REG - IP Group PLC - 2023 Annual Results
13/03/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240313:nRSM6053Ga&default-theme=true
RNS Number : 6053G IP Group PLC 13 March 2024
FOR RELEASE ON 13 March 2024
("IP Group" or "the Group" or "the Company")
IP Group plc 2023 Annual Results Release
Focused and well positioned for the future;
significant inflection points expected over the short term.
IP Group plc (LSE: IPO), which invests in breakthrough science and innovation
companies with the potential to create a better future for all, today
announces its annual financial results for the year ended 31 December 2023.
Highlights
Maturing portfolio with multiple near-term value creation opportunities
- Significant portfolio inflection points, including over 10
companies now in clinical studies and expecting key data by the end of 2025,
expected to evidence strong value creation
- Capital allocation prioritised to high-growth sectors where we
have deep expertise and experience
o Healthier future (Life Sciences): Istesso on track to deliver Phase 2b
data for Leramistat (MBS2320) in rheumatoid arthritis in H1 2024; Pulmocide
Phase 3 study of novel anti-fungal for invasive pulmonary Aspergillus underway
o Tech-enriched future (Deeptech): Featurespace posts double-digit revenue
growth; significant fundraisings completed for Quantum Motion, Accelercomm
& Garrison, portfolio poised to benefit from growth in 2024
o Regenerative future (Cleantech): Significant capital ($15m) committed to
Hysata Series B fund raise, which will complete in 2024. Technical milestone
achieved in 2023
- £0.7bn of total capital raised by portfolio in 2023 alongside
leading co-investors including Bosch Ventures, BP Ventures, Clean Energy
Ventures, L&G, M&G, Merck Ventures, Morningside, Pfizer, Roche and
Sofinnova (2022 £1.0bn)
- Decisive action to focus on the highest-growth opportunities,
deprioritising future investment in our US platform and cessation of plans for
China growth fund
Financial strength maintained during challenging markets
- Strong balance sheet and liquidity with gross cash of £226.9m
(2022: £241.5m)
- £73.2m portfolio investment into 33 companies across our three
high-growth sectors (2022: £93.5m, 46 companies) representing around 10% of
capital raised by our portfolio (2022: 9% of total capital raised)
- Cash proceeds in line with expectations at £38.6m (2022
£28.1m)
- NAV per share declined to 114.8p (-13%), driven primarily by
adjustments to the carrying values of First Light Fusion, our US platform,
Hinge Health and Akamis Bio and reflecting a fair value decrease of listed
holding Oxford Nanopore, Since year-end, further reduction in listed portfolio
of £45.4m.
- Third party managed funds of £650m (2022: £700m), with more
than £100m available for investment
Continued commitment to shareholder returns
- Launched further £20m share buyback fulfilling our commitment
to regular cash returns from realisations
- As announced on 18 December 2023, future cash returns are
expected to be in the form of share buybacks when the share price discount to
NAV exceeds 20%
- Over £75m of total cash returned to shareholders through
dividends and share buybacks since 2021
Summary financials
FY 2023 FY 2022
Net Asset Value (NAV) ((i)) £1,190.3m; 114.8pps £1,376.1m; 132.9pps
Return on NAV ((i)) -13%: (£172.2m) -20%; (£341.1m)
Loss for the year (£174.4m) (£344.5m)
Total portfolio ((i)) £1,164.9m £1,258.5m
Gross cash and deposits ((i)) £226.9m £241.5m
Cash proceeds((i) ) £38.6m £28.1m
Portfolio investment ((i)) £73.2m £93.5m
(i) Note 29 details the Alternative
Performance Measures ("APM")
Greg Smith, Chief Executive of IP Group, said:
"The market environment for early-stage investing remained challenging in
2023. In response, we have prioritised and heavily focused our activities and
capital on developing leading portfolio opportunities in the high-growth
sectors where our teams have deep expertise. The Group's portfolio
successfully raised a total of £0.7bn, with the Group investing £73m
alongside more than fifty co-investors. Having appropriately managed our level
of portfolio investment, the Group finished the year in a strong financial
position with £227m gross cash - an important strategic asset in the current
environment.
The Board remains committed to delivering shareholder returns that include a
regular cash component from realisations. This is now anticipated to be solely
in the form of share buybacks while the share price discount to NAV exceeds
20%.
I believe the Group is well positioned for 2024. We have an excellent team
that combines university relationships with deep sector experience and
networks, allowing us to access highly differentiated dealflow. We are one of
the companies most closely aligned with the UK's 'science superpower'
ambition, which we intend to build on this year. In pursuing our purpose to
accelerate the power of science for a better future by starting and growing
businesses driving the energy transition, the digital transformation and
improved health outcomes, we can make a significant dent in some of society's
biggest needs and deliver compelling financial returns for our shareholders."
Webinar
IP Group will host a webinar for analysts and investors today, 13 March, at
09:00am. For more details or to register as a participant please visit
https://www.investormeetcompany.com/ip-group-plc/register-investor
(https://www.investormeetcompany.com/ip-group-plc/register-investor) .
For more information, please contact:
IP Group plc www.ipgroupplc.com
Greg Smith, Chief Executive Officer +44 (0) 20 7444 0050
David Baynes, Chief Financial and Operating Officer
Liz Vaughan-Adams, Communications +44 (0) 20 7444 0062/+44 (0) 7967 312125
Portland
Tristan Peniston-Bird +44 (0) 7772 031886
Alex Donaldson +44 (0) 7516 729702
Further information on IP Group is available on our website:
www.ipgroupplc.com
Notes
(i) Nature of announcement
This Annual Results Release was approved by the Directors on 13 March 2024.
The financial information set out in this Annual Results Release does not
constitute the Company's statutory accounts for 2023 or 2022. Statutory
accounts for the years ended 31 December 2023 and 31 December 2022 have been
reported on by the Independent Auditor. The Independent Auditor's Reports on
the Annual Report and Financial Statements for 2023 and 2022 were unqualified,
did not draw attention to any matters by way of emphasis, and did not contain
a statement under 498(2) or 498(3) of the Companies Act 2006. Statutory
accounts for the year ended 31 December 2022 have been filed with the
Registrar of Companies. The statutory accounts for the year ended 31 December
2023 will be delivered to the Registrar following the Company's Annual General
Meeting.
The 2023 Annual Report and Accounts will be published in April 2024 and a copy
will be posted on the Group's website (www.ipgroupplc.com
(http://www.ipgroupplc.com) ). In accordance with Listing Rule 9.6.1 a copy of
the Annual Report and Accounts will also be submitted to the National Storage
Mechanism on or around this date and will be available for inspection at:
www.Hemscott.com/nsm.do (http://www.Hemscott.com/nsm.do) from that time.
Throughout this Annual Results Release the Group's holdings in portfolio
companies reflect the undiluted beneficial equity interest excluding debt,
unless otherwise explicitly stated.
(ii) Forward-looking statements
This Annual Report and Accounts may contain forward-looking statements. These
statements reflect the Board's current view, are subject to a number of
material risks and uncertainties and could change in the future. Factors that
could cause or contribute to such changes include, but are not limited to, the
general economic climate and market conditions, as well as specific factors
relating to the financial or commercial prospects or performance of individual
companies within the Group's portfolio.
STRATEGIC REPORT
CHAIRMAN'S SUMMARY
Rarely has the expression 'may you live in interesting times' been more
apposite than when applied to the world in which we live today. Often
expressed as a 'curse' to denote times of trouble and uncertainty, its
accuracy in describing the geopolitical, economic and market backdrops that
set the context for our activities in 2023 and our expectations for the
current year is indisputable. The carry-over from 2022 of the re-rating
downwards of listed technology companies, outside of those involved in AI, was
progressively reflected in reduced appetite for venture investment in private
market funds. This impacted valuations as funding rounds became more
challenging to close, with fresh money able to negotiate advantageous terms
often to the detriment of existing investors unable to fund follow-on
investment.
Fortunately, the balance sheet strength that we established in mid-2022
through raising long-term debt capital ahead of the subsequent series of
interest rate rises in the UK, provided the capacity to support our portfolio
companies selectively where required. Once again, we progressively pared back
our initial investment plans to ensure we retained capacity to support our
priority portfolio companies into 2024 and ended the year with £227m gross
cash.
The mix of our portfolio, substantially in life sciences and energy
transition, plus leading companies in virtual reality, cyber resilience and
fraud detection, remains highly relevant to the future desired by the
societies we serve.
Increasing public policy support for science and innovation
We are increasingly encouraged by evidence of growing public policy support
for science and innovation, given that we are one of the UK's leading
companies supporting the transition of academic discovery and innovation to
successful commercial realisation. We welcomed the Chancellor's announcement
in June of a comprehensive package of policies spanning regulation, research
and development ("R&D"), infrastructure, skills and planning, all aimed at
driving investment, growth and innovation.
Investment capital to meet these objectives is key to delivering the economic
growth and jobs needed to secure the improved lifestyle we desire to leave for
future generations. Investing to enhance existing technologies and to bring
through transformative new technologies aligns fully with our mission to
deliver a better future for people and the planet.
Thus, we are also highly supportive of the initiatives announced by the
Chancellor in the Spring Budget, the Autumn Statement and the Mansion House
reforms to increase investment through UK retirement savings schemes into
unlisted equities. The UK has an enviable, indeed leading, position in
academic-led innovation and these reforms have highlighted the opportunities
available both to scale-up investment support for such business and increase
returns to retirees over their investment horizon. Once implemented, we stand
to gain from the resulting investment flows.
Investment and Financial Performance in 2023
Notwithstanding the 'risk-off' sentiment across much of the market in 2023, we
enjoyed some significant successes and achieved a number of critical
milestones; let me draw attention to two.
In our energy transition portfolio, Hysata marked a year of outstanding
progress, culminating in being recognised by the COP28 Presidency with an
Energy Transition Changemaker award. Hysata's revolutionary high-efficiency
electrolyser is designed to deliver the world's lowest cost green hydrogen, a
key enabler of the clean energy transition. In December, the Group committed
US$15m (£11.8m) to the first close of a fresh funding round for Hysata, which
was externally priced at a substantial uplift to its previous round, resulting
in our existing stake almost tripling in value, with a fair value uplift of
£46.5m.
Istesso completed recruitment for its Phase 2b trial of Leramistat (MBS2320),
its lead drug in rheumatoid arthritis, which represents a $25bn market, and
expects the data by the first half of this year.
There were also disappointments; Oxford Nanopore (ONT), in which the Group
owns a 9.8% stake, saw its share price fall markedly over the year,
notwithstanding revenue growth just below the lower end of guidance. While the
price decline reduced the value of our holding by £31.9m, we remain convinced
of the long-term value of this investment.
Finally, First Light Fusion, which had successfully achieved fusion in 2022,
has not yet completed a planned funding round given market conditions and, as
a result, we wrote down our investment by £49.6m, or 43%, essentially
reversing much of the unrealised gain recognised in 2022 following their
announcement of achieving a fusion result.
Driven by write-downs in the portfolio, we recorded a loss of £174.4m for the
year; (2022: £344.5m loss). As at 31 December 2023, our Net Asset Value stood
at £1,190.3m (2022: £1,376.1m) or 114.8 pence/share (2022:
132.9pence/share). In 2023 we invested £73.2m into the portfolio, out of a
total amount raised by the portfolio of £667m and we realised cash from
disposals, including deferred cash from prior year disposals of £38.6m (2022
comparatives were respectively £93.5m, approximately £1bn and £28.1m). Our
share price ended the year at 58.1p, marginally lower than its entry point to
the year of 61.2p.
Addressing the discount to Net Asset Value ('NAV')
The Board set one of its objectives at the outset of 2023 to take steps
designed to narrow the discount at which our shares trade, versus the stated
NAV per share. We recognise that continuation of this discount is of
considerable disappointment to our shareholders.
In conjunction with our advisors and brokers, management significantly
increased the outreach made to current and potential shareholders, both in the
UK and internationally. Additionally, the Board considered a wide range of
alternative structures through which we could conduct our business and
discussed these with advisers and, in principle, with a number of our larger
shareholders. The outcome of these actions was successful in broadening
interest in the Group from those who were not already invested but that has
not yet resulted in material new investment. It was also clear that structural
change did not offer an obvious route to a valuation uplift, and we concluded,
with broad shareholder support, to continue to concentrate management effort
on working with our priority portfolio companies, given the many critical
events and milestones expected over the coming year. That concentration also
resulted in scaling back on some of our international activities and Greg
discusses this more fully in his report.
We also concluded that we should pause paying a dividend while our shares
stood at a significant discount to NAV and should embark upon a modest share
buyback programme, both to capture the discount and evidence whether such
market intervention would meaningfully narrow the discount. We announced a
buyback programme of up to £20m on 18 December 2023. To date we have bought
5,225,207 shares at an average price of 51.4p.
Director retirement
Our Non-executive colleague, Dr. Elaine Sullivan, will this year have
(substantially) completed her third term of three years and, accordingly, the
Company announces that she will not be standing for re-election at its annual
general meeting ("AGM") on 12 June 2024 and will step down from the
Company's board of directors effective from the close of the AGM.
Looking forward to 2024
2024 sees elections in more than 50 countries representing close to half of
the world's population and GDP, with many outcomes likely to bring significant
change. Two major wars are continuing with no sign of resolution and indeed
risk drawing others into conflict. Inflation seems to have peaked in major
Western economies, but expectations now are for a more measured pattern of
interest rate reductions. Cost of living challenges remain elevated and all of
the above contribute to migration patterns that are difficult to control.
As a result, it is likely that risk appetite will remain cautious until at
least the electoral map has settled and potential policy changes are digested.
The areas in which we invest remain critical to building the future we desire
to leave to future generations so we will continue to ensure that we have the
people and financial resources to support our portfolio companies as they
scale up their contributions to that future. Once again, I look forward to
updating you on progress at the end of a year that we anticipate will see many
milestones reached.
Sir Douglas Flint
Chairman
13 March 2024
CHIEF EXECUTIVE'S OPERATIONAL REVIEW
Overview
The overall market environment for growth companies and early-stage investing
remained challenging during 2023, as Douglas has articulated above. In this
context, the Group has made encouraging progress, focusing our capital and
time on the most promising opportunities within the three high-growth sectors
where we have deep expertise and experience, maintaining our financial
strength and taking further action to deliver shareholder returns. Our overall
financial performance for the year, a negative return of 13% on NAV per share,
was disappointing and below our longer-term aspirations.
Our recent strategy has been one of increased focus, under which around half
of our investment over the last two years has been into eight priority
companies, while we have deprioritised future investment in the US and ceased
plans to raise a fund in China. Nearly 80% of our portfolio value is now
concentrated in 20 companies and more than 90% in 40 companies. I remain
confident that this increased focus, combined with a significant number of
portfolio inflection points in 2024 and beyond, has the potential to deliver
compelling returns.
The market opportunity for our investment themes
The Group's overall investment thesis remains that scientific and
technological innovation with a clear focus on the three thematic areas where
the Group has deep expertise and experience, will address significant societal
need and market opportunity allowing us to deliver financial returns with
real-world impact.
For a healthier future (life sciences), rapid advancements in biotechnology,
pharmaceuticals, and healthcare delivery are driving transformative changes in
how we understand, treat, and prevent diseases, presenting a huge economic
opportunity for innovation. Worldwide prescription drug sales are estimated to
be $1.4tn in 2026, with the well-documented 'patent cliff' for blockbuster
drugs putting $10bns of this at risk. EY estimates Biopharma companies have a
record-equalling $1.4tn 'firepower' for business development and licencing of
potential new drugs. IP Group is strategically positioned to capitalise on
this megatrend, with over ten companies now in clinical studies and expecting
key data by the end of 2025, including a number of later stage clinical
trials.
For a tech-enriched future (deeptech), the global "digital transformation",
characterised by the comprehensive integration and relentless increase in
sophistication of digital technologies in every aspect of society and
business, is the most profound and pervasive megatrend shaping the future of
our world. Spending in this area is forecast to reach $3.4 trillion by 2026.
IP Group has been investing for many years in the fundamental technologies
enabling this transition including artificial intelligence, future computing,
human-machine interface and next generation communication innovations.
Embracing the digital transformation megatrend not only presents lucrative
investment opportunities but also reinforces our commitment to fostering
innovation and driving positive change in the global economy.
For a regenerative future (cleantech), the global trajectory continues to
converge towards adoption of clean energy solutions. Global investment in the
energy transition hit $1.8 trillion in 2023, up 17% on the previous year. Our
foresight in recognising this market opportunity has positioned us to
capitalise on the accelerating transition towards clean energy, resource
efficiency, and environmental sustainability. Leveraging our expertise and
networks through our Kiko Ventures brand, we are actively identifying and
nurturing disruptive startups and visionary entrepreneurs driving impactful
solutions that generate attractive financial returns.
Portfolio focused on high potential opportunities reaching maturity
As noted in our RNS on 30 January 2024, we have made a number of fair value
reductions in the portfolio, primarily as a result of a more difficult funding
environment. This resulted in a negative return on NAV of 13% or £172.2m
(2022: negative return of 20%, £341.1m). As of 31 December 2023, the value of
the Group's portfolio was £1,164.9m (2022: £1,258.5m). This is summarised as
follows, with further commentary in the Portfolio Review below.
All £m unless stated Invested Cash proceeds Net portfolio gain/(loss) Fair value Simple return on capital (%)
at 31 December 2023
Healthier future: Life Sciences (ex ONT) 33.9 3.7 (73.9) 393.8 (17%)
Healthier future: ONT - - (31.9) 173.6 (16%)
Tech-enriched future: Deeptech 11.9 33.2 (4.9) 231.4 (2%)
Regenerative future: Cleantech (Kiko Ventures) 17.6 0.1 (8.7) 275.3 (3%)
Platform investments 9.8 1.6 (41.1) 90.8 (33%)
Total Portfolio 73.2 38.6 (160.5) 1,164.9 (13%)
· Healthier future (life sciences): Disappointing financial performance in
a difficult funding environment for Life Sciences companies was balanced by
underlying progress within the portfolio, with ten companies expecting key
clinical data in the next two years. Most notable is Istesso, which expects
Phase 2b data for Leramistat (MBS2320) in rheumatoid arthritis in the first
half of this year, and Pulmocide, whose Phase 3 study of its novel anti-fungal
for invasive pulmonary Aspergillus is well underway. Key notable non-clinical
milestones included Genomics plc's £35m financing (which closed in 2024) to
help develop its advanced genetic screening business build-out, and Apollo
Therapeutics' $227m Series C financing. The largest fair value reductions were
Oxford Nanopore and Hinge Health where, despite continued double-digit revenue
growth for both companies, lower revenue multiples applied.
· Tech-enriched future (deeptech): Our most valuable deeptech holding,
Featurespace, continues to impress, posting double-digit revenue growth even
at a time of a slowdown in the market more generally. Our early, maturing
portfolio of assets attracted large amounts of growth capital including
Accelercomm in a £21m series B and Quantum Motion Technologies closed the
largest ever funding round for a European quantum computing start-up with over
£40m raised. The portfolio did see some impairments caused by specific issues
but as 2024 progresses it is, on the whole, well placed to capture growth.
· Regenerative future (cleantech): the majority of the Kiko portfolio
performed well this year, with successful funding rounds for C-Capture, OxCCU,
Hysata and Mixergy despite worsening funding conditions. We have grown the
Kiko team in anticipation of softening prices for new cleantech investments
and anticipate an attractive environment for new investments in the coming
year. First close of Hysata Series B generated a fair value uplift of £46.5m
in our holding, following significant technical progress. First Light Fusion
has not yet completed its planned Series C funding round, and we have reversed
the fair value increase from 2022 to reflect this, while noting that the
inertial confinement fusion landscape remains buoyant. We take the outcome of
COP28 climate conference as broadly positive, with agreement to transition
away from fossil fuels entering the final text for the first time and
agreement to triple renewables capacity by 2030.
Geographic focus
Over the last 20 years, the Group has played a leading role in creating a
vibrant ecosystem for science and technology commercialisation in the UK. We
took a pioneering role in partnering with the University of Oxford, were
founder investors in dedicated investment vehicles such as Oxford Science
Enterprises, Cambridge Innovation Capital and the UCL Technology Fund and
remain the most active backer of university spin-outs in the UK, primarily
through our market-leading EIS fund manager, Parkwalk Advisors. To this end,
84% of the Group's portfolio by value is UK-based, although many companies
provide their products and services to an international customer base.
Our operation in Australia is much younger. However, driven largely by the
success of Hysata, a spin-out from the University of Wollongong in New South
Wales, the portfolio had another strong year and has delivered the strongest
returns since it was established in 2017. Australian portfolio companies are
included within the relevant sectors in the portfolio analyses below.
In North America, where the Group has a 58% holding in a fund managed by
Longview Innovation, the funding environment for LP funds has remained
difficult. Having been unable to secure significant additional funding
alongside $10m committed by the Group during 2022, the Longview team has
scaled back its overheads and is focused on maximising value from its current
portfolio. As part of our strategy, we have deprioritised any further capital
to the US platform. While there are a number of potential value inflection
points in the Longview portfolio this year, the Group has reduced the value of
its holding in the US platform by around 50% to reflect these circumstances.
Further, consistent with our strategy to focus on the highest-growth
opportunities, we have decided not to proceed with our plans to raise a fund
in China, although continue to actively pursue co-investment from the wider
Asia region.
Financial strength during challenging markets
The Group has proactively managed its level of investment during the year and,
as a result, remains in a strong financial position with gross cash and
deposits of £227m at year end. The Directors took proactive steps to maintain
financial strength by securing a private market debt issue in 2022 and
reducing investment levels to £73.2m in 2023 from £93.5m in 2022. £38.6m of
cash proceeds were received in 2023. In addition, the Group's portfolio
remains generally well-funded, having raised £667m in 2023.
Third-party funds under management
The Group has a flexible approach to capital that combines balance sheet
monies with earlier-stage, tax-advantaged funds as well as later-stage private
capital and now manages or advises £650m (2022: £700m). Having appointed a
new Head of Global Capital to focus on third-party funds, the team has more
than doubled its engagements with public and private investors in 2023 and
continues to pursue further capital in our third-party funds platform.
Approximately three-quarters of the Group's private capital, £469m, is
managed by Parkwalk, the Group's specialist EIS fund management subsidiary
(2022: £477m). This includes funds managed in conjunction with the
universities of Oxford, Cambridge, Bristol and Imperial College London. The
Group has further integrated Parkwalk Advisors into the Group as a source of
distinctive deal flow and strengthened relationships with industry peers to
surface co-investment opportunities. Market data provider Beauhurst again
named Parkwalk as the most active investor in the sector.
In May 2023, we received FCA approval for Parkwalk to be a full-scope AIFM
(alternative investment fund manager). Parkwalk invested £45.1m in 2023
(2022: £57.4m) in the university spin-out sector across 27 companies (2022:
28). Eight new companies joined the Parkwalk portfolio, two successful exits
were completed, returning £24.9m to investors, while two investments were
sold for a loss and two were written-off. Parkwalk liaised closely with BEIS,
the newly formed DSIT, HMT and HMRC on the financial ecosystem for
knowledge-intensive spinout companies and the UK Government's 'science
superpower' agenda.
The majority of our remaining funds are managed by our Australian team. The IP
Group Hostplus Innovation Fund, managed for top-ten Australian Superannuation
fund, Hostplus, now totals A$310m (£163m) and has invested in several of the
Group's portfolio companies including Oxford Nanopore, Wave Optics, Oxa and
Hysata, providing additive growth capital for companies as they scale.
TelstraSuper is also investing alongside IP Group through a co-investment
mandate.
Impact
The Group's purpose is to accelerate the impact of science for a better
future, delivering financial returns alongside positive, real-world impact.
Our strategy to do so is organised around five pillars of activity -
'accelerate value creation'; 'have an impact on the world that counts';
'develop our unique insight, expertise and access'; 'build a truly distinctive
reputation'; and 'be a home for exceptional talent' - underpinned by
class-leading internal processes, services, and controls.
We have successfully refreshed the Group's brand identity, aimed at
highlighting our expertise and clearly aligning around our impactful purpose.
In terms of impact, we have partnered with the Value Balancing alliance to
co-create an impact framework and approach for developing KPIs for VCs and
have built an impact approach for life sciences and co-convened a working
group for VC firms with the Operating Principles for Impact Management (OPIM),
to provide a platform that will allow for the sharing of best practice and key
learnings around impact. The Group is AAA rated by MSCI, ranked first for our
industry group by Sustainalytics and has PRIME status in the ISS ESG corporate
rating.
Talent as a key driver of success
The talent and capability within in our investment teams is a key asset for
the Group. Strengthening the professional capabilities of our investment teams
has been a key focus since the formation of the investment partnerships in
2018. Our investment partners have considerable experience across venture and
in their respective domains of commercial specialisation, complemented by
strong operational experience. The teams each have a wide network of
co-investors, innovators, and entrepreneurs, which brings high-quality
pipeline opportunities, complimentary capital and portfolio management talent.
We continue to work hard to build stronger networks amongst potential
acquirers and to expand our geographical network to help our companies with
international reach.
We are also improving the external visibility and reputation of our investment
teams, notably with the Kiko brand but also across all our divisions by
marketing our thought leadership on social media and speaking at events. All
our investment teams have now worked together for an extended period. Team
processes have been professionalised and are continuously improving, with
investment decision-making delegated appropriately to practitioners.
