Final results for the year ended 30 June 2023
The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.
31 October 2023
Frontier IP Group Plc
("Frontier IP" or the "Group")
Final results for the year ended 30 June 2023
Financial highlights
· Net assets per share as at 30 June 2023 decreased 8% to 81.8p (30 June 2022: 88.5p)
· Basic loss per share of 5.85p (2022: earnings per share of 18.60p)
· Part-disposal of holding in Exscientia generated cash of £4,926,000 in the period under review (2022: £6,525,000) realising a loss of £786,000 (2022: profit of £2,867,000)
· Unrealised loss on the revaluation of investments of £966,000 (2022: unrealised gain of £10,908,000)
· Fair value of our equity portfolio decreased by 17% to £32,964,000 (2022: £39,712,000) following disposals of £5,713,000 (2022: £3,659,000) and additions of £745,000 (2022: £1,378,000)
· Loss before tax of £4,370,000 (2022: profit before tax £10,879,000)
· Cash balances at 30 June 2023 of £4,603,000 (2022: £4,368,000)
Corporate highlights
· Generated cash proceeds of £4.93 million from selling shares in portfolio company Exscientia during the year. Following the Exscientia share sales, Frontier IP is interested in 493,550 Advanced Depositary Shares in Exscientia representing 0.4% of Exscientia's issued share capital. In total the Group has raised net proceeds of £11.45 million through selling Exscientia shares since January 2022. During the period a total of £2.4 million was invested in the portfolio by Frontier IP off its own balance sheet through debt and equity investments and through advances of which £1.08 million was invested into CamGraPhIC.
· Appointed Nigel Grierson and Dr David Holbrook as independent Non-Executive Directors and Professor Dame Julia King, Baroness Brown of Cambridge DBE FREng FRS became a Senior Independent Director in March 2023. All are members of the audit, remuneration and nomination committees. Campbell Wilson stepped down as a Non-Executive Director in April 2023, having served nine years on the board of directors.
· Expanded our portfolio with the incorporation of two new portfolio companies during the year: Enfold Health and GraphEnergyTech. After the year end, the Group took an equity stake in early-stage company Deakin Bio-Hybrid Materials.
· Post period end the Group announced that Chairman Andrew Richmond would not be offering himself for re-election at the coming Annual General Meeting, having served for over eleven years as an independent Non-Executive Director, the majority of which time was as Chairman. Baroness Brown will become Group Chair following the AGM in December.
Portfolio highlights
· The portfolio continues to mature. Several companies are generating revenues having achieved commercial traction. Others have made significant industrial and technical progress and are either at or reaching their inflection points. Chief Executive Officers were appointed at two companies during the year and one post-year end as we strengthened management teams. Two new portfolio companies were incorporated, and a further one joined the portfolio after the end of the year. Despite difficult market conditions, several portfolio companies raised funds.
Highlights included:
o Alusid launched its first range of mass-produced wall tiles made from sustainable materials with Topps Tiles, the retail arm of Topps Tiles plc the UK's no.1 tile specialist. The company is now developing its first range of floor tiles following a collaboration with Imerys, a world leader in speciality minerals
o CamGraPhIC raised £1.26 million to develop and scale up its graphene-based photonics and announced that Sir Michael Rake, the former chair of BT Group, is to join the board of directors. Post year end, the company secured a loan facility for up to a further £1.5 million
o Pulsiv launched Pulsiv Osmium, a technology to improve the energy efficiency of nearly all mains-powered applications, including power supplies and battery chargers. The company raised £1.5 million, has built a global distribution network, sent reference designs to potential customers and is in talks with major manufacturers
o Celerum appointed David Gladding as CEO during the year and successfully renewed its contract with Colin Lawson Transport, the first customer for its Truck Logistics System software. Post year end, the company added two more customers including Grampian Continental, its first operating internationally
o Steve Cable was appointed CEO of Elute. He has a history of growing software companies as part of his 25 years' experience. The company is testing a beta version of an IP analysis product for investment professionals
o Cambridge Raman Imaging made first sales of its graphene-based ultra-fast lasers for use in Raman imaging microscopes. In tests, its digital imaging technology helped histopathologists detect tumours ahead of traditional methods
o The Vaccine Group successfully completed two government-backed projects to develop candidates for a transmissible Lassa fever vaccine and a Streptococcus suis vaccine. After the year end, the company announced plans to expand its vaccine portfolio
· Other post period end developments included:
o Pulsiv appointed serial technology entrepreneur Mark Gerhard as chair, and Tim Moore joined full time from his role at SharkNinja
o Fieldwork Robotics announced a £1.5 million fundraise from Elbow Beach Capital, and appointed David Fulton as Chief Executive Officer
Key extracts from the Annual Report can also be viewed below which include the basis for a qualified audit opinion and material uncertainty relating to going concern.
ENQUIRIES
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Frontier IP Group Plc |
T: 020 3968 7815 |
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Neil Crabb, Chief Executive Andrew Johnson, Communications & Investor Relations Company website: www.frontierip.co.uk
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neil@frontierip.co.uk M: 07464 546 025 |
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Allenby Capital Limited (Nominated Adviser) Nick Athanas / George Payne
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T: 0203 328 5656 |
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Singer Capital Markets (Broker) Harry Gooden / James Fischer
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T: 0207 496 3000 |
ABOUT FRONTIER IP
Frontier IP unites science and commerce by identifying strong intellectual property and accelerating its development through a range of commercialisation services. A critical part of the Group's work is involving relevant industry partners at an early stage of development to ensure technology meets real world demands and needs.
The Group looks to build and grow a portfolio of equity stakes and licence income by taking an active involvement in spin-out companies, including support for fund raising and collaboration with relevant industry partners at an early stage of development.
Chairman's Statement
Performance
The year to June 2023 was a period of excellent commercial and technical progress for Frontier IP's portfolio. Although it was disappointing to report our first pre-tax loss, the numbers in fact represented a resilient performance when placed in the context of exceptionally difficult markets, particularly for early-stage technology companies, and continued economic uncertainty, high inflation and interest rates. Neil addresses some of the issues in his statement, highlighting the success some companies have enjoyed in moving beyond inflection points to winning commercial contracts. Briefly, revenue generation within the portfolio is increasing as seen in Alusid, Celerum and Fieldwork Robotics. Pulsiv has put in place a global distribution network, and launched its first commercial product, Pulsiv Osmium to improve the power efficiency of almost all mains-powered devices.
Others are approaching inflection points, the stage at which potential starts to be realised, the technology validated and the route to scale up clear. The Vaccine Group successfully completed two government-funded projects; CamGraPhIC is now gaining industry traction from beyond the telecoms industry and Elute Intelligence is beta testing a product aimed at investment professionals. CamGraPhIC and Pulsiv completed funding rounds during the year.
It's important we maintain the pipeline of new companies joining the portfolio, so it was pleasing to see Enfold Health and GraphEnergyTech incorporated during the year with DeakinBio, an existing firm in which we took an equity stake, added after the year end.
A crucial element of our business model is to strengthen the management of our portfolio companies when they reach the point of achieving commercial viability. So, it is highly encouraging to see a number of important appointments made during the course of the year and beyond. Portfolio companies also bolstered their management teams, with Steve Cable and David Gladding becoming chief executives of Elute and Celerum respectively during the year, with David Fulton filling the same role at Fieldwork Robotics and significant appointments at Pulsiv after the year end. Alusid appointed Stuart Christie as chief financial officer.
We've also enhanced our own board. Two new independent Non-Executive Directors were appointed to the Frontier IP Board of Directors during the year. Nigel Grierson and Dr David Holbrook have many years of experience in industry and finance at the highest levels.
Nigel has 20 years' experience in the IT industry with positions in product development, marketing, and senior management, and, as Managing Director of venture capital funds managing investments of over $500 million in start-up companies across Europe. He was co-Managing Director of the Doughty Hanson Technology Fund and has held senior roles at Intel Corporation, including running strategic programmes working directly for Intel's then Chief Executive Officer Dr Andrew Grove and Chief Operating Officer Dr Craig Barrett.
David is a leading healthcare technology investment professional with 30 years' experience in the life sciences sectors. He has sat on more than 20 boards of directors during his career. He is currently a non-executive director at AIM quoted Oxford BioDynamics plc, a senior advisor to digital health investor RYSE Asset Management and Chairman of The Liver Group Charity. Involved in healthcare for 40 years, David has been a physician, held senior business development roles with major multinationals and spent the last 25 years specialising in the innovation space with much of that time in seed venture investing focused primarily on university spin outs.
They joined Dame Julia King, Baroness Brown of Cambridge, as part of the non-executive team on the board. Julia was appointed our Senior Independent Director in March this year and will become Chair at our Annual Meeting in December 2023. I will not be standing for re-election having served for more than eleven years as an independent Non-Executive Director, the majority of which as Chair.
To attract such high-calibre and experienced directors to our board is, I believe, a very strong vindication of Frontier IP's innovative business model, the expertise and skill of our team, and the quality of companies within our portfolio.
The appointments of Nigel and David followed the decision of Campbell Wilson to step down from his role as a Non-Executive Director in April having served on the Board for nearly nine years. Campbell played a vital part in helping Frontier develop and grow. I am delighted to say he remains involved with the Group in an advisory role with several portfolio companies and would like to express my thanks to him for his work on behalf of the Group for the past nine years.
This is my final statement as your Chairman. Having served eleven years on the Board of Directors, it is time for me to leave, so I will not be standing for re-election as this year's Annual General Meeting. Replacing me is Professor Dame Julia King, Baroness Brown of Cambridge, DBE FREng FRS FMedSci. It has been an immense privilege to serve on the board of such an exciting company and to witness the Group's growth during my time here. Julia has already proved to be an invaluable member of the board. In the two years she has been with us, she has put her extensive experience and knowledge of industry, academic and the political world to Frontier IP's great benefit. The Group is in capable hands.
Our governance
Good governance is vital for long-term sustainable growth, and we strive to achieve the highest standards for a business our size. We have adopted the Quoted Companies Alliance Corporate Governance Code, introduced in April 2018. To see more details about how we apply the principles of the Code, see the Our Governance section of this report and our website: https://www.frontierip.co.uk/about/governance/ .
Results
The results represented a resilient performance in what continue to be challenging markets for technology companies and their investors. The fall in fair value of our equity portfolio to £32,964,000 reflected disposals of £5,713,000 and additions of £745,000. We made an unrealised loss on the revaluation of investments of £966,000, against an unrealised gain for the year to June 2022 of nearly £11 million.
The part-disposal of our holding in Exscientia, generated nearly £5 million cash during the year. Our cash balances at 30 June 2023 were £4.6 million.
Outlook
The markets and economic outlook remain difficult to predict given the high levels of global uncertainty. However, I am confident about the prospects for both the group and the portfolio, which is addressing some of the most critical global challenges we face today.
Andrew Richmond
Chairman
30 October 2023
Chief Executive Officer's Statement
Despite a difficult year financially, I am delighted with the significant commercial and technical progress made by companies across the portfolio this year and into the period beyond. Alusid, Nandi Proteins, Cambridge Raman Imaging, Celerum, and Fieldwork Robotics are all either generating revenues or are about to start, taking further strides forward to commercial viability. The day moves closer for a second portfolio company to follow Exscientia in launching an initial public offering or to execute a trade sale.
Alusid has said it is exploring options for an IPO in 2024. The company enjoyed a breakthrough year after successfully completing a deal with Topps Tiles, the UK's no. 1 tile specialist, and Starbucks - Alusid is now selling to franchisees across Europe and the Middle East. The company also made good technical progress in developing a hard-wearing floor tile for which industry interest is already high.
Other companies to watch include Nandi Proteins, which successfully scaled up its technology to create functional food ingredients and is now looking forwards to making important commercial progress in the coming year. Industrial interest in the company's products is high.
CamGraPhIC is another company making excellent technical and commercial progress with its graphene-based photonics technology. The company was already working closely with major multinationals in data and telecommunications but is now starting to gain traction from beyond the sector and from governmental organisations.
Celerum secured its first repeat customer and additional new customers for AI-driven Truck Logistics Software, and Cambridge Raman Imaging gained important validation for its technology with the first sales of its graphene-based ultra-fast lasers for medical imaging. Fieldwork Robotics continues to develop its raspberry-harvesting robots. These are already picking raspberries for supermarkets, and the company's new Chief Executive David Fulton is aiming to have more than a hundred commercially available robots by the end of 2025.
All this represents great progress in the context of an increasingly difficult economic and market backdrop of rising costs, rising inflation and rising interest rates. If there is not going to be an economic contraction in the UK, growth is still likely to be sluggish. Of course, it has taken companies several years to reach this point, perhaps longer than anticipated. But developing the kind of deep technologies, based on substantiative scientific or engineering advances, in which we specialise, takes time. It is not easy. This is a positive: competitors attempting to replicate the technologies successfully developed across our portfolio will find the task hard. The barriers to entry are high.
There are things that could be done to make deep technology commercialisation easier, however. The fear, uncertainty and doubt now stalking the markets are exposing and exacerbating long-term structural problems within the UK: the failure of the education and capital markets to connect properly.
