IP Group Plc (IPO) Earnings Call Transcript & Summary

Good morning, and welcome to the IP Group Plc Half Year Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received in the meeting itself. However, the company will review all questions later today and published the bonds were it's appropriate to do so. Before we begin, I'd like to make the following poll. I'd now like to hand over to Greg Smith, CEO. Good morning to you, sir.

Thank you, sir, and hello, everyone, and welcome to IP Group's 2022 Half Year Results Presentation. Thank you very much 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 and for your time to hear this update from us. And this is the third time that we've now used an [ Investor Meet ] for our results presentation. And this is part of our continuing efforts to dial up our IR activities and get the IP 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, I have David Baynes with me, who is the Chief Financial and Operations Officer. We'll also be joined later by Sam Williams and Mark Reilly, who are respectively the managing partners for our Life Sciences and our tech business particularly for the Q&A piece. And this morning, David and I are here in our U.K. head office in Kings Cross. And some of you who dialed in 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 fact that the 1996 channel tunnel move capitalize the development of this whole area, we hear now it's sort of 1 of the hottest places in the world and people are relocating from Silicon Valley even to be here and is known now as London's Knowledge quarter, but interestingly, this was an initiative that was backed by the U.K. government, by industry and by long-term capital. And I genuinely believe that the wider opportunity for IP Group is to do something similar in our space 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 my point of view, the early summer heatwaves that have affected the U.K. 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 all of you, we're a long-term play on disruptive technologies. Now the results presentation is up on our -- on the IR section 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, I plan to cover a short overview and update on how we've delivered over the past 5 months since I spoke to you for our full year results presentation in March. And that will include an update on the 3 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 short summary and then answer questions. And as the Investor Meet team said, please post questions into the Q&A section, and we'll endeavor to cover them all in the time available. So in terms of the overview, there's 3 key messages for this half year. And you'll have seen the release this morning. But firstly, I'm pleased to be able to report strong progress in those 3 priority companies that we highlighted in March. I'll come on to each of them in turn, but overall, these 3 companies have seen a positive net fair value change in the first half of GBP 71 million. Now our overall NAV per share at 137p is up very slightly from this time last year. And so overall financial results, we've broadly in half 1, seen a reversal primarily of Oxford Nanopore's increase in value that happened during half 2 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. 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. And of course, 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 will be making an interim dividend of 0.5p per share. And in total, this will make GBP 57 million of cash returns to shareholders since the start of 2021. Now before I go into the meat of the presentation, I thought it was probably worth just a few comments on what we're seeing here in the markets in which we operate. And this won't be new news to the many of you who follow our space, but we are clearly operating in pretty challenging geopolitical and public market conditions. I guess a few points on this. Firstly, the public and private markets are linked, but they do operate differently due to factors such as funding cycles. The funding data that we've seen to Q2 in the venture market does actually show signs of resilience and that's in terms of investments, in terms of the committed capital. But as we've seen in our own portfolio, there's definitely been a slowdown in realizations and exits. There's often a public to private lag 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 valuations. So that's very evident in our portfolio. And then from a team point of view, we have an experienced team who have invested across a number of cycles, and so we will 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 points around the fact that our progress and our capital discipline means we continue to have a strong financial position. But in terms of the opportunity, we still see that fundamental demand will continue for the products and services in Life Sciences and clean tech and deep tech that our portfolio companies are delivering. And I think that Martina, who spoke -- who's the CEO of feature space, 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 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 this full year results back in March, I set out sort of 3 main areas of our evolving strategy. And I guess the key message I'm trying to get across is that 5 months later, we're delivering against those. I'll talk a little bit about impact on sustainability later. But in terms of the leading companies, good progress across all of them. We focused larger investments, including GBP 10 million into Istesso and as announced yesterday, Hysata, one of our sort of emerging companies. There's 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 fundamental reason for us to have 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. And I believe that this will be important in allowing us to play and win in our chosen sectors. And I talked about our plans to accelerate our track record into sustainable future, which is one of our 3 thematic areas. And I talked about that in the full year and at the investor update, and as planned, we launched our first Evergreen venture investment platform focused on Cleantech and owned and funded by IP Group. So we made good progress against those strategic focus areas. So in terms of sector expertise, I don't want to spend a long time on this, 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 evidence to support that. So in terms of recent highlights, this is over the last year or 2, of course, people will be