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

Good morning, and welcome to the In Conversation with Mercia Asset Management Investor Presentation. [Operator Instructions]. The company may not be in a position to answer every question it received in the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to make the following poll. And I'd now like to hand you over to Lisa Ward, Head of Portfolio Resourcing. Good morning.

Good morning, and thank you. Welcome to today's webinar In Conversation with Mercia, designed specifically for our retail investors and our shareholders. This event will introduce you to a range of portfolio companies, talking to the founders and CEOs of some of our exciting direct investments and third-party portfolio companies. This is our opportunity to update you on just some of the businesses across our portfolio and the range of sectors that exemplify the immense innovation and diversity that could be found across the U.K. regions, from health tech and Deep Tech to mobile gaming and enabling tech, we want to give you the insight into the sectors and the regional businesses that continue to withstand the most difficult of trading conditions, demonstrating their resilience and our capacity to continue to support this growth. Many of these SMEs are making a significant financial contribution as well as a positive societal impact into the communities in which they are located. With me today is our CEO, Mark Payton; and Julian Viggars, our Chief Investment Officer. Before handing over to Mark, I'd like to just remind you of a few housekeeping points if possible. We will focus on answering questions that we've received through the Investor Meet Company platform. We might not be able to get to them all today. We'll also take questions that you have submitted through the Q&A function. If we don't get to all of them, we'll make sure that we come back to them through the Investor Meet Company platform, where we'll provide a written answers. So today's webinar is a combination of live conversations here in our Mercia Studio as well as virtual interviews and videos. The entire event is being recorded and will be available to you to view again on the Investor Meet Company website. So without further delay, I'd like to introduce you to Dr. Mark Payton, CEO of Mercia Asset Management. Mark?

Thank you. Thank you, Lisa, and welcome, welcome, everybody, joining us across the country. I'm rather hoping the weather is somewhat better than it is here. It's pouring down. We are in our main office in Henley-in-Arden. And I just thought I'd give you a brief introduction about Mercia and what we're trying to show and demonstrate today. Mercia started its journey back in 2010 with a rather small GBP 4 million fund focused really on addressing the lack of capital and support across the U.K. regions. Roll that forward to today, we've got approximately GBP 1 billion in assets under management, AUM. And of that, about GBP 300 million is in free unrestricted cash. And the model that we've been developing over the years is a hybrid model combining, third-party managed funds, and that's really the focus of today alongside our balance sheet capital, our proprietary capital. And our balance sheet capital will invest selectively in businesses from within our funds as well as actually as a limited partner in LP in new funds coming forward. We invest across England, Scotland and Wales. We have 120 people now at Mercia, focused on operations, origination, value creation, value add and, of course, value extraction for our investors' benefit. We have 8 offices, as I said, one of which being the Henley-in-Arden office we are at today. And across those third-party funds, we've got 3 asset classes, private equity, debt and venture. And we've got 400 companies across those pools of capital, 260 of which are within venture. And venture is very much the focus of today's discussion. Julian, as you'll hear from in a moment, heads up our venture activity across the group. But also you'll hear from Ash and Ash focuses down on to Deep Tech, and you'll hear some examples there. And you'll also hear from Peter across our life sciences portfolio as well. And just more specifically about the types of capital that we manage. I think it's really important to just emphasize, these funds are evergreen, long-dated, long-duration capital. And that means Julian and his team can look with some confidence of the future about the capital deployment over time. These funds are not subject to redemptions, et cetera, and the types of capital we manage are broadly in 3 categories: retail. So that's, for instance, enterprise investment scheme, EIS. You'll hear from Julian Dennard later on in that regard; and Venture Capital Trust, the Northern VCTs and you'll hear from Daniela about that, it's a very important pool of capital in that respect. And then we've got government agency capital. So like British Business Bank, where we have a great privilege actually of managing a number of funds across the North England and the Midlands. You'll hear from Will and Ian talking a little bit to that later, too. And then finally, institutional capital. And this is predominantly in private equity and debt, and these are typically regional pension funds, but they're outside of today's discussion, so we won't be dwelling on that too much. And just sort of stepping back and looking at the model that Mercia has developed, it is what we call sort of connected capital -- interconnected pools of capital. So within venture, we can go in early pre-revenue start-up young businesses and follow that through with the appropriate risk-adjusted capital as we look to scale and grow those businesses. And that is really important when you're taking that sort of long-term perspective on the businesses you're supporting. I think also in addition to that, is the fact that our businesses typically, not all, but typically have quite modest capital needs. And that is really important in times of bad as well as good. And what I mean there is the syndication risk is a challenge within the venture community. And that's where for whatever reason, your co-investors choose not to or cannot support the portfolio company you're in because our businesses have capital requests that are pretty much broadly in line with what we have in terms of our interconnected pools of funds and our balance sheet capital, we can support those in times of difficulties as well as you've just heard reference there from Lisa. And to put that into context, actually, the value that you look for as a venture investor can be seen in these difficult times. And you look at the pandemics or when the pandemic came along, Julian actually switched us into investing rather than stepping back. So another step back value has a target of presenting. So during the pandemic, as that kicked off, we actually made more new investments in the year before. And that's because we enjoy to invest through the cycle. We have the privilege and ability with our interconnected pools of capital. And we very much sit -- we take a Board seat on most of our venture deals, and we sit there as an empathetic investor actually, where we sit alongside our founders, alongside our management team, helping them achieve the value that they're trying to create. And Lisa actually heads up our Portfolio Resourcing, where we look to build out management team, build out teams at the Board level as well. So you pull all those pieces together and the competence and capability that Mercia has really had the great privilege of building over these years has resulted in quite the exemplary track record. And that track record really is distilled into numbers. So if you look at it over the last 2 years, we benefited from something like 40 trade sales, 4 IPOs, returning GBP 250 million over that period back to our investors and our shareholders. So I'd just like to thank all of those that are within our funds for the continued support and look forward to hearing more from the team and from the portfolio companies today. Thank you, Lisa.

