Mercia Asset Management PLC (MERC.L) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Mercia Asset Management Interim Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However the company will review all questions received today and publish responses if it's appropriate to do so. These will be available via investment company dashboard and we'll notify you by e-mail when it's ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, I'd like to the[indiscernible]. I'd now like to hand over to Mark Payton, CEO. Good afternoon.

Good afternoon, and thank you, and we welcome everybody to Mercia's interim results for the financial year 2022. Just by way of introduction, my name is Mark Payton, Chief Executive Officer for Mercia, approximately 20 years of experience in venture investing specifically within life sciences and have had the good fortune of seeing a number of businesses from beginning all the way through to exit the most recent of which being OXGENE.

Yes. Good afternoon, everyone. I'm Martin Glanfield. I joined Mercia just over 7 years ago as the employee #7 to help Mark float the business on AIM in December 2014. And my background is as the CFO of publicly traded and private equity-backed technology-enabled businesses.

Good afternoon, everyone. I'm Julian Viggars, Chief Investment Officer. I joined Mercia in 2016 when mostly acquired Enterprise Ventures. Been a fund manager across Mercia's venture funds for the last 15 years or so. In that time, overseen many exits and IPOs, one of those being the investment into Blue Prism, which we did from one of our early managed funds, investing [ GBP 900,000 ] back in 2004 and since returning over 100x that back to our investors since the business floated.

Thanks, Julian. So this slide, Slide 4, I think, really captures, if you like, the spirit of this presentation in terms of the positive momentum that the group is building. Revenues is increased by 21%, grown to GBP 10 million, and that 21% is compared to this time last year. And that GBP 10 million, of course, is for this 6-month interim period. In addition, we've seen a growth in profit after tax. That's grown again 35% compared to this time last year to GBP 11.2 million and a strong balance sheet, a very strong balance sheet. So a GBP 52 million cash on hand, free cash and debt-free. And that liquidity sort of speaks to the whole group. Total liquidity is circa GBP 284 million across our funds as well as onto our balance sheet, and that's a significant part of our assets under management, or AUM. So maybe just over 1/4 of our AUM is in cash, AUM being at GBP 948 million, again, up from GBP 872 million this time last year. And that positive progress across the group and the strong prospects across the group means that the Board has set that interim dividend for this period of 0.3p per share, again, that is up from this time last year with our maiden dividend, which was at 0.1p per share, where we declared not only the dividend, but a progressive dividend policy. And this is part of that journey as we move forward with that. In terms of performance and in terms of exit performance across the group, we've seen 9 profitable exits in this 6-month period and put that into context, in the previous year, we had 10 over the full year, and that was a record year for Mercia. So this positive progress continues as we go forward as well as coupled with our positive investment activity, and that positive investment activity is now translated into Mercia being the fourth most active venture investor in the U.K. and the #1 within our heartlands of the Midlands and the North as a regional investor. Responsible investment is very much at the core of our activities, certainly against the ESG principles that we operate on and with a specific focus on diversity and Net Zero, and I'll talk a little bit about that in a moment. So there are 3 phases really to the continued progress and prosperity, if you like, of Mercia. The first one is find value. So finding value, that is get we get over 1,000 business plans that we've received over this 6 months and of course, winning those deals. So that's translated into 74 deals that we've invested in over this 6-month period, 38 of which are new portfolio companies. And what I mean by that is we've got over 400 companies now across venture, private equity and debt. We've added 38 more in this period, and we will continue to build that portfolio size and diversity. But it's not just about finding deals and winning deals. It's about adding value. We take Board seats on the majority of our venture investments and our private equity investments. And we use that portal into the business as a way of really supporting management to grow and add value to them. We've helped lead 9 syndicated deals within those new businesses we