(“NetScientific”, “NSCI”, the Group” or the “Company”)
Preliminary Results for the year ended 31 December 2021
Good results demonstrate excellent progress in growth strategy to realise shareholder returns
NetScientific plc (AIM: NSCI), the international life sciences and sustainability, technology investment and commercialisation group, announces its preliminary results for the year ended 31 December 2021.
This was an excellent year of progress for the company as shown in the results. Implementation of its planned growth strategy has accelerated and delivered a step change, both strategically and tactically.
- Practical completion of the business turnaround
- Proactive management focused on delivering significant returns
- Raised £7.7 million in an oversubscribed placing
o Enabled acceleration of investment and growth
- Further expansion of the well-balanced portfolio from 17 to 22 companies in targeted sectors
o Deeper involvement in selected companies, potential for greater returns;
o Judicious investments, combining direct balance sheet with “capital light” approach
o Direct investments of c.£4.5m in 9 portfolio companies, plus Cetromed acquisition and new stake in Martlet Capital – supplemented with syndicated investments adding £7.5m to “capital under advisory”
o Key value inflection points identified for profitable liquidity events and exits
- Loss for the year of £2.9m (2020: loss £2.3m) reflecting substantial expensed R&D investment and continued building of the NetScientific platform
- Transformed financial position
o Increases of around 50% in “fair value” and “capital under advisory”
o Strengthened balance sheet, 69% increase in cash to £2.7 million (2020: £1.6 million)
o 156% increase in total assets £20.7 million (2020: £8.1 million)
- Progress in “Trans-Atlantic bridges” programme and international expansion
- Strong position, well placed to realise optimal shareholder value
Post Period Highlights:
- Acquisition of 30% of Vortex Biotech Holdings
Analyst Briefing: 09.30, Thursday 12 May
Management will be hosting a remote presentation via web conference today at 09.30 BST. Analysts wishing to join should register their interest by emailing firstname.lastname@example.org or by telephoning 020 7933 8780.
Investor Presentation: 16.00, Thursday 12 May
The Company will be hosting a presentation to discuss the results through the digital platform, Investor Meet Company, at 16.00 today.
Investors can sign up to Investor Meet Company for free and add to meet NetScientific via the following link https://www.investormeetcompany.com/netscientific-plc/register-investor
Dr. Ilian Iliev, CEO and John Clarkson, Executive Chairman of NetScientific commented: “We are delighted with the Company’s performance during the period. The business has been transformed and we have a clear, planned route and growth strategy to optimise shareholder value from our investments.”
“We remain extremely excited by the growth trajectory of our current portfolio and look forward to adding to this further in due course. This will be supplemented by the creation of a hub in America, which we believe will further enable us to drive value, with our focus on identifying liquidity events and exits at the appropriate juncture.”
For more information, please contact:
|NetScientific||Via Walbrook PR|
|Ilian Iliev, CEO|
|WH Ireland (NOMAD, Financial Adviser and Broker)|
|Chris Fielding / Darshan Patel||+44 (0)20 7220 1666|
|Walbrook PR||+44 (0)20 7933 8780 or email@example.com|
|Nick Rome / Tom Cooper||07748 325 236 / 07971 221 972|
NetScientific plc (AIM: NSCI) is a holding company, that invests in, develops, commercialises and realises shareholder value in life sciences/healthcare, sustainability and technology companies, which offer significant growth potential predominately in the UK, USA, EU and beyond.
The Group has nearly trebled its portfolio from 8 to 22 companies, either through subsidiary, direct balance sheet investment or capital under advisory, varying from start-up private companies to publicly listed equities.
NetScientific delivers shareholder returns through a proactive and hands-on management approach to their portfolio companies; identifying, investing in, and helping to build game-changing companies. The Group targets value inflection points and the release of value through partial or full exits from trade sales, public listings, or equity sales. The Company has a strong transatlantic and growing international presence, providing attractive expansion prospects.
NSCI can deploy a capital-light investment structure; utilising the power of the PLC Brand, and the NetScientific balance sheet to anchor future investments and achieve a multiplier effect by attracting 3rd party investment for the portfolio companies.
