Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: TMT
H119 has been a period of real progress for Allied Minds, with strategic funding rounds for Federated Wireless and HawkEye 360 and the $65.6m sale of Allied Minds’ stake in HawkEye 360 to Advance. With the transaction subject to shareholder approval, 50% of the sale proceeds ($32.8m, c 11p/share) are expected to be returned to shareholders in Q419. Management expects HQ operational costs to reduce to c $7.5m for FY20. It has also taken the opportunity to rationalise the investment portfolio, with the remaining assets showing good progress. Parent cash at 30 June 2019 was $46.6m ($31.3m adjusted for post period-end investments). With NAV no longer disclosed by the company, our latest assessment, adjusted for post period-end investments, is 100.2p/share (87.5p/share fully-diluted).
Written by
Allied Minds |
Is this the turning point? |
Interim results |
Investment companies |
1 October 2019 |
Share price performance
Business description
Next events
Analysts
Allied Minds is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||||
H119 has been a period of real progress for Allied Minds, with strategic funding rounds for Federated Wireless and HawkEye 360 and the $65.6m sale of Allied Minds’ stake in HawkEye 360 to Advance. With the transaction subject to shareholder approval, 50% of the sale proceeds ($32.8m, c 11p/share) are expected to be returned to shareholders in Q419. Management expects HQ operational costs to reduce to c $7.5m for FY20. It has also taken the opportunity to rationalise the investment portfolio, with the remaining assets showing good progress. Parent cash at 30 June 2019 was $46.6m ($31.3m adjusted for post period-end investments). With NAV no longer disclosed by the company, our latest assessment, adjusted for post period-end investments, is 100.2p/share (87.5p/share fully-diluted).
Period end |
Portfolio fair value (US$m) |
Parent-level net cash (US$m) |
NAV |
NAV/share |
P/NAV |
12/17 |
395.6 |
84.2 |
479.8 |
150.0 |
0.35 |
06/18 |
350.1 |
66.0 |
416.1 |
132.4 |
0.40 |
12/18* |
226.7 |
50.6 |
277.3 |
93.4 |
0.56 |
06/19** |
266.1 |
31.3 |
297.3 |
100.2 |
0.53 |
Note: NAV is calculated as fair value plus net cash at the parent level. *FY18/H119 NAV is based on our estimate of fair value as this is no longer disclosed by the company.
**H119 net cash and NAV are adjusted for post period-end investments.
Interim results
Revenue decreased by $0.6m, to $1.5m for H119 (H118: $2.1m), primarily due to deconsolidation of two of the company’s subsidiaries, SciFluor and Precision Biopsy. Cost of revenue for H119 fell to ($0.6m), as did net finance income to $5.5m (H118: $49.4m), primarily reflecting the deconsolidation. Other income increased to $24.7m (2018: zero), with a $33.9m gain on investments offset by losses from deconsolidated entities. Total comprehensive income for the year fell to $2.3m for H119 (H118: $4.1m). Net cash and investments at 30 June 2019 stood at $56.8m (FY18: $97.7m), of which $46.6m was at parent level (FY18: $50.6m).
Portfolio update
Other than the funding rounds at HawkEye 360 and Federated Wireless, the remaining technology portfolio companies continue to report technical and commercial progress. However, Allied Minds took the decision to cease operations at Precision Biopsy and sold its stake in QuayChain for an undisclosed amount. With no material newsflow from SciFluor following its Q4 bridge round, we have prudently ascribed zero value to SciFluor (FY18: $2m) pending further news.
Valuation: 47% discount to firm-looking NAV
Allied Minds has delivered additional validation for two of its three principal portfolio companies since its strategic review in April and will effect a material return of capital to shareholders (with the transaction subject to shareholder approval). With this validation of its assets, together with a focus on preserving cash and delivery of material cash exits, we believe this provides a solid NAV on which Allied Minds should build over time, with our adjusted NAV per share of 100.2p (or 87.5p on a fully-diluted basis).
