IP Group Plc (IPO) Earnings Call Transcript & Summary

So good morning, everybody, and welcome to IP Group's 2021 Full Year Results Presentation. And as many of you will know, the group celebrated its 20th anniversary in 2021, and I'm pleased to be reporting record results for this 20th year. And I'm also pleased to be able to tell you that I believe our opportunity to unlock the value of science in the future is even more significant than in the past. On today's call, we have myself, Greg Smith, the Chief Executive. We have David Baynes, Chief Financial and Operations Officer. We have Sam Williams, Managing Partner of Life Sciences. And we have Mark Reilly, Managing Partner, Tech. And as you probably know, this is my first set of results as the CEO having taken over the role in October after 10 years as Group CFO. So full year results presentations are therefore very normal territory, and yet, it feels somewhat strange to be here talking about financial results when there's such considerable disruption occurring only 1,500 miles away from us here in our new head office in London's Knowledge Quarter. And our thoughts are very much with all those affected. Despite that, for the next little while, our job today is to take you through what we at IP Group achieved last year, and there is a lot to talk about. And of course, the paradox of the uncertainty caused by these significant geopolitical events and indeed other major global challenges such as climate change is that it makes it all the more important for businesses like ours to set out and deliver on a compelling vision. So in terms of the plan for today, I'll cover a short overview and then my plans for evolving and sharpening and focusing the strategy of the business, and this includes an update on a number of our highest conviction companies. And that's at least in part to address the question that I know many of you have raised, which is what's next after Nanopore? And to give you some additional color on that question, today, we have some short videos from the excellent leaders of 3 of these highest-conviction companies, so you can hear the story in their own words. Dave will briefly run through the results for the year, and I'll wrap up with a summary and outlook and then onto questions. And if you could all please post questions in the Q&A section, we will endeavor to cover them all. So by way of overview, the one minute version is in 3 parts this year. So firstly, the group had another record year in 2021, record return on assets, almost GBP 0.5 billion, record realizations and a strong liquidity position. Secondly, coming off of a record year and a position of real strength, I and the leadership team have taken the time to reflect on what we've learned and define how we will take on the next 2 decades and build the next generation of companies that will have a real impact on the world. And then thirdly, we've continued the work that I've led over the past few years to ensure our approach to capital and to returns will scale our business sustainably over the long term. And over that time, I've had a clear focus on unlocking value from our model, value and returns for shareholders. And this is about balancing the competing uses for our capital, investing for long-term growth but also providing returns to shareholders. As examples of that, we returned 34% on our assets this year. But in line with our policy, we distributed a proportion of our cash realizations, a total of over GBP 50 million over the past 12 months through our first dividends and our first buyback program. So briefly on our results. Our financial performance in 2021 surpassed all prior years. Financially, we're a very simple business to understand, net assets, returns and cash being the main financial KPIs. And we delivered a return for the year a profit of GBP 450 million. And the outcome, as some of the analyst notes have picked up this morning, was about 5% ahead of the GBP 425 million that we estimated in our trading statement in January. And we again generated cash realizations of around GBP 200 million, and this meant that we finished the year with a strong financial position, GBP 270 million of net cash. Dave will add a bit more color to these results shortly. But before I move on to the vision, I just wanted to talk very briefly about the impact of heightened geopolitical risk, inflation and our ability to adapt to current circumstances. And I guess there's sort of 2 important points to make here. Clearly, markets are volatile right now. Public market valuations, appetite for high-growth companies is reduced and in some sectors such as biotech, particularly in the U.S., this has exacerbated reductions that began during 2021. And David will talk about the impact of that on our NAV since year-end. And secondly, we're planning for the fact that the funding environment for at least some of our companies may be more challenging for a period of time. And in light of that, our strong cash position and liquidity is a real strategic asset. Like everyone else, we don't know how long this period will last or when the cycles in public markets and the specific subsectors that we operate in will improve. However, I am confident that our portfolio companies will continue to make progress. I'm going to come on and talk about some of those milestones for the year shortly. And a number have announced further funding rounds this year already. And it's important for you, as our shareholders, to know that we're in a position where we can invest capital to support the development of our most compelling companies to ensure that we continue to unlock value for you. So despite some of these sort of shorter-term challenges, I now want to update you on the type of business that we're aspiring to create at IP Group, because I believe at IP Group, we have a business that can and is having a big impact, making a change, making a dent and unlocking value in doing so. And there's real momentum growing around what we're doing, The wider sector in which we operate has changed and grown in recent years. In many ways, it's sort of finally catching up with us. Post COVID, you'll have seen recent announcements from people like [ Sequoia ] and Andreessen Horowitz talking about using breakthrough science and innovation to solve big problems. In Oxford, Nanopore and Ceres Power, we've helped to create and build 2 separate billion-dollar companies from U.K. science. The past couple of months aside, longer-term investment appetite in our space has seen significant levels of private capital committed. For example, our analysis of the Cleantech market in Europe, showed that the number of VC funds with explicit green positioning tripled between the start of the year and COP26 in November with the quantum of capital having increased by more than 10x. So we therefore -- we believe that the medium- to long-term macro environment will be very supportive of our business and our portfolio companies. But of course, others entering the sector means that we need to ensure we remain ahead of the pack. And crucially, we have the experience and the expertise, particularly in our investment teams, and a strong portfolio poised for further growth that I believe will allow us to do so. So during my first 6 months as CEO and given those successes in 2021, I've been working with the wider leadership team to really develop and sharpen the strategy to build on these great foundations and, I think, really deliver a step change in the impact and the companies that we can have on the world and the value that we can unlock in doing so. And IP Group is a very purpose-led business. We've been founded on this idea of evolving science and innovation into world-changing businesses, and this will remain a big part of the group's approach. Our vision is a better future through the impact of science and technology-based companies that we have identified, backed and grown together as long-term partners. But the step change is really in how we plan to deliver this, and a consistent theme here is one of increasing focus. So firstly, we're driven by having a meaningful impact on the world, and we're implicitly a company that's driven by impact. Many of our companies are already creating impact every day. But this will be more of a focus, and you'll see more of this and our company's products reaching more people's lives. Secondly, and consistent with this, we're increasingly focusing our capital, our resources and our expertise on clear thematic areas. And then thirdly, our greatest returns and impact have come from the company's addressing big societal need and big commercial opportunity. And so you will see us increasingly focusing our capital and resource to accelerate a smaller number of conviction companies, where their market opportunity, their product market fit and their progress means that we consider them the most compelling. And importantly, we'll continue that work that I've led over recent years to evolve and successfully apply our capital allocation framework to build IP Group sustainably for the next 20 years and beyond. And our shareholder value proposition comprises primarily capital growth, over the medium term alongside return of a proportion of all cash realizations in the form of growing dividends and, as was the case at the end of 2021, other mechanisms such as buybacks. So the thematic areas that we will be focusing on are those companies whose products and services meaningfully contribute to a healthier future, a tech-enriched future or a sustainable future. And we plan to build significant investments, influence and presence in these sectors. And it's probably worth saying that we don't anticipate that these will be exhaustive for all time. We will, of course, continue to build on the networks and insight generated from 20 years of doing this to evaluate new areas of opportunity. And each of these themes is that, that intersection of significant commercial opportunity, significant societal need and also IP Groups USPs. And these are quite wide themes, and so within each, we have particular areas of focus, and our managing partners are here to just briefly run you through those, and I'll start with Sam.