During 2023 the Group has seen exceptionally low unplanned talent turnover and
added a small number of Investment Associates into our Kiko team. We have
maintained a 'high' eNPS score, completed our 'values' project and delivered
on the second year of our employee-led Inclusion and Diversity (IDP)
masterplan. The Group was placed first in the 2024 Honordex Inclusive PE &
VC index.
The Artificial Intelligence opportunity
As outlined above, one of the Group's investment areas includes identifying,
backing and growing businesses that apply artificial intelligence and machine
learning to significant market opportunities as well as the deep technology
solutions that will enable the realisation of these opportunities, such as
future compute and next generation networks.
We are also taking a proactive approach to the use of generative artificial
intelligence (Gen AI) within our business processes, both through the
deployment of market leading off-the-shelf solutions to improve team
productivity, and the development of in-house, proprietary toolsets for
improving efficiency across all our workstreams. We expect that the
development of Gen AI tools will have a positive impact on opportunity
sourcing, due diligence and market analysis in the shorter term. As an
example, we have developed a proprietary IP landscaping tool that leverages
the inherent power of large language models to rapidly analyse and deliver
insights from bulk data, which is being used initially in our Australian
business. We are also actively monitoring the use of Gen AI across the venture
capital ecosystem, employing our deep understanding of technology to identify,
employ and invest in differentiated solutions that align with our
tech-enriched future/digital transformation investment theme.
Continued commitment to shareholder returns
The Group aims to deliver returns to shareholders primarily in the form of
long-term capital appreciation. Subject to the Group's capital allocation
policy, the majority of cash proceeds will be typically reinvested with a
smaller proportion used to deliver a cash return to shareholders. Since the
introduction of this approach in 2021, the Group has delivered more than £75m
of cash returns to our shareholders via dividends and share buybacks.
Given the continued discount between the Company's share price and its NAV per
share, which the Directors believe significantly undervalues the Group's
portfolio, we launched a share buyback of up to £20m in December 2023. The
Board remains committed to utilising a proportion of realisations to make
regular cash returns to shareholders, which will typically be made in the form
of share buybacks when the share price discount to NAV exceeds 20%. As
previously announced, regular dividend payments will be suspended under such
conditions, and accordingly the Board is not recommending a final dividend for
2023.
During 2023, the Group purchased 220,302 shares for £0.1m and a further
5,004,905 shares for £2.6m have been purchased in 2024. In 2023, the Group
paid the final 2022 dividend of 0.76 pence per share and an interim dividend
of 0.51 pence per share, a total of £13.0m for the year.
In addition, we have more than doubled our investor relations activities with
further investor-focussed events as well as our flagship 'Scale it up' event
at London's Science Museum in May where we hosted a debate on how the UK can
help support more UK innovation to become world-leading companies, showcasing
a number of our portfolio companies. We have also increased the number of
roadshows the Group undertakes, meeting with shareholders and non-holders in
the UK, Europe, US and Middle East.
Outlook
As the UK's most active investor in university spin-outs, we continue to see
huge opportunity for the Group to benefit from increasing public policy
support for science and innovation with £109m capital across our third party
managed funds including Parkwalk still to invest alongside balance sheet
funding. While the current macro environment remains challenging, we see
continued interest in our portfolio and remain confident that investor
appetite for growth companies will return. The Group and its portfolio remain
well-funded and we are confident the Group will reap the benefits of our
maturing portfolio given the number of key milestones anticipated over the
next 12-18 months, particularly in life sciences. The Group is committed to
delivering value for all stakeholders and anticipates that the next 18 months
could be transformational to fair value growth.
Greg Smith
Chief Executive Officer
13 March 2024
PORTFOLIO REVIEW BY SECTOR
Overview
The Group has a focused and maturing portfolio of companies that contribute to
a healthier future (life sciences), a tech-enriched future (deeptech) and a
regenerative future (cleantech, through our Kiko Ventures platform).
In addition, a small number of investments are categorised as platform
investments, which are funds or portfolio companies that invest in other
opportunities.
As at 31 December 2023 As at 31 December 2022
Sector £m % £m %
Healthier future: Life sciences (ex-ONT) 393.8 33% 435.6 35%
Healthier future: Life sciences (ONT) 173.6 15% 205.5 16%
Tech-enriched future: Deeptech 231.4 20% 227.3 18%
Regenerative future: Cleantech (Kiko Ventures) 275.3 24% 266.4 21%
Platform investments 90.8 8% 123.7 10%
Total portfolio 1,164.9 100% 1,258.5 100%
Portfolio Review: Healthier future: Life sciences
IP Group's Life Sciences portfolio comprises holdings in 33 companies valued
at £567.4m at 31 December 2023.
Company name Description Group Stake at 31 December 2023 Net Unrealised + realised fair value movement Fair value
% investment/ (divestment) £m of Group
£m holding
at 31 December 2023
£m
Oxford Nanopore Technologies plc Enabling the analysis of any living thing, by any person, in any environment 9.8% - (31.9) 173.6
Istesso Limited Reprogramming metabolism to treat autoimmune disease 56.5% 15.0 3.1 113.8
Hinge Health, Inc. The World's First Digital Clinic for Back and Joint Pain - (19.6) 34.0
1.8%
Crescendo Biologics Limited Biologic therapeutics eliciting the immune system against solid tumours 14.4% 0.8 - 19.6
Pulmocide Limited Novel inhaled treatment for life-threatening fungal lung infections 12.6% - 4.5 19.2
Ieso Digital Health Limited Digital therapeutics for psychiatry 31.6% 0.6 (3.5) 18.9
Artios Pharma Limited Novel oncology therapies 7.3% - (0.9) 17.4
Microbiotica Limited Gut-microbiome based therapeutics and diagnostics 17.7% - - 16.1
Mission Therapeutics Limited Targeting deubiquitylating enzymes for the treatment of CNS and mitochondrial 18.2% 3.9 (6.3) 15.8
disorders
Centessa Pharmaceuticals plc Discovery and development of medicines that are transformational for patients 2.6% - 9.2 15.7
Other companies (23 companies) 9.9 (60.4) 123.3
Total 30.2 (105.8) 567.4
Oxford Nanopore continues to underperform on a results and share-price basis,
culminating in a disappointing results announcement in March, having warned
that its 2023 revenues would be lower than its previous guidance range in
January 2024. With core growth of 16% in 2023, and revised guidance towards
underlying core growth of 20-30% in 2024 and 30% in the mid-term, we continue
to believe that the company's long-term fundamentals remain intact. We believe
that the company has now rebased its forecast, margins and growth outlook to
what we feel is a realistic level, with room for outperformance.
The largest transaction in 2023 for the Group was a £15.0m investment into
Istesso, primarily via a convertible note, with a further £10m convertible
loan invested in January 2024. We continue to see good progress at Istesso
with its Phase 2b study of Leramistat in rheumatoid arthritis due to read out
in the first half of 2024. The largest funding round within the portfolio was
Apollo Therapeutics' $226.5m Series C financing while, in early 2024, Genomics
plc completed a £35m funding round which will help the company build upon its
initial commercial traction in the field of advanced genetic screening.
In terms of clinical progress across the portfolio, we saw Mission and Artios
Pharma announcing positive Phase 1 data for their lead programmes, and Artios
Pharma, Mission, Kynos and Pulmocide all initiating important clinical
studies, including Pulmocide's Phase 3 study in invasive pulmonary
Aspergillus. We now have ten companies in clinical studies that could provide
key value-driving data over the coming two years. We also saw positive
outcomes for Autifony, which announced a global licensing deal worth up to
$770m with Nasdaq's Jazz Pharmaceuticals which resulted in a £6.1m fair value
uplift.
In terms of NAV performance, the value of the portfolio declined by £73.9m
(-17%) over the year, driven largely by significant fair value reductions in
some key assets, including Hinge Health £17.8m (-33%), Akamis Bio £15.9m
(-75%), Oxular £14.1m (-88%), Enterprise Therapeutics £7.9m (-39%), Mission
Therapeutics £6.3m (-35%) and Oxehealth £5.2m (-50%). These write-downs
resulted from independent valuation reappraisals informed by the more
difficult funding and pricing environment, fundraising conducted at depressed
prices or, in the case of Oxular, from clinical setbacks.
We expect a more positive year in 2024, with downward pressure on valuations
reducing, and evidence that the pharma industry's appetite for acquiring the
best clinical assets is only increasing, as witnessed by some very significant
transactions announced in late 2023/early 2024.
Portfolio Review: Tech-enriched future: Deeptech
IP Group's Technology portfolio comprises holdings in 32 companies valued at
£231.4m at 31 December 2023.
Company name Description Group Stake at 31 December 2023 Net Unrealised + realised fair value movement Fair value
% investment/ (divestment) £m of Group
£m holding
at 31 December 2023
£m
Featurespace Limited Leading predictive analytics company 20.1 - 8.8 73.0
Garrison Technology Limited Anti-malware solutions for enterprise cyber defences 23.6 3.9 - 31.6
Ultraleap Holdings Limited Contactless haptic technology 16.9 - (6.9) 31.0
"feeling without touching"
Accelercomm Limited Developing a high-performance decoding solution for 5G mobile communication 26.5 3.6 0.4 12.5
Other companies (28 companies) (28.8) (7.2) 83.3
Total (21.3) (4.9) 231.4
The IP Group Deeptech team invests in breakthrough technologies across four
high growth sectors of future compute, applied AI, next generation networks
and the human-machine interface, areas in which the UK excels and is
increasingly becoming a dominant global force.
While 2023 was a challenging year for the global technology venture market,
impacting both the availability of new capital as well as the price of funding
rounds, the technology portfolio proved resilient, and we were pleased to have
completed all of our key targeted transactions at uplifted or flat valuations.
These included a £42m round for Quantum Motion Technologies, the largest ever
single investment into a quantum computing startup in the UK, a £21.5m series
B round for Accelercomm and a £15.5m round for Garrison Technologies. While
there were some impairments to valuations, either where comparator valuation
benchmarks reduced and/or where progress was a little slower than planned, we
are pleased with the overall performance and firmly believe the deeptech
portfolio remains poised for growth in 2024 and stands to benefit both from
the continued acceleration of digital transformation across the economy and
specifically from the huge potential of new technologies such as generative
AI.
In 2023, Featurespace continued to deliver healthy growth with double-digit
increases to revenue, a trend which was replicated elsewhere in the portfolio
in companies including Itaconix. Garrison, which eliminates cyber threats
whilst delivering full web access without putting an organisation's sensitive
data and systems at risk, hit its revenue targets to the year ended March 2023
and raised £15.5m of new investment from Legal and General and British
Patient Capital, alongside existing investors including IP Group. The company
has grown rapidly over the last 4 years, compounding revenues at 64% year on
year over this period, with continued attractive growth expected this year.
It was also pleasing to see the completion of a £21.5m series B investment
round at our portfolio company Accelercomm, which is supercharging the world's
wireless infrastructure. The round was led by Swisscom Ventures and Parkwalk
Advisors alongside Hostplus with follow-on funding from all the existing
investors. Accelercomm's technology, which can halve the cost of spectrum and
power in 5G networks by increasing throughput and reducing latency, is already
being used by several of the world's largest corporates, and the company
continues to grow through evolving partnerships with the likes of AMD,
Vodafone and Lockheed Martin.
Quantum Motion Technologies closed a £42m funding round, the largest ever
single investment into a quantum computing startup in the UK. The investment,
which the company will use to develop its silicon-based approach to building a
cost-effective and scalable quantum computer, was provided by Robert Bosch
Venture Capital alongside Porsche SE and British Patient Capital. IP Group and
Parkwalk participated alongside all of the company's other existing investors
(Inkef, NSSIF, Octopus Ventures and OSE). Another of our quantum computing
portfolio companies, Oxford Quantum Circuits, announced its $100m funding
round and the public availability of "OQC Toshiko", the world's first
enterprise-ready quantum computing platform. IP Group was instrumental in the
formation of both these quantum computing companies, and we are proud of their
progress in this pioneering field that has the potential to shape the future
of computing.
Elsewhere in the portfolio, Audioscenic launched its first commercial product
at CES 2023 as the power behind Razer's latest gaming soundbar, the Leviathon
V2 Pro (which won a dozen awards), and they showcased new products in both
laptops and PC monitors at CES 2024. Intrinsic Semiconductor Technologies, a
game-changing company with technology aiming to revolutionise the $100bn
non-volatile memory market, far exceeded its technical milestones and will now
greatly accelerate its commercial development.
In terms of fair value reductions, we reduced the value of our holding in Teya
by £4.5m due to stronger than expected market headwinds although we continue
to believe the business has strong growth prospects and excellent
fundamentals. Ultraleap also faced challenging conditions in the key eXtended
Reality (XR) market which has been slow to materialise, and we have reduced
the fair value of our holding by £6.9m. Ultraleap has, nonetheless, secured
several key licence agreements in the period with well-recognised names and we
remain bullish on the longer-term adoption of XR technologies.
In 2023, the team backed two new opportunities including one in Australia as
well as a £3m investment into DeepRender which is developing the next
generation of image and video compression technology using an AI-first
approach. DeepRender already has commercial engagement with several of the
world's top content streamers and looks set to significantly disrupt this
market in the years to come. As 2024 unfolds, we expect to see strong growth
across our focus portfolio as software sales rebound in the more mature
assets, and technologies deployed into new products in our mid and early-stage
portfolio. Together this positions the asset base well for value accrual
provided the market provides continued access to additional growth and
expansion capital.
Portfolio Review: Regenerative future: Cleantech (Kiko Ventures)
The Cleantech (Kiko Ventures) portfolio comprises holdings in 16 companies
valued at £275.3m at 31 December 2023.
Company name Description Group Stake at 31 December 2023 Net Unrealised + realised fair value movement Fair value
% investment/ (divestment) £m of Group holding
at 31 December 2023
£m
£m
Hysata Pty Limited Developing a new type of breakthrough hydrogen electrolyser and accelerating 36.8 4.7 46.5 70.0
the global transition to net zero
Oxa Autonomy Limited Software to enable every vehicle to become autonomous 11.8 - (0.2) 65.7
First Light Fusion Limited Solving fusion with the simplest possible machine 27.5 - (49.6) 64.9
Bramble Energy Limited The fuel cell company with Gigafactories 31.4 - - 20.9
Nexeon Limited Silicon anodes for next generation 5.2 - (4.7) 11.8
lithium-ion batteries
Other companies (11 companies) 12.8 (0.7) 42.0
Total 17.5 (8.7) 275.3
An early highlight of the year was the $140m Series C fund raise by autonomous
vehicle pioneer Oxa in January 2023. The fundraising, which saw new investor
Google join the share register, was the largest by a cleantech company in IP
Group's history. Google and Oxa have already worked together on simulation and
testing technology, and it was highly encouraging to see one of the world's
most valuable technology companies take a stake in one of our cleantech
assets. Another highlight was electrolyser company Hysata achieving its Series
A technical milestone months ahead of schedule, triggering the second tranche
of its oversubscribed £24m Series A. The technical progress was impressive
with Hysata demonstrating stacks operating at the same exceptionally high 95%
efficiency as the single cell experiment reported in Nature in 2021. Hysata
subsequently launched its Series B funding round, achieving a first close in
January 2023, supported by both Kiko and IP Group Australia. The round
achieved a significant uplift to the Series A, reflecting the impressive
technical progress made by the company. This resulted in a fair value gain of
£46.5m. It is encouraging to see large up-rounds in our cleantech companies
against a backdrop of falling valuations in the wider venture ecosystem.
Earlier-stage assets were also successful in fund raising with Oxford
spin-outs OxCCU and Mixergy both raising up-rounds. In May, OxCCU, which has
breakthrough technology for the synthesis of sustainable aviation fuels
(SAFs), raised an oversubscribed £18m Series A. The round was led by
well-established US cleantech VC Clean Energy Ventures and was their first
investment in a UK company. In January, smart home heating company Mixergy
completed a £9m Series B raise, led by OSE, with new investors Nesta and EDP
Ventures joining the share register. Mixergy has continued to make good
progress and has doubled revenue each year for the past three years. In
addition to the four new investments made in 2022, the team completed one new
investment in 2023 into smart home energy pioneer Tado°. Tado° is the
European leader in smart home energy technology and its smart thermostats,
protected by a strong patent portfolio, lead to reductions in home energy
costs of 22% on average. The company's offerings are particularly welcome and
impactful at the current time of high energy prices and it has now sold a
total of 3 million thermostats. Kiko jointly led a €43m funding round in
January 2023 to help the company expand its offering into home energy
management, combining its thermostats with time-of-use energy tariffs.
In less welcome news, First Light Fusion has not yet completed its Series C
funding round, which was planned to conclude in 2023, leveraging momentum
following its fusion result in 2022. While there is still activity in the
fusion funding market, there has been a decline in multi-hundred-million
funding rounds like those seen in 2021 and targeted by First Light. Given this
delay to funding and the change to fusion market sentiment, we have carried
out a re-evaluation of our holding in First Light using expert third party
input. This has led to a reduction in our holding value of £49.6m. Following
the announcement this year of further improvement to net positive gain
achieved at the National Ignition Facility lab in the US, there is growing
interest in inertial confinement fusion (ICF) technology, as pursued for
commercialisation by First Light. The company recently entered into a
technology collaboration on ICF with the Sandia federal lab in the US giving
access to the Z-machine, the world's most powerful pulse power driver. First
Light is the first privately-funded fusion company to fire a shot on the
Z-machine and its amplifier technology enabled a new pressure record to be set
for the facility.
We have also continued to build the ecosystem around the Kiko brand with a
wide range of speaking and clean energy innovation engagement policy
activities. As one of the founders of Cleantech for UK, a new cleantech policy
initiative, backed by Bill Gates' Breakthrough Energy Ventures, Kiko helped
convene a total of £6bn of funds to support the initiative. Cleantech for UK
aims to promote UK cleantech champions, drawing on the country's world-class
research facilities and investor base, and was launched at Imperial College in
February at an event attended by Bill Gates and the Prime Minister. We
continue to be a member of the leading energy think tank, the Energy
Transitions Commission (ETC), which published an assessment of the role of
fossil fuels in the transition ahead of the UN climate change conference COP28
in Dubai. Our view of the COP28 outcome was that the acknowledgement of the
need to transition away from fossil fuels represents an important step in the
right direction. ETC analysis shows that coal use can and must fall by 85% by
2050, gas by 70% and oil by 95% in order to meet the UN climate goals of
limiting global heating to safe levels. The agreements to triple renewables
and double the rate of energy efficiency improvement also follow longstanding
ETC recommendations. Despite wider headwinds in the venture ecosystem, the
need for clean energy technology remains clear and was reiterated at COP28.
Portfolio review: Platform Investments
IP Group's Platform Investments portfolio comprises holdings in two companies
and three interests in Limited Partnerships, valued at £90.8m at 31 December
2023.
The Platform Investments portfolio contains holdings in funds and companies
that operate in a similar way to IP Group, most significantly our interest in
our US platform, managed by Longview Innovation, Oxford Science Enterprises
Limited, Cambridge Innovation Capital Limited, and the UCL Technology Fund in
all of which IP Group was a founding investor.
Company name Description Group Stake at 31 December 2023 Net Unrealised and realised fair value movement Fair value
% investment/ (divestment) £m of Group
£m holding
at 31 December 2023
£m
US platform (managed by Longview Innovation) Commercialising world class research in the US 58.1 8.1 (42.1) 46.0
Interest in UCL Technology Fund L.P. Commercialising world class research from UCL 46.7 0.8 3.0 20.7
Oxford Science University of Oxford preferred IP partner under 15-year framework agreement 1.8 - (2.3) 18.3
Enterprises plc
Other companies (2 companies/LPs) (0.7) 0.3 5.8
Total 8.2 (41.1) 90.8
Having been unable to secure additional significant funding from third parties
other than $10m which the Group committed in 2022, Longview Innovation has
taken proactive steps to focus its resources on a smaller number of its most
promising portfolio companies, resulting in a rationalisation of the portfolio
and a corresponding portfolio fair value reduction of £42.1m.
Portfolio review: Additional Analysis
Number of investments by sector
As at 31 December 2023 As at 31 December 2022
Sector Number % Number %
Healthier future: Life sciences (ex-ONT) 32 37% 38 40%
Healthier future: Life sciences (ONT) 1 1% 1 1%
Tech-enriched future: Deeptech 32 37% 34 36%
Regenerative future: Cleantech (Kiko Ventures) 16 19% 15 16%
Platform investments 5 6% 7 7%
Total number of portfolio investments (1) 86 100% 95 100%
(1) Excludes de minimis holdings, which have a small value to the Group and
are not actively managed to the same extent as core holdings
Number of Investments
United Kingdom North America Australia & New Zealand Total
1 January 2023 81 1 13 95
Additions 1 - 2 3
Exited & acquired (1) - - (1)
Being closed/liquidated - - (1) (1)
Reclassified to de minimis(1) (6) - (4) (10)
31 December 2023 75 1 10 86
(1) De minimis holdings have a small value to the Group and are not actively
managed to the same extent as core holdings, and are accordingly not included
in the stated number of companies
Co-investment analysis
Including the £73.2m of capital invested by the Group, the Group's portfolio
raised £667m during 2023 (2022: £1.0bn). Co-investment from parties or funds
with a greater than 1% shareholding in IP Group plc totalled £1.0m (2022:
£24.9m). An analysis of this co-investment by source is as follows:
2023 2022
Portfolio capital raised £m % £m %
IP Group(1) 73.2 11% 89.8 9%
IP Group managed funds(2) 12.9 2% 35.6 4%
IP Group plc shareholders (>1% holdings) 1.0 0% 24.9 2%
Institutional investors 317.7 48% 249.7 25%
Corporate, other EIS, individuals, universities and other 262.2 39% 364.0 35%
Capital into multi-sector platforms - 0% 250.0 25%
Total 667.0 100% 1,014.0 100%
1 Reflects primary investment only; during 2023 the Group invested £nil via
secondary purchase of shares (2022: £3.7m).
2 Includes Parkwalk Advisors and other funds managed by IP Group.
Portfolio funding position
The following table lists information on the expected cash-out dates for
portfolio companies IP Group's investment holding value is greater than £4m.
Fair value of
Group holding %
Company name at 31 December 2023
£m
Funded to breakeven 345.8 35%
2024 H1 69.8 7%
2024 H2 57.7 6%
2025 410.8 41%
2026 104.2 10%
2027 10.7 1%
Total companies > £4m value 999.0 100%
Companies < £4m value 75.1
Interest in Limited Partnerships and Platforms 90.8
Total portfolio 1,164.9
FINANCIAL REVIEW
"We continue to navigate carefully through difficult markets. With £227m
gross cash and only 13% of our portfolio needing to raise money in 2024, we
are well-positioned for an improvement in investor appetite."
David Baynes, Chief Financial and Operating Officer
· Loss for the period of (£174.4m) (2022: loss of £344.5m)
· Net assets were £1,190.3m (2022: £1,376.1m)
· Net assets per share were 114.8p (2022: 132.9p)
· Final 2022 dividend of 0.76pps and 2023 interim dividend of 0.51pps paid
in period, talking total cumulative dividends and share buy-backs since 2021
to over £75m
· £60m second tranche of long-term private loan notes drawn
Consolidated statement of comprehensive income
A summary analysis of the Group's performance is provided below:
Year ended Year ended
31 December 2023 31 December 2022
£m £m
Net portfolio (loss)(1) (160.5) (309.1)
Net overheads(2) (22.1) (20.2)
Administrative expenses - consolidated portfolio companies - (0.1)
Administrative expenses -share-based payments charge (2.6) (2.9)
Carried interest plan provision credit /(charge) 4.7 (12.0)
Net finance income 4.2 0.8
Taxation 1.9 (1.0)
Loss for the year (174.4) (344.5)
Other comprehensive (expense)/income (0.4) 0.5
Total comprehensive loss for the year (174.8) (344.0)
Exclude:
Share-based payment charge 2.6 2.9
Return on NAV(1) (172.2) (341.1)
1 Defined in note 29 Alternative Performance Measures.
2 See net overheads table below and definition in note 29 Alternative
Performance Measures.
Net portfolio gains/(losses) consist primarily of realised and unrealised fair
value gains and losses from the Group's equity and debt holdings in portfolio
companies.
Fair value movements
A summary of the unrealised and realised fair value gains and losses is as
follows:
2023 2022
£m
£m
Quoted equity & debt investments (31.8) (428.5)
Private equity & debt investments (83.8) 101.4
Investments in Limited Partnerships (36.5) (6.4)
Foreign exchange movements (8.4) 24.4
Net portfolio losses (160.5) (309.1)
A summary of the largest unrealised and realised fair value gains and losses
by portfolio investment is as follows:
Gains £m Losses £m
Hysata Pty Ltd 46.5 First Light Fusion Limited (49.6)
Centessa Pharmaceuticals plc 9.7 Platform (managed by Longview Innovation) (39.8)
Featurespace Limited 8.8 Oxford Nanopore Technologies plc (31.9)
Autifony Therapeutics Limited 6.1 Hinge Health, Inc. (17.8)
Pulmocide Limited 5.0 Akamis Bio Limited (15.9)
Apollo Therapeutics Group Limited 3.3 Oxular Limited (14.1)
Other quoted 1.2 Other quoted (10.8)
Other private 22.8 Other private (75.7)
Foreign exchange 0.1 Foreign exchange (8.5)
Total 103.5 Total (264.1)
Net overheads
Year ended Year ended
31 December 2023 31 December 2022
£m £m
Other income 5.9 7.1
Administrative expenses - all other expenses (25.8) (24.3)
Administrative expenses - annual incentive scheme (2.6) (3.0)
Net overheads (22.5) (20.2)
Other income
Other income comprises fund management fees and licensing and patent income.
