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 during the meeting itself. However, the company will review all questions submitted today, and publish responses when it's appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Greg Smith. Good morning to you.

Thank you very much, Alice. Good morning, and welcome, everyone, to IP Group's 2023 Half Year Results Presentation. And so this is the third time now and this year that we're presenting an update through the Investor Meet Company platform. And I'll come on to cover this at the end of the presentation, but this is part of our continued investment in an active year-round program of IR activities. We're trying to offer greater transparency and enable a deeper understanding of the group, our focus sectors and key portfolio companies. So in time honored fashion, the disclaimer, the presentation will be up on the IR section of our website shortly after the end of this presentation. Just please note the usual disclaimers about the nature of this update and any forward-looking statements that might be contained within that rather dense text. So today's presentation will cover a short overview from me, an update on how we continue to successfully deliver against the strategy that I set out last year. And this will mainly focus on progress in our 3 investment areas, and I'll give some specific updates on 3 of the companies that I highlighted in our full year results presentation is this sort of value drivers things, inflection points to watch the coming year or 2. And Dave Baynes, our CFOO, who I'm joined by, will then briefly run through the actual financial results for the 6 months. Then I'll wrap up with a summary and outlook and then answer questions. And for that part of the presentation, and we'll also be joined by Mark Reilly, who is our Managing Partner of Technology; and Sam Williams, our Managing Partner of Life Sciences. So that the tough technical questions, I will get Dave to direct to them. So as Alex said, please make sure you post your questions in the Q&A section. As always, we will endeavor to cover all of them. We'll try and group them to keep things sharp. So in terms of the overview for today, I mean, the things that you should take away that our portfolio companies are making really strong progress. They are well funded, and the group continues to be financially strong. I want to start by covering a little bit of market context. So I think, firstly, it's fair to say that there have continued to be some headwinds in the first half. I spoke about these at the time of our full year results presentation and to give a little bit of an update on that. So I think that the general global picture is that the first 2 quarters of 2023 have continued to be at a lower level of sort of total value and number of VC fundraises compared to 2021. It's definitely worth saying, there are signs that this is stabilizing. It's around now the same sort of level of activity for about the past 4 quarters and that's sort of around the same sort of level as 2018, 2019, so maybe some signs of stabilization. And there's been little change in early VC round valuations over the past sort of 5 years, if anything, may be a few million dollars higher. Later stage valuations, however, are definitely back to sort of 2018 levels in the U.S. and there's a sort of a lower level of adoption in Europe. Worth reminding, and we put an RNS about this at the time, there was some disruption to the ecosystem from the failure of SVB, but we were able to deal with that from a position of financial strength. And that activity continues to be at multiyear lows. One bright spot, though, is that biotech M&A in Q1 was up 5x at about $50 billion around the world. So that's sort of definitely one of the bright, bright points. So the environment has been a bit challenging, but that do definitely remain significant longer-term tailwinds, particularly for our focus areas. On the regenerative future side, the numbers are large, whatever you look at, but specifically for one of the companies, I'm going to cover later, and the Hydrogen Council noted that around GBP 240 billion of large-scale hydrogen projects out to 2030 have now been announced. And indeed, this needs to triple to more like GBP 700 billion to reach those net 0 targets. On the tech and rich future side, last year, of course, it was AR, VR, XR and market-to-market...

Greg, we have lost your audio. So please, ladies and gentlemen, just bear with me as I try to reconnect. David, can you hear us well? Greg, can you hear us?

Just bear me 1 second, just while I bring Greg. And maybe let me just take control of that 1 second. Let me just come into your machine there. Okay. Can you hear us there, David?

I've got you. We've got you.

Lovely. Thank you.

