IP Group Plc (IPO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the IP Group Plc Valuations Deep Dive presentation [Operator Instructions] And I'd now like to hand you over to CFO, David Baynes. Good morning, sir.

Good morning. Thank you very much indeed. Hello, Yes, I'm David Baynes. I'm the CFOO actually of IP Group. And I've got with me Chris Glasson, who's our Finance Director. Chris is with me, I'm going to host it, Chris is gonna be mostly presenting and that's with Chris and his team do most of the work So that seems appropriate. I hope you're going to enjoy this is the first of our Deep Dive webinars, where we actually gonna pick up one particular topic and look at it more closely. I did say to Chris, when we first conceived that we did a deep dive valuations webinar. But it probably wouldn't be over attended, I said look chris can you get 10 or 20 people okay, the important 10 or 20 people and that is like important subject. But as I speak, we've got 257 people registered and watching this event. So thank you very for being there. I hope you find this interesting as we do. So very quickly, we're going to run you for a quick introduction and chris is going to go on to the market context. He's is gonna talk in detail about our valuation approach and value of our assets. And then point at allocations disclose in important camps and finally, fact is that most importantly, look at our track record how good we are at getting our values right using litmus test [indiscernible] set as an asset. Hopefully get if far more. So we look at that at the end and see how well we have done in our track record. So very briefly and as a start. And this is one of the key things, may it is quite of a divergence between our assets and the share price we say diverted between the net assets and our share price. We got net assets valued at GBP 1 per share in this morning, we're trading at about 55p. To put that another way, as I pointed out at the year results, you've got 15.0p of that 1.5p free is in cash days. That's obviously cash i cash. And then Nanopore that time was about 20.p even after slightly versus of that 17.0p this morning. And then just assume that the three other companies we talked about in the year-end results,First Light, Istessa, Oxbotica like i see to 60p of value and yet we trade below that. You have 91 companies in that out of 95 aren't included in that band ratio at all. So okay we need something to get over that band valuation, which is why we thought is important we're actaully spending time looking at what we did trying to get valuations right. I'll come back to this slide at the end. So at the beginning we'll start this is our level of knowledge at the beginning of this webinar 8% of what we have on our NAV is free of cash on a fleet not right. and 17% is quoted portfolio. So again, you know you like that's a mark-to-market in the market. So is that pesty 75% that we're gonna talk about today. So that's the slide remember. At the end of this presentation we'll come back to that slide and most hopefully will know and understand better of what to make that out. So i think one of the last thing for me, i don't wanna like telling you most of thing and then i'll tell you what. I'll key the messages out and let's hope they come over during the course of the day. So the first thing, we think we have a very forward batches, i mean we go by best batches. We think what we do is consistent and mildly cautious. The realised gains on the disposals seemed to provide evidence that we are catious and we're getting at finally we believe we are very transparent. we give details of our valuation process. So we'll let you charge and we'll come back at the end of presentation. So now I'll hand over to Chris who will take through the .

