Company Announcements

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

28 October 2021

Frontier IP Group Plc

("Frontier IP" or the "Group")

Final results for the year ended 30 June 2021

Financial highlights

·    Fair value of our equity portfolio increased by 64% to £31,982,000 (2020: £19,444,000)

·    Profit before tax increased by 145% to £10,242,000 (2020: £4,184,000)

·    Total revenue and other operating income increased by 99% to £12,668,000 (2020: £6,377,000) -reflecting the net unrealised profit on the revaluation of investments of £12,306,000 (2020: £5,973,000)

·    Revenue from services decreased by 10% to £362,000 (2020: £404,000)

·    Basic earnings per share increased to 17.47p (2020: 8.76p)

·    Cash balances at 30 June 2021 of £1,992,000 (2020: £2,968,000)

·    Net assets per share as at 30 June 2021 of 69.8p (2020: 51.0p)

Corporate highlights

·    Raised £2.3 million via an oversubscribed placing and retail offer to support additional investment in the Group and to enable increased capacity for bridge financing and investment in portfolio companies

·    The fundraising was firmly supported by existing shareholders and a significant number of new investors

·    Team strengthened with three key appointments

·    Post period end, first portfolio company IPO - Exscientia listed on Nasdaq Global Select Market raising gross proceeds of approximately $304.7 million through a public offer and a further $160 million through private placements with SoftBank and the Bill & Melinda Gates Foundation, with a value of $2.9 billion

·    Post period end, Professor Dame Julia King, Baroness Brown of Cambridge DBE FREng FRS, joined the Board of Directors as an independent Non-Executive Director 

Portfolio highlights

·    Robust commercial and technical progress, including industry engagement and increased pace of fundraisings across the portfolio, reflected by the increase in fair value

·    Growing maturity of the portfolio with a number of companies reaching inflection points, reflected by increased pace of funding rounds, strengthening of management teams, and industry engagement. Fundraisings and grant awards included:  

o  Exscientia closing a Series C funding round at $100 million and raising a further $225 million in a Series D round, led by new investor SoftBank. Post period end, the company raised total gross proceeds of $464.7 million through listing on the Nasdaq Global Select Market with a value of $2.9 billion   

o  Cambridge Raman Imaging raised £250,000 through an equity funding round and involvement in €5 million pan-European project to develop new medical imaging technologies

o  Pulsiv completed £1.5 million equity funding round. In addition, the company converted £500,000 of debt plus accrued interest into equity, including a £250,000 loan from the UK government's Future Fund scheme

o  AquaInSilico was selected to receive $250,000 after being named as an Ocean Innovator by the United Nations Development Programme's Ocean Innovation Challenge. The company also received a €60,000 EIT RawMaterials grant

o  Fieldwork Robotics raised £675,000 through an equity funding round and received £229,000 in grants from schemes managed by Innovate UK

o  Elute Intelligence raised £250,000 in its first equity funding round

o  Nandi Proteins raised £720,000 through a convertible loan, including £360,000 from the UK government's Future Fund, matched by Frontier IP and Shackleton Finance

o  Alusid raised £250,000 in a convertible loan, including £125,000 from the UK government's Future Fund, matched by Frontier IP and a private investor

o  InSignals Neurotech gained €100,000 investment from Portugal Ventures

o  Post period end, CamGraPhIC raised £1.6 million

·    Strong commercial and technical progress made by a number of portfolio companies, including developing new and existing industry partnerships:

o  Exscientia expanded its collaboration with Bristol Myers Squibb. Agreement includes upfront and commercial milestone payments potentially worth more than $1.2 billion. Post period end, Exscientia entered a $70 million collaboration with the Bill & Melinda Gates Foundation

o  The Vaccine Group entered into first commercial agreement, with The Pirbright Institute and ECO Animal Health, and made good progress on developing its novel vaccine platform

o  Fieldwork Robotics secured collaboration agreements with Bosch and Bonduelle, one of the world's leading vegetable producers

o  Cambridge Raman Imaging signed a licence with Motic, a leading manufacturer of medical imaging devices

o  Elute Intelligence launched its Patent Reader product following successful pilot with dedicated user group comprising multinationals, high-tech SMEs and professional intellectual property service providers

·    Steps taken to strengthen leadership and teams across portfolio to oversee scale up of companies:

o  Pulsiv appointed former Aixtron and Arm executive Darrel Kingham as Chief Executive Officer, Dr Zaki Ahmed as Chief Strategy Officer, and announced appointment of Adam Westcott as Chief Financial Officer

o  The Vaccine Group appointed GALVmed Chief Scientific Officer Jeremy Salt as Chief Executive Officer. He is a former senior director for the world's biggest animal health group Zoetis

o  Nandi Proteins appointed David Flower, a former senior director with Boon Rawd Brewing Company and Kerry Foods, as Chief Executive Officer

o  Alusid appointed David Taylor, founding chief executive for both English Partnerships and Amec Developments, property entrepreneur and Pro-Chancellor of the University of Central Lancashire to its board of directors as the University's representative

ENQUIRIES

Chairman's Statement

Performance

Frontier IP and its portfolio companies made excellent progress during the year to June 2021. The results are exceptional. Exscientia was a major part of the uplift in the fair value of the portfolio and the significant increase in the profit before tax. The results to 30 June 2021 however do not take account of Exscientia's successful IPO following the period end. Achievements and developments elsewhere in the portfolio also contributed to our results. It is enough to say here that I am delighted the portfolio made progress across a broad front.

