TIDMIVO
RNS Number : 3487A
Imperial Innovations Group plc
07 October 2009
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7 October 2009
Imperial Innovations Group plc
Gaining momentum and portfolio maturing as profits reported
Imperial Innovations Group plc (AIM: IVO, "Imperial Innovations", "the Group"),
a leading technology commercialisation and investment group, has published
audited results for the year to 31 July 2009.
Operational highlights
* Refocused investment strategy on fewer, higher-quality opportunities
* First major exit has potential to generate GBP16.1m from GBP1.5m investment,
plus royalty stream.
* GBP14.4m invested in 20 companies
* Six new businesses funded and launched
* Strong pipeline: 50 patents filed, 328 inventions appraised
Financial highlights
* Pre-tax profits GBP5.3m (2008: loss GBP6.7m)
* Net proceeds from sale of investments GBP3.9m (2008: GBP3.3m)
* Royalty revenues up 33% to GBP1.2m (2008: GBP0.9m)
* Net asset value GBP85.6m (2008: GBP80.3m)
* Cash and short term liquidity investments at year end GBP30.7m (2008: GBP43.1m)
Martin Knight, Chairman of Imperial Innovations, said:
"We are uniquely positioned to be able to create, build and invest in
ground-breaking technology opportunities addressing large international markets.
Our focus is on companies and IP that address the great global challenges:
energy usage, healthcare, communications. Breakthrough technologies in these
fields are of great potential value.
"Having built a portfolio of pioneering technologies and companies through our
collaboration with, and proprietary access to the IP emanating from Imperial
College London, 2009 was a year in which we began to realise substantial value
from our investments. We achieved a creditable financial performance with the
first major disposal and a notable increase in net asset value, all at a time of
great economic uncertainty.
"Our approach is now proven and we are building a long term sustainable position
supported by a strong balance sheet. We are well positioned to deliver further
exits from an array of impressive and well-managed companies in the portfolio;
and the pipeline of attractive investment and licence opportunities remains
strong.
"The Board remains confident that the momentum and good progress achieved last
year will be maintained in the current financial year."
Enquiries:
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| Imperial Innovations | 020 7594 6589 |
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| Martin Knight, Chairman | |
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| Susan Searle, Chief Executive Officer | |
+--------------------------------------------------+---------------------------+
| Julian Smith, Finance Director | |
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| | |
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| College Hill | 020 7457 2020 |
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| Adrian Duffield/Sue Charles | |
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| | |
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| J.P. Morgan Cazenove | 020 7588 2828 |
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| Steve Baldwin | |
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Note to Editors - www.imperialinnovations.co.uk
Imperial Innovations is one of the UK's leading technology commercialisation and
investment companies. Founded in 1986 and admitted to the AIM in 2006, Imperial
Innovations' access to early stage technology and intellectual property is
unparalleled.
Imperial Innovations' integrated commercialisation approach encompasses the
identification of ideas, the protection of intellectual property, the
development and licensing of technology and the formation, incubation and
funding, through investment, of technology businesses.
Based at Imperial College London, Imperial Innovations' portfolio of equity
holdings in more than 80 companies spans its three core areas of energy usage,
healthcare, communications.
Companies in the portfolio of Imperial Innovations include: Circassia (allergy
therapeutics), Evo Electric (electric motor and generator solutions), Nexeon
(lithium ion battery technology), Polytherics (drug development), Quantasol
(solar concentrators) and Respivert (respiratory drug development).
A complete copy of the Annual Report and Accounts for the year ended 31 July
2009 can be found at http://www.imperialinnovations.co.uk/annualreport2009.pdf
Strategic Overview
The Group has made good progress towards the fulfilment of its business
objectives to generate attractive and sustainable financial returns from the
commercialisation of early stage technology based intellectual property.
In the course of the year ended 31 July 2009, Innovations invested GBP14.4
million in 20 companies while the portfolio of businesses raised in total over
GBP41 million. Four businesses were sold; six new technology businesses were
funded with launch management teams; 328 inventions were disclosed; and 50
patents were filed.
The Group reported a pre-tax profit of GBP5.3 million (2008: loss GBP5.9
million) and a 7% increase in net asset value. The Group realised GBP3.9 million
net cash from the sale of equity holdings and closed the year with cash and
short term liquidity investments of GBP30.7 million (2008: GBP43.1 million). Net
assets at the year end were up by GBP5.3 million to GBP85.6 million (2008:
GBP80.3 million), reflecting the Group's performance including the upward
revaluation of its portfolio.
There were also a number of developments which are significant pointers for the
Group's future prospects: the first major exit; the disposal of three non core
holdings and that most of the GBP14.4 million invested went into later stage
funding rounds, which demonstrated the maturing of the Group's portfolio.
The Group aims to complete at least one large exit every year as well as a
number of smaller ones.
In October 2008, following the rapid change in the economic climate, the Board
implemented a detailed review of the Group's portfolio and business activity.
This resulted in the Group modifying its strategy to focus its resources on a
smaller group of companies, where the combination of management, technology and
market opportunity, matched with both Innovations' and third party funding can
ensure the optimum chance of success.
The Group is now making fewer but larger investments in companies and focusing
on areas where higher returns are more likely. It is also increasingly active in
managing the key portfolio companies, leading investment rounds and working
closely with founders.
As a result of this focus, the top six companies have made great progress.
Furthermore, in the next 10 companies there are some promising developments and
a combination of great technology and management teams. The Group considers that
the quality of each company's management is pivotal to success and this year has
attracted eight new chairman and six chief executives into the businesses.
Throughout the year the Group continued to create new companies and secure seed
funding, developing them in a capital efficient manner using the resources of
the Imperial Incubator. The Group has maintained its high quality threshold
level before fully supporting new businesses.
The intellectual property pipeline is still very strong. The expenditure on
patents, the number of invention disclosures and the 213 as yet commercially
unexploited patents are evidence of a rich pool of intellectual property (IP)
available to the Group.
Innovation's licensing activity has continued with the same focus on
technologies that have the potential for scale and are clearly meeting
industrial needs.
As part of the strategic review, the Group's cost base was cut by an annualised
amount of GBP0.8 million.
Financial review
Revenues, cost of sales and operating costs
Total revenues were GBP4.3 million (2008: GBP5.3 million). The decline mostly
reflects the reduced up-front fees on licensing and technology transfer and
partially offset by increased royalty income and corporate finance fees.
Royalty revenue from IP licences increased to GBP1.2m (2008: GBP0.9 million).
Income from initial licence payments was GBP0.8 million (2008: GBP1.7 million),
reflecting in part the wider economic climate and the reduction in up-front
fees.
IP management consultancy fees from Imperial College London and others was
GBP1.3 million (2008: GBP1.6 million). This expected decrease reflects Imperial
College taking on more of the administrative burden of the IP due diligence and
management under the terms of the Technology Pipeline Agreement. However, this
was offset by a GBP0.2 million increase in corporate finance fees to GBP0.5
million (2008: GBP0.3 million) and other income was GBP0.5 million (2008: GBP0.8
million).
The cost of sales, arising largely from the revenue-sharing arrangement with
Imperial College London, decreased by 27% to GBP1.1 million (2008: GBP1.5
million), principally reflecting the decreased licensing activity. Also higher
prior year costs reflect the higher revenue share on the development phase of a
particular significant licence contract during 2008.
Operating costs, excluding the share based payment charge, increased to GBP6.8
million (2008: GBP6.7 million). Of this, GBP1.3 million (2008: GBP1.3 million)
was expenditure incurred filing patents and protecting the Group's as-yet
unexploited IP.
The Group's cost base was reduced by GBP0.8 million per annum, although the
associated redundancy and reorganisation costs resulted in a one off charge of
GBP0.3 million this year. The full financial benefit of this reorganisation
should be felt in the current financial year. The Group has also implemented a
tight cost control and cash management approach in its portfolio companies.
Interest income was GBP2.0 million (2008: GBP2.3 million), reflecting the scale
of the Group's cash balance.
The Group reported a pre-tax profit of GBP5.3 million (2008: loss GBP5.9
million) with earnings per share of 9.23p (2008: loss per share 10.63p). The
Board is not recommending the payment of a dividend.