probably most aware of Ceres Power and of Nanopore, but also in 2021, we saw the exit the sale of Inivata to Neo Genomics. This is a liquid biopsy business, and that was for almost $400 million, which netted about GBP 64 million of cash to IP Group. And also WaveOptics and the tech and rich space, and that was sold to Snap for around $550 million. And that, we believe, is one of the largest VC-backed deep tech exits in Europe ever. So the track record is broadening out, and it's becoming wider. Then in terms of the people who we co-invest with, we really have a high-quality list of co-investors globally and they include both specialist investors but also broader long-term investors from our ecosystem. And then finally, just to sort of underline this point about realization. Since 2020, we've made nearly GBP 400 million of realizations. And of course, that's slowed in 2022 in the first half. But I think importantly, from an overall portfolio delivery point of view, less than half of 2021's realizations came from Oxford Nanopore. I talked about this theme of deep sector expertise, and I mentioned our plans to accelerate our track record in the sustainable future space. And I highlighted the fact that we plan to launch this new initiative. And I was delighted to announce that we formed this new Cleantech platform called Kiko Ventures. We believe this is the first Evergreen venture investment platform that's focused on Cleantech. It's wholly owned and funded by IP Group. And those who joined us for the investor event or watched it online afterwards, will have heard one of the 3 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. Our plan there is to invest GBP 200 million over 5 years, and that includes companies such as Bramble that we invested GBP 10 million into during the first half and Hysata that I'll come on to talk about shortly. So 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 $1 billion 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 3 that was a Istesso, Featurespace and First Light. And I wanted to just provide a brief update on progress in each of those 3. So we'll take each in turn. So firstly, Istesso. As a reminder, this is pretty emerging science. The whole field in which Istesso operators only had a name for 7 to 8 years. And we have the most advanced clinical stage asset in this field. And the plan is for that to go into Phase IIb shortly. And the company itself has more than 30 consultants. We run it as a virtual model, but an incredibly experienced team, more than 680 years of combined experience, and they've overseen the launch of 4 marketed products in their history. Now the big opportunity here is that at 5% to 10% of the world's population suffers from various immune conditions and rheumatoid arthritis is one where 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 huge, huge problem to be addressed. And what we have in Istesso, and we own about 56% of this company into which we invested about GBP 10 million during the period is a first-in-class therapeutic. And this is really interesting. But the next milestone for it is this Phase IIb trial. Anyone who's interested, you can see the details. There's a public disclosure of this on a cycle clinical trial [indiscernible] and this is a trial that we'll be dosing 224 patients. They'll have sort of moderate rheumatoid arthritis. It will be about 18 months in duration. So we expect this to read out in early 2024. We're looking for a classic endpoint in this space, but we're also looking for side effect profile. So I hope to be able to give you an update on that by the time we get to the full year, so some good progress there. Secondly, Featurespace. As I mentioned, those of you 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 period, that Featurespace is Cambridge spinout 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, this is all about [indiscernible] recurring revenue growth. And Martina talked very confident and clearly about the and their progress to date in delivering against their objective to outgrow a very fast-paced market. The market is growing at sort of 30% to 50% per annum according to all of the analyst reports and the market Featurespace is seeking to achieve ahead of that. So great progress at Featurespace. And then finally, for those 3 First Light, of course, for those in England and those in the U.K., we had a world first only last week when England's women won the European championship, but our world's first was on the First Light and they were the first company to achieve a fusion reaction using what's called projectile driven inertial confinement. And there's a couple of different ways that you can approach fusion but ours was successfully delivered and this was validated by the U.K.'s Atomic Energy Authority. Now the interesting thing here from an 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 10 years ago, and we backed the company all the way since then. And the interesting thing is the ability of that company to model the system has allowed them to identify a route to practical fusion using projectiles. And the idea is you use projectors to compress [indiscernible] and a fuel pellet and you generate fusion plasma. This is more efficient and it enables simpler hardware to be used such as a gas gum. Now demonstrating with Fusion with this approach is 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. And compared to other fusion approaches, this is a much lower cost that the company in total has raised about [ GBP 80 million ] and spent about GBP 40 million to GBP 45 million and others require sort of super low temperatures or magnets or special materials. And during the period off the back of that result, and we doubled our valuation 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 in Gain reactor machine over the course of the coming years. So that's really strong progress in each of those 3 companies. And what I thought I would do now is just give you an insight into a company. And we announced the Series A funding round for this company. It's an Australian business, Hysata. And of course, 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 a really interesting company. And so I really wanted to highlight this as a potential company of the future. I've set out here some of the milestones and the progress of the mass manufacturing will 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 team at Investor Meet to run the video. [Presentation]

