TIDMSEED
RNS Number : 3630U
Seed Innovations Limited
22 November 2023
Seed Innovations Ltd / AIM: SEED / Sector: Closed End
Investments
22 November 2023
SEED Innovations Limited ("SEED" or the "Company")
Interim Results
SEED Innovations Ltd, the AIM quoted company providing
shareholders with exposure to early-stage health, wellness, and
medical cannabis companies to which, in normal circumstances, they
have limited access to, is pleased to announce its interim results
for the six months ended 30 September 2023.
A copy of this announcement and the Interim Results will be
available on the Company's website : www.seedinnovations.co .
HIGHLIGHTS
-- Divestment of holding in Leap Gaming for EUR5.8 million
payable in two tranches. The first tranche of EUR3 million (GBP2.7
million) was received on completion of the deal with the balance
due in April 2024.
-- Partial sale in Avextra AG ("Avextra"), a German based,
European vertically integrated medical cannabis company, generated
gross proceeds of GBP2.45 million (EUR2.9 million), a 62% (1.6x)
return on SEED's original investment in 2021 and 2023.
-- SEED remains a supportive shareholder in Avextra with 2,242
units representing approximately 3% of Avextra on a fully diluted
basis.
-- The net asset value of the Company at 30 September 2023 was
GBP14,611,908 equal to net assets of 6.87 pence per Ordinary Share
- approximately 2.75 times the current share price.
-- On 19 September 2023, the Company announced its intention to
buy back a maximum of 21,500,000 of its own shares in a bid to
increase net asset value and liquidity in its shares.
-- Strong cash and cash receivables of GBP7.1 million as at 30
September 2023 - making it well position to capitalise on
investment opportunities.
The Company remains well positioned to benefit from the
long-term potential of the medical cannabis industry, and other
emerging growth markets, despite recent worldwide geopolitical and
economic events.
Commenting on the interim results, CEO, Ed McDermott said:
"The Company's share price has faced a challenging period amid
persistent unfavourable macro conditions. Despite this,
operationally, we have continued to demonstrate our ability to
identify, invest and generate liquidity events. A testament to this
was our recent partial exit from Avextra at a 1.6x return on SEED's
original investment. The Leap sale, and partial sale of Avextra
have contributed to our strong cash position of GBP7.1 million,
which remains higher than our market capitalisation. Our invested
NAV also in isolation is higher than our market capitalisation.
"We believe we are significantly undervalued and that the
Company's shares, currently trading at approximately a 64% discount
to net asset value, represent an attractive investment opportunity.
To this end, and to increase liquidity and return value to
shareholders, we have, as announced and underway, decided to
buy-back up to 21,500,000 of our own shares. Alongside, we have
also committed to increasing our visibility and accessibility to
investors, via several interactive investor events, which we hope
will increase the understanding of SEED and highlight its potential
to increase shareholder value."
For further information on the Company please visit: www.seedinnovations.com or contact:
Ed McDermott SEED Innovations E: info@seedinnovations.co
Lance de Jersey Ltd
James Biddle Beaumont Cornish T: (0)20 7628 3396
Roland Cornish Limited,
Nomad
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Isabella Pierre Shard Capital Partners T: (0)20 7186 9927
Damon Heath LLP
Broker
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Ana Ribeiro St Brides Partners E: seed@stbridespartners.co.uk
Isabelle Morris Ltd,
Financial PR
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CHAIRMAN'S STATEMENT
FOR THE PERIODED 30 SEPTEMBER 2023
There have been several positive developments for SEED
Innovations during this reporting period. Perhaps the most
significant is the Company's divestment of holdings in two investee
companies at premiums to our original investment, resulting in a
strong current cash balance of GBP2.19 million at 30 September 2023
and over GBP4.3 million at the time of publishing these interim
reports. This puts the Company in the enviable position of having
significant levels of cash to deploy in investments that the board
feel have the potential of increasing shareholder value. That said,
the macro-economic instability continues to play a major role in
stock market volatility and whilst we are seeing some signs of a
more positive sentiment, we have some way to go before we see
stable investor activity, particularly in small caps.
In April we received the first tranche of the Leap Gaming sale
proceeds, with the balance due in April 2024. In September, we went
on to sell just over half of our holding in Avextra AG at a premium
of 62% (1.6x) return on SEED's original investment in 2021 and
2022, which yielded EUR2.9 million (GBP2.45 million). With cash and
receivables at period end of GBP7.1 million, we are in investment
mode and have strong potential deal flow. While there are many
challenges in early stage investing in depressed markets such as
these, there are also opportunities. I remain convinced that our
board's extensive experience and access to these opportunities have
the potential to create further value.
Despite a recent, and frustrating, contraction in our share
price, I was encouraged to see the price rise to around 4.15p in
late September on the back of positive news. Investors can see the
Company is undervalued, with its market capitalisation below the
combined total of cash and future contracted receivables, let alone
Net Asset Value ("NAV"). While the stock price remains volatile, I
am hopeful that this will stabilise, along with the markets, and
consistently improve. This should be helped with the continuation
of a share buy-back programme launched on 2 October, the aim of
which is to provide liquidity for those investors wishing to exit
their investment, as well as reducing the number of shares in issue
and so increasing the NAV per share for those shareholders who
remain with us.
Broader fundraising challenges and limited liquidity across the
UK market have exerted significant pressure on our own stock price
but by extension, have cast a shadow over the endeavours of a few
of our portfolio companies, most recently Northern Leaf and OTO.
These tough circumstances have, regrettably, negatively impacted
the carrying value of these investments, leading to necessary
write-downs. We remain vigilant in navigating these complexities,
and while these adjustments are reflective of the current broader
economic climate, we are committed to steering our investments
toward sustainable growth and resilience in the face of such market
turbulence.
