Okay, it's now 11 o'clock. Therefore, I now declare the 2025 annual general meeting of IP Group PLC open. I'm Douglas Flint, the non-executive chair of IP Group, and I extend a warm welcome to all of our shareholders, those in the room, and those joining us online. With me are Greg Smith, the chief executive officer, David Baines, the chief financial and operating officer, and our four non-executive directors, Dr. Caroline Brown, you can see her stand up and there you go. HJ Chai, Amar Hines, and Anita Kajel. Finally, Angela Leech, who is our company secretary. The company secretary has advised me that we have a quorum present. Therefore, I can now declare the meeting formally open. Let me make a few remarks and then I'll invite Greg to make a few remarks and then we'll get on with the business of the meeting. First of all, a note on succession planning. In the AGM notice, we drew attention to the fact that the nomination committee continues to be mindful that a number of directors, including myself, were approaching the 9-year maximum term over the next couple of years. Therefore, the committee was planning succession to ensure a suitable sequencing of transition that combined appropriate continuity and handover periods with finding the appropriate candidates. In this regard, we agreed it was appropriate that the chair succession was considered early so that an incoming chair had the opportunity to play a meaningful role in the subsequent board refresh. Accordingly, the process for my own succession is now well underway under the direction of the senior independent director. I am not involved in that, quite properly. So that process is ongoing and we can't comment further, but we will update the market at the appropriate time as soon as we have anything required to be said under our regulatory obligations.
Having got that out of the way, just a few comments in relation to last year. As I noted in my statement on the annual report, we recognized that the appetite for higher risk early stage assets across the UK remained cautious and was going to remain cautious, and we adjusted our investment plans accordingly to make sure that we harvested the cash capital that we had and concentrated on our most important high potential portfolio companies, particularly those with good prospects to deliver a cash return in the near to medium term. In terms of priorities, recognizing the stubborn gap between the reported net asset value or NAV per share and our share price, the board set management a number of priorities in 2024 to address this disparity. This included prioritizing portfolio companies with high prospects of early or medium-term realization to demonstrate value creation, pursuing third party co-investment transactions to validate valuation discipline, and attracting third party funds to add capacity to our investing activity. Alongside this, we sought fresh investors to the public company and improved operational gearing through better cost performance. We took cost out during last year. So there were good things and bad things. In terms of successes, we had the highest cash value realization in our history from the sale of our stake in Feature Space, which generated disposal proceeds of 134 million pounds, of which 119 million was received in cash before the end of last year. Total proceeds from Feature Space and others were 183.4 million, five times what we realized in cash in the previous year 2023.
As a consequence, our gross cash at the 31st of December stood at 285 million pounds, an interesting number against the market capitalization at that date of 525 million. We structured and executed a partial secondary sale of shareholdings in six of our portfolio companies, realizing 50 million in cash at an aggregate value modestly ahead of book carrying value, partly to evidence the integrity of our valuation processes. We secured a further Australian dollar 125 million co-investment commitment from Host Plus, one of our key partners, our principal partner through the Australian business. We completed a restructuring, a reorganization of our businesses that will reduce ongoing costs by 5 million annually, some 23% of our cost base. But there were disappointments. Our largest portfolio investment, Oxford Nanoport, fluctuated significantly during the year, losing over half its value in the first half and recovering a decent portion in the second half, but still down 38% over the year. Management, with the board's strong endorsement and given our position as one of its largest shareholders, has spent considerable time supporting Oxford Nanoport on ways to address the volatility in their share price and to derive actions that could lead to a recovery in value for all shareholders.
Although widely anticipated, we were frustrated throughout last year that Estessa, our second largest portfolio holding, was not in a position to release any data from its phase 2B rheumatoid arthritis study with its drug Laristat during 2024. However, on the 11th of February this year, it was able to provide an update which was both disappointing and encouraging. We spent considerable time in 2024 seeking to attract private capital for a scale up fund. These things take longer than you think, but we were trying to build commitments that responded to the fact that many pension funds have made commitments pursuant to the Mansion House Compact and now the updated Mansion House Accord and other government initiatives to support growing innovative UK businesses. The statement yesterday from the chancellor, with support and money for UK science and innovation, was encouraging. While we didn't finalize a scaleup fund in 2024, we're optimistic that the work done and progress made in ongoing discussions will lead to the creation of such a fund in 2025. We are dependent on our counterparts' processes, but I think the commitment to the Mansion House Accord and what the government said yesterday give us a bit of a following wind.
