IP Group H2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 25, 2025

There are 4 speakers on the call.

Operator

Corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, as usual, we would just like to submit the following poll.

Operator

And if you'd give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from IP Group PLC. Greg, good morning, sir.

Speaker 1

Thank you very much, Jake, and thank you all to everyone at Investor Meat Company for once again hosting this live update. It's open to all shareholders and prospective potential shareholders and a mark of our continuing commitment to transparency in reporting. With me on today's full year results call, I'm joined by our managing partner, Mark Riley and our CFO, David Baines. So, as usual, this presentation will be available on the IR section of our website, and before I go any further, please note the usual important disclaimers about the information that will be in this update and particularly the nature of any forward looking statements that might be contained within. So in terms of what we'll cover today, I will provide an overview of the group's performance in 2024.

Speaker 1

I'll then pass on to Mark who will provide an update on a number of our key balance sheet portfolio company holdings. David will then run you through the financial results and then we'll return for a summary and into Q and A. As always, as Jake said, please do post questions in the Q and A section and we'll endeavor to cover all of them, either live if time allows or otherwise we'll do it via the platform. So I'll start with that full year overview. So I think for those of you who joined us for the half year results presentation, you'll recall that I highlighted the focus that was being placed by me and the team on delivering cash exits as a sort of a major priority for this year and that the maturity of our portfolio was sort of beginning to translate into portfolio exits and that momentum appeared to be building into the second half with a number of potential further exits anticipated.

Speaker 1

And I'm obviously pleased to report that we did indeed complete a number of further exits during the second half of twenty twenty four and that resulted in a total of 183,000,000 of cash proceeds realized for the year. And indeed, this performance was significantly ahead of what was again a pretty sluggish period for liquidity across the venture capital market. Now this outperformance on profitable cash exits enabled us to continue to deliver on our commitment to make cash returns to shareholders. And as you'll have seen, we've significantly accelerated our buyback program during the year. We bought back £30,000,000 worth of shares during calendar twenty twenty four and then we announced further buybacks totaling up to 70,000,000, which we've continued to implement during 2025.

Speaker 1

Now in today's release, you'll see that given the persistent discount of which our shares continue to trade, we now intend to allocate 50% of all realizations achieved during 2025 to cash returns to shareholders. As always, we'll continue to review this proportion as a board based on the relative attractiveness of all of our various capital investment opportunities. You also have seen in today's release that as a result of further good progress on realizations during 2025 to date, we've added a further 10,000,000 to our buyback program such that the commitment on the current program now totals up to £80,000,000 And to put that in context, that represents that 80,000,000 represents almost 20% of our current market capitalization. And since the commencement of our buyback program, we've now bought back and canceled more than 10 of the group's shares in issue. Now despite this outperformance on exits and our accelerating buyback, our underlying NAV per share performance was minus 15%.

Speaker 1

I, David, and Mark will cover the main contributors to this performance shortly, But as you would expect, this performance is both disappointing and it's well below what we believe is achievable with our business and our portfolio. As a result, and as I described at the half year, we've taken steps to proactively address this structure that we operate under, our capability and our cost base, and this has resulted in a reduction in our net overheads run rate of approximately a quarter on an annualized basis at the end of twenty twenty four. And while we've had a small number of companies that have sort of failed during the period, many of the fair value reductions represent reversals of previous fair value increases. So several of our portfolio companies raised money in 2021 and early twenty twenty two and some have grown into those valuations. As we'll describe later, although we've seen a fair value reduction for those companies, in many cases, this represents a resetting of value and there remains a significant value creation opportunity for those companies given the size of the markets that they address.

Speaker 1

And overall, we continue to see a significant opportunity to deliver positive back to share performance. Mark will talk more to this shortly. And then finally, as shareholders, regular listeners will know, we've been building out our relationships with pension funds in Australia to manage private capital and that includes managing a commitment of A435 million dollars for Post Plus, one of Australia's leading superannuation funds. We continue to believe there's a significant opportunity to continue to build out those relationships in Australia. And while things are definitely moving more slowly here in The UK, we're increasingly confident that long term private capital will start to flow towards scaling the types of science and technology companies that IP Group helps to create, fund, nurture and grow and that includes under initiatives such as Imagine House Compact and as a result of the other pension fund reforms.

Speaker 1

So I'll cover these in a little bit more detail. First of all, I'll turn to one of the, you know, the sort of standout successes of 2024, that was our investment in feature space and our support of that business through to its sale to Visa, which completed in December. As I said at the half year, this is a very compelling business which is addressing growing multi billion dollar markets in fraud. This was a business that we first invested in in 2012 and we supported the company across seven financing rounds with a senior member of our investment team, John Eddington, being a key member of the board. We were joined on that journey by a strong syndicate of co investors including the likes of Insight Partners, Hyland, and TTV, and that is a network that we will continue to co invest within the future.

Speaker 1

We consistently guided that feature space revenue should be approaching sort of $100,000,000 they shot up on a run rate basis by twenty twenty five, twenty six. And I said, you know, with a decent revenue multiple, a company value of about a billion dollars was realistic at that point. Now as it transpired, the company with our full support achieved approximately that exit level, to Visa and we were delighted to announce that in September and that was in 2024, so a year or two ahead of what we were planning. We were the largest shareholder in the company at exit at about 20% and we will receive a total proceeds of 134,000,000 having invested about 23,000,000. It's worth pointing out that GBP 134,000,000 is about 80% higher than our carrying value at the start of 2024.

Speaker 1

And we consider that that six times multiple and high 20s percent IRR or annualized return and represents a great financial return for our for our shareholders, but it's also important from an impact perspective that Featurespace's anti fraud and anti financial crime tools will now be rolled out across Visa to protect a much wider group of customers. So that was a standout success. That said, it was achieved during a very active second half of twenty twenty four in terms of cash realizations in July, and we realized £9,000,000 from a partial exit of Nasdaq listed Centessa, we completed the sale of Garrison that we've announced in the first half and then in October, another exit from the therapeutics portfolio in the form of Kynos Therapeutics. And the majority of that GBP 134,000,000 of cash proceeds for feature space we received in December, you can see that there GBP 119,000,000 and the balance of GBP 15,000,000 will be received in two tranches in GBP 25 and GBP 26. In December, we also announced the secondary sale of some minority holdings in nine portfolio companies across the group's balance sheet and our managed funds and through this transaction, we expect to generate up to approximately $15,000,000 of cash proceeds and all of those sales overall were at a small premium to our half year balance sheet holding values.

Speaker 1

As you can see from the slide, we've completed about half of this figure to date and we continue to work on the balance during 2025. So that positive momentum on exits continues, with the completion in early twenty five of a number of exits that we announced in 2024 and we've now received more than 20,000,000 cash MEXs so far in '25 which has led to the additional 10,000,000 that we're allocating to our buyback program. And although I'm very limited on what we can say due to SEC rules, and we've also noted that Hinge Health made a recent announcement that it intends to list on the New York Stock Exchange. So I mentioned earlier that delivering these cash exits was one of our sort of most important objectives during 2024, and it's worth pointing out that this was achieved despite continued challenges from a liquidity point of view in the VC market. The and the pitch book MVCA report which generally describing conditions in The US which are pretty applicable to The UK and Europe as well, noted that extra activity has been the blockade limiting VC for the past three years and return generating exits for the market have been few and far between.

Speaker 1

And you can see this in the chart here. So in on the chart on the left shows our exit performance for the past few years, that's in pounds, millions, and over the past few years. And on the right, albeit with different units of measure, you can see the total value of exits across the PCE market in The US as a whole. And You can see that 2024 remains less than half the value seen in 2019 and 2020. Interestingly, PitchBook did note that during the past two years, the largest exit, both in terms of public listings and acquisitions, tended to concentrate in healthcare and information technology, which you can see from the previous slide was also our experience and we believe this continues to support our conviction around the value that can be delivered in these sort of subsectors of deep tech in which we operate.