We are home to some of the world's best universities and researchers. There is not a shortage of scientific and engineering expertise, of ideas or innovation, or people to make them work. We are home to a globally important financial sector able to deploy deep and vast reserves of liquidity. Money is available.
However, the sources of innovation and the sources of capital are not linking efficiently together.
Part of the problem reflects the fact that public equity markets have struggled for some time. In 1966, there were comfortably more than 4,000 companies listed on London's main market; by the end of 2022, the number was about 1,100. Many factors have been put forward for this market failure, including the weightier burdens and greater costs of regulation. Alternative sources of finance, such as venture capital and private equity have grown and prospered in consequence. These changing trends accelerated post the financial crisis as central banks slashed interest rates and launched quantitative easing. Cheap money flooded the markets.
The unwillingness of the UK pension and investment industry to commit to equity investment especially in technology stocks, has compounded the problem. Much of the pension fund money has been switched into bonds as part of a broader move towards indexation to mitigate risks. You could argue that buying long-dated bonds at low yields guarantees only poor returns at best when held to maturity and substantial losses when interest rates go up. Yet it is the case that Arm is owned by Japanese group SoftBank and is listed on Nasdaq; and Oxford Nanopore and Exscientia received no money from traditional UK venture capital backers as they grew. One is now listed in London, the other in New York.
Other possible challenges are emerging. One is the National Security Investment Act. The Act introduces constraints on who can invest in areas defined as strategic by the government. It risks further costs and delays. The full impact has yet to be felt, but unintended consequences could be losing important technologies to foreign markets as companies seek capital abroad or technologies failing because there is no capital.
Therefore, it is good to see government persuading major pension funds to enter a voluntary agreement to commit 5 per cent of their investments to early-stage businesses by 2030, even though it is not mandated that this should be solely in UK companies. It is a small step, but a welcome one.
More can be done. To encourage pension funds to commit capital to technology, I would suggest linking the substantial tax benefits they enjoy to investing in venture capital. The regulatory framework should be tweaked to encourage more asset diversification and longer-term, strategic thinking. From our perspective, incorporating new companies and working with very young businesses, the Enterprise Investment Scheme (EIS) and Seed EIS are important. They were limited by European Union state aid rules, but post-Brexit there is the opportunity to take a more expansive approach.
Despite the challenges, I remain optimistic about the potential for our companies to achieve success.
Crises spur innovation. Wars are the most commonly cited example, but depressions have an impact too. The United States, for example, following the Wall Street crash, enjoyed a decade of then unprecedented technological progress in the run up to its entry into the Second World War in 1941. Important steps were made in areas such as electrical and chemical engineering, aeronautics, and power generation.
Today, the world is facing crises around climate, energy, food, water and health, as well as the uncertainty caused by the Ukraine war and around the direction in the economy and markets. Technology is at the heart of our efforts to meet these challenges and provide a path to prosperity.
And when times are tough, there is always a greater emphasis on costs. Our approach, driven by our industry expertise and partnerships with major companies is highly responsive to their requirements. And given the current economic climate, they are obviously concerned with costs and as swift a return on technology deployment as possible.
Pulsiv's novel technology cuts the amount of energy wasted in converting power from about half to less than 10 per cent. It has the potential to cut costs for manufacturers and energy bills for consumers and, if deployed at scale, it has the potential to reduce the strain on national power grids. The company has successfully built out a global distribution network and made two major board appointments after the year end. Mark Gerhard became chairman. Mark is a serial entrepreneur with a very strong record of growing and exiting technology businesses. And Tim Moore, a Pulsiv non-executive director, left his job as Chief Technology Officer of Nasdaq-listed consumer electronics group SharkNinja to join the company full time as Chief Product Officer. Both appointments support our belief that Pulsiv will become a significant green technology company. Mark said on his appointment that Pulsiv is "highly analogous" to Arm.
CamGraPhIC's graphene-based photonics run at higher speed and lower temperatures than equivalent technologies - therefore using less energy. Data centres, which are reckoned to consume about one per cent of global energy output, are one potential market for the company's optical transceivers.
Our pipeline of new companies is also in robust health. One, GraphEnergyTech, is developing graphene inks to replace silver electrodes in photovoltaic solar cells. This could prove to be a critically vital technology. A study from the University of New South Wales said on current rates of solar energy growth, the industry could consume all known global silver reserves within the next decade. Another new company, DeakinBio, is developing new materials for tiles and other surfaces, joining Alusid in developing technologies that reduces the energy consumed by manufacturing.
The impacts of ultra-processed foods and obesity and the mighty costs they impose on health services are subject to widespread concern. Nandi Protein can help. Its technology uses natural ingredients such as fava beans and whey to replace fat, gluten and chemical, E-number additives in a wide range of different foods. The Vaccine Group is focused on using its novel herpesvirus-based vaccine platform to develop animal vaccines to combat economically harmful and zoonotic diseases. Fieldwork Robotics' fruit and vegetable harvesters address the global shortage of labour prepared to work in the fields. AquaInSilico and Molendotech are both striving towards better water quality. AquaInSilico through its novel software algorithms to improve wastewater treatment, Molendotech with faster tests for harmful bacteria in water, which cut the time needed from days into hours, or even quicker.
We took the decision during the year to strengthen our Board of Directors with two new independent Non-Executive directors, broadening the board's skills base and helping position us for the next phase of our evolution. More recently we announced that Andrew Richmond would not be offering himself for re-election at the coming Annual General Meeting and that Baroness Brown would replace Andrew as Group Chair following the AGM in December. I would like to take this opportunity to thank Andrew for his service, support and counsel over the years of our growth. I wish him every success for the future.
Our companies are striving towards creating technologies with the potential to make material impacts in the areas in which they operate. The pipeline of innovation remains fruitful, as shown by the three new companies added during the year and after. Our strong relationships with industry partners and their engagement with the portfolio gives us confidence that companies are meeting market needs and demands. For all the challenges, I remain upbeat about the Group's future prospects.
Neil Crabb, Chief Executive Officer
30 October 2023
Basis for qualified audit opinion
As noted within the external auditor's report set out in the Annual Report and Financial Statements, expected to be published and sent to shareholders on or around 20 November 2023, the Directors were not able to provide the external auditor with sufficient and appropriate evidence in relation to the estimation of fair value for certain investments, specifically being those investments described as 'Stage 2' in the accounting policies, which have been valued at £1.2 million (representing 3.6% of equity investments of £32.9 million and 2.6% of net assets) as at 30 June 2023. As a result, the external auditor was unable to conclude in respect of the valuation of these investments and was unable to perform alternative procedures. Consequently, this formed the basis for a qualified opinion on these Stage 2 investments.
The external auditors were therefore unable to determine whether any adjustment was necessary to these amounts as at 30 June 2023 or whether there was any consequential effect on the Group and Parent Company's other comprehensive income for the year ended 30 June 2023.
Material uncertainty related to going concern
We draw attention to the accounting policies in the financial statements, which indicate that the Group has insufficient cash to cover its operating expenditure for the 12 months from the date of the signing of these Group and Parent Company financial statements. However, the Directors intend to realise further cash from the Group's sole quoted investment in Exscientia, valued at £2.3 million at 30 June 2023, which they expect will provide the Group and Parent Company with sufficient cash to cover its operating expenditure for this period. The timing and amount of exit proceeds is subject to uncertainty. This condition, and the other matters noted in the accounting policies, indicate the existence of a material uncertainty that may cast significant doubt on the Group's and Parent Company's ability to continue as a going concern. The financial statements do not include any adjustments that may be necessary if the Group or Parent Company were not a going concern.
Key Performance Indicators and Alternative Performance Measures
The Key Performance Indicators and Alternative Performance Measures for the Group are:
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KPI / APM |
Description |
2023 Performance |
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Basic earnings per share (KPI) |
Profit attributable to shareholders divided by the weighted average number of shares in issue during the year. |
Loss of 5.8p (2022: profit of 18.6p) |
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Net assets per share (KPI) |
Value of the Group's assets less the value of its liabilities per share outstanding |
81.8p (2022: 88.5p) |
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Total revenue and other operating income (KPI) |
Growth in the aggregate of revenue from services, change in fair value of investments and realised profit on disposal of investments |
Negative income of £1,380,000 (2022: positive income of £14,104,000) |
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Profit (KPI) |
Profit before tax for the year |
Loss of £4,370,000 (2022: profit of £10,879,000) |
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Total initial equity in new portfolio companies (APM) Note 1 |
Aggregate percentage equity earned from new portfolio companies during the year |
108% (2022:20%) |
Note 1 - The total initial equity in portfolio companies is not an IFRS measure. It is used by Directors to measure the total percentage equity stakes received in all new spin-out companies during the year. It does not reflect holdings in individual spin-outs and does not include equity received through post spin-out investment. For 2023 it is the aggregate percentage holding from two new spin-out companies during the year.
The Group achieved its initial equity Alternative Performance Measure but failed to achieve its four Key Performance Indicators reflecting the difficult market conditions during the year.
Net assets per share decreased by 8% to 81.8p (2022: 88.5p) reflecting a loss after tax of £3,244,000. The value of the Group's investments decreased to £37,589,000 (2023: £42,693,000) reflecting the opening value of Exscientia shares sold of £5,713,000, purchase of investments of £1,576,000 and net unrealised losses on revaluation of £966,000. The Exscientia shares sold generated proceeds of £4,926,000. Loss after tax for the Group for the year to 30 June 2023 was £3,244,000 (2022: profit of £10,230,000) after a deferred tax credit of £1,126,000 (2022: charge of £649,000). This result includes a realised loss on disposal of investments of £786,000 (2022: gain of £2,867,000), an unrealised loss on the revaluation of investments of £966,000 (2022: gain of £10,908,000) and reflects an increase in services revenue to £372,000 (2022: £329,000) Administrative expenses of £3,130,000 (2022: £3,104,000) were flat primarily due to no bonuses being paid in 2023.
Operational Review
During the year, we took the opportunity to refresh our Board of Directors with the appointments of Nigel Grierson and David Holbrook as independent Non-Executive Directors from 15th March 2023. Both Nigel and David have extensive experience in industry and finance.
Professor Dame Julia King, Baroness Brown of Cambridge DBE FREng FRS FMedSci, who joined the Board in October 2021, became Senior Independent Director on the same date. Campbell Wilson stepped down in April 2023 having served as a Non-Executive Director for nine years but continues to support the Group in an advisory capacity with selected portfolio companies.
Companies across the portfolio continued to make good technical and commercial progress, with several starting to generate revenues for the first time as longer-term industry engagement started to translate into contracts and sales. We continued to strengthen management teams across the portfolio. Elute Intelligence and Celerum appointed Chief Executive Officers during the year, as did Fieldwork Robotics after the year end. Pulsiv and CamGraPhIC successfully raised funds during the year, with Fieldwork Robotics following after the year end.
As a people focussed business, we took steps to expand our team and to ensure we attract and retain the best people. We hired four full-time employees to the Frontier IP team during the year.
Our Remuneration Committee began to implement the changes to our remuneration arrangements recommended in last year's external review. Progress is set out in in detail in the Remuneration Committee Report.
Portfolio Review
Frontier IP strives to develop and maximise value from its portfolio. We do so by taking founding stakes in companies at incorporation and then working in long-term partnerships with shareholders, academic and industry partners.
As part of our sustainability agenda, we have mapped our portfolio companies to relevant United Nations Sustainability Development Goals (UN SDGs). All equity holdings are as at 30 June 2023.
Core portfolio
Alusid: Frontier IP stake: 37.4 per cent
Alusid creates beautiful, premium-quality tiles, tabletops and other surfaces by recycling industrial waste ceramics and glass, most of which would otherwise be sent to high-impact landfill.
The company has successfully scaled up its technology for mass production on industry-standard manufacturing equipment and during the year signed a contract to sell its first mass-manufactured tile range, Principle, through Topps Tiles, the UK's no.1 tile specialist.
Alusid also successfully completed a collaboration with one of the world's leading specialty minerals group, Imerys, which resulted in the company developing floor tiles, a missing product from its ranges. Pilot trials are now underway to see if the floor tiles can be mass produced, with high industry interest in the product.
The company is also selling products to Starbucks franchisees across Europe, Middle East and Africa. Other customers include H&M, Cos, Nando's, the BBC and the Stonehenge Visitor Centre, run by English Heritage.
UN Sustainable Development Goal mapping: SDG 9, industry, innovation and infrastructure; SDG 12, responsible consumption and production.
Amprologix: Frontier IP stake: 10.0 per cent
Amprologix was created to commercialise the work of Mathew Upton, Professor of Medical Microbiology at Plymouth's Institute of Translational and Stratified Medicine.
The company continued to make progress with development of its new family of antibiotics based epidermicin, which is derived from bacteria found on human skin, to tackle antimicrobial-resistant MRSA and other superbugs. Ingenza, a leader in industrial biotechnology and synthetic biology, is also a shareholder and is working with Amprologix to develop and scale up the technology.