But public capital markets in 2024 weren't helpful to IP Group nor to most of our peer group. Investor appetite for small cap companies was muted. Many funds devoted to small caps wound up due to lack of interest, leading to selling pressure, including sales of IP Group shares. As we entered 2025, the need for scientific innovation to address society's urgent challenges remains, as stressed yesterday in the chancellor's remarks. The UK government is embracing this ambition to place UK science and technological excellence at the heart of its growth agenda. Public markets, however, are slow to support this ambition with long-term venture and scale up capital. We remain confident that momentum towards this ambition will make the substantial unrecognized value within the portfolio more evident to others. The principal objective for the coming year is to harness the strong desire among UK institutions to support this segment of the UK growth story. It's in their interest, our interest, and the government's interest to configure our business to capture that trend and be successful. So let me hand over to Greg for his comments.
Thank you. And thanks everyone in the room for coming. Very good to see a number of our shareholders here, many I recognize from last year and years before. Thanks to everyone online for giving your time this morning. Very much appreciated. I'm not going to make loads of comments because we covered a lot of material in the full year results presentation on the Investor Meet Company platform. There's a full hour and a half of Dave and I talking if you're that way inclined. I'll just summarize the key messages. Douglas has talked about the challenging environment for venture continuing in 2024. Realizations were very difficult to come by. We were particularly pleased that one of our big priorities for 2024, as a management team and board, was to generate cash realizations from the portfolio, not at discounted prices, but at or above book values. Exiting cash profitably is the number one measure for us. We bucked the trend, delivering over 183 million for the year, about five times the level in 2023. That put us in a strong cash position. A theme you may have seen from this board is our commitment to addressing the discount in the share price and supplementing capital returns with cash. The strong realizations allowed us to reinvest in the portfolio, essential in early stage venture, and also to increase our commitment to our buyback program. We did that in a very material way. We ran out of authority from the last AGM, so we topped it up with a short general meeting a couple of months ago. We will have retired more than 10% of the shares in issue, and by the time we complete the current buyback program, it will be between 15 to 20% of our shares in issue. We take this matter seriously, and the realizations allowed us to do that.
Our NAV per share declined by about 15%, just below a pound. Douglas mentioned some of the disappointments. During the year, we took decisive action to adjust the delivery strategy for pursuing our vision and delivering value to shareholders, which allowed us to reduce operating costs as Douglas said. When you do those things, you set the business up for the right structure and success for the next several years. We're now in a good position to build if we attract the scale up capital needed by the group, the portfolio, and to support economic growth in the UK. Another priority was accessing further capital under management. The appetite is quite audible in the UK. We're seeing signs of first moves. Pension funds talk about the plumbing being put in place; once it is, capital can start to flow. As long-standing shareholders know, we started a business in Australia in 2017. The logic was not just to access world-leading science, but because the Australian pension fund industry, with high mandatory contributions and consolidating value-focused funds, wanted to allocate to venture. We built from a 50 million Aussie dollar mandate with Host Plus, one of the biggest pension funds, to a 435 million commitment now. That path could be followed in the UK as pension funds wrestle with fee burdens, value for money, and accessing an asset class where you don't want to pile billions in at once. Our experience with Australian superannuation funds is good. If I had to guess, additional mandates will likely come in Australia first, but the UK opportunity is very significant. The UK's pension funds collectively would be the second or third largest fund in the world, at three to five trillion pounds. That's a big prize, and we're making efforts to access that on behalf of shareholders.