Can you hear us? Okay. Great. Yes, carry on. Very good. So I don't know how far we got through that, but in essence, I was talking about some very large markets that are being addressed by our sectors. I was finishing on sort of genomics and precision medicine again, sort of GBP 100 million going to GBP 250 billion. I mean, really, these are all big numbers but I think the point of them is just to illustrate that the scale of opportunity to be addressed isn't the issue for our portfolio companies. [ Closer to home ], the last point there on our full year results call, I highlighted this thing around this for the U.K. Science superpower agenda. And I think, importantly, for our sector, particularly, there continues to be quite a lot of momentum around making the U.K. the best place for great companies to start, to grow to scale, and to stay. And that's, of course, while also ensuring that policyholders, pensioners and savers have got enough money for life events and for old age. And I often talk whenever asked about this, about the 3 Cs and having sort of capital, conditions and consumers being needed to achieve this. And on the capital front, whether people [indiscernible] I thought it was very interesting in a couple of reports recently have talked about how the share of U.K. listed companies owned by U.K. pension funds, insurance companies has fallen from 40% down to about 4% since 2000. And crucially, of the 1% of the nearly GBP 5 trillion pensions and insurance assets is invested in unlisted U.K. companies. Now we've been doing a lot of work engaging with various parties on this and the [indiscernible] reforms including quite a lot of continued positive direction on this front, including the pensions contact between many of the U.K.'s leading VC pension managers. So of course, worth pointing out that IP Group is already backed by a number of U.K. pension funds and managers, including Railpen [indiscernible], Schroeders, L&G, Border to Coast we've also got Telstra and Hostplus in Australia. So I think it's really what -- I think the opportunity here is for IP Group to be a core holding for more such funds as well as offering the active potential to access significant private capital. And as a reminder, we currently manage around GBP 700 million of third-party private capital. So we focus a lot of effort here and while we consider the group to be particularly well positioned, well this slide, which I'm afraid it definitely breaks the usual rules of one message per slide. So I'll go quickly, but it sets out why we think that this case. And the simple investment case is the IP Group offers liquid, diversified exposure to high-growth innovation companies across some of the important investment themes in the coming decades. Life Sciences, Cleantech and Deeptech, we are offering investments making a genuine impact. And specifically, we are the most active investor -- the most active U.K. investor in this Deeptech space, and we have a highly experienced team in each of those focus sectors. We've got extensive access to science and innovation across really much of the English-speaking world. In terms of track record, we've created 3 unicorns today. That's Nanopore, Ceres and Hinge Health and we've delivered around a 10% return on NAV per share since IPO [indiscernible] dividends. And impact really is at our core. Our portfolio is very in line with the UN SDGs. So we're quite attractive to that growing pool of ESG and impact investors, including the likes of Liontrust, who are a major shareholder. And we're growing scale. We're about GBP 2 billion of assets now. That's about GBP 1.3 billion on the balance sheet and about GBP 0.7 billion of third-party managed funds in which we earn fees. And I think from a shareholder value point of view, which of course, remains front of mind. We've also continued to support capital returns with a total now of GBP 70 million of cash returns since introducing our new approach to supplemented cash returns in 2021. So we really do continue to pursue our mission from a position of strength. So that overview as sort of context, the financial picture for the first half is as follows. I think first thing and most importantly, the underlying business and the portfolio has made strong progress and that's been well evidenced by a total of GBP 300 million capital raised by the portfolio, of which we invested about GBP 60 million. This actually compares pretty favorably to GBP 350 million raised in the first half of 2022, particularly when you consider my comments earlier on the general VC funding environment. And as you'll see in the release and the quality of our co-investors remains very strong. And I'll talk about 3 particular companies shortly. And the second is that the loss of the half is around GBP 55 million, about 5%. So now, at the 30th of June, it's about GBP 1.27. Now the quoted portfolio, mainly [indiscernible] was actually up by about GBP 45 million in July. So our NAV is a little over 130p per share at today's date or the date of the announcement. And then finally, the group has maintained its financial strategy during the period. Gross cash has actually increased versus 31st of December a little bit, and that's partly as a result of GBP 32 million of cash realizations and then the second tranche of the debt that we placed last year given the challenging investment environment. So we've also tried to give quite a lot more disclosure in our half year results around the funding needs of the underlying portfolio. And Dave is going to cover that in his section shortly. And then finally, we've continued that approach of dedicating a proportion of cash realizations to supporting capital returns, and we're again declaring interim dividend, which can be a little over 0.5p a share. So that's the context and the summary of the results. I now want to move on to that progress. And you will hopefully remember from the full year results, we are fully aligned and engaged behind delivering our purpose to accelerate the impact of science for a better future. And we have a strategy to deliver this. And the key pillar is around accelerating value creation. And the way that we do this is through investment focused approach. I mean our business model is actually very simple. We're aiming to be the leading value add back at impactful early-stage innovation, and we target opportunities. And as you remember, that sort of intersection of societal need, commercial opportunity and IP Group's strength is genuinely [indiscernible] breakthrough innovation, and we use the tech [indiscernible] and experience of our team assess value and risk for all of our innovation better than others. And that leads us to those 3 [ domestic ] focus areas, and I described back in March that each has got quite a distinct and complementary investment profile over the next sort of 1 to 2 years. So let's just take each of those in turn and give a quick update. So on the healthier future side, having sort of consolidated down the portfolio into about 20 core holdings, there are now 12 companies that are targeting key clinical milestones. They're shown and here by stage, we see a couple of them. There's 14 on the slide, a couple of them have [indiscernible] as 12 that are in the clinic. And those 12 add up to about 25p a share or about 40% of our market cap and 7 of those readouts in the next 12 months. You might remember at the full year results, I said 8. The good news is that mission read out positively in half 1. So there's another 7 to come. And the team is very much focusing resource and capital on the delivery of these milestones and driving the commercial value that will arise from successful outcomes with a lower focus on new opportunities. I don't show here, but as a reminder, on the health care side, there's a further 22p per share in Hinge Health and obviously Nanopore, which again is about 1/3 of our market cap, and they are targeting and delivering significant revenue growth. On the tech-enriched side, this slide here is showing the detail portfolio by the focus area on the left and current level of revenues. It's actually the last full year revenues and that's because the value drivers for these types of businesses are generally and one of the key KPIs is revenue and revenue growth. Maybe take 3 of our most valuable Deeptech companies, that's Featurespace, Garrison and [ Teya ]. That adds up to about 10p per share of NAV at 15%, 17% of our market cap, and they are targeting value a region through continued double-digit revenue growth, and they made good progress in the first half towards that. There's obviously a number of promising and early companies. They are looking to grow revenues and many of those, which you'll see in the release raised significant funding plans, including worth noting and Quantum Motion Technologies, GBP 42 million funding, coming up with the largest ever single investment into a quantum computing startup in the U.K. So really good progress there. And then the third, regenerative future. Whether we talk about sustainable investment in climate tech, Cleantech or otherwise, last year, we made a deliberate choice to build on our successful track record and launch Kiko Ventures, a team, a brand, a portfolio focused entirely on this area, and we believe we have the leading team in Europe for this. So current portfolio really is focused on 3 holdings, First Light Fusion, Oxa and Hysata. And again, that's around 20p NAV per share, about 1/3 of our market cap. And First Light has seen good interest, but yet to complete its funding round. And you remember, hopefully, that we heard from CEO, Gavin Jackson at full year results following their GBP 140 million fund raise and appetite for the year. I'll give a quick update on Hysata. I did say at that time that the focus for 2023 is adding new companies to the portfolio. The team continues to have a strong pipeline on that front but we continue to be judicious and measured and we haven't made any sort of brand new investments in the first half. But you can see a lot of activity and some funding rounds, including for OxCCU, which we mentioned results as well, which is a really exciting for the clean fuel business. So that's the summary of those sort of complementary and distinct value drivers for each of the 3 investment areas. I'm now going to give you a quick update on inflection points. So this was the slide. Again, hopefully, you remember that I concluded the full year results presentation back in March, and it shows those focus areas and value drivers, but it also shows a handful of companies that we were sort of noting may well be ones to watch for the next sort of year or 2. And so I just want to evidence the progress in the 3 domestics through an update on one of each