IP Group Plc (IPO) Earnings Call Transcript & Summary

Okay. It's now 11:00. Therefore, I now declare the 2025 Annual General Meeting of IP Group Plc open. I'm Douglas Flint, the Non-Executive Chair of IP Group, and I extend a warm welcome to all of our shareholders, those in the room and those joining us online. With me are Greg Smith, the Chief Executive Officer; David Baynes, the Chief Financial and Operating Officer; and our 4 Nonexecutive Directors, Dr. Caroline Brown, I can't see you, stand up and here you go; Heejae Chae; Aedhmar Hynes and Anita Kidgell, and finally, Angela Leach, who is our Company Secretary and the Company Secretary has advised me that we have a quorum present. Therefore, I can now declare the meeting formally open. Let me make a few remarks, and then I'll invite Greg to make a few remarks, and then we'll get on with the business of the meeting. First of all, a note on succession planning. In the AGM notice, we drew attention to the fact that the Nomination Committee continues to be mindful that a number of directors, including myself, were approaching the 9-year maximum term over the next couple of years. And therefore, the committee was, therefore, planning succession to ensure that there was a suitable sequencing of transition that combine the appropriate continuity and handover periods with finding the appropriate candidates. In this regard, we agreed it was appropriate that the Chair succession was considered early so that an incoming Chair had the opportunity to play a meaningful role in the subsequent Board refresh that would take place. So accordingly, the process for my own succession is now well underway under the direction of the Senior Independent Director. I am not involved in that quite properly, so that process is ongoing, and therefore, we can't comment further on an ongoing process, but we will update the market at the appropriate time as soon as we have anything that is required to be said under our regulatory obligations. Having got that out of the way, just a few comments in relation to last year. As I noted in my statement on the annual report, we recognize that the appetite for higher risk early-stage assets across the U.K. remained cautious and was going to remain cautious, and we adjusted our investment plans accordingly to make sure that we harvested the cash capital that we had, and we concentrated on our most important high potential portfolio companies, particularly those that had a good prospect to deliver a cash return in the near to medium term. In terms of priorities, recognizing the stubborn gap between the reported net asset value or NAV per share and our share price, we, the Board set management a number of priorities in 2024 to address or attempt to address this disparity. This included what I just said, prioritizing portfolio companies that had high prospective early or medium-term realization to demonstrate the value creation from the investment activity, pursuing third-party co-investment transactions to validate the valuation discipline and by bringing in co-investors demonstrate that the model is attractive, not just to people who work in the company and attracting that way third-party funds to add capacity to our investing activity. Alongside this, we saw fresh investors to the public company and improved the operational gearing of the company through better cost performance. We took costs out during last year. So there were good things and bad things. In terms of successes, we had the highest cash value realization in our history from the sale of our stake in Featurespace, which generated disposal proceeds of GBP 134 million, of which GBP 119 million was received in cash before the end of last year. Total proceeds in the year from Featurespace and others were GBP 183.4 million, and that was 5x what we realized in cash in the previous year 2023. As a consequence of that, our gross cash at the 31st of December stood at GBP 285 million, which is an interesting number against the market capitalization at that date of GBP 525 million. We structured and executed a partial secondary sale of shareholdings in 6 of our portfolio companies, which realized $15 million of cash at an aggregate value modestly ahead of book carrying value. And part of that was also to evidence the integrity of our valuation processes. We secured a further AUD 125 million co-investment commitment from Hostplus, who is one of our key partners, our principal partner through the Australian business. And we completed a restructuring, as I said, a reorganization of our business that will reduce ongoing costs by AUD 5 million annually or some 23% of our cost base. But there were disappointments. Our largest portfolio investment, Oxford Nanopore, fluctuated in value significantly during the year, losing over half its value in the first half and then recovering a decent portion of that in the second half, but it was still down 38% over the year as a whole. Management with the Board's strong endorsement, encouragement and given our position as one of its largest shareholders has spent considerable time supporting Oxford Nano on ways to address the volatility in their share price and to drive actions that could lead to a recovery in its value for all of their shareholders. Although widely anticipated, we were frustrated throughout last year that Istesso which is our second largest portfolio holdings, was not in a position to release any data from its Phase IIb rheumatoid arthritis study with its drug Leramistat during 2024. However, on the 11th of February this year, Istesso was able to provide an update, which was both disappointing and at the same time, encouraging. We spent considerable time in 2024, seeking to attract private capital for a scale-up fund, and these things take longer always than you think, but we were trying to build up commitments, thus responded to the fact that many pension funds and others have made commitment pursuant to the so-called Mansion House Compact and now the updated Mansion House Accord and other government-sponsored initiatives to support growing innovative U.K. businesses. And again, in the statement yesterday from the chancellor of the support and money to go into U.K. science and innovation businesses was encouraging in terms of what was committed. And while we didn't finalize a scale-up fund in 2024, we're optimistic that the work done and the progress made and the discussions that continue to be in train are hopefully going to lead to a creation of such a fund in 2025. But obviously, we're dependent on our counterparts in terms of their processes. But I think --I have to say personally, I think the commitment to the Mansion House Accord and what the government said yesterday give us a bit of a following wind. And public capital markets in 2024 weren't helpful to IP Group nor to most of our peer group, that doesn't matter to us as much because investor appetite for small-cap companies was muted. And indeed, many of the funds that were devoted to small-cap companies because of lack of interest wound up during the year, and that led to selling pressure, people have basically closed those funds and sold their shares, including IP Group. So as we entered 2025, undoubtedly, and again, stressed yesterday in the chancellor's remark, the need remains for scientific innovation to address many of society's urgent channel -- challenges. The government in the U.K., as I said, is embracing this ambition to place U.K. science technological excellence at the heart of its growth agenda. And public markets at the moment, however, are a bit slow to support this ambition in terms of providing long-term venture and scale-up capital needed. But we do remain confident that there is momentum towards this ambition. And as a consequence, the substantial unrecognized value within the portfolio that we can see will begin to become more evident to others. So the principal objective for the coming year is to harness what we believe is a strong desire among U.K. institutions to support this segment of the U.K. growth story. It's in their interest, it's in our interest, it's in the government's interest and configure our business in whatever way is needed to capture that trend and be successful. So let me hand over to Greg for his comments.