I'd like to thank our shareholders, many of whom, like me, have
been on this journey for many years. It is gratifying that we have
been able to report new significant entrants to our share register
as well as others who have increased their holdings. We continue to
work to improve communication with our shareholders and potential
investors through broadening the use of social media as well as
streaming our shareholder meetings, and I look forward to welcoming
shareholders to our first London investor event later this
month.
With ever increasing access to potentially interesting
investments, we are confident that the coming months will present
SEED with multiple opportunities, offering avenues for growth and
attractive investment prospects. The evolving landscape holds the
promise of cultivating long-term value, and we are committed to
capitalising on these opportunities to ensure our continued
success.
Ian Burns
Chairman
22 November 2023
REPORT OF THE CHIEF EXECUTIVE OFFICER
FOR THE PERIODED 30 SEPTEMBER 2023
The interim period under review continued to be one with a
number of headwinds including much stock market volatility, and
macro- economic factors remain a significant challenge for SEED. We
are not isolated in this with the small cap sector in general
coming under immense pressure. That said, the last six months has
seen a number of developments for us, with SEED's financial
position strengthen significantly following the sale of Leap Gaming
to IMG Arena US, LLC, and the realisation of a little over half of
our investment in Avextra.
In April, SEED received the first tranche of sale proceeds from
the sale of Leap, being EUR3 million (GBP2.7 million), the balance
being due in April 2024. Pleasingly we then realised half of our
investment in Avextra at a premium of 62% (1.6x) return on SEED's
original investment, yielding EUR2.9 million (GBP2.45 million),
repaying the majority of our initial investment and leaving most of
the balance of our holding as potential pure upside.
In other portfolio developments, I was delighted to see Clean
Food Group raise c.GBP2.3 million in August, in which we invested
GBP216,000. Their raise was supported by industrial food
specialists Doehler Group and Alianza Team along with AIM listed
Agronomics Limited.
As a result of an increased level of cash available, and a
strong potential deal flow, SEED remains confident that the current
environment will offer opportunities to invest and in turn, create
long-lasting value for investors. We are talking, and listening, to
our shareholders about how best to utilise the cash on hand
generated by the recent exits and options considered include the
buyback of shares, a special dividend, and the reinvestment into
new investments.
The strength of our balance sheet and the knowledge that we are
actively looking for investments has attracted a lot of investment
opportunities, through our own network and pleasingly beyond it.
However, quality is key and it is critical that, in a market where
valuations continue to fall, we ensure the deployment of funds at
the optimum time for our shareholders. I am confident that the
right investment(s) will present themselves and we are able to move
quickly on any favourably priced opportunities with the potential
for excellent long-term value. For that reason, the board have
concluded, at this time, to focus on new investment opportunities
and using a portion of the monies received so far to undertake a
share buy-back programme, the aim of which is to provide liquidity
for those investors wishing to exit their investment, as well as
reducing the number of shares in issue increasing the NAV per share
in the future. Whilst we haven't elected to pay a 'special
dividend' at this point, it is something that will remain under
consideration and may be an option when future cash receipts occur,
particularly after significant realisations of investments.
I am frustrated by our stock price which has been variable
during the period under review. Positive news flow has resulted in
buying of our shares at a price, that at points (for example in
late September), has been at a stark contrast to the general,
muted, market sentiment. That said, positive news is not always
translating into a strengthening share price so in the coming
months we will be looking at additional approaches to shareholder
engagement with the aim to enlarging our shareholder base and
increasing liquidity, as well as keeping SEED in the forefront of
the minds of investors trading stocks. Sadly, we cannot manufacture
news when there is none and are sometimes constrained by
restrictions imposed by our investee companies in terms of the
timing of announcements (particularly when we are "inside" in
relation to their own news and developments). At our Annual General
Meeting in September 2023, we spoke of our intention of holding an
in-person investor event over Winter 2023/24 and this is scheduled
for 29 November 2023. It will be an excellent opportunity for
shareholders to meet the board and some of our existing investee
companies.
I remain confident of SEED's future and with cash and cash
receivables at period end of GBP7.1 million, we are well placed to
deploy realised funds into new investments over the next year as
well as continuing with the recently commenced share buy-back
programme. We are seeking to increase shareholder engagement and
more general market engagement via new initiatives and look forward
to meeting more of our investors in person in due course.
Ed McDermott CEO
22 November 2023
INVESTMENT REPORT
The following brings a summary of the portfolio of investments
held by the Company, together with select updates on the underlying
investee companies, into a single report for ease of reference of
shareholders rather than spreading over the Chairman's and CEO
Reports as previously.
The net asset value of the Company at 30 September 2023 was
GBP14,611,908. (31 March 2023: GBP16,032,000), equal to net assets
of 6.87p per Ordinary Share (31 March 2023: 7.54p per Ordinary
Share).
The table below lists the Company's holdings at 30 September
2023, with comparatives as at 31 March 2023.
Prior results as at Interim results as at
31 March 2023 30 September 2023
-------------------- ----------------
Holding Valuation Holding Valuation % of Nav
Holding Category (GBP000's) (GBP000's)
-------------------- ---------------- --------------------- -------------- ------------ -------------- ----------
Juvenescence 128,205
Limited Biotech 128,205 shares 2,556 shares 2,595 17.8%
---------------- --------------------- -------------- ------------ -------------- ----------
Biotech/
Avextra AG Cannabis 5,142 shares 4,436 2,242 shares 1,940 13.3%
---------------- --------------------- -------------- ------------ -------------- ----------
Clean Food Group 7,161,336
Ltd ("CFG") Biotech 5,850,000 shares 965 shares 1,182 8.1%
---------------- --------------------- -------------- ------------ -------------- ----------
Little Green
Pharma Biotech/ 7,324,796
("LGP") Cannabis 7,324,796 shares 715 shares 636 4.4%
---------------- --------------------- -------------- ------------ -------------- ----------
Inveniam Capital 86,810
Partners, Fintech 86,810 shares 596 shares 605 4.1%
---------------- --------------------- -------------- ------------ -------------- ----------
Inc.