Thanks, Greg. So in Life Sciences, our ambition is to develop cures for disease rather than simply trying to treat the symptoms of disease, which is what most current drugs do. And we approach this along 4 simple lines: Firstly, we're investing in technologies that help us understand the underlying biology of disease. So for example, we're invested in genetics through our holdings in, for example, Oxford Nanopore and Genomics plc, which are developing methods needed to mine and understand the human genome. And as another example, we're invested in the human gut microbiome through our holding in Microbiotica Ltd., which has developed methods for understanding the precise role of different gut bacteria in disease, particularly cancer. And we use the fundamental understanding of biology that these sorts of technologies give us to develop products that can reprogram, recondition and redirect the way that cells, tissues and patients themselves behave so as to eliminate disease where it exists but preferably and ultimately to avoid the development of disease in the first place. And with that, I'll hand over to Mark.

Thank you, Sam. So the second of our thematic focus areas, building a future that is enriched by technology, we have 4 thematic areas within that, that we are particularly focused on at present. The first of them is the application of artificial intelligence particularly in the area of cybersecurity and financial technologies. And there is a huge opportunity in that field. As we know, the damage done by cybercrime now is totaling $6 trillion every year, and so there's a huge opportunity. And we're well exposed to some good assets that are looking to address that problem. Second area of focus is on next-generation networks. Our current communications infrastructure today is not capable of supporting some of the use cases of tomorrow, things like virtual reality, augmented reality, vast networks of Internet of Things. And so we're investing both in the software layer and in the hardware layer in companies that are enabling new capabilities in our underlying communications networks. The third of our focus areas is the human machine interface. That's this fascinating evolution going on at the moment in the way that we would interact with machines, and that's becoming a more human-like interaction. And you may have seen from our annual report that we sold a very exciting company in this area, WaveOptics, during 2021. And we still have exposure to this sector through companies like Ultraleap in the portfolio. And finally, the final focus area within this deeptech theme is neuromorphic and quantum computing. We have exposure to some early-stage assets that are developing the next generation of computing capabilities that could add a whole new capabilities to human kind and create new fields of capability there. Then our next thematic -- broad thematic focus area, the third focus area is cleantech, where we have a long heritage of working in cleantech and a team with a great deal of expertise now in this area. We know that to achieve net 0 by 2050, our annual investment across the world in clean technologies will need to triple by 2030 to around $4 trillion. There's a huge impactful opportunity here. And I think we're very well positioned to take advantage of that financial opportunity with the expertise that we have in-house and the experience of working in this area. And we have 4 broad themes within cleantech that we're focused on at present. We are, first of all, looking at novel approaches to generating renewable electricity and replacements for fossil fuels across a variety of sectors. Secondly, we're focused on reducing fossil fuels and optimizing efficiency in the transport sector, which is a major contributor to global emissions today. We are focused on the area of greenhouse gas capture and storage, which will play a key role in achieving net 0. And finally, we're interested in the area of climate risk management given the losses from natural catastrophes is accelerating and increasing and has reached its highest ever level of $500 billion according to Swiss Re. There's a huge opportunity in managing and characterizing that risk. We're also focused on investing in assets in that area.

Thank you very much, Mark. So through this increasing sector focus, we're aspiring to be tackling some of the world's biggest problems, and we'll be seeking to build really meaningful category-leading businesses with at least $1 billion company value potential. And we intend to maintain influential holdings in these companies and, as I said, increasingly focus capital and resource on them as they mature. And we plan to highlight the likely valuation creation milestones for a number of them so that shareholders and other stakeholders can better understand the key steps in the value creation journey. And on this next slide -- if it will transition, on this next slide, we're highlighting a handful of those 3, in particular, in this results presentation, 1 in each of our 3 focus areas. And we think all of these businesses have $1 billion company value potential by 2025. And as part of our last analyst briefing last year, I remember highlighting Inivata, WaveOptics and Ultraleap as companies to watch and each of these enjoyed their various successes over the course of 2021. And we believe there'll be good progress in 2022 for these 3 businesses. So if I take each in turn, Istesso, Featurespace and First Light, with a short video from each of the CEOs, first up is Lisa Patel, who's the CEO of Istesso.

