THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014 (AS AMENDED) (WHICH FORMS PART OF DOMESTIC UK LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 (AS AMENDED)). UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
22 November 2024
Frontier IP Group plc
("Frontier IP", the "Company" or the "Group")
Final results for the year ended 30 June 2024
Financial highlights
· Fair value of our equity portfolio broadly in line with prior year at £33,203,000 (2023: £32,964,000) following the unrealised gain on investment of £2,468,000 (2023: loss £1,780,000), additions of £68,000 (2023: £745,000) offset by disposals of £2,297,000 (2023 : 5,713,000)
· Disposals in our equity portfolio related to the remaining holding in Exscientia which generated cash of £2,547,000 (2023: £4,926,000) realising a gain of £249,000 in the period under review (2023: loss of £786,000)
· Unrealised gain on the revaluation of investments of £1,282,000 (2023: unrealised loss of £966,000) comprising unrealised gains on equity investments of £2,468,000 (2023: unrealised loss of £1,780,000) and unrealised losses on debt investments of £1,187,000 (2023: unrealised gains of £814,000)
· Cash balances at 30 June 2024 of £2,298,000 (2023: £4,603,000)
· Net assets per share as at 30 June 2024 reduced by 2.6% to 79.7p (30 June 2023: 81.8p)
· Loss before tax of £1,337,000 significantly improved on prior year (2023: loss before tax £4,370,000)
· Basic loss per share of 2.01p (2023: basic loss per share 5.85p)
Corporate highlights
· Completed the exit of Exscientia, generating cash proceeds of £2.55 million from the sale of the outstanding equity stake. In total, the Group sold a total of 1,564,000 Exscientia American Depositary Shares between 10 January 2022 and 29 February 2024 for net proceeds of approximately £14 million. The original cost of these shares was less than £2,000
· Appointed new Chief Financial Officer, Jo Stent, replacing Jim Fish who stood down from the Board of Directors as Chief Financial Officer to take up a new position as Portfolio Finance Director. Jo is a chartered accountant with nearly 30 years' experience in senior roles across a broad range of sectors and geographies. She was most recently CFO at Aim-quoted Argentex Group Plc. Her previous roles include CFO of the European Tour and Ryder Cup Europe, CFO of Vodafone Americas and senior positions at Telus Communications and Deloitte
· Professor Dame Julia King, Baroness Brown of Cambridge, who joined the Frontier IP Board of Directors in October 2021, assumed the role of Chair replacing Andrew Richmond. She was previously the Senior Independent Director on the Board.
· The Group took an equity stake in early-stage business Deakin Bio-Hybrid Materials, which is initially developing sustainable alternatives to ceramic tiles.
· The Group announced it holds a 4.26 per cent stake in DiaGen, a Canadian company focused on AI-driven protein and peptide design for medical applications
Portfolio highlights
· The Group's portfolio has a mix of companies at different stages of maturity and it is now considering the potential for realising value from several companies. There was also strong technical progress across the portfolio. Despite the difficult funding environment, four companies raised money during the period and post the year end. We continued to strengthen management teams.
Highlights included:
o Alusid announced it is exploring options for a potential initial public offering after raising £1.13 million in a funding round including a £500,000 investment from Octopus AIM VCT plc and Octopus AIM VCT 2 plc funds. The company successfully scaled up manufacture of its floor tiles
o CamGraPhIC secured a loan facility for £1.5 million and made good progress in development and scale up of its advanced graphene photonics technology. The company is working with a number of potential customers, including multinationals in the semiconductor and telecommunications sector. It is attracting interest from potential government and financial backers
o Pulsiv strengthened its board with the appointment of serial entrepreneur Dr Mark Gerhard as Chair and Dr Tim Moore as Chief Product Officer. After the year end, the company launched the world's most energy efficient 65W USB-C fast charger reference design, which is now garnering interest from potential customers
o Nandi Proteins won its first licensing agreement with a global food ingredients business for its meat / fat replacer. Post period end, the company announced it had secured investment from Nesta and Scottish Enterprise
o The Vaccine Group appointed an advisory board and entered into a collaboration with The Pirbright Institute to develop vaccines to combat African swine fever. Post period end, Defra granted more than £1 million to a project led by the company to develop a vaccine against Streptococcus suis
o Cambridge Raman Imaging commercially launched its ultra-fast lasers for use in Raman imaging technology. Revenues exceeded expectations. Frontier IP put in place a loan facility to support growth
o Fieldwork Robotics raised more than £2 million through an investment round led by Elbow Beach Capital and appointed David Fulton as Chief Executive Officer.
· Post period end developments included:
o GraphEnergyTech raised £1 million through an investment round led by Aramco Ventures, the corporate venturing arm of Aramco
o Deakin Bio-Hybrid Materials raised £693,000 through an oversubscribed funding round led by Green Angel Ventures
Key extracts from the Annual Report can also be viewed below which include the basis for a qualified audit opinion and material uncertainty relating to going concern.
The financial information in this announcement has been extracted from the Group's Annual Report and Statement of Accounts for the year to 30 June 2024 and is prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with UK adopted international accounting standards. Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS and the financial information set out does not constitute the Company or Group's statutory accounts for the years to 30 June 2024 or 30 June 2023.
ENQUIRIES
| Frontier IP Group Plc Neil Crabb, Chief Executive
Andrew Johnson, Communications & Investor Relations Company website: www.frontierip.co.uk
| T: 020 3968 7815 neil@frontierip.co.uk
M: 07464 546 025 andrew.johnson@frontierip.co.uk
|
| Allenby Capital Limited (Nominated Adviser) Nick Athanas / George Payne
| T: 0203 328 5656 |
| Singer Capital Markets (Broker) Charles Leigh-Pemberton / James Fischer | T: 0207 496 3000
|
ABOUT FRONTIER IP
Frontier IP unites science and commerce by identifying strong intellectual property and accelerating its development through a range of commercialisation services. A critical part of the Group's work is involving relevant industry partners at an early stage of development to ensure technology meets real world demands and needs.
The Group looks to build and grow a portfolio of equity stakes and licence income by taking an active involvement in spin-out companies, including support for fund raising and collaboration with relevant industry partners at an early stage of development.
Chair's Statement
Performance
The year to June 2024 saw companies across the portfolio make tangible commercial and technical progress. Although a pre-tax loss is always a disappointment, the figure has significantly narrowed from last year and represents a resilient performance in what were exceptionally difficult conditions in the private markets. This was further reflected in the rise in the fair value of our equity portfolio and an unrealised gain on the revaluation of investments.
Our Chief Executive, Neil Crabb, addresses the key issues in his statement, and highlights some of the successes that we have seen across the portfolio during the year and which have continued after the year end. These include successful funding rounds for Fieldwork Robotics, Alusid, GraphEnergyTech, and Nandi Proteins; a commercial breakthrough for Nandi, which signed its first licensing agreement with a major global food ingredients group; and Cambridge Raman Imaging launching its ultra-fast fibre lasers into the market resulting in the delivery of stronger than expected sales. CamGraPhIC and Pulsiv also delivered strong progress. Deakin Bio-Hybrid Materials became the latest addition to our portfolio.
This progress is bringing the day when we will be able to exit some of our portfolio companies ever closer. The market conditions mean timings are difficult to predict: as Neil explains, there have been sharp falls in IPOs and M&A activity over the last 18 months to two years.
Our portfolio companies are attracting interest from a wide range of very different organisations, from the corporate venturing arm of Aramco, to the investment division of UK social innovation agency Nesta, from major multinationals to specialist investors, such as Green Angel Ventures. This broad appeal indicates to me that the portfolio is offering solutions to deep-seated problems and is meeting fundamental needs.
This is my first statement as your Chair. I'd like to thank my predecessor Andrew Richmond for his eleven years of service as an independent Non-Executive Director, for nine of which he was Chairman. He played an invaluable role in helping Frontier IP grow and develop to the stage it is at today.
I'd also like to touch on some of the factors that attracted me to Frontier IP, to join the board initially as an independent Non-Executive Director, Senior Independent Director and then Chair.
One of the main things was the business model. I have held senior roles in both academia and in industry. The model solves a lot of the problems I experienced from both sides.
To start with, Frontier IP does not have this huge funnel that looks at hundreds of companies and only a very small number go on to be successful. The Group is extremely selective: we work with inventors, founders and academics from a very early stage, and we help them to understand where what they are doing might be applicable.
Academics do not necessarily have the breadth of experience to understand customers. When I was at Rolls-Royce, some would approach us with really clever ideas and technologies they had developed. But because they didn't understand the constraints of our environment and processes, there were many occasions where either we couldn't use them or where they could have been valuable if they had engaged with us at a much earlier stage in the development.
You need people to work with the academics and inventors to show them how their technology can be used. They are the people with experience of technologies and industry who can understand the potential applications within any given market. A key part of the Frontier model is forming the link between the good ideas and how they might be commercialised, who is going to use them, and how potential customers might need to put constraints on how the idea might be developed. A really important part of how the Frontier model works is the high ratio of employees to portfolio companies - very broadly, the ratio is about one to one, and ensures a tight focus on each company.
Commercialising ideas in this way is not easy, developing the kind of deep technologies Frontier focuses on can take time. There are often tricky problems to overcome, but these mean the barriers to entry for those seeking to follow are much higher.
In terms of personnel, I would very much like to take this opportunity to welcome Jo Stent to the Board of Directors as Chief Financial Officer. She has very wide experience across a range of sectors and geographies. Most recently, she was CFO of Aim quoted Argentex Group plc. Previously she was CFO of the European Tour and Ryder Cup Europe, a former CFO of Vodafone Americas, and previously held senior positions at Telus Communications and Deloitte. She replaced Jim Fish, who stood down from the Board of Directors to take up a new role as Portfolio Finance Director. Her experience is already proving invaluable as the Group moves on to the next stage of its growth.
Our governance
Good governance is vital for long-term sustainable growth, and we strive to achieve the highest standards for a business our size. We currently comply with the Quoted Companies Alliance Corporate Governance Code, introduced in April 2018.
The QCA has introduced a new code, the QCA Code (2023) and we are planning to apply the new code for the next financial year to June 2025.
Results
The results represented a resilient performance in what continue to be challenging markets for technology companies and their investors. The rise in fair value of our equity portfolio to £33,203,000 reflected disposals of £2,297,000 and additions of £68,000. We made an unrealised gain on the revaluation of investments of £1,282,000 against an unrealised loss for the year to June 2023 of £966,000 million.
The disposal of our remaining equity holding in Exscientia, generated more than £2.5 million of cash during the year. Our cash balances at 30 June 2024 were £2,298,000.
Outlook
The markets and economic outlook remain difficult to predict given the high levels of global uncertainty. The Group is undertaking a placing and a retail offer through Primary Bid to ensure the balance sheet is in a strong position to support future growth. I am confident about the prospects for both the group and the portfolio, which is addressing important market needs and demands.
Professor Dame Julia King, Baroness Brown of Cambridge, DBE FREng FRS FMedSci
Chair
21 November 2024
Chief Executive Officer's Statement
This has been a tough year. Higher interest rates and the subsequent tightening of credit conditions has ended an era of cheap money flooding into early-stage companies. Other headwinds include a fraught geopolitical situation globally with knock-on impacts on trade and supply chains. Returns have been subdued and exits harder to complete. The number of deals and the amount of equity funding have fallen sharply. Investors are attending more closely to the fundamentals of profits and cash. Some of the high and optimistic valuations we have seen over the past few years, driven by optimistic expectations of revenue growth, now look unsustainable. The Age of the Unicorn is coming to an end.
Frontier IP and our portfolio companies have not been immune from these pressures. It has taken longer than expected to get funding rounds away. Progress towards exits has been slower than I would have liked. The fact we made a narrow pre-tax loss is clearly a disappointment. But setting aside the market issues, across the portfolio there have been pleasing financial, technical and commercial developments.
When times are hard, the principles on which we base our differentiated and innovative business model come to the fore. We do not focus on volume and high deal flow, burning through cash in the hope one or two companies become big. Instead, our approach is capital efficient and focused on quality, framed by key ideas that help us to identify promising technology. Among these would be their potential to reduce costs and improve efficiency. A byproduct is they tend to be sustainable technologies. Efficiency and sustainability march onwards hand-in-hand. For example, an efficient technology might use less energy: therefore, it would cheaper to run and have a lower carbon footprint.
As a result, several of our companies generated a high level of interest and backing from industrial, government and institutions as well as financial backers. Some have won commercial contracts and are now generating revenues. I am confident that we will be able to conclude successful exits in the coming year or two, market conditions notwithstanding.
In our view, Alusid remains the likeliest candidate to be our next exit. It has already announced an intention to IPO and has appointed a broker to explore options. The company's patented processes and know-how are addressing significant needs in an industry grappling with waste and high-energy, carbon-intensive manufacturing. By making tiles almost entirely from recycled materials and removing a firing stage, and so using less energy, Alusid's tiles are the sustainable choice for customers. And because the tiles can be made on existing industrial-scale manufacturing equipment, there is no need for the company to invest huge sums in its own plant. Sub-contracting is much more capital efficient.
In January, the company raised £1.13 million through an investment round led by the Octopus Aim VCT and Octopus Aim VCT 2 funds. Since then, Alusid has made good technical progress, successfully scaling up its floor tiles to industrial production. These have now been launched by Parkside and are expected to become Alusid's second range sold through Topps Tiles. There is clearly global potential, and I am hopeful there will be some further news on European distribution in the next few months.
At the moment, the next in line are CamGraPhIC and Pulsiv. CamGraPhIC is currently undertaking a Series A funding round, which is expected to receive support from major financial, industrial and government backers. Prototypes of the company's graphene transceivers have shown their speeds to be much faster than equivalent technologies, consume 70 per cent less energy and can operate at a much wider range of temperatures. As silicon semiconductors approach the very limits of what they can theoretically achieve, CamGraPhIC's graphene photonics are emerging as a key to enabling the next generations of data centres, AI, 5G and 6G telecommunications and many other applications. Graphene device production can be incorporated simply into existing fabrication plants. The very strong interest we are seeing from various sectors provides an indication of the company's exit potential.
Pulsiv is also completing a funding round to scale up its ground-breaking power conversion technology. Over the last 18 months, the company has established a global distribution network, It has also launched a 65W USB C charger reference design, which operates at a game-changing 90 per cent efficiency, compared to about 50 per cent for existing technologies. We are hoping to announce initial customers for the product by the end of the year. Further product launches up to a 240W USB C reference design are in the pipeline. Talks are ongoing with industry partners about other applications, and technology to improve the energy output of solar cells is under development. There is huge market potential: the technology uses fewer components, is therefore cheaper to make, much more efficient, cheaper to run, and can be used wherever power is converted. Exit options are under active consideration.