So those were the main themes and priorities for the year. Looking forward, we have a very compelling balance sheet portfolio. The vast majority of value, for me and other shareholders, is in the companies on the balance sheet. The two fund management operations supplement our operating costs and reduce net overheads, but the main value is in the portfolio. We were encouraged last year by increasing signs of M&A, in addition to the Feature Space exit. Appetite for IPOs has ebbed and flowed, but we were very pleased to see Hinch Health's successful IPO on the New York Stock Exchange a couple of weeks ago. It was mooted earlier, then market headwinds from US policies impacted, but it priced at the top end of the range at $32 a share and has traded close to where we had it in the books at year end. We invested about a million dollars in that business, realized about 15 million in secondary rounds in 2020 and 2021, and a small amount at IPO. We're on about a 40 to 45 times return on invested capital. That's a successful investment and a good sign of return to IPO activity. So far this year, we've returned about 25 million from further exits, allowing us to add another 10 million to the buyback. We stated in our annual report that we have confidence we can deliver 250 million to the end of 2027. We look forward with confidence. We echo what Douglas said about the chancellor's statement yesterday. There is huge need for investment in science and technology, a compelling opportunity. I hope over the next five years, difficult to predict timing, there will be significantly more capital in the space. If those conditions come to pass, we are very well positioned as the most active investor in university spinouts in the country, doing about 20% of the volume, focused on Oxford, Cambridge, and Imperial. We look forward to delivering further shareholder returns and, as Douglas said, doing something about the stubborn discount. It's frustrating for all of us, particularly for me as CEO and a shareholder. I'll hand back to Douglas for the formal parts of the AGM.
Greg, thanks very much. Before we move to the formal business of considering the AGM resolutions, I'd like to invite shareholders both in the room and online to ask any questions of the board on matters relevant to the business of the meeting. We've also received questions in advance and will seek to answer them. Hopefully we'll have enough time. For those in the room, please give your name and whether you're speaking as a shareholder, proxy, or as a proxy, and who you're representing. For online questions, indicate the same. We've got a bunch of questions already submitted, but are there any questions in the room? I'd like to start with the room. That hand went up faster than anybody else's. So, and then I'll come to you.
Thank you. Harimagam, proxy for Imperial College. The question I've got is: what do you think is the expected return on the portfolio NAV looking forward? Granted, it's not the share price return, it's the NAV return. How does it compare to historic returns? Also, how does that compare to the returns you are seeing in your scaleup capital? I understand you can't discuss returns of a specific LP, but if you can give guidance, that would be helpful. Thank you.
I'm sure Greg's going to do that brilliantly without giving a profit forecast.
Well, I think that's the challenge, isn't it? Maybe I can give you some indications. I'll be very careful not to give profit forecasts or forward-looking statements. Over our history, depending on how you look at the entire NAV per share, you can see the 22p per share of hard NAV when we came to the market and roughly a pound a share now. You can work out an annualized all-in NAV per share return in the single digits. You can look at the performance of UK venture over the last 20 years, from BVCA data: the median is about 4%, the mean about 11%, and the upper quartile around 16-17%. We are clearly targeting the upper half, if not the upper quartile. There are plenty of opportunities in the portfolio to make that a reality. So that's a wide enough way of saying we're targeting compelling, market-leading, top half of the market returns. Venture is a game of outliers, and we need to have more than our fair share of unicorns. There are definitely candidates in the portfolio that we are very excited about. For those online, we're doing a capital markets event in the city, with three of our high potential companies presenting their business cases, and a few others in the room. I'm not promising they'll all be unicorns, but they are candidates with very big market opportunities and differentiated business models. So, we're definitely aiming to be towards the top half of the market.
Please, can we get the microphone down here? Probably people online can't hear. For the benefit of people online. Thank you.
Roger Cshaw, I'm a shareholder. How are you finding demand for your funds where you've got ideas and people coming to you which is going to feed to the future?
It's interesting. The demand in Australia is more real in as much as people have written commitments. In the UK, the main third party funds we have are tax advantage funds. We manage about 450 to 500 million of EIS capital. The EIS market has been reasonably difficult recently, but we've maintained our market leading position. We consistently raise between 25 and 50 million per annum through that platform, and it will continue to be a good source of early stage capital. On the scaleup funding side, the UK industry is wrestling with strategic and tactical issues. The pensions bill released last week went a long way to addressing challenges cited by pension funds, such as focusing on value for money, net returns rather than just cost, and ensuring pension funds are of sufficient scale to allocate appropriately to privates. This is important in the context of overall asset allocation. Long-term venture, private equity, and property should be an appropriate proportion of total assets. Many of those issues were addressed in the pensions bill. It will take time to flow through, consolidating funds towards 25 billion super funds, and that change may disrupt existing allocations. We're having encouraging conversations, and the tone in the last six months has moved more towards action than conceptual.
