Ip Group (LSE:IPO) — Half Year Results

0:00 Good morning, and welcome to the IP GROUP PLC Half Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Greg Smith, CEO. Good morning, sir. Thank you, sir, and hello, everyone, and and welcome to IP GROUP's twenty twenty two half year results presentation. Thank you very much to to Mark and the whole team at Investor Meet company for hosting us again. And, of course, thank you to everyone who is online or watching a recording for your time to hear this update from us. And this is the third time that we've now used Investor Meet for our results presentation, and this is part of our continuing efforts to dial up our IR activities and get the IP

1:03 GROUP story to as many shareholders and potential shareholders as possible. Now on the call today, I have myself, Greg Smith. I'm the chief executive of the company. We have David Baines with me who is the chief financial and operations officer. We'll also be joined later by Sam Williams and Mark Riley who are respectively the managing partners for our life sciences and our tech business, particularly for the q and a piece. And this morning, David and I are here in our UK head offices in Kings Cross, and some of you who dialed in or or even attended the investor update we gave before our AGM in June, you might remember the story that I told at the time of the the fact that the the 1996 Channel Tunnel move catalyzed the development of this whole area we hear now. It's sort of, you know, one of the hottest places in the world, and people are relocating from Silicon Valley even to to be here, and it's known now as London's knowledge quarter.

2:01 But, interestingly, this was, an initiative that was backed by the UK government, by industry, and by long term capital. And I I genuinely believe that the wider opportunity for IP GROUP is to do something similar in our space, and the and the trigger may well be the recognition of the need for science based solutions triggered by economic or geopolitical dislocation, or it might be an increasing realization around climate. And certainly from from my point of view, the early summer heat waves that have affected The UK and Europe in recent weeks have been yet another reminder of the importance of this. What's clear to me is that these events are continuing to shine a real light on our mission to build a better future, to deliver financial returns, impact, and to do so with an inclusive and diverse culture. And for our shareholders, for for all of you, we're a long term play on disruptive technologies.

3:01 Now the results presentation is up on our on the IR section of our of our website, but please note the usual disclaimers here about the nature of this update. So in terms of the running order for today, my plan to cover a short overview, an update on how we've delivered over the past five months since I spoke to you, for our full year results presentation in March, and that will include an update on the three priority companies that I highlighted at the time as well as the increasing depth of our thematic focus areas. Dave will then run through the results for the year, and then I'll wrap up with a a short summary and then on to questions. And and as the the investor meet team said, please post questions into the q and a section, and we'll endeavor to cover them all in the time we're available.

3:50 So in terms of the overview, there's three key messages for this half year, and you'd have seen the the release this morning. But but, firstly, I'm pleased to be able to report strong progress in those three priority companies that we highlighted in March. I'll come on to each of them in turn, but overall, these three companies have seen a positive net fair value change in the first half of 71,000,000. Now our overall NAV per share at a 137 p is up very slightly from this time last year. And so overall financial results, we've broadly in half one seen a reversal primarily of Oxford Nanopore's increase in value that happened during half two of last year. The second point is that your company is very well financed and has strong liquidity, something that I and we continue to believe is a strategic asset in the current geopolitical and market environment.

4:44 We've got strong gross and net cash position, and today, we announced, that we've arranged an additional long term debt placement, and Dave will give more details of that shortly. And then thirdly, we have a continued commitment to shareholder returns. Now, of course, the the the primary driver of shareholder value will be capital growth, and that will be fueled by the delivery of returns on NAV through our portfolio, but we do seek to supplement this with cash returns. And our approach, which is realizations based, is to return a proportion of all realizations in the form of dividends and buybacks. And although we haven't delivered significant realizations in the first half, we'll be making an interim dividend of 0.5 a pence per share. And in total, this will make 57,000,000 of cash returns to shareholders since the start of 2021.

5:35 Now before I go into the the the meat of the presentation, I I thought it was probably worth just a few comments on what we're seeing here in the markets in which we operate. And and this won't be new news to the many of you who follow our space, but we are clearly operating in, you know, pretty challenging geopolitical and public market conditions. I guess a few points on this. Firstly, you know, the the public and private markets are linked, but they do operate differently due to factors such as funding cycles. The the funding data that we've seen to q two in the venture market does actually show signs of resilience, and that's in terms of investments, in terms of committed capital. But as we've seen in our own portfolio, there's definitely been a slowdown in realizations and exits.

6:22 There's often a a public to private lag and and the sort of pre IPO and later growth companies are generally affected first in terms of valuation, and there's been no significant direct impact on the funding rounds for our companies in this half, and Dave will come on to talk about that. And I think that's because commercial progress is often the most relevant factor for fast growth science and technology company valuation. So and that that's very evident in our portfolio. And then from a team point of view, know, we have an experienced team who have invested across a number of cycles, and so we will, you know, manage our resources appropriately while ensuring that we maximize the opportunity for our leading companies, and we've got evidence of that in the first half. And then finally, this point around, you know, the fact that our our our progress and our capital discipline means we continue to have a strong financial position.

7:15 But in terms of the opportunity, I that, you know, we still see that fundamental demand will continue for the products and services in life sciences and cleantech and deep tech that our portfolio companies are delivering. And I think that Martina, who spoke, who's the CEO of FeatureSpace, who spoke at our investor update, I think she really clearly exemplified this when she was talking about the demand for her products and services. And and I think also history tends to show that those with capital and expertise will have significant opportunities to either create or access tomorrow's best companies during times of downturn. So in terms of an update on the strategy so for this this full year results back in March, I set out sort of three main areas of our evolving strategy. And I guess the the key message I'm trying to get across is that, you know, five months later, we're we're delivering against those.

8:14 I'll talk a little bit about impact and sustainability later, but in terms of the leading companies, good progress across all of them. We focused larger investments, including 10,000,000 into Esteso, and as announced yesterday, Hysata, one of our sort of emerging companies. There's a that focus on fewer companies also presents an opportunity for private capital partnering, and I'll talk about that briefly too. And then in terms of deeper thematic focus, I mean, the the fundamental reason for us to have that that is to have deep capability, and that means in our sectors and the sectors that we operate in, we have talented and experienced partners and investment professionals who have worked through economic cycles, who are experts in their fields, and who are thought leaders in their ecosystems.