The potential exits of three other companies are also emerging into view. Nandi Proteins achieved a commercial breakthrough during the year, signing an agreement with a global food ingredients group to make its meat and fat replacers. Technical progress was also made on the firm's egg white and methylcellulose replacement products. The products under development are all high-volume applications, global in scope, and mean the company could become a major business.
The Vaccine Group is also eyeing large market opportunities: for animal vaccines, the global market is estimated at c$13 billion worldwide, while the therapeutics market is worth a further $2.6 billion. During the year, the company entered into collaboration with The Pirbright Institute for an African Swine Fever vaccine.
It has also been an outstanding year for Cambridge Raman Imaging. The company started selling its innovative ultra-fast fibre lasers for high-speed coherent Raman spectroscopy at the beginning of 2024. Success, with revenues running ahead of expectations, meant we had to put in place a loan facility for the company to ensure it could meet demand. The ability of the technology to create digital images of cancerous cells and tissue in near real time for fast and accurate AI assisted tumour diagnosis promises to revolutionise histopathology. CRI is also exploring other options for the technology.
Although our focus is on maximising exit opportunities at the moment, we're also on the lookout for new companies. It's important to maintain a balanced mix of maturities across the portfolio to provide the base for future exits. During the year, we took a 32.8 per cent equity stake in Deakin Bio-Hybrid Materials. The company has developed technology to produce advanced materials from organic waste such as chickpea broth, and inorganic powders, like crushed limestone. Initial applications are as sustainable alternatives to ceramic tiles. Because DeakinBio's materials do not need firing or glazing at hot temperatures, they can produce tiles with a carbon footprint 90 per cent less than traditional tiles. And because they are using less energy, they will be cheaper to manufacture.
Although the private markets have been particularly challenging this year, several of our companies, in addition to Alusid, raised money. I was especially pleased with the mix of investors attracted. They spanned industry and government, as well as more traditional funds and individuals. This strongly validates our differentiated business model, and its focus on the patient development of deep technologies with industry-changing potential. Aramco Ventures, the corporate venturing arm of energy giant Aramco, led an investment round into GraphEnergyTech. Nesta Impact Investments, the investment arm of UK social innovation agency Nesta, backed a Nandi funding round with Scottish Enterprise after the end of the year. Also post period end, Defra backed a TVG-led project to develop a vaccine against an emerging zoonotic disease, Streptococcus suis. Other companies raising money included Fieldwork Robotics, which raised £1.5 million from a fundraising led by Elbow Beach, and DeakinBio in a round led by Green Angel Ventures.
A year of change in politics saw a new government take power after our year end. It is still too early to say how it will affect us and our portfolio companies. However, I was encouraged by the decision to extend the Seed Enterprise Investment Scheme and Enterprise Investment Scheme. We use both schemes widely for providing finance to early-stage businesses within our portfolio.
I am also pleased Labour have promised to press ahead with the Mansion House reforms initiated by the previous government. In last year's Annual Report, I wrote that our globally important financial sector and world-leading universities and researchers were failing to connect properly. The links between finance and the sources of innovation are, if not completely broken, severely frayed. These reforms will hopefully start to bring the pots of capital and the pots of ideas together again.
There were also changes to the Frontier IP board during the year. I am sorry to say that our Finance Director Jim Fish decided to take a step back from the hurly burly of executive directorship but delighted that he has decided to stay with the Group as Group Portfolio Finance Director, supporting our portfolio companies. I am also delighted that Jo Stent has joined us as Chief Finance Officer. In another move, Professor Dame Julia King, Baroness Brown of Cambridge, became Group Chair following a stint as Senior Independent Director.
For all the travails we have seen in the markets this year, I am optimistic about the future for Frontier IP and our portfolio companies. They are taking on some of the most fundamental challenges we face today: around climate, energy, food, water and health. Technology has a vital role in helping us to meet those challenges. And in doing so, we are developing technologies that are more efficient and therefore cost effective. All this means our companies are attracting strong industry interest. With a fair wind, the coming year should see a number of exciting developments. I remain confident about our prospects.
Neil Crabb, Chief Executive Officer
21 November 2024
Matters referring to the Financial Statements
Basis for qualified audit opinion
As noted in the external auditor's report, during the prior year ended 30 June 2023, the Directors were unable to provide the external auditor with sufficient support to reliably perform the year end valuations for certain
investments, specifically being those investments described as 'Stage 2' by management in Note 13, which were valued at £1.2 million as at 30 June 2023 (included in the total Equity investments of £32.9 million in the Group's Consolidated Statement of Financial Position and £28.3 million in the Company Statement of Financial Position). As a result, the external auditor was unable to obtain sufficient appropriate audit evidence in respect of the valuation of these investments as at 30 June 2023 and issued a modified audit opinion for the financial statements to 30 June 2023 as a result. Consequently, the external auditor was unable to determine whether any adjustment was necessary to these amounts as at 30 June 2023 or whether there was any consequential effect on the Group and Parent Company's other comprehensive income for the year ended 30 June 2024, therefore issued a modified audit opinion on the current period's financial statements purely as a result of this prior year matter.
Material uncertainty related to going concern
We draw attention to the accounting policies in the financial statements, which indicates that the Group is reliant on additional funding through the issue of ordinary shares which is not guaranteed. After making appropriate enquiries, the Directors consider that it remains appropriate to adopt the going concern basis in preparing the financial statements. In assessing the going concern, the Directors considered the Group's cash requirements over the three years to 30 June 2027. The forecast included operating activities and known near term purchase of investments. It did not include cash from the purchase of unplanned investments. The analysis showed that as at 30 June 2024 the Group had insufficient cash to cover its operating expenditure for the 12 months from the date of signing of these financial statements. However, the Directors intend to realise further cash from the issue of ordinary shares which they reasonably expect will provide the Group with sufficient cash to cover its operating expenditure for this period. The Directors also expect that this share issue will, where appropriate, assist the Group in supporting portfolio companies during this period. The Group and Company are reliant on additional funding through the issue of ordinary shares, which the timing and amount are not guaranteed however the Directors have a reasonable expectation that the funding will be forthcoming. The amount of shares to be issued will be subject to shareholder approval at the AGM set for 19 December 2024 with funds available shortly thereafter. The financial statements do not include the adjustments that would be required should the going concern basis of preparation no longer be appropriate.
Key Performance Indicators and Alternative Performance Measures
The Key Performance Indicators and Alternative Performance Measures for the Group are:
| KPI / APM | Description | 2024 Performance |
| Basic earnings per share (KPI) | Profit attributable to shareholders divided by the weighted average number of shares in issue during the year. | Loss of 2.01p (2023: loss of 5.8p) |
| Net assets per share (KPI) | Value of the Group's assets less the value of its liabilities per share outstanding | 79.7p (2023: 81.8p) |
| Total revenue and other operating income (KPI) | Growth in the aggregate of revenue from services, change in fair value of investments and realised profit on disposal of investments | Positive income of £1,889,000 (2023: negative income of £1,380,000) |
| Profit (KPI) | Profit before tax for the year | Loss of £1,337,000 (2023: loss of £4,370,000) |
| Total initial equity in new portfolio companies (APM) Note 1 | Aggregate percentage equity earned from new portfolio companies during the year | 32.8% (2023:108%) |
Note 1 - The total initial equity in portfolio companies is not an IFRS measure. It is used by Directors to measure the total percentage equity stakes received in all new spin-out companies during the year. It does not reflect holdings in individual spin-outs and does not include equity received through post spin-out investment. For 2024 it is the aggregate percentage holding from one new spin-out company during the year.
The Group did not meet any of the Key Performance Indicators or Alternative Performance Measure during the year, reflective of the prevailing market conditions.
Net assets per share decreased by 3% to 79.7p (2023: 81.8p) reflecting a loss after tax of £1,126,000. The value of the Group's investments increased by 1% to £33,203,000 (2023: £32,964,000) reflecting the net increase to equity investments of £239,000 and net increase in debt investments of £970,000. The net increase in equity investments of £239,000 reflects an unrealised profit on equity investments of £2,469,000, the opening value of the remaining Exscientia shares sold of £2,297,000 and additions of £68,000. The Exscientia shares sold generated proceeds of £2,545,000, representing a profit of £249,000 in the period. The net increase in debt investments of £970,000 reflects additions of £2,157,000 and an unrealised loss on debt investments of £1,187,000. Loss after tax for the Group for the year to 30 June 2024 was £1,126,000 (2023: loss of £3,244,000) after a deferred tax credit of £211,000 (2023: credit of £1,126,000). This result includes a realised gain on disposal of investments of £249,000 (2023: loss of £786,000), an unrealised gain on the revaluation of investments of £1,282,000 (2023: loss of £966,000) and reflects a decrease in services revenue to £358,000(2023: £372,000). Administrative expenses of £3,508,000 (2023: £3,130,000) increased by 12% primarily driven by people costs as a result of the partial implementation of a previously communicated remuneration review for directors applied in the year as well as regular inflation from 1 July 2023.
Operational Review
During the year, we made two changes to our Board of Directors. Professor Dame Julia King, Baroness Brown of Cambridge, DBE, FREng, FRS, FMedSci, became Chair have previously been Senior Independent Director. She replaced Andrew Richmond who stood down at the annual general meeting held in December 2023. Jim Fish stepped down as Chief Financial Officer from the Board of Directors to take up a new role as Portfolio Finance Director. He has been replaced by Jo Stent, who joined the Group as Chief Financial Officer in April 2024.
Companies across the portfolio made good technical and commercial progress. Several achieved important commercial traction and either started to generate or starting to generate revenues for the first time as longer-term industry engagement started to translate into contracts and sales. We continued to strengthen management teams across the portfolio. Fieldwork Robotics appointed a new chief executive and Pulsiv gained a Chair and a Chief Product Officer.
Successful fundraisings across the portfolio included those by Alusid and Fieldwork Robotics during the year, and after the year end, by GraphEnergyTech, Nandi Proteins and Deakin Bio-Hybrid Materials. DeakinBio was the one addition to the portfolio during the year after the Group took an equity stake in the business.
The Group also put in place loan facilities for CamGraphIC and Cambridge Raman Imaging. Frontier IP also completed the exit of Exscientia and disclosed a small equity holding in DiaGen AI, which is developing AI for protein and peptide design for medical applications.
Portfolio Review
Frontier IP strives to develop and maximise value from its portfolio. We do so by taking founding stakes in companies at incorporation and then working in long-term partnerships with shareholders, academic and industry partners.
As part of our sustainability agenda, we have mapped our portfolio companies to relevant United Nations Sustainability Development Goals (UN SDGs). All equity holdings are as at 30 June 2024.
Core portfolio
Alusid: Frontier IP stake: 35.4 per cent
Alusid recycles industrial waste to create beautiful, premium-quality tiles, tabletops and other surfaces.
During the year, the company successfully developed and scaled up for mass manufacture a range of floor tiles. This was an important development because floor tiles comprise about 60 per cent of the total UK market. Called Mas, the range is made from between 95 per cent and 98.5 per cent recycled content, and has one of the lowest carbon footprints of tiles in the market.
The range was launched by Parkside Architectural Tiles, the commercial arm of Topps Tiles plc. The range is expected to be sold in Topp's retail chain in due course, where it will join Alusid's Principle wall tile range.
The company also raised £1.13 million during the year through a funding round backed by Octopus Investments through its Octopus AIM VCT plc and Octopus AIM VCT 2 plc funds. Following the investment, Alusid announced it was exploring options for an initial public offering.
UN Sustainable Development Goal mapping: SDG 9, industry, innovation and infrastructure; SDG 12, responsible consumption and production.
Amprologix: Frontier IP stake: 9.7 per cent
Amprologix was created to commercialise the work of Mathew Upton, Professor of Medical Microbiology at Plymouth's Institute of Translational and Stratified Medicine.
The company continued to make progress with development of its new family of antibiotics based epidermicin, which is derived from bacteria found on human skin, to tackle antimicrobial-resistant MRSA and other superbugs. Ingenza, a leader in industrial biotechnology and synthetic biology, is also a shareholder and is working with Amprologix to develop and scale up the technology.
COVID-19 heightened interest in other threats to human health globally. Antimicrobial Resistance is deemed one of the major risks to global health by the World Health Organisation. After the year end, a political declaration at the United Nations General Assembly set a series of targets to reduce deaths from resistant bacteria.
UN SDG mapping: SDG 3, good health and well-being
AquaInSilico: Frontier IP stake: 29.0 per cent
AquaInSilico is developing sophisticated software tools able to understand and predict how biological and chemical processes unfold in different operating conditions.
These can be used to optimise wastewater treatment across many industries, including municipal wastewater treatment plants, oil groups, brewers, pulp, paper and steel makers, food processing and waste recovery businesses.
The company's digital tools have been implemented by a client in Cape Verde as part of the Phos-Value project to recycle environmentally harmful nutrients as biofertilisers and improve water quality. The project was supported by the United Nations Development Program. AquaInSilico was also selected to take part in a European PathFinder project to develop sustainable products and made good progress in gaining municipal and industrial interest in its UPWATER® technology.
UN SDG mapping: SDG 6, clean water and sanitation, SDG 12, responsible consumption and production, SDG 14, life below water
Cambridge Raman Imaging: Frontier IP stake: 26.8 per cent
Cambridge Raman Imaging (CRI), our first graphene spin out, made significant commercial progress during the year. The company is developing Raman imaging technology based on ultra-fast fibre lasers to create high-quality digital images in near real time.
Initial applications are for use in medicine to detect and monitor cancerous tumours in human tissues and cells. The images can be analysed by artificial intelligence to make diagnosis even faster and more accurate.
During the year, the company launched its ultra-fast fibre lasers for high-speed Raman spectroscopy into the market. They were a success. Revenues trended ahead of expectations, requiring Frontier IP to put in place a working capital facility to support the company's growth. The markets being addressed by CRI are fast growing and high margin.
The company was formed as a result of a partnership between the University of Cambridge and the Politecnico di Milano in Italy.
UN SDG mapping: SDG 3 good health and well-being
CamGraPhIC: Frontier IP stake: 18.71 per cent
CamGraPhIC, a spin out from the University of Cambridge and Italian institute CNIT, develops graphene-based photonics for ultra-high bandwidth, high efficiency transmission of digital data.
The initial focus is on high-performance computing and artificial intelligence, and smart antennas for 5G and 6G telecommunications. These are very significant markets whose future needs cannot be met by current silicon semiconductor technology. Further possible applications are in the defence, automotive, space and avionics sectors.
Prototype graphene transceivers have demonstrated that speeds are much faster than equivalent technologies and use 70 per cent less energy.