In 2023 other income totalled £5.9m (2022: £7.1m), a decrease from 2022,
primarily due to a £0.6m decrease in revenues from the Group's patent and
license portfolio, and a £0.4m reduction in corporate finance fees due to our
decision to largely cease this activity.
Other central administrative expenses
Other central administrative expenses, excluding performance-based staff
incentives and share-based payments charges, have increased by £1.6m from the
prior year to £25.8m (2022: £24.3m) as a result of increases in non-staff
cost across a number of expense categories.
The charge of £2.6m (2022: £3.0m) in respect of the Group's Annual Incentive
Scheme, reflects a provisional assessment of performance against 2023 AIS
targets which include Group, Team, and Individual performance elements as
described in the Directors Remuneration Report.
Other income statement items
The share-based payments charge of £2.6m (2022: £2.9m) reflects the
accounting charge for the Group's Restricted Share Plan, Long-Term Incentive
Plan and Deferred Bonus Share Plan. This non-cash charge reflects the fair
value of services received from employees, measured by reference to the fair
value of the share-based payments at the date of award, but has no net impact
on the Group's total equity or net assets.
Carried interest plan charge
The carried interest plan credit of £4.7m (2022: £12m charge) relates to the
recalculation of liabilities under the Group's carry schemes, with the credit
in the year reflecting this year's reduction in value of assets within the
scheme. As at 31 December 2023, 70% by value of the Group's equity & debt
investments were included within carry scheme arrangements (2022: 67%). The
liabilities are calculated based upon any excess of current fair value above
cost and hurdle rate of return within each scheme or vintage. Any payments
will only be made following the full achievement of cost and hurdle via cash
realisations and are only paid on the event of a cash realisation.
Consolidated statement of financial position
A summary analysis of the Group's assets and liabilities is provided below:
Year ended Year ended
31 December 2023 31 December 2022
£m £m
Portfolio 1,164.9 1,258.5
Other non-current assets 10.2 7.7
Other net current assets/(liabilities) (7.5) 33.2
Cash and deposits 226.9 241.5
Borrowings (135.2) (81.4)
Other non-current liabilities (69.0) (83.4)
Total Equity or Net Assets ("NAV") 1,190.3 1,376.1
NAV per share 114.8p 132.9p
The composition of, and movements in, the Group's portfolio are described in
the portfolio review above.
Portfolio valuations
Given the public market valuation reductions in the year and slowdown in
private company fundraise activity, we have carried our year-end private
portfolio valuations against a backdrop of heightened valuation uncertainty.
As a response, we have carried out an enhanced valuation process in the
period, including obtaining external valuations for eleven (2022: ten) of our
largest private assets (Istesso, Featurespace, Oxa, First Light Fusion, Hinge
Health, Ultraleap, Ieso Digital Health, Artios Pharma, Mission Therapeutics,
Akamis Bio and MOBILion) accounting for 46% (2022: 44%) of the private
portfolio value.
In the case of Featurespace, our third-party valuers recommended an increase
in valuation in the year, because of strong performance against milestones. In
the case of First Light Fusion, Hinge Health, Ultraleap, Ieso Digital Health
and Mission Therapeutics they recommended a reduction in our carrying values,
reflecting the impact of reduced public market valuations the more challenging
fundraise environment and company-specific performance. Valuations of Istesso,
Oxa, MOBILion and Artios Pharma were broadly unchanged. In all cases, our
carrying values reflect the mid-point or below of the valuation ranges we
received from our external valuation consultants.
Although we saw an increase in the proportion of down rounds within our
portfolio (i.e. where a funding round is agreed at a lower valuation than the
previous funding round price), most of our portfolio fundraises were at higher
valuations than the previous funding round. An analysis of funding rounds
within our portfolio is as follows:
Analysis of priced funding rounds in private portfolio Year ended Year ended
31 December 2023 31 December 2022
No. % No. %
Up round 13 62% 18 62%
Flat round 3 14% 8 28%
Down round 5 24% 3 10%
Total 21 100% 29 100%
The above table reflects priced funding rounds in the private portfolio
(excluding organic and de minimis companies) and excludes debt funding and
funding transactions where a subsequent tranche is drawn based on pre-agreed
pricing.
Most of our portfolio remains well funded, with many of our more mature
companies evidencing commercial progress or anticipating technical or funding
milestones in the next 12-24 months, therefore we remain confident around the
resilience of our portfolio.
The table below summarises the valuation basis for the Group's portfolio.
Further details on the Group's valuation policy and approach can be found in
notes 13 and 14.
Year ended Audited
Year ended
31 December 2023
31 December
£m
2022
£m
Quoted 203.8 228.7
Financing transaction (<12 months) 187.9 289.8
Financing transaction (>12 months) 162.7 117.8
Other: Future market/commercial events 25.0 40.7
Other: Adjusted financing price based on past performance - upwards 99.9 151.8
Other: Adjusted financing price based on past performance - downwards 203.9 154.5
Other: Discounted cash flow (DCF) 126.6 97.7
Other: Revenue multiple 85.4 77.9
Statements from LP 69.7 99.6
Total Portfolio 1,164.9 1,258.5
Further context: Parkwalk portfolio valuations
Thirteen portfolio companies closed funding rounds at uplifts in valuation,
six unchanged and nine at lower valuations than the previously held value.
Other assets
The majority of other long-term and short-term assets relate to amounts
receivable on sale of equity and debt investments, representing deferred and
contingent consideration amounts to be received in more than one year.
Property, plant and equipment includes the lease asset relating to the Group's
Kings Cross head office, which increased in the period due to an extension of
the lease.
Other long-term liabilities relate to carried interest and revenue share
payables, and loans from LPs of consolidated funds. The Group consolidates the
assets of a fund in which it has a significant economic interest, IP Venture
Fund II LP. Loans from third parties of consolidated funds represent
third-party loans into this partnership. These loans are repayable only upon
these funds generating sufficient realisations to repay the Limited Partners.
Borrowings
On 2 August 2022, the Group signed a Note Placing Agreement ("NPA") to issue a
£120m debt private placement to London-based institutional investors
(primarily Phoenix Group). £60m of this was drawn in December 2022 and the
balance was drawn in June 2023, with three equal repayment maturities in
December in 2027, 2028 and 2029. The interest rate is fixed at an average of
5.25%. Approximately £15m of the proceeds were used to repay early the
shorter-dated portion of our EIB debt, leaving £15.6m of EIB debt to be
progressively repaid between now and January 2026 (£6.3m of the EIB debt will
be repaid within twelve months of the period end).
Under the terms of the NPA, the Group is required to maintain a minimum cash
balance of £25m at any time, equity must be at least £500m and gross debt
less restricted cash must not exceed 25% of total equity as at the Group's 30
June and 31 December reporting dates. The NPA also includes 'Cash Trap'
provisions which stipulate that the Group is required to maintain cash and
cash equivalents of not less than £50m at any time and equity must be at
least £750m, gross debt less restricted cash must not exceed 20% of total
equity as at the Group's 30 June and 31 December reporting dates. In the event
of the Cash Trap being triggered, the Group is not permitted to pay or declare
a dividend or purchase any of its shares. In addition, investments are
restricted to £2.5m per calendar quarter other than those legally committed
to. The Group is also required to place the net proceeds of all realisations
(over a threshold of £1m) into a blocked bank account. Entering a Cash Trap
does not constitute a default under the NPA.
For further details of the Group's loans including covenant details see note
18.
Cash and deposits
At 31 December 2023, the Group's cash and deposits totalled £226.9m, a
decrease of £14.6m from a total of £241.5m at 31 December 2022,
predominantly due to outflows from portfolio investment of £73.2m, a £19.3m
net cash outflow from operations, £13.1m of dividend payments and share
buy-backs, offset by net drawdown of debt of £53.8m and realisations of
£38.6m.
The principal constituents of the movement in cash and deposits during the
period are as follows:
Year ended Year ended
December 2023 31 December 2022
£m £m
Net cash (used) in operating activities (19.3) (24..3)
Investments (73.2) (93.5)
Realisations 38.6 28.1
Other investing (0.6) (0.3)
Interest received on deposits 4.1 -
Net cash (outflow) from investing activities (31.1) (65.7)
Dividends paid (13.0) (12.3)
Purchase of treasury shares (0.1) (8.0)
Interest paid (5.5) -
Repayment of debt facility (6.2) (30.4)
Drawdown of loan notes 60.0 60.0
Other financing activities (0.5) (0.5)
Net cash inflow from financing activities 34.7 8.8
Effect of foreign exchange rate changes (0.2) -
Movement during period (14.5) (80.4)
Investments and realisations
The Group invested a total of £73.2m across 33 portfolio companies during the
year (2022: £93.5m; 46), and realised cash proceeds of £38.6m (2022:
£28.1m).
Largest investments and realisations by portfolio company:
Investments £m Cash Realisations £m
Istesso Limited 15.0 Wave Optics Limited 30.8
US platform (managed by Longview Innovation) 8.1 Zihipp Limited(1) 3.4
Hysata Pty Ltd 4.7 Reinfer Limited 1.5
Tado GmbH 4.4 UCL Technology Fund L.P. 0.9
Mission Therapeutics Limited 3.9 Cambridge Innovation Capital Limited 0.7
Other 37.1 Other 1.3
Total 73.2 Total 38.6
1. Plus, deferred consideration valued at £1.5m (2022: £nil)
Deferred consideration estimated at £9.1m was outstanding at year end (2022:
£48.2m), relating to the Group's realisation of Enterprise Therapeutics
(£7.6m, exited in 2020) and Zihipp Limited (£1.5m, exited in 2023).
Treasury policy
It remains the Group's policy to place cash that is surplus to near-term
working capital requirements on short-term and overnight deposits with
financial institutions that meet the Group's treasury policy criteria or in
low-risk treasury funds rated prime or above. The Group's treasury policy is
described in detail in note 2 to the Group financial statements alongside
details of the credit ratings of the Group's cash and deposit counterparties.
On 31 December 2023, the Group had a total of £0.1m (2022: £0.1m) held in US
Dollars, £nil (2022: £nil) held in Euros, £0.8m (2022: £0.7m) held in
Australian Dollars and £0.9m (2022: £0.7m) held in Hong Kong Dollars
Dividend and share buyback
As announced in the Group's half-yearly results, an interim 2023 dividend of
0.51p per ordinary share was paid in September 2023, totalling £5.3m.
On 18 December 2023 the Group announced that, in light of the prevailing
discount between the Company's share price and its NAV per share, it had
initiated a share buyback of up to £20m. The Board remains committed to
making regular cash returns to shareholders from realisations. In future these
regular cash returns will normally be made in the form of share buybacks when
the share price discount to NAV exceeds 20%. Regular dividend payments will be
suspended under such conditions, including consideration of any final dividend
for 2023.
Taxation
The Group's business model seeks to deliver long-term value to its
stakeholders through the commercialisation of fundamental research carried out
at its partner universities. To date, this has been largely achieved through
the formation of, and provision of services and development capital to,
spin-out companies formed around the output of such research. The Group
primarily seeks to generate capital gains from its holdings in spin-out
companies over the longer term but has historically made annual net operating
losses from its operations from a UK tax perspective. Capital gains achieved
by the Group would ordinarily be taxed upon realisation of such holdings;
however, since the Group typically holds more than 10% in its portfolio
companies and those companies are themselves trading, the majority of the
portfolio will qualify for the Substantial Shareholdings Exemption ("SSE") on
disposal.
This exemption provides that gains arising on the disposal of qualifying
holdings are not chargeable to UK corporation tax and, as such, the Group has
continued not to recognise a provision for deferred taxation in respect of
uplifts in value on those equity holdings that meet the qualifying criteria.
Gains arising on sales of holdings which do not qualify for SSE will
ordinarily give rise to taxable profits for the Group, to the extent that
these exceed the Group's ability to offset gains against current and brought
forward tax losses (subject to the relevant restrictions on the use of
brought-forward losses). In such cases, a deferred tax liability is recognised
in respect of estimated tax amount payable.
The Group complies with relevant global initiatives including the US Foreign
Account Tax Compliance Act ("FATCA") and the OECD Common Reporting Standard.
Alternative Performance Measures ("APMs")
The Group discloses alternative performance measures, such as NAV per share
and Return on NAV, in this Annual Report. The Directors believe that these
APMs assist in providing additional useful information on the underlying
trends, performance, and position of the Group. Further information on APMs
utilised in the Group, including the details of a new APM for Cash proceeds is
set out in note 29.
risk management
Managing risk: our framework for balancing risk and reward
Governance
Overall responsibility for the risk framework and definition of risk appetite
rests with the Board who, through regular review of risks, ensure that risk
exposure is balanced with an ability to achieve the Group's strategic
objectives. The IP Group Risk Council is the executive body that operates to
establish, recommend and maintain a fit-for-purpose risk management framework
appropriate for the Group and to oversee the effective application of the
framework across the business. The Risk Council is chaired by the CFOO, its
members include the Company Secretary, Finance Director and Senior Compliance
and Risk Manager and it has representation from operational business units as
required during the year. Risk identification is carried out through a
bottom-up process via operational risk registers maintained by individual
teams, which are updated and reported to the Risk Council at least biannually,
with additional top-down input from the Executive Committee and with a
non-executive review carried out by the Audit and Risk Committee at least
annually.
Risk management process
Ranking of the Group's risks is carried out by combining the financial,
strategic, operational, reputational, regulatory and employee impact of risks
and the likelihood that they may occur. Operational risks are collated into
strategic risks, which identifies key themes and emerging risks, and
ultimately informs our principal risks, which are detailed in the Principal
Risk and Uncertainties section of this report. The operations of the Group,
and the implementation of its objectives and strategy, are subject to a number
of principal risks and uncertainties. Were more than one of the risks to occur
together, the overall impact on the Group may be compounded.
The design and ongoing effectiveness of the key controls over the Group's
principal risks are documented using a 'risk and control matrix', which
includes an assessment of the design and operating effectiveness of the
controls in question. The key controls over the Group's identified principal
risks are reviewed as part of the Group's risk management process, by
management, the Audit and Risk Committee and the Board during the year.
However, the Group's risk management programme can only provide reasonable,
not absolute, assurance that principal risks are managed to an acceptable
level.
The risk management activity in 2023 included updating the Group's risk
appetite statements and key risk indicators, refreshing the Group's existing
operational, strategic and principal risk registers, performing a full refresh
of the key controls and an assessment of the strategic risks and the
appropriateness of our principal risks via executive team and Board risk
workshops.
Risk Council activity
During 2023, the Risk Council continued to build on the Group's existing risk
management framework, enhancing risk management and internal control processes
and working with PwC in an outsourced internal audit capacity and, in doing
so, supported the Board in exercising its responsibility surrounding risk
management.
While awaiting further updates with detail of the exact requirements and
confirmed dates in relation to the proposed legislation and updates to the UK
Corporate Governance Code outlined in the BEIS response statement in June
2022, the Risk Council considered an existing programme of 'no-regrets'
workstreams identified in a previous scoping review which would support the
Group's transition to the expected internal controls regime once announced in
H1 2023. This included a financial reporting focused 'record to report'
review, an entity level controls review and a treasury controls review to
identify and remediate any controls gaps to the expected standard. The Risk
Council reviewed a consultation on proposed changes to the UK Corporate
Governance Code released in May and facilitated the Group's response to the
FRC's consultation with input from Executive and Non-Executive Directors,
Company Secretary and People Director. The Risk Council reviewed the proposed
changes to the Code and considered an appropriate implementation timeline and
resourcing plan to meet the flagged effective date and continue to update our
plans in light of emerging guidance. The Risk Council will review the final
changes and associated guidance once published and reconsider its existing
implementation plan.
The Group adopted a 'Cyber Response Guide' and 'Strategic Ransomware Response
Playbook' in 2021 which details how the Group would respond to a cyber crisis
addressing the threat that cyber attacks now pose to businesses in every
sector. In 2023, the Risk Council onboarded senior external communications
support to provide strategic level support and additional resources to
supplement a crisis scenario in the future, a 'Crisis Communications Manual'
was developed as part of this workstream training was provided to the relevant
individuals within the Group. The Risk Council also updated all existing
policies, procedures and reference materials and provided refresher training
to all staff on plans in place at the Group to respond to a cyber attack,
support available, examples of what a ransomware attack might look like and
the appropriate steps to take if they identify signs of a compromise. The Risk
Council held two communications-focused scenario-based training sessions with
the internal and external communications teams and Silver Response Team (SRT)
Chair in the year and held an externally facilitated cyber crisis simulation
for all members of the SRT including external legal and communications
supports. The Risk Council received a formal report from the Baker Mackenzie
team who facilitated the all-parties training session noting multiple
effective procedures were in place to respond to issues raised in the training
scenario, which the SRT were obviously familiar with, excellent engagement
from the SRT and other attendees, demonstration of good awareness of many
cybersecurity issues and also noted a common-sense approach to responding to
complex issues raised and considered practical ways to minimise effects and
severity of the simulated cyber attack scenario. Areas for improvement were
also identified and the Risk Council is leading the implementation of the
actions identified which are expected to supplement current procedures in
place.
Other projects in the year included:
· Monitoring the set-up of an RMB fund from ICCV,
· The Group's joint venture with China Everbright, to be operated
by the Group's Hong Kong subsidiary and obtaining the requisite licencing
authorities from the local regulator to allow this activity,
· Reviewing risk management disclosures in the Annual Report and
Accounts,
· Updating the Group's Business Continuity Plans,
· Monitoring training and testing completion rates by employees,
· Testing of key controls over the Group's principal risks,
· Monitoring key risk indicators,
· Performing a control investment review to ensure the desired
levels of controls agreed by the Board were in place,
· Continued monitoring of internal audit remediation points,
· Monitoring progress of the Risk Council against its agreed
objectives,
· Reviewing a cyber compliance monitoring programme,
· Providing project management support to the ARC in relation to
the audit tender process,
· The launch of a formal compliance-focused onboarding programme
for new joiners,
· Monitoring of the Group's conflicts procedures,
· Considering the Group's relevant fraud risk categories alongside
their relevant controls and potential likelihood and impact
· Continued communication of key outputs of the risk management
programme to operational business heads and the wider employee group.
Internal audit reviews were conducted over the following areas:
(i) Cybersecurity review: an 'ethical hacking' type
review which consisted of a time-bound collaborative assumed compromise
assessment across all IT infrastructures in operation across the Group;
(ii) Investment process review: a review of the investment
approval process in the Group's Australian business which considered:
(a) Due diligence and risk assessment,
(b) Review, approval and execution of investment documentation
(c) Regulation and compliance
(iii) ESG review: a review of high-level governance
arrangements surrounding internal and external ESG reporting and processes
related to data collection and monitoring to inform internal and external ESG
reporting.
Priorities for 2024 include further business reviews by the internal audit
function, review of the finalised UK Governance Code and associated
preparation for updated internal controls requirements, delivering training
and scenario-based testing programmes for operational resilience workstreams,
and continued enhancement of Group risk reporting and communication across the
business. We continue to monitor the impact of the ongoing wars in Ukraine and
the Middle East, heightened geopolitical tension, supply chain disruption,
inflation and interest rate trends, elevated levels of the cost of living and
volatile capital markets and note the greatest impact to the Group has been
the marked decline in the valuation of technology and Life Sciences sector
listed companies, which we consider heighten our principal risks of
macroeconomic environment and access to capital risks.
Emerging risk
The Group's management and Board regularly consider emerging risks and
opportunities, both internal and external, which may affect the Group in the
near, medium, and long term. The Board considered this subject in detail at
its annual risk workshop at the Board Strategy Day in October and continue to
consider emerging risks throughout the year. Set out below are examples of
some of the potential emerging risks that are currently being monitored by
management and the Board:
Near term Medium term Longer term
Economic and geopolitical uncertainty Global government spending on healthcare and drug development Climate change transition and technology risks
War in Europe and the Middle East is impacting cost of raw materials and Government spending on new healthcare technology, drug development and related Transition risks can occur when moving towards a less polluting, greener
potentially global inflation and there is considerable uncertainty over regulators and investment policy decisions would impact the speed of progress economy. Such transitions could mean that the Group could face higher costs of
policymaking given that eight of the ten most populous countries in the world for the industry as a whole which could encourage more financial and human doing business for example; new climate-related legislation, regulations and
are expected to hold elections in 2024. Despite interest rate increases across capital to the sector and ultimately there would be a greater opportunity for reporting requirements, such as TCFD and SECR reporting, will pose additional
the world in 2023 the global economy has shown considerable resilience and the meaningful impact for all participants including investors such as the Group costs as the Group seeks to manage these risks by investing additional
IMF currently forecast global growth for 2023 to be 3% and predict a similar and its stakeholders. resources to ensure compliance.
level of expansion in 2024. However, capital market volatility has persisted
and continues to impact growth and technology stocks such as IP Group and its Climate change continues to be a key concern of the Group and its
portfolio. stakeholders. IP Group invests in technology that has the potential to have
positive impacts on the environment and the Group is well positioned to take
advantage of the changing preferences of governments, businesses and
individuals.
In addition, IP Group reported against the TCFD recommendations in monitoring
risks and opportunities to the business as presented by climate change.
NEW Cyber, IT security and AI threats Competition and the use of ai tools
Cyber and IT security continue to be areas of risk for the Group and its AI tools could be used more effectively by competitors increasing competition
portfolio which could be targets for hackers or competitors and the regulatory for deals and driving up valuations or be used incorrectly leading to bias in
landscape, which is evolving rapidly around data security and the increasing decision making.
powers of regulators to impose significant fines on companies who
inadvertently breach legislation such as GDPR. The industry saw the
exponential rise in AI-based threats in 2023 with increasing levels of
sophistication available to bad actors to launch more sophisticated cyber
attacks. The Group continued to invest in mitigating controls, regular staff
training and cyber incident exercising to support our response to this risk
area.
Summary of principal risks and mitigants
A summary of the principal risks affecting the Group and the steps taken to
manage these is set out below. Further discussion of the Group's approach to
principal risks and uncertainties is given in the Corporate Governance
Statement and in the Audit and Risk Committee report, while further disclosure
of the Group's financial risk management is set out in note 3 to the
consolidated financial statements. Following the 2023 annual review process,
the heatmap below describes the relative potential risks posed by each of the
Group's identified principal risks i.e. how the principal risks are ranked
against each other.
Consideration of risk appetite
The Group accepts that certain risks are inherent in achieving its strategic
aims, which are set out in the strategy section of the report. The Group
accepts risk only as it is consistent with the Group's purpose and strategy
and where they can be appropriately managed and offer a sufficient risk/reward
balance. The Board has determined its risk appetite in relation to each of its
principal risks and considered appropriate metrics to monitor performance
relative to defined thresholds.
The Board's assessment of risk appetite is provided in the summary of each
principal risk below.
Risk appetite ratings defined:
Very low
Following a marginal-risk, marginal-reward approach that represents the safest
strategic route available
Low
Seeking to integrate sufficient control and mitigation methods in order to
accommodate a low level of risk, though this will also limit reward potential
Balanced
An approach which brings a moderate chance of success, considering the risks,
along with reasonable rewards, economic and otherwise
High
Willing to consider bolder opportunities with higher levels of risk in
exchange for increased business payoffs
Very high
Pursuing high-risk, inherently uncertain options that carry with them the
potential for high-level rewards
risk management.
Principal risks and uncertainties
1 It may be difficult for the Group to maintain the required level of capital The Group's funding model has historically been reliant on capital markets,
to continue to operate at planned levels of investment activity and overheads particularly those in the UK; however, the Group is moving towards
self-sustainability with realisations from the portfolio contributing
significantly to the Group's ongoing capital needs. The ability of the Group
to raise further capital through realisations, or potentially through equity
issues or debt, is influenced by the general economic climate and capital
market conditions, particularly in the UK.
Link to strategy Actions taken by management Risk appetite
Access to sufficient levels of capital allows the Group to invest in its • The Group has significant balance sheet capital and managed funds Low
investment assets, develop early-stage investment opportunities and invest in capital to deploy in portfolio opportunities
its most exciting companies to ensure attractive future financial returns.
• The Group regularly forecasts cash requirements of the portfolio and
3 4 ensures capital allocations are compliant with budgetary limits, treasury and
capital allocation policies and guidelines and transaction authorisation
controls
• The Group ensures that minimum cash is available to maintain
sufficient headroom over debt covenants and regulatory capital requirements
Examples of risk Development during the year Change from 2022
• The Group may not be able to provide the necessary capital to key • The Group appointed a Managing Director of Global Capital in January No change
priority assets, which may affect the portfolio companies' performance or 2023 to develop greater levels of access to strategic third-party capital
dilute future returns of the Group
• The Group's share price continued to trade below NAV during the
• The Group may not be able to realise capital from its portfolio to year.
fund the desired level of investment activity in the portfolio
• A sub-group of the Executive Committee met regularly throughout the
year to oversee workstreams focused on narrowing the gap between NAV and the
share price
• Cash proceeds totalled £38.6m in 2023
• Capital allocation group met monthly in 2023 in response to the
volatile capital market environment and we continue to develop the capital
allocation process to support optimal decision making
• The quoted portfolio value reduced by £32.4m in the year
2 It may be difficult for the Group's portfolio companies to attract The Group's portfolio companies are typically in their development or growth
sufficient capital phases and, therefore, require additional capital to continue operations.