-------------- ------------ -------------- ----------
Biotech/ 1,236,331
Northern Leaf Ltd Cannabis 1,236,331 shares 960 shares 444 3.0%
---------------- --------------------- -------------- ------------ -------------- ----------
Portage Biotech 37,623
Inc. Biotech 37,623 shares 94 shares 65 0.4%
---------------- --------------------- -------------- ------------ -------------- ----------
OTO International CBD SWB shares 71,502
Ltd Wellness (excl loan) 423 shares 38 0.3%
---------------- --------------------- -------------- ------------ -------------- ----------
(South West Brands)
-------------- ------------ -------------- ----------
Leap Gaming Gaming Shares & Loan 5,106 Sold - 0.0%
---------------- --------------------- -------------- ------------ -------------- ----------
Total Investment
Value 15,851 7,505 51.4%
-------------- ------------ -------------- ----------
Cash and receivables,
net of payables
and accruals 181 7,107 48.6%
-------------- ------------ -------------- ----------
Net Asset Value 16,032 14,612
-------------- ------------ -------------- ----------
The movement in the portfolio value of negative GBP1.4 million
is attributable to the negative revaluations of Northern Leaf and
OTO (due to raising funds at discounted prices) and the further
decline in the market price of listed investments Little Green
Pharma and Portage. Gains have been seen in the valuation of
Avextra and due to favorable FX movements.
This report is separated by liquidity profile of the underlying
investments, from those liquid investments which could more easily
be realised to cash by virtue of their own public markets listings,
toward those longer term investments which are less liquid and so
likely to take a longer time and more planning and work to get to a
position for sale via a liquidity event or M&A activity.
LIQUID INVESTMENTS
Portage Biotech, Inc ('Portage')
NASDAQ listed Portage (Ticker: PRTG) is an emerging
biotechnology company developing an immunotherapy-focused pipeline
to treat a broad range of cancers. Its focus is to combine its own
technology with already proven immune-boosting PD1 agents and to
this end, Portage has a pipeline of products targeted for clinical
testing and a growing roster of notable partnerships.
Portage is valued at its trading price on the NASDAQ exchange.
Despite positive analysts targets, market price has continued to
remain depressed well below these levels and is unlikely to be
helped by additional fundraising by Portage at these prices. SEED's
holding is however, a residual balance left after prior profitable
sales of this stock. The holding is in no way material to SEEDs
position and will likely be exited in the future, albeit we are
loathe to realise a loss unnecessarily at this point.
Portage's activity within the period was steady, this
included;
-- The Portage team participated in a panel discussion at both
the Cantor Global Healthcare Conference, the BIO International
Conference, and the at the American Society of Clinical Oncology
(ASCO) Annual Meeting;
-- Portage entered into a clinical trial collaboration agreement
with Merck (known as MSD outside the US and Canada) to evaluate
Portage's next-generation adenosine antagonists in combination with
KEYTRUDA(R) (pembrolizumab), Merck's anti- PD-1 (programmed death
receptor-1) therapy, for patients with solid tumours;
-- In late June Portage announced that it had dosed the first
patient in its Phase 1a trial, ADPORT-601 (NCT04969315). The trial
is evaluating Portage's adenosine 2A receptor (A2AR) antagonist
candidate, PORT-6, in patients with solid tumours including
prostate cancer, and renal and non-small cell lung cancer;
-- It has updated interim data from the Phase 1 portion of the
trial evaluating its lead invariant natural killer T cell (iNKT)
engager, PORT-2 (IMM60), alone and in combination with KEYTRUDA(R)
(pembrolizumab) in patients with advanced melanoma and metastatic
non-small cell lung cancer (NSCLC) presented in a poster
presentation at the 2023 ASCO Annual Meeting.
PRE-LIQUIDITY INVESTMENTS
Being investee companies with a communicated intent to pursue a
liquidity event such as a market listing, or M&A transaction,
in the near to medium term.
Juvenescence Ltd ('Juvenescence')
Juvenescence is a life sciences company developing therapies and
consumer products to modify and support heathy aging focused on
improving and extending human lifespans. By utilising a coalition
of best scientists, physicians, and investors across its four
divisions, it aims to create cutting-edge therapies and products
that disrupt the thinking and behaviour around ageing. Juvenescence
has a broad portfolio of products in development and is driving
innovation amongst two divisions: JuvTherapeutics - Focused on
traditional prescription medicines to modify aging and prevent
diseases, and JuvLife- Consumer products that manage aging and help
increase health span.
Juvenescence has announced a move to a more conventional
"pharma" like development structure which it believes will position
it for a liquidity event in the future as development of its JuvRX
portfolio of pharma solutions progresses. It seems unlikely however
that such a liquidity event will be seen before 2025 at the
earliest.
Despite the sector-wide valuation challenges faced by many life
sciences companies Juvenescence has seen progress its JuvRx Core
Programs, including; Oral PAI-1 Inhibitor (MDI), GDF-15 and follow
on mAbs (BYOMass), Oral CD38 inhibitor (Napa), Oral Therapeutic,
Ketone Ester (Selah), Oral Plasmalogens (Pelagic) that all programs
that continue to progress and hit key milestones enroute to the
clinic.
Northern Leaf Ltd ('Northern Leaf')
Northern Leaf is focused on becoming a key player in the
European medical cannabis supply chain, having already built a
secure operational facility in Jersey. Northern Leaf is leading the
development of a new industry for the British Isles, using
state-of-the-art tracking systems and robust policies and
procedures to ensure the highest levels of quality from seed to
sale.