Cash
The Group ended the year with total cash reserves of GBP30.7 million, comprising
GBP1.4 million of cash and GBP29.3 million of short-term liquid resources. This
is a decrease of GBP12.4 million from the opening balance of GBP43.1 million on
1 August 2008 and can be analysed as follows.
+-------------+--------+--------+
| | 2009 | 2008 |
| | GBPm | GBPm |
+-------------+--------+--------+
| Net | (3.7) | (4.8) |
| cash | | |
| used | | |
| in | | |
| operating | | |
| activities | | |
+-------------+--------+--------+
| Purchase | (14.0) | (6.2) |
| of trade | | |
| investments | | |
+-------------+--------+--------+
| Net | 3.4 | 3.3 |
| proceeds | | |
| from | | |
| sale of | | |
| trade | | |
| investments | | |
+-------------+--------+--------+
| Net | 8.6 | (34.0) |
| cash | | |
| used | | |
| from | | |
| other | | |
| investing | | |
| activities | | |
+-------------+--------+--------+
| Financing | - | 29.3 |
| activities | | |
| (issue of | | |
| net | | |
| equity) | | |
+-------------+--------+--------+
| Movement | (5.7) | (12.4) |
| during | | |
| year | | |
+-------------+--------+--------+
| Adjustment | (6.7) | 36.0 |
| for short | | |
| term | | |
| liquidity | | |
| investments | | |
+-------------+--------+--------+
| Movement | (12.4) | 23.6 |
| in net | | |
| cash | | |
| reserves | | |
+-------------+--------+--------+
The Group invests cash surplus to working capital requirements in short-term
deposits, classified as short term liquidity investments, across a number of
banks with a focus on capital preservation rather than interest earned. The
Group has no foreign currency deposits.
Investment portfolio performance
The investment portfolio grew from GBP50.9 million spread across 89 companies,
to GBP55.8 million across 80 companies. Portfolio companies raised more than
GBP41 million from all sources of investment during the year.
The fair value of the holdings increased by GBP3.3 million (2008: loss GBP7.1
million), before taking into account associated revenue sharing obligations, and
by GBP6.9 million (2008: loss GBP3.0 million) after these obligations.
+-------------+--------+--------+
| Portfolio | 2009 | 2008 |
| movements | GBPm | GBPm |
| excluding | | |
| cash | | |
| invested | | |
+-------------+--------+--------+
| Gains | 12.3 | 4.0 |
| on the | | |
| revaluation | | |
| of | | |
| investments | | |
+-------------+--------+--------+
| Losses | (9.0) | (11.1) |
| on the | | |
| revaluation | | |
| of | | |
| investments | | |
+-------------+--------+--------+
| Fair | 3.3 | (7.1) |
| value | | |
| gains | | |
| / | | |
| (losses) | | |
+-------------+--------+--------+
| Movement | 3.6 | 4.1 |
| in | | |
| associated | | |
| revenue | | |
| sharing | | |
| obligations | | |
+-------------+--------+--------+
| Net | 6.9 | (3.0) |
| fair | | |
| value | | |
| gain / | | |
| (loss) | | |
+-------------+--------+--------+
Investment and divestment
The Group made GBP14.4 million of investments to fund 20 technology companies in
its portfolio. The early stage nature of many of the technology companies is
such that investments are made on a milestone/tranche basis that matches the
companies' need for cash with the achievement of agreed milestones. This
provides investment security for the companies and more control over the Group's
cash payments to the portfolio.
Additional investment commitments undrawn at the year end amounted to GBP3.1
million. Additionally, some investments are made as convertible loans and at the
year end there was a total of GBP7.5 million outstanding, which is included in
fixed-asset investments.
The Group realised net cash proceeds after revenue sharing obligations of GBP3.9
million (2008: GBP3.3 million) from the partial realisation of four investment
assets. Total net investment after net cash disposals in the year was GBP10.6
million (2008: GBP3.0 million).
Portfolio company creation
A total of 20 companies in the portfolio achieved successful follow-on funding
rounds during the year. Equity acquired relates to equity stakes acquired in
companies in consideration for licences granted or services rendered.
As a result of the focus on fewer start ups of higher quality, the Group formed
four companies compared to 11 during the last financial year, although the
number of propositions remained at a healthy 31. The Group seed funded, with
launch management teams, six companies (2008: four companies).
Portfolio company overview
The table below sets out the top 10 technology companies, by value, in the
portfolio including contingent deferred consideration, to illustrate the spread
of the investments held and their relative carrying value. All of the carrying
values listed below reflect the net fair value of the investment, being the
gross value of the holding less the attributable revenue-sharing obligations
associated with each investment. The percentage of issued share capital
represents the absolute percentage of the shares held, without reflecting any
revenue-sharing obligations.
+-----------------------+-------------+-------------+------------+------------+------------+
| |
+-----------------------+
| Company | Net | Cash | Net | Net | % of |
| | investment | invested / | movement | investment | Issued |
| | carrying | (cash | in | carrying | share |
| | value | divested) | carrying | value at | capital |
| | at | 12 months | value | 31 July | held |
| | 31 July | to | 12 months | 2009 | 31 July |
| | 2008 | 31 July | to | | 2009 |
| | | 2009 | 31 July | | |
| | | | 2009 | | |
+-----------------------+-------------+-------------+------------+------------+------------+
| Company | Net | Cash | Net | Net | % of |
| | investment | invested / | movement | investment | Issued |
| | carrying | (cash | in | carrying | share |
| | value | divested) | carrying | value at | capital |
| | at | 12 months | value | 31 July | held |
| | 31 July | to | 12 months | 2009 | 31 July |
| | 2008 | 31 July | to | | 2009 |
| | | 2009 | 31 July | | |
| | | | 2009 | | |
+-----------------------+-------------+-------------+------------+------------+------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP000 | |
+-----------------------+-------------+-------------+------------+------------+------------+
| Ceres Power | 4,454 | - | 629 | 5,083 | 3.6% |
+-----------------------+-------------+-------------+------------+------------+------------+
| Circassia | 7,267 | - | - | 7,267 | 14.2% |
+-----------------------+-------------+-------------+------------+------------+------------+
| EVO Electric | 744 | 1,000 | - | 1,744 | 37.6% |
+-----------------------+-------------+-------------+------------+------------+------------+
| Molecular Vision | 300 | 1,000 | 107 | 1,407 | 57.2% |
+-----------------------+-------------+-------------+------------+------------+------------+
| Nexeon | 3,196 | 4,000 | 4,131 | 11,327 | 35.0% |
+-----------------------+-------------+-------------+------------+------------+------------+
| Osspray | 441 | 950 | - | 1,391 | 40.0% |
+-----------------------+-------------+-------------+------------+------------+------------+
| Process Systems | 1,280 | - | - | 1,280 | 25.4% |
| Enterprise | | | | | |
+-----------------------+-------------+-------------+------------+------------+------------+
| Respivert | 1,120 | 923 | - | 2,043 | 13.4% |
+-----------------------+-------------+-------------+------------+------------+------------+
| Thiakis | 2,642 | (2,856) | 6,211 | 5,997 | - |
+-----------------------+-------------+-------------+------------+------------+------------+
| Veryan Medical | 3,217 | 2,500 | - | 5,717 | 37.6% |
+-----------------------+-------------+-------------+------------+------------+------------+
In July 2009 the Group sold its stake in InforSense to IDBS for GBP0.9 million
in cash at completion, with a further deferred performance-related payment
estimated to be about GBP0.1 million.
Deferred payment obligations
Non current liabilities decreased from GBP12.7 million to GBP5.7 million. This
reflects the decrease in the revenue-sharing obligations to Imperial College
London and other parties arising on the revaluation of investments and the
transfer of GBP1.8 million of shares in Ceres Power to Imperial College London
in satisfaction of the revenue sharing obligation.
Operational review
Realisations
The Group's largest single transaction was the disposal of its 23.7% holding in
Thiakis. This business was sold to Wyeth Pharmaceuticals in December 2008 for a
potential price of GBP99.4 million, subject to achieving certain milestones. The
initial payment was GBP19.6 million, of which the Group received GBP2.9 million,
net of revenue-sharing payments to Imperial College London.
If Thiakis meets its performance targets, the deal could generate up to GBP16.1
million for the Group and GBP6.1 million in revenue share for Imperial College
London and other contributors to the IP.
Thiakis is developing treatments for obesity, including the amelioration of
diseases associated with excess weight such as type 2 diabetes and
cardiovascular disease. It is a good example of Innovations' business model, the
Group having helped founders Professor Stephen Bloom and Dr John Burt to create
the company, and then supporting it with GBP1.5m investment as well as licensing
certain IP rights to it.