COVID-19 heightened interest in other threats to human health globally. During the year, the World Health Organisation reiterated its warnings about the threats from antimicrobial-resistant superbugs and called for a step up in efforts to create new antibiotics.
UN SDG mapping: SDG 3, good health and well-being
AquaInSilico: Frontier IP stake: 29.0 per cent
AquaInSilico is developing sophisticated software tools able to understand and predict how biological and chemical processes unfold in different operating conditions.
These can be used to optimise wastewater treatment across many industries, including municipal wastewater treatment plants, oil groups, brewers, pulp, paper and steel makers, food processing and waste recovery businesses.
During the year, the company saw its digital tools implemented by a client in Cape Verde as part of the Phos-Value project to recycle environmentally harmful nutrients as biofertilisers and improve water quality in the islands. The project was supported by the United Nations Development Program. AquaInSilico was also selected to take part in a European PathFinder project to develop sustainable products and made good progress in gaining municipal and industrial interest in its UPWATER® technology.
UN SDG mapping: SDG 6, clean water and sanitation, SDG 12, responsible consumption and production, SDG 14, life below water
Cambridge Raman Imaging: Frontier IP stake: 26.8 per cent
Our first graphene spin out, Cambridge Raman Imaging (CRI) is developing Raman imaging technology based on graphene-based ultra-fast lasers, to detect and monitor tumours. The company was formed as a result of a partnership between the University of Cambridge and the Politecnico di Milano in Italy.
The main application creates digital images of patient cells and tissue, and the company is developing FFAI based analysis of chemical signatures for accurately differentiating between healthy tissue and diseased tissue in the patient samples, augmenting or replacing subjective diagnosis of samples by histopathologists. The technology removes the need for chemical staining - eliminating a major contributor to sample variation seen between one lab and the next.
During the year, the company successfully integrated its laser with a widely available commercial microscope and sold its first lasers. Tests showed histopathologists could identify tumours at an earlier stage from digital images generated by CRI's technology than they could from other technologies.
UN SDG mapping: SDG 3 good health and well-being
CamGraPhIC : Frontier IP stake: 20.8 per cent
CamGraPhIC develops graphene-based photonics for high-speed data and telecommunications. Graphene photonics are seen as a key enabler for the massive data increases being demanded by 5G and 6G technologies by the company's industrial partners.
Initial applications are high-speed optical transceivers. In laboratory conditions these have worked at 100Gb per second, around twice the speed of equivalent technologies, and across multiple wavebands. They are projected to consume at least 70 per cent less energy. Other uses include high-performance computing and in networks able to meet the demands of processor intensive artificial intelligence applications.
The company raised £1.26 million through an equity funding round during the year to accelerate development and scale up of the technology, and announced that Sir Michael Rake, the former BT Group Chairman would be joining its board of directors at an appropriate time. After the year end, CamGraPhIC put in place a loan facility worth up to £1.5 million, with Frontier IP subscribing to loan notes worth £1.32 million.
UN SDG mapping: SDG 9, industry, innovation and infrastructure, SDG 11, sustainable cities and infrastructure
Celerum: Frontier IP stake: 33.8 per cent
Celerum is developing novel artificial intelligence to improve the operational efficiency of logistics and supply chains.
The company's technology uses specialist algorithms based on nature-inspired computing, software and algorithms based on natural processes and behaviours.
During the year, the company appointed David Gladding as Chief Executive Officer. David has more than 30 years' experience in software and IT services companies, including those specialising in fleet management. The company is now winning customers for its first commercial product Truck Logistics System, launched during the year to June 2022. After the year end, the company announced it had won its first international customer, Grampian Continental, and was successfully developing more sophisticated versions of the software to meet the needs of further customers.
UN SDG mapping: SDG 9, industry, innovation and infrastructure
Des Solutio: Frontier IP stake: 25.0 per cent
Des Solutio is developing safer and greener alternatives to the toxic solvents currently used to extract active ingredients by the pharmaceutical, personal care, household goods and food industries.
It does this through the use of Natural Deep Eutectic Solvents. These are combinations of naturally occurring (often plant based) sugars, acids, alcohols and amino acids that can be used as safe solvents. These new green solvents can be used to replace toxic organic solvents used in conventional processing , such as ethanol, employed currently. This means it is contributing to the environmentally sound management of chemicals, and reducing their release to air, water and soil.
During the year, the company was selected as one of 10 start-ups to take part in the UK hub of the European Institute of Innovation & Technology's Food Network and started validation trials of a natural food preservative.
UN SDG mapping: SDG 9 industry, innovation and infrastructure; SDG 12, responsible consumption and production
Elute Intelligence: Frontier IP stake: 42.2 per cent
Elute's software tools are designed to help users intelligently search, compare and analyse complex documents by mimicking the way people read. There are a huge range of potential applications, from searching patents and contracts, to detecting evidence of plagiarism, collusion and copyright infringement. The company's tools help to enhance research, support improved technological capabilities and innovation. Existing customers for the company's CopyCatch plagiarism detection software include UCAS, The Open University, and Slicethepie, the largest paid review site on the internet.
During the year, Elute announced the appointment of Steve Cable as Chief Executive Officer and is developing Investor Insights, an IP analyst tool for investment firms, which is now in beta phase.
UN SDG mapping: SDG 9, industry, innovation and infrastructure
Enfold Health: Frontier IP stake 75.8 per cent
Enfold Health, incorporated during the year, is developing novel technology for attacking the pathogenic bacteria that drive gum disease (gingivitis and periodontitis). The incorporation resulted from a collaboration between Frontier IP and Dr Ioanna Mela, an Associate Professor in the Department of Pharmacology at the University of Cambridge.
Periodontitis increases the risk of developing many common chronic diseases, including cardiovascular disease, Type 2 diabetes, Alzheimer's, rheumatoid arthritis and pneumonia, and worsens associated symptoms.
Enfold's Board of Directors includes Gerard Majoor, the former Vice President, Innovation and Development, Business Group Health and Wellness, for Philips Oral Health Care and Mother and Child Care.
UN SDG mapping: UN SDG 3 good health and wellbeing
Exscientia: Frontier IP stake: 0.4 per cent
Exscientia, a spin out from the University of Dundee, was the first in our portfolio to IPO, raising total gross proceeds of $510 million through a public offer and private placements with SoftBank and the Bill & Melinda Gates Foundation. It is listed on Nasdaq.
Now based in Oxford, Exscientia is a world leader in artificial intelligence-driven drug discovery. It is the company behind the first AI-created drugs to enter human clinical trials, taking years off traditional drug discovery processes.
During the year, the company continued to expand its pipeline of drug candidates, with four new molecules advancing further into clinical trials during the first half of its financial year to 30 June 2023 alone. The company is also developing its capabilities: it is building its own hardware and software solutions to automate a wide range of laboratory processes.
UN SDG mapping: SDG 3, good health and well-being
Fieldwork Robotics: Frontier IP stake: 22.1 per cent
Fieldwork Robotics is looking to have more than 100 robots available for farmers to hire by 2025 following a post-year end funding round to accelerate further development of the company's raspberry pickers.
The moves follow the start of commercial trials of the raspberry harvesters in Portugal, and the continued focus is on making the robots faster and scaling up the technology.
After the year end, the company also appointed David Fulton as Chief Executive Officer, replacing Rui Andres who is focusing full time on Molendotech as CEO. David has more than 30 years' business experience, most recently as co-founder and director of LAB+BONE, a service to protect dogs' identity by using DNA. Before starting LAB+BONE, he was Chief Executive Office of WeSee, a company using advanced computer vision technology mimicking the human brain's ability to understand and process visual information. He previously held executive positions with Expedia, Adform and Microsoft.
Robotic fruit and vegetable harvesting technology has the potential to improve agricultural productivity, reduce food waste by more accurate picking and minimising human contact, and result in better quality jobs, with harvesting labour replaced by skilled robot operators. There is also potential for cutting carbon emissions through reduced need for migrant labour.
UN SDG mapping: SDG 2, zero hunger; SDG 12 responsible consumption and production
GraphEnergyTech: Frontier IP stake 32.1 per cent
GraphEnergyTech is developing advanced graphene technology for lower-cost and more environmentally-friendly solar cells - and could help save global silver reserves from exhaustion by 2050.
The company, which was incorporated into our portfolio during the year, is developing high-conductivity graphene inks. Initial applications are for graphene electrodes to replace expensive silver electrodes in solar cells. Silver is the most commonly used material for solar cell electrodes, and the solar industry is currently using 100 million troy ounces a year at a cost of at least $2 billion.
Research by the University of New South Wales, Australia, states more than 85 per cent of current silver reserves could be consumed by solar by 2050, with the upper end of its estimates as high as 113 per cent.
GraphEnergyTech's electrodes are 22 per cent cheaper than silver at pilot stage with further reductions expected as the technology is scaled up. The technology also enables high-efficiency perovskite solar cells by eliminating the risk of performance degradation caused by metal migration. Manufacturing is also easy - the graphene inks can be applied a low-cost screen-printing process, compatible with existing equipment.
Using graphene inks will also reduce the environmentally damaging extraction of metals, including the use of mercury and cyanide.
UN SDG mapping: UN SDG 7 affordable and clean energy, UN SDG 9, industry, innovation and infrastructure,
InSignals Neurotech: Frontier IP stake: 32.9 per cent
InSignals Neurotech continues to make progress with its novel technology to analyse the motor symptoms of Parkinson's disease and other neurological disorders. The company is developing wireless devices to measure motor symptoms, such as wrist rigidity, in real time to help surgeons and neurologists assess the extent of the disease. Initial prototypes were designed to help identify the best locations to place implants in the brain. However, an improved version can now be used to monitor symptoms more broadly for disease tracking and to understand better how patients are responding to treatment. A multi-centred clinical trial has been established to test the devices., and a collaboration with the University of Santiago de Compostela in Spain confirmed how object measurements could produce deeper insights into disease progression. A mobile application of the technology is now under development.
The spin out from the Portuguese Institute for Systems and Computer Engineering, Technology and Science ("INESC TEC"), with the support of São João University Hospital, part of the University of Porto.
UN SDG mapping: SDG 3 good health and well-being
Molendotech: Frontier IP stake: 10.4 per cent
Molendotech has developed Bacterisk+, a proprietary screening test for faecal contamination in water. The tests, which can be used on site, cuts testing times from up to two days to under 30 minutes because samples do not need to be sent to a laboratory, enabling environmental agencies and other authorities to assess water quality swiftly. It has been used to screen marine bathing waters, inland recreational waters, irrigation water and food process water.
The company has also developed a test to detect specific bacterial strains, including pathogens, for use in the food industry, animal feeds, veterinary practices and ballast waters.
UN SDG mapping: SDG 6, clean water and sanitation; SDG 12 responsible consumption and production
Nandi Proteins: Frontier IP stake: 19.8 per cent
Nandi Proteins successfully demonstrated commercial scale up of its egg white replacer further extending its range of customised ingredients based on vegetable and animal proteins. The company continued to develop industry relationships over the year, which is expected to result in significant commercial progress in the future.
The company's technology is able to create a wide range of customised ingredients based on naturally occurring vegetable and animal proteins. Nandi's functional proteins can be used to replace undesirable ingredients, such as fat, gluten and chemical E-number additives in processed foods, or to replace animal proteins with vegetable proteins.
Nandi's technology has the potential to contribute to more sustainable agriculture and food production by supporting the plant-based alternative meat industry, by reducing chemical ingredients in processed and ultra-processed foods and by reducing the amount of meat used in processed meat products.
UN SDG mapping: SDG 2, end hunger; SDG 12, responsible consumption and production
PoreXpert: Frontier IP stake: 15.0 per cent
PoreXpert, a software and consultancy firm, has developed novel software and methods to model the voids within porous materials and how gases, liquids and colloidal suspensions behave within them.
Applications include helping companies understand and exploit the nature of oil and gas reserves to improve the efficiency of exploration and extraction, supporting industry efforts to reduce their impact on the environment. It is also being used to help maximise the lifespan of the UK's Advanced Gas Cooled nuclear reactors, which generate 20 per cent of the national energy requirement, without greenhouse gas emissions.
UN SDG mapping: SDG 7, affordable and clean energy; SDG 12, responsible consumption and production
Pulsiv: Frontier IP stake: 18.2 per cent
Pulsiv's progress during the year included the launch of its first commercial product, Pulsiv Osmium, building out a global distribution network and a funding round that raised £1.5 million. The fundraising valued the company at £50 million pre money.
The company also established a global distribution network after signing agreements with partners across North America, Europe and Asia. The company continues to evolve and post period-end significantly strengthened its board with two key appointments of serial entrepreneur Mark Gerhard as chair and Tim Moore, who joined full time as Chief Product Officer from his role at SharkNinja.
Pulsiv's technology has the potential to make a profound impact on the energy sector. It cuts the amount of energy consumed by devices, therefore reducing the strain on power grids, and can boost the output of photovoltaic solar cells. Pulsiv Osmium is initially aimed at improving the efficiency of power supplies, LED lighting and battery chargers, but it can be used across nearly all mains-powered devices.
