Interim Results
IP Group PLC
12 September 2006
For immediate release 12 September 2006
IP GROUP PLC
('IP Group' or the 'Group' or the 'Company')
Interim results for the half year ended 30 June 2006
IP Group plc (LSE: IPO), the intellectual property commercialisation company,
today announces its unaudited interim results for the six months ended 30 June
2006.
Financial highlights
• Profit after taxation: £30.3m (H1 2005: £3.6m, FY 2005: £5.6m)
• Fair value of equity investments: £72.7m (H1 2005: £39.9m, FY 2005:
£44.3m)
• Cash proceeds from sales of equity investments: £3.0m (H1 2005: Nil, FY
2005: £0.8m)
• Investment in spin-out companies £1.9m (H1 2005: £1.7m, FY 2005 £4.2m)
• Cash balance: £57.0m (H1 2005: £42.3m, FY 2005: £39.9m)
• Tight cost control - operating expenses before official list costs: £2.0m
(H1 2005: £2.4m, FY 2005: £4.6m)
Operational highlights
• IP Group admitted to the Official List of the UK Listing Authority on 19
June 2006
• Number of spin-out companies increases to 44 (H1 2005: 33, FY 2005: 37)
• Oxford Catalysts Group plc and Syntopix Group plc float successfully on
AIM
• New 25-year partnership with the University of Surrey
• Extension of partnership with the University of York to cover the entire
university
• Six successful follow-on funding rounds for spin-out companies
• Modern Biosciences plc signs a Memorandum of Understanding with the
University of Manchester for the development of drugable intellectual
property
Post 30 June 2006 highlights
• Launch of IP Venture Fund, in partnership with the European Investment
Fund, to invest in IP Group spin-out companies
• Avacta Group plc admitted to AIM through a reverse takeover
• Modern Biosciences plc signs an agreement to develop a new class of cancer
drug licensed from the University of Manchester
• New 25-year partnerships with Queen Mary (University of London), and the
University of Bath bringing total number of partners to nine
• Investment of £1m in Retroscreen Virology Ltd, a leading anti-viral
contract research organisation and an existing spin-out from Queen Mary
(University of London)
David Norwood, Executive Chairman of IP Group, said: 'IP Group has had a very
successful six month period, generating record first half profits and seeing
significant progress throughout the Group's portfolio. I believe that the
breadth and quality of our spin-out portfolio is very high and, whilst given the
nature of our business it will always be difficult to predict the timing of
gains from the portfolio, I remain confident that our growing number of
spin-outs will generate significant returns for our shareholders.
The second half of the year has started well with two new 25 year university
partnerships, the launch of a new fund and the flotation, through a reverse
takeover, of a spin-out from the University of Leeds.'
For more information, please contact:
IP Group plc 020 7489 5200
Dave Norwood, Executive Chairman
Alan Aubrey, Chief Executive Officer
William Turner, Group Financial Controller
Liz Vaughan-Adams, Communications 020 7489 5206 / 07979 853 802
Further information on IP Group is available on our website: www.ipgroupplc.com
Buchanan Communications 020 7466 5000
Mark Court, Tim Anderson, Mary-Jane Johnson
OVERVIEW
The period ended 30 June 2006 has been one of the most productive in the Group's
history. The Group's portfolio of equity investments has delivered net fair
value gains of £28.9m for the period and a profit before taxation of £30.3m.
University Partnerships
The Group has continued to forge collaborations with research intensive
institutions.
The Group now has partnerships with nine universities. In February the Group
entered into a 25 year collaboration with the University of Surrey, in March the
Group extended its partnership with the University of York to cover the entire
university, and, subsequent to the period end, the Group entered into 25 year
partnerships with Queen Mary (University of London) and the University of Bath.
Portfolio
During the six month period ended 30 June 2006 the Group increased the number of
spin-outs in its portfolio to 44. Two companies from the portfolio, Oxford
Catalysts Group plc and Syntopix Group plc, listed on AIM during the period.
Subsequent to the period end, Avacta Group plc, a spin-out from the University
of Leeds, listed on AIM. Six companies in the portfolio achieved successful
follow-on funding rounds during the period.
