Information  X 
Enter a valid email address

Fusion IP PLC (FIP)

  Print          Annual reports

Tuesday 15 October, 2013

Fusion IP PLC

Preliminary Results

RNS Number : 4791Q
Fusion IP PLC
15 October 2013
 



 

 

 

15 October 2013

 

FUSION IP PLC

('Fusion', the 'Company' or the 'Group')

 

Preliminary results for 12 months ended 31 July 2013

 

 

Fusion IP plc (AIM: FIP), the university commercialisation company that turns world-class research into business, announces its preliminary results for the 12 months ended 31 July 2013.

 

Highlights:

 

·     £20m raised in a placing with new and existing investors;

·     Partnership agreements signed with The University of Nottingham and Swansea University;

·     Investment Memorandum of Understanding (MOU) extended with Finance Wales;

·     26% increase in the carrying value of our investments to £25.0m (2012: £19.8m);

·     Cash and deposit balances totalling £21.3m (2012: £5.9m);

·    Five new portfolio companies started in the year (Proflu, Extraject, PH Therapeutics, Wound Genetics and Rhedyn);

·     £2.6m invested in the portfolio companies by Fusion (2012: £2.9m); and

·     £9.5m invested in the portfolio companies by third party investors (2012: £10.0m).

 

 

Post year end highlights:

 

·    Diurnal's lead drug Chronocort's successful progression of Phase II trials.

 

Commenting on the results, David Baynes, Chief Executive Officer of Fusion IP, said: "As an innovator in the field of university IP commercialisation, we continue to work closely with both research-intensive universities and investment funds, to ensure we maximise our ability to create world class businesses from university research. With a number of our exciting companies moving towards maturity we look forward to 2014 with confidence."

 

For further information please contact:

Fusion IP plc

David Baynes, CEO

+44 (0) 114 275 5555

Stuart Gall, Director


 

Cenkos Securities plc

Elizabeth Bowman, Bobbie Hilliam (Corporate Finance)

+44 (0) 20 7397 8900

Julian Morse (Sales)


 

Media enquiries

Allerton Communications

Peter Curtain

+44 (0) 20 3137 2500

 

About Fusion IP

 

Fusion IP plc (Fusion) was established in 2002 to commercialise university-generated intellectual property. It has long-term exclusive agreements with two of the UK's leading research-intensive universities, the University of Sheffield and Cardiff University, giving it exclusive access to all the IP generated by their research departments. These exclusive agreements enable Fusion to identify world class IP and turn it into a commercial opportunity, either through the creation of a start-up company or a licence.

 

Fusion IP currently owns shareholdings in over 20 portfolio companies, including significant shareholdings in Seren, Magnomatics, Phase Focus, MedaPhor, Asalus and Diurnal.

 

In 2012 Fusion IP announced its first major exit, when it sold its portfolio company Simcyp, a research-based business providing a modelling and simulation platform for predicting the fate of drugs in virtual populations, to US based Certara LP for $32 million, a 200-fold return on its original investment.

 

In 2013 Fusion announced that it had raised £20 million through a Placing to existing and new institutional shareholders. Fusion also announced that it had signed agreements with two additional universities - The University of Nottingham and Swansea University.

 

For more information, visit www.fusionip.co.uk

 

Chairman's Statement

 

I am delighted to present our results for the year ended 31 July 2013. This has been a good year for the Group; we raised £20m in a placing in April; signed new university agreements with the Universities of Nottingham and Swansea; extended our excellent co-investment MOU with Finance Wales for a further five years; started five new portfolio companies and grew the carrying value of our investments by 26% to £25.0m (2012: £19.8m). Although revenue and portfolio returns were lower at £3.0m (2012: £4.8m) and profit, excluding subsidiary spin-out costs and amortisation, was reduced to £1.4m (2012: £3.2m), this has been a year of significant change for the Group. In addition to this, post year-end one of our key life science companies announced the successful progression of its Phase II Chronocort trials; a positive conclusion to these trials in 2014 will be a significant event for the Group.

 

It is well acknowledged that the UK needs to maximise the commercial benefit of the extraordinary science that emanates from its world-class universities. We believe that Fusion, with its access to some of the UK's leading research-intensive universities, is well placed to generate some of the high technology growth businesses of the future.

 

Our university partnership model, extensive experience in business building, and IP sector expertise enables us to identify innovative research that has the potential to be a high value business that will benefit our shareholders, the university and ultimately UK plc. With over £20m of funds, four excellent universities, established relationships with a number of key co-investment partners and a growing and diverse portfolio of exciting companies, we believe we are well placed to fulfil this vision.

 

Our priority in the year ahead is therefore to continue to focus on the growth of the portfolio and we look forward to the year with confidence.

 

Finally, I would like to thank all our stakeholders, including our university partners, investment partners and employees at both Group and portfolio level, for their unstinting support during the year. I was also delighted to see that during the year, our CEO David Baynes was awarded Executive Director of the Year in the Small Cap Awards, sponsored by the London Stock Exchange and others, which recognises the excellent leadership David has demonstrated over the last seven years in building Fusion.

 

Doug Liversidge CBE

Chairman 

 

 

Chief Executive's Statement

 

 

 

£20m placing

 

In April 2013 we were pleased to announce we had successfully raised £20m through a placing with existing and new institutional investors. The placing provided Fusion with the funding to:

·      access additional world class IP from an expanded university base;

·      ensure the Group has the financial strength to invest further in its key portfolio companies; and

·      continue investing in establishing new companies out of its expanded pipeline.

 

Growing university base

 

At the same time as the placing, we announced that we had expanded our university base with the signing of agreements with The University of Nottingham and Swansea University.

 

These new agreements complement Fusion's existing equity-based university agreements with Sheffield and Cardiff, by providing Fusion with access to IP, but without having to make on-going or equity-based payments. This structure provides a flexible partnership for both parties, and enables the university to access Fusion management and funds, while Fusion gains access to that university's IP, without tying up equity or contractual service fees.

 

It also enables Fusion to generate more start-up companies per annum and utilise our central resource more effectively. The new agreements allow for co-investment by IP Group, in line with the existing IP Group co-investment agreement.

 

The University of Nottingham

 

Nottingham is one of the UK's top 10 universities, with centres of excellence in aerospace, advanced manufacturing, energy and biomedical imaging. It has over 40,000 students on its three campuses in the UK, Malaysia and China and as a member of the Russell Group is recognised as one of the UK's leading research-intensive universities. In 2012 it generated over £100m in research grants and after the most recent Research Assessment Exercise (RAE) results in 2008, it was ranked 7th in the UK for its research excellence, according to the research power rankings produced by Research Fortnight.

 

Following the RAE results, 90 per cent of all research at The University of Nottingham was classified as of an 'international standard' and 60 per cent as 'world-leading' or 'internationally excellent'. In 2008 The University of Nottingham was named Entrepreneurial University of the Year.

 

The University of Nottingham has a well-established technology transfer office, with close links with its academic community. To date the university has been involved in over 40 spin-out related companies and has a current portfolio of 30 spin-outs, of which 16 have products in the marketplace.

 

Swansea University

 

We are delighted to expand our operation in Wales through the addition of Swansea University to our university portfolio. Established in 1920, Swansea University is a research led university. In the latest RAE, 85 per cent of its staff submitted for assessment were classified as producing research of an international quality or above and almost 50 per cent as "world-class" or "internationally excellent". It has a number of excellent research departments, including the College of Engineering, which received a 5 QS star rating for the excellence of its teaching, the highest achievable. Its newly built Institute of Life Sciences is one of the premier research facilities in Wales and the largest university campus investment by the Welsh Government. The University also has a well-established technology transfer office.

 

Since the announcement of these new partnerships, Fusion has been working with the Universities to identify the first potential investment opportunities and expects to be announcing its first new investments in Nottingham and Swansea over the next six months.

 

Although we are currently completing the integration of our newly established partnerships, Fusion remains committed to adding additional universities to its partnership portfolio in the longer term.

 

Extention of the Finance Wales investment MOU

 

Following on from the successful investment MOU signed between the two companies in 2007, the new MOU continues the co-investment strategy for investing in opportunities arising from Fusion's IP pipeline agreements with its growing portfolio of Welsh universities.

This agreement provides Fusion with access to substantial additional funding for its portfolio of companies and endorses the success of the original agreement. To date Finance Wales has made 26 investments alongside Fusion totalling £4.9m in Fusion portfolio companies.

 

Portfolio highlights

 

We continue to have a well-balanced portfolio of more than 20 companies, in a range of engineering, nanotechnology, software and medical sectors. The companies are at varying stages of maturity, growth and profitability and nine of the leading companies in the portfolio are described below.

 

Diurnal - drug development

 

Diurnal, our drug development company, spun-out from The University of Sheffield now based in Cardiff, had another busy and extremely successful year, with significant progress made towards approval of its lead product Chronocort.

 

The majority of the year was spent progressing Chronocort through its Phase II trial and post year end in September 2013, Diurnal passed a key landmark when it announced the trial had successfully completed the pharmacokinetic part of its Phase II CATCH (Chronocort As Treatment for Congenital adrenal Hyperplasia) clinical study. Chronocort is a modified release therapy that delivers hydrocortisone in a manner that mimics the body's natural 24-hour hormone cycle, thus combating diseases caused by cortisol deficiency. Diurnal's novel approach to drug delivery has the potential to significantly improve the lives of patients suffering from diseases such as congenital adrenal hyperplasia and adrenal insufficiency.