9:01 And I believe that this will be important in allowing us to play and win in our chosen sectors. And I I I talked about our plans to accelerate our track record in sustainable future, which is one of our three thematic areas. And I I talked about that the full year and the the investor update. And as planned, we launched our first evergreen venture investment platform focused on clean tech owned and funded by IP GROUP. So I I we've made good progress against those strategic focus areas. So in terms of sector expertise, I don't wanna spend a long time on this, but but in terms of sort of trying to exemplify the sector capability that we've built, I just wanted to include a few pieces of of evidence to support that. So in terms of recent highlights, this is over the last year or two. Of course, people will be probably most aware of Ceres Power and of Nanopore.

9:56 But also in 2021, we saw the exit, the sale of Innovata to NeoGenomics. This is a liquid biopsy business, and that was for almost $400,000,000, which netted about £64,000,000 of cash to IP GROUP. And also WaveOptics in the in the tech enriched space, and that was sold to Snap for around $550,000,000. And that, we believe, is one of the largest VC backed deep tech exits in Europe ever. So the track record is is broadening out, and it's it's becoming wider. Then in terms of the people who we coinvest with, we really have a high quality list of coinvestors globally, and they include both sector specialist investors, but also broader long term investors from our ecosystem.

10:45 And then finally, just to sort of under underline this point about realization. Since 2020, we've made nearly 400,000,000 of realizations. Of course, that slowed in 2022 in the first half. But I think, importantly, from an overall portfolio delivery point of view, less than half of twenty twenty one's realizations came from Oxford Nanopore.

11:10 I talked about this, this theme of of deep sector expertise, and and I and I mentioned our plans to accelerate our track record in the sustainable future space. And I I highlighted the fact that we plan to launch this this new initiative. And I was delighted to to announce that that we formed this new new cleantech platform called Keeco Ventures. We believe this is the first evergreen venture investment platform that's focused on cleantech. It's it's wholly owned and funded by IP GROUP. Those who joined us for the investor event or watched it online afterwards will have heard one of the three highly experienced partners we have in that space, Rob, who talked about the opportunities that we see in this space and also a bit about the portfolio, that we're building.

11:56 Our plan there is to invest 200,000,000 over five years, and that includes companies such as Bramble that we invested 10,000,000 into during the first half and Hysata that I'll come on to talk about shortly.

12:13 So as as part of the strategy, I talked about this sort of increased focus, fewer conviction companies, and the idea really here is that the business is trying to create meaningful category leading businesses that have at least billion dollar company value potential and partly in response to feedback from shareholders who are trying to get a better understanding of the value drivers in the future for the group's returns, we committed to setting out the opportunity and also the value creation milestones for these leading companies. And at the year end, I highlighted three. That was Esteso, FeatureSpace, and First Light. And I wanted to just provide a brief update on progress in each of those three, so we'll take each in turn. So firstly, Esteso.

13:02 As a reminder, this is pretty emerging science. The the whole field in which Estesto operates has only had a name for seven to eight years, and and we have the most advanced clinical stage asset in this field. And the plan is for that to go into phase two b shortly. And the company itself has more than 30 consultants. We run it as a as a virtual model, but an incredibly experienced team, more than six hundred and eighty years of combined experience, and they've overseen the launch of four marketed products in their in their history. Now the big opportunity here is that about five to ten percent of the world's population suffers from various immune conditions, and rheumatoid arthritis is one way the body's immune system attacks part of the body and its joints, and it creates a massive reduction in the quality of life, and it's a it's a huge, huge problem to be addressed.

13:57 And what we have, in Esteso, and we own about 56% of this company into which we invested about 10,000,000 during the period, is a a first in class therapeutic. And this is really interesting, but the next milestone for it is this phase two b trial. Anyone who's interested can see the details. There's a public public, disclosure of this on a on a site called clinicaltrials.org. And this is a trial that will be dosing, two hundred and twenty four patients. They'll have sort of moderate, rheumatoid arthritis. It'll be about eighteen months in duration, so we expect this to read out in early twenty twenty four. We're we're looking for a classic endpoint in this space, but we're also looking for side effect profiles. I hope to be able to give you update on that by the time we get to the full year.

14:50 So good progress there. Secondly, feature space. As I mentioned, those of you who who dialed into our investor update will have heard Martina talking about both the opportunity and the progress for this business. This is one where we and Dave will come on and talk about the valuations that we've done during the the period, but FeatureSpace is a Cambridge spin out, and they are applying machine learning and neural networks to be able to combat fraud and financial crime. Huge, huge opportunity. In terms of the investment story, it's relatively simple. This is all about recurring revenue growth, and Martino talked very confidently and clearly about their their progress to date in delivering against their objective to outgrow a very fast paced market.

15:42 The market is growing at sort of 30 to 50% per annum according to all of the analyst reports, and the market feature space is seeking to achieve ahead of ahead of that. So great progress at feature space. And then finally, for those three, First Light, you know, of course, for those those in England, those in The UK, we had a world first only last week when England's women won the European championship, but our our world's first was at First Light, and they were the first company to achieve a fusion reaction using what's called projectile driven inertial confinement. And there's there's a couple of different ways that you can approach fusion, but ours was successfully delivered, this was validated by The UK's Atomic Energy Authority.

16:31 Now the interesting thing here from a IP GROUP shareholder point of view is that I think it really exemplifies the model well. So we understood the potential of this sort of the hydrodynamic simulation tools that the company had developed in the University of Oxford about ten years ago, and we backed the company all the way since then. And and and the interesting thing is the ability of that company to to model the system has allowed them to identify a route to practical fusion using projectiles. And the idea is you use projectiles to compress down a fuel pellet, and you generate fusion plasma. This is more efficient and it enables simpler hardware to be used such as a gas gun. Now demonstrating with fusion, with this approach is, you know, an incredible achievement from a top rated scientific team, and it's happened at a fraction of the cost of other fusion programs. Fusion is really difficult to achieve. It's very risky, but the goal is enormous.