just talked about and actually placed from our own internal resources, so at our cost, not at the portfolio cost, 18 NEDs within those businesses. Just to remind you, for those that are new to us today, the addressable market that Mercia exclusively looks into is the small- to medium-sized enterprises, the SMEs, which are predominantly private businesses, where we will invest from GBP 300,000 approximately, up to GBP 10 million across our suites of funds that we manage into businesses that typically need less than GBP 20 million in total finance. And that's because at the exit, the enterprise values of our portfolio companies are typically between GBP 20 million and GBP 200 million. And when you look at that market, we are exclusively a domestic investor. We only invest within the U.K. That market, we'll have invested about GBP 100 million, we estimate, by the end of this financial year. Compare that to the previous financial year where we invested GBP 70 million. You can see the pace of our growth and we estimate to take about 5% of that addressable market in this financial year, and that's up from 3%. So that's a growing addressable market, and we are growing our stake into that market with much more to go after. In terms of Mercia's investment model, it's a sort of combination of third-party managed funds on the left in the light blue and our proprietary capital in the dark blue. Now in terms of our proprietary capital, it really has 3 functions. It's investing into businesses coming through the third-party funds or alongside the third-party funds. We are a selective investor into funds that we manage. So we will selectively invest as a limited partner, either into asset classes we're trying to grow or into new areas that we're trying to grow into new asset classes. And the final part of that capital is for corporate activities. We've made 2 acquisitions to date, and that capital there is for that function as well. As I said, we're a domestic investor. So the U.K. is where our addressable market resides and what we have very deep knowledge of. And these are, to the left, numbers from Beauhurst actually for investment activity in 2020. And what you see is 70% of all U.K. venture investment took place in London. But within the U.K., these high-growth businesses that we're all looking for, there's 25% of those located in London. So on the middle section, you can see where our offices are. We have an office in London. London is an important place to be investing. But clearly, outside of London, there are disproportionately more opportunities for those physically based there. And as we look to continue our growth through the United Kingdom, we've recently opened an office in Bristol as we start to move into the Southwest and continue to grow our position as one of the most active investors in the U.K. The final bullet point to the right just talks about that exit environment that we sit in with the sorts of businesses that we manage, IPOs can be important but are infrequently that so. Actually, the majority of our exits come through trade sales and, more importantly, just recently, an active and growing secondary market where large venture funds are looking at actually acquiring positions into businesses by taking out existing investors. Indeed, private equity funds are now moving into venture and providing that exit as well as moving into private equity-backed businesses. So that active secondary market is becoming an increasingly important exit environment for us. Beginning of this financial year, Mercia has set out its 2020 vision, and that is split into 2 parts as its name implies. The first part being growing assets under management by 20% per annum on average over 3 years. Another way of looking at that is basically taking circa GBP 1 billion where we are today in AUM and growing that to GBP 1.6 billion over the next 3 years average backwards over those 3 years. And if you look historically, 50% of our AUM growth has been through organic means and 50% have been through 2 acquisitions that we've made over the last 7 years. In terms of the balance sheet performance and its contribution to that AUM, we have that performing at a 14% IRR since IPO, so strongly performing. And then the second part of that 2020 vision is to do with the profit before tax performance of the group. So there, we've set GBP 20 million on average over 3 years per annum. And another way of looking at that is perhaps saying GBP 60 million in 3 years' time average backwards. So that's part of that 2020 dynamic. Supporting that GBP 20 million on average per annum profitability is a very profitable fund management group. This is contributing to that. and as I alluded to, in terms of the balance sheet, the fair value movements and realizations of the balance sheet activity.