Great. Thanks, David. Thanks for the introduction. David said I'm Chris Glasson, I'm the Finance Director here and great to have everyone attending. Me and the finance team have spent a lot of our time valuing the portfolio. So it's great to have an opportunity to take you through what we do in more detail. First section, i was was going to cover is market context for 2022. And this is partly to give you a sort of indication of how we think about the market when we're evaluating our portfolio. So the next couple of slides contain PitchBook data where we find Pitchbook to be our best source of private valuation data. They've got a very extensive today's base of U.S. and European valuations by valuation. So this is U.S. data from Pitchbook's from that Q4. Annual report and at the very high level in the VC space, the 2 key themes, early-stage valuations on the left. We see as higher in 2022, strong momentum from '21 and continuing in 2022 valuations higher. Early stage Pitcbook definer Series B or earlier, which consisted about two out of our top 20 companies and then many of the earlier stage companies in our portfolio. And then on the right-hand side, later-stage valuation services Series C and onwards pitch book data C those softening intake. So about 20% down in the year from 2021 levels and with much of that softening happening in the second half of the year. But it is worth noting that there is a large dispersion of experience within that data. So good companies can still raise at higher valuations. So drilling down to the next level of detail, cutting by data our 3 dramatic areas. We see the cleantech and life sciences data within PitchBook's data centers is indicating a strong performance in 2022, so valuations are year-on-year within our tech domestic area, more mixed picture. So Fintech, flat, computer tech enterprise take down a little bit and consumer tech down somewhat more worth saying that we've got very little direct exposure to consumer tech, our exposures more second degree by potential customers require -- so we do think that across our 3 thematic areas we're actually playing into areas of strength in the market for 2022. So just putting it back in a bit more context on what that means for IP Group's portfolio. So our portfolio of early stage and more mature companies are raising money as they go along. So we typically expect has 1/3 of our companies to raise money in a given year In 2021 and 2022, 29 of our companies raised money in both years in those years. And when we have financing transactions in the portfolio, we track whether those transactions have happened are flat or down valuations versus the previous financing round that the company has executed. And we saw in 2022, that there was no increase in down rounds within the financing some within our portfolio, in fact a slight increase in up round. So we didn't see any evidence from our portfolio the softening valuations. It's also worth noting that we manage around GBP 700 million of third-party funds. We didn't see those trends in both third-party funds manager either. And then just drilling 1 level down into its the data within our portfolio. We also didn't see a softening in valuations in the second half of the year. So we weren't seeing that picture, as I mentioned from the pitch book data. So that's a high-level information on our market context. Moving on to group's valuation approach. So what do we mean when we're talking about valuation. So we're talking specifically about fair value for accounting purposes, and that's defined under international accounting standards and the practice guidelines with in private equity or venture capital portfolio were contained in IPEV. So we follow those IPEV guidelines and devalue our portfolio. And what we're doing when we're assessing the value we're estimating fair value for our private portfolio. And we're trying to arrive at the best estimate possible supported by as much evidence as we can. That's the sort of core thing that we're trying to do. So some high-level valuation principles that really sort of form the core of our approach. We have a thorough well-documented process. We take a monthly cautious approach to valuations. -- we have a policy that we have applied consistently for many years. And that consistency it feels very important. We make maximum use of market-based data. So we are always looking for market-based evidence and we'll always use that evidence in preference to non-marketplace where it's available. we typically use multiple methods. So we don't just take a price of recent investment, for example, but also look at revenue multiples of DCS we're trying to get multiple ways of looking at the same assets and triangulate those approaches. Our investment team inputs extensively in the process, but they're not responsible for valuations. The finance team are responsible with oversight from the audit and risk committee and evaluation committee. So we have segregation of duties, which we think is an important part of best practice. We have multiple layers of challenge through the process, and then we have transparent disclosure of the resulting valuation. And just to give you some stats on the process from 2022. So this is both our annual reporting and our interim reporting 22, we carried out 301 internal valuations, which we documented. We had 18 external valuation reports commissioned. We made 63 private valuation adjustments outside normal funding round. So that's about 20% of our valuation result of adjustments. We held 4 valuation committees 4 ordinary risk committees to focus on external disclosures. And our auditors included 93% of our portfolio value in their samples. So what we're really aiming for from those principles is a conservative approach. So I've highlighted those areas where we feel help us deliver that. And we're really looking to build best practice into our process. And again, our priority practice elements which would be important. So before I get into detail of how we do our valuation, just a handful of points on valuation capability and sort of what we feel really helps us to arrive at accurate valuations for our portfolio. So sort of key most important factors of the long-standing expertise of our team. So that's been our investment team, also the Board and support teams, many of you have been in for many years and working with the companies in our portfolio for many years about consistency and that debt technology is very, very helpful. But close relation to we've got with the majority of our portfolio companies also gives us insights and information that others might not have. So with the tops shareholder in 10 out of our top 20 companies. So that close relationship over many years for inception is very important. Our wide portfolio, and that's read by stage sector and geography, as well as extensive history gives us a big data set to use. So we use that to sort of in the year, but also looking back over financing where we've got things right or one-off it improve things. And then as a PLC, the governance and risk management processes that we have at the PLC are very useful to bring independentS into our process. So those are sort of the key elements of where we think we've got good valuation capability. So diving more into our process. This is the same process largely the half year reporting OR year-end reporting with the main difference between the level of work performed tentatively from an internal point of view, the same process. So first step is the planning and risk assessment stage where we are looking at factors like time since the last funding round positive or negative milestones for specific companies, general market conditions. And we use that first step to identify assets that we want to spend more time on most ejective assets. And we also use that first step to select which companies we're going to get to our external value is for them to take away and perform valuations on independent of us. So the next step, which is really the sort of meat of the valuation process. This is information gathering, both gathering company-specific information such as Board packs from the companies, and worth noting that we got almost 3/4 of our companies, large companies, we have all seats on discussion with our investment team to get their view on performance on the outlook for the company, financial modeling, whether appropriate and then determining a valuation approach. And also worth making that we do cross check our valuations where other public investors have investments in disclosed and we will cross check our valuations to disclose of valuations. So after we've done that process, we've arrived at a set of initial valuations and then comes a review and challenge stay. So firstly, a valuation committee that comprises CEO, CFO and Auditing Risk Committee Chair, and that's where really the majority of the discussion on subjectivity is covered. That valuation committee covers typically around 80% of the portfolio by banner portfolio then there's an audit and risk committee consisting solving of independent directors, and we also have our external offers, as I said earlier, sample 93% of our portfolio for the year-end reporting. So finally, once we've gone through all that process, we're in a point to go ahead with our external reporting. So just a note on our use of external valuation specialist, which I referenced earlier. So we use those for larger and more subjective valuations typically Kroll and Deloitte at the valuation specialists been used in '22. They value 10 out of our largest companies and those overall interest 40% of the portfolio. And we feel like that's an important part of our process. It introduces independent. They have good market insights across a wide range of companies that they're working on, and they have specialist technical expertise. And in terms of the process, they do a similar process to we were doing an internal valuation that give us an output, which is typically a valuation range and I summarized the valuation range the right for a section of the assets that they worked on, and you can see there at the top of the range of GBP 577 million and bottom at the range of GBP 392 million. So in all the cases, we took no higher than the middle of the range given to us by our external valuation experts and in some cases, to lower or indeed the bottom of the line. So overall, that comes out at around 1/3 of the way up the valuation range were given. And we actually think that's a really good sort of indication for the market cautious approach that we think we take. That's a sort of a good benchmark for how we would describe it. So going on to talk to the specifics of valuation approaches that we take. So I've listed an hour here. These are in order of preference and they order top to bottom, and that's based on the degree of market input that there is in each of the approaches. So with the top coated market prices, which obviously that guanine wherever possible and towards the bottom most objective approaches with less direct market inputs. And you can see on the right, we just got a asset bar showing a proportion of the NAV used by each