17:32 And compared to other fusion approaches, this is a much lower cost of company in total has raised about 80,000,000 and spent about 40 to 45, and others require sort of super low temperatures or magnets or special materials. And during the period, off the back of that result, we doubled our valuation. And and as some may have seen in the press, they plan to the company plans to raise additional capital to go on the next stage of its journey and deliver and build this GAIN reactor machine over the course of the coming years. So that's that's really strong progress in each of those three companies. And what I thought I would do now is just give you an insight into a company. We announced the the series a funding round for this company. It's it's an Australian business, Hysata.

18:23 And, of course, it's, you know, it's too early for us to be able to talk about time frames to commercial scale and potential billion dollar valuation, but it's interesting company. And so I I really wanted to highlight this as a, you know, potential company of the future. I've set out here some of the the milestones and the progress that the mass manufacturable stack. We would be planning to have demonstrated that during 2023 and complete field trials during 2024. But I thought no better way to exemplify this than to hear from the company's CEO, Paul. And the video will be available as usual on our website, and so I'll ask the the team at investor meeting to to to run the videos.

19:10 The unfolding climate crisis shows the pressing need for transformative technologies to help put us back in a path to net zero emissions. HISADA's mission is to accelerate the shift away from fossil fuels by delivering the world's most efficient, simple, and reliable electrolyzer. Green hydrogen is a must have for reaching net zero emissions. It's the key energy carrier we need to decarbonize the hard to electrify sectors such as steel, chemicals, industrial heat, and heavy transport. Green hydrogen will grow to the size of today's natural gas industry, delivering 15% of emissions reductions we need to get to net zero. This presents a challenge, but also a huge opportunity. Electrolyzers are the key technology needed for producing green hydrogen.

19:59 These are devices that use electricity to split water into hydrogen and oxygen. When powered by renewables, the hydrogen produced is green, sustainable, and emissions free. Existing electrolyzers are complex and expensive, and are at best around 75% efficient. HISAT is commercializing an entirely new category of electrolyzer, capillary fed electrolysis. We have a simple and elegant mass manufacturable design delivering ultra high system efficiency of 95% or 41 and a half kilowatt hours per kilogram. This is a giant leap in performance against the common technologies. Electricity makes up most of the cost of green hydrogen, so the efficiency boost translates to much cheaper green hydrogen.

20:46 Additionally, our high efficiency enables us to drastically simplify the balance of plant, reducing the capital cost. With its ultra high system efficiency and low CapEx, Isata will deliver the world's lowest cost green hydrogen. For a 1,000,000 ton per annum green hydrogen production facility, our electrolyzers will save producers around $3,000,000,000 in renewables CapEx. These transformational economics are really resonating with the gigascale customers we're talking to. There's nothing else in their supply chains that unlocks these kinds of savings. Hisatta's electrolyzer is built off game changing technology developed at the University of Wollongong. This transformative advance electrolysis was recognized in early twenty twenty two in top tier peer reviewed scientific journal, Nature Communications.

21:34 Our technology's performance is truly groundbreaking, already meeting the International Renewable Energy Agency's twenty fifty electrolyzer efficiency target. Hysata has assembled a world class engineering team to build a modular, mass manufacturable stack, and a dramatically simplified balance of plant. Efficiency, designed for manufacturability, and quality and reliability are core to everything we do at Hysada. Our people and culture are central to our success, and we've created a home for exceptional talent. We're incredibly proud of what we've achieved to date. It's great to be part of a values driven company with such a strong culture and mission to transform the global green hydrogen industry. IP GROUP has had a profound impact on the success of the company to date, partnering with us from inception, bringing a blend of technical expertise, market knowledge, global relationships, and capital to the table. We really couldn't have done this without them.

22:34 Based off outstanding engineering and commercial progress, we are now thrilled to announce we have closed the 42,500,000 series a investment round with incredible investment partners. Veressent Ventures led this round with participation from Kiko Ventures, IP GROUP Australia, Vestas Ventures, Hostplus, and BlueScope. We look forward to continuing to partner with our investors and customers to get this game changing technology to market. With our disruptive economics, Hysata will transform the green hydrogen industry and become the world's leading electrolyzer manufacturer and an era defining company. We're on a clear path to multi gigawatt manufacturing capacity, which will make a major impact on reducing global emissions. We're excited by what the future holds.

23:29 Thanks very much to Paul, and, hopefully, we'll be able to report against delivery on, that exciting future. It's clearly a huge opportunity and one in which, you know, Kiko and the team have spent a significant part focusing on, and this was a really interesting opportunity that we identified alongside the Australia team. So, hopefully, it gives you an idea of some of the interesting things that are that are coming through in the pipeline. So just a a couple more slides from me before I hand on to Dave to talk about the financial results and the two two other areas of of strategic focus. So the another area that I spoke about was this this idea to make impact a more explicit part of the business and the portfolio. And, of course, a lot has been written in market commentary recently about ESG and and impact investing and impact investing trends, and some of this is is definitely less than complementary.

24:27 I mean, from from our point of view, we think that strong ESG is really table stakes for a main market quoted company, and we we continue to to maintain that position. But the really interesting area, and this is something that we continue to embed in our investment processes, including through our ethical investment framework, which you can see on our website if you're interested, is this this this ability to to to measure, to drive, and to report against actual impact, genuine real world impact. And I I hope that I will be able to exemplify this numerically towards the with as part of our of our full year results. But that's certainly a a big drive for us, further information in this whole area is set out in our most recent sustainability report. Again, that's available on our website.

25:22 And then just finally, this I I talked about this idea of, a, is having a strong financial position and, b, focusing, more on some on priority portfolio companies. And, of course, a lot of that is around capital and access to capital. And and capital has always been a fundamental resource for our business, and we have always maintained access to diverse sources of capital, be that PLC equity, be that debt, be that a strong network of coinvestors. And this is an area where I continue to see a really great opportunity now and in the future to grow our third party private capital partnerships. And we've been we've been looking at sourcing and growing and ultimately exiting companies, including our complementary funds.

26:11 So we've been we've been developing real expertise and track record in this in this space, and that includes sourcing an early growth fund. So that's a fund such as Parkwalk, who are the leading manager in The UK of growth in EIS funds. But it also includes growth investors, later stage investors, such as Host plus and Host plus have had a we've had a mandate for two or three years with Host plus to invest internationally across our portfolio. And then there's also opportunities for growth and geographic expansion, and we're primarily doing that through our partnership with China Everbright, and we we plan to launch that fund later this year. And, of course, the fees that are generated by these assets under management contribute to reducing our net cost base, which is clearly important.