Thank you, Douglas, and thanks, everyone, in the room for coming. Very good to see a number of our shareholders here, many that I recognized from last year and the years before. So very good to see you, and thanks to everyone online for giving your time this morning. Very much appreciate it. I'm not going to make loads and loads of comments because I've covered a lot of the material in the full year results presentation, again, that we did via on the Investor Meet Company platform. So there's a full 1.5 hours of Dave and I talking if you're that way inclined. So I won't repeat a lot of that. I thought for those who didn't get a chance to listen, I'd just summarize the key messages. And I think Douglas has talked about something of a challenging environment for venture continuing in 2024. And in the remarks that we made in the full year results, we talked a bit about the continuing trend for realizations being very difficult to come by. And we were particularly pleased that one of the big priorities for us during 2024 as a management team and as a Board when we sat down at the beginning of '24, what would be the most important thing to our shareholders to demonstrate progress would be to generate cash realizations from the portfolio, not at discounted prices because, the share price is already well below the NAV, but at prices that were either at or above where we had the assets in the books, because I think this is a -- I've said before about the sort of the weighing machine of the markets and the sentiment the thing that we have to focus on as an organization is putting cash into businesses, proactively growing those businesses and exiting cash. And there are journeys along the way, but exiting cash profitably is the #1 sort of most important measure for us. So having done that successfully last year, we really bucked the trend in the market and delivered GBP 180 million or just over GBP 183 million, I think it was just over for the year, which was about 5x the level that we achieved in 2023. So we were pleased. It was focused on that, and we delivered on that. And Doug has already said that put us in a strong cash position at the end of the year. And I hope a theme that you, as shareholders, have seen from this Board in the last 2, 3 years, one of the things that we are very committed to is doing what we can to address the discount in the share price and supplement our capital returns with cash. And so that strong performance in realizations allowed us to both reinvest in the portfolio, which is absolutely essential in our business. We absolutely have to do that in the early-stage venture space, but also it allowed us to increase our commitment to our buyback program. And we did that in a very material way. And as I think we'll cover as part of our authorities in the AGM, we actually ran out of authority taken at the last meeting. And so we topped it up with a short general meeting a couple of months ago. So we will have retired more than 10% of the shares in issue and by the time we complete the current buyback program, it will be somewhere between 15% to 20% of our shares in issue. So we take this matter very seriously, but the realization has allowed us to be able to do that. Our NAV per share declined and a lot of that Douglas has mentioned some of the disappointments. It was down by about 15%, just below GBP 1. And we, therefore, during the course of the year, took some quite decisive action, I think, to both adjust the delivery strategy for pursuing our vision and delivering value to shareholders. And that meant we could reduce the operating costs, as Douglas has said. And I think it's just important that whenever you -- when you do those sorts of things, you set the business up for the right structure and the right success for the next 1, 2, 3, 4, 5 years. And I think we're now in a good position where we can build who can attract the scale-up capital, I think, is needed by both the group, by the portfolio and also to support sort of economic growth here in the U.K. In terms of priorities for the year, and the other big one was accessing further capital under management. I would say the appetite is quite audible in the U.K. and we're just seeing signs of the first moves being made. I think a number of sort of pension funds that we talk to talk about the plumbing being put in place. And once the plumbing is in place, hopefully, the capital can start to flow. As you will all be aware as long-standing shareholders, we started a business in Australia back in 2017. And the logic for that was not just to access world-leading science and innovation, it was because the pension fund industry in Australia with high mandatory contributions and a consolidating pool of value for money-based pension funds wanted to allocate to the venture space. And so it's taken us a few years, but we have built from a very early AUD 50 million mandate with one of the biggest pension funds in Australia, Hostplus to AUD 435 million commitment now sort of 5, 6, 7 years later. And I think that's a path that could be followed here in the U.K. as all of the pension funds wrestle with how do we overcome the fee burden and how do we make sure that trustees are looking at value for money, how do we access an asset class where you really don't want to pile billions into the space in 1 year. You want to make sure that you're sort of steady build over champagne problems, but I think it's very important. So our experience with the Australian superannuation funds is good. If I had to guess where I think we'll get more mandates, I think we'll -- probably they will come more in Australia first. I'd have a higher likelihood on us adding an additional mandate in Australia before we get to the U.K., but the opportunity in the U.K. is very significant. We are the second or third largest pool of long-term capital here in the U.K. and the world. I think if you pulled all the pension funds together, it would be the second or third largest fund in the world in sort of GBP 3 trillion to GBP 5 trillion. So there is a big prize there, and it's why we're making efforts to be able to access that on behalf of shareholders. So I hope we can demonstrate progress on that over the course of the coming year. So they were the main themes. They were our sort of priorities for the year. And looking forward, I think we've got a very compelling balance sheet portfolio. The vast majority of the value for our shareholders, myself included, is in the value of the companies on the balance sheet and the 2 fund management operations at either end supplement our operating costs and reduce the net overheads, but the main values in the portfolio. And we were encouraged last year, I would say, that there were some increasing signs of M&A in addition to the exit for Featurespace. And definitely, the appetite towards IPOs has ebbed and flowed even in the first half of this year, but we were very pleased to see Hinge Health's successful IPO on the New York Stock Exchange only a couple of weeks ago. And that was one that had been muted in the press as possibly occurring earlier in the year. And of course, we then had a bit of should we say, some market headwinds in the form of U.S. policies and things impacting. But so it was encouraging that it priced at the top end of the range at $32 a share and has traded up to -- pretty close actually to where we had it in the books at the year-end. And as a reminder for shareholders, we invested about $1 million in that business way back when we realized about $15 million as part of the secondary rounds when they were raising money in the run-up sort of in 2020 and 2021. We realized a small amount of our holding at IPO, the maximum amount that we could, but a relatively small amount. And I think we're on about a 40x to 45x return on invested capital. So that's been a successful investment for the group and hopefully a good sign of some return to IPO activity. So that has meant during the course of this year, I'm stating as at the annual results date, we've returned about GBP 25 million of further exits, which meant we could add another GBP 10 million to the buyback program. And we also made the statement in our annual report that we think there's opportunity, and we have confidence that we can deliver GBP 250 million to the end of 2027. So we're looking forward with confidence. So we -- I'm very much echo what Douglas said about the chancellor's statement yesterday. There is huge support need for investment in science and technology. It represents a very compelling opportunity. And I hope over the next 1, 2, 3, 4, 5 years, difficult to predict the timing, that there will be significantly more capital in the space. And if those conditions come to pass as we think they may, then we are very well positioned as the most active investor in university spin-outs in the country. We do about 20% of the volume of university spinouts largely focused on Oxford, Cambridge, Imperial. And so we are in a very strong position to capitalize on that. So we look forward with confidence to be able to deliver further shareholder returns. And as Douglas said, hopefully, we can do something about the stubborn discount because it's frustrating for all of us and particularly for me in my capacity as CEO and as a shareholder. So I will hand back to Douglas on that note for the formal part of the AGM.

