REG - IP Group PLC - IP Group half-yearly results
02/08/2023 07:00
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RNS Number : 9947H IP Group PLC 02 August 2023
FOR RELEASE ON 2 August 2023
("IP Group" or "the Group" or "the Company")
Half-yearly results
Continued progress in key portfolio companies, strong balance sheet
maintained, portfolio well-funded
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 financial results for the six months ended 30 June 2023.
Half-year 2023 highlights
Portfolio well-funded, continued significant progress in key themes &
companies
· Portfolio companies well-funded; total funds raised by
portfolio approximately £300m (HY22: c.£350m; FY22: £1.0bn) including
Quantum Motion (£42m), AccelerComm (£22m), OXCCU (£18m), Garrison (£16m)
and Mixergy (£9m)
· Only 16% of our portfolio by value need to raise financing
before the second half of 2024
· Private portfolio company funding round valuations remained
robust with 86% of the 14 portfolio funding rounds completed in the period
taking place at or above previous funding round valuations
· Healthier future (Life Sciences): Istesso's Phase 2b trial for
its lead drug MBS2320 in rheumatoid arthritis continues to recruit to plan and
remains on target to read out in H1 2024. Approval received to start
additional Phase 2 trial in idiopathic pulmonary fibrosis (IPF) in H2 2023.
Group completed a £15m investment and further £10m commitment to fully fund
both trials. Pulmocide - recruitment into Phase 3 efficacy study underway
· Tech-enriched future (Deeptech): Featurespace, Garrison and
Ultraleap all posted double-digit revenue growth in H1, significant
fundraisings completed for Quantum Motion, AccelerComm & Garrison
· Regenerative future (Cleantech): Strong technical progress at
Hysata, key milestones achieved, triggering release of second tranche of
Series A funding, OXCCU completed £18m Series A financing led by Clean Energy
Ventures
Strong balance sheet maintained
· Strong balance sheet and liquidity to support new and follow-on
investment in the portfolio with gross cash and deposits at 30 June 2023 of
£250.0m (HY22: £235.7m; FY22: £241.5m); total potential liquidity including
quoted shares of over £450m
· Cash proceeds in line with expectations at £32.2m, mainly from
the second tranche of consideration from the sale of WaveOptics (HY22: £2.1m;
FY22 £28.1m)
· Investment into portfolio maintained: £59.8m into 23 companies
across all three thematic areas (HY22: £52m; FY22: £93.5m) including
significant allocation to Istesso (£15.0m)
· Loss in the period of £54.5m (HY22: Loss of £309.8m; FY22:
Loss of £344.5m), partly driven by a reduction in the value of Oxford
Nanopore, which reduced by £27.8m, and negative portfolio foreign exchange
movements of £11.2m
· Interim dividend of 0.51p per share (2022 interim dividend of
0.50pps; final dividend of 0.76pps)
Post period-end update
The fair value of the Group's holdings in listed companies experienced a net
fair value increase of £45m in the period since 30 June, including ONT
increasing by £42m.
Summary financials
HY to 30 June 2023 (unaudited) HY to 30 June 2022 FY 2022
(unaudited) (audited)
Net Asset Value (NAV) £1,313.6m; 126.7pps £1,414.0m; 136.7pps £1,376.1m; 132.9pps
Loss (£54.5m) (£309.8m) (£344.5m)
Loss/profit excluding ONT ((i)) Loss of (£26.7m) Profit of £35.7m Profit of £25.2m
Total portfolio ((i)) £1,276.1m £1,265.5m £1,258.5m
Net portfolio loss ((i)) (£44.4m) (£291.1m) (£309.1m)
Gross cash and deposits ((i)) £250.0m £235.7m £241.5m
Cash proceeds((i)) £32.2m £2.1m £28.1m
Portfolio investment ((i)) £59.8m £52.0m £93.5m
Dividend 0.51 pps 0.50pps 1.26pps((ii))
(i) Note 12 details the Alternative
Performance Measures ("APM")
(ii) Amount shown for FY 2022 is total
dividend including final dividend approved and paid in 2023
Greg Smith, Chief Executive of IP Group, said: "IP Group is a long-term
investor in breakthrough science and innovation companies that are addressing
many of the world's unmet needs and, while the current economic environment
remains challenging, I am pleased with portfolio progress in the period. The
successful raising of more than £300m of financing by our companies in the
first half, including £60m from the Group, is testament to their quality.
The Group has maintained its financial strength during the period, the result
of £32m cash realisations and having taken pre-emptive action in light of the
challenging investment environment. This financial strength was highlighted as
a strategic asset as our portfolio navigated events such as the failure of
Silicon Valley Bank. We have also continued our approach of dedicating a
proportion of all cash realisations to supporting capital returns for
shareholders through an interim dividend.
The opportunity for value creation in our portfolio remains compelling.
Double-digit revenue growth in our largest deeptech and healthcare companies
is evidence of continued strong demand for their products and services. Our
therapeutics portfolio includes twelve companies with products in clinical
trials, seven of which are targeting key inflection points in the next 18
months. Breakthrough cleantech businesses, such as Hysata, have delivered
technical milestones and commercial demand. The Group is well-positioned to
support these businesses and deliver strong, impactful returns for all
stakeholders over time."
Webinar
IP Group will host a webinar for analysts and investors today, 02 August, at
10:00am. 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 031 886
Alex Donaldson +44 (0) 7516 729702
Further information on IP Group is available on our website:
www.ipgroupplc.com
This half-yearly report 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
portfolio companies within the Group's portfolio of investments. Throughout
this Half-Yearly Report, the Group's holdings in portfolio companies reflect
the undiluted beneficial equity interest excluding debt, unless otherwise
explicitly stated.
Interim Management Report
Summary
The Group, one of the largest investors in university and other
innovation-based companies in the world, has continued to make excellent
progress in its purpose of accelerating the impact of science for a better
future, building on our strong track record of having helped create several
billion-dollar companies (Oxford Nanopore, Ceres Power, Hinge Health). We
believe that an increased focus of capital and resource on our thematic areas,
where we have experienced and specialist investment teams, will enable us to
replicate that success in supporting more businesses to values in excess of
$1bn.
Despite what continues to be a challenging macroeconomic backdrop for
early-stage and growth companies, our portfolio has made good progress in the
period, raising £300m of funding of which IP Group contributed £59.8m (HY22:
£52m; FY22: £93.5m). This compares with total capital raised of £350m in
the same period in 2022, a decline of 17% which compares favourably with
market data suggesting broader venture deal activity declined significantly
year on year. Notable transactions included a £42m fundraise by Quantum
Motion, the largest ever UK quantum funding, a £22m Series B financing for
wireless communications company AccelerComm, a £18m Series A at e-fuel
company OXCCU and financings for Garrison (£16m) and Mixergy (£9m).
Our portfolio's continued success in raising capital in this and earlier
periods means it is well funded. Among the larger holdings in our portfolio, a
third are fully funded to planned profitability, and 51% are funded until the
second half of 2024 or later, with only 16% of the portfolio needing to raise
financing before the second half of 2024.
In terms of other progress within the portfolio, we are pleased to report that
recruitment into Istesso's Phase 2b trial for its lead drug MBS2320 in
rheumatoid arthritis is on schedule and we continue to expect the trial to
readout in the first half of 2024. We are also delighted that the company has
received regulatory approval to start a second Phase 2 trial in IPF, which is
scheduled to start recruiting during the second half of 2023. Our novel
electrolyser company Hysata continues to make excellent progress,
demonstrating larger stacks operating at exceptionally high 95% efficiency
levels.
The Group has taken proactive steps to maintain financial strength through the
prevailing challenging economic environment and geopolitical uncertainty by
securing a private market debt issue last year to provide additional funding
flexibility and reducing our planned investment level. In the current period,
the Group also benefited from £32.2m of cash proceeds, predominantly from the
second tranche of cash consideration from the sale of WaveOptics. This allowed
the Group to finish the first half of the year with gross cash and deposits of
£250.0m.
We see our financial strength as particularly important given the difficult
economic backdrop. This was highlighted during the short period of heightened
volatility around the failure of Silicon Valley Bank, where a small number of
our portfolio companies were directly impacted and we were rapidly able to
offer additional liquidity in support. Fortunately, this support was not
ultimately required however it serves as a reminder of the importance of
capital availability to protect value and, more broadly in the current
environment, potentially access opportunities for future value creation at
attractive prices.
We also remain committed to narrowing the discount to our NAV per share and
maintained our approach of employing a proportion of cash realisations to
support capital returns, which, for this period, will be in the form of an
interim dividend. We have also increased our investor relations activities by
introducing additional 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 holders and non-holders
in the UK and Europe in the first half of the year with meetings planned in
the US, Middle East and Europe in the second half. To help raise the Group's
profile, we also refreshed our brand identity in the first half of the year.
This brand refresh, aimed at highlighting our expertise and clearly aligning
around our impactful purpose, has been received positively by stakeholders.
Financial results: macroeconomic headwinds, strong cash balance
As at 30 June 2023, IP Group had gross cash and deposits of £250.0m (HY22:
£235.7m; FY22: £241.5m), having invested £59.8m in the period including
notable investments into portfolio companies Istesso Ltd (£15m), our North
American platform (£6.6m) and Hysata Pty Ltd (£4.7m) as well as a number of
smaller size investments into current and new opportunities across all three
of our thematic areas. Cash proceeds increased in line with expectations at
£32.2m, mainly from the second tranche of consideration from the sale of
WaveOptics (HY22: £2.1m; FY22 £28.1m).
As at 30 June 2023, the Group's Net Asset Value was £1,313.6, or 126.7 pence
per share (HY22: £1,414.0m, or 136.7pps; FY22: £1,376.1m, or 132.9pps), a
decline of 5.4pps (excluding the impact of the 0.76pps final dividend paid in
June 2023) resulting from the loss of £54.5m (HY22: Loss of £309.8m; FY22:
Loss of £344.5m) in the period.
The Group's portfolio recorded a net fair value reduction of £44.4m in the
period, consisting of a £29.4m reduction in the value of the quoted
portfolio, £11.2m of portfolio foreign exchange losses and an £8.3m
reduction in the value of investment in Limited Partnerships, offset by a
£4.5m gain in the value of private portfolio companies. The reduction in the
quoted portfolio was driven by Oxford Nanopore, which fell in value by £27.8m
in the period but which has recovered significantly since the period end. Net
overheads totalled £10.3m in the period (HY22: £10.9m; FY22: £20.1m).
Overview of business performance including thematic focus & holdings
The performance of the Group's business units is summarised below with further
detail on the performance of each in the Portfolio Review.
All £m unless stated Invested Cash proceeds Net portfolio gain/(loss) Fair value Simple return on capital (%)
at 30 June 2023
Healthier future: Oxford Nanopore - - (27.8) 177.7 (14%)
Healthier future: Life Sciences 22.8 0.1 (7.9) 411.9 (2%)
Tech-enriched future: Deeptech 10.6 31.0 (3.2) 206.4 (2%)
Regenerative future: Kiko Ventures (Cleantech) 12.8 - 6.1 262.4 3%
North America 6.6 - (12.6) 81.1 (14%)
Australia and New Zealand 6.2 - 4.1 52.9 10%
Platform investments 0.4 0.7 0.7 44.0 2%
Organic and De minimis - 0.4 (2.5) 15.4 (14%)
Subtotal 59.4 32.2 (43.1) 1,251.8 (3%)
Attributable to third parties 0.4 - (1.3) 24.3 (5%)
Total Portfolio 59.8 32.2 (44.4) 1,276.1 (4%)
Third-party fund management
The Group continues to view the management of third-party funds as an
important element of our business model, and we manage or advise £690m in
third-party capital across our Parkwalk, Australian and UK business units.