Thank you for assessing the scene, Mark, and demonstrating our complete connected capital model and how it supports a range of companies at each stage of their life cycle. And more importantly, it's critical that Mercia's strong liquidity will be in the months ahead. So now I'd like to introduce you to our CIO, Julian Viggars, who's going to tell us a little bit more about our progress over the last year. Julian.

Thanks, Lisa, and good morning to everyone. So I am going to cover briefly some of the more important parts of our model in more depth. But firstly, just listening to Mark there, I'm really proud of our ongoing success. Those GBP 250 million of exits, they don't happen overnight, and they are the culmination of many, many years of hard work and effort from -- right across our team. So as many of you know, our model is to invest from our funds first. We have circa GBP 1 billion of AUM now. GBP 850 million or so of that lies within our third-party funds. We also have now 65 or so talented investment professionals right across the country. And that is really, really important for our deployment locally into the regions. So if you can imagine, the networks from those 65 individuals now, some of them have been with us for 5, 10 years plus. It's those networks and the fact that we're on the ground that really enables us to really find those entrepreneurs and those management teams enable us to deploy our capital. Now our activities are also having effects more widely into the ecosystems, particularly the corporate finance ecosystems, but also into the communities themselves because fundamentally, we're finding and backing high-growth businesses, which typically do create more and higher quality jobs. So another really important part of our model is Lisa's work in terms of the portfolio resourcing efforts. So we now have access to well over 1,000 non-executive directors, operating partners, venture partners, and they come from all different walks of life. They are, in many ways, also experienced entrepreneurs themselves. And that group of individuals is important to us for a number of reasons. The first one is it's those sorts of individuals that entrepreneurs typically gravitate to, so they are important for our own deal flow. They're important for us in terms of our due diligence when we're looking at new deals. And they're also, I think, critically important to us because these are the individuals that we can add into our portfolio companies to help make a difference. So be it on the governance side, on the finance side, perhaps a little tweaks to the business model, on the sales or indeed on the technology stack, we can find an individual, add them into that company. And again, these can either be short term assignments or more permanent. But importantly, we don't charge for those services. So this is a real value-add part of our model. So now over 250 positions within our third-party funds, and that does provide us on the balance sheet with our proprietary deal flow. So clearly, we enable and encourage our fund investments to go out and seek third-party capital. But the fact that we have been watching those businesses for perhaps between 6 months or even up to 5 or 6 years, gives us an inside track. And again, along the way, we may well have done some of those little tweaks or added into those management gaps or whatever along the way. Now you may have noticed that over the course of the last few weeks, we've made 3 new investments from our balance sheet, and those are Nova Pangaea, Uniphy, both from the Northern Powerhouse Funds and Axis Spine, which comes from EIS funds. And again, you're going to hear directly from those really interesting companies in just a second. You're also going to hear directly from Patrick. O'Luanaigh who's CEO of nDreams and Mike Grant from Warwick Acoustics on the progress that those businesses are making. And I think progress and good progress actually was a phrase that I used just a couple of months back in the summer at our recent results. And I'm pleased to say that that phrase, "good progress" is still the case across our portfolios in spite of perhaps some of the more turbulent times that we're seeing at the minute. The last point I want to make in terms of our model, which is very important, is across our balance sheet, we are very well diversified, both in terms of stage of business but also in terms of sector. So we have games businesses, we have software businesses, life sciences, medical technologies, deep technologies within our portfolio. We're not so exposed to consumer Internet at this point or indeed the public markets. Now that alongside, as Mark and Lisa already alluded to, the significant liquidity that we have between our funds and our balance sheet does put us in a really good position going forward to make and continue to make those really good returns for you. Thanks, Lisa.

