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Tern PLC: Unaudited Interim Results for the six months to 30 June 2019

Tern PLC (TERN) 
Tern PLC: Unaudited Interim Results for the six months to 30 June 2019 
 
25-Sep-2019 / 07:00 GMT/BST 
Dissemination of a Regulatory Announcement, transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
25 September 2019 
 
Tern Plc 
 
(AIM: TERN) 
 
Unaudited Interim Results for the six months to 30 June 2019 
 
 Tern Plc ("Tern" or the "Company"), the AIM quoted investment company 
 specialising in the Internet of Things ("IoT") market, is pleased to 
 announce its interim results for the six months to 30 June 2019. 
 
Key Highlights 
 
                                 30 June 2019   30 June       31 
                                                   2018 December 
                                                            2018 
 
                                            GBP 
                                                      GBP 
                                                               GBP 
Net assets                         17,478,283 13,942,75 16,751,7 
                                                      7       73 
Current assets                      2,153,071 2,671,784 2,152,98 
                                                               1 
Total assets                       17,946,668 14,221,70 17,009,2 
                                                      4       20 
Loss for the period                (62 3,340) (221,252) (312,564 
                                                               ) 
Net asset value per share                6.9p      6.2p     7.1p 
 
· The increased loss for the period compared to the six months to June 
2018 was primarily due to a GBP0.1m increase in operating costs and a GBP0.3 
million lower fair value increase. In the six months to 30 June 2019, 
there was no exchange rate revaluation required compared to 2018 where the 
fair value increase was primarily due to exchange rate movements. 
 
· Cost management continues to be a central focus. The increase in 
administrative costs in the period compared to the monthly burn rate in 
the year ended 31 December 2018 was due to additional advisory costs in 
the UK and the USA, along with an increase in Directors' salaries to begin 
to bring them closer to more conventional market levels. 
 
· The Company raised GBP1.5 million during the period, strengthening the 
balance sheet and improving Tern's investment options. As at 30 June 2019, 
Tern had GBP1.4 million cash on the balance sheet. 
 
· Year-on-year increase in turnover of principal portfolio companies1 from 
calendar year 2018 to 2019 is expected to be of the order of 50%. 
 
· Year-on-year increase in employees within principal portfolio 
companies1, a key growth measurement, increased by 9% in the six months to 
June 2019. 
 
· Net asset value per share remained comparable across the period. 
 
Al Sisto, CEO of Tern Plc, said: 
 
 "During the first half of 2019, Tern has actively focused on developing 
 opportunities to expand its portfolio and to increase the fair valuation of 
 its existing portfolio companies. We have also built our portfolio value 
 through some follow-on investment activities, all the while maintaining our 
 focus on adding value to our investment companies through advice, 
 introductions and capital. 
 
 "Our involvement has enabled the technology entrepreneurs in our portfolio 
 to grow their businesses and has provided our investors with a portfolio of 
 exciting early and growth-stage technology companies. Positive progress was 
 also achieved on our marketing objective to position Tern as a leading 
 investor in UK IoT technology companies and we will be doing more to 
 progress this in the next 12 months. 
 
 We are committed to supporting our portfolio and investing in the very best 
 IoT technology companies in the UK in order to grow our NAV per share. We 
are grateful for the ongoing support of our shareholders and look forward to 
 providing updates to the market as we deliver on our strategy." 
 
Note 1: Principal portfolio company growth excludes Seal and Push, in which 
Tern has a <1% holding and minimal influence. 
 
 Enquiries: 
 
Tern Plc                          via Newgate 
 
Albert Sisto/Sarah Payne 
 
Allenby Capital Limited           Tel: 020 3 328 5656 
 
(Nomad and joint broker) 
 
David Worlidge/Alex Brearley 
 
Whitman Howard                    Tel: 020 7659 1234 
 
(Joint broker) 
 
Nick Lovering/Christopher Furness 
 
Newgate Communications            Tel: 020 7382 4730 
 
Elisabeth Cowell/Fiona Norman 
 
 Chief Executive's Statement 
 
 Tern is focused on delivering NAV growth per share by providing its 
 shareholders with investments into an exciting array of early-stage IoT 
 companies, which provide best-in-class solutions for the healthcare and 
 industrial IoT markets. These markets present sizable opportunities for 
 generating returns, as they have a large underlying population of IoT 
 devices and use cases in existence today. For example, the "all in" IoT 
 healthcare market [1] size is projected to reach US$534.3 billion by 2025 
 expanding at a CAGR of 20% between 2019 and 2025, according to a report by 
 Grand View Research, Inc. (March 2019). The global Industrial Internet of 
 Things (IIoT) market is expected to reach a value of US$922.62 billion by 
 2025, according to a Million Insights report (March 2019). 
 
