Preliminary Results

RNS Number : 6944P

Frontier IP Group plc

29 October 2012

 



FIPP

 

Frontier IP Group Plc

("Frontier IP", "the Group" or "the Company")

Preliminary Results for the year ended 30 June 2012

Frontier IP Group Plc is focused on the commercialisation of intellectual property

Key Points

·     Good progress with developing new opportunities during the year:

-     three new spin-out companies

-     fund management agreement with Narec Capital Limited

-     collaboration with the University of Central Lancashire

·     Revenue from services of £162,000 (2011: £158,000)

·     Total revenue £223,000 (2011: £307,000)

·     Loss before tax of £380,000 (2011: loss of £269,000)

·     Loss per share of 5.45p (2011: loss of 3.86p)

·     Net assets per share as at 30 June 2012 of 36.0p (2011: 41.4p)

·     Post year-end:

-     three new spin-out companies

-     additional collaboration agreement with University of Dundee

·     Fundraising currently in final stage - funds will provide ongoing working capital and support delivery of growth opportunities

·     With the fundraising, the Group will be positioned for continued development

Neil Crabb, Executive Chairman of Frontier IP, said:

"Frontier IP has made good progress during the year ended 30 June 2012 with helping its existing portfolio companies to deploy their technologies and with deepening and extending its relationships within its three university partnerships.  The Company has also continued to develop new opportunities including a fund management agreement with Narec Capital Limited and a collaboration with the University of Central Lancashire.

The new financial year has started well and we believe that, dependent on the successful outcome of the fundraising which is in its final stage, Frontier IP will be well placed to make further progress.  The Board remains confident about the opportunities for growth in the new financial year and beyond."

Enquiries

Frontier IP Group Plc	Neil Crabb, Executive Chairman	T: 0131 220 9491
Biddicks	Katie Tzouliadis / Alexandra Shilov	T: 020 3178 6378
Seymour Pierce Ltd Corporate Finance: Corporate Broking:	Guy Peters / Julian Erleigh David Banks / Paul Jewell	T: 020 7107 8013

Company website: www.frontierip.co.uk

Executive Chairman's Statement

Introduction

Frontier IP has made good progress during the year ended 30 June 2012 with helping its existing portfolio companies to deploy their technologies and with deepening and extending its relationships within its three university partnerships. The Company has also continued to develop new opportunities in the year, including a fund management agreement with Narec Capital Limited ("Narec Capital") and a first collaboration venture with the University of Central Lancashire ("UCLan"). We saw some slippage in the receipt of equity and in completing two licence agreements which impacted results for the year.  However, the completion of the delayed licence agreements remains underway and the equity from several new spin-outs was received in the first quarter of the new financial year. 

The new financial year to 30 June 2013 has started well and the Company is benefiting from a high level of activity across its business. The Company has added three new spin-out companies to its portfolio since the start of July 2012 and, in particular, in August we were very pleased to enter into a new collaboration agreement with the University of Dundee, alongside the existing long term partnership.

Results

Revenue from services showed a small increase to £162,000 (2011: £158,000).  Total revenue of £223,000 was lower than the prior year (2011: £307,000) due to a smaller increase in value of the Group's portfolio holdings and slippage in the receipt of equity from several new spin-outs into the new financial year as well as a delay in the completion of two licence agreements.  With a 5% increase in administrative expenses due to higher personnel costs, the loss before tax was £380,000 (2011: loss of £269,000).  The loss per share was 5.45p (2011: 3.86p).

Cash balances stood at £44,000 at 30 June 2012 (2011: £582,000).  Net assets per share as at 30 June 2012 were 36.0p (2011: 41.4p).  We are currently undertaking a fundraising, which is in its final stage, with the net proceeds intended to provide for the ongoing working capital needs of the business and to support the development and growth of existing relationships, allied advisory roles and commitments to existing funds and the establishment of sector specific funds.  The new monies being raised are fundamental to the future of the business.  We are making good progress and expect to update the market shortly.

Operational Review

The Group now has three university partnerships, with University of Dundee, Robert Gordon University, Aberdeen and Plymouth University.  We believe that there is a broad range of significant commercial opportunities across these three partnerships and, in the short to medium term, we will be focusing our attention on exploring and developing these.