 

The CATCH trial is a Phase II study in patients suffering from congenital adrenal hyperplasia and is being run by the National Institute of Health, Maryland, US under a Cooperative Research and Development Agreement.

 

Chronocort has already received two related orphan drug designations from the European Medicines Agency, which afford ten years of market exclusivity after the grant of marketing authorisation in Europe.

 

Pharmacokinetic data from the first part of the CATCH study has been received by Diurnal. The CATCH trial will now continue until the end of 2013 so that further data can be collected to support a Phase III registration study of Chronocort. The full read-out of the CATCH study is expected during the first quarter of 2014, and subject to a successful outcome, Diurnal would then progress to a Phase III trial.

 

Fusion holds a 43% (undiluted) shareholding in Diurnal

 

Phase Focus - software/engineering

 

Based in Sheffield, Phase Focus has developed a novel 'Virtual Lens' which is a digital replacement for the conventional image-forming optics used in imaging and microscopy. As well as eliminating the limitations and aberrations of conventional lens-based instruments, it can be exploited to visualise and quantify numerous specimen attributes such as surface topography, thickness and refractive index variations, or electric and magnetic field phenomena. Its current products include an Ophthalmic Lens Profiler that can measure soft contact lenses with unprecedented levels of resolution and accuracy; and an optical microscope used for stain-free imaging of biological cells.

 

In February 2013, Phase Focus announced that it had entered into a Licence Agreement with Gatan, Inc. ("Gatan"). Gatan is the world's leading manufacturer of instrumentation and software used to enhance and extend the operation and performance of electron microscopes. The Licence Agreement provides for joint development of a range of products, including a Phase Focus Virtual Lens "add-on" product for existing electron microscopes. Once fully developed, Gatan will market the product through its worldwide sales and distribution network.

 

Fusion holds a 35% (undiluted) shareholding in Phase Focus

 

Seren Photonics - electronics

 

Seren Photonics's revolutionary new light emitting diode (LED) nanotechnology, developed by Professor Tao Wang from The University of Sheffield, has been shown in tests to greatly increase the efficiency of conventional phosphor-converted white LEDs and enable ultra-high bright green LEDs. The ground breaking nanotechnology can be deployed to significantly reduce 'droop' in conventional LEDs which means they can be run much harder and so reducing the number of die required per luminaire. It also means that the 'Green Gap' could be closed enabling efficient pico-projectors, destined for inclusion in future mobile devices such as cell phones and much more efficient colour-mixed white LEDs. In simple terms, Seren's technology means that either for a given power consumption, much brighter LED lamps can be manufactured, or that for equivalent light output, the power consumption of LED lamps can be significantly reduced.

 

High brightness (HB) LEDs are set to replace incandescent lamps as governments around the world bring in legislation banning the manufacture and sale of incandescents and concerns increase about the poor light quality and environmental contamination fears from compact fluorescents. The rate of adoption is expected to accelerate as the brightness of HB LEDs increases and the cost of manufacture reduces.

 

Seren's technology is targeted at the fast growing $13bn white light HB LED markets, such as back lighting for laptops and TVs, signs and displays, as well as domestic, architectural and street lighting.

 

Fusion holds a 40% (undiluted) shareholding in Seren

 

Magnomatics - engineering

 

Our Sheffield-based electric motor company, Magnomatics, develops high torque magnetic transmissions and ultra-compact magnetically-geared motors and generators. The technology uses magnetic fields with high-powered permanent magnets to replace the meshed teeth that normally transmit mechanical power in gear systems. The magnetic fields eliminate the friction of contacting parts. As such, the super quiet, compact technology requires minimal maintenance; no oil lubrication and the gears can't be "stripped" through miss-use. The product has the potential to offer new engineering possibilities ranging from efficient, gearless generators for wind turbines, to lighter and more compact motors for hybrid vehicles.

 

In November 2012, Magnomatics successfully raised £2.5m to develop its novel products for the hybrid and electric vehicle market. It is active in a range of industries, including renewable energy, automotive, aerospace and defence, and has industrial development contracts with some of the world's largest transportation/engineering companies for its PDD system.

 

Fusion holds a 39% (undiluted) shareholding in Magnomatics

 

Asalus Medical Instruments - medical devices

 

Cardiff based Asalus Medical Instruments ("Asalus"), is developing a range of innovative medical devices that aim to improve the safety and efficiency of laparoscopic surgery. Laparoscopic surgery is a modern surgical technique in which operations in the abdomen are performed through small incisions, as compared to the larger incisions needed in traditional surgical procedures. There are several benefits to conducting laparoscopic surgery and, as a result, the number of procedures conducted using this technique has grown rapidly over recent years.

 

Over two million laparoscopic operations per year are now performed in the USA alone and the market for laparoscopic surgery products is estimated at approximately $18bn worldwide, growing 7-8 per cent annually.

 

Its lead product is Ultravision, Asalus's revolutionary surgical smoke clearing system for use in laparoscopic surgery, which successfully completed its 'first-in-man' trial in January 2013. The randomised, controlled, comparative study was the first use of the Ultravision device in patients, with the dual aims of assessing safety and performance. The trial assessed the use of Ultravision in 30 participants undergoing scheduled laparoscopic gallbladder removal at University Hospital Llandough (Cardiff & Vale University Health Board, Wales, UK). The results demonstrated that Ultravision was effective in maintaining a clear visual field throughout the laparoscopic procedure. This was achieved without the need to deflate the abdomen or release smoke produced during surgery into the operating theatre environment. In addition 77% of the procedures were completed without interruption compared to less than 1% in the control group that did not use Ultravision. There were no adverse events. The Company is currently seeking CE mark approval and is targeting European launch in Q4 2013.

 

Fusion holds a 44% (undiluted) shareholding in Asalus

 

MedaPhor - medical simulation

 

MedaPhor is a Cardiff based global provider of advanced ultrasound education and training for medical professionals. Its lead product is ScanTrainer, a virtual reality ultrasound training simulator, which combines 'real-feel' haptic simulation with real patient scans and curriculum-based interactive learning, to provide fast and effective ultrasound training in a non-clinical environment.

 

These educationally driven training systems relieve the pressure and costs on service delivery within hospitals and training schools, by allowing doctors to learn on 'real' patients in their own time, through self-directed learning.

 

MedaPhor has had another excellent year of growth, expandings its sales in the US and Europe, with over 80 hospitals now using the system in eleven countries around the world. During the year MedaPhor signed distribution agreements in Germany and Holland and an exclusive Chinese distribution agreement with Tellyes Scientific, which will enable it to expand sales into the large Chinese medical training market. MedaPhor also launched its second product, the TransAbdominal ScanTrainer, which it hopes will open up the large, general medical ultrasound training market in 2014.

 

In February 2013, US based Riccardo Pigliucci joined MedaPhor as non-exec Chairman, to help drive expansion in the US.

 

Fusion holds a 39% (undiluted) shareholding in MedaPhor

 

i2L Research - environmental testing

 

Based in Cardiff, i2L Research is a product testing and development centre for the pest control industry and agrochemicals industry across Europe. i2L has offices in Newcastle and Cardiff and has expanded its operations into Europe, through new offices in the Czech Republic and Spain.

 

In October 2012, i2L acquired Baltimore based ICR Inc. from MGK of Minneapolis in the USA.  The acquisition significantly expands i2L's European based agrochemicals, biocide and regulatory operations into the USA, the world's largest market for these services.

 

Fusion holds a 31% (undiluted) shareholding in i2L Research

 

Absynth - lifesciences

 

Absynth is a UK biotechnology spin-out company from The University of Sheffield, which has developed a distinctive, non-conventional approach to developing vaccines and therapeutic antibodies based on identifying novel, conserved bacterial antigens that are essential and also antibody-accessible.  Bacterial infections are a major cause of death worldwide, with microbial drug resistance being a significant contributing factor.  

 

Absynth's target is Staphylococcus aureus, including its drug-resistant form MRSA, against which vaccines and antibodies of other companies have failed to show clinical efficacy. It is believed that Absynth's approach has the potential to succeed where others have previously failed and that Absynth's novel antigens offer broad potential against a range of bacterial infections and form the basis of its pipeline that includes vaccines to prevent Clostridium difficile and Streptococcus pyogenes infections. 

 

In July 2013 Absynth announced it had raised £850,000 (of which Fusion invested £450,000) to advance the Staphylococcus aureus programme to key pre-clinical milestones. The investment complements the £175,000 funding secured from the Biomedical Catalyst to further develop Absynth's product pipeline.

 

Fusion holds a 43% (undiluted) shareholding in Absynth

 

FaultCurrent (FCL) - electrical power grid components

 

FCL, which is founded on the invention of Dr Jeremy Hall of the Wolfson Centre for Magnetics, based at Cardiff University's School of Engineering, has devised a unique magnetic fault current limiter design that protects utility electrical distribution networks from unanticipated power surges. 

 

The need for fault current limiters is driven by a dramatic increase in electrical power system fault current levels as energy demand increases and more clean energy sources, such as wind and solar, are added to an ageing and already overburdened national electrical infrastructure.

Deployed in an electrical network substation, a fault current limiter is a smart grid system component that can help protect the grid by absorbing the destructive nature of faults, extending the life of existing network equipment and allowing utilities to defer or eliminate costly equipment replacements or upgrades. Estimates from Europe and the USA suggest investing in smart grid technologies, such as fault current limiters, can save billions of dollars in replacement cost, increase safety, reliability and power quality.