While a proportion of this capital will generally be forthcoming from the
Group, subject to capital allocation and company progress, additional
third-party capital will usually also be necessary. The ability of portfolio
companies to attract further capital is influenced by their financial and
operational performance and the general economic climate and trading
conditions, particularly (for many companies) in the UK.
Link to strategy Actions taken by management Risk appetite
Access to sufficient levels of capital allows the Group's portfolio companies • The Group operates a corporate finance function, which is Low
to invest in- technology and commercial opportunities to ensure future experienced in carrying out fundraising mandates for portfolio companies
financial returns.
• The Group maintains close relationships with a wide variety of
3 4 co-investors that focus on companies at differing stages of development
• The Group regularly forecasts cash requirements of the portfolio and
monitors those with a heightened funding risk
• Parkwalk Advisors continue to have independent investment decision
making and is anticipated to continue to be an important co-investor with the
Group, supporting shared portfolio companies
Examples of risk Development during the year Change from 2022
• The success of those portfolio companies that require significant • IP Group hosted a flagship "scale it up" investor event at London's No change
funding in the future may be influenced by the market's appetite for Science Museum and included a panel discussion on how best the UK can support
investment in early-stage companies, which may not be sufficient more innovation which showcased seven of the Group's most exciting companies
and was attended by over 180 guests.
• Failure of companies within the Group's portfolio may make it more
difficult for the Group or its spin-out companies to raise additional capital • IP Group hosted two portfolio company events in 2023 to showcase the
Group's portfolio companies. These included an in-person Deeptech event to
showcase recent portfolio company performance and key focus areas for
investment and an-person Life Sciences investor update outlining key value
inflection points for the portfolio over the next 12-18 months and included
presentations from Genomics plc and Oxford Nanopore Technologies plc CEOs
• Increased number of targeted international investor roadshows in the
year in the US, UK, EU and Middle East
• Continued management of an A$310m trust and a separate mandate for
an Australian Super Fund which has a mandate to co-invest with IP Group plc
portfolio companies. In the year, six Group portfolio companies received
funding from these investment vehicles. Total assets at the year end for the
managed trust plus undrawn commitments totalled A$307m
• Obtained regulatory permissions in Hong Kong for a licence to raise
capital from Hong Kong in the year
• Parkwalk raised £32m in 2023 and had total AUM of £469m at the end
of 2023 and obtained full-scope AIFM permissions from the FCA allowing the
firm to manage greater levels of third-party capital
3 The returns and cash proceeds from the Group's early-stage companies may be Early-stage companies typically face a number of risks, including being unable
insufficient to secure later rounds of funding at crucial development inflection points,
being unable to source or retain appropriately skilled staff, competing
technologies entering the market, technology can be materially unproven and
may ultimately fail, IP may be infringed, copied or stolen, may be more
susceptible to cybercrime and other administrative, taxation or compliance
issues. These factors may lead to the Group not realising a sufficient return
on its invested capital at an individual company or overall portfolio level.
At the portfolio level, a reduction in NAV and realisation potential could
impact shareholder returns or negatively impact specific strategic
initiatives.
Link to strategy Actions taken by management Risk appetite
Uncertain or insufficient cash returns could impact the Group's ability to • The Group's employees have significant experience in sourcing, Balanced
deliver attractive returns to shareholders when our ability to react to developing and growing early-stage technology companies to significant value,
portfolio company funding requirements is negatively impacted or where including use of the Group's systematic opportunity evaluation and business
budgeted cash proceeds are delayed. building methodologies within delegated board authorities
3 4 • Members of the Group's investment partnership teams typically serve
as non-executive directors or advisors to portfolio companies to help identify
and remedy critical issues
• The Group has portfolio company holdings across different sectors
managed by experienced sector-specialist teams to reduce the impact of a
single company failure or sector decline
• The Group maintains significant cash balances and seeks to employ a
capital efficient process deploying low levels of initial capital to enable
identification and mitigation of potential failures at the earliest possible
stage
Examples of risk Development during the year Change from 2022
• Portfolio company failure directly impacts the Group's value and • The Group's portfolio companies raised approximately £655m of No change
profitability capital in 2023
• At any time, a large proportion of the Group's portfolio may be • Excluding the Oxford Nanopore holding, the Group held board seats on
accounted for by very few companies, which could exacerbate the impact of any 89.5% of portfolio companies valued at greater than £5m by value
impairment or failure of one or more of these companies
• The Group hired four investment professionals across the UK Deeptech
• The value of the Group's drug discovery and development portfolio and Cleantech teams, one investment profession at Parkwalk Advisors and one
companies may be significantly impacted by a negative clinical trial result investment professional in the Australian Physical Sciences team in 2023. Two
investment professionals left the business, of which one took up a senior role
• Cash realisations from the Group's portfolio through trade sales and at an IP Group portfolio company
IPOs could vary significantly from year to year
4 The Group may lose key personnel or fail to attract and integrate new The industry in which the Group operates is a specialised area and the Group
personnel requires highly qualified and experienced employees. There is a risk that the
Group's employees could be approached and solicited by competitors or other
technology-based companies and organisations or could otherwise choose to
leave the Group. Scaling the team, particularly in foreign jurisdictions such
as Australia and New Zealand and Hong Kong, presents an additional potential
risk.
Link to strategy Actions taken by management Risk appetite
The Group's strategic objectives of developing and supporting a portfolio of • Senior team succession plans in place Low
compelling intellectual property-based opportunities into robust businesses
capable of delivering attractive financial returns on our assets is dependent • Formal learning and development programme for all employees in place
on the Group's employees who work with the portfolio companies and those who
support them. • The Group carries out regular market comparisons for staff and
executive remuneration and seeks to offer a balanced incentive package
2 4 5 comprising a mix of salary, benefits, performance-based long-term incentives,
and benefits such as flexible working and salary sacrifice arrangements
• The Group encourages employee development and inclusion through
coaching and mentoring and carries out annual objective setting and appraisals
• The Group promotes an open culture of communication and provides an
inspiring and challenging workplace where people are given autonomy to do
their jobs. The Group is fully supportive of flexible working and has enabled
employees to work flexibly
• An employee forum, "IP Connect" with an appointed designated
Non-executive Director to facilitate dialogue with the Board in both
directions. Part of IP Connect's remit is also to support the evolution of the
culture and continuous improvement of working life at the Group
• An inclusion and diversity committee the "ID Project", sponsored by
the CEO is in place to support an inclusive environment to work
Examples of risk Development during the year Change from 2022
• Loss of key executives and employees of the Group or an inability to • Continued excellent employee engagement (net promoter) scores No change
attract, retain and integrate appropriately skilled and experienced employees obtained in the year from employee engagement surveys
could have an adverse effect on the Group's competitive advantage, business,
financial condition, operational results and future prospects • Continued to dedicate senior team time and resources to the
development of the Group's inclusion and diversity programme, the ID Project.
Progress against key IDP Masterplan objectives and a firmwide inclusive
communications training was provided to all employees in 2023
• More than 90% of employees attended a L&D programme sponsored
training course
• Continued high frequency of employee communications from Executive
Directors and the Head of HR via regular virtual and in-person all-staff
meetings
• The labour market was resilient in 2023 however quit rates, a key
feature of tight pandemic labour markets are now thought to be below 2019
levels. This, alongside moderated labour market demand in response to the
weakened economic activity globally means that while talent acquisition and
retention is still competitive the impact of the wider market has reduced this
risk somewhat for the Group
• Unplanned staff attrition was 2%
• Approximately 59% of employees have been with the Company for at
least five years
5 Macroeconomic conditions may negatively impact the Group's ability to Adverse macroeconomic conditions could reduce the opportunity to deploy
achieve its strategic objectives capital into opportunities or may limit the ability of such portfolio
companies to receive third-party funding, develop profitable businesses or
achieve increases in value or exits. Political uncertainty, including impacts
from Brexit, the COVID-19 pandemic or similar scenarios, could have a number
of potential impacts, including global conflicts impacting the cost of raw
materials required by portfolio companies, changes to the labour market
available to the Group for recruitment or regulatory environment in which the
Group and its portfolio companies operate.
Link to strategy Actions taken by management Risk appetite
The Group's strategic objectives of developing a portfolio of commercially • Senior management receive regular capital market and economic High
successful portfolio companies and delivering attractive financial returns on updates from the Group's capital markets team and its brokers
our assets and third-party funds can be materially impacted by the current
macroeconomic environment. • Monthly capital allocation process and on-going monitoring against
agreed budget
3
• Regular oversight of upcoming capital requirements of portfolio from
both the Group and third parties
• The Group's Risk Council monitors key macroeconomic trends that may
impact the Group
Examples of risk Development during the year Change from 2022
• The success of those portfolio companies that require significant • Macroeconomic and geopolitical conditions remain uncertain in the No change
external funding may be influenced by the market's appetite for investment in UK. Inflation in the UK fell in 2023 to 4.0% and interest rate rises were
early-stage companies, which may not be sufficient seen across the UK, Eurozone, US and elsewhere, ending an era of low interest
rates. In early 2024 the market is anticipating moderate decreases to interest
• Of the Group's portfolio value, 17.5% is held in companies quoted on rates in the short term however the expectation is that interest rates will
public markets and decreases in values to these markets could result in a not revert to the lower interest rates experienced in the recent past
material fair value impact to the portfolio as a whole
• Russia's invasion of Ukraine continued in the year and conflict in
the Middle East began in Q4
• The Group has maintained significant cash reserves available for
investment and as such is well placed to respond to macroeconomic uncertainty
6 There may be changes to, impacts from, or failure to comply with, There may be unforeseen changes in, or impacts from, government policy,
legislation, government policy and regulation regulation or legislation (including taxation legislation). This could include
changes to funding levels or to the terms upon which public monies are made
available to universities and research institutions and the ownership of any
resulting intellectual property.
Link to strategy Actions taken by management Risk appetite
The Group's strategic objectives of creating and maintaining a portfolio of • University partners are incentivised to protect their IP for Low
compelling opportunities to deliver attractive returns for shareholders could exploitation as the partnership agreements share returns between universities,
be materially impacted by failure to comply with, or adequately plan for, a academic founders and the Group
change in legislation, government policy or regulation.
• The Group utilises professional advisors as appropriate to support
2 its monitoring of, and response to changes in, tax, insurance or other
legislation
• The Group has internal policies and procedures to ensure its
compliance with applicable regulations
• The Group maintains directors and officers (D&O) and
professional indemnity insurance policies
Examples of risk Development during the year Change from 2022
• Changes could result in universities and researchers no longer being • Ongoing focus on regulatory compliance, including third-party No change
able to own, exploit or protect intellectual property on attractive terms reviews and utilisation of specialist advisors
• Changes to tax legislation or the nature of the Group's activities, • Parkwalk Advisors Ltd received regulatory permissions from the FCA
in particular in relation to the Substantial Shareholder Exemption, may in the year to allow them to increase the level of assets under management in
adversely affect the Group's tax position and accordingly its value and response to their success as an EIS investment manager
operations
• An application for Type 1 and Type 9 regulatory licences from the
• Regulatory changes or breaches could ultimately lead to withdrawal Securities and Futures Commission ("SFC") in Hong Kong was obtained in the
of regulatory permissions for the Group's authorised subsidiaries, resulting year. The licences allow the Group's Hong Kong subsidiary to raise capital for
in loss of fund management contracts, reputational damage or fines the Group's portfolio companies and other similar companies and manage a
PRC-based fund
7 The Group and its portfolio companies may be subjected to phishing and This could include taking over email accounts to request or authorise
ransomware attacks, data leakage and hacking payments, GDPR breaches and access to sensitive corporate and portfolio
company data.
Link to strategy Actions taken by management Risk appetite
The Group's strategic objectives of creating and maintaining a portfolio of • The Group reviews its data and cybersecurity processes with its Low
compelling opportunities to deliver attractive returns for shareholders could external outsourced IT providers and applies the UK Government's "ten steps"
be materially impacted by a serious cybersecurity breach at a corporate or framework or other national equivalents where relevant
portfolio company level.
• Regular IT management reporting framework in place
2
• Internal and third-party reviews of policies and procedures in place
to ensure appropriate framework in place to safeguard data
• Assessment of third-party suppliers of cloud-based and on-premises
systems in use
• Annual Cyber and IT training is supplemented by regular bite-sized
and interactive cybersecurity training
• Network and infrastructure security systems to respond to emerging
threats
Examples of risk Development during the year Change from 2022
• The Group, or one, or a combination of, its portfolio companies • Ongoing focus on IT security and staff training No change
could face significant fines from a data security breach
• Continued programme of phishing and penetration testing
• The Group or one of its portfolio companies could be subjected to a
phishing attack, which could lead to invalid payments being authorised or a • Implementation of additional cybersecurity systems to provide
sensitive information leak enhanced threat detection
• A malware or ransomware attack could lead to systems becoming • Internal Audit completed an "ethical hacking" style review
non-functioning and impair the ability of the business to operate in the short
term • Onboarded strategic level external communications resource to
supplement response resources to a serious cyber incident
• Three cyber attack simulations were undertaken in the year to allow
executive management to practice their planned response to a serious cyber
incident, including two externally facilitated sessions
• Extensive training and testing of the Group's cyber response plans
in the year
8 The Group may be negatively impacted by operational issues both from a UK The potential for a negative impact to the Group arising from operational
central and international operations perspective issues such as business continuity and the overseas operations through
non-compliance with local laws and regulations, failure to integrate overseas
operations with the Group, an inability to foresee territory-specific risks
and macro-events. The Group may also fail to establish effective control
mechanisms, considering different working culture and environment, leading to
significant senior management time requirement, distracting from core
day-to-day business.
Link to strategy Actions taken by management Risk appetite
The Group's strategy includes building a portfolio of compelling intellectual • Local legal and regulatory advisors have been engaged in the Balanced
property-based companies across the UK and Australia and New Zealand. The establishment phase of overseas operations. International teams typically have
scale of the Group's operations, including internationally represents their own in-house legal teams and regularly report to the UK-based General
increased importance of successful execution of its operations. Counsel
2 5 • Business continuity plans are in place for the Group and tested
regularly
• Our executive recruitment function and HR are involved in senior
hires for new territories. Senior international personnel include current and
former UK employees, encouraging a shared culture across territories
• Video conferencing supplements regular travel between the UK and
other territories to ensure the Group is aligned in its strategy and culture.
• The risk management framework in place across each business unit has
been established in each international territory and is integrated into the
Group's regular risk management processes and reporting
• Third-party suppliers are used for international accounting and
payroll services to reduce the risk of fraud within smaller teams
• The Group's Executive Committee includes senior representatives from
Australia and Hong Kong. Other key committees and working groups also include
team members from international offices
Examples of risk Development during the year Change from 2022
• A legal or regulatory breach could ultimately lead to the withdrawal • Continued coordination of risk reporting across Australia, New No change
of regulatory permissions overseas, resulting in loss of trust management Zealand and Hong Kong
contracts, reputational damage and fines
• Hong Kong regulatory permissions obtained from local regulator and
• Divergent Group cultures may lead to difficulties in achieving the Group risk and compliance reporting programme commenced
Group's strategic aims
• Reviewed disaster recovery plans in the year
• A major control failure could lead to a successful fraudulent attack
on the Group's IT infrastructure or access to bank accounts
• Senior management may spend a significant amount of time in setting
up and establishing new territories, which could detract from central Group
strategy and operations
KEY
STRATEGIC PILLARS
1 Have an impact on the world that counts
2 Develop our unique insights, expertise and access
3 Accelerate value creation
4 Build a truly differentiated reputation
5 Be a home for exceptional talent
Viability statement
The Directors have carried out a robust assessment of the viability of the
Group over a three-year period to December 2026, considering its strategy, its
current financial position and its principal risks. The three-year period
reflects the time horizon reviewed by the Board, and over which the Group
places a higher degree of reliance over the forecasting assumptions used.
The strategy and associated principal risks underpin the Group's three-year
financial plan and scenario testing, which the Directors review and approve at
least annually. As a business which seeks to accelerate the impact of science
for a better future through our portfolio companies, our business model seeks
to balance cash investments, the generation of portfolio returns and portfolio
realisations. The three-year plan is built using a bottom-up model using
assumptions over:
· the level of portfolio investment
· the level of realisations from the portfolio (net of carried
interest payments)
· the financial performance (and valuation) of the underlying
portfolio companies
· the Group's drawdown and repayment of its debt
· the Group's ability to raise further capital
· the level of the Group's net overheads and
· the level of dividends and share buybacks
Of the Group's principal risks, those relating to insufficient capital (both
Group and portfolio companies), insufficient investment returns and
macroeconomic conditions are deemed to be the most relevant to the Group's
viability assessment due to their potential to impact the Group's liquidity
position and net asset position, both of which directly impact the level of
headroom over the Group's debt covenants. Other principal risks including;
personnel risk; legislation, governance and regulation; cyber and IT and
international operations could have an impact on the Group's performance but
are less likely to have a direct impact on viability within the assessment
period.
To assess the impact of the principal risks highlighted above on the prospects
of the Group, the financial plan is stress-tested by modelling severe but
plausible and intermediate downside scenarios where adverse impacts across the
Group's principal risks relating to insufficient capital, insufficient
investment returns and macroeconomic conditions were considered as part of the
review. Under the severe downside scenario, a 70% reduction in planned
realisations and a 35% decline in portfolio fair values which were considered
together with a series of mitigating actions, including reducing planned
levels of investment.
Under these stress-testing scenarios, significant reductions to portfolio
investments are made to preserve the Group's remaining cash balances. In all
scenarios modelled, the Group remains solvent throughout the three-year period
with no breach of debt covenants of a "cash trap period" occurring. See Note
19 for further details on cash trap arrangements.
Based on this assessment, the Directors have a reasonable expectation that the
Group will continue to operate and meets its liabilities, as they fall due, up
to December 2026.
Strategic Report approval
The Strategic Report as set out above has been approved by the Board.
The financial information set out below has been extracted from the Annual
Report and Accounts of IP Group plc for the year ended 31 December 2023 and is
an abridged version of the full financial statements, not all of which are
reproduced in this announcement. Directors' Responsibilities Statement The
responsibility statement set out below has been reproduced from the Annual
Report and Accounts, which will be published in April 2024, and relates to
that document and not this announcement.
Each of the Directors confirms to the best of their knowledge:
• The Group financial statements have been prepared in accordance with
UK-adopted International Financial Reporting Standards ("UK-adopted IFRS") and
give a true and fair view of the assets, liabilities, financial position and
profit and loss of the Group.
• The Annual Report and Accounts includes a fair review of the development
and performance of the business and the financial position of the Group and
the parent company, together with a description or the principal risks and
uncertainties that they face.
On behalf of The Board
Sir Douglas
Flint
Greg Smith
Chairman
Chief Executive Officer
13 March 2023
Consolidated statement of comprehensive income.
For the year ended 31 December 2023
Note 2023 2022
£m £m
Portfolio return and revenue
Change in fair value of equity and debt investments 13 (110.9) (303.4)
(Loss) on disposal of equity and debt investments 15 (10.8) (7.8)
Change in fair value of limited and limited liability partnership interests 14 (38.8) 2.1
Revenue from services and other income 4 5.9 7.1
(154.6) (302.0)
Administrative expenses
Carried interest plan credit/(charge) 23 4.7 (12.0)
Share-based payment charge 22 (2.6) (2.9)
Other administrative expenses 8 (28.0) (27.4)
(25.9) (42.3)
Operating loss 7 (180.5) (344.3)
Finance income 9.8 2.2
Finance costs (5.6) (1.4)
Loss before taxation (176.3) (343.5)
Taxation 10 1.9 (1.0)
Loss for the year (174.4) (344.5)
Other comprehensive income
Exchange differences on translating foreign operations (0.4) 0.5
Total comprehensive loss for the year (174.8) (344.0)
Attributable to:
Equity holders of the parent (171.3) (341.5)
Non-controlling interest (3.5) (2.5)
(174.8) (344.0)
Loss per share
Basic (p) 11 (16.53) (33.01)
Diluted (p) 11 (16.53) (33.01)
Consolidated statement of financial position.
As at 31 December 2023
Note 2023 2022
£m £m
ASSETS
Non-current assets
Goodwill 0.4 0.4
Property, plant and equipment 1.4 0.4
Joint venture investment 0.6 -
Portfolio:
Equity investments 13 1,011.5 1,120.8
Debt investments 13 83.7 38.1
Limited and limited liability partnership interests 14 69.7 99.6
Receivable on sale of debt and equity investments 15,17 7.8 6.9
Total non-current assets 1,175.1 1,266.2
Current assets
Trade and other receivables 16 8.2 8.8
Receivable on sale of debt and equity investments 15,17 1.4 41.3
Deposits 3 126.0 152.8
Cash and cash equivalents 3 100.9 88.7
Total current assets 236.5 291.6
Total assets 1,411.6 1,557.8
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Called up share capital 21 21.3 21.3
Share premium account 102.5 102.5
Retained earnings 1,075.6 1,257.9
Total equity attributable to equity holders 1,199.4 1,381.7
Non-controlling interest (9.1) (5.6)
Total equity 1,190.3 1,376.1
Current liabilities
Trade and other payables 18 17.1 16.9
Borrowings 19 6.3 6.3
Total current liabilities 23.4 23.2
Non-current liabilities
Borrowings 19 128.9 75.1
Carried interest plan liability 23 38.0 44.1
Deferred tax liability 10 4.8 6.8
Loans from limited partners of consolidated funds 19 19.8 19.5
Revenue share liability 20 6.4 13.0
Total non-current liabilities 197.9 158.5
Total liabilities 221.3 181.7
Total equity and liabilities 1,411.6 1,557.8
Registered number: 04204490
The accompanying notes form an integral part of the financial statements. The
financial statements were approved by the Board of Directors and authorised
for issue on 13 March 2024 and were signed on its behalf by:
Greg Smith
Chief Executive Officer
David Baynes
Chief Financial Officer
Consolidated statement of cash flows.
For the year ended 31 December 2023
Note 2023 2022
£m £m
Operating activities
Loss before taxation for the period (176.3) (343.5)
Adjusted for:
Change in fair value of equity and debt investments 13 110.9 303.4
Change in fair value of limited and limited liability partnership interests 14 38.8 (2.1)
Loss on disposal of equity investments 15 10.8 7.8
Long term incentive carry scheme (credit)/charge 23 (4.7) 12.0
Carried interest scheme payments 23 (1.3) (1.0)
Share-based payment charge 22 2.6 2.9
Finance income (9.8) (2.2)
Finance costs 5.6 1.4
Depreciation of right of use asset, property, plant and equipment 0.6 0.6
Corporate finance fees settled in the form of portfolio company equity (0.1) (0.5)
Changes in working capital
Decrease/(Increase) in trade and other receivables 16 1.3 (0.5)
Decrease in trade and other payables 18 (0.3) (2.8)
Drawdowns from limited partners of consolidated funds 0.3 0.8
Other operating cash flows
Interest received(1) 3.7 -
Net interest received - 0.2
Net cash outflow from operating activities (17.9) (23.5)
Investing activities
Purchase of property, plant and equipment - (0.3)
Purchase of equity and debt investments 13 (63.4) (88.9)
Investment in limited and limited liability partnership funds 14 (9.8) (4.6)
Investment in joint venture (0.6) -
Cash flow to deposits (191.7) (208.7)
Cash flow from deposits 218.4 272.1
Proceeds from sale of equity and debt investments 15 37.7 28.1
Interest received on deposits(1) 4.1 -
Distribution from limited partnership funds 14 0.9 -
Net cash outflow from investing activities (4.4) (2.3)
Financing activities
Dividends paid 28 (13.0) (12.3)
Repurchase of own shares - treasury shares 21 (0.1) (8.0)
Lease principal payment (0.5) (0.5)
Interest paid(1) (5.5) -
Repayment of EIB loan facility 19 (6.2) (29.8)
Drawdown of loan facility (net of costs) 19 60.0 59.4
Net cash inflow from financing activities 34.7 8.8
Net decrease in cash and cash equivalents 12.4 (17.0)
Cash and cash equivalents at the beginning of the year 88.7 105.7
Effect of foreign exchange rate changes (0.2) -
Cash and cash equivalents at the end of the year 100.9 88.7
(1 In the current year interest paid and interest received on deposits have
been shown separately. The directors have chosen not to represent the prior
year comparatives as the amounts are immaterial.)
The accompanying notes form an integral part of the financial statements.
Consolidated statement of changes in equity.