Partners include leading multinationals from the telecoms and semiconductor sectors. During the year, CamGraphIC put in place a loan facility worth £1.5 million.
The strong trade interest provides an indication of exit potential.
UN SDG mapping: SDG 9, industry, innovation and infrastructure, SDG 11, sustainable cities and infrastructure
Celerum: Frontier IP stake: 33.8 per cent
Celerum is developing novel artificial intelligence to improve the operational efficiency of logistics and supply chains.
The company's technology uses specialist algorithms based on nature-inspired computing, software and algorithms based on natural processes and behaviours.
During the year, the company announced it had won its first international customer, Grampian Continental, and was developing more sophisticated versions of the software to meet the needs of further customers.
UN SDG mapping: SDG 9, industry, innovation and infrastructure
Deakin Bio-Hybrid Materials: Frontier IP stake: 33.3 per cent
A new addition to the portfolio during the year, Deakin Bio-Hybrid Materials is developing low-energy processes to produce advanced bio-based composites as sustainable alternatives to ceramics.
The company's materials are produced from organic waste such as chickpea broth with widely available waste minerals, such as crushed limestone. Traditional tile manufacturing has a high carbon footprint because of the need to fire and glaze products at a very hot temperature. This means the industry has significant challenges with high energy prices and tighter emission regulations.
DeakinBio's materials do not need to be fired and glazed. They have a carbon footprint 94 per cent lower than conventional tiles and products made from them contain more than 95 per cent recycled content.
After the year end, the company raised £693,000 through an equity funding round led by Green Angel Ventures.
UN Sustainable Development Goal mapping: SDG 9, industry, innovation and infrastructure; SDG 12, responsible consumption and production.
Des Solutio: Frontier IP stake: 25.0 per cent
Des Solutio is developing safer and greener alternatives to the toxic solvents currently used to extract active ingredients by the pharmaceutical, personal care, household goods and food industries.
It does this through the use of Natural Deep Eutectic Solvents. These are combinations of naturally occurring (often plant based) sugars, acids, alcohols and amino acids that can be used as safe solvents. These new green solvents can be used to replace toxic organic solvents used in conventional processing , such as ethanol, employed currently. This means it is contributing to the environmentally sound management of chemicals, and reducing their release to air, water and soil.
The company is developing food preservatives to extend the shelf life of fresh cut products and natural juices, as well as working with industry partners to replace toxic solvents with safer green alternatives.
UN SDG mapping: SDG 9 industry, innovation and infrastructure; SDG 12, responsible consumption and production.
DiaGen AI: Frontier IP stake: 4.15 per cent
Frontier IP announced during the year that it holds an equity stake in DiaGen AI, a Canadian company focused on AI-driven protein and peptide design for medical applications. The Group earned the state in DiaGen, formerly known Proteic Bioscience, in return for advisory services.
DiaGen was founded in 2021 to develop an AI-engine for protein design, drug discovery and diagnostics for health, wellness, longevity and precision medicine. The company entered into a collaboration with fellow portfolio company The Vaccine Group during the year to developing novel and better vaccines for use in animals.
UN SDG mapping: SDG 3 good health and well-being
Elute Intelligence: Frontier IP stake: 40.7 per cent
Elute's software tools are designed to help users intelligently search, compare and analyse complex documents by mimicking the way people read. There are a huge range of potential applications, from searching patents and contracts, to detecting evidence of plagiarism, collusion and copyright infringement. The company's tools help to enhance research, support improved technological capabilities and innovation. Existing customers for the company's CopyCatch plagiarism detection software include UCAS, The Open University, and Slicethepie, the largest paid review site on the internet.
The company is developing an IP analyst tool for investment firms.
UN SDG mapping: SDG 9, industry, innovation and infrastructure
Fieldwork Robotics: Frontier IP stake: 18.2 per cent
Fieldwork Robotics is developing agricultural robots for fruit and vegetable harvesting, with an initial focus on raspberry picking.
During the year, the company raised £1.5 million in seed funding through an investment round led by Elbow Beach Capital. David Fulton joined as Chief Executive Officer, and Christopher Levine as Chief Financial Officer in March. David has more than 30 years' business experience, most recently as co-founder and director of LAB+BONE, a service to protect dogs' identity by using DNA. He previously held executive positions with Expedia, Adform and Microsoft.
After the year end, the company launched Fieldworker 1, an updated harvesting robot, and entered into a collaboration with Costa Group, Australia's leading producer of fresh fruit and vegetables. Fieldwork is seeing strong traction with a growing customer pipeline in Australia, USA and Portugal.
UN SDG mapping: SDG 2, zero hunger; SDG 12 responsible consumption and production
GraphEnergyTech: Frontier IP stake 30.4 per cent
GraphEnergyTech is developing advanced graphene technology for lower-cost and more environmentally-friendly solar cells - and could help save global silver reserves from exhaustion by 2050.
The company is developing high-conductivity graphene inks. Initial applications are for graphene electrodes to replace expensive silver electrodes in solar cells. Silver is the most commonly used material for solar cell electrodes, and the solar industry is currently using 100 million troy ounces a year at a cost of at least $2 billion. Research by the University of New South Wales, Australia, states more than 85 per cent of current silver reserves could be consumed by solar by 2050, with the upper end of its estimates as high as 113 per cent.
GraphEnergyTech's electrodes are 22 per cent cheaper than silver at pilot stage with further reductions expected as the technology is scaled up. Other applications for the technology include batteries, super capacitors, LED lighting and displays.
After the year end, the company raised £1 million through an investment round led by Aramco Ventures, the corporate venturing arm of Aramco, a leading global integrated energy and chemicals company.
Using graphene inks will also reduce the environmentally damaging extraction of metals, including the use of mercury and cyanide.
UN SDG mapping: UN SDG 7 affordable and clean energy, UN SDG 9, industry, innovation and infrastructure,
InSignals Neurotech: Frontier IP stake: 32.9 per cent
InSignals Neurotech continues to make progress with its novel technology to analyse the motor symptoms of Parkinson's disease and other neurological disorders.
The company is developing wireless devices to measure motor symptoms, such as wrist rigidity, in real time to help surgeons and neurologists assess the extent of the disease. Initial prototypes were designed to help identify the best locations to place implants in the brain. However, an improved version can now be used to monitor symptoms more broadly for disease tracking and to understand better how patients are responding to treatment.
A collaboration with the University of Santiago de Compostela in Spain confirmed how object measurements could produce deeper insights into disease progression. A mobile application of the technology is now under development.
The spin out from the Portuguese Institute for Systems and Computer Engineering, Technology and Science ("INESC TEC"), with the support of São João University Hospital, part of the University of Porto.
UN SDG mapping: SDG 3 good health and well-being
Molendotech: Frontier IP stake: 9.5 per cent
Molendotech has developed Bacterisk+, a proprietary screening test for faecal contamination in water. The tests, which can be used on site, cuts testing times from up to two days to under 30 minutes because samples do not need to be sent to a laboratory, enabling environmental agencies and other authorities to assess water quality swiftly. It has been used to screen marine bathing waters, inland recreational waters, irrigation water and food process water.
The company has also developed a test to detect specific bacterial strains, including pathogens, for use in the food industry, animal feeds, veterinary practices and ballast waters.
UN SDG mapping: SDG 6, clean water and sanitation; SDG 12 responsible consumption and production
Nandi Proteins: Frontier IP stake: 19.8 per cent
Nandi Proteins achieved a commercial breakthrough for its innovative food ingredient technology during the year, signing an agreement with a global food ingredients group to make Nandi's meat and fat replacement products.
The meat / fat replacer is one of several high volume applications to reduce fat, additives and gluten in processed foods. Nandi is also developing an egg white replacer for use in alternative meat products, baked goods and meringues and methylcellulose replacer. Both are making good progress.
After the year end, the company secured investment from Nesta Impact Investments, the investment arm of UK social innovation agency Nesta, and Scottish Enterprise, as part of a £500,000 investment made via a convertible loan. The move is part of a wider funding round aimed at raising a total of £1.5 million. Nesta has committed to backing the equity funding round.
UN SDG mapping: SDG 2, end hunger; SDG 12, responsible consumption and production
Plastometrex: Frontier IP stake: 0.4 per cent
The Group holds a small equity stake in Plastometrex, a University of Cambridge spin out focused on developing mechanical testing systems for metal materials. The company has wide range of industry partners, including Airbus, Babcock and Nasa.
SDG 9: build resilient infrastructure, promote sustainable industrialisation and foster innovation
Pulsiv: Frontier IP stake: 17.9 per cent
Pulsiv has developed and patented innovative technology to intelligently manage electrical power wherever it is converted, either from grid to devices, or devices to grid. The company has built out a global distribution network and is now in advanced discussions with potential customers.
During the year, the company strengthened its board the appointments of serial entrepreneur and technology pioneer Dr Mark Gerhard as Chairman and Dr Tim Moore, who was already a non-executive director of Pulsiv, as full-time Chief Product Officer.
Post period end, the company launched a 65 Watt USB-C fast charger reference design. The charger operates at 96 per cent efficiency, believed to be a world best, which means only 4 per cent is lost through heat. The company is targeting applications where space and heat sensitivity are an issue, with initial markets being in-wall plug sockets that incorporate USB-C charging.
Exit options are under active consideration.
UN SDG mapping: SDG 7, affordable and clean energy; SDG 13, climate action
The Vaccine Group: Frontier IP stake: 16.7 per cent
The Vaccine Group enjoyed a year of sustained progress, both technically and in developing relationships and collaborating with leaders in their field. The company is establishing a strong pipeline of innovative vaccines, based on its novel herpesvirus-based platform, for use in livestock, pets and wildlife. There are currently 17 in development. Its vaccines aim to tackle both viral and bacterial pathogens. The total size of the markets addressed by TVG is estimated at more than $15bn.
During the year, the company appointed an advisory board to support scale up and forge deeper industry relationships.
TVG also entered into a Technology Evaluation Agreement with fellow Frontier IP portfolio company DiaGen and entered into a collaboration with The Pirbright Institute. The collaboration aims to develop vaccines to combat African swine fever, a high contagious disease which is deadly to pigs.
Post the year end, a project led by TVG, the University of Plymouth and the University of Cambridge was awarded more than £1 million by the UK Department for Environment, Food & Rural Affairs. The project aims to develop a vaccine against Streptococcus suis, a widespread, harmful and zoonotic pig disease.
UN SDG mapping: SDG 2, end hunger; SDG 3 good health and well-being.
Core Portfolio Summary at 30 June 2024
| Portfolio Company | % Issued Share Capital | About | Source |
| Alusid Limited | 35.4% | Recycled materials | University of Central Lancashire |
| Amprologix Limited | 10.0% | Novel antibiotics to tackle antimicrobial resistance | Universities of Plymouth and Manchester |
| AquaInSilico Lda | 29.0% | Digital tools to optimise wastewater treatment | FCT Nova |
| Cambridge Raman Imaging Limited | 26.8% | Medical imaging using ultra-fast lasers | University of Cambridge and Politecnico di Milano |
| CamGraPhIC Limited | 18.71% | Graphene-based photonics | University of Cambridge and CNIT |
| Celerum Limited | 33.8% | Near real-time automated fleet scheduling | Robert Gordon University |
| Deakin Bio-Hybrid Materials Limited | 33.3% | Sustainable materials made from organic waste and inorganic powders, initially as alternatives to ceramic tiles | Existing Business |
| Des Solutio Lda | 25.0% | Green alternatives to industrial toxic solvents | FCT Nova |
| DiaGen AI Inc | 4.15% | AI-driven protein and peptide design for drug discovery and use in health
| Existing business |
| Elute Intelligence Holdings Limited | 40.7% | Software tools able to intelligently search, compare and analyse unstructured data | Existing business |
| Fieldwork Robotics Limited | 18.2% | Robotic harvesting technology for challenging horticultural applications | University of Plymouth |
| GraphEnergyTech Limited | 30.4% | High conductivity graphene inks | University of Cambridge / École Polytechnique Fédérale de Lausanne |
| Insignals Neurotech Lda | 32.9% | Wearable medical devices supporting deep brain surgery | INESC TEC |
| Molendotech Limited | 9.5% | Rapid detection of water borne bacteria | University of Plymouth |
| Nandi Proteins Limited | 19.8% | Food protein technology | Heriot-Watt University, Edinburgh |
| Plastometrex Limited | 0.4% | Machines and software for high-speed testing of material yields and tensile strength | Existing Business |
| Pulsiv Limited | 17.9% | High efficiency power conversion and solar power generation | University of Plymouth |
| The Vaccine Group Limited | 16.7% | Herpesvirus-based vaccines for the control of bacterial and viral diseases | University of Plymouth |
The Group holds equity stakes in 3 further portfolio companies with nil equity value as at 30 June 2024. As at 30 June 2023, the Group held equity stakes in 6 further portfolio companies with a combined value of £575,000, equivalent to 1.7% of the fair value of the Group's equity investments at 30 June 2023.
Financial Review
Key Highlights
The revaluation of investments of £1,282,000 and a realised gain on the remaining disposal of the Group's holding in Exscientia of £249,000 coupled with services revenue of £358,000 (2023: £372,000) did not offset overall operating costs for the year albeit losses before tax for the year of £1,337,000 were significantly lower versus prior year (2023 loss before tax £4,370,000)
Net assets per share decreased by 3% to 79.7p (2023: 81.8p) reflecting a loss after tax of £1,126,000.
Loss after tax for the Group for the year to 30 June 2024 of £1,126,000 (2023: loss of £3,244,000) was after a deferred tax credit of £211,000 (2023: credit of £1,126,000). This result includes a realised gain on disposal of investments of £249,000 (2023: loss of £786,000), an unrealised gain on the revaluation of investments of £1,282,000 (2023: loss of £966,000) and reflects a decrease in services revenue to £358,000(2023: £372,000). Administrative expenses increased by 12% to £3,508,000 (2022: £3,130,000) primarily due to the partial implementation of an increase in directors' remuneration subsequent to a previously communicated formal external review, as well as regular inflationary increases applied from 1 July 2023.
Revenue and Other Operating Income
Services revenue decreased by 4% to £358,000 (2023: £372,000) while other operating income, comprising realised and unrealised gains on investments, reflected a gain of £1,531,000 (2023: loss of £1,752,000). The realised gain on disposal of investments was £249,000 (2023: loss of £786,000) and the unrealised gain on the revaluation of investments was £1,282,000 (2023: loss of £966,000). During the year, the Group sold the final part of its holding in Exscientia for £2,547,000 realising a gain of £249,000 on the value of the holding at 30 June 2023, 100% of the realised gain for the year to 30 June 2024. The unrealised gain on the revaluation of investments of £1,282,000 comprises gains on equity investments of £2,468,000 and losses on debt investments of £1,187,000.