Because the technology uses fewer components, its new power conversion techniques can be incorporated in smaller, lighter and more cost-effective designs, so the technology has the potential to reduce strains on power grids and cut costs for manufacturers and bills for consumers.
It also works from device to mains, significantly improving the efficiency of renewable sources. The company is also working on a solar microinverter to maximise the output from photovoltaic solar cells.
UN SDG mapping: SDG 7, affordable and clean energy; SDG 13, climate action
The Vaccine Group: Frontier IP stake: 17.0 per cent
The Vaccine Group is creating a wide range of vaccines based on a novel herpesvirus-based platform. Its core focus is on preventing the spread of economically damaging diseases in livestock.
During the year, the company successfully completed two government-funded projects. The first funded by the UK and Chinese governments, developed a vaccine candidate for Streptococcus suis, a bacterial disease carried by pigs that causes significant productivity losses in the global pig industry. However, it can also cause meningitis and other symptoms in humans. The disease is currently poorly served as there are no highly effective vaccines and treatment uses antibiotics but is showing signs of resistance. A Chinese commercial collaborator, the Pulike Biological Engineering Company has demonstrated candidate vaccine production using commercial manufacturing techniques at pilot scale.
The second project involved developing a transmissible candidate vaccine against a virus, Lassa fever, for use in the rats that spread the disease. A small-scale trial showed the candidate could be transmitted between rats, significantly improve their immunity to Lassa fever and reduce its spread between them. Technology to scale up for commercial production was also developed as part of the project, and the company is now in discussion with potential partners about further development. The work was funded by the US Defense Advanced Research Projects Agency, led by the University of California Davis, and involved TVG collaborating with academic partners from around the world.
TVG now has eight vaccine candidates approaching proof of principle. Its most advanced projects are for pigs: in addition to streptococcus suis, the company is also developing vaccines for porcine reproductive and respiratory syndrome virus, porcine circovirus and African swine fever. It is adding more candidates to its pipeline to target diseases affecting horses, cattle, cats and dogs.
UN SDG mapping: SDG 2, end hunger; SDG 3 good health and well-being
Core Portfolio Summary at 30 June 2023
|
Portfolio Company |
% Issued Share Capital |
About |
Source |
|
Alusid Limited |
37.39% |
Recycled materials |
University of Central Lancashire |
|
Amprologix Limited |
10.0% |
Novel antibiotics to tackle antimicrobial resistance |
Universities of Plymouth and Manchester |
|
AquaInSilico Lda |
29.0% |
Digital tools to optimise wastewater treatment |
FCT Nova |
|
Cambridge Raman Imaging Limited |
26.8% |
Medical imaging using ultra-fast lasers |
University of Cambridge and Politecnico di Milano |
|
CamGraPhIC Limited |
20.8% |
Graphene-based photonics |
University of Cambridge and CNIT |
|
Celerum Limited |
33.8% |
Near real-time automated fleet scheduling |
Robert Gordon University |
|
Des Solutio Lda |
25.0% |
Green alternatives to industrial toxic solvents |
FCT Nova |
|
Elute Intelligence Holdings Limited |
42.2% |
Software tools able to intelligently search, compare and analyse unstructured data |
Existing business |
|
Enfold Health Limited |
75.8% |
Improved oral health |
University of Cambridge |
|
Exscientia Limited |
0.4% |
Novel informatics and experimental methods for drug discovery |
University of Dundee |
|
Fieldwork Robotics Limited |
22.1% |
Robotic harvesting technology for challenging horticultural applications |
University of Plymouth |
|
GraphEnergyTech Limited |
32.1% |
High conductivity graphene inks |
University of Cambridge/École Polytechnique Fédérale de Lausanne |
|
Insignals Neurotech Lda |
32.9% |
Wearable medical devices supporting deep brain surgery |
INESC TEC |
|
Molendotech Limited |
10.4% |
Rapid detection of water borne bacteria |
University of Plymouth |
|
Nandi Proteins Limited |
19.8% |
Food protein technology |
Heriot-Watt University, Edinburgh |
|
PoreXpert Limited |
15.0% |
Analysis and modelling of porous materials |
University of Plymouth |
|
Pulsiv Limited |
18.2% |
High efficiency power conversion and solar power generation |
University of Plymouth |
|
The Vaccine Group Limited |
17.0% |
Herpesvirus-based vaccines for the control of bacterial and viral diseases |
University of Plymouth |
The Group holds equity stakes in 6 further portfolio companies. The combined value of these holdings was £575,000, equivalent to 1.7% of the fair value of the Group's equity investments at 30 June 2023.
Financial Review
Key Highlights
Net assets per share decreased by 8% to 81.8p (2022: 88.5p) reflecting a loss after tax of £3,244,000. The loss was driven by a net decrease on revaluation of investments of £966,000 and a realised loss on part disposal of the Group's holding in Exscientia of £786,000.
Loss after tax for the Group for the year to 30 June 2023 was £3,244,000 (2022: profit of £10,230,000) after a deferred tax credit of £1,126,000 (2022: charge of £649,000). This result includes a realised loss on disposal of investments of £786,000 (2022: gain of £2,867,000), an unrealised loss on the revaluation of investments of £966,000 (2022: gain of £10,908,000) and reflects an increase in services revenue to £372,000 (2022: £329,000) and flat administrative expenses of £3,130,000 (2022: £3,104,000) primarily due to no bonuses being paid in 2023.
Revenue and Other Operating Income
Services revenue increased by 13% to £372,000 (2022: £329,000) but other operating income, comprising realised and unrealised gains and losses on investments decreased to a loss of £1,752,000 (2022: gain of £13,775,000). The realised loss on disposal of investments was £786,000 (2022: gain of £2,867,000) and the unrealised loss on the revaluation of investments was £966,000 (2022: gain of £10,908,000). The fall during the year in the value of Exscientia, the Group's only quoted company holding, was a significant contributor to these losses. During the year, the Group sold a further part of its holding in Exscientia for £4,926,000 realising a loss of £786,000 on the value of the holding at 30 June 2022, 100% of the realised loss for the year to 30 June 2023. The decrease in the value of the Group's remaining holding in Exscientia over the year to 30 June 2023 was £2,123,000, 49% of loss before tax for the year to 30 June 2023. The unrealised loss on the revaluation of investments of £966,000 comprises losses on equity investments of £1,780,000 and gains on debt investments of £814,000. The significant contributors to the unrealised loss on equity investments were The Vaccine Group (decrease of £2,164,000), Exscientia (decrease of £2,123,000) and CamGraPhIC (increase of £1,430,000). An increase in the value of the Group's debt investment in CamGraPhIC of £724,000 was the primary contributor to the unrealised gain on debt investments.
Administrative Expenses
Administrative expenses increased by 1% to £3,130,000 (2022: £3,104,000). Prior year expenses included the payment of bonuses totalling £480,000 that were paid to employees of the Group. Excluding prior year bonuses, administrative expenses increased by 19%, primarily due to increased employee costs.
Share Based Payments
Share based payments decreased 53% to £155,000 (2022: £329,000) reflecting option grants during the year.
Earnings Per Share
Basic loss per share was 5.85p (2022: earnings per share of 18.60p). Diluted loss per share was 5.64p (2022: earnings per share 17.53p).
Statement of Financial Position
The principal items in the statement of financial position at 30 June 2023 are financial assets at fair value through profit and loss comprising equity investments of £32,964,000 (2022: £39,712,000) and debt investments of £4,625,000 (2022: £2,981,000). The carrying value of these items is determined by the Directors using their judgement when applying the Group's accounting policies. The matters taken into account when assessing the fair value of the portfolio companies are detailed in the accounting policy on investments. The movement during the year in equity and debt investments is detailed in notes 13 and 14 to the financial statement, respectively.
The Group had goodwill of £1,966,000 at 30 June 2023 (2022: £1,966,000). The considerations taken into account by the Directors when reviewing the carrying value of goodwill are detailed in Note 10 to the financial statements.
The Group had net current assets at 30 June 2023 of £6,181,000 (2022: £5,201,000) reflecting primarily advances of £793,000 (2022: nil) made to portfolio companies prior to formalising as loans. The current assets at 30 June 2023 include trade receivables of £604,000 which are more than 90 days overdue. The portfolio company debtors are in the process of raising funds and the directors are confident that the amounts due to the company will be paid.
Net assets per share
Net assets of the Group decreased to £45,538,000 at 30 June 2023 (30 June 2022: £48,699,000) resulting in net assets per share of 81.8p (30 June 2022: 88.5p).
Cash
The Group's cash balances increased during the year by £235,000 to £4,603,000 at 30 June 2023. Operating activities consumed £3,247,000 (2022: £3,006,000), the increase reflecting primarily advances made to portfolio companies prior to formalising as loans. Investing activities generated £3,384,000 (2022:
£5,382,000). This reflected proceeds on disposal of part of our holding in Exscientia of £4,926,000 (2022: £6,525,000) and the purchase of equity and debt investments of £1,576,000 (2022: £1,141,000) across nine of our portfolio companies.
Principal Risks and Challenges affecting the Group
The specific financial risks of price risk, interest rate risk, credit risk and liquidity risk are discussed in note 1 to the financial statements. The principal broader risks - financial, operational, cash flow and personnel - are considered below.
The key financial risk in our business model is the inability to realise sufficient income through the sale of our holdings in portfolio companies to cover operating costs and investment capital. £4.9 million of cash was generated during the year from selling shares in portfolio company Exscientia. The remaining holding in Exscientia was valued at £2.3 million at 30 June 2023. The other principal financial risk of the business is a fall in the value of the Group's portfolio. With regards to the value of the portfolio itself, the fair value of each portfolio company represents the best estimate at a point in time and may be impaired if the business does not perform as well as expected, directly impacting the Group's value and profitability. This risk is mitigated as the number of companies in the portfolio increases. The Group continues to pursue its aim of actively seeking realisation opportunities within its portfolio to reduce the requirement for additional capital raising.
The principal operational risk of the business is management's ability to continue to identify spin out companies from its formal and informal university relationships, to increase the revenue streams that will generate cash in the short term and achieve realisations from the portfolio.
Early-stage companies are particularly sensitive to downturns in the economic environment. There are currently several areas of concern that could affect the UK and wider global markets and economy. Global risks include the continuing war in Ukraine and emerging conflict and instability in the middle east. The impact of both, particularly the dangers of escalation, on geopolitics, economically and on markets, are uncertain and difficult to predict. Inflation and interest rates are rising. Longer-term risks include uncertainties in the US, where economic growth continues to be slow and around next year's presidential elections, and in China, which is facing demographic challenges and pressures in its property sector.
Any economic downturn would mean considerable uncertainty in capital markets, resulting in a lower level of funding activity for such companies and a less favourable exit environment. The impact of this may be to constrain the growth and value of the Group's portfolio and to reduce the potential for revenue from advisory work. The Group seeks to mitigate these risks by maintaining a strong balance sheet, relationships with co-investors, industry partners and financial institutions, as well as controlling the cash burn rate in portfolio companies.
COVID-19 remains a risk with the possibility of new variants emerging. The likeliest impacts on the Group are operational: Frontier IP and portfolio company employees may contract the virus and be unavailable for work for extended periods of time. The Group seeks to mitigate these risks by maintaining a safe working environment and ensuring portfolio companies have considered and addressed risks.
Changes to the basis on which IP is licensed in the Higher Education sector might lead to reduced opportunity or a need to vary the business model. Any uncertainty in the sector may have an impact on the operation of the Group's commercialisation partnerships in terms of lower levels of intellectual property generation and therefore commercialisation activity. The Group seeks to mitigate these risks by continuing to seek new sources of IP from a wide range of institutions both within and outside of the UK.
The Group is dependent on its executive team for its success and there can be no assurance that it will be able to retain the services of key personnel. This risk is mitigated by the Group through recruiting additional skilled personnel and ensuring that the Group's reward and incentive framework aids our ability to recruit and retain key personnel. We expanded our team during the year and, post period-end, commissioned an external review of our remuneration framework.
After making appropriate enquiries, the Directors consider that it remains appropriate to adopt the going concern basis in preparing the financial statements. However, the Directors intend to realise further cash from the Group's quoted investment in Exscientia valued at £2.3 million at 30 June 2023 which they reasonably expect will provide the Group with sufficient cash to cover its operating expenditure for this period. The Directors also expect that this realisation will, where appropriate, assist the Group in supporting portfolio companies during this period. The dependence on the amount realised from this one quoted technology company represents a material uncertainty. More detail is provided in the Directors' Report.
By order of the Board
Neil Crabb
Director
30 October 2023
Remuneration Review Implementation
Following the review of the Group's remuneration policy during FY 2022, the aim of which was to ensure that the policy continued to reinforce long-term value creation by enhancing the Group's ability to attract and retain the best people, the Group began the implementation of the key findings of the Remuneration Review during the year.
Salary
As recommended, Director's full-time equivalent salaries were raised to £200,000 for the CEO, and to £160,000 for each of the CFO, CCO, and COO in January 2023. The Committee is expecting to implement further increases in FY24 which are likely to be less than the increase in FY23 and will disclose these in the relevant directors' remuneration report.
All non-director staff also received salary increases in order to ease cost of living pressures during the year.