Significant milestones were reached by Northern Leaf despite
challenging market conditions, including several major
accreditations including the Good Manufacturing Practice (GMP)
accreditation by the UK's Medicines and Healthcare Products
Regulatory Agency for its flower product as an active
pharmaceutical ingredient as well as being accredited with the Good
Agricultural and Collecting Practice by Control Union Medical
Cannabis Standard (IMC- G.A.P) for its cultivation facility in
Jersey.
In our final results for March 2023, the Company reported the
conversion of its 2-year GBP600,000 Convertible Loan Note as part
of an equity raise of c.GBP3 million, resulting in SEED holding
1,236,331 preference shares in Northern Leaf, representing 2.2% of
the enlarged equity of Northern Leaf and with a carrying value of
GBP960,000 based upon the price of that raise and with Northern
Leaf targeting an IPO for later this year.
Unfortunately, poor public market conditions including one of
the hardest markets in memory for initial public offerings, have
worked against Northern Leaf's ambitions thus far and whilst work
on an IPO continues, if successful, it will likely be at a lower
price than that at of the last equity raise. As a result, we have
reduced our carrying valuation by a little over half to GBP443,000
to reflect either the risk of an IPO at a lower price or indeed of
a listing not progressing and the resultant pressures of raising
further private funding. This said SEED is encouraged by the drive
and determination of Northern Leaf's management to be successful in
this endeavour and wish them well in their continued work to secure
ongoing funding for the further development of the business as it
transitions into a revenue generating cannabis production
company.
LONGER TERM INVESTMENTS
Being typically early-stage investments and often in the value
creation phase of development, working toward initial sales and/or
profitability. Some positions may have been held for some years
already, with no communicated plans for a public market liquidity
event, nor publicised plans for a sale by M&A. Where progress
in development has been achieved or further upside within an
acceptable timeframe now seems unlikely, SEED may be working with
the investee company to identify a route to a liquidity event, or
may independently find a purchaser for just its own holding in the
investee company.
Clean Food Group Limited ('CFG')
CFG was co-founded by CEO Alex Neves and Co-Chairman (and SEED
CEO) Ed McDermott in 2021, with the goal of becoming the leading
independent UK cultivated food ingredients business. CFG is a
British based food Technology Company which aims to become the
leading independent UK cultivated food business. CFG is developing
a sustainable yeast technology that produces cultivated,
sustainable alternatives to palm oil and soy protein, two
ingredients in food and cosmetics with currently massive and still
growing demand and negative environmental impact. CFG has gathered
a knowledgeable board of directors and an experienced advisory team
which is familiar with biotechnology, life sciences and high-growth
industries.
Since the last reporting period, SEED has invested a further
GBP216,000 in CFG's latest funding round. This raised monies at the
same carrying price per share as was used to value the holding in
March 2023. Other investors and industrial food specialists are
supporting CFG including AIM listed Agronomics, Doehler Group and
Alianza Team. We are confident that the global food industry will
continue to look to invest in healthier and more sustainable food
choices for future generations and CFG will continue to prosper as
a result.
OTO International Limited ('OTO')
OTO is an omni-channel premium wellness brand, whose positioning
as the premium wellness brand of choice has enabled the business to
build three diversified and robust revenue streams (including
retail, spa and e-commerce) across multiple territories including
the UK, USA, Japan and Europe consisting of an exciting and
uniquely positioned portfolio of brands in fast growing consumer
sectors, with products perfectly positioned to take a market share
across beauty, female wellness, personal care and spa.
SEED received a shareholding in OTO of 71,502 shares (1.4% of
OTO) being payment in kind from the sale of South West Brands
('SWB', in which SEED was previously invested) to OTO in April
2023. Following their purchase of SWB, OTO has sadly experienced
some funding issues, resulting in a significant write-down of
carrying value to c.GBP38,000 now. SEED also continues to hold a
loan with SWB / OTO which is now reflected in "Receivables" in
these financial statements.
Inveniam Capital Partners ('Inveniam')
Inveniam is a private fintech company which built Inveniam.io, a
powerful technology platform that utilises big data, AI and
blockchain technology to provide surety of data and
high-functioning use of that data in a distributed data ecosystem.
Inveniam has built Inveniam.io, the data operating system for
delivering access, transparency, and trust in the value and
performance of private market assets.
SEED's investment in Inveniam came about following the failure
of legacy investment Factom and is non-core in relation to the
current investment strategy. As such, it is a position that we will
seek to exit when possible and to this end look forward to a future
improvement in the fortunes of US Tech investing and positive
developments at Inveniam.
Avextra AG (formally Eurox Group GmbH) ('Avextra')
Avextra is a German-based, vertically integrated medical
cannabis company focused on intensifying its investment in
pharmaceutical development internationally while maintaining the
highest European pharmaceutical quality standards to expand its
Avextra-branded pharmaceutical products.
Within the reporting period Avextra successfully exported EU-GMP
standardised cannabis extracts manufactured at its German facility
to its distribution partner in Italy, increasing Avextra's European
footprint and validating its extract focused business strategy.
SEED has been able to negotiate the exit of 56% of our position
in Avextra during the period, realizing EUR2.9 million in cash.
This represented an exit at slightly (2%) above our March 2023
carrying value per share. Given the total invested in Avextra
historically stood at EUR3.17 million, SEED has substantially
recovered our cost of investment thus far, leaving the majority of
the GBP1.94 million carrying value as potential profit to be
realized in the future.
The Board proposes to invest in companies to which, in normal
circumstances, individual investors may have limited access.