Great. Thanks very much. Before we move on to the formal business of considering the AGM resolutions, I'd like to invite shareholders both in the room and online to ask any questions of your Board that you have that are on matters relevant to the business of the meeting. We've also received in advance questions from shareholders, and we will seek to answer these as well. Hopefully, we'll give you -- hopefully, we'll have enough time -- I'm sure we'll have enough time to answer the questions that you have. For those in the room, if you can give your name and whether you're speaking as a shareholder or as a proxy and if it's a proxy, who you're representing. And for those who are submitting questions online, if you could indicate the same, that would be helpful. We've got a bunch of questions already submitted, but are there any questions in the room? I'd like to start with the room if there are questions from the room.

A hand went up faster than anybody else's. So -- and then I'll come to you in...

[indiscernible], a proxy for Imperial College. The question I've got is, what do you think is the expected return on the portfolio NAV looking forward, granted it's not the share price return, it's the NAV return? How does it compare to historic returns? And also, how does that compare to the returns that you're seeing in your scale-up capital? I understand that you can't discuss returns of a specific LP, but if you can give guidance, that would be helpful.

I'm sure Greg is going to do that brilliantly without giving a profit forecast.

Maybe I can give you some indications of maybe where -- I would be very careful on not giving you sort of profit forecast here and making forward-looking statements. I mean, I would say, over our history and depending on whether you look at the entire NAV per share because that's very easy to calculate, you can see the 22p per share roughly of hard NAV that we had when we came to the market and the roughly GBP 1 a share now, you can work out an annualized all-in NAV per share return, which is in the sort of single digits. You can look at the performance of U.K. venture over the last 20 years, which ranges from, I think, the sort of the median is about 4% or something and the mean is about 11% and upper quartile is, I think, 16%, 17%. I haven't got the numbers in front of me, but ballpark from -- and the BBCA data. So we are clearly targeting being in the -- certainly the upper half, if not the upper quartile. And I would say, there are plenty of opportunities in the portfolio to be able to contribute to making that a reality. So I guess that's sort of hopefully maybe a wide enough way of saying we're targeting compelling market-leading sort of top half of the market from our portfolio. And this is -- venture is very much --I'm sure people -- if you're interested in the venture space have read the power law or have read all the books on the space, it's a game of outliers. And so we need to make sure that we have more than our fair share of the unicorns that have been created in the space. We've had 4 to date. And there are definitely candidates in the portfolio that we are very excited about. And for those who are online, we are doing a capital markets event. There are a few numerous faces in the room, and thank you they're hosting us in the city, but we will do those online. And there are a number of -- we've got 3 of our high potential companies that will be presenting and giving their business cases, and we've got a few others in the room. Again, I'm not promising that those are all going to be unicorns, but they are candidates with very big market opportunities and clearly differentiated business models. So we're definitely aiming to be towards the top half of the market.

Please. Okay, get the microphone down here for the benefit of people online.

Roger [indiscernible], I'm a shareholder. How are you finding demand for your funds where you've got ideas and people coming to you, which is going to feed to the future?