Other notable transactions included the sale of Heliswirl tubing technology and
the trade sale of Inforsense. The latter realised GBP0.9 million for the Group.
Licensing
Innovations generated GBP1.2 million (2008: GBP0.9 million) of royalties, a 33%
increase from the portfolio of licences and IP agreements.
Although the economic climate has slowed down licensing activity, with many
partners being unwilling to pay substantial up-front fees, the subsequent
royalty component from licence agreements has a much greater impact than the
receipt of up-front payments. The priority is to find the right partners for our
technologies and conclude agreements with them.
The Group has been successful in securing, in partnership with Imperial College
London, proof-of-concept and development funding from a variety of grant and
government sources including Wellcome Trust, MRC and WRAP. This funding has
helped to progress a number of ideas closer to commercialisation, so enhancing
the chance of successful licensing.
New intellectual property transactions signed included those to:
* Astellas - the second largest Japanese pharmaceutical company for software code
used for modelling how drug molecules bind to receptors inside the body
* Servier - a clinical trials database for high blood pressure in the elderly to
Servier, the second largest French pharmaceuticals company. High blood pressure
is very common, especially in elderly people
* PSE - a virtual modelling tool allowing engineers to predict the properties of
liquids and gases to considerably speed up the design of new process plants
* Syngene - a strain of bacteria for development of a novel class of antibacterial
substances that do not kill the bacteria but disarm them and render them
harmless
* Novartis Institutes for Biomedical Research - a kidney disease related research
tool
* A major chemical company for the separation of single-walled carbon nanotubes
(SWNTs) based on their electrical properties and
* An option agreement with an oil and gas company for tube risers used for field
exploration.
There have also been a number of additional IP related transactions with a
number of the Group's companies including BioCeramic Therapeutics, Membrane
Extraction Technology, MyAction, CVIS, Photobiotics, Navion, Cortexica,
Deltadot, Medermica and Novacem.
Innovations' royalty income is expected to be modest in the medium term.
However, royalty income could increase substantially, if for example a major
therapeutic product such as the Thiakis obesity drug should prove a notable
success. The Thiakis programme could result in royalties in 2014.
Investments
Innovations invested GBP14.4m across 20 companies, including:
In September 2008, investing GBP1 million in Evo Electric. The Group's stake is
37.6%. Evo Electric develops and manufactures advanced electric machines, hybrid
drive trains and generators for a wide range of transportation and power.
In February 2009, leading on a GBP10.0 million fund raising for Nexeon with the
Group investing GBP4 million alongside Invesco Perpetual and Partnerships UK,
resulting in a 35.0% stake. Nexeon develops high-performance silicon anodes for
lithium-ion batteries.
In June 2009, making a further investment of GBP0.9 million in Respivert, which
is developing a new generation of inhaled drugs for treatment of lung disease.
The Group's stake is 13.4%. In total, Respivert raised GBP6 million of
second-tranche funding, with Advent, Fidelity and Schroder Life Science Ventures
also investing.
In January and July 2009, increasing its stake in OSspray to 40.0% by investing
a further GBP1.0 million, alongside NESTA and The Capital Fund. OSspray has
developed a new dental technology application, using bioactive glass as a
desensitising and cleaning agent for air polishing teeth.
In April and July 2009, investing a further GBP2.5 million in Veryan Medical to
increase its stake to 37.6%. The additional investment will fund pivotal trials
of Veryan's stent technology which is designed to reduce the formation of
disease in arteries and be stronger than existing stents.
Other companies with significant funding rounds supported by the Group included
Acrobot (the Group invested GBP0.2 million taking its stake to 19.6%),
CellMedica (GBP0.4 million and 32.1%), Quantasol (GBP1.0 million and 37.8%),
Myotec (GBP0.6 million and 38.8%), and Molecular Vision (GBP1.0 million and
57.2%).
Management of portfolio
There are 80 companies in the Group's portfolio. It is well segmented and
appropriately resourced with three types of companies: accelerated growth,
organic growth and smaller investments.
There are 31 companies termed "accelerated growth", of which 20 are post-Series
A funding (12 life science and eight engineering) and 11 are pre-Series A
funding (five life science and six engineering). These are businesses expected
to follow an equity funded/venture capital type of financing strategy with a
start up phase of investment losses whilst development work is carried out, but
with the potential for significant upside. The Group plays an active role in
these companies, often being represented on the Board, and particularly
encourages the development of a high-calibre management team.
At the start of the year, facing the impact on co-investors of the global
recession and liquidity restrictions, the investment policy for these
"accelerated growth" companies was reviewed. The portfolio was segmented based
on the stage of development of the company, its financing requirements, strength
of the management team, the technology and market potential and likely time to
break-even or exit. Significant time has been invested in ensuring that those
companies reaching a more mature stage, albeit still pre-revenue, have top
quality boards and management teams and are funded to deliver.
Seventeen company holdings are termed "organic growth", growing from their own
resources, with a flexible approach to funding and preferring to generate
revenue from customers (often through a mixed product and service business
model) than to raise external equity capital. They may also secure commercial
partners and grants to keep external capital to a minimum. These companies may
adapt their funding strategy at a later stage. The Group provides the organic
growth companies with access to its industrial network and an efficient company
formation process.
Thirty-two holdings are termed "smaller assets" and represent investments that
are small and/or in established businesses where no further investment is
expected.
Portfolio Update
Several portfolio companies in the accelerated growth segment made significant
operational progress during the year. These companies are now well funded, with
quality management teams in place, and are rapidly maturing as standalone
businesses.
The following notable events occurred during the year:
* CellMedica, a cell therapy company working on new techniques harnessing and
enhancing the power of the immune system to fight human disease, commenced its
Cytomegalovirus impact clinical study, a large clinical trial funded by the
Wellcome Trust.
* Circassia, a biopharmaceutical company developing medicines to control immune
system responses, initiated three Phase-2 trials, two for its cat allergy
product and one for ragweed allergy.
* Molecular Vision, a company developing a low-cost diagnostic device for use in
the doctor's surgery and in the home, appointed Peter Woodford as non-executive
chairman. Peter was previously at Roche Diagnostics.
* Nexeon proved the viability of its battery technology in terms of capacity and
cycle life. It also established a fully operational pilot plant producing
sufficient material to produce high daily volumes of cells. Following a round of
funding in February (see above), the company recruited Scott Brown as CEO with
assistance from Innovations. Scott previously held senior management roles at
Cambridge Display Technology and Sumation.
* OSspray signed distribution arrangements for its Sylc dental whitening product
with Optident for the UK and with White Cross GmbH in Germany.
* Polytherics, a precision chemistry company for optimisation of proteins as
biopharmaceutical products, signed an exclusive licence with Celtic Pharma to
develop and commercialise its first novel biotherapeutic, and achieved a
European patent grant for its core technology platform.
Incubation
The Group continues to refine and enhance its approach to the creation of New
Ventures. In addition to being offered facilities in the Group's "incubator",
New Ventures are actively managed as "start up projects", typically for a 12-18
month period.
The Technology team investigates the technology and IP opportunities for new
companies, while the New Ventures team looks at routes to market, competitive
positioning and sustainability. The formal launch of a new company occurs only
when the Group is confident that seed funding will be available and that the
right management team is in place.
The effect of this more thorough approach is to reduce the number of newly
formed companies but significantly increase their probability of success. The
Group is capital efficient with its New Ventures, using grants to get through
proof of concept stage, stretching seed funding by managing costs and leveraging
grant funding sources. However, when businesses are ready for accelerated growth
then the Group does not hold back from fully capitalising them.
This year six companies were seed funded: Cortexica Vision Systems, Myotec,
Navion, Novacem, Plaxica and Smart Surgical Appliances. The New Ventures team
has concentrated on de-risking and building value in these companies, working
towards demonstration of technologies, product development and marketing to
customers and partners. For example:
* Novacem, a company aiming to combat global warming with carbon-negative cement,
closed a GBP1 million funding round with the London Technology Fund and the
Royal Society as co-investors.
* Cortexica, which is developing technology to replicate human vision, launched
its first product, BrandTrack, to monitor the appearance of logos and brands on
television and video streams.
During the year, 31 company projects were incubated. These projects were
selected from three sources: invention disclosures during the year (328
inventions were identified), entrepreneurs in residence, and identification of
market opportunities through our industrial and management network.
Pipeline development
The Group continues to develop and commercialise a pipeline of promising
technologies and to support them with managerial and commercial expertise.