 

Unlike competing faults current limiters currently in service, FCL's unique solution is designed to be a completely passive, 'fit and forget' permanent magnet device, that requires no external power or back-up, recovers automatically when a fault is cleared and requires minimal maintenance.

 

FCL expects its first full scale system to be deployed for field testing at the end of 2014.

 

Fusion holds a 47% (undiluted) shareholding in FCL

 

During the year we started five companies, however these are at the earliest, high-risk phase of their potential development and therefore may not all progress to later stage funding rounds.

 

Proflu is the latest application for Cardiff University's Professor Chris McGuigan's 'pro-tide' drug delivery technology. The most effective anti-viral drugs on the market all rely upon a slow and inefficient process within the cells called phosphorylation in order to become active against the virus. Creating a 'pro-tide' can allow a pre-phosphorylated version of the drug to be given, potentially resulting in a several hundred fold increase in potency. This technology could create a highly effective anti-influenza drug to combat one of the world's biggest killers. During the yearly epidemics, influenza infects around three to five million people and kills around 10% of these, a greater threat arises from flu pandemics, which have occurred, on average, three times per century for the last 300 years, where the emergence of a new viral strain results in a death toll in the tens of millions. 

 

Extraject Technologieshas been founded on the work of Professor James Birchall and colleagues in the School of Pharmacy and Pharmaceutical Sciences, Cardiff University. Extraject exploits over ten years' experience of designing and testing microneedle delivery systems to develop unique medical devices and processes which could allow new pain free treatment of a range of conditions. The Extraject technology aims to offer a safe and efficacious solution to patients through precise targeting of effective therapies to the appropriate locations in skin. Extraject is part-funded by a grant from the Technology Strategy Board.

 

PH Therapeuticsis developing novel antibody therapies to treat the rare disease Pulmonary Arterial Hypertension (PAH), a chronic condition with high levels of mortality. Based on the research of Dr Allan Lawrie, The University of Sheffield, PH Therapeutics is developing therapeutics which address the underlying causes of the disease by blocking the action of proteins that play a key role in the development of PAH. PAH is caused by both constriction and thickening of the pulmonary arteries. Current drugs relieve symptoms by dilating the narrowed blood vessels but they are unable to reverse the progress of the disease because they do not address the tissue changes that cause thickening of the vessel wall. PH Therapeutics is developing a new class of therapy that specifically targets the cause of vessel thickening in order to both control and reverse this devastating disease. This would represent a major step forward in a disease area that is currently valued as a $3bn global market. 

 

Wound Geneticsis founded on the work of two leading academics at Cardiff University. Professors Keith Harding and Wen Jiang have discovered a unique "prognostic" gene signature that may allow patients with 'hard to heal' chronic wounds to be identified at first presentation. Such early identification of 'hard to heal' wounds enables early referral to specialist care and avoids potentially years of ineffective and costly primary care treatment. The test, currently in its early development phase, involves collecting and processing a tissue sample from the wound which is then used to determine the expression of certain genes indicative of a 'healing' or 'hard to heal' wound. The treating doctor could then use these results to provide different treatment pathways for those patients with 'hard to hea'l wounds. The team is also exploring the use of the gene signature to identify novel therapeutic drug candidates by identifying inhibitors of genes that are active in hard to heal wounds. The ability to accurately and effectively diagnose, treat and manage wounds is an enormous challenge for healthcare providers worldwide. The annual cost of caring for these patients in the UK is conservatively estimated at 5% of the total NHS budget.

 

Rhedyn (Bladder Cancer Diagnostics) is based on the latest research undertaken by Professor Ian Weeks and colleagues in the School of Medicine, Cardiff University. Ian's previous work includes the development of chemiluminesence technology which is used in over 50 million tests annually and was named as one of the top 100 life-changing discoveries of the last 50 years.  The new technology is being used to address the need for accurate non-invasive diagnostic testsfor the detection and monitoring of bladder cancer. The fifth most common type of cancer, the disease often responds well to treatment but almost always recurs meaning that patients have to endure monitoring by repeated cystoscopy which involves the insertion of a fibre optic camera into the bladder through the uretha. This invasive and costly technique has limited accuracy, is unpleasant for patients and contributes significantly to the fact that bladder cancer management has the highest per patient cost of any cancer. Rhedyn is developing a highly accurate, non-invasive diagnostic test for bladder cancer (based on a urine sample) which should detect the presence of the disease within minutes.

 

Research Pipeline potential

 

We continue to have extremely strong relationships with our partner universities and the depth and scale of the research activity at all four of our partner universities is strong. 

 

Outlook

 

As an innovator in the field of university IP commercialisation, we continue to work closely with our four research-intensive universities and investment partners, to ensure we maximise our ability to create world-class businesses from university research. With a number of our exciting companies moving towards maturity we look forward to 2014 with confidence.

 

David Baynes

Chief Executive Officer

 

 

Financial Review

 

Summary

The Group generated an operating profit (excluding subsidiary spin-out costs and amortisation) of £1,250,000 (2012: £3,042,000). In line with expectations the Group reports a loss before tax of £1,204,000 (2012: £505,000 profit). Closing cash and deposits of £21,288,000 (2012: £5,923,000) have increased significantly following the £20m fundraising during the year. The value of the Group's investments in non-subsidiary spin-out companies increased to £24,983,000 (2012: £19,763,000).

 

Revenue

Total revenue and portfolio returns decreased to £3,035,000 (2012: £4,750,000) due to both a reduction in revenue and fewer funding rounds leading to lower net fair value gains on investments.

 

Revenue, which includes the amounts charged to non-subsidiary spin-out companies for management services provided, licence income and income generated by consolidated companies, decreased to £540,000 (2012: £705,000).  The decrease relates to reduced revenue in subsidiaries.

 

The net gain in the fair value of investments amounted to £1,108,000 (2012: £3,567,000). The Group's gains mainly arose from valuation uplifts in five (2012: eight) of the Group's holdings during the year, with uplifts in Diurnal and Asalus being the major components. Fair value write downs and provisions were taken on three investments as we applied a critical eye to company prospects versus funding requirements.


2013

£000

2012

£000

Fair value gains

2,727

4,178

Fair value losses

(1,619)

(611)


1,108

3,567

 

The gain on disposal of subsidiaries/investments of £1,368,000 (2012: £459,000) relates to the deconsolidation of Absynth and FaultCurrent, as a result of Fusion's shareholding dropping to below 50% after funding rounds in the year.

 

Operating expenses

Operating expenses amounted to £4,401,000 (2012: £4,360,000) and are broken down into three components:

 

·     corporate operating expenses of £1,785,000 (2012: £1,708,000) reflect the cost of running the parent PLC company, together with the university operations;

·     subsidiary spin-out operating expenses of £628,000 (2012: £656,000), which are consolidated into the Group's results by virtue of Fusion's >50% shareholding in each spin-out company. Two significant deconsolidations occurred in the second half of 2013, which may reduce the impact of consolidated costs going forward; and

·     amortisation of intangible assets of £1,988,000 (2012: £1,996,000), which reflects the charge over the Cardiff and Sheffield IP rights which are both being amortised on a straight line basis over the ten-year pipeline agreements, together with an amortisation charge for purchased patent costs within certain subsidiary spin-out companies.

 

Investments

As at 31 July 2013 investments in spin-out companies amounted to £24,983,000 (2012: £19,763,000). Movement in the year relates to additions of £2,615,000 (2012: £2,885,000), transfers of £1,497,000 relating to the deconsolidated companies less disposals of £nil (2012: £3,457,000), with net gains in fair value of £1,108,000 (2012: £3,567,000).  Additions consist of equity investments, convertible loan investments, accrued interest and rolled up fees to a number of portfolio companies.

 

The investments are all classified as financial assets and are held at fair value under IAS 39 "Financial Instruments: Recognition and Measurement". The Group uses the International Private Equity and Venture Capital Valuation (IPEVCV) guidelines to establish the fair value of unlisted securities.

 

Intangible assets and Liabilities

IP rights comprise IP, patents and licences purchased by the Group together with the IP pipelines with Cardiff University and The University of Sheffield. As outlined above, the Group's view is that these assets have a finite life of ten years and to that extent they should be amortised over their respective unexpired periods with provision made for any impairment when required. IP rights are tested annually for impairment and are carried at cost less accumulated impairment losses.

 

Non-current liabilities totalling £2,354,000 (2012: £2,337,000) are classified as amounts owed to related parties.

The Group owes amounts totalling £2,354,000 (2012: £2,277,000) to The University of Sheffield and Cardiff University in relation to loan notes and accrued interest, for the most part arising from the purchase of the Group's interest in certain spin-out companies when the IP pipeline agreements were signed in 2005 and 2007 respectively. These liabilities are only repayable in the event of an exit of the underlying investment they relate to.

 

Cash flows

The Group's cash balances at 31 July 2013 amount to £21,288,000 (2012: £3,923,000). These balances include £5,000 (2012: £122,000) in relation to consolidated subsidiary spin-out companies.

The cash inflow in the year amounted to £17,365,000 (2012: £1,961,000) and can be summarised as follows:

 


2013

£000

2012

£000

Net cash used in operating activities

(1,908)

(2,066)

Net cash used in investing activities

(14)

(760)

Net cash from financing activities

19,287

4,787


17,365

1,961

 

The net cash used in investing activities mainly reflects amounts invested in spin-out companies £2,592,000 (2012: £2,885,000), less amounts received back from longer-term bank deposits £2,000,000 (2012: £2,000,000 transferred to deposits), less third party investments into subsidiary undertakings £351,000 (2012: £nil). 2012 also included proceeds from disposals of investments of £3,937,000.