Annual Bonus
Our business model means that the availability of cash to pay bonuses will be dependent on cash being raised through asset realisations, and the bonus opportunity in any financial year is dependent on this activity and will only be paid where the Group determines there is a sufficient surplus to the medium-term operating cash requirement.
Following review, the Remuneration Committee concluded that no bonuses were to be paid, consequently no bonus payments were made during the period.
LTIP
In line with Remuneration Review recommendations, the Group implemented the 'LTIP' as set out in an advisory resolution, and supported by shareholders, at the Company's 2022 Annual General Meeting.
The first awards made under the LTIP were granted in March 2023, to all staff including directors. Details of share options held by Directors who were in office at 30 June 2023 are set out below.
Option awards were also granted to Group non-director employees under the Group's Company Share Option Plan.
Directors' remuneration
An analysis of remuneration by director is given in Note 6 of these financial statements.
Contracts of service
Neil Crabb's, Jacqueline McKay's, James Fish's and Matthew White's service agreements are subject to a six-month notice period.
Share options
The Company currently has three share option schemes.
The Frontier IP Group plc Employee Share Option Scheme 2011, as adopted by the Board of Directors of the Company on 30 November 2012 and amended by the Board of Directors of the Company on 26 March 2018, was able to grant both options which are Enterprise Management Incentive (EMI) approved. This scheme remains in place, but no new options will be granted as the Group has ceased to be a qualifying company for EMI purposes.
Two further schemes are in place: the Frontier IP Group PLC Company Share Option Plan 2021 ("CSOP") and the Frontier IP Group PLC Unapproved Share Option Plan 2021, as amended by Board of Directors Resolution on 7 March 2023 ("LTIP"). During the period, 191,496 share options were granted under the CSOP and 643,376 share options were granted under the LTIP.
Details of share options held by Directors who were in office at 30 June 2023 are set out below:
The market price of the Company's shares at 30 June 2023 was 46.0p. The range of prices during the year was 46.0p to 89.0p.
Directors' interests in shares
The Directors in office at 30 June 2023 had the following interests in the ordinary shares of 10p each in the Company at the year end.
|
|
2023 |
2022 |
|
|
Number |
Number |
|
|
|
|
|
Neil Crabb |
3,445,538 |
2,988,713 |
|
Jacqueline McKay |
208,637 |
12,855 |
|
Andrew Richmond |
850,000 |
1,000,000 |
|
James Fish |
100,000 |
100,000 |
All of the above interests are beneficial.
Professor Dame Julia King, Baroness Brown of Cambridge
Chair of the Remuneration Committee
30 October 2023
Audit Committee Report
Key Responsibilities
The Committee's terms of reference are available on the Group's website. The Committee is required, amongst other things, to:
· monitor the integrity of the financial statements of the Group, reviewing significant financial reporting issues and the judgements they contain;
· review and challenge where necessary the accounting policies used, the application of accounting standards and the clarity of disclosure in the financial statements;
· keep under review the effectiveness of the Group's internal controls and risk management systems; and
· oversee the relationship with the external auditor, reviewing their performance and advising the Board on their appointment and remuneration.
Committee Governance
The Committee comprised of three non-executive directors and was chaired by Andrew Richmond until 13 March 2023 following which the Committee comprised of four non-executive directors and David Holdbrook replaced Andrew Richmond as chair. It meets a minimum of two times per year with the external auditors present. In addition, executive directors are asked to attend.
Activities of the Audit Committee during the year
The Committee met on three occasions during the year under review and up to the date of this Annual Report with all members present and the external auditors in attendance. The main areas covered by the Committee are outlined below:
Internal controls and risk management
The Board has overall responsibility for internal controls and risk management. As the Board's three non-executive directors were also the Committee members during the year, the Group's risk analysis and controls policy was reviewed and updated by the Board. Further details of business risks identified can be found in Key Risks and Challenges Affecting the Group. The risk management process is continually being developed and improved.
Significant estimates and judgements
The focus at the Committee meetings was on the significant estimates, assumptions and judgements used in the financial statements in arriving at the value of investments, reviewing goodwill for impairment and assessing the recoverability of amounts owed to the Group by portfolio companies. The Committee was satisfied that such estimates, assumptions and judgements used were reasonable and appropriate. Details of critical accounting estimates and assumptions and of critical accounting judgements can be found in Note 2 to the Financial Statements.
External audit
The external auditor reports to the Committee on actions taken to comply with professional and regulatory requirements and is required to rotate the lead audit partner every five years. BDO LLP were first appointed as external auditor in FY19 following their merger with Moore Stephens LLP who were the external auditor in place since FY15 following their merger with Chantrey Vellacott DFK LLP who were first appointed in FY08. Timothy West was appointed lead partner in FY17. Chris Meyrick was appointed lead partner in FY22. The Committee has confirmed it is satisfied with the independence, objectivity and effectiveness of BDO LLP and has recommended to the Board that the auditors be reappointed, and there will be a resolution to this effect at the forthcoming Annual General Meeting. In addition to their statutory duties, BDO LLP are also engaged to provide non-audit services where it is felt their knowledge of the business best places them to provide those services, such as review of the interim results, and where these non-audit services are permitted under the Financial Reporting Council's ethical guidelines.
Basis for qualified audit opinion
As noted within the external auditor's report, the Directors were not able to provide the external auditor with sufficient and appropriate evidence in relation to the estimation of fair value for certain investments, specifically being those investments described as 'Stage 2' in the accounting policies, which have been valued at £1.2million (representing 3.6% of equity investments of £32.9 million and 2.6% of net assets) as at 30 June 2023. As a result, the external auditor was unable to conclude in respect of the valuation of these investments and was unable to perform alternative procedures. Consequently, this formed the basis for their qualified opinion on these Stage 2 investments.
David Holbrook
Chairman of the Audit Committee
30 October 2023
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2023
|
|
|
2023 |
|
2022 |
|
|
Notes |
£'000 |
|
£'000 |
|
Revenue |
|
|
|
|
|
Revenue from services
Other operating income Unrealised (loss)/profit on the revaluation of investments |
3
13,14 |
372
(966) |
|
329
10,908 |
|
Realised (loss)/profit on disposal of investments
|
|
(786) |
|
2,867 |
|
|
|
|
|
|
|
|
|
(1,380) |
|
14,104 |
|
|
|
|
|
|
|
Administrative expenses Share based payments Interest income on debt investments |
5 |
(3,130) (155) 232 |
|
(3,104) (329) 155 |
|
Other income |
|
13 |
|
52 |
|
|
|
|
|
|
|
(Loss)/profit from operations |
|
(4,420) |
|
10,878 |
|
|
|
|
|
|
|
Interest income on short term deposits |
|
50 |
|
1 |
|
|
|
|
|
|
|
(Loss)/profit from operations and before tax |
|
(4,370) |
|
10,879 |
|
|
|
|
|
|
|
Taxation |
7 |
1,126 |
|
(649) |
|
|
|
|
|
|
|
(Loss)/profit and total comprehensive (expense)/income attributable to the equity holders of the Company |
|
(3,244) |
|
10,230
|
|
|
|
|
|
|
|
(Loss)/profit per share attributable to the equity holders of the Company: |
|
|
|
|
|
Basic (loss) / earnings per share |
8 |
(5.85)p |
|
18.60p |
|
Diluted (loss) / earnings per share |
8 |
(5.64)p |
|
17.53p |
All of the Group's activities are classed as continuing.
There is no other comprehensive income in the year (2022: nil).
Consolidated Statement of Financial Position
At 30 June 2023
|
|
|
2023 |
|
2022 |
|
|
Notes |
£'000 |
|
£'000 |
|
Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Tangible fixed assets |
9 |
13 |
|
6 |
|
Goodwill |
10 |
1,966 |
|
1,966 |
|
Equity investments Debt investments |
13 14 |
32,964 4,625 |
|
39,712 2,981 |
|
|
|
39,568 |
|
44,665 |
|
Current assets |
|
|
|
|
|
Trade receivables and other current assets |
15 |
1,026 |
|
1,051 |
|
Advances |
16 |
793 |
|
- |
|
Cash and cash equivalents |
|
4,603 |
|
4,368 |
|
|
|
6,422 |
|
5,419 |
|
Total assets |
|
45,990 |
|
50,084 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Deferred taxation |
7 |
(211) |
|
(1,167) |
|
|
|
(211) |
|
(1,167) |
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
17 |
(241) |
|
(218) |
|
|
|
(241) |
|
(218) |
|
Total liabilities |
|
(452) |
|
(1,385) |
|
|
|
|
|
|
|
Net assets |
|
45,538 |
|
48,699 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Called up share capital |
18 |
5,566 |
|
5,501 |
|
Share premium account |
18 |
14,627 |
|
14,576 |
|
Reverse acquisition reserve |
19 |
(1,667) |
|
(1,667) |
|
Share based payment reserve |
19 |
1,291 |
|
1,324 |
|
Retained earnings |
19 |
25,721 |
|
28,965 |
|
Total equity |
|
45,538 |
|
48,699 |
Consolidated Statements of Changes in Equity
For the year ended 30 June 2023
Group
|
|
Share capital |
Share premium account |
Reverse acquisition reserve |
Share- based payment reserve |
Retained earnings |
Total equity attributable to equity holders of the Company |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
At 1 July 2021
|
5,501 |
14,576 |
(1,667) |
1,276 |
18,735 |
38,421 |
|
Issue of shares |
|
|
- |
- |
- |
|
|
Share-based payments |
- |
- |
- |
48 |
|
48 |
|
Profit/total comprehensive income for the year |
- |
- |
- |
- |
10,230 |
10,230 |
|
|
|
|
|
|
|
|
|
At 30 June 2022 |
5,501 |
14,576 |
(1,667) |
1,324 |
28,965 |
48,699 |
|
|
|
|
|
|
|
|
|
Issue of shares |
65 |
51 |
- |
(18) |
- |
98 |
|
Share-based payments |
- |
- |
- |
(15) |
- |
(15) |
|
(Loss)/total comprehensive expense for the year |
- |
- |
- |
- |
(3,244) |
(3,244) |
|
|
|
|
|
|
|
|
|
At 30 June 2023 |
5,566 |
14,627 |
(1,667) |
1,291 |
25,721 |
45,538 |
Consolidated Statements of Cash Flows
For the year ended 30 June 2022
|
|
|
Group |
Group |
|
|
|
2023 |
2022 |
|
|
Notes |
£'000 |
£'000 |
|
|
|
|
|
|
Cash flows from operating activities |
22 |
(3,248) |
(3,006) |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchase of tangible fixed assets |
9 |
(16) |
(3) |
|
Purchase of equity investments |
13 |
(691) |
(614) |
|
Disposal of equity investments |
|
4,926 |
6,525 |
|
Purchase of debt investments |
14 |
(884) |
(527) |
|
Net amounts receivable from group undertakings |
|
- |
- |
|
Interest income |
|
50 |
1 |
|
Net cash from investing activities |
|
3,385 |
5,382 |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Proceeds from issue of equity shares |
|
98 |
- |
|
Costs of share issue |
|
- |
- |
|
Net cash generated from financing activities |
|
98 |
- |
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
235 |
2,376 |
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
4,368 |
1,992 |
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
4,603 |
4,368 |
Notes to the Financial Statements
1. Financial risk management
Financial risk factors
(a) Market risk
Interest rate risk
As the Group has no borrowings it only has limited interest rate risk. The impact is on income, debt investments and operating cash flow and arises from changes in market interest rates. Cash resources are held in floating rate accounts.
Price risk
The Group is exposed to equity securities price risk because of equity investments classified on the consolidated statement of financial position as financial assets at fair value through profit and loss. The maximum exposure is the fair value of these assets which is £32,964,000 (2022: £39,712,000) of which quoted equity investments comprise £2,298,000 (2022: £10,132,000). Equity investments are valued in accordance with the Group's accounting policy on equity investments. Management's monitoring of and contact with portfolio companies provides sufficient information to value the unquoted companies and the Board regularly reviews their progress, prospects and valuation. Information on reasonable possible shifts in the valuation of equity investments is provided in note 13 to the financial statements.
(b) Credit risk
The Group's credit risk is primarily attributable to its debt investments, trade receivables, other debtors and cash equivalents. The Group's current cash and cash equivalents are held with two UK financial institutions, the Bank of Scotland plc and Barclays Bank plc, both of which have a credit rating of "P1" from credit agency Moody's, indicating that Moody's consider that these banks have a "superior" ability to repay short-term debt obligations. The concentration of credit risk from trade receivables and other debtors varies throughout the year depending on the timing of transactions and invoicing of fees. Details of major customers to the Group are set out in Note 4. Details of trade receivables and other current assets are set out in note 15. Details of significant debt investments are set out in Note 14. Management's assessment is aided through representation on the Board and/or through providing advisory services to the companies.
The maximum exposure to credit risk for debt investments, trade receivables, other current asset and cash equivalents is represented by their carrying amount.