Thanks, Julian. So I'd now like to welcome Peter Dines, Mercia's Chief Operating Officer; and also our Managing Director of the National Venture Funds. Peter will share more about Mercia's strength in life sciences sector and showcase our track record with some of our life sciences portfolio, too. So Peter, it's great to have you with us today.

Thanks Lisa. And good morning, everyone. And it's my pleasure to have a role in Mercia to oversee National Venture side of the business, which is primarily EIS and our VCT funds, which is a key part of the business and a fast-growing part of our business. As Lisa said, I'm also involved in life sciences businesses. I've got a background as a medical device entrepreneur, and I involve with a talented team of investment professionals to focus on a number of life science and Health Tech businesses. And what I'd like to do this morning is just share a bit more detail on some of that our approach in this area. As mentioned, Julian just mentioned in terms of our network, that's a key part for us in terms of how we do things maybe slightly differently. So we've got involved with a number of our network of nonexecs and operating partners that are a key part of our deal flow. And we also, because of our model in terms of a number of different funds, we can get involved at a very early stage literally just close to the formation of the company to then provide that partnership approach and antithetic investors, as Mark said, to support the growth, both in terms of our networks and also our capital. In terms of the track record, it's been a successful few years. And as Julian said, it takes some time of lots of effort to realize those investments. But I'd also like to share some of the most recent investment and exits that we've had in this sector. So a few examples would be OXGENE. So OXGENE was initially an early-stage synthetic biology business when we first backed the academic founder, Ryan Cawood. Our EIS funds were involved right at the very beginning, providing follow-on capital and then later on our balance sheet to further scale the business, and we successfully exited that business in 2021 to WuXi. And that was a 5x return for our balance sheet, but up to a 20x return for some of the early stage EIS funds. The expansion is another example of utilizing our network, backing a founder that we'd previously backed. They grew a fast-growing and profitable antigen antibody service business and often in investment, it's about timing, and they were focused on the infectious disease space very quickly pivoted to providing COVID products and services, and we sold that business in July 2020, while the peak of the first lockdown. And again, it was a return of between 8 and 12x money multiple. And then more recently, a slightly different business, we worked with a founder of a company called C7 Health, we founded with Phil, Phil Webb, the CEO, a tech-enabled health service business, which grew very quickly, and we sold this year to in health diagnostic provider for up to 14x return for those early funds. The other thing I think that's key to say in all of these transactions is that we sold a significant premium to holding value. So it recognizes that actually there's intrinsic value in what we're doing as well. In terms of our current portfolio, a number of interesting businesses that are coming through the portfolio. Locate Bio is an orthobiologics business that originally spun out at Nottingham University, and it now has our EIS funds, Midlands regional fund and follow-on capital from our VCTs and also our balance sheet funds. Sense BioDetection is an interesting molecular point-of-care technology business, which again has our EIS and balance sheet funds invested. And as mentioned earlier, Axis Spine is the most recent addition to both our balance sheet funds and also our VCT portfolio having been ceded initially from our EIS funds with follow-on capital. At this point, I'd like to pass over to Daniela, who's one of our key members of our investment team, who also has a focus on the life sciences to hear more.