of those companies. So I'll start in the Life Sciences space, in the healthier futures space with Istesso. So Istesso is one of our top 3 most valuable holdings, and I genuinely believe one which has the opportunity to deliver huge real-world impact and substantial financial returns. So Istesso's vision is sort of to deliver this paradigm shift in health care moving from disease modification to disease resolution or perhaps in layman's terms, moving from simply treating symptoms to starting to cure disease. And the challenge or perhaps the opportunity here is the conventional disease-modifying medicines, they can slow the pathologic or the symptoms and the sort of functional decline. But they can't reverse disease, and in some cases, may even suppress repair. And another example that many of you, you'll probably be aware in closer times is those people who are on immunosuppressants or dealing with such diseases can become immunocompromised. And so there are lots of sort of existing issues with current treatment paradigm. Now Itesso's approach really has the opportunity to go beyond this conventional approach of disease modification and actually move towards rebuilding damaged tissue. So this could enable patients to not only reduce symptoms, but also reverse their decline, resolve the disease and regain lost function is to fundamentally change the way that patients experience disease. So you will hopefully remember that Itesso's lead compound, MBS2320 is currently in a Phase IIb trial for rheumatoid arthritis. And the market opportunity in this space is huge. Estimates vary. We have it on the slide at about GBP 25 billion, and it includes some of the biggest selling drugs in the world, Humira and Enbrel. RA affected vast number of people and prevalent cases are estimated at about 25 million, 27 million around the world. So it's a very, very significant area. Good news, the Phase IIb continues to recruit according to expectations and very much on schedule for a readout in the first half of the next year. And then the sort of second point I make is at the time of the full year results, I mentioned that the FDA had granted Istesso and orphan drug status and fast track status for another debilitating disease that of lung fibrosis or what's idiopathic pulmonary fibrosis, or IPF. And you can get an idea of how it feels to have the symptoms of IPF by taking half breaths for about 30 seconds or so. And I won't get you all to do it now, but you can -- you start to experience a physical reaction and almost a panic and you really want to draw in and breath. Essentially, this is what sufferers experience all the time as the lung function declines. I mean, amazingly in the U.K., IPF accounts for 1% of all deaths each year, and they are again estimated to be about 1 million prevalent cases worldwide. So the market opportunity is also very big, and we have it at about GBP 4 billion current. So in this context and given the market opportunity and our strategy to focus more of our capital on fewer significant opportunities. In the period, we've invested GBP 15 million into Istesso, with a commitment for a further GBP 10 million in 2024, which fully financed both of those trials. The IPF will be a Phase II. It's going to be commencing shortly this year, we'll announce when it starts, and we're targeting a readout in late 2024. And we believe this will significantly increase the upside value case for the company with the downside limited to that incremental investment amount. As a reminder, we own over half of Itesso, we've invested about GBP 40-odd million, recurring value at GBP 113 million, GBP 114 million, as you can see on the slide. And just as a reminder to sort of the market context, I mentioned earlier one of the bright spots so far was this sort of 5x pickup in biotech M&A in Q1. This included an acquisition of a business called Nimbus by Takeda, which is a GBP 4 billion acquisition upfront with a couple of millions of milestones. Nimbus is developing a JAK inhibitor, I think for a TYK2 inhibitor for the autoimmune condition, psoriasis. And this was a Phase 2 company. So -- and it's not a direct read across, but it's at least indicative of strong interest in its general space. So great progress and with Istesso, we're fully funded to deliver 2 Phase II trials next year. So key value inflection points for the group. I'll now share tech a little bit and talk about a company called Garrison. Many of you might well be less aware of this and it's been sort of quietly delivering strong revenue growth, though. And so I wanted to highlight their progress as one of those value drivers we're watching. To sort of -- to frame the problem that Garrison solves is one that I imagine pretty much everyone on this call will be able to relate to, primarily mitigating against sort of ransomware and phishing attacks. People will probably be aware that the average cost of the data breach in 2023, according to IBM was $4.5 million. That's a very significant market. There are various ways to measure it, but we certainly have a TAM at north of billions of dollars, certainly more than margin up to be no constraint on Garrison's growth. And what Garrison has done is they have developed and are selling a new security product, and it's far more effective than the current solutions. Indeed, it increases your -- and the sort of the success rate of preventing malware attacks from about 30% up to close to 100%. And the solution is sort of quite simple in concept, but very difficult to deliver technically. I mean, essentially, they have a hardware appliance, and it sits on the edge of a corporate network. And when employees browse the Internet, the content sort of goes through the appliance and essentially, you use video technology to show the employee the content on the Internet without any direct connection. So it's not possible for malware a spyware, et cetera, to get into your corporate network. Now until reasonably recently, Garrison solution was on-premise. And so key customers were some U.K. and other governments, and they wanted ultra-secure browsing and those had a number of blue chip customers such as Lloyds Banking Group, Fujitsu, Vodafone business. But in the last year or so, Garrison has now launched a cloud product, Ultra, and that's seeing strong early traction with customers. So during the first half, they have a year-end to March. So during the first half of this year, Garrison hits annual revenue of GBP 19.5 million, and that's 64% year-on-year growth over the last 4 years. So it's growing very strongly into a very significant market. And the company completed an oversubscribed funding round during the half, bringing in L&G ventures, Legal and General Ventures as well as B2C. We invested about GBP 4 million in that round, and we own just under 1/4 of the company. So the plan here is to support that business through continued revenue growth and it will improve significant value as a result of doing so. So that's an example of progress in the tech-enriched future side. And then on Hysata, I mean this is genuinely one of the most exciting new companies to emerge from our sort of university sourcing over the last couple of years, it's undoubtedly the case. And those who joined the half year results this time last year, we'll have seen an overview by CEO Paul Barrett, and backed by the completion of the funding round that they did a $42 million Series A, back in July last year, and that's available on the IR section of our website if you would like to go back and have a look at it. And the vision of this business is to completely redefine the economics of green hydrogen and it's a vast market opportunity. I mentioned those numbers from the Hydrogen Council and McKinsey earlier, that's GBP 700 billion to 2030. I mean overall green hydrogen is expected to contribute about 20% of the total abatement required to 2050. And it's particularly relevant for the [indiscernible] sector such as steel, chemicals and maybe and heavy transport and electrolyzers are the key technology for producing this green hydrogen. And the real challenge at the moment is that current electrolyzers are complex, they're expensive and there's only really be incremental operating efficiency improvement over the last 50 years. Now Paul and team aim to address this huge opportunity for a completely novel approach to hydrogen electrolysis for capillary-fed electrolysis. They published in nature with our support and a demonstrated 95% system efficiency compared to the current best of around 70% to 75% efficiency. And so probably perhaps unsurprisingly, given us the market opportunity and a huge differentiation, I start to receive unprecedented commercial interest for potential customers, like of a scale that we haven't seen in early companies like this before, a multi-gigawatt scale orders, of course, providing the technology can be delivered at scale. So over the last sort of 12 months since that funding round. They have done significant work on system development and the manufacturing is highly scalable. It's got abundant raw materials, and we plan to do large-scale manufacturing through contract manufacturing. And the company, you'll see on the slide there, it's also attracting really world-class talent. They recently announced the former Chief Commercial Officer and the VP as their Chairperson. They've got Australia's former Chief Scientist as the Chair of the Advisory Board and they're attracting talent from the likes of sort of Apple and Tesla and into the engineering team. So a really world-class team. And in terms of progress, they hit a really challenging technical milestone in the period. Now they pull details of which they're going to announce or I won't steal their thunder, but it was essentially connected to replicating the performance of that single cell at a greater scale. And I will say this usually takes electric industry companies for several years. So for the team to do it in such a short period of time with relatively limited resources and really remarkable achievement. Not only that, they announced around $10 million of grants from the Australian and German governments. And so while the series A funds, the company took sort of mid-2024, we do expect the exceptional progress to trigger an earlier Series B, and there's been a bit of press speculation on that front. And we own about half of the company and given the significant progress, we took a small uplift of GBP 8 million to have the total value of our holding, which is up to GBP 31 million. We've invested about GBP 13 million into the company. So really strong progress across those -- some of those companies that I highlighted back in March. And with that, I will hand on to Dave for a summary of the financial results.