Thank you. As Mark mentioned at the start of the presentation, our revenues increased by just under 21% to GBP 10.1 million during the period. And this increase in revenues was twice the rate of our cost base to increase. And the cost base slower increase is in part a reflection of the scale of the business now and, therefore, the benefits of operational leverage. We also received during the period net performance fees of GBP 1.6 million mainly from the Northern VCTs. Profit after tax increased 35% to GBP 11.2 million. Our net assets increased to GBP 186.4 million, and with it, net asset per share increased to 42.4p. As Mark mentioned, we have significant available liquidity on our balance sheet. And combined, this positive performance and the confidence of the group's Board and the future performance of the business enables us to declare the interim dividend of 0.3p per share. I think it's also worth mentioning that, that 88% of that revenue is recurring income. It's contracted in recurring income and a very resilient bedrock of our business model. The next slide shows the sequential movements in our assets under management for the 6-month period. And in the net fund flows column, the GBP 11 million in venture raised during the period was represented by 1 new EIS fund raised and also an additional small allocation by the British Business Bank to our Midlands Engine Investment Fund. One of the ironies of our model in a sense is that distribution, which is money back to investors is actually a very good sign of performance rather than just being seen as a reduction in our assets under management. And in the period, GBP 39 million was returned to our investors, and the largest element of that was the dividends paid by the Northern VCTs to their shareholders. Performance is a very key part of our business model. and that is a reflection of the increase in the asset values of the portfolios that we are managing. And as you can see here, again, during the 6-month period, overall, our assets under management increased by GBP 36 million as a result of performance. And again, the largest performing aspect of this GBP 36 million was the increase in the values of the VCT portfolios. We move on to the consolidated income statement, which is our profit loss account reported under IFRS, International Financial Reporting Standards. You'll see here that the revenue number is larger than the GBP 10.1 million, and that is because the gross performance fee is included on this line of GBP 2.6 million. And similarly, accrued bonuses and employers national insurance is included on the administrative expenses line. I think another interesting point in this income statement is the finance income number of GBP 238,000 compared with the year earlier. And what this is, is interest that we've received from convertible loans that we made to our balance sheet investments. And where those loans convert into equity, we are entitled to receive the interest on those loans. I think it's also worth noting the fair value movements there of GBP 8.7 million, which Julian will go into in much more detail shortly. And at the moment, we are still not tax paying. In our balance sheet, we've reached a small milestone, which is that our total assets have now for the first time exceeded GBP 200 million. And it's worth remembering 7 years ago when we started, our opening balance sheet on the day before our IPO was GBP 10 million. And finally, in our cash flow statement, you can see that our adjusted operating profit does turn into cash, and we generated in that first 6-month period GBP 2.6 million of net cash inflow from operating activities. And the cash deployed from the balance sheet into the balance sheet portfolio during this first 6 months period was $5.4 million.