It's interesting. I mean, the demand in Australia is more real in as much as people have written commitments. And in the U.K., the main third-party funds that we have are tax advantage funds. So we manage sort of GBP 450 million, GBP 500 million of EIS capital in the EIS market has been sort of again, reasonably difficult over the last couple of years, and we've been very pleased that we've maintained our market-leading position in that. So we consistently raise somewhere between GBP 25 million and GBP 50 million per annum through that platform. And I think that will continue to be a good source of early-stage capital. On the scale-up funding side, it's -- the industry, I think, in the U.K. is somewhat wrestling with a whole variety of both strategic and tactical issues. And I think the pensions bill that was released in the last week went quite a long way actually to addressing both the challenges that have been cited by pension funds, certainly that we've spoken to and that I know others in the market have spoken to, things like focusing on value for money, i.e., net returns rather than just cost, making sure that pension funds are of sufficient scale that allocating an appropriate proportion of the total capital to privates makes sense. I think this is very important in the context of the overall asset allocation, long-term venture, private equity and property should be taken as an appropriate proportion of the overall total assets. So I think a lot of those issues were heard and addressed in the Pensions Bill. It's going to take a while for the Pensions Bill to flow through, consolidating funds and getting towards the sort of GBP 25 billion super funds that are being talked about. Again, that's going to take some time. And so that change can disrupt the ability of existing funds to allocate capital. So I think we're having encouraging conversations. And I would say, the tone of those in the last 6 months has moved a bit more towards action than conceptual.

So can you just clarify, I was actually asking, are there still plenty of people coming to you with ideas? And are they still asking for money from you? I don't know if ideas are drying up or it's just carrying on as it always did. But what's the state of the supply out there?

Supply is very good. Yes, I think it's not an opportunity supply issue. I think the U.K. and IP Group as part of the U.K. punches above its weight in terms of our ability to create companies, seed companies, get to sort of Series A. So I think the opportunity set remains very compelling.

Why don't we ask Mark to speak. I mean, we should allow a few words from a person who looks after our investments.

I'm Mark Reilly, Managing Partner. Yes, look, I think there will always be lots of ideas coming through the pipeline. I think, as Greg says, the U.K. generates a lot of pretty cutting-edge innovation. The thing that is challenging and scarce is finding talent to marry with those ideas and build a commercial proposition over them. And so that's the thing that we spend a lot of time on is getting the right talent involved in the portfolio to exploit those ideas.

Yes. I mean, I think we're third in the world behind America and China in terms of new ideas, and we are brilliant as a country until we get to Series C, where the scale-up money that comes out of America and China is much, much larger, and that's because there's a larger pool of capital that is directed towards higher risk venture. And one of the things the government is trying to coordinate through Mansion House reforms and other things is to create that pool of capital that's pointed towards longer-term risk investing. And I think risk is the wrong word because particularly now that -- in the good old days, in my day, of course, the good old days, you have defined benefit pension schemes managed professionally and people could allocate money to all types of activity and they did so professionally. Now you've got defined contribution arrangements, which you're asking individuals to say, how do you want your money invested? And it tends to be done by risk. You want low risk, medium risk and high risk. And if you say to an individual, would you like your pension in high-risk assets, they say no. If you say, would you like your pension in high-growth assets, they say, yes. And therefore, we've got to -- the language is wrong, because we need to -- and that's one of the things they want to change. And in fact, we know that youngsters, and that's a broad group for me now, but we know that youngsters do embrace risk too because the number of young people who invest in crypto and don't get me started on that, suggests that they have some tolerance for volatility. So I think we've got to change the narrative on the way people are invited to invest what their defined contribution arrangements are through their corporate sponsors and to sort of say, tick the box between low, medium risk. Guess what happens when you give people those 3 choices. They take medium. You're 28 years old and you're putting 40% of your funds into bonds, it's insane.

He said carefully. Anything else in the room and then we'll go online. Anything else in the room? DB?

Okay. Well, we've had quite a lot of final questions, just for [indiscernible] comfortable, there are 17 of them. I'll go through them. Obviously, I'll let people know who I'm going to point them to. I think probably the first one is coming to me. Yes, exactly. All the easy ones coming to me, hard ones to Greg. Share buybacks have been very steady and overall numbers of shares dropped by about GBP 140 million, which is exactly right, including cancellations and treasury shares, which we're doing all shares. Please, can you give some sense of who the vendors have been puzzled by the fact that there's been no notifications of reductions for major shareholders. There's a bit more, but effectively, that is the question. And it's quite a good question actually because there isn't obvious sellers. So during the course of the last 1.5 years, there have been a couple of big institutions that have probably nothing to do with us actually have actually reduced their positions. Fidelity, for example, closed the fund and say 3% or 4% went in one go. And Land Trust also made a sort of reallocation of capital. So there have been a couple of quite big movements. But other than that, actually, we're buying back pretty much normal market numbers and we get the shareholder register every month. You can imagine we pounce on it and look at it every month. And actually, the big ones, the big shareholders, thank you very much, aren't reducing. It's not an obvious and we're an obvious seller, if that's a hidden question. It is actually just coming out of the normal kind of market flows actually most of those numbers, which to be fair, sometimes puzzles us that we'll be able to keep buying and the price remains low. But ultimately -- that's ultimately very good for NAV per share because we managed to buy a lot of shares at what I would see is ridiculously low price. Next question, I'll take that one as well and the one after and then back to Greg, you'd be glad to hear. Will new shares be issued to satisfy the LTIP awards? The LTIPs are actually now RSUs. I won't go into it. They're broadly similar long-term incentive involving issuing shares. We also issue shares related to half of all the bonus payments actually because half of that is deferred over 2 years and paid in shares. So the Board does have a choice. It can actually issue new shares or it can get the employee benefit trust to actually buy shares back in the market. And at the moment, that is what we have actually been doing. We know -- as I've already mentioned, we've actually been canceling all the shares that are in treasury. The ones we've been buying back, we've been canceling, so we can't use them canceling. So in the last instance when we needed shares for staff, we actually bought back in the market. So the question now presumably is about is it dilutive? And the answer is no, it's not dilutive because we're buying it back, which seems clearly at these prices is a very sensible thing to do. Third one, and then the fourth will go to Greg. What lockup agreements are there in relation to the group's sixth largest shareholdings by value? Could be a big question, not a big question. There's actually only one company that's currently locked up. We normally only get lockups, obviously, to public companies and private companies, the lockup in private companies is liquidity, can you sell it? In public companies, you get formal lockup often when a company first listed for a period normally about 6 months current shareholders are locked in. So that's just on Hinge at the moment. So in Hinge, we're in a period we listed about a month ago. We've got about another 5 months in a lockup. Other than that, we're not in any lockups, Nanopore any other smaller public holdings we have. Fourth question coming your way, Greg, regarding Istesso. What are the areas where the RA drug fell short in the Phase IIb study? And since the readouts, have there been any discussions with other drug companies about a way forward?

