Final Results
IP2IPO Group PLC
18 March 2004
For Immediate Release 18 March 2004
IP2IPO Group plc
Preliminary results for the year ended 31 December 2003
IP2IPO Group plc (AIM: IPO), the intellectual property commercialisation
company, today announces its audited preliminary results for the year ended 31
December 2003.
IP2IPO, which floated on the Alternative Investment Market (AIM) of the London
Stock Exchange in October 2003, raising £31.5 million before expenses, focuses
on the commercialisation of university intellectual property. The Company has
long-term partnerships, lasting 15-25 years, with the University of Oxford
(chemistry department), the University of Southampton, King's College London and
the University of York (Centre for Novel Agricultural Products ('CNAP')).
Post the year end, IP2IPO saw the flotation of one of its investments, Offshore
Hydrocarbon Mapping plc. Offshore Hydrocarbon Mapping plc was the first spin out
company to arise under IP2IPO's partnership with the University of Southampton
and its flotation represents a major endorsement of the IP2IPO business model.
Highlights
• First revenues: £222,000 (2002: nil).
• Losses reduced to £583,000 (2002: £1.56 million).
• Strong cash position: £38.2 million (2002: £4.39 million).
• Six new spin-out companies formed in 2003 - IP2IPO received equity
stakes in each company.
• New partnership signed with King's College London ('KCL') in May 2003:
25-year term covering the entire University.
• New partnership signed with the University of York in October 2003:
25-year term relating to the CNAP.
• £5 million seed capital fund reserved for investments in spin-out
opportunities across the University of Oxford - not just those
originating within the Chemistry Department.
Post year-end highlights:
• Offshore Hydrocarbon Mapping plc ('OHM') floated on AIM on 11 March
2004. OHM raised more than £10 million via a placing at a placing
price of £1.70 per share, valuing the company at £49 million. IP2IPO
sold shares at the time of OHM's flotation to realise proceeds of
£1 million and currently holds 10.42% of OHM's issued share capital.
• Formation of two new companies from within KCL Partnership in March
2004: Phonologica Limited and Proximagen Limited.
• On 5 March 2004, Capsant Neurotechnologies, a company in which IP2IPO
holds a significant equity stake, raised over £1 million via a private
placing, capitalising the company at £4 million.
In addition, David Norwood, Chief Executive Officer of IP2IPO, has today
announced his resignation from the non-executive directorship he held on the
board of The Evolution Group plc. David has successfully steered IP2IPO from its
origins within The Evolution Group to its AIM listing in October 2003 and having
now completed the announcement of IP2IPO's maiden preliminary results, David
considers this to be a natural point to step down from Evolution's board.
Commenting on the Group's preliminary results, David Norwood, Chief Executive
Officer of IP2IPO, said:
'2003 has been a significant year for IP2IPO and the business has expanded
markedly. The Company now has four university partnerships, a promising
portfolio of equity stakes in spin-out companies, a robust pipeline of new
spin-out prospects and, as a result of IP2IPO's flotation, a strong cash
position. Fees for the provision of advisory services have begun to make an
appreciable contribution to covering the costs of the business and overheads
continue to be subject to careful control by the management team.
'The first quarter of 2004 has seen the creation of two spin-out companies from
IP2IPO's partnership with King's College London and the successful completion of
a second round of finance for Capsant Neurotechnologies Limited, a University of
Southampton spin out. Most significantly, we were delighted to see OHM float on
AIM this month. This in itself represents a major milestone for IP2IPO and
demonstrates the Company's ability to create value from university IP.'
For more information contact:
IP2IPO (www.ip2ipo.com)
David Norwood, Chief Executive Officer 020 7071 4348
Buchanan Communications
Tim Anderson, Mark Court, Mary-Jane Johnson 020 7466 5000
Notes to editors
IP2IPO
IP2IPO is an intellectual property (IP) company that specialises in
commercialising university technology. The Company, which was founded in 2001,
has already formed four long-term partnerships with UK universities and listed
on AIM in October 2003.
IP2IPO's first partnership was with the University of Oxford. In return for an
investment of £20 million, IP2IPO has acquired 50 per cent of the University of
Oxford's equity in spin-out companies and technology licenses based on
intellectual property created at the Chemistry Department until 2015. In
November 2003, IP2IPO created a £5 million seed capital fund for investing in
spin-out companies across the University of Oxford, not just those originating
within the Chemistry Department.