This is particularly so in the context of COVID-19. The response from the Frontier IP team and our portfolio companies continued to be exemplary. I would like once again to thank them for their continued efforts and  the way they reacted to the opportunities and challenges arising from the pandemic.

Impacts from the virus on the Group and its portfolio have been broadly as expected, as Neil, our Chief Executive, outlined in our Annual Report last year. The pandemic highlighted the danger of zoonotic diseases and the need for effective vaccines and therapeutics, providing direct opportunities for companies such as The Vaccine Group (TVG), Exscientia and Amprologix. Other companies are well placed to seize the opportunities provided by new ways of working or tackling other issues brought into focus by the pandemic, such as CamGraPhIC  and Fieldwork Robotics.

In most other cases, impact was neutral. The main negative impacts were delays, either because decision making from industrial partners was affected, or labs and other facilities remained closed. The few companies which have suffered, we believe, are still fundamentally good and we remain confident about their futures. Several took advantage of the UK government's furlough scheme and the Future Fund, raising money through convertible loans, and we are grateful for the support.

We continued to strengthen our team with the appointments of Mark Rosten as Software Commercialisation Director, Darren Winter as Director of Corporate Relationships and Harry Ayton as Chemical Process Engineer. They all provide good examples of how we provide hands-on support for our portfolio companies beyond the financial. Mark has over 30 years of experience in product development with 15 years leading and managing software development teams in health, fintech and transport, while Harry has a PhD in Chemical Engineering from the University of Cambridge.

We also raised a further £2.3 million to give us the firepower and flexibility to take advantage of opportunities as they arise. The value of this approach was demonstrated when we were able to provide a loan to CamGraPhIC, a company whose graphene-based photonics have significant potential in telecoms. We were also able to match funding provided by the UK government through its Future Fund scheme to support innovative companies through the pandemic.

Industry partnerships and collaboration are a vital part of what we do. They help us to validate technology and understand potential applications, market needs and demands. So it was pleasing to see Fieldwork Robotics enter relationships with two major multinationals, Bosch and Bonduelle, and Cambridge Raman Imaging with Motic. The Vaccine Group also signed its first commercial agreement with ECO Animal Health Group and The Pirbright Institute - strong backing for its novel vaccine platform technology.

It's also worth mentioning a couple of projects we are involved with outside the portfolio. DNA Origami is a collaboration with Dr Ioanna Mela of the University of Cambridge, exploring the possible application of origami-like DNA nanostructures and their use as drug delivery vehicles. Early work to date is promising.

Frontier IP is also a partner in Emporia4KT, a pan-European project bringing together government, academia and business to support innovation and economic growth across Atlantic coastal economies. Our role is to help identify technology which can be commercialised. Teams from five countries are now developing 13 early-stage technologies.

There were no additions to our portfolio this year, as we focused on supporting the commercial development and scale up of existing companies in the portfolio as they approached inflection points. However, our pipeline of intellectual property opportunities looks good, and we would expect to incorporate new companies in the coming year.

Our governance

Good governance is vital for long-term sustainable growth, and we strive to achieve the highest standards for a company our size. We have adopted the Quoted Companies Alliance Corporate Governance Code, introduced in April 2018. To see more details about how we apply the principles of the Code, see the Our Governance section of this report and our website: https://www.frontierip.co.uk/about/governance/

Board Changes

I am pleased to report that in line with our commitment to maintaining a dynamic management framework we are making some changes to the makeup of our Board. We have appointed Professor Dame Julia King, Baroness Brown of Cambridge DBE FREng FRS, as an independent Non-Executive Director effective from 28 October 2021.

Baroness Brown is an engineer with immense experience across industry and government. Following an academic career at Cambridge University, Julia held senior engineering and business roles at Rolls-Royce between 1994 and 2002, before returning to academia as Principal of Engineering at Imperial College and then as Vice Chancellor and Chief Executive of Aston University from 2006-2016.   She is currently Chair of The Carbon Trust, a non-executive director of Ørsted, Chair of the Adaptation Committee of the Climate Change Committee, a member of the BEIS Hydrogen Advisory Council and a Non-Executive Director of AIM quoted Ceres Power Holdings plc.

Julia is passionate about education and engineering and contributed to the Browne report on university funding and to Lord Stern's review on the research excellence framework. She Chairs STEM Learning Limited and is the Chair of the Governing Board at the Henry Royce Institute for Advanced Materials.

Julia is a Fellow of the Royal Academy of Engineering, a Fellow of the Royal Society and was awarded a DBE for services to higher education and technology. In 2015 she was elevated to her Peerage as the Baroness Brown of Cambridge and sits as a Crossbench Peer in the House of Lords where she is a member of the Science and Technology Select Committee.

In addition, Michael Bourne, currently an independent Non-Executive Director, has notified the Company that, having served on the Board for more than seven years, he has decided to step down from his non-executive role at Frontier IP. Michael will remain on the board until the Company's forthcoming annual general meeting to be held on 9 December 2021 where he will not seek re-election as a director. I would like to take this first opportunity to thank Mike for his service on the Board and his valued contribution during his time in office.

Results

I am delighted with how the Group performed in the year. An increase of 145% in pre-tax profits and an increase in the fair value of our portfolio to £31,982,000 vindicate the strength of our business model.

For the year to 30 June 2021, total revenue and other operating income increased by 99% to £12,668,000 (2020: £6,377,000) as a result of a net unrealised profit on the revaluation of investments of £12,306,000 (2020: £5,973,000), principally due to the increase in fair value of Exscientia. Revenue from services, principally board retainers and licence income decreased by 10% to £362,000 (2020: £404,000) as some services were assigned to companies' own management.