Istesso is at the forefront of a new field of science called immunometabolism. And we're applying the science of immunometabolism to the treatment of autoimmune diseases. These are diseases that affect between 5% and 10% of the world's population and they're carrying associated enormous health economic costs as well as acting as a burden for patients. These diseases occur in the immune system attacks the body's own tissues, and examples of them are multiple sclerosis, where the attack is on the nerves; and diseases like rheumatoid arthritis, where the attack is on the joints. The consequence for patients of that is that they experience progressive disability. And although there are current treatments for these conditions, there's no real possibility for patients to actually resolve or recover from their condition in the long term. Our aim is really to solve that problem. Our lead drug is called MBS2320, and it's a first-in-class treatment for rheumatoid arthritis and other autoimmune diseases. And what that means is that it's the first drug that actually acts in this way to improve the treatment of the condition of rheumatoid arthritis. MBS2320 is in Phase II clinical trials. And because of the unique way in which it works, it offers 4 real benefits for patients. So firstly, it can control their symptoms. Secondly, it can stop the progression of their disease, so the underlying damage that occurs, in this case, to their bones. Thirdly, it actually preserves immunity. And what this means for patients is that the body is able to continue to fight infections. That's something really illustrated as an unmet need in recent times because of the COVID pandemic and the need for patients to shield. And then finally, really uniquely for the patients, MBS2320 offers them the possibility to ultimately, we hope, resolve their condition.

Thank you, Lisa. And so here, I set out the next important milestones for Istesso over the course of the coming few years. And the key one there is the start of the Phase IIb trial. Lisa mentioned that the company's in Phase II. The next step is then to enter the Phase IIb for their lead asset in rheumatoid arthritis, and that will read out in early 2024. And over the course of that time, there may be some other assets entering into the clinic as well. So next up, we have Martina King, who is the CEO of Featurespace.

Hello. I'm Martina King. I'm the CEO of Featurespace, and it's a pleasure to join the IP Group's results presentation today. So first of all, what are we here to -- trying to do? Well, our job is to make the world a safer place to transact. And that we have been able to achieve with our award-winning technology. We have invented adaptive behavioral analytics and more recently brought -- we were the first company to bring recurring neural nets to protecting payments across the world. And this is new technology that we have now patented. Our customers receive our technology and our groundbreaking analytics through the ARIC Risk Hub. And when we were looking for our market fit, our customers or our potential customers said, "Could you make sure your technology is better than what's gone before? And then on top of that, could you make sure that you provide us with exemplary customer service?" And they are the 2 promises that we have kept our industry. And we have been rewarded for that dedication to technology advancement as well as deep customer service. And if I talk about the progress, therefore, commercially that we've made, during the course of the last year, we put on 68 new customers. Our financial progress has been record-breaking. We had our best new business year ever last year, our best year for recurring revenue. Our recurring revenue has grown by 75%. Our compound annual growth rate over the 5 years has grown by 74%. So tremendous growth in all of our top line. And as far as the customer service is concerned, again, we have been able to achieve, consistently, an NPS score that's north of 60. That puts us into that world class category. And I'm really proud of the fact that we've been able to live up to that promise that we've made right at the early stages of getting our market fit. Where do we see our company in 10 years' time? Well, the great thing is there's still plenty of scope for solving the financial crime problem. And every analyst that we look at agrees. The market has continued to be projected to expand over the next 5 years, about an 8 billion market opportunity for us to go after. It's also not a "One technology wins all," as far as our market is concerned.

So as you can probably tell from Martina's note there, the key milestones for this company are continuing their recurring revenue growth. When -- the analysts that we look at as well talk about a huge growing market opportunity, at least 20% per annum. And Featurespace is aiming to outpace that growing market. And then finally, Nick Hawker from First Light Fusion.

I'm Nick. I'm CEO of First Light Fusion. And our mission is solve the problem of fusion power with the simplest machine possible. And simplicity is a thread which runs through all of our technology. Our power plant concepts is dramatically simpler. It can be built with existing technology, existing materials, existing supply chains. We neatly sidestep all of the -- some of the big known engineering issues of fusion power. It also comes into the nature of the core technology as well. So we're working on a new method for inertial fusion which we call Projectile Fusion. We fire a high-velocity projectile, flies for a short distance and hits into a target. The target contains the fusion pill. The machine, which is known as the projectile, is a lot simpler than what the mainstream of inertial fusion is proposing, which is a laser. It's much cheaper. And then the last piece of simplicity is actually when the projectile hits the target, the physics that happens there, the physics take place inside the target, that's simpler, too. And that gives us a really crucial advantage, which is our process can be simulated and can be simulated accurately. That means we learn much faster in the simulations in silico than you ever would with physical experiments. Although, of course, the ultimate question is are the simulations right? So working towards showing fusion that, that's the mission now, but we actually raised some more money at the start of this year, $45 million. That's actually to get ahead and to start on the next phase, which is building a new experiment, bigger, designed to show more energy out than in for the first time. So we're already progressing into that next phase of demonstrating energy gain. And that is the crucial physics demonstration that's needed. But it's not the only activity that we're going to be starting in that next phase. We're actually going to be really broadening out the work we're doing on the plant engineering. And the goal of the next phase is actually to get to a derisked design for a power plant. And that includes the "gain" experiment as the single biggest, most important thing. But there's lots of other detail which we'll be working through. And what that means is that the commercial opportunity for First Light starts at the end of that phase. It doesn't start -- you don't have to wait all the way until the power plant is operating before we start to have a commercial opportunity and potentially, revenue opportunity.