Speaker 1

Moving to shareholder returns, so as Douglas notes in his share statement today, the gap between our share price and our net assets remains sort of stubbornly and frustratingly in place And while this is also largely the case for a few of our listed peers on the London Stock Exchange and indeed for some much larger balance sheet investment businesses globally, we've been taking increasing steps to retire capital at prices that we consider to represent very compelling long term value. Of course, at all times, we have to balance this opportunity with the fact that almost all of our portfolio companies require further funding, and in most cases, some of that is likely to need to come from the group. But our success in generating liquidity has enabled us to continue to return cash from exits to shareholders and we have significantly accelerated our buyback program during 2024. As I mentioned, we've announced two new updates on that front today. And firstly, given that persistent discount, we will now allocate 50% of realizations achieved during 2024 to cash returns to shareholders.

Speaker 1

We'll obviously review this and we'll update on our plans for 2026 and beyond in due course. And then secondly, as I mentioned, we're applying that approach to the 20,000,000 or so realizations today, having a further 10,000,000 to our buyback program. So we completed about 30,000,000 of buying back shares during 2024, so we've got a further 50,000,000 to go. And following the release of our results this morning, we are doing so again at the sort of maximum allowable pace under the Marseille Harbour rules of about 25% of rolling volume. At these levels, at these share price levels, hopefully, they won't all be done at these levels, but we'd be retiring about another 10% of our market cap in addition to the 10% already retired.

Speaker 1

And it's in fact it's worth saying to all shareholders and the level of shares that we have bought back is now approaching the level of authority that you approved at our AGM in 2024. So to ensure we actually have the right authorities to execute the current program, we actually need to seek further shareholder approval, and we'll be doing that at a one off general meeting towards the April. The notice of that general meeting is being posted out to shareholders today. So I mentioned that we outperformed on exits, but we underperformed on overall NAV per share returns with a 17%, 17p per share reduction. Now Mark and David can talk a bit about that and the but I'll cover a couple of the key areas.

Speaker 1

So first of all, the largest overall contributor was Oxford Nanoco. And while we saw something of a fair value improvement from the position at the half year, the overall reduction in the year was still around 7p per share. In terms of Nanopore's sort of business performance, I've made sort of three observations. Firstly, the company did deliver good growth in 2024 about 23% in constant currency that was significantly ahead of its peers and this was a result of their focus on expanding presence into high value applied areas such as clinical, biopharma and applied industrial, which now make up back 30% of the company's revenues. New product launches, particularly the lockdown Q Line series, are essential for delivering some of these more regulated end markets.

Speaker 1

Secondly, Nanapore announced several big landmark contracts and sort of strategic collaborations that included with the UK government, UK Biobank and Precision Health in Singapore and that adds to existing relationships with the likes of the Mayo Clinic in The US for precision medicine in cancer and genetic disorders. Those collaborations will add revenue and expected to advance genomics driven healthcare innovation around the world. And then my third observation is Novo Holdings joined the register as a major shareholder during the year and the Ellison Institute of Technology is now the single largest holder at 11%. This is in addition to Via Maria and strategic relationships that the business has with Nvidia and Apple that that Novo investment was part of a small primary fundraise and our modeling now shows that the company can comfortably trade to its 2028 cash flow breakeven. Now the more recent results have evidently disappointed the market.

Speaker 1

In our view, the company's taken an appropriately prudent view of the impact of NIH budgetary challenges in The US and sales restrictions in China, but it means 2025 growth is anticipated to be nearer that achieved in 'twenty four than the 30% median target, although we think that the recent cost control measures mean the bottom line impact is likely to be minimal. So we can still see how the company achieves its anticipation of EBITDA breakeven in 2027. Now the second category, and Dave's going to talk about this a bit more in the financial results, relates to is the sort of the knock on effect of this ongoing tougher funding environment for growth stage companies on those businesses that need to raise capital reasonably imminently. And a number of these businesses have highly differentiated product offerings and address multibillion markets. However, nonetheless, that funding environment is definitely more challenging than a couple of years ago.

Speaker 1

And this includes businesses such as Okta, which is our world leading industrial autonomy software business, and Mark will provide some further color on that one shortly. And then the third major driver is is sort of commercial delays or technical setbacks specific to a particular company. And, of course, the challenging funding environment doesn't help, but it's it's largely down to, specific issues for the company. And this includes companies like UltraLeap, which is developing this sort of world leading hand tracking technology, which had some commercial setbacks. Again, Mark will talk about that one.

Speaker 1

And another example of this category is, of course, Astesso, and this is this is one where we did have a technical setback. This is our single largest private company holding by value. Of course, during the year, we were frustrated, as were shareholders, that Esteso was not in a position to release any data from its Phase 2b RA study. However, in February, Esteso did provide an update and it was it was disappointing that it didn't achieve the primary endpoint. However, it was also encouraging that the trial results reinforced, liramastat, which is the name of their compound.

Speaker 1

It reinforced that novel mechanism of action and its effectiveness in both protecting the bone of people living with rheumatoid arthritis, and we also saw statistically significant improvements in things like bone erosions and improvements in disability and fatigue in patients and that is a huge positive impact for patients. Now the company will publish full study results shortly and plans further phase two studies to further evaluate the unique potential of that drug to promote what's called adaptive tissue repair, both in RA and in other conditions. And in our initial review of the data, both sort of internally from our team and from independent external specialists, confirms that there is genuinely something unique about the mechanism of this drug and so we are supportive of the company continuing to pursue this development. We're also pleased to report that Esteso is sufficiently funded to conduct those additional studies which the Phase 2b justified. However, given this setback and the knock on implications for monetizing the compound, we reviewed the carrying value including with the support of Deloitte and with review from our orders at KPMG and reduced the fair value by about 32,000,000 or 3p per share.

Speaker 1

So as we entered 2024, we recognized that the appetite for higher risk and early stage assets was likely to remain cautious and there was a lot going on in the world, lots of elections and disruptions to trade and investment flows and lots of geopolitical tension and military conflicts. And we were also very aware of the continued discount between our national share and our share price. And so as a result, we agreed with the board a number of priorities for us to deliver in 2024 to seek to address that and optimize the group for growth. And first of all, as I mentioned, we proactively delivered on profitable realizations. We continue to focus down our investment strategy and we extended our buyback, as I mentioned.

Speaker 1

We reduced our net overheads and we've maintained investment discipline worth saying that we invested about 63,000,000 down from 70 odd million and which was less than 10% again of the total capital $780,000,000 raised by the portfolio as a whole and we also were successful in raising a further $95,000,000 of additional managed private capital, partly through part walk and partly through an extension of our relationship with host clubs. And even these actions have yet to have a sustained impact on that per share or our share price indeed, so we continue to work tirelessly to deliver against these and others, including now using our capital to even more aggressively retire our shares at these prices.

Speaker 2

And as

Speaker 1

you would expect, the board continues to review all options to deliver shareholder value. So just a quick summary of how the business is now set up. You know, we've clearly sought to reduce net overheads and to access additional private capital. This is the way that the group is now structured and increasingly we're making the bulk of our early stage investments through our heart war platform here on the left. Here there is a lower cost of capital arising from EIS tax relief and it's very well suited to precede and seed investment.

Speaker 1

Even in these, the sort of, the challenged markets for raising EIS and VCT funding, we tend to raise about 30,000,000 to 40,000,000 per year. This provides management and performance fees to the group as well as a very differentiated investment pipeline. The next stage of funding after that tends to come from the balance sheet and we're doing later stage series A and on from the permanent balance sheet. This offers capital returns to shareholders directly and a lot of the value, as you'll see in Mark's slide, is in businesses that we anticipate have the opportunity to exit within the next sort of two to three years. And then finally on the right hand side, this is where as businesses start to scale, it's certainly something which is a target in The UK, they need further capital beyond the level that we can provide from the balance sheet, and so we've complemented the balance sheet with private scale up funds and that generates management performance fees for the business but it also helps to ensure that as those companies mature they can get better access to growth capital hopefully generating better returns for shareholders.

Speaker 1

In terms of scale, Hartwold's about half a billion, sterling of assets under management, the balance sheet's about a billion, and we're aiming to scale what is an existing few hundred million on the private fund side, to at least the same level as the balance sheet over time. And then finally, I said earlier that we have seen an overall reduction in NAP per share, but we continue to see this significant opportunity to deliver positive NAP share performance that will be enhanced for long term shareholders by our current active buyback program. I've covered Oxford, Nautcor and Esteso. They're the two largest holdings by value. Each represents about 10% of our Naut per share.

Speaker 1

I'm now going to pass on to Mark to cover the next few, as well as touching on some of those companies that I mentioned had seen a resetting of value for this year for various reasons and yet continue to have very significant upside potential. So, Mark, over to you.