In March 2002, IP2IPO entered into a second long-term partnership with the
University of Southampton. Under the terms of this partnership, IP2IPO is
committed to working with the University of Southampton in the identification
and facilitation of spin-out companies from across the University of Southampton
and to investing £5 million in early-stage University of Southampton spin-out
companies over a four year period in return for equity stakes in those
companies. In addition, IP2IPO also received a 20 per cent stake in Southampton
Asset Management Limited, a company that has been formed to hold the
University's equity stakes in its future spin-out companies. The partnership has
a term of at least 25 years.
IP2IPO entered into its third long-term partnership in May 2003 with King's
College London. IP2IPO will work with King's College London to help identify
and progress commercialisation opportunities as well as invest £5 million in
seed capital in spin-out companies from King's College London over a five year
period in return for equity stakes in those companies. In addition, IP2IPO will
receive 20 per cent of King's College London's equity in spin-out companies and
technology licenses. The partnership has an initial term of 25 years.
In October 2003, IP2IPO announced a fourth partnership with the Centre for Novel
Agricultural Products ('CNAP'), based at the University of York. CNAP is a
flagship research centre that specialises in plant and microbial gene discovery.
Under the terms of the partnership a new company, Amaethon Limited, has been
created which has the right to commercialise CNAP's IP for 25 years. IP2IPO has
committed to invest £1.15m in Amaethon Limited in return for a one third equity
stake in Amaethon Limited (the remaining equity being owned by the University of
York) and will also invest in the spin-out companies based on CNAP's IP which
Amaethon Limited creates.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 December 2003
Notes 2003 2002
£'000 £'000
Turnover 222 -
Administrative expenses
Provision against fixed asset investments (109) (1,537)
Other (1,170) (845)
Total (1,279) (2,382)
Other operating income - 650
Operating loss (1,057) (1,732)
Interest receivable and similar income 474 173
Loss on ordinary activities before taxation (583) (1,559)
Tax on loss on ordinary activities - -
Loss on ordinary activities after taxation (583) (1,559)
Basic and diluted loss per ordinary share 3 (1.9p) (6.3p)
There is no difference between the loss on ordinary activities before taxation
and the loss for the years stated above, and their historical cost equivalents.
All results arise from continuing activities.
There are no recognised gains and losses other than the losses above and
therefore no separate statement of total recognised gains and losses has been
presented.
CONSOLIDATED BALANCE SHEET
As at 31 December 2003
Notes 2003 2002
£'000 £'000
Fixed assets
Intangible fixed assets 12 -
Tangible fixed assets 27 47
Investments
Equity rights 4 17,556 18,056
Equity investments 4 5,804 2,849
23,360 20,905
23,399 20,952
Current assets
Debtors 170 47
Cash at bank and in hand 38,245 4,388
38,415 4,435
Creditors: Amounts falling due within one year (774) (73)
Net current assets 37,641 4,362
Total assets less current liabilities 61,040 25,314
Creditors: Amounts falling due after more than one year (383) -
Net assets 60,657 25,314
Capital and reserves
Called up share capital 4,064 2,528
Share premium account 58,972 24,582
Profit and loss account (deficit) (2,379) (1,796)
Total equity shareholders' funds 60,657 25,314
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2003
Notes 2003 2002
£000 £'000
Net cash outflow from operating activities 5 (708) (770)
Returns on investments and servicing of finance
Interest received 474 173
Net cash inflow from returns on investment and servicing of finance 474 173
Taxation - 89
Capital expenditure & financial investment
Purchase of intangible fixed assets (12) -
Purchase of tangible fixed assets (5) (50)
Purchase of fixed asset investments (1,818) (557)
Net cash outflow from capital expenditure and financial investments (1,835) (607)
Net cash outflow before financing (2,069) (1,115)
Financing
Issue of ordinary shares 37,738 3,000
Share issue costs (1,812) (96)
Net cash inflow from financing 35,926 2,904
Increase in cash 5 33,857 1,789
NOTES TO THE FINANCIAL INFORMATION
1 Basis of preparation
The figures and financial information for the year ended 31 December 2003 do not
constitute the statutory financial statements within the meaning of section 240
of the Companies Act 1985 but are derived from the audited financial statements.
The financial information for the year ended 31 December 2002 is derived from
the statutory accounts for that year which have been delivered to the Registrar
of Companies. The auditor's report on those accounts was unqualified.