Shareholder returns, interim dividend
Delivering returns for shareholders is the Group's financial purpose and
narrowing the discount to our NAV per share remains a focus. The Board remains
focussed on shareholder value creation and has declared an interim dividend of
0.51 pence per share (HY22: 0.50pps). A final 2022 dividend of 0.76 pence per
share was paid in the period, bringing total dividend payments in respect of
2022 to 1.26 pence per share.
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 now delivered more than
£70m of cash returns to our shareholders.
Board changes
We were delighted to welcome Anita Kidgell to the Board with effect from 18
January 2023. Anita brings a wealth of experience gained at GSK plc, one of
the leading global biopharma companies. From her position as Head of Corporate
Strategy at GSK, Anita brings to the Board a rare combination of a scientific
background together with strategic, investor relations and communication
experience. Following her appointment, the Board comprises two executive
directors, five NEDs and the Chairman: equal representation of both male and
female.
Outlook
While the current macro environment remains challenging, IP Group continues to
be well financed and we are confident that our portfolio will deliver strong
returns with a number of key milestones anticipated over the next 12-18
months. In Life Sciences, seven companies are targeting key clinical
milestones, including Istesso, Akamis, Pulmocide and Crescendo. In Deeptech, a
number of companies, including Featurespace, Teya and Garrison are targeting
continued double-digit revenue growth, while in Cleantech, through Kiko
Ventures, the focus remains on driving value from core holdings including
First Light Fusion, Oxa and Hysata, and investing for the future. We continue
to believe that IP Group is well placed to deliver value for shareholders
through capital appreciation supported by cash returns and is well-positioned
for a return of investor appetite towards growth companies.
PORTFOLIO REVIEW
Overview
As of 30 June 2023, the value of the Group's portfolio was £1,276.1m (HY22:
£1,265.5m; FY22: £1,258.5m) reflecting a net portfolio loss of £44.4m
(HY22: loss £291.1m; FY22: loss £309.1m). Cash invested during the period
totalled £59.8m (HY22: £52.0m; FY22: £93.5m) and cash proceeds totalled
£32.2m (HY22: £2.1m; FY22: £28.1m).
The portfolio consists of interests in 93 companies (excluding de minimis and
organic holdings), of which the top 20 by value comprise 70% of the portfolio
value (HY22: 103, 70%; FY22: 95, 76%).
Fair value movements
A summary of the unrealised and realised fair value gains and losses is as
follows:
Six months Six months Year ended
ended ended 31 December
30 June 2023 £m 30 June 2022 2022
£m £m
Quoted equity investments (29.4) (397.5) (428.5)
Private equity & debt investments 4.5 82.2 101.4
Investments in Limited Partnerships (8.3) 8.8 (6.4)
Foreign exchange movements (11.2) 15.4 24.4
Net portfolio losses (44.4) (291.1) (309.1)
A summary of the largest unrealised and realised fair value gains and losses
by portfolio investment (excluding fx movements) is as follows:
Gains £m Losses £m
Hysata Pty Ltd 9.2 Oxford Nanopore Technologies plc (27.8)
Centessa Pharmaceuticals plc 6.2 North American Platform (Longview Innovation) (9.1)
Istesso Limited 3.1 Athenex, Inc. (realised loss) (6.5)
AMSL Innovations Pty Ltd 2.6 Oxehealth Limited (5.2)
OXCCU Tech Limited 2.0 Teya Holdings Ltd (2.7)
Other quoted 1.0 Other quoted (2.3)
Other private 6.6 Other private (10.3)
Total 30.7 Total (63.9)
Investments and cash proceeds
The Group deployed a total of £59.8m across 23 new and existing investments
during the period (HY22: £52.0m, 22, FY22: £93.5m, 46), versus cash proceeds
of £32.2m (HY22: £2.1m, FY22: £28.1m).
Largest investments and cash proceeds by portfolio company:
Investments £m Cash proceeds £m
Istesso Limited 15.0 Wave Optics Limited(1) 30.8
North American Platform (Longview Innovation) 6.6 UCL Technology Fund L.P. 0.7
Hysata Pty Ltd 4.7 Lixea Limited 0.3
Tado GmbH 4.4 Athenex, Inc 0.1
Garrison Technology Limited 3.9 Perpetuum Limited 0.1
Other 25.2 Other 0.2
Total 59.8 Total 32.2
1 Deferred consideration in relation to exit in 2021.
Deferred consideration estimated at £12.5m was outstanding at 30 June 2023
(HY22: £44.3m, FY22: £48.2m), relating to the Group's realisation of
Enterprise Therapeutics (£11.4m, exited in 2020) and Reinfer (£1.1m, exited
in 2022).
Number of Investments
United Kingdom North America Australia & New Zealand Total
1 January 2023 81 1 13 95
Additions 1 - 1 2
Exited (1) - - (1)
Being closed/liquidated - - (1) (1)
Reclassified to de minimis (2) - - (2)
30 June 2023 79 1 13 93
Co-investment analysis
Including the £59.8m of primary capital invested by the Group (the Group
invested £nil via secondary purchases (HY22: £0.3m, FY22: £3.7m), the
Group's portfolio raised approximately £300m during the half year to 30 June
2023 (HY22: approx. £350m, FY22: approx. £1.0bn). Co-investment from parties
or funds with a greater than 1% shareholding in IP Group plc was £nil (HY22:
£9.5m, FY22: £24.9m). An analysis of this co-investment by source is as
follows:
Six months ended Six months ended
30 June 2023 30 June 2022
Portfolio capital raised £m % £m %
IP Group(1) 59.8 20% 51.6 14%
IP Group managed funds(2) 9.9 3% 19.6 5%
IP Group plc shareholders (>1% holdings) - 0% 9.5 3%
Institutional investors 69.9 24% 90.3 25%
Corporate, other EIS, individuals, universities and other 158.7 53% 186.8 53%
Total 298.3 100% 357.8 100%
(1) Reflects primary investment only; during the six months to 30 June
2023 the Group invested £nil via secondary purchase of shares (HY22: £0.3m,
FY22: £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 with an IP Group investment holding value greater than
£4m
Company name Fair value of
Group holding %
at 30 June 2023
£m
Trade to profitability 354.2 33%
2023 59.5 6%
2024 H1 109.4 10%
2024 H2 292.3 27%
2025 240.2 22%
2026 18.1 2%
Total companies > £4m value 1,073.7 100%
Companies < £4m value 83.7
Interest in Limited Partnerships and Platforms 118.7
Total portfolio 1,276.1
Portfolio analysis by sector
The Group splits its core opportunity evaluation, investment and
business-building team into specialist divisions, Life Sciences, Deeptech and
Cleantech within the UK, with geographically focused investment teams based in
the United States and Australia. A small number of investments are categorised
as platform investments, which are portfolio companies which also invest in
other opportunities.
As at 30 June 2023 As at 31 December 2022
Fair value Number Fair value Number
Sector £m % % £m % %
Healthier future: Oxford Nanopore 177.7 14% 1 1% 205.5 17% 1 1%
Healthier future: Life Sciences 411.9 33% 31 34% 390.8 32% 33 35%
Tech-enriched future: Deeptech 206.4 17% 29 31% 201.0 17% 28 29%
Regenerative future: Kiko Ventures (Cleantech) 262.4 21% 14 15% 243.8 20% 15 16%
North America 81.1 7% 1 1% 87.1 7% 1 1%
Australia and New Zealand 52.9 4% 13 14% 42.8 3% 13 14%
Platform investments 44.0 4% 4 4% 43.6 4% 4 4%
Subtotal 1,236.4 100% 93 100% 1,214.6 100% 95 100%
De minimis and organic holdings 15.4 17.0
Subtotal 1,251.8 1,231.6
Attributable to third parties(1) 24.3 26.9
Total portfolio 1,276.1 1,258.5
1 Amounts attributable to third parties consist of £12.8m attributable to
minority interests represented by third-party limited partners in the
consolidated fund, IP Venture Fund II (HY22: £14.9m, FY22: £13.9m), £10.7m
attributable to Imperial College London (HY22: £12.6m, FY22: £12.2m) and
£0.8m attributable to other third parties (HY22: £1.5m, FY22: £0.8m).
Portfolio Review: Healthier future: Oxford Nanopore
Following the disappointing share price performance at the end of 2022, Oxford
Nanopore's share price continued to underperform in the first half, trading as
low as 176p in March 2023. This was due to the poor performance of Life
Sciences Research Tools ("LSRT") companies and some specific disappointment
around the company's reduced 2023 revenue guidance. That said, Oxford
Nanopore's growth remains amongst the strongest in the LSRT space and this was
reflected in the post-results share price rally. The company's recent trading
update for the first half of 2023 underlined this, with expected 22% revenue
growth falling in the middle of its FY 2023 guidance range (16-30% growth).
The company continues to target adjusted EBITDA breakeven by the end of 2026.
In addition to delivering double-digit revenue growth, Oxford Nanopore made a
number of updates to its core technology platform and launched a number of new
products. It also announced a number of significant collaborations in various
applied and clinical markets, which potentially offer upside from a growth
perspective. We remain bullish on the company's long-term prospects, and it
therefore remains a core, strategic holding.
Company name Description Group Stake at 30 June 2023 Net Unrealised + realised fair value movement Fair value
% investment/ (divestment) £m of Group
£m holding
at 30 June 2023
£m
Oxford Nanopore Technologies plc Enabling the analysis of any living thing, by any person, in any environment 10.1% - (27.7) 177.7
Portfolio Review: Healthier future: Life sciences
IP Group's Life Sciences portfolio comprises holdings in 31 companies valued
at £411.9m at 30 June 2023.
Company name Description Group Stake at 30 June 2023(1) Net Unrealised + realised fair value movement Fair value
% investment/ (divestment) £m of Group
£m holding
at 30 June 2023
£m
Istesso Limited From disease modification to disease resolution 56.5% 15.0 3.1 113.8
Hinge Health, Inc. The world's first digital clinic for back and joint pain 1.8% - (2.2) 51.4
Ieso Digital Health Limited Digital therapeutics for psychiatry 32.1% - - 21.8
Akamis Bio Limited(2) Gene and viral therapies for cancer 24.5% - - 21.2
Mission Therapeutics Limited Targeting deubiquitylating enzymes for the treatment of CNS and mitochondrial 18.4% 2.0 - 20.2
disorders
Oxular Limited Treatments and delivery technology for sight-threatening diseases 25.4% 2.9 - 18.8
Crescendo Biologics Limited Biologic therapeutics eliciting the immune system against solid tumours 14.5% - - 18.7
Artios Pharma Limited Novel oncology therapies 7.1% - (0.2) 18.1
Microbiotica Limited Gut-microbiome based therapeutics and diagnostics 17.7% - - 16.1
Pulmocide Limited Novel inhaled treatment for life-threatening fungal lung infections 12.2% - (0.4) 14.3
Other companies (21 companies) - 1.7 (8.2) 97.5
Total - 21.6 (7.9) 411.9
1 Represents the Group's undiluted beneficial economic equity interest
(excluding debt), including only the Group's portion of IPVF II. Voting
interest is below 50%.