Investments sought will be in sectors which have, or have the
potential for, significant intellectual property, principally in
the wellness and life sciences sectors (including biotech,
longevity of life and pharmaceuticals) along with aligned
technology sectors (including artificial intelligence and digital
delivery). Equally the Board will consider investments in
established industries where the business is applying new
technologies and/or 'know-how' to enhance its offering or taking
established business models or products to new markets. In keeping
with its desire to provide its shareholders with access to
investments they may otherwise not be able to participate in, the
Board also intends to apply a portion of the portfolio to
opportunistic investments which may, by exception, fall outside the
above criteria but represent good potential for short term returns.
Such investments will be limited at 15% of the Company's NAV and
would typically be in fundraisings by listed companies or as part
of an IPO.
Initially the geographical focus will be North America and
Europe but investments may also be considered in other regions to
the extent that the Board considers that valuable opportunities
exist and positive returns can be achieved.
INVESTING POLICY
In selecting investment opportunities, the Board will focus on
businesses, assets and/or projects that are available at attractive
valuations and hold opportunities to unlock embedded value. In line
with the existing portfolio it is expected that investments will be
in SMEs with sub GBP100m valuations but with the potential for
significant growth. Where appropriate, the Board may seek to invest
in businesses where it may influence the business at a board level,
add its expertise to the management of the business, and utilise
its industry relationships and access to finance. The extent that
the Company will be a passive or active shareholder will depend on
the interest held and the maturity of the investee company.
The Company's interests in a proposed investment and/or
acquisition will range from minority positions to full ownership
and will comprise multiple investments. The proposed investments
may be in either quoted or unquoted companies; are likely to be
made by direct acquisitions or investments; and may be in
companies, partnerships, earn-in joint ventures, debt or other loan
structures, joint ventures or direct or indirect interests in
assets or businesses.
The Company will pursue a balanced portfolio of an even mixture
of early stage, pre-liquidity event and liquid investments which it
will aim to hold within the portfolio for 2-4 years, 6-24 months
and up to 12 months respectively. Whilst the target is to have the
portfolio split fairly evenly between the different stages of
liquidity there will be no set criteria for which the Company will
hold an investment and the proportion of the portfolio which will
be represented by each investment type.
There is no limit on the number of projects into which the
Company may invest. The Directors intend to mitigate risk by
appropriate due diligence and transaction analysis. The Board
considers that as investments are made, and new promising
investment opportunities arise, further funding of the Company may
also be required.
Where the Company builds a portfolio of related assets it is
possible that there may be cross holdings between such assets. The
Company does not currently intend to fund any investments with debt
or other borrowings but may do so if appropriate. Investments are
expected to be mainly in the form of equity, with debt potentially
being raised later to fund the development of such assets.
Investments in later stage assets are more likely to include an
element of debt to equity gearing. The Board may also offer new
Ordinary Shares by way of consideration as well as or in lieu of
cash, thereby helping to preserve the Company's cash for working
capital and as a reserve against unforeseen contingencies
including, for example, delays in collecting accounts receivable,
unexpected changes in the economic environment and operational
problems.
The Board will conduct initial due diligence appraisals of
potential businesses or projects and, where it believes that
further investigation is warranted, it intends to appoint
appropriately qualified persons to assist. The Board believes it
has a broad range of contacts through which it is likely to
identify various opportunities which may prove suitable.
The Board believes its expertise will enable it to determine
quickly which opportunities could be viable and so progress quickly
to formal due diligence. The Company will not have a separate
investment manager. The Board proposes to carry out a comprehensive
and thorough project review process in which all material aspects
of a potential project or business will be subject to rigorous due
diligence, as appropriate. Due to the nature of the sectors in
which the Company is focused it is unlikely that cash returns will
be made in the short to medium term on the majority of its
portfolio; rather the Company expects a focus on capital returns
over the medium to long term.
The Directors are responsible for preparing these unaudited
condensed half-yearly financial statements, which have not been
reviewed or audited by the Company's independent auditors, and are
required to:
-- prepare the unaudited half-yearly financial statements in
accordance with International Accounting Standard 34: Interim
Financial Reporting;
-- include a fair review of important events that have occurred
during the period, and their impact on the unaudited half-yearly
financial statements, together with a description of the principal
risks and uncertainties of the Company for the remaining six months
of the financial year as detailed in the Chairman's Statement;
and
-- include a fair review of related party transactions that have
taken place during the six-month period which have had a material
effect on the financial position or performance of the Company,
together with disclosure of any changes in related party
transactions from the last annual financial statements which have
had a material effect on the financial position of the Company in
the current period.
CONDENSED HALF-YEARLY STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIODED 30 SEPTEMBER 2023
01 April 01 April 2022
2023 to to
30 September 30 September
2023 2022
(unaudited) (unaudited)
Notes GBP'000 GBP'000
Net realised gain / (loss) on disposal
of financial assets at fair value through
profit and loss 5 1,112 4
Net unrealised (loss)/gain on revaluation
of financial assets at fair value
through profit and loss 5 (2,148) (3,536)
Interest income on financial assets at
fair value through profit and loss - 41
Total investment (loss)/income (1,036) (3,491)
Other income
43 -
Bank Interest income Arrangement fee - 9
Total other income 43 9
Expenses
Directors' remuneration and expenses 12 (179) (173)
Recognition of Directors share based expense 12 - (16)
Legal and professional fees (85) (40)
Other Expenses (91) (80)
Administration fees Adviser and broker's
fees (20) (24)
(35) (46)
Total expenses (410) (379)
Net (loss)/profit before losses and gains
on foreign currency exchange (1,403) (3,861)
Net foreign currency exchange gains/(loss) (17) 72
Total comprehensive (loss)/gain for the
period (1,420) (3,789)
(Loss)/earnings per Ordinary share -
basic and diluted 7 (0.67p) (1.78p)
The Company has no recognised gains or losses other than those
included in the results above.