Modern Biosciences plc ('Modern Biosciences')
Modern Biosciences was established by the Group to address the problem of poor
product pipeline within big pharmaceutical companies. Modern Biosciences will
in-license intellectual property from universities, commission proof of concept
development work and ultimately out-license that intellectual property to
pharmaceutical and biotech companies. Modern Biosciences is a good example of IP
Group being able to leverage its access to leading scientific research to
address a clear market need through an innovative business model. The Group
anticipates that certain other emerging market problems can be addressed in this
way.
In March, Modern Biosciences signed a Memorandum of Understanding with the
University of Manchester relating to the commercialisation of drug related
intellectual property. In July, Modern Biosciences signed an exclusive licence
and research agreement with both the University of Manchester and the University
of Salford for the development of a new class of cancer drug targeting platinum
resistant tumours. Modern Biosciences has also appointed Professor Barry Furr,
OBE, as Chief Scientific Adviser (oncology). Professor Furr was formerly Chief
Scientist and Head of Project Evaluation at AstraZeneca Pharmaceuticals where he
was responsible for the discovery and development of the anti-cancer drugs
Zoladex and Casodex, used for the treatment of breast and prostate cancer
respectively.
Corporate developments
In April, IP Group's share capital was divided by way of a 5 for 1 share split
and to reflect more accurately the direction and activities of the Group, the
Group's name was changed to IP Group plc from IP2IPO Group plc. In May, the
Company raised £16.3m by way of a share placing with institutional investors. In
June, trading in the Group's shares on the Official List of the UK Listing
Authority commenced. The Board is confident that this move will raise the
profile of IP Group both domestically and internationally.
Since the period end, the Company launched the IP Venture Fund, a new venture
capital fund in partnership with the European Investment Fund ('EIF') with a
first closing of £15.5 million. The EIF is one of the leading investors in
venture capital funds in Europe. The fund will invest in portfolio company
follow-on financing rounds.
Personnel changes
On 1 January 2006, Dave Norwood became Executive Chairman of the Group and Alan
Aubrey became Chief Executive Officer. On 31 March 2006, Magnus Goodlad joined
the IP Group Board. On 11 September 2006 Stuart Thompson was appointed Head of
Executive Search and Talent Management. Stuart was previously Head of the
Healthcare and Life Sciences Practice at Whitehead Mann and his appointment
reflects the importance the Group attaches to the selection and retention of the
top executives in the UK for early stage technology businesses.
On 12 September 2006, Stephen Brooke, Director of Business Development, resigned
from the Board. The Board wish to thank Stephen for his contribution to the
Group to date and wish him well for the future.
OPERATIONAL REVIEW
Portfolio performance
The Group recorded net fair value gains of £28.9m (30 June 2005: £4.3m). An
analysis of net fair value gains is given below:
Unaudited six Unaudited Audited 12
months to 30 six months to 30 months to 31
June June December
2006 2005 2005
£'m £'m £'m
Gains on the revaluation of investments 33.1 6.6 14.1
Losses on the revaluation of investments (4.2) (2.3) (8.4)
Net fair value gains 28.9 4.3 5.7
Gains on the revaluation of investments were in part attributable to the
admission to AIM of Oxford Catalysts Group plc and Syntopix Group plc,
collectively generating gains of £14.5m. Following six successful follow-on
private funding rounds, raising a total of £12.3m, the Group recorded gains
within the private portfolio of £18.6m of which Oxford Nanolabs Limited and
Ilika Technologies Limited generated gains of £10.3m and £5.5m respectively.
Losses on the revaluation of investments of £4.2m (H1 2005: £2.3m, FY 2005
£8.4m) were attributable in part to mark to market losses on the Group's
portfolio of AIM-listed investments of £1.2m. Provisions against investments in
the private portfolio amounted to £3.0m.
The Group realised gains on the disposal of investments of £2.0m following the
successful sale at IPO of 1,149,425 ordinary shares in Oxford Catalysts Group
plc.
Since the period end, Avacta Group plc, a spin-out company from the University
of Leeds, has joined AIM through a reverse takeover. At the date of admission to
AIM this transaction generated an additional revaluation gain of £3.5m for the
Group.
Equity stakes
At 30 June 2006 the Group had equity stakes in 44 companies (30 June 2005: 33).
A movement in the number of spin-out companies is given below:
Unquoted spin-outs Quoted spin-outs
(number) (number)
At 1 January 2006 32 5
New spin-out businesses 7 -
Companies floated during the year (2) 2
At 30 June 2006 37 7
During the period the Group invested £0.9m in seven new spin-outs and invested
£1.0m in follow-on funding. Since 30 June 2006, the Group has also invested
£2.8m in five companies.
