TIDMTERN
RNS Number : 3780A
Tern PLC
23 September 2022
23 September 2022
Tern Plc
("Tern" or the "Company")
Unaudited Interim Results for the six months to 30 June 2022
Tern Plc (AIM: TERN), the company focused on value creation from
Internet of Things ("IoT") technology businesses, is pleased to
announce its unaudited interim results for the six months to 30
June 2022 (the "Period').
Highlights
-- Progress across the network of companies(1) in the Period:
o Aggregated Monthly Recurring Revenue ("MRR") for the network
of companies in the six months to 30 June 2022 increased by 112%
which reflects encouraging growth in recurring revenue contracts as
the companies further transitioned from configuration work to a
licencing model. MRR is recognised over a longer period than
initial configuration work and therefore can impact recognised
revenue initially. Turnover of the portfolio companies in the six
months to 30 June 2022, declined by 12% compared to the first half
of 2021 which further reflected that change as short-term one-off
revenue (such as configuration work) is being replaced by
longer-term recurring revenue (such as licence fees) spread over
the life of the contract .
o The period-on-period increase in the number of employees
within the portfolio companies, a key growth measurement, was 52%
in the six months to 30 June 2022 (six months ended 30 June 2021:
14%). This was supported by an increase in MRR per employee of 40%,
highlighting that the increase in employee growth was matched by a
higher growth in MRR.
-- GBP0.8 million (six months to 30 June 2021: GBP0.7 million)
was invested by Tern in its existing network of companies during
the Period, supporting their growth and development.
-- Assets under management were GBP30.2 million as at 30 June
2022, which was a marginal decrease from 31 December 2021 (GBP30.6
million). This included fair value increases for FundamentalVR and
Device Authority (exchange rate related) and a fair value decrease
for Wyld Networks. Wyld Networks is traded on an active financial
market and its fair value is determined by the market price on the
reporting date.
-- The reduction in assets under management was also a key
driver of a reduction in net asset value per share from 9.2p at 31
December 2021 to 8.5p at 30 June 2022.
-- During the Period, the Company agreed to participate in a new
venture capital fund, the Sure Valley Ventures UK Software
Technology Fund, with a commitment to invest up to GBP5 million
over the 10-year life of the fund.
-- FundamentalVR raised a total of GBP7 million in a Series B
fund raise from existing investors and a new institutional
investor, with the Company securing a valuation uplift of 35% from
the previous book valuation. This was followed by an additional
GBP5 million tranche of the Series B at the same valuation in early
Q3 2022.
-- Wyld Networks raised approximately SEK 25.2 million
(approximately GBP2.0 million) upon exercise of 98.6% of its
outstanding T01 Warrants. The business has continued to perform
strongly, with further commercial traction. The company also
expanded its strategic industry positioning by entering into
connectivity partnerships with Eutelsat Communications, Senet Inc
and TrakAssure to form the Multimodal IoT Infrastructure
Consortium(TM) ("MMIIC").
-- Talking Medicines completed a GBP1.59 million syndicated
equity fundraise during the Period, in which Tern contributed
GBP0.4 million, primarily to support its planned expansion in the
USA.
-- Device Authority has continued its positive business momentum
following the strategic investment from Venafi, announced on 2
December 2021, with the business being particularly focussed on
growing its MRR through its subscription base and its modularised
licence platform, KeyScaler(R).
-- InVMA is now trading as Konektio and following the GBP2.125
million equity fund raise, announced on 20 December 2021, the
business has continued to see strong demand for AssetMinder(R).
Al Sisto, CEO of Tern Plc, said:
"Despite the current difficult macroeconomic environment, our
optimism around the potential in Tern's investment strategy and our
network of companies remains undimmed and we continue to strongly
believe that shareholder value will accrue from our exciting
network of companies. They have all made strong progress in the
period and a number have made substantial steps forward in pivoting
their business models away from one-off licence fees, to monthly
recurring revenues, as their offerings have gained further market
traction and relevance. Growth in this significant repeat business
is what we believe is leading to increases in the valuations that
they will be able to attract and attracting new investors to
participate in the continued growth of our investee companies.
"As customer interest and market interest continue to expand,
our companies are proving attractive to a broader set of investors,
both those that are existing shareholders in our companies and
potential new ones that approach our network of companies'
management teams. The majority of these investors have
significantly greater financial firepower than Tern. It is
therefore important that we continue to have the resources to
invest in our companies, both financially and through the other
assistance we provide, in order to protect Tern's early position,
for the benefit of our shareholders.
"Our 'more than funding' model has achieved, and is achieving,
results. This includes completion of the first Series B round
achieved by one of our portfolio companies. The Series B funding
round by FundamentalVR, represented the culmination of our change
in funding strategy adopted in 2017. We have an evergreen
open-ended model, investing in seed, late seed, Series A and in
some cases Series B rounds, where we are able to obtain larger
ownership positions by investing at these earlier risk capital
stages. Then, using our hands on approach and smaller follow-on
investments, we help position our portfolio companies for growth
via Series C and beyond investments, which we believe will
ultimately result in exits of much greater value for our
shareholders and their entrepreneurial founder partners.
"The goal of our model, at the point portfolio companies reach
sufficient maturity, is to provide our shareholders with continuous
access to returns as we exit investments and an appropriate time
and ultimately acquire new early positions in further companies.
The proposed acquisition of Pires investments would, in our
opinion, have been a strong and exciting example of alternative and
faster routes to value creation, although given that the conditions
of the recommended all share offer were not satisfied, we are now
focused on other ways to build long term value for Tern
shareholders.
"These are exciting times for Tern's portfolio companies and I
look forward to reporting on further progress in due course."