Yes. So we covered this a bit in the full year results presentation that we did. So the data were given to us in February and where it fell short was that the trial didn't meet its primary endpoint. If anyone is interested, it's a composite measure of inflammation effectively called ACR 20. It didn't produce a significant enough difference versus the placebo. So that was the primary endpoint. It did indicate various significant benefits in things like bone erosions and disability -- levels of disability and things like fatigue, which are obviously very important to patients. So that supported the novelty of the mechanism of action. I said at the time that Istesso would be publishing further information. We anticipate in the next month that there will be some further information published by the company, which will give a sort of more clarity on, a, what they saw that was unique and, b, what the path forward is. And just one other thing to note, we added a very successful former co-founder of a business called Kymab that was sold to Sanofi for about $1 billion upfront, a guy called Dr. Mike Owen. He's joined the Board of Istesso as a non-exec in the last week or so, which is a great endorsement and very good to have him as an additional non-exec on the Board there. So he made a good statement about his excitement about the novelty of the approach and the commercial opportunity. So a bit more to follow in coming weeks, that is the update more specifically.

Thank you. The next one. The group has bought back over 52 million shares to date. I think that refers in the latest buyback program. We did GBP 30 million last year...

GBP 52 million.

What I say?

Shares.

I apologize, pounds. We did GBP 30 million about last year, and then we've done about GBP 22 million so far this year. So that is about right. What is the current outstanding authority capacity to buy back further shares? If you've been listening closely, that has been briefly mentioned already today. So we are renewing the authority today. So there's another 15%. And for those that are really interested, I can tell you, that will be 141,415,000 shares. So we've got plenty of capacity to buy back more shares. So certainly on the numbers we've committed to date, there's plenty of authority, we won't hit the headline -- the top. And that's why you would have noticed a couple of months ago, we did actually issue a small increase, because actually, the price is so low, we were buying back so many. We were slightly in danger of doing that, but not anymore the new authority is in place from today.

Assuming you all.

Yes, exactly right. You should be okay. I see some of the numbers. Next one to Greg. Does Hysata have potential orders in place? Or will it produce a product and then hope to sell it? Will sales solely be to domestic Australian market? And any indications of time line there?

I'll do a high-level answer to this. So Hysata doesn't have a product yet that is commercially available to sell. And the milestone hoping to achieve this year is sort of a commercial scale product, which is a 100-kilowatt stack. And we're hoping that, that will be online and the company is planning for that to be online, i.e., producing hydrogen by the end of this year. That's a pretty big commercial milestone for the company because it shows that you can go from a single cell or a stack of 10, 15 cells to being able to produce a whole system producing hydrogen. So that's the sort of the most important commercial milestone. In terms of indications of interest from potential customers, I would say, one, the company announced in earlier this year a partnership with ACWA Power, which is a Saudi-based provider. And so that was encouraging in terms of sort of commercial interest. And then secondly, when they did their funding round in -- back in the beginning of '24, the company at that point had a number of strategic or corporate investors and each of those investors gave a sort of a letter of commercial intent, should we say, not something you could factor, not something that would count as an order, but broadly along the lines of if the commercial product meets the specifications that you claim it can, we would like to purchase that. And this is the reason that we would like to purchase it and use it. And those indications were in the orders of a few billion Aussie dollars, so significant. The other bit of the question about will it be solely domestic Australian market? They have potential customers in Australia. Some of those strategic corporates were non-domestic. So there was a big Korean steel manufacturer, for example, who was an investor and could be a potential customer. So globally relevant product.

Thank you very much. Next question, on to #7 for those are accounting. The group managed over GBP 600 million of third-party funds at the end of '24. What's roughly the difference in the relationship between IP Group and Parkwalk and IP Group and Hostplus? Well, Parkwalk, most of you probably know is actually a wholly owned subsidiary of IP Group. So we own that business, a very successful AIS investor. It's also become our sourcing engine. So we're getting all really interesting new companies through its relationship with universities. Whereas Hostplus, we're managing funds on their behalf at the other end of the business model where we're using that capital to help scale up the businesses in the later stage. And that's really the difference between those 2 relationships. Next, I would go to you, Greg. What step-in rights does IP Group have in taking stakes in Parkwalk and Hostplus deals? And who determines the timing?