approach. So the top 3 there the predominant ones by far. So we've got quoted prices at the top and then recent financing transactions have used a recent financing price without adjustments, net down would be a recent financing price that we've adjusted upwards or downwards based on positive or negative performance. We then have future markets or commercial events, which haven't completed at the time of the valuation where we got clear documented terms showing us that a change of value looks likely to happen, I think is not certain at the valuation date. And then we have discounted cash flow models and revenue multiples, which contain less market input. So those are the broad approaches that we use. And then a few additional comments on our thinking for each of those approaches. On recent financing transactions, key questions that we're asking ourselves there. First of all, is the financing transaction at arms length. Does it include for third-party investors -- and that's going to tell us whether we can get to use it. It's all it's a purely internal round we made actually don't think that represents fair value. Assuming we aren't going to use it, and we're thinking about what's the length of time since the financing round is the company's performance significantly positive or negative. And we typically think of recent financing transactions has been strong evidence, but the majority of the private portfolio where they had recent financing rounds and we have an early stage portfolio on early-stage companies. So we are raising money on a regular basis, and we do receive regular inputs from financing rounds. And just one minor point that is that sometimes the preference structures can complicate the application of recent financing rounds -- and that's particularly a case where a company is raising money with preference terms, which means that those preference shares, they're issuing have additional rights versus the ordinary shares, for example, we might hold. We do have a methodology for dealing with that specifically means applying a discount between the issued share classic references and the subordinate share count without reference -- so just some thoughts on recent financing rounds. Adjusted financing sort of many of the same questions many of the same considerations. So really, this is where we've had a recent financing transaction that we have the term performance is negative or positive enough for us to adjust the transaction. So we're then looking for what metrics can we use to help us quantify that adjustment. It's worth saying that, particularly for internal valuations, we're quite reluctant to use this approach to increase the value of a company. So typically, we'll use this to assess that companies underperforming, which therefore reduce the value where we see ourselves taking uplifts on adjusted financing, I think that's typically what is third-party valuation specialist. So you can see on the assets on the right first like us, we increased the value on this basis that we used an external marathon actual use external valuations for all the 3 companies highlighted on the right there. So moving to the less frequently used approaches. So I mentioned briefly earlier, future events. So this is where we have a transaction that is taking place around the valuation date that hasn't completed at the valuation date. And typically, we were looking for documented deal terms, otherwise, we wouldn't typically incorporate into our valuation basis, but when we have an event that appears to be happening and we documented with them thinking what's the nature of the event? Is it a sale? Is it a commercial deal? How certain is it? How likely is it that the deal parameters will change? How good is the evidence that we've got and factor all those in, we will typically be quite conservative in the approach because there is a risk that asset if that deal does to the way. And the biggest example of this was in 2020 when we had a financing transaction also on as part of competing when released our results, and we did incorporate the valuation uplift in that, and that was the correct number that was completed shortly after we released our results. So then just briefly on a couple of other approaches that we use less frequently, discounted cash flows. So we typically only uses for therapeutic companies because they have a well-defined path through clinical trials they have a set of probabilities that have relatively accessible market benchmarks on clinical trial success rate. There's often also market data around deal values. So we feel more comfortable on the therapeutic assets outside that sort of specific example. We tend to find things like the cash flow forecast very difficult to get comfortable over and probability equally very difficult to quantify or get comforted but a therapeutic assets would typically be where we've used this approach but only and we haven't refinancing transactions. So if the is the basement we did have external foundation as part of vacating that approach. And then finally, there's a small number of companies in the portfolio, which are full commercial rollout where we haven't got a seasonable recent financing so we will use revenue multiples for those companies. So then one approach that I didn't mention earlier, but is also in the analysis that we give up our portfolio as a statement from LP. So we do have some holdings which are not held directly but by fund managers, you manage those funds for us. the biggest example being came in LP, the Group's U.S. platform. And so in that case, the fund manager goes to their own process, which will look similar to ours to value their assets and they then give us the opposite that. We received those typically audited. They're typically auditing in arrears of the publication of our group results as the company we published earlier than those their evaluation process will be thorough, but we'll also review the process and review the output where necessary, where we deem it necessary, we will source independent valuation advice on any of the larger assets that we feel that's appropriate for, and we will adjust the valuations given to us by the LP downwards if necessary. So that's the sort of detail the meat of the valuation process that we use. I thought it was helpful to highlight a handful of practical applications of that information from 2022. So we talked earlier about the later stage market data indicating reduction in later-stage valuations. So we incorporated that into our valuation process by some of the more mature companies engaging external valuation specialists and taking some focus write-downs between 25% to 40% for some of those companies. So we reflected that market data. First like Fusion is a good example of an adjusted funding round, but they have a very significant milestone of validated fusion results. Again, we engage external valuation specialist, and that resulted in initial doubling with the carrying value, and that was below the midpoint of the valuation range given by our external consultants. And then finally, Oxbotica, December financing are very recent financing done productivity and there was an assessment of the discount between the issued share -- share class and it's subordinate share class where we took a small discount between the issue check-cashing that we have been updated our merchant. So hopefully, that gives you a view for how we're approaching our valuation process. So I thought it's helpful just to highlight a handful of our valuation disclosures, which give you more detail and transparency on some of the points that we just talked through. So top 20 data, some data around portfolio company fund raises, which we disclosed portfolio valuation basis and external valuation ranges. And many of these are additional exposures that are outside the core disclosures that we'd be required to give, but we do feel are helpful from the point of view of transparency. So on the top 20 companies, we disclosed the information two places we disclosed that in the portfolio review section of our accounts. And at the top table on the right-hand side over here, we disclosed the investment movement, the percentage holding and the closing value and the net investment or divestment from the company in the back half of the accounts that seem we also include the list of companies, the valuation basis and they have an external valuation or not. Around market data, we include data on the total capital raised in the portfolio, which is in the portfolio review section of our accounts and that gives you a sense for how much of the capital raised by our portfolio like groups contributed to about 10% for 2022. So it gives you an idea of both party funding and into our portfolio and what that means from a recent financing point of view. We also disclosed the up flat down round analysis that I have on the market context slide and that's in the financial review section, which hopefully gives you a feeling for the market dynamics that we're seeing in our portfolio we disclose the portfolio valuation basis against those categories that I've just been through to that, both in the financial review section of the accounts and also in Note 13 of the accounts, but we included some disclosures around valuation inputs. And then you also include valuation arrangement slightly varied at the back of the account. So these are in Note 13, so we include ranges on two of our debentures on two of our largest assets and then the overall range for the remainder of our assets. So that corresponds to the external valuation range slide that I showed earlier. A lot of transparent exposure in there and a lot of additional information, which will hopefully help you to come to the same conclusions at our process and our conclusion is sensible. So then very briefly on our valuation track record, the key piece of evidence that we're looking for, which we think provide strong evidence of our conservative valuation approach is realized gains on exits. So over the last 4 years, I grew over GBP 500 million in cash. And what we're looking for is on exit we want to be seeing realizations from the exit at or above the last carrying value of the company. And when that happens, we generate a realized gain on disposal. And as you can see from this first slide, over the last 4 years, we've generated realized gains in each year. So that indicates that we are realizing our assets are more than their carrying value. In terms of how much more, I've highlighted some of the key exits from the last 4 years like showing here the carrying value, the profit on disposal and the premium on disposals. So how much above the carrying value did we sell our assets and you can see that range of experience and then work out as an average premium of 76% across those companies that are highlighted, which is a significant premium. We do think that provides pretty good evidence of the conservative valuation approach. And we do feed that back into our valuation or basin where we've had late incorporating this exit data into our approach. So I'm going to hand back now to David for some concluding remarks before we move on to Q&A.