(c) Capital risk management
The Group is funded by equity finance only. Total capital is calculated as 'total equity' as shown in the consolidated statement of financial position. The Group's objectives for managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to manage the cost of capital. In order to maintain the capital structure, the Group may issue new shares as required. The Group currently has no debt. There were no changes in the Group's approach to capital management during the year.
(d) Liquidity risk
The Group seeks to manage liquidity risk to ensure sufficient liquidity is available to meet the requirements of the business and to invest cash assets safely and profitably. The Group's business model is to realise cash through the sale of investments in portfolio companies and in the absence of such realisations the Group would plan to raise additional capital. The Board reviews available cash to ensure there are sufficient resources for working capital requirements and investments. At 30 June 2023 and 30 June 2022 all amounts shown in the consolidated statement of financial position under current assets and current liabilities mature for payment within one year.
2. Critical accounting estimates and assumptions
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates and judgements.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:
(i) Valuation of investments
In applying valuation techniques to determine the fair value of unquoted equity investments the Group makes estimates and assumptions regarding the future potential of the investments. As the Group's unquoted investments are in seed, start-up and early-stage businesses it can be difficult to assess the outcome of their activities and to make reliable forecasts. Given the difficulty of producing reliable cash flow projections for use in discounted cash flow valuations, this technique is applied with caution. Adjustments made to fair value are, by their very nature, subjective and determining the fair value is a critical accounting estimate. In applying valuation techniques to determine the fair value of debt investments the Group makes estimates and assumptions regarding the time to repayment or conversion, discount rate and credit risk. A 25% increase in the time to repayment or conversion reduces the value of debt investments from £4,625,000 to £4,590,000 and a 25% increase in the discount rate reduces the value of the debt investments from £4,625,000 to £4,569,000. Where warrants are attached to a debt instrument, the fair value is determined using the Black-Scholes-Merton valuation model. The significant inputs to the model are provided in note 14. The price at which debt investments were made is 65% of the fair value of debt investments at 30 June 2023 (2022: 94%).
(ii) Impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the stated accounting policy. The recoverable amount is determined using a value in use value model which requires a number of estimations and assumptions about the timing and amount of future cash flows. As future cash flows relate primarily to proceeds from sale of investments, these estimates and assumptions are subject to a high degree of uncertainty. Note 10 describes the key assumptions and sensitivity applied.
(iii) Consideration of credit losses
The matters taken into account in the recognition of credit losses include historic current and forward-looking information The matters taken into account in the recognition of credit losses include historic current and forward-looking information. The Group's exposure to credit losses is with companies from its own portfolio whose ability to settle their debts is primarily dependant on their ability to raise capital rather than their current trading. The age of debt is not considered in assessing credit loss as the outcome is expected to be binary. The debt is also concentrated in a small number of companies; four companies account for 81% of trade receivables four account for 89% of debt investments at 30 June 2023. Management has in-depth knowledge of these companies and is providing the fundraising service for all four of them. The Group's history of credit loss is not significant and therefore management focus on the factors which impact the ability of these companies to successfully raise capital and a probability of default as a result of the failure to raise capital is applied to determine the expected credit loss. Details of the expected credit loss are provided in note 15.
The Group believes that the most significant judgement areas in the application of its accounting policies are establishing the fair value of its unquoted equity investments and the consideration of any impairment to goodwill. The matters taken into account by the Directors when assessing the fair value of the unquoted equity investments are detailed in the accounting policy on investments.
The considerations taken into account by the Directors when reviewing goodwill are detailed in Note 10. In addition, the Directors judge that the Group is exempt from applying the equity method of accounting for associates in which it has interests of over 20% as they consider the Group to be similar to a venture capital organisation and elects to hold such investments at fair value in the statement of financial position.
IAS28 Investments in Associates and Joint Ventures permits investments held by entities which are similar to venture capital organisations to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit and loss.
3. Revenue from services
During the year the Group earned revenue from the provision of services to portfolio companies and university partners as follows:
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
Retainers with portfolio companies |
336 |
313 |
|
Corporate finance fees from portfolio company fundraisings |
30 |
- |
|
Advisory fees from universities on initial spin-outs |
3 |
7 |
|
License income from universities |
3 |
9 |
|
|
372 |
329 |
4. Major customers
During the year the Group had five major customers that accounted for 86% of its revenue from services (2022: five customers accounted for 76%). Four of these customers were also in the top five in 2022. The revenues generated from each customer were as follows:
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
Customer 1 |
78 |
78 |
|
Customer 2 |
70 |
72 |
|
Customer 3 |
52 |
48 |
|
Customer 4 |
48 |
44 |
|
Customer 5 |
40 |
42 |
|
|
288 |
284 |
|
|
|
|
5. Administration expenses
Expenses included in administrative expenses are analysed below.
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
Employee costs |
2,117 |
2,320 |
|
Consultant |
133 |
81 |
|
Travel and subsistence |
21 |
7 |
|
Depreciation |
9 |
8 |
|
Bad and doubtful debts |
169 |
141 |
|
Fees payable to auditor: |
|
|
|
- audit fee - non-audit services |
92 3 |
60 5 |
|
Legal, professional and financial costs |
378 |
313 |
|
Premises lease |
140 |
113 |
|
Administration costs |
68 |
56 |
|
|
3,130 |
3,104 |
6. Directors and employees
The average number of people employed by the Group during the year was:
|
|
2023 |
2022 |
|
|
Number |
Number |
|
|
|
|
|
Business and corporate development |
20 |
16 |
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
Wages and salaries |
1,518 |
1,714 |
|
Social security |
197 |
218 |
|
Pension costs - defined contribution plans |
186 |
208 |
|
Non-executive directors' fees |
126 |
105 |
|
Other benefits |
52 |
75 |
|
Recruitment |
38 |
- |
|
Total employee administration expenses |
2,117 |
2,320 |
At 30th June 2023, all employees with the exception of Jacqueline McKay were employed by Frontier IP Group plc. Post year-end, Jacqueline McKay's employment contract was changed from subsidiary Frontier IP Limited to Frontier IP Group plc.
The key management of the Group and the Company comprise the Frontier IP Group Plc Board of Directors. The remuneration of the individual Board members is shown below.
Remuneration comprises basic salary, pension contributions and benefits in kind, being private health insurance and life assurance. The type of remuneration is constant from year to year. Ad hoc bonuses may be paid to reward exceptional performance and bonuses were paid during the year to 30 June 2022. Such bonuses are decided by the Remuneration Committee. Share options are also awarded to employees from time to time. The granting of share options to individual employees is determined taking into account seniority, commitment to the business and recent performance.
The total remuneration for each director is shown below.
Amounts in £'000
|
|
Salary |
Bonus |
Other benefits |
Pension |
Share option |
Total |
||||||
|
|
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
2023 |
2022 |
|
Executive |
|
|
|
|
|
|
|
|
|
|
|
|
|
N Crabb |
177 |
143 |
0 |
143 |
5 |
5 |
17 |
14 |
43 |
64 |
242 |
368 |
|
J McKay |
74 |
41 |
0 |
106 |
5 |
5 |
76 |
85 |
36 |
57 |
191 |
294 |
|
J Fish |
125 |
112 |
0 |
74 |
4 |
4 |
31 |
37 |
37 |
58 |
197 |
287 |
|
M White |
152 |
134 |
0 |
30 |
3 |
4 |
15 |
26 |
34 |
54 |
204 |
247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-executive |
|
|
|
|
|
|
|
|
|
|
|
|
|
A Richmond |
48 |
45 |
- |
- |
- |
- |
- |
- |
- |
- |
48 |
45 |
|
M Bourne * |
- |
12 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
12 |
|
C Wilson * |
23 |
27 |
- |
- |
- |
- |
- |
- |
- |
- |
23 |
27 |
|
J King |
34 |
22 |
- |
- |
- |
- |
- |
- |
- |
- |
34 |
22 |
|
N Grierson |
10 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
10 |
- |
|
D Holbrook |
10 |
- |
- |
- |
- |
- |
- |
- |
- |
- |
10 |
- |
|
|
653 |
536 |
0 |
353 |
17 |
18 |
139 |
162 |
150 |
233 |
959 |
1,302 |
* Former directors
7. Taxation
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
Current tax |
- |
- |
|
Deferred tax |
(1,126)
|
649 |
|
Tax (credit)/charge for the year |
(1,126) |
649 |
A reconciliation from the reported (loss)/profit before tax to the total tax (credit)/charge is shown below:
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
|
|
|
|
(Loss)/profit before tax |
(4,370) |
10,879 |
-
|
(Loss)/profit before tax at the effective rate of corporation tax in the UK of 20.5% (2022: 19%) |
(895)
|
2,067 |
|
Effects of: Fair value movement in investments not recognised in deferred tax |
(69) |
(1,689) |
|
Expenses not deductible for tax purposes |
31 |
63 |
|
Movement in deferred tax asset of losses not recognised |
- |
36 |
|
Adjustments arising from difference between average and deferred tax rates |
(169) |
- |
|
Deferred tax recognised in equity |
(171) |
- |
|
Other adjustments |
147 |
172 |
|
Tax (credit)/charge for the year |
(1,126) |
649 |
Deferred Tax
|
|
Group |
Group
|
|
Deferred tax liabilities at 30 June |
2023 |
2022 |
|
Unrealised gains investments |
(689) |
(2,485) |
|
Short-term timing differences - fixed assets |
(1) |
- |
|
|
(690) |
(2,485) |
|
Deferred tax assets at 30 June 2023 |
|
|
|
Tax losses |
277 |
830 |
|
Short-term timing differences - pension |
6 |
11 |
|
Short-term timing differences - outstanding share options |
196 |
476 |
|
Short-term timing differences - fixed assets |
- |
1 |
|
|
479 |
1,318 |
|
|
|
|
|
Net deferred tax (liability) / asset |
(211) |
(1,167) |
|
|
Company |
Company
|
|
Deferred tax liabilities at 30 June |
2023 |
2022 |
|
Unrealised gains investments |
(138) |
(137) |
|
Short-term timing differences - fixed assets |
- |
- |
|
|
(138) |
(137) |
|
Deferred tax assets at 30 June |
|
|
|
Tax losses |
272 |
825 |
|
Short-term timing differences - pension |
- |
- |
|
Short-term timing differences - outstanding share options |
196 |
476 |
|
|
468 |
1,301 |
|
|
|
|
|
Net deferred tax (liability) / asset |
330 |
1,164 |
|
|
Group |
Company |
|
Deferred tax movement |
|
|
|
(Liability)/asset at 1 July 2021 |
237 |
(2,047) |
|
Credited |
649 |
602 |
|
Debited to equity |
281) |
281 |
|
At 30 June 2022 |
1,167 |
(1,164) |
|
|
|
|
|
|
Group |
Company |
|
Deferred tax movement |
|
|
|
(Liability)/asset at 1 July 2022 |
(1,167) |
1,164 |
|
Credited |
1,126 |
(664) |
|
Debited to equity |
(170) |
(170) |
|
At 30 June 2023 |
(211) |
330 |
No deferred tax liability has been recognised on the difference between base cost and fair value of certain financial assets at fair value through profit and loss which qualify as equity investments and which are expected to be exempt from tax under the substantial Shareholding Exemption on their subsequent disposal.
The Group has a net unrecognised deferred tax at year end of £420,000 (Period ended 30 June 2022: £420,000) calculated at 25% in respect of its unutilised pre-April 2017 trading losses of £1,680,000 (gross). This is due to uncertainty in respect of future probable trading profits in Frontier IP Limited against which these losses can be utilised.