Outlook

The results and the pipeline of companies now scaling up and starting to achieve their commercial potential shows our innovative business model is delivering. We are confident Exscientia's successful IPO is a foretaste of future success. We have a built a strong platform for growth, and so we are confident about our prospects for the coming year and beyond.

Andrew Richmond

Chairman

27 October 2021

Chief Executive Officer's Statement

Frontier IP enjoyed a highly successful year to 30 June 2021. The fair value of our equity portfolio rose 64% to £31,982,000, with profit before tax increasing by 145% to £10,242,000. Profit after tax increased by 129% to £9,566,000.

These pleasing numbers are significantly ahead of our expectations. They reflect the excellent commercial and technical progress made across the portfolio despite the difficulties posed by the ongoing COVID-19 pandemic.

Exscientia made the most significant contribution. The company enjoyed a stellar year and is now firmly established as one of the world's leading companies using artificial intelligence (AI) to drive discovery of new drugs. Three of its AI-designed candidates have now entered human clinical trials - the first in the world to do so - with the technology knocking years off the time taken to discover new drug candidates by traditional methods.

This has been accompanied by burgeoning interest and commitment from industry collaborators and investors. One of the world's biggest pharmaceutical companies Bristol Myers Squibb expanded its collaboration agreement, adding further upfront payments and milestones potentially worth more than $1.2 billion. And the company successfully closed a Series C funding round at $100 million after investment from funds managed by BlackRock, followed by a SoftBank-led Series D round raising $225 million and an option to draw a further $300 million if needed.

Its progress over the last year was cemented by a successful $2.9 billion IPO on the Nasdaq Global Select Market, raising gross proceeds of $304.7 million through a public offer and a further $160 million in private placements at the top end of the price range.  The private placements with SoftBank and the Bill & Melinda Gates Foundation, which is supporting the company's work on discovering new therapeutics for COVID-19 and other viruses with pandemic potential, provide further validation for the company's technology.

Exscientia is the first company in our portfolio to IPO. We are confident it will continue to grow and prosper. But we are equally excited by the prospects for our other portfolio companies. Our pipeline is strong, developing in depth and maturity. Significant potential is now emerging.

A number of our companies made impressive progress.  They have reached, or are approaching, inflection points, which mark important and favourable changes in their technical, industrial or financial progress. In response, it is vital that we at Frontier IP ensure they are in the best possible position to take advantage of these opportunities. Part of this is to ensure they are properly funded. We were pleased the pace of fundraisings increased across the portfolio over the year.

Further testament to the quality and technological potential of the portfolio companies are the individuals they attract. During the year, we strengthened the management teams across the portfolio, putting in place the right leaders to push companies towards commercial success. We are very happy with the high calibre of the individuals we have been able to recruit.

I would first draw attention to Pulsiv. We believe the company will become a major green technology business. Its unique technology improves the efficiency of electricity conversion meaning devices waste much less energy than conventional techniques. If widely adopted, it means electricity grids can generate less electricity to meet the demand from devices and appliances. It can be used in virtually all mains-powered devices and has a host of other applications. The technology can be fitted into smaller form factors and can manage energy consumption more intelligently, cutting costs for manufacturers and bills for consumers. The company raised £1.5 million during the year.

To ensure it can achieve its full potential, the company appointed Darrel Kingham, formerly of Aixtron and Arm, as Chief Executive Officer. Since joining Pulsiv, Darrel has transformed the company's approach to scaling up its technology and is now in advanced discussions with a number of major companies about integrating it into their devices.

The Vaccine Group (TVG) and Nandi Proteins also appointed new Chief Executive Officers. Jeremy Salt joined TVG from GALVmed, where he was Chief Scientific Officer. Before GALVmed, he was a senior director for the world's largest animal health group Zoetis. His extensive experience at senior levels means he is the right person to oversee the next phase of TVG's development after a year when it continued to progress well, including its first commercial agreement with ECO Animal Health Group and The Pirbright Institute.

David Flower joined Nandi Proteins from the Boon Rawd Brewing Company, maker of Singha beer. He has also been Managing Director Home Baking for Kerry Foods. Nandi is well placed to exploit opportunities across the food sector, including in the fast-growing alternative meat markets, as well as in processed foods and baking.

I am also excited about the prospects for CamGraPhIC , which is developing high-speed, low-energy, graphene-based photonics for the telecoms industry. In laboratory tests, the technology has performed at about twice the speed of equivalent technologies while consuming much less energy. There is considerable interest from leading multinationals in the industry. And telecoms are only one set of potential applications for the company. It is already exploring possibilities in quantum computing.

These are only four of the companies in our portfolio with the potential to become sizeable businesses. Others are also developing well. Topps Tiles has already announced its intention to launch a range of Alusid-made tiles; Fieldwork's robot soft-fruit and harvesting technology  has been improved significantly in collaboration with Bosch; AquaInSilico is now part of a prestigious United Nations Development Programme project to help protect and conserve one of the world's most diverse marine environments.

Sustainability is attracting heightened interest. It is a natural consequence of what we do and how we work. Science and technology are vital to ensuring we can tackle the social and environmental challenges we all face, from improving health to cutting carbon emissions. There is a strong commercial incentive for identifying IP which helps to solve these problems - and these are opportunities our industry collaborators are keen to explore.

As a result, over the years, we have developed expertise which lies across four clusters - AI and robotics, food and agritech, engineered particles and materials, and pathogens and cell imaging - all of which offer clear benefits to society and the environment.