 

Share capital

As a result of the successful fundraising of £19,252,000, net of expenses, in April 2013, through the placing of new shares, the Company issued 36,499,246 Ordinary shares of 1p each. The new shares issued represented 33% of the Company's enlarged issued share capital. 105,000 Ordinary shares of 1p each were also issued during the year in respect of the exercise of share options, the consideration for these shares amounted to £35,000.

 

 

Consolidated Statement of Comprehensive Income

for the year ended 31 July 2013

 

 

 

 






2013

2012


Note

 £000

 £000

Revenue and portfolio return




Revenue

5

540

705

Dividend income


19

19

Change in fair value of investments

15

1,108

3,567

Gain on disposal of investments/subsidiaries

15

1,368

459



3,035

4,750

Operating expenses




- corporate operating expenses


(1,785)

(1,708)

- subsidiary spin-out operating expenses


(628)

(656)

- amortisation of intangible assets

14

(1,988)

(1,996)


6

(4,401)

(4,360)

Results from operating activities

6

(1,366)

390

Finance income

10

220

177

Finance expenses

10

(58)

(62)

(Loss)/Profit before taxation


(1,204)

505

Taxation

11

-

-

(Loss)/Profit and total comprehensive (loss)/profit for the year


(1,204)

505





Attributable to:




- owners of the parent


(959)

669

- non-controlling interests

20

(245)

(164)



(1,204)

505

Basic and fully diluted (loss)/profit per share

12

(1.14)p

1.00p

 

  

 

Consolidated Statement of Financial Position

as at 31 July 2013

 

 

 

 

 

 






2013

2012


Note

 £000

 £000

Assets




Non-current assets




Property, plant and equipment

13

17

12

Intangible assets

14

7,448

9,446

Investments

15

24,983

19,763

Total non-current assets


32,448

29,221

Current assets




Trade and other receivables

16

929

1,055

Deposits

17

-

2,000

Cash and cash equivalents

17

21,288

3,923

Total current assets


22,217

6,978

Total assets


54,665

36,199

Equity




Called up share capital

18

1,094

728

Share premium

18

63,529

44,486

Other reserves

19

3

125

Retained earnings


(12,518)

(11,848)

Equity attributable to equity holders of the parent


52,108

33,491

Non-controlling interests

20

-

-

Total equity


52,108

33,491

Non-current liabilities




Amounts owed to related parties

21

2,354

2,337

Current liabilities




Trade and other payables

22

203

371

Total liabilities


2,557

2,708

Total equity and liabilities


54,665

36,199

 

 

 

 

Consolidated Statement of Cash Flows

for the year ended 31 July 2013

 

 

 

 

 

 





2013

2012


 £000

 £000

Cash flows from operating activities



(Loss)/Profit for the year

(1,204)

505

Adjustments for:



- depreciation of property, plant and equipment

7

12

- amortisation of intangible assets

1,988

1,996

- net finance income

(162)

(115)

- share-based payments

-

32

- dividend income

(19)

(19)

- gain on disposal of investments/subsidiaries

(642)

(459)

- change in fair value of investments

(1,834)

(3,567)

Changes in working capital:



- decrease/(increase) in trade and other receivables

126

(442)

- decrease in trade and other payables

(168)

(9)

Net cash flows used in operating activities

(1,908)

(2,066)

Cash flows from investing activities



Purchase of property, plant and equipment

(12)

(8)

Purchase of investments

(2,592)

(2,885)

Proceeds from sale of investments

-

3,937

Third party investment into subsidiary spin-out companies

351

-

Cash transfers from/(to) longer-term bank deposits

2,000

(2,000)

Dividend income

19

19

Interest received

220

177

Net cash flows used in investing activities

(14)

(760)

Cash flows from financing activities



Proceeds from issue of share capital

20,035

5,026

Share issue costs

(748)

(239)

Net cash flows from financing activities

19,287

4,787

Net increase in cash and cash equivalents

17,365

1,961

Cash and cash equivalents at the beginning of the year

3,923

1,962

Cash and cash equivalents at the end of the year

21,288

3,923

 

 

 

 

Consolidated Statement of Changes in Equity

for the year ended 31 July 2013

 

 

 

 

 

 







Attributable to equity holders of the Group




Share

Share

Other

Retained


Non-controlling



capital

premium

reserves

earnings

Total

interests

Total


£000

£000

£000

£000

£000

£000

£000

At 1 August 2011

542

39,034

3

(12,347)

27,232

-

27,232

Profit and total comprehensive profit for the year

-

-

-

669

669

(164)

505

Non-controlling interest attributable to the Group

-

-

-

(202)

(202)

202

-

Issue of share capital

186

4,783

-

-

4,969

-

4,969

Share-based payments

-

-

-

32

32

-

32

Part disposal of subsidiaries

-

-

-

-

-

(38)

(38)

Movement in shares to be issued

-

669

122

-

791

-

791

At 31 July 2012

728

44,486

125

(11,848)

33,491

-

33,491

Loss and total comprehensive loss for the year

-

-

-

(959)

(959)

(245)

(1,204)

Non-controlling interest attributable to the Group

-

-

-

289

289

(289)

-

Issue of share capital

366

18,996

(75)

-

19,287

-

19,287

Disposal of subsidiaries

-

-

-

-

-

534

534

Movement in shares to be issued

-

47

(47)

-

-

-

-

At 31 July 2013

1,094

63,529

3

(12,518)

52,108

-

52,108

 

 

 

 

 

Notes to the Consolidated Financial Statements

for the year ended 31 July 2013

 

 

1. General information

Fusion IP plc is a public limited company which is listed on AIM, part of the London Stock Exchange, and is incorporated and domiciled in the UK. The address of its registered office is The Sheffield Bioincubator, 40 Leavygreave Road, Sheffield S3 7RD. The registered number of the Company is 5275732.

These consolidated financial statements are presented in Sterling which is also the currency of the primary economic environment in which the Group operates. The financial statements are presented in round thousands.

 

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

 

Basis of preparation

The preliminary results for the year ended 31 July 2013 have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU as at 31 July 2013. The financial information contained in these preliminary results does not constitute the Group's statutory accounts for the years ended 31July 2013 or 2012, but is derived from those accounts.Statutory accounts for 2012 have been delivered to the registrar of companies, and those for 2013 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets at fair value through profit and loss, as required by IAS 39 "Financial Instruments: Recognition and Measurement".

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

 

The consolidated financial statements principally comprise a consolidation of amounts included in the financial statements of the following companies:

 


Principal


Class of


activity

Holding

shares held

Fusion IP Sheffield Limited

Holding company

100%

Ordinary

Fusion IP Cardiff Limited

Holding company

100%

Ordinary

Biofusion Licensing (Sheffield) Limited*

Dormant

100%

Ordinary

Mantelum Limited*

Dormant

100%

Ordinary

Resagen Limited*

Orphan drug

100%

Ordinary

Rhedyn Limited*

Cancer diagnostics

100%

Ordinary

Wound Genetics Limited*

Advanced wound care

100%

Ordinary

BioHydrogen Limited*

Dormant

60%

Ordinary

Extraject Technologies Limited*

Microneedle technology

60%

Ordinary

Medella Therapeutics Limited*

Cancer therapeutics

60%

Ordinary

PH Therapeutics Limited*

Antibody therapies

60%

Ordinary

Proflu Limited*

Novel new pharmaceuticals

60%

Ordinary

Lifestyle Choices Limited*

Dormant

51%

Ordinary

* Indirectly held.

 

All companies are incorporated in England and Wales.

 

Change in accounting policies

(i)      New standards, amendments and interpretations effective for the first time in the year ended 31 July 2013

The following new standards, amendments and interpretations have become effective for the current financial year. These changes have not had a significant impact on the Group:

·      IAS 1 (amended): Presentation of Financial Statements, presentation of other comprehensive income

·      IAS 12 (amended): Income Taxes, recovery of underlying assets

 

(ii)     Standards, amendments and interpretations not yet effective

At the date of approval of these financial statements, the following standards, amendments and interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases have not yet been adopted by the EU):

·      Amendments to IFRS 1: First time adoption of IFRS - Government loans

·      Amendments to IFRS 1: First time adoption of IFRS - Severe hyperinflation and removal of fixed dates for first time adopters

·      IFRS 9: Financial Instruments and subsequent amendments

·      IFRS 10: Consolidated Financial Statements

·      IFRS 11: Joint Arrangements

·      IFRS 12: Disclosure of Interests in Other Entities

·      Amendments to IFRS 10, 11, 12: Transitional guidance

·      Amendments to IFRS 10, 12  and IAS 27: Investment entities

·      IFRS 13: Fair Value Measurement

·      IAS 19 (revised):  Employee Benefits

·      IAS 27 (revised): Separate Financial Statements

·      IAS 28 (revised): Investments in Associates and Joint Ventures

·      Amendments to IAS 32 and IFRS 7: Financial Instruments, on asset and liability offsetting

·      Amendments to IAS 36: Recoverable amount disclosures for non-financial assets

·      Amendments to IAS 39: Novation of derivatives and continuation of hedge accounting

·      IFRIC 20: Stripping costs in the production phase of a surface mine

·      IFRIC 21: Levies

·      Amendments resulting from Annual Improvements 2009-2011 Cycle

 

At this point in time it is not expected that these standards will have a significant impact on the Group financial statements with the exception of IFRS10 & IFRS11, which may impact on the criteria by which we assess which companies the Group will consolidate. The Board are aware of the effective date and are reviewing the potential impact on the Group financial statements.