So I think this is about sort of pipeline and pipeline flow. So generally speaking, very simplification, the preemption rights of each of the pools of capital we manage, whether it's the balance sheet or the Parkwalk funds or our Hostplus mandate are transferable within the same group. There is a bit of a natural transition. So in the EIS funds, companies can only receive up to GBP 20 million in EIS capital, so there reaches a point where that capacity diminishes. And so as Dave said, most of our new deals are done through that, particularly in the U.K., obviously, are done through those Parkwalk funds, which have got more appropriate cost of capital. And it's -- I don't think there have been any instances where we've initiated a deal, a new deal by Hostplus. Hostplus is a co-invest mandate for existing companies, either from Parkwalk or from the balance sheet. And to give you an idea of scale, in Parkwalk, we do something like 10 new companies a year and about 40 transactions, so sort of 10 new and 30 by way of follow-on. So there's a very rich pipeline for when hopefully the pipes I was talking about, if that capital does flow, we're in a good position.

Thank you. Next question, a run of sort of financing ones coming my way. What portfolio companies are most likely to require the largest investment by IP Group over the next 13 months? I won't give you a comprehensive overview, but I mean, there are companies OXCCU is a very exciting company. We anticipate some investment this year and probably in '27. OXA, the autonomous vehicle software company. That, again, we will anticipate both now and possibly in '27. Hysata when that comes to funding will be very keen to be involved in that, I'm sure, Intrinsix is another one. So there's a number of companies across the portfolio, you imagine, a lot of them in that kind of top 20 companies that we often talk about. Next question, large -- a large part of the group's gross debt is scheduled for repayment dates, which it is. Is this likely to be refinanced with other borrowings or paid from gross cash? Well, we actually obviously have the option to do both. We can clearly have quite considerable cash resources at the moment. We also have quite a lot of liquid assets in terms of holdings and things like Oxford Nanopore and now Hinge as well. So we clearly have the option of doing both. But we will probably look to maintain about 10% of our NAV in debt. It seems a fair simple gearing. It's not too risky given the lack of liquidity in the portfolio. On the other hand, it makes economic sense to have some gearing. So we have the choice to repay it. We may roll it over and push it out and renew it and maintain the same sort of level of debt. And I would anticipate that might be what we do. Next one is around rem. I'll probably do it rather than handing the baton around. Have the nonexecutive directors discussed Board costs, base salaries look relatively high compared to share price performance and relative to other executive and nonexecutive directors? I think on that, what we say is we do look at costs all the time. We did a comprehensive cost review last year, as you may be aware, we reduced overall cost by about 25% in the year. So we're very conscious on that. And at the rem level, we are looking consistently at comps and having external advice and we're ensuring that the level of cost at the Board level is appropriate for both our market cap and the size of business that we are. I don't know if anyone wants to add to that, but that probably answers all of it. Next question is another one around debt. It comes my way again. Once the final GBP 9.4 debt facility, which is on the old European Investment fund is paid back in January '26, does it have any other -- do we have any other debt obligations to pay back before we start paying back the bigger debt facility at the end of '27, '28, '29? And the answer to that is no. So that's a quick question. No, we don't. Those are you have. Next one, me again, I'm afraid, sorry, but we're getting there. Post IPO what is the group's current shareholding in Hinge Health? We actually post the IPO and a small amount of selling we did at the time of the actual IPO itself. We were only able to sell a relatively small amount of one class of share. We have 1.28% or if you want share numbers, 1,034,000. That was worth -- it's moving all time. On Monday, when we wrote this, it was $39 million (sic) [ GBP 39 million ], today, it's about $26 million (sic) [ GBP 26 million ], but it's roughly...

GBP 36 million.

Yes. What did I say? GBP 36 million, I apologize -- it would have been about GBP 26 million. All right. What -- this is for you, Greg, which is probably good news. We -- I think you've sort of answered this maybe when you were answering another question, but I'll do it anyway. What results have you had from pursuing third-party co-investment transactions over the last 12 months? You may feel you've talked on that a bit. I don't know if you want to add to that.

I've already covered that. Just in the interest of time, yes.

You again, will the group commit to continue to use 50% of the proceeds from asset disposals beyond 2025? People may be aware, but we've committed to 50% of proceeds this year to be used on the buyback. I probably hand that over to you.

I think the answer is we always review what the appropriate level of capital allocation is between returns to shareholders, reinvestment in the business, servicing debt, and we'll look at it again and update shareholders as we said we would do towards the end of the year.

Second to last on these, and I've got a few more coming in from outside. So you can't go for your tea quite yet. How do Oxa licensing agreements typically work? What's the approximate value of license income? That's tricky to answer, to be honest. That's an independent company, and I don't think really it's appropriate for me to start putting out in public domain confidential information about the licensing arrangements. But hopefully, we will see significant growth in revenue in that business as those license arrangements do roll out. And then the last pre-asked question, I'll hand this to you, Greg. Please can you explain the change in the business model for First Light Fusion? And what are the initial results from this change? And what are the implications for its cost base?