Cash
At 30 June 2006 the Group had cash of £57.0m (30 June 2005: £42.3m). The Group
covered its operating costs with receipts from fund management income,
consultancy income and interest. The Group's strategy continues to be to monitor
costs carefully and to cover operating expenses with fund management income,
consultancy income and interest receipts.
The Group invested £1.9m in new spin-outs and follow on funding during the
period and received proceeds on the sale of equity stakes of £3.0m. The Group
settled £0.7m of deferred consideration as a consequence of the acquisition of
Techtran Group Limited. The Group therefore generated net cash on its portfolio
of £0.5m (30 June 2005: Outflow £3.5m). The Group issued new share capital for
cash proceeds of £16.6m.
At 30 June 2006 the Group had £28.8m ring-fenced for investment in spin-out
companies from university partners. Subsequent to 30 June 2006, this has
increased to £38.8m following the successful completion of two further
university partnerships each with a cash commitment of £5.0m. Modern Biosciences
has committed up to £1.4m as a result of its research agreement with the
Universities of Manchester and Salford for the development of a new class of
cancer drug. Subsequent to 30 June 2006 the Group has committed £1.4m for
investment in the IP Venture Fund.
CONSOLIDATED INTERIM INCOME STATEMENT
For the six months to 30 June 2006
Note Unaudited six Unaudited Audited 12
months to 30 six months to 30 months to 31
June June December
2006 2005 2005
£'m £'m £'m
Revenue
Gains on the revaluation of investments 33.1 6.7 14.1
Losses on the revaluation of investments (4.2) (2.3) (8.4)
Gains on disposal of equity investments 2.0 - 0.8
Dividends - - 0.2
Revenue from services 0.8 0.8 1.7
31.7 5.2 8.4
Administrative expenses
Employee bonus costs (0.4) - (1.2)
Official list costs (0.3) - -
Other administrative expenses (1.6) (2.4) (3.4)
(2.3) (2.4) (4.6)
Operating profit 29.4 2.8 3.8
Finance income - interest receivable 0.9 0.8 1.8
Profit before taxation 30.3 3.6 5.6
Taxation 4 - - -
Profit attributable to equity holders 30.3 3.6 5.6
Basic earnings per ordinary share (p) 2 13.06 1.64 2.52
Diluted earnings per ordinary share (p) 2 12.83 1.59 2.45
CONSOLIDATED INTERIM BALANCE SHEET
As at 30 June 2006
Unaudited at Unaudited at 30 Audited at 31
30 June June December
2006 2005 2005
£'m £'m £'m
ASSETS
Non-current assets
Property, plant and equipment 0.1 0.1 0.1
Intangible assets:
Goodwill 18.4 18.4 18.4
Acquired intangible assets 0.5 0.7 0.6
Equity rights and related acquisition costs 20.2 20.2 20.2
Equity investments 72.7 39.9 44.3
Financial asset 1.2 - 1.3
Investment in limited partnerships 0.1 0.1 0.1
Total non-current assets 113.2 79.4 85.0
Current assets
Trade and other receivables 1.7 1.0 2.0
Cash and cash equivalents 57.0 42.3 39.9
Total current assets 58.7 43.3 41.9
Total assets 171.9 122.7 126.9
EQUITY AND LIABILITIES
Equity attributable to equity holders
Called up share capital 4.8 4.5 4.6
Share premium account 89.7 84.7 73.3
Merger reserve 12.8 0.8 12.8
Retained earnings 59.4 26.9 29.1
Total equity 166.7 116.9 119.8
Non-current liabilities
Trade and other payables 2.9 4.3 3.6
Provisions 0.3 0.1 0.6
Total equity and non-current liabilities 169.9 121.3 124.0
Current liabilities
Trade and other payables 2.0 1.4 2.9
Total equity and liabilities 171.9 122.7 126.9
CONSOLIDATED INTERIM CASHFLOW STATEMENT
For the six months to 30 June 2006
Unaudited six Unaudited Audited 12
months to 30 six months to 30 months to 31
June June December
2006 2005 2005
£'m £'m £'m
Operating activities
Operating profit 29.4 2.8 3.8
Fair value movements in equity investments (28.9) (4.3) (5.7)
Amortisation of intangible non-current assets 0.1 0.1 0.2
Decrease / (increase) in trade and other receivables 0.3 0.2 0.3
(Decrease) / increase in trade and other payables and (0.3) (2.0) (1.7)
provisions
Profit on disposal of equity investments (2.0) - (0.8)
Dividends - - (0.2)
Equity allocated to staff 0.4 - -
Share-based payment charge - 0.1 0.3
