17 November 2016
Tern Plc ("Tern" or "the Company")
Operational Update and Board Changes
Tern Plc (AIM:TERN), the AIM-quoted company specialising in cloud and Internet of Things ("IoT"), announces an operational update and board changes. The objective of this update is to provide a summary of the Company's progress to date, its new organisational structure and its business strategy.
The Business
Tern was founded a little over three years ago with a view to building an AIM-listed Software investment company capable of transforming and accelerating the performance of the companies in which it invests.
The Company currently has two core investments, Device Authority Ltd and flexiOPS Ltd.
The Company's flagship investment is a 56.9% stake in the voting share capital of Device Authority Ltd . This stake comprises a 60.7% holding in A ordinary shares and a 50.6% holding in A preference shares.
Device Authority provides end-to-end security for IoT-enabled devices. To date, Tern has invested £4.3 million in the business including £2 million in the last fundraising round in which Alsop Louie Partners and other qualified investors also participated. Based on its last fundraising round, and using a conversion rate of $1 : £1.25, the enterprise value of Device Authority is calculated at £18.4 million. Alsop Louie Partners is the US technology venture capital firm known for being one of the original investors in Twitch, the game-streaming site sold to Amazon for $970 million in 2014.
Device Authority was named by CIO Review as one of 'The 50 Most Promising IoT Providers' in 2015 and has since been awarded 'Cool Vendor' status by Gartner and named the 'UK's Most Innovative Small Cyber Security Company' by techUK's Cyber Connect programme and the Department for Culture, Media & Sport.
The Company's other core investment is a 100% stake in flexiOPS Ltd. flexiOPS has an experienced project management and development team that works across a portfolio of projects including Horizon 2020, the European Commission's EU Framework Programme for Research and Innovation, whose purpose is securing Europe's global competitiveness.
The Board believes there is an opportunity to leverage the resources and expertise within flexiOPS to accelerate the go-to-market strategy of Tern's other portfolio companies.
The Company also owns minority interests in two software companies, Push Technologies and Seal Software.
To date, Tern has realised one investment which was announced on 3 November 2016. Concerto, a multi cloud management software business, was sold to Ingram Micro Inc. for a total consideration of $500,000, payable $425,000 on completion with $75,000 at the end of 12 months. Tern acquired Concerto alongside Flexiant Research (now flexiOPS) in June 2016 for a combined total of £75,000 in cash.
Board Composition
In September 2016, Al Sisto was appointed Chief Executive Officer of Tern. In this role, Al will lead Tern and oversee the execution of its strategy.
As Chief Operating Officer at RSA Data Security , Al was responsible for transforming the computer and network security company into an aggressive, sales-orientated software company. As Chairman, President and CEO of Phoenix Technologies, Al oversaw the turnaround of the company and helped cement it as a global player in the BIOS software space.
Founder Angus Forrest is standing down as Chairman and will become the Company's Operations Director. Angus will focus on structuring new investments and the Company's governance obligations. The Company has begun a search for a Non-Executive Chairman with significant Software sector experience to strengthen the team further. In the meantime, Al Sisto will now become acting Chairman of the Board.
Bruce Leith, a founding Director, has become the Company's Business Development Director. Bruce will focus on identifying, developing and cultivating companies that meet Tern's investment criteria.
Sarah Payne will continue in her role as Tern's Financial Director and Secretary. She will also work closely with our investee companies to help them plan and manage their own budgets. Alan Howarth, a Non-Executive Director, will continue to act in his current role.
Strategy
The Company's investing strategy continues to be that of identifying and acquiring underexploited technology assets where it can add value through management's commercial and technical experience, expertise and contacts. Tern looks to add value to its holdings and ultimately deliver strong returns to shareholders by:
- taking influential ownership positions;
- strengthening management teams;
- deploying additional resources where necessary;
- leveraging the Board's network and access to global markets; and
- seeking to complete trade sales within 36 months.
Tern will also seek out investment opportunities to roll up into and grow its flagship investment, Device Authority.
New investments will be made using returns from disposals, strategic placements or a combination of both.
Why Internet of Things?
There are billions of devices connected to the internet today and, according to EY, that number is set to rise to 50 billion by 2020. These devices cannot be managed and secured in these numbers with today's conventional networking methods and, as a result, there is a major opportunity for Device Authority and the wider cyber security industry.
A December 2015 report by Gartner predicts that by 2018, more than 50% of IoT device manufactures will be unable to address basic authentication threats, and that by 2020, more than 25% of recorded attacks on enterprises will involve IoT. It also predicts that during 2020, 50% of IoT security spend will be on provisioning, discovery, authentication and data protection; areas in which Device Authority has first mover advantage.
The Board believes that increasing commercial awareness of the risks related to IoT devices and systems, increasing costs of system failures, the potential for loss of human life and the resulting greater regulation and legislation will drive demand for data security systems.
Al Sisto, Chief Executive Officer of Tern Plc, Said:
"Tern has a very clear focus and is committed to adding value to its investments and thereby generating value for its shareholders."
Enquiries:
| Tern plc Angus Forrest / Al Sisto | Tel: 020 3807 0222 |
| WH Ireland (NOMAD and broker) | Tel: 0117 945 3470 |
| Mike Coe / Ed Allsopp | |
| Peterhouse Corporate Finance (Joint broker) | Tel: 020 7469 0936 |
| Lucy Williams / Duncan Vasey | |
| Whitman Howard (Joint broker) Nick Lovering / Francis North | Tel: 020 7659 1234 |
About Device Authority: Device Authority provides simple, innovative solutions to address the challenges of securing the Internet of Things (IoT). We help our customers simplify the process of establishing a robust, end-to-end security architecture within the IoT and deliver efficiencies at scale through security automation. The Device Authority IoT security platform is purpose-built to address these challenges through automated device provisioning, credential management, secure updates and policy-driven data encryption.
About Tern:
Tern Plc acquires and invests in privately owned companies with IP, established products and customer bases. Its investment strategy is focused on taking an active role in its investee companies in order to improve the business model, accelerate growth, expand the business globally, and identify exit opportunities.