Imperial College London, led by Sir Roy Anderson, has provided a unique and
steady source of quality deal flow. The support the Group receives from the
College's senior management and departments is one of its unique strengths.
The Group has also successfully identified and developed technologies emanating
from Imperial College Healthcare NHS Trust (combining Charing Cross, St Marys
and Hammersmith hospitals) which together with Imperial College's Medical School
combines to form one of the UK's first 5 Academic Health Science Centres. The
close association between the Group, Imperial College London and the Trust
enables the Group to accelerate the adoption of new technologies by the
healthcare system.
Beyond the College, the Group's Commercialisation Services team manages an
incubation contract for the Waste Resources and Action Programme (WRAP), and
contracts with the National Physical Laboratories and Cranfield University on
the commercialisation of inventions. This provides a focus for engaging with
partners and brokering technologies.
Internationally, I2india, co-founded with management, Chairman Chris Mathias,
business angels and TATA group has established operations in Bangalore. It has
entered into a number of agreements with Indian research organisations and has
begun to commercialise various technologies. It is now establishing its pipeline
of technologies from various Indian research organisations. This gives the Group
exposure and access to the Indian market as potential customers and partners for
its technologies.
Outlook
The year was one of good performance and real progress substantiating the
business model. At the same time the portfolio efforts have been focused on more
efficient commercialisation of high-value technologies.
The external challenges that will be posed in 2009/10 will remain intense.
Customers, financial partners and licensees will all be faced with a
continuation of economic uncertainty. However, last year showed that traction is
being achieved in the application of the Group's business model.
The Board is confident that the Group has the right combination of management,
financial resource and exploitable intellectual property to build on its
achievements in the last financial years. The Group is well positioned to
deliver further exits from the portfolio.
Consolidated Income Statement
For the year ended 31 July 2009
+--------------------------------------------------------------+------+----------+---------+
| | Note | 2009 | 2008 |
| | | GBP000 | GBP000 |
+--------------------------------------------------------------+------+----------+---------+
| Continuing operations | | | |
+--------------------------------------------------------------+------+----------+---------+
| Revenue | 3 | 4,320 | 5,336 |
+--------------------------------------------------------------+------+----------+---------+
| Cost of sales | | (1,139) | (1,453) |
+--------------------------------------------------------------+------+----------+---------+
| Gross profit | | 3,181 | 3,883 |
+--------------------------------------------------------------+------+----------+---------+
| Net change in fair value of investments held at fair value | 6 | 6,960 | (2,989) |
| through profit and loss | | | |
+--------------------------------------------------------------+------+----------+---------+
| Administrative expenses: | | | |
+--------------------------------------------------------------+------+----------+---------+
| - Other administrative expenses | | (6,772) | (6,698) |
+--------------------------------------------------------------+------+----------+---------+
| - Share-based payments | | - | (3,202) |
+--------------------------------------------------------------+------+----------+---------+
| Operating profit / (loss) | | 3,369 | (9,006) |
+--------------------------------------------------------------+------+----------+---------+
| Interest receivable | | 1,953 | 2,293 |
+--------------------------------------------------------------+------+----------+---------+
| Interest payable | | - | (11) |
+--------------------------------------------------------------+------+----------+---------+
| Profit / (loss) before taxation | | 5,322 | (6,724) |
+--------------------------------------------------------------+------+----------+---------+
| Taxation | | - | 863 |
+--------------------------------------------------------------+------+----------+---------+
| Profit / (loss) for the financial year | | 5,322 | (5,861) |
+--------------------------------------------------------------+------+----------+---------+
| | | | |
+--------------------------------------------------------------+------+----------+---------+
| Basic earnings / (losses) per Ordinary Share (pence) | 7 | 9.23 | (10.63) |
+--------------------------------------------------------------+------+----------+---------+
| Diluted earnings / (losses) per Ordinary Share (pence) | 7 | 9.20 | (10.63) |
+--------------------------------------------------------------+------+----------+---------+
Consolidated Balance Sheet
As at 31 July 2009
+----------------------------------------------------+----------+----------+---------+
| | Note | 2009 | 2008 |
| | | GBP000 | GBP000 |
+----------------------------------------------------+----------+----------+---------+
| Assets | | | |
+----------------------------------------------------+----------+----------+---------+
| Non-current assets | | | |
+----------------------------------------------------+----------+----------+---------+
| Property, plant and equipment | | 28 | 44 |
+----------------------------------------------------+----------+----------+---------+
| Investments | | 54,954 | 49,369 |
+----------------------------------------------------+----------+----------+---------+
| University Challenge Seed Fund (UCSF): | | | |
+----------------------------------------------------+----------+----------+---------+
| - Investments | | 763 | 800 |
+----------------------------------------------------+----------+----------+---------+
| - Loans | | 42 | 758 |
+----------------------------------------------------+----------+----------+---------+
| Low Carbon Seed Fund (LCSF) | | - | 234 |
+----------------------------------------------------+----------+----------+---------+
| Total non-current assets | | 55,787 | 51,205 |
+----------------------------------------------------+----------+----------+---------+
| | | | |
+----------------------------------------------------+----------+----------+---------+
| Current assets | | | |
+----------------------------------------------------+----------+----------+---------+
| Trade and other receivables | | 7,524 | 1,488 |
+----------------------------------------------------+----------+----------+---------+
| Short term liquidity investments | 8 | 29,300 | 36,000 |
+----------------------------------------------------+----------+----------+---------+
| Cash and cash equivalents | 8 | 1,401 | 7,077 |
+----------------------------------------------------+----------+----------+---------+
| Total current assets | | 38,225 | 44,565 |
+----------------------------------------------------+----------+----------+---------+
| Total assets | | 94,012 | 95,770 |
+----------------------------------------------------+----------+----------+---------+
| | | | |
+----------------------------------------------------+----------+----------+---------+
| Equity and liabilities | | | |
+----------------------------------------------------+----------+----------+---------+
| Equity attributable to equity holders | | | |
+----------------------------------------------------+----------+----------+---------+
| Issued share capital | | 1,746 | 1,746 |
+----------------------------------------------------+----------+----------+---------+
| Share premium | | 51,748 | 51,748 |
+----------------------------------------------------+----------+----------+---------+
| Retained earnings | | 5,903 | 581 |
+----------------------------------------------------+----------+----------+---------+
| Share-based payments | | 8,097 | 8,097 |
+----------------------------------------------------+----------+----------+---------+
| Other reserves | | 18,096 | 18,096 |
+----------------------------------------------------+----------+----------+---------+
| Total equity | | 85,590 | 80,268 |
+----------------------------------------------------+----------+----------+---------+
| | | | |
+----------------------------------------------------+----------+----------+---------+
| Liabilities | | | |
+----------------------------------------------------+----------+----------+---------+
| Non-current liabilities | | | |
+----------------------------------------------------+----------+----------+---------+
| University Challenge Seed Fund (UCSF) | | 805 | 1,590 |
+----------------------------------------------------+----------+----------+---------+
| Provisions for liabilities and charges | 5 | 4,883 | 10,863 |
+----------------------------------------------------+----------+----------+---------+
| Low Carbon Seed Fund (LCSF) | | - | 234 |
+----------------------------------------------------+----------+----------+---------+
| Total non-current liabilities | | 5,688 | 12,687 |
+----------------------------------------------------+----------+----------+---------+
| | | | |
+----------------------------------------------------+----------+----------+---------+
| Current liabilities | | | |
+----------------------------------------------------+----------+----------+---------+
| Trade and other payables | | 2,734 | 2,815 |
+----------------------------------------------------+----------+----------+---------+
| Total liabilities | | 8,422 | 15,502 |
+----------------------------------------------------+----------+----------+---------+
| Total equity and liabilities | | 94,012 | 95,770 |
+----------------------------------------------------+----------+----------+---------+
Consolidated Cash Flow Statement
For the year ended 31 July 2009
+---------------------------------------------+----------+-------+----------+----------+
| | | Note | 2009 | 2008 |
| | | | GBP000 | GBP000 |
+---------------------------------------------+----------+-------+----------+----------+
| Cash inflows / (outflows) from operating | | | | |
| activities | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Operating profit / (loss) | | | 3,369 | (9,006) |
+---------------------------------------------+----------+-------+----------+----------+
| | | |
+----------------------------------------------------------------+----------+----------+
| Adjustments to reconcile operating profit / (loss) | | |
| to net cash flows from operating activities | | |
+----------------------------------------------------------------+----------+----------+