Interim results summary
During H119, revenue decreased to $1.5m in H119 (H118: $2.1m), primarily due to deconsolidation of two of the company’s subsidiaries, SciFluor and Precision Biopsy. Net finance income fell to $5.5m (H118: $49.4m), largely as a result of the deconsolidation. Other income increased to $24.7m (2018: zero), reflecting a $33.9m in gain on investments held at fair value, offset by losses from the deconsolidated entities. Total comprehensive income for the year decreased to $2.3m for H119 (H118: $4.1m).
Non-current assets rose to $117.0m at 30 June 2019 (FY18: $83.7m), mainly due to a $36.4m portfolio company fair value increase. Current assets decreased to $63.1m (FY18: $107.0m), reflecting a fall in cash and cash equivalents to $40.9m.
The group’s net cash outflow from operating activities of $26.3m in H119 (H118: $39.7m) reflected the $27.7m net operating losses for the period (H118: $45.1m), together with an increase in working capital and other finance costs of $8.2m (H118: $3.5m).
The group had a net cash outflow from investing activities of $5.0m in H119 (H118: -$2.0m), predominantly related to purchases of property and equipment and intangibles of $2.5m (H118: $1.6m) and a $2.5m investment in Spin Memory in April 2019. Net cash outflow from financing activities of $12.0m in H119 (H118: $11.9m) partly reflects $12.0m cash distributions to shareholders from the dissolution of Signature Medical and the remaining ABLS companies in the first half of 2019.
Net cash and investments at 30 June 2019 stood at $56.8m (FY18: $97.7m), of which $46.6m is held at parent level (FY18: $50.6m).
Outlook: Further progress expected across portfolio
Allied Minds has now largely delivered on the key terms of the April strategic review, intended to give it the best opportunity to maximise shareholder returns over the medium term, without further recourse to the financial markets:
■
focus remaining cash resources on key assets in the current portfolio;
■
new investment on indefinite hold; and
■
further cuts to central costs (to reduce opex to $5–6m pa).
The company has made good progress in terms of cost reduction, with a number of measures taken, including a reduction in headcount to eight staff and subletting its HQ office space, both by 1 November 2019. However, it has also revised its estimate of ongoing annualised HQ operating expenses to c $7.5m in FY20, driven primarily by a substantial increase in the cost of director and officer insurance. Of the estimated $7.5m in central costs for FY20, $2.9m represents public company costs.
With adjusted net cash of $31.3m at 30 June 2019 (adjusted for $15.3m of investments), together with cash of $32.8m from the sale of its stake in HawkEye 360, management expects to have sufficient cash to allow it to continue to invest in existing assets and maximise the value of its portfolio to shareholders over the medium term, which we understand to mean potentially a three- to four-year time horizon.
In terms of its three principal assets (ex HawkEye 360), Allied Minds also reiterated the key operational objectives for each over the course of 2019:
|
Exhibit 1 Federated Wireless – 2019 key operational management objectives |
|
■ ICD approval, followed by FCC certification – complete ■ Complete build-out of nationally available environmental sensing capability (ESC) network to meet customer requirements – complete ■ Build infrastructure and capacity to support scale of the business – ongoing |
|
Source: Allied Minds |
|
Exhibit 2: BridgeComm 2019 – key operational management objectives |
|
■ Successfully demonstrate One-To-Many (OTM) optical communications technology – complete ■ Develop strategic partnership programme with commercial technology partners to extend the OWC technology offerings – ongoing ■ Expand the capacity of the global ground network through industry partnerships and ground station installations – ongoing ■ Continue developing intellectual property around BridgeComm specific technology – ongoing ■ Continue the strategic relationship with The Boeing Company on both commercial and US Government programmes – ongoing ■ Build strong commercial and government customer backlog – ongoing |
|
Source: Allied Minds |
|
Exhibit 3: Spin Memory – 2019 key operational management objectives |
|
■ Create proof of concepts in silicon that demonstrate the superior performance of Spin Memory’s technologies – ongoing ■ Leverage exclusive licensing agreements with Applied Materials and ARM to bring technology IPs into the mainstream – ongoing ■ Build strong commercial and government customer backlog for new use cases in AI, ADAS, 5G, IoT and more – ongoing |
|
Source: Allied Minds |
Portfolio: Condensed, with solid underpinnings
Third-party investors subscribed for $110.3m of portfolio company equity in H119, including $105.8m post period-end, while Allied Minds invested $24.3m, including $15.3m post period-end.