The Group received equity in three new spin-out companies during the year, Glycobiochem Ltd, Kinetic Discovery Ltd and Alusid Ltd.

Glycobiochem Ltd, a spin-out from University of Dundee, markets a software product called PRODRG, which is designed to generate three-dimensional models of chemicals for use in applications such as rational drug design, as well as a range of innovative molecular and chemical tools developed specifically for research into carbohydrate processing enzymes.  The Group currently holds approximately 5% of the issued share capital of the company.

Kinetic Discovery Ltd, another spin-out from University of Dundee, is a drug discovery services company which specialises in biosensor based screening.  It has a spread of international customers including many of the major pharmaceutical companies, and is already trading profitably.  Kinetic Discovery Ltd is embedded within the University of Dundee, enabling it to continue to benefit from university facilities. This "embedded" approach is one which we are looking to develop further across our partnerships.  The Group currently holds approximately 5% of the issued share capital of the company.

Our equity holding in spin-out company Alusid Ltd arose from our collaboration with UCLan which was agreed in June with UCLan's Silicate Research Unit.  Alusid Ltd is a spin-out with UCLan and was formed just prior to the year end.  The company will licence and commercialise the process to transform waste materials into a highly durable and functional material with applications in the construction industry.  The material has been exhibited at a number of international design shows where it was well received.  The Group currently has a beneficial ownership of 21% of the issued share capital of the company.

After the year end, Frontier IP was allotted equity in a further three spin-out companies, Tissue Repair Technologies Ltd, Ex Scientia Ltd and PoreXpert Limited. 

Tissue Repair Technologies Ltd is a spin-out from University of Dundee.  The company develops novel wound healing agents based on migration stimulating factor, a naturally occurring protein, which Tissue Repair Technologies Ltd believes has particular application in patients with impaired healing, such as diabetics.  The Group currently holds approximately 5% of the issued share capital of the company.

Ex Scientia Ltd, a spin-out from University of Dundee, has been formed to exploit novel informatics and experimental methods to enable new, more effective ways of conducting drug discovery.  The Group currently holds approximately 5.75% of the issued share capital of the company.

PoreXpert Ltd, a new spin-out from Plymouth University, was formed to accelerate the commercialisation activity of the Environmental and Fluid Modelling Group at Plymouth which provides software and consultancy for modelling porous systems.  The company is now establishing distribution channels for a new version of its software released this month.  The Group currently holds approximately 15% of the issued share capital of the company.

In June 2012, we were pleased to announce that we had signed an agreement with Narec Capital Limited ("Narec Capital"), the provider of consultancy and finance services to companies in the renewable energy sector.  The agreement confirms Narec Capital's intention to appoint Frontier IP as its provider of fund management and administration services to a portfolio of renewable energy funds which it plans to launch later this year.  The focus of this funding initiative will be on providing early-stage capital in order to accelerate the deployment and reduce the cost per megawatt hour of renewable energy technologies and projects emerging from sources including utilities, manufacturers, universities and research centres.  Narec is currently investing over £150m of public and private finance to establish the UK's offshore renewable innovation facilities. 

Once the funds are established, under the terms of the agreement, Frontier IP will receive fees arising from the introduction of investors and the provision of fund management services to the funds as well as investment deal fees and carried interest from the funds under management.  We expect the benefits arising from the agreement to be reflected in the current financial year, to 30 June 2013.  In line with existing arrangements, certain regulated activities will be provided through Sigma Technology Management Limited, the FSA authorised and regulated subsidiary of Sigma Capital Group plc, a shareholder in the Company.

In August 2012, we entered into a Collaboration Agreement with University of Dundee.  This is in addition to our existing spin-out commercialisation Relationship Agreement.  The objective of this new collaboration is for Frontier IP and the University of Dundee to work together to define, agree and, as appropriate, establish a vehicle which funds the exploitation of commercial drug development opportunities arising from the Drug Discovery Unit at University of Dundee ("DDU").  The DDU was founded in 2006 in theuniversity's College of Life Sciences, with the aim of translating basic science into lead compounds to validate putative drug targets, to use as tools to investigate disease pathways and, when appropriate, advance to pre-clinical drug candidates.