27:03 But I often say to institutional partners that we speak to, you know, we really are opportunity rich and capital poor. We invested about 70,000,000 during 2020 out of about 1,000,000,000 across the whole portfolio and about a 100,000,000 out of 2,000,000,000 during 2021. And and during the first half, you'll see in in our results, we were about 50,000,000 out of about 350,000,000 raised by the portfolio. So there remains a a huge opportunity for us to do more in this space, and we continue to to work on on that opportunity. So with that, I will hand on to Dave, and he will give you an update, on the financials for the period. Yeah. Thank you, Greg. Yeah. As Greg said at the beginning, I'm, David Baines. I'm the, chief finance and operating officer of the group.

27:51 I'm I'm in fairly quick order, about five to seven minutes. I'll quickly take you through, the group's finances for the period. For those of you who have watched before, despite being a complicated business in terms of all the investments we make and what and all the exciting things we do, the finances are really straightforward. So, hopefully, in this fairly short period, I can give you a pretty good idea of all the key points to note about our finances. The first point, but I think you probably got the idea, we're financially strong. Gross cash of 236,000,000, net of 192,000,000 as we stand today. Second point is our land. Now both of you who obviously were here at the year end, you remember, actually, now I've got up to 1,700,000,000, and we're back at 1,400,000,000. And that's because of a loss in the period of 310,000,000, which which I'll come to in a minute. Most of that really relates to just movements in, the public share price of NanoCore, which actually has performed very well in the period having had four four uplifts in its in its estimates since its IPO.

28:46 But it's obviously been subject to market conditions and has actually fallen in value by 6% in the period. We'll touch in a minute how much of that loss relates to that. But what's really happened, one way of looking at it is we've pretty much gone back to exactly where we were this time last year. We had about 1,400,000,000 this time last year. We had net assets per share of £1.36. Today, we're £1.37. So we went up in the second half. We came back down again. But as you'll see in a minute, most of that does actually relate to Lenapelt, which itself is a very strong asset, and in which we have a great belief, and we believe much of that, all of that and more will be recovered in the years to come. In fact, as you can see from this slide here, if we, take out a Nanopore performance, we've actually made a profit in the period of about £36,000,000. So going to the next slide there, you know, that this repeats. You can see there, Now they pulled down about 60%. I think at the end of the year, was, £6.98, and the period ended falling to $2.76.

29:42 That's a 60% loss. But but as I said also already, we we hope that will, reverse, in time as the markets recover. Actually, ignoring that, as I say, the actual performance of most of rest of portfolio has been good. I mean, you can see down the bottom, most of the the negative have actually been public market side. So you can see the total public market is back 395,000,000 of reduction value, while the client portfolio has actually gone up by a 100,000,000, which reflects how how well some of our priority companies have performed. And if you can see over here in the diagram, you can see that one of those, of course, the FirstSight fusion had its fantastic success getting fusion. We've actually marked that up very conservatively at the moment. It was a it was a doubling in value, in the period. Took about 114,000,000 on our books, but that's still well towards the bottom end of the range of the valuations we've been suggested both by looking at comps, also by third party valuations.

30:33 And fee to say, also had not left because it as you've heard, its performance have been very strong. And just based on funding rounds, both Nexon and HySasha, as you've also had, both gave us uplifts. So eventually, a very strong performance in the private portfolio. And it's really been in those public companies such as and Nanopore. It really accounts for nearly all of that 395,000,000 reduction portfolio. Now that might in turn lead to a question about our valuation process. I would understand there might be some synesthis of how our public companies have fallen. Our private ones don't seem to have done so much. What I would say on that is, we've always been very prudent about value of our companies. Again, those who joined us at the end will remember that traditionally, in terms of the last two years, we've exited companies. They've exited for considerably more than we've carried them in the books at the prior year end. I think last year, a 191,000,000 of exits have been carried at the beginning of year about a 123,000,000.

31:25 So and that had been repeated the year before. So that's what demonstrates by fact that we tend to be relatively conservative. When you look at actually our our rounds this year, private rounds, we found that over half were actually up, and that's 58% very similar to last year. Similar number were flat, 33%, and actually only 8% were down rounds.

31:46 Now and we have some double evidence for that because, of course, part walk set investment team making investments mostly in different assets. Some cross sell that mostly different assets. They made 12 investments in the period. And of that, nine month lifts to reflect on the down ramp. So we are seeing remember, those those are based upon valuation of third party funding rounds. So we are seeing relatively consistent valuations in our group actually for the private portfolio. And the last point I'll just make up on that pie chart at the top is that, actually, quite a lot of our portfolio has also been very recently validated as well either because they're they're they're public company companies or because we've had external valuations, top five companies. We all did external valuations at top five private companies to make sure we have updated valuations. And about 10¢ portfolio actually funding rounds in the period. So there's a number of reasons why we remain confident in those private portfolio valuations.

32:39 Moving on very quickly again. Again, you'll remember the year end, very simple balance sheet made up basically of, a portfolio of assets that have companies ish. So about 1,200,000 of them, and some cash. If you heard, net about 190,000,000, very small amount of liability. So quite easy to see. And as I've already explained, the movement of 300,000,000 over the period due to that movement in the in the public portfolio, slightly mitigated by a private portfolio. Interesting. Next slide. That £1.37, pence per share, those numbers there are how much each pence each company contributes. If you look at that, so like Nanopore, for example, is 20p of that value. You can see that if you added up nearly a pound of our value, 98 bit pay is actually in, over the top 20 companies, Nanopore on cash. So all the rest of it is kind of in the valuation for nothing when we're trading at sort of 80 or pay, and and and some more. So you got nearly you've got nearly a pound of it just in in those companies. So it is kinda quite hard to explain why we're at such a discount. But, clearly, there was a lot of substance bound, justifying our valuation in that. Again, I'll go through this slide relatively quickly. It's just similar information. This just gives us an idea of how, you know, different areas fit over the portfolio that took a 1,200,000,000 of assets.