| Depreciation of property, plant and | | | 21 | 21 |
| equipment | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Fair value movement in investments | | | (6,960) | 2,989 |
+---------------------------------------------+----------+-------+----------+----------+
| Share based payments | | | - | 3,202 |
+---------------------------------------------+----------+-------+----------+----------+
| UCSF management fee | | | (32) | (60) |
+---------------------------------------------+----------+-------+----------+----------+
| | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Working capital adjustments: | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Increase in trade and other receivables | | | (109) | (139) |
+---------------------------------------------+----------+-------+----------+----------+
| Increase / (decrease) in trade and other | | | 11 | (1,847) |
| payables | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Net cash used in operating activities | | | (3,700) | (4,840) |
+---------------------------------------------+----------+-------+----------+----------+
| | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Cash flows from investing activities | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Purchase of trade investments | | 8 | (14,000) | (6,149) |
+---------------------------------------------+----------+-------+----------+----------+
| Proceeds from sale of trade investments | | 8 | 3,939 | 3,600 |
+---------------------------------------------+----------+-------+----------+----------+
| Revenue share paid on asset realisations in | | 8 | (512) | (332) |
| trade investments | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Net cash flows from investments in trade | | | (10,573) | (2,881) |
| investments | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Purchase of property, plant and equipment | | | (5) | (11) |
+---------------------------------------------+----------+-------+----------+----------+
| Interest paid | | | - | (25) |
+---------------------------------------------+----------+-------+----------+----------+
| Interest received | | | 1,902 | 2,079 |
+---------------------------------------------+----------+-------+----------+----------+
| Short term liquidity investments | | | 6,700 | (36,000) |
+---------------------------------------------+----------+-------+----------+----------+
| Net cash flows from other investing | | | 8,597 | (33,957) |
| activities | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Net cash used in investing activities | | | (1,976) | (36,838) |
+---------------------------------------------+----------+-------+----------+----------+
| | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Cash flows from financing activities | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Proceeds from share issues | | | - | 30,000 |
+---------------------------------------------+----------+-------+----------+----------+
| Transaction cost of issue of shares | | | - | (720) |
+---------------------------------------------+----------+-------+----------+----------+
| Income from UCSF fund | | | - | 6 |
+---------------------------------------------+----------+-------+----------+----------+
| Net cash generated from financing | | | - | 29,286 |
| activities | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Net decrease in cash and cash equivalents | | | (5,676) | (12,392) |
+---------------------------------------------+----------+-------+----------+----------+
| Cash and cash equivalents at beginning of | | | 7,077 | 19,469 |
| the year | | | | |
+---------------------------------------------+----------+-------+----------+----------+
| Cash and cash equivalents at end of the | | | 1,401 | 7,077 |
| year | | | | |
+---------------------------------------------+----------+-------+----------+----------+
Consolidated Statement of Changes in Equity Attributable to equity holders of
the group
+----------------------------------+---------+---------+----------+-------------+-----------+---------+
| | Share | Share | Retained | Share-based | Other | Total |
| | Capital | Premium | Earnings | Payments | Reserves | |
+----------------------------------+---------+---------+----------+-------------+-----------+---------+
| | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 | GBP000 |
+----------------------------------+---------+---------+----------+-------------+-----------+---------+
| At 1 August 2007 | 1,501 | 22,713 | 6,442 | 4,895 | 18,096 | 53,647 |
+----------------------------------+---------+---------+----------+-------------+-----------+---------+
| Consolidated loss for the year | - | - | (5,861) | - | - | (5,861) |
| to 31 July 2008 | | | | | | |
+----------------------------------+---------+---------+----------+-------------+-----------+---------+
| Issue of share | 245 | 29,035 | - | - | - | 29,280 |
| capital | | | | | | |
+----------------------------------+---------+---------+----------+-------------+-----------+---------+
| Share-based | - | - | - | 3,202 | - | 3,202 |
| payments | | | | | | |
+----------------------------------+---------+---------+----------+-------------+-----------+---------+
| At 31 July 2008 | 1,746 | 51,748 | 581 | 8,097 | 18,096 | 80,268 |
+----------------------------------+---------+---------+----------+-------------+-----------+---------+
| Consolidated profit for the year | - | - | 5,322 | - | - | 5,322 |
| to 31 July 2009 | | | | | | |
+----------------------------------+---------+---------+----------+-------------+-----------+---------+
| At 31 July 2009 | 1,746 | 51,748 | 5,903 | 8,097 | 18,096 | 85,590 |
+----------------------------------+---------+---------+----------+-------------+-----------+---------+
1. Basis of preparation
The preliminary announcement for the year ended 31 July 2009 has been prepared
in accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union as at 31 July 2009. The financial information contained in
this preliminary announcement does not constitute statutory accounts as defined
in Section 434 of the Companies Act 2006. The financial information has been
extracted from the financial statements for the year ended 31 July 2009, which
have been approved by the Board of Directors and on which the auditors have
reported without qualification. The financial statements will be delivered to
the Registrar of Companies after the Annual General Meeting. The financial
statements for the year ended 31 July 2008, upon which the auditors reported
without qualification, have been delivered to the Registrar of Companies.
2. Accounting policies
Imperial Innovations Group plc is a Public Limited Company incorporated and
domiciled in the United Kingdom whose shares are listed on the Alternative
Investment Market of the London Stock Exchange (AIM). The address of the
registered office is Imperial Innovations Group plc, Level 12, Electrical and
Electronic Engineering Building, Imperial College, London SW7 2AZ. Imperial
Innovations Group plc's shares were admitted to the AIM market of the London
Stock Exchange on 31 July 2006.
The consolidated Financial Statements comprise a consolidation of amounts
included in the financial statements of the following companies:
+-------------+----------------------------+----------------------------+------------+---------------+
| Company | Nature of | Country |
| | operations | of |
| | | Incorporation |
+-------------+----------------------------------------------------------------------+---------------+
| Imperial | Technology licensing and investment holding company | England |
| Innovations | | |
| Limited | | |
+-------------+----------------------------------------------------------------------+---------------+
| Imperial Innovations LLP | Investment holding company | England |
+------------------------------------------+-----------------------------------------+---------------+
| Imperial Innovations Investments | Investment holding company | England |
| Limited | | |
+------------------------------------------+-----------------------------------------+---------------+
| Imperial Innovations Businesses LLP | Investment holding company | England |
+------------------------------------------+-----------------------------------------+---------------+
| Imperial Innovations Investment Management Limited | Investment | England |
| | services | |
| | company | |
+-----------------------------------------------------------------------+------------+---------------+
| Imperial College Company Maker | Investment holding company | England |
| Limited | | |
+------------------------------------------+-----------------------------------------+---------------+
| Chembecell Limited | Inactive | England |
+------------------------------------------+-----------------------------------------+---------------+
| Octam Limited | Inactive | England |
+------------------------------------------+-----------------------------------------+---------------+
| Eostre Energy Systems Limited | Inactive | England |
+------------------------------------------+-----------------------------------------+---------------+
| Jointanalysis Limited | Inactive | England |
+-------------+----------------------------+----------------------------+------------+---------------+
All the principal subsidiaries of the Group have only Ordinary Share capital,
are 100% owned within the Group and have been included in the consolidated
Financial Statements.
The consolidated Financial Statements have been prepared under the historical
cost convention, as modified by the revaluation of certain financial assets and
financial liabilities at fair value through profit and loss, as required by
International Accounting Standard (IAS) 39 'Financial Instruments: Recognition
and Measurement'.
The consolidated Financial Statements of Imperial Innovations Group plc (the
Group) have been prepared in accordance with European Union Endorsed
International Financial Reporting Standards (IFRSs), International Financial
Reporting Interpretations Committee (IFRIC) interpretations and the Companies
Act 2006 applicable to companies reporting under IFRS. The Group has elected to
prepare its entity accounts in accordance with United Kingdom Generally Accepted
Accounting Practice (UK GAAP).
The preparation of financial statements in conformity with IFRS requires the use
of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated
Financial Statements are disclosed in note 24 to the consolidated financial
statements.
Basis of Consolidation
The Group's consolidated Financial Statements consist of Imperial Innovations
Group plc and all of its subsidiaries. The consolidated financial statements
exclude intra-group transactions.