All the items in the above statement are derived from continuing
operations.
CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2023
30 September 31 March
2023 2023
(unaudited)
Notes GBP'000 GBP'000
Non-current assets
Financial assets at fair value through
profit or loss 5 7,504 16,019
7,504 16,019
Current assets
Cash and cash equivalents Other
receivables 2,185 30
4,951 50
7,136 80
Total assets 14,640 16,099
Current liabilities
Payables and accruals (28) (67)
(28) (67)
Net assets 14,612 16,032
Financed by
Share capital 11 2,127 2,127
Other distributable reserve 12,485 13,905
14,612 16,032
Net assets per Ordinary share -
basic and diluted 10 6.87 7.54
CONDENSED HALF-YEARLY STATEMENT OF CHANGES IN EQUITY
AS AT 30 SEPTEMBER 2023
Employee Other
Share Capital share option distributable Total
reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 31 March 2023 2,127 - 13,905 16,032
Total comprehensive income for the year - - (1,420) (1,420)
--------------- ------------- -------------- --------
Balance as at 30 September 2023 2,127 - 12,485 14,612
--------------- ------------- -------------- --------
Balance as at 31 March 2022 2,127 212 18,122 20,461
Total comprehensive loss for the year - - (3,788) (3,788)
Employee share scheme - value of employee
services - 16 - 16
--------------- ------------- -------------- --------
Balance as at 30 September 2022 2,127 228 14,334 16,689
--------------- ------------- -------------- --------
CONDENSED HALF-YEARLY STATEMENT OF CASHFLOWS
FOR THE PERIODED 30 SEPTEMBER 2023
01 April 2023 to 01 April 2022
to
30 September 2023 30 September 2022
(unaudited) (unaudited)
GBP'000 GBP'000
Notes
Cash flows from operating activities
Total comprehensive (loss)/income for
the year (1,420) (3,788)
Adjustments for:
Unrealised loss/(gain) on fair value adjustments
on financial assets at 2,148 3,536
FVTPL
Realised loss/(gain) on disposal of financial
assets at FVTPL (1,112) (4)
Foreign exchange movement 17 (72)
Directors' share based payment expense - 16
Finance income - (37)
Changes in working capital:
(Increase)/decrease in other receivables
and prepayments (4,901) 27
Decrease in other payables and accruals (39) (23)
Net cash outflow from operating activities (5,306) (345)
Cash flows from investing activities
Acquisition of financial assets at fair
value through profit or loss 5 (216) (439)
Disposal of financial assets at fair value
through profit or loss 5 7,695 150
Net cash inflow/(outflow) from investing
activities 7,479 (289)
(Decrease)/Increase in cash and cash
equivalents 2,172 (634)
Cash and cash equivalents brought forward 30 922
(Decrease)/Increase in cash and cash equivalents 2,172 - 634
Foreign exchange movement (17) 72
Cash and cash equivalents carried forward 2,185 360
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIODED 30 SEPTEMBER 2023
1. General Information
SEED Innovations Limited (the "Company") is an authorised
closed-ended investment scheme. The Company is domiciled and
incorporated as a limited liability company in Guernsey. The
registered office of the Company is PO Box 343, Obsidian House, La
Rue D'Aval, Vale, GY6 8LB.
The Company's objective is set out in its Investing Policy which
can be found at https://seedinnovations.co/about/investing-policy
and as detailed on pages 10 to 11 of these financial
statements.
The Company's Ordinary Shares are quoted on AIM, a market
operated by the London Stock Exchange and is authorised as a
Closed- ended investment scheme by the Guernsey Financial Services
Commission (the "GFSC") under Section 8 of the Protection of
Investors (Bailiwick of Guernsey) Law, 2020 and the Authorised
Closed-Ended Investment Schemes Guidance and Rules 2021.
2. Statement of Compliance
These condensed half-yearly financial statements, which have not
been independently reviewed or audited by the Company auditors,
have been prepared in accordance with International Accounting
Standard 34: Interim Financial Reporting. They do not include all
of the information required for full annual financial statements
and should be read in conjunction with the audited financial
statements for the year ended 31 March 2023.
The unaudited condensed half-yearly financial statements were
approved by the Board of Directors on 22 November 2023.
3. Significant Accounting Policies
These unaudited condensed half-yearly financial statements have
adopted the same accounting policies as the last audited financial
statements, which were prepared in accordance with International
Financial Reporting Standards ("IFRS"), issued by the International
Accounting Standards Board, interpretations issued by the IFRS
Interpretations Committee and applicable legal and regulatory
requirements of Guernsey Law and reflect the accounting policies as
disclosed in the Company's last audited financial statements, which
have been adopted and applied consistently.
The Company has adopted all revisions and amendments to IFRS
issued by the IASB, which may be relevant to and effective for the
Company's financial statements for the annual period beginning 1
April 2023. No new standards or interpretations adopted during the
period had an impact on the reported financial position or
performance of the Company.
4. Critical Accounting Estimates and Judgements
The preparation of financial statements in conformity with IFRS
requires the Board to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The Board makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results.
The Directors believe that the underlying assumptions are
appropriate and that the financial statements are fairly presented.
Estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are outlined below:
Judgements
Going concern
After making reasonable enquiries, and assessing all data
relating to the Company's liquidity, the directors have a
reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future and do
not consider there to be any threat to the going concern status of
the Company. For this reason, they continue to adopt the going
concern basis in preparing the financial statements.