For the year ended 31 December 2023
Attributable to equity holders of the parent
Share Share Retained Total Non-controlling Total
capital premium(1) earnings(2) £m interest(3) equity
£m £m £m £m
At 1 January 2022 21.3 102.4 1,617.5 1,741.2 (3.1) 1,738.1
Loss for the year - - (342.0) (342.0) (2.5) (344.5)
Issue of shares(4) - 0.1 - 0.1 - 0.1
Purchase of treasury shares(5) - - (8.0) (8.0) - (8.0)
Equity-settled share-based payments(6) - - 2.9 2.9 - 2.9
Ordinary dividends(7) - - (12.7) (12.7) - (12.7)
Currency translation(8) - - 0.2 0.2 - 0.2
At 1 January 2023 21.3 102.5 1,257.9 1,381.7 (5.6) 1,376.1
Loss for the year - - (170.9) (170.9) (3.5) (174.4)
Purchase of treasury shares(5) - - (0.1) (0.1) - (0.1)
Equity-settled share-based payments(6) - - 2.6 2.6 - 2.6
Ordinary dividends(7) - - (13.0) (13.0) - (13.0)
Currency translation(8) - - (0.9) (0.9) - (0.9)
At 31 December 2023 21.3 102.5 1,075.6 1,199.4 (9.1) 1,190.3
1. Share premium - Amount subscribed for share capital in excess of
nominal value, net of directly attributable issue costs.
2. Retained earnings - Cumulative net gains and losses recognised in the
consolidated statement of comprehensive income net of associated share-based
payments credits and distributions to shareholders.
3. Non-controlling interest - Share of profits attributable to the
Limited Partners of IP Venture Fund II LP.
4. Issue of shares - Share premium in connection with the Interim Scrip
Dividend, the Group has received valid elections from shareholders resulting
in a requirement to issue new ordinary shares of 2p each ("New Shares").
5. Purchase of treasury shares - Reflects the issue of 220,302 ordinary
shares, with an aggregate value of £0.1m, these were purchased by the Company
during the year and are held in treasury. Total value including costs was
£0.1m. (2022: 7,429,494 shares purchased for total value of £8.0m, total
including costs of £8.0m). These shares were purchased for the £20m share
buyback share buyback approved by the Board in December 2023.
6. Equity-settled share-based payments - amounts recognised in respect
of the Group's share-based payments schemes recognised as a subsidiary
investment in the Company accounts with a corresponding entry against equity.
7. Ordinary dividends - Of the £13.0m dividends paid in 2023, £13.0m
was settled in cash (2022: £12.7m total, £12.3m cash, £0.4m Scrip). No new
shares were issued in respect of scrip dividends in 2023 (2022: 485,569 shares
issued).
8. Currency translation - Reflects currency translation differences on
reserves non-GBP functional currency subsidiaries. Exchange differences on
translating foreign operations are presented before tax.
Notes to the consolidated financial statements.
1. Basis of preparation
A) Basis of preparation
The Annual Report and Accounts of IP Group plc ("IP Group" or the "Company")
and its subsidiary companies (together, the "Group") are for the year ended 31
December 2023. The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise stated. The
Group financial statements have been prepared and approved by the directors in
accordance with UK-adopted international accounting standards ("UK-adopted
IFRS").
The preparation of financial statements in compliance with IFRS requires the
use of certain critical accounting estimates. It also requires Group
management to exercise judgement in the most appropriate selection of the
Group's accounting policies. The areas where significant judgements and
estimates have been made in preparing the financial statements and their
effect are disclosed in note 2.
Going concern
The financial statements are prepared on a going concern basis. The directors
have completed a detailed financial forecast alongside severe but plausible
scenario-based downside stress-testing, including the impact of declining
portfolio values and a reduced ability to generate portfolio realisations.
At the balance sheet date, the Group had cash and deposits of £226.9m,
providing liquidity for at least two years' operating expenses, portfolio
investment and debt repayments at recent levels. Furthermore, the Group has a
portfolio of investments valued at around £1.2bn, which is anticipated to
provide further liquidity over the forecast period. Accordingly, our
forecasting indicates that the Group has adequate resources to enable it to
meet its obligations including its debt covenants and to continue in
operational existence for at least the next twelve months from the approval
date of the accounts. For further details see the Group's viability statement
above.
Changes in accounting policies
(i) New standards, interpretations and amendments effective from 1 January
2023
No new standards, interpretations and amendments effective in the year have
had a material effect on the Group's financial statements.
(ii) New standards, interpretations and amendments not yet effective
No new standards, interpretations and amendments not yet effective are
expected to have a material effect on the Group's future financial statements.
(B) Basis of consolidation
IFRS 10 Investment Entity Exemption
IFRS 10 defines an investment entity as one which:
a. Obtains funds from one or more investors for the purpose of providing
those investors with investment management services
b. Commits to its investors that its business purpose is to invest funds
solely for returns from capital appreciation, investment income or both
c. Measures and evaluates the performance of substantially all of its
investments on a fair value basis
We believe that IP Group plc does not meet this definition of an investment
entity with the key factors behind this conclusion being:
• the absence of specific exit strategies for early-stage assets
(indicating condition (b) above is not satisfied)
• the ability to hold investments indefinitely (indicating condition
(b) above is not satisfied)
• the flexibility to explore the direct commercialisation of
intellectual property within the Group if that is determined to be the most
attractive means of generating value for shareholders. (indicating condition
(a) above is not satisfied)
Accordingly, we have applied IFRS 10 consolidation principles for each group
of entities as follows:
(i) Subsidiaries
Where the Group has control over an entity, it is classified as a subsidiary.
Typically, the Group owns a non-controlling interest in its portfolio
companies; however, in certain circumstances, the Group takes a controlling
interest and hence categorises the portfolio company as a subsidiary. As per
IFRS 10, an entity is classed as under the control of the Group when all three
of the following elements are present: power over the entity; exposure to
variable returns from the entity; and the ability of the Group to use its
power to affect those variable returns.
In situations where the Company has the practical ability to direct the
relevant activities of the investee without holding the majority of the voting
rights, it is considered that de facto control exists. In determining whether
de facto control exists the Group considers the relevant facts and
circumstances, including:
• The size of the Company's voting rights relative to both the size
and dispersion of other parties who hold voting rights;
• Substantive potential voting rights held by the Company and by
other parties;
• Other contractual arrangements; and
• Historic patterns in voting attendance.
In assessing the IFRS 10 control criteria in respect of the Group's private
portfolio companies, direction of the relevant activities of the company is
usually considered to be exercised by the company's board, therefore the key
control consideration is whether the Group currently has a majority of board
seats on a given company's board, or is able to obtain a majority of board
seats via the exercise of its voting rights. Control is reassessed whenever
facts and circumstances indicate that there may be a change in any of these
elements of control.
The consolidated financial statements present the results of the Company and
its subsidiaries as if they formed a single entity. Intercompany transactions
and balances between Group companies are therefore eliminated in full. The
consolidated financial statements incorporate the results of business
combinations using the acquisition method. In the statement of financial
position, the acquiree's identifiable assets and liabilities are initially
recognised at their fair values at the acquisition date. Contingent
liabilities dependent on the disposed value of an associated investment are
only recognised when the fair value is above the associated threshold. The
results of acquired operations are included in the consolidated statement of
comprehensive income from the date on which control is obtained. They are
consolidated until the date on which control ceases.
(ii) Associates/portfolio companies
The majority of the Group's portfolio companies are deemed to be Associates,
as the Group has significant influence (generally accompanied by a
shareholding of between 20% and 50% of the voting rights) but not control. A
small number of the Group's portfolio companies are controlled and hence
consolidated, as per section (i) above.
As permitted under IAS 28, the Group elects to hold investments in Associates
at fair value through profit and loss in accordance with IFRS 9. This
treatment is specified by IAS 28 Investment in Associates and Joint Ventures,
which permits investments held by a venture capital organisation or similar
entity to be excluded from its measurement methodology requirements where
those investments are designated, upon initial recognition, as at fair value
through profit or loss and accounted for in accordance with IFRS 9 Financial
Instruments. Therefore, no associates are presented on the consolidated
statement of financial position.
Changes in fair value of associates are recognised in profit or loss in the
period of the change. The Group has no interests in Associates through which
it carries on its operating business. During 2023, the Group made a £0.6m
investment into a Joint Venture established in preparation for potential fund
operations in China. Joint ventures are held at fair value with any change in
value recognised through the income statement.
The disclosures required by Section 409 of the Companies Act 2006 for
associated undertakings are included in note 13 of the Company financial
statements. Similarly, those investments which may not have qualified as an
Associate but fall within the wider scope of significant holdings and so are
subject to Section 409 disclosures of the Companies Act 2006 are included in
note 11 of the Company financial statements.
(iii) Limited Partnerships and Limited Liability Partnerships ("Limited
Partnerships")
a) Consolidated Limited Partnership fund holdings
The Group has a holding in the following Limited Partnership fund, which it
determines that it controls and hence consolidates on a line by line basis:
Name Interest in Limited partnership
%
IP Venture Fund II LP ("IPVFII") 33.3
In order to determine whether the Group controls the above funds, it has
considered the IFRS 10 control model and related application guidance. In
respect of IPVFII, the Group has power via its role as fund manager of the
partnership, and exposure to variable returns via its 33.3% ownership
interest, resulting in the conclusion that the Group controls and hence
consolidates the fund.
b) Other non-consolidated Limited Partnership fund holdings
In addition to Limited Partnerships where Group entities act as general
partner and investment manager, the Group has interests in three further
entities which are managed by third parties:
Name Interest in Limited partnership
%
IPG Cayman LP 58.1
UCL Technology Fund LP ("UCL Fund") 46.4
Technikos LLP ("Technikos") 17.7
The rationale for IPG Cayman LP's categorisation as a non-consolidated fund is
considered a significant accounting judgment and is set out in note 2.
The Group has a 46.4% interest in the total capital commitments of the UCL
Fund. The Group has committed £24.8m to the fund alongside the European
Investment Fund ("EIF"), University College London and other investors.
Participation in the UCL Fund provides the Group with the opportunity to
generate financial returns and visibility of potential intellectual property
from across University College London's research base.
The Group has an 17.7% interest in the total capital commitments of Technikos,
a fund with an exclusive pipeline agreement with Oxford University's Institute
of Biomedical Engineering.
See note 27 for disclosure of outstanding commitments in respect of Limited
Partnerships.
iv) Other third party funds under management
In addition to the Limited Partnership fund IPVFII, described above, the Group
also manages other third-party funds, including within its Parkwalk business
unit, described in further detail in the portfolio review section above, and
on behalf of Australian superannuation fund Hostplus. In both cases, the Group
has no direct beneficial interest in the assets being managed, and its sole
exposure to variable returns relates to performance fees payable on exits
above a specified hurdle. As a result, the Group is not deemed to control
these managed assets under IFRS10 and they are not consolidated.
v) Non-controlling interests
The total comprehensive income, assets and liabilities of non-wholly owned
entities are attributed to owners of the parent and to the non-controlling
interests in proportion to their relative ownership interests.
vi) Business combinations
The Group accounts for business combinations using the acquisition method from
the date that control is transferred to the Group (see (i) Subsidiaries
above). Both the identifiable net assets and the consideration transferred in
the acquisition are measured at fair value at the date of acquisition and
transaction costs are expensed as incurred. Goodwill arising on acquisitions
is tested at least annually for impairment. In instances where the Group owns
a non-controlling stake prior to acquisition the step acquisition method is
applied, and any gain or losses on the fair value of the pre-acquisition
holding is recognised in the consolidated statement of comprehensive income.
c) Other accounting policies
Regulated capital
Top Technology Ventures Limited and Parkwalk Advisors Ltd, are Group
subsidiaries which are subject to external capital requirements imposed by the
Financial Conduct Authority ("FCA"). Similarly, the Group's subsidiary in Hong
Kong IP Group Greater China Services Limited is subject to external capital
requirements imposed by the Securities and Futures Commission of Hong Kong
("SFC"). As such these entities must ensure that they have sufficient capital
to satisfy their respective requirements. The Group ensures it remains
compliant with these requirements as described in their respective financial
statements.
Cash flow statement classification of portfolio investments
Cash flow relating to portfolio investments have been presented as investing
cash flows as opposed to cash flows from operating activities. Management
considers this to be an appropriate classification representing the fact that
the relevant cashflows are allocated towards resources intended to generate
future income and cash flows.
2. Significant accounting estimates and judgements
The directors make judgements and estimates concerning the future. Estimates
and judgements are continually evaluated and are based on historical
experience and other factors, such as expectations of future events, and are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates. The estimates and assumptions which have the most
significant effects on the carrying amounts of the assets and liabilities in
the financial statements are discussed below.
(i) Valuation of unquoted equity and debt investments and limited partnership
interests (significant estimate)
The Group's accounting policy in respect of the valuation of unquoted equity
and debt investments is set out in note 13, and in respect of limited
partnership interests in note 14. In applying this policy, the key areas over
which judgement are exercised include:
• Consideration of whether a funding round is at arm's length and
therefore representative of fair value.
• The relevance of the price of recent investment as an input to
fair value, which typically becomes more subjective as the time elapsed
between the recent investment date and the balance sheet date increases.
• In the case of companies with complex capital structures, the
appropriate methodology for assigning value to different classes of equity
based on their differing economic rights.
• Where an upwards or downwards calibration adjustment to a funding
transaction valuation to reflect positive or negative developments within the
company in question, the size of the adjustment made.
• Where using valuation methods such as discounted cash flows or
revenue multiples, the assumptions around inputs including the probability of
achieving milestones and the discount rate used, and the choice of comparable
companies used within revenue multiple analysis.
• Where valuations are based on future events such as sales
processes or future funding rounds, the appropriate level of execution risk to
be applied to the anticipated event when assessing its valuation impact as at
the balance sheet date.
• Debt investments typically represent convertible debt; in such
cases judgement is exercised in respect of the estimated equity value received
on conversion of the loan.
Valuations are based on management's judgement after consideration of the
above and upon available information believed to be reliable, which may be
affected by conditions in the financial markets. Due to the inherent
uncertainty of the investment valuations, the estimated values may differ
significantly from the values that would have been used had a ready market for
the investments existed, and the differences could be material. Note 13
provides disclosure details on sensitivity and estimation uncertainty.
(ii) Application of IFRS 10 in respect of Istesso Limited and IPG Cayman LP
(significant judgement)
Istesso Limited
In respect of Istesso Limited, although the Group has a 56.5% undiluted
economic interest in the company, the Group holds a significant proportion of
its equity via non-voting shares resulting in it holding less than 50% of the
voting rights at the company. Under Istesso's Articles of Association,
strategic and day-to-day decisions over running of the business rest with
Istesso's board of directors rather than through shareholder voting rights
attached to direct ownership of equity interests held in the entity. In this
respect, power over Istesso is exercised predominantly through directors'
meetings, on which IP Group is not deemed to have majority representation. As
such, the relationship between Istesso and IP Group is designed in such a way
that "shareholder" voting rights are not the dominant factor in deciding who
directs the investee's relevant activities, but it is the directors who do so.
IP Group does not control the board of Istesso Limited via a majority of board
directors, and is specifically prevented from appointing additional directors
to gain control of the board via restrictions in Istesso's Articles of
Association.
During the year, the Group provided a £13.5m convertible loan to Istesso
Limited. This was in addition to a £10m convertible loan which was provided
in 2022. The terms of the loans contain specific provisions preventing their
conversion where this would result in IP Group obtaining control of Istesso.
In addition, the Group provided £1.5m equity funding to Istesso in 2023. As
part of this transaction, convertible loans advanced by IP Group and a third
party in 2020 converted into equity, leading to a marginal increase in IP
Group's economic interest (from 56.4% to 56.5%), but a decrease in IP Group's
voting rights as a result of IP Group's debt conversion being into non-voting
shares.
Based on an updated control assessment, including considerations around
whether IP Group has 'de facto' control of Istesso including inter alia the
number of voting shares held by the Group and its connected parties and the
dispersion of other parties' voting rights, we have concluded that the Group
does not control Istesso Limited under IFRS 10.
Had we concluded that consolidation in the current year was appropriate, the
impact on the Group Balance Sheet would have been to recognise Istesso
Limited's assets and liabilities and to recognise additional intangible assets
including goodwill based on the fair value of the company at acquisition. The
impact on the Group Income Statement would have been the recognition of
Istesso Limited's costs from the point of acquisition. Furthermore, any
subsequent fair value movements in the debt and equity of Istesso Limited
would not be recognised until the point where IP Group was no longer deemed to
control Istesso Limited.
IPG Cayman LP
The Group's US portfolio is held via a limited partnership fund, IPG Cayman
LP, which was set up in 2018 to facilitate third party investment into this
portfolio. The fund is managed by Longview Innovations Inc., formerly an
operating subsidiary of the Group. Prior to 2021, the Group was judged to
control both IPG Cayman LP and Longview innovations Inc. under IFRS 10 and
hence both entities were consolidated.
In 2021, several events took place which caused us to reassess the Group's
control of both entities:
• IPG Cayman LP raised additional third-party funds in the first
half of 2021, which reduced the Group's stake in the fund from 80.7% to 58.1%
and revised the fund's Limited Partnership Agreement to reduced the Group's
rights to replace the fund manager.
• Investors in the 2021 IPG Cayman LP funding round hold an option
to subscribe additional funds which, if exercised, would result in IP Group
holding less than 50% in the fund.
• In November 2021 the Group disposed of its equity in IPG Cayman
LP's fund manager, Longview Innovations Inc. and hence no longer controls the
fund manager.
As a result of these changes, our control assessment concluded that Longview
Innovations Inc, is acting as an agent on behalf of all investors in the
Cayman LP and not solely IPG plc, therefore the Group no longer controls IPG
Cayman LP. The Group therefore ceased to consolidate it from November 2021.
Arriving at this conclusion required the application of judgement, most
significantly in assessing the application guidance contained in IFRS 10 B19
which suggests that in some instances a special relationship may exist (such
as the fact that we remain the largest individual investor in the fund),
implying that an investor has a more than passive interest in the investee.
Having considered this guidance we have concluded that on balance the Group
does not have power over IPG Cayman LP and hence does not control it.
During 2023, the Group advanced $10m into IPG Cayman LP via a Simple Agreement
for Future Equity ("SAFE"). The terms of this SAFE were consistent with those
of another third party who entered into a SAFE with IPG Cayman LP in the year
and did not confer any additional substantive rights to the Group in the
normal course of business and as a result did not change the consolidation
conclusion in respect of IPG Cayman LP.
Had we concluded that consolidation was appropriate in the current year, the
impact on the Group Balance Sheet would have been a gross-up adjustment to
reflect the full value of IPG Cayman LP's assets and liabilities, with no
impact on the Group's net assets. The impact on the Group Income Statement
would have been to recognise IPG's gross portfolio fair value movements and
costs from the date of acquisition, with profits attributable to minority
interest in IPG Cayman LP being reflected as a movement in Minority Interest.
3. Financial risk management
As set out in the principal risks and uncertainties section above, the Group
is exposed, through its normal operations, to a number of financial risks, the
most significant of which are market, liquidity and credit risks.
In general, risk management is carried out throughout the Group under policies
approved by the Board of Directors. The following further describes the
Group's objectives, policies and processes for managing those risks and the
methods used to measure them. Further quantitative information in respect of
these risks is presented throughout these financial statements.
A) Market risk
Price risk
The Group is exposed to equity securities price risk as a result of the equity
and debt investments, and investments in Limited Partnerships held by the
Group and recognised as at fair value through profit or loss.
The Group mitigates this risk by having established investment appraisal
processes and asset monitoring procedures which are subject to overall review
by the Board. The Group has also established corporate finance and
communications teams dedicated to supporting portfolio companies with
fundraising activities and investor relations.
The Group holds ten investments valued at £203.8m which are publicly traded
(2022: 13, £228.7m), and the remainder of its investments are not traded on
an active market.
The net portfolio loss in 2023 of £160.5m represents a 13% decrease against
the opening balance (2022: loss of £304.3m, 21.5%). Sensitivity analysis
showing the impact of movements in quoted equity and debt investments is
disclosed in Note 13, and movements in Limited and Limited Liability interests
is shown in Note 14.
(ii) Foreign exchange risk
The Groups' main exposure to foreign currency risk is via its investment
portfolio, which is partially denominated in US dollars, Australian dollars,
Euros and Swedish Krona. Further details of currency exposure in the portfolio
are given in notes 13 and 14.
The Group's US dollar-denominated proceeds included in deferred consideration
at December 2023 was £9.4m (2022: £35.5m). The reduction is largely due to
the receipt of US dollar-denominated proceeds totalling £30.8m in the first
half of 2023 relating to the disposal of WaveOptics.
The Group periodically enters into forward foreign exchange contracts to
mitigate risk of exchange rate exposure in respect of non GPD-denominated
proceeds. As at 31 December 2023 the notional amount of the forward foreign
exchange contracts held by the Company was £nil (2022: $26.3m). The
settlement date of the contacts outstanding in 2022 was 30 June 2023.
(iii) Interest rate risk
The Group holds a debt facility with the European Investment Bank and a loan
note facility primarily with Phoenix Group with the overall balance as at 31
December 2023 amounting to £135.6m (excluding setup costs). These loans are
all subject to fixed rate interest (following the repayment of variable rate
loans in the year) being subject to an average fixed rate interest of 4.99%
(2022: 4.65%).
For further details of the Group's loans including covenant details see note
19.
The other primary impact of interest rate risk to the Group is the impact on
the income and operating cash flows as a result of the interest-bearing
deposits and cash and cash equivalents held by the Group.
(iv) Concentrations of risk
The Group is exposed to concentration risk via the significant majority of the
portfolio being UK-based companies and thus subject to the performance of the
UK economy. In recent years, the Group has decreased the scale of its
operations in the US as a result of the dilution of its holding in IPG Cayman
LP. The group has, however, the scale of its operations in Australia have
increased as a result of additional investment in this geography and portfolio
value gains.
The Group mitigates this risk, in co-ordination with liquidity risk, by
managing its proportion of fixed to floating rate financial assets. The table
below summarises the interest rate profile of the Group.
2023 2022
Fixed Floating rate Interest Total Fixed Floating rate Interest Total
rate
free
rate
free
£m
£m
£m
£m
£m £m £m £m
Financial assets
Equity investments - - 1,011.5 1,011.5 - - 1,120.8 1,120.8
Debt investments - - 83.7 83.7 - - 38.1 38.1
Limited and limited liability partnership interests - - 69.7 69.7 - - 99.6 99.6
Trade receivables - - 0.6 0.6 - - 2.1 2.1
Other receivables - - 7.6 7.6 - - 6.7 6.7
Receivable on sale of debt and equity investments - - 9.2 9.2 - - 48.2 48.2
Deposits 126.0 - - 126.0 152.8 - - 152.8
Cash and cash equivalents 16.8 83.9 0.2 100.9 - 88.7 - 88.7
142.8 83.9 1,182.5 1,409.2 152.8 88.7 1,315.5 1,557.0
Financial liabilities
Trade payables - - (0.5) (0.5) - - (1.3) (1.3)
Other accruals and deferred income - - (16.5) (16.5) - - (15.6) (15.6)
Borrowings (135.2) - - (135.2) (81.4) - - (81.4)
Carried interest plan liability - - (38.0) (38.0) - - (44.1) (44.1)
Deferred tax liability - - (4.8) (4.8) - - (6.8) (6.8)
Loans from Limited Partners of consolidated funds - - (19.8) (19.8) - - (19.5) (19.5)
Revenue share liability - - (6.4) (6.4) - - (13.0) (13.0)
(135.2) - (86.0) (221.2) (81.4) - (100.3) (181.7)
At 31 December 2023, if interest rates had been 1% higher/lower, post-tax loss
for the year, and other components of equity, would have been £2.2m (2022:
£2.0m) higher/lower as a result of higher interest received on cash &
deposits.
B) Liquidity risk
The Group seeks to manage liquidity risk, to ensure sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably. The Group's treasury management policy asserts that at any one
point in time no more than 60% of the Group's cash and cash equivalents will
be placed in fixed-term deposits with a holding period greater than three
months. Accordingly, the Group only invests working capital in short-term
instruments issued by reputable counterparties. The Group continually monitors
rolling cash flow forecasts to ensure sufficient cash is available for
anticipated cash requirements.
C) Credit risk
The Group's credit risk is primarily attributable to its deposits, cash and
cash equivalents, debt investments and trade receivables. The Group seeks to
mitigate its credit risk on cash and cash equivalents by making short-term
deposits with counterparties, or by investing in treasury funds with an "AA"
credit rating or above managed by institutions. Short-term deposit
counterparties are required to have most recently reported total assets in
excess of £5bn and, where applicable, a prime short-term credit rating at the
time of investment (ratings are generally determined by Moody's or Standard
& Poor's). Moody's prime credit ratings of "P1", "P2" and "P3" indicate
respectively that the rating agency considers the counterparty to have a
"superior", "strong" or "acceptable" ability to repay short-term debt
obligations (generally defined as having an original maturity not exceeding 13
months). An analysis of the Group's deposits and cash and cash equivalents
balance analysed by credit rating as at the reporting date is shown in the
table opposite. All other financial assets are unrated.
Credit rating 2023 2022
£m £m
P1 158.9 177.4
AAAMMF(1) 66.7 54.6
Other(2) 1.3 9.5
Total deposits and cash and cash equivalents 226.9 241.5
1. The Group holds £66.7m (2022: £54.6m) with JP Morgan GBP
liquidity fund, which has a AAAMMF credit rating with Fitch.
2. The Group holds £1.3m (2022: £9.5m) with Arbuthnot Latham, a
private bank with no debt in issue and, accordingly, on which a credit rating
is not applicable. Bloomberg assess Arbuthnot Latham's 1-year default
probability at 0.020408% (2022: 0.2107%).