Subsidiaries are consolidated from the date of their acquisition, being the date
on which the Group obtains control, and continue to be consolidated until the
date that such control ceases. Control comprises the power to govern the
financial and operating policies of the investee so as to obtain benefit from
its activities and is achieved through direct or indirect ownership of more than
half of the voting rights, (currently exercisable or convertible potential
voting rights) or by way of contractual agreement.
The cost of acquisition is measured at fair value of assets given, equity
instruments issued and liabilities incurred or assumed at the date of exchange
plus costs directly attributable to the transaction. Identifiable assets
acquired, and liabilities assumed, in a business combination are initially
measured at their fair values at acquisition date, irrespective of the extent of
any minority interest. The excess of the cost of acquisition over the fair value
of the Group's share of the identifiable net assets is recorded as goodwill.
The Group has elected not to apply IFRS 3, 'Business Combinations',
retrospectively to business combinations that took place before 1 August 2005.
Associates
Associates are entities which the Group does not control, accompanied by a
shareholding of between 20% to 50% of the equity or voting rights.
Investments that are held as part of the Group's investment portfolio are
carried in the balance sheet at fair value even though the Group may have
significant influence over these companies. This treatment is permitted by IAS
28 'Investments in Associates', which requires such investments to be excluded
from its scope where those investments are designated, upon initial recognition,
as at fair value through profit or loss and accounted for in accordance with IAS
39, with changes in fair value recognised in the period of change.
Segmental Reporting
Activities are allocated to one business segment. A business segment is a group
of assets and operations engaged in providing products or services that are
subject to risks and returns that are different from those of other business
segments. A geographical segment is engaged in providing products or services
within a particular economic environment that is subject to risks and returns
which are different from those segments operating in other economic
environments.
Foreign Currency Translation
The consolidated Financial Statements are presented in pounds sterling, which is
the Group's functional and presentational currency. The Group determines the
functional currency of each entity and items included in the Financial
Statements of each entity are measured using that functional currency.
Transactions denominated in foreign currencies are translated into sterling at
the actual rate of exchange ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are translated at rates
ruling at the Balance Sheet date. Exchange differences are included in the
Income Statement.
Property, plant and equipment
All property, plant and equipment are stated at historical cost, together with
any incidental costs of acquisition. Depreciation is provided on all property,
plant and equipment at rates calculated to write each asset down to its
estimated residual value on a straight line basis over its expected useful life,
as follows:
+--------------+--------------------------+
| Office | - over four years |
| equipment | |
+--------------+--------------------------+
| Computers | - over four years |
+--------------+--------------------------+
Intangible fixed assets
Intangible fixed assets, which include acquired patent rights, are stated at
recoverable amount (fair value) and are tested annually for any impairment and
whenever circumstances indicate that the carrying amount may not be recoverable.
Patent costs incurred on internally generated intellectual property are written
off to the income statement in the period in which they are incurred.
Goodwill
Goodwill arising on the acquisition of a subsidiary represents the excess of the
fair value of the consideration given over the fair value of the identifiable
net assets acquired. Goodwill is recognised as an asset and is reviewed annually
for impairment and is carried at cost less accumulated impairment. On disposal
of a subsidiary, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Equity investments and other financial assets
Financial assets within the scope of IAS 39 are classified as either financial
assets at fair value through the profit and loss, loans or receivables, held to
maturity investments or available for sale financial assets except in the case
of University Challenge Seed Fund (UCSF) and Low Carbon Seed Fund (LCSF)
investments. When financial assets are recognised initially they are measured at
fair value, plus, in the case of investments not at fair value through profit
and loss, directly attributable transaction cost. Changes in the fair value of
the UCSF and LCSF investments are set against the value of the UCSF and LCSF
funds respectively and not through the profit or loss. This is in recognition
that the value of the fund has to increase threefold before any repayments or
disbursements can be made to the Group in the case of the UCSF and that the fund
has to exceed a hurdle amount (the lower of GBP2 million and the total amount of
capital contributions drawn down by the partnership) before any distributions
can be made in the case of the LCSF.
Financial Assets at Fair Value through Profit or Loss
The Group classifies all its equity investments as financial assets at fair
value through profit and loss. Investments in associated undertakings that are
held by the Group with a view to the ultimate realisation of capital gains are
designated as financial assets at fair value through profit and loss.
Investments in undertakings that do not meet the definition of an associate
undertaking are also designated as financial assets at fair value through profit
and loss on initial recognition. The fair value movement is net of revenue
share.
Treatment of gains and losses arising on fair value
Realised and unrealised gains and losses on financial assets at fair value
through profit or loss are included in the Income Statement in the period in
which they arise.
Valuation of investments
The fair values of quoted investments are based on bid prices at the Balance
Sheet date.
The fair value of unlisted securities is established using International Private
Equity and Venture Capital Valuation Guidelines (IPEVCVG). The valuation
methodology used most commonly by the Group is the 'price of recent investment'
contained in the IPEVCVG. The following considerations are used when calculating
the fair value using the 'price of recent investment' guidelines:
* where the investment being valued was itself made recently, its cost will
generally provide a good indication of fair value;
* where there has been any recent investment by third parties, the price of that
investment will provide a basis of the valuation;
* if there is no readily ascertainable value from following the 'price of recent
investment' methodology, the Group considers alternative methodologies in the
IPEVCVG guidelines, being principally discounted cash flows and price-earnings
multiples requiring management to make assumptions over the timing and nature of
future earnings and cash flows when calculating fair value;
* where a fair value cannot be estimated reliably, the investment is reported at
the carrying value at the previous reporting date unless there is evidence that
the investment has since been impaired; and
* all recorded values of investments are regularly reviewed for any indication of
impairment and adjusted accordingly.
Recognition of financial assets
The purchase or sale of financial assets is recognised using trade date
accounting for all assets held at fair value through profit and loss. The
recognition of an asset and the liability to pay for it or the de-recognition of
an asset, recognition of any gain or loss on disposal and the recognition of a
receivable from a buyer occur on the date that an irrevocable commitment is made
to purchase or to sell the asset.
Pensions
The Group makes payments to a defined contribution scheme. The assets of the
scheme are held separately from the Group in independently administered funds.
Contributions made by the Group are charged to the income statement in the
period to which they relate.
Share-based payments
Equity settled transactions
Employees (and Directors) receive remuneration in the form of share-based
payments, whereby employees render services in exchange for shares or for rights
over shares. The fair value of the employee services received in exchange for
the grant of options or shares is recognised as an expense. The total amount to
be expensed on a straight line basis over the vesting period is determined by
reference to the fair value of the options or shares determined at the grant
date, excluding the impact of any non-market based vesting conditions (for
example, continuation of employment and performance targets). The share options
are valued using the binomial option pricing model. Non-market based vesting
conditions are included in assumptions about the number of options that are
expected to become exercisable or the number of shares that the employee will
ultimately receive. This estimate is revised at each Balance Sheet date to allow
for forecast leaving employees and the difference is charged or credited to the
income statement, with a corresponding adjustment to equity.
Revenue recognition and cost of sales
Revenue, which excludes value added tax, represents the income generated by the
Group from licensing activities, from intellectual property management services
provided by the Group to Imperial College and other parties. Revenue is stated
gross of any revenue share due to Imperial College with any revenue share
included in cost of sales.
When granting a licence, an initial up-front fee is receivable on signing
followed by subsequent payments when milestone conditions are met. In addition,
sales royalties may also be due under licence agreements. The initial up-front
fee receivable on the execution of a licence is generally recognised in full on
signing as long as all the Group's obligations under the licence have been
completed and the fees are not refundable. Milestone payments are recognised at
the date all the conditions are satisfied for the particular milestone payment
and all the Group's obligations have been completed and the fees are not
refundable. Sales royalties receivable under a licence are generally recognised
on receipt of a royalty statement unless accurate sales information is available
to accrue revenue for royalty over the financial period.
Income received in the form of quoted or unquoted investments from licensing
activities is recognised as licensing income for those investments that have
either a market value or a value attributed to them by other independent third
parties. Income from intellectual property management services is recognised on
a straight line basis over the period to which the services relate. Grant and
investment awards are recognised on an accruals basis.
Commercial Proof of Concept type awards are recognised in the Income Statement
and matched to related expenditure. Technical Proof of Concept type awards are
recognised in the Balance Sheet, under creditors and matched to related
expenditure.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less provision
for impairment. A provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of receivables. The amount of the
provision is the difference between the asset's carrying amount and the present
value of the estimated future cash flows, discounted at the effective interest
rate. The amount of the provision is recognised in the Income Statement within
administrative expenses.