Can I just clarify? I was actually asking: are there still plenty of people coming to you with ideas and are they still demanding money? I don't know if ideas are drying up or it's carrying on as always. What's the state of the supply out there?
Supply is very good. It's not an opportunity supply issue. The UK, and IP Group as part of it, punches above its weight in creating companies, seeding them, and getting to series A. The opportunity set remains very compelling for sure.
Why don't we ask more? Absolutely. I mean we should allow a few words from the person who looks after our investments.
Hello, Mark Riley, managing partner. Yeah, I think there will always be lots of ideas coming through the pipeline. As Greg says, the UK generates a lot of cutting edge innovation. The thing that is challenging and scarce is finding talent to marry with those ideas and build a commercial proposition. That's what we spend a lot of time on, getting the right talent involved in the portfolio to exploit those ideas.
Yeah, we're third in the world behind America and China in terms of new ideas. We are brilliant as a country until we get to series C, where the scale up money from America and China is much larger because there is a larger pool of capital directed towards higher risk venture. One of the things the government is trying to coordinate through Mansion House reforms and other initiatives is to create that pool of capital pointed towards longer term risk investing. I think risk is the wrong word. In the good old days, you had defined benefit pension schemes managed professionally, and people could allocate money to all types of activity. Now you have defined contribution arrangements, asking individuals to choose low, medium, or high risk. If you say high risk, they say no. If you say high growth, they say yes. The language is wrong. We need to change the narrative. Young people embrace risk, as seen with crypto, so there is tolerance for volatility. We need to change how people are invited to invest through corporate sponsors. If you give people low, medium, and high risk choices, they take medium. A 28-year-old putting 40% of their funds into bonds is insane.
He said carefully. Anything else in the room? And then we'll go online. Anything else in the room? DB? Okay, we have had quite a lot of prior questions. Just to reassure you, there are 17 of them. I'll go through them. I'll let people know who I'm going to point them to. Probably the first ones come to me. Share is an easy one. Share buybacks have been very steady; overall numbers of shares dropped by about 140 million, including cancellations in Treasury shares. Please can you give some sense of who the vendors have been? Puzzled by the fact that there have been no notifications of reductions from major shareholders.
There's a bit more, but effectively that is the question, and it's quite a good question because there aren't obvious sellers. Over the last year and a half, a couple of big institutions have reduced their positions, probably nothing to do with us. Fidelity closed funds and about three or four percent went in one go. L Trust also made a reallocation of capital. So a couple of big movements, but other than that, we're buying back pretty normal market numbers. We get the shareholder register every month and pounce on it. The big shareholders, thank you very much, aren't reducing. We haven't got an obvious seller. It's actually coming out of normal market flows. Most of those numbers sometimes puzzle us, that we can keep buying and the price remains low, because ultimately that's very good for NAV per share as we're buying back a lot of shares at a ridiculously low price. Next question, I'll take that one as well and the one after, then back to Greg. Will new shares be issued to satisfy the LTIP awards? The LTIPs are actually now RSUs, broadly similar, long-term incentive involving issuing shares. We also issue shares related to half of all bonus payments, because half of that is deferred over two years and paid in shares.