Online Investor Presentation and Q&A Session
Tern's management and management from certain of Tern's network
of companies will be hosting an online presentation and Q&A
session at 5p.m. BST on Monday 26 September 2022. This session is
open to all existing and prospective shareholders.
Those who wish to attend should register via the following link
where they will be provided with access details:
https://us02web.zoom.us/webinar/register/WN_Q8BHIKzjSpqKDFwyOPxeiA
Participants will have the opportunity to submit questions
during the session, but questions are welcomed in advance and may
be submitted to: tern@investor-focus.co.uk.
Note 1: Our 'network of companies' or 'our companies': Device
Authority Limited, Wyld Networks AB, InVMA Limited (trading as
Konektio), FVRVS Limited (trading as FundamentalVR) and Talking
Medicines Limited, which are companies Tern has interests in and
excludes Push Technology Limited, in which Tern has a <1%
holding and minimal influence.
Enquiries:
Tern Plc via IFC Advisory
Al Sisto (CEO)
Sarah Payne (CFO)
Allenby Capital Limited Tel: 0203 328 5656
(Nominated Adviser and Broker)
David Worlidge / Alex Brearley (Corporate
Finance)
Matt Butlin / Kelly Gardiner (Sales
and Corporate Broking)
IFC Advisory Tel: 0203 934 6630
(Financial PR and IR) tern@investor-focus.co.uk
Tim Metcalfe
Graham Herring
Florence Chandler
Chief Executive's Statement
The first six months of 2022 were a difficult time for capital
markets and venture capital investing as a result of the war in
Ukraine, political instability, rising inflation and macro-economic
headwinds felt across the world. These greater economic
uncertainties and geopolitical risks have negatively impacted the
economic environment across many sectors. Fortunately, the
programmes adopted by our portfolio companies during the Covid
pandemic, specifically Product Led Growth, has enabled them to hone
their go-to market skills to add new clients, grow the
contributions from existing customers and increase the number of
strategic partners critical to market expansion and increasing
valuation metrics.
For example, notwithstanding the current market turbulence,
Talking Medicines successfully completed a GBP1.59 million
syndicated equity fundraise during the Period for its expansion in
the USA, resulting in an uplift in valuation of approximately 62%
on the amount invested by Tern in Talking Medicines, made in
November 2020. Wyld Networks raised approximately SEK 25.2 million
(approximately GBP2.0 million) from the exercise of 98.6% of its
outstanding T01 Warrants, and FundamentalVR raised a total of GBP7
million in a Series B fund raising from existing investors and a
new institutional investor resulting in a valuation uplift of 35%.
This was followed by an additional GBP5 million tranche of the
Series B at the same valuation in early Q3 2022.
These recent independent third-party investments and uplifts in
value recognised across late 2021-early 2022, coupled with the 35%
net asset growth accomplished in 2021, are critical proof points
that our 'more than funding' model has achieved, and is achieving,
results. These results include the completion of the first Series B
round achieved by one of our portfolio companies. This Series B
funding round by FundamentalVR, represented the culmination of our
change in investment strategy adopted in 2017. We have an evergreen
open-ended model, investing in seed, late seed, Series A and in
some cases Series B rounds, where we are able to obtain larger
ownership positions by investing at these earlier risk capital
stages. Then using our hands on approach and smaller follow-on
investments, we help position our portfolio companies for growth
via Series C and beyond, investments which we believe will result
in exits over time of much greater value for our shareholders and
entrepreneurial founder partners.
The goal of our model is to provide our shareholders with
continuous access to increases in our Assets Under Management (AUM)
and the eventual proceeds from returns as we exit investments after
the late Series C round or beyond and acquire a new early position
in new investment opportunities. Therefore, providing an efficient
use of capital with a constant focus on long-term value
appreciation and returns for our shareholders.
During the Period, we saw an opportunity to accelerate this
process via an inorganic step-change in growth for the Company,
which we considered would complement the organic growth from the
portfolio, via the proposed acquisition of Pires Investments Plc.
Following a well-practiced traditional venture capital strategy,
this proposed acquisition was designed to provide a spread of funds
across various different stages of portfolio company development.
This is an important tactic as our current portfolio companies have
either concluded, or should in due course conclude, an A round and
some should be expected to conclude their B round. Key to the
potential value of the transaction was Pires' approximate 20%
holding in the EUR25m SVV1 fund which was fully invested and was
transitioning into its realisation period. The Tern board believed
that the Company's hands-on approach, experience and track record
of success would have been able to accelerate further value
creation and shorten realisation times, resulting in critical cash
inflows to the Company to support growth and shareholder value. The
Board believed our active approach could have accelerated
syndicated third-party validations of the underlying assets and
also add synergistic technology holdings that we perceived were
included within the Pires and SVV1 portfolios.
Unfortunately, the conditions of the recommended all share offer
were not satisfied and the scheme lapsed.
Following the termination of this offer, the Board issued a
strategic update that proposed a continuation of our hybrid model
and a focus on the organic growth generated by our network of
companies. The Board also stated that it was its current intention
not to add any new companies to the Tern network of companies,
other than to meet any commitment the Company may have in relation
to the Sure Valley Ventures UK Software Technology Fund, until it
has received a capital return from an exit of one of its current
investments. This is the path we are pursuing, however, as our
network of companies continue to grow with the help of additional
third-party investors, the ability to realise cash is complicated
by the external syndicate of investors in each of our companies'
desire to achieve maximum value from the growth of customers,
MRR/ARR and market share that continues to progress. None of the
portfolio companies are yet at the traditional point of exit where
value can be maximised.
Environmental, Social and Governance ("ESG")
The Tern Board continues its commitment to conduct its
investment and business activities in line with best practice ESG
principles. During the first half of 2022 we have further succeeded
in developing a culture of awareness throughout our network of
companies and now have appointed leaders at each of our companies,
driving awareness and actions.