There has been some debate around sustainability metrics and their value to investors and other stakeholders. Much of the talk concerns the costs and the effect on returns as companies seek to mitigate negative impacts - for example by offsetting carbon emissions or managing water waste.  Mitigation is necessary but will only take us so far. It is a reactive approach which, we believe, does not give enough weight to the role of new technologies in solving the problems we face. All companies in our portfolio have the potential to make positive societal and environmental impacts - and some, such as Pulsiv, could be transformative.

This year we are introducing a more formal framework for evaluating sustainability by aligning ourselves to the United Nations Sustainable Development Goals. They provide a framework and a set of targets for 2030 which suit the forward-looking nature of our business. You can learn more in the Portfolio Review section of this report.

Finally, I would very much like to thank you, our shareholders, and other stakeholders, for your continued support. We remain confident about our future prospects.

Neil Crabb, Chief Executive Officer

27 October 2021

Key Performance Indicators

The Key Performance Indicators for the Group are:

We are pleased to report that the Group achieved significant increases in four of its five Key Performance Indicators, despite the issues raised by the COVID-19 pandemic. Since the COVID-19 outbreak, we have focused more on the existing portfolio and did not take on any new portfolio companies during the year.

The value of the Group's equity investments increased to £31,982,000 (2020: £19,444,000) with net assets increasing to £38,421,000 (2020: £25,866,000). Profit after tax for the Group for the year to 30 June 2021 was £9,566,000 (2020: £4,184,000) after a deferred tax charge of £676,000 (2020: nil). This result includes a net unrealised profit on the revaluation of investments of £12,306,000 (2020: £5,973,000) and reflects a decrease in services revenue to £362,000 (2020: £404,000), greater administrative expenses of £2,171,000 (2020: £2,011,000) primarily due to an increase in personnel and an increase in share-based payments to £368,000 (2020: £230,000).

Operational Review

Corporate

Frontier IP made robust progress during the year, despite the impact of COVID-19. A number of portfolio companies are now moving rapidly towards achieving their potential. They have made significant technical and commercial advances during the year, and the Group has moved to strengthen them further by supporting fund raisings and appointing senior leadership to their teams.

To flex our business model and ensure we were in a good position to take advantage of the opportunities we saw arising, we raised a further £2.3 million (before expenses) through an oversubscribed placing and PrimaryBid offer. This was in addition to the £3.8 million (net of expenses) we raised in November 2019. The money allowed us to provide more direct financing to portfolio companies, in particular by helping us to match convertible loans from the UK government's Future Fund.

People are vital to our success. Our different business model, which is based on providing direct, hands-on support for technology from a very early stage of development means we look to recruit those with relevant commercial and technical experience, as well as financial.

During the year, we appointed Mark Rosten as Software Commercialisation Director, a non-board role. Mark has more than 30 years' experience leading software teams across the health, fintech and transport sectors. Before Frontier IP, he was Senior Vice President Product Development at mobile payments group Bango plc. Harry Ayton joined as a Chemical Process Engineer. He has a doctorate in Chemical Engineering from the University of Cambridge. Finally, Darren Winter, who has held a number of senior sales positions in the City of London, was appointed Director of Commercial Relationships.

Portfolio Review

Frontier IP strives to develop and maximise value from its portfolio. We do so by taking founding stakes in companies at incorporation and then working in long-term partnerships with shareholders, academic and industry partners.

As part of our sustainability agenda, we have mapped our portfolio companies to relevant United Nations Sustainability Development Goals (UN SDGs). All equity holdings are as at 30 June 2021.

Core portfolio

Alusid: Frontier IP stake: 35.6 per cent

Alusid's innovative formulations and processes create beautiful, premium-quality tiles, tabletops and other surfaces by recycling industrial waste ceramics and glass, most of which would otherwise be sent to landfill. Its processes also use less energy and water than conventional tile manufacturing.

The company continued work to scale up its technology for mass production on industry-standard manufacturing equipment following a successful pilot the previous year.  This culminated in a statement from Topps Tiles that it intended to launch the Alusid-made Principle range. It will be the world's first tile range mass manufactured from recycled materials. During the year, Alusid also raised £250,000 through a convertible loan, including a £125,000 investment from the UK government's Future Fund.

In March, David Taylor CBE, founding chief executive of both English Partnerships and Amec Developments and Pro Chancellor and chair of the University Board, joined Alusid's board of directors as representative of the University of Central Lancashire. 

Alusid's sustainable process technology uses up to 29 per cent less energy than conventional tile manufacture while still running on the same equipment, reducing CO2 emissions. Its product is made from recycled waste, much of which would otherwise end in high-impact landfill.

UN Sustainable Development Goal mapping: SDG 9, industry, innovation and infrastructure; SDG 12, responsible consumption and production.

Amprologix: Frontier IP stake: 10.0 per cent

Amprologix was created to commercialise the work of Mathew Upton, Professor of Medical Microbiology at Plymouth's Institute of Translational and Stratified Medicine.

The company continued to make progress with development of its new family of antibiotics based epidermicin, which is derived from bacteria found on human skin, to tackle antimicrobial-resistant MRSA and other superbugs. Ingenza, a leader in industrial biotechnology and synthetic biology, is also a shareholder and is working with Amprologix to develop and scale up the technology.

COVID-19 has heightened interest in other threats to human health globally. Among these is the danger from antimicrobial resistance, named as a top 10 threat to global health by the World Health Organisation.