Speaker 3

Thanks, Greg. Good morning, everybody. My name is Mark Riley. I've recently taken over the responsibility of running the whole group portfolio. You may recall I've been on these calls before when I was running the technology side of IP Group's business where, of course, we've delivered quite a lot of success in recent years with the, exits that Greg talked about, feature space and, and Garrison in 2024.

Speaker 3

And prior to that, the, wave optics, which we sold for over half a billion dollars. So intending and hoping to bring that, that success across the group level portfolio. Regrettably, my first job is to convey to you, with contrition a write down. As Greg said, the drivers for that were a continued drop in the price of our holding, in Oxford Nanopore. That was the largest contributor, but also there were market headwinds and a contraction in the availability of co investment capital, the associated price erosion that that that causes as well as some commercial setbacks in the portfolio.

Speaker 3

And I'll go into a little bit more detail on that. But the positive message is that, those were setbacks. They weren't write downs. They weren't write offs. They weren't complete loss of opportunity.

Speaker 3

And, history tells us that venture capital as a business model relies on outsized returns from one or a small number of assets that pay back and and deliver upside on on the rest of the portfolio. And inevitably, some of those challenges fall first and that's a fluctuating journey. So those outcomes can be a tough one as we've we've seen this year, but we do continue to have a whole stable of candidates to be the asset that delivers that really sort of high outsized return, to to to to deliver return right across the portfolio. I mean, of course, the degree to which that potential is priced into the current value fluctuates with the market, but, it's high. A few years ago, it was lower this year but the fact is that that potential remains, and picked out a few of our sort of most mature assets to exemplify that and to really characterize that potential.

Speaker 3

All of the assets on this slide are delivering transformative products in multibillion, dollars 10 billion plus market opportunities. Picking out the first one, you may already be familiar with HiSata, which is our hydrogen electrolyzer company. Just an electrolyzer is basically a unit that converts creates hydrogen. It's how you form hydrogen, and they are commercializing a new type of hydrogen electrolyzer that is far more efficient than you can currently buy. If you buy an electrolyzer today, it will be about 75% efficient if it's a good one, and the the Hystater electrolyzer, they've shown that it's capable of 95% efficiency, and they have some milestones coming up this year, technical milestones that are sort of validation points for their device.

Speaker 3

They're building a scale up version of their device at the moment. And those technical milestones are hit and the, the data is looking good so far, then there is a very, sort of immediate opportunity to gain customer traction with that device, and they're selling into a $17,000,000,000 projected market in twenty twenty, thirty 02/1930 for hydrogen electrolyzers. So we see a lot of upside in that opportunity. The second asset covered on this slide is Arteos. They are developing DNA damage response pathway drugs for treatment of cancer.

Speaker 3

They have already published some early data in late twenty twenty three. They published some data where they said that durable confirmed responses were observed and so we take that to mean that they're seeing a reduction in a visible effect on tumors and so now they are doing their phase one stroke two trial, which is expected to complete this year, to prove that effect out in the larger cohort of patients. The third asset on this slide is Pulmozide. So pormazide make a drug that treats a fungal infection of the lung. There's a fungus called aspergillus, which we all inhale it, it's naturally occurring in soil and in fertilizer, and it doesn't usually do you any harm.

Speaker 3

But if you have a reduced immune system or other sort of lung conditions, then this can be very dangerous and in fact fatal. And formicid have a drug, an inhalable drug, which is the sort of novel mechanism for treating this condition, which is showing very promising signs. They, have already done some trials on this drug, and they showed that it potentially has fewer side effects, better efficacy, and improved patient outcomes than existing drugs. And their phase three trial is due to readout next year, so they're getting a lot of interest already in their progress. In shelf, we, we accept we can't settle the value to SEC rules with another company targeting a very large market.

Speaker 3

So that's that sort of exemplified the opportunity, but I also wanted to emphasize this point that, yes, we have had some write downs in the portfolio this year. In addition to Nanopore, there were some private companies that we wrote down, But all of these companies still have that existing opportunity that they, they have an opportunity to deliver upside for us and to, they were not write downs because these companies have failed. They were write downs because they've had challenges or setback to market, some contraction or access to funding challenges, but they are not right offs. They still give us an opportunity to to retain value. UltraLeap had commercial setbacks simply because the market for virtual and augmented reality technologies has developed a lot more slowly than anybody, including Apple and Meta and all the top players in this space anticipated, and didn't get the market traction that they hoped for in the timescale that they hoped for.

Speaker 3

But they have a huge family of very fundamental patents in this area of hand tracking and haptic feedback, and we will use hand tracking for interface with computers in the future. And so we've formed a partnership to monetize that patent portfolio, and there remains good potential for us to get a return on our investment in that asset. Greg talked about Esteso. Obviously disappointing not to have hit the primary endpoint in that trial, but it did generate a lot of encouraging signs that there is something really fundamentally exciting happening with this drug and that there's something compelling from a patient perspective with this drug. And so we now learned a lot and we know what we're going to apply to the next stage of trialing the drug, so there's still a lot of potential there.

Speaker 3

First slide, fusion. They frankly failed to, to raise money with the largest quantum that they wanted to raise. They had a business model that relied on building a fusion reactor, and having not been able to raise money to do that, they have now completely pivoted their business model to be a specialist equipment or specialist component supplier to the people who are building the fusion reactors, the people who are developing usually fusion as an energy source, sort of much more of a picks and shovels play that allows them to be a supplier to the market. And in fact, it's already generating revenue today. So good opportunity there to, to obtain value in that company.

Speaker 3

And finally, Okta on this slide. So they raised money in a in a market that was very, very, very strong. We're we're being self inspect about this. They're coming up to raise money again. We don't know how that will play out.

Speaker 3

We expect that they will raise money, but we don't know the price of that round. So we've taken a small impairment on this, but is still very exciting from a commercial perspective. They have, software deployed in vehicles that are running, carrying passengers today. One of the few sort of system integrators, but one of the few companies to go through a system integrator to put into a vehicle in that way and, and to run their software on the road and, and lots of off road applications. They have several partnerships that are going through trials at the moment, that have very large upside of those trials are successful and, sort of early signs of, promising uptake of that technology and operate applications like airports and ports and so on.

Speaker 3

And finally, the, in addition to these sort of high value companies, the ones that sit at the top of our portfolio by value, there is a whole stable of assets that have the potential to be the next candidates to sit in that sort of a near term exit category. We have lots of exciting companies coming through again targeting very valuable areas of the market. I've just picked out a few of those, but there are a lot to cover. Intrinsic is a semiconductor company that is making smaller feature memory technology. So at the moment, we have a limitation in the feature size that we can apply to random access memory, and that gives us a constraint that we can't sit random access memory on the same chip as processors and so you have a bottleneck in your processing.

Speaker 3

And Intrinsic has technology. It's the only 12 nanometer nonvolatile memory in the world at the moment, and, that should take out later this year. And so, if that is successful and this is the technical parameters of that technology are hit, then we have a very compelling technology to completely transform a hundred million dollar market opportunity in our memory. Oxyhealth and other companies are going very well well into revenue now supplying 50% of NHS England's mental health trusts and they have customers in The US as well. Genomics uses genetic databases and advanced algorithms to understand the genetic component of disease.

Speaker 3

They have some very compelling partnerships with the likes of GSK, Vertex and others. So the point being, there's a lot of kind of potential sat beneath that, the large component of value in the portfolio in that quarter of the portfolio that's made up by our sort of smaller, earliest earlier stage assets. There are a lot of candidates that jump up into those high value buckets. And so in summary, a lot of candidates that deliver that upside return, the write downs were write downs, they weren't write ups, the opportunity remains, and a lot of assets in the lower value portfolio that have the potential to the future of the asset part. Over to you, David.

Speaker 2

Thank you. Thanks very much. Hello, everybody. Good to be with you, Ken. Just quickly go through the financial results.

Speaker 2

I mean, it's a relatively short section, but I'll give you a quick summary of the key points. Cash, very good as you heard. Very strong up about £60,000,000 up about 25%. We'll look at the kind of cash waterfall in a minute and be able to see the bridge from last year to this year. Net assets as we heard less positive down to 97p per share from about £1.14 this time last year.