Thanks very much to Paul. And hopefully, we'll be able to report delivery on that exciting future. It's clearly a huge opportunity and one in which Kiko and the team have spent a significant part and focusing on, and this was a really interesting opportunity that we identified alongside the Australia team. So hopefully gives you an idea of some of the interesting things that are coming through in the pipeline. So just a couple more slides from me before I hand on to Dave to talk about the financial results and the 2 other areas of strategic focus. So another area that I spoke about was 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 impact investing and impact investing trends and some of this is definitely less than complementary. I mean from our point of view, we think that strong ESG is really table stakes for a main market quoted company, and we continue 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 disability to measure, to drive and to report against actual impact genuine real-world impact. And I hope that I will be able to [indiscernible] like this numerically towards the -- as part of our full year results, but that's certainly a big drive for us. And further information in this whole area is set out in our most recent sustainability report. Again, that's available on our website. And then just finally, this -- 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 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 co-investors. 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 looking at sourcing and growing and ultimately exiting companies, including our complementary funds. So we've been developing real expertise and track record in this space. And that includes sourcing an early growth fund, so that fund such as Parkwalk, who are the leading manager in the U.K. with growth in EIS funds. But it also includes growth investors, later-stage investors such as hosts [indiscernible] and Hostplus and Adam -- we've had a mandate for 2 or 3 years with Hostplus invest internationally across our portfolio. And then there's also opportunities for growth in geographic expansion, and we're primarily doing that through our partnership with China Everbright and 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. And but I often say to institutional partners that we speak to, we really are opportunity rich and capital pool. We invested about GBP 70 million during 2020 out of about GBP 1 billion across the whole portfolio and about GBP 100 million out of GBP 2 billion during 2021. And during the first half, you'll see in our results, we were about GBP 50 million out of about GBP 350 million raised by the portfolio. So there remains a huge opportunity for us to do more in this space, and we continue to work 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.