So as Nick said, the next milestone for First Light Fusion is that validated fusion reaction. You can see on here, I've put between 2022 and 2023, this is right at the forefront of science, but we look forward to keeping you updated on progress over the course of the next year or so. And then finally, as I mentioned at the start, Oxford Nanopore was the most material contributor to our results in 2021. And although share price performance has been affected by risk appetite and valuation pressure on high-growth companies, which Nanopore definitely is, from a financial perspective, the company had an incredibly strong 2021 and issued 3 upgrades to their revenue guidance for '21 post IPO. And that most recent upgrade, which is what we show here, has noted expectations for their core Life Science Research Tools revenues to increase by more than 80% year-on-year to above GBP 120 million. The company will be announcing their maiden full year results next Tuesday, and we'll be looking for evidence of the continued revenue growth trajectory and traction in key areas such as whole genome sequencing projects. And Nanopore is in that category of companies, which is delivering genuine real-world impact. Many of you will know that a significant proportion of the COVID-19, a variant was sequenced on Nanopore machines, and there was a very interesting release in the past few weeks, which aside from, again, as world record for fastest genome sequencing outlined the rapid point-of-care genetic analysis that allowed for quicker and more successful treatments across a range of patient types. In terms of the impact for IP Group and our holding, you can see we invested GBP 77 million over the course of our involvement. With Oxford Nanopore, we've now realized GBP 106 million, and we have a 10% holding remaining. And you heard Sam earlier talk about the fact that Nanopore sequencing is consistent with our healthier future theme, and it's around understanding the underlying biology of disease. And as a business, we want to ensure that where we help to create the successful industry disrupting companies, that we use that expertise and network to identify critical mass and build further. And I think there's a real opportunity for us to do that with Nanopore and build around a core holding. Companies such as Microbiotica that Sam mentioned, they're based at the Sanger Center in Cambridge. And I and the team plans to do more with Nanopore, and I hope to be able to update you on that more over the next year or so. And in terms of our holding, we have significant experience and expertise with Nanopore and the space. And so with that knowledge, we see great potential for Nanopore ahead. And we remain focused on our capital allocation. And of course, we will consider our holding over time in that light. So those are the leading companies that we believe will be creating meaningful impact and value within our 3 themes of healthier, tech-enriched and sustainable future. And as I said at the start, this is all about unlocking value for shareholders, and I just want to cover that briefly. So what do you get as a shareholder in IP Group? Well, you get public market liquid exposure to some of the most impactful technologies, and that's built around a deep thematic focus and presence and also international expertise and networks. We don't think that this can be done without an international perspective and outlook, and that will enable us to deliver value. And you'll hear us talking about a number of businesses that have come through from our Australia business. And you'll have also seen in the results the fact that we have got additional capital from our partner Hostplus in Australia to really accelerate our businesses. But we are seeking to build global leaders and many of those will have the potential to scale above GBP 1 billion in value. But we're not starting from scratch. As I hope I've demonstrated today, we've got a very exciting portfolio of high-growth companies. And our permanent capital structure enables flexibility to back those companies from inception all the way to scale, and we intend to maintain influential shareholdings. And then finally, capital allocation to drive returns for shareholders. We have a rigorous approach to this and, as you would expect, a rigorous investment appraisal process, and that's been built over 20 years. And I hope that the buyback is a demonstration of our discipline and creating that tension between internal capital allocation and external, and we plan to use these tools again in the future. So with that, I will pass to Dave, who's going to take you through the results in a little bit more detail.