Speaker 2

It's about a 15% reduction in that per share. It's about a £200,000,000 loss over the period. Net overhead slightly down in the period, we'll talk about that in a minute, down from 22 to 19. They're actually at the year end lower number again. I'll talk about that briefly when I do costs.

Speaker 2

So really, probably, it comes to the main messaging, which is what is in that loss effectively. So, on the green side, on the positive side there on the left hand side of the screen there, obviously, feature space is a keypad at about 56,000,000, about 66. There are a couple of, Kynos and ZyHIM which made it up to about 6,000,000. On top of that there's some other quality companies in the next door box, in Telgemontasan for example, in the year, Sentessa went up in the year, these are companies which we either sold partially. So So about 80,000,000 month, it's on on the left hand side of the screen.

Speaker 2

In the middle, the actual basic up rounds, down rounds, other movements on on platforms, example, relatively neutral, actually, canceled themselves out. So probably where the main story is, I'm afraid, on the right down is on the right hand side of our screen. We've talked about Oxford Nanopore. It's a publicly listed company. Actually, its trading is rather good.

Speaker 2

Actually, it's been achieving the numbers it said it would do. But in this difficult market, it it hasn't performed well and then share prices down in this 66,000,000 of euros in one go. And then leading to the presentation Marcus gave, there's a kind of category of company that actually is extremely strong. We're still very excited about, something like that like Fusion and OXA, which mainly due to the funding environment. So in both cases, those companies have actually funded later than we expected.

Speaker 2

So they haven't yet fully funded where we want to at this stage. When you're in that situation, it's quite difficult to do anything else and have a line down. It's hard to carry. Valuation is sometimes relatively old. Both cases, one funding round is 21, and one's 22.

Speaker 2

So relatively old, you can't rely on them anymore, haven't yet completed another funding round, and therefore, you really have to take decision to be pretty prudent to take relatively significant write downs. We very much hope when subsequent funding rounds happen, which we believe we will on both these companies, we hope they'll be being relatively prudent. But that's just about 40,000,000 out of us like Fusion, for example, and Oxford's about third. So that really accounts for that. And then you have about 100,000,000, a little bit over 130,000,000 where there are actually, I would say, that can be setbacks.

Speaker 2

So we've heard about the status. Obviously, very unusual in that missed its primary endpoint, but a lot of very interesting and really disruptive signs in its secondary endpoint and then some bone repair. Unavoidably though, we had to rerun those numbers and we've had to

Speaker 1

write that down by about £31,000,000

Speaker 2

in the period. Ultimately, the market just explained to you is still an exciting company for interesting new business models that generates license income. But given the primary market hasn't been successful, we had no choice but do a significant write down and write that down by about 26,000,000. And then the last one in that category, a company called Crescendo, which is a drug company, actually a prostate cancer trial did have some good evidence of success, but unfortunately, not enough not over enough patients to make it competitive with other drugs in the market. And as a result, we've taken very prudent view and actually written most of that loss.

Speaker 2

So that really explains you've covered all that loss in in those small number of companies. Next slide, actually, that's what I give pretty much every year. It it it's pretty simple. Our numbers are actually pretty simple, which is good news for CFO. You we don't have a balance sheet.

Speaker 2

You have a cash position in the small amounts and liabilities, most of which, by the way, are contingent on exits. So you can get your payment if you get exits, items such as carrying. And you can see there a reduction from that 1.2 to just under 1,000,000,000 in NAV. In terms of on the right, the actual distribution portfolio is still pretty similar, actually. They've got the vast majority, 83% of it, in the top 40 companies.

Speaker 2

So we are although having in our very model, have a lot of companies but we're not very exciting early stage that as Mark just explained in three companies a moment ago. Actually, a lot of the value is really restricted and focused on a fairly small number of companies. And then not too much. I wanna add to this slide. I'll add to this.

Speaker 2

We talk about each time. Normally, where we normally fund the arm, we've got about a third of the portfolio that is funded. It doesn't need to raise more money. It might raise money if it wants to, but it doesn't need to raise money. And then we normally have about third funding this year and third next year.

Speaker 2

And as it stands, we're relatively small amount this year, but there were enough as you've heard to, mean we broke down some of our bigger assets. But most to act out of '26, pretty hopeful we get those assets funded in the first half, and then you should have a relatively small amount that requires funding, in the second half of the year, which of course is a good place to be combined with our strong cash. So this is what our cash performed. A quick look at numbers, we'll see we invested about 63,000,000, little bit less than years recently. We're investing between 70 and 90, but about 63,000,000 invested, Very good realizations, underpinned a lot on that feature space exit but also a catalyst in there and a number of other exits, meaning we generated over 183,000,000, proceeds there.

Speaker 2

So, sort of three times what we invested. We've heard about share buyback program. We've bought back 30,000,000. We're still committed to about 50,000,000. Our overhead at 19, as we'll pay in a minute, going to be lower soon.

Speaker 2

And a little bit of debt, very small amount of debt funding. Other working capitalizing that curve because on occasions on the licensing side, we we collect money in on behalf of other parties that we then have to distribute. So you have kind of working capital movement. But actually, in the year, we turned 85,000,000, which obviously is very strong. Probably worth making a point, but still strong today.

Speaker 2

It's $277,000,000 in the bank as I speak to. So that although over three months later, that position has remained pretty strong. I think last for me, just to wrap the elements I touched on, during the year, we did a very comprehensive review of both heads. We have reduced the relatively significantly, down by about 23%. You don't see that in the numbers.

Speaker 2

You only see a 13% reduction in the numbers, year to date and that's because they made most reductions in the second half and therefore, we haven't had a full year impact. As at the year end, the run rate has reduced by about 23% which means that we've got about 16,000,000 to 7,000,000 net costs as opposed to about 22,100,000.0 at the beginning of last year. And we've achieved that by focusing on our strategy, being more efficient, relying more than part more for sourcing and that's allowed us to actually reduce our cost across the group without actually significantly detriments our ability to be performed and we hope start delivering good returns to you going forward. So with that, I will hand you back into questions to Graham.

Speaker 1

Thanks very much. Dave, very good. Right, just very quickly to summarize and then get on to questions, we've got a number of questions in the Q and A section, which is very good. Thank you, everyone. So I guess firstly just to highlight that there will be there's more than 35 milestones of various subscriptions coming up across that balance sheet portfolio during 2025.

Speaker 1

Obviously, some will be good, some may be bad, including on the clinical side of things, given the statistical outcomes that are possible there. But as Mars mentioned, a number of them are also product launches, technical updates, and indeed, included in that is first revenues for our fusion business, First Light Fusion, consistent with that now becoming a specialist component supplier. So there will be plenty of milestones to mark us against during the portfolio over the course of the year. I did also want to give shareholders visibility on what we are prioritizing for 2025 and beyond. As I mentioned in 2024, our main priority really was being able to deliver profitable cash exits and I think we delivered on that despite a tough market.

Speaker 1

Clearly the priority for '25 is to get an app per share moving positively again. We talk in the release also about continuing to deliver those cash exits, possible cash exits. We can see line of sight on $250,000,000 from the private portfolio by the end of twenty seven. And we do have line of sight on which companies are potential contributors to that. Of course, the timing and the outcome of those companies is always the most difficult thing to predict, but we do have a very strong pipeline across a number of companies that we are working towards.

Speaker 1

As I mentioned in the release, we are upping the level of our cash exits that we are using for cash returns, to shareholders, which, you know, we are doing this by way of a buyback at the moment. The eventual game plan, you know, as a shareholder myself, is that we get back to a position where we're not trading at a significant discount to NAB. And at that point, we can reconsider using mechanisms such as the dividend, which pays back cash to all shareholders equally. And when the share price isn't at such a significant discount to NAV that's obviously what the board will consider and look at. Another area that we're targeting is to access further private scale up capital and as I said I do believe that there's a great opportunity in Australia.

Speaker 1

Ironically, we're having more success with the Australian superannuation funds than we are with those in The UK. That's not to say that we don't have support from UK long term capital. Rail pen, one of the most active DB schemes in The UK is our largest shareholder. We have a number of other shareholders on the register from that investor group. We have Phoenix, the biggest DC provider in The UK, which provides our long term debt.

Speaker 1

And we also have co investors in a number of our funds. So there are many ways that the sort of imagine house compact, etcetera, can be delivered through IP Group and we're working hard to do that. It is slow, but we are seeing increasing signs that some of that capital may start to flow, whether it will be this year or early next, not sure. We're definitely working towards it being, this year. So I think we can access further private scale up capital.