8. Earnings per share
a) Basic
Basic earnings per share is calculated by dividing the profit attributable to the shareholders of Frontier IP Group Plc by the weighted average number of shares in issue during the year.
|
|
(Loss) / profit attributable to shareholders £'000 |
Weighted average number of shares |
Basic (loss) / earnings per share amount in pence |
|
|
|
|
|
|
Year ended 30 June 2023 |
(3,244) |
55,409,626 |
(5.85) |
|
|
|
|
|
|
Year ended 30 June 2022 |
10,230 |
55,005,546 |
18.60 |
b) Diluted
Diluted earnings per share is calculated by adjusting the weighted number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary shares: share options. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market value share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
|
|
(Loss) / profit attributable to shareholders £'000 |
Weighted average number of shares adjusted for share options |
Diluted (loss) / earnings per share amount in pence |
|
|
|
|
|
|
Year ended 30 June 2023 |
(3,244) |
57,542,781 |
(5.64) |
|
|
|
|
|
|
Year ended 30 June 2022 |
10,230 |
58,339,949 |
17.53 |
9. Tangible fixed assets
|
|
Fixtures and equipment |
|
|
£'000 |
|
Cost |
|
|
At 1 July 2021 |
36 |
|
Additions |
3 |
|
Disposals |
- |
|
At 30 June 2022 |
39 |
|
Additions |
16 |
|
Disposals |
(12) |
|
At 30 June 2023 |
43 |
|
|
|
|
Depreciation |
|
|
Accumulated depreciation at 1 July 2021 |
25 |
|
Charge for the year to 30 June 2022 |
8 |
|
Disposals |
- |
|
Accumulated depreciation at 30 June 2022 |
33 |
|
Charge for the year to 30 June 2023 |
9 |
|
Disposals |
(12) |
|
Accumulated depreciation at 30 June 2023 |
30 |
|
Net book value |
|
|
At 30 June 2022 |
6 |
|
At 30 June 2023 |
13 |
10 Goodwill
|
|
Group |
Company |
|
|
£'000 |
£'000 |
|
Cost |
|
|
|
At 1 July 2021, 30 June 2022 and at 30 June 2023 |
1,966 |
- |
|
|
|
|
|
Impairment |
|
|
|
At 1 July 2021, 30 June 2022 and at 30 June 2023 |
- |
- |
|
|
|
|
|
Carrying value |
|
|
|
At 30 June 2022 |
1,966 |
- |
|
At 30 June 2023 |
1,966 |
- |
The Group conducts an annual impairment test on the carrying value of goodwill based on the recoverable amount of the Group as one cash generating operating unit. The recoverable amount is determined using a value in use model. The net present value of projected cash flows is compared with the carrying value of the Group's investments and goodwill. Projected cash flows are based on management approved budgets for a period of three years and key assumptions over a further seven years. When determining the key assumptions, management has used both past experience and management judgement, but as future cash inflows are derived primarily from the realisation of investments, these assumptions are subject to a high degree of uncertainty. The key assumptions used in the model were rate of return 29% (2022: 33%); average yearly realisations 6.7% (2022: 6.7%); annual growth in trading income 7.2% (2022:8%); annual growth in the cost base 7.8% (2022: 11%; discount 14% (2022: 11%). The Board considers that a reasonable possible change in the rate of return or in the discount rate would cause the carrying amount of the cash generating unit to exceed its recoverable amount. A decrease in the rate of return from 29% to 17% or an increase in the discount rate from 14% to 20% would cause the recoverable amount to equal the carrying amount. The Board considers that the recoverable amount of the Group as one cash generating operating unit is greater than its carrying value.
11. Categorisation of Financial Instruments
|
Financial assets |
At fair value through profit or loss £'000 |
Amortised cost £'000 |
Total £'000 |
|
At 30 June 2022 |
|
|
|
|
Equity investments |
39,712 |
- |
39,712 |
|
Debt investments |
2,981 |
- |
2,981 |
|
Trade and other receivables |
- |
1,052 |
1,052 |
|
Cash and cash equivalents |
- |
4,368 |
4,368 |
|
Total |
42,693 |
5,420 |
48,113 |
|
At 30 June 2023 |
|
|
|
|
Equity investments |
32,964 |
- |
32,964 |
|
Debt investments |
4,625 |
- |
4,625 |
|
Trade and other receivables |
- |
1,026 |
1,026 |
|
Advances |
793 |
- |
793 |
|
Cash and cash equivalents |
- |
4,603 |
4,603 |
|
Total |
38,382 |
5,629 |
44,011 |
All financial liabilities are categorised as other financial liabilities and recognized at amortised cost.
All net fair value losses in the year are attributable to financial assets designated at fair value through profit or loss. (2022: all net fair value gains were attributable to financial assets designated at fair value through profit or loss.)
12. Investment in subsidiaries
|
|
Company 2023 |
Company 2022 |
|
|
£'000 |
£'000 |
|
At 1 July |
2,383 |
2,383 |
|
Provision for impairment |
- |
- |
|
At 30 June |
2,383 |
2,383 |
Group Investments
The Company has investments in the following subsidiary undertakings.
|
|
Country of incorporation |
Proportion of ordinary shares directly held by the Company |
|
|
|
|
|
Frontier IP Limited - principal activity is commercialisation of IP |
Scotland |
100% |
|
Frontier IP Management Limited - principal activity is investment advisory and marketing services |
Scotland |
100% |
|
FIP Portugal, Unipessoal, Lda. - principal activity is commercialisation of IP |
Portugal |
100% |
The registered office of all subsidiaries registered in Scotland is c/o CMS Cameron McKenna Nabarro Olswang LLP, Saltire Court, 20 Castle Terrace, Edinburgh EH1 2EN.
The registered office of FIP Portugal, Unipessoal, Lda is Rua João Frederico Ludovice 22ª, Loja
1500-357, Benfica, Lisbon, Portugal.
13. Equity investments
Equity investments are valued individually at fair value in accordance with the Group's accounting policy on investments. All but one of the Group's equity investments are unquoted and these have been categorised as being level 3, that is, valued using unobservable inputs. The quoted investment are categorised as being level 1, that is, valued using quoted prices in active markets for identical assets or liabilities which the Group can access at the measurement date. All gains and losses relate to assets held at the year end, and the fair value movement has been shown in the income statement as other operating income.
|
Equity Investments
|
Group 2023 |
Group 2022 |
Company 2023 |
Company 2022 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
At 1 July |
39,712 |
31,982 |
26,963 |
16,011 |
|
Additions |
691 |
614 |
691 |
614 |
|
Conversion of debt investments |
54 |
764 |
54 |
764 |
|
Disposals |
(5,713) |
(3,659) |
- |
- |
|
Unrealised (loss)/profit on revaluation |
(1,780) |
10,011 |
551 |
9,574 |
|
At 30 June |
32,964 |
39,712 |
28,259 |
26,963 |
The table below sets out the movement during the year in the value of unquoted equity investments by the valuation matrix stages described in the accounting policy on equity investments:
|
Equity Investments |
|
||||||
|
|
Stage 1 |
Stage 2 |
Stage 3 |
Stage 4 |
Stage 5 |
Stage 6
|
Total |
|
Fair value category |
3 |
3 |
3 |
3 |
3 |
1 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
1 July 2021 |
31 |
232 |
5,078 |
26,641 |
- |
- |
31,982 |
|
Transfers between stages |
(16) |
16 |
- |
(13,210) |
- |
13,210 |
- |
|
Fair value change through other operating income |
6 |
550 |
1,008 |
7,866 |
- |
581 |
10,011 |
|
Additions |
10 |
- |
- |
1,368 |
- |
- |
1,378 |
|
Disposals |
- |
- |
- |
|
- |
(3,659) |
(3,659) |
|
30 June 2022 |
31 |
798 |
6,086 |
22,665 |
- |
10,132 |
39,712 |
|
Transfers between stages |
- |
44 |
2,234 |
(2,278) |
- |
- |
- |
|
Fair value increase through other operating income |
(31)
|
351
|
(2,447)
|
2,469
|
- |
(2,122) |
(1,780)
|
|
Additions |
- |
- |
- |
745 |
- |
- |
745 |
|
Disposals |
- |
- |
- |
- |
- |
(5,713) |
(5,713) |
|
30 June 2023 |
- |
1,193 |
5,873 |
23,601 |
- |
2,297 |
32,964 |
The table below provides information about equity investment fair value measurements. (See the accounting policy on investments for a description of the valuation matrix stages)
|
Valuation matrix stage |
No of Investments |
Fair value |
Inputs |
Reasonable possible shift |
|
|
|
|
£'000 |
|
% |
+/- £000 |
|
At 30 June 2022 |
|||||
|
Stage 1 |
3 |
31 |
The company is valued at fair value which is typically at a notional value of around £50,000 |
20% |
6 |
|
Stage 2 |
3 |
798 |
Management's assessment of the value of IP transferred and valuation of grants from which economic benefit is derived |
31% |
248 |
|
Stage 3 |
7 |
6,086 |
Management's assessment of performance against milestones and discussions of likely imminent fundraising |
40% |
2,434 |
|
Stage 4 |
10 |
22,665 |
The price of last funding round provides unobservable input into the valuation of any individual investment. However, subsequent to the funding round, management are required to re-assess the carrying value of investments at each year-end which result in unobservable inputs into the valuation methodology. |
28% |
6,382 |
|
Stage 5 |
- |
- |
Discounted comparable public company valuation. Unobservable inputs into discounted cash-flow are forecasts of future cash-flows, probabilities of project failure, and evaluation of the time value of money. |
- |
- |
|
Stage 6 1 |
10,132 |
Based on bid price at balance sheet date. |
- |
- |
|
|
30 June 2022 |
39,712 |
|
23% |
9,070 |
|
|
|
|
|
|
|
|
|
At 30 June 2023 |
|||||
|
Stage 1 |
4 |
- |
The company is valued at fair value which is the cost of the initial equity. If advisory services are provided by the Group prior to spin out in return for its equity stake, the cost is the value of services invoiced. If no advisory services have been invoiced prior to spin out, the cost is the nominal value of the shares received. |
- |
- |
|
Stage 2 |
4 |
1,193 |
Management's assessment of the value of IP transferred and the value of grants from which economic benefit is derived. |
36% |
429 |
|
Stage 3 |
6 |
5,873 |
Management's assessment of performance against milestones and discussions of likely imminent fundraising. |
42% |
2,467 |
|
Stage 4 |
9 |
23,601 |
The price of latest funding round provides unobservable input into the valuation of any individual investment. However, subsequent to the funding round, management are required to re-assess the carrying value of investments at each year end which result in unobservable inputs into the valuation methodology. |
31% |
7,316 |
|
Stage 5 |
-
|
- |
Discounted comparable public company valuation. Unobservable inputs into discounted cash flow are forecasts of future cash flows, probabilities of project failure and evaluation of the time cost of money. |
- |
-
|
|
Stage 6 |
1 |
2,297 |
Based on bid price at balance sheet date. |
- |
- |
|
|
|
|
|
|
|
|
30 June 2023 |
32,964 |
|
31% |
10,212 |
|
The percentage reasonable possible shift for each stage is the blended percentage reasonable possible shift of each company at that stage which are based on the Directors' assessment of the level of uncertainty attached to the valuation inputs.
Equity investments are carried in the statement of financial position at fair value even though the Group may have significant influence over those companies. This treatment is permitted by IAS28, Investments in Associates. At 30 June 2023 the Group held an economic interest of 20% or more in the following companies:
|
Name of Undertaking |
Registered Address |
% Issued Share Capital |
Share Class |
|
|
|
|
2023 |
2022 |
|
|
AquaInSilico |
Avenida Tenente Valadim, nº. 17, 2º F, 2560-275 Torres Vedras, Portugal |
29.0% |
29.0% |
Ordinary |
|
Alusid Limited |
Richard House, Winckley Square, Preston, Lancashire, PR1 3HP |
37.4% |
38.9% |
Ordinary |
|
Cambridge Raman Imaging Limited |
Botanic House,100 Hills Road, Cambridge, CB2 1PH |
26.8% |
26.8% |
Ordinary |
|
CamGraPhIC Limited |
Botanic House,100 Hills Road, Cambridge, CB2 1PH |
20.8% |
20.8% |
Ordinary |
|
Celerum Limited |
30 East Park Road, Kintore, Inverurie, AB51 0FE |
33.8% |
33.8% |
Ordinary |
|
Des Solutio LDA |
Avenida Tenente Valadim, nº. 17, 2º F, 2560-275 Torres Vedras, Portugal |
25.0% |
25.0% |
Ordinary |
|
Elute Intelligence Holdings Limited |
21 Church Road, Tadley, RG26 3AX |
42.2% |
41.2% |
Ordinary |
|
Enfold Health Limited |
The Officers' Mess, Royston Road, Duxford, Cambridgeshire, United Kingdom, CB22 4QH |
75.8% |
0.0% |
Ordinary |
|
Fieldwork Robotics Limited |
Research And Innovation Floor 2 Marine Building, Plymouth University, Plymouth, PL4 8AA |
22.1% |
24.5% |
Ordinary |
|
GraphEnergyTech Limited |
The Officers' Mess, Royston Road, Duxford, Cambridgeshire, United Kingdom, CB22 4QH |
32.1% |
0.0% |
Ordinary |
|
Insignals Neurotech Lda |
Rua Passeio Alegre, 20 Centro de Incubacyo e Aceleracyo Do Porto, Porto 4150-570, Portugal |
32.9% |
32.9% |
Ordinary |
|
NTPE LDA |
Avenida Tenente Valadim, nº. 17, 2º F, 2560-275PortugalVedras, Portugal |
47.9% |
47.9% |
Ordinary |
The nature of these companies' business is provided in the Portfolio Review section of the Strategic Report where the holding carries a value.
14. Debt investments
Debt investments are loans to portfolio companies to fund early-stage costs, provide funding alongside grants and bridge to an equity fundraise. Loans ranging from £15,000 to £200,000 were made to seven companies during the period. All debt investments are categorised as fair value through profit or loss and measured at fair value. These have been categorised as being level 3, that is, valued using unobservable inputs. The Group uses valuation techniques that management consider appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs The price at which the debt investment was made may be a reliable indicator of fair value at that date but management consider the financial position and prospects for the portfolio company borrower when valuing debt investments at subsequent measurement dates.
Certain debt investments carry warrants granting the option to purchase shares. The exercise price is generally the price of shares issued at the first equity fundraising following the grant and the period of exercise is generally at any time from the first equity fundraising to an exit event. The fair value of the warrants is determined using the Black-Scholes-Merton valuation model. The significant inputs into the model for each warrant were the exercise price, the current share price valuation, volatility of 70% (2022: 70%), expected life of between three months and six years and annual risk-free interest rates to end of term of between 4.45% and 5.30% (2022: 2.07% and 2.07%). The value of warrants included in debt investments at 30 June 2023 is £1,597,000 (2022: £827,000).