2 Previously called PsiOxus Therapeutics Limited.
The largest transaction in the first half of 2023 was a £15.0m investment
into Istesso, primarily by way of a convertible note. We continue to see good
progress at Istesso with its Phase 2b study of MBS2320 in rheumatoid arthritis
("RA") running according to plan and the start of a Phase 2 study in
idiopathic pulmonary fibrosis due in the second half of the year.
In terms of performance, the value of the portfolio declined by 2% in the
first half, driven by a realised loss at NASDAQ-listed Athenex (£(6.6)m
including de-recognition of deferred consideration), which eventually went
into administration during the period, and a £(5)m write-down in the holding
value of Oxehealth Ltd following a financing round at a depressed price
despite good progress at the business. On the positives, we saw some
appreciation in the Centessa share price, providing for a £5.8m uplift.
We continue to see good fundamental progress across the portfolio with each of
Artios, Kynos and Oxular announcing the initiation of important clinical
studies for their lead assets. Moreover, Mission Therapeutics and Akamis
announced positive safety data from Phase 1 studies, with some evidence of
effect for Akamis' novel gene therapy agent.
Hinge Health continues to significantly grow revenues and expand its customer
base. As for the full-year 2022 valuation process, we engaged a third-party
valuation specialist to assess the company's current value, which resulted in
no change in the value of our holding with the fair value movement in the
period relating only to FX.
Our companies continue to make good clinical, regulatory and commercial
progress, some of which cannot be disclosed for competitive reasons, and we
believe that 2023 will lay the foundations for significant NAV and liquidity
outperformance during the coming few years.
Portfolio Review: Tech-enriched future: Deeptech
IP Group's Technology portfolio comprises holdings in 29 companies valued at
£206.4m at 30 June 2023.
Deeptech Portfolio
The IP Group Deeptech portfolio covers a breadth of areas aimed at delivering
value through growing innovative companies that enable and secure the digital
economy, create new human capability and generate prosperity for all in four
key focus areas: Applied Artificial Intelligence, Next Generation Networks,
Human-Machine Interfaces and Future Computing.
Company name Description Group Stake at 30 June 2023(1) Net Unrealised + realised fair value movement Fair value
% investment/ (divestment) £m of Group
£m holding
at 30 June 2023
£m
Featurespace Limited Leading predictive analytics company 20.4% - - 64.1
Garrison Technology Limited Anti-malware solutions for enterprise cyber defences 23.6% 3.9 - 31.6
Ultraleap Holdings Limited Contactless haptic technology 17.0% - - 31.0
"feeling without touching"
Other companies (26 companies) - 6.7 (3.2) 79.7
Total - 10.6 (3.2) 206.4
(1 ) Represents the Group's undiluted beneficial economic equity interest
(excluding debt), including only the Group's portion of IPVF II. Voting
interest is below 50%.
The first half of 2023 has been a busy period with several key transactions
completing.
The top three assets by value in the Deeptech portfolio - Featurespace,
Ultraleap, and Garrison - which account for more than 60% of the Deeptech
portfolio value, all progressed well in the first half of the year.
Featurespace continues to deliver attractive revenue growth on the back of its
strong customer value proposition, exemplified by the recent revelation that
the high street bank Natwest has improved its scam detection rate by 135%
using Featurespace's technology. Ultraleap launched the next generation of its
hand tracking camera product, the Leap Motion 2, which elicited an
enthusiastic response from customers at the Augmented World Expo in June.
Ultraleap has seen a notable increase in interest as the eXtended Reality (XR)
market 'heats up' and we envisage good commercial progress for the asset this
year.
Garrison Technologies, 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% YoY over this period, with
continued attractive growth expected this year.
We were delighted to see University of Oxford spin-out Quantum Motion
Technologies close 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. All of the company's
existing investors (Inkef, IP Group, NSSIF, Octopus Ventures, Oxford Sciences
Enterprises and Parkwalk Advisors) also participated.
In a similar vein, we were equally pleased 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 providing by 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 Intel, AMD and Xilinx.
The Deeptech team has backed one brand new opportunity so far this year, a
£3m investment into DeepRender which is developing the next generation of
image and video compression technology using an AI-first approach. This
investment was made alongside existing investor Pentech, our fourth deal with
this fund. Previous investments include Acunu and Semetric, both sold to
Apple, and existing portfolio company Monolith.ai. DeepRender already has
commercial engagement with several of the world's top technology companies and
we have high hopes for rapid progress in that asset.
On the less positive side, we have taken an impairment in the value of our
holding in Navenio after slower than hoped for commercial progress, and our
holding in Mirriad has continued to lose value as its share price declined,
albeit the company raised £6.3 million through a placing and open offer
during the period.
Portfolio Review: Regenerative future: Kiko Ventures (Cleantech)
Company name Description Group Stake at 30 June 2023(1) Net Unrealised + realised fair value movement Fair value
% investment/ (divestment) £m of Group
£m holding
at 30 June 2023
£m
First Light Fusion Limited Solving fusion with the simplest possible machine 27.5% - - 114.5
Oxa Autonomy Ltd (2) Software to enable every vehicle to become autonomous 12.1% - (0.2) 65.7
Bramble Energy Limited The fuel cell company with Gigafactories 31.5% - - 20.7
Nexeon Limited Silicon anodes for next generation 5.5% - - 16.3
lithium-ion batteries
Other companies (10 companies) - 12.9 6.3 45.2
Total - 12.9 6.1 262.4
(1) Represents the Group's undiluted beneficial economic equity interest
(excluding debt), including only the Group's portion of IPVF II. Voting
interest is below 50%.
(2) Previously called Oxbotica Limited.
The Kiko Ventures portfolio comprises holdings in 14 companies valued at
£262.4m as at 30 June 2023.
In the first half of 2023, there have been signs that the wider venture market
slowdown has started to impact Cleantech. While First Light Fusion has seen
good interest in its post-fusion Series C round (launched last year with UBS)
the fund raise has not yet completed, impacted by this softening of the
funding environment. We still believe, however, that it will be possible to
complete the round this year and have therefore not altered the valuation of
our holding in the company. As part of our normal valuation process, we will
review this position at year end. First Light continues to progress plans for
its gain scale device, Machine 4, and in June 2023 entered into an agreement
with the UKAEA Centre for Fusion Energy at Culham to construct Machine 4 on
the Culham campus, with UKAEA jointly developing a new building to house the
facility.
Electrolyser company Hysata, which is backed jointly by Kiko and IP Group
Australia, made good technical progress this year, achieving its Series A
technical milestone several months ahead of schedule, which triggered the
second tranche of last year's Series A investment, bringing the total invested
by Kiko into the company to £6.2m. 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. It is
normally difficult to repeat 'hero' single cell data in larger systems, making
this a significant achievement. Hysata has now launched a Series B funding
round, which could complete this year. Given the technical progress and input
from Hysata's advisors on funding valuation we have taken a c50% uplift in our
holding value for the asset.
Despite the weaker funding environment, there were good funding rounds in two
earlier stage businesses, both Oxford University spin-outs. 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 for the past two
years. The new funding will help the company with international expansion
(supported by EDP, one of the biggest energy suppliers in Southern Europe) and
to develop heat pump products. In May, OXCCU, which has breakthrough
technology for the catalytic 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. Attracting a wider diversity of high quality cleantech co-investment
was one of the brand objectives for Kiko, and this deal, the first time we
have had a US venture fund lead a deal in the cleantech portfolio, provides
validation of that benefit. OXCCU was founded by academics behind Oxford
Catalysts Group, IP Group's first cleantech investment in 2004. That company
successfully floated on AIM, and it has been great to work again with an
experienced and successful founding team. The company's CEO and chair also
come from the IP Group stable, with Andrew Symes leaving the Kiko investment
team to become CEO and Alan Aubrey joining as chair. OXCCU thus has a very
high-quality team, and its breakthrough new technology, published in Nature,
has the potential to halve the cost of so called 'e-fuels' produced from power
and CO(2).
We have also continued marketing development of the Kiko brand, building the
reputation as the leading cleantech venture investor in the UK. A highlight
for the year was the role we played in establishing Cleantech for UK, in
partnership with Bill Gates' Breakthrough Energy and the Cleantech Group.
Cleantech for UK is a policy body with the aim of advocating for support for
climate technology development and deployment. We were invited by Cleantech
Group to help establish the founding membership, using our network to bring in
other leading cleantech accelerators and investors, and achieved a group with
combined funds of over £6 billion. Cleantech for UK was launched on 15th
February at a ceremony attended by Bill Gates and Prime Minister Rishi Sunak.
The body published its first report in June: "Building the Next Generation of
Cleantech Champions" a landscape overview which highlighted both the
opportunities and current challenges for the sector in the UK. We continue to
be closely involved, alongside other thought leadership work with the Energy
Transitions Commission and regular interviews in the media.
Portfolio Review: North America (Longview Innovation)
The Group's activities in North America are carried out through a 58%
strategic holding in a dedicated evergreen fund, Longview Innovation
(previously IP Group, Inc. prior to its rebranding in March 2023). In the
first half of 2023, the Longview Innovation portfolio continued to make
progress, achieving operational and financial milestones despite economic
headwinds.
Carisma Therapeutics, a company focused on developing novel cancer
immunotherapies, completed the merger with Sesen Bio and commenced trading on
the NASDAQ market under the symbol CARM. Exyn Technologies closed its Series B
round adding two additional strategic investors across the mining and
inspection market verticals. Optimeos Life Sciences successfully raised a seed
round led by JRS Life Sciences and 7G Bioventures. The funds will be used to
further drive validating engagements, expand the platform and build out the
team. Taktos Therapeutics closed an external Seed financing with a new
investor Washington Research Foundation. Advanced diagnostics company MOBILion
announced partnerships with Rilas Technologies and Switzerland-based TOFWERK
AG to expand the capabilities and reach of its MOBIE analytics platform.
As it looks to the remainder of 2023, Longview Innovation is seeking further
funding for its platform from institutional investors and continues to
identify transformative technologies at their partners.
Company name Description Fair value
of Group
holding
at 30 June 2023(1)
£m
MOBILion Systems, Inc. A platform technology for conducting ion mobility separations with lossless 19.5
ion transfer and manipulation
Uniformity Labs, Inc. Equipment, materials, and software for additive manufacturing 13.7
Exyn Technologies, Inc. Unmanned aerial systems 12.8
Carisma Therapeutics, Inc. Cancer immunotherapy treatments 10.9
Other companies (26 companies) 24.2
Total 81.1
Portfolio Review: Australia and New Zealand
Our portfolio in Australia and New Zealand continues to scale and make
significant progress. The portfolio now stands at 15 companies valued at
£52.9m. In the first half, the portfolio delivered a net fair value uplift of
£4.1m which included follow-on funding at Hysata and AMSL Aero. The pipeline
of opportunities from our university partners at the Group of Eight and
Auckland universities continues to be strong, positioning the platform well
for growth and returns over the coming 3-5 years.