Hello, everyone. Yes. I'm David Baynes. I'm the Chief Finance and Operating Officer. I'm delighted to be with you today. As Greg mentioned at the beginning, we have got a complex business in terms of all the fascinating companies we have. But actually, the financial structure is relatively simple, and I should be able to explain it to you not more than maybe 5 or 6 minutes now. Three key themes I want to talk about is our return on NAV of, really, profit of about GBP 450 million. I'm going to talk a bit about NAV on our balance sheet, and I'm going to talk about some components of that, the actual portfolio of companies and the cash. On the profit, well, you can see a very successful year, so for GBP 450 million from GBP 190 million the year before. Probably worth noting that actually the prior year, quite a lot of that, most of that, about GBP 160 million, GBP 170 million that was actually achieved in the second 6 months, which means over the last 18 months, we have generated about GBP 600 million of profit across the group. If you put it in perspective, it was about our market cap about 2 years ago, so we obviously had a very, very strong period. Now we do have to bear in mind how things have changed in the new year. Clearly, it was a squeeze in technical markets anyway. But then obviously, there's geopolitical considerations in Europe, obviously, have affected share prices. Pretty much all of our public market stocks have actually taken some kind of a reduction in price in the last 2.5 months. And added up, that actually is a reduction of about GBP 264 million, of which the primary item is Nanopore at GBP 233 million. And obviously, we'll have to see. They're difficult times to evaluate, but we'll have to see how these times work out. But it's important to understand those changes at the moment have happened. But going back to our position as at the end of December, which obviously we're reporting to. If I look at the NAV, the NAV is up to GBP 1.3 billion to GBP 1.7 billion. That's quite simple to understand, really, because that's the GBP 450 million less the amount we distributed. We distributed about GBP 50 million in dividends and share buybacks. So actually, the overall increase on the balance sheet was less. It's about GBP 400 million uplift, which is what that is. And then the last thing, which I'll come to a little bit more detail is just the cash, but that, again, has strengthened during the period from a net position of just slightly over GBP 200 million to GBP 270 million. So if I go over the page, I'll explain a little bit more about where that profit came from. So we had uplifts across the group of nearly GBP 0.5 billion, GBP 497 million of uplift. Now of course, a big chunk of that was Nanopore, about GBP 300 million of that, which about GBP 80 million pre-IPO or at the time of the IPO and the rest is post-IPO. But that's still less if you consider the amount of uplift of the rest of the group. We got about GBP 200 million of uplift across the rest of the group. And they're spread pretty widely, as you can see. So you can see that the color-coded life science team there had a GBP 78 million, nearly GBP 80 million of uplift. And if you look on the right, you can see the sort of companies that came from, Hinge Health. And it's in fact contributing about GBP 62 million on that. The tech portfolio, similar uplift at GBP 72 million uplift in the period, slightly more widely spread, that. WaveOptics, as we announced at the time, was bought by Snap, one of the biggest deeptech acquisitions we're aware of at about GBP 500 million. That generated a GBP 27 million uplift. But also, the business formerly known as Yoyo Wallet or Salt Pay, that at an uplift of GBP 16 million. Featurespace, which we've talked about, had GBP 15 million. And Ultrahaptics are haptic -- touch technology company, that had an uplift of GBP 10 million as well. So quite widely spread across that portfolio. Green appropriately for cleantech, that was predominantly First Light Fusion. You can see there, First Light Fusion had a significant fundraising, about GBP 33 million, announced in 2 chunks, just before and after the year-end. That led to an uplift of GBP 31 million. And finally, the United States and Australia, and other parts of our business around the world. They also had a very good year. So everyone had uplifts. Australia, particularly strong, they went from -- they more than doubled their opening assets so it's at -- about AUD 11 million to about AUD 23 million post uplift, so a very strong period for them. So if I then go over and look actually at the balance sheet itself, as I said, this is kind of where you see kind of the simplicity of the business. Here on the left, effectively, you have 2 key bits on our balance sheet: there's the portfolio and then there's cash. Now there is a small amount of liability in debt. We have a European investment bank loan of GBP 51 million as at the year-end, which we'll be paying down over about the next 4 years. GBP 17 million we paid this year, GBP 17 million we paid in the next 2 years. But as you can see, that's a pretty small gray line at the bottom there. The vast majority, obviously, we have is balance sheet, which is growing from GBP 1.2 billion to GBP 1.5 billion and the cash, I've already mentioned, growing. If you look on the right there, you also get an idea of -- this is of all our balance sheet. So of all our balance sheet, Nanopore is at 31%. You can see some of these other companies we talked about, also significant components. Istesso, First Light, Featurespace, all between 3% and 5%. And of course, cash is very important. And I want to just touch on that price per share. So getting at the year-end, it was GBP 1.67 per share. Obviously, that has weakened and the numbers I've already explained, down about 25p per share. It's about GBP 1.42 now but still well ahead of sort of about 90p as it were this morning. So we do still seem to be trading at a significant discount to net assets, which I'm sure people will ask some questions about later. So having looked at the balance sheet, we'll now just go on and look specifically at the portfolio, so that GBP 1.5 billion that I touched on. So if you look at it that way, so we're not considering the cash or anything else, just the portfolio. When looked at like that, you can even add a point, about 38%, just shy of 40% of our portfolio. Life Science is a significant proportion at 30%; and Deeptech at 15%. Cleantech is currently only 7%, but it's obviously had some exits in recent years. But obviously, as you've heard already, our plan is to invest more in that area, and we will see that expand. And also both U.S. and Australia are growing fast. In terms of concentration, the donut, if you like, on the right, we have -- we've always had a more -- there are quite a lot of companies because that is part of identifying the best ideas and building them up over a number of years. We basically have 100 core companies that we value on our balance sheet. But even at that, it's still relatively concentrated. The top 20 are 75% of the value. We have what we call our NOVA-focused companies. It's another 22. You have a total of top 20 in our focus of 44. So they make up 87% of all our banks. I mean, everything else is only 13%. So although our model implicitly has quite a lot of companies as we source all the most exciting technology, actually, much of our focus, effort and value is concentrated on a relatively small portfolio. If I then go over and look at the other big components of the balance sheet, which is the cash. Now obviously, we can look at the statutory cash flow, which is sort of somewhat -- appears somewhat more complicated. Actually, again, this is a relatively simple story here. So we started -- this is a gross cash position. We start GBP 270 million of gross cash. We have overhead -- net overhead of about GBP 19.5 million. We had a good year on income, and we were down on average, 21.5% last year to 19.5%. And we sort of anticipate that number will remain about going forward, something like about 1% to 1.1% of overhead of portfolio -- I mean, of our net assets. So a number of which we hope will remain about that level. The second big thing I've already mentioned is about GBP 70 million a year for the next few years at least to paying back our debt. And then after that, really, there's dividends and share buybacks we've done, actually showing GBP 42 million here because of that GBP 50 million, there was a small amount in share buybacks depleted in January, about GBP 7.8 million. And then the 2 big ones, ready? Our investment, GBP 87 million. That's a number excluding, actually, what went in the state, we treat it separately. But GBP 87 million invested here in Australia. But then compared to that, obviously, we had realizations of GBP 217 million, which is why we've actually strengthened over the year, even allowing for the other costs and overheads that we see. And back here then, I'll do the last to drill down, if you like, looking at that GBP 213 million number going over the page. We're going to have a look at where that number came from. So just a few points I'd really like to make here. First of all, we've done well on exits in recent years. We've grown consistently over the past 3 years. And we had a bigger exit every year, as you can see. Second point I'd like to make is it wasn't all Nanopore. It was quite relatively wide. Nanopore, of course, contributed extremely valuable, GBP 84 million, which we took out at the time of the IPO. But Inivata, which we sold to NeoGenomics, that generated GBP 64 million. WaveOptics, which is a part payment, there will be more to come, GBP 30 million more. And Hinge Health, we took a small amount of Hinge Health, that last significant fundraising. But then they were spread over a number of other companies as well, so fairly widespread. Secondly, if the multiples are good, you can see that multiple is anything to sort of 6, 7x. Hinge Health exceptional because it came in very early. And of course, once you do something in GBP 6.2 billion fund raise, obviously, you get remarkable returns. But still, across the board on these exits, we've been getting very good returns. The last thing I'd really like to make -- last point is actually, it is encouraging to see, but we're obviously counting sensible values. If you look at the GBP 213 million realizations we had this year, they actually were GBP 82 million more than the price we were carrying those assets at the beginning of the year. They were carried, GBP 131 million, which, to some extent, you'd expect. If you float something, it's quite likely that the IPO is going to be a higher price across, over and around that you've last done. Perhaps -- you'd probably be valuing it at that. But obviously, if -- consider that of any alternative. Obviously, if we're in a situation where we were selling these -- we were selling them below and incurring losses, it would suggest we're overvaluing assets. And that clearly isn't case, you can see in the prior year, it was actually more marked in that prior year. The pre-money value was about GBP 108 million to the -- for assets. We sold at GBP 191 million, a significant -- about 72%, 73% uplift from where they were. So I think that's quite encouraging for how we're valuing, say -- obviously, valuing things and what the value of our portfolio is going forward. So with that, I'll hand back to Greg.