UN SDG mapping: SDG 3, good health and well-being

AquaInSilico: Frontier IP stake: 29.0 per cent

AquaInSilico, the Group's fourth spin out in Portugal, is developing sophisticated software tools able to understand and predict how biological and chemical processes unfold in different operating conditions.

These can be used to optimise wastewater treatment across many industries, including municipal wastewater treatment plants, oil groups, brewers, pulp, paper and steel makers, food processing and waste recovery businesses.

Highlights of the company's year included the award of a €60,000 EIT RawMaterials grant from the European Union's European Institute of Innovation and Technology to commercialise tools to remove phosphorus from wastewater in a more environmentally friendly and effective way than existing technologies.

AquaInSilico was also selected to receive $250,000 as an Ocean Innovator through the United Nations Development Programme's Ocean Innovation Challenge. The company is now involved in a two-year project to help protect and conserve one of the world's most diverse marine environments around the Cape Verde archipelago in the Atlantic Ocean. Its tools will be used to reduce the amount of nutrients entering the sea and to improve water quality for the local population.

UN SDG mapping: SDG 6, clean water and sanitation, SDG 12, responsible consumption and production, SDG 14, life below water

Cambridge Raman Imaging: Frontier IP stake: 25.8 per cent

Cambridge Raman Imaging, the Group's first graphene spin out, is developing Raman imaging technology based on graphene-based ultra-fast lasers, to detect and monitor tumours. The company was formed as a result of a partnership between the University of Cambridge and the Politecnico di Milano in Italy.

The key application employs Artificial Intelligence (AI) based analysis of chemical signatures, for accurately differentiating between healthy tissue and diseased tissue in patient samples, augmenting or replacing subjective diagnosis of samples by histopathologists. This will be without chemical staining - eliminating a major contributor to sample variation seen between one lab and the next.

During the year, the company raised £250,000 in its first equity funding round, appointed a Chief Technology Officer, and entered into a collaboration with Chinese manufacturer Motic. The company also announced its involvement in a €5 million project, Crimson, to develop new imaging technologies to enable researchers to investigate diseases unfolding in cells in near real time. This will promote greater understanding of disease, opening the way for the development of new treatments.

UN SDG mapping: SDG 3 good health and well-being 

CamGraPhIC : Frontier IP stake: 26.7 per cent

A second graphene spin out, this time from the University of Cambridge and Italian research institute CNIT, CamGraPhIC develops graphene-based photonics for high-speed data and telecommunications. Graphene photonics are seen as a key enabler for 5G technologies by the company's industrial partners.

Initial applications are high-speed optical transceivers. In laboratory conditions these have worked at 100Gb per second, around twice the speed of equivalent technologies, and consume at least 75 per cent less energy. The area is attracting increased interest, with COVID-19 and the subsequent rise in remote working underlining the need for very high broadband speeds.

UN SDG mapping: SDG 9, industry, innovation and infrastructure, SDG 11, sustainable cities and infrastructure

Celerum: Frontier IP stake: 33.8 per cent

Celerum is developing novel artificial intelligence to improve the operational efficiency of logistics and supply chains. The technology also has the potential to address a host of other complex scientific, engineering and industrial challenges.

Celerum develops technology based on nature-inspired computing, which develops software and algorithms based on natural processes and behaviours, such as those exhibited by ant colonies and fish schools. This novel artificial intelligence can be used to improve the operational efficiency of logistics and supply chains and has the potential to address a host of other complex scientific, engineering and industrial challenges. During the year, the company announced it had been sub-contracted to support software development for Aberdeen-based company PlanSea Solutions.

Although the technology is at an early stage of development, a project conducted on behalf of Highlands and Islands Enterprise across food and drink supply chains in northern Scotland, showed it has the potential to cut carbon emissions by up to 40 per cent if suppliers and logistics firms are willing to work together to share loads.

UN SDG mapping: SDG 9, industry, innovation and infrastructure

Des Solutio: Frontier IP stake: 25.0 per cent

Des Solutio is developing safer and greener alternatives to the toxic solvents currently used to extract active ingredients by the pharmaceutical, personal care, household goods and food industries.

It does this by creating new methods to use Natural Deep Eutectic Solvents, found in a huge array of plants, to replace toxic organic solvents, such as ethanol, employed currently. This means it is contributing to the environmentally sound management of chemicals, and reducing their release to air, water and soil. The company is still at an early stage but is already generating industry interest.

UN SDG mapping: SDG 9 industry, innovation and infrastructure; SDG 12, responsible consumption and production

Elute Intelligence: Frontier IP stake: 41.2 per cent

Elute's software tools are designed to help users intelligently search, compare and analyse complex documents by mimicking the way people read. There are a huge range of potential applications, from searching patents and contracts, to detecting evidence of plagiarism, collusion and copyright infringement.

During the year, the company raised £250,000 through its first equity funding round and launched its innovative Patent Reader product commercially following a successful pilot with a dedicated user group. The Patent Reader allows users to identify relevant patents and understand why they are relevant within minutes. It is also developing an enterprise search tool and continued to provide its COVID-19 document reader free to researchers. The company's tools help to enhance research, support improved technological capabilities and innovation.

UN SDG mapping: SDG 9, industry, innovation and infrastructure

Exscientia: Frontier IP stake: 1.7 per cent

Exscientia, a spin out from the University of Dundee, now based in Oxford, is a world leader in artificial intelligence-driven drug discovery. It is the company behind the first three AI-created drugs to enter human clinical trials, taking years off traditional drug discovery processes.