33:52 At the year end, Nanopore was actually a very good proportion. But because it's gone down by 60%, it's gone from about 32, 33% on its own portfolio to a more sort of manageable 18%. Life sciences at 33%, deep tech at 18. Cleantech's growing quite a lot. Now now, you know, it's key to ventures. It's growing quite a lot to 16% because of the great successes we've had in the period on and also also on FirstNet Fusion. So it does actually look a more balanced portfolio at the moment. At some extent, we hope it'll be less balanced when, hopefully, NARPO recovers, and and that will take up a bigger proportion of the pie chart. Worth also noticing that of all the companies, people often focus on number of companies we have, which is very much part of the model, actually, 70% of all our value is in that top 20. So it is actually a very focused portfolio.

34:36 One of the last two slides kind of just is really messaging about cash. I thought it makes sense just to explain where where our cash has gone on so people understand that. Started these are gross cash positions. We started 320,000,000 of cash. Biggest area was investment as everyone would want it to be. About 52,000,000 have gone into our portfolio during the period. Yeah. I guess that 350,000,000 total based by our companies. That probably in the second half will do a similar amount, maybe fractionally more than that in the second half, but it is worth noting that is down on what we anticipated during the beginning of the year. Clearly, as markets turned and are expected exits reduced, we have modified the map. We're planning to invest as as you would expect, quite frankly. The realizations are very low so far, only 2,100,000.

35:23 We do expect more realizations in the second half. Some have occurred already, but, they will be well down on prior years. Again, I don't think I've been surprised. We wouldn't really want to be selling much in the current market and actually because of our financial strength, we don't have to.

35:36 The third key thing to note really is around dividends. So this is the remainder of the share buyback. We finished that 7,200,000 acquisition first a month and a bit of the year, and those are the dividends we've paid. So as we said, commitment to shareholders, we've made about 15,000,000 being paid back to them. And the last thing worth mentioning with your last number is at 11,100,000 on over hedge. It's pretty much flat year on year. Actually, if you look at it, it looks slightly up. That's because the income's very slightly down. But back to the overhead, at the moment, you're about flat year on year. So they're really the main points I'd make about cash and our cash balance. I'll move on to the last thing that we've announced today. This is, to really increase our liquidity and put us in an even stronger position. So we've traditionally looked to have about 10% of our net assets, in debt. For a company of our type, that seems eminently sensible amount to have.

36:24 And, of course, I hope it means we have more efficient returns to shareholders, allows us to access more money to make into investments.

36:32 We're delighted that we've managed to secure an extra £120,000,000, in a private place through a leading public insurance company and and a small number of other investors. It's at 5.25 fixed interest rate. What I we plan to do is pay down a little bit of the remaining 44,000,000 we have at the European Investment Bank, paid about 15,000,000 left down now, and then so we've effectively increased our position by a £105,000,000 over the period.

37:00 It's being drawn down in a couple of chances. We don't need it today. We don't need to pay interest on it today. So we'll draw half of it about 60,000,000 towards the end of this year and half in about a year's time. And it's on five, six, and seven year repayment periods. So it'd be paid back '27, '28, and '29. It compares very favorably to the EIB debt that we've traditionally had, which was on, you know, as one can imagine, very good terms. These are on very similar terms, and we're we're very pleased we've been able to secure this facility at this time. And it allows us both to keep investing at a time when when obviously a lot of opportunity for us, but it also takes pressure off the need to realize exits until we have to. It gives us even more flexibility about we maximize our return on investments.

37:44 And with that, I'll hand back to Greg. Thank you very much, sir. So, two slides quickly in summary. So the the first was just a reminder on the investment case for you all as shareholders, myself as shareholder, and this is this is crucial. Obviously, we can't have the impact that we want to have on the world if we don't deliver returns for shareholders. And so the shareholder value proposition has three main components, and I I guess the three I'd I'd pull out are firstly this differentiated

38:13 access to impactful deal flow in companies. You know? I've talked earlier about the the sector capability that we've discussed. It's about wider capability and processes that includes our legal team, our IP support, fundraising, and and part of my legacy for IP GROUP as CEO is to build on and scale and leverage that professional capability. Secondly, as, you know, as our model is is primarily based on identifying early stage science with significant potential for value and impact, and that would obviously mean that it would take some time for our portfolio to mature. But having been doing this for the best part of twenty years, we now have five to 10 more maturing companies that we believe will be fast followers to NanoFore and Ceres over the next two to five years. And so we expect our overall returns to improve, and we have, you know, we have an ambition to deliver 20% returns per annum. Now, of course, overall market conditions will be a factor in achieving this, and we'll be judged against the wider VC market over that time, but we we have that as an ambition.

39:18 And then finally, and and and we discuss this regularly with our institutional shareholders.

39:25 I'm fully aware of the discount to NAV. There's been some improvement recently. It remains frustrating for me as a fellow shareholder for you all. And, of course, we know that some performance is linked to the wider markets. We and others in our sector have a high correlation to the tech and the biotech industries, but there are three main ways that we're dealing with this. And in in the shorter term, that's around increased IR. And in the longer term, that's around, you know, developing and executing against our sustainable cash allocation policy and also, obviously, delivering returns against our NAV. And we know that cash returns are a helpful component of the overall return. So we've set out this this sustainable long term policy, and the idea is to take a realizations based approach and return a proportion of all realizations that we make to shareholders by way of, cash returns.

40:17 So there is a continued commitment to do that. And as Dave said, we haven't seen significant realizations in the first half, but we're maintaining the small dividend. And the idea is that the dividend is a small but regular cash return. And then as we make realizations in excess, then those will be used for other mechanisms which are, you know, probably more capital efficient, particularly at the moment in the form of share buybacks.

40:42 But the primary driver of of of long term growth is this ability to source and to grow specific companies, and we give access to shareholders on a diversified basis to those companies. And if anything, we anticipate and see more opportunity in the current environment, and we've been prioritizing investments in our businesses.

41:03 So the overall, summary to to come back to where we started, you know, clearly, the context is this, you sort of volatile and uncertain, geopolitical environment and markets. I mean, as a group, we make long term investment decisions, and so this sort of short term volatility is particularly uncomfortable for for our business. But this is where our experience, our deep sector expertise, our hands on approach to managing our portfolio companies, and our capital resources and capital discipline will be most valuable in aiming to identify

41:35 and to build and to back the best opportunities that will contribute to a healthier, a more sustainable, or a tech enriched future. I'm really pleased to be able to report strong progress in those three priority companies. You know, it's really important that your company is is well financed, that we have a 192 of of net cash at the moment, and we have put in place a facility that will give us flexibility over the next, two, three, four, five years.