Administrative Expenses
Administrative expenses increased by 12% to £3,508,000 (2023: £3,130,000). The increase is primarily due to an increase in employee costs of 16% to £2,451,000 (2023 £2,117,000) as a result of the partial implementation of an increase in directors' remuneration subsequent to a previously communicated formal external review, as well as regular inflationary increases applied from 1 July 2023.
Share Based Payments
Share based payments increased 45% to £225,000 (2023: £155,000) reflecting option grants during the year.
Earnings Per Share
Basic loss per share was 2.01p (2023: loss per share of 5.85p). Diluted loss per share was 1.96p (2023: loss per share 5.64p).
Statement of Financial Position
The principal items in the statement of financial position at 30 June 2024 are financial assets at fair value through profit and loss comprising equity investments of £33,203,000 (2023: £32,964,000) and debt investments of £5,595,000 (2023: £4,625,000). The carrying value of these items is determined by the Directors using their judgement when applying the Group's accounting policies. The matters taken into account when assessing the fair value of the portfolio companies are detailed in the accounting policy on investments. The movement during the year in equity and debt investments is detailed in notes 13 and 14 to the financial statement, respectively.
The Group had goodwill of £1,966,000 at 30 June 2024 (2022: £1,966,000). The considerations taken into account by the Directors when reviewing the carrying value of goodwill are detailed in Note 10 to the financial statements.
The Group had net current assets at 30 June 2024 of £3,994,000(2023: £6,181,000) reflecting primarily the decrease in cash to £2,298,000 (2023 : £4,603,000) The current assets at 30 June 2024 include trade receivables of £940,000 (2023 : £604,000) which are more than 90 days overdue. The portfolio company debtors are in the process of raising funds and the directors are confident that the amounts due to the company will be paid.
Net assets per share
Net assets of the Group decreased to £44,773,000 at 30 June 2024 (30 June 2023: £45,538,000) resulting in net assets per share of 79.7p (30 June 2023: 81.8p).
Cash
The Group's cash balances decreased during the year by £2,305,000 to £2,298,000 at 30 June 2024. Operating activities consumed £ 2,811,000 (2023: £3,248,000). Investing activities generated a total of £370,000 (2023 : £3,385,000). In the main this reflects proceeds on disposal of the remainder of our holding in Exscientia of £2,547,000 (2023: £4,926,000) and the purchase of equity and debt investments of £2,225,000(2023: £1,576,000).
Principal Risks and Challenges affecting the Group
The specific financial risks of price risk, interest rate risk, credit risk and liquidity risk are discussed in note 1 to the financial statements. The principal broader risks - financial, operational, cash flow and personnel - are considered below.
The key financial risk in our business model is the inability to realise sufficient income through the sale of our holdings in portfolio companies to cover operating costs and investment capital The other principal financial risk of the business is a fall in the value of the Group's portfolio. With regards to the value of the portfolio itself, the fair value of each portfolio company represents the best estimate at a point in time and may be impaired if the business does not perform as well as expected, directly impacting the Group's value and profitability. This risk is mitigated as the number of companies in the portfolio increases. The Group continues to pursue its aim of actively seeking realisation opportunities within its portfolio to reduce the requirement for additional capital raising.
The principal operational risk of the business is management's ability to continue to identify spin out companies from its formal and informal university relationships, to increase the revenue streams that will generate cash in the short term and to achieve realisations from the portfolio.
Early-stage companies are particularly sensitive to downturns in the economic environment. There are currently several areas of concern that could affect the UK and wider global markets and economy. Global risks include the continuing war in Ukraine and emerging conflict and instability in the middle east. The impact of both, particularly the dangers of escalation, on geopolitics, economically and on markets, are uncertain and difficult to predict. Inflation and interest rates are rising. Longer-term risks include uncertainties in the US, where economic growth continues to be slow and around next year's presidential elections, and in China, which is facing demographic challenges and pressures in its property sector.
Any economic downturn would mean considerable uncertainty in capital markets, resulting in a lower level of funding activity for such companies and a less favourable exit environment. The impact of this may be to constrain the growth and value of the Group's portfolio and to reduce the potential for revenue from advisory work. The Group seeks to mitigate these risks by maintaining a strong balance sheet, relationships with co-investors, industry partners and financial institutions, as well as controlling the cash burn rate in portfolio companies.
Changes to the basis on which IP is licensed in the Higher Education sector might lead to reduced opportunity or a need to vary the business model. Any uncertainty in the sector may have an impact on the operation of the Group's commercialisation partnerships in terms of lower levels of intellectual property generation and therefore commercialisation activity. The Group seeks to mitigate these risks by continuing to seek new sources of IP from a wide range of institutions both within and outside of the UK.
The Group is dependent on its executive team for its success and there can be no assurance that it will be able to retain the services of key personnel. This risk is mitigated by the Group through recruiting additional skilled personnel and ensuring that the Group's reward and incentive framework aids our ability to recruit and retain key personnel. We expanded our team during the year and have partially implemented findings from an externally commissioned review of our remuneration framework.
After making appropriate enquiries, the Directors consider that it remains appropriate to adopt the going concern basis in preparing the financial statements. In assessing the going concern, the Directors considered the Group's cash requirements over the three years to 30 June 2027. The forecast included operating activities and known near term purchase of investments. It did not include cash from the purchase of unplanned investments. The analysis showed that as at 30 June 2024 the Group had insufficient cash to cover its operating expenditure for the 12 months from the date of signing of these financial statements. However, the Directors intend to realise further cash from the issue of ordinary shares which they reasonably expect will provide the Group with sufficient cash to cover its operating expenditure for this period. The Directors also expect that this share issue will, where appropriate, assist the Group in supporting portfolio companies during this period. The Group and Company are reliant on additional funding through the issue of ordinary shares, which the timing and amount are not guaranteed however the Directors have a reasonable expectation that the funding will be forthcoming. The amount of shares to be issued will be subject to shareholder approval at the AGM set for 19 December 2024 with funds available shortly thereafter.
By order of the Board
Neil Crabb
Director
21 November 2024
Remuneration
Review
The Group reviewed its remuneration policy during FY 2022, to ensure that the policy continued to reinforce long-term value creation by enhancing the Group's ability to attract and retain the best people. The Group has implemented most of the key findings of the review.
Salary
A salary increase of 3% was awarded to all personnel in July 2023 to ease cost of living pressures.
In relation to Directors' pay, the 2022 Remuneration Review recommended Executive director salaries be raised to market median over two years. The year-two increase in Directors' full-time equivalent salaries was not implemented during the year. The Committee is expecting to implement this recommendation in FY25 which would be disclosed in the relevant directors' remuneration report.
Annual Bonus
Our business model means that the availability of cash to pay bonuses will be dependent on cash being raised through asset realisations. As the bonus opportunity in any financial year is dependent on this activity, bonuses will only be paid where the Group determines there is a sufficient surplus to the medium-term operating cash requirement.
Following review, the Remuneration Committee concluded that no bonuses should be paid, consequently no bonus payments were made during the period.
Directors' remuneration
An analysis of remuneration by director is given in Note 6 of these financial statements.
Contracts of service
Neil Crabb's, Jacqueline McKay's, Jo Stent's and Matthew White's service agreements are subject to a six-month notice period.
Share options
The Company currently has three share option schemes.
The Frontier IP Group plc Employee Share Option Scheme 2011, as adopted by the Board of Directors of the Company on 30 November 2012 and amended by the Board of Directors of the Company on 26 March 2018, was able to grant both options which are Enterprise Management Incentive (EMI) approved. This scheme remains in place, but no new options will be granted as the Group has ceased to be a qualifying company for EMI purposes.
Two further schemes are in place: the Frontier IP Group PLC Company Share Option Plan 2021 ("CSOP") and the Frontier IP Group PLC Unapproved Share Option Plan 2021, as amended by Board of Directors Resolution on 7 March 2023 ("LTIP").
During the year, a total of 666,838 grants were made under the terms of the Company's LTIP, structured as grants of nominal cost options, at a price of 10 pence per share.
A total of 169,181 Options were granted to Group non-director employees under the CSOP with an exercise price of 44.5 pence per share, being the closing mid-market price of an existing ordinary share on 1 November 2023, the business day prior to the grant date.
Details of share options held by Directors who were in office at 30 June 2024 are set out below:
The market price of the Company's shares at 30 June 2024 was 36.8p. The range of prices during the year was 32.5p to 74.0p.
Directors' exercise of share options before expiry
Directors' interests in shares
The Directors in office at 30 June 2024 had the following interests in the ordinary shares of 10p each in the Company at the year end.
| | 2024 | 2023 |
| | Number | Number |
| |
| |
| Neil Crabb | 3,573,713 | 3,445,538 |
| Jacqueline McKay | 262,855 | 208,637 |
| |
| |
All the above interests are beneficial.
Professor Dame Julia King, Baroness Brown of Cambridge, DBE FREng FRS FMedSci
Chair of the Remuneration Committee
21 November 2024
Audit Committee Report
Key Responsibilities
The Audit Committee's terms of reference are available on the Group's website. The Committee is required, amongst other things, to:
· monitor the integrity of the financial statements of the Group, reviewing significant financial reporting issues and the judgements they contain;
· review and challenge where necessary the accounting policies used, the application of accounting standards and the clarity of disclosure in the financial statements;
· keep under review the effectiveness of the Group's internal controls and risk management systems; and
· oversee the relationship with the external auditor, reviewing their performance and advising the Board on their appointment and remuneration.
Committee Governance
At 30 June 2024 the Audit Committee comprised the three non-executive directors, chaired by David Holdbrook. It meets a minimum of two times per year with the external auditors present. In addition, executive directors may be asked to attend.
Activities of the Audit Committee during the year
The Committee met on two occasions during the year under review and up to the date of this Annual Report with all members present and the external auditors in attendance. The main areas covered by the Committee are outlined below:
Internal controls and risk management
The Board has overall responsibility for internal controls and risk management. As the Board's three non-executive directors were also the Committee members during the year, the Group's risk analysis and controls policy was reviewed and updated by the Board. Further details of business risks identified can be found in Key Risks and Challenges Affecting the Group. The risk management process is continually being developed and improved.
Significant estimates and judgements
The focus at the Committee meetings was on the significant estimates, assumptions and judgements used in the financial statements in arriving at the value of investments, reviewing goodwill for impairment and assessing the recoverability of amounts owed to the Group by portfolio companies. The Committee was satisfied that such estimates, assumptions and judgements used were reasonable and appropriate. Details of critical accounting estimates and assumptions and of critical accounting judgements can be found in Note 2 to the Financial Statements.
External audit
The external auditor reports to the Committee on actions taken to comply with professional and regulatory requirements and is required to rotate the lead audit partner every five years. BDO LLP were first appointed as external auditor in FY19 following their merger with Moore Stephens LLP who were the external auditor in place since FY15 following their merger with Chantrey Vellacott DFK LLP who were first appointed in FY08. Timothy West was appointed lead partner in FY17. Chris Meyrick was appointed lead partner in FY22. The Committee has confirmed it is satisfied with the independence, objectivity and effectiveness of BDO LLP and has recommended to the Board that the auditors be reappointed, and there will be a resolution to this effect at the forthcoming Annual General Meeting. In addition to their statutory duties, BDO LLP are also engaged to provide non-audit services where it is felt their knowledge of the business best places them to provide those services, such as review of the interim results, and where these non-audit services are permitted under the Financial Reporting Council's ethical guidelines.
Basis for qualified audit opinion
As noted in the external auditor's report , during the prior year ended 30 June 2023, the Directors were unable to provide the external auditor with sufficient support to reliably perform the year end valuations for certain investments, specifically being those investments described as 'Stage 2' by management in Note 13, which were valued at £1.2 million as at 30 June 2023 (included in the total Equity investments of £32.9 million in the Group's Consolidated Statement of Financial Position and £28.3 million in the Company Statement of Financial Position). As a result, the external auditor was unable to obtain sufficient appropriate audit evidence in respect of the valuation of these investments as at 30 June 2023 and issued a modified audit opinion for the financial statements to 30 June 2023 as a result. Consequently, the external auditor was unable to determine whether any adjustment was necessary to these amounts as at 30 June 2023 or whether there was any consequential effect on the Group and Parent Company's other comprehensive income for the year ended 30 June 2024, therefore issued a modified audit opinion on the current period's financial statements purely as a result of this prior year matter.
David Holbrook
Chair of the Audit Committee
21 November 2024
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2024
|
|
| 2024 |
| 2023 |
|
| Notes | £'000 |
| £'000 |
| Revenue | | | | |
| Revenue from services
Other operating income Unrealised (loss)/profit on the revaluation of investments | 3
13,14 | 358
1,282 |
| 372
(966) |
| Realised (loss)/profit on disposal of investments
| | 249 |
| (786) |
| | |
|
| |
|
| | 1,889 | | (1,380) |
| | |
|
| |
| Administrative expenses Share based payments Interest income on debt investments | 5 | (3,508) (225) 409 |
| (3,130) (155) 232 |
| Other income | | 36 |
| 13 |
| | |
|
| |
| (Loss)/profit from operations | | (1,399) | | (4,420) |
|
| |
|
| |
| Interest income on short term deposits | | 62 | | 50 |
| | |
| | |
| (Loss)/profit from operations and before tax | | (1,337) | | (4,370) |
| | |
| | |
| Taxation | 7 | 211 | | 1,126 |
| | |
| | |
| (Loss)/profit and total comprehensive (expense)/income attributable to the equity holders of the Company | |
(1,126) | |
(3,244)
|
|
| |
| |
|
| (Loss)/profit per share attributable to the equity holders of the Company: |
|
|
| |
| Basic (loss) / earnings per share | | (2,01)p | | (5.85)p |
| Diluted (loss) / earnings per share | | (1.96)p | | (5.64)p |
All of the Group's activities are classed as continuing.
There is no other comprehensive income in the year (2023: nil).