Trade payables
Trade Payables are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held with banks, bank
overdrafts and other short-term highly liquid investments with original
maturities of three months or less. Short term liquid investments with a
maturity of over three months are included in a separate category 'Short term
liquidity investments'.
Deferred tax
Deferred tax arises from temporary timing differences as a result of the
different treatment for accounts and taxation purposes of transactions and
events recognised in the Financial Statements of the current period and previous
periods. Net deferred tax assets are not currently recognised in the accounts
because of the uncertainty of future taxable profits against which they may be
recovered.
Provisions (revenue sharing)
Technology Pipeline Agreement
The Group provides for liabilities in respect of revenue sharing with Imperial
College London, arising under the Technology Pipeline Agreement (TPA), and other
parties. Provision for revenue share, based on fair value, on the future
realisation of listed stock and unlisted stock is recognised.
Appointee Director Pool
Imperial Innovations LLP, whose ultimate parent company is Imperial Innovations
Group plc, has entered into a Carry Plan Agreement with members of the Appointee
Director Network. Upon a sale by Imperial Innovations LLP of all or part of a
shareholding in one of the specified companies, an 'allocated amount' (based on
a fixed percentage of net proceeds) will be paid to the Appointee Directors. The
provision is based on fair value.
Operating leases
Costs in respect of operating leases are charged to the Income Statement on a
straight line basis over the lease term.
Carried Interest Plan
The Group operates a Carried Interest Plan for Executive Directors and employees
to invest their own money in the investment part of the business. Before any
payment to a participant becomes due under the carried interest plan, the Group
must first have received back the amount of their investment in the relevant
class together with a hurdle rate of 8% per annum compound on their investment.
At the point at which the hurdle rate has been exceeded a provision is included
for the unrealised gain due to members of the carried interest plan.
3. Segmental reporting
Primary business segment
For the year ended 31 July 2009 and the year ended 31 July 2008 the Group's
revenue and profit / (loss) was derived from its principal activity, within the
United Kingdom. For management purposes, the Group is organised into one
business segment, which encompasses technology transfer, company incubation and
early stage venture capital.
Secondary format geographical segments
The Group operates exclusively in the United Kingdom and therefore no additional
disclosures are given.
4. Investments - Designated at fair value through profit or loss
+---------------------------------------------+----------------+-----------+----------+
| | Quoted | Unquoted | Total |
| | Companies1 | Companies | GBP000 |
| | GBP000 | GBP000 | |
+---------------------------------------------+----------------+-----------+----------+
| At 1 August 2007 | 20,508 | 33,218 | 53,726 |
+---------------------------------------------+----------------+-----------+----------+
| | | | |
+---------------------------------------------+----------------+-----------+----------+
| Gains on the revaluation of investments | - | 3,970 | 3,970 |
+---------------------------------------------+----------------+-----------+----------+
| Losses on the revaluation of investments | (7,262) | (3,822) | (11,084) |
+---------------------------------------------+----------------+-----------+----------+
| Fair value (losses) / gains | (7,262) | 148 | (7,114) |
+---------------------------------------------+----------------+-----------+----------+
| | | | |
+---------------------------------------------+----------------+-----------+----------+
| Investments during the period | - | 6,357 | 6,357 |
+---------------------------------------------+----------------+-----------+----------+
| Proceeds from the sale on investments | (3,557) | (43) | (3,600) |
+---------------------------------------------+----------------+-----------+----------+
| Net investments / (net proceeds from | (3,557) | 6,314 | 2,757 |
| disposals) | | | |
+---------------------------------------------+----------------+-----------+----------+
| | | | |
+---------------------------------------------+----------------+-----------+----------+
| At 31 July 2008 | 9,689 | 39,680 | 49,369 |
+---------------------------------------------+----------------+-----------+----------+
+--------------------------------------------------+------------+-----------+----------+
| | Quoted | Unquoted | Total |
| | Companies1 | Companies | GBP000 |
| | GBP000 | GBP000 | |
+--------------------------------------------------+------------+-----------+----------+
| At 1 August 2008 | 9,689 | 39,680 | 49,369 |
+--------------------------------------------------+------------+-----------+----------+
| | | | |
+--------------------------------------------------+------------+-----------+----------+
| Gains on the revaluation of investments | 652 | 11,696 | 12,348 |
+--------------------------------------------------+------------+-----------+----------+
| Losses on the revaluation of investments | (2,531) | (6,566) | (9,097) |
+--------------------------------------------------+------------+-----------+----------+
| Fair value (losses) / gains | (1,879) | 5,130 | 3,251 |
+--------------------------------------------------+------------+-----------+----------+
| | | | |
+--------------------------------------------------+------------+-----------+----------+
| Investments during the period | - | 14,427 | 14,427 |
+--------------------------------------------------+------------+-----------+----------+
| Proceeds from the sale on investments | (1,848) | (10,245) | (12,093) |
+--------------------------------------------------+------------+-----------+----------+
| Net investments / (net proceeds from disposals) | (1,848) | 4,182 | 2,334 |
+--------------------------------------------------+------------+-----------+----------+
| | | | |
+--------------------------------------------------+------------+-----------+----------+
| At 31 July 2009 | 5,962 | 48,992 | 54,954 |
+--------------------------------------------------+------------+-----------+----------+
1 All quoted companies are listed on AIM.
5. Provisions for liabilities and charges
+----------------------------------------------------+-----------+-----------+----------+
| | Quoted | Unquoted | Total |
| | Companies | Companies | GBP000 |
| | GBP000 | GBP000 | |
+----------------------------------------------------+-----------+-----------+----------+
| At 1 August 2007 | 8,425 | 6,757 | 15,182 |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Increase of liability arising from gains on the | - | 55 | 55 |
| revaluation of investments | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Decrease of liability arising from losses on the | (3,389) | (791) | (4,180) |
| revaluation of investments | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Changes in fair value during the period | (3,389) | (736) | (4,125) |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Realisations during the period | (194) | - | (194) |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| At 31 July 2008 | 4,842 | 6,021 | 10,863 |
+----------------------------------------------------+-----------+-----------+----------+
+----------------------------------------------------+-----------+-----------+----------+
| | Quoted | Unquoted | Total |
| | Companies | Companies | GBP000 |
| | GBP000 | GBP000 | |
+----------------------------------------------------+-----------+-----------+----------+
| At 1 August 2008 | 4,842 | 6,021 | 10,863 |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Increase of liability arising from gains on the | 93 | 275 | 368 |
| revaluation of investments | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Decrease of liability arising from losses on the | (2,447) | (1,543) | (3,990) |
| revaluation of investments | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Changes in fair value during the period | (2,354) | (1,268) | (3,622) |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Provisions utilised in the period | (69) | - | (69) |
+----------------------------------------------------+-----------+-----------+----------+
| Realisations during the period | (1,848) | (441) | (2,289) |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| At 31 July 2009 | 571 | 4,312 | 4,883 |
+----------------------------------------------------+-----------+-----------+----------+
Analysed by obligation:
+--------------------------------------+--------------+---------+---------------+---------+
| | Revenue | Revenue | Deferred | Total |
| | Sharing | Sharing | Consideration | GBP000 |
| | Imperial | Other | GBP000 | |
| | College | GBP000 | | |
| | GBP000 | | | |
+--------------------------------------+--------------+---------+---------------+---------+
| At 31 July 2008 | 9,476 | 908 | 479 | 10,863 |
+--------------------------------------+--------------+---------+---------------+---------+
| Settlements and provisions utilised | (2,232) | (126) | - | (2,358) |
+--------------------------------------+--------------+---------+---------------+---------+
| Changes in fair value attributable | (3,164) | (183) | (275) | (3,622) |
| to revenue share | | | | |
+--------------------------------------+--------------+---------+---------------+---------+
| At 31 July 2009 | 4,080 | 599 | 204 | 4,883 |
+--------------------------------------+--------------+---------+---------------+---------+
The revenue sharing provision represents monies due to Imperial College London
upon the eventual realisation of investments held by the Group under the revenue
sharing arrangements of the Technology and Pipeline Agreement (TPA) and in
recognition of Imperial College London's right to call for a transfer of its
share of the Group's holding in investments. The timing and amount of the
realisation of the provision is dependent on the timing of the disposal of
investments, which is uncertain as this is determined by the investment
strategy.
The other revenue share represents monies due to other third parties in the
Appointee Directors' Pool in respect of the Imperial Innovations LLP assets
acquired as part of the stepped acquisition in 2005. The timing and amount of
the realisation of the provision is dependent on the timing of the disposal of
investments, which is uncertain.
