Frontier IP Group Plc (LON: FIPP), a specialist in commercialising university intellectual property, has today announced its interim results for the six month period ended 31 December 2018.
KEY POINTS:
The Group enjoyed a very strong first half to the year. Three new spin outs were incorporated, including the first two in Portugal, and four portfolio companies announced collaboration agreements with major industry partners. These agreements represent significant steps towards proving the commercial viability of their technology. Further validation came from the success of portfolio companies in winning public sector and private sector funding support.
The fair value of the portfolio rose by 27 per cent. to £11.5 million at 31 December 2018 (30 June 2018: £9.1 million). Total revenues rose by 83 per cent. to £2.2 million (2017: £1.2 million) and pre-tax profits by 138 per cent. to £1.2 million (2017: £0.5 million). A successful placing raised £2.3 million (net of expenses) for the Group in November 2018.
FINANCIAL HIGHLIGHTS:
· Fair value of the portfolio increased by 27 per cent. to £11,508,000 at 31 December 2018 (30 June 2018: £9,060,000), an increase of 43 per cent. year on year (31 December 2017: £8,020,000)
· Total revenue increased 83 per cent. to £2,176,000 (2017: £1,188,000) – the increase reflecting a higher gain on the revaluation of investments of £1,983,000 (2017: £1,068,000)
· Revenue from services increased 61 per cent. to £193,000 (2017: £120,000)
· Profit before tax increased 138 per cent. to £1,247,000 (2017: £524,000) – the increase reflecting the higher gain on revaluation of investments and accounting for greater administrative costs, which rose to £939,000 (2017: £667,000)
· Basic earnings per share increased by 172 per cent.to 3.18p (2017: 1.17p)
· Net assets per share increased to 38.8p as at 31 December 2018 (30 June 2018: 33.2p; 31 December 2017: 32.0p)
· Cash balances stood at £2,528,000 as at 31 December 2018 (30 June 2018: £1,111,000; 31 December 2017: £1,849,000) following a placing in November 2018 which raised £2,333,000 (net of expenses)
PORFOLIO AND OPERATIONAL HIGHLIGHTS:
The six months to 31 December 2018 saw highly encouraging commercial progress with momentum continuing strongly after the period end.
· Tarsis Technology, Fieldwork Robotics, Molendotech and new University of Plymouth spin-out Amprologix announced collaboration agreements with major industry partners. Further details below
· Full commercial launch of the SirenBW bathing water test kit, based on Molendotech’s IP, by Palintest, a subsidiary of FTSE 100 group Halma
· First spin outs in Portugal, NTPE and Des Solutio, from NOVA University Lisbon – NOVA School of Science and Technology
· Alusid raised £1.34 million to support planning for manufacturing scale up
· Government-backed grants awarded to Pulsiv Solar and The Vaccine Group to accelerate technology development
· Oversubscribed placing for Frontier IP raised £2.33 million (net of expenses) for the Group from existing and new investors
· Former AB Sugar Head of Innovation Matthew White joined as Director of Commercialisation
· Strategic partnership with UK Department for International Trade in Portugal
· Post period end:
o Exscientia signed AI drug discovery collaboration agreement with Celgene Corporation, which included initial payment of US$25 million. Exscientia has also raised US$26 million in a Series B funding round and signed Roche collaboration agreement worth up to CHF 67 million
o The US Defense Advanced Research Project Agency named The Vaccine Group as an integral part of $9.67 million project to combat Ebola, Lassa fever and other deadly viruses. TVG also won Department of Health and Social Care grant as part of Anglo-Chinese project
o UK government funding from Department of Health and Social Care to Amprologix and Innovate UK to Nandi Proteins
o Third Portuguese spin out, Insignals Neurotech, from the Institute for Systems and Computer Engineering, Technology and Science
o Director of Commercialisation Matthew White joined the board as an executive director, as separately announced today
Frontier IP Group Plc Chief Executive Neil Crabb said:
“Our business model is based on proving the commercial value of intellectual property by working closely with universities, academics and industry. Only when we are confident the technology works, can be scaled up, and meets a market need or demand, will we ask investors to make significant commitments to the portfolio companies.
The first half of the year provides further evidence our approach is gaining traction with stakeholders.
Four companies announced collaboration agreements with industrial partners, all of whom are among the leaders in their respective sectors.
Three new spin outs joined our portfolio, including the first two in Portugal, a market where we aim to be the market leader. Palintest, a subsidiary of FTSE 100 Group Halma, has started the commercial roll out of bathing water testing kit SirenBW, based on Molendotech’s IP, while Alusid gained strong support for its £1.34 million fund raising to support planning for manufacturing scale up.
We are mindful of the risks in the Group. The nature of the early and development stage companies in our portfolio means their rate of progress or eventual success cannot always be assured.
However, these are strong results. We have generated momentum on all fronts – new spin outs, industry partnerships, and raising funds from private and public sector sources – during the first half. The momentum has gathered pace into the second half of the year. That’s why, based on trading for the year to date and what we see coming down the line, we anticipate that the outcome for the full financial year, ending 30 June 2019, will be ahead of management expectations.”