 

Going concern

The Group's business, together with the factors likely to affect its future development, performance and financial position are set out in the Chief Executive's Review. The financial position of the Group, its cash flows, and its liquidity position are described in the Financial Review. 

The Group has cash and deposit balances as at 31 July 2013 of £21,288,000. The Directors have prepared and review on a regular basis financial forecasts based upon assumptions as to funding, investments in new and existing spin-out companies and the realisation of assets, along with other factors known to have a significant impact on results. Based upon these the Directors have concluded that the Group has adequate working capital and cash balances to operate for the foreseeable future and that it is appropriate to use the going concern basis of preparation for this financial information.

 

Basis of consolidation

Subsidiaries

The Group's consolidated financial statements consist of Fusion IP plc and all of its subsidiaries. The consolidated financial statements exclude intra-group transactions.

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control and continues through to the date control ceases. Control consists of the power to govern the financial and operating policies of the entity in order to obtain benefit from its activities, usually by holding more than 50% of the voting rights or by way of contractual agreement.

The cost of acquisition is measured at fair value of assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the transaction are expensed as incurred. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income.

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the statement of comprehensive income. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as a spin-out investment as detailed below.

Spin-out investments

Spin-out investments are entities over which the Group has significant influence, but not control, generally accompanied by a shareholding of less than 50% of the equity or voting rights. Spin-out investments that are held by the Group with a view to the ultimate realisation of capital gains are accounted for in accordance with IAS 39 "Financial Instruments: Recognition and Measurement" and upon initial recognition are designated at fair value through profit or loss. This treatment is permitted by IAS 28, in which investments held by entities which are akin to venture capitalist organisations can be excluded from its scope.

Dilution gains and losses arising in spin-out investments are recognised in the statement of comprehensive income.

Dividends received from spin-out investments are recognised in the statement of comprehensive income in the period in which they are received.

Loan investments

Loan investments are generally unquoted loan instruments, which are convertible to equity at a future point in time. Such instruments are considered to be hybrid instruments containing a fixed rate of debt host contract with an embedded equity derivative. The Group designates the entire hybrid contract at fair value through the statement of comprehensive income on initial recognition and accordingly, the embedded derivative is not separated from the host contract and accounted for separately. The fair value of loan instruments is established by calculating the present value of expected future cash flows associated with the instrument.

Transactions with minority shareholders - "economic entity approach"

The Group applies a policy of treating transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is deducted from equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. For disposals to non-controlling interests, differences between any proceeds received and the relevant share of non-controlling interests are also recorded in equity.

 

Operating segments

An operating segment is a group of assets and operations, which are identified on the basis of internal reports that are regularly reviewed by the Board, which analyse the Group in order to allocate resources to the segment and to assess its ongoing performance.

 

Property, plant and equipment

All property, plant and equipment is shown at cost less depreciation and impairment. Depreciation is provided to write off the cost, less the estimated residual value, by equal instalments over the estimated useful economic lives as follows:

Computer equipment                          -      4 years
Office/laboratory equipment            -      3 to 5 years
Demonstration prototypes                  -     2 to 3 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within the statement of comprehensive income.

 

IP rights

IP rights comprise IP, patents and licences purchased by the Group together with the IP pipelines with Cardiff University and The University of Sheffield. The Group's view is that these assets have a finite life of ten years and to that extent they should be amortised over their respective unexpired periods with provision made for any impairment when required. IP rights are tested annually for impairment and are carried at cost less accumulated impairment losses.

 

Impairment of intangible assets

Assets that are subject to amortisation are tested for impairment annually as a matter of policy. An impairment loss is recognised for the amount by which the carrying amount exceeds its recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and the value in use. For the purposes of assessing impairments, assets are grouped at the lowest levels for which there are largely independent cash flows (cash-generating units (CGUs)).

 

Research and development expenditure

Expenditure on research activities is recognised in the statement of comprehensive income as an expense as incurred.

Expenditure on development activities is capitalised if the product or process is technically and commercially feasible and the Group intends to, and has the technical ability and sufficient resources to, complete development and if the Group can measure reliably the expenditure attributable to the intangible asset during its development. The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the statement of comprehensive income as an expense as incurred.

 

Financial assets

The Group classifies its financial assets into one of the categories listed below, depending on the purpose for which the asset was acquired. None of the Group's assets are categorised as held to maturity or available for sale.

In respect of regular purchases and sales, these are recognised on the trade-date - the date on which the Group commits to purchasing or selling the asset. Financial assets are derecognised when the rights to receive cash flows from the assets have expired or the Group has transferred substantially all risks and rewards of ownership.

 

Financial assets at fair value through profit or loss

Spin-out investments and associated loans that are held by the Group with a view to the ultimate realisation of capital gains are designated as financial assets at fair value through profit and loss. Realised and unrealised gains on financial assets at fair value through profit or loss are included in the statement of comprehensive income in the period they arise.

Cost

Where the investment being valued was itself made recently, its cost may provide a good indication of fair value unless there is objective evidence that the investment has since been impaired, such as observable data suggesting deterioration of the financial, technical, or commercial performance of the underlying business.

Price of recent investment

The fair value of unlisted securities is established using IPEVCV guidelines. The valuation methodology used most commonly by the Group is the "price of recent investment". The following considerations are used when calculating the fair value using the price of recent investment guidance:

Ÿ  where the investment being valued was itself made recently, its cost will generally provide a good indication of fair value;

Ÿ  where there has been any recent investment by third parties, the price of that investment will provide a basis for the valuation; and

Ÿ  where a fair value cannot be estimated reliably the investment is reported at cost unless there is evidence that the investment has since been impaired.

Other valuation techniques

Where spin-out investments are trading profitably and cash generative there is usually no readily ascertainable value from following the "price of recent investment" methodology. In these circumstances the Group considers alternative methodologies in the IPEVCV guidelines, such as discounted cash flows ("DCF") or price-earnings multiples. DCF involves estimating the fair value of business by calculating the present value of expected future cash flows, based on the most recent forecasts in respect of the underlying business.

When using the earnings multiple methodology, earnings before interest and tax ("EBIT") are generally used, adjusted to a maintainable level. A suitable earnings multiple is derived from an equivalent business or group of businesses, for which the average price-earnings multiple for the relevant sector index can generally be considered a suitable proxy. This multiple is applied to earnings to derive an enterprise value which is then discounted to reflect non-marketability and other risks inherent to businesses in early stages of operation.

 

Other receivables

Other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets and comprise "trade and other receivables", "deposits" and "cash and cash equivalents". They are carried at cost less any provision for impairment.

 

Deposits

Deposits comprise longer term deposits held with financial institutions with an original maturity of greater than three months.

 

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits held with financial institutions with an original maturity of three months or less.

 

Payments on account

Payments on account are recorded within trade and other receivables and represent the transfer of funds in advance to The University of Sheffield held on the balance sheet of Fusion IP Sheffield Limited. The payments on account are held at cost, less any amounts transferred to investments on account of the acquisition of interests in spin-out companies or the transfer of IP from The University of Sheffield.

 

Trade and other payables

Trade and other payables are comprised of trade payables and other short-term monetary liabilities, which are recognised at amortised cost. Unless otherwise indicated, the carrying amounts of the Group's financial liabilities are a reasonable approximation of their fair value.

 

Non-current liabilities owed to related parties

Non-current liabilities owed to related parties relate to loan notes and accrued interest due to The University of Sheffield and Cardiff University arising from the purchase of the Group's interest in its portfolio of spin-out companies. These amounts are repayable on the earlier of the sale by Fusion of the underlying share capital in the Company, or the Company making dividend payments, or ten years from the day of issue should the spin-out company generate a return. These amounts are only payable to the extent that any gain or dividend is received by Fusion, and can be cancelled by Fusion by the return of the shares to which they relate to The University of Sheffield or Cardiff University respectively. They are recognised at amortised cost, which is a reasonable approximation of fair value.

 

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight line basis over the period of the lease.

 

Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in the statement of comprehensive income except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

•     temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

•     temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and

•     taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

 

Employee benefits

Pension obligations

The Group does not operate any pension schemes for employees but makes contributions to employee personal pension schemes on an individual basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due.

 

Share-based payments

Share-based incentive arrangements are provided to Directors and certain employees. Share options granted are valued at the date of grant using the Black-Scholes option pricing model and are expensed on a straight line basis over the vesting period to operating profit.

 

Revenue recognition

Revenue comprises:

Ÿ  fees for various advisory and fund management services which are recognised in the statement of comprehensive income when the related services are performed and when considered recoverable; and

Ÿ  licence fees which are recognised in full upon signing once all the Group's obligations have been completed, in accordance with the substance of the agreement.

 

Corporate operating expenses

Corporate operating expenses reflect the costs associated with running the central functions of the Group. The costs are contained within the Parent Company, Fusion IP plc and the two wholly owned subsidiaries; Fusion IP Sheffield Limited and Fusion IP Cardiff Limited.

 

Subsidiary spin-out operating expenses

Subsidiary spin-out operating expenses reflect the costs associated with running the early stage spin-out companies in the period from when they are first incorporated through to when they have completed third-party venture capital funding which then dilutes the Group's holding below 50% of the equity or voting rights. At this stage the spin-out company is then de-consolidated and accounted for as a financial asset at held fair value.

 

3. Financial risk management

In the normal course of business, the Group uses certain financial instruments including cash, equity investments and loans to its portfolio of spin-out companies. Loans to spin-out companies are treated on the same basis as equity for valuation purposes.