Yes. Thank you, Greg. As of great at the beginning, I'm David Baynes, I'm the Chief Finance and Operating Officer of the group. In a fairly quick order, about 5 to 7 minutes, I'll quickly take you through the group's finances for the period. For those that you have watched before, despite being a complicated business in terms of all the investments we make and what all the exciting things we do finances are relatively straightforward. So hopefully, in the steady 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 where financial gross cash of GBP 236 million, net of GBP 192 million as we stand today. Second point is our length. Now those of you who obviously are here at the year end, you'll remember actually now got up to GBP 1.7 billion, and we're back at GBP 1.4 billion. And that's because of a loss in the period of GBP 310 million, which I'll come to in a minute. Most of that rent just movement in the public share price of Nanopore, which actually has performed by well in the period, having had 4 uplifts in its estimates since its IPO, but it's obviously been subject to market conditions and has actually fall 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 the other is. We've pretty much gone back to exactly where we were this time last year. We had about GBP 1.4 billion this time last year. We had net assets per share of GBP 1.36, today were GBP 1.37. So we went up in the second half, we came back down again. But we'll see a minute, most of that does actually relate to Nanopore, which itself is a very strong asset in which we have a great belief and we believe much of that or all of that and more will be recovered in the years to come. In fact, as you can see from the slide here, if we take out an Nanopore performance, we've actually made a profit in the period of about GBP 36 million. So going to the next slide there, this repeats, you can see there. Nanopore down about 60%. I think at the end of the year, it was GBP 6.98 and the period ended falling to GBP 2.76 at 6% loss. But as I said also already, we hope that will reverse in time as the markets recover. Actually, knowing that, as I say, the actual performance of most of the rest of the portfolio has been good. I mean you can see down in the bottom, more the negative have actually been in the public market side. So you can see the total public market, in fact, GBP 395 million of reduction value while the prior portfolio that has gone up by GBP 100 million, which reflects how well some of our priority counts have performed. If you see over here in the diagram, you can see that one of the of course the First Light Fusion had a fantastic success at infusion. We've actually make that very conservatively at the moment. It was a doubling in value in the period, took about GBP 114 million 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. I'm pleased to say [indiscernible] a uplift you've heard performance has been very strong. And just based on funding aspect next in [ Hysata ] you've also had, both goes up. So we've actually had a very strong performance in the private portfolio. And there's very big in those public companies that suggest Diurnal and Nanopore, really accounted for [ maybe all ] of that GBP 395 million reduction in the portfolio. Now that might in turn lead to a question about our valuation process. I would understand the main [indiscernible] of how our public companies have fallen on private ones, they seem to have done so much. What I would say on that is. We've always been very prudent about valuing our companies. But again, those have joined us at the or remember that traditionally, in fact, the last 2 years, we've exited companies. We've exited for considerably more care in the book at the far year end. I think last year, GBP 191 million of exits have been carried at the beginning about GBP 123 million. So -- and that being repeated the year before. So that's what demonstrates by fact that we can't be relatively conservative. When you look at actually our brands, our private brands, we found that over half flat, and that's 58% very similar to last year. Similar number was flat to 33% and actually only 8% of the down ranges. Now -- and we have some double evidence for that because, of course, Parkwalk set the investment team, making investments mostly in different assets. Some cost mostly different assets. They made 12 investments in the period and of that 9 among this to be flat on the down range. So we are seeing -- maybe those are based upon valuation of the third-party funding that. So we are seeing relatively consistent valuations in our group actually the final portfolio. And the last point, I'd just make up on that pie charts at the top is there's actually quite a lot of that portfolio has also been very recently validated as well as that public companies or because we've had external valuations, top 5 companies, we already external valuations of top 5 private companies to make sure we have updated valuations and about [indiscernible] the portfolio actually funding round in the period. So there's a number of reasons why we remain constant in those private portfolio valuations. Moving on again, again, you remember from the year-end, very simple balance sheet made up basically a portfolio of assets that have both companies so about GBP 1.3 million of them and some cash if you heard net GBP 190 million, very small amount of liabilities. So quite easy to see. And as I've already explained, the moving to GBP 300 million over the period due to that movement in the pubic portfolio, slightly mitigated higher private portfolio. Interest in next slide, that GBP 1.37p per share, those numbers here are how much each company contributes, if you look at that like Nanopore for example, is 20p of that value. You can see that we added at near GBP 1 of our value in '19, but is actually in [indiscernible] over the top 20 companies Nanopore for cash. So all the west is kind of in the valuation for not [indiscernible] we're trading at sort of [indiscernible] and some model. So you got merely -- you've got merely GBP 1 adjusted in those companies. So it is kind of quite hard to explain why we're at such a discount. But there's a lot of substance found and justify a higher valuation on that. Again, I'll go through the slide relatively quickly. It's just similar information. This does give us an idea of how different areas fit over the portfolio a total GBP 1.2 billion of assets. 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 in the portfolio to a more sort of manageable 18%. Life Sciences at 33%, Deeptech at 18%, Cleantech is growing at [indiscernible] innovations and has grown quite a lot to 16% because of the great successes that we had in the period of Hysata and also on First Light Fusion. So it does actually look a more balanced portfolio at the moment. At some extent, we have to be less balance when hopefully Nanopore recovers, and that will take up a bigger proportion of the pie chart. One also noticing [indiscernible] give a focus on a number of companies we have which is very much part of the model. Actually, 70% of all our bank is in that top 20. So ideally that is a very focused portfolio. One of the last 2 slides, kind of just is really messaging about cash. I would make just to explain where our cash has gone on, so people understand that. Started these are gross cash positions. We started GBP 320 million of cash, biggest area with investment as everyone would want it today. About GBP 52 million gone into our portfolio during the period. I guess that GBP 350 million total by our companies. That probably in the second half, there will be 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 our expected exit reduced, we have modified the amount of taints you would expect, like at -- the realizations of only at [ GBP 82.1 million ]. We do expect more realizations in the second half some of occurred already but they will be well down on prior years. And again, I [indiscernible], we wouldn't really want to be saying much in the current market and actually good our financial strength if we don't have to. The third key thing to note really is around the dividend. So this is the remainder of the share buyback. We finished that GBP 7.2 million acquisition [ first ] a month and a bit of the year and also the dividends we paid. So as we said, commitment to shareholders, we've made about GBP 15 million being paid back to them. And the last thing worth mentioning with the last number is at GBP 11.1 million on overheads. It's pretty much flat year-on-year. Actually, if you look at it, looks slightly up. That's because the incomes very slightly down. But actually the overheads at the moment are about flat year-on-year. So they're really the main points I'd make about cash and our cash balance. I 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 look to have about 10% of our net assets [ indent ]. As I come tieback into eminently sensible amount to have. And of course, I hope you mean we have more efficient returns to shareholders, allows us to access more money to make into investments. We're delighted that we've managed to go an extra GBP 120 million in a private place for a leading public insurance company and a small number of other investors. It's a 5.25% fixed interest rate, what we plan to do is pay down a little bit of the remaining GBP 44 million, we have at European Investment Bank paid about GBP 50 million down now and then expect increased our position by GBP 105 million during the period. It's being drilled down to a couple of trusts. We don't need it today and we need to interunit today. So we'll draw half of it about GBP 60 million towards the end of this year and half in about a year's time. And that's on file 6 and 7 year we paid [indiscernible]. So we paid back [ 37, 28 and 29 ]. It compares very favorably to the EIB debt that we've traditionally had, which was on one can imagine very good terms. These are on very similar terms. And we're very pleased we've been able to secure this facility at this time. And it allows growth to keep investing at a time when obviously a lot of opportunity for us, but it also takes pressure off the need to realize exits until we have to give us even more flexibility about we maximize our return on investments. And with that, I'll hand back to Greg.