Thank you, Peter, and good morning. I'm an investment manager at the Mercia Venture Capital Trust, we provide scale of capital to innovative businesses developing new technologies across the variety of sectors. The VCT invests GBP 45 million to GBP 50 million per year in 15 to 20 businesses. that are typically several years into their journey and have early commercial traction. Mercia's EIS and regional funds support start-ups in their first and second round of funding while VCT team can follow through at later stages, investing GBP 3 million to GBP 5 million in funding round of total size of GBP 5 million to GBP 20 million. The VCTs are also able to follow-on and subsequent rounds this completing Mercia's connected capital vision as businesses grow bigger. We will now see a short video about one of our portfolio companies, which has been backed by Mercia since its very inception. Axis Spine Technologies is a medical device company focused on advancing surgery of the lumbar spine. The company was developed with founder, Jonathan Arcos as the Mercia [indiscernible] with a strategy to develop a U.S. market-focused spinal implant company. That will be an attractive acquisition to target -- the acquisition targeted to a major player. The company has recently completed an GBP 11 million investment round in which Mercia provided circa GBP 7 million, split between VCTs, EIS and proprietary capital team alongside the GBP 3 million investment from a U.S. specialist venture capital fund called MedTex. You will now see the video, and I will hand you over to Will Clark afterwards. [Presentation]

Thank Daniela and to Jon at Axis Spine, really is fantastic. I'm not sure you really need to hear anymore. But good morning, I'm Will Clark, MD at Mercia's regional venture activity. You've already heard from Mark and Julian this morning how Mercia is now positioned as a national investor with an active and expanding regional footprint. And in an increasingly competitive markets, we're continually asking ourselves why Mercia to make sure we remain a valuable and relevant manager, both for our investors and our investees. And what I'd like to do now over the next few minutes is provide you with a real insight as to Mercia's regional managed funds activity. You probably heard before, we're in the regions, we're from the regions to the regions. Some of us maybe sound a little bit more like that than others. But bluntly, what this means is we see deals until this don't. Our managed regional fund activity is an integral part of Mercia's ability to find businesses with genuine product and international market fit, and which may go on to require further scale-up risk-adjusted capital from Mercia's EIS, VCT and balance sheet. The key to this is strong deal origination. So as well as being active with digital deal origination campaigns and regular online initiatives, which you might have seen on LinkedIn, such as meet the funder. There are 2 key factors, which I think are really worth highlighting at this point. Firstly, I'd like to call out the efforts of our local teams, the guys and girls on the ground who are working the patch. It's them who are attending the early morning business briefings in Barnsley or the nighttime networking events in Northallerton but they're the ones who are forming relationships and shaping deals, developing conversations with those leaders we want to get to know in their locality. And of course, it's far easier for Mercia's to do this with our regional spread rather than just heading up the East Coast mainline from London once a fortnight. I think the second most important thing is our network. This really does make a difference. And I've just call out again the work that Lisa does in leading our Mercia Nucleus initiative. We've got an active NED and Cx0 network, and these networks comprise experienced successful people who we call real friends of the house, and they regularly do 2 things for us. Not only do they signpost business leaders to Mercia, who are looking for investments, but they're also very willing, as Julian said, to take a phone call and provide a view on a particular investment opportunity or investment thesis. And I think this strong deal origination is borne out in our deployment numbers. And you may be interested to know that over the last 2 years to the end of September, Mercia's regional managed funds alone have invested in excess of GBP 50 million in 109 transactions supporting 83 U.K. regional SMEs. So let me now introduce you to 3 of our superstars and my senior investment colleagues who will be able to showcase our capabilities from the Northeast to the Southwest, encompassing a range of sectors. Firstly, I'd like to introduce you to Ash, who's based in Manchester and Ash leads our Deep Tech investment activity and will be sharing more information about our track record in Deep Tech and introducing you to our portfolio business Uniphy.

Thanks, Will. Good morning, everyone. My name is Ashwin Kumaraswamy. I'm Investment Director with Mercia focusing on deep technologies businesses. Mercia, as an investor is proactive in more ways than one. Primarily, we look at providing complete connected to European finance solutions, but also another end of the spectrum, we create companies that shows our [indiscernible] nature. We bring ideas and teams together and help create businesses from scratch. And one such example is Faradion. Faradion is a business that have Mercia co-founded in 2010. We've been involved in the business from recruiting team members right through to helping business fund at various stages, eventually helping the business be acquired by Reliance Industries early part of this year. And this entire journey of creating companies from scratch right through to building value is unparalleled in U.K. venture capital sector. In terms of deep technology focus at Mercia, we're probably one of the longest serving Deep Tech enthusiasts in the country. And one such example of a new Deep Tech business that we're involved in is a company called Uniphy, which you will shortly see a video of. Uniphy is all about transforming human machine interface where it can turn any industry standard plastic or a smart -- or plastic or glass surface into a smart touch display, and we can also have things such as haptics and other features to it. And selecting these companies as early as possible and nurturing them is where the strength of Mercia lies, now you'll see a video of Uniphy. And post that, I'll hand over the baton to Will Clark. [Presentation]

Isn't that 1 brilliant team. I can't wait to see the options left to buy next car. But anyway, in true euro vision fashion, we're on the move. So we're actually going up to -- go up to Newcastle now and to Ian Wilson, who heads our local town-side office. And Ian is going to focus on our credentials in clean tech. Over to you, Ian.