Joint Australian/Kiko investment Hysata continues to be a highlight in the
portfolio. As described in further detail in the Kiko section, the company is
making strong progress on its mission to deliver the world's most efficient,
simple and reliable electrolyser.
Canopus Networks announced an investment from Konvoy Ventures in March, as it
continues to grow commercial traction for its terabit-scale encryption-proof
customer insights platform.
In our life sciences portfolio, RAGE Biotech is making strong progress with
the development of its lead RNA therapeutic for the treatment of chronic
respiratory disease. Alimetry announced the appointment of Erik Engelson as
Chair, and was named in the top 16 of New Zealand's Callaghan 100 report. We
welcomed Resseptor Therapeutics to the portfolio, a new company developing new
technologies aimed at revolutionising the treatment of autoimmune diseases and
cancer.
Portfolio review: Platform Investments
IP Group's Platform Investments portfolio comprises holdings in two companies
and two interests in Limited Partnerships, valued at £44.0m at 30 June 2023.
The Platform Investments portfolio contains holdings in multi-sector platform
companies that operate in a similar way to IP Group, but focus on a specific
university, such as OSE and CIC, and the UCL Technology Fund ("UCL") all three
of which IP Group is a founding investor of. As at 30 June 2023, IP Group has
a 1.8% holding in OSE valued at £20.6m and a 1.0% holding in CIC valued at
£3.4m (HY22: 2.3%, £20.6m, 1.0%, £4.0m, FY22: 1.8%, £20.6m, 1.0%, £3.5m),
and a 46.4% stake in the UCL fund, valued at £17.1m (HY22: 46.7%, £17.7m,
FY22: 46.7%, £16.9m).
Company name Description Group Stake at 30 June 2023(1) Net Unrealised + realised fair value movement Fair value
% investment/ (divestment) £m of Group
£m holding
at 30 June 2023
£m
Oxford Science University of Oxford preferred IP partner under 15-year framework agreement 1.8 - - 20.6
Enterprises plc
Interest in UCL Technology Fund L.P. Commercialising world class research from UCL 46.4 (0.3) 0.5 17.1
Other companies (2 companies/LPs) - - 0.2 6.3
Total - (0.3) 0.7 44.0
(1 ) Represents the Group's undiluted beneficial economic equity interest
(excluding debt), including only the Group's portion of IPVF II. Voting
interest is below 50%.
Third-party fund management
We are aiming to continue growing the level of funds under management in the
coming years. As of 1 January 2023, we appointed Joyce Xie as Managing
Director, Global Capital, to lead the Group's strategic capital initiatives
with global capital partners and further build our third-party funds platform.
PARKWALK ADVISORS
Parkwalk, the Group's specialist EIS fund management subsidiary, now has
assets under management of £497m (HY22: £450m; FY22: £477m) including funds
managed in conjunction with the universities of Oxford, Cambridge, Bristol and
Imperial College London. In May 2023 Parkwalk received their FCA approval to
be a full-scope AIFM (alternative investment fund manager) as assets passed
€500m in 2022.
Parkwalk invested £24.0m in the first six months of 2023 (HY22: £38.0m;
FY22: £57.4m) in the university spin-out sector across 16 companies (HY21: 19
investments). Again, market data provider Beauhurst named Parkwalk as the most
active investor in the sector.
Six new companies joined the Parkwalk portfolio, and one partial exit was
achieved at a modest uplift in value. Six portfolio companies closed funding
rounds at uplifts in valuation, three unchanged and none at lower valuations
than the previously held value. These companies raised c.£95m in funding in
H1 this year. We expect some further uplifts and some write-downs in the
second half of the year.
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.
Within Parkwalk, and more broadly, the Group continues to explore further fund
management opportunities.
AUSTRALIA
In Australia, the IP Group Hostplus Innovation Fund now totals A$310M (£163m)
and has invested in several of IP Group's portfolio companies around the world
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.
GREATER CHINA
In China, the first close of Fund I from ICCV, our Joint Venture with China
Everbright, has been delayed due to ongoing negotiations with limited
partners.
FINANCIAL REVIEW
· Loss for the period of 54.5m (HY22: Loss of (£309.8m), 2022:
Loss of (£344.5m))
· Net assets were £1,313.6m (HY22: £1,414m, FY22: £1,376.1m)
· Net assets per share were 126.7p (HY22: 136.7p, FY22: 132.9p)
· Final 2022 dividend of 0.76pps paid and 2023 interim dividend
proposed of 0.51pps
· Second tranche debt funding of £60m drawn in the period.
Consolidated statement of comprehensive income
A summary analysis of the Group's performance is provided below:
Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Net portfolio loss(1) (44.4) (291.1) (309.1)
Net overheads(2) (10.3) (10.9) (20.1)
Non-portfolio foreign exchange gains and losses 1.2 (0.2) (0.1)
Administrative expenses - consolidated portfolio companies - - (0.1)
Administrative expenses - share-based payments charge (1.0) (1.4) (2.9)
Carried interest plan provision charge (0.5) (6.0) (12.0)
Net finance income/(expense) 1.6 (0.2) 0.8
Taxation (1.1) - (1.0)
Loss after tax for the period (54.5) (309.8) (344.5)
Other comprehensive income (0.8) (0.1) 0.5
Total comprehensive loss for the period (55.3) (309.9) (344.0)
Exclude:
Share-based payment charge 1.0 1.4 2.9
Return on NAV(1) (54.3) (308.5) (341.1)
(1) Defined in note 12 Alternative Performance Measures.
(2) See net overheads table below and definition in note 12 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 spin-out
businesses, which are analysed in detail in the portfolio analysis above.
Net overheads
Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Other income 3.1 3.1 7.1
Administrative expenses - all other expenses (12.3) (12.3) (24.2)
Administrative expenses - annual incentive scheme (1.1) (1.7) (3.0)
Net overheads (10.3) (10.9) (20.1)
Other income comprises fund management fees and licensing and patent income.
In the current period other income totalled £3.1m (HY22: £3.1m, FY22:
£7.1m), and was largely unchanged from the first half of the previous year.
Other central administrative expenses, excluding performance-based staff
incentives, share-based payments charges and the impact of foreign exchange
movements, have remained in line with the prior year at £12.3m (HY22:
£12.3m, FY22: £24.2m).
The charge of £1.1m 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 (HY22: £1.7m,
FY22: £3.0m).
Other income statement items
The share-based payments charge of £1.0m (HY22: £1.4m, FY22: £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 charge of £0.5m (HY22: £6.0m charge, FY22: £12.0m
charge) relates to the recalculation of liabilities under the Group's carry
schemes. As at 30 June 2023, 70% of the Group's equity & debt investments
were included within carry scheme arrangements (HY22: 63%, FY22: 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
proceeds 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:
Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Portfolio 1,276.1 1,265.5 1,258.5
Other non-current assets 5.3 9.2 7.7
Other net current assets 4.0 24.8 33.2
Cash and deposits 250.0 235.7 241.5
Borrowings (138.3) (44.1) (81.4)
Other non-current liabilities (83.5) (77.1) (83.4)
Total Equity or Net Assets ("NAV") 1,313.6 1,414.0 1,376.1
NAV per share 126.7p 136.7 132.9p
The composition of, and movements in, the Group's portfolio are described in
the portfolio review above.
Portfolio valuations
Given continued volatility in public markets and uncertainty over the extent
of the impact on private valuations, we have continued to seek third party
valuation advice across a number of the larger companies in our portfolio
which were assessed as having a higher degree of valuation uncertainty. These
were First Light Fusion, Featurespace, Hinge Health, Ultraleap, and MOBILion.
In a continuation of the trend observed in 2022, the first half of 2023 saw a
relatively low level of capital raised by the portfolio of just under £300m
(HY22: £350m). As in 2022, the majority of these funding transactions took
place at or above previous funding round prices indicating that we are not yet
seeing evidence of reductions in private valuations from financing
transactions in our portfolio:
Unaudited Unaudited Audited
six months ended
six months ended
year ended
30 June 2023 30 June 2022 31 December 2022
£m £m £m
No. % No. % No. %
Up round 10 72% 7 59% 18 62%
Flat round 2 14% 4 33% 8 28%
Down round 2 14% 1 8% 3 10%
Total 14 100% 12 100% 29 100%
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 12-18 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 3 and 4.
Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Quoted 206.4 269.2 228.7
Funding transaction (<12 months) 268.1 285.3 289.8
Funding transaction (>12 months) 191.0 112.2 117.8
Other: Future market/commercial events 15.8 37.8 40.7
Other: Adjusted financing price based on past performance - upwards 178.3 128.4 151.8
Other: Adjusted financing price based on past performance - downwards 129.2 123.4 154.5
Other: DCF 115.8 99.1 97.7
Other: Revenue Multiple 76.8 105.5 77.9
Statements from LP 94.7 104.6 99.6
Total Portfolio 1,276.1 1,265.5 1,258.5
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.
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 cash proceeds 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 maturities in December in
2027, 2028 and 2029. The interest rate is fixed at an average of 5.25%.
Approximately £15m of the proceeds was used to repay early the shorter-dated
portion of our EIB debt, leaving £22m 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 no less than £50m at any time 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 cash proceeds
(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 to the 2022 Annual Report.
Cash and deposits
At 30 June 2023, the Group's cash and deposits totalled £250.0m, an increase
of £8.5m from a total of £241.5m at 31 December 2022, predominantly due to
outflows of investing activities of £59.9m, a £12.0m net cash outflow from
operations and a £3.1m cash outflow from the repayment of debt, £7.7m of
dividend payments, offset by a drawdown of loan notes of £60m and cash
proceeds of £32.2m.
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 2022 Group financial statements alongside
details of the credit ratings of the Group's cash and deposit counterparties.
The principal constituents of the movement in cash and deposits during the
period are as follows:
Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Net cash (used)/generated in operating activities (12.2) (12.4) (23.5)
Investments (59.8) (52.0) (93.5)
Cash proceeds 32.2 2.1 28.1
Other investing (0.6) (0.5) (0.3)
Cash disposed via disposal of subsidiary undertaking - - -
Net cash (outflow)/inflow from investing activities (28.2) (62.7) (65.7)
Dividends paid (7.7) (7.1) (12.3)
Purchase of treasury shares - (8.5) (8.0)
Repayment of debt facility (3.1) (7.7) (30.4)
Drawdown of loan notes 60.0 - 60.0
Other financing activities (0.3) - (0.5)
Net cash inflow/(outflow) from financing activities 48.9 (86.0) 8.8
Effect of foreign exchange rate changes - (0.1) -
Movement during period 8.5 (86.1) 8.8
Dividend
During the period the Group paid a final 2022 dividend of 0.76p per share,
bringing total dividends paid in respect of FY22 to 1.26p per share. The Board
has declared an interim dividend in respect of the period from 1 January 2023
to 30 June 2023 of 0.51p per ordinary share (the "Interim Dividend").
The Interim Dividend will be payable on or around 4 September 2023. The
ex-dividend date will be 10 August 2023 with a record date of 11 August 2023.