Brilliant, it all happened in just 20 minutes. fantastic, actually. So when I was asked this is very were, we were looking at we could see net cash of 8% in growth 17%, We're trying to understand what portfolio valuation made out. Hopefully now, if i explain now that makes sense. So about 30% of recent financing we talked at pretty high levels of certain -- there's 22% of adjusted financing that's the value of the junction of third party valuation based upon and then you made some adjustment. DCF cashflow is 7% and 8%, as Chris said, to statements from LP and margin potential. So you can now hear when we go through that, that now make sense what we've done. We got a very strong feeling of how it is. We have really very good evidence and also a lot of the valuations we actually have in our portfolio. And that when you take the cash and the public and the weekly funding and the 1 value by third parties, over 80% of the portfolio in fact, all those metrics pretty much outside of our control in most places. So mystery being slightly down, Hopefully we've made our points. We do have a power process in corporate -- we do believe we're mildly cautious. You always see agree with us on that point. realigning support the value. And if you have to put 205 pages of PLC CAGR , we do a pretty detailed estate as well. So what we do now is Q&A requests, and for those of you who are here when we did the year-end results it was at this point when I take the credit and i'm still having to afraid i42 , especially as we've made a commitment that we are to every single question. At this time, I've been watching, watching everyday, I'm glad to thought they are very good questions, all of them -- and there aren't too many to hope we will be able to go together to me, Chris. So question -- so Chris, the first one from Bruce. Bruce just asked, and this is related to the very early site neutral macro performance of public market information. Since has seen some very high profile 1 strike something that 89%. I understand that those are not representative of fintech retaining they're not recent portfolia.