Shares. So the board does have the choice. It can actually issue new shares or it can get the employee benefit trust to actually buy shares back in the market. And at the moment that is what we have actually been doing. We know, as I've already mentioned, we've actually been canceling all the shares that were in treasury. The ones we've been buying back we've been canceling, so can't use them. So in the last instance when we needed shares for staff, we actually bought back in the market. So the question there presumably is about is it dilutive, and the answer is no, it's not dilutive because we're buying it back, which seems clearly at these prices a very sensible thing to do. Third one, and then the fourth will go to Craig. What lock-up agreements are there in relation to the group's six largest holdings by value? Could be a big question. It's not a big question. There's actually only one company that's currently locked up. We normally only get lockups. Obviously for public companies, you know, private companies, the lock-up in private companies is liquidity, can you sell them? In public companies, you get formal lock-up often when a company's first listed for a period normally about six months. Current shocks in, so that's just on Hinge at the moment. So in Hinge, we're in a period. We listed about a month ago, we've got about another five months in a lockup. Other than that, we're not in any lockups. Nanopore, any other smaller public holdings we have. Fourth question coming your way, Greg. What, and so regarding Estesso, what are the areas where the RA drug fell short in the phase 2B study, and since the readouts, have there been any discussions with other drug companies about a way forward?
Yeah, we so we covered this a bit in the full-year results presentation that we did. So the data were given to us in February. Where it fell short was the trial didn't meet its primary endpoint, if anyone's interested. It's a composite measure of inflammation effectively called ACR20. It didn't produce a significant enough difference versus the placebo. So that was the primary endpoint. It did indicate variously significant benefits in things like bone erosions and disability levels and things like fatigue, which are obviously very important to patients. So that supported the novelty of the mechanism of action. I said at the time that Estesso would be publishing further information. We anticipate in the next month that there will be some further information published by the company which will give more clarity on what they saw that was unique and what the path forward is. And just one other thing to note, we added a very successful former co-founder of a business called Kaab that was sold to Sanofi for about a billion dollars up front, a guy called Dr. Mike Owen. He's joined the board of Estesso as a non-exec in the last week or so, which is a great endorsement and very good to have him as an additional non-exec on the board there. He made a good statement about his excitement about the novelty of the approach and the commercial opportunity. So there'll be a bit more to follow in coming weeks. That is the update, I must say.
Thank you. The next one, the group has bought back over 52 million shares today. I think that was first in the latest buyback program. We did 30 million last year. We done about pounds. What did I say? Shares. Pounds. I apologize. Pounds. We did 30 million about last year and then we've done about 22 million pounds so far this year. So that is about right. What is the current outstanding authority capacity to buy back further shares? If you've been listening closely, that has been briefly mentioned already today. So we are renewing the authority today. So there's another 15%. And for those that are really interested, I can tell you that would be 141,415,000 shares. So we've got plenty of capacity to buy more shares. So certainly on the numbers we've committed to date, there's plenty of authority. We won't hit the headline, the top, and that's why you would have noticed a couple of months ago we did actually issue a small increase because actually the price was so low, we were buying back so many, we were in slightly in danger of doing that, but not anymore. In place from today, assuming you all, yeah exactly, it should be okay. I've seen some of the numbers. Next one to Greg. Does Hysata have potential orders in place, or will it produce a product and then hope to sell it? Will sales be solely to the domestic Australian market, and any indications of timeline?
I'll do a high-level answer to this. So Hysarta doesn't have a product yet that is commercially available to sell. The milestone they're hoping to achieve this year is a commercial scale product, which is a 100-kilowatt stack, and we're hoping that that will be online, the company's planning for that to be online, i.e., be producing hydrogen by the end of this year. That's a pretty big commercial milestone for the company because it shows that you can go from a single cell or a stack of 10-15 cells to being able to produce a whole system producing hydrogen. So that's the most important commercial milestone in terms of indications of interest from potential customers. I would say one, the company announced earlier this year a partnership with Aqua Power, which is a Saudi-based provider, and that was encouraging in terms of commercial interest. And then secondly, when they did their funding round back in the beginning of 2024, the company at that point had a number of strategic or corporate investors, and each of those investors gave a letter of commercial intent, should we say, not something you could factor, not something that would count as an order, but broadly along the lines of if the commercial product meets the specifications that you claim it can, we would like to purchase that and this is the reason we would purchase it and use it. And those indications were in the orders of a few billion Aussie dollars, so significant. The other bit of the question about will it be solely domestic Australian market. They have potential customers in Australia. Some of those strategic corporates were non-domestic. So there was a big Korean steel manufacturer, for example, who was an investor and could be a potential customer. So globally relevant product.
