidenced by the ability of every one of
them to either achieve a listing on a stock market (Wyld Networks on NASDAQ
First North Growth Market), or to raise later stage investment from new
third-party investors (Device Authority, FundamentalVR, Talking Medicines and
Konektio). These all indicate that our confidence in the excellent potential
of our companies is shared by other sources of risk capital.
Of course, it is not possible for our companies to avoid the impact of recent
global economic events; interest rates have increased sharply, and technology
businesses have had to quickly adapt to a new world of ensuring that customer
acquisition and revenue generation is paramount. The extensive experience of
our directors over many decades of past technology cycles has enabled us to
help our companies effectively to manage their way through such turbulence.
The downturn in the global technology sector and in particular the collapse of
Silicon Valley Bank has affected the technology business climate, but previous
downturns have demonstrated that such market conditions can have a relatively
short-term effect on early-stage innovative companies with breakthrough
technologies. Their potential remains to be realised.
Our particular positioning and skillset remains very strong, especially our
valuable intimate links with the US technology marketplace, and our ability to
introduce highly effective management, marketing and technology skills and our
extensive experience over many years of ensuring effective operations in
growth businesses.
Our specialisation in IoT technology, along with the novel application of
innovative artificial intelligence ("AI"), and the effective analysis of very
large data sources, are the fields most prized in today's technology markets.
We have also identified a particular focus on life sciences and medical
applications which are among today's key growth areas.
We have also been making excellent progress in the development of ESG
(environmental, social and governance) policies throughout our portfolio.
I would like to take the opportunity to recognise the outstanding performance
during this year of Al Sisto, our CEO, and our executive directors Bruce
Leith, Sarah Payne and Matthew Scherba, in carefully monitoring and adding
value to the various companies under their charge. We are very much a
'hands-on' team who actively participate in the strategy and development of
our various portfolio companies.
I would also like to thank my fellow non-executive director, Alan Howarth, for
his excellent judgment and advice based on his extensive financial and
business experience.
What we do well is provide an ability for our shareholders to participate in
the development of a portfolio of attractive high-potential businesses, not
otherwise available to private investors, whose growth, with our guidance,
will undoubtedly provide long-term capital gains.
I look forward, in the coming months and years, to the further development of
our excellent portfolio of exciting high-growth companies, and to achieving an
excellent return for you, our shareholders.
Ian Ritchie CBE, FREng, FRSE
Chairman
CEO's Statement
Overview
I am pleased to report that our portfolio has shown remarkable resilience and
growth during 2022. With our dedicated support and guidance, they have
executed skilfully, resulting in continued progress and contribution to our
key performance indicators ("KPIs"). Even in the face of unprecedented market
challenges, our investee companies have shown impressive strength and further
development, a true testament to their leadership and our support. Despite the
intense downward pressure on valuations that we witnessed in 2022, our
companies have demonstrated admirable determination and grit, and we couldn't
be prouder of their accomplishments.
In last year's annual report, I described 2021 as a remarkable year for Tern
and UK technology companies. However, 2022 has presented unprecedented
challenges, unlike any we have seen in recent history. The year can be divided
into two distinct halves, with the first continuing the positive momentum from
the previous year as technology companies, investors, and customers maintained
their course post-pandemic. However, the emergence of inflationary concerns
and the subsequent interest rate hikes created a significant shift in the
traditional investing metrics for the technology industry. This has led to
challenges for technology companies globally and here in the UK, both in
public and private markets. The downward pressure on public technology company
shares eventually trickled down to the private technology sector in the second
half of 2022, resulting in declining valuations that have persisted into 2023.
Despite our best efforts, Tern has not been immune to these dynamics and I am
disappointed to report an £8.4m reduction in the unrealised fair value of our
portfolio during the year.
The objective of venture-backed businesses has always been to pursue rapid,
high-growth opportunities, and this remains true today. As investors, we at
Tern are dedicated to supporting talented entrepreneurs by providing the
necessary capital and support to build innovative, category-creating
businesses, which we believe we have successfully done. However, as the cost
of capital increases and market conditions change, we are encouraging our
portfolio to focus on a different narrative. This involves prioritising a
compelling and sustainable opportunity for potential investors, rather than
relying solely on seeking market dominance. We are striving for our portfolio
to strike a balance between growth and seeking profitability, in order to
responsibly reduce burn rates and drive efficient value-creating growth. As
our reported KPIs demonstrate, our portfolio is still experiencing strong
growth, high levels of customer satisfaction, and our exit goals remain
grounded, despite being impacted by the recent turbulence in valuation
metrics.