Good question. So the main change was -- so First Light Fusion is an Oxford spin-out company. We own about 1/4 of it. It was based around some very novel modeling of wave fronts of all things, which was used to then determine what could you do to create the conditions required for fusion, so pressure and temperature to require fusion. And they built a facility in Oxford and got progressively larger machines to fire projectiles at a target to create those conditions and the magic of the company, if you like, is the ability to do lots and lots and lots of iterative modeling and to quite quickly put that into empirical evidence, so to create targets that you can then test against your models and iterate and the use a lot of AI and machine learning to rapidly iterate. So that's the sort of the core of the business. A lot of the company's capital need came from creating or designing what's called the driver technology, the thing that fires the projectile. And there are lots of places around the world that are also doing development of different driver technologies. We, as IP group and certainly as a company, don't know what the winning driver technology is going to be. So the idea is -- and this is a strategy that we help the company to develop is not to try and build our own driver technology, significantly reducing the capital need, but to focus very much on the targets. And the idea is that the targets will then become a consumable in the fusion industry when that comes on stream, which could be a while away. So in the meantime, one of the things that First Light, like many other fusion companies is doing is saying, what are the other use cases, commercial use cases for both that modeling capability and these high gain targets as they're called. And we've actually got initial revenues in the sort of less than $1 million, but a few hundred thousand in materials research from supplying these targets to allow people to create very high temperatures and pressures. So that will give the company the ability to generate some initial revenues even before the very, very big potential revenues of Fusion. So it significantly reduces the cost base and it focuses, no pun intended, on the company's sort of core capability.

Good. So that's the pre-asked questions. Well we not. There are more coming in live as we go. There aren't actually too many. There's about 4 or 5 to go. I'll take the first one because it just happens to interest me, I must admit. This has come from Eugene Bae, who is an individual shareholder. And Eugene has asked, would you consider getting into military technology start-ups? Reason interests me, it's highly pertinent. So we have an ethical investment committee, and we also have an ethical investment framework. So we kind of have guidelines what we do and don't invest. Now up until relatively recently, we actually had -- well, go back a second, we have 2 classes effectively. We have excluded items, things you will not do. And then we have what we call red flags. So items that probably we need to never chat about and consider on a case-by-case basis at the individual investment committees. So before, we did have military, almost any military application actually was excluded. It was in the end of things, deployment, any kind of military application pretty much was included in that definition. And we have recently met and talked about it. It's definitely been a change both in the general community. We've looked around all the other communities, other investing groups, other VC groups other public investors. And we've noticed there's definitely a change. So what we've done is rather than saying, no, it's okay, we've actually just taken out and automatically excluded and moved it into red flag. We seem to find a sensible solution. So now if an investment might have some military applications, it's likely to be referred by the individual investment committee. One of Mark's team will probably refer that up. And the ethics committee will then have a consideration about against this framework and decide whether as a red flag, if it's going to be acceptable or not. There are, of course, still some automatically excluded weapons of mass destruction. There are clearly some instances where they excluded, but we will now consider military applications, which I think is appropriate in the world we live. Okay. And the next question, I'll pass this to you, Greg, possibly, Mark. How are you finding the valuation expectations of potential investee companies?

How are we finding them?

Are they realistic?

Well, in some cases, we are obviously helping to set them as a material investor. And in some cases, we're party to them as a participant in the round, but not setting them. I think in general, in the market, there has been a general reduction in overall funding round valuations, particularly since 2021, and we're seeing that play through. And we spoke at the full year about effectively trying to preempt that in our valuations at any given point in time. So I think, Dave, you used the stat that although there were X number of down rounds, they were actually at or around the level that we had them already marked on the balance sheet. So I say that -- I wouldn't say we've seen a significant increase in valuations yet for companies in general at this stage. I'd say the market still remains sort of a lot less buoyant than it was in 2021. But as with all these things, it's very company specific. If the company has made very good progress, then generally, there'll be an up round. And if it's sort of general market, I'd say things are a bit lower, and that reflects the industry. We see that across Parkwalk and across the balance sheet.

I'm sorry, I didn't mention that was from Alex C. Sorry, Alex, didn't mention. And a second one from Alex. Again, I go to you, Greg. How does the Board ensure it has sufficient sector expertise, especially in deep tech, life sciences and AI to properly assess emerging opportunities and risks?

The Board obviously oversees the process and the governance as a business, a lot rest in the executive management team and the people who are assessing the deals day-to-day. So we have a number of specialist investment partners in each of those areas. So we've got -- for example, Dr. Rod Trezona has been a clean tech investor for the last 20 years and there's an energy transition commissioner, et cetera. So we tend to have our sector specialism at the executive level at the Board level, maybe that's a Douglas question to answer, but we try to have a mix of skills around the Board table. And in some instances, we have people who come from a particular background that we think is important. So for example, Benita, although serves as a general nonexec happens to also have a full-time job at GSK, so has some life science experience, which we find very relevant for assessing life science opportunities. So most of it is done at the exec and the team level, and then there's a balance of skills on the Board.

