- Interim pre-tax profit of £1.4mn
- Net asset value (NAV) up 4 per cent to £47.3mn (84.2p)
- Post-period disposal of £1.7mn shares in Exscentia
Edinburgh-based Frontier IP (FIPP:42.5p), a technology investment company that provides commercialisation services to university spin-outs in return for ‘free equity’ stakes, has returned to profitability, buoyed by £2.8mn of unrealised gains on its portfolio companies.
The largest holding, an 18.2 per cent stake in Plymouth University spin-out Pulsiv Solar, was marked up £0.9mn to £10.3mn in value to account for 22 per cent of NAV. Pulsiv is a green technology company that has developed on-chip technology to improve the energy efficiency of power supplies, battery chargers, LED lighting and photovoltaic solar cells. The company is in advanced talks with major manufacturers, has put in place a global distribution network and appointed some heavyweight directors, too. Pulsiv also plans to launch a 65W USB C for adapters, chargers and wall sockets that will operate at 95 per cent efficiency. There should be more investment upside to come.
In addition, Frontier booked a £1.2mn gain on its 30 per cent stake in GraphEnergyTech, a company co-founded by Professor Michael Grätzel of the Ecole Polytechnique Federale de Lausanne, one of the world's most cited academics. It is developing advanced high-conductivity graphene inks that can be used to create graphene electrodes to replace expensive silver electrodes in solar cells. Silver is the most commonly used material for solar cell electrodes, but the rising popularity of solar power means global reserves could be exhausted by 2050.
Other notable portfolio developments include Nandi Protein's licence agreement with a global food ingredients company, which will manufacture and take to market its first commercial ingredients once final application tests have been completed. The ingredients are collagen-based meat and fat replacers for use in processed meat products, such as sausages and burgers, reducing calories and cost. Nandi is also developing a vegetable protein-based egg white replacement that has been successfully tested in a range of applications (meringues, alternative meat products and multiple bakery products). Frontier holds a 19.8 per cent stake in the company.
Importantly, the group is well funded, having realised £1.7mn post period end from the balance of its holding in Nasdaq-listed Exscientia (US: EXAI), a clinical-stage pharmaceutical technology company. In aggregate, Frontier booked £14mn of cash proceeds on a £2,000 investment.
Strip out pro-forma net cash of £4.4mn (7.8p) from Frontier’s market capitalisation of £23.9mn (42.5p) and investments worth £42.9mn (76.4p) are in the price for 55 per cent less than their carrying valuations despite offering potential for large gains on exit. The glaring disconnect between the value embedded in what is an exciting investment portfolio and the price attributed to the investments by the market is worth exploiting. Buy.
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