Strategy and Market Focus
In 2022, UK M&A activity took a hit and dropped from the record-setting
levels seen in 2021 to pre-pandemic levels. The year-on-year decline of 16%
was, we believe, a result of economic headwinds affecting the volume of deals
completed.
At Tern, we recognise the importance of being agile and having multiple exit
strategies in place to navigate the current market conditions and we firmly
believe that more favourable market conditions are on the horizon in the
second half of 2023.
We remain committed to creating lasting value for our shareholders through our
focus on IoT technology companies that deploy artificial intelligence ("AI"),
machine learning ("ML"), augmented reality/virtual reality ("AR/VR"), natural
language processing ("NLP"), security and communications products and
services. Despite these unexpected events, our portfolio has demonstrated
impressive resilience, which is reflected in their growth in ARR. We have been
encouraging our companies to embrace Software as a service ("SaaS") revenue
models, and it has had a positive impact.
At Tern, our objective is to sell our interests in our portfolio companies
when shareholder value is maximised. We will not sell when valuations are low
or hold indefinitely. We continuously evaluate the optimal timing for
liquidity events, recognising that external events significantly influence
market sentiment. And while we may hold some companies longer to maximise
value for Tern shareholders, a "defined time horizon" would be inappropriate
in rapidly evolving markets. It could be seriously value destructive if
potential buyers knew Tern was obligated to sell by a certain date.
We are confident in the long-term potential of our investment thesis and our
targeting of the double-digit compound annual growth rate ("CAGR") in
healthcare/life sciences and industrial segments. Our approach varies for each
company, but we remain committed to creating value for our shareholders while
reducing dependence on Tern for future funding. Talking Medicines is a prime
example of the success of our investment strategy, and we were proud to report
in 2021 that the valuation of our holding in their equity had increased by 62%
on the November 2020 valuation. Liquidity events are a top priority and we
believe that Tern is in a favourable position to sell when the right time
arises.
Financial Performance, Investments and Realisations
Tern's portfolio's fair value as of December 31, 2022, was £23.9m, reflecting
a decline of £6.7m or 22% from the previous year. This decline was primarily
due to a fair value reduction of £8.4m, offset by additional investment of
£1.7m. Additionally, £3.1m (gross) was raised through three equity raises in
August, October and December 2022 and £42,300 realised from sales of Tern's
holding in Wyld Networks.
As previously referenced, a large part of the fair value decrease at the year
end is a reflection of the dramatic decrease in valuation metrics and models
in the technology sector rather than the underlying prospects of our
companies. For example, FundamentalVR in May 2022 announced a Series B fund
raising round, securing £7m in new equity investment from existing investors
and a new institutional investor, at a valuation uplift of 77% from the
previous book valuation of Tern's holding. The recent follow-on investment
from the last round's investors in April 2023, which was priced at a discount
to the previous round and resulted in a reversal of the previous uplift, in
part reflecting the change in sentiment regarding valuation metrics. This
downwards adjustment to the valuation metrics also impacted the rest of the
portfolio including reductions for Device Authority (£3.2m), Konektio
(£1.9m) and Wyld Networks (£3.2m).
Despite short-term challenges, we remain confident in the long-term potential
of our portfolio and the IoT markets in which we operate. We have maintained
ongoing engagement with and have a clear understanding of our portfolio
companies' cash needs. Our cash and available liquid assets form part of the
important reserve that exists, that can be deployed as appropriate, but we
remain mindful of the importance of preserving capital.
As a quoted company, we are constantly reviewing our expenses to ensure we
operate with maximum efficiency.
ESG
We at Tern are not just another investment firm ticking off boxes on an ESG
checklist. Rather we believe that investing with purpose is our duty, and that
our ultimate goal is to create better outcomes for society, the environment,
and the people that we call our portfolio family.
Our commitment to ESG is the guiding principle that runs through everything we
do, from our investment decisions to our day-to-day operations. To ensure that
we stay true to our values, we have created a portfolio-wide committee
dedicated to providing guidance and support on ESG matters.
Through regular meetings and the sharing of tools and resources amongst our
companies, our ESG committee has helped the entire portfolio develop their own
ESG strategies tailored to their respective markets. As employee, customer,
and investor expectations continue to rise, we understand that ESG is no
longer an option, but a must-have for any successful and responsible business.