Thank you very much, sir. So 2 slides quickly in summary. So the first was just a reminder on the investment case for you all, our shareholders, myself a shareholder, 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 3 main components. And I guess the 3, I'd pull out firstly, this differentiated access to impactful deal flow in companies. I've talked earlier about the sector capability that we've discussed. It's about wider capability and processes that includes our legal team, our IT support, fundraising, and part of my legacy for IP Group of CEOs to build on and scale and leverage that professional capability. Secondly, as our model 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 20 years, we now have 5 to 10 more maturing companies that we believe will be fast followers to Nanopore and Ceres over the next 2 to 5 years. And so we expect our overall returns to improve, and we have an ambition to deliver 20% returns per annum. Now of course, overall market conditions will be a factor in achieving this and will be judged against the wider PC market over that time, but we have that as an ambition. And then finally, and we discussed this regularly with our institutional shareholders. 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 3 main ways that we're dealing with this and in the shorter-term, that's around increased IR. And in the longer-term, that's around developing and executing against our sustainable capital allocation policy and also, obviously, delivering returns against our NAV. And we know that cash returns are a helpful component of the overall return. And so we've set out this sustainable long-term policy. And the idea is to take a realization based approach and return a proportion of all realizations that we make to shareholders by a way of cash returns. 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 probably more capital efficient, particularly at the moment, in the form of share buybacks. But the primary driver 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. So the overall summary to come back to where we started. Clearly, the context is this sort of volatile and uncertain geopolitical environment in markets. I mean, as a group, we make long-term investment decisions and say this for the short-term volatility is particularly uncomfortable 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 and to build and to back the best opportunities that will contribute to a healthier and more sustainable or a tech enriched future. I'm really pleased to be able to report strong progress in those 3 priority companies. It's really important that your company is well financed, that we have [ GBP 192 million ] of net cash at the moment, and we have put in place a facility that will give us flexibility over the next 2, 3, 4, 5 years. And then thirdly, this point around a continued commitment to shareholder returns and the fact that we've returned about GBP 57 million to shareholders since the beginning of 2021. So with that, I will conclude today's presentation and we will turn to the questions that you have. Lots of people have asked. If you haven't, please, please do so, and we'll endeavor to take those in turn, Dave, you can compare for us.

They will compare and certain I'll have to answer as well. Yes, a very good way of questions. So we'll start with. I'll try and do all trying to duck any. First one from [ Lacy N ], "is your investment thesis still solely based on backing companies with IPs from universities or given the rapidly widening opportunity set is in our widen." I think actually one for you, Greg, I'd say, to start.

Yes. So the investment thesis is heavily focused around backing science and technology innovation 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 widening opportunity set. This is particularly in the clean tech space. But you should think of this as primarily focusing on IP-rich businesses and that have a particular technology advantage, 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 understanding.