The proposed dividend has not been included as a liability as at 30 June 2023,
in accordance with IAS 10 "Events after the reporting period".
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 Half-Yearly 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 by the Group is set out in note 12.
Principal risks and uncertainties
A detailed explanation of the principal risks and uncertainties faced by the
Group, and the steps taken to manage them, is set out in the Corporate
Governance section of the Group's 2022 Annual Report and Accounts. The
principal risks and uncertainties are summarised as follows:
· it may be difficult for the Group to maintain the required level of
capital to continue to operate at optimum levels of investment, activity and
overheads;
· it may be difficult for the Group's portfolio companies to attract
sufficient capital;
· the returns and cash proceeds from the Group's early-stage companies
can be very uncertain;
· universities or other research-intensive institutions may terminate
the collaborative relationships with the Group;
· the Group may lose key personnel or fail to attract and integrate new
personnel;
· macroeconomic conditions may negatively impact the Group's ability to
achieve its strategic objectives;
· there may be changes to, impacts from, or failure to comply with,
legislation, government policy and regulation;
· the Group may be subjected to Phishing and Ransomware attacks, data
leakage and hacking;
· the Group may be negatively impacted operationally as a result of its
recent international expansion.
The Group reviewed its operational, strategic and principal risk registers in
the period and has concluded that it is not aware of any significant changes
in the nature of the principal risks that would result in a change to the
Group's principal risks as set out above in the forthcoming six months.
Consolidated statement of comprehensive income
For the six months ended 30 June 2023
Note Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Portfolio return and revenue
Change in fair value of equity and debt investments 3 (27.5) (304.1) (303.4)
(Loss)/gain on disposal of equity and debt investments 3 (5.7) 4.2 (7.8)
Change in fair value of limited partnership interests 4 (11.2) 8.8 2.1
Revenue from services and other income 3.1 3.1 7.1
(41.3) (288.0) (302.0)
Administrative expenses
Carried interest plan charge 9 (0.5) (6.0) (12.0)
Share-based payment charge (1.0) (1.4) (2.9)
Other administrative expenses (12.2) (14.2) (27.4)
(13.7) (21.6) (42.3)
Operating loss (55.0) (309.6) (344.3)
Finance income 3.8 0.6 2.2
Finance costs (2.2) (0.8) (1.4)
Loss before taxation (53.4) (309.8) (343.5)
Taxation (1.1) - (1.0)
Loss after taxation for the period (54.5) (309.8) (344.5)
Other comprehensive income
Exchange differences on translating foreign operations (0.8) (0.1) 0.5
Total comprehensive loss for the period (55.3) (309.9) (344.0)
Attributable to:
Equity holders of the parent (53.9) (308.7) (341.5)
Non-controlling interest (1.4) (1.2) (2.5)
(55.3) (309.9) (344.0)
Loss per share
Basic (p) 2 (5.20) (29.85) (33.01)
Diluted (p) 2 (5.20) (29.85) (33.01)
The accompanying notes form an integral part of the financial statements.
Consolidated statement of financial position
As at 30 June 2023
Note Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
ASSETS
Non-current assets
Goodwill 0.4 0.4 0.4
Property, plant and equipment 0.3 0.5 0.4
Investment in Joint venture 0.6 – –
Portfolio:
Equity investments 3 1,123.8 1,123.4 1,120.8
Debt investments 3 57.6 37.5 38.1
Limited partnership interests 4 94.7 104.6 99.6
Receivable on sale of debt and equity investments 6 4.0 8.3 6.9
Total non-current assets 1,281.4 1,274.7 1,266.2
Current assets
Trade and other receivables 7.3 5.7 8.8
Receivable on sale of debt and equity investments 6 8.5 36.0 41.3
Deposits 166.8 141.3 152.8
Cash and cash equivalents 83.2 94.4 88.7
Total current assets 265.8 277.4 291.6
Total assets 1,547.2 1,552.1 1,557.8
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Called up share capital 8 21.3 21.3 21.3
Share premium account 102.5 102.4 102.5
Retained earnings 1,196.8 1,294.6 1,257.9
Total equity attributable to equity holders 1,320.6 1,418.3 1,381.7
Non-controlling interest (7.0) (4.3) (5.6)
Total equity 1,313.6 1,414.0 1,376.1
Current liabilities
Trade and other payables 11.7 16.9 16.9
Borrowings 7 6.3 15.4 6.3
Total current liabilities 18.0 32.3 23.2
Non-current liabilities
Borrowings 7 132.0 28.7 75.1
Carried interest plan liability 9 44.4 38.1 44.1
Deferred tax liability 7.9 5.8 6.8
Loans from limited partners of consolidated funds 19.8 19.1 19.5
Revenue share liability 11.5 14.1 13.0
Total non-current liabilities 215.6 105.8 158.5
Total liabilities 233.6 138.1 181.7
Total equity and liabilities 1,547.2 1,552.1 1,557.8
Registered number: 4204490
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 1 August 2023 and were signed on its behalf by:
Greg Smith
Chief Executive Officer
David Baynes
Chief Financial & Operating Officer
Consolidated statement of cash flows
For the six months ended 30 June 2023
Note Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Operating activities
Loss before taxation for the period (53.4) (309.8) (343.5)
Adjusted for:
Change in fair value of equity and debt investments 3 27.5 304.1 303.4
Loss/(gain) on disposal of equity investments 5 5.7 (4.2) 7.8
Change in fair value of limited and limited liability partnership interests 4 11.2 (8.8) (2.1)
Depreciation of right of use asset, property, plant and equipment 0.3 0.3 0.6
Long term incentive carry scheme charge 9 0.5 6.0 12.0
Corporate finance fees settled in the form of portfolio company equity (0.1) (0.4) (0.5)
Finance income (3.8) (0.6) (2.2)
Finance costs 2.2 0.8 1.4
Share-based payment charge 1.0 1.4 2.9
Changes in working capital
Carried interest scheme payments 9 (0.1) (1.0) (1.0)
(Increase)/decrease in trade and other receivables 2.9 2.3 (0.5)
(Decrease) in trade and other payables (8.0) (2.5) (2.8)
Drawdowns from limited partners of consolidated funds 0.3 0.4 0.8
Other operating cash flows
Net interest received/(paid) 1.6 (0.4) 0.2
Net cash outflow from operating activities (12.2) (12.4) (23.5)
Investing activities
Purchase of property, plant and equipment - (0.1) (0.3)
Purchase of equity and debt investments 3 (52.8) (49.0) (88.9)
Investment in limited and limited liability partnership funds 4 (7.0) (3.0) (4.6)
Investment in joint venture (0.6) - -
Distribution from limited partnership funds 4 0.7 - -
Cash flow to deposits (146.7) (114.0) (208.7)
Cash flow from deposits 132.7 188.9 272.1
Proceeds from sale of equity and debt investments 5 31.5 2.1 28.1
Net cash (outflow)/inflow from investing activities (42.2) 24.9 (2.3)
Financing activities
Dividends paid 11 (7.7) (7.1) (12.3)
Repurchase of own shares - treasury shares 8 - (8.5) (8.0)
Lease principal payment (0.3) (0.4) (0.5)
Repayment of EIB facility (3.1) (7.7) (29.8)
Drawdown of loan facility (net of costs) 60.0 - 59.4
Net cash inflow/(outflow) from financing activities 48.9 (23.7) 8.8
Net decrease in cash and cash equivalents (5.5) (11.2) (17.0)
Cash and cash equivalents at the beginning of the period 88.7 105.7 105.7
Effect of foreign exchange rate changes - (0.1) -
Cash and cash equivalents at the end of period 83.2 94.4 88.7
The accompanying notes form an integral part of the financial statements.
Consolidated statement of changes in equity
For the six months ended 30 June 2023
Attributable to equity holders of the parent
Share Share Retained Total Non-controlling Total
capital premium earnings £m interest equity
£m £m £m £m
At 1 January 2022 (audited) 21.3 102.4 1,617.5 1,741.2 (3.1) 1,738.1
Loss for the period - - (308.6) (308.6) (1.2) (309.8)
Issue of shares - - (8.2) (8.2) - (8.2)
Equity-settled share-based payments - - 1.4 1.4 - 1.4
Ordinary dividends - - (7.4) (7.4) - (7.4)
Currency translation - - (0.1) (0.1) - (0.1)
At 30 June 2022 (unaudited) 21.3 102.4 1,294.6 1,418.3 (4.3) 1,414.0
Loss for the period - - (33.4) (33.4) (1.3) (34.7)
Issue of shares - 0.1 - 0.1 - 0.1
Purchase of treasury shares - - 0.2 0.2 - 0.2
Equity-settled share-based payments - - 1.5 1.5 - 1.5
Ordinary dividends - - (5.3) (5.3) - (5.3)
Currency translation - - 0.1 0.1 - 0.1
At 1 January 2023 (audited) 21.3 102.5 1,257.9 1,381.7 (5.6) 1,376.1
Loss for the period - - (53.9) (53.9) (1.4) (55.3)
Equity-settled share-based payments - - 1.0 1.0 - 1.0
Ordinary dividends - - (7.7) (7.7) - (7.7)
Currency translation - - (0.5) (0.5) - (0.5)
At 30 June 2023 (unaudited) 21.3 102.5 1,196.8 1,320.6 (7.0) 1,313.6
The accompanying notes form an integral part of the financial statement
1. Operating segments
For both the year ended 31 December 2022 and the period ended 30 June 2023 and
30 June 2022, the Group's revenue and profit before taxation were derived
largely from its principal activities within the UK. As updated in the second
half of 2022 for management reporting purposes, the Group has been organised
into five operating segments:
i) Venture Capital investing within our Life Sciences thematic area
ii) Venture Capital investing within our Deeptech thematic area
iii) Venture Capital investing within our Cleantech thematic area
iv) Venture Capital investing: Other, representing investments not included within
our three thematic areas above, including platform investments, and our US and
Australian 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.