As part of our commitment to environmental transparency, we have taken the
additional step of disclosing Tern's carbon usage with the help of a leading
environmental disclosure platform. We truly believe that accountability is key
to driving change, and that transparency is the first step towards creating a
more sustainable future for all.
Outlook and Summary
Despite the challenges posed by macroeconomic factors and geopolitical
conflicts, our portfolio operates in thriving IoT markets and remain well
positioned for successful exits at the right time. While uncertainty may
persist in the short term, we are heartened by the indicators we are seeing in
the market that point to a return to improvements in valuations.
As hands-on managers, we are committed to continuing to work closely with our
portfolio companies, providing them with the benefit of our expertise and
resources to help them navigate the road ahead. The IoT technology markets,
which remain a core focus for us, continue to offer long-term growth potential
and we are excited to see what the future holds.
At the heart of our investment strategy is a focus on ARR growth, which we
believe is the key driver of valuations for start-ups. We understand the
importance of balancing growth and achieving profitability to drive efficient
growth, and we are dedicated to supporting our portfolio as they chart their
path to success.
We are confident that our portfolio will continue to make important
technological advancements that will solve critical business and social
problems, shaping the future of work and the world we live in.
In closing, we want to express our gratitude to the Tern team, our portfolio
CEOs and employees, and our shareholders for their commitment and patience
during what has been a challenging period. Thank you for your trust in our
vision and for joining us on this exciting journey.
Albert Sisto
CEO
Financial Review
All sectors, excluding energy, saw a decline in venture investing and
valuations during 2022 from higher valuations and catch-up investing post
Covid in 2021. This valuation adjustment flowed through to some of our
portfolio companies and holdings. However, our portfolio continued to focus on
their fundamentals, showing growth through the period with a focus on
maximising growth of annual recurring revenue.
Statement of Financial Position
Net assets at 31 December 2022 were £24.9m, a reduction of £7.5m from the
net assets of £32.4m at 31 December 2021. This is principally due to
movements in investments held at fair value through the profit or loss
("FVTPL") and a reduction in the Company's cash balance. Investments made in
our portfolio, and the net positive impact of foreign exchange movements at
Device Authority and Wyld Networks have been offset by decreases in the fair
value of the portfolio leading to an overall decrease in our investments of
£6.7m. Our cash balance is £1.0m lower at 31 December 2022 compared to 31
December 2021. There is no debt on the Statement of Financial Position.
Investments held at FVTPL of £23.9m relate to our portfolio of high-growth
technology companies. During the year, the fair value of this portfolio
decreased by £6.7m, resulting from investments made of £1.7m and a negative
movement in the fair value of investments held at FVTPL of £8.4m.
Income Statement and Statement of Comprehensive Income
The total comprehensive loss for the year was £10.4m (2021: profit of
£4.6m), primarily due to a net negative movement in the fair value of
investments held at FVTPL of £8.4m: a negative fair value movement of £9.5m
offset by a positive foreign exchange movement of £1.1m.
The Company does not charge high board fees to ensure capital is not deducted
at source and is instead reinvested in the portfolio to drive value creation.
Administration costs increased to £1.8m in 2022 (2021: £1.6m). This
consisted of a £0.1m decrease in directors' fees compared to 2021 and small
increases elsewhere, including travel, professional fees and interest. Other
expenses of £0.4m (2021: £0.1m) include costs relating to the proposed
acquisition of Pires Investments Plc, which ultimately did not complete
(£0.3m).
Statement of Cashflows
During the year, £2.0m was used in the Company's operations, £1.8m deployed
within our existing portfolio, via equity and debt; £1.7m into investments
and £0.1m as repayable debt. A net £2.8m was raised through three equity
raises in August 2022, October 2022 and December 2022. A £0.4m short term
loan was provided to the Company during the year and repaid from the December
2022 fund raise proceeds. The loan included an option over Wyld Networks
shares which has now been cancelled.
Events after the end of the reporting period impacting 2022 results
InVMA Limited, which trades as Konektio, completed a £0.3m equity fundraise
in April 2023. Tern invested £0.1m, with the remainder provided by Konektio's
other institutional investors Mercia and Foresight. Tern and other investors
also converted £0.5m of convertible loan notes in Konektio.