NetScientific is headquartered in London, United Kingdom, and was admitted to trading on AIM, a market operated by the London Stock Exchange, in 2013 (website: netscientific.net).
CHAIRMAN’S AND CHIEF EXECUTIVE OFFICER’S STATEMENT
We are pleased to present the NetScientific Plc (“NetScientific”, the “Group” or the “Company”) annual report and accounts for 2021, which as the results show, proved to be a year of excellent progress for the company.
NetScientific Plc is an active holding company, that invests in, develops, commercialises and aims to realise significant increases in capital returns from healthcare/life sciences, sustainability and technology companies. The Group builds and leverages trans-Atlantic relationships and global opportunities to optimise shareholder value from its investments.
The Group has continued its planned implementation of the new growth strategy agreed in 2020 (ref: Annual Report 2020), and delivered a step change in 2021, both strategically and tactically. Highlights include:
- practical completion of the planned turnaround of NetScientific and its subsidiary companies;
- a successful over-subscribed placing, raising additional funds of £7.7 million (£7.3 million net of costs);
- accelerated implementation of the agreed growth strategy;
- further expanded the well-balanced portfolio from 17 to 22 companies in targeted sectors and high-tech clusters in Cambridge, UK and Leuven, Belgium;
- using our “capital light” in a number of transactions, including further investments in the portfolio, deeper involvement in selected companies, which offer the potential for greater returns;
- applying our proactive management approach to support and drive the portfolio companies, utilising group synergies and with the requisite commercial focus to deliver significant returns;
- strengthening our balance sheet, with encouraging increases of 46% in “fair value” and 51% in “capital under advisory” (exemplified in the KPIs below);
- progressing the “trans-atlantic bridges” programme, which is particularly appropriate in the current global situation; and
- building the holding company platform, with the necessary resources and infrastructure, to develop, expand and drive business growth through appropriate key value inflection points and ultimately delivery of profitable liquidity events and exits.
The Group was able to take advantage of a range of investment opportunities particularly in the latter part of 2021, in both existing and new portfolio companies, totaling some £4.5m of direct investments.
As a result of the noted progress above, the company is ahead of where previously anticipated.
This is despite the difficult external environment, primarily caused by the pandemic, tech markets weakness and the more recent conflict in Ukraine. Reflecting this situation, the last few months have seen significant turmoil in the public markets in the UK and globally. Consequently, as with other biotech and tech focused stocks, our share price has been adversely impacted. which is disappointing for shareholders. However, having completed the turnround and transformed the business, the Group is now in a strong position.
The Board will closely monitor events and maintain a flexible approach to new opportunities, both for investment and generating returns from our investments. NetScientific’s portfolio is focused on fundamentally good businesses, with high growth prospects. These will generate returns through increased value of direct company holdings and a carry fee on “capital under advisory”. We will build on this now established business model and operating template, to drive significant growth and realise shareholder value.
The Group also continues to be well positioned in the environmental, social and corporate governance (“ESG”) and the impact investment space, with long-standing investments in sustainability and healthcare impact areas (such as chronic and infectious diseases) for both therapeutics and diagnostics.
In summary, the Group is focused on sustainable value creation and forming a strong base. We continue to build key processes and infrastructure to enable increased transactional, portfolio management and investment realisation capacity. We finished 2021 with strong momentum, a rebuilt balance sheet and made further progress towards the realisation of key value inflection points.
Highlights and KPIs of the year
During 2021, the company continued to perform successfully against the stated objectives and milestones as follows.
- The “fair value” (unaudited Directors’ estimated value based on BVCA valuation principles) of direct owned stakes increased by c. 46% from £21.2m to £31.0m, with further growth anticipated.
- The value of “capital under advisory increased by c. 51% from £14.6m to £22.1m.
- “Capital under advisory” is associated with carried interest or profit share agreements, typically between 15% and 20% of the profit on advised funds above a minimum return hurdle rate of up to 10%. While it is difficult to value or estimate the current value of these stakes, for illustrative purposes an average 2x return on the portfolio of £22.1m investments could result in carry returns to EMV Capital of £3.3m to £4.4m (2020: £2.2m to £2.9m) depending on the specific carry arrangements.
