Tern PLC: Subscription for £1.5 million and H1 2020 Portfolio Update

 

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATIONS (EU) NO. 596/2014 ("MAR"). IN ADDITION, MARKET SOUNDINGS WERE TAKEN IN RESPECT OF THE MATTERS CONTAINED IN THIS ANNOUNCEMENT, WITH THE RESULT THAT CERTAIN PERSONS BECAME AWARE OF SUCH INSIDE INFORMATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN AND SUCH PERSONS SHALL THEREFORE CEASE TO BE IN POSSESSION OF INSIDE INFORMATION.

20 July 2020

Tern Plc ("Tern" or the "Company")

Subscription for £1.5 million and H1 2020 Portfolio Update

 

Tern Plc (AIM:TERN), the investment company specialising in the Internet of Things ("IoT"), announces that it has raised £1.5 million before expenses through a subscription of 17,647,058 new ordinary shares of 0.02p each (the "Subscription Shares") at a price of 8.5 pence per new ordinary share (the "Issue Price") (the "Subscription"), conditional upon admission to AIM.

 

Tern also provides an update on the activities of the Company and its portfolio companies during the six months ended 30 June 2020 (H1 2020), ahead of publishing its interim results on 21 September 2020. 

 

Highlights

• The funds raised via the Subscription are intended to be used to facilitate a new investment to expand Tern's portfolio and will also:
  • provide additional working capital generally; and
  • facilitate follow-on investment opportunities in Tern's principal portfolio companies as appropriate
• 62% year-on-year increase in turnover of principal portfolio companies1 for H1 2020. The Directors view this as an important positive result given the slow down across the economy during this period
• 7% year-on-year increase in employees within principal portfolio companies, a key growth measurement (H1 2019: 9%). This measure has been impacted in the latter half of the period by a slowdown in recruitment to ensure prudent management through the Covid-19 period

 

1 * Principal portfolio companies excludes Push Technology Limited, in which Tern has a <1% holding and minimal influence.

 

Portfolio Highlights for H1 2020

• Device Authority significantly expanded its sales channel - KeyScaler is now available on the Microsoft Azure Marketplace, an online store
• FundamentalVR received centre accreditation from the Royal College of Surgeons of England and its orthopaedic education simulations were awarded accreditation status by the American Academy of Orthopaedic Surgeons (AAOS)
• Wyld signed an agreement with Highland Health Ventures Limited (HHVL) to test and deploy its Wyld mesh technology into certain care homes in Scotland
• InVMA signed a partnership agreement with Senseye Limited, the industrial software company specialising in predictive maintenance 

 

Tern's CEO Al Sisto said:

 

"We are very pleased to have secured this support via the Subscription for future investment opportunities and look forward to providing updates when we finalise a transaction. Having successfully supported our existing portfolio companies over recent months, many of which are making important contributions to help their customers and partners navigate this challenging time, we believe our investment thesis to provide an active platform for early stage, high potential IoT businesses has been validated. We are therefore excited to build on this by adding exciting, high growth companies to our portfolio and in doing so, to further de-risk our business."

 

Further Information about the Subscription

 

The Directors intend to use the net proceeds of the Subscription to facilitate securing a new investment to expand Tern's portfolio. The Subscription will also provide additional general working capital and strengthen the Company's balance sheet to enable the Company to pursue follow-on investment opportunities in the Company's principal portfolio companies, as appropriate, from a position of negotiating strength. Tern has a strong pipeline of new investment opportunities and anticipates securing at least one new investment before the year end.

 

Application will be made for the 17,647,058 Subscription Shares to be admitted to AIM ("Admission") and it is expected that Admission will take place and trading in the Subscription Shares will commence on 24 July 2020.

 

In accordance with the Financial Conduct Authority's Disclosure, Guidance and Transparency Rules, the Company confirms that on completion of the Subscription and following Admission, the Company's enlarged issued ordinary share capital will comprise 300,999,434 ordinary shares of 0.02p each. The Company does not hold any shares in Treasury.  Therefore, from Admission, the total number of voting rights in the Company will be 300,999,434. Following the completion of the Subscription and Admission, the above figure may be used by shareholders in the Company as the denominator for the calculations to determine if they are required to notify their interest in, or a change to their interest in the Company, under the Disclosure Guidance and Transparency Rules.

 

 

H1 2020 Update

 

Tern has experienced a solid start to the year, despite the current unprecedented times. Tern's Board has continued to hold regular sessions with the senior leadership teams of its principal portfolio companies to share insights on employee wellbeing, business agility and to leverage the synergies within its portfolio companies' businesses to help them adapt to the new challenges presented by the Covid-19 crisis.

 

The Company has also monitored costs closely during the Covid-19 pandemic with continued Director salary reductions and mitigation activities in the principal portfolio companies, primarily salary reductions and some limited use of furlough schemes where relevant. It has also supported its portfolio companies in applying for Innovate UK grants, where applicable, to support their ongoing innovative projects. 

 

Tern had an unaudited cash balance of £0.8 million on 30 June 2020 which will be strengthened by the net proceeds of the Subscription announced today.  The year-on-year increase in turnover of the principal portfolio companies1 for the first six months of 2020 was 62%.  The Directors view this as a positive result given the slow down across the economy during this period.  The year-on-year increase in employees within the principal portfolio companies1, a key growth measurement, increased by 7% in the six months to June 2019. This measure has been impacted in the latter half of the period by a slowdown in recruitment to ensure prudent management through the Covid-19 period.