Deferred consideration represents monies due to Imperial College upon the
eventual realisation of the Imperial Innovations LLP assets acquired from
Imperial College as part of the private share placement in 2005. The deferred
consideration at the date of acquisition (April 2005) was GBP554,000. At each
Balance Sheet date a fair value adjustment is made until the eventual
realisation of the assets. The timing of the realisation of the provision is
dependent on the realisation of the Imperial Innovations LLP assets acquired
from Imperial College, which is uncertain.
6. Net change in fair value of investments held at fair value through profit or
loss
+----------------------------------------------------+-----------+-----------+----------+
| | Quoted | Unquoted | Total |
| | Companies | Companies | GBP000 |
| | GBP000 | GBP000 | |
+----------------------------------------------------+-----------+-----------+----------+
| At 1 August 2007 | 12,083 | 26,461 | 38,544 |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Gains on the revaluation of investments | - | 3,915 | 3,915 |
+----------------------------------------------------+-----------+-----------+----------+
| Losses on the revaluation of investments | (3,873) | (3,031) | (6,904) |
+----------------------------------------------------+-----------+-----------+----------+
| Fair value (losses) / gains | (3,873) | 884 | (2,989) |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Investments during the period | - | 6,357 | 6,357 |
+----------------------------------------------------+-----------+-----------+----------+
| Proceeds from the sale on investments | (3,363) | (43) | (3,406) |
+----------------------------------------------------+-----------+-----------+----------+
| Net investments / (net proceeds from disposals) | (3,363) | 6,314 | 2,951 |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| At 31 July 2008 | 4,847 | 33,659 | 38,506 |
+----------------------------------------------------+-----------+-----------+----------+
+----------------------------------------------------+-----------+-----------+----------+
| | Quoted | Unquoted | Total |
| | Companies | Companies | GBP000 |
| | GBP000 | GBP000 | |
+----------------------------------------------------+-----------+-----------+----------+
| At 1 August 2008 | 4,847 | 33,659 | 38,506 |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Gains on the revaluation of investments | 559 | 11,421 | 11,980 |
+----------------------------------------------------+-----------+-----------+----------+
| Losses on the revaluation of investments | (84) | (5,023) | (5,107) |
+----------------------------------------------------+-----------+-----------+----------+
| Fair value / gains | 475 | 6,398 | 6,873 |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| Investments during the period | - | 14,427 | 14,427 |
+----------------------------------------------------+-----------+-----------+----------+
| Provisions utilised in the period | 69 | - | 69 |
+----------------------------------------------------+-----------+-----------+----------+
| Proceeds from the sale on investments | - | (9,804) | (9,804) |
+----------------------------------------------------+-----------+-----------+----------+
| Net investments / (net proceeds from disposals) | 69 | 4,623 | 4,692 |
+----------------------------------------------------+-----------+-----------+----------+
| | | | |
+----------------------------------------------------+-----------+-----------+----------+
| At 31 July 2009 | 5,391 | 44,680 | 50,071 |
+----------------------------------------------------+-----------+-----------+----------+
Net change in fair value for the period represents the changes in fair value
(disclosed in note 4) less the revenue share charge on these fair value
movements (disclosed in note 5). Net change in fair value of investments of
GBP6,960,000 as set out on the face of the Income Statement represents the
change in net fair value of GBP6,873,000 (above table) plus GBP87,000 to reflect
final adjustments on realisations before revenue share with third parties as
summarised below.
+------------------------------------------------------------+--+---------+----------+
| | | 2009 | 2008 |
| | | GBP000 | GBP000 |
+------------------------------------------------------------+--+---------+----------+
| Net fair value gain / (losses) on portfolio | | 6,873 | (2,989) |
+------------------------------------------------------------+--+---------+----------+
| Changes in fair value realised during the period | | 87 | - |
+------------------------------------------------------------+--+---------+----------+
| Net fair value movement recognised in consolidated income | | 6,960 | (2,989) |
| statement | | | |
+------------------------------------------------------------+--+---------+----------+
7. Earnings / (Losses) per share
Basic earnings / (losses) per share is calculated by dividing the profit /
(loss) for the financial year by the weighted average number of Ordinary Shares
in issue during the period.
The profits / (losses) and weighted average number of shares used in the
calculations are set out below:
+--------------------------------------------------------------+----------+----------+
| | 2009 | 2008 |
+--------------------------------------------------------------+----------+----------+
| Earnings / losses per Ordinary Share | | |
+--------------------------------------------------------------+----------+----------+
| Profit / (loss) for the financial year (GBP000) | 5,322 | (5,861) |
+--------------------------------------------------------------+----------+----------+
| Weighted average number of Ordinary Shares (basic) | 57,630 | 55,130 |
| (thousands) | | |
+--------------------------------------------------------------+----------+----------+
| Effect of dilutive potential Ordinary Shares 1 | 205 | - |
+--------------------------------------------------------------+----------+----------+
| Weighted average number of Ordinary Shares for the purposes | 57,835 | 55,130 |
| of diluted earnings / (losses) per share (thousands) | | |
+--------------------------------------------------------------+----------+----------+
| Earnings / (losses) per Ordinary Share basic (pence) | 9.23 | (10.63) |
+--------------------------------------------------------------+----------+----------+
| Earnings / (losses) per Ordinary Share diluted (pence) | 9.20 | (10.63) |
+--------------------------------------------------------------+----------+----------+
1 Prior year Diluted EPS is the same as EPS as the Group was loss making for the
period.
8. Short term liquidity investments and cash and cash equivalents
+--------------------------------------------------------------+----------+----------+
| | 2009 | 2008 |
| | GBP000 | GBP000 |
+--------------------------------------------------------------+----------+----------+
| Cash at bank and in hand | 1,401 | 7,045 |
+--------------------------------------------------------------+----------+----------+
| UCSF cash | - | 32 |
+--------------------------------------------------------------+----------+----------+
| Total cash and cash equivalents | 1,401 | 7,077 |
+--------------------------------------------------------------+----------+----------+
| Total short term liquidity investments (3 to 12 months) | 29,300 | 36,000 |
+--------------------------------------------------------------+----------+----------+
Reconciliation of amounts invested to Trade Investments:
+--------------------------------------------------------------+----------+----------+
| | 2009 | 2008 |
| | GBP000 | GBP000 |
+--------------------------------------------------------------+----------+----------+
| Investments in period | 14,427 | 6,357 |
+--------------------------------------------------------------+----------+----------+
| Debt to equity conversions | (427) | (208) |
+--------------------------------------------------------------+----------+----------+
| Net cash invested in trade investments in the year | 14,000 | 6,149 |
+--------------------------------------------------------------+----------+----------+
Reconciliation of cash flows arising from sale of Trade Investments:
+--------------------------------------------------------------+----------+----------+
| | 2009 | 2008 |
| | GBP000 | GBP000 |
+--------------------------------------------------------------+----------+----------+
| Disposals of trade investments | 12,093 | 3,600 |
+--------------------------------------------------------------+----------+----------+
| Shares transferred to satisfy revenue sharing obligations | (1,846) | - |
+--------------------------------------------------------------+----------+----------+
| Deferred revenue on disposal of trade investments | (6,308) | - |
+--------------------------------------------------------------+----------+----------+
| Cash flow arising on the proceeds from sale of investment in | 3,939 | 3,600 |
| trade investments | | |
+--------------------------------------------------------------+----------+----------+
Reconciliation of cash flows arising on the sale of trade investments to
provisions for liabilities and charges:
+--------------------------------------------------------------+----------+----------+
| | 2009 | 2008 |
| | GBP000 | GBP000 |
+--------------------------------------------------------------+----------+----------+
| Movement in revenue sharing liability arising from disposal | 2,289 | 194 |
| of trade investments | | |
+--------------------------------------------------------------+----------+----------+
| Previous year accrued revenue share paid | - | 138 |
+--------------------------------------------------------------+----------+----------+
| Shares transferred to satisfy revenue sharing obligations | (1,846) | - |
+--------------------------------------------------------------+----------+----------+
| Provisions utilised in the period | 69 | - |
+--------------------------------------------------------------+----------+----------+
| Cash flow arising on the settlement of revenue sharing | 512 | 332 |
| liabilities on sale of trade investments | | |
+--------------------------------------------------------------+----------+----------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FSWFMMSUSESS
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