Key performance indicators
The Company's financial Key Performance Indicators (KPIs) are focused on
increasing net asset value, increasing net asset value per share and
delivering consistent turnover growth from our portfolio. The Company also
monitors non-financial KPIs, the primary focus being on the increase in
employee numbers and turnover per employee in our portfolio which is an
indicator of growth to support commercial success. These indicators are
monitored closely by the Board and the details of performance against these
are given below.
The return on investments
Unrealised fair value:
· Wyld Networks: £6.0m valuation (31 December 2021: £8.7m): The
equity valuation has decreased due to a reduction in market capitalisation of
£3.0m (reduction in share price) plus an exchange rate loss of £0.2m, offset
by additional funding of £0.5m provided to exercise warrants in Wyld
Networks;
· Device Authority: £11.9m valuation (31 December 2021: £14.7m): The
valuation has decreased due to a net fair value reduction of £3.2m, including
a foreign exchange rate gain of £1.3m, which is considered to be a reflection
of the dramatic decrease in valuation metrics and models in the technology
sector, offset by additional funding provided to the company by Tern of £0.4m
via a CLN. £0.1m of short term loans are also outstanding (and held in trade
and other receivables);
· Konektio: £0.5m valuation (31 December 2021: £2.2m): The equity
value of Konektio reduced due to a fair value reduction of £1.9m with the
pricing of the most recent equity fundraise in April 2023 taken into account,
including £0.2m of additional funding provided via a CLN to the company;
· FundamentalVR: £3.6m valuation (31 December 2021: £3.6m): The
valuation increased due the conversion of an outstanding CLN of £0.6m and a
fair value uplift based on the Series B funding in May 2022, this fair value
increase was then reversed with the most recent equity fundraise in April 2023
(at a 25% discount) taken into account;
· Talking Medicines: £1.8m valuation (31 December 2021: £1.4m): The
valuation has increased due to additional funding provided to the company of
£0.4m. The equity value remains unchanged taking into account the price of
the equity fundraise in January 2022;
· Diffusiondata (previously Push Technology): £0.02m valuation (31
December 2021: £0.02m): The investment is valued at fair value with the price
of the most recent valuation taken into account; and
· SVVUK: £0.1m valuation: The investment is valued at fair value at
the value provided by the SVVUK fund.
The companies in our portfolio are early-stage businesses in evolving markets
where there is a lack of comparative businesses available on which to provide
a comparable valuation and therefore value has been based on an assessment of
numerous factors which includes the multiples achieved in comparable markets
on recent transactions, and an assessment by the Board on the strength of our
companies' sales pipelines and achievability of their 2023 sales forecast.
Wyld Networks is measured as a Level 1 company under IFRS and as such the
value is determined by reference to the appropriate quoted market price at the
reporting date. The global downturn in technology company valuations and
multiples applied to early-stage businesses was taken into consideration when
assessing the fair value of the portfolio, and this in particular is a driver
of the reduction in the fair value of our holding in Device Authority.
Further details in respect of fair value measurement can be found in note 2
below.
The net assets of the Company at 31 December 2022 showed a reduction to
£24.9m (31 December 2021: £32.4m). The net asset value per ordinary share as
at 31 December 2021 decreased to 6.4p (31 December 2021: 9.2p).
The year-on-year unaudited ARR of our portfolio increased by 97% from 2021 to
2022 and the year-over-year growth in aggregated revenue grew by 5% (47% from
2020 to 2021). The key focus for our portfolio is on recurring revenue as it
is a primary driver of valuation growth. As a result, it will be that growth
that we will monitor and report going forward.
The Company has non-financial KPIs which are also monitored regularly by the
Board. The non-financial KPIs are focused on the growth in employee numbers in
our portfolio. We believe these factors help serve as leading indicators of
the future performance and our impact on our stakeholders:
Employees in our portfolio increased by 66% from 2021 to 2022 (35% from 2020
to 2021), and this increase was balanced by an associated increase in ARR such
that ARR per employee also increased by 19% from 2021 to 2022.
Sarah Payne
CFO
Portfolio Companies and Holdings as at 31 December 2022
Wyld Networks AB (publ) ("Wyld Networks" or "Wyld")
Valuation: £6.0m
Holding: 41.2%
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. The company specialises in providing wireless
connectivity between IoT sensors and Low-Earth-Orbit ("LEO") satellites with
its Wyld Connect solution for governments and businesses.