- Increased total Group portfolio from 17 to 22 companies (including EMVC).
- The share price increased on average by 63% from the 2020 average point of 55.3p to a 2021 average of 90.4p. Current share price is 80.0p as of 27 April 2022. The high share price for the year was 180.0p on 8 June 2021 and the low point was 43.0p on 6 January 2021. Analysts continue to value the Group at 180.0p, more than double the current share price.
- Loss for the year increased slightly by 22% on increased activity, R&D, and infrastructure spend, from the previous year’s loss of £2.3 million, to £2.9 million in 2021.
- As a result of the actions taken in 2021, the company ends the year with a stronger balance sheet.
- Cash on the balance sheet £2.7 million (2020: £1.6 million) a 69% increase.
- Total assets £20.7 million (2020: £8.1 million) a 156% increase.
- Net assets £18.5 million (2020: £6.9 million) a 168% increase.
- Working Capital percentage 270% (2020: 289%).
- Debt to Equity percentage 12% (2020: 17%).
- Increased deal execution and revenues.
In addition to the portfolio at the start of the year, the Group’s base has been broadened and strengthened, through the successful acquisition of Cetromed and its related companies and the investment in Martlet Capital, Cambridge. This reinforces our position in strategic sectors, which are well positioned for significant growth. Our approach is to assess, facilitate and support each company to be a successful independent businesses, while always looking to realise the potential and deliver optimal shareholder returns.
Our broader and stronger portfolio is well-balanced, facilitates risk management and provides synergistic benefits, through coordinated management action across the Group. The portfolio includes: subsidiaries, direct balance sheet investments and capital under advisory, in companies which range from start-up private companies to publicly listed equities.
NetScientific is not a trading company. It invests in opportunities to realise capital returns, but seeks to realise revenues, and offset costs where possible. For the year, the Group made a loss of £2.9 million (2020: £2.3 million), all from continuing operations. The loss reflects the loss making of the subsidiaries, primarily due to continued expensed investment in R&D at Glycotest and ProAxsis, delayed sales at ProAxsis due to COVID disruption, and further expensed infrastructure and resource buildout at NetScientific and EMV Capital.
Total comprehensive profit for the year £3.1 million (2020: loss of £2.4 million) after taking into account increases in fair value of equity investments classified as fair value through other comprehensive income.
Direct investments made during 2021 were as follows:
|Date||Company||Country||Type of Investment||Amount|
|March||SageTech Medical Equipment||UK||Equity||201|
|April||Sofant||UK||Convertible Loan Note||100|
|August||SageTech Medical Equipment||UK||Equity||266|
|September||Sofant||UK||Convertible Loan Note||200|
|September||Martlet Capital||UK||Convertible Loan Note||75|
|October||Q-Bot||UK||Convertible Loan Note||300|
|October – December||Q-Bot||UK||Equity||1,025|
|November||Epibone, Inc.||US||Convertible Loan Note||531|
|December||SageTech Medical Equipment||UK||Equity||100|
Total Investments made during 2021
As a result of the actions taken in 2021, the company ends the year with a stronger balance sheet as shown below:
- Cash on the balance sheet £2.7 million (2020: £1.6 million) a 66% increase.
- Total assets £20.7 million (2020: £8.1 million) a 157% increase.
- Net assets £18.5 million (2020: £6.9 million) a 168% increase.
- Working Capital percentage 270% (2020: 289%).
- Debt to Equity percentage 12% (2020: 17%).
Cash on the balance sheet as at 31 December 2021 was £2.7 million (2020: £1.6 million), of which £2.1 million (2020: £0.9 million) is held in the parent company.
Cash used in operations in 2021, was £3.5 million (2020: £2.8 million), the increase mainly due to investment in infrastructure, further investments, and additional management resources as build out proactive management team and continued research and development work.
The cash held within the subsidiary Glycotest, of which £0.4m (2020: £0.6m) is not freely available for use within the wider group as it would need the consent of a minority shareholder.
Having made substantial investments in 2021 and recognising the market conditions, various alternative scenarios were examined, prior to determining the appropriate base budgets. These were reviewed and assessed by the Board at their meeting on 1st of February 2022, before approval.