Second one, perhaps I'll answer this one shall I, "would you set a dividend policy of say, [ 3% ] of NAV and [ David D ]. " Well, I think as Greg has just kind of explained, we're really looking to -- we're looking at both the share buyback and also the dividend has come to one package related to, amongst other things, the exit of achieve. We expect to keep paying a dividend almost come in May. We expect to probably increase in a relatively small amount each year. That's a relatively small increase and here what we're looking at the moment probably what we will be more overall dividends and share buybacks and [indiscernible] ratio of really the value of exits we get. And I think if you look back last year, as [ GBP 100 million, GBP 200 million ] exits, we did buy back to something in the region of about GBP 40 million in total. So that gives you a kind of guidance for that kind of ratio you got in mind. Next one, perhaps, this is a lot of good questions from [indiscernible]. Again, perhaps I'll do the first one because it's a capital allocation but then there's some tricky ones, they are one for Sam coming up. "Capital allocation, should we expect increasing weighting to Deeptech and Cleantech teams versus Life Sciences could time lines to key catalysts to be shorter." Perhaps I'll start and Greg, I'm sure we'll have a view. I think from my side, we've got no sort of predetermined you want this. You don't say that division will get that amount. It's about as a group where the best opportunity is out for returns that we can achieve. So we're evaluating our capital allocation all the time. Form meetings quarterly, now meeting monthly as well [indiscernible] capital allocation. So clearly, overall, we'll be looking at where we think money is best invested. So obviously, we've been in the sense. Greg, I don't know if you want to add to that, I'll be grateful.

No, I think that's absolutely right. The intention is to look for and build and scale opportunities that generate returns and impact. And so we look for huge market opportunity and huge societal need. And then we overlay that with our skill sets, our deep tech expertise, and so it tends to lend itself to those 3 thematic areas. The deep tech area is really quite interesting in this space because you've got some quite obvious application areas, things like and cybersecurity like Featurespace, which is very clearly aligned to a 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 one of the things I think the industry is going to have to trying to get its head around is how do you try to articulate the impact that something like quantum computing has on the world. And so that's work that we're doing. And we know it's a sort of a tricky area, but that's definitely the intention.

The next 1 specifically a static question. I'm delighted you're online, Sam, I have to say, also this one is from [indiscernible]. What's the logic for methotrexate-refractory RA patients while still dosing alongside methotrexate.

That's in reference to the MBS 2320 Phase IIb study. 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 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 on to your drug. There is an argument, of course, for comparing doing a study, for example, in TNF or biologic [ DMARD failure ]. So Paul, you know what I'm talking about, those are slightly more advanced current drugs. And that is something we will explore and we are looking at in supplementary Phase II studies. But at the minimum, we need to do the standard study that everyone does in Phase II. I hope that answers your question, but e-mail me, if not.

And thanks, Sam. I appreciate that. Then there's a last 1 from Paul, a question specifically around the new debt facility, loans, scope to invest in current portfolio or how well does LifeSciences goal at ESG. Well, the answer is you're right, doesn't entirely, really, the definition of supporting its institutions sustainable dependent goals is more wide-reaching 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 LifeScience provision as well as [ where a lot of weight ]. But we're very, very comfortable, very happy to support the sustainable investment aims and have more enough opportunities for us to invest in [indiscernible]. So there's no way of any restriction on the [indiscernible]. Next one for in a good nasty question, I'll give back to you, Greg. In respect to the share price, a huge discount to NAV, could you consider some alignment of management incentives and ordinary shareholders' interest before awarding bonuses? The present system does seem to ignore share price performance.

Yes. 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 settled on, I guess, sort of slightly unconventional on the main market where we reduced actually the level of cash bonus that could be paid to the executives. So I think mine is now the lowest or one of the lowest bonus opportunities on the [indiscernible]. But what the idea was to create even greater alignment between the executive directors and shareholders by making the significant components of our long-term rewards in the form of restricted stock. When we made those first awards, the Remco decided that given the share price performance over the last year, we should not award at the maximum level, so we actually reduced it by 125%. But the idea is over time that I will build up 3.5x 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 top priority for me. And although the amounts are relatively small, I bought shares when I took over as Chief Exec Board Chairs again following the AGM. I continue to believe that IP good shares are a compelling opportunity. So I was entirely comfortable with having that shift in remuneration and towards long-term ownership and alignment of IP group stock. I think that's the way that senior executives should be rewarded in a business, particularly a long-term 1 like this.