Wyld Networks CEO, Alastair Williamson said: "As we continue to evolve and
expand, we are grateful for the insights and guidance that Tern provides,
helping us navigate the challenges and capitalise on the opportunities that
lie ahead."
Device Authority Limited ("DA" or "Device Authority")
Valuation: £11.9m
Equity ownership: 53.8%, plus convertible loan of £0.4m and cashflow loan of
£0.1m
Device Authority is a global leader in securing machine identities and
enabling 'zero trust' security policies for the IoT. Zero Trust is a security
framework requiring all users, whether in or outside the organisation's
network, to be authenticated, authorised, and continuously validated for
security configuration and posture before being granted or keeping access to
applications and data. Device Authority's KeyScaler® software security
platform is believed to be the only platform that can automate and manage
machine identities throughout their lifecycle, delivering automated device
provisioning, authentication, credential management, policy-based end-to-end
data security/encryption and secure updates and providing complete device,
data and operational trust.
Device Authority CEO, Darron Antill said: "Team Tern continues to support the
company in many ways, developing fundraising plans, leveraging its network and
contacts, and actively supporting customer, channel and partner-based
activities."
InVMA Limited (trading as "Konektio")
Valuation: £0.5m
Equity ownership: 36.8%, plus convertible loan of £0.2m
Konektio helps industrial and manufacturing companies prosper by converging
their physical assets with new transformational digital insights. Konektio's
AssetMinder® is a modular, industry 4.0, IoT SaaS platform, using a wide
range of analytical tools, AI and machine learning algorithms to connect whole
factory floors and processes as well as managing resources into and out of the
factory. AssetMinder® assesses the effectiveness and efficiencies of entire
operations, putting customers in control of their assets and therefore
directly impacting productivity, efficiency and business outcomes.
Konektio CEO, Peter Stephens said: "We're in an exciting growth phase where we
are experiencing acceleration in customer demand for AssetMinder solutions at
greater scale. We are seeing this from both existing customers taking more of
our portfolio solutions and new customers working with us for the first time
in existing and expansion markets. We are very excited to have the support of
Tern as we go into this accelerated growth stage."
FVRVS Limited ("FundamentalVR")
Valuation: £3.6m
Equity ownership: 16.6%
FundamentalVR delivers virtual reality 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, practise, and test themselves within a safe,
controllable space that is as close to real-life as possible.
FundamentalVR CEO, Richard Vincent said: "Throughout our journey, Tern has
been an invaluable partner, offering unwavering support and expertise. As we
strive to achieve new heights and increase our commercial traction, their
wealth of experience and guidance have proven to be invaluable."
Talking Medicines Limited ("Talking Medicines")
Valuation: £1.8m
Equity ownership: 23.8%
Talking Medicines is revolutionising the pharmaceutical industry with its
cutting-edge social intelligence platform, PatientMetRx. By harnessing the
power of artificial intelligence (AI) and natural language processing (NLP),
the platform provides pharmaceutical companies with unparalleled insights into
patient and healthcare providers (HCPs) experience and preferences using
social data. This allows companies to deliver a greater return on investment
for marketing and ultimately improve health outcomes for patients. With
PatientMetRx, pharmaceutical companies have access to a level of scale and
depth of patient insights that was previously impossible, enabling them to
make data-driven decisions that drive success.
Talking Medicines CEO, Jo Halliday said: "Tern are a committed investor who
add significant value to scaling our operation through their strategic
involvement particularly around expansion to US and product led growth."
Diffusiondata (previously Push Technology)
Valuation: £0.02m
Equity ownership: <1%
Diffusiondata significantly enhances the ability of organisations to
communicate in real-time. This includes direct communication as well as
indirect, for example, by refreshing data displayed information in real-time
rather than when a user explicitly asks for an update. Interactive
applications are infinitely more engaging, updating in real-time as new data
becomes available.
Sure Valley Ventures UK Software Technology Fund ("SVVUK")
Valuation: £0.1m
Equity ownership: 5.9%
SVVUK is a new UK venture capital fund, investing in cutting-edge software
companies that are at the forefront of immersive technology and metaverse
innovation. With a focus on augmented and virtual reality, artificial
intelligence, the IoT and security, SVVUK's portfolio companies are poised to
transform the digital landscape.