 

Portfolio update

 

Device Authority ("DA")

Tern holding: 56.8%

Outstanding loan: $3.6 million

Sector: Security and Device Operations Management

Invested Since: September 2014

 

In June 2020 Device Authority announced the availability of KeyScaler in the Microsoft Azure Marketplace, an online store providing applications and services for use on Azure. The marketplace significantly expands DA's sales channel as it lets customers worldwide discover, try, and deploy KeyScaler solutions that are certified and optimized to run on Azure. The company has also secured contract renewals via key channel partners and their customers during the period.

 

FundamentalVR ("FVR")

Tern holding: 26.9%

Sector: Healthcare IoT

Invested Since: May 2018

 

In April 2020, FVR announced the expansion of the Fundamental Surgery platform, with the addition of a new education modality @HomeVR.  In this time where rapid learning and remote access has never been more relevant, this has enabled health care professionals to prepare to use new equipment and undertake new procedures. Its multiuser support enables its enterprise customers to provide virtual master classes to accelerate the adoption of new products and procedures. This ability to access training remotely worldwide via the cloud enables collaboration in a virtual operating room or clinic with no requirement for physical presence.  In the current Covid-19 environment, its shared virtual setting also improves the overall communication process among surgeons and trainees.

 

In June 2020, FundamentalVR achieved another important milestone as all the orthopaedic education simulations available on the Fundamental Surgery platform have been reviewed by the American Academy of Orthopaedic Surgeons (AAOS) and awarded accreditation status. This recognition demonstrates the AAOS's commitment to innovation in medical education and will allow orthopaedic surgeons to collect continuing medical education (CME) credits while utilising the unique cutting-edge haptic FVR platform.  This was followed in July 2020 by the company receiving centre accreditation from the Royal College of Surgeons of England.  This kite mark of quality has been adopted by many leading organisations that develop world-class surgical education courses, solutions and platforms.

 

Wyld Networks ("Wyld")

Holding: 100%

Outstanding loan: £1.1 million

Sector: IoT Communications Enablement

Invested Since: June 2016

 

In May 2020, Wyld announced that it had signed an agreement with Highland Health Ventures Ltd (HHVL) to test and deploy its Wyld mesh technology into care homes in Scotland to help protect residents, staff and visitors, and prevent the spread of Covid-19 or other viruses. The patented solution connects smartphones directly to smartphones, without the need for WiFi or cellular connectivity, to create an infrastructure-lite wireless mesh communication network, as well as provide social distance monitoring and alerting.

HHVL is an independent company with a Collaboration Agreement with NHS Highland for the purpose of developing innovations in healthcare. 

 

In July 2020, Wyld announced the launch of Wyld Mesh and Fusion, its innovative mobile mesh networking technology, data curation and content delivery platform. Wyld Mesh and Fusion provides businesses with an innovative way to generate new revenue streams, operate more efficiently, get back to work safely and monitor social distancing practices. Wyld Mesh harnesses the power of mobile devices to create wireless mesh communication networks with applications in enterprise, healthcare, retail, education, events and industry.

 

In the first half of the year Wyld also announced it had signed an agreement with a global satellite operator to co-develop and co-market a LoraWAN direct to satellite solution that is intended to bring the cost of satellite IoT services in line with terrestrial based IoT solutions, aimed at opening up a new frontier in the deployment of IoT solutions.

 

InVMA

Holding: 50%

Outstanding loan: £50,000

Sector: IoT enablement

Invested Since: September 2017

 

In June 2020, InVMA announced that it had signed a partnership agreement with Senseye Limited, the Industry 4.0 software company using machine-learning algorithms for predictive maintenance. Via this partnership, InVMA customers will now be able to more easily, and cost effectively, capture and share their shop-floor and machine performance data, driving better predictive maintenance insights to improve shop floor productivity, product quality and to proactively reduce downtime.

 

Although Covid-19 has had a material impact on the industrial sector, interest in remote monitoring remains.  InVMA has carefully managed demand for their services and products while effectively utilising government furlough support as required.  During this time InVMA has continued to focus on the growth of its Software as a Service (SaaS) product AssetMinder(R), at a time when the Directors believe that remote monitoring has rapidly moved to the forefront of industrial and manufacturing agendas. AssetMinder(R) enables its customers to remotely collect, monitor and aggregate real-time data on assets, devices and equipment; providing predictive insights to drive intelligence-based decisions across individual machines and manufacturing lines to a portfolio of facilities.

 

Information for Distributors

 

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the Product Governance Requirements) may otherwise have with respect thereto, the Subscription Shares have been subject to a product approval process by Allenby Capital Limited, which has determined that the Subscription Shares are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, investors should note that: the price of the Subscription Shares may decline and investors could lose all or part of their investment; Subscription Shares offer no guaranteed income and no capital protection; and an investment in Subscription Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Subscription.  Furthermore, it is noted that, notwithstanding the Target Market Assessment, only investors who have met the criteria of professional clients and eligible counterparties have been procured.  For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to Subscription Shares.

 

 

Enquiries

Tern Plc Al Sisto/Sarah Payne	via Newgate Communications
Allenby Capital (Nomad and joint broker) David Worlidge/Alex Brearley	Tel: 020 3328 5656
Whitman Howard (Joint broker) Nick Lovering/Christopher Furness	Tel: 020 7659 1234
Newgate Communications Elisabeth Cowell/Megan Kovach	Tel: 020 3757 6880