Allied Minds’ portfolio has now been reduced to eight assets (including HawkEye 360 and SciFluor), with four principal assets (HawkEye 360, Federated Wireless, BridgeComm and Spin Memory). We have already highlighted the progress at HawkEye 360 and Federated Wireless. However, although less newsworthy, we understand that the remaining technology portfolio companies also continue to make good technical and commercial progress.
During the period, management took the decision to cease operations at Precision Biopsy and sold its stake in QuayChain for an undisclosed amount. With no material newsflow from SciFluor following its Q4 bridge round (ALM, Woodford), we have prudently ascribed zero value to SciFluor (FY18: $2m), pending further positive news.
We believe that the write-downs in value of Precision Biopsy, QuayChain and SciFluor provide a solid NAV on which Allied Minds should build over time, with our adjusted NAV per share of 100.2p (or 87.5p on a fully-diluted basis).
Exhibit 4: Allied Minds’ portfolio – with Edison assumptions on fair value
Company |
Business description |
Date of latest funding round |
Edison adjusted value at 31/12/18 (US$m) |
Edison adjusted value at 26/9/19 (US$m) |
Edison adjusted value at 26/9/19 (US$m) |
ALM holding 24/9/19 |
ALM holding |
Basis of estimate of Edison fair value assessment |
Undiluted |
Undiluted |
Fully-diluted |
Un-diluted |
Fully-diluted |
||||
Federated Wireless |
Cloud-based SaaS business |
Sep 19 |
63.5 |
85.7 |
72.1 |
43% |
36% |
Valuation of last round (strategics) |
HawkEye 360 |
RF data analytics company |
Aug 19 |
43.4 |
65.6 |
65.6 |
41% |
32% |
Cash offer (shareholder approval) |
Spin Memory |
MRAM Semiconductor memory |
Apr 19 |
73.4 |
73.4 |
57.8 |
43% |
34% |
Valuation of last round (strategics) |
BridgeComm (BridgeSat) |
Optical communications service provider |
Sep 18 |
30.9 |
30.9 |
23.9 |
81% |
63% |
Valuation of last round (strategics) |
TableUp |
Restaurant supply chain software provider |
Apr 18 |
4.3 |
4.3 |
3.6 |
36% |
30% |
Valuation of last round |
Orbital Sidekick |
Space-based hyperspectral imaging/analytics |
Apr 18 |
3.9 |
3.9 |
3.5 |
33% |
30% |
Valuation of last round (3rd party) |
Spark Insights |
Property insurance analytics |
Apr 19 |
2.3 |
2.3 |
1.9 |
71% |
60% |
Valuation of last round |
Other investments |
||||||||
Precision Biopsy |
Medical device and analytics company |
Nov 19 |
2.5 |
0.0 |
0.0 |
65% |
55% |
Written off by ALM |
SciFluor |
Developer of a topical eye droplet treatment |
Nov 19 |
2.0 |
0.0 |
0.0 |
70% |
60% |
Written down to zero by Edison |
QuayChain |
CBRS-enabled Smart Industrial Hubs |
Sep 18 |
0.6 |
0.0 |
0.0 |
72% |
65% |
Sold for undisclosed amount |
Fair value (calculated by Edison) |
221.7 |
266.1 |
228.4 |
|
|
|
||
Net cash held at the parent company |
50.6 |
46.6 |
46.6 |
|||||
Investments (post period end) |
(15.3) |
(15.3) |
||||||
Edison adjusted NAV ($m) |
272.3 |
297.3 |
259.7 |
|||||
Edison adjusted NAV (pence per share) |
100.2 |
87.5 |
||||||
Latest share price (30 Sept 2019) |
52.6 |
52.6 |
||||||
Implied discount to Edison adjusted NAV |
47% |
40% |
||||||
Source: Allied Minds data, Edison Investment Research
Valuation: 47% discount to firm-looking NAV
As we have noted previously, given its narrowed portfolio, Allied Minds now looks less like its patient capital and IP commercialisation peers, as it offers look-through to a concentrated number of emerging technology businesses.