Okay. Thanks, Martin. So my first slide is a new one. It does show the depth that we have within our investment teams and also the divisional leaders across our business. Now we have 65 investment professionals now across our equity and debt teams, many of these very highly experienced with 10-plus years investing or lending under their belt. On top of this, we have our portfolio resourcing and legal functions for another 4 very important team members. So in terms of highlights here, our national VCT and EIS. So the logos you see under this section are all assets that we've either fully or partially exited from in the period. More about that in a minute. On the regional venture, our funds are progressing very well, some very interesting companies growing sharply within them. And again, just to pick a couple. So Inovus is a surgical training aid using VR, again, very innovative growing very rapidly. And Azzure is a Microsoft reseller and integrator also growing very rapidly. Wayne, who heads our PE funds has done the 2 deals. He was projecting for this year, 1 just prior to the period end on just after. And our debt division, we've worked very hard for British Business Bank and deployed loans through the sea builds and then the RLS scheme subsequently. And our proprietary capital, again, just post the period end, we've added 2 more deals, Forensic Analytics and Pimberly. A little bit more about those as well in a minute. So this next slide is a little bit busy, but it does show where and how we invested GBP 55 million. And as you can see from Row 3, the bulk of that is across the venture parts of the business, some GBP 38 million, but we invested also in 74 companies at 38 of those were new with the volume coming from our debt division with 26 new companies. And again, perhaps to answer a question whilst we go from Michael, so we have continued to work on our origination activities, and that's both digitally. So we put on a lot of webinars, meet the funder, digital outreach, a lot of social media, which does attract incoming opportunities, but also we're back out in the communities face-to-face, working with advisers. A lot of deals come from that. And also our own networks. I mentioned 65 staff but also our Nonexecutive Director network very active as well as sourcing deals for us. So this also slide here captures the split of our AUM of GBP 948 million, and I'm very pleased to also say that we have significant liquidity to continue to invest right across the business. This slide shows the geographic split for those 74 investments that we made. As you can see, widely spread across the regions but concentrated in the North and Midlands, which is Mercia's heartlands. And the bottom of the triangle there, Yorkshire and Humber, reflects the larger volumes up from our MPF debt funds. So following the theme of the last couple of slides in terms of deployment, Beauhurst and others have recognized that we are now a second most active venture investor outside London and the fourth overall in the U.K. now. Now that's very interesting but perhaps more interesting for me is the performance that accompanies that activity. So as Mark has already said in the year to March, we transacted 10 exits across the group, returning GBP 100 million. And in this 6-month period, that performance has continued with a further 9 exits returning another GBP 55 million. From the left-hand side of this slide here, these businesses were start-ups at, so very early stage when we were first invested. Then the middle, this is our VCTs and continuing to show some really good performance, 5 more exits. And I think there's more to come here as well, given that in Magpie and Oddbox, we still hold significant stakes in these businesses. And again, more to come in terms of the pipeline for H2 in terms of exits across the business, I think, as well. So this next slide shows the summary performance across our asset classes. Again, bear in mind, we operate over 40 funds, various different ages, sizes, remits and geography. We use TVPI as a measure. We expect these percentages to be increasing over time. If I can just point out the current institutional funds, both venture and PE, now creeping above par, which is given they're relatively early and their life is great, given the renowned J-curve effects. In terms of our VCTs, we look at the right-hand side column, which is the total returns, and that includes cumulative dividends paid over the life of those funds, again, some top quartile performance. And as you can see, those return numbers have increased significantly, circa 20% over the course of the last year. So I'm very pleased with the performance. Just going to pass you back to Martin very briefly for the next slide.