The review included the key budget assumptions, sensitivities, and contingency plans to cover eventualities, including the associated cash flow projections. The review has also taken into consideration the potential impact of changing market conditions and other risks. Having made substantial progress and as shown on the balance sheet, the Group is now in a much stronger position compared to previous years. The Board will closely monitor events and maintain a flexible approach to new opportunities, both for investment and realising returns/financing. Also, there may be additional opportunities to generate new revenue streams, further ensuring the Group has options and cash to mid-2023 and beyond. The financial statements have therefore been prepared on a going concern basis.
The Group continues to monitor the pandemic and follow Government advice. It generally has been able to manage the negative impact on the Group. The consequences have varied across the portfolio, including opening up new opportunities and the individual companies have adjusted accordingly. Group companies have received minimal amounts of Government Covid-19 business support. The approach has been to respond proactively to the operating environment, particularly to minimise downside risks and concentrate on upside opportunities. For example, as a leading respiratory company, ProAxsis has focused on research and commercial development, winning substantial grants (mainly Covid related), which is expected to result in five new products, new revenue streams and further capital gains coming online during 2022.
Given the core focus of the Group, the Board believes that in the aftermath of the COVID pandemic there is increased potential across several of its portfolio companies, and the Group’s model overall.
The Group is operating in an increasing uncertain macroeconomic environment. Capital markets saw significant volatility and uncertainty at the start of 2022. More recently geopolitical concerns, most notably Russia’s recent invasion of Ukraine, are causing additional global market volatility and uncertainty.
Summary and Outlook
NetScientific has transformed from the inherited situation in 2020 and ended 2021 in a strong position; with a clear, planned route and growth strategy to optimise shareholder value from its investments. We have achieved this transformation by:
- Proactive management, with commercial discipline and effective risk management, focused on delivering results, increased revenue and added value, in the portfolio companies.
- Applying the “capital light” investment approach, which leverages NetScientific’s balance sheet and Plc status to bring in syndicated funding across each portfolio company’s life cycle, earning fees and capturing value through “capital under advisory”.
- Judicious direct and syndicated investments, targeted to reflect the post pandemic world, to produce enhanced returns.
- Continuing to establish the necessary resources and infrastructure to drive the strategic and business plans.
- Building the NetScientific platform for robust evaluation, quantified decisions and managed expansion to capitalise on the multiple prospects and potential for substantial returns.
- Exploiting the transatlantic and global opportunities and harnessing the Group synergies, which is particularly appropriate in the current international and economic environment.
- Realigning the market capitalisation, with both the underlying asset value and future potential with clear and focused investor relations.
- Further developing and implementing performance driven plans, incorporating ESG criteria, with clearly defined milestones and KPIs to scale the business and maximising the profitable capital growth of the portfolio.
- Targeted deeper investment involvement and influence in selected portfolio companies, which have the potential to realise £50m-100m+ in value which would enable NetScientific to achieve a £5m-10m+ return on liquidity events.
- Structured evaluation and projections of value inflection points, plus exit opportunities and liquidity events, with the increased focus on realising shareholder returns.
The Board believes that the extended portfolio holds great potential; and remains assured in the Company’s long-term prospects, despite the short-term market challenges. Management is committed to implementing and delivering the agreed strategy, and the Board is focused on realising optimal shareholder returns.
|John Clarkson||Ilian Iliev|
|Executive Chairman||Chief Executive Officer|
|11 May 2022||11 May 2022|
Consolidated INCOME Statement
For the year ended 31 December 2021
|Cost of sales||(118)||(46)|
|Other operating income||153||599|
|Research and development costs||(1,322)||(1,227)|
|General and administrative costs||(2,573)||(1,988)|
Loss from continuing operations
|Gain on purchase||36||–|
Loss before taxation
Income tax credit
Total Loss for the year all from continuing operations
|Owners of the parent||(2,385)||(1,611)|
|Basic and diluted loss per share from continuing and discontinued operations attributable to owners of the parent during the year:||
|From loss for the year||(13.2p)||(2.9p)|