That's a really good question. It is worth saying we don't have significant FinTech exposure. We have at least one fintech holding. But we're not sort of heavily into fintech. So by no means an experts on the fintech space, I would say those high-profile rounds, they will be captured within the data that PitchBook has produced. so they will be factored into that. And that suggest indicate that there have been other financing transactions that happened to higher valuations because we're not seeing overall decrease in FinTech valuations. I mean I do think it is really interesting to sort of look at individual companies. And clearly, there are company-specific dynamics like did they have to raise at a particularly bad time and you say perhaps that's the case for this another companies on the list here. Obviously, we don't detail that -- so I think it's one of the really difficult things that we have to do is trying to reconcile company-specific information with the broader picture for the market and part the way we try and do that is attractive data in our portfolio, which is slightly that flat down rund analysis.

I think the factor also for a we never had a high increase we didn't have an awful lot of companies in our portfolio to get back in 2 months, which have been valued on a Westcoast American multivision valuation we never took them up a lot on the first. So we didn't have a lot to bring down. I mean some of the market adjusting to $47 billion to $5 billion. We didn't kind of have a I think it's....

Yes, yes. It is worth saying that the largest fintech company in our portfolio, we did write down in 2020. So that picture on the market is important -- we've also had external valuation support on the carrying value of that asset, and we did take the write-down. So I think at least to some extent, we are sort of suggest..