Thanks, Julian. This is just a brief snapshot of the progress since we acquired the Northern VCTs 2 years ago. It's our second acquisition since IPO, and it has been going well and it's been delivering on a lot of the promise that we hoped to with the time of the acquisition. We've successfully integrated the investment team that came across to us from NVM, and we've built out that team and added additional support functions. And so far, there have been 8 cross referrals to the VCT team from the rest of the Mercia portfolios. And the VCT team have achieved, since the acquisition, 13 successful exits to the 30 September 2021. So you can see there that the bringing together of the VCT contracts and the investment team and the existing Mercia business has really come together well. So far, the VCTs under our ownership of -- or under our management have raised GBP 32 million (sic) [GBP 38.2 million] just before the first lockdown in 2020, March 2020. And they have announced a new GBP 40 million target fundraise, which will commence early in the new year. And as we mentioned earlier, we've been fortunate to receive so far gross GBP 6.1 million of performance fees, and that has reduced the overall purchase price multiple for the VCT fund management business from an entry multiple of 6.4x earnings. That is now reduced to 5x earnings.

Okay. Thank you, Martin. So into our proprietary capital. So 25 now direct investments, including, as I mentioned, 2 new added post the period end, producing circa GBP 9 million in fair value movements in this period, importantly, on target for our IRR 14 -- just over 14% now. So what is our balance sheet capital used for? So it's 2 things, investment. So we invest in broadly 4 areas, as you can see on the slide there. But also, we will -- we are and we will certainly in the future be using our balance sheet capital also to see new 10-year funds for us to expand our funds under management. And of course, the other reason for our balance sheet capital is corporate activity, and we've also talked about the acquisitions that we've already made. So we believe we have a very clear balance sheet strategy. We have made some refinements to that over the course of the last 18 months. So focusing on those enabling technologies that I've just mentioned, taking advantage of regional strengths. So for example, the Sheffield region is very strong in deep tech, engineering, manufacturing. So we would like to increase the portfolio size from the 25 up to 30. Our average holding period is in the middle of that, 3 to 7 years currently. And as many of you all know, we do build our stakes over time, and we look to take between 10% and 30% equity stakes in the assets that we put on to our balance sheet. One tweak that we've made is to invest now in some later-stage investments, and we've done one of those alongside our VCTs just post the period end and I guess a new class of deal where we've invested in new to Mercia deals alongside our VCTs. So we see a lot of deals that require secondary capital. So that's perhaps to incentivize founders or clear up a part of the cap table. And we can provide a very compelling offering now as one Mercia alongside our VCTs. And we won a very recent deal, Forensic Analytics, against stiff competition in the market because we could enable that deal to be done. Our internal portfolio resource, again, it does add and provide significant value add, Lisa's team made over 100 non-exec venture partner inputs now over the course of the last couple of years across the business. And as you'd expect, with the funds that we have, we've got a significant shadow whip that we can call upon for our direct investments. So this slide shows the current portfolio inside the oval, nicely diversified across those 4 sector areas, focus areas but also now increasingly by maturity. Outside the overall in pink is a number of businesses that we were shadowing as of the 30th of September. So just to call out a few of those around the clock. So forensic analytics is this business I've just talked about where we invested some secondary capital. So this company provides -- it looks at the efficiency of forensic analysis using AI data sets on cellular and WiFi data, working with 43 of the 45 U.K. police forces and also expanding into U.S. and Europe now. Pimberly was the second deal that we've done post period end. Software business growing rapidly again in the U.S. Moving around the clock, PlayerLands, enables gamers to trade virtual goods within games, Further around still Tribosonics uses sensor tech and software to measure real-time wear and tear in bearings and moving parts. And Dxcover is a really interesting business up in Scotland, which uses blood cancer serum various spectroscopy techniques to detect cancer from a very early stage. So a very interesting business there, too. So this is the period in terms of numbers. So starting off the period with GBP 96 million of carrying value on our balance sheet, adding GBP 5.4 million of new cash. The next column shows the fair value movements there quite nicely spread across the portfolio, but you can see some larger numbers from Faradion, Intechnica, Soccer Manager, some going the other way, MyHealthChecked as it was mark-to-market on AIM; and LM Tech, where turnaround that we've started as slowed down given some of the supply chain issues that we've seen coming out of China but, importantly, ending up with a portfolio of now GBP 110 million. So just to canter through our top 10 assets. So just to reiterate as well, we hold significant stakes in these assets and are represented on the board of all these assets. We can see the general progress in valuations across the piece here. So nDreams is our largest asset. It's a virtual reality developer games company. So the revenues are growing market, we think, is opening, particularly from some of the announcements from Facebook around the metaverse. We're seeing some longer-term partnership opportunities coming towards us. A new game for Sony was launched in the year in August, called Fracked, which has gone down very well. And we are due to release our first third-party published game in the early part of 2022. Faradion, big moment for this business in the summer where large Chinese battery business CATL announced its move into sodium ion technology, which has shone a light around this sector. In terms of Faradion, continuing to increase the production of battery packs and getting them out into the market through their Australian joint venture, dealing with a number of OEMs and some significant increased inbounds from potential licensors and funders. Intechnica, which is our e-commerce efficiency web security business, 2 businesses in 1 here for us, a consultancy business, which has shown 20% year-on-year growth, 20% EBITDA margins as well. And a couple of years back, we split out what we thought was a really interesting product business called Netacea, which is looking at the really thorny problem of bot management, scrapers on websites, et cetera, and security around that. Again, some really strong growth, 170% year-on-year. Some really strong net retention figures at 107%. A lot of revenues now coming from the U.S. including now a top 5 global retailer and some significant interest coming from the financial services sector. Medherant, also showing progress in its clinical developments and regulatory progress. And Voxpopme, showing revenue growth up to around $8 million of ARR now growing strongly can bring good progress. Thanks, Mark. Into the second half, our top 10, Impression Tech, which is our aluminum pressings business. So what we're seeing here is, again, much more interest in terms of the licensing of its technology. So we have 4 licensees currently covering U.S., China and Europe, 6 more in discussions. But interestingly, those licensees are now starting to invest quite heavily in the significant plant that's required to service the end customers. So significant inbound from aerospace and also bikes coming through. Intelligent Positioning. Again, we're happy with the effective the turnaround that we've helped in this business, where we're seeing some significant 30% or so growth from a low point following some churn through COVID. Locate Bio, the high points in the period was a GBP 10 million Series A, which we invited BGF into the round with us, enabling the company to progress through 2022 and '23 at clinical development. Warwick Acoustics, flat speaker technology. And again, some really interesting progress with its OEM partners, passing key application milestones, and we're hoping to see some nominations on to some auto models perhaps late in next year. Last on the list here, top 10 is Soccer Manager where we launched the new game, Soccer Manager '22 in a series this year. And we are seeing growth in that and some new games -- 2 new games, in fact, to come out during the course of 2022. So good progress. Thanks, Mark.