Six months ended 30 June 2023 (unaudited)
STATEMENT OF COMPREHENSIVE INCOME Venture capital investing: Life sciences Of which Oxford Nanopore Venture capital investing: Deeptech Venture capital investing: Cleantech Venture capital investing: Other Venture capital investing: Total Third party fund management Consolidated
£m £m £m £m £m £m £m £m
Portfolio return and revenue
Change in fair value of equity and debt investments (27.9) (27.8) (5.1) 6.1 (0.6) (27.5) - (27.5)
(Loss)/gain on disposal of equity and debt investments (7.6) - 1.9 - - (5.7) - (5.7)
Change in fair value of limited and limited liability partnership interests - - - - (11.2) (11.2) - (11.2)
Revenue from services and other income - - - - 0.7 0.7 2.4 3.1
(35.5) (27.8) (3.2) 6.1 (11.1) (43.7) 2.4 (41.3)
Administrative expenses
Carried interest plan charge - - - - (0.5) (0.5) - (0.5)
Share-based payment charge - - - - (0.9) (0.9) (0.1) (1.0)
Other administrative expenses - - - - (9.6) (9.6) (2.6) (12.2)
- - - - (11.0) (11.0) (2.7) (13.7)
Operating loss (35.5) (27.8) (3.2) 6.1 (22.1) (54.7) (0.3) (55.0)
Finance income - - - - 3.7 3.7 0.1 3.8
Finance costs - - - - (2.2) (2.2) - (2.2)
Loss before taxation (35.5 (27.8) (3.2) 6.1 (20.6) (53.2) (0.2) (53.4)
Taxation - - - - (1.1) (1.1) - (1.1)
Loss for the period (35.5) (27.8) (3.2) 6.1 (21.7) (54.3) (0.2) (54.5)
STATEMENT OF FINANCIAL POSITION
Assets 601.0 177.7 207.4 262.4 458.5 1,529.3 17.9 1,547.2
Liabilities - - - - (227.7) (227.7) (5.9)) (233.6)
Net Assets 601.0 177.7 207.4 262.4 230.8 1,301.6 12.0 1,313.6
Other segment items:
Portfolio Investment (22.8) - (10.6) (12.8) (13.6) (59.8) - (59.8)
Proceeds from sale of equity and debt investments 0.1 - 31.0 - 0.4 31.5 - 31.5
Six months ended 30 June 2022 (unaudited)(1)
STATEMENT OF COMPREHENSIVE INCOME Venture capital investing: Life sciences Of which Oxford Nanopore Venture capital investing: Deeptech Venture capital investing: Cleantech Venture capital investing: Other Venture capital investing: Total Third party fund management Consolidated
£m £m £m £m £m £m £m £m
Portfolio return and revenue
Change in fair value of equity and debt investments (386.6) (345.5) 1.3 69.2 12.0 (304.1) - (304.1)
(Loss)/gain on disposal of equity and debt investments 1.2 - 2.6 - 0.3 4.2 - 4.2
Change in fair value of limited and limited liability partnership interests - - - - 8.8 8.8 - 8.8
Revenue from services and other income - - - - (0.6) (0.6) 3.7 3.1
(385.3) (345.5) 3.9 69.2 (20.7) (291.7) 3.7 (288.0)
Administrative expenses
Carried interest plan charge - - - - (6.0) (6.0) - (6.0)
Share-based payment charge - - - - (1.4) (1.4) - (1.4)
Other administrative expenses - - - - (11.6) (11.6) (2.6) (14.2)
- - - - (19.0) (19.0) (2.6) (21.6)
Operating loss (385.3) (345.5) 3.9 69.2 1.7 (310.7) 1.1 (309.6)
Finance income - - - - 0.6 0.6 - 0.6
Finance costs - - - - (0.8) (0.8) - (0.8)
Loss before taxation (385.3) (345.5) 3.9 69.2 1.3 (310.9) 1.1 (309.8)
Taxation - - - - 0.3 0.3 (0.3) -
Loss for the period (385.3) (345.5) 3.9 69.2 1.6 (310.6) 0.8 (309.8)
STATEMENT OF FINANCIAL POSITION
Assets 647.9 226.5 254.6 196.2 436.6 1,535.3 16.8 1,552.1
Liabilities - - - - (134.4) (134.4) (3.7) (138.1)
Net Assets 647.9 226.5 254.6 196.2 (302.2) 1,400.9 13.1 1,414.0
Other segment items:
Portfolio Investment (31.1) - (4.1) (13.1) (3.7) (52.0) - (52.0)
Proceeds from sale of equity and debt investments 1.8 - 0.1 - 0.2 2.1 - 2.1
(1) The figures previously reported for the six months ended 30 June 2022 have
been re-presented into the current segmental split in the table above.
Year ended 31 December 2022 (audited)
STATEMENT OF COMPREHENSIVE INCOME Venture capital investing: Life sciences Of which Oxford Nanopore Venture capital investing: Deeptech Venture capital investing: Cleantech Venture capital investing: Other Venture capital investing: Total Third party fund management Consolidated
£m £m £m £m £m £m £m £m
Portfolio return and revenue
Change in fair value of equity and debt investments (399.4) (369.7) (21.0) 114.6 2.4 (303.4) - (303.4)
(Loss)/gain on disposal of equity and debt investments (12.1) - 4.0 - 0.3 (7.8) - (7.8)
Change in fair value of limited and limited liability partnership interests - - - - 2.1 2.1 - 2.1
Loss on disposal of subsidiary - - - - - - - -
Revenue from services and other income - - - - 1.1 1.1 6.0 7.1
(411.5) (369.7) (17.0) 114.6 5.9 (308.0) 6.0 (302.0)
Administrative expenses
Carried interest plan charge - - - - (12.0) (12.0) - (12.0)
Share-based payment charge - - - - (2.6) (2.6) (0.3) (2.9)
Other administrative expenses - - - - (22.1) (22.1) (5.3) (27.4)
(411.5) (369.7) (17.0) 114.6 (36.7) (36.7) (5.6) (42.3)
Operating loss (30.8) (344.7) 0.4 (344.3)
Finance income - - - - 2.1 2.1 0.1 2.2
Finance costs - - - - (1.4) (1.4) - (1.4)
Loss before taxation (411.5) (369.7) (17.0) 114.6 (30.1) (344.7) 0.5 (343.5)
Taxation - - - - (1.0) (1.0) - (1.0)
Loss for the period (411.5) (369.7) (17.0) 114.6 (31.1) (345.0) 0.5 (344.5)
STATEMENT OF FINANCIAL POSITION
Assets 613.8 205.5 230.5 243.8 451.9 1,540.0 17.8 1,557.8
Liabilities - - - - (176.0) (176.0) (5.7) (181.7)
Net Assets 613.8 205.5 230.5 243.8 275.9 1,364.0 12.1 1,376.1
Other segment items
Portfolio Investment (38.9) (3.2) (20.4) (22.3) (11.9) (93.5) - (93.5)
Proceeds from sale of equity and debt investments 15.6 - 8.7 3.5 0.3 28.1 - 28.1
2. Earnings per share
Earnings Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Earnings for the purposes of basic and dilutive earnings per share (53.9) (308.7) (341.5)
Number of shares Unaudited Unaudited Audited
six months ended
six months
year ended
ended
30 June 2023
31 December 2022
30 June 2022
Number of shares
Number of
Number of
shares
shares
Weighted average number of ordinary shares for the purposes of basic 1,035,891,3111 1,034,323,1533 1,034,483,2788
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 1,035,891,3111 1,034,323,1533 1,034,483,2788
earnings per share
Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Basic (5.20) (29.85) (33.01)
Diluted (5.20) (29.85) (33.01)
No adjustment has been made to the basic loss per share in the period ended 30
June 2023, 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).
3. Portfolio: Equity and debt investments
Top 20 Equity and Debt Investments by holding value
The following table lists information on the 20 most valuable portfolio
company investments, which represent 70% of the total portfolio value (HY22:
70%, FY22: 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 four out of the top 20 holdings (HY22: five, FY22: nine).
Company name Primary valuation basis Fair value of Group holding at 30 June 2023
£m
Oxford Nanopore Technologies plc Quoted bid price 177.7
First Light Fusion Limited *Adjusted funding - upwards 114.5
Istesso Limited DCF 113.8
Oxa Autonomy Ltd Funding transaction < 12 months, PWERM 65.7
Featurespace Limited *Revenue multiple 64.1
Hinge Health, Inc. *Adjusted funding - downwards 51.4
Ultraleap Holdings Limited *Adjusted funding - downwards 37.9
Garrison Technology Limited Funding transaction < 12 months 31.6
Hysata Pty Ltd Adjusted funding - upwards 31.3
Ieso Digital Health Limited Funding transaction > 12 months, PWERM 21.8
Akamis Bio Limited Adjusted funding - upwards 21.3
Bramble Energy Limited Funding transaction > 12 months, PWERM 20.9
Oxford Science Enterprises plc Funding transaction < 12 months 20.6
Mission Therapeutics Limited Funding transaction > 12 months, PWERM 20.2
Oxular Limited Funding transaction > 12 months, PWERM 18.8
Crescendo Biologics Limited Funding transaction > 12 months, PWERM 18.7
Artios Pharma Limited Funding transaction > 12 months, PWERM 18.1
Nexeon Limited Funding transaction < 12 months 16.6
Microbiotica Limited Funding transaction > 12 months, PWERM 16.1
Pulmocide Limited Funding transaction < 12 months, PWERM 14.3
Total 895.4
(* Third-party valuation specialists used for 30 June 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 2022 662.7 729.1 22.8 1,414.6
Investments during the period 2.7 30.5 15.8 49.0
Transaction-based reclassifications during the period - 5.9 (5.9) -
Other transfers between hierarchy levels during the period - - - -
Disposals during period - - - -
Fees settled via equity - 0.4 - 0.4
Change in revenue share - 1.0 - 1.0
Change in fair value in the period(1) (398.3) 74.4 4.4 (319.5)
Change in FX 2.1 12.9 0.4 15.4
At 30 June 2022 (unaudited) 269.2 854.2 37.5 1,160.9
Investments during the period 4.6 30.9 4.4 39.9
Transaction-based reclassifications during the period - 2.5 (2.5) -
Other transfers between hierarchy levels during the period - - - -
Disposals during period (27.5) (14.2) - (41.7)
Fees settled via equity - 0.1 - 0.1
Change in revenue share - (1.0) - (1.0)
Change in fair value in the period(1) (17.7) 19.2 (1.3) 0.2
Change in FX 0.1 0.4 - 0.5
At 1 January 2023 (audited) 228.7 892.1 38.1 1,158.9
Investments during the period - 30.1 22.7 52.8
Transaction-based reclassifications during the period - 7.6 (7.6) -
Other transfers between hierarchy levels during the period 2.2 (2.2) - -
Disposals during period (1.1) (0.1) (0.3) (1.5)
Fees settled via equity - 0.2 - 0.2
Change in revenue share - (1.5) - (1.5)
Change in fair value in the period(1) (22.8) (2.3) 5.8 (19.3)
Change in FX (0.5) (6.6) (1.1) (8.2)
At 30 June 2023 (unaudited) 206.5 917.3 57.6 1,181.4
(1)The total unrealised change in fair value and FX in respect of Level 3
investments was a loss of £4.2m (HY22: gain of £92.1m, FY22: 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 £2.2m (HY22: no instances, FY22: no instances). 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 period totalling £nil (HY22: no instances, FY22:
no instances).
Transfers between level 3 debt and level 3 equity occur upon conversion of
convertible debt into equity. In the current period, transfers of this nature
amounted to £7.6m (HY22: £5.9m, FY22: £8.4m).
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 are valued using techniques which
involve significant subjectivity have been flexed by +/- 10%.