The Group has no significant concentration of credit risk, with exposure
spread over a large number of counterparties and customers. The Group has
detailed policies and strategies which seek to minimise these associated risks
including defining maximum counterparty exposure limits for term deposits
based on their perceived financial strength at the commencement of the
deposit. The single counterparty limit for fixed term deposits in excess of 3
months at 31 December 2023 was the greater of 60% of total group cash or £50m
(2022: 60%, £50m). In addition, no single institution may hold more than the
higher of 50% of total cash or £50m. (2022: 50%, £50m).
The group's exposure to credit risk on debt investments is managed in a
similar way to equity security price risk, as described above, through the
Group's investment appraisal processes and asset monitoring procedures which
are subject to overall review by the Board. The maximum exposure to credit
risk for debt investments, receivables and other financial assets is
represented by their carrying amount.
4. Revenue from services
Accounting Policy:
Revenue from services is generated primarily from within the United Kingdom
and is stated exclusive of value added tax, with further revenue generated in
the Group's Australian operations. Revenue is recognised when the Group
satisfies its performance obligations, in line with IFRS 15. Revenue breakdown
and disclosure requirements under IFRS 15 have not been presented as they are
considered immaterial. Revenue from services and other income comprises:
Fund management services
Fund management fees include fiduciary fund management fees which are
generally earned as a fixed percentage of total funds under management and are
recognised as the related services are provided and performance fees payable
from realisation of agreed returns to investors which are recognised as
performance criterion are met.
Licence and royalty income
The Group's Intellectual Property licences typically constitute separate
performance obligations, being separate from other promised goods or services.
Revenue is recognised in line with the performance obligations included in the
licence, which can include sales-based, usage-based or milestone-based
royalties.
Advisory and corporate finance fees
Fees earned from the provision of business support services including
executive search services and fees for IP Group representation on portfolio
company boards are recognised as the related services are provided. Corporate
finance advisory fees are generally earned as a fixed percentage of total
funds raised and recognised at the time the related transaction is
successfully concluded. In some instances, these fees are settled via the
issue of equity in the company receiving the corporate finance services at the
same price per share as equity issued as part of the financing round to which
the advisory fees apply.
Revenue from services is derived from the provision of advisory and venture
capital fund management services or from licensing activities, royalty
revenues and patent cost recoveries.
5. Operating segments
For both the year ended 31 December 2023 and the year ended 31 December 2022,
the Group's revenue and profit before taxation were derived largely from its
principal activities within the UK.
For management reporting purposes, the Group is currently organised into five
operating segments:
i. Venture Capital investing within our 'Healthier future' thematic area
ii. Venture Capital investing within our 'Tech-enriched future' thematic
area
iii. Venture Capital investing within our 'Regenerative future' thematic
area
iv. Venture Capital investing: Other, representing investments not
included within our three thematic areas above, including platform investments
v. the management of third party funds and the provision of corporate
finance advice
Reporting line items within Venture Capital investing which are not allocated
by thematic sector are presented in the 'Venture Capital investing: other'
segment. The element of our 'Healthier future' thematic area relating to
Oxford Nanopore Technologies Limited is disclosed separately given its size.
These activities are described in further detail in the strategic report
above.
Year ended 31 December 2023
STATEMENT OF COMPREHENSIVE INCOME Venture capital investing: Healthier future Of which Oxford Nanopore Venture capital investing: Tech-enriched future Venture capital investing: Regenerative future Venture capital investing: Other Venture capital investing: Total Consolidated
£m £m £m £m £m £m £m
Third party fund
management
£m
Portfolio return and revenue
Change in fair value of equity and debt investments (92.9) (31.9) (7.0) (8.7) (2.3) (110.9) - (110.9)
(Loss)/gain on disposal of equity and debt investments (12.9) - 2.1 - - (10.8) - (10.8)
Change in fair value of limited and limited liability partnership interests (38.8) (38.8) - (38.8)
Revenue from services and other income 1.3 1.3 4.6 5.9
(105.8) (31.9) (4.9) (8.7) (39.8) (159.2) 4.6 (154.6)
Administrative expenses(1)
Carried interest plan charge(1) 4.7 4.7 - 4.7
Share-based payment charge1 (2.3) (2.3) (0.3) (2.6)
Other administrative expenses(1) (22.6) (22.6) (5.4) (28.0)
(20.2) (20.2) (5.7) (25.9)
Operating loss (105.8) (31.9) (4.9) (8.7) (60.0) (179.4) (1.1) (180.5)
Finance income(1) 9.4 9.4 0.4 9.8
Finance costs(1) (5.6) (5.6) - (5.6)
Loss before taxation (105.8) (31.9) (4.9) (8.7) (56.2) (175.6) (0.7) (176.3)
Taxation(1) 1.9 1.9 - 1.9
Loss for the year (105.8) (31.9) (4.9) (8.7) (54.3) (173.7) (0.7) (174.4)
STATEMENT OF FINANCIAL POSITION
Assets 576.5 173.6 231.4 275.3 310.2 1,393.4 18.2 1,411.6
Liabilities(1) (214.7) (214.7) (6.6) (221.3)
Net Assets 576.5 173.6 231.4 275.3 95.5 1,178.7 11.6 1,190.3
Other segment items
Portfolio Investment (33.9) - (11.9) (17.6) (9.8) (73.2) - (73.2)
Proceeds from sale of equity and debt investments 3.7 - 33.2 0.1 1.6 38.6 - 38.6
Year ended 31 December 2022
STATEMENT OF COMPREHENSIVE INCOME Venture capital investing: Healthier future Of which Oxford Nanopore Venture capital investing: Tech-enriched future Venture capital investing: Regenerative future Venture capital investing: Other Venture capital investing: Total Third party fund Consolidated
£m £m £m £m £m £m management £m
£m
Portfolio return and revenue
Change in fair value of equity and debt investments (400.9) (369.7) (22.2) 121.7 2.0 (303.4) - (303.4)
(Loss)/gain on disposal of equity and debt investments (12.0) - 4.0 - 0.2 (7.8) - (7.8)
Change in fair value of limited and limited liability partnership interests 2.1 2.1 - 2.1
Revenue from services and other income 1.1 1.1 6.0 7.1
(412.9) (369.7) (18.1) 121.7 1.4 (308.0) 6.0 (302.0)
Administrative expenses(1)
Carried interest plan charge(1) (12.0) (12.0) - (12.0)
Share-based payment charge(1) (2.6) (2.6) (0.3) (2.9)
Other administrative expenses(1) (22.1) (22.1) (5.3) (27.4)
(36.7) (36.7) (5.6) (42.3)
Operating loss (412.9) (369.7) (18.1) 121.7 (35.3) (334.7) 0.4 (344.3)
Finance income(1) 2.1 2.1 0.1 2.2
Finance costs(1) (1.4) (1.4) - (1.4)
Loss before taxation (412.9) (369.7) (18.1) 121.7 (34.6) (344.0) 0.5 (343.5)
Taxation(1) (1.0) (1.0) - (1.0)
Loss for the year (412.9) (369.7) (18.1) 121.7 (35.6) (345.0) 0.5 (344.5)
STATEMENT OF FINANCIAL POSITION
Assets 659.2 205.5 257.3 266.4 357.1 1,540.0 17.8 1,557.8
Liabilities(1) (176.0) (176.0) (5.7) (181.7)
Net Assets 659.2 205.5 257.3 266.4 181.1 1,364.0 12.1 1,376. 1
Other segment items
Portfolio Investment (40.9) (3.2) (21.7) (26.2) (4.7) (93.5) - (93.5)
Proceeds from sale of equity and debt investments 15.6 - 4.0 3.5 0.3 28.1 - 28.1
1. These amounts cannot be apportioned to the individual segments of the
venture capital investing business.
6. Auditor's remuneration
Details of the auditor's remuneration are set out below:
2023 2022
£000 £000
Audit of these financial statements (KPMG LLP) 525.3 470.0
Audit of financial statements of funds and subsidiaries of the companies (KPMG 139.2 123.9
LLP)
Audit related assurance services (KPMG LLP) 72.3 60.0
Total assurance services 736.8 653.9
7. Operating loss
Operating loss has been arrived at after charging:
2023 2022
£000 £000
Depreciation of right of use asset, property, plant and equipment (0.6) (0.6)
Total staff costs (see note 9) (19.0) (20.0)
8. Other administrative expenses
Other administrative expenses comprise:
2023 2022
£000 £000
Employee costs (less share-based payment charge) 16.4 17.1
Professional services 4.2 4.0
Consolidated portfolio company costs - 0.1
Depreciation of tangible assets 0.6 0.6
Other expenses 6.8 5.6
28.0 27.4
9. Employee costs
Accounting Policy
Employee benefits
Pension obligations
The Group operates a company defined contribution pension scheme for which all
employees are eligible. The assets of the scheme are held separately from
those of the Group in independently administered funds. The Group currently
makes contributions on behalf of employees to this scheme or to employee
personal pension schemes on an individual basis. The Group has no further
payment obligations once the contributions have been paid. The contributions
are recognised as employee benefit expenses when they are due.
Share-based payments
The Group engages in equity-settled share-based payment transactions in
respect of services receivable from employees, by granting employees
conditional awards of ordinary shares subject to certain vesting conditions.
Conditional awards of shares are made pursuant to the Group's Long Term
Incentive Plan ("LTIP") awards and/or the Group's Annual Incentive Scheme
("AIS"). The fair value of the shares is estimated at the date of grant,
taking into account the terms and conditions of the award, including
market-based performance conditions.
The fair value at the date of grant is recognised as an expense over the
period that the employee provides services, generally the period between the
start of the performance period and the vesting date of the shares. The
corresponding credit is recognised in retained earnings within total equity.
The fair value of services is calculated using the market value on the date of
award and is adjusted for expected and actual levels of vesting. Where
conditional awards of shares lapse, the expense recognised to date is credited
to the statement of comprehensive income in the year in which they lapse.
Where the terms for an equity-settled award are modified, and the modification
increases the total fair value of the share-based payment or is otherwise
beneficial to the employee at the date of modification, the incremental fair
value is amortised over the vesting period.
See the Directors' Remuneration Report and note 22 for further details.
Employee costs (including Executive Directors) comprise:
2023 2022
£000 £000
Salaries 11.3 11.6
Defined contribution pension cost 1.1 1.0
Other bonuses accrued in the year 2.6 3.0
Social security 1.4 1.5
Employee costs 16.4 17.1
Share-based payment charge (see note 22) 2.6 2.9
Total staff costs 19.0 20.0
The average monthly number of persons (including executive directors) employed
by the Group during the year was 101, all of whom were involved in management
and administration activities (2022: 99). General details of the directors'
remuneration can be found in the Directors' Remuneration Report.
10. Taxation
Accounting Policy:
Deferred tax
Full provision is made for deferred tax on all temporary differences resulting
from the carrying value of an asset or liability and its tax base. Deferred
tax is determined using tax rates (and laws) that have been enacted or
substantively enacted by the reporting date and are expected to apply when the
related deferred tax asset is realised or deferred tax liability settled.
Deferred tax assets are recognised to the extent that it is probable that the
deferred tax asset will be recovered in the future.
2023 2022
£000 £000
Current tax
UK corporation tax on profits for the year - -
Foreign tax - -
- -
Deferred tax (1.9) 1.0
Total tax (1.9) 1.0
The Group primarily seeks to generate capital gains from its holdings in
spin-out companies over the longer-term. The majority of these capital gains
qualify for UK Substantial Shareholding Exemption ("SSE") and are therefore
not taxable, resulting in the Group making annual net operating losses from
its operations from a UK tax perspective.
Gains arising on sales of holdings which do not qualify for SSE will
ordinarily give rise to taxable profits for the Group, to the extent that
these exceed the Group's ability to offset gains against current and brought
forward tax losses (subject to the relevant restrictions on the use of
brought-forward losses). In such cases, a deferred tax liability is recognised
in respect of estimated tax amount payable.
The amount for the year can be reconciled to the profit per the statement of
comprehensive income as follows:
2023 2022
£000 £000
Loss before tax (176.3) (343.5)
Tax at the UK corporation tax rate of 23.52% (2022: 19%) (41.5) (65.3)
Expenses not deductible for tax purposes (1.1) 2.3
Income not taxable 2.5 1.5
Prior year adjustment on deferred tax - 0.4
Fair value movement on investments qualifying for SSE 40.9 58.4
Movement on share-based payments 0.6 0.4
Movement in tax losses arising not recognised 0.1 2.9
CIR reactivation (3.1) -
Foreign tax 0.1 -
Rate change on deferred tax (0.4) 0.4
Total tax charge/(credit) (1.9) 1.0
At 31 December 2023, deductible temporary differences and unused tax losses,
for which no deferred tax asset has been recognised, totalled £298.3m (2022:
£278.7m). An analysis is shown below:
2023 2022
Amount Deferred Amount Deferred
£m tax £m tax
£m £m
Accelerated capital allowances - - (0.5) (0.1)
Share-based payment costs and other temporary differences (48.1) (12.0) (15.5) (3.9)
Unused tax losses (250.2) (62.6) (262.7) (65.7)
(298.3) (74.6) (278.7) (69.7)
At 31 December 2023, deductible temporary differences and unused tax losses,
for which a deferred tax liability has been recognised, totalled £18.9m
(2022: £27.3m). An analysis is shown below:
2023 2022
Amount Deferred Amount Deferred
£m tax £m tax
£m £m
Temporary timing differences 54.1 13.5 79.7 19.9
Unused tax losses (35.2) (8.7) (52.4) (13.1)
18.9 4.8 27.3 6.8
11. Earnings per share
Earnings 2023 2022
£m £m
Earnings for the purposes of basic and dilutive earnings per share (171.3) (341.5)
Number of shares 2023 2022
Number of shares Number of shares
Weighted average number of ordinary shares for the purposes of basic 1,036,400,406 1,034,483,278
earnings per share
Effect of dilutive potential ordinary shares:
Options or contingently issuable shares - -
Weighted average number of ordinary shares for the purposes of diluted 1,036,400,406 1,034,483,278
earnings per share
2023 2022
pence pence
Basic (16.53) (33.01)
Diluted (16.53) (33.01)
No adjustment has been made to the basic loss per share in the years ended 31
December 2023 and 31 December 2022, as the exercise of share options would
have the effect of reducing the loss per ordinary share, and therefore is not
dilutive.
Potentially dilutive ordinary shares include contingently issuable shares
arising under the Group's LTIP arrangements, and options issued as part of the
Group's Sharesave schemes and Deferred Bonus Share Plan (for annual bonuses
deferred under the terms of the Group's Annual Incentive Scheme).
12. Categorisation of financial instruments
Accounting policy:
Financial assets and liabilities
Financial assets and liabilities are recognised in the balance sheet when the
relevant Group entity becomes a party to the contractual provisions of the
instrument. De-recognition occurs when rights to cash flows from a financial
asset expire, or when a liability is extinguished.
Derivative financial instruments are accounted for at fair value through
profit and loss in accordance with IFRS 9. They are revalued at the balance
sheet date based on market prices, with any change in fair value being
recorded in profit and loss. Derivatives are recognised in the Consolidated
statement of financial position as a financial asset when their fair value is
positive and as a financial liability whey their fair value is negative. The
Group's derivative financial instruments are not designated as hedging
instruments.
Financial assets
In respect of regular way purchases or sales, the Group uses trade date
accounting to recognise or derecognise financial assets.
The Group classifies its financial assets into one of the categories listed
below, depending on the purpose for which the asset was acquired.
At fair value through profit or loss
Held for trading and financial assets are recognised at fair value through
profit and loss. This category includes equity investments, debt investments
and investments in limited partnerships. Investments in associated
undertakings, which are held by the Group with a view to the ultimate
realisation of capital gains, are also categorised as at fair value through
profit or loss. This measurement basis is consistent with the fact that the
Group's performance in respect of investments in equity investments, limited
partnerships and associated undertakings is evaluated on a fair value basis in
accordance with an established investment strategy.
Financial assets at fair value through profit or loss are initially recognised
at fair value and any gains or losses arising from subsequent changes in fair
value are presented in profit or loss in the statement of comprehensive income
in the period which they arise.
At amortised cost
These assets are non-derivative financial assets with fixed and determinable
payments that are not quoted in an active market. They arise principally
through the provision of services to customers (trade receivables) and are
carried at cost less provision for impairment.
Deposits
Deposits comprise longer-term deposits held with financial institutions with
an original maturity of greater than three months and, in line with IAS 7 are
not included within cash and cash equivalents. Cash flows related to
investments in, and maturities of amounts held on deposit are presented within
investing activities in the consolidated statement of cash flows. Interest
income related to deposits is included within cashflows from operating
activities.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and short-term deposits held
with financial institutions with an original maturity of three months or less.
Interest income related to cash is included within cashflows from operating
activities.
Financial liabilities
Current financial liabilities are composed of trade payables and other
short-term monetary liabilities, which are recognised at amortised cost.
Non-current liabilities are composed of loans from Limited Partners of
consolidated funds, outstanding amounts drawn down from a debt facility
provided by the European Investment Bank, loan notes provided by Phoenix
Group, carried interest plans liabilities, and revenue share liabilities
arising as a result of the Group's former Technology Pipeline Agreement with
University College London.
Unless otherwise indicated, the carrying amounts of the Group's financial
liabilities are a reasonable approximation to their fair value. Non-current
liabilities are recognised initially at fair value net of transaction costs
incurred, and subsequently at amortised cost.
Financial assets At fair Amortised cost Total
value through profit or loss
£m £m
£m
Equity investments 1,011.5 - 1,011.5
Debt investments 83.7 - 83.7
Limited and limited liability partnership interests 69.7 - 69.7
Trade and other receivables - 8.2 8.2
Receivables on sale of debt and equity investments 9.2 - 9.2
Deposits - 126.0 126.0
Cash and cash equivalents - 100.9 100.9
At 31 December 2023 1,174.1 235.1 1,409.2
Equity investments 1,120.8 - 1,120.8
Debt investments 38.1 - 38.1
Limited and limited liability partnership interests 99.6 - 99.6
Trade and other receivables - 8.8 8.8
Receivables on sale of debt and equity investments 48.2 - 48.2
Deposits - 152.8 152.8
Cash and cash equivalents - 88.7 88.7
At 31 December 2022 1,306.7 250.3 1,557.0
In light of the credit ratings applicable to the Group's cash and cash
equivalent and deposits, (see note 3 for further details), we estimate
expected credit losses on the Group's receivables to be under £0.1m and
therefore not disclosed further (2022: less than £0.1m), similarly we have
not presented an analysis of credit ratings of trade and other receivable and
receivables on sale of debt and equity investments.
All net fair value gains in the year are attributable to financial assets
designated at fair value through profit or loss on initial recognition (2022:
all net fair value gains in the year are attributable to financial assets
designated at fair value through profit or loss on initial recognition).
Interest income of £nil 2022: £nil) is attributable to financial assets
classified as fair value through profit and loss.
13. Portfolio: Equity and debt investments
Accounting policy:
Fair value hierarchy
The Group classifies financial assets using a fair value hierarchy that
reflects the significance of the inputs used in making the related fair value
measurements. The level in the fair value hierarchy, within which a financial
asset is classified, is determined on the basis of the lowest level input that
is significant to that asset's fair value measurement. The fair value
hierarchy has the following levels:
Level 1 - Quoted prices in active markets.
Level 2 - Inputs other than quoted prices that are observable, such as prices
from market transactions.
Level 3 - One or more inputs that are not based on observable market data.
Equity investments
Fair value is the underlying principle and is defined as "the price that would
be received to sell an asset in an orderly transaction between market
participants at the measurement date" (IPEV guidelines, December 2022).
Where the equity structure of a portfolio company involves different class
rights in a sale or liquidity event, the Group takes these different rights
into account when forming a view on the value of its investment.
Valuation techniques used
The fair value of unlisted securities is established using appropriate
valuation techniques in line with December 2022 IPEV guidelines. The selection
of appropriate valuation techniques is considered on an individual basis in
light of the nature, facts and circumstances of the investment and in the
expected view of market participants. The Group selects valuation techniques
which make maximum use of market-based inputs. Techniques are applied
consistently from period to period, except where a change would result in
better estimates of fair value. Several valuation techniques may be used so
that the results of one technique may be used as a cross check/corroboration
of an alternative technique.
Valuation techniques used include:
· Quoted bid price: The fair values of quoted investments are based
on bid prices in an active market at the reporting date.
· Funding transaction: The fair value of unquoted investments which
have recently raised equity financing may be calculated with reference to the
price of the recent investment. For investments for which the capital
structure involves different class rights in a sale or liquidity event, a full
scenario analysis via the use of the probability-weighted expected return
method (PWERM) is used to calculate the implied values of the existing share
classes.
· Other: Future market/commercial events: Scenario analysis is
used, which is a forward-looking method that considers one or more possible
future scenarios. These methods include simplified scenario analysis and
relative value scenario analysis, which tie to the fully diluted
("post-money") equity value. The PWERM method may be utilised for this
valuation technique for investments which have an equity structure which
involves different class rights in a sale or liquidity event.
· Other: Adjusted funding transaction price based on past
performance - upwards/downwards: The milestone approach involves making an
assessment as to whether there is an indication of change in fair value based
on a consideration of the relevant milestones, typically agreed at the time of
making the investment decision.
· Other: Discounted cash flows: deriving the value of a business by
calculating the present value of expected future cash flows.
· Other: Revenue multiple: the application of an appropriate
multiple to a performance measure (such as earnings or revenue) of the
investee company in order to derive a value for the business.
The fair value indicated by a recent transaction is used to calibrate inputs
used with valuation techniques including those noted above. At each
measurement date, an assessment is made as to whether changes or events
subsequent to the relevant transaction would imply a change in the
investment's fair value. The Price of a Recent Investment is not considered a
standalone valuation technique (see further considerations below). Where the
current fair value of an investment is unchanged from the price of a funding
transaction, the Group refers to the valuation basis as 'Funding transaction'.
Price of recent investment as an input in assessing fair value
The Group considers that fair value estimates which are based primarily on
observable market data will be of greater reliability than those based on
assumptions. Given the nature of the Group's investments in seed, start-up and
early-stage companies, where there are often no current and no short-term
future earnings or positive cash flows, it can be difficult to gauge the
probability and financial impact of the success or failure of development or
research activities and to make reliable cash flow forecasts. Consequently, in
many cases the most appropriate approach to fair value is a valuation
technique which is based on market data such as the price of a recent
investment, and market participant assumptions as to potential outcomes.
Calibrating such scenarios or milestones may result in a fair value equal to
price of recent investment for a limited period of time. Often qualitative
milestones provide a directional indication of the movement of fair value.
In applying a calibrated scenario or milestone-approach to determine fair
value, consideration is given to performance against milestones that were set
at the time of the original investment decision, as well as taking into
consideration the key market drivers of the investee company and the overall
economic environment. Factors that the Group considers include, inter alia,
technical measures such as product development phases and patent approvals,
financial measures such as cash burn rate and profitability expectations, and
market and sales measures such as testing phases, product launches and market
introduction.
Where the Group considers that there is an indication that the fair value has
changed, an estimation is made of the required amount of any adjustment from
the last price of recent investment.
Where a deterioration in value has occurred, the Group reduces the carrying
value of the investment to reflect the estimated decrease. If there is
evidence of value creation the Group may consider increasing the carrying
value of the investment; however, in the absence of additional financing
rounds or profit generation it can be difficult to determine the value that a
market participant may place on positive developments given the potential
outcome and the costs and risks to achieving that outcome and accordingly
caution is applied.
Debt investments
Debt investments are generally unquoted debt instruments which are convertible
to equity at a future point in time. Such instruments are considered to be
hybrid instruments containing a fixed rate debt host contract with an embedded
equity derivative. The Group designates the entire hybrid contract at fair
value through profit or loss on initial recognition and, accordingly, the
embedded derivative is not separated from the host contract and accounted for
separately. The price at which the debt investment was made may be a reliable
indicator of fair value at that date depending on facts and circumstances. Any
subsequent remeasurement will be recognised as changes in fair value in the
statement of comprehensive income.
Disclosure of unrealised and realised gains and losses
'Change in fair value of equity and debt investments' per the Group Income
Statement represents unrealised revaluation gains and losses on the Group's
portfolio of investment.
Gains on disposal of equity investments represents the difference between the
fair value of consideration received and the carrying value at the start of
the accounting period for the investment in question.
Changes in fair values of investments do not constitute revenue
Equity and Debt Investments within the Top 20 by holding value
The following table lists information on the debt and equity investments
within the most valuable 20 portfolio company investments, which constitute 18
of the top 20 portfolio investments (the other two being holdings in Limited
Partnerships), representing 70% of the total portfolio value (2022: 71%).
Detail on the performance of these companies is included in the Life Sciences,
Deeptech and Cleantech portfolio reviews.
The Group engages third-party valuation specialists to provide valuation
support where required; during the period we commissioned third-party
valuations on nine out of the top 20 holdings (2022: nine).