The movement of debt investments during the year is set out below:
|
|
Group 2023 |
Group 2022 |
Company 2023 |
Company 2022 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
At 1 July |
2,981 |
2,320 |
2,297 |
1,759 |
|
Additions |
884 |
527 |
575 |
427 |
|
Conversion to unquoted equity investments |
(54) |
(764) |
(54) |
(764) |
|
Unrealised profit on revaluation |
814 |
898 |
739 |
875 |
|
At 30 June |
4,625 |
2,981 |
3,557 |
2,297 |
Debt investments with three portfolio companies accounted for 89% of the value of debt investments at 30 June 2023: CamGraPhIC (£2,612,000), Nandi Proteins (£884,000) and Elute Intelligence (£623,000)
Conversions of debt investments are non-cash transactions, so not reflected in the statement of cashflows. All debt investments are classed as non-current. Certain debt instruments have conversion or repayment terms dependent on the amount and timing of an equity fundraising by the portfolio company borrower. The exercise of a conversion right would reclass the debt investment as a non-current equity investment. The expectation is to exercise the right to repayment, however there is uncertainty over the timing and amount of equity fundraisings. Furthermore, notwithstanding the right to repayment being triggered, the Group may decide, depending on the circumstance at the time, to defer repayment or convert into equity for the benefit of the portfolio company borrower in which the Group also holds an equity stake.
15. Trade receivables and other current assets
|
|
Group |
Group |
Company |
Company |
|
|
2023 |
2022 |
2023 |
2022 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Trade receivables |
529 |
388 |
338 |
279 |
|
Receivables from Group undertakings |
- |
- |
357 |
285 |
|
VAT |
7 |
12 |
- |
9 |
|
Prepayments and accrued income |
71 |
386 |
30 |
284 |
|
Other debtors |
74 |
128 |
17 |
67 |
|
Accrued interest |
448 |
180 |
286 |
84 |
|
|
1,129 |
1,094 |
1,028 |
1,008 |
|
|
|
|
|
|
|
Expected credit loss at 1 July |
43 |
- |
27 |
- |
|
Other current assets provided for in the year |
60 |
43 |
62 |
27 |
|
Other current assets written off in the year |
- |
- |
- |
- |
|
Expected credit loss at 30 June |
103 |
43 |
89 |
27 |
|
|
|
|
|
|
|
Less receivables from Group undertakings - non current |
- |
- |
357 |
285 |
|
Current portion |
1,026 |
1,051 |
582 |
696 |
Trade receivables
|
|
Group |
Group |
Company |
Company |
|
|
2023 |
2022 |
2023 |
2022 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Trade receivables not past due |
32 |
28 |
18 |
21 |
|
Trade receivables past due 1-30 days |
35 |
29 |
23 |
21 |
|
Trade receivables past due 31-60 days |
33 |
26 |
18 |
18 |
|
Trade receivables past due 61-90 days |
32 |
27 |
21 |
18 |
|
Trade receivables past due over 90 days |
604 |
376 |
383 |
279 |
|
Gross trade receivables at 30 June |
736 |
486 |
463 |
357 |
|
|
|
|
|
|
|
Expected credit loss at 1 July |
98 |
- |
78 |
- |
|
Debts provided for in the year |
109 |
98 |
47 |
78 |
|
Debts written off in the year |
- |
- |
- |
- |
|
Expected credit loss at 30 June |
207 |
98 |
125 |
78 |
|
|
|
|
|
|
|
Net trade receivables at 30 June |
529 |
388 |
338 |
279 |
Trade receivables are amounts due from portfolio companies for services provided with net amounts recorded as revenue in the consolidated statement of comprehensive income. The expected credit losses are estimated by reference to the financial position and specific circumstances of the portfolio companies, by reference to past default experience and by assessment of the current and forecast economic conditions. The nature of the services provided to portfolio companies means the Group has in-depth knowledge of the companies' prospects both for trading and raising capital and the number of companies with past due receivables is small enabling a full assessment of recoverability by company. The Group also considers if a general provision for expected loss through applying the historical rate of portfolio company failures is material. The Group's history of credit loss is not sufficiently material to inform future expectations and therefore management focus on the factors which impact the ability of its debtor companies to successfully raise capital and a probability of default as a result of the failure to raise capital is applied to determine the expected credit loss.
Receivables from Group undertakings carry interest of 2.0% above Bank of England base rate (2022: 2.0%).
16. Advances
|
|
Group 2023 |
Group 2022 |
Company 2023 |
Company 2022 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Advances |
793 |
- |
785 |
- |
Prior to 30 June 2023 the Group advanced funds to two portfolio companies prior to execution of loan documentation. £785,000 of advances were to CamGraPhIC. The advances were reclassed as Debt Investments post year-end.
17. Trade and other payables
|
|
Group |
Group |
Company |
Company |
|
|
2023 |
2022 |
2023 |
2022 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Trade payables |
23 |
41 |
42 |
62 |
|
Payables to group undertakings |
- |
- |
3,366 |
192 |
|
Social security and other taxes |
68 |
53 |
- |
- |
|
VAT |
9 |
- |
9 |
- |
|
Other creditors |
14 |
10 |
- |
- |
|
Accruals and deferred income |
127 |
114 |
109 |
69 |
|
At 30 June |
241 |
218 |
3,526 |
323 |
|
Less payables to Group undertakings - non current |
- |
- |
(3,366) |
(192) |
|
Current portion |
241 |
218 |
160 |
131 |
18. Share capital and share premium
|
|
Number of shares issued and fully paid |
Ordinary shares of 10p |
Share premium |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
|
At 30 June 2022 |
55,005,546 |
5,501 |
14,576 |
20,077 |
|
Exercise of options |
652,607 |
65 |
51 |
116 |
|
|
|
|
|
|
|
At 30 June 2023 |
55,658,153 |
5,566 |
14,627 |
20,193 |
19. Reserves
The reverse acquisition reserve was created on the reverse takeover of Frontier IP Group Plc. The fair value of equity-settled share-based payments is expensed on a straight-line basis over the vesting period and the amount expensed in each year is transferred to the share-based payment reserve. The amount by which the deferred tax asset arising on the intrinsic value of the outstanding share options differs from the cumulative expense is also transferred to the share-based payment reserve. Included in retained earnings are unrealised profits amounting to £28,562,000 (2022: £35,233,000). Consequently, there were no distributable reserves at 30 June 2023 or 30 June 2022. The movement in reserves for the years ended 30 June 2023 and 2022 is set out in the Consolidated and Company Statement of Changes in Equity.
20. Share options
Frontier IP has three option schemes:
Under the Frontier IP Group Plc Employee Share Option Scheme 2011 - Amended 26 March 2018, both enterprise management incentive options and unapproved options are granted. No payment is required from option holders on the grant of an option. The options are exercisable starting three years from the date of the grant with no performance conditions. The scheme runs for a period of ten years but no new options can be granted as the Group has ceased to be a qualifying company for EMI purposes No options were granted during the year under this scheme.
Under the Frontier IP Group plc Company Share Option Plan 2021 ("CSOP"), no payment is required from option holders on grant of an option. The options are exercisable starting three years from the date of the grant with no performance conditions. The scheme runs for a period of ten years. 191,496 share options were granted during the year under the CSOP.
Under the Frontier IP Group plc Unapproved Share Option Plan 2021 ("LTIP"), no payment is required from option holders on grant of an option. The options are exercisable starting three years from the date of grant provided certain performance conditions have been met. The scheme runs for a period of ten years. 643,376 share options were granted during the year under the LTIP.
Movements in the number of share options outstanding and their related weighted average exercise prices were as follows:
|
|
2023 Weighted average exercise price |
2023
Options |
2022 Weighted average exercise price |
2022
Options |
|
|
Pence per share |
|
Pence per share |
|
|
At 1 July |
31.71 |
4,986,726 |
31.99 |
5,030,181 |
|
Granted |
24.43 |
834,872 |
- |
- |
|
Exercised |
15.00 |
(652,607) |
- |
- |
|
Lapsed |
63.76 |
(69,927) |
64.36 |
(43,455) |
|
At 30 June |
32.22 |
5,099,064 |
31.71 |
4,986,726 |
Of the 5,099,064 outstanding options (2022: 4,986,726) 3,570,616 had vested at 30 June 2023 (2022: 2,836,000). The vested options have a weighted average exercise price of 32.46p.
Share options outstanding at the end of the year have the following expiry date and exercise prices:
|
|
Exercise price Pence per share |
2023 Number |
2022 Number |
|
2024 |
26.88 |
432,393 |
432,393 |
|
2026 |
26.63 |
650,000 |
650,000 |
|
2027 |
40.00 |
399,000 |
399,000 |
|
2028 |
65.00 |
246,000 |
246,000 |
|
2028 |
10.00 |
456,000 |
456,000 |
|
2029 |
66.00 |
652,612 |
694,050 |
|
2029 2030 2030 |
10.00 65.00 10.00 |
734,611 383,260 310,316 |
736,946 409,414 310,316 |
|
2032 |
85.00 |
74,646 |
- |
|
2033 |
66.00 |
116,850 |
- |
|
2033 |
10.00 |
643,376 |
- |
The weighted average remaining contractual life of the outstanding options is 5.8 years.
The weighted average fair value of options granted to executive Directors and employees during the year determined using the Black-Scholes-Merton valuation model was 48.02p per option. The significant inputs into the model were the exercise prices shown above, weighted average share price of 68.5p, volatility of 9.9%, dividend yield of 0%, expected life of 5 years and annual risk-free interest rate of 3.41%. Future volatility has been estimated based on 5 years' historical daily data.
21. Leases
|
|
2023 |
2022 |
|
|
Land & Buildings |
Land & Buildings |
|
|
£'000 |
£'000 |
|
Commitments under non-cancellable leases expiring: |
|
|
|
Within one year |
90 |
91 |
|
Within two to five years |
- |
- |
|
After five years |
- |
- |
|
|
90 |
91 |
The leases relate to rental of serviced offices. Under the terms of the rental agreements, the supplier has the right to terminate the agreement during the period of use, however at inception of the agreement this was not considered likely to occur. For short term leases (12 months or less) and leases of low value assets, the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16's transitional rules. Currently the longest lease ends in March 2024.
22. Cash used in operations
|
|
Group |
Group |
Company |
Company |
|
|
2023 |
2022 |
2023 |
2022 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Profit/(loss) before tax |
(4,370) |
10,879 |
(873) |
8,136 |
|
Adjustments for: |
|
|
|
|
|
Share-based payments |
155 |
329 |
155 |
329 |
|
Depreciation |
9 |
8 |
- |
- |
|
Interest received |
(50) |
(1) |
(52) |
(1) |
|
Unrealised loss/(profit) on the revaluation of investments |
966 |
(10,908) |
(1,290) |
(10,449) |
|
Realised loss/(profit) on disposal of investments |
786 |
(2,867) |
- |
- |
|
Changes in working capital: |
|
|
|
|
|
Trade and other receivables* |
26 |
(456) |
122 |
(250) |
|
Advances |
(793) |
- |
(785) |
- |
|
Trade and other payables |
23 |
10 |
19 |
50 |
|
Cash flows from operating activities |
(3,248) |
(3,006) |
(2,704) |
(2,185) |
*Movement in trade and other receivables includes non-cash accrued interest on debt investments with portfolio companies
The movements in liabilities from financing cashflows are nil.
23. Related party transactions
Neil Crabb is a director of PoreXpert Limited, Pulsiv Limited, CamGraPhIC Ltd, Cambridge Raman Imaging Ltd and Alusid Limited. Campbell Wilson, a former director of Frontier IP, is a principal of Wilson Biopharma Consulting. Matthew White is a director of The Vaccine Group Limited, Nandi Proteins Limited and Fieldwork Robotics Limited. All these companies, with the exception of Wilson Biopharma Consulting, are portfolio companies of the Group. The Group charged fees to these companies and was owed amounts from these companies as follows:
|
By the Group |
Fees charged |
Fees charged |
Amounts owed |
Amounts owed |
|
|
2023 |
2022 |
2023 |
2022 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Nandi Proteins Limited |
78 |
78 |
213 |
120 |
|
Pulsiv Limited |
24 |
44 |
5 |
5 |
|
Alusid Limited |
70 |
72 |
127 |
43 |
|
The Vaccine Group Limited |
48 |
48 |
77 |
34 |
|
Celerum Limited |
52 |
5 |
52 |
- |
|
Fieldwork Robotics Limited |
30 |
- |
- |
104 |
|
CamGraPhIC Ltd |
40 |
- |
112 |
- |
|
Cambridge Raman Imaging Ltd |
24 |
- |
- |
- |
|
|
|
|
|
|
|
By Related Parties
|
|
|
|
|
|
Wilson Biopharma Consulting
|
12 |
12 |
- |
- |
|
|
|
|
|
|
24. Subsequent events
There were no subsequent events to report.
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