We have enhanced our investment criteria to include ESG company
scorecards and review internal policies to ensure they are
inclusive, comprehensive and follow our industries' best
practices.
Lastly, we have upgraded our board assessment process by
utilising a leading software platform to obtain the latest industry
best practice and norms in how we measure our performance. Using
this new tool, we conducted our annual '360 Board Performance
Review', which was completed in August 2022. In addition to using
the new software the review also included additional external input
and commentary from close advisors.
Our Business and Financial Priorities
We continued to use the tools developed during the pandemic with
a particular focus on growing MRR/ARR (Monthly Recurring
Revenue/Annual Recurring Revenue) and new order bookings, where
appropriate, to add to and refine the metrics of the portfolio
companies that we believe drive investment valuation models for
their next funding round and eventual exit.
We have also helped our portfolio companies' expansion into
North America through our network of partners and resources,
including introductions to offshore funding partners to accelerate
their global presence and opportunities. We maintain our goal of
improving their infrastructure, teams and processes to help
position them as global leaders in their business sector.
Our actions are designed to help them accelerate growth,
creating awareness, reduce business risk, increase market value and
enhance new opportunities for them to grow in relevance and size.
This work includes:
-- Opportunities for larger follow-on syndicated Series A and
Series B rounds for our portfolio companies, as measured by
post-money valuation and invested amounts, as they and IoT
(Internet of Things) technology companies as a whole continue to
grow in importance and relevance
-- The ability to secure additional strategic investor partners
from the UK, Europe and the US, while maintaining a position of
influence, which we can drive as a result of our portfolio
companies' market traction, global market success and specific
North America focus
-- Seeking to expand our shareholder base into institutional
holders, with our non-traditional hybrid VC model and evergreen
approach
Outlook
We are optimistic about the second half of 2022, while being
aware of the continuing uncertainty due to economic and
geopolitical effects on the business environment. We believe that
as a result of the current uncertainty and the lessons learned from
the pandemic, governments and enterprises will continue to require
the acceleration of digital transformation of their operations. We
believe that this will be a transformation driven by the types of
IoT technology products and services that are the core focus of our
network of companies, which are now becoming a critical mandate for
success in the New Normal. We are confident that our network of
companies will continue to prove their agility and manage the
challenges in scaling their businesses with the goal of becoming
recognised market leaders.
Al Sisto
Chief Executive Officer
Financial
Highlights
6 months to 6 months to 12 months to
30 June 2022 30 June 2021 31 December
GBP GBP 2021
GBP
Net assets 30,042,449 23,295,920 32,416,549
Current assets 495,675 868,571 2,146,557
Total assets 30,699,907 23,547,031 32,758,604
(Loss)/Profit for
the period (2,414,377) (718,465) 4,578,321
Net asset value per
share 8.5p 7.1p 9.2p
2022 had a positive start, with Talking Medicines completing
their Series A fundraise, Wyld Networks receiving approximately
GBP2 million from the exercise of 98.6% of their T01 warrants and
FundamentalVR completing their Series B fundraise, following late
2021 fundraises already completed by Device Authority and Konektio
. Follow on investment in the Period from Tern into our network of
companies was comparable to the first six months of 2021, with
GBP0.8 million invested during the Period, GBP0.7 million into
existing portfolio companies and GBP0.1 million into a new venture
capital fund, the Sure Valley Ventures UK Software Technology Fund
("SVV"), as the first investment from a five year total commitment
of GBP5 million. Portfolio companies continue to focus on cost
control as the venture market slowed down during the Period.
The Company had an unaudited cash balance of GBP0.3 million as
at 30 June 2022, although following the Period Tern agreed a short
term loan facility of GBP400,000. The loan is either repayable by
31 December 2022, or it can be settled by a call option on 320,455
shares in Wyld Networks. The period-on-period growth in MRR for the
first six months of 2022 was 112% as the mix of revenue continues
to change towards an increased focus on value generative monthly
recurring revenue contracts (MRR). Monthly recurring contracts are
recognised over the period of the contract so have less impact on
revenues in the early months of the contract but are secured over a
much longer period and therefore provide certainty of revenue in
the long term. The value of these longer-term contracts is the
reason MRR is typically used as one of the key variables in
establishing company valuations. This change has also led to the
period-on-period reduction in aggregated turnover of 12% for the
six months of 2022 (six months ended 30 June 2021: growth of 75%),
as short-term one-off revenue is replaced by longer term recurring
revenue spread over the life of the
contract.
The period-on-period increase in employees within our network of
companies(1) , a key growth measurement, was 52% in the six months
to June 2022 (six months ended 30 June 2021: 14%). This drove a 40%
period-on-period increase in MRR per employee. Again, this
indicates that the increase in employee growth was matched by a
higher growth in MRR.
During the six months ended 30 June 2022, the Company continued
to provide ongoing support to its underlying portfolio base. GBP0.4
million was invested into Talking Medicines in its most recent
fundraise, which was reflected in a 62% uplift to the amount
originally invested by the Company and included an investment by a
Boston based life science investor; and GBP0.3 million was invested
in Wyld Networks AB via an exercise of warrants. During the period,
a new investment into the new SVV fund was also made. The profit
share arrangements within the new SVV fund are designed to
encourage the involvement of investors alongside the British
Business Bank, such that the Company can expect to receive a
significantly enhanced share of the total return generated by the
new SVV fund compared to industry standard.