Interest received 1.0 0.8 1.3
Net cash from operating activities - (2.3) (2.5)
Investing activities
Purchase of equity investments (1.9) (1.8) (4.2)
Financial asset 0.1 - (1.4)
Purchase of subsidiary undertaking (0.7) (3.5) (3.5)
Net cash acquired with subsidiary - 1.8 1.8
Proceeds from sale of equity investments 3.0 - 0.8
Dividend received - - 0.2
Net cash generated / (used) in investing activities 0.5 (3.5) (6.3)
Financing activities
Proceeds from issue of share capital 16.6 13.3 13.9
Net increase in cash and cash equivalents 17.1 7.5 5.1
Cash and cash equivalents at the beginning of the period 39.9 34.8 34.8
Cash and cash equivalents at the end of the period 57.0 42.3 39.9
CONSOLIDATED UNAUDITED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the six months to 30 June 2006
Attributable to equity holders of the Group
Total Share Retained Merger Share
Equity capital earnings reserve premium
£'m £'m £'m £'m £'m
At 1 January 2005 87.8 4.1 23.3 0.8 59.6
Consolidated profit for the period to 30 June 2005 3.6 - 3.6 - -
Employee share option charge in period to 30 June 2005 0.1 - 0.1 - -
Pre-acquisition reserves attributable to the Group (0.1) - (0.1) - -
Issue of share capital in the period to 30 June 2005 25.5 0.4 - 12.0 13.1
At 30 June 2005 116.9 4.5 26.9 12.8 72.7
Consolidated profit for the period to 31 December 2005 2.0 - 2.0 - -
Employee share option charge in period to 31 December
2005 0.2 - 0.2 - -
Issue of share capital in the period to 31 December 2005 0.7 0.1 - - 0.6
At 31 December 2005 119.8 4.6 29.1 12.8 73.3
Consolidated profit for the period to 30 June 2006 30.3 - 30.3 - -
Employee share option charge in period to 30 June 2006 - - - -
Issue of share capital in period to 30 June 2006 16.6 0.2 - - 16.4
At 30 June 2006 166.7 4.8 59.4 12.8 89.7
NOTES TO THE INTERIM RESULTS
1. BASIS OF PREPARATION
The interim consolidated financial statements of IP Group plc are as at and for
the six months ended 30 June 2006 and comprise the results, assets and
liabilities of the Company and its subsidiaries ('the Group').
These interim financial statements have been prepared in accordance with the
Listing Rules of the Financial Services Authority. They have not been prepared
in accordance with IAS34 - 'Interim Financial Reporting'. They do not include
all of the information required for full annual financial statements, and should
be read in conjunction with the audited financial statements of the Group as at
and for the year ended 31 December 2005. These interim financial statements
were approved by the board and authorised for issue on 12 September 2006.
The accounting policies applied by the Group in these interim consolidated
financial statements are the same as those applied by the Group in its audited
consolidated financial statements as at and for the year ended 31 December 2005.
The basis of consolidation is set out in the Group's accounting policies in
those financial statements. The directors have changed the format of the income
statement previously reported to show more clearly the analysis of revenues that
are generated from the Group's principal activities. There have been no changes
to previously reported balances or results and it is the directors' intention to
use this format for future financial reports
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income and
expenses. In preparing these interim consolidated financial statements, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
applied to the audited consolidated financial statements as at and for the year
ended 31 December 2005.
The comparative figures for the year ended 31 December 2005 do not constitute
statutory financial statements for the purpose of s240 of the Companies Act
1985. A copy of the Group's statutory financial statements for that year has
been delivered to the Registrar of Companies and contained an unqualified
auditor's report in accordance with s235 of the Companies Act 1985 and did not
contain statements made under either s237(2) or s272(3) of the Companies Act
1985.