Company name Primary valuation basis Fair value of Group holding at 31 Dec 2023 Fair value of Group holding at 31 Dec 2022
£m £m
Oxford Nanopore Technologies plc Quoted bid price 173.6 205.5
Istesso Limited * DCF 113.8 95.6
Featurespace Limited * Revenue multiple 73.0 64.1
Hysata Pty Ltd Funding transaction < 12 months, PWERM 70.0 18.7
Oxa Autonomy Limited * Funding transaction > 12 months, PWERM 65.7 65.9
First Light Fusion Limited * Other: Adjusted financing price based on past performance - Upwards 64.9 114.5
Hinge Health, Inc. * Other: Adjusted financing price based on past performance - Downwards 34.0 53.6
Garrison Technology Limited Funding transaction < 12 months 31.6 27.7
Ultraleap Holdings Limited * Other: Adjusted financing price based on past performance - Downwards 31.0 37.9
Bramble Energy Limited Funding transaction > 12 months, PWERM 20.9 20.9
Crescendo Biologics Limited Funding transaction > 12 months, PWERM 19.6 18.7
Pulmocide Limited Other: Adjusted financing price based on past performance - Upwards 19.2 14.7
Ieso Digital Health Limited * Other: Adjusted financing price based on past performance - Downwards 18.9 21.8
Oxford Science Enterprises plc Other: Adjusted financing price based on past performance - Downwards 18.3 20.6
Artios Pharma Limited * Other: Adjusted financing price based on past performance - Downwards 17.4 18.3
Microbiotica Limited Funding transaction > 12 months, PWERM 16.1 16.1
Mission Therapeutics Limited * Other: Adjusted financing price based on past performance - Downwards 15.8 18.1
Centessa Pharmaceuticals plc Quoted bid price 15.7 6.5
Total 819.5 839.2
* Third-party valuation specialists used for 31 December 2023 valuation. In
these instances, the valuation basis is management's assessment of the primary
valuation input used by the third-party valuation specialist.
Level 1 Level 3
Equity investments in quoted spin-out companies Unquoted equity investments in spin-out companies Debt investments in unquoted spin-out companies Total
£m
£m £m £m
At 1 January 2023 228.7 892.1 38.1 1,158.9
Investments - 32.8 30.6 63.4
Transaction-based reclassifications - 7.8 (7.8) -
Other transfers between hierarchy levels 1.8 (1.8) - -
Disposals (1.6) (7.6) (0.3) (9.5)
Fees settled via equity - 0.1 - 0.1
Change in revenue share(1) - (6.8) - (6.8)
Change in fair value(2) (24.5) (103.7) 23.5 (104.7)
Change in FX(2) (0.6) (5.2) (0.4) (6.2)
At 31 December 2023 203.8 807.7 83.7 1,095.2
At 1 January 2022 662.7 729.1 22.8 1,414.6
Investments 7.3 61.4 20.2 88.9
Transaction-based reclassifications - 8.4 (8.4) -
Other transfers between hierarchy levels - - - -
Disposals (27.5) (14.2) - (41.7)
Fees settled via equity - 0.5 - 0.5
Change in revenue share(1) - - - -
Change in fair value(2) (416.0) 93.6 3.1 (319.3)
Change in FX(2) 2.2 13.3 0.4 15.9
At 31 December 2022 228.7 892.1 38.1 1,158.9
1. For description of revenue share arrangement see description in
note 19.
2. The total unrealised change in fair value and FX in respect of
Level 3 investments was a loss of £85.8m (2022: gain of £110.4m).
Unquoted equity and debt investment are measured in accordance with IPEV
guidelines with reference to the most appropriate information available at the
time of measurement. Where relevant, several valuation approaches are used in
arriving at an estimate of fair value for an individual asset.
For assets and liabilities that are recognised at fair value on a recurring
basis, the Group determines whether transfers have occurred between levels in
the hierarchy by re-assessing categorisation (based on the lowest level input
that is significant to the fair value measurement as a whole) at the end of
each reporting period. Transfers between levels are then made as if the
transfer took place on the first day of the period in question, except in the
cases of transfers between tiers based on an initial public offering ("IPO")
of an investment wherein the changes in value prior to the IPO are calculated
and reported in level 3, and those changes post are attributed to level 1.
Transfers between level 3 and level 1 occur when a previously unquoted
investment undertakes an initial public offering, resulting in its equity
becoming quoted on an active market. In the current period, transfers of this
nature amounted to £1.8m (2022: £nil). Transfers between level 1 and level 3
would occur when a quoted investment's market becomes inactive, or the
portfolio company elects to delist. There has been one instance in the current
year, totalling £0.0m (2022: no instances).
Transfers between level 3 debt and level 3 equity occur upon conversion of
convertible debt into equity. In the current year, transfers of this nature
amounted to £7.8m (2022: £8.4m).
The Group has considered the impact of ESG and climate change issues on its
portfolio, including performing a materiality assessment which suggested the
Group's portfolio has a relatively low level of climate change risk, and clear
areas of opportunity via the Group's Cleantech investments. For an overview of
the portfolio split by sector, please refer to the portfolio analysis by
sector above. We believe our current valuation approach, based largely on
quoted valuations, and funding transactions, reflects market participant
assessment of the ESG and climate risks and opportunities of our portfolio.
Valuation inputs and sensitivities
Unobservable inputs are typically portfolio company-specific and, based on a
materiality assessment, are not considered significant either at an individual
company level or in aggregate where relevant for common factors such as
discount rates.
The sensitivity analysis table below has been prepared in recognition of the
fact that some of the valuation methodologies applied by the Group in valuing
the portfolio investments involve subjectivity in their significant
unobservable inputs. The table illustrates the sensitivity of the valuations
to these inputs. The inputs of investments valued using techniques which
involve significant subjectivity have been flexed, as below.
Valuation Technique Fair value of investments Variable inputs Variable input sensitivity Positive impact Negative impact Fair value of investments
2023 % £m % of NAV £m % of NAV 2022
£m £m
Quoted 203.8 n/a n/a n/a n/a n/a n/a 228.7
Funding transaction 187.9 n/a +/-5 9.4 0.8 (9.4) (0.8) 289.8
<12 months
Funding transaction 162.7 n/a +/-5 8.1 0.7 (8.1) (0.7) 117.8
>12 months
Other: Future market/commercial events 25.0 Estimated impact of future event +/-10 2.5 0.2 (2.5) (0.2) 40.7
Execution risk discount applied to future event (where positive)
Scenario probabilities
Discount rates
Extent to which future event is indicative of facts and circumstances in
existence at the balance sheet date
Other: Adjusted financing price based on past performance - Upwards* 99.9 Company-specific milestone analysis resulting in a positive calibration +/-10 10.0 0.8 (10.0) (0.8) 149.8
adjustment versus the previous funding transaction price
Other: Adjusted financing price based on past performance - Downwards* 203.9 Company-specific milestone analysis resulting in a negative calibration +/-10 20.4 1.7 (20.4) (1.7) 156.5
adjustment versus the previous funding transaction price
Other: Revenue multiple* 85.4 Estimate of future recurring revenues +/-10 8.5 0.7 (8.5) (0.7) 77.9
Selection of comparable companies
Discount/premium to multiple
Other: DCF* 126.6 Discount rate +/-20 25.3 2.1 (25.3) (2.1) 97.7
Clinical trial and drug approval success rates
Estimate of likelihood, value and structure of a potential pharmaceutical
partnership
Estimate of addressable market
Market share and royalty rates
Probability estimation of liquidity event
Estimate of forward exchange rates
Total 1,095.2 84.3 7.1 (84.3) (7.1) 1,158.9
* Due to the large number of inputs used in the valuation of these assets,
unobservable inputs are below a size threshold that would warrant disclosure
under IFRS 13, paragraph 93(d). Due to the large number of inputs, any range
of reasonably possible alternative assumptions does not significantly impact
the fair value and hence no valuation sensitivity is required under IFRS 13
paragraph 93(h)(ii).
Within the 'Other: DCF' category on above is Istesso Limited, in which we
value the equity of IP Group's holding at £86.7m as at 31 December 2023
(2022: £80.8m). The valuation of the equity in this company is based on a DCF
model in which the key inputs include the discount rate, probability of
clinical trial success, market share and royalty rates and the selection of
relevant comparable deal sizes. The DCF model assesses the value of the future
cash flows which would arise from the successful development of the company's
lead asset Leramistat, which is in a PhIIb trial, within Rheumatoid Arthritis.
Our estimated range for the value of the Group's equity investment as at 31
December 2023 is £80m to £120m (2022: £65m to £105m). A valuation range
was not calculated in respect of the Group's debt investment in Istesso
Limited, which totals £27.0m (2022: £14.8m)
Within the 'Adjusted valuation' category on above is First Light Fusion
Limited, whose equity is valued at £64.9m as at 31 December 2023 (2022:
£114.5m). The valuation of this company is based on the last financing round
price, calibrated upwards to reflect (inter alia) its achievement of fusion
subsequent to the fundraise, and an assessment of recent comparable company
financing transactions. Our estimated range for the value of the Group's
equity investment in First Light Fusion based on this model as at 31 December
2023 is £48m to £99m (2022: £93m to £186m).
In addition to Istesso Limited and First Light Fusion Limited, nine other
assets were reviewed by external valuers, using a broad range of relevant
inputs. The aggregate of the range of valuations they concluded upon for these
nine assets was £252.2m-£317.5m, and we have selected points within these
ranges which in aggregate total £267.3m (2022: £234.7m-286.5m, £246.7m).
Change in fair value in the year (including fx) 2023 2022
£m £m
Fair value gains 97.4 183.3
Fair value losses (208.3) (486.7)
(110.9) (303.4)
The Company's interests in subsidiary undertakings are listed in note 10 to
the Company's financial statements.
Currency risk
Exposure to currency risk through asset allocation, which is calculated by
reference to the currency in which the asset or liability is quoted, is shown
below. A +/-1% sensitivity has been included to demonstrate the effect of
fluctuations in foreign exchange rates. 1% is (£considered to be appropriate
due to the stable currencies in which we hold cash.
At 31 December 2023
Investments Sensitivity
£m
+/- 1%
£m
US dollar 85.5 0.8
Australian dollar 99.9 1.0
Euro 6.7 0.1
Swedish Krona 1.6 -
Total 193.7 1.9
At 31 December 2022
Investments Sensitivity
£m
+/- 1%
£m
US dollar 102.2 1.0
Australian dollar 49.6 0.5
Euro 3.0 -
Swedish Krona 1.5 -
Total 156.3 1.5
14. Portfolio: Limited and limited liability partnership interests
Accounting Policy:
Valuations in respect of Limited and Limited Liability Funds are based on IP
Group's share of the Net Asset Value of the fund as per the audited financial
statements prepared by the fund manager. The key judgements in the preparation
of these accounts relate to the valuation of unquoted investments.
Investments in these Limited and Limited Liability Partnerships are recognised
at fair value through profit and loss in accordance with IFRS 9.
'Changes in fair value of Limited Partnership investments' per the Group
Income Statement represents revaluation gains and losses on the Group's
investment in Limited Partnership funds.
Fund interests are valued on a net asset basis, estimated based on the
managers' NAVs. Manager's NAVs apply valuation techniques consistent with IFRS
and are subject to audit. Where audited accounts are received in arrears of
the publication of the Group's results hence these are marked as unaudited in
the table below, however a retrospective review of audited accounts versus
earlier unaudited results is carried out. Managers' NAVs are usually published
quarterly, two to four months after the quarter end. The below table analyses
the fund valuations with reference to manager NAV dates used at 31 December.
Limited & Limited Liability Partnerships Functional currency Status 2023 2022
£m
£m
IPG Cayman Fund L.P. (Longview Innovation) USD Unaudited & Adjusted downwards 46.0 80.0
UCL Technology Fund L.P. GBP Unaudited 20.7 16.9
Technikos LLP GBP Unaudited & Adjusted downwards 3.0 2.7
Total 69.7 99.6
We reviewed the underlying valuation methodologies adopted by our Fund
managers for all Fund investments of material value.
Following our review of valuation methodologies we were satisfied that the
techniques utilised were appropriate, other than in respect of IPG Cayman Fund
L.P. where a downwards adjustment was made to the fund manager's NAV estimate.
Limited & Limited Liability Partnerships movements in year £m
At 1 January 2023 99.6
Investments during the year 9.8
Distribution from Limited Partnership funds (0.9)
Change in fair value during the year (36.5)
Currency revaluation (2.3)
At 31 December 2023 69.7
At 1 January 2022 92.9
Investments during the year 4.6
Distribution from Limited Partnership funds -
Change in fair value during the year 8.5
Currency revaluation (6.4)
At 31 December 2022 99.6
The Group considers interests in limited and limited liability partnerships to
be level 3 in the fair value hierarchy throughout the current and previous
financial years.
The valuation of the Group's interests in limited and limited liability
partnerships is a significant accounting estimate, as management has applied
judgment in adjusting the NAV estimates provided by the fund manager. Such
adjustments were based on an assessment of the valuations of specific equity
and debt investments in portfolio companies held within the fund in question.
In making these assessments, the Group has applied a valuation methodology
consistent with that set out in Note 13. Unobservable inputs are were
portfolio company-specific and, based on a materiality assessment, are not
considered individually significant either at an individual company level or
in aggregate where relevant for common factors such as discount rates.
If no adjustment had been made to the NAV estimates provided by the fund
manager, the carrying value of Limited Liability investments would be higher
by £9.8m.
15. (Loss)/gain on disposal of equity investments
2023 2022
£m £m
Proceeds from sale of equity and debt investments 37.7 28.1
Movement in amounts receivable on sale of debt and equity investments (39.0) 5.8
Carrying value of investments (9.5) (41.7)
(Loss)/profit on disposal (10.8) (7.8)
(Loss)/profit on disposal of investments is calculated as disposal proceeds
plus deferred and contingent consideration receivable in respect of the sale,
less the carrying value of the investment at the point of disposal.
The subsequent receipt of deferred and contingent consideration amounts is
reflected in the above table as a positive amount of disposal proceeds and a
negative movement in amounts receivable on sale of debt and equity
investments, resulting in no overall movement in profit on disposal.
16. Trade and other receivables
Current assets 2023 2022
£m £m
Trade debtors 0.6 2.1
Prepayments 0.8 0.8
Right of use asset(1) - 0.7
Interest receivable 2.9 -
Other receivables 6.8 5.2
Trade and other receivables 8.2 8.8
(1) Now presented under long term assets on the Group Balance Sheet.
The directors consider the carrying amount of trade and other receivables at
amortised cost to approximate their fair value. All receivables are interest
free, repayable on demand and unsecured.
17. Receivable on sale of debt and equity investments
Accounting Policy:
Consideration in respect of the sale of debt and equity investments may
include elements of deferred consideration where payment is received at a
pre-agreed future date, and/or elements of contingent consideration where
payment is received based on, for example, achievement of specific drug
development milestones. In such instances, these amounts are designated at
fair value through profit and loss on initial recognition. Any subsequent
remeasurement will be recognised as changes in fair value in the statement of
comprehensive income.
2023 2022
£m £m
Deferred and contingent consideration (non-current) 7.8 6.9
Deferred and contingent consideration (current) 1.4 41.3
Total deferred and contingent consideration 9.2 48.2
The following table summarises the primary valuation basis used to value the
deferred and contingent consideration:
Investment Primary Valuation Basis 2023 2022
£m £m
WaveOptics Limited Discounted sale amount - 28.8
Enterprise Therapeutics Holdings Limited Probability-weighted DFC model reflecting potential milestone payments 7.7 12.5
Athenex, Inc. Probability-weighted DFC model reflecting potential milestone payments - 5.6
Reinfer Limited Discounted sale amount - 1.1
Perpetuum Limited Discounted sale amount - 0.2
Zihipp Limited Probability-weighted DFC model reflecting potential milestone payments 1.5 -
Total 9.2 48.2
During 2023, consideration of £30.8m was received in 2023 relating to
WaveOptics Limited, £1.5m was received relating to Reinfer and £0.1m was
received relating to Perpetuum. Athenex, Inc. entered liquidation in 2023 and
the fair value estimate of contingent consideration (triggered by future
milestones) was reduced to £nil (2022: £5.6m).
18. Trade and other payables
Current liabilities 2023 2022
£m £m
Trade payables 0.5 1.3
Social security expenses 0.6 0.6
Bonus accrual 3.0 2.8
Lease liability 1.4 0.9
Payable to Imperial College and other third parties under revenue share 6.9 7.1
obligations (see note 20)
Other accruals and deferred income 4.7 4.2
Trade and other payables 17.1 16.9
19. Borrowings and Loans from Limited Partners of consolidated funds
Current liabilities 2023 2022
£m £m
Borrowings 6.3 6.3
Total 6.3 6.3
Non-current liabilities 2023 2022
£m £m
Loans drawn down from the Limited Partners of consolidated funds 19.8 19.5
Borrowings 128.9 75.1
Total 148.7 94.6
Loans drawn down from the Limited Partners of consolidated funds
Accounting Policy:
The Group consolidates the assets of a co-investment fund, IP Venture Fund II
LP, which it manages. Loans from third parties of consolidated funds represent
third-party LP loans into this partnership. Under the terms of the Limited
Partnership Agreement, these loans are repayable only upon these funds
generating sufficient realisations to repay the Limited Partners. Management
anticipates that the funds will generate the required returns and consequently
recognises the full associated liabilities.
The classification of these loans as non-current reflects the forecast timing
of returns and subsequent repayment of loans, which is not anticipated to
occur within one year.
As at 31 December, loans from Limited Partners of consolidated funds comprised
loans into IP Venture Fund II LP £19.8m (2022: £19.5m).
Borrowings
Accounting Policy:
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently carried at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the consolidated statement of comprehensive income over
the period of the borrowing using the effective interest rate method. Costs
incurred in the course of issuing additional debt are recognised on the
balance sheet and charged to the income statement on a straight line basis
over the term of the borrowings.
In 2023, the Group drew a second £60m tranche of the £120m private placing
it agreed with investors including Phoenix Group in 2022. The terms of the
facilities are summarised below:
Description Initial amount Outstanding amount Date drawn Interest rate Repayment terms Repayment commencement date
EIB Facility £50.0m £15.6m Feb 2017 Fixed 3.026% 8 years Jul 2018
IP Group Series A Notes £20.0m £20.0m Dec 2022 Fixed 5.230% 5 years Dec 2027
IP Group Series B Notes £20.0m £20.0m Dec 2022 Fixed 5.210% 6 years Dec 2028
IP Group Series C Notes £20.0m £20.0m Dec 2022 Fixed 5.300% 7 years Dec 2029
IP Group Series D Notes £20.0m £20.0m Jun 2023 Fixed 5.230% 5 years Dec 2027
IP Group Series E Notes £20.0m £20.0m Jun 2023 Fixed 5.210% 6 years Dec 2028
IP Group Series F Notes £20.0m £20.0m Jun 2023 Fixed 7 years Dec 2029
5.30%
Total £170.0m £135.6m
Loans totalling £135.6m (2022: £81.9m) are subject to fixed interest rates
and are recognised at amortised cost. The fair value of these loans as at 31
December 2023 is £125.3m (2022: £76.9m).
In December 2022, the Group drew down the first Tranche of £60m of a £120m
loan Note Purchase Agreement ("NPA") and a further £60m in June 2023. The NPA
contains the following covenants:
• Total equity must be at least £500m as at the Group's 30 June and
31 December reporting dates
• Gross debt less restricted cash must not exceed 25% of total
equity as at the Group's 30 June and 31 December reporting dates
• The Group must maintain cash and cash equivalents of not less than
£25m at any time
Breach of any of the above covenants constitutes default under the NPA.
The NPA also includes the concept of a 'Cash Trap', which is triggered based
on conditions listed below. In the event of the Cash Trap being triggered, the
Group is not permitted to pay or declare a dividend or purchase any of its
shares. In addition, investments are restricted to £2.5m per calendar quarter
other than those legally committed to. The Group is also required to place the
net proceeds of all realisations (over a threshold of £1m) into a blocked
bank account. Entering a Cash Trap does not constitute a default under the
NPA.
A Cash Trap period is entered if any of the following conditions are breached.
• Total equity must be at least £750m as at the Group's 30 June and
31 December reporting dates
• Gross debt less restricted cash must not exceed 20% of total
equity as at the Group's 30 June and 31 December reporting dates
• The Group must maintain cash and cash equivalents of not less than
£50m at any time.
A cash trap period can be remedied by:
• Transferring sufficient cash into the restricted cash account so
that gross debt less restricted cash is less than 20% of total equity
• If because of low equity of high leverage, once these are restored
at a subsequent 30 June or 31 December measurement date
• If because of low liquidity, once two month-ends have passed with
liquidity > £50m
The EIB loan contains a debt covenant requiring that the ratio of the total
fair value of IP Group investments plus cash and qualifying liquidity to debt
should at no time fall below 6:1. The Group must maintain that the amount of
unencumbered funds freely available to the Group set with reference to the
outstanding EIB facility which was £15.6m at December 2023 (2022: £21.9m).
The loan also stipulates that on any date, the aggregate of all amounts
scheduled for payment to the EIB in the following six months should be kept in
a separate bank account, which totalled £3.3m on 31 December 2023 (2022:
£3.4m) The Group is required to maintain a minimum cash balance of £9.4m
(2022: £13.1m).
The Group closely monitors that the covenants are adhered to on an ongoing
basis and has complied with these covenants throughout the year. The Group
will continue to monitor the covenants' position against forecasts and budgets
to ensure that it operates within the prescribed limits.
The 2023 NPA includes fixed and floating charges over the Company's assets,
details of which are available on Companies House.
The maturity profile of the borrowings including undiscounted cash flows and
fixed interest is as follows:
2023 2022
£m £m
Due within 6 months 6.4 4.8
Due 6 to 12 months 6.4 4.8
Due 1 to 5 years 112.4 48.4
Due after 5 years 42.1 43.1
Total(1) 167.3 101.1
The maturity profile of the borrowings was as follows:
2023 2022
£m £m
Due within 6 months 3.1 3.1
Due 6 to 12 months 3.1 3.2
Due 1 to 5 years 89.4 35.6
Due after 5 years 40.0 40.0
Total(1) 135.6 81.9
1. These are gross amounts repayable and exclude amortised costs of
£0.4m (2022: £0.5) incurred on obtaining the Phoenix loans, these are
amortised on a straight line basis over the life of the borrowings.
A reconciliation in the movement in borrowings is as follows:
2023 2022
£m £m
At 1 January 81.4 51.8
Amortisation of costs - -
Capitalised loan costs - (0.6)
Repayment of debt (6.2) (29.8)
New borrowings 60.0 60.0
At 31 December 135.2 81.4
There were no non-cash movements in debt.
20. Revenue share liability
Accounting Policy:
The Group provides for liabilities in respect of revenue sharing obligations
arising under the former Technology Pipeline Agreement with Imperial College
London. Under this agreement, the Group received founder equity in spin out
companies from Imperial College, and following a sale of such founder equity,
a pre-specified "revenue share" (typically 50%) is payable to Imperial College
and other third parties. The liability for this revenue share, based on fair
value, is recognised as part of the movement in fair value through profit or
loss (see note 13 for further details).
2023 2022
£m £m
Current liabilities: revenue share liability (note 18) 6.9 7.1
Non-current liabilities: revenue share liability (note 13) 6.4 13.0
Revenue share liability 13.3 20.1
Prior to 2018, the Group operated the Technology Transfer Office of Imperial
College, under a contract referred to as the Technology Pipeline Agreement
("TPA"). Under the terms of this TPA, the Group owns licences, patents and
equity in spin-out companies generated through Intellectual Property
commercialised from Imperial College but is subject to various revenue-sharing
arrangements whereby income generated from this Intellectual Property is
shared with Imperial College (and other third parties where they have provided
funding to research which is subsequently commercialised). These are
categorised into short-term and long-term liabilities as follows:
Short-term liabilities: Revenue share arrangement
These represent a share of invoiced revenue in respect of licences and patents
governed by the TPA, and a share of proceeds from the disposal of equity where
a disposal of equity which is subject to revenue share (see further details
below) has taken place. The maturity date on such liabilities is typically
less than six months.
Long-term liabilities: Revenue share arrangement
Under the Group's former Technology Pipeline Agreement with Imperial College
London, the Group received founder equity in spin out companies from Imperial
College. Following any sale of such founder equity stakes, a pre-specified
revenue share (typically 50%) is payable to Imperial College and other third
parties. As at 31 December 2023, £6.4m (2022: £13.0m) of our equity
investments were payable on their disposal to Imperial College and other third
parties under these arrangements (i.e. 50% of a gross investment amount of
approximately £13m) (2022: £26m). A corresponding non-current liability is
recognised in respect of these revenue sharing obligations based on the fair
value of the related assets. There is no fixed maturity on the liability as it
becomes payable following the sale of the related portfolio equity investment.
Movements in long term revenue share are as follows:
2023 2022
£m £m
At 1 January 13.0 13.1
Movements in value of equity investments where revenue share is payable (0.3) (0.1)
Disposals in year resulting in transfer to short term revenue share (6.3) -
At 31 December 6.4 13.0
21. Share capital
Accounting policy:
Financial instruments issued by the Group are treated as equity if the holders
have only a residual interest in the Group's assets after deducting all
liabilities. The objective of the Group is to manage capital so as to provide
shareholders with above-average returns through capital growth over the medium
to long-term. The Group considers its capital to comprise its share capital,
share premium, merger reserve and retained earnings.