 

Risk management objectives

The Group is exposed to a number of risks through the performance of its normal operations. The most significant are liquidity and market price risk. Income from surplus funds is dependent on market interest rates.

The Group's main objective in using financial instruments is to promote the commercialisation of IP held by technology businesses through the raising and investing of funds for this purpose. The Group's policies in calculating the nature, amount and timing of investments are determined by planned future investment activity.

Due to the nature of the Group's activities, the Directors do not consider it necessary to use derivative financial instruments to hedge the Group's exposure to fluctuations in interest rates, as these exposures have not been significant during the period covered by this report.

 

Interest rate risk profile of financial liabilities

The Group's trade and other payables consist of short-term payables, therefore disclosures have been excluded. The amounts owed to related parties falling due after more than one year generally relates to loan notes and accrued interest due to The University of Sheffield and Cardiff University arising from the purchase of the Group's interest in its portfolio of spin-out companies. These amounts are interest bearing at a rate which tracks the London Interbank Offered Rate (LIBOR).

 

Borrowing facilities

The Group had no undrawn committed borrowing facilities available during the period.

 

Currency exposures

The Group occasionally enters into transactions in currencies other than Sterling. Any exposure to fluctuations in market currency exchange rates is considered immaterial from a Group perspective. Therefore no sensitivity analysis has been prepared in relation to this risk.

 

Interest rate risk

The Group has directly maintained special interest bearing accounts with corporate banks at variable rates of interest related to LIBOR. These deposits are made on a daily basis with minimal balances held on current account. Fixed rate deposits are placed with corporate banks where surplus funds in excess of £1m exist and interest rates above LIBOR are available. Currently no fixed rate deposits are placed due to the small differential between interest rates on fixed rate deposits and those with instant access. The current market situation is constantly reviewed and fixed rate deposits will be held should interest rates improve sufficiently.

It is estimated that the effect of a 0.5% increase/decrease in interest rates based on the average expected cash balance for next year on profit before tax would be £87,000.

 

The Group's cash and deposits as at 31 July 2013 amounted to £21,288,000 (2012: £5,923,000).

 

Liquidity risk

The Group seeks to manage financial risk, and in particular liquidity risk, ensuring that sufficient liquidity is available to meet foreseeable requirements and to invest surplus cash in low risk instruments with reputable institutions.

 

Market price risk

The Group is exposed to risk in respect of equity investments and loans to spin-out companies. The Group seeks to mitigate this risk by routinely monitoring the performance of the spin-out companies. The Group uses a rigorous investment appraisal process prior to deciding on investment. Regular spin-out company updates are provided to the Board on the status and valuation of investments. Most spin-out companies also have a Fusion IP plc Executive Director on their board who closely monitors the performance of the company against strategic milestones. The value of early stage technology and life science spin-out companies is affected by the ability to attract strategic industrial partners and venture capital institutions to invest in follow-on funding rounds, which is ultimately determined by the general economic environment and the performance of the international equity markets.

 

Capital management

The capital structure of the Group is a mixture of cash balances and equity comprising issued share capital and reserves as detailed in note 18. The Group's objectives when 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.  The Group looks to achieve this by endeavouring to invest in the right opportunities at the right time, balancing cash requirements with forecasts of future cash inputs.

 

The Group does not currently utilise debt within its capital structure. Additional cash and cash equivalents for operating and investment requirements are generated through the issue of new shares when required.

There were no changes in the Group's approach to capital management during the year.

 

4. Critical accounting estimates and judgements

In the process of applying the Group's accounting policies, which are set out in note 2, the Directors have made certain judgements that have a significant effect on the amounts recognised in the financial statements. 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 described below.

 

Valuation of unquoted equity investments

The judgements required to determine the appropriate valuation methodology of unquoted equity investments means there is a risk of material adjustment to the carrying amounts of assets and liabilities. These judgements include a decision whether or not to impair valuations.These judgements are by nature more subjective when investments have experienced a period of time between funding rounds.

Valuations of unquoted equity investments are based on the last external funding round where one has taken place, otherwise at cost, less any provision for impairment if the most recent external funding round establishes a valuation lower than the cost to the Group.

Where unquoted equity investments are trading profitably and cash generative they will be valued using either DCF or price-earnings multiples, which will be discounted to reflect non-marketability and other risks inherent to businesses in early stages of operation. The estimates included in these valuations inherently subjective, especially where assigning non-marketability and risk discounts to unique companies. These valuations are reviewed on a regular basis based on the trading performance of the companies and decisions on whether to increase or impair the carrying value are reviewed by the Directors.

 

Valuation of intangible IP rights

It is Group policy to test, at least annually, whether the IP rights have suffered any impairment. There are a number of variable assumptions set out in note 14. The Directors consider that for each of these variables there is a wide range of reasonably possible alternative values, which result in a wide range of fair value estimates for the IP rights agreement. None of these estimates of fair value is considered more appropriate or relevant than any other. As a result of this, the Directors' view is that the IP rights should be amortised over the ten-year life of the agreement with provision made for any impairment when required.

 

Subsidiaries and spin-out investments

At the point of investing in a new spin-out company the Directors consider the definitions of a subsidiary and a spin-out investment as set out in note 2. The judgements over control of the company are assessed through:

Ÿ  proportion of voting rights held;

Ÿ  power to govern policies of the entity; and

Ÿ  power to appoint a majority of board members.

Whilst generally considered to be a largely non-judgemental area, the choice between subsidiary or spin-out investment has a material impact on the financial statements. The Directors do not consider that there have been any decisions requiring the application of significant judgement in the current period.

 

5. Operating segments

For the year ended 31 July 2013 and the year ended 31 July 2012 the Group's revenue and profit or loss was derived from its principal activity which encompasses technology transfer, company incubation and early stage venture capital. The Group's Board, which is considered to be the Group's chief operating decision maker, have undertaken a review of the Group's operations and its associated business risks and consider the performance of the business as one reportable segment. The portfolio of investments is reviewed with no differentiation made based on the market sector of the company or whether the company originated from the Sheffield or Cardiff IP pipeline. No distinction is made between the assessment of subsidiaries and spin-out companies.

The principal activity of the Group is based solely within the UK hence no geographical analysis is presented.

The disclosures for the reportable segment is therefore given by the primary financial statements and related notes. There are no material differences between the segment information as presented to the chief operating decision maker, and the financial information is presented under IFRS as adopted by the EU.

 

6. Results from operating activities

Results from operating activities have been arrived at after charging the following operating expenses:


 2013

 2012


£000

£000

Depreciation on property, plant and equipment

7

12

Amortisation of intangible assets

1,988

1,996

Employee costs (see note 8)

1,019

994

Net operating leases - property

40

30

Payments to The University of Sheffield/Cardiff University for IP mining

306

315

Research, development and patent costs

433

540

Legal, professional, insurance and advisory costs

253

205

Administration and marketing costs

355

268


4,401

4,360

 

 

7. Auditors' remuneration

During the year the Group obtained the following services from the Group's auditors:


 2013

 2012


£000

£000

Fees payable to the Company's auditors for the audit of the Company's annual accounts

19

18

Fees payable to the Company's auditors and their associates for other services:



-    the audit of the Company's subsidiary spin-out companies

2

3

 

 

8. Employee costs


 2013

 2012


£000

£000

Wages and salaries

853

798

Social security costs

108

107

Pension costs - contributions to money purchase plans

58

57

Share-based payments

-

32


1,019

994

 

Average monthly number of persons (including Non-executive Directors) employed:


 2013

 2012


Number

Number

Central corporate functions

14

13

Subsidiary spin-out companies

1

1


15

14

 

 

 

 

 

 

 

9. Share-based payments

Share option schemes

The Company has share option schemes for both Directors and certain employees. Details of the share options held by Directors are set out within the Report on Directors' Remuneration enclosed in the Group's full financial statements.

Each option will vest monthly as to 1/36th of the Ordinary shares under option on the expiry of each month following the date of the grant until the third anniversary of the date of the grant when the option shall become fully vested. Any vested portion of the options will normally be exercisable between the expiry of the third month after the date of the grant and the tenth anniversary of the date of the grant. No performance conditions are required to be met. Options will become immediately exercisable in full on the death of the option-holder for a period of twelve months from the date of death. If an option-holder ceases to be employed by the Company for any reason other than death, his option (to the extent unexercised and unvested) will lapse, unless under the discretion of the board they are allowed to continue. On a change of control or a voluntary winding-up of the Company, options may be exercised in full for a fixed period. Options will lapse on the expiry of ten years from their date of grant.

Until options are exercised, the option-holders have no voting or other rights in respect of the Ordinary shares under their options. Ordinary shares issued pursuant to the Share Option Agreements shall rank pari passu in all respects with the Ordinary shares already in issue except that they will not rank for any dividend or other distribution announced prior to the date of the exercise. Options are not transferable nor are they pensionable.

 

Warrants

On 23 March 2006, as part of a £10m Side Fund Agreement, Fusion issued warrants to NPI Ventures. Since this date the warrants have changed ownership and last year we were informed that they are currently held by a private equity firm. The warrants outstanding are as follows:

·      1,225,000 Ordinary shares with an exercise price of £1.50;

·      1,225,000 Ordinary shares with an exercise price of £1.60;

·      612,500 Ordinary shares with an exercise price of £1.80; and

·      612,500 Ordinary shares with an exercise price of £2.20.

