12th Sep 2006 07:04
IP Group PLC12 September 2006 For immediate release 12 September 2006 IP GROUP PLC ("IP Group" or the "Group" or the "Company") Interim results for the half year ended 30 June 2006 IP Group plc (LSE: IPO), the intellectual property commercialisation company,today announces its unaudited interim results for the six months ended 30 June2006. Financial highlights • Profit after taxation: £30.3m (H1 2005: £3.6m, FY 2005: £5.6m) • Fair value of equity investments: £72.7m (H1 2005: £39.9m, FY 2005: £44.3m) • Cash proceeds from sales of equity investments: £3.0m (H1 2005: Nil, FY 2005: £0.8m) • Investment in spin-out companies £1.9m (H1 2005: £1.7m, FY 2005 £4.2m) • Cash balance: £57.0m (H1 2005: £42.3m, FY 2005: £39.9m) • Tight cost control - operating expenses before official list costs: £2.0m (H1 2005: £2.4m, FY 2005: £4.6m) Operational highlights • IP Group admitted to the Official List of the UK Listing Authority on 19 June 2006 • Number of spin-out companies increases to 44 (H1 2005: 33, FY 2005: 37) • Oxford Catalysts Group plc and Syntopix Group plc float successfully on AIM • New 25-year partnership with the University of Surrey • Extension of partnership with the University of York to cover the entire university • Six successful follow-on funding rounds for spin-out companies • Modern Biosciences plc signs a Memorandum of Understanding with the University of Manchester for the development of drugable intellectual property Post 30 June 2006 highlights • Launch of IP Venture Fund, in partnership with the European Investment Fund, to invest in IP Group spin-out companies • Avacta Group plc admitted to AIM through a reverse takeover • Modern Biosciences plc signs an agreement to develop a new class of cancer drug licensed from the University of Manchester • New 25-year partnerships with Queen Mary (University of London), and the University of Bath bringing total number of partners to nine • Investment of £1m in Retroscreen Virology Ltd, a leading anti-viral contract research organisation and an existing spin-out from Queen Mary (University of London) David Norwood, Executive Chairman of IP Group, said: "IP Group has had a verysuccessful six month period, generating record first half profits and seeingsignificant progress throughout the Group's portfolio. I believe that thebreadth and quality of our spin-out portfolio is very high and, whilst given thenature of our business it will always be difficult to predict the timing ofgains from the portfolio, I remain confident that our growing number ofspin-outs will generate significant returns for our shareholders. The second half of the year has started well with two new 25 year universitypartnerships, the launch of a new fund and the flotation, through a reversetakeover, of a spin-out from the University of Leeds." For more information, please contact: IP Group plc 020 7489 5200Dave Norwood, Executive ChairmanAlan Aubrey, Chief Executive OfficerWilliam Turner, Group Financial ControllerLiz Vaughan-Adams, Communications 020 7489 5206 / 07979 853 802 Further information on IP Group is available on our website: www.ipgroupplc.com Buchanan Communications 020 7466 5000Mark Court, Tim Anderson, Mary-Jane Johnson OVERVIEW The period ended 30 June 2006 has been one of the most productive in the Group'shistory. The Group's portfolio of equity investments has delivered net fairvalue gains of £28.9m for the period and a profit before taxation of £30.3m. University Partnerships The Group has continued to forge collaborations with research intensiveinstitutions. The Group now has partnerships with nine universities. In February the Groupentered into a 25 year collaboration with the University of Surrey, in March theGroup extended its partnership with the University of York to cover the entireuniversity, and, subsequent to the period end, the Group entered into 25 yearpartnerships with Queen Mary (University of London) and the University of Bath. Portfolio During the six month period ended 30 June 2006 the Group increased the number ofspin-outs in its portfolio to 44. Two companies from the portfolio, OxfordCatalysts Group plc and Syntopix Group plc, listed on AIM during the period.Subsequent to the period end, Avacta Group plc, a spin-out from the Universityof Leeds, listed on AIM. Six companies in the portfolio achieved successfulfollow-on funding rounds during the period. Modern Biosciences plc ('Modern Biosciences') Modern Biosciences was established by the Group to address the problem of poorproduct pipeline within