For the six months to 30 June 2022, the Company recorded a loss
of GBP2.4 million, compared to a loss of GBP0.7 million in the six
months to 30 June 2021. The value of the overall portfolio remained
comparable to the year-end position. This consisted of a GBP0.8
million investment into existing portfolio companies and a GBP1.2
million fair value loss. The movement in fair value was due to a
GBP1.2 million increase in FundamentalVR following its successful
Series B fundraise and a GBP1.6 million increase in Device
Authority following a weakening of the pound against the dollar
which led to an increase in the Sterling value of Device Authority
which is valued in US Dollars. These gains were more than offset by
a GBP4 million reduction in the fair value of the Company holding
in Wyld Networks which is based on the market price of the shares
at the market close on 30 June 2022 plus a small fair value
reduction in the new SVV fund due to the initial fees charged
against SVV's net asset value. We remain conservative in our
approach to the carrying value of our other portfolio companies,
with the fair value incorporating valuations validated by third
party investments which reflects best practice.
As we have indicated, cost management continues to be a focus
for the Company. Operating costs rose marginally by GBP0.1 million
compared to the same period in 2021, with small increases across
most categories. Travel, meeting rooms and office costs have begun
to recover to nearer historic levels following the removal of COVID
restrictions, insurance costs have increased and directors' fees
included an RPI increase. Other expenses related primarily to the
transaction costs associated with the offer for Pires Investments
plc. These costs are below projected levels contained in the
offer's scheme of arrangement documentation, as they included
contingency fees which were not incurred when the acquisition did
not proceed.
The net asset value per share of 8.5p as at 30 June 2022 was
above the 7.1p as at 30 June 2021, but below the year end net asset
value per share of 9.2p. This is predominantly due to the material
reduction in value of Wyld Networks AB. The fair value of this
investment is determined by reference to the market price of the
company at the reporting date.
Sarah Payne
Chief Financial Officer
Note 1: Our 'network of companies' or 'our portfolio companies':
Device Authority Limited, Wyld Networks AB, InVMA Limited (trading
as Konektio), FVRVS Limited (trading as FundamentalVR) and Talking
Medicines Limited, which are companies Tern has interests in and
excludes Push Technology Limited, in which Tern has a <1%
holding and minimal influence.
Portfolio Review
Device Authority Limited ("Device Authority")
Valuation of holding: GBP16.3 million
Holding: 53.8%
Sector: Security
Invested Since: September 2014
Device Authority, a global leader in identity and access
management ("IAM") for the IoT, has continued its positive business
momentum following the strategic investment from Venafi, announced
on 2 December 2021. The business continues to be particularly
focussed on growing its customers, key partners and monthly
recurring revenues through its modularised subscription licencing
of their KeyScaler(R) platform.
Particularly strong recent demand has come from the automotive
and industrial sectors, with opportunities in the retail sector and
with the US Government gaining momentum as a result of increasing
regulatory pressures. The executive order from US President Biden
in May 2021 that tasked the National Telecommunications and
Information Administration (NTIA) and the Commerce Department with
defining the minimum elements of a SBOM (Software Bill of
Materials), considered critical to improving transparency and
security in the software supply chain for national infrastructure,
continues to provide commercial opportunities for Device Authority.
The partnership with Crossroads Innovation Group has led to Device
Authority's inclusion in The Virginia Smart Community Testbed, a
project focused on IoT Security Standards to secure critical
infrastructure. This testbed in Stafford County, Virginia, is home
to developing smart technology for the Commonwealth, and is the
first Smart City Testbed involving an IoT platform, fully
integrated with 5G and other new and emerging technologies for
Smart Cities around the country. Led by the Virginia Innovative
Partnership Corporation with funding from the Virginia Smart
Community Testbed and the Department of Homeland Security, this
project has created a showcasing for best-practices and technology
standards related to securing IoT infrastructure at the Edge, while
addressing the known and emerging challenges of securing critical
infrastructure.
To further simplify early customer adoption, Device Authority
has also launched their KSaaS (KeyScaler(R) software as a service)
offering, which is built on Microsoft's Azure Cloud, and will be
available in the Azure Marketplace to provide additional customer
choice in procurement and consumption. KSaaS provides an
infrastructure-free alternative to on-premise installations,
enabling businesses to achieve total device, data and operational
trust without the burden of costly infrastructure or dedicated
resources, with quicker time to production that is highly scalable.
KSaaS enables initial customers in the automotive, healthcare and
retail sectors to more rapidly onboard KeyScaler(R) and scale in a
secure, hosted cloud environment.
During 2022, Device Authority has entered into partnership
agreements with a number of additional key strategic partners,
including Avnet, BSI, Crossroads Innovation Group, Entrust and ST
Microelectronics. The Entrust-Device Authority partnership has
resulted in integrating the KeyScaler(R) IoT IAM platform with
public key infrastructure (PKI) services from Entrust, extending
the existing collaboration for Hardware Security Module (HSM)
services, to provide device trust, data trust and automation at IoT
scale. This enables security operations across device attestation,
onboarding, Machine Identity Lifecycle Management, certificate
signing and cryptographic operations, connecting to FIPs compliant
Entrust PKI and HSM services. It also automates security operations
into any cloud application and platform by utilizing KeyScaler's
pre-built service connectors or flexible integration framework.
This strategic partnership simplifies, automates and enhances IoT
machine identity security for both existing and new customers,
which the two companies will proactively market.
KeyScaler(R) enables full end-to-end security life cycle
management from Edge to Enterprise into IoT cloud applications such
as Microsoft Azure, Avnet IoTConnect, AWS, Ericsson, PTC ThingWorx
and Google, providing IoT deployments with robust device security
combined with scalability to meet the needs of new and legacy
device deployments.
ABI Research has recently released its annual 'Top Technology
Companies' Whitepaper which highlights the market leaders across
the enterprise sectors of augmented reality, 5G telco cloud-native
platforms, supply chain management and logistics and IoT, among
others. This is an independent report, not paid for by the
companies featured, which aims to provide an authoritative view on
the market-leaders, combined with the top innovators and
implementers in each of the perspective category sectors. Device
Authority has been named as the 'Overall Leader' in IoT Device
Identity Lifecycle Management, in addition to a 'Top Innovator and
Implementer' in this category, moving ahead of their significantly
larger competitors from last year's report. The ABI Research report
can be downloaded at:
https://www.deviceauthority.com/wp-content/uploads/2022/08/37-Technology-Companies-Leading-the-Way-in-2022.pdf
.