Speaker 1

I've got greater visibility, as I said, on those relationships in Australia, which of course is relevant for companies that we have across the portfolio, but hopefully that will be joined by The UK. And then I just want to also make this point a bit at the half year and at the moment we are very much focusing our balance sheet capital, So as Mark said on delivering those companies that are going to deliver now share returns and cash returns in the next few years, which does mean we have deliberately scaled down the number of new investments that we make on balance sheets. But that's not to say that we don't have a rich pipeline. Most of that opportunity pipeline is being delivered through our part walk managed funds. We do 20 to 30 new spin outs a year through that and while the strategy that I described, which is to use the part work and the part work funds as a sort of sourcing engine and then funds from the balance sheet, we haven't actually done many of those because the level of capital that we're allocating to new deals is very low at the moment.

Speaker 1

We think that's the appropriate balance for delivering value to shareholders, delivering that per share. But as we are successful, we will be able to do that in the future. So to summarize the key messages, you know, hopefully by now you'll have these sort of drummed into you, but we did add a formal exit despite the market being tough from a liquidity point of view for VC generally. That's led us to primarily accelerate our buybacks. We've got 50,000,000 programs still outstanding at the moment, which is more than 10% of our existing market cap and that's having already retired and canceled 10% of our shares.

Speaker 1

We hope that that's going to have an impact on share price, a positive impact on share price of course. Our NAV per share did decline. I hope that Mark has been able to set out to you the reasons why we're confident that in many cases those are resetting some value and setbacks rather than write off of opportunity and so we do believe that there is a very significant opportunity to deliver these positive NAP per share performance and the fact that we're doing buybacks at these levels will enhance the NAP per share return for gels and that will hopefully yield results in our share price and that is obviously the most important KPI for shareholders, myself included. So with that, I will now move to Q and A. David, you do a great job every time.

Speaker 1

Thank you

Speaker 2

very much. Jason, I'm very pleased. No, I will, okay, right, so looking ahead everybody, we're forty five minutes in. I will warn you, we'll probably overrun the hour. We will carry on and do all the questions.

Speaker 2

That's what we endeavor to do. I'll let you know when the hour's up for those that might need to go. So, I've got 28 of these to go through. Number one, what I'll answer this. What are the annual costs among the company and are they justifiable given the poor performance of the new CF?

Speaker 2

It's It's a very fair question. I just explained the cost base at a moment ago down from £22,100,000 probably to about £17,000,000 this year. So quite a significant reduction during the period. So we have implemented quite a bit cut. We think it is right sized.

Speaker 2

We always have to review the costs but we think what we did was right at the time and remains right today. It's not something you want to do often or regularly and we think given our belief in the future growth of the company we are about right size as we stand. But as always we'll be watching our costs and one of the key things we need to make sure they don't start creeping up again so we're quite focused on that. Second question, I'm gonna pass it to you Mark, rehysata, I really pre subscribed so I don't know who submitted them, rehysata, where do you see the global hydrogen market developing? Quite a big question.

Speaker 3

Yes, yes, I mentioned this figure of $17,000,000,000 market by 02/1930, which think it's one of the biggest markets in clean tech. There are no practical alternatives to hydrogen, but zero carbon production of steel and shipping and ammonia fertilizer production, methanol production. Between those, sort of obvious adopters of of green hydrogen, there is a, about 12% of global carbon emissions that they account for about 12% of global carbon emissions. So those four sectors alone have demand for something like 200 megatons of zero carbon hydrogen hydrogen that was produced using renewable energy sources. So clearly a company with disruptive efficiency, much more efficient electrolyzer has the opportunity to take advantage of that.

Speaker 3

But it's obviously some of the world's kind of re recalibrating our, our assessment of the market opportunity in regard to The US because there are some headwinds there and challenges in adoption of clean technology. But, what we've observed in clean tech over the past decade is that people quietly get on and do what is it most economically effective, but and economically efficient. And, of course, I I started to deliver a much more efficient solution. So we think that there is a very large market in Europe, a big opportunity there, a very large market in The US as well, and a lot to go out for Highsoft.

Speaker 2

Thank you, Mark. I'm gonna go over to the question from Ken C. I'm going to go your direction, Greg. Is divesting Oxford Nanopore and growing the company privately a solution envisaged by IC Group? Can you answer that to some extent?

Speaker 1

Look, everyone can just to some extent. We tend not to comment on specific companies as regard to corporate transactions like that. I mean, we obviously, as a major shareholder, look at all of these things and obviously speak to the other major shareholders at Nanacore, as well as engaging very regularly with the management team and the senior team. So, I guess, sort of, no options are off the table as is the case for any, any public business.

Speaker 2

Thank you. This question is from MB, again to you Rick. The company is managing third party funds, Host Plus is mentioned. Our investment position is made in a way that equally respects the interest for shareholders and third parties. And it's okay to explain

Speaker 1

how? Yes. Good question. We take this very seriously obviously because, you know, lots of managing of capital is a regulated activity and we have regulated businesses here in The UK, part walks an example, and regulated businesses in Australia. There's a number of mechanisms as to how this is done in terms of the investment mandate for each of those different pools of capital and the investment decision making body, I.

Speaker 1

E. Investment committees, for each of those, pools of capital tend to be different. So for example, in Parkwalk, we have a separate IC, it's a separate, SEA authorized entity, a separate IC which takes decisions that are in the best interest of the EIS investors in those funds and we have a separate investment decision here, on the balance sheet side, for example, that that considers where we're making co investments. I mean, it is something that needs to be managed by all businesses that are managing pools of capital for different stakeholders and we've got good experience of doing it and there is benefit to a healthy degree of sort of collaboration but also appropriate differentiation of decision making. So that's how we manage it.

Speaker 2

Moving on, quite a long question, but I'll read in full. Again, I've got a point of use, Greg. C, the share price discount announced reported at the end of twenty twenty four is still true wide circa 44.8%, we agree. It was circa 49% at the end of twenty twenty three. Do the Board consider the actions taken to reduce the discount by where the 30,000,000 shire buyback program in the year a success?

Speaker 2

If not, would they consider purchasing shares themselves with actual cash to signify to the market their confidence in the company? It is noted that the directors sold shares in the year but did not buy shares other than receiving any unpaid options.

Speaker 1

Well, clearly, the 30,000,000 hasn't had enough of an impact yet, has it? That's why we're doing more and why we're accelerating more. I mean, this question probably came in a little bit, 10.07. So it came in, I think, a bit before we talked about what we're doing to accelerate that further and continue to retire more than 10% of our share capital again. So we are doing this aggressively given that significant discount, persistent discount.

Speaker 1

So now we do always consider purchasing shares. I've done it regularly and certainly would look at it again now that we're outside of our closed period. On the, not necessarily to comment too much on rem policy because I'm not sure how appropriate that is, but it is the reason that we have these disclosures around directors, sort of receiving options and buying and selling shares. We've set up our remuneration to be as long term as possible, so we're a long term business. And so our bonus opportunity is, the max bonus opportunity, I think, I'm right in saying is the lowest bonus opportunity on the FTSE two fifty by percent.

Speaker 1

We've done that deliberately and not only that the amount that we make in any given year, 50% of it is deferred into shares that then obviously it contributes to our minimum shelving requirement, but the intent is it's sort of locked up for a further two years to make it even more long term in nature. The mechanism to do that, unfortunately, is to grant, new price options that then have to be exercised and then much like a bonus, you pay your tax on it, but it shows up as a, you know, sort of a purchase or a gain of shares and then a sale. And we're looking at whether or not there's a way to make that a bit more efficient in terms of the mechanism because I think it does it's unhelpful to make it appear that we're selling shares. Actually, all we're doing is covering the tax, which we would have paid had we received a bonus in cash. So, but we do definitely look at, at buying shares, for for sure and understand that, you know, that sort of signaling.

Speaker 2

Yeah. Thanks very much. I'm gonna highlight, where I said the questions are coming from analysts, and I've been asked in the past to make it clear for analyst questions. And I think this is Paul C, which I'm guessing is you, Paul Cubbon, at Newsw. Thank you for being here.

Speaker 2

A quote from you, Greg, any prospects for additional secondary sales or by noise position as we did in the year?