 

Movements and fair value

The movements relating to share options and warrants during the year are set out below:




2013

2013

2012

2012




Number of share options

Number of Warrants

Number of share options

Number of Warrants

Outstanding at the beginning of the period



644,999

3,675,000

699,999

-

Reinstated during the period



-

-

-

3,675,000

Exercised during the period



(105,000)

-

(55,000)

-

Outstanding at the end of the period



539,999

3,675,000

644,999

3,675,000

        

105,000 share options were exercised during the year, the exercise price per share was 33.5p and the weighted average market share price at the time of exercise was 60.9p.

 

The fair values are determined by using the Black-Scholes option pricing model and the assumptions used at the fair value measurement date are shown in the table below:


Employees

Directors

Directors

Others*

Others*

Warrants

Fair value at grant date

14.43p

47.24p

15.65p

47.24p

15.65p

43.98p to 18.83p

Share price at grant

33.50p

150.00p

33.50p

150.00p

33.50p

152.25p

Dividend yield

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

Expected volatility

42.17%

18.52%

42.20%

18.52%

42.20%

18.85%

Expected life

4 years

1.5 years

6 years

1.5 years

6 years

2.5 years

Risk free interest rate

3.00%

4.46%

3.00%

4.46%

3.00%

4.28%

Number of shares under option

270,000

33,333

100,000

66,666

70,000

 

3,675,000

*Others reflects share options held by the Company Secretary and the spouse of T Atkinson (deceased)

The expected volatility was benchmarked against the FTSE AIM All Share Index on those options issued on 31 July 2010 and for the previous options against an index of similar companies in the Biotech Index as no historic data was available for the Company at the grant date.

 

The fair value of any outstanding share-based options and warrants are recognised as an expense through the profit and loss account over the relevant vesting periods. The charge in the current year was £nil (2012: £32,000)

 

10. Finance income and expenses


 2013

 2012


£000

£000

Finance income



Interest income on bank deposits

122

26

Interest income on loans to spin-out investments

98

151


220

177

Finance expenses



Interest payable on loans from related parties

(58)

(62)


(58)

(62)

Net finance income

162

115

 

 

11. Taxation


 2013

2012


£000

£000

Current tax

-

-

Deferred tax

-

-


-

-

Deferred tax assets of £4,570,000 (2012: £3,943,000) from unutilised tax losses have not been recognised as the Directors consider there to be sufficient uncertainty over the availability of future taxable profits from which the trading losses can be deducted.

The Directors believe that the Group will qualify for the Substantial Shareholder Exemption (SSE) and therefore no deferred tax is provided for in respect of the fair value uplifts in valuation of certain of the equity investments.

 

Corporation tax is calculated at a rate of 20% (2012: 20%) of the estimated assessable profit for the period.

The charge for the year can be reconciled to the profit per the income statement as follows:





 2013

 

2012


£000

£000

(Loss)/Profit before tax

(1,204)

505

Current tax at 20% (2012: 20%)

(241)

101

Effects of:



- expenses not deductible for tax purposes

(672)

(120)

- depreciation in excess of capital allowances

(1)

1

- UK research and development tax credits

16

(29)

- non taxable gains

-

(768)

- tax losses carried forward

898

815

Total tax charge

-

-

 



 

12. Earnings per share


2013

2012

(Loss)/Profit attributable to the equity holders of the parent

(£959,000)

£669,000

Weighted average number of Ordinary shares in issue

84,142,368

66,626,200

Basic and fully diluted (loss)/profit per share

(1.14)p

1.00p

Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the parent by the weighted average number of Ordinary shares in issue during the year.

Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary shares outstanding to assume conversion of all dilutive potential Ordinary shares according to IAS 33. Dilutive potential Ordinary shares include granted share options and warrants where the exercise price is less than the average market price of the Company's Ordinary shares during the year.

IAS 33 requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. Only options or warrants that are "in the money" are treated as dilutive and net loss per share would not be increased by the exercise of such options or warrants. Therefore no adjustment has been made to dilute earnings per share for any outstanding shares options or warrants.

 

13. Property, plant and equipment




Office




and




computer




equipment




£000

Cost




At 1 August 2012



87

Additions



12

Disposals



(18)

At 31 July 2013



81

Accumulated depreciation




At 1 August 2012



(75)

Charge for the year



(7)

Disposals



18

At 31 July 2013



(64)

Net book value




At 31 July 2013



17

 




Offce




and




computer




equipment




£000

Cost




At 1 August 2011



79

Additions



8

At 31 July 2012



87

Accumulated depreciation




At 1 August 2011



(63)

Charge for the year



(12)

At 31 July 2012



(75)

Net book value




At 31 July 2012



12



 

14. Intangible assets




IP rights and patent/licences




£000

Cost




At 1 August 2012



19,893

Disposals



(23)

At 31 July 2013



19,870

Accumulated amortisation




At 1 August 2012



(10,447)

Amortisation charge



(1,988)

Disposals



13

At 31 July 2013



(12,422)

Net book value




At 31 July 2013



7,448








IP rights and patent/licences




£000

Cost




At 1 August 2011



19,893

At 31 July 2012



19,893

Accumulated amortisation




At 1 August 2011



(8,451)

Amortisation charge



(1,996)

At 31 July 2012



(10,447)

Net book value




At 31 July 2012



9,446

 

Recoverable amount of The University of Sheffield and Cardiff University IP pipeline rights

The following key variables are relevant in determining a recoverable amount for the IP pipeline rights:

Ÿ  the timing and number of spin-out companies from both universities;

Ÿ  dilution of percentage shareholding rates as a result of financing related spin-out companies in the future;

Ÿ  disposal values and timings; and

Ÿ  discount factors of 6-8% (2012: 6-8%).

Each year the Directors review the IP pipeline rights for any evidence of impairment. This review is based on a discounted cash flow model which looks at historic information based on the key variables noted above and projects forwards over the remaining life of the IP pipeline rights and through to the exit of the spin-out companies. Based on the review this year, the Directors believe that there is no impairment of the IP rights and that the most appropriate treatment is for the IP rights to be amortised over the ten-year life of the agreement with provision made for any impairment when required, consistent with the treatment in the prior year. The carrying value of the Cardiff University IP rights amounted to £5,492,000 (2012: £7,086,000). The carrying value of The University of Sheffield IP rights amounted to £1,956,000 (2012: £2,348,000).



 

15. Investments


Spin-out




companies

Loans

Total


£000

£000

£000

Fair value




At 1 August 2012

18,930

833

19,763

Additions

1,858

757

2,615

Transfers

64

1,433

1,497

Change in fair value in the year

1,962

(854)

1,108

At 31 July 2013

22,814

2,169

24,983

Change in fair value in the year




Fair value gains

2,727

-

2,727

Fair value losses

(765)

(854)

(1,619)


1,962

(854)

1,108






Spin-out




companies

Loans

Total


£000

£000

£000

Fair value




At 1 August 2011

15,053

1,715

16,768

Additions

2,058

827

2,885

Disposals

(3,457)

-

(3,457)

Transfers

1,371

(1,371)

-

Change in fair value in the year

3,905

(338)

3,567

At 31 July 2012

18,930

833

19,763

Change in fair value in the year




Fair value gains

4,178

-

4,178

Fair value losses

(273)

(338)

(611)


3,905

(338)

3,567

 

The total fair value of investments of £24,983,000 (2012: £19,763,000) has been determined using two valuation methods:

 

•       Level 2 - inputs other than quoted prices that are observable for the assets - £24,203,000 (2012: £19,252,000)

•       Level 3 - inputs for the asset that are not based on observable market data - £780,000 (2012: £511,000)

 

Fair values relating to unquoted equity investments classified as Level 3 have been determined in part or in full by a valuation method that is not supported by observable market prices or rates. Investments in i2l Research Limited and i2l Research USA, Inc have been classified as Level 3 and the individual valuations have been calculated using price-earnings multiples. The increase shown from 2012 to date relates to an uplift based on the year-end price-earnings multiple calculation.

 

During the year both Absynth Biologics and FaultCurrent deconsolidated, whereby the Group's holdings in both these companies dropped below 50% following third party investment. This has led to gains on disposal of subsidiaries/investments £1,368,000 (2012: £459,000), and at the year end carrying values for these companies (including loans held) total £1,980,000. In 2012 gains on disposal were mainly made on the sale of the Group's investment in Simcyp Limited.

 

 

 

At 31 July 2013, the Group had investments where it holds 20% or more of the issued share capital as follows:


Principal


Class of


activity

Holding

shares held

Progenteq Limited

Cartilage replacement therapies

48%

Ordinary

Demasq Limited

Bone and soft tissue imaging products

48%

Ordinary

FaultCurrent Limited

Fault current limiters

47%

Ordinary

Mesuro Limited

Radio frequency design and test instrumentation

47%

Ordinary

Asalus Medical Instruments Limited

Medical devices

44%

Ordinary & Preference

Absynth Biologics Limited

MRSA vaccines

43%

Ordinary &        A Ordinary

Adjuvantix Limited

Vaccine adjuvants

43%

Ordinary

Diurnal Limited

Hormone replacement

43%

Ordinary

Seren Photonics Limited

High Brightness LEDs

40%

Ordinary &        A Ordinary

Iterate Control Limited

Advance control testing software

40%

Ordinary

Magnomatics Limited

Magnetic devices

39%

Ordinary &        A Ordinary

Medaphor Limited

Medical training solutions

39%

Ordinary

Asterion Limited

Cytokine therapies

38%

Ordinary

Phase Focus Limited

Lensless microscopy

35%

Ordinary

Perlemax Limited

Industrial gas processes

35%

Ordinary

Art of Xen Limited

Medical use of xenon gas

32%

Preference

i2L Research Limited

Pesticide testing

31%

A & B Ordinary

i2L Research USA, Inc

Pesticide testing

31%

Ordinary

Nanotether Discovery Science Limited

Drug discovery technology

22%

Ordinary

 

At 31 July 2013, the Group had investments where it holds 20% or less of the issued share capital as follows:


Principal


Class of


activity

Holding

shares held

Simm Investments Limited

Investment company

20%

B Ordinary

Muscagen Limited

Drug discovery

13%

A4 Ordinary

Morvus Technology Limited

Oncology therapies

9%

Ordinary

Zilico Limited

Cervical cancer detection

5%

Ordinary &        C Ordinary

Sarum Biosciences Limited

Antibacterial treatments

2%

Ordinary

Q Chip Limited

Life science and therapeutic products

1%

A Ordinary

All companies are incorporated in England and Wales except for i2L Research USA, Inc which is incorporated in USA.