Thank you, Julian. I mean, one of our -- the vision that Mercia states is to be the first choice for investees, investors and employees. We passionately believe in get it right for your employees and everything else flows through that. We have a responsible investment team that we've had for some time, led by Jill, Jill Williams, I'm a part of that responsible investment team. Following very closely the UN Principles of Responsible Investing. But actually, this word cloud on the right, I think, really summarized the spirit within Mercia as we continue to grow as a business. We had in a way day just recently and unprompted in terms of manage. We asked people when they came into the room to give us just send in the first 3 things that they would use, words they would use to describe Mercia, an ambitious fun, frankly, professional, connected, collaborative. These are, I think, really positive sentiment to receive from what are 106 employees now across 8 regional offices. And I spoke to the Bristol office that we're opening up to move into the Southwest. We have 19 university partnerships as well, which we work closely with and account for about 10% in terms of investment activity into new and existing deals. And as I said at the very beginning, diversity and Net Zero, our key focus is within Mercia. The idea being that we've got over 400 companies, if you heard from Julian, across the portfolio. We set the standard and then we look to bring our portfolio with us, and that have a tremendous impact, certainly on a domestic basis. And on the diversity front, just in terms of gender, 41% of our staff, 31% of the investment team and 2 of the 5 main Board NEDs are women. So it's work in progress, but positive progress in that respect. And then just finally, bringing this together. This has been a positive period. It's been a positive 18 months, and we think that positivity will continue going forward. The acquisition of the fund management contracts for the 3 northern VCTs was the right thing in terms of fit, fully integrated because of it, and these numbers show that, that is delivering. In terms of fee income, it's that quality as well as the growth. The management fee income, a majority of our income is from our third-party managed funds. 88% of that is contracted and recurring. Assets under management continue to scale. We remain optimistic in meeting and hopefully beating that GBP 1.6 billion target in AUM in the next 3 years. The group is well capitalized, tremendous free cash across our funds and across our balance sheet, critical both in terms of supporting existing portfolio but making new investments and assessing the market for corporate opportunities as they come through. The portfolio, as you've just heard from Julian is maturing absolutely highly diversified in terms of sectors that we invest against, but also in terms of stage of development for those businesses. And that's really important because we are not looking to go back out into the market to raise more money to support that portfolio. We have taken that balance sheet to an evergreen position, and we intend to build that in a sustainable fashion. And bring that all together, this is why the Board declared the interim dividend at 0.3p per share, up from the initiated dividend this time last year of 0.1p per share. because the positivity within the group supports our continued progressive dividend policy. So I'd like to thank you for your attention, but we have had questions come through. And I've just been noting those down. So what I'm going to do is I'm not going to say the names of the people that have asked them, but we'll put them into themes. And hopefully, we'll address those questions. We will go through all of them.

The first one was to do -- and this is a sort of theming it around a corporate basis here was to do with dividends and whether the dividends will be actually underwritten by performance fees or realizations from the balance sheet. If I can pass that to you, Martin.

Yes. Thanks, Mark. So the first question to answer is no. We don't see performance fees as playing any part in our dividend policy. And the simple reason for that is that they are unpredictable and often can be one-offs. And we also understand why some listed asset managers would have a dividend policy linked to adjusted operating profit because a cover ratio makes sense when that is their single business model, which is asset management. However, for us, of course, there's 2 sides to our business model. There is the asset management side, which is profitable, but then there is also the balance sheet investing model. And if Mark, if you're able to go to perhaps Slide 12, you can see here that, for the year ending March 31, 2021, so at the far right-hand column, we actually generated realized gains, and that is cash realized gains of GBP 20.3 million. And we wish to share part of those cash gains from time to time with our shareholders. And if we anchored our dividend policy only to adjusted operating profit, then that would be denying shareholders the opportunity to share in these periodic gains. And we have considered whether or not we would do special dividends. But I think a progressive dividend policy over time is more reliable, it's more predictable, and we seek to move towards a yield of approximately 2%.

Thank you. And just keeping with the [indiscernible] here.we've obviously made 2, I think, very successful acquisitions. One question is, do we see many opportunities to acquire other fund managers? And if so, can we hint at a timing, et cetera?

Well, I think the first example is, of course, one of the key aspects of any acquisition is that it compresses time. So it enables you to execute your organic growth strategy much quicker. And the specialist asset management sector is a consolidating sector. And we have executed 2 successful acquisitions so far. And so we'd like to do so again. The way that we look at acquisitions is from a people perspective and from the culture perspective and geography and asset class. So those are our most important priorities because the businesses that we do acquire, we wish to expand once they become part of Mercia, and we're not a slash-and-burn M&A organization. So it is a consolidating sector. There are some high-class management teams out there performing extremely well. And one would hope perhaps to be able to invite 1 or 2 of those to join us over the next 3 years.

Thank you, Martin. Another question, which I'll take actually is what percentage of the company is owned by employees. It's approximately 15%, I think, across the board and management team and employees. And also every employee is an option holder. We think it's very important for alignment, not just in terms of investment, investment returns, but corporate activity as well. So there is a definite sense of ownership across the group. I'm just going to move to the next section, which is on sort of investees. And Julian, if I can go to you, you answered one question on investees, but there's another question here about prices seem to be hot in the market. How do we ensure we don't get caught up in that trap? How do we price these businesses when we want to get into them?