Excellent. Thank you, Greg. Yes, I'm David Baynes. I'll just briefly take you through the financial numbers. As Greg has already told you, we've strong cash position, about GBP 250 million of gross cash. That's actually more than we had at the year-end and more than we had at this time last year. So we managed to achieve that relatively for 2 ways. We had the debt solvency, we'll talk about it a bit that's allowed us to draw down GBP 120 million of debt. And we've also had the exits as planned, about GBP 33 million of exits coming out. Again, as Greg has already said, we had a loss of about GBP 55 million in the period. And that's why you see the NAV reaching slightly from sort of about GBP 1.32, GBP 1.33 to about GBP 1.26, GBP 1.27 per share. But again, also, as Greg has pointed out, a lot of that was due to Nanopore and actually Nanopore reversed it in July just after the results and actually have made a profit of GBP 42 million in the last month. So actually as we stand now, much of that actual loss have been eliminated. We're in a strong financial position, and that's why we're continuing with our dividend slightly up from last year, this time last year at 0.51p. So diving down into that GBP 55 million loss, what was it? But was basically GBP 44 million loss in the portfolio and about GBP 10.5 million of overheads. And if you look at that, again, already made, but actually about GBP 30 million of that loss came from the credit portfolio. Most of that was Nanopore, GBP 28 million of it. Not so obvious is the element of the foreign exchange. Some of it is a foreign exchange loss, you've got there, about GBP 11 million. That happened because the pound strengthened. And I want, of course, as the pound strengthened, it means you're getting less for some of our overseas denominated assets. It meant the U.S. platform and portfolio and the Australian platform of that portfolio have actually sustained a foreign exchange loss when you convert them back into British pounds. There are other small -- a small reduction in the LPs actually the private portfolio, small profit impairment. And that was because we've taken a small uplift on Hysata, and that's also reflected on the other side. Nothing particularly unique of that performance of any divisions, but actually, Cleantech did achieve a small uplift in the period because of Hysata point. When we look at the net assets in the balance sheet, as you would expect, that small loss of GBP 55 million, relatively small compared with NAV that is. The NAV hasn't moved by much reduced by GBP 61 million, which is the loss plus the element of the dividend that we've paid out in the first half of the year. Perhaps that side there on the right is a little bit more interesting, that GBP 1.26 per share. When you look at what makes that up, 10p is net cash. And then you get just the 5 assets which we much touched on today. You get to 62p. Well, we started trading at 60p this morning, I think about 58p. So a whole of the market cap is accounted for by cash in those top 5 assets. Everything else in that portfolio means a whole of the U.S. platform, the Australian platform and another 88 companies are actually currently not factored in the talk about that 71.5p. No enormous change in portfolio composition and concentration from [indiscernible] expected to be. Nanopore is down a little bit, I think it was about 16% a year end, a small amount. You pretty much -- we put Nanopore and Life Sciences together about half the pulp value in Life Science type opportunities. The other thing to note, and as we said at the year-end, Cleantech beginning to grow at 19% of the year at '21 beginning July. I think we expect to see that continuing that pattern. And on the right there, as before, at the year-end, about 74% of our value was concentrated in the top 20 assets. It's now 70% effect reduction in Nanopore again. But it shows that actually despite having a very large portfolio, which is in the nature of the model, actually, a lot of the value is concentrated in a small number of assets. I always say at this stage that cash flow kind of tell the story of the year. And I think that's the same as always. We know that cash is slightly up on the period. And that's really made of an investment of about GBP 60 million. Now to give you a guide, we'll do a similar amount slightly less in the second half. As a guide, GBP100 million to GBP 110 million, probably invested in the year, slightly up from last year, which was GBP 93 million. And that's been entirely funded by obviously drawing down the second tranche of that as a GBP 60 million of way of looking at it. And then the realizations of GBP 31 million. Paid for all of the dividend. It paid that GBP 10.5 million worth of net costs and any working capital. That's pretty much how the cash flows work out but we're just slightly making the point. But those gross costs were actually GBP 12.1 million, that pretty much exactly the same for the period. So cost to remain pretty consistent over the 2 periods. I won't go on about this slide further. We know this. We know that the cash is strong. We know that thing through the liquidity in Nanopore actually got that GBP 450 million of liquidity and cash proceeds are on target. And we have this well-funded debt position. What we know -- people know less about, I think, is how well the portfolio presented. It's interesting if you look at that. So if you look at just the companies we hold above GBP 4 million, that actually makes slightly over 90% of the portfolio by then. Well, 1/3 of that is funding profit that, that doesn't mean they won't make money. IPO, for example, makes money, but they actually have to. They are funded to profit 1/3 of it. And slightly moving up market [indiscernible], only 16% of our portfolio needs to raise money over the next year, that's between now and the end of the next interim, technical 11 months. But over the next year, only 16% and it's not going into the second half of '24. You start getting a significant larger number and then the rest of 22%, 24% until 2025 and beyond. So I think that shows that not only it's the [indiscernible] is strong, but the portfolio companies are strong. And hopefully, with the kind of the turn in the tech market we saw really after the end of '21, that will be into its third year before we start trying to fund some of these companies. One other point I want to make at the point that we've made many times before, but no harm repeating ourselves. We consider the portfolio despite a significant discount on the share price side is very fairly valued. The auditors always say we are marginally cautious in our valuations. And we did actually do a deep dive seminar on valuation, I think a lot of you participated in and thank you for that. And really, the message is the same. About 16% of our portfolio is valued mark-to-market. And then you've got 35% on a funding round with that adjustment, 23% on the funding where we've made some slight adjustments up or down. But it means 75% of the portfolio is either publicly marked on a relatively recent funding valuation. And the rest of the portfolio, even though valued on revenue multiples, a very fair way of valuing companies and discounted cash flows. So actually, we have a well and fairly value portfolio and to [indiscernible], probably worth chance having a quick look at what we've seen out in the market in terms of how our companies have performed. If our companies were being carried at too high value on the private side, you'd see it when the valuation when they did fund ratings, could you see when it will sustain the prices? So for the half year last year, this time last year, there have been 13 fund raisings. And you can see about half of them were actually up about 40% flat small amount down. In the second half of last year, around 16 fund raisings, 75% were up, a relatively small amount of that [indiscernible] down, and we've seen that again. But here you are again. You've got about 70% plus they're actually still being up, a relatively small number are flat or down. That's only about 2 companies out of 14 are actually down. So that seems to support our premise. Interesting good of our position is kind of the leaders in the U.K. in this space. We get very good insights. Parkwalk business as well, and they've made 9 investments in the period, 6 are flat, none down. So I think we feel pretty comfortable with our valuations in summary. So it's my last slide, and then I'll summarize. This is probably the last time I'll talk to that -- we negotiated this last year. We've now drawn it all down. We've drawn down the second tranche. The point it's probably worth making, we did have a good time in the cycle. We've got fixed at 5.25% interest. At the moment, the average we're getting on that fund deposit [indiscernible] deposits for a while, it's 5.5x. So we're actually getting more than we're paying. And on the new deposits we're making, we're getting 6.1x. So obviously, that's worked very well for us as a self-funding debt. So in a very quick summary of what I said. So we know what we've been, number 1, we're well funded, 2 our portfolio is well funded and 3, we believe our portfolio is fairly valuable. I'll hand back to Greg.