INTERIM MANAGEMENT STATEMENT
SUMMARY
Frontier IP made good progress in pursuing growth and value for shareholders by:
· Identifying IP with strong commercial potential to build portfolio – three new spin outs incorporated including first two from Portugal
· Developing industry partnerships to validate technology and scale up: four collaboration agreements announced in the half year
· Supporting fund raising for further development – £1.34 million raised for Alusid, government-backed funding for The Vaccine Group and Pulsiv Solar
· Generating strong financial results: fair value of portfolio increased by 27 per cent. to £11.5 million, total revenues by 83 per cent. to £2.2 million, and pre-tax profits by 138 per cent. to £1.2 million. Cash balances at period end of £2.53 million after oversubscribed placing of £2.33 million (net of expenses)
OPERATIONAL REVIEW
There were positive developments for the Group and its portfolio companies during the half year to December 31, 2018. We continued to build our portfolio, further developed our relationships with university, government and industry partners, and strengthened our team.
Portfolio developments
We added three new spin outs to our portfolio during the period, including the first two in Portugal, and one more from the University of Plymouth. Our other portfolio companies enjoyed solid progress, including several new industry partnerships agreed. Tarsis Technology is collaborating with a world-leading crop protection group, Fieldwork Robotics is developing a soft-fruit harvester with Hall Hunter Partnership, Molendotech is working with G’s Fresh, one of Europe’s biggest fresh produce groups, and Amprologix with industrial biotechnology group Ingenza.
The new spin outs were:
NTPE: Frontier IP stake 31.6 per cent
NTPE, a spin out from Portugal’s NOVA University Lisbon, NOVA School of Science and Technology (“FCT NOVA”), is developing novel technology, called Paper-E, to print electronic circuits, sensors and semiconductors onto any cellulose-based paper. The technology is being developed by a team of over 65 researchers under the leadership of Professors Elvira Fortunato and Rodrigo Martins. Potential applications include paper-based biosensors for diagnostics, smart packaging, and for use in fraud prevention. NTPE was the Group’s first spin out in Portugal.
Des Solutio: Frontier IP stake 25 per cent
Another FCT NOVA spin out, Des Solutio is developing safer and greener alternatives to the chemicals currently used to make beauty, pharmaceutical, personal care and other products. The technology has already attracted interest from several industrial groups. It is being developed by Associate Professor Ana Rita Duarte and Dr Alexandre Paiva.
Amprologix: Frontier IP stake 10 per cent
University of Plymouth spin out Amprologix is developing new classes of antibiotics to combat MRSA and other superbugs. Scale up is already being supported through a partnership with biotechnology and synthetic biology company Ingenza. IBM Watson and the National Physical Laboratory are working with Amprologix to improve antibiotic properties. Post period end, the company won £1.2 million funding from the Department of Health and Social Care to accelerate development of its lead compound, Epidermicin NI01.
Other portfolio developments included:
Exscientia: Frontier IP stake 3.32 per cent
Exscientia, a leader in using artificial intelligence in drug discovery, acquired fellow portfolio company Kinetic, a biophysics specialist, to build its capabilities for tackling novel drug targets to create first-in-class drug candidates. Post period end, the company raised US$26 million in a Series B funding round and announced two AI drug discovery collaboration agreements. The first with Roche is worth up to CHF 67 million. The second with Celgene Corporation included an initial payment of US$25 million and eligibility to receive substantial milestone payments and tiered royalties on net sales of any products resulting from the collaboration.
Molendotech: Frontier IP stake 14.1 per cent
Palintest, a subsidiary of FTSE 100 group Halma, started commercial roll out of SirenBW a rapid water testing kit based on Moldendotech’s novel technology to detect bacteria in water. The University of Plymouth spin out also signed a collaboration agreement to develop water tests for G’s Group, one of Europe’s leading fresh produce companies.
Alusid: Frontier IP stake 35.6 per cent
University of Central Lancashire spin out Alusid uses a patented process to make high-quality tiles and surfaces by recycling industrial waste ceramics and glass otherwise destined for landfill. The company raised £1.34 million through a private funding round to support the planning for manufacturing scale up. It also won the prestigious Jonathan Hindle Prize for outstanding design in 2D materials, awarded by The Furniture Makers’ Company.
Fieldwork Robotics: Frontier IP stake 27.5 per cent
Fieldwork Robotics from the University of Plymouth entered into a collaboration agreement with one of the UK’s biggest soft-fruit growers Hall Hunter Partnership to prototype and field test a raspberry harvesting robot system. The agreement will enable Fieldwork to test and further refine the technology by working in a range of environments.