2023 2022
Issued and fully paid: Number £m Number £m
Ordinary shares of 2p each
At 1 January 1,063,188,005 21.3 1,063,033,287 21.3
Issued in respect of scrip dividend - - 154,718 -
Share capital at 31 December 1,063,188,005 21.3 1,063,188,005 21.3
Existing treasury shares at 1 January (28,110,373) (0.6) (22,279,127) (0.4)
Purchase of treasury shares (220,302) - (7,429,494) (0.1)
Transfer of shares in respect of scrip dividend - - 330,851 -
Shares transferred out of treasury for SAYE 285,335 - 497,249 -
Settlement of employee share-based payments 1,551,820 - 770,148 -
Outstanding at 31 December 1,036,694,485 20.7 1,035,077,632 20.8
The Company has one class of ordinary shares with a par value of 2p ("Ordinary
Shares") which carry equal voting rights, equal rights to income and
distributions of assets on liquidation, or otherwise, and no right to fixed
income.
During 2023, the Company purchased 220,302 ordinary shares (2022: 7,429,494
ordinary shares), with an aggregate value of £0.2k (2022 - £8.0m), and they
are held in treasury. Retained profits have been reduced by £0.2k (2022:
£7.9m), being the net consideration paid for these shares, including the
expenses directly relating to the treasury share purchase.
22. Share-based payments
In 2023, the Group continued to incentivise employees through its LTIP and
AIS. The main terms of both are described in more detail in the Directors'
Remuneration Report.
Deferred bonus share plan ("DBSP")
Awards made to employees under the Group's AIS above a certain threshold
include 50% deferred into IP Group equity through the grant of nil-cost
options under the Group's DBSP. The number of nil-cost options granted under
the Group's DBSP is determined by the share price at the vesting date. The
DBSP options are subject to further time-based vesting over two years
(typically 50% after year one and 50% after year two).
An analysis of movements in the DBSP options outstanding is as follows:
Number of Weighted-average exercise price Number of Weighted-average
options
options
exercise price
2023
2023 2022 2022
At 1 January 2,556,682 - 1,311,615 -
AIS deferral shares award during the year 1,120,292 - 2,066,174 -
Exercised during the year (1,523,595) - (821,107) -
At 31 December 2,153,379 - 2,556,682 -
Exercisable at 31 December - - 2,881 -
1,551,820 shares were transferred from treasury in respect of DBSP scheme
during the year, comprising 1,523,595 DBSP options exercised on 14(th) April
2023 and 28,25 relating to dividends accrued on those options.
The options outstanding at 31 December 2023 had an exercise price of £nil
(2022: £nil) and a weighted-average remaining contractual life of 0.5 years
(2022: 0.6 years).
The weighted average share price at the date of exercise for share options
exercised in 2023 was 61.0p (2022: 84.4p). The aggregate gain made by
directors on the exercise of options in the year (all of which related to the
DBSP) was £0.2m.
As the 2023 AIS financial performance targets were met and as the number of
DBSP options to be granted in order to defer such elements of the AIS payments
as are required under our remuneration policy are based on a percentage of
employees' salary, the share-based payments line includes the associated
share-based payments expense incurred in 2023.
IP Group Restricted Share Plan ("RSP")
As set out in the Remuneration Policy approved by shareholders in 2022, a
Restricted Share Plan was introduced in 2022 to replace the previous LTIP
structure. Vesting of these awards will take place over a three-year period
commencing on 1 April 2023. Any RSP awards that vest will be subject to a
further two-year holding period. Vesting may be subject to a financial
underpin based on NAV growth over the vesting period. For 2022 awards, the
financial underpin has been set such that NAV per share on the vesting date
must be no lower than 100% of NAV per share on the award date, after making
appropriate adjustments for dividends, buy-backs and any other distributions.
Further information on the Group's RSP is set out in the Directors'
Remuneration Report.
The 2023 RSP awards were made on 13 April 2023. The awards will ordinarily
vest on 31 March 2026, to the extent that the performance conditions have been
met.
The movement in the number of shares conditionally awarded under the RSP is
set out below:
Number of Weighted-average exercise price Number of Weighted-average
options
options
exercise price
2023
2023 2022 2022
At 1 January 3,458,509 - - -
Lapsed during the year - - - -
Forfeited during the year (16,367) - (74,235) -
Notionally awarded during the year 6,796,721 - 3,532,744 -
At 31 December 10,238,863 - 3,458,509 -
Exercisable at 31 December - - - -
The options outstanding at 31 December 2023 had an exercise price in the range
of £nil (2022: £nil) and a weighted-average remaining contractual life of
3.9 years (2022: 4.2 years).
The fair value of the RSP shares notionally awarded in 2023 was calculated
using the Finnerty pricing model with the following key assumptions:
2023 2022
IP Group share price as of valuation date £0.602 £0.558
Exercise price £nil £nil
Indicated Discount for Lack of Marketability 15% 15%
Adjusted probability assigned for performance conditions 20% 20%
Fair value at grant date £0.24 £0.21
Pre-2022 IP Group Long Term Incentive Plan ("LTIP")
Awards under the LTIP take the form of conditional awards of ordinary shares
of 2p each in the Group which vest over the prescribed performance period to
the extent that performance conditions have been met. The Remuneration
Committee imposes objective conditions on the vesting of awards and these take
into consideration the guidance of the Group's institutional investors from
time to time. General information on the Group's LTIP is set out in the
Directors' Remuneration Report.
The 2021 LTIP awards were made on 6 May 2021. The awards will ordinarily vest
on 31 March 2024, to the extent that the performance conditions have been met.
The awards are based on the performance of the Group's NAV and Total
Shareholder Return ("TSR"). Both performance measures are combined into a
matrix format to most appropriately measure performance relative to the
business, as shown in the Directors' Remuneration Report within the Group's
2021 Annual Report and Accounts. The total award is subject to an underpin
based on the relative performance of the Group's TSR to that of the FTSE 250
index, which can reduce the awards by up to 50%. The 2021 LTIP matrix is
designed such that up to 100% of the award (prior to the application of the
underpin) will vest in full in the event of both NAV increasing by 15% per
year on a cumulative basis, from 1 January 2021 to 31 December 2023, and TSR
increasing by 15% per year on a cumulative basis from the date of award to 31
March 2024, using an industry-standard average price period at the beginning
and end of the performance period. Further, the matrix is designed such that
30% of the award shall vest (again prior to the application of the underpin)
if the cumulative increase is 8% per annum for both measures over their
respective performance periods ("threshold performance"). A straight-line
sliding scale is applied for performance between the distinct points on the
matrix of vesting targets.
The 2020 awards partially met the threshold performance target and 1,066,196
vested, 6,759,628 lapsed on 31 March 2023. NAV growth to 31 December 2022 was
above the minimum threshold and below the maximum threshold. The one-month
average share price at 31 March 2023 was below the minimum TSR target. As a
result 13.67% of the 2020 LTIP awards vested on 31 March 2023.Vested shares
are subject to a further two-year holding period until 31/03/2025 and will be
issued to participants only at the end of this period.
The table below sets out the performance measures relating to the 2020 LTIP
awards and the actual performance achieved.
Performance condition Target Performance Actual Performance
NAV (at 31 Dec 2022) 8%: £1.37bn £1.38bn
15%: £1.66bn (+8.1% p.a.)
Annual TSR (share price) 8%: 69.9p 57.6p
15%: 82.3p (+0.2% p.a. growth)
Comparative TSR FTSE 250 IP Group 0.2%
-3.7%
The movement in the number of shares conditionally awarded under the LTIP is
set out below:
Number of Weighted-average exercise price Number of Weighted-average
options
options
exercise price
2023
2023 2022 2022
At 1 January 14,490,039 - 17,113,631 -
Lapsed during the year (6,759,628) - (2,534,571) -
Forfeited during the year (1,918) - (89,021) -
Notionally awarded during the year - - - -
At 31 December 7,728,493 - 14,490,039 -
Exercisable at 31 December 4,596,014 - 3,529,818 -
The options outstanding at 31 December 2023 had an exercise price in the range
of £nil (2022: £nil) and a weighted-average remaining contractual life of
0.8 years (2022: 2.0 years).
The fair value of LTIP shares awarded in 2021 for which a charge has been
recognised in the year was calculated using Monte Carlo pricing models with
the following key assumptions:
2021
Share price at date of award £1.254
Exercise price £nil
Fair value at grant date £0.35
Expected volatility (median of historical 50-day moving average) 39%
Expected life (years) 3.0
Expected dividend yield 0%
Risk-free interest rate 0.3%
The fair value charge recognised in the statement of comprehensive income
during the year in respect of all share-based payments, including the DBSP,
RSP and LTIP was £2.6m (2022: £2.9m).
23. Long-term incentive carry scheme - Carried interest plan liability
Accounting Policy:
The Group operates a number of Long Term Incentive Carry Schemes ("LTICS") for
eligible employees which may result in payments to scheme participants
relating to returns from investments.
Under the Group's LTICS arrangements, a profit-sharing mechanism exists
whereby if a specific vintage delivers returns in excess of the base cost of
investments together with an agreed hurdle rate, scheme participants receive a
share of excess returns. Of the Group's total equity and debt investments,
69.0% are included in LTICS arrangements (2022: 66.6%).
The calculation of the liability in respect of the Group's LTICS is derived
from the fair value estimates for the relevant portfolio investments and does
not involve significant additional judgement (although the fair value of the
portfolio is a significant accounting estimate). The actual amounts of carried
interest paid will depend on the cash realisations of individual vintages, and
valuations may change significantly in the next financial year. Movements in
the liability are recognised in the consolidated statement of comprehensive
income.
2023 2022
£m £m
At 1 January 44.1 33.1
Charge for the year (4.7) 12.0
Payments made in the year (1.3) (1.0)
Foreign exchange rate movement (0.1) -
At 31 December 38.0 44.1
24. Related party transactions
The Group has various related parties arising from its key management,
subsidiaries and equity stakes in portfolio companies.
A) Key management transactions
(i) Key management personnel transactions
The following key management held shares in the following spin-out companies
as at 31 December 2023:
Director/ PDMR Company name Number Number of shares acquired/ (disposed of) in the period Number %
of shares held at of shares held at
1 January 31 December 2023
2023
Greg Smith Alesi Surgical Limited 2 - 2 <0.1%
Crysalin Limited(1) 149 - 149 <0.1%
Emdot Limited(1) 4 - 4 0.23%
Istesso Limited 313,425 - 313,425 0.37%
Itaconix plc 4,500 - 4,500 <0.1%
Mirriad Advertising plc 16,667 - 16,667 <0.1%
Oxa Autonomy Limited(2) 8 - 8 <0.1%
Oxford Nanopore Technologies plc 27,008 - 27,008 <0.1%
Rio AI Limited 144,246 - 144,246 <0.1%
Surrey Nanosystems Limited 88 - 88 <0.1%
Tissue Regenix Group plc(3) 5,000 - 5,000 <0.1%
Xeros Technology plc 13 - 13 <0.1%
David Baynes Alesi Surgical Limited 4 - 4 <0.1%
Arkivum Limited 377 - 377 <0.1%
Creavo Medical Technologies Limited(1) 46 - 46 <0.1%
Mirriad Advertising plc 16,667 - 16,667 <0.1%
Oxford Nanopore Technologies plc 2,784 - 2,784 <0.1%
Ultraleap Holdings Limited 2,600 - 2,600 <0.1%
Zeetta Networks Limited 424 - 424 0.11%
Mark Reilly Actual Experience plc(1) 28,000 - 28,000 <0.1%
AudioScenic Limited 53 - 53 <0.1%
Bramble Energy Limited 16 - 16 <0.1%
Diffblue Limited 8,038 - 8,038 <0.1%
Itaconix plc 377,358 - 377,358 <0.1%
Mirriad Advertising plc 66,666 - 66,666 <0.1%
Mixergy Limited - 126 126 <0.1%
Oxa Autonomy Ltd(2) 8 - 8 <0.1%
Ultraleap Holdings Limited 1,700 - 1,700 <0.1%
Sam Williams Accelercomm Limited 127 - 127 <0.1%
Alesi Surgical Limited 1 - 1 <0.1%
Centessa Pharmaceuticals plc 3,247 - 3,247 <0.1%
Creavo Medical Technologies Limited(1) 23 - 23 <0.1%
Genomics plc 333 - 333 <0.1%
Ibex Innovations Limited 1,701 - 1,701 <0.1%
Istesso Limited 7,048,368 - 7,048,368 8.29%
Microbiotica Limited 7,000 - 7,000 <0.1%
Mirriad Advertising plc 3,333 - 3,333 <0.1%
Oxa Autonomy Ltd(2) 3 - 3 <0.1%
Oxehealth Limited 33 32 65 <0.1%
Oxford Nanopore Technologies plc 25,609 - 25,609 <0.1%
Topivert Limited(1) 1,000 - 1,000 <0.1%
Ultraleap Holdings Limited 558 - 558 <0.1%
1. Company being closed down
2. Previously called Oxbotica Limited
3. Opening position restated to reflect 100:1 share consolidation
during the period
Policy for Executive Director holdings in Portfolio Companies
The policy for Executive Director shareholdings in portfolio companies
specifies:
• New direct investments in portfolio companies by executive
directors are prohibited, with the exception of the take-up of pre-emption
rights which relate to existing portfolio company shareholdings. Both Mr Smith
and Mr Baynes are covered by
this policy.
• Mr Smith and Mr Baynes have voluntarily submitted to an additional
binding condition such that any net proceeds received
as a result of realisations from direct holdings in portfolio companies that
exceed £250,000 will be used to purchase shares in
IP Group, until such time as they meet the Minimum Shareholding Requirement
set for their role (currently 350% of annual salary for Mr Smith, 250% for Mr
Baynes).
(ii) Key management personnel compensation
Key management personnel compensation comprised the following:
2023 2022
£000 £000
Short-term employee benefits(1) 3,091 3,918
Post-employment benefits(2) 108 99
Other long-term benefits - -
Termination benefits - -
Share-based payments(3) 1,161 1,374
Total 4,360 5,391
1. Represents key management personnel's base salaries, benefits
including cash in lieu of pension where relevant, and the cash-settled element
of the Annual Incentive Scheme.
2. Represents employer contributions to defined contribution pension
and life assurance plans.
3. Represents the accounting charge for share-based payments,
reflecting LTIP and DBSP options currently in issue as part of these schemes.
See note 23 for a detailed description of these schemes.
B) Portfolio companies
(i) Services
The Group earns fees from the provision of business support services and
corporate finance advisory services to portfolio companies in which the Group
has an equity stake. Through the lack of control over portfolio companies
these fees are considered arm's length transactions. The following amounts
have been included in respect of these fees:
Statement of comprehensive income 2023 2022
£m £m
Revenue from services - 0.2
Statement of financial position 2023 2022
£m £m
Trade receivables 0.1 -
(ii) Investments
The Group makes investments in the equity and debt of unquoted and quoted
investments where it does not have control but may be able to participate in
the financial and operating policies of that company. It is presumed that it
is possible to exert significant influence when the equity holding is greater
than 20%. The Group has taken the Venture Capital Organisation exception as
permitted by IAS 28 and not recognised these companies as associates, but they
are related parties. The total amounts included for investments where the
Group has significant influence but not control are as follows:
Statement of comprehensive income 2023 2022
£m £m
Net portfolio gains 31.7 75.0
Statement of financial position 2023 2022
£m £m
Equity and debt investments 566.4 651.6
C) Subsidiary companies
Subsidiary companies that are not 100% owned either directly or indirectly by
the parent company have intercompany balances (which are eliminated at a
consolidated level) with other Group companies which are disclosed as follows:
2023 2022
£m £m
Intercompany balances with other Group companies 2.1 2.1
These intercompany balances represent funding loans provided by Group
companies that are interest free, repayable on demand and unsecured.
25. Capital management
The Group's key objective when managing capital is to safeguard the Group's
ability to continue as a going concern so that it can continue to provide
returns for shareholders and employees for other stakeholders. The Group sets
the amount of capital in proportion to risk. The Group manages the capital
structure, and makes adjustments to it, in light of changes in economic
conditions and the risk characteristics of its underlying assets. In order to
maintain or adjust the capital structure, the Group may adjust the amount of
issued share capital, issue or repay debt and dispose of interests in
portfolio companies.
During 2023, the Group's strategy, which was unchanged from 2022, was to
maintain an appropriate level of cash and short-term deposit balances in line
with the Group's capital allocation plans, whilst having sufficient cash
reserves to meet working capital requirements in the foreseeable future.
The Group has external borrowings with associated covenants that are described
in note 19. These include covenants around the Group's minimum equity and
maximum debt/equity ratio. Consideration is given to the level of headroom
against these covenants as part of the Group's capital allocation process
where planning corporate actions such as dividends and share buy-backs which
have an impact on the headroom level.
26. Capital commitments
Commitments to Limited Partnerships
Pursuant to the terms of their Limited Partnership agreements, the Group has
committed to invest the following amounts into Limited Partnerships as at 31
December 2023:
Year ended 31 December 2023 Year of commencement of commitment Commitment £m Invested to date Remaining commitment £m
£m
IP Venture Fund II LP 2013 10.0 9.9 0.1
UCL Technology Fund LP 2016 24.8 23.2 1.6
Total at 31 December 2023 34.8 33.1 1.7
Year ended 31 December 2022 Year of commencement of commitment Commitment £m Invested to date Remaining commitment £m
£m
IP Venture Fund II LP 2013 10.0 9.8 0.2
UCL Technology Fund LP 2016 24.8 22.4 2.4
IP Cayman LP 2021 8.3 8.3 -
Total at 31 December 2022 43.1 40.5 2.6
In December 2023 the Group signed a Subscription Share Agreement to invest
US$15m in Hysata Pty Ltd. In May 2023, the Group signed a Convertible Loan
Agreement whose terms included a commitment to invest £10m in Istesso Limited
in 2024 following the issue of a drawdown notice by the company. Both these
investments were made in January 2024
27. Dividends
2023 pence £m 2022 pence £m
per share
per share
Ordinary shares:
Interim dividend 0.51 5.3 0.50 5.3
Final dividend 0.76 7.7 0.72 7.4
Dividends paid to equity owners in the financial year 1.27 13.0 1.22 12.7
Proposed final dividend at financial year end - - 0.76 7.9
Of the £13.0m dividends paid in 2023, £13.0m was settled in cash (2022:
£12.7m dividends, £12.3m settled in cash, £0.4m settled via the issue of
equity). Due to the limited take up of scrip dividends the scheme has been
discontinued.
On 18(th) December 2023 the Group announced that, in light of the prevailing
discount between the Company's share price and its NAV per share, it had
initiated a share buyback of up to £20 million. The Board remains committed
to making regular cash returns to shareholders from realisations. In future
these regular cash returns will normally be made in the form of share buybacks
when the share price discount to NAV exceeds 20%. Regular dividend payments
will be suspended under such conditions, including consideration of any final
dividend for 2023.
29. Alternative performance measures (''APM'')
IP Group management believes that the alternative performance measures
included in this document provide valuable information to the readers of the
financial statements as they enable the reader to identify a more consistent
basis for comparing the business' performance between financial periods and
provide more detail concerning the elements of performance which the managers
of the Group are most directly able to influence or are relevant for an
assessment of the Group. They also reflect an important aspect of the way in
which operating targets are defined and performance is monitored by the
directors. These measures are not defined by IFRS and therefore may not be
directly comparable with other companies' APMs, including those in the Group's
industry. APMs should be considered in addition to, and are not intended to be
a substitute for, or superior to, IFRS measurements.
The directors believe that these APMs assist in providing additional useful
information on the underlying trends, performance and position of the Group.
Consequently, APMs are used by the directors and management for performance
analysis, planning, reporting and incentive-setting purposes.
Calculation
APM Reference for Definition and purpose 2023 2022
reconciliation
£m £m
NAV per share(1) Primary statements, note 21 NAV per share is defined as Net Assets divided by the number of outstanding NAV £1,190.3m £1,376.1m
shares.
The measure shows net assets managed on behalf of shareholders by the Group
per outstanding share.
NAV per share is a standard measure used within our peer group and can be
directly compared with the Group's share price.
Shares in issue 1,036,694,485 1,035,077,632
NAV per share 114.8p 132.9p
Return on NAV Primary statements Return on NAV is defined as the total comprehensive income or loss for the Total comprehensive income (174.8) (344.0)
year excluding charges which do not impact on net assets, specifically
note 4 share-based payment charges.
The measure shows a summary of the income statement gains and losses which
directly impact NAV.
Excluding:
Share-based payment charge 2.6 2.9
Return on NAV (172.2) (341.1)
Net portfolio gains/(losses) note 13, 15, 22 Net portfolio gains are defined as the movement in the value of holdings in Change in fair value of equity and debt investments (110.9) (303.4)
the portfolio due as a result of realised and unrealised gains and losses.
The measure shows a summary of the income statement gains and losses which are
directly attributable to the Total Portfolio (see definition above), which is
a headline measure for the Group's portfolio performance.
This is a key driver of the Return on NAV which is a performance metric for
directors' and employees' incentives.
Gain on disposal of equity investments (10.8) (7.8)
Change in fair value of LP interests(2) (38.8) 2.1
Net portfolio gains/(losses) (160.5) (309.1)
Total portfolio Consolidated statement of financial position, Total portfolio is defined as the total of equity investments, debt Equity investments 1,011.5 1,120.8
investments and investments in LPs.
note 13,14
This measure represents the aggregate balance sheet amounts which the Group
considers to be its investment portfolio, and which is described in further
detail within the portfolio review section of the strategic report.
Debt investments 83.7 38.1
LP interests 69.7 99.6
Total Portfolio 1,164.9 1,258.5
Portfolio investment Primary statements Portfolio investment is defined as the purchase of equity and debt investments Purchase of equity and debt investments (63.4) (88.9)
plus investments into limited participation interests.
This gives a combined measure of investment into the Group's portfolio.
Investment in limited and limited liability partnerships (9.8) (4.6)
Portfolio investment (73.2) (93.5)
Cash proceeds(1) Primary statements Cash proceeds is defined as the proceeds from the disposal of equity and debt Proceeds from the sale of equity investments 37.7 28.1
investments plus distributions received from limited participation interests.
Distributions from limited partnership funds 0.9 -
Cash proceeds 38.6 28.1
Net overheads(2) Financial review, Net overheads are defined as the Group's core overheads less operating income. Other income 5.9 7.1
note 8 The measure reflects the Group's controllable net operating "cash-equivalent"
central cost base.
Net overheads exclude items such as share-based payments and consolidated
portfolio company costs.
Other administrative expenses (28.0) (27.4)
Excluding:
Non-portfolio foreign exchange movements (0.4) 0.1
Administrative expenses: consolidated portfolio companies - 0.1
Net overheads (22.5) (20.1)
Gross cash and deposits Primary statements Cash and deposits is defined as cash and cash equivalents plus deposits. Cash and cash equivalents 100.9 88.7
The measures give a view of the Group's liquid resources on a short-term
timeframe. The Group's Treasury Policy has a maximum maturity limit of 13
months for deposits.
Deposit 126.0 152.8
Cash 226.9 241.5
Loss excluding ONT Primary statements (Loss)/profit excluding ONT is defined as the Groups (loss)/profit for the (Loss) for the year (174.4) (344.5)
year (after tax) excluding the (loss)/profit on the investment held in Oxford
Nanopore publicly quoted shares both realised and unrealised.
This measure gives a view of the results of this business excluding this
single investment which, given its size and recent share price volatility, may
be helpful to users of the accounts as a view of the underlying business.
Excluding:
Change in fair value of equity investment in Oxford Nanopore 31.9 369.7
(Loss)/profit excluding ONT (142.5) 25.2
Simple return on capital (%)(3) Note 29 Defined as net portfolio gains/losses divided by the opening total portfolio Net portfolio (losses) (160.5) (303.4)
value.
This measure gives a view of the size of portfolio gains or losses relative to
the opening portfolio value, giving useful additional context for the value of
gains or losses.
Opening total portfolio value 1,258.5 1,507.5
Simple return on capital (%) -13% -20%
% Return on NAV (%)(3) Note 29 (return on NAV) Defined as return on NAV divided by the opening Net Asset Value. Return on NAV (172.2) (341.1)
Primary statements (Net Asset Value) This measure gives a view of the size of Return on NAV relative to the opening
Net Asset Value, giving useful additional context for the value of returns.
Opening Net Asset Value 1,376.1 1,738.1
Return on NAV (%) -13% -20%
1. For consistency with how we report investments as the purchase of
equity and debt investments plus investment in limited and limited liability
partnerships, the directors believe that this new measure showing cash
proceeds is defined as the proceeds from the disposal of equity and debt
investments plus distributions received from limited liability partnerships
interests profit represents a useful additional measure for users of the
accounts.
2. For clarity non-portfolio foreign exchange movements have been
excluded from net overheads, These exchange movements are on intercompany
loans
and other balance sheet items including cash, and which do not represent an
ongoing overhead cost for the group. Their exclusion is therefore considered
to give a more accurate view of the underlying net overhead costs of the
business.
3. New APMs in the period, showing % Return on Capital and % Return on
NAV, which we believe provide useful additional context on the relative size
of the income statement movements
30. Post balance sheet events
As of the reporting date, unrealised fair value losses in respect of the
Group's quoted portfolio totalled £45.4m, largely in respect of Oxford
Nanopore Technologies plc, which has seen a fair value loss of £50.2m since
31 December 2023.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR UUOORSKUOAURRecent news on IP
See all newsREG - IP Group PLC - Transaction in Own Shares
AnnouncementREG - IP Group PLC - Transaction in Own Shares
AnnouncementREG - IP Group PLC - Transaction in Own Shares
AnnouncementREG - IP Group PLC - Transaction in Own Shares
AnnouncementREG - IP Group PLC - Transaction in Own Shares
Announcement