Thanks, Dave. So I'll quickly summarize before we get on to questions. So firstly, a reminder of the investment case. I mean, the particular investment case, we offer liquid diversified exposure to high-growth innovation companies across some of the most important investing fees over the coming decades. Life Sciences, Cleantech and Deeptech and those are investments making a genuine impact. And then I think we're particularly well positioned for this sort of science superpower and long-term capital agenda. In terms of the key points and from the half year, as Dave said, NAV was down a little bit to the half year, but it all will be flat, but today's date is around GBP 1.30. Our portfolio companies are making strong progress. As Dave just described, they're very well funded and the group continues to be financially strong. And I think maintaining that at a sustainable position for IP Group and is something that we consider is particularly important. We don't want to go back to the days of raising capital every 2 or 3 years. And so we have taken significant steps to ensure that we are self-funded in that regard. And then a quick reminder of the key value inflection points, and hopefully, recapping a little bit on what I said earlier. You've got about 25p or about 20% of NAV in which market cap in 12 [indiscernible], 7 readouts in the next 18 months. And about 1/3 of our market cap in Nanopore and [indiscernible] they're both growing very healthily at double-digit revenues, it's about 10p. The NAV in 3 companies delivering double-digit revenue growth in the Deeptech space, and then there's a further 20p in First Light, Oxa and Hysata. So looking forward we believe that supports the fact that sort of organically, the group is positioned for a really quite transformative period over the next 12 to 18 months. So with that, I thank you all very much for your attention, and we will now turn to questions. And Dave [indiscernible] Looking through the questions, there's a few looking to through the questions. There's a few detailed ones that people might have with things like value of specific companies. And I might suggest that we just reply to those and to the individuals in person, to the platform.