2. EARNINGS PER SHARE
The basic earnings per share has been calculated by dividing the profit for the
period of £30.3m (for the period ended 30 June 2005: profit 3.6m; for the year
ended 31 December 2005: profit £5.6m) by the weighted average number of shares
of 231,957,355 in issue during the six month period to 30 June 2006 (for the six
month period ended 30 June 2005: 203,194,550*; for the year ended 31 December
2005: 222,813,505*).
The diluted earnings per share has been calculated by dividing the profit for
the period of £30.3m (for the period ended 30 June 2005: profit £3.6 m; for the
year ended 31 December 2005: profit £5.6m) by 236,157,460 shares (for the six
month period ended 30 June 2005: 209,067,425*; for the year ended 31 December
2005: 228,381,635*), being the sum of the weighted average number of shares in
issue adjusted for the conversion of the dilutive potential shares, weighted for
the period they were outstanding.
*Comparative figures restated following 5:1 share split in April 2006.
3. EQUITY INVESTMENTS - DESIGNATED AS 'AT FAIR VALUE THROUGH PROFIT OR
LOSS'
Quoted spin out Unquoted spin out Other Total
companies companies investments
£'m £'m £'m £'m
At 1 January 2005 24.0 8.3 3.2 35.5
Investments during the period to 30 June 2005 - 1.7 0.4 2.1
Reclassifications during the period to 30 June 2005 0.3 (0.3) - -
Change in fair value in period to 30 June 2005 4.0 0.3 - 4.3
Adjustment arising on consolidation of Techtran Group - - (2.0) (2.0)
Limited
At 30 June 2005 28.3 10.0 1.6 39.9
Investments during the period to 31 December 2005 - 3.0 - 3.0
Reclassifications during the period to 31 December 0.5 (0.5) - -
2005
Change in fair value in period to 31 December 2005 (4.2) 5.9 (0.2) 1.5
Disposals during the period to 31 December 2005 - (0.1) - (0.1)
At 31 December 2005 24.6 18.3 1.4 44.3
Investments during the period to 30 June 2006 - 1.9 - 1.9
Reclassifications during the period to 30 June 2006 1.1 (1.1) - -
Change in fair value in period to 30 June 2006 14.5 14.2 0.2 28.9
Shares transferred to staff in period to 30 June 2006 - (1.4) - (1.4)
Disposals during the period to 30 June 2006 (0.5) (0.5) - (1.0)
At 30 June 2006 39.7 31.4 1.6 72.7
4. TAXATION
The directors believe that the Group is a trading group as defined in para. 21
Sch. 7AC TCGA 1992 and therefore qualifies for the Substantial Shareholdings
Exemption ('SSE') on chargeable gains arising on the disposal of qualifying
holdings. The Group has previously obtained post-transaction clearance from H M
Revenue & Customs under Code of Practice 10 (CoP10) that SSE applied to previous
disposals in 2004. During the period under review the Group has applied for
clearance under CoP10 in respect of a disposal of shares that took place earlier
this year. This process is ongoing.
The directors have also sought the views of leading Tax Counsel and other
professional advisers on this matter. Should the Group not qualify for SSE as a
trading group then a deferred tax liability of £2.5m will be required to be
recognised in accordance with International Accounting Standard 12 - Income
Taxes.
5. POST BALANCE SHEET EVENTS
Avacta Group plc, a spin-out from the University of Leeds in which IP Group
holds an equity stake of 26% announces it has joined AIM through a reverse
takeover.
Modern Biosciences plc signed an intellectual property in-licensing agreement
with the University of Manchester to develop a cancer drug.
Queen Mary (University of London) and the University of Bath signed 25 year
commercialisation contracts with IP Group.
IP Group announced it had invested £1m in Retroscreen Virology Limited, the
first investment as part of the Company's collaboration with Queen Mary
University
NOTES TO THE INTERIM RESULTS (Continued)
INDEPENDENT REVIEW REPORT TO IP GROUP PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2006 on pages 5 to 9. We have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Listing Rules of the
Financial Services Authority and for no other purpose. No person is entitled to
rely on this report unless such a person is a person entitled to rely upon this
report by virtue of and for the purpose of our terms of engagement or has been
expressly authorised to do so by our written consent. Save as above, we do not
accept responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such liability.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2006.
BDO Stoy Hayward LLP
Chartered Accountants
Southampton
12 September 2006
Notes:
a) The maintenance and integrity of the IP Group plc website is the
responsibility of the Directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accepts no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the web site.
b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
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