Complementary to Device Authority's recognition and progress,
multiple investment firms who focus on the cybersecurity sector
have approached Device Authority with a view to initiating a next
round of funding. Their objective is to provide further funding to
build on Device Authority's 2022 progress, and further enhance
their global growth trajectory through increased sales development
of both partner and direct channels and strategic marketing,
particularly in North America.
Device Authority continues to further develop its products and
recently launched a new release of KeyScaler(R) Edge, in addition
to other platform integration and product enhancements.
As at 30 June 2022, the fair value of Tern's shareholding in
Device Authority increased to GBP16.3 million (31 December 2021:
GBP14.7 million), with a GBP1.6 million movement as a result of the
foreign exchange effects on the sterling value of Device Authority
which is valued in US Dollars.
FVRVS Limited ("FundamentalVR")
Valuation of holding: GBP4.8 million
Holding: 20.0% (reducing to 16.58% post-Period)
Sector: Healthcare IoT
Invested Since: May 2018
FundamentalVR is a leading virtual reality and data analysis
technology platform led by surgical training experts and leading
technologists with a mission to revolutionise surgical training by
bringing simulation into the hands of medical professionals around
the world, using low cost and easily accessible technology.
FundamentalVR's software platform takes advantage of readily
available virtual reality software and devices, such as the Meta
owned Oculus Quest and combines it with cutting edge haptics (being
technology based on the sense of touch) to create a simulation
system that can be used on any modern computer set up. Using
computer learning, the software platform works together with haptic
hardware devices to simulate the physical sensation of operating on
human tissue. It also has the capability to provide artificial
intelligence (AI) driven real-time feedback, procedure correction
data and best practice insight. The result is a simulation system
that provides surgeons with a more hands-on experience and aims to
better prepare them for real life situations, resulting in better
patient outcomes.
During the first half of 2022, FundamentalVR raised a total of
GBP7 million in a Series B fund raising from existing investors and
a new institutional investor, with an additional GBP1.2 million of
convertible loan notes being converted. This was followed by an
additional GBP5 million tranche of the Series B at the same
valuation in early Q3 2022.
FundamentalVR continued to receive recognition for their leading
platform, announcing success at numerous awards, including being
recognised as Best Mixed Reality Solution at the XR Awards and
winner of science category at the BOLD awards. And commercial
traction continued, including news of the Versius Virtual Reality
training created in partnership with CMR Surgical.
As at 30 June 2022, the fair value of Tern's shareholding in
FundamentalVR increased to GBP4.8 million (31 December 2021: GBP3.6
million).
Wyld Networks AB ("Wyld Networks" or "Wyld")
Valuation of holding: GBP5.0 million
Holding: 49.2%
Sector: IoT enablement
Invested Since: June 2016
Wyld Networks, quoted on the NASDAQ First North Growth Market in
Stockholm, enables affordable connectivity across the globe in
areas where wireless coverage is unavailable or congested. The
company specialises in providing wireless connectivity between IoT
sensors and low Earth orbit ("LEO") satellites with its Wyld
Connect solution.
In the first half of 2022, Wyld Networks continued its focus on
the development of Wyld Connect (a satellite IoT terminal and
module) and Wyld Fusion (a provisioning and payment platform). In
particular, Wyld completed the hardware development of Wyld
Connect, the world's first Long Range-Frequency Hopping Spread
Spectrum (LR-FHSS) sensor-to-satellite modem, to enable satellites
to connect to devices/sectors across remote areas around the globe.
Wyld is also continuing with the development of Wyld Fusion in
preparation for the commercial launch of Wyld's end-to-end
satellite IoT solution, planned for later this year.
Additional personnel, both technical and commercial, have been
recruited, including a recently appointed sales manager in Brazil
to support the South American region and a global Head of Sales and
Marketing to support all of Wyld's commercial activities.
Wyld Networks has recently started to sign agreements with
customers in new market areas, outside of the previous focus on
energy and agriculture with customers such as Chevron and Bayer, as
well as with system integrators such as Fujitsu and Wezen.
Recently, Wyld has also signed agreements with some of the world's
largest terrestrial LoRaWAN(R) IoT operators including American
Tower and Senet.
Wyld Networks, together with Eutelsat Communications, Senet Inc
and TrakAssure, is a founder member of the Multimodal IoT
Infrastructure Consortium(TM) ("MMIIC"). The consortium was set up
to bring integrated and interoperable terrestrial and satellite
LoRaWAN(R) IoT connectivity to customers across the globe, as
announced by Wyld Networks and Tern on 11 January 2022. Additional
partnerships were recently signed ahead of the commercial launch
include agreements with AgriSound in the UK and Treevia in
Brazil.
Additionally, Wyld Networks joined the LoRa Alliance(R), the
global association of companies backing the open LoRaWAN(R)
standard* for the IoT in November 2021. In December 2021,
LoRaWAN(R) was officially approved as a standard for low power wide
area networking (LPWAN) by the International Telecommunication
Union, the United Nations specialised agency for information and
communication technologies. The LoRa Alliance(R) also provides a
platform for Wyld to showcase its technology to over 500 member
companies.
As at 30 June 2022, the fair value of Tern's shareholding in
Wyld Networks decreased to GBP5.0 million (31 December 2021: GBP8.7
million). Wyld Networks' shares are traded on an active financial
market and the fair value is therefore determined by reference to
the appropriate quoted market price at the reporting date.