 Our financial priorities continue to be accelerating the progress of our 
portfolio companies' commercial success; value creation; robust realisations 
 and the addition of new investments by: 
 
· Investing in and creating businesses which have market validation and 
competitive advantages; 
 
· Providing hands-on support to achieve value creation and making 
introductions which help our companies achieve scale and a presence in the 
USA; 
 
· Strengthening management and boards where appropriate; 
 
· Syndication of post-seed round investments in our companies, focusing on 
relevant strategic and financial investors, to provide validation, and 
additional growth capital that de-risks the path to commercial success and 
monetisation; and 
 
· Exploring innovative ways to expand the synergistic benefits of our 
portfolio. 
 
 During the six months to 30 June 2019, the fair value per share of our 
 portfolio remained broadly stable at 6.2p (FY18: 6.3p; HY18: 5.1p) which 
 included a 6% increase in the absolute portfolio value. Our operating costs 
 during the period increased compared to the six months to 30 June 2018 by 
    GBP0.1 million to GBP0.7 million (HY18 costs: GBP0.6 million; FY18 costs: GBP1.3 
million). The majority of this increase was due to an increase in Directors' 
 fees and professional fees, alongside one off legal and professional 
 advisory fees. The one-off costs were incurred due to the Company exploring 
 an opportunity to rapidly expand its portfolio through a strategic 
 initiative. This transaction would have added a significant number of 
 companies to the Company's portfolio, increased our NAV and broadened our 
resources to support and manage the larger portfolio. However, after careful 
 due diligence and with the support of our advisers the Board decided not to 
 pursue the opportunity any further. 
 
 Providing a greater opportunity to create and return value to our 
 shareholders is our primary objective and we remain committed to expanding 
 our portfolio to at least twelve companies, leveraging our unique 
 positioning in the IoT space. The timeline for sourcing, structuring and 
executing new investments in market leading UK IoT companies that fit within 
 Tern's investment strategy will sometimes be beyond Tern's direct control. 
As a result, the Board does not now expect to have at least twelve companies 
 within the portfolio by 31 December 2019. However, our deal flow remains 
 strong and this critical goal will be our focus for the remainder of 2019 
 and beyond to fuel the growth of our NAV per share. 
 
During the first six months of 2019 we raised GBP1.5 million to strengthen our 
 financial position for upcoming investment opportunities and to provide 
 additional financing support to our existing portfolio companies to enable 
 their continued growth. During the period we delivered follow-on investment 
  and support amounting to GBP1.4 million. In particular, Wyld Networks, which 
 holds a 90% interest in Wyld Technologies, acquired the assets of Amiho 
 Technology Ltd. As a result of this transaction, we added assets costing 
  only GBP42,910 to the existing business of Wyld Networks and supported the 
  business with additional operating capital of GBP373,292, via a short-term 
 loan. This activity resulted in a new direction for Wyld Networks, which 
 started as flexiOPS, a grant-based business. Wyld Technologies is now 
 focused on the rapidly growing low power IoT mesh connectivity space. 
 
 We, along with Alsop Louie Partners and the Samenuk Family Trust, continued 
 with our convertible loan note support of Device Authority. During the 
 period Tern provided loan note support to Device Authority amounting to 
  GBP622,634 which included a small bridge loan, repaid on receipt of the R&D 
 tax credit. This capital enabled Device Authority to continue its partner 
 and customer development activities, which now includes an expanded list of 
new customers, as it pursues a strategic partner to help leverage its market 
 successes. 
 
 Lastly, the Company provided InVMA with a small convertible loan of GBP50,000 
 and FundamentalVR with a bridge loan advance to a next round of investment 
of GBP325,000. This bridge loan was at favourable terms, with Tern receiving a 
 20% discount upon equity conversion of the bridge at the next round of 
 investment capital into FundamentalVR. 
 
 Year-over-year growth in the aggregate revenue of our principal portfolio 
companies1, a key performance indicator, is forecast to increase by 50% from 
 calendar year 2018 to calendar year 2019 (2017/2018 increase: 58%). In 
 addition, year-over-year employee headcount growth, another important 

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