42:03 And then thirdly, this points around a continued commitment to shareholder returns and the fact that we've returned about 57,000,000 to shareholders since the beginning of 2021. So with that, I will conclude today's presentation, and we will turn to the questions. So if you lots of people have asked. If you if you haven't, please please do so, and we'll endeavor to take those in turn. Dave, maybe you could I'll compare for us, please. Will compare, and something I'll have to answer as well. Yes. Very good way of questions. So we'll start. Well, I'll try and do all of them, try not to duck any.

42:38 First one from Lacey M. Thank you. Is your investment thesis still solely based on backing companies with IP from universities or given the rapidly widening opportunity set is in our wider media? I think that's really one for you, Greg, I'd say to start with. Yeah. So the the investment thesis is is heavily focused around backing science and technology innovation, and and much of what we do, the vast majority of what we do has historically, and I think will continue to be IP from universities. You've seen that in the examples of new companies that we formed during the period, and indeed, during last year. There is a a widening opportunity set. This is particularly in the cleantech space, but you should think of this as primarily focusing on IP rich businesses and that have a particular technology advantage.

43:28 Our advantage as a business is to be able to understand and price that technology risk and then help to build and develop companies based around that that understanding. Thank you. Second one, perhaps I'll I'll answer this one, shall I? Would you set a dividend policy of, say, a percent, say, 3% of NAV from David Deep? Well, I think as Greg just kind of explained, we're really looking to, we're looking at both for share buyback and also the dividends as kind of one package related to amongst other things the exits have achieved. We we expect to keep paying a dividend on this come of May. We expect to probably increase in a relatively small amount each year. It's a relatively small increase annually is what we're looking at the moment. Probably what we will it'd be more overall dividends and share buybacks and probably be a ratio of really the value of exits we get. And I think if you look back last year, so it's a hundred and eighty two hundred million exits.

44:21 We we did buy back something in the region of that 35 to 40,000,000 in total. So that gives you a kind of guide for that kind of ratio that we got in mind. Next one perhaps. This is this is a lot of good questions here from PLC. Again, perhaps I'll do the first one because it's a capital allocation one. So then there's some tricky ones. There are one for Sam coming up. Capital allocation, should we expect increasing weighting to deep tech and clean tech themes versus life sciences? Could timelines for key catalyst be shorter? Perhaps I'll start, and Greg, I'm sure, will have a view. I think from my side, we've got no sort of predetermined view on this. You don't just say that division will get that amount. It's about as a group where the best opportunities are for returns that we can achieve. So we're evaluating our capital allocations all the time, formal meetings quarterly, now meetings monthly as well, you know, capital allocation.

45:13 So, clearly, overall, we'll be looking at where we think money is best invested. So, obviously, within the themes of Greg's outline, perhaps I don't know if you want to add to that, Greg. Or No. I think that's absolutely right. You know, the the intention is to look for and build and scale opportunities that that generate returns and impact. And so we, you know, we look for huge market opportunity and and huge societal need, and then we overlay that with our skill sets, our deep technical expertise. And so it tends to lend itself to those three thematic areas. The the deep tech area is really quite interesting in this space because you've got some quite obvious application areas, things like cybersecurity, like feature space, which is very clearly aligned to positive impact on the world and reducing financial crime. But there are other areas like quantum computing, for example, neuromorphic computing, and that's about really lifting other technologies through those platforms that will develop. And and one of the things I think the industry is gonna have to try and get its head around is how do you how do you try to articulate the impact that something like quantum computing has on the world. And so that's that's work that we are that we're doing. And we know it's a we know it's a sort of a tricky area, but that's that's definitely the intention.

46:26 The next one is specifically an aesthetic question. I'm delighted you're online, Sam, I have to say. Also from PLC, what's the logic for methotrexate refractory RA patients while still dosing alongside methotrexate? Yeah. Can you hear me? Yeah. We got you. Yeah. That's in in in reference to the m b s two three two o phase two b study. Good good question, Paul. That is the standard study, the minimum study that one and the various typical study in methotrexate refractory patients. You keep them on the methotrexate because it would be unethical to take them off. So they're they're inadequately responding to methotrexate, but they haven't totally failed therapy. So when you've got a new investigational drug, it would be unethical to take them off current standard of care and switch them onto your drug. There is an argument, of course, for comparing doing a study, for example, in TNF or biologic DMAR failures. So, Paul, you know what I'm talking about. Those are the slightly more advanced current drugs, and that is something we would explore and we are looking at in supplementary phase two studies. But at the minimum, we need to do the standard study that everyone does in phase two. Hope that answers your question, but email me if if not.

47:50 Thanks. And thanks, Sam. Appreciate that. Then there's an last one from Paul. A question specifically around the the new, debt facility. Loans, scope to invest in current portfolio. How well does life science score in ESG? Well, the answer is you're right. It doesn't entirely. Really, the definition of supporting these institutions' sustainable development goals is more wide reaching than than just, for example, the Cleantech portfolio. It does actually map quite well to a lot of our portfolio. And in some instances, it does also map to the life science division as well, though not always. But we're very, very comfortable, very happy to support their their sustainable investment aims and have more than enough opportunities for us to invest some of money involved. There's no way or any restriction on that side. Next one, fill in a good a good nasty questions. I'll give back to you, Greg. In respect to the share price, it's huge discount to NAV. Could you consider some alignment of management incentives and ordinary shareholders' interests before awarding bonuses?

48:50 The present system does seem to ignore share price performance. Yeah. Phil, that's a great question. And I suppose, hopefully, those who would have seen at the AGM, we've been through a significant consultation exercise with all of our major shareholders about how should the senior leadership team at IP GROUP be remunerated, and we we settled on, I guess, sort of slightly unconventional on the on the main market where we we reduced actually the the level of cash bonus that could be paid to the executives. So I think mine is now the lowest or or one of the lowest bonus opportunities on on the FTSE and certain FTSE two fifty. But what the idea was to create even greater alignment between the executive directors and shareholders by making the the significant components of our long term rewards in the form of restricted stock.