The financial information in this announcement has been prepared on the basis of
the accounting policies as set out in the most recently published set of annual
financial statements. There have been no changes to the Group's accounting
policies in 2003.
Copies of this announcement are available from the Company Secretary. The
audited statutory financial statements for the year ended 31 December 2003 are
expected to be distributed to shareholders by 5 April 2004 and will be available
at the registered office of the Company, 59 St Aldates, Oxford, OX1 1ST.
This preliminary announcement was approved by the board on 17 March 2004.
2 Dividends
The directors do not recommend the payment of a dividend (2002: £Nil).
3 Basic and diluted loss per ordinary share
The basic loss per share has been calculated by dividing the loss for the year
of £583,000 (2002: £1,559,000) by the weighted average number of shares of
30,031,187 in issue during the year (2002: 24,738,139). The Group had no
dilutive potential ordinary shares in either the current year or preceding years
which would serve to increase the loss per ordinary share. There is therefore
no difference between the loss per ordinary share and the diluted loss per
ordinary share in either the current or preceding year.
4 Fixed asset investments
Equity rights
Oxford Acquisition Total
University costs £'000
Chemistry Department £'000
Equity Right
£'000
Cost
At 1 January 2003 17,806 284 18,090
Investment in spin out companies (550) - (550)
Additions - 70 70
At 31 December 2003 17,256 354 17,610
Aggregate amortisation of acquisition costs
At 1 January 2003 - (34) (34)
Charge for the year - (20) (20)
At 31 December 2003 - (54) (54)
Net book value
At 31 December 2003 17,256 300 17,556
At 31 December 2002 17,806 250 18,056
The University of Oxford Chemistry Department Equity Rights
The Group has the right to 50% of The University of Oxford's shareholdings in
companies spun out of its chemistry department for 15 years up to 2015, at a
price equivalent to that subscribed by external investors. It also has the right
to 50% of the royalties due to the University of Oxford under licences generated
by the chemistry department, entered into during the same period.
This agreement was signed in December 2000 and the equity right remaining at the
year end of £17.3 million will only be realised by the receipt of shares in spin
out companies from the University of Oxford Chemistry Department. In the event
that the equity rights are fully realised prior to November 2015, then the
Company will be entitled to acquire the shares in spin out companies from the
chemistry department to which it is entitled under the terms of the agreement at
par value. In the event that the value of shares received in spin out companies
is insufficient to utilise the full £17.3 million by March 2016 the asset will
be written off.
Realisation of the equity rights in the way described above, depends upon:
- The availability and quality of research from the chemistry
department at the University of Oxford, which will provide a continued pipeline
of IP spin out opportunities from the University of Oxford Chemistry Department
over the remaining period of the agreement to March 2016;
- The valuation and volume of successful IP spin out opportunities
arising from the chemistry department, which will allow the utilisation of the
equity rights within the remaining time frame of the agreement;
- Market conditions in general including the availability of external
funds to invest in the spin out companies, which will be largely dependent upon
the appetite for investment in the life science and other sectors; and
- The availability and skill of IP2IPO staff to negotiate with the
academics and the University of Oxford to successfully convert the IP
opportunities to spin out companies.
There is no certainty that individual spin out companies will prove to be
successful or generate a return on investment for the Group.
The directors have reviewed the carrying value of the equity rights at 31
December 2003. Based on the rate at which spin out companies from the
University of Oxford chemistry department have been created to date, the
remaining life of the partnership, the rate at which spin out companies from the
University of Oxford chemistry department are anticipated to be created in the
future, the size of the Group's stake in such companies and the continued
prestige of the department of chemistry, the directors continue to believe that
the equity rights will be realised.
Acquisition costs
The acquisition costs comprise related costs to secure the equity rights and
other university partnerships. These costs are amortised over the life of the
partnership, or in respect of the University of Oxford partnership, the shorter
of the life of the partnership and the period in which the equity rights are
realised.
The life of the Partnership with the University of Oxford is 15 years. The
lives of the partnerships with the University of Southampton, University of York
and King's College London are all 25 years.