Speaker 1

Well, we continue to to look at that all the time. We looked at, a number of possibilities last year and all the time you're balancing sort of the pricing and what's offered and the terms versus what we think we can deliver and how it compares to using the returns to pay for share buybacks or other returns. So we continue to look at it, obviously, when we've got some progress on that front. If we find something that works, then we will, of course, do that again because if we can deliver value to shareholders in that way, we'll absolutely do it.

Speaker 2

A second one for Paul. Again, I'm pointing to you, Greg. Any interest from Big Pharma in a secondary endpoint? Understanding, maybe you need to work and say about a portfolio company.

Speaker 1

Well, I mean, the the short answer is is yes, and as yet insufficient to result in something commercial, but but yes, I mean, there was a there's a significant amount of interest, and the company intends to make some, some much fuller disclosures around particularly those secondary endpoints and what they mean both in RA and in other indications, and that should be, available for, for us to talk about in in in coming weeks. So, we'll definitely update more on that after half year.

Speaker 2

Thank you. And next to a different analyst, Sam England from Berenberg. Thank you for being here, Sam. We appreciate it. You mentioned in the release that you are targeting more than 200,000,000 in exits by the end of twenty twenty seven and a promising pipeline of realizations.

Speaker 2

Can you talk about the visibility you have on this? To what extent does it rely on a pickup in public private market something to support exit? I'm going to chuck that ball

Speaker 3

to you, Mark. So, well, I've talked in the presentation about a lot of the highest prospect assets that we think have a midterm realization prospects. It's hard to pin down precisely when that's coming. I wouldn't have predicted exactly that feature space was going to sell in '24, but we thought that that was one that was coming up in a sort of three year window and indeed, it was a great outcome there. So similar now, we have a stable of assets, that sit in the category of having the potential to deliver in the near term.

Speaker 3

And, the questions disappeared. I can't answer the second bit of it now. But, I think

Speaker 2

it was about what public environment is about. Yeah. The

Speaker 3

funding environment. So we have already seen m and a interest in several of those assets that we talked about. Does it rely on the funding environment picking up? I mean, it relies on third party funding. I don't think it necessarily relies on it.

Speaker 3

It's it's only gonna be delivered if there is a complete sea change in the availability of capital. I think that these are strong companies. And even in relatively difficult markets, strong, mature companies with a near term exit potential tend to raise money. And so I don't envisage that we're gonna have a a sort of major problem unless there is a pickup in the in the availability of capital.

Speaker 2

Yeah. Again, and also, we're talking about the realizations in the private portfolio as well. So we're not seeing any of our public companies included in that. I might think that one.

Speaker 1

Although if they were if if a company were potentially to IPO, it might become one. It might become one that we would then accept.

Speaker 2

Going back to Paul Cullen, you're back. Nice to have you. I'm gonna go this to you, Greg. When do you think the proposals in the Mansion House Compact could start to be implemented and what would it mean for backing visionary ventures in The UK, NICE?

Speaker 1

I don't know. I mean, we'd we'd obviously hoped sooner, than the I suppose that my observation is the nature of the conversation. I spoke, on the last year's full year results, Hannah, the half year about it felt like sort of some of the plumbing for this was being put in place, speaking to, potential signatories to the Imagine House Compact and others who manage money for them, there still are a number of changes particularly to regulations around things like fee caps etc, and that have been pushed through or going through government and legal changes. So that is still to happen, which is sort of causing some, tardiness, I would say, on the delivery. So I hope in '25, I mean, the Magna has gone back, had a 02/1930 backstop date so, time is getting somewhat tight on this for those who have committed to that, But I think the nature of the conversations we're having are starting to move more towards the implementation.

Speaker 1

So hopefully second half of this year, what does it mean for back end visionary ventures in The UK? I mean, there is a huge opportunity here to deliver growth and to deliver investment returns. We've done work with PitchBook to look at what's the nature of the funding gap in The UK, and it's very, very prominent beyond Series B. The UK is very well set up actually for, early stage investment, particularly through EIS and more can be done and, more is being done and then more continues to be done and will continue to do that. But the real opportunity is is backing businesses, to scale so more companies can get to the scale that feature space did before they exit.

Speaker 1

And a great example is Yasser Motors, which we backed through, our EIS funds, and that achieved a sort of 100,000,000 two hundred million dollars company valuation on exit. It's now a core part of Mercedes Benz, Daimler's delivery of, electric drivetrains. Fortunately, that one is still here in The UK, and we're backed through again through Cartwalk, another spin out of that, of that technology from that business. So so hopefully, soon.

Speaker 2

I'm slow. Gently move on. I've got 34 questions. Just over to everyone's away, it's 11:00. I do understand people who are booked for the hour, we'd be quite as understand, maybe it's all awake.

Speaker 2

We're going to carry on and try and get through all of our questions. Perhaps I'll have a go at this one. David Seed, thank you for this. Buybacks don't really turn cash to shareholders in the way that dividend would. Why not we're going to take the latter?

Speaker 2

I have some sympathy to your point. I I understand the point entirely. We we think it does still remain the most efficient way to return our capital at the moment. You could argue if you take out cash and let's say now, which is obviously a liquid position, some of our best consider our discount and that's to be as much as 80%. I think it was an 80% position.

Speaker 2

And so by using our cash to rebuy the shares, we are actually getting an immediate return. If you believe in our we do and we believe it endorsed by the fact that every time we sell assets over the last three or four years, we sell them an agreement with a consistent pattern of 2021, Q3 and very much last year again. We've been consistently sold to the agreement seems to support our values when we have realizations. It does make economic sense to buy them back this way. It should be over time that the residual value to all the remaining shareholders has gone up and the remaining NAND per share for each individual does go up and actually should improve your position in time and that's why we maintain with it.

Speaker 2

Next question is, how much of this is, Sam, again, Sam, how much the portfolio needs to raise capital in 2025 and how are you thinking about the valuations these businesses might achieve relative to last time there is money? Is this factored into calculations? And that's yes. It very much is. I actually had a slide earlier which shows you something like about 45%, I believe.

Speaker 2

It's not so much this year. It's quite a big percent next year. It does need to raise money. So I'm sorry. I apologize.

Speaker 2

25. This year, there isn't very much, is there? We've only got a small amount that remains in the first half and a relatively small amount, in the second half of the year. Most of it's now moved into next year, to '26. Sorry.

Speaker 2

But we very much do factor in what we think companies will raise money at. One of the things that's quite difficult is when you're doing this process is actually knowing what the value is likely to be and just kinda hogs into view if you see what I mean. Something that may not raise money till '26 is actually very hard to show what their current balance can be like, whether the company achieves its milestones, and what value you'd like to get. When they become more imminent, as in this year, you begin to get much better idea. And I think I explained in my short presentation, but a number of those sort of write down to companies we still believe in oxygen actually was because we need to factor in what the potential future funding round might be at.

Speaker 2

So it's very much one of the primary factors that we actually factor in when we're considering evaluation. Next one, I might pass to you, Mark. Let's see. How many part

Speaker 1

work I think I've covered this one. I think

Speaker 2

I've covered it already. How many part work early stage investments have I been directly invested? You mentioned a number, I can't remember. In Series A over the last three years. It's a bit of exact question.

Speaker 2

I don't think we'll answer that bit or

Speaker 3

I don't have the number in front of me. I was just trying to get off the top line to come up with the current investments. I've listed six or seven here that we've invested in over the last few years. So, I mean, it depends on your definition of Series A, but we've certainly provided a lot of assets alongside them.

Speaker 2

Next, I think I've sort of covered it, if they don't mind me today. But I mean, just given the board thinks share price doesn't reflect the company's true value, is the board personally investing in shares other than through weekly purchase? I can't find any information after April 24 on direct to deals. I think it's fair to say we didn't answer that. Next one is, is there any adjustment?

Speaker 2

The next one is Andrew M. Thank you. Obviously, the priority is to support the existing portfolio and realize their value. However, the pay share buybacks has been slow given the scale of discounted land. Returns to shareholders are rightly focused on share buybacks rather than in some category when the discount is so large.

Speaker 2

But in absence of dividends, the rate of share buyback has been far too slow. The pace has even slowed in March. The date of purchase should at least double. I'll answer that one. Yeah.