My name is Ian Wilson. I'm principal for Mercia. I work predominantly in the Newcastle office in the Northeast of England. The Northeast is an interesting place to work right now as it's gone through a fundamental shift in its focus for business. Long gone is the time when the major industries were shipbuilding and coal mining. There's a long tradition of reinvention and regeneration and now is no different. Now the Northeast is at the center of the shift to the knowledge-based economy by following a purpose-led impact strategy with decarbonization, sustainability and green initiatives at the heart of every growth story. There are established success stories, including FTSE 100 listed Sage plc and electric Nissan Leaf and other forthcoming vehicles are manufactured in Sunderland, complementing what is already a growing renewable energy hub already in place. The Ministry of [indiscernible] in the region also has the likes of Equiwatt, the business focused on driving efficiency by facilitating the ability for households to reduce their power consumption at peak times and true -- the brokerage to help drive down energy costs for SMEs. However, the Northeast is not alone. The same story could be told in any of the regions in which we operate. We want to introduce a business from our portfolio, but we'll watch a short video. Tees Valley based Nova Pangaea Technologies, ably led by CEO, Sarah Ellerby. This is a clean tech business that uses wood and other agricultural plant residues and turns them into various biofuels. [Presentation]

[indiscernible] at Nova. And interestingly, Sarah is someone that was introduced by Lisa and through the Mercia Nucleus initiative. Just in terms of this sort of final section, I'd just like to pause for a moment and describe our current mandates. And as you know, Mercia is an extremely ambitious business. And I'd like to give you a flavor of how we're hoping to grow our assets under management. So we actually secured about 40% of the first generation of regional funds, and Mercia currently is managing 3 equity funds, 3 venture funds across the north, the Northeast and the Midlands. And initially, these fund mandates provided Mercia with about GBP 108 million of equity capital for deployment. But since then, we've grown these commitments by a further GBP 44 million to GBP 152 million. So 2023 is actually a key year for us. So not only are there further opportunities to expand each of these 3 current active funds. But following the government's announcement as part of its 2021 Autumn Statement, there's a next generation of regional funds, which, in total, will be worth GBP 1.6 billion for both debt, start-up loans and equity. And we're hoping that some of these initiatives will be in our preferred regional geographies and definitely hope that Mercia will be in the mix for that. So therefore, it should be no surprise that in closing this section, we're going to focus on the recent expansion of our physical footprint into the Southwest. So given the importance which Mercia reattaches to developing local conversations with business leaders and with hoops of tech activity in Sunderland, Glasgow, Bristol and Exeter, we want to ensure that those businesses also benefit from access to Mercia's complete connected capital solution. So thank you. I've enjoyed this opportunity to share more about the people and investments in the regions. We'll have the chance to talk more later in Q&A, but for now, I'll hand you over to Julian Dennard, who having been with Mercia for the last 5 years, is now heading up our new Bristol office. And as you'll hear, as our third superstar is already doing deals in the Southwest. Over to you, Julian.