Allied Minds’ shares currently trade at a 47% discount to our adjusted estimate of H119 NAV of 100.2p (Exhibit 4), or a 40% discount on a fully-diluted basis.
Exhibit 5: Peer group comparison
|
Price |
Currency |
Market cap (m) |
NAV (m) (last reported) |
Cash/ |
NAV |
NAV per share (p) |
Allied Minds |
52.6 |
GBP |
127 |
242 |
25 |
0.53 |
100.2 |
Arix Bioscience |
112.5 |
GBP |
153 |
270 |
20 |
0.56 |
171.0 |
Augmentum FinTech |
109.5 |
GBP |
128 |
135 |
51 |
0.95 |
114.9 |
Draper Esprit |
419.0 |
GBP |
494 |
619 |
100 |
0.80 |
524.0 |
HgCapital |
232.0 |
GBP |
934 |
984 |
79 |
0.95 |
245.0 |
IP Group |
63.6 |
GBP |
674 |
1,172 |
71 |
0.57 |
110.6 |
Malin Corporation |
4.00 |
€ |
183 |
361 |
(24) |
0.51 |
7.90 |
Mercia Asset Management |
30.8 |
GBP |
93 |
125 |
38 |
0.75 |
41.3 |
Oakley Capital |
225.5 |
GBP |
462 |
651 |
96 |
0.71 |
318.0 |
Source: Refinitiv data; Edison Investment Research. Note: Priced at 30 September 2019.
Exhibit 6: Financial summary
$'000 |
2014 |
2015 |
2016 |
2017 |
2018 |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
7,715 |
3,300 |
2,664 |
5,001 |
5,561 |
Cost of Sales |
(5,416) |
(3,925) |
(5,563) |
(5,242) |
(2,827) |
||
Gross Profit |
2,299 |
(625) |
(2,899) |
(241) |
2,734 |
||
Normalised operating profit |
|
|
(47,510) |
(89,372) |
(103,925) |
(94,542) |
(83,583) |
Amortisation of acquired intangibles |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
(1,479) |
(309) |
(1,365) |
(2,363) |
(545) |
||
Share-based payments |
(8,939) |
(7,041) |
(8,385) |
(7,562) |
(7,413) |
||
Reported operating profit |
(57,928) |
(96,722) |
(113,675) |
(104,467) |
(91,541) |
||
Net Interest |
222 |
670 |
2,318 |
305 |
1,313 |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
(1,301) |
||
Fair value changes |
0 |
(1,937) |
(17,585) |
(6,953) |
138,841 |
||
Profit Before Tax (norm) |
|
|
(47,288) |
(90,639) |
(119,192) |
(101,190) |
55,270 |
Profit Before Tax (reported) |
|
|
(57,706) |
(97,989) |
(128,942) |
(111,115) |
47,312 |
Reported tax |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(47,288) |
(90,639) |
(119,192) |
(101,190) |
55,270 |
||
Profit After Tax (reported) |
(57,706) |
(97,989) |
(128,942) |
(111,115) |
47,312 |
||
Minority interests |
12,228 |
20,192 |
32,609 |
35,337 |
(7,990) |
||
Discontinued operations |
0 |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
(35,060) |
(70,447) |
(86,583) |
(65,853) |
47,280 |
||
Net income (reported) |
(45,478) |
(77,797) |
(96,333) |
(75,778) |
39,322 |
||
Basic average number of shares outstanding (m) |
186 |
215 |
217 |
236 |
241 |
||
EPS - basic normalised ($) |
|
|
(0.19) |
(0.33) |
(0.40) |
(0.28) |
0.20 |
EPS - diluted normalised ($) |
|
|
(0.19) |
(0.33) |
(0.40) |
(0.28) |
0.20 |
EPS - basic reported ($) |
|
|
(0.24) |
(0.36) |
(0.44) |
(0.32) |
0.16 |
Dividend ($) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
N/A |
(57.2) |
(19.3) |
87.7 |
11.2 |
||
Gross Margin (%) |
29.8 |
-18.9 |
-108.8 |
-4.8 |
49.2 |
||
Normalised Operating Margin |
N/A |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
44,039 |
92,784 |
38,232 |
28,369 |