Post period end, the company became the first in our portfolio to IPO, raising total gross proceeds of $464.7 million through a public offer and private placements with SoftBank and the Bill & Melinda Gates Foundation. The IPO, priced at the top end of the estimated range, valued the company at $2.9 billion.

It cemented a growing reputation globally, which had already been recognised by investors and the pharmaceutical industry. In March 2021, Exscientia completed a Series C funding round at $100 million with an investment from funds managed by BlackRock; in April a Series D funding round led by SoftBank raised $225 million with an option to raise a further $300 million. The following month, Exscientia announced a collaboration with one of the world's biggest pharmaceutical companies Bristol Myers Squibb with upfront and potential milestones of more than $1.2 billion.

The company also entered a strategic research and development agreement with EQRx, a company committed to developing and providing medicines at lower prices.

Although the company is primarily focused on non-communicable diseases, such as cancer, OCD, Alzheimer's and rare diseases, it announced the discovery of two potential therapeutics for COVID-19 earlier this year.

UN SDG mapping: SDG 3, good health and well-being

Fieldwork Robotics: Frontier IP stake: 22.2 per cent

Fieldwork Robotics made good progress in developing its robot soft fruit picking and vegetable harvesting technology, despite COVID-19 affecting necessary field trials.

During the year, the company entered into a collaboration with Bosch, which optimises the robot arm technology and software to increase speed and reduce costs. This has resulted in a number of improvements to the technology. It also started working with Bonduelle, a leading vegetable producer, on a three-year project to develop a cauliflower harvesting robot.

The company raised £675,000 through an equity funding round and received grants totalling £229,000 from schemes managed by Innovate UK.

Robotic fruit and vegetable harvesting technology has the potential to improve agricultural productivity, reduce food waste by more accurate picking and minimising human contact, and result in better quality jobs, with harvesting labour replaced by skilled robot operators. There is also potential for cutting carbon emissions through reduced need for migrant labour.

UN SDG mapping: SDG 2, zero hunger; SDG 12 responsible consumption and production

Insignals Neurotech: Frontier IP stake: 33.0 per cent

Insignals Neurotech, a spin out from the Portuguese Institute for Systems and Computer Engineering, Technology and Science ("INESC TEC"), with the support of São João University Hospital, part of the University of Porto, is developing wireless wearable devices to precisely measure wrist rigidity to help surgeons place brain implants more accurately. The first product is aimed at Parkinson's disease and has already undergone three clinical studies. During the year, the company received a €100,000 investment from leading Portuguese venture capital firm Portugal Ventures.

InSignals is also working on other applications in neurology.

Parkinson's is the fastest growing neurodegenerative disease worldwide - by 2040, 13 million people are expected to become sufferers.

UN SDG mapping: SDG 3 good health and well-being  

Molendotech: Frontier IP stake: 12.6 per cent

Molendotech continued work on its innovative rapid pathogen detection technology. Siren_BW, a kit to test bathing water for faecal matter based on Molendotech's proprietary bacterial detection technology, is now commercially available. The kit, which can be used on site, cuts testing times from up to two days to under 30 minutes because samples do not need to be sent to a laboratory, enabling environmental agencies and other authorities to assess water quality swiftly.

The company has also developed a novel method to detect specific pathogenic bacteria, and the investment will enable further development of this technology for new markets, including the food industry, where it has the potential to extend shelf life and reduce food waste. This work is being undertaken in collaboration with industry partners.

UN SDG mapping: SDG 6, clean water and sanitation; SDG 12 responsible consumption and production

Nandi Proteins: Frontier IP stake: 20.1 per cent

Nandi Proteins is now scaling up commercial products based on its technology to create a wide range of customised ingredients based on vegetable and animal proteins. These functional proteins can be used to replace undesirable ingredients, such as fat, gluten, E-number additives in processed foods, or those that people do not want to consume - for example, by replacing animal proteins with vegetable proteins.

The company has gained significant industrial traction and is now collaborating with major companies on several applications. These include projects to improve the taste and texture of gluten-free products, using vegetable proteins to replace egg whites in meat alternatives to turn a vegetarian product vegan, and proteins to replace chemical binders and emulsifiers in plant-based alternative meats and baked goods. The company is also developing animal proteins to replace fat.

To oversee scale up and further development of the technology, Nandi appointed David Flower, former managing director Europe for Singha beer maker the Boon Rawd Brewing Company as chief executive. He was previously managing director, home baking, for Kerry Foods. The company also raised £720,000 through a convertible loan backed by £360,000 from the UK government's future fund.

Nandi's technology has the potential to contribute to more sustainable agriculture and food production by supporting the plant-based alternative meat industry and by reducing chemical ingredients in processed food. Cutting fat in affordable processed foods will help to make them less harmful.

UN SDG mapping: SDG 2, end hunger; SDG 12, responsible consumption and production

NTPE: Frontier IP stake: 31.6 per cent

NTPE is developing cellulose-based eco-friendly, low-cost, low-power paper-based electronics to replace silicon in some electronic applications. Called Paper-E, the novel technology means electronic circuits, sensors and semiconductors can be printed onto any cellulose-based paper. Paper-based energy harvesters, such as solar cells, can be included in the circuits.

The company is focusing on a range of potential applications, including a book-E concept to produce cheap and accessible educational tools to teach children about electronics. Longer-term health applications include diagnostic sensors for use in health and food, smart packaging and paper-based sensors for use in very remote environments.