49:46 When we made those first awards, the Remco decided that given share price performance over the last year, we should not award at the maximum level, so we actually reduced it by 25%. But the idea is over time that I will build up three and a half times my salary in IP GROUP shares, and so I will be wholly aligned with shareholders in delivering against share price performance. And that will be very evidently and clearly the the top priority for me. And although the amounts are relatively small, I I bought shares when I took over as chief exec, and I bought shares again following the AGM. And, you know, I continue to believe that IP GROUP shares are a compelling opportunity, so I was entirely comfortable with having that shift in in remuneration towards long term ownership and alignment of IP GROUP stock. I think that's that's the way that senior executives should be should be rewarded in a business, particularly a long term one like this.

50:48 Thank you. Moving on to Bill H. I'll try and answer this one. Would there be any advantages in transforming IP GROUP into an investment trust? It might then be better placed to highlight its high-tech strengths compared with successful private equity trusts such as HP Capital. Well, the answer to that is, we do look at these regularly with them all the time. We're looking at a group structure. At the moment, we have no plan to change. Mean, I our current group structure, we do think it served us very well. We do think that the way we're currently structured with that, but a permanent capital base in particular has really been unique for us and allowed us to do the things we've done in, for example, Manipur and Sarah's Pad, these companies we've held for a long time. But then I wouldn't say never. We don't say never, and we will definitely look at structure ready. I think that's part of our job, trying to make sure we maximize shareholder returns wherever possible.

51:36 So I'm not saying never. We will consider, but at the moment, whenever we've considered these sort of things, we've we've remained with the structure we've currently got. Next one, David d. I'm afraid this is me again. I'm sorry. I didn't mean to hug. Got it. Why are you offering a scrip dividend which entails issuing new shares at a discount to NAV and diluted in NAV per share of all other shareholders? You could settle dividends in shares either bought in the market or from treasury. The dividend reinvestment scheme, which would not dilute the NAV per share of other shareholders. But after this, it's a quirk. There's a quirk in the company's act whereby actually we can't pay the interim dividend using shares we already have. So we have to issue new shares. Now the amount involved is not enormous. It's why we decided to carry on offering the script. We've offered it before. We didn't wanna change it. The number of shares people actually take up in the script aren't enormous.

52:28 At the year end, the final dividend, we will be able to use shares that we've already bought back, so it won't dilute it. These ones we can't, but one is a small number. Two, we wanted to keep paying a dividend and and and offering these terms as we had before. And three, because we're committed to further buybacks at the right time, we we we can truly compensate for that small impact at that time. That was our thinking. And and we will look at neutralizing that that script. That's something we can do. You might not be able to technically use the shares in treasury, but equally, we could use our capital to to buy sufficient shares sort of concurrent with it to to to effectively neutralize that small amount of dilution. So it's a it's a fair point. It's a great. It's a good technical point. One was discussed around this table only last night. I'll hand this to you, Greg. Think the time to for you to have some.

53:17 If focus is growth, why have a dividend policy? Is it not better return on capital focused funds on growing opportunities? Yeah. I know you're you're quite right, Andy. It's a big again, a great question, one we debate all the time. The I I hope I've answered that in the way that we think about our capital allocation. You know, the the primary use of our capital, be it realizations or capital that we've raised over history, is around investing into companies that will generate organic growth and and hopefully be very attractive financial returns. The intention for the dividend was to have a small amount, a small but growing component of cash, but it was meant to be a small consistent part and then also to have the ability to use some of our returns where we have in excess of that to to to buy back shares.

54:07 This is something we seek to balance all the time. We speak to our major shareholders about it, and, you know, we we continue to review it all the time. But you're you're you're right, and this is the essence of that that sort of capital allocation approach. Next one, I'm afraid, me again, Robert m. Are the private company valuations fundamentally discounted cash flow based? Are you and your current investors having to change your thinking on appropriate discount rates given the movement to longer term dated bond rates? Well, without being too done, I'll give you pretty precise answers on this in terms of how we value companies. About 23% of our portfolio at this period end were actually public, so they're mark to market. 23%, so it gives you a total of about half of our portfolio. Another another 23% were recent fundings less than nine months, and then another 10% were actually less than 12.

54:57 Just over 12, I mean, over 12, but still recent enough that we we stayed with them. We have a certain amount about 21% based upon adjusted recent finances, but and really discount cash flow revenue multiples only about 16%. Give you an idea. But and on those, generally, yeah, of course, we're looking at those discount rates all the time, and also they're factored also into the valuations of third party valuers are using when when third party valuers are are looking at our portfolio and deciding what appropriate way to use it. So we so we aren't ignoring them. That is that is true. How did the external values of the five companies compared to your own previous valuations of those five? They were actually very close. We had a I think a couple were small downs and one was upline, if I remember correctly.

55:46 So they were pretty close. They weren't significant, but where there were adjustments to be made, we did make those adjustments to the portfolio and and and made small write downs as as would be appropriate. We do tend to try and take conservative approach to our to our valuations, and we have at year end free valuation committees at the half year too, and we do sit and go through every company. And if you think it's appropriate, we mark them down. And I can safely say that all the ones we've had valuations, we've never marked anything above the mid range. So if you get a range, we're never at the top. We're never better than the mid range for any of them. And where appropriate, have marked them down. That's having two out of those five, we did say. Right. Somebody said, thanks, guys. That's brilliant. I assume they're leaving. Okay.

56:33 Again, I'll probably go to either you, Greg, I think. How much competition is there for access to university IP? Are there any of your university partners where you get first chance to exploit the university IP? Cool, Bill. That's a that's a good question and a really long answer. I'll try and I'll try and do it relatively simply. So it varies by sector and by geography, And there are some examples like in Australia where we get first chance to exploit the university IP. Sometimes if the university has an existing, university managed seed fund, they come in, alongside us, have the opportunity to. Whereas in The US, there are just, letters of intent where we, have have no first rights. And then in The UK, which is probably where this market has developed, the the most in recent years, We've seen, the early part of IP GROUP's history back in sort of the early two thousands was built around exclusive partnerships, and we found that that wasn't the most efficient way both from the university's point of view or from our point of view. So they evolved into various different guises.