big pharmaceutical companies. Modern Biosciences willin-license intellectual property from universities, commission proof of conceptdevelopment work and ultimately out-license that intellectual property topharmaceutical and biotech companies. Modern Biosciences is a good example of IPGroup being able to leverage its access to leading scientific research toaddress a clear market need through an innovative business model. The Groupanticipates that certain other emerging market problems can be addressed in thisway. In March, Modern Biosciences signed a Memorandum of Understanding with theUniversity of Manchester relating to the commercialisation of drug relatedintellectual property. In July, Modern Biosciences signed an exclusive licenceand research agreement with both the University of Manchester and the Universityof Salford for the development of a new class of cancer drug targeting platinumresistant tumours. Modern Biosciences has also appointed Professor Barry Furr,OBE, as Chief Scientific Adviser (oncology). Professor Furr was formerly ChiefScientist and Head of Project Evaluation at AstraZeneca Pharmaceuticals where hewas responsible for the discovery and development of the anti-cancer drugsZoladex and Casodex, used for the treatment of breast and prostate cancerrespectively. Corporate developments In April, IP Group's share capital was divided by way of a 5 for 1 share splitand to reflect more accurately the direction and activities of the Group, theGroup's name was changed to IP Group plc from IP2IPO Group plc. In May, theCompany raised £16.3m by way of a share placing with institutional investors. InJune, trading in the Group's shares on the Official List of the UK ListingAuthority commenced. The Board is confident that this move will raise theprofile of IP Group both domestically and internationally. Since the period end, the Company launched the IP Venture Fund, a new venturecapital fund in partnership with the European Investment Fund ('EIF') with afirst closing of £15.5 million. The EIF is one of the leading investors inventure capital funds in Europe. The fund will invest in portfolio companyfollow-on financing rounds. Personnel changes On 1 January 2006, Dave Norwood became Executive Chairman of the Group and AlanAubrey became Chief Executive Officer. On 31 March 2006, Magnus Goodlad joinedthe IP Group Board. On 11 September 2006 Stuart Thompson was appointed Head ofExecutive Search and Talent Management. Stuart was previously Head of theHealthcare and Life Sciences Practice at Whitehead Mann and his appointmentreflects the importance the Group attaches to the selection and retention of thetop executives in the UK for early stage technology businesses. On 12 September 2006, Stephen Brooke, Director of Business Development, resignedfrom the Board. The Board wish to thank Stephen for his contribution to theGroup to date and wish him well for the future. OPERATIONAL REVIEW Portfolio performance The Group recorded net fair value gains of £28.9m (30 June 2005: £4.3m). Ananalysis of net fair value gains is given below: Unaudited six Unaudited Audited 12 months to 30 six months to 30 months to 31 June June December 2006 2005 2005 £'m £'m £'m Gains on the revaluation of investments 33.1 6.6 14.1Losses on the revaluation of investments (4.2) (2.3) (8.4)Net fair value gains 28.9 4.3 5.7 Gains on the revaluation of investments were in part attributable to theadmission to AIM of Oxford Catalysts Group plc and Syntopix Group plc,collectively generating gains of £14.5m. Following six successful follow-onprivate funding rounds, raising a total of £12.3m, the Group recorded gainswithin the private portfolio of £18.6m of which Oxford Nanolabs Limited andIlika Technologies Limited generated gains of £10.3m and £5.5m respectively. Losses on the revaluation of investments of £4.2m (H1 2005: £2.3m, FY 2005£8.4m) were attributable in part to mark to market losses on the Group'sportfolio of AIM-listed investments of £1.2m. Provisions against investments inthe private portfolio amounted to £3.0m. The Group realised gains on the disposal of investments of £2.0m following thesuccessful sale at IPO of 1,149,425 ordinary shares in Oxford Catalysts Groupplc. Since the period end, Avacta Group plc, a spin-out company from the Universityof Leeds, has joined AIM through a reverse takeover. At the date of admission toAIM this transaction generated an additional revaluation gain of £3.5m for theGroup. Equity stakes At 30 June 2006 the Group had equity stakes in 44 companies (30 June 2005: 33).A