Valuation Technique Fair value of investments Variable inputs Variable input sensitivity Positive impact Negative impact Fair value of investments Fair value of investments
HY23 HY22 FY22
£m % £m % of NAV £m % of NAV £m £m
Quoted 206.5 n/a +/-10 20.7 1.6% (20.7) (1.6%) 269.2 228.7
Funding transaction 268.0 n/a +/-10 26.8 2.0% (26.8) (2.0%) 285.3 289.8
<12 months
Funding transaction 191.0 n/a +/-10 19.1 1.5% (19.1) (1.5%) 112.2 117.8
>12 months
Other: Future market/commercial events 15.8 • Estimated impact of future event +/-10 1.6 0.1% (1.6) (0.1%) 37.8 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* 178.3 • Company-specific milestone analysis +/-10 17.8 1.4% (17.8) (1.4%) 128.3 151.8
Other: Adjusted financing price based on past performance - Downwards* 129.2 • Company-specific milestone analysis +/-10 12.9 1.0% (12.9) (1.0%) 123.5 154.5
Other: Revenue multiple* 76.8 • Estimate of future recurring revenues +/-10 7.7 0.6% (7.7) (0.6%) 105.5 77.9
• Selection of comparable companies
Other: DCF* 115.8 • Discount rate +/-10 11.6 0.9% (11.6) (0.9%) 99.1 97.7
• Clinical trial and drug approval success rates
• Estimate of value and structure of a potential pharmaceutical
partnership
• Estimate of addressable market
• Market share and royalty rates
• Probability estimation of liquidity event
Total 1,181.4 118.2 (118.2) 1,160.9 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 above is Istesso Limited, whose equity is
valued at £86.7m as at 30 June 2023 (HY22: £80.8m, FY22: £80.8m). Our
estimated range for the value of the Group's equity investment in Istesso
based on this DCF model, which was provided by external valuation advisors as
at 31 December 2022 and updated internally as at 30 June 2023, is £66.0m to
£103.0m (HY22: £75.0m to £112.0m, FY22: £65.0m to £105.0m).
Within the 'Adjusted valuation' category above is First Light Fusion Limited,
whose equity is valued at £114.5m as at 30 June 2023 (HY22: £114.5m, FY22:
£114.5m). The valuation of this company involves an assessment against
comparable companies and involves certain key assumptions around their
comparability and First Light's assumed maturity value. Our estimated range
for the value of the Group's equity investment in First Light Fusion based on
this model as at 30 June 2023 is £62.1m to £123.5m (HY22: £84.0m to
£203.0m, FY22: £92.5m to £185.8m).
In addition to First Light Fusion Limited, four other assets were reviewed by
external valuers. The aggregate of the range of valuations they concluded upon
for these assets and our internal valuation range assessment for Istesso was
£298m to £433m, and we have selected points within these ranges which in
aggregate total £385m.
Change in fair value and FX in the period Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Fair value gains 25.3 118.2 183.3
Fair value losses (52.8) (422.3) (486.7)
(27.5) (304.1) (303.4)
4. Portfolio: Limited and limited liability partnership interests
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 (received in arrears of the publication of the
Group's results hence marked as unaudited in the table below). 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 the period end.
Limited & Limited Liability Partnerships Functional currency Status Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
IPG Cayman Fund L.P. USD Unaudited & Adjusted 74.6 85.7 80.0
UCL Technology Fund L.P. GBP Unaudited 17.2 16.2 16.9
Technikos LLP GBP Unaudited 2.9 2.7 2.7
Total 94.7 104.6 99.6
We reviewed the underlying valuation methodologies adopted by our Fund
managers for all Fund investments of material value. In the Cayman Fund L.P.
this includes two investments in which the Group also holds direct
shareholdings outside the fund: MOBILion, Inc. and Carisma Therapeutics, Inc.
Following our review of valuation methodologies we were satisfied that the
techniques utilised were appropriate, other than in one instance where our own
valuation estimates resulted in a lower valuation. We have therefore adjusted
the value of the Group's NAV in the IPG Cayman Fund L.P. to reflect this
revised valuation, and bring it in line with the valuation applied to the
Group's direct interest in the company.
Limited & Limited Liability Partnerships movements in the period £m
At 1 January 2022 92.9
Investments during the period 3.0
Distribution from Limited Partnership funds (0.1)
Change in fair value during the period 8.4
Currency revaluation 0.4
At 30 June 2022 104.6
Investments during the period 1.6
Distribution from Limited Partnership funds 0.1
Change in fair value during the period 0.1
Currency revaluation (6.8)
At 1 January 2023 99.6
Investments during the period 7.0
Distribution from Limited Partnership funds (0.7)
Change in fair value during the period (8.3)
Currency revaluation (2.9)
At 30 June 2023 94.7
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.
If the assumptions used in the valuation techniques for the Group's holding in
each company are varied by using a range of possible alternatives, there is no
material difference to the carrying value of the respective spin-out company.
The effect on the consolidated statement of comprehensive income for the
period is also not expected to be material.
5. (Loss)/Gain on disposal of equity investments
Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Disposal proceeds 31.5 2.1 28.1
Movement in amounts receivable on sale of debt and equity investments (35.7) 2.1 5.8
Carrying value of investments (1.5) - (41.7)
(Loss)/profit on disposal (5.7) 4.2 (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.
6. Receivable on sale of debt and equity investments
Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Deferred and contingent consideration (non-current) 4.0 36.0 6.9
Deferred and contingent consideration (current) 8.5 8.3 41.3
Total deferred and contingent consideration 12.5 44.3 48.2
The following table summarises the primary valuation basis used to value the
deferred consideration:
Investment Primary Valuation Basis Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
WaveOptics Limited Discounted sale amount - 26.4 28.8
Enterprise Therapeutics Holdings Limited Probability-weighted DFC model 11.4 12.7 12.5
Athenex, Inc. Probability-weighted DFC model - 5.1 5.6
Reinfer Limited Discounted sale amount 1.1 - 1.1
Perpetuum Limited Discounted sale amount - 0.1 0.2
Total 12.5 44.3 48.2
During the period £30.9m (HY22: £1.9m, FY22: £1.9m) of cash was received in
respect of amounts recognised as deferred consideration, resulting in a
realised fair value gain of £1.9m (HY22: £0.4m, FY22: £0.4m). Additionally,
deferred consideration of £5.6m relating to portfolio company Athenex, Inc.
was written off, and no cash received in relation to this amount (HY22: £nil,
FY22: £nil).
7. Borrowings
Current liabilities Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Borrowings 6.3 15.4 6.3
Total 6.3 15.4 6.3
Non-current liabilities Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Loans drawn down from the Limited Partners of consolidated funds 19.8 19.1 19.5
Borrowings 132.0 28.7 75.1
Total 151.8 47.8 94.6
8. Share capital
Unaudited Unaudited Audited
six months ended
six months ended
year ended
30 June 2023 30 June 2022 31 December 2022
Issued and fully paid: Number £m Number £m Number £m
Ordinary shares of 2p each
At 1 January 1,063,188,005 21.3 1,063,033,287 21.3 1,063,033,287 21.3
Issued in respect of scrip dividend - - - - 154,718 -
Share capital at period end 1,063,188,005 21.3 1,063,033,287 21.3 1,063,188,005 21.3
Existing treasury shares at 1 January (28,110,373) (0.6) (22,279,127) (0.4) (22,279,127) (0.4)
Purchase of treasury shares - - (7,429,494) (0.1) (7,429,494) (0.1)
Transfer of shares in respect of scrip dividend - - 330,851 - 330,851 -
Shares transferred out of treasury for SAYE 285,335 - - - 497,249 -
Settlement of employee share-based payments 1,551,820 - 770,148 - 770,148 -
Outstanding at period end 1,036,914,787 20.7 1,034,425,665 20.8 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 no treasury shares have been purchased. During 2022, the Company
purchased 7,429,494 ordinary shares, with an aggregate value of £8.0m, and
they are held in treasury. Retained profits have been reduced by £7.9m, being
the net consideration paid for these shares, including the expenses directly
relating to the treasury share purchase. At 30 June 2023 the company had
26,273,218 treasury shares (HY22: 28,607,622, FY22: 28,110,373).
9. Long-term incentive carry scheme - Carried interest plan liability
Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
At 1 January 44.1 33.1 33.1
Charge for the period 0.5 6.0 12.0
Payments made in the period (0.1) (1.0) (1.0)
Forex (0.1) - -
At period end 44.4 38.1 44.1
10. 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 30 June 2023:
Director/ PDMR Company name Number of Number of shares acquired/ (disposed of) in the period Number of %
shares held at shares held at
31 December 30 June
2022 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 50,000 - 50,000 <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 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 Ordinary Shares 7,048,368 - 7,048,368 8.89%
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 18,540 - 18,540 <0.1%
Topivert Limited (1) 1,000 - 1,000 <0.1%
Ultraleap Holdings Limited 558 - 558 <0.1%
Joyce Xie Bramble Energy Limited 88 - 88 <0.1%
Creavo Medical Technologies Limited (1) 21 - 21 <0.1%
Istesso Limited 4,504 - 4,504 <0.1%
Mirriad Advertising plc 4,839 - 4,839 <0.1%
Ultraleap Holdings Limited 1,585 - 1,585 <0.1%
Elizabeth Vaughan-Adams Amaethon Limited (1) 939 - 939 <0.1%
Bramble Energy Limited - A Ordinary Shares 2 - 2 <0.1%
Creavo Medical Technologies Limited (1) 23 - 23 <0.1%
Crysalin Limited (1) 100 - 100 <0.1%
DeepMatter Group plc (4) - 9,110 9,110 <0.1%
EmDot Limited (1) 3 - 3 <0.1%
First Light Fusion Limited 77 - 77 <0.1%
Istesso Limited 218,448 - 218,448 0.26%
Mirriad Advertising plc 4,941 - 4,941 <0.1%
Oxford Nanopore Technologies plc 4,500 - 4,500 <0.1%
Rio AI Limited 16,244,199 - 16,244,199 <0.1%
Surrey Nanosystems Limited 53 - 53 <0.1%
Tissue Regenix Group plc 75,599 - 75,599 <0.1%
Ultraleap Holdings Limited 400 - 400 <0.1%
Angela Leach Amaethon Limited (1) 1,408 - 1,408 <0.1%
Alesi Surigcal Limited 2 - 2 <0.1%
AudioScenic Limited 53 - 53 <0.1%
Barocal Limited 1,010 - 1,010 <0.1%
Boxarr Limited 102 - 102 <0.1%
Bramble Energy Limited - A Ordinary Shares 13 - 13 <0.1%
Creavo Medical Technologies Limited (1) 23 - 23 <0.1%
Crysalin Limited (1) 149 - 149 <0.1%
DeepMatter Group plc (4) - - - 0.0%
Diffblue Limited 644 - 644 <0.1%
EmDot Limited (1) 4 - 4 0.23%
Featurespace Limited 240 - 240 <0.1%
First Light Fusion Limited 27 - 27 <0.1%
Ieso Digital Health Limited - B2 Preferred Shares 29 - 29 <0.1%
Istesso Limited - A Shares 322,923 - 322,923 0.38%
Itaconix plc 4,500 - 4,500 <0.1%
Mixergy Limited 206 - 206 <0.1%
Mirriad Advertising plc 16,667 - 16,667 <0.1%
Oxa Autonomy Ltd (2) 3 - 3 <0.1%
Oxford Nanopore Technologies plc 37,909 (178) 37,731 <0.1%
Lumai Limited (3) 20,000 - 20,000 <0.1%
Rio AI Limited 180,308 - 180,308 <0.1%
Sunborne Systems Limited 2 - 2 <0.1%
Surrey Nanosystems Limited 78 - 78 <0.1%
Tissue Regenix Group plc 146,791 - 146,791 <0.1%
Ultraleap Holdings Limited 500 - 500 <0.1%
Xeros Technology plc 16 - 16 <0.1%
Chris Glasson 8Power Limited 400 - 400 <0.1%
Audioscenic Limited 967 - 967 <0.1%
Creavo Medical Technologies Limited (1) 105 - 105 <0.1%
Istesso Limited 9,009 - 9,009 <0.1%
Mirriad Advertising plc 8,064 - 8,064 <0.1%
Oxa Autonomy Limited (2) 34 - 34 <0.1%
Oxehealth Limited 328 319 647 <0.1%
Topivert Limited (1) 3,000 - 3,000 <0.1%
Ultraleap Holdings Limited 1,585 - 1,585 <0.1%
Moray Wright Mirriad Advertising plc 73,664 - 73,664 <0.1%
OxSyBio Limited (1) 20 - 20 <0.1%
Anthony York Diffblue Limited 179 - 179 <0.1%
Individuals who ceased to be key management personnel on 19(th) April 2023 Number of Number of shares acquired/ (disposed of) in the period Number of %
shares held at shares held at
31 December 30 June
2022 2023
Lisa Patel Alesi Surgical Limited 1 - 1 <0.1%
Creavo Medical Technologies Limited (1) 23 - 23 <0.1%
Istesso Limited 3,477,833 - 3,477,833 4.09%
Microbiotica Limited 3,000 - 3,000 <0.1%
Mirriad Advertising plc 3,333 - 3,333 <0.1%
Oxford Nanopore Technologies plc 9,453 - 9,453 <0.1%
Topivert Limited (1) 1,000 - 1,000 <0.1%
Ultraleap Holdings Limited 1,317 - 1,317 <0.1%
(1) Company being closed down.