Hello. My name is Julian Dennard, and I am the fund principal for 2 of our venture funds, the Midland Engine Early Stage Fund and secondly, our EIS funds. In addition to managing these funds, I'm leading the expansion of Mercia's business into the Southwest, an area where we have previously not had a physical presence. I'm a big supporter of the region and its businesses. I live in the region, and I have been a venture investor here since 2006. During which time, I've built strong relationships across the Southwest, which should serve Mercia well as we grow. The Southwest represents an excellent opportunity for us. When you consider the region sectoral strength, life sciences, aerospace, composites, engineering, cyber, electronics and enterprise software, you can appreciate how closely these map to Mercia's investment focus. These different technologies, the research from regional universities and various established support networks like [indiscernible] have created a rich environment to start-up and scale-up activities for early-stage businesses. The one element that has been lacking is the depth of regional capital to support them. To help us capitalize on the opportunity in the Southwest, we have grown our team to include Adam Watts, in our VCT team and Rafael Joseph in our EIS team. This enables us to cover a wide range of opportunities where companies are seeking between GBP 500,000 and GBP 6 million of initial investment, either as a lead investor or as a part of a syndicate. Demand for the capital is strong, and we are seeing a lot of very interesting opportunities. One example of these high-quality companies is [indiscernible] based business Roadmap, a female-led B2B SaaS business in the HR tech space. Roadmap's platform helps design job offers and create job descriptions that attract and retain talent. They utilize machine learning, natural language processing and [indiscernible] to design job descriptions with inclusivity at their core, promoting workforce diversity. Roadmap has a blue chip customer base and their offering lends itself well to enterprise customers with over 1,000 employees, where there is a large quality of disparate jobs. We're excited about this business for a number of reasons. Firstly, the management are experienced incredible with a passion for their mission. They have already exited businesses in this space. Secondly, whilst at an early stage, they are punching above their weight with clients they are attracting like Baker Hughes and Sage, a testament to the need and strength of their product. And finally, we are supportive of the overall objective to promote equality and diversity. Mercia's physical presence in the Southwest, a regional underserved by venture investors enables us to build the close relationships with the local business community and to find and invest in just this kind of highly pricing opportunity, opportunities that may well be missed by our London-based counterparts. This local presence in Bristol demonstrates our philosophy of being a national investor with a strong regional presence. Thank you, and I'll hand you back to Lisa.

Thank you, Julian. I hope that those short videos gave you a flavor of the breadth and diversity of just some of our portfolio companies, the strength and passion of their leadership, along with the expertise of our investment team. So I'd now like to introduce you to Patrick O'Luanaigh from nDreams and Mike Grant from Warwick Acoustics. And I think we're really just going to be continuing the theme of driving regional businesses. And I'm delighted to talk to you both, good morning.

Good morning.

Good morning.

Great. Good to see that you're both there. Both Warwick Acoustics and nDreams are revolutionizing the customer experience really with their innovative products, and they have quality at the heart of what they do. Both companies [Technical Difficulty] major drives in the last 12 months becoming world-class leaders in their field. So Mike, if I could just start with you, I know many of our shareholders follow both companies avidly. But if you, for those of you who are not familiar with the businesses, it would be great if you could just give us a very quick introduction to the company.

Yes, sure. delighted too, Lisa. Good morning, everybody. Yes, Warwick Acoustics is really changing the way that audio and noise control is done in the automotive industry. We have developed a product version of an electrostatic transducer which is now qualified for use in the automotive industry. Why is that important to car manufacturers? Well, three things. First of all, it is something that can shape the customer experience inside the cabin and as car companies move into the electric vehicle era. They're having to redefine how they engage with customers and how they're actually going to put their brands across to customers in a new way. And we can help them do that through both the shape and the form of a transducers that are different from traditional transducers. Secondly, as you can see, this is a very thin, very lightweight transducer audio system. And that basically allows the manufacturer to save on weight. It also operates on very low power in comparison to existing systems. And together, that saves significantly in the range that an electric vehicle with a given audio system is able to achieve with a given battery pack. And then lastly, this as we'd like the -- our colleagues in Uniphy, this is made out of some very simple but sophisticated plastics, and it's very simple to recycle. It uses upcycled material, and it's considerably more sustainable than existing technology. So based on those three things, we're really getting huge amounts of interest from the car industry. And then on top of that, we have some of the best sounding audio systems in the world, and that for many is just the icing on the cake. So yes, we're making very significant progress towards essentially dominating the world of audio in automotive.

Great. Thank you, Mike. And I'm sure we'll come back to you in 5-10 minutes but I want to give Patrick the opportunity just to introduce nDreams. Patrick.

Thanks. Yes. So we're a virtual reality game developer and publisher. We're very close to being the leading the largest publisher in the world at the moment. We've been developing virtual reality games via our headsets since the end of 2013. The market has taken a while to get going and to grow, where we're suddenly hitting this kind of hockey stick growth at the moment. It's become very, very commercial. We've got 7 projects in development, 3 studios, nearly 200 people very soon. And we're seeing some very exciting stuff happening in the market. We're starting to publish games from other companies as well as developing our own. As we continue to grow and scale alongside companies like [Meta], probably you guys know, but also Sony, HTC. We're seeing a lot of growth from Pico, who are owned by ByteDance and also lots of agreements that Apple will be announcing something very seen. So it's a very, very fast-growing space that's finally, finding its feet, and we're in a really good position.