*The LoRaWAN(R) specification, developed and maintained by the
LoRa Alliance(R), is a Low Power, Wide Area networking protocol
designed to wirelessly connect battery operated 'things' to the
internet in regional, national or global networks, and targets key
IoT requirements such as bi-directional communication, end-to-end
security, mobility and localisation services.
InVMA Limited (trading as "Konektio")
Valuation of holding: GBP2.2 million
Holding: 36.8%
Sector: IoT enablement
Invested Since: September 2017
Konektio's AssetMinder(R) is a modular, industry 4.0, IoT
(software as a service) SaaS platform, using a wide range of
analytical tools and algorithms to connect up whole factory floors
and processes, as well as managing resources into and out of the
factory. AssetMinder(R) assesses the effectiveness and efficiencies
of entire operations, putting customers in control of their assets
and therefore directly impacting productivity, efficiency and
business outcomes.
AssetMinder(R) captures usage and performance data from smart
sensors, providing advanced insights to unlock data-driven
intelligence that optimises processes, condition monitoring,
machine uptime and profitability across a range of industries
including manufacturing, transportation, utilities, smart
infrastructure, and food processing. AssetMinder's technology is
already deployed across thousands of assets, providing valuable
insights and recommendations to people maintaining and managing
critical devices and infrastructure.
The business has continued to add new customers with strong
demand for its Industrial IoT connected asset software as a service
(SaaS) product, as customers look to connect their assets to
AssetMinder(R).
Konektio also announced the appointment of Dr Ron Black as its
Non-Executive Chairman, following a GBP2.1 million fund-raise for
Konektio in December 2021 and a rebrand from InVMA to Konektio.
As at 30 June 2022, the fair value of Tern's shareholding in
Konektio was GBP2.2 million (31 December 2021: GBP2.2 million).
Talking Medicines Limited ("Talking Medicines")
Valuation of holding: GBP1.8 million
Holding: 23.8%
Sector: Data distribution software
Invested Since: November 2020
Talking Medicines, based in Glasgow, London and New Jersey, is a
patient intelligence company designed specifically to curate the
'Voice of the Patient' as a data service to the healthcare
industry. Through a combination of artificial intelligence and
industry expertise to structure signals from social platforms,
Talking Medicines has developed a next generation data platform,
PatientMetRx(R), to deliver insights on patient experience for
pharmaceutical drug brands. Its cloud-based SaaS service is driven
by artificial intelligence models that use machine learning and
natural language processing real world data collection at a scale
that is transformational versus traditional research.
Talking Medicines welcomed Boston-based life science investor
Mark Bamforth in January 2022, when his family office joined
existing investors to invest in the GBP1.59 million funding round.
This provided Talking Medicines with the funds to support its
expansion, particularly in the United States. Following this
investment, the company has been able to scale its US operation,
hiring an experienced US based Chief Customer Officer to spearhead
the commercial uptake of the PatientMetRx(R) service. A pivot of
selling to healthcare advertising and communication agencies has
successfully accelerated the adoption of the solution in North
America amongst some of the world's largest Advertising Agencies
acting as the outsource partners for pharmaceutical marketing. New
features have been added to PatientMetRx(R) service to anticipate
the needs of this market and to reinforce the proposition of
driving efficiency and effectiveness through the service.
Next up are plans to grow the subscription base in North America
and consolidate the team based there; along with plans to bring in
new product capabilities for segmentation and prediction in the
months ahead, opening further opportunities for growth.
As at 30 June 2022, the fair value of Tern's shareholding in
Talking Medicines increased to GBP1.8 million (31 December 2021:
GBP1.4 million).
Sure Valley Ventures UK Software Technology Fund ("SVV")
Valuation of holding: GBP55,956
Holding: 5.9%
Sector: Technology sourcing - Tern deal creation
Invested since: March 2022
SVV is a new venture capital fund investing in a range of
private UK software companies with a focus on companies in the
immersive technology and metaverse sectors, including augmented and
virtual reality, artificial intelligence, the IoT and security,
which are of importance to Tern and its network of companies.
The principal investor in the New SVV Fund is the British
Business Bank ('BBB'), an investment arm of the UK Government. The
first close of this fund will amount to GBP85 million, with the BBB
investing up to GBP50 million and other investors, including Tern,
investing up to GBP35 million over the 10-year life of the fund .
Tern has made a commitment to invest up to GBP5 million over the
life of the fund, which would equate to a c.5.9% interest in the
fund. Thus far Tern has invested approximately GBP90,000 on the
fund's first close.
The fund offers Tern, and other non-BBB investors, a
significantly enhanced share of total return generated by the fund
compared to industry standards as well as a means of deal curation
and a partnership with a team that has already led a successful
early-stage technology fund based in Ireland.
The first investment is a GBP2 million seed investment round,
with SVV providing a GBP1 million investment in RETìníZE Limited
("RETìníZE"), an award-winning creative-technology company .
As at 30 June 2022, the fair value of Tern's shareholding in SVV
was GBP0.06 million.
Push Technology Limited ("Push Technology")
Valuation of holding: GBP22,652
Holding: <1%
Sector: Data distribution
Invested since: July 2014
For organisations worldwide, Push Technology's software product,
Diffusion, powers the real-time applications and systems critical
to their business expansion, revenue growth, and optimal ongoing
business operations. Diffusion simplifies and speeds development,
deployment, and scaling of customers' systems, providing peace of
mind that data is securely managed and efficiently delivered in
real-time.
As at 30 June 2022, the fair value of Tern's shareholding in
Push Technology was GBP0.02 million (31 December 2021: GBP0.02
million).