But actually, I won't try to millennial retort actually for -- and second question, it comes from [Cayden]. 10-months good to see thanks for being here for listed companies, you apply a discount the liquidity side of versus market which would be perhaps a smaller block. I think you used to do that. ONT would be an obvious example we can portfolio the cost.

Okay. So that's a straightforward one. We don't supply a discount. And the reason we notice was specifically prohibited from doing that under IPAC guidelines. So no, we don't do that.

The time we invest in opportunities do you look at in the year and how many actually party evaluation metrics, where typically do the sales. Well, I'll start that. Yes, I mean, we do see alot. So working a very good different. Historically, when we used to be looking at the very early age probably best team in hunt. And not for the number may not change that much actually. You see a lot of information opportunities coming a lot come in people back. It's a very small number that we do. And as in keeping with our overall sale in one key thematic areas that we're going to focused on ones are very deactivations make a big impact on the world. So we want highly impactful stock all things ESG positive. -- classic we want make sure we have a very positive impact on the world to what we do in our main aim. So they're the main actually it's a big market group of positive good do you want to add to that?

Yes. So the one thing I'd add is that we are talking here primarily about valuation for fair value for accounting purposes where the investment team are going to be thinking more about value creation over a longer term and maybe less focused on the sort of mark-to-market twice a year exercise. We definitely do feed in as a finance team on specific investment opportunities and discuss the valuation with the investment team where particularly where they want our emphases on it. But I would say there's only 2 slightly different things going on there around long-term value creation, which is our investment team are focused on and the shorter-term accounting and mark-to-market valuation, which is primarily what we're talking about here.

Good. Technical one coming from [Jaden]. What discount rates do you use o your discounted cash flow and have they changed?

So we have put on discount. So we're saying we don't use DCS that extensively, as you've seen from the slides we did increase the discount rate that we used in the asset that we value on a DCF. We don't disclose the interest rates that we use and we use a combination of discount rates and probability adjustments. And the probability adjustment that's designed to capture things like the chances of an asset going through the next stage of their clinical trials. That should, I think, be combined with the discount rate that we use and that would get you to a sort of high 20%, 25% on a probability and discount rate basis. on that.

Next one, can you generally find the management valuations very to your there a meter of expectations regarding value to get to add to that ??

Yes, I suppose there's definitely -- we tend not to discuss valuations extensively with the management teams of the companies that we're valuing and we feel that's appropriate. We will sometime, but it's fairly rare. I guess management teams have actively thinking more about fundraise dynamics and particularly where evaluation is where our funding runs happened at a specific price that's often a big factor on their thinking. Our previous job sometimes is to assess where we're moving away from that recent funding price be that positive or negative and quantifying how much lower or how much higher. And that's probably where we have friction with management teams where they don't necessarily see it in with us. So we're looking for input from both on from the investment team sometimes from the company, although more rarely but we are forming in a valuation conclusion based on our assessment.

Yes, but we don't want to go back for [ Guanais ] not such a factor. And a normal number if you say the mark-to-market or are we confine completely line expectation, yes. In the case, and I think you're going to answer this in the case of asset value due to the future on method to for execution mix.

Yes, definitely that's an important part of it. So we would include quite big execution risk discounts normally. It depends a lot on the nature of the event, how likely it is to go ahead, how big is the deal terms will change? So particularly on exits where those are often quite binary, you are applying quite heavy discounts.

Yes. And these questions will come up more time just for a sale question, not very relinked to the valuation delay, but why do you not base a share buyback program given the market. We opened a number of times year-on-year as of last month. And as we do have a dividend policy we talked about giving money back to shareholders. And we do have a policy towards retaining a portion of our say at the moment on the most of exits in the talent market. But we do still have that obviously will follow. Similar question, what does management take to increase that the group sort today. Well, we believe doing a lot in very proactive in terms of facing activities such as this. We are still at the share buyback, as we talked about. We're talking to our shareholders lately. And then, in fact, most importantly, we're growing up hopefully the i -- we need to build about key inflection points for over the next 12 to 18 months, and particularly with clinical trials out there have a -- So we believe that all those things will hopefully start to reduce that gap, much of which is actually given us by macroeconomic forces, which are hard for us to manage where everything we can try and get and I go aware of it. Is there anyone in city average gain of 76% over valuation and value wage leverage or accrued and in assets that on the...