Happy to be guided. Sounds very sensible. Yes, so we'll have a go. I have a good timing, well done, we aim for 40 minutes. We're at 39 even with that slight glitch, sorry about that. I'm sure my computer will get the blame. So the very first question, at the annual results in March, it was stated that the core objective of the Board was to reduce the NAV discount down to the share price, which is at the time stood at 59%. It's not much different now. Can you please advise what steps have been taken to reduce the NAV discount down? Where do you believe you've delivered upon this objective as of today. I'll hand that to you, Greg. It's a tricky question there.

Yes. Look, this clearly is the challenge to the business at the moment. The portfolio is going really well. We put ourselves in a sustainable financial position. And currently, we have a significant discount to NAV. So I included a comment on steps that we've taken in the first half or in the 3, 4 months since we are 5 months since we announced our full year results. And objectively, we don't think that we've delivered on that objective, but we continue to significantly drive the sort of the input activity should we say. So firstly, we've continued with the approach of supporting cash -- supporting our capital growth with some cash realization, the proportion of our realizations in the period. And it's that -- we declared an interim dividend and we've significantly increased our MRR activities. I've come up and talked about that. We did a big event at the Science Museum, and we were really sort of delivering to the core leadership there around how the U.K. can support the U.K. and innovation companies and showcase a number of our businesses. So you can get engaged with the [ CBC ] time around those companies and their potential. We spend a lot of time engaging with new shareholders and existing shareholders. That includes across Europe and the U.S. will be up to various other destinations, and we've refreshed our brands and entity. So they're all relatively small things. And I -- fair to say that objectively, we haven't achieved that yet. But we do believe that the best way to deliver that shareholder value over time is to continue growing the NAV per share and the -- which we will do the supplement with cash. And if we have a huge realization and we'll obviously we'll think sensibly about what we do with the money and all cash. So we want to be sustainable.

Thank you. You're going to remain in the crosshairs for some time. I think most questions are like CEO guidance to me. Is Istesso now becoming a major holding? It says nearly 20% to date of market cap. I see yes, point to this transit market cap. Any plans to reduce the shareholding at Istesso?

Not ahead of the results that [indiscernible]. It's plausible that we might raise a little bit of incremental capital. We fully funded the trials. We could do a bit more with a little bit more cash. But in essence, we put the business in a position to deliver on those 2 critical milestones and shareholders will benefit from the risk reward of that, which we think significant on the upside. So no immediate plan.

So again, for you, I think. Any update on the China fund? There's a small part of that?

Nothing more specific than what we've said in the results. We haven't calculate the China fund and maybe we continue to look at it.

Again, an area of your expertise. Importance of Verizon to U.K., any lobbying could be in that area?

Yes. I mean this all falls into the general and -- the general sort of those 3 Cs, I often talk about the sort of the capital the conditions and the consumers on the condition side, definitely Verizon is one that we significantly lobbying, it's probably a bit strong, but certainly when we've spoken to a number of ministers involved and outline the importance of this for our sector. I think it is -- it offers a significant benefit to the U.K. to be part of a more international operation. And Verizon looks like it is the best one of those, the government talks about sort of a credible plan B. So we do continue to push on that front. It affects and fundamental research and affects the ability of some of our companies to access both capital and talent. So we certainly have been speaking where we go on that front.

Next one might fall into the category of detailed question. I'm going to give it to you anyway. Is it so difficult to sell the small staggering 1.8% in Hinge, worth about [ GBP 50 million ], which would provide good funding for the group. I sense that it is locked in. Question, it's value -- it's a relatively small stake is what it is and basically it's asking we do [indiscernible].

Well, I mean it's probably not appropriate to comment on specific stocks, but the point is well made about good funding source. I think when we've given large-size update before we have said that that's one that we would consider realization for sure.

Next more general, and its question, it traditionally comes up a lot as I'll definitely give this you, Greg. How confident do you feel on the outlook, more importantly, perhaps, and why not buy shares back in the company given that varying share prices?

Yes. So this is a discussion that we have a lot with the major shareholders, and we'll be up on a roadshow again over the next couple of weeks. And refresh that view. And our view is that there is more of a premium around being a sustainable business. We generally invest in private companies, where it's not trade in and out of our businesses like we could, if you were running a listed investment trusts. And so we're very confident in the prospects for the future and buying our shares would have an incremental impact on the NAV per share and it's obviously attractive. And I think the appropriate thing to do and what we've set out is when we have a significant realization and a proportion of that is used to support our capital returns, and we've maintained some dividends, but clearly, we have a big success, and we would reduce that with -- to create shareholder value in that way for sure. As a shareholder myself, I completely agree with that.

Probably for me to do a little bit of work, but not much, GBP 60 million invested in the first half. What was the second and third largest investment [indiscernible]? Well, you're right, we invested GBP 15 million. And as you can see, we've potentially committed up to GBP 25 million, so that both those clinical trials are fully funded as required and to be launched. The second one was an investment we made in our U.S. platform, about GBP 6.6 million in the period. And the third is Hysata. We put 4.7%, both obviously sensible places to put our money. Next one, a little bit technical [indiscernible].

I guess the expense would just say to the person who do that question. Thank you. We do appreciate all the detailed comments just to say that the largest private sector investments and the largest private sector source of cash proceeds are disclosed in the release.