Income Statement and Statement of Comprehensive Income
For the year ended 31 December 2022
2022 2021
£ £
Fee income 66,013 63,783
Movement in fair value of investments (8,415,781) 6,240,095
Profit/(Loss) on disposal 11,208 (199,115)
Total investment income (8,338,560) 6,104,763
Administration costs (1,792,523) (1,635,058)
Other expenses (366,596) (75,372)
Operating (loss)/profit (10,497,679) 4,394,333
Finance income 50,915 183,988
(Loss)/Profit before tax (10,446,764) 4,578,321
Tax - -
(Loss)/Profit and total comprehensive income for the period (10,446,764) 4,578,321
Since there is no other comprehensive income, the profit for the year is the
same as the total comprehensive income for the year.
(LOSS)/EARNINGS PER SHARE:
Basic (loss)/earnings per share (2.92) pence 1.35 pence
Diluted (loss)/earnings per share (2.92) pence 1.33 pence
Statement of Financial Position
As at 31 December 2022
ASSETS 2022 2021
NON--CURRENT ASSETS £ £
Investments 23,881,769 30,612,047
23,881,769 30,612,047
CURRENT ASSETS
Trade and other receivables 363,765 189,354
Cash and cash equivalents 931,765 1,957,203
1,295,530 2,146,557
TOTAL ASSETS 25,177,299 32,758,604
EQUITY AND LIABILITIES
Share capital 1,379,282 1,371,970
Share premium 33,341,218 30,546,569
Retained earnings (9,868,199) 498,010
24,852,301 32,416,549
CURRENT LIABILITIES
Trade and other payables 342,998 342,055
TOTAL CURRENT LIABILITIES 342,998 324,055
TOTAL LIABILITIES 342,998 342,055
TOTAL EQUITY AND LIABILITIES 25,177,299 32,758,604
Statement of Changes in Equity
For the year ended 31 December 2022
Share capital Share premium Retained earnings Total equity
£ £ £ £
Balance at 31 December 2020 1,367,635 26,740,789 (4,107,767) 24,000,657
Total comprehensive income - - 4,578,321 4,578,321
Transactions with owners
Issue of share capital 4,335 4,031,665 - 4,036,000
Share issue costs - (225,885) - (225,885)
Share based payment charge - - 27,456 27,456
Balance at 31 December 2021 1,371,970 30,546,569 498,010 32,416,549
Total comprehensive income - - (10,446,764) (10,446,764)
Transactions with owners
Issue of share capital 7,312 3,114,249 - 3,121,561
Share issue cost - (319,600) - (319,600)
Share based payment charge - - 80,555 80,555
Balance at 31 December 2022 1,379,282 33,341,218 (9,868,199) 25,852,301
Statement of Cash Flows
For the year ended 31 December 2022
2022 2021
£ £
OPERATING ACTIVITIES
Net cash used in operations (2,055,814) (1,535,722)
Purchase of investments (1,670,194) (2,504,185)
Cash received from sale of investments 42,346 -
Loans to portfolio companies (144,757) -
Interest received 1,020 56,829
Net cash used in operating activities (3,827,399) (3,983,078)
FINANCING ACTIVITIES
Proceeds on issues of shares 3,121,561 4,000,000
Share issue expenses (319,600) (225,885)
Proceeds from exercise of options - 36,000
Net cash from financing activities 2,801,961 3,810,115
(Decrease) in cash and cash equivalents (1,025,438) (172,963)
Cash and cash equivalents at beginning of year 1,957,203 2,130,166
Cash and cash equivalents at end of year 931,765 1,957,203
Notes
1. BASIS OF PREPARATION
The financial information set out in the announcement does not constitute the
Company's statutory accounts for the years ended 31 December 2022 or 2021.
The financial information for the year ended 31 December 2021 is derived from
the statutory accounts for that year, which were prepared under IFRSs in
conformity with the requirements of the Companies Act 2006, and which have
been delivered to the Registrar of Companies. The auditor's report on those
accounts was unqualified, did not contain a statement under either Section
498(2) or Section 498(3) of the Companies Act 2006.
The financial information for the year ended 31 December 2022 is derived from
the audited statutory accounts for the year ended 31 December 2022 on which
the auditors have given an unqualified report, that did not contain a
statement under section 498(2) or 498(3) of the Companies Act 2006 and did not
include references to any matters to which the auditors drew attention by way
of emphasis. The statutory accounts will be delivered to the Registrar of
Companies following the Company's annual general meeting.