Assessment as an investment entity
In determining the Company meeting the definition of an
investment entity in accordance with IFRS 10, it has considered the
following:
o the Company has raised the commitments from a number of
investors in order to raise capital to invest and to provide
investor management services with respect to these private equity
investments;
o the Company intends to generate capital and income returns
from its investments which will, in turn, be distributed to the
investors; and
o the Company evaluates its investment performance on a fair
value basis, in accordance with the policies set out in these
financial statements.
Although the Company met all three defining criteria, management
has also assessed the business purpose of the Company, the
investment strategies for the private equity investments, the
nature of any earnings from the private equity investments and the
fair value model. Management made this assessment in order to
determine whether any additional areas of judgement exist with
respect to the typical characteristics of an investment entity
versus those of the Company. Management have therefore concluded
that from the assessments made, the Company meets the criteria of
an investment entity within IFRS 10.
Part of the assessment in relation to meeting the business
purpose aspects of the IFRS 10 criteria also requires consideration
of exit strategies. Given that the Company does not intend to hold
investments indefinitely, management have determined that the
Company's investment plans support its business purpose as an
investment entity.
The Board has also concluded that the Company meets the
additional characteristics of an investment entity, in that: it
holds more than one investment; the investments will predominantly
be in the form of equities, derivatives and similar securities; it
has more than one investor and the majority of its investors are
not related parties.
Estimates and assumptions
Fair value of securities not quoted in an active market.
The Company may value positions by using its own models or
commissioning valuation reports from professional third-party
valuers. The models used in either case are based on valuation
methods and techniques generally recognised as standard within the
industry and in accordance with International Private Equity and
Venture Capital Valuation (IPEV) Guidelines. The inputs into these
models are primarily revenue or earnings multiples and discounted
cash flows. The inputs in the revenue or earnings multiple models
include observable data, such as the earnings multiples of
comparable companies to the relevant portfolio company, and
unobservable data, such as forecast earnings for the portfolio
company. In discounted cash flow models, unobservable inputs are
the projected cash flows of the relevant portfolio company and the
risk premium for liquidity and credit risk that are incorporated
into the discount rate. In some instances, the cost of an
investment is the best measure of fair value in the absence of
further information. Models are calibrated by back-testing to
actual results/exit prices achieved to ensure that outputs are
reliable, where possible.
Models use observable data, to the extent practicable. However,
areas such as credit risk (both own and counterparty), volatilities
and correlations require management to make estimates. Changes in
assumptions about these factors could affect the reported fair
value of financial instruments. The sensitivity to unobservable
inputs is based on management's expectation of reasonable possible
shifts in these inputs, taking into consideration historical
volatility and estimations of future market movements.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data to be market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
4. Investments designated at fair value through profit or loss
A reconciliation of the opening and closing balances of assets
designated at fair value through profit or loss classified as Level
1 is shown below:
30 September 2023 31 March 2023
GBP'000 GBP'000
Fair value of investments brought
forward 811 2,632
Purchases during the year - -
Disposals proceeds during the year - (104)
Realised gains/(losses) on disposals - 4
Net unrealised change in fair value (108) (1,721)
Fair value of investments carried
forward 703 811
A reconciliation of the opening and closing balances of assets
designated at fair value through profit or loss classified as Level
3 is shown below:
30 September 2023 31 March 2023
GBP'000 GBP'000
Fair value of investments brought forward 15,208 16,892
Purchases during the period/year 216 443
Disposals proceeds during the period/year (7,695) (54)
Capitalised interest on loan - 102
Realised gains/(losses) on disposals 1,112 (840)
Net unrealised change in fair value (2,040) (1,335)
Fair value of investments carried forward 6,801 15,208
During the period there were no transfers
between the levels.
The valuations used to determine fair values are validated and
periodically reviewed by experienced personnel, in most cases this
validation and review is undertaken by members of the Board,
however professional third-party valuation firms are used for some
valuations and the Company also has access to a network of industry
experts by virtue of the personal networks of the directors and
substantial shareholders. The valuations prepared by the Company or
received from third parties are in accordance with the
International Private Equity and Venture Capital Valuation
Guidelines. The valuations, when relevant, are based on a mixture
of:
-- Market approach (utilising EBITDA or Revenue multiples,
industry value benchmarks and available market prices
approaches);
-- Income approach (utilising Discounted Cash Flow, Replacement
Cost and Net Asset approaches);
-- Price of a recent transaction when transaction price/cost is
considered indicative of fair value; and
-- Proposed sale price.
5. Segmental Information
In accordance with IFRS 8: Operating Segments, it is mandatory
for the Company to present and disclose segmental information based
on the internal reports that are regularly reviewed by the Board in
order to assess each segment's performance and to allocate
resources to them.
Operating segments are reported in a manner consistent with the
internal reporting used by the chief operating decision-maker. The
chief operating decision-maker, who is responsible for allocating
resources and assessing performance of the operating segments, has
been identified as the Board as a whole. The board is responsible
for the Company's entire portfolio and considers the business to
have a single operating segment. Asset allocation decisions are
based on a single, integrated investment strategy, and the
Company's performance is evaluated on an overall basis.
6. (Loss)/Earnings per Ordinary Share
The loss per Ordinary Share of -0.67p (30 September 2022: -1.78p
loss per ordinary share) is based on the loss for the period of
GBP1,420,000 (30 September 2022: loss GBP3,789,000) and on a
weighted average number of 212,747,395 Ordinary Shares in issue
during the year (30 September 2022: 212,747,395 Ordinary
Shares).
7. Dividends
The Directors do not propose an interim dividend for the period
ended 30 September 2023 (30 September 2022: GBPNil).