Consolidated Statement of Financial Position
At 30 June 2024
|
|
| 2024 |
| 2023 |
|
| Notes | £'000 |
| £'000 |
| Assets | | | | |
| Non-current assets | | | | |
| Tangible fixed assets | 9 | 15 | | 13 |
| Goodwill | 10 | 1,966 | | 1,966 |
| Equity investments Debt investments | 13 14 | 33,203 5,595 | | 32,964 4,625 |
| | | 40,779 | | 39,568 |
| Current assets | |
| | |
| Trade receivables and other current assets | 15 | 1,629 | | 1,026 |
| Advances | 16 | 382 | | 793 |
| Cash and cash equivalents | | 2,298 | | 4,603 |
| | | 4,309 | | 6,422 |
| Total assets | | 45,088 | | 45,990 |
|
| |
| | |
| Liabilities | |
| | |
| Non-current liabilities | |
| | |
| Deferred taxation | 7 | - | | (211) |
|
| | - | | (211) |
| Current liabilities | |
| | |
| Trade and other payables | 17 | (315) | | (241) |
|
| | (315) | | (241) |
| Total liabilities | | (315) | | (452) |
|
| |
| | |
|
Net assets | |
44,773 | |
45,538 |
|
| |
| | |
| Equity | |
| | |
| Called up share capital | 18 | 5,617 | | 5,566 |
| Share premium account | 18 | 14,791 | | 14,627 |
| Reverse acquisition reserve | 19 | (1,667) | | (1,667) |
| Share based payment reserve | 19 | 1,437 | | 1,291 |
| Retained earnings | 19 | 24,595 | | 25,721 |
|
Total equity | |
44,773 | |
45,538 |
Company Statement of Financial Position
At 30 June 2024
| | Notes | 2024 |
| 2023 |
| | | £'000 |
| £'000 |
| Assets | | | | |
| Non-current assets | | | | |
| Investment in subsidiaries | 12 | 2,412 |
| 2,383 |
| Equity investments | 13 | 31,108 |
| 28,259 |
| Debt investments | 14 | 4,351 |
| 3,557 |
| Amounts receivable from group undertakings | 15 | 400 |
| 357 |
| Deferred taxation | 7 | - |
| 330 |
| | | 38,271 |
| 34,886 |
| Current assets | |
|
| |
| Trade receivables and other current assets | 15 | 929 |
| 582 |
| Advances | | 287 |
| 785 |
| Cash and cash equivalents | | 2,290 |
| 3,224 |
| | | 3,506 |
| 4,591 |
| Total assets | | 41,777 |
| 39,477 |
|
| |
|
| |
| Liabilities | |
|
| |
| Non-current liabilities | |
|
| |
| Amounts payable to group undertakings | 17 | (6,399) |
| (3,366) |
| | | (6,399) |
| (3,366) |
| | |
|
| |
| Current liabilities | |
|
| |
| Trade and other payables | 17 | (161) |
| (160) |
|
| | (161) |
| (160) |
| Total liabilities | | (6,560 ) |
| (3,526) |
|
| |
|
| |
|
| |
|
| |
| Net assets | | 35,217 |
| 35,951 |
|
| |
|
| |
| Equity attributable to equity holders of the Company | |
|
| |
| Called up share capital | 18 | 5,617 |
| 5,566 |
| Share premium account | 18 | 14,791 |
| 14,627 |
| Share-based payment reserve | 19 | 1,437 |
| 1,291 |
| Retained earnings | 19 | 13,372 |
| 14,467 |
| | |
|
| |
| Total equity | | 35,217 |
| 35,951 |
The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not present the Company statement of comprehensive income. The total loss of the Company for the year was £1,095,000 (2023: loss of £1,537,000).
The financial statements on pages 65 to 95 were approved by the Board of Directors and authorised for issue on 21 November 2024 and were signed on its behalf by:
Jo Stent
Chief Financial Officer
Registered number: 06262177
Consolidated and Company Statements of Changes in Equity
For the year ended 30 June 2024
Group
|
|
Share capital |
Share premium account |
Reverse acquisition reserve | Share- based payment reserve |
Retained earnings | Total equity attributable to equity holders of the Company |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| |
|
|
|
|
|
|
| At 1 July 2022
| 5,501 | 14,576 | (1,667) | 1,324 | 28,965 | 48,699 |
| Issue of shares | 65 | 51 | - | (18) | - | 98 |
| Share-based payments | | | - | (15) | | (15) |
| Profit/total comprehensive income for the year |
- |
- |
- |
- |
(3,244) |
(3,244) |
| | | | | | | |
| At 30 June 2023 | 5,566 | 14,627 | (1,667) | 1,291 | 25,721 | 45,538 |
| | | | | | | |
| Issue of shares | 51 | 164 | - | (79) | - | 136 |
| Share-based payments | - | - | - | 225 | - | 225 |
| (Loss)/total comprehensive expense for the year |
- |
- |
- |
- |
(1,126) |
(1,126) |
| | | | | | | |
| At 30 June 2024 | 5,617 | 14,791 | (1,667) | 1,437 | 24,595 | 44,773 |
Company
|
|
Share capital |
Share premium account | Share- based payment reserve |
Retained earnings | Total equity attributable to equity holders of the Company |
| | £'000 | £'000 | £'000 | £'000 | £'000 |
| | | | | | |
| At 1 July 2022 | 5,501 | 14,576 | 1,324 | 16,004 | 37,405 |
| | | | | | |
| Issue of shares | 65 | 51 | (18) | - | 98 |
| Share-based payments | - | - | (15) | - | (15) |
| Profit/total comprehensive expense for the year |
- |
- |
- |
(1,537) |
(1,537) |
| At 30 June 2023 | 5,566 | 14,627 | 1,291 | 14,467 | 35,951 |
| | | | | | |
| Issue of shares | 51 | 164 | (79) | - | 136 |
| Share-based payments | - | - | 225 | - | 225 |
| (Loss)/total comprehensive expense for the year | - | - | - | (1,095) | (1,095) |
| At 30 June 2024 | 5,617 | 14,791 | 1,437 | 13,372 | 35,217 |
Consolidated and Company Statements of Cash Flows
For the year ended 30 June 2024
| |
| Group | Group | Company | Company |
| |
| 2024 | 2023 | 2024 | 2023 |
| | Notes | £'000 | £'000 | £'000 | £'000 |
|
| |
|
|
|
|
| Cash flows from operating activities | 22 | (2,811) | (3,248) | (2,058) | (2,704) |
| | |
| |
| |
| Cash flows from investing activities | |
| |
| |
| Purchase of tangible fixed assets | 9 | (14) | (16) | - | - |
| Purchase of equity investments | 13 | (68) | (691) | (68) | (691) |
| Disposal of equity investments | | 2,547 | 4,926 | - | - |
| Purchase of debt investments | 14 | (2,157) | (884) | (1,987) | (575) |
| Net amounts receivable from group undertakings | | - | - | 2,988 | 3,103 |
| Interest income | | 62 | 50 | 55 | 53 |
|
Net cash from investing activities | |
370 |
3,385 |
988 |
1,890 |
|
| |
| |
| |
| Cash flows from financing activities | |
| |
| |
| Proceeds from issue of equity shares | | 136 | 98 | 136 | 98 |
| Costs of share issue | | - | - | - | - |
|
Net cash generated from financing activities | |
136 |
98 |
136 |
98 |
| | |
| |
| |
|
Net increase/(decrease) in cash and cash equivalents | |
(2,305) |
235 |
(934) |
(716) |
| | |
| |
| |
| Cash and cash equivalents at beginning of year | | 4,603 | 4,368 | 3,224 | 3,940 |
| | |
| |
| |
|
Cash and cash equivalents at end of year | |
2,298 |
4,603 |
2,290 |
3,224 |
Accounting Policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the year and the preceding year.
Basis of accounting
The financial statements of the Group and the Company have been prepared in accordance with UK adopted International Financial Reporting Standards (IFRS) and in the case of the Company financial statements, as applied in accordance with the Companies Act 2006.
The financial statements have been prepared on the historical cost basis, except where IFRS requires an alternative treatment. The principal variations from historical cost relate to financial instruments.
Going Concern
As described in the Directors' Report, the Group's strategy is to develop a growing portfolio of spin out companies that will provide cash inflows through realisation of investments. In assessing the going concern, the Directors considered the Group's cash requirements over the three years to 30 June 2027. The forecast included operating activities and known near term purchase of investments. It did not include cash from the purchase of unplanned investments. The analysis showed that as at 30 June 2024 the Group had insufficient cash to cover its operating expenditure for the 12 months from the date of signing of these financial statements. However, the Directors intend to realise further cash from the issue of ordinary shares which they reasonably expect will provide the Group with sufficient cash to cover its operating expenditure for this period. The Directors also expect that this share issue will, where appropriate, assist the Group in supporting portfolio companies during this period.
As a result, the Group and Company are reliant on additional funding through the issue of ordinary shares, which is not guaranteed.
Based on the above, this indicates the existence of a material uncertainty which may cast significant doubt over the Group and Company's ability to continue as a going concern and therefore, they may be unable to realise their assets and discharge their liabilities in the ordinary course of business.
The Directors have a reasonable expectation that the funding will be forthcoming. Consequently, the Directors continue to adopt the going concern basis in preparing the Group and Company's financial statements.
The financial statements do not include the adjustments that would be required should the going concern basis of preparation no longer be appropriate.
Changes in accounting policies
a) New standards, interpretations and amendments effective 1 July 2023
There are no new standards, interpretations or amendments which have been applied in these financial statements.
b) New standards, interpretations and amendments not yet effective.
New standards mandatory for periods beginning 1 January 2024 or later:
1) IFRS S1 General requirements for disclosure of sustainability-related financial information
This requires an entity to disclose information about sustainability-related risks and opportunities which will be useful to the users of the financial statements. We are waiting on further information of implementation of this standard in the UK and will assess then its impact on the financial statements.
2) IFRS S2 Climate related disclosures
This requires an entity to disclose climate-related risks and opportunities on the entity's financial position for the reporting period, and anticipated future risks and opportunities. As with IFRS S1, we will assess its impact on future financial statements.
3) Amendment to IAS1: Classification of liabilities as current and non-current
A series of criteria under which liabilities should be classed as current or non-current, in relation to payment obligations and timescales, will be applied in the next financial period. These amendments are not expected to have a material impact on the financial statements of the Group.
Basis of consolidation
The Group financial statements consolidate the financial statements of Frontier IP Group Plc and its subsidiary undertakings. Subsidiary undertakings are consolidated using acquisition accounting from the date of control. An entity is classed as under the control of the Group when all three of the following elements are present: power over the entity, exposure, or rights to, variable returns from its involvement with the entity and the ability of the Group to use its power over the entity to affect the amount of those variable returns.
Segmental reporting
The Group operates in one market sector, the commercialisation of University Intellectual Property, and primarily within the UK. The Group conducts business in Portugal, but transactions during the year were immaterial. Therefore, revenue, profit on ordinary activities before tax and net assets do not need to be analysed by segment.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group's interest in the fair value of the identifiable assets and liabilities of a subsidiary at the date of acquisition. Goodwill is recognised as an asset and reviewed for impairment annually. Goodwill arising on acquisition is allocated to cash-generating units. The recoverable amount of the cash-generating unit to which goodwill has been allocated is tested for impairment annually, or on such other occasions that events or changes in circumstances indicate that it might be impaired. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Property and equipment
The Group does not own any property. Equipment is stated at cost less depreciation and any provision for impairment.
Depreciation
Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its expected useful life. The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. The rates of depreciation are as follows:
Fixtures and office equipment 50% per annum
EV right of use asset over lease term
Financial instruments
Financial assets and financial liabilities are recognised in the Group's statement of financial position at fair value when the Group becomes a party to the contractual provisions of the instrument.
IFRS 9 divides all financial assets into two classifications - those measured at amortised cost and those measured at fair value. Where assets are measured at fair value, gains or losses are either recognised entirely in profit or loss or in other comprehensive income. Impairments are recognised on an expected loss basis. As such where there are expected to be credit losses these are recognised in the profit and loss.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for an appropriate allowance for credit losses over the expected life of the asset. An allowance for expected credit loss is established when there is expectation that the Group will not be able to collect all amounts due. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The movement in the provision is recognised in the comprehensive income statement. The Group applies the IFRS 9 simplified approach to measuring expected loss, details of which are provided in note 15.
Cash
Cash and cash equivalents comprise cash at bank and in hand and short-term deposits and is measured at fair value.
Equity Investments
Equity investments are held with a view to the ultimate realisation of capital gains and are recognised and derecognised on the trade date. They are classified as financial assets at fair value through profit and loss and are initially measured at fair value and the realised gain represents the difference between the carrying amount at the beginning of the reporting period, or the transaction price if it was purchased in the current reporting period, and the consideration received on disposal. The unrealised gain represents the difference between the carrying amount at the beginning of the period, or the transaction price if it was purchased in the current reporting period, and its carrying amount at the end of the reporting period. Gains and losses are presented through the profit or loss in the period in which they arise. Equity investments are classified as non-current assets.
The Group has interests of over 20% but these are not accounted for as associates as the Group elects to hold such investments at fair value in the statement of financial position. IAS 28 Investments in Associates and Joint Ventures does not require investments held by entities which are similar to venture capital organisations to be accounted for under the equity method where those investments are designated, upon initial recognition, as at fair value through profit and loss.
The fair value of equity investments is established in accordance with International and Private Equity and Venture Capital Valuation Guidelines ("IPEV Guidelines"). The Group uses valuation techniques that management consider appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs taking into account any discounts required for non-marketability and other risks inherent in early-stage businesses. The fair value of quoted investments is based on the bid price in an active market on the measurement date. The Group's investments are primarily in seed, start-up and early-stage companies often with no short-term earnings, revenue or positive cash flow making it difficult to assess the value of its activities and to reliably forecast cash flows. The Group normally receives its initial equity prior to any third-party funding and some companies progress without third party funding. In selecting the most appropriate valuation technique in estimating fair value the Group uses a standard valuation matrix to categorise companies. The valuation matrix is as follows:
1. Initial Equity
When the Group has received its initial equity prior to transfer of IP to the portfolio company, the company is valued based on the cost of the initial equity. If advisory services are provided by the Group prior to spin out in return for its equity stake, the cost is the value of services invoiced. If no advisory services have been invoiced prior to spin out, the cost is the nominal value of the shares received.
2. IP Transferred
Once the IP is transferred to the company, but prior to the company raising investment funds, the valuation is based primarily on the value attributed to the IP. The method of valuation will involve evaluating the portfolio company's progress against technical measures, including product development phases and patents. In addition, where grant funding is awarded in relation to its product development costs the value of the grant may be included in the company valuation to the extent that management is satisfied that the company will derive commensurate economic benefit. The assessment of inputs used in valuing companies in advance of a funding round are highly subjective and accordingly caution is applied.
3. Trading Prior to Investment
When the portfolio company commences trading, the Group considers if this indicates a change in fair value. If there is evidence of value creation the Group may consider increasing the value and would seek comparable company valuations to estimate fair value.
4. Price of Recent Investment
If the company receives third party funding, the price of that investment will provide the starting point for the valuation. The Group considers whether any changes or events subsequent to the investment would indicate a change in fair value using a milestone based approach. The milestone based approach involves performing an assessment on the success of relevant milestones that were agreed at the time of investment, including inputs such as revenues, IP assessment, patents, cash burn rates, product testing phases and market traction. Any adjustment made is, whenever possible, based on objective data from the company in addition to management's judgement.