The Board

In December 2011, we were pleased to announce the appointment of Andrew Richmond as a Non-Executive Director, replacing Tim Cockroft.  Andrew brings highly relevant experience to our business, having significant experience of the healthcare, stockbroking and private equity industries.  He is also a Lay Member of the Court of the University of Dundee. 

Outlook

While the wider economic backdrop continues to be challenging, we are encouraged by the level of activity since the start of the new financial year.  Our additional collaboration with University of Dundee has extended that relationship and we are excited by the potential opportunity this offers in the longer term.

The recent growth in the number of portfolio companies represents an opportunity for us to take on advisory roles and we expect to extend this approach to a number of our portfolio companies.

We are also seeing developments in our historic portfolio.  In particular, Nandi Proteins Limited ("Nandi"), the Heriot Watt University spin-out, has recently made significant progress with a number of major food companies towards the licensing and adoption of its protein technology.  Subject to Nandi concluding licence terms, we expect to recover the significant ongoing advisory fees that are being accrued, which have been provided against to date, as well as an uplift in valuation, and we continue to work with the company to assist in the development of its business.

In addition, we are looking forward to furthering our work with Narec Capital and UCLan during the current financial year.

In summary, we believe that, dependent on the successful outcome of the fundraising which is in its final stage, Frontier IP will be well placed to make further progress and the Board remains confident about the opportunities for growth in the new financial year and beyond.

Neil Crabb

Executive Chairman

26 October 2012

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

For the year ended 30 June 2012

		Unaudited 2012		Audited 2011
	Notes	£'000		£'000
Revenue
Revenue from services Other operating income Unrealised profit on the revaluation of investments		162 61		158 149
Total revenue		223		307
Administrative expenses (net)		(603)		(576)
Loss from operations and before tax		(380)		(269)
Taxation	5	-		-
Loss/total comprehensive expense for the year		(380)		(269)
Loss per share attributable to the equity holders of the Company:
Basic and diluted loss per share	6	5.45p		3.86p

All of the Group's activities are classed as continuing and there were no comprehensive gains or losses in either year other than those included in the statement of comprehensive income.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

At 30 June 2012

		Unaudited 2012		Audited 2011
		£'000		£'000
Assets
Non-current assets
Tangible fixed assets		-		1
Goodwill		1,966		1,966
Financial assets at fair value through profit and loss		532		400
		2,498		2,367
Current assets
Trade receivables Other current assets		36 44		21 28
Cash and cash equivalents		44		582
		124		631
Total assets		2,622		2,998
Liabilities
Current liabilities
Trade and other payables		(115)		(112)
		(115)		(112)
Net assets		2,507		2,886
Equity
Called up share capital		697		697
Share premium account		4,457		4,457
Reverse acquisition reserve Share based payment reserve		(1,667) 115		(1,667) 114
Retained earnings		(1,095)		(715)
Total equity		2,507		2,886

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2012

	Share  capital	Share premium account	Reverse acquisition reserve	Share- based payment reserve	Retained earnings	Total equity attributable to equity holders of the Company
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 July 2010	497	3,898	(1,667)	112	(446)	2,394
Issue of shares	200	800	-	-	-	1,000
Costs of issue	-	(241)	-	-	-	(241)
Loss/total comprehensive expense for the year Share-based payments	- -	- -	- -	- 2	(269) -	(269) 2
At 30 June 2011	697	4,457	(1,667)	114	(715)	2,886
Loss/total comprehensive expense for the year	-	-	-	-	(380)	(380)
Share-based payments	-	-	-	1	-	1
At 30 June 2012	697	4,457	(1,667)	115	(1,095)	2,507

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2012

			Unaudited	Audited
			2012	2011
			£'000	£'000
Cash flows from operating activities
Cash used in operations			(466)	(434)
Taxation paid			-	-
Net cash used in operating activities			(466)	(434)
Cash flows from investing activities
Purchase of tangible fixed assets			-	(1)
Purchase of financial assets at fair value through profit and loss			(72)	(72)
Net cash used in investing activities			(72)	(73)
Cash flows from financing activities
Proceeds from issue of equity shares			-	1,000
Cost of share issue			-	(241)
Net cash generated from financing activities			-	759
Net (decrease)/increase in cash and cash equivalents			(538)	252
Cash and cash equivalents at beginning of year			582	330
Cash and cash equivalents at end of year			44	582

Cash used in operations

Loss before tax	(380)	(269)
Adjustments for:
Share-based payments   Depreciation   Fair value (gain)/loss on financial assets through profit and loss Changes in working capital:	1 1 (60)	2 - (149)
Trade and other receivables   Trade and other payables	(20) (8)	(23) 5
Cash flows from operations	(466)	(434)

NOTES

1.   General information

The Company is a limited liability company incorporated in England and with its registered office at NorthWest Wing, Bush House, Aldwych, London WC2B 4EZ.  The Company's trading office is situated at 41 Charlotte Square, Edinburgh EH2 4HQ.