8. Tax effects of other comprehensive income
The Income Tax Authority of Guernsey has granted the Company
exemption from Guernsey income tax under the Income Tax (Exempt
Bodies) (Guernsey) (Amendment) Ordinance, 2012 and the income of
the Company may be distributed or accumulated without deduction of
Guernsey income tax. Exemption under the above mentioned Ordinance
entails payment by the Company of an annual fee of GBP1,200 for
each year in which the exemption is claimed. It should be noted,
however, that interest and dividend income accruing from the
Company's investments may be subject to withholding tax in the
country of origin.
There were no tax effects arising from the other comprehensive
income disclosed in the Statement of Comprehensive Income (30
September 2022: GBPNil).
9. Net Assets per Ordinary Share
The net asset value per Ordinary Share is based on the net
assets attributable to equity shareholders of GBP14,612,000 (31
March 2023:
GBP16,032,000) and on 212,747,395 Ordinary Shares (31 March
2023: 212,747,395 Ordinary Shares) in issue at the end of the
period.
10. Share Capital, Warrants, Options, Treasury shares and Other distributable reserves
30 September 31 March 2023
2023
GBP'000 GBP'000
Authorized:
1,910,000,000 Ordinary Shares of 1p
(2022: 1,910,000,000 Ordinary Shares) 19,100 19,100
100,000,000 Deferred Shares of 0.9p
(2022: 100,000,000 Deferred Shares) 900 900
20,000 20,000
Allotted, called up and fully paid:
212,747,395 Ordinary Shares of 1p
(2022: 212,747,395 Ordinary Shares) (i) 2,127 2,127
Nil Deferred Shares of 0.9p (ii) - -
Treasury Shares:
2,472,446 Treasury Shares of 1p
(2022: 2,472,446) (iii) 25 25
(i) Ordinary Shares
There was no issue of shares during the period ended 30
September 2023 (31 March 2023: Nil).
(ii) Deferred Shares
There was no issue of shares during the period ended 30
September 2023 (31 March 2023: Nil).
(iii) Directors' Authority to Allot Shares
The Directors are generally and unconditionally authorised to
exercise all the powers of the Company to allot relevant
securities. The Directors may determine up to a maximum aggregate
nominal amount of 100% of the issued share capital during the
period until the following Annual General Meeting. The Guernsey
Companies Law does not limit the power of Directors to issue shares
or impose any pre-emption rights on the issue of new shares.
(iv) Shares held in Treasury
There were no changes to the number of Shares held in Treasury
during the period.
11. Related Parties
Ian Burns
Mr Burns is the legal and beneficial owner of Smoke Rise
Holdings Limited, which held 1,674,024 (0.79%) Ordinary Shares
(2022: 1,374,024 (0.65%)) in the Company at 31 March 2023 and the
date of signing this report.
Mr Burns is entitled to an annual remuneration of GBP36,000.
Ed McDermott
Mr McDermott held 4,680,000 (2.2%) Ordinary Shares (2022: Nil)
in the Company at 31 March 2023 and at the date of signing this
report.
Mr McDermott is entitled to an annual remuneration of GBP160,000
(2022: GBP160,000). Mr McDermott was paid no performance bonus in
2023 (2022: Nil) relating to work undertaken in the year ended 31
March 2023.
Lance De Jersey
Mr De Jersey, Finance Director of the Company held 400,000
ordinary shares in the Company as at 31 March 2023 and at the date
of signing of this report.
Mr De Jersey is entitled annual remuneration of GBP106,000
(2022: GBP106,000) and was paid no performance bonus in 2023 (2022:
Nil) relating to work undertaken in the year ended 31 March
2023.
Luke Cairns
Mr Cairns is entitled to an annual remuneration
of GBP36,000.
Alfredo Pascual
Mr Pascual is entitled to an annual remuneration
of EUR106,000 per annum.
30 September 2023 30 September
2022
Directors' Directors'
Remuneration Remuneration
GBP'000 GBP'000
Ian Burns 18 18
Ed McDermott 81 80
Lance De Jersey 53 57
Luke Cairns 18 18
Alfredo Pascual 9 -
179 173
12. Capital Management Policy and Procedures
The Company's capital structure is derived solely from the issue
of Ordinary Shares.
The Company does not currently intend to fund any investments
through debt or other borrowings but may do so if appropriate.
Investments in early stage assets are expected to be mainly in the
form of equity, with debt potentially being raised later to fund
the development of such assets. Investments in later stage assets
are more likely to include an element of debt to equity gearing.
The Company may also offer new Ordinary Shares as consideration as
well as cash, thereby helping to preserve the Company's cash for
working capital and as a reserve against unforeseen contingencies
including, for example, delays in collecting accounts receivable,
unexpected changes in the economic environment and operational
problems.
The Board monitors and reviews the structure of the Company's
capital on an ad hoc basis. This review includes:
-- The need to obtain funds for new investments, as and when they arise;
-- The current and future levels of gearing;
-- The need to buy back Ordinary Shares for cancellation or to
be held in treasury, which takes account of the difference between
the net asset value per Ordinary Share and the Ordinary Share
price;
-- The current and future dividend policy; and
-- The current and future return of capital policy.
The Company is not subject to any externally imposed capital
requirements.
13. Events after the Financial Reporting Date
On 29 September 2023 the Company announced the commencement of a
share repurchase programme of Ordinary Shares for up to a maximum
of 21,500,000 shares and GBP850,000 commencing on 2 October 2023
and ending not later than 29 February 2024. Share purchases will
take place in open market transactions and may be made from time to
time depending on market conditions, share price, trading volume
and other factors. The Company has appointed Shard Capital Partners
LLP to manage the programme and make market purchases of Ordinary
Shares on its behalf, independently of the Company.
As at the date of signing of the financial statements the
Company had purchased 6,485,000 total number of shares at a volume
weighted average price of GBP 0.0325.
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END
IR MZMZMDZDGFZM
(END) Dow Jones Newswires
November 22, 2023 09:29 ET (14:29 GMT)
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