5. Other Valuation Techniques
As the company develops and generates predictable cash flows a combination of valuation techniques are applied as appropriate, such as discounted cash flow, industry specific valuation models and comparable company valuation multiples.
6. Quoted companies.
The fair value of quoted companies is based on the bid price in an active market on the measurement date.
Investment in subsidiary companies is stated at cost, which is the fair value of consideration paid, less provision for any impairment in value. If the recoverable amount of an investment in a subsidiary is estimated to be less than its carrying amount, the carrying amount is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately through profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the investment in subsidiary is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years.
Debt investments
Debt investments are unquoted debt instruments, are loans to portfolio companies and are valued at fair value. None of the instruments are held with a view to selling the instrument to realise a profit or loss. Instruments which are convertible to equity at a future point in time or which carry warrants to purchase equity at a future point in time are considered to be hybrid instruments containing a fixed rate debt host contract with an embedded equity derivative. The Group does not separate the embedded derivative from the host contract and the entire instrument is measured at fair value through profit or loss. The fair value of debt investments is derived by applying probability weightings to the conversion and repayment values of the debt investment plus the value of warrants. Inputs to the conversion value are the nominal value of the loan, interest to conversion, conversion discount and time to conversion. Inputs to the repayment value are the nominal value, interest to repayment and time to repayment. Both values are discounted at a rate appropriate to the portfolio company's stage of development. Where warrants are attached to a debt instrument, the fair value is determined using the Black-Scholes-Merton valuation model. Any indications of changes in the credit risk of the portfolio company borrower are considered when valuing debt investments at subsequent measurement dates.
Financial liabilities and equity
Financial liabilities and equity are classified according to the substance of the financial instrument's contractual obligations rather than the financial instrument's legal form. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Trade payables
Trade payables are not interest bearing and are stated at their amortised cost.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Current and deferred tax
The charge for current tax is based on the results for the year as adjusted for items which are non-assessable or disallowed. It is calculated using rates that have been enacted or substantively enacted by the statement of financial position date.
Deferred tax is accounted for using the statement of financial position liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit.
Share options
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares or options that will eventually vest. The corresponding credit is recognized in retained earnings within total equity. Fair value is measured using the Black-Scholes-Merton pricing model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
Revenue recognition
The Group's revenue streams are recognised in accordance with IFRS 15. The Group applies IFRS 15 to each of its revenue streams analysing its nature, the timing of satisfaction of performance obligations and any significant payments terms.
Fees for services provided by the Group are measured at the fair value of the consideration received or receivable, net of value added tax. The Group's revenue is derived from the following streams:
Business support services are governed by engagement agreements which typically provide for a fixed monthly fee for services to be performed on an on-going monthly basis. The services are invoiced at the end of each month and the revenue recognised for that month.
Fees for corporate finance work are governed by separate engagement agreements where the fee is typically based on a percentage of funds raised and/or a fixed fee. Revenue is recognised when the service is provided and the respective transaction has completed.
Interest income on debt investments in portfolio companies is recognised when it is probable that the economic benefits will flow to the Group and the amount can be reliably measured. Interest income on cash deposits is accrued on a time basis by reference to the principal outstanding and the applicable interest rate.
Where the consideration for spin out services is equity in companies spun out by a university, the revenue recognized is the Group's percentage of equity received applied to the value attributed to the portfolio company on initial spin out. The percentage of equity received is governed by an agreement with the university and revenue is recognized upon spin out. When the consideration for services is a share in licencing income the revenue is recognised on an accruals basis in accordance with the terms of the licensing agreements.
Leases
As a lessee, the Group rents office premises. Under the terms of the rental agreements, the supplier has the right to terminate the agreement during the period of use, however at inception of the agreement this is not considered likely to occur. At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term if the present value is materially different from the lease payments to be made. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, or a change in the in-substance fixed lease payments. For short term leases and leases of low value assets, the Group recognises the expense on a straight-line basis as permitted by IFRS 16.
Retirement benefit costs
The Group operates a defined contribution retirement benefit scheme. The amount charged to the income statement in respect of retirement benefit costs are the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either prepayments or accruals in the statement of financial position.
Notes to the Financial Statements
1. Financial risk management
Financial risk factors
(a) Market risk
Interest rate risk
As the Group has no borrowings it only has limited interest rate risk. The impact is on income, debt investments and operating cash flow and arises from changes in market interest rates. Cash resources are held in floating rate accounts.
Price risk
The Group is exposed to equity securities price risk because of equity investments classified on the consolidated statement of financial position as financial assets at fair value through profit and loss. The maximum exposure is the fair value of these assets which is £33,557,000 (2023: £32,964,000). Equity investments are valued in accordance with the Group's accounting policy on equity investments. Management's monitoring of and contact with portfolio companies provides sufficient information to value the unquoted companies and the Board regularly reviews their progress, prospects and valuation. Information on reasonable possible shifts in the valuation of equity investments is provided in note 13 to the financial statements.
(b) Credit risk
The Group's credit risk is primarily attributable to its debt investments, trade receivables, other debtors and cash equivalents. The Group's current cash and cash equivalents are held with two UK financial institutions, the Bank of Scotland plc and Barclays Bank plc, both of which have a credit rating of "P1" from credit agency Moody's, indicating that Moody's consider that these banks have a "superior" ability to repay short-term debt obligations. The concentration of credit risk from trade receivables and other debtors varies throughout the year depending on the timing of transactions and invoicing of fees. Details of major customers to the Group are set out in Note 4. Details of trade receivables and other current assets are set out in note 15. Details of significant debt investments are set out in Note 14. Management's assessment is aided through representation on the Board and/or through providing advisory services to the companies.
The maximum exposure to credit risk for debt investments, trade receivables, other current asset and cash equivalents is represented by their carrying amount.
(c) Capital risk management
The Group is funded by equity finance only. Total capital is calculated as 'total equity' as shown in the consolidated statement of financial position. The Group's objectives for managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to manage the cost of capital. In order to maintain the capital structure, the Group may issue new shares as required. The Group currently has no debt. There were no changes in the Group's approach to capital management during the year.
(d) Liquidity risk
The Group seeks to manage liquidity risk to ensure sufficient liquidity is available to meet the requirements of the business and to invest cash assets safely and profitably. The Group's business model is to realise cash through the sale of investments in portfolio companies and in the absence of such realisations the Group would plan to raise additional capital. The Board reviews available cash to ensure there are sufficient resources for working capital requirements and investments. At 30 June 2024 and 30 June 2023 all amounts shown in the consolidated statement of financial position under current assets and current liabilities mature for payment within one year.
2. Critical accounting estimates and assumptions
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. Actual results may differ from these estimates and judgements.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:
(i) Valuation of investments
In applying valuation techniques to determine the fair value of unquoted equity investments the Group makes estimates and assumptions regarding the future potential of the investments. As the Group's unquoted investments are in seed, start-up and early-stage businesses it can be difficult to assess the outcome of their activities and to make reliable forecasts. Given the difficulty of producing reliable cash flow projections for use in discounted cash flow valuations, this technique is applied with caution. Adjustments made to fair value are, by their very nature, subjective and determining the fair value is a critical accounting estimate. The valuation of equity investments is explained at note 14 below.
In applying valuation techniques to determine the fair value of debt investments the Group makes estimates and assumptions regarding the time to repayment or conversion, discount rate and credit risk. A 25% increase in the time to repayment or conversion reduces the value of debt investments from £5,595,000 to £5,554,000 and a 25% increase in the discount rate reduces the value of the debt investments from £5,595,000 to £5,510,000. Where warrants are attached to a debt instrument, the fair value is determined using the Black-Scholes-Merton valuation model. The significant inputs to the model are provided in note 14. The price at which debt investments were made is 92% of the fair value of debt investments at 30 June 2024 (2023: 65%).
(ii) Impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the stated accounting policy. The recoverable amount is determined using a value in use value model which requires a number of estimations and assumptions about the timing and amount of future cash flows. As future cash flows relate primarily to proceeds from sale of investments, these estimates and assumptions are subject to a high degree of uncertainty. Note 10 describes the key assumptions and sensitivity applied.
(iii) Consideration of credit losses
The matters taken into account in the recognition of credit losses include historic current and forward-looking information The matters taken into account in the recognition of credit losses include historic current and forward-looking information. The Group's exposure to credit losses is with companies from its own portfolio whose ability to settle their debts is primarily dependant on their ability to raise capital rather than their current trading. The age of debt is not considered in assessing credit loss as the outcome is expected to be binary. The debt is also concentrated in a small number of companies; six companies account for 99% of trade receivables and three account for 80% of debt investments at 30 June 2024. Management has in-depth knowledge of these companies and is providing the fundraising service for all four of them. The Group's history of credit loss is not significant and therefore management focus on the factors which impact the ability of these companies to successfully raise capital and a probability of default as a result of the failure to raise capital is applied to determine the expected credit loss. Details of the expected credit loss are provided in note 15.
The Group believes that the most significant judgement areas in the application of its accounting policies are establishing the fair value of its unquoted equity investments and the consideration of any impairment to goodwill. The matters taken into account by the Directors when assessing the fair value of the unquoted equity investments are detailed in the accounting policy on investments.
The considerations taken into account by the Directors when reviewing goodwill are detailed in Note 10. In addition, the Directors judge that the Group is exempt from applying the equity method of accounting for associates in which it has interests of over 20% as they consider the Group to be similar to a venture capital organisation and elects to hold such investments at fair value in the statement of financial position.
IAS28 Investments in Associates and Joint Ventures permits investments held by entities which are similar to venture capital organisations to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit and loss.
3. Revenue from services
During the year the Group earned revenue from the provision of services to portfolio companies and university partners as follows:
| | 2024 | 2023 |
| | £'000 | £'000 |
| Retainers with portfolio companies | 315 | 336 |
| Corporate finance fees from portfolio company fundraisings | 43 | 30 |
| Advisory fees from universities on initial spin-outs | - | 3 |
| License income from universities | - | 3 |
| | 358 | 372 |
4. Major customers
During the year the Group had five major customers that accounted for 78% of its revenue from services (2023: five customers accounted for 86%). The same five customers were also in the top five in 2023. The revenues generated from each customer were as follows:
| | 2024 | 2023 |
| | £'000 | £'000 |
| Customer 1 | 80 | 78 |
| Customer 2 | 66 | 70 |
| Customer 3 | 50 | 52 |
| Customer 4 | 48 | 48 |
| Customer 5 | 40 | 40 |
| | 284 | 288 |
| | | |
5. Administration expenses
Expenses included in administrative expenses are analysed below.
| | 2024 | 2023 |
| | £'000 | £'000 |
| Employee costs | 2,451 | 2,117 |
| Consultant | 142 | 133 |
| Travel and subsistence | 36 | 21 |
| Depreciation | 9 | 9 |
| Bad and doubtful debts | 245 | 169 |
| Fees payable to auditor: |
| |
| - audit fee - non-audit services | 137 - | 92 3 |
| Legal, professional and financial costs | 257 | 378 |
| Premises lease | 157 | 140 |
| Administration costs | 74 | 68 |
| | 3,508 | 3,130 |
6. Directors and employees
The average number of people employed by the Group during the year was:
| | 2024 | 2023 |
| | Number | Number |
| |
| |
| Business and corporate development | 21 | 20 |
|
| 2024 | 2023 |
| | £'000 | £'000 |
| Wages and salaries | 1,774 | 1,518 |
| Social security | 247 | 197 |
| Pension costs - defined contribution plans | 234 | 186 |
| Non-executive directors' fees | 137 | 126 |
| Other benefits | 59 | 52 |
| Recruitment | - | 38 |
| Total employee administration expenses | 2,451 | 2,117 |
At 30th June 2024, all employees were employed by Frontier IP Group plc.
The key management of the Group and the Company comprise the Frontier IP Group Plc Board of Directors. The remuneration of the individual Board members is shown below.
Remuneration comprises basic salary, pension contributions and benefits in kind, being private health insurance and life assurance. The type of remuneration is constant from year to year. Ad hoc bonuses may be paid to reward exceptional performance, as decided by the Remuneration Committee, with none awarded in the period. Share options are also awarded to employees from time to time. The granting of share options to individual employees is determined taking into account seniority, commitment to the business and recent performance.
The total remuneration for each director is shown below.
Amounts in £'000
| | Salary | Other benefits | Pension | Share option exercise | Share Based Payment | Total | ||||||
| | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 | 2024 | 2023 |
| Executive | | | | | | | | | | | | |
| N Crabb | 206 | 177 | 6 | 5 | 21 | 17 | 19 | 276 | 49 | 43 | 301 | 518 |
| J McKay | 112 | 74 | 6 | 5 | 61 | 76 | 8 | 118 | 36 | 36 | 222 | 309 |
| J Fish* | 87 | 125 | 5 | 4 | 66 | 31 | 34 | - | 34 | 37 | 226 | 197 |
| M White | 163 | 152 | 5 | 5 | 16 | 15 | | | 37 | 34 | 222 | 204 |
| J Stent | 39 | - | | - | 4 | - | | - | | - | 43 | - |
| | | | | | | | | | | | | |
| Non-executive | | | | | | | | | | | | |
| A Richmond* | 28 | 48 | - | - | - | - | - | - | - | - | 28 | 48 |
| J King | 41 | 34 | - | - | - | - | - | - | - | - | 41 | 34 |
| N Grierson | 34 | 10 | - | - | - | - | - | - | - | - | 34 | 10 |
| D Holbrook | 34 | 10 | - | - | - | - | - | - | - | - | 34 | 10 |
| | 744 | 653 | 22 | 17 | 168 | 139 | 61 | 394 | 156 | 150 | 1,151 | 1,330 |
* Former Director
7. Taxation
| | 2024 | 2023 |
| | £'000 | £'000 |
| Current tax | - | - |
| Deferred tax | (211)
| (1,126) |
| Tax (credit)/charge for the year | (211) | (1,126) |
A reconciliation from the reported (loss)/profit before tax to the total tax (credit)/charge is shown below:
| | 2024 | 2023 |
| | £'000 | £'000 |
| |
|
|
| (Loss)/profit before tax | (1,337) | (4,370) |
-
| (Loss)/profit before tax at the effective rate of corporation tax in the UK of 25% (2023: 20.5%) |
(334)
|
(895) |
| Effects of: Fair value movement in investments not recognised in deferred tax |
(617) |
(69) |
| Expenses not deductible for tax purposes | 71 | 31 |
| Movement in deferred tax asset of losses not recognised | 688 | - |
| Adjustments arising from difference between average and deferred tax rates | - | (169) |
| Deferred tax recognised in equity | - | (171) |
| Other adjustments | (19) | 147 |
| Tax (credit)/charge for the year | (211) | (1,126) |
Deferred Tax
| | Group | Group
|
| Deferred tax liabilities at 30 June | 2024 | 2023 |
| Unrealised gains investments | (43) | (689) |
| Short-term timing differences - fixed assets | (3) | (1) |
| | (46) | (690) |
| Deferred tax assets at 30 June | | |
| Tax losses | 601 | 277 |
| Short-term timing differences - pension | 10 | 6 |
| Short-term timing differences - outstanding share options | 134 | 196 |
| | 745 | 479 |
| | | |
| Impairment | (699) | - |
| | | |
| Net deferred tax (liability) / asset | - | (211) |
| | Company | Company
|
| Deferred tax liabilities at 30 June | 2024 | 2023 |
| Unrealised gains investments | (67) | (138) |
| Short-term timing differences - fixed assets | - | - |
| | (67) | (138) |
| Deferred tax assets at 30 June | | |
| Tax losses | 590 | 272 |
| Short-term timing differences - pension | - | - |
| Short-term timing differences - outstanding share options | 134 | 196 |
| | 724 | 468 |
| | | |
| Impairment | (657) | - |
| | | |
| Net deferred tax (liability) / asset | - | 330 |
| | Group | Company |
| Deferred tax movement | | |
| (Liability)/asset at 1 July 2022 | (1,167) | 1,164 |
| Credited | 1,126 | (664) |
| Debited to equity | (170) | (170) |
| At 30 June 2023 | (211) | 330 |
| | | |
| | Group | Company |
| Deferred tax movement | | |
| (Liability)/asset at 1 July 2023 | (211) | 330 |
| Credited | 211 | (330) |
| Debited to equity | - | - |
| At 30 June 2024 | - | - |
No deferred tax liability has been recognised on the difference between base cost and fair value of certain financial assets at fair value through profit and loss which qualify as equity investments and which are expected to be exempt from tax under the substantial Shareholding Exemption on their subsequent disposal.