86,096 |
Intangible Assets |
3,409 |
4,384 |
2,762 |
1,074 |
1,221 |
||
Tangible Assets |
16,330 |
34,173 |
31,882 |
26,627 |
5,997 |
||
Investments & other |
24,300 |
54,227 |
3,588 |
668 |
78,878 |
||
Current Assets |
|
|
248,991 |
158,427 |
232,007 |
184,792 |
107,034 |
Stocks |
2,919 |
1,511 |
2,551 |
0 |
0 |
||
Debtors |
6,305 |
7,342 |
5,900 |
15,642 |
6,400 |
||
Cash & cash equivalents |
224,075 |
105,555 |
209,151 |
158,075 |
100,234 |
||
Cash at parent* |
|
|
N/A |
N/A |
136,700 |
84,200 |
50,600 |
Other |
15,692 |
44,019 |
14,405 |
11,075 |
400 |
||
Current Liabilities |
|
|
(62,480) |
(108,974) |
(155,402) |
(200,202) |
(69,557) |
Creditors |
(11,339) |
(14,268) |
(13,941) |
(14,276) |
(13,030) |
||
Tax and social security |
(947) |
(395) |
(458) |
(4,296) |
(2,333) |
||
Short term borrowings |
(213) |
(228) |
(115) |
0 |
0 |
||
Subsidiary preferred shares |
(49,981) |
(94,083) |
(140,888) |
(181,630) |
(54,194) |
||
Long Term Liabilities |
|
|
(717) |
(863) |
(720) |
(867) |
(436) |
Long term borrowings |
(338) |
(112) |
0 |
0 |
0 |
||
Other long term liabilities |
(379) |
(751) |
(720) |
(867) |
(436) |
||
Net Assets |
|
|
229,833 |
141,374 |
114,117 |
12,092 |
123,137 |
Minority interests |
4,946 |
10,631 |
20,797 |
59,241 |
4,490 |
||
Shareholders' equity |
|
|
234,779 |
152,005 |
134,914 |
71,333 |
127,627 |
CASH FLOW |
|||||||
Op Cash Flow before WC and tax |
(44,618) |
(85,286) |
(97,290) |
(88,440) |
(77,525) |
||
Working capital |
(981) |
2,652 |
468 |
(2,477) |
6,033 |
||
Exceptional & other |
0 |
0 |
0 |
0 |
(283) |
||
Tax |
0 |
0 |
0 |
0 |
0 |
||
Net operating cash flow |
|
|
(45,599) |
(82,634) |
(96,822) |
(90,917) |
(71,775) |
Capex |
(1,764) |
(23,213) |
(4,087) |
(1,522) |
(9,110) |
||
Acquisitions/disposals |
(38,967) |
(51,786) |
74,816 |
5,853 |
(18,884) |
||
Net interest |
222 |
716 |
1,602 |
138 |
896 |
||
Equity financing |
154,408 |
2,443 |
79,319 |
1,595 |
1,594 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
54,473 |
36,165 |
48,993 |
33,892 |
39,438 |
||
Net Cash Flow |
122,773 |
(118,309) |
103,821 |
(50,961) |
(57,841) |
||
Opening net debt/(cash) |
|
|
NA |
(223,524) |
(105,215) |
(209,036) |
(158,075) |
FX |
0 |
0 |
0 |
0 |
0 |
||
Other non-cash movements |
0 |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(223,524) |
(105,215) |
(209,036) |
(158,075) |
(100,234) |
Source: Company accounts. Note: *For clarity, cash at parent has been broken out as a separate line from cash & cash equivalents. As a line item, it does not form part of the calculation for current assets.
|
|
Research: Real Estate
In its recent portfolio update, Picton provided details of significant activity and progress across all property sectors, since its June NAV announcement. This is particularly encouraging given the traditionally quiet summer period and the uncertain political backdrop. The June NAV update showed continuing positive returns, benefiting from an overweight position in industrial and office assets, and the portfolio update shows progress towards unlocking reversionary potential from the portfolio.