That's some of the realized gains over the -- some of the carrying value for those specific assets. So it effectively amended average.

Next one, you can see not valuation-related starts. How involved are you in the companies that you're investing in or on yes, we're. I think contain the presentation there, but we were very involved in all our legal assets on the border. We definitely had a very end on market. So we are -- in that business of helping companies grow very much. The bid is building a long time yes, you may all in assets are.

Yes, yes. And it's a really helpful additional element that we have in our valuation process. So sort of a historic perspective on many of the companies we've been involved in the years being on the Board going forward material. So that information flow that insight is really helpful for our new these assets. So yes, it's an important part of our model --

So next 1 from this [indiscernible] business of Bamberg who is at -- did yesterday at the conference. Any chance you have data on tie on the average fair value came from fundament that took place following internal again. I take it, we will talk about length ties started either been quite notable and prove our market caution more that one, Chris?

Yes. I mean, I guess this is sort of quantifying the point on up, down background. We don't have readily sort of presentable data on that. But it's a good point. It is very company-specific. So you certainly have seen plenty of examples of companies raising money at significantly higher valuations, and we haven't seen lots of instances are down. So I think your general point is correct and if we sort of quantified the point on that.

10% so the gains of over GBP 100 million in private portfolio in a fund realize to is Natalka. Yes. [indiscernible]

Exactly. I mean any sort of counterargument that is you'd expect companies that are going well to increase in value over time. So they're probably shop be going up over time in terms of unrealized gains. But yes, I think it's definitely a good question if you want.

To what extent is the pace of cash flow and factor in our valuation methodology --

so definitely factored in, yes, how much cash companies got the cash runway is and particularly and particularly when we talk about adjusted funding rounds and adjusting those downwards, where that starts to get quite kind of heavy handed to will take quite big write-downs when that cash runway starts getting short, unless they've got pretty well developed plans to raise money yes, that is where we tend to get quite appropriately conservative. And certainly, it's a factor when a company doesn't need to raise money. It's harder to factor in, but the fact that they're not going to be in the market that they have that strong position, I think, is a factor. And we do tend to get in things when companies are out raising money around what their target valuation level of interest. So it's definitely an important part of the overall picture. And sort of going back a little bit to the original question some of those fintech companies, if you're out in a weak market, raising money, you might have to take a much lower valuation. So that is an important factor.

Next one, both basis is for 1 how well financing the top trade companies will need to raise money in 2023?

Yes, yes. So we track the cash runway of the majority of our portfolio in the top 20 companies. And there's a good couple of companies in the top 20 that we don't expect to have to raise again. For the companies that we do expect to raise again the sort of average runway is getting towards the back end in 2024. So there's obviously some variation within the asset some companies that we do expect to raise money '23, but that's the average position we had special not on the road that action.

It's quite difficult, but in 1 word. I mean you've got on some of 1 that wage and the action was as leverage on the top 20 going out back into next year I have a look at doing great leverage as the top 35 companies just got a $1 Billion just over a 1$ billion of assests and 15% of those didn't even need money. About 30% will really get and another sector 2 years, and then there's 30% old that actually went actual 25% . So it's quite well spread out at. Thank you, Paul. Back to another question, we're doing well. analyst questions to. Do you think you can achieve high uplift on exit maintaining to trader compared to exits for financial investments. Chris? Or you take it from. Yes, I'll start on -- it's an interesting question. I think maybe some of it depends on market, I think particularly so as you mentioned before, is to like we properly have a tire have every 2 years. We're at a key moment because we've got 8 clinical trials length next year I would report a lot of that ultimately would get to say because as far parameter they get, and they also have the value taken make to capital and then have a worldwide margin infrastructure to cut. So they can take some pay a lot for it, and it's still going to a lot more meet. So I think the particular area where are better -- and that's the interpolate mismatch but a lot of trading way to go, but that will understand the real disruptive nature quite often what we got to mention people will understand that TK portfolio, kind of the band of what we've got there, probably better than initial financial net one is other. Speaking help think about some of the factors that might contribute to a discount to net, for example, trade value future central active portfolio management charges. I'll say that again. I don't to think about some of the factors that might contribute to a discount question.