The Group has a potential deferred tax asset at year end of £657,000 (Period ended 30 June 2023: unrecognised net deferred tax asset of £420,000) calculated at 25% in respect of Group tax losses in the year to June 2024. This has been fully impaired, due to uncertainty in respect of future probable trading profits in the Group against which these losses can be utilised (2023: trading losses pre-2017 not recognised due to uncertainty regarding future probable trading profits in Frontier IP Limited).
8. Earnings per share
a) Basic
Basic earnings per share is calculated by dividing the profit attributable to the shareholders of Frontier IP Group Plc by the weighted average number of shares in issue during the year.
| | (Loss) / profit attributable to shareholders £'000 | Weighted average number of shares | Basic (loss) / earnings per share amount in pence |
| | | | |
| Year ended 30 June 2024 | (1,126) | 55,986,153 | (2.01) |
| | | | |
| Year ended 30 June 2023 | (3,244) | 55,409,626 | (5.85) |
b) Diluted
Diluted earnings per share is calculated by adjusting the weighted number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary shares: share options. A calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market value share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
| | (Loss) / profit attributable to shareholders £'000 | Weighted average number of shares adjusted for share options | Diluted (loss) / earnings per share amount in pence |
| | | | |
| Year ended 30 June 2024 | (1,126) | 57,673,312 | (1.96) |
| | | | |
| Year ended 30 June 2023 | (3,244) | 57,542,781 | (5.64) |
9. Tangible fixed assets
| | Fixtures and equipment | Electric Vehicle |
| | £'000 | £'000 |
| Cost | | |
| At 1 July 2022 | 39 | - |
| Additions | 16 | - |
| Disposals | (12) | - |
| At 30 June 2023 | 43 | - |
| Additions | 4 | 10 |
| Disposals | - | - |
| At 30 June 2024 | 47 | 10 |
| | | |
| Depreciation | | |
| Accumulated depreciation at 1 July 2022 | 33 | - |
| Charge for the year to 30 June 2022 | 9 | - |
| Disposals | (12) | - |
| Accumulated depreciation at 30 June 2023 | 30 | - |
| Charge for the year to 30 June 2023 | 9 | 3 |
| Disposals | | |
| Accumulated depreciation at 30 June 2023 | 39 | 3 |
|
Net book value | | |
| At 30 June 2023 | 13 | - |
| At 30 June 2024 | 8 | 7 |
10 Goodwill
| | Group | Company |
| | £'000 | £'000 |
| Cost |
| |
| At 1 July 2022, 30 June 2023 and at 30 June 2024 | 1,966 | - |
| |
| |
| Impairment |
| |
| At 1 July 2022, 30 June 2023 and at 30 June 2024 | - | - |
| |
| |
| Carrying value |
| |
| At 30 June 2023 | 1,966 | - |
| At 30 June 2024 | 1,966 | - |
The Group conducts an annual impairment test on the carrying value of goodwill based on the recoverable amount of the Group as one cash generating operating unit. The recoverable amount is determined using a value in use model. The net present value of projected cash flows is compared with the carrying value of the Group's investments and goodwill. Projected cash flows are based on management approved budgets for a period of three years and key assumptions over a further seven years. When determining the key assumptions, management has used both past experience and management judgement, but as future cash inflows are derived primarily from the realisation of investments, these assumptions are subject to a high degree of uncertainty. The key assumptions used in the model were rate of return 29% (2023: 29%); average yearly realisations 7% (2023: 6.7%); annual growth in trading income 6% (2023:7.2%); annual growth in the cost base 6% (2023: 7.8%); discount 15 % (2023: 14%). The Board considers that a reasonable possible change in the rate of return or in the discount rate would cause the carrying amount of the cash generating unit to exceed its recoverable amount. A decrease in the rate of return from 29% to 17% or an increase in the discount rate from 15% to 21% would cause the recoverable amount to equal the carrying amount. The Board considers that the recoverable amount of the Group as one cash generating operating unit is greater than its carrying value.
11. Categorisation of Financial Instruments
|
Financial assets | At fair value through profit or loss £'000 |
Amortised cost £'000 |
Total £'000 |
| At 30 June 2023 | | | |
| Equity investments | 32,964 | - | 32,964 |
| Debt investments | 4,625 | - | 4,625 |
| Trade and other receivables | - | 1,026 | 1,026 |
| Advances | - | 793 | 793 |
| Cash and cash equivalents | - | 4,603 | 4,603 |
|
| 37,589 | 6,422 | 44,011 |
| At 30 June 2024 | | | |
| Equity investments | 33,203 | - | 33,203 |
| Debt investments | 5,595 | - | 5,595 |
| Trade and other receivables | - | 1,629 | 1,629 |
| Advances | - | 382 | 382 |
| Cash and cash equivalents | - | 2,298 | 2,298 |
| Total | 38,798 | 4,309 | 43,107 |
All financial liabilities are categorised as other financial liabilities and recognized at amortised cost.
All net fair value losses in the year are attributable to financial assets designated at fair value through profit or loss. (2023: all net fair value gains were attributable to financial assets designated at fair value through profit or loss.)
12. Investment in subsidiaries
|
| Company 2024 | Company 2023 |
| | £'000 | £'000 |
| At 1 July | 2,383 | 2,383 |
| Addition - conversion of FIP Unipessoal Lda loan | 29 | |
| Provision for impairment | - | - |
| At 30 June | 2,412 | 2,383 |
Group Investments
The Company has investments in the following subsidiary undertakings.
|
| Country of incorporation | Proportion of ordinary shares directly held by the Company |
|
| | |
| Frontier IP Limited - principal activity is commercialisation of IP | Scotland | 100% |
| Frontier IP Management Limited - principal activity is investment advisory and marketing services | Scotland | 100% |
| FIP Portugal, Unipessoal Lda. - principal activity is commercialisation of IP | Portugal | 100% |
The registered office of all subsidiaries registered in Scotland is c/o CMS Cameron McKenna Nabarro Olswang LLP, Saltire Court, 20 Castle Terrace, Edinburgh EH1 2EN.
The registered office of FIP Portugal, Unipessoal, Lda is Rua João Frederico Ludovice 22ª, Loja
1500-357, Benfica, Lisbon, Portugal.
13. Equity investments
Equity investments are valued individually at fair value in accordance with the Group's accounting policy on investments. There are no remaining quoted equity investments (2023: £2,297k). All of the Group's equity investments are unquoted and these have been categorised as being level 3, that is, valued using unobservable inputs. All gains and losses relate to assets held at the year end, and the fair value movement has been shown in the income statement as other operating income.
| Equity Investments
| Group 2024 | Group 2023 | Company 2024 | Company 2023 |
| | £'000 | £'000 | £'000 | £'000 |
| At 1 July | 32,964 | 39,712 | 28,259 | 26,963 |
| Additions | 68 | 691 | 68 | 691 |
| Conversion of debt investments | - | 54 | - | 54 |
| Disposals | (2,297) | (5,713) | - | - |
| Unrealised (loss)/profit on revaluation | 2,468 | (1,780) | 2,781 | 551 |
| At 30 June | 33,203 | 32,964 | 31,108 | 28,259 |
The table below sets out the movement during the year in the value of unquoted equity investments by the valuation matrix stages described in the accounting policy on equity investments:
| Equity Investments | | ||||||
| | Stage 1 | Stage 2 | Stage 3 | Stage 4 | Stage 5 | Stage 6
| Total |
| Fair value category | 3 | 3 | 3 | 3 | 3 | 1 |
|
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| 1 July 2022 | 31 | 798 | 6,086 | 22,665 | - | 10,132 | 39,712 |
| Transfers between stages | - | 44 | 2,234 | (2,278) | - | - | - |
| Fair value change through other operating income | (31) | 351 | (2,447) | 2,469 | - | (2,122) | (1,780) |
| Additions | - | - | - | 745 | - | - | 745 |
| Disposals | - | - | - | | - | (5,713) | (5,713) |
| 30 June 2023 | - | 1,193 | 5,873 | 23,601 | - | 2,297 | 32,964 |
| Transfers between stages | - | (613) | (1,900) | 2,513 | - | - | - |
| Fair value increase through other operating income | - | | (244)
| 2,712
| - | | 2,468
|
| Additions | - | - | | 68 | - | - | 68 |
| Disposals | - | - | - | - | - | (2,297) | (2,297) |
| 30 June 2024 | - | 580 | 3,729 | 28,894 | - | - | 33,203 |
The table below provides information about equity investment fair value measurements. (See the accounting policy on investments for a description of the valuation matrix stages)
| Valuation matrix stage | No of Investments | Fair value | Inputs | Reasonable possible shift | |
|
|
| £'000 |
| % | +/- £000 |
| At 30 June 2023 | |||||
| Stage 1 | 4 | - | The company is valued at fair value
| 20% | - |
| Stage 2 | 4 | 1,192 | Management's assessment of the value of IP transferred and valuation of grants from which economic benefit is derived | 31% | 370 |
| Stage 3 | 6 | 5,873 | Management's assessment of performance against milestones and discussions of likely imminent fundraising | 40% | 2,349 |
| Stage 4 | 9 | 23,601 | The price of last funding round provides unobservable input into the valuation of any individual investment. However, subsequent to the funding round, management are required to re-assess the carrying value of investments at each year-end which result in unobservable inputs into the valuation methodology. | 28% | 6,608 |
| Stage 5 | - | - | Discounted comparable public company valuation. Unobservable inputs into discounted cash-flow are forecasts of future cash-flows, probabilities of project failure, and evaluation of the time value of money. | - | - |
| Stage 6 1 | 2,298 | Based on bid price at balance sheet date. | - | - | |
| 30 June 2023 | 32,964 |
| 23% | 7,582 | |
|
|
|
|
|
|
|
| At 30 June 2024 | |||||
| Stage 1 | 3 | - | The company is valued at fair value which is the cost of the initial equity. If advisory services are provided by the Group prior to spin out in return for its equity stake, the cost is the value of services invoiced. If no advisory services have been invoiced prior to spin out, the cost is the nominal value of the shares received. | - | - |
| Stage 2 | 2 | 580 | Management's assessment of the value of IP transferred and the value of grants from which economic benefit is derived. | 36% | 209 |
| Stage 3 | 5 | 3,729 | Management's assessment of performance against milestones and discussions of likely imminent fundraising. | 42% | 1,566 |
| Stage 4 | 14 | 28,894 | The price of latest funding round provides unobservable input into the valuation of any individual investment. However, subsequent to the funding round, management are required to re-assess the carrying value of investments at each year end which result in unobservable inputs into the valuation methodology. | 31% | 8,957 |
| Stage 5 | -
| - | Discounted comparable public company valuation. Unobservable inputs into discounted cash flow are forecasts of future cash flows, probabilities of project failure and evaluation of the time cost of money. | - | -
|
| Stage 6 | - | - | Based on bid price at balance sheet date. | - | - |
| |
|
|
|
| |
| 30 June 2024 | 33,203 |
| 31% | 10,293 | |
The percentage reasonable possible shift for each stage is the blended percentage reasonable possible shift of each company at that stage which are based on the Directors' assessment of the level of uncertainty attached to the valuation inputs.
Equity investments are carried in the statement of financial position at fair value even though the Group may have significant influence over those companies. This treatment is permitted by IAS28, Investments in Associates. At 30 June 2024 the Group held an economic interest of 20% or more in the following companies:
| Name of Undertaking | Registered Address | % Issued Share Capital | Share Class | |
|
|
| 2024 |
2023 |
|
| AquaInSilico | Avenida Tenente Valadim, nº. 17, 2º F, 2560-275 Torres Vedras, Portugal | 29.0% |
29.0% | Ordinary |
| Alusid Limited | Richard House, Winckley Square, Preston, Lancashire, PR1 3HP | 35.4% |
37.4% | Ordinary |
| Cambridge Raman Imaging Limited | Botanic House,100 Hills Road, Cambridge, CB2 1PH | 26.8% |
26.8% | Ordinary |
| Celerum Limited | 30 East Park Road, Kintore, Inverurie, AB51 0FE | 33.8% |
33.8% | Ordinary |
| Des Solutio LDA | Madan Parque, Rua dos Inventores, 2825-182 Caparica, Portugal | 25.0% |
25.0% | Ordinary |
| Elute Intelligence Holdings Limited | 21 Church Road, Tadley, RG26 3AX | 40.71% |
42.2% | Ordinary |
| Enfold Health Limited | The Officers' Mess, Royston Road, Duxford, Cambridgeshire, United Kingdom, CB22 4QH | 75.8% |
75.8% | Ordinary |
| GraphEnergyTech Limited | The Officers' Mess, Royston Road, Duxford, Cambridgeshire, United Kingdom, CB22 4QH | 30.4% |
32.1% | Ordinary |
| Insignals Neurotech Lda | Rua Passeio Alegre, 20 Centro de Incubacyo e Aceleracyo Do Porto, Porto 4150-570, Portugal | 32.9% |
32.9% | Ordinary |
| NTPE LDA | Avenida Tenente Valadim, nº. 17, 2º F, 2560-275 TorresVedras, Portugal | 47.9% |
47.9% | Ordinary |
| Deakin Bio-hybrid Materials | 73 Temperance Street, Ardwick, Manchester, England,M12 6HU | 33.3% | 0% | Ordinary |
The nature of these companies' business is provided in the Portfolio Review section of the Strategic Report where the holding carries a value.