Thank you. Moving on to [indiscernible]. 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 place to highlight its high-tech strength compared with successful private equity trust such as HD Capital. Well, the answer to that is we do look at these regularly them all the time. We're looking at a good structure. At the moment, we are not going to change. I mean our current group structure, we do think serves us very well. We do think that the way we're currently structuring for that, but a permanent capital base in particular has really been unique for us and how is to do the things we've done like for example Nanopore and Ceres Power companies in held for a long time. But then I wouldn't say never -- we don't say never, and we will definitely look at that structure ready. I think as part of our job, trying to make sure we maximize shareholder returns wherever possible. So I'm not saying never, we will consider. But at the moment, whenever we [indiscernible] sort of things, we remain with the structure we've currently got. Next one, David D. [indiscernible] I'm sorry, I mean the -- why are you offering a script dividend, which entails issuing new shares at a discount to NAV and diluted NAV share of all the shareholders. You could settle dividends in shares either bought in the market or for treasury. The dividend reinvestment scheme, which would not dilute the NAV per share of other shareholders. The answer is this. It's -- 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 this. We posted it before we didn't want to change it. The number of shares people actually take up [indiscernible] enormous. At the year-end, the final dividend, we will be our teams share that we've already bought back so we -- these ones, we can't. But 1 it's a small number, and 2 we want to keep paying a dividend and on offering these terms as we had before. And 3, we're good were committed to further buybacks at right time, we can truly compensate that small impact at that time. That was our thinking.

And we will look at neutralizing that script. That's something we can that you might not be able to technically use the shares in treasury, but equally, we could use our capital to buy sufficient shares sort of concurrent with it to effectively neutralize that small amount of dilution. So it's a fair point.

You get a technical point. One would you discuss around the table any last night. I'll hand it to you, Greg time for you to have some. It's focus of growth, why have a dividend policy? Is it not better return on capital-focused funds on growing opportunities.

Yes. I know you're quite right, Andy. It's again, a great question, 1 we debate all the time. I hope I've answered that in the way that we think about our capital allocation. 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 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 buy back shares. This is something we seek to balance all the time. We speak to our major shareholders about it and we continue to review it all the time. But you're right, and this is the essence of that sort of capital allocation approach.

Next, I'm paid to me again, Robert, are the private company valuations fundamentally discounted cash flow base. Are you and your co-investors having to change your thinking on appropriate discount rates given the movement to longer-term dated bond rates. Well, without making too down, I can be pretty precise answers on this in terms of how we value the company. About 23% of our portfolio at this period end were actually [indiscernible] mark to market. 23%, so being a total of about half of our portfolio, another 23% when recent fund things less than 9 months. And then another 10% were actually less than trial just over 12%, I mean, over 12%, but it's still recent enough that we say [ widen ]. We have a certain 21% based of our adjusted recent finances and really discount cash flow revenue multiple is only about 16%, give you an idea. But along those, generally, of course, we're looking at those discount rates all the time and also they're factors also into the valuation of third-party value using when [indiscernible] are looking at our portfolio and the same what appropriate rate to use. So we aren't ignoring that is true. How did the external value of the 5 companies compare your own previous valuations below 5. They were actually very close. We had, I think, a couple were small bounds and one with outline correctly. So they were pretty clear they weren't significant, but where there were adjustments to the menu, we did make those adjustments to the portfolio and make full right down and would be appropriate. We do tend to try and take a conservative approach to our valuations. And we have at year-end revaluation committees at the half year, too, and we do sit and go through every company. And if you think it's appropriate, we mark it down. And I can say to say all the ones beside valuations, we've never marked anything above the midrange. So if you get a range, we're never at the top. We're never better than the midrange for any of them and where appropriate we have marked on [indiscernible] fine we can say. Right. So I said, [indiscernible] thank you guys, that's brilliant. I see they're leading. Okay. Again, I'll probably go to over you, Greg. I think how much competition is there for access to University IP? Are there any of your university partners we get first chance to exploit the U.S.

That's a good question and a really long answer. I'll try to relatively simply say it. 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 [indiscernible] fund, they come in alongside the opportunity to. Whereas in the U.S., there are just letters of intent where we have no first rights. And then in the U.K., which is probably where this market has developed the most in recent years. We've seen the early part of IP Group's history back in sort of the early 2000s was built around exclusive partnerships, and we found that, that wasn't the most efficient way, both from the university point of view or from our point of view. And so they evolved into various different guys ways that we access IP in the U.K. now tend to come through examples such as Parkwalk, who managed the alumni and [indiscernible] funds for each of Oxford, Cambridge and Imperial, but also through our networks and our relationships with the key thought leaders and researchers in those areas in which we seek to operate. So in some cases, we get first refusal in other cases, and we don't -- and the idea is to have that sort of blended differentiated access to IP. That was sort of a short summary answer.