Thanks, Dave. Okay. So to wrap up before we move to questions, I guess, to repeat the key messages that you've heard. Just -- we've had a record year, and that has been built on 2 decades of doing what we do. I talked a bit about the evolving strategy. We'll give you more information on that over the course of this year and some of the specific initiatives that we will be looking at to really focus down on those thematic areas and those leading assets. And you should start to see increasing behavior from us of allocating more of our capital into those leading companies. A good example of that was Bramble Energy, which completed a round, we did GBP 10 million of that round. We were the lead investor and really putting conviction into a company that's in a space that we know very, very well. And of course, we'll continue to grow capital under management, up 18% in 2021 with opportunities to do that in '22 and beyond. And I will maintain sharp focus on shareholder value creation using that capital allocation approach that we have developed over the last couple of years and delivering return on NAV alongside cash returns. And then in terms of outlook, while difficult times may well lie ahead, we have the ambition to deliver far more impact on returns, really make a dent in some of the world's big problems. And of course, ambition and drive is important, but it's not sufficient. So importantly, I believe we have got the team, the experience, the expertise, the portfolio and the capital to do this. On behalf of our portfolio companies and the current and future beneficiaries of the cures and the products and the services and the end users, thank you for providing the growth capital to enable them to deliver. It will be worth it. And I look forward to updating you on our progress over the course of this year and beyond. And with that, I will have a look at the questions.

Thank you, everyone, for sending in questions. So first up, a question on will a copy of this presentation be posted on the company's website. Yes, absolutely, and that will be posted up today. And also they we'll be using some of the video content that will be available for people to look at and using some of that through our sort of media channels. And there's a couple of questions about discount and what that means from a -- from the point of view -- specific things, specific initiatives to narrow the NAV valuation discount. So I'll let Dave speak to that one in a second, but I guess there's a few elements to that. One is we haven't really been out to talk about the portfolio beyond Oxford Nanopore. And a lot -- understandably, a lot of focus of shareholder conversations has been around Nanopore pre-year-end. I hope through this process and as we are continuing to deliver over the course of this year, investors will understand the valuation creation milestones. And of course, we've got to deliver progress in portfolio companies. In terms of the -- and the tools that we have to do that, we've got our capital allocation policy and framework. And so of course, as we make further realizations, we'll continue to apply that policy, and we have the tools such as share buyback to be able to employ. And then Dave, do you want to just talk about a couple of the others?

Yes. I am going to start -- our fulfillment actually has 2 sides, really. There's a kind of a tactical and strategic. At a tactical level, we're going to have -- there's all sorts of initiatives we're going to be doing. So as you've already heard, we're going to be in some circle. We'll probably raise our profile. We'll talk a lot more probably on the public domain. We'll appear on more conferences, et cetera, et cetera. We're looking at those investors, for example, maybe our own competitors that have invested in us. We'll look at people that should be interested in our sector, make sure we go meet them. So there's a lot of kind of tactical stuff we'll do. And obviously strategic, as Greg's already spoken about, obviously, one of the most important things is, I think, to communicate to the market, there's a lot more to IP Group than Nanopore. Of course, Nanopore is a sensational company we're very proud of. But if you begin to get a flavor today, there's sort of 7 to 10 other companies which we believe will come through a significant banding in the not too distant future. And I think part of it is important, but our messaging is out there to explain that, to explain the themes we've talked about today. But also we will be doing more shareholder activities we've talked about in terms of things like considering -- continuing to grow our dividend policy and continuing to review our share buybacks. So we are very focused at both ends, I'd say, of its creation, at that discount, because I'm sure we find it as puzzling, quite frankly, and also frustrating as I'm sure a lot of our shareholders do. But we're very focused on it and plan to do as much as we can to obviously reduce that discount.