The Company is quoted on AIM.

This preliminary announcement was approved for issue by a duly appointed and authorised

committee of the Board of Directors on 26 October 2012.

2.   Basis of preparation

The financial information set out in this announcement does not constitute statutory financial statements for the year ended 30 June 2012 or 30 June 2011.  The report of the auditor on the statutory financial statements for the year ended 30 June 2011 was (i) unqualified; (ii) did not include references to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain statements under section 498(2) or (3) of the Companies Act 2006.  The statutory financial statements for the year ended 30 June 2010 have been delivered to the Registrar of Companies.  Once the financial statements for the year ended 30 June 2012 have been audited, the statutory financial statements for the year ended 30 June 2012 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

3.   Accounting policies

      The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 June 2011 as described in the Group's Annual Report for that year and as available on our website www.frontierip.co.uk with the exception of the accounting policy for valuing equity received in spin-out companies which was revised during the year ended 30 June 2012.  The new accounting policy is detailed below.  The value at which the investments were held at 30 June 2011 and 30 June 2010 would not have been materially different if the revised accounting policy had been adopted for the whole of the preceding year.

Where the Group receives equity in companies when they are spun out by a university and there is no associated funding round, the Group applies an initial standard valuation matrix as a means of estimating fair value.  The valuation matrix is as follows.

1.   On initial spin-out value the company at £50,000.

2.   Once the IP is transferred to the company, uplift the valuation by between £50,000 and £300,000 depending on the value attributed to the IP.

3.   Consider if the valuation should be increased when the company commences trading and starts to generate revenue.

4.   Apply International and Private Equity and Venture Capital Valuation Guidelines ("IPEV Guidelines") if the company receives third party funding.

5.   As the company develops, use other valuation methodologies such as turnover multiple, price/earnings ratio, net present value of future cash flows, as appropriate.

Under the previous accounting policy, where the Group received equity in companies when they were spun out by a university and there was no associated funding round, the Group applied an initial standard valuation amount as a means of estimating fair value.  Subsequently the fair value of these investments and the Group's other unlisted investments was established using IPEV Guidelines.

There are no new standards and interpretations with an effective date after the date of these financial statements and which have not been early adopted which would have a material effect on the Group's financial statements.

4.   Segmental information

The chief operating decision-maker has been identified as the Group board of directors.  The board reviews the Group's internal reporting in order to assess performance and allocate resources. Currently the Group has one operating activity, the commercialisation of University IP.  All of the Group's activities are carried out in the UK.

5.   Taxation

There is no charge to taxation for the year ended 30 June 2012 (2011: Nil) due to the Group making a taxable loss.

The tax asset relating to the Group's losses is not recognised, in accordance with Group policy.   Using a corporation tax rate of 25.5%, the Group has cumulative unrelieved management expenses and other tax losses of £339,000 available for use to offset future profits.

6.   Loss per share

The calculation of the basic loss per share for the year ended 30 June 2012 and 30 June 2011 is based on the losses attributable to the shareholders of Frontier IP Group Plc divided by the weighted average number of shares in issue during the year.

	Losses attributable to shareholders £'000	Weighted average number of shares	Basic loss per share amount in pence
Year ended 30 June 2012	380	6,972,165	5.45
Year ended 30 June 2011	269	6,972,165	3.86

No warrant or option is potentially dilutive as the average market price of the ordinary shares during the year was less than the exercise price of the warrants and options, hence basic and diluted loss per share are the same.

7.   Availability of statutory financial statements

Copies of the full statutory financial statements will be available in due course on the Company's website, www.frontierip.co.uk, and at the Company's offices at 41 Charlotte Square, Edinburgh EH2 4HQ.

 

END

 

 

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