movement in the number of spin-out companies is given below: Unquoted spin-outs Quoted spin-outs (number) (number)At 1 January 2006 32 5New spin-out businesses 7 -Companies floated during the year (2) 2At 30 June 2006 37 7 During the period the Group invested £0.9m in seven new spin-outs and invested£1.0m in follow-on funding. Since 30 June 2006, the Group has also invested£2.8m in five companies. Cash At 30 June 2006 the Group had cash of £57.0m (30 June 2005: £42.3m). The Groupcovered its operating costs with receipts from fund management income,consultancy income and interest. The Group's strategy continues to be to monitorcosts carefully and to cover operating expenses with fund management income,consultancy income and interest receipts. The Group invested £1.9m in new spin-outs and follow on funding during theperiod and received proceeds on the sale of equity stakes of £3.0m. The Groupsettled £0.7m of deferred consideration as a consequence of the acquisition ofTechtran Group Limited. The Group therefore generated net cash on its portfolioof £0.5m (30 June 2005: Outflow £3.5m). The Group issued new share capital forcash proceeds of £16.6m. At 30 June 2006 the Group had £28.8m ring-fenced for investment in spin-outcompanies from university partners. Subsequent to 30 June 2006, this hasincreased to £38.8m following the successful completion of two furtheruniversity partnerships each with a cash commitment of £5.0m. Modern Bioscienceshas committed up to £1.4m as a result of its research agreement with theUniversities of Manchester and Salford for the development of a new class ofcancer drug. Subsequent to 30 June 2006 the Group has committed £1.4m forinvestment in the IP Venture Fund. CONSOLIDATED INTERIM INCOME STATEMENTFor the six months to 30 June 2006 Note Unaudited six Unaudited Audited 12 months to 30 six months to 30 months to 31 June June December 2006 2005 2005 £'m £'m £'m Revenue Gains on the revaluation of investments 33.1 6.7 14.1 Losses on the revaluation of investments (4.2) (2.3) (8.4) Gains on disposal of equity investments 2.0 - 0.8 Dividends - - 0.2 Revenue from services 0.8 0.8 1.7 31.7 5.2 8.4Administrative expenses Employee bonus costs (0.4) - (1.2) Official list costs (0.3) - - Other administrative expenses (1.6) (2.4) (3.4) (2.3) (2.4) (4.6)Operating profit 29.4 2.8 3.8Finance income - interest receivable 0.9 0.8 1.8Profit before taxation 30.3 3.6 5.6Taxation 4 - - -Profit attributable to equity holders 30.3 3.6 5.6Basic earnings per ordinary share (p) 2 13.06 1.64 2.52Diluted earnings per ordinary share (p) 2 12.83 1.59 2.45 CONSOLIDATED INTERIM BALANCE SHEETAs at 30 June 2006 Unaudited at Unaudited at 30 Audited at 31 30 June June December 2006 2005 2005 £'m £'m £'m ASSETSNon-current assetsProperty, plant and equipment 0.1 0.1 0.1Intangible assets: Goodwill 18.4 18.4 18.4 Acquired intangible assets 0.5 0.7 0.6Equity rights and related acquisition costs 20.2 20.2 20.2Equity investments 72.7 39.9 44.3Financial asset 1.2 - 1.3Investment in limited partnerships 0.1 0.1 0.1Total non-current assets 113.2 79.4 85.0Current assetsTrade and other receivables 1.7 1.0 2.0Cash and cash equivalents 57.0 42.3 39.9Total current assets 58.7 43.3 41.9 Total assets 171.9 122.7 126.9EQUITY AND LIABILITIESEquity attributable to equity holdersCalled up share capital 4.8 4.5 4.6 Share premium account 89.7 84.7 73.3 Merger reserve 12.8 0.8 12.8 Retained earnings 59.4 26.9 29.1 Total equity 166.7 116.9 119.8Non-current liabilitiesTrade and other payables 2.9 4.3 3.6Provisions 0.3 0.1 0.6Total equity and non-current liabilities 169.9 121.3 124.0Current liabilities Trade and other payables 2.0 1.4 2.9Total equity and liabilities 171.9 122.7 126.9 CONSOLIDATED INTERIM CASHFLOW STATEMENTFor the six months to 30 June 2006 Unaudited six Unaudited Audited 12 months to 30 six months to 30 months to 31 June June December 2006 2005 2005 £'m £'m £'m Operating activitiesOperating profit 29.4 2.8 3.8Fair value movements in equity investments (28.9) (4.3) (5.7)Amortisation of intangible non-current assets 0.1 0.1 0.2Decrease / (increase) in trade and other receivables 0.3 0.2 0.3(Decrease) / increase in trade and other payables and (0.3) (2.0) (1.7)provisionsProfit on disposal of equity investments (2.0) - (0.8)Dividends - - (0.2)Equity allocated to staff 0.4 - -Share-based payment charge - 0.1 0.3Interest received 1.0 0.8 1.3Net cash from operating activities - (2.3) (2.5)Investing activitiesPurchase of equity investments (1.9) (1.8) (4.2)Financial asset 0.1 - (1.4)Purchase of subsidiary