Yes. So that covers -- there are a handful of comments on that point on discount and share price. And we will definitely be on the front foot this year and investing in our IR activities as well to ensure that the story is well understood. Clearly, that's part of the role of the leadership team is to ensure that, that story is well understood and people understand those clear valuation milestones. The -- there's a question around just the thematic focused approach mean IP Group will do less early stage or spinouts. And in the annual report, we set out a number of the new things that we've done this year. I mean the simple answer to that is no, but I might ask Mark and Sam to just talk about how they are thinking about early-stage pipeline and the new things that we've done this year. Perhaps, Mark, to start, please?

Certainly. Yes, the answer is no. We're still actively looking at new opportunities and actively backing new opportunities. We've done 3 or 4 new things in the past sort of 2 or 3 months. We've done a couple of Oxford spin-outs in the area of next-generation computing. One of the areas I was talking about and also a couple of cleantech investments. So we're very active on the technology side.

And to add to that, we're very active in -- still in early stage investing. Our sources don't have to be university partners or universities in general. We can also source from industry, which we have looked at a number of opportunities. But I'm pleased to say, actually, just this morning, we closed a -- the first very early stage investment of 2022. So a novel approach to the treatment of cancer. So that's very exciting. So we're very active in the early portfolio.

And so this one, "Looking at your funding and schedule for 2022 and your current cash balance, does it make sense for us to assume more capital deployment than last year?" I think it's fair to assume that we're mindful of the short-term environment here. The plan would be to deploy at least as much capital into the portfolio as we did in 2021. But of course, there are some relatively unprecedented times that we're living through at the moment in terms of the geopolitical situation. But we do think there are significant opportunities for us to accelerate those leading companies that I had up on the thematic slide over the course of this year. So I think it's safe to assume, at least as much as 2021, but we will obviously keep an eye on how the current conditions play out. One for Mark and Sam on investments this year. Has relatively lower early-stage funding availability due to market conditions helped you invest at more favorable valuations in your view? Or has that not filtered down yet?

I would say it hasn't quite started filtering down yet, but I do expect that it will. But I mean, I think the good news is, in my sector, particularly, for example, biotech, although the public markets are suffering, private markets still remain strong and vibrant. And there's still a lot of deals being done between pharmaceutical companies, biotech companies, even early-stage biotech companies. So the level of activity in the private markets actually has not particularly dropped off. So that's good news. But also it means we haven't yet been able to take advantage of sort of discount pricing, but I'm sure that will filter through in the next few months.

And a very similar answer to me -- from me.

And then one for you, Mark. On the cleantech holdings, have you been seeing increasing interest potentially followed by accelerated commercialization for any of your cleantech holdings as part of a global effort to reduce Russian oil dependency?

Yes, perhaps not to -- directly to reduce our Russian oil dependency because the acceleration of interest in this sector predates that. I would say since the beginning of last year, we've seen a huge renewed interest in the area of cleantech and particularly with COP26 drawing a lot of attention to it last year as well. So -- and presumably, the desire to reduce dependence on Russian oil will also influence that and reinforce it as well. We are -- that definitely creates opportunities to accelerate commercialization for some of our companies, and we are actively working on initiatives to do that and have begun to put those into process for several of our cleantech assets.

Thanks, Mark. Sam, one for you. So regarding the number to your holding, Istesso. Can you give us a quick overview of the Phase IIb trial for MBS2320? And what does success look like? Has the trial started yet? Or when is that anticipated? Is the plan to self-fund the trial?

The trial will start imminently, and there's a lot of regulatory activity going on in the background to support that. The trial, it's quite a big study, so it's -- the simplest way to think of it is as an expansion of the Phase IIa study. That sounds like the person asking the question is familiar with. So in this study, we will be looking at different doses of the drug. And the reason for that is that we want to identify the lowest possible dose that has the maximum efficacy because, clearly, that will have 2 impacts: a, give us a very safe dose; and secondly, give us a dose that is cheaper to produce, so improve our margins. And we -- actually, we think of it as quite a derisked study because the Phase IIa, if we can reproduce what we did in the Phase IIa, but in this larger population and there's more statistical powering in the study, et cetera, that will give us, we think, a very good chance of success. So really, in many respects, this is a trial that is -- it's something we have to do in part of the developmental pathway to get to a lower dose, but we expect for the trial to work. It's going to be recruiting over 200 patients, so it's -- this is a -- quite a big study in a number of different territories. So I hope that answers the question.