The other thing I'd say is that there's only a very few companies where we are the dominant shareholder. And most of what we are investing in, we are one of many. And therefore, we take comfort from the evidence that we invest 70 to million a year in the portfolio, but that's usually 10% of what's invested in the portfolio in aggregate. So there's a lot of other people investing on the same terms as we are. And therefore, there is the comfort that other people have similar views on the valuation, and we get independent valuations done by subject matter experts. So we review the evidence. It would be almost impossible to have on a Board of 5 independent directors covering every conceivable area from quantum computing to bioscience. Obviously, DB has all that, but we got the evidence, and we assess the credibility of the information that's put to us to assess the confidence we have in management. And we have a high degree of confidence in management because of that track record. I mean, Hinge Health is a good example. I mean, Hinge Health, as he said, we invested $1 million 100 years ago, whatever it was, a long time ago. And now -- and it went through all sorts of iterations. And I think the company at one time was worth what, $6 billion, and now it's worth $3 billion. And in the beginning of the year, we're very excited it was going to do an IPO, and then people said there's not a chance of getting it done this year because the markets were terrible. And then we had the kind of Liberation Day and all these kind of things and people said it's going to be really impossible, and they did it in May. So it's been up and down and people said it was going to be in the third or fourth quarter, and it's not going to happen at all and you'll never get the valuation. And they pretty much went at the top of the range. it can change on a daily basis. And therefore, we've got to be realistic that we are looking over a medium to long term because you could get very excited on a day-to-day basis because suddenly flavored du jour and the next day, no one is interested in that particular sector. Again, military is a good example. I mean, one of the most successful IPOs in the last month or so was the battery maker CATL in Hong Kong, which the Americans descried -- 30% of the take-up was from American investors. But the American government put on a list that said, you have to be aware that some of the equipment from the company is used by the military. Well, it makes batteries. I mean batteries are in everything. And the same with deep tech science. I mean, quantum computing will be used for everything from health care to military. So the definition of what is military now, particularly as we see that small drones, you can buy in the shops. And indeed, if you talk to people who are involved in some of the crazy things that are happening in the world today, they say that some of these drones are being driven by young people using their Xboxes. So is an Xbox a piece of military equipment?

It's now. Perfect timing. We have a little bit time left. I think [indiscernible]. Last question I have online. I'll go to you, Greg. You've now returned a considerable amount of capital through buybacks, which is a very good thing. Could you, however, remind me of the aspects that affect IP's decision regarding buybacks versus dividends, something we've discussed before. From the perspective of a shareholder, waiting for a possible rerating of shares, a dividend come while waiting would also be quite a nice alternative. Greg, I pass it to you.

Yes. I mean, they do. No, no, I'm was taking about the question. The question is very good one and something we debate all the time at the Board. I mean, we're always talking about what's the most efficient way. And you can certainly -- there is a school of thought that a buyback isn't a return of capital because it's retiring some shares -- sorry, not equivalent to a dividend, not paying cash to shareholders because it's retiring capital. I think the model where dividends, which are GBP 1 in a GBP 1 to all shareholders is a good way of supplementing capital growth for sure. And the call that we made a year or 2 back now was the amount of discount was so great that it was in the benefit of all shareholders on balance to use buybacks rather than dividends. But we did say at the time that we expect that to persist while we have a discount of more than 20% to our NAV per share. And we much like the proportion of our realizations that we use to invest in the business and return to shareholders, we also look at the correct or the most appropriate mechanism to do that. So -- and then we continue to do that. So it was a relative value-based judgment.

And with perfect timing for those that wanted to run 11 to 12, that's the last question we have online.

Okay. Is there anything else in the room? I see no hands. Okay. So thanks for questions. Thanks for the engagement. The formal proceedings of the Annual General Meeting is now the next thing we will consider. So the Notice of Meeting with all the explanatory notes was published on the 16th of April. The requisite Notice of Meeting has been given. Therefore, if there's no objection, I will propose taking the Notice of Meeting as read. I see no objection, excellent. The voting will be conducted by way of a poll, vote on each resolution. MUFG Corporate Markets is the company's registrar, and they have been appointed to act as scrutineers. A summary of each resolution will be shown on the screen behind me. Resolutions 1 to 13 and 16 are proposed as Ordinary Resolutions and Resolutions 14, 15, 17 and 18 are Special Resolutions. For shareholders attending online, as advised in the Notice of AGM, you're not able to vote online, and I hope you will have submitted your votes by proxy. For those attending physically, if you can complete the poll card given to you at registration by ticking the appropriate box as to how you wish to vote. If you've already voted and you don't want to change your vote, you don't need to fill in the poll card. If you haven't already voted, if you could fill in the poll card, that would be great. And if anyone needs any further guidance assistance, our registrars will leap to help you, and we'll keep the poll vote open for 10 or 15 minutes until everyone has completed the poll cards, and then we will conclude the formal business of the meeting. So those who are wishing to fill in the poll cards could do so. And then I'll ask you if anyone hasn't finished and then we can close the meeting. So poll card completion now. [Voting]

And Scott is at the back, if anyone wants to help waving his hand.

He is an expert. Anyone need to complete poll cards? Is there anyone in train completing the poll card? [indiscernible] sitting around if no one's got a poll card to complete. Anyone? You've completed, you've done it? You've done it, excellent. Hand in your homework at the end. Thank you very much. Anyone else still completing? Okay. So if you could hand in the completed poll cards, that would be great. That now concludes the formal business of the Annual General Meeting. Can I thank you again, those online and those in the room for taking the time to be with us. We do appreciate it. And this is a very interesting company and your interest in the company is something that we are very grateful for. The final results of the poll of the meeting will be announced through the regulatory information service and posted on the company's website as soon as practical. Are we putting up the proxy results? My goodness, just like magic. Those -- the results we've already received, the proxy votes already cast are behind us. You'll see that everything has been passed comfortably. The final figures will obviously be updated for those poll cards that are going to be handed in after the meeting, but I doubt they will change the shape of that poll. So we're very pleased to have such support from our shareholders. So thank you. I declare the meeting over.

Thank you to the Board of IP Group. We will now redirect those online to provide the company with their feedback. Thank you for joining us today.