There's 3 more questions. So we should be fairly close to the 1-hour mark. Perhaps I'll cue deal with this out of Hysata evaluation change after late [ underground ]. Well, there was a decent uplift and you can see in the presentation that GBP 8.4 million uplift to take into the books. We recognize at the period end. We haven't, at the moment, and you'll see it at 1 actually giving fixed percentages company is particularly sensitive to actually people work at be to what the pre-management, post-management work. So we haven't actually [ publicized ] those. I can say that had a decent valuation uplift. We are very confident to achieve the sort of milestone to the hope to achieve over the next 12 to 18 months, it could be considerably more size about books at that time. We will see.

It's fair to say that we had about half of the business as well.

Yes. Yes, that's about half, we're taking the debt and the equity. So it's a significant charge in accordance to that kind of model. Second to last question. I think to you, Greg, for it. Can you tell us about -- what can you tell us about your thoughts on how long you will maintain [indiscernible] and Nanopore shareholders?

Yes. Well, obviously, Nanopore's a significant part of the company, a huge part of our history, and I think it will be a big part of our future. I guess the things I'd say on Nanopore, and this is an expression of our strategy from cradle to maturity. We were the first investor and we have a really great relationship with Gordon and the team. We saw them at London calling, and actually the whole board were up. We saw them in Oxford's just a few weeks ago. And then so we were the largest holder pre-IPO. And as a Board, we discussed and approved an overall approach to realizing the value, and that led us to realize 20% of our holding at IPO. And so obviously, we were locked up until April on the rest. And our view in the short-term certainly is in the current market environment, world equity markets seem 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 GBP 600 plus million of cash. They announced the refinancing of their offices lately. So -- 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 positive. 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. And of course, we plan consistent with the capital allocation policy to reinvest the majority of that and return some cash to shareholders. So I can't give you an exact time but don't expect IP Group to be a significant holder of public equity as part of our business model over the sort of medium- to long-term.

Another question is joint. I've actually got 2 left. I missed it here. I've got 2 left. One to Mark, I think, 1 for Sam. Mark has a disadvantage. You can't see these questions, it's coming you blind back. Is Highstar going to disrupt my holding at ITM power through undercutting green hydrogen generation costs. Mark, if you're there, Mark.

That is a -- look, potentially, it will disrupt the entire hydrogen energy market. It's really breakthrough technology at a totally different economics to its competitors and it does have that potential. It's something that's an early-stage technology, but as you can see a lot of people have invested in it on the basis of its -- green is a promising technology. And we think if you start to see the development milestones as they occur in the next 2 years, then it really does threaten that market and there's a great opportunity there.

Thank you, Mark. Thanks, [indiscernible] the question. Last one, [indiscernible], this is for you, Sam, if you're still there. You haven't spoken much about Hinge Health. Is the competition changing here?

Yes. So again, Hinge Health has been a phenomenal success. It's been a great one for us. So second biggest holding in Life Science 1/3 after ONT and Istesso. 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. 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 see no slowdown in Hinge Health.

Thank you, Tim. That's great. And I think that is the last of our questions. I'm going to say the [indiscernible], hand you back to Greg.

Greg, David. I think you've actually managed to address all those questions from investors. And of course, the company will review all questions committed today and we'll have a responses on the Investor Meet Company platform. But just before redirect investors right with their feedback, which was 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 an hour and a bit to the updated story at the half year. And I hope the 3 key messages that people have taken away are that we're making strong progress in the companies that we highlighted at the beginning of the year, well in March, so over the first 5 months, and we're confident in the progress of those companies over the course of the next 6 months and beyond. And secondly, the key message is that your company is very well financed, and we've acted to ensure that, that continues and that we have flexibility in the current geopolitical and market environment. And then thirdly, 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 thank you all, and I look forward to updating you in due course. We plan a couple of capital markets events in October, specific thematic ones. And to look at the 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 early 2023, and we'll report hopefully on further great progress. Thanks all and speak to you soon.

Great. David, thanks once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirect to provide your feedback in order of the management team can better understand your views and expectations. This only takes a few minutes to complete, but I'm sure will 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.

Thank you.

Thanks, Alexander.