I don't -- we've got a note to say yes or no, but yes, it looks like it did. So another question here. Can you please indicate, with the current top 20 holdings, expected capital call for IP not to be diluted? Do you need the GBP 250 million cash balance for this. I mean, the answer is we have a number of places that we seek to allocate capital with the strategy that we've outlined and the way that we'll apply our capitation policy would mean that a significant proportion of that will go into those top -- not necessarily top 20 holdings but those conviction holdings that I outlined earlier in the presentation. And you'll see that over the course of this year that an increasing proportion of our cash will go into those companies. That being said, we do still need to ensure this is a sustainable business. And the idea is to have both focus and diversification across companies and across themes, because different themes come in and out of fashion and investor appetite. There's a comment here. What are the plans to divest the 10% stake in Nanopore further this year, perhaps if prices are back to GBP 7 or above. I mean, clearly, we think the company, at GBP 7 or above, is a lot better than GBP 4 or GBP 5. At the moment, I guess, I'll refer back to that earlier comment that we made. We will -- we have a great understanding of the business. We will look for -- first of all, for guidance from the company and their sort of short-term plans. And we will use that capital allocation approach to balance, sort of reducing that holding in Oxford Nanopore with the opportunities that we have to both invest capital into exciting businesses and return to shareholders a proportion of that, as we've demonstrated over the last year. In terms of -- another question here, after record years for full year '20 and full year '21, how cautious or optimistic are you about full year '22 today? I mean, crikey, that's crystal ball gazing. I mean, in terms of the capital markets, clearly, things are very volatile. In terms of the larger companies that we have got the most, particularly the 3 companies that we've shown you today, I'm -- we are very confident that those companies are going to make material progress over the course of the next 12 to 18 months. And of course, the macro environment can have an impact on the valuations of those businesses, but the -- what we tend to see is through the cycle, that it's more the progress made by the companies that's driving the valuation with an overlay of the macro than the other way around for our businesses. But I would say we're definitely cautiously optimistic and definitely on the progress that those companies can make. There's a question here. Is there a danger that the company is spreading its skills too thinly over 3 different -- 3 very different growth markets? Will it not be better to direct its financial and/or technical firepower and a small, more concentrated portfolio, a strategy followed by a successful private equity investors like HG Capital Trust? I think -- I mean, there's clearly an important thing here around scale. We've spent quite a number of the last 10, 15 years trying to build IP Group to the sort of scale where we can offer liquidity to our shareholders in the form of a stock that you can actually trade. I mean, we believe in order to do that, we need to be at least up in the billions valuation. And so a smaller approach dividing the business up would have a couple of things. Firstly, it would mean that you'd create smaller, less liquid companies that would be less attractive to companies and investors around the world. And then the second is there are genuine platform benefits to having those 3 broad thematic areas. We want to have deep, deep understanding, deep presence, deep focus in each of those areas. You'll see, for example, over the course of this year, we plan to have a renewed presence on the cleantech side. But having those things together under one roof means that you can access greater pools of capital internationally, you can benefit from networks greater internationally, and some of the insights around building companies, taking companies through funding rounds, IP and the way that businesses protect their IP and development and commercial relationships with companies around the world, all of those things have benefits to being a larger organization focused on those 3 thematic areas. And don't forget, we've been doing this across very, very broad areas, and this is more of a narrowing and a sharpening of what we've done in the past with a more deliberate focus. And we believe that's the best way to accelerate those companies and to accelerate value. There's a question for Sam, specifically. "could we have an update, please, on Artios?"

Yes, sure. So that's a very promising company in the field of developing novel treatments for cancer coming back to what I spoke about earlier in terms of trying to find cures for disease. And things are going very well. You will have probably seen that last year, the company raised a very significant funding round with a number of new life science -- U.S. life science funds coming into the company. So it's very well supported now, extremely well-funded. The company now has 2 of its novel agents in Phase I clinical studies, so we would expect data over the next, I would imagine, 12 to 18 months, I think, is about the right time line, which could provide some evidence of efficacy. And I think things are looking extremely positive for the company.

Thanks, Sam. Quite a good quick question in on why continue to hold a small stake in Hinge Health when it does not reflect your criteria for influential state but has significant value to be deployed elsewhere or return to shareholders. And I guess sort of -- probably more a question for Sam, but from my perspective, we -- when that company completed their last funding round last year, we took the opportunity to take some capital off the table and perhaps give you an indication of how we're thinking about that company. Sam, jump to talk a bit more about Hinge?

No, I think we're aligned with the sort of sentiment behind the question. I mean we're very happy to be in a rapidly, very fast-growing company. The company's revenue growth is quite phenomenal. That said, we recognized at the end of last year that health tech valuations got quite full, one might argue. And so we took money off the table as much as we could in the -- in that round. And we're very much attuned to the notion that we would potentially take money off the table if and when and as the opportunity arises in companies like this where we're not -- it's not a strategic stake. We're not on the Board. We don't have strategic input. So yes, I think we're sort of aligned with the sentiment behind that question.

Yes, thank you. Just conscious, we're now at 11:00, I will -- and there's a couple more questions on here. So have there been any major changes to your shareholder register over the last year? We include that as an appendix in our results presentation, as we always do. So when that's up on the website, you can have a look at the current state of the register. I mean, the short answer is there haven't been any major additions or removals from the top sort of 10 to 12 holders, although within those holders, there has been some movements up or down by 1% or 2%. But we'll disclose that as we usually do on our -- as an appendix to this presentation. And that the -- another one here. Interesting to note, you'll be looking to leverage increasing levels of third party capital managed by the group. Can you elaborate on this and in which areas of the portfolio you envisage being able to deploy it? Is it likely to be by thematic area or by region? I think in the -- I mean, the obvious short-term opportunities are, you've just seen us announce the updated and increased relationship with Hostplus. That's an international portfolio there, so that's investing in both Australian companies but primarily in growth companies across the world. And I think the types of investors who are interested in that sort of product do want to have access to the most interesting and compelling growth opportunities internationally. And then there is a regional one, though however, so that -- our China business, and we have an office in Hong Kong, and we have a relationship with China Everbright. And the idea there is to form fund, and that will happen over the course of this year. I mean, that will be for investing in, essentially, joint ventures or operations of existing portfolio companies who want to enter into the China market. So that is a sector specific -- sorry, geography-specific one. So we'll do a bit of both. And of course, we'll continue to grow our business in Parkwalk, which remains the leading EIS fund provider and for growth capital in the U.K. So conscious of time, I think we've covered all of the major themes and questions, I think. If any shareholders believe that we haven't, then we're very open to feedback and challenge, so please do drop us a line on the IR. E-mail address is on the website, and we'll, of course, endeavor to get back to you. But I will just say thank you all very much for your support and also for your time today. I do genuinely believe there is a really significant opportunity here to deliver both value and impact through the portfolio. We have the team. We have the expertise to do this, and we're in a good capital position that will enable us to accelerate those key businesses. So with that, I'll wrap things up and look forward to updating you all again soon. Many thanks.