Unaudited Income Statement and Statement of Comprehensive
Income
For the six months ended 30 June 2022
6 months 6 months 12 months
to 30 June to 30 June to 31 December
Notes 2022 2021 2021
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
Fee income 20,000 41,950 63,783
Movement in fair value
of investments 7 (1,233,024) 25,688 6,240,095
Loss on disposal - - (199,115)
------------ ------------ ----------------
Total investment
income (1,213,024) 67,638 6,104,763
Administration costs (947,016) (832,991) (1,635,058)
Other expenses (294,104) (21,328) (75,372)
Operating (loss)/profit (2,454,144) (786,681) 4,394,333
Finance income 39,767 68,216 183,988
(Loss)/profit before
tax (2,414,377) (718,465) 4,578,321
Tax - - -
------------ ------------ ----------------
(Loss)/profit and total
comprehensive (loss)/income
for the period (2,414,377) (718,465) 4,578,321
------------ ------------ ----------------
Earnings per share 6
Basic (loss)/earnings
per share (0.69)p (0.22)p 1.35p
Diluted (loss)/earnings
per share (0.69)p (0.22)p 1.33p
Unaudited Statement of Financial Position
As at 30 June 2022
30 June 30 June 31 December
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
Note GBP GBP GBP
Assets
Non-current assets
Investments 7 30,204,232 22,678,460 30,612,047
30,204,232 22,678,460 30,612,047
------------ ------------ ------------
Current assets
Trade and other receivables 205,259 420,785 189,354
Cash and cash equivalents 290,416 447,786 1,957,203
495,675 868,571 2,146,557
Total assets 30,699,907 23,547,031 32,758,604
------------ ------------ ------------
Equity and liabilities
Share capital 8 1,371,970 1,367,635 1,371,970
Share premium 30,546,569 26,740,789 30,546,569
Retained earnings (1,876,090) (4,812,504) 498,010
30,042,449 23,295,920 32,416,549
------------ ------------ ------------
Current liabilities
Trade and other payables 657,458 251,111 342,055
------------
Total liabilities 657,458 251,111 342,055
Total equity and liabilities 30,699,907 23,547,031 32,758,604
------------ ------------ ------------
Unaudited Statement of Changes in Equity
For the six months ended 30 June 2022
Share Share Retained Total
capital premium earnings equity
GBP GBP GBP GBP
Balance at 31 December (4,107,767
2020 1,367,635 26,740,789 ) 24,000,657
------------------------ ---------- ----------- ------------ ------------
Total comprehensive
income - - (718,465) (718,465)
Transactions with
owners
Share based payment
charge - - 13,728 13,728
------------------------ ---------- ----------- ------------ ------------
Balance at 30 June
2021 1,367,635 26,740,789 (4,812,504) 23,295,920
------------------------ ---------- ----------- ------------ ------------
Total comprehensive
income - - 5,296,786 5,296,786
Transactions with
owners
Issue of share capital 4,335 4,031,665 - 4,036,000
Share issue costs - (225,885) - (225,885)
Share based payment
charge - - 13,728 13,728
------------------------ ---------- ----------- ------------ ------------
Balance at 31 December
2021 1,371,970 30,546,569 498,010 32,416,549
------------------------ ---------- ----------- ------------ ------------
Total comprehensive
income - - (2,414,377) (2,414,377)
Transactions with
owners
Share based payment
charge - - 40,277 40,277
------------------------ ---------- ----------- ------------ ------------
Balance at 30 June
2022 1,371,970 30,546,569 (1,876,090) 30,042,449
------------------------ ---------- ----------- ------------ ------------
Unaudited Statement of Cash Flows
For the six months ended 30 June 2022
6 months 6 months 12 months
to 30 June to 30 June to 31 December
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
Note GBP GBP GBP
OPERATING ACTIVITIES
Net cash used in operations 9 (881,510) (898,409) (1,535,722)
Purchase of investments (785,277) (684,971) (2,504,185)
Loan to investee companies - (99,000) -
Interest received - - 56,829
------------ ------------- ----------------
Net cash used in operating
activities (1,666,787) (1,682,380)) (3,983,078)
------------ ------------- ----------------
FINANCING ACTIVITIES
Proceeds on issue of shares - - 4,000,000
Share issue expenses - - (225,885)
Proceeds from exercise of options - - 36,000
------------ ------------- ----------------
Net cash from financing activities - - 3,810,115
------------ ------------- ----------------
(Decrease) in cash and cash
equivalents (1,666,787) (1,682,380) (172,963)
Cash and cash equivalents
at beginning of period 1,957,203 2,130,166 2,130,166
Cash and cash equivalents
at end of period 290,416 447,786 1,957,203
------------ ------------- ----------------
Notes to the Unaudited Interim Statements
For the six months ended 30 June 2022
1. General information
Tern is an investing company specialising in private software
companies, predominantly in the Internet of Things (IoT).
The Company is a public limited company, incorporated in England
and Wales, with its shares traded on AIM, a market of that name
operated by the London Stock Exchange.
The address of Tern's registered office is 27/28 Eastcastle
Street, London W1W 8DH. Items included in the financial statements
of the Company are measured in Pounds Sterling, which is the
Company's presentational and functional currency.
2. Basis of preparation
The interim financial information in this report has been
prepared in accordance with UK-adopted international accounting
standards. The financial statements have been prepared on the basis
of the recognition and measurement principles of the IFRS that were
applicable at 30 June 2022. They do not include all of the
information required for full annual financial statements and
should be read in conjunction with Tern's audited financial
statements for the year ended 31 December 2021. The financial
information for the year ended 31 December 2021 set out in this
interim report does not constitute statutory accounts as defined in
Section 434 of the Companies Act 2006. The Company's statutory
financial statements for the year ended 31 December 2021 have been
filed with the Registrar of Companies and can be found on the
Company's website: www.ternplc.com . The auditor's report on those
financial statements was unqualified and did not contain statements
under Section 498 (2) or Section 498 (3) of the Companies Act 2006.