Speaker 2

It's fair. One of the reasons it flowed recently last month was we go into what's called a closed period. And during the closed period, we're treated as being inside because we didn't get an idea of what our results were like. That meant we weren't able to change any instructions every share buyback, and we actually set it at 6%. We've been buying back about 15% of the of the previous thirty days average deal flow.

Speaker 2

We are likely to increase in fact, we could increase that this morning. So we'll increase that then bit technical, but I think we're safe harbor, the maximum we really meant to do. And we've increased that maximum, so we'll start buying back at about 25%. I think given the very low price, I think given the rather high volumes in the last couple of months, we should have seen going through. I would expect to see us buying back at a faster pace.

Speaker 2

And last time we're in the situation, similar to the back end of last year, we began to buy it for 809 hundred, even a million shares a day. And of course, if you start buying it that way, we're buying, what, a percent every two weeks. So we said that probably it's built in that you'll start seeing an increase in the rate at which we are buying back. Next one, David, b. Hello.

Speaker 2

With Esteso, is the effect of the treatment potentially slower to emerge than the timeline of the primary endpoint or is the effect of treatment different to that which is being done? Can I give that to you perhaps regarding sort of the boardroom's test there? Shall I say again?

Speaker 1

No. No. I understand the question. Yes. Great question, David.

Speaker 1

We think that that might be the case, yes. And the Phase 2b was done over effectively a three month period for various reasons, ethics and the fact that all the Phase two drugs that have in RA that have gone through in the past two, three, four years were done on that same time frame. However, it that that could well be an explanation, and I'll leave it at that for now because there will be more information on this, as I said, from the company in sort of coming weeks, but that is a that's a that's a very good observation, and we think we think that is potentially what's going on. When you cure the underlying condition, the physical symptoms take a little bit longer to, to be reduced.

Speaker 2

I can give this one to you as well, Greg. Andrew M, thank you. Please expand on how the group scale up fund will operate.

Speaker 1

Well, so the scale up fund is an opportunity, here in The UK, primarily focused at series b and beyond. And the intent, as I said, on the, on the sort of funding strategy slide is to add additional capital at the series b plus stage. And so series all have different definitions depending who you talk to. But effectively, as businesses hit the point of, commercial traction, they often need to raise rounds that are in the order of magnitude of sort of 50,000,000 to, say, 102 hundred million of funding. And there is a very big gap in the market for that type of funding, which is particularly acute here in The UK.

Speaker 1

The intention is that that would be a product that addresses that. It's also better suited to, sort of a fixed life fund, being done privately. So that's the intent.

Speaker 2

Thank you, Andrea. And the second question, Mike shared this one a bit, Mark. How realistic is OX evaluation given lack of contract awards over the last six months?

Speaker 3

Well, I think it's the right valuation. It's got a lot of investor interest. It's got very exciting commercial traction. I see a lot of high prospects with that company. I don't wanna be specific about the where they are commercially because that's confidential to the company and they wouldn't want us to share some of that.

Speaker 3

But we spend a lot of time on these valuations and we think it's the right right product.

Speaker 2

Yeah. I agree entirely. I'm happy we looked at. We're we're relatively well informed. There's funding potential funding going on.

Speaker 2

We're relatively well informed, and so we've had an eye to that. So I think we feel relatively confident in it, but you never know. It is it is a very difficult process finding these companies even when, you know, you're quite imminent to something else. You never know for sure. So we'll see, but we're relatively confident we've got that one right.

Speaker 2

This is a kind of, esoteric question from Gavin Air. Thank you. I'll go to you, Greg. We might all join in. Mhmm.

Speaker 2

Why continue the share price, actually, not improve share price rather than investing further in new companies which given the chance to improve that, what is the principal objective of IB Group?

Speaker 1

Gavin, this is the regular debate or decision that the board of IP Group has to take with guidance from the executive team who are managing the business from day to day, and it is a balance. So we've historically sought to invest 80% of our proceeds back into the portfolio and use 20% to return cash in some form to shareholders. At the moment, we think that the level that the shares are at represents very compelling value, but we do also need to invest in the portfolio to deliver now. So we're doing this from a share point of view, a share price point of view, so obviously buying and retiring shares at a discount to, NAP per share inherently improves the NAP per share. That's the intent.

Speaker 1

But you can't do that adding for an item because then the portfolio NAV per share will reduce at a greater level than the the cash that you're using. So we we do agree the principal objective of IPO is to deliver investment returns. However, given the given the discount to NAV, we've we've been more we're using more of our capital to, seek to address that discount. Yep.

Speaker 2

Thank you very much. And, Andrew, another question sorry. Andrew, I have another question. This is, I think to me, write down in Flesite Fusion valuation following a large write down last year raises questions about valuation accuracy. What kind of question, but I get your point.

Speaker 2

Without sounding too defensive, it is probably one of the hardest companies companies to value. Obviously, the potential for first light fusion achieving some kind of fusion breakthrough is absolutely immense. If it can be achieved over the next ten, fifteen years, it's got a completely whole new alternative energy source for the earth that could power power, humanity incredibly cheaply. Actually, what was our terminal value that is hard to measure and it makes it very, very difficult to actually work out what a light the ultimate valuation would be. We originally did put the value up considerably at the end of 'twenty one, early 'twenty '2 when it achieved fusion and perhaps in hindsight that was too much.

Speaker 2

I think now we're now much more anchored to realistic kind of funding round valuations. However, every year we're very diligently have third party valuations and we've tried to juggle this difficult asset to value. And I think we've done a relatively good job. I accept in hindsight, we wouldn't have taken that significant increase we took probably at the time of the future being achieved all those years ago. With that aside, I do think we managed to try and get it relatively fairly valued.

Speaker 3

I think the other thing to say is it's a very different company to the one that it was a year ago. It's had a complete pivot in its business model and we've valued it differently.

Speaker 2

Thank you, Mark. Yeah. That's good. Another Andrew M, again to me, what further measures on cost reduction in 2025, I sort of covered that. I think we're not planning on the deductions we've done.

Speaker 2

I think we're well sort of scaling the business. However, as I said, we do need to keep a sharp eye on cost. I think we can keep up the supply chain with inflation. So then we will still be keeping a very sharp eye on what we allow to add to our overall running cost and we'll try and keep it the level we have it at.

Speaker 1

I guess what I'd say, you'll see from the results, although small impact, the board and the exec and having no pay rises again this year, so that mitigates some of the effects of inflation. Yes, that's right. We'll see that in the remuneration.

Speaker 2

You'll see that in the doses when they come. You don't actually see that yet, but that's right. We will certainly at board level, we're increasing again for the second year, which does seem appropriate in the form of Andrew, again, this is you, Mark. Definitely you. First slide focused on revenues.

Speaker 2

What realistic time frame?

Speaker 3

Yeah. I I'm I'm I suppose they're kind of under the premise of the question is that, fusion is still an emerging area and there isn't a large market for fusion power production today, but there are a lot of people making very serious efforts, to develop fusion. They need improved technologies to, to help improve their their the power of their systems and to amplify the, the effect of the reactions that they're generating, which is what some Foslight Fusion does. And so the company is projecting good revenue growth over the next few years. They're already in revenue today and have the prospects of generating millions of pounds of revenue in, in sort of three year time horizon.

Speaker 2

Thank you. Andrew, again, what I think, Mark, what is the major area of investment in 2025?

Speaker 3

Yes. This is a we spend a lot of time thinking about where our thematic focus areas should be. We have other seminars on this topic because the teams intermittently run seminars communicating our focus areas. So we're very interested in the impact of AI, and we have a lot of investments in the impact of AI in the compute stack. So I talked about intrinsic semiconductor memory technology company that enables us to have computing that will service the increasingly intent needs of AI processing.

Speaker 3

We also have technologies that sit within the communications network because our demands on the communication network will change a lot as a result of AI. We remain very focused on clean tech. However, political fluctuations are affecting that industry. We still see a steady march towards a clean energy adoption, and we have technologies that are very compelling and can exceed the benefits of fossil fuels in those domains. And so that's some of the key areas for us, but we could spend a lot of time getting the team in to talk about those.

Speaker 2

Next, it's gonna be a very short question because we can't answer it. Any sense of time and range? No. We we don't actually and, not really. We know more than you.

Speaker 2

John H, sort of covered this. When will you reinstate and suspend a dividend? Many holders require a dividend to justify holding shares.

