Ip Group Regulatory News (IPO)

("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

(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."

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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.

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:

A summary of the largest unrealised and realised fair value gains and losses by portfolio investment (excluding fx movements) is as follows:

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:

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

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:

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

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.

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.

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.

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.

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)

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 CO2.

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.

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).

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:

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

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:

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:

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.

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:

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

The accompanying notes form an integral part of the financial statements.

Consolidated statement of financial position

As at 30 June 2023

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

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

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:

Reporting line items within Venture Capital investing which are not allocated by thematic sector are presented in the 'Venture Capital investing': other segment.