 

16. Trade and other receivables


 2013

 2012


£000

£000

Trade receivables

5

8

Amounts due from related parties

54

171

Other tax and social security

29

33

Other receivables

655

573

Payments on account

82

132

Prepayments and accrued income

104

138


929

1,055

The Directors consider that the carrying amount of trade and other receivables approximates their fair value.

Other receivables mainly represents an amount due in respect of the sale of Simcyp - £573,000 is held in escrow for two years as security for certain warranty and indemnity cover. This amount is due early 2014.

 

The amounts due from related parties are detailed in note 24.

Payments on account represent the transfer of funds in advance to The University of Sheffield, details of which are set out in the accounting policy for "payments on account".

 

Credit risk

The Directors believe that given the majority of trade and other receivables are with related parties (primarily public sector organisations) there is little risk to credit quality.

 

Ageing of trade receivables

No trade receivables are past their due date and no impairment provision was considered necessary in the current or preceding years.

 

17. Deposits and cash and cash equivalents


2013

2012


£000

£000

Deposits

-

2,000

Deposits comprise treasury deposits held by the Group with an original maturity of greater than three months. The carrying amount of these assets approximates their fair value.

 


2013

2012


£000

£000

Cash and cash equivalents

21,288

3,923

Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value.

 

18. Share capital and premium


2013

2012


£000

£000

Allotted, called up and fully paid



109,437,096 (2012: 72,832,850) Ordinary shares of 1p each

1,094

728

Share premium

63,529

44,486

The Company has one class of Ordinary shares which carry equal voting rights, equal rights to income and distribution of assets on liquidation or otherwise and no right to fixed income.

 

On 11 April 2013, following the successful completion of a Placing for new shares, the Company issued 36,499,246 Ordinary shares of 1p each. Of the total number of shares, 3,045,000 shares were issued to IP Group plc and 33,318,637 shares were issued to new and existing institutional shareholders, the consideration from these shares amounted to £20,000,000 less share issue costs of £748,000. The share issue costs represent legal and brokerage fees incurred on the transaction and have been charged to the share premium account. The remaining 135,609 shares were issued to The University of Sheffield to satisfy a pre-existing pipeline agreement and therefore had no consideration. As a result of this transaction IP Group plc hold 20% of the Company.

 

The new shares issued represented 50% of the Company's then existing share capital and following the issue represents 33% of the Company's enlarged issued share capital.

 

Additionally during the year, on the exercise of share options, the Company issued a further 105,000 Ordinary shares of 1p each, the total consideration for these shares amounted to £35,000. Details of the share options are given in note 9.

 

19. Other reserves

The Other reserves totalling £3,000 (2012: £125,000) comprise a capital redemption reserve of £1,000 (2012: £1,000) and a capital reserve of £2,000 (2012: £2,000) arising from the Company's admission to AIM in 2005 and the resulting differences on consolidation under merger accounting. The additional £122,000 in 2012 represented the 135,609 shares still to be issued in respect of the extended pipeline agreement with The University of Sheffield, these have now been issued, see note 18.

 

 

 

20. Non-controlling interests


 2013

 2012


£000

£000

At 1 August

-

-

Disposal of subsidiary undertakings

534

-

Part disposal of subsidiary undertakings

-

(38)

Share of loss in year

(245)

(164)

Non-controlling interests attributable to Group

(289)

202

At 31 July

-

-

The disposal of subsidiary undertakings reflects the deconsolidation impact of Absynth Biologics Limited and FaultCurrent Limited.

 

21. Non-current liabilities


 2013

 2012


£000

£000

Amounts owed to The University of Sheffield

769

811

Amounts owed to Cardiff University

1,585

1,526

Amounts owed to related parties

2,354

2,337

£769,000 owed to The University of Sheffield (2012: £751,000) and £1,585,000 owed to Cardiff University (2012: £1,526,000) relate to loan notes and accrued interest arising from the purchase of the Group's interest in its portfolio of spin-out companies. These amounts are repayable on the earlier of the sale by Fusion of the underlying share capital in the company, or the company making dividend payments, or ten years from the day of issue. These amounts are only payable to the extent that any gain or dividend is received by Fusion and can be cancelled by Fusion by the return of the shares to which they relate to The University of Sheffield or Cardiff University respectively. The additional £60,000 owed to The University of Sheffield in 2012 related to a loan with Absynth Biologics Limited, a previously consolidated subsidiary spin-out company.

 

Maturity analysis

Due to the repayment terms described above, the date of maturity of these loans is uncertain.

 

22. Trade and other payables


 2013

 2012


£000

£000

Trade creditors

104

71

Amounts due to related parties

13

71

Other creditors

5

6

Other tax and social security

-

1

Accruals and deferred income

81

222


203

371

 

23. Operating lease commitments


 2013

 2012


£000

£000

Minimum commitments under non-cancellable operating leases on property expiring:



- no later than one year

15

-

- later than one year and no later than five years

-

25


15

25

The lease payments represent amounts payable by the Group for its office requirements in the UK.

 

24. Related party transactions

 

During the year, the Group entered into the following transactions with various related parties. All transactions were conducted on terms prevailing in an arms length transaction.

Under the terms of the agreement dated January 2009 Fusion IP Sheffield Limited paid The University of Sheffield £96,250 (2012: £105,000), as payments to support the management of the IP pipeline.

During the year, as part of the April 2013 funding round, the remaining 135,609 shares required to satisfy a pre-existing pipeline agreement were issued to The University of Sheffield for no consideration, see note 18.

Fusion has continued to accrue interest due on loans in respect of the purchase of the original portfolio companies from The University of Sheffield. The total amount due is set out in note 21.

Fusion IP Sheffield Limited purchased IP and made contributions towards patent costs from The University of Sheffield during the year with a total value of £39,520 (2012: £92,767).

Fusion IP Sheffield Limited incurred costs of £26,448 (2012: £26,124) under a secondment agreement with The University of Sheffield for services from personnel.

Fusion IP Sheffield Limited incurred costs in respect of leased office premises and related expenses from The University of Sheffield £21,060 (2012: £19,902).

At 31 July 2013 the total balance due to The University of Sheffield in respect of the above transactions was £10,172 (2012: £16,428).

Fusion IP Sheffield Limited received licence income via The University of Sheffield for the year of £53,828 (2012: £35,114) with balance owed to Fusion from the University at 31 July 2013 of £164 (2012: £nil).

During the year, the Group purchased administrative and other services from Sheffield University Enterprises Limited (SUEL), a wholly owned subsidiary of The University of Sheffield, totalling £32,118 (2012: £31,470). At 31 July 2013 the balance due to SUEL was £2,408 (2012: £3,459).

Under the terms of the agreement dated January 2007 Fusion IP Cardiff Limited paid Cardiff University £210,000 (2012: £210,000) as payments to support the management of the IP pipeline.

Fusion has continued to accrue interest due on loans in respect of the purchase of the original portfolio companies from Cardiff University and during the year, under the same terms as the original agreement, an additional loan of £22,301 was added in exchange for shares in Sarum Biosciences Limited. The total amounts due are set out in note 21.

Fusion IP Cardiff Limited made payments of £7,321 (2012: £nil) to Asalus Medical instruments Limited, a participating interest, in respect of the Cardiff office space.

During the year whilst a subsidiary company, Absynth Biologics Limited, increased their loan from The University of Sheffield to £140,000 (2012: £60,000). Absynth Biologics Limited deconsolidated on 10 July 2013 and therefore no balances are included as at 31 July 2013 (2012: £60,212). Interest to the point of deconsolidation of £3,936 (2012: £425) is included in finance expenses.

During the year, Fusion supplied management services to companies in which it held a participating interest totalling £310,756 (2012: £375,737). At 31 July 2013 the amount owed to Fusion was £54,062 (2012: £171,134).

During the year, companies in which Fusion held an interest contracted for £644,528 (2012: £725,565) of research services combined from The University of Sheffield and Cardiff University. At 31 July 2013 the combined amount owed to the universities for these contracted research services was £47,353 (2012: £198,853 which includes a consolidated balance of £50,911).

During the year, IP Group plc invested £1,220,821 (2012: £948,777) in companies in which Fusion held a participating interest.

As part of the April 2013 fundraising IP Group purchased a further 3,045,000 shares in Fusion, see note 18.

During the year, directors of Fusion invested £5,000 (2012: £nil) in companies in which Fusion held a participating interest.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR NKQDDABDDCKD

a d v e r t i s e m e n t