Cellulose is natural, sustainable and recyclable material. Its use can help reduce the severe negative impact of silicon mining, use and disposal. The technology is still at an early stage of development.

UN SDG mapping: SDG 12, responsible consumption and production

PoreXpert: Frontier IP stake: 15.0 per cent

PoreXpert, a software and consultancy firm, has developed novel software and methods to model the voids within porous materials and how gases, liquids and colloidal suspensions behave within them.

Applications include helping companies understand and exploit the nature of oil and gas reserves to improve the efficiency of exploration and extraction, supporting industry efforts to reduce their impact on the environment. It is also being used to help maximise the lifespan of the UK's Advanced Gas Cooled nuclear reactors, which generate 20 per cent of the national energy requirement, without greenhouse gas emissions.

UN SDG mapping: SDG 7, affordable and clean energy; SDG 12, responsible consumption and production

Pulsiv: Frontier IP stake: 18.3 per cent

About half the electricity used by devices is wasted because of inefficient power conversion - that's why converters heat up in operation. Pulsiv's novel technology converts electricity much more efficiently - in tests it wastes only about 10 per cent of the energy. Furthermore, its fundamentally new power conversion techniques can be incorporated in smaller, lighter and more cost-effective designs. So the technology has the potential to reduce strains on power grids and cut costs for manufacturers and bills for consumers.

The technology can be used in nearly all mains-powered products, battery chargers, lighting applications, electric vehicles, portable power tools and DC motors. Not only does it convert electricity from mains to device more efficiently, it also works from device to mains, significantly improving the efficiency of renewable sources. The company is working on a solar microinverter to maximise the output from photovoltaic solar cells. 

During the year, the company completed a £1.5 million equity funding round and significantly strengthened its management team. Darrel Kingham, formerly of Aixtron and Arm, joined as chief executive officer. Dr Zaki Ahmed, the man behind the technology, left his post at the University of Plymouth to join full time as chief strategy officer, and Tim Moore, executive vice president of Shark Robotics, Shark Ninja, became a non-executive director. Adam Westcott has been appointed as chief financial officer. These appointments reflect the fact the company is now pushing ahead with full commercial scale up of the technology.

UN SDG mapping: SDG 7, affordable and clean energy; SDG 13, climate action

The Vaccine Group: Frontier IP stake: 17.0 per cent

The Vaccine Group is creating a wide range of vaccines based on a novel herpesvirus-based platform. Its core focus is on preventing the spread of zoonotic and economically damaging diseases. Vaccines under development include those for COVID-19, African swine fever, bovine tuberculosis, bovine mastitis, streptococcus suis, Ebola and Lassa fever. To date, the company and its international partners have been awarded more than £9 million in grant funding from the UK, US and Chinese governments.

Key events of the year include the company signing its first commercial collaboration agreement with ECO Animal Health Group and The Pirbright Institute to develop vaccines for porcine respiratory and reproductive syndrome.

To reflect the progress made by the company, Jeremy Salt was appointed chief executive officer to oversee the vaccine platform's continued development and commercialisation of the technology. Jeremy joined from GALVmed, where he was chief scientific officer. He has previously director of Biologicals Research & Development for Europe, Africa and Middle East of the world's biggest animal health group Zoetis.

UN SDG mapping: SDG 2, end hunger; SDG 3 good health and well-being

Core Portfolio Summary at 30 June 2021

The Group holds equity stakes in 8 further portfolio companies. The combined value of these holdings was £28,000, equivalent to 0.1% of the fair value of the Group's portfolio at 30 June 2021.

Financial Review

Key Highlights

The value of the Group's equity investments increased to £31,982,000 (2020: £19,444,000) with net assets increasing to £38,421,000 (2020: £25,866,000).

Profit after tax for the Group for the year to 30 June 2021 was £9,566,000 (2020: £4,184,000) after a deferred tax charge of £676,000 (2020: nil). This result includes a net unrealised profit on the revaluation of investments of £12,306,000 (2020: £5,973,000) and reflects a decrease in services revenue to £362,000 (2020: £404,000), greater administrative expenses of £2,171,000 (2020: £2,011,000) primarily due to an increase in personnel and an increase in share-based payments to £368,000 (2020: £230,000).

On 21 July 2020, the Company conducted a placing of 4,243,140 new ordinary shares of 10p for cash at a price of 55p per share raising £2,334,000 before expenses of £152,000.

Revenue

Total revenue and other operating income for the year to 30 June 2021, which is the aggregate of services revenue and unrealised gain on the revaluation of investments, increased 99% to £12,668,000 (2020: £6,377,000). Revenue from services decreased 10% to £362,000 (2020: £404,000). The Group's net unrealised profit on the revaluation of investments increased 106% to £12,306,000 (2020: £5,973,000). Unrealised gains on revaluation of equity investments of £12,603,000 (2020: £7,064,000) were offset by fair value decreases of £412,000 (2020: £1,051,000). £8,803,000 of the equity investment gain relates to Exscientia Limited which raised capital in April 2021 at an increased price and £1,494,000 to The Vaccine Group Limited. Unrealised gains included net unrealised profit on the revaluation of debt investments of £115,000 (2020: unrealised loss of £40,000).

Administrative Expenses

Administrative expenses increased 8% to £2,171,000 (2020: £2,011,000). The increase is primarily due to increased employee and consultant costs.

Share Based Payments

Share based payments increased 60% to £368,000 (2020: £230,000) reflecting the charge for options granted in November 2020 and a full year's charge for options granted in December 2019.

Earnings Per Share

Basic earnings per share were 17.47p (2020: 8.76p). Diluted earnings per share were 16.62p (2020: 8.41p).