57:41 Ways that we access IP in The UK now tend to come through examples such as Park Walk who manage the alumni seed funds for each of Oxford, Cambridge, and Imperial, but also through our networks and our relationships with the key thought leaders and and researchers in in those areas in which we seek to operate. So in so in some cases, we get first refusal. In other cases, we don't, and and the idea is to have that sort of blended differentiated access to to IP. And that was sort of a short summary. Yeah. It's a good long answer. There's three more questions, Diego. So we should be fairly close to the one hour mark. Perhaps I'll quickly deal with this. How did high start of valuation change after latest funding grant? Well, there was an uplift. There was a decent uplift, and you can see in the presentation that the £8,400,000 uplift we've booked taken to the books. We've recognized that the the period end. We haven't at the moment, and you'll see if you look at the announcement, actually given fixed percentages, company is particularly sensitive to actually people work out exactly what the pre money, post money were. So we haven't actually publicized those.

58:48 I can say that a decent valuation uplift. We are very confident if it achieves us on milestones and hopes to achieve over the next twelve, eighteen months, there could be considerably more more size of uplifts at that time. We will see. It's fair to say that we had about half the businesses Yeah. We did. Yeah. That's fair. That's about half of what we're taking the debt and the equity workplace. So, yeah, it's a significant shareholder in accordance with our kind of model. Second to last question, I think to you, Craig, probably. Yeah. How can you tell us about what can you tell us about your thoughts on how long you will maintain the Oxford Nanopore shareholding? Yeah. Well, obviously, Nanopore is a a significant part of the of the the company, huge part of our history, and I think it'll be a big part of our future. The I guess the things I'd say on Nanopore, mean, this is an expression of our strategy from cradle to maturity. We were the we were the first investor, and we have a a a really great relationship with Gordon and the team. We saw them at London Calling, and I and the actually, the whole board were up.

59:49 We saw them, I mean, Oxford just a few weeks ago. And so we were the the largest holder pre IPO. And as a board, we discussed and approved an an overall approach to realizing the value, and that led us to to realize 20% of our of our holding at IPO. And so we obviously were locked up until April on the rest. And our view in the short term certainly is, you know, in in in the current market environment, you know, world equity market seems to be dislocated. This isn't the optimal time to sell, and we don't fortunately have to sell at this point. With as Dave said, we're delighted with the progress in the underlying business, numerous upgrades, technology improvements, and the company is very well financed. So they have about 600 plus million of cash. They they announced a refinancing of their offices lately. So and and they're still talking about breaking even in 2026, I think it is. So we don't expect them to need additional equity. So all of those things are positives.

1:00:47 All that being said, the purpose of IP GROUP isn't to be a long term holder of significant positions in large cap public equity. And so over time, there's a plan for us to reduce that position as a percentage of NAV. And part of that will be from delivering in the other companies, and part of that will be reducing our position. Of course, we plan consistent with the capital allocation policy to reinvest the majority of that and return some cash to shareholders. I can't give you an exact time, but don't don't expect IP GROUP to be a significant holder of of, you know, public equity as part of our business model over the over the sort of medium to long term. Excellent. Another question's joined. I've actually got two left. I misled you. I've got two left. One for Mark, I think one for Sam.

1:01:32 Mark has a disadvantage. You can't see these questions. Everything's coming to you blind, Mark. Is high start going to disrupt my holding in ITM ITM power through undercutting green hydrogen generation costs? Vas, if you're there, Mark. Is a yeah. Look, potentially, it's it will disrupt the entire hydrogen energy market. It's it's a really breakthrough technology. It's totally different economics to to its competitors, and it does have that potential. It's an early stage technology, but as you can see, a lot of people have invested in it on the basis of its credence as a promising technology. And we think if you start to see the development milestones as they occur in the next two years, then it really does threaten that that market, and there's there's a great opportunity there.

1:02:23 Thank you, Mark. Thanks, Christopher Dean, for the question. Last one, got me b. You this is for you, Sam, if you're still there. You haven't spoken much about Hinge Health. Is the competition changing here? Yeah. So, again, Hinge Health has been a phenomenal success. It's been a a great one for us. It's our second biggest holding in life science. What a third after ONT and, Esteso. No. I don't think, the company is any I mean, obviously, based on the success of Hinge, other people would like to get into that market. But they announced recently that they had added more customers this year than they have added in every other single year of their existence. So they are growing extremely rapidly.

1:03:10 Like, I can't give you revenue numbers because those are confidential, but I can tell you that those, the expectations this year are also very strong. So we we see no slowdown in in Hinge at all. Thank you, Ken. That's great. And I think that is the last of our questions. I'm gonna say they're all gone, like, we hand it back to Greg. Yeah. So to the Greg, David, thank you very much. I I think you've actually managed to address all those questions from investors. And, of course, the company will review all questions submitted today and will publish their responses on the investor meet company platform. But just before redirecting, investors provide you with their feedback, which I know is particularly important to you both. Greg, could I just ask you for a few closing comments? Of course. First closing comment, thank you everyone for dialing in and listening for for an hour and a bit to, the updated story at the half year.

1:04:00 I hope the three key messages that people have taken away are that we're making strong progress in the companies that we highlighted, at beginning of the year while in March. So over the over the first five months, and we're confident in the progress of those companies over the course of the the next six months and beyond. Secondly, the key message is that your company is is very well financed, we've acted to ensure that that continues and that we have flexibility in the current geopolitical and market environments. And then thirdly, you know, we continue to have this commitment to delivering shareholder returns. We've changed our remuneration structure. We've continued to work on our capital allocation policy, and this is something which is very important in the long term sustainable future of the business. And so with that, I I thank you all, and I look forward to updating you.

1:04:48 In due course, we plan a couple of capital markets events in, in October, specific thematic ones, and so look out for news of those on our website in due course. You can listen and hear more about some of the themes and the portfolio companies. Otherwise, I will see you all again hopefully in, in early twenty twenty three, and we'll report hopefully on further great progress. Thanks all, and speak soon. Greg, David, thanks once again for updating investors today. Could I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of IP GROUP PLC, we'd like to thank you for attending today's presentation, and good morning to you all.

1:05:37 Thank you. Thanks, Alexandra.