Yes. I quite understand, we have to go quite a few pages back to get -- you may not get that page, which we entirely understand. It's quite a lot of in there. Can we explain the voting structure with Istesso, specifically how you have less than 50% of votes with 56.5% shareholding? So I have a quick word to that one. Yes, you are right. It's not uncommon in essential structure is to have different classes of share with different rights, quite frankly. Sometimes they have additional present, sometimes funds have different voting rights. In our case, we have about 43, 42.8 voting rights in that company at the moment. And that's just a product of the investments we've made and the agreements we've reached during that period. As of any venture investment, you still have relatively significant influence compared with that's a public company because there were always restrictions in the shareholder group tell things like what a company can do such as selling itself, entering new agreements, raising money. So it's probably less pertinent than it might be in other companies. And that's why that happens. Two questions from you, yes. Right. Nice to have you here. I haven't been this one yet, so we'll find out quite a strong half in investment funds. Is that more due to unusual high funding needs of our holdings? Is it more opportunistic? [indiscernible] attached to invest in several of the attractively valued opportunities. Question number one. Second, given the delay on the First Light Fusion funding round, have your valuation expectations changed? Are you still confident First Light fusion value in your books allows for a fair value gain post funding. So I would go on those a little bit like my area. It is quite as strong. But actually, what we've done is we've managed our cash very well. It's allowed us to maintain our level of investment. So from GBP 63 million to GBP 93 million probably GBP 110 million, yes. So it allowed us to support a growing portfolio. Well, being sensible about the amount we invest, as I explained earlier in the presentation. So it's an increase in last year, but not too sizable. And it's just it's having us in difficult times, expand the portfolio. It's not necessarily because our companies have necessarily needed more. It's more us taking the opportunity to invest in bigger companies, I would say. On First Light Fusion, our valuation expectations, I think the -- in this current market -- ever since market turned at the end of '21, the likely value in its round, we have tempered a little bit but we still feel very confident it's like to raise money run about the day to we carry it at. Obviously, it fundamental [indiscernible] for 2, and we'll have to review that later. That's it. There's another question about does decision not to buy back own shares reflects sharp fall in net cash in half 1? Not really. Our cash position is strong. Hopefully, I understand the question. As we explained, no, I think Greg will explain why we haven't really been buying back shares at the moment.

Yes, I think that was the net cash point. It's just -- I think it's worth making we've got the debt are exact [ 27, 28, 29 ], so we are obviously look at net cash and gross cash, looking at the ability to invest. But our forecast realization in some of those [indiscernible] is clearly intended to maintain a sort of sustainable position for group.

Okay. Next one, I'm not quite sure we did mention. You mentioned that investment so far this year has been minimal. I'm not sure I have actually about GBP 59 million thing quite good but you were looking to invest in new companies during the second half. Do you notify shareholders on this? And when you have invested giving details of the reason and potential of such investment, if not why not?

Yes, yes. So thanks, Russell. That comment was -- I'll just sort of covering and what I'd said the focus was for the [ TCO ] team on the Cleantech side, and that's new, new companies. So the way that the funding for our company's often works is relatively small initial investment and then we scale the investment in [indiscernible] as the company set milestones or preferably they're not hit those milestones then we are able to close them relatively early. That's a core part of the model. We tend to not announce individual new investments because of the quantum compared to the market cap, et cetera. But we do try to give details of those, again look at our annual report, we get quite a lot of detail on the investment case for a number of the new businesses that we've made in the year, setting out exactly that the potential and why we backed it and there was one in the Deeptech portfolio, again, that we've described in the RNS during this period. So we tend not to do an RNS on each individual new investment just because of the quantum there out would be, but we do update at the full year and the half year. And so hopefully that helps.

Yes. I have moved over a few questions as you say, a technical or company specific. The question about Garrison being close to breakeven. Mark, are you there? I can't see you. I don't know if you're there. Do you want to refer to you this?

I'm here, yes. So look, I think we ought not to disclose the specifics of recent numbers on behalf of the company. I think that's up for them to release and they haven't done yet. They have allowed us to talk about their revenue, which, as we said, is close to GBP 20 million this year. And their past year revenues are on company's house. So that's public information and their margins and corresponding loss around company's house so you can see the trajectory of that business. But look, it's doing very well. It's moving towards a profitable position, and we're very pleased with that.

Great. Thank you for that. Thanks very much. The question about what happens to the valuation of [indiscernible] very little to any change by very small amount? A question about Istesso, what the value was at the year end? That's about GBP 12.3 million. The question about what's the mix of new investors during recent funding rounds of portfolio comment, how many of them are [ VCs ] compared to non-fee? Would you like to refer to that, Greg? I know there's information in the release.

Sure. Yes, there's a bit of -- so again, we're trying to put information in release both around specific companies where they release the information and also the overall mix of the types of investors that are investing in our portfolio companies. So you could -- I mean the general trend that we've seen and that the market will see more generally is that there's been a bit of a reduction in financial investors and corporate VCs that have maintained or even increased in some cases. But I'm talking to very generally across the sector. And if you have a look at the nature of the investors in our brands, it ranges from people like L&G Capital, venture fund, [indiscernible] , Garrison, L&G sort of specific venture [ vehicles ] or indeed. And there's quite a lot of customer and corporate investment in the [indiscernible] for example. So Mark, I don't know whether you want to add anything on -- whether you're seeing anything particularly unusual or different in your companies?

No, I wouldn't say so. I think what we say to [indiscernible].