Equity investments
University Amaethon Limited University of Other Total
of Oxford Southampton University
spin outs spin outs spin outs
£'000 £'000 £'000 £'000 £'000
Cost
At 1 January 2003 2,091 - 520 1,775 4,386
Investment in spin out companies 581 1,150 1,282 51 3,064
At 31 December 2003 2,672 1,150 1,802 1,826 7,450
Provision for impairment
At 1 January 2003 - - - 1,537 1,537
Charge for the year - - - 109 109
At 31 December 2003 - - - 1,646 1,646
Net book values
At 31 December 2003 2,672 1,150 1,802 180 5,804
At 31 December 2003 2,091 - 520 238 2,849
University of Oxford Chemistry spin-outs
During the year ended 31 December 2003, there were investments in the University
of Oxford spin out companies with a value of £581,000, being an investment in
ReOx Limited valued at £556,000 and an investment in VASTox Limited of £25,000.
At the year end the directors have undertaken a review of the carrying values of
all these investments and concluded that there is no indication of impairment.
Southampton University spin outs
Under the terms of the partnership with the University of Southampton the Group
also owns a 20% interest in the capital of Southampton Asset Management Limited
(the remaining shares in which are owned by the University of Southampton). The
purpose of Southampton Asset Management Limited is to hold the University of
Southampton's equity interests in spin out companies. The Group's interest in
Southampton Asset Management Limited results in the Group receiving a directly
owned stake in spin out companies equivalent to 20% of the stake to which
Southampton Asset Management Limited is entitled. These equity interests in
spin out companies are acquired by the Group at a price per share equal to par
value and as such do not represent material amounts in the financial statements.
The Group has no participating influence in Southampton Asset Management
Limited.
In addition the Group has committed to invest up to £5 million directly in spin
out companies from the University of Southampton in return for direct equity
interests in these companies. During the year ended 31 December 2003, the Group
made investments in HepCgen Limited, Nanotecture Limited, Southampton
Polypeptides Limited, Stratophase Limited and SynAIRgen Limited under this
agreement with a value of £1,282,000.
At the year end the Directors have undertaken a review of the carrying values of
these investments and concluded that there is no indication of impairment.
Investment in Amaethon Limited
Under the terms of the partnership with the Centre for Novel Agricultural
Products ('CNAP'), a specialist division of the University of York, a
commercialisation company, Amaethon Limited, has been set up which will hold all
the University of York's interest in spin out companies and licenses based on
CNAP's intellectual property. The Group has committed to invest £1.15 million in
Amaethon Limited over a three year period and in return has received a 33%
interest in the equity share capital of this company, with the University owning
the remaining shares. At 31 December 2003 the Group has made payments in respect
of this investment totalling £383,000, with the balance due in two further equal
tranches of £383,000 in 2004 and 2005. £50,000 of each of the remaining tranches
is fully committed while the other £333,000 depends upon Amaethon Limited
achieving certain milestones. The directors consider that these milestones will
be achieved and accordingly have accrued for the total consideration payable.
At the year end the directors have undertaken a review of the carrying value of
this investment and concluded that there is no indication of impairment.
Other University spin outs
Other university spin outs relate to those investments not included within the
original partnerships with the Universities of Oxford, Southampton, York and
King's College London. These investments were originally made by Beeson Gregory
Technology Investments Limited and subsequently transferred to IP2IPO Limited in
July 2001. During the year ended 31 December 2003, there was a further
investment of £51,000 in Novarc Limited.
At the year end the directors have undertaken a review of the carrying values of
these investments and concluded that a further provision of £109,000 is
required.
5 Notes to the consolidated cash flow statement
i) Net cash flow from operating activities
2003 2002
£'000 £'000
Operating loss (1,057) (1,732)
Depreciation of tangible fixed assets 25 23
Amortisation of acquisition costs 20 18
Increase in debtors (123) (30)
Increase in creditors 318 64
Provision against fixed asset investments 109 1,537
Loan waiver - (650)
Net cash outflow from operating activities (708) (770)
ii) Reconciliation of net cash flow to movement in net funds
2003 2002
£'000 £'000
Movement in cash in the year 33,857 1,789
Changes in net funds resulting from cash flows 33,857 1,789
Other non cash items
- Loan waiver - 650
Movement in net funds in the year 33,857 2,439
Opening net funds 4,388 1,949
Closing net funds 38,245 4,388
The non-cash movement in net funds in the year ended 31 December 2002 related to
the waiver of a loan between the Company and Evolution Beeson Gregory Limited.
iii) Analysis of net funds
At 1 January 2003 Cash flow At 31 December 2003
£000 £'000 £'000
Cash at bank and in hand 4,388 33,857 38,245
Net funds 4,388 33,857 38,245
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