Pulsiv Solar: Frontier IP stake 18.9 per cent
Pulsiv Solar, which develops novel technology to improve the energy efficiency of photovoltaic cells and power converters, won a £129,929 grant from Innovate UK towards a £288,732 project to complete technological development of its solar micro-inverter. The project is creating a product ready for scale up and commercialisation offering energy efficiency improvements of at least 5 per cent over current market leaders. Other applications being explored for the technology include improving the energy efficiency of power converters used in a huge range of consumer devices, such as televisions, mobile phones and laptops.
Tarsis Technology: Frontier IP stake 18 per cent
University of Cambridge spin out Tarsis Technology entered into a collaboration agreement with one of the world’s leading manufacturers of crop-protection products. The collaboration is researching the use of Tarsis’ metal-organic-framework technology to deliver pesticides and fungicides in a more precise and controlled way. The technology has a wide range of potential applications.
As previously announced Frontier IP agreed to lend up to £150,000 to Tarsis to enable the company to meet its working capital requirements in return for equity options- this is an example of Frontier IP’s efficient capital model in action. As at 31 December 2018 Frontier IP have under this arrangement provided a loan totaling £40,000 to Tarsis.
The Vaccine Group: Frontier IP stake 19.2 per cent
The Vaccine Group’s novel technology has the potential to be used as a base for many different vaccines to combat diseases, such as Ebola and Lassa fever, that can jump from animals to animals or humans. The company won a £50,000 grant from global bacteriology network Bactivac to develop a vaccine to tackle one of the main causes of bovine mastitis, E.coli. Post period end, the company won a £403,000 grant from the Department of Health and Social Care as part of a £1.46 million Anglo-Chinese project to combat S.suis in pigs, a disease which can cause meningitis in humans. After the period end, the company was named as an integral partner in a US$9.67 million US DARPA project to protect the US military forces and homeland from zoonotic diseases.
Further post period end portfolio developments:
Nandi Proteins: Frontier IP stake 20.7 per cent
Nandi Proteins is developing novel ingredients to replace sugar, fat and E-number additives in food. The company won a £180,697 grant from Coeliac UK and Innovate UK, the UK’s innovation agency, as part of a £250,000 project to create new ingredients to improve the taste and texture of gluten-free bread. Nandi is leading the project, in which the other commercial partners are Genius Foods, Agrii, part of Origin Enterprises plc, and AB Mauri, the ingredients subsidiary of FTSE 100 group AB Foods.
Insignals Neurotech: Frontier IP stake 33 per cent
We incorporated our third Portuguese spin out after the period end. Insignals Neurotech is a spin out from the Institute for Systems and Computer Engineering, Technology and Science, with the support of São João University Hospital, part of the University of Porto. The company is developing wireless wearable devices to aid deep brain surgery on patients suffering from Parkinson’s disease and other neurological conditions.
Corporate developments
The Group continued to make significant progress during the first half of the year to provide the basis for future growth and value creation.
We strengthened our team with the appointment of Matthew White as Director of Commercialisation. Matt’s immediate role before joining was Head of Innovation for AB Sugar. He has more than 23 years’ experience in technology, product and service innovation, business development and marketing. He is based in our Cambridge office. Matt has now been appointed to the board as an executive director, further details of which have been announced today.
The Group also built on its growing position in Portugal by signing a partnership agreement with the UK government’s Department for International Trade. The move means the British Embassy in Lisbon is providing strategic support for Frontier IP, including introductions to industry partners. The half year saw our first two Portuguese spin outs join the portfolio.
An oversubscribed placing raised £2.33 million (net of expenses) for the Group, reflecting strong backing the Group enjoyed from existing and new investors.
OUTLOOK
Our business continues to gather pace rapidly. The strong interest we are now seeing in our portfolio companies from a broad range and growing number of industry leaders is a clear indication our business model, with its strategic focus on identifying commercialisable IP and early engagement with commercial partners, is paying off. We are investing in our people and are confident that we are building on a strong base to deliver further progress during the second half of the financial year and beyond.
Neil Crabb
Chief Executive Officer
RESULTS SUMMARY
Financial assets at fair value through profit and loss at 31 December 2018 increased to £11,508,000 (30 June 2018: £9,060,000; 31 December 2017: £8,020,000). Total revenue over the first half increased by 83 per cent. to £2,176,000 (2017: £1,188,000) reflecting the higher investment revaluations (unrealised) of £1,983,000 (2017: £1,068,000) while revenue from services increased to £193,000 (2017: £120,000). The profit before tax increased by 138 per cent. to £1,247,000 (2017: £524,000) reflecting the higher investment revaluations, partially offset by the higher administrative expenses. Administrative expenses increased by 41 per cent. to £939,000 (2017: £667,000) primarily reflecting increased staff numbers, salaries and associated costs. Basic earnings per share was 3.18p (2017: 1.17p).
Cash balances stood at £2,528,000 as at 31 December 2018 (30 June 2018: £1,111,000; 31 December 2017: £1,849,000) following a placing in November 2018 which raised £2,333,000 net of expenses. Net assets per share as at 31 December 2018 were 38.8p (30 June 2018: 33.2p; 31 December 2017: 32.0p).