These interim financial statements have been prepared under the
historical cost convention as adjusted for the valuation of
investments and have been approved for issue by the Board of
Directors.
3. Going concern
The financial statements have been prepared on the going concern
basis.
The Directors have a reasonable expectation that the Company has
adequate resources to continue operating for the foreseeable
future. For this reason, they continue to adopt the going concern
basis in preparing the Company's financial statements.
In the event that additional funding was required, management is
confident that they would be able to obtain additional funds from
various sources. For example, the Company can exit part of its
investment in its held level one investments with the risk that
such transactions are determined by an inherent and undetermined
market risk.
4. Investments
The investment valuation consists of equity investments.
In accordance with IFRS 10, paragraph 4B, investments are
recognised at fair value through profit and loss (FVTPL) in line
with guidance set out in IFRS 9. Changes in foreign exchange rates
impact investments valued in a foreign currency.
5. Critical accounting judgements and key sources of estimation uncertainty
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
rarely equal the related actual results. The key sources of
estimation uncertainty that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below.
ESTIMATES
Fair value of financial instruments
The Company holds unquoted investments of GBP25.2 million that
have been designated as held for trading on initial recognition.
Where practicable the Company determines the fair value of these
financial instruments that are not quoted using the most recent bid
price at which a transaction has been carried out. These techniques
are significantly affected by certain key assumptions, such as
market liquidity. Given the nature of the investments being
early-stage businesses, other valuation methods such as discounted
cash flow analysis to assess estimates of future cash flows and
derive fair value estimates cannot always be substantiated by
comparison with independent markets and, in many cases, may not be
capable of being realised immediately.
JUDGEMENTS
Investments held at FVTPL
The critical judgement is the assessment that the investments
should be consolidated. This assessment was reached following a
review of all the key conditions for an investment entity, as set
out in IFRS 10 and the Company was judged to have met those key
conditions as follows:
-- The Company obtains funds from one or more investors for the
purpose of providing those investor(s) with investment management
services;
-- The Company commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
-- The Company measures and evaluates the performance of
substantially all its investments on a fair value basis.
In coming to this conclusion, the Company also judged that its
investment-related activities do not represent a separate
substantial business activity or a separate substantial source of
income to the investment entity.
6. Earnings/(Loss) per share
Earnings/(Loss) per share is calculated by reference to the
weighted average shares in issue as follows:
6 months 6 months 12 months
to to to
30 June 30 June 31 December
2022 2021 2021
GBP
GBP GBP
(Loss)/profit for the purposes
of basic and fully diluted
loss per share (2,414,377) (718,465) 4,578,321
-------------------------------- ------------ ------------ ------------
Weighted average number
of ordinary shares (see
note below): Number Number Number
For calculation of basic
earnings/(loss) per share 352,014,701 330,338,101 339,559,205
For calculation of fully
diluted earnings/(loss)
per share 352,014,701 330,338,101 342,975,205
(Loss)/Earnings per share
Basic (loss)/earnings per
share (0.69)p (0.22)p 1.35p
Diluted (loss)/earnings
per share (0.69)p (0.22)p 1.33p
In June 2021 and June 2022 the fully diluted earnings per share
is the same as the basic earnings per share as the share options
were underwater which would have an anti-dilutive effect on
earnings per share.
7. Investments
30 June 30 June 31 December
2022 2021 2021
GBP GBP GBP
-------------------------------------- ------------ ----------- ------------
Fair value of investments
brought forward 30,612,047 21,904,791 21,904,791
-------------------------------------- ------------ ----------- ------------
Interest accrued on convertible
loan note 39,932 63,010 162,091
Additions 785,277 684,971 2,504,185
Disposals - - (199,115)
-------------------------------------- ------------ ----------- ------------
Cost of investments carried
forward 31,437,256 22,652,772 24,371,952
Fair value adjustment to investments (1,233,024) 25,688 6,240,095
Fair value of investments
carried forward 30,204,232 22,678,460 30,612,047
-------------------------------------- ------------ ----------- ------------
On 31 May 2022, the convertible loan facility issued to FVRVS
Limited was converted into equity with any movements in fair value
taken to profit or loss for the period.
8. Issued share capital
There have been no share issues in the period.
9. Cash flow from operations
6 months 6 months 12 months
to 30 June to 30 June to 31 Dec
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
(Loss)/profit for the period (2,414,377) (718,465) 4,578,321
Adjustments for items not included
in cash flow:
Movement in fair value of investments 1,233,024 (25,688) (6,240,095)
Loss on disposal - - 199,115
Share-based payment charge 40,277 13,728 27,456
Finance income (39,767) (68,216) (183,988)
Operating cash flows before movements
in working capital (1,180,843) (798,641) (1,619,191)
Adjustments for changes in working
capital:
- (Increase)/decrease in trade and
other receivables (excluding loan
to investee companies) (16,070) (55,278) 37,015
- Increase/(decrease) in trade and
other payables 315,403 (44,490) 46,454
----------- ----------- -----------
Cash used in operations (881,510) (898,409) (1,535,722)
=========== =========== ===========
10. Events after the reporting period
On 11 August 2022, it was announced that FVRVS Limited
successfully closed a second tranche of its Series B fund raising
round, securing an additional GBP5 million in new investment. The
Company did not participate in this tranche of the fund raise.
Tern agreed a short-term loan facility of GBP400,000 in July
2022. The loan bears interest of 10% and is either repayable by 31
December 2022, or it can be settled by a call option on 320,455
shares in Wyld Networks.
11. Availability of interim results
Copies of this report will be available from the Company's
website www.ternplc.com .
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END
IR SEUFUEEESESU
(END) Dow Jones Newswires
September 23, 2022 02:01 ET (06:01 GMT)
Tern (LSE:TERN)
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