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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