Statement of Financial Position

The principal items in the statement of financial position at 30 June 2021 are financial assets at fair value through profit and loss £34,302,000 (2020: £20,307,000) and goodwill £1,966,000 (2020: £1,966,000). Financial assets at fair value through profit and loss comprise equity holdings of £31,982,000 (2020: £19,444,000) and debt investments of £2,320,000 (2020: £863,000) in portfolio companies. The carrying value of these items is determined by the Directors using their judgement when applying the Group's accounting policies. The matters taken into account when assessing the fair value of the portfolio companies are detailed in the accounting policy on investments. The considerations taken into account by the Directors when reviewing the carrying value of goodwill are detailed in Note 9 to the financial statements. 

The Group had net current assets at 30 June 2021 of £2,379,000 (2020: £3,588,000). The current assets at 30 June 2021 include trade receivables of £172,000 which are more than 90 days overdue from portfolio companies Alusid, Elute Intelligence and Fieldwork Robotics. Other debtors also include an unsecured interest free loan to Alusid of £31,000. The directors are confident that Alusid, Elute Intelligence and Fieldwork Robotics will be able to raise sufficient funds to finance their business plans and pay the amounts due to the Group.

Net assets of the Group increased to £38,421,000 at 30 June 2021 (30 June 2020: £25,866,000) resulting in net assets per share of 69.8p (2020: 51.0p).

Cash

The Group's cash balances decreased during the year by £976,000 to £1,992,000 at 30 June 2021.  Operating activities consumed £1,466,000 (2020: £1,758,000) and investing activities consumed £1,692,000 (2020: £600,000) reflecting the purchase of debt investments of £1,618,000 (2020: £588,000) which included a loan of £933,000 to CamGraPhIC Limited and £320,000 to Nandi Proteins Limited. The Group raised cash of £2,182,000 net of costs through a placing in July 2020.

Key Risks and Challenges affecting the Group

The specific financial risks of price risk, interest rate risk, credit risk and liquidity risk are discussed in note 1 to the financial statements. The key broader risks - financial, operational, cash flow and personnel - are considered below.

The key financial risk in our business model is the inability to realise sufficient income through the sale of our holdings in portfolio companies to cover operating costs and investment capital. This risk has been mitigated through the post-year end initial public offering of Exscientia, our most valuable holding at 30 June 2021, creating a significant, readily realisable asset to cover our cash requirements for the foreseeable future. The other principal financial risk of the business is a fall in the value of the Group's portfolio. With regards to the value of the portfolio itself, the fair value of each portfolio company represents the best estimate at a point in time and may be impaired if the business does not perform as well as expected, directly impacting the Group's value and profitability. This risk is mitigated as the number of companies in the portfolio increases. The Group continues to pursue its aim of actively seeking realisation opportunities within its portfolio to reduce the requirement for additional capital raising.

The principal operational risk of the business is management's ability to continue to identify spin out companies from its formal and informal university relationships, to increase the revenue streams that will generate cash in the short term and achieve realisations from the portfolio.

Early-stage spin out companies are particularly sensitive to downturns in the economic environment. Any downturn would mean considerable uncertainty in the capital markets, resulting in a lower level of funding activity for such companies and a less favourable exit environment. The impact of this may be to constrain the growth and value of the Group's portfolio and to reduce the potential for revenue from advisory work. The Group seeks to mitigate these risks by maintaining relationships with co-investors, industry partners and financial institutions, as well as controlling the cash burn rate in portfolio companies.

The remaining risks to the Group attributable to the COVID-19 pandemic on the Group are: Operational - Frontier and portfolio company employees may contract the virus and be unavailable for work for extended periods of time; Valuation - the economic impact could delay the commercial progress and fundraisings of some portfolio companies; and general economic deterioration could impede the company's ability to raise funds when required. The Group seeks to mitigate these risks by maintaining a safe working environment, ensuring portfolio companies have considered and addressed risks and strengthening the Group's balance sheet.

Changes to the basis on which IP is licensed in the Higher Education sector might lead to reduced opportunity or a need to vary the business model.  Any uncertainty in the sector may have an impact on the operation of the Group's commercialisation partnerships in terms of lower levels of intellectual property generation and therefore commercialisation activity.  The Group seeks to mitigate these risks by continuing to seek new sources of IP from a wide range of institutions both within and outside of the UK.

The impact of Brexit is still to become fully apparent but could have a broad disruptive impact on the Group: reduced research funding impacting access to quality IP in the higher education sector; reduced grant funding for portfolio companies; disruption to the business of portfolio companies who trade with the EU or who are unable to recruit skilled labour. We believe the direct impact of Brexit on the Group's operations to be limited but will be kept under review. However, we will continue to work closely with our portfolio companies to mitigate the impact of any issues arising.

The Group is dependent on its executive team for its success and there can be no assurance that it will be able to retain the services of key personnel. This risk is mitigated by the Group through recruiting additional skilled personnel and ensuring that the Group's reward and incentive framework aids our ability to recruit and retain key personnel. The Executive Directors are encouraged to hold direct interests in shares in the Company.

By order of the Board

Neil Crabb

Director

27 October 2021

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2021

All of the Group's activities are classed as continuing.

There is no other comprehensive income in the year (2020: nil).                             

Consolidated Statement of Financial Position

At 30 June 2021

Consolidated Statement of Changes in Equity

For the year ended 30 June 2021

Consolidated Statement of Cash Flows

For the year ended 30 June 2021