(2 ) Previously called Oxbotica Limited.
(3) Previously called OxONN Limited.
(4) Opening position restated to reflect 1,000,000,000:1 share
consolidation during the period
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. Given 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 Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Revenue from services - 0.1 0.2
Statement of financial position Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £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 Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Net portfolio gains 7.3 50.1 75.0
Statement of financial position Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Equity and debt investments 632.1 522.6 651.6
C) Subsidiary companies
Subsidiary companies that are not 100% owned either directly or indirectly by
the parent company have intercompany balances with other Group companies
totalling as follows:
Unaudited Unaudited Audited
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
Intercompany balances with other Group companies 2.5 2.5 2.1
These intercompany balances represent funding loans provided by Group
companies that are interest free, repayable on demand and unsecured.
11. Dividends
Unaudited Unaudited Audited
six months ended
six months ended
year ended
30 June 2023 30 June 2022 31 December 2022
Declared and paid during the year per share £m per share £m per share £m
Ordinary shares:
Interim dividend paid - - - - 0.50 5.3
Prior financial year final dividend paid 0.76 7.7 0.72 7.4 0.72 7.4
Dividends paid to equity owners in the period 0.76 7.7 0.72 7.4 1.22 12.7
Proposed interim dividend at half 0.51 5.3 0.5 5.3 0.5 5.3
year
Proposed final dividend at financial - - - - 0.76 7.9
year end
Of the £7.7m dividends paid in 2023, £7.7m was settled in cash, of the
£12.7m dividends paid in 2022, £12.3m was settled in cash and £0.4m was
settled via the issue of equity under the Group's scrip programme. Due to the
limited take up of scrip dividends the scheme has been discontinued.
The proposed 0.51p dividend has not been included as a liability as at 30 June
2023, in accordance with IAS 10 "Events after the reporting period", it will
be paid in September 2023.
12. 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 Unaudited Unaudited Audited
reconciliation
six months
six months ended
year ended
ended 30 June 2022 31 December 2022
30 June 2023 £m £m
£m
NAV per share Primary statements NAV per share is defined as Net Assets divided by the number of outstanding NAV £1,313.6m £1,414.0m £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 1,036,914,787 1,034,425,665 1,035,077,632
NAV per share 126.7p 136.7p 132.9p
Return on NAV Primary statements Return on NAV is defined as the total comprehensive income or loss for the Total comprehensive income (55.3) (309.9) (344.0)
period excluding charges which do not impact on net assets, specifically
share-based payment charges.
The measure shows a summary of the income statement gains and losses which
directly impact NAV.
Excluding:
Share-based 1.0 1.4 2.9
payment charge
Return on NAV (54.3) (308.5) (341.1)
Net portfolio gains Primary statements Net portfolio gains are defined as the movement in the value of holdings in Change in fair value (27.5) (304.1) (303.4)
the portfolio due as a result of realised and unrealised gains and losses.
of equity and debt investments
The measure shows a summary of the income statement gains and losses which are
directly attributable to the Total Portfolio (see definition below), 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.
(loss)/Gain on disposal of equity investments (5.7) 4.2 (7.8)
Change in fair value (11.2) 8.8 2.1
of LP interests(2)
Net portfolio (loss)/gains (44.4) (291.1) (309.1)
Total portfolio Consolidated statement of financial position Total portfolio is defined as the total of equity investments, debt Equity investments 1,123.8 1,123.4 1,120.8
investments and investments in LPs.
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 57.6 37.5 38.1
LP interests 94.7 104.6 99.6
Total Portfolio 1,276.1 1,265.5 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 (52.8) (49.0) (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 (7.0) (3.0) (4.6)
Portfolio investment (59.8) (52.0) (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 31.5 2.1 28.1
investments plus distributions received from limited participation interests.
This gives a combined measure of cash received from the Group's portfolio.
Distributions from limited partnership funds 0.7 - -
Cash proceeds 32.2 2.1 28.1
Net overheads(2) Financial review Net overheads are defined as the Group's core overheads less operating income. Other income 3.1 3.1 7.1
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 (12.2) (14.2) (27.4)
Excluding:
Non-portfolio foreign exchange movements (1.2) 0.2 0.1
Administrative expenses: consolidated portfolio companies - - 0.1
Net overheads (10.3) (10.9) (20.1)
Gross Cash and deposits Primary statements Cash and deposits is defined as cash and cash equivalents plus deposits. Cash and cash equivalents 83.2 94.4 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 166.8 141.3 152.8
Cash 250.0 235.7 241.5
(Loss)/profit excluding ONT Primary statements Loss/profit excluding ONT is defined as the Group's (loss)/profit for the (Loss) for the period (54.5) (309.8) (344.5)
period (after tax) excluding the (loss)/profit on the investment held in
Oxford Nanopore publicly quoted shares both realised and unrealised.
Excluding:
Change in fair value of equity investment in Oxford Nanopore 27.8 345.5 369.7
(Loss)/profit excluding ONT (26.7) 35.7 25.2
.
(1. ) For consistency with how were 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 participation interests
profit represents a useful additional measure for users of the accounts.
(2. ) For clarity non-portfolio foreign exchange movements
have been removed from net overheads, these exchange movements are on
intercompany loans and other balance sheet items.
13. Post balance sheet events
As at 31 July 2023, unrealised fair value gains subsequent to the reporting
date in respect of the Group's quoted portfolio totalled £44.7m, largely in
respect of Oxford Nanopore Technologies plc, which has seen a fair value gain
of £42.0m since 30 June 2023.
Statement of Directors' responsibilities
General information
The comparative financial information presented herein for the year ended 31
December 2022 does not constitute full statutory accounts within the meaning
of the Companies Act 2006. The Group's Annual Report and Accounts for the year
ended 31 December 2022 have been delivered to the Registrar of Companies. The
Group's independent auditor's report on those accounts was unqualified, did
not include references to any matters to which the auditor drew attention by
way of emphasis without qualifying their report and did not contain a
statement under Section 498(2) or 498(3) of the Companies Act 2006.
Accounting policies
Basis of preparation
This condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the UK.
The annual financial statements of the Group are prepared in accordance with
UK-adopted international accounting standards. As required by the Disclosure
Guidance and Transparency Rules of the Financial Conduct Authority, the
condensed set of financial statements has been prepared applying the
accounting policies and presentation that were applied in the preparation of
the Company's published consolidated financial statements for the year ended
31 December 2022.
Accounting estimates and judgements
The preparation of the half-yearly results requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expenses. 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.
In preparing these half-yearly results, the significant judgements made by
management in applying the Group's accounting policies and the key sources of
estimation uncertainty relating to the valuation of unquoted equity and debt
investments and limited participation interests were the same as those applied
to the audited consolidated financial statements for the year ended 31
December 2022.
The significant accounting judgments made in preparing these half-yearly
results relating to the application of IFRS 10 in respect of Istesso Limited
and IPG Cayman LP were updated to reflect events during the period as follows:
· For Istesso Limited, the investment of £15m in the period,
primarily via convertible loan notes ('CLN'). Given that, inter alia, the CLN
conferred no substantive control rights prior to a long stop date of 1 January
2025, and that IP Group's voting interest in Istesso reduced in the period as
a result of the conversion of a third party CLN into voting shares, the
Directors concluded that IP Group continues not to control Istesso Limited
under IFRS 10.
· For IPG Cayman LP, the commitment to invest $10m in the period
via a Simple Agreement for Future Equity ('SAFE') did not confer additional
substantive rights and therefore that IP Group plc continues not to control
IPG Cayman LP under IFRS 10.
Going concern
The Directors are required to satisfy themselves that it is reasonable to
presume that the Group is a going concern. The Group had Cash and Deposits of
£250.0m as at 30 June 2022. In light of the Group's forecast net overhead
costs, debt repayment obligations and other committed spend, the Directors are
satisfied that in taking account of reasonably possible downsides, the Group
has adequate access to resources to enable it to meet its obligations and to
continue in operational existence for at least the next 12 months.
Statement of Directors' responsibilities
The Directors confirm to the best of their knowledge that: the half-yearly
results have been prepared in accordance with IAS 34 as adopted by the
European Union; and the interim management report includes a fair review of
the information required by the FCA's Disclosure and Transparency Rules (4.2.7
R and 4.2.8 R).
The Directors of IP Group plc and their functions are listed below.
By order of the Board
Sir Douglas Flint
Greg Smith
Chairman
Chief Executive Officer
1 August 2023
INDEPENDENT REVIEW REPORT TO IP GROUP PLC
1. Conclusion
We have been engaged by IP Group plc ("the Company") to review the condensed
set of financial statements in the half-yearly results for the six months
ended 30 June 2023 which comprises Consolidated Statement of Comprehensive
Income, Consolidated Statement of Financial Position, Consolidated Statement
of Cash Flows, consolidated Statement of Changes in Equity and the related
explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
results for the six months ended 30 June 2023 is not prepared, in all material
respects, in accordance with IAS 34 Interim Financial Reporting as adopted for
use in the UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
2. Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued for use in the
UK. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. We read the other
information contained in the half-yearly financial report and consider whether
it contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an
audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention that causes us to believe that the directors
have inappropriately adopted the going concern basis of accounting, or that
the directors have identified material uncertainties relating to going concern
that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However, future events or conditions may cause the Group to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Group will continue in operation.
3. Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FCA.
The annual financial statements of the Group are prepared in accordance with
UK-adopted international accounting standards.
The directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the directors are
responsible for assessing the Group's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
4. Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the Basis for conclusion section of this report.
5. The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Jonathan Martin
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
1 August 2023
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