14. Debt investments
Debt investments are loans to portfolio companies to fund early-stage costs, provide funding alongside grants and bridge to an equity fundraise. Loans ranging from £40,000 to £1,457,000 were made to five companies during the period. All debt investments are categorised as fair value through profit or loss and measured at fair value. These have been categorised as being level 3, that is, valued using unobservable inputs. The Group uses valuation techniques that management consider appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs The price at which the debt investment was made may be a reliable indicator of fair value at that date but management consider the financial position and prospects for the portfolio company borrower when valuing debt investments at subsequent measurement dates.
Certain debt investments carry warrants granting the option to purchase shares. The exercise price is generally the price of shares issued at the first equity fundraising following the grant and the period of exercise is generally at any time from the first equity fundraising to an exit event. The fair value of the warrants is determined using the Black-Scholes-Merton valuation model. The significant inputs into the model for each warrant were the exercise price, the current share price valuation, volatility of 70% (2023: 70%), expected life of between three months and six years and annual risk-free interest rates to end of term of between 3.95% and 4.64% (2023: 4.45% and 5.30%). The value of warrants included in debt investments at 30 June 2024 is £440,000(2023: £1,881,000).
The movement of debt investments during the year is set out below:
| | Group 2024 | Group 2023 | Company 2024 | Company 2023 |
| | £'000 | £'000 | £'000 | £'000 |
| At 1 July | 4,625 | 2,981 | 3,557 | 2,297 |
| Additions | 2,157 | 884 | 1,987 | 575 |
| Conversion to unquoted equity investments | - | (54) | - | (54) |
| Unrealised profit / (loss) on revaluation | (1,187) | 814 | (1,193) | 739 |
| At 30 June | 5,595 | 4,625 | 4,351 | 3,557 |
Debt investments with three portfolio companies accounted for 80% of the value of debt investments at 30 June 2024: CamGraPhIC (£2,629,000), Nandi Proteins (£953,000) and Elute Intelligence (£892,000).
Conversions of debt investments are non-cash transactions, so not reflected in the statement of cashflows. All debt investments are classed as non-current. Certain debt instruments have conversion or repayment terms dependent on the amount and timing of an equity fundraising by the portfolio company borrower. The exercise of a conversion right would reclass the debt investment as a non-current equity investment. The expectation is to exercise the right to repayment, however there is uncertainty over the timing and amount of equity fundraisings. Furthermore, notwithstanding the right to repayment being triggered, the Group may decide, depending on the circumstance at the time, to defer repayment or convert into equity for the benefit of the portfolio company borrower in which the Group also holds an equity stake.
15. Trade receivables and other current assets
|
| Group | Group | Company | Company |
| | 2024 | 2023 | 2024 | 2023 |
| | £'000 | £'000 | £'000 | £'000 |
| Trade receivables | 804
| 529 | 474 | 338 |
| Receivables from Group undertakings | - | - | 400 | 357 |
| VAT | 17 | 7 | 7 | - |
| Prepayments and accrued income | 104 | 71 | 29 | 30 |
| Other debtors (excluding advances) | 79 | 74 | 4 | 17 |
| Accrued interest | 906 | 448 | 645 | 286 |
|
| 1,910 | 1,129 | 1,559 | 1,028 |
|
|
| |
| |
| Expected credit loss at 1 July | 103 | 43 | 89 | 27 |
| Other current assets provided for in the year | 178 | 60 | 141 | 62 |
| Other current assets written off in the year | - | - | - | - |
| Expected credit loss at 30 June | 281 | 103 | 230 | 89 |
|
|
| |
| |
| Less receivables from Group undertakings - non current |
- |
- |
400 |
357 |
| Current portion | 1,629 | 1,026 | 929 | 582 |
Trade receivables
|
| Group | Group | Company | Company |
|
| 2024 | 2023 | 2024 | 2023 |
|
| £'000 | £'000 | £'000 | £'000 |
| Trade receivables not past due | 27 | 32 | 17 | 18 |
| Trade receivables past due 1-30 days | 32 | 35 | 23 | 23 |
| Trade receivables past due 31-60 days | 21 | 33 | 12 | 18 |
| Trade receivables past due 61-90 days | 21 | 32 | 11 | 21 |
| Trade receivables past due over 90 days | 940 | 604 | 568 | 383 |
| Gross trade receivables at 30 June | 1,041 | 736 | 631 | 463 |
| |
| |
| |
| Expected credit loss at 1 July | 207 | 98 | 125 | 78 |
| Debts provided for in the year | 30 | 109 | 32 | 47 |
| Debts written off in the year | - | - | - | - |
| Expected credit loss at 30 June | 237 | 207 | 157 | 125 |
| |
| |
| |
| Net trade receivables at 30 June | 804 | 529 | 474 | 338 |
Trade receivables are amounts due from portfolio companies for services provided with net amounts recorded as revenue in the consolidated statement of comprehensive income. The expected credit losses are estimated by reference to the financial position and specific circumstances of the portfolio companies, by reference to past default experience and by assessment of the current and forecast economic conditions. The nature of the services provided to portfolio companies means the Group has in-depth knowledge of the companies' prospects both for trading and raising capital and the number of companies with past due receivables is small enabling a full assessment of recoverability by company. The Group also considers if a general provision for expected loss through applying the historical rate of portfolio company failures is material. The Group's history of credit loss is not sufficiently material to inform future expectations and therefore management focus on the factors which impact the ability of its debtor companies to successfully raise capital and a probability of default as a result of the failure to raise capital is applied to determine the expected credit loss.
Receivables from Group undertakings carry interest of 2.0% above Bank of England base rate (2023: 2.0%).
16. Advances
| | Group 2024 | Group 2023 | Company 2024 | Company 2023 |
| | £'000 | £'000 | £'000 | £'000 |
| Advances | 382 | 793 | 287 | 785 |
In the period to 30 June 2024 the Group advanced money to five portfolio companies on a short-term basis. The largest of these advances was £175,000 to Camgraphic Ltd.
17. Trade and other payables
| | Group | Group | Company | Company |
| | 2024 | 2023 | 2024 | 2023 |
| | £'000 | £'000 | £'000 | £'000 |
| Trade payables | 49 | 23 | 71 | 42 |
| Payables to group undertakings | - | - | 6,399 | 3,366 |
| Social security and other taxes | 92 | 68 | - | - |
| VAT | 0 | 9 | - | 9 |
| Other creditors | 16 | 14 | - | - |
| Accruals and deferred income | 158 | 127 | 90 | 109 |
| At 30 June | 315 | 241 | 6,560 | 3,526 |
| Less payables to Group undertakings - non current |
- |
- |
(6,399) |
(3,366) |
| Current portion | 315 | 241 | 161 | 160 |
18. Share capital and share premium
|
| Number of shares issued and fully paid | Ordinary shares of 10p |
Share premium |
Total |
|
|
| £'000 | £'000 | £'000 |
| At 30 June 2023 | 55,658,155 | 5,566 | 14,627 | 20,193 |
| Exercise of options | 508,793 | 51 | 164 | 216 |
| | | | | |
| At 30 June 2024 | 56,166,948 | 5,617 | 14,791 | 20,409 |
19. Reserves
The reverse acquisition reserve was created on the reverse takeover of Frontier IP Group Plc. The fair value of equity-settled share-based payments is expensed on a straight-line basis over the vesting period and the amount expensed in each year is transferred to the share-based payment reserve, which in 2023-24 was £225,000 (2023: £155,000). The amount by which the deferred tax asset arising on the intrinsic value of the outstanding share options differs from the cumulative expense is also transferred to the share-based payment reserve. This amount was zero in the year ended June 2024 (2023: £171,000). Included in retained earnings are unrealised profits amounting to £29,096,000 (2023: £25,721,000). Consequently, there were no distributable reserves at 30 June 2024 or 30 June 2023. The movement in reserves for the years ended 30 June 2024 and 2023 is set out in the Consolidated and Company Statement of Changes in Equity.
20. Share options
Frontier IP has three option schemes:
Under the Frontier IP Group Plc Employee Share Option Scheme 2011 - Amended 26 March 2018, both enterprise management incentive options and unapproved options are granted. No payment is required from option holders on the grant of an option. The options are exercisable starting three years from the date of the grant with no performance conditions. The scheme runs for a period of ten years but no new options can be granted as the Group has ceased to be a qualifying company for EMI purposes No options were granted during the year under this scheme.
Under the Frontier IP Group plc Company Share Option Plan 2021 ("CSOP"), no payment is required from option holders on grant of an option. The options are exercisable starting three years from the date of the grant with no performance conditions. The scheme runs for a period of ten years. 169,181 share options were granted during the year under the CSOP.
Under the Frontier IP Group plc Unapproved Share Option Plan 2021 ("LTIP"), no payment is required from option holders on grant of an option. The options are exercisable starting three years from the date of grant provided certain performance conditions have been met. The scheme runs for a period of ten years. 666,838share options were granted during the year under the LTIP.
Movements in the number of share options outstanding and their related weighted average exercise prices were as follows:
| | 2024 Weighted average exercise price | 2024
Options | 2023 Weighted average exercise price | 2023
Options |
| | Pence per share |
| Pence per share |
|
| At 1 July | 32.22 | 5,099,064 | 31.71 | 4,986,726 |
| Granted | 16.98 | 836,019 | 24.43 | 834,872 |
| Exercised | 27.12 | (508,793) | 15.00 | (652,607) |
| Lapsed | 99.32 | (132,541) | 63.76 | (69,927) |
| At 30 June | 29.47 | 5,293,749 | 32.22 | 5,099,064 |
Of the 5,293,749 outstanding options (2023: 5,099,064) , 3,622,858 had vested at 30 June 2024 (2023: 3,570,616). The vested options have a weighted average exercise price of 33.51p.
Share options outstanding at the end of the year have the following expiry date and exercise prices:
| | Exercise price Pence per share | 2024 Number | 2023 Number |
| 2024 | 26.88 | - | 432,393 |
| 2026 | 26.63 | 650,000 | 650,000 |
| 2027 | 40.00 | 352,000 | 399,000 |
| 2028 | 65.00 | 233,000 | 246,000 |
| 2028 | 10.00 | 432,000 | 456,000 |
| 2029 | 66.00 | 562,612 | 694,050 |
| 2029 | 10.00 | 729,211 | 734,611 |
| 2030 | 65.00 | 353,719 | 383,260 |
| 2030 | 10.00 | 310,316 | 310,316 |
| 2032 | 85.00 | 74,646 | 74,676 |
| 2033 | 66.00 | 116,850 | 116,850 |
| 2033 2033 2033 | 10.00 44.50 10.00 | 643,376 169,181 666,838 | 643,376 - - |
The weighted average remaining contractual life of the outstanding options is 5.6 years.
The weighted average fair value of options granted to executive Directors and employees during the year determined using the Black-Scholes-Merton valuation model was 30.13p per option. The significant inputs into the model were the exercise prices shown above, weighted average share price of 44.5p, volatility of 9.9%, dividend yield of 0%, expected life of 5 years and annual risk-free interest rate of 4.36%. Future volatility has been estimated based on 5 years' historical daily data.
21. Leases
|
| 2024 | 2023 |
|
| Land & Buildings | Land & Buildings |
|
| £'000 | £'000 |
| Commitments under non-cancellable leases expiring: |
| |
| Within one year | 105 | 91 |
| Within two to five years | - | - |
| After five years | - | - |
| | 105 | 91 |
Property leases relate to rental of serviced offices. Under the terms of the rental agreements, the supplier has the right to terminate the agreement during the period of use, however at inception of the agreement this was not considered likely to occur. For short term leases (12 months or less) and leases of low value assets, the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16's transitional rules. Currently the longest lease ends in March 2025.
22. Cash used in operations
|
| Group | Group | Company | Company |
|
| 2024 | 2023 | 2024 | 2023 |
|
| £'000 | £'000 | £'000 | £'000 |
| Profit/(loss) before tax | (1,337) | (4,370) | (765) | (873) |
| Adjustments for: |
| |
| |
| Share-based payments | 225 | 155 | 225 | 155 |
| Depreciation | 9 | 9 | - | - |
| Interest received | (62) | (50) | (81) | (52) |
| Unrealised loss/(profit) on the revaluation of investments |
(1,282) |
966 |
(1588) |
(1,290) |
| Realised loss/(profit) on disposal of investments | (249) | 786 | - | - |
| Changes in working capital: |
| |
| |
| Trade and other receivables* | (602) | 26 | (348) | 122 |
| Advances | 413 | (793) | 498 | (785) |
| Trade and other payables | 74 | 23 | 1 | 19 |
| Cash flows from operating activities | (2,811) | (3,248) | (2,058) | (2,704) |
*Movement in trade and other receivables includes non-cash accrued interest on debt investments with portfolio companies
The movements in liabilities from financing cashflows are nil.
23. Related party transactions
Neil Crabb is a director of Graphenergytech Ltd, PoreXpert Limited, Pulsiv Limited, CamGraPhIC Ltd, Cambridge Raman Imaging Ltd and Alusid Limited. Matthew White is a director of The Vaccine Group Limited, Nandi Proteins Limited,and Deakin Bio-Hybrid Materials Ltd. All of these companies are portfolio companies of the Group. The Group charged fees to these companies and was owed amounts from these companies as follows:
| By the Group | Fees charged | Fees charged | Amounts owed | Amounts owed |
|
| 2024 | 2023 | 2024 | 2023 |
|
| £'000 | £'000 | £'000 | £'000 |
| Nandi Proteins Limited | 66 | 78 | 292 | 213 |
| Pulsiv Limited | 24 | 24 | 5 | 5 |
| Alusid Limited | 80 | 70 | 155 | 127 |
| The Vaccine Group Limited | 48 | 48 | 135 | 77 |
| CamGraPhIC Ltd | 40 | 40 | 167 | 112 |
| Cambridge Raman Imaging Ltd | - | 24 | - | - |
| Deakin Bio-Hybrid Materials Ltd | 25 | - | - | - |
| | | | | |
|
| | | | |
| | | | | |
24. Subsequent events
There were no subsequent events to report.
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