Speaker 1

I'll cover this one. You know, it's a balance, lots of different views on this. I definitely understand the position of retail holders myself, included, obviously. I think the right thing at the moment is the, is using the capital for buybacks. There is an intention over the long term if the share price gets back to closer to NAV, then dividends are an efficient mechanism for a category of shareholders to receive cash returns.

Speaker 2

And we have to remember, while it's more than 20% discount, we're going to maintain the form of five x in this way rather. Next one, Melon, nice to have you. Another analyst, analyst from Edison. Thank you, Lee. This is going your way, Mark.

Speaker 2

Have you seen any impact on funding rounds due to investors diverting capital into AI businesses?

Speaker 3

Yeah. I mean, every every business is an AI business or or will be soon. It's it's a sort of enabling technology in the same way that the Internet was in in February. So it's not quite the way I think of it in in terms of our own investments. I wouldn't say it's a a trend that I've noticed.

Speaker 3

I wouldn't say anybody's phoned me up and said we're not gonna invest in your in your portfolio company because we're diverting all our capital into AI. It's possible that's the sort of market mentality, but, a lot of very large cohort of our businesses are either enablers of the opportunity in AI or have the opportunity to leverage AI to product propositions. So I see it as we have a a value proposition for people investing in AI as opposed to losing out to to that. Fair enough.

Speaker 2

The next one, I'm gonna point to you, but it may not be going too long because it's really it's the same question, and it's attention between should you be getting buybacks or should you be investing in your own portfolio? We have sort of covered. But from Andrew M again, massive gross cash balances, twenty first to May 25. Please highlight what portfolio companies can give a better return every 12 to adjust substantially increasing the rate of share buybacks. I don't know if you wanna come with any particular ones or feel we've covered that anyway.

Speaker 2

We've probably covered. I'm happy to move on. Happy to come on. We have covered that quite a lot trying to get that balance right. Igor p, I'm sorry.

Speaker 2

This one's a twenty ninth question. What's your plan regarding O and T? Will this continue to be a strategic long term investment? Would you prefer to monetize it partially or in full should the share price move closer to its fair value? How do you protect against O and T being subject to an opportunist takeover bid?

Speaker 2

Probably a new theme, Greg.

Speaker 1

Yeah. Mark, I have a view on this as well. I mean, all companies in the portfolio are up for sale at the right price and that's definitely the mandate of the business for sure. And so if the share price was closer to what we consider to be fair value or indeed reflected what we consider to be a good price, then yes, we would be better to monetize it partially or in full for sure, absolutely, if that's the case. Had you projected against stand up or been subject to an opportunistic takeout bid?

Speaker 1

I mean, the truth is you don't. There are, and I mentioned earlier, there are a number of what I consider to be strategic holders on the register, people like Via Meria, Novo Holdings, Ellison Institute of Technology, us, who clearly have got views on the long term value of the business but also have the same financial objectives, that other shareholders have. So I think there's there are some strategic holders on the register, but, you know, as an investor in that business, you've always got to consider whether monetizing it is the right strategy and and we'll do that, you know, as as as that's appropriate.

Speaker 2

I'm gonna push on through to give everyone a guide. It's about, 11:20. We'll we'll definitely finish at 11:30. I think maybe an hour and a half we'll have had our our share. So let's try and get to the remaining seven rate questions.

Speaker 2

Please, missus Philip, Ben, just who exactly is selling the shares? Who are the main sellers? I could start on that, but I'm not gonna name individual institutions. We all we have this ourselves. We get share risk at least once every month.

Speaker 2

We analyze it every month. We look at it. And in most months, there are not consistent So that's not consistent. During the year, this year, they've gone by since twenty fourth. There were a couple of institutions.

Speaker 2

Normally, in one case, because, the fan manager retired and they collected funds and allocated, reallocation that funds, they did actually reduce their positions in the year. And That's why we saw during the year, there were a couple of occasions where it's quite big lumpers came to market. So 10,000,000 and 12,000,000 trading in the day. But generally, on an ongoing basis, it's more iconic in a lack of buy off from sellers, I think, probably. There's not a persistent seller at the moment over and above those kind of instances where we still haven't in the year.

Speaker 2

I won't name those funds, but you'll see them drop off the register if you look at it. Next question, how are your peers performing in terms of NAV per share and funding challenges?

Speaker 1

Probably not for us to comment on this. Well, we not.

Speaker 2

We're not, I might say. It's in the sector, these discounts are relatively consistent. We're not the only people in this sort of sector who have for some period, now ever since interest rates turn, been suffering relatively big discounts and that I think that's fair. Probably common to us. Okay.

Speaker 2

Russell h, question 32. Can you give us an idea when you believe or how long it will take for the Nav discount to justify and be disappear? You must discuss this presumably on a regular basis.

Speaker 1

Go. I think we've discussed and this was a question that came in at, half an hour ago at 10:52, so my guess is that we've covered the vast majority of our views on this. I mean, yes, we discuss it very regularly, every board meeting, and, you know, it influences our capital allocation decisions significantly. So, so very regularly as for when it

Speaker 2

will return, that's that's a difficult one to call. John h, just a slightly more robust question. The discount now remains massive and an agent has failed to address this. The shares trade at close to a long time, though, back when the company has listed it. Isn't it time to wind up the company and distribute the proceeds?

Speaker 1

And also, can we have a vote on this? I mean, the as I said during the presentation, we, the board, are reviewing all options all the time as you would expect any public company board to do. We consider that the company has the opportunity to deliver value for shareholders, long term value for shareholders, and we're very focused on delivering shareholder value and we see there's a number of growth drivers over the coming months and years. So, you know, we continue to keep this under review and regularly reviewing our existing strategy amongst a range of other options.

Speaker 2

Russell Edge, for you, Mark, again, you may have answered this. So actually this is after you talked about your pipeline a bit. Can you tell us a little bit about the next set of companies we're looking to invest in, startups or early stage businesses become the next big business over the next five to ten years? I know you did touch on free delivery.

Speaker 3

It was after that but since then I've gone through our sort of focus areas and opportunities for CMAI

Speaker 1

and so on.

Speaker 3

So, yeah.

Speaker 2

You feel that's covered. Thank you. Last two, I should go again here. The last two were some more like comments. John H, it's a balance on dividends but now no reason not to do both anytime we do.

Speaker 2

Fair enough, I think that the significant level of discounts at the moment have been essentially the buybacks for the reason I've given. And the last and not least, none suspend dividends due buybacks. Okay. It's the same. I think it's the same point, same person, John H.

Speaker 2

Thank you very much for that. And hopefully, we've covered that with the answers we've given. I can report we have finished all 36 questions. Jake, I think we do hand over to you or is it Greg Whitelock now?

Operator

Yeah. Absolutely. Greg, David, Mark, if I may just jump back in there. Thank you very much indeed for your presentation and for being so generous of your time then addressing all of those questions that came in this morning. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended.

Operator

But, Greg, perhaps before really now just looking to redirect those on the call to provide you

Speaker 3

with their feedback, which I

Operator

know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap

Speaker 3

up with, that'd be great.

Speaker 1

Yeah. Thank you, everyone. Thank you for your time. Thank you for your support this year. You know, mixed year this year, we've outperformed on exits.

Speaker 1

We've accelerated buybacks, obviously, as we've discussed in the Q and A session. And there's a lot of debate that goes on internally about that capital allocation and what's the right balance and what's the right mechanism. But we do have an active buyback program that's currently more than sort of 10% of our shares in issue. And the NAV per share decline is definitely not what we're targeting and we're working very hard. We've made changes in the year and we continue to change that forward looking strategy.

Speaker 1

We're seeking to access further and scale up capital. But I hope what you take away from this is that both the buyback reducing our share count and the strong portfolio upside potential that we have in a number of those leading companies will yield results both in terms of net per share performance this year and, and our share price. And, you know, we we do recognize that is the most important KPI for shareholders, and the board is fully aware of it. And, we're working very hard to deliver returns for shareholders. So thank you all for your time, and I look forward to updating you at the next set results.

Operator

Perfect, Greg. That's great. And thank you all once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations? This will only take a few moments to complete, but I'm sure it will be greatly valued by the company.

Operator

On behalf of the management team of IP Group PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.

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Earnings Conference Call
IP Group H2 2024
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