undertaking (0.7) (3.5) (3.5)Net cash acquired with subsidiary - 1.8 1.8Proceeds from sale of equity investments 3.0 - 0.8Dividend received - - 0.2Net cash generated / (used) in investing activities 0.5 (3.5) (6.3)Financing activitiesProceeds from issue of share capital 16.6 13.3 13.9Net increase in cash and cash equivalents 17.1 7.5 5.1Cash and cash equivalents at the beginning of the period 39.9 34.8 34.8Cash and cash equivalents at the end of the period 57.0 42.3 39.9 CONSOLIDATED UNAUDITED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITYFor the six months to 30 June 2006 Attributable to equity holders of the Group Total Share Retained Merger Share Equity capital earnings reserve premium £'m £'m £'m £'m £'mAt 1 January 2005 87.8 4.1 23.3 0.8 59.6Consolidated profit for the period to 30 June 2005 3.6 - 3.6 - -Employee share option charge in period to 30 June 2005 0.1 - 0.1 - -Pre-acquisition reserves attributable to the Group (0.1) - (0.1) - -Issue of share capital in the period to 30 June 2005 25.5 0.4 - 12.0 13.1At 30 June 2005 116.9 4.5 26.9 12.8 72.7Consolidated profit for the period to 31 December 2005 2.0 - 2.0 - -Employee share option charge in period to 31 December2005 0.2 - 0.2 - -Issue of share capital in the period to 31 December 2005 0.7 0.1 - - 0.6At 31 December 2005 119.8 4.6 29.1 12.8 73.3Consolidated profit for the period to 30 June 2006 30.3 - 30.3 - -Employee share option charge in period to 30 June 2006 - - - -Issue of share capital in period to 30 June 2006 16.6 0.2 - - 16.4At 30 June 2006 166.7 4.8 59.4 12.8 89.7 NOTES TO THE INTERIM RESULTS 1. BASIS OF PREPARATION The interim consolidated financial statements of IP Group plc are as at and forthe six months ended 30 June 2006 and comprise the results, assets andliabilities of the Company and its subsidiaries ("the Group"). These interim financial statements have been prepared in accordance with theListing Rules of the Financial Services Authority. They have not been preparedin accordance with IAS34 - "Interim Financial Reporting". They do not includeall of the information required for full annual financial statements, and shouldbe read in conjunction with the audited financial statements of the Group as atand for the year ended 31 December 2005. These interim financial statementswere approved by the board and authorised for issue on 12 September 2006. The accounting policies applied by the Group in these interim consolidatedfinancial statements are the same as those applied by the Group in its auditedconsolidated financial statements as at and for the year ended 31 December 2005.The basis of consolidation is set out in the Group's accounting policies inthose financial statements. The directors have changed the format of the incomestatement previously reported to show more clearly the analysis of revenues thatare generated from the Group's principal activities. There have been no changesto previously reported balances or results and it is the directors' intention touse this format for future financial reports The preparation of interim financial statements requires management to makejudgements, estimates and assumptions that affect the application of accountingpolicies and the reported amounts of assets and liabilities, income andexpenses. In preparing these interim consolidated financial statements, thesignificant judgements made by management in applying the Group's accountingpolicies and the key sources of estimation uncertainty were the same as thoseapplied to the audited consolidated financial statements as at and for the yearended 31 December 2005. The comparative figures for the year ended 31 December 2005 do not constitutestatutory financial statements for the purpose of s240 of the Companies Act1985. A copy of the Group's statutory financial statements for that year hasbeen delivered to the Registrar of Companies and contained an unqualifiedauditor's report in accordance with s235 of the Companies Act 1985 and did notcontain statements made under either s237(2) or s272(3) of the Companies Act1985. 