Yes. I mean that is, obviously, in theory, our assets are fair valued at the year-end. So the balance sheet value is what it is. But I do see that if you were doing a DCF, you would bring in the discounted value of costs. On the other hand, if our portfolio continues to grow as we hope it will, and you've got the bandwith in the portfolio to offset that. So it's going to be 1 way of looking at it. It may well be a valid way, but in theory, the portfolio stay valued at the end of the financial year. So if you're looking at it from a value point of view, sort of, it is what it is. Okay. got that in, Paul's back as I say, we've got that right. falls back dose an increasing mix of investments coming to the early-stage fintech company. thing else that they will do keyer highly guide team in the market actually very well network And I think mentioned [ Tito ] on a separate brand is sadly helping. And I think that's an enormous amount of energy is coming even more well less in that marketplace. So think about the exit, you'll definitely see a great high profile. Yes, I was going to say they certainly be report that it's a competitive states obviously a lot of interesting in clean tech. We think we're well positioned there, but it's a competitive space. So important to have that market position that we do.

I'd just like to say, it's 9:45 now, I think is what we share quite understand that some people want to own this before, but we made a commitment that to those on questions, we will be balancing that questions until we get to the end having constantly said they were over very many. They seem to be querying. A few more questions. I'd quite understand people may need to get their lives, but we'll carry on to and try and answer all the questions as well as we can do in the spot which is I want as the first one, we may not is company specific. You'll probably video model was investment you use on a session cash flow.

And what you're about I keep saying to it's a little about is but it's were soft same but certainly right in terms of how we're approaching that DTF. So we have a drug in clinical trials. We have an estimate of success rate that we're getting through 3 clinical trials. We have an estimate of market value and partnering value. So that's sort of how DTF works. But I don't think we'll go into the specifics of actions on this one.

You have to be a managed maybe moving the forestation might give an indication before you're back. Thank you very much. Good question. How can depart carry valuations above your

I would say -- I mean, we would certainly like to be in the kind of slightly below our peers consistent or slightly below, and we had at least 1 example I can think clearly, which we discussed in our valuation committee probably look at peer valuations, and we were at the lower end, below the 2 comparative valuations that we saw being disclosed out there. So yes, we typically wouldn't want to be significantly above our peers.

This year, have you back it and the good question before. I'll read it out to do same answer, could you go on a bit more on detail on your assumptions by assessing valuation and treat assuming commercialization probably AC, et cetera. I think that we were -- I must say time pretty prudent to have a particularly a function satiate -- we would go to value at the main pace common line in an Analyst Day meeting mighy have some indication. Here's an interesting question. I haven't actually seen before. Thank you very much, is -- do you factor in any environmental social cost benefits of portfolio businesses in a or if not, through separate measurement and reporting of the impact on people and planet. -- meet it, debating any environmental social cost benefits of portfolio companies valuation is not. I don't think specifically -- I mean, clearly, if something is got enormous ESP positive impact, it's like the and -- so 1 of the grid yes, we do. There's not a specific criteria on that. So but interesting. Your point about are we measuring reportable. Yes, we are. Remember, there's an impact focus business. And we may have only interest in companies which is going to be impact a positive impact on the world going forward. And we've applied a new full-time ESG director who's working on improving our forte. And one of the things we do we actually incorporated into our bets and incentives is identifying key impact targets for our top 20 companies and in agreeing porting with them and factoring those into our performance in the year. So this is an area but north of par. Well, as a [indiscernible] portent, our near you report impact -- it's very difficult to make it -- you can report to everyone there's a 1 number. How do you report impacting we are getting a lot more work over the next year, trying to some metrics in health not quite to your question, but it's not specifically back into valuation coming investment companies that have no significant impact. And last one, a comment from Paul or worth the try -- l why you think or valuations. That does look like not that far directly 50 minutes like we're there...

David, Chris absolutely. And thank you very much indeed for being so generative of your time then addressing all of those questions that came in from investors today. [Operator Instructions] But David, just really before redirecting those on the call to provide you their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments to wrap up with, that would be great.

I hope you get a lot more of these events as we said during the presentation, we it more communication with markets in general than the shareholders. You can see our upcoming events quite in a way about 10 events in there. So we are exact and then all the ones of [indiscernible] , we're going to include on this platform. So I think again invite to you will see further invite of a further deep dive event probably detect take any linear will be some more detail specifically thank you very much, such attendance numbers. I hope you all have a good day. Thank you. Bye.

And thank you once again for taking the time to update investors today. [Operator Instructions] On behalf of the management team of IP Group plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.