Thank you. Next question, perhaps I'll answer this one. Net cash has fallen about 42% over the last year. Do you expect the group to move into a net debt position over the next 2 years? And what sort of gearing do you as comfortable? The answer I'd give to that is actually, we're looking not to be in to net debt generally. We're building on our capital allocation markets not to do so. Clearly, we plan for it for a few years. We are pretty conservative approach on that, and we've managed it well to date. We have the advantage, of course, we got to decide how much we invest in the company. It's allowed us to control our cash flow relatively well, actually. So regards to that, no. As for gearing in general, we don't plan to do any more than beyond that. I think that pretty much answer that question. About 10% of net is comfortable for me. So it's about 1.3, 1.4 of NAV, you can have about GBP 140 million of debt. It's when that NAV grows, it's quite like to things like Itesso and Hysata or Nanopore, that might give the opportunity to slightly increase that gearing level, but I wouldn't personally want as a CFOO want to go but about 10%. I think the Board agrees with that. Quite a good question. All good questions, but this is a good word I'm going to give it to you, Greg. Given the IP discount, what are the main reasons you get from potential new investors on why they're not investing in IP?

Yes. I mean we're trying to make it as difficult as possible for them to give such reasons, but clearly, people are still with training at a discount. So the one of the most common at the moment, I'm using Berenberg data here. So I hope it's right to do so. This is but one of the most common reasons is that it's not the market for these types of investments, seems to be quite a common response to the positions. So as you see, I'll try to give a bit of market context that shows that we think that the venture fund environment has improved somewhat. And clearly quoted markets that has quite run particularly on the tech side in the U.S., albeit focused on another company. So I think it's -- so that does tend to be one is around we could make it clear of the success that we've had to date, the track records that we're trying to build into our reporting more of the sort of typical VC type metrics, so things like we tend to try to quote the net return on NAV over the entire period. But as we move towards having the sectors in place, for sort of 3, 4, 5 years, we'll be starting to disclose the IRRs of those sectors and of course, we're doing individual companies as well. So that can be one. And another one that we hear is it's quite a complicated story to get your head around. And so similarly, part of the logic for the strategy is to help to drive to greater value creation but also to make a story to [indiscernible] digest that sort of simple investments will impact across those 3 themes. And with those 3 key value drivers is trying to get it sort of as simple as possible. So I think that's probably a few of the few of the reasons it's there.

Yes. Down to my last few questions to be going until the end. There's one that's a statement saying I think you should continue not to do share buyback. Obviously, an opinion. It's a thing that people debate about long and hard. How big a stake in IP Group is held by our staff and directors? That's sort of fully disclosed in the documents.

Yes. I mean it's fair to say that we have a policy, which I'm definitely building towards and to have, I think it's 3.5x my salary in IPG shares I continue to buy shares periodically half of my bonuses deferred into shares and all of my long-term incentive is in the form of shares. So I'm very aligned behind having a shareholding and making our share prices as [indiscernible] as it can be.

Yes. And I think I'm in the same place. It might be an free time charters, but I'm a similar, very similar place. Quick question, quick FX question. You mentioned the loss due to FX. Do we have a [indiscernible] FX. Haven't normally hedged FX because we also had commitments as well. So it's kind of self-hedging traditionally let you use dollars when you're investing in these other territories. We have though hedged in a case, for example, an exit in the U.S. and hedged on that foreign currency risk. So it's mostly been self-hedging and where it hasn't, we have we have done so to answer that. And I think this is the last question. Given that IPG is a small cap category, does that mean you're excluded from the mandate of institutional capital? So how can you better attract more institutional capital to the shares? So last question, Greg, can you answer that one?

Yes. Great question. I mean we for a relatively small cap company. We've got quite a few blue-chip share registered -- the share register at the half year is in the back of the Slides -- it's in the back of the presentation, so you can see. I mentioned earlier that we quite a number of institutions, one of the other challenges that we face a bit at the moment, it is quite circular itself for billing is that the because of the size of the market cap and because we've got quite a steady, sticky top sort of [ 10% ] shareholders, the proportion of our free [indiscernible], which is liquid and therefore available to trade means you've got quite a deal. Share price is not uncommon in the U.K. market at the moment, see earlier comments on equity ownership. But we do [indiscernible] against people who have dating liquidity with tolerance would like to have exposure to venture -- listed venture who wants the better price. One of the things we are mindful, obviously, you might have seen there's a couple of other smaller [ vehicles ] very similar to what we are doing and generally speaking when you get down below sort of GBP 100 million or GBP 200 million of market cap. It's very hard to escape from that to scale and got this [ vehicle ] is quite important, not to the detriment of forming [indiscernible] stretch of imagination. And in terms of how do we better attract institution capital, clearly, we go after the long-term pool. So pension funds and sovereign wealth funds, family offices and particularly, as I mentioned earlier, the ESG and sort of impact focused on we don't market ourselves as a sort of regulated impact stock. But clearly, the underlying drivers of pretty much every company that we have in the portfolio is delivering genuine real-world impact. So that's how we position it with those.

I think we got a quite a perfect time. We're 1 minute past. We [indiscernible] good judgment. But -- and a couple of questions, not many about 4 we haven't answered, but we will make sure we do those offline specifically about companies or whatever. And I will just, therefore, hand back to Greg for the final comments.

Thank you. So I just wanted to very quick. So I mentioned this at the start, and it points to this thing around how do we make sure we're attractive to institutional capital holders and indeed, that we can help investors to understand what's in the portfolio and how we go about delivering value. So we have a very active program of events. And you can see the 5 events that we've already completed this year. Hopefully, the investor update with Gordon and Peter on the genomic space was good insight into that space. And these half year results, we are doing virtually as always. And we've got a Deeptech event. We've got an ESG deep dive, ESG impact deep dive and we've got a Cleantech event coming up. this half, and we will probably be looking to redo our Deeptech Conference in Asia and with our portfolio companies in the first half of next year. So very active in this space. Yes.

Greg, David, Mark. Thank you for updating us today and for addressing all those questions. Could I please ask investors not to close this session as you will now be automatically redirected to provide feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of IP Group Plc, we would like to thank you for attending today's presentation, and good morning to you all.