The financial statements of the Company have 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 31 December 2022. The accounting policies are
consistent with those applied in the preparation of the interim results for
the period ended 30 June 2022. The accounting policies are also consistent
with the statutory accounts for the year ended 31 December 2021.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Although these estimates are based on management's best
knowledge of the amount, event or actions, actual results may ultimately
differ from those estimates.
In accordance with IFRS 10, para 4 the Directors consider the Company to be an
investment company and has taken the exemption not to present consolidated
financial statements or apply IFRS3 when it obtains control of another entity
as it is an investing company that measures all of its investments at fair
value through the income statement in accordance with IFRS 9.
1.1 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. This has been assessed using detailed cash flow analysis
so that the Board can conclude that the Company has sufficient working capital
resources to continue for at least 12 months from the approval of the
financial statements without any additional financing requirement. In the
event that opportunities are presented such that additional funding was
required, management are confident that they would be able to obtain
additional funds from various sources. For example, the Company can exit part
of its investment in listed equity securities with the risk that such
transactions are determined by an inherent and undetermined market risk.
2. FAIR VALUE MEASUREMENT
For Level 3 investments, private company portfolio companies, the fair value
assessment was made by the directors using the price of the shares in the most
recent fundraise, where this was available, as well as an assessment of market
valuations placed on comparable businesses, a review of the underlying asset
values and a review of the sales pipeline and forecast to support any
valuation applied. Convertible loans provided to portfolio companies are
evaluated with reference to IFRS 9.
3. NON-CURRENT ASSETS
INVESTMENTS
2022 2021
£ £
Fair value of investments brought forward 30,612,047 21,904,791
Interest accrued on convertible loan note 46,447 162,091
Additions 1,670,194 2,504,185
Disposals (31,138) (199,115)
Fair value of investments carried forward 32,297,550 24,371,952
Fair value adjustment to investments (8,415,781) 6,240,095
Fair value of investments carried forward 23,881,769 30,612,047
Cost Valuation Equity ownership
£000 £000 %
Wyld Networks AB 2,299 5,985 41.2
Device Authority Limited 8,932 11,861 53.8
InVMA Limited (Konektio) 1,695 469 36.8
FVRVS Limited (FundamentalVR) 2,928 3,630 16.6
Talking Medicines Limited 1,260 1,792 23.8
Diffusiondata Limited 120 23 <1
Sure Valley Ventures UK Software Technology Fund 222 122 5.9
17,456 23,882
The convertible loan facility issued to Device Authority is a financial asset
with multiple derivatives and the entire contract has been designated at
FVTPL, with any movement in fair value taken to profit or loss for the year.
As at 31 December 2022, the principal of the convertible loan outstanding was
£354,547 ($427,520) (2021: Nil). The unsecured cashflow loan issued to Device
authority carries interest. The balance outstanding of the cashflow loan as at
31 December 2022 was £144,757 ($174,551) (2021: Nil).
The convertible loan facility issued to InVMA is a financial asset with
multiple derivatives and the entire contract has been designated at FVTPL,
with any movement in fair value taken to profit or loss for the year. As at 31
December 2022, the principal of the convertible loan outstanding was £170,000
(2021: Nil).
The convertible loan facility issued to FVRVS was converted into equity during
the year with any movements in fair value taken to profit or loss for the
year.
4. (LOSS)/EARNINGS PER SHARE
2020 2019
£ £
2022 2021
(Loss)/Profit for the purposes of basic and fully diluted profit per share £(10,446,764) £4,578,321
2022 2021
Number Number
Weighted average number of ordinary shares:
For calculation of basic earnings per share 357,424,413 339,559,205
For calculation of fully diluted earnings per share 357,424,413 342,975,205
2022 2021
(Loss)/Earnings per share:
Basic (loss)/earnings per share (2.92) pence 1.35 pence
Diluted (loss)/earnings per share (2.92) pence 1.33 pence
In 2022 the fully diluted loss per share is the same as the basic loss per
share as the share options were underwater which would have an anti-dilutive
effect on loss per share.
5. POSTING OF ANNUAL REPORT AND ANNUAL GENERAL MEETING
The annual report for the year ended 31 December 2022 will shortly be
available from the Company's website (https://www.ternplc.com/investors
(https://www.ternplc.com/investors) ) and will be posted to shareholders.
The annual report contains a notice of the AGM which will be held at 9am on
Thursday 29 June 2023 at the offices of Reed Smith, The Broadgate Tower, 20
Primrose Street, London, EC2A 2RS.
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