2. EARNINGS PER SHARE The basic earnings per share has been calculated by dividing the profit for theperiod of £30.3m (for the period ended 30 June 2005: profit 3.6m; for the yearended 31 December 2005: profit £5.6m) by the weighted average number of sharesof 231,957,355 in issue during the six month period to 30 June 2006 (for the sixmonth period ended 30 June 2005: 203,194,550*; for the year ended 31 December2005: 222,813,505*). The diluted earnings per share has been calculated by dividing the profit forthe period of £30.3m (for the period ended 30 June 2005: profit £3.6 m; for theyear ended 31 December 2005: profit £5.6m) by 236,157,460 shares (for the sixmonth period ended 30 June 2005: 209,067,425*; for the year ended 31 December2005: 228,381,635*), being the sum of the weighted average number of shares inissue adjusted for the conversion of the dilutive potential shares, weighted forthe period they were outstanding. *Comparative figures restated following 5:1 share split in April 2006. 3. EQUITY INVESTMENTS - DESIGNATED AS 'AT FAIR VALUE THROUGH PROFIT ORLOSS' Quoted spin out Unquoted spin out Other Total companies companies investments £'m £'m £'m £'m At 1 January 2005 24.0 8.3 3.2 35.5Investments during the period to 30 June 2005 - 1.7 0.4 2.1Reclassifications during the period to 30 June 2005 0.3 (0.3) - -Change in fair value in period to 30 June 2005 4.0 0.3 - 4.3Adjustment arising on consolidation of Techtran Group - - (2.0) (2.0)LimitedAt 30 June 2005 28.3 10.0 1.6 39.9Investments during the period to 31 December 2005 - 3.0 - 3.0Reclassifications during the period to 31 December 0.5 (0.5) - -2005Change in fair value in period to 31 December 2005 (4.2) 5.9 (0.2) 1.5Disposals during the period to 31 December 2005 - (0.1) - (0.1)At 31 December 2005 24.6 18.3 1.4 44.3Investments during the period to 30 June 2006 - 1.9 - 1.9Reclassifications during the period to 30 June 2006 1.1 (1.1) - -Change in fair value in period to 30 June 2006 14.5 14.2 0.2 28.9Shares transferred to staff in period to 30 June 2006 - (1.4) - (1.4)Disposals during the period to 30 June 2006 (0.5) (0.5) - (1.0)At 30 June 2006 39.7 31.4 1.6 72.7 4. TAXATION The directors believe that the Group is a trading group as defined in para. 21Sch. 7AC TCGA 1992 and therefore qualifies for the Substantial ShareholdingsExemption ("SSE") on chargeable gains arising on the disposal of qualifyingholdings. The Group has previously obtained post-transaction clearance from H MRevenue & Customs under Code of Practice 10 (CoP10) that SSE applied to previousdisposals in 2004. During the period under review the Group has applied forclearance under CoP10 in respect of a disposal of shares that took place earlierthis year. This process is ongoing. The directors have also sought the views of leading Tax Counsel and otherprofessional advisers on this matter. Should the Group not qualify for SSE as atrading group then a deferred tax liability of £2.5m will be required to berecognised in accordance with International Accounting Standard 12 - IncomeTaxes. 5. POST BALANCE SHEET EVENTS Avacta Group plc, a spin-out from the University of Leeds in which IP Groupholds an equity stake of 26% announces it has joined AIM through a reversetakeover. Modern Biosciences plc signed an intellectual property in-licensing agreementwith the University of Manchester to develop a cancer drug. Queen Mary (University of London) and the University of Bath signed 25 yearcommercialisation contracts with IP Group. IP Group announced it had invested £1m in Retroscreen Virology Limited, thefirst investment as part of the Company's collaboration with Queen MaryUniversity NOTES TO THE INTERIM RESULTS (Continued) INDEPENDENT REVIEW REPORT TO IP GROUP PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006 on pages 5 to 9. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. Our report has been prepared in accordance with the terms of our engagement toassist the Company in meeting the requirements of the Listing Rules of theFinancial Services Authority and for no other purpose. No person is entitled torely on this report unless such a person is a person entitled to rely upon thisreport by virtue of and for the purpose of our terms of engagement or has beenexpressly authorised to do so by our written consent. Save as above, we do notaccept responsibility for this report to any other person or for any otherpurpose and we hereby expressly disclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. BDO Stoy Hayward LLP Chartered Accountants Southampton 12 September 2006 Notes: a) The maintenance and integrity of the IP Group plc website is theresponsibility of the Directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accepts noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site. b) Legislation in the United Kingdom governing the preparation anddissemination of financial information may differ from legislation in otherjurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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